The Pantanassa
Norsk Bjergningskompagni A/S v Owners of the steamship Pantanassa, her cargo and freight
[1970] 1 All ER 848
Categories: SHIPPING; SALE OF GOODS
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BRANDON J
Hearing Date(s): 25, 26 NOVEMBER, 16 DECEMBER 1969
Sale of goods – C and f contract – Cargo sold to cargo owners by charterers of ship – Freight to be payable by cargo owners on arrival of ship – Bills of lading provided for freight to be payable at destination – Ship ran aground before reaching destination but was salved with cargo – Apportionment of liability to pay salvage reward in respect of ship and cargo – Whether freight element in price of cargo at risk of charterers or cargo owners.
By written contracts of sale dated on or about 24 February 1964 made between a firm of importers in Athens (the charterers) and timber merchants carrying on business in various parts of Greece (the cargo owners), Russian timber was sold by the charterers to the cargo owners. The contracts provided that the timber should be shipped from Russia to Greece on c and f terms and that: ‘The freight is payable in cash upon arrival of the vessel’. The charterers chartered the Pantanassa from the shipowners under a charterparty dated 10 August 1964. The timber cargo was loaded under the charterparty at Archangel about the end of October 1964. On the bills of lading there were written the words ‘Freight payable at destination’. On 4 November 1964, the Pantanassa ran aground in Norway. On 9 November 1964, the contractors were engaged to salve the ship and cargo under Lloyd’s standard form of salvage agreement by the master ‘as Agent for the vessel her cargo and freight and the respective owners thereof … ’ The contractors rendered successful salvage services to the ship and cargo. The salvage agreement contained arbitration provisions whereby the amount of salvage reward payable by owners of salved interests was to be fixed by arbitration in London or, in the event of an appeal from the award (such as in fact took place), by an appeal arbitrator. In relation to the determination of the proportions in which the persons interested in the salved property were liable to pay the salvage reward, the appeal arbitrator stated a special case for the opinion of the court, the question being whether the freight element in the purchase price of the cargo salved was at the risk of the charterers or the ship owners or the cargo owners. On the reference to the court it was agreed that freight, on any view of the matter, was not at the risk of the shipowners and that the only live question was whether it was at the risk of the charterers or formed part of the cargo value. On the assumptions that a claim for salvage lay against charterers as owners of freight at risk, that the reference to ‘owners of freight’ in the relevant provision of the salvage agreement included charterers so that the master at least purported to make the agreement on their behalf, and that, if the master purported to make the agreement on the charterers’ behalf he had authority to do so.
Held – The freight element in the price of the timber was at the risk of the charterers and not of the cargo owners (see p 857 h, post), because—
(i) the natural and ordinary meaning of the words ‘The freight is payable in cash upon arrival of the vessel’ in the contract of sale between the charterers and the cargo owners was that the freight was payable if and when the Pantanassa arrived at her port of destination and that, if the ship did not arrive, it was not payable (see p 854 h, post); Fragano v Long (1825) 4 B & C 219 distinguished;
(ii) it was the accepted view that under a cif contract in which freight collect
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bills of lading were used the buyer’s obligation to pay freight was conditional on the arrival of the goods (see p 855 h, post); (dicta of Blackburn J in Ireland v Livingston [1861–73] All ER Rep at 590 applied); the c and f contracts in the present case were contracts in which such bills of lading were used, so that the buyer’s obligation to pay freight might be expected to be conditional on the arrival of the goods; in fact the language used was readily capable of having that effect and there was no reason for trying to construe it otherwise (see p 855 j, to p 856 a, post);
(iii) there was commercial difficulties in interpreting the contracts of sale as imposing on the cargo owners the obligation to pay the freight whether the ship arrived or not (see p 856 b and c, post); accordingly,
(iv) the payment of freight contemplated by the contracts of sale was, as in other cif or c and f contracts under which freight collect bills of lading were used, payment of bill of lading freight to the ship against delivery, and not payment to the charterers, or the charterers’ bank, in case delivery should never take place (see p 856 e, post).
Notes
For the incidence of risk in sale of goods, see 34 Halsbury’s Laws (3rd Edn) 76–79, paras 115–122, and for cases on the subject, see 39 Digest (Repl) 491, 387–391, and 686, 687, 1810.
For payment of freight when ship is chartered, see 35 Halsbury’s Laws (3rd Edn) 485, 486, paras 692, 693, and for cases on the subject, see 41 Digest (Repl) 548–550, 3270–3282.
Cases referred to in judgment
Calcutta and Burmah Steam Navigation Co Ltd v De Mattos, De Mattos v Calcutta and Burmah Steam Navigation Co Ltd (1864) 33 LJQB 214, 10 LT 246, 39 Digest (Repl) 491, 390.
Dupont v British South Africa Co (1901) 18 TLR 24, 39 Digest (Repl) 634, 1445.
Fragano v Long (1825) 4 B & C 219, 3 LJOSKB 177, 107 ER 1040, 8 Digest (Repl) 168, 1091.
Ireland v Livingston (1872) LR 5 HL 395, [1861–73] All ER Rep 585, 41 LJQB 201, 27 LT 79, 1 Asp MLC 389, 39 Digest (Repl) 686, 1810.
Polenghi Brothers v Dried Milk Co Ltd (1904) 92 LT 64, 39 Digest (Repl) 662, 1621.
Soproma SPA v Marine and Animal By-Products Corpn [1966] 1 Lloyd’s Rep 367.
Special case
This was a special case stated on 14 July 1969 by John Naisby QC in respect of his adjudication as appeal arbitrator in an arbitration held pursuant to a contract in Lloyd’s standard form of salvage agreement dated 9 November 1964. The question of law raised in the special case is set out at p 851 e, post. In the event of the court being of opinion that the freight element in the purchase price of the cargo salved was at the risk of the charterers, the appeal arbitrator by para 20(1) of the special case found that the value of the shipowners’ interest was £40,000, that of the charterers was £38,810 and that of the cargo owners £143,167, making a total salved value of £221,977, and he awarded that the shipowners, the charterers and the cargo owners should pay to the contractors the salvage reward of £45,000 with interest thereon in the same proportions that the value of their respective interests bore to the total salved value. The facts are set out in the judgment.
Michael Thomas for the contractors.
G K Beattie for the shipowners.
Nicholas Phillips for the cargo owners.
James Rochford for the charterers.
Cur adv vult
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16 December 1969. The following judgments were delivered.
BRANDON J read the following judgment. The court has before it an award in the form of a special case stated by an arbitrator under s 22(1)(b) of the Arbitration Act 1950.
There are four parties concerned. First, Norsk Bjergningskompagni A/S, a Norwegian salvage company, whom I shall call ‘the contractors’; second, the owners of the steamship Pantanassa, whom I shall call ‘the shipowners’; third, G N Frangistas, a company or firm of import and export merchants of Athens, whom I shall call ‘the charterers’; and fourth, a group of Greek timber merchants carrying on business in various parts of Greece and the Greek islands, whom I shall call ‘the cargo owners’.
About the end of October or beginning of November 1964 the Pantanassa, which I shall call ‘the ship’, left Archangel bound for various Greek ports. She was carrying a cargo of timber, including deck cargo. The cargo had been bought by the charterers from Russian exporters, V/O Exportles, Moscow, on f o b terms, and resold by the charterers to the cargo owners on c and f terms. The charterers had chartered the ship from the shipowners to load the cargo at Archangel and to carry it to various Greek ports, in performance of their obligations both as buyers under the head contract of sale and as sellers under the contracts of resale. On 4 November 1964, a few days after sailing from Archangel, the ship ran aground near Honningsvaag in north Norway. She was refloated by her own efforts, but made so much water that she had to be beached on a sandy bottom in Vesterpollen Bay.
The contractors were engaged by the master to salve the ship and cargo under Lloyd’s standard form of salvage agreement. The salvage agreement was dated 9 November 1964. The master entered into it expressly as agent for the owners of the ship, her cargo and freight. Clause 13 of the agreement further provided:
‘The Master or other person signing this agreement on behalf of the property to be salved enters into this Agreement as Agent for the vessel her cargo and freight and the respective owners thereof and binds each (but not the one for the other or himself personally) to the due performance thereof.’
The agreement contained arbitration provisions, the effect of which was that the amount of the salvage reward payable by the owners of the salved interests was to be fixed by arbitration in London. For this purpose the original arbitrator, and, in the event of an appeal, the appeal arbitrator, were to be appointed by the committee of Lloyds. Acting under this agreement the contractors rendered successful salvage services to the ship and cargo. Subsequently the committee of Lloyds appointed J Franklin Willmer QC as original arbitrator to fix the amount of the salvage reward.
In the original arbitration the contractors claimed salvage from three parties. These were the shipowners as owners of the salved vessel, the cargo owners as owners of the salved timber and the charterers as owners of freight at risk. Notice of the original arbitration proceedings was given to all these three parties. Two of them, the shipowners and the cargo owners, took a normal part in the original arbitration, both before and at the hearing, at which they were represented by solicitors and counsel. The charterers, however, took no part and did not appear at the hearing. Despite this the original arbitrator decided to hear and determine the contractors’ claim against them, holding that he was entitled to do so under cl 15 of Lloyd’s form. At the hearing before the original arbitrator all three parties present, namely contractors, shipowners and cargo owners, put forward a common case with regard to the nature and values of the salved interests. The common case was that there were three salved interests, ship, cargo and freight at charterers’ risk; and that the values of these three interests were: ship £40,000, cargo £143,167 and freight £38,810, making a total of £221,977. This case was based on two propositions accepted by the three parties who put it forward. The first proposition was that, at the time of the salvage services, the property, or at least the risk, in the timber cargo had passed to the cargo owners. The second proposition was that freight was at the charterers’ risk. The first proposition was accepted as correct by the
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original arbitrator and its correctness has not been disputed at any stage since. With regard to the second proposition, however, the original arbitrator took the view, on the evidence before him, that freight was not at the risk of the charterers but formed part of the value of the cargo. In accordance with this view he fixed the total salvage reward at £45,000, to be paid by the shipowners and cargo owners in proportion to the values of their respective interests, which he found in the case of the ship at £40,000 and in the case of the cargo at £143,167 plus £38,810, ie £181,977. He made no award against the charterers.
There was an appeal by the shipowners and the cargo owners against that award and the committee of Lloyds appointed John Naisby QC, as appeal arbitrator. Notice of the appeal arbitration proceedings was given to the charterers but, again, they took no part in the proceedings and, again, the appeal arbitrator proceeded without them. On the appeal two matters were raised. First, it was contended by both the shipowners and the cargo owners that the total salvage reward of £45,000 was excessive. Secondly, it was contended by the cargo owners that in any case the proportion of the total reward payable by them should be based on a value of the cargo of £143,167 and not £181,977, on the ground that freight was at the risk of either the charterers or the shipowners, and that the proportion of the total reward referable to freight should, therefore, be paid by one or other of these two parties. The appeal arbitrator dealt with these two matters separately. In relation to the first matter he made an interim award affirming £45,000 as the correct amount for the total salvage reward. In relation to the second matter he stated his award in the form of a special case for the opinion of the court on the following question of law:
‘Whether on the facts found and on a true construction of the material documents the freight element in the purchase price of the cargo salved and carried to Greece was at the risk of the charterers, or the [shipowners] or the [cargo owners].’
He made three alternative awards on the basis of each of the three possible answers to that question. He further awarded, that if the special case was not set down within six weeks of publication, the third of these alternative awards, which affirmed the decision of the original arbitrator on this part of the case also, should stand.
The cargo owners set down the special case for hearing within the time prescribed, and it was argued before me on 25 and 26 November 1969. The charterers, who had been given notice of the hearing of the special case, appeared before me by counsel in addition to the other three parties. At first, counsel for the charterers was unwilling to take part in the argument. The reason for this appeared to be that he wished to keep open the point that neither arbitrator had jurisdiction to adjudicate on the claim against the charterers, and feared that, if he took part in the argument, the charterers might thereafter be precluded from taking this point. Later, however, he changed his attitude and, without objection from the other three parties, argued the merits of the special case on the charterers’ behalf. At the hearing before me it was agreed by counsel for all four parties that freight, on any view of the matter, was not at the risk of the shipowners, and that the only live question was whether it was at the risk of the charterers or formed part of the cargo value. Counsel for the contractors expressed indifference as to the outcome of this issue, since the contractors were entitled to a total salvage reward of £45,000 on either basis. Counsel for the shipowners was, as a result of the agreement just mentioned, left without an opponent. In the result the argument of the special case developed into a straight fight between the cargo owners and the charterers with the other two parties in the role of lookers-on only.
The facts material to the question of law stated by the appeal arbitrator are as follows. The timber was sold by the charterers to the cargo owners under written contracts of sale of which a typical example is annexed to the special case. That contract is dated 24 February 1964 and provided as follows:
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‘Contract of Sale No 6. It is hereby confirmed the sale by [the charterers] of the goods described hereunder in detail and under the following terms: Buyers: [the cargo owners], Kavala, Tel 32–81. Time of delivery: In three or four shipments from May until October 1964, from the ports of Archangel or Leningrad. Place of delivery: C & F Kavala—Discharge from holds at the expenses of buyers. Terms of payment: The [cargo owners] are obliged to make a telegraphic remittance for the 25% of the FOB value in the name of the [charterers] and in favour of V/O Exportles, Moscow, 20 days prior to shipment. The balance of 75% of the FOB value is payable on the arrival of the shipping documents at the Bank. The freight is payable in cash upon arrival of the vessel. Payment as above is effected on the basis of the invoice to be issued by V/O Exportles, Moscow. The difference between our invoice on the basis of the under-mentioned prices and the FOB value plus freight, is payable in cash at the time of the handling of documents. The stamp duty on the invoice to be borne by the [cargo owners].’
There follows a detailed description of the goods as regards quantity, quality and sizes, and then the price is stated in this way—‘Price per standard for the quality IV Redwood £86.50; … for the quality u/s strips £81; … for the quality IV strips £72’.
The ship was chartered by the charterers from the shipowners under a written charterparty dated Athens 10 August 1964. It was entered into for the shipowners by their Athens agents, Franco Shipping Co Ltd It was on the Russwood form with substantial alterations and additions. The provisions relating to freight are contained in cl 1, 21, 28 and 23. In cl 1 the freight is stated to be ‘£17 per St Petersburg Standard Hundred of 165 cubic feet’. Clause 21 has been altered and, as altered provides: ‘The freight shall be paid as per clause No 28.' Clause 28 provides:
‘The freight is due by Charterers in British £ Sterling from external account, on signature of Bills of Lading. The freight is deemed earned on shipment of the goods, ship lost or not lost.’
Clause 23 provides:
‘The Charterers’ responsibility under this charter shall cease upon shipment of the cargo provided such cargo is worth not less than the freight, dead freight, demurrage wheresoever incurred, and charges under clause 15, on arrival of the Vessel at port of discharge. The Master or Shipowner shall have an absolute lien upon the cargo for all freight, dead freight, demurrage wheresoever incurred, damages under clause 20(b), extra insurance under clause 6(e), lighterage at port of discharge, average, and charges under clause 15.’
The timber cargo was duly loaded under the charterparty at Archangel about the end of October 1964. Bills of lading in respect of it were issued, of which a typical example relating to a parcel of deck cargo consigned to Iraklion in Crete is annexed to the special case. It states, so far as material:
‘Shipped at Archangel in good order and condition by order of “Exportles” of Moscow in and upon the good Steamship called the Pantanassa … now lying in Archangel and bound for Iraklion, Crete, via other loading Ports; as per Charter dated 10.8.1964 … fifteen thousand nine hundred and thirty-five pieces of Redwood from Archangel quality fourth Deals, Battens, Boards and ends (as per specification on the other side of this Bill of Lading) of which all pieces on deck at Charterers’ risk to be delivered in the like good order and condition at the aforesaid Port of destination unto Order of National Bank of Greece, Iraklion, Crete or their Assigns he or they paying Freight for the same as per Charter Party dated as above. All the terms, conditions, clauses and exceptions contained in the said Charter Party apply to this Bill of Lading and are deemed
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to be incorporated herein, including clauses 23 and 24 and the liberties under clauses 8(c) and (d), 9(d), 13 and 14(b) thereof. General Average, if any, shall be settled in Moscow according to the York-Antwerp Rules 1950 … Dated in Archangel this 28th day of October 1964.’
On the left of the bill of lading, in manuscript, are these words: ‘Freight payable at destination.' It was common ground that those words, being in manuscript, were intended to override any inconsistent provisions relating to payment of freight incorporated from the charterparty by the printed words of the bill of lading.
On 29 October 1964, the charterers sent a letter to the shipowners’ Athens agents which is annexed to the special case. That letter reads as follows:
‘Please be advised that at Shipper’s request and in consideration you accepting to sign Bills of Lading “FREIGHT PAYABLE AT DESTINATION,” despite clause No 28 of Charter Party, please be advised that we will keep you harmless of any consequences from doing so and especially will consider the freight as earned on shipment of the goods, ship lost or not lost, for all purposes including General Average purposes.’
On 1 November 1964, the charterers issued a 60-day draft in favour of the shipowners for the freight due under the charterparty. The amount of the draft was paid in seven instalments between 22 December 1964 and 9 January 1965. The cargo was insured with various Greek insurance companies by the National Bank of Greece on account of cargo owners. A typical policy, with a translation, is annexed to the special case. The amounts insured under these policies exceeded the fob price of the goods, but in some cases at least was less than the fob price plus freight.
The appeal arbitrator has found, in the special case, that the cargo owners paid for the timber in accordance with their contracts of sale. It will be necessary to consider later precisely what meaning should be attached to this finding. It seems to be based, so far as the payment of freight by the cargo owners is concerned, on a letter from the shipowners’ Athens agents to the National Bank of Greece as agents for the charterers, which is annexed to the special case and has been found by the appeal arbitrator to be typical in relation to the performance of the contracts of sale between the charterers and the cargo owners. As translated that letter reads:
‘As Agents for the above ship, we have to advise you that the freight charges for STDS 182,338 of timber under Bills of Lading 1, 1A and 2 from [Archangel] amount to 3,099·15·0 pounds sterling, or £17 0·0. per STDS. The said STDS of timber belong to the following … ’
and then a distribution between four receivers is set out, after which the letter continues: ‘The said freight charges have been paid.’
The contracts of sale of the timber were made between Greek sellers and Greek buyers in Greece. They would, therefore, appear to be governed by Greek law. The charterparty provided for the adjustment of general average in Moscow and arbitration of disputes also in Moscow. It would appear, therefore, to be governed by Russian law. No point, however, was taken before either arbitrator that these agreements were governed by foreign law. In these circumstances the court must, I think, treat them as if English law applied.
Before I examine the question of law stated by the appeal arbitrator there are certain preliminary matters which I think it right that I should mention. The special case, as stated, proceeds on a number of assumptions of law, the correctness of which may be at least arguable. The first assumption is that, by English maritime law, a claim for salvage lies against charterers as owners of freight at risk. The second assumption is that the expression ‘owners of freight’ in Lloyd’s standard form of salvage agreement includes charterers so that the master purported at least to make the agreement on the charterers’ behalf. The third assumption is that, if the master
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purported to make the agreement on the charterers’ behalf, he had authority, as agent of necessity, to do so. I think that I am bound to approach this special case on the footing that these assumptions are correct, for the question of their correctness is not raised before me. In doing so, however, I must not be taken as expressing a view either way with regard to such correctness.
The argument for the cargo owners was as follows. By cl 28 of the charterparty the charterers became liable to pay the charterparty freight to the shipowners on signing of bills of lading, and such freight was deemed earned on shipment, ship lost or not lost. By the terms of the contracts of sale between the charterers and the cargo owners the freight was payable in cash on arrival of the ship. This meant that it was not payable if the ship did not arrive. Further, by the terms of the bills of lading, which formed part of the shipping documents delivered by the charterers to the cargo owners under the contracts of sale, freight was expressly made payable at destination. This meant that it was not payable if the ship did not arrive at destination. Having regard to these provisions, if the adventure had been lost during the voyage so that the ship did not arrive at destination, the charterers would have been liable to the shipowners for the full charterparty freight despite such loss. The cargo owners, on the other hand, would not have been liable for the bill of lading freight because this would not, by reason of the non-arrival of the ship, have been payable. In the result, the charterers would have had to pay out the charterparty freight, without being able to recover through the shipowners, in the form of bill of lading freight collected by them, the freight element in the price of the goods. It followed that, so far as loss of the adventure was concerned, the bill of lading freight, which represented the freight element in the price of goods, was at the risk of the charterers, not of the cargo owners.
The argument for the charterers was as follows. On the true construction of the contracts of sale the cargo owners were bound to pay the freight whether the ship arrived or not. The provision that freight should be payable on the arrival of the ship did not mean that payment was conditional on arrival. The provision governed only the time at which this element of the price of the goods should be paid, and its meaning was that freight should be paid either when the ship arrived or, if she did not arrive, when she would have arrived in the ordinary course. On this view, if the adventure had been lost, the cargo owners would still have been liable to pay to the charterers the freight element in the price of the goods. It followed that, so far as loss of the adventure was concerned, the freight element in the price of the goods was at the risk of the cargo owners, not of the charterers.
There are, as it seems to me, three strong grounds for preferring the case put forward by the cargo owners to that put forward by the charterers. These are, first, the natural and ordinary meaning of the provision relating to the payment of freight contained in the contracts of sale. Secondly, the usual position as regard such payment under c and f contracts where freight collect bills of lading are used. Thirdly, the commercial difficulties inherent in the interpretation of the contracts of sale advanced for the charterers.
I shall consider each of these grounds in turn. First, as to the natural and ordinary meaning of the relevant provision. The words are: ‘The freight is payable in cash upon arrival of the vessel.' I should have thought that meant that freight was payable if and when the ship arrived and, if the ship did not arrive, it was not payable. Fragano v Long was cited by counsel for the charterers as an authority to the contrary. In my view, however, it was a very different case on the facts and cannot be regarded as governing the present case. In particular in that case the whole price of the goods did not become payable until three months after arrival, and it seems to follow that, if bills of lading were used at all, they were freight prepaid and not freight collect. It was not, to my mind, an ordinary cif contract at all. While no case on the construction of one contract can, in general, be a binding authority on the construction
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of another and different contract, there are a number of cases which, so far as they go, point a different way from Fragano v Long. These are Calcutta and Burmah Steam Navigation Co Ltd v De Mattos, Dupont v British South Africa Co, and Polenghi Brothers v Drier Milk Co Ltd.
Secondly, as to the usual position as regards payment of freight under c and f contracts where freight collect bills of lading are used. C and f contracts only differ from cif contracts in that the sellers are not required to insure the goods for the buyer. In the case of cif contracts, payment of the freight element in the price may be effected in one of two ways. The first way is for the sellers to prepay the freight and invoice the buyer for the full cif price, which is payable by the buyer against shipping documents. The second way is for the seller to leave the buyers to pay the freight on the delivery of the goods, invoicing him only for the cif price less freight. When the first method is used the seller provides freight prepaid bills of lading. When the second method is used he provides what have conveniently been called freight collect bills of lading, ie bills of lading under which freight is payable by the receiver (who may be the buyer himself or a sub-buyer from the buyer) to the ship at the port of discharge. The distinction between the two methods was considered in Soproma SPA v Marine and Animal By-Products Corpn.
The classic description of a cif contract given by Blackburn J in Ireland v Livingston ((1872) LR 5 HL 395 at 406, [1861–73] All ER Rep 585 at 590) relates to a contract under which freight collect bills of lading are used. He said ((1872) LR 5 HL 395 at 406, [1861–73] All ER Rep 585 at 590):
‘The terms at a price, “to cover cost, freight, and insurance, payment by acceptance on receiving shipping documents”, are very usual, and are perfectly well understood in practice. The invoice is made out debiting the consignee with the agreed price (or the actual cost and commission, with the premiums of insurance, and the freight, as the case may be), and giving him credit for the amount of the freight which he will have to pay to the shipowner on actual delivery, and for the balance a draft is drawn on the consignee which he is bound to accept (if the shipment be in conformity with his contract) on having handed to him the charterparty, bill of lading, and policy of insurance. Should the ship arrive with the goods on board he will have to pay the freight, which will make up the amount he has engaged to pay. Should the goods not be delivered in consequence of a peril of the sea, he is not called on to pay the freight, and he will recover the amount of his interest in the goods under the policy. If the non-delivery is in consequence of some misconduct on the part of the master or mariners, not covered by the policy, he will recover it from the shipowner. In substance, therefore, the consignee pays, though in a different manner, the same price as if the goods had been bought and shipped to him in the ordinary way.’
It was clearly the view of Blackburn J that, under such a contract, the buyer’s obligation to pay freight was conditional on the arrival of the goods. This still seems to be the accepted view today: see British Shipping Laws, Vol 5, CIF and FOB Contracts by D M Sassoona. This passage follows statements made earlier in Kennedy on CIF Contractsb.
The c and f contracts in the present case seem to me to have been contracts under which the second method of effecting payment of the freight element in the price,
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namely, by the use of freight collect bills of lading, was intended to be, and was in fact, used. On that basis, in the light of the usual position under such contracts, one would expect to find that the buyer’s obligation to pay freight was conditional on the arrival of the goods. In fact the language used is, to put it at its lowest, readily capable of having that effect and, that being so, I cannot see any reason for trying to construe it otherwise.
Thirdly, as to the commercial difficulties inherent in the interpretation of the contracts of sale advanced for the charterers. Under a c and f contract where freight collect bills of lading are used, the ship in effect collects the freight element in the price of goods, the sanction for such collection being the ship’s lien on the goods for such freight. This is how the freight was in fact paid when the ship arrived in the present case, as is shown by the letter which is annexed to the special case. If the charterers are right in saying that freight was payable even if the ship did not arrive, to whom was it payable and where, and what was the sanction for its payment? Counsel for the charterers suggested that, in that case, the cargo owners would have to pay the charterers instead of the ship, and do so at the charterers’ Athens bank. But there is nothing about that in the contracts of sale, nor would it be a usual obligation in a c and f contract under which freight collect bills of lading are used. There would, moreover, be no sanction to enforce such payment as there usually is under cif and c and f contracts, for the documents would have been handed over at an earlier stage and there would ex hypothesi be no lien on the goods to enforce.
In my view, the payment of freight contemplated by the contracts of sale is, as in other cif or c and f contracts under which freight collect bills of lading are used, payment of bill of lading freight to the ship against delivery of the goods and not payment to the charterers or the charterers’ bank, in case delivery should never take place.
The view to which these arguments would lead differs from that arrived at by the original and appeal arbitrators. The appeal arbitrator gave no reasons for his view. I make no complaint about that, but it means that I do not know what they were.
The original arbitrator gave various reasons which I have considered carefully. Summarised, they appear to have been as follows. First, that the case is governed by Fragano v Long. Secondly, that, while it might be reasonable to construe contracts of sale as making payment of freight conditional on arrival of the goods, it was not reasonable to construe them as making such payment conditional on the arrival of the ship, whether with or without the goods. Thirdly, that the construction contended for by the charterers was more consistent with c and f contracts generally. Fourthly, that it was difficult to believe that charterers would have agreed to pay the charterparty freight in advance, ship lost or not lost, while making contracts for sale under which, if the ship was lost, the freight element in the price would not be recoverable. Fifthly, that the amount for which the cargo owners insured the goods included the freight element in the price.
Having had the benefit of very much fuller argument on the matter than the original arbitrator, I am not persuaded by these reasons. As to the first reason, I think, as I have already said earlier, that Fragano v Long is distinguishable and that a number of other cases point the other way. As to the second reason, it appears that counsel for the cargo owners conceded before the original arbitrator that, under the terms of the contracts of sale, freight would have been payable if the ship had arrived without the goods. Before me he asked for, and was given, leave to withdraw this concession. I think that the concession was mistaken. I think that the provision in the contracts of sale for payment of freight on arrival of the ship means on arrival of the ship with the relevant goods. If that is right, the argument based on counsel’s concession falls to the ground. As to the third reason, I am unable to share the view of the original arbitrator. For the reasons which I have already given I think that
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the construction of the contracts of sale put forward by the cargo owners is more consistent with the usual characteristics of c and f contracts, under which freight collect bills of lading are used, than the construction put forward by the charterers. As to the fourth reason, I do not think that it is really relevant to the question of construction involved. The contracts of sale were made in February whereas the charterparty was not made until August 1964. It may be that the charterers could only obtain a ship on terms that they paid freight in advance, ship lost or not lost. If so, the fact that they chartered the ship on those terms is not significant even with regard to their view of the meaning of the contracts of sale. In any case, their view of the effect may have been mistaken.
One thing is made very clear by their letter of indemnity to the shipowners which is that the charterers were fully aware of the difference between their own obligation with regard to payment of freight under the charterparty, and the cargo owners’ obligation with regard to payment of freight under the contracts of sale. As to the fifth reason, further evidence with regard to the amounts of the insurance effected by cargo owners was put before the appeal arbitrator, and his finding was, as stated earlier, that, while the amounts exceeded the fob price, they did not in all cases at least cover the full cost of the freight.
In these circumstances, I do not consider that any inference can be drawn from the amounts for which the goods were insured by the cargo owners. Even if the cargo owners had insured for amounts which covered the whole freight element, I do not think that that fact would assist in construing the contracts of sale for two reasons. First, it could be explained on the ground that the risk of damage, as distinct from non-arrival, was on the cargo owners in respect of the whole value of the goods including the freight element of such value. Such damage might be 90 per cent or 95 per cent, so that the cargo owners would, in any case, have an interest in insuring the full value. Secondly, while the cargo owners’ understanding of the effect of the contracts of sale might be relevant if the language were obscure, it cannot govern its effect if the language is reasonably clear.
Going back to the second reason given by the original arbitrator, it was said that the appeal arbitrator’s finding that the cargo owners paid for the goods in accordance with the contracts of sale involved a finding that they paid freight for goods that were not carried to destination, as well as for those which were. It was said that the finding involved this because of the appeal arbitrator’s view as to the obligation with regard to payment of freight under the contracts of sale. This may be a correct interpretation of the appeal arbitrator’s findings, although I feel some doubt about it, but assuming it is, I do not see that it helps much in construing the contracts of sale. There could be various reasons for the cargo owners paying freight on nonarrived goods, especially if they were in the same parcel as arrived goods, and I do not think that the only inference is that they thought that they were legally bound to do so. But, in any case, even if they did think that they were legally bound to do so, their view cannot, on this point any more than the other point discussed earlier, govern the effect of the contracts if the language used is reasonably clear.
In my judgment, for the reasons which I have given, the argument for the cargo owners is right and that for the charterers is wrong. I shall, accordingly, answer the questions stated by the appeal arbitrator in para 5 of the special case by saying that the freight was at the risk of the charterers. The result of that will be that the alternative award in para 20(1) of the special case (See p 849 h, ante) will take effect.
Order accordingly.
Solicitors: William A Crump & Son (for the contractors); Norton, Rose, Botterell & Roche (for the shipowners); Waltons, Bright & Co (for the cargo owners); Middleton, Lewis & Co (for the charterers).
N P Metcalfe Esq Barrister.
D’Silva v Lister House Development Ltd
[1970] 1 All ER 858
Categories: LANDLORD AND TENANT; Tenancies
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 29, 30, 31 OCTOBER, 3, 5, 6 NOVEMBER 1969
Landlord and tenant – Lease – Execution – Counterpart lease and lease both executed but not exchanged – Lessor a limited company – Whether company executed lease in escrow – Absence of evidence of intention of those executing lease on behalf of company – Law of Property Act 1925, s 74(1).
Landlord and tenant – Tenancy – Periodic tenancy –Creation – Sub-tenant going into possession – Payment of rent – Whether sub-tenant entitled to protection of interest valid between himself and immediate landlord – Sub-tenant not party to headlease – Landlord and Tenant Act 1954, s 23(4).
By a lease from a company concerned with the management of a large estate in the Harley Street area of London the defendant company was the tenant of Lister House. The lease contained a covenant by the defendant company not to carry on any profession, trade or business on the premises without the prior consent of the landlord. The plaintiff, a registered medical practitioner, was looking for a suite of consulting rooms in the area. The plaintiff’s business adviser opened negotiations for the grant of a lease of rooms in Lister House subject to contract with the defendant company. In due course the plaintiff’s solicitors returned the draft lease approved to the defendant company’s solicitors and it was agreed between the parties that the plaintiff should be allowed into possession for the purpose of carrying out redecoration on the payment of one quarter’s rent. This rent was paid and the plaintiff went into possession on 21 March 1968. On 1 April, the plaintiff’s solicitors returned the counterpart of the lease duly executed by the plaintiff. On 8 April, the defendant company applied to the head landlord for a licence in respect of the plaintiff’s use of the premises. On 10 April, the seal of the defendant company was affixed to the engrossment of the lease. On 11 April, the head landlord replied that it was not prepared to grant the necessary licence in respect of the plaintiff as his name did not appear in the English section of the medical register. The defendant company was pressed by the head landlord to recover possession of the consulting rooms and threatened with forfeiture if it failed to remedy its breach of covenant. On a claim by the plaintiff for specific performance of an agreement between the plaintiff and defendant company by correspondence and for an order that the defendant company execute the lease.
Held – (i) The plaintiff was not entitled to specific performance because there was no agreement established between the parties, since negotiations subject to contract for the grant of a lease remained in a state of negotiation until exchange of the lease and counterpart (see p 865 j, to p 866 a, post).
Eccles v Bryant [1947] 2 All ER 865 applied.
(ii) As there was no evidence whether it was or was not the intention of those executing the lease on behalf of the defendant company that the grant of the lease should be conditional on the approval of the landlord, the lease must be taken to have been duly executed as a deed and not as an escrow and was binding on the defendant company under s 74(1)a of the Law of Property Act 1925(see p 867 j, post); and since the plaintiff was not a party to the headlease, s 23(4)b of the Landlord and Tenant Act 1954 was not applicable (see p 868 j, post) with the result that the plaintiff was entitled to protection under Part 2 of that Act as a sub-tenant having an interest
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in property valid between himself and his immediate landlord (see p 869 j, post).
(iii) Alternatively, the plaintiff became a quarterly tenant of the defendant company by going into possession on payment of a quarter’s rent (see p 868 f, post) and was equally entitled to protection under Part 2 of the Landlord and Tenant Act 1954 for the reasons stated in holding (ii), supra.
Notes
For offer and acceptance, see 8 Halsbury’s Laws (3rd Edn) 76–78 paras 130, 131, and for the essentials of an informal contract, see 23 ibid 441, 442, para 1041, 1042 and for cases on the subject, see 12 Digest (Repl) 53–56, 287–310.
For the requirements for the execution of a deed by a corporation, see 9 Halsbury’s Laws (3rd Edn) 17, para 26, and for cases on the subject, see 17 Digest (Repl) 221–225, 200–255.
For business tenancies, see 23 Halsbury’s Laws (3rd Edn) 885, 886, para 1707; and for cases on the subject, see 31 Digest (Repl) 32–44, 1890–2025.
For the Law of Property Act 1925, s 74, see 20 Halsbury’s Statutes (2nd Edn) 580 and for the Landlord and Tenant Act 1954, s 23, see 34 ibid 408.
Cases referred to in judgment
Beesly v Hallwood Estates Ltd [1961] 1 All ER 90, [1961] Ch 105, [1961] 2 WLR 36, 21 Digest (Repl) 377, 1135.
Dick v Jacques (1920) 36 TLR 773, 31 Digest (Repl) 711, 7974.
Eccles v Bryant [1947] 2 All ER 865, [1948] Ch 93, [1948] LJR 418, 12 Digest (Repl) 70, 396.
Parker v Jones [1910] 2 KB 32, 79 LJKB 921, 102 LT 685, 31 Digest (Repl) 587, 7063.
Radnor (Earl of) v Lovibond & Co Ltd [1958] 108 Law Journal 204.
Cases also cited
Bain v Fothergill (1874) LR 7 HL 158.
Bolton (HL) Engineering Co Ltd v TJ Graham & Sons Ltd [1956] 3 All ER 624, [1957] 1 QB 159.
Bounnewell v Jenkins (1878) 8 Ch D 70.
Day v Singleton [1899] 2 Ch 320.
Edgware Estates Ltd v Coblentz [1949] 2 All ER 526, [1949] 2 KB 717.
Filby v Hounsell [1896] 2 Ch 737, [1895–99] All ER 427.
Hollington Brothers Ltd v Rhodes [1951] 2 All ER 578.
Isaac v Hotel de Paris Ltd [1960] 1 All ER 348, [1960] 1 WLR 239.
Leveson v Parfum Marcel Rochas Ltd (1966) Estates Gazette 407.
Oak Property Co Ltd v Chapman [1947] 2 All ER 1, [1947] KB 886.
Raingold v Bromley [1931] 2 Ch 307, [1931] All ER Rep 822.
Rossiter v Miller (1878) 3 App Cas 1124, [1874–80] All ER Rep 465.
Sayers v Collyer (1884) 28 Ch D 103, [1881–85] All ER Rep 385.
Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 All ER 941, [1969] 2 QB 609.
von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, [1911–13] All ER Rep 148.
Wheeler v Mercer [1956] 3 All ER 631, [1957] AC 416.
Action
In this action Dr Ronald Patrick D’Silva claimed, inter alia, specific performance of an alleged agreement with the defendant company, Lister House Development Ltd, for the grant of a lease to him of certain consulting rooms and an order that the defendant company execute the lease. The facts are set out in the judgment.
M J Dunkerly for the plaintiff.
Mark Myers for the defendant company.
Page 860 of [1970] 1 All ER 858
6 November 1969. The following judgments were delivered.
BUCKLEY J. The plaintiff in this case, Dr D’Silva, is a doctor who lives and practises at Luton and who, since the end of March or early in April 1969, has also been using consulting rooms at Lister House, Wimpole Street, London, as consulting rooms where he sees patients and where patients attend for treatment by a qualified nurse whom the doctor employs. This action arises out of the circumstances in which the plaintiff went into possession of that consulting room. The defendant company, Lister House Development Ltd, is a tenant of Lister House under a lease of 6 July 1936 from a company called General Real Estates Investment and Trust Ltd, which is a company that is concerned with the ownership and management of the estate in the area of London in and around Harley Street known as the Howard de Walden Estate. By the terms of that headlease the defendant company covenanted with the other parties or one of them, inter alia, in the following terms:
‘That (without the previous consent which may be temporary or permanent revocable or irrevocable or otherwise howsoever formed or qualified of the lessor) there shall not be carried on or exercised in or upon any part of the said premises any profession trade or business whatsoever with the exception that the portion thereof forming the ground floor of the said messuage shall be used as and for consulting rooms by such medical surgical or dental practitioners (not exceeding 12 in number) in respect of whom personally the lessor may from time to time grant permission by licence in its usual revocable form or such other form and subject to such conditions as it may think fit for him or her to practise on the said ground floor … ”
The plaintiff had been anxious to find consulting rooms in the Harley Street neighbourhood from about the end of 1967. His business affairs were looked after by a personal friend, Mr James Neville-O’Brien, who was engaged in commercial business activities with other members of the plaintiff’s family and who on account of that association seems to have undertaken on a non-remunerative basis the complete management of all the plaintiff’s financial and other business affairs, apart from his actual medical practice.
Mr O’Brien has a sister, Anne Neville-O’Brien, who is employed by a firm of estate agents called Henry & James as a negotiator. In November 1967, when the plaintiff first started trying to find consulting rooms in London, an approach was made on his behalf in respect of some accommodation at 98 Harley Street, the freehold of which forms part of the Howard de Walden Estate. That application came to nothing. Later other accommodation which might have suited the plaintiff’s needs was found at 78 Harley Street and negotiations were opened with a view to his acquiring a consulting room at that address from a Mr J A Reid. The freehold in 78 Harley Street also forms part of the Howard de Walden Estate.
Miss O’Brien told me that she had been aware of the fact that the plaintiff wanted to acquire a consulting room in this part of London since about November 1967. Although her brother was in constant contact with the plaintiff, it seems that Miss O’Brien only met him on comparatively rare occasions, but they were social acquaintances, perhaps one would say friends. In February 1968, Miss O’Brien made contact with the office of Mr John Sunley, who is a director of a company which is called Bernard Sunley Investment Trust (Management) Ltd and is part of the group of companies of which the defendant company forms an element. As the result of that contact, on 2 February 1968, a Mr Liney, who was employed in that company as an estate management surveyor was instructed by Mr Sunley’s secretary to give details to Miss O’Brien of suite 7 at Lister House and also of flat 4 at Lister House.
Mr Liney attempted to make contact with Miss O’Brien on 7 February; he was not successful in doing so on that day, but on the following day he did talk to her on the telephone and he gave her particulars of suite 7, which is the consulting room suite of which, as I said at the beginning of this judgment, the plaintiff has been in possession for some months. Miss O’Brien says that at that time she did not mention
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the plaintiff’s name to Mr Liney and did not tell him that she had a doctor who was interested in taking this accommodation. She says that she did not communicate that information to Mr Liney until shortly after 6 March. On this part of the case there is a conflict of evidence, for Mr Liney says that on 7 February 1968, Miss O’Brien told him that the plaintiff might be interested in taking suite 7 and it is a fact that on the memorandum written in Mr Liney’s own handwriting, which originated on 7 February and which has a note added dated 8 February 1968, the plaintiff’s name appears in connection with a conversation which, according to the note, took place on 8 February 1968.
Ar this time the plaintiff was still in negotiation through Mr O’Brien for a consulting room at 78 Harley Street. On 20 February, Howard de Walden Estates Ltd wrote a letter to the firm of estate agents who were then acting for the plaintiff in connection with that application, in which they said:
‘We note that [the plaintiff] is in the commonwealth section of the Medical Register but as he is not in this country’s medical directory, we regard that we are not prepared to give our consent in this case.’
At that time the medical register was divided into two parts, in one part of which were recorded the names of all the registered medical practitioners who had qualified in this country and in the other part of which were recorded the names of medical practitioners who had qualified in other countries, either in the Commonwealth or elsewhere abroad, and the ground of objection to the plaintiff which was taken by Howard de Walden Estates Ltd was that his name appeared in the latter section of the register and not in the former. It was explained in evidence that those doctors whose names appeared in the latter section of the register were equally as qualified to practise as medical practitioners in this country as the doctors whose names appeared in the former part of the register; but, nevertheless, on 20 February 1968, the Howard de Walden Estate took this ground for refusing to agree to what, I suppose, would have been a sublease of a consulting room at 78 Harley Street to the plaintiff.
On 6 March 1968, Miss O’Brien wrote a letter to her brother in which she told him that Mr Liney of Mr John Sunley’s company had got a consulting room going at Lister House. She said that it was after she had written that letter, that she communicated with Mr Liney again and told him for the first time, according to her evidence, the name of the plaintiff as a possible tenant of suite 7. Mr Liney is perfectly clear in his recollection that he was given the plaintiff’s name on 8 February 1968, and that he could have got it from no other source than Miss O’Brien and, indeed, it has not been suggested that he could have got it from any other source. I think that Miss O’Brien has become confused about the sequence of events. I think that it is clear from the document in Mr Liney’s handwriting that he was told the name of the plaintiff on 8 February 1968, and that he was given the plaintiff’s name on that occasion by Miss O’Brien.
Following on the letter of 6 March 1968, from Miss O’Brien to her brother, Mr O’Brien made contact with Mr Liney by telephone and he says that from then on he took over the negotiations on the plaintiff’s part. Although I accept that that is substantially true, it is not wholly true, for on 13 March 1968, Miss O’Brien writing on the professional paper of her employers’ firm Henry & James, wrote to Bernard Sunley Investment Trust (Management) Ltd a letter in these terms:
‘Re: Ground Floor, Suite 7, Consulting Rooms 11/12 Wimpole Street, London, W.1. We write to confirm that [the plaintiff] 91 Strathmore Avenue, Luton, proposes to take a lease of the above subject to contract. The solicitors acting for him are … ’
Then the solicitors’ names are given as well as the names of references in support of the plaintiff’s application and the letter goes on:
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‘Please forward the draft lease to [the plaintiff’s] solicitors as soon as possible, as possession is required at the earliest possible date. Should you require any other information, please telephone me.’
Then she signs it: ‘per pro Henry & James’.
The references were in due course taken up and, from 18 March onwards, the matter is dealt with in correspondence between the solicitors acting for the defendant company, Messrs Brecher & Co, and the solicitors acting for the plaintiff, Messrs Clayton & Co. On 18 March, Messrs Brecher & Co wrote to Messrs Clayton & Co:
‘We understand you are representing [the plaintiff] in the proposed lease of the above suite from [the defendant company] for a term of five years commencing on the 25th instant at an exclusive annual rent of £650 and that [the plaintiff] will be responsible for all legal costs and fees in connection with the grant of the proposed lease. Kindly confirm. We are taking in hand the preparation of the draft lease and hope to send this to you for approval when ready.
Mr Muller of Messrs Clayton & Co, whose name was in fact one of the names which had been given as referees, answered an application to give a reference for the plaintiff on 19 March 1968. On the same day Messrs Clayton & Co wrote to Messrs Brecher & Co acknowledging the latter’s letter, saying that they had been instructed by the plaintiff, and asking for the draft lease as soon as possible. On 19 March, Messrs Brecher & Co wrote enclosing the draft lease for approval, together with a spare copy and the letter states:
‘The draft sent herewith being in standard form used by [the defendant company] for letting in Lister House, no alterations will be permitted.’
On 20 March, Messrs Clayton & Co returned the draft lease, approved on the plaintiff’s behalf. In their letter they wrote:
‘We look forward to receiving the engrossment of the counterpart for signature fairly quickly. It would be appreciated if you would be good enough, if possible by telephone tomorrow, to let us know whether [the plaintiff] may take possession for the purpose of redecoration. We are ready to exchange immediately and would like if possible to complete this matter early next week.’
On 21 March, Messrs Brecher & Co wrote to Messrs Clayton & Co thanking them for that letter enclosing the draft lease approved, stating that they were having the draft engrossed and were hoping to send it for signature early in the following week. Then they continued:
‘In the meantime, we confirm our telephone conversation agreeing to hand over the keys of the premises to [the plaintiff] and in that respect we have contacted him for the purpose. We also confirm having obtained your agreement to call for a quarter’s rent in advance from [the plaintiff] in exchange of the keys.’
Mr Muller in his evidence said that on about 20 or 21 March Mr de Souzatelephoned him and said that the plaintiff could take possession provided that he paid a quarter’s rent. He says that Mr de Souza told him that he had enquired of the defendant company if the plaintiff could take possession and the answer was: ‘Yes, he could’, and Mr Muller was asked to ensure that the plaintiff would pay a quarter’s rent in advance. That was the telephone conversation which was referred to in the last letter that I have read.
On 21 March, Mr O’Brien and the plaintiff collected the keys from Messrs Brecher & Co’s office and a cheque was given drawn by the plaintiff in favour of Bernard Sunley Investment Trust (Management) Ltd for £162 10s, being one quarter’s rent or being a sum equal to one quarter’s rent under the proposed lease. The plaintiff then went to Lister House for the first time. He had not until this stage
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of the proceedings visited the premises at all, but Mr O’Brien had done so on two previous occasions to see what their condition was and to see whether they were suitable for the plaintiff’s purposes. The plaintiff went into possession on 21 March, he carried out certain redecoration and it may be other works, and sometime fairly soon after the beginning of April he began to practise there.
Meantime, to go on with the correspondence, on 22 March 1968, Messrs Brecher & Co wrote to Messrs Clayton & Co:
‘… we confirm having handed over to [the plaintiff] two keys to the premises in exchange for his cheque in the sum of £162 10s. being the first quarter’s rent payable under the lease … ’
On 22 March, they sent the engrossment of the counterpart to Messrs Clayton & Co for execution by the plaintiff, accompanied by a note of their charges, which were to be paid by the plaintiff.
On 10 April, the seal of the defendants was affixed to the engrossment of the lease by the assistant secretary of the defendant company and that seal was countersigned by the secretary of the company on 15 April and by Mr John Sunley, a director of the company, on 18 April. Meanwhile, on 1 April 1968, the executed counterpart, which the plaintiff had executed, was sent to Messrs Brecher & Co together with their fee.
Mr Liney was aware of the fact that under the terms of the headlease under which the defendant company held their interest in Lister House the consent of the landlord would be necessary to the use of suite 7 by the plaintiff, under the user clause in that lease which I read earlier. He says that on about 15 March, he dictated a letter to go to the head landlords asking for their licence or consent, but by an oversight that letter was never typed and never dispatched. It was not until 8 April that he discovered this and he then wrote to Howard de Walden Estates Ltd making formal application for a licence to be granted in respect of the plaintiff’s use of suite 7.
On 11 April, a letter came back from Howard de Walden Estates Ltd saying that they regretted that as the plaintiff’s name did not appear in what they described as ‘our Medical Directory’ they were not prepared to grant the necessary licence and they never have been prepared to grant the necessary licence, notwithstanding efforts which the defendant company have made to induce them to change their minds.
So the position was that the plaintiff was in occupation of the consulting room. He had executed the counterpart lease and the defendant company had executed the lease, but there had been no exchange of the lease and the counterpart. The counterpart had been sent by Messrs Clayton & Co to the defendant company’s solicitors, but the lease itself sealed by the defendant company was still in the possession of the defendant company.
The plaintiff had put up a name plate at Lister House in the hall in his own name and had also put a plate with his name on it on the door of suite 7. Those were removed, under instructions from the defendant company, by the porter at Lister House. By cheque dated 29 June 1968, a further sum of £162 10s was paid by the plaintiff to Bernard Sunley Investment Trust (Management) Ltd in respect of the consulting room. That sum was accepted without prejudice on 1 July 1968.
It seems that the seal had been attached to the lease without the authority of any resolution of the board of the defendant company, but on 31 July 1968, at a board meeting held on that day a resolution is minuted as having been passed resolving that the signing and sealing of, amongst other documents, this lease was approved and confirmed. The secretary of the defendant company, who gave evidence, said that the inclusion in that resolution of the execution of this lease was a mistake, that it ought not to have been included, because of the outstanding difficulty about obtaining the head landlord’s licence. The defendant company has been pressed by the head landlords to recover possession of the consulting room from the plaintiff
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and they have been threatened with proceedings for forfeiture of their lease of Lister House if they fail to remedy the breach of covenant involved in allowing the plaintiff to practise in the consulting room without the consent of the head landlords.
This action was commenced on 22 May 1968. The plaintiff alleges in the first place that there was an agreement for a lease by correspondence between the defendant company’s solicitors and his own solicitors. In that respect he relies particularly on the letters of 19 March, 20 March, 21 March, 22 March and 1 April, to all of which I have referred. He goes on to say that that agreement has been partly performed, in that the plaintiff has entered into possession of the suite and has paid the first quarter’s rent and that he has spent, it is alleged, approximately, £1,500 on decorating and equipping the suite. I have not been concerned with the quantification of that sum in this action and I do not know how much in fact the plaintiff spent, but I do not think it is disputed that he did spend some money in redecoration of the consulting room.
Then the plaintiff in his statement of claim relies on the fact that the lease was in fact executed by the defendant company and says, as an alternative plea, that in consequence of his going into possession and paying rent, as I understand it, he has become a periodic tenant of the defendant company and as such he is entitled to be protected under Part 2 of the Landlord and Tenant Act 1954. He asks for specific performance of the alleged agreement and an order that the defendant company execute the lease; he asks for a declaration in respect of his right to put up name plates and an injunction to restrain the defendant company from removing or interfering with his name plates, and ancillary relief.
The defendant company admits having executed the lease, but they say that in the circumstances of the case it was executed only as an escrow and not as a deed immediately binding, the condition of the escrow being, as I understand it, that the defendant company should be successful in obtaining the necessary licence from the head landlords, which they are unable to obtain, and in these circumstances they counterclaim for possession of the consulting room and mesne profits.
In his reply the plaintiff specifically denies that Miss O’Brien acted as his agent at any time and he denies that she was orally informed by Mr Liney that the licence of the head landlords was required. With regard to that last-mentioned matter, Miss O’Brien’s evidence was to the effect that she was well aware of the difficulty which the plaintiff had experienced with regard to 98 and 78 Harley Street and she was particularly anxious that any application of the plaintiff in respect of Lister House should not be vulnerable, as far as any consent on the part of the Howard de Walden Estate to his practising there was concerned. She says that when she got into touch with Mr Liney, shortly after 6 March, she told him about this and she received an assurance from him that the property, Lister House, was owned by the Bernard Sunley Group of companies, or one of the companies in that group. She thinks that she was told that they had a long lease of 99 years, or something of that order, and she also thought that she might have been told that the Howard de Walden Estate was the freeholder; but she was emphatic that she was told that they would have nothing whatever to do with this application. She seems to have been under the impression that the difficulty which had arisen before was that the Howard de Walden Estate had been dissatisfied with the plaintiff’s references.
What she clearly had in her mind was that she had been told by Mr Liney that the defendant company would not have to forward the plaintiff’s references to the freeholders. She says that Mr Liney assured her that references would only be required for Bernard Sunley, she called it, which really means for the defendant company in this context, that at any rate what was good enough for the defendant company would be good enough for the Howard de Walden Estate.
It is clear, I think, from her evidence that by 7 or 8 March when she spoke to Mr Liney, following her letter of 6 March to her own brother, Miss O’Brien knew that the Howard de Walden Estate owned the freehold of the property, and she
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said, and I accept her evidence, that she told the plaintiff and her brother this shortly after the time when she learned it from Mr Liney. Mr O’Brien thinks that she was mistaken about the date when she told him this, but I do not think that she was. I think that she did tell him that the Howard de Walden Estate was the owner of the freehold, but the conversations between Mr Liney and Miss O’Brien and the conversations between Mr Liney and Mr O’Brien were probably calculated to convey the impression that the Howard de Walden Estate had really no substantial interest in the qualifications or the character of the plaintiff and that any application to them for any licence that might be required or for any approval that might be necessary would be a mere formality, for that was the view which Mr Liney himself held.
Both Miss O’Brien and Mr O’Brien were very anxious to satisfy themselves that the plaintiff would not run into any further difficulty about obtaining the approval of the Howard de Walden Estate to his tenancy of this consulting room. They wanted to be satisfied that the Howard de Walden Estate could not interfere with the outcome of the negotiations which they were conducting with the defendant company and, in those circumstances, it is not surprising that they would have been satisfied with Mr Liney’s assurance that the Howard de Walden Estate really had no substantial interest in the question at all and that any application to them for approval was a mere matter of form.
I am conscious of the fact that that view of the conversations between Mr Liney, Miss O’Brien and Mr O’Brien is not consistent with the evidence which they have given, but Mr Liney was quite evidently aware of the fact that, as a matter of form at least, the approval of the Howard de Walden Estate had to be obtained. I cannot believe that when the position of the Howard de Walden Estate was raised in the course of these conversations, as it was both by Miss O’Brien and Mr O’Brien, Mr Liney told them that the Howard de Walden Estate had nothing whatever to do with this property or that he told them that the consent of the Howard de Walden Estate would not be required. What he told them, I think, was that it was purely a matter of form and not of substance.
There was some discussion whether the letter written by Miss O’Brien on 13 March was one which she wrote on the plaintiff’s behalf as his agent, or whether it was one that she wrote in some other capacity. She herself, in her evidence, expressed the view that her clients were the Bernard Sunley Companies and that she was not acting for the plaintiff, but that she was reporting in this letter to her own clients what she had learned about the plaintiff’s application. She regarded herself, according to her evidence, as negotiating with the plaintiff, not as negotiating on his behalf; but I find it very difficult to read the letter of 13 March in that way, for this reason if for no other reason, in the letter she says that the plaintiff proposes to take a lease subject to contract. Unless she put in the words ‘subject to contract’ of her own initiative she must, I suppose, be taken to have been reporting something which she had been told by somebody else, but I have not heard one word of evidence to suggest that anybody told her that the plaintiff’s proposal to take a lease was subject to contract.
This is a letter which I think she wrote possibly in a somewhat muddled frame of mind, possibly without thinking on whose behalf she was acting, but she wrote it to put forward to the defendant company or to Bernard Sunley Investment Trust (Management) Ltd, to whom the letter is addressed, which is a company associated with the defendant company, the plaintiff’s proposal to take a lease subject to contract. I think that the result of that is that this letter must be treated as one written by Miss O’Brien on the plaintiff’s behalf opening negotiations for a lease of the consulting room, on the terms that those negotiations should be what is commonly described as ‘subject to contract’.
It is, I think, clearly established by authority that negotiations subject to contract for the grant of a lease remain in a state of negotiation until exchange of lease and
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counterpart. The authority for that is Eccles v Bryant. Accordingly, that letter is a bar to any claim by the plaintiff that there was here a contract by correspondence, for the correspondence must, I think, be taken as correspondence in the course of negotiations which were conducted on the footing that everything would remain in a state of negotiation until exchange of lease and counterpart. Moreover, it is also established by the same authority and by cases that are referred to in the judgment in Eccles v Bryant that letters written by solicitors acting as solicitors relating to a proposed grant of a lease, or relating to a proposed acquisition of property by sale, are letters written by agents of the parties who have no authority to conclude a contract; they are not written by agents within whose ostensible authority there lies the function of making a contract.
The letters relied on here are letters between solicitors and in the absence of special authority, in my judgment, they cannot be relied on as constituting a contract by correspondence. On these two grounds I think that the plaintiff’s claim that there was here a contract for a lease by correspondence fails.
It has been contended on the plaintiff’s behalf that at 21 March, when the plaintiff went into possession and paid £162 10s, the parties changed their minds as to the subject to contract nature of the negotiations and that a new basis of treating was then adopted, as a result of which there then came into existence an agreement by implication that the plaintiff should be entitled to a lease on the terms of the draft which had then been approved on both sides. I do not feel that I can accept that view, for all the documentation seems to indicate that the parties still contemplated that there would be an exchange of the lease and counterpart, that is to say, that matters would proceed in a way wholly consistent with the subject to contract nature of the earlier negotiations.
I come next to the element of the case which concerns the sealing of the lease by the company. Section 74(1) of the Law of Property Act 1925, provides:
‘In favour of a purchaser a deed shall be deemed to have been duly executed by a corporation aggregate if its seal be affixed thereto in the presence of and attested by its clerk, secretary or other permanent officer or his deputy, and a member of the board of directors, council or other governing body of the corporation, and where a seal purporting to be the seal of a corporation has been affixed to a deed, attested by persons purporting to be persons holding such offices as aforesaid, the deed shall be deemed to have been executed in accordance with the requirements of this section, and to have taken effect accordingly.’
In the present case the seal of the defendant company was affixed to the lease and it was attested by the company’s secretary and a director. Therefore, the deed must be taken to have been duly executed by the defendant company. Counsel for the defendant company said that that only refers to the due authority of those who have affixed the seal of the company to the document and that it does not extend to or answer the question whether the document has ever been delivered by the defendant company. In my judgment, that is a fallacious view. The section states that the document is to be deemed to have been duly executed and execution imports not only sealing the document, but also delivering it as an executed document, ie a document binding on the party who executed it either to take effect immediately as a deed immediately binding, or to take effect subject to some condition as an escrow. Once a document has been sealed by a company in circumstances satisfying the requirements of the section it is not, in my judgment, in the same position as a document signed and sealed by a private individual in the privacy of his own library and then put into a drawer without any further act showing that he intended it to be treated as a deed immediately binding on him, or a deed signed and sealed by an individual and handed to his solicitors to await delivery at some later date; it is a deed which
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has to be treated as executed and, therefore, it must be treated as a deed binding on the company either immediately, or as an escrow.
The question in the present case is whether, having regard to the surrounding circumstances and the conduct of the parties, it is right to regard this lease as having been executed by the defendant company as an escrow, or whether I ought to regard it as having been executed as an immediately binding deed. The management of this part of the defendant company’s business was under the control of the head of the management department, who was Mr Graves. He was the superior of Mr Liney. Mr Graves was aware of the necessity for the head landlord’s approval of the plaintiff’s use of the consulting room and his view was that until that licence was obtained the lease, although executed, would not be binding on the defendant company. He said:
‘We [ie the defendant company] would not consider ourselves bound by the document until the licence was obtained.’
The same view was expressed by Mr Liney.
I do not think that I am here concerned directly with what the views of those who were interested on the plaintiff’s side were, because the problem to be considered in this connection is what was the intention of the defendant company when the lease was executed. I have had no evidence as to what was in the mind of Mr Sunley, the director who countersigned the sealing of the deed. I have had evidence from Mr Williams, the secretary, who said in the course of his evidence that he could not be sure that he had had the need of the head landlord’s licence in mind when he signed the lease.
The argument which has been presented is that the only intention that is really of any significance here was the intention of Mr Graves and Mr Liney, being the persons who managed this branch of the defendant company’s business. I do not accept that view. What I have to consider is what was the intention of those who executed the deed at the time when the deed was executed. The defendant company, of course, could only execute the deed by the instrumentality of its officers or agents and the people who were authorised to execute deeds were not Mr Graves or Mr Liney, but the directors of the defendant company. As I say, I have had no evidence directed to what the intention of those parties was and I have not even got evidence to indicate that they would have been likely to have in mind the fact that in this instance the approval of the head landlord was necessary.
As I understand it, other properties owned by the defendant company are capable of being let without any consent being obtained. There is no suggestion that when this document was executed anybody addressed his mind to the question whether or not the head landlord’s approval was necessary to the particular proposed user of the consulting room and, it seems to me that the intention of Mr Liney and Mr Graves is really irrelevant to this, for they are not the persons who execute deeds on behalf of the defendant company.
Accordingly, in my judgment, the evidence does not establish satisfactorily, or indeed at all, that it should be taken as having been the intention of the defendant company that this lease should be executed only subject to a condition and as an escrow. It is very unfortunate, because evidently this is the result of an oversight in the defendant company’s management; but, in my judgment, the lease was executed unconditionally and consequently I must take it as having been duly executed, for that is what the section of the Law of Property Act 1925 requires me to accept, and as duly executed in a form and in circumstances which rendered it immediately binding on the defendant company. If that is the position then, at any rate as soon as the plaintiff sent his counterpart duly executed to the company, the lease was effective in accordance with the decision in Beesly v Hallwood Estates Ltd.
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If I am wrong in that view, there is the further question to be considered what was the effect of the plaintiff’s being let into possession in these circumstances? The view which has been put forward on behalf of the defendant company in this respect is that possession was asked for a particular purpose, ie to allow the plaintiff to carry out redecoration. Certainly that was the purpose for which possession was asked before the date at which the tenancy was stipulated to commence, but when that was asked for the defendant company’s solicitor made contact with his principals and, as the result of instructions which he then obtained, he told Messrs Clayton & Co that the plaintiff could go into possession if the plaintiff paid one quarter’s rent in advance. It was not stipulated that he should only go into possession for the purpose of carrying out redecorations or anything of that kind. He was to be allowed to go into possession before 25 March if he paid one quarter’s rent in advance. I think that it is not insignificant that in one of the letters that is referred to as a quarter’s rent under the lease.
Mr Liney gave evidence, and I should like to say that he gave his evidence very clearly and well. He gave evidence to the effect that a quarter’s rent, or what he regarded as a sum equivalent to a quarter’s rent, was asked for as a security for the performance of a certain undertaking. He says that he had instructed Mr de Souza, the solicitor acting for the defendant company, that before the plaintiff was let into possession he should be required to give an undertaking that he would execute the lease when the licence had been obtained. No such undertaking was ever in fact exacted, but Mr Liney regarded the payment of £162 10s as security for the performance of that undertaking. He was not, I think, very clear precisely what that imported.
I think probably in the upshot it comes to little more than that the £162 10s was to be in the nature of the payment of a deposit as an earnest of the plaintiff’s intention to go on with the transaction; but that was not what Messrs Brecher & Co said that it was. They asked for payment of a quarter’s rent and it was on payment of a quarter’s rent that the plaintiff went into possession. If I put out of my mind for the moment the question of the effect of the execution of the lease and assume that there never has been any effective lease brought into existence then, in my judgment, the effect of that must be that the plaintiff became a quarterly tenant of the defendant company. If he became a quarterly tenant of the defendant company then he seeks to rely on Part 2 of the Landlord and Tenant Act 1954. Section 23(4) of that Act provides:
‘Where the tenant is carrying on a business, in all or any part of the property comprised in a tenancy, in breach of a prohibition (however expressed) of use for business purposes which subsists under the terms of the tenancy and extends to the whole of that property, this Part of this Act shall not apply to the tenancy unless the immediate landlord or his predecessor in title has consented to the breach or the immediate landlord has acquiesced therein … ’
It has been suggested that as the result of that subsection the plaintiff cannot rely on Part 2 of the Act, because it is said that he is an unlawful sub-tenant; but, in my judgment, it is quite clear that what is referred to there is a breach, by the person who is in occupation and is using the premises for business purposes, of some prohibition which is immediately binding on him. If I am right in the view that the plaintiff is either a tenant of this consulting room under the lease executed by the defendant company, or a periodic tenant as the result of his having gone into possession on payment of the rent, there is no prohibition binding as between him and the defendant company which would prohibit him from using the consulting room for any purpose that he wished and he is not in breach of the covenant in the headlease, for he is not a party to that covenant. Consequently, it seems to me that this subsection has no bearing on the present case.
It has also been suggested that the plaintiff, being an unlawful sub-tenant, as it is
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said, is not a tenant within the meaning of this Act at all. Tenancy is defined in s 69(1) as meaning:
‘… a tenancy created either immediately or derivatively out of the freehold, whether by a lease or underlease, by an agreement for a lease or underlease or by a tenancy agreement or in pursuance of any enactment (including this Act), but does not include a mortgage term … ’
On the view that the lease is effective, or on the view that there is a periodic tenancy it can, I think, be made out on that definition that the plaintiff is a tenant under the tenancy; but there is a decision of a learned county court judge in Earl of Radnor v Lovibond & Co Ltd, in which a rather similar point arose, in the following circumstances. The case was a claim for possession of a boathouse and some land left to the first defendants under a lease expiring on 12 November 1955. The first defendants made no claim to any right to retain possession, but the second defendant, who was in occupation, claimed to be entitled to remain under Part 2 of the 1954 Act:
‘It was conceded that the second defendant occupied the land, which included certain valuable fishing rights, for the purpose of his business as an inn or hotel keeper. The head lease to the first defendants contained a covenant not to sub-let the whole or any part of the premises without the previous written consent of the landlord or his agent. On May 12 1950, the first defendants let the premises on a monthly tenancy to the second defendant, but never asked for or received permission to do so. [The learned county court judge] said that the short but difficult question was whether the second defendant had or ever had had a sufficient interest in the premises to have the rights conferred on a sub-tenant by the Landlord and Tenant Act 1954. At common law no person could acquire any sub-tenancy or interest against a head landlord of a greater extent in time than that of his immediate landlord, but it was equally clear that a sub-tenant as well as a tenant might acquire rights after the expiry of the lease under the Act. The crucial time was the expiry of the tenancy or subtenancy at common law—in this case the expiration of the head lease. It was clear that the second defendant had a tenancy valid against the first defendants at that time, and though such tenancy was defeasible by re-entry by the head landlord, Parker v Jones was authority for the proposition that unless and until that event an interest was vested in him. If the head landlord had sought a forfeiture, the second as well as the first defendants would have been entitled to seek relief. Was the second defendant “a tenant … by an agreement … for an underlease” within the definition in s. 69(1) of the Act? Apart from authority, he (His Honour) would have inclined to the opinion that he took a defeasible but not a void interest, but it seemed to him that he was bound by the principle laid down by Peterson J. in Dick v. Jacques, in deciding whether a person was a sub-tenant under the Rent Restriction Act of 1915 [Increase of Rent and Mortgage Interest (War Restrictions) Act 1915]. Accordingly the plaintiffs must succeed and there would be an order for possession.’
With the greatest respect to the learned county court judge, I feel difficulty in accepting that view, for it seems to me to be clear that on the facts of this case, as on the facts of the case before the learned county court judge, the sub-tenant has got an interest in the property which is valid as between him and the intermediate landlord. Either under a lease or an underlease, or by agreement for a lease or underlease, or by a tenancy agreement he is a tenant and, if he is a tenant, then he is entitled to the protection of Part 2 of the Act, unless he falls within one of the exceptions,
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and the only exception which is suggested to apply in the present case is s 23(4). For reasons that I have already given, I do not think that the plaintiff comes within the provisions of that subsection.
The cases under the Rent Restrictions Act, including Dick v Jacques, which was referred to by the learned county court judge, are under quite different legislation and, with the utmost respect to the learned county court judge, they do not appear to me to lay down any principle which could control the proper interpretation of the Landlord and Tenant Act 1954, which must be construed on its own terms. Consequently I do not find that on that ground the plaintiff is outside the operation of Part 2 of the Act.
For these reasons, although I confess with some regret, for I have sympathy with the defendant company, I come to the conclusion that the plaintiff is entitled to succeed in this action and that the counterclaim fails.
Judgment for the plaintiff.
Solicitors: Denis Hayes & Co, agents for John W Clayton & Co, Luton (for the plaintiff); Brecher & Co (for the defendant company).
Richard J Soper Esq Barrister.
Greater London Council v Connolly
[1970] 1 All ER 870
Categories: HOUSING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, LORD PEARSON AND SIR GORDON WILLMER
Hearing Date(s): 12, 13 JANUARY 1970
Housing – Rent – Increase – Notice of increase – Condition in tenancy providing for increase – Length of notice uncertain – Requirement of reasonable notice implied.
Housing – Rent – Certainty of rent – Condition in tenancy providing for increase – Amount of increase uncertain – Condition not void if increased amount may be calculated with certainty on date it became payable.
Housing – Rent – Increase – Increase of rent without notice to quit – Whether statutory powers invalidated contractual provisions in tenancy – Prices and Incomes Act 1968, s 12(1), (3).
Housing – Notice to quit – Validity – Signature – Director of housing duly authorised to take eviction proceedings – Instructions to director to issue notices given by chairman of housing committee – Presumption of due authority not rebutted – Local Government Act 1933, s 287B (2).
In June 1968, the Greater London Council gave written notice to tenants of their houses that following the report of the Prices and Incomes Board, rent increases of ‘2d in the shilling’ would take effect from 30 September 1968. The amount of the increase complied with s 10 of the Prices and Incomes Act 1968 but the notice did not satisfy s 12 of the Acta. The contractual conditions of tenancy, which were brought to the attention of tenants and were printed on the back of rent books, included condition 2, that ‘The weekly net rent and other sums as shown on the front cover of the rent card are liable to be increased or decreased on notice
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being given’. The length of notice was not specified nor the amount of increase. Some of the tenants refused to pay the increased rent, and in July 1969 the chairman of the Greater London Council’s housing committee, in response to a report by the director of housing, who was the person authorised to take proceedings to evict tenants, gave instructions that notices to quit would be issued against the defaulting tenants if the arrears of rent were not cleared within three weeks. In consequence, the director of housing on 19 August 1969, served on the defaulting tenants notices to quit in proper form which were signed by himself and stated to be duly authorised by the Greater London Council. The tenants refused to quit and orders for possession were made against them. On appeal by the tenants.
Held – (i) The rent increases had been validly made under condition 2 which was not void for uncertainty, because—
(a) it was possible to imly into the condition that reasonable notice of increase was required, and reasonable notice was given by the notice of June 1968(see p 874 e and g, p 876 g, and p 878 j, post);
(b) rent was sufficiently certain where it could be calculated with certainty at the time when it became payable, even though the increase was dependent on the whim of the landlord, and here the notice of June 1968 enabled the rent to be calculated with certainty as at 30 September 1968(see p 874 h, p 875 a, p 877 f and p 878 j, post); dicta of Sir George Jessel MR and Brett LJ in Re Knight, ex parte Voisey (1882) 21 Ch D at 456, 458, of Lord Asquith of Bishopstone in A-G of Alberta v Huggard Assets Ltd and A-G of Canada [1953] 2 All ER at 956, and of Denning LJ in Treseder-Griffin v Co-operative Insurance Society Ltd [1956] 2 All ER at 38, 39 applied; and
(c) the power to increase rent given to local authorities by s 12b of the Prices and Incomes Act 1968 did not invalidate any contractual provision and accordingly condition 2 was not invalidated by s 12(see p 875 b, p 877 j, and p 878 j, post).
(ii) The notices to quit were duly authorised because the presumption of due authority arising under s 287B (2)c of the Local Government Act 1933 had not been rebutted, and it was not shown that there was anything unauthorised in the instructions given by the chairman of the housing committee (see p 875 e and g, and p 878 d and j, post).
(iii) Accordingly, the appeal would be dismissed and the orders for possession would stand.
Notes
For the requirement that rent must be certain, see 23 Halsbury’s Laws (3rd Edn) 538, 539, para 1196, and for cases on the subject, see 31 Digest (Repl) 242, 243, 3764–3772.
For the Local Government Act 1933, s 287B, see 43 Halsbury’s Statutes (2nd Edn) 801.
For the Prices and Incomes Act 1968, s 12, see 48 Halsbury’s Statutes (2nd Edn) 796.
Cases referred to in judgments
A-G of Alberta v Huggard Assets Ltd and A-G of Canada [1953] 2 All ER 951, [1953] AC 420, [1953] 2 WLR 768, 8 Digest (Repl) 782, 460.
Knight, Re, ex parte Voisey (1882) 21 Ch D 442, 52 LJCh 121, 47 LT 362, 31 Digest (Repl) 242, 3765.
Treseder-Griffin v Co-operative Insurance Society Ltd [1956] 2 All ER 33, [1956] 2 QB 127, [1956] 2 WLR 866, Digest (Cont Vol A) 1008, 3772a.
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Cases also cited
A-G for Ontario v Canadian Niagara Power Co [1912] AC 852.
Chapman v Honig [1963] 2 All ER 513, [1963] 2 QB 502.
Daniel v Gracie [1844] 6 QB 145.
Holwell Iron Co Ltd v Midland Ry Co [1910] 1 KB 296.
Kendall v Baker (1852) 11 CB 842.
Selby v Greaves (1868) LR 3 CP 594.
Simms Motor Units Ltd v Minister of Labour and National Service [1946] 2 All ER 201.
Smith v Cardiff Corpn [1955] 1 All ER 113, [1955] Ch 159.
Walsh v Lonsdale (1882) 21 Ch D 9.
Appeal
This was an appeal by the tenant, Terence Connolly, from so much of the judgment of his Honour Judge Moylan given at Bow County Court on 17 November 1969 as adjudged that the plaintiffs, the Greater London Council, were entitled to possession of the dwelling-house at 39 Waverton House, Candy Street, London E 3, let to the tenant, and ordered that the tenant should deliver up possession of the house on 5 January 1970. The facts are set out in the judgment of Lord Denning MR.
Raymond Walton QC and G Avgherinos for the tenant.
H E Francis QC and B K Levy for the Greater London Council.
13 January 1970. The following judgments were delivered.
LORD DENNING MR. The Greater London Council own some quarter-of-a-million houses. In the autumn of 1968 they increased the rents of the tenants by amounts which average 7s 6d per week, but there were no increases exceeding 10s per week. The great majority of the tenants, 97 1/2 per cent of them, paid the increase. But the remaining 2 1/2 per cent refused to pay. Some months later the chairman of the housing committee of the Greater London Council said at one of their meetings:
‘… I have decided to give the defaulting tenants due notice that unless they clear the arrears within three weeks, the Council will issue notice to quit and on expiry thereof will take proceedings in the county courts for the recovery of possession.’
In consequence, the director of housing for the Greater London Council prepared and served notices to quit. He sent them under cover of a letter of 14 August 1969, in which he wrote:
‘As no payment has been made by you in response to my letters urging you to pay the arrears of rent due to the Council, I have no alternative but to serve on you the enclosed Notice to Quit. Unless you now clear the arrears in full before the expiry of the Notice to Quit, the Council’s Solicitor will be instructed to commence possession proceedings against you without further warning.’
Enclosed in that letter was a notice to quit in proper form addressed to each of the tenants. I will read a typical one:
‘On behalf of the LANDLORD, the Greater London Council, I hereby give you NOTICE TO QUIT and deliver up possession of the TENEMENT OR PREMISES situate [describing the address] which you now hold as a weekly Tenant of the Council, on Monday, the 22nd day of September 1969, or at the expiration of the week of your tenancy which shall expire next after the end of four weeks from the service of this notice. Dated this 19th day of August 1969.’
It was signed by Mr Macey—
‘Director of Housing and Agent to and on behalf of the Greater London
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Council, the Landlord, and duly authorised by the said Council to sign this Notice.’
The tenants did not pay the arrears. They did not quit. So the Greater London Council issued proceedings in the county court for possession of the premises. They did not claim the arrears. They simply claimed possession.
The main point made by the tenants is that the rents were not validly increased; that it was not lawful for the Greater London Council to serve notice to quit when their object was to force the tenants to pay an illegal increase of rent.
I must first mention that the Greater London Council and other local authorities are not bound by the Rent Acts. Council houses are outside those Acts. Until recently the only limitation on local authorities, in regard to rent, was that contained in the Housing Act 1957, s 111(1). It provided that ‘the authority may make such reasonable charges for the tenancy or occupation of the houses as they may determine’. That was the only limitation. The charges had to be ‘reasonable. But the Prices and Incomes Act 1968d imposed a further limitation. It said that the local authorities could not increase the rents except with the approval of the Minister of Housing. Section 10(1) provided:
‘… it shall not be lawful for a local authority to charge in respect of any houses to which this section applies rents exceeding the former rents, unless the increases accord with proposals submitted to and passed by the Minister under this section.’
The Greater London Council satisfied those requirements. The increased rents were reasonable. And the Minister did in fact approve all the increases. The approval was given a few weeks before the Act was passed, but it was nevertheless good because s 10(12) so provides.
Although the increases were reasonable and approved, nevertheless they had to be made lawfully. At common law a landlord cannot, in the absence of agreement, increase the rent, against the will of the tenant, unless he gives notice to quit and determines the tenancy. The Prices and Incomes Act 1968 made a change. It gave power to a local authority to increase the rent without a notice to quit. Section 12(1), (3), provides that the local authority may increase the rent by a notice which gives the tenant four weeks’ notice of the increase; and also tells the tenant that he has a right on his part to terminate the tenancy if he wishes. In this case the Greater London Council gave a notice, but it was not sufficient to satisfy s 12. It did not tell the tenant of his right to terminate the tenancy. As the notice did not come within the Act, the Greater London Council relied on the conditions of the tenancies. We were told that a leaflet containing these conditions is given to every tenant before he accepts the tenancy. He is asked to read them and sign an acknowledgment. Then the rent book is issued with the conditions printed on the back. They include:
‘2. The weekly net rent and other sums as shown on the front cover of the rent card are liable to be increased or decreased on notice being given.
‘3. The tenancy may be terminated by four weeks’ notice to expire on a Monday. If terminated by the Council it shall be by a written notice signed by or under the authority of the Director of Housing and served on the tenant or left for him upon or affixed to the premises four weeks at least prior to the date of termination … ’
The council claim that they acted in pursuance of the power given them by condition 2, and say that the notice of June 1968 is in keeping with that condition. It said this:
Page 874 of [1970] 1 All ER 870
‘Dear Tenant,
Rent Scheme for GLC Tenants
Following the report from the National Board of Prices and Incomes the Government have approved the Council’s new Rent Scheme for rents to rise by an average of 7s. 6d a week with no increases exceeding 10s. a week. The Council, therefore, proposes to introduce this Scheme on 30 September 1968 and from the same date to replace the Social Aid Scheme by a new Rebate Scheme giving generous rent reductions to tenants in greater need … ’
The letter goes on to give details. The increase of rent is ‘2d in the shilling’, and so forth.
Counsel for the tenant urges that condition 2 is bad because it is too uncertain; and therefore, by our law of contract, it is invalid. Further, that the rent is not certain; and, therefore, by our law of landlord and tenant, it is invalid.
At common law, in the absence of agreement, the landlord cannot increase the rent except by giving a notice to quit. He must first determine the tenancy and then get the tenant to agree to pay the increase. Many tenants are frightened by notice to quit. They do not know what is behind it. To save their feelings, the Greater London Council have inserted condition 2 so as to enable them to increase the rent without giving notice to quit. In these days money diminishes in value continually. As it diminishes, it is only reasonable that the landlords should be able to increase the rent without going through the form of a notice to quit. That is the object of this condition.
It is said that the condition is too vague. It is too uncertain; and, therefore, invalid by the law of contract. I do not think so. The courts are always loath to hold a condition bad for uncertainty. They will give it a reasonable interpretation whenever possible. It is possible here. I read this condition as saying that the rent and other sums ‘are liable to be increased or decreased by the landlord on reasonable notice being given by him’. The court can always say what is reasonable notice. Here, in order to be reasonable, I should have thought that the Greater London Council ought to give a notice of the same length as they would have to give in order to determine the tenancy (ie four weeks); and they ought to add on a week or two so as to enable the tenant to give a counter-notice, in case he wished to leave rather than pay the increased rent. Reasonable notice would, therefore, be five or six weeks. The Greater London Council, in these notices, gave at least two months. The circular was issued in June 1968, and the increase did not take effect until 30 September 1968. That was ample notice.
It is next said that the rent is uncertain, and that the condition is, therefore, invalid by the law of landlord and tenant. It is clear law that a rent must be certain. But that does not mean that it must be certain at the date of the lease. Rent is sufficiently certain if it can be calculated with certainty at the time when payment comes to be made. Here the notice of increase enabled the rent to be calculated with certainty as at the time when the increase was to operate, ie 30 September 1968. Next it was said that the increase was not valid if it was dependent on the whim of the landlord. At first I was impressed by that point. But my doubts were resolved by A-G of Alberta v Huggard Assets Ltd and A-G of Canada ([1953] 2 All ER 951 at 956, [1953] AC 420 at), when Lord Asquith of Bishopstone said:
‘It is said in the present case that the royalty [the equivalent of rent here] is “uncertain” because its amount depends on the whim, from time to time, of the grantor. It seems doubtful whether this quality is fatal. In this very case, the charter of 1670 provided for a royalty which, in some sense, depends on the whim of the grantor, the King. He is to receive two elks and two black beavers every time he visits the territories in question. No one can tell whether he will visit the territory at all; nor if he does, how often: yet his unpredictable election
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to visit it never, seldom, or repeatedly, determines the number of elks and beavers to be “yielded up“.’
In the light of that case, I think that this rent was sufficiently certain, even though the amount of it was dependent, in a sense, on the whim of the Greater London Council. This is confirmed by the modern practice amongst coveyances of providing for increases in rent as money falls in value.
So I hold, therefore, that this condition is valid. Section 12 of the Prices and Incomes Act 1968 does not replace it or do away with it. That section is useful when local authorities have not any such condition in their contracts of tenants. The Greater London Council do not need to invoke s 12. They can rely on condition 2.
The next point is technical. After the tenants refused to pay the increase, the Greater London Council determined to give notices to quit. It is said that the notices to quit were not duly authorised. There is a short answer to this point. The notices were duly signed by the director of housing. Under the Local Government Act 1933, S 287B(2)e:
‘Any document purporting to bear the signature of the clerk of the authority or of any officer stated therein to be duly authorised by the authority to sign such a document or the particular document, as the case may be, shall be deemed, until the contrary is proved, to have been duly given, made or issued by the authority of the local authority.’
There is, therefore, a presumption of validity and of due authority in favour of the notice to quit. And the presumption was not rebutted.
The last point made by counsel for the tenant was that the decision (to give notices to quit) was not made by the director of housing, as it ought to be, but by the chairman of the housing committee. In April 1965, the Greater London Council passed a resolution which gave to the director of housing the power to—
‘… authorize proceedings for the eviction of tenants of the Council in appropriate cases, with freedom to consult the chairman or vice-chairman of the Housing Committee where, in his view, any doubt or special difficulty arises.’
Counsel for the tenant said that the director of housing did not exercise his own discretion; on the contrary, he submitted to the directions of the chairman of the housing committee. I do not think that there is anything in this point. I think that, under the standing orders, the chairman of the housing committee probably had power to give directions. But, even if he had no such power, all that the chairman did here was to lay down a general policy, whilst leaving the director to exercise his discretion as to individual cases. There was nothing wrong in his so doing.
In conclusion, I would mention one matter which was considered by the county court judge. He held that, if the notices to quit were given by the Greater London Council for the purpose of trying to get an invalid rent increase, then the council would be acting ultra vires. I think that the judge may well be right on that point. Although the notices to quit would be technically in order, they might be vitiated by the unlawful purpose behind them. It is, however, not necessary to pronounce on that ground today. I hold that these increases of rent were made quite lawfully; and that, as these tenants have not paid those increases, the Greater London Council were entitled to give the notices to quit. The judge was quite right to make the orders for possession. But I hope that it will not be necessary for the orders to be enforced. I hope that the tenants will pay the increased rent and so settle the matter. I would dismiss the appeal.
LORD PEARSON. I agree, and I will merely say a few words on each of the
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four specific issues which were raised in this appeal. The first issue is whether condition 2 in the contract of tenancy was void for uncertainty as a matter of contract law. As Lord Denning MR has said, the courts are always loath to hold a clause invalid for uncertainty if a reasonable meaning can be given to it, and it seems to me easy to give a reasonable meaning to this condition. Indeed I would not have thought that the ordinary person reading it would have any real doubt as to what it meant. The conditions of the tenancy are introduced by these words.
‘The Conditions of Tenancy applicable to the accommodation you are invited to view are set out below for your information. If you accept the tenancy you will be required to sign an acknowledgement confirming that you have read and understood the Conditions of Tenancy.’
Evidently these conditions of tenancy are introduced to the tenant in some document addressed to him by the local authority who will become his landlords, and it is in the light of those introductory words that one can read condition 2:
‘The weekly net rent and other sums as shown on the front cover of the rent card are liable to be increased or decreased on notice being given.’
That is a warning to him that the local authority, his landlords, may by notice increase or decrease the rent. So I do not think there is any real uncertainty as to the person by whom this notice has to be given.
The second point taken was that there is no statement specifying what length of notice is to be given. I think that the answer is the one which has been given, that a reasonable notice is to be implied. As counsel for Greater London Council pointed out in his argument, there are a number of illustrations of cases in which the law implies that something not specified is to be understood as reasonable. In a sale of goods contract, if there is no specified price, a reasonable price is to be understood; and if an employee is to be dismissed, he must be dismissed by reasonable notice. It has to be ascertained on the facts of a particular case what is reasonable. I do not think that in this case it is necessary on the whole or desirable to state what length of notice would be appropriate. I do not think that one can say that the same period of notice must be appropriate in all cases. If a notice of decrease of rent or other sum were to be given, there would be no need for a protracted notice, and probably one day’s notice would be sufficient. But it is the other way round if a notice of increase is to be given; then there is something to be said for the view that rather more than four weeks’ notice should be given in order that the person in occupation should have an opportunity of leaving before the increased rent or other sum has to be paid. But I think that it is sufficient to say that one can give certainty to the clause by saying that reasonable notice is required and it has to be considered on the facts of a particular case whether the notice is reasonable or not. In this particular case there can be no doubt that an adequate notice was given, because it was given on some date in June to expire at the end of September. That was a very long notice and was clearly adequate.
The second question is whether condition 2 is void because it fails to provide a certain rent—a rent certain, as required by law? That has to be decided in the light of the established authorities on the point and there are three which strike me as important. The first is Re Knight, ex parte Voisey; and the two most relevant passages are in Sir George Jessel MR’s judgment ((1882) 21 Ch D at 456) and in the judgment of Brett LJ ((1882) 21 Ch D at 458). Sir George Jessel MR pointed out ((1882) 21 Ch D at 456):
‘Again, we are familiar in London and many other large towns with variable rents, especially in building and improving leases, where there are rents varying from year to year, and in gaps and intervals, depending upon the performance of
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various duties, sometimes by the tenant, sometimes by the landlord, and sometimes by one or the other. The kind of improvement most familiar to us in regard to agricultural leases is drainage. It very often happens that when the landlord does the drainage he puts in a stipulation that he shall receive a certain percentage on what he lays out, and he may be entitled to drain even without the consent of the tenant,and to cause the tenant to pay an increased rent.’
The importance of the passage is that it shows that the increase of rent may be dependent by the terms of the lease on some unilateral act of the landlord.
The other passage which I think is important is in the judgment of Brett LJ, where he deals with the question of a fluctuating or variable rent, and he said ((1882) 21 Ch D at 458):
‘If in the present case the agreement had been this, that in case of the nonpayment of the instalments by the mortgagor, the rent should be the damage which the other party might suffer, so that it would have to be ascertained at large or by a tribunal, that would be a stipulation for an uncertain payment which could not be rent, and then there would be no lease. But here it seems to me that, upon the happening of the condition named, the rent fixes itself and is therefore a certain rent.’
As I understand that passage, the reason why in the first case there has not been a certain rent is because it would not be ascertained until afterwards, when the question was submitted to some arbitrator or tribunal or court to decide how much the rent should be. The present case seems to me to be one which falls within the last sentence of that passage. On the happening of the condition, namely, when the landlord serves the required notice, the rent is fixed, and therefore the rent is fixed by the time it becomes payable. I would adopt something which counsel for the tenant said: there has to be a certain rent to be demanded and paid or distrained for. The rent has to be certain at the time when it is demanded and has to be paid; and it would follow that it will be certain at the time when it can be distrained for. That is the rule which would naturally be derived from those passages in Re Knight, ex parte Voisey ((1882) 21 Ch D at 456, 458). It is also confirmed by what is said in A-G of Alberta v Huggard Assets Ltd and A-G of Canada ([1953] 2 All ER 951 at 956, [1953] AC at 440), and also by what Denning LJ said in Treseder-Griffin v Co-operative Insurance Society Ltd ([1956] 2 All ER 33 at 38, 39, [1956] 2 QB 127 at 148, 149). In my view the right rule is that the rent has to be certain at the time when it becomes payable, and that requirement is complied with in the present case.
The third issue in this appeal is whether, on the assumption that condition 2 was initially valid when it was made a condition of the contract, it was invalidated by implication by s 12 of the Prices and Incomes Act 1968. Such an implication is not to be read into the Act unless it is a really necessary implication, and I cannot find any necessity for such an implication here. The manifest object of s 12, as has been pointed out, is to do away with the need—the awkward and inconvenient need—which would exist at common law in having to terminate a tenancy and then offer a tenancy on new terms when all you want to do is to increase the rent. It is very desirable for administrative reasons and also to spare some tenants from mental distress on receiving a notice to quit, to provide some other means. Section 12, as I understand it, merely says that for the future local authorities shall have this power under the Act to increase the rent merely by giving notice to the tenant; and there is nothing in s 12 which implies that any contractual arrangement is to be invalidated by this provision. It would be open to any local authority to use this method. It might be desirable; it might be advisable as a matter of convenience and prudent administration to make use of s 12 rather than some contractual provision. But I am wholly unable to extract from s 12 any such implication as is suggested. It was still entirely open to the local authority here to use their own contractual provision; they were not in the least precluded from doing so by s 12.
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The final and fourth question is whether the notice to quit was served with the authority of the Greater London Council. As has been pointed out, it is right to start with the proposition that by statute the burden of proof is on any person seeking to dispute the authority of such a notice as this. This notice itself stated that it was served with the authority of the Greater London Council, and therefore the words of the Act would then come into force. The words of the Act are, in s 287B (2) of the Local Government Act 1933, as amended (See footnote 3 ante).
‘Any document purporting to bear the signature of the clerk of the authority or of any officer stated therein to be duly authorised by the authority to sign such a document or the particular document, as the case may be, shall be deemed, until the contrary is proved, to have been duly given, made or issued by the authority of the local authority.’
That puts the burden of proof on the objector—in this case the tenant—to show that the notice to quit was served without the authority of the council. The director of housing, who sent this notice to quit, stated in it that he did so with the authority of the Greater London Council. There are several documents showing that he was authorised to send the notice. But what is said is that, because there was an instruction issued to him by the chairman of the housing committee, therefore the service of the notice was not an exercise of the authority and discretion of the director of housing, and therefore it is invalid. I think that it is sufficient to say that the burden of proof is on the tenant, and it is not shown that there was anything unauthorised in what took place here. As regard the action taken by the chairman of the housing committee, reference has been made to certain standing orders of the Greater London Council, and the ones referred to were G9, E7 and C13. It has not been shown that the action taken by the chairman of the housing committee was not authorised by those provisions. Also there is this point, that the instructions given by the chairman of the housing committee were apparently given in response to a joint report by the solicitor and by the director of housing. Now, it is plain from another document that the director of housing was—
‘Empowered to authorize proceedings for the eviction of tenants of the Council in appropriate cases, with freedom to consult the chairman or vice-chairman of the Housing Committee where, in his view, any doubt or special difficulty arises.’
As that resolution gave freedom for the director of housing to consult the chairman, it must convey an authority to the chairman to give guidance when he is consulted. It looks, therefore, on all these documents as if the director of housing was, by making his report to the chairman of the housing committee, asking for his direction or guidance or instruction, and it looks as if the instruction was given in response to that and therefore by way of guidance given when consulted by the director of housing. That is how it appears on the face of the document, and it has not been shown that that is a wrong inference. It is prima facie the natural inference, and for that reason I would hold that the onus of showing the want of authority has not been discharged by the tenant. There may well be other reasons for arriving at this conclusion, but to my mind that is sufficient. Therefore I agree that the order which has been made by the learned county court judge should be confirmed and the appeal dismissed.
SIR GORDON WILLMER. I find myself in agreement with both the judgments which have been delivered, and in those circumstances I do not think it is necessary for me to add any further words of my own.
Appeal dismissed. Order for possession; order deferred for two months. Leave to appeal to the House of Lords refused.
Solicitors: James Goudie (for the tenant); Solicitor, Greater London Council.
Wendy Shockett Barrister.
R v Tottenham Justices, ex parte Rubens
R v Middlesex Quarter Sessions, ex parte Rubens
[1970] 1 All ER 879
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, WILLIS AND BRIDGE JJ
Hearing Date(s): 8, 9 DECEMBER 1969
Quarter sessions – Appeal to – Jurisdiction to entertain question of what plea should have been entered at trial – Plea of guilty accompanied by statement indicating innocence – Remission of case to court of summary jurisdiction – Order expressing the opinion of quarter sessions.
Quarter sessions – Appeal to – Leave – Time for – Application for leave after sentence passed – Accused committed to quarter sessions for sentence.
On 30 January 1969, the applicant pleaded guilty before the Middlesex justices at Edmonton petty sessions to a charge of obtaining petrol by false pretences with intent to defraud, and a statement relating to the facts of the offence, which the applicant had made to the police, was read to the court. The justices committed the applicant for sentence to quarter sessions under s 29 of the Magistrates’ Courts Act 1952. On 28 February 1969, Middlesex Quarter Sessions sentenced the applicant to six months’ imprisonment and ordered that a previous suspended sentence of four months should come into effect and be served consecutive to the term of six months. After sentence, counsel for the applicant invited the court to grant leave to appeal against conviction out of time on the ground that there had been material before the justices at Edmonton, in the form mainly of the statement made to the police, which showed that his purported plea of guilty had been equivocal and should not have been accepted. The court granted leave and purported to rescind the sentence it had just passed. On 2 April 1969, the appeal was heard before a differently constituted court of quarter sessions which took the view that the plea had been equivocal because the statement denied by implication that there had been any intent to defraud. The court’s decision was expressed in these terms: ‘The court has come to the conclusion that in all the circumstances this case must go back for trial to the justices and we make that order accordingly. When the formal order was drawn up, the operative words were: ‘The court ordered that the case be remitted to the Tottenham Magistrates’ Court with the opinion that a plea of not guilty be entered. The applicant duly appeared before the justices at Edmonton on 5 May, but they took the view that they were functus officio, and declined to act in accordance with the order or opinion of quarter sessions, or at all. Middlesex Quarter Sessions then ordered that the appeal against conviction should be reinstated for further hearing, and when the reinstated appeal was heard by quarter sessions on 10 June 1969, the court purported to dismiss the appeal against conviction. The applicant applied to the Divisional Court: (i) for an order of mandamus to the justices at Edmonton requiring them to proceed in accordance with the order of the court of 2 April and to enter a plea of not guilty; (ii) for an order of certiorari to quash the purported dismissal of the applicant’s appeal by the court on 10 June; and (iii) for an order of prohibition to restrain quarter sessions from proceeding to pass sentence on the original committal.
Held – Orders of mandamus, certiorari and prohibition would be made, because—
(i) quarter sessions had acted within their jurisdiction in considering the question whether the material before petty sessions had disclosed an equivocation in the plea
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(see p 883 f, and p 885 b and c, post); R v Durham Quarter Sessions, ex parte Virgo [1952] 1 All ER 466 and R v Blandford Justices, ex parte G (an infant) [1966] 1 All ER 1021 approved;
(ii) there were no grounds for the contention that once quarter sessions, on a committal under s 29 of the Magistrates’ Courts Act 1952, had passed sentence on a prisoner convicted on his own plea, it was then too late for quarter sessions to grant him leave to appeal out of time or to entertain an appeal against his conviction on the ground that the plea was equivocal. There was no distinction in principle between a case proceeding to sentence at petty sessions and a case proceeding to sentence on a committal under s 29 at quarter sessions (see p 883 h, and p 885 b and c, post);
(iii) notwithstanding the language of the formal order drawn up pursuant to the order of the court of 2 April the lower court were nevertheless bound to follow such order (see p 884 g, and p 885 b and c, post).
Per Lord Parker CJ. Where there has been undoubtedly an unequivocal plea, a later application to change that plea to a plea of not guilty, made possibly as a result of new facts coming to light, is impossible once sentence has been imposed and the case is finished. But where the question is not whether a change of plea otherwise unequivocal should be allowed, but whether the plea itself was an unequivocal plea, the matter can be investigated and a change of plea allowed at any stage in the proceedings before the appeal has been finally disposed of (see p 885 c and d, post).
Notes
For allowing an accused who has pleaded guilty before the magistrates to change his plea, see 25 Halsbury’s Laws (3rd Edn) 206, para 375.
Cases referred to in judgments
R v Blandford Justices, ex parte G (an infant) [1966] 1 All ER 1021, [1967] 1 QB 82, [1966] 2 WLR 1232, Digest (Cont Vol B) 505, 346b.
R v Durham Quarter Sessions, ex parte Virgo [1952] 1 All ER 466, [1952] 2 QB 1, 116 JP 157, 33 Digest (Repl) 304, 1289.
R v Riley [1963] 3 All ER 949, 128 JP 85, Digest (Cont Vol A) 1121, 1289b.
R v West Kent Quarter Sessions Appeal Committee, ex parte Files [1951] 2 All ER 728, 115 JP 522, 33 Digest (Repl) 288, 1159.
S (an infant) v Manchester City Recorder [1969] 3 All ER 1230, [1970] 2 WLR 21.
Application for orders of mandamus, certiorari and prohibition
This was an application by Graham Martin Paul Rubens, who had appeared before the justices for the petty sessional division of Tottenham in Greater London on 30 January 1969, and had there pleaded guilty to and had been convicted of obtaining four gallons of petrol by false pretences with intent to defraud, for an order of mandamus directed to those justices requiring them to enter a plea of not guilty. The applicant further sought an order of certiorari to remove into the High Court for the purpose of being quashed an order made by quarter sessions for the Middlesex area of Greater London on 10 June 1969, whereby it was ordered that the applicant’s appeal against his conviction be dismissed, and, in addition, an order of prohibition prohibiting quarter sessions from proceeding further on the committal of the applicant for sentence. The facts are set out in the judgment of Bridge J.
Brian Galpin for the applicant.
D H Farquharson for the respondents.
9 December 1969. The following judgments were delivered.
BRIDGE J delivered the first judgment at the invitation of Lord Parker CJ. In these proceedings counsel moves on behalf of the applicant, one Graham Martin Paul Rubens, for orders of mandamus and certiorari and prohibition in the following
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circumstances. On 30 January 1969, the applicant appeared unrepresented before the Middlesex justices at Edmonton petty sessions. He was charged with obtaining a quantity of petrol by false pretences with intent to defraud. He pleaded guilty. When the facts were outlined to the justices by the police officer in charge of the case, he read out a statement which the applicant had made relating to the facts of the offence in the course of the police investigations. Thereupon the applicant asked the court to take 11 other offences into consideration and the justices committed him for sentence to Middlesex Quarter Sessions under s 29 of the Magistrates’ Courts Act 1952.
He first appeared at quarter sessions pursuant to that committal on 12 February 1969 when the matter was adjourned for medical reports. He appeared again on 28 February 1969 and on that occasion Richard Vick Esq was the deputy chairman presiding. Having heard, no doubt, speeches in mitigation, for the applicant was by this time represented by counsel, the court sentenced the applicant to six months’ imprisonment and ordered that a previous suspended sentence of four months should come into effect and be served consecutive to the term of six months, making a sentence of ten months in all. After sentence the court was invited to give the applicant leave to appeal against his conviction out of time. The ground on which it was submitted that he ought to be permitted to appeal against conviction was that there had been material before the justices at Edmonton in the form mainly of the statement that the applicant had made to the police, which had been read out to the court, and which showed that his purported plea of guilty had been equivocal and should not have been accepted by the justices. The court under the deputy chairmanship of Richard Vick Esq must have been impressed with this, for the court granted leave to appeal out of time, gave the applicant legal aid and thereupon purported to rescind the sentence which had just been passed.
Pursuant to that grant of leave, an appeal against the applicant’s conviction was heard by a differently constituted court of quarter sessions with this time his Honour Judge Ranking sitting as deputy chairman on 2 April 1969. After hearing the matter fully argued the court on that occasion took the view that the plea of guilty before the justices had indeed been equivocal. They acted on the footing that the statement which the applicant made to the police describing the facts out of which the charge arose, and describing them substantially in terms of the case on which the prosecution relied, was nevertheless a statement inconsistent with guilt, because by implication it denied that there had been any intent to defraud on the part of the applicant.
At the conclusion of the argument the deputy chairman expressed the court’s decision in these terms:
‘The court has come to the conclusion that in all the circumstances this case must go back for trial to the justices and we make that order accordingly.’
However, when the formal order came to be drawn up, the operative words in the order were these:
‘The Court ordered that the case be remitted to the Tottenham Magistrates’ Court with the opinion that a plea of not guilty be entered.’
Accordingly on 5 May the applicant appeared once more before the justices at Edmonton. They took the view that they were functus officio and they declined to act in accordance with the order or opinion of quarter sessions. They thought that they had no jurisdiction in the matter to take any further steps, and accordingly they did precisely nothing.
As will be apparent, at that stage matters were left wholly in the air. It is not perhaps surprising to learn that the next step was taken by Middlesex Quarter Sessions, who ordered that the applicant’s appeal against conviction should be reinstated for further hearing. The final appearance of the applicant at Middlesex
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Quarter Sessions was on 10 June 1969 when his reinstated appeal was heard before the court under its chairman, Ewen Montagu QC, and the court on this last occasion, differing from the view which had been taken in April by his Honour Judge Ranking, purported to dismiss the appeal against conviction and was about to proceed to pass sentence once again on the original committal when counsel, who by this time appealed for the applicant, informed the court of the applicant’s intention to apply to this court for the orders which have now been applied for, and in the light of that information quarter sessions adjourned further consideration of the case.
It is in those circumstances that counsel now submits that the applicant is entitled: first, to an order of mandamus to the justices at Edmonton requiring them to proceed in accordance with quarter sessions’ order of 2 April, and to enter a plea of not guilty; secondly, to an order of certiorari to quash the purported dismissal of the applicant’s appeal against conviction by quarter sessions on 10 June; and thirdly, to an order of prohibition to restrain quarter sessions from proceeding to pass sentence on the original committal under s 29.
Counsel for the applicant’s submissions can be quite shortly summarised. First, he says on the authorities it is clear that quarter sessions on 2 April (which I may perhaps for convenience call the ‘Ranking court’) had jurisdiction in the circumstances to entertain the applicant’s appeal against his conviction. Secondly, so counsel submits, if the first proposition is well founded, it must follow, and I think this is common ground and in my judgment in any event clearly right, that it is quite immaterial whether the decision of the Ranking court was on the material before the court a right decision or an erroneous one. It was not challenged by the prosecution either on appeal by case stated or otherwise. The third submission is that if the order of quarter sessions was one which it was within the court’s jurisdiction to make, it then was binding on the justices of petty sessions and they must follow it. Fourthly, it is submitted, the subsequent proceedings before quarter sessions were a nullity, for in fact the applicant’s appeal against his conviction had already been disposed of.
In support of those submissions counsel for the applicant referred us to a number of authorities, the most important of which is the decision of this court in R v Durham Quarter Sessions, ex parte Virgo. In that case a man was charged before justices in petty sessions with stealing a bicycle. He was unrepresented and pleaded guilty, but when he was asked by the justices what he wanted to say in mitigation, he said he had taken the bicycle by mistake. The justices nevertheless proceeded to pass sentence on him of six months’ imprisonment. He, like the applicant in this case, appealed to quarter sessions, with the advantage of legal representation, against that conviction on the ground that the material before the justices showed that the plea had been equivocal and the justices ought never to have accepted it as a plea of guilty. Quarter sessions acceded to that view of the matter and allowed his appeal to the extent that they remitted the case, as quarter sessions in this case have done, to petty sessions with, in the Virgo case, a direction to petty sessions to enter a plea of not guilty and proceed with the trial.
The prosecution in the Virgo case then applied to the Divisional Court for an order of certiorari contending that quarter sessions had acted in the matter without jurisdiction. That application failed; it is only necessary to refer to a short passage from the leading judgment of Lord Goddard CJ ([1952] 2 QB at 6, 7, [1952] 1 All ER at 469):
‘It is true that in R v West Kent Quarter Sessions Appeal Committee, ex parte Files ([1951] 2 All ER 728 at 732), I concluded my judgment by saying: “It is not the case of a court inquiring into matters to find out whether they had jurisdiction or not. On the face of the proceedings before the court was a statement by the defendant that he pleaded guilty. In those circumstances, quarter sessions had no right to hear
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the appeal, and they must be prohibited from entertaining it“. I think that the concluding words of my judgment go too far. I think that where the question is whether or not the plea which is put in by the prisoner at the hearing before the justices amounted to a plea of guilty or not guilty, that is a matter which the court can entertain. I think that it would be putting it too high against an unrepresented prisoner who had pleaded guilty, but before being sentenced had made a statement to the court which showed that he meant to deny that he had acted feloniously or criminally, to insist that as he had said he pleaded guilty that was therefore an end of the matter. It must not be taken that the concluding words of my judgment in the West Kent case ([1951] 2 All ER at 732) preclude courts of quarter sessions from considering whether the plea which was made at the trial, taking all that the prisoner said into account, was a plea of guilty or not guilty … This court think that quarter sessions handled this case quite properly and that the order which they made sending it back with a direction to petty sessions that the plea should be one of not guilty and that the case should be heard, was a proper one.’
It is to be observed that in the very recent case in the House of Lords of S (an infant) v Manchester City Recorder the decision of this court in the Durham case was expressly approved and Lord Reid said that ([1969] 3 All RE at 1234, [1970] 2 WLR at 27) ‘[it] seems to be both good law and good sense’.
The applicant further relies on the decision of this court in R v Blandford justices ex parte G (an infant) as authority, if authority is required, for the proposition that the material before a court which may indicate that a plea is equivocal includes not only what is said in court after the plea, in mitigation or otherwise, by or on behalf of a defendant but also a statement made by the defendant prior to that plea and presented to the court as part of the prosecution case by the prosecution. Pausing there, prima facie it appears in my judgment clear on the authorities referred to, that quarter sessions acted within their jurisdiction on 2 April; the question that they then asked themselves was the question whether the material before petty sessions had disclosed an equivocation in the plea. They were not asking themselves the quite different question, which sometimes arises, whether, an unequivocal plea having been entered and accepted, discretion should be exercised in favour of the prisoner to allow him to change it.
Counsel for the respondents nevertheless submits that on a number of grounds the court should in this case withhold the prerogative orders sought by the applicant. The first submission is that the authority of the Durham case is distinguishable on this ground, that whereas in the Durham case sentences had been passed by justices in petty sessions, here the applicant was committed for sentence to, and sentenced by, quarter sessions. The submission is that once quarter sessions on a committal under s 29 has passed sentence on a prisoner convicted on his own plea, it is then too late in any circumstances for quarter sessions to grant him leave to appeal out of time or to entertain an appeal against his conviction on the ground that the plea was equivocal.
For my part I am quite unable to accept that contention. In principle I can see no distinction between a case proceeding to sentence at petty sessions and a case proceeding to sentence on a committal under s 29 at quarter sessions. The submission confuses what are two quite distinct functions of quarter sessions, the function of passing sentence on a committal under s 29 and the function of entertaining an appeal against conviction.
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Then the second submission to which I hope I do justice is to this effect: it is said that the question whether or not a purported plea of guilty should be treated as equivocal and entered as a plea of not guilty is to some extent one of discretion, and it is said here that back in January when the case was first before them, the justices at petty sessions had considered the matter, exercised a discretion of their own, declining to treat the plea as equivocal and accepting it as a plea of guilty, and then it is said it follows that quarter sessions had no supervisory or appellate discretion to substitute their view for the view of the justices.
Speaking for myself I am far from satisfied that if the justices in petty sessions had considered the matter, applied their minds to it, and come to the conclusion that the plea was unequivocal, quarter sessions would have had no jurisdiction on appeal to differ from that. It is unnecessary to decide that point for the simple reason that in my judgment there is no material whatever for this court to show that petty sessions ever did consider the question whether the plea was unequivocal or equivocal or reached any conclusion about that matter. The question was not raised before them, the applicant being unrepresented and they do not say in the affidavit which they have filed in these proceedings that they raised the question for themselves and applied their minds to it.
Thirdly, counsel for the respondents submits that even though quarter sessions had jurisdiction on 2 April to entertain the applicant’s appeal from his conviction and to remit the matter to petty sessions, nevertheless in the event they only did so with an expression of opinion, not with any binding order or direction, and that was accordingly, so the submission runs, an opinion which petty sessions, if so minded, were free to disregard.
It is plain that the reason why the formal order was drawn up in the terms to which I have referred is that the clerk, or whoever drew it up, had taken the trouble to look at the statutory language specifying the powers of quarter sessions on appeals against conviction, which is to be found in s 1 of the Summary Jurisdiction (Appeals) Act 1933a. The relevant words are:
‘(vii) quarter sessions may by their order confirm, reverse or vary the decision of the court of summary jurisdiction, or may remit the matter with their opinion thereon to a court of summary jurisdiction acting for the same petty sessional division or place as the court by whom the decision appealed against was given … ’
That form of language is very familiar in many Acts governing the exercise of appellate jurisdiction, including the appellate jurisdiction of this court, and I have never heard it suggested before, that an appellate court vested with the power to remit a case to a lower court on a successful appeal with the opinion of the appellate court is not making an order which the lower court is bound to follow. Indeed, if it were otherwise and lower courts were in such cases free to disregard the opinion of the appellate court, it is difficult to see what purpose there could be in bringing an appeal. I would reject that submission.
Finally, counsel for the respondents submits that even though the court were to conclude that the Ranking order in April was an order made within the jurisdiction of quarter sessions, nevertheless this court should look at the merits of the order, come to a conclusion whether it was an order rightly or wrongly made within jurisdiction, and if coming to the conclusion that it was an order wrongly made, should in the exercise of the court’s discretion decline to issue mandamus to enforce it. I am unable to accede to the view that that would be a proper procedure. The prosecution had the opportunity if so minded to challenge the Ranking order after it was made, and as I have already pointed out neglected to do so. Quite apart from that, it seems to me that if we were to take that course we would leave matters in the air in the
Page 885 of [1970] 1 All ER 879
same way in which they were left in the air when petty sessions declined to act on the order of quarter sessions back in May 1969, and in any event I fail to see how this view of the matter could relieve us of the duty to make the orders of certiorari and prohibition which are sought in relation to the subsequent proceedings of quarter sessions. For these reasons in my judgment the orders of mandamus, certiorari and prohibition should all go.
WILLIS J. I agree.
LORD PARKER CJ. I agree and I would only add this, that I think that in considering a matter such as this, it is important to bear in mind two possible positions. One possible position is that there has been undoubtedly an unequivocal plea and later an application made possibly as the result of new facts coming to light to change that plea to a plea of not guilty. In such a case, as at present advised, I think that that is impossible once sentence has been imposed and the case is finished. Such was the position in R v Riley, a case which was not specifically considered by the House of Lords in the recent caseb to which Bridge J has referred, but which, so far as I am concerned, I consider properly decided.
The other position is the one which really arises in this case, where the question is not whether a change of plea otherwise unequivocal should be allowed, but whether the plea itself was an unequivocal plea. In such a case it seems to me that the matter can be investigated and a change of plea allowed at any stage in the proceedings before the appeal has finally been disposed of.
Orders for mandamus, certiorari and prohibition.
Solicitors: Stikeman, Somper & Co (for the applicant); Solicitor, Metropolitan Police (for the respondents).
Euan Sutherland Barrister.
Practice Direction
(Infant: Infant’s estate: Application for appointment as guardian)
[1970] 1 All ER 885
PRACTICE DIRECTIONS
CHANCERY DIVISION
5 March 1970.
Practice – Chancery Division – Infant’s estate – Application for appointment of guardian – Property not worth more than £500 – Straightforward application – Property to be paid into court – Jurisdiction of Chancery masters.
Buckley J has authorised the Chancery masters to make orders appointing guardians of minors’ estates for the purpose of collecting property to which they are absolutely entitled, where the application is straightforward and the property concerned is not worth more than £500 and is to be paid into court. By such an order the master may direct income to be accumulated or paid out of court for the minor’s maintenance. Cases where the fund is worth more than £500 or is to be left out of court in the hands of trustees will be referred to the judge as hitherto.
By direction of Buckley J.
R E Ball, Chief Master
Burns v Edman
[1970] 1 All ER 886
Categories: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISION
Lord(s): CRICHTON J
Hearing Date(s): 10, 11, 12 NOVEMBER 1969
Fatal accident – Action – Application of maxim ex turpi causa non oritur actio – Fatal Accidents Act 1846, ss 1, 2.
Damages – Measure of damages – Loss of expectation of life – Life of criminal unhappy – Damages reduced – Law Reform (Miscellaneous Provisions) Act 1934, s 1.
B when aged 32 and in good health was killed in a motor accident in November 1964 in circumstances in which the court found the defendant to have been three-quarters liable in negligence. During his lifetime B had had on the evidence no honest employment, and the court inferred that such support as B’s family had received from him, stated to be around £20 per week, came from the proceeds of criminal offences and that his widow (the plaintiff) had known this (or at least had not succeeded in establishing that she did not know this). In her action for damages under the Fatal Accidents Act on behalf of herself and B’s four infant dependents and under the Law Reform (Miscellaneous Provisions) Act 1934 on behalf of his estate, it was contended for the plaintiff that B might in the future have reformed and supported his family by honest work, and that in any event public policy required that the dependency should be paid by way of compensation by the tortfeasor rather than by the taxpayer through social security benefit.
Held – (i) The maxim ‘ex turpi causa non oritur actio’ would apply so as to disentitle the widow to claim damages (see p 887 j, post).
(ii) This maxim also disentitled the widow and dependants to damages under the Fatal Accidents Act 1846, because the injury suffered by each of them under s 2a of the Act was in effect the deprivation of their share of goods dishonestly obtained (see p 889 d, post) and, on the facts, the possibility that B might in the future have reformed was entirely speculative and unproven to the point of improbability (see p 889 f, post); under the Fatal Accidents Acts only the claim for funeral expenses could succeed (p 889 g, post).
(iii) In respect of damages for loss of expectation of life, while the figure of £500 might normally be awarded under the Law Reform (Miscellaneous Provisions) Act 1934, s 1, in respect of a strong healthy man aged 32, the court would take judicial notice of the fact that the life of a criminal was an unhappy one and would award £250(less one-quarter by reason of B’s contributory negligence) (p 889 j, post).
Notes
For restrictions on right of action for recovery of benefit by reason of public policy, see 1 Halsbury’s Laws (3rd Edn) 10–11, para 15, and 11 ibid 229, 230, para 397.
For assessment of damages under the Fatal Accidents Acts 1846–1959, see 28 ibid 100–103, paras 110, 111.
For considerations affecting damages for loss of expectation of life, see 11 ibid 256, 257, para 428.
For the Fatal Accidents Act 1846, ss 1, 2, see 17 Halsbury’s Statutes (2nd Edn) 4, 5.
For the Law Reform (Miscellaneous Provisions) Act 1934, s 1, see 13 ibid (3rd Edn) 115.
Cases referred to in judgment
Barnett v Cohen [1921] 2 KB 461, [1921] All ER Rep 528, 90 LJKB 1307, 125 LT 733, 36 Digest (Repl) 213, 1126.
Page 887 of [1970] 1 All ER 886
Beresford v Royal Insurance Co Ltd [1938] 2 All ER 602, [1938] AC 586, 107 LJKB 464, 158 LT 459, 29 Digest (Repl) 397, 2995.
Crippen, In the estate of [1911] P 108, [1911–13] All ER Rep 207, 80 LJP 47, 104 LT 224, 21 Digest (Repl) 270, 470.
LeBagge v Buses Ltd [1958] NZLR 630.
Pigney v Pointers Transport Services Ltd [1957] 2 All ER 807, [1957] 1 WLR 1121, Digest (Cont Vol A) 467, 269a.
Action
In this action the plaintiff, suing as widow and administratrix of the estate of her husband, claimed damages against the defendant in respect of her husband’s death as a result of an accident on the highway on 22 November 1964. She claimed under the Fatal Accidents Acts 1846–1959 on behalf of herself and the four infant dependants of the deceased, and under the Law Reform (Miscellaneous Provisions) Act 1934 on behalf of his estate. The facts are set out in the judgment.
Patrick Bennett QC and J R Peppitt for the plaintiff.
John Archer for the defendant.
12 November 1969. The following judgment was delivered.
CRICHTON J. In the early morning of 22 November 1964, the plaintiff’s husband, a man aged 32, a strong and healthy man, was killed in a motor accident. The court here has found as a fact that the defendant in this action was three-quarters to blame for the collision and that the deceased was one-quarter to blame. In these circumstances the plaintiff, now a woman of 32, sues under the Law Reform (Miscellaneous Provisions) Act 1934 on behalf of the deceased’s estate and under the Fatal Accidents Acts 1846–1959 on behalf of herself and the other dependants of the deceased, ie his stepson now aged 14, and his children, a girl aged 12 and twin girls aged 10.
It has been found in this case impossible for the plaintiff to establish that the deceased had any capital assets to support his family or that during his lifetime he had any honest employment. The plaintiff, however, said in evidence that the deceased gave her £20 every Friday and paid the rent of the house. Although at death, we understand, it is the policy of the Home Office or the prison authorities to destroy the records of criminals, it nevertheless has appeared in evidence in this case that the deceased, in July 1954, was sentenced to three years’ imprisonment for robbery with violence at the Central Criminal Court. And that, in May 1962, after his marriage to the plaintiff in December 1958, he was convicted of being an accessory before and after the fact of felony, and at Northampton received a sentence of 21 months’ imprisonment.
In these circumstances, it is, in my judgment, a fair inference that such support as the deceased afforded his family, and I am far from satisfied that it amounted to a regular £20 a week, came from the proceeds of criminal offences. The plaintiff said that the deceased from time to time profited financially from gambling on greyhounds but, in my view, this is wholly uncertain and unproven. The plaintiff further said that she did not know that such money as the deceased gave her came from the proceeds of crime. I have already found as a fact that she did know, or that she did not succeed in establishing that she did not know that such money as the deceased gave her was from the proceeds of crime. So far as the plaintiff is concerned, therefore, in my judgment, she would not be entitled to claim damages because the maxim which has stood the test of time ex turpi causa non oritur actio would apply.
Quite apart from that, however, the court has to consider whether, on the facts as I have found them, the plaintiff and the infant dependants are entitled to damages under the Fatal Accidents Act 1846. Counsel for the plaintiff says that they are so entitled. He puts his case in this way: that being dependants they are prima facie
Page 888 of [1970] 1 All ER 886
entitled to damages because the death of the deceased was, at any rate in part, caused by the negligence of the defendant. Secondly, that the only bar to their recovering damages is that to award damages to them would be contrary to public policy, because the support that they were afforded before the death of the deceased emanated from the proceeds of crime. And thirdly, that under the Fatal Accidents Acts claimants who are suing as innocent parties on their own behalf are not suing as personal representatives of the deceased on behalf of the estate or standing in the shoes of the deceased, as was done in Beresford v Royal Insurance Co Ltd and in In the Estate of Crippen, which were both unsuccessful claims. And counsel cited Pigney v Pointers Transport Services Ltd in support of the proposition that under the Fatal Accidents Acts a widow making her separate claim was entitled to recover damages even though the death of her husband had resulted from his suicide at a time when he was not found to be insane, but it was there held—quite clearly—that the suicide of the deceased was directly attributable to the injuries sustained by him in an accident for which the defendant was responsible. I distinguish that case on that ground from the present case in the sense that, although it is a case undoubtedly in which a widow was entitled to make her own separate case under the Fatal Accidents Acts and is good authority for that proposition, if good authority for it is needed in the light of earlier decisions, it is quite clearly distinguishable from this case in which the support proceeded directly from the proceeds of criminal offences.
A further case cited by counsel for the plaintiff was LeBagge v Buses Ltd, which was a decision of the Court of Appeal in New Zealand on the following facts: the deceased, in an action by his dependants under what corresponds in New Zealand to the Fatal Accidents Act, gained a small proportion of his earnings by committing an infraction of certain regulations which forbade him to drive his milk float seven days a week, but confined him to six days’ work. He did, in fact, earn about an extra £1 a week by driving on the seventh day. The Court of Appeal in New Zealand held that such an infraction against a regulation which was not in fact enforced against him but might possibly have been in the future was really of minimal importance, and that the judge directing the jury in regard to damages was right in telling the jury to pay little attention to that argument. I think that case is wholly distinguishable from the present case. Here the support given to the dependants of the deceased flowed directly from criminal offences.
Nevertheless, counsel for the plaintiff argued that it was sufficient for the plaintiff to show: first, that the death of the deceased was caused by the negligence of the defendant; and secondly, that from whatever source it did emanate the dependants, including the plaintiff, had in fact lost the financial support of the deceased through the negligence of the defendant, and he went on to say further that it was good public policy that the dependency should be paid by way of compensation by the defendant as tortfeasor rather than by the taxpayer through the medium of social security.
Counsel for the defendant submitted the following argument, and before I indicate what it was, I think that it is profitable to look at the words of ss 1 and 2 of the Fatal Accidents Act 1846. Section 1 provides:
‘… Whensoever the death of a person shall be caused by wrongful act, neglect, or default, and the act, neglect, or default is such as would (if death had not ensued) have entitled the party injured to maintain an action and recover damages in respect thereof, then and in every such case the person who would have been liable if death had not ensued shall be liable to an action for damages,
Page 889 of [1970] 1 All ER 886
notwithstanding the death of the person injured, and although the death shall have been caused under such circumstances as amount in law to felony’.
I think that the plaintiff is over that hurdle because it is clear that although the deceased would not have been able, in my view at any rate, to maintain an action against the defendant for loss of earnings, nevertheless if he had been injured and had not died, he would quite clearly have been able to maintain an action against the defendant for damages for personal injuries. But s 2 provides:
‘… Every such action shall be for the benefit of the wife, husband, parent, and child of the person whose death shall have been so caused, and shall be brought by and in the name of the executor or administrator of the person deceased; and in every such action the jury may give such damages as they may think proportioned to the injury resulting from such death to the parties respectively … ’
Now one has to examine in this case what the injury is—first of all to the plaintiff and secondly to the children. Counsel for the defendant argues that the injury in the case of each of the dependents really amounts to this on examination: that he or she is saying: ‘I have been deprived of my share of other people’s goods, brought to me by the deceased’, and brought from the proceeds of dishonesty—dishonestly obtained, and insofar as that is the injury, it is a mala causa or turpis causa and, says counsel, it is not maintainable under the Fatal Accidents Act 1846. I agree with counsel for the defendant in this argument, and in my judgment neither the plaintiff nor any other dependent is entitled to damages under the Fatal Accidents Act 1846 for that reason.
Now I ought, I think, to deal with another argument put forward by counsel for the plaintiff. He argued in this way: that although at the time of his death such support as the deceased afforded to his family proceeded from criminal offences, yet that might not have been so in the future. He might have reformed and taken up remunerative, honest work and continued to support his family from that source. In the circumstances, I have come to the conclusion that that possibility is, in the circumstances, entirely speculative and unproven to the point of improbability. And Barnett v Cohen indicates with clarity that damages under the Fatal Accidents Act 1846 cannot be awarded for such speculative possibilities as the potential support from a child of tender years to its parents in later life. I think that case is comparable to the present case from the point of view of the possibility of reform.
The funeral expenses of £41 are claimed under the Fatal Accidents Acts, and insofar as that claim is concerned, in my judgment it succeeds, and under the Fatal Accidents Acts there will be judgment for the plaintiff for £30 15s being three-quarters of £41.
I now pass to consideration of the claim in respect of the deceased’s estate for loss of expectation of life under the Law Reform (Miscellaneous Provisions) Act 1934. Counsel for the plaintiff argued that the maximum figure for loss of expectation of life these days is £500, and that there is no reason why the deceased, as a strong and healthy man of 32 or his estate should not receive that figure. On the other hand, counsel for the defendant argued that damages for loss of expectation of life, and he is quite right about this in the light of the authorities, are really damages for loss of a happy life or the element of happiness, insofar as it outweighs the element of unhappiness in life. Now the deceased, as I find, was a criminal and I agree with counsel for the defendant. I think that I am am entitled to take judicial notice of the fact that the life of a criminal is an unhappy one, and I think that that fact sounds, in the assessment of damages under the 1934 Act for loss of expectation of life. Accordingly,
Page 890 of [1970] 1 All ER 886
I would award the plaintiff under that head, as administratrix of the estate of the deceased the sum of £250, reduced by a quarter in respect of the contributory negligence, namely £187 10s, making under both Acts a total sum of £218 5s.
Judgment for the plaintiff for £218 5s.
Solicitors: W H Hopkins & Co (for the plaintiff); L Bingham & Co (for the defendant).
K Diana Phillips Barrister.
Ready Mixed Concrete (East Midlands) Ltd v Yorkshire Traffic Area Licensing Authority
[1970] 1 All ER 890
Categories: TRANSPORT; Road
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 19 JANUARY 1970
Road traffic – Licence – Goods vehicle – Carrier’s licence – Licence holder owner driver of vehicle – Contract with appellants to carry concrete for hire or reward – Owner driver falling ill – Employee of appellants sent to drive vehicle – Appellants possessing no carrier’s licence – Employee’s wages and insurance paid by appellants while he drove vehicle but small sum deducted from contract payments – Arrangement continued only until appellants’ contracts carried out – Whether employee servant of owner or appellants – Road Traffic Act 1960, s 164(1), (3).
The appellants, who dealt in ready-mixed concrete, entered into a contract with a haulage contractor, who possessed a carrier’s licence, whereby in consideration of certain rates specified in the agreement he undertook the collection, carriage and delivery of mixed concrete and other materials to the appellants’ customers in his truck. Under the contract, he was to act on the reasonable directions of the appellants, he was to keep the truck clean and in good repair and only if the appellants did not require him to use the truck could he use it for his own trade or business; further, he could with the written consent of the appellants employ another person to operate the truck, but in that event he was to be liable for the acts of such other person and for the performance of his obligations under the contract. The haulage contractor fell ill for a month and was unable to find a replacement driver for the truck. The appellants, who had contracts to implement and deliveries to be made, sent one of their employees, S, to drive the truck. S drove the truck with the haulage contractor’s approval for two weeks to fulfil the contracts. During that time the appellants continued to pay S’s wages, his national insurance stamp and the selective employment tax payable in respect of him, but when they paid the haulage contractor for the loads carried when the truck was driven by S, an agreed sum of 15s a load was deducted to cover all expenses. On the question whether the appellants, who did not possess a carrier’s licence, were using the truck within the meaning of s 164a of the Road Traffic Act 1960 at the time when S was driving it,
Held – (i) The presumption against the transfer of a servant (S) from the general employer (the appellants) to the temporary employer (the haulage contractor) was not rebutted, because—
(a) the appellants had paid S’s wages, national insurance stamp and the selective employment tax, which were in no sense represented by the agreed sum of 15s deducted from the payment to the haulage contractor (see p 894 j, to p 895 b, and p 896 f, post); and
Page 891 of [1970] 1 All ER 890
(b) the appellants offered the services of S solely for the purpose of performing the particular contracts which they had outstanding when the haulage contractor fell ill (see p 895 d, and p 896 f, post); accordingly,
(ii) S was never the servant of the haulage contractor but remained at all times the servant of the appellants, the use and benefit of his work alone being transferred (see p 895 e and p 896 f, post).
Dictum of Bowen LJ in Moore v Palmer (1886) 2 TLR at 782 applied.
McGregor v JS Duthie & Sons & Co Ltd [1966] SLT 133 distinguished.
Notes
The Road Traffic Act 1960, s 164, is repealed as from a day to be appointed by the Transport Act 1968, ss 94(8), 165 and Sch 18, Part IV.
For when licence is required to use a goods vehicle, see 33 Halsbury’s Laws (3rd Edn) 736,737, para 1251, and for a case on the subject, see 8 Digest (Repl) 289, 1859.
For the employment of other person’s servants, see 25 Halsbury’s Laws (3rd Edn) 501–505, paras 965–968, and for cases on the subject, see 34 Digest (Repl) 179–181, 1270–1284.
For the Road Traffic Act 1960, s 164, see 40 Halsbury’s Statutes (2nd Edn) 853.
Cases referred to in judgments
Century Insurance Co Ltd v Northern Ireland Road Transport Board [1942] 1 All ER 491, [1942] AC 509, 111 LJPC 138, 167 LT 404, 34 Digest (Repl) 31, 95.
Donovan v Laing, Wharton and Down Construction Syndicate Ltd [1893] 1 QB 629, [1891–94] All ER Rep 216, 63 LJQB 25, 68 LT 512, 57 JP 583, 34 Digest (Repl) 24, 53.
M’Cartan v Belfast Harbour Comrs [1911] 2 IR 143, 34 Digest (Repl) 287, *1203.
McGregor v J S Duthie & Sons & Co Ltd [1966] SLT 133.
Malley v London, Midland & Scottish Ry Co 1944 SC 129, 34 Digest (Repl) 27, *48.
Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd and McFarlane [1946] 2 All ER 345, [1947] AC 1, 115 LJKB 465, 175 LT 270, 34 Digest (Repl) 180, 1279.
Moore v Palmer (1886) 2 TLR 781, 51 JP 196, 34 Digest (Repl) 23, 51.
Sykes v Millington [1953] 1 All ER 1098, [1953] 1 QB 770, [1953] 2 WLR 973, 117 JP 257, 8 Digest (Repl) 289, 1859.
Case also cited
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433, [1968] 2 QB 497.
Case stated
This was a case stated by justices for the county borough of Barnsley in respect of their adjudication as a magistrates’ court sitting at Barnsley on 23 January and 20 February 1969.
On 15 October 1968, an information was preferred by the respondents, the licensing authority for the Yorkshire Traffic Area, against the appellants, Ready Mixed Concrete (East Midlands) Ltd, charging that, on 20 April 1968, they were guilty of an offence under Part IV of the Road Traffic Act 1960, by using a motor vehicle number of PWE 754E as a goods vehicle within the meaning of the Act on Doncaster Road, Barnsley, for the carriage of goods in connection with the trade or business of concrete suppliers carried on by them, they not then being the holder of a licence under Part IV of the Act in respect of the vehicle, contrary to s 164 of the Act. The following facts were proved or admitted. On 1 May 1967, an agreement for the hire-purchase of a motor vehicle, registered number PWE 754E (‘the truck’) was entered into by Readymix Finance Ltd, and one Gerald Robert Clewes (‘the haulage contractor’). The appellants owned and supplied to the haulage contractor
Page 892 of [1970] 1 All ER 890
a revolving drum in which concrete was transported on the back of the truck. On 1 May 1967, the appellants entered into a written agreement with the haulage contractor, under the terms of which it was agreed, inter alia, that in consideration of the appellants’ paying the haulage contractor at the rates specified in the agreement: (i) the haulage contractor would collect, carry and deliver ready-mixed concrete, batched materials and other substances to the appellants’ customers, and, in so doing, the haulage contractor was an independent contractor; (ii) the haulage contractor would abide by all reasonable directions from any competent servant of the appellants as to the regulation and management of the appellants’ premises and plant, for ensuring the prompt and orderly loading and dispatch of the materials at such premises and plant, for the regulation of traffic at the premises and plant and, when so requested by the appellants, to collect for and transmit to the appellants any moneys due to them on delivery of any of the materials; (iii) the haulage contractor would keep the truck clean and in good and substantial repair and condition, and, if he failed to do that, that could be done by the appellants, and the haulage contractor be charged accordingly; (iv) the haulage contractor would pay the cost of all alterations, modifications and improvements to the truck, but without putting any such work in hand before first obtaining the appellants’ consent in writing; (v) subject to the rights of the appellants, the haulage contractor should be at liberty to carry on or be engaged or concerned in any other business or trade; (vi) the haulage contractor could, with the written consent of the appellants, employ another suitable person as a driver to operate the truck in the haulage contractor’s place, provided such other driver complied and the haulage contractor procured that such driver complied with all the relevant provisions of the agreement with regard to the operation and use of the truck and the haulage contractor should be liable for the acts of such other driver and for the performance of his obligations. The appellants had the right to require the haulage contractor to cease to allow such other driver to drive the truck if they considered him unsuitable or failing to comply with any of the relevant provisions of the agreement with regard to the operation and use of the truck. In or about the second week of April 1968, the haulage contractor became ill and was ill for a month. He was confined to bed so that he was unable to find a replacement driver for the truck. The appellants telephoned him, and on 19 April 1968 they sent one of their employees, Antony Keeling Stacey, whom the haulage contractor had not seen before, to drive the truck during his illness. The appellants did not possess a duplicate set of keys for the truck, and the haulage contractor gave his keys to Mr Stacey. Before Mr Stacey drove off, the haulage contractor told him to take care of the truck. Mr Stacey drove the truck for two weeks and during that time the haulage contractor did not know where it was. The haulage contractor could have refused to allow Mr Stacey to drive the truck and could have stopped him from continuing to do so. The appellants were entitled to direct Mr Stacey as to the number, quantity and destination of the loads, as they had been entitled to do when the haulage contractor was driving the truck. If Mr Stacey had refused to accept these directions from the appellants, they could have dismissed him. Mr Stacey continued to receive his wages from the appellants, who also paid his national insurance stamp and selective employment tax payable in respect of him. The haulage contractor paid nothing directly to Mr Stacey, but when the appellants paid the haulage contractor for the loads carried by the truck while Mr Stacey was driving they deducted the sum of 15s per load. This sum had been agreed between the appellants and haulage contractors who worked for them as being a fair deduction to cover all expenses. At the end of the two weeks Mr Stacey visited the haulage contractor to inform him of the work which he had done with the truck and that he had taken care of it. On 20 April 1968, Mr Stacey drove the truck in connection with the transport of the appellants’ concrete in Doncaster Road, Barnsley. At that time the haulage contractor, but not the appellants, was the holder of a carrier’s licence in respect of the truck.
Page 893 of [1970] 1 All ER 890
It was contended by the appellants that they were not ‘using’ the truck on 20 April 1968 when the true meaning of that word was considered in the light of the decided authorities. On 20 April 1968, Mr Stacey was temporarily the servant or agent of the haulage contractor, and not the servant or agent of the appellants, although the appellants had formerly been the general employers of Mr Stacey. The decisive test of whether Mr Stacey was the servant or agent of the appellants or, alternatively, of the haulage contractor was that of which of them had the right to control, not what the driver did, but the way in which the driver performed his duties. On applying that test to the facts of the case, it was the haulage contractor, and not the appellants, who had the right, and who in fact exercised the right, to tell Mr Stacey how he was to drive the vehicle. The fact that the truck belonged to the haulage contractor gave additional support to that conclusion. In reality, the haulage contractor, and not the appellants, paid Mr Stacey’s wages, state insurance contributions and selective employment tax, and he also had the right to terminate Mr Stacey’s employment with him as driver of the truck. Sykes v Millingtonb was authority only for the proposition that a driver could not be the servant or agent of both the general and temporary employers at the same time, and it also differed materially from the present case on its facts; in particular, in Sykes’s casec, the vehicle belonged to the general employer. For those reasons, the respondents had not proved beyond reasonable doubt that Mr Stacey was not the servant or agent of the haulage contractor at the material time and that he was the servant or agent of the appellants. It was contended by the respondents that Mr Stacey was at all material times in the general employment of the appellants and he continued to be their servant when he was ordered by them to drive the truck. Throughout the two weeks when Mr Stacey was driving the truck he acted in accordance with orders given to him by the appellants in the ordinary way. The haulage contractor was not in a position to instruct Mr Stacey in what he was to do or where he was to go, or to exercise any other control over him when he was driving the truck. The 15s per load deducted by the appellants did not constitute a payment by the haulage contractor to Mr Stacey but was on account of expenses incurred by the appellants in providing a driver. Mr Stacey was not at any time the servant or agent of the haulage contractor. Since Mr Stacey was the servant of the appellants when he was driving the truck on 20 April 1968, they must be deemed to be the persons using the same on that day. Since on 20 April 1968 the appellants were not the holders of a carrier’s licence entitling them to use the truck they were guilty of an offence under s 164 of the 1960 Act.
The justices were of the opinion that the truck at the material time was being used by the appellants in connection with their trade and business, and that the driver at the material time was the servant of the appellants. They were therefore satisfied that the case had been proved and that the appellants were guilty and they fined them £5 with witness costs of £15.
The appellants now appealed.
A W M Davies QC and P M Baker for the appellants.
J H R Newey for the respondents.
19 January 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county borough of Barnsley, who convicted the appellants of an offence contrary to s 164 of the Road Traffic Act 1960. That section provides that:
‘(1) Subject to the provisions of this Part of this Act, no person shall use a goods vehicle on a road for the carriage of goods—(a) for hire or reward; or (b) for or in connection with any trade or business carried on by him, except under a licence granted under this Part of this Act (hereafter in this Part of this Act referred
Page 894 of [1970] 1 All ER 890
to as a “carrier’s licence”): … (3) For the purposes of this Part of this Act, the driver of a vehicle, if it belongs to him or is in his possession under an agreement for hire, hire-purchase or loan, and in any other case the person whose agent or servant the driver is, shall be deemed to be the person using the vehicle.’
To anticipate the facts, on 20 April 1968 a vehicle which belonged to a man called Clewes, a haulage contractor, was seen on the road being driven by a man called Stacey. If at the material time Mr Stacey was the servant of the haulage contractor, then no offence was committed at all, because the haulage contractor had the necessary carrier’s licence. On the other hand, if Mr Stacey was, as the prosecution maintained, throughout the servant of the appellants, then the appellants did not have the necessary carrier’s licence, and, accordingly, were guilty of an offence against s 164. [His Lordship stated the facts, and continued:] It was in those circumstances that the justices expressed their conclusion in these words:
‘We were of the opinion that the truck at the material time was being used by the Appellants in connection with their trade and business, and that the driver at the material time was the servant of the Appellants. We were therefore satisfied that the case had been proved and that the Appellants were guilty. We fined them £5 with witness costs of £15.’
Before the justices, the appellants’ contention was that the decisive test of whether Mr Stacey was the servant or agent of the appellants or of the haulage contractor was which of them had the right to control, not what the driver did, but the way in which the driver performed his duties? I do not propose to refer to the number of authorities in connection with what is the proper test or tests. That the man in control of the driver of a piece of machinery or a motor car is in general circumstances the owner of that machinery or motor car is, I think, undoubted. In the usual case the question arises on a matter of vicarious liability for negligence when machinery and driver have been lent to someone; that was the position in Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd and McFarlane ([1946] 2 All ER 345 at 348, [1947] AC 1 at 12), where Viscount Simon said:
‘I would prefer to make the test turn on where the authority lies to direct, or to delegate to, the workman, the manner in which the vehicle is driven.’
That was adopted in the case which concerns the sectiond which was the predecessor of s 164, namely, Sykes v Millington. Whether, accordingly, the case arises under s 164 of the Road Traffic Act 1960 or in a case regarding vicarious liability for negligence, the test I think is the same.
In a Scottish case of McGregor v JS Duthie & Sons & Co Ltd ([1966] SLT 133 at 143), a case to which I must refer in more detail in a moment, Lord Strachan in his judgment said:
‘The lorry was the property of the appellants. The sheriff-substitute has so found, and I see no warrant in the evidence for taking a different view. There is some suggestion that Brebner had purchased, or was in the course of purchasing, the lorry from the appellants, but that has not been proved. The question of ownership is I think of some importance because prima facie the owner of a vehicle is the person who has authority to give directions as to how it is to be driven.’
For my part I accept that; though not the decisive test, it may be a prima facie test of the position. But, of course, many other authorities to which I find it unnecessary to refer emphasise that that is, even when one is dealing with a motor car or machinery, not the sole test. There are a number of other considerations, and the presumption is against there having been any transfer—and I use that in a perfectly neutral
Page 895 of [1970] 1 All ER 890
fashion—from the general employers to the temporary employer, if employer is the right term to use. Amongst other considerations there is, of course, as it has been put: who is the paymaster? In the present case, as I have already said, it is perfectly clear that the appellants were the paymasters. They paid the wages, the national insurance and tax. It is true that, when settlement was effected between the haulage contractor and the appellants, a sum of 15s a load was deducted. It is quite clear that that was not an amount representing the wages paid to Mr Stacey, but was an arbitrary sum fixed, as the justices found, as a fair deduction to cover all expenses. Of course, as is conceded, the appellants alone could dismiss him; equally they chose him. If the haulage contractor, who could have refused to allow Mr Stacey to drive the truck, had done so, it does not follow that another driver would have been provided. It can be said on the other side that the haulage contractor must have been able to be in a position to tell Mr Stacey how to drive the truck, not above a certain speed and matters of that sort. Equally it can be said that Mr Stacey was helping the haulage contractor to earn money by performing his part of the contract with the appellants. The latter matter, however, to my mind does not carry very much weight because this contract was clearly for the benefit of both the haulage contractor and the appellants.
Indeed, as I understand it, the matter really arises in this way, that the appellants said: we have to make these deliveries, we are not asking you, the haulage contractor, to lend us the truck, but we will lend you a driver to perform these particular deliveries, deliveries which only extend over a fortnight, albeit the haulage contractor, we are told, was ill for a month. When one comes to balance all these factors, then I, for my part, am satisfied that this is a case in which it cannot be said that Mr Stacey became the servant, albeit temporarily, of the haulage contractor. It seems to me much more a case falling within the second alternative stated by Bowen LJ in Moore v Palmer ((1885) 2 TLR 781 at 782), when he said: ‘The great test was this—whether the servant was transferred, or only the use and benefit of his work?’
Counsel for the appellants has referred the court to a passage in Atiyah’s Vicarious Liability in the Law of Tortse, where he writes:
‘Although this testf was favoured by LORD WRIGHT in the Century Insurance caseg, LORD MACKAY expressed some scepticism about it in Malley v. London, Midland and Scottish Rly. Co. [1944 SC 129 at 145] and now that it is clear that the servant is in no real sense transferred [that must be in a technical sense] to the temporary employer in any case, it is thought that this test can safely be discarded as both unhelpful and irrelevant.’
I only mention that to point out that, in fact, Bowen LJ’s remarks were approved by Lord Dunedin specifically in M’Cartan v Belfast Harbour Comrs ([1911] 2 IR 143 at 152), where he quoted Bowen LJ and said: ‘And this test must be applied, in my opinion, to the whole facts of the case.' Perhaps almost more important, bearing in mind the test laid down by Viscount Simon in the Mersey Docks and Harbour Board case ([1946] 2 All ER at 348, [1947] AC at 12), is the fact that, in the Century Insurance case ([1942] 1 All ER at 494, [1942] AC at 513), Viscount Simon LC himself quoted with approval the passage that I have read in the judgment of Bowen LJ in Moore v Palmer ((1886) 2 TLR at 782), and this is followed by a further approval by Lord Wright ([1942] 1 All ER at 496, [1942] AC at 516).
Page 896 of [1970] 1 All ER 890
The only case which has caused me some doubt is the Scottish case McGregor v JS Duthie & Sons & Co Ltd to which I briefly referred a moment ago. The facts were extremely complicated, but from such analysis as I have been able to make, it would appear that the position there was very much the same as in the present case. Duthies had a vehicle, they had not got a driver. A certain partnership who had a contract with Duthies had a driver and lent this driver to Duthies; there was an accident, and the curious feature of it is that one of the members of the partnership was in fact sitting in the cab with the man, his general servant, whom he had lent while the hirer of that servant, Duthies, was miles and miles away. In that case, the sheriff-substitute had held that the servant had become temporarily the servant of Duthies and the Court of Session held that they saw no reason to interfere with that decision. All I would emphasise is, as Lord Dunedin said in the Belfast Harbour Comrs case ([1911] 2 IR at 149): that one should not be too strongly influenced by other decisions one way or the other. He said:
‘My Lords, I entirely demur to this manner of treating the case. There is no principle involved in Donovan’s Case or in this case, except the principle which I have already mentioned, … respondent superior, and as to which no one entertains any doubt. The application of that principle to each particular case depends upon facts, and is a question of fact, and the facts of one case can never rule another … ’
Although the facts are to some extent similar in Duthie’s case to this case, there are some quite special features, one of which incidentally was that the loan of the servant was quite clearly not merely ad hoc for certain deliveries, but was for a period, the period being until Duthies were in a position to find and employ a permanent truck driver. I only mention that as one possible distinction. In any event I have come to the conclusion that, on the facts of the present case, the justices were right and I would dismiss this appeal.
ASHWORTH J. I agree.
TALBOT J. I also agree.
Appeal dismissed. On 6 February 1970 leave to appeal to the House of Lords was refused.
Solicitors: Dale & Newbery, agents for Keeble Hawson, Steele Carr & Co, Sheffield (for the appellants); Treasury Solicitor.
N P Metcalfe Esq Barrister.
Central Electricity Generating Board v Dunning and others
[1970] 1 All ER 897
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 20, 21, 22, 23 JANUARY 1970
Electricity – Supply – Transmission system – Overhead line – Consent of Minister to entire route – Sections of route over land occupied by gliding club – Whether club’s land ‘pleasure ground’ – Whether Minister’s consent ultra vires – Electricity (Supply) Act 1919, s 22.
The plaintiff board proposed to erect a supergrid line some 90 miles in length between Yorkshire and Lancashire which would in part pass over land in the occupation of the fifth defendant, a gliding club. Membership of the club was open to the general public, and it was the only gliding club in the area of the Yorkshire Pennines. The land, which was privately owned by the first four defendants and used by members of the club, consisted of some 118 acres, 83 of which were moorland and 35 pasture. The proposed supergrid would have passed directly over all the fields comprising the 35 acres except one, and might by its width have affected that also. Improvements and developments, principally comprising levelling and the removal of stones and walls, had been carried out on the land almost entirely by voluntary work of members and their friends. The placing of the proposed electric lines above the route would constitute an interference with gliding from the loan to such a degree as to render it substantially impossible. On 17 July 1969, the Minister of Power gave his consent under s 10(b) of the Schedule to the Electric Lighting (Clauses) Act 1899 to the entire 90 miles, and also under the Electricity (Supply) Act 1919, s 22a to the actual placing of the line across the club’s land. The club alleged that the consents were ultra vires the Minister on the ground that the club was using the land as a pleasure ground within the meaning of the exception contained in s 22 of the 1919 Act. The plaintiff board therefore commenced proceedings seeking declarations that none of the land over which it was proposed to place electric lines was land used as a pleasure ground and that it was entitled to place lines across the land.
Held – The words ‘pleasure ground’ in s 22 of the Electricity (Supply) Act 1919 imported the conceptions first, that it was the ground that gave pleasure to people and not ground on which a person carried on an activity pleasurable to him, and secondly, that the ground was not completely natural but that some planting, cultivation or planning had been carried out on it so that it gave pleasure to people; and the club’s land which consisted of moorland and pasture and on which only the limited work of levelling and stone removal had been carried out could not be described as a ‘pleasure ground’ in this context (see p 902 c and d, and p 903, c post).
Notes
For wayleaves over private ground, see 14 Halsbury’s Laws (3rd Edn) 432–435, paras 839–841.
For the Electricity (Supply) Act 1919, s 22, see 11 Halsbury’s Statutes (3rd Edn) 912.
Cases referred to in judgment
Booth v City of Minneapolis (1925) 203 North West Reporter 625.
Page 898 of [1970] 1 All ER 897
Ellenborough Park, Re, Re, Davies (decd), Powell v Maddison [1955] 2 All ER 38, [1956] Ch 131, [1955] 3 WLR 91; affd CA [1955] 3 All ER 667, [1956] Ch 131, [1955] 3 WLR 892, 19 Digest (Repl) 198, 1389.
Napier Borough v Napier Harbour Board [1942] NZLR 435.
R v Minister of Health, ex parte Waterlow & Sons Ltd [1946] 2 All ER 189, [1946] KB 485, 115 LJKB 376, 175 LT 424, 26 Digest (Repl) 700, 116.
Shoemaker v United States (1892) 147 US Reports 282.
Stephens v Cuckfield Rural District Council [1960] 2 All ER 716, [1960] 2 QB 373, [1960] 3 WLR 248, 124 JP 420, 45 Digest (Repl) 357, 117.
Stevens v National Telephone Co Ltd [1914] 1 IR 9, 45 Digest (Repl) 174, *23.
Cases also cited
A-G v Sunderland Corpn (1876) 2 Ch D 634.
Camden (Marquis) v Inland Revenue Comrs [1914] 1 KB 641.
Carden v Tuck (1588) Cro Eliz 89.
Copeland v Greenhalf [1952] 1 All ER 809, [1952] Ch 488.
Fergusson v London, Brighton & South Coast Ry Co (1863) 3 De GJ & Sm 653.
Gilbert v Tomison (1824) 4 Dow and Ry KB 222.
Green (H E) & Sons v Minister of Health [1946] KB 608.
Lee v Showmen’s Guild of Great Britain [1952] 1 All ER 1175, [1952] 2 QB 329.
London Corpn v Cusack-Smith [1955] 1 All ER 302, [1955] AC 337.
Newhill Compulsory Purchase Order, 1937, Re [1938] 2 All ER 163.
Paddington Corpn v A-G [1906] AC 1, [1904–07] All ER Rep 362.
R v St Pancras Assessment Committee (1877) 2 QBD 581.
Read v Bishop of Lincoln [1892] AC 644.
Ripon (Highfield) Housing Order 1938, Re [1939] 3 All ER 548, [1939] 2 KB 838.
Adjourned summons
This was an application by originating summons dated 8 October 1969 by the Central Electricity Generating Board against the following defendants: (1) Anthony Settering Dunning; (2) Dennis Hamilton Marshall; (3) Albert Michael Rose; (4) Geoffrey Greenhough; and (5) the Halifax Gliding Club Ltd, whereby the plaintiff board claimed the following relief: (1) a declaration that none of the lands across which it was proposed to place electric lines in the Urban District of Ripponden was land used as a pleasure ground; and (2) a declaration that by virtue of two consents dated 17 July 1969 given under s 22 of the Electricity (Supply) Act 1919 the plaintiff board was entitled to place the electric lines across the lands in the position shown on the plans annexed to the consents (subject to the terms and conditions therein specified). The first four defendants were the owners and the fifth defendant (‘the club’) was the lessee and occupier of 118.525 acres of land known as Ringstone Edge Farm in the Urban District of Ripponden in the West Riding of Yorkshire. The facts are set out in the judgment.
Charles Sparrow QC and George Bartlett for the plaintiff board.
John M Collins for the club.
The first four defendants took no part in the proceedings and agreed to abide by the decision of the court.
23 January 1970. The following judgment was delivered.
FOSTER J. This originating summons raises a short question of construction of s 22 of the Electricity (Supply) Act 1919. The plaintiff is the Central Electricity Generating Board which desires to erect a supergrid line carrying 400 kV from Eggborough in Yorkshire to Darwen in Lancashire, for the best deployment and use of generation and for the security of supply of electricity. In fact Yorkshire has a surplus of generation while Lancashire has a deficiency. The line between Eggborough and
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Darwen is some 90 miles long and will cost nearly £8 million to construct. The case is of great importance and urgency to the plaintiff board since if this part of the supergrid cannot be completed it will affect the plaintiff board’s programme for the generation and supply of electricity throughout England. It is also of great importance to the fifth defendant which is a gliding club and which operates on land called ‘Ringstone Edge Farm’ which I will call ‘the club’s land’ and will have to stop its activities if the supergrid line is built over the route proposed.
The history of the matter can be taken from paras 4 and 5 of the affidavit of Mr Charles Frankland Park which was filed on behalf of the plaintiff board:
‘4. Statutory authority for an overhead transmission line is secured in two stages. In the first stage the Minister of Power is asked to approve under Section 10(b) of the Schedule to the Electric Lighting (Clauses) Act, 1899, the general route of the line. This may be regarded as the broad planning stage. The lands and interests involved will be numerous and may even extend over several counties. Suggested alternative routes may be offered for the Minister’s consideration. Ministerial consent at this stage does not carry authority actually to enter upon private property for the purpose of erecting the line. This further authority is obtained piecemeal in the form of wayleaves either by negotiation with individual owners and occupiers or (wherever agreement cannot be reached) by further application to the Minister for his consent. This application is made under Section 22 of the Electricity (Supply) Act, 1919. In the case of land covered by buildings or used as a garden or pleasure ground, which is outside the scope of the said Section 22 compulsory purchase orders for the right to place an electric line are made under Section 9 of the Electricity Act, 1947.
‘5. The present proceedings are concerned with a portion of the [plaintiff board’s] 400 kV overhead transmission line planned to run from Eggborough in Yorkshire to Darwen in Lancashire. This line is intended to be an important feature of the [plaintiff board’s] transmission system generally called the Supergrid. The active planning of this line began in 1961 and Ministerial consent under the said Section 10(b) has been given in respect of the entire 90 miles of its length. The line has been substantially constructed over that part of the route which is marked by a solid red line on the plan now produced and shown to me and marked “C.F.P.1” and construction is now in progress over that part of the route which is marked by a broken red line on the said plan. The necessary wayleaves and compulsory purchase orders have been obtained for the entire route except for a one mile section of the line in the vicinity of Greetland Moor in the Urban District of Elland, in respect of which the [plaintiff board] is examining a minor adjustment to the route at the instance of the Minister of Power. The need for the completion and operation of the part of the line under consideration in these proceedings is urgent.’
I should add that the one-mile section is not part of the section with which this summons deals.
On 18 May 1967, the Minister gave his consent, subject to a review of the line between Rishworth and Barkisland which is the part of the line which passes over the club’s land. The plaintiff board therefore reconsidered its proposal and produced a new route which would skirt the club’s land to the south. Again, a public inquiry was held, from 27 October to 8 November 1968, and as a result the Minister not only gave, on 17 July 1969, his consent to the original proposal under s 10(b) of the Electric Lighting (Clauses) Act 1899 but also on the same date gave his consent under the Electricity (Supply) Act 1919, s 22, to the actual placing of the line across the club’s land. The club now says that those consents are ultra vires the Minister, since in s 22 there is an exception in regard to ‘pleasure ground’, and it says that the club is using the land as a pleasure ground.
The club’s land consists of some 118 acres of which some 83 acres are moorland
Page 900 of [1970] 1 All ER 897
and some 35 acres are pasture. They are shown on the plan CFP2 enclosed by a red line. The plaintiff board’s proposed supergrid line will pass directly over all the fields of the 35 acres of pasture except one, but may by its width affect that one also. Mr Rose in his affidavit on the part of the club states:
‘15. The following improvements and developments have been carried out on the said land, almost entirely by the voluntary work of the members of the Club and their friends. (a) Improvement of ground surface. This has involved the removal of rocky outcrops, filling holes and hollows and quarries and generally levelling the ground surface so that it should be suitable for safe gliding. This entailed the provision not only of suitable landing and take-off areas but also emergency landing spaces within the boundaries of the said land as from time to time in gliding it becomes impossible for a glider to follow the planned circuit pattern, that is to say to land in the same direction and the same area as that from which the glider took off. (b) Removal of large areas of dry stone wall and loose rock. The Club purchased a trailer to assist with the said work which has not yet been completed. The hazards presented by the pre-existing stone walls has been reduced to a manageable level. Approximately 800 yards of stone-walling has been removed and a total weight of approximately 1200 tons of loose rocks and stone walling. These have been used for the work set out in (a) and for providing bridges across gullies on the said land. (c) Removal of a concrete Trigonometrical Point on the summit of the said Moor. (d) Removal of an overhead transmission line, which presented a hazard to gliding, by arrangement with the Yorkshire Electricity Board. (e) The conversion of Ringstone Edge Farm. The interior of the said farmhouse was substantially renovated and converted for use as a Clubhouse and for social and catering purposes. Part of the said farm was converted to make provision for maintenance and repair facilities therein. (f) The purchase and erection of a hangar. In 1960 the Club purchased for the sum of £850 a hangar of dimensions 60 feet by 30 feet for the use of aircraft owned by the Club and its members and the same was erected on the said land.
‘16. It has been the Club’s intention that in time the said land should be developed to a state where it would be suitable for light-powered aircraft which inter alia would lead to the launching of gliders by powered aircraft and also take advantage of recent technological advances in the field of powered gliders able to launch themselves.
‘17. In addition to the facilities available to its own members, the Club offers temporary membership to members of other gliding clubs and also members of the general public who wish to enjoy the thrill of gliding. Flying experience is often given to members of organisations such as schools and the Boy Scouts and such applications for such experience are received very frequently.
‘18. The Club is a popular resort for many hundreds of visitors who come to picnic and watch the spectacle of gliding, and they are encouraged to do this by a prominent notice placed at the main entrance to the Club’s premise. It is anticipated that the proximity of the M 62 Motorway, which is now under construction, will also lead to a stimulation of interest among the general public who come to watch and also attract new members by reason of the easier accessibility of the Club.
‘19. Membership of the Club is open to the general public subject only to the normal discretionary powers of the Council of Management to refuse membership. It is the only gliding club in the area of the Yorkshire Pennines. No other such club exists within a distance of 30 miles and the nearest clubs operate from a flat ready-made airfield less conducive to soaring. By reason of its geographical location the Club is ideally situated for the major part of the West Riding of Yorkshire and East Lancashire in which latter area no club
Page 901 of [1970] 1 All ER 897
open to public membership exists or is likely to be formed owing to the restriction on air space imposed by the Control Area associated with Manchester Airport which in fact extends almost to the western boundary of the Club’s flying area.
20. … I am firmly of the opinion that there is no known alternative site conferring these requirements of (a) Geographical location (b) Suitable surface (c) Favourable contours (d) Freedom from controlled air space and to this extent there is an intrinsic value in the Club’s present location over and above the level of amenities which can be evaluated in simple financial terms.
‘21. The placing of the proposed electric lines along the route proposed would constitute an interference with gliding from the said land to such a degree as to render it substantially impossible. The proximity of the said line to the whole of the said land would be such that it would be impossible save for highly skilled glider pilots in completely favourable conditions to land there. Furthermore, the method of launching from the said land is by that customary on such sites, namely by winch and it is dangerous to use a winch positioned at a less distance than 1200 feet from overhead electric lines, because of the danger of the cable coming into contact with such lines. There are no steps known to me which would render the said land usable for training or for normal gliding purposes.
‘22. By reason of the premises if Plaintiff Board places overhead electric lines on the route proposed it will be impracticable for the Club to continue its activities.’
The club, soon after the consents were given by the Minister, threatened to apply for an injunction to restrain the plaintiff board from carrying out the work on the footing that the Minister had no power to give his consents. This threat caused the plaintiff board to start the present proceedings.
The question can be shortly stated: is the club’s land used as a pleasure ground within the meaning of the exception contained in s 22 of the Electricity (Supply) Act 1919? I will read that section from 11 Halsbury’s Statutes (3rd Edn) p 912 as the section has been amended by the Electricity Act 1947 which has omitted some words from the original way in which s 22(1) was drafted in 1919. The material part is the first six lines which provides:
‘… any authorised undertakers may place any electric line below ground across any land, and above ground across any land other than land covered by buildings or used as a garden or pleasure ground in cases where the placing of such lines above ground is otherwise lawful, and where any line has been so placed across any land the … undertakers may enter on the land for the purpose of repairing or altering the line … ’
There follows a long proviso which I do not think is material. The material words as contained in this section are ‘other than land covered by buildings or used as a garden or pleasure ground’.
The plaintiff board puts forward this definition of ‘pleasure ground’: ‘an enclosure of cultivated land akin to a garden’. the club puts forward this definition: ‘a defined piece of land laid out or adapted and managed for the purposes of pleasurable recreation’. I bear in mind the decision of the Court of Appeal in Stephens v Cuckfield Rural District Council, where the court said that it was unwise for the court to try to give an exhaustive definition of words used in a statute but should confine itself to the particular question before it and ask this question: ‘does the land in question in all the circumstances come within the words of the Statute?’ I do not, therefore, propose to accept either the plaintiff board’ or the club’s definition of a pleasure ground. Each case must, I think, be decided on its own facts.
Page 902 of [1970] 1 All ER 897
Counsel have referred me to a number of other statutory enactments which have contained the words ‘pleasure ground’ and to a number of literary works of landscape gardeners where the words have been used. But there is only one case in which s 21 of the Telegraph Act 1863(the predecessor of s 22 of the 1919 Act), has been construed and that is Stevens v National Telephone Co Ltd. However, I do not think that case gives much assistance on the problem before me. It is with no disrespect to counsels’ argument that I do not deal in detail with the various cases and statutes which have been quoted to me. But in each of them the words ‘pleasure ground’ are found in different contexts and may have different meanings.
Counsel for the club objected to my looking at or paying any attention to the writings of landscape gardeners in their literary works. But I do not think that I need decide whether I may do so or not since I do not think that they give me much assistance. They seem to use the words ‘pleasure ground’ to mean various things at various times, although always, of course, in connection with landscape gardening.
In my judgment, the words ‘pleasure ground’ import the conception that it is the ground which gives pleasure to people. It does not mean ground on which a person carries on an activity which is pleasurable to him or her. If the latter were true Twickenham, Wembley and Ascot would be pleasure grounds. I cannot think that the legislature, in 1919, thought that a sports stadium or a racecourse was a pleasure ground. I think that it also imports the conception that the ground is not completely natural but that some planting, cultivation or planning has been carried out in producing the ground so that it gives pleasure to people. When one speaks of persons using a pleasure ground for rest and recreation one is thinking of a person going for a walk in the ground and gaining pleasure from its appearance. This concept is to some degree borne out in Re Ellenborough Park, Re Davies (decd), Powell v Maddison ([1955] 2 All ER 38 at 43, [1956] Ch 131 at 141), where Danckwerts J said:
‘In the present case, of course, there are no uncertainties such as occur in the case of a claim by prescription or user. There is an express grant of “the full enjoyment of the pleasure ground set out and made in front of the plot of land” conveyed to the grantee. Presumably this means the right to enjoy the ground as a pleasure ground in all the ways in which a pleasure ground would normally be enjoyed, which would no doubt include the right to walk about on any parts not covered by flower beds and the like and to sit down on appropriate parts of the ground and possibly to picnic there.’
Sir Raymond Evershed MR in the Court of Appeal ([1955] 3 All ER 667 at 677, [1956] Ch at 168) in the same case said:
‘The enjoyment contemplated was the enjoyment of the vendors’ ornamental garden in its physical state as such—the right, that is to say, of walking on or over those parts provided for such purpose, that is, pathways and (subject to restrictions in the ordinary course in the interest of the grass) the lawns; to rest in or on the seats or other places provided; and, if certain parts were set apart for particular recreations such as tennis or bowls, to use those parts for those purposes, subject again, in the ordinary course, to the provisions made for their regulation; but not to trample at will all over the park, to cut or pluck the flowers or shrubs, or to interfere in the laying out or upkeep of the park. Such use or enjoyment is, we think, a common and clearly understood conception, analogous to the use and enjoyment conferred on members of the public, when they are open to the public, of parks or gardens such as St James’s Park, Kew Gardens or the gardens of Lincoln’s Inn Fields.’
It is, of course, true that in a public park or a public pleasure ground one might find
Page 903 of [1970] 1 All ER 897
a football pitch or sports ground, but I am not dealing here with a public pleasure ground. It will be noticed that both the American cases Booth v City of Minneapolis and Shoemaker v United States which were cited to me and the New Zealand case Napier Borough v Napier Harbour Board dealt with the question of a public park or of a public pleasure ground. In this case the club’s land is privately owned by the first four defendants. It is used by the members of the club. It is true that in R v Minister of Health, ex parte Waterlow & Sons Ltd, it was conceded by the Crown that the words ‘pleasure ground included a sports ground’, but no such concession is made in this case, and in that case the sports ground was very different from the landing area in the present case.
If then in this case the general considerations which I have mentioned are applied to the club’s land, can it be described as ‘a pleasure ground’? In my judgment it cannot, since it consists of pasture land and moor in Yorkshire to which the only work which has been carried out is the levelling of the ground and the removal of stones to permit the taking-off and landing of gliders and to which the members go to enjoy gliding and not to enjoy the ground as a ground. In my judgment, therefore, the club’s land is not a ‘pleasure ground’ within the exception contained in s 22.
I heard some argument on whether or not the club ‘used’ the ground and whether it was an occupier, lessee or had merely an easement, but this does not arise and I need not decide that question.
I should add that the first four defendants are the legal owners of the club’s land and have taken no part in the argument and agree, quite properly, to abide by this court’s decision.
Declarations accordingly.
Solicitors: A L Wright (for the plaintiff); Rollit, Sons & Haydon, agents for Jobbings, Fawcett & Grove, Leeds (for the club).
Jacqueline Metcalfe Barrister.
Practice Note
(Practice: Chancery Division: Witness Lists: Dates for trial)
[1970] 1 All ER 904
Categories: PRACTICE DIRECTIONS
Hearing Date(s): 2 MARCH 1970.
Practice – Chancery Division – Lists – Witness lists – Estimate of expected duration – Necessity for realistic and reliable forecasts.
Practice – Chancery Division – Lists – Witness lists – Notification of settlement.
Practice – Chancery Division – Lists – Witness lists – Estimate of expected duration – Revision of estimate – Notification.
Practice – Chancery Division – Lists – Witness lists – Fixed dates – Part 1 – Temporary measures.
The following statement was made by Buckley J on 2 March 1970.
The system by which dates for trial are fixed for witness actions in Part 1 of the Witness List in this Division (Paractice Direction of 1954 ([1954] 1 All ER 946, [1954] 1 WLR 693)) can only work efficiently if the forecasts certified by counsel of the expected length of trial are realistic and reasonably reliable. So also the system by which witness actions estimated to last not more than two days are placed in Part 2 of the Witness List for trial without a fixed date (Practice Directions of 1966 ([1966] 1 All ER 916, [1966] 1 WLR 538; and [1966] 2 All ER 720, [1966] 1 WLR 1125)) can only work efficiently if that part of the list is confined to cases which can genuinely be expected to last not more than two days.
When dates have to be specially fixed for other kinds of business such as adjourned summonses, motions and petitions, the efficient management of the lists and the ability of the court to honour other fixed dates again depends on realistic and reasonably reliable forecasts of the expected length of hearings being supplied.
I fully realise the difficulties which counsel sometimes encounter when forecasting the probable length of a hearing. There have, however, recently been a number of instances where the court has been given forecasts which seem to have been quite unrealistic. I want, therefore, to emphasise that counsel’s forecasts are an important contribution to the efficient management of the business of the Division and to the ability of the court to honour its fixed dates punctually.
If a case is settled, or if circumstances affecting its probable length arise, notice of this and, where appropriate, a revised estimate in writing of the length of the hearing must be left promptly with the cause clerk (room 136) who will note it and transmit it to the clerk of the judge in charge of the list.
In view of the impending redistribution of business among Divisions of the High Court, which is to be expected when the Administration of Justice Bill now before Parliament becomes law, it would be undesirable at present to fix any dates for trial of witness actions in this Division beyond those for which fixed dates have already been published in the cause list, except in special circumstances. For the time being therefore, dates for trial of actions which have been set down but for which no date for trial has yet been fixed or which are set down hereafter will not be fixed in accordance with the Practice Direction of 1954 already referred to. They will be placed in order of setting down in a waiting list and dates for trial of cases in this list will be fixed at a later stage, when the likely effect of the redistribution of business can be more clearly appreciated. This will not affect the operation of Part 2 of the Witness List in any way.
If for any special reason it is desired to fix a date for trial of any case which is in the waiting list, an application should be made to myself as the judge in charge of the Witness List.
Edwards v Society of Graphical and Allied Trades
[1970] 1 All ER 905
Categories: EMPLOYMENT; Contract of service; Industrial relations
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 25, 26, 27 NOVEMBER 1969
Trade union – Expulsion – Damages – Trade union member expelled from membership and employer induced to terminate contract of service – No foreseeable prospect of employment in same grade – Duty of member to mitigate damage.
Where someone has lost employment as the result of a breach of contract or tort on the part of another, and who is under an obligation to mitigate his damages, he will only be required to mitigate his damage by accepting other employment if that employment is of a kind which he can reasonably be expected to accept, having regard to his standing, his experience and his personal history (see p 910 j to p 911 a, post).
The plaintiff, a temporary member of the defendant trade union, had his membership terminated by the union when he was over six weeks in arrears with his union contributions and thereby no longer eligible under the union rules to remain a member. The plaintiff had authorised the union to instruct his employers to deduct his union contributions from his pay but, by an oversight, the union failed to do so. The plaintiff applied for readmission to the union on the ground that his having ceased to be a member was due to no fault on his part but to the union’s error, but in July 1966 the union refused to reinstate him. In December 1967, as a result of union intervention, the employers, who operated on a 100 per cent trade union membership basis, dismissed the plaintiff from his employment as a skilled technician with one month’s payment in lieu of notice. As a result of being denied union membership, the plaintiff had difficulty in obtaining employment of the same standard in the printing trade in the Manchester area, but in September 1968 he obtained employment in a non-union firm, being dismissed from there in May 1969 for declining to carry out work which was not within the scope of his contract of service. In April 1969, the union admitted that they had been mistaken in treating the plaintiff as no longer a member of the union, and intimated that, in those circumstances, he had at all material times remained a temporary member of the union. Acting in their capacity as an employment exchange for their members when vacancies arose in firms operating on a closed shop basis, the union offered the plaintiff various jobs in the Manchester area which were inferior in grade to the one which he had held when he was a union member. In an action for damages by the plaintiff, the trial judge found that there was no prospect of the plaintiff recovering his original job, that vacancies rarely occurred in the grade in which the plaintiff was skilled, that from April 1969 onwards the union had not found it possible to offer a vacancy in that kind of job to the plaintiff, and that the plaintiff had made very considerable efforts on his own behalf to find equivalent employment in non-union shops in the Manchester area.
Held – (i) The plaintiff was entitled to damages on the basis that he had lost his employment with his original employers and that, at present, there was no foreseeable likelihood of his obtaining employment in the printing industry in any grade better than that of a labourer (see p 912 b, post).
(ii) Applying by way of analogy the sort of principles applied in cases of personal injury and the defendant union not having satisfied the court that there was any terminus ad quem at which the prospective period of the plaintiff being out of work in his proper grade ought to be treated as likely to come to an end, the plaintiff
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would be awarded £6,760, being £676 loss of earning capacity multiplied by ten (see p 912 c, d and f, post).
Notes
For the duty of a plaintiff to mitigate his loss, see 11 Halsbury’s Laws (3rd Edn) 289, 290, para 476, and for cases on the subject, see 17 Digest (Repl) 111, 112, 249–259.
For the measure of damages for wrongful dismissal, see 25 Halsbury’s Laws (3rd Edn) 523, 524, para 995, and for cases on the subject, see 34 Digest (Repl) 128–132, 866–897.
Case referred to in judgment
Yetton v Eastwoods Froy Ltd [1966] 3 All ER 353, [1967] 1 WLR 104, Digest (Cont Vol B) 100, 3685aa.
Action
The plaintiff, Beresford Edwards, sought declarations that he was, and at all material times continued to be, a member of the defendant union, the Society of Graphical and Allied Trades, and that his purported expulsion from the defendant union for non-payment of his union dues was null and void or, alternatively, that the refusal of the union to readmit him to membership was improper and wrongful. The plaintiff further sought an injunction restraining the defendant union from doing any act calculated, directly or indirectly, to interfere with his prospects for obtaining employment in the printing industry, and damages. On 9 April 1969, the defendant union admitted that it had been wrong in asserting that the plaintiff was not a member of the union and at the trial only the claim for damages remained in issue. The facts are set out in the judgment.
Peter Pain QC and Anthony Lester for the plaintiff.
R I S Bax QC and M R Hickman for the defendant union.
27 November 1969. The following judgment was delivered.
BUCKLEY J. The plaintiff in this action is a Guyanese gentleman. He is now 39 years of age, married and has four children. He came to this country in 1960, having previously had experience of the printing trade in Guyana, where his family have, as I understand it, a printing business, in which, from a comparatively early age, he acquired practical knowledge. He obtained employment in this country with a printing business in Manchester called Hugh Stevensons. He acquired that employment on the basis that he was a qualified tradesman, and the particular trade in which he was employed was that of a cutter and creaser. He joined a trades union, which subsequently, by amalgamation, was embodied in the defendant union, the Society of Graphical and Allied Trades. No point arises on any distinction between the union which the plaintiff joined and the identity of the defendant union, so I need not go into the details of that. The union is one which, under its rules, has a membership which is divided into temporary members and full members. The plaintiff was originally admitted as a temporary member, and in course of time became a full member, but then, owing to some difference with the union, he had certain other members ceased to be members of the union. He rejoined the union at a later date as a temporary member and remained a temporary member thereafter.
The promotion of a temporary member to full membership is a matter which rests in the exclusive discretion of the committee of the branch of the defendant union. There is nothing in the rules which entitles a temporary member to become a full member even after a considerable period of temporary membership. Rule 18(4) (h) of the rules provides that temporary membership shall terminate automatically if the member becomes over six weeks in arrears. That means, of course, in arrears with his contributions to the union. Paragraph (j) of the same sub-rule
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provides that it is a condition of acceptance of membership that holders of temporary membership cards must relinquish them immediately on application by the branch committee responsible for their issue, and shall have no claim on the union or its funds. So a temporary member has no security of tenure in his membership, and can be ejected from the union by the branch committee at any time without the union becoming under any liability. Paragraph (k) of the same sub-rule provides that temporary members shall not have any right of appeal from any decision of their branch committee or of the executive council.
The union operated a system by which union members would authorise the union to require their employers to deduct their union contributions from their weekly pay packets, and this system was put into operation by the defendant union at the works of Hugh Stevensons. The plaintiff signed the appropriate form authorising the defendant union to instruct the employers to make the appropriate deductions from his pay. He thereafter presumed that that course was being taken and that he need not make any contributions in any other way, but, unfortunately, apparently by some oversight in the union machine, this scheme was never put into operation in the plaintiff’s case, although it was in the case of nearly all the members of the union employed at Stevensons. There were in fact five employees at Stevensons (one of whom was the plaintiff) in respect of whom the system went wrong, because the employers were never instructed to make the deductions from the employees’ pay. In consequence of this, the plaintiff became in arrear in his subscriptions to the defendant union for a period of over six weeks, and the union then asserted that he had automatically ceased to be a member of the union in consequence of the provisions of r 18(4) (h). The plaintiff sought readmission to the union on the ground that his having ceased to be a member was not his fault but the fault of some oversight in the union’s own administration, but this was refused by the union in July 1966.
Stevensons are a firm who operate on a 100 per cent union membership basis, and in consequence of the union having determined to treat the plaintiff as having ceased to be a member of the union, difficulties arose about his continued employment at Stevensons. On 6 November 1967, he was suspended, and on 21 December 1967 he was dismissed on a month’s notice. He was given one month’s pay in lieu of notice and his employment was ended. This was entirely due to the fact that he had ceased, or was alleged by the defendant union to have ceased, to be a member of the union. The employers, Hugh Stevensons, had no complaint to make of his work, and, had it not been for the difficulty about his union membership, there is no reason to suppose that he would not have continued in the employment of that firm. The plaintiff was unable for some time to obtain other employment. It seems that in the Manchester area there is great difficulty in obtaining employment in the printing industry, and that there are many skilled printers, skilled in various aspects of the printing trade, who are unable to obtain employment.
The defendant union acts in the capacity of an employment exchange for its own members in relation to vacancies occurring in the shops which are run on a closed shop or 100 per cent union membership basis, and the union itself finds great difficulty, for lack of vacancies, in placing its own tradesmen members when out of work. In Hugh Stevensons’ business an internal promotion system is operated of such a kind that, when a vacancy occurs on the staff, the management fills that vacancy, if it can, by promotion of an employee already in the employ of the firm, and does not seek to enlist the labour outside.
After having been out of work for some time, the plaintiff was successful in obtaining employment in a non-union firm called Boxmakers (Manchester) Ltd, where he was first taken on in an assistant capacity, but after a week or so was promoted to a higher grade of job, a job of a kind which, in the grading used by the defendant union, would be a grade I employment, that being the grade in which the plaintiff’s employment had been with Hugh Stevensons, and he remained
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employed by that firm until 2 May 1969. He then lost that employment in these circumstances. He was in charge of a machine manufacturing materials to make boxes involving, I was told, some 15,000 boards, suitable, as I understand it, for making 15,000 boxes. He was working this machine single-handed. The machine is an automatic machine into which the boards are fed through a controlled feed. The appropriate operations are carried out on them and they emerge from a machine on to a pallet or stillage. When a suitable number of boards have been loaded on to one stillage, then another stillage is put on the top of it and then another load is taken. Then, when three of four, or it may be five, such loads have been built up one on the top of the other, those stillages are removed and others are substituted in their place, until in due course the whole of the material has been processed. He had done a full day’s work on this. It seems to have been a two-colour job. He had run the boards all through for one colour and the time had come to put them through the machine so that the second colour could be applied, but, as the result of the first operation, all the stillages that the plaintiff had available were full, and in order to put the second operation in train it was necessary that some of these stillages should be unpacked to free them for use as the boards came through as the second operation was performed.
This was not work which properly fell within the terms of the plaintiff’s employment. It would normally have been done by a labourer, not a skilled tradesman. Unfortunately, the labourer employed by Boxmakers Ltd had been away ill for some weeks. The foreman, and subsequently the manager (who gave evidence before me), required the plaintiff to clear the work himself off a sufficient number of the stillages, and this he declined to do. In consequence of this, he was warned that, if he refused to do it, he would be dismissed. He continued his refusal, and so he was dismissed. Apart from this incident, it seems that the plaintiff’s conduct with these employers had been satisfactory, for he was given a written recommendation, dated 6 May 1969, in which Mr Lynch, the works manager, said that the plaintiff had been in the employment of the company from 9 September 1968 to 1 May 1969 and that he had been found to be honest and a good time-keeper, that he was employed in the Heidelberg department dealing with printing, also cutting and creasing, and his work was quite satisfactory.
On 9 April 1969, the defendant union for the first time admitted that they had been mistaken in treating the plaintiff as no longer a member of the union. On that date their solicitors wrote a letter to the plaintiff’s solicitors, giving notice that the defendant union no longer contended that the plaintiff’s membership of the union had been properly terminated, and intimated that, in those circumstances, the plaintiff had at all times remained a temporary member of the society. Thereupon the plaintiff’s solicitors on 17 April 1969 acknowledged the letter, and said that they would be obliged if the union’s solicitors would forward to them as soon as possible a membership card appropriate for the current year. The union’s solicitors said, in a letter of 21 April 1969, that they were taking instructions on that matter, but nothing further occurred in this connection until 5 June, when the union’s solicitors wrote saying that they understood that the plaintiff was still in possession, or should be in possession, of his temporary membership card. There seems to have been some confusion as to a card which had been included in the discovery made by the plaintiff in this action, but the position was that the union’s solicitors at that stage intimated that they thought that the plaintiff must still be in possession of his card. The plaintiff denied that he ever had a temporary membership card. I do not think that that is probable. I think that in that respect his evidence is mistaken. I think that he probably did have a temporary membership card at some stage, but it is not at all unlikely that he had lost it. He had not got a temporary membership card in his possession, or, at any rate, he had not knowingly got a temporary membership card in his possession at the relevant time.
This action was commenced on 8 May 1968 and, of course, assumed a very
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different complexion when, on 9 April 1969, the defendant union made the admission to which I have referred. In the action the plaintiff claims a declaration that he is, and at all material times continued to be, a member of the defendant union, and a declaration that his purported expulsion was null and void or, alternatively, a declaration that the refusal of the union to readmit him to membership was improper and wrongful. That last part of the claim now disappears because of the admission made by the union. He also asks for an injunction restraining the defendant union from doing any act calculated, directly or indirectly, to interfere with his prospects for obtaining employment in the printing industry.
There are some other facts to which I ought to make reference. I have already mentioned that there were five employees of Stevensons in all in respect of whom the system of deducting union contributions from pay went wrong. The other four members were all accepted back into membership of the defendant union and were allowed to pay up their arrears. It was only the plaintiff in respect of whom the union maintained their stand that he was not any longer a temporary member of the union.
After the action had been launched and after they had admitted that they were mistaken about the stand they had taken on the membership issue, the defendant union did make certain offers to the plaintiff of jobs where there were vacancies in the printing trade in the Manchester area. On 13 June 1969, the plaintiff’s solicitors were informed by the union’s solicitors of a vacancy in a temporary job as a general assistant with a company called the Electric Modern Printing Co Ltd of Waterloo Road, Cheetham, Manchester. The plaintiff attended on that firm, but he was told that what was wanted was a general assistant who would sweep the floors, make the tea, carry the work to the machines and do menial work of that kind, and he said that he was not prepared to take it. Later, on 9 July 1969, the defendant union’s solicitors informed the plaintiff’s solicitors that there was employment available at the Co-operative Wholesale Society at Gregg Street, Redditch, Stockport, as a general assistant. That work was admittedly work of grade IV character—ie the work of a general labourer—and the plaintiff did not accept it. Later, on 28 August 1969, the union’s solicitors told the plaintiff’s solicitors that there was a vacancy for a general assistant in the letterpress machine department at a company called Deans of Stockport Ltd at Cheadle. This offer the plaintiff did not pursue at all because it was put forward as a general assistant’s job and he assumed that it was a job of the same kind as the two which had been offered to him through the union previously, although it seems that in fact the vacancy was for a grade III job of some kind, superior to a labourer’s job, but, nevertheless, inferior to a technician’s job in grade I, which was what the plaintiff had held with Hugh Stevensons.
The case which is put forward on the plaintiff’s behalf is that, in breach of their contract under the rules, the defendant union wrongfully asserted that the plaintiff had ceased to be a member of the union and that, as a direct consequence of that breach of contract, the plaintiff lost his employment with Hugh Stevensons and has ever since been unable to obtain comparable employment. It is quite clear on the evidence, I think, that there is no prospect of the plaintiff’s recovering his job at Hugh Stevensons. It is also clear on the evidence that vacancies rarely occur in the tradesmen’s grade I type of job in the particular trade in which the plaintiff is skilled, that of cutter and creaser, and that from the date when they acknowledged their error in April 1969 to the present time the union has not found it possible to offer a vacancy in that kind of job to the plaintiff, and that the plaintiff has made considerable—I think very considerable—efforts on his own behalf to find equivalent employment elsewhere than in those businesses in connection with which the union itself acts as an employment exchange—ie mainly in the non-union shops in the Manchester area—and, notwithstanding those efforts, he has been able to obtain only the one job with Boxmakers, to which I have referred, where he did well but which he lost in circumstances I have mentioned. It has been suggested on behalf of the defendant
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union that the plaintiff’s right to damages cannot be an open-ended commitment and that it must close somewhere; and it is suggested that the point at which it does close, or has closed, is the point at which the plaintiff ceased to be employed by Boxmakers, because it is said that his dismissal from Boxmakers had nothing whatever to do with the union and was a novus actus interveniens which breaks the chain of causation and relieves the union for responsibility for any loss which the plaintiff may suffer after that event.
It was clearly the plaintiff’s duty to mitigate the damage which he suffered as the result of the defendant union’s breach of contract as far as lay within his power. It seems to me that it ought not to be held against him that, in mitigating the damage, he put an end to his right to claim damages. If it could be shown that, when he was employed by Boxmakers, a situation arose in which it could be said that he was no longer suffering any damage from what the union had done, and that what followed thereafter was attributable to himself, that I could understand, but if, as seems to be the case, it is admitted on behalf of the defendant union that entry into Boxmakers’ employment did not put an end to his right to damages, I find it difficult to see how his leaving Boxmakers’ employment, whatever the circumstances may be, could put an end to his right to claim damages. No doubt it put an end to the particular mitigation of damage which he had so far achieved, and it might be that, if he was to blame for his employment with Boxmakers coming to an end, that might have some effect on the measure of damages which he could recover thereafter, but I cannot myself reach the conclusion that the employment by Boxmakers or the cesser of that employment can put an end to the defendant union’s liability in damage.
The plaintiff did not lose his employment with Boxmakers as the result of any breach of his contract of service with that company or as the result of any misconduct on his part, for Mr Lynch, the general manager, expressed the view that the work which the plaintiff declined to do was not work which he could be expected to do as part of his duties arising out of his employment. If he was under no legal obligation to do that work, he may have shown himself very unaccommodating to his employers, but he could not have been either in breach of his contract or guilty of misconduct, and although it may perhaps have been an unhelpful attitude to adopt, nevertheless it was one which the plaintiff was entitled to adopt. Indeed, I am satisfied that had Boxmakers not been a non-union shop but a closed shop, where the union would have supported its members in insisting on observance of the terms of their employment, it is unlikely that the plaintiff would have been dismissed.
The plaintiff having acted in this respect within his legal rights and having been dismissed as a result of a decision taken by his employers, I do not think that he is to be saddled with responsibility for losing that employment so as to detract in any way from his rights against the union.
Then it is said, that, in the state of the printing trade in the Manchester area, it is reasonable for any skilled man who is out of employment to accept employment of a lower grade than that for which he is qualified until he can obtain employment in his appropriate grade, and that the plaintiff ought to have accepted one or other of the three opportunities that were offered him by the defendant union in the way of mitigating the damage he had suffered. Mr Stringer, an official of the union, said that on many occasions a grade I man had taken work in a lower grade when he could not get grade I work; and, indeed, he had never known any member of his union to refuse to do so. Two members of the union were called who had in fact agreed to accept work of a lower grade than that for which they were qualified at a time when they could not get work in their own grade. The plaintiff, as I have said, was a qualified craftsman in his particular craft, and in a trade such as this where the labour position is very tight, employment in a particular grade is obviously a thing which is of particular value, and loss of employment in that grade is all the more severe if it is likely to be very difficult to obtain employment in that grade again.
The authorities, I think, establish that, where someone has lost employment as
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the result of a breach of contract or tort on the part of another, and is under an obligation to mitigate his damages, he will only be required to mitigate his damage by accepting other employment if that employment is of a kind which he can reasonably be expected to accept, having regard to his standing, his experience and his personal history. The matter was discussed by Blain J in Yetton v Eastwoods Froy Ltd ([1966] 3 All ER 353 at 362, [1967] 1 WLR 104 at 115), who reviewed a number of the authorities and said:
‘Thus, the opportunity to reduce damages by finding reasonable (I repeat reasonable) alternative employment, should be taken and, indeed, sought, whether such employment is by the same defaulting employer or by someone else; in either case the test being whether it is reasonable to refuse it or not in the circumstances of each case. So that no one of the decided cases is necessarily binding in the circumstances of other cases, though great help is to be found in applying the principles by having a look at them’.
The question, therefore, to which I have to apply my mind in this connection is whether, having regard to all the surrounding circumstances, it is reasonable to expect the plaintiff to accept work as a labourer when the work which he had previously done and of which he had been deprived by the act of the defendant union was work as a skilled tradesman; and, although I accept the evidence that many men in this trade would be prepared to take that course rather than remain unemployed, I am not prepared to take the view that it is reasonable to expect someone in the plaintiff’s position to accept work as a labourer. It might be different if he were in a position in which he could confidently expect that at some time in the future he could look forward to obtaining employment against in his trade and in the grade in which he was qualified to work; but the position with regard to that from the plaintiff’s point of view is unsatisfactory.
The four main printing firms in the Manchester area are all firms that operate either on a closed shop basis or on a 100 per cent union membership basis, with whom the plaintiff could not expect to find employment except through the defendant union. The defendant union operates a system of placing members in vacancies as they occur which gives priority of full members of the union above temporary members, and as between full members gives priority to those who have been longest unemployed in the appropriate grade, and I expect provides the same priority as between temporary members; but, having regard to the extreme shortage of vacancies in the area in the plaintiff’s own trade, it seems that, while he remains a temporary member of the union, there is little likelihood of his obtaining employment as a grade I worker in any of the trades union shops. There are a large number of smaller concerns, one of which is Boxmakers, which are non-trades union shops, with which it may be that he would be able at some time or other to obtain employment. The plaintiff has, as I have said, made considerable efforts to obtain employment in that market and has only been successful in getting one job, namely, that with Boxmakers, but the rate of pay in those concerns is likely to be lower than the rate of pay in the trades union shops, and it is the view of the defendant union, and I do not dissent from it in any way, that their members are more secure in their jobs than are those people who are employed in the non-trades union shops; so that the possibility of his obtaining employment otherwise than through the defendant union is not an opportunity which holds out the same attractions as the jobs which he could obtain through the union if they were able to offer him a vacancy.
On 16 May 1969, the plaintiff’s solicitors wrote to the defendant union’s solicitors a letter in which, on behalf of the plaintiff, they asked for him to be given full membership of the union. The union’s solicitors in reply to that said that they were taking instructions, but nothing further has occurred. Promotions from temporary membership to full membership are dealt with by the membership subcommittee of the branch committee which meets as and when required, but the
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evidence which I heard led me to suppose that it certainly would have met on more than one occasion since May 1969, and nothing has been done about the admission of the plaintiff to full membership. The union is not under any contractual obligation to admit him to full membership, but the fact that he remains a temporary member is something which, I think, I have to take into account in assessing the likelihood of his obtaining suitable work in the future.
In these circumstances, I think that the plaintiff is entitled to damages on the basis that he has lost his employment with Stevensons and that, at present, there is no foreseeable likelihood of his obtaining employment in the printing industry in any grade better than that of grade IV, the grade of a labourer. When I say that there is no foreseeable likelihood of his obtaining any better grade of employment, I have to consider in relation to what sort of period I ought to calculate the damage that he must be taken to have suffered. In that connection, I have been invited to apply by way of analogy the sort of principles that are applied in cases of personal injury where, having ascertained the loss of earning capacity of the person injured, the court has then to try to make an estimate of his probable earning life, and then, discounting that, to multiply one year’s loss of earning capacity by a suitable number of years to arrive at a lump sum in damages. The burden must, I think, rest on the defendant union to show that there is some sort of terminus ad quem at which the prospective period of the plaintiff being out of work in his proper grade ought to be treated as likely to come to an end, and they have not, unfortunately, succeeded in satisfying me that there is any such date. That does not mean that I think he never will, but I am quite unable to say when he will recover employment in grade I.
The amount that he would be earning net with Stevensons had he remained in their employment is a little under £30 a week. The amount which he could earn as a labourer in the printing industry, including overtime, net can, I think, be reasonably taken at something rather over £16 a week, resulting in a difference of something of the order of £13 a week, or £676 a year. Doing the best I can to make a reasonable and rational estimate based on that loss of earning capacity, and the prospect of the plaintiff getting into the same sort of employment as he had before in the future, I think that that figure should be multiplied by ten, and, accordingly, I think that he should recover £6,760 in damages.
Judgment for the plaintiff for £6,760.
Solicitors: Lawford & Co (for the plaintiff; W H Thompson (for the defendant union).
Richard J Soper Esq Barrister.
B (G C) v B (B A)
[1970] 1 All ER 913
Categories: FAMILY; Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): ORMROD J
Hearing Date(s): 12, 22 MAY 1969
Divorce – Maintenance of wife – Variation of order – Consent order – Consent order based on mistake – Matrimonial Causes Act 1965, s 31.
The court, having the widest possible powers under the Matrimonial Causes Act 1965, s 31, to vary orders for maintenance, is not precluded from entertaining a husband’s application to vary maintenance orders made by consent on the ground that they were based on a mistake as to his means and a mistake as to the amount of his liability to income tax (see p 915 e, and p 916 g, post).
Dictum of Sir George Jessel MR in Mullins v Howell (1879) 11 Ch D at 766 applied.
Wilkins v Wilkins [1969] 2 All ER 463 explained.
L v L [1961] 3 All ER 834 and B (M A L) v B (N E) [1968] 1 WLR 1109 distinguished.
Notes
For the power to vary orders for maintenance, see 12 Halsbury’s Laws (3rd Edn) 444–446, paras 999, 1001, 1002, and for cases on the subject, see 27 Digest (Repl) 622–624, 5803–5840.
For the Matrimonial Causes Act 1965, s 31, see 45 Halsbury’s Statutes (2nd Edn) 488.
Cases referred to in judgment
B (M A L) v B (N E) [1965] 1 WLR 1109, Digest Supp.
Foster v Foster [1964] 3 All ER 541, [1964] 1 WLR 1155 n, Digest (Cont Vol B) 376, 5822e.
L v L [1961] 3 All ER 834, [1962] P 101, [1961] 3 WLR 1182, Digest (Cont Vol A) 789, 5760a.
Mullins v Howell (1879) 11 Ch D 763, 48 LJCh 679, 50 Digest (Repl) 536, 2034.
South American and Mexican Co Ltd Re, ex parte Bank of England [1895] 1 Ch 37, [1891–94] All ER Rep 680, 64 LJCh 189, 71 LT 594, 10 Digest (Repl) 972, 6701.
Wilkins v Wilkins [1969] 2 All ER 463, [1969] 1 WLR 922.
Appeal
This was an appeal by the husband from an order of Mr Registrar Pritchett in the Guildford District Registry dated 8 January 1969, dismissing an application by the husband for variation of two orders of maintenance made by consent in favour of the former wife and of their two children. The hearing was in chambers but judgment was delivered in open court. The facts are set out in the judgment.
A B Ewbank for the husband.
B H Anns for the wife.
Cur adv vult
22 May 1969. The following judgment was delivered.
ORMROD J read the following judgment. This is an appeal from an order by Mr Registrar Pritchett in the Guildford District Registry dated 8 January 1969, whereby he dismissed an application by the husband for variation of two orders for maintenance of the former wife and of their two children, C born on 3 June 1960, and R born on 6 June 1962. These two orders, dated 23 January 1967 and 7 February 1967, were expressed to be made by consent; and the learned registrar dismissed the husband’s application for variation on the ground that the orders, having been made by consent and there having been no material changes in the circumstances since the making of the orders, the court could not entertain the application.
The husband’s case in a sentence is that his former solicitors consented to the
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making of these two orders on his behalf partly as a result of a mistake of fact as to his gross income, partly as a result of an erroneous calculation of the effect of the orders from the balance of the income which would be available to him, and partly in direct opposition to his instructions. There are other criticisms of his former solicitors to which I will refer later. Before me counsel for the husband contended that the court could and should re-examine the basis on which these orders were made and make such variations in them as may be just. Counsel for the wife contended that, as they were consent orders, the court had no power to re-open the matter or to vary them unless and until a change of circumstances could be demonstrated.
Before considering the law on this matter, it will be convenient to state as shortly as possible the history of this case. The marriage took place on 15 October 1958. It was dissolved on the ground of the husband’s adultery by decree nisi on 19 December 1966, which was made absolute on 20 March 1967. The husband at all material times is and was a civil airline pilot. Negotiations over maintenance proceeded in a desultory manner during 1966, neither side giving very much information to the other, until, in a letter dated 5 January 1967, the wife’s solicitors put forward for consideration three alternative proposals for the maintenance of the wife and children. They took a great deal of trouble, much more than they could have been expected to take, to explain their proposals to the husband’s former solicitors. They set out in detail their calculations, purporting to show the exact effect of their three alternatives in gross and net terms on the income of the husband, the wife and the children.
Unfortunately, in so doing they made two mistakes, which should have been observed by the husband’s then solicitors. First, they took the husband’s gross income at£3,950, whereas the true figure should have been £3,556 at the highest, or £3,280 if they had allowed for superannuation and other deductions. This error arose because they simply grossed up the net figure for his income, which they had obtained from a statement from the airline, making no adjustment for the personal allowance. Secondly, in their calculations, they overlooked the fact that the husband was not entitled to earned income relief on that part of his income which was paid to the wife and the children. The result was that the figures showing the income as remaining to the husband were seriously overstated. The scale of the error can be seen by comparing the sum left to the husband in their scheme C—namely, £122 per month—with the actual amount which became available to him, namely, £65 to £70 a month. The husband’s solicitors did not detect these mistakes and the husband, on the basis of the wife’s solicitors’ calculations, accepted their scheme C, which involved his submitting to an order in favour of the wife in the sum of £1,800 per annum less tax, and £240 per annum less tax for each child. The husband also complains that, in agreeing to the sum of £240 per annum for each child, the solicitors exceeded his instructions as contained in a letter dated 17 February 1966 from him to them. This is not an impressive point, since the true figure of £240 is clearly set out in the proposals prepared by the wife’s solicitors. He also says, and there is more substance in this, that his solicitors made no effort to find out the extent of the wife’s resources, and no allowance for them was made in arriving at the figures for the consent order.
Later in 1967 the husband changed his solicitors and on 1 December 1967 served a notice of application to vary these orders. He filed an affidavit sworn on 28 November 1967, which was served on the wife’s solicitors. In the meantime, she had returned to Australia with the children where her father and mother were living. By a letter dated 20 December 1967, the husband’s solicitors wrote to the wife’s solicitors stating that, pending the application to vary, the husband proposed to reduce his payments to £52 10s per month—representing a total gross sum for the wife and children of £1,073 instead of £2,280 under the order. In January 1968 and February 1968, the wife filed three affidavits in reply. Thereafter the matter proceeded very
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slowly, until on 13 November 1968 the wife succeeded in obtaining an attachment of earnings order against the husband.
Eventually on 8 January 1969 the application came on before Mr Registrar Pritchett. At that time the husband’s salary had risen to £3,570 gross; it is now £3,735 gross. Counsel for the wife submitted that the consent order was binding on the husband and could not be varied unless either the husband’s means had diminished or the wife’s had increased. He relied on L v L ([1961] 3 All ER 834 at 840, [1962] P 101 at 119). He further submitted that in any application to vary these orders the court must start from the orders themselves, and that any variation of them must be based on changes occurring after they were made; and that there was no power, even if a subsequent change in circumstances could be proved, to assess the husband’s liability de novo. In other words, the orders could only be altered proportionately to the change in the circumstances. For this he relied on a decision in the Court of Appeal in Foster v Foster. Assuming, therefore, for the purposes of argument, that the husband’s solicitors and/or the husband had made a bona fide mistake as to his income, or as to the incidence of income tax in his financial position, so that the order consented to by solicitors was manifestly too high, the husband would be burdened with the mistake for the rest of the joint lives of the husband and wife. It was suggested that his only remedy was to sue his solicitors for negligence.
Counsel for the husband submitted that the power of the court to vary maintenance orders had been significantly enlarged by s 14(2) of the Administration of Justice (Miscellaneous Provisions) Act 1938—now to be found in the Matrimonial Causes Act 1965, s 31: There can be no doubt that the 1938 Act significantly enlarged the powers of the court to vary maintenance orders, as can be seen by comparing its terms with the former provision, which was contained in s 190(2) of the Supreme Court of Judicature (Consolidation) Act 1925. In its present form, s 31 of the 1965 Act gives the court the widest possible powers to vary its orders for maintenance. The section contains no limiting words at all. Subsection (3) requires the court to have regard to all the circumstances of the case, including any increase or decrease in the means of either of the parties to the marriage. The section clearly contemplates that there may be circumstances other than a change in means which would justify a variation in the original order. The court, therefore, has extremely wide discretion in these cases, and, in my judgment, it is the intention of the legislature that the court should exercise its discretion in these matters in such a way as to achieve substantial justice between the parties with a minimum of technicalities. This is a jurisdiction in which the maximum flexibility must be preserved, so that account can be taken of all the foreseeable and unforeseeable factors which can arise out of the relationship which must persist in many cases between persons who have once been husband and wife, and particularly where they remain parents. And the discretion, wide though it is, must be exercised judicially; but it ought not to be fettered more than is necessary to comply with established principles of law.
The question, therefore, is whether I am prevented from entertaining this appeal by some rule of law outside the Act, because, in my judgment, this case falls prima facie within the words of the section. In a case where the court has conducted an enquiry into the facts and reached a conclusion as to the means and merits of the respective parties and made an order, the dissatisfied party has his right of appeal. If a mistake has been made in the assessment of means, perhaps owing to a misstatement of the income of one party, or the subsequent discovery that relevant information was not before the court, the error can be put right on appeal or possibly on a subsequent application to the judge. The only question there is a procedural one. But in the case of a consent order, the position is said to be different.
It is true that s 31(1)(h) of the 1925 Act provides for appeals from consent orders
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with leave of the judge, but counsel for the wife submits that the consent order is essentially a contract embodied in the order and can be relied on as an estoppel. There is ample authority for that general proposition. See, for example, Re South American and Mexican Co Ltd, ex parte Bank of England, cited by Payne J in B (M A L) v B (N E) ([1968] 1 WLR 1109 at 1122). But, in my judgment, it is the underlying contract rather than the consent order simpliciter which gives rise to the estoppel.
The cases referred to in the Supreme Court Practice 1970a are all cases arising out of judgments or orders made by consent by parties litigating in other Divisions in which the court makes final judgments. The reasoning in these cases must be applied with great caution to cases such as the present, where no final judgment is or can be made; and the court retains its powers to adjust the orders in the light of all the circumstances of the case. In certain cases arising out of maintenance proceedings, a consent order will in fact be a final order; in others it will be found an estoppel; but in all such cases underlying the consent order, there will be found a true contract.
In L v L, the wife had agreed to her application for maintenance being dismissed on payment of a lump sum of £660, which was paid. In B (M A L) v B (N E), the husband submitted to a consent order for the maintenance of the wife in return for a waiver by the wife for valuable rights under a settlement. But in a case such as the present, there is nothing more than an assent that a particular sum is appropriate, and consequently an order is drawn up providing for payment of that sum without further enquiry.
Counsel for the wife has made an ingenious attempt to discover grounds for estoppel in this case by suggesting that the wife, in reliance on the order, undertook certain commitments in buying a house. But it is the essence of a maintenance order, whether made by consent or otherwise, that it is effective only until further order. In my judgment, a consent order of this latter type does not amount to an estoppel, first because there is no contractual basis for the estoppel, and secondly because the order is not a final but an interlocutory order. There is authority for the proposition that the court can vary interlocutory consent orders. In Mullins v Howell ((1879) 11 Ch D 763 at 766), Sir George Jessel MR said:
‘I have no doubt that the Court has jurisdiction to discharge an order made on motion by consent when it is proved to have been made under a mistake, though that mistake was on one side only, the Court having a sort of general control over orders made on interlocutory applications.’
I accordingly hold that the court is not precluded from entertaining the husband’s application to vary these orders on the ground that they were based on a mistake as to his means and a mistake as to the amount of his liability to income tax. Had I been obliged to hold otherwise, a serious injustice would have been done to him, the effects of which would or might persist in all future assessments as to his liability for maintenance. The reason for saying this is the argument of counsel for the wife that the order for £1,800 per annum less tax must be taken as the datum in all future applications to vary the original order. He goes further and contends that, on any such application, the court must compare the husband’s means at the date of application not with the figure on which the consent order was based mistakenly—ie £3,950—but with his actual income 1966–67—ie £3,556 at maximum. In other words, he will always be paying too much. A suggested remedy, an action for damages against his former solicitors, would, if successful, have the surprising result of providing a financial infusion into the family (ie the wife, the husband and their children) which, taken as a group, have suffered no loss at all.
I was kindly supplied by counsel for the wife with a transcript of a judgment
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recently delivered by Baker J in Wilkins v Wilkins. That case seems to me to fall into the same class as L v L and B (M A L) v B (N E), because, in reliance on the consent order in question, the wife abandoned what might have been a successful defence to her husband’s petition on the ground of cruelty. There is only one point which I would respectfully question, and that is where the learned judge observed ([1969] 2 All ER at 466, [1969] 1 WLR at 926) that neither he nor the registrar could hear an appeal from the judge who made the order. Where the court is asked to review an order made on what subsequently turns out to be a mistaken basis, I do not think it is accurate to say that it is purporting to act as an appellate tribunal. It is exercising its powers to vary, having regard to all the circumstances of the case; or its inherent power to vary interlocutory consent orders, referred to by Sir George Jessel MR in the case which I have already cited.
Having held that there is power to entertain an application to vary a consent order on the ground of mistake, I have now to consider whether the court ought to exercise the power in this case. In my judgment, the court ought not readily to accede to any such application, since to do so might seriously undermine the value of such orders and so discourage parties from agreeing on them. On the other hand, if the court were to decline to intervene where an injustice appears to have been inflicted, it might equally discourage parties from resolving their differences in this way. Moreover, if a mistake in consenting to such an order were to have the onerous effects on solicitors acting for the parties as has been suggested in this case, it might seriously deter solicitors from entering into consent orders on behalf of their clients, and lead to a situation where solicitors acting in such cases might well decline, for their own protection, to adopt this useful and convenient way for settling questions of maintenance. It therefore follows that the onus must be on the party seeking to vary the consent order to satisfy the court: first, that a mistake was made in consenting to the order; and secondly, that such mistake has resulted in an order which is clearly and substantially different from the order which would probably have been made in the absence of mistake. Mere assertion that the husband thought at the time that he would be able to afford to pay the agreed amount would obviously not do. Proof of a specific mistake, either by showing that the figures were wrongly stated or not fully disclosed, would probably be essential. The effect of a mistake on the other party must also be considered, even though it may not be possible to establish a formal estoppel in law. Other considerations may also arise.
In the present case, it has been clearly demonstrated that the order for the wife’s maintenance at £1,800 per annum less tax was based on an erroneous figure of the husband’s income, an erroneous calculation of his liability to tax, and an erroneous assumption that the wife had no resources of her own. The resulting error in the amount of the order is sufficiently substantial to call for an adjustment in the amount of the order. It was suggested by counsel for the wife that the husband might have had some ulterior motive in agreeing to the excessive order—eg the avoidance of further enquiry into his means or of the expense of a complicated discovery. If there were any substance in such a suggestion it would be another matter which the court must consider before varying the consent order. I am satisfied, however, in this case that there is nothing in the evidence before me to support it; indeed, the evidence negatives it. On the other hand, I do not think that a case has been made out for reconsidering the order for maintenance of the children, nor do I understand counsel for the husband to be inviting me to do so.
I must now return to the figures with the preliminary observation that an order for a wife in the sum of £1,800 per annum less tax is distinctly higher than one would normally expect where the husband’s income is £3,950. In 1967, at a time
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when the order was made, the husband’s income as shown in his affidavit of 28 November 1967 was £3,556 less tax, from which I would have deducted his superannuation and other small expenses which reduces it to £3,280 less tax. This is in fact the sum available for distribution among his family, and the wife will in due course benefit from the husband’s pension. Assuming that the husband had no other resources and that the wife had no means of her own, this would suggest an order not exceeding about £1,100 per annum less tax. The husband, however, receives allowances when he is abroad and it is difficult to evaluate the real benefit which he receives from them, but his bank statement shows that, for a substantial period, he has not been using his current account for day-to-day living expenses. He has bought a house, but with a very large mortgage, which costs him about £950 per annum in interest and premiums less tax allowances, and he has also bought a boat. Still assuming no means of the wife, these further considerations might at most justify an order of a somewhat higher figure than £1,100 per annum less tax, compared with the actual order of £1,800 per annum less tax. His present salary is £3,735 less tax and superannuation and expenses, which leaves him about £3,500 less tax. On the other hand, the salary arrangements of pilots are under review and a further rise is probable in the near future.
The assumption that the wife has no means of her own is, however, wrong. It is not easy to estimate her financial position, and she has not been as forthcoming about it as she might have been. Before the divorce she had a share in an Australian company called J Jordan Pty Ltd, a private company controlled by her father. In 1963 and 1964 she received substantial dividends from this company, but it went into voluntary liquidation, I think in 1966. As a result the wife received a substantial repayment of capital. Her deposit account statement with the Central Banking Co of Sydney shows that in August 1966 she transferred £5,700 to her savings account in Australia at the Rose Bay branch of the same bank. Since the conclusion of the argument I have been provided, by agreement of the parties, with her passbooks of this account from 16 February 1967 to March 1969. This account does not, therefore, show the receipts from her deposit account in England of the sum of £5,700. On the other hand, it appears that in the year June 1966 to June 1967 she lent the sum of $(Australian) 13,469 to a company called Glenthorn Pty Ltd, another of her father’s companies, which no doubt represents this sum of £5,700. During 1967 and 1968, this loan was repaid and was reinvested in the purchase of a house. In addition, the wife received some £2,200 in February 1967 as her share of the proceeds of sale of the matrimonial home in England. Out of this she paid her passage and the children’s passage to Australia, and transferred £1,571 to the deposit account at Rose Bay. This account was credited with some fairly substantial sums during 1967, so that in June 1967 it was in credit to the extent of $5,486, or about £2,000. At that time, therefore, she had $13,469, or £l5,386 on loan to Glenthorn, and £2,000 in the deposit account, giving her about £7,000 capital. In September 1967, she paid $15,241, or about £6,000 in part payment of a house, presumably the money repaid by Glenthorn and some of the money from her deposit account. In addition she has a holding of some 10,000 shares in another company called Slater Kinsella Pty Ltd, another private company controlled by her father. Her income tax return for the year to June 1967 showed a receipt by her of a dividend from this company of $500 or £200. Since there is no corresponding entry in her 1966 return, I presume that she acquired this holding in 1967. There is also no entry relating to it in her 1968 income tax return, although she still holds the shares. It is said that no dividend was paid in 1968 owing to losses suffered by the company as a consequence of a severe drought, but there is a document which has been produced which is a declaration by the directors of their intention to apply $1,790 in payment of a dividend for 1968. A similar announcement for 1967 showed that $1,400 was appropriated for the dividend, of which the wife received $500. She also received at least as much in 1968.
This is not very satisfactory, and, coupled with the misleading statements in para 3
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of her affidavit of 31 January 1968, that she used the proceeds of the sale of her home in England (ie £2,200 less £500 for fares) as the deposit on the purchase of her home in Beaucluse, New South Wales, and borrowed the balance on mortgage—when in fact she had used £6,000 of her original capital and borrowed only about 30 per cent of the purchase price on mortgage—makes me hesitate to accept her evidence unless it is clearly supported. A similar comment might be made about para 2 of her affidavit of 27 February 1968, which is so carelessly drafted that it is misleading.
Doing the best I can on this information, I shall assume that the wife has capital assets of about £7,000. The capital value of the shares in Slater Kinsella Pty Ltd may well be small, because it is a minority shareholding in a private company; but I can see no reason why the intention of the directors to use $1,790 was not implemented, in which case the wife should have received rather more than $500 by way of dividend. I shall assume that she is likely to receive at least £200 per annum from this holding, and take 5 per cent on the capital of £6,000—that is, £300 per annum, in each case of course less tax. I take this low rate of interest partly because her mortgage interest is 50 per cent and partly because her benefit is only the fact that she is paying less for her accommodation than she might have paid if she had had no capital; and I am ignoring the balance of capital because I am not clear what has happened to it.
I shall assume that the husband’s income will rise in the immediate future to some extent, and that he will continue the benefit of his allowances, to the extent that he saves on living expenses when he is abroad. And I am prepared to treat his superannuation and other small expenses as set out in his affidavit as permissible deductions and take his income at £4,000 less tax per annum. I think this may be on the high side, but it is intended to take count of his probable financial position over the next two years or so.
Using the conventional test, but recognising that it is not a rule, the provisional calculation for maintenance would be £4,000 plus £500, equals £4,500; one-third of that is £1,500 from which £500 must be deducted, leaving £1,000 per annum less tax. However, I have to take account of devaluation, and of the fact that the wife has herself and two children to keep and needs ready money, and that there is nothing sacrosanct about the one-third test. I think that the fair figure would be £1,250 for the wife and £240 for each of the children, which gives her an income of £2,230 less tax and leaves the husband £2,270 less tax. It would not be right to backdate this to January 1967 because it would put the wife into great difficulty, and the mistake is essentially the mistake of the husband. On the other hand, I think that I ought to remit any outstanding arrears.
Order accordingly. Leave to appeal to the Court of Appeal granted.
Solicitors: Gordon, Dadds & Co (for the husband); F E Baldock & Co, Guildford (for the wife).
Alice Bloomfield Barrister.
Re a Debtor (No 31 of 1969), ex parte the Debtor v Triggs Turner & Co
[1970] 1 All ER 920
Categories: BANKRUPTCY
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS AND GOFF JJ
Hearing Date(s): 27 OCTOBER 1969
Bankruptcy – Petition – Amendment – Petition amended by substituting another act of bankruptcy for that originally alleged – Bankruptcy notice did not expire until after presentation of petition – Application for leave further to amend petition by restoring reference to original act of bankruptcy – Lapse of more than three months since original act of bankruptcy occurred – Whether court could allow amendment which would introduce act of bankruptcy out of time, in a case where that act had at some time previously appeared on petition – Bankruptcy Act 1914, s 109(3).
W and the respondents served separate bankruptcy notices on a debtor. The time for complying with W’s bankruptcy notice expired on 20 May 1969. The time for complying with the respondents’ bankruptcy notice expired at the end of 8 July 1969. On 8 July 1969, W presented a bankruptcy petition against the debtor. The act of bankruptcy alleged was the debtor’s failure to comply before 21 May 1969 with W’s bankruptcy notice. An application to amend the petition was subsequently granted and it was in fact amended by substituting the respondents for W as the petitioning creditors and also by substituting, as the act of bankruptcy alleged, failure to comply with the respondents’ bankruptcy notice, in place of failure to comply with W’s notice. The petition as so amended was, however, invalid because the time for complying with the respondents’ notice did not expire until the end of the day on which the petition was presented. The respondents applied for the petition to be further amended under s 109(3)a of the Bankruptcy Act 1914 by restoring the act of bankruptcy originally relied on, ie the failure to comply with W’s bankruptcy notice before 21 May 1969. At the date of the hearing of the application, more than three months had elapsed since the occurrence of that act of bankruptcy.
Held – An amendment would not be allowed which would introduce an act of bankruptcy more than three months after its occurrence, whether the act had at some time previously appeared on the petition or not (see p 922 c, f and g, post). The fact that the act of bankruptcy which the respondents were seeking to restore was that originally relied on and then struck out could not put the respondents in a better position than that which they would have been in if the act of bankruptcy had never been set up at all (see p 922 j to p 923 a, post).
Notes
For amendment of petition, see 2 Halsbury’s Laws (3rd Edn) 303, para 576, and for cases on the subject, see 4 Digest (Repl) 162–164, 1472–1490.
For the Bankruptcy Act 1914, s 109, see 3 Halsbury’s Statutes (3rd Edn) 136.
Cases referred to in judgment
Debtor (No 21 of 1950), Re a, ex parte the Debtor v Bowmaker Ltd [1950] 2 All ER 1129, [1951] Ch 313, 4 Digest (Repl) 106, 951.
Maund, Re, ex parte Maund [1895] 1 QB 194, 64 LJQB 183, 72 LT 58, 4 Digest (Repl) 163, 1479.
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Appeal
This was an appeal by Geoffrey Robert Pallant, the debtor, against an order made on 29 July 1969 by the registrar of the Portsmouth County Court substituting Messrs Triggs Turner & Co, the respondents, as petitioning creditors in place of Wadhams (HMC) Ltd. The notice of appeal also asked, inter alia, that the petition be dismissed.
The debtor appeared in person.
Julian Priest for the respondents.
27 October 1969. The following judgments were delivered.
UNGOED-THOMAS J. This is an appeal against an order made in the Registry of the Portsmouth County Court substituting Messrs Triggs Turner & Co, the respondents, as petitioning creditors in place of Wadhams (HMC) Ltd. The order was made on 29 July 1969. The notice of appeal is, roughly speaking, an appeal against that substitution. But it goes on, as I read it consequentially, to ask that the petition be dismissed. Not only has the order for substitution itself been debated before us but we have also had the advantage of assistance on the validity of the petition which, as will appear, has had rather a curious history. It is perfectly clear to us that the order for substitution was validly made. So clear that I do not propose to spend any time in reviewing it.
The petition itself came before the court on 26 August 1969 and it was then adjourned. In due course leave was given to amend the petition, and this is where the complication in this case arises. On 15 September, the amended petition was filed but the amendment did not consist merely of substituting the respondents, as petitioners in place of Wadhams and their debt in place of Wadhams’s debt, but also substituted an act of bankruptcy founded on a bankruptcy notice by the respondents in place of the act of bankruptcy founded on a bankruptcy notice by Wadhams. So the present petition before us on the file is the petition so amended founded on the respondents’ bankruptcy notice and the consequential act of bankruptcy resulting from non-compliance with it.
The time for complying with Wadhams’s bankruptcy notice expired on 20 May 1969 so that the three months for relying on that bankruptcy notice so as to establish an act of bankruptcy as a basis for a petition would have expired on 20 August. The time for complying with the respondents’ bankruptcy notice expired at the end of 8 July 1969. The petition was dated 8 July and therefore no act of bankruptcy as the foundation to this petition of 8 July could be based on the respondents’ bankruptcy notice which did not expire until after the presentation of the petition. The result is that the petition as it stands is not well-founded.
It is then, however, asked by the respondents to this application that the court amend the petition under s 109(3) of the Bankruptcy Act 1914 so as to restore the allegation of the act of bankruptcy founded on Wadhams’ bankruptcy notice and thus produce a well-founded petition. Section 109(3) is couched in wide terms:
‘The court may at any time amend any written process or proceeding under this Act on such terms, if any, as it may think fit to impose.’
Nevertheless the court would not, or maybe, as is suggested by some authorities, could not amend the petition in such a manner as to enable it to be founded on an act of bankruptcy which had occurred more than three months before the date of the amendment; and this is conceded. In Re a Debtor (No 21 of 1950), ex parte the Debtor v Bowmaker Ltd ([1950] 2 All ER 1129 at 1131, [1951] Ch 313 at 318) Harman J quoted Vaughan Williams LJb in insisting that the formalities in bankruptcy notices should be complied with:
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‘” … since the commission of an act of bankruptcy was a serious matter and involved consequences of what has been called a penal nature it was important to see that the necessary preliminaries were complied with.”’
And in the same judgment he pointed out ([1950] 2 All ER 1129 to 1131, [1951] Ch 313 at 318) that a petition is more readily amended as being a formal matter following on the act of bankruptcy.
In Re Maund, ex parte Maund ([1895] 1 QB 194 at 198) in dealing with the different questions of an amendment of a petition so as to introduce a new petitioner in respect of a new debt after a lapse of three months from the date of the act of bankruptcy on which the petition was founded Vaughan Williams J said that it was perfectly plain that the amendment should not be allowed, although it would be allowed if made before the expiration of the three months’ period. In other words the vice in the introduction is not due to the introduction of a new creditor or a new debt but in such an introduction not taking place within three months after the act of bankruptcy. The fundamental difficulty is that the Act itself does not contemplate that an act of bankruptcy shall be available as a basis for a petition more than three months after the date of that act. That policy, indeed, as is recognised and conceded, would clearly apply to prevent an amendment which would introduce de novo the act of bankruptcy based on the Wadham’s notice to validate the petition as it at present stands.
What we are, in effect, asked to do is to go back on the amendment that has been made and to treat the petition in effect as though it always stood without the amendment which deleted the act of bankruptcy originally relied on—even though amendment now could not be made to enable the petitioner to rely on that act of bankruptcy.
One of the difficulties facing such an exercise of the discretion is that there is no time limit at all which can be indicated as limiting the period for its exercise. It would be left wide open to the discretion of the court in all the circumstances of the case. But discretion with regard to acts of bankruptcy has not been left wide open to the court without time limit at all. It is clearly the intention of the legislature as expounded in the authorities that any act of bankruptcy should be relied on within the three months’ period which it prescribes, and it seems to me to be as contrary to this to allow an amendment which would introduce an act of bankruptcy out of time, whether such act at some time previously appeared on the petition or not.
Therefore, whilst considering the appeal against the order for substitution has failed, I would, in accordance with the very proper concern of the parties to avoid costs and further process, for my part dismiss the petition.
GOFF J. I agree with Ungoed-Thomas J’s conclusion and with his reasons for it. If this petition had been presented on 8 July 1969 relying and relying only on the act of bankruptcy founded on the bankruptcy notice given by the respondents—that is, as it now stands—it would have been plainly bad. Moreover it is conceded that the fault could not even be cured by substituting another act of bankruptcy based on the notice given by Wadhams on an application to make such an amendment more than three months after the date of that act of bankruptcy. That concession was, in my judgment, plainly right. The whole case that the respondents have therefore for the amendment they seek is that the matter is distinguished because until the amendment on 15 September this petition was a valid petition based on an available act of bankruptcy founded on the Wadhams’s notice. But in my judgment that cannot assist. Having chosen to amend their petition by substituting another act of bankruptcy the petition must stand or fall and the claim to have it amended must stand or fall on the footing that it is a petition based on that act of bankruptcy and no other. I cannot see how the fact that the Wadhams’s act of bankruptcy was originally relied on and then struck out by amendment could put
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the respondents in a better position than that which they would have been in if they had never set it up at all.
I have perhaps merely stated less felicitously what Ungoed-Thomas J has already stated and I agree with his conclusion and with his reasoning.
Appeal and petition dismissed.
Solicitors: Rising & Ravenscroft agents for Triggs Turner & Co, Guildford (for the respondents).
Jacqueline Metcalfe Barrister.
Re Fildes Bros Ltd
[1970] 1 All ER 923
Categories: COMPANY; Insolvency
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 15, 16, 20 JANUARY 1970
Company – Winding-up – Compulsory winding-up – Principles of quasi-partnership – Whether applicable – Contractual rights between parties – Articles of association and settled course of conduct between parties to be considered.
Company – Winding-up – Compulsory winding-up – Contributory’s application – Just and equitable – Scope of phrase – Facts at date of hearing only to be considered – Petitioner confined to allegations in petition – Companies Act 1948, s 222(f).
The question whether it is right for the court to apply the principles of quasi-partnership to the question of winding-up a company depends not only on the contractual rights of the parties as determined by the articles of association but also on the settled and accepted course of conduct between the parties, whether or not cast into the mould of a contract (see p 926 h, post).
Dictum of Simonds J in Re Cuthbert Cooper & Sons Ltd [1937] Ch at 398 applied.
The question whether it is ‘just and equitable’ to wind-up a company, within the meaning of s 222(f) of the Companies Act 1948, must be answered on the facts which exist at the time of the hearing; and a petitioner is confined to the heads of complaint set forth in his petition (see p 927 d and f, post).
Dictum of Plowman J in Re Lundie Brothers Ltd [1965] 2 All ER at 699 followed.
Notes
For just and equitable grounds for winding-up by the court, see 6 Halsbury’s Laws (3rd Edn) 534, 535, para 1035, and for cases on the subject, see 10 Digest (Repl) 856–866, 5638–5694.
For the Companies Act 1948, s 222, see 5 Halsbury’s Statutes (3rd Edn) 289.
Cases referred to in judgment
Cooper (Cuthbert) & Sons Ltd, Re [1937] 2 All ER 466, [1937] Ch 392, 106 LJ Ch 249, 157 LT 545, 10 Digest (Repl) 857, 5645.
Haines Plant Ltd, Re (11 June 1969) unreported.
K/9 Meat Supplies (Guildford) Ltd, Re [1966] 3 All ER 320, [1966] 1 WLR 1112, Digest (Cont Vol B) 110, 5645b.
Lundie Brothers Ltd, Re [1965] 2 All ER 692, [1965] 1 WLR 1051, Digest (Cont Vol B) 110, 5645a.
Yenidje Tobacco Co Ltd, Re [1916] 2 Ch 426, [1916–17] All ER Rep 1050, 86 LJCh 1, 115 LT 530, 10 Digest (Repl) 863, 5683.
Page 924 of [1970] 1 All ER 923
Petition
This was the petition of contributory Brian William Fildes praying that Fildes Bros Ltd might be wound up by the court under the Companies Act 1948. The respondent was Ian Henry Fildes, the brother of the petitioner. The capital of the company consisted of 1,000 £1 shares of which the two brothers held 499 each. The remaining two shares were held by their respective wives. The facts are set out in the judgment.
C A Settle QC and L J Porter for the petitioner, Brian.
R B S Instone for the respondent, Ian.
Cur adv vult
20 January 1970. The following judgment was delivered.
MEGARRY J read the following judgment. This contributory’s petition for a compulsory winding-up order arises from an unhappy tale of two brothers and two companies. The petitioning contributory has been conveniently referred to by his first name, Brian, and the opposing contributory by his first name, Ian; and I shall adopt that usage. The two companies each carried on butchers’ businesses, one wholesale and one retail, in the Manchester area; and each was a family company, the father being in effect the founder of both companies. For over a dozen years Brian, to some extent helped by Ian, ran the wholesale company, entitled JH Fildes & Sons Ltd; and at all material times since their mother’s death in 1961 Brian and Ian held all the shares in the company equally between them, and they were the only two directors. The company fell on hard times, however, and on 4 June 1969 it went into a creditors’ voluntary liquidation.
The retail company, Fildes Bros Ltd, is the one with which I am directly concerned. I shall call it ‘the company’s. This has at all material times been run by Ian, with a little intermittent assistance from Brian. Of the 1,000 shares, each brother owns 499, and their wives own one each. The two brothers were at all material times the only directors of the company, and Ian is chairman of the company, with a casting vote both on the board and at meeting.
The petition is based on a claim that it is just and equitable that the company should be compulsorily wound up. Brian’s main complaints fall under three heads. First, Ian had opened a new bank account in his own name and was paying in and drawing out the company’s money from it; and he had done this without consulting Brian. Under cross-examination, Brian agreed that some while before 17 September 1969, when the petition was presented, he had known of the reasoned explanation as to the nature of this account which Ian’s solicitors had put forward in a letter dated 4 August. Brian had been refusing to follow the previous practice of each brother signing blank cheques for use in the company run by the other brother, and in order to avoid having to get Brian to sign cheques as they were required, Ian had opened this new account. A resolution of the directors at their first meeting on 3 September 1960 had authorised Ian to operate the company’s bank account by himself, but in fact the mandate given to the bank had required the signature of both directors. There is now no question of Ian withholding from Brian information about the state of the account, and so on. The account is used solely for the company’s moneys, and is at a different bank from that at which Ian keeps his personal account. In short, an allegation with sinister implications turns out to have a far from sinister explanation.
Secondly, Brian complains that Ian will not employ him in the retail business. Owing to the collapse of the wholesale company, Brian is now without employment. Leading counsel for Brian accepted that Brian was not entitled to salaried employment by the company, and that Ian’s refusal to employ him was not per se a ground for winding-up. Ian’s view is that in a butcher’s business wholesale experience is quite different from retail experience, and that it would take Brian some weeks to
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learn the retail side satisfactorily. He is also unwilling to dismiss any of his present staff in order to make room for Brian and to set free enough money to pay him.
Thirdly, Brian fears that Ian will run the company for his own benefit, taking all the profits by way of director’s remuneration. Brian contends that Ian had agreed with him when the company was incorporated that the aggregate profits of the two companies should be divided between the two brothers equally by way of director’s remuneration. Ian denies having made any such agreement. Under cross-examination he agreed that certain figures put to him by counsel for Brian showed that for the financial years ended in 1966, 1967 and 1968 there had, to within £50 or less, been an equality of total remuneration from the two companies between the two brothers. However, that, he said, was mere coincidence. Brian produced remarkably little evidence of any of the details of the alleged agreement, and I am far from satisfied that any such agreement was ever made. Evidence of what in fact happened during 1966, 1967 and 1968 is not very cogent evidence of an agreement alleged to have been made when the company was incorporated in 1960. The figures for the first three years of the company’s trading would, I should have thought, been more in point; but Brian, on whom lay the onus of proving the agreement, did not put them before me. It seems far more probable that, instead of there having been any agreement, by 1966 the brothers had settled into a course of conduct which produced the rough equality that one would expect from two brothers with two business of this sort. The broad picture is that in each of the three years each brother drew a total of rather over £2,000 from the company that he was running, and something between £750 and £1,250 from the other company, so that each received in all an annual total of something between £3,000 and £3,500. The collapse of the wholesale company has understandably put Brian, who is about 49 years old, in a position of considerable difficulty.
Apart from Brian’s major complaints, there were some other matters. Ian at one time threatened to have Brian removed from the board of directors. He now accepts that it would be wrong for him to attempt this. Ian also proposed that his wife should be appointed a director of the company. At one stage, too, Ian objected to Brian being on the shop premises unless Ian was there as well, and required that Brian should come there only by prior appointment. He has now withdrawn those contentions. As he volunteered under cross-examination, he was a bit bitter and twisted a few months ago. The unexplained collapse of the family wholesale business had been a blow to him, and he said things at the time that now do not look well. He recognises that he is not entitled to more than proper commercial remuneration for the work he does at the shop, and that if more is earned than is needed to pay this, consideration must be given to paying dividends.
The main contention of Brian’s counsel is that, first, this is a case of a partnership carried on in the guise of a company, and so falls within the doctrine of Re Yenidje Tobacco Co Ltd. Secondly, on that footing, there was now such a lack of confidence between Brian and Ian as would justify the dissolution of a partnership, and that this was not exclusively attributable to Brian. Accordingly, it was just and equitable that the company should be wound up, and an order to this effect should be made. Re Lundie Brothers Ltd was, he said, the case that came nearest to this case. On the other side, counsel for Ian controverted each of these propositions.
Is this a quasi-partnership case? Counsel for Brian accepted that each brother was a semi-sleeping partner in the business carried on by the other; but he stressed the family history of the two companies and the alleged arrangement for an equal division of the joint profits. He likened the case to a company which carried on business in two places, with one director controlling one branch and one controlling the other. Counsel for Ian, however, drew a sharp distinction between one company
Page 926 of [1970] 1 All ER 923
trading in two places and two companies, each with its own place of business. The two brothers, he said, never ran the business of this particular company on a partnership basis; and the petition is merely to wind up this company. In other words, in order to apply the quasi-partnership concept to a company, one must find that the quasi-partners have been carrying on the business of that particular company on a partnership basis; and if this is not the case, it is nihil ad rem that there is or has been another company which the inactive quasi-partner has been carrying on.
The point is a curious one, and not easy. As counsel for Brian points out, the day-to-day running of the company’s business is not the same as the management of the company. True, Ian is in complete control of the day-to-day running of the retail butcher’s shop; but in the general management of the company at the board table, the brothers are equal, subject always to Ian’s casting vote. Does the quasi-partnership concept apply to such cases?
No authority has been cited to me in which the partnership concept has been applied to a company with one director who devotes nearly all his time to the company’s business and another who does little more than attend the directors’ meetings requisite to enable the company to continue in business. As I have already mentioned, counsel for Brian accepted that Brian had been somewhat of a sleeping partner in the company, just as Ian was somewhat of a sleeping partner (although less dormant) in the wholesale company. At the same time, the words ‘just and equitable’ are very wide in their scope, and I cannot say that they are incapable of embracing a case where one director is far more active in the company’s affairs than the other.
I must, however, consider a further point. In Re Cuthbert Cooper & Sons Ltd Simonds J made what Pennycuick J described in Re K/9 Meat Supplies (Guildford) Ltd ([1966] 3 All ER 320 at 324, [1966] 1 WLR 1112 at 1117) as ‘an extremely important extension’ of the principle of the quasi-partnership cases. That extension was that in considering that principle, one must have regard to the contract between the parties as shown by the articles of association. Simonds J said ([1937] Ch at 398, [1937] 2 All ER at 468):
‘… the question whether it is right for me applying here the principles of partnership to the question of dissolution to wind up this company or not largely depends on what are the contractual rights of the parties as determined by the articles of association in this case.’
(In parenthesis I may observe that the word ‘largely’ is omitted from the report of this case in [1937] 2 All ER 466 at 468, and in the quotation from it in the Re K/9 case as reported in [1966] 2 All ER 320 at 325. The reports of Re Cuthbert Cooper & Sons Ltd at 106 LJ Ch 250, 157 LT 546 and 53 TLR 549, however, all include the word, and I think its omission by the All England Reports must be a slip. In any case, the word seems to me to be properly included.)
In the present case, the articles do not have much bearing on what I have to decide; but as it is the contract between the parties which is of importance, then it seems to me that one must have regard not merely to what the articles say, but also to what the parties are shown to have agreed in any other manner. It cannot be just and equitable to allow one party to come to the court and require the court to make an order which disregards his contractual obligations. The same, I think, must apply to a settled and accepted course of conduct between the parties, whether or not cast into the mould of a contract.
In the present case the alleged agreement for profit sharing was for many years admittedly carried out by each brother running one company, with little interference on control by the other. In effect, Brian is saying “The company that I ran has collapsed; now let me come and work in the company which I have always accepted that you should run without my having any part in the work’. The case is, in a
Page 927 of [1970] 1 All ER 923
sense, the reverse of Re Lundie Brothers Ltd. That was a case of exclusion, and counsel for Brian accepts that the present case is not in that category. The present case is a case not of exclusion but of non-inclusion, if I may put it that way. The case is not one of the petitioning contributory complaining of the status quo being changed against his interests; it is one where he complains that the status quo has not been changed in his favour. Even if this is a proper case for the application of the quasi-partnership concept (a matter on which I feel some hesitation) I do not think that it is open to Brian to complain of Ian continuing to do what was in accordance with the settled practice between them. The refusal of Ian to employ Brian is thus in my judgment not merely not enough per se (as counsel for Brian accepts) but it is also not a counter to be weighed in the scales with other matters. If in so holding it is said that I am extending still further the important extension made by Simonds J I face that prospect with equanimity, deriving some degree of comfort from the word ‘largely’ in his judgment ([1937] Ch at 398). I do not think that equity will listen only to what the articles say and ignore a settled course of conduct; equity is not like that.
Secondly, there is the question of lack of confidence, assuming (as for this purpose I do) that the quasi-partnership concept applies. In this respect, it is necessary to determine what facts are to be considered. Two limitations appear to be of possible relevance. First, in my judgment the question whether it is just and equitable to wind up the company is one which must be answered on the facts which exist at the time of the hearing. If on the facts existing when the petition was presented it was then just and equitable to wind up the company, but subsequently it has ceased to be so, I do not think a winding-up order should be made. Section 222(f) of the Companies Act 1948 is cast in the present tense, providing for an order if the court ‘is’ of opinion that it ‘is’ just and equitable that the company should be wound up. No doubt if there were cogent grounds for complaint at the time when the petition was presented, but they afterwards melted away, there may be consequences in relation to costs; but a winding-up order under this head must be based on subsisting facts and not on past history. Counsel for Brian accepts this view, and I need say no more about it.
Secondly, the petitioner is confined to the heads of complaint set forth in his petition. His evidence may no doubt amplify and explain these complaints, but I do not think that he can rely on any new head not fairly covered by his petition. For this proposition counsel for Ian cited Re Cuthbert Cooper & Sons Ltd ([1937] Ch at 399, [1937] 2 All ER at 468), which I have already mentioned, where Simonds J said:
‘For the purpose of determining whether the petition should be granted or not, it is necessary for me to look at the allegations in the petition, and I do not propose to travel beyond them.’
This can hardly be said to carry the point, although it gives some indication of it. I think, however, that the matter is covered by more recent authority. In Re Lundie Brothers Ltd ([1965] 2 All ER at 699, [1965] 1 WLR at 1058) Plowman J said:
‘It was suggested in the course of argument that it was really the evidence and not the allegations in the petition which was of importance in this matter. I entirely dissent from that proposition. It seems to me that it would be wrong for the court to travel outside the allegations in the petition, particularly in a case of this sort where the petition is based on the proposition that the respondents to it have been guilty of some oppression or some lack of probity.’
Page 928 of [1970] 1 All ER 923
To that passage I may add the comment on it which I made in Re Haines Plant Ltd:
‘That was primarily said in relation to a petition under section 210, but I do not think it can be questioned that the same principle would apply to a petition for winding-up.’
In cases in which there are no normal pleadings, it seems to me important that those who oppose a winding-up should know, in time to prepare their case, what are the allegations that they have to meet. If after a petition has been presented the petitioner wishes to broaden his attack, let him first amend his petition.
Accordingly, the question for me is whether, as matters stand today, what has been alleged in the petition and proved before me makes it just and equitable to wind up the company. Whatever grounds Ian may in the past have given Brian for the presentation of the petition, I have to decide the case in the light of the evidence now before me; and this includes the oral evidence of Ian and Brian. Counsel for Brian said that the court must decide this case largely on personalities. In that respect, I must say that I found Ian an impressive witness, frank, fair-minded and businesslike. Brian, on the other hand, was at times confused and not very lucid. Insofar as their evidence conflicts, I prefer the evidence of Ian; and I think that he will try to act honourably and properly in the management of this company. No doubt there will be differences of opinion about disputable matters; but taking the view of Ian that I did, I do not think that he will act unfairly, especially now that he has acquired the knowledge of his duties towards his brother which this case has brought him.
Counsel for Brian very properly stressed that Ian’s change of attitude was at the eleventh hour, and that he had given no hint of it before giving his evidence. It was, he said, a delayed repentance, with last minute concessions. I accept that, and the criticism of Ian that it implies. But I also accept Ian as a witness of sincerity; and if repentance is genuine, it is not nullified by being tardy. In my judgment, there is now no justifiable ground for Brian having such a lack of confidence in Ian as to support the making of a winding-up order.
Counsel for Brian accepts that this is not a case of deadlock, nor of exclusion; I have rejected the existence of the alleged agreement for sharing profits equally; counsel for Brian accepts that the refusal to employ Brian is not enough per se, and in any case I have rejected it as having any weight; counsel for Brian very properly says that he does not make too much of the bank episode; and I do not accept that Ian is proposing to run the company for his own benefit. Even if one goes outside the four corners of the petition, in the end Brian is left with complaints which in my judgment are wholly insufficient to support the petition. The petition must therefore be dismissed.
Petition dismissed.
Solicitors: David Blank, Alexander & Co, Manchester (for the petitioner, Brian); Addleshaw, Sons & Latham, Manchester (for the respondent, Ian).
R W Farrin Esq Barrister.
Hampson v Powell
[1970] 1 All ER 929
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 29 JANUARY 1970
Road traffic – Driving without due care and attention – Evidence – Circumstantial evidence sufficient to identify defendant as driver of vehicle involved in accident.
On 14 April, M, driving his Cortina car on a road which he was not able subsequently to name, stopped at traffic lights with two or three cars in front of him. He felt a bump, his car was pushed forward and the boot flew open. A truck (as he described it) having emerged from a side street to his rear damaged the rear offside wing of the Cortina. M took a note of the truck’s registration number. J was, at the same time, driving his car in H lane approaching the traffic lights when he saw a lorry in K street waiting to come out into H lane. J held back and the lorry swung out. J heard a bang and saw the boot of a Cortina car in front fly open; J did not see where the lorry went after that and did not note the lorry’s registration number. Some ten minutes later a police officer went to the junction of H lane and K street and saw the Cortina and the damage to it. As a result he eventually traced a lorry, registration number HXJ 604F, and he interviewed the appellant some days later. The appellant told the police officer that on 14 April at the relevant time he had been driving that lorry at the junction of K street and H lane. No trace of damage could be seen on the lorry, and the appellant said that he had no knowledge of having collided with a Cortina car. The appellant was charged, inter alia, with driving without due care and attention. Before the justices, M did not give the registration number of the lorry in evidence and the appellant did not give evidence. The justices, ruling that there was sufficient evidence to satisfy them, convicted the appellant of driving without due care and attention. On appeal,
Held – The fact that there was, so far as the justices knew, no other lorry, that the particular lorry driven by the appellant was at the precise spot at the precise time the accident occurred, was sufficient for them to have come to the conclusion in the absence of anything else that it was sufficiently and properly proved that the appellant was the driver concerned (see p 931 h and p 932 b, post).
Jones v Metcalfe [1967] 3 All ER 205 distinguished.
Notes
For the law relating to circumstantial evidence in criminal cases, see 10 Halsbury’s Laws (3rd Edn) 722, 723, para 1387, and for cases on the subject, see 14 Digest (Repl) 402, 3937–3939.
Case referred to in judgment
Jones v Metcalfe [1967] 3 All ER 205, [1967] 1 WLR 1286., Digest Supp.
Case stated
This was a case stated by justices for the city of Manchester, acting in and for the said city, in respect of their adjudication as a magistrates’ court sitting at the Court House, Minshull Street, Manchester, on 27 June 1969.
On 2 June 1969, three informations were preferred by the respondent Michael John Powell, a police constable, against the appellant, Walter Hampson, charging that on 14 April 1969 he drove a motor vehicle on Kersley Street at the junction with Hulme Hall Lane, Manchester, without due care and attention, contrary to s 3 of the Road Traffic Act 1960; and that owing to the presence of the motor vehicle on
Page 930 of [1970] 1 All ER 929
the road an accident occurred, whereby damage was caused to a vehicle other than that vehicle, and that he unlawfully failed to stop, contrary to s 77(1) of the Road Traffic Act 1960. He was further charged that not having given his name and address to a person having reasonable grounds for so requiring, he unlawfully failed to report the accident at a police station or to a police constable as soon as reasonably practicable and in any case within 24 hours of the occurrence thereof, contrary to s 77(2) of the Road Traffic Act 1960.
The evidence at the hearing was as follows. Mr W McKendrick stated that at 4.10 pm on 14 April 1969 he was driving his firm’s Cortina motor car. He could not remember the names of the roads but they were in the police statement. He had stopped at the traffic lights, there were two or three cars in front when he felt a bump and was pushed forward. A truck came out of a side street immediately to his rear left and damaged his rear offside wing. He took the number of the lorry. The boot lid of his car flew open. Mr Peter Jones stated that at 4.10 pm on 14 April 1969 he was driving his car down Hulme Hall Lane. As he approached the traffic lights at Bradford Road, he saw a lorry in Kersley Street waiting to come out into Hulme Hall Lane. He held back. The lorry then swung out turning left towards Ashton New Road. He heard a bang and saw the boot of the Cortina car in front fly up. He could not see where the lorry went after that. He did not know the registration number of the lorry. The respondent stated that at 4.20 pm on 14 April 1969 he went to the junction of Kersley Street and Hulme Hall Lane. He saw that a white Cortina motor car registration number GNK 324G had received damage to the rear offside light unit. As a result of what he was told he traced from the taxation office a lorry registration number HXJ 604F. Some days later he interviewed the appellant at his home who told him that on 14 April 1969 at 4.10 pm he was the driver of a lorry registration number HXJ 604F in Kersley Street and Hulme Hall Lane. The respondent examined the lorry and could find no marks on it indicating a collision. The circumstances of the alleged incident were outlined to the appellant and the allegation of his being involved put to him. The appellant replied: ‘It’s the first I know of it. I am not aware of colliding with a Ford Cortina.' The respondent asked him, ‘Why didn’t you stop?’ and he replied, ‘How could I when I didn’t know it had happened’. The respondent told him the matter would be reported. The appellant did not give evidence.
It was contended for the appellant that the prosecution had failed to identify the appellant as the driver of the offending lorry and/or that the prosecution had failed to show that the lorry driven by the appellant was the one involved in the incident, and therefore the three summonses failed.
The respondent did not make any submission to the justices.
The justices were of opinion that the evidence before them was sufficient to satisfy them beyond any reasonable doubt that the appellant was the driver of the lorry involved in the accident and that it was the appellant’s lorry which was involved in the accident because, although there was no direct evidence that lorry HXJ 604F was the lorry involved in the accident there was circumstantial evidence which pointed clearly to this fact; namely: (a) evidence that a lorry collided with Mr McKendrick’s car at the junction of Kersley Street and Hulme Hall Lane at 4.10 pm on 14 April 1969; (b) evidence that the appellant was the driver of a lorry at precisely that time and place on that date; this evidence was not challenged by the appellant, nor did he give evidence before the justices; and accordingly the justices convicted the appellant who now appealed.
L R Sieve for the appellant.
D G F Franks for the respondent.
29 January 1970. The following judgments were delivered.
TALBOT J who delivered the first judgment at the invitation of Lord Parker CJ, having stated the facts, continued: What is now said on behalf of the appellant is
Page 931 of [1970] 1 All ER 929
first that there was no admissible evidence of identification to prove that he was the driver of that motor lorry involved in the collision with Mr McKendrick’s motor car. Secondly, it is said that the evidence which the justice relied on was not sufficient to prove that the appellant was the lorry driver. What the justices relied on is contained in the expression of their opinion when they stated:
‘… the evidence before us was sufficient to satisfy us beyond any reasonable doubt that the appellant was the driver of the lorry involved in the accident and that it was the [appellant’s] lorry which was involved in the accident because although there was no direct evidence that lorry HXJ 604F was the lorry involved in the accident there was circumstantial evidence which pointed clearly to this fact; namely: (a) evidence that a lorry collided with Mr McKendrick’s car at the junction of Kersley Street and Hulme Hall Lane at 4.10 pm on the 14 April 1969; (b) evidence that the appellant was the driver of a lorry at precisely that time and place on that date; and this evidence was not challenged by the appellant, nor did he give evidence before us, … ’
Counsel for the appellant cites in support of his contention that there was no admissible evidence of identification, Jones v Metcalf. There the facts were somewhat similar to those in the present case. A lorry driver had become involved in an accident and did not stop. There was a bystander who took the number of the lorry; eventually the driver was traced and interviewed by a police officer as in this case. But the distinction between that case and this lies within the words of Lord Parker CJ who said ([1967] 3 All ER at 207, [1967] 1 WLR at 1290):
‘The justices, and I have very much sympathy with them, accepted the common sense approach that they were entitled to come to the conclusion that the police constable acted on the information given by Mr. Dickinson and that Mr. Dickinson must have identified the lorry as EWH 820. In my judgment, however, they were not entitled to do it.’
The reason, as I understand it, that that case differs from the present one was because the justices there accepted evidence which was inadmissible and they were not entitled to do so and, having done that, they came therefore to a wrong decision.
The first question therefore here is whether the evidence which the justices accepted identifying the appellant as the driver of the lorry was inadmissible; clearly it was not. I will not recite what the justices found. It is simply this, that the lorry was there at the time and place and, so far as one can see from the evidence, no other lorries were in the vicinity and in those circumstances the justices said that they felt sure that the appellant was the driver concerned.
The second submission that that evidence is not sufficient is, in my judgment, not a good submission. The fact that there was, so far as the justices knew, no other lorry, that this lorry driven by the appellant was at the precise spot at the precise time the accident occurred, was sufficient in my judgment for them to have come to the conclusion in the absence of anything else that it was sufficiently and properly proved that the appellant was the driver concerned. That is sufficient to dispose of the first offence of driving without due care and attention, but there remain the other two offences, failing to stop and failing to report. It is a necessary ingredient to those offences that the driver should know that he had been involved in an accident so that he would then stop and later report the accident if that is what he had to do.
The only evidence about this was that given by the respondent in the form of the answers of the appellant. He said that he did not know and therefore he could not stop, and similarly of course it means he could not report. That being the
Page 932 of [1970] 1 All ER 929
only evidence, there was in my judgment no evidence on which the justices could find that he did know and ought to have stopped and reported the accident. Therefore so far as the two latter offences are concerned the appeal should succeed.
ASHWORTH J. I agree.
LORD PARKER CJ. I also agree.
Appeal allowed in part.
Solicitors: Simpson, Silvertown & Co agents for Singer & Co, Manchester (for the appellant); D S Gandy, Manchester (for the respondent).
Jacqueline Charles Barrister.
BSC Footwear Ltd (formerly Freeman, Hardy & Willis Ltd) v Ridgway (Inspector of Taxes)
[1970] 1 All ER 932
Categories: TAXATION; Income Tax
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SALMON AND MEGAW LJJ
Hearing Date(s): 4, 5, 6, 7 NOVEMBER 1969, 23 JANUARY 1970
Income tax – Profits – Computation of profits – Accountancy method – Valuation of stock at end of year – Original cost or market value – Meaning of market value – Replacement value or retail sale value.
The taxpayers carried on the trade of selling footwear as retailers from their many retail shops throughout the country, most of the footwear being acquired from manufacturers. They operated a system of fixing an average ‘mark up’ in terms of a percentage of retail selling price, eg 35 per cent, to produce gross profit which was a larger percentage of cost. They carried large stocks and it was an essential aspect of the trade that there were sales in January of stock in hand at the end of the previous year, and also sales in the summer. The sales were at reduced retail prices which did not produce the gross profit represented by the percentage mark up for ordinary sales. In valuing the stock in hand at the end of each year brought forward at the beginning of the next year, they jobbed backwards from the expected reduced retail prices in the sales to produce values on which those prices would reflect the mark up used to arrive at ordinary sale prices. The values were termed replacement values and represented the sums the taxpayers said they would be prepared to pay for the stock having regard to their estimates of future retail prices and their marked up percentages. They were assessed to income tax on the basis that the value was the cost price or the market value if lower, and the market value was the price obtainable if the footwear was sold in the retail market based on the taxpayers’ estimates of retail selling prices in due course, less salesmen’s commission.
Held – The basis of valuation adopted by the Crown was correct because, in valuing the stock at the lower of cost and market value, market value meant the net realisable price at which the stock could be expected to be sold in due course in the market in which the taxpayers’ trade was conducted, ie the retail market, and not the price in the market in which the goods were bought for resale and not the value on the wholly artificial system used in the taxpayers’ computation, which did not represent values in a real market and did not accurately reproduce the profits or gains of each
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particular year as required by the Income Tax Acts (see p 936 a and b, p 938 g, p 940 c, and p 941 d and j, post).
Per Salmon LJ: On the present state of the authorities and indeed on principle, it is ordinarily permissible to enter stock in a profit and loss account at less than cost price for tax purposes only if its net realisable sale price is less than its cost price (see p 940 a, post).
Decision of Cross J, sub nom Freeman, Hardy & Willis Ltd (now BSC Footwear Ltd) v Ridgway (Inspector of Taxes) [1969] 3 All ER 165 Affirmed.
Notes
For the valuation of stock-in-trade in the computation of profits for income tax purposes, see 20 Halsbury’s Laws (3rd Edn) 145, 146, paras 254–256, and for cases on the subject, see 28 Digest (Repl) 71–75, 268–286.
Cases referred to in judgments
Ostime (Inspector of Taxes) v Duple Motor Bodies Ltd, Inland Revenue Comrs v Duple Motor Bodies Ltd [1961] 2 All ER 167, [1961] 1 WLR 739, 39 Tax Cas 537, Digest (Cont Vol A) 865, 286a.
Whimster & Co v Inland Revenue Comrs (1925) 12 Tax Cas 813, 1926 SC 20, 28 Digest (Repl) 424, * 944.
Cases also cited
Brigg Neumann & Co v Inland Revenue Comrs (1928) 12 Tax Cas 1191.
Minister of National Revenue v Anaconda American Bars Ltd [1956] 1 All ER 20, [1956] AC 85.
Patrick (Inspector of Taxes) v Broadstone Mills Ltd [1954] 1 All ER 163, 35 Tax Cas 44.
Appeal
The taxpayers appealed to the Special Commissioners of Income Tax against an assessment to income tax made on them for 1960–61 under Case I of Sch D to the Income Tax Act 1952 in the sum of 2,800,000, less £200,000 capital allowances. The question for determination was the value of the stock held by the taxpayers at the beginning and at the end of the accounting period forming the basis of assessment, viz at 1 January and 31 December 1959.
The taxpayers contended that the stock valuations in their accounts were correct in principle and produced a fair result in all the circumstances and that their profits should be computed accordingly. In the case of about two-thirds (in value) of the total stocks that valuation coincided with original cost and it was not in dispute. In the case of all the other lines the valuation was below original cost and was what the taxpayers estimated to be replacement value, ie the value at which the buyer would be prepared to go into the market to replace such stocks, if he had any occasion to do so and if he could do so at that price.
The Crown contended as follows: (i) that the computation of profits for the purpose of Case I of Sch D had to reflect as nearly as possible ‘the full amount of the profits or gains of the year’, as prescribed by s 127(1) of the Income Tax Act 1952, in accordance with the ordinary principles of ordinary accounting and the provisions of the Income Tax Acts; (ii) that it was established law that accounts drawn up for that purpose should not anticipate profits or losses, except in the case of expected losses on stock-in-trade; (iii) that such losses could only reasonably be anticipated in relation to the net realisable value of stock-in-trade, and ‘replacement price’ was only relevant insofar as it might in some circumstances be the best guide to net realisable value; (iv) that the selling expenses to be taken into account in estimating the realisable value were the expenses specifically referable to the stock in question and not the general expenses of the business for later periods of accounting; (v) that the basis of valuation adopted by the taxpayers was not a true ‘replacement price’ basis and distorted the
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financial achievement of the year; and (vi) that the taxpayers’ profits should be computed on the Crown’s basis of valuation.
The commissioners’ decision was as follows:
‘It is established law that in computing the profits of a trader for the purpose of assessment to Income Tax under Case I of Schedule D, stock-in-trade may be entered at cost or market value, whichever is the lower. The principle was explained by Lord Reid in Ostime (Inspector of Taxes) v Duple Motor Bodies Ltda as being that a trader may enter stock at cost to avoid taxing a profit before it is realised; on the other hand if the market value at the accounting date is below cost, that lower value may be taken, to enable the trader to anticipate the loss which he expects to incur when he sells the stock. As we understand the authorities, when profits are being computed for tax purposes the law does not permit stock to be entered at a value (being below cost) which is lower than what is sufficient simply to anticipate the loss expected to be realised when the goods are sold. The value must be taken at the accounting date, and the loss being anticipated is the loss expected at that time; it must be recognised that if things turn out better than expected the valuation may produce a profit in the following year’s account, but if the expectation is precisely fulfilled the sale of the stock will produce neither profit nor loss in the next year’s account. In the present case such part of the stock as is not entered at cost has been entered by the [taxpayers] at a figure designed to enable the [taxpayers] to show (in the following year’s account) [their] normal margin of profit when the stock is sold. The practice, in our opinion, produces a valuation of such stock below that which the law allows for computing profits for tax purposes. The basis of valuation for which the Crown contended was described as “net realisable value” and was calculated by taking the expected retail selling price less known or anticipated direct selling cost (which the Crown took to be salesmen’s commission). In our opinion, in the circumstances of the present case this is a fair basis for valuation and produces a result which accords with the law as we understand it. It was suggested on behalf of the [taxpayers] that there might be other items of direct selling costs, besides the salesman’s commission, which should be taken into account, but no attempt was made to specify them or attach a figure to them. The [taxpayers’] method of valuation has been consistently used by [them] and accepted by the Inland Revenue authorities for Income Tax purposes for many years. In these circumstances we have considered very carefully whether the authorities, as we understand them, require us to adopt in its place the basis of valuation put forward by the Crown. We think they do, and we accordingly hold that the appeal fails in principle and we leave the figures to be agreed.’
On 12 February 1969, as reported at [1969] 3 All ER 165, Cross J dismissed the taxpayer’s appeal by way of case stated against that decision, holding that the stock-in-trade should be valued at original cost or market value and market value meant retail market price. The taxpayers appealed to the Court of Appeal.
C N Beattie QC, M P Nolan QC and D de M Carey for the taxpayers.
Hubert H Monroe QC and P W Medd for the Crown.
Cur adv vult
23 January 1970. The following judgments were delivered.
RUSSELL LJ. The taxpayers trade is that of selling footwear as retailers from their many retail shops up and down the country. For the most part they acquire the footwear for their trade from the manufacturers. The question for decision
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concerns the correct method of ascertaining the full amount of the profits or gains of the trade of a year. Stated more narrowly the question for determination is the correct method of ascertaining the value of stocks of footwear held by the taxpayers at 1 January 1959 and 31 December 1959, the opening and closing dates of the accounting period forming the basis of assessment. Stated yet more narrowly the question for determination is what is the market value to be considered in the present case in applying the time honoured formula under which for income tax purposes in valuing stock in hand at the close of an accounting period (and consequently at the opening of the next accounting period) such stock is to be brought in at cost or if the market value be lower than cost, then at that lower value.
For many years the taxpayers have kept their accounts on a basis that has been accepted by the Crown as demonstrating the full amount of their profits or gains for the relevant periods for the purposes of income tax. But a challenge to this was made for the first time by the Crown in respect of the period of 1959. Of course in the long run, since any basis of valuation must be followed consistently, it would seem that in a broad sense it makes little difference which approach to market value is adopted. But questions of tax are seldom viewed in the long run. The dispute before us demonstrates that the Crown considers it preferable to challenge the previously accepted system, while the taxpayers consider it preferable to adhere to it. Ours not to reason why; certainly not ours to explain why.
The full facts are set out in the findings of the commissioners in the case stated. I believe that for present purposes only the barest outline will suffice. The taxpayers operate a system, to some extent flexible, by which management fix from time to time an average mark up in terms of a percentage of retail selling price; say, as an example, 35 per cent. This produces the gross profit which is a larger percentage of cost; footwear costing £3 5s is aimed to sell at £5 and vice versa.
Very large stocks are carried and it is an essential part or aspect of this trade that there are sales in January and also in the summer of stock in hand at the end of the previous year. These sales are at reduced retail prices that will not of course produce the gross profit at which the percentage mark up had been, so to speak, aimed. In valuing the stock in hand at 31 December (and consequently at 1 January) in their accounts the taxpayers in effect job backwards from the expected (reduced) retail prices in the sales so as to produce a figure as the value of stock on which the expected (reduced) price in the sales will reflect a mark up as previously stated; for example 35 per cent. The calculations are meticulous and detailed. The resultant values are described as replacement values, the sums that the taxpayers say that they would be prepared to pay for the stock having regard to their estimates of future retail prices and their desired mark up percentage. This seems to me a perfectly legitimate way of presenting such a company’s financial situation over the years; much evidence was given before the commissioners by those of great experience in such matters to that effect, and I would not presume to criticise it. As a system of presenting accounts it was described as ‘sophisticated’ a word that has in this use travelled far from its true sense. But the question for tax purposes is whether the value attributed to stock in hand by this method of calculation is properly to be described as market value, bearing in mind that stock is to be brought in at cost unless market value is shown to be lower. The Crown contends that market value in this context requires that the stock should be taken at the figures expected to be realised in due course on sale in the retail market. It is of course obvious that the taxpayers’ system of ascertaining replacement values will produce values lower than cost in many cases in which according to the Crown’s contention market value is not lower than cost and the stock must accordingly be valued at cost. Broadly speaking the taxpayers contend that any diminution in hope of net profit on cost should be reflected in the terminal valuation, whereas the Crown contends that for income tax purposes a valuation below cost is permissible only when sale at a figure below cost is expected.
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I must say, as I did at an early stage in argument, that I have always thought that in this context market value meant the price at which the stock could be expected in due course to be sold in the market in which the trade of selling by the taxpayer was conducted. And after extensive argument I am not persuaded that my original assumption was wrong. It seems to me to be wholly artificial to speak of the values calculated in the manner stated as the market values of the stock; the taxpayers would not dream of selling in any market at those values when they aim, in due course of selling retail, at prices showing a gross profit of over 35 per cent of those values. Nor was it suggested that there would be then available from manufacturers the equivalent of stocks in hand at the relevant marked down values.
In my judgment income tax law in this regard does not march step by step in the divergent footprints of the accountancy profession. Maybe it would be appropriate that for tax purposes any of several methods in this connection of showing a year’s profits or gains of a trade should be acceptable, as may be the case when ascertaining the proper cost and therefore value of work in progress. But it seems to me that for tax purposes the valuation of stock in hand at market value if lower than cost has crystallised in a retail trade as the price fairly to be expected as the retail sale price of the goods in due course, assuming that (as here) a retail sale is still to be expected. The trader’s market is the retail market, and while that market exists for the goods I see no justification for turning to any other market, or for thinking that in the accustomed judicial phrase reference is made to any other market. It is said that the Crown’s contention cannot be acceptable because the formula assumes a sale on a market of the whole of all stock in hand on the very terminal date; no such sale is conceivable in the present case of all this stock in the retail market all on one day; and indeed the figures of expected sale values put forward by the taxpayers on which the Crown relies as showing market values are avowedly on sales spread over several months. For myself I do not see that this gives rise to a problem. It seems to me that in this context market value, although it falls to be estimated at a particular date, can quite readily refer to the price that the goods will fetch when sold in due course in the relevant market.
In my view the accepted practice of entering stock in hand at cost at the terminal date of the first period and the opening date of the second period arises from the fact that the expenditure has not contributed anything directly to the figures of gross profit in the first period. It is unused expenditure to be carried forward into the second period in which it is estimated that it will contribute on sale to the gross profit of that period. But it is estimated that on sale it will not contribute to the gross profit of the second period, ie if it is estimated that it will sell below cost, the shortfall is to be regarded in the course of stock valuation as irrecoverable and may properly be treated as a loss incurred in the first period. This I believe to be the basis of the principle that for tax purposes market value if below cost may be taken as the value of stock in hand. The principle relates to loss of all gross profit and more, and not to diminution.
The Crown’s figures of valuation are based on the taxpayers’ estimate of retail selling prices in due course; but they allow a deduction for salesmen’s commission. This it is suggested by the taxpayers reveals a fallacy in the Crown’s approach, for, they say, all kinds of overheads will be involved in producing these sales, overheads that will be absorbed in the mark up involved in the taxpayers’ method of valuation. I do not myself think that this shows a fallacy. Granted that market value means that which the stock is expected to produce on retail sale, it seems to me logical and reasonable to look for the money expected to reach the till as a result of sales; in effect the salesman’s commission does not reach the till, although in practice he does not abstract it from money handed over the counter and pocket it before paying the balance into the till.
I have not rehearsed in detail the contentions of the taxpayers which I am sure justify their method of presenting their accounts from year to year to shareholders
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and creditors, a method which no doubt they will continue to follow. They do not, however, in my judgment affect the issue, which in my view is to be decided by the view that the relevant market for present purposes is that in which the taxpayers sell and intend to sell this stock—the retail market—and the market value is the price at which in due course they expect to sell it in that market. If of course in a retail trade a particular line was no longer saleable in the retail market, but had to be sold in some special market (say) abroad as a lot, the market would not be the retail market; but that is not this case.
I would dismiss the appeal.
SALMON LJ. This appeal raises the point whether or not the taxpayers’ audited accounts for the year 1959 disclose the full amount for tax purposes of the profits or gains for that year. It is on those profits or gains that the assessment for tax for the year 1960 has to be made: see the Income Tax Act 1952, s 127(1). The Act gives no help on how profits or gains are to be computed. In Ostime (Inspector of Taxes) v Duple Motor Bodies Ltd ([1961] 2 All ER 167 at 169, 39 Tax Cas 537 at 566), Viscount Simonds said:
‘… first, that the ordinary principles of commercial accounting must, as far as practicable, be observed and, secondly, that the law relating to income tax must not be violated … that is to say, by one means or another the full amount of the profits or gains of the trade must be determined.’
As the learned judge pointed out ([1969] 3 All ER 165 at 170, [1969] 1 WLR 1488 at 1498) in the present case, profit is an elusive concept; indeed, I suppose that few commercial questions have been so much debated or, in some cases, proved so difficult to resolve as what is the true profit in a particular year? Sometimes the problem is capable of more than one acceptable solution. Clearly the year’s profit depends a great deal on stocktaking and the method of valuation which is adopted. In many trades there is little room for debate about the correct method. In others, however, of which the present case is an example, the correct method is debatable and may, perhaps, be capable of different but equally valid solutions for commercial purposes. Much turns on accountancy practice. Although this may appear elaborate and artificial to a lawyer (see Lord Simonds’s speech in the Duple case ([1961] 2 All ER at 169, 39 Tax Cas at 567)) it is aimed, almost always successfully, at arriving at an aspect of the truth. For upwards of 20 years prior to 1959, the eminent chartered accountants who audited the taxpayers’ accounts have accepted the taxpayers’ method described by Russell LJ, which I need not repeat. The auditors would certainly not have certified the accounts unless, in their view, these accounts had presented a true picture of the taxpayers’ profits or gains. The Crown must equally have been satisfied during all those years that the taxpayers’ method fairly revealed the full amount of the taxpayers’ profits or gains for the years in question. The findings of the commissioners show that there are many chartered accountants who agree that this method, approved for so long by the Crown and by the taxpayers’ auditors, is unexceptionable. The Crown, however, claims that now, at last, it has seen the light. It has discovered that it erred for more than 20 years in accepting the taxpayers’ method as correctly showing the taxpayers’ full profits or gains for each of those lost years. They seek to challenge for the year 1959 and all succeeding years the method with which for year after year they had previously agreed. I confess that I have little sympathy with the attitude adopted by the Crown. I should have thought that, in all the circumstances of this case, it might well have considered it unnecessary if not undesirable to repudiate a practice which, with full knowledge of all the material facts, it had followed for so long. Moreover, it is very much in the public interest
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that accounts should be prepared conservatively, that the closing stock should not be overstated and the profits for the year thereby inflated. The contrary practice only too often results in the investing public being cheated. If, on the other hand, the accounts for the year are prepared so that the value of the closing stock and the amount of the profits for that year are kept down to a conservative level, no investor can be deceived and the profits for the following year will automatically be increased so that any possible loss of tax by the Revenue in year A will probably be recouped in year B. This, however, cannot affect the point which we have to decide for we are not concerned with whether the taxpayers’ method of stock valuation is commercially sound and gives a fair picture of their trading results over the years. This is not challenged. The question for us is whether, taking the year 1959 in isolation, as we must, the taxpayers’ method shows the actual amount of profit for income tax purposes, made in that particular year.
In the Duple case the House of Lords was chiefly concerned with the proper method of valuing working in progress. What Lord Reid said may, however, be equally applicable to stock-in-trade ([1961] 2 All ER at 175, 39 Tax Cas at 572).
‘So the real question is what method best fits the circumstances of a particular business. And, if a method has been applied consistently in the past, then it seems to follow that it should not be changed unless there is good reason for the change sufficient to outweigh any difficulties in the transitional year.’
In the present case we are asked to decide between two competing methods as a broad matter of principle. Should the stock be taken: (i) at its cost price or at its expected net realisable resale price if that price falls below cost (as the Crown contends); or (ii) at its cost price or at replacement price in a notional market which would show an arbitrary profit calculated by the taxpayers if such replacement price is lower than cost (as the taxpayers contend)? There appears to be some difference of opinion between accountants in deciding which of these two methods should be followed. I am tempted to echo what Lord Reid said in another context ([1961] 2 All ER at 173, 39 Tax Cas at 571): ‘… if the accountancy profession cannot do that, I do not see how I can.' I feel, however, reluctantly driven to the conclusion that, in the present case, there is ‘good reason for the change sufficient to outweigh any difficulties in the transitional year’ because the method consistently applied prior to 1959, however commercially sensible it may be and however true the picture it gives of the taxpayers’ trading results over the years, does not for the year 1959, taken in isolation, accurately reproduce the profits or gains of that particular year as is required for the purpose of income tax. The method adopted must, for tax purposes, be not only consistent over the years but must produce the full profits or gains for each year.
I think that it is important to remember that in dealing with stock-in-trade we are not concerned with the valuation of an asset in a balance sheet. Nor are we attempting to assess the real value of the stock-in-trade to the taxpayers. Our task so far as the closing stock is concerned, is to quantify a notional receipt in a profit and loss account according to an accountancy practice long recognised and accepted by the courts:
‘… the values of the stock-in-trade at the beginning and at the end of the period covered by the account should be entered at cost or market price, whichever is the lower; although there is nothing about this in the taxing statutes.’;
see the judgment of the Lord President (Lord Clyde) in Whimster & Co v Inland Revenue Comrs ((1925( 12 Tax Cas 813 at 823, 1926 SC 20 at 25) which has been approved and followed, without question, by the House of Lords ever since 1925.
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No doubt it may seem strange, as Lord Simonds pointed out in the Duple case ([1961] 2 All ER at 170, 39 Tax Cas at 567), that the closing stock should be treated as a receipt, and illogical, as Lord Reid pointed out in the same case ([1961] 2 All ER at 173, 39 Tax Cas at 570), that it should be marked down when the market price falls but not marked up when the market price rises. However strange or illogical the practice may appear, it is, I think, founded on sound commercial experience and good sense. Naturally all money spent in buying stock-in-trade is entered on the expenditure side of the profit and loss account and all money realised by the sale of stock-in-trade appears on the revenue side of that account. If in year A there has been heavy buying and at its end there remains a substantial amount of stock, it would give an entirely false picture of the year’s trading results were the existence of the closing stock to be ignored in the profit and loss account. Much of the amount spent in acquiring it would appear as an item of expenditure which would apparently (but not really) have been lost. Thus the figures for year A would be falsely depressed and those for year B falsely inflated. It is for this reason that closing stock in year A is normally entered in the year’s profit and loss account as the notional receipt of an amount equal to its cost. The same figure is carried forward into year B as opening stock; it is the first item on the expenditure side of that year’s profit and loss account. Thus this stock is treated, in effect, as not having been bought in year A or in preceding years but in year B. Accordingly, the profit or loss in year A is not affected by the amount which has been spent in buying the closing stock. The profit or loss on that stock is left to fall in year B, in which year it will presumably be made. The only exception to that rule is an exception made in favour of the taxpayer. If, at the end of the year, the market price of the closing stock can be shown to have fallen below the cost price, the stock is taken into the account at the market price and thus the loss is anticipated. To that extent, the taxpayer is relieved from paying some of the tax he would otherwise have had to pay in respect of year A. If on the other hand there had been a rise in the market price of the stock at the end of the year A, the rise is ignored and the stock is still taken into account at cost price. It is a cardinal principle of accountancy practice and of our tax law that, whilst provision may be made in the trading accounts for expected losses, profits must not be anticipated. No tax is chargeable on a profit until that profit has been achieved. It is, I think, important to realise that, so far, the only concession made by the courts to the taxpayer in this field is that the taxpayer is allowed to anticipate in year A a loss he expects to make in year B on his closing stock for year A by reason of a fall in the market price of that stock at the end of year A.
‘The rule, cost or market value, is not a substantive rule of law; it is a means of enabling the taxpayer to anticipate a loss by bringing expected loss into account.’
per Lord Reid in the Duple case.
It has never yet been held that the taxpayer may anticipate in year A a diminution of the profits which he may have hoped to make in year B on the closing stock for year A by writing down his closing stock for that year below its cost price. Commercially and for the purpose of his internal account it is conceded that it may well be wise for him to do so. I find it difficult however to see how, if challenged, he can obtain any tax concession for year A on this basis although no doubt, ordinarily, the tax position would adjust itself in year B. Taking year A in isolation, as I think we must, it would follow that if the taxpayers are right, a taxpayer whose normal rate of profit is eg 50 per cent could write down his closing stock in year A below its cost price because he anticipates making only 45 per cent profit in year B as a result of a fall in the market at the end of year A. He would thus show an anticipated loss
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on that closing stock whereas, in fact, he expects it to show a handsome profit. On the present state of the authorities and indeed on principle, it is in my judgment ordinarily permissible to enter stock in a profit and loss account at less than cost price for tax purposes only if its net realisable resale price is less than its cost price. The question what items (if any) of indirect selling costs can properly be deducted from the expected resale price in order to arrive at the net realisable resale price of the closing stock was not fully explored before the commissioners, nor was it argued before the learned judge or in this court. Therefore, like the learned judge ([1969] 3 All ER 165, [1969] 1 WLR 1488), I express no view on this point, which will have to be agreed or decided later. It follows from what I have already said that I cannot accept the taxpayers’ contention that the words ‘market price’ in the time honoured phrase ‘cost or market price, whichever is the lower’ ordinarily refer to the price in the market in which the goods were bought for resale—certainly not in the case of a retail taxpayer.
I am conscious, however, that there are many businesses in which manufacturers hold considerable stocks of commodities such as steel, tin, tobacco, tea, rubber, and so on which are used in the course of manufacturing goods for sale. The market prices of some of these commodities fluctuate violently. There is no material before me to show how such stocks are dealt with in the profit and loss account when the market in which the stocks were bought has fallen by the end of the accounting period. I doubt whether the resale price of the commodities in question is the true criterion because the manufacturer has no intention of reselling them except as part of a manufactured product. In such cases the market price may well be the price in the market in which the commodities were bought. Such businesses are, however, very different from that with which we are concerned in the present case and as Lord Reid pointed out in the Duple case ([1961] 2 All ER at 175, 39 Tax Cas at 572) ‘… the real question is what method best fits the circumstances of a particular business’.
The taxpayers’ contention that they may for tax purposes enter their closing stock in their accounts below cost price at a market price which would show them a gross profit of 37.19 per cent is beset with difficulties. To begin with there was certainly no market in which they could have acquired the goods at such a price. Clearly the goods could not have been bought from manufacturers or wholesalers at such a price. Equally clearly, no other retailers nor the taxpayers themselves for that matter would have sold at those prices when they could obtain much higher prices in their own shops. What the taxpayers are attempting to do is to enter the stock at what they argue would be its value to them in a notional market which can have no existence in reality.
It also seems to me to be very difficult to accept that none of the closing stock was worth more to the taxpayers than a price which on resale would show them a profit of 37.19 per cent. They were in 1959 most experienced and carried on their business with the highest degree of efficiency; their budget forecasts and estimated resale prices are agreed to have been prepared with meticulous care and remarkable accuracy. It cannot really be doubted that they at all times realised that, at the end of the year, they would be left without about one-third of the total stock carried during the year and that of this remaining stock a certain proportion would fail to achieve a gross profit of 37.19 per cent. No one suggests that when the taxpayers bought their stock they were unable to form an accurate estimate of what that proportion would be and by how much it would fall short of a profit of 37.19 per cent. Accordingly, the taxpayers’ contention that their closing stock can be written down below cost price to provide for a diminution in expected profit runs into the initial, and, to my mind, insuperable, difficulty (apart from all the others) that at all times the taxpayers realised that it would not achieve an overall profit of 37.19 per cent.
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They did not at any time in year A expect it to sell for more than the price it would realise in year B.
I would accordingly dismiss the appeal.
MEGAW LJ. The crux of the case, as I see it, is the meaning to be given to the phrase ‘market price’ or ‘market value’ in the judicially created formula which has for so long been accepted. It was first stated by the Lord President (Lord Clyde) in Whimster & Co v Inland Revenue Comrs ((1925) 12 Tax Cas 813 at 823, 1926 SC 20 at 25) in these words:
‘… the ordinary principles of commercial accounting require that in the profit and loss account of a merchant’s or manufacturer’s business the values of the stock-in-trade at the beginning and at the end of the period covered by the account should be entered at cost or market price, whichever, is the lower; although there is nothing about this in the taxing statutes.’
Lord Clyde’s market price’ has in later cases been silently transmuted into ‘market value’. ‘Price’ and ‘value’ have different meanings, although in a given case the price of an article and its value may well be identical. For the moment I shall assume that ‘market price’ means ‘market value’.
I do not think that the method of valuing stock for which the taxpayers contend can be regarded as an assessment on the basis of market value. Their business is retail trade. They have the goods in order to sell them at retail. The price at which the goods might be bought and sold on the wholesale market is not relevant. The taxpayers own the goods in question. They are not going to buy them. They are going to sell them. In any event, in order to justify a figure as being market value, there must be an assumption, based on reason, that someone would be prepared to sell and that someone else would be prepared to buy the goods in question (ie goods of the same quantity, quality and description) at or about the relevant time at the price in question. Here the evidence of the taxpayers themselves, as shown in para 9 of the case stated, precludes any such assumption.
The method of valuing the stock for which the Crown contends is not subject to that objection. There is an assumption, based on reason, and indeed accepted by both parties, that he goods in question will hereafter be sold in the market—the retail market—at the prices which subject to deduction of salemen’s commission the Crown asserts to be the relevant market value. The Crown’s contention involves this: that when one seeks to ascertain the market value of goods remaining in stock in this business at 31 December 1959, for the purposes of ascertaining the profit or loss of the business for the year 1959, it is appropriate to take as being such value the price which is expected to be realised in a sale in, say, the summer of 1960, or, it may be, even later.
Of course, no one would suggest that the market value of stock in hand on 31 December 1959 could sensibly be assessed as nil because the day happened to be a Sunday or holiday when no goods could be sold at retail. Nor could the market value normally be taken as being represented by the possibly very low price which would be obtainable on a forced sale basis, flooding the market in order to dispose of the whole of the stock within a few days or a few weeks after 31 December. That would be right only if there were some real business necessity for dealing with the goods in that way. Market value on a particular day is, I believe, not necessarily to be confined to actual or notional transactions on that precise day. It may properly relate, and in this case I think does properly relate, to what is going to happen in a real market on a future date. How far in the future one may look depends on the ordinary course of the business with which one is concerned, in respect of goods such as those whose market value falls to be ascertained; here, the stock-in-trade at the end of the year.
Page 942 of [1970] 1 All ER 932
What, then, is the position where, as here, in the ordinary course of business, the most profitable method and the normal method of disposal of stocks in hand on 31 December 1959 involves the selling of them, or some of them, at special bargain sales, weeks or months after the relevant accounting year has ended? There can be no doubt that this sensible method of doing business will involve expenditure which is properly referable to the stock thus to be sold. The goods have to be kept in store or on the shelves. They presumably are insured, at a cost. There may well be expenditure in advertising specifically to attract the public to buy these goods from the previous year’s stock at the bargain sales. All this expenditure is incurred in 1960 for the purpose of securing the market price on 1959’s left-over stock. Is it right to ignore such expenditure in assessing the market value of the goods at 31 December 1959? For it is ignored if one takes the market value simply as being the price which will be obtained at bargain sales in January or July or October 1960, less salesmen’s commission.
It is here, I believe, that the word ‘market’ comes in, whether it is associated with ‘price’ or with ‘value’. The price which will be realised on a sale of the stock in July 1960 may not represent the ‘value’ simpliciter of the stock at 31 December 1959 unless deduction is made for the expenses necessarily to be incurred between 31 December 1959 and the date of the sale of those goods. But the price which will be realised does represent the market value of the stock at 31 December 1959, if it is in the ordinary course of the business that the stock-in-hand at the end of the year should be dealt with in that way. Perhaps it was because of this conception that Lord Lyde used the words ‘market price’ rather than ‘market value’.
If this were wrong, it would mean that the Crown’s method of computation is wrong, because it would not give effect to the true market value of the stock at 31 December 1959. But it would not make the taxpayers’ right. The taxpayers sought to refute the Crown’s method by the argument that it did not make allowance for overhead expenditure; but they did not contend, as I understand, even as an alternative that the Crown’s method would be correct, provided it made such allowance. Hence, if the Crown’s method is wrong, the consequence is, not that the taxpayers’ method is right, but that there is here no scope for the alternative of market value at all. So the taxpayers would be left simply with the stock being taken at cost.
I confess that, for myself, with all respect, I do not see any really acceptable or logical basis for a differentiation being drawn between the salesmen’s commission and the other overhead expenses. The latter, I think, were rightly disregarded. But the Crown has made this concession.
I agree that the appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords granted.
Solicitors: Titmuss, Sainer & Webb (for the taxpayers). Solicitor of Inland Revenue.
F A Amies Esq Barrister.
Westminster City Council v J Jarvis & Sons Ltd and another
[1970] 1 All ER 943
Categories: CONSTRUCTION: CONTRACT
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD HODSON, LORD GUEST, VISCOUNT DILHORNE AND LORD WILBERFORCE
Hearing Date(s): 12, 16 FEBRUARY, 18 MARCH 1970
Building contract – Extension of time – Contractor’s right to extension for delay by nominated sub-contractor – Sub-contractor purporting to complete on time – Subsequent discovery of defects – Remedial works by sub-contractor after time expired – No delay entitling contractor to extension of time for completion of contract – RIBA form of contract – Local Authorities Edition (With Quantities) 1963, condition 23(g).
The employer engaged the contractor to erect a multi-storey car park. The employer’s architect nominated the sub-contractor to perform certain piling work. The contract between the employer and the contractor was in a standard RIBA form and provided, inter alia, that the contractor pay the employer liquidated damages for delay, and (by condition 23) ‘… if in the opinion of the Architect … the completion of the Works is likely to be or has been delayed … (g) by delay on the part of nominated sub-contractors … the Architect … shall … make … a fair and reasonable extension of time for completion of the Works … ' The sub-contract between the contractor and the sub-contractor provided, inter alia, for the sub-contractor to indemnify the contractor for loss or damage caused to the contractor by failure on the part of the sub-contractor to complete works within the specified time. The sub-contractor agreed to complete piling work by 20 June 1966 and purported so to do. Its men and equipment were withdrawn shortly thereafter. The contractor thereafter carried out further work on the site. On 13 July, the architect wrote to the contractor in which he made reference to ‘completion’ of the piling work and referred to the possible release of retention money against a guarantee by the sub-contractor. On 21 July, one of the piles was damaged accidentally and subsequent investigation showed that many of the piles were defective. The architect approved remedial works involving the construction of replacement piles in new positions (resulting in the work eventually accepted by the employer not being the same as that specified in the original contract drawings). The remedial works were completed on 29 September. The main contract was delayed. On the question whether the completion of the works was delayed by reason of delay on the part of the sub-contractor so as to entitle the contractor, under condition 23(g) of the contract with the employer, to be granted an extension of time by the architect,
Held – The sub-contractor could not be said to be in delay, because—
(i) on 20 June 1966 it had achieved apparent completion (ie it had achieved such completion as would enable the contractor to take over himself (see p 944 d, p 946 b and j, and p 951 h, post)) or (per Viscount Dilhorne) it had completed works to the reasonable satisfaction of the architect and the contractor (see p 944 d, p 946 g and j, p 950 e, and p 953 b, post); and
(ii) delay in this context was not synonymous with sloth or dilatoriness (see p 944 d, p 946 a and j, and p 951 e, post).
Decision of Court of Appeal sub nom J Jarvis & Sons Ltd v Westminster City Council [1969] 3 All ER 1025 reversed.
Notes
The RIBA in a press notice dated 20 March 1970 stated that the form of contract referred to in this case had been produced by the Joint Contracts Tribunal on which the RIBA was one of the 11 constituent bodies. The RIBA further stated that it
Page 944 of [1970] 1 All ER 943
would take immediate steps to ensure that the criticism of the courts would be considered by the tribunal without delay.
For extensions of time in building contracts, see 3 Halsbury’s Laws (3rd Edn) 490, 491, paras 961, 962, and for cases on the subject, see 7 Digest (Repl) 352, 353, 65–70.
Appeal
This was an appeal by the employer Westminster City Council against an order of the Court of Appeal (Davies, Salmon and Karminski LJJ) dated 11 July 1969 and reported [1969] 3 All ER 1025 allowing the appeals of the contractor J Jarvis & Sons Ltd and the sub-contractor Peter Lind & Co Ltd against the order of Donaldson J made on 17 June 1968. The facts are set out in the opinion of Lord Hodson.
K F Goodfellow QC and Donald Keating for the employer.
R L A Goff QC, A R Barrowclough and I Kinnell for the sub-contractor.
The contractor did not appear.
Their Lordships took time for consideration
18 March 1970. The following judgments were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend, Lord Wilberforce, I would allow this appeal.
LORD HODSON. My Lords, by an originating summons taken out by J Jarvis & Sons Ltd (the contractor) joining Westminster City Council (the employer) as first and Peter Lind & Co Ltd (the nominated sub-contractor) as second defendants the contractor sought the determination of the question:
‘… whether the [contractor is] entitled to an extension of time for completion of the works required to be carried out at Rochester Row in the City of Westminster under a contract in writing between the [employer] and the [contractor] in the R.I.B.A. standard form made the 21st September 1966 on account of delay caused by the [sub-contractor] who [was] nominated [a sub-contractor] under such contract.’
The contract works consisted of a multi-storey car park with flats, offices, showrooms, petrol filling station and computer centre. The sub-contractor was nominated by the architect to do piling work.
The contract provided for liquidated damages for ‘delay’ at £1,800 a week. By condition 23—
‘… if in the opinion of the Architect … the completion of the Works is likely to be or has been delayed … (g) by delay on the part of nominated sub-contractors … the Architect … shall … make … a fair and reasonable extension of time for completion of the Works … ’
The controversy concerns the meaning of the phrase ‘delay on the part of nominated sub-contractors’.
The contractor took possession of the site on 6 December 1965 and on 4 April 1966 the nominated sub-contractor commenced the piling works. These it purported to complete by 20 June 1966, the due date for completion to take place under the piling sub-contract. Three days later the sub-contractor withdrew its men and equipment from the site. Nothing appeared to be wrong until 21 July 1966, when the contractor’s excavating machine accidentally nudged one of the exposed piles which broke off. Drilling tests showed that many of the piles were defective. The defects were the result either of bad workmanship or the use of bad materials by the sub-contractor. The sub-contractor began remedial works approved by the architect
Page 945 of [1970] 1 All ER 943
involving the construction of replacement piles in new positions so that the piling work eventually accepted by the employer was not the same as that specified in the original contract drawings. The remedial works were completed on 29 September 1966; the main contract work was delayed.
The issue raised by the summons was tried before the commercial judge without pleadings on an agreed statement of facts. The contest has been between the employer, now the appellant, and the sub-contractor, now the second respondent, for the contractor was not concerned either to assert or deny its entitlement to an extension of time. There is, as usual, no contractual nexus between the employer and the sub-contractor and the relevant matter to be decided is as to the respective rights of the employer and the contractor under the main contract.
The contention of the sub-contractor which failed before the trial judge and succeeded in the Court of Appeal ([1969] 3 All ER 1025, [1969] 1 WLR 1448) is succinct. It is that there is ‘delay on the part of nominated sub-contractors’ within the meaning of condition 23(g) if such a sub-contractor fails to do anything which it is required to do under the sub-contract by the due date for performance, that is by the date by which the sub-contract requires him to do that thing. Condition 23(g) is indeed an odd provision. It appears in a list of grounds for extension of time which one would naturally expect to find in a contract as between employer and contractor for the protection of the latter—eg force majeure, exceptionally inclement weather, civil commotion or strikes. Condition 23(g) exceptionally protects the sub-contractor from the consequence of his own delay.
In this case if the contractor is entitled to an extension of time on account of delay by the sub-contractor he would be relieved of liability for liquidated damages at the rate of £1,800 a week. As between the employer and the contractor the period of delay has been agreed at 21 1/2 weeks making the total liability £38,700. Consequentially the sub-contractor would be relieved from liability for damages otherwise payable to the contractor in respect of defective workmanship and late completion of the work.
The sub-contractor does not shrink from the full implications of its submission. It relies on the opening words of condition 23:
‘Upon it becoming reasonably apparent that the progress of the Works is delayed, the Contractor shall forthwith give written notice of the cause of the delay to the Architect … and if in the opinion of the Architect … the completion of the Works is likely to be or has been delayed beyond the Date for Completion … ’
There then follow paras (a) to (j) and a direction to the architect to make in writing a fair and reasonable extension of time for completion of the works. Delay according to this argument may go on indefinitely, for the word is not qualified and ought not to be artificially restricted by reference to ‘completion’, a word which does not appear in the condition, still less by imposing on the word ‘completion’ an artificial meaning.
The relevant facts as found by the trial judge were these. The sub-contract work was never properly performed. The sub-contractor ceased to do this on 20 June 1966 when it purported to have completed the work and left the site. The remedial work afterwards accepted by the employer was substituted work designed to mitigate the damage done by failure to perform the work in accordance with the sub-contract. He concluded that delay on the part of the sub-contractor can only occur while the sub-contractor is still in the process of performing or purporting to perform the sub-contract. This admittedly produces the paradox that if one is working on a contract, one may be guilty of delay within the meaning of the condition; aliter, if one has ceased to work on the contract, one is not so guilty. Counsel for the sub-contractor relies on this paradox as reinforcing his submission that there is no justification for limiting the relevant delay to the period which precedes completion or purported
Page 946 of [1970] 1 All ER 943
completion of the work. Further he submits that delay does not mean, in the context of condition 23(g), either slow execution or dilatoriness, as the employer has contended. I agree with the contention that delay relates to the time when performance is due. From the contractor’s point of view it matters not why the work has not been done on time. Dilatoriness is not in itself relevant.
The short answer, however, to the sub-contractor’s main contention is that although the employer’s argument leads to anomalies, delay does not, for practical purposes, run after there is such completion as will enable the contractor to take over himself. That was the position on 20 June 1966. There was then apparent completion; nothing that had then occurred had held up the contract; nothing appeared to be wrong until the contractor’s excavating machine a month later accidentally nudged one of the exposed piles. The discovery of the latent defects in the piles showed that the sub-contractor was in breach, not that it was in delay. It did not return in order to fulfil its contract but to remedy the breach. Time had already run out.
Condition 23(g), included as it is in a list of legitimate excuses for delay on the part of the main contractor, points to the conclusion that what is in contemplation is the contractor being prevented by no fault of his own in keeping up to the agreed time for performance, that is to say completion, of his contract in due time. As Donaldson J pointed out, delay with which condition 23 is concerned, is delay in terms of the main contract. He held that, on the facts of this case, there was no delay on the part of the sub-contractor within the meaning of the condition. Some support is given to this as being a sensible conclusion by condition 23(i) (to which attention was drawn by Davies LJ ([1969] 3 All ER at 1030, [1969] 1 WLR at 1456))—
‘by reason of the opening up for inspection of any work covered up or of the testing of any of the work materials or goods in accordance with clause 6(3) of these Conditions (including making good in consequence of such opening up or testing), unless the inspection or test showed that the work materials or goods were not in accordance with this Contract … ’
This is exactly what happened. The work was opened up and the sub-contractor’s work was found not to be in accordance with the contract. It is absurd that if the contractor cannot, because the work was defective, claim an extension of time under condition 23(i) he can nevertheless claim under condition 23(g). The construction given to condition 23(g) by Donaldson J is, I think, consistent with the distinction which exists between provisions which enable the main contractor to proceed and the final completion when certificates are given and final payments made.
Taking into account the letters from the architect to the contractor of 13 July 1966 and 16 August 1966, I think that the learned judge was justified in his conclusion that, notwithstanding the latent defects in the work which were subsequently discovered, there was apparent completion on 20 June 1966, when the site was handed over to the contractor. On this basis his conclusion as to the construction of condition 23(g) and its application to the facts of this case was, in my opinion, correct.
I would allow the appeal accordingly, and restore the judgment of Donaldson J.
LORD GUEST. My Lords, since preparing an opinion in this appeal, I have had the advantage of reading the speech of my noble and learned friend, Lord Wilberforce. I am content to agree with the reasons which he gives for allowing the appeal.
VISCOUNT DILHORNE. My Lords, on 21 September 1966, the employer and the contractor entered into a contract in the form issued by the RIBA headed ‘Local Authorities Edition (with Quantities)’ for the building by the contractor of a
Page 947 of [1970] 1 All ER 943
multi-storey car park in Rochester Row. The contract was to have retrospective effect. The sub-contractor was nominated by the employer as sub-contractor to do the piling work and, as required, duly entered into a contract for that work with the contractor. The date for the completion of the sub-contract work was 20 June 1966. The date for completion of the whole contract was 15 January 1968. The sub-contractor thought that it had completed the work it had to do under its contract by 20 June 1966, and removed its equipment and left the site.
The contractor then carried out construction work on the site. The building was to rest on the piles and they, I understand, had to do some work on the tops of the piles. About a month later progress with the building virtually stopped as defects in some of the piles had become apparent. It was decided to test them. Eighteen out of the 74 or 78 constructed by the sub-contractor were found defective due to bad workmanship or the use of bad materials. With the approval of the architects the sub-contractor returned to the site and did remedial work, which consisted, inter alia, of the construction of replacement piles. This work was not completed until 29 September 1966, and this led to the building not being finished when it should have been.
The sub-contract entered into by the contractor and sub-contractor had by virtue of condition 27 of the contract between the employer and the contractor to provide and did provide: (1) that the sub-contractor should carry out and complete the sub-contract works in every respect to the reasonable satisfaction of the contractor and of the architect; (2) that the sub-contractor should observe, perform and comply with all the provisions in the contract made with the employer which were to be observed, performed and complied with by the contractor so far as they related to and applied to the sub-contract works; and (3) that if the sub-contractor failed to complete the sub-contract works within the period specified or within any extended time granted by the contractor with the consent of the architect and the architect certified that the works ought reasonably so to have been completed, the sub-contractor should pay to the contractor either liquidated damages at an agreed rate for the period for which the works remained incompleted, or if no rate was agreed, a sum equivalent to any loss or damage suffered or incurred by the contractor and caused by the failure of the sub-contractor to complete the works within the specified time.
By condition 22 the contractor agreed to pay liquidated damages at the rate of £1,800 a week for the period the works were incompleted if it failed to complete the contract works by the date for completion or within any extended time which had been granted. That the contract was not completed by the date it should have been is not disputed. The employer and the contractor have agreed that if under the contract an extension of time should have been granted, a fair and reasonable extension would have been 21 1/2 weeks, on the basis presumably that completion was delayed that time. So, if the contractor is not entitled to that extension, it would seem that it is liable to pay the employer £38,700.
As the architects gave the certificate referred to in (3) above and as no rate was agreed, the sub-contractor will be liable to pay to the contractor what it has to pay to the employer in liquidated damages. It is for this reason that the contest on the hearing of this appeal has been between the employer and the sub-contractor, the contractor not appearing. The sub-contractor contended that the architect should have granted the contractor an extension of time on account of its delay in completing the sub-contract works with the consequence that it and the contractor would avoid liability for liquidated damages.
It bases this claim on condition 23 of the building contract. So far as material it provides as follows:
‘Upon it becoming reasonably apparent that the progress of the Works is delayed, the Contractor shall forthwith give written notice of the cause of the delay to the Architect … and if in the opinion of the Architect … the completion of the Works is likely to be or has been delayed beyond the Date of Completion … or beyond any extended time previously fixed … (g) by delay on the part
Page 948 of [1970] 1 All ER 943
of nominated sub-contractors or nominated suppliers which the Contractor has taken all practicable steps to avoid or reduce, or (h) by delay on the part of artists tradesmen or others engaged by the Employer in executing work not forming part of this Contract … then the Architect … shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works … ’
So if the sub-contractor can show that completion of the main contract was delayed by its delay, the architects are under a duty to grant an extension of time.
It is indeed curious that in this form of contract issued by the RIBA and approved by many other bodies one should find a provision under which a sub-contractor can benefit from its own default. All the other grounds stated in this clause for an extension of time are grounds where the contractors and sub-contractors have not been at fault and where the delay in completion of the main contract is due to circumstances beyond their control.
Was there delay within the meaning of condition 23(g) in the completion of the sub-contract works? Much argument was directed by the employer to the meaning of the word ‘delay’ in condition 23(g). Counsel for the sub-contractor in the course of his argument, which lost nothing of its persuasiveness by its brevity, contended that there was delay if the sub-contractor failed to do anything it was required to do under the contract by the due date of performance. I have no doubt that counsel’s contention is right. Looking at condition 23 by itself, that condition is concerned with delay in the completion of the main contract and in condition 23(g) and (h) it would be surprising if the word ‘delay’ meant something other than a failure to perform by the due date whether it be by nominated sub-contractors or nominated suppliers or artists, tradesmen or others engaged by the employer. Condition 27(a)(iv) which I have summarised in (3) ante (which provides that a contract made with a nominated sub-contractor must include a provision for the payment of damages if the sub-contractor fails to complete the sub-contract works within the specified time), supports the conclusion that delay occurs when there is a failure to complete in due time.
What precisely is meant by completion in this context? The basis of Donaldson J’s judgment appears to me to be that, in his view, the sub-contract was completed by 20 June 1966, and the basis of the judgments in the Court of Appeal ([1969] 3 All ER 1025, [1969] 1 WLR 1448) that the sub-contract work was not completed until 29 September. If by 20 June 1966, the sub-contractor had completed the sub-contract work to the reasonable satisfaction of the architect and the contractor then it had complied with its contract and was not guilty of delay. No extension of time for the completion of the main contract could then be granted under condition 23. If, as the Court of Appeal ([1969] 3 All ER 1025, [1969] 1 WLR 1448) held, it had not completed by that date, then there was delay by it and the architects should grant an extension.
The main contract not only states the date for completion of the contract works. It also provides by condition 15(1) that when in the opinion of the architect the works are practically completed, he shall issue a certificate to that effect and ‘Practical Completion of the Works shall be deemed for all the purposes of this Contract to have taken place on the day named in’ the certificate. The contract does not define what is meant by ‘practically completed’. One would normally say that a task was practically completed when it was almost but not entirely finished; but ‘Practical Completion’ suggests that that is not the intended meaning and that what is meant is the completion of all the construction work that has to be done.
This interpretation is supported by the fact that the defects liability period runs from the date in the practical completion certificate (the appendix to the contract). This contract provided for a defects liability period of 12 months. Condition 30(5)(b) requires the contractor either before or within a reasonable time after practical completion of the works to send to the architect all the documents necessary for the
Page 949 of [1970] 1 All ER 943
computations that have to be made under that clause. Before practical completion the contractor and nominated sub-contractor have to comply with such instructions as the architect may give under condition 6. After practical completion they may be required to make good any defects, shrinkages or other faults which appear in the defects liability period (condition 15).
Under condition 30(6) the architect has so soon as practicable but before the expiry of six months after the end of the defects liability period or after defects which became apparent in that period have been made good or after the receipt by the architect of the documents necessary for the computations required by that condition, whichever is the latest, to issue the final certificate which, unless there has been a request for arbitration, is conclusive evidence that the works have been properly carried out and completed in accordance with the terms of the contract. So the final certificate may not be issued long after the completion of the works. From these provisions there are, in my opinion, two conclusions to be drawn: first, that the issue of the certificate of practical completion determines the date of completion, which may of course be before or after the date specified for that in the contract; and secondly, that the defects liability period is provided in order to enable defects not apparent at the date of practical completion to be remedied. If they had been then apparent, no such certificate would have been issued. It follows that a practical completion certificate can be issued when, owing to latent defects, the works do not fulfil the contract requirements and that under the contract works can be completed despite the presence of such defects. Completion under the contract is not postponed until defects which became apparent only after the work had been finished, have been remedied.
The contract does not provide for the issue of a practical completion certificate on the completion of a nominated sub-contractor’s work. He has to complete that work to the reasonable satisfaction of the architect and the contractor. If he does and latent defects subsequently appear he can be called on to rectify them.
So in this case the vital question is, were the sub-contract works completed to the satisfaction of the architects and contractor by 20 June 1966? On 16 August 1966, the architects certified as follows:
‘As the piling works at the above Contract have not been completed to our satisfaction within the period specified in the sub-contract or within the extended time that you may have granted the Sub-Contractor with our written consent, we have no alternative but to certify in accordance with Clause 27(d)(ii) of the R.I.B.A. Form of Contract that the same ought reasonably to have been completed within that time.’
This certificate was issued after the defects in the piles had become apparent, and that did not happen until about 20 July.
If the architects and contractor had not thought that the sub-contract works were completed on 20 June 1966, they surely would have objected to the sub-contractor’s departure from the site. They did not do so. And the contractor would surely not have carried out construction work which had to stop when the defects were discovered, if it had not thought the sub-contract works, the piling on which the building was to rest, had been satisfactorily completed.
In its tender of 16 December 1965, the sub-contractor wrote that it had assumed:
‘… that bearing in mind our Guarantee, the Architect will exercise his power in accordance with Clause 27(e) of the Contract to authorise release of all retention monies six months after completion of the piling, subject to our indemnifying the Main Contractor against any latent defects in our work.’
On 13 July 1966, the architects wrote to the contractor the following letter, a copy of which was sent to the sub-contractor:
Page 950 of [1970] 1 All ER 943
‘Rochester Row Car Park—Piling Sub-Contract.
‘We understand that further to the completion of the above work by Peter Lind and Co. Ltd. the Sub-contractor under the terms of his original offer may request the release of all retention monies six months after completion of the piling in accordance with clause 27(e) of the Main Contract, subject to indemnifying the Main Contractor against any latent defects in the piling work.
‘As you remember there is a certain amount of suspicion whether all piles are sound, but it would be a most costly process to ascertain this now by core drilling.
‘The Guarantee given by [the sub-contractor] in their accepted offer is £50,000 against all damage due to the failure of the foundations for a period of two years after completion of their work, a sum which we consider grossly inadequate in all the circumstances.
‘We feel that you should insist that the Guarantee sum, which may need to covet the reinstatement of certain portions of the building in case of failure of some piles, should be increased to cover any possible excess above the existing Guarantee figure, and that the Guarantee should extend the period of two years from the date of completion of the Main Contract … ’
The letter can only have been written on the basis that the sub-contractor had completed the sub-contract work to the architects’ reasonable satisfaction. That they had a certain amount of suspicion about the soundness of all the piles is clear, but they would not have referred to the completion of the work or concerned themselves about the adequacy of the guarantee and return of the retention moneys had they not then regarded the work as completed and reasonably satisfactory. They changed their attitude in August after discovery of the latent defects.
In the light of these facts I conclude that the sub-contractor had completed the subcontract works to the reasonable satisfaction of the architects and the contractor by 20 June 1966, and so was not guilty of delay.
In my opinion, the answer to the question raised in the originating summons is ‘No’ and this appeal should be allowed.
LORD WILBERFORCE. My Lords, this appeal is again concerned with the construction of a RIBA form of contract, the particular version being the ‘Local Authorities Edition (with Quantities) 1963 Edition’. The provision requiring interpretation is clause 23(g) of the conditions, which entitles the contractor to an extention of time if the completion of the works is likely to be, or has been, delayed beyond the date for completion—
‘(g) by delay on the part of nominated sub-contractors … which the Contractor has taken all practical steps to avoid or reduce.’
The contest is essentially as to the meaning of ‘delay’ in this context.
In order to understand the contentions and also because, finally, a conclusion must be reached on the facts, it is necessary to state how the dispute arose.
The contract between Westminster City Council (as employer) and J Jarvis & Sons Ltd (as contractor) was for the erection of a multi-storey car park with other accommodation. The work had to be completed, subject to any permitted extension, by 15 January 1968. Liquidated damages at £1,800 per week were payable for delay in completion. The architect nominated Peter Lind & Co Ltd, as sub-contractor to carry out piling work and a sub-contract was entered into with the contractor under which, and by virtue of an extension, the piling work had to be completed by 20 June 1966. The contract works began on 6 December 1965, and the sub-contractor commenced the piling work on 4 April 1966.
What occurred on and after 20 June 1966 will require some further examination, but, briefly, the piling work was by that date purportedly complete, in the sense that
Page 951 of [1970] 1 All ER 943
all the piles contracted for (over 70 in number) had been placed in position. By 24 June 1966, the sub-contractor had withdrawn its labour and equipment from the site, and the sub-contract appeared to have been carried out. Soon after there were signs that the piles were defective. On 21 July 1966, the top of one of them, on being nudged by an excavator, broke off. a number of meetings took place, and it was decided that they should be tested by core-drilling. Out of 74 so tested, nine were abandoned on the sub-contractor’s suggestion without examination by the architect; a further 18 were found to be defective on account of bad workmanship or materials. The sub-contractor carried out remedial work, involving the construction of replacement piles, which occupied several weeks in the autumn of 1966.
These works of inspection and replacement delayed the progress and completion of the main contract, and it has been agreed, as between the employer and the contractor, that a fair and reasonable extension, if the contractor is entitled to any extension under condition 23, would be 21 1/2 weeks. This period is not agreed by the sub-contractor. However, since it is plain that if the contractor is liable under the contract to the employer, he must in turn have a claim against the sub-contractor, the case against the employer on the present appeal has been argued by the sub-contractor, the contractor taking no part. It can be seen at once that the provision above quoted (condition 23(g)) forces the parties into a paradoxical position. The sub-contractor, who it is clear was making every effort to complete the sub-contract in time, and at one point firmly contending that it had done so, now appears as an advocate of its own delay. The employer, whose concern is to establish contractual responsibility for a serious delay in completion of the contract, appears as contending that there has been no delay. Such an illogical consequence suggests that the condition, which creates it, has been inserted and drafted without any clear appreciation of its purpose or scope. I shall have to revert to this point later.
But what is to be made of the condition? One thing seems clear, that ‘delay’ does not, as the employer at one time contended, mean ‘sloth’ or ‘dilatoriness’ on the part of the sub-contractor. There are at least two good reasons against this meaning; in the first place, it would put an impossible burden on the architect if he were required to form an opinion that the sub-contractor had not worked as fast or diligently as he might have done, and to measure the extent to which time could have been saved had he done so. This part of the contract would, in practice, become unworkable. And, secondly, it is contractually irrelevant whether the sub-contractor could have worked faster; what matters is whether it has done what it agreed to do in the contractual time. If it has, it does not matter, for the purposes of the contract, whether it achieved its target by leisurely methods; if it has not, it does not matter with what feverish energy it set about its work. This suggested test, then, is both unworkable and irrelevant.
That leaves two alternatives. The sub-contractor contends that it is in delay whenever in any respect it fails to fulfil in time its contractual obligation. The employer contends that there is only delay if, by the sub-contract date, the sub-contractor fails to achieve such completion of its work that it cannot hand over to the contractor. Or, putting it negatively, that the sub-contractor is not in delay so long as, by the subcontract date, it achieves such apparent completion that the contractor is able to take over, notwithstanding that the work so apparently completed may in reality be defective. This, on the employer’s argument, may involve a breach of contract, but does not involve delay.
The sub-contractor’s contention has at least the merit of simplicity and comprehensiveness; its counsel admitted, indeed claimed, that it brings within the clause any breach of contract, any failure timeously to perform its total obligation, whether by repudiation, or insolvency, or departure from the site, provided always of course that such breach or failure led to delay in the progress of the main contract works. So it was in delay here on and after 20 June 1966, because it had not constructed sound piles by that date. This contention, it was admitted, might seem a little extreme, or
Page 952 of [1970] 1 All ER 943
even in some cases absurd, but the extremity or absurdity lay in the inclusion of the clause in the contract and this once swallowed the consequences should not be strained at.
My Lords, if such an interpretation were imposed by the words used, it would have to be accepted whatever (short of completely frustrating the contract) the consequences might be. Within the limit I have mentioned the parties must abide by what they have agreed to and it is not for the courts to make a sensible bargain for them. But the words used do not suggest that this is the right meaning; for if it were, why should the word ‘delay’ be used? Why not frankly exonerate the contractor for any delay in completion due to any breach of contract or failure, eo nomine, of the sub-contractor? Add to this difficulty the unattractive consequences which followed and the objections become overwhelming; for the condition would amount to little better than a charter for bad work, wilful failure and default of every kind. The worse the sub-contractor’s conduct of its sub-contract and the greater impact it has on its timeous fulfilment and that of the contractor, the more complete is its escape from liability, the more firmly the loss so occasioned is made to rest on the helpless employer.
The employer’s construction at least avoids the worst of these consequences, for it relates the impact of the clause to such default as prevents the contractor from taking over and proceeding with its work. It fits in reasonably well with those provisions in the contract which distinguish between such completion as enables the contract to proceed, and such final and verified completion as enables certificates to be given, final payment to be made and the party cleared of all obligation under the contract.
It is not without its difficulties. Some of these were clearly demonstrated in the Court of Appeal ([1969] 3 All ER 1025, [1969] WLR 1448); it is only necessary to point to the fact that if the defects in the piles had been discovered before the sub-conract completion date, and work had been at once put in hand to remedy them—thereby producing a similar period of delay in the completion of the main contract, the clause would, it seems, have applied, but it does not do so if the work was ‘complete’ (although defective) on that same date so that the contractor could take over. One must set against this the advantage that, if the sub-contract work is apparently completed and handed over, and some defects appear very much later, but before the contract date, as they might in a large contract, this would not, on the employer’s construction, be a case of delay, although it might be so on the sub-contractor’s. But even so the first type of difficulty is a very grave defect and a serious reflection on the clause; indeed, I cannot believe that the professional body, realising how defective this clause is, will allow it to remain in its present form. But in my opinion, although it is never agreeable to have to choose the lesser of two incongruities, we have to do so here and I find the employer’s version qualifies for this not very flattering description.
So, finally, how does this construction fit the facts? It is common ground that the sub-contractor ‘purported to complete’ the piling works by 20 June 1966, and left the site. We know, too, thata ‘Further construction work on the site was then carried out by the Contractor’. On 13 July 1966, the architect wrote to the contractor a letter in which he said that ‘further to the completion of the [piling] work’ the sub-contractor might request the release of retention money against a guarantee. He did, it is true, go on to record suspicion as to the soundness of the piles and to suggest an increase in the guarantee, but the letter was consistent only with his belief that the sub-contract work was ‘completed’. The sub-contractor had recorded that this was its position on 9 June 1966b. On 16 August 1966, after defects had been revealed, the
Page 953 of [1970] 1 All ER 943
architect wrote again to the contractor stating that ‘As the piling works … have not been completed to our satisfaction within the period [of] the sub-contract’ they certified that they ought reasonably to have been completed within that time. This I do not consider alters the view of the matter which all concerned held on 20 June 1966, that the work was completed—although it might turn out to be defective; it is saying no more than that it is now seen to be defective and that the architect was not satisfied with it. The learned judge made no explicit finding but his judgment proceeded on the basis that the sub-contractor had achieved apparent completion, and handed over to the contractor on 20 June 1966. I think that this was correct in fact and in law.
I would allow the appeal and restore the judgment of Donaldson J.
Appeal allowed.
Solicitors: E Woolf (for the employer); Masons (for the contractor); Herbert Oppenheimer, Nathan & Vandyk (for the sub-contractor).
S A Hatteea Esq Barrister.
F W Woolworth & Co Ltd v Gray
[1970] 1 All ER 953
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 18 FEBRUARY 1970
Weights and measures – Prepacked goods – Short weight – Defence – Availability of defence to retailer – Weights and Measures Act 1963, s 26(2).
The defence provided by s 26(2)a of the Weights and Measures Act 1963 (that in any proceedings for an offence by reason of the quantity of any goods made up for sale being less than that marked on the container, the person charged may prove that a deficiency arose after the marking and was attributable wholly to factors for which reasonable allowance was made in stating the quantity of the goods in the marking or making up of the goods for sale) is not restricted to the person who has packed and marked the goods but is also available (eg) to the retailer (see p 958 e and h, and p 960 b, g and h, post).
Notes
For quantity less than that stated and defences thereto in offences under the Weights and Measures Act 1963, see Supplement to 39 Halsbury’s Laws (3rd Edn), para 1218A, 8, 9, 11; and for a case on the subject, see 47 Digest (Repl) 796, 132.
For the Weights and Measures Act 1963, s 26, see 43 Halsbury’s Statutes (2nd Edn) 1406.
Authority cited
O’Keefe on Weights and Measures, 1966, pp 356, 715.
Case stated
This was a case stated by justices for the city of Leicester, acting in and for the city, in respect of their adjudication as a magistrates’ court sitting at Leicester on 22 July 1969.
On 22 July 1969, 85 informations were preferred by the respondent, William
Page 954 of [1970] 1 All ER 953
Gray, against the appellants, F W Woolworth & Co Ltd, charging that on 5 March 1969, at their store at 52–54 Gallowtree Gate, Leicester they had in their possession for sale 85 3 lb bags of flour each prepacked in a container marked with a statement in writing with respect to its quantity the quantity of the goods being found to be less than that stated, contrary to s 24(3) of the Weights and Measures Act 1963 (‘the Act’). The justices heard R H M Branded Foods Ltd, and J W French & Co Ltd, the two suppliers of 44 and 41 bags of flour respectively cited as warrantors under s 25 of the Act and they found the following facts. On 5 March 1969, two inspectors of weights and measures visited the appellants’ store at 52–54, Gallowtree Gate for a routine check and on weighing 369 bags of flour marked as containing 3 lb, 146 were found to be correct or overweight and 223 contained less than 3 lb weight of flour. Eighty-five of the 223 were taken as the subject for prosecution; and the weights of flour in the 85 bags were: in one bag 2 lb 13 oz 11 dr; in one bag 2 lb 13 oz 12 dr; in one bag 2 lb 14 oz 1 dr; in one bag 2 lb 14 oz 2 dr; in two bags 2 lb 14 oz 3 dr; in one bag 2 lb 14 oz 6 dr; in two bags 2 lb 14 oz 7 dr; in three bags 2 lb 14 oz 8 dr; in two bags 2 lb 14 oz 9 dr; in three bags 2 lb 14 oz 10 dr; in eight bags 2 lb 14 oz 11 dr; in nine bags 2 lb 14 oz 12 dr; in eleven bags 2 lb 14 oz 13 dr; in eight bags 2 lb 14 oz 14 dr; in two bags 2 lb 14 oz 15 dr; in six bags 2 lb 15 oz; in two bags 2 lb 15 oz 1 dr; in four bags 2 lb 15 oz 2 dr; in four bags 2 lb 15 oz 3 dr; in three bags 2 lb 15 oz 4 dr; in five bags 2 lb 15 oz oz 5 dr; in four bags 2 lb 15 oz 6 dr; in one bag 2 lb 15 oz 9 dr; and in one bag 2 lb 15 oz 11 dr. Mr Shaw, the deputy manager of the shop and then acting manager was informed of the results of the weighings and spot checks were made once a month. Check weighing of prepacked food liable to loss of weight by evaporation was desirable once a week and weights and measures inspectors so recommended to shopkeepers. Neither such inspectors who carried out the checks had given such advice to anyone in the appellants’ store. Weights and measures inspectors in Leicester distinguished between check weighing described as carrying a scale round to the fixtures and weighing a number of packages of each item on the spot, and spot checking, described as picking up one package or two packages of some items. Both check weighing and spot checks involve the use of weighing equipment and either the articles to be weighed have to be carried to the equipment or the scale taken to the fixtures. At the appellants’ store, check weighing was not carried out; there was no check on the weight of prepacked goods on delivery; there was no set pattern of spot checks nor did they take place on any set day. There was no evidence that the relevant bags of flour on display had actually been subject to such a spot check or any check other than a visual check for burst bags; no record was kept of such spot checks unless a deficiency was found sufficiently serious to report to head office for the purpose of complaint to the supplier. During the eight or nine years the supervisor had been carrying out spot checks at the store no such deficiency had been found; bags of flour were rotated in the stock room so that it was put on display in accordance with the time of receipt and to avoid flour over two months old being sold. (Two months being the suggested shelf life of the flour.) There was no evidence that any of the bags of flour on display was over two months’ old. The appellants’ store carried a light stock of flour and recorded every fortnight; when carrying out the spot checks 5 dr (which on evidence was the weight of a bag) was allowed for bag weight but since 5 March 1969 it had been customary to make an allowance of 6 dr. The average moisture content of flour was about 14 per cent causing it to fluctuate in weight according to the conditions under which it was kept particularly those of temperature and humidity; and those facts were not known to the manager or deputy manager of the appellants’ store. On 5 March 1969, the temperature in the appellants’ store was high compared with that outside and the humidity was low—which had been so for some time—conditions which would more than usually tend to reduce the moisture content of flour; there was no evidence of the reading of a thermometer in the store on that day but it would not have been less than 60 degree F. The weight of a packet of flour could vary
Page 955 of [1970] 1 All ER 953
up or down from day to day. The deficiency found on the weighings was a deficiency in the weight of flour. This was due to a drawing out of the moisture content through the porous bags because of the tendency of the humidity inside the bag to equate with the very low humidity of the heated air inside the store at the material times. The appellants made no enquiry of the suppliers of the life of flour or the overweight tolerance given. In the case of a local miller supplying 100 local shops with 3 lb bags of flour giving a tolerance of 8 to 12 dr overweight no deficiencies had been found. Notice of reliance on a warranty had been given to the two suppliers of the flour and the suppliers each admitted giving a warranty. Both suppliers gave an overweight tolerance of 8 or 10 dr to ensure that there was not less than 3 lb of flour in each bag when delivered to the retailer for resale. This tolerance was reasonable. Both suppliers operated a strict system of check weighings to ensure that the quantity of flour in each bag was 3 lb plus the tolerance allowed of 8 or 10 dr. The bags of flour when delivered to the store of the appellants contained not less than 3 lb each. Only full air-conditioning would have kept stable humidity conditions in the appellants’ store. That would have cost about £30,000 in the store. The conditions in which the appellants stored flour in the store room were good. The relevant bags of flour were on the first floor of the store near a staircase where conditions were more likely to lead to loss of weight by evaporation than if they had been displayed elsewhere in the store but representatives of the suppliers had not made adverse comments on this situation.
It was contended by the appellants: that under s 25 the warranty being undisputed, the evidence established that the appellants’ employees, at the time of the commission of the offence, believed that the bags were at least 3 lb in weight and had then no reason to believe otherwise. The question of reasonable steps to ensure that while the shopkeeper was in possession of the goods the quantity did not change had to be judged in relation to their actual or imputed knowledge at the time; so interpreted the appellants had taken all reasonable steps. Check weighing could not ensure that the quantity of the flour remained unchanged. Even at the date of the hearing, it was established that the only ways in which prevention of loss of moisture in the exceptional humidity conditions prevailing on 5 March were either to take the goods off display every night and store them in conditions where the atmospheric conditions would be the same inside as outside or by installing humidifiers or full air-conditioning. Consequently the appellants had taken all reasonable steps. That under s 26(1) the exceptional humidity conditions on 5 March constituted a cause beyond the appellants’ control and as at that date it could not be said that the appellants foresaw or could reasonably have foreseen the extent or effect of these conditions on the weight in the bags. Actual or imputed knowledge must be judged as at the date of the commission of the offence and in those circumstances the appellants had taken all reasonable precautions and exercised all due diligence. That under s 26(2) the case fell within both paras (a) and (c) and it was unchallenged that conditions (i) and (iii) were satisfied. It was common ground that the deficiency was solely by reason of loss of moisture through the bags due to changes in humidity. This possibility was foreseen by the suppliers who made allowances of 8 or 10 dr per 3 lb. It was unchallenged that these were reasonable allowances. The fact that the extent of the deficiencies proved to have existed on 5 March went beyond these tolerances did not prevent them being reasonable because the combination of extremely cold dry air entering the store and being heated to a temperature of over 60 degree F resulted in conditions in which moisture would have been drawn from the bags at a wholly exceptional speed and to a wholly exceptional extent. The amount of overweight allowances which would have been required to ensure that the bags contained 3 lb or more in these wholly exceptional conditions was so great that it could not be described as a reasonable allowance. A reasonable allowance was one which would be sufficient to cover all conditions normally to be expected, but did not have to cover every conceivable combination of circumstances.
Page 956 of [1970] 1 All ER 953
It was contended by the respondent that the appellant did not take all reasonable steps to ensure that while the bags of flour were in their possession the quantity of the flour remained unchanged. Reasonable steps would have been to ascertain from the suppliers whether the goods were likely to lose weight by evaporation, and if so how large an allowance was made for this. It would have been a reasonable step to carry out weekly check weighing to ascertain whether any changes in the method of place of display were necessary. The requirements that the appellants must take all reasonable steps and exercise due diligence meant that they must take some positive steps to ensure compliance with the law. What the reasonable steps is a matter of fact to be judged by objective standards. The appellants were not entitled to contend that their lack of knowledge and failure to attempt to remedy this lack should relieve them from the duty to take reasonable steps or to consider what were reasonable steps. The standard of reasonableness did not fall in direct proportion to their own standard of knowledge. The appellants’ belief that the weights marked on the packages were accurate was unreasonable.
The justices were of opinion that although the appellants had discharged the burden of proof under s 25(1)(a), (b) and (c) they were not satisfied on a balance of probabilities that the appellants had made out the defences under s 25(1)(d) or s 26(1) for the following reasons. The defences under both ss 25 and 26(1) rested on substantially the same point: under s 25, that the appellants took all reasonable steps to ensure that whilst in their possession the quantity of the goods remained unchanged, and under s 26 that the appellants took all reasonable precautions and exercised all due diligence to avoid the commission of such offences in respect of these goods by the appellants or any person under the appellants’ control. Counsel for the appellants appeared to rely mainly on the ignorance of the appellants’ servants that flour varied in weight according to its moisture content. He thus suggested that this lack of knowledge excused the appellants from taking any steps, or any steps which could be said to be reasonably effective, to ascertain whether the weight of flour was less than the weight marked on the containers. The justices were of opinion that the appellants’ servants took no steps to ascertain whether the weight of flour in the bags remained as received by the appellants at their store, which they were satisfied was, when received, 3 lb or more. Further under s 26(1)(a) it had to be shown that the commission of the offence was due to a mistake or accident or other cause beyond the appellants’ control. It was not suggested the offences occurred by mistake or accident, and the justices did not feel that it was beyond the control of the appellants’ servants to take effective steps to check the bags of flour for loss of weight. The defence under s 26(2) appeared to apply only to the case of the one who filled a container and marked it. Section 23(3) was a defence to a prosecution under s 24(1). In these circumstances counsel for the appellants having admitted that a contravention of s 24(3) of the Act had been proved by the respondent and being satisfied that the defences raised had not been satisfied the justices found the appellants guilty of the offences charged, and the appellants now appealed.
John Davies QC and W A B Forbes for the appellants.
K R Wheeler for the respondent.
18 February 1970. The following judgments were delivered.
LORD PARKER CJ having stated the facts continued. In those circumstances it is perfectly clear that prima facie an offence was committed against s 24(3) of the Act which provides, so far as it is material:
‘If, in the case of any goods pre-packed in or on a container marked with a statement in writing with respect to the quantity of the goods, the quantity of the goods is at any time found to be less than that stated, then, subject to [certain matters] any person who has those goods in his possession for sale … shall be guilty of an offence.’
Page 957 of [1970] 1 All ER 953
I said prima facie an offence was committed against that section, because as is well known under this Act there are a number of defences open to a person charged. The first line of defence, and one which I think myself was the one pressed before the justices, was a defence based on the warranty. That defence is set out in s 25(1) of the Act, and provides that if the person charged bought the goods from some other person in circumstances such as this with a written warranty that the goods were of the quantity marked on the container, and that at the time of the commission of the offence the purchaser had no reason to believe the statement contained in the warranty to be inaccurate, and did in fact believe in its accuracy, then subject to s 25(1)(d) a defence is made out. Section 25(1)(d) provides, however, that—
‘in the case of proceedings relating to the quantity of any goods [the person charged must show] that he took all reasonable steps to ensure that, while in his possession, the quantity of the goods remained unchanged … ’
The justices held that the defence was not available to the appellants because they did not take all reasonable steps to ensure that the quantity of the goods remained unchanged once they had purchased them.
Counsel for the appellants contended before the justices and has contended, albeit faintly in this court, that that was a finding which the justices were not entitled to arrive at. He says that what is reasonable must be judged in the light of the knowledge of the person charged, and he points to findings in the case that the manager, the sub-manager and those in the shop said that they did not know the characteristics of flour of giving up and taking in moisture according to the factors of humidity, temperature and ventilation. For my part I think that that is an impossible argument, even if one really accepted the fact that the appellants must be taken not to realise, what I should have thought was elementary, that flour in porous bags will take in moisture and give out moisture. The truth of the matter is that they relied on this warranty and took no steps whatever to ensure that there was no change in the quantity by weight in these bags.
The second defence open to the appellants is set out in s 26(1) of the Act which provides:
‘In any proceedings for an offence in respect of any goods under this Part of this Act or any instrument made thereunder, it shall be a defence for the person charged to prove—(a) that the commission of the offence was due to a mistake, or to an accident or some other cause beyond his control; and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence in respect of those goods by himself or any person under his control.’
The justices had very great doubt whether the appellants could even surmount the hurdle in s 26(1)(a), but were quite clearly of the opinion for the same reason as they discarded the defence under s 25, that it was impossible to say that the appellants had surmounted the second hurdle by taking all reasonable precautions and exercising all due diligence; indeed in this court counsel for the appellants frankly abandoned that defence.
There remains a third defence under s 26(2). It is a defence peculiar to the case of goods which are made up for sale, whether prepacked or otherwise. It is a defence which is specifically referred to in s 24(3) creating the offence in respect of prepacked goods, because it states specifically that the provisions in sub-s (3) are subject to the provisions of this Part of this Act, and in particular to s 26(2). Section 26(2) is a somewhat long subsection but, so far as it is material, it provides:
‘In any proceedings for an offence under this Part of this Act or any instrument made thereunder by reason of the quantity—(a) of any goods made up for sale or for delivery after sale (whether by way of pre-packing or otherwise) in or
Page 958 of [1970] 1 All ER 953
on a container marked with an indication of quantity; or … (c) of any goods required by or under this Act to be pre-packed, or to be otherwise made up in or on a container for sale or for delivery after sale, or to be made for sale, only in particular quantities,
being less than that marked on the container … it shall be a defence for the person charged to prove that the deficiency arose—
(i) in a case falling within paragraph (a) of this subsection, after the making up of the goods and the marketing of the container; …
(iii) in a case falling within paragraph (c) of this subsection after the making up or making, as the case may be, of the goods for sale, and was attributable wholly to factors for which reasonable allowance was made in stating the quantity of the goods in the marking or document or in making up or making the goods for sale, as the case may be.’
It is a provision which is not altogether easy to understand and it is completely new. In other words, whereas a number of provisions in the Weights and Measures Act 1963 adopt the provisions, albeit in somewhat different language sometimes, of the Sale of Food (Weights and Measures) Act 1926, s 26(2) provides a completely new defence. One may shorten the reading of this; it provides that in any proceedings for an offence by reason of the quantity of any goods made up for sale (and this flour was made up for sale in these bags) being less than that marked on the container (that is the finding in this case) it shall be a defence for the person charged to prove that a deficiency arose thereafter, after the making, and was attributable wholly to factors for which reasonable allowance was made in stating the quantity of the goods in the marking or making up of the goods for sale. The justices held that that subsection did not apply in such a case as this at all, and that is the first point taken by counsel for the respondent in this case. He says that the subsection and the defence provided by that subsection only applies in a case where the man charged is the man who has packed and marked. For my part I have read this subsection over and over again, and on the face of it at any rate, it is not limited to such a case. It deals on its face quite generally with any case where there is a charge of a deficiency in quantity in any goods which have been prepacked or prepared for sale. The real argument for limiting the subsection in the manner in which the justices felt that it should be limited must, as it seems to me, derive, and derive solely, from the very last words, namely, when considering the deficiency, it is stated that the deficiency must be attributable wholly to factors for which reasonable allowance was made in stating the quantity of the goods. The argument is that no one can judge what allowance should reasonably be made in packing and marking an article such as flour who does not know the conditions under which it is thereafter going to be stored, questions again of ventilation, of temperature and of humidity. It is said that for that reason s 26(2) should be limited to a defence available to the packer and marker himself.
I confess that I have not found this an easy matter, but I have come to the conclusion that there are no grounds for so limiting the availability of this defence. I see no reason why manufacturers or wholesalers cannot make an allowance for this loss of moisture by reason of these various matters on the basis of storage under normal conditions. It seems to me that it is perfectly possible by means of checks and the taking of samples, for manufacturers to arrive at an allowance or a tolerance, as it is referred to, which under normal conditions of humidity, temperature and ventilation, will ensure that the weight will at no time fall below that marked on the container, in this case 3 lb. That as I understand it was what the supplier sought to do.
There is a finding dealing with this matter in the case which states:
‘Both suppliers gave an overweight tolerance of 8 or 10 drams to ensure that there was not less than 3 lb. of flour in each bag when delivered to the retailer for resale. This tolerance was reasonable.’
Page 959 of [1970] 1 All ER 953
As it seems to me, that finding is ambiguous in that it might be merely a finding that the suppliers allowed 8 or 10 dr which was a reasonable tolerance to ensure that when delivered by them to the retailer the articles conformed to the warranty, in other words to ensure that whilst stored in their own premises, ie the suppliers’ premises, the articles would be in a state under which when delivered to the retailer the weight would not be less than 3 lb. That is certainly a possible reading of this; on the other hand it has been said that what this finding really amounts to is that the suppliers considered what, in general, were the conditions under which retailers would store the goods for selling to the public; and gave an allowance which would ensure that under normal conditions as it were the weight would not fall below 3 lb.
Rather than send this back to the justices, the court has been invited to consider the evidence which was given in this case. I find it only necessary to refer to one or two short passages. Mr Seal, who was the senior scientist employed by the suppliers, R H M Branded Foods Ltd, said that his company allowed an overweight allowance of an average 10 dr; he said that that was reasonable. He went on to show how that had been arrived at. He said:
‘We asked for a number of bags to be collected—bags of flour—3 lb and 1 lb bags of self-raising and plain flour from different stores around the country over a period of eight weeks in a survey of the weight of moistures.
‘Q To see whether there had been any drop in weight through moisture loss in these retail shops? A Exactly, yes.
‘Q Having analysed this result, what conclusion did you come to about the sufficiency or otherwise of your 10 dram allowance? A As far as the majority of the stores were concerned, it was adequate.’
Mr Mackay was the quality control director of the other suppliers, J W French & Co Ltd, and he said that they gave a tolerance of not less than 8 dr over the 3 lb. He went on to say that they had always found it satisfactory over the years.
Finally, Mr Potter, inspector of weights and measures, was asked about this matter and his answers are I think of very considerable importance. There was a discussion as to the effect of atmospheric conditions, and Mr Potter was asked:
‘Can you suggest to the court what a reasonable tolerance at the time of milling would be in the case of a 3 lb bag? A Well, we only have one flour pre-packer in Leicester,and they put in somewhere between half and three-quarters of an ounce in a 3 lb bag.
‘Q That would be between 8 and 12 drams? A That is it.
‘Q Would you say that that is reasonable? A Well, this is a local packer packing for the local shops, and we check this flour very frequently. They have 100 shops in Leicester, and to my knowledge we have not found any short-weight bags for a long time.
‘Q You see, what I am asking you is this. Is that or is it not a reasonable tolerance? A It is in this case, yes.
Q Is it a reasonable tolerance for manufacturers generally? A Generally it is.’
Finally he was asked:
‘Therefore, if [the appellants] had a tolerance of 10 drams, that would fall midway between the two, and that would sound to you to be a reasonable tolerance? A Yes.’
It seems to me that in the face of that evidence that it is idle to say that the suppliers did not consider the position after delivery as well as the position before delivery; in particular Mr Potter clearly took that view in his reference to the local packer in Leicester supplying the 100 shops because his checks were clearly made at those
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shops and not at the packing station as it were of the local miller. It is of course true that the justices might have heard all that evidence and merely come to the conclusion that this was a reasonable tolerance while the goods were awaiting delivery to the retailer; but having read that evidence it seems to me perfectly clear that the true inference is that their finding was a finding as to this being reasonable in relation to the position after delivery, and I treat it myself as such a finding. It follows in my view therefore that the appellants can avail themselves of the defence set out in s 26(2) based on the finding that a reasonable allowance was made for the relevant factors and that there was nothing to suggest that the deficiency was not wholly attributable to those factors for which allowance had been made.
There is no suggestion of any exceptional feature in regard to the appellants’ store at Leicester; in many passages it is said to be a very good store, a very well run store. There is little doubt that the conditions in that store will vary with the weather outside, and that the humidity may be low, as it apparently was on 5 March, the weather being cold, and the temperature inside was high compared with outside. The only feature which could in any way be said to be exceptional here was that these goods were apparently stored near a staircase where the draught might cause a greater loss of moisture. That is referred to in the case, where it is said that the representative of the suppliers had seen the position in which these were stored, and had made no adverse comments on the situation. Of course, if a retailer in the position of the appellants did something which nobody could foresee, such as suddenly run their shop with a temperature of 90 degrees, it would be impossible, as I see it, for them to show that the deficiency ensuing therefrom was attributable wholly to the factors for which reasonable allowance had been made, the factors being humidity, temperature and ventilation which one would find in the normal run of shops, and I would like to reserve for myself the position which might arise in such circumstances as those.
Finally, I would only like to say that for my part I am happy to have come to this conclusion, because really where is one in such a case as this? Here is an article which may vary from day to day, it may be deficient in weight one day, it may be over-weight a week later; it may be deficient in weight when it is handed to the purchaser and it may be overweight when it comes to be used. I would allow this appeal and quash the conviction.
ASHWORTH J. I agree and subject to the same reservations that Lord Parker CJ has indicated. I think with respect to counsel for the appellants that he put his case too high when he said that, so to speak, s 26(2) of the Weights and Measures Act 1963 gives a complete escape route to a retailer who is able to establish that a packer has made a reasonable allowance. That reasonable allowance will go so far, but it will not necessarily take him all the way.
DONALDSON J. I agree.
Appeal allowed. Conviction quashed.
Solicitors: Lovell, White & King (for the appellants); R R Thornton, Leicester (for the respondent).
N P Metcalfe Esq Barrister.
Manchester Corporation v Connolly and others
[1970] 1 All ER 961
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DIPLOCK, WIDGERY AND MEGAW LJJ
Hearing Date(s): 12, 13, 14 JANUARY 1970
Injunction – Interlocutory injunction – Trespass – No defence on facts – Whether interlocutory remedy available for substantial relief before final judgment.
Execution – Possession – Writ of possession – Jurisdiction to grant leave to issue writ of possession on interlocutory application.
From September 1969 caravans belonging to the appellants were left on a vacant site which belonged to the respondents. The site had no sanitary facilities, water supply or provision for refuse disposal and the presence of the appellants there had rendered it a danger to public health. In December 1969, the respondents issued a writ in the Chancery Court of the County Palatine of Lancaster seeking an injunction restraining the appellants from, inter alia, entering on the land and permitting their caravans to remain there. On a motion the Vice-Chancellor made an interlocutory order granting the injunction and further ordered that the appellants give up possession to the respondents ‘who are to be at liberty to issue a writ of possession … ’
Held – (i) Although the injunction gave the respondents their whole remedy before the action was tried it should be continued, since plainly there was no defence to the action and the only object in raising a defence was delay (see p 964 h, and p 967 a and g, post).
(ii) There were no provisions in either the Supreme Court of Judicature (Consolidation) Act 1925 or the Rules of the Supreme Court to allow the court to make an order for possession and give leave to issue a writ of possession on an interlocutory motion before final judgment had been obtained (see p 966 e, and p 967 a and g, post).
Notes
For interlocutory injunctions, see 21 Halsbury’s Laws (3rd Edn) 364–370, paras 763–776, and for cases on the subject, see 28 Digest (Repl) 748–766, 60–203.
Cases referred to in judgments
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 55, 45 Digest (Repl) 215, 189.
Heywood v BDC Properties Ltd [1963] 2 All ER 1063, [1963] 1 WLR 975, Digest (Cont Vol A) 1301, 926b.
Southport Corpn v Esso Petroleum Co Ltd [1953] 2 All ER 1204, [1953] 3 WLR 773; rvsd CA [1954] 2 All ER 561, [1954] 2 QB 182, [1954] 3 WLR 200; rvsd in part HL sub nom Esso Petroleum Co Ltd v Southport Corpn [1955] 3 All ER 864, [1956] AC 218, [1956] 2 WLR 81, 120 JP 54, Digest (Cont Vol A) 1213–1214, 68a.
Wykeham Terrace, Re, Brighton, ex parte Territorial Auxiliary and Volunteer Reserve Association for the South-East Territorial Association v Hales (1969) 119 NLJ 1068.
Interlocutory appeal
This was an appeal by 31 persons who kept caravans on a site in Manchester, the property of the respondents,the Manchester Corporation, from an interlocutory order made by the Vice-Chancellor of the Chancery Court of the County Palatine of Lancaster (T A C Burgess V-C) dated 15 December 1969, granting an injunction restraining the appellants from knowingly entering or remaining or causing or permitting their caravans to be placed or remain on the respondents’ land and an order that the appellants give up possession of the respondents’ land who were at
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liberty to issue a writ of possession. The facts are set out in the judgment of Lord Diplock.
C F Fletcher-Cooke QC and Nina Stanger for the fourteenth, fifteenth, twentieth and twenty-first appellants.
S J Sedley for all other appellants.
A W Simpson for the respondents.
14 January 1970. The following judgments were delivered.
LORD DIPLOCK. This is an unfortunate case, because it deals with a group of people who have hitherto at any rate found themselves unable to adjust themselves to modern social conditions. They are gypsies not in the romantic and evocative sense of the term, but in the statutory sense that they are persons of nomadic habit of life whatever their race or origin. They have no fixed abode, but live an itinerant life in caravans, although it appears from the evidence that the itinerary some of them make seems largely restricted to the city of Manchester and its environs. But however unfortunate they may be, that does not entitle them to flout the law. The duty of the court, when its aid is sought, is to administer the law. While I should be the last—or sitting in this court perhaps the last but one—to say that it is no part of the function of the courts to develop the common law so as to adapt it to changing social conditions, it is not within the court’s power, and no part of its function, to provide solutions to sociological problems which call for administrative action by central or local government such as would be involved in the construction and supervision of suitable sites for gypsies. That is a matter for Parliament and Parliament has in fact already dealt with it in Part II of the Caravan Sites Act 1968, but that Part of the Act is not yet in forcea. It has still to be brought into force by an order of the Minister. This case does perhaps show the urgency of bringing that Part of the Act into force.
The facts of this case can be stated quite shortly. In September 1969, a number of caravans began to be left on a vacant site in the city of Manchester belonging to the respondents. It would appear from the evidence that some of them at any rate came from a vacant site belonging to the university where they had attracted not unnaturally the sympathy of some of the students at the university. The site to which they came belonging to the respondents is a cleared site of considerable extent. It had no sanitary facilities, water supply or provision for refuse disposal, and the evidence (which for practical purposes was uncontested) is that the presence of these gypsies, their caravans, their vehicles and their children on this site has rendered it a danger to public health.
On 29 November 1969, the respondents gave notice under the powers conferred on them by s 27 of the Manchester Corporation Act 1962 requiring the appellants to remove their caravans from the site. That notice was not complied with and on 2 December the respondents’ appropriate officer came on to the site with the intention of towing away the caravans. When he got there and while he was on it there arrived on the site some eight young persons who were students at Manchester University, and one of them told him that she was secretary of the Manchester University Students’ Union and that if the respondents started to tow the caravans away there were between 60 and 100 students in the refectory who were ready at a moment’s notice to come on to the site. In order to avoid a breach of the peace the officer accordingly did not carry out his intention of towing away the caravans.
On 8 December, the respondents issued a writ in the Chancery Court of the County Palatine of Lancaster in which they sought an injunction—
‘restraining the [appellants] and each of them by themselves with their respective servants or agents or otherwise from knowingly entering or remaining or
Page 963 of [1970] 1 All ER 961
causing or permitting motor vehicles caravans or other vehicles or movable dwellings to be placed or remain upon any vacant land belonging to the [respondents], and particularly the [respondents’] land bounded by Brunswick Street Stockport Road Shakespeare Street Plymouth Grove and Upper Brook Street in the City of Manchester [and also] an order that the [appellants] do forthwith give the [respondents] possession of the [respondents’] said land.’
On the same day they took out a motion for an interlocutory injunction in the terms set out in the writ, and also for an interlocutory order on the appellants to give up possession of the land.
On 10 December, the writ and the notice of motion were served on the appellants and on 11 December the motion was heard before the Vice-Chancellor. It was adjourned on the appellants’ request until 15 December,when the learned Vice-Chancellor made an interlocutory order granting the injunction in the terms asked with a minor variation with which I will deal in due course, and also ordering—
‘that the said [appellants] do forthwith give the [respondents] possession of the [respondents’] said land who are at liberty to issue a Writ of Possession at any time after noon on Monday, 22nd December, 1969.’
The learned Vice-Chancellor took the view that there was no possible defence to this action. Here were the appellants flouting the law and it would be a misuse of the process of the courts to allow them to continue to do so during a period, necessarily of some not inconsiderable duration, before the action came on for trial and the respondents obtained final judgment to which in the Vice-Chancellor’s view they would inevitably be entitled. On 19 December, shortly before Christmas, the Court of Appeal on the application of the appellants, suspended the injunction until the first day of the present sittings and ordered the appeal to come on on that day, which it has done.
Counsel’s real complaint for the four appellants whom he represents was that from a practical point of view the injunction disposed of the matter. It gave to the respondents the remedy that they required before the action had been tried. The appellants, he said, were entitled to their day in court and entitled to continue to trespass as long as the day of the trial could be postponed. If this involved a danger to public health, as on the evidence it plainly did, counsel submitted that the respondents, as the sanitary authority, should in the meantime have provided the trespassing appellants with all the necessary amenities to make their unlawful occupation comfortable for them and safe to the public.
If there were any arguable defence to the respondents’ claim it would be necessary to consider the balance of convenience between the hazard to the health of the public which was involved in the appellants’ remaining there and the hardship to the appellants involved if they were compelled to move. But if there were no possible defence to the action I agree with the Vice-Chancellor that it was a misuse of the process of the court to withhold from the respondents a remedy to which they were clearly entitled while the normal stages preparatory to the trial of a genuinely contested action were being gone through with the inevitable delay. Since delay in eviction from the site was what was really sought by the appellants, to do so would have been to give to wrongdoers the fruit of their wrongdoing, although judgment in the action would inevitably ultimately have been given against them. The Vice-Chancellor, as I have said, took the view that there was plainly no defence to this action. The appellants complain that it was premature for him to form that view; had he waited for the trial it might have been possible to adduce material which would disclose some defence. During the month which has passed since the Vice-Chancellor’s order, the appellants have had the opportunity and availed themselves of it, to file voluminous evidence, much of it of great intrinsic interest, but of marginal relevance, on which they would seek to rely as a defence to the respondents’ claim
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and have had ample opportunity of considering any arguments capable of supporting such a case. These arguments have been expounded with great skill and eloquence by both counsel for the appellants. It is not their fault if at the end of it all I can only describe the suggested defences as fanciful. The most skilful counsel cannot make bricks without any straw.
I will deal very shortly with the defences which were adumbrated. First it was said that the respondents were disentitled to relief because they were in breach of statutory duty which they owed to the appellants. I will not pause to consider the effect on the respondents’ right to an interlocutory injunction if any breach of statutory duty of the kinds suggested were established, for in my view no shadow of a case has been made of a breach of statutory duty owed by the respondents to the appellants. The first suggestion made was that there was a duty on the respondents to provide for the appellants temporary accommodation under s 21 of the National Assistance Act 1948. That is contained in Part III of the Act. Suffice it to say that this part of the Act is concerned with the provision of accommodation in premises. It indeed substitutes a new system in place of the workhouse for providing shelter to the temporarily homeless. It has nothing to do with the provision of sites for caravans. The second Act relied on I have already mentioned; it is the Caravan Sites Act 1968. Under that Act when Part II is brought into force there will be a duty on local authorities, subject to schemes approved by the Minister, to provide sites for caravans. There will even then be no duty to allow gypsies to put their caravans on any property that they please belonging to the respondents. But whatever the position may be when that Act comes into force, it is not in force and there can be no breach of statutory duty of a statute which has not yet come into effect.
The second defence adumbrated was clothed in the respectable Latinity of jus necessitatis which I take to be a Latin euphemism for the English aphorism ‘necessity knows no law’. The learned Vice-Chancellor described this defence as adumbrated before him as a startling proposition. The only authority to which we were referred and on which it was said to be based was a dictum of Devlin J in Southport Corpn v Esso Petroleum Co Ltd. Devlin J dealt there with the possible defence of necessity in relation to the jettisoning of cargo from a stranded ship. It has (if I may say so with great respect) absolutely nothing to do with this case,and I find the proposition that there is a defence of necessity on the facts of this case as startling as the Vice-Chancellor himself did.
Those were the two defences adumbrated by counsel for the four appellants. Counsel for the remaining appellants referred to two others which I must mention. The first was that it was suggested that the respondents were in breach of their duty under the Education Act 1944 because to remove these families from the site would have deprived the children of the opportunity to attend local schools, which it would appear on the evidence they did not attend anyway. For good measure he added the Genocide Act 1969. I will say no more about those defences than that they appear to be even more startling than the defence of necessity.
In my view, in a case which is no doubt exceptional, where there is plainly no defence to an action and the only object is delay, the Vice-Chancellor was quite right in exercising his discretion to grant interlocutory relief in the form of an injunction. The injunction in my view should stand with a modification of the words which I shall deal with later.
There is, however, another point in the case. The learned Vice-Chancellor, in addition to granting the interlocutory injunction, made an order for possession of the premises in favour of the respondents and gave them liberty to issue a writ of possession. The power to make such an order on an interlocutory application was not challenged before the Vice-Chancellor. There is a precedent for it in a
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very recent decision of Stamp J: Re Wykeham Terrace, Brighton, ex parte Territorial Auxiliary and Volunteer Reserve Association for the South-East Territorial Association v Hales. I do not doubt that an order for possession is a convenient order to make in such a case as this where there is clearly no defence to the claim for possession, but the question does arise whether it can be made as an interlocutory order and not as a final judgment. The power to make such an order in the Chancery Court of the County Palatine of Lancaster is the same, subject to geographical limitations, as in the High Court of Justice, and must be found in the Supreme Court of Judicature (Consolidation) Act 1925 or the rules of the court, which are the same as those of the Supreme Court, or in the previous practice of the old Court of Chancery.
Section 32 of the Supreme Court of Judicature (Consoldation) Act 1925 provides:
‘The jurisdiction vested in the High Court and the Court of Appeal respectively shall, so far as regards procedure and practice, be exercised in the manner provided by this Act or by rules of court, and where no special provision is contained in this Act or in rules of court with reference thereto, any such jurisdiction shall be exercised as nearly as may be in the same manner as that in which it might have been exercised by the court to which it formerly appertained.’
We have had an opportunity of seeing the transcript of Stamp J’s judgment in the case in which he granted an interlocutory order for possession. It appears that he founded himself on the decision of the Court of Appeal in Heywood v BDC Properties Ltd. In that case the interlocutory relief granted was an order vacating the registration of a land charge. The jurisdiction of the court to make such an order is conferred by s 10(8) of the Land Charges Act 1925 which is in the following terms:
‘The registration of a land charge may be vacated pursuant to an order of the court or a judge thereof.’
There is nothing in the Act about procedure other than the words which I have read, and the Rules of the Supreme Court then in force clearly contemplated that such an order might be made on an interlocutory application in an action. The question argued on the appeal in Heywood’s case was whether it was permissible to grant interlocutory relief which gave substantially the whole of the relief claimed in the action. It was held that in a case where it was plain that there was no defence, it was permissible so to do. Insofar as the argument in the present case is based on the ground that the injunction gives substantially the whole of the relief claimed in the action, that case is an answer to that contention. But it does not deal with the problem with which we are concerned here which is whether there is any power to make an order for possession and give leave to issue a writ of possession as an interlocutory remedy and not merely as part of the final judgment. For the reasons I have already indicated, any such power, if it exists, must in my view, be found either in the 1925 Act or in the rules made thereunder, or in the previous practice of the court.
So far as the Act is concerned, the only relevant section is s 45(1) which provides:
‘The High Court may grant a mandamus or an injunction or appoint a receiver by an interlocutory order in all cases in which it appears to the court to be just or convenient so to do.’
This is not exhaustive of the powers of the court to grant interlocutory remedies. One must look to the rules to see whether there is any further power to be found in the rules which would enable the court to make an order for possession and give leave to issue a writ of possession on an interlocutory motion and before final judgment. Counsel for the respondents has been unable to point to any rule which confers such a power. The relevant rule appears to be RSC Ord 29 which deals with
Page 966 of [1970] 1 All ER 961
the various forms of interlocutory remedies. I need not deal with them in detail; they are familiar interlocutory remedies and suffice it to say nothing whatever appears about an order for possession or leave to issue a writ of possession. The writ of possession is itself dealt with in RSC Ord 45, r 3, but there again there is nothing in that rule which suggests that this could be granted as an interlocutory remedy rather than as a final judgment in the action.
Finally, one must look to see if there is anything in the previous practice of the court either of common law or chancery which would enable such an order to be made and such a writ to issue before and otherwise than as a result of final judgment in an action. The writ of possession was originally a common law writ (although it is now regulated, as I say, by RSC Ord 45, r 3) under which it was ordered that the plaintiff recover possession of the land. Like other common law remedies it did not act in personam against the defendant. It authorised the executive power as represented by the sheriff to do certain things, perform certain acts, in this particular case to evict from land persons who were there and to deliver possession of the land to the plaintiff. Chancery however acted in personam and the form of order in such a case would be that the defendant deliver possession of the land to the plaintiff. Counsel for the respondents has been unable to point to any authority for the proposition that the common law writ could be issued except as the result of a final judgment. It is the current form of writ of possession requiring the sheriff to hand over possession to the respondents and to evict any persons who may be there, leave to issue which has been granted by the Vice-Chancellor in this case. In my view, it is not, as the rules stand at present, within the power of a court to grant such an order on an interlocutory application. I can see a great deal of common sense in allowing it to be done in such a case as this, but unless and until the rules are altered to provide for it, there is in my view no power to make such an order except in a final judgment; although no doubt a final judgment by the summary procedure under RSC Ord 14.
I have assumed for the purposes of considering this matter that the rules of the Chancery Court of the County Palatine of Lancaster are in this respect the same as those of the High Court. Counsel for the respondents who has great experience of practice in this court, has given us that assurance, so that what I have said in relation to the powers of the High Court apply also to the powers of the Vice-Chancellor’s court. It follows, therefore, that although the appeal must be dismissed so far as the injunction is concerned,there was in my view no power to make a further order for possession and that part of the learned Vice-Chancellor’s judgment cannot stand.
As I mentioned before, so far as the injunction is concerned, there is a slight amendment to be made to the form in which it was granted by the Vice-Chancellor which, whether he meant it or not, was slightly different from the form in which it was asked for by the respondents. It is agreed by counsel for the respondents that the proper order would be as follows; and I will read out the relevant part which requires to be changed:
‘… be restrained until trial of this action or further order by themselves, their respective servants or agents or otherwise from knowingly entering or remaining or causing or permitting motor vehicles, caravans or other vehicles or movable dwellings to be placed or remain upon any vacant land [and here is the change] belonging to the plaintiffs and in particular … ’
and then describe the land which is the particular subject-matter of this action.
I omitted in the course of my judgment to mention that there was ample evidence (and indeed counsel for the four appellants did not contest this) that the appellants had formed the intention, if sent off this land, and able to do so, of camping on other land belonging to the respondents, so that the extended injunction is for that reason justified.
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WIDGERY LJ. I find myself in complete agreement at every point with the judgment which has been delivered and I do not propose to take time by going over the ground a second time. Counsel for the remaining appellants, however, did make one point in regard to a difference (as he submits) between the position of a local authority plaintiff and a private plaintiff each seeking to exercise his proprietary rights in regard to land which he owns and occupies. His submission was that even if a private plaintiff in the situation of this present plaintiff would have an undeniable right to obtain possession through the machinery of the court, yet in some way this might be different where the plaintiff was a local authority because of the supposed duty of the local authority to act reasonably. For my part I recognise no difference in principle between the two characters of plaintiff, and it is somewhat dangerous to talk loosely about an obligation of a local authority to act reasonably. Of course in the popular sense of the word every local authority is expected to act reasonably, but that does not mean that the courts are in a position to substitute their own idea of what is reasonable for that which the local authority has decided.
Perhaps I might refer briefly to the much-quoted judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corpn. In that case Lord Greene MR said ([1947] 2 All ER at 683, [1948] 1 KB at 230):
‘… it is true to say … that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere. That, I think, is right, but that would require overwhelming proof, and in this case the facts do not come anywhere near such a thing. Counsel in the end agreed that his proposition that the decision of the local authority can be upset if it is proved to be unreasonable, really meant that it must be proved to be unreasonable in the sense, not, that it is what the court considers unreasonable, but that it is what the court considers is a decision that no reasonable body could have come to, which is a different thing altogether.’
In this case it is perfectly clear, in view of the unchallenged evidence of a threat to health, that no one could say that the decision of the respondents to proceed with this matter was in any sense unreasonable.
Accordingly I concur in the order proposed.
MEGAW LJ. I agree with both of the judgments that have been delivered.
Appeal dismissed as to injunction. Appeal allowed as to order for possession.
Solicitors: Peter Kingshill (for the appellants); G C Ogden, Manchester (for the respondents).
Rosalie Long Barrister.
Australian Coastal Shipping Commission v Green and others
[1970] 1 All ER 968
Categories: SHIPPING
Court: QUEEN’S BENCH DIVISION
Lord(s): MOCATTA J
Hearing Date(s): 11, 12, 19 DECEMBER 1969
Shipping – General average expenditure – Vessel and cargo in position of peril – Towage contract on UK Standard Towage Conditions giving wide indemnity to tug owners – Contract a general average act – Expenditure reasonably incurred by shipowners defending actions on indemnity in Australian courts – Whether general average expenditure as being direct consequence of general average act – Risk of damage to tug at least a possibility at time of contract – York-Antwerp Rules 1950, rules A, C.
The plaintiffs, owners of two cargo-carrying vessels (the Bulwarra and Wangara), were insured against marine perils under policies of marine insurance which incorporated cl 8 of the Institute Time Clauses, under which where the contracts of affreightment so provided (as they did) the adjustment of general average should be according to the York-Antwerp Rules 1950. As a result of events occurring on 13 July 1960 and 18 November 1961 the Bulwarra and Wangara were respectively put in a position of peril at points near the Australian coast. Shore officers acting on the plaintiffs’ behalf contracted with tug owners to tow the vessels to safety; the contracts of towage contained provisions for the payment of hire at a fixed rate and incorporated the UK Standard Towage Conditions, under which a very wide indemnity was given to the tug owners even against the consequence of negligence by their crews. While the vessels were being towed pursuant to the contracts the towropes parted and in consequence of the foulng of the tugs’ propellers thereby, one tug grounded and became a total loss and the other tug accepted salvage services from third parties and was also damaged. The plaintiffs reasonably incurred expenses in defending actions by the tug owners in the Australian courts. It was agreed by the parties, and so found by the court that in engaging the tugs on the terms of the UK Standard Towage Conditions the plaintiffs’ shore officers voluntarily and reasonably adopted an extraordinary measure for the preservation of the vessels and cargoes from loss by the perils insured againsta; and the court inferred the following additional facts: (1) that there was a substantial risk in towage operations, particularly in stormy weather such as prevailed in the instant casualties, that towropes might break and foul tugs’ propellers; (2) that if this were to happen close inshore there was a substantial risk that the tug would run aground and be damaged or need rescue by other assistance; (3) that these facts were known to nautical men and were known to the shore officers; and (4) that by reason of the incorporation of the UK Standard Towage Conditions in the towage contracts the shore officers knew that a liability to indemnify the tug owners in the terms of those conditions was being undertaken. On a claim by the plaintiffs that the expenses reasonably incurred by them in the Australian courts by reason of the indemnity clauses were general average expenditure covered by the policies of insurance,
Held – The expenses claimed were general average expenditure, because—
(i) (as was agreed) the general average acts were the engaging of the tugs on the UK Standard Towing Conditions, and this was reasonable in relation both to the cost of towage and the towage conditions in the interests both of the plaintiffs and of the cargo (see p 979 j, to p 980 a, post);
Page 969 of [1970] 1 All ER 968
(ii) there was no authority establishing that a liability arising under the terms of a contract, other than a charge thereunder for a service, could not give rise to an expense recoverable in general average, nor any relevant principle in law which should lead to that conclusion (see p 980 a, post); Anderson, Tritton & Co v Ocean Steamship Co [1881–85] All ER Rep 663 distinguished; and
(iii) the expenses here incurred by the plaintiffs were the direct consequences of the general average acts (under rule Cb of the York-Antwerp Rules 1950) (see p 980 b, post) inasmuch as
(a) applying Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co ([1899] 2 QB 403), if the plaintiffs’ shore officers did not bring to mind a liability to the tug owners consequent on the parting of the towropes, they ought to have done so (see p 979 d, post), or
(b) applying Anglo-Grecian Steam Trading Co Ltd v T Beynon & Co ((1926) 24 Lloyd LR 122), liability to the tug owners consequent on the parting of the towropes was at least a possibility and was so connected with the general average act of engaging the tugs as not to break the chain of causation (see p 979 e, post).
Notes
For general average expenditure and the liability of underwriters, see 22 Halsbury’s Laws (3rd Edn) 122–125, paras 228–235, and 35 ibid 507–510, paras 726–728, and for cases on general average expenditure, see 41 Digest (Repl) 513–516, 2864–2919.
For the York-Antwerp Rules 1950, see 22 Halsbury’s Laws (3rd Edn) 446–452, para 9010.
Cases referred to in judgment
Anderson, Tritton & Co v Ocean Steamship Co (1884) 10 App Cas 107, [1881–85] All ER Rep 663, 54 LJQB 192, 52 LT 441; rvsg sub nom Ocean Steamship Co v Anderson, Tritton & Co (1883) 13 QBD 651, 41 Digest (Repl) 516, 2908.
Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co [1899] 2 QB 403, 68 LJQB 900, 81 LT 296, 41 Digest (Repl) 512, 2862.
Anglo-Grecian Steam Trading Co Ltd v T Beynon & Co (1926) 24 Lloyd LR 122.
Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd [1915] 3 KB 586, 84 LJKB 1958, 113 LT 805; affg [1915] 1 KB 833, 41 Digest (Repl) 520, 2940.
Leitrim, The [1902] P 256, 71 LJP 108, 87 LT 240, 41 Digest (Repl) 513, 2869.
McCall & Co v Houlder (1897) 66 LJQB 408, 76 LT 469, 2 Com Cas 129, 41 Digest (Repl) 512, 2853.
Morrison Steamship Co Ltd v Steamship Greystoke Castle (Owners of Cargo lately laden on) [1946] 2 All ER 696, [1947] AC 265, [1947] LJR 297, 176 LT 66, 41 Digest (Repl) 514, 2887.
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126, [1961] 1 Lloyd’s Rep 1, Digest (Cont Vol A) 1149, 185a.
Cases also cited
Polemis and Furness, Withy & Co Ltd, Re [1921] 3 KB 560, [1921] All ER Rep 40.
Saint Line Ltd v Richardson, Westgarth & Co Ltd [1940] 2 KB 99.
Seapool, The [1934] P 53, [1933] All ER Rep 764.
Stansbie v Troman [1948] 1 All ER 599, [1948] 2 KB 48.
Svendson v Wallace Brothers (1884) 13 QBD 69; affd (1885) 10 App Cas 404.
Wetherall (JH) & Co Ltd v London Assurance [1931] 2 KB 448, [1931] All ER Rep 819.
Action
In this action the plaintiffs, Australian Coastal Shipping Commission, sued John Richard Daniel Green, as representative underwriter under two policies of marine
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insurance covering a number of the plaintiff’s ships including the motor vessels Bulwarra and Wangara, in respect of which they claimed to be indemnified for their share of certain alleged general average expenditure arising out of events which occurred on 13 July 1960 and 18 November 1961. The facts are set out in the judgment.
C S Staughton for the plaintiffs.
S O Olson for the defendant.
Cur adv vult
19 December 1969. The following judgment was delivered.
MOCATTA J read the following judgment. The plaintiffs in this action were at the material times owners of two vessels called the Bulwarra and the Wangara. The first defendant is a representative underwriter under two policies of marine insurance, one of which is relevant to the plaintiffs claim in respect of the Bulwarra, which arises out of events occurring on 13 July 1960, the other being relevant in respect of the claim in respect of the Wangara, which arises out of events occurring on 18 November 1961. The second and third defendants were respectively owners or consignees of cargo on board the Bulwarra and the Wangara at the relevant dates. The action was brought to recover against the first defendant his proportion of the plaintiffs’ share of what was alleged to be certain general average expenditure incurred by them, or, alternatively, to recover the whole of such expenditure under the sue and labour clauses in the policies. As against the second and third defendants the plaintiffs claimed their contributions to the relevant general average expenditure incurred. The second and third defendants were never served and I am, therefore, now concerned only with the claims against the first defendant, whom I will call ‘the defendant’.
Most of the relevant facts in relation to the two claims against the defendant are contained in an agreed statement of facts. In what follows I state the facts substantially as they appear in this statement.
As regards the Bulwarra, the facts were that on 13 July 1960 she was moored at Port Kembla, New South Wales, whilst loading a cargo of steel products for carriage to Freemantle. Owing to very severe weather her aftermooring was carried away and she was in a position of peril. A shore officer of the plaintiffs’ agents, Port Kembla Stevedoring & Agency Co Pty Ltd, acting on their behalf then engaged the tug Hero to tow the vessel back to the wharf. By reason of the course of dealing between the plaintiffs and the owners of the tug Hero, the contract thereby concluded contained provision for the payment of hire at a fixed rate and incorporated the United Kingdom Standard Towage Conditions. A copy of those well-known conditions was annexed to the statement of facts. It is unnecessary that I should read them out verbatim; it is sufficient to say that they contain very stringent terms in favour of the tug owner amounting to a very wide indemnity in his favour by the hirer of the tug, even against the consequences of negligence by the crew of the tug.
Whilst the Bulwarra was being towed pursuant to the contract the towrope parted and fouled and jammed the propeller of the tug. Consequently the engines could not turn the propeller and the tug grounded and became a total loss. Her owners then sued the plaintiffs in the Supreme Court of New South Wales claiming an indemnity against the loss of the tug under cl 3 of the UK Standard Towage Conditions. The claim failed on the grounds that the loss of the tug was caused by unseaworthiness in that her anchor was not connected to a chain so as to be ready for use in an emergency, that the owners of the Hero had not exercised reasonable care to make her seaworthy, and that the unseaworthiness caused the loss.
The plaintiffs reasonably incurred costs in defending the action brought against them by the owners of the Hero and have not recovered part of such costs amounting to £1,313 5s 4d. If this was general average expenditure, the proportion thereof falling to be borne by the plaintiffs is £1,017 14s 11d. It is agreed that it was general
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average expenditure if the plaintiffs’ liability to the owners of the Hero, had they been found liable, would have been general average expenditure.
When engaging the tug Hero on the terms of the UK Standard Towage Conditions the plaintiffs’ shore officer voluntarily and reasonably adopted an extraordinary measure for the preservation in time of peril of the vessel and the cargo already on board from loss by a peril or perils insured against under the first of the two policies of marine insurance I have mentioned. I interpose that the language used in that sentence appears to be taken from the definition of a general average act contained is s 66(2) of the Marine Insurance Act 1906. It is equally apt to cover the definition of such an act in slightly different words contained in rule A of the York-Antwerp Rules 1950, which I set out later.
It is agreed that in general—and this applies equally in the case of the Wangara—a person in charge of a ship in such a situation of peril has a choice whether to enter into a towage contract, which will normally be subject to the UK Standard Towage Conditions, or engage salvors on a no cure no pay basis, which will not be subject to those conditions but will result in much higher remuneration being payable if the operation is successful, and either could be described as a reasonable course to adopt.
If it be material to consider whether the plaintiffs’ shore officer must have contemplated the possibility of the tug being damaged in the course of the towage, or any question of foreseeability, the parties agreed that the court should be at liberty to take into account the facts found in the judgment of the Supreme Court of New South Wales given on 12 February 1965, a copy of which was annexed to the agreed statement of facts. At all material times the cargo already loaded on board the Bulwarra was being carried on terms which included provision that general average should be adjusted in accordance with the York-Antwerp Rules 1950.
Turning now to the facts in relation to the Wangara, she sailed from Melbourne on 17 November 1961 with a cargo of steel products for carriage to Auckland, New Zealand. On the following day she grounded off Point Lonsdale at the entrance to Port Phillip, Victoria, and was in a position of peril. Two of the plaintiffs’ senior shore officers, acting on their behalf, then engaged the tug Walumba to tow the vessel off. By custom and/or the course of dealings between the plaintiffs and the owners of the Walumba the contract thereby concluded contained provision for the payment of hire at a fixed rate and incorporated the UK Standard Towage Conditions.
Whilst the Wangara was being towed pursuant to the contract, the towrope parted and fouled the propeller of the tug. The tug then accepted salvage services from third parties and was also damaged. The salvors claimed salvage reward in the Supreme Court of Victoria from the owners of the Walumba, who in turn joined the present plaintiffs as parties to those proceedings, claiming an indemnity under the UK Standard Towage Conditions.
Consequent on the judgment of Adam J in those proceedings and an unsuccessful appeal by the plaintiffs to the High Court of Australia, the plaintiffs reasonably incurred expenditure totalling just over £20,000 in respect of: (a) the claim of the owners of the Walumba in respect of damage suffered by that vessel; (b) the claim of the owners of the Walumba to be indemnified against the claim of the salvors—I would add that the salvage award was £10,000; (c) costs ordered to be paid by the plaintiffs; and (d) costs incurred by the plaintiffs. If these expenses were general average expenditure, the proportion thereof falling to be borne by the plaintiffs is £13,776 5s 6d. It is agreed that if the amounts referred to in (a) and (b) were general average expenditure, the amounts referred to in (c) and (d) were also general average expenditure.
In engaging the tug Walumba on the terms of the UK Standard Towage Conditions the plaintiffs’ shore officers voluntarily and reasonably adopted an extraordinary measure for the preservation in time of peril of the vessel and her cargo from loss by a peril or perils insured against under the second of the two policies of marine
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insurance I have mentioned. If it be material to consider whether the plaintiffs’ shore officers must have contemplated the possibility of the tug being damaged in the course of the towage, or any question of foreseeability, the parties agreed that the court should be at liberty to take into account the facts found in the judgment of the Supreme Court of Victoria and the judgments of the High Court of Australia, copies of which were annexed to the agreed statement of facts. At all material times the cargo on board the Wangara was being carried on terms which included provision that general average should be adjusted in accordance with the York-Antwerp Rules 1950.
It was not suggested by either counsel that the differences on the facts between the two cases were material to the issues in the action. Finally, it was agreed that the court was at liberty to draw inferences of fact. For this purpose my attention was drawn by counsel for the plaintiffs to certain passages in the judgments of the Australian courts. It is unnecessary that I should make detailed references to these, other than to say that it appears that the owners of the Hero invoiced the plaintiffs for £30 for the tug’s services.
I have no hesitation, on the material before me, in drawing the following four inferences of fact, which I did not understand to be disputed by counsel for the defendant. (1) There is a substantial risk in towage operations, particularly in stormy weather such as prevailed at the time of both these casualties, that the towrope may break and foul the propeller of the tug. (2) If that happens at a time when the tug is close to the shore, as was the case at the time of both these casualties, there is a substantial risk that the tug will run aground and be damaged, or will have to be rescued by other assistance if any is available. (3) These facts are generally known to nautical men and were known to the shore officers of the plaintiffs and their agents. (4) Since the UK Standard Towage Conditions were incorporated, by course of dealing in the case of the Bulwarra and by custom and/or course of dealing in the case of the Wangara, in the contracts between the plaintiffs and the owners of the respective tugs, the shore officers concerned knew that those conditions were applicable and knew that the plaintiffs were undertaking a liability to indemnify the owners of the respective tugs in the terms of those conditions.
Counsel for the plaintiffs urged that I should make a further finding. This was, however, disputed and it is desirable that I should return to this matter later.
As against the defendant the plaintiffs’ claims, other than the alternative ones under the sue and labour clauses in the policies, are based on s 66(4) of the Marine Insurance Act 1906, which provides:
‘Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him … ’
Since by the terms of cl 8 of the Institute Time Clauses in the policies, where the contract of affreightment so provided, the adjustment of general average should be according to the York-Antwerp Rules 1950, I have been concerned primarily with the construction of rules A and C of the 1950 rules. It is convenient that I should here set out the terms of those two rules.
‘A. There is a general average act when, and only when, any extraordinary sacrifice or expenditure is internationally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime venture.
‘C. Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.
‘Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage, and any indirect loss whatsoever, such as loss of market, shall not be admitted as general average.’
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As a matter of grammar, counsel for the plaintiffs submitted that rule A should be read subject to the gloss that some such words as ‘measure resulting in’ should be understood as being included after the word ‘extraordinary’, in order, as one amongst many examples, to cover expenses which are the direct consequence of the general average act under rule C, since otherwise it was difficult to speak of expenses which were the direct consequence of expenditure. Counsel for the defendant, rightly in my view, was prepared to accept this gloss without tying himself to the particular words to be inferred.
The main argument of counsel for the plaintiffs was that the expenses in dispute in these cases in respect of the tugs Hero and Walumba were the direct consequences of the admitted general average act in each case, namely, the engagement by the plaintiffs of the respective tugs on the terms of the United Kingdom Standard Towage Conditions. Counsel for the defendant submitted there was a distinction between hiring a tug and liability to a tug owner under a towage contract, and that these expenses were not the ‘direct’ consequences of the general average acts and were also excluded by the words ‘any indirect loss whatsoever’ in the second paragraph of rule C.
That the problems raised are difficult is self-evidenct on the mere statement of the conflicting arguments, and their difficulty assumes formidable proportions when one remembers that Viscount Simonds said in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) ([1961] 1 All ER 404 at 413, [1961] AC 388 at 423) that a test of what was the direct consequence of an event ‘… leads to nowhere but the neverending and insoluble problems of causation’. Despite this forbidding warning, I have to deal with these very words in rule C, which date back to the 1924 edition of the York-Antwerp Rules. In these circumstances, it is not surprising that both counsel referred me to a number of decisions prior to 1924 on what may be called the remoteness issue and to earlier statements on it in Lowndes: Law of General Averagec.
Before going to these authorities for such assistance as they may give on that issue, I think it useful to have regard to some more general considerations and arguments. Thus I think there is force in the submission of counsel for the plaintiffs that if the authorities and the words of the rules permit it, it is desirable that when the master or other agents of the owners of a vessel has or have to consider, often in circumstances of great difficulty and urgency, what course to take ‘for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure’, it is important that technicalities of the law should not, unless this is unavoidable, give rise to a conflict of interests, and thus fetter or influence the choice to be made in the best interests of all concerned. For example, circumstances might arise when a master had to choose, for the common safety, between a jettison of cargo and entering into a towage contract. If the decision in this case be that the expenses in question are irrecoverable in general average, it would be difficult for a master to exclude that consideration from his mind when making his choice. Again, had the plaintiffs’ shore agents here contracted with the tug owners on Lloyd salvage forms on a no cure no pay basis, the points at issue could not have arisen, but had the tugs’ efforts been successful, very much larger sums would have been payable by way of general average than had the tugs been successful under the towage contracts that were in fact concluded. It is agreed that it was reasonable to enter into such contracts on the terms as to potential liability to the tugs therein contained. It would seem regrettable if, as a result of the decision in this case, other persons faced with comparable problems should be reluctant to take what would otherwise be a reasonable course.
Counsel for the defendant submitted that the claim was a novel one, notwithstanding that the UK Standard Towage Conditions, in one version or another, had
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been in use for very many years; that if it succeeded it would be the first case in the books in which expenditure arising out of a contract, other than charges thereunder for services rendered, had been recoverable as general average; and that a decision to the latter effect would greatly and perhaps dangerously increase the scope of liability in general average.
As regards the last point, expenditure would not, however, be recoverable unless reasonably incurred: see rule A. This would appear to be a substantial safeguard. As regards novelty, this is no obstacle if all that the court does is to apply old principles to new instances: see Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd. In fact, however, both as regards novelty and the aspect that the expenses here arose out of a liability assumed under a contract, the somewhat difficult case of Anderson, Tritton & Co v Ocean Steamship Co shows that closely similar facts have arisen before in relation to general average.
In that case the owners of the Achilles sought to recover a general average contribution from cargo on board their vessel incurred when, on 2 June 1880 she got into difficulties on a sand bank in the Yangtze River off Hankow and her master signalled to the Shanghai for assistance. A towrope was passed to the Shanghai, which endeavoured for some time to free the Achilles. The towrope then snapped, damaging the Shanghai to the extent of £37 10s, but her efforts, coupled with the effect of the current on the moving sands, on one view of the facts, turned out to be sufficient to enable the Achilles to free herself. Four days later the master of the Achilles signed an agreement ante-dated to 2 June, already signed by the master of the Shanghai, for towage services for a period of up to 24 hours, for a sum of 10,000 taels, whether the Shanghai should be successful or not, and also bound his owners to pay for all damage occasioned to the Shanghai in the course of rendering the towage service. The contract, although entered into after the event, envisaged the services as to be performed in the future. The action was brought to recover the defendants’ proportion of general average expenditure, including a very small element in respect of the damage to the Shanghai. The plaintiffs succeeded in the first court, lost in the Divisional Court, succeeded in the Court of Appeal ((1883) 13 QBD 651 sub nom Ocean Steamship Co v Anderson, Tritton & Co) and lost in the House of Lords ((1884) 10 App Cas 107, [1881–85] All ER Rep 663), where a new trial was ordered on the grounds primarily, as I understand the opinions in the House of Lords, that the question whether the amount charged as a disbursement under the contract was exorbitant or not had not been left to the jury. The contract had, of course, been entered into after the event and there were grounds for regarding it with some suspicion. Lord Blackburn said that while on the special facts there was little ground for doubting that the owners of the Achilles had ratified the contract signed by their master, it was quite a different matter whether that contract had in any way bound the cargo owners. He said ((1884) 10 App Cas at 117, [1881–85] All ER Rep at 667):
‘But neither the owners of the ship nor their master have authority to bind the goods, or the owners of the goods, by any contract [and later, on the same page, he said:] … there is neither reason nor authority for saying that the whole amount which the owners of the ship choose to pay is, as a matter of law, to be charged to general average … ’
No specific mention was made of the undertaking in the contract to pay for the cost of damage to the Shanghai.
It is therefore clear that points similar to those arising in the present case are not so novel as counsel for the defendant suggested. The more important matter is whether the reasoning of the House of Lords establishes that an expenditure arising
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out of a contract in relation, not to a charge for services but to an indemnity given under the contract, is necessarily irrecoverable in general average. I do not think that it does, since the specific point was not discussed. Nor do I think that the passage I have cited about the master not having authority to bind the owners of the goods by any contract is determinative of the issue in this case, particularly in view of the special facts and the second passage that I have cited. The House of Lords took the view that the questions left by the trial judge to the jury did not cover the matter adequately, particularly as to quantum. The question put to the jury, ie whether the master pursued a reasonable course in the circumstances, was not regarded as sufficiently specific and may well have been treated as directing the jury’s mind solely to the point whether his conduct was reasonable in the interest of his owners, who subsequently, in all probability, had to be taken as having ratified it.
Here it is agreed that the plaintiffs’ shore officers in engaging the two tugs on the terms of the UK Standard Towage Conditions voluntarily and reasonably adopted an extraordinary measure for the preservation in time of peril of the vessel and the cargo already on board. I think that this, together with the further agreement that it would have also been reasonable to have engaged salvors on a no cure no pay basis, shows that it is agreed that in so engaging the tugs, the plaintiffs’ shore officers were acting reasonably in the interests of ship and cargo, both as regards the remuneration for the tugs’ services and as regards the indemnity given the tug owners by the conditions of the contracts. If it be necessary to do so, I have no hesitation in drawing a further inference of fact to this effect. For these reasons, I do not consider that the reasoning or decision in Anderson, Tritton & Co v Ocean Steamship Co are a bar to the plaintiffs in this action.
The only other case brought to my attention as possibly having some bearing on the question whether liability under a contract, other than in respect of a charge for services rendered thereunder, could constitute an expense recoverable in general average was The Leitrim, in which it was decided that loss of time whilst a vessel was undergoing repairs consequent on a general average act, necessary in order for her to complete the voyage, did not give rise to a claim in general average. There are dicta ([1902] P at 265, 266) in that case to the effect that the contract between the shipowner and the time charterer was irrelevant on the issue whether loss of time charter time was recoverable in general average. I think that counsel for the plaintiffs was right in submitting that this had no bearing on the present case, where the general average acts were admitted to be the entering into contracts with the tug owners under the terms of which the disputed expenses arose.
In view of what I have just said, I should mention that counsel for the plaintiffs urged in his reply, putting his case rather differently from in his opening, that quite apart from such guidance as was to be obtained from the authorities on the issue of remoteness, the plaintiffs should succeed and that rule C could be no bar. The general average acts here were agreed to be the entering into the towage contracts on the conditions contained therein. The expenses in respect of which it is sought to recover here arose as the result of events falling within those conditions. Such expenses must, therefore, be the direct consequence of the general average act. I hesitate to say that the conclusion in the last sentence necessarily in all cases follows from the two preceding ones, which are indisputable; but I agree that, to put it no higher, the setting in which one has to consider the application of rule C is favourable to the plaintiffs.
The question whether expenses consequent on a general average act are too remote to be recoverable in general average is discussed in Lowndes: Law of General Average (now British Shipping Lawsd) in a passage which on three occasions has been applied
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by the courtse. The passage begins by stating the questions which Lowndes himself formulated as being relevant. It readsf:
‘… since we have to determine quod pro omnibus datum est, and since giving must always imply an intention to give, what we have here to ascertain must be, what loss at once has in fact occurred, and likewise must be regarded as the natural and reasonable result of the act of sacrifice? or, in other words, what the shipmaster would naturally, or might reasonably have intended to give for all when he resolved upon the act? If then, upon the act of sacrifice any loss ensued which the master did not in fact bring before his mind at the time of making the sacrifice, it would have to be considered whether it were a loss of which he naturally might or reasonably ought to have taken account.’
In the next paragraph Lowndes set out Ulrich’s summary on the matterg:
‘“General average” comprises not only the damage purposely done to ship and cargo, but also (1) all damage or expense which was to be foreseen as the natural (immediate) consequence of the first sacrifice, since this unmistakably forms part of that which was given for the common safety; (2) all damage or expense which, though not to be foreseen, stands to the sacrifice in the relation of effect to cause, or, in other words, was its necessary consequence. Not so, however, those losses or expenses which, though they would not have occurred but for the sacrifice, yet, likewise, would not have occurred but for some subsequent accident.’
Counsel for the plaintiffs relied on both those quotations, and in particular on the judgment of Roche J in Anglo-Grecian Steam Trading Co Ltd v Beynon & Co, which he submitted brought both into line. Counsel for the defendant submitted that that case and others were distinguishable and that the facts here brought the case within the last sentence in Ulrich’s summary.
In Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co the facts, taken from the headnote, were:
‘The plaintiffs shipped a deck cargo of cattle and sheep on board the defendants’ ship for carriage from Buenos Ayres to Deptford under a contract which provided that the ship should on no account call at a Brazilian port before landing her live stock. The reason for this provision was that by an Order of the Board of Agriculture foreign animals could not be landed in the United Kingdom if the ship conveying them had touched at a Brazilian port in the course of her voyage. During the voyage the ship sprung a leak, and the master, for the safety of all concerned, put into a Brazilian port for repairs. The plaintiffs thereby suffered loss in consequence of the live stock being unable to be landed in the United Kingdom, and having to be sold elsewhere at lower prices than would have been realized in the English market.’
It was held that the depreciation of the livestock was a loss which the plaintiffs were entitle to have made good in general average. In his judgment Bigham J first of all said ([1899] 2 QB at 409) that he was satisfied that the master knew well enough that the effect of
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putting into a Brazilian port would be to render the discharge of the cattle at Deptford impossible and that this would cause serious loss to the plaintiffs. He then read the passage from Lowndes and Ulrich and said ([1899] 2 QB at 410):
‘These two passages seem to me to express accurately the principles upon which the damages to be made good in general average are to be ascertained; and applying those principles to the present case, I think that as, when the master of the Edenbridge resolved upon the average act, he knew, or ought to have known, that he was sacrificing the advantages which the plaintiffs then have known, that he was sacrificing the advantages which the plaintiffs then possessed by reason of the ship not having touched a Brazilian port, he must be taken to have intended that the value of those advantages should be made good in general average; and the master’s intention is the intention of the parties interested, whose agent he is. I am further of the opinion that the damage in question is a necessary consequence of the general average act.’
The importance of that case is not so much the actual decision, since as counsel for the defendant pointed out, the mere fact of putting into a Brazilian port at once brought the existing English law into play and caused the loss to the plaintiffs, but the approval by Bigham J of both passages and his references to what the master ought to have known and must be taken as having intended.
In Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd the plaintiff steamship owners claimed from owners of the cargo in respect of two items of general average sacrifice and expenditure. As the result of grounding damage in the Severn and subsequent stranding, the vessel became very seriously damaged, and both ship and cargo were in imminent danger. It was decided to take her into Sharpness dock as a part of refuge, although both pilot and master contemplated her striking the lower pier and doing damage. She damaged herself to the extent of about £1,600 and the pier to the extent of about £5,000, and the plaintiffs sought contribution in general average in respect of both items from cargo. Bailhache J had to deal with this matter under the Marine Insurance Act 1906 and said that the law on the matter was the same after the Act as before it. He referred ([1915] 1 KB at 835, 836) to the two quotations from Lowndes I have read and to their being approved by Bigham J in the Anglo-Argentine Live Stock case and he held both items to be general average. As regards the liability to indemnify the harbour authority, which admittedly arose, as counsel for the defendant in the present case emphasised, from the law of tort and not out of contract, Bailhache J said ([1915] 1 KB at 836):
‘Following these guides it is quite clear upon the facts stated by me that the damage to the steamship and to the pier both fall within the statutory definition of general average loss. This disposes of the right to contribution in respect of the damage to the steamship, and would dispose of the right to contribution in respect of the damage to the pier, but, strangely enough, there is no decision to be found upon the point whether general average expenditure includes the making good of damage done to the property of some third person. In principle, in such as case as this, it clearly does. If I ask Mr. Lowndes’ question quod pro omnibus datum est? I answer, the damage to the steamship plus the liability to indemnify the dock authorities for the damage to their pier; and if I now turn to Ulrich, the collision with the pier was a foreseen result, and not the result of a subsequent accident.’
The decision was approved in the Court of Appeal ([1915] 3 KB 586).
Counsel for the plaintiffs applying the judgment of Bailhache J to the facts here, asked what did the plaintiffs’ shore officers, acting on behalf of the master, give?
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His answer was that they gave the hire charge for the tugs and an indemnity. In modern parlance the engagements with the tug owners were in the nature of package deals. He also submitted on the contract point that had the master, in Bailhache J’s caseh, had time to obtain the harbour authority’s consent to entering Sharpness, and had he been required to sign an indemnity before attempting to enter the dock, the result must have been the same, although the expense incurred would have arisen under the indemnity.
The last case dealing with the tests of Lowndes and Ulrich was Anglo-Grecian Steam Trading Co Ltd v T Beynon & Co. There the shipowners claimed contribution from cargo interests for general average expenses. The vessel after leaving Cardiff picked up a buoy, some part of which or its moorings became foul of the propeller of the ship, putting both her motive power and her steam steering apparatus out of action, and causing damage aft allowing water to enter the after peak. In view of the consequent danger in the bad weather prevailing, it was decided to beach the vessel in the centre of Whitmore Bay. Unfortunately she grounded sooner than expected and slightly more to eastward than intended, the towropes to the tugs parted and the vessel got on the rocks and suffered damage the subject-matter of the claim. Roche J held the attempted beaching to have been made reasonably and to come within rule 5 of the relevant York-Antwerp Rules, which were those of 1890. There was, of course, no counterpart to Rule A or C in those rules. The defendants then argued that the going on the rocks was a subsequent accident which was something unexpected and not connected with the original beaching. Roche J referred to the passage from Ulrichi and Anglo-Argentine Live Stock & Produce Agency v Temperley Shipping Co. He then said ((1926) 24 Lloyd LR at 127):
‘I find that, although the grounding on the rocks was not at any rate foreseen as either a necessary or even a probable consequence by the pilot, yet it was not a subsequent accident unconnected with the grounding. It was at all times a possibility and it was a possibility which did not render the action of beaching illegitimate, or render the subsequent materialisation of the possibility into an actuality so disconnected with the beaching which brought it about as to break the chain of causation and prevent the plaintiffs from recovering in respect of the damage done by the rocks.’
Counsel for the plaintiffs naturally relied strongly on this passage and on the earlier one ((1926) 24 Lloyd LR at 127) in which Roche J had said that had some accident intervened which was something unexpected and not connected with the original beaching, the loss by going on the rocks would not have been recoverable in general average. Counsel for the defendant distinguished this case on its facts, apart from the absence of any contractual liability. Going on the rocks, he said, was so clearly connected with the grounding that it was not surprising that Roche J found there to have been one sequence of events and no break in the chain of causation. Here, however, there was an interruption in the services on which the tugs were engaged and an independent casualty to each tug.
It is this point in the respective arguments that it becomes material to consider the four additional inferences of fact which I made earlier in this judgment and the fifth for which counsel for the plaintiffs contended. That was, ‘It is probable that the facts set out in the additional facts found, numbered (1) and (2), were present to the minds of the shore officers concerned at the time when the tugs were engaged, and if they paused to consider the position that would arise if the tugs were damaged
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and in need of assistance, they must have realised that an indemnity would be claimed from the plaintiffs.' Counsel for the defendant argued that it was a wholly artificial concept to imagine or infer that the plaintiffs’ shore officers acting on behalf of the masters contemplated that the towropes might or would break and that if so the propellers might be fouled, the tugs would run aground if not rescued, and that these or similar events would bring the indemnity provisions of the towage conditions into play. The officers, he argued, were entitled to assume that the towage for which they engaged the tugs would be successful. No doubt the latter was the case, but it by no means follows that the probabilities or possibilities mentioned in the suggested fifth inference of counsel for the plaintiffs are artificial, fanciful or irrelevant.
It seems to me, in view of the three authorities just cited, I can approach this question in two ways. One is to ask, in the words of Lowndes himself (adapting them slightly to the facts here), what the plaintiffs’ shore officers might reasonably have intended to give for all when they entered into the towage engagements, and, if they did not bring to mind at that time a liability to the tug owners consequent on the breaking of the towropes, whether they naturally might or reasonably ought to have done so. In view of the four inferences of fact that I have drawn and the remark of Bigham J as to what the master in Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co ([1899] 2 QB at 410) ought to have known, I find myself obliged to answer that if they did not bring this matter to mind, they ought to have done so. The other way is to consider, adapting the language of Roche J in Anglo-Grecian Steam Trading Co Ltd v T Beynon & Co ((1926) 24 Lloyd LR at 127), first, whether liability to the tug owners consequent on the breaking of the towropes was a possibility, the answer to which must be in the affirmative, and, secondly, whether the actuality was so connected with the general average act of engaging the tugs by reason of the peril to the ships and their cargo as not to break the chain of causation. Again, in view of the four inferences I have drawn, I think the answer, although not so clear, must be in the affirmative. For these reasons I find the expenses claimed to be the direct consequences of the general average acts.
I should briefly mention two only of the other cases cited. There are dicta in McCall & Co v Houlder strongly supporting the plaintiffs’ case on a prima facie view of them. The judgment of Mathew J there, however, did not discuss the quotations in Lowndes or deal in any detail with the arguments on remoteness or indirect consequences. Secondly, as a result of a suggestion I made in argument, counsel for the plaintiffs referred in his reply to Morrison Steamship Co Ltd v Owners of Cargo lately laden on Steamship Greystoke Castle, particularly to certain passages in the three majority opinions ([1946] 2 All ER at 699, 700 per Lord Roche, at 708, 709 per Lord Porter and at 718 per Lord Uthwatt, [1947] AC at 280, 281, 294, 295 and 311). He submitted that the principles there stated supported his argument that, as entering into the towing engagements constituted the general average acts done on behalf of all (although not, of course, so as to make cargo owners principals and directly liable to the tug owners) and as any hire charges due thereunder were admittedly recoverable in general average, so also must other expenses incurred by the plaintiffs in meeting their liabilities under the indemnity provisions of the engagements be similarly recoverable. It is sufficient to say that whilst I have not based my judgment on those passages, since I find it difficult to assess their true import in relation to the issues in this action, they seem to me to favour the conclusions I have reached.
I can shortly summarise my reasoning as follows: (1) The general average acts here were engaging the tugs on the UK Standard Towage Conditions. (2) This was
Page 980 of [1970] 1 All ER 968
reasonable in relation both to the cost of towage and the towage conditions, not only in the interests of the plaintiffs, but also in the interests of cargo. (3) There is no authority establishing that a liability arising under the terms of a contract, other than a charge thereunder for a service, cannot give rise to an expense recoverable in general average. (4) There is not relevant principle in law, which should lead to the conclusion in (3). (5) The expenses in question here incurred by the plaintiffs were the direct consequences of the general average acts.
In view of my conclusions, it is unnecessary to decide or express any opinion on whether the plaintiffs would otherwise be entitled to succeed under the sue and labour clauses, since by s 78(2) of the 1906 Act general average losses and contributions are not recoverable under such clauses.
Judgment for the plaintiffs.
Solicitors: William A Crump & Son (for the plaintiffs); Waltons, Bright & Co (for the defendant).
K Diana Phillips Barrister.
Moore v Lambeth County Court Registrar (No 2)
[1970] 1 All ER 980
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND WIDGERY LJJ
Hearing Date(s): 2, 3, 6, 31 OCTOBER 1969
Execution – Wrongful and irregular execution – Excessive execution – Liability of county court registrar in absence of malice.
Execution – Wrongful and irregular execution – Distress warrant for judgment moneys and costs suspended as to judgment moneys – Whether distress leviable in respect of costs outstanding.
In order to establish a claim for damages against an officer of the court for wrongful execution on goods under a distress warrant issued to recover the amount of a judgment for rent owing and costs, the owner of the goods need only show that the warrant did not authorise the officer to levy execution to the value of goods which were in fact seized and that therefore, despite the absence of malice on the part of the officer, the execution was excessive (see p 984 g, p 985 e, and p 986 h, post).
De Medina v Grove (1847) 10 QB 172, Jenings v Florence (1857) 2 CBNS 467 and Clissold v Cratchley [1908–10] All ER Rep 739 distinguished.
Quaere: whether, in the event of execution of a distress warrant for judgment moneys and costs, which was subject to an order for suspension as to judgment moneys, distress was leviable, as a matter of construction of the order, in respect of the costs outstanding (see p 985 d, and p 986 g, post).
Notes
For wrongful and irregular execution, see 16 Halsbury’s Laws (3rd Edn) 36–40, paras 53–57, and for cases on the subject, see 21 Digest (Repl) 544–553, 422–495.
Cases referred to in judgments
Clissold v Cratchley [1910] 2 KB 244, [1908–10] All ER Rep 739, 79 LJKB 635, 102 LT 520, 21 Digest (Repl) 545, 432.
Page 981 of [1970] 1 All ER 980
Dalton (a bankrupt), Re, ex parte Herrington & Carmichael (a firm) v Trustee of the property of the bankrupt [1962] 2 All ER 499, [1963] Ch 336, [1962] 3 WLR 140, Digest (Cont Vol A) 56, 799a.
De Medina v Grove (1847) 10 QB 172, 17 LJQB 321, 116 ER 67, 21 Digest (Repl) 546, 440.
Gawler v Chaplin (1848) 2 Exch 503, 18 LJEx 42, 11 LTOS 68, 13 JP 154, 154 ER 590, 21 Digest (Repl) 615, 1022.
Jenings v Florence (1857) 2 CBNS 467, 26 LJCP 277, 30 LTOS 54, 140 ER 500, 21 Digest (Repl) 547, 442.
Rookes v Barnard [1964] 1 All ER 367, [1964] AC 1129, [1964] 2 WLR 269, Digest (Cont Vol B) 217, 13a.
Watson v Murray & Co [1955] 1 All ER 350, [1955] 2 QB 1, [1955] 2 WLR 349, 21 Digest (Repl) 565, 610.
Williams v Williams and Nathan [1937] 2 All ER 559, 21 Digest (Repl) 683, 1757.
Appeal
This was an appeal by the tenant, George Moore, from the decision of his Honour Judge Goodall sitting at the Southwark County Court made on 4 November 1968 awarding him damages against the Registrar of the Lambeth County Court for wrongful execution on the tenant’s goods and against the landlord, Major Kennard Scott-Simpson, for wrongful detention, but dismissing the claim against the landlord’s solicitor, Howard C Thomas. The registrar cross-appealed against the order for damages for wrongful execution. The facts are set out in the judgment of Russell LJ.
The tenant appeared in person.
M A B Burke-Gaffney for the registrar, the landlord and the landlord’s solicitor.
Cur adv vult
31 October 1969. The following judgments were delivered.
RUSSELL LJ. The appellant was tenant of a furnished room at 9 Chestnut Road, London, SE27. The second respondent was his landlord; the third respondent was the landlord’s solicitor. The landlord obtained judgment in the Lambeth County Court on 13 December 1967 for possession (to be given on 3 January 1968) and for recovery of £83 rent and mesne profits (to be paid on 27 December 1967) with costs to be taxed on scale 3.
The tenant complied with no part of this judgment and a warrant issued on 8 January 1968 in the form of county court form 200, with appropriate deletions, requiring the registrar and bailiffs of the court forthwith to give possession of the premises to the landlord, and ordering them—
‘forthwith to levy the amount due to the [landlord] under the said judgment or order, together with the costs of this warrant and costs of executing the same, by distress and sale of the goods and chattels of the [tenant] … ’
The warrant was endorsed with a calculations as follows:
£ s d
‘Amount for which judgment was obtained 83 0 0
to be taxed
Subsequent costs
Fee for issuing this warrant 4 0 0
Solicitor’s costs of issue 5 0
Total amount to be levied 87 5 0’
Page 982 of [1970] 1 All ER 980
The tenant applied for a stay of execution of the warrant. On 9 February 1968 the registrar ordered that the ‘landlord be at liberty to enforce the warrant of possession in this action’ and further ordered—
‘that the warrant of execution as to Money Judgment be suspended so long as the [tenant] do pay to the registrar of this court £2 every calendar month commencing 9th March, 1968.’
The landlord’s costs of the application were assessed at £1. On 16 February 1968, the judge refused an appeal by the tenant and ordered him to pay a further sum of £1 for the landlord’s costs into court by 1 March 1968. As a consequence of the registrar’s order the warrant was endorsed—
‘Warrant of possession to be enforced. Suspend warrant as of money claim at £2 a month.[Landlord’s] costs £1. (See inset.)’
The inset was the box containing the calculation totalling £87 5s which included the warrant costs totalling £4 5s. Meanwhile, the tenant, on 13 February 1968, paid £2 into court in early compliance with the condition of suspension; and, indeed, paid another £2 on 5 March. On 19 February 1968, the court bailiff, armed with this warrant, attended the premises with the landlord and a clerk from his solicitors and delivered possession to the landlord. At the same time the bailiff seized property of the tenant consisting of a radiogram, 50 records in two containers and a coffee table, The tenant finally recovered possession of these articles on 27 April 1968. He then sued the registrar, the first respondent to this appeal, and the landlord and landlord’s solicitor, the two other respondents to this appeal, in the Southwark County Court fo damages in respect of their conduct in relation to his chattels, on the ground of wrongful execution and wrongful detention. The county court judge, after a long hearing, gave judgment in favour of the tenant for £25 in respect of wrongful execution against the registrar, with costs, and for £10 against the landlord, with costs, and dismissed the action against the landlord’s solicitor with such costs as were additionally caused by his being made a defendant.
The tenant appeals from that decision, asserting: (1) that damages for the wrongful execution should have been exemplary and were in any event quite inadequate; (2) that the damages under this head should have been ordered against the landlord and his solicitor also; (3) that the sum of £10 damages against the landlord was quite inadequate; and (4) that the damages under that last head should have been ordered against the landlord’s solicitor also. I observe that the second and fourth of those contentions can, as a practical matter, relate only to the order as to costs in favour of the landlord’s solicitor. The tenant also contended that the judge should not have rejected his claim that he was entitled to further damages for damage said to have been done to his radiogram when in the custody of the registrar and the landlord.
There were two other matters in his appeal which I will dispose of at once. The tenant objected to the way the registrar dealt with the matter of taxation of his costs below, but any such objection must be made to the judge and not to us. Secondly, he sought to raise a point on an interlocutory order in respect of which leave to appeal out of time had already been refused by this court, and cannot now be raised. The registrar cross-appealed as to the judgment for £25, asserting that the action did not lie in the circumstances, but it is convenient (inasmuch as I think the action does lie) to deal first with the tenant’s appeal.
The main ground for asserting that exemplary or punitive damages should have been awarded against the registrar for the bailiff’s conduct was that the seizure was not merely wrongful but malicious. But here there are two difficulties in the tenant’s way; both, to my mind, insuperable. On 26 July 1968, an order was made by consent striking out the word ‘maliciously’ in the particulars of claim and substituting the word ‘wrongfully’. Further, the judge, having heard the evidence of the bailiff as well
Page 983 of [1970] 1 All ER 980
as that of the registrar and the landlord, came to a clear conclusion that whatever wrong had been done in the seizure had been by mistake and not maliciously, and there is nothing in the circumstances of the case which would entitle this court to draw the inference that the judge had misled himself in this regard. The tenant is convinced that all were minded to punish and humiliate him in a malicious and high-handed way; so much so that he argued that this was demonstrated by the fact that the registrar and landlord contended that the seizure was not wrongful in law; an obvious fallacy.
What then of quantum as to the £25? It seems to me that the learned judge considered the matter properly in point of principle in a careful reserved judgment, and awarded a round sum as overall compensatory damages, bearing in mind injury to the tenant’s feelings and deprivation of his goods from 19 February to 11 March (when the registrar released them from execution), those goods including a radiogram and records from which he was accustomed to draw musical solace as well as instruction in the German language on records drawn from the local library. Some phrases were picked out from the judgment by the tenant for criticism, which I need not detail here; but neither that criticism nor the size of the sum persuade me that this is an award with the quantum of which this court would be justified in interfering.
The suggestion that the judgment for £25 should go against the landlord and his solicitor as well as the registrar is, in my view, ill founded. It is based on the fact that they were present at the levy on the goods, and by reference to cases of wrongful distress for rent. But mere presence does not bring liability: see Williams v Williams and Nathan. Their presence was referable to the delivery of possession of the property. There was no evidence that they had any part in the levy on the goods. The responsibility of a landlord for wrongful distress for rent is based on a relationship with the person distraining that does not obtain in a case such as this.
I turn next to the damages of £10 awarded for detention of the goods by the landlord from the time when the registrar released them from the custody of the law. The goods while still under levy had, with the assent of the bailiff been stored in other premises nearby of the landlord. On 11 March 1968, the registrar wrote to the landlord’s solicitors, authorising the return of the goods to the tenant, having formed the view that the execution had been satisfied by the payments made by the tenant into court. An arrangement was made to return them on 16 March, but this arrangement was cancelled at the last moment, and it was not until 27 April that return was made. For the landlord it was accepted that they should have been returned on 16 March. Once more the tenant contended that the landlord failed in this regard with a view to punishing and harming him, and contended that the correspondence showed this. I am not persuaded of this. I think that the landlord showed a lack of a sense of urgency in this matter, and I gather that the judge also so thought; but it does not appear to me that there is any ground on which we can interfere with his estimate of the proper sum to be awarded as compensation.
The submission that the landlord’s solicitor should be included in the award of £10 is based on a passage in the joint defence that they were lawfully in actual possession following lawful levy of execution by the bailiff. Now, it is manifest that the goods were in fact only in the possession and under the control of the landlord, the solicitor being merely his solicitor. The pleading is capable of reference only to the period before 12 March, and I propose so to construe it rather than make an order in conflict with the facts. I would therefore reject this submission.
On the question of damage done to the radiogram, the judge did not find himself able to rely on and did not accept the evidence of the tenant that this was done while in the custody of the landlord. The repair estimate produced by the tenant was dated 17 October 1968, many months after he regained possession. There is no ground for
Page 984 of [1970] 1 All ER 980
disturbing the judge’s decision on this point. Consequently, the appeal fails on all points and must be dismissed.
I turn now to the cross-appeal of he registrar against the judgment for £25 and costs. It was contended that the suspension order did not wholly suspend the warrant for execution on the tenants’ goods since it remained active in respect of the costs of the warrant (£4 5s) or in respect of those costs less the sum of £2 paid (as before stated) by the tenant. Accordingly, it was said that there was a legal basis for seizure of the tenant’s goods, and the fact that on any footing the value of the goods seized made the execution excessive gave no cause of action in absence of malice, the presence of which the judge had negatived. We were referred to certain cases, including the case in this court of Clissold v Cratchley. In that case a writ of fieri facias in respect of a judgment was sued out after the judgment had been satisfied, and the subsequent seizure of goods was held to be an actionable trespass. It certainly would appear that the view was taken that if the judgment had been still alive at the time when the writ was sued out an action in trespass would not have lain and that malice would have had to be established to support an action on the case for improper execution. This would appear to be in accord with the views expressed in other cases such as De Medina v Grove and Jenings v Florence. But these were not cases of excessive execution; that is to say, the seizure of goods plainly in excess in point of value of the sum for which the warrant or writ purported to authorise execution. In Gawler v Chaplin, on that part of the case which dealt with excessive execution, the court stated that prima facie in such case the sheriff is a wrongdoer; and the relevant declaration had not alleged malice but merely a wrongful and injurious seizure and knowledge of excess in value of the goods seized. In Watson v Murray & Co it did not occur to Hilbery J, that malice was a necessary ingredient in a case of seizure of goods greater in value than the sum stated in the writ or warrant, for no malice was alleged, and the ground for not deciding on that particular point against the sheriff was that in fact no possible damage had been suffered by the owner of the goods (shop stock) who was allowed to carry on his trade in them. Finally, in Re Dalton (a bankrupt), ex parte Herrington & Carmichael (a firm) v Trustee of the property of the bankrupt ([1962] 2 All ER 499 at 504, [1963] Ch 336 at 346) the Divisional Court used the phrase (excessive and therefore wrongful and tortious execution’: although it is true to say that this was obiter.
In my judgment, the warrant, to the knowledge of the registrar, did not authorise execution for, at best, more than £4 5s; the goods seized were far more than could be justified by the warrant, and the fact that the registrar’s officer for some reason purported to levy for approximately £87 certainly cannot improve the situation; accordingly a tort was committed in respect of the tenant’s goods of which he was entitled in law to complain. It was further argued for the registrar on the particular facts of the case that there was immediate abandonment of the seizure, so that no damage can have been sustained in respect of it. I need not detail the facts. No evidence was given of any intention to abandon, it would be for the registrar to establish abandonment; his subsequent actions point in the opposite direction. Finally, it was suggested in general terms that £25 was an excessive amount as compensatory damages. I can only say that I do not agree and I would dismiss the cross-appeal.
It is not, in those circumstances, necessary to decide whether the warrant, having regard to the suspension order, authorised any execution to be levied on the tenant’s goods at all. But I think that it might be useful if a view were expressed. In an ordinary
Page 985 of [1970] 1 All ER 980
case, where both possession and money judgments are under the judgment not to be enforced while instalments are kept up, there is no problem under county court form 200; the whole judgment is suspended and if default is made in instalments the warrant as a whole will issue and no problem can arise over the costs of the warrant or over levying on the goods for the amount due ‘together with’ the costs of the warrant. If the judgment were for possession in a non-Rent Act case (ie with no suspension) but ordered that judgment for arrears of rent and mean profits should not be enforced by execution conditional on payment of instalments, the warrant issued would be for possession only, but would, it seems to me, include a provision for levy on goods of the costs of the warrant, some minor adjustment in the wording of the form being required. The possession warrant costs would, of course, be less than the costs of a combined warrant such as issued here. Here the warrant that issued was one warrant with one cost of issue. The question is to what extent the suspension order of the registrar interfered with its full effect. That suspension related only to ‘money judgment’; that, in my view, cannot, as a matter of construction of the order, extend beyond execution in respect of the sum of £83 and the taxed costs of the action. Accordingly, in my judgment, the warrant for execution on goods remained in force in respect of the sum of £4 5s, subject to the effect of later payments.
SACHS LJ. The trial of this case lasted some two days, largely because the devious issues raised by the registrar entailed consideration of a number of intricate points of fact and of law, so I would like at the outset to record indebtedness to the learned county court judge for his careful judgment, with which, after over two days of argument in this court, I find myself in agreement at all points. I thus agree that both the appeal and cross-appeal should be dismissed, and only desire to add a few words on the main claim for wrongful levy of execution.
It is of obvious importance to a debtor whose goods are being seized in execution by an officer of the court that the officer should know what is the exact sum for which he is levying; that the debtor should know exactly what sum is being demanded, and that the records of the court should show with precision what action has been attempted and what has been achieved. As regards the latter two points, the tenets of natural justice are reinforced by s 122 of the County Courts Act 1959 and the substance of county court form 162, headed ‘Notice of Levy’. In the present case the bailiff recorded on the back of the warrant that he had sought to levy and had in fact levied costs which he said in evidence amounted to £2 (£1 in respect of the 9 February application and £1 in respect of those costs of warrant attributable to the possession judgment); the registrar in evidence opined that the levy had been for £4 5s (costs of warrant attributable to both judgments); yet form 162 as handed to the tenant stated that the levy was for £87 5s and that this was the sum he had to pay within half-an-hour to avoid incurring liability for further fees or expenses. Moreover, whilst the maximum sum for which it was in these proceedings contended that a levy could be made was £4 5s, the learned county court judge held that the bailiff did in fact levy for £87 5s and that the value of the goods seized, whilst consistent with a levy for that sum, was quite inconsistent with and excessive for a levy for either £2 or £4 5s. That the levy was at least obviously excessive, even if not wholly wrongful, has thus at all material times been manifest.
The sequence of events leading to the above state of affairs has been recounted by Russell LJ and need not be repeated. It is accordingly sufficient for me to say that in such an unhappy state of affairs it is a pity that the registrar did not before trial concede that he was in the wrong and confine his attentions to the quantum of damages recoverable from him. As long ago as 1848 the duty of those who levy execution was defined in Gawler v Chaplin as being confined to seizing goods reasonably sufficient
Page 986 of [1970] 1 All ER 980
to satisfy on sale the relevant indebtedness of the judgment debtor. It has never been necessary for success in such an action as the present to show anything more than that the seizure was obviously excessive. That is enough to establish a right on the part of the judgment debtor to compensatory damages. The authorities for this proposition having been reviewed by Russell LJ and it is not necessary for me to deal with them further. I should, however, perhaps add that it remains open for consideration whether on proof of malice, of which there was none in the present case, a plaintiff may be able in appropriate cases to recover exemplary damages, on the basis that the case would then fall within the first category mentioned by Lord Devlin in Rookes v Barnard ([1964] 1 All ER 367 at 410, [1964] AC 1129 at 1226). In the upshot, the only practical advantage of the lengthy examination of the matter in the county court and on appeal has been that light has fallen on the shortcomings of certain forms being used in the course of execution procedure, and that these were brought, during the county court proceedings, to the notice of those well able to deal with such matters and to secure any necessary amendments.
In particular, county court form 200 (the warrant issued when there has been judgment both for the recovery of possession and for rent in arrear) is unhappily worded at the point where it deals with the costs of the warrant and of its execution. It is on this account all the more unfortunate that the order of the registrar of 9 February 1968, suspending execution ‘as to money judgment’, lacked that precision which is essential in relation to all documents which concern a levy by order of the court. Had it been intended to permit a levy for some moneys, whether for costs or otherwise, the order should have so stated plainly instead of using the phrase referred to. Accordingly, I agree with the broad view adopted by the learned county court judge that the order of 9 February precluded any lawful execution for money, including any costs which may have originally been ordered to be paid and the costs of the warrant. Any doubt as to the construction of such an order of the court due to its lack of precision should be resolved in favour of the subject whose goods are concerned.
How, then, can a registrar be heard to say, as had to be contended on this appeal, that his order staying a warrant for execution as to a ‘money judgment’ means clearly (albeit, incidentally, quite contrary to the understanding of his own bailiff) that the execution can go forward as to such costs of issuing the warrant (here a fee of £3 5s out of a total fee of £4 5s) as are solely attributable to the judgment for the money? And form 200 does not, on the face of it, provide any means for dividing up its own costs between the relevant judgments. There is at last a doubt, and the county court judge was right in referring to the construction propounded on behalf of the registrar as being a trap for a litigant in person who had applied for a general stay. It follows that I agree with the county court judge that the levy on the tenant’s goods was wholly wrongful and not merely excessive. This is the only point on which I have the misfortune to differ from what has been said by Russell LJ in his judgment. This difference, however, does not affect the upshot of the case; on the particular facts here, the amount of damage suffered by the tenant is not affected.
RUSSELL LJ. I am asked by Widgery LJ, who cannot be here, to say that he had read and agrees with my judgment.
Appeal and cross-appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitor: Treasury Solicitor.
E H Hunter Esq Barrister.
Donnelly v Jackman
[1970] 1 All ER 987
Categories: CRIMINAL; Police
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 27 JANUARY 1970
Police – Constable – Assault on, in execution of duty – Duty – Scope – Attempt to stop suspect to make enquiries – No charge or arrest at that time – Constable touched suspect on shoulder – Suspect struck constable – Alleged assault on constable in execution of duty.
The appellant was walking along the pavement when a police officer in uniform came up to him with a view to making enquiries about an offence which the officer had cause to believe that the appellant might have committed. The appellant ignored the officer’s repeated requests to stop and speak to him. At one stage the officer tapped the appellant on the shoulder, and shortly after the appellant tapped the officer on the chest. It became apparent that the appellant had no intention of stopping. The officer then again touched the appellant on the shoulder with the intention of stopping him (but neither then nor previously had the officer any intention to arrest the appellant), whereupon the appellant struck the officer with some force. The appellant was charged with and convicted of assaulting the officer in the execution of his duty. On appeal,
Held – The touching of the appellant’s shoulder was a trivial interference with his liberty and did not amount to a course of conduct sufficient to be outside the course of the officer’s duties; accordingly the appeal would be dismissed (see p 989 f to h, post).
Dicta of Ashworth J in R v Waterfield, R v Lynn (1963) 3 All ER at 661 and of Lord Parker CJ in Rice v Connolly [1966] 2 All ER at 651 applied.
Davis v Lisle [1936] 2 All ER 213 and Kenlin v Gardiner [1966] 3 All ER 931 distinguished.
Notes
For powers of arrest by a police constable, see 30 Halsbury’s Laws (3rd Edn) 130, para 207, for when resisting a police officer is justifiable, see 10 ibid 634, 635, para 1207, and for cases on the subject, see 15 Digest (Repl) 852–854, 8194–8216.
Cases referred to in judgment
Davis v Lisle [1936] 2 All ER 213, [1936] 2 KB 434, 105 LJKB 593, 155 LT 23, 100 JP 280, 15 Digest (Repl) 852, 8201.
Kenlin v Gardiner [1966] 3 All ER 931, [1967] 2 QB 510, [1967] 2 WLR 129, Digest (Cont Vol B) 191, 8225a.
Rice v Connolly [1966] 2 All ER 649, [1966] 2 QB 414, [1966] 3 WLR 17, 130 JP 322, Digest (Cont Vol B) 191, 8219b.
R v Waterfield, R v Lynn [1963] 3 All ER 659, [1964] 1 QB 164, [1963] 3 WLR 946, 128 JP 48, 48 Cr App Rep 42, Digest (Cont Vol A) 416, 8201a.
Case stated
This was a case stated by justices for the county of Surrey in respect of their adjudication as a magistrates’ court sitting at Farnham on 12 June 1969. The respondent, Maurice Jackman, preferred an information against the appellant, Michael James Donnelly, charging him with assaulting Edward Roy Grimmett, a police officer, whilst acting in the execution of his duty. The facts are set out in the judgment of Talbot J.
C P B Purchas for the appellant.
J M Wright for the respondent.
Page 988 of [1970] 1 All ER 987
27 January 1970. The following judgments were delivered.
TALBOT J delivered the first judgment at the invitation of Lord Parker CJ. This is an appeal by way of case stated from justices for the county of Surrey when they heard an information on 12 June 1969 which alleged that the appellant on 5 April 1969 at Elstead in Surrey assaulted Edward Roy Grimmett, a police officer whilst acting in the execution of his duty.
The facts found by the justices were these; at about 11.15 am on Saturday, 5 April, the appellant was lawfully walking along a pavement when Pc Roy Grimmett in uniform came up to him for the purposes of making enquiries about an offence which the officer had cause to believe the appellant had committed or might have committed. The officer spoke to the appellant asking him if he could have a word with him. The appellant ignored that request, and continued to walk along the pavement away from the officer. The officer followed close behind him, and apparently repeatedly asked him to stop and speak to him. At one stage the officer tapped the appellant on the shoulder, and apparently shortly after that the appellant turned round and in turn tapped the officer on the chest saying ‘Now we are even, copper’.
It became apparent to the officer, so the finding proceeds, that the appellant had no intention of stopping to speak to him. The officer then again touched the appellant on the shoulder with the intention of stopping him, whereupon the appellant then turned round and struck the officer with some force. The finding is that the officer did not touch the appellant for the purpose of making any formal arrest or charge, but solely for the purpose of speaking to him. Following the striking of the officer, the appellant was arrested for assaulting the officer in the execution of his duty and taken to the police station. The justices convicted the appellant, finding the summons proved.
The principal question it seems to me is whether the officer was acting in the execution of his duty, and a secondary question, whether anything he did caused him to cease to be acting in the execution of his duty. When considering what the duties of the officer were, I do not think that I can do better than cite the words of Lord Parker CJ in Rice v Connolly ([1966] 2 All ER 649 at 651, [1966] 2 QB 414 at 419), when he said:
‘It is also in my judgment clear that it is part of the obligations and duties of a police constable to take all steps which appear to him necessary for keeping the peace, for preventing crime or for protecting property from criminal injury.’
Furthermore, in considering the problem whether the officer went outside the ambit of his duties so as to be ceasing to be acting therein, I would refer to the words of Ashworth J taken from R v Waterfield, R v Lynn ([1963] 3 All ER 659 at 661, [1964] 1 QB 164 at 170), and this is the way it was put:
‘In the judgment of this court it would be difficult, and in the present case it is unnecessary, to reduce within specific limits the general terms in which the duties of police constables have been expressed. In most cases it is probably more convenient to consider what the police constable was actually doing and in particular whether such conduct was prima facie an unlawful interference with a person’s liberty or property. If so, it is then relevant to consider whether (a) such conduct falls within the general scope of any duty imposed by statute or recognised at common law and (b) whether such conduct, albeit within the general scope of such a duty, involved an unjustifiable use of powers associated with the duty.’
The main point taken by counsel for the appellant is that the result of what the officer did was such that he was not acting in the execution of his duty. He had, argued counsel, no right to stop the appellant or any other person other than by arrest.
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In support of his argument he cited several authorities in which officers, whilst it is alleged acting in the execution of their duties, had been assaulted, in which the court had found that in fact that was not so, they were not acting in the execution of their duties. The first one was Davis v Lisle. That was a case where a police officer, taking these facts from the headnote, believing that an offence had been committed by the servant of the appellant of causing an obstruction on the highway with a motor lorry, was making enquiries, and he went to the appellant’s garage and he went into the garage. The appellant asked him to leave and as a result of not leaving he was assaulted. It was held that even if the respondent police officer had a right to go into the garage and make enquiries, he became a trespasser after he had been told to leave, and henceforward was not acting in the execution of his duty.
That seems to me a very different case from the present one which we are considering. There the police officer had gone so far as to make himself a trespasser. The other authority quoted by counsel for the appellant was Kenlin v Gardiner. There two schoolboys apparently were visiting a number of premises and caused certain police officers to be suspicious; the police officers therefore went up to make enquiries, they said that they were police officers and asked the boys what they were calling on these houses for. Apparently the boys were acting perfectly innocently and had a perfectly lawful reason for what they were doing. However, the upshot of it was that they became alarmed and the police officers seized them by the arm, with the result that these boys retaliated and assaulted the police officers. There again in my judgment the facts of that case are vastly different from those that we are considering because there each officer had taken hold of one of the boys and had in fact detained him.
Turning to the facts of this matter, it is not very clear what precisely the justices meant or found when they said that the officer touched the appellant on the shoulder, but whatever it was that they really did mean, it seems clear to me that they must have felt that it was a minimal matter by the way in which they treated this matter and the result of the case. When one considers the problem: was this officer acting in the course of his duty, in my view one ought to bear in mind that it is not every trivial interference with a citizen’s liberty that amounts to a course of conduct sufficient to take the officer out of the course of his duties. In my judgment the facts that the justices found in this case do not justify the view that the officer was not acting in the execution of his duty when he went up to the appellant and wanted to speak to him. Therefore the assault was rightly found to be an assault on the officer whilst acting in the execution of his duties, and I would dismiss this appeal.
ASHWORTH J. I agree.
LORD PARKER CJ. I agree.
Appeal dismissed.
Solicitors: Vizard, Oldham, Crowder & Cash agents for Mellersh & Lovelace, Godalming (for the appellant); McNamara Ryan & Co, Chertsey (for the respondent).
Rosalie Long Barrister.
B Marsh (Wholesale) Ltd v Commissioners of Customs and Excise
[1970] 1 All ER 990
Categories: TAXATION; VAT and Customs and Excise
Court: QUEEN’S BENCH DIVISION
Lord(s): DUNN J
Hearing Date(s): 9, 12 JANUARY 1970
Purchase tax – Certificate of registration – Condition – Requirement that representations as holder be made only in specified circumstances or in respect of specified goods – No directions issued as to circumstances or goods – Whether notice imposing condition valid – Purchase Tax Act 1963, s 6(4)(b).
The plaintiffs carried on business as wholesalers and factors in a variety of goods, and from October 1968 they held a certificate of registration for the purposes of the Purchase Tax Act 1963. Possession of the certificate enabled them to obtain relief from purchase tax on making representations to their suppliers in respect of any particular goods required by them for sale. On 18 December 1969, a customs surveyor served on the plaintiffs a printed notice dated 16 December 1969 stating that under the powers (relating to the imposition of conditions on certificates) conferred on them by s 6(4)a of the 1963 Act the Commissioners of Customs and Excise required the plaintiffs from the date of service to ‘make representations as being the holder of a certificate of registration only in such circumstances, and as respects such classes of goods, as the Commissioners may from time to time direct’. The wording of the requirement in the notice followed the wording of s 6(4)(b) of the 1963 Act. Accompanying the notice was a letter which stated, inter alia, that pending the issuing of any further directions by the commissioners, the plaintiffs’ certificate of registration would cease to have any effect and they would therefore no longer be entitled to make representations for the tax free supply of any chargeable goods or in respect of any importations of chargeable goods. The plaintiffs claimed that the commissioners’ notice of 16 December 1969 was ultra vires, void and of no effect, on the ground that s 6(4) of the 1963 Act gave the commissioners no power either directly to withdraw or cancel a certificate or indirectly to do so by requiring its use only in accordance with directions and failing to give any directions.
Held – The notice of 16 December 1969 was a valid notice in the terms in which it was given (see p 1000 g, post) because the words ‘may from time to time direct’ at the end of s 6(4)(b) of the Purchase Tax Act 1963 indicated that the commissioners might give directions at any time and it was not necessary for them to give directions at the same time as giving notice of a requirement (see p 1000 e, post).
Per Dunn J. Only if the words are ambiguous does it become necessary for me to consider whether s 6 is penal in its effect or designed for the protection of the subject, in which case s 6(4) falls to be construed strictly against the Crown. In my judgment s 6 is not a penal section, nor is it for the protection of the subject … but I do not rest my judgment on any presumption of construction or absence of presumption. I find no ambiguity in the subsection (see p 1000 b and c, post).
Quaere. Whether the commissioners in a particular case could say in terms that they would never issue a direction (see p 1000 f, post).
Notes
For certificates of registration for purposes of purchase tax, see 33 Halsbury’s Laws (3rd Edn) 231, 232, para 394.
For the Purchase Tax Act 1963, s 6, see 43 Halsbury’s Statutes (2nd Edn) 1020.
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Cases referred to in judgment
Carltona Ltd v Works Comrs [1943] 2 All ER 560, 17 Digest (Repl) 441, 119.
Comrs of Customs and Excise v Cure & Deeley Ltd [1961] 3 All ER 641, [1962] 1 QB 340, [1961] 3 WLR 798, 39 Digest (Repl) 351, 839.
Point of Ayr Collieries Ltd v Lloyd-George [1943] 2 All ER 546, 17 Digest (Repl) 480, 278.
Action
This was an action by the plaintiffs, B Marsh (Wholesale) Ltd, asking for three declarations against the defendants, the Commissioners of Customs and Excise. The facts are set out in the judgment.
M Waters QC and P N Brandt for the plaintiffs.
Gordon Slynn for the commissioners.
12 January 1970. The following judgment was delivered.
DUNN J. In this action the plaintiffs claim three declarations. First, a declaration that on a true construction of s 6 of the Purchase Tax Act 1963, and in the events which have happened, the requirement dated 16 December 1969 served by the commissioners on the plaintiffs on 18 December 1969 and purported to be imposed under s 6(4) of the Purchase Tax Act 1963 is ultra vires, void and of no effect. Secondly, a declaration that the plaintiffs are entitled to the certificate of registration dated 16 September 1968 and issued to them on or about 8 October 1968 under s 6 of the Purchase Tax Act 1963. Thirdly, a declaration that the plaintiffs are not under a duty either to surrender the said certificate of registration or to notify any of their suppliers or agents that they have ceased to be entitled to a certificate of registration.
[His Lordship then referred to the factors which led to the case being set down for trial on 9 January 1970, the last day of the vacation, and after stating that the facts were set out in an affidavit by Mr Benjamin Marsh, a director of the plaintiffs, on 23 December 1969 and were admitted save as to one paragraph, and that documents were exhibited to the affidavit, his Lordship outlined the facts as follows:] The plaintiffs from about September 1963 carried on business as wholesalers and factors of hardware, fancy goods, toys, electrical goods and toiletries, and in due course they applied for registration and were duly registered for the purposes of the Purchase Tax Act 1963 on 16 September 1968, since when the plaintiffs have carried on business as a registered trader in the same classes of goods.
At the time of registration the commissioners, as it is admitted they were entitled to do, imposed as a condition of issuing a certificate of registration a requirement under the Purchase Tax Act 1963 that Mr Marsh should give security in a sum of £15,000 by way of bond for the payment of the purchase tax for which the plaintiffs might be or become accountable. That condition was duly complied with, the bond was furnished, and on 8 October 1968 the commissioners issued to the plaintiffs a certificate of registration in common form which has been put in evidence before me, the certificate being dated 16 September 1968.
In the first instance the commissioners, as they were entitled to do, required the plaintiffs to furnish returns of the amounts of purchase tax for which they were accountable in respect of monthly periods and to pay within seven days of the end of the monthly period. That requirement was subsequently relaxed on 19 August 1969, when the plaintiffs were required in future to furnish tax returns and pay tax on a quarterly basis. At some date after that the plaintiffs were charged with others with conspiring to defraud the customs and excise in respect of purchase tax, but it is right that I should say that the plaintiffs have always denied those charges.
On 18 December 1969, a number of customs and excise officials called at the plaintiffs’ premises and desired to take stock. Mr Smellie, a customs surveyor, asked Mr Marsh to hand over the certificate of registration to him. Mr Marsh said that the certificate was with his solicitors. Mr Smellie also handed to Mr Marsh, with
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a covering letter, a notice and a letter, which I propose to read in full as they are vital documents in this action. The notice is dated 16 December 1969 and is addressed to the plaintiffs. It is a printed form and states:
‘Under the powers conferred on them by Section 6(4) of the Purchase Tax Act, 1963, the Commissioners of Customs and Excise hereby require with effect from the date of service of this Notice that you shall make representations as being the holder of a certificate of registration only in such circumstances, and as respects such classes of goods, as the Commissioners may from time to time direct.’
The letter, which is dated 18 December 1969 and is signed by Mr Smellie as a surveyor of customs and excise, is in these terms:
‘1. I am directed by the Commissioners of Customs and Excise to serve on you herewith a Notice of requirements imposed by them on you under the powers conferred by Section 6(4) of the Purchase Tax Act, 1963. 2. The Commissioners have not at present issued any directions as to the circumstances in which, or in respect of which classes of goods, you may make representations as being the holder of a certificate of registration. 3. As from the date of this notification of the Commissioners’ requirements and pending the issuing of any further directions by the Commissioners, (a) your certificate of registration ceases to have any effect, and therefore you are no longer entitled to make representations as being the holder of a certificate of purchase tax registration (i) to any of your registered suppliers for the tax free supply to you of any chargeable goods; or (ii) in respect of any importations of any chargeable goods; (b) in accordance with Regulation 4(2) of the Purchase Tax Regulations 1965b, you are accordingly required to surrender to me forthwith your certificate of registration; and (c) in accordance with Regulation 10(2) of the Purchase Tax Regulations 1965, you are required to notify immediately, in writing any of your registered suppliers to whom you have delivered an extant representation or representations, that pending further notice, you have ceased to be entitled to hold a certificate of registration. (d) you should also notify in writing any agents holding extant authorities to make representations on your behalf with regard to imported chargeable goods, that, pending further notice, you have ceased to be entitled to hold a certificate of registration … ’
The last paragraph reminds the plaintiffs that even though their certificate of registration is currently of no effect, they are still registered under the Purchase Tax Act 1963, and consequently still required to keep accounts, to render returns and pay tax.
On the same day, 18 December, the plaintiffs’ solicitors wrote a letter which set out the objections which they were then taking to the course which had been adopted by the customs officials.
On returning to his office that day, 18 December, Mr Smellie wrote a further letter, which, as it is relied on by the Commissioners, I shall read in full. The letter states:
‘On 18th December, 1969, at 10.45 a.m. in accordance with Regulation 4(2) of the Purchase Tax Regulations 1965, I required you to surrender to me forthwith your certificate of registration for purchase tax purposes. You did not comply with this requirement and I confirm my statement to you that you have ceased to be entitled to hold a certificate of registration. I am reporting the matter for the consideration of the Commissioners of Customs and Excise.’
Finally, to complete the facts of the matter, the following day a letter was written
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on behalf of the commissioners. I need read only the second paragraph, which is in these terms:
‘In the present case, the Commissioners having considered all the relevant circumstances, are of the opinion that it is requisite for the security of the revenue to take action under their statutory powers. The Commissioners are not prepared to suspend consequential action, and they must accordingly require [Mr Marsh] to surrender his certificate of registration and to notify the sellers to whom he has given representations that for the time being, he is not entitled to a certificate of registration.’
They then point out that under the regulations a person to whom a certificate of registration has been issued is required to keep it at his principal place of business and that, in handing the certificate to their solicitors, the plaintiffs had committed a breach of the law for which penalties are prescribed. That letter was sent to the plaintiffs’ solicitors in reply to their letter of 18 December to which I have just referred. The plaintiffs’ solicitors replied to it on the same day, notifying the secretary of the customs and excise that they were intending to institute proceedings for an injunction in the near future. So much for the relevant facts.
The scheme of the legislation with which I am concerned is contained wholly in the Purchase Tax Act 1963, and I propose to refer to those sections which I regard as relevant to the determination of this question. Section 1(1) creates purchase tax on the—‘wholesale value of chargeable goods which are purchased from … persons required by this Act to be registered … ’ Section 1(2) provides:
‘The tax shall be under the care and management of the Commissioners of Customs and Excise, who may do all such acts as may be deemed necessary and expedient for raising, collecting, receiving and accounting for the tax … ’
Section 2 defines chargeable goods. Section 3 provides that the wholesale value of the goods shall be taken to be the price which the goods would fetch, for the purpose of calculating the tax. And there follow a series of sections, beginning with s 4, dealing with registration. Section 4(1) provides:
‘Subject to the provisions of this section and of section 8 of this Act, the following persons shall be registered under this Act, that is to say:—(a) every wholesale merchant or manufacturer whose business includes the selling of any chargeable goods; … ’
which, of course, includes the plaintiffs. Section 5(1) then goes on to provide that every such person shall make an application for registration in the prescribed form to the commissioners. Section 6(1) provides that:
‘The Commissioners shall, subject to the provisions of section 8 … register every person who is required by this Act to be registered, and on registering any such person shall, subject to the provisions of this section, issue to him a certificate of registration.’
Section 6(2) and (3) are not applicable to any matter which I have to consider. Section 6(4) is the subsection which I am called on to construe and I read it in full:
‘The Commissioners may, where it appears to them to be requisite for the security of the revenue to do so, impose as a condition of issuing a certificate of registration to a registered person or of the continuance in effect of such a certificate issued to such a person—(a) a requirement that he shall give security up to an amount and in a manner approved by the Commissioners for the payment of tax for which he may be or become accountable; or (b) a requirement that he shall make representations as being the holder of a certificate of registration
Page 994 of [1970] 1 All ER 990
only in such circumstances or as respects such classes of goods as the Commissioners may from time to time direct … ’
Section 6(5) is not applicable to any matter which I have to consider but sub-s (6) provides:
‘The fact that a person who is required to be registered is by virtue of any provision of this section not for the time being entitled to a certificate of registration shall not be treated as derogating in any respect from the effect of that requirement.’
that is to say, the requirement to be registered. Section 7 of the Act deals with the registration of retailers, with which I am not concerned. Section 8 deals with cases in which registration may be withheld, and it is agreed in this case that the commissioners have not purported to act under that section. Section 9 is the first of a series of sections dealing with general provisions as to charge of tax, and it provides in sub-s (1) that tax shall be charged ‘on the wholesale value of all chargeable goods’. Subsection (2) defines a chargeable purchase as being:
‘a purchase made from a wholesale merchant or manufacturer who is required by this Act to be registered … not being—(a) a purchase of goods by a registered wholesale merchant as stock for his business; … ’
The relevance of that subsection will become apparent when I refer to the next relevant provision, s 13(1), which provides:
‘Subject to subsection (2) of this section [which deals with imports], purchase shall be deemed for the purposes of this Act to be a purchase of goods by a registered wholesale merchant as stock for his business, or by a registered manufacturer as materials, if a representation is made to the seller in the prescribed manner and at the prescribed time by the buyer that he is the holder of a certificate of registration issued under this Act, and that he intends to sell the goods or to use them as materials, and not otherwise.’
It is apparent, therefore, from the combination of s 9(2) and s 13(1) that the practical effect of a trader holding a certificate of registration is that in respect of any particular purchase he is able to make a representation to his suppliers, and in those circumstances the purchase is not a chargeable purchase and no tax is payable by the trader.
For completeness, I should refer to s 13(2) which deals with imports and provides:
‘A purchase made by a registered person otherwise than in the United Kingdom or made by a person required by this Act to be registered before the date on which he is registered shall be deemed for the purposes of this Act to be such a purchase as aforesaid if the Commissioners are satisfied, on a representation to that effect made to them, that the purchase was so made and that the buyer intended to sell the goods or to use them as materials.’
I then go straight to s 31, which empowers the commissioners to make regulations. Subsection (1) provides:
‘The Commissioners may make regulations providing for any matter for which provision appears to them to be necessary for the purpose of giving effect to the provisions of this Act and of enabling them to discharge their functions thereunder, and in particular … (e) as to the form, issue, continuance in effect, variation, custody, use and surrender of certificates of registration.’
Section 33 of the Act creates certain offences, and I was referred in particular to sub-s (8) which provides;
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‘If any person … (b) contravenes any requirement imposed by or under regulations made under section 31 of this Act, the contravention being one in respect of which no other penalty is specified in this section, he shall be liable to a penalty of fifty pounds.’
The last section to which I need refer is the interpretation section, s 40, in which the expression ‘registered’ is defined as meaning:
‘registered under this Act, “registration” has a corresponding meaning, and “holder of a certificate of registration” means the holder of a certificate of registration which is in effect for the time being.’
Pursuant to the powers conferred on them by s 31, the commissioners have made certain regulations, known as the Purchase Tax Regulations 1965. They were made on 26 April 1965, laid before Parliament on 18 May that year and came into operation on 1 July that year. There are only two regulations to which I should refer. The first is reg 4, which provides:
‘(1) Every certificate of registration shall be in the form numbered 2 in the Schedule to these Regulations and shall have effect during such time as the registration to which it relates has effect or until the Commissioners otherwise direct: Provided that the Commissioners may, if in their opinion the circumstances require it, vary the particulars contained in any such certificate, whereupon it shall have effect as varied, or cancel it and issue a fresh certificate.
‘(2) A person to whom a certificate of registration has been issued shall keep it at his principal place of business or at such other place as the Commissioners direct and shall produce it on demand to an officer and shall surrender it to the Commissioners immediately on its ceasing to have effect or on demand by them or by an officer.’
Regulation 10 deals with representations under s 13(1) of the Act. Nothing turns on reg 10(1), but reg 10(2) provides:
‘A buyer who has delivered a representation to the seller and thereafter ceases to be registered or to be entitled to a certificate of registration shall immediately on so ceasing notify the seller in writing that he has ceased to be registered or to be entitled to a certificate of registration … ’
There are two preliminary matters with which I should deal before coming to the arguments of the respective counsel. The first is that it is conceded on behalf of the commissioners that, if I were to be in favour of the plaintiffs, relief by way of declaration would be the proper form of relief and that I would have jurisdiction under s 21(1)(a) of the Crown Proceedings Act 1947 to make the declarations claimed. The second preliminary matter is that the powers of the commissioners under s 6(4) may only be exercised where it appears to them to be requisite for the security of the revenue to do so. It has not been argued on behalf of the plaintiffs that the commissioners were acting in bad faith in exercising the powers which they have sought to exercise. The commissioners are the sole judges of whether the action which they take under the subsection is requisite for the security of the revenue. There is evidence before me that it appeared to the commissioners to be requisite for the security of the revenue to act as they did. It is, therefore, not for me to enquire further into that matter. The sole question, therefore, under s 6(4) which I have to decide is whether the commissioners had the power to issue the notice of 16 December.
In support of the plaintiffs’ case that they had no such power, counsel made the following submissions. First, that s 6(1) puts the obligation on the commissioners to register and to issue certificates of registration. This obligation was complied with in the instant case and a certificate accordingly issued on 8 October dated
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16 September. Secondly, s 6 contains no power to withdraw or cancel a certificate simpliciter. So long as a trader remains registered he is entitled to hold a certificate. Thirdly, s 6(4) gives the commissioners certain powers which can be exercised either before the certificate is issued or after its issue as a condition of its continuance. Fourthly, in the instant case the commissioners purported to impose a condition for the continuance in effect of the certificate. But what they have done by their notice of 16 December and their letter of the 18th is to say to the plaintiffs ‘You shall only make representations in such circumstances and as respects such classes of goods as we may direct, and we are not for the time being at any rate going to give any directions’. This, says counsel, does not constitute the imposition of a condition and s 6(4) gives the commissioners no power to do what they have purported to do, which in effect is to withdraw or cancel the certificate.
Fifthly, by analogy, under s 6(4)(a) the commissioners could not say to a trader ‘You are to give security but we are not going to tell you the amount or the manner in which security is to be provided’. Similarly, says counsel, under s 6(4)(b) the commissioners cannot say ‘You shall only make representations in certain circumstances but we are not going to tell you the circumstances.' Sixthly, again by reference to s 6(4)(a), the security required by the commissioners must be such as can reasonably be complied with, otherwise the commissioners would not be acting bona fide. Similarly, under s 6(4)(b) the circumstances must be capable of compliance and the classes of goods must be classes of goods in which the trader normally trades and not quite different goods. It would not be a proper exercise of the power for the commissioners to require that a trader in, for example, toys should only make representations in respect of furs. Seventhly, the words ‘from time to time’ in s 6(4)(b) merely give the commissioners power to vary the terms of any requirement. They do not entitle the commissioners to suspend the certificate pending the imposition of a requirement. Eighthly, the whole power in s 6(4) is a power to impose certain requirements as a condition of the continuance in effect of the certificate. The condition must be a bona fide condition so that the certificate may continue and not cease to have effect. Finally, counsel for the plaintiffs submitted that declarations 2 and 3 in the originating summons stood or fell with declaration 1, which turned on the validity of the notice of 16 December 1969.
Counsel for the commissioners submitted first, that s 6(4) was wide enough to entitle the commissioners to say to a trader, as they have said in their notice of 16 December, ‘You shall only make representations in such circumstances and as respects such classes of goods as we may from time to time direct’, full stop; and they may go on to say ‘At the moment we give no directions but that does not mean that we shall not give them in the future’. Counsel submitted that the notice of 16 December was on a printed form; it followed precisely the wording of the subsection and could not, therefore, be ultra vires. Secondly, counsel submitted that the commissioners would be entitled to say under s 6(4) ‘You shall only make representations in such circumstances and as respects such classes of goods as we may from time to time direct and we shall issue no direction’. But, says counsel, they have not gone as far as that in this case.
Thirdly, counsel for the commissioners accepted that the effect of the notice of 16 December is that if and when directions are given, the plaintiffs may make representations only in such circumstances and as respects such classes of goods as the commissioners shall then direct, but that meanwhile it is not possible for the plaintiffs to make any representation at all. That, says counsel, makes sense under the scheme of the Act. The first stage under the Act, he says, is that a trader within s 4 must be registered, and the commissioners have a duty under s 6(1) to register and issue a certificate of registration. He then contrasts the registration and its effect with the certificate of registration and its effect. He says that the purpose of registration is that a list of traders shall be kept who are accountable for purchase tax on chargeable sales and the application of chargeable processes. There is an
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obligation on the persons who register to keep proper returns. The purpose of the certificate, he submits, is to enable the trader to make representations under s 13(1) and reg 10 and this is of benefit to the trader. It follows, he argues, that there is no presumption that the sections relating to the issue and continuance of certificates should be construed strictly against the Crown; there is no presumption of construction either way. Section 6(4) gives the commissioners certain powers which are exercisable where it appears to them to be requisite for the security of the revenue. It is very important for the security of the revenue that the commissioners should have wide powers over the issue and continuance of certificates and s 6(4) should accordingly be construed widely. Fifthly, counsel submitted that the words ‘only in such circumstances’ in s 6(4)(b) means, for example, only in relation to certain specified people or only on certain terms as to trade; they are also wide enough to mean in no circumstances at all. Counsel submitted that the commissioners could impose the strictest possible condition, so that a trader in effect could not make any representation at all; and that it was only a small step from that to do what has been done here, that is, to stop him making representations altogether for the time being.
Sixthly, counsel for the commissioners submitted that the words ‘of the continuance in effect’ in the subsection give the commissioners power to say to a trader, ‘If you are going to continue to hold a certificate in the future, you must comply with conditions which we shall impose in the future’. Before the certificate was issued the commissioners could say, ‘We will only issue a certificate subject to a requirement that you shall only make representations in such circumstances as we may from time to time direct’. Similarly, at any time during the currency of the certificate the commissioners could say, ‘This is not a certificate that you can hold or use because we require that you shall only make representations in such circumstances as we may direct’.
Counsel for the commissioners then turned to the second declaration that is claimed and submitted that, even if the notice of 16 December was ultra vires, the plaintiffs were not entitled to a declaration in the form of declaration 2, which is a declaration that the plaintiffs are entitled to the certificate of registration. The reason, said counsel, was that there was a demand by an officer, and he referred to Mr Smellie’s further letter written on 18 December 1969, and indeed by the commissioners in their letter of 19 December 1969. Counsel referred to reg 4(2) and submitted that that regulation was intra vires and within the powers conferred on the commissioners to make regulations under s 31. He referred in particular to s 31(1)(e) and said that the regulation fell squarely within the powers conferred by para (e). It followed, said counsel, the regulation being in his submission intra vires, that the commissioners had power to demand the surrender of the certificate and the trader had a duty to surrender the certificate, and the effect was that the certificate ceased to have effect.
So far as the third declaration is concerned, which is a declaration that the plaintiffs are not under a duty either to surrender the certificate of registration or to notify any of their suppliers or agents that they have ceased to be entitled to a certificate of registration, counsel for the commissioners first submitted that if the notice was ultra vires the plaintiffs were entitled to this declaration. But he later submitted that even if the notice was ultra vires, if reg 4(2) was, as he submitted, intra vires, the certificate having been demanded the plaintiffs were under a duty to surrender. They were no longer entitled to it and accordingly under reg 10(2) they were under a duty to notify their suppliers that they had ceased to be entitled to a certificate. I regard the alternative point under the regulations in relation to the third declaration as still open to the commissioners to argue should this case go further.
Counsel for the plaintiffs in reply, submitted that s 33(8)(b) created offences in relation to the regulations. He said that if the notice was validly given and the requirements in the letter of 18 December not complied with, then the plaintiffs would have committed an offence or offences. He, therefore, submitted that s 6(4) was of a penal nature and should be construed strictly against the Crown. Secondly,
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he submitted that the form of the notice of 16 December was not a statutory form and the fact that it was printed had no relevance to the construction of the subsection.
He then dealt exclusively with the alternative case under the regulations made by counsel for the defendants. He said first, that this alternative case was not open to the defendants because it had never been taken in the correspondence. Secondly, he said there was no evidence of a demand for the surrender for the certificate other than a demand linked to the notice of 16 December. Therefore, he submitted that if the notice was bad, the demand was bad. Thirdly, he submitted that reg 4(2) was ultra vires save perhaps in a case where the avowed purpose of the demand was to amend or hand back or issue another certificate.
In support of that submission, he referred me to Comrs of Customs and Excise v Cure & Deeley Ltd. That was a case decided under the Finance (No 2) Act 1940 which formerly governed the question of purchase tax. Under s 33(1) of that Act, a subsection which is very similar in terms and precisely similar in effect to the first part of s 31(1) of the Purchase Tax Act 1963, it was provided that:
‘The Commissioners may make regulations providing for any matter for which provision appears to them necessary for the purpose of giving effect to the provisions of this Part of this Act and of enabling them to discharge their functions thereunder … ”
Pursuant to that power the commissioners made a regulation (reg 12 of the Purchase Tax Regulations 1945c) as follows:
“If any person fails to furnish a return as required by these regulations or furnishes an incomplete return the Commissioners may, without prejudice to any penalties which may be incurred by such person, determine the amount of tax appearing to them to be due from such person and demand payment thereof, which amount shall be deemed to be the proper tax due from such person and shall be paid within seven days of such demand unless within that time it is shown to the satisfaction of the Commissioners that some other amount is the proper tax due which other amount shall immediately be paid to the Commissioners.’
It was said on behalf of the taxpayer in the Cure & Deeley case that that regulation was ultra vires and it was so held. The effect of the decision of the case has now been overruled by s 27 of the 1963 Act, which gives the commissioners power to estimate the tax. But counsel for the plaintiffs relied on the Cure & Deeley case in view of certain expressions of principle which Sachs J made as to the power of the commissioners to make regulations under s 33 of the Finance (No 2) Act 1940. He relied in particular on a passage which is in these terms ([1961] 3 All ER at 657, [1962] 1 QB at 366, 367):
‘In the first place I reject the view that the phrase “appear to them to be necessary” when used in a statute conferring powers on a competent authority, necessarily makes that authority the sole judge of what are its powers as well as the sole judge of the way in which it can exercise such powers as it may have.’
Then Sachs J said ([1961] 3 All ER at 657, 658, [1962] 1 QB at 367):
‘To my mind a court is bound before reaching a decision on the question whether a regulation is intra vires to examine the nature, objects, and scheme of the piece of legislation as a whole, and in the light of that examination to consider exactly what is the area over which powers are given by the section under which
Page 999 of [1970] 1 All ER 990
the competent authority is purporting to act. In taking that view I respectfully apply the line of approach adopted by LORD GREENE, M.R., in the cases previously cited [those were Carltona Ltd v Works Comrs and Point of Ayr Collieries Ltd v Lloyd-George] where he referred to the need for the acts of the competent authority to fall within the four corners of the powers given by the legislature.’
Sachs J then said ([1961] 3 All ER at 658, [1962] 1 QB at 368):
‘Having reached this conclusion I now turn to the legislation under consideration in the present case.’
The section being considered was s 33(3) of the Finance (No 2) Act 1940 which contained the charging provisions. Then Sachs J said ([1961] 3 All ER at 659, [1962] 1 QB at 369):
‘It is against the background of the foregoing examination of the relevant legislation that the court has to interpret the words in s 33(1) of the Act of 1940: “for the purpose of giving effect to the provisions of this Part of this Act and of enabling them to discharge their functions thereunder” to see what is the area over which the power of the commissioners to make regulations extends. The word “and”, as was rightly conceded by counsel for the commissioners, is one which, if the court can (contrary to his main submission) consider the ambit of the powers given by s. 33, necessitates the regulations being such as are required for the discharge of the commissioners’ functions as well as their being related to the provisions of Part 5 of the Act. On this footing it is to my mind clear that reg. 12 is ultra vires on at any rate three grounds … ’
and Sachs J went on to state that one of those grounds was ([1961] 3 All ER at 659, [1962] 1 QB at 369) ‘… the fundamental repugnance of reg 12 to the charging provisions of the relevant legislation … ' Finally, counsel for the plaintiffs relied on a later sentence in which Sachs J said ([1961] 3 All ER at 661, [1962] 1 QB at 372):
‘Moreover, in a taxing statute it is better that sections designed to give protection to the subject be construed strictly, rather than that there be allowed a laxity, so as to enable the merits of a case to hold sway.’
That was in relation to an argument which had been addressed to him that the document which was relied on had not been signed by one of the persons referred to in one of the sections of the Act.
Counsel for the plaintiffs submitted that in the instant case the legislation under consideration in considering whether or not the regulations were ultra vires is s 6(4), which empowers the commissioners to impose conditions on the continuance in effect of the certificate. He said that this subsection must be construed strictly. He also submitted that s 31(1)(e) is governed by the words in the subsection ‘appears to them to be necessary for the purposes of giving effect to the provisions of this Act’ and he said that if the Act itself gives no power to demand a certificate by the commissioners or by an officer, as reg 4(2) purports to do, then such power cannot be conferred by regulation, and that the regulation is repugnant to the provisions of s 6(4).
Counsel for the commissioners, in dealing with the Cure & Deeley case, referred to s 31(1) of the 1963 Act and emphasised the words that the commissioners were empowered to make regulations where it ‘… appears to them to be necessary for the purpose … of enabling them to discharge their functions [under the Act] … ' He submitted that the commissioners had a duty under the Act to obtain the tax due and that the performance of these duties required them to have a power to demand
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the certificate. He conceded that there was or might be some overlap between the provisions of s 6(4) and s 31(1), but he said effect must be given to both sections and he referred me once again to s 31(1)(e), which gives the commissioners express power to issue regulations as to, inter alia, the surrender of certificates of registration.
I conceive it to be my duty prima facie to construe the words of s 6(4) of the 1963 Act according to their ordinary meaning as used in the English language, in the light of and against the background of the scheme of the Act as set out in the other relevant sections. Only if the words are ambiguous does it become necessary for me to consider whether s 6 is penal in its effect or designed for the protection of the subject, in which case s 6(4) falls to be construed strictly against the Crown. In my judgment s 6 is not a penal section, nor is it for the protection of the subject. It is one of a concatenation of sections dealing with the registration and issue of certificates which entitle traders to relief from tax under s 13(1), but I do not rest my judgment on any presumption of construction or absence of presumption. I find no ambiguity in the subsection. The subsection reads as follows, so far as is relevant:
‘The Commissioners may, where it appears to them to be requisite for the security of the revenue to do so, impose as a condition … of the continuance in effect of such a certificate issued to [a registered person] … (b) a requirement that he shall make representations as being the holder of a certificate of registration only in such circumstances or as respects such classes of goods as the Commissioners may from time to time direct.’
I repeat the last words ‘as the Commissioners may from time to time direct’. The operative word is ‘may’, not ‘shall’. There is no obligation on the commissioners to give directions at any particular time, and in my judgment the words ‘from time to time’ go further than meaning a mere variation of directions, as submitted by counsel for the plaintiffs. In my judgment the commissioners may give directions at any time, and it is not necessary for them to give directions at the same time as giving notice of a requirement that a trader shall make representations only in such circumstances or as respects such classes of goods as the commissioners may from time to time direct. It is not necessary for me to decide, and I do not decide, whether the commissioners could in a particular case say in terms that they will never issue a direction. All I am required to decide is whether the commissioners were entitled to give the notice of 16 December 1969 in the terms in which it was given. In my judgment they were. The notice was a valid notice and therefore the first declaration fails. It having been conceded that if the first declaration fails, the second and third declarations also fail, I make no order on either of those two declarations.
On the view I have taken of the validity of the notice, it is not necessary for me to decide whether, if the notice had been ultra vires, the commissioners would have been entitled under the regulations to demand the surrender of the certificate or whether the regulations themselves were ultra vires. I make no finding on either of those matters, but I have recited in this judgment the arguments of counsel on what I have called the alternative points both out of deference to them and in case this matter goes further.
Judgment for the commissioners.
Solicitors: Tarlo, Lyons & Aukin (for the plaintiffs); Solicitor, Customs and Excise.
K Diana Phillips Barrister.
Rooney v Haughton
[1970] 1 All ER 1001
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 22, 23 JANUARY 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Breath test – Second breath test – Suspect taking first breath test at police station – Whether suspect entitled to insist on second breath test at same station – Road Safety Act 1967, s 2(7).
On the true construction of s 2(7)a of the Road Safety Act 1967, a person who has taken one breath test in a police station, and has then and there been arrested because of the result shown by the test, is not entitled to insist on a second breath test at that same station (see p 1003 h and p 1004 b, post).
Notes
For requirements to take a breath test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 2.
For the Road Safety Act 1967, s 2, see 47 Halsbury’s Statutes (2nd Edn) 1556.
Case referred to in judgments
Scott v Baker [1968] 2 All ER 993, [1969] 1 QB 659, [1968] 3 WLR 796, Digest Supp.
Cases also cited
Leachinsky v Christie [1945] 2 All ER 395, [1946] KB 124.
Swift v Barrett [1940] 163 LT 154.
Case stated
This was a case stated by the stipendiary magistrate for the city of Liverpool (L M Pugh Esq) in respect of his adjudication as a magistrates’ court sitting at Liverpool on 27 May 1969 when on an information preferred by the respondent, James Haughton, he convicted the appellant, Terence Rooney, of driving a motor vehicle with a blood-alcohol content in excess of the prescribed limit.
P G Smith for the appellant.
Heather Steel for the respondent.
23 January 1970. The following judgments were delivered.
ASHWORTH J. This is an appeal by way of case stated from a decision of the learned stipendiary magistrate for the city of Liverpool, before whom the appellant came charged that he was driving a vehicle on a road having consumed alcohol in such quantity that he, to put it shortly, had exceeded the prescribed limit of alcohol in his blood. It is a somewhat unusual case, and the facts giving rise to the charge were as follows: at 2.30 am on 1 January 1969, the appellant was driving a taxi, and was involved in a collision with a motorist named Baker. The appellant did not stop after the accident, but drove to Old Swan police station in order to report the accident. At the same time Mr Baker drove to the same station in order to report the accident, and unhappily for all concerned the arrival of both was simultaneous and they met outside the police station. Perhaps not surprisingly, there ensued what is described as a heated argument. A police officer on duty at Old Swan police station heard this
Page 1002 of [1970] 1 All ER 1001
argument, heard, as the case finds, a disturbance in the vestibule, and went out to Mr Baker and the appellant and asked them to come into the police station, which they did. Inside the station, the officer asked the reason for the argument, and no doubt because of what he saw or smelt, the officer asked the appellant to take a breath test, and the breath test gave a positive result. The officer then told the appellant that he was arresting him under the Road Safety Act 1967 and took him to Eaton Road, Bridewell, in the city, where he had a further breath test which again proved positive. In the result, he was charged as already indicated, and duly convicted.
Before the learned magistrate three distinct contentions were put forward, and it is convenient to deal with them separately. The first contention was that there was no evidence that the device used by the police officer for the purpose of taking the breath test at Old Swan police station, was a type approved by the Secretary of State. Counsel for the appellant recognises that there is a specific finding of fact which is contained in the case stated that the device was one approved by the Home Office, but it is urged that this finding is of no consequence, if there was no evidence on which it could be based, and no doubt because this point was taken below the case contains a short statement of the evidence relating to the question whether the device was of a type approved for the purpose of a breath test by the Home Office. The question now arises whether such evidence was enough. I do not propose to read it at all; it is fair to say that such evidence was not as complete or as positive as one normally finds in this type of case, especially since the decision in Scott v Baker. In my view the present appeal should serve as a useful warning to police officers that they should be prepared to be questioned regarding the nature of the device used. But having considered the evidence give in chief, which included the statement that the device was one approved by the Home Office, and perhaps equally important, the evidence given in cross-examination, I have come to the conclusion for my part that there was enough evidence to support the findings. As might be expected, there was no contradictory evidence, and in my judgment the learned stipendiary magistrate was entitled to make the finding of fact to which I have already referred.
The second contention was that the police officer had no power to arrest the appellant under s 2(4) of the 1967 Act, since the appellant had previously been arrested and detained at a police station. The learned stipendiary magistrate was prepared to deal with this contention on the assumption that there had been a previous arrest, although he expressed in terms considerable doubt whether in fact such previous arrest had taken place. For my part, I take the view that on the facts stated, there was no such previous arrest. In the case it is stated:
‘The Police Officer did not tell them he was arresting them. He did not charge them inside the station with any arrestable offence. He did not at any time state in terms the offence for which he had arrested them.’
In my view the police officer took the right and proper course of asking the two men who were involved in a heated argument outside the police station to come inside; they complied with the request, but it does not mean that they were arrested, and indeed it is difficult to see why the police officer should have arrested them unless they refused to comply with his request. Accordingly, in my view the basis of this contention is not made out, and it is therefore unnecessary to decide whether the police officer would have had power to arrest the appellant for the purposes of s 2(4) of the Road Safety Act 1967 if at the time the appellant had already been arrested.
The third contention was that the evidence relating to the taking and analysis of the specimen of blood was inadmissible, since the appellant did not consent to the specimen being taken for the purposes of s 7(2) of the Act. The relevant facts are set out in the case stated and I read them:
Page 1003 of [1970] 1 All ER 1001
‘(m) The Officer told the Appellant that he required him to provide a specimen of blood or urine for a laboratory test and asked if he was willing to provide a specimen of blood. The Appellant agreed and the Officer for that purpose requested Doctor Crawford to attend. (n) When Doctor Crawford arrived he asked the Appellant to provide a sample of blood. The Appellant at first agreed but then said he wished to supply a sample of urine. The Doctor informed him that he had already agreed to supply a sample of blood and that it was at that time too late for the Appellant to change his mind. (o) The Doctor then again asked for a sample of blood and the Appellant permitted Doctor Crawford to take a specimen of blood.’
On these findings it seems to me that the question is whether the consent eventually given is to be regarded as no consent, on the ground that it was obtained improperly. Assuming, though not deciding, that it was open to the appellant to change his mind and provide a specimen of urine rather than blood, the facts found show that he did consent to give a specimen of blood. Prima facie, evidence of that consent is admissible unless the court in its discretion excludes it as having been obtained under pressure. The learned stipendiary magistrate did not express any view on this point, but for my part I can see no good ground or any ground for excluding the evidence.
At the hearing of the appeal a fourth contention was put forward, and as the court heard argument on it, it is desirable to deal with it. The contention is based on the wording of s 2(7) of the Act, which provides:
‘A person arrested under this section or under [s 6(4) of the Road Traffic Act 1960] shall, while at a police station, be given an opportunity to provide a specimen of breath for a breath test there.’
It is argued that although the appellant was given a breath test at Old Swan police station before his arrest, it was nonetheless necessary to give him an opportunity for a second breath test at that station after he had been arrested. I have no doubt at all that sub-s (7) was designed to apply to the wholly different situation such as a case where a person has been arrested under s 2(4) and has been brought to a police station. In such a case the first breath test which leads to arrest has to be taken ‘there or nearby’ the place where the person was driving or attempting to drive: see s 2(1). Such a person is then taken to a police station after being arrested, and is there entitled to an opportunity of a further breath test which can no doubt be taken in more convenient circumstances than those which exist on a road. If, of course, that station is one at which arrangements can be made for a specimen of blood or urine to be taken, a second breath test is required under s 3 of the Act.
In my view sub-s (7) caters for what I might call an intermediate police station, to which a person is brought after arrest, or before being taken on to a police station for the provision of a blood or urine specimen. Notionally one can add in sub-s (7) after the words ‘while at a police station’ the words ‘to which he has been brought’. Unless the language of sub-s (7) compels me to do so, I am not prepared to construe the subsection as requiring that a person who has taken one breath test in a police station and has then and there been arrested because of the result shown by the test, should be entitled to insist on a second breath test at that same station. The taking of a second breath test in such circumstances would be a pointless exercise, because the second breath test could be taken within minutes of the first, and in my judgment the subsection does not require it. What the subsection does require is that an opportunity for a breath test should be given while the suspect person is at a police station, and in the present case that requirement was manifestly fulfilled. It was argued that the subsection covers the case of a man kept for an undue time at the police station where he has been arrested, in which case the second test might be negative. But this situation is covered by s 3, which provides for a further breath test at the police station where a blood or urine specimen is provided. If undue time has
Page 1004 of [1970] 1 All ER 1001
been spent at the first police station so that a second breath test at that station is likely to prove negative, there is all the more likelihood of a negative result if the second breath test is taken later at another police station before the blood or urine specimen is provided.
Ingenious as no doubt some of these contentions are, in my judgment there is no substance in any of them, and I would dismiss this appeal.
TALBOT J. I agree that the appeal should be dismissed.
LORD PARKER CJ. I also agree.
Appeal dismissed.
Solicitors: Grant, Saw & Sons agents for Michael A Globe & Co, Liverpool (for the appellant); Stanley Holmes, Liverpool (for the respondent).
Euan Sutherland Esq Barrister.
McPhail v London Borough of Islington
[1970] 1 All ER 1004
Categories: HOUSING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 16, 17 DECEMBER 1969
Housing – House in multiple occupation – Personal washing facilities – Whether expression includes provision of hot water supply – Question of degree and fact – Housing Act 1961, s 15(1).
The landlord owned a house occupied by four families under separate lettings. It was one of several such houses owned by the landlord in which the tenants ordinarily made their own provision for hot water. The local authority served a notice on the landlord under s 15(1)a of the Housing Act 1961 specifying works which in the opinion of the local authority were required to render the premises reasonably suitable for occupation and requiring those works to be executed. The works specified included the provision of a piped supply of hot water. On the question whether the local authority had power under s 15(1) to require (under the expression ‘personal washing facilities’) the provision of a piped supply of hot water.
Held – (i) The question what reasonable washing facilities were required to make particular premises reasonably suitable for the occupation of those dwelling there was one of fact and degree.
(ii) The decision of the local authority concerned was not conclusive on that question (being subject to a right of appeal under s 17 of the Act).
Page 1005 of [1970] 1 All ER 1004
(iii) It would be wrong to construe the words ‘personal washing facilities’ as never including a hot water supply.
(iv) In relation to the premises in question it was appropriate that the expression ‘personal washing facilities’ should be deemed to include a hot water supply.
Notes
For houses let as lodgings or occupied by members of more than one family, see 19 Halsbury’s Laws (3rd Edn) 614, para 992, and for cases on the subject, see 38 Digest (Repl) 260–262, 680–701.
For the Housing Act 1961, s 15, see 41 Halsbury’s Statutes (2nd Edn) 486.
Appeal
This was an appeal by Donald Douglas McPhail, the landlord and owner of 25 Thornhill Square, London N1 (‘the landlord’), against the order of his Honour Judge Dow at Clerkenwell County Court made on 2 April 1969 dismissing his appeal against a notice served on him under s 15 of the Housing Act 1961 by the London Borough of Islington. The facts are set out in the judgment of Russell LJ.
T M Eastham QC and D E Hill-Smith for the landlord.
W J Glover QC and G E Moriarty for the local authority.
17 December 1969. The following judgments were delivered.
RUSSELL LJ. This is an appeal from his Honour Judge Dow at Clerkenwell County Court which raises a point of law under s 15 of the Housing Act 1961. That Act amended the Housing Act 1957 in relation to houses in multiple occupation. So far as is at present concerned, s 15 provides that the local authority can serve a notice requiring works to be carried out by a landlord if it forms the opinion that the condition of the house is so far defective in respect of certain matters, having regard to the number of individuals or households therein, as not to be reasonably suitable for occupation by them. The works are to be those which in the opinion of the local authority are required for making the premises reasonably suitable for such occupation. The ‘certain matters’ that I have just referred to include ‘water supply’ and ‘personal washing facilities’. It should be noted that there is a right of appeal by the landlord to the county court on the ground that the condition of the premises did not justify the local authority in requiring the works.
The landlord owns a house in multiple occupation, 25 Thornhill Square, London N1. It is one of a good many such houses owned by him in the area in which the tenants ordinarily make their own provision for hot water either by heating on a stove or fitting a heater to the cold water supply. The local authority served a notice under s 15 which described, so far as is now material, the alleged defect as:
‘personal washing facilities: lack of supply of hot water to (1) basement letting, (2) first floor letting, (3) second floor letting’,
and it specified the works to be executed, so far as now material, as follows:
‘personal washing facilities—provide a piped supply of hot water over a sink or wash hand basin in the following lettings … ’
and then the same three lettings are set out. I pause for a moment to say that it is agreed that the words ‘provide a piped supply of hot water’ are not to be taken literally but are to be read as if, for example, it was ‘provide for a piped supply of hot water’, etc.
The landlord appealed to the county court against that requirement, and the only part of his appeal which is now to be considered is para 3:
‘That section 15 of the Housing Act 1961 does not empower the council to stipulate the provision of a hot water supply.’
Page 1006 of [1970] 1 All ER 1004
Thus the question is simply what is the true construction of s 15 with particular reference to the phrase ‘personal washing facilities’. Does this phrase empower the local authority to treat the absence of facilities in the shape of availability of a piped supply of hot water to a suitable basin or sink as a relevant defect? The learned county court judge thought that it did, and the landlord now appeals to this court.
For the landlord it is argued that the words ‘personal washing facilities’ are capable of referring only to a piped supply of cold water to a suitable basin or sink; that the phrase should be narrowly or strictly construed inasmuch as: (a) the section involves compulsory expenditure by the landlord without, at least until the Housing Act 1969, any grant in aid, although of course a return on the capital laid out may be obtained by increases in rent; and inasmuch as (b) the section since the Housing Act 1964 involves, on disobedience to a notice requiring works to be carried out, a criminal offence. Further, our attention was drawn to a number of statutory provisions designed to improve the standard of housing amenities in which express reference is made to hot water showing, it was argued, that in a relevant field when Parliament meant hot water it said it. Those references I need not read out, but they were to the House Purchase and Housing Act 1959, s 4; the Housing Act 1964, s 43; the Housing Act 1969, ss 1 and 7 and Sch 1; and also in fact another section of the 1961 Act, s 30. For my part I am not led by these arguments to the conclusion that the phrase ‘personal washing facilities’ is as a matter of construction limited to the supply of cold water. It seems to me that on their ordinary construction the words extend to embrace not only a cold water supply but also a hot water supply and I do not see why I should narrow them from their ordinary scope by reason of the arguments which I have labelled (a) and (b). Nor am I persuaded to the contrary by the express references elsewhere in legislation to hot water. In these other instances standard amenities are laid down as qualifying for grant and it is necessary in such case to specify precisely that not only cold but also hot water is required in order to qualify for grant. It would not have done in that context to use a phrase which would cover either a cold supply or a hot supply. In the present case there does not seem to me to be any similar need for such precise specification.
There is in my judgment an additional reason for construing the words ‘personal washing facilities’ as a phrase capable of extending to hot water. It is undoubted that provision of a shower bath may be required under this section as a personal washing facility. But surely Parliament is not to be thought so foolish as to envisage the lack of a cold water only shower as a relevant defect. While a bath with only a cold water tap may be made supportable by liberal addition from boiling kettles, I know of no method by which a cold water only shower can similarly be tempered in cold weather to the washing needs of the average person.
Finally a point was made, in fact from the Bench, that the section was directly related to the numbers of individuals or households in the premises. How, it was asked, could the need for hot water as such be related to numbers? The answer to this point is, I venture to think, in the end clear. As an example, a household of one person may rub along well enough on the occasional boiled kettle for that one’s personal washing. But if one has a household of, say, six including four children, a piped supply of hot water from a geyser into a basin or sink may be far more necessary for the regular attainment of personal cleanliness.
I would dismiss the appeal.
SACHS LJ. The practical issue which has given rise to this litigation concerned the providing of a hot water supply system of the category often referred to as the Ascot type, in a number of premises in multiple occupation. Must it, if the local authority so orders under s 15 of the Housing Act 1961, be installed by the landlord—who can then recoup himself by raising the rent? Or should it be left to the tenant to add such an installation to the existing cold water supply provided by the landlord—if the tenant happens to want piped hot water? In the particular house under
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consideration there were four families in occupation under separate lettings. One tenant had installed his own hot water supply system and the other three had not. There then came into existence the order now under appeal.
For the purpose of determining the above issue the court has to consider whether in that particular section ‘personal washing facilities’ include a piped hot water supply (it being common ground that an Ascot system is such a supply system). If the local authority has the power to order that such a system be provided by the landlord, it is from that section alone that it can derive, and then only if the local authority is of the opinion that the existing personal washing facilities are defective to the degree prescribed in it.
The relevant three words to my mind refer to such reasonable washing facilities, in the ordinary meaning of those words, as are required to make the particular premises reasonably suitable for the occupation of those dwelling there. That must be a matter of fact and degree in which regard must be had to a number of factors including the general conditions prevailing in the locality under consideration and the particular conditions in the premises themselves. Just as conditions vary as between a house in central London and a crofter’s cottage on a barren Hebridean island, so also must vary the assessment of what are reasonable personal washing facilities in the context of the section.
No suggestion has been made in the course of the agreed statement of facts or indeed in this court to the effect that a piped hot water supply system is not in general a reasonable constituent of personal washing facilities in the relevant area of London or in particular in these premises. It has, however, been submitted that the relevant words should be so construed as never to include such a hot water system. That submission I reject as conflicting with the ordinary meaning of the words. Indeed it conflicts as well with the whole tenor of the obvious intentions of the legislature. To suggest in these days that personal washing facilities cannot include the provision of such hot water seems to me to be wholly untenable and for these reasons I also would dismiss the appeal.
It is, however, of importance to mention one far-reaching submission raised by the local authority in order to reject it with some firmness. It was suggested at first instance and more faintly in this court that in some way or other the opinion of the local authority was conclusive as to what personal washing facilities were reasonable and what facilities were defective to the extent referred to in s 15(1). For the local authority to have formed an opinion to the effect mentioned in the subsection is, of course, a condition precedent to any purported exercise of its relevant powers, but any suggestion that the courts are bound by or cannot go behind that opinion is quite unfounded. Such a suggestion must indeed seem odd to anyone who knows anything either of the way local authorities may form their opinions (we are told that in the instant case the decisions are delegated to a single member), or of the potential dangers of bureaucratic inflexibility amongst its advisers. The specific right of appeal given by s 17(1) of the 1961 Act of itself makes it clear that the submission has no force; it is thus unnecessary to set out further reasons why it was bound to fail.
PHILLIMORE LJ. I must confess my mind has vacillated to some extent during the hearing of this appeal, but I have come to the same conclusion as my Lords and indeed I would wish to express it in the way that Ruseell LJ has done.
For myself, as I see the problem it is this. The short question we have to decide is: what is the meaning of the words ‘personal washing facilities’ in s 15 of the Housing Act 1961? In the selfsame Act s 30(1), providing for grants for improvements, stipulates that, whereas under the House Purchase and Housing Act 1959 a hot water supply may constitute an improvement, under sub-s (2) a hot water supply at a
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fixed bath or shower in a bathroom and at a wash-hand basin and a sink shall be substituted for the earlier provision.
Counsel for the landlord says with force that if personal washing facilities are to include a piped supply of hot water as referred to in s 30, why does not it say so in s 15? Secondly he submits that since this is a penal statute it must be construed so as to interfere to the minimum with the ordinary rights of the citizen.
I have come to the conclusion, first, that Parliament intended that personal washing facilities should be the subject of a local test. After all, the meaning of the words may very with the area in question and the type of housing available. It would be odd, as it seems to me, if a house in Mayfair had no piped hot water supply, but this is by no means the case all over London. Thus, as I think, it was not unreasonable to confide to the local authority the initial decision as to what is necessary in the case of a house in multiple occupation in that area or what would be regarded as reasonably suitable in that locality for that number of people. Section 17, as has already been pointed out, provides for an appeal to a local county court judge.
I believe that the words are capable of including a piped supply of hot water. The local authority think that it must include such a supply in the case of this house occupied as it is by four families. Indeed the landlord could have asked the court to review the case on the facts, but he did not. He said fairly and squarely that this provision cannot include a piped supply of hot water. I ask myself, why not?If it can in the case of a Mayfair house, why not in the case of Islington?
Section 15, it is true, is concerned primarily with the problems involved in houses in multiple occupation. One must have the right quantity for the number of people involved. Why does not this provide for hot water? It seems to me, as Russell LJ has already said, that a kettle may do for a single individual, but a husband and wife and four children may need more hot water than a kettle will supply. So I think that this was a matter of fact for the judgment of the learned judge.
Dealing with the second submission, of course specific words are vital if there is to be a risk of prosecution. The landlord can now be prosecuted for failure to comply with such a notice as this. Obviously the words of the notice itself provide a specific test. The citizen knows exactly what he has to deal with. The only possible test of the need for personal hot water facilities is provided by a local decision with a safe guard of appeal. So I think that the requirement of precision is met.
I agree that there is no analogy between s 15 and s 30 and that the landlord is in effect trying to restrict the ordinary meaning of the words ‘personal washing facilities’.
For those reasons I also would dismiss this appeal.
Appeal dismissed. Leave to appeal to the House of Lords.
Solicitors: Nicholls, Christie & Crocker, Wembley (for the landlord); Director of Legal and Administrative Services, Islington (for the local authority).
Kaushalya Purie-Harwell Barrister.
Ministry of Housing and Local Government v Sharp and another
[1970] 1 All ER 1009
Categories: TOWN AND COUNTRY PLANNING: TORTS; Negligence
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SALMON AND CROSS LJJ
Hearing Date(s): 9, 10, 11, 12 DECEMBER 1969, 29 JANUARY 1970
Town and country planning – Compensation notice – Certificate of registrar of local land charges – Conclusiveness – Error – Omission of compensation notice – Whether certificate conclusive.
Town and country planning – Compensation notice – Registration – Rules – Ultra vires – Whether power to make certificates issued by local land registrar conclusive as to existence of compensation notice – Town and Country Planning Act 1954, s 28(5) – Local Land Charges (Amendment) Rules 1954 (SI 1954 No 1677), r 2.
Statutory duty – Certificate – Issue – Register of local land charges – Issue of false certificate – Conclusiveness – Loss of incumbrancer’s rights – Whether right of action for breach of statutory duty – Land Charges Act 1925, s 17(2).
Negligence – Duty to take care – Certificate – Issue – Register of local land charges – False certificate issued by employee of local authority – Conclusiveness – Loss of incumbrancer’s rights – Whether employee owed duty of care – Vicarious liability of local authority.
Negligence – Duty to take care – Statement – Official certificate of search of local land charges register – Vicarious liability of local authority to incumbrancer for inaccurate preparation by employee – Whether voluntary assumption of responsibility essential.
In 1960, the Ministry of Housing and Local Government paid compensation relating to land for which planning permission had been refused and in respect of which a claim had been established under the Town and Country Planning Act 1947. The Ministry then served a compensation notice on the local council, who registered it pursuant to s 28(5)a of the Town and Country Planning Act 1954 in the local land charges register. In 1962, planning permission was granted and prospective purchasers, who (being the developers) would have been liable to repay the compensation to the Ministry, caused a search to be made in that register. An employee of the council, who made the search, negligently failed to record the compensation notice and issued a clear certificate under the hand of S, the registrar of local land charges. On the question whether the Ministry was entitled to damages for loss of entitlement to repayment of compensation and, if so, from whom,
Held – (i) The Local Land Charges (Amendment) Rules 1954, r 2, which (inter alia) made a certificate of search conclusive in respect of a compensation notice, was intra vires the rule-making power (s 28(5) of the Town and Country Planning Act 1954) (see p 1015 f, p 1021 j to p 1022 a and p 1036 d, post).
(ii) Accordingly, the Ministry had suffered damage by reason of its loss of entitlement to repayment of compensation (see p 1015 g and p 1036 e, post).
(iii) (Lord Denning MR dissenting) section 17(2) of the Land Charges Act 1925 did not impose an absolute obligation on the registrar to make an effective search and issue a complete certificate of search; accordingly, he was not liable under s 17(2) for the Ministry’s lossb (see p 1023 h, p 1036 h and p 1037 f, post).
Page 1010 of [1970] 1 All ER 1009
(iv) It could not be said that (in the absence of a contractual relationship) liability in negligence for a mis-statement arose only as a result of a voluntary assumption of liability (Dictum of Lord Devlin in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER at 611 explained) (see p 1018 h, p 1027 j to p 1028 a and p 1038 d, post); accordingly, the employee of the council was liable to the Ministry and (it was conceded) the council was vicariously liable for its employee’s fault (see p 1019 c, p 1028 f and p 1038 h, post).
Per Salmon LJ. (i) The present case does not precisely fit into any category of negligence yet considered by the courts. The Ministry has not been misled by any careless statement made to it by the defendants or made by the defendants to someone else who the defendants knew would be likely to pass it on to a third party such as the Ministry, in circumstances in which the third party might reasonably be expected to rely on it (see p 1027 b, post).
(ii) The word ‘officer’ in the Land Charges Act 1925, s 17(5) covers the registrar (see p 1023 a, post).
Decision of Fisher J [1969] 3 All ER 225 reversed in part.
Notes
For searches and official certificates of search in respect of local land charges, see 23 Halsbury’s Laws (3rd Edn) 99–100, para 208.
For the construction of a statute to ascertain whether an action lies, see 36 ibid 451–455, paras 687–682, and for cases on the subject, see 44 Digest (Repl) 354–357, 1912–1938.
For the exercise of public executive functions generally, see 30 Halsbury’s Laws (3rd Edn) 685–706, paras 1323–1350, and for cases on the subject, see 38 Digest (Repl) 6–25, 11–128, and 70–73, 467–488.
For the general principles of negligence, see 28 Halsbury’s Laws (3rd Edn) 3–22, paras 1–19 and for cases on the subject, see 36 Digest (Repl) 12–30, 34–133.
For the Land Charges Act 1925, ss 15 and 17, see 20 Halsbury’s Statutes (2nd Edn) 1088, 1093.
For the Town and Country Planning Act 1954, s 28, see 34 Halsbury’s Statutes (2nd Edn) 950.
For the Local Land Charges Rules 1934, r 15, see 18 Halsbury’s Statutory Instruments (1st Re-issue) 276.
Cases referred to in judgments
A-G v Mutual Tontine Westminster Chambers Association Ltd (1876) 1 Ex D 469.
Candler v Crane Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, 36 Digest (Repl) 17, 75.
Cutler v Wandsworth Stadium Ltd [1949] 1 All ER 544, [1949] AC 398, [1949] LJR 824, 25 Digest (Repl) 504, 582.
Dawson & Co v Bingley Urban District Council [1911] 2 KB 149, [1911–13] All ER Rep 596, 80 LJKB 842, 104 LT 659, 36 Digest (Repl) 31, 138.
Donoghue (or M’Alister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, 101 LJPC 119, 147 LT 281, 36 Digest (Repl) 85, 458.
Douglass v Yallop (1759) 2 Burr 722, 97 ER 532, 38 Digest (Repl) 63, 380.
Glanzer v Sheppard (1922) 23 NY 236.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, Digest (Cont Vol A) 51, 1117a.
Henly v Lyme Corpn (1828) 5 Bing 91, 6 LJOSCP 222, 130 ER 995, affd sub nom Lyme Regis Corpn v Henley (1834) 1 Bing NC 222, [1824–34] All ER Rep 603, 38 Digest (Repl) 24, 119.
Herbert v Paget (1662) 1 Lev 64, 83 ER 299, 38 Digest (Repl) 63, 379.
Lane v Cotton (1701) 1 Ld Raym 646, 91 ER 1332, 38 Digest (Repl) 70, 468.
Page 1011 of [1970] 1 All ER 1009
Le Lievre v Gould [1893] 1 QB 491, 62 LJQB 353, 68 LT 626, 57 JP 484, 36 Digest (Repl) 9, 27.
Payne v Esdaile (1888) 13 App Cas 613, 58 LJCh 299, 59 LT 568, 53 JP 100, 44 Digest (Repl) 212, 263.
Saunderson v Baker and Martin (1772) 3 Wils 309, 95 ER 1072, 21 Digest (Repl) 636, 1250.
Seaford Court Estates Ltd v Asher [1949] 2 All ER 155, [1949] 2 KB 481, affd HL sub nom Asher v Seaford Court Estates Ltd [1950] 1 All ER 1018, [1950] AC 508, 31 Digest (Repl) 679, 7719.
Stanbury v Exeter Corpn [1905] 2 KB 838, 75 LJKB 28, 93 LT 795, 70 JP 11, 38 Digest (Repl) 45, 230.
Appeal
This was an appeal by the Ministry of Housing and Local Government against a decision of Fisher J dated 3 June 1969 and reported [1969] 3 All ER 225, dismissing an action brought by the Ministry to recover from the defendants, W A F Sharp and the Hemel Hempstead Rural District Council, the sum of £1,828 11s 5d. The facts are set out in the judgment of Lord Denning MR.
J P Warner and Gordon Slynn for the Ministry.
D S Hunter and C P Sydenham for the defendants.
Cur adv vult
29 January 1970. The following judgments were delivered.
LORD DENNING MR
1 Introduction
In order to show the issues in this case, I will first state the facts in outline. In 1960, the Ministry of Housing and Local Government (whom I will call the Ministry) registered a planning charge with the local land registry at Hemel Hempstead. It was a charge for £1,828 11s 5d on a piece of land at King’s Langley owned by a Mr Neale. In 1962, a company which intended to purchase the land requisitioned an official search at the local land registry. The clerk in the registry who made the search was negligent. He failed to notice the Ministry’s charge; or to include it in the official certificate. He issued a clear certificate to the purchasers. They completed the purchase on that footing. The Ministry said that in consequence they had lost the benefit of their charge; and that they could not claim against the purchasers for the sum of £1,828 11s 5d. So they claimed damages for the mistake made by the clerk. They sued the local registrar; and also the local council on the ground that they were responsible for the mistake of the clerk.
The judge (See [1969] 3 All ER 225, [1969] 3 WLR 1020) rejected the claim because, he said, the Ministry suffered no damages from the clerk’s mistake. They could have recovered, he said, the £1,828 11s 5d from the purchasers, despite the clear certificate that was given to them.
This decision has made conveyancers tremble. They fear that no purchaser will, in future, be able to rely on an official certificate of search—at any rate if it comes from a local land registry. Even if it states that the land is clear of any local land charge, yet the purchaser may be afterwards saddled with one. Government departments are alarmed too. So much disturbance has been caused by the decision that we expedited the appeal. We now give our decision. But I must first state the facts in detail.
2 The facts
In 1960, Mr Neale, a jeweller, owned a piece of land fronting Chipperfield Road at King’s Langley, Hertfordshire. It was 1.3 acres, just opposite his house. He had owned
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it for 20 years. He thought that it might be ripe for development. So he applied for permission to build on it. On 16 February 1960, the local planning authority refused him permission. The reason they gave was because it was in the green belt. Mr Neale claimed compensation for this refusal. In July 1960, the Ministry determined the amount of compensation at £1,828 11s 5d; and paid it to Mr Neale.
But the payment was subject to this proviso: if the planning authorities afterwards changed their minds and gave permission to develop, then the £1,828 11s 5d would have to be repaid by someone or other. Not necessarily by Mr Neale, who received it. But by the person who was going to develop the land. That was made clear by s 29c of the Town and Country Planning Act 1954. It said that no development was to be carried out until the sum was repaid.
In order to secure this repayment, the Ministry were given a charge on the land. Section 28(4)c of the 1954 Act required the Ministry to give a compensation notice to the local council and to the local planning authority. That notice was to be registered by the proper officer of the local council in the register of local land charges, see s 28(5)c. The purpose of this registration was this: if any person was minded to buy the land, he would be able to search the register and see that the land was charged with repayment of the £1,828 11s 5d. He would know that he could not develop the land without repaying it. It would be his obligation to repay it before developing the land.
On 25 July 1960, the Ministry duly deposited a compensation notice with the Hemel Hempstead Rural District Council (the council), and also with the local planning authority, the Hertfordshire County Council. On 27 July 1960, the clerk to the council, or someone on his behalf, entered particulars in the register of local land charges. The entry was under ‘Planning Charges’ and was numbered 982. It stated that the notice was registered under s 28 for the sum of £1,828 11s 5d, compensation paid owing to the refusal dated 16 February 1960. It described the land by reference to a map annexed.
The map was the most important part of the register. It was a large scale map showing the boundaries of every plot of land. On many of the plots there were numbers which represented entries in the register. On this plot (of 1.3 acres fronting Chipperfield Road) there were four numbers. There was entry 982 which represented the Ministry’s charge for £1,828 11s 5d; and three other numbers representing other entries in the register. These other numbers are of no materiality in this case save that they contributed to the mistake afterwards made. When the clerk, two years later, searched the register, he noted the other three numbers and entered their particulars on the official certificate. But he overlooked entry 982 (which was the Ministry’s charge for £1,828 11s 5d), and so did not enter the particulars of it on the official certificate.
At any rate, in 1960 the Ministry’s charge was registered. All particulars were duly entered. Two years later, on 13 July 1962, Mr Neale again applied for planning permission for this same plot of land. He wanted to build houses on it. This time it was granted. On 2 October 1962, the council on behalf of the local planning authority, granted him outline permission. Mr Neale then offered the plot for sale with planning permission. A company called J & A Parsons (Builders) Ltd came on the scene as prospective purchasers. Their solicitor made a requisition for an official search in the register of local land charges. It was made on 1 November 1962, to the council, and was in these words:
‘A search in the Register of Local Land Charges … is required for subsisting entries against the land described below up to and including the day of search.
Land in Chipperfield Road, King’s Langley, Herts. (plan annexed hereto).’
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(This plan showed the plot of 1.3 acres.)
Early in November 1962, some clerk in the council’s offices made the search and made the mistake. He overlooked entry 982 and prepared the official certificate without any mention of it. He put it before the proper officer (the clerk to the council, who was the local registrar) for signature; and he signed it. It was in these words:
‘Hemel Hempstead Rural District Council … Official Certificate of Search (For the use of the Local Registrar)
‘The search in the Register of Local Land Charges of the above-named Authority against the land specified in the plan accompanying the above requisition reveals up to and including the day named hereunder the subsisting entries referred to in the Schedule attached hereto.
‘Signature of Local Registrar. W. A. F. Sharp.
‘Date 13th November, 1962.’
The schedule showed the three other entries against the land but omitted the entry relating to the Ministry’s charge for £1,828 11s 5d.
The purchasers accepted that official certificate as accurate. They believed that the land was clear of any charge. On 14 December 1962, they completed the purchase of the plot from Mr Neale. They paid him £12,000. If they had known of the charge for £1,828 11s 5d, they would, no doubt, have deducted that sum from the price they paid. They have since developed the land and built four houses on it.
On 28 February 1963, the Ministry asked Mr Neale to pay back the £1,828 11s 5d. He at first seemed ready to do so, but afterwards, having consulted his solicitors, he refused to do so. He was, indeed, under no obligation to repay it. The statute (s 29 of the 1954 Act) imposes the obligation on the developer. Mr Neale was not the developer. The purchasers, J & A Parsons (Builders) Ltd, were the developers.
On 27 March 1963, the Ministry asked the purchasers to pay the £1,828 11s 5d. Their solicitors rejected the claim, saying that they had no knowledge of the charge. They enclosed a photostat copy of the official certificate, which showed no entry of the charge.
On 27 September 1963, the Ministry acknowledged that they could make no claim against the purchasers. They wrote saying that:
‘… in view of the clear search certificate [J & A Parsons (Builders) Ltd], are entitled to claim the protection of section 17(3) of the Land Charges Act 1925 and cannot be required to make a repayment … The Department are therefore pursuing this matter with the Local Registrar.’
On the same day the Ministry wrote to the clerk to the council, saying that they looked to him, in his capacity of local registrar, to reimburse the sum of £1,828 11s 5d. He denied liability. In July 1967, the Ministry claimed repayment from the council; but they, too, contested it. So the Ministry have taken these proceedings against Mr W A F Sharp, the local registrar who signed the official certificate; and the council who employed the clerk who made the mistake.
Fisher J ([1969] 3 All ER 225, [1969] 3 WLR 1020) held that, if the Ministry had suffered damage, they could have recovered against Mr Sharp (the local registrar) because he was in breach of a statutory duty; and against the council because of the negligence of their staff; but the judge threw out the Ministry’s claim, because he held that the Ministry had suffered no damage. He decided that the clear search certificate did not protect the purchasers, that the Ministry could have insisted on the purchasers’ paying the full £1,828 11s 5d and that it was the Ministry’s own look-out if they chose (as they did choose on 27 September 1963) not to make any claim against the purchasers.
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The Ministry appeal to this court on the issue of damage. Mr Sharp and the council cross-appeal on the issue of liability.
3 The conveyancing point
If the official search certificate had disclosed the Ministry’s charge for £1,828 11s 5d, then, of course, the purchasers would have taken subject to it. They would have had to pay the £1,828 11s 5d to the Ministry before developing the land, see s 29(1) of the 1954 Act. If they started development without paying it, the Ministry could demand the sum from them, see s 29(8).
But the official search certificate did not disclose the Ministry’s charge. What then? Are the purchasers affected by it? Do they take the land subject to a charge of which they knew nothing?
The Lord Chancellor has made rules which answer the question. They provide (by a complicated series of cross-references) that the search certificate is conclusive in favour of the purchasers; so that they are clear of the Ministry’s charge. But the judge has held that the Lord Chancellor had no power to make those rules. So I will consider the rule-making power and then the rules themselves.
(i) The rule-making power
The rule-making power is contained in s 28(5) of the 1954 Act which provides for the registration of compensation notices. It says:
‘Notices deposited under this section shall be registered in the register of local land charges, in such manner as may be prescribed by rules made for the purposes of this section under subsection (6) of section Fifteen of the Land Charges Act, 1925, by the proper officer of the council of the county borough or county district.
The crucial words are ‘in such manner’. The judge treats them literally and says that the rules may only regulate the manner of the registration and not the effect of registration. But the Lord Chancellor has treated the section as empowering him to determine the effect as well as the manner of registration.
The problem is best seen by setting out the words of s 15(6) of the Land Charges Act 1925 which provides, inter alia, that separate rules may be made under the Act (ie by the Lord Chancellor under s 19):
‘(a) for prescribing the mode of registration of a general or specific charge … ; (c) for prescribing the proper officer to act as local registrar, and making provision as to official certificates of search to be given by him in reference to subsisting entries in his register; (d) for determining the effect of an official certificate of search in regard to the protection of a purchaser, solicitor, trustee or other person in a fiduciary position, and for prescribing the fees to be paid for any such certificate or for a search … ’
Fisher J says that under s 28(5) the Lord Chancellor can only make rules under s 15(6)(a) and the first ten words of s 15(6)(c), and nothing else, whereas the Lord Chancellor regards himself as having power to make rules under all the paragraphs, including (c) in its entirety, and (d).
(ii) The rules made by the Lord Chancellor
In the belief that he had the necessary power, the Lord Chancellor made rules by a statutory instrumentd. These made the Local Land Charges Rules 1934e applicable to a planning charge, including a compensation notice. Rule 4(1) of the 1934 rules provided that the ‘proper officer’ to act as registrar, for purposes of registering, charges, should be the clerk of the local council. Rule 15(1) provided that:
‘The provisions of sub-sections (1), (2), (3), (7), (8) and (9) of section 17 of the Land Charges Act (which relate to official certificates of search and to the effect
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of such certificates) shall apply to the registrars and registries of local land charges … ’
If that rule was lawfully made by the Lord Chancellor, it applied those specified subsections of s 17 of the Land Charges Act 1925, and, in particular, these which are especially relevant in the present case:
‘17. (1) Where any person requires search to be made at the registry for entries of any matters or documents … he may on payment of the prescribed fee lodge at the registry a requisition in that behalf. (2) The registrar shall thereupon make the search required, and shall issue a certificate setting forth the result thereof. (3) In favour of a purchaser or an intending purchaser, as against persons interested under or in respect of matters or documents whereof entries are required or allowed as aforesaid, the certificate, according to the tenor thereof, shall be conclusive, affirmatively or negatively, as the case may be.’
(iii) The validity of the rules
The judge made much research into paralleled Acts of Parliament. He analysed the sections which gave power to make rules as to the registration of charges as local land charges. He divided them into three classes; and decided that the present s 28(5) gave the lowest power of all, viz: power only regulate the manner of registration, and not the effect of it.
I find no help from this analysis of other Acts of Parliament. I go simply by this 1954 Act. If s 28(5) is construed literally, it would justify the judge’s view. But we do not now in this court stick to the letter of a statute. We go by its true intent. We fill in the gaps. We follow what I said in Seaford Court Estates Ltd v Asher ([1949] 2 All ER 155 at 163, [1949] 2 KB 481 at 497). Looking at s 28(5) quite broadly, I am of opinion that the words ‘in such manner’ should be read as including ‘to such effect’. They are only shorthand to bring in the entire rule-making power contained in s 15(6) of the Land Charges Act 1925. If Parliament had intended it to be limited to particular paragraphs, such as s 15(6)(a) or (c), it would have singled them out for special mention; whereas, instead, it left it quite general.
In my opinion, therefore, s 28(5) on its true construction brings in the entire rulemaking power contained in s 15(6) of the Land Charges Act 1925. It entitled the Lord Chancellor to incorporate s 17(1), (2) and (3) of the Land Charges Act 1925 and apply them to local land charges. I hold, therefore, that those subsections are applicable in this case. In particular, s 17(3) makes the certificate conclusive in favour of the purchasers. They are entitled to assume conclusively that the land was clear of any charge. They were not, and are not, liable to pay the Ministry’s charge for £1,828 11s 5d. The Ministry have, therefore, suffered damage. They will lose that sum unless they can recover it from the party who made the mistake.
4 The liability of the registrar
According to the rules, the ‘proper officer’ to act as registrar, for the purpose of registering local land charges, is the clerk to the local council. But in this respect he does not act as a servant of the council. He acts as a public officer in his own right. His duties are prescribed by statute. It is he who is responsible for their due performance, not the council, see Stanbury v Exeter Corpn. As local land registrar, he is in the selfsame position as the Chief Land Registrar. Each is responsible for keeping a register of land charges. The one in the local registry. The other in the central registry. But each is governed by the same statutory provisions. Each has the same powers and is subject to the same obligations. See s 15(3) of the Land Charges Act 1925. The only difference is that the local land registrar deals with local land charges and the Chief Land Registrar deals with land charges generally. (Some difference
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was suggested because originally the local land registrar was only concerned with charges in favour of his own council. But that is quite insufficient to warrant any distinction between them.) They are both in the same position. I will, therefore, speak of the registrar, as meaning either of them.
The fundamental obligation of the registrar is to keep the register, and in return he receives the prescribed fees. He must enter in the register every charge which is duly submitted to him. He must allow any person to search the register and, if asked, he must make an official search and issue an official certificate setting forth the result: see s 17(1) and (2) of the Land Charges Act 1925. The object of the register is to provide security for two classes of people, incumbrancers and purchasers. (1) Incumbrancers. By requiring his charge to be entered on the register, an incumbrancer is entitled to regard it as safe, not only against the owner of the land, but also against any purchaser from him. If it is not entered on the register, he loses his charge; for it is then of no effect against a purchaser, even though the purchaser had full knowledge of it, see s 13 of the Land Charges Act 1925, and s 199 of the Law of Property Act 1925. (2) Purchasers. By requiring a search, a purchaser is entitled to know exactly what charges incumber it, and to adjust his price accordingly. If the registrar issues an official certificate, showing the land to be clear of any charge, that is conclusive in favour of the purchaser, see s 17(3) of the Land Charges Act 1925.
Suppose, now, that a clerk in the registry makes a mistake. He omits to enter a charge, or wrongly gives a clear certificate, with the result that the incumbrancer loses the benefit of it. Who is to suffer for the mistake? Is the incumbrancer to bear the loss without any recourse against anyone? Surely not. The very object of the registration system is to secure him against loss. They system breaks down utterly if he is left to bear the loss himself.
Who then is to bear the loss? The negligent clerk can, of course, be made to bear it, if he can be found and is worth the money, which is unlikely. Apart from the clerk himself, there is only one person in law who can be made responsible. It is the registrar. He must answer for the mistakes of the clerk and make compensation for the loss. He is a public officer and comes within the settled principle of English law that, when an official duty is laid on a public officer, by statute or by common law, then he is personally responsible for seeing that the duty is carried out. He may, and often does, get a clerk or minor official, to do the duty for him, but, if so, he is answerable for the transgression of the subordinate: see Saunderson v Baker and Martin ((1772) 3 Wils 309 at 317) where Blackstone J states the position of the sheriff. Sometimes it is an absolute duty, in which case he must see that it is performed absolutely: see the instances given by Sir John Holt in Lane v Cotton ((1701) 1 Ld Raym 646 at 651). At other times it is only a duty to use due diligence, in which case he must see that due diligence is used: see the celebrated judgment of Best J in Henly v Lyme Corpn ((1828) 5 Bing 91 at 107–109). But, in any event, if the duty is broken, and injury done thereby to one of the public, then the public officer is answerable. The injured person can sue him in the civil courts for compensation. It is not open to the public officer to say: ‘I get low fees and small pay. It is very hard to make me personally responsible’. By law he is responsible. He will, of course, if he is wise, insure himself against his liability, or get the government to stand behind him. But liable he is to the person injured. Our English law does not allow a public officer to shelter behind a droit administratif.
It is, of course, open to Parliament to exempt a public officer from personal liability, as indeed it did exempt the registrar by s 131 of the Land Registration Act 1925, but in that case Parliament itself set up an insurance fund. It did not leave the injured person to suffer. In our present case, under the Land Charges Act 1925, Parliament has not exempted the registrar from liability. It has provided no insurance fund. So he is personally liable. Otherwise the injured person would be left without a remedy—which is unthinkable.
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In support of this principle, I would cite two cases which actually dealt with the keepers of registers. In the old days it was the clerks of the courts who kept the registers. They were held liable for any mistakes made in the keeping of them. In Herbert v Paget the defendant was the keeper of the writs and records of the court. Someone tampered with one of the judgments in his custody to the prejudice of the plaintiff. The keeper was not himself negligent but the court by a majority held him liable:
‘… by Mallett and Wyndham it was held, that though here appeared no neglect or want of care in the defendant, yet he having taken upon him to keep the records, he is at his peril to answer for all the misusage that is in the records, and so is chargeable in the action. Twisden held the contrary, that he ought not to be chargeable, for that by no industry he could prevent it.’
Even Twisden would have held him liable, if he had been negligent. In Douglass v Yallop, the chief clerk of the court kept the roll on which judgments were entered up. Lord Mansfield held that it was his duty to see that the judgments were duly entered and he could not excuse himself by delegating it to others ((1759) 2 Burr at 722):
‘Lord Mansfield intimated that it very much concerned the chief clerk, to take care that judgment be actually entered up upon the roll in due time, and docketted: for that after he has received his fees for making such entry, he would be liable to an action upon the case, to be brought by a purchaser who should have become liable to it, and had searched the roll without finding it entered up.’
After those cases there were several statutes which put on the chief clerks of the courts the duty of keeping registers of judgments, lis pendens, and so forth; but did not provide for mistakes. I have no doubt that, in case an entry was omitted, the chief clerk would be liable to compensate anyone who suffered by the mistake.
5 Official searches
In those days, anyone (who might be affected by an entry in a register) had to make his own search, by himself or by his attorney. If he overlooked an entry, it was his own look-out. In 1882, Parliament made provision for official searches. These were to be made by the proper officer who kept the register. Section 2(2) of the Conveyancing Act 1882f provided that, on requisition being made—
‘… the proper officer shall diligently make the search required, and shall make and file in the office a certificate setting forth the result thereof … ’
and it provided that the certificate was conclusive in favour of a purchaser.
Suppose now that the proper officer delegated this duty to a clerk, as he usually would; and that the clerk was careless and overlooked an entry; and gave a clear certificate wrongly. The purchaser would take clear of the charge; and the incumbrancer would have lost his charge. Would he have a remedy? Surely he would. The ‘proper officer’ was under a statutory duty. He was under a duty to search diligently. That duty was broken; and he was answerable. The statute itself provided no remedy for the want of diligence. But a civil action was clearly imported on the well-known principles set out in Comyn’s Digest, exemplified in Dawson & Co v Bingley Urban District Council; and restated in Cutler v Wandsworth Stadium. Especially as, at that time in 1882, there was no remedy at common law for negligence in giving a certificate, see the statement in Le Lievre v Gould ([1893] 1 QB 491 at 502) per Bowen LJ. Unless there was an action for breach of statutory duty, the incumbrancer would be left without a remedy, which is unthinkable.
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In 1925, when Parliament set up the land charges register, it repeated in substance s 2 of the 1882 Act, but, significantly enough, dropped the word ‘diligently’. Section 17(2) of the Land Charges Act 1925 provides:
‘The registrar shall thereupon make the search required, and shall issue a certificate setting forth the result thereof.’
I should myself read that section, as the judge did, as imposing an absolute duty. The registrar is under a duty to make an effective search, ie a search which will discover any relevant entry in the register; and he is to issue a complete certificate, is a certificate which sets forth every relevant entry. Nothing less will adequately protect the incumbrancer. If a mistake is made whereby the incumbrancer loses his charge, it is small comfort for the registrar to tell him:
‘None of our clerks was negligent—it was the computer which made the mistake; or ‘Some stranger came in and sponged out the entry.’
If a mistake is made, whether by negligence or not, the loss should fall on the officer responsible; and not on the innocent incumbrancer.
Even if I am wrong, however, in thinking that s 17(2) of the Land Charges Act 1925 imposes an absolute duty, still it must at least impose a duty to use due diligence, just as did s 2 of the 1882 Act. And that is enough for this case, and for most cases. The registrar is personally responsible for seeing that due diligence is used by all his subordinates in making the search. If there is any failure, whereby injury is done, he is liable to compensate the injured person.
Unless this remedy lies against the registrar, I do not think that it lies against anyone else, save only against the clerk who made the mistake. The Crown cannot be sued for the mistakes in the Land Registry. The Crown Proceedings Act 1947 does not apply to ‘proceedings by or against the Registrar of the Land Registry or any officers of that Registry … : see s 23(3)(f). Nor can the local council be sued for the mistakes in the local land registry. The local land registrar is their clerk, but he is not, in this respect, under their control. In keeping the register and issuing the certificates, he is not acting for the council. He is not carrying out their duties on their behalf. He is carrying out his own statutory duties on his own behalf. So he himself is responsible for breach of those duties and not the council, see Stanbury v Exeter Corpn.
6 The liability of the clerk who made the mistake
I have no doubt that the clerk is liable. He was under a duty at common law to use due care. That was a duty which he owed to any person—incumbrancer or purchaser—who, he knew or ought to have known, might be injured if he made a mistake. The case comes four square within the principles which are stated in Candler v Crane Christmas & Co ([1951] 1 All ER 426 at 433–436, [1951] 2 KB 164 at 179–185), and which were approved by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd.
Counsel for the defendants submitted to us, however, that the correct principle did not go to that length. He said that a duty to use due care (where there was no contract) only arose when there was a voluntary assumption of responsibility. I do not agree. He relied particularly on the words of Lord Reid in Hedley Byrne & Co Ltd v Heller & Partners Ltd ([1963] 2 All ER at 583, [1964] AC at 487), and of Lord Devlin ([1963] 2 All ER at 610, 611, [1964] AC at 529). I think that they used those words because of the special circumstances of that case (where the bank disclaimed responsibility). But they did not in any way mean to limit the general principle.
In my opinion the duty to use due care in a statement arises, not from any voluntary
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assumption of responsibility, but from the fact that the person making it knows, or ought to know, that others, being his neighbours in this regard, would act on the faith of the statement being accurate. That is enough to bring the duty into being. It is owed, of course, to the person to whom the certificate is issued and who he knows is going to act on it, see the judgment of Cardozo J in Glanzer v Sheppard. But it also is owed to any person who he knows or ought to know, will be injuriously affected by a mistake, such as the incumbrancer here.
7 The liability of the council
I have some doubt whether the council were responsible for the clerk who made the mistake. It might be said that, although they paid the clerk, he was, so to speak, seconded to the registrar, so as to be, for the purposes of the register, on the registrar’s staff; and so the registrar was responsible for his mistake. But counsel for the defendants did not take this point. He conceded that, if the clerk was liable, the council would accept liability for him. I gladly accept this concession, for clearly, if the registrar is not liable, the council must be. The injured person cannot be left without a remedy.
8 Conclusion
In my opinion the law should be, and is, that the register of the land charges must be kept accurate; and that an official certificate of search must faithfully record every entry. If the registrar or his subordinates make a mistake, and any person suffers loss by it, then that person should be indemnified for his loss. It should not be necessary for him to prove negligence, although there will nearly always be negligence, in making the mistake. Suffice it that a mistake has been made and caused loss. The loss should be borne by the registrar. This is essential for the good working of the land registration system. It is not in the least unfair to the registrar. We were told that the government always stands behind the Chief Land Registrar and indemnifies him. And that the local authorities always insure the local land registrars. That is the case here. The action is being defended by the insurers. They have no doubt calculated a premium commensurate with the risk of mistake and should, therefore, be prepared to pay for the loss when it occurs.
I agree with the judge on the liability of the registrar and of the council; but not on the damageg. I would allow the appeal and give judgment for the Ministry against the registrar and the council.
SALMON LJ. In 1960, the owner of 1.3 acres of land in the Hemel Hempstead rural district area applied for planning permission to develop the land for residential purposes. He had an established claim to develop it under the Town and Country Planning Act 1947. Nevertheless, permission was refused. The owner therefore became entitled to claim, claimed and was paid compensation to an amount of some £1,828 under the Town and Country Planning Act 1954. Notice of these facts was duly served by the Minister on the council and registered in the registry of local land charges, as required by s 28 of the 1954 Act. It followed by reason of the provisions of s 29 of that Act that no one could thereafter carry out any new development on the land until £1,828 had been repaid to the Minister or secured to his satisfaction.
In 1962, the owner was in negotiation to sell the land to some prospective purchasers who planned to build houses on it. Accordingly, the owner made another application for permission to develop the land for residential purposes. This time, the application was granted. The purchasers made a requisition for an official search in the registry of local land charges. Mr Sharp, the clerk to the council who was the ‘proper officer’ charged with the duty of acting as the local registrar (see s 15 of
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the Land Charges Act 1925, and r 4 of the Local Land Charges Rules 1934h), issued a certificate to the purchasers. This certificate was signed by Mr Sharp and purported to show the result of the search. It showed (quite wrongly) that the register of local land charges contained no entry relating to the land. It omitted any reference to the payment of compensation to the owner in respect of the original refusal of planning permission. This mistake was admittedly attributable to the carelessness of one of the council’s servants who made the search. On the faith of the clear certificate the purchasers bought the land. When the minister applied to them for repayment of compensation as a condition of developing the land, they produced a clear certificate and contended that by reason of s 17(3) of the Land Charges Act 1925, and r 15 of the Local Land Charges Rules 1934 the certificate conclusively relieved them from any liability to the Minister in respect of the compensation. The Minister conceded that this contention was correct and ultimately brought the present action claiming some £1,828 from Mr Sharp as damages for breach of an absolute statutory duty (it being conceded at the trial that Mr Sharp had been in no way negligent nor vicariously responsible for the negligence of the council’s servant) and a like amount from the council in respect of their negligence or vicarious responsibility for the negligence of their servant who had searched the register and prepared the certificate for Mr Sharp’s signature. But for the clear certificate, so it was alleged, the £1,828 would have come back to the Minister before the land could be developed. As it was, that sum has been lost forever.
In the course of an extremely careful and elaborate judgment, the learned judge found: (a) that the clear certificate issued to the purchasers did not absolve them from paying the £1,828 to the Minister before they could develop the land; (b) that Mr Sharp, in issuing an incorrect certificate had committed a breach of an absolute statutory duty which made him liable to the Minister for any damage which that breach might have caused; and (c) that the council had been negligent through their servant who conducted the search and were therefore liable to the Minister for any damage which this negligence might have caused. It followed, however, that because of finding (a) the Minister had suffered no damage, and the action accordingly failed.
Finding (a)
I am afraid that I cannot agree with this finding which apparently has caused general consternation amongst conveyancers. It seems to me to involve too restricted a construction of the relevant statutory provisions. We have been told that the grounds on which it was based were suggested by the learned judge. They were naturally accepted by counsel for the defendants who has argued them, together with all the other points in support of the defendants’ case with remarkable ability and persuasiveness.
Section 28(5) of the Town and Country Planning Act 1954, can properly be criticised on the ground that it makes the unusual mistake of being too compressed. It could with advantage have been somewhat expanded. The subsection does not state in express terms that notices relating to compensation shall be treated as if they were local land charges. Nevertheless it seems to me that this follows from the provisions in s 28(4) and (6) of the Act that they must be registered in the register of local land charges when compensation has become payable. Why otherwise should these compensation notices appear in this register? Moreover they have many of the characteristics of an ordinary land charge which, incidentally, is nowhere defined in the statute. The compensation notices attach to the land in respect of which they are registered. After registration, but only after registration of the compensation notice, this land cannot be developed by anyone until the compensation specified in the notice has been repaid to the Minister or secured to his satisfaction: s 29 of the Act. As Lord Herschell said in Payne v Esdaile ((1888) 13 App Cas 613 at 623, 624):
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‘… the word “charge” may well be used to describe a burden imposed upon land, and if a payment has to be made in respect of land, and it can only be enjoyed subject to the liability for that payment, I cannot think that there would be any great straining of language if it were spoken of as charged upon the land.’
Accordingly, I would read the whole of the rule-making powers contained in s 15(6) of the Land Charges Act 1925 as applying to compensation notices registered under the 1954 Act. It follows therefore that there was ample power to make r 15 of the Local Land Charges Rules 1934 (as amended by the Local Land Charges (Amendment) Rules 1954)i. This rule applied sub-ss (1), (2), (3) (7), (8) and (9) of s 17 of the Land Charges Act 1925 to the registrars and registries of local land charges. Section 17(3) of the 1925 Act makes any certificate issued out of the registry conclusive in favour of the purchaser ‘… as against persons interested … in respect of matters … required … ’ to be registered. The learned judge construed the words in s 28(5) of the Town and Country Planning Act 1954 so as to confine the rule-making powers to the mode of entry in the register and the person by whom the entry was to be made. He concluded that there was no power to make a rule stating the legal effect of any certificate which might be issued by the registrar. If this narrow view of s 28(5) of the 1954 Act be right, it must follow that r 15 of the Local Land Charges Rules 1934 (as amended) was ultra vires not only (as the learned judge found) insofar as it applied s 17(3) of the Land Charges Act 1925 to registered compensation notices but also insofar as it applied any of the other subsections of s 17 to such notices. Although, as I have already indicated, s 28(5) of the 1954 Act is not very happily worded, I cannot accept that it has such a restrictive effect as that given to it by the learned judge. It seems to me that it contemplates the enactment of—
‘… rules made for the purposes of this section under subsection (6) of section fifteen of the Land Charges Act, 1925 … ’
It imposes no clog on the discretion of the rule-making body, ie the Lord Chancellor, to prevent him from making rules for the purposes of s 28 in respect of all the matters dealt with by s 15(6) of the Land Charges Act 1925. It no doubt contemplates that the rules will provide, amongst other things, for, but not only for, the mode in which the notice shall be registered in the registry of local land charges.
The purpose of requiring registration as a condition precedent to the prohibition against developing the land before repayment of the compensation (s 29 of the Town and Country Planning Act 1954) was obviously to protect the prospective purchaser of the land by giving notice in the registry of local land charges of what amounted to a charge on the land. It would be strange indeed if Parliament had intended that the rules made for the purposes of s 28 of the 1954 Act could not provide for a right to require an official search or a duty to issue a certificate setting out the results of such a search nor state the effect of such certificate. Power to provide for such matters by rule existed in relation to the local land charges mentioned in the Land Charges Act 1925. Similar powers seem to have been conferred by the multifarious Acts passed between 1882 and 1954 which required many things akin to land charges to be registered in the registries of local land charges. I cannot understand why in respect of the 1954 compensation notice type of land charge alone, Parliament should be taken to have intended that the rule-making powers should be curtailed. As I hope I have made plain, in my view the combined effect of ss 28 and 29 is that a compensation notice is treated as if it were a local land charge from the moment it is registered although the Act does not expressly say so. At the moment of registration all the rule-making powers conferred by s 15(6) of the Land Charges Act 1925 apply. These powers are in no way cut down by s 28(5) of the 1954 Act. If, however, I am wrong in
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my view about the effect of registration I would respectfully adopt the liberal construction of s 28(5) favoured by Lord Denning MR and hold that that subsection alone brings into play all the rule-making powers to which I have referred.
We are not concerned with whether or not it is desirable or appropriate to leave the legal effect of any official certificate to the discretion of the rule-making authority. Nor is it relevant that in some cases that discretion has been exercised to make the certificate absolutely conclusive and in other cases it has not; nor with whether the reasons for taking the one course or the other were good, bad or indifferent. Still less, in my view, are we concerned with the language used in the other multifarious statutes to which I have referred. It is trite law that it is not permissible to construe the language of one statute by reference to the language of another, A-G v Mutual Tontine Westminster Chambers Association Ltd. Accordingly, although I recognise the attraction of the arguments in support of the grounds on which the learned judge based what I have referred to as his finding (a), I am afraid that I cannot agree with that finding.
There was another ground on which the learned judge concluded that his finding (a) could probably be supported although he expressed no concluded view about it. He thought that s 17 of the Land Charges Act 1925 could be applied only to ‘matters or documents whereof entries are required or allowed’ to be made in the registry by the 1925 Act and that accordingly r 15 of the Land Charges Rules 1934 could not be effective to apply s 17 to compensation notices which are not required or allowed to be registered by the 1925 Act but by the 1954 Act. This again seems to me to be altogether too narrow a verbal construction of r 15 which applies certain subsections of s 17 to the ‘registrars and registries of local land charges’. Clearly, in my view, r 15 is intended to and does make the substance of certain subsections of s 17 apply to all entries in local land registries to which r 15 relates. Pushed to its logical conclusion, the learned judge’s line of reasoning would lead to the bizarre result that r 15 cannot effectively apply any of the provisions of s 17 to any local charges because the words ‘registrar’ and ‘registry’ in s 17 are defined by s 20 of the 1925 Act as meaning, respectively’, the Chief Land Registrar’ and ‘His Majesty’s Land Registry.' I am unable to accept the learned judge’s finding (a).
Finding (b)
I will now consider the learned judge’s finding that, but for his view about r 15, the claim against Mr Sharp for breach of statutory duty would succeed. Does s 17(2) of the Land Charges Act 1925 impose an absolute duty on Mr Sharp to search the local land register and issue a certificate accurately setting out any relevant entry which it may contain? When an absolute duty is created by statute, the statute: (a) usually defines the duty with precision; (b) makes its breach punishable as a criminal offence; and sometimes, (c) impliedly gives a right of action for its breach to the class of persons for whose protection the duty is created. One thing is, I think, clear. Parliament cannot have intended that the registrar should personally search the register. Clearly it must have contemplated that these duties to search might be performed, as they always are in practice, through some comparatively minor clerk in the employ of Her Majesty’s Land Registry or of the local authority as the case may be. Section 17(5) of the Land Charges Act 1925 provides:
‘If any officer, clerk, or person employed in the registry commits, or is party … to, any act of fraud or collusion, or is wilfully negligent … in relation to any certificate … he shall be guilty of a misdemeanour … ’
At first sight, it is questionable whether the word ‘officer’ includes the registrar. Section 17(5) is, however, clearly lifted from s 2(6) of the Conveyancing Act 1882j, which started: ‘If any officer … ’ and s 2(2) of that Act cast on ‘the proper officer’
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similar duties to those now imposed by s 17(2) of the Land Charges Act 1925 on the registrar. I am therefore inclined to the view that the word ‘officer’ in s 17(5) covers the registrar. It however imposes a penalty only for fraud, collusion or wilful negligence, and not for the breach of any absolute obligation.
The real question is whether Parliament intended that in the event of a search being inaccurate and the certificate failing to set out the relevant entries in the register, the registrar should be personally liable to the incumbrancer for the financial loss which this failure may have caused him? Clearly, an incumbrancer would, in such circumstances, suffer damage since, under s 17(3) of the Land Charges Act 1925, the certificate would be conclusive in favour of a purchaser or intending purchaser ‘in respect of matters or documents whereof entries [in the register] are required’.
There have been numerous attempts in the books to lay down guidelines as to when a civil action may be brought claiming damages for breach of an absolute statutory obligation against the person on whom such an obligation is imposed. The learned judge has formulated a number of useful principles culled from Cutler v Wandsworth Stadium Ltd and the authorities referred to and extensively quoted in that case. None of these principles has been challenged but none is conclusive. I respectfully echo the words of Lord Simonds ([1949] 1 All ER at 547, 548, [1949] AC at 407):
‘It is, I think, true that it is often a difficult question whether, where a statutory obligation is placed on A., B., who conceives himself to be damnified by A.’s breach of it, has a right of action against him … I do not propose to try to formulate any rules by reference to which such a question can infallibly be answered. The only rule which in all circumstances is valid is that the answer must depend on a consideration of the whole Act and the circumstances, including the pre-existing law, in which it was enacted. But that there are indications which point with more or less force to the one answer or the other is clear from authorities … ’
In the present case there are undoubtedly some indications which would point to an answer in favour of the Minister if the Act imposes an absolute obligation. It is clear that s 17(1), (2) and (3) of the Land Charges Act 1925 were enacted particularly for the benefit of chargees, incumbrancers (of whom the Minister is one) and purchasers rather than for the benefit of the general public. Purchasers, chargees and incumbrancers may suffer the most grave financial loss if the search which s 17(2) requires is not properly carried out or the certificate which it requires is inaccurate. Neither s 17(5) nor any other provision in the Act affords them any protection against an inaccurate certificate.
Persuasive as these indications may be that if the Act imposes an absolute obligation, then a civil action lies for its breach, I have come to the conclusion that ‘on a consideration of the whole Act and the circumstances, including the pre-existing law, in which it was enacted’ the action against Mr Sharp will not lie. In my view the Act imposes no absolute obligation, so the question whether an action would lie for its breach does not really arise.
I agree that it is difficult to think of a case in which the certificate could be inaccurate if the search had been made and the certificate prepared with diligence. But that is beside the point. Section 2(2) of the Conveyancing Act 1882 which was the precursor of s 17(2) of the Land Charges Act 1925 was in these terms:
‘Thereupon the proper officer shall diligently make the search required, and shall make and file in the office a certificate setting forth the result thereof … ’
If the duty had been absolute under the 1882 Act there could have been no point
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in using the word ‘diligently’. It would seem, therefore, that between 1882 and the 1920s, the only duty in making a search and issuing a certificate was a duty to act diligently. It would be strange indeed if the legislature had intended to convert this into an absolute duty by merely dropping the word ‘diligently’ from what was mainly a consolidating statute. If the legislature had intended to make the registrar absolutely liable for any damage caused (through no fault of his or of anyone else) by an inaccurate certificate, I am convinced that it would have imposed that liability in very much clearer language than that used in s 17. I can see no reason why the legislature should impose such a liability on a registrar, however tender it may be to purchasers and incumbrancers. It does not seem to me to be any answer to say that the Crown would probably stand behind the registrar. No doubt it would, but only as a matter of grace.
I hope that nothing I have said can be taken to mean that I consider that anyone in this country is allowed to shelter behind any kind of droit administratif. Indeed I consider that one of the most important functions of our courts is vigilantly to protect the rights of the individual against unlawful encroachment by public officers and by the administration. The courts’ powers to this end might well, in my view, be enlarged. Certainly such powers as we possess should be vigorously exercised. I do not suggest that the registrar escapes liability because he is a public officer. The question is not: can the registrar escape from some absolute obligation which the statute imposes on him? But: what obligation (if any) does the statute impose on him?
I am afraid that I cannot agree with Lord Denning MR that unless the statute imposes an absolute duty to produce an accurate certificate, incumbrancers and purchasers are left out in the cold. Between 1882 and 1925 the registrar’s duty was expressed as being a duty to search ‘diligently’, and was also in my view impliedly a duty to use reasonable care in issuing a certificate. The dropping of the word ‘diligently’ in the 1925 Act no more expunged the registrar’s duty of care than it converted it into an absolute duty to produce an accurate certificate. If the registrar delegated any of his duties he would, I think, be answerable in damages for the carelessness of his delegate. The proof of negligence should impose no real burden on incumbrancers or purchasers for the very fact that a certificate was inaccurate would ordinarily raise a strong prima facie case of negligence. I recognise that in 1925 and indeed until 1954, it was wrongly supposed by most lawyers that Le Lievre v Gould had been correctly decided. This authority laid down that there could be no liability in tort for a negligent mis-statement causing financial loss. No one, however, has ever doubted that such a liability could arise out of a fiduciary relationship or could be imposed by contract or by statute. I respectfully agree with Lord Denning MR that if (as I think) the Act creates a statutory duty of care, a civil action would lie for breach of that duty. In my view incumbrancers and purchasers are adequately protected without reading any absolute duty into the 1925 Act if they have any right of action against the registrar for breach of a statutory duty of care.
I express my views about the registrar’s statutory duty of care without finally deciding the point for we have heard no argument about it. The point was not taken on behalf of the Minister either below or in this court. The learned judge’s finding against Mr Sharp was based solely on breach of the supposed absolute statutory obligation. In his judgment he does not even mention negligence so far as Mr Sharp is concerned. Nor is there any reference to it in the notice of appeal or in the respondents’ notice. In this court, counsel for the Ministry confined himself, in his appeal against the judgment in favour of Mr Sharp, to breach of absolute statutory duty. Indeed he argued that it was important that such a duty should be held to exist independently of negligence because of the likelihood of registration search and certificates being one day, perhaps soon, effected by computer. Computers might
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produce an inaccurate certificate without any negligence on the part of anyone. I recognise the force of this argument today. I hardly think, however, that unless we can attribute truly supernatural prescience to our legislators, it can really affect the construction of a statute passed in 1925. I am afraid I cannot agree that unless an absolute statutory obligation rests on registrars to produce accurate certificates there would be a real danger of the whole system of registration breaking down. It seems to have worked quite well for the last 100 years or so. Yet during that period there is no trace in the books of any claim against a registrar for breach of such an absolute obligation, or indeed for anything else. I have carefully considered the older authorities to which Lord Denning MR has referred. Although they are most interesting, I can find little support in them for the proposition that Parliament has imposed the absolute obligation on registrars for which the Minister contends. Part VI of the Land Charges Act 1925 consisted of a single section, namely, s 15 which created local land charges. Section 15(3) provides that:
‘… the proper officer of the local authority shall … be subject to the same obligations as the registrar … is subject to in regard to a land charge.’
That is how, with the help of r 15 of the Local Land Charges Rules 1934, Mr Sharp comes into the picture. Accordingly, if s 17 of the Land Charges Act 1925 was intended to impose the suggested absolute obligation on the registrar, it must have been intended to impose the same obligation on local registrars. It seems incredible to me that in 1925, Parliament could have intended to impose such a liability on local registrars who were, of course, clerks to the local authorities concerned. In 1925, the local authority itself was almost invariably the chargee of every local land charge, particulars of which were entered in its register. In the exceptional case, it would be some other local authority which would be the chargee. No local authority would expect its clerk to waste his time or theirs by personally searching the register. It is in the interest of the local authority that such work should be delegated to one of their comparatively junior servants—as it always is. Accordingly if one of these, in 1925, missed an entry in the register and a clear certificate were wrongly issued to a purchaser, it would have been the local authority itself which would have suffered. Parliament cannot have intended that, in these circumstances, the local authority should have the right to recover perhaps many thousands of pounds from its blameless clerk. It is important to remember that it is the intention of Parliament in 1925 with which we are concerned not with what might have been its intention now after the local land registries have been cluttered up with a mass of material not even thought of in 1925. I cannot, however, see that there could be any justification even today for imposing the suggested absolute duty on any registrar and I am satisfied that the Land Charges Act 1925 did not do so.
I reject the Minister’s argument founded on ss 83, 85 and 131 of the Land Registration Act 1925. The argument, as I understand it, and which I hope I do not oversimplify, runs as follows: s 131 excuses the Chief Land Registrar and virtually anyone else employed in the Land Registry from liability in any action or proceedings in respect of anything done in good faith ‘in the exercise or supposed exercise of the powers’ conferred by that Act. Section 85 broadly provides an indemnity against damage suffered through a mistake made by anyone in the registry purporting to act under the statute. Accordingly, so the argument runs, but for s 131 there would be an absolute liability on all and sundry in the registry and this liability is removed by s 131 only because of the indemnity given by s 85. Therefore, since there is nothing in the Land Charges Act 1925 which corresponds with either of these sections, the absolute liability for which the Minister contends must exist. I am afraid I cannot agree. I do not accept that s 131 was inserted for the purpose of removing an absolute liability which would otherwise have existed. It was, in my view, designed to protect those working in the registry from being plagued by vexatious actions. It accordingly provided that any claim, save a claim in fraud, could be struck out in
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limine. The indemnity in s 85 was a beneficient provision, possibly in part to compensate for the loss of a cause of action in negligence, and which, in any event, justice demanded. It might well have been introduced into the Land Charges Act 1925, but only insofar as concerned Her Majesty’s Land Registry, for in 1925 Parliament could hardly have been expected to set up a central fund in effect to indemnify local authorities against the mistakes of their own servants. Accordingly, the fact that no provisions corresponding to ss 83, 85 or 131 of the Land Registration Act 1925 appear in the Land Charges Act 1925 seems to me to be irrelevant to the question we have to decide. For these reasons, in my view, the claim against Mr Sharp fails.
Finding (c)
I must now consider the learned judge’s finding that the council are liable to the Minister for the damage which he has suffered by reason of the negligence of the council’s servant. The courts are slow to find an absolute statutory duty save when such a duty is expressly stated in clear terms by the statute which is supposed to impose it. Nor, if such an obligation is imposed, will the courts hold that anyone responsible for its breach may be sued for damages unless such an intention is clearly to be implied from the statute. A liability to pay damages for breach of an absolute statutory duty often involves a heavy burden, without fault, on the part of him who has to bear it. An action for negligence is, however, quite a different matter. If A fails in his duty to B to take reasonable care, it is only just that A should compensate B for the damages which A’s breach of duty has caused. In the present case, no one disputes that the issue of the clear certificate was due to carelessness on the part of the council’s servant who was deputed by the council to search the register. Nor, in my view, can there be any doubt but that this carelessness caused the Minister damage to the tune of some £1,828. The only real question on this part of the case is, did the council or their servant owe the Minister any duty of care. I entirely agree with the learned judge that the answer to this question is ‘Yes’.
The statutory duty to search and issue the certificate is, of course, placed on the registrar. As I have indicated earlier in this judgment, there is nothing, in my view, to prevent him from delegating this duty. I do not pause to consider whether the registrar may be responsible for any want of reasonable care on the part of the person to whom he has delegated his duty under that section. The point has not been raised before us. The case against Mr Sharp is based solely on breach of an absolute statutory obligation independent of negligence, and as I have already stated, that claim, in my judgment, fails.
The only negligence we have to consider is the alleged negligence of the council or of their servant who conducted the search and for whose negligence they admit that they would be responsible. The servant and certainly the council must, or should have known that unless the search was conducted and the certificate prepared with reasonable care, any chargee or incumbrancer whose registered charge or quasicharge was carelessly omitted from the certificate would lose it and be likely to suffer damage. In my view, this factor certainly creates as close a degree of proximity between the council and the incumbrancer as existed between the appellant and respondent in Donoghue v Stevenson. It matters not that the primary duty under the statute may have been on the local registrar. It would, in my view, be altogether too pedantic and unrealistic to hold that the council’s servant who searched the register must be deemed to have ceased to be in their employment and to have been transferred for this purpose to another master, namely the council clerk.
It is true that in Donoghue v Stevenson it was physical injury that was to be foreseen as a result of the failure to take reasonable care whereas in the present case it is financial loss. But this no longer matters, and it is now well established that, quite apart from any contractual or fiduciary relationship, a man may owe a duty of care
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in what he writes or says just as much as in what he does: see Hedley Byrne & Co Ltd v Heller & Partners Ltd. No doubt in our criminal law, injury to the person is or should be regarded as more serious than damage to property and punished accordingly. So far, however, as the law of negligence relating to civil actions is concerned, the existence of a duty to take reasonable care no longer depends on whether it is physical injury or financial loss which can reasonably be foreseen as a result of a failure to take such care.
The present case does not precisely fit into any category of negligence yet considered by the courts. The Ministry has not been misled by any careless statement made to it by the defendants or made by the defendants to someone else who the defendants knew would be likely to pass it on to a third party such as the Ministry, in circumstances in which the third party might reasonably be expected to rely on it, see for example, Denning LJ’s dissenting judgment in Candler v Crane Christmas & Co which was adopted and approved by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd. I am not, however, troubled by the fact that the present case is, in many respects, unique. I rely on the celebrated dictum of Lord Macmillan that ‘The categories of negligence are never closed’, Donoghue v Stevenson ([1932] AC at 619, [1932] All ER Rep at 30), and the words of Lord Devlin in Hedley Byrne & Co Ltd v Heller & Partners Ltd which I will presently cite. In Hedley Byrne & Co Ltd v Heller & Partners Ltd, the question was whether a voluntary assumption of a responsibility by the defendants could be implied. The defendants (a bank) were asked for a reference about one of their customers. They were under no obligation to give it. They chose to do so, knowing that it was likely to be relied on and might well cause damage if it were given carelessly. They gave it carelessly. They, however, endorsed the reference with the words ‘without responsibility’ which negatives an assumption of responsibility. The House of Lords held that but for this endorsement the defendants would have been liable. That case turned largely on whether or not there was an implied assumption of responsibility from which a duty to take reasonable care could be inferred. Hence, the emphasis in all the speeches in the House of Lords on whether or not the defendants had voluntarily assumed responsibility for the words they had written. Lord Devlin thought that responsibility could attach only to giving the reference ([1963] 2 All ER at 611, [1964] AC at 529) ‘… and only if the doing of that act implied a voluntary undertaking to assume responsibility’. He said ([1963] 2 All ER at 611, [1964] AC at 529–531):
‘I do not think it possible to formulate with exactitude all the conditions under which the law will in a specific case imply a voluntary undertaking … Where, as in the present case, what is relied on is a particular relationship created ad hoc, it will be necessary to examine the particular facts to see whether there is an express or implied undertaking of responsibility.' But he added, ‘I regard this proposition as an application of the general conception of proximity. Cases may arise in the future in which a new and wider proposition, quite independent of any notion of contract, will be needed … and it will then be necessary to return to the general conception of proximity to see whether there can be evolved from it … a specific proposition to fit the case.’
It has been argued, in the present case, that since the council did not voluntarily make the search or prepare the certificate for their clerk’s signature they did not voluntarily assume responsibility for the accuracy of the certificate and, accordingly, owed no duty of care to the Minister. I do not accept that, in all cases, the obligation
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to take reasonable care necessarily depends on a voluntary assumption of responsibility. Even if it did, I am far from satisfied that the council did not voluntarily assume responsibility in the present case. On the contrary, it seems to me that they certainly chose to undertake the duty of searching the register and preparing the certificate. There was nothing to compel them to discharge this duty through their servant. It obviously suited them better that this somewhat pedestrian task should be performed by one of their comparatively minor servants than by their clerk so that he might be left free to carry out other far more difficult and important functions on their behalf.
I do not think that it matters that the search was made at the request of the purchasers and that the certificate issued to him. It would be absurd if a duty of care were owed to a purchaser but not to an incumbrancer. The rules made under many of the statutes creating local land charges do not apply s 17(3); they do, however, apply s 17(1) and (2) of the Land Charges Act 1925. If, in such cases, a clear certificate is carelessly given, it will be the purchaser and not the incumbrancer who will suffer. Clearly land may be worth much more unincumbered than if it is subject to a charge. The purchaser who buys on the faith of a clear certificate might suffer very heavy financial loss if the certificate turns out to be incorrect. Such a loss is reasonably to be foreseen as a result of any carelessness in the search of the register or the preparation of the certificate. The proximity between the council and the purchaser is even closer than that between the plaintiff and the defendants in Candler v Crane Christmas & Co. The council even receive a fee, although a small one, for the certificate. Clearly a duty to take care must exist in such a case. Our law would be grievously defective if the council did owe a duty of care to the purchaser in the one case but no duty to the incumbrancer in the other. The damage in each case is equally foreseeable. It is in my view irrelevant that in the one case the certificate is issued to the person it injures and in the other case it is not. The purchaser is deceived by the certificate about his legal rights when s 17(3) of the Land Charges Act 1925 does not apply whilst the incumbrancer’s legal rights are taken away by the certificate when s 17(3) does apply. In my view the proximity is as close in one case as in the other and certainly sufficient to impose on the council through their servant a duty to take reasonable care.
In my judgment the case against Mr Sharp fails but the case against the council succeeds. Accordingly, to that extent, I would allow the appeal.
CROSS LJ. There are three questions to be answered in this case. The first is whether the judge was right in holding that the Ministry suffered no damage by reason of the ‘clear’ certificate given to J & A Parsons Ltd, the purchasers, because the Local Land Charges (Amendment) Rules 1954k were ‘ultra vires’ the Lord Chancellor insofar as they purported to provide that the certificate should be conclusive against the Ministry that no compensation notice had been registered at the date of the search.
The second is whether the judge was right in holding that the registrar was under a statutory duty to secure the accuracy and consequently is personally liable to indemnify the Ministry, although not himself guilty of any negligence against any loss which the Ministry in fact suffered through the error in the certificate.
The third is whether the judge was right in holding that the council, as employers of the searcher who negligently failed to record the notice in the certificate, are liable to compensate the Ministry for any loss which they in fact suffered through the error in the certificate.
To answer these questions it is necessary to have in mind the statutory provisions with regard to the registration of land charges and also, so far as the second question
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is concerned, the history of that legislation. I shall deal with the legislation chronologically although the historical matter has little, if any, relevance to questions one and three.
The judgements Act 1838l, s 19, provided that no judgments of the superior courts of law or equity should affect purchasers or mortgagees of the lands of judgment debtors unless and until registered in the Court of Common Pleas in the prescribed manner, and further provided that the officer should be entitled to a fee of 5s for every entry and that anyone could search the register on payment of a fee of 1s. The Judgments Act 1839m provided that in the absence of express notice a ‘lis pendens’ should not bind a purchaser or mortgagee unless it was registered in the same way as a judgment, and the Judgments Act 1855n provided that certain annuities or rentcharges should not affect purchasers or mortgagees of land unless and until registered in the Court of Common Pleas.
The Supreme Court of Judicature (Officers) Act 1879o established, by s 4, the Central Office; provided, by s 5, that a number of offices, including the office of the Registrar of Judgments, should be concentrated in and amalgamated with the Central Office; and, by s 6, transferred to the Central Office a number of officials, including the Registrar of Judgments, with their respective clerks and messengers.
Down to the date of the establishment of the Supreme Court on 1 November 1875, the Registrar of Judgments had been the Senior Master of the Court of Common Pleas and at the date of the passing of the 1879 Act was presumably the Senior Master of the Common Pleas Division; but that Act, by s 14 and Part III of Sch 1, provided that on a vacancy occurring the Senior Master of the Supreme Court should become Registrar of Judgments. Hitherto no provision had been made for official searches in the registers kept by the Registrar of Judgments. Searches had to be made personally by the solicitors of the parties interested to make them. This defect was remedied by the Conveyancing Act 1882p, s 2 of which provided (so far as relevant) as follows:
‘(1.) Where any person requires, for purposes of this section, search to be made in the Central Office of the Supreme Court of Judicature for entries of judgments, deeds, or other matters or documents, whereof entries are required or allowed to be made in that office by any Act described in Part I. of the First Schedule to the Conveyancing Act of 1881, or by any other Act, he may deliver in the office a requisition in that behalf, referring to this section.
‘(2.) Thereupon the proper officer shall diligently make the search required, and shall make and file in the office a certificate setting forth the result thereof; and office copies of that certificate shall be issued on requisition, and an office copy shall be evidence of the certificate.
‘(3.) In favour of a purchaser, as against persons interested under or in respect of judgments, deeds, or other matters or documents, whereof entries are required or allowed as aforesaid, the certificate, according to the tenure thereof, shall be conclusive, affirmatively or negatively, as the case may be …
‘(6.) If any officer, clerk, or person employed in the office commits, or is party or privy to, any act of fraud or collusion, or is wilfully negligent, in the making of or otherwise in relation to any certificate or office copy under this section, he shall be guilty of a misdemeanour.
‘(7.) Nothing in this section or in any Rule made thereunder shall take away, abridge, or prejudicially affect any right which any person may have independently of this section to make any search in the office; and every such search may be made as if this section or any such Rule had not been enacted or made.’
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The Acts referred to in Sch 1 to the Conveyancing and Law of Property Act 1881q, included the Judgments Acts 1838, 1839 and 1855. The rulesr made under s 2 of the 1882 Act, prescribing (inter alia) forms of requisitions for searches, proceeded on the footing that in the case of searches for judgments, lis pendens and annuities, the ‘proper officer’ for the purpose of the Act was the Registrar of Judgments, and RSC (1883) Ord 61, r 23, provided that the Registrar of Judgments should on a request in writing cause a search to be made for judgments and issue a certificate of the result.
The next Act to be considered is the Land Charges Registration and Searches Act 1888s, the chief objects of which were to protect purchasers of land by enabling them to discover the existence of charges created: (a) by process of execution under judgments of the court; and (b) by Acts of Parliament enabling public authorities to impose charges on land. Such latter charges were in the Act called ‘land charges’. By the Act three registers were established at the Land Registry: (1) a register of writs and orders affecting land, eg writs of elegit; (2) a register of deeds of arrangement affecting land; and (3) a register of land charges. Section 17 of the 1888 Act enacted that the provisions as to searches in the Central Office, requisitions, certificates, officers, and clerks, and for the protection of solicitors, trustees, agents, and other persons in a fiduciary position contained in s 2 of the Conveyancing Act 1882, except so much thereof as should apply to the making of general rules, should apply to searches in any register or index kept in pursuance of the Act. The ‘proper officer’ for the purpose of the 1888 Act was undoubtedly the Chief Land Registrar and it is to be observed that s 86 of the Land Transfer Act 1875t, had expressly provided that neither he nor any registrar or assistant registrar or anyone acting under his or their authority should be liable to any action for anything done or omitted to be done by him in good faith in the exercise or supposed exercise of the powers of that Act. That provision is now s 131 of the Land Registration Act 1925. Under the Land Transfer Act 1875 no provision was made for setting up an insurance fund to indemnify persons injured by the operation of the Act. Such a fund was first established by s 21 of the Land Transfer Act 1897u, now s 85 of the Land Registration Act 1925. The next Act to be noticed is the Land Charges Act 1900v which closed the Register of Judgments and transferred to the Land Registry the registers of lis pendens and annuities.
One now comes to the property legislation of 1925 which vastly increased the number and scope of matters which could be entered in the central register of land charges kept by the Chief Land Registrar and also created a new form of land charge called a local land charge to be registered in local registers kept by the proper officer of local authorities. Sections 198 and 199 of the Law of Property Act 1925 laid down the general principle that registration of any instrument or matter under the provisions of the Land Charges Act 1925 should constitute actual notice of such instrument or matter and that a purchaser should not be prejudicially affected by notice of any instrument or matter capable of registration under the Land Charges Act 1925 which was void or not enforceable against him under that Act.
Turning to the Land Charges Act 1925 itself, s 1 provides that the registrar shall continue to keep the five registers which he kept previously, namely:
‘(a) a register of pending actions; (b) a register of annuities; (c) a register of writs and orders affecting land; (d) a register of deeds of arrangement affecting land; and (e) a register of land charges.’
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Sections 2 to 9 contain detailed provisions as to the first four registers. Section 10, dealing with the register of land charges, divides them into five classes, Class A consisting of the type of land charge registrable under the 1888 Act, and Classes B to E of new types of land charge, eg puisne mortgages, equitable charges, estate contracts and restrictive covenants. Section 13, which is directed to the protection of purchasers against unregistered land charges, provides:
‘(1) A land charge of Class A created after the thirty-first day of December, eighteen hundred and eighty-eight, shall be void as against a purchaser of the land charged therewith or of any interest in such land, unless the land charge is registered in the register of land charges before the completion of the purchase.
‘(2) A land charge of Class B, Class C or Class D, created or arising after the commencement of this Act, shall (except as hereinafter provided) be void as against a purchaser of the land charged therewith, or of any interest in such land, unless the land charge is registered in the appropriate register before the completion of the purchase:
‘Provided that, as respects a land charge of Class D and an estate contract created or entered into after the commencement of this Act, this subsection only applies in favour of a purchaser of a legal estate for money or money’s worth.’
Section 16 provides that any person may search in any register or index kept in pursuance of the Act on paying the prescribed fee. Section 17, which replaces the provisions of s 2 of the Conveyancing Act 1882 imported into the Land Charges legislation by the 1888 Act, provides (so far as material to be stated here) as follows:
‘(1) Where any person requires search to be made at the registry for entries of any matters or documents, whereof entries are required or allowed to be made in the registry by this Act, he may on payment of the prescribed fee lodge at the registry a requisition in that behalf.
‘(2) The registrar shall thereupon make the search required, and shall issue a certificate setting forth the result thereof.
‘(3) In favour of a purchaser or an intending purchaser, as against persons interested under or in respect of matters or documents whereof entries are required or allowed as aforesaid, the certificate, according to the tenor thereof, shall be conclusive, affirmatively or negatively, as the case may be.
‘(4) Every requisition under this section shall be in writing, signed by the person making the same, specifying the name against which he desires search to be made, or in relation to which he requires a certificate of result of search, and other sufficient particulars.
‘(5) If any officer, clerk, or person employed in the registry commits, or is party or privy to, any act of fraud or collusion, or is wilfully negligent, in the making of or otherwise in relation to any certificate under this section, he shall be guilty of a misdemeanour …
‘(6) Nothing in this section or in any rule made under this Act affects any right which any person may have independently of this section to make any search in the registry; and every such search may be made as if this section or any such rule had not been enacted or made.’
It is to be noted that subsection (2) omits the word ‘diligently’. Section 19 empowers the Lord Chancellor to make rules for the purpose of carrying the Act into effect. Section 20 defines (inter alia) ‘Purchaser’ as—
‘any person (including a mortgagee or lessee) who, for valuable consideration, takes any interest in land or in a charge on land; and “purchase” has a corresponding meaning; … “Registrar” [as] the Chief Land Registrar; [and] “registry” [as] His Majesty’s Land Registry.’
Section 23 provides that the Act shall not apply to land charges and other matters
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affecting registered land which can be protected by registering a notice under the Land Registration Act 1925. Section 15w, dealing with local land charges, provides (so far as material) as follows:
‘(1) Any charge ‘hereinafter called “a local land charge”) acquired either before or after the commencement of this Act by the council of any administrative county, metropolitan borough, or urban or rural district, or by the corporation of any municipal borough, or by any other local authority under the Public Health Acts, 1875 to 1907, the Metropolis Management Acts 1855 to 1893, or the Private Street Works Act, 1892, or under any similar statute (public general or local or private) passed or hereafter to be passed, which takes effect by virtue of the statute, shall be registered in the prescribed manner by the proper officer of the local authority, and shall (except as hereinafter mentioned in regard to charges created or arising before the commencement of this Act) be void as against a purchaser for money or money’s worth of a legal estate in the land affected thereby, unless registered in the appropriate register before the completion of the purchase
‘(2) Except as expressly provided by this section, the provisions of this Act relating to a land charge of Class B shall apply to a local land charge.
‘(3) As regards a local land charge, the registration by the proper officer shall (without prejudice to the right of the registrar also to register the charge if and when the prescribed application and information is made and furnished to him) take the place of registration by the registrar, and, in reference thereto, the proper officer of the local authority shall have all the powers and be subject to the same obligations as the registrar has or is subject to in regard to a land charge …
‘(6) Separate rules may be made under this Act in reference to local land charges for giving effect to the provisions of this section and in particular—
‘(a) for prescribing the mode of registration of a general or specific charge; (b) for empowering a local authority, where it has no means (without incurring unreasonable expense) of ascertaining the person against whom a specific charge should be registered, to register the same only against the land affected; (c) for prescribing the proper officer to act as local registrar, and making provision as to official certificates of search to be given by him in reference to subsisting entries in his register; (d) for determining the effect of an official certificate of search in regard to the protection of a purchaser, solicitor, trustee or other person in a fiduciary position, and for prescribing the fees to be paid for any such certificate or for a search; (e) for prescribing the fees, if any, to be paid for the cancellation of an entry in the register …
‘(8) This section applies to local land charges affecting registered as well as unregistered land.’
The Lord Chancellor has made rules under s 15(6) of the Act—the relevant rules being the Local Land Charges Rules 1934, as subsequently amendedx. Rule 4 provides who is to be the proper officer to act as registrar of local land charges. He is in fact always the clerk or the person for the time being authorised to act as clerk of the relevant local authority, that authority being generally the authority in whose area the land affected is situated. Rule 158 which provides for searches and certificates of search, provided (so far as material) as follows:
‘(1) The provisions of sub-sections (1), (2), (3), (7), (8) and (9) of Section 17 of the Land Charges Act (which relate to official certificates of search and to the effect of such certificates) shall apply to the registrars and registries of local land charges …
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‘(2) Every requisition for search made under the said provisions as applied by this Rule shall be in writing signed by the person making the same or by the solicitor acting for the person requiring the search to be made, and shall define the land in respect of which the search is to be made by means of a plan drawn to scale and (except where the applicant does not require a plan to be returned) furnished in duplicate, or by any other means sufficient to enable to the land to be identified …
‘(6) Any person desiring to make a personal search in the register shall, if so required by the local registrar, furnish his name and address and indicate by reference to a plan or otherwise the parcel or parcels of land in respect of which he proposes to search.’
It is to be observed that the provisions of s 17(5) of the Land Charges Act 1925 are not reproduced in the Local Land Charges Rules 1934.
In the course of the 45 years which have elapsed since the passing of the Land Charges Act 1925, Parliament has enacted many statutes containing provisions for the registration in local land charges registers of various charges or prohibitions or restrictions on the user of land or buildings imposed in favour of Ministers of the Crown and statutory bodies.
The appellants prepared for the purposes of the appeal a list (which did not purport to be exhaustive) of 75 such provisions contained in 45 statutes. The wording of these provisions is not uniform, but the great majority of them fall under one or other of three formulae. As an example of the first one, one may take s 3(4) of the Housing (Rural Workers) Act 1926, which provides as follows:
‘(4) Section fifteen of the Land Charges Act, 1925, as amended by the Law of Property (Amendment) Act, 1926, shall apply to conditions applying by virtue of this section in relation to any dwelling as if they were a local land charge, and any such conditions shall be registered accordingly by the proper officer as a local land charge.’
An example of the second formula is s 14 of the Requisitioned Land and War Works Act 1948, which provides (so far as material) as follows:
‘(1) Subject to the provisions of this section, section twelve of this Act shall not after the thirty-first day of December, nineteen hundred and forty-nine, apply to any pipe-line, or works accessory thereto, unless the rights conferred by subsection (1) of that section have been registered in the prescribed manner in the appropriate register of local land charges …
‘(4) The power conferred by subsection (6) of section fifteen of the Land Charges Act, 1925, to make rules for giving effect to the provisions of that section shall be exercisable for giving effect to the provisions of this section, and in subsection (1) of this section the expression “prescribed” means prescribed by rules made in the exercise of that power.’
The sections with which we are concerned in this appeal, namely ss 28 and 29 of the Town and Country Planning Act 1954 contain in s 28(5) an example of the third formula. The sections (so far as relevant) provide as follows:
s 28(4): ‘Where, on a claim for compensation under this Part of this Act in respect of a planning decision, compensation has become payable of an amount exceeding twenty pounds, the Minister shall cause notice of that fact, specifying the planning decision and the land to which the claim for compensation relates, and the amount of the compensation and any apportionment thereof under this section, to be deposited with the council of the county borough or county district in which the land is situated and, if that council is not the local planning authority, with the local planning authority.
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‘(5) Notices deposited under this section shall be registered in the register of local land charges, in such manner as may be prescribed by rules made for the purposes of this section under subsection (6) of section fifteen of the Land Charges Act, 1925, by the proper officer of the council of the county borough or county district.’
s 29(1): ‘No person shall carry out any new development to which this section applies, on land in respect of which a notice (in this section referred to as a “compensation notice”) is registered under the last preceding section, until such amount (if any) as is recoverable under this section in respect of the compensation specified in the notice has been paid or secured to the satisfaction of the Minister.’
The rules made by the Lord Chancellor for the purpose of giving effect to the relevant section have taken various forms. In some cases there is no provision in them corresponding to s 17(3) of the Land Charges Act 1925; whereas in other cases, including that with which we are concerned, such a provision is included. (See Garner: Local Land Chargesy.)
The Local Land Charges ‘Amendment) Rules 1954z, which contain the rules made by the Lord Chancellor under s 28 of the Town and Country Planning Act 1954, provided, so far as relevant, as follows:
‘2. The Local Land Charges Rules, 1934 as amended, shall apply to notices required to be registered in the register of local land charges pursuant to subsection (5) of section 28 and subsection (2) of section 57 of the Town and Country Planning Act, 1954, in the same manner and to the same extent as they apply to local land charges registrable pursuant to section 15 of the Land Charges Act, 1925 … ’
I turn now to consider the first question arising on this appeal, namely whether this statutory instrument was ultra vires the Lord Chancellor insofar as it purported to provide that a certificate should be conclusive against the Ministry that no compensation notice had been registered at the date of search. The judge in deciding this question appears to me, with all respect to him, to have adopted too strict and literal an approach to the construction of the relevant statutes and statutory instruments and to have paid too little attention to the salutary maxim that any document should, so far as is reasonably possible, be construed ut res magis valeat quam pereat. It is easy to level criticisms at the drafting of the provisions which have to be construed in this case. To start with r 15 of the Local Land Charges Rules 1934 itself; s 17 of the Land Charges Act 1925 applies only to matters or documents whereof entries are required or allowed by the Act to be made in the registry of land charges, ie the central registry kept by the Chief Land Registrar. It is, therefore, strictly speaking, impossible to do what r 15 tells one to do, namely to apply that section to matters and documents which are to be registered in local registries. Obviously, however, one must read r 15 as though it had said that provisions corresponding to those contained in s 17 in relation to matters and documents registrable under the Act in the central registry shall apply mutatis mutandis to the matters and documents registrable under the Act in the local registries. The judge apparently accepts that one must put this gloss on the words of r 15—at all events he does not say that one must not do so—but he levels a similar sort of criticism at the wording of this statutory instrumentaa (no doubt it would apply also to many other statutory instruments) which purports to apply r 15 of the Local Land Charges Rules 1934 to the registration of matters registrable under a statute other than the Land Charges Act 1925. Although he does not make the point, the foundation of his judgment indicates that he would have been prepared to do so if
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necessary. The point which he makes is that r 15, referring as it does to s 17 of the 1925 Act, can apply only to matters and documents registrable under that Act, ie to land charges and to local land charges properly so called, and not to matters registrable under other Acts. But the answer to this criticism is surely that just as one must read r 15 itself as though it said that provisions corresponding to those in s 17 relating to matters registrable in the central registry are to apply mutatis mutandis to matters registrable in the local registries, so one must read this, and similar statutory instruments, as saying that provisions corresponding to those in s 17 of the Act as applied by r 15 to local land charges are to apply mutatis mutanidis to matters registrable under the Act in question. But the ratio decidendi of the judge on this point rests on the words in s 28(5) of the Town and Country Planning Act 1954 ‘shall be registered … in such manner as may be prescribed by rules’, etc. These words in his view limit the rule-making power of the Lord Chancellor under this Act to the power given by s 15(6)(a) of the 1925 Act, ie prescribing the mode of registration, and to the power contained in the first half of s 15(6)(c), ie prescribing the proper officer to act as local registrar. The Lord Chancellor has no power, on this view, to make any provision in his rules for official searches as provided by the second half of s 15(6)(c) or, a fortiori, to make provision for the effect of such searches as provided in s 15(6)(d), or, apparently, to make provision for fees. The judge ([1969] 3 All ER 225, [1969] 3 WLR 1020) does not make it clear whether or not he considers that the use of the word ‘manner’ in formula 2 has the same restrictive effect as he has held it to have in formula 3. In formula 2, it will be remembered, a subsection providing that the notice, condition or restriction is to be registered ‘in the prescribed manner’ in the register of local land charges, is followed by a subsectionab providing that:
‘The power conferred by subsection (6) of Section fifteen of the Land Charges Act, 1925, to make rules for giving effect to the provisions of that section shall be exercisable for giving effect to the provisions of this section … ’
It is scarcely arguable that the wide words in the second subsection referring quite generally to the power given by s 15(6) of the 1925 Act to make rules for giving effect to the whole of that section, are limited by the use of the word ‘manner’ in the first subsection to so much of the power given by s 15(6) as relates to the mode of registration. Such an argument would be extremely far-fetched and I would have no hesitation whatever in rejecting it. The two subsections read together simply provide that the notice or condition in question is to be registered under rules to be made for the purpose which can prescribe not only the mode but also the effect of registration. Now, it appears to me to be clear that formula 3 is simply a rather unfortunate attempt to shorten formula 2 and has just the same effect.
This conclusion is strengthened by a consideration of the extraordinary result which could flow from the narrow construction adopted by the judge. One can well see that in some cases it is desirable to exclude any provision corresponding to s 17(3) of the Act making a certificate of search conclusive. The nature of the condition or restriction in question may be such that it is right that it should continue to be binding on a purchaser, even though he has obtained a clear certificate owing to some error in the registry. But the judge’s construction involves not only that the Lord Chancellor had no power to make a certificate conclusive but that he had no power to provide for a certificate at all. It is to my mind altogether incredible that Parliament should have provided that a condition or restriction should be registered in a local registry without any provision for the issue of official certificates of search which, in the vast majority of cases will be accurate and so will give the proposing purchaser warning of the existence of the matter in question. Personal searches were coming to be felt to be burdensome as long ago as 1882 and are a thing of the past today. One may, of course,
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ask oneself why these various charges, conditions and restrictions created by Acts of Parliament passed after 1925, do not fall into one or other of two clearly defined classes: (a) those which are to be treated as if they were local land charges with the result that they will be void against a purchaser if not registered and in respect of which even if registered a clear certificate will be conclusive in the purchaser’s favour; and (b) those which are to be registered, so that the purchaser will be able (failure to register or errors in the Registry apart) to discover their existence, but which will not be void as against him if not registered and in respect of which a clear certificate will not be conclusive.
At first sight there seems no need for the intermediate class of which we have an example here where the matter in question is not treated as if it were a local land charge and so is not void as against a purchaser if not registered but where, nevertheless, if it is registered a clear certificate in respect of it is conclusive in favour of a purchaser because a provision corresponding to s 17(3) of the 1925 Act appears in the relevant rules.
As was pointed out in argument, this entails the odd result that if the notice in question here had not in fact been registered before the purchasers’ solicitor made his search, the Ministry could have registered it later, provided that development of the land had not already begun, and enforced the compensation charge against the developer. But whether or not the somewhat anomalous status of notices under s 28 is or is not justifiable, I have no doubt that the Lord Chancellor had power to incorporate a provision corresponding to s 17(3) of the 1925 Act in the rules made under the 1954 Act and that although the notice was in fact registered before the search, the Ministry is precluded by reason of the clear certificate from saying as against the purchasers that the notice is on the register and so cannot enforce the charge against them since under s 29 registration is a condition precedent to the enforcement of the charge. Consequently in my judgment the decision of the judge of the first question was wrong.
I turn now to the second question. In 1925, the great majority of local land charges were charges in favour of the local authority whose clerk was himself the local registrar. It would certainly seem, prima facie, somewhat odd that Parliament should have provided that if any member of the staff in the local registry, who would himself be a servant of the local authority in question, was negligent either in failing to register a local land charge or in giving a clear certificate to a purchaser although the charge was on the register, the registrar although not himself guilty of any negligence should be liable in damages to his employers for any loss which they might suffer. But if the Chief Land Registrar was under a statutory duty to secure the accuracy of search certificates issued by the central registry then it would follow from s 15(3) of the Act that local registrars became subject to a similar statutory duty.
Now I cannot believe that if the Chief Land Registrar was not under such a liability before 1925, the 1925 Act made him liable. The amendments to the pre-existing law with regard to land charges, eg the increase in the number of land charges and the introduction of local land charges, were made by the Law of Property Act 1922. The 1925 Act was a consolidating Act incorporating these amendments, which did not include the omission of ‘diligently’ in s 17(2), with the pre-existing law. ‘Diligently’ was dropped by the draftsman of the consolidating Act presumably because he thought that it was implied anyway. So one must go back and consider whether the 1888 Act imposed a liability. In 1888, the registrar was expressly exempted from liability to be sued for acts done in exercise of his powers under the Land Transfer Act 1875; so Parliament at that date cannot have thought that there was anything inherently objectionable in the fact that members of the public who suffered through innocent mistakes in the registry should have no civil remedies. As he was exempt from liability under the Land Transfer Act 1875, to subject him to liability under the Land Charges Act 1925 would, prima facie, be anomalous. The anomaly would, however, be explicable if and so far as the various officers of the Supreme Court
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who were directed to maintain registers by the Acts scheduled to the Conveyancing and Law of Property Act 1881, and similar Acts, were themselves liable to be sued, for the provisions for official searches and certificates made applicable to the registrar in 1888 were taken from the provisions in s 2 of the Conveyancing Act 1882. Further, in 1900, two registers formerly kept by the Registrar of Judgments were transferred to the Chief Land Registrar. But if and so far as the court officials were not themselves liable to be sued I find it very difficult to suppose that Parliament intended to subject the Chief Land Registrar to liability by the 1888 Act. The natural assumption would be that Parliament either considered that no express exemption corresponding to the Land Transfer Act 1875 provision was necessary or, more probably, simply forgot to put one in.
So the point which to my mind is crucial is to what extent, if at all the various ‘proper officers’ were liable to be sued? The case of Douglass v Yallop, to which Lord Denning MR refers, shows that the Senior Master of the Court of Common Pleas, who received 5s for each entry, would have been liable to be sued for any damages suffered by the plaintiff for his failure to register a judgment presented for registration under the Judgments Act 1838. Of course, by 1888, the Registrar of Judgments (the Senior Master of the Queen’s Bench Division) received a fixed salary and it might perhaps be argued that his personal liability to be sued for the failure of one of his clerks to register a judgment did not survive the legislation which reorganised the courts. But even if that is not so, what we are concerned with is the obligation to issue certificates of search which was first created by the Conveyancing Act 1882. That Act was a code applicable to all registers kept, or apparently to be kept, in the Central Office under the Acts scheduled to the Conveyancing and Law of Property Act 1881, and any other Acts; so that it might apply to functionaries of varying status. I find it difficult to suppose that Parliament in the year 1882 would have intended by such an Act to make these unidentified officers of the court paid by salary personally liable to ensure the accuracy of the certificates of search issued in respect of registers under their charge. But in any case the Act contains the word ‘diligently’ and that, as I see it, must have excluded an absolute liability independent of any negligence. Of course, in this case the subordinate to whom the registrar delegated the task of searching was himself negligent and it may be, as Salmon LJ suggests, that if this claim against the registrar had been framed in negligence he could not have escaped liability by saying that the negligence was not his but that of his delegate. But it is not necessary, as I see it, to express a concluded view on this point because the claim against the registrar was not based on negligence but on the contention that he was under an absolute duty to ensure the accuracy of the certificate. In my judgment, therefore, the decision of the judge on the second question was wrong.
Turning, finally, to the third question, the council cannot be under any liability to the plaintiffs unless their employee, the searcher who failed to record the notice, was himself liable to be sued by them in tort. The council did not seek to rely on the fact that although the searcher was their employee he was not acting under their orders when he made the search in question but under the orders of the local registrar who although himself an employee of the council was, in his capacity as local registrar, acting independently. Again it was common ground that if the searcher was liable to be sued by the plaintiffs in tort for giving an erroneous clear certificate to a prospective purchaser he would equally be liable to be sued by them for failure to register the notice in the first instance.
The question is whether there was sufficient ‘proximity’ between the plaintiffs and the searcher—whether he was sufficiently their ‘neighbour’—to render him liable to be sued under the modern developments of the law of tort which were initiated by Donoghue v Stevenson and extended to negligent statements in Hedley Byrne & Co Ltd v Heller & Partners Ltd. Some points can readily be got out of the way. The
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problem posed by the case of the hydrographer who draws an inaccurate chart and is sued by an unknown purchaser of it does not arise here because the searcher will have been given a request to register, or a request for a search, as the case may be, on behalf of an identified person with whom he will have been brought, in a sense, into direct contact.
Further, although the searcher’s work does not involve any ‘special skill’ he may fairly be assumed to have realised that not to register a document submitted for registration, or to omit to disclose a registered charge in a certificate of search, might cause serious damage to the party requesting the registration or the search. Again I do not think that the fact that the searcher did not undertake the function of making the statement in question ‘voluntarily’, except in the sense that he could have refused to accept employment in so potentially hazardous an occupation, is relevant to the problem in hand.
It is true that the phrase ‘voluntary assumption of risk’ occurs frequently in the speeches in the Hedley Byrne case, but I agree with the judge that that case did not purport to lay down any metes and bounds within which legal liability in tort for false statements, on which the parties to whom they are made rely, has to be confined. (See in particular per Lord Devlin ([1963] 2 All ER at 611, [1964] AC at 530, 531).) I see no sufficient reason why in an appropriate case the liability should not extend to cases in which the defendant is obliged to make the statement which proves to be false.
But, granted all that, I am still not altogether satisfied that it would be right to hold the searcher liable in this case. Suppose a private organisation to offer for reward to supply information of the credit-worthiness of persons with whom those who apply for information are thinking of entering into business dealings; suppose, further, that an employee of theirs by failing to search their records properly creates an entirely false impression of the credit-worthiness of some person by relying on which the applicant suffers damage; and suppose, finally, that the organisation is insolvent and that the applicant sues the employee, who has recently inherited a legacy and so is worth powder and shot, in tort. In such circumstances I think that the defendant might say to the plaintiff with some plausibility: ‘Of course, I was to blame. My employers may, for all that I know, have some claim against me; but it was they who put this false information into circulation. I did not publish it myself, and you and I ought not to be regarded as “neighbours” for the purpose of he law of tort.’
Of course the facts in this case differ from the facts which I have supposed in that, if I am right on the second question in this appeal, the plaintiffs have no remedy against the man who published the information, but I am not altogether satisfied that this difference affords a sufficient ground for holding the searcher, and consequently the council, liable in this case.
However, as my Lords, who are much more conversant with this branch of the law than I am, agree in thinking that the council are liable, I am not prepared to dissent from their view of the matter. I would allow the appeal against the council but not against Mr Sharp.
Appeal allowed in part. Leave to appeal to the House of Lords granted.
Solicitors: Solicitor, Ministry of Housing and Local Government; Beddington, Hughes & Hobart (for the defendants).
Wendy Shockett Barrister.
North West Metropolitan Regional Hospital Board v T A Bickerton & Son Ltd
[1970] 1 All ER 1039
Categories: CONSTRUCTION
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD HODSON, LORD GUEST, VISCOUNT DILHORNE AND LORD WILBERFORCE
Hearing Date(s): 3, 4, 5, 9, 10, 11 FEBRUARY, 18 MARCH 1970
Building contract – Sub-contractors – Sub-contract for prime cost item – Sub-contract repudiated – Main contractor performing sub-contract work without prejudice – Whether architect required to nominate substitute sub-contractor – Whether main contractor entitled to be paid for costs reasonably incurred in excess of sub-contract price – RIBA form of contract – Local Authorities Edition (With Quantities) 1963, conditions 11(3), 27.
The employers engaged the contractor to erect certain buildings at a hospital. The contract (which was a standard RIBA form ‘Local Authorities Edition (With Quantities) 1963’) provided that, for the consideration mentioned, the contractor would (on and subject to the conditions annexed) carry out and complete the works shown on the contract drawings and described by or referred to in the contract bills and in the conditions. The consideration included estimates of the prices for prime cost works to be carried out by sub-contractors to be nominated by the employers’ architect. The employers instructed the contractor to enter into sub-contracts with subcontractors nominated by the architect in terms dictated by the employers. So far as the sum to be paid to any nominated sub-contractor differed from the estimated prime cost sum for that work, the contractor’s consideration was adjusted. No specific provision was made requiring the architect to nominate sub-contractors or to renominate a sub-contractor if an original nominee should for any reason fail to perform the sub-contract. The contract (between the employers and the contractor) also provided (condition 11(3)) that the architect should issue instructions in regard to the expenditure of prime cost sums included in the contract bills. Condition 27 provided: ‘The following provisions of this Condition shall apply where prime cost sums are included in the Contract Bills, or arise as a result of Architect’s … instructions given in regard to the expenditure of provisional sums, in respect of persons to be nominated by the Architect … to supply and fix materials or goods or to execute work. (a) Such sums shall be deemed to include 2 1/2 per cent cash discount and shall be expended in favour of such persons as the Architect … shall instruct, and all specialists or others who are nominated by the Architect … are hereby declared to be sub-contractors employed by the Contractor and are referred to in these Conditions as “nominated sub-contractors“. Provided that the Architect … shall not nominate any person as a sub-contractor against whom the Contractor shall make reasonable objection … ’ The contract required that, under any subcontract, a nominated sub-contractor would be required to observe, perform and comply with all the provisions of the contract on the part of the contractor to be observed, performed and complied with so far as they related to sub-contract work, and that a sub-contractor would indemnify the contractor against the same liabilities in respect of sub-contract works as those for which the contractor was liable to indemnify the employers under the contract.
The architect nominated S Ltd as sub-contractor to undertake the installation of a heating system. S Ltd entered into a sub-contract with the contractor but thereafter went into liquidation. The liquidator refused to perform the sub-contract. The contractor thereupon asked the employers to issue a variation order postponing the work until a new sub-contractor was appointed. The architect refused to issue a variation order or to renominate a sub-contractor, and called on the contractor to complete the contract. Subsequently, the contractor agreed to do so without
Page 1040 of [1970] 1 All ER 1039
prejudice to his legal rights. The contractor claimed that the work had cost substantially more than the sub-contract price, but the employers refused to pay more than the sub-contract price. An arbitrator stated a special case for the court asking whether the employers by their architect were required to renominate a sub-contractor to carry out the sub-contract work and (if so) whether the contractor should be entitled to claim any sum in excess of the sub-contract price.
Held – (i) The relevant conditions of the contract must be construed as placing an obligation on the employers to renominate a sub-contractor in the event of the repudiation of a sub-contract by a nominated sub-contractor.
J M Reilly Ltd v Belfast Corpn (1968) unreported disapproved.
(ii) On the failure of the employers to renominate a sub-contractor, the contractor was not restricted to the sub-contract price as consideration for undertaking the sub-contract work.
Decision of the Court of Appeal sub nom Bickerton & Son Ltd v The North West Metropolitan Regional Hospital Board [1969] 1 All ER 977 affirmed.
Notes
The RIBA in a press notice dated 20 March 1970 stated that the form of contract referred to in this case had been produced by the Joint Contracts Tribunal on which the RIBA was one of the 11 constituent bodies. The RIBA further stated that it would take immediate steps to ensure that the criticism of the courts would be considered by the tribunal without delay.
For liability of an employer to builder for work done, see 3 Halsbury’s Laws (3rd Edn) 516, para 1027, and for cases on the subject, see 7 Digest (Repl) 440, 441, 401–406.
Cases referred to in opinions
Cross (K) (Doncaster) Ltd v York (East Riding) County Council (12 October 1966) unreported.
Hampton v Glamorgan County Council (1915) 84 LJKB 1506, affd HL [1917] AC 13, 86 LJKB 106, 115 LT 726, 81 JP 41, 15 LGR 1, 7 Digest (Repl) 447, 424.
Leslie & Co Ltd v Metropolitan Asylums District Managers (1901) 68 JP 86, 1 LGR 862, 7 Digest (Repl) 439, 394.
Reilly (J M) Ltd v Belfast Corpn (28 June 1968) unreported.
Appeal
This was an appeal by the North West Metropolitan Regional Hospital Board (the employers) against an order of the Court of Appeal (Danckwerts, Sachs and Edmund Davies LJJ) dated 4 November 1968, and reported [1969] 1 All ER 977, allowing an appeal by T A Bickerton & Son Ltd (the contractor) from an order of Nield J dated 31 May 1968 and reported 66 LGR 597. Nield J answered the first of two questions raised on a special case stated in the negative, whereupon the second question did not arise. The two questions are set out at p 1049 c and d, post, and the facts are set out in the opinion of Lord Reid.
K F Goodfellow QC and I N Duncan Wallace for the employers.
M L M Chavasse QC and Donald Keating for the contractor.
Their Lordships took time for consideration
18 March 1970. The following opinions were delivered.
LORD REID. My Lords, the appellants employed the respondents as contractors to erect certain buildings at their hospital at Abbots Langley, and they nominated a company called Speediwarm Ltd as the sub-contractor who was to provide the
Page 1041 of [1970] 1 All ER 1039
heating system. Speediwarm then contracted with the contractor but very soon went into liquidation and the liquidator refused to carry out the contract. Then, without prejudice to their respective rights, the employers and contractor arranged that the contractor should do this work. It did so and there is no complaint about its work. But the work cost substantially more than the price at which Speediwarm had agreed to do it. The employers contend that the contractor is only entitled to be paid Speediwarm’s price. The contractor contends that, when Speediwarm fell out, the employers ought to have nominated another sub-contractor and paid its price; and that, as they did not do so, they must pay the contractors on he basis of quantum meruit.
I must first explain the nature of the contract between the employers and the contractors. The employers put out for tender bills of quantities and drawings. With regard to the greater part of the work the bills were detailed and the contractor filled in its prices. But certain parts of the work were reserved for sub-contractors to be nominated by the employers. With regard to these parts no details were given, and sums known as prime cost sums were inserted by the employers as estimates of what those parts were likely to cost. So the tendering contractor had no concern either with the details of this work or the price to be paid for it. The work was to be part of the contract work and so the contractor’s tender was made up of the sums for which it offered to do its part of the work together with the prime cost sums settled by the employers. The employers obtained tenders from specialists, selected by them for the prime cost work, and then, when they had made their contract with the contractor, they instructed the contractor to enter into a contract with the sub-contractor whom they nominated in terms which they dictated, having settled those terms with the nominated sub-contractor. Then, if the sum to be paid to the nominated sub-contractor differed from the estimated prime cost sum, as it almost certainly would, the contractor’s contract price for the whole work was adjusted to take account of this difference.
The contractor’s contract with the employers included bills of quantities, contract drawings and the conditions contained in the RIBA form of contract—a form published by the Royal Institute of British Architects. So the questions at issue in this case must be answered by construing those conditions. Condition 1(1) is in these terms:
‘The Contractor shall upon and subject to these Conditions carry out and complete the Works shown upon the Contract Drawings and described by or referred to in the Contract Bills and in these Conditions in every respect to the reasonable satisfaction of the Architect/Supervising Officer.’
The works there referred to clearly include prime cost work to be done by nominated sub-contractors so the principal contractor is in breach of its contract with the employers if these works are not duly carried out and completed. But it will be able to sue the nominated sub-contractor for breach of the sub-contract. Admittedly the principal contractor is liable if the prime cost works are defective. How much farther its obligation goes must depend on the true interpretation of later conditions.
The main condition with regard to nominated sub-contractors is condition 27. The relevant provisions are as follows:
‘The following provisions of this Condition shall apply where prime cost sums are included in the Contract Bills, or arise as a result of Architect’s/Supervising Officer’s instructions given in regard to the expenditure of provisional sums, in respect of persons to be nominated by the Architect/Supervising Officer to supply and fix materials or goods or to execute work.
‘(a) Such sums shall be deemed to include 2 1/2 per cent cash discount and shall be expended in favour of such persons as the Architect/Supervising Officer shall instruct, and all specialists or others who are nominated by the Architect/Supervising Officer are hereby declared to be sub-contractors employed by the Contractor and are referred to in these Conditions as “nominated sub-contractors“.
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Provided that the Architect/Supervising Officer shall not nominate any person as a sub-contractor against whom the contractor shall make reasonable objection, or (save where the Architect/Supervising Officer and Contractor shall otherwise agree) who will not enter into a sub-contract which provides (inter alia):—
‘(i) That the nominated sub-contractor shall carry out and complete the sub-contract Works in every respect to the reasonable satisfaction of the Contractor and of the Architect/Supervising Officer and in conformity with all the reasonable directions and requirements of the Contractor.
‘(ii) That the nominated sub-contractor shall observe, perform and comply with all the provisions of this Contract on the part of the Contractor to be observed, performed and complied with (other than clause 20 [A] of these Conditions, if applicable) so far as they relate and apply to the sub-contract Works or to any portion of the same.
‘(iii) That the nominated sub-contractor shall indemnify the Contractor against the same liabilities in respect of the sub-contract Works as those for which the Contractor is liable to indemnify the Employer under this Contract.’
Conditions 11(3) and 30 also throw some light on the matter. But I do not think that they affect the proper construction of condition 27, and I need not set them out. The crucial problem is to discover the meaning of the first part of condition 27(a). ‘Such sums’ must refer back to ‘prime cost sums’ in the preceding sentence. ‘… such persons as the Architect … shall instruct’ must be the same as ‘persons to be nominated by the Architect … to execute work’, ie nominated sub-contractors. And no light is thrown on the problem by the initial words of condition 27(a) (Such sums shall be deemed to include 2 1/2 per cent cash discount’. I did not understand any of that to be disputed in argument. So I can rewrite the crucial words—‘prime cost sums shall be expended in favour of persons nominated by the Architect to execute work’. This is meaningless if ‘prime cost sums’ has its ordinary meaning of sums entered or provided in the bills of quantities for work to be executed by nominated sub-contractors. Such sums are never expended; they are only estimates of the sums which will later appear in the sub-contract between the contractor and nominated sub-contractors as the prices to be paid to the nominated sub-contractors for the prime cost work to be done by them. Once these sub-contracts are made, the prime cost sums have no further part to play except in accounting as provided in condition 30(5) (c).
In order to give this sentence an intelligible meaning, either ‘prime cost sums’ or ‘expended’ must be given an unusual meaning. It was argued for the employers that ‘expended’ could mean ‘allocated’. But that would not help, because prime cost sums are never allocated to a nominated sub-contractor or to anybody else, and in the end counsel for the employers were unable to suggest any word or phrase the substitution of which for the word ‘expended’ would make sense of this sentence. On the other hand, if ‘prime cost sums’ can be read as meaning the sums which become payable for prime cost work then the meaning of the sentence becomes clear. And that does not appear to me to be doing too great violence to the words in the clause. I would, therefore, read this clause as directing that sums payable in respect of prime cost work ‘shall’ be expended in favour of nominated sub-contractors and no one else. ‘Expended in favour of’ is a rather odd expression but it is, I think, accounted for by the fact that payments for work done by the nominated sub-contractor are paid in the first instance by the employers to the principal contractror, but they are earmarked and are then paid by the contractor to the nominated sub-contractor.
The RIBA form of contract makes no express provision for an event which cannot be very uncommon—that for one reason or another the contract between the principal contractor and the nominated sub-contractor is terminated before the sub-contract work is completed. The problem is what is to happen in that event. There appear
Page 1043 of [1970] 1 All ER 1039
to me to be three possibilities, and no more were suggested in argument. The first is that the employers must then make a new nomination, or, if they do not wish the work to be continued, give an instruction to that effect by way of variation. If they do make a new nomination, then as in the case of the first nomination they must make a bargain with the new nominees and then instruct the principal contractor to make a sub-contract in terms of that bargain. Then, if the price in the second sub-contract exceeds the price in the first sub-contract which has come to an end, the employers must bear the loss. That is the contention of the contractor. The second possibility is that, when the contract with the nominated sub-contractor is terminated, it becomes the right and duty of the principal contractor to do the prime cost work itself at the price fixed in the sub-contract which has been terminated. The third possibility is that the principal contractor must be held to have undertaken that the nominated sub-contractor will complete the work so that, when, by reason of the termination of the sub-contract, it becomes impossible for that obligation to be performed, there is an irremediable breach of contract by the principal contractor. The employers argued that one or other of these interpretations is correct.
It appears to me that there are insuperable objections to both of the employers’ contentions. The scheme for nominated sub-contractors is an ingenious method of achieving two objects which at first sight might seem incompatible. The employers want to choose who is to do the prime cost work and to settle the terms on which it is to be done, and at the same time to avoid the hazards and difficulties which might arise if they entered into a contract with the person they have chosen to do the work. The scheme creates a chain of responsibility. Subject to a very limited right to object, the principal contractor is bound to enter into a contract with the employers’ nominee, but it has no concern with the terms of that contract, for those terms are settled by the employers and their nominee. I can find nothing anywhere to indicate that the principal contractor can ever have in any event either the right or the duty to do any of the prime cost work itself. That would, I think, be contrary to the whole purpose of the scheme, and it would be strange if the contractor could have to do work for which it never tendered and at a price which it never agreed. Moreover, if I have correctly construed condition 27, its provision that payment for prime cost work shall be made in favour of nominated sub-contractors and, therefore, cannot be made to the contractor on its own account necessarily involves the conclusion that the contractor is not to do prime cost work itself. So I reject the employers’ first contention.
We were referred to an unreported judgment of the Court of Appeal in Northern Ireland, J M Reilly Ltd v Belfast Corpn, where it was held that, on a nominated sub-contractor going into liquidation and the liquidator refusing to complete the sub-contract, there was no duty on the employer to make a second nomination. As I read the judgments, all the learned judges held that, when the nominated sub-contractor dropped out, it became the duty of the principal contractor to do the prime cost work itself. Lord MacDermott CJ quoted the obligation in condition 1(1) that ‘the Contractor shall … carry out and complete the Works’, and then said:
‘The work covered by ordinary sub-contracts made by the main contractor would not reduce the latter’s field of performance, and I can find nothing in the main contract to suggest that sub-contracts with a nominated sub-contractor were to stand in any different position. If my view on this is right, a construction which would place an obligation on the employers to re-nominate seems to be founded on little more than wishful thinking.’
I would agree that, if the principal contractor had any duty under the main contract to do prime cost work itself, it would follow that the employer would not be bound to make a second nomination. My impression from reading these judgments is
Page 1044 of [1970] 1 All ER 1039
that no very detailed argument can have been submitted to the effect that the principal contractor never has either the right or the duty to do prime cost work, and, for the reasons which I have given, I am unable to agree with the decision in Reilly’s case.
The employers’ alternative contention involves similar difficulties. If they could establish that, under their contract, there can never be any duty on the employers to nominate a second sub-contractor if the first nominee drops out, then it could be said that, when the principal contractor undertook to complete the prime cost work—as it did in condition 1—it undertook that it would be completed by the first nominated sub-contractor, for it was not entitled to do the work itself. But if, on a proper construction of the contract, the employers are bound to renominate if the first nominee drops out, then there is no question of guaranteeing the first nominated sub-contractor. The contractor’s obligation is simply duly to hand over the completed work. If it does not do so, it is in breach of contract. If the fault is its own, it bears the loss, but if the fault is that of the nominated sub-contractor it can sue the sub-contractor for the damages it has to pay to the employers.
There is a further objection to this contention of the employers. If the contractor is bound to complete the prime cost work but cannot do it itself under the contract and it cannot be done by a nominated sub-contractor because the first has dropped out and there is no provision for a second, then there is deadlock. There is no way in which the work can be done under the contract. It is said that the contractor could then go in and do the work itself in order to mitigate damages. But then the work would not be done under the contract and the employers and their architect would lose all control over it. That cannot have been the intention, and I gravely doubt whether the contractor could have any such right. So, unless the contractor’s contention is correct, there will be grave and perhaps insuperable difficulties when any nominated sub-contractor refuses to complete its contract.
But I see no great difficulty in holding that the contract requires a second nomination if the original nominated sub-contrator drops out. It is said that there is no express provision for this. But then neither is there any express provision for the first nomination. Indeed, the absence of any such provision has led to a view, which has attracted considerable support, that the employers have no duty to make any nomination but only have a right or option to do so. But that cannot be right. The contract provides that the prime cost work shall be done, and it may be that the contractor cannot do or at least cannot finish its own work until it is done. The prime cost work is not even defined until the nominated sub-contractor is brought in. No one suggests that the principal contractor has any concern with prime cost work until it is required to make a contract with a nominated sub-contractor. It would be a clear breach of contract by the employers if their failure to nominate a subcontractor impeded the contractor in the execution of its own work.
Once it is accepted that the principal contractor has no right or duty to do the work itself when the nominated sub-contractor drops out any more than it had before the sub-contractor was nominated, then equally it must be the duty of the employers to make a new nomination when a nominated sub-contractor does drop out. For otherwise the contract work cannot be completed. Moreover, condition 27 requires that payment for prime cost work shall be expended in favour of nominated sub-contractors. So if the first drops out, no payment for the prime cost work still to be done can be made under the contract unless that work is done by a second nominated sub-contractor.
Perhaps I should add that there was an argument that, if my view is right, there will be grave difficulty if a contractor wrongfully terminates the sub-contract—it may be because it thinks erroneously that the sub-contractor is in fundamental breach of the sub-contract. Then, in my view, the contractor would be in breach
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of his contract with the employers. A new sub-contractor would have to be nominated. But the contractor would have to pay damages for its breach of contract including any loss caused to the employers by that breach.
Although I have come to a clear conclusion that there was in this case a duty to renominate, the provisions of the RIBA form of contract are so confused and obscure that no conclusion can be reached without a long and complicated chain of reasoning. The RIBA form of conditions sponsored by the institute is in very common use. It has been amended from time to time. For a long time it has been well known that the question at issue in the present case has given rise to doubt and controversy. It could have been set at rest by a small amendment of these conditions. But the institute have chosen not to do that, and they have thereby caused the long and expensive litigation in the present case.
I would dismiss this appeal.
LORD HODSON. My Lords, this is an appeal by the employers against an order of the Court of Appeal ([1969] 1 All ER 977) in favour of the contractor. The Court of Appeal, reversing Nield J ((1968) 66 LGR 597), answered in favour of the employers two questions of law raised by an award in the form of a special case stated.
The dispute between the parties arose from a building contract dated 20 October 1964 relating to building works at Leavesden Hospital, Abbots Langley. The articles of agreement and conditions were, apart from certain immaterial matters, in a form issued by the Royal Institute of British Architects and the National Federation of Building Trades Employers. The form is known as ‘Local Authorities Edition (With Quantities) 1963’.
The contract provided for the architect, as agent of the employers, to nominate sub-contractors to be employed by the contractor to perform certain work forming part of the total works to be executed under the main contract. A firm called Speediwarm Ltd tendered to the employers in respect of certain mechanical installations for heating in the sum of £7,389 15s 2d. The tender was accepted and the architect duly nominated Speediwarm as sub-contractor to perform this work and the contractor and Speediwarm entered into a sub-contract accordingly. Speediwarm, having done very little work, went into voluntary liquidation. The liquidator refused to perform the contract, and, on 23 December 1964, the contractor, by letter, asked the employers to issue a variation order postponing the work until a new sub-contractor was appointed. On 11 January 1965, the employers’ architect replied pointing out that the employers were not in contractual relationship with Speediwarm. He called on the contractor to complete the contract and refused to issue a variation order or to nominate another sub-contractor. Subsequently the contractor, having a heating division capable of carrying out the work, did so without prejudice to its legal rights. The contractor claimed that the work had cost it £909 more than the nominated sub-contractor had agreed to accept, but the employers refused to pay anything more than would have been payable to Speediwarm had this firm carried out the work.
On a special case stated for the decision of the court pursuant to s 21(1) (a) of the Arbitration Act 1950, Nield J answered in favour of the employers the following question of law:
‘Whether or not in the circumstances of the case on a true construction of the said agreement it was the obligation of [the Employers] by their Architect to make a second nomination of a sub-contractor to carry out the remaining sub-contract work.’
Having answered this question in the negative, the second question whether the
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contractor was or was not limited in his claim did not arise for decision. The Court of Appeal ([1969] 1 All ER 977) answered the first question in the affirmative, that is to say, in favour of the contractor, and as to the second question held that the contractor was not limited in its claim to the figure included in the Speediwarm contract.
The particular problem on this contract (or on an earlier form which is not different in any significant extent) has arisen because of the odd circumstance that the provision for specialist sub-contractors to be nominated by employers is not expressly defined as being a requirement to nominate once and for all or as a requirement to nominate when necessary. The contract itself begins as follows:
‘1 For the consideration hereinafter mentioned the Contractor will upon and subject to the Conditions annexed hereto carry out and complete the Works shown upon the Contract Drawings and described by or referred to in the Contract Bills and in the said Conditions.
‘2 The Employer will pay to the Contractor the sum of … (£61,985 4. 6) … or such other sum as shall become payable hereunder at the times and in the manner specified in the said Conditions.’
Of the conditions the following are relevant to the question under consideration:
‘11(3) The Architect/Supervising Officer shall issue instructions in regard to the expenditure of prime cost … sums included in the Contract Bills …
‘27 The following provisions of this Condition shall apply where prime cost sums are included in the Contract Bills … in respect of persons to be nominated … to execute work.
‘(a) Such sums … shall be expended in favour of such persons as the Architect … shall instruct, and all specialists or others who are nominated by the Architect … are hereby declared to be sub-contractors employed by the Contractor and are referred to in these Conditions as “nominated sub-contractors” …
‘30 (5) … (c) In the settlement of accounts the amounts paid or payable under the appropriate contracts by the Contractor to nominated sub-contractors … shall be set against the relevant prime cost … and the balance … shall be added to or deducted from the Contract Sum...’
It is to be observed that the contract is expressed to be ‘subject to the Conditions’.
This case concerns a prime cost sum of £6,930a included in the contract sum of £61,000. The prime cost is a provisional figure fixed on behalf of the employers before the bills go out to contractors for tender. The tender having been accepted in the sum of £7,389 15s 2d, this takes the place, as it were, of the prime cost provisionally fixed in the first place.
The argument for the employers is that the contractor is primarily liable under the contract to put right things wrongly done and to do the work if nothing is done. The main contractor is liable in damages to the employers in respect of breaches by way either of non-performance or mis-performance. The contractor has its remedy against the sub-contractor. It, as it were, warrants the sub-contractor in respect of sins of commission and also sins of omission. The employers fulfil their duty when they nominate once and for all in respect of the work that they want done by a specialist. When the nominated sub-contractor repudiates its bargain with the main contractor, it is said that the latter becomes in breach of its contract with the employers and any work it did thereafter was done in its own interests in mitigation of the damage which the employers would otherwise have suffered and been able
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to recover from it as flowing from its breach. The contention of the employers, in the absence of any requirement in the contractual conditions that they should be required to renominate when the first nominated sub-contractor drops out, is that there is nothing to relieve the contractor from its promise to carry out and complete the work.
It is clear from authority that, in such circumstances as exist here, the main contractor does not enter into the sub-contract with the nominated sub-contractor either as agent or as trustee for the employer—see Leslie & Co Ltd v Metropolitan Asylums District Managers and Hampton v Glamorgan County Council.
Two cases support the employers’ contention that an employer in parallel circumstances is not bound to renominate if it wants the work done. In K Cross (Doncaster) Ltd v York (East Riding) County Council, a decision was given by an official referee, Sir Walter Carter QC. He held that, there being no express term compelling the employer to renominate, such a term could not properly be inferred. More recently in the Court of Appeal in Northern Ireland a like conclusion was reached in a similar situation by a court consisting of Lord MacDermott CJ, McVeigh LJ and Lowry J. In J M Reilly Ltd v Belfast Corpn, Lord MacDermott CJ held, and I respectfully agree with him, that, if there is an obligation to renominate in order to get the work done on the failure of the nominated sub-contractor, additional expense involved should fall on the employers and not on the main contractor. On the second question raised here I would, accordingly, find that, if the contractor succeeds on the first question, it should be paid the sum of £900, if agreed, or,if not agreed, whatever sum is found to be due on a quantum meruit basis. Lord MacDermott CJ did not, however, nor did either of his colleagues, find it possible to imply a term to the effect that a second nomination should be made when necessary. Again I respectfully agree.
On the bare question of construction, however, although I agree that the problem is one of great difficulty I have reached the same conclusion as the Court of Appeal ([1969] 1 All ER 977) in England. There are practical difficulties either way. One argument put forward by the employers, relied on in Reilly’s case and in this, is to be found in Hudson on Building and Engineering Contractsb in relation to the contention that a term for a second nomination should be implied. The editor writes:
‘If no such item is implied, the contractor can recover as damages from the original sub-contractor the difference between the original and the later sub-contractor’s price, whereas if such a term is to be implied the result must be that a nominated sub-contractor, provided he acts in good time, can repudiate his contract with impunity, since the main contractor will have suffered no damage as a result.’
This argument is weighty in considering the question of construction of the conditions without reference to ‘implied term’. Its weight was fully appreciated in the Court of Appeal ([1969] 1 All ER 977) in this case which recognised that a sub-contractor who had put in too low a tender or found itself offered more lucrative work might promptly disclaim and would at most have to pay the contractor nominal damages knowing that the main contractor was under no liability to the employers in the circumstances which it had itself created. This, of course, deprives the employers of the advantage normally enuring to them from the absence of any privity of contract between themselves and sub-contractors.
There are weighty considerations which point in the opposite direction. What is to happen when the sub-contractor drops out by repudiating the contract, as in this case, or by death or bankruptcy leaving the work wholly or partially unperformed? It is conceded by the employers that, having nominated a sub-contractor
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to do prime cost work, they cannot require the contractor to perform it. The repudiation by the sub-contractor makes no difference to that position. The employers must, it seems, if they want the prime cost work done, either renominate or pay a reasonable sum to the persons called on to do the work. There seems no way out of this impasse save by construing the relevant conditions as placing an obligation on the employers to renominate, in the event of the collapse of the first nomination, if they want the work to be done.
I have not so far attempted to justify these observations by reference to the language of the relevant conditions. This I must do. Condition 11(3), much relied on in the Court of Appeal ([1969] 1 All ER 977) as containing mandatory words, is, it is true, part of the contract to be construed. It did not, however, appear in earlier editions of the contract and does not, I think, add anything to the conclusion which is to be reached by the reading of condition 27 itself. This condition deals with prime cost sums included in the contract bills in respect of persons to be nominated by the architect to execute work. When it is necessary to deal with the expenditure of the prime cost sums, it must necessarily be intended to refer to the sum which represents the prime cost sum and is included in the contract between the contractor and the nominated subcontractor. Condition 27(a) provides that such sums ‘… shall be expended in favour of such persons as the architect … shall instruct’. If this condition is to be complied with it involves expenditure in favour of nominated sub-contractors and none other. To produce this result more than one nomination may be necessary. To give business efficacy to the document I would, therefore, construe that condition in favour of the contractor as requiring ‘nomination when necessary’.
I have not referred to condition 16F in the bills of quantities (which support this construction) in view of the difficulty presented by condition 12(1) which makes it clear that, subject to immaterial exceptions, the conditions cannot be overriden, modified or affected by what is contained in the bills. Condition 30(5)(c), fairly described as an accounting provision, lends support to the construction which appeals to me. It is explanatory of condition 27 in showing how the accounting is to be done, and it is difficult to see how the accounting system is to be worked unless nominations issued where necessary are contemplated.
In my opinion, the contractor, on repudiation by the sub-contractor, was entitled to await a fresh nomination from the employers. It was not in breach of its contract for it cannot complete the work without a renomination. In reaching this conclusion I do so with hesitation having regard to the contrary opinion on the construction of the contract expressed by Lord MacDermott CJ in the Reilly case. I am, however, of the firm opinion that the Court of Appeal ([1969] 1 All ER 977) in England has reached a correct conclusion and I answer the questions in the same way, with the addition to the second question that the contractor should be remunerated on the basis of a quantum meruit.
I would dismiss the appeal.
LORD GUEST. My Lords, the employers entered into a contract on the RIBA form with the contractor to construct certain work on a school and training unit at Leavesden Hospital, Abbots Langley, Hertfordshire. The agreement was dated 20 October 1964. The conditions referred to in the agreement provided that, where prime cost sums were included in the contract bills, the architect should nominate a sub-contractor to do the work. Prime cost sums appeared in the contract bills in respect of a heating installation described in the bills as ‘mechanical installation’ at a figure of £6,680c. Tenders were invited from sub-contractors to do this work, and Speediwarm Ltd was ultimately nominated by the architect as the sub-contractor for this work. Shortly after the signing of the contract the nominated
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sub-contractor, Speediwarm Ltd, went into voluntary liquidation and the liquidator refused to carry out the sub-contract. There was consequently a repudiation of its contract by the sub-contractor. Questions arose as to the financial consequences of this repudiation, and parties went to arbitration. A special case was stated by the arbitrator for the opinion of the court under s 21(1)(a) of the Arbitration Act 1950. Following on this repudiation the employers refused to nominate a further sub-contractor and maintained that they were under no obligation to do so, and that it was the contractor’s obligation to carry out and complete the work of the sub-contractor. The contractor without prejudice carried out the remainder of the sub-contract work. The questions for the opinion of the court are:
‘(a) Whether or not in the circumstances of the case on a true construction of the said agreement it was the obligation of the [employers] by their Architect to make a second nomination of a sub-contractor to carry out the remaining sub-contract work and
‘(a) Whether, if the answer to question (a) is in the affirmative, the amount payable by the [employers] to the [contractor] should be limited as claimed by the [employers] in paragraph 10d hereof if the [contractor] [has] in fact reasonably expended greater sums in completing the work by [itself] or other sub-contractors.’
The case came before Nield J ((1968) 66 LGR 597) who answered question (a) in the negative and, according to his answer to this question, question (b) did not arise. When the case came before the Court of Appeal ([1969] 1 All ER 977), the Court of Appeal themselves suggested a further question (c) which was in two branches. In the view which I take of the case it is unnecessary to set out this question. The Court of Appeal allowed the appeal from Nield J and answered question (a) in the affirmative, and answered question (b) in the negative.
It is now necessary to set out in some detail the relevant conditions of the contract. Condition 1(1) provides:
‘The Contractor shall upon and subject to these Conditions carry out and complete the Works shown upon the Contract Drawings and described by or referred to in the Contract Bills and in these Conditions in every respect to the reasonable satisfaction of the Architect/Supervising Officer.’
By condition 2(1), the contractor was bound to comply with all instructions issued to it by the architect in regard to any matter in respect of which the architect is expressly empowered by the conditions to issue instructions. By condition 11:
‘(1) The Architect/Supervising Officer may issue instructions requiring a variation and he may sanction in writing any variation made by the Contractor otherwise than pursuant to an instruction of the Architect/Supervising Officer. No variation required by the Architect/Supervising Officer or subsequently sanctioned by him shall vitiate this Contract.
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‘(2) The term “variation” as used in these Conditions means the alteration or modification of the design, quality or quantity of the Works as shown upon the Contract Drawings and described by or referred to in the Contract Bills, and includes the addition, omission or substitution of any work, and alteration of the kind or standard of any of the materials or goods to be used in the Works, and the removal from the site of any work materials or goods executed or brought thereon by the Contractor for the purposes of the Works other than work materials or goods which are not in accordance with this Contract.
‘(3) The Architect/Supervising Officer shall issue instructions in regard to the expenditure of prime cost and provisional sums included in the Contract Bils and of prime cost sums which arise as a result of instructions issued in regard to the expenditure of provisional sums … ‘
By condition 17, the Contractor was not entitled without the written consent of the employers to assign the contract, and was not, without their written consent, entitled to sublet any portion of the work. By condition 27:
‘The following provisions of this Condition shall apply where prime cost sums are included in the Contract Bills, or arise as a result of Architect’s/Supervising Officer’s instructions given in regard to the expenditure of provisional sums, in respect of persons to be nominated by the Architect/Supervising Officer to supply and fix materials or goods or to execute work.
‘(a) Such sums shall be deemed to include 2 1/2 per cent cash discount and shall be expended in favour of such persons as the Architect/Supervising Officer shall instruct, and all specialists or others who are nominated by the Architect/Supervising Officer are hereby declared to be sub-contractors employed by the Contractor and are referred to in these Conditions as “nominated sub-contractors” … ‘
There follows a proviso which dictated the terms of the sub-contract into which the contractor should enter with a nominated sub-contractor. There is an important provision (condition 27(f)) which provides that neither the existence nor the exercise of the powers referred to nor anything else contained in the conditions would render the employers in any way liable to any nominated sub-contractor.
Condition 30 deals with certificates and payment of the contractor. I find it only necessary to quote in detail condition 30(5)(c) which is in these terms:
‘In the settlement of accounts the amounts paid or payable under the appropriate contracts by the Contractor to nominated sub-contractors or nominated suppliers (including the discounts for cash mentioned in clauses 27 and 28 of these Conditions), the amounts paid or payable by virtue of clause 4(2) of these Conditions in respect of fees or charges for which a provisional sum is included in the Contract Bills, the amounts paid or payable in respect of any insurances maintained in compliance with clause 19(2) of these Conditions, the tender sum (or such other sum as is appropriate in accordance with the terms of the tender) for any work for which a tender made under clause 27(g) of these Conditions is accepted and the value of any work executed by the Contractor for which a provisional sum is included in the Contract Bill shall be set against the relevant prime cost or provisional sum mentioned in the Contract Bills or arising under Architect’s/Supervising Officer’s instructions issued under clause 11(3) of these Conditions as the case may be, and the balance, after allowing in all cases pro rata for the Contractor’s profit at the rates shown in the Contract Bills, shall be added to or deducted from the Contract Sum. Provided that no deduction shall be made in respect of any damages paid or allowed to the Contractor by any sub-contractor or supplier.’
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The arguments for six days ranged over a wide field, but in my view, the basic question is rightly concentrated in question (a) in the special case. This question is whether, in the circumstances of a repudiation by a nominated sub-contractor, there was an obligation on the employers through their architect to nominate a fresh sub-contractor to complete the work. As the answer to this question goes, the rest will, in my view, follow. The employers did not argue that, if question (a) were answered in the affirmative, question (b) could be answered otherwise than in the negative, which was the form which the order of the Court of Appeal ([1969] 1 All ER 977) took. And it is agreed that question (c) does not arise. At one time I was under the impression that the question (a) depended in some way on whether, in the circumstances, it could be said that there was a breach of contract by the contractor. I have now reached the conclusion that this question is very largely irrelevant, and, it has at least a very remote bearing on the principal question (a).
The way in which the employers submitted their argument on breach of contract was as follows. In the circumstances, owing to the contractor’s obligation under condition 1(1) to carry out and complete the work, which work included the prime cost work to be done by the sub-contractor, when the sub-contractor repudiated, it was argued that damages for breach of contract then immediately became due by the contractor. The contractor, in substantial performance of its contract, completed the work by its own workmen in order to mitigate any damages which might flow from its breach of contract. In my view, this question of breach of contract does not arise and, in any case, has no bearing on the principal issue stated in question (a). I say so for two reasons. When the nominated sub-contractor repudiated the sub-contract, there was at that date no breach of contract by the contractor. It was still an open question whether it could complete the work in accordance with condition 1(1) of the contract. The employers did not treat the repudiation as a breach of contract. Moreover, the contractor could not be in breach of its contract with the employers if the employers failed in their duty of renomination. The cause of any failure to perform the contract by the contractor was caused by the failure of the employers to renominate a sub-contractor.
I, therefore, now propose to consider the answer to question (a). In my view, there was an obligation on the employers to nominate a sub-contractor on the repudiation by the original nominated sub-contractor of his contract with the contractor. This obligation stems from a proper construction of conditions 11 and 27 which I have already quoted. The main reason, in my view, for this result is that it is only if there is a duty to renominate that the contract can be made to work. The contract is a commercial document, and in order to give it business efficacy it is necessary, in my view, that, if the nominated sub-contractor disappears from the field due to its repudiation of its contract with the contractor, then it is necessary, in order that the contract may be completed, that the employers should renominate. Plainly, the purpose of the employers nominating a sub-contractor is in order that they may get the work done by a particular contractor of their choosing. If the result of the repudiation by the sub-contractor is that there is no duty to renominate, then the whole purpose of the conditions providing for nominated sub-contractors would be defeated. On a proper construction of the conditions of the contract, the contractor is not entitled to do work by itself for which a prime cost sum is allocated in the contract. If the contention for the employers were right, and the contractor could do the work for which a prime cost sum was allocated, this would be work entirely outside the contract, and the architect would have no control over it. The contractor would not be obliged to carry out the work according to the contract. The provisions of condition 30(5)(c) make it clear that there is no provision for payment by the employers for work done under the prime cost condition unless this payment is made through the medium of the nominated sub-contractor.
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If my view be right that there was a duty in the circumstances on the employers to nominate a new sub-contractor when the first sub-contractor repudiated its contract, then the employers are in breach of the terms of the conditions and damages are due for their failure.
Reference was made to a number of authorities, most of which had a very remote bearing on the question at issue. J M Reilly Ltd v Belfast Corpn decided by the Court of Appeal in Northern Ireland is, however, in point. It does not appear from the judgment that arguments were as fully developed as in the present case. The Court of Appeal appear to have considered that it was a casus omissus. However, I have come to the conclusion that the duty to renominate can be found within the terms of the contract.
Before concluding, I should say that I am not at all certain whether the result correctly carries out the intentions of the parties. But the terms of the contract are by no means clear, and it would be worth while for those responsible for the RIBA contract to look at it again with a view to clarifying some of the doubtful provisions.
I would dismiss the appeal.
VISCOUNT DILHORNE. My Lords, under the building contract entered into by the appellants and respondents, the respondents (hereinafter referred to as ‘the contractor’) undertook to carry out and complete certain building work at Leavesden Hospital. The contract which was in the form issued by the Roval Institute of British Architects in 1963 and described as the ‘Local Authorities Edition (With Quantities)’ gave the appellants (hereinafter referred to as ‘the employers’) the right to nominate sub-contractors for the execution of work in respect of which a prime cost sum had been entered in the bills of quantities. They nominated a company called Speediwarm Ltd as sub-contractor to provide a heating and hot water system referred to in the bills of quantities as a ‘mechanical installation’ and the contractor duly entered into a sub-contract with Speediwarm for this purpose. Before they had carried out any appreciable part of their contract, Speediwarm went into liquidation. The liquidator elected not to perform the contract and now the question to be answered is what are the obligations of the parties in this situation.
This is by no means the first time that this question has arisen in relation to RIBA agreements. It arose in K Cross (Doncaster) Ltd v York (East Riding) County Council in 1966 and in J M Reilly Ltd v Belfast Corpn. Both these decisions were on earlier forms of the RIBA agreement, and it is an unfortunate fact that the present case, which has involved lengthy and no doubt expensive litigation, arises from the failure in the form now in use to make any clear provision for the situation which arises when a nominate sub-contractor repudiates its contract and ceases to act.
The employers contend that the contractor undertook to carry out and complete all the works specified in the bills of quantities, including the works in respect of which prime cost sums were entered; that when the contract with Speediwarm was repudiated, there followed automatically a breach by the contractor of its contract with the employers, and that consequently the contractor which, without prejudice to its rights, carried out the work Speediwarm should have done, is not entitled to be paid therefor more than Speediwarm would have received if it had carried out its contract. The contractor, on the other hand, contended that, when Speediwarm repudiated, it became the duty of the employers under the contract to nominate another sub-contractor to do the work Speediwarm should have done, and that, as they had refused to do so when asked, they were in breach of the agreement and the contractor was entitled to be paid for the work carried out in place of Speediwarm on a quantum meruit basis.
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It was a common ground that the execution of the work, whether by the contractor or a new nominated sub-contractor, would cost more than the sum Speediwarm would have received had it done it. So the determination of the issues in this appeal will decide on whose shoulders that extra cost will fall. The answer to the problem depends on the construction of the RIBA contract into which the parties entered. It began with four articles of agreement. To those articles conditions were annexed. The first article reads as follows:
‘For the consideration hereinafter mentioned the Contractor will upon and subject to the Conditions annexed hereto carry out and complete the Works shown upon the Contract Drawings and described by or referred to in the Contract Bills and in the said Conditions.’
The first of the conditions annexed repeated this article with the addition of the words ‘in every respect to the reasonable satisfaction of the Architect … ’. The mechanical installation for which a prime cost sum was entered was referred to in the bills of quantities, the contract bills, and so it cannot be disputed that, unless affected by the conditions, the contractor undertook to carry out and complete that work.
Article 2 stated that the employers would pay £61,985 4s 6d (which included the sum of £6,680e, the prime cost of the mechanical installation) or such other sum as should become payable under the agreement. The third and fourth articles said who were to be the architect and quantity surveyors and expressly gave power to nominate a successor if they ceased to act.
Condition 11(3), inter alia, provided that the architect should issue instructions in regard to the expenditure of prime cost sums. This condition was not included in the RIBA agreements considered in the two cases to which I have referred. With condition 11(3) must be read condition 27, which has beside it the heading ‘nominated sub-contractors’. It is, in my opinion, on the construction of this condition that the answers to the questions in this case primarily depend. It begins with the following words:
‘The following provisions of this Condition shall apply where prime cost sums are included in the Contract Bills … in respect of persons to be nominated by the Architect … to execute work.
(a) Such sums shall be deemed to include 2 1/2 per cent discount and shall be expended in favour of such persons as the Architect … shall instruct, and all specialists or others who are nominated by the Architect … are hereby declared to be sub-contractors employed by the Contractor and are referred to in these Conditions as “nominated sub-contractors“. Provided that the Architect … shall not nominate any person as a sub-contractor against whom the Contractor shall make reasonable objection, or … who will not enter into a sub-contract which provides (inter alia) … ‘
Condition 11(3) does not appear to me to add to condition 27, to vary it or to be in conflict with it in any respect. A condition similar to condition 27 was included in the earlier forms issued by the RIBA and I do not know what the purpose was of adding condition 11(3).
It was not disputed that, if the architect wanted the work covered by a prime cost sum to be carried out, he must nominate a sub-contractor and give instructions in relation thereto to the contractor. If he did not want the work carried out, he would have to give instructions requiring variation of the contract by the omission of the work under conditions 11(1) and (2). If no such instructions were given,he had to nominate, and failure to do so would be a breach of contract.
The first part of condition 27 makes it clear that persons are to be nominated to
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execute works covered by a prime cost sum, and the words ‘Such sums … shall be expended in favour of such persons as the Architect … shall instruct’ make it clear that it is the nominated sub-contractors who are to receive payment for it. Under this condition, the contractor is not entitled to do the work itself or by a sub-contractor of its choice. It must be done by a nominated sub-contractor. ‘Such sums’ refer to the prime cost sums which, as I have said, are included in the contract price. In this case, as I expect in most, after the inclusion of a prime cost sum in the contract bills, the architect obtained tenders for the execution of the work. He then directed the contractor to accept Speediwarm’s tender which was for the sum of £7,389 15s 2d and the contractor did so.
While the language of this part of condition 27 cannot I think, be regarded as well drafted, its object and purpose is, in my opinion, clear. It is to provide that prime cost work can only and shall only be carried out by persons nominated by the architect, and they and they alone are to be paid for doing it. If this is right, then the words ‘Such sums’ must be interpreted as applying to more than the sum entered as the prime cost in the contract bills. It must be taken to refer also to the price of the tender which the architect has instructed the contractor to accept, that is to say, the price in the sub-contract. If this be the correct interpretation, it follows that, although the contractor has undertaken to carry out and complete the contract works, including the works covered by a prime cost sum, it is not in its power, at least initially, under the contract to carry out and complete the works covered by such sums.
I cannot myself see the extent of the contractor’s obligation under art 1 and condition 1 is in any respect limited or affected by the right of the architect to nominate sub-contractors. He has accepted responsibility for the carrying out and completion of all the contract works, including those to be carried out by the nominated sub-contractor. Once a sub-contractor has been nominated and has entered into the sub-contract, the contractor is as responsible for its work as it is for the works of other sub-contractors employed by it with the leave of the architect. Its responsibility for the work covered by the prime cost sum will, however, not arise until there has been a nomination and the necessary sub-contract has been entered into. If the architect fails to nominate, then, unless he has given instructions varying the contract by the omission of the prime cost work, the employers will be in breach of contract.
This is, in my opinion, the position at the inception of the contract. Does a different situation arise when a nominated sub-contractor repudiates its contract and ceases to act? When that happens, is there a breach of contract by the employers if another sub-contractor is not nominated? Does the repudiation by the nominated sub-contractor mean that there has been an immediate breach of the contract by the contractor? On such repudiation has the contractor any right to step in and do the work itself or get it done by sub-contractor of its choice? The effect of a sub-contractor repudiating its contract and ceasing to act is that, unless there is a fresh nomination, there is no one left who can carry out the prime cost work. The contract gives no right to the contractor to do it. It expressly provides that it must be done by a nominated sub-contractor, and the right to nominate a sub-contractor enables the architect to choose who shall do the work. So, unless the architect makes a fresh nomination, that work cannot be carried out in accordance with the requirements of the contract. Just as it is a condition precedent to the contractor’s liability under art 1 and condition 1 in respect of prime cost work that a sub-contractor shall be nominated and shall enter into the required sub-contract, so, in my opinion, it remains a condition precedent to the contractor’s liability in respect of such work that there should be a fresh nomination should the sub-contractor first nominated cease to act.
The employers contended that, once they had made a nomination in respect of prime cost work, they had fulfilled their obligation under the contract and had no power to make a fresh nomination. As I have pointed out, provision was made for renomination should the architect or the quantity surveyors appointed cease to act. While it is true that the contract makes no express provision for the nomination of a
Page 1055 of [1970] 1 All ER 1039
second sub-contractor, the language of conditions 11(3) and 27 does not, in my opinion, support the contention that the architect can and is only under a duty to make one nomination. The mandatory requirement that prime cost work is only to be carried out by a nominated sub-contractor and that it is to be paid for it indicates, in my view, that it is the duty of the architect to nominate again should the first nominated sub-contractor repudiate its contract. In this case the employers were asked to do so. They refused. In so doing I have come to the conclusion that they were guilty of a breach of contract.
Breaches of contract by the contractor may occur during the currency of the contract, eg use of wrong materials, departure from the drawings, defective work which despite instructions from the architect is not put right. The contractor’s duty is to complete the work to the satisfaction of the architect by the date of completion. To suggest that every breach by a sub-contractor of its contract necessarily involves a breach of the main contract by the contractor is, I think, putting it far too high. In the case of ordinary sub-contractors the contractor may be able to remedy the breach before the date of completion, but, when the breach is by a nominated subcontractor, it cannot do that as it is debarred from doing that sub-contractor’s work.
Where there is a nominated sub-contractor, it is, I think, clear that, by art 1 and condition 1, the contractor has undertaken responsibility for the execution of the prime cost work and will be liable in damages if it is not properly carried out. This view is supported by condition 15 which imposes the duty of the contractor of remedying defects which appear in the defects liability period and which are included in a schedule of defects, whether they be defects in the work it does or in prime cost work, at its own expense.
The sub-contract of a nominated sub-contractor must by virtue of condition 27(a), mirror the main contract. That condition requires the sub-contract to provide:
‘(i) That the nominated sub-contractor shall carry out and complete the sub-contract Works in every respect to the reasonable satisfaction of the Contractor and of the Architect … and in conformity with all the reasonable directions and requirements of the Contractor.
‘(ii) That the nominated sub-contractor shall observe, perform and comply with all the provisions of this Contract on the part of the Contractor to be observed, performed and complied with … so far as they relate and apply to the sub-contract Works or to any portion of the same.’
So the contractor can pass on the nominated sub-contractor the obligation to make good defects in the sub-contract work which appear in the defects liability period and the sub-contractor will be under a duty to remedy them at its own expense.
The employers’ contention that, on a nominated sub-contractor repudiating its contract, the contractor immediately became liable in damages for the failure to carry out the sub-contract work was strenuously and persistently argued. This would mean that the contractor had entirely underwritten the execution of the sub-contract, that it had guaranteed its performance by a person whom it had had no part in selecting and was liable in damages, which might be very heavy, to the employers which it might be unable to recover from the nominated sub-contractor if that sub-contractor had repudiated owing to bankruptcy or liquidation.
I think it inherently improbable that any sensible contractor would undertake such an open-ended commitment. I cannot think that that was the intention of the parties at the time the contract was entered into and I do not think that, under this contract, it has done so.
Its obligation to complete under art 1 is ‘upon and subject to the conditions’ annexed to the articles. The contractor’s obligation to complete is subject to the requirements of conditions 11(3) and 27, and in relation to prime cost work arises, in my opinion, only when those requirements are complied with, and they can only
Page 1056 of [1970] 1 All ER 1039
be complied with if there is in existence a nominated sub-contractor under contract to do the work.
Some weight was placed on conditions 30(5)(c), the material parts of which read as follows:
‘In the settlement of accounts the amounts paid or payable under the appropriate contracts by the Contractor to nominated sub-contractors … shall be set against the relevant prime cost … mentioned in the Contract Bills … and the balance, after allowing in all cases pro rata for the Contractor’s profit at the rate shown in the Contract Bills, shall be added to or deducted from the Contract Sum. Provided that no deduction shall be made in respect of any damages paid or allowed to the Contractor by any sub-contractor … ‘
This I regard as an accounting provision. I do not think that it throws any revealing light on whether it is the architect’s duty to renominate. It distinguishes between the prime cost sum and the amount payable under sub-contracts. This is necessary for the settlement of accounts. It does not show that the meaning to be given to ‘Such sums’ in condition 27 must be restricted to prime cost sums.
It follows from what I have said that K Cross (Doncaster) Ltd v York (East Riding) County Council and J M Reilly Ltd v Belfast Corpn, a decision of the Court of Appeal of Northern Ireland, may have been wrongly decided and were wrongly decided, in my view, unless there were material differences between the RIBA contract considered in those cases and that in this case.
As in my opinion, on the proper construction of the contract, there was a duty to renominate after Speediwarm had repudiated, and as renomination was a condition precedent to the contractor becoming responsible for the carrying out and completion of the prime cost work, in my view the answers to the questions asked by the arbitrator are (a) ‘Yes’; (b) ‘No’. In my opinion, the contractor is entitled to be paid on a quantum meruit basis. Question (c), added by consent of the parties, does not, therefore, arise.
I would dismiss the appeal.
LORD WILBERFORCE. My Lords, since preparing an opinion on this appeal I have had the benefit of reading those of your Lordships which are unanimously in favour of the contractor. I am now content to substitute for my observations a simple concurrence that the appeal be dismissed.
Appeal dismissed.
Solicitors: J Tickle & Co (for the employers); Masons (for the contractor).
S A Hatteea Esq Barrister.
Re Morris (deceased)
Lloyds Bank Ltd v Peake and others
(Hurdwell cited)
[1970] 1 All ER 1057
Categories: SUCCESSION; Administration of Estates
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): LATEY J
Hearing Date(s): 20, 21, 22, 23 OCTOBER, 10 NOVEMBER 1965
Probate – Grant – Exclusion of words in codicil – Carrying out intention of testatrix – Intention that codicil should revoke particular sub-clause of will – Slip by drafting solicitor in carrying out instructions – Codicial as drafted and executed revoking whole of relevant clause – Whether court required by any rule of evidence or law to hold that testatrix knew and approved of contents of codicil – Absence of power for court to add words to codicil – Omission of words as nearest way to give effect to intentions of testatrix.
The testatrix executed her last will, making by cl 3 certain provisions in favour of her housekeeper and bequeathing by cl 7 a large number of pecuniary legacies, each one of which was preceded by a Roman numeral in brackets. Clause 7(iv) contained a pecuniary legacy in favour of the housekeeper. Some two months later the testatrix wrote to her solicitor saying that she wished to alter the bequest to her housekeeper but that otherwise there was to be no alteration in the dispositions of her will. The solicitor prepared a codicil in which, by an error in drafting, the words ‘I revoke Clauses 3 and 7 of my said Will’ were inserted in cl 1, whereas, in order to give effect to the testatrix’s instructions, the clause should have read ‘I revoke Clauses 3 and 7(iv) of my said Will’. The codicil containing the mistaken form of wording was duly executed by the testatrix, who probably cast her eye over the document without noticing the error. Clause 2 of the codicil contained bequests in favour of the housekeeper similar to those contained in cll 3 and 7(iv) of the will, except for a reduction in the amount of the pecuniary legacy.
Held – The codicil would be admitted to probate with the omission of the numeral 7 in cl 1 (see p 1068 d, post), because—
(i) on the facts as proved no court could conclude that the testatrix knew and approved of the contents of the codicil, unless it was required so to hold by some rule of evidence or law (see p 1061 h, post);
(ii) the fact that a testator read and executed a document raised a prima facie inference that he knew and approved its contents but there was no rule precluding the court from considering all the evidence in order to arrive at the truth, whether fraud was suggested or merely mistake (see & 1064 g, post) (dicta of Sachs J in Crerar v Crerar (1956) unreported applied; Guardhouse v Blackburn [1861–73] All ER Rep 680 (in part) no longer binding);
(iii) although a testator who had delegated to a draftsman the task of drafting an instrument and had executed it as drafted might in some circumstances be bound by a mistake which the draftsman had made, the testator would not be so bound at any rate in a case (such as that before the court) where the mind of the draftsman had never really been applied to the words introduced and never adverted to their significance and effect and there was a mere clerical error on the part of the draftsman, a slip; accordingly, the testatrix was not bound by the mistake of the draftsman which was never brought to her notice (see p 1067 f and g, post);
(iv) although the law was clear that where there was absence of approval (for example, because of mistake) the court had no power to rectify by adding words (see p 1061 j, post), it had power to pronounce against the codicil in its entirety or to exclude part and admit the rest (see p 1067 h, post);
Page 1058 of [1970] 1 All ER 1057
(v) the testatrix’s intentions would be most nearly effected by excluding the numeral 7 in cl 1 of the codicil which would then read: ‘I revoke Clauses 3 and () of my said Will’. The Chancery Court as the court of construction might then deduce from the will and codicil (as altered) read together that the testatrix’s intention was that the other clause after the words ‘Clauses 3 and ()’ should be 7(iv), or might decide from reading the documents that the gifts in cl 2 of the codicil were intended to be substitutional (see p 1067 h to p 1068 b, post).
Notes
For the power to exclude words from probate, see 16 Halsbury’s Laws (3rd Edn) 190, para 323, and for cases on the subject, see 23 Digest (Repl) 136–138, 1402–1410, 1419–1422.
For the presumption in favour of a testator’s knowledge and approval of the contents of his will, see 16 Halsbury’s Laws (3rd Edn) 206, para 367, and for cases on the subject, see 23 Digest (Repl) 110, 1095, 1096, and 48 Digest (Repl) 432, 3796–3799.
Cases referred to in judgment
Atter v Atkinson (1869) LR 1 P & D 665, 20 LT 404, 33 JP 440, 48 Digest (Repl) 432, 3796.
Crerar v Crerar (1956) unreported.
Fulton v Andrew (1875) LR 7 HL 448, [1874–80] All ER Rep 1240, 44 LJP 17, 32 LT 209, 23 Digest (Repl) 133, 1382.
Gregson v Taylor [1917] P 256, 86 LJP 124, sub nom Re Philpot, Gregson v Taylor 117 LT 318, 48 Digest (Repl) 432, 3799.
Guardhouse v Blackburn (1866) LR 1 P & D 109, [1861–73] All ER Rep 680, 35 LJP & M 116, 14 LT 69, 23 Digest (Repl) 110, 1096.
Harter v Harter (1873) LR 3 P & D 11, 42 LJP & M 1, 27 LT 858, 37 JP 583, 23 Digest (Repl) 136, 1402.
Hastilow v Stobie (1865) LR 1 P & D 64, 35 LJP & M 18, 13 LT 473, 33 Digest (Repl) 605, 213.
Horrocks, Re, Taylor v Kershaw [1939] 1 All ER 579, [1939] P 198, 108 LJP 86, 160 LT 324, 23 Digest (Repl) 138, 1429.
Martell v Consett Iron Co Ltd [1955] 1 All ER 481, [1955] Ch 363, [1955] 2 WLR 463, Digest (Cont Vol A) 125, 110a.
Rhodes v Rhodes (1882) 7 App Cas 192, 51 LJPC 53, 46 LT 463, 23 Digest (Repl) 136, 1408.
Cases also cited
Beech, In the Estate of [1923] P 46, [1922] All ER Rep 106.
Boehm, In the Goods of [1891] P 247.
Brisco v Baillie and Hamilton [1902] P 234.
Chilcott, In the Goods of [1897] P 223.
Cooper, In the Goods of [1899] P 193.
Duane, In the Goods of (1862) 2 Sw & Tr 590.
Garnett-Botfield v Garnett-Botfield [1901] P 335.
Marklew v Turner (1900) 17 TLR 10.
Moore, In the Goods of [1892] P 378.
Morell v Morell (1882) 7 PD 68, [1881–85] All ER Rep 642.
Oswald, In the Goods of (1874) LR 3 P & D 162.
Perera v Perera [1901] AC 354.
Schott, In the Goods of [1901] P 190.
Stedman, In the Goods of (1881) 6 PD 205, [1881–85] All ER Rep 410.
Swords, Re [1952] 2 All ER 281, [1952] P 368.
Vaughan v Clerk (1902) 87 LT 144.
Walkeley, In the Goods of [1893] 69 LT 419.
Page 1059 of [1970] 1 All ER 1057
Probate action
The plaintiff bank, Lloyds Bank Ltd, one of the executors named in the last will dated 3 July 1963 of Marjorie Pendrel Morris, who died on 12 September 1963, claimed to have the will proved in solemn form together with a codicil thereto dated 17 December 1962. The first defendant, Geoffrey Proby Peake, was the brother of the testatrix and the only person entitled to her estate in the event of an intestacy and was also a residuary beneficiary under the will and codicil. The second defendant, William Thomson, was the other executor named in the will and a devisee thereunder and was by the will given a pecuniary legacy which was revoked by the codicil as executed. The party cited, Winifred Elizabeth Hurdwell, was by the will given a specific legacy and a pecuniary legacy which were revoked by the codicil. The codicil gave to her a similar specific legacy and a smaller pecuniary legacy. The facts are set out in the judgment.
P W E Taylor for the plaintiff bank.
Bruce Holroyd Pearce QC and J Hamilton for the first defendant.
W R K Merrylees for the second defendant.
F J Cridlan for the party cited, Miss Hurdwell.
Cur adv vult
10 November 1969. The following judgment was delivered.
LATEY J read the following judgment. In this case the testatrix’s solicitor, who drafted her last testamentary instrument, made a slip in drafting it. The result of that mistake was to produce an instrument fundamentally at variance with the testatrix’s instructions and with what she wanted and intended. The case raises in acute form questions concerning the Probate Court’s power, if any, to put the matter right because the destination of large sums of money depends on whether the instrument should be admitted to probate in its entirety or admitted with part or parts of it excluded or rejected in its entirety.
In the nature of things, the main burden of argument fell on counsel for the plaintiff bank and counsel for the first defendant, and I am indebted to them for their review of the authorities, necessarily a lengthy one, and their helpful addresses. What has emerged is that, in several instances, the authorities are in conflict one with the other and that this branch of the law is, to put it mildly, far from clear. The case highlights the problems which a sub-committee of the Law Reform Committee appointed by the Lord Chancellor is presently considering. Two of those problems are whether the Court of Probate should have power to add words to give effect to a testator’s intentions and whether the court of construction should have wider power to admit external or extrinsic evidence to ascertain a deceased person’s intentions.
The facts are clear and can be briefly stated. On 3 July 1962, the testatrix executed her last will. By cl 3 she left to Miss Hurdwell, a resident employee, the contents of the latter’s bedroom except for the curtains and carpets in it. By cl 7 she left a large number of pecuniary legacies. They were 20 in all. Each one was preceded by a Roman numeral in brackets. Clause 7(iv) is in these terms:
‘To the said Winifred Elizabeth Hurdwell the sum of Two thousand pounds TOGETHER WITH a sum equivalent to two years wages at the rate payable at my death which sum is to be paid as soon as possible thereafter.’
It is now known that these 20 legacies amount in aggregate to more than the value of the estate at the date of the testatrix’s death. There will have to be an abatement and, of course, there will be no residue. The will itself was deposited with Lloyds Bank Ltd A copy was sent to the testatrix on 4 July. This copy was deposited on 10 July at the testatrix’s bank, Westminster Bank Ltd at Wokingham, and there it remained until after the testatrix’s death. The letter from Westminster Bank Ltd
Page 1060 of [1970] 1 All ER 1057
evidencing this goes on to say that the bank’s records do not show whether the testatrix examined the will while herself in the bank.
Then, on 13 September 1962, the testatrix wrote to her solicitor saying that she wanted to alter her bequest to Miss Hurdwell by substituting £300 for £2,000 and three weeks’ wages for two years’ wages, her bequest as to the contents of the bedroom to remain as it was under the 1962 will. Otherwise there was to be no change in the dispositions of her will. There followed an exchange of letters between her solicitor and the testatrix, the purpose of which was to make sure that the solicitor was clear about what precisely the testatrix intended for Miss Hurdwell and nothing else. Then under cover of a letter dated 25 September but probably posted on 26 September, the solicitor sent a draft codicil, which for convenience I describe as ‘A’. This was in the following terms:
‘Draft 26/9/62 I, Marjorie Pendrel Morris, of Little Beeches, 11 Reading Road, Wokingham in the County of Berkshire Widow hereby declare this to be a Codicil to my last Will which bears date the Third day of July One thousand nine hundred and sixty two
1. I revoke Clauses 3 and 7 of my said Will
2. i give (free of duty) to Winifred Elizabeth Hurdwell of Little Beches 11 Reading Road Wokingham aforesaid:—
(a) All the contents of her bedroom at my death
(b) The sum of £300a together with one month’s wages at the rate of £2 per week
3. i direct that Lloyds Bank Limited shall give to the said Winifred Elizabeth Hurdwell as soon as possible after my death two weeks’ notice to leave my said house
4. In all other respects I confirm my said Will
in witness whereof … ’
(The testatrix since writing on 13 September had decided on a month’s wages instead of three weeks’.) This is where the solicitor’s drafting slip first appears. The drafting codicil would perfectly have given effect to the testatrix’s instructions and intentions if instead of stating ‘I revoke Clauses 3 and 7 of my said Will’, cl 1 of the codicil had stated, ‘I revoke Clauses 3 and 7(iv) of my said Will’.
The solicitor gave evidence, and I take the opportunity of saying that he is candid and high principled. He said that this mistake was his and his alone, and that, to him, it is obvious that the testatrix had assumed (without herself confirming) that this codicil changing her dispositions by reference merely to numbered paragraphs of her will correctly gave effect to her instructions and intention. I am sure that he is right and, anticipating, I so find. He is plainly careful and conscientious and I suspect that a mistake of this kind is a rare, if not unique, event in his professional life. The solicitor then went on holiday and there followed letters between the testatrix and the solicitor’s managing clerk, Mr Berry. The testatrix was writing about minor details concerning the new bequest to Miss Hurdwell only. She plainly was contemplating no change in her other testamentary dispositions. Mr Berry then prepared an engrossed codicil (which I describe as ‘B’) to be executed by the testatrix. Mr Berry had evidently looked for himself at the 1962 will before preparing ‘B’, and cl 1 reads: ‘I revoke Clause 3 and sub-Clause (iv) of Clause 7 of my said Will’. He had correctly given effect to the testatrix’s intentions. This was sent off to the testatrix under cover of a letter of 16 October, signed by the solicitor who had returned.
Whether the testatrix received this engrossment but mislaid and forgot it, or whether in some way it went astray, has not emerged, but on 24 November the
Page 1061 of [1970] 1 All ER 1057
testatrix wrote asking for the codicil. The solicitor prepared another engrossment but used his own incorrect draft ‘A’ and not Mr Berry’s correct one ‘B’. So, on 17 December 1962, the testatrix duly executed (as the evidence of the attesting witness proves) the codicil which is the subject of this action. Clause 1 of the codicil states: ‘I revoke Clauses 3 and 7 of my Will’, thus defeating the testatrix’s intentions, instead of saying, I revoke Clauses 3 and 7(iv) of my said Will’, which would have given effect to her intentions. The testatrix took the codicil to Westminster Bank Ltd at Wokingham to execute, it was duly executed including the alterations appearing on it, but there was no discussion about its meaning and effect. The probability is that, between receiving the engrossment and executing it, the testatrix read it in the sense of casting her eye over it. I so find.
I do not ignore the points which counsel for the first defendant has urged concerning some of the notes of instructions regarding the will and earlier wills, and regarding another later document dated 21 June 1963. (This last document on the face of it was duly executed but it has been investigated; statements have been taken from those appearing to have attested and it is agreed—and I so find—that it was not duly executed.) I need not detail those points. Nor do I ignore the agreed fact that the residuary legatees are old people in their eighties and are, and have at all material times been, living on a very small pension. Taking all that into account (and leaving aside for the moment two points of law for which counsel for the first defendant contends) the truth in this case is crystal clear.
It is this. The testatrix intended to do no more than alter her bequest to Miss Hurdwell. Her instructions were clear that this was all she intended to do. She adhered to this intention until and after the execution of the codicil. She had no intention at all of altering her other bequests. Mr Berry prepared an engrossment which correctly gave effect to those intentions. The solicitor prepared the engrossment (which became the executed codicil) which, due to his and no one else’s slip, not only did not give effect to the testatrix’s intentions and instructions but fundamentally defeated them. The testatrix relied on her solicitor to draft a document which gave effect to her simple instructions (why should she not?). The document she received made the material alterations not in any self-descriptive manner but only by reference to the numerals of clauses in another document, the will. She glanced through the engrossment but did not read it in conjunction with the will or a copy of the will (if indeed the will or a copy of it was available which, on the evidence, I doubt). That the engrossment effected what in fact it effects she never knew—it never registered on her consciousness—it was never within her cognisance—to mention some of the phrases which have been used in this context. If she had known she would never have approved and never have executed. Those facts, in my judgment, are proved beyond any room for doubt.
The law is that, for a testamentary instrument to be valid, its contents must be known to and approved by the testator who executes it. That scarcely needs saying. Every canon of common sense and justice establishes it. Unless one or other of the two rules for which counsel for the first defendant contends covers this case, on the facts as proved it is not credible that any person of common sense, any juror, any judge, using the English language in its ordinary meaning, could conclude that the testatrix knew and approved of the contents of this document. Of course she did not. That some rule or rules of evidence or law could have been evolved by the court to require the court to hold by some fictitious or artificial reasoning that nevertheless she did know and approve is repugnant, to say the least.
Is there any such rule? Counsel for the first defendant argues that there are two and, if one looks at some of the cases and some of the dicta, it must be said in justice to his argument that it is not without support. Before considering those two alleged rules, it must first be said that the law is clear that, where there is absence of knowledge and approval (eg because of mistake, as in this case), the court has no power to rectify by adding words to the instrument. This has been so clearly stated judicially
Page 1062 of [1970] 1 All ER 1057
and for so long that it is not open to question in this court and can only be changed by legislation, or, possibly, by a higher tribunal. Were it not so the defect in this codicil would be simply and entirely cured by the insertion of the Roman numeral ‘(iv)’ after the numeral ‘7’ in cl 1, thereby giving effect to the testatrix’s intentions in their entirety. Counsel for the second defendant, indeed, advanced an argument to that effect. The Court of Probate has power in certain limited circumstances to rectify by excluding words from the executed paper. By so doing it alters the executed paper. Why, then, should it not have power to alter it by adding words in certain limited circumstances? The Wills Act 1837, after all, was designed to minimise the danger of fraud. It was not concerned with, and did not contemplate, mistakes, although it appears that the early authorities which establish that there was no power to rectify by addition must have assumed that mistake was also contemplated. If the matter were res integra it might not, to my mind, be a hopeless argument, but in the light of the long-established law it is today an argument which must be rejected.
The two rules which counsel for the first defendant contends are these. First, a rule of evidence: that a competent testator who has read, or has had read over to him, the instrument and has executed it must be taken to have known and approved of its contents, except where there is a suspicion of fraud. Against this, counsel for the plaintiff bank contends that such a rule, if there ever was one, has been eroded by subsequent authority. Secondly, a rule of law: that where a testator has delegated to an appointed draftsman (eg a solicitor) the drafting of the instrument, and the testator executes the paper drafted by the draftsman acting bona fide the testator is bound by any mistake that the draftsman has made. Against this, counsel for the plaintiff bank argues that an intending testator cannot delegate to another the task of making the will, and that knowledge and approval of what a draftsman has written is imputed to a testator in a strictly limited category of circumstances only.
I have done my best to consider all of the many cases to which counsel have referred, and to see whether a reconciliation is possible producing consistent principles. Such an attempt in the past has produced intellectual gymnastics, if not acrobatics. But I have not been capable of one which does produce such a reconciliation. I do not believe that all the decisions and all the dicta are reconcilable. What does seem clear is that there has been a developing trend (with, perhaps, an occasional regression) towards a more flexible and (dare one say?) more realistic approach. I refer to some, but by no means all, of the reported cases.
1 The rule of evidence? It is argued that a rule of universal application is enunciated by Lord Penzance in Guardhouse v Blackburn. The rule appears from the first, fourth and fifth propositions stated in the judgment as follows ((1866) LR 1 P & D at 116, [1861-73] All ER Rep at 684):
‘… First, that before a paper so executed is entitled to probate, the Court must be satisfied that the testator knew and approved of the contents at the time he signed it … Fourthly, that although the testator did know and approve the contents, the paper may be refused probate, if it be proved that any fraud has been purposely practiced on the testator in obtaining his execution thereof. Fifthly, that subject to this last preceding proposition, the fact that the Will has been duly read over to a capable testator on the occasion of its execution, or that its contents have been brought to his notice in any other way, should, when coupled with his execution thereof, be held conclusive evidence that he approved as well as knew the contents thereof.’
That wording is clear and unequivocal, and leaves no doubt that Lord Penzance intended to and did lay down absolute rules. If the testator is capable, had the will read over to him or otherwise had notice of its contents at the time of the execution, then, in the absence of fraud, the court cannot have regard to other evidence showing
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that he did not in fact know and approve; he must be taken to have known and approved. Lord Penzance himself so regarded it in Atter v Atkinson. In his direction to the jury, he said ((1869) LR 1 P & D at 670):
‘The question of fact is, did Mrs Newcombe really ever read the contents of this document? If you are satisfied that she read it, then, as a proposition of law, I feel bound to direct you that she must be taken to have known and approved of its contents. If, being of sound mind and capacity she read this residuary clause, the fact that she afterwards put her signature to it is conclusive to shew that she knew and approved of its contents.’
Shortly afterwards, in Harter v Harter ((1873) LR 3 P & D 11 at 22), Sir James Hannen expressly accepted and agreed with Lord Penzance.
These three cases represent the high water mark of the rule. Presumably there were good reasons in the interests of justice nearly 100 years ago which impelled the court to fetter its own power to get at the true facts. But has not the more modern trend in many fields been to strike such fetters off, so that the court can make the best use of all materials available to ascertain the truth? At any rate, in this field there has been, in my opinion, a progressive erosion of the rigidity of the rule. This began in 1875 in Fulton v Andrew. The material part of the headnote reads ((1875) LR 7 HL at 449):
‘There is no unyielding rule of law (especially where the ingredient of fraud enters into the case) that, when it has been proved that a testator competent in mind, has had a will read over to him, and has thereupon executed it, all further enquiry is shut out.’
It is true that, in his speech, Lord Cairns LC said ((1875) LR 7 HL at 462, [1874-80] All ER Rep at 1245) that in that case it was not necessary to determine whether Lord Penzance was right in the formulation of the rule: but he spoke of it in guarded terms and with obvious tones of reservation. Moreover, earlier in his speech, after substantially setting out the rule as it is now urged by counsel for the first defendant, he said ((1875) LR 7 HL at 460, 461, [1874-80] All ER Rep at 1244):
‘My Lords, I should in this case, as indeed in all other cases, greatly deprecate the introduction or creation of fixed and unyielding rules of law which are not imposed by Act of Parliament. I think it would be greatly to be deprecated that any positive rule as to dealing with a question of fact should be laid down, and laid down now for the first time, unless the Legislature has, in the shape of an Act of Parliament, distinctly imposed that rule.’
Lord Hatherly spoke ((1875) LR 7 HL at 469) of the:
‘… supposed existence of a rigid rule, by which, when you are once satisfied that a testator of a competent mind has had his will read over to him, and has thereupon executed it, all further inquiry is shut out.’
Later, he said ((1875) LR 7 HL at 469):
‘Now, my Lords, laying down, for my own part, no general rule of any description whatever, which I carefully avoid doing with reference to cases of this description … ’
Page 1064 of [1970] 1 All ER 1057
In my opinion, the part of the headnote already quoted correctly distils the essence of the decision. Eighty years later, in another context but in similar general vein, Jenkins LJ in Martell v Consett Iron Co Ltd ([1955] 1 All ER 481 at 498, [1955] Ch 363 at 414) said:
‘… it is an abuse of authorities to extract from judgments general statements of the law made in relation to the facts and circumstances of particular cases, and treat them as concluding cases in which the facts and circumstances are entirely different … ’
Looking at the cases which followed Fulton v Andrew, some of which could not have been decided the way they were if the rule had continued to apply, it seems clear that eminent judges regarded the rule in Guardhouse v Blackburn as having received its quietus and as no longer binding the court. Two further extracts from the speeches in Fulton v Andrew demonstrate that by ‘reading’ or ‘reading over’ there must be more than a mere literal, physical fact of reading. Lord Cairns LC spoke ((1875) LR 7 HL at 460, [1874-80] All ER Rep at 1243) of ‘the consciousness of the testator’ regarding the contents of the will. Lord Hatherly said ((1875) LR 7 HL at 473):
‘I do say that at least the jury should be satisfied that it was read over to him, and not only that it was read over to him, but that it was read over in such a manner as that the discrepancy between the instructions and the will was brought before the consideration of the testator.’
In principle, surely, it is as necessary that this should be enquired into where the question is one of mistake, as where the question is one of fraud?
On this part of the case it is necessary only to refer to two more cases. In Gregson v Taylor Hill J, although not finding it necessary to determine the precise extent to which the effect of Guardhouse v Blackburn must be taken to have been qualified, in cases where no fraud is alleged, by Fulton v Andrew, assumed that it was no longer a binding rule. He went on to say ([1917] P at 261):
‘… the direction which a judge should give a jury or himself must be put at least as high as this, that when it is proved that a will has been read over to or by a capable testator, and he then executes it, these circumstances afford a very grave and strong presumption that he knew and approved all the contents, a presumption which can be rebutted only by the clearest evidence.’
Indeed, when those conditions are satisfied prima facie the inference would be that the testator knew and approved, but the point is that the court is not precluded from considering all the evidence to arrive at the truth, and this is so not only if fraud is suggested but also if mistake is suggested.
In my opinion, the approach of the court today is as stated by Sachs J in Crerar v Crerar. This case was not reported. A transcript of the judgment was asked for, but it is the practice, so I was informed, for the shorthand writer to destroy his notes after ten years have elapsed; and the judgment was given in April 1956. However, the material passages are quoted in an article written and signed by a member of the Bar in the Law Journalb. Moreover, those parts of the judgment concerned
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with the law were prepared verbatim for delivery, and Sachs LJ has been good enough to allow me to verify from those prepared parts the accuracy of the quotations in the article. They are accurate. Sachs J saidc:
‘… enquiries touching the validity of a testamentary disposition have always been considered matters touching the conscience of the court [and he rejected] the idea that there is any rule of law applicable to unusual cases which can so put that conscience into a straight-jacket as to preclude it from drawing inferences in the usual way and thus force the court to a decision which would, on the particular facts be artificial.’
He went on to sayc that the court has:
‘… to consider all the relevant evidence available and then, drawing such inferences as it can from the totality of that material, it has to come to a conclusion whether or not those propounding the Will have discharged the burden of establishing that the testatrix knew and approved the contents of the document which is put forward as a valid testamentary disposition. The fact that the testatrix read the document, and the fact that she executed it, must be given the full weight apposite in the circumstances, but in law those facts are not conclusive, nor do they raise a presumption of law.’
The author of the article concludes by hopingc:
‘… that the decision of Sachs J., in Re Crerar will help the Probate Court to give effect to the wishes of other testators, and to avoid imputing to them a fictitious knowledge and approval of testamentary documents whose meaning they did not know and would not have approved.’
That aspiration, in my opinion, should not be a pious one.
The testatrix was competent, did (as I have found) in a literal, physical sense read the codicil and did duly execute it, and, if the rule in Guardhouse v Blackburn survived, I should be bound to find that she knew and approved of the contents of it. But that rule does not survive in any shape or form, and on all the evidence I have no doubt at all that she did not in fact know and approve its contents. That leaves the question whether there is a rule of law requiring that knowledge and approval must be imputed in certain circumstances and, if there is, whether this is such a case. To put it another way: should a testator be bound by a draftsman’s mistake of which the testator is not aware?
2 A rule of imputed knowledge and approval? Without derogating from the helpful arguments and the review of the many cases, I can state my conclusion on this aspect and the reasons for it, more shortly. Counsel for the first defendant based his proposition primarily on what Lord Blackburn said giving the judgment of the Judicial Committee of the Privy Council in Rhodes v Rhodes. Lord Blackburn said:
‘Their Lordships think that there is no difference between the words which a testator himself uses in drawing up his will, and the words which are bona fide used by one whom he trusts to draw it up for him. In either case there is a great risk that words may be used that do not express the intention. There probably are very few wills in which it might not be contended that words have been so used. However this may be, the Court which has to construe the Will must take the words as they find them.’
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From this and other cases that followed it is established, in my opinion, that there are cases where, although the testator did not in fact know and approve the effect of what he is executing he is deemed to do so. He is bound by the draftsman’s mistake. Here again it is not easy to reconcile all the decisions and dicta, but certainly the rule does not cover all cases where a draftsman had made a mistake; indeed, it applies to a limited class of case. Its basis is one of expediency, because without it confusion and uncertainty would produce worse results.
The fundamental principle is that an intending testator cannot delegate to another the task of deciding how his property shall be willed. He cannot hand over the making of his will to another: see Hastilow v Stobie ((1865) LR 1 P & D 64 at 67). But although he cannot hand over the making of a will, he can entrust someone else with the task of drafting a will which he (the intending testator) wants to make. The scope of the draftsman’s authority is to carry into effect the testator’s intentions. In some cases (where, for example, an expert in law is needed to provide the appropriate wording to give effect in law to the testator’s intentions) the testator has to accept the phraseology selected by the draftsman without himself really understanding its esotericmeaning, and in such a case he adopts it and knowledge and approval is imputed to him. If the draftsman in the use of the selected phraseology, which he, knowing the testator’s intentions, has deliberately and not per incuriam chosen, and thus himself known and approved, has made a mistake as to the effect of that phraseology, the testator, having adopted it, is bound by the mistake. So far, I think, the law is plain.
I was much attracted by counsel for the plaintiff bank’s argument that that is where the line should be drawn. He argued that, save in that limited class of case, the testator is bound only by what the draftsman writes on his instructions. If he puts in something which is contrary to the testator’s instructions, he is acting outside the scope of his authority, and the testator is not bound unless, of course, the discrepancy is brought to his understanding and he adopts it. To enlarge the category of cases in which, although unaware of the draftsman’s mistake, knowledge and approval is imputed to the testator and he is bound by it, would be to subtract unnecessarily and wrongly from the fundamental principle that it is for a testator and no one else to make the will. But whether the line can be drawn there so that it follows that in all other cases there is not knowledge and approval, and the court thus has power to intervene, is far from plain. There are decisions and dicta either way.
As is said in Mortimer on Law and Practice relating to Probate,d it is difficult to extract a definite principle from the cases on this subject. In Mortimere the learned and authoritative author suggests that the cases establish the following propositions:
‘First. Where the mind of the draftsman has really been applied to the particular clause, then, whether the error has arisen from the fact that he misunderstood the instructions of the testator, or, having understood the instructions, has used inappropriate language in seeking to give effect to them, the testator who executes the Will is—in the absence of fraud—bound by the error so made as if it were his own, even if the mistake were not directly brought to his notice; and the Court will not omit from the probate the words so introduced into the will. Secondly. Where the mind of the draftsman has never really been applied to the words of the particular clause, and the words are introduced into the Will per incuriam, without advertence to their significance and effect, by a mere clerical error on the part of the draftsman or engrosser, the testator is not bound by the mistake unless the introduction of such words was directly brought to his notice.’
There is nothing in this, so far as I can see, inconsistent with the decision and reasoning
Page 1067 of [1970] 1 All ER 1057
in Re Horrocks, Taylor v Kershaw, and it is supported by the authorities cited in Mortimer.
Re Horrocks was a case of the use of technical language by a solicitor and the effects in law of the language chosen. The Court of Appeal decided that the court had no power to omit the word ‘or’ from the will on the two grounds that the solicitor draftsman had deliberately selected the language with the result that the testatrix was bound by this choice; and that in any event the exclusion of ‘or’ would itself defeat the testatrix’s intentions. It is true that Sir Wilfrid Greene MR., who gave the judgment of the court, discussed the case on the hypothesis that the use of ‘or’ instead of ‘and’ was a typist’s error. But there is, so far as I can see, nothing in the judgment to vitiate the propositions in Mortimer. Indeed, Sir Wilfrid Greene used the word ‘selected’ in the sense, I think, of consciously choosing, and he makes it plain that the court can exclude words where there is a mere slip, and can do so where the effect is to leave what is left devoid of ascertainable content and thus inoperative (so altering the intention as expressed on the face of the instrument).
On this part of the case there is a further passage, not quoted in the article in the Law Journal, in the judgment of Sachs J in Crerar v Crerar as follows:
‘Further, it is not the law of this country that the testatory can give testamentary validity to a testamentary disposition by accepting without understanding its effect something put forward by another.’
This, surely, is fundamentally the law, and one would expect it to follow that any exceptions which the courts have found it necessary to make should indeed be exceptions, reluctantly made in special and limited circumstances. But whether the line is to be drawn as suggested in Mortimer, or, possibly, as submitted by counsel for the plaintiff bank, at a place which gives the court power in more cases, it is not, I think, necessary for me to decide in this case.
In my judgment, wherever the line is drawn, this case on its facts falls into the category where the court has power to do what it can by omission. The introduction of the words ‘Clause 7’ instead of ‘Clause 7(iv)’ was per incuriam. The solicitor’s mind was never applied to it, and never adverted to the significance and effect. It was a mere clerical error on his part, a slip. He knew what the testatrix’s instructions and intentions were, and what he did was outside the scope of his authority. And he did it, of course, without knowing and approving what he himself was doing. How can one impute to the principal the agent’s knowledge and approval which the agent himself has not got? Accordingly, I hold that the testatrix was not bound by this mistake of the draftsman which was never brought to her notice. The discrepancy between her instructions and what was in the codicil was to all intents and purposes total and was never within her cognisance.
Accordingly, the case is one in which the court has power to rectify, using that word in a broad sense, so far as it can. Which is the proper course? To pronounce against the instrument in its entirety? Or to exclude part and admit the rest? Certainly to reject the whole instrument would come much nearer to giving effect to the testatrix’s dispositive intentions (both in the number of beneficiaries and in the amounts involved) than would the admission of the whole instrument. But is the instrument severable, and can one get nearer still by excluding part? In my judgment, I can. I cannot add ‘(iv)’ after ‘7’ but, if ‘7’ is excluded, cl 1 of the codicil would read as follows: ‘1. I revoke Clauses 3 and () of my said Will.’
I agree with counsel for the plaintiff bank’s submission that this would have one of the following effects: The Chancery Court as the court of construction might deduce from the two documents (the will and the codicil so altered) read together that the testatrix’s intention was that the other clause after the words ‘Clauses 3 and ()’
Page 1068 of [1970] 1 All ER 1057
should be 7(iv). Or the court might decide from a reading of the documents alone that there was not enough intrinsic evidence to fill in the blank but that the revocation of cl 3 of the will, coupled with the reinstatement of the same gift in cl 2 (a) of the codicil, rebutted the presumption that the gifts in cl 3 of the will and cl 2 of the codicil were cumulative, and thus lead to the construction that those in cl 2 of the codicil were intended to be substitutional. Either of those decisions would give full effect to what in fact the testatrix intended. Or the court might decide that the presumption prevailed and the gifts were cumulative.
Counsel for the plaintiff bank submitted that the court would probably come to one or other of the first two conclusions, but that is not a matter on which I can express any opinion other than to take it into account. Of course, the ambiguity being a patent one, the court of construction will not be able to admit the external evidence which makes the testatrix’s intentions as clear as crystal, or to have regard to the findings of fact in that regard in this action. One can only say that that is a situation which W S Gilbert would have found ripe, but is otherwise unattractive; and perhaps the Lord Chancellor’s committee may find an acceptable improvement.
Counsel for the plaintiff bank and counsel for the second defendant contended that this was the right course to take. Counsel for Miss Hurdwell did not argue that there was no power to take this course. He did contend that it would be better to pronounce against the codicil in its entirety, thus avoiding the further expense of construction proceedings. But I do not think that that factor outweighs the others.
Accordingly, the codicil will be admitted to probate with the omission of the numeral 7 in cl 1.
Order accordingly.
Solicitors: Fladgate & Co (for the plaintiff bank); Bell, Brodrick & Gray (for the first defendant); Paul Emerson, Basingstoke (for the second defendant and the party cited).
Alice Bloomfield Barrister.
R v Commissioners of Customs and Excise, ex parte Cooke and Stevenson
[1970] 1 All ER 1068
Categories: TAXATION; VAT and Customs and Excise: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, WILLIS AND BRIDGE JJ
Hearing Date(s): 24, 25 NOVEMBER 1969
Mandamus – Application for – Sufficiency of interest – Off-course betting premises licence – Collection of duty by Commissioners of Customs and Excise – Statutory provision for method of payment – Purported authority given by Ministry to commissioners to accept payment otherwise than as provided by statute – Application by bookmakers for mandamus requiring commissioners to comply with statute – Whether applicants had sufficient interest to support application for mandamus – Finance Act 1969, s 2, Sch 8.
The Finance Act 1969, s 2a, imposed a tax on bookmakers in the form of a duty of excise on a new form of licence in respect of off-course betting premises. By Sch 8b to the Act the Commissioners of Customs and Excise were made responsible for the collection of the duty which was in general payable by an annual sum or two half-yearly instalments at the option of the person liable for the duty. The tax caused
Page 1069 of [1970] 1 All ER 1068
widespread discontent among bookmakers and representations were made to the Financial Secretary to the Treasury concerning the difficulties encountered by bookmakers and by the Horserace Totalisator Board. As a result of these representations press notices were issued on 11 and 12 September 1969 to the effect that the commissioners were authorised in principle to accept payment of the annual licence duty by monthly instalments and to grant a licence on receipt of one month’s duty and 11 post-dated cheques with the application for a licence. This new arrangement for collection of the duty was accepted by some 11,000 bookmakers and the Horserace Totalisator Board. Two bookmakers (the applicants) who had complied with the terms and provisions of the Finance Act applied for orders of mandamus requiring the Commissioners of Customs and Excise to exercise the jurisdiction conferred on them by and in accordance with the Act.
Held – The applicants had failed to show that they had some interest over and above the interests of the community as a whole to support their application; their only interest or motive was the ulterior one of putting their competitors out of business; accordingly, their application failed (see p 1073 e, g and j, post).
Notes
For conditions precedent to issue of mandamus, see 11 Halsbury’s Laws (3rd Edn) 104–106, paras 194–196, and for cases on the subject, see 16 Digest (Repl) 318–343, 967–1210.
For the Finance Act 1969, s 2, Sch 8, see Service to Halsbury’s Statutes (3rd Edn).
Cases referred to in judgment
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997, [1968] 2 WLR 924., Digest Supp.
R v Income Tax Special Purposes Comrs (1888) 21 QBD 313, [1886–90] All ER Rep 1139, 57 LJQB 513, 59 LT 455, 53 JP 84, 16 Digest (Repl) 346, 1235.
R v Income Tax Special Purposes Comrs, ex parte Dr Barnardo’s Homes National Incorporated Association [1920] 1 KB 26, 89 LJKB 194; revsd CA [1920] 1 KB 468; affd HL [1921] 2 AC 1, 16 Digest (Repl) 394, 1879.
R v Lewisham Union Guardians [1897] 1 QB 498, 66 LJQB 403, 76 LT 324, 61 JP 151, 16 Digest (Repl) 322, 1009.
R v Treasury Lords Comrs (1872) LR 7 QB 387, 41 LJQB 178, 26 LT 64, 38 JP 661, 16 Digest (Repl) 343, 1214.
R v Woods, Forests, Land Revenues, Works and Buildings Comrs, ex parte Budge (1850) 15 QB 761, 19 LJQB 497, 15 LTOS 561, 117 ER 646, 16 Digest (Repl) 345, 1231.
Cases also cited
Marreco v Richardson [1908] 2 KB 584, [1908–10] All ER Rep 655,.
R v Inland Revenue Comrs, Re Nathan (1884) 12 QBD 461.
Application
These were applications by Herbert Leonard Cooke and Edward Peter Stevenson, bookmakers, for orders of mandamus directed to the Commissioners of Customs and Excise, the terms of which are set out at p 1070 b, post. The facts are set out in the judgment of Lord Parker CJ.
W R Rees-Davies for the applicants.
Gordon Slynn for the commissioners.
25 November 1969. The following judgments were delivered.
LORD PARKER CJ. In these proceedings, counsel moves on behalf of two applicants, Herbert Leonard Cooke and Edward Peter Stevenson; they are both
Page 1070 of [1970] 1 All ER 1068
bookmakers, and they each apply for an order of mandamus directed to the Commissioners of Customs and Excise, and I read from the statement filed under RSC Ord 53:
‘Requiring them to exercise the jurisdiction conferred upon them by Section 2 and the Eighth Schedule of the Finance Act 1969 and in particular to issue licences only to such applicants as have complied with the terms and provisions laid down in the said Act and furthermore to collect such dues as are provided for in accordance with the terms contained in the said Act by way of payment of half of the full duties therein described and not otherwise.’
The matter arises in this way: the Finance Act 1969 imposed by s 2 a new tax on bookmakers, and it is a tax which has been resented, at any rate by bookmakers. It is a heavy tax, and it takes the form of being a duty of excise on a new form of licence in respect of off-course betting premises. By s 2(3) the tax is to be:
‘(a) in the case of premises which for rating purposes constitute or are comprised in a hereditament having a rateable value, three times that value; and (b) in any other case, £150.’
Schedule 8 to that Act deals with the collection of the tax, and by para 1(1) it is provided:
‘The duty on betting premises licences shall be under the care and management of the Commissioners [ie the Commissioners of Customs and Excise], who may (without prejudice to any other provision of this Schedule) make regulations providing for any matter for which provision appears to them to be necessary for the administration or enforcement of the duty, or for the protection of the revenue in respect thereof.’
Paragraph 2 goes on to state how the applications are to be made:
‘An application for a betting premises licence in respect of any premises shall, in the case of a new licence, be made to the Commissioners not later than fourteen days before—(a) 1 October, 1969; … ’
Then by para 5 it is provided:
‘(1) Where a betting premises licence is granted so as to have effect from the beginning of the licence-year or from a date in that year not later than the end of February, and section 237 of the Customs and Excise Act 1952 does not apply for the reduction of the duty payable on the licence, the licence may at the option of the person liable for the duty be granted on payment of only half of the full duty; and in that case the second half shall be paid not later than the following 1 March.
‘(2) If default is made in payment of the second half of the duty, the licence shall be of no effect so long as the default continues.
‘(3) If after 1 March any sum remains unpaid in respect of the second half of the duty, that sum may be recovered as a debt due to the Crown.’
Finally, it is to be observed that by para 7 it is provided:
‘Section 234 of the Customs and Excise Act 1952 (which relates to payment for excise licences by cheque) shall apply to the duty on a betting premises licence, but as if for the reference to a penalty of £50 there were substituted a reference to a penalty of £500.’
It is accordingly quite clear that no one is entitled to a betting premises licence unless he had paid either the whole amount of the duty in advance, or under para 5, half in advance and half on 1 March.
Page 1071 of [1970] 1 All ER 1068
This tax gave rise to a good deal of trouble, and in September 1969 representations were made to the Financial Secretary to the Treasury, and indeed to the Chancellor concerning the difficulties which would be encountered by bookmakers and by the Horserace Totalisator Board in complying with the provisions of Sch 8, even by paying half in the first place and half on 1 March. On 11 September, a press notice was issued, which stated:
‘The Financial Secretary said that the Chancellor had already been considering these points very carefully and had asked him to give the deputation the following assurances: (1) The Customs are being authorised in principle to accept payment of the annual licence duty by monthly instalments. The precise arrangements, to include safeguards against failure to pay the instalments regularly, would be discussed as a matter of urgency between the Customs and representatives of the bookmakers.’
On that day or the next day, there were discussions with representatives of the bookmakers, and on 12 September a further press notice was issued which stated:
‘Following the meeting between the Financial Secretary to the Treasury and a deputation led by Lord Wigg on 11 September, the Commissioners of Customs and Excise have discussed with representatives of the bookmaking interests the manner in which the betting premises licence duty is to be paid in monthly instalments, and the following procedure has been agreed. When completing the licence application form received from the Collector of Customs and Excise the bookmakers should amend Part III of the form, second sentence, by deleting the words “one half of”; and adding to the final sentence “together with 11 post-dated cheques, the first dated 1 November 1969, and the other dated the 1st day of each succeeding month“. The form should be returned to the Collector with the twelve cheques, the first dated not later than 1 October 1969, and the others as indicated above. A licence will be issued by the Collector on receipt of a properly completed application and the cheques.’
Following that a letter was written to all bookmakers, and presumably to the Horserace Totalisator Board, offering to carry out that arrangement. As a result, as I understand it, some 11,000 bookmakers and the Horserace Totalisator Board have accepted that arrangement and have paid and are paying the tax in accordance with it. It is an arrangement which is open to all bookmakers, but certain of them and in particular the applicants in this case, have chosen not to avail themselves of these monthly payments, but have paid either the whole in advance or the half in advance with the intention of paying the other half on 1 March.
It is those circumstances that these applications are made, and counsel for the applicants says at the very outset that here is an Act, the law of the land, which is just not being complied with; there has been no amending Act. He says, indeed, that it is, as he would put it, the word of the Minister which is being used to outweigh the law of the land, and in those circumstances he says that the applicants are entitled to an order of mandamus which, without going into the details of how it would have to be framed, is in effect a mandamus to the Commissioners of Customs and Excise to carry out their functions under the Act, and not under the word of any Minister.
At an early stage I asked counsel for the commissioners whether there was any statutory authority for their action in the matter, and subject to an argument concerning s 234 of the Customs and Excse Act 1952, counsel, with his usual frankness, said there was no statutory authority for their action.
I will deal at once with s 234(1), it is in these terms:
‘Any Government department or local authority having power to grant an excise licence may, if they think fit, grant the licence upon receipt of a cheque for the amount of the duty payable thereon.’
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As I understand counsel’s argument, it amounts to this, that that subsection would empower the commissioners to accept cheques, singular including the plural and that there is no reason why those cheques should not be postdated, or an arrangement made that they are not to be presented for a fixed period; that on well-known legal principles if there was failure to pay by cheque, or indeed the cheque was paid, then the failure or payment will rank as at the date when the cheque was given. On that argument he would seek to say that what was done by the commissioners here was covered by statutory authority.
For my part, I am quite unable to accept the argument of counsel for the commissioners on that part of the case; it does not seem to me that the result he contends for can possibly be derived from the wording of s 234(1). Moreover, it would only apply as a valid argument to some of the 11,000 bookmakers who have availed themselves of the monthly payments in the present case, because in an appreciable number of cases they have paid cash and not paid by cheque.
Accordingly, as I have said, one approaches this case on the basis, and I confess for my part an alarming basis, that the word of the Minister is outweighing the law of the land. However, having said that, one moves on to the far more difficult question whether mandamus will lie. It is sometimes said as a general proposition that mandamus will not lie against the Crown or an officer or servant of the Crown. I think that we all know in this day and age that that as a general proposition is quite untrue; there have been many cases, of which the most recent one is Padfield v Minister of Agriculture, Fisheries and Food, in which a mandamus was issued to a Minister. Indeed that has always been the case, as can be seen since as long ago as 1850 in R v Woods, Forests, Land Revenues, Works and Buildings Comrs, ex parte Budge ((1850) 15 QB 761 at 768) where Sir Frederick Thesiger expressed the proposition in argument in this form:
‘Whenever a person, whether filling an office under the Crown or not, has a statutory duty towards another person, a mandamus will lie to compel him to perform it.’
Those words of Sir Frederick Thesiger were in fact adopted by Sir Alexander Cockburn CJ.
There are, of course, cases in which it had been held that a servant or officer of the Crown may have as his only duty a duty towards the Crown. That indeed as I understand it was the deciding factor in R v Treasury Lords Coms; but equally there are other cases, eg R v Income Tax Special Purposes Comrs, ex parte Dr Barnardo’s Homes National Incorporated Association and the well-known case of R v Income Tax Act Special Purposes Comrs, which show quite clearly that where by statute an officer or servant of the Crown has also a duty towards a member of the public, then provided that member of the public has a sufficient interest, mandamus will lie.
Accordingly, so far as I am concerned, the only and real point as I see it in this case is whether it can be said that the applicants have the necessary interest. In regard to mandamus, this has always been dealt with on a very strict basis, and in R v Lewisham Union Guardians it was stated by Wright J, who incidentally was an authority on these matters, as follows:
‘Certainly, so long as I have had anything to do with applications for a mandamus I have always understood that the applicant, in order to entitle himself to a mandamus, must first of all shew that he has a legal specific right to ask for the interference of the Court.’
Page 1073 of [1970] 1 All ER 1068
Quite clearly the applicants have no such specific right as individuals. They are not complaining that a licence was not issued to them; they are not complaining that they were not offered the same terms as other bookmakers in regard to monthly payments. They are not seeking to enforce any specific right or, put another way, any specific duty owed to them.
The matter does not, of course, end there, because it might be sufficient if they were able to show that they had some interest, although not a direct personal interest, but some interest over and above the interests of the community as a whole. That, as I understand it, is what counsel for the applicants seeks to do; the way he puts it is this: that these statutory provisions were designed to curtail the activities of bookmakers, that Parliament had it in mind that by imposing this heavy duty, making it payable either as a whole in advance or by half-yearly instalments, a perceptible number of bookmakers would be put out of business or, rather I should say, it would result in the closing of betting premises.
Counsel for the applicants goes on to say that the applicants real interest is that by this arrangement invoked by the commissioners, their competitors are greater in number than they otherwise would have been, and they have produced affidavits from bookmakers to say that if they had not had a chance of paying by the month, they would probably have gone out of business.
As it seems to me there are two answers in regard to that. First, it is quite clear that the Finance Act 1969, is, as its title shows, only concerned with the collection of tax; any question of control of bookmakers, tightening up regulations concerning bookmakers, preventing more betting premises from being set up, are matters with which the Finance Act 1969 is not concerned, but come into the realm of the Betting Acts, in particular the Betting, Gaming and Lotteries Act 1963. Secondly, as it seems to me in any event the interest, or the motive, which is moving this application is what I would term an ulterior motive, a motive of putting people out of business and nothing more.
Without referring to the authorities, it is sufficient I think to refer to a passage in 11 Halsbury’s Laws (3rd Edn) p 105, para 196, dealing with Crown Proceedings, where these words occur:
‘… but the mere fact that a person is interested in the performance of a duty as a member of a class of persons, all of whom may be regarded as equally interested, but himself having no particular ground for claiming performance, or that he has some ulterior purpose to serve, but no immediate interest on his own or any other person’s behalf, will not be sufficient grounds for granting a mandamus.’
Accordingly, in my judgment the applicants have not shown the degree of interest which alone would be sufficient to support these applications.
I would only add this, that for my part if that hurdle had been surmounted, I would endeavour in the exercise of the court’s discretion to enable mandamus in some form to go. But once one gets into the realm of drafting the order, I can foresee very great difficulties, and it may be that in the end it would have to be limited to conduct of the commissioners in the future, which I would think at earliest to be 1 March.
WILLIS J. I agree.
BRIDGE J. I also agree.
Applications dismissed.
Solicitors: Tackley, Fall & Read (for the applicants); Solicitor, Customs and Excise.
Kaushalya Purie-Harwell Barrister.
Hinz v Berry
[1970] 1 All ER 1074
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, LORD PEARSON, SIR GORDON WILLMER
Hearing Date(s): 16 JANUARY 1970
Damages – Measure of damages – Nervous shock – Wife witnessing accident in which husband killed and children injured – Morbid depression, a form of psychiatric illness, suffered by wife as a result of the shock – £4,000 awarded in the exceptional circumstances of the accident witnessed by the wife.
The plaintiff, happily married for ten years with four children of her own and four foster children, and two months pregnant with her fifth child, saw from the other side of the road, where she was picking flowers with one of the children, an accident in which a car ran into the stationary van where her husband and all the other children were preparing a picnic; she saw her husband lying dying in the road and the children, most of whom were injured, strewn about the road with blood streaming from their heads. The plaintiff had a robust character, was level-headed and very capable and the trial judge found that if she had not seen the accident she would have stood up to the situation although sorrowful, but that the morbid depression, a recognisable psychiatric illness, which she had suffered since the accident was caused by the shock of witnessing the accident, and he awarded her damages of £4,000 for that additional mental suffering. On appeal by the defendant contesting the quantum of damages but not the principles applied by the judge.
Held – In the exceptional circumstances of the accident which were of a horrifying and tragic character, £4,000, although a high figure, was not a wholly erroneous award of damages for the nervous shock suffered by the plaintiff in witnessing the accident, and the court would not interfere with the award and would dismiss the appeal (see p 1076 e and f, and p 1078 b, c and h, post).
Per Lord Denning MR. The court has to draw a line between sorrow and grief for which damages are not recoverable; and nervous shock and psychiatric illness for which damages are recoverable. The way to do this is to estimate how much the plaintiff would have suffered if, for instance, her husband had been killed in an accident when she was 50 miles away; and compare it with what she is now, having suffered all the shock due to being present at the accident (see p 1075 h, post).
Notes
For damages for shock, see 11 Halsbury’s Laws (3rd Edn) 278, 279, para 460; and for cases on the subject, see 17 Digest (Repl) 122, 123, 330–339.
Cases referred to in judgment
Schneider v Eisovitch [1960] 1 All ER 169, [1960] 2 QB 430, [1960] 2 WLR 169, Digest (Cont Vol A) 461, 19a.
Tregoning v Hill (1965) The Times, 2 March.
Appeal
This was an appeal by the defendant, Anthony Paul Berry, from that part of the judgment of O’Connor J, given on 4 June 1969, awarding the plaintiff, Evelyn Frances Hinz, damages of £4,000 for nervous shock. The facts are set out in the judgment of Lord Denning MR.
G A Carman for the defendant.
K G Jupp QC and F J M Marr-Johnson for the plaintiff.
Page 1075 of [1970] 1 All ER 1074
16 January 1970. The following judgments were delivered.
LORD DENNING MR. It happened on 19 April 1964. It was bluebell time in Kent. Mr and Mrs Hinz, the plaintiff, had been married some ten years, and they had four children, all aged nine and under. The youngest was one. The plaintiff was a remarkable woman. In addition to her own four, she was foster mother to four other children. To add to it, she was two months pregnant with her fifth child.
On this day they drove out in a Bedford Dormobile van from Tonbridge to Canvey Island. They took all eight children with them. As they were coming back they turned into a lay-by at Thurnham to have a picnic tea. Mr Hinz was at the back of the Dormobile making the tea. The plaintiff had taken Stephanie, her third child, aged three, across the road to pick bluebells on the opposite side. There came along a Jaguar car out of control driven by Mr Berry, the defendant. A tyre had burst. The Jaguar rushed into this lay-by and crashed into Mr Hinz and the children. Mr Hinz was frightfully injured and died a little later. Nearly all the children were hurt. Blood was streaming from their heads. The plaintiff, hearing the crash, turned round and saw this disaster. She ran across the road and did all she could. Her husband was beyond recall, but the children recovered.
An action has been brought on her behalf and on behalf of the children for damages against the defendant. The injuries to the children have been settled by various sums being paid. The pecuniary loss to the plaintiff by reason of the loss of her husband has been found by the judge to be some £15,000; but there remains the question of the damages payable to her for her nervous shock—the shock which she suffered by seeing her husband lying in the road by the van dead, and the children strewn about.
The law at one time said that there could not be damages for nervous shock; but for these last 25 years, it has been settled that damages can be given for nervous shock caused by the sight of an accident, at any rate to a close relative. Very few of these cases have come before the courts to assess the amount of damages. O’Connor J fixed the damages at the sum of £4,000 for nervous shock. The defendant appeals saying that the sum is too high.
I would like to pay at once a tribute to the insurance company for the considerate and fair way in which they have dealt with the case. In English law no damages are awarded for grief or sorrow caused by a person’s death. No damages are to be given for the worry about the children, or for the financial strain or stress, or the difficulties of adjusting to a new life. Damages are however recoverable for nervous shock, or, to put it in medical terms, for any recognisable psychiatric illness caused by the breach of duty by the defendant.
There are only two cases in which the quantum of damages for nervous shock has been considered. One is Schneider v Eisovitch. The other an unreported case of Tregoning v Hill, but they do not help us here. Somehow or other the court has to draw a line between sorrow and grief for which damages are not recoverable; and nervous shock and psychiatric illness for which damages are recoverable. The way to do this is to estimate how much the plaintiff would have suffered if, for instance, her husband had been killed in an accident when she was 50 miles away; and compare it with what she is now, having suffered all the shock due to being present at the accident. The evidence shows that she suffered much more by being present. I will consider first the grief and sorrow if she had not been present at the accident. The consultant psychiatrist from the hospital in Maidstone wrote:
‘It is common knowledge that there is a “Mourning Period” for all of us, and that normally time dispels this. In the average person it might be a year, but in a predisposed person it can be greatly prolonged.’
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The plaintiff was not predisposed at all. She was a woman of great capacity, levelheaded, hard working, happily married. She would have got over the loss of her husband in, say, a year.
Consider next her condition, as it is, due to being present at the accident. Two years after the accident, the consultant psychiatrist wrote:
‘There is no medical doubt at all that she is suffering from a Morbid Depression … now she is officially ill. [He went on to give some of the symptoms. She said to him] “It does not seem worth going on. I feel I cannot cope at all. I get so dreadfully irritable with the children too … It is wrong but I feel like killing him [ie one of the children]” [The consultant went on:] She feels exhausted, has frequent suicidal ruminations and at the same time is covered with guilt at being like this. The posthumous baby now saddens her even more because it cries Dad, Dad, and [one of the elder children] persists in saying “You have not got a Dad” and then the other fatherless children join in the chorus … In other circumstances I would probably have brought her into Hospital, at least for a rest, but possibly for electrical treatment and it may come to that yet … ’
At the trial, five years after the accident, she frequently broke down when giving her evidence. She brought the children to court. They were very well turned out. The judge summed up the matter in this way:
‘… I am satisfied that she was of so robust a character that she would have stood up to that situation; that she would have been hurt, sorrowful in mourning, yes, but in a state of morbid depression, no … ’
He awarded her £4,000 on this head. There is no suggestion that he misdirected himself. We can only interfere if it is a wholly erroneous estimate. I do not think that it is erroneous. I would dismiss the appeal.
LORD PEARSON. This is a case of considerable importance, because I think it is the first case in which the problem of assessing damages of this kind has come to the Court of Appeal. I would like to point out at the outset that this is an exceptional case. The circumstances of the accident as witnessed by the plaintiff were of an exceptionally horrifying and tragic character, and it is easy to believe that she suffered an extremely severe shock from witnessing it. She has been since the accident for a period of not far short of six years in a sad and depressed state. Counsel for the defendant has given us a list of five causes of the depressed state, and he says, I think rightly, that these five causes have all been operating from the date of the accident until now. The first factor was her own inevitable grief and sorrow at losing her husband, a good husband who was also a good father to her family. That would have caused much sorrow and mourning in any event. Secondly, there was her anxiety about the welfare of her children who were injured in the accident. Thirdly, there was the financial stress resulting from the removal of this very hardworking breadwinner who took extra work in addition to his normal work. She may well have been in considerable financial difficulty. The fourth factor was the need for adjusting herself to a new life, which may well have been quite unusually severe in this case. Now, all those four factors are not compensatable, that is to say they are not proper subjects to be taken into account in assessing damages according to English law. And then we come to the fifth of the five substantial factors, and that is the shock of witnessing the accident. That is the only factor which is compensatable in the sense that I have explained. It is not disputed that this factor is a proper subject for compensation. The only problem is one of assessment. Is the figure which has been awarded in respect of it a figure which is within the reasonable range? If this factor had been merely one out of five and they had all been more or
Page 1077 of [1970] 1 All ER 1074
less equal in their effect and there had been no special consequences attributable to this one, I would have thought that the figure awarded was much too high. But the position here is rather different. It has been held—and there is evidence in support—that this factor of the extreme shock of witnessing the exceptionally tragic accident has produced a special and for the time being very disastrous consequence, namely that the plaintiff is not only in a sad and depressed state owing to the loss of her husband and perhaps a harassed state owing to the difficulty of looking after her family in this situation, but something more than that; she has been and still is in a positively morbid state. There is a recognisable psychiatric illness. The finding of the learned judge, as I understand his judgment—and I will read the relevant passage in a moment—is that this is a special consequence which has been added by the shock to what otherwise her condition would have been. The other matter I mention before reading the relevant passages in the learned judge’s judgment is that, according to the medical prognosis, this most unhappy state of affairs, that the plaintiff is not only sad and depressed but is in a morbid state of depression, is not expected to continue for very much longer after this case has been finally disposed of. Now, having said that, I will read the relevant passages from the learned judge’s judgment, because I think he has stated the principle correctly, and the only problem is whether the estimate which he has made on the basis of the principle can be regarded as with the proper range or not. He said:
‘… I approach the problem by saying that the death of her husband in 1964 would in any event have been a very serious blow; so too would the injury of her children. She plainly relied on the love and affection of her husband quite apart from his capacity as bread-winner. It must have caused a very serious upset to her. The injury to her children and their loss of a father and psychiatric disturbance would again undoubtedly have preyed upon her mind, but I am satisfied that she was of so robust a character that she would have stood up to that situation; that she would have been hurt, sorrowful in mourning, yes, but in a state of morbid depression, no, and it seems to me that she is entitled to be compensated effectively for the extreme mental anguish which she has suffered during the last five years as a result of being present at the scene of this disaster … I do not think it correct to approach this case on the basis that her present troubles are permanent or anything like that. Unfortunately—and this is not the Defendant’s fault, and I do not cast any blame on the Plaintiff’s advisers—bringing this case to decision has taken a very long time. To some extent that must have operated on [the plaintiff’s] mind. No-one suggests that she is other than a genuine woman, but it seems to me that after this case is decided, when damages have been assessed and money is available, that her depression will subside. Basically she must remain of a strong character, and effectively I approach the problem, doing the best I can, of awarding her compensation for what, as I have already said, is the intense suffering which she has borne for the last five years and for some further time.’
Well, I am not sure that the last sentence is quite rightly expressed. It should not be for the whole of the mental anguish and suffering which she has endured during the last five or six years. It should be only for that additional element which has been contributed by the shock of witnessing the accident, and which would not have occurred if she had not suffered that shock. It is a difficult distinction to draw, but I think that the learned judge has laid a proper foundation and has found a right ground of decision, namely that where there is an extra element which has been added by the shock of witnessing the accident, that is a proper subject of compensation. On his findings in this case that that element in itself was the sole cause of the added morbidity, the recognisable psychiatric element in her present condition, that is a proper ground for a substantial sum of money to be awarded. As to the sum itself, it has seemed to me since the beginning of the case and I still feel that it is
Page 1078 of [1970] 1 All ER 1074
a high figure. I myself would have been inclined to award some lower figure; but it is well recognised that in cases of this kind different minds can take different views as to the proper figure, and if the figure awarded is within the reasonable range, then it is not right for the Court of Appeal to interfere. Indeed it has been said that the Court of Appeal ought not to interfere on the ground only that the figure is too high unless it appears to be a wholly erroneous estimate of what the damages should be; and although I feel it is high, I am not able to say it is a wholly erroneous estimate, and for that reason I would dismiss the appeal.
SIR GORDON WILLMER. I have reached the same conclusion. I would like to emphasise once again that this is a very exceptional case, and I hope that that circumstance will be borne in mind should there be occasion in future to refer to what has been decided in the present case. I also regard it as an extremely difficult case. However, the medical evidence is exceptionally strong to show that the state of depression and anguish to which the plaintiff has been reduced over the past five years goes far beyond what one would ordinarily expect in the case of a lady deprived of her husband as the result of an accident. To my mind the evidence is conclusive to show that the reason for the additional suffering of the plaintiff is to be found in the fact that she was herself a personal witness of the tragedy. It is important to bear in mind that what has resulted is described by the psychiatrist who gave evidence as a “recognisable psychiatric illness’. I think it is clear on the evidence that that illness is attributable, and really wholly attributable, to the nervous shock resulting from the actual witnessing of the accident. The learned judge found—and the medical evidence was amply sufficient to support him—that but for this the plaintiff—
‘… was of so robust a character that she would have stood up to that situation; that she would have been hurt, sorrowful in mourning, yes, but in a state of morbid depression, no … ”
It is for that state of morbid depression, an illness brought about by the nervous shock, that she is entitled to be compensated.
It seems to me that it is quite impossible to find any fault whatsoever with the manner in which the learned judge directed himself as to the principles to be applied. There has, however, during the argument been some suggestion that, having correctly directed himself on the law, the learned judge very quickly forgot what he had himself said, and, no doubt quite unconsciously, allowed his natural sympathy for the plaintiff to run away with him, with the result that he awarded an inflated figure. I do not accept that criticism. I agree with Lord Pearson that the sum at which the learned judge arrived was a high figure; but in this case we are in an area where the damages seem to me to be even more than usually at large. It is practically impossible to find any signposts on the road; there is no tariff or pattern of awards in this class of case; and this makes it very difficult for any one judge to criticise another judge’s estimate of what the damages ought to be. I find myself quite unable to say that in this rather fluid state of affairs the sum at which the learned judge in the present case arrived was such as could fairly be described as a ‘wholly erroneous estimate’. High as his award was, I think that no sufficient reason has been shown for interfering with it, and accordingly I agree that the appeal should be dismissed.
Appeal dismissed. No interest allowed on damages not yet paid.
Solicitors: Gregory, Rowcliffe & Co agents for John Gorna & Co, Manchester (for the defendant); Waterhouse & Co agents for F B Jevons, Riley & Pope, Tonbridge (for the plaintiff).
Wendy Shockett Barrister.
Morris and others v The Crown Office
[1970] 1 All ER 1079
Categories: ADMINISTRATION OF JUSTICE; Contempt of Court: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, DAVIES AND SALMON LJJ
Hearing Date(s): 10, 11 FEBRUARY 1970
Contempt of court – Criminal contempt – Power to commit instantly to prison – Provisions relating to suspended sentences not applicable to criminal contempt – Criminal Justice Act 1967, s 39.
Criminal law – Sentence – Youthful offender – Imprisonment – Provisions of s 17(2) of Criminal Justice Act 1948 not mandatory – Provisions complied with when contempt in face of court – Criminal Justice Act 1948, s 17(2).
Contempt of court – Criminal contempt – Contempt in face of court – Three months’ imprisonment imposed – Whether sentence excessive – Students breaking up hearing by shouting and singing in court.
A group of Welsh students from Aberystwyth University who were under the age of 21, by prearrangement invaded a court in the Royal Courts of Justice, London, where a judge was sitting to hear a case and broke up the hearing by striding into the well of the court, shouting slogans, scattering pamphlets and singing. They did this to demonstrate for the preservation of the Welsh language. Some of the students refused to apologise to the judge who instantly sentenced them to three months’ imprisonment for contempt of court. They appealed to the Court of Appeal but did not feel able to apologise to that court.
Held – (i) A judge of the High Court still had power at common law to commit instantly to prison for criminal contempt since the provisions of s 39a of the Criminal Justice Act 1967 as to suspending sentences did not apply to committal for criminal contempt (see p 1083 d, p 1085 a, and p 1087 e, post).
(ii) The requirements of s 17(2)b of the Criminal Justice Act 1948 (Salmon LJ doubting that they applied), had been complied with for the judge was clearly of opinion that no other method of dealing with the appellants was appropriate, and had before him all the necessary information about the circumstances of the offence because it had taken place before his eyes; but even if the judge had failed to comply with s 17(2), those provisions were directory only and failure to comply with them would not make the sentences bad (see p 1081 h, p 1084 j, and p 1087, e, post).
(iii) The sentences were not excessive at the time they were given but, having regard to the absence of violence, dishonesty or vice in the appellants and that they had already spent one week in prison, the court would allow their appeals and would bind them over for 12 months to be of good behaviour, to keep the peace and to come up for judgment if called on within the next 12 months (see p 1083 g and j, p 1084 c, p 1086 f and g, and p 1087 g and h, post).
Notes
For contempt in the face of the court, see 8 Halsbury’s Laws (3rd Edn) 5, para 5, and for cases on the subject, see 16 Digest (Repl) 10–19, 24–128.
For the Criminal Justice Act 1948, s 17, see 8 Halsbury’s Statutes (3rd Edn) 354, and for the Criminal Justice Act 1967, s 39, see ibid 603.
Cases referred to in judgments
R v Almon (1765) Wilm 243, 97 ER 94, 16 Digest (Repl) 6, 2.
Page 1080 of [1970] 1 All ER 1079
R v Davies [1906] 1 KB 32, [1904–07] All ER Rep 60, 75 LJKB 104, 93 LT 772, 16 Digest (Repl) 12, 44.
Skipworth’s Case (1873) LR 9 QB 230, 28 LT 227, sub nom R v Skipworth, R v de Castro, 12 Cox CC 371, 37 JP Jo 85, 16 Digest (Repl) 23, 171.
Cases and authorities also cited
A-G v Butterworth [1962] 3 All ER 326, [1963] 1 QB 696.
A-G v James [1962] 1 All ER 255, [1962] 2 QB 637.
B (J A) (an infant) Re [1965] 2 All ER 168, [1965] Ch 1112.
Clements and Costa Rica Republic v Erlanger (1877) 46 LJCh 375.
Davies, Re (1888) 21 QBD 236.
Howard v Bodington (1877) 2 PD 203.
Johnson, re (1887) 20 QBD 68.
O’Shea v O’Shea and Parnell (1890) 15 PD 59.
Powis v Hunter (1832) 2 LJCh 31.
R v Lefroy (1873) LR 8 QB 134.
R v Philpot (1959) 44 Cr App Rep 49.
Archbold Pleading, Evidence & Practice in Criminal Cases (37th Edn) paras 3471, 3476.
Maxwell on Interpretation of Statutes (11th Edn) 45.
Oswald’s Contempt of Court (3rd Edn) 6.
Appeals
These were appeals by 11 students, Griffith Wyn Morris, Dyfan Roberts, John Alwyn Elis, Hefin Elis, Emrys Jones, David Meirion Jones, Nest Tudor, Carolyn Mair Owen, Meinir Ceridwen Evans, Nan Jones and Sian Angharad Edwards, against sentences of three months’ imprisonment passed on each of them by Lawton J on 4 February 1970 for contempt of court. The facts are set out in the judgment of Lord Denning MR.
D Watkin Powell for the appellants.
The Attorney General (Sir Elwyn Jones QC) and Gordon Slynn as amici curiae.
Cur adv vult
11 February 1970. The following judgments were delivered.
LORD DENNING MR. Last Wednesday, just a week ago, Lawton J a judge of the High Court here in London, was sitting to hear a case. It was a libel case between a naval officer and some publishers. He was trying it with a jury. It was no doubt an important case, but for the purposes of today it could have been the least important. It matters not. For what happened was serious indeed. A group of students, young men and young women, invaded the court. It was clearly prearranged. They had come all the way from the University of Aberystwyth. They strode into the well of the court. They flocked into the public gallery. They shouted slogans. They scattered pamphlets. They sang songs. They broke up the hearing. The judge had to adjourn. They were removed. Order was restored.
When the judge returned to the court, three of them were brought before him. He sentenced each of them to three months’ imprisonment for contempt of court. The others were kept in custody until the rising of the court. Nineteen were then brought before him. The judge asked each of them whether he or she was prepared to apologise. Eight of them did so. The judge imposed a fine of £50 on each of them and required them to enter into recognisances to keep the peace. Fourteen of them did not apologise. They did it, they said, as a matter of principle and so did not feel able to apologise. The judge sentenced each of them to imprisonment for three months for contempt of court.
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In sentencing them in this way the judge was exercising a jurisdiction which goes back for centuries. It was well described over 200 years ago by Wilmot CJ in an opinion which he prepared but never delivered. He said:
‘… it is a necessary incident to every Court of Justice … to fine and imprison for a contempt to the Court, acted in the face of it … ’
That is R v Almon ((1765) Wilm 243 at 254). The phrase ‘contempt in the face of the court’ has a quaint old-fashioned ring about it; but the importance of it is this: of all the places where law and order must be maintained, it is here in these courts. The course of justice must not be deflected or interfered with. Those who strike at it strike at the very foundations of our society. To maintain law and order, the judges have, and must have, power at once to deal with those who offend against it. it is a great power—a power instantly to imprison a person without trial—but it is a necessary power. So necessary indeed that until recently the judges exercised it without any appeal. There were previously no safeguards against a judge exercising his jurisdiction wrongly or unwisely. This was remedied in 1960. An appeal now lies to this court; and, in a suitable case, from this court to the House of Lordsc. With these safeguards this jurisdiction can and should be maintained. Eleven of the appellants have exercised this right to appeal; and we have put all other cases aside to hear it. For we are here concerned with their liberty; and our law puts the liberty of the subject before all else.
At this point I would pay a tribute to the way in which counsel for the appellants conducted this appeal on their behalf. He did as well as any advocate I have ever heard. We have been much assisted too by the Attorney General, who came here, not as prosecutor, but as a friend of the court. He put all the relevant considerations before us to our grateful benefit.
Now I must turn to the points, technical as they may seem, which arise in this appeal; but one must remember that, by our law, everyone who is accused is entitled to avail himself of every point which can legitimately be raised on his behalf, no matter how technical. The first point taken by counsel for the appellants was that the requirements of s 17(2) of the Criminal Justice Act 1948 were not complied with. That section provides:
‘No court shall impose imprisonment on a person under twenty-one years of age unless the court is of opinion that no other method of dealing with him is appropriate; and for the purpose of determining whether any other method of dealing with any such person is appropriate the court shall obtain and consider information about the circumstances, and shall take into account any information before the court which is relevant to his character and his physical and mental condition.’
Counsel for the appellants says that those requirements were not complied with, and that, on that account, the sentence of imprisonment was bad. I cannot accept this point. I think that those requirements were fulfilled. The judge was clearly of opinion that no other method was appropriate. He had before him all necessary information about the circumstances of the offence, because it had taken place before his very eyes. He had taken into account, no doubt, that the appellants were of excellent character and were entirely fit; for they were students of the University of Aberystwyth, which is itself high commendation. In any case, however, even if the judge did fail to obtain any necessary information, that would not make the sentence bad; for the provisions in this regard are not mandatory but directory only.
The second point taken by counsel for the appellants was that as the judge sentenced the appellants to three months, he was bound by statute to suspend the sentence
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and not imprison them at once. This depends on s 39(1) and (3) of the Criminal Justice Act 1967, which, so far as material, provides:
‘A court which passes a sentence of imprisonment for a term of not more than six months in respect of one offence shall order that the sentence shall not take effect unless, during a period specified.. the offender commits in Great Britain another offence punishable with imprisonment and thereafter a court, having power to do so orders … that the original sentence shall take effect.’
It is to be noticed that a court is not bound, even under that section, to suspend the sentence if ‘the act or any of the acts constituting that offence consisted of an assault on or threat of violence to another person’. But the appellants did not assault anyone; nor did they threaten violence to anyone. Accordingly, if the committal for contempt falls within s 39, the court was bound to suspend the sentence.
This raises the important point in the case: does a committal for contempt fall within the statutory provisions under which sentences are to be suspended? Counsel for the appellants took us word by word through s 39; and I must say that, taken word by word, there is much to be said for his submission. Take first the word ‘court’. It is not defined in this Act except to say that it ‘does not include a court-martial’d. So it appears to include the High Court. It is not cut down by the reference in the preamble to ‘criminal courts’. If s 39 does apply to a committal for criminal contempt, it would be absurd to say that it applied to a disturbance in the Crown Court but not to a disturbance in the civil court; or that it applied to the Criminal Division of this court and not to the Civil Division. It must apply to both or neither. Moreover, as counsel for the appellants submitted, when a judge, who is hearing a civil case, puts it on one side and adjourns it so as to deal with a criminal contempt, for which he gives a sentence of imprisonment, then for that purpose he is acting as a criminal court. So I hold that the word ‘court’ taken literally includes the High Court.
The next word is ‘offence’. That is wide enough to include a contempt in the face of the court. All our old books from the earliest times say that it is a misdemeanour at common law which is punishable on indictment, by fine or imprisonment, as all misdemeanours are. It is rare nowadays to punish it on indictment. It is nearly always punished summarily by the court itself. But that it is an ‘offence’ there can be no doubt.
Finally the words ‘sentence of imprisonment’. When the judge commits a person to prison for three months, he is inflicting a ‘sentence of imprisonment’. There is no doubt about it—unless, of course, there is something in the Act which says it is not to be regarded as a sentence. In this Act there is a provision in s 104 which excludes certain matters from being sentences of imprisonment. It excludes committal for any non-payment of money (like a committal for debt on a judgment summons); or committal for non-payment of rates (when there is not sufficient distress); or committal in respect of a civil contempt (as for failing to obey an injunction). All those are civil matters which are excluded. Section 104 does not in terms exclude criminal contempt as it was excluded in the Criminal Justice Act 1961e. Prima facie therefore it is included in the words ‘sentence of imprisonment’.
So taking s 39 literally, word by word, there is a great deal to be said in favour of counsel for the appellants’ argument. But it is a mistake to take words in an Act too literally. The whole scheme of the Act must be considered. If one reads this Act as a whole, one will find that the legislature never intended s 39 to apply to a committal for criminal contempt. I say this because there is no power in this Act for any High Court judge to give effect to a suspended sentence—if he gave one—for a committal for contempt of court. The Act contains provisions which enable all the ordinary criminal courts to follow up their suspended sentences. Section 42
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provides that if a suspended sentence is passed by the Central Criminal Court, a judge of that court can follow it up. Likewise with a suspended sentence passed by the Crown Courts of Liverpool and Manchester, or by a court of assize, quarter sessions or a magistrates’ court. The judges of those courts can follow up any suspended sentence which one of them has passed in the exercise of their ordinary criminal jurisdiction. But there is no power for a judge of the High Court to follow up a suspended sentence passed by himself or by another judge of the High Court. In the same way, a county court judge is by statute (s 157 of the County Courts Act 1959) expressly given power to commit for a month; but if he is bound, under this 1967 Act, to suspend it, there is no power for him or any other judge to follow it up.
Furthermore if a High Court judge or a county court judge should give a suspended sentence for contempt of court—and the offender afterwards was brought before a magistrates’ court for some other offence—the magistrates could not give effect to the suspended sentence. Nor could the judge who passed it. It would be necessary to devise some special procedure, for there is nothing in the act by which the suspended sentence could be given effect.
The upshot of it is that there is no provision in this Act for giving effect to a suspended sentence for contempt of court—whereas there are provisions for dealing with suspended sentences for all other criminal offences. This leads me to the conclusion that the legislature never intended that committal for contempt of court should be subject to suspension of sentence. Although I recognise the force of counsel for the appellants’ argument, I cannot accept it.
I hold therefore that a judge of the High Court still has power at common law to commit instantly to prison for criminal contempt, and this power is not affected in the least by the provisions of the 1967 Act. The powers at common law remain intact. It is a power to fine or imprison, to give an immediate sentence or to postpone it, to commit to prison pending his consideration of the sentence, to bind over to be of good behaviour and keep the peace, and to bind over to come up for judgment if called on. These powers enable the judge to give what is, in effect, a suspended sentence. I have often heard a judge say at common law, for ordinary offences, before these modern statutes were passed: ‘I will bind you over to come up for judgment if called on to do so. Mark you, if you do get into trouble again, you will then be sentenced for this offence. I will make a note that it deserves six months’ imprisonment. So that is what you may get if you do not accept this chance.' That is the common law way of giving a suspended sentence. It can be done also for contempt of court.
I came now to counsel for the appellants’ third point. He says that the sentences were excessive. I do not think that they were excessive, at the time they were given and in the circumstances then existing. Here was a deliberate interference with the course of justice in a case which was no concern of theirs. It was necessary for the judge to show—and to show to all students everywhere—that this kind of thing cannot be tolerated. Let students demonstrate, if they please, for the causes in which they believe. Let them make their protests as they will. But they must do it by lawful means and not by unlawful. If they strike at the course of justice in this land—and I speak both for England and Wales—they strike at the roots of society itself, and they bring down that which protects them. It is only by the maintenance of law and order that they are privileged to be students and to study and live in peace. So let them support the law and not strike it down.
But now what is to be done? The law has been vindicated by the sentences which the judge passed on Wednesday of last week. He has shown that law and order must be maintained, and will be maintained. But on this appeal, things are changed. The appellants here no longer defy the law. They have appealed to this court and shown respect for it. They have already served a week in prison. I do not think it necessary to keep them inside it any longer. The appellants are no ordinary criminals. There is no violence, dishonesty or vice in them. On the contrary, there is much
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that we should applaud. They wish to do all they can to preserve the Welsh language. Well may they be proud of it. It is the language of the bards—of the poets and the singers—more melodious by far than our rough English tongue. On high authority, it should be equal in Wales with English. They have done wrong—very wrong—in going to the extreme they did. But, that having been shown, I think we can, and should, show mercy on them. We should permit them to go back to their studies, to their parents and continue the good course which they have so wrongly disturbed.
There must be security for the future. They must be of good behaviour. They must keep the peace. I would add, finally, that there is power in this court, in case of need, to recall them. If it should become necessary, this court would not hesitate to call them back and commit them to prison for the rest of the sentence which Lawton J passed on them.
Subject to what my brethren will say in a few moments, I would propose that they be released from prison today, but that they be bound over to be of good behaviour, to keep the peace and to come up for judgment if called on within the next 12 months.
DAVIES LJ. Agreeing as I do with what has fallen from Lord Denning MR, I do not propose to say very much about the law. I would, however, preface my observations by two very short quotations from the many authorities which we had cited to us as to the nature of the jurisdiction. The first passage is from Skipworth’s Case. The passage I have in mind is in the judgment of Blackburn J, where the learned judge said this with regard to contempt and the method of dealing with it ((1873) LR 9 QB at 233):
‘… if we are to wait for that to be done by ordinary criminal process and an ordinary trial, there might be great mischief done, because that process is slow, and before that process could come into train the mischief would be done by the due administration of justice being hampered and thwarted.’
And the other passage is in the judgment of Wills J in R v Davies ([1906] 1 KB 32 at 40, 41, [1904-07] All ER Rep 60 at 66) where he referred to the famous judgment of Wilmot CJf to which we have been referred, in these terms:
‘… a considerable part of the undelivered judgment of Wilmot CJ to which we have referred is devoted to shewing that the real offence is the wrong done to the public by weakening the authority and influence of a tribunal which exists for their good alone. He adds that such conduct is pre-eminently the proper subject of summary jurisdiction. Attacks upon the judges, he says, “excite in the minds of the people a general dissatisfaction with all judicial determinations … and whenever men’s allegiance to the laws is so fundamentally shaken, it is the most fatal and dangerous obstruction of justice, and in my opinion calls out for a more rapid and immediate redress than any other obstruction whatsoever; not for the sake of the judges as private individuals, but because they are the channels by which the King’s justice is conveyed to the people” … The public mischief is identical, and in each instance the undoubted possible recourse to indictment or criminal information is too dilatory and too inconvenient to afford any satisfactory remedy.’
With that general view of this jurisdiction, I would turn very shortly to the points that counsel for the appellants made in the course of his argument. With regard to his point under s 17 of the Criminal Justice Act 1948 I propose to say nothing. I entirely agree with what Lord Denning MR has said about that. The judge had full knowledge of the circumstances. The events had taken place in his sight and hearing,
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and there was no other information before the court that he ought to have considered. The point under s 39 of the Criminal Justice Act 1967 is obviously much more difficult; but I have in the end come to the conclusion without any hesitation that that section does not apply to committals for contempt. What may loosely be called the criminal law statutes apply in my view to the ordinary process of criminal prosecution, whether in a court of summary jurisdiction or at assizes or quarter sessions. Quite apart from the difficulty, to which Lord Denning MR adverted, in the way of enforcing a suspended sentence, if such were passed for a criminal contempt, there are a number of provisions in the criminal law statutes, as I am calling them, which obviously have no application whatsoever to proceedings for contempt. Take probation; it would be quite impossible, I think, for a judge dealing with a case of contempt to make a probation order. Yet such a course is possible in all criminal cases. I cannot see for myself that it would be possible for the judge committing for contempt to send the offender, if he were of the appropriate age, to a detention centre. What it comes to in my mind is that the code—the procedure, if that is the apt expression—is entirely different in cases of criminal contempt from that which applies in ordinary criminal cases.
And finally, on the law I would refer to a point that Lord Denning MR has already mentioned, namely, the position of a county court judge. By s 157(1) of the County Courts Act 1959, it is provided:
‘(1) If any person—
(a) wilfully insults the judge of a county court, or any juror or witness, or any officer of the court during his sitting or attendance in court, or in going to or returning from the court; or
(b) wilfully interrupts the proceedings of a county court or otherwise misbehaves in court;
any officer of the court, with or without the assistance of any other person, may, by order of the judge, take the offender into custody and detain him until the rising of the court, and the judge may, if he thinks fit—(i) make an order committing the offender for a specified period not exceeding one month to any prison to which the judge has power to commit; or (ii) impose upon the offender a fine not exceeding twenty pounds for every offence.’
So there one sees that in a case such as the present, if it occurred in a county court, the judge could make an order committing the offender—or, in this case, the offenders—to prison, but for not more than one month, and if counsel for the appellants’ main point were a good one, that would mean that no county court judge could ever effectively commit to prison, since he would have to suspend the operation of the order, his maximum power being one month. That would be I think a most serious matter, for any one could in effect with impunity, subject to the imposition of a fine however serious his conduct was, interrupt and interfere with the proceedings of a county court.
I turn now from the law to consider the merits or demerits of this case. On occasions one has the misfortune to encounter someone who makes a disturbance in court. Usually when that happens it is a case of a disappointed litigant who, from a sense of rage or disappointment at the result of his case, loses control of himself and gives vent to his feelings by an outburst either by word of mouth or physically. That is a situation which has to be dealt with according to its seriousness. He may be fined, or, in serious cases, he may be sent to prison. But that is not this case. As I ventured to comment at an early stage of the argument in this case, this is a deliberate conspiracy. A group of young people, nearly all of them being undergraduates at the University College of Wales at Aberystwyth, objected to and resented an order made, it is to be noted, by a Welsh court against one of the leaders of an organisation to which they are all devoted. Some of the appellants may, for all I know, be law students, hoping in time to become solicitors, barristers or even magistrates or judges. Whether
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that be so or not, they are all people of education and intelligence and must be taken to know that it is completely wrong for whatever reason to interrupt or interfere with the due process of the courts of law. What did they do? They banded together and made the journey from Aberystwyth to London with the deliberate intention of interfering with the conduct of a case or cases in the Royal Courts of Justice—a deliberate invasion. Their purpose was to invade a court of justice here in the Strand by singing and other means. They interrupted with the greatest contumely and brought to a halt an important trial which had nothing whatsoever to do with Wales, the Welsh people or the Welsh language. As Lord Denning MR has said, it would not have made any difference if the trial with which they interfered had been not of great importance. One has naturally great sympathy with the aims of those who wish to preserve the Welsh language and to extend its use. But such disgraceful and outrageous performances as we are concerned with in this case can do nothing to achieve or promote those aims; they can do nothing but bring shame and disgrace on our country.
I am fully conscious that for obvious reasons I may feel a greater sense of outrage and disgust in this matter than do my Lords, and, of course, a deep feeling of humiliation that such a thing could happen. But, making all due allowance for that, the fact remains that this sort of performance is quite intolerable and, if it occurs, must be sternly punished. Nowadays one hears a great deal about demonstrations and protests, and a court of law may constitute a convenient amphitheatre in which such protests or demonstrations may be conducted, more particularly as the press are usually present. One may have every Tom, Dick and Harry, whatever their particularity may be, trying the same game. It follows, therefore, that such conduct as that of which the appellants are guilty must be punished. Counsel for the appellants, for whose admirable presentation of this appeal the court is most grateful, as should be the appellants, frankly informed us that they expected to punished, and so, it is supposed, suffer some degree of martyrdom for their causes.
The punishment which Lawton J meted out to them was not wrong in principle in any respect. I pay no attention to their infantile rudeness in insisting on speaking in Welsh to a judge who, as they must have known, could not understand what they were saying, when they themselves were perfectly fluent in English. But the same cannot be said for their failure to apologise either to the judge, or, after two invitations, to this court. This is a bad case; but on the whole I am content to agree with the course which Lord Denning MR has proposed. We have had more information from learned counsel as to the background and motives of the appellants than was available to the learned judge, and it is perfectly true, as counsel for the appellants submitted, that there is here no element of violence, vice or dishonesty. Nevertheless, this was a most serious case and the appellants may count themselves lucky to be treated in the way proposed. They have had a week in prison, which should have brought them to some realisation of their folly and of what such conduct may entail. I would emphasise the warning that any repetition of such conduct will almost certainly result in most serious consequences. I agree with the order proposed by Lord Denning MR.
SALMON LJ. Everyone has the right publicly to protest against anything which displeases him and publicly to proclaim his views, whatever they may be. It does not matter whether there is any reasonable basis for his protest or whether his views are sensible or silly. He can say or write or indeed sing what he likes when he likes and where he likes, providing that in doing so he does not infringe the rights of others. Every member of the public has an inalienable right that our courts shall be left free to administer justice without obstruction or interference from whatever quarter it may come. Take away that right and freedom of speech together with all the other freedoms would wither and die, for in the long run it is the courts of justice
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which are the last bastion of individual liberty. The appellants, rightly or wrongly, think that they have a grievance. They are undoubtedly entitled to protest about it, but certainly not in the fashion they have chosen. In an attempt, and a fairly successful attempt, to gain publicity for their cause, they have chosen to disrupt the business of the courts and have scornfully trampled on the rights which everyone has in the due administration of justice; and for this they have been very properly punished, so that it may be made plain to all that such conduct will not be tolerated—even by students. The archaic description of these proceedings as ‘contempt of court’ is in my view unfortunate and misleading. It suggests that they are designed to buttress the dignity of the judges and to protect them from insult. Nothing could be further from the truth. No such protection is needed. The sole purpose of proceedings for contempt is to give our courts the power effectively to protect the rights of the public by ensuring that the administration of justice shall not be obstructed or prevented (Skipworth’s Case and R v Davies). This power to commit for what is inappropriately called ‘contempt of court’ is sui generis and has from time immemorial reposed in the judge for the protection of the public. Although the point is by no means free from difficulty, I agree with my Lords that Parliament cannot be taken to have intended that this power should be fettered by the Criminal Justice Acts of 1948 and 1967. To my mind it is plain that Parliament never intended these Acts to apply to proceedings such as these. For one thing, the 1967 Act supplied no machinery whereby a suspended sentence for contempt of court could ever be made effective if the culprit repeated his offence. Therefore the point that the judge’s power was limited by s 39(3) of the 1967 Act to imposing only suspended sentences fails. In my view the 1948 Act is equally inapplicable, and therefore s 17 of that Act has nothing to do with this case. But even were it otherwise, the judge here was clearly and in my view rightly of the opinion that there was no appropriate method of dealing with the appellants other than by imprisonment. Moreover, he had all the necessary information about the circumstances before him and sentenced them on the basis that they were all persons of previous good character. In my view s 17(2) of the 1948 Act is in any event directory only. If a judge fails to obtain or pay attention to the necessary information before sentencing, his sentence would not thereby be invalid. It would only mean that the appellate court would obtain the necessary information and review the sentence in the light of it.
I believe that the very proper sentences imposed by Lawton J have served to bring home to the appellants and to anyone else who may be tempted to follow their example that even in our so-called ‘permissive’ society, it is unsafe to assume that ‘anything goes’. Everyone has now been warned. If this sort of conduct is repeated by anyone in the future, whatever their motives, no excuse will be accepted, and a sentence of three months’ or even six months’ imprisonment should not, in my view, be regarded as in any way excessive. Because, and only because, this is the first time that anything of this kind has occurred and its real gravity may not have been generally recognised, I agree that it is possible to take the exceptionally merciful course proposed by my Lords. I would add that for my part I consider that after this warning, it would be impossible ever to take this course again. In similar circumstances a sentence of at least three months’ imprisonment would be imposed and served.
I agree that the appeals should be allowed.
Appeals allowed; orders committing appellants to prison set aside; appellants bound over for 12 months to keep the peace and be of good behaviour and to come up for judgment if called on to do so.
Solicitors: T D Jones & Co (for the appellants); Treasury Solicitor.
Wendy Shockett Barrister.
Re D (infants)
[1970] 1 All ER 1088
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, HARMAN AND KARMINSKI LJJ
Hearing Date(s): 29 JANUARY 1970
Child – Care – Local authority – Child boarded out with foster parents – Records required to be kept in respect of child – Privilege – Records privileged and should not be disclosed other than in exceptional cases – Boarding-Out of Children Regulations 1955(SI 1955 No 1377), reg 10(1) (a).
The case records required to be kept under reg 10 of the Boarding-out of Children Regulations 1955 by a local authority in respect of children in their care who are boarded out are privileged documents and should not be disclosed otherwise than in exceptional circumstances when the court has overruled the privilege (see p 1089 e and h, and p 1090 d and f, post).
Official Solicitor v K [1963] 3 All ER 191 distinguished.
Notes
For boarding-out of children in care, see 21 Halsbury’s Laws (3rd Edn) 280, 281, para 597.
For documents protected from production for inspection, see 12 Halsbury’s Laws (3rd Edn) 38, 39, para 55, and for cases on privileged documents, see 18 Digest (Repl) 90–142, 743–1282.
For the Boarding-Out of Children Regulations 1955, reg 10, see 11 Halsbury’s Statutory Instruments (First Re-issue) 243.
Case referred to in judgment
Official Solicitor v K [1963] 3 All ER 191, [1965] AC 201, [1963] 3 WLR 408, Digest (Cont Vol A) 933, 2149b.
Cases also cited
Conway v Rimmer [1968] 1 All ER 874, [1968] AC 910.
Fowler v Fowler and Sine [1963] 1 All ER 119, [1963] P 311.
Henley v Henley (Bligh Cited) [1955] 1 All ER 590 n, [1955] P 202.
Mole v Mole [1950] 2 All ER 328, [1951] P 21.
Practice Direction [1968] 1 All ER 762, [1968] 1 WLR 373.
Interlocutory appeal
This was an appeal by Cheshire County Council from the order of Whitford J, dated 27 January 1970, whereby he directed the county council to produce for inspection records kept by them pursuant to reg 10 of the Boarding-Out of Children Regulations 1955, relating to two infants in the council’s care, boarded out by them with foster parents. The facts are set out in the judgment of Lord Denning MR.
P J Millett for the foster parents.
A J Balcombe QC and R G Woolley for the county council.
K Bruce Campbell QC and G Rodway for the mother.
29 January 1970. The following judgments were delivered.
LORD DENNING MR. This case concerns two children, a girl of 4 1/2 and a boy of three. Their parents are a married couple, both under 21. They have now separated. For the last two years or more the two children have been in the care of a county council, who have boarded them out with foster parents. The children have been made wards of court.
The mother now seeks to take the children from the foster parents and have them
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herself. The county council think that they should stay with the foster parents. Whitford J is hearing the case. The child care officers of the county council have given evidence; and are available for cross-examination by counsel for the mother. The child care officers can, of course, refresh their memory from their notes made at the time; and, if they do, they are liable to be cross-examined on those notes. But counsel for the mother goes further. He wants to see all the case notes and reports which have been made by the child care officers, even though they do not use them to refresh memory. He wants to go through all their notes and reports, and see if he can find anything in them which would be useful to him in cross-examination of the child care officers; and also, I suppose, anything which would be useful to him in cross-examination of the foster parents. He wants, I expect, if it suits him, to put these notes and reports in evidence under the Evidence Acts.
The county council object to producing these notes and reports. They say that it is of great importance that the child care officers should be completely free and frank in making these notes and reports; and that this freedom and frankness would be imperilled if they were liable to be disclosed.
I think the county council are right. These case records are made by the child care officers in pursuance of the Boarding-Out of Children Regulations 1955a. Regulation 10 provides ‘(1) A local authority shall compile a case record in respect of—(a) every child boarded out by them … ’. Every such case record has to be preserved for at least three years after the child has attained 18 or diedb. It is specially providedb that the case record ‘shall be open to inspection … by any person duly authorised in that behalf by the Secretary of State’. That shows that the case record is regarded as private and confidential. If a person wants to see them, he has to be duly authorised by the Secretary of State. Otherwise he cannot be allowed to see them.
In view of that regulation, I think that these case records should be regarded as privileged, just as are the records kept by a legal adviser. The child care officers should not be compelled to produce them, any more than legal advisers are compelled to produce their notes. Official Solicitor v K is quite distinguishable. That concerned confidential reports made by the Official Solicitor. The House of Lords held that, if those confidential reports were shown to the judge, it would usually be desirable that they should also be shown to the party affected by them. But it was in the discretion of the judge in every case. That has no bearing here. It is not the judge who wants these case notes. It is counsel for the mother. He wants them for his own purposes so as to use them for cross-examination of the witnesses. He would have no hope of obtaining them if the county council were not a party; and he only demands to see them because the county council happen to be a party. I do not think this should be permitted. I have never known discovery being ordered in a custody case, and I do not think we should start now.
During the argument, I put the case of a doctor who has made notes and is called as a witness. He cannot be compelled to produce his notes. He can, if he wishes, refresh his memory from his notes; and if he does so, of course, he can be cross-examined on those notes; but unless he refreshes his memory by them, they are not admissible in evidence. The same should apply to the child care officers.
On principle I hold that these case notes and records should not be disclosed at the instance of another party to the suit. There may be exceptional circumstances in which the court might overrule the privilege, but certainly not in this case. I think the judge was in error. I would reverse his decision.
HARMAN LJ. This is a very unusual application. For one thing, it is an application in the domestic jurisdiction of the court, and I never heard in my experience
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of discovery of documents in such a case. In the second place, the county council have, so to speak, got here by accident. One would not ordinarily find a county council a party to a suit which deals with orders of the court or custody or care and control of infants in a suit between their parents. Thirdly, this is a special category of documents brought into being for the assistance of the county council which is obliged under the Children Act 1948c to cause these records to be kept in order to have continuity of control. It is said that whether or not the county council are a party, either party or the foster parents may oblige the county council to disclose their statutory records. The answer made is: first of all, that is giving discovery in a wardship case. It is quite contrary to practice. Secondly, that it is contrary to public policy, because these records must not be kept by people looking over their shoulders in case they should be attacked for some opinion which they may feel it their duty to express. It seems to me it would be a very bad precedent, whether the county council be a party or not, that documents of this kind should be uncovered and looked through to see whether in the past some opinion has not been expressed which is said to be inconsistent with the present attitude. If ever there was a case where privilege is justified, I think it is this case, and I deprecate the action of the judge who read these documents and held that there was really no harm in disclosing them, because he has willy nilly coloured his mind; and if he had said ‘I have read them, but nobody else shall’, then I think that a grievance might arise in the mind of the mother or father or foster parents. But, as it is, it seems to me that no one should have read them; they should be private and privileged documents not to be read by anybody; and in my judgment, anyhow, it would be right, if any party wishes it, that another judge who has not read these documents should resume the hearing of this case. I would allow the appeal on that footing.
KARMINSKI LJ. I agree. I only want to add a very few words on the problem of discovery in infant cases. Speaking only from my own experience, I have no recollection of any such order ever having been made. That, of course, is far from conclusive, and I do not want it to be thought that I am in any way stating as a rule of practice that such an order can never be granted in any circumstances. I would however add this: that even if such an order could be made, it should rarely if ever be made, for the reasons given by Harman LJ, against a public authority having a statutory duty. Otherwise such an authority might find it difficult to do its duty fully and properly without some degree of apprehension lest on some occasion in the future reports made in such a case as this confidentially, might come under public scrutiny in a court of law. I agree that this appeal must be allowed.
Appeal allowed.
Solicitors: H P & H C Rigby, Middlewich (for the foster parents); Gregory, Rowcliffe & Co, agents for the clerk, Cheshire County Council; Walker, Smith & Way, Chester (for the mother).
Wendy Shockett Barrister.
Note
Woodford and another v Smith and another
[1970] 1 All ER 1091
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 4, 5, 6 FEBRUARY 1970
Injunction – Interlocutory – Injunction having effect of granting sole relief claimed in action – Unincorporated association – Membership in dispute – Relief sought for members deprived of rights – Whether proper case for granting injunction.
Notes
For the principles governing the grant of interlocutory injunctions, see 21 Halsbury’s Laws (3rd Edn) 364–366, paras 763–766, and for cases on the subject, see 28 Digest (Repl) 748–756, 60–122.
Cases referred to in judgment
Ashby v White (1703) 2 Ld Raym 938, 92 ER 126, 1 Digest (Repl) 26, 197.
A-G v Stockton-on-Tees Corpn (1927) 91 JP 172, 45 Digest (Repl) 162, 660.
Bailey (Malta) Ltd v Bailey [1963] 1 Lloyd’s Rep 595.
Booker v James (1968) 19 P & CR 525, 112 Sol Jo 421.
Dodd v Amalgamated Marine Workers’ Union (1923) 93 LJCh 65, 129 LT 401, 45 Digest (Repl) 556, 1340.
Heywood v BDC Properties Ltd [1963] 2 All ER 1063, [1963] 1 WLR 975, Digest (Cont Vol A) 1301, 926b.
Motion
On 5 December 1969, Reginald Patrick Woodford, whose membership of the Fulham and Hammersmith Ratepayers and Residents’ Association was in dispute and Matthew Wallis, an admitted member, commenced an action by writ on behalf of themselves and all other members of the association other than the defendants, against Howard W V Smith, the secretary of the association, and N Hutchins, the chairman of the committee of the association, seeking a declaration that 57 named persons had been members of the association since the date on which their subscriptions were received on behalf of the association and also claiming injunctions. The present notice of motion sought injunctions in similar terms, namely, by para (ii) an injunction restraining the defendants from proceeding with the annual general meeting of the association or holding such meeting unless the 57 persons named had been given notice of the meeting and were permitted to attend and vote thereat, and by para (iv) an injunction restraining the defendants from any use whatever of forms of proxy.
The history of the dispute was as follows. The Fulham and Hammersmith Ratepayers and Residents’ Association was founded in 1935 and its constitution and rules were adopted soon afterwards. The rules provided for the association to be managed by a committee of 20, elected at the annual general meeting of the association each year, together with a president, treasurer and secretary, also to be elected at the annual general meeting, as ex officio members. In 1968, there began to be signs of dissension on the committee. A series of votes took place on minor matters, with voting of the order of ten to three or 11 to two. The present motion arose out of the annual general meeting for 1969, which was called for 5 November. The meeting was rowdy, and the police had to be called in before the meeting had reached the
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election of officers or of the committee. Subsequently, by a notice dated 4 December, 12 December was fixed for the adjourned annual general meeting. However, on 5 December the writ in the action was issued and the notice of motion served. Two factions had developed in the committee of the association. One faction, in the minority on the committee, had been attempting to recruit members of the association, and the other faction had been meeting what it regarded as a threat by taking various procedural steps. The main issues were whether or not the 57 persons mentioned above ever became members of the association, and whether this was a proper case for an interlocutory injunction.
Peter Pain QC and B E Capstick for the plaintiffs.
J H Hames for the defendants.
6 February 1970. The following judgments were delivered.
MEGARRY J, having stated the facts, considered two preliminary matters: first, the question whether there was any provision under the rules for the appointment of proxies, and he held that there was not; secondly, he considered whether the plaintiffs were entitled to represent all members except the defendants and held that for the purposes of the motion they could do so. On the main issue whether the 57 persons were in fact members of the association, his Lordship considered the rules, the normal practice for constituting membership and the evidence on both sides. He continued: In my judgment, subject to one qualification, the rules do not confer on the committee any power to reject or suspend any application for membership, and the committee cannot confer any power on the secretary or anyone else to postpone an application until the committee can consider it. The qualification is that if there are sufficient grounds for believing that an application is not in accordance with the rules, as where it does not appear to have been in fact made by the proposed applicant, or he cannot fairly be said to be in agreement with the objects of the association, then the committee may refuse to treat the applicant as a member, at all events until the doubts are resolved. But doubts as to an application by A are no ground for rejecting or suspending an application by B. In the motion before me, no grounds have been established which would justify the rejection or suspension of the applications made by the 57; and as the defendants have not, despite the lapse of time, put forward any detailed objection to any of their applications I think that they all became members as soon as their membership forms and subscriptions were received by or on behalf of the association.
I turn, then, to the last point. Is this a proper case for an injunction? Counsel for the defendants forcefully contends that it is not, saying that the plaintiffs were suffering no loss or legal wrong which would induce the court to act, and that the balance of convenience was against the grant of any injunction. This was not, said counsel for the defendants a case in which there were any substantial property rights at stake; for nobody suggested that the association had assets of any great value. Nor was it a trade union case where a man’s livelihood was at stake. It was a mere domestic dispute in a local association, with no matter of principle in issue, and those who did not like what had been done could go off and form a new association, instead of attempting to invoke the powerful and discretionary weapon of an injunction. As for the second plaintiff, he, as an unquestioned member, had no interest which ought to be supported by an injunction in relation to the exclusion of the 57. That might be a wrong to the 57 if (as I have held) they were wrongfully excluded, but that did not give the second plaintiff the right to claim an injunction.
Forcefully though these contentions were advanced, they did not persuade me. It has been common ground throughout that the rules constitute a contract between the members of the association. In breach of their contract, the defendants and others have been excluding the first plaintiff and others from the benefits of membership to which they are entitled. No doubt the value of any property rights of a
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member are small, and perhaps negligible; but the case is one which has manifestly aroused strong feelings amongst a large number of those affected, and the association is concerned with matters of public importance in the district. It accordingly seems proper that the matter should be resolved at the earliest possible moment. Further, unless the court intervenes, the first plaintiff and the others of the 57 will be denied their rights as members at the adjourned annual general meeting. The wrongful deprivation of a right to vote even at a meeting of a mere private association is, in my judgment, no trivial matter. It may not be possible to put any real monetary value on it, any more than it may be possible in the case of a Parliamentary vote (see Ashby v White); but that does not mean that the court must abstain from intervention. If an injunction be refused now, the election can take place without the 57 having an opportunity to take part in or vote at the adjourned annual general meeting, so that by the time this action is heard, unwelcome changes may have taken place in the association which the 57 may be powerless to put right. Leaving the matter until the trial of the action may thus fail to achieve justice.
Counsel for the defendants also read me a passage in the Supreme Court Practice 1970a, which runs as follows:
‘It is not the practice of the Court (except by consent) to grant on an interlocutory application an injunction which will have the practical effect of granting the sole relief claimed (Dodd v Amalgamated Marine Workers’ Union). This does not deter the Court from granting such interlocutory injunction as may be necessary to preserve property or prevent irreparable damage.’
When I ventured to assert that this did not represent the law, counsel for the defendants accepted that as being the case. I do not think that there is anything to prevent the court in a proper case from granting on motion substantially all the relief claimed in the action. It is true that in Dodd v Amalgamated Marine Workers’ Union ((1923) 92 LJCh at 66, 129 LT at 402) it was said in the Court of Appeal that it was not the ‘usual practice’ or the ‘general rule of practice’ to grant on motion all the relief claimed in the action. But this language is general rather than absolute, the judgments are very brief, no reasons are given, and there have been later decisions. Thus in Bailey (Malta) Ltd v Bailey ([1963] 1 Lloyd’s Rep 595 at 598), Lord Denning MR flatly said that it seemed to him that there was ‘no such rule’. In this, he based himself on what Sargant LJ had said in A-G v Stockton-on-Tees Corpn ((1927) 91 JP 172 at 174), where there is what I may call a reasoned demolition of the supposed rule, the basis of which seems to have been an objection to trying the same point twice over. In the Bailey case ([1963] 1 Lloyd’s Rep at 600) Harman LJ referred to the supposed rule as a theory which had in his view ‘long been exploded’: see also Heywood v BDC Properties Ltd and Booker v James. I have ventured to refer to these authorities (which were not discussed before me, since there was no need) because it is time that the passage in the Supreme Court Practice 1970 which I have read received the firm touch of a revising hand. Plainly in the present case the objection which counsel for the defendants raised but did not press is no obstacle to granting the injunction sought. In my judgment, looking at the case as a whole, there are no grounds on which the court should refuse to grant an injunction.
[His Lordship then remarked that if the defendants were able to proffer an undertaking in the terms of the notice of motion, it would be proper to accept such an undertaking rather than granting an injunction. He stated further that the adjourned
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annual general meeting should be held as soon as possible and not be further adjourned until after trial of the action.]
Order in terms of para (ii) of the motion and undertaking in terms of para (iv).
Solicitors: Lewis Cutner & Co (for the plaintiffs); Sampson & Co (for the defendants).
R W Farrin Esq Barrister.
Drummond-Jackson v British Medical Association and others
[1970] 1 All ER 1094
Categories: CIVIL PROCEDURE: PROFESSIONS; Medical
Court: COURT OF APPEAL, CIVIL DIVISON
Lord(s): LORD DENNING MR, LORD PEARSON, SIR GORDON WILLMER
Hearing Date(s): 14 JANUARY, 13 FEBRUARY 1970
Practice – Striking out – Pleading – Statement of claim – No reasonable cause of action – Power to strike out exercisable only in clear and obvious case – Action with some chance of success on consideration of pleadings only – Libel action – Alleged libel in scientific paper criticising plaintiff’s technique of dental anaesthesia – Plaintiff a practising dental surgeon – Paper capable of bearing meaning defamatory of plaintiff in his profession – RSC Ord 18, r 19 (1) (a).
The plaintiff, a practising dental surgeon, developed a technique of anaesthesia for use in dentistry consisting of intravenous injection of a drug called methohexitone, and he used and recommended this technique, acquired an international reputation for it, and founded a society to advance its use. Following on the report of a Ministry of Health committee expressing disquiet about the technique, four highly-qualified scientists made an investigation into the technique and their paper which was long, highly technical and illustrated with diagrams, was published as an article in the British Medical Journal. The article, which contained four references to the plaintiff by name, made a severe attack on his technique, suggesting that it was prejudicial to good dentistry and must be regarded as having seriously detrimental physiological effects which may have been the cause of certain reported deaths. The plaintiff brought an action for libel against the publishers of the journal and the four scientists alleging in his statement of claim that the whole article was a libel on him. The first defendantsa applied under RSC Ord 18, r 19 (1) (a)b, to strike out the statement of claim as disclosing no reasonable cause of action but the master and, on appeal, the judge in chambers, refused the application.
Held – (Lord Denning MR dissenting) the summary power to strike out a pleading for failure to disclose a reasonable cause of action was one which should be exercised only in plain and obvious cases, where the alleged cause of action, on consideration only of the allegations in the pleading, was certain to fail (see p 1101 e and f and p 1105 b, post) (dicta of Danckwerts and Salmon LJJ in Nagle v Feilden [1966] 1 All ER at 695, 697, applied); in the present case, the article complained of in the statement of claim was capable of bearing a meaning defamatory of the plaintiff since it was open to a jury to conclude that the attack made on his technique involved an attack on his professional reputation as a dentist (see p 1103 b, and p 1106 g, post) (dictum of Lord Atkin in Sim v Stretch [1936] 2 All ER at 1240 applied); and, accordingly, the statement of claim disclosed a reasonable cause of action, that is (per Lord
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Pearson at p 1101 f, post) one with some chance of success on consideration only of the allegations in the pleading, and should not be struck out.
Notes
For the question whether words complained of are capable of being defamatory, see 24 Halsbury’s Laws (3rd Edn) 19–21, paras 40, 41, 26, 27, para 49 and 107, 108 para 198, and for cases on libellous statements reflecting on the plaintiff in the way of his profession, see 32 Digest (Repl) 25–32, 145–187.
For striking out a pleading showing no cause of action, see 30 Halsbury’s Laws (3rd Edn) 37, 38, para 76, and for cases on the subject, see 50 Digest (Repl) 63–72, 504–563.
Cases referred to in judgments
Bendle v United Kingdom Alliance (1915) 31 TLR 403, 32 Digest (Repl) 24, 141.
Botterill v Whytehead (1879) 41 LT 588, 32 Digest (Repl) 29, 178.
Capital and Counties Bank v Henty & Son (1882) 7 App Cas 741, [1881–85] All ER Rep 86, 52 LJQB 232, 47 LT 662, 47 JP 214, 32 Digest (Repl) 23, 135.
Dauncery v Holloway [1901] 2 KB 441, 70 LJKB 695, 84 LT 649, 32 Digest (Repl) 43, 362.
Dyson v A-G [1911] 1 KB 410, 81 LJKB 217, 105 LT 753, 50 Digest (Repl) 65, 515.
Edsall v Russell (1842) 4 Man & G 1090, 12 LJCP 4, 134 ER 446, 32 Digest Repl) 48, 454.
Evans v Harlow (1844) 5 QB 624, 13 LJQB 120, 2 LTOS 400, 114 ER 1384, 32 Digest (Repl) 248, 2767.
Griffiths v Benn (1911) 27 TLR 346, 32 Digest (Repl) 249, 2772.
Harman v Delany (1731) 2 Stra 898, 93 ER 925, 32 Digest (Repl) 22, 124.
Hoeppner v Dunkirk Printing Co (1930) 227 NY Appellate Division 130, 237 NY Supplement 123.
Hough v London Express Newspaper Ltd [1940] 3 All ER 31, [1940] 2 KB 507, 109 LJKB 524, 163 LT 162, 32 Digest (Repl) 69, 921.
Hubbuck & Sons v Wilkinson, Heywood and Clark Ltd [1899] 1 QB 86, [1895–99] All ER Rep 244, 68 LJQB 34, 69 LT 429, 32 Digest (Repl) 248, 2765.
Ingram v Lawson (1840) 6 Bing NC 212, 9 LJCP 145, 7 LT 134, 133 ER 84, 32 Digest (Repl) 28, 176.
Leng (John) & Co Ltd v Langlands (1916) 114 LT 665, 32 Digest (Repl) 174, 1875.
Linotype Co Ltd v British Empire Typesetting Machine Co Ltd (1899) 81 LT 331, affg sub nom Empire Typesetting Machine Co of New York v Linotype Co Ltd (1898) 79 LT 8, 32 Digest (Repl) 22, 127.
Morris v Sandess (or Sanders) Universal Products [1954] 1 All ER 47, [1954] 1 WLR 67, 32 Digest (Repl) 83, 1057.
Nagle v Feilden [1966] 1 All ER 689, [1966] 2 QB 633, [1966] 2 WLR 1027, Digest (Cont Vol B) 323, 585a.
Rondel v Worsley [1967] 3 All ER 993, [1969] 1 AC 191, [1967] 3 WLR 1666., Digest Supp.
Roy v Prior [1969] 3 All ER 1153, [1969] 3 WLR 635.
Schmidt v Secretary of State for Home Affairs [1969] 1 All ER 904, [1969] 2 Ch 149 [1969] 2 WLR 3137.
Sim v Stretch [1936] 2 All ER 1237, 32 Digest (Repl) 32, 192.
Société Francaise des Asphaltes v Farrell (1885) Cab & El 563, 32 Digest (Repl) 207, 2233.
South Hetton Coal Co v North-Eastern News Association Ltd [1894] 1 QB 133, [1891–94] All ER Rep 548, 63 LJQB 293, 69 LT 844, 58 JP 196, 32 Digest (Repl) 177, 1903.
Stubbs Ltd v Russell [1913] AC 386, 82 LJPC 98, 108 LT 529, 32 Digest (Repl) 40, 314.
Tournier v National Provincial and Union Bank of England [1924] 1 KB 461, [1923] All ER Rep 550, 93 LJKB 449, 130 LT 682, 32 Digest (Repl) 80, 1028.
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Turner (otherwise Robertson) v Metro-Goldwyn-Mayer Pictures Ltd [1950] 1 All ER 449, 32 Digest (Repl) 31, 186.
Wiseman v Borneman [1969] 3 all ER 275, [1969] 3 WLR 706.
Case and authority also cited
Lewis v Daily Telegraph Ltd [1963] 2 All ER 151, [1964] AC 234.
Gatley on Libel and Slander (6th Edn) paras 4, 57, 69, 120.
Interlocutory appeal
This was an appeal by the British Medical Association, the first defendants, to vary the order of Milmo J, made on 18 December 1969, whereby their application to strike out the action brought against them by Stanley Lithgow Drummond-Jackson, the plaintiff, for damages for libel, on the ground that the statement of claim disclosed no reasonable cause of action, was dismissed. The ground of the appeal was that the article complained of was not capable of being defamatory of the plaintiff. The facts are set out in the judgment of Lord Denning MR.
H M Davidson for the first defendants.
R L C Hartley for the plaintiff.
Cur adv vult
13 February 1970. The following judgments were delivered.
LORD DENNING MR. Mr Drummond-Jackson, the plaintiff, is a dental surgeon. He practises at 53 Wimpole Street. Some years ago, together with some other dentists, he developed a special technique called intermittent intravenous methohexitone. It was for use in ‘conservative dentistry’, that is, in preserving teeth by filling instead of pulling them out. Instead of giving a patient gas, the technique was to inject into a vein a light dose of a drug called methohexitone. This rendered the patient unconscious for a time. The injection was repeated in small doses intermittently so as to keep the patient under as long as needed.
The plaintiff used and recommended this technique. He wrote an article about it in 1962 in the British Dental Journal. He acquired an international reputation for it. He founded a society to advance the use of it. It was called the Society for the Advancement of Anaesthesia in Dentistry.
Other dentists were not so sure of this technique. It was considered at a high level. The Ministry of Health appointed a joint sub-committee, who made a report in 1967 on dental anaesthesia. This joint sub-committee considered this technique and disclosed some disquiet about it. They stated:
‘… The barbiturate now most often used intravenously in dentistry is methohexitone … Methohexitone possesses the general properties of the barbiturates which, when given intravenously, depress respiration and which will, with increasing dosage, eventually produce apnoea followed, if recovery occurs, by a gradual return of respiratory function. … Some patients, such as young nervous adults, may even become violent and uncontrollable when under the influence of barbiturates … the patient warned not to drive a car and to restrict his activities, especially the use of machinery, until the following day. This is especially important in the case of barbiturates.’
Following on that authoritative report, a team of four highly qualified men at Birmingham University made a scientific investigation into this technique. They were all in the department of anaesthesia. They were the defendants, Mr Wise, the senior registrar of the department, Professor Robinson, the professor of anaesthesia,
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Mr Heath, the lecturer and Mr Tomlin, the first assistant. This team selected 30 patients who volunteered. These 30 were treated with this technique. The effect on them was examined with all the latest scientific equipment. Measurements were made. Tests were taken. The responses recorded. The results were brought together in a scientific paper subscribed by the team of four. They came to the conclusion that this technique was dangerous; and that its dangers should be brought to the notice of all concerned.
On 31 May 1969, the British Medical Journal published the scientific paper by these four in full. It was headed ‘Physiological Responses to Intermittent Methohexitone for Conservative Dentistry’. It was a long paper, illustrated by diagrams, and full of technical details. The British Medical Journal made it the subject of their leading article in the same issue headed ‘Intermittent Intravenous Methohexitone’.
It is not possible for me in this judgment to set out the whole of the paper. But it is said to be a libel on the plaintiff. So I will pick out the key sentences:
‘… Methohexitone was introduced in this country in 1960 and its intermittent injection was recommended for use in conservative dentistry by [the plaintiff] in 1962. Several advantages have been claimed for this technique. …
‘Since the introduction of the technique disquiet about its safety has been expressed (Report of a Joint Sub-committee on Dental Anaesthesia, 1967). As no scientific investigation has so far been undertaken to establish these claims, it was decided to investigate the physiological responses to intermittent injection of this drug in a number of fit, healthy volunteers undergoing conservative dentistry …
‘The so-called minimal-incremental technique of administering methohexitone as described by [the plaintiff] (1962) was used [then there is a reference to the rest period].
‘These rest periods have been described by [the plaintiff] (1967) as necessary for both patient and operator …
‘The purpose of the investigation was to determine the physiological responses to repeated doses of methohexitone in order to establish whether the claims for the safety ([the plaintiff] 1967) of the technique were upheld or whether the theoretical risks outlined in the Report of a Joint Sub-Committee on Dental Anaesthesia (1967) were indeed real …
‘It would seem that the fears of the Joint Sub-Committee on Dental Anaesthesia have been substantiated, for the technique produces fluctuating levels of anaesthesia with loss of integrity of the respiratory and cardiovascular systems. Concern was also felt because on a number of occasions the anaesthetic conditions produced were prejudicial to good dentistry.
‘Several deaths associated with this technique have been reported in the press, but it is difficult to gauge the overall number of patients who may be at risk with the drug. … The number of patients at risk would not appear to be as great as has been suggested. Nevertheless, on the evidence presented, the technique of intermittent methohexitone must be regarded as having serious detrimental physiological effects, which may well have been the cause of the reported deaths.’
On 8 July 1969, the plaintiff issued a writ against the British Medical Association (the publishers of the British Medical Journal) and the four scientists. The statement of claim states that the whole of the scientific paper was a libel on the plaintiff. It states that the defendants:
‘… falsely and maliciously published … and wrote and caused to be published of and concerning the plaintiff and of and concerning him in the way of his profession and in relation to his conduct therein the following words … ’
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(then follows the whole of the scientific paper. It covers six closely-typed foolscap pages, and includes the diagrams, and also all the references to other literature).
The defendants applied to strike out the statement of claim as disclosing no reasonable cause of action. The master and the judge refused to strike it out. The British Medical Association, the first defendants, apply for leave to appeal to this court. We give leave and proceed to hear the appeal.
The first question is whether this procedure—an application to strike out—is an appropriate procedure. I think that it is. I start with this: there is one issue which lies at the heart of this case. It is whether the words are reasonably capable of being understood as being defamatory of the plaintiff personally. No innuendo is pleaded. The plaintiff relies solely on the natural and ordinary meaning of the words. No evidence is admissible on this issue. As Goddard LJ said in Hough v London Express Newspaper Ltd ([1940] 3 All ER 31 at 35, [1940] 2 KB 507 at 515):
‘In the case of words defamatory in their ordinary sense, the plaintiff has to prove no more than that they were published. He cannot call witnesses to prove what they understood by the words. Nor will it avail the defendant to call any number of witnesses to say that they did not believe the imputation. The only question is whether reasonable people might understand them in a defamatory sense.’
This question is one which can and should be decided at the outset on the pleadings. But the practice in England has been otherwise. I can tell you what happens. At the end of the plaintiff’s case, counsel for the defendant submits that the words are not capable of a defamatory meaning. The judge, for caution’s sake, rules that they are capable and leaves the case to the jury. (The judge may, in his own mind, feel that the words are not reasonably capable of a defamatory meaning; but, in case he is wrong—and to avoid the expense of another trial—he may think it better to take the opinion of the jury. Or he may even rule erroneously that the words are capable.) So the case goes on. The defendant calls his evidence to prove fair comment or his other defences. The jury find the words to be defamatory and negative all defences. So judgment is entered against the statement. The defendant appeals to the Court of Appeal, saying that the words were not capable of a defamatory meaning. Sometimes he wins in this court, and gets the judgment set aside, as in Griffiths v Benn. Sometimes there is a difference of opinion here, and the case goes to the House of Lords. They find that the words were not capable of a defamatory meaning and give judgment for the defendants. That is what happened in the leading cases of Capital and Counties Bank v Henty & Son, and Sim v Stretch. So the parties are put to the expense and trouble of a long trial when it could all have been avoided by a preliminary move.
Under the old system of pleadings, our forefathers managed things better. The plaintiff had to set out the words in his decision. The defendant could demur on the ground that the words were not capable of a defamatory meaning. The issue was decided on demurrer without the expense of a trial. That is what happened in the leading case of Evans v Harlow. It is very appropriate here. The defendant published in a newspaper a caution against the plaintiff’s lubricators, saying that they were badly designed so that the tallow was wasted. The Court of Queen’s Bench held, on demurrer, that the words were not actionable as a libel.
In Scotland, too, they always have managed things better; and they do so to this day. The issue of ‘defamatory or not’ is not left to the trial but is decided on the pleadings at an early stage. Their practice has been highly commended by the House of Lords and reckoned to be preferable to the English: see Stubbs Ltd v Russell ([1913] AC 386 at 394, 400) and
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John Leng & Co Ltd v Langlands. The latter case is also very appropriate here. A newspaper made ((1916) 114 LT at 667) a ‘pretty severe criticism’ on a system adopted by an architect. The House held that it was not actionable as a libel.
I think that the time has come when we should follow the Scottish practice in this regard. After all, this question of ‘defamatory or not’ is an essential and truly preliminary question, see Stubbs Ltd v Russell ([1913] AC at 400) per Lord Shaw of Dunfermline. If it is decided in favor of the defendant, that is the end of the case—before much expense is incurred. If it is decided in favour of the plaintiff, the trial judge knows conclusively that it must be left to the jury. Their verdict then is the end of the matter. It cannot be re-opened. Either way it is a good thing to decide it at the outset.
The procedure of ‘striking out’ is ready to hand. We have used it many times lately to decide preliminary issues. For instance, whether a barrister can be made liable for negligence in conducting a case in court, Rondel v Worsley; whether the Inland Revenue Commissioners are bound to give a taxpayer the opportunity of seeing certain documents, Wiseman v Borneman; whether students of scientology are entitled to remain in England, Schmidt v Secretary of State for Home Affairs; and whether an action lies for maliciously applying for a bench warrant, Roy v Prior. All these issues were decided on an application to strike out the statement of claim. They took days to argue, but in the end the proceedings were struck out. It became clear, after argument, that the facts alleged by the plaintiff did not give rise to a cause of action.
I propose, therefore, to adopt this new procedure and to ask, and try to answer, the important question: are these words reasonably capable of being understood as being defamatory of the plaintiff? Understood, that is, by the sort of people likely to read them. These are, I take it, the medical men who read the British Medical Journal.
In coming to this question, I must point out that the plaintiff has not pleaded any innuendo, not even a ‘false innuendo’. So we do not know what is the defamatory meaning which he says the words bear. We are left to guess. This is, I think, unfortunate; because there is all the difference between a meaning which is defamatory to him personally, and a meaning which is defamatory of his technique. If the words are defamatory of him personally, he has an action for libel; but if they are only defamatory of his technique, he has no action for libel but at most an action for malicious falsehood. These two actions must be kept distinct. They have very different consequences. In libel the law presumes everything against the writer; the words presumed to be false and malicious; and it is for the writer to prove, if he can, that the words were true and the comment was fair, or otherwise make good his defence. But in malicious falsehood the boot is on the other foot. The writer is presumed to be acting honestly and without malice; and it is for the plaintiff to prove, if he can, that the words were written by the defendant falsely and maliciously and were calculated to damage the plaintiff in his calling; see s 3(1) of the Defamation Act 1952.
Seeing that there is so great a difference between the two actions, the plaintiff here has chosen the one which suits him best. He asserts that this article is a libel on him. He has set it out in its entirety. His counsel told us that in this action every word of it is presumed to be false. Even the records of all the tests and experiments are, he said, presumed to be untrue. So much so that, if the action goes for trial, the defendants must be prepared to prove the correctness of all their tests and experiments and to justify all their conclusions; and he, the counsel for the plaintiff, will be able to cross-examine the defendants on them. Just imagine the time required to prepare for trial; and the length of the trial itself!
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It would, I think, be altogether wrong for such a burden to be placed on the defendants. It should not be permitted. The law draws a distinction between libel and lawful criticism. Libel is personal and subjective. It is a lowering of the man himself in the eyes of right-thinking people generally. It is actionable without more ado. Lawful criticism is impersonal and objective. It is criticism of goods, of a design, a system, or a technique. It points out defects and deficiencies in them without attacking the man himself. It is not actionable unless proved to be both false and malicious.
Applying this test, I hold that this scientific paper is no libel. Here are a group of scientists who have done a valuable piece of research. They have discovered that the technique practised by the plaintiff is dangerous. It is surely in the public interest that they should make known their findings to the profession; and that the scientific journals should be entitled to publish them without fear of a libel action. So far from everything being presumed against them. I think that everything should be presumed in their favour; for they are doing a public service. It may be that, in criticising the plaintiff’s technique, they are casting some reflection on him. That cannot be helped. Every criticism of a technique tends to cast some reflection on those who practise it. But that does not give cause for a libel action. These scientists have nowhere descended to an attack on the plaintiff personally. They should not be plagued with a libel action. The case is, to my mind, covered by Griffiths v Benn; and John Leng & Co Ltd v Langlands. The comments on a system in those cases were far more violent and severe than these here, but it was held that there was nothing which went beyond the bounds of lawful criticism.
So here I hold that the defendants have not gone beyond the bounds. They have only exercised the right of lawful criticism. It would be a sorry day if scientists were to be deterred from publishing their findings for fear of libel actions. So long as they refrain from personal attacks, they should be free to criticise the systems and techniques of others. It is in the interests of truth itself. Were it otherwise, no scientific journal would be safe. I would allow the appeal and strike out this statement of claim.
LORD PEARSON. The plaintiff has brought an action for libel against the authors and publishers of an article in the British Medical Journal. The article has been described, and the most material portions of it have been set out, in the judgment of Lord Denning MR. The defendants applied under RSC Ord 18, r 19, for an order for the statement of claim to be struck out as disclosing no reasonable cause of action. The master decided not to make the order, and on appeal the judge in chambers, Milmo J, affirmed the master’s decision and refused leave to appeal to this court. The defendants have now applied to this court for leave to appeal, and their appeal has been heard together with the application for leave.
First, it becomes necessary to consider what is the proper use of the powers conferred by RSC Ord 18, r 19, which is the successor of the former RSC Ord 25, r 4, and for the present purpose is sufficiently similar to be identified with it. RSC Ord 18, r 19, provides:
‘(1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that—
(a) it discloses no reasonable cause of action or defence, as the case may be; or
(b) it is scandalous, frivolous or vexatious; or
(c) it may prejudice, embarrass or delay the fair trial of the action; or
Page 1101 of [1970] 1 All ER 1094
(d) it is otherwise an abuse of the process of the court;
and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.
‘(2) No evidence shall be admissible on an application under paragraph (1) (a) … ’.
Over a long period of years it has been firmly established by many authorities that the power to strike out a statement of claim as disclosing no reasonable cause of action is a summary power which should be exercised only in plain and obvious cases. The authorities are collected in The Supreme Court Practice 1970c under the heading ‘Exercise of Powers under this Rule’ in the notes under Ord 18, r 19. One which might be added is Nagle v Feilden ([1966] 1 All ER 689 at 695, 697, [1966] 2 QB 633 at 648, 651). Reference has been made to four recent cases: Rondel v Worsley, Wiseman v Borneman, Roy v Prior and Schmidt v Secretary of State for Home Affairs. In each of these cases there was an important question of principle involved, and the hearing of the application under RSC Ord 18, r 19, was much longer and more elaborate than is usual, but the final decision was that the alleged cause of action was clearly unsustainable, and so the statement of claim disclosed no reasonable cause of action and was ordered to be struck out. There was no departure from the principle that the order for striking out should only be made if it becomes plain and obvious that the claim or defence cannot succeed, but the procedural method was unusual in that there was a relatively long and elaborate instead of a short and summary hearing. It must be within the discretion of the courts to adopt this unusual procedural method in special cases where it is seen to be advantageous. But I do not think that there has been or should be any general change in the practice with regard to applications under the rule.
In my opinion the traditional and hitherto accepted view—that the power should only be used in plain and obvious cases—is correct according to the evident intention of the rule for several reasons. First, there is in r 19 (1) (a) the expression ‘reasonable cause of action’, to which Sir Nathaniel Lindley MR called attention in Hubbuck & Sons Ltd v Wilkinson, Heywood and Clark Ltd ([1899] 1 QB 86 at 90, 91, [1895-99] All ER Rep 244 at 247). No exact paraphrase can be given, but I think ‘reasonable cause of action’ means a cause of action with some chance of success, when (as required by r 19(2)) only the allegations in the pleading are considered. If when those allegations are examined it is found that the alleged cause of action is certain to fail, the statement of claim should be struck out. In Nagle v Feilden ([1966] 1 All ER at 695, [1966] 2 QB at 648) Danckwerts LJ said:
‘The summary remedy which has been applied to this action is one which is only to be applied in plain and obvious cases, when the action is one which cannot succeed or is in some way an abuse of the process of the court’.
Salmon LJ said ([1966] 1 All ER at 697, [1966] 2 QB at 651):
‘It is well settled that a statement of claim should not be struck out and the plaintiff driven from the judgment seat unless the case is unarguable’.
Secondly, r 19 (1) (a) takes some colour from its context in r 19 (1) (b)—‘scandalous, frivolous or vexatious’—r 19 (1) (c)—‘prejudice, embarrass or delay the fair trial of the action’—and r 19 (1) (d)—‘otherwise an abuse of the process of the court’. The
Page 1102 of [1970] 1 All ER 1094
defect referred to in r 19 (1) (a) is a radical defect ranking with those referred to in the other paragraphs. Thirdly, an application for the statement of claim to be struck out under this rule is made at a very early stage of the action when there is only the statement of claim without any other pleadings and without any evidence at all. The plaintiff should not be ‘driven from the judgment seat’ at this very early stage unless it is quite plain that his alleged cause of action has no chance of success. The fourth reason is that the procedure, which is (if the action is in the Queen’s Bench Division) by application to the master and on appeal to the judge in chambers, with no further appeal as of right to the Court of Appeal, is not appropriate for other than plain and obvious cases. In Dyson v A-G ([1911] 1 KB 410 at 419), Fletcher Moulton LJ said:
‘Differences of law, just as differences of fact, are normally to be decided by trial after hearing in Court, and not to be refused a hearing in Court by an order of the judge in chambers. Nothing more clearly indicates this to be the intention of the rule than the fact that the plaintiff has no appeal as of right from the decision of the judge at chambers in the case of such an order as this. So far as the rules are concerned an action may be stopped by this procedure without the question of its justifiability ever being brought before a Court.’
That is the basis of rule and practice on which one has to approach the question whether the plaintiff’s statement of claim in the present case discloses any reasonable cause of action. It is not permissible to anticipate the defence or defences—possibly some very strong ones—which the defendants may plead and be able to prove at the trial, nor anything which the plaintiff may plead in reply and seek to rely on at the trial. Does this statement of claim disclose an alleged cause of action which has some chance of success? For practical purposes the answer must be ‘yes’, unless the words complained of (which are the whole article) are incapable of bearing any meaning defamatory of the plaintiff. If the words complained of clearly must be considered as defamatory only of a system or technique, with no imputation on the plaintiff in the way of his profession as a dentist, the defendants’ application for the statement of claim to be struck out should succeed.
In this connection I think it is relevant to set out para 1 of the statement of claim.
‘The plaintiff is a dental surgeon who practises at [an address stated]. Between the years 1962 and 1965 the plaintiff together with members of the undermentioned Society developed a technique of using intermittent increments of methohexitone to maintain anaesthesia for conservative dentistry. The plaintiff has an international reputation for using and recommending the said technique. The plaintiff was the principal founder of the Society for the Advancement of Anaesthesia in Dentistry (S.A.A.D.).’
In the article complained of there are four references to the plaintiff by name as follows:
‘[1] Methohexitone was introduced in this country in 1960 and its intermittent injection was recommended for use in conservative dentistry by [the plaintiff] in 1962.
‘[2] The so-called minimal-incremental technique of administering methohexitone as described by [the plaintiff] (1962) was used.
‘[3] These rest periods have been described by [the plaintiff] (1967) as necessary for both patient and operator.
‘[4] The purpose of the investigation was to determine the physiological responses to repeated doses of methohexitone in order to establish whether the claims for the safety ([the plaintiff] 1967) of the technique were upheld or whether the theoretical risks outlined in the Report of a Joint Sub-Committee on Dental Anaesthesia (1967) were indeed real.’
Page 1103 of [1970] 1 All ER 1094
The plaintiff is likely to have no great difficulty in satisfying the jury, or the judge acting as a jury, that his name and his practice and his reputation have been and are closely associated with this technique of anaesthetising patients by intermittent doses of methohexitone for the purposes of conservative dentistry. In the circumstances I think that it would be open to 12 reasonably-minded jurymen to come to the conclusion that the severe attack which this article makes on the technique involves an attack on the plaintiff’s reputation as a dentist. It is a severe attack especially in the sentence:
‘Nevertheless, on the evidence presented, the technique of intermittent methohexitone must be regarded as having serious detrimental physiological effects, which may well have been the cause of the reported deaths.’
I am not expressing any opinion whether or not the attack is justifiable, or whether or not it is fair comment on a matter of public interest. The sole question at this stage is whether it is capable of bearing a meaning defamatory of the plaintiff. If so, the action must proceed, and if it proceeds to trial, the jury or the judge acting as a jury will have to decide the question of fact whether the article does bear a meaning defamatory of the plaintiff. On that question of fact I express no opinion.
How can it be argued that this article could not reasonably be given any meaning defamatory of the plaintiff in his profession as a dentist? I think that it can only be so argued on the basis of a narrow view being taken as to the scope of defamation of a person in his trade, business or profession. Many reported cases are concerned with the question whether defamation of goods involves defamation of the trader who sells the goods: Harman v Delany, Ingram v Lawson, Edsall v Russell, Evans v Harlow, Société Francaise des Asphaltes v Farrell, Linotype Co Ltd v British Empire Typesetting Machine Co Ltd, Griffiths v Benn ((1911) 27 TLR 346 at 350) and Bendle v United Kingdom Alliance. The best statement of the principle is (as one has learnt to expect) contained in a judgment of Lord Esher MR. In South Hetton Coal Co v North-Eastern News Association Ltd ([1894] 1 QB 133 at 139, [1891-94] All ER Rep 548 at 550) he said:
‘Suppose the plaintiff was a merchant who dealt in wine, and it was stated that wine which he had for sale of a particular vintage was not good wine; that might be so stated as only to import that the wine of the particular year was not good in whosoever hands it was, but not to imply any reflection on his conduct of his business. In that case the statement would be with regard to his goods only, and there would be no libel, although such a statement, if it were false and were made maliciously, with intention to injure him, and it did injure him, might be made the subject of an action on the case. On the other hand, if the statement were so made as to import that his judgment in the selection of wine was bad, it might import a reflection on his conduct of his business, and shew that he was an inefficient man of business. If so, it would be a libel. In such a case a jury would have to say which sense the libel really bore; if they thought it related to the goods only, they ought to find that it was not a libel; but if they thought that it related to the man’s conduct of business, they ought to find that it was a libel.’
Page 1104 of [1970] 1 All ER 1094
I doubt whether the analogy sought to be drawn in the present case between a trader’s goods and a professional man’s technique is sound. Goods are impersonal and transient. A professional man’s technique is at least relatively permanent, and it belongs to him; it may be considered to be an essential part of his professional activity and of him as a professional man. In the case of a dentist it may be said: if he uses a bad technique, he is a bad dentist and a person needing dental treatment should not go to him.
In any case, words may be defamatory of a trader or business man or professional man, although they do not impute any moral fault or defect of personal character. They be defamatory of him if they impute lack of qualification, knowledge, skill, capacity, judgment or efficiency in the conduct of his trade or business or professional activity: Harman v Delany, Edsall v Russell, Botterill v Whytehead, the Linotype case ((1898) 79 LT at 9, on appeal (1899) 81 LT at 333), South Hetton Coal Co v North-Eastern News Association Ltd, Griffiths v Benn, Dauncey v Holloway ([1901] 2 KB 441 at 447) and Tournier v National Provincial and Union Bank of England ([1924] 1 KB 461 at 477, [1923] All ER Rep 550 at 557) per Scrutton LJ. It can be suggested that the article complained of in the present case impliedly imputes to the plaintiff lack of judgment and lack of efficiency in the conduct of his professional activity, inasmuch as he has adopted and practised and recommended a method of anaesthetising patients which (as the article says) is dangerous for the patients and may impede good dentistry. That suggestion is worthy to be considered by the jury or the judge acting as a jury, and should not be withdrawn from them or him.
The only case which I have found dealing with an accusation that the plaintiff used a bad technique is an American case relating to a football coach. In Hoeppner v Dunkirk Printing Co ((1930) 237 NY Supplement 123 at 127) it was said in the judgment:
‘While the articles complained of fail to charge the plaintiff with the commission of any crime, or to attack his moral character, the fair inference to be drawn from the language used is that the plaintiff is an inefficient coach, and has failed to properly instruct the team in modern plays and in the technique of the game, so that they could successfully meet and compete with other teams in their class.’
After a citation from an English case, it was said ((1930) 237 NY Supplement at 129):
‘The law recognises one’s right to live, and that the majority of people are compelled to earn a living.’
It was held that the articles were libellous per se.
In my opinion the words complained of in the present case are capable of bearing a meaning defamatory of the plaintiff, and it should be left to the jury or the judge acting as a jury to determine as a question of fact whether they do bear such a meaning. Whatever guesses one might make as to the probable strength of the defendants’ defences could not justify a decision to strike out the statement of claim in a summary way at this initial stage of the action. Accordingly I would dismiss the appeal.
Page 1105 of [1970] 1 All ER 1094
SIR GORDON WILLMER. In this case we are invited by the defendants to strike out the action, in which damages for libel are claimed, on the ground that the statement of claim discloses no reasonable cause of action. The power to strike out in limine is no doubt a valuable weapon in the hands of the court, enabling it to prevent abuse of its process by the prosecution of vexatious or frivolous litigation. But it is clear that such a drastic power must be sparingly exercised, and it has long been established that recourse will be had to it only in plain and obvious cases. The authorities in support of this rule are too well-known to require individual citation; a great many of them are collected in the notes to RSC Ord 18, r 19, in The Supreme Court Practice 1970d.
I do not accept the view expressed by Lord Denning MR that this well-established and salutary rule is now a thing of the past and can be disregarded. This was never argued before us, and for my part I should not be prepared to brush the rule aside without having the matter fully argued. Moreover, with all due respect, I do not think that the recent cases to which Lord Denning MR has referred support the proposition which he has advanced. The question whether a point is plain and obvious does not depend on the length of time it takes to argue. Rather the question is whether, when the point has been argued, it has become plain and obvious that there can be but one result. When Archimedes exclaimed ‘Eureka’, he was rejoicing in the discovery of a proposition which for centuries now has come to be regarded as plain and obvious. But it must have been anything but plain and obvious to him and his predecessors until he had made his discovery and proved its truth. I think that a better test for determining whether a point is plain and obvious is to see how many, if any, of the judges who have occasion to hear it argued are prepared in the end to express a dissenting opinion. Judged by this test the four cases to which Lord Denning MR has referred were indeed plain and obvious cases, as the result showed.
In the present case it is alleged by the defendants that the words complained of, consisting in an article in a learned scientific journal, are incapable of bearing any defamatory meaning. If that be so, there would, of course, be nothing for the judge at the trial to leave to the jury; for to say that words are incapable of bearing a defamatory meaning is equivalent to saying that no 12 jurymen could reasonably come to the conclusion that they are defamatory—see Turner (otherwise Robertson) v Metra-Goldwyn-Mayer Pictures Ltd ([1950] 1 All ER 449 at 454) per Lord Porter and Morris v Sandess Universal Products ([1954] 1 All ER 47 at 51, [1954] 1 WLR 67 at 73) per Jenkins LJ. In such circumstances it would no doubt be proper to strike out the action in limine before any further sums are expended in fruitless costs.
However, the learned judge in the present case appears to have had no difficulty in rejecting the contention that the words complained of here are incapable of bearing a defamatory meaning. Having regard to his unrivalled experience in this field, I should have been disposed to regard it as almost presumptuous on my part to express a different view. But it happens that in fact I take the same view, and even without the assistance of the learned judge, I should unhesitatingly have reached the same conclusion. It seems to me that this is precisely the type of case in which a plaintiff is entitled to have the benefit of a jury’s verdict.
Judges have in the past shrunk—I think with good reason—from the task of defining with precision the meaning of the word ‘defamatory’. The conventional test that defamatory words are such as expose the plaintiff to hatred, ridicule and contempt is now generally accepted as being too narrow—see Tournier v National Provincial and Union Bank of England ([1924] 1 KB 461 at 477, 487), per Scrutton and Atkin LJJ and Sim v Stretch, per Lord Atkin. In the latter case Lord Atkin drew attention ([1936] 2 All ER 1237 at 1240) to the importance of considering the
Page 1106 of [1970] 1 All ER 1094
person, or class of persons, whose reaction to the publication should be the test of the wrongful character of the words used. In the particular case he thought it sufficient to pose the question ([1936] 2 All ER 1237 at 1240): ‘would the words tend to lower the plaintiff in the estimation of right-thinking members of society generally?’ In the present case the plaintiff is an experienced dental surgeon, and the article complained of relates to dentistry; and this circumstance, I think, is sufficient to indicate the class of persons whose reaction to the publication is to be considered.
The article is of a highly technical nature, barely intelligible to the ordinary layman without a good deal of explanation and interpretation. It is concerned with a technique of intermittent injection of a drug called methohexitone for use as an anaesthetic in conservative dentistry. It alleges, as is the admitted fact, that this technique was introduced by the plaintiff, who has since 1962 used it and recommended its use. The article asserts that several advantages had been claimed for the use of this technique, the nature of which I do not find it necessary to detail here. But the article then goes on to say that disquiet about the safety of this technique had been expressed in the report of a sub-committee on dental anaesthesia, and asserts that no scientific investigation had hitherto been undertaken to establish the plaintiff’s claims. For this reason it was decided to investigate the physiological responses of selected patients to intermittent injection of the drug. The results of this investigation are then set out in considerable detail, which I need not analyse except to say that what is said to have been ascertained is that the use of the plaintiff’s technique is fraught with a number of dangers. The article summarises the results as follows:
‘It would seem that the fears of the Joint Sub-Committee on Dental Anaesthesia have been substantiated, for the technique produces fluctuating levels of anaesthesia with loss of integrity of the respiratory and cardiovascular systems. Concern was also felt because on a number of occasions the anaesthetic conditions produced were prejudicial to good dentistry.
‘Several deaths associated with this technique have been reported in the press, but it is difficult to gauge the overall number of patients who may be at risk with the drug. [Then, after suggesting that the number of patients at risk might not be so great as thought, the article concludes:] Nevertheless, on the evidence presented, the technique of intermittent methohexitone must be regarded as having serious detrimental physiological effects, which may well have been the cause of the reported deaths.’
That being the gist of the article, the case which the plaintiff seeks to set up, as I understand it, is that he is attacked in the way of his profession, in that, without any proper prior investigation, he is alleged to have been preaching and practising a dangerous technique, found in a number of instances to produce deleterious effects, and possibly resulting in death in several cases. It should in my judgment be for a jury to say whether all this is defamatory of the plaintiff, as an attack on his professional reputation. What I find it impossible to say, at any rate at the present stage, is that the words of the article are plainly and obviously incapable of bearing any defamatory meaning.
It has been urged on behalf of the defendants that so to hold would be most detrimental to the advancement of scientific knowledge, since no scientific journal will in future feel safe in publishing an article which is critical of the views of an opposing school of thought. I do not accept that there is any such danger. For one thing, it is perfectly possible for scientific gentlemen to criticise each other’s views and theories without saying anything capable of being construed as defamatory, even though they may be, in Gilbert’s words—
‘Maintaining with no little heat
Their various opinions.’
Page 1107 of [1970] 1 All ER 1094
But quite apart from that, it is, I think, to be emphasised that the present case is not concerned merely with the presentation of opposing views on some theoretical scientific subject. The essential feature of the case is that the plaintiff is a practising dental surgeon, and the gist of his case is that the article complained of is unjustifiably critical of the way in which he carries on his practice, thereby damaging his professional reputation.
For these reasons I for my part am satisfied that the learned judge below came to the right conclusion, and that this appeal ought to be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Jacobs & Greenwood (for the first defendants); Agar-Hutton & Co (for the plaintiff).
Wendy Shockett Barrister.
Practice Direction
(Queen’s Bench Division: Practice: Payment into court)
[1970] 1 All ER 1107
PRACTICE DIRECTIONS
QUEEN’S BENCH DIVISION
24 MARCH 1970
Practice – Payment into court – Transfer of money in court to short-term investment account Procedure for obtaining order.
1. Doubts have arisen as to the appropriate method of obtaining an order, which at present is necessary, to enable money paid into court under RSC Ord 22 to be transferred to a short-term investment account.
2. After careful consideration the masters have decided that application for this purpose should be made by summons to be presented to a master after the time for acceptance has expired. No return date need ordinarily be taken and the master will dispense with an affidavit of service if satisfied that all parties have been informed of the intended application and do not object. The summons may be lodged with the masters’ secretary or be presented to any master who is disengaged.
3. If application is not made by the party who paid the money in, it may be made by any other party.
4. The summons should—(i) Recite that the time of acceptance has expired and that notice of acceptance has not been given; (ii) State the amount standing in court which it is desired to invest; and (iii) Apply that that sum ‘be placed on a short-term investment account to the credit of the action and that the interest do accumulate therein until further order’.
5. If accompanied by an engrossment of the proposed order and a payment schedule in the usual form (both in duplicate) the documents, if in order, will be dealt with by the Central Office and the copy order will be available for collection in the judgment room on the next day but one.
24 March 1970.
B A Harwood, Senior Master
Myrddin-Baker v Teesside County Borough Council
[1970] 1 All ER 1108
Categories: LOCAL GOVERNMENT
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 28 JANUARY 1970
Local government – Officer – Loss of employment – Compensation – Resettlement and longterm compensation – Appeal to Industrial Tribunal – Power of tribunal to hear further evidence on appeal from compensating authority – Local Government (Compensation) Regulations 1963 (SI 1963 No 999), regs 14(1), 38(1), 43(3).
The appellant, who had been clerk and solicitor for 17 years with a rural district council, was given notice of termination of his service when that council ceased to exist and was merged with other councils to form a county borough council (the respondents). He then started work as a salaried partner in a firm of solicitors. As a result of his dismissal the appellant claimed resettlement and long-term compensation under the Local Government (Compensation) Regulations 1963 from the respondents. In filling up the necessary forms the appellant stated that his salary as partner of the firm of solicitors was £1,500 per annum. The respondents decided his claims on the basis of his statement. The appellant appealed to the Industrial Tribunal against the decisions of the respondents. At the time of the appeal he had received emoluments of only £180 (ie after nine months). The tribunal took the view that it was not their function as an appellate tribunal to look at the facts afresh in the light of the appellant’s actual emoluments, but to decide whether the respondents’ assessment was right on the information the appellant himself had given to the respondents.
Held – The tribunal had erred in law because on a reference the tribunal had to consider and determine the matter afresh on the information before them and had power under regs 43(3)a and 38b of the Local Government (Compensation) Regulations 1963 to require such further information as they might require in order to consider and determine the matter; accordingly, the case would be remitted to the tribunal to consider what the emoluments in fact were which the appellant had received by virtue of his other employment and, in the light of that and of the provisions of the regulations, what the resettlement and long-term compensation should be (see p 1111 g and j, post).
Notes
For the right of local government officers to compensation for loss of employment or loss or diminution of employments, see 24 Halsbury’s Laws (3rd Edn) 507, para 937.
Appeal
The appellant, Thomas Myrddin-Baker, claimed resettlement and long-term compensation in respect of the termination of his employment under the Local Government (Compensation) Regulations 1963 from the respondents, the Teesside County Borough Council. This was an appeal from the decision of the Industrial Tribunal sitting at Darlington and dated 1 August 1969, on his appeal against the quantum
Page 1109 of [1970] 1 All ER 1108
of compensation assessed by the respondents. The facts are set out in the judgment of Lord Parker CJ.
J M Rankin QC and J G C Phillips for the appellant.
G E Moriarty for the respondents.
28 January 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal from a decision of the Industrial Tribunal given on 1 August 1969 in regard to the quantum of what is referred to as resettlement compensation and long-term compensation arising as a result of the appellant losing his employment with the respondents.
The matter arises in this way: the appellant was clerk and solicitor to the rural district council of Eston in the north riding of Yorkshire; he had occupied that position for 17 years when on 1 April 1968, by virtue of the Teesside Order 1967c the Eston rural district council ceased to exist. A new county borough of Teesside was formed, and by that order, to which it is unnecessary to refer, the officers, and the appellant was an officer, of the local authorities abolished were transferred to the borough council of Teesside. He was three days later given notice of termination of his service as from 31 July 1968. He then began work as a salaried partner in a new firm of solicitors constituted at Normanby. As such salaried partner he was entitled to remuneration. The whole matter in dispute is over the amount of that remuneration which ought to be taken into consideration in assesssing the quantum of resettlement and long-term compensation.
The provisions regarding compensation are to be found in the Local Government (Compensation) Regulations 1963d. I find it unnecessary to read all the relevant provisions here, and it is sufficient I think to come to the first head of compensation which is resettlement compensation for loss of employment, beginning with reg 6. Regulation 6 itself sets out that a compensating authority shall consider and determine the entitlement to resettlement compensation. Regulation 7 provides the conditions which must exist, and the requisite condition here in reg 7(1)(a) was clearly fulfilled, in that it is admitted that the appellant suffered loss of employment attributable to the provisions of the Teesside Order 1967. The other conditions were also fulfilled.
When one comes to the regulation determining the amount, which is reg 8(1), one finds that it provides:
‘Subject to the provisions of paragraph (2) of this regulation, resettlement compensation payable to a person to whom this Part of these regulations applies shall for each week for which such compensation is payable be a sum ascertained by taking two thirds of the weekly rate of the net emouments which the claimant has lost and deducting therefrom such of the following items as may be applicable … (b) two thirds of the net emoluments received by him in respect of such week from work or employment undertaken in place of the employment which he has lost … ’
Long-term compensation is dealt with in Part IV beginning at reg 12. Again there are conditions which have to be fulfilled and no question arises in respect of those. Regulation 14(1), however, sets out certain factors which are to be borne in mind and it provides:
‘For the purpose of determining whether long-term or retirement compensation for loss or diminution of emoluments should be paid to a claimant, and if so the amount of the compensation (subject to the limits set out in these regulations) regard shall be had to such of the following factors as may be relevant, that is to say:—… (b) the emoluments and other conditions, including security of tenure, whether by law or practice, of any work or employment undertaken
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by the claimant in place of the employment he has lost; (c) the extent to which he has sought suitable employment and the emoluments which he might have acquired by accepting other suitable employment offered to him … (f) all the other circumstances of his case … ’
Regulation 14e deals with the amount of long-term compensation. It is unnecessary to read it further save to say that the maximum annual sum shall in no case exceed two-thirds of the net emoluments which the claimant has lost.
As a result of his dismissal, the appellant filled up the necessary forms, one in respect of resettlement compensation, the other in respect of long-term compensation and in each form in para 10 be answered the part of the question ‘Particulars of any work or employment … undertaken in place of the employment lost’ as follows: ‘Date on which work or employment was undertaken 26th. August 1968. Name and address of employer … as salaried partner in firm of … ’ so and so solicitors. ‘Salary or wages £1500 per annum’, and no other fees or emoluments. On that the respondents, and no blame attaches to them whatever, worked out the calculation of resettlement compensation on the basis of a deduction of two-thirds of that £1,500, namely a deduction of £1,000. When they came to long-term compensation, however, they deducted the whole of the £1,500 and not merely two-thirds of it, the £1,000. As a result of those decisions, the appellant appealed, as he was entitled, to the Industrial Tribunal.
As it seems to me, two points then were taken. The first, in respect of which the tribunal found in the appellant’s favour, was that the respondents ought not to have deducted the full £1,500 in calculating long-term compensation but only two-thirds of it, £1,000, as in the case of resettlement compensation. To that extent the tribunal found in the appellant’s favour. The other point raised was that the respondents were in fact, as it turned out, wrong in treating his salary as £1,500. Reference was made to a letter of 7 June 1968 which was just before he became a salaried partner, which appears to be an offer, or the terms of an offer, of partnership. I do not propose to read it in detail, but the scheme was that for the first two years the appellant was to be a salaried partner at £1,500 a year, but that in the third year he should acquire a 25 per cent interest in the practice, and that thereafter the remuneration as a salaried partner should decrease, he getting his earnings out of the profits. That letter stated that the other three prospective partners were meanwhile prepared to finance the commencement of that business, and that he would not be called on to contribute financially.
When the matter came before the tribunal, the appellant as I understand it, said that the scheme which he thought was going to work out whereby he was going to get £1,500 guaranteed for the first two years, proved wrong because what happened was that finance had to be obtained from the bank, and in fact the profits after deducting the interest on the financial transactions were such that in nine months he was only able to draw £180. In other words the original offer on which he based his salary for two years as £1,500 did not work out that way, and in fact the agreement was changed, and he had to bear a share of the financing and his drawings had been only £180. That, as I understand it, is what the appellant said before the tribunal. When they came to deal with that matter, the tribunal stated their opinion thus:
‘The [appellant] also said that his current earnings should be disregarded as in practice they have not approached anywhere near £1,500 per annum. We accept that this may be correct, but even after his accountant had produced audited accounts he did not write to the [respondents] and point out that £1,500 was, in his view, an over statement.’
If I might just pause there, he did write letters to the respondents which would
Page 1111 of [1970] 1 All ER 1108
appear to have drawn their attention, although not very clearly, to the fact that this figure of £1,500 might well be wrong. The tribunal then continued:
‘It does seem to us that the [respondents were] correct in accepting that his current emoluments were what he had stated. We do not think that it is for us to take a different view. In our view that is a point which could properly be the subject of an application for a review, but is not a ground on which we should hold the award already made to be erroneous.’
It is conceded that emoluments here, and in particular net emoluments as defined in the regulations, must refer to the emoluments actually received, and accordingly if his drawings for the nine months were really £180, which I understand is £196 for a full year, the two-thirds of the emoluments which fall to be deducted must be two-thirds of £196. For my part I do not think that the tribunal were taking a different view. It seems to me that the tribunal said that the respondents were quite right in deducting two-thirds of £1,500 because so far as they knew that was the salary which he was drawing, and when it comes before the tribunal even though the tribunal thought that might be incorrect, their function as an appellate tribunal was to see whether the respondents assessed the compensation rightly on the information then before them.
Counsel for the respondents has sought to persuade us that there is a finding of fact here that the tribunal were not satisfied that the salary was anything other than £1,500. I cannot read the paragraph which I have read in that way. It seems to me that they are saying that the appellant’s evidence may well be correct, he may well only have drawn £180 in nine months, but nevertheless that is not a ground for the tribunal saying that the award by the respondents was wrong on the information then before them; that is purely a matter for review under the provisions dealing with review in the regulations. In saying that, the tribunal, as it seems to me were clearly erring in law, having regard to the terms of reg 43 of the 1963 Regulations. Regulation 43(1) provides for reference to the matter to the tribunal, and reg 43(3) provides:
‘On receipt of such a reference, the tribunal shall consider and determine the matter in accordance with the provisions of these regulations and the compensating authority shall give effect to the decision of the tribunal with any modifications that may be required in consequence of any appeal from the decision on a point of law.’
It seems to me that on such a reference the tribunal must consider and determine the matter afresh on the information before them, and that they have on such a reference all the power, including the powers given under reg 38, for requiring such further information as they may require in order to consider and determine the matter. In those circumstances it seems to me that the tribunal here, on the reading which I have given to this paragraph in their decision, have erred in law; I would allow this appeal and send the case back to the tribunal with the opinion of this court, asking the tribunal to consider what the emoluments in fact were which the appellant had received by virtue of his other employment, and in the light of that and the provisions of the regulations, including the factors set out in reg 14(1), what the resettlement and long-term compensation should be.
ASHWORTH J. I agree.
TALBOT J. I agree.
Appeal allowed. Case remitted.
Solicitors: J G Haley (for the appellant); Lewin, Gregory, Mead & Sons agents for E C Parr, Middlesbrough (for the respondents).
N P Metcalfe Esq Barrister.
Warder and another v Cooper
[1970] 1 All ER 1112
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 17, 19 DECEMBER 1969
Injunction – Interlocutory – Principle governing grant – Breach of statute – Damages not appropriate to remedy mischief against which statute aimed – Occupation of dwelling by employee under terms of employment – Termination of employment – Retaking of possession by employer without court proceedings – Whether employee entitled to interlocutory injunction designed to secure access to dwelling – Rent Act 1965, s 32(1), (2).
The defendant was the managing director of a company which carried on business on property which it held under a lease. The lease contained an absolute covenant against underletting. On the property was a bungalow. The defendant had authority to grant, on behalf of the company, a licence to occupy the bungalow to employees of the company, but denied that either he or the company had permission from the landlord to create a tenancy. The defendant acting on behalf of the company engaged the first plaintiff as foreman. The terms of employment were recorded in a document dated 15 October 1969 which stated ‘.. Bungalow. Rent free, whilst employed … Notice. Two weeks’ notice to be served either way’. The first plaintiff commenced his duties and moved himself and his wife and family and his furniture into the bungalow. The defendant on behalf of the company gave the first plaintiff two weeks’ notice to terminate his employment and to vacate the bungalow on 5 December. On 5 December the first plaintiff and his family left the bungalow, but his goods and furniture remained there. The defendant changed the locks on the bungalow and moved some of the first plaintiff’s furniture into a garage. When on 8 December the first plaintiff returned to the bungalow, he could not get in. The first plaintiff asked for an interim injunction designed to secure access to the bungalow.
Held – The first plaintiff was entitled to an interim injunction because—
(i) even if, as was prima facie the case, the first plaintiff had merely a licence, it was conceded that he had exclusive possession of the bungalow under the terms of his employment and accordingly by virtue of s 32(2)a of the Rent Act 1965 was to be deemed a tenant for the purpose of the prohibition on recovering possession otherwise than by court proceedings contained in s 32(1)b (see p 1114 j to p 1115 a, post);
(ii) the first plaintiff had made out a prima facie case of residence at the time of the exclusion from the bungalow by the defendant; in locking the plaintiff out, the defendant was in breach of s 32(1) (see p 1115 d, post);
(iii) although s 32 conferred on the first plaintiff no proprietory interest in the bungalow, the breach of its terms by the defendant was a tort (see p 1115 h, post), and if the court were to refuse the injunction, leaving the plaintiff to a remedy in damages, it would be allowing just the mischief which the section was designed to prevent (see p 1116 b, post).
Dictum of Lord Denning MR in Luganda v Service Hotels Ltd [1969] 2 All ER at 695 applied. Thompson v Park [1944] 2 All ER 477 distinguished.
Notes
For interim injunctions, see 21 Halsbury’s Laws (3rd Edn) 364–366, paras 763–766, and for cases on the subject, see 28 Digest (Repl) 748–756, 60–122.
Page 1113 of [1970] 1 All ER 1112
For the rights of a servant in occupation of his master’s premises, see 23 Halsbury’s Laws (3rd Edn) 410, 411, para 990.
For the Rent Act 1965, s 32, see 45 Halsbury’s Statutes (2nd Edn) 846.
Cases referred to in judgment
Luganda v Service Hotels Ltd [1969] 2 All ER 692, [1969] 2 Ch 209, [1969] 2 WLR 1056.
Thompson v Park [1944] 2 All ER 477, [1944] KB 408, 113 LJKB 561, 170 LT 207, 30 Digest (Repl) 539, 1736.
Cases also cited
Finbow v Air Ministry [1963] 2 All ER 647, [1963] 1 WLR 697.
Hemmings and Wife v Stoke Poges Golf Club Ltd [1920] 1 KB 720, [1918–19] All ER Rep 798.
Riggs, Re, ex parte Lovell [1901] 2 KB 16.
Torbett v Faulkner [1952] 2 TLR 659.
Motion
The plaintiffs, Keith Frederick Warder and Deirdre Rosalind Anne Warder, sought an interim injunction restraining the defendant, Denis Roy Cooper, from interfering with the plaintiffs’ access to and user and occupation of the bungalow of which the plaintiffs had been in occupation. The facts are set out in the judgment.
Gavin Lightman for the plaintiffs.
F M Ferris for the defendant.
Cur adv vult
19 December 1969. The following judgment was delivered.
STAMP J. Coopers Garages (Aldermaston) Ltd has a garage and filling station business on the Bath Road at Beenham, in Berkshire. The property, which includes a bungalow, is let on a lease to the company and the lease contains an unqualified covenant against underletting. The bungalow was erected so that it might be used to house a garage employee. The garage is rather isolated and it is difficult to get employees unless accommodation can be offered. The defendant, Denis Roy Cooper, has authority to grant, on behalf of the company, a licence to occupy the bungalow to persons employed in the garage business, but he says that neither he nor the company has any permission from the landlord to create a tenancy in respect of the bungalow.
Towards the end of September 1969 the defendant, who is the managing director and the majority shareholder of the company, acting on behalf of the company, engaged the first plaintiff as foreman. It is the defendants’ evidence that he told the first plaintiff that the bungalow would be available for the first plaintiff while he was working for the defendant. The defendant was desperate for a foreman and took on the first plaintiff without a reference.
The terms of the employment are recorded in a document dated 5 October 1969, which states:
‘Terms of Employment. Hours. Monday to Friday, 8 am to 5.30 pm. Lunch hour 1 pm to 2 pm. Saturdays. 8 am to 1 pm. Wages. £25. per week, overtime above the hours stated, 12/6 per hour. Bungalow. Rent free, whilst employed. Holidays. Two weeks paid holiday a year with the normal bank holidays. Notice. Two weeks notice to be served either way.’
In the meantime, the first plaintiff had commenced his duties and had moved himself, his wife, the second plaintiff, his family and his furniture into the bungalow. Shortly before 19 November, the defendant gave the first plaintiff oral notice to terminate employment on Friday, 5 December. On 19 November, the company gave the
Page 1114 of [1970] 1 All ER 1112
first plaintiff a written notice, which, for the purposes of this motion, I must take to have been in these terms:
‘Dear Sir, With reference to our conversation of last week wherein it was promised that you would get Notice to Quit we herein give you this notice. After a months’ trial we have decided that you are unsatisfactory. As per our agreement you have two weeks’ notice to date from 21 November 1969. We also remind you that the bungalow is to be vacant on December 5th 1969.’
5 December, the day on which the notice expired, was a Friday. On that day, the first plaintiff and his family left the bungalow and remained away until the following Monday evening. The defendant asserts that he had grounds, which he specifies, for thinking that the first plaintiff had left permanently. But his goods and furniture were still there. At some time prior to the evening of Monday, 8 December, the defendant changed the locks on the bungalow and moved some of the first plaintiff’s furniture into the garage. When, on 8 December, in the evening, the first plaintiff returned to the bungalow, he could not get in. He asks for an injunction designed to secure access to the bungalow.
The first plaintiff puts forward three grounds on which he claims such an injunction. First, he urges that he became, and is, a statutory tenant of the bungalow and that, therefore, no valid notice to quit has been served. Given the premise, no doubt the conclusion follows. The first plaintiff has not, however, in my judgment, made out a prima facie case that his occupation was occupation as a tenant. The fact that no rent was specified to be payable, that the landlord could not, without breaking his covenant in the lease under which he held the bungalow, sublet the bungalow, and that the employment was liable to be determined on two weeks’ notice, suggests that it may turn out otherwise at the trial that the occupation was under a licence rather than as a tenant.
Secondly, the first plaintiff urges that if, contrary to his first contention, his occupation was under a licence, he was entitled to remain for a reasonable time after the determination of the licence to enable him to find alternative accommodation. He asserts that the company was aware on Friday, 5 December, that the first plaintiff was having difficulty in finding alternative accommodation and that the defendant ‘did not demur’. There is a conflict of evidence here and since I regard it as most unlikely that the defendant did not demur to the first plaintiff staying on in the bungalow after his employment had ceased when it would be required for his replacement, I do not think that the first plaintiff has made out a prima facie case in this regard either. The first plaintiff had already had his two weeks’ notice, which, prima facie, the parties, having agreed to a notice of that length, was a reasonable notice to determine the licence. Indeed, counsel for the plaintiffs conceded that if the first plaintiff was entitled to a reasonable time after the determination of the licence, two weeks would be reasonable. But, as I have said, the first plaintiff had already had that time and I see no ground for implying a proviso that he should have a further two weeks to find alternative accommodation.
The third point made by the first plaintiff, which is based on s 32 of the Rent Act 1965 presents more difficulty. Subsection (2) of that section provides:
‘For the purposes of this Part of this Act a person who, under the terms of his employment, had exclusive possession of any premises otherwise than as a tenant shall be deemed to have been a tenant and the expressions “let” and “tenancy” shall be construed accordingly.’
Counsel on behalf of the defendant felt unable to argue that the first plaintiff did not have exclusive possession, so that if, as I think was prima facie the case, the first plaintiff had a licence, there was, for the purposes of Part III of the Rent Act 1965 and more
Page 1115 of [1970] 1 All ER 1112
particularly for the purposes of s 32(1) of the Act, a tenancy, and the first plaintiff was the tenant of the bungalow. Section 32(1) provides:
‘Where any premises have been let as a dwelling under a tenancy which is not a protected tenancy within the meaning of this Part of this Act and—(a) the tenancy (in this Part of this Act referred to as the former tenancy) has come to an end; but (b) the occupier continues to reside in the premises or part of them; it shall not be lawful for the owner to enforce against the occupier, otherwise than by proceedings in the court, his right to recover possession of the premises.’
Counsel for the defendant invited me to find, for the purposes of this motion, that before the lock on the bungalow was changed the first plaintiff had ceased to reside in the premises, so that s 32(1) (b) was not satisfied. But the first plaintiff was unquestionably resident at the bungalow on 5 December. He did not remove his furniture, and on the facts at present before the court, again it may turn out otherwise at the trial, I can only find that the first plaintiff has made out a prima facie case of residence at the time of his exclusion. The fact that the lock was changed suggests that the defendant did not think that residence had ceased.
On the facts before me, I therefore find that, in locking the first plaintiff out, the defendant was in breach of s 32(1) of the Rent Act 1965. Ought I then to grant the injunction sought? Counsel for the defendant, pointing to the fact that s 32 does not confer any rights on the first plaintiff—not even a right to remain in occupation—urged that an injunction ought not to be granted. Much reliance was placed by the first plaintiff on the recent decision of the Court of Appeal in Luganda v Service Hotels Ltd. The plaintiff in that case, who was, as the court held, entitled to six months’ security of tenure under the Act, was locked out of his residence by the landlord and obtained an injunction against the landlord to give him access. But, as counsel for the defendant pointed out, the distinction between that case and this is that in that case the Rent Act 1968 conferred a right to six months’ security of tenure, whereas there is nothing like that conferred by s 32. And, indeed, Edmund Davies LJ, in holding ([1969] 2 All ER at 696, [1969] 2 Ch at 220) the plaintiff entitled to the injunction which he sought, pointed to this right to remain in the premises for six months and distinguished the case from Thompson v Park, where the Court of Appeal held that where a licence to use certain premises had been wrongfully revoked the licensee could be restrained from entering on or using the premises and must content himself with a claim for damages for breach of contract. In Thompson v Park, the expelled party, having no interest in the land, was, after revocation of the licence, a trespasser, whereas in the Luganda case he was not; so tested, the present case falls within Thompson v Park and outside Luganda v Service Hotels Ltd. But I distinguish Thompson v Park from the present case on another ground. There, what the owner of the land was assumed to have done was to break the terms of the licence under which the defendant claimed to use it—a mere breach of contract—whereas here, what the defendant has done is to infringe the terms of an Act and so committed a tort. For although s 32 conferred on the first plaintiff no proprietary interest in the bungalow, the breach of its terms by the defendant was, in my judgment, a tort. The first plaintiff was clearly one of the class of persons whom the section was intended to protect, the injury—the evidence is that the first plaintiff is homeless—is of the kind that the section is intended to prevent and it is the breach of the statutory duty which is causing the damage to the first plaintiff.
However much sympathy I may feel for a defendant who has taken on a servant whom he finds unsatisfactory and cannot really recover the accommodation required for another employee who is to replace him, I feel bound to grant the injunction
Page 1116 of [1970] 1 All ER 1112
sought. The intention of Parliament that possession of premises occupied by a person in the position of the first plaintiff, may not be obtained except by proceedings in the court, is clear from s 32. The first plaintiff is entitled to the benefit of the section. If the court were to refuse the injunction, leaving the first plaintiff to a remedy to damages for the tort, it would be allowing just the mischief which the section was designed to prevent. If the matter had come before the court on a threat by the defendant to lock out the first plaintiff, I entertain no doubt that an injunction would have been granted. And to quote Lord Denning MR in the Luganda case ([1969] 2 All ER at 695, [1969] 2 Ch at 220), ‘They should not be in a better position by wrongfully locking him out’.
Injunction granted.
Solicitors: Pritchard, Englefield, Leader, Henderson agents for Gardner, Leader & Co, Newbury (for the plaintiffs); Francis & Parkes, Reading (for the defendant).
Richard J Soper Esq Barrister.
Procedure Direction
(House of Lords: Judicial fees)
[1970] 1 All ER 1116
Categories: PRACTICE DIRECTIONS
Court: HOUSE OF LORDS
Hearing Date(s): 26 MARCH 1970
House of Lords – Judicial fees – Fees on documents – Taxing fees.
As from 1 April 1970 the judicial fees of the House of Lords will be increased. The new figures will be as follows:—
Fees on documents
Lodgment of petition of appeal 4
Entering appearance 1
Issue of order of service 4
Return of recognisance 4
Lodgment of petition not referred to appeal committee 4
Lodgment of joint petion, from each party thereto 4
Lodgment of petition referred to appeal committee (including report thereon) 6
Application for order on consent, in lieu of petition 2
Lodgment of case, including laying case on the table, entering appeal on cause list, bar, fee, and counsel attending
26
Lodgment of joint case, including laying case on the table, entering appeal on cause list, bar fee, and counsel attending
46
Application to set down for hearing 4
Issue of final judgment 6
Taxing fees
The fees payable on the sums allowed by the taxing officer on bills of costs will be charged at 2 1/2 per cent (6d in the pound or part of a pound) on the whole of the sum allowed. This will replace the present charge of 2 1/2 per cent on the first £300 and 1 per cent thereafter.
26 March 1970.
David Stephens, Clerk of the Parliaments
Griffiths v Freeman
Jones v Freeman
[1970] 1 All ER 1117
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 25 FEBRUARY 1970
Criminal law – Handling stolen goods – Magistrates’ court – Information in general terms – Whether information bad for duplicity – Magistrates’ Courts Rules 1968 (SI 1968 No 1920), r 83(1) – Theft Act 1968, s 22(1).
Section 22(1)a of the Theft Act 1968 constitutes a single offence of handling stolen goods; accordingly an information preferred in a magistrates’ court simply alleging handling of goods contrary to the section is not bad for duplicity and is sufficient when read in the light of r 83(1)b of the Magistrates’ Courts Rule 1968; in the ordinary way, however, particulars should be given in order to enable the accused to understand the ingredients of the charge (see p 1118 j to p 1119 a and p 1119 b and d, post).
Notes
For handling stolen goods, see Supplement to 10 Halsbury’s Laws (3rd Edn), para 1565A 1.
For the scope of informations, see 25 Halsbury’s Laws (3rd Edn) 187, 188, para 339, and for cases on the subject, see 33 Digest (Repl) 199–201, 407–425.
For the Theft Act 1968, s 22, see 8 Halsbury’s Statutes (3rd Edn) 796.
Cases and authorities also cited
Cotterill v Lempriere (1890) 24 QBD 634.
Hargreaves v Alderson [1962] 3 All ER 1019, [1964] 2 QB 159.
R v Brown [1969] 3 All ER 198, [1969] 3 WLR 370.
R v Surrey Justices, Ex parte Witherick [1932] 1 KB 450, [1931] All ER Rep 807.
J C Smith, The Law of Theft, ch 12.
Edward Griew, The Theft Act 1968, ch 9.
Cases stated
These were three cases stated by justices for the county of Flint, acting in and for the petty sessional division of Prestatyn in respect of their adjudication as a magistrates’ court sitting at Prestatyn on 10 July 1969. On 3 July 1969 three informations were preferred by the respondent, Francis Charles Freeman, against the two appellants as follows—(1) charging the appellant, Clive Griffiths, that he on or about 15 April 1969 at Rose Cottage, Foel Gron, Bagillt, in the county of Flint, did handle 35,000 cigarettes, the property of the Chester Co-operative Society knowing or believing them to have been stolen, contrary to s 22 of the Theft Act 1968; (2) and (3), in identical terms charging (2) the appellant, Clive Griffiths, and (3) the appellant, George Jones, that each of them between 7 April 1969 and 5.30 pm on Tuesday, 15 April 1969, in the county of Flint, did handle certain specified food stuffs, the property of the Chester Cold Storage and Ice Co Ltd, knowing or believing the same to have been stolen, contrary to s 22 of the 1968 Act. The appellants in each case contended that the charge was bad in law in that each charge failed to specify that the alleged handling was dishonest, and failed to specify the type of handling alleged
Page 1118 of [1970] 1 All ER 1117
in the terms of s 22(1) of the 1968 Act. Each appellant was convicted on the offence charged and the appellants now appealed.
D A J Vaughan for the appellants.
A N Fricker for the respondent.
25 February 1970. The following judgments were delivered.
LORD PARKER CJ. These are three appeals by way of case stated from decisions of justices for the county of Flint sitting at Prestatyn, who in each case convicted the appellant of an offence contrary to s 22 of the Theft Act 1968, the offence being handling stolen goods.
The informations in each case took this form, albeit the articles in question were different: that the appellant, between certain days in the county of Flint, did handle, then are set out the substances handled to a total value of so much, the property of, etc, knowing or believing the same to have been stolen, contrary to s 22 of the Theft Act 1968. In the light of the point raised in these appeals it is unnecessary to refer to the facts at all. What happened was that at the very outset the point was taken that the informations were bad in law. The justices having heard argument were of opinion that the informations were good in law, accordingly the appellant in each case was asked to plead; he pleaded not guilty, but on the admitted facts he was convicted. In fact the points raised before the justices took this form, that the charge was bad in law and he ought not to be asked to plead thereto, that the charge failed to specify that the alleged handling was dishonest, and that the charge failed to specify the form of handling alleged in the terms of s 22(1) of the Theft Act 1968.
Before this court counsel for the appellants has recognised that a number of those alleged defects could be cured under s 100 of the Magistrates’ Courts Act 1952, and accordingly he confines his argument here to one point alone which, if correct, could not be cured under s 100. The point is that the charge in each case was void for duplicity. Section 22 of the Theft Act 1968 takes this form. In sub-s (1) it states what handling stolen goods consists of: sub-s (2) sets out the offence:
‘A person guilty of handling stolen goods shall on conviction on indictment be liable to imprisonment for a term not exceeding fourteen years.
Subsection (1), what one might call the definition provision, provides:
‘A person handles stolen goods if (otherwise than in the course of the stealing) knowing or believing them to be stolen goods he dishonestly receives the goods, or dishonestly undertakes or assists in their retention, removal, disposal or realisation by or for the benefit of another person, or if he arranges to do so.’
Counsel for the appellants says that the effect of the section is not to provide a single offence of handling, but to set out what are said to be no less than eighteen separate offences. If the latter construction is true, quite clearly the informations in the present case were void for duplicity. Accordingly it really becomes a question of the construction of s 22, and for my part I am quite satisfied that s 22 constitutes but one single offence. Accordingly, when one comes to the duty of the prosecution, one looks at r 83(1) of the Magistrates’ Courts Rules 1968c, which provides:
‘Every information … issued … for the purposes of, or in connection with, any proceedings before a magistrates’ court for an offence shall be sufficient if it describes the specific offence with which the accused is charged, … in ordinary language avoiding as far as possible the use of technical terms and without necessarily stating all the elements of the offence, and gives such particulars as may be necessary for giving reasonable information of the nature of the charge.’
It seems to me accordingly that it is sufficient to allege a handling of goods contrary
Page 1119 of [1970] 1 All ER 1117
to the section, but that in the ordinary way particulars should be given in order to enable the accused to understand the ingredients of the charge which he has to meet.
That was not done in this case, but quite clearly having regard to the agreed facts here, there was no embarrassment and no particulars were called for. In a case where there is likely to be any embarrassment it is quite clear to me that the information should set out particulars, and that if it does not, an application for particulars should be acceded to. It is a short point. I find it unnecessary to refer to the various cases to which we have been referred. I would only mention that for my part I would like to confine this judgment to proceedings in magistrates’ courts. It may be, whatever be the true position in law, that when one comes to deal with indictments, the better practice may be as envisaged in the latest appendix to Archboldd of having separate counts describing the different methods of handling. I would dismiss these three appeals.
ASHWORTH J. I agree.
DONALDSON J. I also agree.
Appeals dismissed.
Solicitors: Lake, Parry & Treadwell agents for J Lumley Williams & Co, Flint (for the appellants); Ward, Bowie & Co agents for Llewellyn-Jones & Armon Ellis, Wold (for the respondent).
N P Metcalfe Esq Barrister.
Practice Note
(Criminal Law: Application for leave to appeal)
[1970] 1 All ER 1119
Categories: PRACTICE DIRECTIONS
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND ASHWORTH J
Hearing Date(s): 17 MARCH 1970
Criminal law – Appeal – Practice – Application for leave to appeal – Importance of intending appellant seeking legal advice – Necessity for grounds of appeal to be substantial and particularised – Discretion to direct loss of time on refusal of unmeritorious applications.
Notes
For the power to direct that time spent in custody pending the determination of an appeal shall not count as part of a sentence, see the Criminal Appeal Act 1968, ss 29(1), 31(2)(h) (8 Halsbury’s Statutes (3rd Edn) 709, 711).
17 March 1970. The following judgment was delivered.
LORD PARKER CJ at the sitting of the court made the following statement.
After consulting those members of the Court of Appeal who help to man the Criminal Division I wish to make the following announcement.
In 1969 there were approximately 9,700 applications for leave to appeal to the Court of Appeal. This year the number may well exceed 12,000. In spite of strenuous efforts the delays caused by the rapid rise in numbers have become unacceptable. Where the applications have merit, the delays are intolerable. In each of the many thousands of applications, the Criminal Appeal office must obtain the papers from the court of trial, and, in most cases, a transcript. The papers must contain all the essential information about the case, and may be numerous and elaborate.
Page 1120 of [1970] 1 All ER 1119
The office is concerned with all of the many different aspects of the cases, and its task has become formidable. Although the staff has been strengthened, and is, and has been, under constant review, the present numbers of cases are not far short of overwhelming. The shorthand writers, on whom the demands for transcripts are made, are hard pressed already to man the courts quite apart from preparing transcripts. A transcript requires skill, and time, to prepare. Thousands of transcripts of high quality have been delivered, some promptly, but in many others there are difficulties and complaints about delay. All the papers have to be read by one or more of a small group of judges. In the course of a year they have to read tens of millions of words. In the first instance, with some exceptions, the papers in a case are read by one judge (known as the ‘single judge’). In 75 per cent of the cases, at a conservative estimate, it then becomes apparent, after time, effort and public money have been expended on obtaining the papers and the transcript, that the application is unarguable. Such applications delay those in which there are arguable points of substance and merit and absorb the time of the judges, who are much needed for other work, causing delay and hardship elsewhere. Both the court and the single judge have power in their discretion to direct that part of the time during which the prisoner is in custody after putting in his notice of application shall not count towards his sentence. Nevertheless, the power of the single judge to direct that time shall be lost has, hitherto, been exercised only in rare cases. The power has been used sparingly, because, until recently, a prisoner might be without legal advice, and, until the refusal by the single judge, might have thought that there were grounds to support his application. However, provisions for advice on appeals under legal aid were made in the Criminal Justice Act 197 and those provisions have been in force since October 1968. There has been, therefore, sufficient time since then for the provisions to become generally known and understood. Now, no prisoner need be without advice. A form of letter is provided in prison to enable him to ask for it. Further, if he has made his application without advice, because in some special circumstances he has been unable to obtain it, it is open to him to ask this court for assistance.
Where, therefore, an application which is unarguable is made, notwithstanding that advice on appeal is available, the single judge has no reason to refrain from directing that time shall be lost if he thinks it right so to exercise his discretion in all the circumstances of the case. From 7 April 1970 those who contemplate putting in a notice of application for leave to appeal, and their legal representatives, must bear this matter in mind. The court will take steps to bring it to their attention. It follows that it is important that those contemplating an appeal should seek advice. They should remember that it is useless to appeal without grounds and that the grounds should be substantial and particularised, and not a mere formula. Where the grounds submitted in support of the application are settled, and not merely settled but also signed by counsel, it will be plain to the single judge that there were reasons for making the application even if despite those grounds the single judge decides that the application is one that clearly ought to be dismissed. As the court has pointed out alreadya, counsel should not draft grounds of appeal unless they are prepared to support them by argument before the court.
Finally, where an application devoid of merit has been refused by the single judge and a direction for loss of time has been made, the full court, on renewal of the application, may direct that additional time shall be lost if, once again, it thinks it right so to exercise its discretion in all the circumstances of the case. The object is to enable prompt attention to be given to meritorious cases by deterring the unmeritorious applications which stand in their way.
N P Metcalfe Esq Barrister.
Jennings v Norman Collison (Contractors) Ltd
[1970] 1 All ER 1121
Categories: CONSTRUCTION: TORTS; Negligence
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON AND WINN LJJ AND SIR GORDON WILLMER
Hearing Date(s): 4, 5 FEBRUARY 1970
Building – Building regulations – Gangway – Concrete passageway part of actual building under construction – Whether a ‘gangway’ – Building (Safety, Health and Welfare) Regulations 1948(SI 1948 No 1145), reg 27(2).
Building – Building regulations – Safe means of access – Access to roof by means of ladder, concrete passageway and steel-framed door with deadlock – Means of access to and egress from roof constituted by passageway and door together – Construction (General Provisions) Regulations 1961(SI 1961 No 1580), reg 7.
Negligence – Contributory negligence – Appeal – Apportionment of liability – Principle on which appellate court will intervene – Substantial misjudgment by trial judge of factual basis on which he made his assessment.
The plaintiff was an experienced and able building foreman employed by the defendants who were building contractors. The defendants were engaged in the construction of a three-storey extension to an Oxford college which, at the time of the accident, was almost complete except for the erection of the internal staircases. There was a ladder from the third floor on to a concrete roof on which an erection had been built to take a tank. Inside this there was a concrete passageway 3 feet wide by 8 feet long, and the top of the ladder from the third floor rested against this passageway. When one climbed the ladder and got on to the passageway there was, immediately to the left, a steel-framed door made of glass, some 2 feet 6 inches wide, which led out of the erection on to the rest of the flat roof. The door had a deadlock whereby, when it was shut, the lock engaged and the door could then only be opened by using a key. Because the frame of the door was somewhat twisted, it was quite difficult to close and some force had to be used on the key to get the door shut so that the lock engaged. The means of access on to the roof beyond the door was along the passageway, through the door and on to the roof; and the means of egress from the open roof was through the door and on to the passageway. The distance between the roof and the floor below was some 8 feet 6 inches. The plaintiff, who had been doing some work on the roof, came back through the doorway on to the passageway and seized the key with his left hand in order to shut the door. As he was pulling the key, it came out of the lock, causing him to lose his balance and fall over the open space on his left on to the concrete floor below, whereby he suffered very grave injuries. In an action for damages against the defendants, the trial judge held that there had been no breach of statutory duty under the Building (Safety, Health and Welfare) Regulations 1948, reg 27(2)a, or of the Construction (General Provisions) Regulations 1961, reg 7b, or negligence, on the part of the defendants but that, if he was wrong, the plaintiff was guilty of contributory negligence and that he would have apportioned the blame as to 80 per cent to the plaintiff and 20 per cent to the defendants. On appeal by the plaintiff,
Held – The appeal would be allowed, because—
(i) although reg 27(2) of the regulations of 1948 had no application since, looked at from a common-sense point of view, the passageway was not a gangway within
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the meaning of that regulation (see p 1124 c, p 1127 g, and p 1128 d and f, post); dictum of Pearson LJ in Curran v William Neill & Son (St Helens) Ltd [1961] 3 All ER at 117 applied; yet,
(ii) the defendants were in breach of reg 7 of the regulations of 1961 in that the provision of the door with no handle, and nothing but the key to pull it closed, in the vicinity of an unguarded drop meant that the means of access to and egress from the roof where the plaintiff had to work were unsafe (see p 1126 g, p 1127 j, and p 1128 f and h, post); dictum of Parker J in Sheppey v Matthew T Shaw & Co Ltd [1952] 1 TLR at 1275 approved; and
(iii) the plaintiff was guilty of contributory negligence in that he did not appreciate the danger, as he should have done, and could have given instructions for safety measures to be taken, and although there was a site manager employed by the defendants who was in a position of authority over the plaintiff, as well as a safety officer whose duty it was to see that the work was generally conducted safely, so that a substantial measure of responsibility rested on the defendants, the trial judge having made a substantial misjudgment of the factual basis on which he made his assessment, the correct apportionment of blame was that the plaintiff was two-thirds and the defendants one-third to blame (see p 1126 j, p 1127 a and b, d to f, p 1128 b and p 1129 b, post).
Notes
The Building (Safety, Health and Welfare) Regulations 1948, reg 27, has been revoked and replaced by the Construction (Working Places) Regulations 1966 (SI 1966 No 94), reg 28. The Construction (General Provisions) Regulations 1961, reg 7, has been revoked and replaced by the Construction (Working Places) Regulations 1966(SI 1966 No 94), reg 6.
For the obligation to provide safe means of access in building operations, see 17 Halsbury’s Laws (3rd Edn) 125–128, para 206, and for a case on the subject, see 24 Digest (Repl) 1076, 332.
For the basis of assessment of liability in cases where there is contributory negligence, see 11 Halsbury’s Laws (3rd Edn) 317, para 513.
For the Building (Safety, Health and Welfare) Regulations 1948, reg 27, see 8 Halsbury’s Statutory Instruments (First Re-Issue) 199, and for the Construction (General Provisions) Regulations 1961, reg 7, see ibid 265.
Cases referred to in judgments
Brown v Thompson [1968] 2 All ER 708, [1968] 1 WLR 1003, Digest Supp.
Curran v William Neill & Son (St Helens) Ltd [1961] 3 All ER 108, [1961] 1 WLR 1069, Digest (Cont Vol A) 601, 344a.
Sheppey v Matthew T Shaw & Co Ltd [1952] 1 TLR 1272, 24 Digest (Repl) 1076, 332.
Trott v W E Smith (Erectors) Ltd [1957] 3 All ER 500, [1957] 1 WLR 1154, Digest (Cont Vol A) 597, 332a.
Appeal
This was an appeal by the plaintiff, Wilfred Alan Jennings, from an order of Lawton J dated 21 May 1969, dismissing his action for damages for personal injuries against the defendants, Norman Collison (Contractors) Ltd. The facts are set out in the judgment of Salmon LJ.
J R Phillips QC and P W Medd for the plaintiff.
R I Kidwell QC and G M M Wakeford for the defendants.
5 February 1970. The following judgments were delivered.
SALMON LJ. The plaintiff in this case is a building foreman of very considerable experience and ability and is in the employ of the defendants, who are building
Page 1123 of [1970] 1 All ER 1121
contractors. In 1965, the defendants were erecting an extension to Somerville College at Oxford, which was some three storeys high. By 24 December 1965, most of the work which the defendants had to do had been completed, but amongst the work that had not been finished was the erection of the internal staircases. There were ladders leading from the ground floor to the first floor, from the first floor to the second floor and from the second floor to the third floor, and then from the third floor on to a concrete roof. On this roof there had been an erection built to take a tank. Inside this there was what I will call neutrally a passageway of concrete 3 feet wide by 8 feet long. The top of the ladder leading from the third floor was resting against this concrete passageway inside the erection to which I have referred. The position is well shown in the photographs before us. It appears that leading out of the erection on to the rest of the flat concrete roof was a door. The door, we are told, was some 2 feet 6 inches or so wide, and the ladder was resting on the concrete passageway just next to the door, so that anyone climbing up the ladder and getting on to this passageway would find the door on his immediate left. This door was a steel-framed door, and it was made of glass. It had what is called a deadlock, that is to say, when the door was shut the lock engaged, and the only means of opening the door was by using a key. The means of access on to the roof beyond the door was along the passageway, through the door and on to the roof. The means of egress from the open roof was through the door, on to the passageway and then, if one was going down below, down the ladder. The distance between the roof and the floor below was some 8 feet 6 inches.
The evidence in the case consisted entirely of that given by the plaintiff himself. No evidence was called by the defendants, and they presumably and the judge certainly, because he expressly said so, accepted the plaintiff’s evidence as being entirely correct. It appears that the frame of the door was somewhat twisted, and it was quite a difficult operation to close the door. Some force had to be used on the key to get the door shut so that the lock engaged. On 24 December 1965, the plaintiff had been told that there was some leak on the roof, so that some further work would be required to be done there. He went up on to the roof to see what the trouble was. He climbed the ladder, which took him on to the passageway, with the door immediately on his left; he opened the door by means of the key; he went out on to the roof to do whatever work he had to do and then he came back intending to retrace his steps. He got through the doorway safely on to the concrete passageway. He then seized the key with his left hand in order to shut the door, and, as he was pulling the key so as to shut the door, the key came out of the lock, which caused him to lose his balance and fall over the open space on his left on to the concrete floor some 8 feet or so below him. Most unfortunately, he met with very grave injuries.
He brought this claim against the defendants, claiming damages for breaches of statutory duty, to which I will refer in a moment, and also claiming damages for negligence, the particulars of negligence being that:
‘The Defendants their servants or agents were negligent in that they failed to ensure that the said metal door leading to the roof of the said extension was provided with a handle when they ought to have foreseen that their employees would try to shut the said door by using the key and that the key might come out of the keyhole, causing them to lose their balance and fall from the said concrete platform which was not made safe by the provision of a guard rail.’
The learned judge found against the plaintiff. He held that there was no breach of statutory duty and no negligence. He further went on to hold that, if he should be wrong in any of those findings, the plaintiff was guilty of a high degree of contributory negligence, and he would have apportioned the blame as to 80 per cent to the plaintiff and 20 per cent to the defendants. From that decision the plaintiff now appeals.
The first alleged breach of statutory duty with which I propose to deal is the
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allegation made by the plaintiff that the defendants were in breach of reg 27(2) of the Building (Safety, Health and Welfare) Regulations 1948c. It provides:
‘All gangways, runs and stairs from which a person is liable to fall a distance of more than 6 feet 6 inches shall be provided with—(a) suitable guard-rails of adequate strength to a height of at least 3 feet above the gangway … ’
The contention on this appeal is that what I have called the passageway was in reality a gangway within the meaning of that word in these regulations, and that the plaintiff was liable to fall a distance of more than 6 feet 6 inches, and that the defendants had failed to supply suitable guardrails of adequate strength to a height of at least 3 feet. Indeed, they had not supplied any guardrails at all.
The first question that falls to be decided is whether the decision of the judge was right when he held that this 8 feet by 3 feet passageway was not a gangway within the meaning of the regulation. This is a mixed question of fact and law. For myself, I think, looking at it from a common-sense point of view, that it is impossible to describe this 8 feet by 3 feet concrete passage as a gangway. That is all that it is necessary to decide on this part of the case. There is, however, another reason why, in my judgment, the learned judge’s view is probably correct. Regulation 26 is in these terms (I only read the relevant words):
‘(1) Every gangway … from any part of which a person is liable to fall a distance of more than 6 feet 6 inches shall—(a) be closely boarded, planked or plated … ”
Counsel for the defendants says, with great force, that this regulation, according to the express language which it uses, purports to apply to every gangway. If every gangway is to be closely boarded, planked or plated, it seems to follow that this concrete passageway, or any floor of that kind, is something to which the framers of this regulation cannot have intended to refer. He then goes on to rely on a proviso, the relevant parts of which provides
‘Provided that the requirement of paragraph (1)(a) [ie the paragraph that I have just read] shall not apply—… (ii) to a gangway or run which is part of the permanent fixed equipment of a building and the boards, plates or planks of which are so secured as to prevent their moving and so placed that the space between adjacent boards, planks or plates does not exceed I inch, if there is no risk of persons below such gangway or run being struck by tools or other objects falling through the gangway or run … ’
It is important to remember that we are considering what the meaning of the word ‘gangway’ is in these building regulations. It may, and indeed, it does, in my view, have an entirely different connotation when used in relation to a factory in the Factories Acts. Counsel for the defendants says that these building regulations do not contemplate any part of the permanent building as being a gangway for the purpose of this regulation, and he draws attention to the fact that, in the proviso, the words used are ‘… a gangway … which is part of the permanent fixed equipment of a building’. If it was contemplated that a gangway could be a permanent part of the building, one would have expected the regulation to run ‘a gangway or run which is a permanent part of the building’. Moreover, since the gangway has to consist, according to the definition of a gangway in the regulation, of boards, plates or planks, counsel says (and I think correctly) that it cannot be part of the permanent building.
Some reliance was placed on behalf of the plaintiff on Curran v William Neill & Son (St Helens) Ltd. I do not propose to deal with that case in detail, because, in my view,
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it does not really carry the matters which were in dispute in this case any further. The court was not considering the point which concerns us. That was a case in which a gutter was being constructed and the workmen, as they progressed with the construction of a gutter, were walking along the part of the gutter which they had already constructed and using it as a gangway in order to carry materials required to project the gutter forward. Whilst one of them was carrying some materials along the gutter, the gutter gave way and the workman fell to the ground. Pearson LJ said ([1961] 3 All ER at 117, [1961] 1 WLR at 1082):
‘Those provisos [he was referring to reg 26 of the 1948 building regulations] refer to something which is permanent and which is also a specific piece of equipment rather than a part of a building which may sometimes be used as a working place or as a route to a working place.’
Although it was not necessary for the decision of the case, and the court did not, I think, attempt to decide this point, it is fairly plain that Pearson LJ took the view that a gangway or working platform, although it might be part of the permanent equipment of a building, eg a catwalk, which could conveniently be used by workmen in the course of construction, certainly could not consist of a part of the actual building itself. I incline to the same view.
It follows that the learned judge’s conclusions on this part of the case cannot be faulted.
A suggestion was made during the course of the argument that the words in reg 26(1) ‘Every gangway … from any part of which a person is liable to fall a distance of more than 6 feet 6 inches … ’ meant ‘is likely to fall’. But although it is not necessary to decide the point, I very much doubt if that is the true construction of the regulation. I think that it means no more than this: every gangway from which person ‘may’ fall a greater distance than 6 feet 6 inches.
I should have referred to the argument put on behalf of the plaintiff to the effect that reg 26 really meant that any gangway which is constructed of boards, planks or plates shall be closely boarded, planked or plated and, therefore, does not apply to gangways which are not. The regulation does not say so. It refers to ‘every gangway’, and then it goes on to state how that gangway shall be constructed, making certain exceptions in the proviso.
The next alleged breach of statutory obligation with which I will deal is a breach of reg 7 of the Construction (General Provisions) Regulations 1961d. That provides:
‘(1) Sufficient safe means of access and egress shall so far as is reasonably practicable be provided and maintained to and from every place at which any person has at any time to work and every place shall so far as is reasonably practicable be made and kept safe for any person working there.’
There is no doubt that the open roof to which I have referred was a place at which, on 24 December 1965, the plaintiff had to work, and, indeed, he had had to work there on a number of occasions previously. The means of access to and egress from that place was the passageway and door to which I have referred. As I have already stated, the way to get to the working place was by the concrete passageway through the door, and the way to get away from it was through the door on to the concrete passageway.
The question for us is: was that means of access and egress safe? In Trott v W E Smith (Erectors) Ltd, Jenkins LJ, who gave the leading judgment of this court, cited ([1957] 3 All ER at 505, [1957] 1 WLR at 1100),
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with approval, a passage from the judgment given by Parker J in Sheppey v Matthew T Shaw & Co Ltd ([1952] 1 TLR 1272 at 1275), and these are the material words:
‘A means of access is unsafe if it is a possible cause of injury to anybody acting in a way a human being may be reasonably expected to act in circumstances which may reasonably be expected to occur.’
The learned judge in the course of his judgment, when he was referring to this door and the lock, said:
‘One result of having a lock like that, of course, is this, that the door can be kept locked if the key is removed. Another result which is relevant to this case is that it is not very easy to shut a door so fitted, because you can only pull the door towards you to shut it by twisting the key slightly in the lock and then pulling on the key. Of course, if you do not twist the key sufficiently to stop it coming out of the lock when you start pulling, the key will in fact come out.’
It is quite obvious that, if the key does in fact come out, the man who is pulling is likely to lose his balance, and there he is very close to the edge of this 8 feet drop, and, if the key comes out, it is possible—indeed it is probable—that he may overbalance and drop on to the floor below, thereby injuring himself. It is equally plain, according to the finding of the learned judge, that a man could meet with an accident of this sort without any negligence on his part. The learned judge said later in his judgment:
‘The allegation contained in the defence that he [ie the plaintiff] was guilty of some kind of negligence in losing his balance, and in allowing the key to come out of the lock, in my judgment does not begin to be contributory negligence on its own.’
It seems plain to me that anybody acts in a way a human being may reasonably be expected to act if he does precisely what the plaintiff did. It is equally plain that the circumstances are such that it could be reasonably expected that, in these circumstances, an accident might well occur. I think that the learned judge fell into error by looking at this passageway of 8 feet by 3 feet by itself as being the means of access to the place of work. I think that he may have been led into the error by the fact that all the emphasis was put on the passageway by the plaintiff. It was, however, only part of the access. The access consisted of that passageway and the door, and it was a combination of the fact that the door was to some extent difficult to shut and could only be closed by pulling on the key when the plaintiff was standing close to a drop and that, if the key came out, as well it might, he was likely to fall on to the floor below, that made this means of access unsafe. Therefore, with great respect to the learned judge, I cannot accept this finding that there was no breach of reg 7.
That being so, it makes it quite unnecessary to consider whether there was anything in the nature of negligence on the part of the defendants. I think that it is plain from this uncontradicted evidence of the plaintiff, which was accepted by the judge, that the means of access to and egress from the roof was unsafe.
The only other question with which it is necessary for me to deal is the judge’s apportionment of blame. It is very unusual for this court to interfere with an apportionment, and we are slow to do so. But we are entitled—indeed, I think it is our duty—to do so if we come to the conclusion that the apportionment is seriously wrong. For my part, I have come to that conclusion. That the plaintiff was guilty of contributory negligence there is no doubt. He was, as I have already said, a highly experienced foreman and an intelligent man. He said, in effect (I am paraphrasing his evidence), that the danger had never occurred to him. It should have occurred to him. It is said that he could have protected himself if it had occurred
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to him by hanging on with his right hand to one of the struts which were on the far side of the passageway. For my part, I do not place very much reliance on that. If, however, he had appreciated the danger, as I think that he should have done, he could have done one of two things; he could have given instructions for a temporary handle to be fixed to the door so that it could be pulled to without the risk to which I have already referred; alternatively, he could have had a balustrade erected along the length of the passageway and put the ladder at the other end of the passageway to the door so that, if the key came out of the door when it was being pulled shut and whoever was pulling it shut overbalanced, he would be saved by the balustrade from falling to the floor below. Which of those two alternatives would have been the more practical I do not know. I suspect the former. It matters not. There can be no doubt that, if he had asked or given instructions for either of those two methods to be adopted, they would have been adopted and the accident could have been avoided. It must be remembered also that he had been through this door on a good many occasions, he knew all about the frame being twisted and the difficulty of shutting it and the fact that the key was there, and it ought to have been obvious, as the learned judge said, that the key could easily slip out when the door was being pulled to.
On the other hand, there was a site manager in the employ of the defendants and a safety officer. The site manager was in a position of authority over the foreman. It is true that he was a young man, but the judge accepted that he was an extremely intelligent young man who was supervising and in charge of the site and was there very frequently. In addition, there was a safety officer, and, indeed, under reg 5 of the regulations of 1961, to which counsel for the plaintiff has referred, it was the defendants’ duty to appoint a safety supervisor, which they did. His duty was to see that the work was generally conducted safely and to supervise the whole of the works, to ensure that that requirement should be carried out. To my mind, a substantial measure of responsibility rests on the defendants. I would consider that the right apportionment of blame here is that the plaintiff is two-thirds to blame and the defendants one-third to blame; ie the plaintiff will recover one-third of whatever may be the appropriate sum to award him by way of damages, and I would allow the appeal accordingly.
WINN LJ. I agree. My reasons for so agreeing are so virtually identical with those expressed by Salmon LJ that I do not intend to give any separate expression of them.
I do, however, desire to say with reference to the submission that the platform or passageway was a gangway within the meaning of the Building (Safety, Health and Welfare) Regulations 1948e, that I myself would reject that submission. In coming to that conclusion, it is inevitable that one should have formed a personal opinion of the relative cogency of the respective judgments in Curran v William Neill & Son (St Helens) Ltd. Of those judgments, I myself entirely concur with that of Pearson LJ and, indeed, with the different but equally sound reasoning, I respectfully think, of Willmer LJ. I do not find myself personally in agreement with the judgment of Pearce LJ in the Curran case. I would prefer to reserve for future consideration acceptance or rejection of the arguments that counsel for the defendants tendered with regard to the construction of reg 26 and, indeed, equally to reserve consideration of the submission made by counsel for the plaintiff as to its proper construction. I am not prepared to agree with either of those suggested constructions.
So far as reg 7 of the Construction (General Provisions) Regulations 1961f is concerned, I completely agree without qualification with all that Salmon LJ has said.
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I, too, think that the learned judge misdirected his mind when he concentrated on access from the ladder to the roof and not on the access from that portion of the roof which was contained in the building to that portion of the roof, and egress from that portion of the roof, which lay outside the glass door.
I, too, would vary the assessment of proportions of blame, and feel that that is justified in this particular case notwithstanding the terms of the judgment of this court in Brown v Thompson. This is a case where, as Salmon LJ has said (and I agree) the learned judge made a substantial misjudgment of the factual basis on which he made his assessment. I would agree with the judgment given by Salmon LJ.
SIR GORDON WILLMER. I also agree; and I can state my reasons quite briefly.
I am prepared to assume, in the light of what was said in Curran v William Neill & Son (St Helens) Ltd, without necessarily deciding it, that something which will be a permanent part of a building when that building has been completed may be capable of being a gangway within the meaning of reg 27 of the Building (Safety, Health and Welfare) Regulations 1948g. But having said that, I think it right to go on to say that I would approach the question in this case in the same way as I myself approached the similar question in the Curran case, by asking, as a matter of common sense, whether this particular structure can fairly be called a gangway? As a matter of common sense, I do not think that it could be. I reach that conclusion amongst other reasons, because it was not a way that led from anywhere to anywhere at the time when this unfortunate accident happened. No doubt it was intended eventually, when the staircase had been constructed, to lead from the head of the staircase through the door on to the exterior roof. But at the time we are talking about, it was in no sense a way by which people were likely to pass or repass; and that, I should have thought, is an essential feature of a gangway. Nor was it being used as such by anybody, and certainly it was not being used as such by the plaintiff at the time of his accident. I agree, therefore, although perhaps not quite for the same reasons, that reg 27 has no application in the circumstances of the case.
I am, however, abundantly satisfied that this is a case in which a breach of reg 7 of the Construction (General Provisions) Regulations 1961h has been proved, in the sense that the defendants failed to provide a safe means of access and egress. The learned judge, who decided in favour of the plaintiff, concentrated his attention on, or at least overemphasised the importance of, the access from the ladder to what has been described as the passage. But he seems to have overlooked the plaintiff’s evidence on the point, which has been the subject of a good deal of the argument before us, as to the safety of the doorway when taken in conjunction with the passage immediately adjacent to it. He states his conclusion as follows:
‘… I am quite satisfied on the evidence in this case that the ladder up to this piece of roof underneath the tank housing was a sufficient safe means of access and egress to and from the roof.’
With the greatest possible respect to the learned judge, that is not the point in this case, or at any rate it is by no means the whole of the point. It seems to me, for the reasons which Salmon LJ has already given, that the provision of this particular kind of door, especially as the frame was twisted, with no handle, and with nothing but the key to pull it closed, in the vicinity of an unguarded drop of 8 feet 6 inches, down which anybody could fall if he overbalanced, was not a safe means of access to the roof. I agree with the view already expressed that this falls exactly within the words used by Parker J in Sheppey v Matthew T Shaw & Co Ltd ([1952] 1 TLR 1272 at 1275) and adopted by
Page 1129 of [1970] 1 All ER 1121
Jenkins LJ in Trott v W E Smith (Erectors) Ltd ([1957] 3 All ER 500 at 505, [1957] 1 WLR 1154 at 1160) I do not pause to read the words again; they have already been read. In those circumstances, I am satisfied that the learned judge came to a wrong conclusion so far as concerns reg 7 of the regulations of 1961.
That leaves only the question of apportionment of blame. As to that, I do not wish to add anything to what has already been said beyond recording my agreement with the proposed apportionment of two-thirds and one-third.
Appeal allowed. Plaintiff held two-thirds and defendants one-third to blame. Parties agreed that on full liability the damages would be £20,000.
Solicitors: Kinch & Richardson agents for Fairfax, Barfield & Bilncowe, Banbury (for the plaintiff); Herbert Smith & Co (for the defendants).
Euan Sutherland Esq Barrister.
R v Bhagwan
[1970] 1 All ER 1129
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND CROSS LLJ AND BRABIN J
Hearing Date(s): 5, 6, 17 FEBRUARY 1970
Criminal law – Conspiracy – Conspiracy to commit act injurious to public interest – Conspiracy to evade controls on immigration – Evasion of examination on landing – Whether unlawful as tending to defeat intent and purpose of statute – Commonwealth Immigrants Act 1962, Sch 1, Part I, para 1.
The appellant, a Commonwealth citizen to whom the provisions of the Commonwealth Immigrants Act 1962 applied, a landed, with others, at a point on the English coast where there was no immigration officer so that he was not examined in accordance with para 1 of Part I of Sch 1a to the Act. He was charged with conspiracy to evade the control on immigration of Commonwealth citizens into the UK in order that he might enter the UK without, on landing, submitting himself for examination.
Held – The indictment disclosed no offence known to the law (see p 1135 c, post), because—
(1) the appellant had not committed any act expressly prohibited or caused any other person to commit such an act (see p 1134 f, post); R v Newland [1953] 2 All ER 1067 distinguished; accordingly
(ii) he could be guilty of a criminal conspiracy only if his act in not submitting himself to examination was injurious to the public interest as tending to defeat the clear intention and purpose of the Commonwealth Immigrants Act 1962 (see p 1134 f and g, post); and
(iii) the scheme and purpose of the Act (prior to its amendment by the Commonwealth Immigrants Act 1968) did not contemplate that every Commonwealth citizen subject to control should necessarily be examined by an immigration officer (see p 1134 h, post)
Notes
For conspiracy, see 10 Halsbury’s Laws (3rd Edn) 310–314, paras 569, 570, and for cases on the subject, see 14 Digest (Repl) 121–125, 851–869.
Page 1130 of [1970] 1 All ER 1129
For the examination of Commonwealth immigrants, see Supplement to 5 Halsbury’s Laws (3rd Edn) para 1514, and for offences in connection with the control of immigration, see ibid para 1515.
For the Commonwealth Immigrants Act 1962, Sch 1 (as originally enacted), see 42 Halsbury’s Statutes (2nd Edn) 21. The Commonwealth Immigrants Act 1962 has been amended by the Commonwealth Immigrants Act 1968.
Cases referred to in judgment
R v Newland [1953] 2 All ER 1067, [1954] 1 QB 158, [1953] 3 WLR 826, 117 JP 573, 37 Cr App Rep 154, 15 Digest (Repl) 913, 8787.
Shaw v Director of Public Prosecutions [1961] 2 All ER 446, [1962] AC 220, [1961] 2 WLR 897, 125 JP 437, 45 Cr App Rep 113, Digest (Cont Vol A) 339, 919a.
Cases also cited
Calvin’s Case (1608) 7 Co Rep 1a.
Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] 1 All ER 142, [1942] AC 435.
Fender v Mildmay [1937] 3 All ER 402, [1938] AC 1.
Quinn v Leathem [1901] AC 495, [1900–03] All ER Rep 1.
R v Barnett [1951] 1 All ER 917, [1951] 2 KB 425.
R v Bassey (1931) 22 Cr App Rep 160.
R v Blamires Transport Services Ltd [1963] 3 All ER 170, [1964] 1 QB 278.
R v Bramley (30 October 1946) unreported.
R v Brixton Prison Governor, ex parte Ahson [1969] 2 All ER 347, [1969] 2 QB 222.
R v Griffiths [1965] 2 All ER 448, [1966] 1 QB 589.
R v Higgins (1801) 2 East 5.
R v Kenrick (1843) 5 QBD 49.
R v Mawbey (1796) 6 Term Rep 619, [1775–1802] All ER Rep 457.
R v Sterling (1663) 1 Lev 125.
R v Wheatley (1761) 2 Burr 1125.
R v Whitaker [1914] 3 KB 1283.
R v Willett (1906) 70 JP 127.
R v Young (1944) 30 Cr App Rep 57.
Schmidt v Secretary of State for Home Affairs [1969] 1 All ER 904, [1969] 2 Ch 149.
Appeal
This was an appeal by Dharam Singh Bhagwan against his conviction at the Central Criminal Court (Judge Humphreys QC) on 22 October 1969 on his plea of guilty to a charge of conspiracy to evade the control on immigration imposed under the Commonwealth Immigrants Act 1962. The trial judge granted a certificate of appeal on the ground that the indictment disclosed no offence known to the law. On 28 May 1969, the appellant was interviewed in Hayes, Middlesex, by police officers when, in answer to questions, he said that he had landed in a fishing boat somewhere on the Engligh coast with eight or nine other men and that he had not been examined by an immigration officer. The appellant admitted that he had been in the United Kingdom for many months. His passport disclosed that he had left India on 23 March 1967 and it bore no endorsement with a landing stamp at any UK port and he had no work permit.
Quintin Hogg QC and V K Winstain for the appellant.
R D L Du Cann for the Crown.
Cur adv vult
17 February 1970. The following judgment was delivered.
WIDGERY LJ read the judgment of the court. The appellant pleaded guilty at the Central Criminal Court to a charge of conspiracy, and was
Page 1131 of [1970] 1 All ER 1129
sentenced to one day’s imprisonment with a recommendation that he be deported. He is a citizen of India and thus a Commonwealth citizen by virtue of s 1 of the British Nationality Act 1948. The indictment was in the following terms:
‘Statement of Offence. Conspiracy to evade the control on immigration imposed under the Commonwealth Immigrants Act, 1962.
Particulars. Between the 1 January and 23 October, 1967, conspiring with other persons to evade the control on immigration of Commonwealth citizens into the United Kingdom in order that you, being a Commonwealth citizen and subject to such control, might enter the United Kingdom without, upon landing, submitting yourself for examination by an immigration officer and medical inspector and without holding an employment voucher’.
Prior to the entry of his plea the appellant had moved to quash the indictment on the ground that it disclosed no offence known to the law, but this submission was overruled. He now appeals, by authority of a certificate of the trial judge, on the same ground.
This appeal requires a careful examination of the terms of the Commonwealth Immigrants Act 1962. By its long title it is described as an Act (inter alia) to make temporary provision for controlling the immigration into the United Kingdom of Commonwealth citizens. Its purposes is novel in that a Commonwealth citizen is also a British subject by virtue of s 1(2) of the British Nationality Act 1948, and there had never previously been any restriction on, or control of, entry of British subjects into the UK. By s 1(2) of the 1962 Act Part I of that Act applies to any Commonwealth citizen, other than a person born in the UK or a citizen of the UK and colonies holding a UK passport. The Act accordingly applied to the appellant. By s 3(1)(a) it is provided that the provisions of Part I of Sch 1 shall have effect with respect to ‘the examination of persons landing or seeking to land in the United Kingdom from ships and aircraft’. Paragraph 1 of Part I of Sch 1 provides:
‘(1) Subject to the provisions of this paragraph, an immigration officer may examine any person who lands or seeks to land in the United Kingdom for the purpose of ascertaining whether that person is or is not a Commonwealth citizen subject to control under Part I of this Act, and if so for the purpose of determining what action, if any, should be taken in his case under the said Part I; and it shall be the duty of every such person to furnish to an immigration officer such information in his possession as that officer may reasonably require for the purpose of his functions under this paragraph.
‘(2) A person shall not be required to submit to examination under this paragraph after the expiration of the period of twenty-four hoursb from the time when he lands in the Untied Kingdom unless, upon being examined within that period, he is required in writing by an immigration officer to submit to further examination.’
The immigration officer referred to is an officer appointed by the Secretary of State (s 16) and the powers of such an officer, on the examination of a Commonwealth citizen to whom the Act applies, are contained in s 2. In brief, he has a discretion to admit or refuse admission, subject to the provisions of s 2(2) and (3), which specify a number of circumstances in which admission cannot be refused. In particular a Commonwealth citizen landing in the UK cannot be refused admission if under s (2) (3) (a) he has an employment voucher of the kind there described, unless the overriding power of refusal under s 2(4) or (5) arises on medical grounds, or in the interests of national security or by reason of his criminal record, or if a deportation order in respect of him is in force.
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The offences which may be committed by a Commonwealth citizen under the Act appear in s 4. The two material to this case are as follows:
‘(1) If any person being a Commonwealth citizen to whom section one of this Act applies—(a) enters … the United Kingdom, otherwise than in accordance with the directions or under the authority of an immigration officer, while a refusal of admission under section two of this Act is in force in relation to him … he shall be guilty of an offence; …
‘(4) If any person acts in contravention of, or fails to comply with, any provision of the First Schedule to this Act, or of any order made, directions given or requirement imposed thereunder … he shall be guilty of an offence.’
The offence is a summary offence in each case (s 14).
These provisions provide a striking contrast to those which for nearly 50 years had controlled the entry of aliens into the UK. By the Aliens Order 1953c, art 1—
‘… an alien shall not land … in the United Kingdom except with the leave of an immigration officer, and shall not so land … elsewhere than at an approved port … ’
Thus an alien commits an offence by landing, unless he comes by a prescribed route, and submits himself to an examination, whereas a Commonwealth citizen, even though subject to control under the Act, may land wherever he chooses and is, in our opinion, under no obligation to seek out an immigration officer and present himself for examination. Counsel for the Crown contended that since the immigration officer has a duty to examine, there must be a corresponding duty on the immigrant to submit himself for examination, but we do not regard this as applying to an immigrant who lands at a point where no immigration control exists. Indeed the terms of para 1 of Sch 1 are permissive and we do not think that the Act imposes a duty to examine on the immigration officer unless he has had directions to that effect from the Secretary of State under s 16(3).
As will appear later, the 1962 Act was substantially amended in 1968 but in the form in which it existed at the date of this alleged offence it left the extent of control to be exercised on Commonwealth immigration very much in the hands of the Secretary of State. It was for him to decide how many immigration officers to appoint and where to deploy them. It was for him to direct on such matters as whether examination should be selective or should apply to all persons landing. On the immigrant’s side there was no restriction on his right as a British subject to land where he chose and no prohibition of landing unless he had in fact been examined by an immigration officer and refused admission (s 4(1)(a)).
By pleading guilty to this charge the appellant admitted the facts alleged in the particulars of the indictment. It may thus be assumed that he well knew that his entry was subject to control and that if he landed at one of the more conventional points of entry he was liable to be examined by an immigration officer and refused admission. It may also be assumed that he deliberately chose to land at a point where he was unlikely to find an immigration officer and that he did this in combination with others. Counsel for the Crown invited us to look at the depositions for further details, in particular as to the route followed from India and the constitution of the appellant’s party, but in the face of objection from counsel for the appellant we decided that this issue should be determined on the wording of the indictment.
Counsel for the Crown concedes that the appellant committed no substantive offence under the 1962 Act but contends that he was guilty of an indictable conspiracy by reason of his having so acted in combination with others.
According to Hawkins’s Pleas of the Crownd (see Archbold’s Criminal Pleading,
Page 1133 of [1970] 1 All ER 1129
Evidence & Practicee), conspiracy as an indictable misdemeanour consists in the agreement of two or more persons to do an unlawful act or to do a lawful act by unlawful means. Many textbook writers have endeavoured to classify the acts which may be treated as unlawful for this purpose, but the meaning of the word remains elusive. It is clear that an agreement to commit a substantive crime, to cheat and defraud, or to commit certain torts, is sufficient to support an indictment but none of these is relevant to the present case. There remains a further class of which Lord Reid said in Shaw v Director of Public Prosecutions ([1961] 2 All ER 446 at 456, [1962] AC 220 at 273, 274):
‘No one has ever attempted to define what makes an act “unlawful” so as to bring it within this class, the law seems to be haphazard depending largely on historical accident. Perhaps as good a summary as any is that which goes back to early editions of Professor Kenny’s bookf ”… certain other acts … which … are not breaches of law at all, but which nevertheless are outrageously immoral or else are, in some way, extremely injurious to the public“.’
The modern example of this class which approaches most closely to the present case is R v Newland, a decision of the Court of Criminal Appeal in 1953. At that time an order having statutory force and known as the Domestic Pottery (Manufacture and Supply) Order 1947g, sought to prohibit the sale of decorated pottery on the home market in order that it should all be exported, and, accordingly, prohibited manufacturers from selling such pottery except for export. The accused obtained decorated pottery from a manufacturer by falsely pretending that it would be exported, but then sold it on the home market. The order did not prescribe a penalty for making such a false declaration nor did it specifically prohibit the obtaining of decorated pottery by such means, or its subsequent sale. The accused were convicted of conspiring to effect a public mischief and this conviction was upheld on appeal.
Lord Goddard CJ, in giving the judgment of the court observed that although the order did not specifically deal with the obtaining of goods in this way ([1953] 2 All ER at 1070, [1954] 1 QB at 164)—
‘… it is obvious that, if persons who falsely represent that they intend to export the goods and thereby obtain supplies of them could then with impunity sell the goods in this country, the whole scheme would break down and the object of the legislature would be defeated.’
He confirmed that ([1953] 2 All ER at 1071, [1954] 1 QB at 165)—
‘It is much too late to object that a conspiracy to effect a public mischief is an offence unknown to the law.’
And whilst recognising the caution which the courts should observe when asked to hold an act to be one tending to create a public mischief, he pointed to two reasons which justified the conviction in that case, namely ([1953] 2 All ER at 1072, [1954] 1 QB at 166):
‘The particulars sufficiently allege a common law misdemeanour, namely, conspiracy, and whether the matter is looked at simply as a conspiracy to effect an unlawful purpose or a conspiracy by dishonest devices to defeat the clear intention and purpose of an Act of Parliament or to work to the prejudice of the State, in our opinion, they disclose offences which have long been known to the common law of this country.’
Page 1134 of [1970] 1 All ER 1129
In Shaw’s case the indictment charged a conspiracy to corrupt public morals. Unlike the present case and R v Newland it was not concerned with the use of a charge of conspiracy to reinforce a system of control imposed by statute, but it nevertheless throws light on the duty of the courts to intervene in cases of the public mischief type when Parliament has failed to do so. Viscount Simonds in upholding the power of the court to convict of the offence then charged said ([1961] 2 All ER at 452, [1962] AC at 267):
‘In the sphere of criminal law, I entertain no doubt that there remains in the courts of law a residual power to enforce the supreme and fundamental purpose of the law, to conserve not only the safety and order but also the moral welfare of the state, and that it is their duty to guard it against attacks which may be the more insidious because they are novel and unprepared for.’
He pointed out that the court has a residual power ([1961] 2 All ER at 452, [1962] AC at 268):
‘… where no statute has yet intervened to supersede the common law, to superintend those offences which are prejudicial to the public welfare. Such occasions will be rare, for Parliament has not been slow to legislate when attention has been sufficiently aroused.’
On the same topic Lord Reid referred to the fact that the judges appear to have continued to extent the law of conspiracy after they have ceased to extend offences by individuals and added ([1961] 2 All ER at 457, [1962] AC at 275):
‘Even if there is still a vestigial power of this kind, it ought not, in my view, to be used unless there appears to be general agreement that the offence to which it is applied ought to be criminal if committed by an individual … When there is sufficient support from public opinion, Parliament does not hesitate to intervene. Where Parliament fears to tread it is not for the courts to rush in.’
Although the present case does not charge conspiracy to effect a public mischief it must, we think, be subject to the same principles since the only basis on which the act agreed on in this case can be described as ‘unlawful’ is that it was injurious to the public interest.
The appellant’s entry into the United Kingdom could not have been regarded as injurious to the public interest before, or apart from, the 1962 Act, and it was not prohibited by that Act. Unlike R v Newland, the appellant used no deceit and did not cause any other person to do a prohibited act. Accordingly it seems to us that the Crown cannot bring his act into the ‘unlawful’ category unless it can show at the very least that that act tended to defeat the clear intention and purpose of the Act.
The fist and fundamental question therefore is whether the scheme and purpose of the Act did contemplate that every Commonwealth citizen subject to control should be examined by an immigration officer. It may seem unfair that such a system should be operated on a selective basis so that some immigrants were exempt and some were not, and at first sight it may seem unlikely that Parliament should have so intended, but an examination of the Act has brought us to a different conclusion. It seems clear to us that the omission of any requirement on an immigrant to land at a specified port was not accidental and that the whole Act shows an intention to treat Commonwealth citizens far less rigidly than aliens.
Part I of the Act was to apply only until 31 December 1963 unless renewed, and, as we have already pointed out, its effectiveness depended largely on the extent to which the Secretary of State elected to use the powers conferred on him. We regard it as probable that Parliament recognised that some immigrants would enter without
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examination but thought that the numbers would be so small as to be insignificant. If this be so, and the present charge were nevertheless upheld, the courts would indeed be rushing in where Parliament refused to tread. We can we understand that, by 1967, the flow of unexamined immigrants may have assumed serious proportions, but an act does not not take on itself the character of a public mischief merely because others copy the example. If Parliament miscalculated the volume of unexamined entry it was for Parliament and not the courts to change the law, and this was in fact done by the Commonwealth Immigrants Act 1968, which made it an offence for a Commonwealth citizen to land unless he had been examined on board ship or aircraft or, alternatively, he landed in accordance with arrangements approved by an immigration officer and duly submitted himself to examination.
For these reasons we concluded that the indictment disclosed no offence known to the law and we allowed the appeal.
Appeal allowed. On 20 February 1970 the Court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether an indictment for conspiracy will lie against a Commonwealth immigrant who in combination with others entered the United Kingdom between 1962 and 1968 by evading examination by an immigration officer and a medical examination and without holding an employment voucher, but refused leave to appeal to the House of Lordsh.
Solicitors: Norman E Bell & Co (for the appellant); Director of Public Prosecutions (for the Crown).
S A Hatteea Esq Barrister.
British Transport Docks’ Board v Williams
[1970] 1 All ER 1135
Categories: SHIPPING: CONSTRUCTION
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND TALBOT JJ
Hearing Date(s): 23, 26 JANUARY 1970
Dock – Crane – Movable dockside crane – Repainting – ‘Works of engineering construction’ – Whether crane a ‘steel … structure other than a building’ or of similar nature – Factories Act 1961, s 176(1) – Engineering Construction (Extension of Definition) Regulations 1960 (SI 1960 No 421), reg 3, Schedule – Construction (Working Places) Regulations 1966 (SI 1966 No 94), reg 2(1).
The appellants were convicted of contraventions of the Construction (Working Places) Regulations 1966, following an accident to one of their workmen who was engaged in repainting under the platform of a level luffing electrically operated portal crane. The crane was movable in that it could run along a rail track on the quay side and, with the jib, wings and counter-balance weights removed, it had been moved by a floating crane from one part of the dock to another, although it could be moved without being taken apart and re-erected. On appeal, on the question whether the crane was a ‘steel … structure other than a building’ or of a similar nature to a steel structure, so as to come within the definition of ‘works of engineering construction’ in reg 2(1)a of the 1966 Regulations, as defined in s 176(1)b of the Factories Act 1961, as extended by reg 3 of, and the Schedulec to, the Engineering Construction (Extension of Definition) Regulations 1960,
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Held – The appellants had been rightly convicted, because that part of the crane, up to and including the platform was capable of being in law a structure on which machinery, namely the crane itself, was supported, and the fact that it could be moved on its wheels or taken from one place to another without dismantling did not prevent it from being a structure within the regulations, or something of a similar nature to a structure (see p 1141 d and f post).
Notes
For the meaning of structure generally, see 3 Halsbury’s Laws (3rd Edn) 433, para 816, 31 Halsbury’s Laws (3rd Edn) 270–272, para 399, and for cases on the subject, see 38 Digest (Repl) 251, 614, and 630–632, 955–958.
For the Factories Act 1961, s 176, see 13 Halsbury’s Statutes (3rd Edn) 568.
Cases referred to in judgment
BP Refinery (Kent) Ltd v Walker (Valuation Officer) [1957] 1 All ER 700, [1957] 2 QB 305, [1957] 2 WLR 907, 121 JP 231, 38 Digest (Repl) 630, 956.
Cardiff Rating Authority v Guest Keen Baldwins Iron & Steel Co Ltd [1949] 1 All ER 27, [1949] 1 KB 385, [1949] LJR 713, 113 JP 78, 38 Digest (Repl) 630, 955.
Lavy v London County Council [1895] 2 QB 577, 64 LJMC 262, 73 LT 106, 59 JP 630, 26 Digest (Repl) 569, 2346.
London County Council v Tann [1954] 1 All ER 389, [1954] 1 WLR 371, 118 JP 152, 38 Digest (Repl) 251, 614.
Cases also cited
Kimpton v Steel Co of Wales Ltd [1960] 2 All ER 274, [1960] 1 WLR 527.
Knight v Demolition and Construction Co Ltd [1953] 2 All ER 508, [1953] 1 WLR 981.
Venner v M’Donell [1897] 1 QB 421.
Case stated
This was a case stated by Newport (Monmouthshire) justices in respect of their adjudication as a magistrates’ court sitting at Newport on 14 May 1969.
Informations were preferred by the respondent, John Derlwyn Williams, HM inspector of factories, under the Construction (Working Places) Regulations 1966, against the appellants, the British Transport Docks’ Board, charging that (i) on 28 January 1969, at South Dock, Alexandra Dock in the county borough of Newport, being employers of workmen undertaking operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied, they contravened reg 26(1) (b) of the regulations in that a certain working platform at the place, to wit a board being used by Colin Richard Manley to paint crane 97 and used for the deposit of materials, being a working platform from which a person was liable to fall a distance of more than 6 feet 6 inches, was not at least 34 inches wide, whereby they were guilty of an offence as provided by s 155(1) of the Act; (ii) on 28 January 1969, at the dock, being employers of workmen undertaking operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied, they contravened reg 13(5) of the regulations in that the distance between the two consecutive supports on which a platform rested, to wit a board being used by Colin Richard Manley to paint crane 97 at the place, was not fixed with due regard to the anticipated load and the nature of the platform whereby they were guilty of an offence as provided by s 155(1) of the Act; (iii) on 28 January 1969, at the dock, being employers of workmen undertaking operations or works to which s 127 of the Factories Act 1961 and the Construction (Working Places) Regulations 1966 applied, they contravened reg 9(1) of the regulations in that a certain part of a scaffold, namely a board being used as a working platform by Colin Richard Manley to paint crane 97 at the place, was not of sound material for the purpose for which it was used whereby they were guilty of an offence
Page 1137 of [1970] 1 All ER 1135
as provided by s 155(1) of the Act. At the hearing of the informations, the respondent adduced the following facts in evidence which were admitted formally by the secretary of the appellants under the provisions of s 10 of the Criminal Justice Act 1967. On Tuesday 28 January 1969, a painter, one Colin Manley aged 22, employed by the appellants at Alexandra Docks, Newport, Monmouthshire, was instructed by Charles Edgar Webb, the general foreman for the appellants, to go and paint the structure of crane 97 at South Dock. As the original chargehand had been transferred to the stores, Mr Webb appointed Mr Manley as temporary chargehand. Mr Manley was told to carry on with the painting but was given no special instructions as to the method of obtaining access and the scaffolding to be used. It appeared that, during November 1968, work had originally started on the crane but was stopped due to weather conditions and other jobs, and the boards used at that time were left on the crane. The boards involved were about 14 feet long and 2 inches in thickness. Mr Manley, Raymond Smith and two other painters climbed up on the crane and two of them started work above the catwalk, Mr Manley and Mr Smith working below. Two boards were placed in the bracing supported by the crossmembers of the crane and the third board placed across them at right angles, the distance between the supporting boards being approximately 12 feet. Work proceeded painting various parts of the crane below the catwalk until about 2.00 pm. Mr Manley was sitting on the board supported by the two other boards painting the underside of the catwalk by means of a brush about 2 feet long. At his side on the same board was a gallon tin of paint. When Mr Manley was sitting painting about 3 feet from one of the support boards, the board broke underneath him and he fell to the dockside a distance of approximately 37 feet suffering severe injuries. Subsequent examination of the board showed that the board was not of sound material. The board forming the working plaintiff was only 9 inches wide and was used for depositing material. If that board had been inspected at all it was some time in November 1968, and it had been left out in all weather conditions since that time. No further inspection had been done prior to work starting on the day of the offence. The appellants adduced in evidence the following facts which were admitted by the respondent under the provisions of s 10 of the Criminal Justice Act 1967. Crane 97 was a 6-ton level luffing electrically operated portal crane. That crane, together with 19 others, was manufactured and erected by Stothert & Pitt Ltd of Bath. The supplying and erection took place between 1958 and 1960. The contract for the supply and erection of those cranes was mainly governed by the general conditions of contract as issued by the Institution of Mechanical Engineers and Institution of Electrical Engineers. The cranes were brought to the docks in convenient sections. The size of those sections depended on the size of road transport available. The sections were then married up at ground level and lifted by derrick. Those cranes were movable and could move any distance provided the length of quay was available. They ran along a rail track. The 20 cranes referred to above were erected on South Quay. In October 1967, four of those cranes were required to be moved from South Quay to West Side Wharf, that movement being carried out by the floating crane. Because the jib of the floating crane was not high enough and the capacity of the floating crane was not great enough, part of those cranes had to be taken off. The jibs were removed as were the wings and the counter-balance weights. That substantially lightened the cranes and lowered the height so that the floating crane’s jib could be above the load. Crane 97 was in fact one of the cranes moved from South Quay. Cranes could be bought and sold. A crane had in fact been taken from Newport to Port Talbot by floating crane almost in one piece. At the present time there was a 6-ton crane at Newport which was being offered up for sale. In the event of a purchaser being found, the crane would be disconnected and reassembled on a site where the purchaser required it. Crane 97 was 65 feet high to the top of its machinery house. The maximum operating radius of its jib was 70 feet. The track on which the crane ran had a 13 feet 6 inches gauge.
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On behalf of the appellants it was contended that the Construction (Working Places) Regulations 1966 did not apply to the work of painting crane 97 on which Mr Manley was engaged at the time of his accident. The grounds on which that contention was based were that, by reg 2 of the regulations, they applied only to ‘building operations’ and ‘works of engineering construction’. Those phrases were defined in s 176(1) of the Factories Act 1961, and the definition of ‘work of engineering construction’ had been extended by the Engineering Construction (Extension of Definition) Regulations 1960. The appellants argued that the painting of crane 97 did not fall within the ambit of those definitions. It was conceded that the appellants were guilty of the three changes if the Construction (Working Places) Regulations 1966 applied. On behalf of the respondent it was contended that the painting of crane 97 was an operation to which the Construction (Working Places) Regulations 1966 applied. The grounds on which that contention was based were that crane 97 was part of the dock and that, therefore, the operation of painting it fell within the definition of ‘work of engineering construction’ contained in s 176(1) of the Factories Act 1961; that the work of painting crane 97 fell within the definition of ‘work of engineering construction’ contained in the Schedule to the Engineering Construction (Extension of Definition) Regulations 1960 on the basis that it was ‘The construction, structural alteration or repair (including re-pointing and re-painting)’ of ‘any steel or reinforced concrete structure other than a building … ’, and that the work of painting crane 97 fell within the definition set out above on the grounds that it was ‘other civil or constructional engineering works of a similar nature’ to the works specifically referred to in the Schedule to the Engineering Construction (Extension of Definition) Regulations 1960.
The justices came to the conclusion that the painting of crane 97 was an operation which fell within the definition of the phrase ‘work of engineering construction’ contained in the Schedule to the Engineering Construction (Extension of Definition) Regulations 1960 and was ‘The construction, structural alteration or repair (including re-pointing and re-painting)’ of a ‘steel or reinforced concrete structure other than a building … ’ Accordingly, they found the appellants guilty on each of the three charges, and fined them £10 on each charge. The appellants now appealed.
Esyr Lewis for the appellants.
T H Bingham for the respondent.
26 January 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county borough of Newport who convicted the appellants, the British Transport Docks’ Board, of three offences against the Construction (Working Places) Regulations 1966d. The three matters in respect of which it is said that the regulations have been contravened were that: first, a board had been used for repainting a crane which was not 34 inches wide despite the fact that anybody on it might fall more than 6 feet 6 inches, contrary to reg 26(1) (b); secondly, that the distance between the two consecutive supports on which a platform rested, namely, the board, was not fixed with due regard to the anticipated load and the nature of the platform, contrary to reg 13(5); and lastly, that part of the scaffold, namely, the board being used as a working platform, was not of sound material for the purpose, contrary to reg 9(1). [His Lordship stated the facts, and continued:] At the trial, and indeed in this court, it is admitted that these offences were proved if and only if the Construction (Working Places) Regulations 1966 apply. Regulation 2(1) of those regulations provides:
‘These Regulations apply—(a) to building operations; and (b) to works of engineering construction; undertaken by way of trade or business, or for the purpose of any industrial or commercial undertaking … ’
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No question of this repainting being a building operation arises; the sole question is whether it was works of engineering construction. That phrase is defined in the Factories Act 1961, s 176(1), ‘work of engineering construction’ being there defined as meaning, so far as it is material—
‘… the construction, structural alteration or repair (including re-pointing and re-painting) or the demolition of any dock, harbour, inland navigation, tunnel, bridge, viaduct, waterworks, reservoir, pipe-line, aqueduct, sewer, sewage works, or gasholder, except where carried on upon a railway or tramway … ”
I should mention that counsel for the respondent has sought to contend that this crane, which I will describe in detail a little later, came within the words the ‘repainting … of any dock’, in that the crane was part of a dock. For reasons which will appear later, I do not propose to decide that point finally, although, as at present advised, I would find very great difficulty in acceding to counsel’s argument. The matter does not, however, rest there because in 1960 that definition in s 176(1) was extended. The Engineering Construction (Extension of Definition) Regulations 1900e provide as follows by reg 3:
‘The definition of the expression “work of engineering construction” [in s 176(1) of the 1961 Act, as it now is] shall be extended to include the works specified in the Schedule to these Regulations.
‘SCHEDULE: The construction, structural alteration or repair (including repointing and re-painting) or the demolition of any of the following except … [it is unnecessary to read the exceptions] that is to say, any steel or reinforced concrete structure other than a building, any road, airfield, sea defence works or river works, and any other civil or constructional engineering works of a similar nature to any of the foregoing works.’
The question then arises whether this crane was, within those regulations, ‘any steel … structure other than a building’. Secondly, if it is not, whether it is of a similar nature to any of the foregoing works, namely such as any steel structure.
As the evidence disclosed, this large crane was known as a 6-ton level luffing electrically operated portal crane; it, with 19 others, had been manufactured and erected between 1958 and 1960. The cranes were brought to the dock in convenient sections and there erected. As the photographs show, they are to some extent movable in that they can move along a rail track. It should also be mentioned because it may be of slight materiality that this particular crane, and indeed three others, had been moved from South Quay to West Side Wharf by means of floating cranes, in other words there had been occasions when they could be moved without being taken apart and re-erected. All that was necessary apparently to move this crane from one place to another was to remove the crane’s jib and the counterbalancing weight.
This court has been referred to a number of authorities in which the Divisional Court and courts of first instance, and indeed the Court of Appeal, have had to consider in various contexts the word ‘structure’, and in some the words ‘in the nature of a structure’. For my part, I get comparatively little help from looking at decided cases on this matter, and for this reason, that the context differs, the mischief aimed at by the particular legislation in which those words occur differs, and I think that the safest course is to look at the particular case with which one is concerned. If authority is needed for that, it is to be found in a quotation from London County Council v Tann ([1954] 1 All ER 389 at 391, [1954] 1 WLR 371 at 374),
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where Lord Goddard CJ referred to the test laid down by Lindley LJ in Lavy v London County Council ([1895] 2 QB 577 at 582, 583). Lindley LJ said:
‘We must look at this case, and not at the effect of other cases. In this case we must ask ourselves, as men of the world, whether such a new wall [he was dealing with a wall] as this is not a building, structure, or erection within the mischief of s 75 [of the Metropolis Management Act 1862].’
I mention that because there is a danger, I think, in attaching too much weight to the rating cases. The two rating cases to which this court was referred are, first, Cardiff Rating Authority v Guest Keen Baldwins Iron & Steel Co Ltd, and a more recent case of BP Refinery (Kent) Ltd v Walker (Valuation Officer). Both those rating cases were considering an order which was itself a ‘machinery and plant order’; not only that, but the order concernedf contained exceptions which clearly showed that the definition of ‘plant and machinery’ in that order extended to objects which would not in the ordinary way be looked on as a structure. Looking at the present case, therefore, alone for a moment, one asks oneself whether the justices were wrong in law in deciding, as they did, that the repainting of the lower part of this crane, ie under the platform, came within the Engineering Construction (Extension of Definition) Regulations 1960 as being the repainting of a steel structure or, I would add, the repainting of works of similar nature to a steel structure.
In my judgment, it is impossible to say that they erred in law. It seems to me clear that, as a matter of ordinary language, it is perfectly natural for one to describe at any rate the lattice work and girders up to and including the platform on which the crane moved as being a structure or similar to a structure. Indeed, counsel for the appellants in his reply said quite frankly: it is a structure in ordinary language. But his argument is that, in the context, it is to be given a more limited meaning.
As I understand it, he first says: this is plant, or plant and machinery, and from beginning to end in considering the Construction (Working Places) Regulations 1966, no mention is made of plant and machinery, and yet, he would say, it is an expression well known in this context, and, indeed, the specific regulations, namely the Construction (Lifting Operations) Regulations 1961g, specifically apply to lifting machinery of which this crane is one. So far as that argument is concerned, I find it impossible to accede to it. The question is not whether this is plant and machinery, but whether it is a structure, and it seems to me that an object can come within the meaning of ‘structure’ albeit it is or is part of plant. Accordingly, I get no assistance from that argument.
The second argument, as I understand it, derives from the context in which these words appear. Counsel points out that, if one takes the definition in s 176(1) of the Factories Act 1961, all the objects there ‘dock, harbour, inland navigation, tunnel, bridge’ etc are all works which are fixtures and have become part of the land, whereas he says that this crane is movable, that it never becomes part of the land, and, indeed, that it can be moved without being dismantled. Again, when one gets to the Engineering Construction (Extension of Definition) Regulations 1960, he points out that the matters referred to, apart from ‘structure’, namely ‘road, airfield, sea defence works or river works’, are again all permanent works forming part of the land. I appreciate that argument, but, for my part, I feel that it does not carry counsel for the appellants home. It is quite clear, I should have thought, that there are steel structures which never become part of the land in the technical sense, and yet clearly are structures for the purpose of these regulations. Again, as it seems to me, one
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gets some help from the Building (Safety, Health and Welfare) Regulations 1948h themselves, because it is to be observed there that, in dealing with ‘building’ as opposed to ‘engineering construction’, one of the matters excepted is ‘pole or lattice work structures designed solely for the support of machinery, plant or electric lines’. Accordingly, that being excluded from the safety regulations dealing with building, one would naturally expect to find them in the safety regulations which deal with structures, and, indeed, I think that they are fully covered by the expression steel structure or work of a similar nature.
The main argument has been based on the fact that there is a degree of mobility in these cranes; large as they are, they can be moved along 13-foot wide railway tracks on the dock itself. Again, it does not seem to me that that is conclusive one way or the other, and, while appreciating the distinction which I have already made in relation to the rating cases, it is quite clear from what is said in those cases (See [1949] 1 All ER at 31, 36, [1949] 1 KB at 396, 401, 402, and [1957] 1 All ER at 715, 716 [1957] 2 QB at 327, 328), by Denning LJ and Jenkins J, that mobility does not prevent what would otherwise be a structure from being a structure or at any rate in the nature of a structure. So far as the present case is concerned, I find it sufficient to base my decision on this ground, namely that at any rate that part of the crane up to and including the platform is capable of being in law a structure on which machinery, namely the crane itself, is supported, and the fact that it can be moved on its wheels or taken from one place to another without dismantling does not prevent it from being a structure within these regulations, or at any rate something of a similar nature to a structure.
Finally, I would add this, that, although there has been some argument in relation to the exact interpretation of the Schedule to the Engineering Construction (Extension of Definition) Regulations 1960, it seems to me that those words ‘and any other civil or constructional engineering works of a similar nature to any of the foregoing works’ do not merely qualify what has been described in the preceding words as works, namely sea defence works or river works, but include everything that has gone before which, when completed, can be looked on as works, namely road, air defence and steel or reinforced concrete structures. Accordingly, for those reasons, I cannot see that the justices have erred in law and I would dismiss this appeal.
ASHWORTH J. I agree.
TALBOT J. I agree.
Appeal dismissed. The court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, ie, whether on the evidence summarised in the case stated the justices were entitled in law to hold that the repainting of the quay crane described in the agreed facts set out in the case stated was work within the meaning of the Schedule to the Engineering Construction (Extension of Definition) Regulations 1960, but refused leave to appeal to the House of Lords.
Solicitors: J Rigby (for the appellants); Solicitor, Department of Employment and Productivity.
N P Metcalfe Esq Barrister.
Hindle v Joseph Porritt & Sons Ltd
[1970] 1 All ER 1142
Categories: HEALTH; Health and safety at work
Court: MANCHESTER AUTUMN ASSIZES
Lord(s): BRABIN J
Hearing Date(s): 7, 8 OCTOBER 1969
Factory – Dangerous machinery – Duty to fence – Part of machinery not dangerous in itself – Stationary part – Moving material – Felt milling machine – Whether stationary part and moving material together amounted to dangerous part – Factories Act 1961, s 14(1).
The plaintiff was employed by the defendants as a felt miller and part of his work consisted in constantly and repetitively removing the creases which developed in the felt passing through his machine. The felt travelled upwards through the machine at 7 to 8 feet per second in a loose continuous band from idler rollers at ground level through to power rollers at the back. The idler rollers were harmless in the themselves and at one end of two of the rollers was fixed a metal carrier arm 29 inches from the top of the machine. The carrier arm was not inherently dangerous being merely an ordinary piece of metal used to take revolving rollers and, in certain cases, a bar which was inserted to limit the area through which the felt was to move. An operator wishing to remove the creases would put his hand around the rear side of the felt, his hand and arm being covered by a glove or sleeve open at both ends for easy release. The plaintiff in putting his right hand around the left-hand side of the felt, an acceptable practice, had his hand caught by the moving felt. Before he could release it from the glove his arm was carried up and twisted and he hit his shoulder against the carrier arm. The plaintiff had been using this well-established milling process for 40 years. The plaintiff claimed damages against the defendants for negligence and/or breach of statutory duty. On the issue of negligence the trial judge found against the plaintiff on the basis that there was no evidence of any practical solution to reduce the slight risk involved in using the machines and in addition the risk of accident was almost non-existent. On the issue of breach of s 14a of the Factories Act 1961,
Held – The moving felt coupled with the stationary carrier arm did not amount to a dangerous part of machinery (see p 1148 c, post) and the defendants were therefore not in breach of their statutory duty merely because a moving piece of material had carried the plaintiff’s arm so that it struck the carrier arm which was not in itself a dangerous part of machinery, where in any event the same accident would have happened whether or not the carrier arm had been fenced (see p 1147 c and p 1148 c, post).
Notes
For the statutory duty to fence dangerous parts of machinery, see 17 Halsbury’s Laws (3rd Edn) 74–76, para 126, and for cases on the subject, see 24 Digest (Repl) 1049–1055, 180–218.
For the Factories Act 1961, s 14, see 13 Halsbury’s Statutes (3rd Edn) 417.
Cases referred to in judgment
Bolton v Stone [1951] 1 All ER 1078, [1951] AC 850, 36 Digest (Repl) 18, 79.
British Rys Board v Liptrot [1967] 2 All ER 1072, [1969] 1 AC 136, [1967] 3 WLR 770, Digest Supp.
Eaves v Morris Motors Ltd [1961] 3 All ER 233, [1961] 2 QB 385, [1961] 3 WLR 657, Digest (Cont Vol A) 588, 218e.
Midland and Low Moor Iron and Steel Co Ltd v Cross [1964] 3 All ER 752, [1965] AC 343, [1964] 3 WLR 1180, Digest (Cont Vol B) 299, 218fa.
Action
In this action Daniel Hindle claimed damages against his employers, Joseph Porritt &
Page 1143 of [1970] 1 All ER 1142
Sons Ltd, for negligence and/or breach of statutory duty. The facts are set out in the judgment.
F B Carter for the plaintiff.
T P Russell for the defendants.
8 October 1969. The following judgment was delivered.
BRABIN J. On 21 February 1966, the plaintiff was injured at his work. He is now 65 years of age, having retired from this employment three months ago. He spent 51 years in that employment. For 40 of those years he was a felt miller and, if his appearance and demeanour in this court mean anything, he must have been a very valuable servant. This is a case in which I have heard, in addition to the plaintiff, another man of the same calibre, Mr Howarth, 30 years a milling machine operator; and on behalf of the defendants the witness, Mr Gill, who is the manager of a similar type of premises doing the same kind of work which is owned by an associate company. He also was a very good witness.
There are various types of felt that require to be milled and for that reason machines of different sizes are used. When felt is being milled it requires to be at a certain temperature and it becomes necessary in the process for the miller constantly to remove the creases which develop in the felt as it makes its way through the machine. No one could put an accurate figure to show how often in the course of a day a person is called on to remove these creases. The plaintiff made a rough guess and said 20 to 30 times a day. Mr Howarth, working on a different machine in the main shop on certain felt of a lighter quality, spoke of a ten minute continuous process for removing creases.
The plaintiff’s estimate of 20 to 30 times a day is, I am sure, if anything, an underestimate of the number of occasions when on average he would be called on to do this. Anyone visiting this factory which works on dayshifts, and seeing a miller at work would find this removal of creases being carried on constantly and repetitively.
The process of removal of creases is called ‘gloving the felt’. The reason for that is that since the felt is moving it would create friction against the arm of the operator as he handled it. This would be particularly marked at a time, for example, spoken about by Mr Howarth when over a ten minute period the operator would for all practical purposes be gloving the felt the whole time. In order to overcome the risk of friction burning, the men are supplied with a glove or sleeve which comes right over the hand and covers the arm and is open at both ends. The miller can, with the glove on his arm, glove the felt and obtain protection against friction burning. There is a risk that the man’s hand may move upwards with the felt, and to overcome that risk the operator, in such a circumstance, withdraws his arm from the glove or sleeve which will carry on with the felt but the operator’s arm, having been withdrawn, will not be damaged.
It is convenient now to describe the milling machine. It is shown in the photographs and contains felt which at the time of the accident might well have been something of the order of some 70 feet in length and 400 inches wide. When the felt is milled it will have been reduced both in length and width. The felt goes through the machine as a loose continuous band and it looks like an endless heavy sheet. It moves from the ground upwards between the idler rollers, and through the power rollers at the back of the machine. In the various photographs produced in this case a number of rollers can be seen. These are idler rollers. The plaintiff could not touch the power rollers. Each visible roller is in itself harmless.
The machine is constructed in a particular way, and one end of two of the rollers is fixed to an arm called the carrier arm which is made of iron or steel. This is part of the general structure of the machine. The distance between the top part of the base of the machine and the bottom of the carrier arm is 29 inches.
An operator wishing to glove the felt can put his hand round the other side of the felt running upwards through the machine to remove the creases. For a person who is unfamiliar with the machine it might seem likely that if the operator wanted to
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glove the felt from the left he would put his left hand in and, if he wanted to glove it from the right, he would put his right hand in; but that deduction would be wrong. It is quite acceptable for an operator to go in on the left hand side of the felt using his right arm. The plaintiff did it that way at the time of his accident, presumably because it was heavy felt and there was more power in his right arm to permit him to do what had to be done. The felt moves at about 7 to 8 feet per second. I say that because Mr Gardiner, the expert witness called on behalf of the plaintiff, measured the speed at 5·35 mph or 7 3/4 feet per second, but there is no certainty that the felt he was gauging was exactly the same as the accident felt.
The plaintiff put his right hand round the left-hand side of the moving felt. In those circumstances his arm must, to some degree, be twisted a little. As he gloved the felt, somehow the felt closed over his hand and before he could pull his hand out of the glove and clear himself from the machine his arm was taken up and twisted and he hit his shoulder against the carrier arm. Then the plainiff’s arm was released. As a result of that accident the plaintiff is left with an arm which is not as good as the arm was before the accident. There is some limitation of movement and some disability and pain caused when the arm is used in a particular way. The damages which would be awarded in this claim, bearing in mind the plaintiff’s age and the nature of the injuries, would be modest.
The plaintiff had had an earlier accident in 1953, but it took place on a different machine and in different circumstances, for then, when working on a smaller machine, he was operating at a higher level than he should have done and his arm was caught on a roller. It was pointed out to him that he was then operating the machine wrongly and he retorted by saying that no one had told him to do it otherwise. Mr Howarth gave evidence about an accident which he had had in 1961 on a smaller machine when he was gloving felt and his hand was caught between a bar and the side roller. His hand hit a bar, but Mr Howarth, who is obviously on friendly terms with the plaintiff and is, as I say, an admirable witness, made it quite clear that one could not really compare his accident with the plaintiff’s accident.
The accident machine was of German manufacture, a type of machine which has been in use in this country for years. It might seem probable, as it comes from Germany, that it is used in Germany too, but there is evidence from Mr Gill that the same process on the same type of machine is also carried out in America and Canada. English machines of a similar design also exist and the evidence satisfied me beyond doubt that this method of milling felt can be described as a well-established and standard method of doing it. The plaintiff has done it this way for 40 years. It is similarly done in other factories.
There is now a newer type of machine coming into use. Mr Gill, on behalf of the defendants, explained how in the mill which he manages this new machine has also been installed. The main difference between the new and the old machines is that the new machine has two speeds, a half speed and a normal speed, and in order to familiarise the men with that new machine, Mr Gill’s employers, have been carrying out a series of tests by putting all the operators to work on the new machine. So far the sum total of these experiments had been that the men prefer the older machines because using the new machine at a slower speed makes the work not easier but more difficult.
This is relevant on another matter because the plaintiff called Mr Gardiner to give his opinion of the defendants’ machines. He was hard put to think of a way in which the machines could be improved and there is no doubt, because this is one of these cases where there has been the fullest disclosure on the facts, that Mr Gardiner made a recommendation in respect of the common law aspect of this case. He did not make such a recommendation when he reported on the machine, but since that date he has proffered a suggestion, namely, that the machine should be fitted with a button which would permit the felt to be inched. Thereby, the work would be done at a very slow speed where there would be no risk of the man’s arm being carried up by the material.
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Mr Gill, who probably knows more about these machines than anybody in this case hearing this evidence, did not believe that Mr Gardiner could be suggesting that. Mr Gill took that suggestion to mean that the felt should be moved at the slower speed, but when it was made clear that that was what Mr Gardiner was suggesting, Mr Gill explained that in fact the suggestion was in practice absurd. One reason is that before the felt can be milled it must be run to reach the required heat and if the heat is less than required the felt cannot be milled. Mr Gill pointed out that if one were to inch the felt one would lose the heat. Secondly, he pointed out that if, for example, Mr Howarth were to glove the felt over a period of ten minutes, as he now does, and was called on to glove it on the machine at inching speed, the process would take hours and hours. Even if that difficulty could be overcome, it would not properly permit the gloving of the felt because, with the machine moving so slowly, the crease that was removed by the operator would reassert itself before the felt got through the roller. So the sole suggestion made in this case has been shown to be quite impracticable and of no validity.
Having given this case careful consideration and listened to the evidence and bearing in mind that the plaintiff and Mr Howarth have been involved in different accidents in the past, it seems to me clear that the claim at common law is completely defeated on the evidence. When one puts those accidents and the plaintiff’s accident into true perspective, it means that the felt has been gloved on what must be hundreds of thousands perhaps even millions of occasions and the two accidents that occurred before the plaintiff’s accident, and distinctly different from it, become wholly insignificant. Mr Gardiner did suggest that in the use of this machine there was a risk of injury which was very slight. The defendants’ expert agreed that it was very slight. He also referred to it as a remote possibility. Mr Gardiner conceded it was not easy to overcome and the defendants’ expert, Mr Beecham, said there was no real practical solution to reduce this slight risk.
This kind of situation has been referred to many times in cases, including one that has been referred to for another purpose, Eaves v Morris Motors Ltd. Pearson LJ said on that occasion ([1961] 3 All ER at 242, [1961] 2 QB at 401), quoting from Bolton v Stone ([1951] 1 All ER 1078 at 1081, [1951] AC 850 at 858):
‘Nor is the remote possibility of injury occurring enough. There must be sufficient probability to lead a reasonable man to anticipate it. The existence of some risk is an ordinary incident of life, even when all due care has been, as it must be, taken.’
Therefore, this accident shows that a risk which is almost non-existent can result in an accident. The defendants have gone further than they need have done in satisfying me positively that there is no breach of the common law duty proven.
It is further claimed that the defendants were in breach of s 14 of the Factories Act 1961. In the pleadings it is alleged that there was a trapping point between the felt and the carrier arm. Counsel has pointed out that that is not a true description of the situation created in this machinery and the words ‘trapping point’ do not help in considering this matter. What is said is that the movement of the felt coupled with the existence of the carrier arm makes the carrier arm a dangerous part of the machinery because the plaintiff’s arm was itself moved upwards by the rising felt.
There has been much litigation turning on the meaning of this section in relation to the workpiece, or the material, and the machine. It is important to consider the words of s 14 which provides:
‘(1) Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position
Page 1146 of [1970] 1 All ER 1142
or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced …
‘(6) The Minister may, as respects any machine or any process in which a machine is used, make regulations requiring the fencing of materials or articles which are dangerous while in motion in the machine.’
Subsection (6) draws several distinctions. It refers to the machine and the process as distinct from the dangerous parts of the machinery, and it refers to the fencing of the materials or articles which themselves become dangerous in motion in the machine again as distinct from the dangerous part of the machinery itself.
I have been much helped by counsel in this case because, having considered the authorities which they have brought before me which they consider relevant, they agreed as a result of argument on a submission on the state of the law in this matter. Eaves v Morris Motors Ltd, to which I have already referred in another context, establishes that material alone or a workpiece is not required by the Factories Act 1961 to be fenced.
It is agreed that all dangerous moving parts must be fenced. It seems to me, also, right to say that if one has two moving parts of machinery neither singly dangerous but which together create a danger—the example that comes to mind is that of a trapping point—that danger so created results in the existence of a dangerous part of the machinery, which is required to be fenced. Similarly, if a moving part of the machinery is so close to a stationary part that together they produce a danger, that is a dangerous part of the machinery. If a moving part of the machinery not itself dangerous which is so close to the moving material never dangerous in itself but which in conjunction with the moving part creates danger, that creates a dangerous part and must be fenced.
On behalf of the defendants it is submitted that if moving material itself not dangerous, and not, therefore, a dangerous part of the machinery, comes close to a stationary part of the machine not itself dangerous, that is not a dangerous part of the machinery. On behalf of the plaintiff it is said that that is a dangerous part of the machinery which requires to be fenced. In Midland and Low Moor Iron and Steel Co Ltd v Cross this problem was raised but not decided. Lord Evershed said ([1964] 3 All ER at 757, 758, [1965] AC at 369, 370):
‘There remain, however, difficult questions to which allusion was made in the course of the arguments in the present case—particularly questions as to the applicability of the Act to danger arising from workpieces (not themselves part of the machine) and other moving material when the machine itself, or the relevant part of it, is stationary. I must not be taken from my citations to have indicated any view on these questions. They do not in the present case arise, and I express no view on them.’
Lord Hodson said ([1964] 3 All ER at 760, [1965] AC at 374):
‘I appreciate that difficult questions may arise where, for example, as in some of the unreported cases to which reference has been made, it appears that the part of the machine which may, in conjunction with material, be dangerous may be itself at all times stationary so that it would seem that there would be nothing dangerous to fence, since the danger is derived from the moving material rather than from the stationary part of the machine.’
Lord Donovan said ([1964] 3 All ER at 761, [1965] AC at 375):
‘The question whether a stationary part of a machine can be a dangerous
Page 1147 of [1970] 1 All ER 1142
part does not arise in the present case. It may raise difficult problems. Thus, to put a fence round a pillar of a machine and so reduce the gap between the pillar and some moving part, might actually increase the danger of a nip. On the other hand, there may be cases of stationary machines which are dangerous simply because of sharp projections or exposed cutting surfaces. Much will depend on the facts of the particular case.’
In this case there is no inherent danger such as a cutting edge or fixed projecting nut to be found in that part of the machine called the carrier arm. It is for all practical purposes an ordinary piece of metal forming part of the structure of the machine and used to take revolving rollers and, in certain cases, a bar which is sometimes inserted in order to limit the area through which the felt is to move.
If one were to fence this carrier arm on the basis that it was a dangerous part of the machinery I can see the force in the argument that that which would be put round it as a fence would create exactly the same danger that would exist if there was not a fence in position.
On behalf of the defendants it is argued that the use of the word machinery for this carrier arm is a misuse of language and that although the arm may be part of the machine it is not a dangerous part of any machinery. This matter was raised in another case, in the House of Lords, British Rys Board v Liptrot. It is not necessary for me to go into the facts of that case save to say that the distinction between whether a particular object was a machine or machinery was sought to be argued by the appellant. The argument was not heard by the House of Lords because of certain procedural failures on behalf of those who sought to put it forward, but the matter was touched on in two of the speeches. Viscount Dilhorne said ([1967] 2 All ER at 1077, [1969] 1 AC at 153):
‘In relation to s 14 the question is not whether it is a machine to which that section applies but whether there is any part of machinery which is dangerous if not securely fenced. In this case it was not open to the appellants to contend before your lordships that the respondent’s injuries were not caused by a part of the machinery of the crane or that, if they were, that part was not a dangerous part if not fenced. If it had been open to them to do so, the respondent would, I think, have had considerable difficulty in satisfying me that the wheel of the chassis and the body of the crane were part of the machinery of the crane. The finding of BARRY J, on this not having been challenged, the appeal has to be determined on the basis that the respondent’s injuries were caused by a dangerous unfenced part of the machinery though, if the finding had been challenged, that might have been held not to be the case.’
Lord Reid said ([1967] 2 All ER at 1081, [1967] 1 AC at 159):
‘Section 14 deals with dangerous parts of machinery. Sometimes one finds in the authorities references to dangerous machines; but that is not what the section says, and to ask the question—is this machine dangerous?—can easily lead to error. A vehicle is a dangerous machine in the sense that, if it is driven in a dangerous manner, it may run into someone and injure him. What, then, are the dangerous parts of the machine? It is not the parts of the machine which are dangerous but the machine as a whole; if one had to specify dangerous parts, presumably in the case of an ordinary motor car they would be the bumper, the mudguards and the grille or casing which in more modern cars is found in front of the radiator, but they are not parts of the machinery at all. Of course it would be impossible to fence against this kind of danger; but s 14 is not
Page 1148 of [1970] 1 All ER 1142
dealing with this kind of danger; it is dealing with parts of machinery where danger arises from their not being fenced and is obviated by fencing. So it appears to me that the fact that vehicles in motion create a kind of danger which does not exist with stationary or fixed machinery is no reason for not requiring the fencing of parts of the machinery in vehicles which are dangerous whether the vehicle is in motion or not.’
As was said in Midland and Low Moor Iron and Steel Co Ltd v Cross much will depend on the facts of the particular case. Looking at the facts of this particular case, I consider that this part of the structure of the machine, the carrier arm, is not a dangerous part of the machinery; it is just a part of the machine. Further, I do not think that the mere fact that a moving piece of material carries the plaintiff’s arm so that it strikes the carrier arm thereby constitutes a breach of the statute. Taking the moving felt and the stationary arm together, they do not, in my judgment, amount to a dangerous part of the machinery. Had this carrier arm been fenced, then unless someone had considered some kind of foam rubber covering of the arm—and there is no evidence to suggest that anyone should or would cover it other than with an ordinary fence—the same accident would have happened that did happen without any fencing being on this arm.
If this process is dangerous, and the evidence shows it is not, and was such as to call for the protection of the workman, this would in my view be a process to which s 14(6) might apply in the sense that if the statute applies at all, it would only apply if regulations had been made requiring the fencing of material or articles which are dangerous while in motion in the machine. It is most unlikely that any such regulation would be made, because no one would think of this moving material in the machine as being itself a dangerous process.
There is a further point arising from this. The plaintiff’s injury was really caused by the twisting of his arm. It is true that he banged his shoulder for in doing so his arm was released, but any injury that he sustained was not really in the bruising of his arm but in the twisting of it. I am not seeking to distinguish this in any greater detail, but if in fact the whole of the injury was caused by the twisting of the arm, there can be no liability because it would be the material alone that had caused it and not the carrier arm.
The agreed medical report does say, however, that the plaintiff suffered a combination of sprain and contusion of his shoulder, and so on that admitted fact, the injuries were of two kinds: the sprain which was obviously caused by the twisting, and the contusion, which was caused by hitting the bar. The relevance of that is, I think, that the contusion alone would never have caused any action to be brought. It is the twisting that caused the action to be brought and that demonstrates in effect that any possible injury caused by the carrier arm would be minimal. However, for the reasons that I have given I find that there is no breach of s 14 of the Factories Act 1961 and this claim fails.
It is sad for such a plaintiff that at the end of an honourable life working for the defendants for 51 years he leaves their employment with, not a serious injury, but one that he would much sooner be without, caused to him in his work. It is not suggested that he was himself to blame for his accident. It was an accident for which the defendants are not in law responsible. The claim, therefore, fails.
Judgment for the defendants.
Solicitors: Rowley Ashworth & Co, Manchester (for the plaintiff); James Chapman & Co, Manchester (for the defendants).
M Denise Chorlton Barrister.
Inland Revenue Commissioners v Helical Bar Ltd
[1970] 1 All ER 1149
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 28 NOVEMBER, 3 DECEMBER 1969
Income tax – Accounting period – Alteration of period of account of company – New period ending earlier in year of assessment – Decision and direction of Commissioners of Inland Revenue fixing basis periods – Nine months’ overlap of periods – Overlap forming part of years taken as basis periods for ascertainment of profits for two distinct years of assessment – Whether profits of nine months taxed twice over – Income Tax Act 1952, S 127(2) (b), (3).
The taxpayer company’s accounting period ran from 1 February to 31 January, so that the period of account ended 31 January 1963 was the basis period for the year of assessment 1963–64, and the period of account ended 31 January 1964 was the basis period for the year of assessment 1964–65. After 31 January 1964 the company acquired certain new interests and for commercial reasons adopted a 15 month period of account from 1 February 1964 to 30 April 1965, thus throwing the end of the new period of account forward into a new year of assessment. The company’s profit was for the period ended 31 January 1963 £104,867, for the period ended 31 January 1964 £141,203 and for the 15 month period ended 30 April 1965 £95,654. The Commissioners of Inland Revenue, pursuant to s 127(2) (b)a of the Income Tax Act 1952, decided that the period of 12 months ended 30 April 1964 should be the basis period for the year of assessment 1965–66; and they made a direction under s 127(3)a of the 1952 Act altering the basis period for the year of assessment 1964–65 from the period ended 31 January 1964 to the period ended 30 April 1963. These adjustments necessarily involved an apportionment on a time basis of the company’s profits for the periods of account ended 31 January 1964 and 30 April 1965. In the result profits of £78,798 from 1 May 1962 to 31 January 1963 were included in the basis period for two years of assessment, ie 1963–64 and 1964–65. The Special Commissiners concluded that the profits of the nine-months overlap were ‘in a real sense’ charged to tax twice over and they reduced the assessment for 1964–65 by £78,798. The Crown appealed.
Held – The appeal would be allowed because—
(i) The company’s profits for the nine months from 1 May 1962 to 31 January 1963 were only brought into assessment for income tax twice over in the sense that those nine months formed part of the year taken as a basis period for the ascertainment of profits for two distinct years of assessment, namely, 1963–64 and 1964–65(see p 1154 g, post);
(ii) That was the inevitable result of putting back the date at which the company’s year of account ended, but that did not in the circumstances involve any double taxation (see p 1154 h, post); and
(iii) The Special Commissioners having based their decision on the mistaken view that the direction under s 127(3) of the Income Tax Act 1952 involved double taxation, their decision was vitiated (see p 1156 h, post).
Notes
For changes in accounting periods, see 20 Halsbury’s Laws (3rd Edn) 128, para 225.
For the Income Tax Act 1952, s 127, see 31 Halsbury’s Statutes (2nd Edn) 122.
In relation to the year 1970–71 and subsequent years of assessment, the Income Tax Act 1952, s 127, is replaced by the Income and Corporation Taxes Act 1970, s 115.
Page 1150 of [1970] 1 All ER 1149
Case referred to in judgment
Gollin v Inland Revenue Comrs [1943] 1 All ER 346, 168 LT 274, 25 Tax Cas 161, sub nom Inland Revenue Comrs v Gollin 112 LJKB 343; subsequent proceedings (1945) 27 Tax Cas 6, 28 Digest (Repl) 372, 1627.
Case stated
This was an appeal by the Crown against a decision of the Special Commissioners of Income Tax that a sum of £78,798 should be deducted from the profits of Helical Bar Ltd assessable to income tax for the year 1964–65. The case stated is substantially set out in the judgment.
C N Beattie QC and P W Medd for the Crown.
H Major Allen QC and A E W Park for the taxpayer company.
Cur adv vult
3 December 1969. The following judgment was delivered.
PENNYCUICK J read the following judgment. This is an appeal by the Commissioners of Inland Revenue against a decision of the Special Commissioners whereby they reduced the amount of the taxpayer company’s assessment to income tax under Case I of Sch D for the year of assessment 1964–65 by the amount of £78,798. The taxpayer company is known as Helical Bar Ltd The appeal is concerned with the adjustment of profit taxable under Case I of Sch D which falls to be made where a trader alters the dates of his period of account in such a way that the period ends earlier in the year of assessment than heretofore. The appeal is also in some way connected with the transition from income tax to corporation tax.
I propose in the first place to read the relevant provisions from the Income Tax Act 1952, as amended. It is essential in this connection to bear in mind throughout that the profit chargeable with tax under Case I of Sch D for any given year of assessment is ascertained by reference to a previous basis period of account, normally the year of account last ended before the commencement of the year of assessment. Obviously in certain circumstances—eg, the commencement of a trade, and, as here, an alteration in the period of account—certain adjustments have to be made. Section 127 of the Income Tax Act 1952 deals with this matter. The section, as it stands amended under certain subsequent provisions, now provides:
‘(1) Subject to the provisions of this and the three next following sections, tax shall be charged under Cases I and II of Schedule D on the full amount of the profits or gains of the year preceding the year of assessment.
‘(2) Where, in the case of the trade, profession or vocation, an account has or accounts have been made up to a date or dates within the period of three years immediately preceding the year of assessment—(a) if an account was made up to a date within the year preceding the year of assessment and that account was the only account made up to a date in that year and was for a period of one year beginning either at the commencement of the trade, profession or vocation, or at the end of the period on the profits or gains of which the assessment for the last preceding year of assessment was to be computed, the profits or gains of the year ending on that date shall be taken to be the profits or gains of the year preceding the year of assessment; (b) in any case to which the provisions of paragraph (a) do not apply, the Commissioners of Inland Revenue shall decide what period of twelve months ending on a date within the year preceding the year of assessment shall be deemed to be the year the profits or gains of which are to be taken to be the profits or gains of the year preceding the year of assessment.
‘(3) Where the Commissioners of Inland Revenue have given a decision under paragraph (b) of subsection (2) of this section and it appears to them that in consequence thereof the tax for the last preceding year of assessment in respect
Page 1151 of [1970] 1 All ER 1149
of the profits or gains from the same source should be computed on the profits or gains of a corresponding period, they may give directions to that effect and an assessment or repayment of tax shall be made accordinglyb. [Then follow these two paragraphs, inserted by the Income Tax Management Act 1964, Sch 4]:
‘1. The decision whether or not to give a direction under the subsection shall be subject to an appeal to the General or Special Commissioners who shall grant such relief, if any, as is just. Subject to paragraph 2 below, the appeal shall be brought within thirty days of receipt of notice of the decision.
‘2. If the decision is to give a direction, and an assessment is made in accordance with the direction, the appeal against the decision shall be by way of an appeal against the assessment.’
It will be observed that under s 127(2) (b) the commissioners must give a decision selecting a basis period for the relevant year and this decision is not appealable. The commissioners then have power under s 127(3) to give a direction altering the basis period for the previous year of assessment. This direction is appealable. I mention in passing having regard to one argument which was addressed to me that it seems clear that the commissioners in exercising their powers under s 127(3), must take as the new basis period for the preceding year of assessment a period ending on the date at which the period selected under sub-s (2) begins. It is accepted on behalf of the commissioners that the commissioners have power on appeal under sub-s (3) to make whatever adjustment is necessary in order to bring about a fair result as regards the last preceding year of assessment in the circumstances of the particular case. The principle on which the commissioners act, and rightly act, will be found well summarised in Simon’s Income Taxc:
‘The general principle is that the average rate of assessments over the years affected should be equated to the average rate of profits made in the accounting periods that go to form the basis of those assessments.’
As regards the latitude of the commissioners’ powers, I was referred to the judgment of Lord Greene MR in Gollin v Inland Revenue Comrs. That was a decision under a different statutory provision, namely, that in which income attributable to a period exceeding a year may be spread for the purposes of surtax. The relevant expression is, ‘such relief as may be just.' Lord Greene MR said ([1953] 1 All ER at 349, 25 Tax Cas at 169, 170):
‘The operative part of the section, in cases where it applies, gives to the Special Commissioners power to charge an applicant to super tax, or adjust his liability to super tax, for the year in question and any succeeding year so as to give such relief as may be just, having regard to all the circumstances. Pausing there for a moment, that language appears to me to give to the Special Commissioners the widest possible discretion to do what appears to them as just-minded men to be just in the circumstances of the case. Down to that point there is nothing to suggest that there are any particular matters which the Special Commissioners are bound to take into consideration or any special matters which they are forbidden to take into consideration. The whole matter is left at large, and they would be entitled to take into consideration anything which to them appeared to be relevant to the question of justice. That, of course, does not mean that they could take into account matters which, on any view of any reasonable man, must be quite irrelevant to the question; for instance,
Page 1152 of [1970] 1 All ER 1149
it does not mean that they could take into account the special position of a man’s family affairs or anything of that kind. It must be related to the incidence of taxation, but subject to that, the discretion, down to that point, is of the widest possible character. But the sectiond goes on and it says this: ”… and in particular to the amount of any liability or additional liability to super tax which would have arisen for any preceding year or years if … ” and then it sets out two contingencies.’
It seems to me that that reasoning is applicable as regards the powers of the commissioners under sub-s (3). There is no reason in principle that I can see why the commissioners should not take corporation tax into account if and so far as it is relevant to do so as regards the last preceding year in question. Again, there is no reason why the adjustment should not take the form of reducing the amount of the assessment. Indeed it is not apparent what other form it could take.
In the present case, the taxpayer company’s period of account up to and including 31 January 1964 ran from 1 February to 31 January, so the period of account ended 31 January 1963 was the basis period for the year of assessment 1963–64; the period of account ended 31 January 1964 was the basis period for the year of assessment 1964–65. After 31 January 1964 the taxpayer company acquired certain new interests and for commercial reasons took a 15 month period of account from 1 February 1964 to 30 April 1965, thus throwing the end of the new period of account forward into a new year of assessment, and so rendering it ineligible as the basis period for the year of assessment 1965–66. The taxpayer company continued thereafter, so far as I am aware, to use the period of 12 months ended on 30 April as the period of account.
The taxpayer company’s profit for the period of account ended on 31 January 1963 was £104,867, its profit for the period of account ended on 31 January 1964 was £141,203, and its profit for the 15 month period ended 30 April 1965 was £95,654. The alteration in the taxpayer company’s period of account brought s 127 into play and in due course the commissioners made a decision under sub-s 2 (b) making the period of 12 months ending 30 April 1964 the basis period for the year of assessment 1965–66. They further made a direction under sub-s (3) altering the basis period for the year of assessment 1964–65 from the period ended 31 January 1964 to the period ended 30 April 1963. This decision and direction were in accordance with normal practice. The adjustments necessarily involved an apportionment on a time basis of the profit for the periods of account ended 31 January 1964 and 30 April 1965 respectively.
The taxpayer company complains of the direction under sub-s (3) on the ground that it involves some form of double taxation. The taxpayer company’s complaint does not rest on any hardship of the kind which sometimes results from a wide variation in the amount of a trader’s profits over the relevant years, that being the type of hardship which sub-s (3) appears, at any rate primarily, designed to meet. I do not overlook that there was in fact a considerable variation in the taxpayer company’s profits here.
The case as formulated by the Special Commissioners is also in some way related to the transition from income tax to corporation tax. Very summarily, the taxpayer company was chargeable to income tax for the last time in the year of assessment 1965–66. It became chargeable to corporation tax for the first time as from the date in the year 1964–65 at which its period of account begins; obviously, the earlier this date, the earlier its liability for corporation tax begins. But irrespective of whether this date is early or late in the year 1964–65, the taxpayer company is chargeable with income tax for the whole year 1965–66. So a company having a period of account ending early in the year of assessment is at a real disadvantage as compared with a company having a period of account ending late in the year of assessment, although
Page 1153 of [1970] 1 All ER 1149
this disadvantage is to some extent blanketed by certain provisions not now material as regards the actual payment of tax. Thus in the present case the taxpayer company incurred a real disadvantage as regards corporation tax by the alteration of its period of account so as to end on 30 April instead of on 31 January. I have mentioned the incidence of corporation tax because it comes repeatedly into the case stated and evidently influenced the commissioners, but counsel for the taxpayer company expressly disclaims reliance on hardship resulting from acceleration of the date for the commencement of corporation tax. The taxpayer company’s claim as advanced before the commissioners and supported today is based on the contention that there was some form of double taxation.
I propose now to read the case stated. I think that in this particular case it will be convenient to make comments on the case stated as I go along rather than to read it first as a whole:
‘1. (1) At a Meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 9th December, 1968 Helical Bar Limited hereinafter called “the Company” appealed against the following assessment to Income Tax:—Year: 1964/65 Amount: £114,099 less Capital Allowances. (2) The appeal was brought under Subsection (3) of Section 127 of the Income Tax Act, 1952, as amended by the Income Tax Management Act, 1964, Schedule 4. The assessment was made in accordance with a direction by the Board of Inland Revenue (hereinafter called “the Board”) pursuant to the said Subsection (3) and the question (shortly stated) was what relief therefrom, if any, should be just.
‘2. The facts set out in this paragraph were agreed or proved: (1) The Company is a company limited by shares which was incorporated in July 1919. Its business is the design and erection of all types of ferro-concrete structures and foundations. (2) At all material times up to 31st January, 1964 the Company made up its accounts to 31st January in every year. Prior to April 1965 the Company acquired the whole of the respective issued share capitals of five trading companies, which accordingly became its wholly-owned subsidiaries. This involved a substantial increase in the business of the Group and at the same time a new Chairman was appointed to the Board of the Company. The next accounting date of the Company was then postponed and its accounts were made up for a fifteen month period to the 30th April, 1965. (3) The profits of the material accounting periods of the Company were:—Year to 31st January 1963: £104,867 Year to 31st January 1964: £141,203 15 Months to 30th April 1965: £95,654. (4) Following upon this change of accounting date, the Board (a) in pursuance of their powers under Section 127(2) (b) of the Income Tax Act, 1952 decided that the basis period to be adopted in determining the Case I assessment on the Company for the year 1965/66 should be the period of 12 months to 30th April, 1964; and (b) in pursuance of their powers under Section 127(3) of the said Act, directed that the Case I assessment on the Company for the preceding year 1964/65 should be computed on the profits for the twelve months ending 30th April, 1963. There is annexed hereto marked “A” a copy of the statement from the Inland Revenue setting out the calculations falling to be made in accordance with these decisions.’
Appendix A shows how the profits for the two years of assessment are made up on the basis of time apportionments for the relevant basis periods. As regards the year of assessment 1965–66, the basis period is the year ended 30 April 1964 and the profits for that year are made up of nine twelfths of £141,203—that is the profit for the period of account ended on 31 January 1964—and three fifteenths of £95,654—that is the profit for the 15 months period of account ended on 30 April 1965. That gives a total of £125,033. As regards the year of assessment 1964–65, the basis period is the year ended 30 April 1963 and the profits for that year are
Page 1154 of [1970] 1 All ER 1149
made up of nine-twelfths of £104,867—that is the profit for the period of account ended on 31 January 1963—and three-twelfths of £141,203—that is the profit for the period of account ended on 31 January 1964. That gives a total of £113,951. Then follow certain adjustments, into which it is not necessary to go, and the adjustments end up with a figure of £114,160, which is so close to the figure of £113,951 as to make no significant difference. To return to the body of the case, para 2(5) states:
‘The decision by the Board described in paragraph (4) (a) above is in accordance with its published practice. [Then they exhibit a copy of the publication setting out this practice. Counsel did not consider it necessary to read that publication and I will not refer to it.] The direction described in paragraph (4) (b) above is not precisely in accordance with that practice, although the difference in figures is small. An alternative approach (not in accordance with the Board’s practice) would have been to adopt 31st January as the accounting date for income tax purposes throughout. The effect of these two alternatives can be summarised as follows:—(a) Basis periods following the Inland Revenue’s two decisions Income Tax Year 1963/64 Basis Period: Year to 31.1.63 Income Tax Year 1964/65 Basis Period: Year to 30.4.63 Income Tax Year 1965/66 Basis Period: Year to 30.4.64; Corporation Tax First accounting period: 1.5.64 to 30.4.65. (b) If 31st January had been adopted as the accounting date for income tax purposes throughout Income Tax Year 1963/64 Basis Period: Year to 31.1.63; Income Tax Year 1964/65 Basis Period: Year to 31.1.64; Income Tax Year 1965/66 Basis Period: Year to 31.1.65; Corporation Tax. First accounting period: 1.2.65 to 30.4.65. (6) The effect of the decisions of the Inland Revenue described in paragraph 4(a) and (b) above is that:—(a) the profits of the Company for the period from 1st May, 1962 to 31st January, 1963 are brought into assessment twice over, once in respect of the year 1963/64 and again in respect of the year 1964/65 and no corresponding period drops out; and (b) the Company’s profits for the period from 1st May, 1964 to 31st January, 1965 are charged to corporation tax instead of income tax. Neither of these two consequences would ensue if 31st January were adopted as the accounting date of the Company for income tax purposes throughout. There is annexed hereto and marked “C” a statement prepared by Messrs. Black Geoghegan & Till, the Auditors of the Company, giving details of the figures involved.’
I will refer to that statement in a moment but I will first make certain comments on what is said in para 2(6)(a) and (b).
The profits for the nine months from 1 May 1962 to 31 January 1963 are only brought into assessment for income tax twice over in the sense that these nine months form part of the year taken as a basis period for the ascertainment of profit for two distinct years of assessment, namely, 1963–64 and 1964–65. The charge of tax for each year of assessment is only on the profits of a single basis year. It is true that no corresponding period drops out. That is the inevitable result of putting back the date at which the trader’s year of account ends, but that does not in the circumstances involve any double taxation. The profits for the nine months from 1 May 1964 to 1 January 1965 are chargeable to corporation tax. They are so charged instead of to income tax only in the sense that, as a result of the change in taxation, these profits are prevented from forming part of the profits of any basis year of income tax. It is literally true that the consequences set out at the beginning of para 2(6)(b) would ensue if 31 January had been adopted as the accounting date of the taxpayer company for income tax purposes throughout.
I now turn to appendix c, which is the statement prepared by the company’s accountants. Although it is tedious to read the figures I must, I think, do so.
‘Proposed bases of assessment. 1963/64 1.2.62–31.1.63 1964/65 1.5.62–31.1.63 1.2.63–30.4.63 1965/66 1.5.63–30.4.64. Doubly assessed period—1.5.62—31.1.63.
Page 1155 of [1970] 1 All ER 1149
Profits of basic periods:—(i) Assessments 1.2.62–31.1.63 = 104,867 = 1963/64 1.5.62–31.1.63 = 78,650 [coupled with] 1.2.63–30.4.63 = 35,301 [total 113,951] = 1964/65 1.5.63–30.4.64 = 125,033 = 1965/66. [The total of those figures for the assessments is £343,851. Then there is a trivial adjustment which increases it to £344,060.] (ii) Profits 1.2.62–31.1.63 = 104,867 1.2.63–31.1.64 = 141,203 1.2.64–30.4.64 = 19,131.’
The total of these figures for profits is £265,201. The difference—ie the amount by which the total of profits £265,201 is less than the total assessments £344,060—is £78,859. It appears on the face of those figures as if the amount of the assessments had exceeded the amount of the corresponding profits by the sum of £78,859, but it will be seen that the profits brought in are only profits for two years and three months. These cannot properly be compared with the profits for the three years which form the basis period for the three respective years of assessment.
To return once more to the body of the case, para 2(7) states:
‘Shortly stated, the effect of the Board’s basis for assessments is that whereas the aggregate profits of the Company’s three accounting periods (i.e. year to 31st January, 1963, year to 31st January, 1964 and 15 months to 30th April, 1965: total 39 months) amounts to £341,724, the aggregate of the profits assessed to Income Tax and Corporation Tax as per paragraph (5) (a) above (on the basis of periods totalling 48 months) amounts to £420,583. The difference of £78,859 corresponds to the profits of the 9 months period brought into assessment twice over (vide 5(a) above. We were later informed that the correct figure was not £78,859 but £78,798.’
There is nothing significant in that last sentence. I find great difficulty in following this passage, which involves a comparison of the profits for 39 months of account with profits assessed to income tax and corporation tax on the basis of periods totalling 48 months. So far as income tax is concerned, the profits for the three years of assessment 1963–64, 1964–65 and 1965–66 are charged on the profits of three basis periods overlapping certainly but each of one year and no more.
To return to the case stated [para 2(7)]:
‘It was suggested to us in the course of argument that we might adjourn the appeal to enable the Board to reconsider the whole matter in the light of the possibility of adopting the alternative approach described in paragraph 5(b) above. This, in the event, we did not do.
‘3. It was contended on behalf of the Company:—(1) that the Board’s direction in respect of 1964/65, in the circumstances created by the Board’s decision in respect of 1965/66, resulted in an injustice; (2) that the injustice could be measured by the amount of the profits of the nine months’ period which was included in the basis period for 1963/64 and also in the basis period for 1964/65; (3) that the said injustice should be cured by deducting £78,798 from the amount of the assessment under appeal.
‘4. It was contended on behalf of the Board:—(1) that the Board’s direction under Section 127(2) (b) was properly made, that it was in accordance with the Revenue’s published practice, and that it was not subject to appeal; (2) that the direction made under Section 127(3), although not precisely in accordance with the Board’s published practice, did not result in injustice, since it was more favourable to the Appellants than if the practice had been followed; (3) that the power to grant such relief, if any, as is just could only be exercised within the limits of the fundamental requirement of the Income Tax Acts of assessing the profits of twelve months in each year of assessment; (4) that a reduction in the assessment for 1964/65 of £78,798 would result in the assessment being
Page 1156 of [1970] 1 All ER 1149
based upon the profits of only three months so that the assessments to income tax for the three years in question, namely, 1963/64, 1964/65 and 1965/66 would be calculated on the profits of only 27 months; (5) that tax charged under Cases I and II of Schedule D on the preceding year basis is not tax charged on the profits of the accounting year ending in the preceding year of assessment but is tax charged in respect of the profits of the year of assessment, those profits being measured by the profits of the aforesaid earlier accounting year; (6) that, accordingly, the adoption of the profits of a particular twelve month period for measuring the profits of two years of assessment, as for example in the commencement provisions under Section 128, did not result in double taxation; (7) that any apparent disadvantage to the Company which may have resulted from the first accounting period for Corporation Tax commencing on the 1 May, 1964 was the consequence of the Company’s change of accounting date, the Board’s decision under Section 127(2) (b), and the provisions of the Finance Act, 1965; and it was not relevant to an appeal against the direction under Section 127(3); (8) that the direction under Section 127(3) should be supported and the consequential assessment for the year 1964/65 confirmed.
‘5. We, the Commissioners who heard the appeal, noted that the direction made in relation to 1964/65 resulted in the basis periods for 1963/64 and 1964/65 overlapping by nine months. Such overlapping of basis periods was, we thought, a thing which might not uncommonly happen in Income Tax computations, and did not necessarily, of itself, give rise to any injustice. In the present case, looking at the overlap in the light of the circumstances of the Board’s decision relative to 1965/66 and the consequential charge to Corporation Tax as from 1st May, 1964, we came to the conclusion that the profits of the nine months’ overlap were being in a real sense charged to tax twice over, and this we considered was, in the particular circumstances, unjust. In all the circumstances it seemed to us that an appropriate way of relieving this injustice was to deduct £78,798 from the amount of the 1964/65 assessment. We accordingly reduced the assessment to £35,301, less Capital Allowances.’
Leaving aside the rather perplexing comparisons of like with unlike, the conception on which the commissioners based their finding, unless I have completely misunderstood it, is not really double taxation at all, but the fact that the period from 1 May 1964 to 31 January 1965 is brought into the first period in respect of which corporation tax is chargeable. That really means that the hardship to the taxpayer company lies in the advancement of the date as from which chargeability to corporation tax commences. Reliance on the contention in that simple form is, as I have said, expressly disclaimed by counsel for the taxpayer company and I had better not pursue it. The difficulty in the way of such a contention is, I suppose, to be found in para 4(7) of the contentions made on behalf of the Board as set out in the case stated. Suffice it to say that so far as income tax is concerned I am quite unpersuaded that there has been any double taxation and that being so, the basis on which the commissioners expressed their conclusion and on which counsel for the taxpayer company supported it seems to me to disappear. Once one concludes, as I feel bound to do, that the commissioners based their decision on the mistaken view that the direction involved double taxation, their conclusion is obviously vitiated. No other ground has been adduced for interfering with their direction.
I ought, I think, before leaving the matter, to make one point clear. If one takes the three years actual profit, ie £104,867 for the year 1 February 1962 to 31 January 1963, £141,203 for the year 1 February 1963 to 31 January 1964 and £76,523, twelve-fifteenths of the profits for the 15 months from 1 February 1964 to 30 April 1965, one gets a total of £322,593. That is less by £21,467 than the total amount of profit charged, ie £344,060. That, however, is not the ground on
Page 1157 of [1970] 1 All ER 1149
which the taxpayer company rests its contention and I am not concerned to go further into that matter. For the reasons which I have given I must allow this appeal.
Appeal allowed.
Solicitors: Solicitor of Inland Revenue; Slaughter & May (for the taxpayer company).
K Buckley Edwards Esq Barrister.
W v W
[1970] 1 All ER 1157
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND CROSS LJJ
Hearing Date(s): 3, 4 NOVEMBER 1969
Divorce – Infant – Blood test – Paternity of child – Criterion whether test will be ordered – Test in best interests of child – Inconclusive result.
The husband and wife, who were white, were married in October 1957. Their first child was born in October 1959, the second in March 1961. In late January 1963, the wife committed adultery with a coloured man, B, at her mother’s house. In July 1963, while the wife was pregnant with her third child, she left the matrimonial home and went to live elsewhere. On 6 December 1963, she gave birth to a full-term child who had a negroid appearance. In November 1964, the wife filed a petition for divorce alleging cruelty and desertion by the husband. In his amended answer the husband alleged adultery with B, who had disappeared, and service on whom was dispensed with. A decree nisi was granted to the husband on the ground of the wife’s adultery with B. The court ordered that the third child, Paul, be represented by the Official Solicitor on the trial of an issue whether the husband was the father of Paul. There was a 70 per cent chance that, if a blood test of Paul were ordered by the court, the husband would be shown not to be the father.
Held – (Lord Denning MR dissenting) the court could not order Paul’s blood to be tested because, in order to determine the question whether in the exercise of its discretion the court should order a blood test, the sole criterion to be applied was what was in the best interests of the child (see p 1160 g, and p 1161 e, post); and where the blood test might well show that the husband was not the child’s father, but would not give the child any indication of the identity of his father, a blood test would not be in the child’s best interests (see p 1161 a, b and f, post).
M (D) v M (S) and G (M (D A) intervening [1969] 2 All ER 243 followed.
Notes
For the jurisdiction of the court to order blood tests in matrimonial proceedings, see Supplement to 21 Halsbury’s Laws (3rd Edn) para 428.
Cases referred to in judgments
B v B and E (B intervening) [1969] 3 All ER 1106, [1969] 1 WLR 1800.
B R B v J B [1968] 2 All ER 1023, sub nom B (B R) v B (J), [1968] P 466, [1968] 3 WLR 566, Digest Supp.
L, Re [1968] 1 All ER 20, [1968] P 119, [1967] 3 WLR 1645, Digest Supp.
M (D) v M (S) and G (M (D A) intervening) [1969] 2 All ER 243, sub nom M (D K) v M (S V) and G (M intervening) [1969] 1 WLR 843.
Interlocutory appeal
This was an appeal by the husband from a decision of Sir Jocelyn Simon P, dated
Page 1158 of [1970] 1 All ER 1157
9 May 1969, refusing to make an order that a blood test be carried out on Paul, an infant and child of the wife, in the issue of the paternity of Paul. The facts are set out in the judgment of Lord Denning MR.
Betty Knightly for the husband.
E Swift for the Official Solicitor as guardian an litem of the infant, Paul.
4 November 1969. The following judgments were delivered.
LORD DENNING MR. We heard this case in July, but we adjourned it because the Family Law Reform Act 1969 was about to come into operation; but, having looked at it, I do not think that it affects our decision.
The question is whether a blood test should be ordered in a paternity issue. The husband and wife were married on 12 October 1957. He was 26; she was 19. He was a butcher. They had two children, a daughter born on 8 October 1959 and a son born on 8 March 1961. On 5 July 1963, the wife left the home, taking with her those two children. She was the pregnant with a third child. She went to live at Bristol with a man who was a coach driver. She looked after his house for him. The husband, who stayed in London, paid maintenance for those two children. On 6 December 1963, the wife in Bristol gave birth to a full-term child, Paul. The wife wrote and told the husband that she had Paul. He never saw Paul, but he paid maintenance for Paul also.
On 8 November 1964, the wife filed a petition for divorce, charging the husband with cruelty and desertion. The husband filed an answer denying the charge. He alleged in his answer that the wife was committing adultery with the coach driver in Bristol. The coach driver put in an answer denying the adultery. The husband never saw any of the children, but he went on paying maintenance for all three until October 1966. Then he asked the wife for a photograph of the children. She wrote a letter stating:
‘I have been to studio to get the children’s photo taken (a group) it has cost me £2 2s. 0d. You did say that you’d pay for it. The size of it is 9 1/2 inch X 7 1/2 Inch. When you send the money for it and I receive it, then I will send photo by return of post.’
She sent him the photograph of the children. I have it here in my hand now. It shows the two elder children as obviously children of white parents. But Paul is very different in features, in colour and hair—so different that any ordinary person might think the father of Paul was a coloured man. The husband clearly formed that view. He thought that Paul was not his child, but must be the child of a coloured man. He instructed an enquiry agent who saw the wife. She made a statement in which she said that the three children were children of the marriage, but she admitted that she had had intercourse with a coloured man from Guyana. She stated:
‘In January 1963 I became friendly with a man called Victor Barsatti who lived at my mother’s home, and late in January 1963 Mr Barsatti and I committed adultery at my mother’s home. It only happened once and I did not tell my husband.’
(It was a fact that the wife’s mother had coloured men as lodgers, and the wife used to visit her mother at weekends.) Thereupon the husband amended his answer to charge adultery by the wife with Mr Barsatti at the mother’s address.
So the husband charged adultery by the wife with Mr Barsatti. But Mr Barsatti had disappeared. He could not be found. Service on him was dispensed with. The divorce petition came on for hearing. A decree nisi was pronounced on the ground of the wife’s adultery with a man on whom service had been dispensed with, ie Mr Barsatti. The coach driver was dismissed from the suit. The court was concerned
Page 1159 of [1970] 1 All ER 1157
about Paul and made an order that Paul should be represented by the Official Solicitor.
The Official Solicitor’s representative saw the wife, and reported:
‘I informed the “wife” that I had seen a photograph of the two admitted children of the family and whilst one can immediately see that the two admitted children are brother and sister, Paul is quite unlike them and has what I would describe as negroid features. The “wife” admitted that this was so, although she stated that his features are not so negroid as appears in the photograph. She explained that Paul was a rhesus negative baby, born with jaundice, but his blood was not changed because of the divorce proceedings. She stated that when Paul is “off colour” he always becomes yellow due to the jaundice and it is for this reason that his skin is slightly coloured. She further stated that there is Spanish and North-American-Indian blood in her family, and that this is the reason why he tends to have a negroid appearance. In fact, the “wife” showed me a letter from her mother in which she confirmed that the family had Spanish, French and North-American-Indian blood.’
The court directed an issue to be tried whether Paul was the child of the husband or not. In other words, a paternity issue. The question is whether or not Paul should have a blood test. The husband is quite willing for his blood to be tested. The wife is quite willing for her blood to be tested. She is quite willing too that Paul should have a blood test. All those are willing. Mr Barsatti has disappeared. No one knows where he is. So his blood cannot be tested. Nevertheless, a blood test could be useful. If the blood of the husband, wife and child was tested, there is a 70 per cent chance that the husband could be shown not to be the father. The Official Solicitor, on behalf of Paul, says that it is not in his best interests to have a blood test, and, therefore, it should not be ordered.
In Re L ([1968] 1 All ER 20 at 25, [1968] P 119 at 157, 158) I said:
‘… in a paternity issue, or any proceedings where it is in the best interests of the child to have its paternity settled one way or the other, the court can order a blood test.’
In B R B v J B ([1968] 2 All ER 1023 at 1027, [1968] P 466 at 476) Diplock LJ said an order could be made where ‘… it is in the child’s best interests that it should be made’. Similar words were used recently in M (D) v M (S) and G (M (D A) intervening). To those words I would make this addition: in my opinion, when a court is asked to decide a paternity issue, it is in the best interests of everyone that it should do it on the best evidence available. The issue is of such importance and affects so many persons that it should be decided on all the evidence and not half of it. In the old days the court had no option; it had to rely on presumption of legitimacy. Now when it has blood tests ready to hand, it should make use of them. I say that it is ‘in the best interests of everyone’, because I think that everyone is concerned in the paternity issue and of course I include Paul. Paul’s best interests are bound up with the interests of all those about him. Take the little brother and sister. Take the wife. Take the husband. They can all see that there is a question mark about Paul’s paternity; and their attitude to him will be affected by the outcome. Take Paul himself. Whenever there is a question mark as to the parenthood of a child, the one thing the child will want to know when he grows up is: who is my father? He will be torn apart unless he knowns. It is better for him, as for everyone else, that the truth should out.
If the blood test is taken and the court decides on all available evidence, it will be much more satisfactory for all concerned. When I say ‘all available evidence’ I mean the evidence of the wife herself; the evidence of the wife’s mother as to her
Page 1160 of [1970] 1 All ER 1157
lodgers and as to the weekends the wife spent there; and evidence of the blood test. If then the court finds on all the evidence that the husband is the father, it will be much better for Paul. The husband will have to pay maintenance for Paul, and it may be that he will take an interest in Paul. And Paul himself, as he grows up, will have the satisfaction of knowing that a court of England has found that he was legitimate. But if the court refuses to allow Paul’s blood to be tested, its pronouncement will itself be suspect. What will the husband think of a court which refuses a blood test when he and his wife want it? No one can be satisfied with a finding by a court of paternity when the court of its own accord chooses to rely on a presumption of legitimacy and throws aside scientific evidence of a blood test which is ready to hand.
One word more. If this blood test is refused, and the court decides the paternity issue without it, then after the decision the parties can themselves have their blood tested and have Paul’s blood tested too. The Official Solicitor cannot stop them. Nor can anyone else. These tests may prove that the court’s finding is completely wrong. The court should not expose itself to such a condemnation. Better to have Paul’s blood tested now and decide in the light of it. In my view, it would be in the best interests of Paul and of those about him that the court should be assisted in this case by the taking of a blood test. I would, therefore, allow the appeal and order a blood test.
As to the new Act, the relevant part is not yet in operation. When it does come into force, I expect that the court will approach the question much as it does now. Section 21 does not appear to affect the position. It was passed, I believe, to give protection to the medical men.
WINN LJ. This appeal in my opinion raises no question of principle, but a very narrow issue of fact. I do not think that the references made to the Family Law Reform Act 1969, including Part III which is not yet in force, provide any assistance to the court in deciding this appeal. I would say about the portion of the Act at which we have looked, Part III, no more than that I agree with what Lord Denning MR has said about the effect of ss 21 and 22. None of those sections has any bearing on the exercise by the court of its discretion when asked to make an order for the taking of blood samples. They regulate the manner in which and conditions subject to which such specimens are to be taken if the court orders that they be taken. The submission of counsel for the husband and the judgment delivered by Lord Denning MR both emphasise what, for my part, I think is quite certainly right, that the question before this court today must be determined by applying the sole criterion: what is in the best interests of this infant? Counsel for the husband did not suggest that any other test should be applied. Her whole submission was on the footing that, judged by the best interests of Paul, it was right that the court should in its discretion order that blood tests be taken. Lord Denning MR has reiterated in his judgment, and I respectfully agree with all that he has said in that respect, that the tests which are laid down in the existing authorities are still the appropriate criteria. In particular, without quoting the words precisely, Lord Denning MR has, as I understand it, reaffirmed what he himself said in M (D) v M (S) and G (M (D A) intervening). I do not read it in extenso. I merely take out this passage, which is perfectly in point ([1969] 2 All ER at 244, 245, [1969] 1 WLR at 846):
‘If it were possible, by means of the blood test, to show that the husband was the father, it might be to the child’s benefit. But it cannot show that. This is not a case where one of two known men is the father. The only known man is the husband. There is a 70 per cent. chance that it may show that the husband was not the father. But, if that is shown, what good is it to the boy? It would only show that he is illegitimate and that the wife was telling lies when she said that the husband was the father.’
Page 1161 of [1970] 1 All ER 1157
That is almost precisely the situation here. There is a 70 per cent chance, if this blood test which is asked for is granted, that Paul might be told, either at the age of six or later, that the husband of his mother was not his father, without giving him any indication of the identity or characteristics in any respect of the man who in nature begot his birth. I think that this is a jury case in essence and that this court is being asked as a jury of fact to answer the question: is it in the best interests of Paul that a blood test should be ordered? I am utterly unable to reconcile my view on that question with the opinions expressed by Lord Denning MR. I disagree, with the utmost respect and deference, but also with emphasis, with the reasoning that Lord Denning MR has given supporting his opinion on that matter of fact. I very much regret having so to do. I do it with deference and respect. I take precisely the opposite view. I do not propose to give any further reasons for my own view.
I think this appeal should be dismissed.
CROSS LJ. Even assuming that we are entitled to look at Part III of the Family Law Reform Act 1969, although it has not yet come into operation, I agree with Lord Denning MR and Winn LJ that it affords us no help in deciding this appeal; for it says nothing about the principles on which the court should act in exercising its discretion to order or to refuse to order blood tests. The principle on which the court has acted hitherto is not to order a child’s blood to be tested unless it considers that it is in the interest of the child that its blood should be tested. It may, perhaps, be wrong to treat the child’s interest as paramount. Counsel for the husband did not argue that it was wrong, and in any case the principle is laid down in decisions of this court. The question in the appeal is, therefore, whether it was in Paul’s interest that a blood test should be ordered. He has been living since his birth with his mother, who takes the view—she may be right, she may be wrong—that her husband is his father. Although there is no evidence on this point, I would think that it is probable that she will have told Paul and also have told her other children that her husband is Paul’s father.
What will be the effect on Paul of this taking of a test? If it showed that the husband could not be the father, which is one possible result, Paul would be left in the position of having no identifiable father at all and would sooner or later realise that his mother had been lying when she told him that her husband was his father. I cannot think that such a result would be in Paul’s interests. If, on the other hand, the test showed that the husband could be the father, Paul would gain nothing, for it is most improbable that his attitude would change. This case appears to me to be precisely on all fours with M (D) v M (S) and G (M (D A) intervening). It is true that the question there arose on an issue of adultery. But if in that case a decree having been granted on the ground of adultery with some other person, a paternity issue was directed, the court would surely not give a different decision with regard to the test from that which it had given when the issue was still one of adultery only.
I would add in conclusion that, with all respect to Lord Denning MR, I cannot accept that it is always best in these matters that the truth should be known. In that connection I would refer to B v B and E (B intervening).
I agree with Winn LJ that this appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Godfrey Davis & Baldwin, Mitcham (for the husband); Official Solicitor.
Wendy Shockett Barrister.
S v MCC (formerly S) and M (S intervening)
[1970] 1 All ER 1162
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND KARMINSKI LJJ
Hearing Date(s): 2, 3 FEBRUARY 1970
Divorce – Infant – Blood test – Paternity of child – Criterion whether test will be ordered – Interests of infant and interests of justice.
The parties were married in 1946 and had had three sons. In 1963, the wife left the matrimonial home to live in a house where there were coloured people. She returned in December 1964, but stayed away for periods of time thereafter. In January 1965, when the wife was away all night, the husband found a note in her handlbag with the name and address of the co-respondent written on it. On 20 March 1965, the wife again left for a time. During March 1965 the infant intervener was conceived. In May 1965, the wife left again in company with the co-respondent. In December 1965 she returned once more and on 15 December gave birth to the infant intervener in hospital. The husband, saying that the infant was coloured, refused to recognise her as his and shortly after the wife left for the last time taking the infant with her and took up residence in the same house as the co-respondent. In March 1966 the husband commenced proceedings for divorce. In December 1966 the wife applied to the magistrates for an affiliation order against the co-respondent in respect of the infant which was adjourned pending the result of the proceedings with regard to the legitimacy of the infant. In May 1968 the husband was granted a divorce on the ground of the wife’s adultery with the co-respondent from August 1965, and the judge expressed the view that there had been adultery between them since about January 1965. He ordered that a legitimacy issue should be tried as to the legitimacy of the infant. At the request of the husband it was ordered that blood tests be taken of the parties concerned, subject to the consent of the co-respondent. The co-respondent did not consent and the Official Solicitor objected to the infant’s blood being tested. On appeal against the overruling of the Official Solicitor’s objection,
Held – (Sachs LJ dissenting) – It was right to order that a blood test be taken of the child, because—
(i) although the interest of the child was not the sole criterion (see p 1164 g, and p 1170 d, post), on the facts of the case it was in her social interest (see p 1165 b and p 1170 e post) and (per Lord Denning MR) in her financial interests (see p 1165 a, post); and
(ii) in the interests of justice in deciding whether the child was legitimate or not, the court should have before it the best evidence available (see p 1165 e and p 1170 j, post).
Dictum of Lord Sumner in Russell v Russell [1924] AC at 748 applied.
Notes
For the jurisdiction of the court to order blood tests in matrimonial proceedings, see Supplement to 21 Halsbury’s Laws (3rd Edn) para 428.
Cases referred to in judgments
B v B and E (B intervening) [1969] 3 All ER 1106, [1969] 1 WLR 1800.
B R B v J B [1968] 2 All ER 1023; sub nom B (B R) v B (J) [1968] P 466, [1968] 3 WLR 566, Digest Supp.
Gittrow v Day [1965] 1 All ER 73, [1965] 1 WLR 317, 129 JP 94, Digest (Cont Vol B) 53, 355b.
Page 1163 of [1970] 1 All ER 1162
L, Re [1968] 1 All ER 20, [1968] P 119, [1967] 3 WLR 1645, Digest Supp.
Russell v Russell [1924] AC 687, 93 LJP 97, 131 LT 482, 27 Digest (Repl) 318, 2649.
W v W p 1157, ante.
Whitton v Garner [1965] 1 All ER 70, [1965] 1 WLR 313, 129 JP 92, Digest (Cont Vol B) 53, 355a.
Cases also cited
Bastable v Bastable and Sanders [1968] 3 All ER 701, [1968] 1 WLR 1684.
Bickley v Bickley [1964] 3 All ER 917 n, [1965] 1 WLR 600 n.
Blyth v Blyth and Pugh [1965] 2 All ER 817, [1965] P 411.
Holmes v Holmes [1966] 1 All ER 356, [1966] 1 WLR 187.
Hornal v Newburger Products Ltd [1956] 3 All ER 970, [1957] 1 QB 247.
Knowles v Knowles [1962] 1 All ER 659, [1962] P 161.
Mellery-Pratt v A-G (1969) 113 Sol Jo 656.
Mayo v Mayo [1948] 2 All ER 869, [1949] P 172.
Interlocutory appeal
This was an appeal by the Official Solicitor as guardian ad litem for the infant intervener from an order in chambers of his Honour Judge Ingress Bell QC sitting as a special commissioner in divorce on 15 October 1969 that a blood test be taken of the infant in order to determine the question of her legitimacy in proceedings for divorce between the husband and the wife. The facts are set out in the judgment of Lord Denning MR.
E Sanderson Temple QC and H A Kershaw for the Official Solicitor as guardian ad litem of the infant intervener.
F P R Hinchliffe QC and D C Waddington for the husband.
The wife and the co-respondent did not appear and were not represented.
3 February 1970. The following judgments were delivered.
LORD DENNING MR. The parties were married on 24 August 1946 when the husband was 23 and the wife was 19. Soon after their marriage they had three sons who are now 22, 17 and 15 years old. They are ordinary white children. When the youngest of these three sons was a boy of ten, the wife had a baby girl, who is said to be coloured. She was conceived in March 1965 and born on 15 December 1965. So she is now just over four. The question is whether, in order to determine her paternity, a blood test should be taken.
The evidence shows that in 1963 the wife left the matrimonial home and went to live in a house where there were coloured people. She came back on Christmas eve 1964 and stayed for a while. In January 1965 she was away all night. The husband found in her handbag a note. It had the name of Mr M, the co-respondent, on it, with his address. The wife went away and came back from time to time. On 20 March 1965—mark the date—she went away again for a time, but came back. Eventually, on 14 May 1965, she left once more. She took her suitcase. Mr M fetched her in a taxi. She told the husband that she must go with him and she left. She did not come back to the husband till December 1965. She was then obviously pregnant and the baby imminent. The husband took her in for humanity’s sake. She went from there to the hospital. She was there two or three weeks. She came back with her new-born baby. The husband said that it was a coloured child. He refused to accept it as his. She stayed in the home for three or four weeks with the child. Then she went herself to the house where Mr M was living, taking the child with her. She has stayed in that house with the child ever since. Mr M has stayed there too.
In March 1966 the husband took divorce proceedings. Then a significant thing
Page 1164 of [1970] 1 All ER 1162
happened. On 7 December 1966 the wife took out a complaint before the magistrates against Mr M. It was an affiliation summons. She claimed that he was the father of the child, and ought to support her. An affiliation summons has to be taken out within 12 months of the birth, and the wife took it out. The complaint has been adjourned pending these proceedings. In May 1968 the divorce case was heard. It was not contested. The judge granted a decree of divorce on the ground of the wife’s adultery with Mr M from August 1965. The judge expressed the view that there had been adultery between them from January 1965, or thereabouts; but it was unnecessary for him to put it in his order. He then ordered that a legitimacy issue should be tried as to the legitimacy of the child. It was essential for the judge to determine the legitimacy of the child because, if she was a child of the marriage, he had to make sure that proper arrangements were made for her.
On the legitimacy issue, the husband asked for blood tests to be taken of all concerned. The judge ordered a blood test to be taken of the husband, the wife, Mr M and the child. He made that order, however, subject to the consent of Mr M. But Mr M did not consent to his blood being tested. The husband and the wife were quite ready to have a blood test and for the child’s blood to be tested. But as Mr M did not consent, the matter was brought back before the judge. The Official Solicitor appeared as guardian ad litem for the child. He objected to the child’s blood being tested. The judge overruled his objection. He ordered that a blood test be made of the husband, of the wife, and also of the child. The Official Solicitor appeals on behalf of the child to this court. The contest is this: the Official Solicitor says that a blood test should not be ordered of an infant child unless it is shown to be in the sole and exclusive interest of the child. Counsel for the husband says that a blood test can be ordered, not only in the interest of the child, but also in the interest of others, such as the husband himself. It can also be ordered, he says, in the interests of justice itself. The Family Law Reform Act 1969 gives statutory recognition to blood tests. The relevant portion, Part III, is not yet in operation. It has been held up for administrative reasons. We can, however, look at it; and, looking at it, there is no guidance in it as to the principles which the courts are to adopt. In these circumstances, the courts will, no doubt, apply the same principles after the Act as we now apply before it. Hence the importance of this case.
Undoubtedly, one of the important matters to be considered is the interests of the child. I do not think that it is the sole matter. But it is an important matter. So I consider it first. Counsel for the husband urges that it is in the financial interests of the child for there to be a blood test. Suppose, he says, there is no blood test. The wife will probably lose her affiliation summons against Mr M for the simple reason that she has made statements in these proceedings saying that the husband is the father; and, in view of this, the justices would be disinclined to accept her evidence that Mr M was the father. Suppose, next, says counsel, that a blood test is taken, and it proves that the husband is not the father (and there is a 70 per cent chance of proving it), then her chances of succeeding against Mr M are greatly increased. Once she shows that the husband did not have access to her, she will be regarded as a ‘single woman’. As I read the cases, a married woman is a ‘single woman’ for the purposes of an affiliation summons if her husband did not have access to her, ie did not have intercourse with her such as to result in the birth of the child. In other words, if the blood test shows that the husband is not the father, it means that the wife was a ‘single woman’ so as to be able to proceed against Mr M. Then, when she couples with that evidence the fact that Mr M refuses to have a blood test, she will be virtually certain to win the case against him. She would be able to pray in aid what I said in Re L ([1968] 1 All ER 20 at 26, [1968] P 119 at 159):
‘If an adult unreasonably refuses to have a blood test, or to allow a child to
Page 1165 of [1970] 1 All ER 1162
have one, I think that it is open to the court in any civil proceedings … to treat his refusal as evidence against him, and may draw an inference therefrom … ’
The new Act affirms that selfsame principle. So I am prepared to accept counsel for the husband’s submission that a blood test is in the financial interests of the child.
But I am not content to rest the decision on the financial interests of the child. That is too narrow a line for my liking. I think that it is in the social interests of the child—so that she can take her place in society. We do not know what the wife will tell the child about her father. If she tells her that the husband is the father, will not the child say: ‘Why does not father want to see me? Why does he not give me presents like other fathers?’ If the wife tells the child that Mr M is her father, will not the child say: ‘Why does he not recognise me?’ When she is growing up, she is bound to realise that there is a question-mark about her birth. She will be desperately anxious to know ‘who is my father?’ It is surely in her best interests that the answer should be given as truthfully as possible.
Finally, I must say that, over and above all the interests of the child, there is one overriding interest which must be considered. It is the interests of justice. Should it come to the crunch, then the interests of justice must take first place. I would adopt the words which Lord Sumner used many years ago in Russell v Russell ([1924] AC 687 at 748):
‘… my own view is that in the administration of justice nothing is of higher importance than that all relevant evidence should be admissible and should be heard by the tribunal that is charged with deciding according to the truth … It is best that truth should out and that truth should prevail.’
In my opinion, when a court is asked to decide whether a child is legitimate or not, it should have before it the best evidence which is available. It should decide on all the evidence, and not on half of it. There is at hand in these days expert scientific evidence—by means of a blood test—which can in most cases resolve the issue conclusively. In the absence of strong reason to the contrary, a blood test should be made available. The interests of justice so require.
I agree with the judge and would dismiss the appeal.
SACHS LJ. I would first record my indebtedness for the admirable arguments put forward by all counsel on what to my mind is a matter of real difficulty and one of transcending importance to so many children. In B R B v J B ([1968] 2 All ER 1023 at 1029, [1968] P 466 at 481), which decided that the High Court had jurisdiction to order a blood test to be taken of an infant, but only on a parens patriae basis, I ventured to suggest that the matters to be dealt with:
‘… give scope … for deeply different individual judicial views as to what is and what is not in the interests of the child in relation to potential bastardisation on the given facts of any one case.’
In practice, the principles on which the issues in this appeal should be approached have indeed, proved to be a subject of deep differences in this court. Those differences stem not a little from questions which will, I hope, before long be answered by the House of Lords; they are human questions on which I for one would be only too grateful to have some guidance from wiser heads than mine.
The differences of approach are, perhaps, best illustrated by first citing as exemplifying one view, passages from judgments of Harman, Winn and Cross LJJ. In B v B and E (B intervening) ([1969] 3 All ER 1106 at 1108, [1969] 1 WLR 1800 at 1804), Harman LJ said:
Page 1166 of [1970] 1 All ER 1162
‘… the person whose interests are paramount in all infant cases is the child, and in my opinion what the court has got to consider is whether it is in the interests of this child that this operation should be performed.’
It may be appropriate to mention that Harman LJ has a particularly wide and long experience of the approach to issues arising under the parens patriae jurisdiction of the court; an approach not necessarily quite the same as that applied to the exercise of the purely statutory powers. Turning next to W v W (Page 1157, ante), decided on 4 November 1969, where Winn and Cross LJJ gave the majority decision, Winn LJ said (At 1160, ante):
‘… the question before this court today must be determined by applying the sole criterion: what is in the best interests of this infant? Counsel for the husband did not suggest that any other test should be applied. Her whole submission was on the footing that, judged by the best interests of [the infant], it was right that the court should in its discretion order that blood tests be taken.’
Cross LJ said (At 1161, ante):
‘The principle on which the court has acted hitherto is not to order a child’s blood to be tested unless it considers that it is in the interest of the child that its blood should be tested. It may, perhaps, be wrong to treat the child’s interest as paramount. Counsel for the husband did not argue that it was wrong, and in any case the principle is laid down in decisions of this court.’
At this moment it is convenient to mention that junior counsel for the infant has pointed out that (with one exception which I am about to cite), in all the judgments in all the cases in this court, the only considerations mentioned as relevant to the exercise of discretion before ordering a blood test of an infant have been the interests of the child, and that no mention was made of the interests of others.
Next I come to the other view. So far as this court is concerned, it is set out in the powerfully worded judgment of Lord Denning MR in W v W (At 1159, ante), and I hope that a citation of the two following sentences will correctly give its general import. Lord Denning MR said:
‘… in my opinion, when a court is asked to decide a paternity issue, it is in the best interests of everyone that it should do it on the best evidence available. The issue is of such importance and affects so many persons that it should be decided on all the evidence and not half of it … [The infant’s] best interests are bound up with the interests of all those about him.’
In essence, I would respectfully suggest that that judgment, read as a whole, puts forward the proposition that truth must out, and, indeed, that truth should out ruat coelum. That is an attractive banner to which counsel for the husband immediately attached himself with enthusiasm.
The difference between the two approaches appears to me to be that, if one takes the first approach, one gets a relatively small number of cases in which an order for a blood test would be made. If one takes the second approach, then one would make an order in the vast majority of cases, and there would rarely be exceptions—exceptions, counsel for the husband suggested, only when there was some sort of quasi estoppel. If this latter approach is correct, then most of the discussion and ratio decidendi in the other cases in this court was otiose.
For my part I consider that I am bound by the majority views in W v W. In the circumstances, however, it is right to add that, when the parens patriae principle
Page 1167 of [1970] 1 All ER 1162
has to be applied in this particular category of cases, I would subscribe to their primary approach; and in that behalf I adhere to what I said in B R B v J B ([1968] 2 All ER at 1028, [1968] P at 479):
‘Prominent to my mind is the fact that it is essential to remember that the parens patriae jurisdiction is one for the benefit and protection—I emphasise the words “and protection”—of the infant; and that, it must be emphasised, can be something very different from the self-centred interests that adults may have in sorting out their own affairs.’
Of course, I recognise, as everyone else would recognise, that the banner, truth must out in the interests of justice, is one which, as already mentioned, carries considerable attractions. But it must also be remembered that it does not take account of at least one other factor—that the adult citizen in certain matters has a right to consider his own interests in deciding what course to pursue, whilst here one is concerned with a child who cannot take those matters into account. It is thus for the court to put the child in no worse position than an adult citizen in such matters.
On the authorities that I have seen to date, one should look at what are the paramount interests of the child; other interests are subordinate, unless they either coincide with them or unless there is some exceptional reason for giving effect to them. This approach is of particular importance because almost every application for a blood test which comes before the courts is brought by an applicant from some motive of self-interest. That, indeed, has been conceded quite willingly by counsel for the husband to apply to this case. Arguments adduced on behalf of an applicant are apt to be extremely wide ranging and ingenious, but that cannot obscure the point that it is for a particular motive that the litigation starts.
On the approach which seems to me to be correct, the onus lies on those who seek to place the stamp of illegitimacy positively on small children to show that, on the facts, it is to the infant’s advantage, or at the very least, that it is not to its disadvantage. Why is that onus thus placed? It is very little probably in most cases to do with money, and a good deal to do with factors which are somewhat imponderable. Over the centuries the position of being known to be illegitimate has certainly been a disadvantage. What of today? That involves many questions; two only need to be mentioned at this stage. The first is, how do others look on it? Is the label nowadays a disadvantage or not to the infant’s progress in the world’s affairs? For that purpose, it is no use merely applying humanitarian thought in the quiet atmosphere of these courts; nor is it much use merely looking at the way the legislature is trying hard to better the position of the illegitimate. It is a very practical, human question, and I say no more than that the onus is on those who seek to assert that the human outlook has changed. I prefer thus to do no more than raise the question, and to remember that there may be varying views in different sections of the community and in different areas—London being far from representative. Secondly, how does the illegitimate child himself look on the matter? Again, I prefer not to speak for another generation whether or not they consider it to be a disadvantage or to result in a chip on the shoulder. Shakespeare in his day used the phrase: ‘Some coiner made me counterfeit’. To come to more recent times, there occurred after the second war a case (well away from London) when an earnest young man was called a bastard, in the literal sense of that word, by his girlfriend. Next day he killed her. No other cause or provocation was suggested; the jury found manslaughter. One may make of that what one may, but it demonstrates the problem for consideration. The answers to these human questions can be given what weight is thought fit by wiser heads.
What seems clear is that, over the centuries, the law has set up a presumption of legitimacy, and that hitherto it has been regarded as working soundly and to the intended and true advantage of infants. Before adopting a different approach the
Page 1168 of [1970] 1 All ER 1162
burden appears to lie on those who seek to show human nature has changed. As things stand, it seems to me right that the onus should be firmly on an applicant who in truth seeks, for his own interests, to obtain via the court the child’s consent to become firmly labelled illegitimate, to show that, in the particular case, that is to the child’s advantage. Cases where the financial interest of the child may be advantaged may, of course, arise, and the number of those cases has probably been considerably enlarged by Part II of the Family Law Reform Act 1969. Moreover, there may naturally be other cases where the child may gain advantages through a blood test, eg where there will follow legitimisation by marriage of the natural parents or a stable adoption. But what is the position in this particular case? The advantages put forward by counsel for the husband are: first, it is always best that truth should out (that, to my mind, is an approach which is not open in this court); secondly, financial; and, thirdly, what he called the emotional aspects.
At this stage it is right to mention one special point which has been canvassed—the one of colour. It should be recorded that there is not one shred of evidence before this court that this is a coloured child. There is merely an allegation in particulars of the petition that the child is coloured. But this is a matter which the Official Solicitor who has acted, as usual, responsibly throughout has said is in dispute; according to the Official Solicitor, the wife is of dark skin herself. As to these matters we have literally no evidence at all.
What, on the evidence before us, would be the advantages of becoming clear that the child is a child of Mr M? We know that he is a Pakistani, but not when he came to this country. What is his age? We do not know. What does he do? We do not know. What status has he—married or not? We do not know. If married, has he one wife or more than one? We do not know. Has he got children? We do not know. Does he intend to stay the rest of his life in this country? We do not know. What are his intentions with regard to the wife in this case? The only evidence is that they were, in the summer of 1965, living apparently together in a bed-sitting room, and that she has changed her name but has not changed it to the name of Mr M. What are his finances? We do not know—except that he was in 1965 living in a bed-sitting room in a house described as ‘crowded’. On that state of facts, no evidence has to my mind been presented to this court on which it can be said that any financial advantage to the child had been proved if it were established that Mr M was her father.
Next comes the suggestion that the child will be better brought up as the child of Mr M, particularly when she is reaching an age of about ten. Let me say at once that, had there been evidence of good chances of satisfactory adoption and stability in the future, I myself would certainly have wished to consider the matter more closely. There is no such evidence. We might have had a welfare officer’s report, but the county court judge has not thought fit to order such a report.
Next comes a point which appeared to have some attractions at the outset. Starting from the undisputed premise that one thing to be avoided was leaving a child with no one the law would designate as its father, counsel for the husband strongly urged the following submission as to what could happen if there was no blood test. The husband, it was said, might succeed in the legitimacy proceedings without the blood test and have the child declared illegitimate. When, however, there came before the justices the affiliation proceedings (which it was suggested by the Official Solicitor had been taken out as an ‘insurance’), then the absence of that blood test would militate against and, indeed, destroy the chances of the wife’s success. If, however, there was a blood test which excluded the husband from paternity, then the wife would probably succeed in the affiliation proceedings to the financial advantage of the child.
What are the chances of the husband’s success before the special commissioner if there is no blood test? Counsel for the husband, who must have assumed the existence of evidence not before this court, assessed those changes at 50–50. I suppose
Page 1169 of [1970] 1 All ER 1162
that it is just possible that the husband would succeed before the special commissioner; but he would have great difficulty—for he has himself said in his evidence that, over the vital period from 14 March 1965 over the next succeeding two or three weeks, the wife was only (as I read his evidence) away for one day; and there is no suggestion that they were not over that period sharing a room together when in the same house. What would be the position? I would have doubted whether, on any evaluation of chances, there is as much as a 50 per cent chance of success, and on the material before this court, I would rate it much lower.
Then would come the proceedings before the justices. The first hurdle that the wife has to overcome is that set up by the phrase ‘single woman’ in s 1 of the Affiliation Proceedings Act 1957. On the only two cases cited in this court (Whitton v Garner and Gittrow v Day), I would, with all respect to other views, have thought on the material before us that her chances of surmounting that hurdle were minimal. Moreover, at the next hurdle she would anyway have, in the words of counsel for the husband, a lot of explaining to do, having regard to her own statements. First in her statement on 18 August 1965 to the enquiry agent, she said: “I am pregnant and expecting the birth of my child in December 1965 and my husband is the father of this expected child.' Secondly, in her answer of 13 July 1966, the first paragraph sets out that she states:
‘That the child who is mentioned [that is the child here in question] … is a child of the family having been begotten in marital intercourse between the [husband] and [the wife].’
She added that the husband accepted the infant as a child of the family—albeit that that must have been for a very short period. In addition, she may well be faced by an allegation that counsel for the husband conceded might prove embarrassing if pursued. In the particulars of the husband’s petition, one finds the allegation that:
‘… the [wife] is a loose and immoral woman, having in July, 1965 been ordered by her Landlord to leave her lodgings at 100 Preston New Road Blackburn because of her conduct in making advances to male tenants in the house.’
The source of this allegation appears in the transcript and, if established, the effect on the wife’s chance of establishing paternity against Mr M might well be material.
One way and another, the chances of the wife succeeding before the justices seem minimal in almost any combination of circumstances—even if there was a blood test. So when one looks at the situation as a whole, it seems to me that this argument founded on the help the child might get to obtain financial support from Mr M is a mirage; even if he were a person shown to be of sufficient substance and likely to remain in this country. Indeed, far the more likely result of any blood test excluding the husband from paternity would be precisely that most to be avoided—‘no known father’. I would add that the husband for whom these elaborate arguments are adduced has not even troubled to have his own blood test put at this stage before the court to show whether or not he belongs to a common group such as O, in which case the chances of a successful result from the blood test would be less than average. There is only before the court what we are told is nowadays the standard affidavit (regrettably drawn without reference to the facts of the particular case) as to a 70 per cent average chance of excluding the husband.
Accordingly, if I have started correctly in my approach to the question of onus, it seems to me that there is clearly only one answer possible in this case—that it has not been established that this test is in the interests of the child. Accordingly, I would allow the appeal.
Page 1170 of [1970] 1 All ER 1162
KARMINSKI LJ. I find myself in complete agreement with the judgment which has been delivered by Lord Denning MR, and with his reasons. But because this is a matter of some importance and of public interest, and out of respect to the very full and careful judgment which Sachs LJ has just given, I desire to add some observations of my own. Primarily this question before the court is a question of fact; but, before the facts can be ascertained, we have to know what are the broad principles which should be applied in a matter of this kind. In W v W, to which Sachs LJ has just referred, Winn LJ, in giving the first of the majority judgments of the court, started his judgment by saying that that appeal was in his opinion one which raised no question of principle but a very narrow issue of fact. I approach the present matter in the same way. Lord Denning MR has said—and again I expressly agree with him—that the first matter to consider on the question of principle is the interest of the child. I agree also that the interests of the child are various, including not only financial, but social and family considerations. The word ‘paramount’ has often been used in this connection as the test. I have, myself, always had some difficulty in knowing precisely what ‘paramount’ means as it is used in the Act which deals with the guardianship of infants; but I am content here to say that the first concern and the most important, though not the only one, is the interests of the child itself. In his judgment in W v W, Winn LJ said that the question must be determined by applying the sole criterion, what is in the best interests of this infant? With respect, I am quite unable to agree with him. In my view, the interest of the infant is not the sole criterion. It is, perhaps, significant that, in the same context, Cross LJ (At 1161, ante) used the phrase ‘It may, perhaps, be wrong to treat the child’s interest as paramount’. He went on (At 1161, ante) to use this test: ‘The question in the appeal is, therefore, whether it was in [the child’s] interest that a blood test should be ordered.' I do approach the matter here on the lines that we have to consider whether it was in the child’s interests that a blood test should be ordered. On social grounds a good deal has to be said in favour of ascertaining the paternity of this child. On the facts of this case, the three older children that the wife bore during the marriage are in a different age group, the youngest of these three children being over 11 years older than the child. In a few years time, unless the truth is ascertained, the child may reach adolescence without a known father or any known brother, and hence a sense of insecurity which so often leads to serious trouble thereafter. Financial grounds are some what indefinite, because, as Sachs LJ has rightly pointed out, we do not know anything about the co-respondent. We know nothing of his status, his financial position, his job, and his intentions vis-à-vis the wife. That is not necessarily anybody’s fault at all. The co-respondent has been, perhaps prudently, reticent and has not told us anything. He is unlikely to consent to a blood test. We do not know what good it may be to the child in the future if her paternity is ascertained and it is known that she is a child of the co-respondent.
On principle, I myself agree entirely that the public interest should not be subordinate to the interests of this or any other infant. The public interest, as Lord Sumner pointed out in the passage quoted by Lord Denning MR, requires that truth should out and that truth should prevail. Lord Sumner, though he was giving a minority opinion in Russell v Russell ([1924] AC 687 at 748) when he said those words, as in fact considering there the case that, on the then rules of law, neither the husband nor the wife was permitted to give evidence of non-access in marriage tending to bastardise a child born in wedlock, a state of affairs not wholly irrelevant to the present problem. Lord Sumner was not alone in his minority opinion. Lord Carson agreed with him, but he did not deal with this particular problem. In my view, it is vital in these cases that the best evidence available should be before the court, so that the truth should prevail.
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For those reasons, on the facts of this particular case, I have come to the conclusion that the order for a blood test made by the learned judge was right and that this appeal fails.
Appeal dismissed. Leave to appeal to the House of Lords.
Solicitors: Official Solicitor; Ramsbottom, Liddle & Co, Blackburn (for the husband).
G R A Argles Esq Barrister.
Tuck v Robson
[1970] 1 All ER 1171
Categories: LEISURE AND LICENSING: CRIMINAL; Criminal Law
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 18, 19 FEBRUARY 1970
Licensing – Offence – Aiding and abetting by licensee of consumption of drinks after hours – Passive assistance with knowledge of facts.
At 11.00 pm on 11 April 1969, the appellant who was the licensee of a public house, called ‘time’ in his saloon bar and switched off the main lights. At 11.05 pm he called ‘glasses please’ after which he went into the public bar to clear away glasses and to assist customers from that part of the premises. No consumption of intoxicating liquor was by law permitted on the premises after 11.00 pm. It was established that to the appellant’s knowledge customers were consuming liquor in the saloon bar until the police arrived at 11.23 pm and that the appellant had taken no steps to stop them, since he thought that all he was required to do was to call time and ask the customers to leave. On appeal against conviction for aiding and abetting the consumption of intoxicating liquor out of hours.
Held—The appeal would be dismissed because there was no question that the appellant had full knowledge of the facts which constituted the offence and the magistrate was, as a reasonable tribunal, entitled in all the circumstances to draw the inference that the appellant lent passive assistance to the commission of the offence by being present at the time and not taking steps to enforce his right to eject customers or at any rate to revoke their licence to be on the premises (see p 1175 f to h, post).
Dictum of Devlin J in National Coal Board v Gamble [1958] 3 All ER at 209, 210 applied.
Quaere. Whether there should be a prosecution for aiding and abetting an offence when the principal offender has not been prosecuted (see p 1173 e, post).
Notes
For aiding and abetting, see 10 Halsbury’s Laws (3rd Edn) 279, para 519, and 306, para 566, and for cases on the subject, see 14 Digest (Repl) 99–102, 628–647.
For the law relating to the sale or consumption of intoxicating liquor outside the permitted hours, see 22 ibid 674, para 1429, and for cases on the subject, see 30 Digest (Repl) 106–109, 779–798.
Page 1172 of [1970] 1 All ER 1171
Cases referred to in judgment
Du Cros v Lambourne [1907] 1 KB 40, 76 LJKB 50, 95 LT 782, 70 JP 525, 14 Digest (Repl) 99, 633.
Duxley v Gilmore (1959) 123 JP Jo 331.
Ferguson v Weaving [1951] 1 All ER 412, [1951] 1 KB 814, 115 JP 142, 14 Digest (Repl) 100, 639.
National Coal Board v Gamble [1958] 3 All ER 203, [1959] 1 QB 11, [1958] 3 WLR 434, 122 JP 453, 42 Cr App Rep 240, Digest (Cont Vol A) 336, 647a.
R v Coney (1882) 8 QBD 534, 51 LJMC 66, 46 LT 307, 46 JP 404, 14 Digest (Repl) 91, 540.
Thomas v Lindop [1950] 1 All ER 966, 114 JP 290, 14 Digest (Repl) 100, 638.
Case stated
This was an appeal by way of case stated from a decision of a stipendiary magistrate (C S S Burt Esq QC) sitting at Lambeth on 30 June 1969 convicting Alan Tuck, the appellant, on three informations laid by Thomas Robson, the respondent, alleging the offence of aiding and abetting the commission of offences contrary to s 35 of the Magistrates’ Courts Act 1952 and s 59(1) of the Licensing Act 1964. None of the principle offenders had been prosecuted. The facts are set out in the judgment of Lord Parker CJ.
G H Hodgson for the appellant.
Ann Goddard for the respondent.
19 February 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of one of the magistrates of the magistrates’ courts of the metropolis sitting at Lambeth, who convicted the appellant of an offence contrary to the licensing laws. The informations, three in number, alleged that on a certain day he being the licensee of certain premises aided and abetted three customers to consume intoxicating liquor out of hours.
The relevant statutory provision is to be found in s 59(1) of the Licensing Act 1964, which, so far as it is material, provides:
‘Subject to the provisions of this Act, no person shall, except during the permitted hours—(a) himself or by his servant or agent sell or supply to any person in licensed premises … any intoxicating liquor, whether to be consumed on or off the premises; or (b) consume in or take from such premises any intoxicating liquor.’
Accordingly, if liquor is bought during permitted hours and is being consumed after the permitted hours, the consumer commits an offence and the licensee could only be guilty if anything of aiding and abetting.
What happened in the present case was that it 11.23 pm on 11 April 1969 police officers went into the Canterbury Arms public house in Maddocks Way, London, SE17, of which the appellant was a joint licensee. At the time the police entered the main lights in the saloon bar had been extinguished, leaving those on behind the bar, and there was a barmaid standing behind the bar. In the saloon bar the police found 20 customers, 12 of whom were consuming intoxicating liquor, including the three involved in these three informations. They were drinking alcoholic drinks, some of them standing and others sitting at tables.
No consumption of intoxicating liquor is permitted on the premises after 11.10 pm and the justices found that at 11.00 pm the appellant had called ‘time’ and had switched off some of the main lights, and at 11.05 pm had called ‘glasses please’.
Page 1173 of [1970] 1 All ER 1171
Having done that, he went into the public bar to clear away glasses and assist customers from that part of the premises. He knew, so the finding is, that during that period from 11.10 pm until the time the police arrived at 11.23 pm, ie 13 minutes, that customers were consuming liquor in the saloon bar, and took no steps to stop them. Evidence was given of a conversation between the appellant and the police, during which the appellant said:
‘I thought that if I called out “time” and asked customers to leave, that is all I am required to do.’
On those short facts, it was submitted on behalf of the respondent that since the appellant left the saloon bar to go to another bar at the end of permitted hours whilst to his knowledge some of his customers still had intoxicating liquor in their possession which they clearly were going to continue to consume, and took no steps either to take the drinks from them or move them from the licensed premises, or further dissuade them from drinking, he aided and abetted them in the offence. The learned magistrate said:
‘I agreed with the contention of the [respondent] and accordingly convicted the appellant on all three informations.’
The point left for the court is the question: do the facts found constitute the alleged offence? I should perhaps say there was a second question left for the court, ie can or should the appellant be prosecuted for aiding and abetting when the principal offender has not been prosecuted? That point has not been pursued in this court.
As it seems to me, two things must be proved before an accused can be held to be guilty of aiding and abetting the commission of the offence: first, he must have full knowledge of the facts which constitute the offence. I interpose, there is no question of that here; there is a finding that the appellant knew full well that after 11.10 pm drink was being consumed. Secondly, there must be some form of voluntary assistance in the commission of the offence. Sometimes the word used is ‘encouragement’, and the real question here is how far inaction, passive tolerance, can amount to assistance so as to make the accused guilty of aiding and abetting.
The decisions under the licensing laws in this regard are few in number, and the only one which is directly relevant, as it seems to me, was one of which this court has not got a full transcript. It is Duxley v Gilmore. There informations had been preferred charging the licensee with aiding and abetting certain specified persons to consume liquor on the premises after the end of permitted hours. The report states:
‘The facts disclosed by the evidence were that on the night in question at about 20 minutes after closing time there was a considerable amount of drinking going on by persons who were sitting down, apparently at their ease. It was conceded by the appellant that efforts had been made by the respondent to get the customers away. The appellant sought to tender evidence that the respondent had been warned by police officers on two occasions during the preceding month that persons had been observed drinking drinking in the public house outside permitted hours, but the justices held that the evidence was inadmissible. At the close of the case for the prosecution they accepted a submission made on behalf of the respondent that there was no case to answer and dismissed the informations.’
On appeal to this court is was held:
Page 1174 of [1970] 1 All ER 1171
‘that there could be a case against the licensee for aiding and abetting an offence if he knew of it and by his conduct encouraged it, and that that conduct might be active encouragement or marked passive tolerance; here the evidence disclosed a prima facie case and the case must be remitted to the justices to hear and determine, with the direction that the evidence relating to previous warnings was admissible as relevant to the issues of the respondent’s knowledge and connivance.’
So far as the facts are concerned, it may be that this is really a stronger case, because in that case it was conceded that the appellant had made efforts to get the customers to go, whereas in the present case all that the appellant had done had been to call ‘time’, to put out the lights, and say ‘glasses please’. However, it seems to me one cannot deduce too much from that case, which was a case in which the magistrate had acceded to a submission of no case, and all this court did was to send the case back to continue the hearing, the result of which we do not know.
The other cases concerning licensing are Thomas v Lindop and Ferguson v Weaving. Neither of those are very helpful because this particular point did not arise in either of those cases. In Thomas v Lindop, the licensee did not know the full facts, and the court, without going into the question of what did amount to encouragement or assistance, held that there could not be aiding and abetting without knowledge of the full facts. However, in Thomas v Lindop it is quite clear to me that the court assumed that if the licensee had had full knowledge there might well have been the necessary encouragement or assistance.
Ferguson v Weaving really concerned the question whether a licensee could be held guilty of aiding and abetting through an aiding and abetting by his servant. The court held that that was not so, but assumed as it seems to me that his presence on the premises with full knowledge of what was going on and a failure to take any steps in the matter could amount to aiding and abetting. Indeed, in Ferguson v Weaving ([1951] 1 All ER at 414, [1951] 1 KB at 819) Lord Goddard CJ said:
‘At the same time, there can be no doubt that, if a licensee consciously permits consumption after hours, it would amount to aiding and abetting the offence, but we have now to consider whether, as the section does not create a substantive offence in the licensee, she can be convicted of aiding and abetting by imputing to her the knowledge of her servant.’
As I have said, in neither of those cases was this point in question, but both undoubtedly proceeded on the basis that the licensee might in certain circumstances be held guilty of aiding and abetting through mere inaction.
That that can be so is clear; the matter depending of course on the circumstances of the case, and the position of the parties. Without referring to the cases in detail, it has been held, as Slade J said in the National Coal Board v Gamble ([1958] 3 All ER 203 at 210, [1959] 1 QB 11 at 25):
‘Mere passive acquiescence is sufficient only, I think, where the alleged aider and abettor has the power to control the offender and is actually present when the offence is committed: for example, the owner of a car sitting alongside his chauffeur when the latter commits an offence.’
True, that passage occurs in a dissenting judgment, but the principle there set out is quite clear, and no doubt Slade J, had in mind a case to which this court has been referred, Du Cros v Lambourne where the owner of a car was held guilty of aiding
Page 1175 of [1970] 1 All ER 1171
and abetting an offence committed by the driver, a woman whom he had allowed to drive and next to whom he was sitting as a passenger.
Moreover, quite apart from the question of control, it is quite clear that there may be circumstances in which mere presence is prima facie evidence of aiding and abetting. Devlin J in National Coal Board v Gamble ([1958] 3 All ER at 209, 210, [1959] 1 QB at 24) cited Cave J in R v Coney ((1882) 8 QBD 534 at 543) in which the defendants were charged with aiding and abetting an illegal prize fight at which they had been present. Devlin J said:
‘The judgments all refer to “encouragement”, but it would be wrong to conclude from that that proof of encouragement is necessary to every form of aiding and abetting. [I take the learned judge to mean there that proof of active encouragement is necessary to every form of aiding and abetting.] Presence on the scene of the crime without encouragement or assistance is no aid to the criminal; the supply of essential material is. Moreover, the decision makes it clear the encouragement can be inferred from mere presence. CAVE J, who gave the leading judgment, said of the summing-up ((1882) 8 QBD 534 at 543): “It may mean either that mere presence unexplained is evidence of encouragement, and so of guilt, or that mere presence unexplained is conclusive proof of encouragement, and so of guilt. If the former is the correct meaning, I concur in the law so laid down; if the latter, I am unable to do so.” This dictum seems to me to support the view which I have expressed. If voluntary presence is prima facie evidence of encouragement and therefore of aiding and abetting, it appears to me to be a fortiori that the intentional supply of an essential article must be prima facie evidence of aiding and abetting.’
With those dicta in mind, one looks again at the facts of this case. Here is a licensee who is in control of his premises; he has full knowledge that liquor is being consumed after hours; he takes no steps in the matter other than to call ‘time’ and ask customers to leave, which he did at 11.00 pm, and as he himself puts it ‘I thought that if I called out “time” and asked customers to leave, that is all I am required to do’.
The question as it seems to me is whether the magistrate, as a reasonable tribunal, was entitled in all the circumstances to draw the inference that here there was passive assistance in the sense of presence with no steps being taken to enforce his right either to eject the customers or at any rate to revoke their licence to be on the premises. In my judgement the magistrate was entitled to draw that inference, and accordingly I would dismiss this appeal.
ASHWORTH J. I agree.
DONALDSON J. I agree.
Appeal dismissed.
Solicitors: Hanbury, Gery, Brooks & Weston (for the appellant); Solicitor, Metropolitan Police (for the respondent).
Jacqueline Charles Barrister.
R v Area Committee No 9 (North Eastern) Legal Aid Area, ex parte Foxhill Flats (Leeds) Ltd
[1970] 1 All ER 1176
Categories: ADMINISTRATION OF JUSTICE; Tribunals
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 4, 5 MARCH 1970
Legal aid – Assisted person – Executors of small estate – Means of executors above limit for legal aid – Area committee looked only to means of widow beneficially interested in estate – Certificate granted in respect of proceedings – Whether certiorari lay to quash certificate – Legal Aid and Advice Act 1949, s 2(1) – Legal Aid (General) Regulations 1962 (SI 1962 No 148), reg 5(5), (11).
An area legal aid committee granted two civil aid certificates to the executors of P in order that they might continue to defend and counterclaim in a High Court action commenced by the applicant against P. The executors had been substituted as defendants in the action. The area committee had ignored the means of the executors, who were solicitors with means in excess of the limit for the grant of legal aid. Only the means of P’s widow, the only person beneficially interested in P’s virtually insolvent estate, had been considered, and she clearly qualified for legal aid. On an application for an order of certiorari to quash the legal aid certificate on the ground that the area committee had made no determination whether the executors were persons for whom legal aid was available under s 2(1)a of the Legal Aid and Advice Act 1949,
Held – The area committee were not entitled to ignore the means of the executors, and the applicant, as a person aggrieved, was entitled to an order of certiorari because the provisions of reg 5 (11)b of the Legal Aid (General) Regulations 1962 relating to persons concerned in a representative capacity applied only for the purpose of determining contributions to be made when such persons were already eligible for legal aid; and the exceptions from the provisions of reg 5(5)c were correspondingly restricted (see p 1180 d h and j, post).
Notes
For financial means of assisted persons, see 30 Halsbury’s Laws (3rd Edn) 493, para 915.
For grants of certificates to trustees, executors or administrators, see ibid 512, para 957.
For the Legal Aid and Advice Act 1949, ss 2, 3, see Supplement to 18 Halsbury’s Statutes (2nd Edn) paras [1262], [1263] Amended Texts.
For the Legal Aid (General) Regulations 1962, reg 5, see 5 Halsbury’s Statutory Instruments (Second Re-Issue) 248.
Case referred to in judgment
R v Manchester Legal Aid Committee, ex parte R A Brand & Co Ltd [1952] 1 All ER 480, [1952] 2 QB 413, 50 Digest (Repl) 485, 1701.
Motion for certiorari
This was an application by way of motion by Foxhill Flats (Leeds) Ltd (the applicant)
Page 1177 of [1970] 1 All ER 1176
to bring up and quash two civil aid certificates granted by the Area Committee No 9 (North Eastern) Legal Aid Area, on 12 February 1969 (as subsequently amended by the area committee) to John Ramsey Balmforth and Ronald Naylor, the executors of Ernest Arthur Pilcher to continue to defend and counterclaim in an action in the Chancery Division, originally instituted against Ernest Arthur Pilcher. The facts are set out in the judgment of Lord Parker CJ.
W H Goodhart for the applicant.
T H Bingham for the area committee.
Mark Potter for the executors.
5 March 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of the applicant, a company called Foxhill Flats (Leeds) Ltd, for an order of certiorari to quash two civil aid certificates granted by the Area Committee No 9 (North Eastern) Legal Aid Area on 12 February 1969 (as subsequently amended by the area committee) to two persons, John Ramsey Balmforth and Ronald Naylor, executors of one Ernest Arthur Pilcher to continue to defend and counterclaim in an action in the High Court of Justice (Chancery Division) entitled Foxhill Flats (Leeds) Ltd v Pilcher. Before leaving the relief claimed, which I have read from the statement, I think it is more accurate to say that these two legal aid certificates were granted by the local committee and that really it is the amendments of 20 June 1969 whereby the certificates were extended to cover defending proceedings, as opposed to taking counsel’s advice that are sought to be quashed.
The matter arises in this way: by a contract entered into in December 1964 the applicant, who is now in the course of voluntary liquidation, entered into a contract with Mr Pilcher for the sale to Mr Pilcher of property known as the Foxhill Property for a sum of over £100,000. In fact he failed to complete on the due day, he failed to complete on the extended day, and finally the applicant issued a writ in the Chancery Division claiming specific performance of the contract, or alternatively forfeiture and damages for breach of contract. Mr Pilcher in fact gave up possession of the property and the applicant resumed possession of it and eventually sold it for a much smaller sum, namely £45,000. It was in those circumstances that the applicant proceeded then with its claim for damages, claiming in addition to forfeiture of the deposit, liquidated damages of approximately £35,000. In those proceedings Mr Pilcher put in a defence alleging that he had been induced to enter into this contract by misrepresentation on the part of agents for the applicant, the misrepresentation being, it was said, as to the amount of the debts which were to be taken over under the contract. In addition, Mr Pilcher counterclaimed for some £27,000, consisting in the main of moneys that he had paid by way of deposit. After a reply and defence and counterclaim had been delivered, pleadings were closed in November 1966, and before the proceedings came on for hearing Mr Pilcher died, his death being on 18 June 1968. On 4 September 1968, probate was granted of Mr Pilcher’s will to the executors. In fact the value of Mr Pilcher’s estate was small, some £660 gross, and there was a considerable amount of creditors. The executors were accordingly substituted as defendants in the action, and thereupon applied for a legal aid certificate to defend the proceedings and prosecute the counterclaim. Certificates were granted first to obtain counsel’s opinion, and then later in June 1969, to prosecute the counterclaim and to defend the proceedings.
The sole issue here now, although there were other issues at one time, is whether legal aid can properly be granted to the executors, they being persons who undoubtedly have means which exceed the limit for the grant of legal aid. What the area committee did was to ignore the means of the executors and to consider the means of Mrs Pilcher, the widow, who clearly did qualify for legal aid. Before looking at the Legal Aid and Advice Act 1949 and the regulations, it is undoubtedly clear that the
Page 1178 of [1970] 1 All ER 1176
only persons to whom legal aid can be granted to prosecute proceedings are parties to the action, in this case the executors. The question is whether the area committee were entitled to ignore the means of the executors and to consider only the means of Mrs Pilcher.
The 1949 Act provides by s 2(1) that: ‘Subject to this Part of this Act, legal aid shall be available for any person whose disposable income does not exceed … ’ what is now £700 a year, and it is accepted before this court that the means of both the executors exceed that sum. Section 2(2) goes on to provide for the payment of contributions by those who are eligible for legal aid and it provides:
‘Where a person receives legal aid in connection with any proceedings … (c) he may be required to make a contribution to the legal aid fund in respect of the sums payable thereout on his account; … ’
Section 3 it is unnecessary to refer to, save to say that it shows quite clearly that it is the means of the applicants, the parties to the proceedings, that have to be considered. Section 4(6) provides:
‘… a person’s disposable income and disposable capital, and the maximum amount of his contribution to the legal aid fund in respect of any proceedings shall be determined by the [Supplementary Benefits Commission] … ’
Pausing there, in the case of executors if nothing more is provided one might have a case, as here, where one gets wealthy executors with an almost insolvent estate when they would not be eligible for legal aid; equally one might have a very substantial estate with executors of straw who would be eligible for legal aid, albeit that the area committee in their discretion might not grant it. The difficulties which might arise in those circumstances were envisaged by s 12, which gives the Lord Chancellor power to make such regulations as appear to him necessary or desirable for giving effect to this Part of the Act or for preventing abuses thereof. By s 12(3):
‘Regulations may also modify any provisions of this Part of this Act so far as appears to the Lord Chancellor necessary to meet the special circumstances where—(a) a person seeking or receiving legal aid or advice—(i) is not resident in England or Wales; or (ii) is concerned in a representative, fiduciary or official capacity … ’
The sole question here is whether the regulations that have been made have enabled the area committee to do what they did in the present case.
In 1950 regulations were made, the Legal Aid (General) Regulations 1950d; one of the regulations, reg 4(3) provided:
‘Where an application for a certificate is made by a trustee, executor, administrator or other person in circumstances in which, in the opinion of a Local Committee, a court would order the taxed costs of the proceedings to be paid out of a property, estate or fund, the Committee shall not grant the application unless it appears that the property, estate or fund would be so diminished or exhausted by that order as to cause hardship to any person beneficially interested.’
In R v Manchester Legal Aid Committee, ex parte R A Brand & Co Ltd the committee had ignored the means of a trustee in bankruptcy, and looking to the bankrupt, had granted legal aid to, because it has to be to a party to the proceedings, the trustee in bankruptcy. The other party to the action, Messrs R A Brand & Co Ltd, took the point that they were aggrieved persons being opposed by a party granted legal aid which they said should not have been granted, and they sought by certiorari to quash the certificate granted by the committee. What was relied on there, amongst other
Page 1179 of [1970] 1 All ER 1176
matters, but primarily, was reg 4(3). Without going into the matter in detail, this court held that reg 4(3) had not changed the restriction on the grant of legal aid to an applicant, but was merely providing, as it were, a second hurdle which had to be overcome. Not only must the applicant be eligible for legal aid, but in such a case as was envisaged by reg 4(3) there was the additional hurdle there referred to, namely that there must in addition be hardship to a person beneficially interested.
R v Manchester Legal Aid Committee, ex parte R A Brand & Co Ltd is, of course, also authority, which is not challenged in this court, that a party to proceedings, such as in that case Messrs Brand, and in the present case the applicant, is an aggrieved person, and that certiorari will lie to quash a legal aid certificate. I should add that in that case it was almost conceded that the committee had exceeded their jurisdiction, and in giving the judgment of the court I concluded this aspect of the matter by saying ([1952] 1 All ER at 486, [1952] 2 QB at 423):
‘The truth of the matter is that at the moment there are no specific provisions dealing with the position of a trustee in bankruptcy in relation to the income test. That a special provision could be made is clear from s 12(3) of the Act … It may be, but this is not a matter for this court, that some special provisions should be made, but at the moment there are none.’
Eight years passed and admittedly nothing was done by way of regulations to cure this position. But in 1960 new regulationse were made and the real question is whether, as no doubt was intended, these new regulations have, as it were, stopped the gap. Regulation 4(3) of the 1950 regulations is now reg 5 (10) of the Legal Aid (General) Regulations 1962f. Following the decision in the Manchester case, quite clearly that has not enabled the committee to do what they have done in the present case. Regulation 5(11) is, however, entirely new; it provides:
‘Where an application is made by a person who is concerned in the proceedings or claim only in a representative, fiduciary or official capacity, then, for the purposes of determining any contribution to be made to the Fund, the personal resources of the applicant shall not be taken into account, but the appropriate committee may, in their discretion, have regard to the value of the property or estate, or the amount of the fund out of which the applicant is entitled to be indemnified, and to the resources of the persons, if any, who are beneficially interested.’
Accordingly it applies on its face only to the determination of contribution in a case in which legal aid can properly be granted to persons who are eligible for legal aid. Of course, if those words ‘for the purposes of determining any contribution to be made to the Fund’ were omitted, the position might be said to be clear, but on looking at the express wording of this regulation, it is dealing merely with contribution in a case where the applicant for legal aid is eligible for legal aid.
Counsel for the area committee, and the court is indebted to him for his very careful argument, has relied strongly on reg 5(5) of the 1962 regulations. It is the first of the series of paragraphs dealing with legal aid for the purpose of proceedings, as opposed to claim. It is new to this extent, that it inserts words excepting the provisions there from cases dealt with in reg 5 (11), and also in reg 6(4). Regulation 5(5) provides:
‘Subject to the provisions of Regulation 11 and of paragraphs (4) and (6) of this Regulation, an application for a certificate in respect of proceedings shall
Page 1180 of [1970] 1 All ER 1176
not be approved except after consideration by the appropriate committee of the general circumstances in which it is made, including questions of fact or law arising out of the proceedings, nor, except as is provided by paragraph (11) of this Regulation and paragraph (4) of Regulation 6, shall the application be approved except after determination by the Board of the disposable income, disposable capital and maximum contribution of the applicant.’
Regulation 6(4) deals with a case, amongst others, where there are proceedings in an appellate court in which the applicant for legal aid was the assisted person in the court below, and there it is provided that a further reference to the Supplementary Benefits Commission for the purpose of ascertaining means and maximum contribution is unnecessary. That accordingly is excepted from reg 5(5), and one would expect that if reg 5 (11) was intended to do what it is suggested it was, that there should be an exception in such cases. The wording however is: ‘except as is provided by paragraph (11)’, and para (11) only provides for the determination of a contribution in the case of persons in a representative, fiduciary or official capacity. Accordingly, on its strict reading, reg 5(5) only excepts the obligation to go to the Supplementary Benefits Commission in regard to assessing the maximum contribution. Regulation 5(11) merely provides that the committee may determine the contribution, and that the resources of the applicant himself are not to be taken into account for that purpose. For my part I find it quite impossible as a matter of construction to say that this point is covered by the combined effect of reg 5(5) and (11).
Counsel for the area committee in addition refers to further changes that have taken place since the Manchester case. He refers to the fact that reg 18(6) is new, dealing with costs, and also that since the time of that case the Legal Aid Act 1964 has been passed dealing with cases of hardship incurred by a person who is opposed by an assisted party. When one looks at that Act and the regulations made thereunder, namely the Legal Aid (Costs of Successful Unassisted Parties) Regulations 1964g, it is perfectly clear that this matter has been dealt with. Regulation 3 provides:
‘Where an unassisted party is concerned in proceedings only in a fiduciary, representative or official capacity, then for the purposes of section 1(3) (b) of the Act the court shall not take into account his personal resources, but shall have regard to the value of the property, estate or fund out of which the unassisted party is entitled to be indemnified and may in its discretion also have regard to the resources of the persons, if any, who are beneficially interested in that property, estate or fund.’
There is no doubt that the general scheme should be interpreted, if it is possible, in such a way as to enable the committee to do what the area committee did in the present case. But as counsel for the area committee quite rightly says, though no doubt the 1962 regulations were intended to stop the gap, the question is whether that has been done, and short of rewriting the present regulations I see no means of holding that that has been done. Accordingly in my judgment this motion succeeds; an order of certiorari should go as asked.
ASHWORTH J. I agree.
DONALDSON J. I agree.
Order for certiorari.
Solicitors: Biddle & Co agents for Harrison, Plackett & Bulmer, Leeds (for the applicant); A Beal, Leeds (for the area committee); Ward, Bowie & Co agents for Booth & Co, Leeds (for the executors).
N P Metcalfe Esq Barrister.
R v Wakefield Justices, ex parte Butterworth
[1970] 1 All ER 1181
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, WILLIS AND BRIDGE JJ
Hearing Date(s): 24 NOVEMBER 1969
Magistrates – Procedure – Conviction – Plea of guilty – Plea entered by accused’s solicitor – Accused not asked how he pleaded – Whether certiorari lay to quash conviction – Magistrates’ Courts Act 1952, s 13(1).
The applicant appeared before justices charged with certain offences. Before he was asked to plead he was asked whether he consented to summary trial. The solicitor who represented him stated that the applicant agreed to summary trial and added that ‘he pleads guilty’. The trial then proceeded and the applicant was convicted and committed for sentence to quarter sessions. On an application for an order of certiorari,
Held – Since there had been a failure to comply with the requirement of s 13(1)a of the Magistrates’ Courts Act 1952 in that the applicant had not been asked to plead before the commencement of the trial, the only proper course was to quash the convictions and to send the case back to the justices for a venire de novo (see p 1182 b, and d to f, post).
Notes
For plea at a summary trial, see 25 Halsbury’s Laws (3rd Edn) 206, para 375.
For the Magistrates’ Courts Act 1952, s 13, see 32 Halsbury’s Statutes (2nd Edn) 433.
Case referred to in judgment
R v Kettering Justices, ex parte Patmore [1968] 3 All ER 167, [1968] 1 WLR 1436, 132 JP 510, Digest Supp.
Motion for certiorari
This was an application by David Butterworth for leave to apply for an order of certiorari to remove into the High Court and quash certain convictions and committals for sentence by the justices in the petty sessions at Wakefield in the county of York on 3 March 1969. The facts are set out in the judgment of Lord Parker CJ.
B Bush for the applicant.
The justices were not represented.
24 November 1969. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of the applicant, one David Butterworth, for an order of certiorari to quash certain convictions of the applicant by justices for the County Borough of Wakefield on 3 March 1969, and in addition to quash the committals for sentence in respect of those offences to the quarter sessions for the West Riding of Yorkshire. What happened was this, that on 3 March the applicant appeared before two justices and was asked whether he consented to summary trial in accordance with the provisions of s 25 of the Magistrates’ Courts Act 1952. That was before he was asked to plead, and quite rightly so. He then apparently consulted with his solicitor who was
Page 1182 of [1970] 1 All ER 1181
representing him, and his solicitor thereupon addressed the justices and said that the applicant agreed to summary trial. That was clearly perfectly proper in accordance with the decision of this court in R v Kettering Justices, ex parte Patmore. Unfortunately the solicitor then added the words ‘and he pleads guilty’, and the matter then proceeded. Accordingly, the applicant was never asked himself whether he pleaded guilty, something which is required under s 13(1) of the Magistrates’ Courts Act 1952.
That being so, it seems to me that there was an error in procedure, and that the only proper course here is to quash the three convictions. It is unnecessary, therefore, to consider the more interesting question whether, if the applicant had been asked how he pleaded, the answer given by the solicitor on his behalf was sufficient. The only doubt that I had in this case was whether it was proper to exercise the discretion in favour of the issue of orders of certiorari. From beginning to end there is no statement on affidavit to the effect that the applicant desired to plead not guilty, and indeed the matter, so far as the court is concerned, only came to light in the course of an application to the Criminal Division of the Court of Appeal on an appeal against sentence, he having been sentenced to four years’ imprisonment in all by West Riding Quarter Sessions.
However, as it seems to me the proper course here is to quash these convictions and to send the case back to the justices for a venire de novo. The matter will start again before the justices, when it is hoped that the applicant will be asked personally whether he pleads guilty or not guilty, after, of course, s 25 of the Act has been complied with. In my judgment, therefore, the orders for certiorari should go to quash these convictions.
WILLIS J. I agree.
BRIDGE J. I agree.
Orders for certiorari.
Solicitors: Van Sandau & Co agents for Redfearns, Heckmondwike (for the applicant).
Kaushalya Purie-Harwell Barrister.
Practice Direction
(Chancery Division: Practice: Master’s powers)
[1970] 1 All ER 1183
PRACTICE DIRECTIONS
CHANCERY DIVISION
30 JANUARY 1970
Practice – Chambers – Chancery Division – Masters’ powers – RSC Ord 32, r 14.
The following is published by permission of the judges of the Chancery Division for the information of the profession and supersedes their memorandum on this subject dated 26 October 1960 ([1960] 3 All ER 497, [1960] 1 WLR 1195).
1. Since 1955 the powers of the chancery masters have been governed by the former RSC Ord 55, r 15 and the present RSC Ord 32, r 14. Under this rule the masters have power to transact all such business and exercise all such authority and jurisdiction as may be transacted and exercised by a judge in chambers except such as the judges of the division may from time to time direct, or which any other rule may expressly direct, to be transacted or exercised by a judge in person. Under RSC Ord 32, r 14(2) a master may not determine a question of the construction of a document or a question of law raised for the determination of the court by an originating summons but such orders are not made in chambers.
2. A memorandum for the guidance of the masters in the exercise of their powers was issued on 30 March 1955 ([1955] 1 All ER 913, [1955] 1 WLR 427) and reissued in an amended form on 26 October 1960 ([1960] 3 All ER 497, [1960] 1 WLR 1195). Since then there have been modifications from time to time and further adjustments have now become desirable. This memorandum accordingly supersedes the previous memoranda and is again intended for guidance.
3. The masters will continue to transact business and exercise jurisdiction to the same extent as they did under the practice prevailing before 1955 but may make the following additional orders:
(a) For service out of the jurisdiction in clear cases.
(b) For the appointment of trustees except in cases where
(i) a trustee is to be superseded without his consent by a trustee (other than a judicial trustee) and
(ii) the fund is substantially in excess of £2,000.
(c) Vesting property or directing or authorising some person to assign or convey unless there is a pending application for a new trustee which should be determined by a judge.
(d) For enquiries relating to the next of kin of a deceased person, including special enquiries for particular persons and their issue, but only in clear cases.
(e) Approving purchases of dwelling-houses and land by executors, administrators or trustees, but only in clear cases.
(f) Giving leave to take proceedings under s 1 of the Leasehold Property (Repairs) Act 1938.
(g) Determining a rent which it would be reasonable for a tenant to pay while a tenancy continues by virtue of s 24 of the Landlord and Tenant Act 1954, under s 24A of that Act but not orders under s 38(4) of that Act.
(h) Summary orders for specific performance under RSC Ord 86 by consent or if the following conditions are satisfied:
(i) the agreement sued on is a formal written contract and
(ii) the defendant is in default of appearance or does not appear at the hearing or there is clearly no defence.
(i) Approving a compromise on behalf of a person under disability:
(i) where there is a claim not involving the payment of money and
Page 1184 of [1970] 1 All ER 1183
(ii) where the value of that person’s interest in a fund or, if there is no such fund, the maximum amount of the claim in question (as certified by counsel) does not significantly exceed £2,000(but not so as to effect any variation of trusts for the purposes of the Variation of Trusts Act 1958).
(j) For payment or transfer of funds out of court where a petition would have been necessary under the practice prevailing before 1955(that is, in effect, where a devolution of trust funds had to be proved and it was not merely a question of establishing the identity or title of some particular person) but only where the value of the fund, or the share or part thereof the subject of the application, does not significantly exceed £5,000 at the date of the issue of the summons.
(k) Giving general liberty to wards to go out of the jurisdiction on condition that on each occasion:
(i) the written consent of all persons concerned, or their solicitors, is obtained and
(ii) the order provides that proper undertakings for the ward’s return shall be lodged with the master.
(l) For the appointment of a receiver and for the grant of an injunction if, and only so far as, the injunction is ancillary or incidental to an order for the appointment of a receiver by way of equitable execution.
(m) For an injunction in a consent order but only if the parties are unwilling to consent to an undertaking in lieu of an injunction.
4. A master should not, without the special authority of a judge, make the following orders:
(a) An order for the administration of an estate or execution of trusts in a beneficiary’s action. (The masters had power under the old practice to make such an order in a creditor’s action, where there was evidence of insolvency.)
(b) An order sanctioning any compromise, arrangement or transaction except in any of the cases specified in para 3.
(c) An order binding persons on whom service of a notice of judgment or order for accounts and enquiries has been dispensed with.
5. Cases involving difficulties or complications should be referred by the master to the judge, as heretofore, and before exercising his extended powers a master should consider in every case whether it is one in which it would be more appropriate that the judge should make the order.
6. Nothing in this memorandum is intended to derogate from the established practice under which a judge may (a) in a special case authorise a master to make any order which the judge has power to make in chambers or (b) reserve any particular matter for his own decision.
30 January 1970.
R E Ball, Chief Master, Chancery Division
Re Grover’s Will Trust
National Provincial Bank Ltd v Clarke and others
[1970] 1 All ER 1185
Categories: SUCCESSION; Administration of Estates: TRUSTS
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 16, 17 DECEMBER 1969
Administration of estates – Partial intestacy – Hotchpot – ‘Any beneficial interests acquired by any issue of the deceased’ – Intestacy as to one moiety of residue – Other moiety settled by will on trust to pay income to testator’s daughter during her life and after her death for her children – Daughter’s life interest subject to protective trust under which income might be applicable for benefit of daughter’s husband – Whether interests to be brought into account in determining daughter’s interest under partial intestacy included interest of daughter’s children as well as daughter’s own interest – Administration of Estates Act 1925, s 49(1).
One moiety of the residuary estate of a testator who died in 1949 was settled by his will on trust for his son and the son’s children. In the event (which happened) of the son having no children who took an interest in the moiety under the will, the son’s moiety fell on his death to be dealt with on the footing of a partial intestacy. Subject to the entitlement of the testator’s widow (who had predeceased the son) to her statutory legacy, the testator’s next-of-kin were the son and the testator’s daughter (who had also predeceased the son). The other moiety of the residuary estate was settled by the testator’s will on trust to pay the income to the testator’s daughter during her life and after her death for all her children who should attain the age of 21 years or previously marry. The daughter’s life interest was subject to a protective trust under which, if forfeiture had occurred, income might have been applicable for the benefit of a husband of the daughter. On the question what interests had to be brought into account by way of hotchpot in the distribution of the son’s moiety by virtue of the provisions in s 49a of the Administration of Estates Act 1925 requiring the bringing into account of ‘any beneficial interests acquired by any issue of the deceased’ under the will,
Held – (i) The daughter and her children had to bring into account interests which together amounted to the entire capital of one moiety of the residuary estate (see p 1191 g, post) because—
(a) under s 49 of the Administration of Estates Act 1925 the interest to be brought into account on a partial intestacy by a child of a testator included not only the interest taken by the child himself but also the interest taken by any issue of the child under the will of the testator (see p 1191 b and e, post); Re Morton (decd), [1956] 3 All ER 259 and Re Young’s Will Trusts [1950] 2 All ER 1040 followed.
(b) the protective trust attaching to the daughter’s interest could be disregarded and on the facts of the case the daughter and her children took between them the entire beneficial interest in one moiety of the residuary estate (see p 1191 f, post).
(ii) Accordingly the other moiety of the testator’s residuary estate went on the partial intestacy to those claiming under the son (see p 1191 j, post).
Page 1186 of [1970] 1 All ER 1185
Notes
For distribution under a partial intestacy, see 16 Halsbury’s Laws (3rd Edn) 407, 408, para 783.
Cases referred to in judgment
Morton (decd), Re, Morton v Morton v Warham [1956] 3 All ER 259, [1956] Ch 644, [1956] 3 WLR 663, Digest (Cont Vol A) 568, 9752a.
Young’s Will Trusts, Re, Young v Young [1950] 2 All ER 1040, [1951] Ch 185, 24 Digest (Repl) 966, 9752.
Cases also cited
Hillar-Drake, Re [1944] 1 All ER 375, [1944] Ch 235.
Foster, Re [1920] 1 Ch 391.
Thompson Settlement Trusts, Re [1953] 1 All ER 1139, [1953] Ch 414.
Adjourned summons
The plaintiff, the National Provincial Bank Ltd, which was the executor of the will of Sidney Frederick Grover who died on 25 May 1949, sought a declaration determining the distribution of one moiety of the testator’s residuary estate. The first and second defendants, John Joseph Clarke and Joy Spottiswoode-Clarke, were children of the testator’s daughter Nellie May Amos. The first defendant and the third defendant, Thomas Wooliscroft, were the personal representatives of another child of the testator’s daughter. The fourth defendant, Cyril John Reynolds, was the personal representative of the testator’s daughter Nellie May Amos. The fifth defendant, Denys Henry Lambert, was the personal representative of the testator’s son, Sidney Rowland Grover. The sixth defendant was the truste in bankruptcy of the testator’s son. The facts are set out in the judgment.
I L R Romer for the plaintiff.
G F Dearbergh for the first, second, third and fourth defendants.
N Micklem for the fifth defendant.
G T Hesketh for the sixth defendant.
17 December 1969. The following judgment was delivered.
PENNYCUICK J. I have already decided in this case the first question raised by the summons, namely, whether in the event which happened of the testator’s son, Sidney Rowland Grover, having no child who took an interest in the reversion on his death, his moiety falls to be dealt with on the footing of a partial intestacy. I have now to deal with a much more perplexing question, namely, what interests have to be brought into account by way of hotchpot in determining how that moiety shall be distributed amongst the next-of-kin of the testator. Apart from his widow’s interest in respect of her £1,000, the next-of-kin were the son, Sidney Rowland Grover, and the testator’s daughter, Nellie May Amos.
I will read again the provision in the testator’s will under which this question arises. By cl 7, after constituting his residuary estate, directing that the income should be paid to his wife during her life and bequeathing certain reversionary legacies on his death, the testator directed that his trustee should—
‘… stand possessed of the remainder of my residuary estate upon the following trusts:—(i) Upon trust to pay one equal half of the income thereof to my daughter Nellie May Amos during her life and the remaining half to my son Sidney Rowland Grover during his life and after their death (ii) Upon trust to pay and divide the capital and income thereof between all the children of my said daughter and son who shall attain the age of twenty-one years or previously marry and if more than one in equal shares … ’
Page 1187 of [1970] 1 All ER 1185
Then the existing son of Sidney Rowland Grover is cut out. Clause 8 creates an express protective trust of the income both of the daughter and of the son. In the case of the son there was a forfeiture. In the case of the daughter there was not a forfeiture.
The question then arises, what interests have to be brought into account by way of hotchpot in the distribution of the son’s moiety on his death. This question depends on the proper construction of certain provisions in the Administration of Estates Act 1925. Section 46 introduces the statutory trusts for the issue on an intestacy. Section 47(1) (i) defines the statutory trusts. I need not read that paragraph. It is in effect a stirpital division. Section 47(1) (ii) provides:
‘Where the property held on the statutory trusts for issue is divisible into shares, then any money or property which, by way of advancement or on the marriage of a child of the intestate, has been paid to such child by the intestate or settled by the intestate for the benefit of such child (including any life or less interest and including property covenated to be paid or settled) shall, subject to any contrary intention expressed or appearing from the circumstances of the case, be taken as being so paid or settled in or towards satisfaction of the share of such child or the share which such child would have taken if living at the death of the intestate, and shall be brought into account, at a valuation (the value to be reckoned as at the death of the intestate), in accordance with the requirements of the personal representatives.’
Section 49 proceeds to deal with the case of partial intestacy. It does so, as far as now material, in these terms:
‘Where any person dies leaving a will effectively disposing of part of his property, this Part of this Act shall have effect as respects the part of his property not so disposed of subject to the provisions contained in the will and subject to the following modifications:—(a) The requirements as to bringing property into account shall apply to any beneficial interests acquired by any issue of the deceased under the will of the deceased, but not to beneficial interests so acquired by any other persons; … ’
As has been pointed out in the cases to which I will refer in a moment, s 47(1) (iii) presents no particular difficulty. It imposes a straightforward provision under which, against the stirpital share of any child, there is to be brought into account any money paid by way of advancement on the marriage of the child or settled for the benefit of the child. That, of course, includes property settled on such trusts that the child takes a primary life interest but no more.
On the other hand, s 49 presents great difficulties of language which have been considered in the two reported cases to which I will refer in a moment. Section 49 is by its express terms an annexe to s 47 and must be read in conjunction with s 47, that is to say, a member of the class of issue of the deceased, ie a descendant of any degree, who acquires a beneficial interest under his will has to bring some subject-matter into account against the share which he takes under the partial intestacy. One might have expected s 49, conformably with s 47, to provide that each child of the deceased should bring into account any legacy, including a share of residue, bequeathed to the child or settled by the will for the benefit of the child. But it is impossible so to read s 49 without a hopeless contortion of language. It may be observed, incidentally, that if that had been the effect of s 49, the exclusion of interests acquired by other persons at the end of para (a) would have been superfluous.
It is clear that the subject-matter to be brought in under s 49 is beneficial interests acquired by descendants. The section is, however, singularly obscure as to what beneficial interests are to be brought into account as against the share of any given descendant. The section merely prescribes that the requirements of the previous
Page 1188 of [1970] 1 All ER 1185
section shall apply to any beneficial interests acquired by any issue of the deceased under the will of the deceased.
A possible construction of that provision, which was advanced in the cases to which I am going to refer, and which, I confess, appeals to me, was that it must be treated on some reddendo singula singulis principle with the consequence that any descendant of the testator who acquires a beneficial interest under his will brings that interest, and nothing more, into account against his share under the partial intestacy. So, for instance, a child of the testator would bring into account any beneficial interest acquired by that child under the will, but nothing more, and similarly a grandchild of the testator would bring into account any beneficial interest taken by that grandchild. It is accepted, I think, on all hands that that is so as regards a grandchild. On the other hand, it has been decided in the two cases to which I am going to refer, that a child must bring into account something more than the beneficial interest which the child himself acquires under the will.
I propose now to refer to those two cases. So far as counsel have been able to discover, this point has never been considered in any other case. In Re Young’s Will Trusts, Young v Young the headnote is as follows ([1951] Ch at 185):
‘A testator directed his trustees to hold his residuary estate, after the death of his widow, in trust as to five-sevenths for five of his children in equal shares; to hold a further one-seventh share at their discretion to pay or apply the income or capital for the maintenance and support of X, another of his children, or any child or children of his during his life; and after his death to distribute any unapplied surplus between his children. The testator bequeathed the remaining one-seventh share on trusts for Y, another son, who, apparently without the knowledge of the testator, had died a bachelor before the date of the will, and his children, similar to the trusts respecting the child or children of X. At the death of the widow, the testator having died intestate as to the share of Y, the question arose whether the legal personal representative of X was liable to bring into account the capital of the one-seventh share settled, after the widow’s death, on X and his children, or was entitled to participate in Y’s share without bringing anything into hotchpot. Held, having regard to the fact that the legislation relating to the principle of hotchpot had been extended by the Administration of Estates Act, 1925, so as to include cases of partial intestacy, (1.) that X’s one-seventh share was a “beneficial interest” within s 49(a) of that statute, which directed that the requirements as to bringing property into account should apply to “any beneficial interests acquired by any issue of the deceased under the will of the deceased”; (2.) that the word “issue” in that phrase meant “children or remoter issue”; (3.) that X and his children were the issue, who had between them acquired a beneficial interest, namely, the one-seventh share, and that share ought to be brought into account.’
The facts of the case are of some importance. I will not take up time in reading them, but they should be looked at in order that the judgment may be fully appreciated. Harman J set out ([1951] Ch at 187, 188, [1950] 2 All ER at 1041) the facts and then said ([1951] Ch at 188-190, [1950] 2 All ER at 1042):
‘The question before me is what is to happen to the remainder of that one-seventh share. Under the old law there would not have been any difficulty: it would have been divided among the next-of-kin, because it was decided under the old Statute of Distributions of Charles II—which involved the bringing in of portions, as they were called, on an intestacy—that it did not apply to a
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partial intestacy. But the draftsmen of the legislation of 1925, seeing, no doubt, that that produced some anomalies, thought that they would improve the position; but it seems to me that, in the result, a new crop of anomalies has been produced. [Harman J set out s 47 and continued:] So far it is not difficult to understand what is meant. But turning then to s 49, which is designed, according to the sidenote, to apply the same principle to cases of partial intestacy, in other words, to remedy what was thought to be a defect in the old Statute of Distributions, it is provided [Harman J set out s 49 and continued:] It is said here that only he has to bring into account who has acquired a beneficial interest under the will, and that therefore Charles, the son, who takes a share as one of his father’s next-of-kin, has nothing to bring into account because not he, but his children, took the one-seventh share in the events which happened, as he never had more than a very limited interest in the income of that share; or, at the most, that all that needs to be brought in against Charles is the interest that he took, such as it was, which must be valued as well as possible, and would, I suppose be of very little worth. The result would be that almost the whole fund would go to Charles. The contrary view is that this sub-section is meant to produce, as it were, a stirpital division, in equality so far as possible, and that that is why the word “issue” is used here, although the word “children” is used in s 47. Any member of the family belonging to a certain branch must bring in everything that has been taken or acquired under the will by that branch. Therefore, his children having taken an absolute interest in the one-seventh share under the will, Charles, taking under the intestacy, should bring it into account. I am far from saying that Charles can be said to have “acquired” anything, but, on the whole, I prefer the view last stated. It seems to me that in the words “any beneficial interests acquired by any issue of the deceased”, “issue” must mean children or remoter issue. So it seems to me that what is to be brought into account is the beneficial interest which the issue acquired. Who are the issue in question? The father and children, the two generations between them, are the issue, and it seems to me, therefore, that anything that the father and children together acquired under the will is a beneficial interest acquired by the issue. True, there was a power, or a trust, in the event of some income not being applied during the father’s lifetime, to distribute it to other members of the family. But that trust never arose. It was never exercised and there was no occasion for its exercise; and I think that it should be ignored, and that in effect the father and his children between them had the one-seventh share, which was settled on them. That is what in my judgment ought to be brought into account.’
In the passage which I have read Harman J stated the principle in extremely wide terms ([1951] Ch at 189, [1950] 2 All ER At 1043):
‘Any member of the family belonging to a certain branch must bring in everything that has been taken or acquired under the will by that branch.’
He then applied that principle by holding that the capital of the share must be brought into account. I was much troubled by what was said in that passage, but, in order to appreciate it, it is, I think, essential to bear in mind that, leaving out of account the remote interest referred to in the last paragraph of the judgment, Charles and his children had between them the entire beneficial interest in that share. That being so, it was natural to treat the several interests as together equivalent to the capital value of the share and to deal with the matter on that basis.
The second case is Re Morton (decd), Morton v Warham. The headnote states ([1956] Ch at 644):
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‘Where on a partial intestacy the benefits received under the will of the testator, which have to be brought into hotchpot by the children or issue of the testator under the provisions of sections 47 and 49 of the Administration of Estates Act, 1925, include life or lesser interests, the method of valuation of such life or lesser interests is the actuarial value of the interest actually taken, and not the capital of the share settled on such child or issue.’
Again, I will not read the facts, but once again they should be read in order to fully appreciate the judgment.
Danckwerts J stated the facts and then made a telling criticism of s 49. He said ([1956] Ch at 647, [1956] 3 All ER at 260, 261).
‘I think that is as bad a piece of draftsmanship as one could conceive, in many respects. It says “the requirements“. What requirements” I am told the requirements are to be found in section 47(1) (iii). There one finds certain provisions which are not by themselves particularly apt for application to something else.’
And Danckwerts J set them out with comments as he went along. I think that I need not for present purposes read the rest of that paragraph. Danckwerts J then continued ([1956] Ch at 648, 649, [1956] 3 All ER at 261, 262):
‘If those two sections of the Administration of Estates Act, 1925, applying to this case, whatever is taken by the persons taking on intestacy, being issue of the deceased, under the will of the deceased has to be brought into account, it would appear. The provisions of section 49 are much more general in certain respects than those of section 47. Section 47 is confined, in the clause which I have read, to children; but it seems plain that section 49(a) applies to issue of any degree, and it applies apparently to any beneficial interest acquired by any issue of the deceased under the will of the deceased. Consequently, the result of that appears to be that people who take in the present case under the partial intestacy of John Morton have got to bring into account, against any shares which they take in that way, the beneficial interests of any kind which they take under the provisions of the will; and it seems plain, if section 47 is to be read as part of section 49(which, I suppose, it has), that one has got to include something less than an absolute interest, because one has got to include “any life or less interest“. Consequently, it seems to me that the life interest taken by those who do not take an absolute interest under the will should be accounted for under section 49 in a division of the testator’s estate on intestacy. The question is: how are those life interests or lesser interests, if there be any, to be dealt with? I have been referred to certain cases, In Re Young, in which Harman J. treated the share of the whole stirps as being equivalent to a gift of the capital of the interest in which they had successive interests, and directed that the whole capital be brought into that stirps in that manner … [Danckwerts J then referred to two cases from which he received no help and continued:] It seems to me, reading section 47 with such application as I can give to it, that the life interests or less interests which are brought in at a valuation, must be brought in at a valuation appropriate to the nature of the interest—and that seems to me to require that the life interest should be valued according to the relevant actuarial considerations; and they cannot be brought in as if they were equivalent to an absolute interest in the capital. To value the interest as being equivalent to a gift of capital in a case where a person takes no more than a life interest seems to me contrary to fairness, common sense and everything else. Accordingly, I so hold. I will declare that in
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calculating the amounts to be taken by the testator’s children on a partial intestacy each child ought to bring into hotchpot the value of the interest actually taken by such child or his or her issue.’
At first sight there appears to be a cleavage of view between Harman J and Danckwerts J as to the effect of s 49. If, indeed, there were such a cleavage my duty, I apprehend, would be to put on s 49 such construction as I thought right. But on further analysis, and particularly having regard to the explanation given to me by counsel for the trustee in bankruptcy of the son, of the facts in the two cases, I think that the cleavage is probably more apparent than real. In each case the learned judge held, or Danckwerts J, apparently took it for granted, that the interest to be brought into account by a child of the testator included not only the interest taken by the child himself but the interest taken by any issue of such child. The difference between the two cases is that in Re Young the interests of the child and the child’s children, disregarding an interest under the protective trust which Harman J was prepared to disregard, together amounted to the entire interest in the fund. Therefore it was simple and natural to bring the capital of the fund into account not quoad capital in the same sense as a fund settled for the benefit of the child is brought in under s 47, but quoad the sum of the beneficial interests in the fund.
In Re Morton there were other beneficial interests in the fund; so that method could not be adopted and what had to be done was to value severally the beneficial interests. It does not appear from the judgment but I imagine that in the case of the daughter, Edith Harriet Hutton, who had a child who attained 21 years, the capital value of her settled share would have been brought in as representing their combined beneficial interests. Once it is accepted that in each of those cases the learned judge applied the same basic principle, ie that the child must bring in his beneficial interest and also the beneficial interest of any of his issue, then I must clearly follow those decisions and apply the same principle in the present case.
Turning to the facts of the present case, the position is that the daughter, Nellie May Amos, and her children took between them the entire beneficial interest in one moiety of the residuary estate. That moiety was settled on trust to pay the income to the daughter during her life and after her death for all her children who shall attain the age of 21 years. Here again there is a protective trust under which, should a forfeiture occur, income might be applicable for the benefit of a husband of the daughter. However, that is the same point which Harman J was prepared to disregard in Re Young and I think that I can so disregard it here. Once it is accepted that the daughter and her children have to bring into account interests which together amount to the entire capital of one moiety of the residuary estate, that really is the end of the matter.
All sorts of difficulties arise in taking the date for the valuation where there is a partial intestacy and the various interests on intestacy do not fall into possession until a date long after the death of the testator. It may be that in certain circumstances it is necessary, in applying s 49, to depart from the words in brackets in s 47 ‘(the value to be reckoned as at the death of the testator)’. I do not think, however, that I am concerned here with those difficulties. Whatever date one takes one must compare like with like. Then one finds that the daughter and her children have taken half the fund. So necessarily the other half of the fund goes to Sidney or those claiming under him, in this case his trustee in bankruptcy.
I should have mentioned that the daughter, Nellie May Amos, took under cl 5 a diamond ring and the son under the same clause took a gold watch and chain.
It is, however, common ground that those interests really cancel out. There is also a reversionary legacy in cl 7 of £500 to a daughter of Nellie May Amos, but that cannot
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affect the position because on any footing Nellie May Amos cannot, having regard to the hotchpot already effected, take any interest under the partial intestacy.
I propose accordingly to make a declaration to the effect indicated above.
Declaration accordingly.
Solicitors: B A Woolf & Co (for the plaintiff); Heald, Johnson, Garten & Co (for the first, second, third and fourth defendants); Bircham & Co (for the fifth defendant); Goldingham, Wellington & Co (for the sixth defendant).
Richard J Soper Esq Barrister.
Rother Valley Railway Co Ltd v Ministry of Transport
[1970] 1 All ER 1192
Categories: TRANSPORT; Rail
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 23, 26 JANUARY, 23 FEBRUARY 1970
Light railway – Amending order – Application for order authorising sale of railway to company formed to operate it – Matters to be taken into account by Minister in determining application – Whether Minister entitled to take public interest into account – Light Railways Act 1896, ss 7, 24.
The construction of a light railway between Robertsbridge, Sussex and Tenterden, Kent was authorised by the Rother Valley (Light) Railway Act 1896a and certain variations and extensions were authorised by three orders made under the powers conferred by the Light Railways Act 1896. By the Railways Act 1921, the Transport Act 1947 and the Transport Act 1962, the railway became vested in the British Transport Commission and latterly in the British Railways Board. Passenger services on the railway were discontinued in 1954 and freight services in 1961 but until 1969 a small section was used intermittently. The plaintiff company was formed with the object of acquiring and operating the railway (which was physically capable of being put into operation), and by a contract dated 6 April 1966 the British Railways Board agreed to sell to the plaintiff company virtually the whole of the railway for £36,000. This contract was conditional on the Minister of Transport (as successor to the powers of the Light Railway Commissioners and the Board of Trade) making an amending order under s 24b of the Light Railways Act 1896, authorising the board to sell the railway to the company. The company duly applied to the Minister for such an order and, after an inspector from the Minister had held an inquiry, the company was informed that the application for the order would not be granted because the advantages to the public of having the railway would be outweighed by the effect on road traffic of the level-crossings and by the probability of heavy public expenditure on bridges and also other factors involving the public interest.
Held – In refusing the company’s application under s 24 b for an amending order, the Minister went outside the provisions of the 1896 Act, which gave her no power to suppress a railway which had already been authorised, however, desirable such suppression might be in the general public interest (see p 1201 e, post). Even if s 24 made applicable to an amending order the requirements of s 7c regarding the consideration of applications, only those requirements applied, and the Minister
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must consider only those factors, which were fairly related to the amendment (see p 1200 j to p 1201 a, post). The construction of s 7 with s 24 (in the absence of any intention to change the scope of the Act on the transfer of powers thereunder to the Minister) and the more general consideration that a power or duty given for a limited purpose ought to be exercised for that purpose alone indicated that the Minister was not entitled to take into account general considerations of public interest (see p 1201 h, post).
Notes
For authorisation of light railways by order, see 31 Halsbury’s Laws (3rd Edn) 783, 784, para 1251, and for matters to be considered by Minister of Transport on application for a light railways order, see ibid 792, 795, paras 1273–1279, and for cases on the subject, see 46 Digest (Repl) 335–340, 137–290.
For the Light Railways Act 1896, ss 7, 24, see 19 Halsbury’s Statutes (2nd Edn) 873, 880.
Special case
The Rother Valley Railway Co Ltd issued a writ against the Ministry of Transport, seeking a declaration that a decision of the Minister of Transport that an order should not be granted authorising the British Railways Board to sell the Kent and East Sussex Light Railway to the company was invalid and of no effect. The parties signed a special case under RSC Ord 33, r 3 for the decision of the court. The facts are set out in the judgment.
I Percival QC and E A Seeley for the company.
S W Templeman QC and J P Warner for the Ministry.
Cur adv vult
23 February 1970. The following judgment was delivered.
MEGARRY J read the following judgment. By the Rother Valley (Light) Railway Act 1896, Parliament authorised the construction of a light railway. By the Cranbrook and Tenterden Light Railway Order 1899, the Rother Valley Light Railway (Extensions) Order 1902, and the Kent and East Sussex Light Railway (General Powers) Order 1904, which were all made under the powers conferred by the Light Railways Act 1896, certain extensions and variations were authorised. The upshot was that a light railway from Robertsbridge in Sussex to Tenterden in Kent, about 13 1/2 miles long, was constructed and operated. Originally it was known as the Rother Valley Light Railway, but by the Order of 1904 it was renamed the Kent and East Sussex Light Railway. In general, a railway is classified as a light railway if there are appropriate restrictions of weight and speed: see the Regulation of Railways Act 1868, s 28. It is common ground that in due course, as a result of the Railways Act 1921, the Transport Act 1947, and the Transport Act 1962, the railway became vested in the British Transport Commission and, latterly, the British Railways Board. I shall refer to these bodies collectively as ‘the board’.
In 1954, the board ceased to run passenger services on the railway, and in 1961 the freight services were also discontinued. At that time, I understand, this could be done without ministerial authority. The railway did not, however, altogether go out of use. Until February 1969, a stretch of about half a mile from Robertsbridge to a spur leading to a private siding at a corn mill was used for freight, bringing vegetable matter to the mill. The distance was small, and the use intermittent: in the first eight months of 1967, there were 14 trains in each direction. But this stretch included the level crossing over the A21 road; and in all there are seven level crossings, which play a significant part in this case. In addition, the board has permitted the plaintiff to move a certain amount of rolling stock over some or all of the railway.
The plaintiff is a company formed in recent years with the object of acquiring and
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operating the railway: I shall call it ‘the company’. By a contract in writing dated 6 April 1966 made between the board and the company, the board agreed to sell virtually the whole of the railway to the company for £36,000. This agreement was expressed to be conditional on the Minister of Transport (whom I shall call ‘the Minister’) making an order on the application of the company authorising the board to sell the railway to the company on terms which provided for the transfer to the company ‘to the exclusion of the Board of all rights powers privileges and obligations of the Board (whether statutory or otherwise)’ in relation to the railway; and a draft of the order to be sought was set out in a schedule to the agreement. There were also certain provisions relating to the possibility of the Minister refusing to make the order, or not making it within a stated time.
The company duly applied to the Minister for such an order, and as a result an inspector from the Ministry held a public local inquiry at Tenterden on 21 and 22 March 1967. The inspector reported in April 1967; and his conclusion was that the Minister had not enough material on which to found a decision. At the request of the defendant, the Ministry of Transport (which I shall call ‘the Ministry’), the company then provided further information on certain matters; and agreement was reached with the two principal objectors, the Kent River Authority and the Rother Internal Drainage Board, on a protective clause for inclusion in the order, in consequence of which these objections were withdrawn.
By a letter dated 4 September 1967 the company was informed by an official in the Ministry that the Minister had decided that the application for the order should not be granted; and I must return to that letter in due course. On 30 November 1967 the company issued the writ, claiming a declaration that the decision was invalid and of no effect. On 3 November 1969 the parties signed a special case under RSC Ord 33, r 3, and it is this that is now before me.
In the meantime, the company had issued a writ against the board, seeking a declaration that the agreement was still in force, and also an injunction to restrain the board from taking up the railway track. Buckley J granted an interlocutory injunction to this effect, but subsequently Pennycuick J discharged this injunction on the ground that the time limit under the agreement for making the order had expired; and the Court of Appeal affirmed this decisiond. The board, however, has refrained from removing the track, and physically the railway is capable of being put into operation subject, no doubt, to the execution of various works of maintenance and so on. The whole case turns on the question whether, in reaching her decision, the Minister has taken into account certain matters which she ought to have excluded from consideration. The company says that she has, and the Ministry denies it. It is agreed between the parties that if the Minister was entitled to take these matters into account the action fails, whereas if she was not, the company is entitled to a declaration that the Minister’s decision referred to in the letter of 4 September 1967 was void. In this event, it is agreed that the company’s application for an order is still on foot, and that the only matter remaining for the Minister’s consideration will be the ability of the company to meet the financial obligations which would devolve on it if the order were to be made. The company has from the outset explicitly disclaimed any attack on the good faith of the Minister.
The matters to which I have referred are set out as follows in para 12 of the special case:
‘The Minister approached the question whether she should make the said Order on the footing that her duty was to consider whether the public interest would be best served by her making the Order so as to enable the railway to be operated by the Plaintiff, or by her not making it in which case the railway would remain closed and the track would be removed: As appears from the
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said letter the Minister’s reasons for reaching her decision were that in her view the advantages to the public of having the railway would be outweighed by the effects on road traffic of the level-crossings and by the probability of heavy public expenditure on bridges.’
On this point I think that I should quote the latter part of the Ministry’s letter of 4 September. After referring to the company’s finances and the withdrawal of the objections by the drainage authorities, the writer of the letter states:
‘The Minister has also considered the “other factors involving the public interest” referred to in the Inspector’s recommendation. The most serious disadvantage of re-opening this line lies in the fact that it crosses seven roads on the level. These level crossings include one on the A.21, one on the A.229, and two on the A.28, all principal roads with large and growing flows of road traffic, particularly in summer. On the A.21 alone the summer peak flow is over 13,000 vehicles a day, with an annual growth rate of 7 or 8 per cent.
‘The Minister cannot lightly contemplate imposing further delays on road traffic flows of this order of magnitude. She is advised that queues of up to 30 cars would result from the operation of manned barriers of the type suggested by the Railway Inspectorate as suitable for this line. She is further advised that in this situation, having regard to the expected growth of traffic, it might well be necessary ultimately to provide dual carriageway bridges to carry at least three of the roads over the line; this could involve a burden to public funds of several hundred thousand pounds.
‘In considering this aspect, the Minister noted that the two County Councils did not formally object to the granting of the Order, but that the spokesman for Kent County Council made it clear at the Inquiry (para. 121) that the interruption to road traffic was in his view undesirable and that the Minister should be thoroughly satisfied about the public need for the railway.
‘Similarly, the Inspector in his conclusion, felt (para. 157) that “there is a public demand, slenderly amounting to evidence of a public need, but of a strength which could not prevail against serious objections on wider public grounds to the railway being re-opened“.
‘The Minister’s decision on this Order must be based on the widest possible assessment of public transport needs. Her final considered view is that the advantages to the public of having the railway would be outweighed by the effects on road traffic and by the probability of heavy public expenditure on bridges.
‘I am to add that the Minister realises that this decision must be a great disappointment to all those who have worked to build up the Company, even though in my letter of 26 May 1966 I referred to problems likely to arise in relation to the level crossings. Her decision was reached only after the most careful consideration of all the factors involving the public interest.’
For brevity, I shall comprehensively refer to these factors as ‘the public interest’.
the company’s application was for the making of an order which it submitted in draft. This order contained three operative clauses, which I shall quote with the correction of a number of spelling and other mistakes:
‘3(1). The Board and the Company may enter into and carry into effect agreements providing for the transfer to and vesting in the Company of the railway on such terms and conditions as may be agreed between the Board and the Company. (2) As from the date upon which the railway shall become vested in the Company the Company shall to the exclusion of the Board be entitled to the benefit of and to exercise all the rights, powers and privileges and be subject to all the obligations of the Board whether statutory or otherwise
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for the time being in force in respect of the railway. 4 Notwithstanding anything in section 5 of the Rother Valley Light Railway (Extensions) Order 1902 the motive power on the railway shall be steam, diesel, diesel electric, electric, turbine or any combination of these types.’
The order also dealt with costs. The order was expressed to be made under ss 7, 9, 10, 18 and 24 of the Light Railways Act 1896, as amended.
Apart from being required by the contract, cl 3(1) of the order seems to be otiose: it does not appear to be required by any statutory provision, nor does it seem to amend any order. Clause 3(2) appears to operate as a general amendment of all the orders, in effect substituting the name of the company for that of the original company wherever it occurs. Clause 4 specifies the order that it amends.
The argument before me has ranged far and wide. No authorities were cited as none seemed to be in point. The central core of the argument has been the relationship of ss 7 and 24 of the Light Railways Act 1896. Section 7 deals with the processes applicable to an application for authorising a light railway under the Act, while s 24 deals with amendments to orders made under the Act. A major question has been the extent to which s 24 makes s 7 applicable to an application for an amending order. Counsel for the Ministry says that all of s 7 is applied, so far as it is relevant, whereas counsel for the company has said that nothing in s 7 which relates to steps to be taken prior to the making of the order is applicable. Accordingly, I must consider the meaning and effect of the 1896 Act.
The 1896 Act established a body known as the Light Railway Commission, and required an application for an order authorising a light railway to be made to the commissioners. Section 7 provided:
‘(1) Where an application for authorising a light railway under this Act is made to the Light Railway Commissioners, those Commissioners shall, in the first instance, satisfy themselves that all reasonable steps have been taken for consulting the local authorities, including road authorities, through whose areas the railway is intended to pass, and the owners and occupiers of the land it is proposed to take, and for giving public notice of the application, and shall also themselves by local inquiry and such other means as they think necessary possess themselves of all such information as they may consider material or useful for determining the expediency of granting the application.
‘(2) The applicants shall satisfy the Commissioners that they—(a) published once at least in each of two consecutive weeks, in some newspaper circulating in the area or some part of the area through which the light railway is to pass, an advertisement describing shortly the land proposed to be taken and the purpose for which it is proposed to be taken, naming a place where a plan of the proposed works and the lands to be taken, and a book of reference to the plan, may be seen at all reasonable hours, and stating the quantity of land required; and (b) served notice in the prescribed manner on every reputed owner, lessee, and occupier of any land intended to be taken, describing in each case the land intended to be taken, and inquiring whether the person so served assents to or dissents from the taking of his land, and requesting him to state any objections he may have to his land being taken.
‘The plan and book of reference shall be in the prescribed form, and for the purposes of this section the expression “prescribed” shall mean prescribed by rules made under this Act.
‘(3) The Commissioners shall before deciding on an application give full opportunity for any objections to the application to be laid before them, and shall consider all such objections, whether made formally or informally.
‘(4) If after consideration the Commissioners think that the application should be granted, they shall settle any draft order submitted to them by the applicants for authorising the railway, and see that all such matters (including provisions
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for the safety of the public and particulars of the land proposed to be taken) are inserted therein, as they think necessary for the proper construction and working of the railway.
‘(5) The order of the Light Railway Commissioners shall be provisional only, and shall have no effect until confirmed by the Board of Trade in manner provided by this Act.
‘(6) Where an application for a light railway has been refused by the Light Railway Commissioners, the applicants, if the council of any county, borough, or district, may appeal against such refusal to the Board of Trade, who may, at any time if they think fit, remit the application or any portion thereof to the said Commissioners for further consideration with or without special instructions.’e
Section 8 next provides for the submission of any such order to the Board of Trade for confirmation and for the Board of Trade to give public notice of any such order. Section 9 provides for the Board of Trade considering any such order. I think I can then turn to s 24, which has been the centre of the argument. This provides:
‘An order authorising a light railway under this Act may be altered or added to by an amending order made in like manner and subject to the like provisions as the original order. Provided that—(a) the amending order may be made on the application of any authority or person; and (b) the Board of Trade, in considering the expediency of requiring the proposals for amending the order to be submitted to Parliament, shall have regard to the scope and provisions of the original order; and (c) the amending order shall not confer any power to acquire the railway except with the consent of the owners of the railway.’
In due course, I shall refer to the changes subsequently made by Parliament, whereby the Minister of Transport now discharges the functions of the commissioners and the Board of Trade. For the present, I need only say that the initial steps to be taken to obtain an order authorising a light railway fell under seven heads. Briefly, these steps, made requisite by s 7(1) to (3) (which are still in force today), were as follows. (1) The commissioners must satisfy themselves that all reasonable steps have been taken for consulting the local authorities (including road authorities) through whose areas the railway ‘is intended to pass’. (2) The commissioners must similarly satisfy themselves as to consultation with ‘the owners and occupiers of the land it is proposed to take’. (3) The commissioners must similarly satisfy themselves as to the giving of ‘public notice of the application.’ (4) The commissioners must ‘possess themselves of all such information as they may consider material or useful for determining the expediency of granting the application’. Let me interpose that it is the applicability of this requirement, with the word ‘expediency’, which is of major importance to the submission of counsel for the Ministry. (5) The applicants must satisfy the commissioners that they have published the requisite newspaper advertisements as to the ‘land proposed to be taken’. (6) The applicants must similarly satisfy the commissioners that they have served the necessary notices on the owner and occupier of ‘any land intended to be taken’, with the necessary inquiries and requests. (7) Before deciding on an application, the commissioners must give full opportunity for any objections to laid before them, and they must consider all such objections. Subsections (5) and (6) of s 7, I may say, have been repealed, so that there is now no question of the confirmation of a provisional order, or an appeal against the refusal of an application.
Now by common consent an amending order under s 24 may take many forms. It may authorise an extension to the railway; on the other hand, it may do no more
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than increase the borrowing powers of the railway, or (as cl 4 of the draft order before me in fact provides) alter the permitted means of traction. Counsel for the Ministry says that if the order is of the latter type, s 24 nonetheless applies the whole of the procedure laid down by s 7, excepting only those parts which are plainly inappropriate. In the present case, he accepts that of the above list of seven heads, only numbers (3), (4) and (7) are applicable: the other four are all plainly inappropriate to cases where no new line is to be constructed and no land is to be taken. In other words, the phrase ‘in like manner’ in s 24 does not mean ‘in identical manner’, but ‘in a similar manner, so far as is appropriate to the order in question’. Accordingly, as the fourth head applies, the Minister was bound to pay regard to all that she considered ‘material or useful for determining the expediency of granting the application’: and these words required and authorised the Minister to have regard to the public interest. No point, I may say, has been taken on the fact that one of the meanings of ‘expedient’ is ‘politic rather than just’. Perhaps I should add that the words ‘and subject to the like provisions’ in s 24 have caused no difficulty, for they appear to relate principally, if not exclusively, to the list of provisions set out in s 11.
Counsel for the company, on the other hand, emphasises the word ‘made’ in s 24, and asserts that a distinction must be made between the manner of making an order, and the process leading up to the making of that order. He submitted that s 24 makes none of the seven heads set out above applicable to an amendment order. What s 24 did was merely to provide that the commissioners should make the draft order under s 7(4), that under s 7 (5) it should be only provisional in the first instance, that it must then be submitted to the Board of Trade under s 8, and that the Board of Trade had to take certain steps under ss 8 and 9, including giving notice to the public. On this footing, in this case no local inquiry should have been held under s 7(1), for this subsection had no application.
This is not an easy point. I do not think that s 24 can occupy any place of high honour in the annals of parliamentary draftsmanship. On counsel for the Ministry’s submission an amending order merely increasing a company’s borrowing powers initially invokes, by means of s 24, the whole machinery of s 7(1), only to have most of it rejected as irrelevant. Counsel for the company’s submission, on the other hand, leads to the conclusion that an amending order extending the railway would not need to be exposed to the precautions requisite on the making of an initial order, even though lands were to be taken. At this stage I propose to say no more than that I find neither submission of compelling cogency. Before returning to them, I propose to say something of the later history of the legislation and the general considerations that have been put before me.
Under the Ministry of Transport Act 1919, s 2, the powers of the Board of Trade under the 1896 Act were transferred to the Minister of Transport. By the Railways Act 1921, s 68(1), orders under the 1896 Act were to be made by the Minister of Transport instead of being made by the Light Railway Commissioners and confirmed by the Minister of Transport as successor to the Board of Trade; and the subsection continued by transferring all the powers or the Light Railway Commissioners to the Minister of Transport, and provided that:
‘(b) the Minister on considering an application for an order shall take all such matters into consideration and do all such things as he, as successor of the Board of Trade, is under the principal Act required to take into consideration and do on submission of an order to him for confirmation … ’
The Railways Act 1921, also effected various repeals in the 1896 Act, including all s 8 and parts of ss 7 and 9. The broad result of these changes was to put the whole process of making an order into the hands of the Minister. No longer was the draft order to be make by the commissioners with the power of confirmation in the Board of Trade. One particular result of this change was that it was no longer the Light
Page 1199 of [1970] 1 All ER 1192
Railway Commissioners who were concerned, under s 7(1) of the 1896 Act, with the acquisition of all such information as ‘they may consider material or useful for determining the expediency of granting the application’. Instead, it was to be the Minister or Transport.
Now the functions of the Minister of Transport were, and are, far wider than those of the Light Railway Commissioners ever were: see Ministry of Transport Act 1919, s 2. One has only to mention highways to glimpse the gulf. The commissioners were constituted and exercised functions under an Act bearing the long title ‘An Act to facilitate the Construction of Light Railways in Great Britain.f Section 1(1) of the Act provided:
‘For the purpose of facilitating the construction and working of light railways in Great Britain, there shall be established a commission, consisting of three commissioners, to be styled the Light Railway Commissioners, and to be appointed by the President of the Board of Trade.’
Section 1(2), which, unlike sub-s (1), survived the 1921 Act, provides:
‘It shall be the duty of the Light Railway Commissioners to carry this Act into effect, and to offer, so far as they are able, every facility for considering and maturing proposals to construct light railways.’
Accordingly, before the 1921 Act was enacted, it seems plain that the functions of the commissioners were essentially those facilitating the construction of light railways. It was no part of their function to exercise a balanced judgment between possibly rival claims of road and rail. Nor can I see that any such function was confided to the Board of Trade. Section 9(1) of the 1896 Act provided:
‘The Board of Trade shall consider any order submitted to them under this Act for confirmation with special reference to—(a) the expediency of requiring the proposals to be submitted to Parliament; and (b) the safety of the public; and (c) any objection lodged with them in accordance with this Act.’
The remaining provisions of s 9 were as follows:
‘(2) The Light Railway Commissioners shall, so far as they are able, give to the Board of Trade any information or assistance which may be required by the Board for the purpose of considering any order submitted to them or any objection thereto.
‘(3) If the Board of Trade on such consideration are of opinion that by reason of the magnitude of the proposed undertaking, or of the effect thereof on the undertaking of any railway company existing at the time, or for any other special reason relating to the undertaking, the proposals of the promotors ought to be submitted to Parliament, they shall not confirm the order.
‘(4) The Board of Trade shall modify the provisions of the order for ensuring the safety of the public in such manner as they consider requisite or expedient.
‘(5) If any objection to the order is lodged with the Board of Trade and not withdrawn, the Board of Trade shall consider the objection and give to those by whom it is made an opportunity of being heard, and if after consideration they decide that the objection should be upheld, the Board shall not confirm the order, or shall modify the order so as to remove the objection.
‘(6) The Board of Trade may, at any time, if they think fit, remit the order to the Light Railway Commissioners for further consideration, or may themselves hold or institute a local inquiry, and hear all parties interested.’
I can see nothing in these provisions to suggest that the board had power to refuse to confirm an order, without submitting it to Parliament, on what I may call general
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considerations of policy, or road-rail considerations. Public safety, objections, magnitude, and the effect on existing railways are all specifically mentioned. No doubt these are not exhaustive: but general considerations of policy are so important that if they had been thought to be in point they must inevitably have been mentioned.
When Parliament replaced the commissioners and the Board of Trade by the Minister, did it intend thereby to require and authorise the Minister to take into account those wider considerations that flow from the Minister’s extensive powers and responsibilities in other spheres? Are the considerations which should be treated as relevant under the Act of 1896 to fluctuate with the functions of the Minister who for the time being is given the powers under the Act? Or does the scope of the Act remain unchanged, whoever exercises the powers?
I should be slow to impute to Parliament an intention to change the ambit of an Act when no more is done than to change the persons or bodies who exercise the powers under the Act. Here, it seems to me, the language of transfer points against any such change. In particular, by s 68(1) of the 1921 Act, what the Minister is to do in considering an application for an order is to:
‘… take all such matters into consideration and do all such things as he, as successor of the Board of Trade, is under the principal Act required to take into consideration and do on submission of an order to him for confirmation … ’
This seems to me to be language of mere substitution rather than of extension. To provide that the Minister who is to consider what the Board of Trade was to consider is not to provide that the Minister must (or can) consider much else besides. The subsection continues with the words:
‘… and the principal Act shall have effect as if for references to the Light Railway Commissioners there were substituted references to the Minister, and for references to the confirmation of orders by the Minister, as successor to the Board of Trade, there was substituted references to the making of orders by the Minister.’
This again is merely language of substitution, with the word ‘was’ as a sport of Parliamentary grammar.
These considerations seem to me to provide substantial support for the more general argument that counsel for the company advanced so forcefully. The decision that there should be a light railway, with its level crossings, was made long ago. That must be taken as settled. When this application is made to amend the old orders, all that should be considered is the amendment: it is wrong to take into account matters relevant to the establishing of the railway, and use the power to decide whether an amendment should be made as a means of suppressing the railway altogether, thus reversing the initial decision that there should be a railway. The board could resume operations without seeking any such order as this: and where the only real question is who should have power to run the railway, it is introducing a wholly extraneous matter to say, ‘If the order is refused, the railway will in effect be suppressed, and such a suppression is in the general public interest’. That is the argument.
Counsel for the Ministry, on the other hand, contended that it was proper for the Minister to consider what will happen if the order is made, to contrast that with what will happen if it is refused, and then to consider which is expedient in the public interest, including in particular considerations affecting roads. It cannot be right, he said, that the Minister should be forced to confirm an order which the Minister considers to be against the public interest.
I can see the force of this: but I do not think that it is really consistent with another part of counsel for the Ministry’s argument. Once it is admitted (as he was constrained to admit, and, indeed, assert) that the provision for amending orders made by s 24 does not incorporate all the requirements of s 7, but only those which are
Page 1201 of [1970] 1 All ER 1192
fairly relevant to the amendment put forward, then I think it must, or at least ought to, follow that in considering those requirements that are relevant to any particular amendment, the Minister must consider only those factors which fairly relate to the amendment. In other words, if in cases under s 24 the Minister is to tailor s 7 to the particular application, then I think that tailoring should be general and not selective. What has to be considered is an application for an amending order; and if s 7 is not to be taken in its full width, but some requirements are to be omitted altogether as being inappropriate to such an application, then the other requirements, which are not thus omitted, must equally be applied to the extent appropriate to the application, and no further. I do not think it can be said, ‘Because this is an application for an amending order, and some requirements are to be discarded as being wholly inappropriate to that order, the other requirements must be applied to their full width, considering everything that is relevant to making an initial order, and must not be confined to a width appropriate to the amendment sought.’
On this footing, I do not think it right that on an application for an amending order such as the order in this case the expediency of having or operating a railway at all should be considered. What must be considered is no more than the amendments sought to be made. Given that a light railway has been duly authorised and constructed, the question is whether it should be transferred from the board to the company, with a transfer of obligations, and whether the extension of motive power ought to be authorised. On such an application, I do not think it right to consider whether there ought to be a railway in operation there at all. I accept that it can be said that one consequence of a transfer from the board to the company is that a moribund line will become active. But the Act gives no power to suppress a railway that has been authorised, and I do not think that powers given by an Act intended to facilitate the construction of light railways ought to be used with the object of suppressing them, however desirable such a suppression may be in the general public interest and in the interests of road users and the public funds. In my judgment, the Act conferred no such power. In reaching her decision, the Minister went outside the provisions of the Act, and brought into play considerations which, however relevant for other purposes, should have been excluded in respect of the particular application before her. Accordingly in my judgment the answer to the question of law which para 17 of the special case puts before the court for decision is ‘No’.
That suffices to dispose of the case. But before I part with it I ought to say a few words more about one matter. I doubt the soundness of counsel for the company’s contention which in a s 24 case excludes anything in s 7 that relates to steps to be taken prior to the making of an order. I am content to assume, without deciding, that counsel for the Ministry’s submission is the sounder, though with an important qualification which in this case negatives the result for which he contended. In other words, I assume that s 7, so far as appropriate, does apply: but in its application, I hold that it does not permit the Minister to take into consideration what for brevity has been called the public interest. I base this on the construction of s 7 when read with s 24, on the absence of any intention to change the scope of the Act by substituting the Minister for the commissioners and the Board of Trade, and on the more general consideration that a power or a duty given for a limited purpose ought to be exercised for that purpose alone, and not, however honestly and reasonably, for some ulterior purpose. I would only add that this is a case in which Parliament has manifestly failed to make its meaning plain. I find it very easy to understand how the Minister came to go wrong, amid the press of duties, in applying those Delphic statutory provisions on which, with the aid of two days of powerful argument and time for consideration, I have now succeeded, not without difficulty, in placing a meaning. But in my judgment she was wrong; and that is that.
Judgment for the company.
Solicitors: Sharpe, Pritchard & Co (for the company); Treasury Solicitor.
R W Farrin Esq Barrister.
Jefford and another v Gee
[1970] 1 All ER 1202
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, DAVIES AND SALMON LJJ
Hearing Date(s): 11, 12, 13, 16 FEBRUARY, 4 MARCH 1970
Interest – Damages – Personal injury – Fatal accident – Principles to be applied in awarding interest – Special damages and general damages – Law Reform (Miscellaneous Provisions) Act 1934, s 3, as amended by the Administration of Justice Act 1969, s 22.
The following principles should be applied in awarding interest in personal injury cases under s 3a of the Law Reform (Miscellaneous Provisions) Act 1934, as amended by s 22b of the Administration of Justice Act 1969, which amendment obliges the court to award interest but does not alter the principles which the court should apply under the 1934 Act (see p 1205 d, post)—
(i) Interest should be awarded to a plaintiff not as compensation but for being kept out of money which ought to have been paid to him (see p 1208 a, post).
Principle stated by Lord Herschell LC in London, Chatham and Dover Ry Co v South Eastern Ry Co [1893] AC at 437 applied.
(ii) On special damages interest should, ordinarily, be awarded on the total sum of the special damages from the date of the accident until the date of trial, at half the appropriate rate of interest allowed on the general damages. Any recoupment of special damage from some other quarter should be taken into account in awarding the interest (see p 1208 b and j to p 1209 a, post).
Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd (p 225 ante) followed.
(iii) On damages for loss of future earnings no interest should be awarded because a plaintiff will not have been kept out of any money but on the contrary will have received it in advance (see p 1209 b, post).
(iv) On damages for pain and suffering and loss of amenities interest should be awarded, at the appropriate rate, from the date of service of the writ to the date of trial (see p 1209 f, post).
(v) On damages under the Fatal Accidents Acts and for loss of expectation of life under the Law Reform (Miscellaneous Provisions) Act 1934, interest should be awarded at the appropriate rate from the date of service of the writ to the date of trial (see p 1209 j to p 1210 a, post).
(vi) The appropriate rate of interest on general damages should be the rate allowed on money in court placed on short term investment account under the Administration of Justice Act 1965, ss 6, 7, and the Supreme Court Fund Rules 1927, as amended, and the rate should be taken as the average rate so allowed over the period for which the interest is awarded (see p 1210 d and p 1212 f, post).
(vii) To carry out the 1934 Act as amended, the court should itemise the damages; and the judgment should state the rate of interest and the period for which it is awarded. The interest should be stated as a gross sum without deducting tax (see p 1212 d and g, post)
(viii) Payment into court should be made as before without regard to interest. If a plaintiff recovers more than the payment in, apart from interest, he will get his costs and if he recovers no more than the payment in, apart from interest, he will not get his costs from the date of the payment in and will have to pay the defendant’s costs. In either case a plaintiff will get the appropriate award of interest irrespective of the payment in; but if he takes the money out of court in satisfaction of his claim, he will not be entitled to interest under the 1934 Act as there will have been no judgment (see p 1211 e and f, post).
Page 1203 of [1970] 1 All ER 1202
(ix) In exceptional cases, eg of gross delay, the court may diminish or increase the award of interest or alter the period for which it is allowed (see p 1212 h, post).
Notes
For the award of interest on damages, see 27 Halsbury’s Laws (3rd Edn) 10, 11, paras 10, 12, and for cases on the subject, see 35 Digest (Repl) 211, 212, 179–182.
For the Law Reform (Miscellaneous Provisions) Act 1934, s 3, see 18 Halsbury’s Statutes (2nd Edn) 525.
For the Administration of Justice Act 1969, s 22, see Service to Halsbury’s Statutes (3rd Edn).
Cases referred to in judgment
Aizkarai Mendi, The [1938] 3 All ER 483, [1938] P 263, 107 LJP 141, 159 LT 490, 36 Digest (Repl) 230, 1221.
Arnott v Redfern (1826) 3 Bing 353, 4 LJOSCP 88, 130 ER 549, 35 Digest (Repl) 202, 100.
Berwickshire, The [1950] 1 All ER 699, [1950] P 204, 1 Digest (Repl) 262, 1631.
Carmichael v Caledonian Ry Co 1870 8 Macph (HL) 119.
Green (F W) & Co Ltd v Brown & Gracie Ltd 1960 SLT (Notes) 43.
Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd p 225 ante [1970] 2 WLR 198.
Kong Magnus, The [1891] P 223, 65 LT 231, 7 Asp MLC 64, 1 Digest (Repl) 262, 1630.
Liesbosch (Dredger) (Owners) v Steamship Edison (Owners) [1933] AC 449, 102 LJP 73, 18 Asp MLC 380; sub nom The Edison [1933] All ER Rep 144, 149 LT 49, 42 Digest (Repl) 945, 7368.
London, Chatham and Dover Ry Co v South Eastern Ry Co [1893] AC 429, 63 LJCh 93, 69 LT 637, 58 JP 36, 35 Digest (Repl) 209, 159.
Macrae v Reed and Mallik Ltd 1961 SC 68.
Napier Star, The [1933] P 136, [1933] All ER Rep 886, 102 LJP 57, 149 LT 359, 18 Asp MLC 400, 1 Digest (Repl) 263, 1638.
Northumbria, The (1869) LR 3 A & E 6, 39 LJ Adm 3, 42 Digest (Repl) 951, 7422.
Riches v Westminster Bank Ltd [1943] 2 All ER 725, 35 Digest (Repl) 211, 180.
Riches v Westminster Bank Ltd [1947] 1 All ER 469, [1947] AC 390, [1948] LJR 573, 176 LT 405, 35 Digest (Repl) 212, 181.
Appeals
This was an appeal by the defendant, Phyllis Gee, from that part of the judgment of Waller J, given on 16 June 1969, whereby he awarded the plaintiff, Thomas William Jefford, interest at 6 1/2 per cent on the sum of £3,500 ordered to be paid by the defendant as general damages for personal injuries. The plaintiff cross-appealed that interest should be awarded on the whole amount of the damages awarded to him including the special damages, namely on £5,631 11s 6d, and that the rate of interest should be increased to such extent as the court thought just. The facts are set out in the judgment of the court.
John D Stocker QC and M J Turner for the defendant.
R I Kidwell QC and J D W Hayman for the plaintiffs.
J D May QC and J H R Newey as amici curiae.
Cur adv vult
4 March 1970. The following judgments were delivered.
LORD DENNING MR read the judgment of the court.
1 Introduction
On 30 November 1966, the plaintiff was riding his motor scooter along Archway Road in North London. The defendant, drove her motor car so negligently that she ran into him and knocked him off the scooter. His head was badly cut. Three teeth
Page 1204 of [1970] 1 All ER 1202
were knocked out. He had a broken wrist. But, worst of all, he had a badly broken right leg. He has had many operations for it but has never recovered the full use of it. He has been off work a long time. On 25 July 1967 the plaintiff issued a writ claiming damages. Liability was admitted. The defendant paid into court £4,250 in satisfaction of the claim. The plaintiff did not take it out. The trial was held on 16 June 1969. The judge awarded a sum of £5,631 11s 6d. It was made up as follows:
Special damages £2,131 11s 6d
General damages £3,500
Counsel for the plaintiff asked for interest on the whole or part of the sum awarded. The judge allowed no interest on the special damages. But he allowed interest at 6 1/2 per cent per annum on the general damages of £3,500 for 2 1/2 years, ie from the date of the accident, 30 November 1966, to the date of trial, 16 June 1969. The total interest came to £568 15s.
The defendant appeals from this award of interest. The notice of appeal states that no interest at all should have been awarded on the general damages or, alternatively, it should not have been allowed on so much of it as represented loss of prospective future earnings: and, in any case, the period of 2 1/2 years was too long: and the rate of 6 1/2 per cent was too high. The notice of appeal also complains that the award of interest took no account of the defendant’s payment into court.
The plaintiff cross-appeals asking that interest shall be awarded on the whole of the damages, including the special damages as well as the general damages. The plaintiff also asks that the rate should be higher than 6 1/2 per cent.
The appeal and cross-appeal raise the question: on what basis should interest be awarded in personal injury cases? This question is of especial importance because, since 1 January 1970, Parliament has made it compulsory for the judges to award interest in personal injury cases. But, in making it compulsory, Parliament has, quite understandably, left it to the courts to decide the principles on which they should act. So we have given urgent consideration to it. The question stands out: how is the statute to be applied? Up and down the country people want to know the answer. Trade unions, insurers, accountants, solicitors, barristers, all want to know. Scores of cases have already come before the judges. Each has given a different answer. As the Latin saying has it, ‘quot homines, tot sententiae’, which means, put into English: ‘Count the number of men; then the number of different opinions; and you will find there are as many different opinions as there are men.' Such is the confusion that we feel it our duty to set out the guide lines, even though in some respects our observations may be obiter dicta. In this task we sought the assistance of the Official Solicitor, who instructed counsel as friends of the court. Their assistance has been invaluable to us.
2 The statutes
The power of the court to award interest in these cases was contained originally in s 3(1) of the Law Reform (Miscellaneous Provisions) Act 1934. It provided:
‘In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment: Providing that nothing in this section—(a) shall authorise the giving of interest upon interest; … ’
It should be noticed that the power of the court was then discretionary. But, since 1 January 1970, it has become compulsory in personal injury cases. This is by reason
Page 1205 of [1970] 1 All ER 1202
of s 22 of the Administration of Justice Act 1969 which adds these subsections to the above s 3(1):
‘(1A) Where in any such proceedings as are mentioned in subsection (1) of this section judgment is given for a sum which (apart from interest on damages) exceeds £200 and represents or includes damages in respect of personal injuries to the plaintiff or any other person … then (without prejudice to the exercise of the power conferred by that subsection in relation to any part of that sum which does not represent such damages) the court shall exercise that power so as to include in that sum interest on those damages or on such part of them as the court considers appropriate, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.
‘(1B) Any order under this section may provide for interest to be calculated at different rates in respect of different parts of the period for which interest is given, whether that period is the whole or part of the period mentioned in subsection (1) of this section.’
The present case was tried on 16 June 1969. So it is governed solely by the 1934 Act. But our decision today will, we think, be applicable also to cases which are tried after 1 January 1970. These will be governed, of course, not only by the 1934 Act but also by the 1969 Act. But the 1969 Act does not alter the principles which the court should apply in awarding interest. All it does is to oblige the court to apply those principles. It was suggested that the words ‘such part of them as the court considers appropriate’ indicate some different principles. But we do not think so. They only express the same principles as in the 1934 Act, but in different words. It should be noticed, too, that the 1969 Act is retrospective, in this sense, that it applies to all personal injuries, no matter how many years ago, so long as the case comes for judgment after 1 January 1970. We were told that the insurance companies find this embarrassing because their premiums were calculated in the past without regard to interest. The addition of compulsory interest on past injuries puts everything out.
3 The previous law
Every Act has to be considered with reference to the previous law and the state of the earlier authorities. These show that the 1934 Act was intended to give effect to a principle enunciated by Lord Herschell LC in 1893. So we will trace it out.
(i) At common law
The rule of the common law of England was that, in the absence of express agreement, interest could not be recovered on a debt or damages and equity in this respect followed the law. This situation was regretted by many great judges. In regretting it, they stated the principle which the courts ought to apply. Thus in 1826, Best CJ said:
‘However a debt is contracted, if it has been wrongfully withheld by a Defendant after the Plaintiff has endeavoured to obtain payment of it, the jury may gave interest in the shape of damages for the unjust detention of the money.’
See Arnott v Redfern ((1826) 3 Bing 353 at 359).
In 1893 in London, Chatham and Dover Ry Co v South Eastern Ry Co ([1893] AC 429 at 437), Lord Herschell LC, stated the principle, which he thought should be applied, in these words:
‘… I think that when money is owing from one party to another and that other is driven to have recourse to legal proceedings in order to recover the amount due to him, the party who is wrongfully withholding the money from the other ought not in justice to benefit by having that money in his possession
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and enjoying the use of it, when the money ought to be in the possession of the other party who is entitled to its use. Therefore, if I could see my way to do so, I should certainly be disposed to give the appellants, or anybody in a similar position, interest upon the amount withheld from the time of action brought at all events.’
(ii) The acceptance of the principle
The principle thus stated by Lord Herschell LC was set out in its entirety by the Law Revision Committee in its Second Interim Reportc which led to the 1934 Act. That very distinguished committee accepted the principle, and stated in para 8:
‘In practically every case a judgment against the defendant means that he should have admitted the claim when it was made and have paid the appropriate sum for damages. There are of course some cases where it is reasonable that he should have had a certain time for investigation, and in those cases the Court might well award interest only from the date when such reasonable time had expired … ’
The committee went on to state in para 9 that this principle should apply not only to special damages for tort but also to general damages in running down cases or for pain and suffering in personal injury.
That committee reported in March 1934. The Law Reform (Miscellaneous Provisions) Act 1934, was passed on 25 July 1934. It contained s 3(1) which gave the courts power to award interest on debts and damages. The very purpose of that section was to ‘… effect the reform which the Lord Chancellor thought that justice required’ and to do ‘what LORD HERSCHELL would fain have done’: see Riches v Westminster Bank Ltd ([1947] 1 All ER 469 at 473, [1947] AC 390 at 402), per Lord Wright and per Lord Simonds ([1947] 1 All ER at 476, [1947] AC at 407). It may, therefore, be regarded as giving statutory effect to Lord Herschell’s principle.
We applied this principle very recently in Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd (Page 225 at 236 ante, [1970] 2 WLR 198 at 212) where we all agreed in saying:
‘… the basis of an award of interest is that the defendant has kept the plaintiff out of his money; and the defendant has had the use of it himself. So he ought to compensate the plaintiff accordingly.’
It should be noticed that it is not necessary for a plaintiff to claim interest in his pleadings. The court can award interest without any claim being made in the pleadings, see Riches v Westminister Bank Ltd.
(iii) In Admiralty
The Court of Admiralty did not apply the common law. It followed the civil law and gave interest on damages whenever the non-payment was due to the wrongful delay of the defendant. To use the Latin phrase, whenever the non-payment was ex mora the obligor. EX mora means, of course ‘on account of the delay’. It is so stated in the Digestd. See also The Northumbria ((1869) LR 3 A & E 6 at 10) per Sir Robert Phillimore. Interest ex mora was awarded when the defendant wrongfully withheld payment In short, Lord Herschell’s principle again. So far as the Court of Admiralty was concerned, the 1934 Act only gave statutory force to that principle which it had long applied: see The Berwickshire ([1950] P 204 at 206), per Lord Merriman P. It is useful, therefore to see how the Court of Admiralty applied it.
Page 1207 of [1970] 1 All ER 1202
When a profit earning ship was sunk in a collision, the Court of Admiralty awarded interest on the value of the ship, capitalised at the date of loss, from the date of the loss to the date of the trial; see The Kong Mognus, as applied by the House of Lords in Dredger Liesbosch (Owners) v Steamship Edison (Owners) ([1933] AC 449 at 468, [1933] All ER Rep 144 at 162). When a ship was not sunk, but only damaged, the Court of Admiralty awarded interest on the cost of repairs, but only from the time that the repair bill was actually paid, because that was the date from which the plaintiff had been out of pocket, see The Napier Star ([1933] P 136 at 138, [1933] All ER Rep 886 at 888), per Langton J. When there was loss of life in a collision, the Court of Admiralty allowed interest only from the date of a registrar’s report. This was done both on a widow’s claim under the Fatal Accidents Acts for the pecuniary loss, and also the claim under the Law Reform (Miscellaneous Provisions) Act 1934 for pain and suffering and loss of expectation of life: see The Aizkarai Mendi. The reason was, no doubt, because the amount was only quantified at the date of the registrar’s report and so it was only from that date that defendants could reasonably be expected to pay it.
(iv) In Scotland
In Scotland, too, the courts followed the civil law. Interest was awarded ex mora. The principle was that interest was awarded, as of right, whenever a principal sum of money was ‘wrongfully withheld and not paid on the day when it ought to have been paid’; see Carmichael v Caledonian Ry Co (1870 8 Macph (HL) 119 at 131) per Lord Westbury. This is Lord Herschell’s principle once again. It corresponds, said Lord Normand, to the interest awarded under the 1934 Act, see Riches v Westminster Bank Ltd ([1947] 1 All ER at 479, [1947] AC at 412). It is useful, therefore, to see how the Scottish courts applied it.
The Scottish courts drew a distinction between debt and damages. They awarded interest, as of course, on a debt from the date of service of the summons, see London, Chatham and Dover Ry Co v South Eastern Ry Co ([1893] AC at 442), per Lord Shand and Riches v Westminster Bank Ltd ([1947] 1 All ER at 479, [1947] AC at 412), per Lord Norman. But the Scottish courts awarded interest on damages only from the date of the judgment. The reason was because it was only then that the sum was quantified. Quantification will usually fix the earliest date from which interest can reasonably be taken to run, see F W Green & Co Ltd v Brown & Gracie Ltd (1960 SLT (Notes) 43 at 44), per Lord Keith of Avonholm and Macrae v Reed and Mallik Ltd (1961 SC 68 at 72), per the Lord Justice-Clerk, (Lord Thomson). But this was altered by the Interest on Damages (Scotland) Act 1958. The courts of Scotland were given power to award interest on damages. But interest could not be awarded from the date of the accident. It could only be awarded, at earliest, from the date on which the action was commenced. Under this Act the Court of Session held that, in a personal injury case, interest could be awarded on out-of-pockets (which we would call special damages) from the date of service of the summons. But not on loss of future earnings, nor on solatium (which we would call pain and suffering and loss of amenities of life). to these items the Court of Session still applied the test of quantification. These items could only be quantified at the date of judgment and interest on them only ran from the date of judgment, see Macrae v Reed and Mallik Ltd.
4 The resultant principles today
Gathering together the best of the reasoning from those various sources
Page 1208 of [1970] 1 All ER 1202
we would suggest that these principles should be applied in awarding interest in personal injury cases:—
Interest should not be awarded as compensation for the damage done. It should only be awarded to a plaintiff for being kept out of money which ought to have been paid to him.
(i) Special damages
Special damages mean the actual pecuniary loss suffered by a plaintiff, up to the date of trial, owing to the wrongful act of a defendant. In principle a plaintiff should be awarded interest on the sum which represents that loss as from the date it was incurred. If he has been recouped that loss from some other quarter, that should be taken into account in awarding interest, for he ought not to be compensated for losing money when he has not suffered the loss: see Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd.
The plaintiff’s claim for special damages in this case is typical. They were agreed at £2,131 11s 6d, made up as follows:—
(a) Loss of wages £ s d
Loss of wages from date of accident (30th November 1966) to date of trial (16th June 1969)
2,336
8
0
Less 50 per cent of sickness benefit (£647 4s) received during that period
323
12
0
2,012 16 0
(b) Medical and incidental expenses 6 0 0
(c) Damage to scooter and clothing, etc. 112 15 6
£2,131 11 6
The plaintiff was not, however, out of pocket for the whole of that sum because he received the other 50 per cent of sickness benefit, ie £323 12s, without having to give any credit for it. His employer also lent him £205 free of interest whilst he was out of work.
(a) Loss of wages. This occurred week by week. In principle, the interest should be calculated on each week’s loss from that week to the date of trial. But that would mean too much detail. Alternatively, it would be possible to add up the loss every six months and allow interest on the total every six months until trial. That would seem fair, especially as the loss for the initial weeks might be for total incapacity, and afterwards only for partial incapacity when he could do light work. More rough and ready, the total loss could be taken from accident to trial: and interest allowed only on half of it, or for half the time, or at half the rate.
(b) Medical expenses. In principle interest should run from the date on which they are paid. But they are not usually so large as to warrant separate calculation.
(c) Damage to scooter and clothing. In principle interest should run from the date when the account is paid for repairs or replacements. But, here again, the amounts are not so large as to warrant separate calculation.
(d) Overall result. Taking all these things into account, we think that the special damages should be dealt with on broad lines. The amounts of interest at stake are not large enough to warrant minute attention to detail. Losses, expenditure and receipts should all go into one pool. In all ordinary cases we should have thought that it would be fair to award interest on the total sum of special damages from the date of the accident until the date of trial at half the rate allowed on the other
Page 1209 of [1970] 1 All ER 1202
damages, ie in this case interest on £2,131 11s 6d for 2 1/2 years at a rate which we will later consider.
(ii) Loss of future earnings
Where the loss of damage to the plaintiff is future pecuniary loss, eg loss of future earnings, there should in principle be no interest. The judges always give the present value at the date of trial, ie the sum which, invested at interest, would be sufficient to compensate a plaintiff for his future loss, having regard to all contingencies. There should be no interest awarded on this because a plaintiff will not have been kept out of any money. On the contrary, he will have received it in advance.
In this case the judge awarded £3,500 general damages, but did not divide it up. It was suggested before us that £1,000 was for future loss of earnings and £2,500 for pain and suffering and loss of amenities. In accordance with the above principle, interest should not be awarded on the £1,000 for future loss of earnings.
(iii) Pain and suffering and loss of amenities
When the compensation payable to a plaintiff is not for actual pecuniary loss but for continuing intangible misfortune, such as pain and suffering and loss of amenities (which cannot fairly be measured in terms of money), then he should be awarded interest on the compensation payable. But such interest should not run from the date of the accident, for the simple reason that these misfortunes do not occur at that moment, but are spread indefinitely into the future and cannot possibly be quantified at that moment, but must of necessity be quantified later. It is not possible to split those misfortunes into two parts; those occurring before the trial and those after it. The court always awards compensation for them in one lump which is by its nature indivisible. Interest should be awarded on this lump sum as from the time when a defendant ought to have paid it, but did not: for it is only from that time that a plaintiff can be said to have been kept out of the money. This time might in some cases be taken to be the date of letter before action, but at the latest it should be the date when the writ was served. In the words of Lord Herschell LC ([1893] AC at 437), interest should be awarded ‘from the time of action brought at all events’. From that time onwards it can properly be said that a plaintiff has been out of the whole sum and a defendant has had the benefit of it. Speaking generally, therefore, we think that interest on this item (pain and suffering and loss of amenities) should run from the date of service of the writ to the date of trial. This should stimulate a plaintiff’s advisers to issue and serve the writ without delay which is much to be desired. Delay only too often amounts to a denial of justice. In this case, the figure on this head was £2,500. We think that interest should be awarded on this sum from the date of service of the writ until the date of trial.
(iv) Fatal Accidents Acts
When the courts award damages to a widow under the Fatal Accidents Acts, they award one lump sum calculated by taking the yearly pecuniary loss and multiplying it by a number of years’ purchase. The courts do not divide it into two parts, such as special damage up to date of trial and future loss after the date of trial. They treat it as damage inflicted once and for all at the time of the accident. The damages are calculated at so many years’ purchase, no matter whether the case is tried one month, one year, or three years after the accident. Quite often these claims take some time to investigate, both on the issue of liability and also on damages. A reasonable time should be allowed for such investigation. At the end of that time, if the case is not settled out of court, plaintiff’s advisers should issue and serve the writ and defendants should make payment. From that time onwards it can properly be side that a widow and dependents have been kept out of their money. In these circumstances, we think that interest should be awarded on fatal accidents damages
Page 1210 of [1970] 1 All ER 1202
as from the date of service of the writ. So also with the conventional award of £500 under the Law Reform (Miscellaneous Provisions) Act 1934. In Admiralty the present practice is to award interest as from the date of the registrar’s report. This should be awarded from the date of service of the writ.
5 Rate of interest
It was suggested to us that, in principle, the rate of interest on a debt or damages before judgment should be the same as the rate after judgment. It would be anomalous if a defendant paid less interest after judgment than before it.
This argument would be acceptable if the rate of interest on a judgment debt were a realistic rate. But it is not so. It is only 4 per cent. It was so enacted in 1838e and has never been changed since. It should be changed. We are told that steps are being taken to increase it. But we do not think we should wait for this to be done. We ought to award a realistic rate, even if it does mean an anomaly. To go to the other extreme, it was suggested that bank rate should be awarded. That stands at 8 per cent. We cannot agree with this suggestion. Bank rate fluctuates too much.
A better guide is, we think, the rate which is payable on money in court which is placed on short term investment account. This is an investment which is made under the Administration of Justice Act 1965, ss 6, 7, and the Supreme Court Funds Rules 1927f (rr 73 to 80). It was started in October 1965. It is said in the Supreme Court Practice 1970g to be:
‘… particularly suitable for money which is unlikely to remain invested for a long time and which may have to be withdrawn, in whole or in part, at comparatively short notice.’
The rate of interest is fixed from time to time by rules made by the Lord Chancellor. The rates so far are as follows:
Started from 1 October 1965 at 5 per centh
Increased from 1 September 1966 to 5 1/2 per centi
Increased from 1 March 1968 to 6 per centj
Increased from 1 March 1969 to 6 1/2 per centk
Increased from 1 March 1970 to 7 per centl
The period in this case is 1967 to 1969. We think that over that period we should take a mean or average of the rate obtainable on short term investment account. This would be 6 per cent.
6 Tax
When the court awards interest on debt or damages for two, three or four years, the interest is subject to tax because it is ‘yearly interest of money’: see Riches v Westminster Bank Ltd. Furthermore, seeing that all the interest is received in one year, then, although it may cover two, three or four years’ interest, nevertheless, the whole of it comes into charge for tax in the one year in which it is received. This may operate very hardly in those cases where this big sum changes the rate of tax: as for instance, a low taxpayer is brought into a higher—or a high taxpayer has
Page 1211 of [1970] 1 All ER 1202
to pay much of it away in surtax. But that cannot be helped. The tax man must collect all he can.
There are special statutory provisions about deducting tax. For instance, if the person who pays the interest is a company or a local authority, it must deduct tax and make the payment of interest net of tax: see s 26 of the Finance Act 1969. But, if the person paying is an individual, he must pay the interest as a gross sum, leaving the plaintiff to pay the tax. We do not think that the courts, when awarding interest, should get involved in such questions. Interest should be computed and awarded as a gross sum payable by a defendant, leaving him to work out whether he should deduct tax or not.
7 Payment into court
Seeing that a claim for interest under the 1934 Act need not be pleaded (Riches v Westminster Bank Ltd), it is plain that it is not itself a cause of action. It is no part of the debt or damages claimed, but something apart on its own. It is more like the award of costs than anything else. It is an added benefit awarded to a plaintiff when he wins the case.
Such being the character of interest, we do not think a defendant can, or should, make any payment into court in respect of it. If it is not claimed by a plaintiff in the pleadings, a defendant cannot be expected to make a payment into court in respect of it. Even if it is claimed, it is no part of the cause of action. A defendant is only allowed to make a payment into court ‘in satisfaction of the cause of action’, see RSC Ord 22, r 1(1). Interest being no part of the cause of action, he cannot make a payment in respect of it.
A defendant should, therefore, in future make his payment into court in the same way as he always has done, namely, an amount which he says is sufficient to satisfy the cause of action apart from interest. If a plaintiff recovers more (apart from interest) he gets his costs. If he recovers no more (apart from interest) he does not get his costs from the date of the payment in and he will have to pay the defendant’s costs. A plaintiff will, of course, in either case, get the appropriate award of interest irrespective of the payment into court.
If a plaintiff takes the money out of court in satisfaction of the claim, that is the end of the case. He gets no interest because there is no judgment. The 1934 Act only entitles a plaintiff to interest when he gets a judgment. As a matter of practice, however, if a plaintiff is disposed to think that the payment into court will cover his claim, he will tell the defendant that he is disposed to go to trial in order to collect the interest but that such a course would be to their mutual disadvantage because the Revenue would extract tax on it: so it would be better for them to split the interest and settle for a sum somewhat higher than the sum in court.
We must mention, however, one significant thing about money paid into the High Court. It carries no interest unless the court orders it to be placed to a deposit account or to a short term investment account under s 6(1) of the Administration of Justice Act 1965: see r 74(b) (c) of the Supreme Court Funds Rule 1927m. Very few people seem to know about these provisions. They do not ask for the money to be placed on a short term investment account. So it carries no interest. The Accountant General no doubt invests it and keeps the interest to help pay for running these courts. We expect that when this becomes widely known, all defendants will ask for the money to be placed on a short term investment account. It will then, as from 1 March 1970, earn 7 per cent interest which will go to the credit of a defendant and may be used, we suppose, as he may direct; see r 80 of the Supreme Court Fund Rules 1927m. This will be a loss to the eschequer but a benefit to defendants.
Page 1212 of [1970] 1 All ER 1202
8 Settlements
It is only compulsory to award interest on judgments. When interest is awarded on a judgment, tax is payable on it. It is very different with settlements. If the parties agree expressly that no interest is included, the Revenue will not be able to go behind it. It is to the advantage of both parties to settle on these terms, rather than benefit the Revenue. There is nothing illegal in it. It is everyday practice to make arrangements with a view to avoiding tax.
9 County courts
Up till now we have only considered proceedings in the High Court. The same principles apply to proceedings in the county courts when the amount of the judgment is more than £200. There is a little difference about payment into court. When money is paid into the county court, there are provisions for investing it and payment of interest on it. At first it may only go on deposit at 2 1/2 per cent, but afterwards it may be invested on a short term investment account, on which it earns interest at the same rates as are earned in the Supreme Court.
10 Conclusion
In order to carry out the 1969 Act, the court will, in future, have to itemise the damages in most personal injury cases. The court should in general award interest on the items on the following lines:
Special damages. Interest should be awarded from the date of the accident to the date of trail at half the appropriate rate.
Loss of future earnings. No interest should be allowed.
Pain and suffering and loss of amenities. Interest should be awarded at the appropriate rate from the date of service of the writ to the date of trial.
Fatal Accidents Acts. Interests should be awarded at the appropriate rate from the date of service of the writ to the date of trial.
Appropriate rate. The appropriate rate should be the rate allowed by the court on the short term investment account, taken as an average over the period for which interest is awarded. It started in 1965 at 5 per cent and has increased by steps of 1/2 per cent every year till it stands at 7 per cent from 1 March 1970. In most cases coming up for decision in this coming year, the average may be taken to be 6 per cent.
Form of judgment. The judgment should state the rate of interest and the period for which it is awarded, and should state it as a gross sum without deducting tax.
Payment into court. Payment into court should be made as heretofore without regard to interest: and costs awarded accordingly.
Exceptional cases. In exceptional cases, such as when one party or the other has been guilty of gross delay, the court may depart from the above suggestions by diminishing or increasing the award of interest, or altering the periods for which it is allowed.
In this case the appeal and cross-appeal should be allowed and the order varied so as to allow for interest on the special damages of £2,131 11s 6d at 3 per cent per annum from the date of the accident, 30 November 1966, to the date of trial, 16 June 1969, and on £2,500 (being that part of the general damages which relates to pain and suffering and loss of amenities) at 6 per cent per annum from the date of service of the writ, 2 August 1967, to the date of trial, 16 June 1969.
Appeal and cross-appeal allowed.
Solicitors: L Bingham & Co (for the defendant); W H Thompson (for the plaintiffs); Official Solicitor.
Wendy Shockett Barrister.
Joscelyne v Nissen and another
[1970] 1 All ER 1213
Categories: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 1, 2, 19 DECEMBER 1969
Contract – Rectification – Written contract – Antecedent expressed accord on particular point – No concluded binding agreement prior to written contract – Whether rectification available.
The father lived in a house called Martindale from where he carried on a car hire business. In 1960, the father received a notice to quit. The daughter in order to help her parents bought Martindale with the help of a mortgage and let her husband’s house furnished to pay off the mortgage instalments and moved to Martindale. The parents occupied the ground floor and the daughter and her husband the first floor. In 1963, the daughter’s mother became very ill with two successive strokes and was unable to look after herself. The father had to devote a good deal of his time to looking after her with the result that his business was adversely affected. The father and the daughter discussed a scheme, which culminated in the signing by them of a contract dated 18 June 1964. By this contract the father agreed to transfer his motor car hire business to the daughter on certain terms and conditions, one of which was that in consideration of the transfer, the daughter would permit the father during his life to have the uncontrolled right to occupy and reside in the ground floor of Martindale ‘free of all rent and outgoings of every kind in any event’. In pursuance of this term in the contract the daughter for a time paid the gas, electricity and coal bills and the cost of home help for the father. Trouble then arose between the daughter and her parents, and the father commenced proceedings in the county court against the daughter. The daughter was apparently advised that the wording of the contract did not require her to pay for the items previously mentioned and she accordingly stopped further payments of those items. The father amended his particulars of claim to raise the point either as a matter of construction or by way of rectification,
Held – This was a case of rectification based on antecedent expressed accord on a point adhered to in intention by the daughter and father as parties to the subsequent written contract (see p 1223 e, post) and since both parties were in agreement up to the moment when they executed the written contract that the daughter should pay all outgoings on Martindale, and the written contract did not conform with that agreement,the court had jurisdiction to rectify the written contract, although there may have been no concluded and binding contract between the parties until the written contract was executed (see p 1220 c and p 1222 f, post).
Dictum of Simonds J in Crane v Hegeman-Harris Co Inc [1939] 1 All ER at 664 applied.
Notes
For rectification of contracts, see 26 Halsbury’s Laws (3rd Edn) 914–918, paras 1698–1704, and for cases on the subject, see 35 Digest (Repl) 135–145, 291–360.
Cases referred to in judgment
Craddock Bros v Hunt [1923] 2 Ch 136, [1923] All ER Rep 394, 92 LJCh 378, 129 LT 228, 35 Digest (Repl) 142, 338.
Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662; affd CA [1939] 4 All ER 68, 35 Digest (Repl) 154, 431.
Earl v Hector Whaling Ltd [1961] 1 Lloyd’s Rep 459.
Faraday v Tamworth Union (1916) 86 LJCh 436, 81 JP 81, 35 Digest (Repl) 132, 272.
Higgins (W) Ltd v Northampton Corpn [1927] 1 Ch 128, 96 LJ Ch 38, 136 LT 235, 90 JP 82, 35 Digest (Repl) 108, 93.
Page 1214 of [1970] 1 All ER 1213
London Weekend Television Ltd v Paris and Griffith (1969) 113 Sol Jo 222.
Lovell and Christmas Ltd v Wall (1911) 104 LT 85, 35 Digest (Repl) 140, 325.
McCartney v Brighton Corpn (1904) The Times 20 May.
Mackenzie v Coulson (1869) LR 8 Eq 368, 35 Digest (Repl) 140, 323.
Morelle Ltd v Wakeling [1955] 1 All ER 708, [1955] 2 QB 379, [1955] 2 WLR 672, 38 Digest (Repl) 898, 941.
Rose (Frederick E) (London) Ltd v Wm H Pim Junr & Co Ltd [1953] 2 All ER 739, [1953] 2 QB 450, [1953] 3 WLR 497, 35 Digest (Repl) 147, 369.
Schofield v W C Clough & Co [1913] 2 KB 103.
Shelburne (Countess Dowager) v Earl of Inchiquin (1784) 1 Bro CC 338, 28 ER 1166; on appeal HL (1785) 5 Bro Parl Cas 166, 35 Digest (Repl) 148, 372.
Shipley Urban District Council v Bradford Corpn [1936] Ch 375, 105 LJCh 225; on appeal CA [1936] Ch 399, 105 LJCh 232, 154 LT 444, 35 Digest (Repl) 141, 326.
Slack v Hancock (1912) 107 LT 14, 35 Digest (Repl) 137, 305.
United States of America v Motor Trucks Ltd [1924] AC 196, 93 LJPC 46, 130 LT 129, 35 Digest (Repl) 137, 307.
Appeal
This was an appeal by the daughter, Margaret Ellen Nissen and the husband, Christopher Nissen, from the decision of his Honour Judge Granville Smith at Edmonton County Court on 26 July 1968 in which he ordered rectification of a written agreement made between the daughter and the father, Lawrence Henry Prince Joscelyne. The facts are set out in the judgment of the court delivered by Russell LJ.
K H Zucker for the daughter and her husband.
R I S Bax QC and D A Wood for the father.
Cur adv vult
19 December 1969. The following judgment was delivered.
RUSSELL LJ. The judgment which I am about to read is the judgment of the court. This is an unhappy dispute between father and daughter which has led to an investigation into differing expressions of judicial views on what is required before a contractual instrument may be rectified by the court.
The father (with the mother) were living as tenants of a house called Martindale in Enfield. He carried on from there and from an office at the nearest railway station a car hire business both self-drive and chauffeur driven, the cars being garaged at Martindale. In 1960, he was given notice to quit. The daughter and the husband lived in a house belonging to the husband also in Enfield. To help her parents in their difficulty the daughter bought Martindale with the help of a mortgage, let the husband’s house furnished to pay off the mortgage instalments, and moved to Martindale. The father and mother lived in the ground floor, the daughter and husband on the first floor. Each floor had its own kitchen and bathroom facilities. The daughter helped with the car hire business to some extent. In 1963 the mother was seriously ill with two strokes, returning from hospital in January 1964, unable to look after herself. The father even with the aid of a home help had to devote much of his time to looking after her, his business was suffering as a result, and he felt that he could not really carry on. Because of this he and the daughter discussed a scheme by which she should take over the business, a scheme that culminated in the signing by them of an agreement on 18 June 1964.
For the present purposes it is sufficient to say that it was found by the county court judge that at an early stage it was made clear between them in conversation that if the business and its assets were, as proposed, made over to the daughter she should in return pay him a weekly pension to supplement his old age pension and in addition pay the expenses in connection with Martindale attributable to the parents’ part of the house, and that these expenses should include the gas, electricity
Page 1215 of [1970] 1 All ER 1213
and coal bills and also the cost of the necessary home help. It is not before this court disputed that it was expressly agreed and intended that these particular items should be paid for by the daughter as such expenses and that they negotiated on that footing: it is not disputed that the father and the daughter continued in this expressed accord thereafter and when they signed the agreement still intended that it should provide for such payment. It is however, argued for the daughter that the contract signed did not on its true construction provide for payment of these matters and that since there was here no complete concluded contract antecedent to the written agreement then in point of law the remedy of rectification is not available to the father.
The various steps leading to the signing of the agreement need not be detailed, since they do not touch on the particular matters. The agreement signed was in the following form. It was made between the father and the daughter and stated:
‘Whereby it is agreed as follows: 1 [The daughter] shall be deemed to have taken over from [the father] the business of a car hire proprietor hitherto carried on by [the father] under the style of Station Hire from “Martindale” Stanley Road, Enfield aforesaid under the style of “Station Cars” as from the first day of May One thousand nine hundred and sixty three. 2 [The daughter] shall be deemed to have taken over all the assets and liabilities of the business of self-drive and chauffeur driven car hire carried on under the style and from the premises aforesaid as from the first day of May One thousand nine hundred and sixty three. 3 [The daughter] shall indemnify [the father] and his estate and effects from any claims or payment made in respect of the liabilities of the said business including all past or future claims in respect of income tax and/or surtax arising in respect of the business. 4 In consideration of the transfer of the assets of the self-drive and chauffeur driven portion of the said business [the daughter] shall pay by way of a pension to [the father] (such pension to be payable for the life of [the father] or the duration of the business) the sum of Three pounds ten shillings per week. 5 [The father] shall be permitted to have the use of any of the cars of the business when not needed for business work and to carry out driving work for [the daughter] subject to payment to him of one fifth of the charge made to each customer. 6 [The daughter] shall discharge all expenses in connection with the whole premises “Martindale” Stanley Road Enfield aforesaid and shall indemnify [the father] from and against any claim arising in respect of the same. 7 [The daughter] shall permit [the father] during his life to have the uncontrolled right to reside at and occupy the ground floor of “Martindale” Stanley Road Enfield aforesaid or such other property as may be agreed upon in writing free of all rent and outgoings of every kind in any event. 8 [The daughter] shall be entitled to at least three annual weeks holiday in each year. 9 [The father] shall be entitled to at least three weeks annual holiday in each year. 10 [The daughter] hereby agrees with [the father] that she will not at any time sell the whole or any part of the said business without [the father] receiving one half of the said moneys or otherwise deal with the same or take in a partner without the consent of [the father] which consent may be arbitrarily withheld by [the father] without assigning any reason therefor.’
For a time all went well under the agreement, the daughter paying the gas, coal and electricity bills attributable to the ground floor and also the weekly cost of the home help, in addition to the pension of £3 10s weekly, but of course taking the profits of the business. (There were separate gas meters for the two floors, but the ground floor electricity meter carried the electricity for the garage while we were told that the first floor electricity meter carried the current for the ground floor immersion heater.) Trouble then arose because of incursions on the ground floor of drivers and customers of the business. It was suggested that the parents move upstairs and the daughter and the husband downstairs, in variation of the agreement. The parents refused because of the mother’s difficulty in movement. The father
Page 1216 of [1970] 1 All ER 1213
went away for a holiday and on his return found that the mother and all their belongings had been moved upstairs behind his back. The fat was in the fire, proceedings started in the county court, and the status quo was restored as a result of interlocutory proceedings. However the daughter was no doubt then advised that the language of the agreement did not require her to pay for the items that we have mentioned and she stopped doing so. (As indicated, she necessarily continued to pay for the parents’ immersion heater; the father necessarily paid for the garage electricity; though who was the gainer by this is not known.)
The father to meet this new attitude amended his particulars of claim to raise this point either as a matter of construction or by way of rectification. The county court judge decided against the father on construction but in his favour on rectification. A cross-appeal by the father on the question of construction was not pursued. The relevant facts on the question of rectification we have already stated.
For the daughter it is argued that the law is that the father cannot get rectification of the written instrument save to accord with a complete antecedent concluded oral contract with the daughter, and, as was found by the judge, there was none. For the father it is argued that if in the course of negotiation a firm accord has been expressly reached on a particular term of the proposed contract, and both parties continued minded that the contract should contain appropriate language to embrace that term, it matters not that the accord was not part of a complete antecedent concluded oral contract.
The point of law has a curious judicial history, involving apparently the disappearance from professional sight of the case in the Court of Appeal of Lovell and Christmas Ltd v Wall until its existence was recognised in the judgment of Denning LJ in Frederick E Rose (London) Ltd v Wm H Pim Junr & Co Ltd ([1953] 2 All ER at 739, [1953] 2 QB 450) apart from a passing reference by Eve Ja, who had been the trial judge in the Lovell and Christmas case.
It is convenient to start with the case of Mackenzie v Coulson, a decision of Sir W M James V-C. There a policy of insurance was in terms in accordance with the wishes of the assured and the insurers sought rectification based on an insurance slip which is not a contract; the facts are a little complicated but it would seem that the insurers sought to impute to the assured an intention (and mistake) based on knowledge of a junior clerk of an agent of the assured of the contents of the slip. We should have thought this a difficult proposition to sustain. In deciding against rectification Sir W M James V-C used this language ((1869) LR 8 Eq at 375):
‘Courts of Equity do not rectify contracts: they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. But it is always necessary for a Plaintiff to show that there was an actual concluded contract antecedent to the instrument which is sought to be rectified; and that such contract is inaccurately represented in the instrument. In this instance there never was any contract other than this policy which the Plaintiffs have so signed … It is impossible for this Court to rescind or alter a contract with reference to the terms of the negotiation which preceded it.’
This statement of the law supports the daughter’s contention.
We turn next to the lost cause of Lovell and Christmas Ltd v Wall in this court. A covenant not to be concerned in the business of a provision merchant was held not broken by manufacturing and selling margarine, and it was further held that here was no case for rectification so as to provide that the covenantor should not compete with the business of the covenantee, company or its subsidiaries. We do not think that it is necessary to examine closely the facts of the case, save to say that we do not think that the facts demonstrated that such a firm accord on the relevant term
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had been reached in the course of negotiation as even on the father’s argument is required. There is no doubt however that general statements of the law as contended for by the daughter were firmly made, albeit obiter, and made in the face of the argument that is now put forward by the father. Sir Herbert Cozens-Hardy MR said ((1911) 104 LT at 88):
‘The essence of rectification is to bring the document which was expressed and intended to be in pursuance of a prior agreement into harmony with that prior agreement. Indeed, it may be regarded as a branch of the doctrine of specific performance. It presupposes a prior contract, and it requires proof that, by common mistake, the final completed instrument as executed fails to give proper effect to the prior contract.’
He had in the course of argument said ((1911) 104 LT at 88):
‘Surely rectification ought to be looked upon as a branch of specific performance subject to an exception in the case of voluntary settlements.’
Fletcher Moulton LJ said ((1911) 104 LT at 91):
‘Rectification can only come where there is a case of contract. And, as James V.-C. put it so well in the case which has been cited of Mackenzie v. Coulson, the law does not make new contracts for parties. All it does it to rectify an incorrect expression in writing of the contract that was made. And, to my mind, it is not only clear law, but it is absolutely necessary logic, that there cannot be a rectification unless there has been a pre-existing contract which has been inaptly expressed. The consequence is that if you have to ascertain whether there was or was not a pre-existing contract, for that purpose you must look at what happened before the contract was entered into. It is a very great mistake to think that that can lightly be done unless you can prove the existing contract. If the completed contract is badly expressed, all the “communings beforehand”, whether you have gone into them or not, have to be rejected by the court in deciding the nature of the instrument.’
Buckley LJ expressed himself somewhat differently ((1911) 104 LT at 93):
‘In ordering rectification the court does not rectify contracts, but what it rectifies is the erroneous expression of contracts in documents. For rectification it is not enough to set about to find out what one or even both of the parties to the contract intended. What you have got to find out is what intention was communicated by one side to the other, and with what common intention and common agreement they made their bargain.’
Next to be considered are obiter dicta at first instance of Younger and Romer JJ. In Faraday v Tamworth Union ((1916) 86 LJCh 436 at 438), the former expressed the provisional opinion that even had there been mutual mistake the contract could not have been rectified since the Union could not contract except under seal. In W Higgins Ltd v Northampton Corpn ([1927] 1 Ch 128 at 136) (in which there was on the facts no mutual mistake) Romer J said this:
‘But where, as here, there is no precedent contract between the parties, I cannot see that I have any jurisdiction to make a different contract between the parties from the only one which exists, merely because I come to the conclusion that both parties previously to making that contract had intended to make a different one. There is a passage [(1916) 86 LJCh 436 at 438] in a judgment of Younger J.’s which was cited to me which supports the view that I have expressed. It is only a dictum, because
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in that particular case he was able to set aside a contract entered into under a mistake of one party, inasmuch as the mistake had been contributed to or induced by, although innocently, the acts of the defendants; but he did say in the course of his judgment that, had there been a mutual mistake, he did not see how he could have rectified the contract.’
Romer J then quoted from the judgment of Younger J with approval and disapproved a decision of Grantham J in McCartney v Brighton Corpn which might have been in the opposite sense. In Schofield v W C Clough & Co ([1913] 2 KB 103 at 105) Sir Herbert Cozens-Hardy MR quoted in argument from the judgment in Mackenzie v Coulson ((1869) LR 8 Eq at 375) but did not curiously enough mention his own opinion to the same effect in Lovell and Christmas Ltd v Wall. In Craddock Bros v Hunt ([1923] 2 Ch 136 at 159, [1923] All ER Rep 394 at 405) we find an obiter dictum of Warrington LJ:
‘The jurisdiction of Courts of equity in this respect is to bring the written document executed in pursuance of an antecedent agreement into conformity with that agreement. The conditions to its exercise are that there must be an antecedent contract and the common intention of embodying or giving effect to the whole of that contract by the writing, and there must be clear evidence that the document by common mistake failed to embody such contract and either contained provisions not agreed upon or omitted something that was agreed upon, or otherwise departed from its terms.’
The same view is indicated, again obiter, by the Judicial Committee of the Privy Council in United States of America v Motor Trucks Ltd ([1924] AC 196 at 200, 201) where it was said:
‘Nor does the rule make any inroad upon another principle, that the plaintiff must show first that there was an actually concluded agreement antecedent to the instrument which is sought to be rectified; and secondly, that such agreement has been inaccurately represented in the instrument.’
In the train of this undoubtedly formidable array of judicial opinion comes the judgment of Clauson J in Shipley Urban District Council v Bradford Corpn. This was again obiter, since the case was decided on the construction of the instrument in question; but the case was very fully argued and the arguments very fully considered in a reserved judgment. (This case went to appeal and was argued both on construction and rectification; but this court ((1936) 154 LT 444) dismissed the appeal on construction and expressed no opinion on rectification.) This was also a case in which the parties could only contract under seal. The absence of reference to Lovell and Christmas Ltd v Wall suggests that it had found no place in current textbooks, which appear to have been fully combed by counsel, though not the English and Empire Digest. Clauson J after reviewing the authorities, many of which do not appear to have been cited in the Lovell and Christmas case, said ([1936] Ch at 395–397):
‘Notwithstanding these authorities, counsel for the Corporation argued, as I understood them, that the jurisdiction of the Court to rectify a document is limited to the case where it is possible to prove that before the execution of the document there was in existence a legally enforceable agreement, whether oral or written (or possibly an agreement which would be legally enforceable
Page 1219 of [1970] 1 All ER 1213
but for some statutory provision requiring special formalities) in terms which the document was intended to record, but failed by mutual mistake to record. They argued, and in my view correctly, that, in view of the inability, which the plaintiffs admitted, of the Council and the Corporation to bind themselves to such an agreement as that in dispute otherwise than under seal, it was impossible to predicate that there was any agreement between the Council and the Corporation except that constituted by the sealed document. They drew the conclusion (which, indeed, appears to me to be, on their premises, inevitable) that the Court could not rectify an agreement between two such bodies as the Council and the Corporation even on the clearest evidence that the document, even by the merest copying slip, failed to record what all parties intended it to record. Even as regards such bodies as the Council and the Corporation this would seem to be rather startling; but it will be observed—and counsel for the defendants did not shrink from accepting this conclusion—that in the case of ordinary individuals, an instrument, on this theory, cannot be rectified except on proof of a previously existing legally binding document, proof which, in the case of most written contracts (though not, of course, as a rule in the case of conveyances) is not usually available, simply because negotiation has not, even where intentions have been found to coincide, crystallized into contract, until the moment of executing the written contract. It must be conceded that, whether or not it is difficult to reconcile the defendants’ argument with principle and with the long and ancient line of authorities which I have summarized above, there is some justification to be found in the books for their contention. It is to be remembered that many, perhaps even most, rectification cases deal with the reforming of a final instrument, such as a conveyance or a settlement, so as to accord with a previous instrument, such as a contract for sale or articles for a settlement, and that the high standard of mutual mistake which the Court requires—Thurlow L.C. in Shelburne (Countess Dowager) v. Earl of Inchiquin [(1784) 1 Bro CC 338 at 341] even used the phrase ‘irrefragable’ ”—makes cases where mutual mistake can be proved, in the absence of any previous written instrument, very rare, and that where, in the absence of any previous instrument, mutual mistake can be clearly proved, the matter may very often be put right out of Court, without litigation. It would thus not be surprising to find that, in cases where the exact point was not material, language may be used in general terms, in relation to cases of rectification by reference to a previous written instrument, which is not strictly accurate in reference to a case where rectification proceeds on proof of mutual mistake in recording the concurrent intention of the parties at the moment of execution of the instrument which it is sought to rectify. [He then referred to the judgment in Mackenzie v Coulson [(1869) LR 8 EQ at 375] and continued:] The language of the Vice-Chancellor was, if I may respectfully say so, perfectly accurate in reference to the cases which he obviously had in mind, where mutual mistake is sought to be established by reference to the terms of a previous contract. His words, however, apart from their context, have, there is no doubt, found their way into works of no little authority in such a form as to suggest, as, indeed, the defendants’ counsel argued, that the jurisdiction of the Court cannot be exercised, even in cases of clear mutual mistake, in the attempt to embody in the instrument the concurrent intention of the parties existing at the moment of the execution of the instrument, unless a previously existing contract can be proved. It is sufficient for me to say that, had it been necessary for me to decide the point, I should not have felt justified in accepting this interpretation of the Vice-Chancellor’s language as correct.’
He then referred to other dicta that we have mentioned indicating that he was unable to accept them as correct.
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Next we have Crane v Hegeman-Harris Co Inc decided by Simonds J. The facts need not be set out. Simonds J said ([1939] 1 All ER at 664, 665):
‘Before I consider the facts and come to a conclusion whether the defendants are right in their contention, it is necessary to say a few words upon the principles which must guide me in this matter. I am clear that I must follow the decision of CLAUSON, J., as he then was, in Shipley Urban District Council v. Bradford Corpn., the point of which is that, in order that this court may exercise its jurisdiction to rectify a written instrument, it is not necessary to find a concluded and binding contract between the parties antecedent to the agreement which it is sought to rectify. The judge held, and I respectfully concur with his reasoning and his conclusion, that it is sufficient to find a common continuing intention in regard to a particular provision or aspect of the agreement. If one finds that, in regard to a particular point, the parties were in agreement up to the moment when they executed their formal instrument, and the formal instrument does not conform with that common agreement, then this court has jurisdiction to rectify, although it may be that there was, until the formal instrument was executed, no concluded and binding contract between the parties. That is what the judge decided, and, as I say, with his reasoning I wholly concur, and I can add nothing to his authority in the matter, except that I would say that, if it were not so, it would be a strange thing, for the result would be that two parties binding themselves by a mistake to which each had equally contributed, by an instrument which did not express their real intention, would yet be bound by it. That is a state of affairs which I hold is not the law, and, until a higher court tells me it is the law, I shall continue to exercise the jurisdiction which CLAUSON, J., as I think rightly, held might be entertained by this court. Secondly, I want to say this upon the principle of the jurisdiction. It is a jurisdiction which is to be exercised only upon convincing proof that the concluded instrument does not represent the common intention of the parties. That is particularly the case where one finds prolonged negotiations between the parties eventually assuming the shape of a formal instrument in which they have been advised by their respective skilled legal advisers. The assumption is very strong in such a case that the instrument does represent their real intention, and it must be only upon proof which LORD ELDON, I think, in a somewhat picturesque phrase described as “irrefragable” that the court can act. I would rather, I think, say that the court can only act if it is satisfied beyond all reasonable doubt that the instrument does not represent their common intention, and is further satisfied as to what their common intention was. For let it be clear that it is not sufficient to show that the written instrument does not represent their common intention unless positively also one can show what their common intention was. It is the light of those principles that I must examine the facts of this somewhat complicated case.’
It is we think probable that the eminent counsel concerned in the case did not really dispute that Clauson J’s opinion represented the law on the relevant point; it does not appear from the judgment that they did, and very many more cases would have been cited had they done so. Equally in the Court of Appeal ([1939] 4 All ER 68), Sir Wilfrid Greene MR said ([1939] 4 All ER at 71):
‘Two arguments on behalf of the present appellant were before SIMONDS, J., and these arguments are before us. They were these. First, that upon the facts of the case no case for rectification had been made out: secondly, that the matter in question, namely, the issue between the parties as to whether or not the
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agreement ought to be rectified was a matter which fell within the terms of the arbitration submission, which could have been raised before the arbitrator, and ought to have been raised before him, and could not be raised after he had issued his award and was functus officio … Simonds, J., in a judgment of conspicuous clarity, rejected the appellant’s argument on both points. He found that the facts brought to his mind that high degree of conviction which unquestionably is to be insisted upon in rectification cases.’
Sir Wilfrid Greene MR continued ([1930] 4 All ER at 72):
‘The case is no doubt one of importance to the parties and for that reason I have thought proper to put in my own language my reasons for saying that this appeal should be dismissed, but I might have been content to say that the judgment of SIMONDS, J., both on law and on fact, is one with which I am in entire agreement.’
Clauson and Goddard LJJ agreed. In referring particularly to the judge’s rejection of the argument on rectification, in our view Sir Wilfrid Greene MR was referring in fact to his rejection of argument on the facts, not the law. Accordingly, we have in Crane v Hegeman-Harris Co Inc in both courts an acceptance of the law on rectification as not requiring a complete antecedent concluded contract, in a case in which the decision must have been otherwise if such an antecedent contract was essential to rectification. But it seems to us that the contrary was not really argued, and we leave aside for the moment whether in those circumstances the principles of precedent require us to be bound by this case on the relevant point.
Next we refer to the horsebeans case in this court, Frederick E Rose v Wm H Pim Junr & Co Ltd. That was a case in which there was nothing that could be described as an outward expression between the parties of an accord on what was to be involved in a term of a proposed agreement. It turned out that locked separately in the breast of each party was the misapprehension that the word ‘horsebeans’ meant another commodity, but as we understand the case there was no communication between them to the effect that when they should speak of horsebeans that was to be their private label for the other commodity. The decision in our judgment does not assert or reinstate the view that an antecedent complete concluded contract is required for rectification: it only shows that prior accord on a term or the meaning of a phrase to be used must outwardly have been expressed or communicated between the parties. Denning LJ said ([1953] 2 All ER at 747, 748, [1953] 2 QB at 461, 462):
‘It is not necessary that all the formalities of the contract should have been executed so as to make it enforceable at law: see Shipley Urban District Council v. Bradford Corpn.; but, formalities apart, there must have been a concluded contract. There is a passage in Crane v. Hegeman-Harris Co. Inc. [[1939] 1 All ER at 664] which suggests that a continuing common intention alone will suffice, but I am clearly of opinion that a continuing common intention is not sufficient unless it has found expression in outward agreement. There could be no certainty at all in business transactions if a party who had entered into a firm contract could afterwards turn round and claim to have it rectified on the ground that the parties intended something different. He is allowed to prove, if he can, that they agreed something different: see Lovell and Christmas v. Wall [(1911) 104 LT at 88, 93], per LORD COZENS-HARDY, M.R., and per BUCKLEY, L.J.; but not that they intended something different.’
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Insofar as this passage might be taken to suggest that an antecedent complete concluded contract is necessary it would be in conflict with the views of both courts in Crane v Hegeman-Harris, and is not supported by the other judgments. Insofar as it speaks of agreement in the more general sense of an outwardly expressed accord of minds it does no more than assent to the argument of counsel for the defendants ([1953] 2 QB at 457) on the true width of the views of Simonds J.
We conclude this review of authority with a few other cases to which our attention was drawn. In Earl v Hector Whaling Ltd ([1961] 1 Lloyd’s Rep 459 at 470) Harman LJ said:
‘As to the facts, it does not appear to me that there ever was an oral agreement. There was a common intention, and that is enough. In spite of Lord Justice Denning’s observations in Frederick E. Rose (London) Ltd v. William H. Pim Junr. & Co., Ltd. [[1953] 2 All ER at 747, [1953] 2 QB at 461], I think that Mr. Justice Clauson’s original decision in Shipley Urban District Council v. Bradford Corporation, (as followed by Mr. Justice Simonds (as he then was)) in Crane v. Hegeman-Harris Company, Inc. [[1939] 1 All ER at 664], that you do not need a prior contract, but a prior common intention, is right; and here, as it seems to me, both parties always intended that there should be a written agreement, and they came to a common intention as to what that written agreement was to be, or thought they did; and if the evidence satisfied one that that common intention did not appear in the written document, then you would have a case for rectification.’
We do not take Pearce LJ to suggest the contrary view ([1961] 1 Lloyd’s Rep at 468).
Lastly reference was made to a decision of Megaw J shortly noted (so far) in London Weekend Television Ltd v Paris and Griffith. He expressed the view that the propositions of Simonds J in Crane’s case were binding as a result of their express approval by this court. He then used this phrase, according to the report, a phrase which if correct covers the present case:
‘Where two persons agreed expressly with one another what was the meaning of a particular phrase but did not record their definition in the contract itself, if one of the parties sought to enforce the agreement on the basis of some other meaning, he could be prevented by an action for rectification.’
In our judgment the law is as expounded by Simonds J in Crane’s case, with the qualification that some outward expression of accord is required. We do not wish to attempt to state in any different phrases that with which we entirely agree, except to say that it is in our view better to use only the phrase ‘convincing proof’ without echoing an old fashioned word such as ‘irrefragable’ and without importing from the criminal law the phrase ‘beyond all reasonable doubt.' Remembering always the strong burden of proof that lies on the shoulders of those seeking rectification, and that the requisite accord and continuance of accord of intention may be the more difficult to establish if a complete antecedent concluded contract be not shown, it would be a sorry state of affairs if when that burden is discharged a party to a written contract could, on discovery that the written language chosen for the document did not on its true construction reflect the accord of the parties on a particular point, take advantage of the fact.
The contention in law for the daughter would, we apprehend, involve this proposition, that if all the important terms of an agreement were set out in correspondence with clarity, but expressly ‘subject to contract’, and the contract by a slip of the copyist unnoticed by either party, departed from what had been ‘agreed’, there could not be
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rectification. We have been puzzled by the suggestion of Sir Herbert Cozens-Hardy MR in the Lovell and Christmas case ((1911) 104 LT at 88) that rectification should be regarded as a branch of the doctrine of specific performance; we do not see any necessary connection, more particularly since rectification is available in the case of voluntary settlements. In our judgment the view of Simonds J ([1939] 1 All ER at 662) and this court ([1939] 4 All ER 68) on the point were correct and on the facts found by the county court judge the father established a claim to rectification. It is not necessary therefore to decide whether we were bound in any event by the decision of this court in Crane’s case, notwithstanding that (in our view) the contrary was not argued, the particular point of law being in fact essential to the dismissal of the appeal. This question of precedent was discussed at some length in this court in Morelle Ltd v Wakeling and as at present advised it would appear to us that it may well not be right to say that the decision in Crane’s case was made per incuriam: we refer in particular to the judgment of the full court in Morelle’s case ([1955] 1 All ER at 718, [1955] 2 QB at 406), though we are not completely content on this point. This court is not omniscient in the law, nor are counsel, however eminent. We work under great pressure from the lists, and whilst not always ready to accept a concession on a point of law from the Bar it is not infrequent to do so, and moreover on a point essential to the decision of the appeal, without further investigation. We are attracted by a suggestion that the conceded point of law should be open to argument in another case, provided it is made plain that that should not be made the basis for the further suggestion that, where an argument, though put forward, had been only weakly or inexpertly put forward, the point of law should similarly be open; for much uncertainty could thus be undesirably introduced.
We wish to stress that this is a case of rectification based on antecedent expressed accord on a point adhered to in intention by the parties to the subsequent written contract: we were in no way concerned with arguments as to collateral terms of a contract.
The actual order of the county court judge would appear to have rectified the wrong clause in the agreement, and to have omitted the reference, in the accepted evidence of the father, to payment of expenses being made out of the business. Counsel were able to agree the proper form of order. The order will accordingly be varied so as to provide that in lieu of rectification of cl 7 of the contract thereby ordered, cl 6 shall be rectified so as to read:
‘[The daughter] shall until she sells the business and out of the proceeds of the business discharge [the father’s] expenses in respect of gas, coal, electricity and home help incurred by him while occupying “Martindale” … aforesaid or such property as may be agreed upon in pursuance of clause 7 hereof and shall indemnity [the father] from and against any claim arising in respect of the same.’
We would add that we very much hope that the father and the daughter will now be able to return to a proper familial relationship after their differences, which will have given them the distinction, if such it be, of being enshrined in the law reports. So the result is that the appeal is dismissed. The cross-appeal was not pursued.
Appeal dismissed.
Solicitors: Baylis Pearce, McMillan & Mott (for the daughter and the husband); Craigen, Wilders & Sorrell (for the father).
Kaushalya Purie-Harwell Barrister.
Holmes and another v Cowcher
[1970] 1 All ER 1224
Categories: LAND; Mortgages
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 12 JANUARY 1970
Mortgage – Redemption – Mortgagee’s entitlement to arrears of interest – Action for redemption by mortgagor – Sale of mortgaged property by agreement – Whether mortgagee entitled to more than six years’ arrears of interest out of proceeds of sale – Whether six year limitation period for recovery of interest by mortgagee applicable to redemption action – Limitation Act 1939, s 18(5).
Although an action by a mortgagee for mortgage interest, which has remained unpaid for longer than the limitation period of six years from the date on which it became due, is statute barred by virtue of the Limitation Act 1939, s 18(5), a mortgagor as a condition of redeeming must pay all arrears of interest however, old (see p 1225 h, and p 1226 f, post). At the date of the commencement of an action for redemption, interest due under a mortgage was in arrear for substantially more than six years. After commencement of the action, the property charged was sold by the mortgagee pursuant to his statutory power of sale with the agreement of the mortgagors.
Held – The mortgagee was entitled, out of the money realised on the sale of the property, to be allowed the amount of the interest accrued more than six years before the action was brought.
Dictum of Sir Richard Kindersley V-C in Edmunds v Waugh (1866) LR 1 Eq at 421 applied.
Notes
For limitation of actions and the interest claimable on redemption of a mortgage, see 24 Halsbury’s Laws (3rd Edn) 276, para 543, and for cases on the subject, see 32 Digest (Repl) 492–495, 1033–1058 and 35 Digest (Repl) 584–587, 2580–2595.
Cases referred to in judgment
Dingle v Coppen, Coppen v Dingle [1899] 1 Ch 726, 68 LJCh 337, 79 LT 693, 35 Digest (Repl) 725, 3913.
Edmunds (Edmund) v Waugh (1866) LR 1 Eq 418, 35 LJCh 234, 13 LT 739, 1 Digest (Repl) 10, 69.
Elvy v Norwood (1852) 5 De G & Sm 240, 21 LJCh 716, 19 LTOS 198, 64 ER 1099, 35 Digest (Repl) 501, 1890.
Lloyd, Re, Lloyd v Lloyd [1903] 1 Ch 385, 72 LJCh 78, 87 LT 541, 32 Digest (Repl) 494, 1056.
Marshfield, Re, Marshfield v Hutchings (1887) 34 Ch D 721, 56 LJCh 599, 56 LT 694, 32 Digest (Repl) 492, 1042.
Case also cited
Martin’s Mortgage Trusts, Re [1951] 1 All ER 1053; sub nom C E M Matthews Ltd v Marsden Building Society [1951] Ch 758.
Adjourned summons
The mortgagors, Mary Elsie Sarah Samuline Holmes and Irenie Emily Arnesen Sparkes, sought a declaration that the mortgagee, Gordon Cowcher should not be allowed outstanding interest on their mortgage prior to the six years before commencement of proceedings. The facts are set out in the judgment.
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Ian McCulloch for the mortgagors.
J F Mummery for the mortgagee.
12 January 1970. The following judgment was delivered.
STAMP J. Shorn of its trimmings, this is, in my view, a very simple case which admits of only one answer to the question raised. The action is for redemption of a mortgage, commenced by an originating summons dated 31 May 1968. Since the issue of the summons the property charged has, in fact, been sold by the mortgagee pursuant to his statutory power of sale with the agreement of the mortgagors.
At the date of the issue of the originating summons, interest due under the mortgage was in arrear for substantially more than six years. The question which arises is whether the mortgagee is entitled, out of the money realised on the sale of the property, to be allowed the amount of the interest accrued more than six years before the action was brought.
Reliance is placed, on behalf of the mortgagors, on s 18(5) of the Limitation Act 1939, not directly but by way of analogy. It provides:
‘No action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge or payable in respect of proceeds of the sale of land, or to recover damages in respect of such arrears shall be brought after the expiration of six years from the date on which the interest became due: … ’
Although counsel for the mortgagee submits that this is not such an action, it is said, by analogy with that section, that the court in allowing the mortgagors redemption of the mortgage ought not to charge the mortgagors with the arrears of interest accrued more than six years ago.
Redemption is, of course, an equitable remedy and in an action for redemption it has always been the rule that the mortgagor, as a condition of obtaining redemption, must discharge all the principal and all the interest, whether statute barred or not, payable under the mortgage. This principle is to be found in a number of cases to which I have been referred (see, in particular, Dingle v Coppen, Coppen, v Dingle, a decision of Byrne J, Re Lloyd, Lloyd v Lloyd, Re Marshfield, Marshfield v Hutchings, and Edmunds v Waugh. These decisions are, of course, decisions anterior in point of time to the Limitation Act 1939, but, in my judgment, they apply was well to s 18(5) of that Act as they apply to s 42 of the Real Property Limitation Act 1833a which section s 18(5) replaces. See also The Law of Real Property by Megarry and Wadeb where the position is stated thus:
‘Mortgage Interest. There is also a six years’ period for any action for arrears of mortgage interest. But a mortgagee who exercises his power of sale may retain all arrears of interest, however old, out of the proceeds of sale, for this is not recovery by action; and if the first mortgagee sells, the second mortgagee is similarly entitled to all his arrears of interest out of the surplus proceeds of sale. Further, a mortgagor who seeks to redeem can do so only on the equitable terms of paying all arrears of interest.’
That last statement of the law is directly in point and, in my judgment, it correctly states the position.
The principle underlining the judgments to which I have referred and the rule as
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stated, is conveniently found in the judgment of Sir Richard Kindersley V-C in Edmunds v Waugh, ((1866) LR 1 Eq at 421) to which I have already referred, in which he said:
‘Moreover, it does not appear to me to come within the spirit of the Act, which, it must be remembered, is an Act taking away existing rights, and which must be construed with reasonable strictness. The intention of the Legislature, I think, was that if a man chose to let interest run into arrear for more than six years, and then come to a court of justice to recover the interest, he should be entitled to recover six years’ interest; but it does not follow that the Legislature intended that a mortgagor who has lost his legal right, and comes to the Court insisting on his equity to redeem, should be allowed—although he has failed to pay the interest which he ought to have paid for more than six years—to redeem on payment only of six years’ interest. There would be no justice in such a construction of the statute. Is the omission of the mortgagor to pay the interest which he ought to have paid less culpable than the omission of the mortgagee to demand and enforce payment of it?’
These remarks of Sir Richard Kindersley V-C seem to me to entirely demolish the submission advanced on behalf of the mortgagors to the effect that, in this respect, equity ought to follow the law. Plainly, if I am to follow what Sir Richard Kindersley V-C said, as I must clearly do, equity does not, in this respect, follow the law, and ought not to be held so to do. On behalf of the mortgagors, some reliance was placed on Elvy v Norwood as establishing the contrary view. Having given that case the best consideration I can, I concluded that it is in line with the other authorities to which I have referred and I cannot extract from it the principle that where mortgage interest is irrecoverable by the mortgagee at law, he ought not to be allowed to retain that interest out of the proceeds of sale or that the mortgagor, when seeking redemption, need not account for such interest.
Counsel for the mortgagors submitted that the question, on what terms a mortgagor should be allowed to redeem, is a matter of discretion to be decided according to the relative conduct of the parties. He has not persuaded me that there is any authority for such a general proposition. I think that, on the authorities which have been referred to me, the submission made on behalf of the mortgagee, that the question is not one of discretion but to be decided as a matter of right, is well founded. Nor am I persuaded that there has, in any event, been such a degree of misconduct on the part of the mortgagee as would, if I had a discretion to do so, justify me in imposing some special condition or limitation on the terms on which the mortgagee can retain the purchase money.
Order accordingly.
Solicitors: Bull & Bull (for the mortgagors); Gregory, Rowcliffe & Co (for the mortgagee).
Richard J Soper Esq Barrister.
Home Counties Dairies Ltd and another v Skilton and another
[1970] 1 All ER 1227
Categories: EMPLOYMENT; Contract of service: COMPETITION
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, SALMON AND CROSS LJJ
Hearing Date(s): 15, 16, 21 JANUARY 1970
Trade – Restraint of trade – Agreement – Master and servant – Dairyman and milk roundsman – Agreement not for one year after termination of employment to serve or sell milk or dairy produce to customers served by employee during last six months of employment – Validity.
The employee, a milkman, who had been in the service of his employer, who carried on business as a dairyman, for just over a year, entered into a written service agreement with the employer which included the following clauses: ‘12. During his employment hereunder the Employee shall not, without the previous consent of the Employer, enter the service of or be employed in any capacity or for any purpose whatsoever by any person, firm or company carrying on any dairy business. 15. The Employee expressly agrees not at any time during the period of one year after the determination of his employment under this agreement (whether the same shall have been determined by notice or otherwise) either on his own account or as representative or agent of any person or company, to serve or sell milk or dairy produce to, or solicit orders for milk or dairy produce from any person or company who at any time during the last six months of his employment shall have been a customer of the Employer and served by the Employee in the course of his employment’. Nearly five years later the employee left the service of the employer, and almost immediately began to work as a milkman for the second defendant, a rival dairyman, on the same milk round as that on which he had worked for the employer. The employer brought an action for an injunction to restrain, and damages for, the employee’s breach of cl 15. On the question whether the clause was too wide and therefore invalid as being an unlawful restraint of trade,
Held – The restraint imposed by cl 15 was valid, and so should be enforced, because,—
(i) construing it with regard to the circumstances when the agreement was made, the position of the parties to it, and the wording of cl 12, it applied only to the employer’s trade as a dairyman and the employee’s trade as a milk roundsman and would not prevent the employee from entering the employment of someone other than a dairyman to sell eg butter and cheese (see p 1231 d and e, p 1233 b c and f and p 1234 f, post); Haynes v Doman [1899] 2 Ch 13 applied;
(ii) the application of the restriction to customers of the employer during the last six months of the employment was not unreasonable, as the employer could reasonable hope, if any of those customers had left him during that period, that they might return (see p 1232 a, p 1234 c and p 1235 e and f, post).
G W Plowman & Son Ltd v Ash [1964] 2 All ER 10 applied.
Notes
For reasonableness of agreements in restraint of trade, see 38 Halsbury’s Laws (3rd Edn) 22–24, paras 41–42, and for cases on the subject, see 45 Digest (Repl) 443–451, 271–315.
Cases referred to in judgments
Attwood v Lamont [1920] 3 KB 571, [1920] All ER Rep 55, 90 LJKB 121, 124 LT 108, 45 Digest (Repl) 442, 263.
Page 1228 of [1970] 1 All ER 1227
Dewes v Fitch [1920] 2 Ch 159; affd HL sub nom Fitch v Dewes [1921] 2 AC 158, [1921] All ER Rep 13, 90 LJCh 436, 125 LT 744, 45 Digest (Repl) 460, 420.
Haynes v Doman [1899] 2 Ch 13, 68 LJ Ch 419, 80 LT 569, 45 Digest (Repl) 449, 300.
Heron II, The, Koufos v C Czarnikow Ltd [1967] 3 All ER 686, [1969] 1 AC 350, [1967] 3 WLR 1491, Digest Supp.
Mitchel v Reynolds (1711) 1 P Wms 181, [1558–1774] All ER Rep 26, 24 ER 347, 45 Digest (Repl) 395, 110.
Moenich v Fenestre (1892) 61 LJCh 737, 67 LT 602, 45 Digest (Repl) 493, 802.
Morris (Herbert) Ltd v Saxelby [1916] 1 AC 688, [1916–17] All ER Rep 305, 85 LJ Ch 210, 114 LT 618, 45 Digest (Repl) 449, 296.
Plowman (G W) & Son Ltd v Ash [1964] 2 All ER 10, [1964] 1 WLR 568, 45 Digest (Repl) 447, 288.
Rannie v Irvine (1844) 7 Man & G 969, 14 LJCP 10, 4 LTOS 133a, 135 ER 393, 45 Digest (Repl) 462, 466.
Appeal
This was an appeal by Home Counties Dairies Ltd (the first plaintiff) and Westcott Dairies Ltd (the employer) from a decision of Pennycuick J dated 3 July 1969 (on a motion for an injunction which by consent was treated as the trial of the action), refusing to grant an injunction to restrain Sidney William Skilton (the employee) from breaking, and Hugh Alexander (Boxhill) Ltd (the second defendant) from procuring a breach by the employee of, cl 15 of an agreement dated 3 July 1964 made between the employer and the employee, on the ground that cl 15 was an unreasonable restraint of trade. The facts are set out in the judgment of Harman LJ.
G B H Dillon QC and Ian McCulloch for the plaintiffs.
J W Mills QC and J A R Finlay for the defendants.
Cur adv vult
21 January 1970. The following judgments were delivered.
HARMAN LJ. The milkman is a familiar figure to all town dwellers. In my youth he walked behind a rattling cart with a milk churn in the middle of it, surrounded by numerous small cups hung on the rail, and as he stopped at each house he drew off a quantity of milk in one of his cups and delivered it to the cook who came up the area stairs with a jug. Nowadays he rides round in what is called a float and delivers his milk, more hygienically I suppose, certainly more silently, in bottles; but he has been throughout the years, one way or the other, a familiar and probably influential character well-known to every householder in the road. It is natural in the circumstances that he acquires usually on behalf of a master a clientele along his round who, if he is an agreeable and competent man, will tend to rely on him for arrival and to follow his departure to serve another employer. In these circumstances it is natural that employers should make great efforts to retain the goodwill so acquired and to restrain, so far as they can, the employee who leaves their service from taking his clients with him. This is very much a part of the employer’s goodwill which he is entitled to protect, for it is his most saleable asset.
Thus it comes about that cases concerning milk roundsmen have been a familiar topic in the courts for a number of years, and the present is only the latest of them. I do not think I need trace the long history of agreements in restraint of trade from the time of Lord Macclesfield (see Mitchel v Reynolds) down to quite recent years. Generally speaking an agreement in restraint of trade may be upheld if partial and on the long view to the advantage of both parties to it. There is a great difference between what restrictions are allowable as between the vendor of the good will of a
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business and the buyer and those allowable as between master and servant. These are perhaps best illustrated by Attwood v Lamont. When a man sells the goodwill of his business, one of the principal items will be his trade connections, and the buyer is entitled to protect that by restraining the vendor from setting up in competition with the very thing which he has agreed to buy. In the case of a master and servant, aside from confidential information, the servant is entitled to make use of the skill and knowledge he has acquired in the master’s service and may not be prevented from competing with it. There has certainly been in the course of time a swing in the view taken by the court in these matters, and many cases in which an injunction was granted in the last century would not succeed now. Nevertheless, if the object be merely to protect the master’s legitimate interest in his goodwill and the restraint does not have as its paramount object to restrain competition, nor have the effect of hindering the employee in activities outside the area of the master’s trade, a restraint can still be imposed.
If one follows the course of the milk round agreements, it is clear that the employers have often failed because they tried to get too much, and indeed made use of such restrictions as these as what the courts thought to be instruments of oppression. The type of restriction has been much narrowed as time went on, and the only importance of the present case, except to the parties, is that this particular restriction has been framed in the interests of the employers and apparently carefully limited in order to avoid the pitfalls which the decisions have shown to exist. The judge here took the view that the agreement in question was nevertheless too wide to be enforced, as it did go to matters beyond the employer’s interest. Notwithstanding all the precautions taken, he held that there were circumstances in which the present agreement could be used to restrain the employee from activities altogether outside the employer’s goodwill and that therefore the whole agreement was void. It is necessary, therefore, to examine the agreement in detail.
The employer had for a number of years up to 1969 carried on a dairyman’s business at Chapel Road, Westcott, near Dorking, and in June 1963 it employed the employee as a roundsman in that business. The agreement was made on 3 July 1964, when the employee had already been in the employment as a roundsman in the business for a year. It consists of a printed form of agreement under a 6d stamp. Clause IB provides, by way of recital:
‘That the Employer and Employee confirm that the Employer has continuously employed the Employee since the 8th June 1963 and that he is now employed as a salesman.’
Clause 2 provides: ‘That the terms of the employment as at the date hereof are as set out in the Schedule hereto.' I need not read the details of the schedule about wages, holidays and so on, hours of work and sickness, pensions and so forth. It provides in cl 6 that in the first year there is to be one week’s notice; two years, two weeks’ notice; and more than five years, four weeks’ notice to terminate on either side. It then provides:
‘9(i) The Employee shall pay into the Employer’s office daily all monies collected on his behalf, if required. (ii) The Employer shall afford the Employee every facility for checking the amounts of milk, dairy and other commodities issued to him for sale to customers. [Here one has for the first time the subject-matter, namely “milk, dairy and other commodities“.] 10 The Employee shall accept full responsibility for all milk, dairy produce and other commodities issued to him, and will faithfully record all sales made on behalf of the Employer and also account for same either by monies paid in or by itemised credit as recorded by him in the rounds book.’
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One notes there that this is a round, because its receipts are to be recorded in a rounds book. Clause 11 is about protective clothing. Clause 12 has some importance and is in these terms:
‘During his employment hereunder the Employee shall not, without the previous consent of the Employer, enter the service of or be employed in any capacity or for any purpose whatsoever by any person, firm or company carrying on any dairy business.’
In other words, he must not serve another dairyman except with consent; but it is only dairymen he may not serve. Clause 15 provides:
‘The Employee expressly agrees not at any time during the period of one year after the determination of his employment under this agreement (whether the same shall have been determined by notice or otherwise) either on his own account or as representative or agent of any person or company, to serve or sell milk or dairy produce to, or solicit orders for milk or dairy produce from any person or company who at any time during the last six months of his employment shall have been a customer of the Employer and served by the Employee in the course of his employment.’
This agreement continued until March 1969, with slight variation of the amount of wages, when the employer sold its goodwill for a large sum to the first plaintiff. There was a written agreement dated 27 March 1969 to assign, but that has not so far been followed by an actual assigning document. The first plaintiff agreed to take over all employees of the employer, but of course it could not oblige them to transfer their services, and at the end of March the employee left the service of the employer a week’s notice being given by agreement. On 7 April, the employee entered employment of the second defendant, who is a dairyman in the same area, and immediately started to serve the same milk round as he had worked when he had been employed by the employer—a flagrant breach of his covenant—whereupon the first plaintiff on 11 April issued the writ in this action to enforce the covenant in cl 15, which I have read. By amendment, the employer was added as a plaintiff, and the second defendant as a defendant, but the person seeking to enforce the covenant is the first plaintiff, the employer being joined only because the first plaintiff’s title remains an equitable one. It was not disputed before us that the obligations of the employee, whatever they were, were assignable.
The action as against the second defendant was for an injunction to restrain it from procuring the alleged breach. The judge refused the motion on the ground that the covenant was too wide and so void. He also held that the second defendant had not joined in any solicitation of customers of the plaintiffs. It is against the first of those refusals that this appeal is brought, so that the words we have to construe are:
‘… serving or selling milk or dairy produce to … any person or company who at any time between the 4th October, 1968, and the 4th April, 1969, was a customer of [the employer] and served by the [employee] during that period in the course of his employment by [the employer].’
It is limited to as short a time as one year after the determination of the employment and so as to apply to customers only during the last six months of the employment and further to customers who shall have been served by the employee himself. It is no wonder that the judge was at first sight of opinion that the restraint so limited was a valid one, but he was persuaded on further consideration that it went beyond the allowed limit, which is of course the protection of the goodwill of the employer’s business, and was therefore void. He reached this conclusion on the ground that the words ‘dairy produce’ included butter and cheese, that butter and cheese are articles which are dealt in, among others, by grocers and that therefore the employee would
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be prevented from taking employment with a grocer in the town of Dorking because he would be at risk of being asked to serve a customer of the grocer with butter or cheese who had been a customer of the employer and would thus be in breach of his covenant and to that extent unable to earn his living in a way which could not possibly damage or injure the employer’s goodwill.
In my judgment, this is a misconstruction of the agreement. It is the first principle in construing written documents, whether wills or any other documents in writing, to consider the circumstances at the time when they were made and the position of the parties to them. Now the first thing to observe here is that this is an agreement between a dairyman and one of his roundsmen then operating a milk round on his behalf. It may therefore be supposed to be concerned with the employer’s trade as a dairyman and the employee’s trade as a milk roundsman, and there are indications throughout the document that it is with this subject-matter that it is concerned. For instance, in cl 10, what is to be recorded in ‘the rounds book’ are amounts of milk, dairy and other commodities issued to the roundsman for sale to customers; that is to say, customers of the dairyman living on the milk round or near it, and being therefore such articles as are dealt with in the course of such activities. I am therefore of opinion that, on true construction of the agreement, it has nothing to do with any commodity not such as is dealt with by the employee in the course of his round. The fact that butter and cheese may be described as ‘dairy produce and other commodities’ does not seem to me to have the effect of preventing the employee from entering the employment of someone other than a dairyman who happens to sell butter and cheese. If it were so, he could not be employed in a restaurant, and this seems to me to be outside the scope of the agreement altogether. It is in fact, on its true construction, an agreement not to serve an employer as a milk roundsman calling on the customers of the old milk round whom he has served in the last six months. This is precisely the area which, to my mind, the employer is entitled to protect. The familiar difficulty about customers (as to which see G W Plowman & Son Ltd v Ash) does not arise, because the customers are only persons whom the employee has himself served within the six months.
If authority be needed for the proposition that covenants of this sort must be limited to circumstances which the court considers the parties had in their contemplation, it will be found in Sir Nathaniel Lindley MR’s judgment in Haynes v Doman ([1899] 2 Ch 13 at 24, 25). That was a restraint of trade case, but not a milk round. Sir Nathaniel Lindley MR said:
‘Another matter which requires attention is whether a restriction on trade must be treated as wholly void because it is so worded as to cover cases which may possibly arise, and to which it cannot be reasonably applied … Agreements in restraint of trade, like other agreements, must be construed with reference to the object sought to be attained by them. In cases such as the one before us, the object is the protection of one of the parties against rivalry in trade. Such agreements cannot be properly held to apply to cases which, although covered by the words of the agreement, cannot be reasonably supposed ever to have been contemplated by the parties, and which on a rational view of the agreement are excluded from its operation by falling, in truth, outside, and not within, its real scope.’
Then he went on to say that even in extreme cases where one might find words that would suit, one could exclude such effects because they were not within the contemplation of the parties.
The further point was taken that the customer restriction would apply to anyone who had been a customer within the last six months of the employment and had during that period ceased so to be, and it was said that the employer could have no
Page 1232 of [1970] 1 All ER 1227
legitimate interest in such persons. I think this point is met in the judgment in G W Plowman & Son Ltd v Ash ([1964] 2 All ER at 13, [1964] 1 WLR at 572), where it was said a customer might have left temporarily and that his return was not beyond hope and was therefore a matter of legitimate interest to the employer.
In my opinion, therefore, the appeal ought to be allowed.
SALMON LJ. I agree. The result if this appeal turns on the true construction of the agreement between the employee and the employer made on 3 July 1964. At the time of this agreement, the employee had been employed by the employer as a dairy roundsman for upwards of a year and the agreement provided for the terms on which he should continue to serve the employer in that capacity. The clause in question is cl 15, which provides:
‘The Employee expressly agrees not at any time during the period of one year after the determination of his employment under this agreement (whether the same shall have been determined by notice or otherwise) either on his own account or as representative or agent of any person or company, to serve or sell milk or dairy produce to, or solicit orders for milk or dairy produce from any person or company who at any time during the last six months of his employment shall have been a customer of the Employer and served by the Employee in the course of his employment.’
This clause is clearly in restraint of trade. Accordingly, it is unenforceable unless it is reasonable from the point of view of the employer, the employee and the general public. I need not quote any of the well-known passages from the speech of Lord Parker of Waddington in Herbert Morris Ltd v Saxelby, nor any other of the almost equally well-known passages in the authorities that have been cited to us on this topic. No separate question of public interest arises in the present case. The sole question is whether the clause imposes a greater restraint on the employee than is reasonably necessary for the protection of the employer’s business. If it does, it is unenforceable. If it does not, it is conceded that it would be reasonable from every point of view and therefore enforceable.
At one stage, counsel for the employee and the second defendant argued that the clause was unreasonable from the employee’s point of view, since he might be discharged at short notice just after his employment had commenced. This point was, however, wisely abandoned when it was pointed out that the employment had already been in existence for upwards of a year at the time when the agreement was made.
The learned judge said:
‘At first sight this covenant in Clause 15 appears unexceptionable. It is limited in time to one year after termination of employment and it is confined to persons who during the last six months of the employment were customers of the employer and were served by the employee in the course of his employment. So it will be seen that this covenant avoids a number of pitfalls in this branch of the law … [the employee], with the co-operation of [the second defendant], is clearly breaking the restrictive obligation which is unexceptionable in the very circumstances which the parties were likely to have contemplated.’
In all this I agree with the learned judge. He considered, however, that since ‘dairy produce’ includes butter and cheese, cl 15 would prevent the employee from being employed in a grocer’s shop which stocks butter and cheese, as most grocer’s shops do; that this restriction was unnecessary for the protection of the employer’s business, and that accordingly he was obliged to give judgment for the defendants,
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although he did so with considerable regret and reluctance. No doubt cl 15 read in isolation does have the effect postulated by the learned judge. Indeed, I think that, so read, it would also prevent the employee from serving the customers to which it refers with milk in a milk bar or a café or restaurant. I cannot, however, accept this construction. The clause must be read in the context of the whole agreement. Read in that way, the clause, in my view, is limited in its scope. The employer carried on a dairy business and none other. The employee was employed as a milk roundsman in that business. The clear intention of cl 15 was to afford that business protection against the employee’s activities whilst carrying on a dairy business of his own or whilst engaged in another dairy business after his employment with the employer had ended. The clause is not intended, nor does it, in my view, purport to prevent him from selling cheese or butter in a grocery business; nor, for that matter, from doing anything in any business other than a dairy business. I rely for this construction on the context of the whole agreement. It is, also, I think supported especially by cl 12, which provides:
‘During his employment hereunder the Employee shall not, without the previous consent of the Employer, enter the service of or be employed in any capacity or for any purpose whatsoever by any person, firm or company carrying on any dairy business.’
As I read cl 12, it is confined to a dairy business. Accordingly, the employee would be free during the course of his employment to occupy his spare time, if he chose to do so, by serving in a grocery shop which stocked butter and cheese. I find it incredible that cl 15 could mean that he is prohibited from doing something after he has left the employment which he was free to do during the course of the employment. Although the words of cl 15 are no doubt wide enough, when read literally and in isolation, to be given a meaning which makes the clause void, nevertheless, if taken in the context of the whole agreement, it is clear that the clause is intended to restrict the employee’s activities only when engaged in the same type of business as the employer’s. The clause must be construed according to its manifest intention: so construed, it is, in my view, clearly enforceable: see Rannie v Irvine, Moenich v Fenestre and Haynes v Doman.
There are only two other points which I need mention. Counsel for the employee and the second defendant has argued that even if cl 15 bears the meaning which I attribute to it, it is still too wide because it would prevent the employee from serving a customer of the class stipulated if both the employee and the customer moved from Surrey, say, to Leeds and the employee started a dairy business there. No doubt such a case would come within the clause, but in such circumstances no real damage would be suffered by the employer and none would be awarded it; nor would an injunction be granted in the most unlikely event of the employer being unwise enough to bring an action. The best that it could hope for in such circumstances would be judgment for nominal damages and an order against it to pay the employee’s costs.
If a clause is valid in all ordinary circumstances which can have been contemplated by the parties, it is equally valid notwithstanding that it might cover circumstances which are so ‘extravagant’, ‘fantastical’, ‘unlikely or improbable’ that they must have been entirely outside the contemplation of the parties.
There has been some argument at the Bar whether the circumstances have to be ‘extravagant’ or ‘fantastical’ or only ‘unlikely or improbable’ to fall within the principle which I have enunciated. All these words have been used in the different authorities to which we have been referred. I do not think it matters which word is chosen. We are not dealing with semantics or metaphysics, but with reality. The
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words ‘likely’ or ‘probable’ have a wide range of meanings which vary according to the context in which they are used and which have been subject to considerable differences of judicial opinion: see, for example, Lord Reid’s speech in The Heron II ([1967] 3 All ER 686 at 693–696, [1969] 1 AC 350 at 387–393). In my judgment, the far-fetched possibility about the customer and the employee moving, say, to Leeds is so completely outside the contemplation of the parties and so remote that it cannot affect the validity of cl 15.
The other point made by counsel for the employee and the second defendant is that cl 15 is too wide inasmuch as it is not confined to persons who were customers at the termination of the employment. At the most, so he contended, it could properly include only such persons who had ceased to be customers within a month of the employee leaving his employment. I am afraid I cannot accept this argument. As was pointed out by this court in G W Plowman & Son Ltd v Ash ([1964] 2 All ER 10 at 13, [1964] 1 WLR 568 at 572), the employer may reasonably hope that his customers will return and he may take reasonable steps to prevent his employee doing anything to frustrate those hopes. Like Harman LJ and the learned judge, I think that there is nothing unreasonable in the six-months or the 12-months’ periods referred to in cl 15.
For these reasons I would allow the appeal.
CROSS LJ. I agree. The argument below proceeded on the footing—or at all events was understood by the judge to be on the footing—that cl 15 of the agreement of 3 July 1964 must be construed as covering every form of employment undertaken by the employee after he left the service of the employer which might involve his serving or selling milk or dairy produce to anyone. Such a construction would lead to extravagant results which cannot be supposed to have been within the contemplation of the parties—as, for instance, that if he was employed by an A B C or a milk bar he could not supply a glass of milk to anyone whom he had served with milk on his round during the last six months of his employment by the employer. The agreement was for the employment of the employee as a milk roundsman, and I think that cl 15 should be construed as applying only to the event of his engaging himself in or being employed by someone engaged in the business of a dairyman.
The view that this limited construction of cl 15 is right receives support from cl 12, since, if the wide construction of cl 15 is adopted, the employee would be able to do some things during his employment, eg be employed in his spare time by a cheesemonger, which he could not do after he had left the service of the employer. Cheese is certainly a ‘dairy product’, but I do not think that a cheesemonger could be said to be carrying on ‘dairy business’.
Turning to the cases, this method of approach to the construction of a clause of this sort is supported by the judgment of Maule J in Rannie v Irvine ((1844) 7 Man & G 969 at 978) and of this court in Moenich v Fenestre, which was a master and servant case; but then it is said that, even on this limited construction, cl 15 may still in terms apply to situations in which it would be unreasonable that the employee should be under any such restriction. For instance, someone whom he had supplied with milk on his round while in the employment of the employer might move to another district which the employer did not serve but which was served by another dairy which was then employing the employee. The answer to that point is, I think, that even in a master and servant case the court will not pay regard to improbable contingencies which were not within the contemplation of the parties and in respect of which, if they occurred, no court would grant an injunction or award damages: see the judgment of Sir Nathaniel
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Lindley MR in Haynes v Doman ([1899] 2 Ch 13 at 25), and the judgment of Warrington LJ in Dewes v Fitch ([1920] 2 Ch 159 at 184).
Next it was objected that a restriction for 12 months after the end of the service was too long in a case where the employee could be dismissed during the first two years of service under the agreement on a week’s notice, since he might be dismissed before he had had any opportunity of establishing friendly relations with any customers. This objection is not on any footing sustainable in this particular case because the employee had in fact been in the employ of the employer for about a year before the agreement was signed, but it may well be that, for the reasons given by Sir Nathaniel Lindley MR in Haynes v Doman ([1899] 2 Ch at 26), such an objection ought not to prevail even in a case where the service starts at the date of the agreement.
Finally it was argued that to make the restriction apply to customers whom he had served in a period as long as six months before the termination of his employment was not reasonably necessary for the protection of the employer, since persons who were served by the employee on his round in the early part of the six months might have given up the employer in favour of some rival several months before the employee left. Counsel for the employee and the second defendant conceded that some period of time before the termination of the employment could reasonably be inserted to meet the case of an employee who tells customers that he is going to leave his old employer and join another dairy some time before he actually leaves and induces some people to hand over their custom to the prospective new employer while he is still serving under the agreement; but counsel suggested that one month was the longest period which could properly be inserted in a milk roundsman’s agreement, since it was not reasonable to suppose that customers who gave up one dairy in favour of another would revert to the former. This sort of objection appears not to have been taken in any case before G W Plowman & Son Ltd v Ash and there it failed, although the ban on canvassing extended to any person who had been a customer of the employers, even though not known to the defendant, at any time during the employment. Here, of course, the restriction is not only on canvassing for orders but also on serving or selling milk; but it only applies to customers who had been served by the employee during a specified period before the end of his employment, which seems to me, as it did to the judge and to Harman and Salmon LJJ, by no means unreasonably long. A restraint on an ex-employee which is directed only to the prevention of competition is, of course, void; but this restraint is plainly intended to protect the employer’s trade connection. It is in practice extremely difficult to frame restrictions which will adequately protect a trade connection and may not at the same time cover some cases where a breach will not injure the trade connection. If the court can see that the restriction has been carefully framed for a legitimate purpose, I do not think that it should hold it void as contrary to public policy in favour as those of an ex-employee who is in flagrant breach of it on such narrow grounds as those relied on in this case.
In my judgment, the appeal should be allowed.
Appeal allowed; injunction against the employee that he ‘will not as a milk roundsman or in the course of a dairy business do any of the following things, that is to say … ' Inquiries as to damages caused by the acts of the employee in breach of the contract, and by the acts of the second defendant in inducing the breach of contract. Leave to appeal to the House of Lords refused.
Solicitors: Reynolds, Porter & Co (for the plaintiffs); Atkins, Walter & Locke, Dorking (for the defendants).
Henry Summerfield Esq Barrister.
Re Evans’s Contract
Evans and another v Deed
[1970] 1 All ER 1236
Categories: LAND; Sale of Land
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 22, 23, 26 JANUARY 1970
Sale of land – Sale of registered land with benefit of easements over unregistered land – Right of way and drainage rights – Whether vendor could be required by purchaser to procure registration of easements at Land Registry before completion – Land Registration Act 1925, s 110(5).
The purchaser of a piece of registered land with appurtenant easements over land which was not registered sought to compel the vendors, under s 110(5)a of the Land Registration Act 1925, to procure registration of themselves as proprietors of the easements.
Held – (i) Although the easements were land within the meaning of s 3(viii)b of the Act and an easement, if registered, could be registered land by virtue of s 3(xxiv)c, the easements were not registered land at the time of the sale, and accordingly s 110(5) had no application to them (see p 1238 d, post).
(ii) Alternatively, if the easements were registered land, s 110(5) had no application because the vendors were already registered in respect of the easements since they were the registered proprietors of the land to which th easements were appurtenant (see p 1238 e and g, post).
Notes
For vendor and purchaser provisions on the sale of registered land, see 23 Halsbury’s Laws (3rd Edn) 227–229, paras 496–503.
For the Land Registration Act 1925, s 110, see 20 Halsbury’s Statutes (2nd Edn) 1034.
Originating summons
By summons dated 30 October 1969 the vendors, John Arthur Evans and Phyllis Ada Evans, sought a declaration that they had sufficiently answered specific requisitions on title by the purchasers, William Kenneth Paul Deed, arising on a contract for the sale of registered land and that a good title had been shown. The facts are set out in the judgment.
W A Blackburne for the vendors.
C P F Rimer for the purchaser.
26 January 1970. The following judgment was delivered.
STAMP J. This is a vendor purchaser summons which has been—if I may say so—very well and truly argued on both sides. The question for determination arises on a contract dated 17 June 1969. By that contract the freehold property described in the schedule to it was agreed to be sold by the vendors to the purchaser for the sum of £17,000. The vendors were selling as beneficial owners and the property was sold subject to the National Conditions of Saled. The contract contained no special
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provisions regarding title, and none of the National Conditions of Sale is relied on by either party.
The property was described in the schedule to the contract in the following terms:
‘ALL THAT land lying to the south of West End Lane Harlington Middlesex as shown edged red on the plan annexed hereto as the same is registered at H.M. Land Registry with Title Absolute under Title No. … [the number is specified] TOGETHER WITH the benefit of the rights and liberties contained in a Deed dated 12th August 1968 and made between the Mayor Aldermen and Burgesses of the London Borough of Hillingdon (1) M.L.H. (1957) Company Limited (2) and [the vendors] (3) and in the supplemental Deed dated … day of … 1969 and made between the Mayor Aldermen and Burgesses of the London Borough of Hillingon (1) and [the vendors] (2).’
The land edged red in the plan is, as indicated in the description, registered land of which the vendors are the proprietors. No question arises regarding the title to this land. At the date of the contract the purchaser knew the terms of the deed of 12 August 1968 and had seen a draft of a supplemental deed, subsequently executed, referred to in the description which I have read. The former deed, as I understand it, conferred a right of way over the land of the mayor, aldermen and burgesses, the servient land, and the latter, rights of drainage. The servient land was not registered land. Among other requisitions the purchaser’s solicitors asked for and, after an initial refusal, obtained evidence of the title of the Borough of Hillingdon to the servient land. It consisted of a conveyance of sale dated 2 July 1934 to the urban district council of Hayes and Harlington, which I take to be the predecessors of the London Borough of Hillingdon. Nothing turns on it. The purchaser has also insisted—and this contention has been rejected by the vendors—that until there has been registration at the Land Registry of the easements granted by the borough to the vendors as appurtenant to the vendors’ land, the vendors’ title has not been properly completed and that the purchaser is entitled to require that such title be made good at the Land Registry. He is entitled—so the argument runs—to registration of the whole of the property contracted to be sold.
It is common ground that there is nothing in the Land Registration Act 1925, or in the rules made thereundere which requires the proprietor of registered land to register an easement appurtenant to the registered land over unregistered land, and in this connection my attention has been called to a number of provisions of the rules. Among them is r 252(1), which is in the following terms:
‘Where the proprietor wishes (whether on first registration or at any other time) to have a specific entry on the register of any appurtenant right, capable of subsisting as a legal estate, to which he may be entitled, he may apply to the Registrar in writing, signed by himself of his solicitor, for such as entry to be made.’
Registration is clearly optional, but no one suggests that after completion of this contract the purchaser could not successfully apply for registration of the easements under the rule.
It is convenient to add that registration of the purchaser as proprietor of the registered land will vest the appurtenant easements in him. This is made clear by r 251 of the Land Registration Rules 1925. The purchaser is accordingly protected by the mere registration of himself as proprietor of the registered land and able to obtain a specific entry of the existence of the easements to which the vendors have made title.
Counsel for the purchaser, while not denying these propositions and conceding
Page 1238 of [1970] 1 All ER 1236
that registration of the easements was not a statutory requirement relating to registration, submits, however, that as between a vendor and a purchaser the purchaser, if he so requires, is entitled to insist on the vendor himself obtaining registration of an easement such as those of which I am concerned, before completion. The submission is based primarily on the terms of s 110 of the Land Registration Act 1925, and more particularly on sub-s (5) of that section. Section 110 provides:
‘On a sale or other deposition of registered land to a purchaser other than a lessee or chargee … (5) Where the vendor is not himself registered as proprietor of the land or the charge giving a power of sale over the land, he shall, at the request of the purchaser and at his own expense, and notwithstanding any stipulation to the contrary, either procure the registration of himself as proprietor of the land or of the charge, as the case may be, or procure a disposition from the proprietor to the purchaser: … ’
‘The land’ is defined by the effect of s 3(viii) of the Land Registration Act 1925 to include—‘… an easement, right, privilege, or benefit in, over, or derived from land; … ' And, so the argument runs, the vendors are, on the plain wording of s 110(5) bound to procure registration of themselves as proprietors of the easements.
The argument has an engaging simplicity, but I think that it ignores that the subject-matter of s 110, as appears from the introductory words, is registered land. The section is concerned with a sale or disposition of registered land, and, although the easements in question here may be, by definition, land, and an easement which is registered may be registered land within the meaning of the definition in s 3(xxiv) of the Act, what is being sold in the present case is, as counsel for the vendors submits, (1) the registered land and (2) land—if you will—which has not been registered. If those easements are not registered land, then s 110 has no application to them. If, per contra, those easements are by the effect of the definition of registered land, registered land, then, it appears to me, sub-s (5) does not bite, because the vendors are, in fact, the registered proprietors of them.
Counsel for the purchaser pointed out that the definition of registered land contained in s 3(xxiv) of the Act provides:
‘“Registered land” means land or any estate or interest in land the title to which is registered under this Act or any enactment replaced by this Act, and includes any easement, right, privilege, or benefit which is appurtenant or appendant thereto, … ’
Either these easements fall within that definition or they do not. If they do, well, then the vendors are registered in respect of them, because they are appurtenant to the land in respect of which the vendors are registered. If they are not registered land then they do not fall within the provisions of s 110(5).
Declaration granted that requisitions on title had been sufficiently answered by the vendors and that a good title to the property had been shown in accordance with the contract of sale.
Solicitors: Browne, Denman & Co, Uxbridge (for the vendors); Owen White & Catlin, Shepperton (for the purchaser).
Richard J Soper Barrister.
Hinchcliffe (Inspector of Taxes) v Crabtree
[1970] 1 All ER 1239
Categories: TAXATION; Capital Gains Tax
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 4, 5 DECEMBER 1969
Capital gains tax – Shares – Quoted on London Stock Exchange – Take-over – Computation of gain – Negotiations for take-over current at 6 April 1965 – Well advanced and likely to come to fruition – Not communicated to Stock Exchange – Negotiations completed on 16 August 1965 – Price which shares might reasonably be expected to fetch on sale in open market at 6 April 1965 – ‘Special circumstances’ – Finance Act 1965, s 44(1), (3).
The taxpayer had a considerable holding of quoted ordinary stock, preferred ordinary stock and preference stock in a public company of which he was a joint managing director. In 1964 negotiations began for a take-over of the entire capital of the company by Vickers Ltd. By 6 April 1965 these negotiations were well advanced and likely to come to fruition but had not yet been completed. Only a few individuals including the taxpayer himself were aware of the negotiations. According to evidence accepted by the Special Commissioners, information as to the negotiations should have been communicated to the Stock Exchange at some time before 6 April 1965 but was not so communicated. The negotiations were completed on 16 August 1965 and under the take-over agreement the taxpayer received 55s for each ordinary stock unit held by him. Capital gains tax was assessed on him on the footing that the market value of the ordinary stock at 6 April 1965 was 42s 6d per unit. The taxpayer contended that this value must be increased by reference to the negotiations which were current at 6 April 1965. The commissioners upheld this contention and decided that the market value of the ordinary stock on 6 April 1965 should be taken at 51s 3d per unit, with a corresponding increase in the values of the preferred ordinary and preference stock units.
Held – The commissioners’ decision would be upheld because—
(i) The market value of any asset, ie the price which that asset might reasonably be expected to fetch on a sale in the open market, must be the price in a market where the prospective purchasers had all such information as to any relevant factors as was normally available to purchasers in that market, having regard to the nature of the market (see p 1246 j, post);
Re Lynall (decd) [1969] 3 All ER 984 applied;
(ii) The extent and character of the information which prospective purchasers must be treated as having differed from market to market and from subject-matter to subject-matter; and it could not be maintained that a prospective purchaser of quoted shares on the Stock Exchange was entitled to the same sort of information as the purchaser of unquoted shares by private treaty (see p 1247 a, post);
(iii) Nevertheless, the commissioners were clearly justified in finding that prospective purchasers on the Stock Exchange were entitled to have information as to takeover negotiations (see p 1247 b, post);
(iv) The absence of this information represented a ‘special circumstance’ within the Finance Act 1965, s 44(3)a which rendered the quoted value of shares other than a proper measure of market value (see p 1247 c, post).
Per Pennycuick J. Once one is driven away from the Finance Act 1965, s 44(3), I do not think that there is any difficulty in the applying s 44(1)a in isolation from s 44(3) (see p 1247 g, post).
Page 1240 of [1970] 1 All ER 1239
Notes
For the valuation of shares for capital gains, see Supplement to 20 Halsbury’s Laws (3rd End) paras 3085, 3086.
For the Financial Act 1965, s 44, see 45 Halsbury’s Statutes (2nd Edn) 567.
Case referred to in judgment
Lynall (decd), Re, Lynall v Inland Revenue Comrs [1969] 3 All ER 984, [1969] 3 WLR 771.
Case stated
This was an appeal by the Crown from a decision of the Special Commissioners of Income Tax that the existence of take-over negotiations at 6 March 1965 which had not been communicated to the Stock Exchange was a ‘special circumstance’ within the Finance Act 1965, s 44(3), so that the quoted price of shares at that date was not a proper measure of value within s 44(1). The case stated is substantially set out in the judgment.
Michael Wheeler QC, P W Medd and J P Warner for the Crown.
G B Graham QC and P E Whitworth for the taxpayer.
5 December 1969. The following judgment was delivered.
PENNYCUICK J. This is an appeal by the inspector of taxes from a decision of the Special Commissioners of Income Tax whereby they reduced an assessment to capital gains tax on the taxpayer, Mr Peter Neville Crabtree. The appeal raises a question in regard to the valuation of quoted shares in a company as at the first basis date for the purpose of the tax, namely, 6 April 1965. Summarily, the taxpayer had a considerable holding of stock—ordinary stock, preferred ordinary stock and preference stock—in a public company, R W Crabtree & Sons Ltd, of which he was a joint managing director. These stocks were quoted on the London Stock Exchange. In 1964 negotiations began for a take-over of the entire capital of the company by Vickers Ltd. By 6 April 1965 these negotiations were well advanced and likely to come to fruition but had not yet been completed. Only a few individuals, including the taxpayer himself, were aware of the negotiations. According to evidence accepted by the commissioners, information as to the negotiations should have been supplied to the Stock Exchange at some time before 6 April 1965. It was not in fact so supplied. On 6 April 1965 the middle market quotation of the ordinary stock was 42s 6d per unit. The negotiations were completed on 16 August 1965, and a press release was issued the next day. Under the take-over agreement the taxpayer received 55s for each ordinary stock unit. Capital gains tax was assessed on him on the footing that the market value of the ordinary stock at 6 April 1965 was 42s 6d per unit. The taxpayer contends that this value must be increased by reference to the negotiations which were current at 6 April 1965. The commissioners, after hearing expert evidence, upheld the taxpayer’s contention and decided that the market value of the ordinary stock on 6 April 1965 should be taken at 51s 3d per unit. A corresponding result took place in regard to the preferred ordinary stock and the preference stock, which are not of much practical importance having regard to the figures.
Only one statutory provision is of importance in this case, namely, the Finance Act 1964, s 44. This is contained in the part of the 1965 Act dealing with capital gains tax. The relevant terms of s 44 are as follows:
‘(1) Subject to the following subsections, in this Part of this Act “market value” in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market.
‘(2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time …
Page 1241 of [1970] 1 All ER 1239
‘(3) Subject to paragraph 22(3) of Schedule 6 to this Act the market value of shares or securities quoted on the London Stock Exchange shall, except where in consequence of special circumstances prices so quoted are by themselves not a proper measure of market value, be as follows … ’
Then comes a certain rather complicated formula which in the circumstances of the present case results in middle market value. The reference to para 22(3) of Sch 6 is not significant for the present purpose.
I turn now to the case stated. The case stated is rather lengthy but a good deal of it consists of findings as to the steps in the take-over negotiations which it will be unnecessary to read:
1‘. At a Meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 7th and 8th February, 1968, Mr. Peter Neville Crabtree (hereinafter called “the Respondent”) appealed against an assessment to Capital Gains Tax in the sum of £65,695 made upon him in respect of chargeable gains for the year 1965/66.
‘2. Shortly stated the question for our decision was what should be taken for the purposes of the said tax to be the market value as at 6th April, 1965, of certain holdings of Stock Units of R.W. Crabtree & Sons Ltd. (hereinafter called “the Company”) which were then owned by the Respondent.
‘3. Evidence was given before us by Mr. A. Rayner, chartered accountant and Mr. P. N. Crabtree, the Respondent, who were at all material times Joint Managing Directors of the Company; by Mr. J. R. Gillum, a director of Kleinwort Benson Ltd., merchant bankers; and by Mr. G. J. Chandler, a member of the London Stock Exchange and a partner in the firm of Cazenove & Co., stockbrokers.
‘4. [sets out the various documents which were proved or admitted.]
‘5. As a result of the evidence both oral and documentary adduced before us we find the facts set out in paragraph 6 below proved or admitted. Evidence given by Mr. Gillum and Mr. Chandler as to take-over and valuation matters is set out in paragraphs 7 and 8 below.
‘6(1). The company manufactured both newspaper and offset lithographic machinery and was the parent company of a group of companies manufacturing printing machinery and allied equipment for the printing industry. It had an issued share capital of £2,600,250, divided into 2,400,000 Ordinary Stock Units of £1 each, 100,125 Preferred Ordinary Stock Units of £1 each and 100,125 6% Cumulative Preference Stock Units of £1 each. These Stock Units are hereinafter referred to as “Ordinary”, “Preferred Ordinary” and “Preference” Stock Units respectively. (2) During the year 1965/66 the Respondent disposed of the following Stock Units of the Company held by him on 6th April, 1965: 98,604 Ordinary Stock Units, 3,232 Preferred Ordinary Stock Units 1,800 Preference Stock Units. These disposals took place as a result of the acceptance of a cash offer made by Vickers in August 1965 to acquire the whole of the issued capital of the Company. The prices which the Respondent received for the said holding pursuant to this offer were:—For each Ordinary Stock Unit 55s. in cash, For each Preferred Ordinary Stock Unit 40s. in cash, For each Preference Stock Unit 25s. in cash. (3) Each of these Stocks was quoted on the London Stock Exchange. On 6th April, 1965, the middle market quotations for them were:—Ordinary Stock Units 42s. 6d. per Unit, Preferred Ordinary Stock Units 31s. 3d. per Unit, Preference Stock Units 17s. 6d. per Unit. (4) [sets out the relevant provisions of the Finance Act 1965, s 44 which I have just read, and continues:] On the basis specified in those provisions for cases not within the exception cited above the market value of the Company’s Stock Units on 6th April, 1965, would be the figures set out in subparagraph (3) above. On the appeal before us, however, it was in issue between the parties whether on the facts of the case it was or was not within the said exception; and
Page 1242 of [1970] 1 All ER 1239
secondly if it was what should then be taken to be the market value of the Company’s Stock Units on 6 April, 1965, ascertained in accordance with the provisions of subsection (1) of the said Section 44, that is, be taken at that date to be “the price which those assets might reasonably be expected to fetch on a sale in the open market.” (5) As to the first question, the situation as at 6th April, 1965, was that negotiations between representatives of Vickers and the Company had taken place prior to that date concerning the making by Vickers of a cash offer for the whole of the Company’s issued capital, but that by that date no information of any kind as to those negotiations had been publicly disclosed. In fact the public did not get to know of the negotiations until the Vickers’ press release was published—that is, until 17th August, 1965 … (6) [sets out at length the opening of the negotiations]. (7) [sets out various meetings by representatives of the two sides]. (8) [refers to a meeting at Whitehall Court on 14th January 1965 and continues:] On the basis of figures set out in the last-mentioned document the Company calculated that the value of its Ordinary Stock Units was £3 per unit. The Stock Exchange middle market quotation for Ordinary Stock Units on 14th January, 1965, was 47s. 6d. (9) [refers to a further meeting on 24th February and continues:] The discussion proceeded on this footing [the footing being cash] and on the basis that the figure would be about £7 million. [Then there are references to further matters arising in the negotiations.] (10) As matters turned out, however, arrangements for the take-over offer were for various reasons not finalised until the following August. [And it goes into those reasons.] (11) [sets out the meeting held on 6th August, 1965 and concludes:] In relation to the question of the price to be paid for the Company’s Ordinary Stock Units the Vickers representatives pointed out that the Stock Exchange price had fallen back from 47s. 6d. to 42s. od. They suggested that in these circumstances it would be appropriate to reduce somewhat the previous figure of £3, and it was finally agreed that 55s. od. would be an appropriate figure. As regards the Preferred Ordinary and Preference Stock Units Vickers accepted the Company’s suggestion that having regard, inter alia, to the rights of holders of these Units to a premium of 5s. od. on repayment, prices of 40s. and 25s. respectively for these Stocks would be appropriate figures. (12) [deals with a meeting held on 11th August 1965.] (13) On the following Monday, 16th August, 1965, a Board meeting of the Company was held at Leeds to approve the merger, and thereafter a meeting was held with the Vickers representative at which the documents relating to it were signed. A press release was issued by Vickers for publication on the following day, and the offer was issued on Wednesday, 18th August, 1965, that is, one day later. (14) Some seven months thus elapsed between the meeting at Whitehall Court on 14th January, 1965, referred to in subparagraph (8) above and the finalising of the offer. During this period the middle market quotations on the London Stock Exchange of the Company’s Ordinary Stock Units fluctuated as follows … [The highest was 51s 3d, that at 6th April was 42s 6d and the lowest was 41s.] (15) Those concerned in the negotiations at no time sought to engage in any dealing in the Company’s Stock Units while the negotiations were in progress. Neither the Respondent nor Mr. Rayner would have been willing sellers of their own holdings of the Company’s Ordinary Stock Units on 6th April, 1965, at 42s. 6d. per unit. Had Mr. C. H. Crabtree, the Respondent or Mr. Rayner envisaged selling any of their personal holdings of the Company’s Stock Units during the period while the negotiations were in progress it would not have been commercially sensible for them to have done so at prices in line with those quoted at the time for the Company’s Stock Units on the London Stock Exchange.
Paragraph 7, the next paragraph, is that which contains their findings as to the expert evidence of Mr Guillum, a director of Kleinwort Benson Ltd, merchant bankers, and it is of critical importance in this case. It provides:
Page 1243 of [1970] 1 All ER 1239
‘7. Mr. Gillum gave evidence before us (which we accepted) to the following effect:—Kleinwort Benson Ltd. are frequently retained to advise in relation to take-overs, mergers and amalgamations, and as a director of the Company he had considerable experience of such matters. He was not called in to advise the directors of R. W. Crabtee & Sons Ltd. until August, 1965. By that time the arrangements for the take-over were completed apart from some minor technicalities. As to the position as at 6th April, 1965, he thought that there had been what might be called a state of suspended animation in the negotiations from the time of the meeting in February at Whitehall Court until Vickers were in a position to proceed with their offer in August. The only matters that appeared to have been left unsettled were the final determination of the prices to be paid for the stock, minor technicalities such as are always left over in such cases until the last moment, and finally, Vickers’ ability to finance the purchase. A company of the standing of Vickers would not, he thought, have entered into the serious negotiations which had taken place unless they had every expectation of being able to implement them. He considered that it would have been appropriate for the shareholders of R. W. Crabtree & Sons Ltd. to have been advised by or before the beginning of April, 1965, of the position generally as regards the approach made by Vickers. If he had them been advising the directors of the Company, he would have favoured a statement being made to the effect that they announced that discussions were in progress which might lead to a cash offer being made for the whole of the issued capital, but that the discussions were expected to be of some duration and that no further announcement should therefore be expected at an early date. Had such an announcement been made he had no doubt that the Stock Exchange quotation for the Ordinary Stock Units would then have gone up. As to how much the price would have risen, he thought that the middle market quotation of 47s. 6d. on 14th January might reasonably have been expected on such an announcement to go up by, say, 5s. to 52s. 6d. Thereafter he would have expected the price to have remained relatively stable, but perhaps owing to interest waning somewhat in the period up to 6th April, 1965, to have fallen back by then by a shilling or so. So approaching the matter he thought that if an appropriate announcement had been made the middle market quotation on 6th April, 1965, would probably have been, say, 51s. 6d. or 51s. od. instead of 42s. 6d. The movement in the quotations for the Preferred Ordinary and Preference Stock Units would, he thought, have been much smaller. The values of such stock tended to move only within much closer limits. The middle market quotations of these stocks as at 6th April, 1965, might, he thought, have been increased by perhaps 1s. 6d. and 9d. respectively, that is to say, have been 32s. 9d. for the Preferred Ordinary and 18s. 3d. for the Preference Stock Units. The Stock Exchange had not in his view been given at that time information as to the negotiations which should have been supplied to it, and he thought that because of this current quotations did not afford any true measure of the value of the Stock Units in question. Mr Gillum would not have expected either side to have engaged in dealings in the Company’s Stock Units while negotiations were proceeding. He knew of no sanction to prevent them doing so other than that they would have forfeited respect in the parlours of the City. He did not feel competent to say what the effect on the quotation for the Company’s Ordinary Stock Units would have been if the Respondent had endeavoured to realise his holding of them on the London Stock Exchange on 6th April, 1965. His own valuation figures were based on an announcement having been made.
‘8. Mr. G. J. Chandler gave evidence before us (which we accepted) to the following effect:—Cazenove & Co were among the oldest firms of brokers on the London Stock Exchange. They tended to specialise in new issue work, and as a partner in the firm he was actively engaged in such work. He also
Page 1244 of [1970] 1 All ER 1239
acted as investment adviser to a number of companies and was the Chairman of a quoted Investment Trust Company. He had made many share valuations for Estate Duty purposes. He considered that the position in the present case between 24th February, 1965 and 6th April, 1965, was that serious negotiations had taken place and that Vickers were definitely interested and would hope to make an offer to acquire the Company’s issue capital. With this knowledge he would have advised a client not to sell at the then quoted price. As to the value of the Company’s Ordinary Stock Units at 6th April, 1965, in such circumstances he considered that the probability was then in the region of seven-tenths that a bid would be made. If a bid had been made then, he thought it likely that it would still have been of the order of 55s. rather than £3 a unit, that is to say about 12s. 6d. in excess of the middle market quotation of 42s. 6d. Allowing for the element of uncertainty in the situation, he thought that, with knowledge of the take-over negotiations, it would be reasonable to take as a fair figure for the value of the Stock at 5th April, 1965, the quotation of 42s. 6d. plus 70% of 12s. 6d., that is 51s. 3d. In his opinion that was the price that anybody who knew of the take-over negotiations would have been prepared to pay on 6th April, 1965. Although the absence of an announcement by the directors would have had a marked effect on the prices quoted on that day, that fact did not affect his valuation. As regards the Preferred Ordinary and Preference Stocks he thought that those Stocks were dealt with on a generous basis, and that an announcement of the take-over negotiations would have affected prices for them as at 5 April, 1965, only to a relatively small extent. He considered that the values of these Stocks at that date would have been perhaps 2s. od. to 2s. 9d. more than the middle market quotation for the Preferred Ordinary Stock and, say, 9d. more than the middle market quotation for the Preference Stock, that is to say in the region of 33s. 3d. to 34s. od. for the Preferred Ordinary Stock and 18s. 3d. for the Preferred Stock. He thought the Stock Exchange the best market for quoted securities if one wished to effect an immediate sale. In the circumstances, however, the Respondent would have been foolish to put his holding on the market on 6th April, 1965, at the then quoted price. An alternative way of selling a substantial holding was by private negotiation. In his view Stock Exchange prices depended on buyers and sellers, and often on what information was available to them, though he considered the buying and selling aspect was more important. If the Respondent had wished to sell his Ordinary Stock Units on 6th April, 1965, the holding would, he considered, have been too big to put on the market at once. The sale price for a large block could be very different from that for a small block—it might be much higher or much lower, depending on the circumstances.
‘9. [mentions certain cases on estate duty valuation].
‘10. It was contended on behalf of the Respondent:—(1) that on the facts set out herein there were as at 6th April, 1965, special circumstances in consequence of which the prices then quoted on the London Stock Exchange for the Company’s Ordinary Preferred Ordinary and Preference Stock Units were not by themselves a proper measure of market value; (2) that the market values for capital gains tax purposes of the said Stock Units as at that date should therefore be ascertained not on the basis specified in subsection (3) of Section 44 of the Finance Act, 1965, but in accordance with the provisions contained in subsection (1) of that Section; (3) that on a proper construction of the said subsection (1) the said market values were on the facts set out herein greater than the middle market quotation prices for the said Stock Units on 6th April, 1965, on the London Stock Exchange; (4) that in arriving at the said market values account should be taken of the evidence hereinbefore set out as to the true value of the Stock Units in question as at that date; (5) that the appeal should accordingly succeed.
Page 1245 of [1970] 1 All ER 1239
‘11. It was contended on behalf of the Inspector of Taxes:—(1) that on the facts set out herein there were not as at 6th April, 1965, any special circumstances in consequence of which prices then quoted on the London Stock Exchange for the Company’s Ordinary, Preferred Ordinary or Preference Stock Units were not by themselves a proper measure of market value; (2) that the market values of the said Stock Units as at that date should accordingly be ascertained on the basis specified in subsection (3) of Section 44 of the Finance Act, 1965; (3) alternatively to (1) and (2), that if the said market values fell to be determined not under subsection (3) but under subsection (1) of the said Section and thus to be taken to be the prices which the Stock Units might reasonably be expected to fetch in the open market on 6 April, 1965, those prices should be ascertained on the basis of regard being had to the prices then quoted for the Stock Units on the London Stock Exchange; (4) [I need not read this contention which was discarded.]
‘12: We, the Commissioners who heard the appeal observed that it was common ground that we had in this case to assume that the stocks in question had been sold by the Respondent and immediately re-acquired by him, at their market value on the 6th April, 1965, that being laid down by paragraph 22(2) of Schedule 6 to the Finance Act, 1965, and that the statutory provisions governing their valuation were those contained in Section 44 of that Act. The stocks in question had been quoted on the London Stock Exchange, and the basis of valuation for them was therefore that set out in Section 44(3)—“except where in consequence of special circumstances prices so quoted are by themselves not a proper measure of market value“. By Section 44(1) it was enacted that “Subject to the following subsections, in this Part of this Act ‘market value’ in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market“. We thought it unnecessary to seek to summarise the evidence we had heard as to how matters stood as regards the take-over negotiations at the 6th April, 1965. It was, we thought, clear on the evidence that prior to that date Vickers had entered into serious negotiations and had envisaged making a take-over bid by a cash offer. The meetings of the 14th January, and the 24th February, 1965, had taken place. They had not carried matters to the point of finality, but they had carried them to a stage at which in Mr. Gillum’s view it would have been appropriate for the Directors of R. W. Crabtree & Sons Ltd., to have made a public announcement to the effect that discussions were in progress which might lead to a cash offer being made for the whole of the issued capital—with some caveat to the effect that some matters were not yet settled and no further announcement should be expected at an early date. On the evidence before us the consequence of any such announcement would in our view undoubtedly have been that the London Stock Exchange prices at the 6th April, 1965, would have been substantially greater than the prices that were then in fact quoted. Were there in those circumstances special circumstances in consequence of which the quoted prices were not a proper measure of market value as defined in Section 44(1)? On the facts we were of opinion that there were here special circumstances within the meaning of those words in Section 44(3), and on the evidence before us we were satisfied that the London Stock Exchange prices on the 6th April, 1965, were substantially less than they would have been if an announcement of the kind which Mr. Gillum considered should have been made had been made before that date. In such circumstances what should be taken to be the market value within Section 44(1), i.e. the price which the stocks in question might reasonably be expected to fetch on a sale in the open market? In this connection we had had our attention invited to a number of cases and had given them careful consideration. [They then make quotations from the various estate duty cases which I will not take up time in reading.] The cases in which those observations were made were not,
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however, cases concerned with undisclosed negotiations for a take-over and we thought that in relation to the present case we should consider the actual facts in the case before us and the application to them of the statutory provisions as to valuation set out in Section 44 of the Finance Act, 1965. So approaching the matter we thought that, as it had been put in argument, the Stock Exchange was, in relation to the stocks at the 6th April, 1965, “working in blinkers“. A horse in blinkers was shut off from seeing a good deal. When a market was shut off, as we thought the London Stock Exchange here had been, from information vital to a realistic assessment of the true value of the assets in question, was it right to refer to that market as “the open market” envisaged in Section 44(1)? Having weighed the matter, we thought that it was not. Accordingly we held that the appeal succeeded in principle. On the further question of how much, we had had the advantage of hearing the evidence given by Mr. Gillum and Mr. Chandler. In the course of it they indicated figures which they considered appropriate, and the reasoning which led them to arrive at those figures. As to the Ordinary Stock Mr. Gillum thought that there would have been a rise of say 5s. od. from the 47s. 6d. figure to 52s. 2d. following by a waning of, say, 1s. od. or so to say 51s. 6d. or 51s. od. at the 6th April, 1965. Mr. Chandler, by an entirely different process of reasoning, arrived at a figure of 51s. 3d. On the evidence we saw no good ground for adopting a substantially lower figure such as that of 47s. od. put forward by the Crown. Having carefully considered what had been said in evidence on the matter of figures we determined that the market value of the Ordinary Stock at the 6th April, 1965, computed in accordance with the provisions of Section 44(1), was 51s. 3d. As to the Preference Stock Mr. Gillum and Mr. Chandler both arrived at a figure of 18s. 3d., and we adopted that figure. As regards the Preferred Ordinary Stock Mr. Gillum arrived at a figure of 32s. 9d. and Mr. Chandler at figures ranging from 33s. 3d. to 34s. od. Having carefully reviewed what had been said we determined that the market value of the Preferred Ordinary Stock at the 6th April, 1965, was 33s. od.’
It will be seen then that the commissioners decided (1) that the existence of the take-over negotiations and their non-communication to the Stock Exchange constituted ‘special circumstances’ within the meaning of s 44(3), ie special circumstances in consequence of which the prices quoted on the London Stock Exchange were by themselves not a proper measure of market value; and (2) being then thrown back on sub-s (1) unaided by sub-s (3) that the market value of the ordinary stock units could be taken at 51s 3d, the market value of the preferred ordinary stock units at 33s and the market value of the preference stock units at 18s 3d.
On the present appeal it was contended on behalf of the Crown that the take-over negotiations and their non-communication did not constitute special circumstances within the meaning of sub-s (3). It was said that in considering the market value of quoted shares—ie the price which those shares might reasonably be expected to fetch on sale in the open market—one must treat the file of prospective purchasers on the Stock Exchange as possessing only such information as they did, in fact, possess, and that the non-communication of information concerning the take-over negotiations accordingly did not represent special circumstances resulting in the Stock Exchange quotation not being a proper measure of market value.
I am unable to accept this contention. It seems to me that the market value of any asset, ie the price which that asset might reasonably be expected to fetch on a sale in the open market, must be the price in a market where the prospective purchasers have all such information as to any relevant factors as is normally available to purchasers in that market, having regard to the nature of the market. I mention in parenthesis that the statement is in accordance with the reasoning of the Court of Appeal in Re Lynall (decd), Lynall v Inland Revenue Comrs which I will
Page 1247 of [1970] 1 All ER 1239
mention in a moment and which was decided after the case came before the commissioners.
Obviously the extent and character of the information which prospective purchasers must be treated as having differs from market to market and subject matter to subject matter and it could not be maintained that a prospective purchaser of quoted shares on the Stock Exchange is entitled to the same sort of information as, for example, the purchaser of unquoted shares by private treaty. On the other hand, having regard to the evidence of Mr Gillum, which the commissioners accepted, the commissioners were, it seems to me, clearly justified in finding that prospective purchasers on the Stock Exchange were entitled to have information as to the takeover negotiations. Once they reached this conclusion, it necessarily follows that the absence of this information represents a special circumstance which renders the quoted value something other than a proper measure of market value. Having reached the conclusion, and as I have said, justifiably reached the conclusion that s 44(3) was inapplicable, the commissioners were then thrown back on s 44(1) unaided by s 44(3). Under sub-s (1) alone the commissioners were bound to select whatever method of ascertaining the market price in a hypothetical open market they thought appropriate. They were further bound it seems to me in applying whatever method they selected to treat the prospective purchasers in that hypothetical open market as having information as to the take-over negotiations. In fact they were presented with two alternative methods of valuation, namely, that of Mr Gillum and that of Mr Chandler. These methods were different, but each proceeded on the footing that the prospective purchasers had information as to the take-over negotiations. Either would have been an appropriate method. As they reached the same result within a matter of shillings, the commissioners were not concerned to choose between them. Again I think the commissioners were fully justified in accepting one or other of these methods of valuation, including the assumption of information as to the negotiations.
As regards this second point, counsel for the Crown, once driven away from s 44(3), was constrained to say that when one went to s 44(1) one was in fact taken back to the Stock Exchange quotations under s 44(3), notwithstanding that ex hypothesi those quotations were not of themselves a proper measure of market value. That is a counsel of despair and I do not think there is any reason why the court could adopt it. Once one is driven away from s 44(3) I do not think that there is any difficulty in applying s 44(1) in isolation from s 44(3).
Counsel for the taxpayer pointed out that the Stock Exchange is not the only possible market even for quoted shares. That is true. It seems to me, however, that I am not concerned in this case to travel outside the methods of valuation which were accepted by the commissioners.
I must now refer although I will do so quite shortly, to Re Lynall (decd), Lynall v Inland Revenue Comrs in the Court of Appeal. That case was concerned with a different question, namely, the amount of information to which prospective purchasers must be treated as entitled on the sale by private treaty of unquoted shares. The judgments do, however, bear on the present point in this respect, that they lay down that the court must adopt what they call an objective test as to the information which would normally be available to prospective purchasers is contradistinction to what they call the subjective test of what information the particular directors would have made available. I will quote two short passages. Widgery LJ defined what I have called the objective test in these terms ([1969] 3 All ER at 991, [1969] 3 WLR at 780):
‘… that in addition to the published information the vendor and purchaser should be deemed to have all information which would normally be made
Page 1248 of [1970] 1 All ER 1239
available to a genuine intending purchaser of property of the kind in question, this being information which a purchaser would expect to have and without which he would be unwilling to buy.’
Cross LJ defined the objective test in these words ([1969] 3 All ER at 994, [1969] 3 WLR at 783):
‘… the knowledge to be imputed to the parties to the hypothetical sale was merely possession of the information which a willing vendor would normally require before he was prepared to sell and a willing purchaser would normally require before he was willing to purchase.’
The objective test was the one which they accepted.
I have quoted those passages because they do have some bearing on the knowledge which prospective purchasers of quoted shares on the Stock Exchange should be treated as possessing, but in the end the position of quoted shares is quite different from that of unquoted shares and one should not, I think, press too far an analogy from that case.
I ought to mention in conclusion that the taxpayer was himself, of course, one of those who possessed the information which on Mr Gillum’s evidence should properly have been made available to the Stock Exchange. It is not suggested that that is a relevant circumstance for the present purpose. For the reasons which I have given I propose to dismiss the appeal.
Appeal dismissed.
Solicitors: Solicitor of Inland Revenue; Simpson, Curtis & Co, Leeds (for the taxpayer).
K Buckley Edwards Esq Barrister.
Practice Direction
(Probate: Grants of representation: Rhodesia)
[1970] 1 All ER 1248
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (PROBATE)
7 APRIL 1970
Probate – Grant – Cessation of resealing in England of grants made in Rhodesia – Applications for grants of representation in case of persons dying domiciled in Rhodesia.
Grants of representation made by the High Court of Rhodesia after 13 September 1968 will not now be resealed by the High Court of Justice in England.
Applications for grants of representation to the estates of persons who die domiciled in Rhodesia may be made under r 29 of the Non-Contentious Probate Rules 1954a.
Compton Miller, Senior Registrar
7 April 1970.
Volume 2
Thomas v Fryer
[1970] 2 All ER 1
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DONOVAN, RUSSELL AND MEGAW LJJ
Hearing Date(s): 23, 24, 25 FEBRUARY 1970
Rent restriction – Possession – House required by landlord – Landlord becoming such by purchase – Landlord taking as beneficiary under will as varied by family arrangement – Whether landlord by purchase – Rent Act 1968, s 10, Sch 3, case 8.
Rent restriction – Possession – Hardship – Evidence that mental health of landlord likely to deteriorate if possession refused – Admissibility of evidence – Rent Act 1968, Sch 3, Part III, para 1.
The owner of a dwelling-house, which was let to the tenant, died after 7 November 1956 and by her will left the residue of her estate, including the house, to her four children in equal shares. By a family arrangement one daughter, the landlord, took the house in part satisfaction of her share of residue, and paid three-quarters of the value of the house to her two brothers and sister in order to achieve equality of benefit. In an action by the landlord against the tenant for possession of the house under the Rent Act 1968, s 10 and Sch 3, case 8, on the ground that she reasonably required it for occupation as her own residence,
Held – An order in favour of the landlord for possession of the house had been properly made under the Rent Act 1968, s 10 and Sch 3, case 8, because—
(i) the landlord had not become landlord by purchasing the house or any interest therein after 7 November 1956, since on the true construction of Sch 3, case 8, ‘purchasing’ had its ordinary and not its technical legal meaning (see p 5 h and j, p 7 b and p 8 d, post); accordingly, as the landlord had acquired the house by a family arrangement under the mother’s will, she could not be said to have purchased it;
(ii) in deciding whether greater hardship would be caused by granting an order for possession than by refusing one, in accordance with Sch 3, Part III, para 1, to the Rent Act 1968, evidence that the mental health of the landlord was likely to deteriorate rapidly if possession were refused, was admissible although such evidence ought always to be carefully scrutinised (see p 6 g, p 7 g and p 8 f to h, post).
Notes
For landlord by purchase, see 23 Halsbury’s Laws (3rd Edn) 823, para 1605, and for greater hardship, see 823, 824, para 1606.
For the Rent Act 1968, s 10, Sch 3, see Halsbury’s Statutes (2nd Edn) 399, 469.
Cases referred to in judgment
Baker v Lewis [1946] 2 All ER 592, [1947] KB 186, [1947] LJR 468, 175 LT 490, 31 Digest (Repl) 706, 7949.
Bristol (Marquis) v Inland Revenue Comrs [1901] 2 KB 336, 70 LJKB 759, 84 LT 659, 65 JP 360, 39 Digest (Repl) 323, 676.
Inland Revenue Comrs v Gribble [1913] 3 KB 212, 82 LJKB 900, 108 LT 887, 44 Digest (Repl) 331, 1653.
Page 2 of [1970] 2 All ER 1
Jopling v Inland Revenue Comrs [1940] 3 All ER 279, [1940] 2 KB 282, 109 LJKB 734, 163 LT 361, 39 Digest (Repl) 324, 679.
Littlechild v Holt [1949] 1 All ER 933, [1950] 1 KB 1, [1949] LJR 1299, 31 Digest (Repl) 707, 7953.
Appeal
This was an appeal by Alice Fryer, the tenant of a dwelling-house, against an order for possession of the house in favour of her landlord, Mildred Elizabeth Thomas, made by his Honour Judge Moylan at Edmonton County Court on 5 June 1969. The facts are set out in the judgment of Lord Donovan.
P R Oliver QC and A N L Butterfield for the tenant.
E J Prince for the landlord.
25 February 1970. The following judgments were delivered.
LORD DONOVAN. This appeal arises out of a contest for the possession of a dwelling-house. The house is 47 Queens Road, London, N 11. The tenant, Alice Fryer, a widow aged 60 or 61, has lived in this house with members of her family for over 30 years. She has a controlled tenancy. Possession of the house is now sought by the landlord, Mildred Elizabeth Thomas. She does so pursuant to case 8 of Sch 3 to the Rent Act 1968, which, read with s 10 of the Act, allows a court to make a possession order if the landlord (inter alia) reasonably requires the dwelling-house for occupation as a residence for himself, and did not become a landlord by purchasing the dwelling-house or any interest therein after one of two specified dates. In this case the specified date which is applicable is 7 November 1956.
Miss Thomas became the landlord of this house in the following circumstances. It was owned by her mother, who died on 26 June 1961. In her will she disposed of the house by a residuary gift in these words:
‘The residue of my Estate I give and bequeath in equal shares unto my four children, Barbara, Owen, Geoffrey and Mildred if living at my death … ’
Mildred is the landlord to whom I have already referred. All four children survived their mother. All four were named as executors. The eldest child alone, however, ie Mr Owen Thomas, proved the will on 5 October 1961. Besides the house the testatrix left some £4,500 in stocks and shares. After making specific bequests of certain chattels, and leaving some pecuniary legacies to others, she disposed of the residue in the terms I have already quoted. The residuary gift therefore comprised the house and such of the investments as were not required to meet the legacies.
The landlord is a teacher by profession. She is now some 51 or 52 years of age. She has spent a large part of her life travelling. Before her mother died, the landlord had told her mother that she would like to have the house. After the mother’s funeral the question what should be done with the house arose, and there was a discussion among the four children. In the normal way I should simply summarise the evidence relating to it; but the words themselves, as noted by the county court judge from whose order this appeal is brought, reveal the atmosphere in which the relevant transaction was conceived and concluded, and I therefore quote them. The landlord said:
‘Owen asked us what should be done about this house— asked others if they wanted it—they said NO, he asked me; I said YES. Certain amount of effort to persuade me not to have it. But I wanted my own home in this country. Owen was strongest in trying to persuade me not to have it; he said it would be better for me to have securities. Eventually all agreed that house should be mine. Nothing said about money on this occasion. Later Owen gave me deeds of house and said I had better see about getting the house transferred.
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I took deeds to a solicitor. Owen said I should probably have to pay some money to make an adjustment, because he wanted to give me securities as well as the house, and we did not know whether this would be more than my share of the estate. Eventually he told me to make out a cheque for £500 to him—I assumed for him and other brother. On another occasion he told me to let my sister have £250, which in course of time I did. I had earlier been to an estate agent at Owen’s request and asked him to value house. I obtained valuation—£900. After this Owen gave me the deeds. I took it to a solicitor, told him the house was to belong to me and asked him to do the necessary work. Eventually I also received stocks and shares from mother’s estate. Never entered my head that I was “buying” the house from Owen or the family.’
Under cross-examination, she said, among other things:
‘Later, Owen gave me deeds of house. I said “Can I get on with this?” I took deeds to a solicitor—husband of an old friend of mine—and told him house was to be mine. As far as I remember no details of money had been mentioned at that stage. Order of events: (1) Discussion after funeral. (2) I went to estate agent to get valuation—few days before 28.7.61. (3) I told Owen what valuation was. (4) I told Owen I was going back to Africa. He gave me deeds. I went to solicitor and told him to send all documents to Owen. (5) I went to Africa middle November 1961. (6) After house was in my name I was asked to pay money. It was in my mind that I should have to make a money adjustment. I don’t remember whether Owen mentioned this before I returned to Africa or wrote to me in Africa. I only concerned myself that I should not intentionally do down my brothers and sister. I don’t remember seeing an account of distribution of mother’s estate. Valuation. I went to an estate agent who knew parents. I told him I was going to have the house from mother’s estate and asked him to value it. I visited him again. He said value £900. I said “Is that all?” He said “Well, it could be £1,000“. He then made out a document—which I presume was valuation. I didn’t think of the £750 as3/4 of value of house—I just paid what Owen said.’
Mr Owen Thomas in his evidence said:
‘I remember a discussion—not sure if we were all present— after mother’s death about fact that [landlord] wanted house. The others agreed she could. [Landlord] has a way of trying to hurry people up. It took me some time to persuade other executors to stand down. Before I had done this [landlord] asked if I would like her to get valuation of house for probate—because she was in the area. She went to estate agent who had collected mother’s rents. Valuation was sent to me by the estate agent. Before I went on holiday in September I had put in application for probate. [Estate Duty Office] made a mistake in calculation of duty—I had to repeat application. I finally got probate 5.10.61. At that point [landlord] was going to Africa and wanted to hurry up transfer of house. She asked me if she could arrange for a solicitor to get on with it. I agreed. I gave her the deeds. She went to the solicitor and arranged for me to call on him. I went to see Robbins, solicitor. I told him that all I required was a simple transfer of title—no question of investigation of title or other researches. He acted on my instructions having had no specific instructions from [landlord] who had approached him on my behalf as executor. Solicitor suggested it would be wise to do a search. I agreed because I wanted to be sure [landlord] wasn’t taking over something I didn’t know value of. Solicitor said appropriate form of transfer was an assent. I asked him to prepare this after searches. I told solicitor bill to be sent to me as executor. This was early November. He kept me hanging about for some time. Eventually he produced Assent for me to sign. I signed it. I was careful to have it dated 1.11.61, which
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made it 1st item of property in estate to be disposed of. Before mother died I had mother’s estate arranged so it could be neatly divided into quarters. When [landlord] said she wanted house, I felt this might be an unfair share of estate. At that time lot of talk about Labour Party nationalising rented property. This was why I talked to [landlord] about it because whereas stock market was down and shares all likely to improve I felt house likely to go other way. This didn’t affect [landlord’s] wish to have house. As I was anxious [landlord] should have same chance to benefit from appreciation in share values as 3 other beneficiaries I persuaded her to accept 1/4 of those. This meant some adjustment had to be made. [Landlord] made a cash adjustment but more or less left it to me to decide what it should be. This must have been first discussed when I persuaded [landlord] to accept 1/4 share of stocks. That was before she went to Africa. Idea was to clear whole thing up before she went to Africa. When [landlord] agreed to take 1/4 of the shares I worked out what the cash adjustment should be—probably in same conversation. I thought it should be 3/4 of the approximate value of the house or a bit more because houses are usually undervalued for probate. I told [landlord] this but did not name any figure. Next that I knew was [landlord] sent me a cheque for £500, to be divided between brother and me, and said she had made a private arrangement with sister re other £250. I thought this was a little too much. I was running a personal account with [landlord]—paying occasional expenses for her. I credited this with the £25 excess and told her to adjust arrangement with sister by £12 10s. I didn’t look on this transaction as selling house to [landlord]. If I had been selling to her I think I would have expected her to use her own solicitor. I would not have taken responsibility of giving him instructions.’
Then in cross-examination:
‘At the time I did not have provisions of Rent Act in mind. The £500 from [landlord] does not appear in the estate account. A few shares were sold, some retained for grandchildren and beneficiaries and rest split into 4 and transferred. I have kept accounts on receipts and disbursements. I have not yet prepared final accounts.’
That evidence was given on 5 June 1969.
The landlord had made an unsuccessful attempt to get possession of the house in 1968. The county court judge who tried that case decided no more than this, that greater hardship would be caused by granting the order than by refusing it. As to this, see the Rent Act 1968, Sch 3, Part III, para 1. He decided no other question.
The present proceedings represent a second attempt by the landlord. The case was heard by his Honour Judge Moylan, sitting at Edmonton County Court, and on 5 June 1969 he made an order for possession in the landlord’s favour but postponing its operation for six months. Counsel on behalf of the tenant in the county court took a preliminary objection which the judge disposed of first. It was that the circumstances in which the landlord acquired the house involved the consequence that she could not discharge the onus which was on her of proving that she had become landlord otherwise than by purchasing the house or an interest therein after 7 November 1956. Accordingly, she could not bring herself within case 8 and her application for possession must therefore fail. The judge rejected this contention. His broad reason was this. This was a family arrangement between beneficiaries under the will by which the landlord was allowed to have the house as part of the residue, whilst at the same time making compensatory payments to her fellow residuary legatees in order to achieve equality of benefit. Such a family arrangement was not, he decided, equivalent to becoming a ‘landlord by purchasing the dwelling-house or any interest therein’ within the meaning of case 8.
In this appeal from that decision, counsel for the tenant, in a strenuous argument,
Page 5 of [1970] 2 All ER 1
insisted that it was wrong. A family arrangement and a purchase are not, he said, mutually exclusive terms. So much may be conceded. The motive for a transaction does not determine its legal character. Again, on one would dispute that. Counsel then went on to say, in effect: ‘Here is the house. The landlord was left by will an undivided fourth share in it. She wanted, however, the whole. Her fellow residuary legatees let her have it. She agreed to pay compensatory payments to them, and indeed paid them £750. That was equivalent to the three-quarters interest which they had in it. What is that except the purchase of an interest in the dwelling-house?’ Despite the attraction of the argument, I find myself after due consideration unable to accept it. One has to decide what is meant by ‘purchasing the dwelling-house’ in the context of the Rent Act 1968, and particularly in the context of case 8. This particular provision has a history going back at least to the Rent and Mortgage Interest Restrictions (Amendment) Act 1933, the 1968 Act being a consolidating measure.
In Baker v Lewis ([1946] 2 All ER 592 at 594, [1947] KB 186 at 191) Morton LJ said:
‘I am well aware that the word “purchaser” and the words “by purchase” have in certain contexts a technical meaning which is well-known to all lawyers, but I am not aware of any case in which the words “by purchasing a dwelling-house” have been given any technical meaning. For my part I feel no doubt that they simply refer to a transaction of purchase or buying.’
That, of course, by itself does no more than rule out the technical meaning of ‘purchase’ in the law of property.
In Littlechild v Holt ([1949] 1 All ER 933 at 936, 937, [1950] 1 KB at 7) Denning LJ said:
‘The intention of the legislature was that people should not be able to buy houses over the heads of the tenants and then turn them out without giving them alternative accommodation … The acquisition of the reversion, whether it be a freehold or a leasehold, for money or money’s worth, and whether payable in a lump sum or by instalments, is plainly a “purchase”, but the acquisition of it under a will is not a purchase: Baker v. Lewis.’
There are certain cases under the Stamp Act 1891 where family arrangements involving the transfer of assets to a beneficiary for a consideration have been held to be ‘conveyances on sale’. See, for example, Jopling v Inland Revenue Comrs and Marquis of Bristol v Inland Revenue Comrs. There are other stamp duty cases dealing with such family arrangements where the opposite conclusion has been reached. See the cases cited in Sergeant on Stamp Dutiesa. In those circumstances I do not myself get much help from the cases under the Stamp Act 1891.
One returns to what the county court judge said was the root question: Would the ordinary and reasonable person call this transaction a purchase and sale of the house? I think he would not. He would call it a domestic arrangement between members of a family for the division of their mother’s estate in a manner which did justice to all of them. The landlord, if asked how she got the house would, I think, instinctively reply: ‘I got it as my share under my mother’s will, although I had to get my brothers and sister to agree, and I made adjusting payments so as to achieve fairness’. I think that is the true view, and that the learned county court judge was therefore entitled to rule as he did on the preliminary point.
This makes it unnecessary for me to deal with another point, raised in this court,
Page 6 of [1970] 2 All ER 1
which, although not taken below, is clearly open on the evidence. That is, that the transaction was agreed to and was effected during the course of administration of the estate, before the residue had been ascertained. It took place, therefore, at a time when none of the residuary beneficiaries had any proprietary interest in the house to sell, but simply a right against the executor to have the estate properly administered.
Counsel for the tenant then contended that greater hardship would be caused by granting than by refusing the order. On this point the judge went with great care into the relevant circumstances of both parties and decided against the contention. This is a finding of fact against which there would ordinarily be no appeal. But it has been argued that it is vitiated because the judge took into account in favour of the landlord evidence which he should have ignored. This was evidence given on her behalf by Dr William Gooddy, a well-known neurologist. He said that the landlord’s failure to obtain possession of the house in the proceedings which she brought in 1968 had worried and depressed her ever since; that in consequence she has not been able to keep up with her teaching work, despite her high qualifications. He gave an instance of her failure to complete the marking of certain Cambridge University examination papers; and eventually expressed his opinion thus:
‘I am quite sure that her preoccupation with the situation which I have outlined is having an adverse effect on her health. I do not say that the situation is necessarily entirely responsible for her present state of health; but in a person of her age and background, who might any way suffer from severe depression, her housing problem is damaging her to a serious degree medically. For these reasons, I am quite sure that [the landlord] is undergoing great hardship on medical grounds. Her general health will, in my opinion, deteriorate quite rapidly, if she is unable to obtain possession of her property. I feel it is most important for the future welfare of this conscientious and valuable teacher that, if her case is reconsidered in a county court, this medical point should be considered when assessing the degrees of hardship likely to be experienced by the contending parties.’
Counsel for the tenant then said that, if this sort of evidence is to be admitted, where is the line to be drawn? Is it to be contended, for example, that a bad loser will suffer hardship whereas a good loser will not? Is a party to be allowed to say: ‘If I lose this case all sorts of things may happen to my state of mind which will cause me hardship?’ I recognise the danger that evidence may be given on these lines which could be without real weight, or even be spurious; but the trial judge will normally, I think, be able to recognise truth as distinct from falsehood or exaggeration. In the present case, where it was proved that the health of one of the parties was already suffering, and that her health was likely to deteriorate rapidly if possession were refused, I can see no reason whatever why the judge should not have taken this evidence into account, even though such deterioration had its origin in mental suffering.
In my opinion, therefore, this appeal fails and should be dismissed.
RUSSELL LJ. In cases such as this, under case 8 of Sch 3 to the Rent Act 1968, it is necessary for the landlord to show that he did not become landlord by purchasing the dwelling-house or any interest therein after 7 November 1956. Here the landlord became entitled after that date under her mother’s will to a quarter share of her residuary estate. The estate included the dwelling-house. All four residuary beneficiaries agreed that she should have the house appropriated to her as part of and on account of her share of residue. It was, of course, implicit in this that a figure representing the value of the house should be brought into hotchpot in the division of the cash or other assets constituting the rest of the estate. Accordingly, the executor assented to the vesting of the house in the landlord. Until that assent
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neither the landlord nor any other residuary beneficiary had any beneficial interest in the house, the estate being unadministered. By that assent the legal estate and entire beneficial interest became vested in the landlord.
I am prepared to accept for the purposes of argument that had the value of the house been over the exemption limit, the assent which effected the appropriation would have required to be stamped under the Stamp Act 1891 as a conveyance on sale. But it does not follow from that that the landlord thereby became landlord by purchasing the house, in the context of the Rent Act 1968. That phrase is one which is to be interpreted in an ordinary sense, and not in a technical fashion. She acquired the house and became landlord by virtue of the testamentary benevolence of the mother as representing part of her quarter share of residue and as a partial distribution of the estate. If the landlord or anyone in her position were to be asked: ‘When did you buy your house?’ the answer would surely be: ‘I did not buy it. It came to me as part of my share of my mother’s estate.’
In fact the assent was not followed by an uneven division of the rest of the residuary estate. This was because the executor, Mr Owen Thomas, for some reason which I do not understand, insisted on the landlord having a full quarter of the mother’s investments, and the equivalent of hotchpot was subsequent to the assent achieved in fact by payment by her of £750 (as representing three-quarters of the value of the house) to the other three beneficiaries direct. It does not seem to me that this fact makes any difference; she still became landlord of the house on the execution of the assent but not by purchasing the house. Suppose that the mother had specifically devised the house to the landlord, and in leaving residue to the four children in equal shares had provided that the value of the house should be brought into hotchpot in the division of residue. It could not be said that the plaintiff had become landlord by purchasing the house. Nor would the answer be different if for some reason instead of bringing the figure into hotchpot the landlord were to achieve the equivalent by payment of three-quarters of the sum to the other residuary beneficiaries. It seems to me unreal to say that she does so become landlord by purchasing the house when the beneficiaries agree that the estate shall be administered in the manner in which it would have been administered had the will taken that form.
On the second part of the case, I cannot accept the criticism of the judge’s finding on ‘greater hardship’ under Sch 3, Part III, para 1. The question before the judge was whether greater hardship would be caused to the tenant by not allowing her to remain in possession, or to the landlord by not allowing her to take possession and make her home there. The medical evidence was strong that the mental or psychological condition of the landlord was such that if she was prevented from making her house her home, as the judge summarised it, ‘her health will deteriorate very seriously indeed’. It was argued, and this was the only point taken in criticism of this part of the judgment, that the judge should have ignored ill-effects of deprival of possession attributable to a mental weakness or neurosis. In the end counsel was forced to argue that in considering hardship regard might be had to illness of the body but not of the mind. This I cannot accept. But I would observe that evidence such as this when given in these cases should be closely scrutinised.
Accordingly I agree that the tenant’s appeal fails under both heads. I do this with some regret, since this house has been the home of the tenant for some 30 years; but there are two sides to the question, as the judge has held.
MEGAW LJ. The question which the learned county court judge put to himself was: is this transaction properly described in ordinary non-technical words as buying or purchasing of this house by the landlord? I think that was the right question. Lord Donovan, in his judgment, has cited a passage from the judgment of Morton LJ in Baker v Lewis ([1946] 2 All ER 592 at 594, [1947] KB 186 at 191) in which he expressed the view that the words ‘by purchasing the
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dwelling-house’ do not have any technical meaning. Morton LJ then went on: ‘If I had felt any doubt on that point I should have been assisted by the decision in Inland Revenue Comrs v Gribble … ’ In Inland Revenue Comrs v Gribble ([1913] 3 KB at 217) Sir Herbert Cozens-Hardy MR said:
‘None of those cases satisfies me that we ought to put any other meaning on the word “purchased” in this section than that which is the ordinary and commercial and businesslike meaning of the word, and I decline to incorporate in this section what I have ventured to call the technicalities of real property law.’
That was a case concerned with the Finance Act 1910 and dealing with reversion duty.
On the facts of the present case, the learned county court judge answered the question which he had correctly put to himself in these words:
‘If the reasonable and ordinary person were asked, immediately after the transaction, was this or was this not a sale, in my judgment an informed, reasonable man, would conclude that it was not a sale.’
On the evidence, I do not think that that conclusion can be faulted. In my view, the ordinary reasonable person, knowing the facts which emerged from the evidence, would say that the landlord acquired this house, not by purchase, but under her mother’s will. Under her mother’s will the landlord was entitled to one-quarter of the residue. With the consent of the other beneficiaries, and as he was entitled to do, the executor, Mr Owen Thomas, appropriated the house to the landlord for the satisfaction of her entitlement under the will. True, she gave cheques for £500 and £250 to compensate the other beneficiaries, but that was merely a part of the mechanics of the adjustment of the entitlements under the will. It does not result in her having become landlord by purchasing the house of any interest therein.
Turning to the second ground of appeal, I think that, where evidence of this sort is adduced, the court which has to decide the question of ‘greater hardship’ should scrutinise it with very great care and should not act on it lightly, or otherwise than after the most mature consideration of its reliability, and, if it is reliable, of the weight to be given to it in comparison with the other factors. Here I have no doubt that the learned judge did consider the evidence in that way. He was convinced of the reliability and accuracy of the evidence given by a distinguished neurologist. There is no doubt that a court is entitled to take into account, in assessing relative hardship, the effects which will be produced on the physical health of the parties if the decision goes one way or the other. I see no reason in principle why effects on mental health should be excluded from consideration, especially where, as here, the medical evidence is that general health will suffer in the result. It may well be that relevant matters of mental health are more difficult to prove, and should be viewed with greater suspicion, because they may be more easy to feign, and it may be more difficult to detect the fabricator, the malingerer, or the person who exaggerates; but there is no principle of law which precludes such matters from being taken into account.
I too confess that I have great sympathy for the tenant, who is being turned out of the house in which she has lived for 30 years. She may not unfairly feel that what has tipped the scales against her is the very fact that she is of stable disposition and not neurotic. Yet I cannot see that the judge has erred in principle in taking into account the medical evidence relating to the landlord.
I agree that the appeal fails.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Stafford Clark & Co (for the tenant); Lawrence, Graham & Co (for the landlord).
Henry Summerfield Esq Barrister.
Mellstrom v Garner and others
[1970] 2 All ER 9
Categories: ADMINISTRATION OF JUSTICE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, SALMON AND KARMINSKI LJJ
Hearing Date(s): 28 JANUARY 1970
Declaration – Jurisdiction – Hypothetical question – Application for declaration serving no useful purpose – Application misconceived – Declaration of entitlement to commit breach of professional etiquette.
An agreement dissolving a partnership between chartered accountants, and providing for the plaintiff, the retiring partner, to be employed thereafter in the partnership practice by the defendants, the continuing partners, as a salaried partner, further provided ‘that the retiring partner … shall not at any time hereafter interfere with or intervene or endeavour to divert any of the business intended to be carried on by the continuing partners and forming the basis of goodwill’. The plaintiff applied to the court for a declaration that this provision did not prohibit him from canvassing persons who had been clients of the partnership only since the date of the agreement. The plaintiff did not intend to canvass such clients and the defendants did not intend falsely to accuse him of so doing.
Held – The application for a declaration was misconceived, and must be refused, because as the plaintiff did not intend so to canvass a declaration would serve no useful purpose (see p 10 h, p 11 j and p 12 a and b, post), and in any event the court would not give the plaintiff a declaration that he was entitled to do something notoriously against the rules of the Institute of Chartered Accountants (see p 10 h, p 11 e and p 12 a, post).
Per Karminski LJ. The practice relating to declarations regarding the future is one which is exercised … with very considerable reserve (see p 12 a, post).
Notes
For the discretion to make declaratory judgments, see 22 Halsbury’s Laws (3rd Edn) 749–751, para 1611, and for cases on the subject, see 30 Digest (Repl) 169–175, 202–241.
Cases referred to in judgment
Guaranty Trust Co of New York v Hannay & Co [1915] 2 KB 536, [1914–15] All ER Rep 24, 84 LJKB 1465, 113 LT 98, 30 Digest (Repl) 174, 239.
Odhams Press Ltd v London and Provincial Sporting News Agency (1929) Ltd [1936] 1 All ER 217, [1936] Ch 357, 105 LJCh 195, 154 LT 277, 30 Digest (Repl) 178, 264.
Appeal
This was an appeal by the defendants Royston Donald Garner, Michael Plant and John Desmond Finnigan against the decision of Megarry J, given on 18 April 1969, granting a declaration to the plaintiff, Graham Frederick Charles Mellstrom. The facts are set out in the judgment of Salmon LJ.
T H Bingham for the defendants.
P Goodenday for the plaintiff.
28 January 1970. The following judgments were delivered.
HARMAN LJ. This is a dispute between chartered accountants who have accepted advice of perhaps the most unpromising sort that I have ever seen. How professional men like these, who after all must be comparatively familiar with documents having a legal flavour, can have put their names to such a farrago of nonsense as this document
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passes my comprehension. It does not construe; it does not make sense at all; but each party seeks from the court a declaration as to the true interpretation of this nonsensical affair. It is not said that either of them has either broken any of its provisions or seeks to break them; it is not suggested that there are any facts whatever to be considered; and we are to make what in my younger days used to be called a declaration ‘in the air’. That is against the principles of the Court of Chancery as I understand them.
RSC Ord 15, r 16 (which originally was RSC Ord 25, r 5), provides:
‘No action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.’
Wide words it is true, but very much constricted under the practice of the court even since 1915, when the well-known case Guaranty Trust Co of New York v Hannay & Co, was decided in a King’s Bench Court of Appeal. In the Supreme Court Practice 1970 one finds this notea:
‘Where specific relief, other than a declaration, is not claimed, the jurisdiction to make a binding declaration of right should be exercised with great caution … [and, just above that] The power to make binding declaration of right is a discretionary power … [There are various examples given of that. The note continues:] A claim for a declaration only, not followed by a claim for consequential relief, will be carefully watched; but properly employed it is useful … Thus a declaration will not be made against a person who has asserted no right nor formulated any specific claim … ’
That is precisely in point here. Neither of these people claimed to do something which the other says that he was not entitled to do. All they say is: ‘If I did it, it would not be any breach.' That is not enough. There are various other instances in the course of the notes. There is one about documents—Odhams Press Ltd v London and Provincial Sporting News Agency (1929) Ltd—which is cited in a noteb—
‘… where a claim was for a general declaration of copyright in a class of documents (starting prices) and no infringement as regards existing documents was alleged or probable … ’
I think that the judge here has gone beyond the jurisdiction allowed him under that order. The plaintiff wanted a declaration that he was entitled to canvass customers of the firm, with certain exceptions. That would have been a gross breach of professional etiquette on his part and I do not think that in any event the court would give him a declaration that he was entitled to do something which is notoriously against the rules of the Institute of Chartered Accountants. That is not the sort of thing that the court will do. The result would only be either that he would be committing that breach and would be struck off, or he would not be committing it, in which case there would be no need for the declaration. Consequently, I think that the judge went too far in struggling with this farrago of nonsense, and, being defeated by it, it then has no effect. In other words, he might have said: ‘I dare say it has, but I do not think it is an application in which the court is called upon to say so.' I would have dismissed the action at the start as being misconceived, and would maintain that decision now.
Page 11 of [1970] 2 All ER 9
SALMON LJ. I agree. In my view, these proceedings are clearly misconceived. The plaintiff and the defendants are all chartered accountants. The plaintiff was in partnership with two of the defendants up to 7 April 1967. He then entered into an agreement dissolving the partnership in which he had been the moving spirit; and the agreement provided that he should continue (on terms which it is unnecessary for me to recite) as what was defined in the agreement as a ‘salaried partner’. Clause 5(b) of the agreement apparently is causing the plaintiff concern. It is in these terms:
‘IT IS FURTHER PROVIDED that the Retiring Partner shall not accept as clients clients of the old Partnership [that part he does not worry about; but then the clause goes on] and shall not at any time hereafter interfere with or intervene or endeavour to divert any of the business intended to be carried on by the Continuing Partners and forming the basis of goodwill.’
This clause, like the rest of the agreement is most inelegantly drafted. It has not been suggested that it prevents the plaintiff from acting for persons who had been clients of the partnership after 7 April 1967, and during the time when he was a salaried partner. It is conceded that he would be entitled to act for such clients if they came to him of their own free will. What has disturbed the plaintiff about the second part of the clause is whether it prohibits him from canvassing the clients to whom I have referred. Accordingly he issued this originating summons endeavouring to obtain a declaration that the clause on its true construction does not prohibit him from canvassing these clients.
No one disputes that to canvass a client is a gross breach of professional etiquette on the part of a chartered accountant; and it is a breach of which the institute takes the most serious view and to which it applies the most stringent penalties. Counsel for the plaintiff says—and of course we accept—that the plaintiff has no intention at all of canvassing anyone. Now, if he has no intention of canvassing anyone, what can be the purpose of this originating summons? If he does not canvass, it does not matter very much whether or not the clause prohibits him from doing so. Counsel says, however, that if the plaintiff did canvass (which he does not intend to do), or if the defendants falsely accused him of canvassing (which they say they do not intend to do), he would be protected by the declaration which he seeks. A more academic question I find it difficult to imagine. It is certainly not the sort of question about which the court ought, in its discretion, to make any declaration.
The learned judge gave a full and elaborate judgment, in which he finally came to the conclusion that the clause in question was meaningless and therefore did not prohibit canvassing; and he made a declaration to that effect. From that decision the defendants appeal. I find it quite unnecessary to construe the clause; but I must not be taken as agreeing with the learned judge’s view of it—although it is, of course, a very badly drafted clause. We have not heard argument about it; but I should not be surprised, had I heard the argument, if I might have considered that it does prohibit canvassing. The learned judge, having taken the view which he did, quite rightly did not go on to consider whether, if it did prohibit canvassing, it would be too wide to be enforceable. It is unnecessary for me to express any view about that, and I form none of any kind. But to my mind it is quite plain that it is wrong for the court to grant the declaration asked for by the plaintiff. I cannot, for my part, see that it could do any practical good, except on the basis that the plaintiff does hope to canvass, which of course he does not, or on the basis that the defendants would falsely accuse him of canvassing, which I have no reason to suppose they would. This is a case in which the learned judge might, and indeed if his attention had been drawn to the point, no doubt would, have refused to consider the meaning of the agreement and would have refused to make any declaration because the proceedings ought never to have been brought. I therefore agree with Harman LJ that the appeal should be allowed.
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KARMINSKI LJ. I also agree with the judgments of Harman and Salmon LJJ and desire only to add this. The practice relating to declarations regarding the future is one which is exercised, as I understand it, with very considerable reserve. It is not the practice to grant one if it is embarrassing or useless for any good purpose. The declaration sought here is unlikely, as I see it, to be embarrassing; but I cannot see, for the reasons already given, what, if any, useful purpose it could possibly serve. In fact I have come to the conclusion that it would not serve any useful purpose, and therefore ought not to be granted.
I agree that the order must be set aside.
Appeal allowed. Order below discharged.
Solicitors: J Tickle & Co (for the defendants); Harry I Alkin & Co (for the plaintiff).
Henry Summerfield Esq Barrister.
R v Palfrey
R v Sadler
[1970] 2 All ER 12
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, WINN LJ AND TALBOT J
Hearing Date(s): 13, 14 JANUARY 1970
Statute – Construction – Inclusio unius exclusio alterius – Application of maxim – Choice between two named persons or objects – Road Traffic Act 1962, s 2(1).
Road traffic – Driving while unfit to drive through drink – Specimen of blood – Consent to – Specimen provided after warning required by s 3 (10) of Road Safety Act 1967 – Road Traffic Act 1962, s 2(1).
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Specimen for laboratory test – Conditions precedent to request for specimen – Arrest – Lawfulness of arrest not material to validity of request for specimen – Road Safety Act 1967, s 3(1).
Road Traffic – Driving while unfit to drive through drink – Specimen of blood – Consent to – Lack of consent established – Discretion to exclude evidence – Road Traffic Act 1962, s 2(1).
The reference to ‘a specimen of blood taken from him with his consent’ in s 2(1)a of the Road Traffic Act 1962 (which empowers a court to have regard to any evidence which might be given of the proportion or quantity of alcohol which was contained in the blood or present in the body of the accused) does not imply that no regard should be had to a specimen not taken with his consent; the maxim inclusio unius exclusio alterius being inapplicable to a situation other than one where there is only a choice between two named persons or objects (see p 16 a and b, post).
An analysis, and the certificate giving the result of an analysis of the proportion of alcohol in the blood of a person, taken for the purposes of a charge under s 1 of the
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Road Safety Act 1967 and purporting to have been taken pursuant to ss 2b and 3c can be used for the purposes of supporting, and as evidence supporting, a charge under s 6(1)d of the Road Traffic Act 1960 and s 2(1) of the Road Traffic Act 1962 (empowering the court to have regard on such a charge to evidence of the proportion of alcohol in the accused’s blood as ascertained by analysis of a specimen of blood taken from him ‘with his consent’), notwithstanding the warning of potential sanctions for failure to provide a specimen required to be given by s 3(10) of the Road Safety Act 1967 (see p 15 c and f, and p 18 c, post).
The requirement imposed by s 3(1) of the Road Safety Act 1967 on any person ‘who has been arrested’ to provide a specimen for a laboratory test is not dependent on the lawfulness of the arrest; the question is merely whether or not he is a person who is under arrest, ie whether he is free to go, or whether he has been told that he is in a state of custody (see p 16 e and p 17 h and j, post).
Per curiam. If an accused raised and substantiated that he could not truly be said to have given his consent for the purposes of s 2(1) of the Road Traffic Act 1962, the court would have a discretion to exclude the evidence of the analysis of the specimen of blood obtained (see p 18 h and j, post).
Notes
For the maxim expressio unius exclusio alterius, see 11 Halsbury’s Laws (3rd Edn) 395, para 644, and for cases on the subject, see 17 Digest (Repl) 305, 1118–1128, 41 ibid 158, 44, and 44 ibid 265, 903–906.
For the offence of driving whilst under the influence of drink, and related offences, see 33 Halsbury’s Laws (3rd Edn) 626–629, paras 1057–1061, and for cases on the subject, see 45 Digest (Repl) 93–96, 309–330.
For provisions empowering the court to have regard to evidence of the quantity of alcohol in the blood on charges of driving whilst under the influence of drink, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1059.
For the offence of driving a motor vehicle with undue proportion of alcohol in blood, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 1.
For the Road Traffic Act 1960, s 6, see 40 Halsbury’s Statutes (2nd Edn) 717.
For the Road Traffic Act 1962, s 2, see 42 ibid 888.
For the Road Safety Act 1967, ss 2, 3, see 47 ibid 1556, 1558.
Cases referred to in judgment
Campbell v Tormey [1969] 1 All ER 961, [1969] 1 WLR 189.
R v Payne [1963] 1 All ER 848, [1963] 1 WLR 637, 127 JP 230, 47 Cr App Rep 122, 45 Digest (Repl) 115, 391.
Page 14 of [1970] 2 All ER 12
Scott v Baker [1968] 2 All ER 993, [1969] 1 QB 659, [1968] 3 WLR 796, Digest Supp.
Cases also cited
Callis v Gunn [1963] 3 All ER 677, [1964] 1 QB 495.
Director of Public Prosecutions v Carey [1969] 3 All ER 1662, [1969] 3 WLR 1169.
Kuruma Son of Kaniu v Reginam [1955] 1 All ER 236, [1955] AC 197.
R v Jones (E J M) [1970] 1 All ER 209, [1970] 1 WLR 211.
R v Mitten [1965] 2 All ER 59, [1966] 1 QB 10.
R v Nowell [1948] 1 All ER 794.
R v Wall [1969] 1 All ER 968, [1969] 1 WLR 400.
Appeals
(i) R v Palfrey
The appellant, Henry Palfrey, was tried at Cambridgeshire and Isle of Ely Quarter Sessions on 27 March 1969 before the chairman (G R Rougier Esq QC) and a jury on an indictment containing two counts: (i) (count 1) that on 27 November 1968 he drove a motor vehicle on a road having consumed alcohol in such a quantity that the proportion thereof in his blood exceeded the prescribed limit, contrary to s 1(1) of the Road Safety Act 1967; and (ii) (count 2) that on 27 November 1968 when driving a motor vehicle in a public place he was unfit to drive through drink, contrary to s 6(1) of the Road Traffic Act 1960. The chairman ruled the appellant be tried on count 1 first. The appellant pleaded not guilty and at the close of the evidence submitted there was no case to answer. The chairman acceded to the submission and directed the jury to return a verdict of not guilty which they did. The appellant was convicted on count 2 and sentenced to a fine of £30 and was disqualified from driving for 12 months and his driving licence, ordered to be endorsed. He appealed on the grounds that, although found not guilty of an offence contrary to s 1 (1 of the Road Safety Act 1967, the analyst’s certificate as to the quantity of alcohol in his blood was obtained under the 1967 Act procedure and was wrongly admitted in evidence on the charge under the Road Traffic Act 1960. A second ground of appeal was not pursued at the hearing of the appeal but an additional ground was stated with leave, namely that the chairman misdirected the jury in that he failed to direct them that they should have regard to the analyst’s certificate only if they were satisfied that the sample had been obtained from the appellant with his consent.
Sir Harold Cassel for the appellant Palfrey.e
J G Leach for the Crowne(ii) R v Sadler
The appellant, Edward Daniel Sadler, was tried at South East London Quarter Sessions (deputy chairman L A Moules Esq) on 6, 7 and 8 August 1969 on an indictment containing two counts: (i) (count 1) that on 19 March 1969 driving when unfit to drive through drink or drugs, contrary to s 6(1) of the Road Traffic Act 1960; and (ii) (count 2) driving, on 19 March 1969, a motor vehicle with a blood-alcohol concentration above the prescribed limit, contrary to s 1(1) of the Road Safety Act 1967. The appellant pleaded not guilty and at the close of the prosecution case a submission of no case to answer was made. The deputy chairman ruled that the appellant was entitled to an acquittal on count 2 but that there was a case to answer on count 1. He was convicted on count 1 and sentenced to a fine of £50 and disqualified from driving for three years and his driving licence was endorsed. The appellant appealed against his conviction and sentence on the grounds that the deputy chairman wrongfully admitted evidence of a blood test analysis on count 1 when he had ruled on a different count (count 2) that the blood test had been taken after unlawful arrest and had accordingly withdrawn that count from the jury. A further ground of appeal was stated at the hearing, that alternatively the appellant was autrefois acquit.
Page 15 of [1970] 2 All ER 12
Jean Henderson for the appellant Sadler.
D H Farquharson for the Crownf
14 January 1970. The following judgment was delivered.
WINN LJ delivered the judgment of the court in both cases at the invitation of Lord Parker CJ. These two appeals arise in the case of the appellant Palfrey on a certificate granted by the learned chairman of Cambridgeshire Quarter Sessions and in the case of the appellant Salder on leave given by the single judge, although really not required since plainly a point of law is raised by that appeal.
The essential question for determination is the same in each of the two cases; and it is, put succinctly, this: whether or not an analysis, and the certificate giving the result of an analysis of the proportion of alcohol in the blood of an accused person, taken for the purposes of a charge under s 1 of the Road Safety Act 1967 purporting to have been taken pursuant to ss 2 and 3 can be used for the purposes of supporting, and as evidence supporting, a charge under s 6 of the Road Traffic Act 1960 and the Road Traffic Act 1962.
In each case the appellant was acquitted on a charge brought against him under the 1967 Act, and that followed in each case on a submission of no case to answer made by learned counsel then defending. Subsequently the appellant in each case was tried on a charge of driving when his capacity to drive properly was substantially impaired by the consumption of alcohol, under the 1960 and 1962 Acts.
The argument in the case of the appellant Sadler was very clearly put, and the discussion with the learned chairman was very plainly recorded and helpfully available for this court in the transcript. Regrettably, in the other case of the appellant Palfrey, those comments cannot be made, no doubt for the special reason that the shorthand writer had been ill and had to submit to a serious operation soon after the trial; it is no doubt for that reason that it is very difficult in many passages in the transcript to gather what was said by learned counsel, or indeed by the presiding chairman.
In substance, what was argued was this in each case: it is unlawful, and therefore must be inadmissible, to produce in evidence on a charge under the 1960 Act an analysis which had been taken under the 1967 Act provisions after the accused had been warned as that Act requires by s 3 (10), particularly because the wording of s 2 of the 1962 Act makes it plain that only a specimen provided or taken with the consent of the accused or suspected person is admissible in evidence. It is, I think, convenient to take that last submission a little out of turn, and perhaps giving it rather more emphasis than, viewing the matter as a whole, it merits, in order to dispose of it finally. It was said by counsel for the appellant Palfrey that his appeal could be put very succinctly indeed, and he acceded to a suggestion from the court that the submission as so far adumbrated then by him was really a two-minute submission and raised no more than a two-minute point.
He said, looking at the Road Traffic Act 1962, s 2(1), as amendedg, that one finds these words:
‘In any proceedings for an offence under the said section six [ie the section creating the offence in the 1960 Act], the court shall, subject to subsection (4) of this section [which is irrelevant], have regard to any evidence which may be given of the proportion or quantity of alcohol or of any drug which was contained in the blood or present in the body of the accused, as ascertained by analysis … of a specimen of blood taken from him with his consent by a medical practitioner, or of urine … provided by him, at any material time … ’
Counsel for the appellant Palfrey said that it is a simple instance of the application of a rule of logic often conveniently cited in the terms of a well-known Latin tag, inclusio
Page 16 of [1970] 2 All ER 12
unius exclusio alterius, and, said counsel, since we have here an expressed inclusion of the case where a specimen is taken with consent, and the section says that to that specimen so taken regard is to be had, it follows that no regard is to be had to any specimen not so taken, ie no regard to any specimen of which it cannot be postulated, and I suppose he would say, as to which it has not been proved by the Crown, that it was taken with the consent of the appellant.
The frailty of that submission, and I respectfully agree that it is a two-minute point, is that alterius is the genitive of a Latin word, insofar as the court recalls its former learning, which means ‘the other of two’, not ‘another’; the logic of the proposition, and the force of the proposition, depends entirely on establishing that there is only a choice between two named persons, or objects; in such a case it can be said that if one of the two available is chosen, that is an exclusion of the other. But save in that special case, the maxim has no effect in logic or in law.
Apart altogether from that, it does not follow, as a matter of common sense, that, because it is affirmatively enacted that in certain circumstances a certain thing shall be done, there is any enactment that that thing shall not be done in any other circumstances. Therefore I pass from that submission, noting, before leaving it, that there is a more difficult and general proposition which has been canvassed in the course of this appeal, namely the question whether or not regard should be had to any evidence obtained from an accused person who has not been previously warned, cautioned, or had it made clear to him that he is free to give or not give a particular answer or a particular piece of material or evidentiary article.
The argument, apart from this particular point of ‘logical’ submission, depended very largely, in counsel for the appellant Sadler’s presentation of his case, on the submission that, if an arrest could be shown to have been unlawful, then all that followed on that arrest would, ipso facto, of necessity be equally unlawful. The court rejects that proposition in toto; it just is not sound. It cannot be said, and when this point was put to counsel she did not, it seemed to the court, effectively answer it, that wherever an individual is unlawfully in arrest, in a state of custody unlawfully begun, a free and open confession, or anything else which he may do or say whilst in that state of unlawful arrest, is not to be given in evidence, because the original arrest was unlawful. The proposition is far too wide.
Apart from that, it has to be recognised, and the court does think it is important to declare that the reasons why, in a number of cases, including Campbell v Tormey and others which it would be otiose to name, heard in recent months, an acquittal has been directed on the ground that the offence under the 1967 Act had not been established were not grounds of unlawfulness, but grounds of failure to comply with conditions precedent to the validity of the certificate of analysis, and its submission in evidence.
The possibility that this point, which has been the centre of dispute in the instant appeal, would sooner or later come up for decision, was foreseen by Lord Parker CJ when he was giving the judgment of the court in Scott v Baker. Lord Parker CJ, with prescience, said this ([1968] 2 All ER at 998, [1969] 1 QB at 671, 672) (I do not pause to say anything more about the facts or circumstances of Scott v Baker:
‘It seems to me quite impossible to argue that a specimen was properly provided under s 3, as it has to be before there is an offence, unless those matters have first been complied with. It may, of course, well be that, in the case of the principal Act, the Road Traffic Act, 1960, where a person has been charged, not of having a proportion of alcohol in his breath exceeding the prescribed limit but of driving when he is unfit to drive through alcohol, that the specimen provided then can be used, and properly used, to prove the offence, notwithstanding that there have been no breath tests prior thereto at all. But, so far as
Page 17 of [1970] 2 All ER 12
this offence is concerned, the offence created by s 1 of the Act of 1967, I am quite clear that, before a person can be convicted, it must be shown that the specimen has been provided as laid down in s. 3.’
It is plain that Lord Parker CJ, without using the words, is there saying, I venture respectfully to think, that these requirements to which he has indirectly referred are conditions precedent to the validity of the analysis as evidence; and Lord Parker CJ said, and really this is a very pregnant sentence, if I may be allowed respectfully to say so in Lord Parker CJ’s hearing ([1968] 2 All ER at 998, [1969] 1 QB at 671):
‘That section [ie s 1 of the Road Safety Act 1967] provides that it shall only be an offence if the person drives a motor vehicle having consumed alcohol which is later shown to exceed the prescribed limit on the provision of a specimen under s 3.’
It follows that it is only a specimen which has been provided in a manner which entirely conforms with the requirements of s 3 which is capable of establishing an excess of alcohol proportion constituting the offence.
The means of measuring is itself part of the definition of the offence, not evidentiary probative material tending to establish that an offence has been committed. If I may digress for a moment, I trust not at too great length, Parliament could perfectly well, with an equal logic and the same reason, have prescribed (since this was, after all, an additional infringement of the personal liberty of the citizen) that there should be certain strict requirements as to the type of instrument or the manner of testing which were to be observed before the offence could be shown to have been committed. It could have said that the instrument must be made by Messrs So-and-So; it could have said it must be certified by So-and-So as in good working order within such-or-such a period before it was used; it could have said that it should be approved by such-and-such a scientific institution for use in certain temperatures or altitudes, and so on and so forth. Section 1 is an attempt by strict requirement of certain conditions precedent to make it plain that the offence is only committed if there is established to be a certain proportion by such-and-such a particular type of measurement of material taken after particular preliminary steps relating to arrest and the offer of a breath test, and so on and so forth.
When one turns to the 1962 Act, nothing of the kind is there stipulated to be satisfied, and the 1962 Act, s 2, stands unimpaired in force as a result of the enactment of the Road Safety Act 1967. It is quite plain, without dwelling on it, that Parliament has drafted the 1967 Act with an eye directly on the provisions of s 2 of the 1962 Act.
Counsel for the Crown (in the case of the appellant Sadler) helped the court with his submissions on various points which established quite plainly that that is so, and it is equally clear, as indeed he submitted, that the 1967 Act expressly provides that, subject to very limited change, the provisions of s 2 are to remain in full force and effect. Inter alia, it is made plain by the 1967 Act, s 3, that there is to be a requirement, which must be complied with, to provide a specimen for a laboratory test, which may be a specimen of blood or of urine, resting on any person—I quote from the beginning of s 3(1)—‘who has been arrested under the last foregoing section or section 6(4) of the principal Act’. There the person liable to be required to give the specimen may be a person who has been arrested under s 2 of the 1967 Act. There is no question left open by the wording whether or not his arrest under that section has been lawful or not lawful; he is one who has been arrested in purported pursuance of that s 2 of the 1967 Act. It is not a question of whether or not certain conditions precedent have been satisfied. The question is merely whether or not he is a person who is under arrest; whether he is under arrest or not depends on whether he is free to go as he pleases, or has been told that he is in a state of custody. If he has been
Page 18 of [1970] 2 All ER 12
arrested under either s 2 of the 1967 Act or s 6(4) of the principal Act, the 1960 Act, and he is at a police station, then provided that he has previously been given an opportunity of providing a specimen of breath for a breath test at that station—in each of these appeals the appellant was given such an opportunity—he may then be required by a constable to provide a specimen for a laboratory test.
It is provided by s 3(10) of the Road Safety Act 1967 that:
‘A constable shall [it is mandatory] on requiring any person under this section to provide a specimen for a laboratory test warn him that failure to provide a specimen of blood or urine may make him liable to imprisonment, a fine and disqualification … ’
This must include, in all good sense, any instance of ‘requiring’ in bona fide, even if mistaken, reliance on s 3(10).
That being so, it is plain that, provided the appellants had been arrested under s 2 of the 1967 Act, which is common ground, had in fact been arrested and had been given, as they were, an opportunity at the station to provide a breath test, then the provisions that I have just read, both of them, apply. It follows from that, that quite apart from it being quite impossible to suggest that the constable in either of these cases acted improperly in giving the warning that he was required by the mandatory provision just read to give, he said and did nothing which Parliament did not intend him to in the situation which existed in each of these cases.
It is said, nonetheless, that there was an absence of consent on the part of the appellants to the taking by a medical practitioner of a blood specimen from his body. It is not necessary in the present case to express any opinion as to the meaning of ‘consent’ in the section. In neither case was there any suggestion that in fact the appellants were unwilling to give the specimen; in the case of the appellant Sadler there is no mention of the matter at all; in the case of the appellant Palfrey there is some slight superficial reference to the possibility that he might not have been willing and ready, had he not had this impetus or stimulus given to him of the warning, to agree to provide the specimen by having it taken from him by a medical practitioner. It is not a real issue in either of these cases. Counsel who was then defending the appellant Palfrey was logical enough to say that, of course, there was no merit whatsoever in the appellant Palfrey’s position; he said that meaning really, of course, that there was no complaint whatever of the way in which this specimen was taken.
There is no merit, there is no substance; the point taken by each of the appellants is a purely technical point, a further attempt to suggest that Parliament failed to pass an effective Act when they enacted the Road Safety Act 1967. There have been too many such objections, and it is to be hoped that these two appeals will illustrate clearly that there is no ground on which objection can be taken because of such circumstances as occurred in these cases. It is entirely as an afterthought that it is said that it has not been established affirmatively that the blood specimen in either of these two cases was taken with the consent of the appellants. The court thinks that that was not really a relevant point at all. If in any particular case it was desired to say that a specimen which was available, as to which a certificate was tendered, should not be admitted because it had been improperly taken, taken against the will of the accused person, taken, let it be said, without his true consent (thus raising a question as to what ‘consent’ means in s 2) then it would be for the accused person to raise the issue and show that at least there is some substance for it. Then undoubtedly if such substance were shown, discretion would come in as a requirement, inasmuch as it would be right for the court to exclude, in the exercise of its discretion, any evidence of the kind in question obtained improperly, obtained unfairly, obtained in a manner improperly and unfairly prejudicial to the accused.
There would be a discretion, as Lord Parker CJ said in R v Payne to exclude; it
Page 19 of [1970] 2 All ER 12
is not a question of the exercise of a discretion whether or not to admit. In neither of these cases was any discretion purported to be exercised. If there were here any matter which justified the application of a discretionary jurisdiction, then this court would be in a position itself to exercise the discretion, and would have no hesitation, had that been the situation, which it does not think it is, in exercising discretion against excluding this evidence. As it is, the evidence is not evidence properly analogous to or to be compared with a confession, since the very strict rules excluding admissions or confessions made on inducement or promise by persons in authority are limited in their application to confessions or admissions, not to the discovery of material real evidence which itself has probative meaning. Thus, if the first footman leaving the mansion is found to have in his suitcase the duchess’s tiara, it is not really a question of confession if he voluntarily or involuntarily opens the suitcase, and it is found that it is there; the tiara is not a confession but real evidence. One may compare fingerprints.
Those are the principal matters which arise in these cases. There is no need, as the court sees it, to consider any exercise of the power of the court under the provisoh. The court would have had little hesitation, had this been a case where such an exercise might have been required, in using it to say that the conviction should be upheld in each case. The point really is a short one, but because it has been very well argued in each of these appeals, and because the matter is one of some general importance, since anything which tends to suggest a weakness in the Road Safety Act 1967 is of great importance to the public, time, somewhat excessive time I regret, has been taken in delivering this judgment of the court. In each case the appeal is dismissed.
I should add that whilst I did rather generally state that the court would have had little hesitation in applying the proviso, it might well have had more hesitation in the case of the appellant Sadler than in the case of the appellant Palfrey.
Appeals dismissed. On 16 January in R v Sadler the court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, viz where a person driving a motor vehicle is arrested under the provisions of s 2 of the Road Safety Act 1967 and a specimen of blood is provided by him under s 3 of that Act, whether evidence of the proportion or quantity of alcohol contained in his blood as ascertained by the analysis or measurement of the specimen is admissible on a charge made under s 6 of the Road Traffic Act 1960, having particular regard to the provisions of s 3(10) of the Road Safety Act 1967 and of s 2(1) of the Road Traffic Act 1962, but refused leave to appeal to the House of Lords.
On 18 February the appeal committee of the House of Lords dismissed the petition for leave to appeal.
Solicitors: Registrar of Criminal Appeals (for the appellant Palfrey); Wild, Hewitson & Shaw, Cambridge (for the Crown); Registrar of Criminal Appeals (for the appellant Sadler); Solicitor, Metropolitan Police (for the Crown).
Rosalie Long Barrister at Law.
R v Bove
[1970] 2 All ER 20
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND ASHWORTH J
Hearing Date(s): 16 FEBRUARY, 20 MARCH 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen for laboratory test – Driver not driving at time request made for specimen for breath test – Arrest – Whether arrest illegal – Whether subsequent request for specimen for laboratory test valid – Road Safety Act 1967, ss 2(1), (5), 3(1), (3).
Some five to 15 minutes after the appellant had got out of his car and locked it, a constable in uniform required him to provide a specimen of breath for a breath test under s 2(1)a of the Road Safety Act 1967. The appellant refused. He was thereupon arrested under s 2(5)b and taken to a police station, where he refused a second breath test and to provide a specimen for a laboratory test when required to do so by a constable under s 3(1)cof the 1967 Act, and was charged with contravening s 3(3)(a)dof the Act. The jury were directed that there was nothing to indicate that the appellant had alcohol in his blood while his car was in motion. On appeal against conviction,
Held – The conviction must be quashed because, since the appellant was no longer driving, he had been illegally arrested under s 2 of the 1967 Act (see p 22 e, post) (Pinner v Everett [1969] 3 All ER 257 applied) and, therefore, could not be required to provide a specimen under s 3(1) of that Act (see p 22 g and p 24 b, post).
R v Palfrey, R v Sadler, p 12 ante, explained.
Notes
For the offence of driving a motor vehicle with an undue proportion of alcohol in the blood and related offences, see Supplement to 33 Halsbury’s Laws (3rd Edn), para 1061A.
For the Road Safety Act 1967, ss 2, 3, see 47 Halsbury’s Statutes (2nd Edn) 1556, 1558.
Cases referred to in judgment
Pinner v Everett [1969] 3 All ER 257, [1969] 1 WLR 1266, 133 JP 653.
R v Palfrey, R v Sadler, p 12 ante [1970] 1 WLR 416.
Scott v Baker [1968] 2 All ER 993, [1969] 1 QB 659, [1968] 3 WLR 796, 132 JP 422, 52 Cr App Rep 526, Digest Supp.
Appeal
This was an appeal by Ettore Bove against his conviction on 18 April 1969 at Inner London Quarter Sessions before the deputy chairman (P H Layton Esq) and a jury
Page 21 of [1970] 2 All ER 20
of failing to provide a specimen for a laboratory test, contrary to s 3(3)(a) of the Road Safety Act 1967. He was fined £20, ordered to pay £60 costs and disqualified from holding a driving licence for 12 months. The appeal was pursuant to a certificate granted by the deputy chairman under s 1(2) of the Criminal Appeal Act 1968 in terms set out at letter e below. The appeal first came before the court (Lord Parker CJ, Ashworth and Donaldson JJ) on 16 February 1970 when it was adjourned until it was known whether or not the appeal committee of the House of Lords would grant leave to appeal in R v Sadlere. On 18 February 1970, the appeal committee dismissed the petition for leave to appeal in that case. The facts are set out in the judgment of the court.
L Giovene for the appellant.
D H Farquharson for the Crown.
20 March 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. In April 1969, at Inner London Quarter Sessions, the appellant was convicted of failing to provide a specimen of blood or urine for a laboratory test, contrary to s 3(3) of the Road Safety Act 1967. He was fined, ordered to pay costs and disqualified for twelve months. He now appeals against his conviction pursuant to a certificate granted by the deputy chairman in the following terms:
‘Whether: 1. at the relevant time the [appellant] was a “person driving” within the meaning of section 2 of the Road Safety Act 1967 and 2. there was no evidence upon which the jury could find that the [appellant] has had a reasonable excuse for failing to provide a specimen for a laboratory test under subsection (3) of section 3 of the Road Safety Act 1967.’
In addition, grounds had been settled by counsel alleging that his arrest was unlawful since he was not a person driving.
The short facts as appear from the evidence set out in the summing-up to the jury are as follows: in the early hours of the morning of 5 February 1969, about 4.00 am, two constables were on duty in uniform in Tottenham Court Road. As they approached a left hand junction, a car which turned out to be driven by the appellant overtook them from behind, and, on turning the corner into Stephen Street, according to the constables, it clipped the pavement and bounced round the corner. Accordingly, they felt that there was something to investigate; they stopped at the corner of Stephen Street and they saw that this car had pulled up and stopped a little distance along it. The appellant and two women got out of the car. He locked the car door and all three walked towards the constables. According to the evidence as left to the jury, the constables noticed that he was walking rather deliberately, unsteady on his feet, and, when he came up to them, he smelt of alcohol. There apparently was some conversation with him and the women. It is suggested that he went to a club and came back again, but a time came, whether it was five minutes or ten minutes or 15 minutes later, when he was asked to give a specimen of breath. He categorically refused. He said: ‘I am not giving one, you have not seen me drive. I was walking when you stopped me.' A breathalyser was sent for and he again refused, whereupon he was arrested, and he said ‘You arrest me for nothing before, why you do it again’. Apparently he had been in some trouble in which one of these constables, Pc Baldwin, had been previously concerned. The appellant was taken along to Tottenham Court Road police station under arrest, where he was given, as he had to be, an opportunity to take a second breath test, and again he refused. He was then asked in due form to supply a specimen of blood or urine, and the requirements of the Act were fulfilled in respect of that. Again the appellant
Page 22 of [1970] 2 All ER 20
refused, and, accordingly, he was charged with an offence contrary to s 3(3) of the Act which provides:
‘A person who, without reasonable excuse, fails to provide a specimen for a laboratory test in pursuance of a requirement imposed under this section shall be guilty of an offence … ’
This case was heard before the decision in the House of Lords in Pinner v Everett. It was left to the jury to consider as a matter of fact whether, when the appellant was asked to give the breath test, he was still ‘a driver’, and apparently the jury must have come to the conclusion that he was a driver. It is quite clear, having regard to the decision in the House of Lords, that the question left to the jury should have been whether he was driving at the time or attempting to drive. In any event, under the decision of Pinner v Everett, it would be quite impossible in this case for the jury to find, if they properly directed their minds, that the appellant was still driving. He had got out of the car; he had locked the car, he was going to a club, and, indeed, had some conversation with the police and was not given a breath test for an appreciable time after that. It was never left to the jury, and this court does not feel that they can go into the matter whether there was really evidence from which the jury on a proper direction could hold that these police constables had a reasonable cause to believe that he had consumed alcohol when they saw him in Tottenham Court Road—in other words, while the car was still in motion; and, indeed, the deputy chairman told the jury that there was in effect nothing to indicate that the driver had alcohol in his body while the car was in motion—in other words from what they saw of the driving of the car.
Accordingly, one approaches this case on the basis that the appellant was illegally arrested under s 2 of the Act. There is no doubt that in every decision of this court, beginning with Scott v Baker and ending with Pinner v Everett in the House of Lords, it has always been assumed to be the law that a man could not be convicted of an offence under s 1 unless a specimen of blood or urine had been obtained pursuant to s 3. When one turns to s 3, one finds that, before a specimen for a test can be required, there must have been an arrest under s 2 of the Act or under s 6(4) of the Road Traffic Act 1960, and that there must have been an opportunity for a breath test at the police station. It has always been assumed in case after case that an invalid arrest will make the certificate inadmissible, and, accordingly, that that will be a defence to a charge under s 1 of the 1967 Act. When one bears that in mind, it is difficult to think that anything else could be the position when one is considering the case not where a man has given a specimen of blood or urine, but has refused to give one; and when one looks at s 3(3) creating the offence which I have already read, it is a failure to provide a specimen in pursuance of a requirement which may be made under this section, namely, under s 3(1), after an arrest and after an opportunity for giving a breath test. Accordingly, approaching this at first sight it would seem to indicate that the illegality of the arrest would be a defence to this charge.
Counsel for the Crown, and the court is indebted to him, has, however, sought to support this decision in the light of certain passages in a recent case in the Court of Appeal of R v Palfrey, R v Sadler. The facts of that case are entirely different, but I think that it is necessary to refer to them in a little detail What had happened there was that a man had been arrested under s 2 of the 1967 Act; he had provided a specimen of blood and it had been analysed. But on a charge under s 1 of that Act it was held that that certificate was inadmissible because he had not been properly arrested. Accordingly, what the prosecution then did was to charge him under
Page 23 of [1970] 2 All ER 20
s 6 of the Road Traffic Act 1960, and they sought to put in evidence the analyst’s certificate that had been obtained for the purposes of the charge under the 1967 Act. The question before the Court of Appeal was whether that was possible. The main argument was that the conditions for the taking of the specimen under the two Acts were different in that compulsion could be used so far as the s 3 requirement under the 1967 Act was concerned, whereas under s 6 of the 1960 Act as amended by s 2(1) of the Road Traffic Act 1962 it had to be a voluntary giving of the sample. Accordingly, it was said that a specimen obtained under the 1967 Act could not be used as evidence on a charge under the Road Traffic Act 1960. That was the issue which the court had to determine.
One of the arguments was that just as a failure to comply with the conditions in s 2 would make inadmissible the certificate of the analyst for the purposes of the 1967 Act, so it also would make inadmissible that analysis for the purposes of the 1960 Act. Winn LJ, in giving the judgment of the court, proceeded to deal with that argument by saying that of course when one is dealing with conditions precedent, and the requirements in s 2 are conditions precedent to the admissibility of the analyst’s certificate for the purposes of the 1967 Act, then a failure to comply with such a condition is a defence. But there were no such conditions precedent, as he pointed out, to the admissibility of any analyst’s certificate for the purposes of the 1960 Act, as amended, and the decision of the Court of Appeal accordingly was that there was nothing to prevent its being used. It may be that it had resulted originally from an illegal arrest, but that did not make it inadmissible for the purposes of the 1960 Act. However, as counsel for the Crown pointed out, the headnote states ([1970] 1 WLR at 417):
‘Held … that, whether the arrest of a person in purported pursuance of section 2 of the Act of 1967 was lawful or unlawful, he was liable to be required to provide a specimen for a laboratory tests in accordance with section 3(1) … ’
And Winn LJ said (At p 17, ante, [1970] I WLR at 423, 424):
‘Inter alia, it is made plain by the 1967 Act, s 3, that there is to be a requirement, which must be complied with, to provide a specimen for a laboratory test, which may be a specimen of blood or of urine, resting on any person—I quote from the beginning of s 3(1)—“who has been arrested under the last foregoing section or section 6(4) of the principal Act“. There the person liable to be required to give the specimen may be a person who has been arrested under s 2 of the 1967 Act. There is no question left open by the wording whether or not his arrest under that section has been lawful or not lawful; he is one who has been arrested in purported pursuance of that s 2 of the 1967 Act. It is not a question of whether or not certain conditions precedent have been satisfied. The question is merely whether or not he is a person who is under arrest; whether he is under arrest or not depends on whether he is free to go as he pleases, or has been told that he is in a state of custody.’
I must take full responsibility for those remarks as having been a member of the court, but I am quite satisfied in my own mind that neither Winn LJ nor the other members of the court had any intention of saying something which in effect would drive a coach-and-four through the way in which this Act has been administered from and including Scott v Baker, up to and including Pinner v Everett. They were remarks which were certainly obiter, and, as I have said, I am sure were never intended to be used for the proposition for which they are now cited. This court was considering, as I have said, the validity of this certificate for the purposes of the 1960
Page 24 of [1970] 2 All ER 20
Act even though undoubtedly it was inadmissible for the purposes of the 1967 Act. Counsel for the Crown, in directing our attention to the observations in R v Palfrey, R v Sadler, has very frankly pointed out the difficulties of reconciling that with the many cases up to and including Pinner v Everett, and also points to the somewhat absurd results which would follow from s 3(3)(a) of the 1967 Act if the requirement of a specimen for the purposes of that subsection meant a requirement irrespective of whether the conditions precedent had been fulfilled.
I think that the appeal must be allowed and the conviction quashed.
Appeal allowed. Conviction quashed.
Solicitors: Lawrence Alkin & Co (for the appellant); Solicitor, Metropolitan Police (for the Crown).
N P Metcalfe Esq Barrister.
Llewellyn v Carrickford and others
[1970] 2 All ER 24
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 24, 25, 27 FEBRUARY 1970
Injunction – Jurisdiction – Restraint of proceedings pending in High Court – Garnishee proceedings – Supreme Court of Judicature (Consolidation) Act 1925, s 41.
Practice – Appearance – Application for authority to enter appearance on behalf of another person sui juris – Whether power to grant.
On 23 December 1969, the C company obtained judgment in default of defence in an action against the L company in the Queen’s Bench Division. On 29 December, the C company applied for and obtained a garnishee order nisi in respect of a credit standing to the name of the L company in the bank. Further consideration in the garnishee proceedings was fixed for 23 January 1970. On 12 January, the plaintiff, one of the two directors of the L company, issued a writ and on 13 January a notice of motion, claiming: (i) an injunction to restrain the C company and the first defendant (the other director of the L company and the director of the C company) from taking steps to enforce the garnishee order; or (ii) an order that the plaintiff be authorised to enter an appearance on behalf of the L company in the action in the Queen’s Bench Division,
Held – The court had no jurisdiction to deal with the relief sought, because—
(i) the garnishee proceedings were themselves pending proceedings restraint of which by injunction was prohibited by s 41a of the Supreme Court of Judicature (Consolidation) Act 1925, if not by reason of their being proceedings in the action on whose judgment they were based, then by reason of their being, independently of the action, proceedings within the meaning of s 41(see p 28 b, post);
(ii) there was no power in the court to order the plaintiff to enter an appearance
Page 25 of [1970] 2 All ER 24
on behalf of the L company, which was a person sui juris; accordingly, the plaintiff would have to apply either for the winding-up of the company on the ground of deadlock or for relief under s 41 proviso (b) in the garnishee proceedings (see p 28 f, post).
Notes
For absence of jurisdiction to restrain proceedings, see 21 Halsbury’s Laws (3rd Edn) 350, para 734, and for cases on the stay of proceedings, see 51 Digest (Repl) 998–1000, 5347–5356.
For the Supreme Court of Judicature (Consolidation) Act 1925, s 41, see 18 Halsbury’s Statutes (2nd Edn) 478.
Cases referred to in judgment
Artistic Colour Printing Co, Re (1880) 14 Ch D 502, 49 LJCh 526, 42 LT 802, 51 Digest (Repl) 999, 5351.
T C Trustees Ltd v J S Darwen (Successors) Ltd [1969] 1 All ER 271, [1969] 2 QB 295, [1969] 2 WLR 81.
Cases also cited
Constellation, The [1965] 3 All ER 873, [1966] 1 WLR 272.
Deighton v Cockle [1912] 1 KB 206, [1911–13] All ER Rep 133.
General Service Co-operative Stores, Re [1891] 1 Ch 496.
Hart v Hart (1881) 18 Ch D 670.
Liverpool Household Stores Association, Re (1888) 1 Meg 83.
People’s Garden Co, Re (1875) 1 Ch D 44.
Romer & Haslam, Re [1893] 2 QB 286.
Roundwood Colliery Co Ltd, Re [1897] 1 Ch 373, [1895–99] All ER Rep 530.
Salt v Cooper (1880) 16 Ch D 544, [1874–80] All ER Rep 1204.
Venner’s Electrical Cooking and Heating Appliances Ltd v Thorpe [1915] 2 Ch 404.
Wright v Redgrave (1879) 11 Ch D 24.
Motion
By his notice of motion dated 13 January 1970 the plaintiff, David Richard Hollis Llewellyn, sought: (1) an injunction restraining the first two defendants, Richard James Carrickford and Carrickford Productions Ltd (the Carrickford company), from taking any step in an action brought by the Carrickford company against the fourth defendant, Llewellyn and Carrickford Associates Ltd (the Llewellyn company), to enforce an order made in the Queen’s Bench Division for payment of £2,500 and costs until the appointment of a liquidator for the Llewellyn company or until the further order of the court; and alternatively (2) an order that the plaintiff be authorised to enter an appearance on behalf of the Llewellyn company in the proceedings brought against the company by the Carrickford company in the Queen’s Bench Division and to apply to have the order for payment set aside. The third defendant was Lloyds Bank Ltd. The writ in the action, which claimed the same relief as in the notice of motion, was issued on 12 January 1970, and it was agreed that the motion should be treated as the trial of the action. On the motion, the first two defendants gave undertakings to carry out arrangements which the plaintiff said were made between the parties for disposing of the dispute before the writ in this action was issued, so that the only matter left in dispute was the costs of the proceedings. The facts are set out in the judgment.
J H Hames for the plaintiff.
O R Smith for the defendants.
Page 26 of [1970] 2 All ER 24
27 February 1970. The following judgment was delivered.
UNGOED-THOMAS J. This is a motion for an injunction to restrain the first two defendants from taking any step to enforce an order made in the Queen’s Bench Division for payment of £2,500 by Llewellyn and Carrickford Associates Ltd (which I shall refer to as ‘the Llewellyn company’) to the first two defendants. There is alternative claim for relief namely that the plaintiff may be authorised to enter an appearance on behalf of the Llewellyn company in the proceedings in the Queen’s Bench Division and then to apply in that Division to have the order for payment set aside. The plaintiff in this action is David Richard Hollis Llewellyn. The first defendant is Richard James Carrickford; the second defendant, a company, Carrickford Productions Ltd (which I shall refer to as ‘the Carrickford company’); and there is a third defendant, Lloyds Bank Ltd (the bank).
This application arises out of difficulties between the plaintiff and the first defendant. Each of them is entitled to half the shares in the Llewellyn company. They are the only two directors; and, as directors, I understand, on an equal footing. Owing to disagreement between them there is complete deadlock in the Llewellyn company. The first defendant is, in addition, the director and principal shareholder in the Carrickford company. There was a dispute between the plaintiff and the first defendant with regard to payments that were to be made by the Llewellyn company to the Carrickford company, and it was as a result of this dispute that the action in the Queen’s Bench Division was brought. The writ was issued on 9 December 1969, and on 12 December the solicitors to the first defendant and the Carrickford company wrote to the plaintiff’s solicitors that the writ was being issued by the Carrickford company against the Llewellyn company for the sum of £2,500. In those circumstances the plaintiff’s solicitors awaited the service of the writ on them in due course and never told the plaintiff that the writ was being issued. The writ was served, in fact, by post on the Llewellyn company in accordance with s 437(1) of the Companies Act 1948 at the Llewellyn company’s registered office. The office had ceased to be the office of the Llewellyn company and had become occupied by a firm which said that the writ was not received at that address.
On 23 December 1969, judgment was entered in default of defence in the Queen’s Bench action, and on 29 December the plaintiff’s solicitors received a letter dated 24 December informing them of the order made in the Queen’s Bench Division. On 29 December, on the application of the Carrickford company, a garnishee order nisi was made in respect of a credit for some £4,500 standing to the name of the Llewellyn company in their account with the bank. And on that day when the garnishee order nisi was made further consideration was fixed for 23 January 1970. On 12 January, the writ in this action was issued and, on 13 January, the notice of motion, ie between the garnishee order nisi on 29 December and the further consideration in the garnishee proceedings due for hearing on 23 January.
On the motion the first two defendants have given undertakings to carry out arrangements which the plaintiff says were made between the parties for disposing of the dispute before the writ in these proceedings was taken. So the only matter left in dispute is the costs of these proceedings. The defendants say that the application in this Division for the relief sought is quite misconceived, that there is no jurisdiction in this Division to deal with it; that, therefore, the only outcome of the application would be dismissal with costs. And the parties—very wisely, in all the circumstances—agreed to treat the notice of motion as the trial of the action, so that the decision on the issue, which I have indicated, will be relevant not merely to the costs on the motion but also to the costs of the action in this Division.
I will deal first then with the application for the injunction. Here the defendants’ case rests on s 41 of the Supreme Court of Judicature (Consolidation) Act 1925, which provides:
‘No cause or proceeding at any time pending in the High Court or the Court of Appeal shall be restrained by prohibition or injunction, but every matter of
Page 27 of [1970] 2 All ER 24
equity on which an injunction against the prosecution of any such cause or proceeding might formerly have been obtained, whether unconditionally or on any terms or conditions, may be relied on by way of defence thereto: Provided that—(a) Nothing in this Act shall disable either of the said courts, if it thinks fit so to do, from directing a stay of proceedings in any cause or matter pending before it; and (b) Any person, whether a party or not to any such cause or matter, who would formerly have been entitled to apply to any court to restrain the prosecution thereof, or who may be entitled to enforce, by attachment or otherwise, any judgment, decree, rule or order, in contravention of which all or any wise, any judgment, decree, rule or other, in contravention of which all or any part of the proceedings in the cause or matter have been taken, may apply to the High Court or the Court of Appeal, as the case may be, by motion in a summary way, for a stay of proceedings in the cause or matter, either generally, or so far as may be necessary for the purposes of justice, and the court shall thereupon make such order as shall be just.’
What I am primarily concerned about at this stage are the opening words of s 41. The defendants say that to grant the injunction would be contrary to those words. This turns on the meaning of the word ‘pending’. The question may, therefore, be expressed as whether there is now in the Queen’s Bench Division a proceeding pending. The garnishee proceedings were proceedings in being before the issue of the writ and the notice of motion, as I have indicated. Those proceedings were in the stage between order nisi and the hearing for order absolute. So those proceedings, such as they were, seem to me to have been incontestably pending. The question is, whether they were proceedings pending in the High Court within the meaning of s 41. They might be regarded as proceedings pending by reason of the judgment on the action on which they follow still being pending, and there are authorities in support of such a submission. They may alternatively be regarded as proceedings pending independently of their being within the action in the Queen’s Bench Division which resulted in the judgment in respect of which the garnishee application was made. If the latter, the question arises whether they are proceedings pending within the meaning of s 41 or whether they are, by reason of being of an administrative nature, outside the ambit of that section.
There appears to have been some difference of view on whether or not execution by writ of fieri facias is a proceeding pending before the court. The difference however seems only to arise because the writ of fieri facias, unlike a garnishee order, may be—
‘issued as of right immediately on payment becoming due and as a matter of course without leave, and there is no necessity for prior notice or service of the judgment on the judgment debtor.’
See T C Trustees Ltd v J S Darwen (Successors) Ltd ([1969] 1 All ER 271 at 274, [1969] 2 QB 295 at 303) per Winn LJ and Re Artistic Colour Printing Co.
A garnishee order, however, can only be obtained on application to the court in garnishee proceedings under RSC Ord 49. The cross-heading to RSC Ord 49 is: ‘Garnishee proceedings’: so it itself uses the term ‘proceedings’. It provides that where a person has obtained judgment for the payment by another of money and somebody else is indebted to the judgment debtor—
‘(1) … the Court may, subject to the provisions of this Order and of any enactment, order the garnishee [that is the person indebted to the judgment debtor] to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee … (2) An order … shall in the first instance be an order to show cause, specifying the time and place for further
Page 28 of [1970] 2 All ER 24
consideration of the matter, and in the meantime attaching such debt as is mentioned in paragraph (1), or so much thereof as may be specified in the order, to answer the judgment or order mentioned in that paragraph … ’
So it is only by an order of the court, on application to it, that a debtor to the judgment debtor is garnisheed. There is as the rules of court provide a hearing on the application for the order nisi and again on the application for an order absolute. It seems to me that these proceedings are not of an administrative nature but of a judicial nature.
For my part, I conclude that garnishee proceedings are themselves proceedings within the meaning of s 41 of the 1925 Act if not by reason of their being proceedings in the action on whose judgment the proceedings are based, yet nevertheless by reason of themselves being, independently of the action, proceedings within its meaning.
There is some support for this view in the way in which the garnishee proceedings are dealt with as between the different Divisions. I understand that garnishee proceedings may be taken, for instance, in the Chancery Division in respect of a judgment debt in the Queen’s Bench Division, particularly—although I gather not exclusively—where a charging order is made in the Queen’s Bench Division and it is sought to enforce that charge and take garnishee proceedings. This would rather suggest that the garnishee proceedings should be considered as being not in the action in the Queen’s Bench Division but as independent proceedings. But whether that be the true view or whether the true view be that the proceedings are in the action, nevertheless on the one ground or the other—and I need not decide in the circumstances of this case as between these two grounds—there were at the time the writ was issued and the application was made garnishee proceedings pending in the Queen’s Bench Division.
The alternative relief sought is for authority for the plaintiff to enter an appearance in the Queen’s Bench action on behalf of the Llewellyn company and to apply in that action to have the order for payment by the Llewellyn company set aside. It seems to me that the short answer to this is that this court has no power to authorise one person, namely the plaintiff, to act for another person sui juris, namely the Llewellyn company. The appropriate course would be either to apply for the winding-up of the Llewellyn company on the ground of deadlock, in the circumstances, and for the liquidator to take such course as he may be advised; or, alternatively, to apply in the Queen’s Bench Division garnishee proceedings, for relief, available in accordance with s 41, proviso (b), of the 1925 Act, which I have read. Uncertainty and delay were raised as objections to the procedure by way of winding-up. But such objection does not apply to an application under s 41, proviso (b), for a stay of the garnishee proceedings in the Queen’s Bench Division. So the plaintiff would not be prejudiced by his being unable to obtain the alternative relief which he seeks in this action, because as speedy and full relief would be available for him in the Queen’s Bench Division itself.
My conclusion, therefore, is that I would have no jurisdiction to deal with the relief sought. As the defendants in giving the undertaking which they have given have completely reserved their position on the question whether the plaintiff would be entitled to the relief sought on the notice of motion, then I am bound to conclude that the application would fail. The normal order for costs would therefore be the defendants’ costs in the cause and there is no ground for departing from it.
Order accordingly.
Solicitors: Landau & Landau (for the plaintiff); Nutt & Oliver (for the defendants).
Jacqueline Metcalfe Barrister.
Note
The Anneliese
Owners of the ship Arietta S Livanos v Owners of the ship Anneliese
[1970] 2 All ER 29
Categories: SHIPPING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WINN AND KARMINSKI LJJ, ASSISTED BY COMMODORE R H A BOND OBE AND CAPTAIN J E BURY, ASSESSORS
Hearing Date(s): 9, 10 11 MARCH 1970
Shipping – Collision – Apportionment of liability – Apportionment equally if ‘not possible to establish different degrees of fault’ – Meaning – Maritime Conventions Act 1911, s 1(1).
Notes
For division of loss in proportion to fault on collisions at sea, etc, see 35 Halsbury’s Laws (3rd Edn) 696–698, paras 1047, 1048.
For the Maritime Conventions Acts 1911, s 1, see 23 Halsbury’s Statutes (2nd Edn) 830.
Cases referred to in judgment
British Aviator, The [1965] 1 Lloyd’s Rep 271.
British Fame (SS or Vessel) (Owners) v SS or Vessel Macgregor (Owners) [1943] 1 All ER 33, [1943] AC 197, 112 LJP 6, 168 LT 193, 74 Lloyd LR 82, 42 Digest (Repl) 913, 7085.
Lucile Bloomfield, The M/V Ronda (Owners) v SS Lucile Bloomfield (Owners) [1967] 2 All ER 633 n, [1967] 1 WLR 697 n, [1967] 1 Lloyd’s Rep 341, Digest Supp.
Peter Benoit, The (1915) 85 LJP 12, 114 LT 147, 13 Asp MLC 203, 42 Digest (Repl) 885, 6735.
Appeal
This was an appeal by the defendants, the owners of the ship Anneliese, against an order of Brandon J made on 2 May 1969, in an action in which the owners of the ship Arietta S Livanos were plaintiffs, whereby he pronounced the collision in question in the action to have been occasioned in equal degree by the fault or default of the owners, master and crew of the Arietta S Livanos and by the fault or default of the owners, master and crew of the Anneliese and condemned the plaintiffs in one-half of the defendants’ counterclaim and condemned the defendants in one-half of the plaintiffs’ claim for damages proceeded for.
The case is only reported on the construction of s 1(1) of the Maritime Conventions Act 1911.
Gerald Darling QC and W I R Ward for the defendants.
B C Sheen QC and A P Clarke for the plaintiffs.
11 March 1970. The following judgments were delivered.
KARMINSKI LJ delivered the first judgment at the request of Davis LJ. On 22 October 1966 a collision occurred between two ships, the Arietta S Livanos, the owners of which are the plaintiffs, and the Anneliese, the owners of which are the defendants. The time of the collision was somewhere between 14.45 and 15.00 GMT, and it took place at a position which has been roughly estimated at 13 1/2 miles north of the island of Ushant off the north-west corner of France. Nothing turns on the place of collision. Very heavy damage was done especially to the Arietta S Livanos (to which I shall refer henceforth as the Arietta), though considerable damage was done also to the Anneliese. In addition to the physical damage, one man who was
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a member of the crew of the Arietta was killed. Each side blames the other for the collision and each alleges that the other was at fault. The allegations in the pleadings contain almost all the complaints which are made in collision actions by one ship against the other. Weather conditions at the time of the collision were fairly quiet. The wind was light and the sea was calm. The light, as was to be expected at that time of the year, was not bright, and there were patches of fog and occasional rain.
It is now necessary to turn briefly to describe how these ships approached each other. The Arietta, a large tanker which was proceeding fully loaded with 40,000 tons of crude oil towards the end of a voyage from the Persian Gulf to Rotterdam, was drawing as was to be expected a considerable amount of water, a little over 36 feet fore and aft. She was therefore, as she rounded Ushant, proceeding in what may be roughly described as an easterly direction. The Anneliese is a slightly smaller vessel, 620 feet in length. She was in ballast on a voyage from Emden in Germany to Liberia. She was not a tanker but a bulk carrier, and being light her draught was only a little over 19 feet forward and 22 feet aft. She was going roughly in a westerly direction.
It is not necessary for the purposes of this appeal to describe in detail how they rounded Ushant and what precautions they took, but each blamed the other for not keeping a proper look-out, for going too fast and for making quite wrong alterations of course. I shall refer to these alterations in more detail later. The case was heard very fully before Brandon J and his conclusion was that both were guilty of negligence. But in the end he came to the conclusion that he could not distinguish sufficiently between the many faults committed on both sides (to which I shall refer in some detail later) to make it possible for him to apportion blame.
It is necessary in any appeal of this kind to look at what the duties of a court are under the Maritime Conventions Act 1911. Section 1(1) provides:
‘Where, by the fault of two or more vessels, damage or loss is caused to one or more of those vessels, to their cargoes or freight, or to any property on board, the liability to make good the damage or loss shall be in proportion to the degree in which each vessel was in fault: Provided that— (a) if, having regard to all the circumstances of the case, it is not possible to establish different degrees of fault, the liability shall be apportioned equally … ’
Brandon J found himself unable to establish different degrees of fault and ordered that the liability should be apportioned equally. The defendants appeal to this court and say that was wrong, and a large number of complaints are made about that finding. The defendants say that the learned judge was wrong in holding that the ultimate alteration of course by the Arietta hard-a-port was not the main cause of the collision. Further it is said that Brandon J was wrong in not making a clear distinction between the look-out kept on the respective vessels, and in failing to hold that the Arietta was very seriously to blame for a complete failure of look-out which was both causative and blameworthy. Those of course are serious matters, and there are others to which I shall refer in due course when I look more closely at the judgment of Brandon J.
[His Lordship reviewed the evidence and the findings of the judge in the light of the advice of the assessors and concluded.] Having come to a different conclusion from that of Brandon J as to the degree of culpability between the two ships, I find myself free to re-examine the duty of this court in relation to assessing the degree in which each vessel was at fault. Having regard to my own conclusions I think it is possible now to try to apportion the degree in which the Anneliese on the one side and the Arietta on the other were at fault. Matters of this kind cannot be determined by any mathematical formula. The causes of collision have to be analysed as I have attempted to do, applying the findings of the judge and my own conclusions where
Page 31 of [1970] 2 All ER 29
they differ from his. I now find myself in a position to apportion in this case, and for myself I have come to the conclusion that the Arietta was two-thirds to blame and the Anneliese one-third to blame, and I would allow this appeal on that allocation of blame.
DAVIES LJ. I entirely agree. [His Lordship made certain comments on the facts of the case and continued:] I would, however, though I am not sure that it is directly in issue in the present case, say a word or two about the Maritime Conventions Act 1911. Counsel for the defendants almost entreated this court to throw some light on this question which apparently troubles him and no doubt other practitioners in the Admiralty Court. Karminski LJ has read the section. The way in which the learned judge approached the question right at the end of his judgment was expressed in these words:
‘On the whole, I have come to the conclusion that, with such serious faults on both sides, it is impossible to say that there is any clear preponderance of blame on the Arietta.’
That expression ‘clear preponderance of blame’ of course derives from the speech of Lord Atkinson in The Peter Benoit ((1915) 114 LT 147 at 151, 13 Asp MLC 203 at 207) where the learned Lord said that there must be proved ‘a clear preponderance of culpability’; and apparently that sort of approach has been adopted in the Admiralty Court over the years. With the greatest respect to Lord Atkinson, the section does not state that there must be proved a clear preponderance of culpability. What is provides is—
‘… the liability to make good the damage or loss shall be in proportion to the degree in which each vessel was in fault: Provided that— (a) if, having regard to all the circumstances of the case, it is not possible to establish different degrees of fault, the liability shall be apportioned equally … ’
Now that section, as I read it, is mandatory. It does not say that the liability shall be apportioned equally unless different degrees of fault are shown. It is the other way round. It says that the court must apportion the liability in proportion to the degree in which each vessel was at fault unless it is impossible so to do. Of course, the different degrees of fault must be proved, like anything else in a court of law.
If I may respectfully say so, I would on this matter associate myself entirely with what was said by Winn LJ in The Lucile Bloomfield and I think I should refer to his words in that case. Having referred to Owners of SS British Fame v Owners of SS Macgregor and The British Aviator, he said ([1967] 2 All ER at 635):
‘When I look again now at that section, I observe (and I think it is right that I should say this) a perfectly clear indication that the primary task of the court is to apportion liability according to fault. This is followed by the proviso that if the court finds it not possible to apportion different degrees of fault, the court is to declare an equal distribution of fault. It is, therefore, as a matter of construction, a condition precedent to a declaration that liability be apportioned equally that the court has found it impossible to establish different degrees of fault. To my mind that is not the same thing as saying that where different degrees of fault cannot be established, then the liability should be equal.’
Then Winn LJ went on to refer in particular to Lord Atkinson ([1967] 2 All ER at 635):
Page 32 of [1970] 2 All ER 29
‘When LORD ATKINSON, in The Peter Benoit in 1915, spoke of the need to justify differentiation between the blameworthiness of two vessels, and of the need that there should be ‘a clear preponderance of culpability”, those words may not mean more than this, that one is not to seek to distinguish a mere five per cent, 7 1/2 per cent and ten per cent, by way of distinction, and that if it only where there is a marked distinction of material amount that it is right to depart from fifty per cent.’
Then Winn LJ referred to the dictim of Wilmer LJ in The British Aviator ([1965] 1 Lloyd’s Rep at 277) and concluded with these words ([1967] 2 All ER at 635):
‘I now more clearly appreciate than before that what has happened historically is that the language of s 1 of the Maritime Conventions Act, 1911, and more particularly of the proviso, has been construed against a background of pre-existing practice so as to give to the meaning of the words a restrictive, narrow and (as I venture to think) unduly narrow construction of the language used by Parliament.’
As I have said, I entirely agree with everything that fell from Winn LJ in that case and I do not think there is anything that I can further usefully add in the course of this short judgment than to say that I agree with the proposed apportionment suggested by Karminski LJ. I would consequently allow the appeal on those terms.
WINN LJ. I agree with the reasoning of the judgment of Karminski LJ and with the order which he proposes. I further desire expressly to declare myself in complete agreement with all that Davies LJ has said about the facts, and the relevant law insofar as it is to be derived from the Maritime Conventions Act 1911, s 1, which he has discussed in his judgment.
I would like to crave leave to amend slightly, insofar as it is permissible at this stage what I am recorded as having said in the report of The Lucile Bloomfield ([1967] 2 All ER at 635) to which Davis LJ referred. I am not charging the reporter with any omission or error; but I think what I meant to say is slightly different. I am reported as saying ([1967] 2 All ER at 635):
‘To my mind that is not the same thing as saying that where different degrees of fault cannot be established, then the liability should be equal.’
I wish that that be amended to ‘… that unless different degrees of fault can be established then the liability should be equal’. I am not pretending that I remember that I said that, but I think I may perhaps have said that. I think it is of some importance that it should be appreciated that we are no longer in this particular respect of allocation of responsibility governed by the precept of Exodus:a
‘And if one man’s ox hurt another’s, that he die; then they shall sell the live ox and divide the money of it; and the dead ox also they shall divide.’
It seems to me nowadays the apportionment should be a little more precise than was then prescribed. I agree with the result proposed.
Appeal allowed.
Solicitors: Bentleys, Stokes & Lowless (for the defendants); Ince & Co (for the plaintiffs).
F A Amies Esq Barrister.
Corbett v Corbett (otherwise Ashley)
[1970] 2 All ER 33
Categories: FAMILY; Other Family
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): ORMROD J
Hearing Date(s): 11, 12, 13, 14, 17, 18, 19, 20, 21, 24, 26, 27, 28 NOVEMBER, 1, 2, 8, 9 DECEMBER 1969, 2 FEBRUARY 1970
Nullity – Incapacity of wife – Wife registered as male at birth – Wife later undergoing sex-change operation – Provision of artificial vagina – Whether wife a woman for purposes of marriage – Whether wife capable of consummating marriage.
Nullity – Declaration – Marriage void – Wife a man – Power of court to make bare declaratory order – RSC Ord 15.
In September 1963 the parties went through a ceremony of marriage. At that time the petitioner knew that the respondent had been registered at birth as of the male sex and had in 1960 undergone a sex-change operation consisting in removal of the testicles and most of the scrotum and the formation of an artificial vagina in front of the anus, and had since then lived as a woman. In December 1963 (the parties having been together for no more than 14 days since the ceremony of marriage), the petitioner filed a petition for a declaration that the marriage was null and void because the respondent was a person of the male sex, or alternatively for a decree of nullity on the ground of non-consummation. The respondent, by her answer, asked for a decree of nullity on the ground of either the petitioner’s incapacity or his wilful refusal to consummate the marriage; and, by an amendment made during the trial, pleaded that the petitioner was estopped from alleging that the marriage was void and of no effect or, alternatively, that in the exercise of its discretionary jurisdiction to make declaratory orders under RSC Ord 15, the court, in all the circumstances of the case, ought to refuse to grant to the petitioner the declaration prayed for in the prayer to the petition. On the medical criteria for assessing the sexual condition of an individual, the trial judge found that the respondent had been shown to be of male chromosomal sex, of male gonadal sex, of male genital sex and psychologically to be a transsexual.
Held – (i) Marriage being essentially a relationship between man and woman, the validity of the marriage depended on whether the respondent was or was not a woman and, the respondent being a biological male from birth, the so-called marriage was void (see p 49 a, post).
(ii) With regard to non-consummation (assuming the marriage to be valid), the respondent was physically incapable of consummating a marriage as intercourse using the completely artificially constructed cavity could never constitute true intercourse (see p 49 h, post).
S v S (otherwise W) (No 2) [1962] 3 All ER 55 distinguished.
(iii) Since the case fell within the statutory jurisdiction of the High Court derived from s 2 of the Matrimonial Causes Act 1857, and the ecclesiastical courts did in fact grant declaratory sentences in cases of ‘meretricious marriages’, there was no discretion to withhold a decree of nullity (see p 51 f, post).
Kassim (otherwise Widmann) v Kassim (otherwise Hassim) (Carl and Dickson cited) [1962] 3 All ER 426 applied.
Notes
For failure to consummate a marriage owing to malformation, see 12 Halsbury’s Laws (3rd Edn) 229, para 430.
For the form of decree in nullity suits, see 12 Halsbury’s Laws (3rd Edn) 226–228, para 424, and for cases on the subject, see 27 Digest (Repl) 551, 552, 5015–5018.
Page 34 of [1970] 2 All ER 33
Cases referred to in judgment
Bateman v Bateman (otherwise Harrison) (1898) 78 LT 472, 27 Digest (Repl) 689, 6606.
Bruce v Burke (1825) 2 Add 471, 162 ER 367, 27 Digest (Repl) 483, 4212.
D—E v A—G (falsely calling herself D—E) (1845) 1 Rob Eccl 279, 163 ER 1039, 27 Digest (Repl) 273, 2187.
Dennis v Dennis [1955] 2 All ER 51, [1955] P 153, [1955] 2 WLR 817, Digest (Cont Vol A) 716, 2592b.
Elliott v Gurr (1812) 2 Phillim 16, 161 ER 1064, 27 Digest (Repl) 269, 2157.
Hayes (falsely called Watts) v Watts (1819) 3 Philim 43.
Hayward v Hayward [1961] 1 All ER 236, [1961] P 152, [1961] 2 WLR 993, Digest (Cont Vol A) 740, 3096a.
Kassim (otherwise Widmann) v Kassim (otherwise Hassim) (Carl and Dickson cited) [1962] 3 All ER 426, [1962] P 224, [1962] 3 WLR 865, Digest (Cont Vol A) 233, 922a.
S v S (otherwise W) (No 2) [1962] 3 All ER 55; sub nom SY v SY (otherwise W) [1963] P 37, [1962] 3 WLR 526, Digest (Cont Vol A) 701, 2197b.
Sapsford v Sapsford and Furtado [1954] 2 All ER 373, [1954] P 394, [1954] 3 WLR 34, Digest (Cont Vol A) 716, 2592a.
W (otherwise K) v W [1967] 3 All ER 178 n, [1967] 1 WLR 1554, Digest Supp.
Wilkins v Wilkins [1896] P 108, 65 LJP 55, 74 LT 62, 27 Digest (Repl) 598, 5596.
Petition
This was a petition by Arthur Cameron Corbett praying for a declaration that the ceremony of marriage which took place in Gibraltar on 10 September 1963 between himself and the respondent, then known as April Ashley, was null and void and of no effect, because the respondent at the time of the ceremony was a person of the male sex; or in the alternative for a decree of nullity on the ground that the marriage was never consummated owing to the incapacity or wilful refusal of the respondent to consummate it. By her answer, the respondent asked for a decree of nullity on the ground of either the petitioner’s incapacity or his wilful refusal to consummate the marriage. By an amendment made during the trial, the respondent pleaded that the petitioner was estopped from alleging that the marriage was void and of no effect or, alternatively, that, in the exercise of its discretionary jurisdiction to make declaratory orders, the court in all the circumstances of the case, ought to refuse to grant the petitioner the declaration prayed for in the prayer to the petition. The facts are set out in the judgment.
Joseph Jackson QC and J C J Tatham for the petitioner.
J P Comyn QC and Leonard Lewis QC for the respondent.
Cur adv vult
2 February 1970. The following judgment was delivered.
ORMROD J read the following judgment. The petitioner in this case, Mr Arthur Cameron Corbett, prays, in the first place, for a declaration that a ceremony of marriage which took place in Gibraltar on 10 September 1963 between himself and the respondent, then known as April Ashley, is null and void and of no effect because the respondent, at the time of the ceremony, was a person of the male sex. In the alternative, he alleges that the marriage was never consummated owing to the incapacity or wilful refusal of the respondent to consummate it, and asks for a decree of nullity. In her answer, the respondent denied the allegation that she was of the male sex at the time of the ceremony and asserted that she was of the female sex at that time. She denied that she was incapable of consummating or had wilfully refused to consummate the marriage. In para 5 of the answer, she admitted that for many years she had been regarded as a male but had undergone an operation for the construction of a vagina before the ceremony of marriage, and alleged that the petitioner was aware of all the material facts before the ceremony took place and was, therefore, not entitled to a decree of nullity on the ground of
Page 35 of [1970] 2 All ER 33
incapacity or wilful refusal. In para 6, she alleged that the petitioner had achieved full penetration on several occasions but withdrew after a very short time without ejaculation, either because he was incapable of ejaculation, or because he was unwilling to do so, and then became hysterical. Paragraph 7 contains an implied averment that the marriage was in fact consummated, and then goes on to allege in the alternative that the petitioner wilfully refused to consummate it. Paragraph 8 contains an alternative allegation of incapacity on the part of the petitioner. The prayer to the answer, therefore, asks for a decree of nullity in favour of the respondent, on either incapacity or wilful refusal. By an amendment, made by leave at a late stage of the trial, the respondent pleaded that the petitioner was estopped from alleging that the marriage was void and of no effect or, alternatively, that in the exercise of its discretionary jurisdiction to make declaratory orders, the court, in all the circumstances of this case, ought to refuse to grant the petitioner the declaration prayed for in the prayer to the petition.
A number of technical points arise on these pleadings which I will deal with in detail at a later stage in this judgment. For the moment it is enough to say that counsel for the respondent very frankly admitted that there were formidable difficulties in his way on both limbs of his late amendment to the answer; and that, in my judgment, there is no foundation in law or fact for either submission.
The case, therefore, resolves itself into the primary issue of the validity of the marriage, which depends on the true sex of the respondent; and the secondary issue of the incapacity of the parties, or their respective willingness or unwillingness, to consummate the marriage, if there was a marriage to consummate. On the primary issue, the basic facts are not in dispute; the problem has been to discover them. On the secondary issue, there is a direct conflict of evidence between the petitioner and the respondent, but it lies within a narrow compass. An unusually large number of doctors gave evidence in the case, amounting to no less than nine in all, including two medical inspectors to the court. Each side called three leading medical experts to deal with various aspects of anatomical and psychological sexual abnormality. In the event, as is to be expected when expert witnesses of high standing are involved, there was a very large measure of agreement between them on the present state of scientific knowledge on all relevant topics, although they differed in the inferences and conclusions which they drew from the application of this knowledge to the facts of the present case. The quality of the medical evidence on both sides was quite outstanding, not only in the lucidity of its exposition, but also in its intellectual and scientific objectivity, and I wish to express to all the distinguished doctors concerned in this case my gratitude for the immense amount of time and trouble which they have devoted to it, and for the patient and careful way in which they answered the many questions put to them during the long periods for which some of them were in the witness box. The cause of justice is deeply indebted to them. My only regret is that it did not prove possible to save a great deal of their time by exchanging reports and making available to all of them all the known facts about the respondent’s physical condition both before and after the operation, including facilities for a joint medical examination, before the hearing began. Had such steps been taken a great deal of time and expense might have been saved.
The relevant facts must now be stated as concisely as possible. The respondent was born on 29 April 1935 in Liverpool and registered at birth as a boy in the name of George Jamieson, and brought up as a boy. It has not been suggested at any time in this case that there was any mistake over the sex of the child. In 1951, at the age of 16 years, he joined the Merchant Navy. Before being accepted, the respondent had what she (I shall use ‘he’ and ‘she’ and ‘his’ and ‘her’ throughout this judgment as seems convenient in the context) described in cross-examination as a ‘vague medical examination’, and was accepted. As George Jamieson, the respondent did one and a half voyages as a merchant seaman before being put ashore at San Francisco and admitted to hospital there, after taking an overdose of tablets. He was subsequently
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returned to this country and became a patient at Ormskirk Hospital. No evidence was available from this hospital but subsequently, in January 1953, at the age of 17, he was referred by his general practitioner to the psychiatric department of the Walton Hospital, Liverpool, where he came under the care of Dr Vaillant, the consultant psychiatrist, at first as an out-patient, and later, for a short time, as an in-patient. Dr Vaillant gave evidence under a subpoena issued on behalf of the petitioner, and produced the hospital records which showed that the respondent had been physically examined by one of Dr Vaillant’s assistants and that no abnormality had been observed other than that he presented a ‘womanish appearance’ and had ‘little bodily and facial hair’. Dr Vaillant said in evidence that he never had any doubt that the respondent was a male. The hospital records contain summaries of several therapeutic interviews with the respondent, some under the influence of small doses of amytal or ether, in the course of which he expressed an intense desire to be a woman, which, he said, he had experienced since he was a child and gave some account of various homosexual experiences which he had had on board ship. After some six months’ treatment, the doctor who had been treating the respondent under Dr Vaillant’s supervision reported his conclusions to the general practitioner in a letter dated 5 June 1953, which reads in part as follows:
‘This boy is a constitutional homosexual who says he wants to become a woman. He has had numerous homosexual experiences and his homosexuality is at the root of his depression. On examination, apart from his womanish appearance, there was no abnormal finding.’
Unfortunately, it has proved impossible to trace this doctor whose evidence would have been of great value in resolving some of the questions raised by the experts called on behalf of the respondent.
Thereafter, the respondent came to London and did casual work in the hotel trade there, and in Jersey, until, in 1956, he went to the south of France, where he met the members of a well-known troupe of male female impersonators, normally based at the Carousel night club in Paris, and later himself became a member of the troupe. By this time, on any view of the evidence, the respondent was taking the female sex hormone, oestrogen, regularly, to encourage the development of the breasts and of a feminine type of physique. At that stage he was known as ‘Toni/April’.
It will be necessary to examine the evidence relating to the taking of oestrogen in more detail later. After about four years at the Carousel night club, he was introduced to a certain Dr Burou who practised at Casablanca, and, on 11 May 1960, he underwent, at Dr Burou’s hands, a so called ‘sex-change operation’, which consisted in the amputation of the testicles and most of the scrotum, and the construction of a so-called ‘artificial vagina’, by making an opening in front of the anus, and turning in the skin of the penis after removing the muscle and other tissues from it, to form a pouch or cavity occupying approximately the position of the vagina in a female, that is between the bladder and the rectum. Parts of the scrotum were used to produce an approximation in appearance to female external genitalia. I have been at some pains to avoid the use of emotive expressions such as ‘castration’ and ‘artificial vagina’ without the qualification ‘so-called’, because the association of ideas connected with these words or phrases are so powerful that they tend to cloud clear thinking. It is, I think, preferable to use the terminology of Miss Josephine Barnes, who examined the respondent as one of the medical inspectors in this case. She described the respondent as having a ‘cavity which opened on to the perineum’. There is no direct evidence of the condition of the respondent’s genitalia immediately before their removal at this operation. I was informed by counsel that Dr Burou had refused to supply any information, or even to answer letters addressed to him by the respondent’s solicitors. The respondent, herself, was almost as unhelpful. In evidence-in-chief, she said that she ‘thought’ that she had a penis at the time when she was in the Merchant Navy.
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She had testicles at that time. She said ‘I haven’t the foggiest idea of the size of my penis’ and had no idea of the size of the testicles. In cross-examination, she was asked whether she had ever had an erection, and whether she had had ejaculations. She simply refused to answer either question and wept a little. It is a curious fact that, in the further and better particulars under para 5 of the answer, the operation is said to have been for the removal of a ‘vestigial’ penis, and the construction of an artificial vagina. No explanation was forthcoming as to the source of the word ‘vestigial’, and there is no evidence that the respondent’s penis or testicles were abnormal. Insofar as credibility is concerned, I do not think that it would be right to hold that these particular answers reflect adversely on the respondent’s credit generally, because the evidence of the psychiatrists is that persons who suffer from these intense desires to belong to the opposite sex, often exhibit a profound emotional reaction when asked about the genitalia which they so much dislike. Nevertheless, such unhelpful evidence does nothing to support the suggestion that there was anything unusual about the respondent’s sexual anatomy.
Following the operation, the respondent returned to London, now calling herself April Ashley, and dressing and living as a female. In evidence she stated that, after the operation, she had had sexual relations with at least one man, using the artificial cavity quite successfully. In November 1960, about six months after the operation, the petitioner and the respondent met for the first time. He was then aged 40, married and living with his wife and four children, but sexually unhappy and abnormal. In the witness box, he described his sexual experience in considerable detail with apparent frankness and without obvious embarrassment. He was, in fact, an unusually good witness, answering all the questions put to him carefully, and without any attempt at prevarication or evasion. He said that he had had sexual relations with a large number of women before his first marriage, and with others, both during it, and after it was dissolved in 1962. He also described his sexual deviations. From a comparatively early age, he had experienced a desire to dress up in female clothes. In the early stages of his marriage he had done so in the presence of his wife on a few occasions. Subsequently, he had dressed as a woman four or five times a year, keeping it from his wife, but the urge to do so continued. With considerable insight he said ‘I didn’t like what I saw. You want the fantasy to appear right. It utterly failed to appear right in my eyes’. These remarks are highly relevant to the understanding of the human aspects of this unusual case. From about 1948 onwards his interest in transvestism increased; at first it was mainly literary, attracting him to pornographic bookshops, but gradually he began to make contact with people of similar tendencies and associated with them from time to time in London. This led to frequent homosexual behaviour with numerous men, stopping short of anal intercourse. As time went on he became more and more involved in the society of sexual deviants, and interested in sexual deviations of all kinds. In this world he became familiar with its ramifications and its personalities, amongst whom he heard of Toni/April as a female impersonator at the Carousel, which he described as ‘the Mecca of every female impersonator in the world’. Eventually, through an American transvestite known as ‘Louise’, he got in touch with the respondent and they met for the first time on 19 November 1960 at his invitation for lunch at the Caprice restaurant. The petitioner’s description of this first meeting contains the key to the rest of this essentially pathetic, but almost incredible story. By this time he was aware that April Ashley, as she was now calling herself, had been a man and had undergone a so-called ‘sex-change operation’. When he first saw her he could not believe it. He said he was mesmerised by her. ‘This was so much more than I could ever hope to be. The reality was far greater than my fantasy.' In cross-examination he put the same thought in these words, ‘It far outstripped any fantasy for myself. I could never have contemplated it for myself’.
This coincidence of fantasy with reality was to determine the petitioner’s behaviour towards the respondent over the next three years or more. The respondent’s
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reaction to the petitioner appears to have been largely passive throughout the whole period of the relationship. After the meeting in November 1960 they saw more and more of each other, meeting daily and sometimes twice a day. He had originally introduced himself to her under an assumed name but soon disclosed his real identity. During these meetings, the respondent gradually ‘in dribs and drabs’ disclosed the whole of her history to the petitioner, including a detailed account of the operation. According to the petitioner, his original motive in seeking an introduction to the respondent was essentially transvestite in character, but quite soon he developed for her the interest of a man for a woman. He said that she looked like a woman, dressed like a woman and acted like a woman. He disclosed his true identity to the respondent to show that his feelings had become those of a full man in love with a girl, not those of a transvestite in love with a transsexual. He repeatedly said that he looked on the respondent as a woman and was attracted to her as a woman. On the other hand, it is common ground that, before the ceremony of marriage, nearly three years later, there was no sexual activity in a physical sense between them at all of any kind, although there was the most ample opportunity. At the most, their relationship went no further than kissing and some very mild petting. At no time did the respondent permit the petitioner to handle her naked breasts or any part of her body. The petitioner’s letters to the respondent, nearly all of which appear to have survived, whereas all but one of the respondent’s have been destroyed, show a similar emotional situation, affectionate, yet quite passionless, with continual emphasis on marriage and the pleasure which the petitioner felt in thinking of the respondent as the future Lady Rowallan. This is not at all the sort of relationship which one would expect to satisfy a man of such extensive and varied sexual experience as the petitioner claims to be. The respondent, however, agrees with his account of their relationship, except that she claims on one single occasion, in a fit of jealous rage in Paris in 1961, he attempted to assault her sexually. Her description of the incident did not suggest to me that there was anything particularly sexual about it. She said that she never had any real feeling for the petitioner and had been his ‘nurse’ for three years. She obviously found him a difficult and perplexing person. She says, and some of the petitioner’s letters bear her out, that his emotions swung about like a pendulum, from feeling jealous of her as a woman, by which, I think, she meant, jealous of her success in adopting the female role which he often wished he could adopt also, to jealous feelings about other men who were attracted to her. I think that there is a good deal of substance in this view of the petitioner’s attitude. Listening to each party describing this strange relationship, my principal impression was that it had little or nothing in common with any heterosexual relationship which I could recall hearing about in a fairly extensive experience of this court. I also think that it would be very unwise to attempt to assess the respondent’s feminine characteristics by the impression which the petitioner says she made on him. While I accept his account of his sexual experience from a qualitative point of view, I am sceptical about the quantity of it, but I have no difficulty in concluding that he is a man who is extremely prone to all kinds of sexual fantasies and practices. He is an unreliable yardstick by which to measure the respondent’s emotional and sexual responses. As a further indication of the unreality of his feelings for the respondent, it is common ground that he introduced her to his wife and family and quite frequently took her to his house or on outings with them.
By September 1961, the situation between the petitioner and his wife had become impossible owing to his obsession with the respondent, and a separation was arranged. In the meanwhile, with his assistance, she had changed her name to April Ashley by deed poll and obtained a passport in that name. Attempts to persuade the superintendent registrar to change her birth certificate, however, failed. At some stage after the operation, the Ministry of National Insurance issued her with a woman’s insurance card, and now treat her as a woman for national insurance purposes. During 1961, she worked successfully as a female model, until the press got hold of
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the story and gave it wide publicity. Later that year the petitioner decided to live in Spain and bought a villa and a night club, called Jacaranda, at Marbella. In December 1961 they went together to Marbella on the basis that they would share the villa but not sleep together, and eventually marry when his divorce came through. The respondent stayed about a week and then left for a while, returning later for about a month and then leaving again. This pattern of coming and going continued for a long time. When she was in Marbella the respondent slept at the villa and the petitioner at the club. She was largely supported by him and he was happy to do so. In 1962, they became the subject of intense press publicity, culminating in a series of articles in the News of the World in which the respondent told her life story in considerable detail, most of which seems to have been comparatively accurate. After his wife obtained a decree absolute in June 1962, the petitioner repeatedly pressed the respondent to marry him but she would not agree. She continued to come and go as she wished while he remained at Marbella. Between July 1962 and July 1963 he estimated that they were together for rather less than half the time; their relations remained the same, they slept in separate houses and their ‘engagement’ was continually on and off as rows took place between them. Nothing of a sexual nature occurred during all this time. In July 1963, the petitioner took the first steps about a marriage. He consulted a lawyer in Gibralter about it and discussed financial arrangements with the respondent.
It is, I think, obvious that both of them had considerable doubts about whether they could marry, or whether they could find anyone to marry them. In fact, the lawyer in Gibralter succeeded in getting a special licence for them. They neither asked for, nor received, any legal advice as to the validity of such a marriage. The ceremony was fixed provisionally for 10 September when she suddenly agreed to go through with it and they rushed off to Gibralter. I think that there can be little doubt that the petitioner was still in the grip of his fantasies and that the respondent had much more sense of reality.
After the ceremony, they returned to the villa at Marbella where some sexual approach was made by the petitioner. It is, however, common ground that the respondent then said that she was suffering from ‘abscesses’ in her so-called vagina and the subject was dropped, and they continued to sleep apart, she at the villa, he at the club, for the next three or four nights. She then left for London as had been previously arranged, to take some lessons, preparatory to getting into a drama school. It was agreed that she would find a flat in London and he would join her when he could. In fact, he went to London on about 4 October 1963 and stayed about a week in a flat with her. There is a direct conflict of evidence as to what happened sexually between them at this period. He says that she continued to complain of the abscesses. She says that they had cleared up and that they slept together, and that on several occasions he succeeded in penetrating her fully, but immediately gave up, saying ‘I can’t, I can’t’ and withdrew without ejaculation, and burst into tears. On 12 October, the petitioner returned to Spain; the respondent, who had failed to get into the drama school, remained in London until early December, when she joined him at the villa. Again there is a conflict of evidence as to what took place between them which I shall examine in more detail when I come to the issues of incapacity and wilful refusal. After about three days, the respondent suddenly packed her suitcases and, immediately and without warning, left for London. This was the end of their relationship. They had been together for no more than 14 days in all since the so-called marriage. Shortly after her return to London, probably on 11 December, the respondent wrote a letter which is significant, and throws some light of this strange situation and on her behaviour since the marriage. It shows, I think, that reality had broken in on her and that she, quite understandably, could not face the intolerably false position into which they had got themselves. The letter reads as follows:
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‘11 Dec 1963
London
Dear Arthur,
A letter from me. A none too happy one I’m afraid. I have thought and thought, not slept for days. But from all the pain and torture on my mind I see only one thing very very clear. That is I will not ever be coming back to you. I don’t know what I will do. I don’t know how I will live. But I know I won’t be back.
The last three years have been the longest the unhappiest, the most horrible of my short twenty eight years. In those three years I have known you!!!! So you must understand that although I don’t put all the blame on you, you do seem to have been a terrible jinks on me.
I am paying dearly for my sin of marrying you. The worry and anguish I have felt in the past three years is making me ill. So the only thing I can do is to try to cut you out of my life completely. Then all I have are my earthly problems. A job, a less expensive place to live. Arthur don’t think I expect any money from you I don’t. Because I know I should never have married you. But I do hope you will either let the house or pay whatever rent you think. At least that.
It’s so funny but I felt so much more (although I never really did) secure before I married you than I did after. Then you denying what you had so promised made me feel so sick to the stomach. I could never have stood myself, let alone you afterwards. Then I seem to remember you trying to convince me of other lies of yours in the past. I don’t want to sound bitter, but I suppose I am a little. At the moment my life seems a wreck all over again. I hope this time I have a little more strength.
Arthur as I am quite a nice person I will say, and do nothing about getting an annulment until you let me know. I can respect that you would not like to hurt your family any more with cheap publicity in that I hope should I ever want my freedom you will respect my wishes.
I hope you sell your land. In brief Arthur I hope one day you will find happiness. Although my heart is breaking I think you had better have Mr Blue. Give my kindest thoughts to Rogelia, Pepe and Jose Luis.
God bless you
April
P.S. You have better address your C/of Caroline 73 Queen Gate as I will leave here in a few days.’
The petitioner, still living his fantasy, was able to sustain it for a longer period. His reply is written in terms which suggest that he did not take her letter very seriously. There are two other letters written by him in 1964. So far as he is concerned the love affair was continuing despite the respondent’s obvious withdrawal. Thereafter, communications seem to have ceased altogether until, on 16 February 1966, the respondent’s solicitors issued an originating summons under s 22 of the Matrimonial Causes Act 1965 claiming maintenance. No previous request for maintenance had been made, and in the witness box in the present suit the respondent expressly disclaimed any intention of asking for financial provision from the petitioner. She does, however, maintain that he gave her the villa at Marbella and she has been looking for some means of enforcing her claim to it. Difficulties, however, arose over serving the necessary proceedings on the petitioner out of the jurisdiction, and proceedings for maintenance were started as a substitute for a direct claim to the villa. The s 22 proceedings reached the stage of filing affidavits of means but got no further. The petitioner did not challenge the validity of the marriage in his affidavit but eventually, on 15 May 1967, filed his petition in this suit.
I now turn to the medical evidence and will begin by reading the report and the
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supplementary report of the medical inspectors to the court, Mr Leslie Williams, FRCS, FRCOG, and Miss Josephine Barnes, DM, FRCS, FRCOG:
‘We, the undersigned, appointed by the High Court Medical Inspectors in the above cause, have this day, at 44 Wimpole Street, W.I., examined the sexual organs of April Corbett (otherwise Ashley) the respondent. We find that the breasts are well developed though the nipples are of masculine type. The voice is rather low pitched. There are almost no penile remains and there is a normally placed urethal orifice. The vagina is of ample size to admit a normal and erect penis. The walls are skin covered and moist. There is no impediment on “her part” to sexual intercourse. Rectal examination does not reveal any uterus or ovaries or testicles. There is no scar on the thigh indicating where a skin graft might have been taken. We strongly suggest that an attempt be made to obtain from Dr Burou, Clinique du Parc, 13 Rue Lepbei, Casablanca a report on what exactly was done at the operation. We also strongly suggest that an investigation into “her” chromosomal sex be carried out by some expert such as Prof Paul Polani, Dept. of Paediatric Research, Guys Hospital, London.
22nd May, 1968’
Supplementary Report
April Corbett the respondent was examined at 44 Wimpole Street, London, W.I., on May 22nd, 1968 by Miss Josephine Barnes and Mr. Leslie Williams. April Corbett had had an operation for the construction of an artificial vagina and the surgical result was remarkably good. It may be noted that the normal vagina is lined by skin which is moistened by mucoid secretion from the cervix uteri. The artificial vagina in this case also appeared to be lined with skin and it was moist presumably owing to the presence of sweat glands in the skin used to line the artificial vagina. The suggestion in the first report that a chromosome test should be done was because the result of such a test would be one means of making our factual information about the case more complete.
6th July, 1968.’
The suggested investigation into the respondent’s ‘chromosomal sex’ refers to a method of examining the structure of the individual body cells for evidence of male or female characteristics, which I shall have to discuss in more detail later. The investigation was carried out by Professor F T G Hayhoe of Cambridge who reported, on 31 October 1968, that all the cells which he examined were of the male type.
The expert witnesses called by the petitioner were Professor C J Dewhurst, FRCSE, FRCOG, Professor of Obstetrics and Gynaecology at Queen Charlotte’s Hospital; Professor Dent, MD, FRS, FRCP, Professor of Human Metabolism at University College Hospital; and Dr J B Randell, MD, FRCP, DPM, consultant psychiatrist at Charing Cross Hospital. Professor Dewhurst is the co-author of a book called ‘The Intersexual Disorders’; and is particularly interested in cases which exhibit anomalies in the development of the sex organs. Dr Randell has made a special study of individuals with abnormal psychological attitudes in sexual matters, particularly transvestites and transsexuals. He and Professor Dewhurst are working together with a plastic surgeon in a team which is studying the treatment of transsexuals by operations similar in character to that which was performed on the respondent by Dr Burou. The experts called by the respondent were Dr Armstrong, MD, FRCP, consultant physician at Newcastle Royal Infirmary; Professor Ivor Mills, FRCP, Professor of Medicine at Cambridge; and Professor Roth who is Professor of Psychiatry in the University of Newcastle-on-Tyne. Dr Armstrong has written a number of papers on sex and gender problems and is co-editor of a well- known book ‘Intersexuality in Vertebrates including Man’. Professor Mills is particularly interested in endocrinology as applied to cases showing various kinds of sex anomalies, that is, in the study of the chemical substances produced by the sex organs and other tissues in the body, and of their effects in the individual patient.
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Professor Roth has considerable experience of the psychological aspects of such cases.
It was agreed by counsel on both sides that reports, articles in learned journals, and books written by any of the witnesses could be used in evidence without formal proof. It was also agreed that publications by other writers, either in the form of articles or books, should be treated as part of the evidence in the case. This sensible course enabled the relevant material to be put before the court in a convenient and sensible way. It is easier for scientific witnesses to give their evidence-in-chief in narrative form rather than on a question and answer basis. It enables them to express themselves in a form to which they are more accustomed, and avoids some of the pitfalls of the question and answer technique in which the form of a question may inadvertently condition the answer and lead to misunderstanding. It is easier also for counsel and the judge.
There was general agreement among all the doctors on the basic principles and the fundamental scientific facts. Anomalies of sex may be divided into two broad divisions, those cases which are primarily psychological in character, and those in which there are developmental abnormalities in the anatomy of the reproductive system (including the external genitalia). Two kinds of psychological abnormality are recognised, the transvestite and the transsexual. The transvestite is an individual (nearly, if not always a man) who has an intense desire to dress up in the clothes of the opposite sex. This is intermittent in character and is not accompanied by a corresponding urge to live as or pass as a member of the opposite sex at all times. Transvestite males are usually heterosexual, often married, and have no wish to cease to play the male role in sexual activity. The transsexual, on the other hand, has an extremely powerful urge to become a member of the opposite sex to the fullest extent which is possible. They give a history, dating back to early childhood, of seeing themselves as members of the opposite sex which persists in spite of their being brought up normally in their own sex. This goes on until they come to think of themselves as females imprisoned in male bodies, or vice versa, and leads to intense resentment of, and dislike for, their own sexual organs which constantly remind them of their biological sex. They are said to be ‘selective historians’, tending to stress events which fit in with their ideas and to suppress those which do not. Some transsexual men live, dress and work regularly as females and pass more or less unnoticed. They become adept at make-up and knowledgeable about using oestrogen, the female sex hormone, to promote the development of female-like breasts, and at dealing with such masculine attributes as facial and pubic hair. As a result of the publicity which has been given from time to time to so-called ‘sex-change operations’, many of them go to extreme lengths to importune doctors to perform such operations on them. The difficulties under which these people inevitably live result in various psychological conditions such as extreme anxiety and obsessional states. They do not appear to respond favourably to any known form of psychological treatment and, consequently, some serious-minded and responsible doctors are inclining to the view that such operations may provide the only way of relieving the psychological distress. Dr Randell has recommended surgical treatment in about 35 cases, mostly restricted to castration and amputation of the penis, but in a few carefully selected cases he and Professor Dewhurst and the plastic surgeon who is working with them have undertaken vagino-plasty as well, that is the construction of a so-called artificial vagina. The purpose of these operations is, of course, to help to relieve the patient’s symptoms and to assist in the management of their disorder; it is not to change their patient’s sex, and, in fact, they require their patients before operation to sign a form of consent which is in these terms:
‘I … of … do consent to undergo the removal of the male genital organs and fashioning of an artificial vagina as explained to me by … (surgeon). I understand it will not alter my male sex and that it is being done to prevent deterioration in my mental health.
…
(Signature of Patient)’
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Professor Roth is doubtful about the therapeutic efficacy of these procedures and has only recommended one of his patients for operation.
There is, obviously, room for differences of opinion on the ethical aspects of such operations but, if they are undertaken for genuine therapeutic purposes, it is a matter for the decision of the patient and the doctors concerned in his case. The passing of the Sexual Offences Act 1967, s 1, seems to have removed any legal objections which there might have been to such procedures. This phenomenon of transsexualism must, however, be seen in its true perspective. It occurs in men and women of all ages, some of whom are married in their true sex and are fathers or mothers of children. In a paper published on the British Medical Journal in December 1959, Dr Randell refers to 13 transsexual men who were or had been married. Some of his male patients, on whom operations have been performed, have been men of mature age; one was a naval petty officer aged 42 years. All his male transsexual patients, which now number 190, have been biologically, that is anatomically and physiologically, normal males. Female transsexuals present corresponding problems but they are not relevant to the present case.
It is clear from the account which I have given of the respondent’s history that it accords very closely with this description of a male transsexual. Dr Randell considered that the respondent is properly classified as a male homosexual transsexualist. Professor Dewhurst agreed with this diagnosis and said the description ‘a castrated male’ would be correct. Dr Armstrong agreed that the evidence contained in the Walton Hospital records was typical of a male transsexual, but he considered that there was also evidence that the respondent was not a physically normal male. He said that the respondent was an example of the condition called inter-sex, a medical concept meaning something between intermediate and indeterminate sex, and should be ‘assigned’ to the female sex, mainly on account of the psychological abnormality of transsexualism. Professor Roth thought that the respondent was a case of transsexualism with some physical contributory factor. He was prepared to regard the case as one of inter-sex, and thought that the respondent might be classified as a woman ‘socially’. He would not recommend that the respondent should attempt to live in society as a male. Both he and Dr Randell had been successful in asking the Ministry of Labour to register some of their male transsexual patients as female for national insurance purposes. Insofar as there are any material differences in the evidence of Dr Randell, Dr Armstrong and Professor Roth, I was less impressed by Dr Armstrong’s evidence than by that of the other two doctors, both of whom were exceptionally good witnesses. Of the latter two, I am inclined to prefer the evidence of Dr Randell because I do not think that the facts of this case, when critically examined, support the assumptions which Professor Roth had been asked to make as the basis of his evidence.
There was a considerable amount of discussion in the course of the expert evidence about the aetiology or causation of transsexualism. Dr Randell and Professor Roth regard it at present as a psychological disorder arising after birth, probably as a result of some, as yet unspecified, experiences in early childhood. The alternative view is that there may be an organic basis for the condition. This hypothesis is based on experimental work by Professor Harris and others on immature rats and other animals, including rhesus monkeys, which suggests that the copulatory behaviour of the adult animals may be affected by the influence of certain sex hormones on particular cells in the hypothalamus, a part of the brain closely related to the pituitary gland, in early infancy. At present the application of this work to the human being is purely hypothetical and speculative. Moreover, the extrapolation of these observations on the instinctual or reflex behaviour of animals to the conscious motives and desires of the human being seems to be, at best, hazardous. The use of such phrases as ‘male or female brain’ in this connection is apt to mislead owing to the ambiguity of the word ‘brain’. In the present context it refers to a particular group of nerve cells, but not to the seat of consciousness or of the thinking process. In my judgment,
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these theories have nothing to contribute to the solution of the present case. On this part of the evidence my conclusion is that the respondent is correctly described as a male transsexual, possibly with some comparatively minor physical abnormality.
I must now deal with the anatomical and physiological anomalies of the sex organs, although I think that this part of the evidence is of marginal significance only in the present case. In other cases, it may be of cardinal importance. All the medical witnesses accept that there are, at least, four criteria for assessing the sexual condition of an individual. These are—
(i) Chromosomal factors.
(ii) Gonadal factors (ie presence or absence of testes or ovaries).
(iii) Genital factors (including internal sex organs).
(iv) Psychological factors.
Some of the witnesses would add—
(v) Hormonal factors or secondary sexual characteristics (such as distribution of hair, breast development, physique etc which are thought to reflect the balance between the male and female sex hormones in the body).
It is important to note that these criteria have been evolved by doctors for the purpose of systematising medical knowledge, and assisting in the difficult task of deciding the best way of managing the unfortunate patients who suffer, either physically or psychologically, from sexual abnormalities. As Professor Dewhurst observed ‘We do not determine sex—in medicine we determine the sex in which it is best for the individual to live’. These criteria are, of course, relevant to, but do not necessarily decide, the legal basis of sex determination.
The hermaphrodite has been known since earliest times as an individual who has some of the sexual characteristics of both sexes. In more recent times the true hermaphrodite has been distinguished from the pseudo-hermaphrodite. The true hermaphrodite has both a testis and an ovary and some of the other physical characteristics of both sexes. The pseudo-hermaphrodite has either testes or ovaries, and other sexual organs which do not correspond with the gonads which are present. Still more recently, much more knowledge has been obtained about these cases by the development of techniques which enable the structure of the nucleus of the individual cells of the body to be observed under the microscope. Using these techniques, it is possible to see the individual chromosomes in the nucleus. These are the structures on which the genes are carried which,in turn, are the mechanism by which hereditary characteristics are transmitted from parents to off-spring. The normal individual has 23 pairs of chromosomes in his ordinary body cells, one of each pair being derived from each parent. One pair is known to determine the sex of normal individuals. The normal female has a pair which is described as XX; the normal male a pair which is described as XY. The Y chromosomes can be distinguished quite clearly from the X. In the male, the X chromosome is derived from the mother and the Y from the father. In the female one X chromosome is derived from the father and one from the mother. All the ova of a female carry an X chromosome but the male produces two populations of spermatozoa, one of which carries the Y, and the other the X chromosome. Fusion of a Y spermatozoon with an ovum produces an embryo with XY chromosomes which, under normal conditions, develops into a male child; fusion of an ovum with an X spermatozoon produces an XX embryo, which becomes a female child. Various errors can occur at this stage which led to the production of individuals with abnormal chromosome constitutions, such as XXY and XO (meaning a single X only). In these two cases, the individuals will show marked abnormalities in the development of their reproductive organs. The XXY patient will become an under-masculinised male with small, under-developed testes and some breast enlargement. The abnormality will become apparent at puberty when the male secondary sex characteristics, such as facial hair
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and male physique, will not develop in the normal way. The XO individual has the external appearance of a female, a vagina and uterus but no active ovarian tissue. Without treatment the vagina and uterus remain infantile in type and none of the normal changes of puberty occur. Administration of oestrogen, however, produces many of these changes. The individual of course remains sterile.
The Y chromosome is, therefore, normally associated with the development of testicular tissue in the embryo, the second X chromosome with the development of ovarian tissue. This is, however, by no means the whole story. Whether or not a normal male or female child develops depends on what may be loosely called the maintenance of the correct chemical balance in the embryo. The process may be illustrated by two examples. The first is called the ‘adreno-genital syndrome’, in which the chromosomal constitution is XX but the external genitalia appear to be male. Gross enlargement of the clitoris produces a phallus which may be mistaken for a penis, and fusion of the labia produces the appearance of a scrotum, but no testicles are present in it. This may lead to a diagnosis of undescended testicles in a male, but further investigation reveals that the individual has normal ovaries, a normal uterus and vagina and no actual male organs. This condition is caused by the exposure of the embryo at a critical phase of its development to the effect of masculinising or androgenising substances either from the mother or from some abnormality in the foetus itself. The individual is, in fact, a fertile female and surgical removal of the abnormal external genitalia will enable her to live and function as a normal woman. In the second example, the external genitalia appear to be female but the chromosomal constitution is XY. Testes are present, usually in the abdomen. In the extreme case called the testicular, feminisation syndrome, the individual appears to be more or less normal female with well-formed breasts and female external genitalia but with an abnormally short vagina, ending blindly, no cervix and no uterus. In another type, the testicular failure syndrome, the appearance of the external genitalia may be more doubtful, with a phallic organ which could be either a small penis or an enlarged clitoris and a short vagina. It seems that in these cases the embryonic sexual organs fail to respond normally to the male hormone, testosterone, which is produced by the foetal testis.
All the medical witnesses accept that these examples are properly described as cases of inter-sex. In each there are discrepancies between the first three criteria for sex assessment, ie the chromosomal sex and the gonadal sex do not correspond with the genital condition of the patient. But there is a difference of opinion whether cases in which the chromosomal, the gonadal and the genital sex are congruent, but psychological or hormonal factors are abnormal, should be classified as cases of inter-sex. Dr Randell said that, in terms of sex determination, he would not give much weight to such psychological factors as transsexualism if the chromosomes, the gonads and the genitalia were all of one sex. Professor Dewhurst’s views are similar. Dr Armstrong and Professor Roth, on the other hand, would classify transsexuals as cases of inter-sex. Professor Mills, as an endocrinologist, takes a rather different view. In his opinion, patients in whom the balance between male and female hormones is abnormal should be regarded as cases of inter-sex, and he considers that there is sufficient evidence to justify the view that the respondent is an example of this condition.
Professor Mills’s conclusion is, of necessity, based largely on inference because the removal of the testicles at the operation in 1960 would, to a considerable extent, affect the hormonal balance at the present time. He thinks that the respondent was probably a case of partial testicular failure, in the sense that, though born a male, the process of androgenisation at and after puberty did not proceed in the normal way. It is suggested that she may be a case of what is called Klinefelter’s syndrome, a disorder in which a degree of feminisation takes place about the time of puberty in hitherto, apparently, normal males. The diagnostic signs of this condition are atrophied or very small testicles, some spontaneous development of the breast,
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a female pattern of pubic hair and very little facial hair. Many, but not all, of these cases are of the XXY chromosome type. To make this diagnosis with any degree of confidence it is necessary to know whether the respondent’s testicles were abnormally small or not, and it is desirable to examine a biopsy specimen of them under the microscope. There is, however, no evidence on this point at all. There is evidence from the respondent that spontaneous development of the breasts occurred at about the age of 18 years, but I am unable to accept her statement that this was spontaneous. It is admitted that she had taken oestrogen over a long period to promote the growth of the breasts. In evidence she said that she began to take it in Paris at the age of 20 years, but she told Professor Roth that she had started taking it at the age of 18 years. The Walton Hospital notes record that, on 22 May 1953, she was suggesting that she should take female hormones to help her change her sex. Oestrogen can be obtained quite easily and without prescription. It was suggested that the absence of pigmentation round the nipples indicated that she could not have taken large quantities of oestrogen but, on her own admission, she was taking it regularly in Paris over a period of four years. In the circumstances I am not prepared to accept her evidence that the development of the breasts was spontaneous.
Professor Mills attached much significance to the note in the Walton Hospital records, ‘little bodily or facial hair’, and to his examination of the face which showed no sign of what he called ‘androgenised hair’. In his opinion, this condition could not have been produced by taking oestrogen, nor could he find any sign of the removal of the hair by electrolysis or any other type of depilation. Professor Dent, however, said that he had seen cases in which puberty in boys had been delayed for several years but had then come on, in which there was no sign of male-type facial hair at the age of 18. In such cases he thought that oestrogen followed by castration could account for its absence as in this case. Dr Randell said that he had seen male transsexuals with no sign of facial hair. Professor Mills, I think, was relying largely on his experience of attempting, unsuccessfully, to treat hirsute women with oestrogens. In my judgment, it would not be safe to draw any inferences from the absence of facial hair in an individual who had been closely associated with experienced female impersonators for a number of years.
Professor Mills also referred to two chemical tests carried out on the respondent’s urine, both, of course, after the removal of the testicles, the results of which indicated that the hormonal balance in the respondent was strongly female in character. One of these tests, the estimation of the 17 ketosteroids in the urine, was repeated during the trial in the laboratory at University College Hospital, and gave a distinctly different result. Professor Dewhurst pointed out that this test requires the collection of a 24–hour specimen of urine, and that in both cases the volume of urine supplied by the respondent was much smaller than was to be expected. As neither sample was collected under supervised conditions—the respondent being merely asked to supply the specimen—little significance can be attached to the results, particularly in a forensic as opposed to clinical situation. A similar comment is to be made about a psychological test called the Turner-Miles test which was used on the respondent. This is a questionnaire which is completed by the patient, but in this case the psychologist was not present and, indeed, has never seen the respondent. There is no evidence as to how the questionnaire was completed.
In my judgment, therefore, the factual basis for the Klinefelter syndrome or any other hormonal disorder has not been established, although the respondent may have been a partially under-developed male at the time of the operation. It follows that it has not been established that the respondent should be classified as a case of intersex on the basis of hormonal abnormality.
My conclusions of fact on this part of the case can be summarised, therefore, as follows. The respondent has been shown to have XY chromosomes and, therefore, to be of male chromosomal sex; to have had testicles prior to the operation and, therefore, to be of male gonadal sex; to have had male external genitalia without
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any evidence of internal or external female sex organs and, therefore, to be of male genital sex; and psychologically to be a transsexual. The evidence does not establish that she is a case of Klinefelter’s syndrome or some similar condition of partial testicular failure, although the possibility of some abnormality in androgenisation at puberty cannot be excluded. Socially, by which I mean the manner in which the respondent is living in the community, she is living as, and passing as, a woman more or less successfully. Her outward appearance, at first sight, was convincingly feminine, but on closer and longer examination in the witness box it was much less so. The voice, manner, gestures and attitude became increasingly reminiscent of the accomplished female impersonator. The evidence of the medical inspectors, and of the other doctors who had an opportunity during the trial of examining the respondent clinically, is that the body, in its post-operative condition, looks more like a female than a male as a result of very skilful surgery. Professor Dewhurst, after this examination, put his opinion in these words—‘the pastiche of feminity was convincing’. That, in my judgment, is an accurate description of the respondent. It is common ground between all the medical witnesses that the biological sexual constitution of an individual is fixed at birth (at the latest), and cannot be changed, either by the natural development of organs of the opposite sex, or by medical or surgical means. The respondent’s operation, therefore, cannot affect her true sex. The only cases where the term ‘change of sex’ is appropriate are those in which a mistake as to sex is made at birth and subsequently revealed by further medical investigation.
On that state of facts, counsel for the petitioner submitted that it had been established that the respondent was a male and that, accordingly, the so-called marriage must be void and of no effect. Counsel for the respondent, however, contended that the respondent should be classified, medically, as a case of inter-sex, and that, since the law knew only two sexes, male and female, she must be ‘assigned’ to one or the other, which, in her case, must be female, and that she should be regarded for all purposes as a woman. He submitted further that ‘assignment’ was a matter for the individual and his doctor, and that the law ought to accept it as determining his sex. The word ‘assign’, although it is used by doctors in this context, is apt to mislead since, in fact, it means no more than that the doctors decide the gender, rather than the sex, in which such patients can best be managed and advise accordingly. It was also suggested that it was illogical to treat the respondent as a woman for many social purposes, such as nursing her in a female ward in hospital, or national insurance, and not to regard her as a woman for the purpose of marriage. These submissions are very far-reaching and would lead to some surprising results in practice but, before examining them in detail, I must consider the problems of law which arise in this case on a broader basis.
It appears to be the first occasion on which a court in England has been called on to decide the sex of an individual and, consequently, there is no authority which is directly in point. This absence of authority is, at first sight, surprising, but is explained, I think, by two fairly recent events, the development of the technique of the operation for vagino-plasty, and its application to the treatment of male transsexuals; and the decision of the Court of Appeal in S v S (otherwise W) (No 2), in which it was held that a woman, suffering from a congenital defect of the vagina, was not incapable of consummating her marriage because the length of the vagina could be increased surgically so as to permit full penetration. There are passages in the judgments which seem to go so far as holding that an individual, born without a vagina at all, could be rendered capable of consummating a marriage by the construction of an entirely artificial one. But for this decision, the respondent would have had no defence to the prayer for a decree of nullity on the ground of incapacity. Until this decision, all matrimonial cases arising out of developmental abnormalities of the
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reproductive system could be dealt with as case of incapacity, and, therefore, it has not been necessary to call in question the true sex of the respondents, assuming that it had occurred to any pleader to raise this issue. Now that it has been raised, this case is unlikely to be the last in which the courts will be called on to investigate and decide it. I must, therefore, approach the matter as one of principle.
The fundamental purpose of law is the regulation of the relations between persons, and between persons and the State or community. For the limited purposes of this case, legal relations can be classified into those in which the sex of the individuals concerned is either irrelevant, relevant or an essential determinant of the nature of the relationship. Over a very large area the law is indifferent to sex. It is irrelevant to most of the relationships which give rise to contractual or tortious rights and obligations, and to the greater part of the criminal law. In some contractual relationships, eg life assurance and pensions schemes, sex is a relevant factor in determining the rate of premium or contributions. It is relevant also to some aspects of the law regulating conditions of employment, and to various State-run schemes such as national insurance, or to such fiscal matters as selective employment tax. It is not an essential determinant of the relationship in these cases because there is nothing to prevent the parties to a contract of insurance or a pension scheme from agreeing that the person concerned should be treated as a man or as a woman, as the case may be. Similarly, the authorities, if they think fit, can agree with the individual that he shall be treated as a woman for national insurance purposes, as in this case. On the other hand, sex is clearly an essential determinant of the relationship called marriage, because it is and always has been recognised as the union of man and woman. It is the institution on which the family is built, and in which the capacity for natural heterosexual intercourse is an essential element. It has, of course, many other characteristics, of which companionship and mutual support is an important one, but the characteristics which distinguish it from all other relationships can only be met by two persons of opposite sex. There are some other relationships such as adultery, rape and gross indecency in which, by definition, the sex of the participants is an essential determinant: see Rayden on Divorce,a Dennis v Dennis and the Sexual Offences Act 1956, ss 1 and 13.
Since marriage is essentially a relationship between man and woman, the validity of the marriage in this case depends, in my judgment, on whether the respondent is or is not a woman. I think, with respect, that this is a more precise way of formulating the question than that adopted in para 2 of the petition, in which it is alleged that the respondent is a male. The greater, of course, includes the less, but the distinction may not be without importance, at any rate in some cases. The question then becomes what is meant by the word ‘woman’ in the context of a marriage, for I am not concerned to determine the ‘legal sex’ of the respondent at large. Having regard to the essentially heterosexual character of the relationship which is called marriage, the criteria must, in my judgment, be biological, for even the most extreme degree of transsexualism in a male or the most severe hormonal imbalance which can exist in a person with male chromosomes, male gonads and male genitalia cannot reproduce a person who is naturally capable of performing the essential role of a woman in marriage. In other words, the law should adopt, in the first place, the first three of the doctors’ criteria, ie the chromosomal, gonadal and genital tests, and, if all three are congruent, determine the sex for the purpose of marriage accordingly, and ignore any operative intervention. The real difficulties, of course, will occur if these three criteria are not congruent. This question does not arise in the present case and I must not anticipate, but it would seem to me to follow from what I have said that greater weight would probably be given to the genital criteria than to the other two. This problem and, in particular, the question of the effect of surgical operations in such cases of physical inter-sex, must be left
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until it comes for decision. My conclusion, therefore, is that the respondent is not a woman for the purposes of marriage but is a biological male and has been so since birth. It follows that the so-called marriage of 10 September 1963 is void.
I must now return briefly to counsel for the respondent’s submissions. If the law were to recognise the ‘assignment’ of the respondent to the female sex, the question which would have to be answered is, what was the respondent’s sex immediately before the operation? If the answer is that it depends on ‘assignment’ then, if the decision at that time was female, the respondent would be a female with male sex organs and no female ones. If the assignment to the female sex is made after the operation, then the operation has changed the sex. From this it would follow that if a 50 year old male transsexual, married and the father of children, underwent the operation, he would then have to be regarded in law as a female, and capable of ‘marrying’ a man! The results would be nothing if not bizarre. I have dealt, by implication, with the submission that, because the respondent is treated by society for many purposes as a woman, it is illogical to refuse to treat her as a woman for the purpose of marriage. The illogicality would only arise if marriage were substantially similar in character to national insurance and other social situations, but the differences are obviously fundamental. These submissions, in effect, confuse sex with gender. Marriage is a relationship which depends on sex and not on gender.
I now turn to the secondary issue of incapacity or wilful refusal to consummate the marriage, assuming for this purpose that the marriage is valid and that the respondent is to be treated as, or deemed to be, a woman. I must deal with this quite shortly because this judgment is long enough already. Of the two versions of the events which took place after the ceremony I prefer, and accept, the petitioner’s. Although in some ways the respondent’s account seems more plausible, and the lack of any contemporary complaints by the petitioner in the correspondence seems surprising, the evidence of the respondent on the question of the alleged abscesses in the so-called artificial vagina was so unsatisfactory and unconvincing that I had little doubt but that on this part of the case she was not telling the truth. The failure on her part to call the doctor, Dr Rosedale, who, she said, had been treating her for this condition at the relevant time, and the absence of any explanation for not calling him, casts further doubt on her reliability. I was, moreover, impressed by the petitioner’s frankness in dealing with his letter written on 26 October 1964. This letter is typical of the kind of letter which one often finds in nullity cases and which throws light on the sexual situation between the parties. To my surprise, the petitioner immediately made it clear that he was not referring to the sexual failure. A dishonest witness would have seized on this letter as most helpful to his case. I accordingly, accept his evidence that the respondent evaded the issue of sexual relations, and that he did not press it believing that this aspect of the marriage would come right in the end. I find it extraordinarily difficult, in the peculiar circumstances of this case, to judge whether the respondent’s attitude should be regarded as a wilful refusal or a psychological repugnance. I regard both as essentially unreal in this particular case, but the evidence supports refusal better than repugnance. In any event, however, I would, if necessary, be prepared to hold that the respondent was physically incapable of consummating a marriage because I do not think that sexual intercourse, using the completely artificial cavity constructed by Dr Burou, can possibly be described in the words of Dr Lushington in D—E v A—G (falsely calling herself D—E)b as ‘ordinary and complete intercourse’ or as ‘vera copula—of the natural. When such a cavity has been constructed in a male, the difference between sexual intercourse using it, and anal or intra-crural intercourse is, in my judgment, to be measured in centimetres.
I am aware that this view is not in accordance with some of the observations of
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the Court of Appeal in S v S (otherwise W) (No 2), but, in my respectful opinion, those parts of the judgments which refer to a wholly artificial vagina, go beyond what was necessary for the decision in that case and should be regarded as obiter. The respondent in that case was assumed to be a woman, with functioning ovaries, but with a congenital abnormality of the vagina, which was only about two inches long and small in diameter, according to the report of the medical inspectors. This is a very different situation from the one which confronts me. There are, I think, certain dangers in attempting to analyse too meticulously the essentials of normal sexual intercourse, and much wisdom in another of Dr Lushington’s observations in the same case where he said ((1845) 1 Rob Eccl at 297):
‘It is no easy matter to discover and define a safe principle to act upon: perhaps it is impossible affirmatively to lay down any principle which, if carried to either extreme, might not be mischievous.’
The mischief is that, by over-refining and over-defining the limits of ‘normal’, one may, in the end, produce a situation in which consummation may come to mean something altogether different from normal sexual intercourse. In this connection, I respectfully agree with the judgment of Brandon J in W (otherwise K) v W. The possibility mentioned by Wilmer LJ in his judgment in S v S (otherwise W) (No 2) ([1962] 3 All ER at 63, [1963] P at 61) that a married man might have sexual relations with a person, using a so-called artificial vagina, and yet not commit adultery, does not seem to me to be very important, since neither oral intercourse with a woman, nor mutual masturbation will afford the wife the remedy of adultery: Sapsford v Sapsford and Furtado.
The issue of approbation in relation to the prayer for relief on the ground of the respondent’s incapacity was raised by para 5 of the answer, but it was not, in fact, argued before me, so I propose to say no more about it than that, in his evidence-in-chief, the petitioner admitted that he knew all about the respondent’s physical condition before the ceremony of marriage.
In the result, therefore, I hold that it has been established that the respondent is not, and was not, a woman at the date of the ceremony of marriage, but was, at all times, a male. The marriage is, accordingly, void, and it only remains to consider the pleas raised by the reamended answer of estoppel or, alternatively, that the court should, in its discretion, withhold a declaration; and the proper form of the order in which my judgment should be recorded. On the issue of estoppel it is important to remember that there is no question here of estoppel per rem judicatam, as in Wilkins v Wilkins. Here the alleged estoppel is an estoppel in pais or by conduct. I am content to follow the decision of Phillimore J in Hayward v Hayward, in which he held that the doctrine of estoppel was not applicable in proceedings for a declaration that a marriage was void, and that, in any event, no estoppel in pais could arise in that case, as in this, because the relevant facts were known equally to both parties. The suggestion that a ceremony, which is wholly ineffectual and void in law, can be rendered effectual between the actual parties by some species of estoppel, would produce the anomalous result that any third party, whose interests are affected by this ‘marriage’, could at any time successfully challenge its validity, relying on the admissions in the evidence given before me. This defence accordingly fails. For reasons which I will give in a moment in connection with the form of my order, the court has, in my judgment, no discretion to withhold a decree of nullity.
The petitioner, therefore, succeeds on the issue of the validity or otherwise of the marriage, and the only remaining question is whether he is entitled to a declaratory judgment under RSC Ord 15, or whether the order of the court should be in the usual form of a decree of nullity. Counsel for the petitioner sought to distinguish
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the present case from Kassim (otherwise Widmann) v Kassim (otherwise Hassim) (Carl and Dickson cited), in which I held that, in a case of bigamy, the court had no option to give a declaratory judgment, but must grant a decree of nullity under its matrimonial jurisdiction, derived from the former ecclesiastical courts. He submits that, if he is right in his contention that the respondent is a man, the ceremony of marriage in this case was in fact, if not in intention, a mere sham, and the resulting ‘marriage’ not merely a void but a meretricious marriage, which could not, in any circumstances, give rise to anything remotely matrimonial in character. Accordingly, the court ought to make a bare declaratory order, recording the fact that the so-called marriage was not a marriage at all. Counsel for the respondent contended that this case could not be distinguished from Kassim v Kassim, and that, if I was against him on the first part of the case, I should grant a decree of nullity to the petitioner. The importance of this distinction is, of course, that, on a decree of nullity, the court has power to entertain an application for ancillary relief whereas, if a declaratory order is made, there is no such power. I have considerable sympathy with counsel for the petitioner’s argument because, on the facts as I have found them, a matrimonial relationship between the petitioner and the respondent was a legal impossibility at all times and in all circumstances, whereas a marriage which is void on the ground of bigamy, non-age or failure of third party consents, might, in other circumstances, have been a valid marriage. I do not, however, think that these arguments in fact support the distinction between this case and Kassim v Kassim, the ratio decidendi of which was that, in granting a decree of nullity in the case of a marriage which is void for bigamy, this court is exercising its statutory jurisdiction, that is the jurisdiction transferred to it from the ecclesiastical courts by the Matrimonial Causes Act 1857. The real question, therefore, is whether or not the ecclesiastical courts would have entertained such a case as the present and granted a ‘declaratory sentence’ on proof that the ‘wife’ was a man. I have not been referred to any authority on this point, and it may well be that no such case ever came before the ecclesiastical courts, but, in the absence of any indication that they would not have entertained such a case, I feel bound to conclude that this case falls within the statutory jurisdiction of the High Court, derived originally from s 2 of the 1857 Act. The ecclesiastical courts did in fact grant declaratory sentences in cases of ‘meretricious’ marriages: Elliott v Gurr. There is, in my judgment, no discretion to withhold a decree in the exercise of this jurisdiction: Hayes (falsely called Watts) v Watts, Bruce v Burke and Bateman v Bateman (otherwise Harrison).
If it had been a matter of discretion, under either the statutory jurisdiction of this court or RSC Ord 15, I should, unhesitatingly, have granted a decree or a declaration, as the case may be, in this particular case, because to decide otherwise would be absurd in the extreme. The effect of a refusal to do so would merely be to deprive the parties of a record of my decision in a convenient form since the facts, once determined, speak for themselves. In cases where transactions are void ipso jure the order of the court effects nothing. It merely records the existing state of facts.
The petitioner, is therefore, entitled, in my judgment, to a decree of nullity declaring that the marriage in fact celebrated on 10 September 1963 between himself and the respondent was void ab initio.
Decree of nullity to petitioner.
Solicitors: Crossman, Block & Keith (for the petitioner); Fallons (for the respondent).
Alice Bloomfield Barrister At Law.
Stafford Knight & Co Ltd v Conway
[1970] 2 All ER 52
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND KARMINSKI LJJ AND SIR GORDON WILLMER
Hearing Date(s): 9 FEBRUARY 1970
County court – Costs – Payment into court – Payment in full and final settlement of claim and costs with denial of liability – Acceptance by plaintiff – Whether plaintiff debarred from lodging bill of costs – CCR Ord 11, rr 7, 8.
Where the plaintiff in a county court action takes out money paid into court by the defendant in circumstances in which CCR Ord 11, 8,a applies, the plaintiff has an absolute right to lodge a bill of costs for taxation pursuant to r 8 (d), even if the payment in was stated to be ‘in full and final settlement of the claim and costs’ (see p 54 e and p 55 b, post), because r 8 does not confer any discretion on the court to refuse to consider the bill nor can the defendant, by the wording of his notice of payment in, qualify in any way the plaintiff’s right (see p 54 h, and j and p 55 b and c, post).
Notes
For liability for additional costs on payments of whole claim, see 9 Halsbury’s Laws (3rd Edn) 231, para 525.
For CCR Ord 11, rr 7, 8, see the County Court Practice 1969, 341, 342.
Appeal
This was an appeal by the plaintiffs, Stafford Knight & Co Ltd, against the decision of his Honour Judge Beresford given at Willesden County Court on 19 June 1969 refusing to tax the plaintiffs’ additional costs in an action brought by the plaintiffs against the defendant, P Conway. The facts are set out in the judgment of Winn LJ.
J R Playford for the plaintiffs.
J A Speed for the defendants.
9 February 1970. The following judgments were delivered.
WINN LJ. This is a rather curious little, but by no means unimportant, point which arises on the application of one of the county court rules. CCR Ord 11, rr 7, 8 and 9, and not so directly rr 10, 11 and 12 all relate to payments into court in varying circumstances. In this particular case it is quite plain that there has been acrimony between the parties to the action and between the solicitors retained by the respective parties. Whether both or either of them was at fault is no concern of this court at all and has nothing to do with the reasoning for allowing, as the court proposes to allow, the appeal of the plaintiffs in the action.
The plaintiffs are insurance brokers; the defendant apparently was the proprietor or the user of two lorries providing services and of course requiring road insurance cover. The details are quite irrelevant for the purposes of this judgment; but there had been transactions between the defendant and the plaintiffs in obtaining insurance; the cover had been granted in respect of two lorries for different times, and there had been cancellations before the full term of the policy or policies giving cover on each of the lorries. These matters gave rise, finally, to a dispute as to how much, if anything, was due from the defendant to the plaintiffs as the balance of account in respect of those transactions.
Consequently, an action was started in the Willesden County Court on 4 December 1968. On the 24th, Christmas eve, the defendant said, in effect, that he was not suffering from the conscience of a debtor at that festive season because he had paid
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(and he said so expressly) for all the cover that he had received, and having regard to the cancellations and various other matters he did not owe a penny more. A request for further and better particulars of his defence was made on 1 January 1969. Some solicitors were then retained, and within the next three weeks, on 20 January 1969, they filed some further and better particulars. But an order was issued by the registrar for still further and better particulars, that order being dated 23 January 1969. The registrar then ordered that the plaintiffs should have the costs of that application in any event. They have not been taxed, and it follows that they have not yet been paid.
On 10 March, both parties appeared before the learned judge. The defendant asked for an adjournment, and the learned judge granted the adjournment reserving the costs of that day. On 31 March, another three weeks later, the defendant made a payment into court of a total of £54 18s 6d; that was, £49 3s 6d for the claim and £5 15s, the amount of the costs which were endorsed on the original summons. The notice of payment into court is in terms which require express mention. They are these:
‘Take notice that the Defendant brings into Court the sum of £54. 18s. 6d., being the amount claimed on the Summons of £49. 3s. 6d. together with the costs endorsed thereon amounting to £5. 15. 0d. with a denial of liability in full and final settlement of the claim and costs herein.’
The plaintiffs’ solicitors plainly received that notice on or before 2 April, because on 2 April they wrote to the defendant’s solicitor in the following terms:
‘We are in receipt of your letter of the 31st ultimo [which was the date on which the defendant’s solicitor wrote to the county court] enclosing Notice of Payment into Court. We are lodging out Bill of Costs pursuant to Order 11, Rule 8(d).’
Pausing there for a moment, it is to be noticed that when that letter was written the plaintiffs’ solicitors well knew the terms of the notice of payment into court, and well knew that the defendant was endeavouring to make it plain to them—in fact, plainly was stating to them—that the amount that had been paid into court was available to be taken out only in full and final satisfaction of the claim and the costs therein. Then they notified their intention of delivering a bill of costs, and persisted in that notwithstanding the defendant’s solicitor’s letter of 8 April 1969, which made the point: ‘… we therefore do not think that you have the right to bring in a Bill without obtaining a specific Order for it.’
The question arises whether or not the court had an absolute discretion to refuse to consider the bill of costs which the plaintiffs brought in, or whether it was the duty of the court to consider any such bill and allow or disallow, in the ordinary process of taxation, any particular items and reduce, if it seemed fit so to do, the total of the claim for costs in which that bill was made out. Turning to the rules, one finds in Ord 11, r 7(1), that it is provided that the rule is to ‘… have effect whether the only relief claimed in an action is the payment of money … ’ In this case, the only relief claimed is the payment of money. But there is a further condition, stated in these words:
‘… and the defendant, within 8 days of the service of the summons on him inclusive of the day of service, pays money into court in satisfaction of the claim. [Then by sub-rule:] (2) Where the amount paid into court is the whole amount of the claim, together with the costs stated on the summons, the action shall be stayed … ’
That means, stayed for all purposes. Order 11, r 8, deals with the situation and category to which the instant case belongs, in the following terms:
‘Where in any case to which the last preceding Rule of this Order does not apply the only relief claimed is the payment of money and the whole amount
Page 54 of [1970] 2 All ER 52
of the claim is paid into court, the following provisions shall apply— (a) Proceedings in the action, except those authorised by this Rule, shall be stayed, and the defendant shall not be liable for any costs incurred after the receipt by the plaintiff of the notice of payment into court.’
Pausing there for a moment, one sees that by contrast with the absolute provision in r 7 the stay provided for by r 8 is not a complete and absolute say, but is to put a stay on all proceedings other than those authorised by r 8.
Rule 8 goes on to provide (leaving aside para (b), which is irrelevant) by para (c):
‘Subject as hereinafter provided, if the amount of the costs entered on the summons is not paid into court with the amount of the claim, the plaintiff may have judgment entered for such costs or any balance unpaid and the costs of entering judgment.’
That provision is not relevant to the instant case because the amount of the costs entered on the summons was paid into court in this case. However, para (d) is more relevant, and that provides:
‘Subject as hereinafter provided, if the plaintiff claims any additional costs [and it is common ground among counsel that that means any costs additional to the costs mentioned above] he may within fourteen days of the receipt by him of the notice of payment into court lodge a bill costs for taxation … ’
and there are then consequential provisions. It is said that the words ‘he may … lodge a bill of costs for taxation’ are otiose and meaningless, since he does not need any leave to write to the registrar’s office and seek to send in a bill of costs. That is of course perfectly true; but the words ‘lodge a bill’ mean ‘to cause the office to accept a bill lodged for taxation’. The words ‘he may … lodge’ are equivalent in my opinion to ‘he may do this and the court must accept what he sends forward as the lodging of a bill of costs’. The provision is mandatory for the court, though it is of course, in its terms, permissive to the plaintiff.
The view taken by the registrar and by the learned judge in a sense represents a rather different approach to the problem. The learned judge said, quite rightly, that broadly speaking a successful plaintiff can seldom be deprived of costs by the court, but if he is deprived of costs by the court and the court can give judicial reasons for that order of deprivation, then the court order is unappealable, and it is in a sense an absolute discretion which the court is required to exercise.
That may very well be true; but in my opinion it is quite beside the point. It is not a question here of whether there is any discretion to deprive a successful plaintiff of costs in any particular action or in any particular circumstances; it is a question of the construction of the rules of court, CCR Ord 11, rr 7 and 8. Further it was said by the registrar, and the learned judge took the same view, that the form of notice drafted by the defendant’s solicitor, on which I ventured, in a desire to compliment him, a comment that it was ‘ingenious’ and clever, was so framed that by taking money tendered on the basis of the terms of that notice the plaintiffs must be deemed, either contractually or quasi-contractually, or on a basis of some estoppel, to have disqualified themselves, or disbarred themselves from making any claim for any further costs.
That view just does not appeal to me as having any legal basis at all, since it is not open to parties to defeat the clear provisions of the rules of court by such an ingenious device and strategy as that. If it were allowed to prevail then very serious consequences might well arise in the event of the action proceeding to its conclusion as a hearing before the judge and then a dispute taking place as to how the parties should be held liable at that stage for costs.
I think the learned judge’s view was wrong. He did not have a discretion such as he thought he had. He failed to carry out his task of construing the rules of court. If he
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had done that and construed them as I think they should be construed, he should have come to the opposite conclusion.
I would allow this appeal.
KARMINSKI LJ. I agree.
SIR GORDON WILLMER. I also agree. It seems to me that by its plain terms CCR Ord 11, r 8(d), confers on the plaintiff a right, in the events which have happened in this case, to lodge his bill for taxation. I can see nothing in that rule, or in any of the other rules of court, to show that a plaintiff forfeits the right given to him by para (d) if he accepts the money paid into court, as these plaintiffs did; nor do I think that by skilfully wording the terms of his notice of payment in, the defendant can in any way qualify the plaintiffs’ absolute right to lodge their bill for taxation.
Appeal allowed.
Solicitors: Royds, Rawstorne & Co (for the plaintiffs); Edgar H Hiscocks (for the defendant).
S A Hatteea Esq Barrister.
Practice Note
(Admiralty: Insurance of arrested property)
[1970] 2 All ER 55
Categories: PRACTICE DIRECTIONS
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION (ADMIRALTY)
Hearing Date(s): 20 APRIL 1970.
Admiralty – Practice – Insurance of arrested property.
The President has given his approval to the following practice:—
1. As from 1 May 1970 the marshal will cease to insure any arrested property for the benefit of parties at any time during the period of arrest (whether before or after the lodging of a commission of appraisement and sale, if any).
2. The marshal will use his best endeavours (but without any legal liability for failure to do so) to advise all parties known to him as being on the record in actions in rem against the arrested property, including caveators against release of that property, before any such property moves or is moved beyond the area covered by the usual port risks policy. (NB the marshal may not know of actions in rem in district registries, or in county courts, against property which is already under arrest in other proceedings in the High Court unless the parties send him notice of their action.)
In these circumstances, practitioners’ attention is drawn to the necessity of considering the questions of insuring against port risks for the amount of their clients’ interest in any property arrested in an Admiralty action and the inclusion in any policy of a ‘Held Covered’ clause in case the ship moves or is moved outside the area covered by the usual port risks policy. The usual port risks policy provides, inter alia, for a ship to be moved or towed from one berth to another up to a distance of five miles within the port where she is lying.
This practice note replaces that of 31 July 1963.
Kenneth C McGuffie, The Admiralty Registrar
Cutler v Vauxhall Motors Ltd
[1970] 2 All ER 56
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, EDMUND DAVIES AND KARMINSKI LJJ
Hearing Date(s): 13 JANUARY, 4 MARCH 1970
Damages – Personal injury – Amount of damages – Grazed ankle requiring daily dressings for about 14 days.
Damages – Personal injury – Special damages – Relevance of future contingency in assessment of special damages – Loss of wages as result of injury culminating in operation – Operation inevitable in any event at future date.
In November 1965, the plaintiff grazed his right ankle by reason of his employers’ negligence. The graze required daily dressings for about a fortnight, after which it appeared to have healed completely. In May 1966, the plaintiff was found to have a varicose condition of both legs (which must have existed before November 1965), and an ulcer at the site of the graze. The ulcer necessitated an operation to strip the veins of the right leg; and it was decided to treat the left leg similarly. This operation was performed in September 1966; after it the plaintiff was off work for a while, and then on light work only for a time, which caused him a £173 net loss of wages. If the plaintiff had not grazed his ankle, a similar operation, with similar consequences, would have been necessary in 1970 or 1971, but this would not now be necessary owing to the 1966 operation. In an action by the plaintiff against his employers for damages in negligence, the trial judge awarded £10 damages for the graze and the consequent discomfort, but refused to award damages in respect of the £173 loss and the discomfort of undergoing the operation.
Held – (Russell LJ dissenting) The plaintiff was not entitled to recover any part of the £173 loss of wages or damages for discomfort, because—
(i) even though the loss had already been sustained at the date of the trial, future probabilities were to be taken into account in determining whether the plaintiff was entitled to recover in respect of the loss (see p 62 b and g, post);
(ii) there was no reasonable probability that, even if the plaintiff had not suffered the graze, he would have avoided having to undergo an operation similar to that which he had in fact undergone, at a cost at least equivalent to £173 (see p 62 b and g, post).
Dictum of Hamilton LJ in Harwood v Wyken Colliery Co [1913] 2 KB at 169, 170 applied.
Per curiam. The £10 damages was appropriate for the grazed ankle.
Notes
For measure of damages in tort for personal injury, see 11 Halsbury’s Laws (3rd Edn) 255, 256, para 427, and for cases on the subject, see 17 Digest (Repl) 101, 102, 155–168.
Cases referred to in judgments
Baker v Willoughby [1969] 3 All ER 1528, [1970] 2 WLR 50.
Harwood v Wyken Colliery Co [1913] 2 KB 158, 82 LJKB 414, 108 LT 283, 34 Digest (Repl) 562, 3848.
Performance Cars Ltd v Abraham [1961] 3 All ER 413, [1962] 1 QB 33, [1961] 3 WLR 749, Digest (Cont Vol A) 465, 173a.
Rouse v Port of London Authority [1953] 2 Lloyd’s Rep 179.
Shearman v Folland [1950] 1 All ER 976, [1950] 2 KB 43, 36 Digest (Repl) 205, 1072.
Page 57 of [1970] 2 All ER 56
West (H) & Son Ltd v Shephard [1963] 2 All ER 625, [1964] AC 326, [1963] 2 WLR 1359, Digest (Cont Vol A) 119, 1053c.
Appeal
This was an appeal by the plaintiff, Ivor William Cutler, against the decision of Donaldson J, given at Manchester Assizes on 30 October 1968, in an action against his employers, Vauxhall Motors Ltd. The facts are set out in the judgments of Russell and Edmund Davies LJJ.
G A Carman for the plaintiff.
M Morland for the Defendants.
Cur adv vult
4 March 1970. The following judgments were delivered.
RUSSELL LJ. This is a curious case. The relevant facts may be briefly stated. The plaintiff, when at work in November 1965, for the defendants, his employers, Vauxhall Motors Ltd, used an unstable box to stand on, and as a result of its instability he slipped and sustained a slight graze of his right ankle, which required daily dressings for a fortnight but apparently then had no other effect. The defendants admitted liability in that they should have provided steps or some other stable platform for his work. For the graze and its attendant discomfort and inconvenience the judge gave £10 damages, which is appropriate.
Some time later the plaintiff had pain or discomfort in his right leg higher up, and ultimately in June 1966 saw a specialist. It emerged that he had for some time, unknown to himself, suffered from a condition of varicosity in the veins of his legs, a condition antecedent to the accident. Being in this condition the graze had set up an ulcer. I do not think precision in medical terms is needed for consideration of this case, but the situation in summary was that in July 1966 due to the ulcer owing to the graze, the plaintiff’s varicose condition had reached a stage when the specialist recommended operation to cure that condition. In September 1966, he was operated on successfully, the operation not unnaturally being performed not only on his right leg but also on the other. He suffered of course pain and discomfort from the operation; it resulted in some permanent scars on his legs, though these took the place of unsightly lumps due to varicosity; and he was off work wholly or partially, due to the operation, to an extent that involved a net loss of earnings of an agreed amount of £173. This loss was suffered well before the trial, and was claimed as special damages. The judge awarded £10 damages, as already mentioned, but nothing by way of special damages or further general damages, with a consequent order as to costs adverse to the plaintiff. Thus simply stated the result may seem very startling. The plaintiff did in fact lose £173 in earnings because of the operation made necessary by the ulcer caused by the accident for which the defendants were responsible. The plaintiff did in fact suffer the operation with its anxieties, pains and discomfort in September 1966 because of the ulcer caused by the accident. The fact that he was vulnerable to such an ulcer because of his existing condition of varicosity does no more by itself to diminish the defendants’ liability in damages than does an eggshell skull in other cases.
But the judge was faced with evidence that if the accident had never happened the pre-existing condition of varicosity of the plaintiff was such that in all probability the plaintiff’s condition would in 1970 or 1971 have called for the very operation that he underwent in September 1966. Accordingly he cancelled out the pain and discomfort in 1966 as a mere anticipation of the inevitable, and similarly the net loss of earnings. Before this court it is asserted by the plaintiff: (a) that as to the operation
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and its attendant pain and discomfort, straight cancellation is wrong in law, though maybe a substantial offset should be made as a reflection of the obverse of the egg-shell skull cases, the guilty defendant being entitled also in mitigation of damages to call in aid the principle that he takes the plaintiff in his existing condition; and (b) that as to the special damages—loss of earnings—it is contrary to established law and wrong in principle to make an offset at all, the loss of earnings having been indubitably suffered.
The plaintiff, aged 41 at the time of the accident, was in steady employment with the defendants. When advised to have the operation on his legs he acted reasonably and agreed. These were factors in considering whether in all probability without the accident he would have anyway in due course suffered the pain and discomfort of the operation and a similar loss of earnings, with the result (it was argued) that the accident did no more than accelerate inevitable damage, or (to put it another way) while causing the detriment and damage simultaneously conferred the benefit of saving the plaintiff from similar detriment and damage in 1970 or 1971.
In argument for the plaintiff it was contended (correctly) under several heads that damage similar to that caused by the accident was not inevitable. Suppose him to die before the time when in due course he would have been ripe for the operation anyway, there could be no answer to a claim by his personal representative for £173. Similarly the future operation might have been made unnecessary by advances in medical science. The plaintiff might, it was said, not then have agreed to the operation. So far as loss of earnings is concerned, it was pointed out that in 1970 or 1971 the plaintiff might not lose any earnings, or might not lose the same amount by the operation, because he might at the time of the operation be on strike, or unemployed, or on holiday, or a man of leisure having won a football pool, or a self-employed shopkeeper with a wife to run the business in his absence. A number of points of this nature were put forward to show either that the operation was not inevitable in 1970 or 1971, or that it would not inevitably result in loss of earnings or in loss of earnings of the same extent. But the fact remained that there was a high degree of probability (a) that the operation would have taken place in any event in 1970 or 1971, and (b) that it would have brought in its train similar loss of earnings. Does this high degree of probability justify the judge’s view that no damages should be awarded either for the loss of earnings proved, or for the pain and discomfort involved in the operation?
For the plaintiff it was pointed out, correctly so far as I am aware, that there is no case in which ascertained special damage caused by the defendant’s default has ever been denied to a plaintiff, or reduced, on the ground of a probability that it would have been suffered in due course by the plaintiff in any event. Special damages, it was said, were special in this sense also. Though civil liability was in principle based on a balance of probabilities, to offset wholly a certainty nothing less than certainty could suffice. For the defendants it was said that there is no magic in special damages, which are only that part of the total damages (a) suffered up to the date of trial, and (b) capable of quantification by calculation rather than estimation (though, as in Rouse v Port of London Authority, there may be an element of estimation in the calculation of pre-trial loss of earnings); consequently, it was said, there is no reason in principle why there should not be offset the probability (here of high degree) that the accident has benefited the plaintiff by avoiding a similar loss in the near future; and the principle is clear that a defendant, whether guilty of a breach of contract or of tort, may take advantage of a particular condition of the plaintiff and of a benefit to the plaintiff that the wrong done brings in its train, unless the benefit be collateral or independent such as insurance or the benevolence of a third party.
A good example of the principle that a tortious defendant may, in resisting a claim
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for damages, or the full amount thereof, rely on an already damaged condition of the plaintiff is to be found in Performance Cars Ltd v Abraham in the Court of Appeal. Not only must the tortfeasor take the plaintiff as he finds him to the disadvantage of the tortfeasor, he may also take him as he is to the advantage of the tortfeasor in an appropriate case. In that case damage to a car would have required complete recellulosing, but due to a previous accident that was already necessary.
A good example of a case where a countervailing benefit produced by the tort was not to be set against damages is Shearman v Folland in the Court of Appeal. In that case a woman who normally lived in hotels at seven guineas a week claimed as damages 25 guineas a week nursing home fees; this court refused to deduct seven guineas a week as hotel expenses saved, because the precise style in which the plaintiff might but for the accident have lived was a collateral matter, not in pari materia; the court would have deducted the proportion of the 25 guineas properly attributable to mere lodging had it been (which it was not) ascertainable; and did deduct £1 a week for board. This case is, I think, no guide to the present case; the likelihood of the future operation is not, I think, properly to be described as a collateral matter or as not in pari materia.
I do not consider that the probability that the plaintiff would have undergone the same operation four or five years later exempts the defendants from all liability for damages for pain and suffering attributable to the operation. I do not think that it is a correct approach to say that on a balance of probabilities this would have happened some years later anyway. The pain and suffering of the operation is a certainty caused by the tort; the saving from the same operation in the future is only a probability, albeit a strong probability. Giving to the matter the best consideration that I can, I think that there should be a very considerable but not total offset against the damages for pain and suffering, but I do not think that this offset should leave the plaintiff with less than £100 under the head of general damages for pain and suffering in addition to the £10.
As to the special damages for loss of earnings, I cannot accept that in the award the likelihood that a loss of earnings would have been in any event suffered in 1970 or 1971 is to be ignored. There is nothing sacrosanct about ascertained pre-trial damages as a part of the compensation called for by a tort. Equally I would make a substantial but not total offset against the £173 for the probability that the plaintiff has been, by the 1966 operation, saved a wages loss in 1970 or 1971, and I would leave him with £25 under this head. In summary, therefore, I would award the plaintiff a total of £135, being the above two sums of £100 and £25 plus the £10 awarded by the learned judge.
I arrive at this conclusion with diffidence, since I am not wholly in agreement with the learned judge or with my brethren in this court.
EDMUND DAVIES LJ. The problem presented by this appeal may be thus stated: in a claim for damages for personal injuries where liability is proved or admitted, is the plaintiff necessarily entitled to recover in full such financial loss resulting from the accident as he had sustained by the date of trial, or may future probabilities be adverted to and so reduce or even extinguish any entitlement to be recouped as financial loss? This question is seemingly covered by no reported decision, and the manner in which it was answered by the learned trial judge in the present case would, certainly at first sight, startle most men in the street and, indeed, many lawyers.
On 11 November 1965, the plaintiff workman (than aged 41) had a slight fall in the course of his employment with the defendants. The only immediate effect was a graze of the inner side of his right ankle, which required daily dressings for
Page 60 of [1970] 2 All ER 56
about a fortnight. There was no interruption of his work, the healing process appeared complete, and in respect of that incident and its immediate sequelae the judge awarded him £10 damages. If the story stopped there, no one could properly assert that those damages (while modest) were inadequate, having regard to the triviality of the accident and its apparently slight consequence; but, unhappily, more was to come. In May 1966, the plaintiff felt a pain below the right knee, and examination by his family doctor then revealed a varicose condition in both legs, which was hitherto unknown to the plaintiff. On 6 July 1966, the surgeon to whom he had been referred reported the presence of a small ulcer on the right ankle at the site of the old graze. He also found ‘bilateral severe varicose veins’. Because of the presence of the ulcer an early operation to strip the veins of the right leg was decided on and, at the same time, the left leg was similarly treated. This bilateral operation was performed in September. During the period when the plaintiff was entirely off work and later on light work, he admittedly sustained a net financial loss of wages amounting to £173.
No question arises in this appeal regarding the attributability of the ulcer to the accident, nor is it now challenged that the need to perform the operation at the time it was carried out—namely, in September 1966—was likewise brought about solely because of the sequelae of the accident. In these circumstances, it was contended for the plaintiff at the hearing in October 1968 that he was entitled as of right to recover the whole £173 as special damages. The trial judge accepted that in most cases such a result would be inevitable; but complication arose from the fact that the bilateral varicosity was, as such, unconnected with the accident and had preceded it. Furthermore, it had developed to such a severe extent by the autumn of 1966 that, even had the plaintiff sustained no accident, a similar operation would have become necessary by 1970 or 1971. This being the evidence, the learned judge made these observations:
‘It is for the Plaintiff to prove his loss. He did not, and I think could not, suggest that if he had had the operations in 1970 or 1971 he would have suffered any smaller loss of wages, or that the operations would have been any less uncomfortable … The position is then that the accident expedited an inevitable loss by some four years and the Plaintiff has been rid of his varicose veins that much earlier. Is this a loss? I think not.’
He accordingly disallowed in toto the claim for £173 special damages and awarded the plaintiff the £10 merely as general damages for the grazed ankle resulting from the slight fall.
Counsel for the plaintiff claims that this was quite wrong. He submits here, as he did below, that nothing that might (or was even likely to) happen after the trial could have the effect of reducing financial loss proved to have accrued by the date of the hearing. In other words, in relation to special damage only a backward look is permissible, and peering into the future is an irrelevant (and therefore impermissible) exercise. It is accordingly submitted that, in cases such as the present, where no question of diminution of damages by reason of any contributory negligence arises, and where the accrued loss claimed and established is of a purely financial character, the assessment of the plaintiff’s entitlement in respect of that loss is simply a matter of arithmetic. If it is conceded that he has done his sum right, counsel for the plaintiff urges that he is entitled in every case to be indemnified in full for that financial loss.
It is to be observed that the trial took place in October 1968, which was about two years after the bilateral operation was performed and some two to three years before, on the medical evidence, it would in any event have become necessary. But it has been submitted for the plaintiff that by 1970 or 1971 circumstances might have become so altered as to render the operation either unnecessary or (if performed)
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not inevitably leading to the financial loss claimed or, indeed, to any loss. A variety of possibilities were canvassed—that before 1970 the plaintiff might have died; or he might have found work with other employers who made up wages in full when employees were on sick leave; or he might have had a lucky ‘windfall’ and so ceased work altogether; or a dramatic medical break-through might, after all, have rendered the operation unnecessary. In the light of these possibilities, counsel for the plaintiff has attacked the soundness of the judge’s conclusions (a) that there was performed in 1966 merely an operation which would have been inevitable in 1970 or 1971, and (b) that, whenever the operation was performed, the financial loss sustained by the plaintiff would be inescapable and identical with that sustained in 1966.
Was the learned judge right? If he was, then it is said that the remarkable result would follow that if the plaintiff had died in (say) 1969, his widow would have had no claim under the Law Reform (Miscellaneous Provisions) Act 1934, in respect of the undoubted diminution of the deceased’s estate to the extent of the £173 wages lost; but this result does not seem to me necessarily to follow from the judgment. The learned judge was dealing with a man of 44, there was no suggestion that his expectation of life was below that normally enjoyed by a man of that age, and we do not know what conclusion he would have arrived at had there been any ground for thinking that death or any other significant event would have supervened before in the ordinary course the remedial operation would have become necessary. I have sympathy with counsel for the plaintiff, who seems to have been taken aback by the novel point taken up, so we were told, by the learned judge of his own accord; but, in the light of all that happened after the accident, including the resumption of work by the plaintiff with the same employers, it is difficult to think that, had counsel for the plaintiff had more time to consider the matter (and none was sought from the court), he would have been better equipped with either evidence or argument than he was when the case was heard. That future contingencies needed to be taken into consideration I accept, and it is the undoubted fact that the judge made no reference to them. Even so, in all the circumstances, had he done so I do not think that they would, or ought, to have made any difference to his conclusion if his approach to the cardinal problem was right. Similarly, while it is incontestable that, on any view, the plaintiff was entitled to recover the interest on his £173 for the few years by which his operations were accelerated, the amount so earned would have been trifling and could have made no difference to the order for costs, the defendants having paid £100 into court.
The issue, then, is whether such financial loss as has accrued can in no circumstances be affected by looking into the future. In most cases such a question does not arise, and it has become the convenient practice where damages for personal injuries are claimed to divide them into (a) special and (b) general damages. The former include accrued and ascertained financial loss and these have to be expressly pleaded, while the prospect of future financial loss forms part of general damages. But the task confronting the court is the comprehensive one of assessing the totality of damages to be awarded, even though it performs it in stages. In doing so, the court is undoubtedly entitled to have regard to circumstances which have arisen between the accident and the trial—indeed, it must. Thus, it has to bear in mind that unemployment in the industry might have prevented the injured plaintiff from earning all the wages claimed to have been already lost (Rouse v Port of London Authority), or that, in a fatal injury case, ‘the needs of the widow … or of the children … may have become less because of her remarriage’ (per Lord Reid in Baker v Willoughby ([1969] 3 All ER 1528 at 1531, [1970] 2 WLR 50 at 54)). In the same way, it is required to have regard to future contingencies. Accordingly, the defendant may call evidence to establish that the plaintiff’s prospects of future
Page 62 of [1970] 2 All ER 56
uninterrupted employment at the same wages were precarious, owing to his poor state of health or to uncertain industrial conditions. This forward-looking is essential if the court is to perform its task of taking into account the actual consequences which have resulted from the tort, as Lord Morris of Borthy-y-Gest put it in H West & Son Ltd v Shephard ([1963] 2 All ER 625 at 633, [1964] AC 326 at 348).
Why, then, should the court be prevented from adverting to future probabilities when considering whether the plaintiff is entitled to recover, under his general claim for ‘damages’, financial loss which at the date of trial he had undoubtedly sustained? There being no reasonable grounds for regarding as probable in the present case that the plaintiff would die before 1970 or 1971 (he has certainly survived until 1970) or that for any other reason he would not then lose, as a result of the inevitable operation, a sum at least equivalent to £173, on what legal principle should the defendants be made liable to pay that sum? In Harwood v Wyken Colliery Co ([1913] 2 KB 158 at 169, 170) Hamilton LJ said:
‘In assessing damages for injury caused to a plaintiff workman by the tortious negligence of the employer or his servants a jury would be directed that … they had to give solatium for suffering and compensation for disablement, but so that the tort-sufferer should not make a profit out of the wrong done him, the object being by the verdict to place him in as good a position as he was in before the wrong, but not in any wise in a better one.’
While these observations were not directed to the problem involved in the present appeal, they are surely applicable. On the known facts, were the plaintiff held entitled to recover the £173 presently lost, the result would be that the defendants would be recouping him for a loss which, had there been no accident at all, in all probability he would himself have been obliged to bear. While the point is a novel one, on principle I do not think that their liability to do this has been established. It therefore follows that, in dealing with the claim for ‘damages’, the learned trial judge cannot in my view be regarded as having been other than strictly correct in disallowing the £173 in toto. I therefore find myself constrained to hold that the appeal should be dismissed.
KARMINSKI LJ. I have had the advantage of reading the judgment of Edmund Davies LJ and I agree with both his conclusions and his reasoning, but as the case has been both interesting and unusual, I would add a few observations of my own.
What has to be ascertained here are the actual consequences to the plaintiff of the defendant’s wrongdoing. There can be no doubt that one consequence, and an immediate one, was the graze to his right ankle. The damage so caused by the graze was valued by the judge of £10. Taken in isolation, this sum cannot be criticised at too small; but the graze set off a varicose condition in both legs, which required surgical treatment. The varicose condition was in existence before the accident, and would have required surgical treatment in any event in the foreseeable future. The accident merely advanced the date of the operation.
The immediate result of the operation was to cost the plaintiff £173 in lost wages, and at first impression there is much to be said in favour of his being compensated for the loss; but on consideration I have come to the conclusion that it would be wrong to ignore the strong probability on the evidence that in any event this loss was inevitable, though at a later date. To ignore this probability would be to put the plaintiff, in the words of Hamilton LJ in Harwood v Wyken Colliery Co ([1913] 2 KB at 170), in a better position than he was before the wrong.
Page 63 of [1970] 2 All ER 56
I have therefore come to the conclusion that the judgment of Donaldson J was right, and that this appeal should be dismissed.
Appeal dismissed.
Solicitors: W H Thompson, Manchester (for the plaintiff); Percy Hughes & Roberts, Birkenhead (for the defendants).
Henry Summerfield Esq Barrister.
Practice Direction
(Divorce: County court list: Numbering of cases and prefix letters)
[1970] 2 All ER 63
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
20 April 1970.
Divorce – Matrimonial causes list – County court list – Numbering of cases – Use of prefix letter.
Divorce – Matrimonial causes list – County court list – Cases set down for trial – Procedure for automatic removal from list – Restoration.
CAUSES FROM DIVORCE COUNTY COURTS AND THE DIVORCE REGISTRY FOR HEARING IN THE COUNTY COURT LIST AT THE ROYAL COURTS OF JUSTICE
The hearing numbers of the above causes run from 1 to 9999 with a prefix letter. The prefix letter at present in use is B. When number B9999 is reached subsequent numbers will be prefixed by letter C, run from C1 to C9999 and then commence again with the prefix letter D, and so on. In order to clear the lists of cases which have been set down for trial for some time and in which no application for a hearing date has been made it is proposed, when it is necessary to commence a new prefix letter, to strike out of the list all cases numbered under the second preceding prefix letter in which no application to fix a date has been made.
It is anticipated that prefix letter C will start in use within the next week. When it does start in use all cases in the series A1 to A9999 in which no application has been made to fix a date will be struck out of the list.
Causes struck out of the list under this direction may be restored to the current list by filing notice to restore in the Divorce Registry.
Compton Miller, Senior Registrar
Whitbread & Co Ltd v Bell
Bell v Whitbread & Co Ltd
[1970] 2 All ER 64
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 11, 12 MARCH 1970
Gaming – Competition – Competition in connection with trade or business – Scheme involving completion of words by attaching letters to coupons – No skill involved – Each participant striving against others for limited number of letters – Whether scheme a competition – Whether a competition in which success did not depend to a substantial degree on the exercise of skill – Betting, Gaming and Lotteries Act 1963, s 47.
Gaming – Lottery – Scheme involving distribution of prizes by chance – No payment or contribution by participants towards prizes or prize fund – Whether scheme capable of constituting lottery – Betting, Gaming and Lotteries Act 1963, s 42.
Whitbreads, to promote their business as brewers and owners of licensed premises, conducted a scheme with prizes called ‘Win with Whitbread’ in some 300 public houses. Customers entering the public houses were handed a sealed envelope containing three letters, and coupons bearing certain words. To win a prize the appropriate letters had to be struck on the coupon so as to complete one of the words. There were some coupons entitling customers to prizes without having to complete a word. The receipt of an envelope was in no way conditional on buying a drink. Whitbreads were charged, in respect of two of the public houses, under s 42a of the Betting, Gaming and Lotteries Act 1963 that ‘Win with Whitbread’ was a lottery and that they had used the premises for purposes connected with the lottery and under s 47b of the Act that ‘Win with Whitbread’ was a competition in which success did not depend to a substantial degree on the exercise of skill. They were convicted on the 47 charges and acquitted on the s 42 charges. On appeals by Whitbreads against the conviction and by the prosecutor against the acquittal,
Held – Both appeals would be dismissed, because—
(i) as to the s 42 charges, there was no lottery because the participants had not made any payment or contribution, either towards the prizes themselves, or towards funds, ie profits, out of which prizes were provided (see p 67 c, p 68 j, and p 71 b, post) (dicta of the Lord Justice-General (Lord Clyde), Lord Sands and Lord Blackburn in Barnes v Strathern 1929 SC (J) at 46, 48 and 49 respectively applied; dicta of the sheriff substitute in Douglas v Valente 1968 SLT (Sh Ct) at 87 approved; Willis v Young and Stembridge [1907] 1 KB 448 distinguished);
(ii) as to the s 47 charges,
(a) the scheme was a competition in the sense that each participant was striving against the others to secure the limited number of letters available to complete any particular word on the coupon (see p 69 h, and p 71 b and f, post) (dicta of Lord Greene MR, du Parcq and Morton LJJ in Elderton v United Kingdom Totalisator Co Ltd [1945] 2 All ER at 626, 629 and 630 respectively, applied); and
(b) it was immaterial that no skill was required for success in the competition; the words of s 47 (1) (b) of the Act covered anything less than a substantial degree of skill including no skill at all (see p 70 h, and p 71 a and b, post).
Page 65 of [1970] 2 All ER 64
Notes
For what is a lottery, see 18 Halsbury’s Laws (3rd Edn) 238, 239, para 460, and for cases on the subject, see 25 Digest (Repl) 493–495, 511–527, an 511–513, 614–622.
For the Betting, Gaming and Lotteries Act 1963, ss 42, 47, see 14 Halsbury’s Statutes (3rd Edn) 583, 591.
Cases referred to in judgment
Barnes v Strathern 1929 SC (J) 41, 1929 SLT 37, 25 Digest (Repl) 492, *534.
Douglas v Valente 1968 SLT (Sh Ct) 85.
Elderton v United Kingdom Totalisator Co Ltd [1945] 2 All ER 624, [1946] Ch 57, 115 LJCh 81, 173 LT 384, 25 Digest (Repl) 510, 612.
Hall v Cox [1899] 1 QB 198, 68 LJQB 167, 79 LT 653, 25 Digest (Repl) 513, 619.
McCollom v Wrightson [1968] 1 All ER 514, [1968] AC 522, [1968] 2 WLR 578, 132 JP 261, Digest Supp.
Minty v Sylvester (1915) 84 LJKB 1982, 114 LT 164, 79 JP 543, 25 Digest (Repl) 494, 526.
Willis v Young and Stembridge [1907] 1 KB 448, 76 LJKB 390, 96 LT 155, 71 JP 6, 25 Digest (Repl) 493, 511.
Cases also cited
Bartlett v Parker [1912] 2 KB 497.
Morris v Blackman (1864) 2 H & C 912.
Taylor v Smetten (1883) 11 QBD 207.
Cases stated
These were two cases stated by justices for the North Riding of Yorkshire acting in and for the petty sessional division of Langbaurgh East in respect of their adjudication as a magistrates’ court sitting at Guisborough on 23 September 1969. In both cases informations were preferred on 8 July 1969 by the prosecutor, Detective Chief Inspector Allan Bell, against Whitbread & Co Ltd, in one case charging that two offences had been committed by them under s 42 of the Betting, Gaming and Lotteries Act 1963 in that between 22 March and 31 May 1969 in connection with a certain lottery known as the ‘Win with Whitbread’ competition they had used certain premises for the purposes connected with the lottery and in the other case charging that two offences had been committed by them under s 47 of the Act in that they had, between the same dates, conducted a certain competition called ‘Win with Whitbread’ in which success did not depend to a substantial degree on the exercise of skill. The s 42 offences were alleged to have been committed in connection with Whitbread’s business of licensed premises carried on by them under the name of Whitbread & Co Ltd. In each case one offence related to the Moorcock Hotel and the other to the Abbey Inn, both in Guisborough.
The following facts were found. Between 22 March 1969 and 31 May 1969 Whitbreads conducted a scheme called ‘Win with Whitbread’ in connection with their business of brewers and owners of licensed premises. In particular, the scheme was conducted on the premises known as the Moorcock Hotel and the Abbey Inn. Persons visiting the premises were handed a sealed envelope containing a leaflet with three perforated letters which had an adhesive backing. It was immaterial how many drinks a person had, or who paid for them, because each person received only one envelope during any one period of opening of the licensed premises. In addition a supply of the coupons was made available to all persons visiting the premises. There was no evidence that any purchase was necessary to obtain either envelopes or coupons. To win a prize in the scheme it was necessary to fill in all the blank spaces on the coupon with the appropriate letters to complete a word. Moreover, a person receiving a ‘Win with Whitbread’ instant winner coupon did not even have to complete a word. He became entitled to his prize immediately on presenting his coupon to the licensee.
Page 66 of [1970] 2 All ER 64
In respect of the proceedings under s 42 of the Act it was contended by the prosecutor that payments which were made for drinks or other items in the Moorcock Hotel and the Abbey Inn must be deemed to include something towards the cost of taking part in the promotion, which therefore amounted to a lottery. It was contended by Whitbreads that in order to constitute a lottery there must be a chance of losing as well as of winning and that it could not properly be said that, by buying drinks at normal prices, participants in the competition purchased anything so as to be indirectly putting up a stake in connection with it. The justices were of opinion that ‘Win with Whitbread’ did not amount to a lottery, because there was no evidence of any stakes put up by those taking part. Accordingly, they dismissed the two informations under s 42 of the Act.
In respect of the proceedings under s 47 of the Act, Whitbreads, without abandoning the point, did not argue that success in their promotion depended to a substantial degree on the exercise of skill. They contended that ‘Win with Whitbread’ did not amount to a competition, since it was so easy to play that there was no element of striving by the participants in their efforts to win. In was contended by the prosecutor that ‘Win with Whitbread’ did amount to a competition, success in which did not depend to a substantial degree on the exercise of skill. The justices were of the opinion that ‘Win with Whitbread’ did amount to a competition in which success did not depend to a substantial degree on the exercise of skill. Furthermore, they did not accept the argument that striving between the participants was an essential element of a competition. They took the view that to hold otherwise would create a situation in which it would be virtually impossible to secure a conviction under s 47 of the 1963 Act, whatever the facts. Either substantial skill would be present, in which case the competition would be exempt from s 47, or else the outcome would depend mainly on chance, in which case the effort required would be minimal and there would be no competition. They also considered whether financial participation by the competitors was an essential ingredient of the competition, another point which was not argued before them. Since s 47 used the words ‘any competition’ the justices were of opinion that it included a competition in which the competitor paid nothing. Accordingly, they convicted Whitbreads, fined them £25 on each charge and ordered them to pay £75 costs.
The prosecutor appealed against the dismissal of the informations under s 42 and Whitbreads appealed against their conviction on the informations under s 47.
Norman C Tapp QC and R Castle-Miller for the prosecutor.
Michael Kerr QC and R A R Stroyan for Whitbreads.
12 March 1970. The following judgments were delivered.
LORD PARKER CJ stated the facts and continued: It is convenient in the first instance to deal with the lottery charge, that is the charge contrary to s 42 of the Act. Section 42 comes in Part III of the Betting, Gaming and Lotteries Act 1963 the first section in that being s 41, which declares that: ‘Subject to the provisions of this Act, all lotteries are unlawful.' Then by s 42(1), which creates offences, it is provided:
‘Subject to the provisions of this section, every person who in connection with any lottery promoted or proposed to be promoted either in Great Britain or elsewhere … (f) uses any premises, or causes or knowingly permits any premises to be used, for purposes connected with the promotion or conduct of the lottery … shall be guilty of an offence.’
Nowhere in the history of lotteries or in this Act is there a statutory definition of a lottery. At least it consists of the distribution of prizes by chance, that is to say cases where there is no element of skill whatever on the part of the participant. If there is any degree of skill involved, then there is no lottery. If authority is needed for that, it is to be found in Hall v Cox. It is clear, however, and indeed admitted that that
Page 67 of [1970] 2 All ER 64
is not a complete definition. The prosecution maintain that the only further element, apart from allurement, is that there should be something in the nature of a commercial venture, and that the absence of any payment or contribution by the participants, as was found in the present case, is not conclusive. Looked at realistically, the prosecution say that the whole object of the promotion was to increase the sale of liquor, and that as the coupons themselves state, what no doubt was the fact, that Whitbreads’s pubs displayed the ‘Win with Whitbread’ sign, there was here an advertisement or allurement of the scheme. Accordingly, say the prosecution, the justices ought to have convicted.
For my part I am quite unable to accept that argument. There is, as far as I know, no case of a successful prosecution for running a lottery which has not involved some payment or contribution by the participants, and indeed the trend of authority has all been the other way. There must be some payment or contribution, if not towards the prizes themselves, at any rate towards funds, ie profits, out of which prizes are provided. The court has been referred to a number of authorities in this matter; I propose to refer to but a few of them. The first one that I would like to refer to is a Scottish case of Barnes v Strathern. In that case the Lord Justice-General (Lord Clyde) said (1929 SC (J) at 46):
‘A lottery has been compendiously defined as a scheme for the distribution of money by chance. It usually, if not always, takes the form of the creation of a fund by the participants in the lottery, who buy tickets or pay subscriptions in consideration of an offer by the promoters to award them a prize on some contingency the happening whereof depends on chance.’
Lord Sands said (1929 SC (J) at 48):
‘The definition may perhaps seem to be incomplete. It may be said that there must be super-added an element of allurement and contribution. If a public entertainer distributes money to members of the audience chosen at random it has been held to be a lottery. But if a benevolent member of the audience, with no interest in the pecuniary success of the entertainment, were, out of eccentric goodness of heart, to distribute money at random among members of the audience chosen by pure chance, as for example every tenth person, that would not be a lottery.’
Finally Lord Blackburn said (1929 SC (J) at 49):
‘It is often difficult to say whether any individual scheme falls within the definition or not. But this is settled law that, if the winning of a prize in a scheme in which a number of persons take tickets depends entirely upon chance and is independent of any exercise of skill, the scheme is a “lottery” and illegal under the Act.’
The only apparent exception to which this court has been referred is Willis v Young and Stembridge. It is a case which depends entirely, as I see it, on its very special facts. There the proprietors of a weekly newspaper caused medals to be distributed gratuitously among members of the public, each medal bearing a distinctive number with the words ‘Keep this, it may be worth 100l. See the Weekly Telegraph to-day’. The winning numbers which were arbitrarily selected by the newspaper proprietors and were unknown to the distributors, were published weekly in the newspaper. There was in fact no need to buy the paper in order to ascertain who had won, but
Page 68 of [1970] 2 All ER 64
it was proved in evidence that a great number of the participants did buy the newspaper; they paid 1d for their newspaper, not to read it, but in order to ascertain the winning numbers and as a result the circulation of the newspaper was shown to have gone up some 20 per cent during the progress of the scheme. It was there held that although it was possible for an individual holder of a medal to obtain a prize without paying anything for his chance, the medal holders as a body collectively contributed some of the money to the fund out of which the money came for the prizes; accordingly the scheme was held to be a lottery. Those special factors it seems to me are quite different from the facts in the present case. Here if any further beer was bought as a result of the promotion of this scheme—and there was no evidence as to this— that would merely be paying for a drink in order to drink it, and in no way concerned with the alleged lottery.
Willis v Young and Stembridge was specifically referred to in a recent case in the House of Lords of McCollom v Wrightson. It was a case concerning bingo played in public houses where the participants paid nothing in order to play the game. It in fact was a prosecution under the gaming provisions of the Act, and did not allege a lottery. It was held in the speech of Lord Hodson, with which all their Lordships agreed, that so far as the gaming charge was concerned a wager by the participant was necessary before an offence was committed. Lord Hodson referred to Willis v Young and Stembridge in these terms ([1968] 1 All ER at 517, [1968] AC at 528):
‘A subsidiary argument was advanced by the appellant, that an indirect benefit to the donor of a prize was equivalent to a stake in the game. This argument was based on two cases, one Willis v. Young and Stembridge, and the other Minty v. Sylvester.’
Then Lord Hodson referred to the facts of Willis v Young and Stembridge, and continued ([1968] 1 All ER at 517, [1968] AC at 528):
‘It is unnecessary to consider whether the case [ie Willis v Young and Stembridge] was rightly decided for in no sense can it properly be said that by buying drinks or in some other way those who attended the parties purchased anything so as to be indirectly putting up any stake in connexion with the bingo playing. By being attracted to the hotel no doubt they were induced to buy drinks, but in no sense were they contributing to the prizes even if they bought drinks before play began.’
Accordingly, assuming that Willis v Young and Stembridge was rightly decided (counsel for Whitbreads specifically desires to keep open that point), it is clear that what happened in the present case does not amount to a payment or contribution.
Finally there is another Scottish case again in 1968, Douglas v Valente. It was decided by the sheriff-substitute, who considered the dictionary meanings and the cases concerning lotteries, and towards the end of his judgment said (1968 SLT (Sh Ct) at 87):
‘Despite that observation, I am satisfied that the whole trend of judicial decision and the majority of judicial observations, as well as the more recent dictionary definitions, favour the view that in its ordinary sense a lottery involves contribution to the prize fund by the participants.’
I entirely agree, subject, possibly to the deletion of the words ‘to the prize fund’, unless by that is meant to a fund out of which the prizes are provided. Accordingly, so far as the informations alleging offences against s 42 of the Act are concerned, I would dismiss them.
Page 69 of [1970] 2 All ER 64
Turning then to the appeal against conviction, on the two informations laid under s 47, the facts as I have already said were the same. The justices in convicting Whitbreads stated:
‘We were of the opinion that “Win with Whitbread” did amount to a competition in which success did not depend to a substantial degree upon the exercise of skill. Furthermore, we did not accept the argument that striving between the participants was an essential element of a competition. We took the view that to hold otherwise would create a situation in which it would be virtually impossible to secure a conviction under section 47, whatever the facts. Either substantial skill would be present, in which case the competition would be exempt from section 47, or else the outcome would depend mainly upon chance, in which case the effort required would be minimal and there would be no competition.’
Section 47 of the Act is the last section in Part III and s 47 (1) provides:
‘It shall be unlawful to conduct in or through any newspaper, or in connection with any trade or business or the sale of any article to the public— (a) any competition in which prizes are offered for forecasts of the result either—(i) of a future event; or (ii) of a past event the result of which is not yet ascertained or not yet generally known; (b) [and this is the relevant provision for the purposes of the present case] any other competition success in which does not depend to a substantial degree upon the exercise of skill … ’
As to this counsel for Whitbreads makes two submissions. The first, and I think the main one, was that what took place here was not a competition in the sense that there was no striving between any one participant and another. He points out that it is irrelevant whether or not there were any participants or customers, as I will call them, beyond a single one, and that one customer’s chance of winning is the same whether or not he is the only customer.
For my part, while recognising that there is no competing and no rivalry in that sense, it seems to me that there is no reason to construe the ‘competition’ in the section in that narrow sense. As a matter of ordinary language each participant was striving against the others to secure the limited number of letters available to complete any particular word in the coupon. To take the most substantial prize which resulted from completing the word ‘Whitbread’, other than the letter ‘i’ which was said to be ‘free’, which would result in the prize of a BOAC holiday for two, it is likely that the promoters having decided to limit the number of prizes of that sort in a particular way to one, two, three, four, whatever it may be, would only print the corresponding numbers of the letter ‘W’ which was peculiar to ‘Whitbread’. It did not appear in any of the other words in the coupons. Accordingly, as it seems to me as a matter of common sense each customer was striving against the others to get one of the very limited letters ‘W’. In that sense it seems to me that they were competing and striving one with the other.
Although the observations were undoubtedly obiter, I do think that it is worthwhile to consider what was said in Elderton v United Kingdom Totalisator Co Ltd. The case concerned s 26 of the Betting and Lotteries Act 1934 which contained similar words, albeit the lay-out was somewhat different, to the words in s 47 of the 1963 Act. Lord Greene MR said ([1945] 2 All ER at 626, 627, [1946] Ch at 64):
‘The next stage in [counsel for the appellants’] argument is that, if it is pool betting, it cannot be a competition in which prizes are offered. In my opinion, that
Page 70 of [1970] 2 All ER 64
proposition does not bear inspection. In the present case there is, I think, a competitive element in a strict and narrow sense of that phrase. Counsel for the appellants said that the word “competition” in this context necessarily involves the idea of several persons pitting their skill against one another. I do not think that it is to be limited in that way, because I apprehend that, if a newspaper, for instance, were to offer a prize for any successful forecast of a given future event, that would be a competition and the persons who go in for it would be properly described as competitors. If that were not so, it seems to me that the obvious scope and intention of the section could be perfectly easily defeated.’
du Parcq LJ said ([1945] 2 All ER at 629, [1946] Ch at 69):
‘I agree entirely with what LORD GREENE, M.R., has said as to the word “competition“. It is not necessary to decide whether, in order that you may have a competition, there must be a necessary conflict of interests between the participants in it. I agree with the view, which was, I think, indicated by LORD GREENE, M.R., that you may have a competition, properly so-called, where there is no necessary conflict of interests, as, for instance, if the promoters say: We will give a prize, a fixed and an unvarying prize, to everybody who is completely successful. It is not necessary to decide the point today.’
Morton LJ said ([1945] 2 All ER at 630, [1946] Ch at 70):
‘Even if the entrants had only aimed at producing a wholly correct forecast, I think that the Points Pool would have been a competition … ’
As I have said those observations were all obiter in the sense that the court went on to decide the case on a different point. Nevertheless as it seems to me they are persuasive authority and accord with the view that I had formed.
Counsel for Whitbreads’s second submission is really this, that an offence only occurs under the section when there is some element of skill, though not to a substantial degree. He suggests that the scheme of the Act is to provide that if real skill is involved in the competition, it is altogether outside s 47. If there is no skill involved in the competition then again it is outside s 47 albeit it may be a lottery, but s 47 only applies if, while the winning depends mainly on chance, there may be some degree of skill involved albeit not to a substantial degree.
The answer as I see it is simply this, that the section does not so provide. The relevant words in s 47(1) are:
‘It shall be unlawful to conduct … (b) any other competition success in which does not depend to a substantial degree upon the exercise of skill … ’
and that as it seems to me clearly covers the case where no skill is involved. Counsel for Whitbreads did suggest that the draftsman had deliberately used the words in para (b) rather than some such words as ‘the success in which does not depend on any or any substantial degree on the exercise of skill’. But as it seems to me it was quite unnecessary to use such words; the words that were used cover anything less than a substantial degree of skill including no skill at all. Moreover s 47(2) as it seems to me lends considerable support to this view. Section 47(2) is in these terms:
‘Any person who contravenes the provisions of this section shall, without prejudice to any liability to be proceeded against under section 42 of this Act, be guilty of an offence.’
If the competition covered by s 47 is only one where some skill is involved, then it
Page 71 of [1970] 2 All ER 64
could not be a lottery, and the words ‘without prejudice to any liability to be proceeded against under section 42 of this Act’ were wholly unnecessary. It follows for the reasons I have given that I would likewise dismiss this appeal.
I would only like to add my respect to the justices who have not only considered these matters with great care, but have in my view come to a correct result.
ASHWORTH J. I agree.
DONALDSON J. I agree, and I would only like to add one brief word about the competition aspect. If one has unlimited prizes and competitors are required to achieve a particular standard, then there is a competition between each contestant and the promoters. This is what counsel for Whitbreads referred to as vertical competition. If one has a limited number of prizes, but no standard, the best contestants being the winners, there is competition between contestants, ie horizontal competition. It is possible to combine those approaches and to have both a standard and limited prizes, and that is what has happened in the present instance. In such a situation there is theoretically both vertical and horizontal competition, but if, as I assume to be the case here, it was intended that all the limited number of prizes should be won, then in reality there is purely horizontal competition, competition between contestants.
Lord Parker CJ has said that common sense suggests that there are limited prizes here. I respectfully agree, and when one looks at the coupon, the internal evidence is overwhelming. Every one of these words has a control letter in it. Two of them have two control letters, and where there might be confusion, as for example with letter ‘i’ which occurs in ‘Whitbread’ and is also the control letter for the word ‘Choice’, it is awarded as a free letter where it is not being used as a control. It is perfectly clear that the mechanics are designed to enable the promoters, quite properly, to limit their expenditure in prizes whilst at the same time to expand the competition to an almost limitless extent by issuing non-control letters. In the circumstances, I have no doubt at all that there was competition between the contestants.
Appeals dismissed. On the application of Whitbreads the court certified under s 1 (2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether the necessary elements to constitute a prize competition within the meaning of s 47 (1) (b) of the Betting, Gaming and Lotteries Act 1963 include: (a) an element of striving inter se, or striving to attain a standard set by the promoters, on the part of the participants to achieve the object of the competition; or (b) the exercise by the participants of some degree, albeit not a substantial degree of skill; or (c) a combination of (a) and (b); but the court refused leave to Whitbreads to appeal to the House of Lords. On the application of the prosecutor the court likewise certified that a point of law of general public importance was involved, namely (a) whether a scheme for the distribution of prizes by lot or chance launched as a commercial venture for the furtherance of the promoter’s trade with allurement held out to the public, suffices to constitute a lottery within the meaning of Part III of the Betting, Gaming and Lotteries Act 1963; (b) whether an essential element of a lottery within the meaning of Part III of the Betting, Gaming and Lotteries Act 1963, was contribution by the main body of participants; and, if so, what constituted the requisite contribution; but the court refused leave to the prosecutor to appeal to the House of Lords.
Solicitors: Callingham, Tucker & Co (for Whitbreads); Iliffes agents for Alex Lauriston & Son, Middlesbrough (for the prosecutor).
N P Metcalfe Esq Barrister.
Rendell v Hooper
[1970] 2 All ER 72
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 3 NOVEMBER 1969, 9 MARCH 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Breath test – Administration of – Inflation of bag in requisite manner – Failure to inflate at one breath in accordance with manufacturer’s instructions – Whether test valid – Road Safety Act 1967, ss 2(4), (5), 7 (3).
The appellant was stopped by a constable when he was driving his van. The constable suspected that the appellant had alcohol in his body and required him to provide a specimen of breath for a breath test. At the first attempt he failed to inflate the bag of the breath test device fully and only did so at the second attempt. The manufacturer’s instructions for the use of the breath test device stated that the bag should be inflated by one single breath. The breath test was positive and the appellant was arrested. On an analysis of a blood specimen revealing a blood-alcohol proportion above the prescribed limit, he was charged with contravening s 1(1)a of the Road Safety Act 1967, and convicted before the justices. The justices were of opinion that the appellant had failed to take the test in the prescribed manner, which would not justify an arrest under s 2 (4)b, but that his arrest was justified under s 2 (5)c. On appeal,
Held – The conviction should stand, because—
(i) a departure from the manufacturer’s instructions did not vitiate the test if the test was carried out in good faith and reasonably (see p 75 f and p 76 b, post); Director of Public Prosecutions v Carey [1969] 3 All ER 1662 followed;
(ii) in view of the express wording of s 7 (3)d of the 1967 Act, by which a specimen of breath meant a specimen in sufficient quantity for a breath test to be carried out, the constable must be presumed to have been acting in good faith and reasonably as no point to the contrary had been raised before the close of the prosecution case (see p 75 g and p 76 b, post); and
(iii) accordingly, the justices were right in convicting, although it was s 2 (4) of the Act under which the arrest of the appellant was valid and not s 2 (5) (see p 75 j to p 76 a and b, post).
Per Curiam. If by cross-examination or in some other way the point is once raised of lack of bona fides or reasonableness, then it will be for the prosecution to negative the point, the burden of proof remaining on the prosecution (see p 75 h, post).
Page 73 of [1970] 2 All ER 72
Notes
For the requirement to take a breath test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 2.
For the Road Safety Act 1967, ss 1, 2, 7, see 47 Halsbury’s Statutes (2nd Edn) 1554, 1556, 1562.
Cases referred to in judgment
Director of Public Prosecutions v Carey [1969] 3 All ER 1662, [1969] 3 WLR 1169, 134 JP 73, 54 Cr App Rep 119.
R v Chapman [1969] 2 All ER 321, [1969] 2 QB 436, [1969] 2 WLR 1004, 133 JP 405, 53 Cr App Rep 336.
Cases also cited
Brennan v Farrell [1969] Crim LR 494.
Case stated
This was a case stated by justices for the county of Devon acting in and for the petty sessional division of Axminster in respect of their adjudication as a magistrates’ court sitting at Axminster on 11 March 1969.
On 11 March 1969, an information was preferred by the respondent, Roy Stanley Hooper, a chief inspector of police, against the appellant, Hubert Albert Francis William Rendell, charging that he on 13 February 1969 at Colyton, in the county of Devon, did drive a motor vehicle namely a goods vehicle on a certain road called the Exeter-Lyme Regis road, having consumed alcohol in such quantity that the proportion thereof in his blood as ascertained from a laboratory test for which he subsequently provided a specimen under s 3 of the Road Safety Act 1967, exceeded the prescribed limit at the time he provided the specimen, contrary to s 1 (1) of the 1967 Act, and the appellant was released on bail to appear at Axminster magistrates’ court at 10.00 am on the same date.
The following facts were found. On the night of 13 February 1969 the appellant was driving his van along the A 3052 road from the Axminster direction and was observed by a police constable who was driving a police mini van. After following it for about half a mile the van was seen to be swerving. The police officer overtook the van and caused it to stop. It was being driven by the appellant whose speech was slurred and he smelt of drink. Told of the officer’s suspicions and that he would be given a breath test, the appellant consented. The appellant sat in the front passenger seat of the police mini van whilst his own vehicle was moved into a lay-by. He was offered an approved breath testing device—an ‘Alcotest (R) 80’—and asked to blow into the bag of the instrument. The appellant blew into the bag, only partially inflating it. The officer handed the instrument back to him as there was not sufficient breath in the bag, and asked the appellant to blow again. The appellant blew into it again and filled it. The instrument gave a positive indication. The officer told him that as the test had proved positive he was being arrested and would be taken to a police station. So far as the taking of this test was concerned the appellant complied with the directions of the police constable. At the police station he was asked for and gave a further specimen of breath which proved positive and as a result a doctor was called and a blood sample was taken in accordance with the provisions of the 1967 Act. An analysis of the blood sample subsequently disclosed a concentration of 172 milligrammes per 100 millilitres of alcohol to blood.
It was contended by the appellant that the first breath specimen had not been taken correctly in that contrary to the instructions for use of Alcotest (R) 80 written in the lid of the container the appellant had been permitted to fill the bag of the instrument with two blows instead of filling it in one blow and that as a result the indication given by the instrument was not a proper indication sufficient to give the constable a
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power of arrest under the provisions of s 2 (4) of the 1967 Act. It was further contended by the appellant that the police constable had arrested the appellant in pursuance of powers under s 2 (4) and not under s 2 (5).
It was contended by the respondent that if the bag of the Alcotest (R) 80 instrument had not been inflated in one blow as requested by the officer then the appellant had ‘failed’ to give a specimen within the meaning of s 2 (5) of the 1967 Act and the constable was therefore authorised under that subsection to arrest the appellant.
The justices were of the opinion that the contention of the prosecution was correct and that the appellant had failed to take the test in the prescribed manner and that this fact whilst it did not justify the arrest of the appellant under s 2 (4) did justify his arrest under s 2 (5) of the 1967 Act and that the subsequent procedures were therefore in accordance with the provisions of the 1967 Act. They therefore convicted the appellant of the offence and imposed a fine of £30, ordered him to pay costs of £5 5s and an advocate’s fee of £5 5s and disqualified him from holding or obtaining a driving licence for 12 months. The appellant now appealed. The appeal first came before the court on 3 November 1969 when it was adjourned.
G G Macdonald for the appellant.
David Calcutt for the respondent.
9 March 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county of Devon sitting at Axminster who convicted the appellant of an offence contrary to s 1(1) of the Road Safety Act 1967.
The short facts were that on the night of 13 February 1969 the appellant was observed by a police constable driving his van along a road. The constable followed him and said that the van appeared to swerve. The constable in due course overtook the van, and caused it to stop, when the appellant’s speech appeared to be slurred and his breath smelt of drink. He was asked to undergo a breath test and he consented. For a moment I am going to omit what then happened. Eventually the bag was blown up and the test proved positive, and thereupon, because it proved positive, the appellant was arrested, in other words arrested under s 2(4) of the Act. He was taken to a police station, another breath test was given, again it proved positive, a sample of blood was taken and the analysis showed 172 milligrammes of alcohol in 100 millilitres of blood.
There would therefore seem no reason why the appellant should not have been convicted. But what happened when the appellant was given the first breath test was this, he was asked to blow into the bag. He thereupon did blow into the bag but only partially inflated it. The constable then handed the instrument back to him as there was not sufficient breath in the bag to enable a test to be carried out and asked the appellant to blow again. The appellant then blew into it again and filled it, and as I have said the test proved positive.
Section 7(3) of the Road Safety Act 1967 provides:
‘References in this Part of this Act to providing a specimen of breath for a breath test are references to providing a specimen thereof in sufficient quantity to enable that test to be carried out.’
One would think that as the first blow had not, as the justices found, provided sufficient breath for the test, that it was perfectly in order for the constable to say: ‘Have another blow and fill the bag so that there is sufficient quantity to enable a test to be made’. However, it is said that the test was invalid because the Alcotest (R) 80 equipment which was used in this case contains manufacturer’s instructions, one of which is ‘The measuring bag must then be fully inflated by one single breath in not less than 10 and not more than 20 seconds’. It is said accordingly that the constable not having obeyed those instructions, not having obtained a breath test by
Page 75 of [1970] 2 All ER 72
means of one single blow, the test was invalid, the arrest was invalid, consequently the analyst’s certificate was inadmissible.
Until Director of Public Prosecutions v Carey in the House of Lords, the position was in accordance with R v Chapman in the Court of Appeal, where it was held ([1969] 2 QB at 437):
‘That the Secretary of State’s approval of the Alcotest device included the instructions of how the test was to be taken, and that if the defendant had not blown up the device in one breath he had failed to take the test in the manner prescribed, which required it to be done in one blow.’
Later the whole question of manufacturer’s instructions was considered in the House of Lords in Director of Public Prosecutions v Carey to which I have referred. For my part I find it very difficult in reading through the speeches in this case to find how far this particular problem in connection with the breath test is now settled. It seems to me that there are a number of different views expressed. It seems that Viscount Dilhorne ([1969] 3 All ER at 1671, [1969] 3 WLR at 1178) and Lord Hodson ([1969] 3 All ER at 1666, 1667, [1969] 3 WLR at 1173) at any rate were saying that a failure to inflate in one single breath would not vitiate the breath test. On the other hand Lord Diplock said ([1969] 3 All ER at 1678, 1679, [1969] 3 WLR at 1186):
‘The sensible thing to do, and it appears to be the common practice, is to tell the suspect to fill the bag with a single deep breath. It is, in my view, sufficient if in the constable’s bona fide judgment the way in which the bag is in fact inflated by the suspect does not depart so widely from the instructions that it is likely to show a significantly greater proportion of alcohol in the suspect’s blood than is actually there.’
There again, though stating what Lord Diplock thinks is the proper practice, he does not suggest that a departure from it is of itself sufficient to vitiate the test.
All their Lordships, however, appear to be clear on this, that there is no absolute requirement expressed or implied that a test, in order to be a breath test within the meaning of the Act, must be carried out in perfect compliance with the manufacturer’s instructions. It is held that a departure from those instructions does not vitiate the test if that test is carried out in good faith and reasonably. What counsel for the appellant says in the present case is that it is for the prosecution to prove that there was good faith and reasonableness, or, as he put it, no negligence; he says that there being no evidence in regard to that in the present case, the prosecution did not prove their case.
For my part I am satisfied, having regard to the express wording of s 7 (3), that in the absence of any point to the contrary being raised before the close of the prosecution case the constable is presumed to act in good faith and reasonably. Here there is no suggestion of bad faith or not acting reasonably; those points not having been raised, it seems to me that the case is proved.
Of course, if by cross-examination or in some other way the point is once raised of lack of bona fides or reasonableness, then it will be for the prosecution to negative the point, the burden of proof remaining on the prosecution. But as I have said, unless and until those points are raised, it is not for the prosecution to negative them. In these circumstances as it seems to me the justices were right in convicting in the present case, albeit I should say that they came to that conclusion taking the view that the arrest was justified under s 2 (5) for a failure to give a breath test in that it
Page 76 of [1970] 2 All ER 72
was only done by two blows. That is clearly wrong and has not been put forward by counsel for the respondent in support of the conviction. But as I have said, it seems to me that this arrest under s 2 (4) was valid, and accordingly that the conviction on that ground must stand.
ASHWORTH J. I agree.
DONALDSON J. I also agree.
Appeal dismissed.
Solicitors: Roche, Son & Neale agents for Beviss & Beckingsale, Axminster (for the appellant); Sharpe, Pritchard & Co agents for N B Jennings, Exeter (for the respondent).
N P Metcalfe Esq Barrister.
Brooklands Selangor Holdings Ltd v Inland Revenue Comrs
[1970] 2 All ER 76
Categories: TAXATION; Stamp Duties
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 1, 2, 3 DECEMBER 1969
Stamp duty – Reconstruction or amalgamation of companies – Transfer of property from one associated company to another – Relief from duty – Partial take-over of first company by second company – Second company majority shareholder – Differences between second company and minority shareholders in first company – Formation of third company with share capital of £100 held by first company – Agreement between first company and third company – Scheme of arrangement – Approval by court – Purchase by third company of part of estates and shareholdings of first company – Shares of third company allotted direct to minority shareholders of first company by way of consideration – Claim to reliefs – Whether arrangement ‘reconstruction’ – Whether acquisition of ‘not less than 90 per cent of issued share capital’ – Whether first company ‘beneficial owner’ of not less than 90 per cent of issued share capital of third company – Finance Act 1927, s 55 – Finance Act 1930, s 42.
A company, BSR, owned three rubber estates and shares in subsidiary companies. Another company, PH, acquired as part of a take-over transaction, 72 per cent of the preference stock and over 50 per cent of the ordinary stock in BSR. Owing to differences between PH (the majority shareholder) and the minority shareholders in BSR, the parties agreed to partition BSR’s assets. BSR was to retain certain of its estates and shares in other companies and the remainder of the estates and shares were to go to the taxpayer company in which the minority shareholders in BSR were to have the entire shareholding. To comply with the requirements of company law, the transaction had to be effected through the medium of a scheme of arrangement. The taxpayer company was to purchase specified assets of BSR in consideration of cash and stock in the taxpayer company which was to be allotted to the minority shareholders of BSR directly. The cash, which was less than one-tenth of the total consideration, was to make good what would otherwise have been an excess in the value of the assets taken by the taxpayer company over its proportionate interest in BSR. The taxpayer company was incorporated on 21 September 1966 and had in the first place a paid-up
Page 77 of [1970] 2 All ER 76
share capital of £100 in 2s stock units, all of which were then held beneficially by BSR. The consideration in stock units was based on a professional valuation of the assets of BSR to be taken over by the taxpayer company and was subsequently affirmed by the directors of BSR.
The stock in the taxpayer company was for convenience issued on the basis of one 2s stock unit for each one 2s stock unit in BSR, but in effect the issue price of each stock unit in the taxpayer company, including premium, was 7s 5d. These arrangements were embodied in agreements made between the taxpayer company and BSR on 11 October and 15 November 1966. On 12 December 1966, the scheme of arrangement was sanctioned by the court; on 20 December, the taxpayer company passed a resolution increasing its capital, and on 29 December the order sanctioning the scheme of arrangement was delivered to the Registrar of Companies. Immediately afterwards the 2s stock units of the taxpayer company resulting from the carrying out of the scheme of arrangement were quoted on the Stock Exchange at 4s 9 3/4d per unit, as against 7s 5d. Duty was charged at the ordinary ad valorem rates on (a) the increase in capital of the taxpayer company, (b) a declaration of trust in favour of the taxpayer company of certain land in Malaysia, and (c) three transfers to the taxpayer company of ordinary stock in other companies. The taxpayer company claimed reliefs from stamp duty under the Finance Act 1927, s 55a, and the Finance Act 1930, s 42b.
Held – The taxpayer company was not entitled to the reliefs claimed, because—
(i) the word ‘reconstruction’ in s 55(1) of the 1927 Act denoted the transfer of the undertaking or part of the undertaking of an existing company to a new company with substantially the same persons as members of the new company as were members of the old company (see p 87 d and p 88 e, post); Re South African Supply and Cold Storage Co Ltd [1904] 2 Ch 268 followed;
(ii) the apparent purpose of s 55 of the 1927 Act was to grant relief from duty where the underlying ownership of the undertaking transferred remained substantially unaltered (see p 87 f, post); dicta of Lord Hanworth MR in Oswald Tillotson Ltd v Inland Revenue Comrs [1932] All ER Rep at 970 applied;
(iii) the effect of the transaction in question was that holders of stock in the taxpayer company were most substantially different from holders of stock in BSR in that they consisted of approximately half only in value, though the vast majority in number, of the holders of stock in BSR (see p 88 g, post); and
(iv) at 29 December 1966, when the obligations under the agreements and the scheme of arrangement had become unconditional, BSR was not in any relevant sense the beneficial owner, within s 42(2) of the 1930 Act, of the £100 stock in the taxpayer company, since it was under an immediate and unconditional obligation to transfer that stock to someone else as part of a transaction the other parts of which fell to be performed at the same time (see p 90 b and f, post).
Per Pennycuick J: I am not persuaded that the word ‘consideration’ in para (c) of s 55(1) [of the Finance Act 1927] means anything other than the expressed consideration … I do not see any justification for going outside the professional valuation of the assets as confirmed by the directors as a proper measure of the value of the shares to be issued (see p 88 j and p 89 a, post). Where the consideration for the acquisition of a property consists in the entire share capital of the company which acquired the property, it seems to me entirely wrong to measure that consideration by taking the Stock Exchange quotations of the individual share units which make up that entire share capital (see p 89 a, post).
Page 78 of [1970] 2 All ER 76
Notes
For relief from capital and transfer stamp duty in case of reconstructions and amalgamations of companies, see 6 Halsbury’s Laws (3rd Edn) 782–786, paras 1576–1584, and for cases on the subject, see 9 Digest (Repl) 420, 2719, 2720.
For relief from transfer stamp duty in case of transfer of property as between associated companies, see 6 Halsbury’s Laws (3rd Edn) 786, 787, paras 1585, 1586.
For the Finance Act 1927, s 55, see 21 Halsbury’s Statutes (2nd Edn) 935, and for the Finance Act 1930, s 42, see ibid 959.
As respects instruments executed on or after 1 August 1967, the Finance Act 1930, s 42, is amended by the Finance Act 1967, s 27 (2) (47 Halsbury’s Statutes (2nd Edn) 1438).
Cases referred to in judgment
Craddock (Inspector of Taxes) v Zevo Finance Co Ltd [1944] 1 All ER 566; affd HL [1946] 1 All ER 523n, 174 LT 385, 27 Tax Cas 267, 28 Digest (Repl) 74, 283.
Hooper v Western Counties and South Wales Telephone Co Ltd (1892) 68 LT 78, 10 Digest (Repl) 1085, 7509.
South African Supply and Cold Storage Co Ltd, Re, Wild v Same [1904] 2 Ch 268, 73 LJCh 657, 91 LT 447, 10 Digest (Repl) 1084, 7508.
Tillotson (Oswald) Ltd v Inland Revenue Comrs [1933] 1 KB 134, [1932] All ER Rep 965, 101 LJKB 737, 147 LT 481, 9 Digest (Repl) 420, 2719.
Wood Preservation Ltd v Prior (Inspector of Taxes) [1969] 1 All ER 364, [1969] 1 WLR 1077.
Case stated
This was an appeal by way of case stated by the taxpayer company, Brooklands Selangor Holdings Ltd, against ad valorem stamp duty charged on certain instruments which came into existence as the result of a scheme of arrangement affecting the taxpayer company. The case stated is substantially set out in the judgment.
R B S Instone for the taxpayer company.
Michael Wheeler QC and J P Warner for the Crown.
Cur adv vult
3 December 1969. The following judgment was delivered.
PENNYCUICK J. This is an appeal by way of case stated from assessments to stamp duty on (1) an increase in the nominal capital of the taxpayer company Brooklands Selangor Holdings Ltd and (2) a declaration of trust operating as a conveyance on sale and certain stock transfers in favour of that company. Before coming to the case stated I will state in summary form the basic facts which underlie the present dispute.
Before the events to which I will next refer, a company known as Brooklands Selangor Rubber Co Ltd, referred to as BSR, owned three rubber estates and also shares in certain subsidiary companies. A company known as Plantation Holdings Ltd, referred to as PH, acquired as part of a take-over transaction, 72 per cent of the preference stock in BSR and something over 50 per cent of the ordinary stock of BSR. Differences arose between PH on the one hand and the minority shareholders on the other hand, PH wanting to continue trading through the company and its subsidiaries, and the minority wanting a quick realisation. In the event the parties agreed on an arrangement which was, in effect, a partition of BSR’s assets. The company was to retain certain of the estates and shares specified under the head ‘Division of Assets’ in the document to which I have referred; the remainder of the estates and shares were to go to a new company in which the minority shareholders were to have the entire shareholding. The new company chosen for this purpose is the present taxpayer company, Brooklands Selangor Holdings Ltd. It will of course be apparent that in order to comply with the requirements of company law the transaction could
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not be effected by way of a simple partition but had to be effected through the medium of a scheme of arrangement including a reduction of capital. The taxpayer company was incorporated on 21 September 1966 and had in the first place a paid-up share capital of £100 in 2s stock units, all of which were held beneficially by BSR. The plan was that the taxpayer company should purchase certain specified assets of BSR. The consideration was to be stock in the taxpayer company which was to be allotted to the minority shareholders directly. The consideration under this agreement was the sum of £1,236,462. That was to be satisfied as to £115,593 in cash, and as to the balance, ie £1,120,869, by shares in the taxpayer company to be converted forthwith into stock. The reason why there was a sum of cash was to make good what would otherwise have been an excess in the value of the assets taken by the taxpayer company and through it the minority shareholders over their proportionate interest in BSR.
On 1 April 1965, a professional valuation was made of the assets to be taken over by the taxpayer company. The valuation was made on a going concern basis. The sum of £1,120,869 was based on that valuation, which was subsequently affirmed by the directors of BSR. The stock in the taxpayer company was for convenience issued on the basis of one 2s stock unit in the taxpayer company for one stock unit in BSR, the effect being that each stock unit was issued at a premium, the issue price of each stock unit being 7s 5d. An agreement was made on 11 October 1966 between BSR and the taxpayer company to which I will refer in greater detail when I come to read the case. The basic term of the agreement was for the sale of the specified estates and shares for a total consideration of £1,236,462 to be satisfied as I have mentioned. That agreement was modified by a supplemental agreement dated 15 November 1966, the effect of which was that the new stock in the taxpayer company was to be issued direct to the minority shareholders in BSR. On 12 December 1966, the scheme of arrangement was sanctioned and I shall have to read the operative parts of that scheme of arrangement. Then, on 20 December 1966, the taxpayer company duly passed a resolution for the increase of its capital. The order sanctioning the scheme of arrangement was delivered to the Registrar of Companies on 29 December 1966. Finally, I should mention that immediately afterwards the 2s stock units of the taxpayer company resulting from carrying out the arrangement were quoted on the Stock Exchange at 4s 9 3/4d per unit as against the figure of 7s 5d which I mentioned above. The instruments were presented for adjudication and duty was charged at the ordinary ad valorem rate on the increase of capital of the taxpayer company and on the instruments of conveyance. It is against those assessments that the present appeal is brought.
Before turning to the case stated, I must read the statutory provisions under which the taxpayer company claims relief from duty. Section 55(1) of the Finance Act 1927 provides:
‘If in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any companies it is shown to the satisfaction of the Commissioners of Inland Revenue that there exist the following conditions, that is to say— (a) that a company with limited liability is to be registered, or that since the commencement of this Act a company has been incorporated by letters patent or Act of Parliament, or the nominal share capital of a company has been increased; (b) that the company (in this section referred to as “the transferee company”) is to be registered or has been incorporated or has increased its capital with a view to the acquisition either of the undertaking of, or of not less than ninety per cent. of the issued share capital of, any particular existing company; (c) that the consideration for the acquisition (except such part thereof as consists in the transfer to or discharge by the transferee company of liabilities of the existing company) consists as to not less than ninety per cent. thereof—(i) where an undertaking is to be acquired, in the issue of shares in the transferee company
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to the existing company or to holders of shares in the existing company; or (ii) where shares are to be acquired, in the issue of shares in the transferee company to the holders of shares in the existing company in exchange for the shares held by them in the existing company; then, subject to the provisions of this section … ’
There follow two heads of relief, (A) in respect of the nominal share capital of the transferee company and (B) in respect of duty under conveyance or transfer on sale. Then s 55 (8) provides:
‘In this section, unless the context otherwise requires— References to the undertaking of an existing company include references to a part of the undertaking of an existing company; The expression “shares” includes stock.’
The other statutory provision is contained in s 42 of the Finance Act 1930, which provides:
‘(1) Stamp duty under the heading “Conveyance or Transfer on Sale” in the First Schedule to the Stamp Act, 1891, shall not be chargeable on an instrument to which this section applies …
‘(2) This section applies to any instrument as respects which it is shown to the satisfaction of the Commissioners of Inland Revenue—(a) that the effect thereof is to convey or transfer a beneficial interest in property from one company with limited liability to another such company; and (b) that either—(i) one of the companies is beneficial owner of not less than ninety per cent. of the issued share capital of the other company; or (ii) not less than ninety per cent. of the issued share capital of each of the companies is in the beneficial ownership of a third company with limited liability.’
I next turn to the case stated. This is rather a lengthy document, prepared with meticulous accuracy and I think I must read the greater part of it in order that this case may be fully understood:
‘1. The opinion of the Court is desired as to the Stamp duty chargeable on certain instruments (hereinafter called “the Adjudicated Instruments”) presented by the Appellant to the Respondents under Section 12 of the Stamp Act 1891 for the opinion of the Respondents as to the Stamp duty with which they are chargeable. The Adjudicated Instruments consist of:—(a) A Statement of Increase of the Nominal Capital of the Appellant made pursuant to Section 112 of the Stamp Act 1891 (as amended) on 20 December 1966 … (b) A Declaration of Trust in favour of the Appellant of certain land in Malaysia, dated 29th December 1966 … (c) Three Stock Transfers, each dated 29th December 1966, being Transfers to the Appellant of ordinary stock in other companies …
‘2. The Adjudicated Instruments came into existence in the circumstances hereinafter mentioned.
‘3. (a) Brooklands Selangor Rubber Company, Limited (hereinafter called “B.S.R.”) was incorporated on 11th April 1910 under the Companies (Consolidation) Act 1908 as a company limited by shares. At all relevant times up to 29th December 1966 the issued capital of B.S.R. was £662,001. 8s. consisting of £52,500 Cumulative Preference Stock and £609,501. 8s. Ordinary Stock, transferable in each case in amounts and multiples of 2s., and its Share Premium Account stood at £700,803. 3s. Both classes of stock were officially quoted and dealt in on the Stock Exchange London. (b) The business of B.S.R. consisted at all relevant times of the ownership and cultivation both directly and through subsidiary companies of rubber estates. (c) At all relevant times up to and including 10th October 1966 B.S.R. was the beneficial owner of the whole of the issued capitals
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of Semenyih Rubber Estate, Limited, Tarun (Malay) Rubber Estates, Limited, Kuala Pertang Syndicate, Limited and Bukit Selangor Rubber Estates (1920) Limited (hereinafter called “Semenyih”, “Tarun”, “Pertang” and “Bukit” respectively) all four of which were companies incorporated in England and owners of rubber estates, and the issued capital of each of which consisted of ordinary stock. One of the questions in issue in this Appeal is at what date after 10th October 1966 B.S.R. ceased to be beneficial owner of such stock. (d) At all relevant times up to and including 10th October 1966 Semenyih and Tarun were the beneficial owners of 60,000 and 75,000 shares respectively of the 450,000 issued shares of Kuala Pahi Development Company Limited (hereinafter called “Pahi”) a company which owned a rubber estate, the other 315,000 of such shares being in the beneficial ownership of persons having no association with the group of companies controlled by B.S.R.
‘4. As a result of a partially successful take-over offer in 1965 Plantation Holdings Limited (hereinafter called “P.H.”) a company incorporated in England, became the beneficial owner of approximately 72% of the issued Preference Stock and just over 50% of the issued Ordinary Stock of B.S.R. This gave rise to a divergence of views. It was P.H.’s policy that both B.S.R. and its subsidiary companies should retain their rubber estates and continue to exploit them. The Ordinary Stockholders of B.S.R. who did not accept the offer of P.H. (hereinafter called “the Minority”) preferred a policy whereunder B.S.R. would cause the said estates to be realised with a view to the eventual liquidation of B.S.R. and the distribution of its surplus assets among its Stockholders. The Minority numbered 1,425 Stockholders. [Then comes a reference to a letter dated 28th January 1966 to which I need not refer.]
‘5. (a) On 24th October 1966 a further circular letter (hereinafter called “the second circular” … ) was sent on behalf of the Board of B.S.R. to the Preference and Ordinary Stockholders of B.S.R. informing them of a Scheme of Arrangement (hereinafter called “the Scheme”) which had been formulated, and was acceptable to P.H., to effect the proposed division of the assets of B.S.R. between P.H. and to minority. [I will not take up time in reading the circular now.] (b) The Scheme was propounded under section 206, Companies Act 1948 and embodied the following features:— (i) The repayment of all the Preference Stock of B.S.R. at 2s. 6d. per 2s. unit of Stock. This accorded with the rights of the Preference Stockholders of B.S.R. … (ii) The transfer to a new subsidiary of B.S.R. formed for the purpose, namely the Appellant, of a proportion of the assets of B.S.R. (after allowing for the repayment of Preference Stock) corresponding to the proportion of its Ordinary Stock held by the Minority. (iii) The distribution among the Minority of all the Ordinary Stock of the Appellant, in the proportion of 2s. of Ordinary Stock of the Appellant for every 2s. of Ordinary Stock of B.S.R., in satisfaction of their interests. (c) It was, under the Scheme, proposed that there should be transferred to the Appellant the following assets of B.S.R.:— (i) certain rubber estates in Malaysia (hereinafter called “the scheduled estates”); and (ii) the issued stock of Semenyih, Tarun and Bukit respectively; but that before the transfer of their said issued stock Semenyih and Tarun should sell their shareholdings in Pahi to Pertang, the stock of which was to be retained by B.S.R. (d) It was further proposed that the distribution of the Ordinary Stock of the Appellant should take the form of a repayment of the Ordinary Stock of B.S.R. held by the Minority, and of a further part of its Share Premium Account, to be satisfied in specie by the allotment of Ordinary Stock of the Appellant and the transfer of the £100 stock of the Appellant which B.S.R. already held as a result of the transactions mentioned in paragraph 6(a) below. The allotments of Ordinary Stock of the Appellant were to be renounceable in favour of other members of the Minority, but no further. (e) The second circular intimated that application would be made to the Council of The Stock Exchange,
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London, for permission to deal in and for quotation for the Ordinary Stock of the Appellant … ’
Again I will not take up time in reading the scheme of arrangement in detail, but I will read verbatim paras 1 and 2 of the operative part:
‘1. The capital and share premium account of Brooklands shall be reduced in manner following: (A) By returning to the holders of the preference stock all the capital paid up thereon together with a premium of 6d. for every 2s. of such stock (which shall be debited to the share premium account of Brooklands) and the fixed dividend thereon calculated down to the date of the return of capital; and (B) By cancelling all the ordinary stock of Brooklands held by the minority and further reducing the share premium account of Brooklands to such extent as shall be requisite to permit the distribution amongst the minority in substitution for their cancelled ordinary stock 2s. of ordinary stock of Holdings for every 2s. of the cancelled stock held by them respectively.
‘2. For the purpose of giving effect to the distribution of ordinary stock of Holdings required by paragraph 1 (B) of this scheme the directors of Brooklands shall procure Holdings to allot and distribute in manner so required the stock to which Brooklands is entitled under the sale agreement and to transfer £100 stock of Holdings already owned by Brooklands as soon as practicable after the effective date … [As will be apparent, in the scheme of arrangement BSR is referred to as Brooklands and the appellant company is referred to as Holdings.]
‘5. This scheme (which expression herein means this scheme in its present form or with or subject to any modification or condition as aforesaid) shall become operative on the earliest day (herein referred to as “the effective date”) on which each of the following conditions shall have been satisfied: (A) All resolutions of Brooklands and Holdings and their respective boards of directors necessary to give effect to this scheme shall have been passed; (B) the reduction of the capital and share premium account of Brooklands involved in this scheme shall have taken effect; and (C) an office copy of an order of the Court sanctioning this scheme under Section 206 of the Companies Act, 1948, shall have been delivered to the Registrar of Companies for registration.’
To return to the case stated, para 5(f) annexes a number of documents to which I need not refer and para 5(g) sets out para 5 of the scheme, which I have just read. The case continues:
‘6. In anticipation of the despatch of the second circular to the Stockholders of B.S.R. the following steps had been taken:—(a) On 21st September 1966 the Appellant had been incorporated under the Companies Act 1948 as a private company with a nominal capital of £100 divided into 1,000 shares of 2s. each. The objects for which the Appellant was incorporated were stated in its Memorandum of Association to be (inter alia) to acquire and take-over that part of the undertaking, assets and liabilities of B.S.R. which consisted of certain of its rubber estates in the Federation of Malaya and the Share Capital of its subsidiary companies, Bukit, Semenyih and Tarun. By 6th October 1966 the whole of the £100 nominal capital of the Appellant had been issued to B.S.R. or to nominees of B.S.R., had been paid up in cash and had been converted into Stock. (b) On 11th October 1966 two Agreements were executed, each of which was expressed to be conditional upon the Scheme being sanctioned, pursuant to the provisions of the said section 206, within three months. Those Agreements which were referred to in the second circular were as follows:— (i) An Agreement (hereinafter called “the first Agreement”) between Semenyih, Tarun and Pertang for the sale by Semenyih and Tarun respectively of their shares in Pahi to Pertang for a total consideration of £76,408 … (ii) An Agreement (hereinafter called “the second Agreement”) between B.S.R. and the Appellant for the sale by B.S.R.
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to the Appellant of the scheduled estates (together with all buildings, plant machinery and vehicles thereon or used in connection therewith) and of all the issued stock of Semenyih, Tarun and Bukit for a total consideration expressed as £1,236,462 to be satisfied as to £115,593 in cash and as to the balance of £1,129,869 by the allotment to or in accordance with the directions of B.S.R. credited as fully paid up of 3,003,991 shares of 2s. each in the capital of the Appellant, which shares should stand converted into stock transferable in amounts and multiples of 2s. forthwith upon becoming fully paid up. The second Agreement was expressed to be conditional not only upon the Scheme being sanctioned, pursuant to the provisions of section 206 within three months, but conditional also upon a special resolution of the Appellant being passed not later than seven days after the date upon which the Scheme should become operative in the terms of a Resolution set forth in the Third Schedule to the second Agreement. This was a Resolution to increase the capital of the Appellant from £100 to £300,499. 2. 0. by the creation of an additional 3,003,991 shares of 2s. each “with a view to the acquisition of part of the undertaking of B.S.R.”; further to increase the capital of the Appellant from £300,499 2. 0. to £350,000 by the creation of an additional 495,009 shares of 2s. each; to provide for the conversion of the shares constituting the increased capital of the appellant into stock upon their becoming fully paid up; and to alter the Appellant’s Articles of Association with a view to its ceasing to be a private company … The figure of £1,120,869 referred to in the second Agreement had been agreed upon between the parties to that Agreement having regard to a professional valuation of £1,120,969 which had been made of the assets to be transferred under the second Agreement to the Appellant (which valuation is referred to on page 7 of the second circular) and to the £100 paid up capital of the Appellant already in issue. The sum of £115,593 referred to in the second Agreement was a cash payment to be made by the Appellant to B.S.R. to compensate for the fact that the said valuation of those assets exceeded by that amount the appropriate proportion of the assets of B.S.R. to be transferred to the Appellant. It was stated in clause 6 of the second Agreement that the assets to be transferred pursuant thereto had been valued as follows [and there is an attribution of values to the respective items]. It was provided in clause 3 of the second Agreement that completion thereof should take place on the same day (or as soon thereafter as should be reasonably practicable) as the Scheme should become operative; and in clause 4 that B.S.R. should, until the Appellant or its nominee had been entered in the Register of Members of Bukit, Semenyih and Tarun, act in accordance with the instructions of the Appellant in connection with the issued stock of those companies and should account to the Appellant for any dividends received in respect thereof. In clause 5(h) it was warranted by B.S.R. that no dividends, bonuses or other distributions had been declared made or paid on any of the said stock since the last accounting date, or would be prior to completion other than as therein mentioned. (c) On 13th October 1966 an order of the High Court, under the said section 206, was obtained for the convening of the meeting of the holders of the Ordinary Stock of B.S.R. (other than P.H.) for the purpose of considering the Scheme and, if thought fit, approving it with or without modification. [The second agreement of 11th October 1966 should be looked at for its precise terms but those terms are fully and accurately summarised in the case stated and I need not read the agreement itself here.]
‘7. On 15th November 1966 the second Agreement was modified by a supplemental Agreement between B.S.R. and the Appellant which provided that notwithstanding the provisions of the second Agreement the 3,003,991 consideration shares in the Appellant should instead of being allotted to B.S.R. be allotted to the Minority in the proportion of one such share for every 2s. of Ordinary Stock of B.S.R. held by them respectively … The effect of clause 2 of the second
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Agreement as modified by the supplemental Agreement was that those consideration shares were to be allotted to the Minority in the form of stock certificates registrable only in the names of members of the Minority.
‘8. On 16th November 1966—(a) the meeting of the holders of Ordinary Stock of B.S.R. other than P.H. convened under the Order of the Court dated 13th October 1966 was held and the Scheme as modified by the supplemental Agreement was approved at that meeting by the majority prescribed by section 206 Companies Act 1948; (b) at an Extraordinary General Meeting of B.S.R. held immediately after the last mentioned meeting the special Resolution of B.S.R. necessary to give effect to the Scheme was passed in the terms set out in the Notice convening that meeting …
‘9. On 12th December 1966 the High Court sanctioned the Scheme as modified to take account of the supplemental Agreement and confirmed the reductions of the capital and share premium account of B.S.R. A copy of the Order of the Court is annexed …
‘10. On 20th December 1966 at an extraordinary General Meeting of the Appellant a Special Resolution was duly passed in the terms set forth in the Third Schedule to the second agreement. [That was the resolution to increase the capital.] Thereupon the Statement of Increase of the Nominal Capital of the Appellant referred to in paragraph 1(a) above, which is one of the Adjudicated Instruments, was made. It stated that the nominal capital of the Appellant had been increased by the addition thereto of the sum of £349,900 divided into 3,499,000 shares of 2s. each.
‘11. On Friday 29th December 1966:—(a) The Order of the High Court dated 12th December 1966 and a Minute approved by the Court showing the capital of B.S.R. as altered by the Order were registered at the Companies Registry pursuant to section 69(1) and section 206(3) of the Companies Act 1948. The Scheme thereupon became effective; (b) B.S.R. executed a deed acknowledging that it held the scheduled estates upon trust for the Appellant in consequence of the completion that day of the sale thereof pursuant to the second Agreement. This is the Declaration of Trust referred to in paragraph 1(b) above, which is the second of the Adjudicated Instruments; (c) Semenyih and Tarun, pursuant to the first Agreement, executed transfers to Pertang of their shares in Pahi … (d) B.S.R., pursuant to the second Agreement, executed transfers to the Appellant of the whole of the issued capitals of Semenyih, Tarun and Bukit (with the exception in each case of a few stock units which were held by nominees) … (e) B.S.R. and its nominees executed transfers to Fenchurch Investments Limited of the 1,000 stock units of 2s. each which represented the then issued capital of the Appellant. Fenchurch Investments Limited was one of the Minority and was known to be willing to retain the stock units of the Appellant to which it was entitled under the Scheme. It was accordingly a suitable recipient of these 1,000 stock units which could not be allotted in renounceable form. (f) A meeting of the Board of Directors of the Appellant was held at which it was resolved (inter alia) that the said transfers to Fenchurch Investments Limited be passed for registration and that in accordance with the terms of the second Agreement and the Supplemental Agreement 3,003,991 Ordinary Stock Units of 2s. each be allotted to holders of Ordinary Stock of B.S.R. (other than P.H.) registered at the close of business on 29 December 1966 in the proportion of one unit of Ordinary Stock of the Appellant for each Ordinary Stock unit of B.S.R. then held … (g) The sum of £115,593 being the cash part of the consideration for the acquisition by the Appellant of the Scheduled estates and of the stock of Semenyih, Tarun and Bukit was duly paid by the Appellant to B.S.R. [Paragraph 12 deals with the issue of stock certificates].
‘13. Permission to deal on the London Stock Exchange in the stock of the Appellant was formally granted on 3rd January 1967 and that stock was first
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dealt in on that Exchange on that day. It was quoted on that day and for some time thereafter at 4/8 1/4d–4/11 1/4d per 2s. unit giving a middle market price of 4/9 3/4d. At this middle market price 3,003,991 stock units of the Appellant were worth £722,835 on 3rd January 1967. Nothing happened between the 29th December 1966, the date of completion, and the 3rd January 1967, the date of first quotation, which would have materially influenced the value of such stock. The middle market price of the stock units of B.S.R. (which were in registered form and not in bearer or renounceable form) on 29th December 1966 was 4/7 1/2d.
‘14. (a) It was contended by the Appellant that:— (i) In computing the Stamp Duty chargeable on the said Statement of Increase of the Nominal Capital of the Appellant, the amount by which that capital had been increased, viz. £349,900, should, in accordance with section 55 (1) (A) (ii), Finance Act 1927, be treated as being reduced by the amount credited as paid up on the 3,003,991 stock units of the Appellant allotted as consideration under the second Agreement, viz. £300,399. 2s. and that that Stamp Duty was therefore chargeable only in respect of £49,500. 18s. (ii) The said Declaration of Trust and the three Stock Transfers referred to in paragraph 1 (c) above were relieved from liability to ad valorem “Conveyance or Transfer on sale” duty by the provisions of Section 55 (1) (B), Finance Act 1927. (b) In particular it was contended by the Appellant:— (i) That it had in connection with a scheme for the reconstruction of B.S.R. issued shares for the acquisition of part of the undertaking of B.S.R. comprising the scheduled estates and the stock of Semenyih, Tarun and Bukit and that the Adjudicated Instruments had been made for the purpose of or in connection with the transfer of such part undertaking. (ii) That in determining whether for the purpose of sub-section (1)(c)(i) of the said section 55 the consideration for the said acquisition consisted as to not less than 90% thereof in the issue of shares in the transferee company (viz. the Appellant) the value of the 3,003,991 stock units issued by the Appellant should be taken to be £1,120,869 (that being the value attributed to them by Clause 6 of the second Agreement having regard to the said professional valuation of the assets transferred to the Appellant) and that this figure represented more than 90% of the total consideration of £1,236,462. (c) Alternatively, it was contended by the Appellant that, if the provisions of the said section 55 had not been complied with, the said Declaration of Trust and the said Stock Transfers were relieved from ad valorem “Conveyance or Transfer on Sale” duty by Section 42, Finance Act 1930 because the effect of each of those instruments was to convey or transfer a beneficial interest in property from one company with limited liability (viz. B.S.R.) to another such company (viz. the Appellant) and B.S.R. was at the relevant time in each case the beneficial owner of not less than 90% of the issued capital of the Appellant.
‘15. It was (and is) common ground that:— (a) If the provisions of section 55, Finance Act 1927 apply, the said Statement of Increase of the Nominal Capital of the Appellant is chargeable with Stamp Duty in respect of the said sum of £49,500. 18s. only and that the amount of such Stamp Duty is £248. (b) If the provisions either of the said section 55 or of section 42, Finance Act 1930 apply the said Declaration of Trust and the said Stock Transfers are not chargeable with any Stamp Duty.
‘16. (a) The Respondents were however of the opinion that neither the provisions of the said section 55 nor those of the said section 42 applied. (b) In particular, the Respondents were of the opinion that relief under the said section 55 was not appropriate because:—(i) The Scheme was not “a scheme for the reconstruction of any company or companies or the amalgamation of any companies” within the meaning of those words in that section. (ii) If, contrary to the opinion expressed in sub-paragraph (i) above, the Scheme was otherwise within the section, the condition imposed by subsection (1)(c)(i) of the section was not satisfied.
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In the opinion of the Respondents, for the purpose of that sub-section the value of the 3,003,991 stock units forming part of the relevant consideration should be ascertained by reference to their market value on 29th December 1966 and not by reference to the valuation of the assets transferred to the Appellant which had been made for the purposes of the second Agreement; that, in the circumstances, and consistently with section 6, Stamp Act 1891, the market value should be determined according to the middle market price of the stock units on 3rd January 1967, so that the consideration was £838,428 (being as to £722,835 the value of the said stock units ascertained as aforesaid and as to the balance of £115,593 the part of the consideration payable in cash) of which more then ten per cent. consisted of cash. (c) The Respondents were further of the opinion that relief under Section 42 Finance Act 1930 was not appropriate because B.S.R. had before the execution of the said Declaration of Trust and of the said Stock Transfers ceased to be beneficial owner of the issued capital of the Appellant.’
I have thought it right to read virtually the whole of the case stated in order that the facts underlying these issues may be clearly understood. The issues themselves fall within a very narrow compass.
(1) Under s 55 of the Finance Act 1927, two issues arise, namely (i), was this a scheme for the reconstruction of any company or companies? and (ii), did the consideration consist as to not less than 90 per cent thereof in the issue of shares in the taxpayer company to the holders of shares in BSR?
I will deal first with the question whether the transaction amounted to a reconstruction. In ordinary speech the word reconstruction is, I think, used to describe the refashioning of any object in such a way as to leave the basic character of the object unchanged. In relation to companies, the word ‘reconstruction’ has a fairly precise meaning which corresponds, so far as the subject-matter allows, to its meaning in ordinary speech. It denotes the transfer of the undertaking or part of the undertaking of an existing company to a new company with substantially the same persons as members as were members of the old company. On this point I was referred in particular to two cases, the first being Hooper v Western Counties and South Wales Telephone Co Ltd. The question in that case was concerned with the meaning of reconstruction in a debenture issue. Chitty J said ((1892) 68 LT at 80):
‘What is included in “reconstruction” by persons conversant with company law? There is one mode of reconstruction which may perhaps be said to be within the strict sense of the term. [He then gave a particular instance of what would be called reconstruction where a company continues to exist, and then he went on:] The usual mode of reconstruction is when a company resolves to wind itself up, and proposes the formation of a new company, which is to consist of the old shareholders, and to take over the old undertaking, the old shareholders receiving shares in the new company. In that case the old company ceases to exist in point of law, and there in in form a sale to the members of a new corporation. But the company is in substance, and may be fairly said to be, reconstructed. [Then a little lower down he quoted Lord Lindley on the Law of Companiesc in this passage:] ” … reconstruction differs from amalgamation in that, as a rule, there is only one transferring company, and the company to which the property in question is transferred is practically the same company with some alterations in its constitution“. [Then he said] … that appears to me to afford a clue to the meaning of the word as used in a clause like the present.’
In that passage Chitty J put a very restricted meaning on the word ‘reconstruction’.
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He said in terms that the new company was to consist of the old shareholders. No one I think now would put quite such a restricted meaning on the term as that.
The other case was that of Re South African Supply and Cold Storage Co Ltd where, again in a different context from the present case, Buckley J had to consider the meaning of the term ‘reconstruction’. He said ([1904] 2 Ch at 286):
‘Then it remains to consider whether what was done was for the purpose of “reconstruction or amalgamation“. What does “reconstruction” mean? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on—that would be a mere sale—but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves, I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same.’
So in that passage Buckley J repeated in effect what was said Chitty J in the earlier case but he repeatedly inserted the qualification ‘substantial’. I respectfully adopt that passage as an accurate statement of what is meant by the word ‘reconstruction’, always, of course, in the absence of any controlling factor leading to some other meaning. To quote again the last sentence: ‘Substantially the business and the persons interested must be the same.’
Turning to the Finance Act 1927, s 55, there appears no reason at all to give the word ‘reconstruction’ in that section a wider meaning than was attached to it in the two cases which I have quoted. The apparent purpose of s 55 is to grant relief from duty where the underlying ownership of the undertaking transferred remains substantially unaltered. If authority were needed for that statement as to the apparent purpose of the Act, it will be found in the judgment of Lord Hanworth MR in Oswald Tillotson Ltd v Inland Revenue Comrs ([1933] 1 KB 134 at 155, 156, [1932] All ER Rep 965 at 970), where he said:
‘When I come to consider the purpose of this section, and to see why there is to be an immunity and exemption from transfer stamp duty, I find that it is because the old company is really represented or replaced by the new company, and the shareholders in the new company are to be in substance the shareholders of the old company.’
Counsel for the taxpayer company contended that in s 55 the word ‘reconstruction’ had a much wider meaning and that there could within the terms of that section be a reconstruction where the undertaking or part of the undertaking of the existing company was transferred to a new company, the shares in which were owned even by a single member of the existing company. In support of that argument he relied on the difference in wording between sub-para (i) and sub-para (ii) in para (c) of s 55 (1). It will be remembered that para (b) deals with two alternative events, namely, that the transferee company has been incorporated or has increased its capital with a view to the acquisition either of the undertaking or not less than 90 per cent of the share capital of any existing company. Then in para (c) the consideration has to consist of not less than 90 per cent:
‘… (i) where an undertaking is to be acquired, in the issue of shares in the transferee company to the existing company or to holders of shares in the existing
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company; or (ii) where shares are to be acquired, in the issue of shares in the transferee company to the holders of shares in the existing company in exchange for the shares held by them in the existing company..’
Counsel for the taxpayer company fastened very properly on the circumstance that in sub-para (i) the expression is ‘holders’ and in sub-para (ii) it is ‘the holders’. So he says that under sub-para (i) it is sufficient that the shares are to be issued to any one or more holders of shares in the existing company. I do not think that that difference in language will bear the weight which counsel seeks to put on it. In sub-para (i) the word ‘holders’ without the prefix ‘the’ is correctly used, because one may quite well have a reconstruction consisting of the acquisition of an undertaking for shares in such circumstances that not every holder of shares in the existing company takes shares in the transferee company. For example, here, the holders of preference stock are excluded or, again, dissentients may be excluded. On the other hand, in sub-para (ii) the expression ‘the holders’ is appropriately used because in that sub-paragraph the expression relates back to the latter part of para (b), ie not less than 90 per cent of the share capital of any particular existing company, and sub-para (ii) of para (c) necessarily applies to the holders of all the shares which make up that 90 per cent or more. Even if the difference were not explicable, I do not think it would be sufficient to bring about this startling enlargement of the scope of the word ‘reconstruction’ which comes in the opening words of sub-s (1), ie ‘If in connection with a scheme for the reconstruction of any company or companies … ’ I do not think there is anything in para (c) or elsewhere in the section or in the context which operates to give the word ‘reconstruction’ in the opening words a wider meaning than it ordinarily dears.
Turning to the facts of the present case, the substance of the scheme is that the undertaking of BSR is partitioned between PH and the minority shareholders in proportions corresponding to their holdings of the ordinary stock of BSR, the preference stockholders being paid off. That partition, in order to comply with the requirements of company law, was carried out by the transfer of part of the undertaking of BSR to the new company in consideration of stock in the transferee company, ie the taxpayer company, and the issue of that stock directly to the minority shareholders by way of reduction of capital. The effect of that transaction is that the holders of the stock in the taxpayer company are most substantially different from the holders of the stock in BSR. That is to say, they consist of approximately half only in value, though the vast majority in number of the holders of the stock in BSR. So the transaction represents the transfer of a part of BSR’s undertaking from the holders of the whole of the stock in BSR to the holders only of approximately half the stock in BSR. That, I think, involves a substantial alteration in the membership of the two companies within the meaning of the passages which I have quoted from the judgments of Chitty and Buckley JJ. It seems to me that that transaction is not a reconstruction and that a transfer made pursuant to that transaction falls neither within the letter nor within the intent of s 55.
The decision of that issue against the taxpayer company disposes of the taxpayer company’s claim to relief under s 55 of the Finance Act 1927. It is therefore unnecessary for me to express a concluded view on the second issue arising under that section, namely, that of consideration. As the matter has been fully argued, however, I think it right to make certain comments on this issue even though they may be obiter. I will do so extremely shortly. I am wholly unpersuaded that the contention advanced on behalf of the Crown on this point is well founded. In the first place I am not persuaded that the word ‘consideration’ in para (c) of s 55(1) means anything other than the expressed consideration. I do not find it necessary to equate and I do not think I would be justified in equating, that word ‘consideration’ there with the expression ‘amount or value of the consideration’ in the charge for transfer duty. But even if that is wrong and one is entitled to look at the value of the shares
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to be issued in contradistinction to the expressed consideration, I do not see any justification for going outside the professional valuation of the assets as confirmed by the directors as a proper measure of the value of the shares to be issued. Where the consideration for the acquisition of a property consists in the entire share capital of the company which acquires the property, it seems to me entirely wrong to measure that consideration by taking the Stock Exchange quotations of the individual share units which make up that entire share capital. I cannot myself see any reason why the value of the entire share capital should be less than the value of the underlying assets set on them as a going concern by a proper professional valuer.
On this point I was referred to one or two cases and I propose only to cite one paragraph from the judgment of Lord Greene MR in Craddock (Inspector of Taxes) v Zevo Finance Co Ltd. That case was concerned with an entirely different point, namely, the value of shares when treated as stock in trade, but this passage seems to me to be in point here: ([1948] 1 All ER at 569, 570, 27 Tax Cas at 277, 278)
‘The fallacy, if I may respectfully so call it, which underlies the argument, is to be found in the assertion that where a company issues its own shares as consideration for the acquisition of property, those shares are to be treated as money’s worth as though they were shares in another company altogether, transferred by way of consideration for the acquisition. This proposition amounts to saying that consideration in the form of fully-paid shares allotted by a company must be treated as being of the value of the shares, no more and no less. Such a contention will not bear a moment’s examination where the transaction is a straightforward one and not a mere device for issuing shares at a discount. In the everyday case of reconstruction, the shares in the new company allotted to the shareholders of the old company as fully-paid will often, if not in most cases, fetch substantially less than their nominal value if sold in the market. But this does not mean that they are to be treated as having been issued at a discount; or that the price paid by the new company for the assets which it acquires from the old company ought to be treated as something less than the nominal value of the fully-paid shares. The Crown in this case is in fact attempting to depart from the rule (the correctness of which it itself admits) that the figure at which stock in trade is to be brought in is its cost to the trader and to substitute the alleged market value of the stock for its cost. Of course, in a case where stock which a company proposes to acquire for shares is deliberately over-valued for the purpose of issuing an inflated amount of share capital, very different considerations apply. But nothing of the kind is present in this case which, as I have already pointed out, is a perfectly proper and normal reconstruction. The propriety of the course adopted is manifest when the uncertainty as to the value of the investments, which is pointed out by the commissioners, is borne in mind. It is, I think, true as a general proposition that, where a company acquires property for fully-paid shares of its own, the price paid by the company is, prima facie, the nominal value of the shares. It is for those who assert the contrary to establish it, as could be done, for example, in the suggested case of a deliberately inflated valuation. In the present case the Crown has failed to establish the contrary on the facts as found, and there is no justification for the proposition that, on these facts, the commissioners were bound in law to decide the appeal in favour of the Crown.’
That case is, of course, distinguishable from the present in the respect that it was concerned with a different context of reconstruction and also that it was concerned with whether shares should be treated as issued at par or at a discount, while here the question is concerned with the amount of the premium at which the shares
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are to be treated as having been issued, but I think nonetheless that that passage goes some way towards meeting the contention of the Crown in this case.
Before I leave this issue, I should mention an argument which was advanced on behalf of the Crown, namely, that under the sale agreement and scheme of arrangement, what was being transferred to the taxpayer company was not part of the BSR’s undertaking at all. With all respect I see no merit in that argument.
(2) I turn now to the remaining issue, namely, that under s 42 of the Finance Act 1930. The question here is whether at the relevant date one of the companies, namely, BSR should be treated as having been the beneficial owner of not less than 90 per cent of the issued capital of the other company, namely, the taxpayer company. The relevant date seems to me to be 29 December 1966, that being the date on which the provisions of the sale agreement and of the scheme of arrangement became unconditional and that being also the date for completion of the various operations carried out under the agreement and the scheme of arrangement. At that date the issued capital of the appellant consisted of £100 in 2s stock units, and until the operations which were carried out on that date there is no doubt that BSR was—I think through a nominee—the beneficial owner of that £100 capital. It was, however, the beneficial owner subject to the obligations which arose under the agreement and the scheme of arrangement, those obligations remaining conditional until the conditions contained in the scheme of arrangement should have been satisfied. Those conditions were all satisfied on 29 December; conditions (A) and (B) had already been satisfied and condition (C) was satisfied when an office copy of the order sanctioning the scheme was delivered on that date to the Registrar of Companies. On the agreement and scheme of arrangement becoming conditional, BSR fell under an unconditional obligation to make an immediate transfer of the £100 stock. That obligation is not in terms contained in the agreement but it is in terms contained in the scheme of arrangement. All the other operations comprised in the transaction fell to be performed and were indeed performed at the same time as part of a single transaction with the transfer of the £100 stock. It seems to me impossible to maintain that at that date, 29 December, when the obligations under the agreement and the scheme of arrangement had become unconditional, BSR was in any relevant sense the beneficial owner of the £100 stock. Its position was that it was under an immediate and unconditional obligation to transfer that stock to someone else as part of a transaction the other parts of which fell to be performed at the same time.
I was referred on this point to one or two authorities, but I think it will be sufficient to cite the recent case of Wood Preservation Ltd v Prior (Inspector of Taxes) in the Court of Appeal. In that case the Court of Appeal were concerned with the expression ‘beneficial owner’ in a different connection, namely, s 17 of the Finance Act 1954, which is concerned with succession to a trade. I will cite two passages dealing with the expression ‘beneficial ownership’ where it occurs in that context. Lord Donovan said ([1969] 1 All ER at 367, [1969] 1 WLR at 1096):
‘The question is: Is this state of affairs “beneficial ownership” for the purposes of s. 17? Now the expression is not there defined. But it is useful to remember that what the legislature did in s. 17 was to allow one company to carry forward for its own tax benefit the losses of another. It allowed that to be done where there was a substantial measure of identity between the two companies. It stipulated that such identity of interest should be beneficial ownership of not less than 75 per cent of the shares in the company which was to enjoy the concession by the company which made the losses—i.e., 75 per cent at the time of the relevant change, which here would be the transfer of the business. In other
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words, for this purpose, the corporate veil was to be pierced. But if one finds, as here, that the company which made the losses, though still the legal owner of the shares, is bereft of the rights of selling or disposing or enjoying the fruits of these shares, then, bearing in mind the purposes of s. 17, I have in the end concluded that it would be a misuse of language to say that it still remained the beneficial owner of these shares.’
Harman LJ said ([1969] 1 All ER at 368, [1969] 1 WLR at 1097):
‘Now s. 17 of the Finance Act 1954 deals with “ownership“. It then goes on to say that where the word “ownership” is used it means “beneficial ownership“. That means, I think, an ownership which is not merely the legal ownership by the mere fact of being on the register but the right at least to some extent to deal with the property as one’s own.’
It seems to me that those passages are well applicable to the expression ‘beneficial owner’ in s 42. In the present case it is perfectly clear that at 29 December 1966 BSR had not in any respect the right to deal with the £100 stock in the taxpayer company as its own. On the contrary, it was under an immediate binding obligation to transfer it to someone else. I think there is nothing in the context of this provision which would warrant giving a generous meaning to the expression ‘beneficial owner’. On the contrary, to treat as a beneficial owner someone in the position of BSR would, I think, be contrary to the purpose of the section. I would only add this, that considerable difficulties arise in this connection if one seeks to equate the expression ‘beneficial owner’ with the expression ‘equitable owner’ in the technical sense in which that term is used in equity law. In the present case, as counsel for the taxpayer company correctly points out, it would be extremely difficult to point to any particular minority stockholder at 29 December 1966 and say that that particular stockholder was in equity the holder of a particular parcel of stock. I do not think, however, that equitable ownership is to be thus equated for this purpose with beneficial ownership although, no doubt, in many instances they may come to the same thing. That was so in more than one of the reported cases under this section. What one is concerned with is beneficial ownership and I am satisfied that here, in the particular circumstances of this case, BSR was not the beneficial owner of this parcel of stock. I propose accordingly to dismiss this appeal.
Appeal dismissed.
Solicitors: D J Freeman & Co (for the taxpayer company); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Eldridge v British Airports Authority
[1970] 2 All ER 92
Categories: TRANSPORT; Road
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 6 MARCH 1970
Road traffic – Hackney carriage – Metropolitan police area – London Airport – Byelaw prohibiting plying for hire other than on authorised standing – Statutory obligation to accept hiring when carriage standing in any street or place – ‘Standing’ – Whether byelaw repugnant to statute – London Hackney Carriage Act 1831, s 35 – Airports Authority Act 1965, s 12(6) – London (Heathrow) airport Byelaws 1966, art 5(44).
A taxi driver who stopped his cab and picked up passengers at London Airport at a point other than an authorised standing was convicted under art 5 (44)a of the London (Heathrow) Airport Byelaws 1966. On the question whether the driver when stopped was compelled to go with any person desirous of hiring his cab since he was ‘standing in any street or place’ within the meaning of s 35b of the London Hackney Carriage Act 1831, which, by s 12(6)c of the Airports Authority Act 1965, applied to London Airport,
Held – For the purpose of s 35 of the 1831 Act ‘standing’ meant something akin to waiting or parking, not merely being stationary, and it was always open to a taxi driver to avoid standing in circumstances which would involve him in an obligation to load passengers; accordingly, art 5(44) of the byelaws was not repugnant to s 35 of the 1831 Act (see p 96 e and f, post).
Dictum of Lord Goddard CJ in Hunt v Morgan [1948] 2 All ER at 1068 disapproved.
Notes
For the London Hackney Carriage Act 1831, s 35, see 24 Halsbury’s Statutes (2nd Edn) 804.
For the Airports Authority Act 1965, s 12, see 2 Halsbury’s Statutes (3rd Edn) 657.
Cases referred to in judgment
Hunt v Morgan [1948] 2 All ER 1065, [1949] 1 KB 233, 113 JP 67, 45 Digest (Repl) 157, 634.
Cases also cited
Dormer v Newcastle-upon-Tyne Corpn [1940] 2 All ER 521, [1940] 2 KB 204.
Powell v May [1946] 1 All ER 444, [1946] KB 330.
Case stated
This was a case stated by the Middlesex Area Sessions Appeals Committee in respect of their decision on 30 July 1969 whereby they allowed the appeal of the respondent, Maurice Eldridge, in respect of two convictions before the justices for the petty sessional division of Uxbridge sitting at Uxbridge under the London (Heathrow) Airport Byelaws 1966, arts 2 and 5(44), and the Airports Authority Act 1965, s 9, on 17 March 1969 and 26 March 1969. The facts are set out in the judgment of Donaldson J.
J B R Hazan QC and A C L Lewisohn for the appellant.
The respondent appeared in person.
Page 93 of [1970] 2 All ER 92
6 March 1970. The following judgments were delivered.
DONALDSON J delivered the first judgment at the invitation of Lord Parker CJ. This is an appeal by way of case stated by the Middlesex Area Sessions Appeals Committee in respect of their decision on 30 July 1969 when they quashed two convictions for alleged offences by the respondent, Mr Maurice Eldridge, who is a licensed taxi driver, and was driving a licensed taxi cab. The first conviction related to 17 March 1969 when, it was said, the respondent loaded passengers otherwise than at an authorised standing at London Airport contrary to arts 2 and 5(44) of the London (Heathrow) Airport Byelaws 1966, and s 9 of the Airports Authority Act 1965. The second conviction related to 26 March 1969 and was for a similar offence. He was also convicted under the same byelaws of plying for hire otherwise than at an authorised standing on 26 March, but there is and was no appeal in respect of that conviction. He was originally convicted by the justices for the petty sessional division of Uxbridge sitting at Uxbridge, and was fined £5 in respect of each of the informations. He appealed to quarter sessions against the first two convictions on the ground that the byelaws were repugnant to statutory law, and that he was not guilty of the offence.
So far as the first offence was concerned quarter sessions found that at 7.15 pm on 17 March 1969 at the main entrance to no 2 terminal at London Airport, the respondent stopped his taxi with the ‘For Hire’ sign illuminated at the kerbside close to a man with a suitcase; that the man with the suitcase spoke to the respondent and entered the taxi, and that the respondent switched off the ‘For Hire’ sign and drove away. He was stopped, and the alleged offence was pointed out to him, and the respondent said that he should have been first on the rank. There were at the time some five taxis available on the authorised standing at no 2 terminal, and the respondent’s taxi was at that time within 200 yards of the authorised standing. That latter finding is material in relation to an exception in the byelaws for picking up passengers more than half a mile away from an authorised standing.
So far as the second offence is concerned, that is said to have been committed at 5.25 pm on 26 March when the respondent was in his taxi which was stationary in no 2 carriageway opposite the main doors of no 2 terminal at the airport. At that time a man spoke to the respondent through the door of the taxi, and then entered it with two other people; the respondent set his meter and began to move away but was stopped by Pc Newman, who pointed out to him that he had committed an offence, to which the respondent replied ‘Have you read page 15 of the Airports Authority Act? I cannot stop any one entering the taxi as there are no locks on the passenger door’. Regrettably, quarter sessions appeals committee have not recorded what was the reply of the policeman. At the time of that question there were again five taxis available on the authorised standing in no 2 carriageway, and again the respondent’s taxi was relatively close to an authorised standing some 100 years away.
Before London Sessions Appeals Committee it was contended by the respondent, who has argued his case himself before us with great skill and moderation, that: (i) byelaw 5(44) is invalid, since it is repugnant to s 35 of the London Hackney Carriage Act 1831, which by reason of the provisions of s 12(6) of the Airports Authority Act 1965 specifically applies to London Airport; (ii) that he did not in fact on either occasion load passengers within the meaning of the byelaw, since they entered the taxi themselves, and he was unable to use force to prevent them doing so; and (iii) the byelaw is invalid because it is unreasonable. The first point is the main point, and to that I will return. The second point is in my judgment quite ill-founded. There are no specific findings of fact relating to it, but it must be a matter of common knowledge that it is not normally necessary to use force to prevent passengers boarding a taxi. This really is no answer in fact or in law. The third point taken was that the byelaw was unreasonable in that it required persons who might have luggage to walk half a mile to an authorised stand, and was therefore invalid. It is unnecessary to refer to the authorities concerning the invalidity of byelaws on
Page 94 of [1970] 2 All ER 92
grounds of unreasonableness, since there is no finding of fact in the case on which any suggestion of unreasonableness could arise. In argument it was said that it is unreasonable to require passengers to walk half a mile to an authorised stand, but that of course does assume that the authorised stands are upwards of half a mile from the terminal buildings in London Airport, and it is a matter of common knowledge that that is not so in the case of the passenger terminals.
By way of further reply, the respondent did raise a point about passengers who might go to freight buildings for special purposes and want a taxi to return therefrom. If there are sufficient passengers wanting to do that, and if the freight buildings are unreasonably far from the main passenger terminals, no doubt the airports authority will be prepared to consider recommendations to establish some standing near the freight buildings, but that does not arise on this case.
Returning to the main point, quarter sessions held that the respondent had on each of the dates loaded passengers within the meaning of the byelaw, but they cuashed the convictions because they held the byelaw to be invalid as being inconsistent with and contrary to the general law of England. In order to consider that point, it is necessary to look at the various statutory provisions which are involved. I start with s 9(1) of the Airports Authority Act 1965, which is the section which authorises the making of the byelaws. It provides:
‘The Authority may, in respect of any aerodrome owned or managed by it, make byelaws for regulating the use and operation of the aerodrome and the conduct of all persons while within the aerodrome, and in particular byelaws … (b) for preventing obstruction within the aerodrome; … (d) for prohibiting waiting by hackney carriages except at standings appointed by the Authority; … ’
Schedule 3 to the Act provides a procedure for making byelaws which allows for representations to be made to the Minister concerned and empowers the Minister to modify the draft byelaws if he wishes to do so in the light of those representations. In this case the Minister did in fact introduce modifications. It is clear of course that such a procedure is highly desirable, but it is equally clear that if, despite the representations and despite the modifications by the Minister, the resulting byelaws are ultra vires, they are unenforceable. Accordingly the existence of this desirable procedure is no answer to the merits of the respondent’s point.
Section 12(6) of the Airports Authority Act 1965(the whole section being under the rubric ‘Control of road traffic’) provides:
‘Any road or place within an aerodrome in the metropolitan police district which is owned or managed by the Authority shall be deemed to be a street or place within the meaning of section 35 of the London Hackney Carriage Act 1831.’
Section 35 of the London Hackney Carriage Act 1831 provides:
‘… Every hackney carriage which shall be found standing in any street or place … shall, unless actually hired, be deemed to be plying for hire, although such hackney carriage shall not be on any standing or place usually appropriated for the purpose of hackney carriages standing or plying for hire; and the driver of every such hackney carriage which shall not be actually hired shall be obliged and compellable to go with any person desirous of hiring such hackney carriage; … and in case such driver shall fail to produce sufficient evidence of having been and of being so hired as aforesaid he shall forfeit forty shillingsd.’
Page 95 of [1970] 2 All ER 92
Article 5(44) under which the respondent was prosecuted provides:
‘No person shall ply for hire with a taxi or load passengers except on an authorised standing appointed for that purpose and indicated by the sign “Taxis” at the head of the rank [and then these words were added by the Minister] provided that it shall not be an offence to load passengers at a distance of more than half a mile from the nearest of such authorised standings.’
The respondent says that in the face of art 5 (44) and s 35 of the 1831 Act he is on the horns of a dilemma. If he stops to put down a passenger whom he has brought to London Airport or if, whilst the taxi is empty, he stops for any other reason, perhaps because he is halted in traffic, he is then deemed to be plying for hire. Section 35 requires him to pick up any passenger who in those circumstances asks him to take him to some other destination. If he complies with his obligations under s 35 of the 1831 Act, he is in breach of the byelaw. If he fails to comply and therefore avoids prosecution under the byelaw, he is liable to proceedings against him under s 35 of the 1831 Act. There is in this case, as will be seen from what I have just said, no problem whether there is or is not repugnancy on the respondent’s construction of the Act, and it is unnecessary to go into the authorities concerning what constitutes repugnancy or the special case of repugnancy within the terms of a single act. This, if the respondent is right, is a clear case of repugnancy on any view of the matter.
The respondent is supported by Hunt v Morgan. This was a decision of a Divisional Court consisting of Lord Goddard CJ, Hilbery and Birkett JJ, and the reserved judgment of the court was given by Lord Goddard CJ. The case was concerned with the problem of the rights and obligations of the driver of a cruising taxi cab, because it was thought before that case and it is no doubt still thought by a very large number of people that a driver of a taxi cab going about the streets of London with its flag up and its ‘For Hire’ sign illuminated is under an obligation to stop if anybody hails him. Hunt v Morgan decides that that is not the case and that, to quote the headnote ([1949] 1 KB at 233):
‘The driver of a taxi-cab which is travelling along the road is not “plying for hire at any place” within the meaning of s 7 of the Hackney Carriages (London) Act, 1853, and commits no offence under s 17, sub-s. 2, if he refuses to accept as a passenger one who desires to hire his cab: a driver can only be required to accept as a fare a person desiring to hire his cab when it is actually standing on a rank or stationary in a street.’
Thus it does not in terms deal with the problem with which we are concerned in this case. In the course of the judgment Lord Goddard CJ referred to s 7 of the 1853 Act and explained that it obliged the driver of a cab plying for hire to take a fare subject to certain mileage limits and reasonable excuses. He referred to s 33 of the London Hackney Carriage Act 1843, and showed that under that Act it was an offence to ply for hire otherwise than on a standing or place appointed for that purpose. He went on to say ([1949] 1 KB at 239, [1948] 2 All ER at 1068):
‘That it is the standing cab and not the moving cab that must accept a fare seems to be shown also by s 35 of the Act of 1831. As we have already said, that Act contained no provision with regard to cab ranks or standing places, but it does provide that every cab found standing in any street or place shall, unless actually hired, be deemed to be plying for hire, although such cab shall not be
Page 96 of [1970] 2 All ER 92
on any standing or place usually appropriated for the purpose of cabs standing to plying for hire, unless it is actually hired at a time when some person wishes to be driven in it … This section is unrepealed, and it would therefore appear that if a cab is standing in the street having, for instance, just set down a passenger, the driver is bound to accept as a fare any person who desires to be driven, provided that person so informs the driver while he is still stationary and unengaged. At any rate, it seems to us clear that a cab driver commits no offence under the Act of 1853 by refusing to stop when hailed, and that he can only be required to accept anyone who chooses to hire him when he is actually on a rank or is stationary in a street.’
This passage from the judgment is of course of the highest persuasive authority, but it was not, I venture to think, necessary for the decision in Hunt v Morgan and indeed I think the wording of itself shows that it was in the nature of an aside. It is necessary in the present case to decide what is meant under s 35 by ‘standing’. In my judgment ‘standing’ in the context of that section means something akin to waiting or parking. It does not mean being stationary. Were it otherwise, the licensed driver in an ordinary taxi cab who was stopped at traffic lights when he had virtually no petrol left and was trying to get to a petrol pump, or to go home, would be at the mercy of everyone who wished to hire a cab. This would be an intolerable situation for taxi cab drivers. Furthermore it might produce a most unseemly scramble on the part of the taxi driver to drive away as soon as his passenger was out and before the next passenger could come up to him. I am quite satisfied that Lord Goddard CJ’s mind was not addressed to that sort of problem, and that the construction which I put on s 35 is the construction which should be preferred. If, as I think, that is the right construction of s 35, no repugnancy arises for it will always be open to a taxi driver to avoid ‘standing’ within the meaning of s 35 in circumstances which would involve him in an obligation to load passengers contrary to the byelaw.
Accordingly, although I have considerable sympathy both with the respondent and the appeals committee in the difficulties which arise on the law relating to this matter, I am satisfied that the quarter sessions were wrong and for my part I would allow this appeal.
ASHWORTH J. I agree.
LORD PARKER CJ. I also agree and have nothing to add.
Appeal allowed. Case remitted.
Solicitors: Turberville Smith & Co, Uxbridge (for the appellant).
Euan Sutherland Esq Barrister.
Note
R v Bonner and others
[1970] 2 All ER 97
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): EDMUND DAVIES AND KARMINSKI LJJ AND LAWTON J
Hearing Date(s): 24 FEBRUARY 1970
Criminal law – Theft – Partnership property – Taking by one partner – Theft Act 1968, ss 1(1), 3(1), 5(1).
Notes
For the Theft Act 1968, ss 1, 3, 5, see 8 Halsbury’s Statutes (3rd Edn) 783, 784, 785.
Cases referred to in judgment
Barton v Williams (1822) 5 B & Ald 395, 106 ER 1235; affd (1825) 3 Bing 139, 130 ER 466, 37 Digest (Repl) 18, 150.
Farrar v Beswick (1836) 1 M & W 682, 5 LJEx 225, 150 ER 608, 46 Digest (Repl) 497, 457.
Morgan v Marquis (1853) 9 Exch 145, 23 LJ Ex 21, 22 LTOS 91, 156 ER 62, 46 Digest (Repl) 497, 462.
R v Smith (Jesse) (1870) LR 1 CCR 266, 39 LJMC 112, 22 LT 554, 34 JP 484, 15 Digest (Repl) 1074, 10,595.
Case also cited
Baker v Barclays Bank Ltd [1955] 2 All ER 571, [1955] 1 WLR 822.
Appeals
These were appeals by George Andrew Bonner, Anthony Stuart Town, William Anderson and Michael Barry Town against their convictions on 24 September 1969 at Middlesex Quarter Sessions before the deputy chairman (his Honour Judge Ranking) and a jury, of theft of property from one Webb contrary to s 1(1) of the Theft Act 1968. The appellants in their defence claimed that the appellants Bonner and Webb were partners and that the property alleged to have been stolen was property of the partnership. The appellants appealed pursuant to a certificate granted by the trial judge under s 1(2) of the Criminal Appeal Act 1968 in the following terms: ‘Whether, having regard to decided cases and the provisions of the Theft Act 1968, the jury were misdirected on the law relating to the theft by a partner of partnership property.' Bonner also sought leave to appeal against his conviction on the ground that the verdict was unsafe or unsatisfactory.
N J Inglis-Jones for the appellants.
D G Wright for the Crown.
24 February 1970. The following judgments were delivered.
EDMUND DAVIES LJ giving the judgment of the court, outlined the facts and stated that the members of the court had come to the conclusion that the combination of circumstances in the case were such that the verdict of the jury was unsafe and unsatisfactory and accordingly all the appeals would be allowed and the convictions quashed. His Lordship continued: However, as (to the best of our belief) this is the first time that the position of partners has been considered since the passing of the Theft Act 1968, and out of respect to counsel for the appellants for his most attractive submissions, we think it right to deal with the legal point which led to the learned judge certifying the case as one fit for appeal.
Page 98 of [1970] 2 All ER 97
Counsel for the appellants has submitted that, even if (contrary to his basic submission) it would be going too far to say that a partner can never steal partnership property, yet, in the circumstances of this particular case, the offence of theft has not been made out. He has taken us back a long way in legal history. He has referred us to Morgan v Marquis where Parke B dealt with the capacity of one tenant in common to maintain an action in conversion against his companions, and said ((1853) 9 Exch at 147) that such an action was not maintainable unless there has been destruction of the particular chattel or something equivalent to its destruction. We have also been referred to the decision of Parke B in Farrar v Beswick ((1836) 1 M & W 682 at 688) where he said:
‘I have always understood, until the doubt was raised in Barton v Williams, that one joint-tenant or tenant in common of a chattel could not be guilty of a conversion by a sale of that chattel, unless it were sold in such a manner as to deprive his partner of his interest in it. A sale in market overt would have that effect.’
Counsel for the appellants has accordingly submitted that in the circumstances of this case a mere taking away of partnership property, even with the intention of keeping the other partner permanently out of possession of it, would not per se suffice to amount to theft. There would have to be something like destruction of the metal or its sale in market overt, which would have the effect (provided there was innocence in the buyer) of transferring a good title to him and so defeating the title of the deprived partner. Counsel summarised the matter by submitting that for there to be an ‘appropriation’ within the Theft Act 1968 there must be a ‘conversion’ of the property by one or other of the foregoing methods, neither of which was resorted to here. Therefore, so it is submitted, there was no theft.
Rejecting that submission, his Honour Judge Ranking directed the jury in these terms:
‘… even if you are satisfied that there was a full partnership between Webb and [the appellant Bonner], a partner has no right to take any partnership property with the intention of permanently depriving the other of his share. Therefore, even if [the appellant Bonner] was a partner of Webb, if he took that lead (which was partnership property) intending to deprive Webb permanently of his share and, when he did it, he knew perfectly well that he had no legal right to take it, then he is guilty of theft; he is guilty of the theft of the whole property, and not just guilty of the theft of Webb’s share, because the whole of it was partnership property and it had not been divided … and if one partner takes it he is guilty of stealing the whole of it.’
Was this a misdirection? This court is clearly of the opinion that it was not. Sections 1, 3 and 5 of the Theft Act 1968 are here relevant. Section 1(1) provides:
‘A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and “thief” and “steal” shall be construed accordingly.’
Section 3(1) defines the word ‘appropriates’ in these terms: ‘Any assumption by a person of the rights of an owner amounts to an appropriation … ’ Section 5(1) definesa the phrase, ‘belonging to another’, used in s 1.
Page 99 of [1970] 2 All ER 97
Counsel for the appellants has boldly submitted that, since the basic requirement of theft is the appropriation of property belonging to another, there can be no such appropriation by one co-owner of property which is the subject-matter of the co-ownership or partnership; and that there can be no ‘assumption of the rights of an owner’ in a case like the present, where one is dealing with (as the appellant Bonner claims) property belonging to a partnership.
The whole object of the Theft Act 1968 was to get away from the technicalities and subtleties of the old law. Counsel for the appellants has not repeated before us an interesting submission which he made below; but, since we are dealing with this topic, we think that it might be helpful if we resurrect it and attempt to dispose of it now. His submission below went somewhat on these lines: The Larceny Act 1916 had a special provision (s 40(4)) that—
‘If any person, who is a member of any co-partnership or is one of two or more beneficial owners of any property, steals, or embezzles any such property of or belonging to such co-partnership or to such beneficial owners he shall be liable to be dealt with, tried, and punished as if he had not been or was not a member of such co-partnership or one of such beneficial owners.’
The parent of that provision was the Larceny Act 1868, a one-section Act, and in R v Jesse Smith ((1870) LR 1 CCR 266 at 269) Bovill CJ said, referring to the Larceny Act 1861:
‘At the time that Act (24 & 25 Vict. c. 96) was passed theft by a partner of the goods of the firm did not fall within the criminal law, either common or statute. This defect was supplied by 31 & 32 Vict. c. 116,b which, after reciting that “it is expedient to provide for the better security of the property of co-partnerships and other joint beneficial owners against offences by part owners thereof, and further to amend the law as to embezzlement”, proceeds to enact, by the first section, that if a partner, or one of two or more beneficial owners, shall steal, any property of such co-partnership or such joint beneficial owners, “every such person shall be liable to be dealt with, tried, convicted, and punished for the same as if such person had not been or was not a member of such co-partnership, or one of such beneficial owners“.’
Counsel for the appellants submitted that, there having been a special provision in the Larceny Act 1916, following on the earlier Act, dealing with the position of a partner wrongfully treating partnership property, and there being no repetition of that statutory provision in the Theft Act 1968, the inference is that the law has been changed and that it is no longer theft for a partner to deprive a co-partner of any of the partnership property even if it be done dishonestly and with intent to deprive permanently.
I said a little earlier that the object of the Theft Act 1968 was to get rid of the subtleties and, indeed, in many cases the absurd anomalies of the pre-existing law. The view of this court is that in relation to partnership property the provisions in the Theft Act 1968 have the following result: provided there is the basic ingredient of dishonesty, provided there be no question of there being a claim of right made in good faith, provided there be an intent permanently to deprive, one partner can commit theft of partnership property just as much as one person can commit the theft of the property of another to whom he is a complete stranger. Recent though the Act is, this matter has not gone without comment by learned writers. Professor Smith in his valuable workc on the Theft Act 1968 expresses his own view quite clearly under the hearing ‘Co-owners and partners’ in this way:
Page 100 of [1970] 2 All ER 97
‘D and P are co-owners of a car. D sells the car without P’s consent. Since P has a proprietary right in the car, it belongs to him under s 5(1). The position is precisely the same where a partner appropriates the partnership property.’
In the joint work of Professor Smith and Professor Hogan, the matter is thus dealt withd:
‘… D and P … may … be joint owners of the property. Obviously there is no reason in principle why D should not be treated as a thief if he dishonestly appropriates P’s share, and he is so treated under the Theft Act.’
We thus have no doubt that there may be an ‘appropriation’ by a partner within the meaning of the 1968 Act, and that in a proper case there is nothing in law to prevent his being convicted of the theft of partnership property. But this excursus is of an academic kind in the present case, for we have already indicated our view regarding the unsatisfactory and unsafe nature of the verdicts returned against each of these accused. In these circumstances, all four appeals are allowed.
Appeals allowed. Convictions quashed.
Solicitors: Registrar of Criminal Appeals (for the appellants); Solicitor, Metropolitan Police.
N P Metcalfe Esq Barrister.
Morgon v Murch
[1970] 2 All ER 100
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND KARMINSKI LJJ AND SIR GORDON WILLMER
Hearing Date(s): 10 FEBRUARY 1970
Rent restriction – Death of tenant – ‘Residing with’ – Mother statutory tenant of dwelling-house – Married son returning to live with mother after deserting wife and children – Matrimonial home remaining in son’s name – Death of mother seven months after son’s return – Whether son entitled to succeed mother as statutory tenant – Rent Act 1968, Sch 1, para 7.
The defendant’s father was the statutory tenant of a dwelling-house owned by the plaintiff. When the father died, his widow, the defendant’s mother, became first successor to the tenancy. The defendant had originally lived in the house with his parents but in 1955 after his marriage he had moved to a council house. On 4 November 1967, the defendant left his wife and children and went to live with his mother. In April 1968, the wife obtained an order from the justices who found that the defendant had been guilty of cruelty to the wife and had deserted her on 4 November 1967. Despite requests by his wife to do so, the defendant took no steps to have the tenancy of the council house transferred to her name. On 27 June 1968, the defendant’s mother died and the defendant continued to live in the house. The plaintiff brought proceedings in the county court and obtained an order for possession of the house. The defendant appealed. On the question whether the defendant had been residing with his mother for the period of six months immediately preceding her death so as to enable him to succeed to the statutory tenancy by virtue of para 7 of Sch 1a to the Rent Act 1968,
Page 101 of [1970] 2 All ER 100
Held – The word ‘reside’ in the 1968 Act must be given its ordinary, natural, common language meaning (see p 103 d, post); the defendant was living with his mother, in the sense that he was making his home with her, during the material period, during that time he had made no move to become reconciled with is wife and there had been no immediate prospect of his return to the matrimonial home; accordingly he was entitled to succeed to the statutory tenancy (see p 104 f to h, and p 105 f to h, post).
Dicta of Jenkins and Romer LJJ in Collier v Stoneman [1957] 3 All ER at 25 and 27 applied.
Notes
For succession to a statutory tenancy, see 23 Halsbury’s Laws (3rd Edn) 811, 812, para 1590, and for cases on the subject, see 31 Digest (Repl) 662, 666, 7627–7649.
For the Rent Act 1968, Sch 1, see 48 Halsbury’s Statutes (2nd Edn) 465.
Cases referred to in judgments
Collier v Stoneman [1957] 3 All ER 20, [1957] 1 WLR 1108, Digest (Count Vol A) 1078, 7645d.
Middleton v Bull [1951] 2 TLR 1010, [1951] WN 517, Digest (Cont Vol A) 1075, 7636b.
Appeal
This was an appeal by the defendant, George Albert Robert Murch, from the judgment of his Honour Judge Cunliffe at the Portsmouth County Court dated 21 May 1969 Whereby he adjudged that the defendant was not entitled to the protection offered by para 7 of Sch 1 to the Rent Act 1968 and ordered that the defendant hand over possession of the premises occupied by him to the plaintiff, Louisa Annie Morgon. The plaintiff died after service of the notice of appeal and on 15 December 1969, her executor, Kenneth Douglas Adcock, was joined as plaintiff in the proceedings in her place. The facts are set out in the judgment of Winn LJ.
K R Bagnall for the defendant.
D W Keene for the plaintiff.
10 February 1970. The following judgments were delivered.
WINN LJ. This is an interesting and important case. Possibly it will not so often be relevant as formerly it might have been, since the provisions of the statute to some extent have worked themselves out in the course of time, but the problem is in the instant case of great importance since on its solution depends the answer to the claim made for vacant possession of a dwelling-house. It is unnecessary to go into the details of the transmission of the reversion to this house. They have all been properly attended to in course of the procedural steps which have been taken in order to substitute the plaintiff for the original plaintiff. No more need be said about that.
The issue really is in a very narrow compass. It is whether or not the defendant in these proceedings in the county court, against whom an order for possession was made, had resided with his own mother during the period of six months immediately preceding her death, which occurred on 27 June 1968. Counsel for the defendant has, on the appeal, if I may be allowed to say so, very competently, succinctly and lucidly assisted the court; we were able to travel quickly through the relevant provisions of the Rent Act 1968, and in particular the more immediately relevant provisions of Sch 1 to that Act, and subsequently of para 7 of Sch 1 to the Act. By reason of the help which the court thereby derived, it really is unnecessary to embark on any discussion of most of the provisions of that Schedule, or of the Act itself. It is necessary to note, however, that under para 7:
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‘Where … a person who was a member of the first successor’s family was residing with him at the time of and for the period of six months immediately before his death then, after his death, that person or if there is more than one such person such one of them as may be decided by agreement, or in default of agreement by the county court, shall be the statutory tenant if and so long as he occupies the dwelling-house as his residence.’
It is common ground, fortunately for the court, that the premises in question, which are known as 62 Fir Copse Road, Purbrook, Hants, were let some little time ago to Mr William Murch, the father of the defendant in the instant proceedings, who died on 2 September 1967 and that the premises were subject to the Rent and Mortgage Interest Restrictions Acts 1922 to 1939, and that therefore the father’s tenancy was a protected tenancy. After the death of the father on 2 September 1967, his widow, Violet Lily May Murch, retained possession of the same dwelling-house as a tenant pursuant to the Rent Restrictions Acts protection, and it is common ground (counsel have been kind enough to say so expressly) that within the meaning of the relevant provisions the widow became thereafter the first successor.
There is no doubt, it is manifest on the evidence, that the defendant spent quite a lot of the time comprised in the period of six months immediately preceding the death of his mother in the house where his mother was then living. His life was to a considerable extent spent there and he was living there. He was there a very substantial part of that relevant time although, of course, he was away sometimes for a couple of nights together, sometimes for the weekend, the reasons for his absence being either his work as a bricklayer or the fact that he wished to visit friends or other relatives: but it is common ground that he was for the most part, the majority of that relevant time, in the house, sleeping there, eating there, and no doubt from time to time watching the television (if they had one) or otherwise occupying himself, for example, looking after the budgerigars that were the property of his mother. The question is whether he was residing there.
Now, as it happened, he used one upon a former time to live in this house. One is not told by the evidence exactly when or how it came about that he left the house, expect that he was moved by reason of overcrowding, and apparently that may have been in January 1955, a considerable time ago. He then went to 20 Waite End Road, Waterlooville, which was a council house or flat, and he lived there with his wife, and in the course of time there were five children there with them. There is no doubt that he was residing at that address, 20 Waite End Road, Waterlooville, as his usual place of residence, if that is not a somewhat grandiloquent way of referring to a council house. That was where he was normally living until November 1967, for a period of 12 years. Before his father died, the defendant in this action did spend a little time, a certain amount of time, with his father in the performance of filial duties to his ailing father. His father then died and he continued to visit his mother from time to time, again no doubt to help her in her advancing age, but before November 1967 it is not suggested, as one understands, by anybody that he was residing in the mother’s house. He had his own place in which he was normally living.
Incidentally,though this is perhaps no very great help towards a solution of the problem, it does seem to me personally rather undesirable to discourage sons and daughters from going to their aged parents’ homes to render to them filial duties and help. It would be better really to encourage them by making available to them the advantages which the Act of Parliament clearly intended to afford to them, and it would be adverse to the interests of elderly people, ageing parents, if it were to be said that one must prove very strictly, in order to have the advantage of the Act, that one has been in a sense which is technical within the meaning of the Income Tax Acts, for example, residing permanently in the parent’s house.
The change of circumstances in November 1967 was very marked and of great
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relevance to the problem before the court, because on 4 November 1967 the defendant left his wife and left the house where he had been living for 12 years, 20 Waite End Road. The wife gave evidence in the proceedings, and she said: ‘[The defendant] left me in November 1967’—and, she said—‘to live at No 62’, using that expression, as far as one can judge, instinctively and naturally as conveying the idea that he had split his life away from hers and he was going to live thereafter not with her at her house, the house where she remained, but at his mother’s house. There were proceedings before the justices, but not until April 1968. They found as between the defendant and the wife that the defendant had deserted his wife on 4 November 1967 and had been guilty of cruelty towards her—not, at that stage, a very encouraging, prospect for reconciliation and a return to cohabitation in that house.
When evidence was given in the instant case by the plaintiff, or on behalf of the plaintiff, the expression was used, ‘I cannot say how long [the defendant] has resided in the house’. There is an instance for the use of the word ‘reside’ instead of the word ‘live’. It is a pompous sort of synonym for ‘live at’ to say ‘reside at’, or ‘reside in’. But the 1968 Act uses the expression ‘resided’ and one must look at it in the light of the guidance afforded by decided cases which, without going into detail, seem to me to say perfectly plainly that the word ‘resided’ is to be given its ordinary, natural, common language meaning. For example, in Collier v Stoneman Jenkins LJ in a long and very carefully phrased judgment said quite plainly that the test should be: what would be the ordinary meaning of the words? His judgment can be summed up in these words. After a considerable analysis he said ([1957] 3 All ER at 25, [1957] 1 WLR at 115):
‘… “the words ‘residing with’ must be given their ordinary popular significance“. Given that significance, it seems to me that they clearly apply to the grand-daughter’s position in the present case. If the tenant [an elderly lady of 94, showing that independence and courage which is so scarce these days, assisted as she was by young relatives, such as seldom now will be seen helping old people of 94] had been asked whether anyone resided with her in the flat I do not see how she could consistently with the facts have answered the question otherwise than by saying: “Yes, my grand-daughter, her husband and their son reside with me“.’
Sellers LJ said ([1957] 3 All ER at 27, [1957] 1 WLR at 118) that he thought it was perfectly plain that within the ordinary meaning of the words the grand-daughter was residing with the grandmother up to the date of her death.
In Middleton v Bull ([1951] 2 TLR 1010 to 1012) to which we have been referred by counsel for the plaintiff in his very helpful submission, Denning LJ made it plain that whether or not there has been residence for the relevant period within the meaning of the statute may sometimes be a finding of fact and sometimes a finding of law. The judge must find the primary facts and if the inference from the primary facts is such as any layman may draw, then the inference will be an inference of fact and a finding of fact; but if a lawyer is required to draw the correct inference, then the inference and the finding would be findings of law.
In my opinion there is no doubt at all that the learned judge here made a finding, or drew an inference, which he was only qualified to draw, or purported to be qualified to draw, as a lawyer, since he posed to himself a test which he was regarding as a test having validity in law. He was not merely finding an inference of fact from primary facts established by his own findings. In my personal opinion he erred in that he took, as his crucial test, and the dominant criterion, the question whether
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or not the defendant had abandoned, and intended no longer to return to, his own former living place or—I have to use the word—residence.
The judge posed to himself correctly, and then later, in my respectful opinion, incorrectly, the problem which he had to answer. He said:
‘… the problem now is whether the defendant is entitled to claim that he was residing with her at the time and had been for six months before her death:’
That is a correct statement of the problem. Later he said: ‘… the problem is whether for six months he has been occupying the dwelling as his residence’. He said again, still later in the judgment:
‘The important word is residing which requires reasonably permanent residence—seven months’ residence was not enough unless he gave up his own home. Had the defendant given up his home?’
In my respectful opinion, with all respect to the learned county court judge, that is a misdirection since a man may, in law, have more than one place in which he resides as well as more than one place in which he lives. He may have a house in London, he may have a house in the country, he may have a house in New York, he may have a house also at Florida, he may have a house in New England, and it may well be that it would be right to say of him in fact and in law that he resides in each of those places, if he spends time in them of which it can be postulated that the time which he spends there, and the intention which he has when he spends it, is more then is comprised in and directed to the paying of a temporary visit.
I think it unnecessary to say more to indicate the reason why I personally consider that the learned county court judge came to the wrong conclusion, and that on the facts which were before him he was bound, as a matter of law, to find that the defendant had been living with his mother for more than six months before she died, in the sense that he was making his home there with her. He had no immediate prospects of going back to his normal house. He was not reconciled with his wife during the material period. Whether or not, if one had searched his own mind one would have found in it an intention to go away from 62 Fir Copse Road so soon as his mother died, or would have found an intention to stay there until he decided to be reconciled and was able to be reconciled with his wife, or until some other event occurred, it is quite impossible for this court by speculation to determine. The fact is that he was living there and he was not living any where else during the material time. He was found to be living there by other members of the family who would have liked to have evicted him if they could, but they did not succeed in doing it. On the contrary, they went in there and joined him in living in 62 Fir Copse Road.
I have no doubt myself that the proper answer in this case is that the defendant is entitled to the protection afforded to him by the express terms of the 1968 Act particularly having regard to the terms of para 7 of Sch 1 to that Act, and I would allow this appeal.
KARMINSKI LJ. I agree. Winn LJ has read para 7 of Sch 1 to the Rent Act 1968 and I do not propose to read it again. The paragraph requires that the person concerned shall be a member of the first successor’s family and one residing with him or her at the time of, and for six months immediately before, that person’s death. The important words are ‘residing with’. The learned county court judge misdirected himself, in my view, as to the test. He said:
‘The important word is residing which requires reasonably permanent
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residence—seven months residence was not enough unless he gave up his own home.’
In my view that test was a wrong one, and further, on the facts, as we know them, was not justified.
Winn LJ has referred to Collier v Stoneman. I wish to add only this. The test was in my view very helpfully put by Romer LJ. He said this ([1957] 3 All ER at 27, [1957] 1 WLR at 117):
‘The question which has to be decided, in my opinion, is whether a tenant and a member of his family were, according to ordinary notions, residing together and not how they lived their respective lives.’
Applying that test to the present case it is, in my view, important to see how in November 1967 the defendant came to live at what had been his home as a bachelor, and for a short time after marriage. He left his wife on 4 November 1967 under circumstances which enable a court of competent jurisdiction, that is the justices of the petty sessional division of Havant in Hampshire, to make a finding of desertion against him. They also found on that date that he had been guilty of persistent cruelty towards his wife.
In my view, the finding of desertion is an important one. We have not got the evidence on which the finding was made, but I must assume that the justices had proper evidence before them on which to make that finding. That finding means this, that at that time the defendant had withdrawn from cohabitation with his wife without her consent, intending to bring cohabitation permanently to an end. So far as we know, there have been no approaches towards a reconciliation either by him or by his wife. The making of a non-cohabitation clause does not of course make a reconciliation an impossibility; but the wife, in whose favour that order was made, is relieved of any duty in law to resume cohabitation with her husband. So far as I am aware, there have been no approaches towards reconciliation in either direction. All we know is that the wife, who gave evidence before the learned county court judge, had asked the defendant to get the tenancy of the council house transferred to her name, and that he refused to do so in April 1968. I cannot find from his refusal any intention or wish on his part to resume cohabitation with his wife. It may be that he was merely anxious not to oblige her.
But coming to the real issue here, I have not any doubt that this man came within the provisions of para 7 of Sch 1. I agree that the learned county court judge was wrong for the reasons I have given and therefore that this appeal should be allowed.
SIR GORDON WILLMER. In my opinion the learned county court judge mis-directed himself in the respects to which Winn and Karminski LJJ have referred. I can only agree that this appeal should be allowed.
Appeal allowed.
Solicitors: Gregory, Rowcliffe & Co agents for Cousins, Burdidge & Connor, Waterlooville (for the defendant); Blake, Lapthorn, Rea & Williams, Waterlooville (for the plaintiff).
S A Hatteea Esq Barrister.
John Walker & Sons Ltd and others v Henry Ost & Co Ltd and another
[1970] 2 All ER 106
Categories: TORTS; Passing off: CONFLICT OF LAWS
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 26, 27, 28, 29, 30 JANUARY, 2, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20 FEBRUARY, 13, 25 MARCH 1970
Passing-off – Geographical name – False trade description – Admixture of single malt whisky and cane spirit sold as Scotch whisky – Whether plaintiffs producers of Scotch whisky – Supply by defendant in England of means to produce and retail admixture as Scotch whisky in Ecuador – Whether defendant committed tort of passing-off.
Conflict of laws – Tort – Passing-off – Actionability in England – Tort actionable by law of Ecuador – Tortious acts originating within jurisdiction of English court – Public policy.
The plaintiffs were all blenders and exporters in Scotland and England of ‘Scotch whisky’, most of which was a blend of malt and grain whiskies sold under well-known brand names. The first defendant, a whisky broker, admitted that between 1959 and 1969 it had shipped quantities of single malt whisky to the second defendant, a firm in Ecuador. Shipments of a number of bottles, labels and cartons for ‘White Abbey’ and ‘Scottish Archer’ ‘Scotch whisky’ were also admitted by the first defendant. It was found as a fact that the major shareholder in and managing director of the first defendant company knew that the single malt whisky which was being shipped to the second defendant would be resold in Ecuador under the labels ‘White Abbey’ and ‘Scottish Archer’ ‘Scotch whisky’ after being admixed with local cane spirit. It was further found that the labels were not only liable to deceive the ultimate purchaser, but had in fact so deceived, and that the managing director of the first defendant company intended the whisky, bottles, labels and cartons to be used in such manner and was further actuated by the dishonest motive of causing the part of the reputation of Scotch whisky, enjoyed by the plaintiffs, to be filched. In a passing-off action by the plaintiffs against the defendants, the plaintiffs claimed that two torts had been committed; first, the sale by the first defendant to the second defendant of instruments of deception in England to enable the second defendant to pass-off in Ecuador liquor as Scotch whisky which is in fact a mixture of single malt whisky and local cane spirit, and secondly, the passing-off by the first defendant in collaboration with the second defendant of a mixture of malt whisky and local cane spirit as Scotch whisky in Ecuador.
Held – (i) The first defendant had committed the tort of passing-off in England, because—
(a) although the plaintiffs were the blenders of ‘Scotch whisky’, they were also the producers thereof, since 99 per cent of ‘Scotch Whisky’ was blended and marketed by the plaintiffs under well-known brand names; accordingly, as producers the plaintiffs fell within the principle enunciated in J Bollinger v Costa Brava Wine Co Ltd a inasmuch as they were entitled to have upheld the description of their product as ‘Scotch whisky’ (see p 117 c, post), which in all the circumstances constituted a trade description since the geographical expression was sufficiently precise and included the origin of the goods (see p 117 f, post); and
(b) the acts of the first defendant in providing the means to the second defendant, whereby malt whisky and cane spirit could be sold in Ecuador under the false trade description of ‘Scotch whisky’, amounted to tortious acts done in England, since
Page 107 of [1970] 2 All ER 106
the first defendant not only knew that the second defendant was going to add local cane spirit to the single malt whisky and sell it as ‘Scotch whisky’, but also intended that the whisky which was supplied should be admixed and bottled and that the labels should be put on the bottles describing it as ‘Scotch whisky’ (see p 120 c, post).
Quaere. Whether a trader in England who sells goods and labels which are true and has no knowledge of any improper use of those goods in a foreign country commits a tort in England (see p 120 b, post).
(ii) The first defendant in collaboration with the second defendant had, by passing-off in Ecuador an admixture of malt whisky and local cane spirit as ‘Scotch whisky’, committed a tort in Ecuador, which was actionable in England, because—
(a) The acts complained of by the plaintiffs were actionable in Ecuador and had all originated from the acts of the first defendant in England (see p 123 e, post);
(b) there was no reason why an English court was not the proper forum for the matter to be litigated, particularly when there was evidence that the first defendant was attempting to start similar activities in other Latin American countries (see p 123 f, post).
Notes
For local names in relation to passing-off, see 38 Halsbury’s Laws (3rd Edn) 622–624, para 1024, and for cases on the subject, see 46 Digest (Repl) 238–243, 1552–1573.
For jurisdiction in respect of foreign torts, see 7 Halsbury’s Laws (3rd Edn) 84–86, paras 155–157, and for cases on the subject, see 11 Digest (Repl) 449, 450, 878–884.
Cases referred to in judgment
Bollinger (J) v Costa Brava Wine Co Ltd [1959] 3 All ER 800, [1960] Ch 262, [1959] 3 WLR 966, 46 Digest (Repl) 227, 1485.
California Fruit Canners’ Association v Myer (1899) 104 Fed Rep 82.
Chaplin v Boys [1969] 2 All ER 1085, [1969] 3 WLR 322.
De Kuyper (John) & Son v W & G Baird Ltd (1903) 20 RPC 581, 46 Digest (Repl) 158, * 370.
Draper v Trist [1939] 3 All ER 513, 46 Digest (Repl) 307, 2073.
Jameson (John) & Son Ltd v R S Johnston & Co Ltd (1901) 18 RPC 259.
Lever v Goodwin (1887) 36 Ch D 1, [1886–90] All ER Rep 427, 57 LT 583, 46 Digest (Repl) 308, 2078.
Marengo v Daily Sketch and Sunday Graphic Ltd [1948] 1 All ER 406, [1948] LJR 787, 46 Digest (Repl) 305, 2059.
Midland Counties Dairy Ltd v Midland Dairies Ltd (1948) 65 RPC 429, 46 Digest (Repl) 239, 1557.
Orr Ewing & Co v Johnston & Co (1880) 13 Ch D 434, 42 LT 67; affd sub nom Johnston v Orr Ewing (1882) 7 App Cas 129, 51 LJCh 797, 46 LT 216, 46 Digest (Repl) 48, 258.
Rodgers (Joseph) & Sons Ltd v Rottgen (1889) 5 TLR 678, 46 Digest (Repl) 266, 1726.
Singer Manufacturing Co v Loog (1880) 18 Ch D 395; on appeal (1882) 8 App Cas 15, 52 LJCh 481, 49 LT 3, 46 Digest (Repl) 204, 1363.
Vine Products v Mackenzie & Co Ltd [1969] RPC 1.
Walker (Hiram) & Sons v Grubman (1915) 224 Fed Rep 725.
Cases also cited
Ajami v Comptroller of Customs [1954] 1 WLR 1405.
Ballantine (George) & Son Ltd v Ballantyne Stewart & Co Ltd [1959] RPC 273.
Barber v Manico (1893) 10 RPC 93.
Boord & Son v Bagots, Hutton & Co Ltd [1916] 2 AC 382.
Bradford Corpn v Pickles [1895] AC 587, [1895–99] All ER Rep 984.
Donckt v Thellusson (1849) 8 CB 812.
Ferguson v Wilson (1866) 2 Ch App 77.
Harter v Souvazoglu [1875] WN 11.
Page 108 of [1970] 2 All ER 106
Kat v Diment [1950] 2 All ER 657, [1951] 1 KB 34.
Kerfoot v R A Cooper Ltd (1908) 25 RPC 508.
Lazard Brothers & Co v Midland Bank Ltd [1933] AC 289.
Leeds Industrial Co-operative Society Ltd v Slack [1924] AC 851, [1924] All ER Rep 259.
Perlak Petroleum Maalschappij v Deen [1924] 1 KB 111.
Reddaway & Co Ltd v Banham & Co Ltd [1896] AC 199, [1895–99] All ER Rep 133.
Spalding Brothers v A W Gamage Ltd (1915) 84 LJCh 449, [1914–15] All ER Rep 147.
Spicer Brothers Ltd v Spalding & Hodge Ltd (1915) 32 RPC 52.
Whitstable Oyster Fishery Co v Hayling Fisheries Ltd (1901) 18 RPC 434.
Wilkinson v Griffith (1891) 8 RPC 370.
Wright, Layman & Ummey Ltd v Wright (1949) 66 PRC 149.
Action
This was an action by (1) John Walker & Sons Ltd, (2) White Horse Distillers Ltd, (3) James Buchanan & Co Ltd, (4) John Haig & Co Ltd, (5) John Dewar & Sons Ltd, (6) Arthur Bell & Sons Ltd, (7) Hill Thomson & Co Ltd, (8) MacDonald & Muir Ltd, (9) James Martin & Co Ltd and (10) William Sanderson & Son Ltd against (1) Henry Ost & Co Ltd and (2) Vinalco SA Productora Ecuatoriana de Licores. The facts are set out in the judgment.
J A Brightman QC, J Burrell and D J Nicholls for the plaintiffs.
Leonard Lewis QC for the first defendant.
The second defendant did not appear and was not represented.
Cur adv vult
25 March 1970. The following judgment was delivered.
FOSTER J read the following judgment. This is a passing-off action in which the plaintiffs claim that two torts have been committed: first, the sale by the first defendant to the second defendant of instruments of deception in England to enable the second defendant to pass off in Ecuador liquor as Scotch whisky which is in fact a mixture of single malt whisky and local cane spirit; and secondly, the passing-off by the first defendant in collaboration with the second defendant of a mixture of malt whisky and local cane spirit as Scotch whisky in Ecuador. Before I consider the first tort, there are certain facts which are not in dispute or were admitted.
First, the plaintiffs. There are ten different plaintiff companies, six of which are subsidiaries of the Distillers Co Ltd, all blenders and exporters of Scotch whisky under well-known brand names. It was agreed before me that the first plaintiff blends and exports ‘Johnnie Walker Black Label’, ‘Johnnie Walker Red Label’ and ‘Swing’; the second plaintiff ‘White Horse’; the third plaintiff ‘Black and White’ and ‘Buchanans’; the fourth plaintiff ‘Haig’, ‘Haig’s Dimple’ and ‘Haig’s Pinch’; the fifth plaintiff ‘Ancestor’ and ‘White Label’; the sixth plaintiff ‘Bells’; the seventh plaintiff ‘Queen Anne’ and ‘Something Special’; the eighth plaintiff ‘Highland Queen’; the ninth plaintiff ‘Martins’; and the tenth plaintiff ‘Vat 69’ and ‘Vat 69 Gold’. It was further agreed that of the ten plaintiffs, eight have registered offices in Scotland and two in London. Of the eight who have registered offices in Scotland, five have branch offices in London. All are members of the Scotch Whicky Association, a company limited by guarantee and registered in Edinburgh, to which I will later refer in more detail.
Secondly, Scotch Whisky. There are two basic types of Scotch whisky: Scotch malt whisky which is made from malted barley only, and Scotch grain whisky which is made from malted barley together with unmalted barley and maize in varying proportions. There are two different processes, the pot-still process which produces malt whisky and the patent or Coffey still process which produces grain whisky. There are in Scotland between 115 and 120 distilleries producing either a malt whisky or a grain whisky. I had detailed evidence before me of the process whereby the malt whisky and the grain whisky are actually produced, but I do not think that
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I need deal in detail with the method of production. It is sufficient to say that all Scotch whisky is produced from barley or other grain.
Thirdly, blending. 99 per cent of the whisky sold to the public is blended whisky, ie a number of malt whiskies are blended with a number of grain whiskies to produce the whisky sold to the public under brand names, and the number of whiskies so blended to produce one brand can be as high as 40 to 50. The formula for each brand is secret and the blender, who selects by nose and not by taste, is a very highly skilled individual and usually a director of the blender’s company. There are about 150 blenders in Scotland and about 24 blenders in England. About six companies have blending establishments adjacent to their distilleries. The evidence before me was that there were no blenders outside Scotland and England. Of the 1 per cent of whiskies sold which are not blended, there is one unblended or single grain whisky called ‘Cameron Brig’ sold almost entirely in the Kingdom of Fife and some 30 unblended or single malt whiskies, but their total sales are no more than 1 per cent and none are exported under any brand names. The blenders blend, market and sell under some 200 brand names, of which only 30 or 40 have a wide circulation.
Fourthly, definition of Scotch whisky. The first definition of Scotch whisky is to be found in the report of the royal commission on whisky and other potable spirits in 1909 ((1909) Cd 4796). It was defined by statute in the Finance Act 1933, s 24, and in the Customs and Excise Act 1952, s 243(1)(b), which provides:
‘spirits described as Scotch whisky shall not be deemed to correspond to that description unless they have been obtained by distillation in Scotland from a mash of cereal grain saccharified by the diastase of malt and have been matured in warehouse in cask for a period of at least three years.’
The latest and rather more elaborate definition is to be found in the Finance Act 1969, Sch 7, para (1)(a).
Fifthly, the Scotch Whisky Association. The association was incorporated in Scotland on 22 April 1960 as a company limited by guarantee with the main object of protecting and promoting the interests of the Scotch whisky trade generally both at home and abroad. It took over the former unincorporated association which had existed since 1947, with a similar object. It has some 160 companies as members. Because of the 1939–45 war whisky, which cannot be sold until it is at least three years old, was until 1959 in very short supply, but in 1959 the amount of whisky available became surplus to immediate requirements. It was therefore in 1959 that what is called ‘the admixture trade’ began. This is the export of single malt whiskies (because single malt whiskies have a stronger flavour and taste than grain whiskies) to foreign countries where it is mixed with local spirits and sold as a drink. This occurs in several foreign countries, particularly in Japan and South America. It started in Ecuador by the purchase in Ecuador of single malt whisky and mixing it with local spirit distilled from sugar cane. On 13 December 1962, the association sent a letter to all its members in which it wrote:
‘Should a member feel that it is in his interest to ship Malt Whisky which he knows is intended for admixture, the Council recommend that he should only do so after satisfying himself:—a) that the admixed product will not be labelled or advertised in such a way as to claim or suggest that it is Scotch Whisky. b) that if a label or advertisement contains a statement that the product contains Scotch Whisky it should also state either the percentage of Scotch Whisky or the fact that the product contains other spirits in addition. c) that the member’s name and address should not appear on labels or advertisements in such prominence as to suggest that the member is the producer when he is, in fact, the supplier of only one of the ingredients.’
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It was an attempt to stop the sale abroad as Scotch whisky of the admixture of single malt Scotch whisky with local spirit under the description Scotch whisky. In fact, in 1965 the association set up a labelling panel consisting of a chairman, a Scottish Queen’s Counsel (the present chairman is Professor T B Smith QC, the Dean of the Faculty of Law at Edinburgh University) and three assessors who are members of the council of the association. The function of this panel is to examine labels submitted to it and adjudicate on whether they are misleading or not. The three assessors make recommendations to the chairman, whose decision is final.
The defendants. First, the first defendant is a limited company incorporated on 12 January 1948 having its registered office at 351 Oxford Street, London W1, with the object of carrying on the business of manufacturers of wines, liqueurs, spirits, etc It has an authorised share capital of £5,000 divided into 5,000 shares of £1, of which 2,000 have been issued and 1,999 are held by Mr Jindrich Ost and one by Mrs Edith Ost, his wife, and they are the only directors. Mr Jindrich Ost it the managing director and Mrs Edith Ost is also the secretary. On 3 July 1951, the first defendant registered under the Registration of Business Names Act 1916, the name ‘Glenvale Distillery’, the nature of the business being stated as whisky merchants and exporters, and having its principal place of business also at 351 Oxford Street, W1. On 25 June 1952, the first defendant registered in England as a trade mark under the Trade Marks Act 1938, in respect of Scotch whisky, the mark ‘Scottish Archer’. Another company, called Asra Wine and Produce Ltd, in which Mr Jindrich Ost is also largely interested, was incorporated on 26 February 1946 and that company on 15 January 1947 registered in England, as a trade mark in respect of Scotch whisky, the mark ‘White Abbey’. On 23 November 1959, Mr Jindrich Ost signed a power of attorney for and on behalf of the first defendant appointing as its attorney with power of substitution, and I quote:
‘VINALCO, Manager ENRIQUE WAPPENSTEIN, of 135 Calle Santiago, Quito, Ecuador, to whom it grants special Power of Attorney, to request, on its behalf, the Government of Ecuador to register in the name of the undersigned Company the Trade Mark “WHITE ABBEY” WHISKYand to authorise the use of the Trade Mark in the Branch at Quito, Ecuador.’
Mr Ost apparently failed to remember that it was the Asra company which had registered that mark and not the first defendant. On 15 February 1960, another power of attorney was similarly signed by Mr Jindrich Ost, again appointing Vinalco its attorney:
‘to register in the name of the said Glenvale Distillery the Trade Marks “SCOTTISH ARCHER SCOTCH WHISKY” and “GLENVALE FINE OLD LONDON DRY GIN” and to the use of the Trade Marks in the Branch at Quito, Ecuador.’
These are the only documents other than the correspondence which have been disclosed showing any relationship between the first defendant and the second defendant or its predecessors in business.
Secondly, the second defendant. This was incorporated in Ecuador by Mr Enrique Wappenstein in January or February 1963, as a limited company, the principal object being to prepare and bottle all kinds of spirits, vinegar and other allied products. All parties in this action were under the impression that the second defendant was the body which had dealings with the first defendant from the start in 1959, and even in its defence, in para 2, the second defendant admitted selling spirits in Ecuador since 1961, that is two years before its incorporation, and it transpired at a later stage that prior to the second defendant’s incorporation, the business was carried on by Mr Enrique Wappenstein under the firm name of Messrs Vinalco Exportación e Importacion. After some days of the hearing the plaintiffs sought leave to amend
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the pleadings by bringing into the action the acts done by the first defendant prior to the incorporation of the second defendant. I was prepared to give the plaintiffs leave to amend provided that the first defendant should have leave to bring third party proceedings against Mr Enrique Wappenstein or his firm claiming contribution as joint tortfeasors. The plaintiffs were not prepared to accept those terms and I granted them leave to appeal from my decision, time to run coterminously with the time for appealing from the order in this action. The present position of the second defendant is that its defence has been struck out and there is a motion for judgment against it in default, which I have stood over to be heard after the delivery of this judgment. The action has therefore been fought and fought hard by the first defendant only, without the assistance of the second defendant. The only witness called by the first defendant was a Mr Badcock, who appeared on subpoena and is the secretary of Tomatin Distillers Ltd He gave evidence that the second defendant had purchased a quantity of malt whisky from Tomatin Distillers Ltd and in 1967 30 hogsheads had been actually shipped. He, however, in cross-examination said that he had got an undertaking from the second defendant that the single malt shipped would not be admixed with local spirit and sold as Scotch whisky.
Other admitted facts. First, there were a number of facts which were admitted by the first defendant. In particular, the first defendant admitted that each of the plaintiffs had for many years blended and bottled liquor distilled in Scotland from grain and that each of them had exported to Ecuador such liquor under the description of Scotch whisky. It was further admitted that the liquor had been advertised in Ecuador to the extent of an agreed file, which I will deal with later, under the description Scotch whisky, and the export figures were also agreed. It was also agreed that in 1959 there were bottles of liquor being sold in Ecuador with one of two labels ‘Scottish Archer’ and ‘White Abbey.' These labels (which I will call the original labels) can be described as follows: ‘White Abbey.' On the cap of the bottle, which is white, are the words ‘WHITE ABBEY SCOTCH WHISKY.’ The ‘White Abbey’ label has at the top a picture of an abbey and then come the words: ‘WHITE ABBEY registered trade mark Blended very old WHISKY of the finest concentrare SCOTCH malt Henry Ost & Co Ltd Glasgow & London.’ These words are in English and the words ‘Whisky’ and ‘Scotch’ have a tartan device on them and are much bigger than the other words. Underneath there are in Spanish the words ‘prepared in ecuador by henry ost & co ltd glasgow and london branch quito’. The ‘Scottish Archer’ label has the words in English ‘SCOTTISH ARCHER’ at the top, with a tam o’shanter in red and black, and then follow the words: ‘de luxe blended WHISKY of the finest concentrate SCOTCH malt glenvale distillery glasgow & london' Again the words ‘Whisky’ and ‘Scotch’ are much larger and this time coloured red and white. At the bottom of the label are the words in Spanish, which translated are: ‘Prepared in Ecuador by Glenvale Distillery Glasgow Branch Quito.' It was also agreed that a bottle of ‘White Abbey’ and ‘Scottish Archer’ with the original labels were bought in 1964 in Ecuador and that in 1969 five bottles of ‘White Abbey’ were bought in Ecuador, two of these had the original label and three modified by reducing the word ‘Scotch’ in size. In 1969, four bottles of ‘Scottish Archer’ were bought in Ecuador and of these one had the original label, one had the word ‘Scotch’ in smaller lettering, and two had in addition in large letters ‘High Quality’.
The writ was issued on 12 July 1965; the statement of claim delivered on 28 July 1965. The first defendant further admitted that shipments of single malt whisky started in 1959 to Messrs Vinalso Exportación e Importación and after 1963 continued up to December 1969 to the second defendant.
Secondly, it was agreed between the parties that between 1959 and 1965 the first defendant had shipped to Messrs Vinalco Exportación e Importación and after its incorporation to the second defendant the following items: (i) 276,000 odd empty bottles; (ii) 22,000 odd cartons (containing the empty bottles); (iii) 150,000 ‘Scottish Archer’ labels; and (iv) nearly 25,000 proof gallons of single malt whisky. There
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was no admission of the ordering or shipment of ‘White Abbey’ labels. It was further agreed that from June 1966 until December 1969 the first defendant shipped 230 barrels or casks of single malt whisky and that one shipment of 2,030 cartons marked ‘Scottish Archer’, each containing 12 empty bottles, was made on 10 October 1966. Counsel for the first defendant said that no further labels or bottles or cartons were shipped, but this was not agreed by the plaintiffs. The cartons for the ‘White Abbey’ liquor contained the words ‘White Abbey very old Whisky Henry Ost & Co Ltd Glasgow—Scotland Succursal Quito Ecuador’ on the two broader sides and on one other side the words ‘Vinalco Quito via Guayaquil Ecuador’. No carton was produced for ‘Scottish Archer’, but on 31 October 1961 the first defendant ordered from United Glass Ltd 500 dozen bottles, packed in cartons, with the words on either side ‘Scottish Archer Scotch Whisky, shipped by Glenvale Distillery, Glasgow, Scotland’, and these were to be shipped to Mr Wappenstein’s firm. It was further agreed that total shipments of Scotch whisky to Ecuador from 1959 to 1965 was 1 1/2 million bottles and that the plaintiffs exported 760,000 bottles during that period, so that their percentage was about 50 per cent of the total trade in Scotch whisky exports to Ecuador.
Thirdly, when no evidence was called on behalf of the first defendant (except Mr Badcock, to whom I have already referred), counsel for the first defendant was forced to admit that I must proceed on the footing that the first defendant had never had an address in Glasgow, that Glenvale Distillery never existed as a distillery but was simply a business name at the registered office of the first defendant at 351 Oxford Street, London W1, and that the first defendant had never had a branch in Quito and had never prepared anything there. Insofar as the labels state this, they are untrue. The evidence was that the first defendant purchased single malt whiskies from various distilleries in Scotland and resold and shipped them to the second defendant in Ecuador. There was evidence that the first defendant was really a whisky broker and there was nothing to suggest that the first defendant ever saw, touched or blended the whisky bought and resold by it to the second defendant.
Fourthly, it was further agreed that on 1 June 1962, an undertaking was given by Mr Enrique Wappenstein and by Mr Jindrich Ost and Mrs Edith Ost on behalf of the first defendant to the Scotch Whisky Association that, in consideration of the association withdrawing its opposition to an application to register in Peru ‘Glenvale’ and ‘Scottish Archer’ as trade marks, they undertook, and I quote:
‘a) That we will limit the specifications of goods for both Applications so as to read “Alcoholic and non-alcoholic drinks wholly produced in Scotland“. [and] b) That we will not now or at any time in the future use the Trade Marks GLENVALE or SCOTTISH ARCHER upon any beverages whether alcoholic or not which are not wholly produced in Scotland.’
The first tort alleged by the plaintiffs. There are five questions of fact for decision. First, is a spirit which is distilled exclusively in Scotland sold in Ecuador under the geographical description ‘Scotch whisky’? To put the question in the way it was put to me by counsel for the first defendant, the plaintiffs have failed to prove that the description ‘Scotch whisky’ means anything in Ecuador. For instance, it might never have been heard of in central China. For the plaintiffs, there was the unchallenged evidence of Senor Borjas, a distinguished Ecuadorian citizen, that he had been drinking Scotch whisky for 40 years and that he often asked at a bar in Ecuador for a ‘Scotch’. There was further evidence, which was accepted by the first defendant, that in Ecuador, which has a population of some 5 1/2 million persons, the plaintiffs spent nearly £30,000 in advertising between 1959 and 1970. It was further accepted that the plaintiffs used more than 17 brand names on Scotch whisky sold in Ecuador and that some 32 brand names in all were on sale there. Further, there was unchallenged evidence before me that in September 1969, two witnesses were able to
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purchase Scotch whisky in almost every establishment which was visited, including supermarkets, high-class restaurants, cafes and even stalls at a market. In my judgment, the plaintiffs have proved conclusively that Scotch whisky has been well known in Ecuador for many years and means a blend of Scotch whiskies, since no single malt or single grain whisky has ever been sold there.
The second question is: has the expression ‘Scotch whisky’, or its translation into Spanish of ‘whisky Escoces’, been so debased as to include an admixture of Scotch malt whisky mixed with locally distilled cane spirit? It is true, as counsel for the first defendant point out, that there are a number of admixtures now being sold in Ecuador. But the evidence showed that the first admixture was ‘White Abbey’ in 1959, followed later by ‘Scottish Archer’. And, of the admixtures, only four were proved to be sold as Scotch whisky, the others being sold as whisky and truthfully stating they were an admixture of Scottish malt whisky and local spirit. The local sellers of whisky in Quito, which is the capital of Ecuador, when asked, almost always knew the difference between Scotch whisky and the admixture which they often called national whisky. A typical example of the type of deception practised in Ecuador was the label on a bottle of a whisky called on the front ‘King Henry VIII Whisky’, but this label can readily be removed and underneath there is a completely different label calling it Scotch whisky. I find as a fact that the description ‘Scotch whisky’ had not become so debased between 1959 and 1965 that the description had no reputation left in Ecuador. I have no doubt that an Ecuadorian of whatever repute knows today that ‘whisky Escoces’ means a blend of whiskies distilled in Scotland.
I can take the third and fourth questions of fact together. The first is this: did Mr Jindrich Ost know that the liquor sold by the second defendant was an admixture, and second, or the fourth question: if so, did he appreciate there would be a deception in Ecuador? The best evidence of Mr Jindrich Ost’s knowledge and appreciation is his own evidence, but he has not gone into the witness box and no explanation has been proffered by his counsel for his failure to give evidence. I was invited to be bold in such circumstances in coming to the conclusion that he knew and appreciated every step; but, in my judgment, the conclusion does not have to be a bold one from the facts proved before me.
In the first place, single malt whisky has never yet been exported for sale, but only for admixing, and Mr Jindrich Ost must have known this. Mr Jindrich Ost could not have thought blending of single malt and single grain Scotch whiskies was taking place in Ecuador. The evidence was that the first defendant was a whisky broker originally and it was not until 1959 that the admixture trade started and started in Ecuador with the first defendant’s names. It is clear from the correspondence that Mr Enrique Wappenstein had visited Mr Jindrich Ost in London before 1961 and that Mr Jindrich Ost visited Mr Enrique Wappenstein at some time before September 1963. They had both given the undertaking on 1 June 1962 to the Scotch Whisky Association in regard to Peru, which I have already mentioned. This undertaking and the delivery of the statement of claim on 28 July 1965 did not prevent the shipments of single malt whisky by Mr Jindrich Ost to Mr Enrique Wappenstein being continued. And there are very many expressions in the correspondence disclosed, such as (and I quote various expressions): ‘the production of the whisky here’, ‘I can’t make anything’, ‘raw material’, ‘the finished product’, ‘produce a blend’, ‘trial mixtures’, ‘mix better merchandise’, ‘much more suitable for your purposes’, which lead inevitably to the conclusion that Mr Jindrich Ost knew that the liquor was being sold by Mr Enrique Wappenstein or his company in Ecuador under the labels ‘White Abbey’ and ‘Scottish Archer’ after admixing with the local cane spirit, and all the acts of Mr Jindrich Ost show conclusively that he appreciated the deception which might and would occur in Ecuador. I find in fact in a letter, dated 5 September 1963, from Mr Jindrich Ost to Mr Enrique Wappenstein that Mr Jindrich Ost asked if he could have shares in the various firms then being set up in South American countries.
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The fifth question is: are the labels in fact likely to deceive a purchaser in Ecuador? The first defendant submitted that the admixture could be clearly detected for three reasons: (i) it had ‘Elaborado en el Ecuador’ printed on all labels; (ii) there is a considerable price differential between the true Scotch whisky and the admixture; (iii) there is a difference between the two in regard to revenue stamps on the imported and the national products. All these reasons were proved wrong by the evidence of Mr Stanley Holt, a director of Stanley Holt & Son Ltd and of a subsidiary, Ian Scott & Sons Ltd His evidence was that his company shipped in bulk to Ecuador a blended whisky (blended of malt and grain whiskies) of the highest quality. In Ecuador, distilled water was added to bring it down to the requisite proof and it was bottled and sold as ‘Scott’s Special Scotch Whisky’. It bore the words ‘Elaborado en el Ecuador’, it was very much cheaper because the duty was lower when the whisky was shipped in bulk, and it had the same revenue stamp as the other admixtures, namely, a green stamp over the stopper with the words ‘Tipo Whisky’ or type of whisky.
Mr Stanley Holt, when asked in cross-examination whether he had any real means of knowing whether his agents in Ecuador were misconducting themselves and putting national alcohol into his whisky, said that while he could never be certain, his agents in Ecuador had been visited twice in the last 3 1/2years, once by himself and once by his export manager, and that he himself had tested about six bottles of ‘Scott’s Special Scotch Whisky’ brought at different places in Ecuador. When asked why so much of the label was in English and not Spanish, he said that there is a lot of advantage in a thing like Scotch whisky, which has a prestige value, to have as much as possible of inference from the country of origin. But, apart from his evidence, I have no doubt that the labels were in fact liable to deceive, by merely looking at them, particularly when it is borne in mind that the one to be deceived is an Ecuadorian knowing no English and to whom ‘Scotch whisky’ in Spanish is ‘whisky Escoces’. It must, however, also be borne in mind that the words ‘Elaborado en el Ecuador’ can hardly be seen, that I saw photographs of ‘Scottish Archer’ and ‘White Abbey’ being sold in shops and stalls in Quito, Ecuador, amid well-known brand names of Scotch whisky. In a case such as this, it is not necessary to prove actual deception, but two cases were proved before me. Dr Salazar in his evidence said:
‘When this White Abbey, Scotch, had only just come on the market, I bought some bottles. I thought it was genuine Scotch whisky produced in Ecuador, because I was easily led by the wording on the label, and here there is no mention of the use of Ecuadorian alcohol.’
At a grocery and liquor shop known as the Bodega, in Quito, Mr Kirke on 2 September 1969 was offered ‘Vat 69’ and ‘Black and White’, which he said was too dear, so he was offered ‘White Abbey’ and ‘McKenzie’. He bought a bottle of ‘White Abbey’ for 75 sucres and was given a receipt with the words in Spanish which translated are ‘One bottle whisky Scotch—White Abbey’ on it written by the seller in Spanish.
In regard to the price differential, the evidence was that the price of well-known genuine brands bought in Quito in September 1969 varied in price between 120 and 265 sucres; that of local or national whiskies (the admixtures) sold between 63 and 80 sucres. But ‘Scott’s Special Scotch Whisky’ sold at between 90 and 95 sucres, and one bottle was bought in September 1969 for 89 sucres. In addition, a number of well-known brands of Scotch whisky found their way on to the market without paying duty and their price was as low as 65 sucres.
In regard to stamps, apart from the confusion with ‘Scott’s Special Scotch Whisky’, the evidence before me showed that of 20 bottles (two purchased in 1964 and 18 in 1969) in Quito, of the Scotch whiskies four had red stamps, one had a green stamp and four had no stamps. Of the admixtures, three had red stamps, three had green
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stamps, two had brown stamps, two maroon stamps, and one had no stamp, and no evidence by the first defendant was produced as to what the correct stamp was at any given time. In fact some stamps were put on the back of the bottles so that it could not be seen from a bar or supermarket without turning the bottle round. I have no hesitation in coming to the conclusion that the labels were not only liable to deceive, but in fact have actually deceived and that Mr Jindrich Ost intended that the whisky, the bottles, labels and cartons should be used in the manner in which in fact they were used and that he was actuated by the dishonest motive of causing a part of the reputation of Scotch whisky, part of which is enjoyed by the plaintiffs, to be filched. It is true that the plaintiffs’ claim did not impute any dishonesty by the first defendant, but I follow the judgment of Harman J in Midland Counties Dairy Ltd v Midland Dairies Ltd ((1948) 65 RPC 429 at 434–435) when he said:
‘This is a case in which no fraud is alleged in the pleadings and in which the chief witness for the Plaintiffs disclaimed any intention of imputing dishonesty to Mr. Ambrose, and it was pressed upon me that in those circumstances I must exclude all such considerations from my mind. In my opinion the Court is not bound by the form of the pleadings, or by disclaimer on the Plaintiffs’ behalf, to shut its eyes to a case of fraud if convinced that one exists. Fraud of course is not a necessary ingredient of the tort of passing-off, but it is an important factor, for if the Court come to the conclusion that the Defendant was actuated in adopting the style complained of by the dishonest motive of filching some part of the Plaintiffs’ reputation, then the Court will not be astute to find that this nefarious design has failed.’
The plaintiffs in this case made no such disclaimer. It is true that the plaintiffs have attempted to prove that the first defendant did actually supply ‘White Abbey’ labels to the second defendant, and I was asked to infer from the facts that in fact it did so. I find that in Harpers Export Magazine, dated June 1968, the first defendant has an advertisement showing a ‘White Abbey’ bottle with the words ‘SCOTCH WHISKY’ on it and it appears to have the same Spanish words at the bottom as on the other labels used in Ecuador. And there was some evidence that the ‘White Abbey’ labels were at first printed in France, but on whose instructions I know not, and that the first defendant sought an order from the second defendant for ‘White Abbey’ labels for miniature bottles. However, I do not think on the facts that I can say that the supply of labels of ‘White Abbey’ by the first defendant to the second defendant had been proved, but the first defendant must inevitably have authorised the second defendant to use those labels, or at least stood by while they were used in Ecuador until at least September 1969, and I cannot think that the wrong is any the less if the labels with the first defendant’s English trade mark and business name thereon, and which in many respects are admittedly false, are printed and supplied to the second defendant by someone other than the first defendant, when, as I have held, the first defendant knew and intended that there should be a deception.
An honest trader such an Ian Scott & Sons Ltd or even the first defendant’s own witness from Tomatin Distillers Ltd takes precautions to see that the admixtures are not sold as Scotch whiskies. There is no evidence that Mr Jindrich Ost took any such precautions. On the contrary, he took active steps to start the sale of admixtures as Scotch whiskies in Ecuador and, even if Mr Enrique Wappenstein had merely added distilled water to the single malt whisky and affixed the label, it might have been true to say it was Scotch whisky but it would not have been true to say—(i) it was blended malt whisky; (ii) it was blended by the first defendant or by the nonexistent Glenvale Distillery; (iii) that the first defendant had a place of business in Glasgow; or (iv) that the first defendant prepared anything in Ecuador or had a branch there.
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I turn to the plaintiffs’ submissions of law. These submissions may be summarised as follows: (1) to maintain an action for passing-off, the particular plaintiffs need not be the only persons with the right to the trade description. (2) The geographical expression ‘Scotch whisky’ constitutes a trade description because the geographical expression is sufficiently precise and it includes the origin of the goods. (3) The first defendant commits the tort of passing-off when it supplies to the second defendant the means whereby the second defendant can pass off under a false trade description as the plaintiffs’ goods products which are not the plaintiffs’ goods. (4) The plaintiffs are entitled to an injunction to restrain the supply of goods in England calculated to lead to a passing-off abroad under a false trade description as the plaintiffs’ goods products which are not the plaintiffs’ goods, and the foreign law is irrelevant. (5) In the case of the sale of instruments of deception to a middleman, the tort of passing-off is complete when the instruments of deception are sold to the middleman and not when the deception occurs in the market; and (6) it is tortious to supply any article or product for the purpose of furthering a deception.
For the first two submissions, the plaintiffs relied on J Bollinger v Costa Brava Wine Co Ltd (the champagne case), and Vine Products v Mackenzie & Co Ltd (the sherry case). For the third submission, the plaintiffs relied on Singer Manufacturing Co v Loog, and, for the fourth, on seven cases, but principally on Orr Ewing & Co v Johnston & Co in the Court of Appeal and in the House of Lords and on Joseph Rodgers & Sons Ltd v Rottgen. For the fifth submission, the plaintiffs relied on Lever v Goodwin. Particularly on Draper v Trist, and, for their last submission, on the Rodger’s case, the Singer case, two Irish case, John Jameson & Son Ltd v R S Johnston & Co Ltd and John De Kuyper v W & G Baird Ltd and one American case, Hiram Walker & Sons v Grubman.
The first defendant’s submissions were these: (1) Bollinger’s case was wrongly decided and I should not follow it. It opens far too wide a field of action and proceeds on the footing that where there ought to be a remedy, therefore there is a remedy. In that case virtually all the champagne producers were the plaintiffs. (2) If Bollinger’s case is rightly decided, the facts of this case do not bring the plaintiffs within the principle of that case. In both Bollinger’s case and the Vine Products case it was the producers of the commodity who were seeking to uphold the description and in a particular area. In this case it is not the distillers who bring the action but the blenders, and they may be anywhere. There is no suggestion that the blenders must come from Scotland and in fact the evidence was that there are some in England. (3) The first defendant has not committed a tort actionable in England. The first defendant has never represented anything in the United Kingdom. The first defendant has supplied to the second defendant whisky, 50,000 ‘Scottish Archer’ labels and cartons for both ‘Scottish Archer’ and ‘White Abbey’, but the wrong depends on how these are used at a later date in Ecuador. They could be used quite legitimately there, as in the case of ‘Scott’s Special Scotch Whisky’. (4) In all the English and Irish cases relied on by the plaintiffs, the goods themselves were wrongly marked. It is true that Walker v Grubman, the American case, might cover the present case, but that is not an authority in an English court and the English law does not know of the principle of unfair competition; and, lastly, there can be no claim for damages
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except where fraud is pleaded and proved, and reliance was placed on Draper v Trist and Marengo v Daily Sketch and Sunday Graphic Ltd.
Conclusions. In regard to Bollinger’s case, the case was followed and approved by Cross J in the Vine Products case. He said ([1969] RPC at 23):
‘If I may say so without impertinence I agree entirely with the decision in [Bollinger’s] case—but as I see it it uncovered a piece of common law or equity which had till then escaped notice—for in such a case there is not, in any ordinary sense, any representation that the goods of the defendant are the goods of the plaintiffs and evidence that no-one had been confused or deceived in that way is quite beside the mark. In truth the decision went beyond the well-trodden paths of passing off into the unmapped area of “unfair trading” or “unlawful competition“.’
If I also may say so without impertinence, I agree with the decisions both of Bollinger’s case and the Vine Products case, and I propose to follow them. In my judgment, the plaintiffs do fall within the principle enunciated in Bollinger’s case and I reject the argument that the blenders are not the producers of Scotch whisky. The evidence was that 99 per cent of Scotch whisky was blended and marketed by the blenders under their brand names. Blending is a highly skilled process essential to the whisky industry, and the sales of single whiskies are minimal. It is to be noticed that in the Vine Products case nearly all the sherry was imported in bulk into England and bottled in England, and no distinction was drawn between shippers and producers, and sherry itself is a wine which has been blended; and in the American case of California Fruit Canners’ Association v Myer mentioned in the judgment of Danckwerts J in Bollinger’s case ([1959] 3 All ER at 810, [1960] Ch at 282), it was the canning companies which successfully sued and not the growers of the fruit. Nor do I think the present case falls outside the principle in Bollinger’s case because blenders of Scotch whisky may be found in England. Blenders who only blend whiskies distilled in Scotland with other whiskies distilled in Scotland are entitled to use the description ‘Scotch whisky’ wherever the actual blending takes place. In my judgment, therefore, the plaintiffs are correct in their first two submissions.
On the third and fourth submissions of the plaintiffs, the plaintiffs relied on the Singer case, in which James LJ said ((1880) 18 Ch D at 412):
‘I have often endeavoured to express what I am going to express now (and probably I have said it in the same words, because it is very difficult to find other words in which to express it)—that is, that no man is entitled to represent his goods as being the goods of another man; and no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false representation himself to a purchaser who purchases from him, he enables such purchaser to tell a lie or to make a false representation to somebody else who is the ultimate customer.’
And Cotton LJ said ((1880) 18 Ch D at 422):
‘… but it was urged… that it might be used as an instrument of deception by the purchasers from the Defendant when they were selling again. In my opinion, if a man does that, the natural consequence of which (although it does not deceive the person with whom he deals, and is therefore no misrepresentation to him) is to enable that other person to deceive and pass off his goods as somebody else’s, for that he is answerable. But this is confined to those things which
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in their necessary or natural uses accompany the things sold. For instance, the corks of champagne bottles marked ”Moet and Chandon” must be in the bottles sold, and must accompany the bottles. They must necessarily accompany the thing to the retail buyer, and so must labels to be put on the bottles. The very reason for their existence is that they must be put on the bottles, and, if they are deceptive and fraudulent, then the person who prepares them is answerable for it. Such things must not be used if their natural and legitimate consequence is, not to deceive the person to whom they are sold, but to enable the seller to pass off the goods as being the goods of other persons.’
In the Orr Ewing case ((1880) 13 Ch D at 453, 454), which was a trade mark case, in the Court of Appeal, James LJ said:
‘Now, what could have been the only motive which can be suggested to a man of the world by a man of the world of the Defendants in doing that, but to do something which was likely to be mistaken for the Plaintiffs’ goods, which would be accepted by the customers of the man who had been in the habit of selling them as being a continuation of the same goods which he had been in the habit of supplying to them? It is not necessary for this case to decide that a man actually intended to tell a lie, or that a lie has been told. It is sufficient in the language of Lord Kingsdown, that a man should wilfully use a part of the trade-mark of his neighbour, that part so used being by the user of it calculated to enable his goods to be passed off for the goods of his neighbour. I am of opinion, independently of the mass of evidence which has been given in support of that probability, that it was probable, and probable almost to a certainty, that the new ticket of the Defendants would tend to enable anybody so minded to represent those goods as being goods of the same character, proceeding from the same manufacturers, as the goods which had been formerly accepted with confidence under the mark which was a guarantee of the Plaintiffs’ goods. It was calculated to do so. Beyond that, supposing that by some accident a man had inadvertently used a ticket which was so calculated to deceive the ultimate purchaser, and therefore so calculated to injure the Plaintiffs in their legitimate right of property in a trade-mark, the moment the attention of the Defendants or any persons in their position was called to the fact of the similarity of the two marks and to the complaint of the persons who owned the first mark that it was likely to injure them, it was his duty to immediately discontinue the use of the trade-mark complained of; and, however, honest or inadvertent the original mistake may have been, the continuation of the use of it after that was pointed out is itself sufficient evidence of a fraudulent intention. The fraud would then consist in continuing to do it even if there had been an original inadvertence in the use of it. But I am bound to say in this case, that I am not, on the evidence, satisfied that there was any innocent inadvertence or mistake. I am not satisfied that there was not from the first an original intention to use an imitation of the Plaintiffs’ mark with the intent that that imitation should enable the Defendants’ goods to be passed off as the Plaintiffs’ goods.’
And Baggallay LJ said ((1880) 13 Ch D at 457):
‘There is of course a possibility of the whole transaction having been honest, but the circumstances under which this design was prepared ought to have rendered the parties doubly careful with regard to anything they did in respect of it; and I am bound to say that, in my opinion, the case is one of the very strongest suspicion as regards an intention to imitate and to copy the Plaintiffs’ trade-mark. But it does not appear to me to be necessary for the Plaintiffs to establish that such an intention existed. It might have had an influence as regards
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the costs of the action, if the Defendants had been misled by the Plaintiffs, or if they had acted entirely through inadvertence; but even if they had acted through ignorance or inadvertence, they could not be allowed to continue to use a trade-mark of a character which would be calculated to lead to the deceit which I have already suggested. It does not appear to be necessary to enter into any further comment upon the evidence of this case. I am satisfied on that evidence that the question which I suggested at the outset as the one which we were called upon to answer in this case must be answered in the affirmative. I am satisfied that the mark which the Defendants have used is one calculated to deceive the purchasers of the articles to which it was affixed, or of the articles contained in the bundles to which it was affixed, and that it must have that effect. That being the case, it seems to me impossible to dissent from the view taken by Mr Justice Fry, and I think his judgment must be affirmed.’
And in the House of Lords Lord Selborne LC said ((1882) 7 App Cas at 226):
‘It is true that deception in fact is not in this case proved; but there is a large body of trustworthy evidence to the effect that such deception would be liable, and very likely, to occur, at all events with the more ignorant class of consumers, particularly in the up-country districts; and with this evidence my own judgment concurs. Nor am I able to conceive any satisfactory explanation, under all the circumstances of this case, of the adoption by the defendants of that particular device—two elephants at the upper corners of the ticket with a cloth or banner suspended between them— knowing as they did the plaintiffs’ ticket, knowing also the character and circumstances of the markets, and entering as they did upon this particular branch of trade with the direct object of competing with and underselling the plaintiffs, unless it was because they had a desire and intention to approach to the plaintiffs’ trade-mark as nearly as they possibly could. For such desire and intention no motive can be suggested, except that of getting some part of the benefit of the goodwill and reputation of the plaintiffs’ trade.’
And Lord Watson ((1882) 7 App Cas at 231, 232):
‘Apart from all questions as to the bona fides or mala fides of the appellants, I am disposed to hold that the circumstances to which I have already adverted afford sufficient grounds for an injunction against the appellants. When a prominent and substantial part of a long and well known trade-mark, denoting the manufacture of a particular firm, appears as a prominent and substantial part of the new trade-mark of a rival, it seems reasonable to anticipate that the goods of the latter may be mistaken for, or sold as, the manufacture of the firm to which the older trade-mark belongs. The probability of that result is in this case enhanced by the circumstance that all Turkey red yarns exported from this country are sold in packages which, in size shape and colour, have the closest resemblance to each other. The reproduction of a prominent part of another merchant’s trade-mark upon a new ticket does not per se establish that the latter was prepared by its owner with a view to deceive, by himself selling, or by enabling others to sell, his goods as the manufacture of that other merchant. But no man, however honest his personal intentions, has a right to adopt and use so much of his rival’s established trade-mark as will enable any dishonest trader, into whose hands his own goods may come, to sell them as the goods of his rival.’
There is much force in the defendants’ submission that in all the cases relied on by the plaintiffs the wrongful mark was attached to the article sold, while in this
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case the wrongdoing occurs when the second defendant admixes the single malt with the local cane sprit in Ecuador. But in the present case, as I have said, even if the second defendant had merely added water to the malt whisky and then bottled it, as in the case of ‘Scott’s Special Scotch Whisky’, several inaccuracies would remain. To take the ‘White Abbey’ label, it would not have been blended malt whisky, the first defendant has no place of business in Glasgow or a branch in Quito, and it is not prepared by the first defendant in Quito. To take the ‘Scottish Archer’ label, again it is not blended malt, nor does the Glenvale Distillery exist at all, let alone have a place of business or a branch in Quito where the whisky is prepared.
I would be slow to decide that if a trader in England sells goods and labels which are true and has no knowledge of any improper use of those goods in a foreign country such trader has committed a tort in England. But when I have already held as a fact that Mr Jindrich Ost, the proprietor of the first defendant, not only knew that the second defendant was going to add cane spirit and sell it as Scotch whisky but intended that the whisky which was supplied should be admixed, bottled and have the labels put on the bottle describing it as Scotch whisky, then in my judgment the first defendant’s acts in selling those instruments amount to tortious acts done in England.
I turn to the second tort alleged by the plaintiffs. The plaintiffs’ submissions are that there has been a passing-off by the first defendant in collaboration with the second defendant of an admixture of Scotch whisky and local cane spirit as Scotch whisky in Ecuador and that such passing-off can be the subject-matter of an action in England if it is actionable in England and not justifiable by the laws of Ecuador. The rule is stated in Dicey and Morris, on the Conflict of Lawsb in these terms:
‘Rule 158. An act done in a foreign country is a tort and actionable as such in England, only if it is both (1) actionable as a tort, according to English law, or in other words, is an act which, if done in England, would be a tort; and (2) not justifiable, according to the law of the foreign country where it was done.’
The words ‘not justifiable’ in that rule have recently been considered by the House of Lords in Chaplin v Boys and their Lordships took somewhat different views on whether these words should remain in the rule. Lord Donovan and Lord Pearson accepted the rule as stated in Dicey. Lord Guest thought that the rule should be amended so as to substitute ‘not actionable’ for ‘nor justifiable’, and Lord Hodson and Lord Wilberforce thought that the test should be double actionability with some degree of flexibility to admit or exclude claims on the ground of public policy. Putting the rule at its worst against themselves, the plaintiffs must show that the tort is actionable both in England and in Ecuador. Whether the tort is actionable in Ecuador under the law of Ecuador is a question of fact in this court and accordingly I heard evidence of that law from Dr Salazar who was called by the plaintiffs, and Dr Valls who was called by the first defendant.
First defendant’s submissions. On behalf of the first defendant it was submitted that the first defendant had itself done nothing in Ecuador and that the second defendant was not and was not sued as being agents of the first defendant in the doing of acts in Ecuador, that the proper forum in which to bring this action is Ecuador and not in England, and that the plaintiffs, being mostly Scottish companies, some not even having a place of business in England were ‘forum-shopping’. In any event, it was said that the labels had been approved by the Directorate of State Monopolies in Ecuador and that therefore there could be no infringement either of the First Edition of the Latin American Food Code or of the Trade Mark Law in Ecuador, and in general the matter was not actionable in Ecuador.
Ecuadorian law. Dr Salazar is a Doctor of Jurisprudence of Quito University and is in practice as a lawyer in Quito. Dr Valls is a member of the Spanish and
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English Bars and a Doctor of Laws in Madrid. He has been giving evidence in these courts for over 30 years on problems of Spanish and Spanish-American law and has made a study of Ecuadorian law. Technically, as he is not a member of the legal profession there and therefore not entitled to practise, he is not so highly qualified as Dr Salazar, though his views are entitled to the greatest weight. Having said that, I was not surprised to find that these two experts were not very far apart in the evidence which they gave before me, except on one point.
Trade Mark Law. Dr Salazar’s evidence was that in Ecuador a person who uses a mark containing a false indication in respect of the origin of an article which he prepares is liable in civil proceedings (or quasi-delict, as he called it) to the other person in damages if he sues. He referred me to art 38, of the Trade Mark Law and art 2331 of the Civil Code. Article 38 provides:
‘A fine of from 500 to 1000 sucres and six months to one year imprisonment shall be imposed on the person: 6. Those who in their articles which they prepare or in the merchandise with which they engage in commerce use Marks containing false indications in respect of the nature, amount, quality, origin and source in respect of the same, or falsely warrant that they have received prizes in respect of certificates, medals, diplomas or other distinctions in exhibitions or in any other way. This same provisions shall be applied to persons who use trade marks with the denomination of “registered” without their being so.’
And art 2331 of the Civil Code is in these terms:
‘The person who has committed a delict or quasi-delict which has caused damage to another is bound to compensate therefor; without prejudice to the penalty which the law may impose for the delict or for the quasi-delict in question.'
I was also referred to arts 2332 and 2333 of the Civil Code. Dr Valls said in examination in chief:
‘If circumstances arise which are similar to those contained in art 38(6) and, as I said before, providing that one could establish a wrong and the direct consequences of that wrong in terms of damages, the plaintiff could of course bring proceedings under the Civil Code, para 2331.’
It is fair to say that Dr Valls thought that the proof of damages would be difficult, if not impossible.
Latin American Food Code. Dr Salazar further told me that where a person designates his products with a geographical description which does not correspond to the region of preparation causing damage to another, he also would be civilly liable to that other in damages. He referred me to arts 78 and 503, para 7, of the First Edition of the Latin American Food Code which was incorporated into the law of Ecuador by Decree No 462 dated 4 November 1963 and also referred me to art 2331, which I have already mentioned. Article 78 is in these terms:
‘In general, geographical descriptions from a country, region or town, cannot be used for the designation of products prepared in other places, when these may induce deception. The following are excepted: foreign geographical descriptions which, by usage, have become generic for specific products and which, for this reason, do not constitute descriptions of origin. Such are: French Bread, Parmesan Cheese, French Vermouth, Roquefort Cheese, Indian Sauce, British Sauce, Portuguese Sauce and others which may be approved. It is prohibited to designate products (wine, cheeses and others) with geographical descriptions which do not correspond to the region or place of preparation.’
And art 503, para 7, provides:
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‘Whisky Escoces (Scotch Whisky), Whisky Irlande (Irish Whisky), Whisky Canadienne (Canadian Whisky) describe exclusively whisky produced in Scotland, Ireland and Canada respectively.’
Dr Valls in his evidence said:
‘If the implication or reaction which I got from the label was that it was a product manufactured in a particular place whereas in fact it was not manufactured in a particular place, then it would induce deception, but if on that label there is clearly visible an indication of the region or place of preparation then there would not be.’
It is fair to say that he thought that the words on the labels ‘Elaborado en el Ecuador’ were sufficient to prevent deception, but he did not disagree with the proposition that if there was deception a civil action would lie. Dr Salazar told me that the damages which could be obtained would include both loss of profits and debasement of goodwill, and after prolonged cross-examination Dr Valls agreed, though he thought it would again be very difficult, if not impossible, to prove that such damages followed directly from the wrong. Dr Valls in his evidence-in-chief said that a person would not be able to claim if he was only one of a class entitled to the geographical description. This point (the point in Bollinger’s case) had never been put to Dr Salazar, but again after considerable cross-examination Dr Valls admitted that an action would lie in such circumstances if damage directly flowing from the wrong could be proved by the particular plaintiff.
Authorisation by Directorate of Monopolies. A document was produced dated 2 October 1964 from the head of the Department of Control, Alcohol Section, to the General Director of Monopolies (of which the section formed part) which states:
‘Mr Enrique Wappenstein, Managing Director of the liquor manufacturing company VINALCO, established in the City of Quito, has registrations of the trade marks SCOTTISH ARCHER, SCOTCH WHISKY and WHITE ABBEY BLENDED SCOTCH WHISKY in order to use them for the liquors identified as whisky which have been analysed and approved by this Directorate. These trade marks are registered under No. 075 of the 6th January, 1961, and No. 6359, of the 18th November, 1959, respectively.’
A letter dated 13 September 1965 was also produced by the first defendant from the manager of the Alcohol section of the Directorate of Monopolies to Mr Enrique Wappenstein in these terms:
‘1. The Company of Vinalco Productora Ecuatoriana de Licores Sociedad Limitada is, by means of a contract signed with this office’s general management, authorized to manufacture the whiskeys “White Abbey” and “Scottish Archer” as concessionary of Henry Ost & Co., Ltd., 351 Oxford Street, London, W.1. (Glenvale Distillery London & Glasgow Ltd.), having fulfilled all legal requirements. 2. You may manufacture the whiskey “White Abbey” in conformity with our official communication No 6325–4 of 17th November, 1959, and the whiskey “Scottish Archer” in conformity with our official communication No. 3248–4 of 22nd June 1960. 3. The labels, used by Vinalco, are the same as were approved with official decree No 6353–4 of 18th November 1959, decree 3248–4 of 22nd June, 1960, and No 075/4 of 6th January 1961.’
A point was taken by the plaintiffs that the first defendant had not strictly proved that the labels in use when the second defendant was incorporated are in fact the labels approved by the official decrees. I would not want to decide this case on so narrow a point as that and it is fair to say that the bottles do carry a number of
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figures and letters at the bottom which may be the official reference of the directorate’s approval of the labels.
The question which arises here is whether the approval of the labels given by the Directorate of State Monopolies would be a bar to any proceedings in Ecuador. On this question there was a direct conflict of evidence between Dr Salazar and Dr Valls. Dr Salazar said that such approval was merely permission to distribute the alcoholic products as potable and did not authorise or legalise what would otherwise be an infringement of the Trade Mark Law or of the First Edition of the Latin American Food Code. Dr Valls said that the approval for the use of the label was sanctifying a right and the competent authority had examined that right of property and determined that it may be used. On this point I prefer the evidence of Dr Salazar, since it is confirmed by an interdepartmental memorandum dated 16 October 1962 from the Director General of State Monopolies to the Minister of the Treasury, at a time when Dr Garcia was attempting to stop the sale, through administrative means, of admixtures. Paragraph 7 states:
‘The claim presented by Dr. Cesar Palacio Garcia, in the name of The Scotch Whisky Association, is not worthy of the cognizance of the Minister of the Treasury or of this office, nevertheless the petitioner can resort, in defence of the interests he represents, to the Ministry of Economy Trade Marks Section, or exercise the civil or penal actions he may deem advisable.’
This confirms the view of Dr Salazar that civil action is open. In my judgment, it has been satisfactorily proved as a fact before me that the acts complained of by the plaintiffs are actionable in Ecuador.
On the submission of the first defendant that the plaintiffs are ‘forum-shopping’, all the acts complained of have originated from the acts of the first defendant in England, which include the shipment of materials to Ecuador and causing them to be landed there. I can see no reason why an English court is not the proper forum for this matter to be litigated, particularly when there was evidence that the first defendant was attempting to start similar activities in other Latin American States. In my judgment, the plaintiffs also succeed on the second tort.
Order accordingly.
Solicitors: Ince & Co (for the plaintiffs); Bennett, Kaufman & Seigal (for the first defendant).
Jacqueline Metcalfe Barrister.
Woodhouse AC Israel Cocoa Ltd SA and another v Nigerian Produce Marketing Co Ltd
[1970] 2 All ER 124
Categories: CONTRACT: SALE OF GOODS
Court: QUEEN’S BENCH DIVISION
Lord(s): ROSKILL J
Hearing Date(s): 9, 10, 11 FEBRUARY 1970
Estoppel – Estoppel in pais – Estoppel by conduct – Contract for sale of goods – Price expressed in £ Nigerian – Representation that £ sterling acceptable to vendors – Whether £ sterling to be unit of account or of payment – True construction of representation not decisive – Question of fact – Reasonable but incorrect interpretation by representee sufficient to support estoppel.
Before the devaluation of sterling in November 1967, the buyers, members of the Cocoa Association of London, and the Sellers, the Nigerian Produce Marketing Co Ltd, contracted for the sale and purchase of Nigerian cocoa. The sellers’ form of contract provided for payment at a stated rate per cwt in £ Nigerian ‘payment to be made by cash in Lagos for 100 per cent of the invoice amount against presentation and in exchange for shipping documents’. Owing to possible devaluation of sterling, the secretary of Cocoa Association of London wrote to the sellers and invited them to consider reverting to their former practice of selling their produce for payment in sterling. The sellers replied to the Cocoa Association of London on 28 July 1967: ‘Payment Terms … We have given very serious consideration to your request to pay for Marketing Board produce in £ sterling. This matter has been thoroughly considered and it has been decided that for transactions concluded from 1 September 1967 payment may be made in £ sterling in London or in £ Nigerian in Lagos. It has further been decided that for payments in respects of transactions already concluded in £ Nigerian payment may be made in £ sterling provided the transfer charges are borne by the buyer concerned … ’ On 29 August, the sellers withdrew the arrangement offered on 28 July, whereupon the secretary of the Cocoa Association of London wrote again to the sellers asking if the sellers could arrange to accept payment against documents in sterling in Lagos as a temporary measure. The sellers replied on 30 September: ‘I write to confirm that payment can be made in sterling and in Lagos … If you are agreeable to those conditions you are at liberty to make payment in sterling not only with contracts already entered into but also with future contracts.' After devaluation, the buyers insisted that they were entitled to pay in sterling in Lagos on the basis of £1 sterling for £1 Nigerian, while the sellers maintained that the agreement set out in the letter of 30 September related only to the currency of payment and that enough sterling must therefore be provided to pay the full contract value in £ Nigerian. After disagreement between the two arbitrators appointed, an umpire found in favour of the buyers but stated a special case for the opinion of the court.
Held – The sellers were estopped from insisting on performance of the contract by payment in Lagos in £ Nigerian or their sterling equivalent in value, because—
(i) the fact that the relevant letters did not on their true construction have the effect of substituting the £ sterling for the £ Nigerian as the currency of the contract, was not decisive, as the question to be decided was not what construction the letters truly bore on their face but how those letters, which were plainly intended to be acted on, would be reasonably interpreted by those to whom they were addressed, always provided that that interpretation was not so widely extravagant or unreasonable as to be wholly unacceptable as a possible construction of the documents (see
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p 141 j to p 142 a, post); dicta of Bowen LJ in Low v Bouverie [1891–94] All ER Rep at 355 and of McNair J in Marquess of Bute v Barclays Bank Ltd [1954] 3 All ER at 369 applied;
(ii) there was no justification for reversing the conclusion which the umpire had reached on the questions of fact which were matters for him to decide, namely, that the documents were regarded in the trade and by the buyers as representing that the sellers were prepared to accept payment as if the currency of the contract were £ sterling and not £ Nigerian (see p 142 g and p 143 h, post).
Notes
For estoppel in pais, see 15 Halsbury’s Laws (3rd Edn) 169, 170, para 338, and for cases on the subject, see 21 Digest (Repl) 366–368, 1090–1092.
Cases referred to in judgment
Birmingham and District Land Co v London and North Western Ry Co (1888) 40 Ch D 268, [1886–90] All ER Rep 620, 60 LT 527, 31 Digest (Repl) 565, 6856.
Bloomenthal v Ford [1897] AC 156, 66 LJCh 253, 76 LT 205, 21 Digest (Repl) 370, 1111.
Bute (Marquess) v Barclays Bank Ltd [1954] 3 All ER 365, [1955] 1 QB 202, [1954] 3 WLR 741, 21 Digest (Repl) 444, 1498.
Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd [1947] AC 46, [1947] LJR 385, 21 Digest (Repl) 399, 1256.
Carr v London and North Western Ry Co (1875) LR 10 CP 307, [1874–80] All ER Rep 418, 44 LJCP 109, 31 LT 785, 39 JP 279, 21 Digest (Repl) 367, 1091.
Central Newbury Car Auctions Ltd v Unity Finance Ltd [1956] 3 All ER 905, [1957] 1 QB 371, [1956] 3 WLR 1068, 21 Digest (Repl) 484, 1713.
Combe v Combe [1951] 1 All ER 767, [1951] 2 KB 215, Digest (Cont Vol A) 280, 1366a.
Freeman v Cooke (1848) 2 Exch 654, [1843–60] All ER Rep 185, 18 LJEx 114, 12 LTOS 66, 21 Digest (Repl) 366, 1090.
Goodwin v Robarts (1876) 1 App Cas 476, [1874–80] All ER Rep 628, 45 LJQB 748, 35 LT 179, 6 Digest (Repl) 423, 2978.
Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641.
Hughes v Metropolitan Ry Co (1877) 2 App Cas 439, [1874–80] All ER Rep 187, 46 LJQB 583, 36 LT 932, 42 JP 421, 21 Digest (Repl) 392, 1221.
Low v Bouverie [1891] 3 Ch 82, [1891–94] All ER Rep 348, 60 LJCh 594, 65 LT 533, 21 Digest (Repl) 198, 5.
Panchaud Freres S A v Etablissements General Grain Co [1969] 2 Lloyd’s Rep 109; rvsd CA (6 November 1969) unreported.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1954] 2 All ER 28, [1954] 1 WLR 862; rvsd HL [1955] 2 All ER 657, [1955], 1 WLR 761, Digest (Cont Vol A) 1250, 1872b.
Whitechurch (George) Ltd v Cavanagh [1902] AC 117, 71 LJKB 400, 85 LT 349, 21 Digest (Repl) 377, 1138.
Special case
This was a case stated by the umpire, R E R Dowling Esq, who was appointed following the disagreement of the arbitrators appointed pursuant to the agreements between the buyers, Woodhouse AC Israel Coca Ltd SA and AC Israel Cocoa Inc, and the sellers, Nigerian Produce Marketing Co Ltd, whereby any dispute thereunder was to be settled by arbitration as provided for by the rules, regulations and byelaws of the Cocoa Association of London. In his award, the umpire found the following facts:
1. The sellers had sold cocoa to members of the Cocoa Association of London (CAL) for a considerable number of years. Before about October 1963 contracts were entered into on CAL Form A14. All were for a price expressed in sterling. From about October 1963, at the request of the sellers, contracts entered into on the form
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were for a price expressed in Nigerian currency. The contracts entered into between the buyers and the sellers which were the subject of this dispute were all for a price expressed in Nigerian currency. The practice of contracting in Nigerian currency contrasted with the practice which prevailed in dealings between Ghana and members of CAL where the contracts were for a price expressed in sterling.
2. Woodhouse Drake and Carey Ltd (‘Woodhouse’) acted as agents for the buyers both in entering into contracts on their behalf and making payments under such contracts. The existence and scope of this agency was known to the sellers.
3. It was the general policy of Woodhouse as agents for the buyers to cover forward outstanding exchange transactions in respect of currencies other than sterling.
4. There was in practice no available forward market in Nigerian currency. On the other hand, there was at no time any difficulty in obtaining spot Nigerian currency to pay accounts on due date. In paying such accounts, the buyers paid the transfer charges necessary to procure payment in Nigerian currency in Lagos. These charges were a charge of 1/8 per cent for exchanging sterling into Nigerian currency, a charge for transferring funds of 1/16 per cent with a maximum of £3 2s 6d and a small cable charge. The sellers were fully aware of these facts.
5. In the summer of 1966 the parties commenced the correspondence which had given rise to this dispute.
6. In their letter of 16 August 1966 CAL made clear to the sellers that they were concerned about their inability to cover forward in respect of contracts expressed in terms of Nigerian currency. Thereby CAL made clear to the sellers that they were concerned with securing the expression of the price in contracts in terms of sterling so as to obviate the need to cover forward and that they were not concerned with the money of payment. The sellers were, therefore, aware that CAL were seeking a return to the practice whereby the price of contracts was expressed in sterling. By their letter of 3 August 1967 to Woodhouse, of which advance notice had been given to CAL and by CAL to Woodhouse in the letters of 28 July 1967 and 2 August 1967 respectively, the sellers offered to accept payment as if the price under the contracts had been expressed in sterling; this offer was made in relation both to concluded contracts and to future contracts. By their letter of 29 August 1967 the sellers withdrew their offer in relation to contracts to be entered into after 1 September. By their letter of 29 August 1967 Woodhouse had, however, on behalf of the buyers accepted the sellers’ offer. This acceptance operated in relation to the contracts dated 21 June 1967, 22 June 1967, 26 June 1967, 11 August 1967(two contracts), 17 August 1967 and 22 August 1967. Those contracts were thereby varied.
7. CAL made further representations to the sellers after receipt of the letter of 29 August 1967. In the course of correspondence, the sellers represented by their letter of 30 September 1967 that in respect of contracts then open (which included the 14 contracts in dispute) they were prepared to accept payment as if the price in the contracts had been expressed in sterling of the same nominal amount.
8. The contents of the letter of 30 September 1967 were communicated to Woodhouse on behalf of the buyers and the sellers were informed of this fact on 5 October 1967. Thereafter Woodhouse reasonably regarded all open contracts as though the prices were expressed in sterling of the same nominal amount. Mr Coventry Woodhouse gave evidence that, although it was believed probable that in the event of a sterling devaluation there would be an equivalent percentage devaluation of Nigerian currency, he was concerned about the possibility that Nigerian currency might not follow sterling. Therefore he would, prior to the devaluation of sterling in 1967, have made some attempt to hedge the buyers’ contractual commitments or to attempt to obtain insurance cover so as to protect the buyers against their exchange exposure under their contracts with the sellers. The umpire accepted his evidence that because of the representations made by the sellers he did not make any such attempts. Therefore the buyers relied on the representations of the sellers.
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9. The pound sterling was devalued in terms of Nigerian currency on 18 November 1967.
10. After devaluation in all contracts on CAL Form A11 made between the buyers and the sellers the price was denominated in sterling.
11. The due dates for payment against documents for the relevant shipments under all the said contracts fell after 18 November 1967.
12. The sellers insisted on payment of prices as if measured in Nigerian currency of the amounts expressed in the contracts, and threatened to suspend shipments unless they were paid accordingly. The buyers, therefore, under protest and with full reservation of their legal rights, paid the full amounts claimed.
The umpire stated the following question for the opinion of the court: whether on the facts found the buyers were entitled to the relief claimed or any part thereof? The umpire found that they were so entitled and ordered that the sellers pay to Woodhouse AC Israel Cocoa Ltd SA £60,226 15s 1d and to AC Israel Cocoa Inc £105,243 12s 5d.
Michael Kerr QC and T H Bingham for the sellers.
R A MacCrindle QC and Anthony Evans for the buyers.
11 February 1970. The following judgment was delivered.
ROSKILL J. The devaluation of sterling in 1949 left a trail of problems behind it which ultimately had to be solved in these courts. The more recent devaluation of sterling in November 1967 has similarly raised a number of problems. Only recently the Court of Appeal had before it a problem concerning salvage awardsa. Now there comes before this court for determination the problem whether the buyers or sellers under a large number of contracts entered into before the devaluation of sterling in November 1967 for the sale and purchase of Nigerian cocoa, should bear the loss occasioned by devaluation. At the time when each of those contracts was entered into, the pound sterling and the Nigerian pound were of equal value in the foreign exchange market; pound sterling was worth pound Nigerian. But the pound sterling was devalued in November 1967, not only in terms of the United States dollar and other foreign currencies, but also in terms of the Nigerian pound. Accordingly, when in terms of those currencies against which the pound sterling was devalued the pound sterling itself became worth approximately 15 per cent less than had previously been the case, the Nigerian pound became correspondingly about 15 per cent more valuable. The question thus arises, do the buyers have to sell a greater number of pounds sterling in order to provide the number of Nigerian pounds said to be necessary for the purpose of discharging their contractual obligations under the contracts, or, by virtue of arrangements said to have been made, or more accurately, of correspondence exchanged between the parties, are the buyers entitled to say to the sellers ‘notwithstanding devaluation the position is still in effect as if the pound sterling were equal to the Nigerian pound, so that although we, the buyers, will provide the appropriate sum in sterling, nonetheless you, the Nigerian sellers, when you sell those pounds sterling so provided by us will receive a lesser quantity of Nigerian pounds in respect of your cocoa’?
The contracts under which the dispute before the court immediately arises are 14 in number. In addition there are another 75 contracts. It was agreed between the parties on the occasion of the interlocutory hearing before the two trade arbitrators that the disputes arising out of the further 75 contracts would await determination pending the decision in these 14 cases. I was told, though it does not appear on the face of the documents, that the Nigerian sellers wished to refer this dispute direct to this court for decision, but the buyers insisted, as they were entitled to do, on arbitration before the Cocoa Association of London, in accordance with the
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terms of the contracts entered into. Trade arbitrators were accordingly appointed. According to the special case which is now before the court, they disagreed. They appointed R E R Dowling Esq as umpire and he has duly stated this case for decision of the court. Apparently it was at the request of the parties that he stated one question only in order to leave the argument to range as widely as possible (as it undoubtedly has), namely: ‘Whether on the facts found the [buyers] are entitled to the relief claimed or any part thereof.' The umpire decided that the buyers were entitled to the relief claimed, and in respect of one of the buyers he awarded them the sum of £60,226 15s 1d, together with interest, and to the other buyers he awarded no less than £105,243 12s 5d together with interest. The total involved, therefore, in these 14 contracts along is about £165,000, and no doubt the total sum involved overall in this dispute is very much greater.
I should explain that the reason why (and this emerges clearly from the special case) the proceedings took the form of a claim by the buyers against the sellers was that, when the time for payment net cash against documents arrived, which in every case was after devaluation, the sellers insisted on what I will call, to use neutral language at the moment, payment in full. In other words, they insisted before they would hand over the shipping documents to the buyers that they should receive the sums in sterling which would, on the due date for payment, provide that same number of Nigerian pounds as the buyers would have had to have provided on that due date had devaluation not taken place. The buyers, therefore, paid what I will call the full amounts in the first instance, and the form of the arbitration was to recover those payments as moneys paid under duress. The sellers naturally set up the terms of the contract by way of defence, and the substantial reply to that defence was estoppel. It is convenient to mention now that, although counsel for the buyers did not argue before me that the buyers could rely on a contractual variation of the contracts to the same effect as that which they sought to obtain by reliance on estoppel, he nonetheless reserved the right to argue that point hereafter in a higher court if necessary. Indeed, there were a number of points on both sides which were thought not to be open here, but which might be open in a higher court or higher courts and which were reserved accordingly. The buyers before me, and, it would seem, before the umpire, rested their case primarily not on contract but on estoppel.
In order to understand how the dispute arose, it is necessary to go back to before October 1963, when Nigeria became independent and the marketing arrangements out of which the present disputes arise first came into being. As appears in para 1 of the special case, before October 1963 trading in Nigerian cocoa was on a form known as a CAL A14. It might be trading in cocoa for sterling, or it might be trading, so far as facts show, cocoa for United States dollars. In the large bundle of documents which the umpire has conveniently annexed to the special case, there will be found a sample contract dated ‘London February 2nd 1962’, which provides for the sale of about 500 tons of cocoa, cif Philadelphia, at a price of 19 1/8 cents per lb US currency with arbitration ‘… in accordance with the Arbitration rules of the Cocoa Merchants’ Association of America, Inc., New York City’. Similar arrangements were made in relation to payments in London in sterling with arbitration in London according to the rules of the Cocoa Association of London in relation to the pre-October 1963 contracts which were entered into in respect of what I will call London trading at this time. But after October 1963 and as the case puts it, at the request of the sellers, contracts were no longer entered into in that form. On the contrary, they began to be and thereafter were always concluded on CAL Form A11(there is a sample contract dated 15 July 1965 annexed to the case), which provided for payment at a stated rate per cwt in Nigerian pounds, ‘Payment to be made by cash in Lagos for 100 per cent. of the invoice amount against presentation and in exchange for shipping documents … ’ If one looks at that sample contract form dated 15 July 1965, one sees that the only clause (and counsel for the buyers laid some stress on this) in which there is an express reference to the currency is cl 3 which provides
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in terms that the price shall be ‘At 92/6d … NIG. [that means Nigerian] per CWT. shipping weights’. Then cl 4 goes on: ‘Cost, freight and insurance to LIVERPOOL.' It is right, as I think counsel for the sellers said, that as a matter of English law the effect of cl 12 would be to require payment in any event in Nigerian currency in Lagos. But be that as it may, the only express reference to the currency as such is in the price clause of the contract, and that is not without importance hereafter. This practice continued after 1963 through 1964, 1965 and 1966. When one looks at the contracts, one finds that the earliest is dated 5 May 1967, and the last is dated 22 September 1967. Every one of those contracts, I am told, and it is found, was on a contract form illustrated by the sample contract Form A11 and was for a price to be expressed in Nigerian currency. The umpire at the end of para 1 of the special case has contrasted this practice of contracting in Nigerian currency with the practice which prevailed in dealings between members of the Cocoa Association of London and sellers in Ghana where, he says, the contracts so entered into were for a price expressed in sterling.
As the 1960’s progressed, it is plain that traders on the London cocoa market became increasingly concerned about the possibility of devaluation of sterling. In this respect, their troubles and anxieties began nearly 18 months before the event ultimately took place. Where possible the London traders, and particularly the buyers (as merchants to in, I believe, nearly all the commodity markets and have done for many years), sought to hedge their future currency commitments by buying forward if they were able to do so. Naturally, with this fear in mind and with these very heavy commitments for future purchases of Nigerian pounds under this large number of cocoa contracts to which I have already referred, they wished to hedge the devaluation risk if they could. Plainly the easiest way of doing so and, indeed, the time-honoured way of doing so would be to buy, if they could, Nigerian pounds forward just as they would have bought any other non-sterling currency forward, to hedge the risk of a change in the relative values between their own currency, sterling, and what I will call for the moment the currency of the contract, whatever that might be. But at that time (and the reason for it does not matter) it was not possible to buy Nigerian pounds forward. The umpire found at the beginning of para 4 that ‘There was in practice no available forward market in Nigerian currency’. On the other hand, ‘there was at no time’, he found, ‘any difficulty in obtaining spot Nigerian currency to pay accounts upon due date. That, of course, would have suited the sellers admirably, but, for the reasons I have stated, ability to buy spot Nigerian currency as and when the date for payment arose was not sufficient to protect the buyers against the devaluation risk. There is—and the umpire has exhibited it to the special case (although he does not in terms refer to it in the special case)—a long letter from a Mr McLoughlin, who is a director of the Cocoa Association of London, but who is writing on this occasion not for the Cocoa Association of London but, it seems, if one reads the letter, on his own behalf as representing his own company, Overseas Buyers Ltd I need not, I think, read the whole of this letter. Who was right as between him and the sellers about the responsibility for the inability to buy Nigerian pounds forward, is neither here nor there for present purposes. The fact remains that there was no forward market and that is all that matters. But the importance of that letter is that it makes it as plain as plain can be, whatever the precise language of the letter, that what was troubling the writer of the letter, and no doubt others trading in the London market, was the devaluation risk. Mr McLoughlin wrote:
‘I have gone into this very carefully from all angles, and frankly speaking find that should [the sellers] still insist on payment in Nigerian Pounds instead of Sterling even in the event of there being a time lag before Nigeria follows Great Britain should the latter unexpectedly devalue the Pound, then as I see it an impossible situation would arise, because it is quite impossible for us to obtain any cover whatsoever in respect of Nigerian Pounds.’
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The penultimate paragraph of the letter is also not without interest, because Mr McLoughlin referred to what he described as his consumer clients having been prompted to raise this same question by a certain Mr Maja of West African Commodities, Lagos, who apparently in his turn had foreseen the very event which happened 18 months later. It is to be noticed that when the sellers replied to the letter from which I have just quoted in a long letter dated 22 August, Mr Maja’s opinions are somewhat lightly regarded, for the writer states:
‘With regard to the statement credited to a certain Mr. Maja, we are surprised to learn that a reputable firm like the Overseas Buyers Limited should allow itself to be disturbed by such speculative statements which should not be rated any higher than the personal opinions of those making them, probably for their own selfish purposes’,
a passage which perhaps merits the comment that, as before, prophets are not without honour save in their own country.
The correspondence then continued with a letter from the secretary of the Cocoa Association to the secretary of the sellers, dated 16 August. That is just over a month after the letter Mr McLoughlin wrote. The approach to the Nigerian authorities is now opened up on a much wider front. The letter states—and this, I think, I ought to read in full:
‘Members of this Association have expressed concern regarding a difficulty which exists when purchasing Nigerian Cocoa directly from [the sellers] compared with other Origins, notably from Ghana. This is apparently caused by [the sellers] rendering Contracts which stipulate “payment to be made in Nigerian pounds“. Owing to official policy, regulations, etc., also prevailing conditions, it is virtually impossible readily to obtain a cover for Nigerian Pounds in any volume. This is particularly relevant so far as forward requirements are concerned in conjunction with Cocoa Contracts concluded with [the sellers] for shipment some three to six months, and even further, ahead. As you may know, it is illegal for a U.K. member to obtain a cover for these transactions in another currency other than Nigerian pounds. Even if it was possible freely to obtain adequate cover, such operations would obviously involve additional cost which would subsequently be reflected in the price of Cocoa and Other Produce you are marketing. My Board has, therefore, instructed me to ask that [the sellers] consider reverting to [their] erstwhile practice of selling [their] Produce (Cocoa) for payment in Sterling as is the custom of most other Commonwealth and/or Sterling Area Origins. For shipment to North America, your Company may prefer Payment in Dollars. My Board have asked me to express in advance their appreciation for the Marketing Company’s co-operation in this matter, which it is felt would certainly be mutually beneficial and of great assistance to future business in respect of Nigerian Produce.’
Pausing there, two things are plain. The first is that that letter has in mind the devaluation risk, though it does not say so in terms as did Mr McLoughlin’s earlier letter. The second is that the method that is proposed for avoiding the devaluation risk is to return to what I will call the pre-1963 practice of contracting in sterling. Of course, had that practice been adopted, the devaluation risk would instantly have passed from the buyers back to the sellers, that is, of course, on the assumption that any devaluation would be a devaluation favourable to the Nigerian pound and unfavourable to the pound sterling.
On 22 August, Mr Oluyide, who had been the recipient of Mr McLoughlin’s letter, replied to it. He set out at length what he said were the comments of the Central Bank of Nigeria. I need not read that letter. The last paragraph of it refers in terms to devaluation. The Cocoa Association’s letter of 16 August was
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acknowledged. Mr McLoughlin replied to the letter dated 22 August to which I have just referred but not read. He wrote:
‘As I am just about to leave for a holiday, I would like to acknowledge, and also thank you for your letter, and to say that I would like to go into this matter further on my return. At first glance, so far as I could see, your reply does not solve the problem, for as advised, it is not usually possible to readily obtain any large volume of Nigerian pounds for forward delivery against our forward commitments with you, furthermore, if this was always possible, it would cost money, which would add to the cost of Nigerian Produce, and our small working margin would not be able to stand any additional charges than at present allowed for. If I may say so, if payment was made in sterling, as with other countries in the sterling area, such remittances could be automatically converted into Nigerian pounds for use by the [sellers] and/or Nigerian Central Bank, as is being done at present. Arrangements could be made whereby the buyer takes over the usual charge for this, which would then not involve the [sellers] in any additional cost than previous.’
Pausing there for one moment, it is convenient to make the comment that, when reading that letter through, counsel for the sellers said that the only effect of that letter, if adopted, would have been to alter the currency of payment, but it would never have altered the currency of account which would remain under those arrangements the Nigerian pound and not the pound sterling. But counsel for the buyers riposted to that argument that this letter was by no means wholly concerned with currency payments but was part of a correspondence which was dealing with the much wider problem of devaluation. I make this comment at this juncture both on the letters I have already read and on those which I have still to read. It is important in this correspondence not to pick on one phrase or another but to look at the whole tenor of the correspondence and see what it was that the parties were trying to do, what the problem was that they were trying to solve, and how far, if at all, the response to the approaches made was going to provide a satisfactory solution to what was the real problem involved.
There was another request to Mr Oluyide to answer the association’s letter, and the sellers replied:
‘The subject of payment terms is still a matter for consideration by our Board of Directors and we will get in touch with you as soon as a decision is taken.’
I would say in passing that that is the first reference to the phrase ‘payment terms’, a phrase which will be found recurring several times in the subsequent correspondence. There is another follow-up letter dated 21 February 1967.
I turn to what is one of the two most important letters in the whole case (the other I shall refer to shortly). This letter, dated 28 July 1967, has been subjected before me by learned counsel on both sides to microscopic scrutiny. It has been read and reread, and various submissions have been made on its true construction. Let me first of all read it. It is addressed by the sellers to the secretary of the Cocoa Association of London Ltd, and it is what I might call the official answer to the letter of 16 August 1966. It begins:
‘Dear Sir, PAYMENT TERMS [thus one gets the phrase which was used for the first time in the letter from the sellers to which referred a moment ago] We refer to your letters dated 16th August, 1966, 31st October, 1966 and 21st February, 1967 on the above subject. We have given very serious consideration to your request to pay for Marketing Board produce in pounds sterling. This matter has been thoroughly considered and it has been decided
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that for transactions concluded from the 1st of September, 1967, payment may be made in pounds sterling in London or in £N in Lagos. It has been further decided that for payments in respect of transactions already concluded in £N, payment may be made in pound sterling provided the transfer charges are born by the buyer concerned. We trust that you will find the above to be very satisfactory and that the possibility of payment in pound sterling will reduce the cost of buying Nigerian produce by our customers.’
It will be convenient, before I go on, to read the relevant findings on this. I need not, I think, read any more from para 4 or para 5 of the special case. The beginning of para 6 summarises what I have already said. It continues:
‘The [sellers] were therefore aware that the C.A.L. [that is the Cocoa Association, London] were seeking a return to the practice whereby the price of contracts was expressed in sterling. By their letter of the 3rd August 1967 to Woodhouse [I shall come to that later] of which advance notice had been given to the C.A.L. and by the C.A.L. to Woodhouse in the letters of the 28th July 1967 and 2nd August 1967 respectively, the [sellers] offered to accept payment as if the price under the contracts had been expressed in sterling; this offer was made in relation both to concluded contracts and to future contracts.’
I pause there for one moment because the first of counsel for the sellers’ criticisms was that that statement that the letter of 28th July 1967 was an offer to accept payment as if the price under the contracts had been expressed in sterling was an unjustified gloss or, alternatively, an erroneous conclusion in law as the true meaning of that letter when construed in accordance with well-established legal principles. I shall come back to that letter again in a moment. It was acknowledged and circulated to various trading members which would include the agents for the buyers. One then finds later (and these are among the letters referred to in the special case) letters dated 3rd August 1967 and circulated by the sellers over the same signature (that of the managing director) as the signature to the letter of 28 July 1967 which I have already read:
‘For sometime now, we have been giving serious consideration to the request of buyers that they should be allowed to pay for Marketing Board produce in pound sterling. Accordingly, this matter has been thoroughly considered and it has been decided that for transactions concluded from the 1st of September, 1967, payment may be made in pound sterling in London or in £Nigerian in Lagos. It has been further decided that for payments in respect of transactions already concluded in £Nigerian, payment may be made in pound sterling provided the transfer charges are borne by the buyer concerned. We trust that this concession on our part will be found to be very satisfactory to all concerned and that the possibility of payment in pound sterling will reduce the cost of buying Nigerian produce by our customers.’
That is substantially a repetition of the text of the letter of 28 July 1967, but there then follows this sentence which is repeated in the later letter: ‘Will those buyers who wish to make future contracts in pound sterling, please let us know by return of post.' It is not without significance that, although the earlier letter of 28 July 1967 does not, as a matter of language, refer to making future contracts in pounds sterling as opposed to paying under existing or future contracts in pounds sterling, nonetheless, the later letters of 3 August 1967 do in terms refer to the possibility of the buyers to whom the letters were addressed making future contracts in pounds sterling, which was, of course, what had been requested in the original correspondence from the letter of Mr McLoughlin onwards. When that point was put to counsel for the sellers, he replied that those two letters were ill expressed in the last paragraphs.
There were certain letters dealing with what I might call the banking consequences of adopting certain proposals. I need not, I think, spend time on them because, as I read those documents, they are neutral on the crucial point at issue. I go on to
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consider the letter where the arrangements proposed in the letter of 28 July 1967 and referred to again in the later letters of 3 August 1967 were withdrawn. The secretary of the Cocoa Association of London, writing to the sellers, acknowledges the withdrawal of the facility.
I now go back to para 6 of the special case:
‘By their letter of the 29th August, 1967, the [sellers] withdrew their offer in relation to contracts to be entered into after the 1st September. By their letter of the 29th August, 1967, Woodhouse had, however, on behalf of the [buyers] accepted the [sellers’] offer. This acceptance operated in relation to the contracts dated the 21st June 1967, the 22nd June 1967, the 26th June 1967, the 11th August 1967 (two contracts), the 17th August 1967 and the 22nd August 1967. [Those are 7 of the 14 contracts in dispute at present.] The said contracts were thereby varied.’
I have already mentioned the points that were reserved for argument in a higher court. Before me it was not contended by counsel for the buyers that there was any contractual variation of any of the contracts other than those seven because, as he rightly said, there is no finding in the special case that there was any contractual variation of any of the other contracts.
I go now to a letter of 20 September 1967, to which the other crucial letter of 30 September 1967 is an answer. The secretary of the Cocoa Association wrote answering a letter from the sellers, which I have not read:
‘I thank you for your letter of 6th September which, together with previous correspondence, was discussed at a board meeting held yesterday. I am asked to reiterate the view of members that those who exercised the option offered in your letter of 28th July in regard to open contracts are still most disturbed by the cancellation of the facility. It is noted that you state circumstances outside your control caused you to withdraw. I am requested to ask if you can arrange to accept payment against documents in sterling in Lagos as a temporary alternative?’
The reply was as follows:
‘Your letter dated the 20th September, 1967 and addressed to the Managing Director has been passed on to me. I write to confirm that payment can be made in Sterling and in Lagos with the following provisos: (1) That the buyer will be responsible for the transfer charge; (2) that documents be made available in Lagos. If you are agreeable to those conditions, you are at liberty to make payment in sterling not only with contracts already entered into but also with future contracts.’
That letter was acknowledged and circulated. That was the last of the correspondence before devaluation. To complete the correspondence, there was a telex (it may be a cable but it looks like a telex) in which the Cocoa Association of London after devaluation wrote and sent this:
‘Please pass following to Managing Director or Secretary from Cocoa Association of London Ltd Stop The Board of the C.A.L. presumes that you may now wish to revise for new business the arrangements made with our members in your letter 30th Sept … by you to some of our members whereby payment can be made in sterling in Lagos on the basis of one pound sterling for one Nigeria pound provided the buyer pays the transfer charge which arrangements our members will be carrying out for all contracts concluded with N.P.M.C. up to November 1967 please advise … ’
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That drew this reply from the sellers:
‘We acknowledge receipt of your message dated 22nd November 1967, We sympathise with members of your Association and others who have been adversely affected by the British Government decision to devalue the Pound Sterling X We have to advise you however that the assumption of your Board with regards to the insinuation that the basis of payment is one Pound Sterling for one Nigerian Pound is incorrect X We wish to point out that our contracts with Buyers are denominated in Nigerians Pounds and we agreed and still agree that payments can be made in Pound Sterling X You will appreciate however that we are not in a position to renegotiate the contract price and all buyers must be aware that enough Pound Sterling must be provided to pay for the contract value X When contracts are made in Nigerian Pounds payment can be made as we have agreed in our letter to you in sterling in Lagos X Enough sterling must be provided however to pay the full contract value X The procedure indicated in our letter of September 1967 will still continue for the future X.’
That telex or telegram was circulated to members by the association.
Let me now go back to the special case and read paras 7 and 8, for these are the paragraphs which contain the crucial findings on which counsel for the buyers relies and, at any rate, the first two of which counsel for the sellers challenges.
‘7. The C.A.L. made further representations to the [Sellers] after receipt of the letter of the 29th August 1967. In the course of correspondence, the [sellers] represented by the letter of the 30th September 1967 that in respect of contracts then open (which included the 14 contracts in dispute) they were prepared to accept payment as if the price in the contracts had been expressed in sterling of the same nominal amount. 8. The contents of the letter of the 30th September 1967 were communicated to Woodhouse on behalf of the [buyers] and the [sellers] were informed of this fact on the 5th October 1967. Thereafter Woodhouse reasonably regarded all open contracts as though the prices [were] expressed in sterling of the same nominal amount. Mr. Coventry Woodhouse gave evidence that, although it was believed probable that in the event of a sterling devaluation there would be an equivalent percentage devaluation of Nigerian currency, he was concerned about the possibility that Nigerian currency might not follow sterling. Therefore he would, prior to the devaluation of sterling in 1967, have made some attempt to hedge the [buyers’] contractual commitments or to attempt to obtain insurance cover so as to protect the [buyer’s] against their exchange exposure under their contracts with the [sellers]. I accept his evidence that because of the representations made by the [sellers] he did not make any such attempts. Therefore the [buyers] relied upon the representations of the [sellers].’
In the rest of the special case the umpire merely set out the subsequent history and stated the question of law.
There is thus a clear finding of reliance at the end of para 8. Counsel for the sellers, much as I apprehend he would have wished to do so, found himself unable to challenge that finding. There is a finding in the second sentence of para 8 that: ‘… Woodhouse reasonably regarded all open contracts as though the prices [were] expressed in sterling of the same nominal amount.' Counsel for the sellers challenged that finding on the ground that whatever Woodhouse may themselves have thought, it was not a view which any reasonable man could reasonably have held. He argued that that finding was open to review by the court. He also challenged the final sentence of para 7 and the finding in the middle of para 6, both of which I have already read. I can summarise his argument by saying that the only representation sought to
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be relied on and found, was a representation in the letter of 30 August; that representation read alone or read with the antecedent correspondence was a representation in writing; nothing other than this document or these documents were relied on and accordingly the question was one of the construction of the document or documents concerned; that was a matter of law for the court. For the same reason, he also argued that the findings in para 7 and the earlier finding relating to the letter of 16 August in para 6 were also open to review by the court. He subsequently slightly modified that submission in the course of his reply by saying that the true question was whether that representation being in writing was capable of being the representation relied on by the buyers. That question, he said, was a question of law for the court and not a question of fact for the umpire. On the other hand, it was said by counsel for the buyers that these were questions of fact and that the matter was concluded against the sellers by the findings which had been made by the umpire.
These questions are of considerable difficulty and much time has been spent referring to the relevant authorities. One can perhaps approach the matter in this way. There are three positions which, as the law stands today, may arise. At the one extreme there is what I would call the firm contractual position when parties, having made a contract, clearly vary that contract either expressly or by implication and thereafter remain bound by their contract so varied either expressly or by implication. That is not the position which the buyers have taken up here, though they reserve the right to argue this hereafter. At the other extreme one gets the case where two parties are in contractual relationship and something happens as a result of which one party grants to the other party what is really no more than what I would call, and indeed has been called in some of the cases, an indulgence for a single purpose only and of limited duration. Let me take a very simple example; a landlord says to a tenant ‘You may delay payment of rent this week or this month for two or three days but let it be quite clearly understood that this must not occur again and next month I shall expect punctual payment of rent on the due date’. In such a case the tenant is plainly in peril if he does not pay the following month on the due date. I would in this connection respectfully echo the words used by Viscount Simonds in his dissenting speech in the House of Lords in Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd ([1955] 2 All ER 657 at 660, [1955] 1 WLR 761 at 763):
‘On this part of the case I will be as brief as I can, for, having read the opinion of LORD COHEN in which the facts of the case are set out at greater length, I am not prepared to dissent from his conclusion. It would not, however, be right in a case in which I find myself unable to agree with the decision of the Court of Appeal ([1954] 2 All ER 28, [1954] 1 WLR 862) to say nothing on the far-reaching conclusion to which they have come. My Lords, the decision of the Court of Appeal ([1954] 2 All ER 28, [1954] 1 WLR 862) in the first action was based on nothing else than the principle of equity stated in this House in Hughes v. Metropolitan Ry. Co. ((1877) 2 App Cas 439 at 448, [1874–80] All ER Rep 187 at 191) and interpreted by BOWEN, L.J., in Birmingham and District Land Co. v. London and North Western Ry. Co. ((1888) 40 Ch D 268 at 286, [1886–90] All ER Rep 620 at 627) [I shall later quote from that case] … These last words are important, for they emphasise that the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position. I lay stress on this, because I would not have it supposed, particularly in commercial transactions, that mere acts of indulgence are apt to create rights, and I do not wish to lend the authority of this House to the statement of the principle which is to be found in Combe v Combe ([1951] 1 All ER 767 at 770, [1951] 2 KB 215 at 220) and may well be far too widely stated.’
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That then, fortified by Lord Simonds’s warning, is what I call the other extreme position.
In between those two extreme positions is the position which it is now well recognised can arise by reason of the conduct of one party, one to another, in the course of the working out of contractual relations by which they are already bound. The law has, as Lord Simonds pointed out in the passage from which I have quoted, long recognised that the conduct of the parties may lead to a modification of strict contractual rights so that one party who has conducted himself in a particular way cannot thereafter insist on the contract being performed by the other party as if the first mentioned party had never conducted himself in that particular way. That goes back at least 100 years to the decision of the House of Lords in Hughes v Metropolitan Ry Co, but in recent years the doctrine has been greatly developed in a series of cases to which I have been referred in the course of the argument. It is in this connection worth quoting from a passage in which Lord Wright, in delivering the opinion of the Judicial Committee in Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd ([1947] AC 46 at 55), himself quoted from Sir Frederick Pollock. Lord Wright said:
‘That great lawyer Sir Frederick Pollock has described the doctrine of estoppel as “a simple and wholly untechnical conception, perhaps the most powerful and flexible instrument to be found in any system of court jurisprudence“.’
It was said here by counsel for the buyers that, whatever the letters from the sellers of 28 July and 30 September 1967, read alone or in conjunction with the rest of the correspondence, may mean if they are to be construed with the stern unbending eye of a commercial lawyer or an expert in the legal theory of money, that is not the test to apply. These documents were sent to and circulated among gentlemen whose expertise lay not in the niceties of private international law or of the legal theory of money but in the every-day transactions and dealings in cocoa. The question is not how a lawyer would regard this correspondence. The question is how those commercial men, as reasonable men, would regard that correspondence. That primarily, if not entirely, is a question of fact for the trade umpire to whom the parties, in accordance with the terms of their contract (whether willingly or not is neither here nor there), referred their dispute for determination.
It is necessary, in order to resolve this problem to consider the matter in the light of the authorities in some detail for it was said by counsel for the sellers that these documents are incapable of bearing the meaning sought to be placed on them by counsel for the buyers, incapable, that is, as a matter of their true construction and, therefore, as a matter of law. It was said that if they are so incapable, they cannot in law be used to lay the foundations of the estoppel on which the buyers have sought to rely and on which the umpire, subject to the decision of the court, held that they were entitled to rely. It was further submitted that when one looks at these documents, no reasonable man viewing this objectively could possibly have taken the view of these documents which the buyers are found in the special case to have done, even though, as is found and not now disputed, they acted on the view which they are found to have taken. If those arguments are well founded in law, then it would seem that the umpire came to the wrong conclusion in point of law. On the other hand, it is said by counsel for the buyers, ‘No, that is not the test at all. One has a range of possibilities: if in fact no reasonable person could have understood the documents in a particular way, then the plea fails. But if the documents are susceptible on a careful reading of more than one meaning, the crucial fact is that a reasonable man could read it in the way in which he did read it, and read it in that way as appearing to him as a reasonable man to be the only possible way. If in
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those circumstances a reasonable man, circumstanced as was the hypothetical reasonable addressee, could reasonably understand the document or documents in the sense for which he contends and did in fact so understand it and relied on it to his detriment, that is enough to give rise to the estoppel’.
I start with a case not often cited in this connection but more often cited in connection with the development of the law of negotiability, namely, Goodwin v Robarts. The point at issue concerned the nature of certain scrip issued in London by Rothschilds and whether the buyer of that scrip was entitled to have that scrip treated as a negotiable instrument. That does not matter for present purposes. What does matter is a passage in the speech of Lord Cairns LC who said ((1876) 1 App Cas at 490, [1874–80] All ER Rep at 630);
‘The scrip itself would be a representation to any one taking it— a representation which the Appellant must be taken to have made, or to have been a party to—that if the scrip were taken in good faith, and for value, the person taking it would stand to all intents and purposes in the place of the previous holder. Let it be assumed, for the moment, that the instrument was not negotiable, that no right of action was transferred by the delivery; and that no legal claim could be made by the taker in his own name against the foreign Government; still the Appellant is in the position of a person who has made a representation, on the face of his scrip, that it would pass with a good title to any one on his taking it in good faith and for value, and who has put it in the power of his agent to hand over the scrip with this representation to those who are induced to alter their position on the faith of the representation so made.’
Lord Hatherley said ((1876) 1 App Cas at 493, [1874–80] All ER Rep at 632):
‘I agree with my noble and learned friend on the woolsack in thinking that this case might be disposed of upon that ground alone.’
There one has, almost exactly 100 years ago, the House of Lords enunciating, in relation to a document which admittedly they did ultimately hold to be a negotiable instrument, that even if it were not in law a negotiable instrument, nonetheless the circumstances in which it had been put into circulation in the London money market were such that those putting it into circulation were representing that it had all the qualities of a negotiable instrument, looking simply at the face of that document alone.
I pass to the case to which Lord Simonds referred in the passage from which I have already quoted, namely, Birmingham and District Land Co v London and North Western Ry Co. I can go to the judgment of Bowen LJ where he said ((1888) 40 Ch D at 285, 286, [1886–90] All ER Rep at 627):
‘The next point is a simple one, perfectly simple as regards the principle of law and equity to be applied. As Lord Cairns put it in the passage which has been read (and which I read again simply because I desire to add one word of answer to the argument which was addressed to us by [counsel for the defendant] in Hughes v. Metropolitan Ry. Co. ((1877) 2 App Cas at 448, [1874–80] All ER Rep at 191): “If parties who have entered into definite and distinct terms involving certain legal results— certain penalties or legal forfeiture—afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might
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have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties“.’
The next case in chronological order is well known. It underlies much of the modern doctrine of estoppel, Low v Bouverie. It is important, as counsel for the buyers stressed in his argument, to observe, as only emerges from the judgment of Kay LJ ([1891] 3 Ch at 113, 114, [1891–94] All ER Rep at 359), that this case was tried on admissions by both sides. There was, as Kay LJ said:
‘… no statement by the Plaintiff or by his professional advisers, who were the real actors in the negotiations, as to what meaning they attributed to the letters on which they now rely as a misrepresentation; nor is there any statement or admission as to the extent of the reliance which they placed upon the alleged misrepresentation. The Court has to determine what the representation amounted to, and how far it influenced the Plaintiff’s conduct.’
Thus that case was one where, if I may use the phrase, all issues were open, so that the appellate court was not fettered by any finding of fact by the tribunal of fact and was free to draw, as it did draw, its own inferences from the facts admitted by the parties, for the purpose of obtaining a decision from the court. I need not, I think, read the facts. The important passages are those in the judgments of Lindley ([1891] 3 Ch at 103, 104, [1891–94] All ER Rep at 354), Bowen ([1891] 3 Ch at 105, 106, [1891–94] All ER Rep at 355) and Kay ([1891] 3 Ch at 113, 114, [1891–94] All ER Rep at 359) LJJ. Lindley LJ, after disposing of the question of duty, went on ([1891] 3 Ch at 103, 104, [1891–94] All ER Rep at 354):
‘But the difficulty of affording the Plaintiff relief on this ground [ie estoppel] arises from the ambiguity of the Defendant’s letters. They are quite consistent with the view that the incumbrances mentioned by the Defendant were all he knew of or remembered. A statement, however, to that effect would not stop him from showing that there were others which he did not know of or did not remember. But then it is said that he ought to have known of them and remembered them, as notice of them had been given to him; and it is admitted that if he had looked into the deeds and documents relating to the trust, he would have found that there were other incumbrances besides those which he did in fact know of and did accordingly mention. Knowledge and means of knowledge are very different things; and if a person truly says he only knows or remembers so and so, is it right to treat him as saying that he knows more, even if it is his duty to inform himself accurately before he speaks? … But then it is said that the Defendant’s language was such as to be calculated to mislead, and as in fact to mislead, the Plaintiff’s solicitors, who applied to the Defendant for information; and reliance is placed on the judgment of Baron Parke in Freeman v. Cooke, and of [Brett J] in Carr v. London and North Western Ry. Co.. But the answer to this argument is, that the Plaintiff too hastily inferred from the Defendant’s letters that there were no other incumbrances besides those which he mentioned. He never said this in terms; I cannot think he meant to be so understood; and although the Plaintiff’s solicitors may have so understood him, I do not think they had more reason to be satisfied with his last letter than with his first, which they saw was too loosely expressed to justify them in acting upon it.’
It may be convenient to interpose a reference back to a remark of Kay LJ’s in the
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course of the argument where he quoted ([1891] 3 Ch at 93) from that judgment of Parke B in Freeman v Cooke ((1848) 2 Exch at 663, [1843–60] All ER Rep at 189), to which Lindley LJ referred in the passage which I have just read. Parke B said ((1848) 2 Exch at 663, [1843–60] All ER Rep at 189):
‘By the term “wilfully”, however, in that rule, we must understand, if not that the party represents that to be true which he knows to be untrue, at least, that he means his representation to be acted upon, and that it is acted upon accordingly; and if, whatever a man’s real intention may be, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it, and did act upon it as true, the party making the representation would be equally precluded from contesting its truth … ’
That passage is, of course, classic. I can go on next to Bowen LJ’s judgment in Low v Bouverie ([1891] 3 Ch at 106, [1891–94] All ER Rep at 355):
‘Therefore we come to the conclusion in this case, that in order to entitle the Plaintiff to relief, we must find here such an estoppel as would justify a claim for relief based upon the hypothesis that the Defendant is precluded from denying the truth of the fact which he is supposed to have asserted. Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed. Now, after a careful consideration of these letters, I have come to the conclusion that the Defendant did not make any clear statement of the character which the Plaintiff alleges.’
Finally Kay LJ, in a passage which I have not yet read, said ([1891] 3 Ch at 113, [1891–94] All ER Rep at 359):
‘… where no fraud is alleged, it is essential to show that the statement was of such a nature that it would have misled any reasonable man, and that the Plaintiff was in fact misled by it.’
I do not think it necessary to go through all the cases between then and the present time such as, for example, George Whitechurch Ltd v Cavanagh. I can go to more recent cases, particularly a judgment of McNair J in Marquess of Bute v Barclays Bank Ltd. The problem arose there out of the frauds of a man called McGaw who had fraudulently misapplied certain warrants payable to Lord Bute in respect of a sheep subsidy. The question arose first what did the warrant mean on its face; and, secondly, irrespective of what it meant on its face, was there, in the circumstances, an estoppel. McNair J said ([1954] 3 All ER at 369, [1955] 1 QB at 213):
‘On this state of facts, it was argued that an estoppel against the plaintiff was established by the application of the principles (i) that an estoppel by representation may arise from A putting into the possession of B, or allowing B to obtain possession of, a document containing a representation that the payment may be made to B personally; and (ii) that, if the document contains such a representation or is reasonably understood by the person to whom it is presented to contain such a representation, the person to whom it is presented can safely pay B and is under no obligation to make investigation or inquiry to ascertain
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whether this representation is true. Authority for both these principles is, in my judgment, to be found in Goodwin v. Robarts, ((1876) 1 App Cas at 489, [1874–80] All ER Rep at 630. Bloomenthal v. Ford ([1897] AC 156 at 168) and Freeman v. Cooke. The representation, however, must be clear and unequivocal or at least reasonably be understood to be clear and unequivocal.’
Bloomenthal v Ford has been referred to in argument. I need not pause to cite from it. In my judgment, those case support McNair J’s conclusions. McNair J then went on ([1954] 3 All ER at 369, [1955] QB at 213):
‘I have already stated my conclusion that, as a matter of construction, the warrants do not contain a representation that payments may be made to McGaw personally; but, for the purpose of the principles above stated, the crucial question on the facts of this case is whether they could reasonably be understood to contain such a representation.’
McNair J, being the judge of fact as well as in law, concluded that they could not reasonably be taken to contain such representation.
Counsel for the sellers was constrained, I think, to admit that if the full breadth of his argument was right, he must argue that that part of McNair J’s judgment in which he says it ‘must be clear and unequivocal or at least be reasonably understood to be clear and unequivocal’ was wrong. His argument rested on the fact that the representation must, on its true construction, be clear and unequivocal. But that is precisely what McNair J said it need not be, if it was reasonably understood to be clear and unequivocal. Even if, if I may respectfully say so, I were minded to disagree with McNair J’s judgment (which I most certainly am not), I would not do so in this court. That judgment has stood—it is quoted in many textbooks— for 15 years and if it is to be challenged, it should be challenged in a higher court rather than at first instance.
There are two other cases to which I would refer only in passing. The first, to which I have already referred, Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd ([1947] AC at 55, 56), where Lord Wright said:
‘A question now of estoppel must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities. On that basis the language of the bill of lading, read fairly, and as a whole, is not, for reasons which their Lordships have already here given, such as to found an estoppel … It is true that the unqualified statement is only one step in the establishment of the estoppel. Estoppel is a complex legal notion, involving a combination of several essential elements, the statement to be acted on, action on the faith of it, resulting detriment to the actor. Estoppel is often described as a rule of evidence, as, indeed, it may be so described. But the whole concept is more correctly viewed as a substantive rule of law. The purchaser or other transferee must have acted on it to his detriment, as, for instance, he did in this case when he took up the documents and paid for them. It is also true that he cannot be said to rely on the statement if he knew that it was false: he must reasonably believe it to be true and therefore act on it. Estoppel is different from contract both in its nature and consequences. But the relationship between the parties must also be such that the imputed truth of the statement is a necessary step in the constitution of the cause of action. But the whole case of estoppel fails if the statement is not sufficiently clear and unqualified.’
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The second is the judgment of Dixon J in the High Court of Australia in Grundt v Great Boulder Proprietary Gold Mines Ltd ((1937) 59 CLR 641 at 674–677), in a passage in which, if I may respectfully say so, every word is of relevance, but I will not lengthen this judgment by quoting in extenso from it.
I now, in the light of those authorities, return to consider the submissions that were made. Counsel for the sellers’ principal point was founded on a passage in Dicey and Morris on the Conflict of Lawsb. He referred me to rule 152, and in particular to the commentary on that rulec where the learned editors set out the effect of certain of the gold clause cases which have been decided in the last 30 or 40 years in the courts of this country and also refer to Dr Mann’s well-known work on the Legal Aspect of Moneyd. The passage begins (and I will not read it all):
‘Money serves the twofold function of a means of measurement and of a medium of payment. Hence a distinction must be drawn between the currency in which a debt is expressed or a liability to pay damages is calculated and the currency in which such debt or liability is to be discharged.’
Counsel for the sellers said at the outset of his argument that the language used was clear, that there was as a result of the language of the letters an option over the money and place of payment, but there was never any change in regard to what is called in Dicey and Morris ‘the money of account’. Therefore, he said when one construes these documents in this way and as having that effect, they are incapable in point of law of bearing the meaning which is said to have been the meaning which the buyers gave to them and as a result of which the buyers are found to have acted to their detriment.
The first question I have to decide is whether they do bear that construction. The second question is whether, if they do, that is conclusive against the buyers. If one looks at these documents with the same eye as one would have to use if one were construing a gold clause in a bond or, perhaps, a gold clause in a lease or some other document these arguments would have great force. It may well be that if here either party had sought to rely on a contractually enforceable variation of the original terms of the contract, the buyers would have found it difficult to say that these became contracts in which a sterling price had been substituted for the original price payable in Nigerian currency under cl 3. The relevant alterations would, I apprehend, find a more apposite place in the payment clause, cl 12, than in cl 3, the price clause. Therefore, if I had to deal with this as a matter of the construction of the documents, I should (though it is not necessary on the view I take of this case to decide this finally) feel compelled to take the view that these letters do not, on their true construction, have the effect of substituting the pound sterling for the Nigerian pound as what I would call the currency of the contract, so as in effect to cast the devaluation risk on the sellers and not on the buyers. I am conscious that the effect of that conclusion is that at the end of this correspondence the buyers would not have achieved as a matter of contract that which they set out to achieve. But there seems to have been considerable confusion of language and terminology on both sides and if I had to decide this solely as a question of construction of these letters, I would not construe them as altering the currency of the contract from the Nigerian pound to the pound sterling. Counsel for the sellers contended that that was the end of the case because he argued that if the letters were incapable in law of bearing that construction, there could not be any question of a reasonable man reasonably placing a different interpretation on them. I do not think that is the law. The question is not what construction the letter truly bear on their face when interpreted with, perhaps, what a businessman might regard as the over-rigid eye of a lawyer, but how these letters which were plainly intended to be acted on would be reasonably
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interpreted by those to whom they were addressed, always provided that that interpretation was not so wildly extravagant or unreasonable as to be wholly unacceptable as a possible construction of the documents.
It is against that background that the passage in McNair J’s judgment in the Marquess of Bute v Barclays Bank Ltd ([1954] 3 All ER at 369, [1955] 1 QB at 213) becomes relevant for, as he put it, even if the document did not contain itself when properly construed the representation sought to be relied on, it was sufficient if it was ‘… reasonably understood by the person to whom it is presented to contain such a representation … ’ I can find nothing in the authorities relied on which supports counsel for the seller’s submission that the first question which the court has to ask itself (particularly on a special case) is whether a reasonable man could have reached this conclusion. What a reasonable man would do and in fact did do has always been regarded as a question of fact for the tribunal of fact. As I read the findings in the special case here, the umpire said (although perhaps the findings might have been expressed a little more clearly) that whatever the true construction may be of those letters and of the crucial letter, dated 30 September 1967, nonetheless, all those documents were regarded in the trade, and above all, by the buyers as representing that the sellers were in fact prepared to do that which the buyers were asking, namely, to accept payment as if the currency of the contract were the pound sterling and not the Nigerian pound. That, I think, is the true significance of the findings in para 7. This matter, as I said a moment ago, must not be viewed through the eyes of the lawyer. The flexible instrument of estoppel enables over-rigid interpretations of the conduct of the parties in the performance of commercial contracts to be avoided. I think that the umpire was seeking to say here: ‘Whatever a lawyer might say these documents meant when properly construed, having regard to the fact that the buyers were plainly seeking to overcome the devaluation problem, the cocoa trade in London in general and these buyers in particular regarded the crucial letters as granting that for which the buyers had asked, namely, that thereafter the sellers were not going to seek to insist on performance by payment in Lagos in Nigerian pounds or its equivalent in sterling.
Therefore, it seems to me, with great respect to counsel for the sellers’ submissions, that it is not right to approach this problem in the way in which he invited me to approach it. The right approach is to put oneself, as I think the umpire put himself, in the position of a particular addressee and see whether that particular addressee understood the correspondence in that way, always subject to that particular addressee acting reasonably when he did so. I think the findings that the particular addressee concerned did understand the correspondence in this way and that they acted reasonably in doing so means to them this correspondence had one meaning and one meaning only and in that sense was to them clear and unambiguous. As Bowen LJ said in the passage to which I have already referred in Low v Bouverie ([1891] 3 Ch at 106, [1891–94] All ER Rep at 355), the requirement that something should be clear and unambiguous does not mean that it cannot possibly be open to different constructions. The crucial question is whether the particular documents bore a clear and unambiguous meaning to the addressees who received them, and the umpire has answered in effect ‘Yes, it did’.
There is one other matter to which I would refer. The approach which I have sought to adopt to the problem now under consideration is, I think, consistent with the approach which was recently adopted in the Court of Appeal in Panchaud Freres SA v Etablissments General Grain Co, reversing a judgment of mine in that case ([1969] 2 Lloyds Rep 109). The facts can be briefly summarised. The court of appeal of the corn trade took the view that conduct by buyers in relation to the handling of shipping documents in effect precluded them from thereafter rejecting the goods when they found out that those shipping documents contained a false statement. I took the
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view (wrongly in the view of the Court of Appeal) that the findings were not sufficient to justify depriving the buyers of their right to reject. The Court of Appeal treated the finding by the court of appeal of the corn trade as a finding of fact that the conduct of the buyers was such in that case that it would be inequitable to allow them to go back on the implied representation which had been made. Lord Denning MR said:
‘The present case is not a case of “waiver” strictly so called. It is a case of estoppel by conduct. The basis of it is that a man has so conducted himself that it would be unfair or unjust to allow him to depart from a particular state of affairs which another has taken to be settled or correct, see the cases I referred to in Central Newbury Car Auctions Ltd v Unity Finance Ltd ([1956] 3 All ER 905 at 909, 910, [1957] 1 QB 371 at 380).’
He went on to say that awards in special cases should not be, in words which he quoted from an earlier judgment of Diplock J, ‘examined with a toothcomb to make sure that they have used the exactly correct technical legal terms of art’. In his judgment in the same case Winn LJ, after saying this was not a case of waiver, said:
‘In my own judgment it does not seem possible in this case to say affirmatively that there was here either a fresh agreement, to rescind or vary the original contract, or anything which, within the scope of the doctrine as hitherto enunciated, could be described as an estoppel or a quasi estoppel. I respectfully agree with Lord Denning MR that what one has here is something perhaps in our law not yet wholly developed as a separate doctrine—which is more in the nature of a requirement of fair conduct—a criterion of what is fair conduct between the parties. There may be an inchoate doctrine stemming from the manifest convenience of consistency in pragmatic affairs, negativing any liberty to blow hot and cold in commercial conduct.’
Finally Cross LJ said:
‘The whole question is to my mind one of degree and therefore one of fact for the committee. Roskill J made the point that, even if these buyers had noticed the discrepancy between the two dates, there was no reason why they should have accepted the date in the certificate of inspection rather than the date in the bill of lading as being the true date. I see the force of that observation; but the committee may have said to themselves: “There are strong motives for antedating a bill of lading. It is all too common for such documents to be antedated; on the other hand, there is no reason for suspecting the date in the certificate of inspection.” But whatever was in their minds the conclusion seems to me to be eminently a matter for them and one with which the court should not interfere.’
In the present case this matter went to arbitration before an umpire. He has made those findings. I can see nothing in the authorities which have been cited to me which would justify me in reversing the conclusions which he has reached on questions of fact which were matters for him and not for this court. Accordingly, for those reasons which I have endeavoured to give, I uphold the award and answer the question posed in the special case in the same way as the umpire, namely, ‘Yes’.
There is one final matter to which I should allude. The special case is technically defective in that had I acceded to the argument of the sellers, there is no alternative award to uphold and I should have had to send the matter back to the umpire to make an alternative award. Very sensibly, particularly as this matter is unlikely to rest in this court, the parties have agreed to amend the special case by adding an
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alternative award so that if the umpire’s decision and my present decision is thereafter held to be wrong, the matter can be dealt with without the expense and time of going back to the umpire.
For those reasons, the award will be upheld.
Award upheld.
Solicitors: Freshfields (for the sellers); Coward, Chance & Co (for the buyers).
Euan Sutherland Esq Barrister.
Hampshire County Council v Shonleigh Nominees Ltd
[1970] 2 All ER 144
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 18, 19 FEBRUARY, 5 MARCH 1970
Declaration – Jurisdiction – Hypothetical question – Question suitable for being decided as preliminary issue – Saving of costs if question so decided.
Practice – Striking-out – Originating summons – Hypothetical question – Whether summons should be treated as preliminary issue – Whether summons should be struck out as abuse of process.
Practice – Parties – Local authority – Assertion and protection of rights of public – Whether bound to sue on relation of Attorney General – Highways Act 1959, s 116(2), (5).
The plaintiffs, a local authority, sought by way of an originating summons to establish whether, on the construction of s 14a of the Defence Act 1842, a public right of way which they believed had existed over an airfield belonging to the defendants had been extinguished by the conveyance of the airfield by the Air Ministry to the defendants’ predecessors in title. The defendants, who denied that a right of way had ever existed, applied to have the originating summons struck out, on the grounds: (1) that the question raised in it was hypothetical and an abuse of process; or (2) that the proceedings (being proceedings to enforce a public right) were not properly constituted in the absence of the Attorney-General.
Held – (1) Although it was in a sense hypothetical, the question raised in the originating summons was not one where facts and law were so mixed as to render it unsuitable for treatment as a preliminary issue and, if decided before other litigation concerning the alleged right of way was pursued, it would result in a great saving of costs; accordingly the originating summons would not be struck out as an abuse of process (see p 150 f and g, post).
(2) The plaintiffs were not enabled by s 116b of the Highways Act 1959 to sue in their own name without joining the Attorney-General in the absence of any explicit provision in that section giving them power to do so; accordingly, unless the Attorney-General was prepared to give his fiat, the originating summons would have to be struck out (see p 154 c and f, post).
Dictum of Kay LJ in Tottenham Urban District Council v Williamson & Sons Ltd [1896] 2 QB at 354, 355, and Prestatyn Urban District Council v Prestatyn Raceway Ltd [1969] 3 All ER 1573 applied.
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Notes
For striking out or staying proceedings for abuse of process, see 30 Halsbury’s Laws (3rd Edn) 407, paras 766, 767, and for cases on the subject, see 51 Digest (Repl) 998–1003, 5347–5373.
For the Attorney General as a necessary party to a claim, see 30 Halsbury’s Laws (3rd Edn) 310–312, paras 569, 570.
For the Highways Act 1959, s 116, see 15 Halsbury’s Statutes (3rd Edn) 261.
Cases referred to in judgment
Argosam Finance Co Ltd v Oxby [1964] 3 All ER 561, [1965] Ch 390, [1964] 3 WLR 774, Digest (Cont Vol B) 422, 1352c.
Asoka Kumar David v MAMM Abdul Cader [1963] 3 All ER 579; sub nom David v Abdul Cader [1963] 1 WLR 834, 45 Digest (Repl) 212, 169.
Bermondsey Vestry v Brown (1865) LR 1 Eq 204, 13 LT 574, 55 ER 882, 16 Digest (Repl) 544, 3850.
Carl-Zeiss-Stiftung v Herbert Smith & Co (a firm) [1968] 2 All ER 1002, [1969] Ch 93, [1968] 3 WLR 281., Digest Supp.
Everett v Ribbands [1952] 1 All ER 823, [1952] 2 QB 198, 33 Digest (Repl) 400, 135.
F S Securities Ltd (formerly Federated Securities Ltd) v Inland Revenue Comrs [1963] 1 All ER 318, [1963] 1 WLR 173; affd CA [1963] 3 All ER 229, [1963] 1 WLR 1223; rvsd HL sub nom Inland Revenue Comrs v F S Securities Ltd (formerly Federated Securities Ltd) [1964] 2 All ER 691, [1965] AC 631, [1964] 1 WLR 742, Digest (Cont Vol B) 427, 1588a.
Nuneaton Local Board v General Sewage Co (1875) LR 20 Eq 127, 44 LJCh 561, 16 Digest (Repl) 544, 3851.
Prestatyn Urban District Council v Prestatyn Raceway Ltd [1969] 3 All ER 1573, [1970] 1 WLR 33.
Tottenham Urban District Council v Williamson & Sons Ltd [1896] 2 QB 353, 65 LJQB 591, 75 LT 238, 1 Digest (Repl) 10, 85.
Wallasey Local Board v Gracey (1887) 36 Ch D 593, 56 LJCh 739, 57 LT 51, 51 JP 740, 36 Digest (Repl) 311, 581.
Warwickshire County Council v British Railways Board [1969] 3 All ER 631 [1969] 1 WLR 1117.
Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] 1 All ER 277, [1961] Ch 375, [1961] 2 WLR 196, Digest (Cont Vol A) 182, 5325a.
Yeoman Credit Ltd v Latter [1961] 2 All ER 294, [1961] 1 WLR 828, Digest (Cont Vol A 628, 13a.
Cases also cited
A-G and Spalding Rural District Council v Garner [1907] 2 KB 480.
Glasgow Navigation Co v Iron Ore Co [1910] AC 293.
Parkinson (Sir Lindsay) & Co Ltd’s Trust Deed, Re [1965] 1 All ER 609, [1965] 1 WLR 372.
Procedure summons
This was an application by the defendants, Shonleigh Nominees Ltd, by summons dated 24 June 1969, for an order under RSC Ord 18, r 19, or alternatively under the inherent jurisdiction of the court, striking out an originating summons dated 16 April 1969 issued by the plaintiffs, Hampshire County Council. The facts are set out in the judgment.
Jeremiah Harman QC and J Bradburn for the plaintiffs.
Michael Fox QC and Michael Miller for the defendants.
Cur adv vult
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5 March 1970. The following judgments were delivered.
PLOWMAN J read the following judgment. This is an application—
‘… on the part of the defendants for an Order under Order 18 Rule 19 of the Rules of the Supreme Court alternatively under the inherent jurisdiction of the Court striking out the originating Summons herein on the grounds
(a) that it discloses no reasonable cause of action and
(b) that it is otherwise an abuse of the process of the Court.’
Two grounds are put forward as justifying this drastic course: (1) that the question raised by the originating summons is wholly hypothetical; or, if that is wrong, (2) that the proceedings are not properly constituted in the absence of the Attorney General.
The originating summons is headed: ‘In the matter of the Defence Act 1842’, and it asks for—
‘A declaration upon the true construction of the Defence Act 1842 or otherwise that in the events that have happened all or any rights of the public to use as a highway a roadway or track formerly crossing the land of the defendant Company at Thruxton in Hampshire known or formerly known as Thruxton Airfield are still exercisable.’
Thruxton Airfield was built by the Air Ministry during the last war as an operational airfield. In 1958, it was sold by the Air Ministry to predecessors in title of the defendants who themselves acquired it in 1967. The plaintiffs believe, for reasons into which I need not go, that before the war, there was a public right of way across the airfield. But the existence or non-existence of the right of way is not the problem which is raised by the originating summons.
The question which the originating summons is intended to raise is whether, assuming such a right of way to have existed, it was extinguished by virtue of s 14 of the Defence Act 1842, on the conveyance of the airfield by the Secretary of State for Air to the defendants’ predecessors on 2 September 1959. Section 14 of the Defence Act 1842 provides:
‘… Immediately from and after the payment of such purchase money, and the execution of every such conveyance, surrender, and assignment as aforesaid, the purchaser or purchasers therein named, or the person or persons making such exchange as aforesaid, shall be deemed and adjudged to stand seised and possessed of the messuages, buildings, castles, forts, lines, or other fortifications, manors, lands, tenements, and hereditaments, which shall be so purchased or taken in exchange by, and conveyed surrendered assigned, or made over to him, her, or them respectively, and notwithstanding any defect in the title of the said principal officers thereto, freed and absolutely discharged of and from all and all manner of prior estates, leases, rights, titles, interests, charges, incumbrances, claims, and demands whatsoever, which can or may be had, made, or set up in, to, out of, or upon or in respect of the same messuages, buildings, castles, forts, lines, or other fortifications, manors, lands, tenements, and hereditaments, by any person or persons whomsoever on any account whatever (save and except such estates, leases, rights, titles, interests, charges, incumbrances, claims, and demands whatsoever, as in any such conveyance, surrender, deed of exchange, or assignment shall be excepted).’
The question of the true construction of that section is not one which falls to be determined on the present application.
Counsel for the defendants submits that the question raised by the originating summons is hypothetical because the defendants deny the assumption on which the question is based, namely that a public right of way over the airfield did at one time exist. Counsel says that if the defendants are right about that, the question raised
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by the originating summons is purely academic; on the other hand, if the plaintiffs are right about the Defence Act 1842, there will have to be further proceedings to decide whether a right of way ever existed in fact. Counsel submits that, for reasons into which I need not enter, the plaintiff’s have always known that the defendants were taking two points, first that no public right of way ever existed, and secondly, if they were wrong about that, that it was extinguished by the operation of s 14 of the Defence Act 1842. Counsel submits that in these circumstances, the plaintiffs should have started their proceedings by writ, raising both points.
In support of his submissions he cited Argosam Finance Co Ltd v Oxby a case in the Court of Appeal. In that case the plaintiff company applied by originating summons, asking ([1964] 3 All ER at 564, [1965] Ch at 393, 394)—
‘… (a) Whether on the true construction of s 341 of the Income Tax Act, 1952, for the purpose of ascertaining thereunder whether the [plaintiff] company being a person at all material times carrying on the trade of a dealer in stocks and shares has sustained a profit or loss in such trade dividends (other than dividends charged to tax under Sch. C of the said Act) received by it from shares purchased by it in the course of its trade as a dealer and from which tax has been deducted at the source should be included in the calculation? (b) If the answer to (a) be in the affirmative whether if the calculation shows a profit less than the gross amount of the dividends so received the [plaintiff] company being such a dealer is entitled either under the said Act or otherwise to recover from the Commissioners of Inland Revenue the sum representing the tax on the difference between such profit and the gross amount of the dividends since to the extent of such difference the [plaintiff] company being a person carrying on such trade has suffered double taxation once by deduction at source from the dividends so received by it and again by inclusion of such dividends at their gross amount in computing the profits or loss of its said trade? And for a declaration that the answer to (a) is in the negative or alternatively that the answer to (b) is in the affirmative.’
Lord Denning MR said([1964] 3 All ER at 564, [1965] Ch at 422:
‘It is to be noticed that in the summons the [plaintiff] company assumes in its favour that it is “a person at all material times carrying on the trade of a dealer in stocks and shares” and that the shares were purchased “in the course of its trade as a dealer“. That assumption is the essential prerequisite to a claim for repayment, either under s. 341 or in equity. The assumption is disputed by the Crown. They deny that these shares were purchased in the course of trade. They say it was a mere dividend stripping device. In these circumstances the Revenue applied to strike out the proceedings. They said that the proceedings were “frivolous and vexatious”; but the more apposite phrase is that they were “an abuse of the process of the court” under the new R.S.C., Ord. 18, r. 19.”
And then, after dealing with a question of jurisdiction Lord Denning MR went on ([1964] 3 All ER at 565, [1965] Ch at 423):
‘I prefer to put the decision on the simple ground that this summons is an abuse of the process of the court. The [plaintiff] company in October, 1963, sought to ask the court a hypothetical question: If this transaction was a trading transaction, how should the company account for dividends taxed at source? The company knew perfectly well that that very question was being propounded
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in the case of F.S. Securities, Ltd (formerly Federated Securities, Ltd.) v Inland Revenue Comrs., which was under appeal to the House of Lords. The answer could be known authoritatively in five or six months. What possible use was it asking a court of first instance in this summons to answer it beforehand? Apart from the futility of the proceedings, it is quite apparent that, even if the court answered the question, nevertheless there would have to be further proceedings before some tribunal to ascertain the fundamental question: Was this a trading transaction? This summons, if it were entertained, would ensure that there would have to be two sets of proceedings—one to determine how the accounts should be made up— the other to determine the question of trading. Whereas, if the [plaintiff] company applied to the commissioners for relief under s. 341, the whole matter might be disposed of in one proceeding. It seems to me clear that the question of trading should be determined at the outset of any proceedings. It is quite wrong to ask hypothetical questions before that vital question is answered. The court turns its face against answering hypothetical questions unless it will be of real practical use. In this case it would be an abuse for it to entertain this summons. I would therefore strike it out. I would dismiss the application accordingly.’
Harman LJ put it a little differently. He said ([1964] 3 All ER at 565, [1965] Ch at 424):
‘It is strangest summons that I ever saw, and although it is said nowadays it does not matter whether you begin your action by writ or originating summons, you still cannot in my opinion come to the court and say: “I do not know what to do: please tell me which way I should go next.” That is really what this summons does. It seeks to elicit from the court advice on what litigation the [plaintiff] company shall pursue. The company wants the court to give it a bit of good advice and I do not believe that the court exists in order to provide that form of relief for the litigant.’
And, then, Diplock LJ said ([1964] 3 All ER at 566,[1965] Ch at 425):
‘To ask a hypothetical question of that kind is, I think, quite clearly an abuse of the process of the court. I agree that this appeal should be dismissed.’
Counsel for the defendants also suggested that there were serious practical objections to allowing the originating summons to go on before the facts had been ascertained. He cited the warning uttered by Viscount Radcliffe in the Privy Council in Asoka Kumar David v MAMM Abdul Cader ([1963] 3 All ER 579 at 538, [1963] 1 WLR 834 at 840) where Lord Radcliffe said:
‘In their opinion, for the reasons stated above, this action is not one that can justly be disposed of on preliminary issues argued in advance of the hearing of evidence. Useful as the argument of preliminary issues can be when their determination can safely be foreseen as conclusive of the whole action in which they arise, experience shows that very great care is needed in the selection of the proper occasion for allowing such procedure. Otherwise the hoped-for shortening of proceedings and saving of costs may prove in the end to have only the contrary effect to that which is intended. This, unfortunately, is one of such cases.’
Counsel for the defendants submitted that it is undesirable that the courts should try questions of law without knowing the facts on which they turn and cited Lord
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Denning MR’s statement in Carl-Zeiss-Stiftung v Herbert Smith & Co (a firm) ([1968] 2 All ER 1002 at 1004, [1969] Ch 93 at 98) (to which I will refer presently) ‘I always like to know the facts before deciding the law … ’ In particular counsel for the defendants suggested that the answer to the Defence Act 1842 point might depend on the precise nature of any public right proved in evidence.
Counsel for the plaintiffs accepts that the plaintiffs knew that, at any rate at one time, the defendants were taking both the points to which I have referred, but he said, and I accept, that for reasons, into which, again, I need not go, at the time when the originating summons was issued, the plaintiffs thought that the only real issue was that of the effect of the Defence Act 1842. He submitted that this issue could be decided conveniently and cheaply by originating summons and that the decision on the point could well be decisive of the whole matter. If the decision were in favour of the defendants, the question whether or not there had ever been a public right of way would be academic. The latter question would be an expensive and protracted issue to try, involving as it well might, the bringing to London of the bevy of oldest inhabitants which is usual in such cases. He submitted that, in any case, two sets of proceedings would be unnecessary since under RSC Ord 28, r 7, the defendants could, if they wished, raise the question of the existence of a public right of way by counterclaim in the present proceedings. Counsel further submitted that the issue was ‘public right of way or no public right of way’, not whether some other and what public right existed over the airfield, and that in order to decide the question of the construction and effect of s 14 of the Defence Act 1842 it was unnecessary to probe further into the facts.
Counsel for the plaintiffs relied on the decision of the Court of Appeal in Carl-Zeiss-Stiftung v Herbert Smith & Co. The headnote of that case states ([1969] Ch at 94):
‘A plaintiff brought an action against solicitors for an account and payment of all moneys they had received and were to receive from defendants in respect of fees, costs and disbursements in defending a passing-off action still proceeding in which the plaintiff claimed, as the solicitors admittedly knew, that all the assets of the defendants were and always had been the plaintiff’s property; considerable fees, costs and disbursements would be incurred in future in defending the passing-off action preceding and during trial to establish matters in issue between the plaintiff and the defendants. In the action against the solicitors the plaintiff averred matters which were in issue in the passing-off action, and the solicitors moved for an order for the trial as a preliminary issue of the question whether the solicitors would be accountable to the plaintiff, for the moneys admittedly received, if the plaintiff established the matters averred. Pennycuick J. dismissed the motion. On appeal:—Held, allowing the appeal, that since a decision in favour of the solicitors on the issue would dispose of the claim against them irrespective of the passing-off action, the trial of the preliminary issue should be ordered.’
Lord Denning MR said ([1968] 2 All ER at 1003, 1004, [1969] Ch at 98, 99):
‘The defendants now ask that a preliminary issue be tried so as to decide whether they are liable for moneys which they received from their clients honestly on account of their fees and disbursements. They point out that they cannot safely conduct the litigation for the West Germany company with this risk, and, I might almost say, this threat, hanging over their heads. The judge refused to order a preliminary issue. He said that the main action should be
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fought out to its conclusion before the trial judge; and that then this second action against the defendants should be tried before the same judge. I am afraid that I cannot agree with the judge’s decision. The defendants ought to know where they stand. They should be able to conduct the litigation without having a sword suspended over their heads. It is not a hypothetical issue. It is a practical issue of urgency. It is very desirable that it should be decided as soon as possible before many further costs are incurred. I know that it has been said on one or two occasions that a preliminary issue should be ordered only when, whichever way it is decided, it is conclusive of the whole matter. That was said by LORD EVERSHED, M.R., in Windsor Refrigerator Co., Ltd. v. Branch Nominees, Ltd ([1961] Ch 375 at 382); and by HARMAN LJ, in Yeoman Credit, Ltd v Latter ([1961] 2 All ER 294 at 299, [1961] 1 WLR 828 at 835). I do not think that that is correct. The true rule was stated by ROMER, L.J., in Everett v. Ribbands ([1952] 1 All ER 823 at 827, [1952] 2 QB 198 at 206): “Where there is a point of law which, if decided in one way, is going to be decisive of the litigation, advantage ought to be taken of the facilities afforded by the rules of court to have it disposed of at the close of pleadings or very shortly afterwards.” I have always understood such to be the practice. I quite agree that, in many cases, the facts and law are so mixed up that it is very undesirable to have a preliminary issue. I always like to know the facts before deciding the law; but this is an exceptional case. The defendants have received in good faith moneys for the defence of this action. The ought to know at once whether they can safely go on receiving them. If the issue of law is decided in their favour, it will dispose of the claim against them, irrespective of the main action. I would order a preliminary issue to be tried.’
In the end, in my judgment, it comes down to a question of discretion. RSC Ord 18, r 19, opens with the words ‘The Court may … ’ not ‘shall’, and the position is no different under the inherent jurisdiction.
In the present case I do not propose to strike out the originating summons on the first ground submitted by counsel for the defendants, even if it is technically an abuse of process to raise a hypothetical question and I am far from saying that it is necessarily so. I am impressed with the fact that if question 1 of the originating summons is decided one way it is going to be decisive of the dispute between the parties. I take into account the great saving of costs which may result if that question is decided before other litigation is pursued, and I do not consider that the facts and law are so mixed up as to make it undesirable to treat the originating summons as a preliminary issue. In the circumstances, notwithstanding that the question raised is in a sense hypothetical, I do not consider that it would be right to strike out the originating summons on this ground.
I turn now to the other objection taken by counsel for the defendants to the proceedings as at present constituted, namely that the plaintiffs have no locus standi in the absence of the Attorney General. It is well settled that prima facie and in the absence of special damage only the Attorney General can maintain an action to enforce a public right. The question therefore arises whether there is any exception of which the plaintiffs are entitled to avail themselves in the present case.
Two statutory enactments were referred to in argument. The first was s 276 of the Local Government Act 1933 which provides:
‘Where a local authority deem it expedient for the promotion or protection of the interests of the inhabitants of their area, they may prosecute or defend any legal proceedings.’
It is, however, common ground that this does not avail the plaintiffs here because
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in Prestatyn Urban District Council v Prestatyn Raceway Ltd, Goff J held that the section did not enable a local authority to sue in respect of a public nuisance in the absence of the Attorney General. Part of the headnote to that case is as follows ([1970] 1 WLR at 33, 34):
‘The plaintiffs, in proceedings against the defendant company and another, moved the court for interlocutory injunctions restraining the defendants’ activities. They claimed, inter alia, that the racing activities were … (3) a public nuisance in respect of which the plaintiffs had a right to sue otherwise than upon the relation of the Attorney-General by virtue of section 276 of the Local Government Act, 1933:—Held … (3) That although the Local Government Act, 1933, was not merely a consolidating Act but an amending one, the powers under section 276 which were claimed by the plaintiffs went far beyond mere amendment, and had it been the intention that section 276 should alter the law so as to enable a local authority to sue in its own right, thereby removing the discretionary powers of the Attorney-General, this would have been stated in explicit terms: that therefore the plaintiffs’ contention under section 276 also failed and, accordingly, the plaintiffs’ motion must be dismissed … ’
Then, Goff J said ([1969] 3 All ER at 1581–1583, [1970] 1 WLR ar 43–45):
‘That leaves the third way of putting the matter, and here the crux of the question is a pure question of law, whether the plaintiff council can sue in its own right or is bound to sue on the relation of the Attorney-General, for it is can sue in its own right the question of its conduct prior to the action becomes irrelevant because it is not asserting its own position; it is acting as the guardian of the public, and of course the convenience or inconvenience of the persons living in the neighbourhood immediately acquires much greater weight in considering the balance of convenience. Even so, if I thought that the plaintiff council could sue in its own right, I would have thought that it could not be right to order what was being done to be cut off immediately, and the further one goes into the season the less the inconvenience to the public and the greater the strength of the argument on the balance of convenience for the defendants. But I do not think that I need weigh that further because I have come to the conclusion in the state of the authorities, and on the point of law, that the plaintiff council is wrong.
‘The only authority, such as it is, dealing with … s 276, is a passage in the judgment of LORD DENNING, M.R., in Warwickshire County Council v. British Railways Board ([1969] 3 All ER 631 at 634, [1969] 1 WLR 1117 at 1122). Having come to the conclusion: … that an injunction should notc be granted, he said: “There is one further point. It was suggested that the plaintiffs had no right to bring this action; and that the only way in which it could be done would be by an action on the relation of the Attorney-General. Any difficulty on that score has been avoided because we understand that the Attorney General is ready to give his consent to a relator action. I do not think there is any need for it. The plaintiffs were perfectly entitled to take these proceedings on behalf of the inhabitants of their area. Section 276 of the Local Government Act 1933 states that where a local authority deem it expedient for the promotion or protection of the interests of the inhabitants of their area, they may prosecute or defend any legal proceedings. That covers this case.
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I may add that their position in regard to road service licences is expressly recognised in s. 135(2) of the Road Traffic Act 1960 where they are given authority to make representations about road service licences.” It was suggested that this is an authority binding on me because the Court of Appeal must have made that a ground for their decision since they did not require an amendment by the addition of the Attorney-General. But it is abundantly clear that the point was not argued, and was not argued because counsel for the defendant board in that case said that there was no point in arguing it in view of the fact that the Attorney-General was prepared to consent to the action being made a relator action. I cannot think that a pronouncement of opinion in those circumstances can be an authority binding on me, although of course I treat it, falling from the lips of LORD DENNING, M.R., with great respect, and the fact that he said it has caused me to hesitate before arriving at an opposite conclusion. But of course no opposite point was put to that learned lawyer and he proceeded simply on a first-blush impression of the meaning of the words used.
‘However, there are other authorities which bear on this matter. In Wallasey Local Board v Gracey ((1887) 36 ChD 593 at 597), which was a case arising under s 107 of the Public Health Act 1875, STIRLING, J., held that the words in the section “cause any proceedings to be taken” meant “cause any proceedings known to the law to be taken” and did not, therefore, authorise the local authority to sue in its own name. Of course the words there are not as strong. They are “cause any proceedings to be taken” and not as in s 276 of the Act of 1933 “take … proceedings”, but nonetheless the authority has weight. It appears from that case that, in Bermondsey Vestry v. Brown, the words of the Act in question in that case were actually “and to take such other proceedings for the opening thereof”, the last word referring to the stopping of a right of way within the parish. It was held, again, that that did not give the local authority a right to sue in its own name. If that stood unchallenged that would be a strong authority against the construction the plaintiff council seeks to put on s 276 of the Act of 1933, but in Nuneaton Local Board v. General Sewage Co., ((1875) LR 20 Eq 127 at 133) SIR JAMES BACON, V.-C., said: “The argument that the Attorney-General ought to be a party to the suit which was supported by the case of Bermondsey Vestry v. Brown to which [counsel] last alluded, need not, in my opinion, be referred to here. The day may possibly come— whether it will or not I do not say—when the question, whether a corporation, created by statute to discharge such duties as a local board of health are created to fulfil, may or may not file a bill to restrain the infringement of a public right, with or without the Attorney General, will have to be decided.” So that SIR JAMES BACON, V.-C., entertained doubt on the subject. The Local Government Act 1933 is not merely a consolidating Act; it is an amending Act. But if the plaintiff council is right this is not a mere amendment of an existing statutory provision, it is a wide new enabling power altering the law and removing the matter from the discretion of the Attorney-General where it has always rested. In those circumstances, I am impressed by what KAY, L.J., said in Tottenham Urban District Council v Williamson & Sons, Ltd ([1896] 2 QB 353 at 354, 355). That judge was again dealing with s. 107 of the Act of 1875, but his observations appear to me to be general: “The ordinary law is, that when anyone complains of a public nuisance he must obtain the fiat of the Attorney-General for proceedings by way of information, unless he can show that the nuisance of which he complains is the cause of special damage to himself, and so ground for action. I cannot see that the Public Health Act, 1875, has altered the law in this respect. The section relied on is s 107; but that does not say that a local authority can take proceedings which no private person can take, and which are unknown to the law. Had that been the intention
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of the Act, I should have expected to find the new remedy, hitherto unknown to the law, stated in explicit terms.” That seems to me to apply directly to s 276 of the Act of 1933.
‘In general, therefore, I am against the plaintiff council, but there are two matters which remain for consideration … ’
I need not go into those matters.
The other enactment is that on which the plaintiffs rely and is s 116 of the Highways Act 1959. That section, as amended by the London Government Act 1963, so far as material, provides;
‘(1) The Minister may assert and protect the rights of the public to the use and enjoyment of any trunk road, including any roadside waste which forms part of it.
‘(2) The council of a county as respects any county road in the county, or the Greater London Council, the council of a county borough or London borough or the Common Council as respects any highway in their area, may assert and protect the rights of the public to the use and enjoyment of any such road or highway, including any roadside waste which forms part thereof.
‘(3) Without prejudice to subsections (1) and (2) of this section, it shall be the duty of the council of a county district to assert and protect the rights of the public to the use and enjoyment of all highways in their district and to prevent, as far as possible, the stopping up or obstruction of those highways, and the duty imposed by this subsection on the council of a county district shall extend to a highway in an adjoining county district in the county in which their district is situated if, in the opinion of the council, the stopping up or obstruction of that highway would be prejudicial to the interests of their district.
‘(4) Without prejudice to the foregoing provisions of this section, it shall be the duty of the council of a county district to prevent any unlawful encroachment on any roadside waste comprised in a highway within their district.
‘(5) Without prejudice to their powers under section two hundred and seventy-six of the Local Government Act, 1933, a council may, in the performance of their functions under the foregoing provisions of this section, institute or defend any legal proceedings and generally take such steps as they deem expedient …
‘(9) Any proceedings or steps taken by a council in relation to an alleged right of way shall not be treated as unauthorised by reason only that the alleged right is found not to exist.’
Counsel for the defendants submitted that this section is no wider than s 276 of the Local Government Act 1933 and is covered by the Prestatyn case. He compared the words ‘may … institute or defend any legal proceedings’ in s 116(5) of the Highways Act 1959 with the words’ may prosecute or defend any legal proceedings’ in s 276 of the Local Government Act 1933 and submitted that they were in substance indistinguishable.
Counsel for the plaintiffs submitted that s 276 did no more than make the appropriate local authorities competent litigants. It did not enable them to sue for a public nuisance (in the absence of special damage) without joining the Attorney-General because, although the section made them competent litigants, it did not confer any cause of action on them. The fiat of the Attorney-General was needed in the Prestatyn case because the local authority as such was in no different position from any member of the public and a member of the public cannot sue to enforce public rights except in the name of the Attorney-General. Section 116 however, in counsel for the plaintiffs’ submission, went further than s 276 of the 1933 Act in that sub-s (5) did not stand alone. Section 116(2) (which has no counterpart in
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s 276) in terms provides that a county council may assert and protect the rights of the public to the use and enjoyment of any county road in its county and counsel for the plaintiffs submitted that the effect of this was to give a county council a cause of action in respect of the matters mentioned and so to entitle the plaintiffs to claim the relief which they claim by the present originating summons without joining the Attorney General.
I have found this a difficult point. Section 116(5) would not of itself, in my judgment, enable the plaintiffs to sue in their own name without joining the Attorney General, for the reasons stated by Goff J in the Prestatyn case. The real question is whether sub-s (2) enables them to do so; more particularly whether the words ‘may assert and protect the rights of the public’ have that effect. On the whole I am of opinion that they do not. Whatever the precise ambit of those words may be, it must, I think, stop short of enabling a council to assert and protect public rights by initiating legal proceedings because otherwise sub-s (5) in this context would be otiose. If the legislature had intended that a council should be able to sue in its own name without joining the Attorney General, one would have expected to find words to that effect in sub-s (5). As Kay LJ said in Tottenham Urban District Council v Williamson & Sons Ltd ([1896] 2 QB at 355), in a passage quoted by Goff J ([1969] 3 All ER at 1583, [1970] 1 WLR at 45):
‘Had that been the intention of the Act, I should have expected to find the new remedy, hitherto unknown to the law, stated in explicit terms.’
As an example of the new remedy being stated in explicit terms I may cite s 100 of the Public Health Act 1936, which provides:
‘If in the case of any statutory nuisance the local authority are of opinion that summary proceedings would afford an inadequate remedy, they may in their own name take proceedings in the High Court for the purpose of securing the abatement or prohibition of that nuisance, and such proceedings shall be maintainable notwithstanding that the authority have suffered no damage from the nuisance.’
In my judgment therefore counsel for the defendants’ argument on this point succeeds and unless the Attorney-General is prepared to give his fiat, the originating summons must be struck out.
On the plaintiffs’ undertaking to apply with all due speed to the Attorney-General for his fiat, no order to be drawn up pending the result of that application; if the Attorney-General gave his fiat the plaintiff to be at liberty to amend by joining him as a co-plaintiff; if the fiat was refused, the originating summons to be struck out.
Solicitors: Theodore Goddard & Co agents for A H M Smyth, Winchester (for the plaintiffs); Beer, Timothy Jones & Webb (for the defendants).
Jacqueline Metcalfe Barrister.
Re Barleycorn Enterprises Ltd
Mathias and Davies (a firm) v Down (liquidator of Barleycorn Enterprises Ltd)
[1970] 2 All ER 155
Categories: COMPANY; Insolvency
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 24 FEBRUARY 1970
Company – Winding-up – Costs – Compulsory winding-up – Order of priority – Assets insufficient to meet liabilities – Floating charge under a debenture on whole of assets – Property subject to charge part of the assets out of which costs payable – Accountants’ fees for preparing statement of affairs, approved by official receiver, payable out of assets in priority to preferential claims and to floating charge – Companies Act 1948, ss 267, 319 – Companies (Winding-up) Rules 1949 (SI 1949 No 330), r 195.
At the request of the directors of B Ltd which had been ordered to be compulsorily wound up, the applicants, a firm of chartered accountants, prepared the company’s statement of affairs and their fees for this work which came to £202 10s were approved by the official receiver. The preferential claims for rates and wages amounting to £5,161 exceeded the assets of the company which amounted to £4,744; and there was also a floating charge under a debenture on the whole of the company’s assets. On the question whether the applicants were entitled to payment of their fees out of the assets,
Held – The word ‘assets’ in s 267a of the Companies Act 1948, and in r 195(1)b of the Companies (Winding-up) Rules 1949, included property which was subject to a floating charge, for s 319(5) and (6)c of the 1948 Act showed that where there was a floating charge the legislature no longer regarded the property subject to the charge as belonging wholly to the debenture holder on a winding-up and that such property formed part of the assets of the company which were applicable first, in payment of the costs and expenses of the winding-up, second in payment of the preferential claims and only third in payment of the debenture holder; accordingly, the applicants’ fees, being costs of the winding-up, were payable out of B Ltd’s assets and took priority over the preferential claims and over the debenture holder (see p 158 d to g, p 159 b and d, and p 160 b d and g, post).
Notes
For the priority of payments out of the assets, see 6 Halsbury’s Laws (3rd Edn) 667, paras 1318, 1319, 672, para 1332, and 675, 676, para 1338, and for cases on the payment of fees and costs, see 10 Digest (Repl) 1004–1007, 6895–6927.
For the Companies Act 1948, ss 267, 319, see 5 Halsbury’s Statutes (3rd Edn) 319, 345.
For the Companies (Winding-up) Rules 1949, r 195, sec 4 Halsbury’s Statutory Instruments (First Re-Issue) 135.
Cases referred to in judgment
Glyncorrwg Colliery Co, Re, Railway Debenture and General Trust Co v The Co [1926] Ch 951, [1926] All ER Rep 318, 96 LJ CH 43, 136 LT 159, 10 Digest (Repl) 841, 5531.
Lloyd (David) & Co, Re, Lloyd v David Lloyd & Co (1877) 6 Ch D 339, 37 LT 83, 10 Digest (Repl) 844, 5564.
Page 156 of [1970] 2 All ER 155
Marine Mansions Co, Re (1867) LR 4 Eq 601, 37 LJ CH 113, 17 LT 50, 10 Digest (Repl) 765, 4972.
Oriental Hotels Co, Re, Perry v Oriental Hotels Co (1871) LR 12 Eq 126, 40 LJ CH 420, 24 LT 495, 10 Digest (Repl) 1122, 7811.
Regent’s Canal Ironworks Co, Re, ex parte Grissell (1875) 3 Ch D 411, 10 Digest (Repl) 1006, 6924.
Westminster Corpn v Chapman [1916] 1 Ch 161, [1914–15] All ER Rep 676, 85 LJ Ch 334, 114 LT 63, 80 JP 74, 10 Digest (Repl) 994, 6834.
Cases and authorities also cited
Anglo-Austrian Printing & Publishing Union, Re [1895] 2 Ch 891.
Ormerod, Grierson & Co, Re [1890] WN 217.
Richards v Kidderminster Overseers [1896] 2 Ch 212.
Woods v Winskill [1913] 2 Ch 303, [1911–13] All ER Rep 318.
Pennington’s Company Law (2nd Edn) 701.
Palmer’s Company Precedents (16th Edn) 732.
Appeal
This was an appeal by Gordon Harold Down, the liquidator of Barleycorn Enterprises Ltd, from the decision of his Honour Judge Sir Owen Temple-Morris QC, given at the Cardiff County Court on 12 June 1969, whereby he ordered that the fees of £202 10s of the applicants, Ronald James Mathias and K H Davies, a firm of chartered accountants, for preparing the statement of affairs on the compulsory winding-up of Barleycorn Enterprises Ltd, should be paid out of the assets of that company. The ground of appeal was that the judge was wrong in law in holding that the fees, being costs of the winding-up, fell to be paid in priority to preferential creditors and to the debenture holder under a floating charge on the whole of the assets of the company when there were no free assets for payment of such costs. The facts are set out in the judgment of Lord Denning MR.
N G Wootton for the liquidator.
M T Pill for the applicants.
24 February 1970. The following judgments were delivered.
LORD DENNING MR. In August 1967 a company, Barleycorn Enterprises Ltd, was put into compulsory winding-up. The directors asked the applicants, a firm of chartered accountants in Cardiff—Mathias and Davies, to prepare the statement of affairs. They did so. It showed:
Assets £
Cash at bank 542
Other assets 4,202
4,744
Preferential claims
Rates and wages 2,161
Money advanced by bank for wages 3,162
5,323
It also showed that the bank had a floating charge under a debenture for £6,972, of which £3,162 were the moneys advanced for wages.
It is plain from those figures that the preferential claims exhausted all the assets.
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So there was nothing left for the general body of creditors. Now the question arises as to the fees payable to the applicants for preparing the statement of affairs. Their fees came to £202 10s, and were approved by the official receiver. The liquidator says that they rank behind the preferential claims and even behind the debenture holders. So the applicants get nothing. But the applicants say that they are entitled to their fees in priority to the preferential claims. They are part of the costs of winding-up which, they say, come first. The judge (his Honour Sir Owen Temple-Morris QC) held that the applicants were entitled to their fees first. The liquidator appeals to this court.
The Companies Acts contain provisions regulating the order of payment out of the ‘assets’ of the company. The question is: what does the word ‘assets’ mean in this context? Especially when there is a floating charge. Two of the material sections go back to 1862, but I will read them as they stand, re-enacted in the Companies Act 1948, in the same words as in the Companies Act 1862. Section 267 applies in a compulsory winding-up:
‘The court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs, charges and expenses incurred in the winding up in such order of priority as the court thinks just.’
Section 309 applies in a voluntary winding-up:
‘All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall be payable out of the assets of the company in priority to all other claims.’
The word ‘assets’ in these sections in 1862 was used as meaning only those free assets which were not the subject of a floating charge. In those days it was held that, when there was a debenture which gave the creditor a floating charge over the property of the company, then, as soon as the charge crystallised on a winding-up, the property did not belong to the company but to the debenture holder. It was, therefore, not included in the ‘assets’ of the company and was not available for any of the general costs of the winding-up. If the floating charge covered all the property, the debenture holder took it all, subject only to the costs of realising it, eg the auctioneer’s charges: see Re Marine Mansions Co, Re Oriental Hotels Co, Perry v Oriental Hotels Co ((1871) 1 LR 12 Eq 126 at 133) and Re Regent’s Canal Ironworks Co, ex parte Grissell ((1875) 3 Ch D 411 at 427), per James LJ.
In 1888 and 1897 Parliament began to use the word ‘assets’ in a different sense. It used the word ‘assets’ so as to include not only the free assets, but also all those assets which were subject to a floating charge. It used the word in this new sense in the statute which created, for the first time, ‘preferential payments’. These were rates, taxes and wages. They took priority over a floating charge. This was done by s 1 of the Preferential Payments in Bankruptcy Act 1888d, as amended by s 2 of the Preferential Payments in Bankruptcy Amendment Act 1897e. The sections of the 1888 and 1897 Acts were re-enacted in the Companies (Consolidation) Act 1908f, the Companies Act 1929g and the Companies Act 1948. I will read them as they now appear in the Companies Act 1948, s 319, and underline the significant words:
‘(1) In a winding up there shall be paid in priority to all other debts [rates, taxes, wages and so forth] …
‘(5) The foregoing debts shall—(a) rank equally among themselves and be
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paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and (b) in the case of a company registered in England, so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.
‘(6) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them … ’
Those subsections show quite clearly that since 1897 a debenture holder, who holds a floating charge, can no longer sweep up all the company’s property for his own benefit. Before he takes any of it, there have to be paid: (i) ‘such sums as may be necessary for the costs and expenses of the winding up’, see s 319(6); and (ii) the preferential claims for rates, taxes, wages, and so forth. They are the ‘foregoing debts’ which are given priority over the floating charge, see s 319(5)(b).
The subsections also show that the legislature is using the word ‘assets’ in a different sense from what it did before 1897. When there is a floating charge, the legislature no longer regards the property as belonging wholly to the debenture holder. The property which is subject to the charge forms part of the ‘assets’ of the company which are to be applied first, in payment of the costs and expenses of the winding-up, second, in payment of the preferential claims, and only third in payment of the debenture holder.
The word ‘assets’ in ss 267 and 309, which go back to 1862, must, I think, be now interpreted in this new sense and not in the sense in which it was interpreted by the courts before 1897. So without changing the word, we have changed its meaning. It bears a different meaning now from what it did in 1862. This is unusual, but necessary in order to make sense of the legislation as a whole. Sections 267 and 309 now mean that, when there is a floating charge, the ‘assets’ include all the property which is subject to the charge. The costs of the winding-up take priority, therefore, over the floating charge.
The word ‘assets’ is used in this new sense in the rule which prescribes the order in which the costs of the winding-up are to be borne. The rule goes back to 1902, but it is now r 195(1) of the Companies (Winding-up) Rules 1949h. It provides:
‘The assets of a Company in a winding-up by the Court … shall … be liable to the following payments, which shall be made in the following order of priority, namely:—
First.— The taxed costs of the petition …
Next.— The remuneration of the special manager (if any).
Next.— The costs and expenses of any person who makes or concurs in making, the Company’s statement of affairs … ’
That rule clearly gives the applicants a high priority for their fees in the costs of winding-up. As part of those costs, they take priority over the preferential payments for rates, taxes and wages, and over the debenture holder.
This view is confirmed by the little book by Mr Topham on Company Lawi. He wrote it for students, but it is the best of its kind. He wrote in the 10th editionj:
‘Certain “preferential payments” must be made before payment of other unsecured debts, and, where the security is only a floating charge secured by debentures, these preferential payments must be paid before the debenture holders, but not before the costs of liquidation.’
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It is also confirmed by the statutory form which contains a note to the effect that the estimates for ‘unsecured creditors’ are subject to the cost of winding-up.
We were referred to two cases which were said to be to the contrary, namely, Westminster Corpn v Chapman and Re Glyncorrwg Colliery Co, Railway Debenture and General Trust Co v The Co. But the point did not arise for decision in those cases. We have also been referred to some textbooks which contained statements to the contrary. I dismiss these as erroneous. I think the order of payment in this winding-up is: first, the costs of the winding-up; second, the preferential payments; third, the debenture holder under the floating charge; fourth, the unsecured creditors.
The fees of the applicants form part of the costs of the winding-up. They were approved by the official receiver. They come first and must be paid. I think the county court judge was right in ordering them to be paid. I would dismiss this appeal.
SACHS LJ. The decision of this court in the present case will, I appreciate, have relatively far-reaching effects and will end a situation in which liquidators have in the past successfully taken a point which can be wholly destitute of merits, as was indeed conceded in the instant case, and one which can enure to the detriment of the public interest when there is a winding-up order of the court. Nonetheless, being in full agreement with all that has fallen from Lord Denning MR in his judgment, I feel it only necessary to add but little.
I would in the first place like to add my tribute to the assistance that has been received from the submissions of counsel. In the end I was convinced by the admirable argument so lucidly expounded by counsel for the applicants that there has been no full appreciation, either in any previous judgment or in the standard textbooks normally cited to this court, of the effect of the provisions of ss 2 and 3 of the Preferential Payments In Bankruptcy Amendment Act 1897k (now reproduced in s 319(5) (b) and s 94 of the Companies Act 1948), when read in conjunction with s 1(2) and (3) of the Preferential Payments in Bankruptcy Act 1888l (now reproduced in s 319(5) (a) and (6) respectively of the 1948 Act). The result of superimposing the 1897 Act on the 1888 Act was to make a serious inroad into the rights of debenture holders as previously held to exist by a series of authorities based on a line of reasoning favouring those holders. That line is perhaps best illustrated in the judgments of Sir George Jessel MR and James LJ in Re David Lloyd & Co, Lloyd v David Lloyd & Co which make plain that in those days judgments on points such as those in issue before this court today were given on the basis that when a winding-up order took effect, the assets of the company changed to being assets of the debentures and could not be touched. When that line of reasoning continued to be followed in judicial decisions after the 1888 Act and looked like frustrating to some degree the effect of that Act, the legislature stepped in and passed the 1897 Act.
The combined effect of the two Acts produces changes greater than appear to have been noticed in the textbooks or otherwise despite the clear indication given by footnote 2 to form 22m (statement of affairs) reproduced in Buckley on the Companies Actsn. One practical effect of the changes is that instructions given to accountants to compile a statement of affairs when once sanctioned (r 56o) by an official receiver,
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an officer of the court, cannot, as was here attempted, in future be disowned by the liquidator nor can the burden of compiling such a statement necessarily be transferred to public funds in the event of the directors failing to provide one.
On the basis of those changes as explained by Lord Denning MR’s judgment, I too would dismiss this appeal.
PHILLIMORE LJ. I entirely agree, and if I add a very few words, it is in deference to the excellent arguments addressed to us on both sides. Counsel for the liquidator’s submission at the conclusion of his argument was that if there were free assets, that is to say, assets not covered by some floating charge or debenture, then the proper order for payment would be: first, the costs of the winding-up; secondly, the preferential debts; and, thirdly, the floating charge. On the other hand if there were no free assets and everything was covered by the floating charge, then the order would be: first, the preferential debts; secondly, the floating charge; and, thirdly, the costs of the winding-up—which in practice would mean that whoever did the winding-up would not get anything unless he had made some prior bargain. I find it very difficult to defend the logic which would make the order of priority as between costs and preferential debts dependent on whether or not there was a floating charge. It seems to me that if one compares the words of the various sections, it is quite clear that, at all events, in the Companies Act 1948—and that is the Act with which we are dealing—where the word ‘assets’ occurs without qualification, or even the phrase ‘assets of the company’, that must mean all the assets and not merely free assets, that is to say, assets free of any floating charge. It is only really possible to make sense of ss 94, 267, 309 and 319 on that basis. The point is emphasised when one looks at s 319(5) (b), which deals with the position as between the preferred creditors and the debenture holders where there are no free assets to meet the claims of the preferential claimants; and it is provided that in the case of a company registered in England, so far as the ‘assets of the company available for payment of general creditors’—now, there is a phrase which clearly means free assets—‘are insufficient to meet’ the foregoing debts, they ‘have priority over claims of holders of debentures’, and so on. So there it is manifest that where Parliament means to designate those assets which are free of the floating charge, it uses special words to distinguish the position from that where the simple word ‘assets’ is used, as in the other sections to which I have referred, and in s 319(6) itself. As I see it, r 195, which is the rule applying to this case, and form 22, which is provided for under the Companies (Winding-up) Rules 1949p, which are made by virtue of s 267 of the 1948 Act, must, where the word ‘assets’ is used, mean the same as in the principal section from which they derive their birth. If that be right, it is perfectly clear that r 195 requires that the assets of the company should be used to meet these costs in preference to the claims of either preferential creditors or debenture holders.
For those reasons I entirely concur with Lord Denning MR and Sachs LJ that this appeal must be dismissed.
Appeal dismissed.
Solicitors: Helder, Roberts & Co agents for Gordon Williams & Co, Cardiff (for the liquidator); Hallinan, Blackburn, Gittings & Hambleton, Cardiff (for the applicants).
Wendy Shockett Barrister.
Kirkwood v Kirkwood
[1970] 2 All ER 161
Categories: FAMILY; Ancillary Finance and Property, Children
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P AND ORMROD J
Hearing Date(s): 14 JANUARY 1970
Magistrates – Husband and wife – Infant – Child of the family – Acceptance of child as one of the family – Knowledge of material facts necessary for acceptance – Whether wife’s failure to disclose illegitimacy of children material fact – Matrimonial Proceedings (Magistrates’ Courts) Act 1960, s 16(1).
Magistrates – Husband and wife – Maintenance – Wilful neglect to maintain child – Children not children of husband – Children illegitimate children of wife – Children accepted by husband as children of the family – Wife in desertion – Exercise of discretion to award maintenance in respect of children.
The parties were married in March 1968 at a time when the wife had two children by her previous marriage and two illegitimate children, who came with her and joined the husband and they lived together as a family until October 1968 when the husband left, having been expelled by the wife. At no time before the marriage or during cohabitation did the wife inform the husband that the two children were in fact illegitimate and not, as he had supposed, the children of her first husband. At the time of the parting the husband, who was earning £20 a week, gave the wife £10 1s 4d, that is £3 1s 4d rent and £7 for maintenance; he then became unemployed and gave her £5 1s 4d, being £3 1s 4d for rent and £2 extra. On appeal by the husband from an order of the magistrates’ court finding that the two children were children of the family and on appeal by the husband and cross-appeal by the wife from an order that the husband pay £1 per week for each child,
Held – (i) The relevant provision of the Matrimonial Proceedings (Magistrates’ Courts) Act 1960 (see s 16(1)a) being clearly designed primarily for the protection of children who were in the position of being children of one spouse and not of the other, and the husband being perfectly prepared to accept the two children, the non-disclosure of their illegitimacy by the wife could not affect their acceptance (see p 164 d and f, p 166 f and p 167 h, post).
R v R [1968] 2 All ER 608 and P (R) v P (P) [1969] 3 All ER 777 distinguished.
(ii) The court would not interfere with the order for maintenance for the two children since the justices, reviewing the whole of the case and exercising their discretion rightly, had concluded that £1 a week for each child was fair and reasonable (see p 166 d, and p 167 j, to p 168 a, post).
Smith v Smith and Brown [1962] 3 All ER 369 applied.
Notes
For acceptance of a child as one of the family for the purposes of custody and maintenance, see Supplement to 12 Halsbury’s Laws (3rd Edn) para 755A, and for cases on the subject, see Digest (Cont Vol B) 383, 6756a, 6757e.
For the power to order maintenance for any child of the family, see Supplement to 12 Halsbury’s Laws (3rd Edn) 1087, 7.
For the Matrimonial Proceedings (Magistrates’ Courts) Act 1960, s 16, see 40 Halsbury’s Statutes (2nd Edn) 419.
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Cases referred to in judgment
Bond v Bond [1964] 3 All ER 346, [1967] P 39, [1965] 2 WLR 1008, 128 JP 568, Digest (Cont Vol B) 384, 6960bb.
Cobb v Cobb [1955] 2 All ER 696, [1955] 1 WLR 731, Digest (Cont Vol A) 692, 2130aa.
P (R) v P (P) [1969] 3 All ER 777, [1969] 1 WLR 898.
R v R [1968] 2 All ER 608, [1968] P 414, [1968] 2 WLR 1468., Digest Supp.
Roberts v Roberts [1962] 2 All ER 967, [1962] P 212, [1962] 3 WLR 448, 126 JP 438, Digest (Cont Vol A) 825, 6757b.
Smith v Smith and Brown [1962] 3 All ER 369, [1962] 1 WLR 1218, Digest (Cont Vol A) 806, 6341c.
Appeals
These were an appeal by the husband and a cross-appeal by the wife from a decision of the Liverpool City Magistrates made on 23 May 1969, that two children born to the wife before the marriage were children of the family and ordering that the husband pay £1 per week for the maintenance of each of the children. The husband appealed against the finding that the children were children of the family and against the amount ordered by way of maintenance, and the wife cross-appealed against the amount ordered by way of maintenance. The facts are set out in the judgment of Ormrod J.
I B Campbell for the husband.
M N Bhadresa for the wife.
14 January 1970. The following judgments were delivered.
ORMROD J. There are two appeals in this matter, one by the wife and one by the husband—the husband’s notice of appeal being the earlier by two days. Both these appeals arise out of a decision of the Liverpool City Magistrates made on 23 May 1969. On that occasion they had before them a series of complaints by both the parties. The husband had issued a complaint against the wife alleging that she had treated him with persistent cruelty; he had a second complaint alleging adultery by the wife; and a third complaint alleging desertion, which was constructive in character. There was a complaint by the wife alleging desertion on her side. As a result of the hearing, three out of those four complaints were dismissed, ie the summons for persistent cruelty, the summons for adultery by the wife, and the wife’s summons for desertion; and an order was made on the finding that the wife had deserted the husband.
The only matter which comes before us on appeal relates to the question of the two children, John and Janet Robertson. These two children were born, John in July 1963 and Janet in November 1964; they are in fact illegitimate children of the wife born before this marriage, which took place on 30 March 1968, and they were not children of the wife’s first marriage. She had two children by that marriage as well, and, when she married the husband, these two children came with her and joined him and they lived together as a family until the separation occurred on 4 October 1968 when the husband left, as the justices found, having been expelled by the wife.
The husband appeals to this court on two points. He says first that the justices were wrong in finding that these children were children of the family in the sense that he had accepted them as such; and, secondly, he complains that the order for maintenance which the justices made at the end of the case of £1 a week for each child was excessive. There is a cross-appeal by the wife, the substance of which is that she says that the figure of £1 a week for each of the two children is insufficient and asks for a higher order.
On the question of acceptance of these children, first of all, by the husband, it is common ground that he knew of the existence of the two children before the married, and he knew that the two children would come and live with him and the wife if
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the marriage took place between him and the wife—and the marriage did take place and the children did come and live with him and the wife, and he maintained all of them. The point that is now raised is this. It is said, and it is admitted by the wife, that, before the marriage and indeed during the subsistence of the cohabitation, she did not disclose to the husband that these two children were not, as he had supposed, the children of her first husband but were, in fact, her children by some other man. He says, or it is said on his behalf, that, had he known that these children were not children of the first husband, he might not have gone on with the marriage. He does not in his own evidence put the case nearly as high as that. In fact, there is a passage in the evidence which seems to the contrary. The fact is, I think, that he did not discover that these children were illegitimate until these proceedings in the magistrates’ court had actually started, because that seems to be the first time that the wife admitted to anybody that they were not the children of her first husband. The relevant passage in his evidence is this:
‘When we married my wife had two children, John and Janet, with her. John was named after my wife’s first husband’s brother. A week before the marriage I asked the wife if she had anything to tell me. She told me she had two other children by her former husband. We kept the family of John and Janet together. I lived with the wife up till the 4 October 1968. The wife and I had a bit of a flare. She told me the children were her children and not mine. I did not have much to do with the children. The wife used to tell the children to get away from me.’
And he produced their birth certificates which showed, of course, that there was a blank in the column of the father. Then he went on: ‘When I left on the 4 October 1968 I was not sure but I had a good idea’, which plainly means that he was not sure but that he had a good idea that these children were not the children of the first husband by that time. Then he said: ‘After I left I continued to maintain my wife, sent her £10 1s 4d, £3 1s 4d of that was rent, I was earning about £20 a week’, and he then came out of work and reduced it to £5 1s 4d on the same basis. Then in cross-examination he said:
‘I heard about the other two children before the marriage. I was shocked at what my wife had told me; had a bit of a talk about it and we decided to get married. I didn’t known when my wife was divorced. I didn’t ask her. I didn’t ask her any questions about John and Janet. I was prepared to look after the children. I didn’t ask any questions about them. If the wife had been straight with me it would have made no odds. She said she had named the boy after her first husband. I took it for granted they were children of first husband.’
That, I think, is as far as the matter goes on his evidence. So far as the wife’s evidence is concerned, it does go a little bit further. In cross-examination she admitted that she had never told the husband that these two children were illegitimate; she was the only one that knew. Then she said:
‘He was going to call the wedding off. If I had told him John and Janet were illegitimate the marriage might have been off. I did not think it concerned my future husband. John and Janet were the children of one father and my husband did not know that the children were illegitimate. They were called John and Janet Robertson, that is my former husband’s name’,
and she admitted that she told her husband that John was christened after her former husband’s brother.
What counsel for the husband submitted was this, that there had not been by the wife a full and frank disclosure of the nature of these children before the husband accepted them and, therefore, it should not be regarded as acceptance by him in
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law. He relied on and took the point that on the evidence of the wife at any rate it might well have been that the marriage would never have taken place at all, and, therefore, no family would ever have been created had the disclosure been made by the wife of the true status of these children, and that consequently he ought not to be held to have accepted them. To that, in my judgment, there are two answers. The first is that, on the facts, I do not think that the evidence supported the proposition that the husband would not have gone on with this marriage had he known that the two children were illegitimate. His answer which I read a moment ago that, had she been frank with him, it would have been all right seems clearly to indicate that it was lack of frankness on her part rather than any particular quality in the children which was disturbing him. But, assuming that there was something to be said for it on the facts, it seems to me that a very difficult situation would arise if this court were to hold that some deception of this kind is enough to invalidate an apparent or prima facie acceptance of the children by a husband.
The relevant provision in the Matrimonial Proceedings (Magistrates’ Courts) Act 1960b, and the provision in the Matrimonial Causes Act 1965c of a corresponding nature, are clearly designed primarily for the protection of children who are in this position of being children of one spouse and not of the other; and, if this court were to lay down that acceptance involves something approaching a contractual arrangement so that it would be vitiated by non-disclosure or something of that kind, we might be driving a very large wedge into this statutory provision, because the facts here are that the husband accepted two children of his future wife, and in that respect it differs, I think, from cases like R v R, in which the basis of the case had been that the husband did not know at the time that the child or children were not his, and, therefore, he accepted the children believing them to be his and not questioning the matter, when in fact it turned out afterwards that they were not his at all—so that his mind had never been directed to the question of whether or not he was prepared to accept another man’s child or children into the family. This is not the situation in this case at all. The husband here was perfectly prepared to accept these two children; the only question is whether the non-disclosure of their illegitimacy can affect their acceptance. In my judgment it cannot. Even if this disclosure might have seriously affected his mind in deciding to marry or not, the non-disclosure should not affect the question whether he had accepted the children in law. It would obviously be an inadequate ground to justify a court in interfering with the validity of the marriage. The courts in this country have always rigorously set their face against avoiding marriages on the ground of non-disclosure, except in the most extreme circumstances and with the most extremely thorough safeguards. This is to open a door which is an extremely dangerous one, and my own view is that it would be quite wrong to introduce this sort of concept into the question of acceptance of children as part of the family. It is necessary, of course, that the husband should know that they are not his children if he is to bring his mind to bear on this question at all; but where, as here, we have a marriage to a woman with two children, in my judgment that is enough, prima facie, to establish acceptance by him.
Counsel for the husband referred to P (R) v P (P), a decision of Lawton J, but that case is a quite different matter altogether. The ratio of P (R) v P (P) is that both the husband and the wife must agree together that the children are children of the family, and Lawton J came to the conclusion on the evidence that from the very outset the wife was quite determined that the children should not be regarded as children of herself and her husband, but as hers, living, it is true, in the home with them, but entirely under her control, and having nothing to do with the husband, except that he provided the maintenance for them and they lived under the same roof. It is an application of the proposition that there must be mutuality between
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spouses in arriving at a decision to accept such children into the family before they become either children of the family or relevant children living with the parties.
So I think that counsel for the husband’s argument fails, firstly, on the facts, and, secondly, on the law, and I think that the justices were right in finding on the facts of this case that the husband had accepted the children and made them children of the family and so brought them within the jurisdiction of the justices so far as an order for custody or maintenance was concerned.
That brings me to the question of quantum. Here, as I said, the husband has appealed on the basis that the quantum is too much, and the wife complains that the amount is too little. The justices arrived at the figure of £1 a week, obviously from their reasons, in a rather rough and ready fashion. There was no specific evidence of the husband’s means at that hearing. He had been earning £20 a week but had lost his job and been unemployed. A the time of the parting when he left he gave his wife £10 1s 4d, that is £3 1s 4d rent and £7 cash for maintenance; after he became unemployed he gave her £5 1s 4d, being £3 1s 4d for rent and £2 a week extra. The justices attributed the extra £2 as being paid respectively for £1 for each of the two children. There is no evidence, it is fair to say, of that allocation of the money, and I am not at all clear where they actually got that idea from. I suppose they simply looked at it in this way—that there was the sum of £5 1s 4d a week made available to the wife, out of which she had to pay £3 1s 4d rent and there would, therefore, be £2 left over; and they made an order for £1 a week for each of these two children.
So far as counsel for the husband is concerned, he submits that that order was too high; too high because the wife, largely by her own conduct in breaking up the marriage, had produced the situation in which the husband could not maintain the children in the matrimonial home as he had undertaken to do and, therefore, her conduct should be taken into account and would be enough to diminish the maintenance considerably. He referred to Smith v Smith and Brown, a decision of the Court of Appeal upholding a decision by his Honour Judge Drabble, who in a somewhat similar situation had declined to make any order for maintenance for the two children of the family at all. The Court of Appeal upheld his exercise of discretion in that way and dismissed the appeal. In the course of their judgments, their Lordships clearly accepted and approved an earlier decision in this court, Roberts v Roberts, in which this court held that, when construing s 2(5) of the Matrimonial Proceedings (Magistrates’ Courts) Act 1960(or s 34(4)(a) of the Matrimonial Causes Act 1965), the duration of the cohabitation between the husband and wife was not a proper matter to be taken into account. Section 2(5) of the 1960 Act provides:
‘In considering whether any, and if so what, provision should be included in a matrimonial order by virtue of paragraph (h) of subsection (1) of this section for payments by one of the parties in respect of a child who is not a child of that party, the court should have regard to the extent, if any, to which that party had, on or after the acceptance of the child as one of the family, assumed responsibility for the child’s maintenance, and to the liability of any person other than a party to the marriage to maintain the child.’
The decision in Roberts v Roberts is an interpretation or construction of the word ‘extent’, and the decision, in effect, is that one cannot look at the duration of the time over which the husband has maintained the children insofar as extent is concerned. Extent means what proportion or percentage of maintenance of the child the husband has borne. The point under s 34(4)(a) of the Matrimonial Causes Act 1965 is the same.
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But it is clear from Smith v Smith and Brown that the Court of Appeal accepted the position that, in approaching these cases, the court has a wide discretion to do what is just in all the circumstances of the case, and quite clearly that would involve, in cases where the court is dealing with children who are not children of the marriage but are children of the family by acceptance, some different considerations from those which would apply to children of the parties themselves. In Smith v Smith and Brown, it is clear that a very difficult and unreasonable situation had arisen, just as it has in many ways in this case, that is, that the wife, on the findings of the justices, has put an end to cohabitation, and has, therefore, herself undermined, as it were, the basis of the arrangement which was made between the husband and herself that the children should become children of the family, and substituted for that arrangement a very different one, where she is living apart from him with the children and expecting him to maintain them. It seems in my judgment reasonable that the court should look at all the surrounding circumstances in these cases and make an order which in all the circumstances is a fair and reasonable one. That it is not an easy decision to make in any of these cases I, of course, appreciate.
In those circumstances, it seems to me that, although the justices made no specific enquiry into the husband’s means, and may have misinterpreted the evidence as to the allocation of the £5 1s 4d, I think that they approached this matter of maintenance for the children in a broad and sensible way, using their discretion rightly, and arrived at the conclusion that £1 a week for each child was, in all the circumstances of this case, fair and reasonable. It is obviously far less actually than what is required to feed and clothe children of this age, but that of course is not the point. The point is what is fair between the parties altogether, and, in my judgment, the justices have exercised their discretion on the proper principle and we should not interfere. For my part, I would have thought their order was the right one to make, so in my judgment both these appeals should be dismissed.
SIR JOCELYN SIMON P. I agree with what Ormrod J has said in his judgment; and I only wish to add to it on three matters.
First, on the notes of evidence. We were provided, as the rule demands, with the note taken by or on behalf of the justices’ clerk. In addition to that, there was prepared for us what was called a ‘Supplemental Note of Evidence’. That was agreed between counsel for the husband and the wife by way of reconstruction of the evidence from their own notes. In the end it was not claimed that there was any such difference between what I may call the ‘unofficial’ and the ‘official’ notes of evidence as to be a compelling factor in the appeal. In those circumstances, it seems to me that this court should be very slow to depart from the line laid down in Bond v Bond ([1964] 3 All ER 346 at 347, [1967] P 39 at 43). The clerk’s note is prima facie the best evidence of what has occurred in the court below: Cobb v Cobb; moreover, only in exceptional circumstances will this court allow any other evidence. Nevertheless, if the clerk’s note is manifestly imperfect the court may allow it to be supplemented. The inconvenience of departing from the general rule is demonstrable from the instant case. The decision was arrived at after an adjournment; and it would be reasonable to suppose that, before the resumed hearing, the justices had read over to them the evidence that had been previously taken. That evidence would have been the evidence as recorded by their clerk or on his behalf. Matters appearing in a note of evidence may bear an almost infinity of nuance; and it would be unsafe to tie the justices with evidence that they have not themselves had opportunity of considering with a view to evaluating how it struck them at the time. I, therefore, think that, although it was helpful of
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counsel to try to agree their own notes, this was not a case where we would have been justified in departing from the general rule laid down in Cobb v Cobb and Bond v Bond.
Secondly, the question of ‘acceptance’ of the children. For the purpose of this decision, I am prepared to grant that counsel for the husband is right when he says that the onus lies on the wife to prove that a child who is not the child of the husband was nevertheless accepted by him as a child of the family. That would be the legal onus that remains on the wife throughout the case, so that at the end of the case the court must be satisfied on a balance of probabilities that the husband has accepted the child, not being his own child, as nevertheless a child of the family. But the difference between a legal onus and a factual (or shifting) onus was pointed out by Lord Denning MR, in a famous article in the Law Quarterly Reviewd. On that basis, the legal onus on the wife is prima facie, though not conclusively, discharged by showing that, after a family has been constituted by marriage between her and the husband, the child came to live with them as (in the popular sense) a member of the family. That then shifts the onus of fact on to the husband.
But counsel for the husband further argued that any such shifting onus of fact was rebutted in this case by the husband; so that at the end of the case the wife had not discharged the legal onus which remained on her throughout. The way that it is said that the husband rebutted the shifting onus of fact was this. There cannot be ‘acceptance’ within the meaning of the statute unless the child is received in knowledge of all the material facts. Any fact is material which would have weighed with a reasonable husband, in the circumstances of this husband, in deciding whether to receive the child in question as a member of his family. Such a fact, in the scope of this case, it is argued, is that the husband did not know (because the wife did not tell him) that these were illegitimate children. There was no evidence that knowledge of the children’s illegitimacy would have, or even might have, directly caused the husband to have refused to have received them. But it was put in this way. The knowledge of the illegitimacy would have caused the husband to reject, not the children, but the marriage itself; so that, if the husband had had knowledge of that illegitimacy, there would have been no family for the children to have been accepted into. By that circuitous argument on materiality, it I may put it that way, the illegitimacy of the children was a material fact, lack of knowledge of which vitiated an ostensible acceptance or reception of these children.
I agree with Ormrod J that that argument is not established on the evidence here. But even if the evidence came up to establishing it, I do not myself think, for the reasons that Ormrod J gave, that it should be accepted. This provision is a provision for the protection of children, who are frequently the innocent sufferers of the breakup of a marriage. It seems to me that to accept counsel for the husband’s argument would involve a serious erosion of the provision made for the protection of the children. The wife’s failure to disclose the status of the children admittedly would not operate to invalidate the marriage; so I do not see why it should operate to invalidate an ostensible acceptance. For those reasons, as well as those stated by Ormrod J, I would reject the argument put forward on behalf of the husband on acceptance.
Thirdly, with regard to quantum, again I respectfully agree with what Ormrod J has said. I do not think that the justices’ argument in their reasons for the sum of £1 a week really stands up to critical examination, if it is to be taken in its literal sense. But I think that in the end, for the reasons that Ormrod J has given, the justices, reviewing the whole of the case, thought that £1 a week for each child was the sort of sum which it was just and equitable for the husband to pay for the
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children’s support. In any event, I would myself, in exercise of the power of this court to make any finding which could have been made in the court below, unhesitatingly come to that conclusion. I think that Smith v Smith and Brown is authority for such an approach. I would, therefore, on that issue dismiss both the appeal and the cross-appeal, and I agree with the order that Ormrod J has proposed.
Appeal and cross-appeal dismissed.
Solicitors: Quinn, Dixon & Co, Liverpool (for the husband); John A Behn, Twyford & Reece, Liverpool (for the wife).
Alice Bloomfield Barrister.
Sullivan v Sullivan
[1970] 2 All ER 168
Categories: FAMILY; Divorce
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND KARMINSKI LJJ AND SIR GORDON WILLMER
Hearing Date(s): 17, 18 MARCH 1970
Divorce – Desertion – Constructive desertion – Wife’s pregnancy by another man at time of marriage – Concealment from husband – Physiological condition not conduct constituting a matrimonial offence – Going to validity of marriage only.
At the time of her marriage the wife did not disclose to her husband that she was pregnant by another man. The husband in fact did not have intercourse with her, and on discovering her pregnancy three weeks after the marriage left her. He was not aware of his right under s 9a of the Matrimonial Causes Act 1965 within a year of the marriage to petition for the marriage to be voided on the ground of the pregnancy, and in his answer to the wife’s petition for divorce nearly three years later he sought a decree of divorce on the ground of constructive desertion since the marriage by the wife’s deceiving and marrying him when pregnant without his knowledge.
Held – The husband’s petition for divorce would be dismissed, because to establish the offence of constructive desertion there must be some misconduct on the part of the wife during the marriage, and the wife’s pregnancy was not conduct but a state or physiological condition which went only to the validity of the marriage (see p 171 c and j, and p 172 g, post).
Notes
As to constructive desertion as a ground for divorce, see 12 Halsbury’s Laws (3rd Edn) 246–251, paras 459–465, and for cases on the subject, see 27 Digest (Repl) 350–352, 2897–2913.
For the Matrimonial Causes Act 1965, s 9, see 45 Halsbury’s Statutes (2nd Edn) 460.
Cases referred to in judgments
Baker v Baker [1953] 2 All ER 1199, [1954] P 33, [1953] 3 WLR 857, 117 JP 556, Digest (Cont Vol A) 725, 2906a.
Moss v Moss [1897] P 263, 66 LJP 154, 77 LT 220, 27 Digest (Repl) 36, 131.
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Appeal
This was an appeal by the husband against an order made by his Honour Judge McDonnell sitting as a special commissioner in divorce on 30 July 1969, dismissing the answer and cross-petition for divorce of the husband. The ground of appeal was that the judge misdirected himself in law in that he found as a matter of law that when the husband left the wife on 29 May 1961, as a result of his discovering for the first time that the wife was three months pregnant by another man, the parties having been married on 6 May 1961, the wife was not in desertion.
H S Law for the husband.
The wife did not appear and was not represented.
18 March 1970. The following judgments were delivered.
WINN LJ. This appeal is marked by three particular features, all of them most satisfactory, of which the court is very appreciative. One of those features is that, being in need of a transcript of the evidence given at the hearing which was not available yesterday, the court made a request to Mr Kinghorn and he, very promptly—and the court expresses its gratitude for the help which he has given—obtained by this morning from the mechanical recording department of the Royal Courts of Justice a transcript of the evidence which was given at the hearing. The court is grateful for that very considerable assistance thus afforded.
The second feature which the court feels is extremely satisfactory is that this judgment from which the appeal is brought, a judgment of his Honour Judge McDonnell, was clearly prepared with the greatest of care by the learned county court judge. Internal evidence reveals that he had made a research and study of his own into the topic, and the terms in which he expressed his opinion were clearly thought out and very appropriate to convey his considered judgment in the matter. The case was before the learned county court judge on 2 July, on 16 July and on 30 July 1969, he sitting as a special commissioner.
The third feature for which the court expresses its gratitude as well as its deep appreciation is the extremely interesting submissions made to the court by Mr Law, counsel for the husband. It is not intended in any way to deprecate those efforts if I say I am wholly unconvinced by the submissions that he has made. It seems to me that what counsel has really done is to plead for a reform of the law. Insofar as his purpose may have been, by referring to principle or authority, to convince this court that the law at present is what he would require it to be in order to obtain for the husband the relief that he is manifestly concerned earnestly to obtain, it seems to me that he has failed to provide any support from the cases to which he has directed the court’s attention.
The matter, so far as I am concerned, can be very succinctly stated, since I do not intend to embark at all on the jurisprudence underlying the position in law of the parties. The marriage took place on 6 May 1961. The parties parted on 29 May 1961. In a literal and physical sense on 6 May, the husband went away; he went to sea, being a deckhand on a dredger. It is important to add that by a finding of the county court judge it is established that he did not have at that time, or at any time, any intercourse with the wife he had married on that day, 6 May. He unfortunately has had at least two mental break-downs and at the time of the hearing before the county court judge was confined on a three years’ sentence in Chelmsford gaol; he was not at his intellectual best, if he ever had a state of intellect which could be described as ‘best’. He clearly is virtually illiterate and virtually unable to express himself with any clarity, almost wholly lacking in any memory of the relevant matters.
One of the reasons why he was in gaol at the time was that he committed bigamy having apparently forgotten, as he put it himself, either that he had ever been married or that he had not since been divorced. That was not his major offence. He was,
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of course, at the wedding on 6 May. During the subsequent party—which he himself refers to in the somewhat grandiloquent terms as ‘the wedding reception’—a friend of his told him that no doubt whilst he was away at sea his bride would be carrying on her same course of sexual association. However, he went away to sea not then believing that story, as he told the county court judge. But when he came back a few days later, rather unexpectedly since his voyage was intended to last for three months, he found that his wife was going regularly to see a doctor; although she tried to conceal that fact from him, he went himself to see the doctor and after some little trouble learned from the doctor that his wife was pregnant and three months pregnant, this still being in May 1961. It was apparent, therefore—and she admitted this when he tackled her with it—that she was pregnant two or three months before she had married him, and pregnant by another man whom she then named, at the time when she accepted this. He then left her and since that time has never cohabited with her in any way.
She petitioned for divorce on the ground that he, the husband, had deserted her on 29 May when he went away. Her petition was dated 5 February 1968. The husband did not during the first year of the marriage avail himself of a provision of the Matrimonial Causes Act 1965, of which he may well have been wholly unaware. By s 9 of that Act, in a fasciculus of sections dealing with ‘Remedies’, it is provided that, in addition to any other ground on which a marriage is by law void or voidable:
‘… a marriage shall, subject to the next following subsection, be voidable on the ground—… (d) that the respondent was at the time of the marriage pregnant by some person other than the petitioner.’
That relief is provided subject to the conditions that the petitioner was at the time of the marriage ignorant of the facts alleged, that the proceedings are instituted within a year from the date of the marriage, and that marital intercourse with the consent of the petitioner had not taken place.
Counsel for the husband has submitted to this court that the mere fact that there is an express remedy—and, as he says, a remedy which provides immediate relief allowing nullity to be claimed on those specific grounds— is no indication that Parliament intended that there should not be other grounds of relief taking the form of a decree of nullity or a decree of divorce available to a petitioner husband who might be able to show that he had had a bastard child foisted on him at the time of the wedding of which he had no knowledge until subsequently, even if he has not availed himself— and, of course, it might be in some circumstances he would not learn soon enough about it—of the relief given by s 9 to which I have referred. The learned county court judge had to deal with this matter, not on the wife’s petition but on the husband’s answer, which was itself filed on 18 December 1968. An order had been made staying the wife’s petition—in which, incidentally, discretion had been sought—and the husband’s answer itself asked for a decree of divorce on the ground of constructive desertion by the wife, that constructive desertion having occurred in May 1961 by her having deceived him and having come to him pregnant without his knowledge that that was her state.
Counsel for the husband puts the matter attractively; with a plea which stresses, rationally as well as a little emotionally, the dilemma and difficulties in which a husband would find himself as a result of such conduct by a fraudulent wife who managed to get him to marry her without disclosing her past, he uses, for example, such expressions as ‘she was incubating after the wedding the child of another man, intending, and indeed being bound in due course, to produce this as a bomb in the hold of the ship which would blow the wedding to smithereens’. All those matters, of course, are touching, but they are not convincing in any logical sense. Nor can it really be said, as I see it, that having a child after a marriage has been entered into as a result of intercourse committed before the marriage took
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place is any conduct during the marriage other than the passive permitting of a continuance of a pre-existing pregnancy. As I said—and it seems logically this must be so—the only effective course open to the wife once she had married and knew herself to be carrying a baby which would ultimately be born was to have herself aborted; counsel for the husband was not prepared to say that it was her duty as a wife to preserve the marriage by having herself aborted.
The learned county court judge stated the problem, he dealt with great care and thoroughness with all the relevant authorities, and then he summed up the problem in words which I respectfully adopt, since I think myself they cannot be improved on as an expression of the problem which he had to decide. He said:
‘In my judgment, to establish the offence of constructive desertion there must be some misconduct on the part of the spouse alleged to be guilty of constructive desertion during the marriage.’
I respectfully agree that that is the problem. I respectfully agree with the whole of the judgment of the learned county court judge. I could not possibly improve on it myself. For the reasons which he gave, because I do agree with him, I think that this appeal should be dismissed.
KARMINSKI LJ. I agree, and having heard what has fallen from Winn LJ I have very little to add. I would however like to deal very briefly with the history of the law on the question of what relief if any can be given to this sort of case, where a wife has concealed from her husband, at the time of the marriage between them, the important fact that she is at that time pregnant by another man. I want to make it as clear as I can that nothing which I am about to say can make it less important and desirable that there should be complete frankness between spouses preceding their marriage as to the past of each of them.
But as the law stood until the Matrimonial Causes Act 1937 there was no relief by way of a decree of nullity in the case of circumstances, as in the present case, of concealment by a wife at the time of her marriage that she was then pregnant. In Moss v Moss the matter was fully argued before Sir Francis Jeune P, by very eminent counsel for the petitioner husband and equally eminent counsel who were called on by the court to argue on behalf of the Queen’s Proctor. Sir Francis Jeune P’s judgment there is, if I may respectfully say so, a classic statement of the law as it then stood. He dealt with the history of the law on this topic, from the cannon lawyers to the time of the judgment in 1897. But he held that concealment of pregnancy did not render the marriage null and void, and so the law remained for 40 years. The Matrimonial Causes Act 1937, s 7, provided for the first time as a ground of nullity that at the time of the celebration of the marriage the respondent was pregnant by some person other than the petitioner. That section, as in subsequent sections which have re-enacted it, required that the petitioner should be at the time of the marriage ignorant of the facts alleged; and further that proceedings should be instituted within a year from the date of the marriage. That is still the law, and the same provisions are to be found in s 9 of the Matrimonial Causes Act 1965. These limitations therefore are matters which have formed part of our law for substantially over 30 years.
What the learned county court judge found in this case was that there was no misconduct by the wife at any time after or during the marriage. With that finding I am in complete agreement, and that being so, it is impossible to import into this case conduct or misconduct by the wife which entitled the husband to bring cohabitation to an end. In other words, there was no desertion, constructive or otherwise, on the part of the wife. Unfortunately here the husband, who has been described
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by Winn LJ (and I agree with the description) as a man of at least very moderate intelligence, failed to take advice and did not bring proceedings within the year, not knowing what his rights were because he had not troubled to get advice. I am not without sympathy with him because he could not get advice since he was not intelligent enough to realise that advice should be sought to help him in his difficulties. But the requirements of the Act are strict and must be strictly observed. I cannot in spite of the attractive argument of counsel for the husband, find that there was any misconduct by the wife during the marriage or after the ceremony of marriage which constituted desertion on her part. I agree that this appeal must be dismissed.
SIR GORDON WILLMER. I have come to the same conclusion, and I venture to add some words of my own only because of the importance of the questions discussed before us. First of all, I would like to express my own agreement with what fell from Winn LJ as to the excellence and helpfulness of the judgment delivered by the learned county court judge, with which I find myself wholly in agreement.
It seems to me that the fact of pregnancy of the wife by another man at the time of the marriage, like other antecedent circumstances such as venereal disease, goes to the validity of the marriage and nothing but the validity of the marriage. That is what must have been the view of Parliament when it passed the forerunner to what is now s 9 of the Matrimonial Causes Act 1965. Successive Matrimonial Causes Acts since 1937 have provided the husband who finds his wife pregnant by another man with a remedy in nullity, provided he complies with the somewhat narrow conditions imposed. This husband knew nothing about that; he did not seek legal advice; and the result was that the statutory limitation period had long since elapsed before he took any action at all. Whether he intended it or not, it is clear that his failure to exercise such rights as he had under what is now s 9 of the 1965 Act had the effect of affirming the validity of the marriage; and insofar as he was affirming its validity he was doing so in the conditions which then existed, ie in the knowledge that his wife was pregnant by another man in consequence of premarital intercourse. Assuming the marriage to be a valid marriage— which, for the reasons I have given, I think we must—there is no reason to doubt that, subject to one matter to which I will refer hereafter, the wife thereafter did nothing which could fairly be described as constituting a matrimonial offence, such as would justify the husband in seeking a dissolution of the marriage. Of course it is commonplace that, if a spouse is guilty of conduct during the marriage such as to justify the other spouse leaving, that spouse can be held guilty of constructive desertion; but I emphasise that in order to bring that about there must be ‘conduct’, and conduct during the marriage. Here there was no such conduct. The wife’s pregnancy was not ‘conduct’; it was a physiological condition, and the fact that, apart from miscarriage or abortion, a child was bound eventually to result is no more than the inevitable consequence of the wife’s physiological condition.
The learned judge was referred to a number of authorities with which he dealt in his judgment and we have in turn been referred to those and also some additional ones. I do not propose to deal with them myself, because the new cases cited to us, like the cases cited to the learned judge, really have extremely little, if any, bearing on the novel problem which we have been asked to solve in this case. These cases related to matters which can only be described as ‘conduct’ during the currency of the marriage, and it seems to me for the reasons I have given, that what we are here concerned with is the wife’s physiological state at the time of the marriage as opposed to any subsequent ‘conduct’ on her part. Broadly speaking, I agree with the decision of the learned judge as expressed in the paragraph at the end of his judgment which Winn LJ has already read. I think it may perhaps be worth commenting that if the submissions of counsel for the husband were right, and if circumstances such as we have here are to be held sufficient per se to found a case of constructive desertion
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justifying a decree of dissolution, there would have been no need for Parliament to introduce the additional remedy of nullity on the ground of the pregnancy of the wife by another man before marriage. The fact that Parliament saw fit to do so seems to me to reinforce what I have already said, ie that the existence of such a state of affairs (namely pregnancy of the wife at the time of the marriage) goes to the validity of the marriage and only to the validity of the marriage.
I cannot help feeling some measure of sympathy for the unfortunate husband who now finds himself, many years after the events complained of, denied any remedy in respect of the matters of which he now complains. But as has been pointed out he was a relatively illiterate and uneducated man who did not have the benefit of any advice. It may be of some comfort to him to learn that he is not necessarily even now wholly without remedy. It has transpired during the course of the argument that the wife in her original petition was asking for the discretion of the court to be exercised in her favour, thereby admitting on her pleading that she had been guilty of adultery during the course of the marriage. The husband is not in a position to prove that adultery on the part of the wife, since the wife’s solicitors have lost touch with the wife and, being without instructions, quite properly have refused to disclose to the husband’s advisers the contents of the wife’s discretion statement. But it seems to me that at the least the husband must be entitled to say that the wife’s prayer for discretion in her petition is sufficient to induce in his mind a reasonable belief that she had committed adultery, a reasonable belief which nothing has happened up to date to dispel. On this ground he would in any case be justified in leaving his wife and, assuming that Baker v Baker was correctly decided, I think he would be entitled to go on and say further that on that ground the wife was guilty of constructive desertion. I do not promise that if he launches proceedings in the future they will necessarily succeed, but I think it right to refer to that as showing that his position is by no means a hopeless one.
I agree that the appeal must be dismissed.
Appeal dismissed.
Solicitors: M A Jacobs & Sons (for the husband).
F A Amies Esq Barrister.
Ferdinand Wagner (a firm) v Laubscher Brothers & Co (a firm)
[1970] 2 All ER 174
Categories: CONFLICT OF LAWS
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 27 FEBRUARY 1970
Conflict of laws – Foreign judgment – Registration in England – Stay of execution – Conclusive foreign judgment in plaintiffs’ favour – Cross-action commenced in England by defendants raising same issues as were raised in foreign action but claiming greater sum than plaintiffs awarded on foreign judgment – Cross-action not a special circumstance rendering it inexpedient to enforce foreign judgment – Foreign Judgments (Reciprocal Enforcement) Act 1933, s 2(2) – RSC Ord 47, r 1(1).
In 1968 the plaintiffs, manufacturers in Germany, obtained conclusive judgment in the courts of Germany against the defendants, their distributors in England, for a sum of about £6,000, and registered the judgment in England pursuant to s 2 of the Foreign Judgments (Reciprocal Enforcement) Act 1933. In 1964, while the German action was proceeding, the defendants had commenced in England a cross-action which raised the same issues as were raised in the German action, claiming £10,000 against the plaintiffs. The defendants’ action went to sleep until the German action was concluded in the plaintiffs’ favour when the defendants sought to continue their action. The defendants, having abandoned attempts under the 1933 Act to set aside the German judgment, applied under RSC Ord 47, r 1a, to stay execution on the German judgment on the ground that it was inexpedient to enforce it against them because they had started an action in England against the plaintiffs. On appeal from the master, the judge granted the defendants an unconditional stay of execution. The plaintiffs appealed.
Held – Since, under s 2(2)b of the Foreign Judgments (Reciprocal Enforcement) Act 1933, a foreign judgment registered in England and the same force as a judgment obtained in England, and a stay of execution of an English judgment would not be granted under RSC Ord 47, r 1, simply because the defendant had brought a cross-claim in another action against the plaintiff, the court would not stay execution of the German judgment, there being no special circumstances which rendered it inexpedient to enforce the judgment; accordingly, the plaintiffs’ appeal would be allowed (see p 176 f and h, p 177 j to p 178 c and p 179 b, post).
Per Curiam. The tests to be applied on an application under RSC Ord 47, r 1, are quite different to those applicable under Ord 14 proceedings (see p 176 e, p 178 b, and p 179 c, post).
Notes
For the effect of registration of a foreign judgment, see 7 Halsbury’s Laws (3rd Edn) 162, para 289.
For stay of execution, see 16 Halsbury’s Laws (3rd Edn) 34–36, paras 49–52.
For the Foreign Judgments (Reciprocal Enforcement) Act 1933, s 2, see 6 Halsbury’s Statutes (3rd Edn) 366.
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Case referred to in judgment
Yukon Consolidated Gold Corpn Ltd v Clark [1938] 1 All ER 366, [1938] 2 KB 241, 107 LJKB 240, 158 LT 330, 11 Digest (Repl) 533, 1440.
Appeal
This was an appeal, the Court of Appeal granting leave to appeal, by the plaintiffs, Ferdinand Wagner (a firm), from the order of Chapman J made on 29 January 1970, whereby he granted the defendants, Laubscher Brothers & Co (a firm), an unconditional stay of execution of the judgment against them obtained by the plaintiffs in the Courts of Germany for a sum of over £6,000 sterling. The facts are set out in the judgment of Lord Denning MR.
W S E Getz for the plaintiffs.
S E Brodie for the defendants.
27 February 1970. The following judgments were delivered.
LORD DENNING MR. This case arises out of the Foreign Judgments (Reciprocal Enforcement) Act 1933. The plaintiffs, Ferdinand Wagner (a firm), have obtained a judgment in the courts of Germany for a sum of Deutschmarks which is over £6,000 in English money. They have registered it in England. They seek to enforce it against the defendants, Laubscher Brothers & Co (They are an English firm, of which a Mrs Templer is the proprietor.) The defendants applied for a stay of execution. The master granted a stay on terms of money being brought into court. On appeal the judge granted an unconditional stay. Now the plaintiffs ask for leave to appeal to this court. We give leave to appeal and proceed to determine the appeal.
The plaintiffs are manufacturers in the Federal Republic of Germany. They manufacture accessories for spectacle frames. The defendants are distributors in England of such articles. In February 1959, the plaintiffs appointed the defendants to be their selling agents for Great Britain and Ireland for five years. In 1959 and 1960, the plaintiffs supplied a number of these accessories for spectacle frames, and the defendants paid for them. But later on troubles arose. The plaintiffs supplied more of these accessories, but the defendants did not pay for them. So the plaintiffs sued the defendants in the courts of Germany for the price. It was the sum of DM33,561·80. They started proceedings in Germany in January 1961. On 5 October 1961, the plaintiffs obtained judgment for that sum in the district court of Karlsruhe, together with interest, which was to run at 9 per cent from 1 January 1961, and costs. That is the judgment which was eventually registered.
Meanwhile the defendants appealed from court to court in Germany. They appealed to the regional court at Mannheim. They appealed from there to the Federal Court (which corresponds to our House of Lords). The Federal Court remitted it to the regional court for a new trial. On 26 April 1966, the regional court reheard it. They upheld the judgment in favour of the plaintiffs. The defendants appealed again to the Federal Court. On 15 January 1968, the Federal Court in Germany finally dismissed the defendants’ appeal. The result was that there was in Germany a conclusive judgment in favour of the plaintiffs against the defendants. It was a judgment which was dated 5 October 1961 for DM33,561·80 with 9 per cent interest from 1 January 1961. The next step was to register that judgment in England. On 28 August 1969, the judgment was registered in England for the total sum of DM68,466·86, which, converted into sterling, was £6,161 7s 10d.
This brings me to the Foreign Judgments (Reciprocal Enforcement) Act 1933. By reason of s 2(2), it is quite plain that, on registration, the German judgment became, for all practical purposes, of the same force and effect as if it had been given by the High Court in England. In an effort to avoid this effect, the defendants first applied to set it aside on several grounds set out in s 4 of the 1933 Act on which a registered judgment can be set aside. But none of these availed the defendants.
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So they did not proceed further with that application. Secondly, the defendants applied to stay execution on the judgment. They relied on RSC Ord 47, r 1(1), which provides that a court may grant a stay of execution if it is satisfied—‘(a) that there are special circumstances which render it inexpedient to enforce the judgment or order.’
The defendants said that it was inexpedient to enforce this German judgment against them because they had started an action in the English courts against the plaintiffs. They said that they had a claim against the plaintiffs for damages of £10,000, which would far overtop the £6,000 on the German judgment. This leads me to examine the action which the defendants have brought against the plaintiffs. The writ was issued in this English action on 4 May 1964. A year later, on 4 March 1965, points of claim were delivered. The plaintiffs delivered points of claim as ordered and applied to stay the English proceedings because there were the parallel proceedings going on in Germany which raised the same issues. Mocatta J dismissed the application. He did not stay the English action. But nevertheless the defendants did not proceed with it. It slept from 1965 till 1968, whilst the proceedings were going on in Germany. Then, after the German proceedings had finally ended in favour of the plaintiffs, the defendants sought to bring the English action to life again. They rely on it as a ground for staying execution in the German judgment.
We have examined the issues in the English action. They seem to me to raise the selfsame issues as were decided by the German courts in the German action. Nevertheless the master granted a stay of execution on the German judgment on terms of bringing the money into court. On appeal, the judge granted a stay unconditionally. If his order stands, it means that the plaintiffs will be held up and not be able to enforce their German judgment for an indefinite time—until the English action is decided.
I am afraid that I cannot agree with the judge’s approach to this matter. He seemed to have regarded it as if there was a summons under RSC Ord 14 in which the question is whether there is an arguable point. But I think this procedure to enforce a foreign judgment is quite different from RSC Ord 14. Here is a German judgment which is equivalent to an English judgment. If the plaintiffs had obtained an English judgment, we should not, for one moment, grant a stay simply because the defendants had brought a cross-claim in another action against the plaintiffs. So here we should not stay execution in this German judgment simply because the defendants have brought a cross-action in England against the plaintiffs.
That would be quite enough to decide the case. But I would go further. The English action raises, as far as I can see, the selfsame issues as have been determined in the courts of Germany adversely to the defendants. It would be quite wrong to grant a stay of execution so as to enable the defendants to fight the same issues all over again in England. I would say, quite simply, that when a foreign judgment is registered here in England, we should give it the selfsame force as we would an English judgment. Under this reciprocal arrangement, we expect the courts of foreign countries to give effect to the judgments of our courts. We should likewise give effect to theirs. I think that the plaintiffs should be entitled to enforce their judgment here. I would therefore allow the appeal and remove any stay.
SACHS LJ. This is a particularly plain case in which plaintiffs in a foreign court having, after so many years of litigation in Germany, succeeded in recovering the full amount of their claim, should not be further kept out of the fruits of their judgment.
The German litigation commenced as long ago as January 1961. Initially the hearing came before the Landesgericht of Pforzheim (here referred to as a district court) which is deemed to be a superior court of the Federal Republic of Germany
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under the Reciprocal Enforcement of Judgments (Germany) Order 1961c. It went twice before the Oberlandesgericht or regional court. It was considered twice by the Bundesgerichstof, which is the highest federal court, and on the last occasion that it came before that court, on 15 January 1968, the German litigation came to a final end by the plaintiffs being held entitled to recover their judgment in full. The cause of action in Germany was throughout for goods sold and delivered as long ago as 1960, and by the 1968 judgment the plaintiffs became entitled to interest at 9 per cent from 1961.
In the middle of this stream of litigation on the other side of the Channel the defendants chose on 4 May 1964 to launch an action in this country. Their claim was for breach of warranty in regard to goods sold and delivered, including the selfsame goods the price of which was being claimed in the German action. In addition, claims were made for collateral breaches of the agreement of February 1959 which resulted in those goods being supplied. So far as appears from the material before this court, each and every one of the issues of liability sought to be raised in the English action was also covered either by an identical issue raised in the German courts, or by one so parallel that it covered all potential issues raised in the English action, even though the precise damages or remedies claimed in the English action may have been larger. As already indicated, every one of those issues arose out of the implementation of the 1959 agreement; moreover every one of those issues was eventually determined in the German courts in favour of the plaintiffs.
What then is the principle on which we should approach such a situation? To adopt the phraseology used in Cheshire’s Private International Lawd, the English tribunal cannot sit as a court of appeal against a judgment pronounced on the merits by a foreign court which was competent to exercise jurisdiction over the parties. Such an attitude would force the plaintiff back to his original cause of action and it would avail him little that he had already been successful abroad. In other words, it would be a gross injustice to the successful plaintiff abroad to have all the issues reviewed here once more in England.
How then does one look at this particular claim a stay to which is sought to enable the defendants, so far as they find it possible, to relitigate in the Commercial Court here a large number of issues all or almost all of which have been thus the subject of lengthy litigation in Germany? To my mind, an application for a stay in those circumstances is quite a hopeless proposition; and it matters not whether the findings of the German court definitely give rise to a plea of res judicata, or whether they went no further than being matters to which great weight ought to be given in an application of the present type.
There are two further factors which aggravate the hopelessness of the proposition. In the first place, one has only to give a glance at the documents which constitute the 1959 agreement to see that they related to a contract governed by German law—indeed in the judgment of the Oberlandesericht it was specifically stated that there was no contest there on that point; and it has often been well said that laws are rarely administered as satisfactorily as in the tribunal of the country governed by them. Secondly, a point that makes the defendants’ position even worse before this court today is the complete lack of diligence in pursing their action in this country commenced by the writ of March 1964. It was only on 8 February 1968 that they gave notice to proceed in that action in which they had taken not a single step since August 1965.
For those reasons I agree entirely that this appeal should be allowed and would only add a few words on a matter of general principle. Section 2(2) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 makes it plain that judgments of any
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foreign court to which the Act has been applied by Order in Council when registered rank exactly the same as a judgment of a court in this country. Accordingly whilst, of course, RSC Ord 47, r 1, may in certain circumstances be relied on when it is sought to obtain a stay on a foreign judgment in the same way as it might in certain circumstances be relied on when a stay is sought of a judgment of one of the courts of this country, that can only successfully be done when there are ‘special circumstances which render it inexpedient to enforce the judgment or order.' For my part I too, with all respect to the approach of the learned judge in chambers, consider the tests to be applied when an application is made under RSC Ord 47, r 1, quite different to those applicable to RSC Ord 14 proceedings. In the present case there are no special circumstances whatsoever that would render it inexpedient to enforce the German judgment and many that tend the other way.
PHILLIMORE LJ. I agree. Counsel for the defendants says that once the judge appreciated that this action brought by the defendants in this country was a bona fide action, there was really no alternative but to grant a stay, as he did. I confess that I have wondered in the course of this appeal whether it really is a bona fide action. It appears that the action in this country was not begun until the plaintiffs had obtained judgment in the district court and until the defendants’ appeal against that judgment had been dismissed. It was at that stage that the defendants started their action in England—an action in which they made claims which, as Mocatta J pointed out in his judgment in 1965, could perfectly well have been advanced in the course of the proceedings in Germany if they had made them earlier. Then, the action in England after 1965 was allowed to go to sleep. That was because the defendants had launched an appeal in Germany, and it was not until that appeal had succeeded and had been followed by a new trial in the regional court, and then by a final hearing in the federal court, that the action in this country was dusted down and put in motion once more. I confess I get the impression that this application is a step in a long skilful hitherto successful delaying operation. However, it may be that I am wrong, and I will assume for the purpose of my judgment that I am and that this is a bona fide claim. The fact remains that the plaintiffs have contested their claim through all the courts of the Federal Republic; they have succeeded and they have got judgment—a final judgment which they registered in this country. The defendants have abandoned any attempt to set that judgment aside, and so the courts of this country are bound to treat that judgment in accordance with s 2 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 as if it were an English judgment; and that means that it is a judgment which is not lightly to be interfered with. The plaintiffs are entitled to the fruits of their litigation. It is important that the courts of this country should loyally observe the provisions of the Act. As Greer LJ pointed out in Yukon Consolidated Gold Corpn Ltd v Clark ([1938] 1 All ER 366 at 368, [1938] 2 KB 241 at 253)—a passage which is cited by Professor Cheshire in his Private International Lawe:
‘… it was fully appreciated by those who thought about foreign judgments that British judgments were never enforced as of right in foreign countries, and that was believed, and rightly believed, to operate as an injustice to this country. Whereas we enforced foreign judgments by means of action in this country, foreign countries refused to enforce the judgments obtained in this country, and it was to deal with that situation that the statute of 1933 was passed.’
And, of course, it depends on proper reciprocity. Now, what are the considerations which it is said would justify interference with the rights of the plaintiffs to enforce their judgment – special reasons within the meaning of RSC Ord 47, r 1? I agree
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with my Lords that there are not any special reasons. The fact of the matter is that the claim which these respondents are making in their action in England is one they could perfectly well have made years ago in the proceedings in Germany if they had wanted to. The issues on which that claim depends have all been, as it is said, adverted to. I would put it rather more strongly and say they had been fully ventilated and for the most part in my view decided in the course of the German proceedings. This judgment was not obtained by default or anything of the sort: it was obtained by a succession of hearings before the superior courts of another country which is party to this reciprocal enforcement of judgments Act. If such a judgment had been obtained in the courts of this country, it is very difficult to think that a judge of the High Court here would have stayed its execution simply on the ground that the defendants here say they have got some sort of counterclaim which they should have put forward before but which they now really want to pursue. I think this appeal is right. The learned judge approached this matter from a wrong point of view, and the appeal must be allowed.
Appeal allowed; application to stay refused. Leave to appeal to the House of Lords refused.
Solicitors: Slaughter & May (for the plaintiffs); Crawley & de Reya (for the defendants).
Wendy Shockett Barrister.
Breen v Amalgamated Engineering Union and others
[1970] 2 All ER 179
Categories: EMPLOYMENT; Industrial relations: ADMINISTRATIVE
Court: QUEEN’S BENCH DIVISION
Lord(s): CUSACK J
Hearing Date(s): 13, 14, 15, 16, 19, 21, 22, 23, 26, 27, 28, 29 JANUARY, 13 FEBRUARY 1970
Trade union – Domestic tribunal – Natural justice – Refusal of district committee to endorse member’s election as shop steward – Functions of committee under union rules discretionary – Whether committee exercising judicial or quasi-judicial function – Allegations of breach of contract and bad faith – Whether decision of committee void.
In November 1965, the plaintiff was elected shop steward of the defendant union at his place of work. Rule 13(21) of the rules of the union provided that shop stewards elected by members were subject to approval by the district committee of the union and should not function until such approval was given. At a meeting on 9 December 1965 the committee unanimously resolved that it was unable to approve the plaintiff’s election as shop steward. The committee’s decision not to approve his election was communicated to the plaintiff without any reason being given. On 18 December 1965, the plaintiff protested in writing to the committee against their decision, requested that the matter should be reconsidered and complained that no reasons had been given. At a meeting on 30 December the committee considered their refusal but adhered to the decision and directed that the plaintiff should be informed of the reasons for their refusal. In a letter to the plaintiff dated 31 December the following reasons were given: that in 1958 the plaintiff had resigned as shop steward as a result of an accusation that he had misappropriated union funds (the committee had subsequently withdrawn the allegation), that in June 1961 the plaintiff again resigned as shop steward because he was prepared to work night shifts contrary to the other shop stewards’ decision not to do so, and that in March 1963 his credentials as a shop steward had been withdrawn because he was over eight weeks in arrears with his subscriptions. The plaintiff claimed against the union a declaration: (i) that the decision of the committee was ultra vires, invalid
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and void, being contrary to the rules of natural justice and to the rules of the union; (ii) that there was an error on the face of the record in respect of the first two reasons given in the letter of 31 December 1965; (iii) that the members of the committee were actuated by malice, bias and bad faith; and (iv) damages for breach of contract as contained in the union rules.
Held – The action failed, because—
(i) at the meeting on 9 December 1965 the committee was exercising the function and discretion allotted to it under r 13(21) and on 30 December it was considering the plaintiff’s letter of 18 December which was not an appeal but a protest, a request for reconsideration and for reasons; accordingly on neither occasion was there any dispute on which the committee was required to adjudicate or which required the exercise of functions either judicial or quasi-judicial; its decision, therefore, was not void or in breach of contract for failure to observe the precepts of natural justice, as no duty to observe these applied (see p 181 j and p 182 e and h, post);
(ii) the decision was not impeachable on the ground of error on the face of the record since that, too, had no application to the committee’s proceedings (see p 182 j, post); and
(iii) even though the proceedings were neither judicial nor quasi-judicial the decision could be vitiated by bad faith but on the evidence bad faith had not been found (see p 183 b, post).
Notes
For quasi-judicial functions and the application of the rules of natural justice, see 30 Halsbury’s Laws (3rd Edn) 716–719, paras 1366–1368, and for cases on the subject, see 38 Digest (Repl) 100–105, 722–750.
Cases referred to in judgment
Faramus v Film Artistes’ Association [1963] 1 All ER 636, [1963] 2 QB 527, [1963] 2 WLR 504; affd HL [1964] 1 All ER 25, [1964] AC 925, [1964] 2 WLR 126, 45 Digest (Repl) 542, 1228.
Lawlor v Union of Post Office Workers [1965] 1 All ER 353, [1965] Ch 712, [1965] 2 WLR 579, Digest (Cont Vol B) 718, 1214a.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, [1963] 2 WLR 935, 127 JP 295, 37 Digest (Repl) 195, 32.
Taylor v National Union of Seamen [1967] 1 All ER 767, [1967] 1 WLR 532., Digest Supp.
Action
By an amended writ issued on 27 July 1967 the plaintiff, Patrick Adair Breen, claimed against the first defendant, the Amalgamated Engineering Union (the union) a declaration that the decision of the district committee of the union in December 1965 refusing to endorse his election as shop steward was ultra vires and void, and damages for breach of contract. He claimed against the other defendants, all members of the union, Victor Townsend (secretary of the committee), Arthur Blizard (sometime chairman of the committee), John Banks, James McFadyn, A Short, Alan Cobb, William Yarney, G H Smith and Cyril Parton, damages for conspiracy by breaches of the union rules and by unlawful and malicious activities to prevent him being elected to and/or maintaining the office of shop steward, and a declaration in the same terms as that claimed against the union.
Cusack J heard evidence relating to the episodes alleged by the plaintiff to show the existence of a conspiracy and sustained malice of some or all of the defendants towards him. The facts of the episodes were: (1) in June 1958, the plaintiff was accused, falsely as was admitted, of appropriating money from union funds intended to be paid over to other members; (2) in November 1958, the plaintiff’s election as a shop steward was frustrated by an alteration to the number of persons eligible to vote which deprived him of some of his supporters; (3) in May 1961, the plaintiff
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undertook shift work contrary to a resolution of his fellow shop stewards and was so ostracised that he was obliged to resign as shop steward; (4) in March 1963, the plaintiff was deprived of his credentials as a shop steward and the management was asked to suspend him from his job, it having been discovered that at the time when he had been elected as a shop steward and approved by the committee he was in arrears with his union contributions; (5) on 9 December 1965, the committee, which by r 13(21) of the union rules had to meet to approve the election of shop stewards, unanimously decided not to approve the plaintiff’s election in November 1965 as a shop steward in view of his past history, no reasons being given to the plaintiff; (6) on 30 December 1965, the committee reconsidered its decision, having received a letter from the plaintiff dated 18 December 1965 protesting against the refusal to endorse his election and the failure to give reasons for the decision and asking for the matter to be reconsidered; but the committee adhered to its previous decision and directed that the plaintiff be informed of the reasons; (7) on 31 December 1965, the secretary of the committee, Mr Townsend, wrote to the plaintiff giving as the reasons the two occasions when the plaintiff had resigned as a shop steward, one being after the accusations of dishonesty in 1958 and the other when he undertook the night shift work contrary to the resolution of the other shop stewards in 1961, and also the withdrawal of his credentials in 1963. His Lordship found in respect of each episode: (1) as regards the accusation in June 1958, there was not evidence of hostility towards the plaintiff on the part of Mr Townsend and Mr Blizard; (2) the evidence about the election in November 1958 and its aftermath showed no overt act in pursuance of a conspiracy or anything which indicated the existence of a conspiracy at that time; (3) there was no evidence of malice by Mr Townsend towards the plaintiff in 1961; (4) the withdrawing of the plaintiff’s credentials in 1963 was a justifiable action and the committee had not exceeded their powers under the union rules, it was not an overt act of conspiracy nor did it indicate the existence of a conspiracy at all and although the attempt to get him suspended was not justifiable, it was ineffective since the management refused to act upon the resolution; (5), (6), (7) there was no discussion at the meeting of 9 December 1965 of the trouble over money in 1958 and it played no part in the decision. Taking the episodes separately or together there was no evidence to show that the defendants or any two of them had combined or agreed to prevent the plaintiff being endorsed as a shop steward or to prevent him from being elected to or holding that office. This case is reported only on the plaintiff’s claim for a declaration and damages for breach of contract.
Sir Peter Rawlinson QC and R A Rosen for the plaintiff.
R B Gibson QC and A A M Irvine for the defendants.
Cur adv vult
13 February 1970. The following judgment was delivered.
CUSACK J having found that the plaintiff failed on his claim for damages for conspiracy continued. There is still for consideration the question of a breach of contract. It is to be noticed that although a declaration and damages for conspiracy are sought against all defendants, damages for breach of contract are sought only against the union. It is pleaded on behalf of the plaintiff that the decision of the district committee taken on 30 December 1965, was ultra vires, invalid and void as being contrary to natural justice and to the union’s own rules. I note that the complaint on the pleadings is made only about 30 December 1965. The defendants, however, submit that procedurally there was no distinction between what happened on 30 December 1965, and what happened at the original meeting on 9 December. Certainly it is necessary for me to consider both meetings.
On 9 December 1965, the committee were exercising the function allotted to them under r 13(21), the relevant part of which contains the provision that shop stewards elected by members are subject to approval by the district committee and shall not function until such approval is given. A refusal to approve does not affect the livelihood or membership of the union of the person concerned; its only direct
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effect is to prevent his functioning as a shop steward for the period for which he had been elected by the members and so also to lose the few shillings payable by way of fees under r 13(21) to which he might be entitled if he attended meetings or submitted a written report.
It is admitted that on 9 December the committee took its decision without giving the plaintiff any opportunity to be heard or to make representations. It is for that reason that it is submitted in argument that this was a breach of the rules of natural justice. The task of ascertaining when the rules of natural justice do or do not apply is not free from difficulty. I have been referred to a number of authorities, which I have found interesting though, without disparaging the industry of counsel, not always in point, since some of them deal with circumstances quite different from the present, such as the trial of specific accusations of misconduct or the removal from office of a person already functioning in that office. The citation of dicta from judgments should always be related to the facts of the particular case and to the relief which is then being sought. Suffice it to say that I have fully considered such cases as Faramus v Film Artistes’ Association, Ridge v Baldwin, Lawlor v Union of Post Office Workers, Taylor v National Union of Seamen, and other authorities to which I have been referred. I should perhaps draw attention to the fact that Lawlor v Union of Post Office Workers was a case which was concerned with and arose from a motion for interlocutory relief, and a good deal of the reasoning in the judgment is directed to the appropriateness or otherwise of granting interlocutory relief on the facts of that particular case.
I do not find it necessary to review these or the other authorities in detail. It is clear that a committee fails at its peril to observe the rules of natural justice if it is exercising a judicial or quasi-judicial function. But in my view the district committee on 9 December 1965, was not doing anything of the sort. It was entirely a matter for discretion whether the plaintiff was approved or not. If some charge had been brought against him, as it was in 1958, then of course he should have been allowed to defend himself and to be heard, as he was before the sub-committee in that year. On this occasion no such circumstances arose.
I turn, therefore, to 30 December 1965 and to consider whether the proceedings then were of a judicial or quasi-judicial nature. The committee was considering the plaintiff’s letter. But it was not one in which he introduced the word ‘appeal’ at all—though one should not attach too much significance to the actual word used or not used.
Rule 20(2) of the rules of the union which relates to appeals is not happily worded. But I do not think it is disputed that the plaintiff if he so desired could have appealed to the executive council of the union. I find that he would have been entitled so to do. If the proceedings at the district committee on 30 December were an appeal, one may ask oneself who was he appealing from, and to whom? The answer in each case must be: the district committee. This was not really an appeal at all but a protest, a request for reconsideration, and a request for reasons. The powers and duties of the district committee were exactly the same as on 9 December. On neither occasion was there any dispute on which they were required to adjudicate or which required the exercise of functions either judicial or quasi-judicial. There is no substance in the allegation that they were in breach of contract on either occasion in failing to observe the precepts of natural justice.
The further allegation that there was an error on the face of the record— by which is meant the letter of 31 December 1965—fails, for the same reasons, since it could only have application to judicial or quasi-judicial proceedings.
Lastly I must deal with the allegation that some or all of the members of the committee were on 30 December 1965, actuated by bias, bad faith and malice so that
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their decision should be treated as invalid and void. The evidence relied on in support of this was really the same, insofar as the individuals who participated in that decision are concerned, as the evidence intended to support the conspiracy charge, save, of course, that neither Mr Townsend nor Mr Parton was a member of the committee. I accept that a decision not to approve could be vitiated if it was made in bad faith, even though the proceedings were neither judicial nor quasi-judicial. I am, however, unable to find that there was bias, malice or bad faith. In particular, I find that the futile action of the committee in 1963 in suggesting that the plaintiff should be suspended from his job does not provide any sufficient evidence that the committee was in 1965 acting in bad faith.
If the rules of natural justice are not applicable, the court is not concerned with the reasonableness of the decision made, though a decision which is wholly unreasonable may indicate a lack of good faith. I think it is right that I should say that although the decision not to approve the plaintiff may have been harsh viewed from his personal point of view, I do not think it can be justifiably characterised as unreasonable, in the circumstances, on the part of the committee.
My final conclusion, therefore, is that this action fails, and there must be judgment for the defendants.
Judgment for the defendants.
Solicitors: Rupert Martin, Southampton (for the plaintiff); W H Thompson (for the defendants).
Janet Harding Barrister.
Note
Re Boxco Ltd
[1970] 2 All ER 183
Categories: COMPANY; Incorporation
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 16 MARCH 1970
Company – Registration – Restoration to register – Validation of acts done on company’s behalf before restoration – Registration of legal charge – Companies Act 1948, s 353(6).
Notes
For the power to restore a company’s name to the register, see 6 Halsbury’s Laws (3rd Edn) 788, 789, para 1590.
For the Companies Act 1948, s 353, see 5 Halsbury’s Statutes (3rd Edn) 373.
Case referred to in judgment
Tyman’s Ltd v Craven [1952] 1 All ER 613, [1952] 2 QB 100, 10 Digest (Repl) 1141, 7949.
Petition
The company, Boxco Ltd, and a shareholder in the company sought by this petition to have the company’s name restored to the register and an order in the following terms, namely that from and after the restoration of the name of the company to the register the company should be deemed duly to have delivered to the Registrar of Companies for registration on 31 December 1969, the legal charge dated 12 December 1969, whereby the company borrowed moneys on security of a first mortgage on 50 Bryne Road SW 12 and 111 Fernlea Road SW12, and the particulars thereof required by s 98 of the Companies Act 1948.
The facts, as taken from the judgment of Pennycuick J were as follows. The company was struck off the register on 28 October 1969 by reason of its default in making certain returns. On 12 December 1969, in ignorance that the company
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was no longer in existence, its directors purported to create a legal charge on certain property (mentioned above in the petition) then being purchased by the company. The particulars of that legal charge were delivered for registration pursuant to s 98 of the Companies Act 1948, but registration was not accepted by reason that the company was no longer in existence. It was in evidence that the company had ot purported to create any further charge and that the company was solvent.
M K I Kennedy for the petitioners.
J E F Lindsay for the Registrar of Companies.
16 March 1970. The following judgment was delivered.
PENNYCUICK J stated the facts as set out above and continued: It seems to me that I ought to make the order in the terms sought. Section 353(6) of the Companies Act 1948, so far as now material, provides:
‘If a company or any member or creditor thereof feels aggrieved by the company having been struck off the register, the court on an application made by the company or member or creditor before the expiration of twenty years from the publication in the Gazette of the notice aforesaid may, if satisfied [on one or other of a number of matters] order the name of the company to be restored to the register, and upon the office copy of the order being delivered to the registrar for registration the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.’
Consideration was given to that subsection by the Court of Appeal in Tyman’s Ltd v Craven, when the majority in the Court of Appeal emphasised the retrospective character of sub-s (6) and gave an express direction pursuant to the subsection carrying out that retrospective effect.
It seems to me that the principle laid down by the Court of Appeal in that case is fully applicable here, bearing in mind the evidence that the company is solvent and no subsequent charges have been created. It is clear that no one can be prejudiced by the retrospective order sought and I think it would be right that the company should now be put in the same position retrospectively as if the legal charge of 12 December 1969 had been duly created and the particulars duly delivered for registration on 31 December 1969. I understand from counsel for the registrar that the registrar will find no difficulty in acting on an order in those terms.
I propose, on the usual undertakings by the company, to which I need not refer further, to make the order sought in the petition. Both petitioners jointly and severally to pay the registrar’s costs.
Order accordingly.
Solicitors: Armstrong & Co (for the petitioners); Solicitor, Board of Trade.
Richard J Soper Esq Barrister.
R v Tarry
[1970] 2 All ER 185
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 24 MARCH 1970
Criminal law – Sentence – Suspended sentence – Activation – Fresh offence committed in respect of which probation order imposed – Whether probation order a conviction such as to enable suspended sentence to be activated – Criminal Justice Act 1948, s 12 – Criminal Justice Act 1967, ss 39(1), 40(1).
Criminal Law – Sentence – Suspended sentence – Fresh offence committed during period of suspension – Magistrates wishing to make order of probation or discharge – Duty to commit to assizes or quarter sessions for sentence – Criminal Justice Act 1967, s 56.
By virtue of s 12a of the Criminal Justice Act 1948 a conviction in respect of which a probation order is made is not deemed to be a conviction, except for the purposes of the proceedings in which the order is made. Accordingly a suspended sentence imposed under s 39(1)b of the Criminal Justice Act 1967 cannot be brought into operation under s 40(1)c on conviction for an offence committed in the operational period if the conviction is one in respect of which a probation order is made (see p 187 g, and p 188 c, post).
R v Stobbart [1951] 2 All ER 753 and R v Metcalfe [1968] Crim LR 626 applied.
Per Curiam. It ought to be a rule of practice for magistrates’ courts that, whenever they are minded to make an order which will not enable the suspended sentence to be brought into operation, namely, absolute discharge, conditional discharge or probation … the proper course is to refrain from making one or other of those orders and to commit under s 56 of the Criminal Justice Act 1967, so that the court of quarter sessions or assize court, as the case may be, that imposed the suspended sentence can deal with the whole matter together (see p 188 f, post).
Notes
For suspended sentences, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 922A, 1, 2, 3.
For the effects of probation and discharge, see 10 Halsbury’s Laws (3rd Edn) 507, 508, para 922.
For the Criminal Justice Act 1948, s 12, see 8 Halsbury’s Statutes (3rd Edn) 352, and for the Criminal Justice Act 1967, ss 39, 40, see ibid 603, 606.
Cases referred to in judgment
R v Metcalfe [1968] Crim LR 626.
R v Stobbart [1951] 2 All ER 753, 115 JP 561, 35 Cr App Rep 125, 14 Digest (Repl) 583, 5810.
Page 186 of [1970] 2 All ER 185
Appeal
On 30 April 1969, at Surrey Assizes (Mocatta J), the appellant, Derek Newton Tarry, pleaded guilty to eight offences, including theft, asked for nine other offences to be taken into consideration, and was sentenced to concurrent terms of two years’ imprisonment suspended for three years. In February 1970, the appellant was convicted at Reigate magistrates’ court on two charges of theft and after two other cases had been taken into consideration, he was placed on probation for three years. On 10 March 1970, he was brought back to Sussex Assizes to be dealt with for the breach of the suspended sentences, and Thompson J, not having his attention specifically drawn to the provisions of s 12 of the Criminal Justice Act 1948, ordered the suspended sentences to take effect. On 13 March 1970, acting as a single judge under s 31 of the Criminal Appeal Act 1968, Thompson J granted the appellant leave to appeal against the suspended sentence order, on the question whether in the light of s 12 of the 1948 Act there was power to bring the suspended sentence into operation as a result of a later conviction during the operational period in respect of which the probation order had been made.
Shirley Ritchie for the appellant.
Gordon Slynn for the Crown.
24 March 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On 30 April 1969, at Surrey Assizes the appellant pleaded guilty to two counts of theft, two counts of forging a valuable security, two counts of uttering a valuable security, one count of obtaining money by virtue of a forged instrument, and one count of attempting to obtain money by virtue of a forged instrument and, after nine other cases were taken into consideration, he was sentenced to two years’ imprisonment on each count concurrent, suspended for three years. However, on 5 February 1970 at Reigate magistrates’ court he was convicted of two offences of theft and after two further offences had been taken into consideration, he was placed on probation for three years.
Before turning to what happened thereafter, it is worth stating a little more about the facts. It appears that the cases for which the appellant was given a suspended sentence concerned raising money because he was in difficulties, pressure being brought to bear on him by a girlfriend who was pregnant, and he raised money for surgical attention. There was also a suggestion that the doctor concerned had brought undue pressure to bear on the appellant in threatening to tell the girl’s parents if he did not pay up forthwith. The earlier lot of offences concerned stealing from his father; he would steal a cheque from his father, make it out for a considerable sum of money, and then get, or attempt to get, somebody to cash it for him, assuring whoever it was that his father had given him the cheque to settle his debts. As I have said, the appellant was given a suspended sentence in those circumstances, but when he was convicted in February 1970 it was for theft, this time from his employer, £80 10s on one occasion and £25 16s 2d on the other occasion. Speaking for myself, I simply do not understand how the Reigate justices came to put him on probation in those circumstances. Whatever difficulties he was in with his girlfriend did not justify stealing from his employer. Having been put on probation, however, the appellant was brought back before an assize court, this time at Sussex Assizes on the 10 March 1970, and there the judge, not having his attention specifically drawn to s 12 of the Criminal Justice Act 1948, took the very natural course of bringing this suspended sentence into operation. Three days later the matter was mentioned to him again, it being pointed out that under s 12 of the 1948 Act to which I must refer in a moment, it was likely that the judge had no power to bring the suspended sentence into operation. Thereupon arrangements were made for the immediate service of notice of application for leave to appeal and the judge very rightly, in the
Page 187 of [1970] 2 All ER 185
opinion of this court, converted himself to a single judge under s 31 of the Criminal Appeal Act 1968, and gave leave to appeal to this court.
The point that is now raised is one which experience shows is attracting the attention of people all over the country; to some extent it is a novel point, namely whether a suspended sentence can be brought into operation as the result of a conviction later during the operational period in respect of which an order of absolute discharge or conditional discharge or probation is made. Section 12 of the 1948 Act is in these terms:
‘(1) Subject as hereinafter provided, a conviction of an offence for which an order is made under this Part of this Act placing the offender on probation or discharging him absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made and of any subsequent proceedings which may be taken against the offender under the foregoing provisions of this Act … ’
The relevant provisions in regard to suspended sentence are to be found in ss 39, 40 and 41 of the Criminal Justice Act 1967. Section 39(1) provides:
‘A court which passes a sentence of imprisonment for a term of not more than two years for an offence may order that the sentence shall not take effect unless, during a period specified in the order, being not less than one year or more than three years from the date of the order, the offender commits in Great Britain another offence punishable with imprisonment … ’
I deliberately break off there, because an argument could be put forward that really the condition precedent here is not conviction, but the commission of an offence, and therefore s 12 of the 1948 Act would not operate. However, s 39(1) goes on to provide another condition, as it were, because it continues:
‘… and thereafter a court having power to do so orders under the next following section that the original sentence shall take effect … ’
Accordingly, that takes one to s 40(1), which provides for a suspended sentence being brought into operation by a court having power to do so under the following section, or the court before which he subsequently appears or is brought, and all that is conditional on the opening words of the subsection, which are: ‘Where an offender is convicted [by a magistrates’ court] of an offence punishable with imprisonment … ’
Accordingly, in the judgment of this court, it is really impossible to say that the only condition here is the commission of an offence; there must be in fact a conviction. Accordingly, when one looks at s 12 of the 1948 Act, it seems abundantly clear that the conviction on which the order of probation was made is not to rank as a conviction for any purposes other than those provided in s 12 itself. The court would add that this is fully in accord with such authority as is material in the matter, in particular R v Stobbart, where the Court of Criminal Appeal there had to consider the effect of a conviction followed by probation in regard to a qualifying offence for the purposes of corrective training. The court held there that, as it was not a conviction or was deemed not to be a conviction, it could not constitute one of the qualifying convictions for the purposes of corrective training. More recently, in a case which came before the Court of Appeal on 30 August 1968, R v Metcalfe, the court, amongst other things, had to consider whether an offence taken in consideration committed during the operational period of a suspended sentence could bring into operation that suspended sentence. The court said:
‘It is to be observed that although on 2 May he asked to have taken into consideration another offence of receiving committed after 21 February— namely during the operational period of the suspended sentence—it is established
Page 188 of [1970] 2 All ER 185
by decisions of the Court of Criminal Appeal that he was not thereby convicted of that offence within s 40 … ’
that is of the Criminal Justice Act 1967.
Accordingly, the view which this court takes is in accordance with authority and, moreover, in accordance as it seems to them with the policy behind the Act, because by s 39(2) it is provided:
‘A court which passes a suspended sentence on any person for an offence shall not make a probation order in his case in respect of another offence of which he is convicted by or before the court or for which he is dealt with by the court.’
It is true that that is applicable only to a case where at one and the same time it is contemplated giving a probation order and a suspended sentence, but it clearly shows the policy behind the 1967 Act and confirms the view, if confirmation is needed, that a suspended sentence shall not be brought into operation if the conviction for the current offence committed in the operational period was deemed not to be a conviction. Accordingly, in the opinion of this court, the order bringing into force this suspended sentence must be quashed.
The court would only add this: a magistrates’ court convicting an accused of an offence committed during an operational period in respect of a suspended sentence imposed at quarter sessions or assize cannot itself bring the suspended sentence into operation. Section 41(2) provides them with two courses. One is to sentence for the current offence, and then to give notice of the conviction to the clerk of the court by which the suspended sentence was passed so that the prisoner can be brought back before that court; the other is to impose no sentence but to commit the accused under s 56 of the Criminal Justice Act 1967 to the court which imposed the suspended sentence so that that latter court can deal with the whole matter together, namely the sentence for the current offence and the bringing into operation with or without change of the suspended sentence. The magistrates’ court in the present case did the former; they sentenced the appellant and then gave notice so that he would be brought back to assizes. In the opinion of this court it ought to be a rule of practice for magistrates’ courts that, whenever they are minded to make an order which will not enable the suspended sentence to be brought into operation, namely absolute discharge, conditional discharge or probation, then in those circumstances their proper course is to refrain from making one or other of those orders and to commit under s 56 of the 1967 Act so that the court of quarter sessions or assize court, as the case may be, that imposed the suspended sentence can deal with the whole matter together. In the result this appeal succeeds and the order bringing into force the suspended sentence is quashed, and the suspended sentence remains and is still liable to be brought into operation if the appellant commits another offence during the period of suspension.
Appeal allowed. Conviction quashed.
Solicitors: Register of Criminal Appeals (for the appellant); Treasury Solicitor.
N P Metcalfe Esq Barrister.
Warren v Warren and Russell
[1970] 2 All ER 189
Categories: FAMILY; Divorce
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): WRANGHAM J
Hearing Date(s): 4 AUGUST 1969, 9, 10 MARCH 1970
Divorce – Collusion – Agreements and arrangements – Consideration by court – Test whether likely to lead to decree contrary to the justice of the case – Agreement involving abandonment of case which might have been successful – Whether leave to implement should be granted – Matrimonial Causes Act 1965, s 5(2).
The wife petitioned for divorce on the ground of the husband’s cruelty, praying for the exercise of the court’s discretion in respect of her adultery. The husband denied the cruelty and cross-petitioned on the ground of the wife’s adultery with the party cited. After negotiations between the parties, the leave of the court was sought to implement an agreement whereby the wife would abandon her charge of cruelty, allowing the husband to proceed on her admitted adultery with the party cited who would pay £50 towards the husband’s costs and arrangements were made for the custody and care and control of the children of the family. The wife had been advised by counsel that she would succeed in her petition on the ground of cruelty.
Held – Although the wife’s chances of success on the ground of cruelty were evenly balanced and the result, were the agreement to be implemented, might be different from that were there to be a contested trial, the rights and liabilities of the parties depended far less on the form of decree than used formerly to be the case; accordingly, as the agreement was in the interests of the children of the marriage and there was an even chance that the result would be the same as that at the end of a contested trial, implementation of the agreement was unlikely to result in a substantial injustice and would be granted (see p 192 d and f, post).
Gosling v Gosling [1967] 2 All ER 510 and dictum of Salmon LJ in Tumath v Tumath [1970] 1 All ER at 114, 115 applied.
Per Wrangham J. Even if the court is satisfied in any particular case that there is a real chance that the result of the agreement will be that the decree is awarded to a party to whom it would not be awarded at the trial of a contested suit, that is not necessarily fatal to the agreement. It is no more than one of the matters to be taken into account (see p 192 e, post).
Observations on possible difficulties where the withdrawal of a triable case might prevent the party withdrawing it from raising the same points in later maintenance proceedings (see p 192 a and c, post).
Notes
In the effect of collusion in divorce proceedings, see 12 Halsbury’s Laws (3rd Edn) 300–302, paras 594–598, and for cases on the subject, see 27 Digest (Repl) 388–395, 3206–3253.
For the Matrimonial Causes Act 1965, s 5, see 45 Halsbury’s Statutes (2nd Edn) 451.
Cases referred to in judgment
Field v Field [1964] 2 All ER 81, [1964] P 336, [1964] 2 WLR 847, Digest (Cont Vol B) 378, 5957Ac.
Gosling v Gosling [1967] 2 All ER 510, [1968] P 1, [1967] 2 WLR 1219, Digest Supp.
Head (formerly Cox) v Cox (Smith cited) [1964] 1 All ER 776, [1964] P 228, [1964] 2 WLR 358, Digest (Cont Vol B) 359, 3219a.
Mulhouse (formerly Mulhausen) v Mulhouse (formerly Mulhausen) [1964] 2 All ER 50, [1966] P 39, [1964] 2 WLR 808, Digest (Cont Vol B) 351, 2395c.
Page 190 of [1970] 2 All ER 189
Porter v Porter [1969] 3 All ER 640, [1969] 3 WLR 1155.
Tumath v Tumath [1970] 1 All ER 111, [1970] P 78, [1970] 2 WLR 169.
Application
This was an application by the husband, E L Warren, under s 5(2) of the Matrimonial Causes Act 1965 asking for leave to implement an agreement made by him with the wife, E M Warren, after the presentation by the wife of a petition for divorce based on the ground of the husband’s cruelty and seeking the court’s discretion in her favour to which the husband had answered denying cruelty and cross-praying on the ground of the wife’s adultery. The application was adjourned for hearing into open court. The facts are set out in the judgment.
B H Anns for the wife.
W J K Millar for the husband.
10 March 1970. The following judgment was delivered.
WRANGHAM J. In this case the wife prays for the dissolution of her marriage on the ground that the husband has treated her with cruelty. She asks for the discretion of the court to be exercised in her favour. By his answer the husband denies the cruelty alleged and cross-prays on the ground of her adultery. By her reply the wife admits some but not all of the adultery alleged against her. In the memorandum of appearance the party cited denied adultery altogether.
On 4 August 1969, an application was made to the court by the husband under s 5(2) of the Matrimonial Causes Act 1965 asking leave to implement an agreement or arrangement providing that the cruelty proceedings should be stayed; that the suit should proceed undefended on the answer, on the basis of the admitted adultery; that the party cited should pay £50 towards the husband’s costs; and that the custody of the two children of the family (two little girls now seven and four) should be committed to the husband, with care and control to the wife. Both parties are anxious to remarry as soon as possible and each will then probably be in a position to offer a home to the children, who are at present in the charge of the local authority.
The application was supported by an affidavit from the husband, exhibiting letters which had passed between the solicitors for the parties. In one of these letters, dated 29 July 1968 the wife’s solicitors recorded that she had been advised by counsel that she would succeed in her petition on the ground of cruelty. Accordingly I adjourned the application and later adjourned it again for argument in open court on the question whether it was proper for me, in these circumstances, to give leave to implement an agreement providing for the abandonment of a charge of cruelty which was regarded as likely to be successful. Counsel for the wife, who was responsible for the advice that had been given to her, told me frankly that in his opinion the wife’s case would succeed if her evidence were believed and that he was responsible for the advice that had been given to her, told me frankly that in his opinion the wife’s case would succeed if her evidence were believed and that he was unable to express any view on the question whether she would be believed or not. Everything, he said, would depend on the impression that she and her husband respectively made on the judge when they were in the witness box. He contended, however, that leave could properly be given to implement an agreement providing for the abandonment of her case, and emphasised the difficulties that counsel were in when asked to assess the prospects of success in such cases as this.
It was not argued that the agreement was not collusive. It plainly was. What was argued was that it was not objectionable because, as it was said, there was no real danger that any unjust result would flow from its implementation. The distinction between objectionable and unobjectionable agreements was considered by the Court of Appeal in Gosling v Gosling. In that case, Willmer LJ said ([1967] 2 All ER at 515, [1968] P at 14) that he was not prepared to differ from the views of three judges at first instance, who had accepted
Page 191 of [1970] 2 All ER 189
and followed the tests propounded in Head (formerly Cox) v Cox (Smith cited), to distinguish between these two categories. In Head v Cox ([1964] 1 All ER at 777, [1964] P at 230) it had been said that the first test to be applied was: is the result of the agreement likely to be that a result is arrived at in the proceedings contrary to the justice of the case? Sachs LJ, in Gosling v Gosling ([1967] 2 All ER at 521, 522, [1968] P at 24) laid down a single and simple test in virtually the same language.
The vital question, therefore, is whether this agreement is likely to produce a result contrary to the justice of the case. In my opinion the chances of the wife succeeding in establishing cruelty if the case were tried out, must be regarded as evenly balanced; nor is it possible without a trial to arrive at any clearer assessment. The wife’s case that the break-down of the marriage was due to the husband’s cruelty rather than to her adultery is a case of substance, quite unlike the shadowy defence of the husband in Gosling v Gosling. It is not, therefore, established that the result to be produced by the agreement, namely a decree in favour of the husband, is positively likely to be the same as the result of a contested suit. No one can foretell whether a contested suit would end in a decree in favour of the husband on the ground of adultery, a decree in favour of the wife on the ground of cruelty, discretion being exercised in her favour, or discretionary decrees in favour of both.
It was argued, however, that the justice of the case did not demand that the decree should be pronounced in favour of the right suitor. All that the justice of the case required was that there should be a genuine matrimonial offence on which a decree could be founded. It was said that the question to whom the decree was granted, was now of little or no importance for, since Porter v Porter, and Tumath v Tumath it no longer governs the assessment of the maintenance and it had long since ceased to affect the custody or care and control of children. This argument derived considerable support from the words of Salmon LJ who, in Tumath v Tumath ([1970] 1 All ER at 114, 115, [1970] P at 86), said:
‘When a marriage has irretrievably broken down and it is obvious that it will be dissolved it seems to me to be wrong that a great deal of public time and money should be spent in deciding which of the parties is to be granted the decree or whether perhaps they should both be granted a decree. [That is precisely the situation in this case.] … Everyone knows that until comparatively recently divorce cases have habitually been hotly contested in public at great expense to the parties or to the legal aid fund solely for the purpose of securing a supposed benefit for one or other of the parties in future maintenance or custody proceedings. This cannot in my view serve any useful purpose and may indeed be properly regarded as contrary to modern concepts of public policy.’
To the same effect, or to a similar effect were the words of Sachs LJ in Gosling v Gosling ([1967] 2 All ER at 521, 522, [1968] P at 24), when he said:
‘Looking at the case as a whole as it appears on the material before him, [that is before the judge] is the agreement one likely to produce a result contrary to the justice of the case? The mere fact that some valid claim for relief is withdrawn, or some triable defence is not pressed, is not of itself conclusive on this point … ’
It is plain that both those learned judges regard agreements which prevent what they regard as undesirable trials as themselves desirable and to be encouraged. It is not entirely easy to reconcile those opinions with the view of Sir Jocelyn Simon P
Page 192 of [1970] 2 All ER 189
that collusion is an inherently undesirable activity: see Mulhouse (formerly Mulhausen) v Mulhouse (formerly Mulhausen) ([1964] 2 All ER 50 at 54, [1966] P 39 at 46), a view underlined by Willmer LJ in Gosling v Gosling ([1967] 2 All ER at 516, [1968] P at 15).
It is clear that the withdrawal of a triable case might well result in injustice if the party withdrawing it were in any way prevented from raising the same points in any later maintenance proceedings. In Field v Field, it was held that the husband, whose prayer for dissolution on the ground of adultery had been rejected after his wife had denied adultery on oath at the trial of the suit, was estopped from alleging adultery in later maintenance proceedings. This result might always occur if at the trial of the suit in which one charge had been withdrawn, the other party gave evidence in disproof of the withdrawn charge. No promise not to give such evidence could be relied on, if only because such evidence might be elicited by the judge himself in making the enquiry that he is required to do by s 5(1)(a) of the Matrimonial Causes Act 1965. It may be, however, that this difficulty could be avoided by an application to strike out the charges which are not to be pursued, so that it could be said that no adjudication was made on them.
The position, I think, may be summed up in this way. Leave to implement a collusive agreement cannot be given unless the conditions laid down in Gosling v Gosling are fulfilled. In considering whether the agreement fulfils the main requirement referred to in that case, that is to say the requirement that the agreement should not be one likely to produce a result contrary to the justice of the case, it is right to take into account the fact that the rights and liabilities of the parties depend far less on the form of the decree than used formerly to be the case. Even if the court is satisfied in any particular case that there is a real chance that the result of the agreement will be that the decree is awarded to a party to whom it would not be awarded at the trial of a contested suit, that is not necessarily fatal to the agreement. It is no more than one of the matters to be taken into account. To hold otherwise, I think, would be in direct contravention of the opinion so clearly expressed by Salmon LJa in the words that I have cited.
In the present case I am satisfied that the proposed agreement is in the interests of the children and that though there is at least an even chance that it may not result in the same decree as the decree that would be pronounced at the end of a contested trial, it is unlikely to result in any substantial injustice as between husband and wife. I, therefore, give leave to implement the agreement.
Order accordingly.
Solicitors: F E Baldock & Co, Guildford (for the wife); Day, Whately & Co, Godalming (for the husband).
Alice Bloomfield Barrister.
Buckoke and others v Greater London Council
[1970] 2 All ER 193
Categories: ADMINISTRATIVE: ADMINISTRATION OF JUSTICE; Tribunals: LOCAL GOVERNMENT
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 13, 20, 23 MARCH 1970
Fire Brigade – Exercise of disciplinary power – Whether court will interfere with exercise – Disciplinary proceeding against firemen – Whether firemen would be granted injunction to restrain proceedings against them – Fire Services (Discipline) Regulations 1948 (SI 1948 No 545), reg 1.
Fire brigade – Brigade order – Order concerning crossing of traffic signals at red – Construction of order – Whether order a command to break law or to take care – Whether useful purpose would be served if court ordered withdrawal of order – London Fire Brigade order 144/8.
The plaintiffs, members of the London Fire Brigade and of the Fire Brigades Union and employed by the defendants, the Greater London Council, were charged under the Fire Services (Discipline) Regulations 1948, reg 1a, with failing to operate fire appliances which were driven by drivers who were prepared to exercise discretion in crossing traffic signals at red, when such action was contrary to the general law but not the plaintiffs’ brigade code of discipline, the relevant provisions of which were contained in the London Fire Brigade order 144/8b. The plaintiffs sought an injunction restraining the defendants from continuing the disciplinary proceedings against the plaintiffs and, in substance, a mandatory order requiring the defendants to withdraw the London Fire Brigade order 144/8 on the ground that it was unlawful, as involving a master’s instructions to a servant how to break the law if the servant decided to break it.
Held – (i) The plaintiffs would not be granted the injunction because in its discretion (which was as equally applicable to a claim for an injunction as it was to a motion for an order of certiorari) the court would not interfere with the exercise of a disciplinary power in a service such as a fire brigade (see p 197 g, post).
Dictum of Singleton LJ in Ex parte Fry [1954] 2 All ER at 122 applied.
(ii) The mandatory order would not be made because—
(a) the London Fire Brigade order 144/8 was not an order to the driver of a fire appliance to break the law but a command to take care and no useful purpose was to be served in ordering the defendants to withdraw the order;
(b) from the point of view of fire brigade discipline, the only result would be that a driver would have greater, not less, freedom of action and the plaintiffs were better protected by the order remaining in force (see p 197 h, and p 198 b, post).
Notes
For appeals and control by the court with relation to special tribunals, see 9 Halsbury’s Laws (3rd Edn) 580, 581, para 1352.
For the Fire Services (Discipline) Regulations 1948, see 9 Halsbury’s Statutory Instruments (Third Re-issue) 9.
Cases referred to in judgment
Fry, ex parte [1954] 2 All ER 118, [1954] 1 WLR 730, 118 JP 313, 38 Digest (Repl) 258, 666.
R v Electricity Comrs, ex parte London Electricity Joint Committee Co (1920) Ltd [1924] 1 KB 171, [1923] All ER Rep 150, 96 LJKB 390, 130 LT 164, 88 JP 13, 16 Digest (Repl) 433, 2381.
Page 194 of [1970] 2 All ER 193
R v Metropolitan Police Comr, ex parte Parker [1953] 2 All ER 717, [1953] 1 WLR 1150, 117 JP 440, 16 Digest (Repl) 461, 2811.
Case also cited
Bouzourou v Ottoman Bank [1930] AC 271.
Motion
By their notice of motion dated 26 February 1970 the plaintiffs, William Walter Buckoke, and 19 other members of the London Fire Brigade, sought two injunctions against the defendants, the Greater London Council, namely (1) an injunction restraining the defendants by themselves, their servants or agents or howsoever from implementing in any manner whatsoever until the trial of the action or further order London Fire Brigade order 144/8 of 3 February 1967 and (2) an injunction restraining the defendants by themselves their servants or agents or howsoever from continuing until trial or further order with disciplinary proceedings under the Fire Services (Discipline) Regulations 1948, then pending against the plaintiffs. By their writ issued on 25 February 1970, the plaintiffs had claimed, inter alia, a declaration that the London Fire Brigade order 144/8 of 3 February 1967 was an unlawful order and an injunction requiring the defendants to withdraw the order. It was agreed that the motion should be treated as the trial of the action. The facts are set out in the judgment.
Peter Pain QC and P B Creightmore or the plaintiffs.
R I Kidwell QC and G M Hamilton for the defendants.
23 March 1970. The following judgment was delivered.
PLOWMAN J. The 20 plaintiffs in this case are members of the London Fire Brigade. They are also members of the Fire Brigades Union. The defendants, the Greater London Council, are the fire authority responsible for the London Fire Brigade. The dispute with which I am concerned arises out of the practical dilemma with which the driver of a fire appliance is faced when the traffic lights are at red. There is no legal dilemma because the law is clear. It is an offence for any vehicle, including a fire engine, to cross a traffic signal at red unless instructed to do so by the police, and it is not within the competence of the defendants or of any other authority to suggest otherwise.
But the task of firemen is to get to a fire as quickly as possible, for life and property may be at stake. So what is a driver to do when he is on his way to a fire and finds the traffic lights against him? Is he to obey the law and wait until the lights are green, thereby wasting precious seconds, or is he to break the law and cross at red, thereby saving those seconds, but possibly creating other dangers? His legal duty is clearly to obey the law, and nonetheless because some people, though not the union, think that the law should be changed. Different fire authorities deal with the problem in different ways. Some, including the defendants, leave it to the driver’s discretion; others do not. When it is said that the matter is left to the driver’s discretion, what is meant is this: that any driver is perfectly at liberty to wait until the lights are green if he chooses to do so and the defendants have no power to say otherwise, or to discipline him if he does not do so. But, while he is still subject to the general law, he will not be liable to be treated as having disobeyed an order within the additional code of discipline affecting firemen as such, if he crosses the red lights. Some firemen, among whom are the plaintiffs, dislike this discretion being left to the driver. They think it is dangerous. What they want is a double sanction: first, that of the general law; secondly, a brigade order that traffic signals must not be crossed at red.
The plaintiffs’ objections to the present position have culminated in their disobedience to orders to man fire appliances driven by drivers who are prepared to
Page 195 of [1970] 2 All ER 193
exercise their so-called discretion, and they now find themselves on charges under the Fire Services (Discipline) Regulations 1948c. Regulation 1 provides:
‘A member of a fire brigade commits an offence against discipline (hereinafter in these Regulations referred to as an “offence”) if he commits one or more of the offences set out in the Schedule hereto.’
The first offence set out in the Schedule is:
‘Disobedience to orders, that is to say, if he disobeys, or without sufficient cause fails to carry out, any lawful order, whether in writing or not.’
Those regulations provide for the hearing of charges by the chief officer, with a right of appeal, unless the only punishment is a caution, to the fire authority, with a further appeal in certain cases to the Secretary of State.
The disciplinary proceedings against the plaintiffs have been adjourned pending the outcome of the motion now before me. The parties have agreed that the motion shall be treated as the trial of the action and the relief which the plaintiffs are seeking is twofold: first, they ask for an injunction restraining the defendants from continuing the disciplinary proceedings; and secondly, in order no doubt to arm themselves with ammunition for the disciplinary proceedings, they are asking in substance for a mandatory order on the defendants to withdraw an order known as ‘London Fire Brigade order No 144/8’.
I will read this order, dated 3 February 1967:
‘Traffic light signals—Drivers of fire brigade vehicles are under the same obligation at law to obey traffic light signals as the drivers of order vehicles. If, however, a Brigade driver responding to an emergency call decides to proceed against the red light, he is (unless signalled to proceed by a police constable in uniform) to stop his appliance, car, or other vehicle at the red light, observe carefully the traffic conditions around him, and to proceed only when he is reasonably sure that there is no risk of a collision; the bell is to be rung vigorously and/or the two-tone horn sounded and the blue flashing (lights) operated. Extreme caution is to be used and the driver is not to cross until it is clear that the drivers of other vehicles appear aware that he is proceeding. The onus of avoiding an accident in such circumstances rests entirely on the Brigade driver, who is to remember that a collision might well prevent his vehicle from reaching its destination and might also block the road for other essential services; no call is so urgent as to justify this risk.’
Counsel for the plaintiffs, submits that that is an unlawful order in that it is an order by a master to a servant telling him how to break the law if he decides to break it. Counsel for the defendants, on the other hand submits that the order is in no sense a licence to break the law but an order imposing restraint—limiting and not enlarging a driver’s freedom of action.
I will return to this matter in a moment, and I will deal first with the plaintiffs’ attempt to stultify the disciplinary proceedings against them. In my judgment they are not entitled to the relief which they claim in respect of this matter. In Ex parte Fry, it was held by a Divisional Court and affirmed by the Court of Appeal that the court will not interfere, by an order of certiorari, with the exercise of a disciplinary power in a service such as the fire brigade. That too was a case of a fireman being disciplined for breach of an order which he claimed to be an unlawful order. The headnote reads as follows ([1954] 1 WLR at 730):
Page 196 of [1970] 2 All ER 193
‘The applicant, a fireman, on being ordered to clean the uniform of an assistant divisional officer of a fire brigade, refused to do so. Thereupon he was suspended from duty and charged under the Fire Services (Discipline) Regulations, 1948, reg 1, with disobedience to orders. The chief fire officer heard the matter and held that the applicant was guilty of disobedience to orders and punished the offence by a caution, that being the least of the punishments laid down in regulation 13 of the regulations of 1948. The applicant applied to the Divisional Court for leave to move for certiorari to quash the order of the chief fire officer. The Divisional Court refused leave, holding that a chief officer of a force governed by discipline, such as a fire brigade, in exercising disciplinary authority over a member of the force, was not acting judicially or quasi-judicially. Certiorari went to courts or to some body which could fairly be said to be a court. The court would not interfere with the discipline of police forces, fire brigades or similar bodies which in their nature must be generally known as disciplined services and where the chief officer was simply acting as an officer in the matter of discipline. On appeal:—Held, that the court, in its discretion, should refuse the application. The applicant had deliberately disobeyed the orders given to him by a superior officer. If he felt that he had been ordered to so something which he thought he ought not to be ordered to do, there were proper means of bringing his complaint to the Fire Authority.’
Lord Goddard CJ said ([1954] 1 WLR at 732–734, [1954] 2 All ER at 119, 120):
‘In my opinion, the chief officer, although he is the chief officer of a body set up by a statute in the sense that he sits by virtue of the regulations made under the Fire Services Act, 1947, cannot in any sense be said to be a court. The Secretary of State, under the power given him by the Act of 1947, has made disciplinary regulations laying down terms under which fire officers are to administer discipline in the body of which they are chief officers, and providing for certain penalties which may be inflicted, and the conditions under which they may be inflicted. Those regulations give a right of appeal, to the fire authority in certain cases, and to the Secretary of State in other cases, but where the only punishment awarded, if it can be dignified by the name of punishment, is a caution, there is no appeal. It is said that this court can review the order of the chief officer who administered the caution. In R v Metropolitan Police Comr, ex parte Parker ([1953] 1 WLR 1150 at 1155, [1953] 2 All ER 717 at 721), a case under a different statute and which is not entirely on all fours with the present case, I said: “Where a person, whether he is a military officer, a police officer or any other person whose duty it is to act in matters of discipline, is exercising disciplinary powers, it is most undesirable, in my opinion, that he should be fettered by threats of orders of certiorari and so forth, because that would interfere with the free and proper disciplinary exercise of the powers that it may be expected he would otherwise use.” It seems to me impossible to say that a chief officer of a force which is governed by discipline, such as a fire brigade, is, in exercising disciplinary authority over a member of the force, acting either judicially or quasi-judicially, any more than a schoolmaster is when he is exercising disciplinary powers over his pupils. It is true that there is an Act of Parliament, the Fire Services Act, 1947, but so there is an Army Act, and there are the Queen’s Regulations under the Army Act. Under the Army Act a court-martial can be set up to deal with certain offences, and a commanding officer has power to deal with certain disciplinary offences in the orderly room; there he is not sitting as a court but as an officer administering discipline. I have never heard it suggested that this court can issue certiorari to bring up his order, nor do I know of any case with regard to police officers, who are also dealt with
Page 197 of [1970] 2 All ER 193
under regulations in matters of discipline, in which this court has ever yet purported to exercise control over those bodies by the issue of the writ of certiorari. Certiorari goes to courts, or to something which can fairly be said to be a court. Recently, beginning with R v Electricity Comrs, ex parte London Electricity Joint Committee Co (1920) Ltd, very considerable expansion has been given to the word “court” because nowadays government departments are given powers which may be called semi-judicial or quasi-judicial powers, and, accordingly, this court has exercised control over them by certiorari. That is an entirely different thing from saying that this court can interfere with the discipline of police forces, fire brigades or similar bodies which, in their nature, must be generally known as disciplined services, where the chief officer is simply acting as an officer in the matter of discipline. In such cases this court ought not to exercise control by means of the writ of certiorari. In my opinion, there is no ground for giving leave to move in this case, and the application is refused’.
Hallett J agreed. The matter then went to the Court of Appeal and in his judgment Singleton LJ said ([1954] 1 WLR at 736, 737, [1954] 2 All ER at 122):
‘In this case I prefer to base my decision upon the second ground [that is, the ground of discretion]. This applicant is a member of a service which is of great public importance. For the good of that service and of those who are employed in the service, the Secretary of State has made regulations so that their position may be ascertained, and so that there may be as few difficulties as possible. There is, as was said in another case, a complete code. If a man feels that he is ordered to do something which he ought not to be ordered to do, he can raise the matter in the way that I have said, but, if instead of doing that, he deliberately sets out to disobey the order given to him by a superior officer, he is only making difficulties for himself and for the whole of the service, and that is something which he ought to realize. Again, in the ordinary case which is dealt with by the chief officer, a case of discipline, there is an appeal to the fire authority. In the circumstances of the present case, there was not, because the punishment inflicted was only a caution, but there are ways and means of bringing to the notice of the fire authority in a proper case the conduct of one who has to preside over a disciplinary tribunal of this kind if it is thought right and proper that that should be done. In the circumstances I do not think that the Divisional Court ought to have granted the relief which the applicant sought, nor do I think that this court should do so. The application must be dismissed.’
Hodson and Morris LJJ agreed. In my judgment the ratio decidendi of that case is just as applicable to a claim for an injunction as to a claim for an order of certiorari; both are discretionary remedies.
I come back to order 144/8. In the first place I do not accept the submission that it is an unlawful order. It is not a command to break the law but a command to take care. It is not order 144/8 which confers on drivers the discretion to which objection is taken but the absence of any brigade order that they are to obey traffic signals. In any case, I do not consider that any useful purpose would be served in ordering the defendants to withdraw it. Suppose it were withdrawn, the only result would be that from the point of view of fire brigade discipline a driver would have greater, not less, freedom of action. As I have said, what the plaintiffs really want is a different order, that is to say, an order rendering the drivers who cross traffic signals at red liable to be disciplined by the chief officer. In a letter dated 18 February 1970 the solicitors for the Fire Brigades Union wrote to the chief officer a letter, of which the following is the first paragraph:
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‘As you know I act for the Fire Brigades Union. My clients have instructed me to request you to withdraw London Fire Brigade Order No. 144/8 and to issue in its place an instruction that drivers of Fire Brigade vehicles are to observe the law by obeying road traffic signals.’
But it is quite clear that I have no power to direct the defendants to issue an order of that sort. That being so, the plaintiffs, in my opinion, are better protected by the order remaining on foot than they would be by its withdrawal.
In my judgment, therefore, the plaintiffs fail under this head too, and by consent, treating the motion as the trial of the action, I dismiss it.
Motion dismissed.
Solicitors: W H Thompson (for the plaintiffs); H F W Wilson (for the defendants).
Jacqueline Metcalfe Barrister.
R v Kelly
[1970] 2 All ER 198
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND CROSS LJJ AND O’CONNOR J
Hearing Date(s): 14 APRIL 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Breath test – Person driving or attempting to drive – Driver stopped car voluntarily – Left driving seat to make a telephone call unconnected with driving – Questioned on matter unconnected with driving – Only then asked to take breath test – Whether then driving or attempting to drive – Road Safety Act 1967, s 2(1)(a).
Road traffic – Driving with blood-alcohol proportion above limit – Evidence – Provision of specimen – Breath test – Person driving or attempting to drive – Issue whether accused was or was not driving – Primary facts not in dispute – When issue an issue of law – Road Safety Act 1967, s 2(1)(a).
The appellant was seen driving his motor car by a police officer who followed in his car as he wished to ask a question on a matter unconnected with driving. Before he could be stopped by the police officer, the appellant himself stopped his car in the vicinity of a telephone box in order to make a telephone call. The police officer stopped his car and interrupted the appellant before he reached the telephone box and began to question him. The police officer suspected that the appellant had consumed alcohol and invited him to take a breath test which proved to be positive. The chairman of quarter sessions directed that, on the question whether the appellant was a person driving within the meanings of s 2(1)a of the Road Safety Act 1967, there was no issue of fact to be left to the jury. The appellant was convicted. On appeal,
Held – The appeal would be allowed because the appellant (i) had voluntarily stopped his car, (ii) had left the driving seat, and (iii) was intending to make a telephone call apparently quite unconnected with the driving; accordingly as a matter of law he was not a person driving and the chairman should have directed the jury to acquit him (see p 201 d to f, post).
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Pinner v Everett [1969] 3 All ER 257 and Stevens v Thornborrow [969] 3 All ER 1487 followed.
Per Curiam. In cases where the primary facts are not in dispute and where, therefore, the only issue left is whether on those primary facts, and the authorities, the accused person is or is not driving, the only matter outstanding is an issue of law and the presiding judge must give his ruling on it (see p 200 h, post).
Notes
For the offence of driving a motor vehicle with an undue proportion of alcohol in the blood, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A.
For the Road Safety Act 1967, s 2, see 47 Halsbury’s Statutes (2nd Edn) 1556.
Cases referred to in judgment
Pinner v Everett [1969] 3 All ER 257, [1969] 1 WLR 1266, 113 JP 653.
Stevens v Thornborrow [1969] 3 All ER 1487, [1970] 1 WLR 23.
Appeal
This was an appeal by Francis William Kelly against his conviction at South West London Sessions on 17 July 1969 before the chairman (Judge F H Cassels) and a jury of driving with blood-alcohol concentration above the prescribed limit. The facts are set out in the judgment of Widgery LJ.
C J M Tyrer for the appellant.
W N Denison for the Crown.
14 April 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. The appellant was convicted at South West London Sessions on 17 July 1969 of one offence of driving with a blood-alcohol concentration above the prescribed limit. He was sentenced by the learned chairman to a fine of £20 with 90 days’ imprisonment in default, and an order for costs and an order for disqualification from driving were made. He now appeals with the leave of the full court against his conviction.
This is another case in which the issue with which this court is concerned is whether at the material time the appellant was a ‘person driving’ a motor vehicle within the meaning of s 2 of the Road Safety Act 1967. The case was heard, as I emphasised, on 17 July 1969 which was a few days before the House of Lords delivered judgment in Pinner v Everett, and it follows that neither the learned chairman nor counsel had the advantage of the direction which those speeches contained. In the result the chairman, having heard a submission from counsel for the appellant relative to the terms of s 2 of the Act, decided against the submission, told counsel that he was going to direct the jury that no point arose under the section, and did so. In substance the complaint in this court today is that the chairman (in the light of subsequent decisions of this court and the House of Lords) ought either to have left the issue, whether the appellant was a person driving, to the jury, or, alternatively, that he ought to have directed them that the appellant was not a ‘person driving’ in accordance with the authorities.
The court is supplied with a short transcript only, and as this kind of case normally requires a minute examination of the circumstances of the arrest, it is unfortunate that that evidence is not available. It is not available for the very good reason that the shorthand writer who took the note left the country after preparing the short transcript and it is quite impossible now to obtain the full transcript.
Accordingly, the court has taken the facts of this case from counsel for the appellant, who was present in the court below and who took the wise precaution, we understand,
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of discussing with counsel for the Crown the facts he was going to put before the court as those on which the issue turned. Those facts then are these, and these only, that on 17 March 1969, which was the date of the offence, the appellant was driving his motor car on a public road. He was seen by a police officer (also in a motor car) and that police officer wished to speak to him in order to ask him a question wholly unconnected with the circumstances of this case. The police officer, therefore, proceeded to follow the appellant in his own car with a view to stopping him and putting this question at a convenient moment.
However, before the police officer had a chance to attract the appellant’s attention the appellant himself stopped his car in the vicinity of a telephone box with a view to going into the telephone box and making a telephone call. We do not know what the subject of the call was to be, or to whom it was to be made. The police officer, who was in close contact, stopped his car close by, walked across and intervened before the appellant reached the telephone box and a conversation ensued at that point, which must have been a few feet from the car and a few feet from the telephone box also. The conversation began with a reference to the question which the police officer had at all times wished to ask, but after an interval, which must have been a very short one, the officer began to suspect that the appellant had alcohol in his body, no doubt from the smell of his breath and similar symptoms. Thereupon the police officer invited him to take a breathalyser test.
When the matter came to sessions, as I have already indicated, the learned chairman took the view that there was no issue to leave to the jury whether at the material time the appellant was a person driving or not, and it is right to say that we feel that no reflection is cast on the chairman or on counsel having regard to the state of the authorities known at that time. It is fair also to say that no one seems really seriously to have thought that it was open to the appellant to challenge the proposition that he was a person driving, but, of course, since that time we are wiser as a result of developments which have occurred.
What then is the position before us? First of all, it is submitted by counsel for the appellant that this was a matter which the learned chairman ought to have left to the jury. In Pinner v Everett the House of Lords on a number of occasions referred to the fact that such an issue may have to be left to the jury, and the substantial complaint here is that by failing to leave it to the jury, a mis-trial occurred. In our judgment, the question of what can and cannot be left to the jury when this point is raised depends very much on the particular facts spoken to in evidence. There are, of course, cases where there is a real issue as to the primary facts, and in those cases the matter has to be left to the jury like any other issue of fact. On the other hand, there will be cases where there is no dispute as to the primary facts, and where there is no question left for decision by anyone except the final and basic question of law, namely whether those primary facts disclose that the appellant was a person driving at the material time. In cases where the primary facts are not in dispute and where, therefore, the only issue left is whether on those primary facts, and the authorities, the accused person is or is not driving, we think that the presiding judge must face the responsibility that the only matter outstanding is a matter of law and give his ruling on it.
This case is, we think, such a case. When in this court it was submitted in argument that the matter should have been left to the jury, the court was prompted to ask counsel for the appellant what the direction to the jury should have been. Counsel, if I may say so, was quite understandably embarrassed in seeking to answer that question because a moment’s thought makes it clear that if the facts are established and not in dispute, that which remains must be a question of law, and so we think in this case it was. What are the important features of fact here on which the question
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of law must be determined? It was held in this court not long ago in Stevens v Thornborrow, that having regard to the speeches in the House of Lords in Pinner v Everett, it is easier, as Lord Parker CJ said ([1969] 3 All ER at 1490, [1970] 1 WLR at 27, 28), to find that a man has ceased to be a person driving if he has dismounted, that is to say has left the driving seat. In this case the appellant had dismounted before the police officer suspected any infringement of the Act. Secondly, it was pointed out ([1969] 3 All ER at 1490, [1970] 1 WLR at 27, 28) in the same case that an important factor is whether the activities of a person who has dismounted are activities connected with the operation of driving or not. If he stops his car for a purpose unconnected with driving, then it is a very must easier case to argue that he had ceased to be a driver than if he had stopped his car to clean the windscreen or to test the efficiency of his lights, or some other act in connection with the operation of driving.
In this case three outstanding points are to be noticed. First, the appellant stopped his car voluntarily. He did not stop through traffic congestion or in response to an order from a police officer. Secondly, he dismounted, albeit he had not left his car by more than a few feet, and, thirdly, that for which he had dismounted was to make a telephone call. We need not consider what the position would be if the evidence had disclosed that the telephone call was in some way concerned with the operation of driving. We do not know what the purpose of the call was and, therefore, must make the assumption most favourable to the appellant and assume that it was unconnected with the purpose of driving. Hence one has these three factors: the voluntary halt, the dismounting from the car and the embarking on an operation assumed to be for purposes unconnected with driving. Given these facts, we think it would have been idle, and indeed impossible, for the learned chairman to have invited the jury to say whether on those facts the appellant was a person driving or not. All that was left was a pure question of law, whether on those facts the requirement of the section had been satisfied.
We are satisfied that if the chairman had approached the matter in that way, he would have been bound to conclude as a matter of law on the authorities as they now stand that the appellant was not a person driving at the material time. The proper course for him was to direct the jury to acquit. He failed to do so. The appeal must be allowed and the conviction quashed.
Appeal allowed.
Solicitors: Registrar of Criminal Appeals (for the appellant); Solicitor, Metropolitan Police.
S A Hatteea Esq Barrister.
Bucks v Bowers (Inspector of Taxes)
[1970] 2 All ER 202
Categories: TAXATION; Assessment: COMPANY; Partnerships
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 8, 12 DECEMBER 1969
Income tax – Partnership – Earned income relief – Partner’s share of investment income taxed by deduction – Firm of merchant bankers – Taxpayer a partner – Loss on firm’s trading – Greater sum received by firm by way of income taxed by deduction – Credit balance divisible between partners – Whether taxpayer’s share of interest charged under Case III and of interest and dividends charged under Case IV or V of Sch D ‘earned income’ of taxpayer – Apportionment between partners of income qualifying for earned income relief (if any) – Income Tax Act 1952, s 525(1).
The taxpayer was a partner in a firm of merchant bankers. The firm consisted of nine partners, including two companies, whose shares of profit were determined by articles of partnership. From time to time the firm held a large number of investments the income of which was taxed by deduction. Such investments included, inter alia, securities the interest on which was charged under Case III of Sch D and foreign investments the interest on or dividends from which were charged under Case IV or Case V of Sch D. For its own purposes the firm made up a composite profit and loss account into which were brought, on the one side, the whole of the receipts including income taxed by deduction and, on the other side, outgoings. For the purpose of tax, the firm made up a trading account the profit on which was charged under Case I of Sch D, but from which the income taxed by deduction was omitted in accordance with recognised practice. For the year 1964–65 the firm made a loss on its trading account, but received a much greater sum by way of income taxed by deduction. The balance became divisible between the partners in the shares specified in the articles of partnership. The taxpayer claimed that, having regard to the definition of ‘earned income’ in s 525(1)a of the Income Tax Act 1952, he was entitled to earned income relief in respect of so much of his share of profits as was properly allocable to interest charged under Case III of Sch D or income charged under Case IV or Case V Sch D. The taxpayer worked full-time in the business of the firm during 1964–65. The inspector of taxes refused the taxpayer’s claim and the General Commissioners confirmed his decision.
Held – The commissioners’ decision would be upheld, because—
(i) income taxed by deduction could not be brought into a trading account for the purpose of tax so as to form a component of the trading profit charged under Case I of Sch D and so constitute earned income under that head (see p 208 c, post);
(ii) the foregoing principle applied to interest no less than to dividends (see p 208 b, post); Inland Revenue Comrs v F S Securities Ltd (formerly Federated Securities Ltd) [1964] 2 All ER 691 applied;
(iii) there was a sharp dichotomy between investment income on the one hand, and earned income on the other hand, and it must follow that any item of income which was investment income could not also be earned income (see p 208 j, post);
(iv) the source of interest was not the trade but the loan obligations from which the interest sprang; and the source of income from foreign investments was not the trade but the foreign investments (see p 208 f, post).
Per Pennycuick J. The right to earned income relief, if any, crystallised once and for all at the end of the year of assessment and … ex post facto re-allocation of income could not operate to redistribute the right to relief (see p 209 g, post).
Page 203 of [1970] 2 All ER 202
Notes
For earned income relief, see 20 Halsbury’s Laws (3rd Edn) 438–440, paras 818, 819, and for cases on the subject, see 28 Digest (Repl) 302, 303, 1316–1320.
For the Income Tax Act 1952, s 525, see 31 Halsbury’s Statutes (2nd Edn) 488.
In relation to tax for the year 1970–71, and subsequent years of assessment, the Income Tax Act 1952, s 525, is replaced by the Income and Corporation Taxes Act 1970, s 530.
Cases referred to in judgment
Cenlon Finance Co Ltd v Ellwood (Inspector of Taxes) [1962] 1 All ER 854, [1962] AC 782, [1962] 2 WLR 871, 40 Tax Cas 176; affg [1961] 2 All ER 859, [1961] Ch 634, [1961] 3 WLR 242, 40 Tax Cas 176, Digest (Cont Vol A) 847, 173d.
Inland Revenue Comrs v F S Securities Ltd (formerly Federated Securities Ltd) [1964] 2 All ER 691, [1965] AC 631, [1964] 1 WLR 742, 41 Tax Cas 666; rvsg [1963] 3 All ER 229, [1963] 1 WLR 1223, 41 Tax Cas 666; affg [1963] 1 All ER 318, [1963] 1 WLR 173, 41 Tax Cas 666, Digest (Cont Vol B) 428, 1588a.
Lewis v Inland Revenue Comrs [1933] 2 KB 557, 103 LJKB 689, 149 LT 511, 18 Tax Cas 174, 28 Digest (Repl) 331, 1461.
Liverpool and London and Globe Insurance Co v Bennett (Surveyor of Taxes) [1913] AC 610, 82 LJKB 1221, 109 LT 483, 6 Tax Cas 327, 28 Digest (Repl) 83, 317.
Sterling Trust Ltd v Inland Revenue Comrs (1925) 12 Tax Cas 868, 28 Digest (Repl) 452, 1947.
Case stated
This was an appeal by Michael Bucks (the taxpayer), a partner in N M Rothschild & Sons (the firm) from a decision of the General Commissioners of Income Tax whereby they refused to allow earned income relief under s 211 of the Income Tax Act 1952 in respect of the taxpayer’s share of the income of the firm consisting of interest charged under Case III of Sch D and interest on or dividends from foreign investments charged under Case IV or Case V of Sch D. The case stated is substantially set out in the judgment.
M P Nolan QC and J E H Pearce for the taxpayer.
C N Beattie QC and P W Medd for the Crown.
Cur adv vult
12 December 1969. The following judgment was delivered.
PENNYCUICK J. This is an appeal by Mr Michael Bucks from a decision of the General Commissioners whereby they rejected an appeal by the taxpayer against the refusal of the inspector of taxes to allow earned income relief under s 211 3f the Income Tax Act 1952 in respect of the taxpayer’s share of the income of the firm of N M Rothschild & Sons (to which I shall refer as ‘Rothschilds’) for the year 1964–65.
The circumstances which give rise to this appeal are of an unusual character. The firm of Rothschilds consists of nine partners; namely, four members of the Rothschild family, three other individuals (including the taxpayer) and two limited companies. Its affairs are regulated by articles of partnership under which the partners are entitled to shares of profit determined as therein provided. The business of the firm is that of merchant bankers. In the course of this business, it holds from time to time, and constantly varies, a great number of investments the income of which is taxed by deduction. Such investments include securities the interest on which is charged under Case III of the Sch D. The interest on these securities is the subject of deduction under ss 169 and 1970 of the Income Tax Act 1952. They also include foreign investments the interest on or dividends from which are charged under Case IV or Case V of Sch D. The interest on these securities, paid through a paying agent in the United Kingdom, is the subject of deduction under s 188 of the Income Tax Act 1952. By
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definition, ‘dividends’ in that section includes interest. The investments also include shares in United Kingdom companies the dividends on which were not in the year 1964–65 charged under any particular Schedule and which again were the subject of deduction. For its own purposes, the firm makes up a composite profit and loss account into which are brought, on the one side, the whole of its receipts (including income taxed by deduction) and, on the other side, outgoings. For the purpose of tax, the firm makes up a trading account the profit on which is charged under Case I of Sch D, the income taxed by deduction being omitted from this trading account. That is in accordance with recognised practice. In the year 1964–65, for reasons not material, the firm made a loss on its trading account. It received, however, a sum much greater than this loss by way of income taxed by deduction. The balance of profit thus resulting—ie in effect the income taxed by deduction less the trading loss—became divisible between the partners in the shares specified in the articles of partnership. The share of the taxpayer was £17,406.
The taxpayer contends that he is entitled to earned income relief in respect of so much of his share of profit as is properly allocable to interest charged under Case III of Sch D or income charged under Case IV or Case V of Sch D. Admittedly, having regard to the definition of ‘earned income’ contained in s 525 of the 1952 Act, he is not entitled to earned income relief in respect of so much of his share as is properly allocable to dividends. It is not in dispute that the taxpayer bona fide worked full-time in the business of the firm during the year 1964–65, and thus in any ordinary commercial sense earned his share of the profit. The question is whether this share constitutes ‘earned income’ under the definition in s 525. I need not read s 211, which confers earned income relief. The case turns on the definition in s 525(1), and that I must read so far as is relevant:
‘Subject to the provisions of subsection (2) of this section, in this Act, “earned income” means, in relation to any individual—(a) any income arising in respect of any remuneration from any office or employment of profit held by the individual, or in respect of any pension, superannuation or other allowance, deferred pay or compensation for loss of office, given in respect of the past services of the individual … (b) any income from any property which is attached to or forms part of the emoluments of any office or employment of profit held by the individual; and (c) any income which is charged under Schedule B or Schedule D and is immediately derived by the individual from the carrying on or exercise by him of his trade, profession or vocation, either as an individual or, in the case of a partnership, as a partner personally acting therein … ’
So, in order to qualify as earned income under para (c), with which alone we are concerned, any given item of income must comply with two requirements: (i) it must be charged under Sch B or Sch D—and I interpose that the reference to Sch B is of no significance here, and I shall not refer to it again—and (ii) it must be immediately derived from the carrying on or exercise of the relevant trade, profession or vocation.
With that introduction, I turn to the case stated, which in para 1 sets out the usual introductory matters and continues:
‘2. The issue before the Commissioners was whether any and if so how much of the Appellant’s share of the partnership income in the year in question, which arose wholly from securities held by the partnership in the course of its merchant banking business, was earned income within the meaning of Section 525(1)(c) of the Act so as to entitle the Appellant to relief under Section 211 of the Act.
‘3. The following facts were admitted or proved:—(a) The Appellant was at the material time a partner in the firm of N. M. Rothschild & Sons of New Court, St. Swithin’s Lane, London, E.C. 4 (hereinafter called “the Firm”), the other
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partners being [and there are then set out the names of the four family partners, the other two outside partners and the two limited company partners]. (b) The terms and conditions upon which the said partners carried on the business of the Firm in the relevant period are contained in a Deed of Articles of Partnership dated 12 April 1962, a Deed of Supplemental Articles of Partnership dated 12 June 1962, and a Deed of Supplemental Articles of Partnership dated the 1 April 1963 … [Those are annexed to the case, and I do not think it would be useful to refer to their provisions now.] (c) The Appellant and the other individual partners were during the relevant period employed full time on the business of the Firm, which consists of merchant banking and other related activities. (d) The two main categories into which the business falls are commercial banking and investment banking, and in the course of both of these activities the Firm acquires income from which Tax is deducted at source. (e) One of the most important activities on the commercial banking side of the business is the borrowing and lending of money. In particular short-term deposits are regularly sought and accepted. The partners decide daily what rate of interest can be offered to ensure that the Firm can make a “turn” by a corresponding short-term “investment” of the moneys deposited. The moneys deposited with the Firm on a short-term basis may be used to purchase gilt-edged securities or local authority loans or may be placed on deposit with other banks or used to grant overdrafts to the Firm’s own customers. The profitability of the Firm’s commercial banking department is dependent to a large extent on the partners’ daily decisions in these matters, but profitability cannot be pursued without regard to risk and liquidity. Liquidity is essential to meet heavy withdrawals which may arise in times of crisis or when there is nervousness about sterling; and British Government securities are particularly attractive to the Firm because they give a relatively high interest yield and can always be sold for prompt cash in a free market. The proportion of such investments held by the Firm is high. (f) The activities of the investment banking section of the Firm, particularly dealing transactions, providing finance for clients and underwriting stock and share issues, lead to the acquisition by the Firm of stocks and shares. These are held on dealing account and profits arising on their realisation are included in the profits of the Firm. The Firm also holds investments in other companies with which it has a close or old-established relationship, which it also treats as dealing stock. It also holds shares in a small number of companies as trade investments. (g) The business earns gross receipts, such as fees and interest paid gross with no deduction of Income Tax, and also receipts from which Income Tax has been deducted such as dividends and yearly interest on stocks and shares acquired and held on dealing account. All these receipts arise from the Firm’s banking activities and are taken into account in computing its commercial profits. (h) The Balance Sheets, Profit and Loss Accounts and Appropriation Accounts of the Firm for the years ended 31 March 1964 and 31 March 1965, showing the commercial profits for these years and the appropriation of such profits to the accounts of the partners were before us. By agreement between the parties these are not annexed to this Case but copies will be available for the consideration of the Court if required. (i) Schedules numbered I to IV … are annexed to … this Case … Schedule I … shows the sources from which the statutory income of the partnership for 1964/65 was derived and the amount derived from each source. Schedule II … shows an allocation of that statutory income between the partners, upon which they agreed on the 22 February 1968, after the Appellant’s claim for earned income relief in respect of partnership income had been refused. This agreement purported to allocate all the partnership income charged to tax under Cases III, IV or V or Schedule D, to the individual, as distinct from the corporate partners. Schedule IV … purports to show the way in which the rights of the partners under the partnership agreement
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were reflected in the allocation shown in Schedule II. Schedule III … shows what the Appellant claimed to be the total of his earned income for 1964/65 on this basis. The Inspector had accepted that he was entitled to earned income relief in respect of the Schedule E income shown in this Schedule, but had refused relief in respect of the Schedule D partnership income. [It may be useful, in order to obtain a full understanding of this case, to look at those schedules, but it is not useful to refer to them in detail here.]
‘4. It was contended on behalf of the Appellant that:— (1) The interest and dividends received by the partners in respect of loans made and shares and securities acquired in the ordinary course of trade were income immediately derived from the carrying on of the trade. (2) In so far as such interest and dividends were charged to tax under Schedule D, the share of the Appellant therein was earned income as defined by Section 525(1)(c) of the Act. (3) Section 223 of the Act provides that the share of the Appellant in the trading income of the partnership shall be deemed to be the share to which he is entitled but does not provide which of the various types of partnership income that share shall consist of and in particular does not require a pro rata allocation among all partners of the income qualifying for earned income relief. (4) In the light of the principle illustrated by the decision in Sterling Trust Ltd v Inland Revenue Comrs the partners were entitled to allocate the various types of trading income to their respective shares ex post facto in the manner shown by Schedule II … (5) The earned income of the Appellant, for the purposes of his claim for relief from tax under Section 211 of the Act, is therefore correctly shown in Schedule III …
‘5. It was contended on behalf of the Crown that:—(i) The definition of earned income in Section 525(1)(c) of the Act did not coincide with the ordinary commercial view taken by the partners in the Firm, because it was limited to income charged under Schedules B or D of the Act, and necessarily excluded income from gilt-edged securities which were chargeable under Schedule C and income from dividends of United Kingdom Companies not directly chargeable under any Schedule before 1965. (ii) If the definition in Section 525(1)(c) of the Act had the meaning contended on behalf of the Appellant, it would have the surprising and anomalous effect that interest from United Kingdom Government securities and dividends from shares in United Kingdom Companies received by bankers or share dealers in the course of their trade would be excluded from earned income relief, while relief would be granted in respect of interest from other loans and dividends from shares in foreign Companies. (iii) The requirement that the income to be relieved should not only be charged under Schedule B or Schedule D but should also be immediately derived by the individual from the carrying on or exercise of his trade, excluded from relief income charged to tax by way of deduction without regard to the carrying on of any trade or any resulting profit or loss. (iv) The case of Inland Revenue Comrs v F S Securities Ltd (formerly Federated Securities Ltd) and in particular certain dicta of Lord Radcliffe’s in that case ([1964] 2 All ER at 696, 41 Tax Cas at 694), provided authority for the view that income charged to tax by way of deduction could not be treated as income immediately derived from the carrying on of a trade within the meaning of Section 525(1)(c) of the Act. (v) The partnership income in respect of which relief was claimed was therefore not earned income within the meaning of Section 211. (vi) In any event the partners were not entitled to allocate the statutory income for the year in question among themselves in the manner shown in Schedule II … because: (a) the rights of the partners to relief under Sections 223 and 211 of the Act depended on their rights under the Partnership Deed and could not be
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varied by subsequent allocation; (b) the case of Sterling Trust Ltd v Inland Revenue Comrs had no application to the rights of the partners inter se, being concerned with payments out of and not rights to income; and (c) the case of Lewis v Inland Revenue Comrs was authority for the view that the partners should be treated as sharing rateably, according to their respective rights under the Partnership Agreement, in each category of statutory income of the partnership.
‘6. We the Commissioners were of the opinion and decided that we were unable to allow the claim of the Appellant that he was entitled to earned income relief under Section 211 of the Act in respect of his share of the partnership income for the year in question, and therefore it was not necessary for us to decide the second issue of how much of the Schedule D income within the profits of the Firm was attributable to the Appellant’s share of such profits.’
There is singularly little authority on the interpretation of s 525 in isolation. The section has, however, received a good deal of judicial attention in connection with surtax directions under Part IX, Chapter III, of the Income Tax Act 1952: see s 262b, which provided for automatic direction on investment companies. Section 257c, so far as now material, provided:
‘(1) The preceding provisions of this Chapter shall, in relation to companies which are investment companies, have effect subject to the subsequent provision of this Chapter.
‘(2) In this section, and in the subsequent provisions of this Chapter, “investment company” means a company the income whereof consists mainly of investment income, and “investment income” means, in relation to a company, income which, if the company were an individual, would not be earned income … ’
The scope of the definition in s 257 was considered by the House of Lords in Inland Revenue Comrs v F S Securities Ltd. In that case, the company had performed a largescale dividend-stripping operation. The headnote read as follows ((1964) 41 Tax Cas at 666):
‘The Appellant Company was incorporated in August, 1954, and was at all material times under the control of not more than five persons. Its memorandum of association provided, inter alia, that it might purchase, hold and deal in shares, etc. In December, 1954, and March, 1955, the Company purchased the entire share capital of three companies, each of which had substantial undistributed profits. On 28th March, 1955, all three companies declared large dividends. The value of their shares decreased as a result, and this decrease was reflected in the trading account of the Company for the period from 1st September, 1954, to 31st March, 1955. The Company claimed and was allowed relief under Section 341, Income Tax Act, 1952, in respect of a trading loss for that period on the basis that the dividends should be excluded in computing its trading profit or loss for tax purposes. On 22nd January, 1960, a direction under Section 245, Income Tax Act, 1952, was given in respect of the Company’s actual income from all sources for the above-mentioned period, on the footing that it was an investment company within the meaning of Section 257(2). On appeal, the direction was confirmed by the Special Commissioners. In the Court of Appeal ([1963] 3 All ER 229, 41 Tax Cas 666) and the House of Lords, the Company contended that the dividends declared
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on 28th March, 1955, were, consistently with Cenlon Finance Co. Ltd. v. Ellwood (Inspector of Taxes) trading receipts to be taken into account in arriving at its liability under Case I of Schedule D. Held, that the Commissioners’ decision was correct.’
Lord Reid and Viscount Radcliffe made a thorough examination of the basis on which a trading company in receipt of income taxed by deduction should make up its accounts for the purpose of tax, and concluded that such income, being separately charged by deduction, could not properly be brought into account as a receipt in the trading account. It is clear beyond argument that that reasoning applies to interest no less than to dividends; and, indeed, Lord Radcliffe more than once used the expression ‘interest and dividends’. The decision of the House of Lords in Inland Revenue Comrs v F S Securities Ltd is conclusive that interest and dividends cannot be the trading profit charged under Case I of Sch D, and so constitute earned income under that head.
Counsel for the taxpayer, however, contends that even if that has to be accepted then interest (though not dividends) and also income from foreign investments, when these are received by a trader in the course of carrying on his trade, come within the definition of ‘earned income’ as separate items of charge. Such interest (unlike dividends) is charged under Case III of Sch D, and income from foreign investments is charged under Case IV or Case V of Sch D. So such interest and income do certainly comply with the first requirement in s 525(1)(c), ie they represent income which is charged under Sch D. Further, he says, such income falls within the natural meaning of the words ‘immediately derived … from the carrying on or exercise … of his trade’, in para (c).
Quite apart from authority, I do not think that, in the context of an income tax statute, one would naturally treat income received under deduction by a trader in the carrying on of his trade as ‘derived’, still less ‘immediately derived’ from the carrying on of that trade. It is certainly derived by him in the course of that trade; but the word ‘from’ suggests that the trade must be the source of the income, and that is not so in the case of income charged by deduction. The source of interest is not the trade but the loan obligations from which the interest springs. Equally, the source of income from foreign investments is not the trade, but the foreign investments. Again, the word ‘immediately’ rather suggests that the trade must be the direct source, so as to exclude income derived from a different source itself owned by a trader in the carrying on of his trade. The distinction is a fine one, but it is, I think, founded on the basic principles of the income tax code.
Here, too, however, assistance is to be found in the speech of Lord Radcliffe in Inland Revenue Comrs v F S Securities Ltd. After quoting the terms of ss 257 and 525 of the Act, he said ([1964] 2 All ER at 696, 41 Tax Cas at 694).
‘It is plain therefore that in these special sections about surtax directions the legislature has adopted the ordinary distinction between investment income and earned income that belongs to the tax code.’
So Lord Radcliffe is taking it for granted that that distinction between investment income and earned income forms part of the tax code. He went on to say that it is plain that the same distinction is made applicable to the provisions concerning surtax directions. There is thus a sharp dichotomy between investment income, on the one hand, and earned income, on the other hand, and it must follow that any item of income which is investment income cannot also be earned income. There was some discussion whether that statement should be regarded as a dictum, but, if so, it is a dictum of the highest authority made in the course of laying down the basic principles applicable in this context, and I certainly propose to follow it.
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Counsel for the taxpayer relied on the judgment of Ungoed-Thomas J in the same case ([1963] 1 All ER 318 at 322, 323, 41 Tax Cas at 675, 676), and in particular his conclusion that a dividend received by a trader might be treated as being ‘immediately derived’ from the carrying on of his trade. But without entering on a detailed analysis, I think it is really clear that the reasoning of the learned judge, which was affirmed by the Court of Appeal ([1963] 3 All ER 229, 41 Tax Cas 666), has been overtaken by the decision of the House of Lords ([1964] 2 All ER 691, 41 Tax Cas 666), and I do not think I am entitled to place reliance on it. Counsel for the taxpayer also relied on Liverpool and London and Globe Insurance Co v Bennett (Surveyor of Taxes) in the House of Lords. In that case, the company had become entitled to interest on foreign investments which was not remitted to this country and consequently, of course, was not charged with tax by way of deduction. The House of Lords upheld an assessment to tax under Case I of Sch D in contradistinction to Case IV of Sch D. That case does not, I think, assist the taxpayer in the present case, where the relevant income was charged with tax by way of deduction.
It is only too clear that, in the unusual circumstances of the present case, the rather technical construction which I find myself obliged to put on the definition of ‘earned income’ works a real hardship on the taxpayer. One would naturally wish to put on any given statutory provision a construction which produces a fair result. It is worthwhile to observe, for that reason— and only for that reason—that in many other cases the wider construction contended for by the taxpayer would give rise to much uncertainty and might produce a result which would be thought unduly favourable to the taxpayer. I am not, however, concerned with that sort of enquiry; nor, as it has been said, to weigh anomaly against anomaly. I must apply the terms of the section as read in the context of the income tax legislation and as explained by the highest judicial authority.
I must now mention one further point which was raised by the case; namely, the allocation of income made between the partners some time after the end of the relevant year. On the view which I have taken on the main issue, this question does not arise, but I think I ought to express shortly my view on it. It appears clear that, in the absence of agreement to the contrary between the partners, any part of the income of the firm which qualified for earned income relief would, for the purpose of such relief, have to be apportioned rateably between the partners in proportions corresponding to their shares of the entire income under the articles of partnership. In the present case, as appears from the schedules exhibited to the case stated, the partners agreed on 22 February 1968—ie several years after the conclusion of the year of assessment 1964–65—to re-allocate the income for that year in such proportions that the individual partners (in contradistinction to the corporate partners) took the entire income in respect of which earned income relief was claimed. It seems to me clear that the right to earned income relief, if any, crystallised once and for all at the end of the year of assessment, and that this ex post facto re-allocation of income could not operate to redistribute the right to relief. Counsel for the taxpayer relied on Sterling Trust Ltd v Inland Revenue Comrs, where the question was as to the allocation of an outgoing to a particular part of the company’s income. It seems to me that quite different considerations arise in that connection from those which arise in relation to the allocation of shares of profit. However, as I have said, that question does not arise here and I need say nothing further.
Appeal dismissed.
Solicitors: Freshfields (for the taxpayer); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Note
Re John’s Assignment Trusts
Niven v Niven
[1970] 2 All ER 210
Categories: FAMILY; Ancillary Finance and Property
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 5, 6, 9 MARCH 1970
Husband and wife – Property – Matrimonial home – Home jointly owned by spouses – Express declaration of trust – Divorce of parties – Wife seeking sale of property – Entitlement to proceeds of sale – Whether courts would go behind express trust – Intention of parties – Whether wife could be put on terms to grant tenancy to husband.
Notes
For the determination of rights of property as between husband and wife, see 19 Halsbury’s Laws (3rd Edn) 900, 901, para 1492, and for cases on the subject, see 27 Digest (Repl) 263–265, 2119–2133.
Cases referred to in judgment
Bedson v Bedson [1965] 3 All ER 307, [1965] 2 QB 666, [1965] 3 WLR 891, Digest (Cont Vol B) 349, 2130fa.
Jones v Challenger [1960] 1 All ER 785, [1961] 1 QB 176, [1960] 2 WLR 695, 47 Digest (Repl) 400, 3595.
Parrington v Parrington [1951] 2 All ER 916, 27 Digest (Repl) 648, 6105.
Pettitt v Pettitt [1969] 2 All ER 385, [1969] 2 WLR 966.
Tymoszczuk v Tymoszczuk (1964) 108 Sol Jo 676.
Wilson v Wilson [1963] 2 All ER 447, [1963] 1 WLR 601, Digest (Cont Vol A) 671, 621m.
Action
This was an action by Ruby Niven against her former husband, Henry Verdun Niven, who had obtained a decree of divorce against her in 1965. The following facts are taken from the judgment of Goff J. The parties were married on 1 August 1936 and for nearly five years they lived with his parents. At the end of this period, on 26 June 1941, a freehold house called Rock View was purchased. The price was £400, of which £300 was raised on a mortgage of the house with a collateral security on an insurance policy in the name of the defendant. The remaining £100 was provided out of savings from what the defendant allowed the plaintiff. The house was conveyed into the defendant’s name. The mortgage was subsequently paid off by the plaintiff out of her wages and moneys allowed to her by the defendant. In 1948 the house was sold and a leasehold property known as 15 Henfaes Road, Tonna, was purchased. By an assignment dated 19 April 1948 and made between Willie George Johns of the one part and the plaintiff and the defendant of the other part, Johns assigned to the plaintiff and the defendant his leasehold interest of 99 years in the premises together with certain fixtures, plant and machinery and the goodwill of the business then being carried on by him on the premises, the purchase price being £2,000. By such assignment the house and shop premises were conveyed in trust for the plaintiff and defendant as beneficial joint tenants. The premises were purchased out of the proceeds of sale of Rock View as to £1,847; and the remainder was borrowed from the bank on mortgage. The business was
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run almost entirely by the plaintiff in her own name. She used the proceeds for the common benefit of herself, the defendant and their son, and for household expenses generally. In 1959, the plaintiff left the defendant and on 26 January 1965 he obtained a decree of divorce on the ground of her desertion. He continued to live at 15 Henfaes Road. When the plaintiff left the home, her two sisters continued to carry the business on until 1964, but it failed and was discontinued.
By her summons under the Law of Property Act 1925, s 30, and the Trustee Act 1925, s 57, the plaintiff sought the following relief: (1) that the defendant might be ordered to concur with the plaintiff in selling 15 Henfaes Road being property held by them as joint tenants and trustees for sale. (2) That the net proceeds of such sale be paid into a joint account in the name of the plaintiff and the defendant. (3) A declaration that the plaintiff was entitled to a lien on the property for the amount found (in pursuance of the enquiry thereinafter requested) to have been spent by her out of her own moneys in or about the execution of the trusts of the assignment. (4) An enquiry as to what sum or sums had been expended by the plaintiff in or about the execution of the trusts. (5) An account of what was due to the plaintiff in respect of the moneys so expended and out of the proceeds of the sale and payment out of the amount so found to be due. The defendant alleged that the business had been carried on by the plaintiff on behalf of the plaintiff and defendant as partners in equal shares and asked for an account to be taken of the partnership dealings.
J F Mummery for the plaintiff.
Gavin Lightman for the defendant.
9 March 1970. The following judgment was delivered.
GOFF J having stated the facts continued: Two main claims arise in this action. First, the plaintiff says that 15 Henfaes Road was held in trust for her and the defendant as beneficial joint tenants, but the defendant denies that and claims that he is the sole beneficial owner. Secondly, the plaintiff says the business was hers, but the defendant says there was a partnership and he claims an account accordingly.
[His Lordship accepted the defendant’s evidence that the price of Rock View was £400 and that £100 of it was provided out of savings from the allowances made by the defendant to the plaintiff. He found that the £300 raised on mortgage was paid off out of a common pool arising from her earnings and from allowances made to her. He continued:] I turn to the two main questions. As to the house, the assignment contained an express declaration of trust for the plaintiff and the defendant as beneficial joint tenants. In Pettitt v Pettitt ([1969] 2 All ER 385 at 405, [1969] 2 WLR 966 at 989) Lord Upjohn said:
‘In the first place, the beneficial ownership of the property in question must depend on the agreement of the parties determined at the time of its acquisition. If the property in question is land there must be some lease or conveyance which shows how it was acquired. If that document declares not merely in whom the legal title is to best but in whom the beneficial title is to vest that necessarily concludes the question of title as between the spouses for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter even on death or the break-up of the marriage.’
Counsel for the defendant, in answer to that, has relied on the judgments of Lord Denning MR and Davies LJ in Bedson v Bedson but Davies LJ, at least, was influenced by the view then held by some but since shown by the House of Lords to be erroneous, that s 17 of the Married Women’s Property Act 1882 gave the court an overriding discretion. Lord Upjohn pointed this out immediately after the passage which I
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have already read from his speech in Pettitt v Pettitt ([1969] 2 All ER at 405, [1969] 2 WLR at 989). Even Davies LJ, however, said that to go behind an express trust there must be evidence that the parties did not intend it.
Wilson v Wilson also emphasises the importance of an express trust, and in that case Russell LJ said ([1963] 2 All ER at 452, [1963] 1 WLR at 608):
‘In the present case the conveyance was to the husband and wife as purchasers as joint tenants on trust for sale. They then proceeded in the same document expressly to declare what were to be their beneficial interests in the property and the proceeds of any sale thereof—namely, that they were to be beneficial joint tenants. As I read the judgment below and the affidavits, there is no evidence to justify the conclusion that this declaration of beneficial interests was in any way due to mistake or a misunderstanding of instructions. The fact that purchase price was produced as to £750 by the husband out of his own resources and by family loans, and the balance of £1,600 by a building society mortgage under which both husband and wife were mortgagors, and that the husband paid off instalments totalling £400 odd is entirely consistent with the beneficial trust declared by them.’
Fraud is disclaimed but counsel for the defendant has argued that ‘mistake’ in Lord Upjohn’s speech should be given a wide meaning. He craved in aid such mistake as might, for example, be an answer to a claim for specific performance, and he said it could not mean common law mistake such as would invalidate the whole transaction. Whatever ‘mistake’ may mean in this context there does not seem to me, on the facts of this case, to be any sufficient ground entitling the defendant to go behind the express trust.
The plaintiff says that she told the defendant that the property was being put in joint names and that he agreed. That appears to me to be probable, and I accept it. It is difficult to see how otherwise the defendant came to execute the deed, as he did, in the solicitors’ office. It is attested by their clerk. He cannot remember it being read through to him but surely a solicitor obtaining a signature to a deed would either read it through or, at least, give some explanation of its effect. In any case the defendant himself admits that the plaintiff did tell him about a fortnight later and he raised no objection. Moreover, he very frankly said that at that time the parties were living happily together, and, as he put it, ‘What was hers was mine, and what was mine was hers; it was all ours’. The assignment as drawn, therefore, accords with the probable intention and wishes of the parties at the time.
In 1957, when the marriage was breaking up, the plaintiff arranged for a sale to an uncle, and the defendant was willing to concur in that sale provided he was paid half the purchase money. He said he was trying to save the marriage; but that will not do because he said that there was a little house going in the village for £500, and that a half share would enable him to buy it for himself and his son and leave him with £1,000 over, so that the transaction was one which was to operate on the break-up of the marriage and not one which was going to save it.
I therefore hold that the property is held in trust for the plaintiff and the defendant jointly, or, rather, now in equal shares because the proceedings have severed the joint tenancy.
Alternatively, counsel for the plaintiff argued that the case was covered by the Married Women’s Property Act 1964 which provides that if any question arises as to the right of a husband or a wife to money derived from any allowance made by the husband for the expenses of the matrimonial home or for similar purposes, or to any property acquired out of such money, the money or property shall, in the absence
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of any agreement between them to the contrary, be treated as belonging to the husband and the wife in equal shares. He says that that has retrospective effect, and, further, that moneys paid in discharge of a mortgage on the matrimonial home are part of the expenses of the matrimonial home and covered by the section. He submitted, therefore, that the original property, Rock View, must be held to have belonged to the parties equally, because, both in respect of the initial £100 and the subsequent payment off of the mortgage, it was acquired from an allowance or allowances made by the husband for the expenses of the matrimonial home. That, then, he says, is reflected in the purchase of 15 Henfaes Road. Counsel for the defendant argues that the section is not retrospective and that grave difficulties would arise if it were held so to be, and, in any event, that moneys used to pay off a mortgage do not come within the ambit of the Act, for they are not expenses of the matrimonial home and that, apart from the Act, by paying off a mortgage one can only secure a charge by subrogation and not an aliquot share of the equity. There is some authority but not much on this point, since there is one case only, Tymoszczuk v Tymoszczuk, where Master Jacob held, first, that the Act was retrospective but, secondly, that mortgage payments were not expenses of the matrimonial home. If that be right, the alternative argument would leave the plaintiff with a one-eighth interest. In the view which I have taken of the effect of the express declaration of trust, it is unnecessary for me to decide the points arising on this alternative way of presenting the case. But I may say that I, for my part, feel some difficulty in applying the section retrospectively, notwithstanding its wide terms, and I incline to the view that the relevant time is not when the question arises but when the money which is under consideration, or which acquired the property, was in fact allowed by the husband to the wife. Otherwise I think there might be serious difficulties with regard to accrued titles. Also, I must not be taken as accepting the view that where the section does apply moneys paid to discharge a mortgage on the marital home are not expenses of the matrimonial home or expenses for similar purposes within the section.
As to the business, I see no escape from the conclusion that it was a partnership business, although the defendant never looked at the accounts or enquired into the disposal of the proceeds, and it was carried on in the plaintiff’s name. [His Lordship after reviewing the evidence concerning the running of the business concluded that a partnership account should not be ordered in respect of any part of the period until the wife left the home. He continued:] I am supported in the conclusion at which I have arrived by Parrington v Parrington. True it is that the problem there under consideration was a different one altogether, namely whether a purchase by a wife of her husband’s interest in a partnership business for a price payable by instalments was a post-nuptial settlement within the meaning of the powers of the Divorce Court, but the reasoning assists me where it was pointed out that the partnership might be predominantly a relationship of husband and wife. The position changed, however, when she left the home, and I must direct accounts and enquiries to cover the period after that.
[His Lordship considered the form of order and continued:] Then I have to consider the question of a sale. That is a matter which has been dealt with in a number of cases, and, particularly for present purposes in Jones v Challenger, where it was held that where property was acquired by husband and wife jointly for the purpose of providing a matrimonial home neither party had a right to demand the sale of the property while that purpose still existed. That might defeat the object behind the trust. But with the end of the marriage that purpose was spent and the duty to sell was restored. It was then for the court to look at all the circumstances and consider not merely whether it was reasonable for the husband to continue to live
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in the house or for the wife to receive her share of the trust property in cash, but whether it was inequitable for the wife once the matrimonial home had gone, to want to realise her investment. Applying that principle, it seems to me that there must be a sale of this property, unless the wife can be put on terms to grant a tenancy. Counsel for the defendant said that was done in Bedson v Bedson ([1965] 3 All ER 307, [1965] 2 QB 666), but there the court was considering a different matter, an interim order. He also said that the court had power to do that under s 30 of the Law of Property Act 1925a because the trustees have a power of leasing and, assuming the plaintiff does not agree, the tenancy is a transaction proposed by the defendant with respect to which the trustees are refusing to exercise their statutory powers of leasing under s 28 of the 1925 Act, and therefore the court has a general discretion under s 30. I cannot take that view of the matter because the trustees have no power to let the property to themselves, though, of course, if they wished to do it, or one of them desired to have it done, then in the ordinary case where a trust is still subsisting application could be made to the court for authority to effect the transaction. I do not think, however, that it can be said that where one of the trustees desires to have a tenancy there is a proposed transaction which the court can order under s 30 where the trust for sale has become immediately operative. The proposition of a tenancy has only just been advanced and it may be that the parties will be able to deal with the matter by agreement on that basis. Therefore, I will include in my order an authority for the defendant, notwithstanding he is a trustee, to take a tenancy of the property on such terms as may be agreed between him and the plaintiff. It is not for me to say what the parties can or ought to agree, but no doubt the matter will be considered having regard to the fact that this is the defendant’s home and the plaintiff is married and living elsewhere.
Subject to that, I propose to order a sale at such time, and in such manner, as the parties may agree, or, in default of agreement, a sale by auction, by such auctioneers as the parties may agree or the court may, in default of such agreement, determine, at such reserve, if any, and at such time, not being less than five nor more than seven months from the date hereof as the auctioneers determine.
Orders accordingly.
Solicitors: Seeley & Son agents for L C Thomas & Son, Neath (for the plaintiff); Sharpe, Pritchard & Co (for the defendant).
R W Farrin Esq Barrister.
Practice Note
(Criminal Law: Time to elapse before majority verdict of jury accepted)
[1970] 2 All ER 215
Categories: PRACTICE DIRECTIONS
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, SACHS LJ AND EVELEIGH J
Hearing Date(s): 11 MAY 1970
Criminal law – Trial – Jury – Verdict – Majority verdict – Time to elapse before majority verdict accepted – Practice to be followed – Criminal Justice Act 1967, s 13.
Notes
For majority verdicts, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 796A.
For the Criminal Justice Act 1967, s 13, see 8 Halsbury’s Statutes (3rd Edn) 590.
11 May 1970.
LORD PARKER CJ at the sitting of the court said: In the light of difficulties which, as disclosed by recent cases, are arising under s 13a of the Criminal Justice Act 1967, the court desires to issue the following Practice Note, supplementary to the Practice Direction ([1967] 3 All ER 137, [1967] 1 WLR 1198) dated 31 July 1967. In future, any verdict of a majority of a jury shall not be accepted until two hours and ten minutes have elapsed between the time that the last member of the jury has left the jury box to go to the jury room and the time when there is put to the jury the first of the questions set out in para 3b of the Practice Direction ([1967] 3 All ER 137, [1967] 1 WLR 1198) of 31 July 1967. Moreover, before the first of those questions is put, the period that has elapsed since the last member of the jury left the jury box shall be stated in open court by the senior officer of the court present when the jury is about to be asked to return a verdict.
N P Metcalfe Barrister.
Slough Estates Ltd v Slough Borough Council and others (No 2)
[1970] 2 All ER 216
Categories: TOWN AND COUNTRY PLANNING: CONSTRUCTION
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 3, 4, 5, 9, 10, 11, 12 MARCH 6 MAY 1970
Town and country planning – Development – Permission for development – Construction of permission with incorporated plan – Permission relating to land shown uncoloured on plan – Plan proposing development only of land shown coloured – Whether discrepancy between permission and plan reconcilable – Whether meaning of permission ascertainable.
Construction – Public document – Admission of extrinsic evidence to alter or qualify meaning – Planning permission.
In 1945, a local authority issued a document purporting to grant planning permission in respect of land owned by the company. The permission referred to ‘the land situate at the Trading Estate at present undeveloped, and shown uncoloured on the plan submitted, to be used for industrial purposes’. (The words in italics were inserted in typescript on the printed form of permission.) The ‘plan submitted’ to which the purported planning permission referred contained proposals for the development of areas shown coloured thereon, especially for the erection of 240 ‘proposed new factories’; but it contained to proposals for any development of the uncoloured areas; and it did not contain any proposal for any industrial use except the implied proposal that the new factories should be used for factory purposes. The company never acted on the purported planning permission of 1945. When the company desired to erect new factories from time to time, the company applied for specific planning permissions and before 1955 succeeded in obtaining them. In 1955, the company made large-scale applications for building permissions, but these applications were refused and the company applied for and obtained compensation. In proceedings begun in 1966 the company sought declarations concerning the effect of the purported planning permission of 1945. The first declaration sought was in substance a declaration that the 1945 permission permitted the erection of factories on all land of the estate which remained undeveloped in 1945 (whether the land was shown coloured or uncoloured on the plan). The second declaration, sought as an alternative to the first, was in substance that the company had permission to develop all such land of the estate for industrial purposes so that permission for the erection of factories could not be withheld merely on the ground that the land ought to be used otherwise than for industrial purposes. The third declaration sought was that the company had permission for the erection of industrial premises on the land undeveloped in 1945 and shown uncoloured on the plan and which had not since been developed.
Held – (i) The company had not shown an entitlement to any of the declarations claimed (see p 217 j, p 218 f and g, and p 225 g and h, post).
(ii) In particular the granting of the first declaration would involve the rejection of the word ‘uncoloured’ inserted in typescript in the printed planning permission. The declaration would put on the permission an interpretation to which there were serious objections, both because it did violence to the wording of the document and because it gave results not likely to have been intended. The interpretation was not a probable one and ought not to be accepted (see p 217 j, p 218 f and g, p 223 b and e, p 224 f and p 225 h, post). The second proposed declaration was open to the same objections as the first, except that it gave a more natural meaning to the expression
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‘to be used for industrial purposes’ (which was not apt to cover the erection of buildings) (see p 217 j, p 218 f and g and p 225 a and h, post). The third declaration would involve the erection of industrial premises on the undeveloped uncoloured land which was unsuitable for the purpose and would depart widely from the proposals contained in the plan (see p 217 j, p 218 f and g and p 225 b and h, post). Accordingly none of the declarations sought should be made.
(iii) It was not in the circumstances necessary to consider whether the purported planning permission was abandoned by the subsequent conduct of the company or whether a planning permission could be abandoned (see p 217 j, p 218 f and g and p 225 g and h, post).
Per Curiam. In construing a public document it is not in general permissible to admit evidence of facts which were known to the maker of the document but which are not common knowledge to alter or qualify the apparent meaning of words or phrases used in the document (see p 218 e, f and g and p 225 h, post; cf p 222 g to j, post).
Decision of the Court of Appeal [1969] 2 All ER 988 affirmed but on different grounds.
Notes
For time limits imposed on the duration of planning permissions, see the Town and Country Planning Act 1968, ss 65, 66 (48 Halsbury’s Statutes (2nd Edn) 1631, 1632).
Cases referred to in opinions
Camrose (Viscount) v Basingstoke Corpn [1966] 3 All ER 161, [1966] 1 WLR 1100, 130 JP 368, Digest (Cont Vol B) 698, 1766.
Miller-Mead v Minister of Housing and Local Government, Same v Same [1963] 1 All ER 459, [1963] 2 QB 196, [1963] 2 WLR 225, 127 JP 122, 45 Digest (Repl) 352, 100.
Sussex Caravan Parks Ltd v Richardson [1961] 1 All ER 731, [1961] 1 WLR 561, 125 JP 237, Digest (Cont Vol A) 1280, 207a.
Wilson v West Sussex County Council [1963] 1 All ER 751, [1963] 2 QB 764, [1963] 2 WLR 669, 127 JP 243, 45 Digest (Repl) 332, 25.
Appeal
This was an appeal by Slough Estates Ltd from an order of the Court of Appeal (Lord Denning MR, Salmon and Karminski LJJ) dated 27 March 1969 and reported [1969] 2 All ER 988 affirming the judgment of Megarry J dated 15 February 1968 in favour of Slough Borough Council and Buckinghamshire County Council. The facts are set out in the opinion of Lord Pearson.
Douglas Frank QC, Charles Sparrow QC, Patrick Freeman and David Keene for the company.
J L Arnold QC, Jeremiah Harman QC and Elizabeth Appleby for the local authority and the county council.
Their Lordships took time for consideration
6 May 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend, Lord Pearson, I would dismiss this appeal. But I wish to add a few observations about a question of law which is involved. The company argued that in construing the planning permission with which we are concerned it is proper to have regard to all relevant facts known to the planning authority when the permission was given—in this case correspondence which had passed between the parties. We did look at this correspondence before deciding whether it was admissible and in my view it
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does not help the company so it is unnecessary to reach a decision. But as the matter was argued and is of general importance I think that I should state my opinion.
It is well settled that the court in construing a will or a contract must put itself in the shoes of the testator or the parties by admitting in evidence all relevant facts known at the time by the testator or by both the parties. But in my view it does not at all follow that the same applies to a public document. It could not possibly apply to a Minister making a statutory instrument. How far can it apply to a written grant of planning permission? This is available to purchasers from the person who originally obtained the permission. He may have no means of discovering what facts were known to the planning authority. It is true that the person who originally obtained the permission would be likely to know. But the question may arise after many years. And it could hardly be that the permission could mean one thing in the hands of the original owner and something different in the hands of a purchaser from him.
There is not much authority on the matter. We were referred to two cases. In Miller-Mead v Minister of Housing and Local Government the permission granted was, if its words were given their ordinary meaning, wider than what had been asked for in the owner’s application. But it was held not proper to use the application to cut down the ordinary meaning of the permission. On the other hand in Sussex Caravan Parks Ltd v Richardson there are observations by Harman LJ to the effect that in construing an entry in a valuation list it is permissible to have regard to extrinsic evidence and the company relied on them. They were not essential to the decision and are not supported by the judgment of Holroyd Pearce LJ.
Of course extrinsic evidence may be required to identify a thing or place referred to, but that is a very different thing from using evidence of facts which were known to the maker of the document but which are not common knowledge to alter or qualify the apparent meaning of words or phrases used in such a document. Members of the public, entitled to rely on a public document, surely ought not to be subject to the risk of its apparent meaning being altered by the introduction of such evidence.
LORD MORRIS OF BORTH-Y-GEST. My Lords, I have had the advantage of reading the speech of my noble and learned friend, Lord Pearson, and I agree with it. I agree also with the observations of my noble and learned friend, Lord Reid.
I would dismiss this appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the opinions of my noble and learned friends, Lord Reid and Lord Pearson. I agree with them and I agree that this appeal should be dismissed.
LORD PEARSON. My Lords, the plaintiffs and appellants are Slough Estates Ltd and I will refer to them as ‘the company’. They own the Slough Trading Estate, which is about 500 acres in extent. They build factories and let them out to tenants. They also provide roads, railway sidings, warehouses, electric power and other ancillary services. By 1945 they had developed in this way rather more than half of the trading estate. In 1945 they submitted a plan to the Slough Borough Council who are the first respondents. On 17 October 1945, the council granted to the company a purported planning permission. They used a printed form, deleting certain words and inserting certain words in typescript and manuscript. I will set out the material words of the document in full, showing the deletion and also showing in italics the inserted words:
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‘Form 2(CP./UL.) Application No. U L 21
… SLOUGH BOROUGH COUNCIL
TOWN AND COUNTRY PLANNING ACTS, 1932 AND 1943
TOWN AND COUNTRY PLANNING (GENERAL INTERIM DEVELOPMENT) ORDER, 1945a
SOUTH BUCKS JOINT PLANNING SCHEME
To Slough Estates Limited
c/o W. H. L. Price, Bedford Avenue, Slough, Bucks
In pursuance of their powers under the above-mentioned Acts and Order, the Council as Interim Development Authority hereby permit the land situate at the Trading Estate at present undeveloped, and shown on the accompanying plan(s) to be used for the purpose in and shown uncoloured on the plan submitted, to be used for industrial purposes subject to the submission by the developer and subsequent approval by the Council, or by the Minister of Town and Country Planning on appeal, of particulars of the proposed development [and to compliance with the conditions specified hereunder:—
That further particulars of the proposed development be submitted and approved in due course.
The reasons for the Council’s decision to grant permission for the development, subject to compliance with the conditions hereinbefore specified:—
To ensure that development shall comply with the Planning Scheme now in course of preparation.]
DATED the Seventeenth day of October, 1945
J. H. Warren
Town Clerk’
The ‘plan submitted’, to which the purported planning permission refers, is a vital document and as it cannot be exhibited to this opinion it will have to be described. It is a plan with a scale of 1/2500 showing the trading estate and other land as well. It does not show the boundary of the trading estate. Some parts are coloured and some are uncoloured. The meanings of the different colours are stated on the plan. Of the coloured parts: (1) about 240 rectangular or other shapes, stated to cover 2,647,697 square feet, are coloured pink, and this colouring means that they are ‘proposed new factories’; (2) there is an area coloured blue and bearing the legend ‘Grid station’, and there is another area probably meant to be coloured blue and bearing the legend ‘Power Station’, and the blue colour is stated to mean ‘Electricity Generating Station’, but there is nothing to show whether the electricity generating station is existing or proposed or partly existing and partly proposed; (3) there are four rectangles coloured red and stated to be canteens, but there is nothing to show whether they are existing or proposed; (4) there are numerous areas coloured green, and the green colour denotes ‘open space’, and some of the green-coloured areas bear the legend ‘car park’, and one large one bears the legend ‘No development’; (5) there are a number of strips coloured yellow, and the yellow colouring denotes ‘proposed new roads’.
In addition: (6) certain black lines, if continuous, mean existing soil sewers or drains, and, if broken, mean proposed soil sewers or drains; (7) certain other black lines, if continuous, mean existing rain water drains, and, if broken, mean proposed rain water drains; (8) pairs of black lines close together mean proposed new railroads.
The uncoloured areas on the plan must consist mainly, although not entirely, of developed portions of the estate, but there is nothing to indicate which portions are
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developed and which undeveloped. Although the central and eastern parts of the estate are mostly uncoloured and there are concentrations of pink-coloured shapes in the northern, western and southern parts, the uncoloured and coloured areas are not segregated from each other. There are small uncoloured areas surrounding and interspersed with the concentrated pink-coloured shapes, and there are pink-coloured shapes here and there in the mainly uncoloured areas.
Comparison of the purported planning permission with the plan reveals a remarkable discrepancy between them. On the one hand, the plan contains proposals for development of the coloured areas, especially for the erection of the 240 ‘proposed new factories’ on the areas coloured pink; it contains no proposals for any development of the uncoloured areas; and it does not contain any proposal for any industrial use except the implied proposal that the new factories should be used for factory purposes. On the other hand, the purported planning permission does not permit any development of the coloured areas; it does not, expressly at any rate, permit the erection of any buildings; but it permits industrial use of the uncoloured areas.
In the period of nearly 25 years which has elapsed since the purported planning permission was granted no development has been carried out in pursuance of it. When the company have desired to erect new factories from time to time, they have applied for specific planning permissions, and they were able to obtain them until recently, when apparently there has been a new policy prevailing with regard to the issue of industrial development certificates, which were required under s 14(4) of the Town and Country Planning Act 1947 and s 38 of the Town and Country Planning Act 1962, to authorise the granting of planning permissions for the erection of industrial buildings. After the coming into force of the Town and Country Planning Act 1954, the company made large-scale applications for building permissions in respect of 80 acres and 12 1/2 acres, and when these applications were refused they applied for and obtained compensation. The existence of the purported planning permission granted in 1945 was not forgotten, as it was mentioned in the course of an enquiry held in 1952, and the application UL 21, to which reference is made in the right-hand top corner of the purported planning permission, was mentioned as a previous application in the applications made in 1955 in respect of the 80 acres and the 12 1/2 acres. But although this purported planning permission was not forgotten it was not acted on.
Now in these proceedings, begun by originating summons in 1966, the company are seeking declarations. In the course of the hearing before Megarry J, in October 1967, leave was given for the relief asked for in the originating summons to be amended to read as follows:
‘1. A Declaration that the [company] have permission to erect factories with ancillary services on the areas of the Slough Estate which remained undeveloped on the 17th October 1945 and which have not since been developed subject to approval by the Local Planning Authority or by the Minister of Housing and Local Government on appeal of such particulars as the said authority may require or alternatively of such particulars other than lay out.
‘2. Alternatively a Declaration that the [company] have permission to develop such areas for industrial purposes so that permission for the erection of factories cannot be withheld merely on the ground that the land ought to be used otherwise than for industrial purposes.
‘3. SUCH further or OTHER DECLARATIONS as may in the premises be just
‘4. Costs.’
At a later hearing before Megarry J on 15 February 1968, the company asked in pursuance of para 3 of the originating summons (ie by way of ‘further or other Declaration’) for—
‘A Declaration that the [company] have a valid planning permission in the
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terms of a grant dated 17 October 1945 for the erection of industrial premises on the land at the Slough Trading Estate shown uncoloured on the plan referred to therein on that date undeveloped and which has not since been developed.’
These desired declarations do not expressly refer to the purported planning permission granted on 17 October 1945, but they are sufficiently linked with it, because the heading of the originating summons shows that it is ‘IN THE MATTER of [inter alia] A PERMISSION dated … 17th October, 1945’.
As the proceedings were by originating summons there was no discovery of documents and there were no interrogatories and the only evidence was in two affidavits and some oral evidence given by the deponents.
The first question is whether on the materials available the company have shown a prima facie entitlement to any of the declarations asked for or to any other declaration. The local authority and the county council deny such entitlement, and further say that the purported planning permission has been abandoned by the company by their subsequent conduct.
Before coming to consider each of the declarations asked for, I must refer to the material statutory and sub-statutory provisions. The purported planning permission was granted under the Town and Country Planning Act 1932b, as amended by the Town and Country Planning (Interim Development) Act 1943c. The 1932 Act by s 6 authorised a local authority or joint committee by resolution to decide to prepare or adopt a planning scheme, but such a resolution was not to take effect until it was approved by the Minister. Section 10(1) authorised the Minister to make ‘an interim development order’ with respect to development of land between the date on which such a resolution took effect and the date of the coming into operation of the planning scheme. By s 10(2) the order might itself permit the development of land either unconditionally or subject to any condition specified in the order, or might empower any authority so specified to permit development of land in accordance with the terms of the order. Section 10(3) provided:
‘Where an application for permission to develop land is made to the specified authority in manner provided by the order, the authority may, subject to the terms of the order, grant the application unconditionally or subject to such conditions as they think proper to impose, or may refuse the application … ’
Section 10(3) also provided in effect that if an application was not dealt with in two months it should be deemed to be granted unconditionally, but this provision was in effect reversed by s 2(3) of the 1943 Act, whereby subject to certain exceptions an application not dealt with in two months should be deemed to be refused. The 1932 Act containedd a definition of ‘development’, which, so far as not material, was as follows:
‘“Development”, in relation to any land, includes any building operations or rebuilding operations, and any use of the land or any building thereon for a purpose which is different from the purpose for which the land or building was last being used: Provided that … (ii) the use of land within the curtilage of a dwelling-house for any fresh purpose other than building operations shall not be deemed to be a development of that land if the purpose is incidental to the enjoyment of the dwelling-house as such.’
There was a Town and Country Planning (General Interim Development) Order 1933e, made under the 1932 Act and this was revoked and replaced by the Town and Country Planning (General Interim Development) Order 1945, which came into force on 1 May 1945. Plainly the purported planning permission, as it was dated
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17 October 1945 was granted under the 1945 order. The application UL 21, in response or purported response to which it was granted, has to be found in a series of letters and the date of it is not clear but it may have been before 1 May 1945 and so made under the 1933 order. However, I do not think that there is for the purposes of this appeal any material difference between the relevant provisions of the two orders and for the sake of brevity I will only set out the relevant provisions of the 1945 order. Article 10 provided:
‘Subject to the provisions of this Article and to the subsequent provisions of this order, any person who desires to apply for permission under this order shall apply in writing to the interim development authority and shall furnish to the authority, together with his application, a plan in triplicate sufficient to identify the land to which the application relates (hereinafter called a “site plan”) and particulars illustrated by plans and drawings in triplicate, sufficient to show the proposed development: Provided that it shall not be necessary to furnish plans and drawings, other than a site plan, in any case where the proposed development is sufficiently described by the particulars together with the site plan, or where the application is expressed to be an application for general permission conditional on the subsequent approval by the authority, or by the Minister on appeal, of the particulars of the proposed development.’
Article 12 provided:
‘The grant or refusal by an interim development authority of permission to develop land shall be in writing and, where the authority decide to grant permission subject to conditions, or to refuse permission, the reasons for their decision shall be stated in writing.’
I think that it is right to say that there is not in the 1932 Act or the 1943 Act or the 1933 order or the 1945 order: (i) any provision for permission to be granted by an interim development authority otherwise than in response to an application; or (ii) any provision (such as is contained in s 18(4) of the 1947 Act and s 21(1) of the 1962 Act) that the grant of permission is to enure for the benefit of the land and of all persons for the time being interested therein; or (iii) any provision (such as is contained in s 14(5) of the 1947 Act and s 19(4) of the 1962 Act) requiring a local planning authority to keep a register containing prescribed information with respect to applications for planning permission, including information as to the manner in which such applications have been dealt with.
Under these relevant Acts and orders of 1932–1945 what documents can properly be taken into account in construing the planning permission? If the purported planning permission had been on the face of it a complete and self-contained document, not incorporating by reference any other document, I should have been inclined to apply the rule, established under later Acts by Miller-Mead v Minister of Housing and Local Government and Wilson v West Sussex County Council, that the application should not be taken into account in construing the planning permission unless the planning permission incorporates the application by reference. But in the present case the the purported planning permission was not complete or self-contained on the face of it, because it incorporated by reference ‘the plan submitted’. Also it referred in the top right-hand corner to ‘Application No. U.L. 21’. Under art 10 of the 1945 order (or its predecessor, art 8 of the 1933 order) the company should have furnished with their application a site plan, sufficient to identify the land to which the application related. It did not do this. I think that it was right in the circumstances to examine the correspondence leading up to the grant of the planning permission of 17 October 1945 with a view to ascertaining what the application was and how the plan was submitted and what function it was intended to perform.
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The conclusion, however, after examining the correspondence, is that the application was made informally in a series of letters putting forward the plan as the plan ‘submitted’. There was no other plan, and there were virtually no particulars of the proposed development except those contained in the submitted plan. The whole content of the application was in the submitted plan, which failed to identify the land to which the application related.
I now come to consider in turn the three declarations asked for, which have been set out above: (1) According to the first declaration asked for the purported planning permission granted on 17 October 1945 authorised development by erection of factories on the whole of the land which was then undeveloped both that which was coloured on the plan and that which was uncoloured on the plan. This view was accepted by the Court of Appeal ([1969] 2 All ER 988, [1969] Ch 305) as a correct interpretation of the purported planning permission. They held that the word ‘uncoloured’ made the permission absurd and must be rejected, so that the material part of the permission would read ‘permit the land situate at the trading estate at present undeveloped and shown on the plan submitted, to be used for industrial purposes’. The basis of this drastic method, wholly ignoring or treating as omitted the word ‘uncoloured’, is that with that word included the purported planning permission does not make good sense as a practical, operative permission. Most of the areas shown uncoloured on the plan were already developed. The undeveloped, uncoloured areas were: (1) small pieces of land scattered around and between the pink-coloured areas of the proposed new factories; (2) similar small pieces not separately shown but no doubt existing around and between the factories already erected; and (3) a few larger pieces of varying shapes and not very suitable as sites for factories. Obviously there is a substantial argument in favour of the interpretation adopted by the Court of Appeal ([1969] 2 All ER 988, [1969] Ch 305). But there are serious objections to it, both because it does violence to the wording of the document and because it gives results not likely to have been intended.
(a) This interpretation would allow development of the whole of the undeveloped land, both that which is shown coloured and that which is shown uncoloured on the plan. This would be inconsistent both with what is said on the plan, proposing development only of coloured areas, and with what is expressly stated on the purported planning permission, authorising development only of the uncoloured areas. It would be odd if the intended meaning of the two documents, or of the one document incorporating the other, was something radically different from what either of them has said.
(b) The word ‘uncoloured’ is one of a short series of words specially inserted in typescript in a printed form and following deletion of some of the printed words. Be it assumed that the words struck out, even if legible, are to be disregarded because the person making up the document intended that they should not be there. Nevertheless any person reading the document would see that some words had been struck out and other words substituted, and he would reasonably infer that the substituted words were specially and intentionally inserted. It is a bold, and in my view dubious, construction to ignore the word ‘uncoloured’, when it is one of the series of words specially inserted.
(c) If this interpretation in accordance with the first declaration is correct, the purported planning permission was a document of outstanding importance to the company and of considerable importance to the planning authorities. It permitted the erection of 240 factory buildings, which would cover a very large acreage and would approximately use up the rest of the company’s trading estate. It would relieve the company entirely or almost entirely of the need to submit any more applications for planning permission, because it must be supposed they had the permission in principle already, and would only have to submit from time to time as their building programme progressed suitable particulars of the details of the next
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factories to be built. And yet, for the purposes of the interpretation now being considered, it must be supposed that no responsible person in the company’s organisation ever read this vital document with sufficient care to notice the gross error of putting in the absurd word ‘uncoloured’, or, if any such person did notice it or have it drawn to his attention, the company did not take the trouble to ask the planning authorities to rectify the gross error. It is possible that such an error could be overlooked, but it is improbable that it was.
(d) I think there would be serious administrative objections to granting a planning permission of the far-reaching character suggested. The planning authorities would be depriving themselves of control. The company would have planning permission for 240 factories covering approximately the rest of their estate, and they could, as and when they found it convenient, present particulars for new factories to be built under their ‘blanket’ planning permission already obtained, and if the particulars were suitable presumably they would have to be approved. It is unlikely that the planning authorities would intend to place themselves in such a position of weakness.
(e) If the purported planning permission really granted a blanket permission to erect 240 factories and so covered approximately the whole of the rest of the estate, the company’s subsequent behaviour, in omitting to make use of it and preferring to make specific applications from time to time for planning permission for new factories or groups of factories, seems incomprehensible in the absence of some explanation, and no or no adequate explanation was forthcoming.
(f) If the word ‘uncoloured’ is left out, it is at least difficult to ascertain the meaning of the words that remain—the words ‘shown on the plan submitted’. How is the undeveloped land shown on the plan? There are the areas coloured pink for proposed factories and the strips coloured yellow for roads, but these are not the only undeveloped areas, and the theory involved in the first declaration asked for is that the permission applies to all the undeveloped areas. The other undeveloped areas are not shown on the plan—not identifiable from the plan.
(g) It is at least doubtful whether the phrase ‘to be used for industrial purposes’ in this document covers the erection of factories. It would more naturally be taken to convey a use permission rather than a building permission.
In my opinion, these objections ought to prevail. The interpretation which the company seek, by the first declaration asked for, to place on the purported planning permission is not a probable interpretation and ought not to be accepted. Accordingly no such declaration should be made.
(2) The second declaration asked for, which was put forward by counsel for the company in this appeal as a second best but still desirable conclusion, makes the purported planning permission apply to the whole of the undeveloped land, both coloured and uncoloured, but makes it operate only as a use permission. As a use permission it would authorise the use of the land for industrial purposes not involving building operations, eg for open storage, or perhaps for the purpose of laying ut an estate for future building operations but not carrying out any building operations without further permission.Viscount Camrose v Basingstoke Corpn was cited as illustrating the possibilities of a use permission.
This second declaration asked for and would have some advantages over the first one. It would give a more natural meaning to the expression ‘to be used for industrial purposes’, because one would expect erection of buildings to be expressly mentioned if intended to be permitted, and the name ‘U L 21’ for the application means ‘Use of Land 21’. Also the supposed blanket permission for the whole of the remainder of the estate would be less surprising and less improbable if it were only a use permission, so that further permission would be required for building operations. On the other hand, a mere use permission would be radically different from what was asked for in the plan submitted (ie permission to build 240 factories).
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In my opinion, the objections (a) to (f) set out above apply to the interpretation involved in the second declaration asked for, and apply with sufficient force to render it an improbable and unacceptable interpretation of the purported planning permission. Accordingly the second declaration asked for should not be made.
(3) The third declaration asked for was, I think, not supported or at any rate not strongly supported by counsel for the company in arguing this appeal. In any case I think that it is untenable. It does have the advantage of applying only to the uncoloured land and so involving no violence to the language of the purported planning permission. But it would involve the erection of industrial premises on the undeveloped and uncoloured land, which is unsuitable for that purpose, and it departs widely from the proposals contained in the plan submitted, which were for the erection of factories on the land coloured pink. In my view, the third declaration asked for should not be made.
Two other interpretations of the purported planning permission were suggested in the course of the argument. (4) It was suggested that ‘uncoloured’ was a mistake for ‘coloured’. This would reconcile the purported planning permission with the proposals contained in the plan, but it would be open to all or nearly all of the objections (a) to (g) set out above and it was not supported in argument by either side. In my view it is not acceptable.
(5) It was suggested that the purported planning permission is to be read literally as it stands, but that it was intended and should be understood not as an operative permission but as a mere token permission. The theory is that the company by submitting the plan were asking for a permission which was much too wide and could not properly be granted; but the planning authorities did not wish to give a mere refusal—they did not wish to give an express refusal nor to give a deemed refusal by failure to give a decision within two months; therefore they had to give some permission; they gave the minimum permission, which was a mere use permission applying only to the undeveloped uncoloured land; this would be of little, if any, practical utility but it would be of some benefit to the company as conveying some recognition of the industrial character of the remainder of the estate. I find this suggested interpretation of the purported planning permission more attractive than the others, because it does give answers to the questions (1) Why was this strange document issued? (2) Why did it remain unamended and unused for more than 20 years? It is, however, a speculative interpretation and I could not say firmly that it should be accepted, and in any case it is not asked for by the company. The interpretation of the purported planning permission remains wrapped in mystery and days of argument have not shown what it means. The company have not shown a prima facie entitlement to any of the declarations asked for. On that ground the appeal should be dismissed. It is not necessary, and without a definite interpretation it would hardly be feasible, to consider whether the purported planning permission was abandoned by the subsequent conduct of the company. I wish to reserve the question whether a planning permission can be abandoned.
I would dismiss the appeal.
LORD DIPLOCK. My Lords, I agree with the speech of my noble and learned friend, Lord Pearson, and with the additional observations of my noble and learned friend, Lord Reid.
I would therefore dismiss this appeal.
Appeal dismissed.
Solicitors: Kenneth Brown, Baker, Baker (for the company); Sharpe, Pritchard & Co (for the local authority and the county council).
S A Hatteea Esq Barrister.
R v Picker
[1970] 2 All ER 226
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, WIDGERY LJ AND BRIDGE J
Hearing Date(s): 10 APRIL 1970
Criminal law – Sentence – Life imprisonment – Manslaughter – Principles to be applied in deciding whether to impose life imprisonment.
When sentencing an offender in a simple case of manslaughter, a judge should impose a determinate sentence and should not pass the difficult matter of sentencing and length of detention to others. Where, however, the nature of the offence and the make-up of the offender are of such a nature that the public require protection for a considerable time unless there is a change in the offender’s condition, it is right to impose a life sentence (see p 227 d to f, post).
Notes
For matters to be considered in imposing sentence and fixing punishment, see 10 Halsbury’s Laws (3rd Edn) 488, 489, para 890, and for cases on the subject, see 14 Digest (Repl) 548–550, 5305–5364.
Appeal
This was an appeal by Ian Thomas Picker against a sentence of life imprisonment imposed on him by Willis J at Nottingham Assizes on 20 July 1967 after the jury had convicted him of manslaughter. Leave to appeal was granted out of time by Mackenna J for the court to consider whether the sentence imposed was the right one. The facts are set out in the judgment of the court.
D G A Lowe QC and P J Walmsley for the appellant.
The Crown did not appear and was not represented.
10 April 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On 20 July 1967, at Nottingham Assizes the appellant was convicted of manslaughter having been charged with murder. He was in the result sentenced to life imprisonment, and it is against that sentence that he now appeals, an extension of time having been granted for that purpose by the single judge.
The facts are in a very short compass. The deceased was a woodsman aged 76 on an estate in Nottinghamshire. No doubt in the course of his duties, he was frequently called on to deal with poachers and trespassers. Shortly after 10.00 pm on 13 June 1967, a man was seen lying on the ground at the back of a cottage near the reservoir, and in the early hours of the next morning the deceased’s son found that this man lying there was his father. The medical evidence was that the deceased had sustained serious wounds; a severe wound over the head, having been struck at least once and possibly with three blows with a blunt instrument on the head; there was a large wound on the scalp, a fracture of the skull, a large haemorrhage in the brain coverings and bruises of the brain. In addition the right ankle had fractured. Death resulted from the head injuries, including the fractured skull.
The next day the appellant, who was a day over 17 at the time, admitted to a fellow employee that it was he who had killed the deceased. He said: ‘I don’t know what came over me.' He made a statement to the police and gave evidence. His case was that an altercation had taken place and that he had, as he said quite frankly, lost his temper, had picked up a piece of wood or a log, and had struck the deceased.
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The defence to the charge of murder was first, no intent to murder or to do grievous bodily harm, alternatively provocation. The jury acquitted the appellant of murder, and when asked by the trial judge to state on what ground they found manslaughter, they conveyed that it was not on the grounds of provocation but on the absence of intent.
It may well be on the facts as they emerged that this was a very lenient verdict of the jury. But the trial judge naturally had to accept that verdict, and as he himself said, intended in sentencing him so to do. The sole question here is whether in all the circumstances, for an accused of 17 committing this offence one day after he was 17 this was an appropriate sentence. No doubt the learned judge in accepting the verdict of the jury felt that this was not a case for a long prison sentence. What exactly was in his mind is by no means clear, but he certainly thought and intended those who heard him to understand, that a sentence of life imprisonment would be, as it were, in mercy to the appellant, and as counsel for the appellant now says, the appellant has been detained ever since three weeks before trial itself, and there are no signs whatever that his case is being considered with a view to release.
This case does raise the question of the right principles to be applied in deciding whether to impose life sentences. There is no doubt that a life sentence can properly be imposed in mercy. Thus, in a case whether the nature of the offence and the make-up of the offender are of such a nature that the public require protection for a considerable time unless there is a change in his condition, maybe a mental condition at present unknown, it is right for the judge to impose a life sentence. This will enable some other authority to ascertain from time to time whether the condition has changed and it is safe for the offender to be released. If this were not done it might be necessary for the judge to impose a long sentence. But where no such condition exists, it is quite clear in the opinion of this court that a judge should not pass the difficult matter of sentencing and the length of detention to others. This was a simple case; it was not murder, it was not manslaughter on the grounds of provocation or diminished responsibility, it was simply manslaughter because no intent either to murder or to do grievous bodily harm had been found by the jury. Quite clearly the appellant had to be punished, and he had to be sent to prison, and it was for the judge, in the opinion of this court, to say what the proper term of imprisonment for this sentence was. The court has come to the conclusion that the proper sentence for the appellant was a determinate sentence of four years’ imprisonment. Accordingly, the sentence of life imprisonment will be set aside and a sentence of four years’ imprisonment will be substituted. It follows that if the appellant has earned remission he will be released today or tomorrow.
Appeal allowed in part. Sentence varied.
Solicitors: Clayton, Mott & Son, Nottingham.
N P Metcalfe Esq Barrister.
McPhail and others v Doulton and others
[1970] 2 All ER 228
Categories: TRUSTS
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD HODSON, LORD GUEST, VISCOUNT DILHORNE AND LORD WILBERFORCE
Hearing Date(s): 13, 14, 15, 19, 20 JANUARY, 6 MAY 1970
Settlement – Trust – Uncertainty – Power or imperative trust – Discretion to make grants to or for the benefit of officers and employees, etc, of a company and their relatives and dependents – Imperative direction that trustees ‘shall apply’ net income of fund – Whether deed created a power or a trust – Test to be applied to determine whether trust was valid or void for uncertainty.
By deed dated 17 July 1941, a fund was established for the benefit of officers and employees, etc, of a company. Clause 9 of the deed, so far as material provided: ‘(a) The Trustees shall apply the net income of the Fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the Company or to any relatives or dependents of any such persons in such amounts at such times and on such conditions (if any) as they think fit … (b) The Trustees shall not be bound to exhaust the income of any year or other period in making such grants as aforesaid and any income not so applied shall be dealt with as provided by Clause 6(a) hereof’. By cl 9(c) the trustees were empowered to realise ‘any investments representing accumulations of income and [to] apply the proceeds as though the same were income of the Fund … ’ They were further empowered to ‘realise any other part of the capital of the Fund … ’ Clause 6(a) provided that moneys in the hands of trustees and not required for the immediate service of the fund might be placed on deposit or current account with a bank or might be invested. Clause 10 provided: ‘All benefits being at the absolute discretion of the Trustees, no person shall have any right title or interest in the fund otherwise than pursuant to the exercise of such discretion, and nothing herein contained shall prejudice the right of the Company to determine the employment of any officer or employee’. The class eligible for benefit under cl 9(a) namely ‘the officers and employees or ex-officers or ex-employees … or any relatives or dependents of any such persons’ was so large as to be almost certainly incapable of exact ascertainment. On the questions (i) whether the provisions of cl 9(a) of the deed constituted a power or a trust, and (ii) if cl 9(a) amounted to a trust, what test should be applied to determine the validity of the trust,
Held – (i) Clause 9(a) was mandatory and constituted a trust (see p 230 d, p 231 g, p 235 g and h, p 238 d, and p 241 d, post).
(ii) (Lord Hodson and Lord Guest dissenting) the test to be applied to ascertain the validity of the trust ought to be similar to that accepted in Re Gulbenkian’s Settlement Trusts a for powers, namely that the trust was valid if it could be said with certainty that any given individual was or was not a member of the class of beneficiaries designated (see p 230 d, p 238 d and 246 f, post).
Inland Revenue Comrs v Broadway Cottages Trust [1954] 3 All ER 120 overruled in part.
Decision of the Court of Appeal sub nom Re Baden’s Deed Trusts [1969] 1 All ER 1016 reversed insofar as it affirmed that cl 9(a) of the deed dated 17 June 1941 constituted a power and not a trust.
Notes
For certainty of objects of a trust, see 38 Halsbury’s Laws (3rd Edn) 835, 836, para 1399,
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and for certainty in relation to trust powers, see 30 Halsbury’s Laws (3rd Edn) 213, para 375, and for cases on the subject, see 47 Digest (Repl) 46–48, 303–325 and 58–61, 419–450, cf 37 Digest (Repl) 403, 404, 1330–1332.
Cases referred to in opinions
Benjamin, Re, Neville v Benjamin [1902] 1 Ch 723, 71 LJCh 319, 86 LT 387, 22 Digest (Repl) 163, 1483.
Blight v Hartnoll (1881) 19 Ch 294, 51 LJCh 162, 45 LT 524; on appeal CA (1883) 23 Ch D 218, [1881–85] All ER Rep 660, 52 LJCh 672, 48 LT 543, 48 Digest (Repl) 282, 2527.
Brown v Higgs (1803) 8 Ves 561, [1803–13] All ER Rep 146, 32 ER 473; affg (1800) 4 Ves 708, 5 Ves 495, 31 ER 366, 700, [1803–13] All ER Rep 146; on appeal (1813) 18 Ves 192, [1803–13] All ER Rep 146, 47 Digest (Repl) 15, 11.
Brunsden v Woolredge (1765) Amb 507, 27 ER 327, 49 Digest (Repl) 806, 7586.
Clarke v Turner (1694) Freem Ch 198, 22 ER 1158, 47 Digest (Repl) 59, 426.
Gestetner (decd), Re, Barnett v Blumka [1953] 1 All ER 1150, [1953] Ch 672, [1953] 2 WLR 1033, 37 Digest (Repl) 411, 1400.
Gisborne v Gisborne (1877) 2 App Cas 300, 46 LJCh 556, 36 LT 564, 47 Digest (Repl) 380, 3397.
Gower v Mainwaring (1750) 2 Ves Sen 87, 28 ER 57, 37 Digest (Repl) 406, 1347.
Gulbenkian’s Settlement Trusts, Re, Whishaw v Stephens [1968] 3 All ER 785, [1968] 3 WLR 1127; affg [1967] 3 All ER 15, [1968] Ch 126, [1967] 3 WLR 1112., Digest Supp.
Hain’s Settlement, Re, Tooth v Hain [1961] 1 All ER 848, [1961] 1 WLR 440, 47 Digest (Repl) 60, 444.
Harding v Glyn (1739) 1 Atk 469, 26 ER 299, 47 Digest (Repl) 46, 303.
Hewit v Hewit (1765) Amb 508, 27 ER 328, sub nom Hewett v Hewett 2 Eden 332, 2 Digest (Repl) 131, 976.
Hodges, Re, Davey v Ward (1878) 7 Ch 754, 47 LJCh 335, 47 Digest (Repl) 382, 3418.
Inland Revenue Comrs v Broadway Cottages Trust, Inland Revenue Comrs v Sunnyland Trust [1954] 3 All ER 120, [1955] Ch 20, [1954] 3 WLR 438, 47 Digest (Repl) 48, 315.
Kemp v Kemp (1801) 5 Ves 849, 31 ER 891.
Liley v Hey (1842) 1 Hare 580, 11 LJCh 415, 66 ER 1162, 8 Digest (Repl) 391, 842.
Marlborough (Duke) v Godolphin (Lord) (1750) 2 Ves Sen 61, [1558–1774] All ER Rep 264, 28 ER 41, 48 Digest (Repl) 464, 4185.
Morice v Durham (Bishop) (1805) 10 Ves 522, [1803–13] All ER Rep 451, 32 ER 94, 47 Digest (Repl) 47, 308.
Mosely v Moseley (1673) Rep temp Finch 53, 23 ER 28, 47 Digest (Repl) 97, 703.
Ogden, Re, Brydon v Samuel [1933] Ch 678, [1933] All ER Rep 720, 102 LJCh 226, 149 LT 162, 48 Digest (Repl) 479, 4339.
Richardson v Chapman (1760) 7 Bro Parl Cas 318, 3 ER 206, 47 Digest (Repl) 325, 2954.
Supple v Lowson (1773) Amb 729, 27 ER 471, 49 Digest (Repl) 808, 7608.
Tempest v Camoys (Lord) (1882) 21 Ch D 571, [1881–85] All ER Rep 836, 51 LJCh 785, 48 LT 13, 47 Digest (Repl) 382, 3419.
Warburton v Warburton (1701) 2 Vern 420, 23 ER 869; on appeal (1702) 4 Bro Parl Cas 1, 2 ER 1, 40 Digest (Repl) 670, 1639.
Wilson v Turner (1883) 22 Ch D 521, 53 LJCh 270, 48 LT 370, 28 Digest (Repl) 577, 893.
Appeal
This was an appeal by Robert Thomas Mitchell McPhail, Enid May Baden and Raymond Rostron Baden from an order of the Court of Appeal (Harman and Karminski LJJ; Russell LJ dissenting) dated 5 February and reported [1969] 1 All ER 1016, affirming so much of the order of Goff J dated 12 July 1967 and reported [1967] 3 All ER 159 as declared that on the true construction of a deed dated 17 July 1941 the provisions of cl 9(a) thereof constituted a power and not a trust. The appellants were the personal representatives of Bertram Baden (the settlor) (who
Page 230 of [1970] 2 All ER 228
had by the deed established a fund for providing benefits for the staff of Matthew Hall & Co Ltd (the company), and claimed, in the event of the deed being void, to be entitled to so much of the trust fund as represented assets contributed thereto by the settlor. The respondents were Peter Duke Doulton, Alexander Laing Pearson, Arthur Henry James Hoskins and Denis Edward Clancey, (the trustees of the deed), Arthur Frederick Smith (one of the staff of the company), the company and Joseph Francis Norris (an employee of the company but not one of its staff). The facts are set out in the opinion of Lord Wilberforce.
J E Vinelott QC and R A R Evans for the appellants.
E I Goulding QC and A A Baden Fuller for the respondents.
Their Lordships took time for consideration
6 May 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend, Lord Wilberforce, I would allow this appeal and make the order which he suggests.
LORD HODSON. My Lords, the question under appeal is whether on its true construction the provisions of cl 9(a) of a deed dated 17 July 1941, by which one Bertram Baden established a fund to provide benefits for the staff of Matthew Hall & Co Ltd, and their relatives and dependants, constitutes a trust binding the trustees to distribute income in accordance with its provisions or is a mere power not imposing any such duty. Clause 9 provided:
‘(a) The Trustees shall apply the net income of the Fund in making at their absolute discretion grants … in such amounts at such times and on such conditions (if any) as they think fit …
‘(b) The Trustees shall not be bound to exhaust the income of any year or other period in making such grants … and any income not so applied shall be … [placed in a bank or invested].
‘(c) The Trustees may realise any investments representing accumulations of income and apply the proceeds as though the same were income of the Fund and may also … at any time prior to the liquidation of the Fund realise any other part of the capital of the Fund … in order to provide benefits for which the current income of the Fund is insufficient.’
Clause 10 provided that all benefits being at the discretion of the trustees, no person had any interest in the fund otherwise than pursuant to the exercise of that discretion. Of the preceding clauses, cl 6(a) provided that all moneys in the hands of the trustees and not required for the immediate service of the fund may be placed in a deposit or current account with any bank or banking house in the name of the trustees or may be invested as hereinafter provided; cl 7 dealt with the trustees’ power of investment.
The settlor died in April 1960, and his executors, the appellants, claim that, the deed being wholly void, payment of the fund is due to the settlor’s estate. This claim is resisted by those whose interest it is to establish that, whether there is a trust or a mere power under which they may benefit, in neither case is the provision which they seek to support void for uncertainty. The importance to the parties of the particular question under appeal lies in the circumstance that as the law stands on the authorities it appears at least probable that the prospects of success for the appellants on the question whether the deed is void for uncertainty are considerably greater if the effect of cl 9 is to constitute a trust than if, on the other hand, it only has the effect of giving to the trustees a mere power not amounting to a trust.
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At first instance Goff J ([1967] 3 All ER 159, [1967] 1 WLR 1457) held that nothing more than a power imposing no duty was contained in the provision contained in cl 9. On appeal the majority of the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) sustained his judgment without being able to find any certainty in their conclusion, in view of the even balance, as it seemed to them, of the arguments presented. The majority felt able to sustain the judgment by relying on the doctrine ut res magis valeat quam pereat in order that the terms of the deed might have a chance of being effective since, without flying in the teeth of its provisions, the view of the trial judge might prevail thus giving a better opportunity to those on whom the testator wished to confer benefit.
There is no doubt that the primary trust here is expressed in a mandatory form. True that this is not necessarily conclusive, cf Re Hain’s Settlement, Tooth v Hain, per Lord Evershed MR, but it is powerful foundation for the argument that a trust so created in its inception is not converted into a power by the mere addition in a later clause of a power to accumulate surplus income. Notwithstanding the different views expressed by the learned judges who have considered the matter in the courts, I cannot for myself resist the conclusion reached by Russell LJ ([1969] 1 All ER at 1023, [1969] 2 Ch at 401) that cl 9 is a provision for the distribution of the whole with power to accumulate. There is a complete disposition with a primary duty to distribute, a trust for the whole period of its existence with a power to carry forward from year to year.
Clause 10 is relied on by the respondents as showing that no member of the class was to entitled to benefit from the fund otherwise than by the exercise of the discretion of the trustees. So it is said that there cannot be a trust of the income but only a power over it. I do not accept this. I agree with Russell LJ that cl 10 correctly recites the effect of cl 9, viz that all benefits are at the discretion of the trustees. The remainder of the clause states the legal result. If this makes cl 10 superfluous it does not justify, in my opinion, the conclusion that it produces a resulting trust to the settlor of income over which the trustees might not exercise their discretion in the event of accumulation being no longer permissible. On the face of it, cl 9(b) is no more than a provision for retention of moneys unexpended during the lifetime of the trust and as Russell LJ pointed out it has no other function. True that the language of cl 9(c) using the word ‘accumulation’ which often has a technical significance, denoting capital, followed by the permission to apply the proceeds as though the same were income and the succeeding reference to any other part of the capital of the fund suggest and lend support to the contrary conclusion. I am, I admit, unable to account for this language except on the footing of attributing to the draftsman a failure to give accurate expression to the intention of the settlor. I am, however, satisfied after construing this deed as a whole that the appellants are right in their first contention, viz that cl 9(a) constitutes a trust or power coupled with a duty under which the trustees are bound to distribute the whole estate. Clause 9(a) and (b) together are mandatory, the latter being assisted by an administrative proviso including provision for the retention and investment of unexhausted income. Clause 9(c), notwithstanding its references to capital, is concerned only with those investments which it is to be noted can be realised only with the consent of all the trustees. This treatment is in contrast with powers given to two (or more) trustees as to the trust fund generally (see cl 6(b)). For these reasons I am of opinion that the order of the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) should be reversed insofar as it affirmed that part of the order of Goff J ([1967] 3 All ER 159, [1967] 1 WLR 1457) dated 12th July 1967, which declared that the provisions of cl 9(a) constitute a power and not a trust. Unfortunately this does not settle the dispute between the parties.
Goff J had in addition held that the power was valid and was not void for uncertainty, and on that footing had held that an amending deed dated 21 December 1962, was also valid. This additional holding was discharged by the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388)
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which ordered remission to the Chancery Division for further hearing of the question whether on the true construction of the deed of 17 July 1941, the provisions for the benefit of officers and employees and ex-employees of the company and relatives or dependants of such persons are (a) valid or (b) void for uncertainty or for any other reason. This latter part of the order of the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) should stand together with a declaration that the provisions of cl 9(a) constitute a trust, not a power.
There remains the vexed question, much canvassed before your Lordships not only in this case but in Re Gulbenkian’s Settlement Trusts, Whishaw v Stephens, as to the distinction, if any, between trusts and bare powers in favour of a class of persons when the court has to consider whether a disposition fails by reason of uncertainty.
Of late years a number of dispositions have been considered by the courts in which donors have sought to make elaborate provisions in favour of beneficiaries including such persons as the employees of limited companies and their wives and widows. Such a case was Inland Revenue Comrs v Broadway Cottages Trust decided in the Court of Appeal. It was there recognised that the accepted test of the validity of a trust was that it must be such as the court can control. The authority for this proposition is to be found in Morice v Bishop of Durham ((1805) 10 Ves 522 at 539, 540, [1803–13] All ER Rep 451 at 458) as stated by Lord Eldon LC where he said:
‘As it is a maxim, that the execution of a trust shall be under the control of the Court, it must be of such a nature, that it can be under the controul; so that the administration of it can be reviewed by the Court; or, if the trustee dies, the Court itself can executed the trust: a trust therefore, which, in case of mal-administration could be reformed; and a due administration directed; and then, unless the subject and the objects can be ascertained, upon principles, familiar in other cases, it must be decided, that the Court can neither reform mal-administration, nor direct a due administration.’
In a sentence there is no trust over which the court cannot assume control. If the inability arises from inability to ascertain the objects of the alleged trust, it is said to be void for uncertainty. The language used on this topic may have varied from time to time but is, I think, consistent with that used in the Broadway Cottages case where, in holding that the trusts of income were not such as the court could enforce, the court based itself on the judgment of Lord Tomlin (sitting at first instance) in Re Ogden, Brydon v Samuel who held that a trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment. I adhere to the view expressed in the Court of Appeal in the Broadway Cottages case, that this proposition is based on sound reasoning. The Broadway Cottages case has stood for many years. Disquiet has, however, now arisen about a strict adherence to the requirement of certainty there propounded. This disquiet is due to the narrow distinction between trust, on the one hand, where certainty is required and mere powers, on the other hand, where something less is needed. This matter was discussed before your Lordships in Re Gulbenkian’s Settlement Trusts and disquiet at the effect of the Broadway Cottages case is, I think, to be discerned in the speech of my noble and learned friend, Lord Reid, in the Gulbenkian case, and was clearly expressed by the two learned Lords Justices, both experienced equity lawyers, in the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) in this case. The observations on the distinction to which I have referred were not strictly necessary to the discussion in the Gulbenkian case but the matter does become of crucial importance in the instant case in view of the ratio decidendi which prevailed in the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388).
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The problem itself is not new. I may, I hope, be forgiven for referring to the leading case of Brown v Higgs ((1800) 4 Ves 708, 5 Ves 495, (1803), 8 Ves 561 at 568, [1803–13] All ER Rep 146 at 153) twice heard before the Rolls Court by Sir Richard Arden MR and finally in your Lordships’ House by Lord Eldon LC. At the rehearing Sir Richard is reported ((1800) 5 Ves at 505, [1803–13] All ER Rep at 151) as admitting that the distinction between trust and power was very nice. He illustrated the nicety by reference to the case of the Duke of Marlborough v Lord Godolphin.
The distinction between a trust and a mere power can be stated shortly although the short statement will require some explanation. It is that where there is a trust there is a duty imposed on the trustees who can be controlled if necessary in the exercise of their duty. Whether the trust is discretionary or not the court must be in a position to control its execution in the interests of the objects of the trust. Where there is a mere power entirely different considerations arise. The objects have no right to complain. Where by the instrument creating the power the discretion is made absolute and uncontrollable the court cannot interfere (Gisborne v Gisborne). The trust in default controls and he to whom the trust results in default of exercise of the power is in practice the only one competent to object to a wrongful exercise of the power by the donee. Counsel did not profess to know of any successful application to the court by a person claiming to be an apparent object of a bare power. I exclude from consideration cases in which bad faith may be alleged.
I do not deny that what I have said about powers is, so to speak, blurred at the edges by cases in which powers of donees who refuse to exercise their discretion have been treated by the courts as trusts. These powers have been described as intermediate between trusts and powers and are described in detail in Farwell on Powersb where he cites from the judgment of Lord Eldon LC in Brown v Higgs ((1803) 8 Ves at 569, 570, [1803–13] All ER Rep at 154) the following passage:
‘Where there is a mere power of disposing and it is not executed, the Court cannot execute it; but wherever a trust is created and the execution of that trust fails by the death of the trustee or by accident, the Court will execute the trust. But there are not only a mere trust and a mere power, but there is also known to the Court a power which the party to whom it is given is intrusted and required to execute; and with regard to that species of power, the Court, considers it as partaking so much of the nature and qualities of a trust, that if the person who has that duty imposed on him does not discharge it, the Court will to a certain extent discharge the duty in his room and place. The principle is that if the power is one which it is the duty of the donee to execute, made his duty by the requisition of the will, put upon him as such by the testator, who has given him an interest extensive enough to enable him to discharge it, he is a trustee for the exercise of the power, and has not a discretion whether he will exercise it or not. The Court adopts the principle as to trusts, and will not permit his negligence, accident, or other circumstances to disappoint the interests of those for whose benefit he is called upon to execute it.’
This passage as quoted by the learned author is to the same effect but not verbatim the same as that which appears in the report. (See (1803) 8 Ves at 569, 570, [1803–13] All ER Rep at 154) It does, however, show that where powers of a fiduciary character, as opposed to being mere powers not coupled with a duty, are concerned the court’s position differs in no way from that which it occupies in the case of trusts generally. Lord Eldon LC in the same case said ((1803) 8 Ves at 576, [1803–13] All ER Rep at 156) that it was difficult to reconcile all the cases.
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Examples of interference by the court are to be found in such cases as Gower v Mainwaring which shows that the court, where a rule has been laid down for the guidance of donees of powers, will act on it in the same way as the donees might have done. If trustees disclaim the power, the court may execute it—see Hewett v Hewett. In Re Hodges, Davey v Ward the court interfered where trustees were considered to be acting capriciously. Where duty and power are coupled the court can compel the trustees to perform the duty—see Gisborne v Gisborne and Tempest v Lord Camoys.
In the Gulbenkian case the majority of your Lordships held the view that where there is a valid gift over in default of appointment a mere or bare power of appointment among classes is valid if it can be said with certainty whether any given individual is or is not a member of a class and that the power did not fail simply because of the impossibility of determining every member of the class. In my opinion a mere power is a different animal from a trust and the test of certainty in the case of trusts which stems from Morice v Bishop of Durham is valid and should not readily yield to the test which is sufficient in the case of mere powers.
The unhappy results which may follow from incompetent drafting may be, in the case of an instrument held to impose a trust, that it is so much waste paper whereas in the case of an instrument differing perhaps on the face of it very little from the invalid trust instrument a good gift of a power to benefit objects may emerge. Thus it is said in order to avoid fine distinctions the test should be the same for both. One persuasive argument used is that, in applying the principle that where there is a trust the court must be in a position to exercise it, the court cannot exercise the trustees’ discretion in the event of their failing to do so. The discretion being conferred on and exercisable by the trustees alone the court cannot do other than authorise a distribution in equal shares. This, in cases comparable with the present, must lead to a result tending towards absurdity and makes the strict test of certainty open to serious criticism. This disability of the courts to exercise the discretion reposed in trustees was referred to in the recitation of the argument for the Crown in the judgment of the court in the Broadway Cottages case. ([1954] 3 All ER at 125, [1955] Ch at 30) It was not referred to specifically in the conclusion reached by the court although it would be fair to say that the arguments of the Crown set out in the judgment were implicitly accepted. For myself I do not deny that there is force in the argument based on the absurdity of an equal division especially as it has not always been accepted.
In what are called the relations cases, Mosely v Moseley, Clarke v Turner and Warburton v Warburton, the court did exercise its own discretionary judgment against equal division. Similarly, in a different context the same principle was applied in Richardson v Chapman ((1760) 7 Bro Parl Cas 318 at 326, 327) where it appears from the reported argument that the court decreed the proper act to be done not by referring the matter to the trustee’s discretion but by directing him to perform as a mere instrument the thing decreed. These cases may be explained as cases where there were indications which acted as pointers or guides to the trustees and enabled the court to substitute its own discretion for that of the trustees.
This practice, however, has fallen into desuetude and the modern, less flexible, practice has it appears been followed since 1801 when Sir Richard Arden MR in Kemp v Kemp stated that the court now disclaims the right to execute a power and gives the fund equally. The basis of this change of policy appears to be that the court has not the same freedom of action as a trustee and must act judicially according
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to some principle or rule and not make a selection giving no reason as the trustees can. The court, it is said, is driven in the end to the principle that equity is equality unless, as in the relations cases, the court finds something to aid it. Where there is no guide given the court, it is said, has no right to substitute its own discretion for that of the designated trustees. I regret that the court is driven to adopt a non possumus attitude in cases where trustees fail to exercise a trust power. In this connection it is perhaps not irrelevant to note that the court has not shown itself helpless in cases of failure and uncertainty where an order has been made to distribute part and pay the balance into court (see Re Benjamin, Neville v Benjamin). Difficulties of fact in these cases must often arise especially after the passage of time when it is not known what has happened to members of a class who have gone abroad or disappeared and should be capable of solution. Certainty of description, however, if required, must be required at the moment when a trust instrument operates.
I have had the advantage of reading the speech which has been prepared by my noble and learned friend Lord Wilberforce whose opinion particularly on this topic is of very strong persuasive power. I cannot, however, bridge the gulf which still I think yawns between us. If one bases oneself, as I do, on the passage from Lord Eldon LC’s judgment in Morice v Bishop of Durham ((1805) 10 Ves at 539, 540, [1803–13] All ER Rep at 458) as defining the features of a trust, it is, in my opinion, impermissible to sanction, in the case of an uncertain disposition in the sense of the passage quoted, the authorisation by the court of a scheme of distribution such as he suggests. I cannot accept that this is justified by stating that a wider range of enquiry is called for in the case of trust powers than in the case of powers (meaning ‘mere’ as opposed to ‘trust powers’). To adopt this solution is I think to do the very thing which the court cannot do. As was pointed out by my noble and learned friend Lord Upjohn in the Gulbenkian case ([1968] 3 All ER at 793, [1968] 3 WLR at 1139)—
‘The trustees have a duty to select the donees of the donor’s bounty from among the class designated by the donor; he has not entrusted them with any power to select the donees merely from among claimants who are within the class, for that is constituting a narrower class and the donor has given them no power to do this.’
I have read and reread the speech of my noble and learned friend, Lord Wilberforce, with, I hope, a readiness to change my mind and to temper logic with convenience, but having given the best consideration I can to the problem, I still adhere to the view I have previously expressed in the Broadway Cottages case and in the Gulbenkian case ([1968] 3 All ER 785, [1968] 3 WLR 1127) as to the requirements for certainty in the case of the objects of a trust.
I agree with Russell LJ ([1969] 1 All ER at 1024, [1969] 2 Ch at 402) that the appeal should be allowed and would declare that the provision of cl 9(a) constitutes a trust, and remit the case to the Chancery Division for determination whether cl 9 is (subject to the effects of s 164 of the Law of Property Act 1925), valid or void for uncertainty.
LORD GUEST. My Lords, I have had the advantage of reading the speech of my noble and learned friend, Lord Hodson. I agree with it. I only make a few observations of my own.
On the question of construction I have no doubt, in agreement with Russell LJ in the Court of Appeal, ([1969] 1 All ER at 1023, [1969] 2 Ch at 402) that this is a trust and must be so construed. Clause 9(a)
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is mandatory and provides that the trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of certain persons. By cl 9(b) they are not bound to exhaust the income of any one year or period in making such grants. Any income not so applied is to be dealt with according to cl 6(c) which provides that moneys in the hands of the trustees not required for the immediate service of the fund are to be placed on deposit or current account or invested. There is a distinction made between the fund as defined by cl 1 and consisting of the capital of the fund and the income which according to cl 9(a) is to be distributed among the beneficiaries. It was argued for the respondents that the terms of the deed imported an accumulation of income with power to distribute. I prefer the appellants’ description as a direction to distribute income with a power to withhold income. There is, in my view, a complete answer to the argument that cl 9(c) contains a mere power and not a trust in that if it was a power the trustees would not be bound to distribute one penny of the income. This is quite contrary to the plain intentions of the settlor that all the income of the fund should be distributed with a power to withhold.
If I understand English law correctly there is a basic distinction between a deed containing a power and a deed containing a trust. The distinction may be difficult to draw, but once drawn the effect is different. In the former case there is a resulting trust in favour of the settlor on failure to exercise the power or in the case of an invalid exercise. In the case of a trust the beneficiaries are the objects of the trustee’s bounty. The trustees are acting in a fiduciary capacity. If the trustees fail to exercise their discretion, the court can compel them to exercise the trust. This distinction has been recognised in the authorities over the years (see Gisborne v Gisborne) and finally confirmed by a majority of your Lordships in Re Gulbenkian’s Settlement Trusts, Whishaw v Stephens. In that case the deed admittedly contained a power and the test accordingly was whether in the case of any individual the trustees could safely say that he did or did not come within the category of objects of the power and it was held that the deed was valid (see Lord Upjohn ([1968] 3 All ER at 792, [1968] 3 WLR at 1138)). But my noble and learned friend Lord Upjohn having dealt with the question of a mere power proceeded to make some general observations on the question where there was a trust and not a power. The distinction between a power and a trust was clearly recognised in those observations albeit obiter by Lord Upjohn. My noble and learned friend, Lord Hodson, and I concurred in his opinion. But I do not detect in the opinions of the other noble Lords in that case any disagreement with the distinction.
On the assumption that this is a deed containing a trust power and not a mere power—as I understand all your Lordships agree—the question then arises what test is to be applied in order to determine the validity of the trust? Up till the present day the test in each case has been different. In the case of a power it is only necessary for the trustees to know whether a particular individual does or does not come within the ambit of the power (the Gulbenkian case). In the case of a trust power it is necessary for the validity of the trust that the class among whom the trustees are to exercise their discretion must be ascertainable. This is the result of the decisions in Re Ogden, Brydon v Samuel (a decision of Lord Tomlin) and latterly in Inland Revenue Comrs v Broadway Cottages Trust as confirmed in the opinions of the majority of your Lordships in the Gulbenkian case.
It is now suggested for the first time that so far as the test of validity is concerned a mere power and a trust power can be assimilated. It is worth observing at the outset that this is a change of direction from the opinion expressed by the majority
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as recently as 1968. This is justified not on the ground that the arguments in the previous case were not fully canvassed nor on the ground that the previous decision was plainly wrong, but on the basis of expediency.
I will now attempt to analyse the basis of the view of those who consider that there should be an assimilation of the tests for validity. As I have already said, the distinction between a mere power and a trust power is fundamental. The court, apart from a mala fide exercise of a mere power has no control over the exercise of the power by the donee or trustees as the case may be. If it is not exercised or fails for invalidity the fund goes to those entitled in default, under the settlement or on a resulting trust as the case may be. It is very different in the case of a trust power. There the trustees are under a fiduciary duty to exercise the power. The beneficiaries can compel the trustees to exercise the power by application to the court if necessary. If the beneficiaries agreed among themselves to equal divisions they could compel the trustees to distribute the whole fund. (See Harman J in Re Gestetner (decd), Barnett v Blumka. ([1953] 1 All ER 1150 at 1154, [1953] Ch 672 at 686)) One of the reasons which, it is said, requires complete ascertainment of the class of objects is that if the court has to administer the trust then, as it is only the trustees who have discretionary powers, the court can only make an equal division. ‘Equity is equality.' This basic conception is challenged by reference to what is known as the ‘relation’ cases. It is said that the court in these cases has, instead of making an equal division, made a selection in the exercise of its discretion. This shows, it is said, that the principle of equal division is not a necessary result of the exercise of a trust power by the court. I regard the ‘relation’ cases as special for this reason, that in all of them some guide or pointer was given to the trustees as to the manner in which that discretion was to be exercised. The settlor entrusted a discretion to his trustee with certain guidelines and in these circumstances the court did not find it difficult to exercise its own discretion in accordance with the supposed intention of the settlor. For example in Clarke v Turner the devise was to ‘such of the relations … as he should think best, and most reputable for his family’. The court chose the heir-at-law as the most reputable. In Warburton v Warburton ‘a very extraordinary’ case as described by Sir Richard Arden MR in Kemp v Kemp the discretion was among the executors, brothers and sisters according to their needs. The court gave a double share to the heir. Richardson v Chapman was not a ‘relation’ case but depended on its own very special facts. Granted that the court did not in these cases direct an equal division, it by no means follows that in a non-relation case where the trustees are given the discretion to distribute amongst a wide class of objects with no guidelines the court would exercise a power of selection. The court has no discretion and is given no guidelines on which to exercise a discretion. It is on the trustees that the settlor has conferred the discretion. The court can in these circumstances only order an equal division. I consider that the reliance on the ‘relation’ cases is based on an insecure foundation. Moreover in none of those cases was it ever suggested that the class of objects was not ascertainable. The test of validity never therefore arose.
A more fundamental objection, however, to the reliance on these cases as a basis for a change in the law is not only their great antiquity—all in the eighteenth century—but also that they were all decided before Kemp v Kemp and Morice v Bishop of Durham where the principle of equality was firmly established and has, so far as my researches go, never been questioned since. In Kemp’s case the relation cases were cited but were not thought of sufficient importance to alter the practice.
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I do not requote the passage from Lord Eldon LC’s judgment in Morice v Bishop of Durham ((1805) 10 Ves at 539, 540, [1803–13] All ER Rep at 458) referred to the speech of my noble and learned friend Lord Hodson.
It would be presumptuous on my part to attempt to improve on the language of my noble and learned friend Lord Upjohn in the Gulbenkian case. I agree with the conclusions he expressed ([1968] 3 All ER at 793, [1968] 3 WLR at 1139) in that part of his speech which has been correctly described as obiter dictum. It seems to be as plain as can be that if all the objects are not ascertainable then to distribute amongst the known objects is to take a narrower class than the settlor has directed and so to conflict with his intention. It has been suggested that it is not in conformity with the court’s duty to administer a trust that the settlor’s intentions are to be defeated by this ‘narrow distinction’ between mere power and trust power. As I have already said I regard the distinction as basic. It is also suggested that it is in the public interest that trusts of the nature of the present should be saved, if possible, because of the great benefit conferred on the beneficiaries. I agree, but if this is desirable the remedy is by legislation and not by judicial reform. For these reasons, I adhere to my concurrence with the whole of the opinion of my noble and learned friend, Lord Upjohn, in the Gulbenkian case.
I would allow the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce. I agree with it. For the reasons he gives in my opinion the provisions of cl 9(a) of the deed constitute a trust and I entirely agree with his observations as to the tests to be applied to determine the validity of a trust.
I, too, would allow the appeal and make the orders he proposes.
LORD WILBERFORCE. My Lords, This appeal is concerned with the validity of a trust deed dated 17 July 1941, by which Mr Bertram Baden established a fund for the benefit, broadly, of the staff of the respondent company Matthew Hall & Co Ltd. Mr Baden died in 1960 and the appellants are the executors of his will. They claim that the trust deed is invalid and that the assets transferred to the trustees by their testator revert to his estate. The trusts established by the deed are of a general type which has recently become common, the beneficiaries including a wide class of persons among whom the trustees are given discretionary powers or duties of distribution. It is the width of the class which in this, and in other cases before the courts, has given rise to difficulty and to the contention that the trusts are too indefinite to be upheld.
The trust deed begins with a recital that the settlor desired to establish a fund for providing benefits for the staff of the company and their relatives or dependents. The critical clauses are as follows:
‘9. (a) The Trustees shall apply the net income of the Fund in making at their absolute discretion grants to or for benefit of any of the officers and employees or ex-officers or ex-employees of the Company or to any relatives or dependents of any such persons in such amounts at such times and on such conditions (if any) as they think fit and any such grant may at their discretion be made by payment to the beneficiary or to any institution or person to be applied for his or her benefit and in the latter case the Trustees shall be under no obligation to see to the application of the money,
‘(b) The Trustees shall not be bound to exhaust the income of any year or other period in making such grants as aforesaid and any income not so applied shall be dealt with as provided by Clause 6(a) hereof.
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‘[Clause 6(a) All moneys in the hands of the Trustees and not required for the immediate service of the Fund may be placed in a deposit or current account with any Bank or Banking house in the name of the Trustees or may be invested as hereinafter provided.]
‘(c) The Trustees may realise any investments representing accumulations of income and apply the proceeds as though the same were income of the Fund and may also (but only with the consent of all the Trustees) at any time prior to the liquidation of the Fund realise any other part of the capital of the Fund which in the opinion of the Trustees it is desirable to realise in order to provide benefits for which the current income of the Fund is insufficient.
‘10. All benefits being at the absolute discretion of the Trustees, no person shall have any right title or interest in the Fund otherwise than pursuant to the exercise of such discretion, and nothing herein contained shall prejudice the right of the Company to determine the employment of any officer or employee.’
Clause 11 defines a perpetuity period within which the trusts are, in any event, to come to an end and cl 12 provides for the termination of the fund. On this event the trustees are directed to apply the fund in their discretion in one or more of certain specified ways of which one is in making grants as if they were grants under cl 9(a). There are certain other provisions in the deed on which arguments have been based, but these are of a subsidiary character and citation of them is unnecessary.
The present proceedings were started in 1963 by an originating summons taken out in the Chancery Division by the trustees of the deed seeking the decision of the court on various questions, including that of the validity or otherwise of the trusts of the deed. It came before Goff J ([1967] 3 All ER 159, [1967] 1 WLR 1157) in 1967. He first decided that the references in cll 9 and 12 to employees of the company were not limited to the ‘staff’ but comprised all the officers and employees of the company. There was no appeal against this. On the main question of validity, the learned judge was, it seems invited first to decide whether the provisions of cl 9(a) constitute a trust or a power. This was on the basis that certain decided cases (which I shall examine) established a different test of invalidity for trusts on the one hand and powers on the other. He decided in favour of a power, and further that on this footing cl 9 (a) was valid. On appeal, the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) by a majority upheld the decision in favour of a power, but held also that the learned judge had applied the wrong test for the validity of powers, the correct test being that stated (subsequent to the hearing before Goff J) by this House in Re Gulbenkian’s Settlement Trusts, Whitshaw v Stephens. The Court of Appeal therefore remitted the case to the Chancery Division to reconsider the validity of cl 9(a) as a power.
In this House, the appellants contended, and this is the first question for consideration, that the provisions of cl 9(a) constitute a trust and not a power. If that is held to be the correct result, both sides agree that the case must return to the Chancery Division for consideration, on this footing, whether this trust is valid. But here comes a complication. In the present state of authority, the decision as to validity would turn on the question whether a complete list (or on another view a list complete for practical purposes) can be drawn up of all possible beneficiaries. This follows from the Court of Appeal’s decision in Inland Revenue Comrs v Broadway Cottages Trust as applied in later cases by which, unless this House decides otherwise, the Court of Chancery would be bound. The respondents invite your Lordships to review this decision and challenge its correctness. So the second issue which arises, if cl 9(a) amounts to a trust, is whether the existing test for its validity is right in law and if not, what the test ought to be.
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Before dealing with these two questions some general observations, or reflections, may be permissible. It is striking how narrow and in a sense artificial is the distinction, in cases such as the present, between trusts or as the particular type of trust is called, trust powers, and powers. It is only necessary to read the learned judgments in the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) to see that what to one mind may appear as a power of distribution coupled with a trust to dispose of the undistributed surplus, by accumulation or otherwise, may to another appear as a trust for distribution coupled with a power to withhold a portion and accumulate or otherwise dispose of it. A layman and, I suspect, also a logician, would find it hard to understand what difference there is.
It does not seem satisfactory that the entire validity of a disposition should depend on such delicate shading. And if one considers how in practice reasonable and competent trustees would act, and ought to act, in the two cases, surely a matter very relevant to the question of validity, the distinction appears even less significant. To say that there is no obligation to exercise a mere power and that no court will intervene to compel it, whereas a trust is mandatory and its execution may be compelled, may be legally correct enough, but the proposition does not contain an exhaustive comparison of the duties of persons who are trustees in the two cases. A trustee of an employees’ benefit fund, whether given a power or a trust power, is still a trustee and he would surely consider in either case that he has a fiduciary duty; he is most likely to have been selected as a suitable person to administer it from his knowledge and experience, and would consider he has a responsibility to do so according to its purpose. It would be a complete misdescription of his position to say that, if what he has is a power unaccompanied by an imperative trust to distribute, he cannot be controlled by the court if he exercised it capriciously, or outside the field permitted by the trust (cf Farwell on Powersc). Any trustee would surely make it his duty to know what is the permissible area of selection and then consider responsibly, in individual cases, whether a contemplated beneficiary was within the power and whether, in relation to other possible claimants, a particular grant was appropriate.
Correspondingly a trustee with a duty to distribute, particularly among a potentially very large class, would surely never require the preparation of a complete list of names, which anyhow would tell him little that he needs to know. He would examine the field, by class and category; might indeed make diligent and careful enquiries, depending on how much money he had to give away and the means at his disposal, as to the composition and needs of particular categories and of individuals within them; decide on certain priorities or proportions, and then select individuals according to their needs or qualifications. If he acts in this manner, can it really be said that he is not carrying out the trust?
Differences there certainly are between trusts (trust powers) and powers, but as regards validity should they be so great as that in one case complete, or practically complete ascertainment is needed, but not in the other? Such distinction as there is would seem to lie in the extent of the survey which the trustee is required to carry out; if he has to distribute the whole of a fund’s income, he must necessarily make a wider and more systematic survey than if his duty is expressed in terms of a power to make grants. But just as, in the case of a power, it is possible to underestimate the fiduciary obligation of the trustee to whom it is given, so, in the case of a trust (trust power), the danger lies in overstating what the trustee requires to know or to enquire into before he can properly execute his trust. The difference may be one of degree rather than of principle; in the well-known words of Sir George Farwell (Farwell on Powersd) trusts and powers are often blended,and the mixture may vary in its ingredients.
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With this background I now consider whether the provisions of cl 9(a) constitute a trust or a power. I do so briefly because this is not a matter on which I or, I understand, any of your Lordships have any doubt. Indeed, a reading of the judgments of Goff J ([1967] 3 All ER 159, [1967] 1 WLR 1457) and of the majority in the Court of Appeal ([1969] 1 All ER 1016, [1969] 2 Ch 388) leave the strong impression that, if it had not been for their leaning in favour of possible validity and the state of the authorities, these learned judges would have found in favour of a trust. Naturally read, the intention of the deed seems to me clear: cl 9(a), whose language is mandatory (‘shall’), creates, together with a power of selection, a trust for distribution of the income, the strictness of which is qualified by cl 9(b) which allows the income of any one year to be held up and (under cl 6(a)) either placed, for the time, with a bank, or, if thought fit, invested. Whether there is, in any technical sense an accumulation, seems to me in the present context a jejune enquiry; what is relevant is that cl 9(c) marks the difference between ‘accumulations’ of income and the capital of the fund: the former can be distributed by a majority of the trustees, the latter cannot. As to cl 10, I do not find in it any decisive indication. If anything it seems to point in favour of a trust, but both this and other points of detail are insignificant in the face of the clearly expressed scheme of cl 9. I therefor agree with Russell LJ and would to that extent allow the appeal, declare that the provisions of cl 9(a) constitute a trust and remit the case to the Chancery Division for determination whether on this basis cl 9 is (subject to the effects of s 164 of the Law of Property Act 1925) valid or void for uncertainty.
This makes it necessary to consider whether, in so doing, the court should proceed on the basis that the relevant test is that laid down in the Broadway Cottages case or some other test. That decision gave the authority of the Court of Appeal to the distinction between cases where trustees are given a power of selection and those where they are bound by a trust for selection. In the former case the position, as decided by this House, is that the power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class. (The Gulbenkian case.) But in the latter case it is said to be necessary, for the trust to be valid, that the whole range of objects (I use the language of the Court of Appeal) should be ascertained or capable of ascertainment.
The respondents invited your Lordships to assimilate the validity test for trusts to that which applies to powers. Alternatively, they contended that in any event the test laid down in the Broadway Cottages case was too rigid, and that a trust should be upheld if there is sufficient practical certainty in its definition for it to be carried out, if necessary with the administrative assistance of the court, according to the expressed intention of the settlor. I would agree with this, but this does not dispense from examination of the wider argument. The basis for the Broadway Cottages case principle is stated to be that a trust cannot be valid unless, if need be, it can be executed by the court, and (though it is not quite clear from the judgment where argument ends and decision begins) that the court can only execute it by ordering an equal distribution in which every beneficiary shares. So it is necessary to examine the authority and reason for this supposed rule as to the execution of trusts by the court.
Assuming, as I am prepared to do for present purposes, that the test of validity is whether the trust can be executed by the court, it does not follow that execution is impossible unless there can be equal division. As a matter of reason, to hold that a principle of equal division applies to trusts such as the present is certainly paradoxical. Equal division is surely the last thing the settlor ever intended; equal
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division among all may, probably would, produce a result beneficial to none. Why suppose that the court would lend itself to a whimsical execution? And as regards authority, I do not find that the nature of the trust, and of the court’s powers over trusts, calls for any such rigid rule. Equal division may be sensible and has been decreed, in cases of family trusts for a limited class, here there is life in the maxim ‘equality is equity’, but the cases provide numerous examples where this has not been so, and a different type of execution has been ordered, appropriate to the circumstances.
Mosely v Moseley is an early example, from the time of equity’s architect, where the court assumed power (if the executors did not act) to nominate from the sons of a named person as it should think fit and most worthy and hopeful, the testator’s intention being that the estate should not be divided. In Clarke v Turner, on a discretionary trust for relations, the court decreed conveyance to the heir at law judging it ‘… most reputable for the family, that the heir at law should have it’. In Warburton v Warburton on a discretionary trust to distribute between a number of the testator’s children, the House of Lords affirmed a decree of Lord Keeper Wright that the eldest son and heir, regarded as necessitous, should have a double share, the court exercising its own discretionary judgment against equal division.
These are examples of family trusts but in Richardson v Chapman the same principle is shown working in a different field. There was a discretionary trust of the testator’s ‘options’ (viz rights of presentation to benefices or dignities in the Church) between a number of named or specified persons, including present and former chaplains and other domestics; also ‘my worthy friends and acquaintance, particularly … the Reverend Doctor Richardson’. The House of Lords (reversing Lord Keeper Henley) set aside a ‘corrupt’ presentation and ordered the trustees to present Dr Richardson as the most suitable person. The grounds of decision in this House, in accordance with the prevailing practice, were not reported, but it may be supposed that the reported argument was accepted that where the court sets aside the act of the trustee, it can at the same time decree the proper act to be done, not by referring the matter to the trustee’s discretion, but by directing him the perform as a mere instrument the thing decreed ((1760) 7 Bro Parl Cas at 326, 327). This shows that the court can in a suitable case execute a discretionary trust according to the perceived intention of the truster. It is interesting also to see that it does not seem to have been contended that the trust was void because of the uncertainty of the words ‘my worthy friends and acquaintance’. There was no doubt that Dr Richardson came within the designation. In the time of Lord Eldon LC, the Court of Chancery adopted a less flexible practice; in Kemp v Kemp Sir Richard Arden MR commenting on Warburton v Warburton (‘a very extraordinary case’) said that the court now disclaims the right to execute a power (ie a trust power) and gives the fund equally. But I do not think that this change of attitude, or practice, affects the principle that a discretionary trust in a suitable case, be executed according to its merits and otherwise than by equal division. I prefer not to suppose that the great masters of equity if faced with the modern trust for employees, would have failed to adopt their creation to its practical and commercial character. Lord Eldon LC himself, in Morice v Bishop of Durham, laid down clearly enough that a trust fails if the object is insufficiently described or if it cannot be carried out, but these principles may be fully applied to trust powers without requiring a complete ascertainment of all possible objects.
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His earlier judgment in the leading, and much litigated, case of Brown v Higgs, shows that he was far from fastening any rigid test of validity of trust powers. After stating the distinction, which has ever since been followed, between powers, which the court will not require the donee to execute, and powers in the nature of a trust, or trust powers, he says of the latter that if the trustee does not discharge it, the court will, to a certain extent, discharge the duty in his room and place. To support this, he cites Harding v Glyn an early case where the court executed a discretionary trust for ‘relations’ by distributing to the next of kin.
I dwell for a moment on this point because, not only was Harding v Glyn described by Lord Eldon LC as having been treated as a clear authority in his experience for a long period, but the principle of it was adopted in several nineteenth century authorities. When the Broadway Cottages Trust case came to be decided in 1955, these cases were put aside as anomalous (See [1954] 3 All ER at 126, 127, [1955] Ch at 33, 35) but I think they illustrate the flexible manner in which the court, if called on, executes trust powers for a class. At least they seem to prove that the supposed rule as to equal division does not rest on any principle inherent in the nature of a trust. They prompt one to ask why a practice, or rule, which has been long followed and found useful in ‘relations’ cases, should not also serve in regard to ‘employees’, or ‘employees and their relatives’, and whether a decision which says the contrary is acceptable.
I now consider the modern English authorities, particularly those relied on to show that complete ascertainment of the class must be possible before it can be said that a discretionary trust is valid. Re Ogden, Brydon v Samuel is not a case which I find of great assistance. The argument seems to have turned mainly on the question whether the trust was a purpose trust or a trust for ascertained objects. The latter was held to be the case and the court then held that all the objects of the discretionary gift could be ascertained. It is weak authority for the requirement of complete ascertainment.
The modern shape of the rule derives from Re Gestetner (decd), Barnett v Blumka where the judgment of Harman J, to his later regret, established the distinction between discretionary powers and discretionary trusts. The focus of this case was on powers. The judgment first establishes a distinction between, on the one hand, a power collateral, or appurtenant, or other power ([1953] 1 All ER at 1153, [1953] Ch at 684) ‘… which does not import a trust on the conscience of the donee’ and on the other hand a trust imposing a duty to distribute. As to the first, the learned judge said ([1953] 1 All ER at 1153 [1953] Ch at 684): ‘… I do not think it can be the law that it is necessary to know of all the objects in order to appoint to any one of them.' As to the latter he used these words ([1953] 1 All ER at 1153, [1953] Ch at 685):
‘… it seems to me there is much to be said for the view that he must be able to review the whole field in order to exercise his judgment properly.’
He then considered authority on the validity of powers, the main stumbling block in the way of his own view being some words used by Fry J in Blight v Hartnoll ((1881) 19 Ch 294 at 300, 301), which had been adversely commented on in Farwell on Powers, and I think it worth-while quoting the words of his conclusion. He said ([1953] 1 All ER at 1155, 1156, [1953] Ch at 688):
‘The settlor had good reason to trust the persons whom he appointed as trustees, I have no doubt, but I cannot see that there is here such a duty as makes
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it essential for these trustees, before parting with any income or capital, to survey the whole field and consider whether A is more deserving of bounty than B. That is a task which is, and which must have been known to the settlor to be, impossible, having regard to the ramifications of the persons who might be members of this class.
‘If, therefore, there is no duty to distribute, but only a duty to consider, it does not seem to me that there is any authority binding on me to say that this whole trust … is bad. In fact, as has been admitted, there is no difficulty in ascertaining whether any given postulant is a member of the specified class; if that could not be ascertained, the matter would be quite different, but of John Doe or Richard Roe it can be postulated whether he is or is not eligible to receive the settlor’s bounty. There being no uncertainty in that sense, I am reluctant to introduce a notion of uncertainty in the other sense by saying that the trustees must survey the world from China to Peru when there are perfectly good objects of the class … in England.’
Subject to one point which was cleared up in this House in Re Gulbenkian’s Settlement Trusts, all of this, if I may say so, seems impeccably good sense, and I do not understand the learned judge to have later repented of it. If the judgment was in any way the cause of future difficulties, it was in the indication given—not by way of decision, for the point did not arise— that there was a distinction between the kind of certainty required for powers and that required for trusts. There is a difference perhaps but the difference is a narrow one, and if one is looking to reality one could hardly find better words than those I have just quoted to describe what trustees, in either case, ought to know. A second look at this case, while fully justifying the decision, suggests to me that it does not discourage the application of a similar test for the validity of trusts.
So I come to Inland Revenue Comrs v Broadway Cottages Trust. This was certainly a case of trust, and it proceeded on the basis of an admission, in the words of the judgment, ‘that the class of “beneficiaries” is incapable of ascertainment’. In addition to the discretionary trust of income, there was a trust of capital for all the beneficiaries living or existing at the terminal date. This necessarily involved equal division and it seems to have been accepted that it was void for uncertainty since there cannot be equal division among a class unless all the members of the class are known. The Court of Appeal applied this proposition to the discretionary trust of income, on the basis that execution by the court was only possible on the same basis of equal division. They rejected the argument that the trust could be executed by changing the trusteeship, and found the relations cases of no assistance as being in a class by themselves. The court could not create an arbitrarily restricted trust to take effect in default of distribution by the trustees. Finally they rejected the submission that the trust could take effect as a power; a valid power could not be spelt out of an invalid trust.
My Lords, it will have become apparent that there is much in this which I find out of line with principle and authority but, before I come to a conclusion on it, I must examine the decision of this House in Re Gulbenkian’s Settlement Trusts on which the appellants placed much reliance as amounting to an endorsement of the Broadway Cottages case. But is this really so? That case was concerned with a power of appointment coupled with a gift over in default of appointment. The possible objects of the power were numerous and were defined in such wide terms that it could certainly be said that the class was unascertainable. The decision of this House was that the power was valid if it could be said with certainty whether any given individual was or was not a member of the class and did not fail simply because it was impossible to ascertain every member of the class. In so deciding, their
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Lordships rejected an alternative submission, to which countenance had been given in the Court of Appeal ([1967] 3 All ER 15, [1968] Ch 126) that it was enough that one person should certainly be within the class. So, as a matter of decision, the question now before us did not arise or nearly arise. However the opinions given were relied on, and strongly, as amounting to an endorsement of the ‘complete ascertainment’ test as laid down in the Broadway Cottages case.
My Lords, I comment on this submission with diffidence, because three of those who were party to the decision are present here today, and will express their own views. But with their assistance, and with respect for their views, I must endeavour to appraise the appellants’ argument. My noble and learned friend Lord Reid’s opinion can hardly be read as an endorsement of the Broadway Cottages case. It is really the opinion of my noble and learned friend Lord Upjohn which has to be considered. Undoubtedly the main part of that opinion, as one would expect, was concerned to deal with the clause in question, which required careful construction, and with the law as to powers of appointment among a numerous and widely defined class. But having dealt with these matters the opinion continues with some general observations. I have considered these with great care and interest; I have also had the advantage of considering a detailed report of the argument of counsel on both sides who were eminent in this field. I do not find that it was contended on either side that the Broadway Cottages case was open to criticism—neither had any need to do so. The only direct reliance on it appears to have been to the extent of the fifth proposition (See [1954] 3 All ER at 125, [1955] Ch at 31), which was relevant as referring to powers, but does not touch this case. It is consequently not surprising that my noble and learned friend Lord Upjohn nowhere expresses his approval of this decision and indeed only cites it, in the earlier portion, insofar as it supports a proposition as to powers. Whatever dicta therefore the opinion were found to contain, I could not, in a case where a direct and fully argued attack has been made on the Broadway Cottages case, regard them as an endorsement of it and I am sure that my noble and learned friend, had he been present here, would have regarded the case as at any rate open to review. In fact I doubt very much whether anything his Lordship said was really directed to the present problem. I read his remarks as dealing with the suggestion that trust powers ought to be entirely assimilated to conditions precedent and powers collateral. The key passage is where he said ([1968] 3 All ER at 793, 794, [1968] 3 WLR at 1139):
‘Again the basic difference between a mere power and a trust power is that in the first case trustees owe no duty to exercise it and the relevant fund or income falls to be dealt with in accordance with the trusts in default of its exercise, whereas in the second case the trustees must exercise the power and in default the court will. It is briefly summarised in 30 HALSBURY’S LAWS (3rd Edn.), p. 241, para 445: ”… the court will not … compel trustees to exercise a purely discretionary power given to them; but will restrain the trustees from exercising the power improperly, and if it is coupled with a duty … can compel the trustees to perform their duty.” It is a matter of construction whether the power is a mere power or a trust power and the use of inappropriate language is not decisive (Wilson v. Turner ((1883) 22 Ch D 521 at 525)).
‘So, with all respect to the contrary view, I cannot myself see how, consistently with principle, it is possible to apply to the execution of a trust power the principles applicable to the permissible exercise by the donees, even if trustees of mere powers; that would defeat the intention of donors completely.
‘But with respect to mere powers, while the court cannot compel the trustees
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to exercise their powers, yet those entitled to the fund in default must clearly be entitled to restrain the trustees from exercising it save among those within the power. So the trustees, or the court, must be able to say with certainty who is within and who is without the power. It is for this reason that I find myself unable to accept the broader proposition advanced by LORD DENNING, M.R. ([1967] 3 All ER at 18, 19, [1968] Ch at 133, 134), and Winn LJ ([1967] 3 All ER at 21, [1968] Ch at 138), mentioned earlier, and agree with the proposition as enunciated in Re Gestetner and the later cases.’
The reference to defeating ‘the intention of donors completely’ shows that what he is concerned with is to point to the contrast between powers and trusts which lies in the facultative nature of the one and the mandatory nature of the other, the conclusion being the rejection of the ‘broader’ proposition as to powers accepted by two members of the Court of Appeal. With this in mind it becomes clear that the sentence so must relied on by the appellants will not sustain the weight they put on it. This is ([1968] 3 All ER at 793, [1968] 3 WLR at 1138):
‘The trustees have a duty to select the donees of the donor’s bounty from among the class designated by the donor; he has not entrusted them with any power to select the donees merely from among known claimants who are within the class, for that is constituting a narrower class and the donor has given them no power to do this.’
What this does say, and I respectfully agree, is that, in the case of a trust, the trustees must select from the class. What it does not say, as I read it, or imply, is that in order to carry out their duty of selection they must have before them, or be able to get, a complete list of all possible objects.
So I think that we are free to review the Broadway Cottages case. The conclusion which I would reach, implicit in the previous discussion, is that the wide distinction between the validity test for powers and that for trust powers, is unfortunate and wrong, that the rule recently fastened on the courts by the Broadway Cottages case ought to be discarded, and that the test for the validity of trust powers ought to be similar to that accepted by this House in Re Gulbenkian’s Settlement Trusts for powers, namely that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class.
I am interested, and encouraged, to find that the conclusion I had reached by the end of the argument is supported by distinguished American authority. Professor Scott in his well-known book on Trustse discusses the suggested distinction as regards validity between trusts and powers and expresses the opinion that this would be ‘highly technical’. Later in the Second Restatement of Trustsf (which Restatement aims at stating the better modern view and which annotates the Broadway Cottages case) a common test of invalidity is taken, whether trustees are ‘authorised’ or ‘directed’; this is that the class must not be so indefinite that it cannot be ascertained whether any person falls within it. The reporter is Professor Austin Scott. In his Abridgementg, Professor Scott maintains the same position:
‘It would seem … that if a power of appointment among the members of an indefinite class is valid, the mere fact that the testator intended not merely to
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confer a power but to impose a duty to make such an appointment should not preclude the making of such an appointment. It would seem to be the height of technicality … ’
Assimilation of the validity test does not involve the complete assimilation of trust powers with powers. As to powers, I agree with my noble and learned friend Lord Upjohn in Re Gulbenkian’s Settlement that although the trustees may, and normally will, be under a fiduciary duty to consider whether or in what way they should exercise their power, the court will not normally compel its exercise. It will intervene if the trustees exceed their powers, and possibly if they are proved to have exercised it capriciously. But in the case of a trust power, if the trustees do not exercise it, the court will; I respectfully adopt as to this the statement in Lord Upjohn’s opinion ([1968] 3 All ER at 793, [1968] 3 WLR at 1139). I would venture to amplify this by saying that the court, if called on to execute the trust power, will do so in the manner best calculated to give effect to the settlor’s or testator’s intentions. It may do so by appointing new trustees, or by authorising or directing representative persons of the classes of beneficiaries to prepare a scheme of distribution, or even, should the proper basis for distribution appear, by itself directing the trustees so to distribute. The books give many instances where this has been done and I see no reason in principle why they should not do so in the modern field of discretionary trusts (see Brunsden v Woolredge, Supple v Lowson, Liley v Hey and Lewin on Trustsh). Then, as to the trustees’ duty of enquiry or ascertainment, in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as well enable them to carry out their fiduciary duty (cf Liley v Hey). A wider and more comprehensive range of enquiry is called for in the case of trust powers than in the case of powers.
Two final points: first, as to the question of certainty, I desire to emphasise the distinction clearly made and explained by Lord Upjohn ([1968] 3 All ER at 793, [1968] 3 WLR at 1138), between linguistic or semantic uncertainty which, if unresolved by the court, renders the gift void, and the difficulty of ascertaining the existence or whereabouts of members of the class, a matter with which the court can appropriately deal on an application for directions. There may be a third case where the meaning of the words used is clear but the definition of beneficiaries is so hopelessly wide as not to form ‘anything like a class’ so that the trust is administratively unworkable or in Lord Eldon LC’s words one that cannot be executed (Morice v Bishop of Durhami). I hesitate to give examples for they may prejudice future cases, but perhaps ‘all the residents of Greater London’ will serve. I do not think that a discretionary trust for ‘relatives’ even of a living person falls within this category.
I would allow the appeal and make the order suggested earlier in this opinion. The costs of the appellants of this appeal taxed on a common fund basis should be paid out of so much of the trust fund subject to the trust deed of 17 July 1941, as was derived from Bertram Baden deceased.
Appeal allowed. Declaration that the provisions of cl 9(a) constituted a trust. Case remitted for determination whether on this basis cl 9 was (subject to the effects of s 164 of the Law of Property Act 1925) valid or void for uncertainty.
Solicitors: Slaughter & May (for the appellants); Gregory, Rowcliffe & Co (for the respondents).
S A Hatteea Esq Barrister.
Note
Re Park (deceased)
Inland Revenue Commissioners v Park and others
[1970] 2 All ER 248
Categories: TAXATION; Estate Duty
Court: COURT OF APPEAL, CIVIL DIVISION
Hearing Date(s): 10 MARCH 1970
Estate duty – Practice – Disputed claim – Crown proceeding by originating summons – Whether proper procedure where accountability not admitted – Crown’s appeal against striking out of proceedings compromised – Proceedings on appeal stayed on agreed terms – Crown Proceedings Act 1947, s 14.
Notes
For recovery of duty by the Crown, see 15 Halsbury’s Laws (3rd Edn) 151–153, paras 309–312.
For the Crown Proceedings Act 1947, s 14, see 8 Halsbury’s Statutes (3rd Edn) 856.
Interlocutory appeal
This was an appeal by the plaintiffs, the Inland Revenue Commissioners, from the decision of Goff J, dated 27 November 1969, and reported [1970] 1 All ER 611, whereby he ordered to be struck out, as prejudicial or embarrassing to the fair trial of the action, proceedings commenced by the plaintiffs by originating summons under the Crown Proceedings Act 1947, s 14, and RSC Ord 77, r 8, claiming against the first defendant, Robert Anthony Park, an account of the property comprised in a settlement made by his grandfather, Henry James Park, the deceased, on 25 May 1962 not being property comprised in a second settlement made on 16 August 1963, and an order for payment of estate duty on the account; and against the second and third defendants, Charles Anderson Hinks and Antony Bartliff Little, the trustees of a second settlement made by the first defendant on 16 August 1963, similar orders in relation to property comprised in the first settlement which by the Finance Act 1957, s 38, was deemed to be property comprised in the second settlement.
Arthur Bagnall QC and M Nesbitt for the defendants told the court that the parties asked for an order to be made staying all proceedings on the appeal on agreed terms with liberty to apply as to the enforcement of the terms. The parties wished for the order to be made in this form so as to enable the proceedings which had been dismissed to continue while avoiding the difficulty that the court, on well-established authority, could not allow an appeal by consent.
P R Oliver QC and J P Warner for the Crown expressed agreement.
Accordingly, the appeal was compromised and an order was made staying all proceedings on the appeal on the following terms set out in a schedule to the order:
1. Subject as provided in the schedule, the originating summons should continue as if the proceedings had not been dismissed before Goff J.
2. The plaintiffs should serve on the defendants within 28 days a statement of the substance of their case on the footing that the state of mind of the deceased and of no other person was called in issue.
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3. Save as might be expressly admitted by the defendants, the said statement should be treated as denied by the defendants.
4. The plaintiffs should be bound by the said statement which should not be open to amendment without the leave of the court on the same terms and conditions as if it were a statement of claim.
5. All the documents exhibited to the affidavit of Mr Johnsa and all correspondence between the plaintiffs and Latimer, Hinks, Marsham & Little [solicitors for the defendants] should be admissible in evidence as if such correspondence had been conducted by Latimer, Hinks, Marsham & Little as solicitors for the defendants.
6. Unless the defendants should file evidence within 28 days after service of the said statement—(a) inferences drawn by Mr Johns from the said documents and correspondence should not be evidence and (b) neither side should be entitled to discovery, interrogatories or other interlocutory relief.
Solicitors: Solicitor of Inland Revenue; Butt & Bowyer agents for Latimer, Hinks, Marsham & Little, Darlington (for the defendants).
Wendy Shockett Barrister.
R v King
[1970] 2 All ER 249
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, SACHS LJ AND EVELEIGH J
Hearing Date(s): 4 MAY 1970
Criminal law – Sentence – Suspended sentence – Fine – Imprisonment in default of payment of fine – Whether court imposing suspended sentence can also impose fine – Need for care to see that fine imposed in addition to suspended sentence is well within convicted person’s means.
There is nothing in principle to prevent a court when imposing a suspended sentence from imposing a fine also, which adds a sting to what might otherwise be thought by the convicted person to be a ‘let-off’. But in imposing such a fine special care should be taken to see that it is well within the convicted person’s means to pay (see p 250 e, post).
Notes
For the power of the court to fine, see 10 Halsbury’s Laws (3rd Edn) paras 901, 902, and for suspended sentences, see Supplement to ibid para 922A.
Appeal
On 14 October 1969 at Coventry Quarter Sessions, the appellant pleaded guilty to theft and on 15 October 1969 was convicted before the deputy recorder (D E Roberts Esq) and a jury of burglary. He was sentenced to 12 months’ imprisonment suspended for two years, plus a fine of £100 or six months’ imprisonment in default, in respect of the burglary, and to a fine of £20 or 28 days’ imprisonment in default, in respect of the theft. He appealed against sentence with leave of the single judge. The facts are set out in the judgment of the court.
A W Palmer for the appellant.
The Crown did not appear and was not represented.
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4 May 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. At Coventry Quarter Sessions on 14 October 1969 the appellant pleaded guilty to theft, and the next day he was convicted of burglary; for the theft he was fined £20 with 28 days’ imprisonment in default of payment within one month, and on the burglary conviction he was sentenced to 12 months’ imprisonment suspended for two years, and also to a fine of £100 with six months’ imprisonment in default of payment within the six months following the month given for payment in respect of the theft charge. He now appeals against his sentence by leave of the single judge.
The theft charge related to the stealing of a vehicle excise licence from an Austin Healey car; so far as the burglary charge is concerned the appellant and a co-accused broke into the house belonging to the steward of the Amalgamated Engineering Union Club in Coventry, situate next to the club. They broke a window pane, undid the front door, but were seen by two schoolgirls, who reported the matter. The appellant escaped after a struggle with the barman, who arrived on the scene, but was later caught by the police. In fact nothing was stolen.
The appellant is aged 35. He lived down a very inauspicious start. There were seven findings of guilt against him, the last in 1948, and since then he has been of good character, was a good workman, and is said to earn something between £30 and £35 a week. The point on which the single judge gave leave to appeal was that the court should consider whether it was good practice when imposing a suspended sentence to impose a fine, at any rate on the same count, the danger then being that an accused might in the end serve two sentences of imprisonment on two separate occasions for the same offence. This court, however, is quite clear that there is nothing in principle to prevent such a course being taken. Indeed, in many cases it is quite a good thing to impose a fine which adds a sting to what might otherwise be thought by the prisoner to be a let-off. The only warning that this court would like to give is that in imposing a fine special care should be taken in such cases to see that it is well within the accused’s means to pay, otherwise if a fine is given which results in imprisonment, then the danger foreseen by the single judge might well arise. Bearing that in mind, and only that in mind, this court, having seen the appellant’s income and outgoings, propose to halve these two fines, reduce the £100 to £50 and £20 to £10, but leaving the period of payment and the imprisonment in default to stand.
Appeal allowed in part.
Solicitors: Registrar of Criminal Appeals (for the appellant).
N P Metcalfe Esq Barrister.
S (otherwise P) v S (J and P cited)
[1970] 2 All ER 251
Categories: FAMILY; Other Family
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): WRANGHAM J
Hearing Date(s): 23, 24 FEBRUARY 1970
Nullity – Practice – Petition for decree of nullity – Cross-petition by husband alleging adultery – Whether issues should be tried together or issue of nullity tried first.
The wife petitioned for a decree of nullity of marriage on the ground of the husband’s impotence or wilful refusal to consummate the marriage. By his answer the husband denied these allegations and cross-petitioned for a decree of divorce on the ground of the wife’s adultery. On the question whether the issues should should be tried together or the issue of nullity tried first,
Held – In accordance with the practice of the ecclesiastical courts before 1857, an issue whether a marriage was void ab initio should be tried before any issue which was based on the validity of the marriage; accordingly, the nullity issue should be tried first (see p 252 h, post).
Anon (1857) Dea & SW 295 and M (otherwise D) v D (1885) 10 PD 175 followed.
Notes
For jurisdiction in nullity suits, see 12 Halsbury’s Laws (3rd Edn) 223, 224, para 419, and for the order in which issues are tried where the respective claims are for dissolution of marriage and nullity, see ibid 386, para 850.
Cases referred to in judgment
Anon (1857) Dea & SW 295, 164 ER 581, 27 Digest (Repl) 441, 3715.
M (otherwise D) v D (1885) 10 PD 175, 27 Digest (Repl) 519, 4618.
Robins v Wolsey (1755) 2 Lee 149, 161 ER 294, 27 Digest (Repl) 531, 4757.
S (otherwise G) v S [1907] P 224, 76 LJP 118, 27 Digest (Repl) 441, 3719.
Petition
This was a petition by the wife for a decree of nullity of marriage on the ground of the husband’s impotence, or alternatively on the ground of his wilful refusal to consummate the marriage. The husband by his answer denied these allegations and cross-petitioned on the ground of the wife’s adultery. The facts are set out in the judgment.
T I Payne for the wife and the parties cited.
A B Ewbank for the husband.
24 February 1970. The following judgment was delivered.
WRANGHAM J. In this case the wife prayed for a decree of nullity of marriage on the ground of the impotence of the husband, or alternatively on the ground of his wilful refusal to consummate the marriage. The husband by his answer denied these allegations and, by way of cross-petition, he alleged that the wife had committed adultery. At the outset of the proceedings, the question was raised whether these two issues (perhaps three issues because adultery is alleged with more than one person) should be tried together, or whether the issue of nullity on the ground of impotence or wilful refusal should be tried first. On the side of the wife it was contended it was and always had been the practice of these courts for an issue of nullity to be disposed of before any issue relating to the dissolution of the marriage was begun. For the husband it was contended that there was no such general practice,
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but that the court should give such directions as were most consistent with the justice of the case on any particular occasion. It was common ground that there was no statute and no rule which directly governed the question which was in issue.
In those circumstances, in my view, the right course for this court would be to investigate what the practice of the ecclesiastical courts was before 1857. It is said and indeed was not contested that the practice of the ecclesiastical courts still governs the practice of this court where there is no other guide as to what the practice should be. I need only refer to the statutory provisions set out in Rayden on Divorcea. What the practice of the ecclesiastical courts was appears very plainly indeed from Anon decided in 1857. The court was the Consistory Court of London and the judge was Dr Lushington. There was no higher authority on the practice of the ecclesiastical courts. Dr Lushington had to decide the question whether a wife could plead adultery as a defence to the husband’s allegation of nullity by reason of impotence, and he decided that she could not. In the course of his judgment it became necessary for him to consider the practice of the ecclesiastical courts in dealing with cross-allegations of nullity and some matrimonial offence such as adultery. He referred to Robins v Wolsey, where the judge had held that a husband who sued his wife for a divorce for adultery could not prove the adultery until the question of marriage had been disposed of, the wife having pleaded that the marriage was void by reason of bigamy. He expressed the view in terms that there was no distinction in this context between a void and a voidable marriage, and he summarised the authorities which he considered in this way ((1857) Dea & Sw at 304) ‘… first, if the marriage be denied, that question must be disposed of before evidence can be taken as to adultery or cruelty … ’ That sets out the matter beyond doubt as it was in 1857, just before the Matrimonial Causes Act 1857 was passed. It appears from M (otherwise D) v D, decided in the year 1885 that that practice was still adopted at that date. Although the matter is not discussed by Sir James Hannen P, it is recorded that, there being two suits, one by a wife on the ground of the impotence of the husband, and the other by the husband on the ground of the adultery of the wife, ‘the suit for nullity was heard first’. In the same way, it appears that in 1907 this practice was still being followed. That appears from S (otherwise G) v S.
I was not referred to any authority which showed one way or another whether the practice had changed since. In those circumstances, I think the right thing for this court to do would be to follow a practice which was clearly the practice of the ecclesiastical courts in 1857, which continued apparently to be adopted in 1885 and in 1907, particularly as it seems to have behind it a weight of reason and common sense. I do not purpose to repeat the reasons given by Dr Lushington in his judgment in Anon, but it seems to me that much of what he said, if not all of it, is still good sense today. In other words where there is an issue whether a marriage ought to be declared to have been void from the start, whether it be void or voidable, that question should be disposed of before any further issue, which arises only on the assumption of the validity of the marriage, is entered on. So far as convenience and economy is concerned, it seems to me that there are many cases in which that practice will promote convenience and economy, though no doubt there will be other cases where it does not. I was asked to lay down what in my view was the practice of this court in view of the existing authorities. In my view the proper practice is as I have stated.
Accordingly, I directed that the issue of nullity should be tried first. As it has turned out, the defence to the issue of nullity was withdrawn at a certain stage of the proceedings, after the medical evidence had been thoroughly understood. In
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those circumstances, the order of this court will be that there be a decree of nullity; the cross-petition will be dismissed; and there will be no order as to costs, other than legal aid taxation.
Decree of nullity.
Solicitors: Jeffrey Gorden & Co (for the wife and the parties cited); Rowe & Maw (for the husband).
Alice Bloomfield Barrister.
Note
Mornford Investments Ltd v Minister of Housing and Local Government and another
[1970] 2 All ER 253
Categories: TOWN AND COUNTRY PLANNING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 10, 11, 24 MARCH 1970
Town and country planning – Development – Use classes – Students’ hostel – Subsequent use as residential hotel – Whether change of use requiring planning permission – Town and Country Planning (Use Classes) Order 1963 (SI 1963 No 708), art 3(1), Schedule, Class XI.
Notes
For use classes, see 37 Halsbury’s Laws (3rd Edn) 264–269, paras 368, 369, and for cases on the subject, see 45 Digest (Repl) 327, 12, and 328–334, 14–30.
For the Town and Country Planning (Use Classes) Order 1963, art 3, Schedule, see 21 Halsbury’s Statutory Instruments (Second Re-Issue) 103.
Appeal
This was an appeal by Mornford Investments Ltd from a decision of the Minister of Housing and Local Government contained in a letter of decision dated 5 December 1969 (for the material terms of the letter, see p 254 c, post). The Minister had confirmed with a slight variation two enforcement notices served by the council of the Royal Borough of Kensington and Chelsea relating to the use of premises at 82 and 84 Lexham Gardens as a hotel without the grant of planning permission.
On 4 June 1968, conditional planning permission was granted for the use of the premises as a students’ hostel. Gradually thereafter the use made of the premises altered and by July 1968 the use was confined mainly to overseas visitors, some 72 per cent of whom stayed for periods varying from one or two nights to a few months. The premises had become, in practice, a residential family hotel. The Minister found that the change constituted development but the appellants argued that, since the development constituted the use of the premises for a purpose within the same class, permission for development was not required by virtue of art 3 (1) of the Town and Country Planning (Use Classes) Order 1963a. The relevant class of that order (Class XI) provides: ‘Use as a boarding or guest house, a residential club, or a hotel providing sleeping accommodation.’
Page 254 of [1970] 2 All ER 253
The appeal first came before the court on 10 March 1970.
A D Dinkin for the appellants.
R A W Sears for the Royal Borough of Kensington and Chelsea.
24 March 1970. The following judgments were delivered.
LORD PARKER CJ having stated the facts continued: The case made by counsel for the appellants here is that the Minister was wrong in saying that no hostel can be in Class XI and he failed to consider the case of the particular form of use, and ask himself whether that use was a use falling within Class XI. The Minister in his letter of decision used these words which both counsel recognise are wrong. It may be that it is a question of trying or expression, but as worded it is this:
‘Since, however, a use of building as a hostel is not a use falling within any Use Class it cannot be in the same Class (Class XI) as a “hotel providing sleeping accommodation“. Accordingly it is considered that Article 3 of the Use Classes Order 1963b is not available to assist your clients.’
That is as worded clearly wrong, because a use of a building as a hostel can and does fall within several classes of the use classes order. The real question is whether the use of a building with planning permission as a students’ hostel falls within Class XI itself. It may be that the Minister is really saying that a students’ hostel is something sui generis and cannot be looked on as a boarding or guest house or residential club where the change to a hotel would not require permission. However, he does not say so, and the court feels that the Minister should be given an opportunity of appearing before this court and supporting his letter of decision. One of the points that concerns the court at the moment is that the form of the permission granted for a students’ hostel did not take the form of permitting the use as a hostel and then providing as a condition that it would be only for students; it is a flat permission, as it were, for a students’ hostel. Although it did not happen in this case, it seems to the court that one way of running a students’ hostel would be to run it as a residential club; then the question would arise whether a change from a residential club for students to a residential club simplicitor or for old people or for any other purpose, would amount to a change of use. If it did not, then it seems to this court that it could well be said the change from residential club to hotel was something which did fall within the use classes order. It is to be observed that counsel for the Royal Borough of Kensington and Chelsea conceded that if that situation arose, the matter would come within the use classes order. It may well be that the Minister would make no such admission, but whatever the true view, having regard in particular to what is clearly a misstatement in his letter of decision, the court thinks that the proper course is to adjourn this appeal and to invite the Minister to be represented, and to support his letter of decision.
ASHWORTH J. I agree.
DONALDSON J. I agree.
The appeal came before the court again on 24 March 1970.
A D Dinkin for the appellants.
Gordon Slynn for the Minister.
R A W Sears for the Royal Borough of Kensington and Chelsea.
Page 255 of [1970] 2 All ER 253
LORD PARKER CJ in the course of his judgment said: The court today has had the advantage of hearing counsel on behalf of the Minister. For myself I am still not satisfied, having heard counsel, that the Minister applied his mind to the right question, or found impliedly that the expression ‘students’ hostel’ described something which was sui generis and not within the use classes order. However, at the end of the day it seems to me that that is the real question and that as a matter of law this use for which planning permission was obtained as a students’ hostel is something sui generis. In those circumstances I would dismiss this appeal.
ASHWORTH J. I agree.
DONALDSON J. I also agree.
Appeal dismissed.
Solicitors: Travers Smith, Braithwaite & Co (for the appellants); Solicitor, Ministry of Housing and Local Government; Solicitor, Royal Borough of Kensington and Chelsea.
N P Metcalfe esq Barrister.
Machent v Quinn
[1970] 2 All ER 255
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 20 APRIL 1970
Magistrates – Information – Theft – Information charging accused with stealing specified articles – Proof only that accused stole some of the articles specified – Whether necessary that prosecution should prove all articles specified in information to have been stolen – Theft Act 1968, s 9.
The respondent was charged on an information with entering shop premises as a trespasser and stealing certain specified articles valued at £199 odd, contrary to s 9a of the Theft Act 1968. The justices found on the respondent’s admission that he broke the shop window and stole some of the goods valued at £25. On the question whether, in order to secure a conviction, it was necessary for the prosecution to prove that all the articles contained in the information had been stolen,
Held – It was unnecessary that the prosecution should prove that all the articles mentioned in the information (or in the case of an indictment, in the indictment) had been stolen; but the sentence should relate only to the articles proved to have been stolen (see p 256 e and g, post).
Notes
For the Theft Act 1968, s 9, see 8 Halsbury’s Statutes (3rd Edn) 788.
Cases stated
This was an appeal by way of case stated from a decision of the justices for the city
Page 256 of [1970] 2 All ER 255
of Manchester sitting on 21 October 1969 dismissing an information against the respondent for entering premises as a trespasser and stealing goods therein contrary to s 9 of the Theft Act 1968. The facts are set out in the judgment of Lord Parker CJ.
D G Nowell for the appellant.
The respondent appeared in person.
20 April 1970. The following judgment was delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the city of Manchester who dismissed an information preferred by the appellant against the respondent. The information alleged that the respondent had, on a day in September 1969, entered certain premises as a trespasser and had stolen therein 35 shirts, nine pairs of trousers, four sweaters, two beach sets and two cardigans, valued at nearly £200. The justices found on the respondent’s own admission that he broke a window of the premises and stole from the window display four sweaters, together valued at £25. On that a submission was made that it was impossible for the justices to convict because the prosecution had not proved all the ingredients set out in the information, namely the rest of the garments, 35 shirts, nine pairs of trousers, two beach sets and two cardigans. The justices apparently without consulting their clerk, came to the conclusion that that submission was right, and that they had no power to convict the respondent of burglary and theft at all, even in regard to the part of the goods admitted to have been stolen.
It is quite clear that the justices here were entirely wrong. It has always been accepted that it is unnecessary that the prosecution should prove that all the articles mentioned in the information or indeed, in the case of an indictment, in the indictment, have been stolen. If proof is given that the accused has stolen any one of those articles it is sufficient. What happens is that, in the case of justices, the memorandum of conviction would be entered as ‘Convicted of burglary and stealing’—in this case— ‘four sweaters valued at £25’, and of course the sentence to be imposed is the sentence in relation to that. In my judgment, this case must go back to the justices with a direction to convict the respondent of the burglary and theft of four sweaters valued at £25, and it is then for the justices to impose the appropriate sentence.
BRIDGE J. I agree.
BEAN J. I also agree.
Appeal allowed. Case remitted.
Solicitors: D S Gandy, Manchester (for the appellant).
N P Metcalfe Esq Barrister.
Charrington v Simons & Co Ltd
[1970] 2 All ER 257
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 8, 9, 10, 11, 12, 15, 16, 17, 18, 19 DECEMBER 1969, 14, 15, 16 JANUARY, 9 FEBRUARY 1970
Injunction – Mandatory injunction – Discretion over grant of remedy – Breach of covenant in conveyance – Benefit of injunction to plaintiff – Detriment to defendant – Suspension of order to allow defendant to ameliorate breach.
In June 1966, the plaintiff, who owned apple orchards of Bramley and Cox’s Orange Pippins conveyed the Cox’s orchard to the defendant company, granting it easements and rights over his own land and reserving certain rights over the land conveyed, including a right of way over a track which served and separated the two orchards and connected them with the main road. The conveyance envisaged the possibility of the construction of a hard surface on the track. The defendant company convenanted: ‘Not to resurface the said track … so as to raise the level of the track above the level of the surrounding land … ’ In August 1967, a ten foot wide strip of concrete surface was constructed on the track by contractors to the defendant company which surface for much of its length was 4 inches (and in some places 12 inches or more) above the land adjoining the plaintiff’s Bramley orchard. Where the track passed near the plaintiff’s store building which was adjacent to the main road but also served by the track, the concrete surface was some inches above an existing concrete apron and loading bay of the store. The effect of the difference in levels was to interfere with the plaintiff’s use of his land and to hazard the operation of grass cutting and spraying equipment needed to cultivate the Bramley orchard. This equipment could be damaged by coming into contact with the raised concrete surface of the track, while the difference in level between the concrete track and apron alongside the store made deliveries by heavily laden lorries somewhat hazardous.
Held – (i) When considering the plaintiff’s claim for a mandatory injunction, the court had to consider whether in the circumstances as they existed after the breach of covenant, which was admitted by the defendant company, a mandatory order, and, if so, what kind of mandatory order would produce a fair result. The court had to take into account, amongst other relevant circumstances, the benefit which the order would confer on the plaintiff and the detriment which it would cause to the defendant company. The plaintiff should not be deprived of relief to which he was justly entitled merely because it would be disadvantageous to the defendant company, but he should not be permitted to insist on a form of relief which would confer no appreciable benefit on himself and would be materially detrimental to the defendant company (see p 261 h, post); accordingly,
(ii) a mandatory injunction would be granted requiring the defendant company to remove the concrete surface so far as it was above what had been the level of the land on the plaintiff’s side of the track immediately adjoining the Bramley orchard before any works on the track had begun (see p 263 c, post), but the operation of the injunction would be suspended for three years from the date of judgment to give the defendant company an opportunity, with the plaintiff’s consent, so far as that was necessary, to carry out ameliorative works in respect of the difference in level between the concrete surface and the plaintiff’s land, while leave would be given to the plaintiff to apply at any time for removal of the suspension and to the defendant company to apply for discharge of the injunction (see p 263 e, post); and
(iii) an injunction would be granted restraining the defendant company from resurfacing the track in any way so as to raise the level thereof above that of the adjoining land (see p 263 d, post).
Page 258 of [1970] 2 All ER 257
Notes
For mandatory injunctions generally, see 21 Halsbury’s Laws (3rd Edn) 361–364, paras 757–762, and for cases on the subject, see 28 Digest (Repl) 775–777, 272–292 and 779, 780, 303–319.
Cases referred to in judgment
Doherty v Allman (1878) 3 App Cas 709, 39 LT 129, 28 Digest (Repl) 740, 14.
Holland v Worley (1884) 26 Ch D 578, 54 LJCh 268, 50 LT 526, 49 JP 7, 28 Digest (Repl) 792, 412.
Shelfer v City of London Electric Lighting Co, Meux’s Brewery Co v City of London Electric Lighting Co [1895] 1 Ch 287, [1891–94] All ER Rep 838, 64 LJCh 216, 72 LT 34, 28 Digest (Repl) 792, 418.
Smith v Smith (1875) LR 20 Eq 500, 44 LJCh 630, 32 LT 787, 28 Digest (Repl) 772, 241.
Cases also cited
A-G v Mid Kent Ry Co and South East Ry Co (1867) 3 Ch App 100.
British Transport Commission v Gourley [1955] 3 All ER 796, [1956] AC 185.
Manners (Lord) v Johnson (1875) 1 Ch D 673.
Sefton (Earl) v Tophams Ltd and Capital and Counties Property Co Ltd [1964] 3 All ER 876, [1964] 1 WLR 1408.
Sharp v Harrison [1922] 1 Ch 502.
Action
The plaintiff, Clive Reginald Charrington, sought, inter alia, a mandatory injunction requiring the defendant company to remedy its breach of a covenant contained in a deed of conveyance made between the parties dated 3 June 1966. By that deed the plaintiff, after negotiations with a Mr Webb, the plaintiff’s neighbour, who was also employed by the defendant company, conveyed to the defendant company approximately 130 acres, which included an orchard of Cox’s Orange Pippins, out of his total holding of 212 acres. The conveyance also included a track which provided access from the main road to the land of both parties. The plaintiff retained an orchard of Bramley apple trees which bordered the length of the track, reserving rights to himself over the track and the defendant company’s land. The conveyance included the grant of:
‘All such rights and easements and quasi-rights and quasi-easements as have hitherto been used and enjoyed in connection with the property hereby transferred over the [plaintiff’s] adjoining property as if the said properties had hitherto belonged to different owners and the said rights and easements and quasi-rights and quasi-easements had been acquired by prescription … ’
The plaintiff reserved to himself:
‘A right of way with or without vehicles over the track shown … on the said plan the [plaintiff] contributing a half share of the cost of the maintenance and repair of such track but so that the [plaintiff] shall be under no obligation to make any contribution whatsoever towards the cost of resurfacing the said track or towards its maintenance after it shall have been resurfaced … [and] All such similar rights and easements and quasi-rights and quasi-easements over the property hereby transferred for the benefit of the said adjoining property retained by the [plaintiff].’
The defendant company covenanted with the plaintiff:
‘Not to resurface the said track … so as to raise the level of the track above the level of the surrounding land.’
Page 259 of [1970] 2 All ER 257
In January 1967, the defendant company informed the plaintiff through Mr Webb that it proposed to construct a road along the path of the track as soon as the weather permitted. The defendant company commenced construction of the concrete road during August 1967 and by 22 August some 64 yards in length had been completed. The plaintiff observed that it had been constructed above the level of the surrounding land in breach of the covenant and, after telephoning the defendant company and Mr Webb, who was managing the defendant company’s property, wrote in the following terms to Mr Simons who was managing director of the defendant company:
‘This is to confirm our telephone conversation this afternoon regarding breach of covenant. I have just noticed that the roadway you are constructing is a good deal above the surrounding land and this will of course make our cultivations, spraying, etc., impossible to carry out … the covenant states, “Not to resurface the said track … so as to raise the level of the track above the level of the surrounding land“. I would appreciate your putting this matter right as soon as possible’.
On 23 August, the plaintiff’s solicitors wrote to the defendant company’s solicitors as follows:
‘This covenant is of the utmost importance to [the plaintiff] and while it would be a matter of regret to [the plaintiff] if this could not be resolved on a friendly basis, we are instructed to make it clear that Proceedings for an Injunction and Damages will have to be instituted tomorrow unless we can have an assurance from you on the telephone by 12 o’clock mid-day (to be confirmed in writing) that the works so far carried out in breach of the covenant will be reinstated so as to comply with the covenant and the remainder of the work carried out in accordance with the covenant.’
No assurance being received, the writ was taken out on 24 August 1967. The concrete road was finished by 29 or 30 August and was for a great part 4 inches (and in a few places 12 inches or more) above the adjoining land on the plaintiff’s side of the road. The judge found: (1) that the concrete road in its present state effectively prevented the plaintiff in the course of his cultivation of his Bramley orchard from using the area which the road occupied in the way in which he used it before the road was constructed both for mowing and spraying; (2) that this interference resulted in a state of affairs considerably less convenient for the plaintiff than that which previously existed; and (3) that the existing state of affairs occasioned a substantial risk of damage to the plaintiff’s mowing machine, and some but not a great risk to the plaintiff’s spraying machine. There was a present risk that his operations might not be as successful as they could have been before the concrete road was laid.
The plaintiff was reassured by the contractor’s foreman (inaccurately as it proved) during the construction of the road that in the vicinity of the plaintiff’s store, and its loading bay or apron, the level of the surface of the concrete road was to be approximately the same as the level of the adjoining ground. This might have had some influence on the plaintiff’s mind when deciding against seeking interlocutory relief. As regards access to the store, Buckley J said:
‘I reach the conclusion that in the present state of affairs it is possible, but less easy than it used to be, to get a lorry, and particularly a heavily laden one, on to the apron, and that doing so would impose some strain on the vehicle which might cause damage to it.’
P R Oliver QC and P J Millett for the plaintiff.
S W Templeman QC and J D Waite for the defendant company.
Cur adv vult
Page 260 of [1970] 2 All ER 257
9 February 1970. The following judgment was delivered.
BUCKLEY J read the following judgment in which he stated the facts, and continued: Counsel for the defendant company have conceded, as in my opinion they were bound to do, that the concrete road constitutes a breach of the covenant contained in the conveyance of 3 June 1966 not to resurface the track so as to raise its level above the level of the surrounding land. It also, in my judgment, amounts to a derogation from the grant by the defendant company implicit in the reservation contained in that conveyance of all such quasi-rights and quasi-easements over the land conveyed as had hitherto been used and enjoyed in connection with the property retained by the plaintiff, although the case has not been put on this ground. One of the quasi-easements which the plaintiff had enjoyed over the track before the conveyance to the defendant company had been the use of it in the course of his cultivation, which in the present state of the track has been rendered impracticable. I have not been satisfied that shoulders of the kind and dimensions which the contractors proposed to construct would have overcome this. The plaintiff, however, seeks relief not on this latter ground but on the ground of breach of covenant, and has urged a claim to be entitled to relief in the form of a mandatory injunction requiring the defendant company to remove the concrete resurfacing. That the plaintiff is entitled to some kind of relief is, in my judgment, clear. The question is, of what kind.
I have been referred to the celebrated dictum of Lord Cairns LC in Doherty v Allman ((1878) 3 App Cas 709 at 720) to the effect that if parties for valuable consideration and with their eyes open contract that a thing shall not be done, all that a court of equity will do is, by way of specific performance by the court of that negative bargain, to ensure by injunction that that thing shall not be done. On the other hand, it has been urged on behalf of the defendant company that, in the present case, although there has been an admitted breach of covenant, it can be rendered innocuous, that the defendant company is prepared to do this at its own expense, and that a mandatory injunction would be oppressive to the defendants.
Counsel for the defendant company referred me to Shelfer v City of London Electric Lighting Co, where the question was whether an injunction or damages under the Chancery Amendment Act 1858 was the appropriate form of remedy for a continuing nuisance by noise and vibration. A L Smith LJ said ([1895] 1 Ch at 322, 323, [1891–94] All ER Rep at 847, 848):
‘Many Judges have stated, and I emphatically agree with them, that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be. In such cases the well-known rule is not to accede to the application, but to grant the injunction sought, for the plaintiff’s legal right has been invaded, and he is prima facie entitled to an injunction. There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorized by this section. In any instance in which a case for an injunction has been made out, if the plaintiff by his acts or laches has disentitled himself to an injunction the Court may award damages in its place. So again, whether the case be for a mandatory injunction or to restrain a continuing nuisance, the appropriate remedy may be damages in lieu of an injunction, assuming a case for an injunction to be made out. In my opinion, it may be stated as a good working rule that—(1.) If the injury to the plaintiff’s legal rights is small, (2.) And is one which is capable of being estimated in money, (3.) And is one which can be adequately compensated by a small money payment, (4.) And the case is one in which it would be oppressive to the defendant to grant
Page 261 of [1970] 2 All ER 257
an injunction:—then damages in substitution for an injunction may be given. There may also be cases in which, though the four above-mentioned requirements exist, the defendant by his conduct, as, for instance, hurrying up his buildings so as if possible to avoid an injunction, or otherwise acting with a reckless disregard to the plaintiff’s rights, has disentitled himself from asking that damages may be assessed in substitution for an injunction.’
In that case, the court granted an injunction restraining the nuisance. It was not a case of a mandatory injunction, and, as counsel for the defendant company stressed, the offence could not be continued and at the same time rendered innocuous; if the defendant company ceased to commit a nuisance, it ceased to offend; if it continued to commit a nuisance, it could not have rendered the offence innocuous.
Counsel for the defendant company also relied on Holland v Worley, an ancient lights case, in which Pearson J, after citing part of the judgment of Sir George Jessel MR in Smith v Smith ((1875) LR 20 Eq 500 at 505), said ((1884) 26 Ch D at 587):
‘But I do not think that I shall be misinterpreting the Master of the Rolls, if I say that his opinion (in which I heartily concur) seems to me to be this, that, if the defendant is doing an act which will render the plaintiff’s property absolutely useless to him unless it is stopped, in such a case, inasmuch as the only compensation which could be given to the plaintiff would be to compel the defendant to purchase his property out and out, the Court will not, in the exercise of the discretion given it by Lord Cairns’ Acta, compel the plaintiff to sell his property to the defendant. But in other cases, where the injury to the plaintiff would be less serious, where the Court considers that the property may still remain the plaintiff’s and be substantially useful to him, as it was before, and the injury, therefore, is one of a nature that can (without taking away the plaintiff’s property from him) be compensated by money, then the Court, if it thinks right, may exercise the discretion given it by the Act.’
The question in the present case is not whether damages should be awarded in lieu of an injunction or an injunction granted. Neither side has suggested that damages, apart from special damages which I will deal with later, would be an appropriate remedy here. It is whether I should grant a mandatory injunction to remove the concrete or put the defendant company on terms, either in the form of undertakings or a mandatory order, to carry out some other work to make the road innocuous to the plaintiff. Different considerations may, I think, arise in a case where the court has to consider whether a defendant should be compelled by a mandatory order to remedy a breach of contract which he has committed from those which would arise if the question were whether the court should restrain a threatened breach of contract. To the latter case the principle enunciated by Lord Cairns LC in Doherty v Allman ((1878) 3 App Cas at 720) may apply in its full rigour. Where a mandatory order is sought, the court must consider whether in the circumstances as they exist after the breach a mandatory order, and, if so, what kind of mandatory order, will produce a fair result. In this connection, the court must, in my judgment, take into consideration amongst other relevant circumstances the benefit which the order will confer on the plaintiff and the detriment which it will cause the defendants. A plaintiff should not, of course, be deprived of relief to which he is justly entitled merely because it will be disadvantageous to the defendant. On the other hand, he should not be permitted to insist on a form of relief which will confer no appreciable benefit on himself and will be materially detrimental to the defendant.
There is no doubt that the covenant here was entered into for valuable consideration and that the parties’ eyes were open. The plaintiff would not have parted
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with the track without some such protection and Mr Simons understood this. There is equally no doubt that the defendant company, operating through Mr Webb, went on with the work after 22 August 1967 in the knowledge that the covenant existed and that the plaintiff was asserting that the road was in breach of it. It seems that neither Mr Webb nor Mr Simons sought professional legal advice whether the concrete resurfacing would constitute a breach of the covenant. No one else did so. Had such advice been sought the answer must have been that the resurfacing, at least, might be held to be a breach of the covenant. The work was continued at the defendant company’s peril in this respect. This was, I think, mainly due to Mr Webb’s sanguine self-confidence. He seems to have thought that, because in his view the resurfacing of the track could do the plaintiff no harm, there was nothing about which the plaintiff could reasonably complain; but the plaintiff was entitled to insist on compliance with the covenant, and it is now admitted that there was a breach of it. The evidence does not, I think, establish that Mr Webb pressed on with the work in order to complete it before the plaintiff could obtain relief. He allowed the work to continue because, obtusely, he did not think that the plaintiff had any reasonable ground for complaint.
The plaintiff was aware from the contractors that a shoulder was intended along his side of the track. He had, so far as I can see, no valid ground to object to this so far as this work was to be carried out on the defendant company’s land, except maybe as an incident to the breach of covenant involved in the making of the concrete road. He did, however, object, in consequence of which some part or so much of the shoulder as had already been constructed was removed and no more was constructed. On the other hand, I think that the evidence establishes that, if the shoulder had been constructed along the whole length of the plaintiff’s side of the track, much of this work would have encroached on the plaintiff’s land and would have constituted a trespass.
It is said that the defendant company has at all material times been willing to carry out at its own expense such works as would render the breach innocuous to the plaintiff. I accept that it would be possible to carry out such works, assuming that the plaintiff is agreeable to some part of them being carried out on his land, and that the defendant company has at all material times been willing to do so at its own expense. It is hard to understand why this was never communicated to the plaintiff. In the defence as delivered on 23 November 1967, it was alleged that, at or about the time of the concreting, the defendant company offered at its own expense to build a ramp near the store leading from the plaintiff’s property on to the surface of the concrete, ie of the concrete road. This allegation was not established in the evidence. No other offer of this kind was ever made to the plaintiff. On the other hand, the plaintiff made no effort to investigate the possibility of any accommodation along these lines after delivery of the defence.
With these considerations in mind, the defendant company’s conduct does not appear in a meritorious light. On the other hand, it cannot, I think, be said that the defendant company has snatched an unfair advantage or otherwise has acted dishonourably. In my opinion, the evidence establishes that, if the level of the land on the plaintiff’s side of the track were raised by a gradual incline to at least the level of the concrete road at a slope not steeper than 1 in 12, constructed of soil with a suitable substratum of hardcore in the low places, and this was properly consolidated and grassed, the road would no longer cause the plaintiff any inconvenience and the plaintiff would be able to conduct the cultivation of his Bramley orchard as he was previously accustomed to do without any detriment to his orchard or any of the trees in it. The evidence also satisfies me that, if a concrete shoulder or apron were added on either side of the concrete road where it adjoins the loading apron at the plaintiff’s store measuring 20 feet X 12 feet on the one side and 20 feet X 14 feet on the other side, or thereabouts, the plaintiff’s access to store A would be fully as good as it was before the concrete road was made without any detriment
Page 263 of [1970] 2 All ER 257
to the plaintiff’s orchard. Such works as these, however, would clearly encroach on the plaintiff’s land. I could not, therefore, order the defendant company to carry them out without the plaintiff’s consent.
If I were to grant a mandatory injunction requiring the defendant company to remove the concrete, it is obvious that this would occasion considerable expense which I would expect to exceed the cost of the ameliorative works to which I have just been referring, but I have no evidence enabling me to compare the two. Removal of the concrete would leave the defendant company without a viable access to their property including their storage building at the southerly end of the track. They would as a practical matter be bound to reconstruct the track in some other way. Such an order would cause the defendant company not only substantial expense but also grave inconvenience.
In these circumstances I propose to adopt a course of perhaps a somewhat unusual kind. I shall grant a mandatory injunction requiring the defendant company to remove the concrete road referred to in the statement of claim so far as the same is above what was the level of the land on the plaintiff’s side of the track immediately adjoining the Bramley orchard before any work on the track began, and I shall grant an injunction restraining the defendant company from resurfacing the track referred to in the statement of claim or any part or parts thereof so as to raise the level thereof above the aforesaid level of the adjoining land. I shall suspend the operation of the mandatory injunction for a period of three years from today’s date to give the defendant company an opportunity, with the plaintiff’s consent so far as necessary, to carry out such ameliorative works as I have mentioned, and I shall give both parties liberty to apply at any time in the plaintiff’s case for a removal in whole or in part of the suspension, and in the defendant company’s case for a discharge or modification in whole or in part of the mandatory injunction. Should the plaintiff refuse to agree to any of the works to which his agreement is necessary, he would be unlikely, so far as I am concerned, to have a favourable hearing if he sought to have the suspension removed while his refusal continued, and his attitude would be taken into consideration on any application by the defendant company to have the injunctions or either of them discharged or varied. On the other hand, should the defendant company fail to carry out the ameliorative works adequately or at all within a reasonable time, or should such works, contrary to my confident expectations, fail to afford a satisfactory practical solution, these matters would be taken into account on any application by the plaintiff for a removal of the suspension, and likewise on any application by the defendant company.
[His Lordship dealt with the question of special damage claimed for the loss of business sustained by the plaintiff due to the interference with the access to the plaintiff’s store, and awarded damages for losses sustained by the plaintiff in the 1967–68 season, but not for the 1968–69 or 1969–70 seasons as the plaintiff by remedial works carried out on his own land could have mitigated the loss sustained.]
Injunctions granted.
Solicitors: Thomson, Snell & Passmore, Tonbridge (for the plaintiff); Ernest W Long & Co (for the defendant company).
Richard J Soper Esq Barrister.
Sinfield and others v London Transport Executive
[1970] 2 All ER 264
Categories: TRANSPORT; Road: LOCAL GOVERNMENT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND CROSS LJJ
Hearing Date(s): 17, 18, 24 MARCH 1970
London Transport Executive – Transfer to executive of rights of London Passenger Transport Board – Existing right of board to make alterations to certain bus services – Right of board not subject to any fetter – Whether right after transfer to executive subject to general statutory provisions requiring executive to consult with local authorities – Transport (London) Act 1969, ss 16(1), 23(3).
London Transport Executive – Duty to consult with local authorities before altering bus services – Whether duty to consult only in relation to traffic considerations – Whether duty extending also to convenience of public transport passengers – Transport (London) Act 1969, s 23(3).
In November 1969, the London Passenger Transport Board applied to the Metropolitan Traffic Commissioner under the Road Traffic Act 1960, s 141a, for route approval to alter and withdraw certain services. On 24 December 1969, such approval was given and thereupon the board became entitled in law, without any fetter, to make the proposed alterations. By the Transport (London) Act 1969, the London Transport Executive came into being on 1 January 1970, the vesting date, when the board ceased to exist, and by s 16(1)b ‘all property, rights and liabilities’ of the board were transferred to the executive. By s 23(3)c of the 1969 Act the executive was required in the case of a bus service operated before 1 January 1970 to consult with, inter alia, any borough council within whose area the bus service passed before the executive varied the service in any of certain respects. On the question whether the duty to consult the borough council applied to the alterations which the board had become absolutely entitled to make before the transfer of its rights to the executive,
Held – The board had become entitled, on 24 December 1969, to make the alterations and that entitlement was transferred to the executive by virtue of s 16(1), being a right within the meaning of that subsection, and the right was not in the hands of the executive subjected by s 23(3) to the requirements of consultation (see p 267 b, p 268 j and p 270 f, post).
Smith v London Transport Executive [1951] 1 All ER 667 applied.
Per Curiam. The variation or withdrawal of a bus service in relation to the convenience of the travelling public was not a matter for consultation under s 23(3)
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because the section was concerned only with pure traffic considerations; provision for matters such as public convenience was provided elsewhere in the Act (see p 268 f and p 270 c and f, post).
Notes
For the Road Traffic Act 1960, s 141, see 40 Halsbury’s Statutes (2nd Edn) 836.
For the Transport (London) Act 1969, ss 16(1), 23(3) see Service to Halsbury’s Statutes (3rd Edn).
Case referred to in judgment
Smith v London Transport Executive [1951] 1 All ER 667, [1951] AC 555, 115 JP 213, 45 Digest (Repl) 3, 1.
Appeal
This was an appeal by the fifth plaintiff, Camden Borough Council (the other four plaintiffs having discontinued), from the dismissal by Plowman J of their interlocutory motion for a mandatory injunction that the defendant, London Transport Executive, reinstate withdrawn bus routes and varied services which passed through the council’s borough. The facts are set out in the judgment of Russell LJ.
Andrew Rankin QC and Gerald Levy for the council.
H E Francis QC and D A Thomas for London Transport Executive.
Cur adv vult
24 March 1970. The following judgments were delivered.
RUSSELL LJ. On 24 January 1970, the London Transport Executive withdrew bus services 163 and 239, and varied in relevant respects services 63, 134 and 214. Before doing so, the executive had not had any consultation with the Camden Borough Council through whose borough these routes passed. The council, having joined as a co-plaintiff with the individual original plaintiffs (who have now discontinued), moved for an interlocutory order against the executive to reinstate the withdrawn services and reintroduce the varied services without variations, asserting that the executive was required by statute (the Transport (London) Act 1969) to consult with (inter alios) the council before taking such action, and had acted illegally. Plowman J held that in any event it was not a proper case for a mandatory interlocutory injunction, and expressed tentative obiter views on matters of construction. The council appeals, and both the council and the executive invite us to treat the hearing of the appeal as the trial of the action, and this we are prepared to do.
Prior to 1 January 1970, a body called the London Passenger Transport Board was the body empowered by statute (I speak in general terms) to run the ordinary London omnibuses. It was not required for this purpose to have any road service licence; but in order to operate a service over any route it was necessary to obtain the approval of the Metropolitan Traffic Commissioner. I refer to parts of s 141 of the Road Traffic Act 1960. Under sub-s (1), after saying that within the London special area a road service licence was not required by the British Transport Commission or an executive, which meant in that case the London Passenger Transport Board, within the London special area, it went on to provide:
‘… but it shall not be lawful for the Commission or an Executive to use a vehicle as a stage carriage or express carriage on a road within the London special area except on a route approved by the traffic commissioner for the Metropolitan Traffic Area (in this section referred to as the “metropolitan commissioner”).
‘(2) The metropolitan commissioner, in approving a route, may define it by reference to the streets or parts of streets which may be traversed and to the
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terminal points, if such points are within the London special area, and may attach to his approval conditions for securing that—(a) no vehicles, except vehicles of such class or description, or vehicles used for such purposes, as may be specified in the condition, shall be used on that route; (b) passengers shall not be taken up or shall not be set down except at or between specified points, or shall not be taken up or shall not be set down between specified points; and (c) vehicles on reaching the end of the approved route shall turn at such places, or by using such streets or parts of streets, as may be specified; …
‘(3) The metropolitan commissioner before approving a route, or a part of a route, which lies within the metropolitan police district, or within the City of London, shall consult with the commissioner of police.’
The London Passenger Transport Board, as a consequence of the impact of the new Victoria underground line on the pattern of public transport passenger travel, decided in 1969 that it would adopt the alterations to the bus services of which complaint is now made, subject of course to the approval of the changed routes by the traffic commissioner. Such alterations involve of course a great deal of preliminary study, planning and arrangements, including extensive changes in duty rosters, reorganisation at various garages, and discussions with trade unions. Time is also required after approval by the traffic commissioner to give adequate advance notice to the travelling public.
In November 1969, application for route approval was made by the board to the traffic commissioner. On 24th December 1969, the necessary approval was given without condition. At that moment the board became entitled in law without any fetter to make the alterations to the bus services proposed; only the practical need to give adequate warning to the public stood in the way, a factor which no doubt loomed large in the board’s original intention to make the alterations on 24 January 1970, a date that was adhered to by the executive.
By the Transport (London) Act 1969, the executive was brought into being, and on it was conferred with effect from the vesting day (1 January 1970) the general power and duty to run the London bus services. I speak in general terms but for present purposes with, I hope, sufficient accuracy. The board ceased to exist. Section 141 of the 1960 Act requiring route approval no longer operated. Section 23(3) of the 1969 Act, however, required in certain circumstances consultations. It enacts that where it is proposed to provide a bus service in London which has not been provided continuously since immediately before 1 January 1970, then before deciding on the route of that service, or a terminal point, or a pick-up or set-down point, or a point at which or a street by the use of which buses may turn round at a terminal point, the executive shall consult with certain bodies or persons. They are (a) the Greater London Council (so far as the service is to be provided in Greater London), (b) the commissioner or commissioners of police concerned, (c) any borough council within whose area the route, point, place or street is situated. The section imposes in similar terms an obligation to consult where it is proposed to vary a London bus service which is being operated and has continuously since before 1 January 1970, been operated. (We were not shown any provision for consultation on a proposal to vary a bus service newly provided since 1 January 1970, but the case does not touch that point.)
The contention of the council is that this section imposed on the executive an obligation to consult with the council before deciding on and therefore before introducing the alterations to the bus services already mentioned, and, as is accepted, there was no consultation and the proposed variations relevantly affect the Camden area and the proposed withdrawals are of services passing through that area.
In my judgment, there is a short answer to the council’s contention; and it is to be found in s 16(1), of the 1969 Act, which is in the following terms:
‘Subject to the provisions of this Act, on the appointed day for the purposes
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of this section (in this Act referred to as “the vesting date”) all property, rights and liabilities of the London Board shall be transferred to, and by virtue of this Act vest in, the Executive.’
I have already referred to the fact that the board became on 24 December 1969 entitled by statute to make the alteration to the bus services now complained of. It seems to me that the board had the right to do this, and I see no reason to construe ‘rights’ in s 16(1) in some restricted sense which excludes this particular right, or to hold that the transferred right in the hands of the executive is subjected by s 23(3) to the requirements of consultation. Any other view would, it seems to me, be contrary to the plain and ordinary meaning of the word ‘rights’. Moreover, the view that s 23(3), in a statute enacted in June 1969 requires consultation before decision on matters decided on and relevantly approved before 1 January 1970 would have had a most undesirable tendency to produce a ‘mark time’ attitude in the board. The same result may be achievable by a more general consideration of s 23(3) alone. It speaks of decisions not being made without consultation, and it is argued that it cannot apply to decisions made before 1 January 1970, which have become (by approval) unqualified, in the context of a statute by which in effect the undertaking of the board is intended to be taken over as a going concern by the executive. I think that there is legal merit in that argument, but need not rely on it. My view of the scope of s 16(1) is much fortified by the views expressed in Smith v London Transport Executive, where the defendant was a different and earlier entity with the same name which replaced another different London Passenger Transport Board. It seems to me to follow a fortiori from the views expressed in that case that the ability of the board in this case to introduce the alterations to bus services now complained of would pass to the executive as one of the ‘rights’ of the board under s 16(1). Plowman J expressed obiter a view of the applicability of s 16(1) contrary to my view, but Smith v London Transport Executive was not cited to him.
What I have said suffices to produce the result that this action should be dismissed. But we were invited to express a view, albeit obiter, on the scope of s 23(3) for the guidance of the executive and of relevant councils. The point arose in this manner: the objection of the original plaintiffs and of the council to the alterations in the services was and is nothing to do with the proper regulation of vehicular traffic in the streets— referred to in argument as pure traffic considerations. The complaints are that they do not provide, or do diminish, a proper service to those members of the public who wish to travel by public transport. They are objections founded not on traffic considerations but on convenience to public transport passengers. The executive contended that such latter consideration was not within the scope of the section, that the only complaint of the council was related to that consideration and that therefore the council had no standing to bring this action which, if merely grounded in ultra vires, required the intervention, at least by relation, of the Attorney General.
In my opinion, the executive’s contention is sound. It is first to be observed that the 1969 Act contains machinery in s 14 through which complaints such as are now made may through a users’ consultative body reach, in the form of recommendations, the Greater London Council, which may give directions to the executive. Provision was made in earlier legislation, we were told, for this kind of complaint to be ventilated, and is to be contrasted with s 141 of the 1960 Act which was concerned with pure traffic considerations. The coincidence between matters mentioned in s 141 of the 1960 Act and in s 23(3) of the 1969 Act suggests that the latter is equally dealing with pure traffic considerations. I refer to the route, the points, the place and the street. It was argued that the introduction of consultation with borough councils— which are concerned with the general welfare of the inhabitants— must be because a wider field than pure traffic consideration is envisaged by s 23(3). Why,
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it was asked, bring them in when the relevant police commissioner can take care of the traffic consideration? But then it might equally be said why bring the traffic commissioner into s 141 of the 1960 Act on top of the police commissioner? Moreover, the borough councils are much concerned in pure traffic considerations. They are highway authorities; they control parking and parking meters; they are concerned with traffic safety and traffic flow and in that connection with the route proposed and the positioning of bus stops. An argument for the wider construction of the subsection was based on the concluding provision that the executive may consult ‘… with any other person whom it appears proper to the Executive for them to consult’: but there may well be such persons to be properly consulted on pure traffic considerations; for example, the proprietors of a large store or other premises on the route with delivery problems.
But the point which I find conclusive in this matter is that in my opinion the subsection does not require consultation before withdrawing a bus service. Withdrawal of a bus service is the act most likely to give rise to complaints of inconvenience or expense to the travelling public— indeed, the principal outcry in the present case has been caused by the withdrawal of two services— and I find it inconceivable that, if Parliament had intended by the subsection complaints of a diminished or less convenient service to the travelling public to be the subject of consultations, withdrawal of a service would not have been brought in, and indeed in terms brought in. Equally it is to be observed that withdrawal of a service is the one act that cannot possibly give rise to traffic problems or involve in its proposal traffic considerations. It was argued that withdrawal was within the subsection as being a 100 per cent variation; and reliance was placed on the words ‘any variation affecting the route’. But the language of the subsection is plainly considering a bus service which, when varied, will continue as a bus service. The word ‘affecting’ is attributable to the fact that reference to the route is followed by reference to the terminal points, etc, etc.
In my opinion, the impact of a proposed provision or variation or withdrawal of a bus service on the convenience of the public travelling thereby is not a matter for consultation under s 23(3). Provision is made elsewhere for such matters. Section 5(1) lays on the executive the general duty to secure, in accordance with principles from time to time laid down or approved by the Greater London Council, with due regard to the efficiency, etc, to provide or secure the provision of such public passenger transport services as best meet the needs for the time being of Greater London; though s 5(6) provides that that requirement does not impose any duty or liability enforceable by proceedings before any court. It is through the users’ consultative body under s 14 that such grievances as may exist must be aired under the Act.
As I have said, these expressions of opinion on the scope of the proper subject-matter of consultation under s 23(3) are obiter dicta, and ordinarily I would have hesitated to express any view for that reason. But, having been invited by the parties to do so, and this aspect of the case having been fully argued, and having come to a clear conclusion, I do so in the hope that the expression of opinion will serve a useful purpose.
In the result, the action fails and I would dismiss the appeal.
SACHS LJ. I agree that on 24 December 1969 the London Passenger Transport Board on receiving the approval of the Metropolitan Traffic Commissioner became fully entitled to make the relevant alterations in the bus service; that such entitlement was a ‘right’ within the meaning of s 16(1) of the Transport (London) Act 1969; and that this right vested on 1 January 1970 in the London Transport Executive. Any other interpretation of s 16(1) would incidentally have led to a blight on the activities of the old board in that it would in many cases not have been practicable to go ahead in any normal way between 25 July 1969 (when the 1969 Act received the royal assent) and 1 January 1970 with proposals for alterations in
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bus routes. On this short ground the executive are thus entitled to have the appeal dismissed— contrary to the obiter view expressed on this point at first instance.
I would only add that I reject the submission put forward by counsel for the executive that proposals of the old board which did not obtain approval under s 141 of the Road Traffic Act 1960 by 1 January 1970 are not affected by s 23(3) of the 1969 Act.
I now turn to the point on which we were asked by both counsel to express an obiter view. My considerable hesitation in so doing is increased by being conscious that the Greater London Council is not represented, nor is the City of Westminster, nor is any borough council affected other than the plaintiff council. Having, however, been persuaded to join my brethren in conforming to the request I do so rather, in the hope that, for reasons which will appear later, it may not have too settling an effect.
It is apposite first to mention that counsel for the executive emphasised not once but several times that whatever be the true construction of s 23(3) and whatever order this court might make, it was in the end the executive and no one else who would make the decision. If that was intended to intimate that the executive merely looked on consultations as being an opportunity for those consulted to make ineffective representations, it would represent an approach that, to put it mildly, cannot be supported. Consultations can be of very real value in enabling points of view to be put forward which can be met by modifications of a scheme and sometimes even by its withdrawal. I start accordingly from the viewpoint that any right to be consulted is something that is indeed valuable and should be implemented by giving those who have the right an opportunity to be heard at the formative stage of proposals before the mind of the executive becomes unduly fixed.
Such a right to be consulted is something which one would have expected to find in the provisions of the 1969 Act so that the Greater London Council and the other councils would have an opportunity to make appropriate representations before changes in bus services were brought into operation. Moreover, it would seem essential to them that such consultation should be on a broad basis so as to enable them to deal with any important question that touched either their interests or those who lived in their area.
It follows that only with reluctance would one so interpret the provisions of s 23(3) as to confine any consultation to what have been described as ‘traffic conditions’, ie the flow of traffic, when these are in the main a matter for the Commissioner of Police. In that event, there is no provision whatsoever for consultation with anyone concerned with the interests of users whilst fresh proposals are at a formative stage. The voice of such users will in practice only be heard by virtue of s 14 when the changes have come into operation— and everyone familiar with administrative process knows how much more difficult it is to get a decision reversed or modified once it has come into effect.
A no less important effect of the interpretation thus put forward on behalf of the executive is that the councils would literally have no right at all to be heard on matters which may concern their own vital interests. The provision of or failure to provide proper transport facilities may seriously affect a council in more than one way. For instance, a new route may render noisy a previously quiet residential district and reduce the rateable values there; lack of transport can affect the ability of a borough to attract trade or commerce; indeed, transport facilities or the lack of them can do much to change the character of a neighbourhood. It seems clearly right and accordance with the normal policy of the legislature in such matters that councils should be able to make heard the various interests of themselves in their corporate capacities and of their ratepayers. Of the latter only those who fall within the ambit of s 14 can at best complain when it is too late to avoid the tendency of those in a big organisation to sit comfortably back on a fait accompli and point to the undesirability of another change— rehearsing (as was done in the present case) a catalogue of administrative difficulties.
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There are, moreover, weighty arguments to be put forward in favour of the broader interpretation on the basis of the wording of s 23 itself. The words ‘any variation affecting, the route’ are wide; some words (perhaps ‘the service’) may well have been omitted in error from the curiously ungrammatical phraseology just before the comma that precedes ‘the route’; the words imposing a duty to consult are nowhere preceded or followed by some limiting phrase such as ‘in so far as traffic conditions are concerned’; there is the reference to ‘any other person’ to which Russell LJ has referred; and above all there is the first impression of width of consultation that the section must give to layman, legislator and lawyer alike.
It is thus with real reluctance that I feel impelled towards the narrower view of the relevant section, for which Russell LJ has cited the reasons. Most cogent of the points that emerged was the concession of counsel for the council that reductions in the frequency of services do not come within s 23, coupled with the fact that withdrawals of services are not mentioned in it. (But for that coupling it would at least be arguable that a ‘variation’ would include in the context of such a section a ‘withdrawal’.) Moreover, there is the fact that the general effect of s 23 of the 1969 Act is in essence so very much the same as that of s 141 of the 1960 Act, which was solely concerned with traffic conditions.
Accordingly, if I had to express a final view on s 23(3), despite having considerable difficulty in assuming that the legislature intended to give only such a limited right of consultation to the council, I would feel even greater difficulty in differing from the more confident view of my brethren on a matter of strict construction. In thus dealing obiter with this point, I have in mind that one of two effects may follow. The Greater London Council or one of the other councils may, if it is thought fit, seek the application of the leapfrog procedure so as to obtain a decision of the House of Lords in some other proceeding. Alternatively, it may perhaps seem apposite for them to seek an amendment to the 1969 Act.
I agree that the appeal must be dismissed.
CROSS LJ. I agree with the judgment of Russell LJ and have nothing to add.
Appeal dismissed.
Solicitors: B H Wilson (for the council); G S M Birch (for London Transport Executive).
Rosalie Long Barrister.
R v National Insurance Commissioner, ex parte Mellors
[1970] 2 All ER 270
Categories: SOCIAL SECURITY
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND DONALDSON JJ
Hearing Date(s): 3, 4, 24 MARCH 1970
Industrial injury – Disablement benefit – Special hardship allowance – Calculation of amount – Standard of remuneration – Pre-accident occupation and post-accident occupation – Whether comparison of earnings on total amounts or on hourly basis – National Insurance (Industrial Injuries) Act 1965, s 14(6).
The applicant, a chargeman ripper in the coal mining industry, was injured at work and as a result had to seek other employment (as a driver). He received disablement benefit and was entitled also to special hardship allowance under s 14(6)a of the National Insurance (Industrial Injuries) Act 1965. In the relevant period, a chargeman ripper was likely to earn £28 1s 9d per week for five shifts involving 36 1/4 hours’ work whereas the applicant’s weekly earnings averaged £26 18s 2d for eight or nine
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shifts totalling more than 66 hours per week. On the question whether, in assessing the quantum of the applicant’s special hardship allowance, his post-accident earnings should be scaled down to give a notional figure for earnings by reference to the hours actually worked in the pre-accident employment,
Held – (Donaldson J dissenting) the quantum of the special hardship allowance was properly determined by comparison between the pay packets which the applicant was capable of earning without regard to the hours per week during which he was employed.
R v Industrial Injuries Comr, ex parte Humphreys [1965] 3 All ER 885 distinguished.
Notes
For special hardship allowance where beneficiary in receipt of disablement benefit, see 27 Halsbury’s Laws (3rd Edn) 828–830, para 1459.
For the National Insurance (Industrial Injuries) Act 1965, s 14, see 45 Halsbury’s Statutes (2nd Edn) 1106.
Case referred to in judgments
R v Industrial Injuries Comr, ex parte Humphreys [1965] 3 All ER 885, [1966] 2 QB 1, [1966] 2 WLR 63, Digest (Cont Vol B) 541, 3596a.
Motion for certiorari
This was an application by way of motion by Samson Mellors for an order of certiorari to bring up and quash Decision R (I) 7/69 made by a tribunal of commissioners pursuant to the provisions of the National Insurance (Industrial Injuries) Acts 1965–1969 on 6 August 1969. The facts are set out in the judgment of Lord Parker CJ.
D J Turner-Samuels for the applicant.
Gordon Slynn for the respondent.
Cur adv vult
24 March 1970. The following judgments were delivered.
LORD PARKER CJ. This case raises a point of construction on which depends the applicant’s entitlement to an increased disability pension under s 14 of the National Insurance (Industrial Injuries) Act 1965. It is a short point, but one of far-reaching importance and no little difficulty.
The applicant, Mr Samson Mellors, was employed in the coal mining industry as a chargeman ripper when, on 27 October 1961, he sustained an industrial injury to his left eye. As a result he was forced to seek other employment and since October 1965 he has worked at the same mine as a driver in the plant pool. Disablement benefit under s 12 of the 1965 Act was assessed at 12 per cent for life from 3 July 1962. In addition he was awarded and paid special hardship allowances at various rates and at the maximum rate for the period 3 January 1967 until 9 April 1969. This case is concerned with the immediately ensuing period from 10 April until 8 October 1969 in respect of which the local tribunal reduced the special hardship allowance to 15s 7d per week. The applicant appealed to the appeals tribunal which affirmed the principles underlying the award of a reduced allowance, but on the basis of corrected figures, revised the sum awarded to 23s per week.
We have been concerned with principle and not quantum, but in order that the issues may emerge it is necessary to set out the relevant figures. In the relevant period, as to which there was no dispute, a man in the applicant’s former employment of chargeman ripper was likely to work five shifts each week involving 36 1/4 hours of
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work and to earn £28 1s 9d per week. No overtime was included or available. In the same period the applicant’s weekly earnings, on the basis of the revised figures, average £26 18s 2d, but in order to earn this sum he had to work and did work eight or nine shifts involving more than 66 hours per week. The award of 23s per week represented the difference between these figures rounded up to the nearest shilling.
Prior to the decision of the Court of Appeal in R v Industrial Injuries Comr, ex parte Humphreys it was generally accepted that the principle on which the appeals tribunal proceeded in the present case was correct. However, after that decision the chief industrial insurance commissionerb has held that where a man worked longer hours in his new job than he had in the old one, a straightforward comparison of weekly wage packets was not comparing like with like. He therefore scaled down the applicant’s post-accident actual earnings to give a notional weekly figure for earnings in that job related to the number of hours actually being worked by others doing the claimant’s pre-accident job. The difference between these two figures formed the basis of his award. We are asked to decide which, if either, of these methods of approach represents that enjoined by s 14 of the 1965 Act which provides:
‘(1) The weekly rate of a disablement pension shall, subject to the following provisions of this section, be increased by an amount not exceeding the appropriate amount specified in paragraph 5 of Schedule 3 to this Act if as the result of the relevant loss of faculty the beneficiary—(a) is incapable and likely to remain permanently incapable of following his regular occupation; and (b) is incapable of following employment of an equivalent standard which is suitable in his case, or if as the result of the relevant loss of faculty the beneficiary is and has at all times since the end of the injury benefit period been incapable of following the said occupation or any such employment as aforesaid.
‘(2) In the foregoing subsection—(a) the reference to a person’s regular occupation shall be taken as not including any subsidiary occupation of his; (b) the reference to employment of an equivalent standard shall be taken as not including employment other than insurable employment; and in assessing the standard of remuneration in any employment, including a person’s regular occupation, regard shall be had to his reasonable prospects of advancement …
‘(6) Subject to the last foregoing subsection, an increase of pension under this section shall be payable for such period as may be determined at the time it is granted, but may be renewed from time to time, and the amount of the increase shall be determined by reference to the beneficiary’s probable standard of remuneration during the period for which it is granted in the insurable employments, if any, which are suitable in his case and which he is likely to be capable of following as compared with that in his regular occupation within the meaning of subsection (1) of this section.’
Both counsel relied on the legislative history. This begins with s 9 of the Workmen’s Compensation Act 1925 under which a straight comparison fell to be made between the average weekly earnings before the accident and afterwards. This was followed by ss 12 and 14 of the National Insurance (Industrial Injuries) Act 1946, under which for the first time disablement benefit was calculated on the basis of loss of faculty irrespective of loss of earning capacity and an additional hardship allowance was provided when there had been a loss of earning capacity. This hardship allowance was to be a flat rate increase of 11s 3d a week if the claimant was rendered incapable of following his pre-accident employment or employment of an equivalent standard. Before this ever took effect, the National Insurance (Industrial Injuries) Act 1948 replaced this with a variable increment not exceeding 20s, the amount of which fell to be calculated in accordance with provisions which were not materially different from those in the 1965 Act.
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It will be seen, therefore, that Parliament in 1946 clearly intended a complete break with the scheme of the 1925 Act and that by the 1948 Act the test of average weekly earnings was not reintroduced but a test based on the standard of remuneration. On the other hand it can be said that the 1948 Act reintroduced the test of weekly earnings, substituting the standard or norm of remuneration for average earnings in order to avoid a calculation based on a period when the claimant might have been off work or when the circumstances were otherwise exceptional.
In my judgment no real help is to be obtained from a consideration of the legislative history save this: that Parliament enacted the consolidating Act of 1965 which in s 14(6) followed the wording of s 14(4) of the 1948 Act when it must be taken to have known that those administering the Act had consistently for a period of some 17 years adopted the test laid down by the tribunal in the present case. Both sides again relied on R v Industrial Injuries Comr, ex parte Humphreys. Counsel for the respondent points out that neither party in that case appears to have considered that the hours worked by a ripper as compared with those worked by a welder/burner was a relevant consideration. When the matter was considered by the Court of Appeal, Lord Denning MR ([1965] 3 All ER at 887, [1966] 2 QB at 12) looked only at the comparative weekly pay packets and Salmon LJ ([1965] 3 All ER at 891, [1966] 2 QB at 19) considered weekly earnings by men in the two employments at Doncaster and Wrexham. It does not appear, however, whether there was in fact any difference in hours worked. In any event it is unlikely that any member of the court had the present point in mind and chose his words accordingly. Counsel for the applicant, on the other hand, relies on this decision, as did the chief industrial insurance commissioner in the decisions referred to, as laying down the principle of comparing like with like. However, the Court of Appeal adopted this principle in regard to the comparison between the earnings of a welder/burner at Doncaster with those of a ripper at Doncaster as opposed to Wrexham and again had not had their minds directed to the present point.
I turn therefore to s 14(6) itself and the construction of the words ‘standard of remuneration’ by reference to which the amount of the hardship allowance has to be determined, bearing in mind what I think must be correct that the subsection provides a yardstick for calculating a loss of earning capacity. Counsel for the applicant submits that loss of earning capacity involves consideration of how much work has to be done in order to earn remuneration and that one cannot compare one standard of remuneration with another without considering the number of hours worked in the respective employments. Only thus— and this is true so far as the present case is concerned— can a fair result be obtained. It is an attractive argument but for my part I cannot accede to it. Once it is legitimate to consider how much work has to be done to earn a particular remuneration I see no reason for limiting the enquiry in that way. One would, I think, have to consider the relative nature of the work, the relative dangers and conditions which vary infinitely in different employments. Again, the method of remuneration varies from employment to employment. In some cases it will be by piecework— in some there will be no fixed hours and so on. I cannot think that Parliament intended to do other than lay down a yardstick which would produce a degree of certainty in the result— something which could produce uniformity amongst the many insurance officers concerned. The only way, as I see it, in which this degree of uniformity can be achieved is by considering what pay packet the claimant is capable of earning. This was the method employed for some 17 years prior to the decision in Humphreys’s case, and one which Parliament in 1965 made no attempt to change. Counsel on each side was at pains to point out the undoubted anomalies which might arise whichever argument prevailed. That, however, is exactly what one would except if, as I think, a simple yardstick capable of producing a degree of certainty and uniformity was provided. It is also true that
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the words ‘by reference to’ support the view that some elasticity is contemplated. Some elasticity, however, is I think necessary in any event and anyhow the words are necessary in order to calculate the amount of the weekly rate of allowance for the relevant period. In the result I would dismiss this motion.
ASHWORTH J. Section 14 of the National Insurance (Industrial Injuries) Act 1965 is one of a group of sections under which an injured workman may receive, in addition to a disablement pension awarded under s 12, compensation for financial loss resulting from his injury. Section 12 itself is not related to financial loss but provides for what is called disablement benefit, which is assessed on a fixed scale in accordance with the extent of the disablement. The sidenote to s 14 indicates the purpose of the section (Increase of disablement pension in cases of special hardship) and the additional payment is commonly referred to as a special hardship allowance. There is no dispute in this case regarding the applicant’s entitlement to such an allowance; the problem is how such allowance is to be calculated, and the answer depends on the construction of s 14(6), and in particular the words ‘standard of remuneration’, by reference to which the amount of the allowance has to be determined.
As a starting point, I agree with the view that the expression ‘standard of remuneration’ has a different meaning from that of the expression ‘average weekly earnings’ which was used to provide a basis of comparison under the Workmen’s Compensation Acts. At the same time, it is in my view impossible to determine a workman’s standard of remuneration without ascertaining what his average earnings were or are likely to be. One reason for the change in expression may well be that a comparison of average weekly earnings was thought to be too rigid. It is a matter of mere arithmetic and is capable of producing distorted results if, for example, unusual circumstances occurred during the period under review. Accordingly, as it seems to me, the expression ‘standard of remuneration’ was introduced in order to enable the assessment of the allowance to be made on a wider view than was possible when the calculation was merely arithmetical. In my view the word ‘standard’ denotes what is nowadays commonly referred to as a ‘norm’ and prima facie at any rate the expression ‘standard of remuneration’ denotes what a man normally earns or may be expected to earn. This view gives effect to what appears to be the object of s 14, namely to provide compensation for loss of earning capacity.
Counsel for the applicant contends that, while this approach may be an improvement on the position prevailing under the Workmen’s Compensation Acts, it will not achieve the result of providing compensation for loss of earning capacity unless the enquiry is taken further and consideration is given to the question how much work has to be done in order to earn remuneration. It is contended that unless regard is paid to the hours spent in earning the remuneration, a true comparison cannot be made between the standard of remuneration of one occupation and that of another. Reliance is placed on two decisionsc of the chief industrial insurance commissioner; in the first of these he stated:
‘Conversely, in my judgment one must make this comparison on a fair basis, assuming that in both jobs the claimant would be working similar hours.’
As I understand him, counsel for the applicant did not go so far as to contend that this principle has to be applied in every case; he said that if the time basis is more or less the same, the amount of the special allowance will be the difference in earnings, but if the times are substantially different, it will be convenient to adopt an hourly basis or daily basis. In passing I would only comment that this departure from the chief industrial insurance commissioner’s principle would in practice give rise to a
Page 275 of [1970] 2 All ER 270
great deal of controversy and no suggestion was put forward to indicate what difference in hours would be accepted as tolerable.
For my part, I cannot agree with counsel for the applicant’s contention, to which there are several objections. In the first place, I think that it involves a misconstruction of s 14(6) by reading ‘standard of remuneration’ as ‘rate of remuneration’. If Parliament had intended that the hourly rate was to be the yardstick for comparing two occupations, the draftsman could have so provided, presumably indicating at the same time how the relevant number of hours was to be ascertained, for the purpose of calculating the weekly increase in pension. Secondly, I do not think that the nature and character of the occupation, in which I include the hours which have to be worked, is a relevant factor for the purposes of s 14(6). As it seems to me, the nature and character of the new occupation fall to be considered under s 14(1) when one of the issues is whether the employment is suitable for the workman. But, once s 14(1) is satisfied, the issue is limited to his respective standards of remuneration, namely what he may normally be expected to earn. In one of the decisionsd of a deputy commissioner to which reference was made, para 6e sets out very clearly his approach to a problem of assessment under s 14(6) and I agree with it. Thirdly, if ‘standard of remuneration’ involves a wider concept than that which I have indicated, I see no reason why it should be extended merely to include the hours worked. The hazards and the conditions of work vary enormously and if occupations are to be compared on the footing that like must be compared with like, the task of assessment becomes almost impossible. Fourthly, by no means all occupations are paid for on an hourly basis. Piecework is an obvious illustration; another is the case of someone receiving a fixed wage with no fixed hours, or with hours varying according to the season of the year. Commission may form part of a workman’s remuneration; alternatively, there may be perquisites or concessions such as free coal or free milk. In such cases the task of expressing a man’s remuneration in terms of an hourly rate would be an unreal exercise and the result would be artificial. Fifthly, the assessment by reference to hourly rates may be artificial or unreal for another reason. It involves reducing the number of hours actually worked in the new occupation to the number of hours worked before the injury, in the present case reducing 66 hours to 36 1/4 But it may well be that the number of hours worked in the new occupation is normal for that occupation, and to reduce 66 to 36 1/4 is to create an artificial working week.
Page 276 of [1970] 2 All ER 270
Section 14 in its then existing form, which (apart from an alternation in the numbering of the subsections) was for all relevant purposes the same as that of the present section, was considered by the Court of Appeal in R v Industrial Injuries Comr, ex parte Humphreys. But the problem which arises in the present case was not then argued and although there are observations in all three judgments which may be said to support the view which I am expressing, it would not be right to regard that decision as being in any sense conclusive of the present case. But at least there is nothing that I can see in the judgments which precludes me from taking the view which I have expressed. Both counsel were at pains to emphasise the anomalies which according to each of them would arise if the other’s contentions were upheld. Frankly, I have not derived much assistance from this line of argument nor can I respond to counsel for the applicant’s invitation to embark on the task of comparing the anomalies, assuming them to exist. It may well be that whichever construction of s 14(6) is adopted, anomalies may arise but with a subsection in this form, that result is not by any means unusual. Accordingly, I do not propose to lengthen this judgment by references to the examples put forward in argument.
In conclusion it is perhaps worth mentioning the point that the administration of the relevant sections occupies the attention of some 1,500 to 2,000 insurance officers and accordingly it may be supposed that Parliament at least intended that their task should be simplified so far as possible. I do not regard this factor as carrying much weight in the construction of s 14 but the conclusion to which I have come is at least consistent with simplicity. I would dismiss this motion.
DONALDSON J. I would have allowed the motion. The issue turns on the true construction of s 14 of the National Insurance (Industrial Injuries) Act 1965. I need not refer to its legislative history, which has already been mentioned, save to say that I derive no assistance from that source. Section 14 is, so far as is material, in two distinct parts, namely the qualifying part (sub-ss (1) and (2)) and the quantifying part (sub-s (6)).
A claimant can qualify in two different ways. First, he can show that he is incapable and is likely to remain permanently incapable of following his regular (ie pre-accident) occupation and that he is incapable of following employment of an equivalent standard which is suitable in his case. Alternatively, he can qualify by showing that he is and has at all times since the end of injury benefit period been incapable of following his regular employment or employment of an equivalent standard which is suitable in his case. The only difference between these qualifications is that one looks to the future whilst the other looks to the past. Both involve a consideration of ‘employment of an equivalent standard’ and in my judgment ‘standard’ in this context must mean ‘standard of remuneration’ which are the key words when it comes to construing s 14(6). I say this because in no other way can one give effect to s 14(2) which provides:
‘In the foregoing subsection … in assessing the standard of remuneration in any employment, including a person’s regular occupation, regard shall be had to his reasonable prospects of advancement.’
It follows that a claimant who earns as much in his post-accident employment as he would have done had he been capable of remaining in his regular occupation, may yet qualify under s 14(1). This would be the case if his regular employment held out reasonable prospects of advancement whereas his post-accident employment was a dead-end job. I mention this because it seems to me to show that in the context of s 14(1) at least, we are not concerned in all cases with a simple comparison of current actual with current notional earnings.
Page 277 of [1970] 2 All ER 270
Turning to s 14(6) the operative words are—
‘… the amount of the increase shall be determined by reference to the beneficiary’s probable standard of remuneration during the period for which it is granted in the insurable employments, if any, which are suitable in his case and which he is likely to be capable of following as compared with that in his regular occupation within the meaning of subsection (1) of this section.’
Three points emerge, namely: (1) the amount of the increase falls to be determined ‘by reference to’ certain criteria and not ‘in accordance with’; (2) what has to be compared are ‘standard of remuneration’, and not, at least in terms, ‘earnings’, ‘average earnings’, ‘weekly earnings’ or ‘wage packets’; and (3) the basis of comparison is not the claimant’s actual post-accident occupation but—
‘the insurable employments [in the plural], if any, which are suitable in his case and which he is likely to be capable of following.’
Before coming to the kernel of the present case, namely what is meant by a ‘standard of remuneration’, let me consider the other two points. First, ‘by reference to’ denotes in my judgment a more flexible relationship than ‘in accordance with’ and, for example, fully justifies the tribunal in the present case in rounding up the allowance from 22s 7d which, on the tribunal’s approach, would have been the proper figure to assess ‘in accordance with’ a comparison of the two standards of remuneration. These words would also justify a ‘nil’ assessment where the difference was minimal in the context of the amount which would be payable weekly and the cost of administration. Secondly, the fact that the basis of comparison is not the applicant’s actual post-accident employment, but that or those which are suitable in his case and which he is likely to be capable of following shows, if it were ever in doubt, that the section is concerned with loss of earning capacity and not with loss of earnings. The same point was made expressly by Lord Denning MR in R v Industrial Injuries Comr, ex parte Humphreys ([1965] 3 All ER at 886, [1966] 2 QB at 11), and is, I think, implicit in the other judgments. What a man actually earns is often very good evidence of his capacity to earn, but it is not conclusive either in the context of his pre-accident or his post-accident employment. Thus a man for domestic or other reasons may take employment which does not fully utilise his earning capacity. Or again he may voluntarily restrict his hours of work either before the accident or afterwards or both. This in fact happened in a decisionf where the claimant both before and after the accident chose to work shorter hours than would otherwise have been the case in order that he might undertake important voluntary work in local government. Again in another decisiong a lady chose to work part-time as a biscuit packer before her accident and part-time as a biscuit checker afterwards. No doubt she could have worked full-time, but at the expense of her domestic responsibilities. In each case the comparison which has to be made is between what the claimant would have been capable of earning in his regular occupation were it not for the loss of faculty and what, with that loss of faculty, he is capable of earning and not what he in fact earns.
This brings me to the meaning of ‘a standard of remuneration’. Counsel for the respondent submits that it means the level of earnings which the claimant will probably achieve in a normal working week. In this context he defines a normal working week as an average of those weeks which show no unusual characteristics, eg one containing a public holiday or one which includes exceptional overtime. Counsel for the applicant submits that this virtually equates ‘standard of remuneration’ with ‘average earnings’. He submits that the words mean a claimant’s actual earnings considered as an hourly rate and then grossed up by reference to the hours worked in his regular occupation.
Page 278 of [1970] 2 All ER 270
Counsel for the applicant’s approach has many attractions, but I am unable to accept it for three reasons. First, it does not work if overtime payments are a component of a man’s weekly earnings. For example, if a man’s rate of pay is 10s per hour for the first 40 hours and 20s per hour thereafter, his earning capacity expressed as an hourly rate is 11s 8d per hour if he works for 48 hours. In relation to any other length of a working week it will be different. Secondly, it gives rise to the anomalies to which counsel for the respondent drew attention. Thus if, for example, the pre-accident occupation would have produced £20 for 40 hours work at 10s per hour and the post-accident employment produces £18 15s for 30 hours work at 12s 6d per hour, a comparison of hourly rates would exclude any entitlement to a hardship allowance although the man is undoubtedly worse off and probably suffers from some loss of earning capacity. Similarly post-accident employment for 45 hours at 10s per hour would leave the man £1 10s better off than pre-accident occupation of 40 hours at 10s 6d. A claimant in this situation would be entitled to an allowance of £2 a week, although he may have suffered no loss of earning capacity. Counsel for the applicant accepts this, but says that anomalies are bound to arise. In fairness to the chief industrial insurance commissioner, who adopted this approach in one decisionh, it should be pointed out that he never had to consider a case such as the first which I have cited and, had it been necessary for him to do so, he might not have adopted the same approach. Certainly he thought it right to say in that decisioni:
‘I am not saying that this is necessarily the only or even the best approach in other cases, but I am satisfied that it is the fairest one in this case.’
Thirdly, I am not convinced that the hourly rate approach is simple to apply or would produce uniform results in the varied circumstances which may confront the many individual insurance officers.
Counsel for the respondent’s approach also has attractions, not least in its administrative simplicity. However, it is open to the objection that it assumes that what others are earning in the claimant’s regular occupation and what the claimant will probably earn in his post-accident employment form a reliable index of the claimant’s loss of earning capacity. This assumption has no basis in fact, for either limb of the equation is liable to be affected by factors peculiar to the claimant or by the availability of employment, neither of which is relevant (see in relation to the latter point, the judgment of Davies LJ in R v Industrial Injuries Comr, ex parte Humphreys ([1965] 3 All ER at 890, [1966] 2 QB at 16)). It is also open to the greater objection that if the hours worked in the new employment differ from those which would have been worked in the regular occupation, like is not being compared with like. I am quite satisfied, and I think that it is generally accepted, that the ‘standard of remuneration’ to which the section refers is a yardstick of physical and mental capacity to earn and that the comparison is designed to reveal to what extent, if any, that capacity has been reduced by the relevant loss of faculty. Capacity to earn depends in both men and machines on the rate and value of output (whether it is goods or services) and the period over which that output can be maintained. What is in fact earned depends in the case of men on a large number of other factors such as the availability of employment and the willingness of the man concerned to accept the conditions obtaining in that employment, but these factors have nothing to do with the basic capacity to earn. Of the three factors governing capacity to earn, namely, rate of output, value of output and period over which the output, both have a time base. It follows that if there is to be any true and direct comparison between indices of capacity to earn, they must first be reduced to a common time base.
The approach of counsel for the applicant attempts to adopt a common time base
Page 279 of [1970] 2 All ER 270
but fails to achieve this result in a number of cases. The approach of counsel for the respondent, which was adopted in the present case, makes no attempt to do so and involves the assertion that a man who takes home £28 after working for 40 hours has the same earning capacity as one who takes home £28 after working for 60 hours. This I cannot accept as a general proposition for the 40–hour man will, in the example given, usually have at least 20 hours of earning capacity left in him and this has been left out of account. To give another example, the woman doctor who marries and takes part-time employment in school clinics for a few hours a week may well earn the same amount in any week as a labourer who is employed on a full-time basis, but their respective earning capacities are manifestly different. How then are the standards of remuneration to be ascertained and compared? First, one must establish a common time base. As hardship allowance is payable weekly, the working week is the obvious choice. However, the working week itself requires some definition for it is clearly inconvenient and unrealistic to seek to measure earning capacity in terms of the 168–hour period which forms the calendar week. Since earning capacity in a post-accident employment is to be compared with earning capacity in the regular occupation, the simple and logical course is to treat the number of hours normally worked in the regular occupation as the length of the working week. In computing this number of hours regard should be had to clock time and not to the hours used for computing wages, since in some employments the rate of wages rises after the expiration of a particular period or for work done at particular times, whereas in others the rate remains the same but the employee is credited with having worked for longer hours than he has in fact worked, eg time and a half, double time, or, in the coal industry, a bonus shift. Having thus selected a common time base, the amounts which can be earned in this time in the respective activities provide comparable standards of remuneration and true indices of earning capacity. There is no problem over ascertaining the standard of remuneration for the regular occupation, for by definition the working week is that in that occupation and the earnings in such a week are usually a matter of record. Little greater difficulty is involved in ascertaining the standard of remuneration with which this falls to be compared. The only question which the insurance officer has to ask himself is ‘What is the claimant capable of earning in the insurable employments which are suitable in his case and which he is likely to be capable of following if he followed such employment for the same number of clock hours?’ The employment referred to will normally be the claimant’s post-accident employment, but in exceptional cases— if for example he is unemployed although employable— this will not be so.
Applying this test to the present case, the applicant’s standard of remuneration for his regular occupation of chargeman ripper was £28 1s 9d for a working week of 36 1/4 hours. The insurance officer would then have to find out what a driver in the plant pool would earn if he too worked for 36 1/4 hours. I cannot ascertain this figure because I do not know whether the applicant’s hourly rate increased after a given number of hours or whether the 66 hours referred to is clock time or notional time designed to produce overtime remuneration. It is, however, clear that the difference in standards of remuneration would greatly exceed the £1 2s 7d which is the basis of the present award. This approach is equally applicable and workable whether the claimant is paid on the basis of hourly rates, piecework or a salary and whether he voluntarily restricts his hours of work before or after the accident or both. If applied to the anomalous cases to which I have referred, it removes the anomalies, but I will not lengthen this judgment by illustrating this fact. Furthermore it ignores all factors which relate to the attractions and conditions of the work, eg the ease and boredom of the life of a night watchman as compared with the effort and interest of some other occupations or the advantage, or as the case may be the disadvantage, of proximity of the place of work to the claimant’s home. In a word it takes account of all factors which have a bearing on the claimant’s earning capacity, it ignores all
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factors which are irrelevant to a measurement of that capacity and it is simple to administer with uniformity in widely varying circumstances throughout the country.
Motion dismissed.
Solicitors: O H Parsons (for the applicant); Solicitor, Department of Health and Social Security (for the respondent).
N P Metcalfe Esq Barrister.
Practice Direction
(Practice: Chancery Division: Enquiries for next-of-kin: Family provision: Designation of minors
[1970] 2 All ER 280
PRACTICE DIRECTIONS
CHANCERY DIVISION
12 May 1970. The following judgments were delivered.
Practice – Chancery Division – Separate certificate in enquiries for next-of-kin.
Family provision – Evidence – By way of statements exhibited to affidavits.
Practice – Chancery Division – Designation of persons of less than full age.
R E Ball, Chief Master
1 SEPARATE CERTIFICATES IN ENQUIRIES FOR NEXT-OF-KIN
Where in the course of enquiries for next-of-kin the number of stirpital shares or sub-stirpital shares and the persons entitled to certain of those shares have been ascertained but there may be difficulty and delay in tracing the persons entitled to the remaining shares the master may, at his discretion, by separate certificate certify the number of the stirpital or sub-stirpital shares and the persons entitled to the shares as to which the evidence is complete. When such a certificate has been filed the parties may apply to the court under RSC Ord 43, r 8, for an order allowing immediate payment to the persons entitled to the certified shares without reserving any part of such shares to meet the subsequent costs of ascertaining those entitled to the remaining shares. It is nevertheless pointed out that it may not always be to the advantage of the beneficiaries to ask the court to adopt this course.
2 EVIDENCE IN APPLICATIONS UNDER THE INHERITANCE (FAMILY PROVISION) ACT 1938
The judges of the Chancery Division will no longer expect evidence on applications under the Inheritance (Family Provision) Act 1938, to be by way to statements exhibited to formal affidavits. The Practice Direction ([1967] 2 All ER 299, [1967] 1 WLR 698) dated 10 April 1967 is to be treated as modified accordingly but otherwise remains in effect.
3 DESIGNATION OF PERSONS OF LESS THAN FULL AGE
The introduction by the Family Law Reform Act 1969 of the term ‘minor’ as descriptive of persons of less than full age has resulted in the possibility of such persons being described either as infants or as minors in writs and originating summonses. No attempt will be made to interfere with the plaintiff’s choice but the Chancery registrars in drawing up orders will, for the sake of uniformity, substitute the words ‘minor’ and ‘minors’ for ‘infant’ and ‘infants’ wherever they occur.
By the direction of Buckley J.
R v Turner
[1970] 2 All ER 281
Categories: CRIMINAL; Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, WIDGERY LJ AND BEAN J
Hearing Date(s): 24 APRIL 1970
Criminal law – Trial – ‘Plea-bargaining’ – Change of plea to guilty during prosecution case – Duty of counsel when advising change of plea – Whether accused’s freedom of choice vitiated by belief that change of plea recommended by judge to counsel.
The appellant pleaded guilty to the theft of his own car from garage proprietors who had a lien on it. On the second day of his trial his counsel advised the appellant that a change of plea might result in a non-custodial sentence, but that, if the trial proceeded and an attack was made on police officers accusing them of complete fabrication (which were the appellant’s instructions), the appellant’s previous convictions would be put before the jury and he ran the risk of going to prison. After a long discussion the appellant’s counsel said that he wanted to discuss the matter with the trial judge. When he returned he told the appellant as his own personal opinion that there was a very real possibility that, if he was convicted by the jury and an attack had been made on the police officers, with his previous convictions he might receive a sentence of imprisonment, but that, if at that stage he pleaded guilty, he must take counsel’s word that he would receive a sentence not involving imprisonment. The appellant was repeatedly told that the choice was his, but nothing was done to disabuse him of the impression, which he later confirmed he had formed, that counsel was repeating the trial judge’s views. Ultimately the appellant retracted his plea and the jury returned a formal verdict of guilty. On appeal,
Held – There was no evidence that the appellant’s counsel exceeded his duty in advising the appellant to plead guilty (see p 284 a, post); nevertheless, as the appellant might have thought that his counsel’s views were those of the trial judge, in which case it was really idle to think that the appellant had a free choice in retracting his plea of not guilty, the proper course was to treat the plea of guilty as a nullity, with the result that there was a mistrial and an order should be made for a venire de novo (see p 284 j to p 285 a, post).
Observations on ‘plea-bargaining’ (see p 285 b to j, post).
Case referred to in judgment
R v Hall [1968] 2 All ER 1009, [1968] 2 QB 788, [1968] 3 WLR 359, 132 JP 417, 52 Cr App Rep 528., Digest Supp.
Appeal
This was an appeal by Frank Richard Turner against his conviction and sentence for theft at the North East London Quarter Sessions by the deputy chairman (Judge J B Hobson) and a jury on 27 January 1970. The facts are set out in the judgment of the court.
C L Hawser QC and P M Herbert for the appellant.
J B R Hazan QC and H M Self for the Crown.
24 April 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On 26 January 1970 at North East London Quarter Sessions, the applicant, to whom the court has now granted leave to appeal, pleaded not guilty to the theft of a car. On 27 January 1970, he retracted that plea of not guilty and pleaded guilty, whereupon a formal
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verdict was taken from the jury and he was fined £50, with four months’ imprisonment in default of payment within four months, his license was endorsed, and he was ordered to pay £75 towards the cost of the prosecution.
It is in some ways a curious case, because this car was his own car, and to a layman no doubt that raises a curious conception. But what had happened was, on the prosecution case (because in the light of the plea of guilty no evidence was, of course, called for the defence), the appellant had left his car at a garage the proprietors of which were a father and son by the name of Brown. He had left it some time in February 1969, asking for new piston rings to be fitted. It was the prosecution case that, after a discussion, there was an agreement that the engine should be reconditioned for a cost of £65. The work was begun, and completed on 7 March 1969. On that day, and this it is always to be remembered is the prosecution case, the appellant called at the garage and said that he would come the next day to collect the car. I should have added that, when the car was left, rather naturally so was the ignition key. The garage not having very much space, parked the car, when the repairs were completed, in the street, and by 6.30 pm on 7 March 1969 the garage found that the car had been taken away from the place in the street where it had been parked. The garage still had the key and so the police were rung up. However, the next thing that happened was that, on 16 March 1969, Mr Arthur Brown found this car parked in the very street where the appellant lived, and, I suppose rather indignantly, took the car back to the garage, took the engine out, and then towed the car, less engine, back to the place in the street where it had been found. The matter then got into the hands of the police, and in the end a prosecution was commenced at the instigation of the garage proprietors. The police gave evidence first, that there had been an interview on 16 March 1969 when enquiries were made of the appellant as to his car, when he told an admitted lie, because he said that he had never taken the car to the garage at all. The very next day, however, in answer to Detective Sergeant Thompson, the appellant acknowledged that that had been a lie. He then said that he had gone and taken the car away but that he had taken it with the full consent of the proprietors, who had handed back the key to him, the prosecution case being that Mr Arthur Brown still had the key. In those circumstances there clearly was, as the deputy chairman ruled, a case to go the jury of theft of his own car, because there was evidence from which the jury could find that the garage proprietors had a proprietary interest, namely, a lien on the car, and that, by reason of the alleged lies that had been told to the police, this had been done dishonestly. I should add that the appellant is 46, that he lives with a Miss Nelson, by whom he has two children, and that he has three findings of guilt, 14 previous convictions, and in his favour that he seemed, under the influence possibly of Miss Nelson, to be turning over a new leaf in that his last conviction was in 1966.
Pausing there, there is really nothing to enquire into. But, of course, the matter does not end there, there is really nothing to enquire into. But, of course, the matter does not end there, because this case has attracted considerable publicity as a result of what the appellant is said to have said to his solicitor the next day, and as a result of what the solicitor has made extremely public throughout the country. What is said now, in the amended grounds of appeal which have been put in, is really that the appellant did not have an opportunity of exercising a free choice in retracting his plea of not guilty and pleading guilty, and that, as it were, his mind did not go with the plea of guilty. Accordingly, it was in those circumstances, as indeed it was in R v Hall, the Dulwich picture case, for the court to look into the matter, to hear evidence in regard to it in order to see, as was stated in that case ([1968] 2 All ER at 1011, 52 Cr App Rep at 534), whether the prisoner in the circumstances had a free choice, since the election must be his, and the responsibility his, to plead guilty or not guilty.
The uncontested facts are that, by the luncheon adjournment on the second day,
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the prosecution witnesses had been called (in effect the garage proprietors) but not the police evidence, and up to that stage, at any rate, it could be said that things were going very well for the appellant. Indeed, the garage proprietors were saying in effect that they thought that they were suing for their money, that it was a civil case. At any rate, the time had come when the police were going to give evidence. The appellant was represented by counsela, and he very rightly was worried in the matter, because he had instructions not merely to challenge the police and suggest that they had misunderstood the appellant’s answers or had failed to remember what he had said, or anything of that sort, but his direct instructions were to attack the police, accusing them of complete fabrication in conjunction with the garage proprietors. Naturally he was faced with this, that, if he observed these instructions, it would be almost certain that the jury would have put before them the appellant’s previous convictions. Accordingly, he did what is the duty of every counsel to do, to give the best advice in the interests of the prisoner as he can. Having explained the legal position, how this could amount to a theft assuming the lien was proved, he went on to ask the appellant seriously to consider changing his plea to one of guilty. He did that quite openly in the presence of the solicitorb then representing the appellant and he said on more than one occasion, putting it in strong words, that, on a plea of guilty, it might well be a non-custodial sentence, but that, if he continued and these convictions came out, the appellant ran the risk maybe of going to prison.
There were long discussions beginning about 1.50 pm in the interview room of the courts, which continued to approximately 3.30 pm. Part of the time Miss Nelson, with whom the appellant lived, was present and part of the time his sister, a Mrs Crowe, was there. There was also the solicitor then acting for the appellant, and his clerk, and of course counsel then representing the appellant. But quite clearly none of those persons, except the appellant, was there all the time; in particular counsel was not there all the time. The time came when counsel said that he wanted to discuss the matter with the deputy chairman; he went, and when he came back he gave what the court accepts was his own personal opinion. His own personal opinion in the matter, and I take this from the evidence of the solicitor then acting for the appellant who appeared before us, was this:
‘There is a very real possibility that if you are convicted by the jury and an attack has been made on the police officers, with your sixteen previous convictions, you may receive a sentence of imprisonment. If at this stage you plead guilty, you must take my word for it, you will receive a fine or some other sentence which will not involve imprisonment.’
Those were counsel’s views, and, as I have said, the court accepts that he was passing on his own views. The interview continued, and throughout the appellant adhered to his view that he was going to fight, that he was not going to retract his plea of not guilty. By about 3.30 pm it was intimated to the court that it would continue to be a fight, and counsel then representing the appellant and the appellant left the interview room to go back into court. A further interview took place (there is some dispute over what happened at that) in the cell adjoining or below the dock. It was only for a minute or two, but at the end of that interview the appellant said that he was going to retract his plea. Accordingly when everybody assembled in court the indictment was put to him again, he pleaded guilty, and the formal verdict of the jury was taken.
The first point taken by counsel now for the appellant was that counsel then representing the appellant exercised such pressure on the appellant, undue pressure,
Page 284 of [1970] 2 All ER 281
something beyond the bounds of his duty as counsel, so as to make the appellant feel that he must retract his plea, that he had no free choice in the matter. The court would like to say that it is a very extravagant proposition, and one which would only be acceded to in a very extreme case. The court would like to say with emphasis that they can find no evidence here that counsel then representing the appellant exceeded his duty in the way he presented advice to the appellant. He did it in strong terms. It is perfectly right that counsel should be able to do it in strong terms, provided always that it is made clear that the ultimate choice and a free choice is in the accused person. The one thing that is clear from all the evidence is that, at every stage of these proceedings, certainly up to the interview in the cell, it was impressed on the appellant by counsel, by the solicitor then acting for the appellant, by Miss Nelson herself, that the choice was open to him, and, insofar as it rests on undue influence by counsel, the court is quite satisfied it wholly fails.
The matter, however, does not end there because, although it may be sufficient in the majority of cases if it is made clear to a prisoner that the final decision is his, however forcibly counsel may put it, the position is different if the advice is conveyed as the advice of someone who has seen the judge, and has given the impression that he is repeating the judge’s views in the matter. As I have said, the court is quite satisfied that counsel then representing the appellant was giving his own views and not the judge’s at all. But it had been conveyed to the appellant that counsel had just returned from seeing the deputy chairman; what was said gave the solicitor then acting for the appellant the impression that those were the judge’s views, and counsel then representing the appellant very frankly said that, in the circumstances, the appellant might well have got the impression that they were the judge’s views. Accordingly one asks: was he ever disabused of that, did anything happen to show that these were not the judge’s views on the case?
Apparently a time came when the discussion had been going on for a long time, when the acting temporary clerk of the court came down to inform counsel (although he does not remember it, I think it must be right) that the judge could not allow much longer. He saw the prosecuting counsel in the robing room and conveyed this to him, and he went into the interview room and said something to counsel then representing the appellant. The clerk of the court is quite satisfied in his own mind that what he said was that he was authorised to say that, whatever happened, that is whether there was a plea of guilty or whether the plea of not guilty stood, the result would be the same, it would not be a term of imprisonment, and, of course, if that were so, that was really the end of the matter. There was absolutely no reason whatever for the appellant to alter his plea, he would be no worse off if he kept to his plea of not guilty. Counsel then representing the appellant at any rate did not get that impression; he got the impression from the clerk of the court that the message that he was authorised to give was that, if at this stage there was a plea, it would be a fine, and of course that would, if true, really bear out the impression which the appellant already had. This court is quite satisfied that the clerk of the court must be wrong in his recollection— no doubt he was not asked about this until some time after the event—because we should not be here today if that really had happened. Accordingly, nothing was conveyed by the clerk of the court which could have disabused the appellant of the impression which he had formed earlier. Indeed, it may well have confirmed it. True, as I have said, he was warned that the choice was his, but, once he felt that this was an intimation emanating from the judge, it is really idle in the opinion of this court to think that he really had a free choice in the matter.
Accordingly, although not without some doubt, the court feels that this appeal must succeed. I say with some doubt because, despite all that I have said, the appellant drafted grounds of appeal himself originally, and really there is nothing of this in those grounds. However, the solicitor then acting for the appellant said that he was informed of this point the day after the trial, and in all the circumstances of the case
Page 285 of [1970] 2 All ER 281
the court feels that the proper course is to treat the plea that was given as a nullity, with the result that the trial which took place was a mistrial, and that there should be an order for a venire de novo.
Before leaving this case, which has brought out into the open the vexed question of so-called ‘plea-bargaining’, the court would like to make some observations which may be of help to judges and to counsel, and indeed to solicitors.
1. Counsel must be completely free to do what is his duty, namely, to give the accused the best advice he can, and if need be advice in strong terms. This will often include advice that a plea of guilty, showing an element of remorse, is a mitigating factor which may well enable the court to give a lesser sentence than would otherwise be the case. Counsel of course will emphasise that the accused must not plead guilty unless he has committed the acts constituting the offence charged.
2. The accused, having considered counsel’s advice, must have a complete freedom of choice whether to plead guilty or not guilty.
3. There must be freedom of access between counsel and judge. Any discussion, however, which takes place must be between the judge and both counsel for the defence and counsel for the prosecution. If a solicitor representing the accused is in the court he should be allowed to attend the discussion if he so desires. This freedom of access is important because there may be matters calling for communication or discussion, which are of such a nature that counsel cannot in the interests of his client mention them in open court. Purely by way of example, counsel for the accused may by way of mitigation wish to tell the judge that the accused has not long to live, is suffering maybe from cancer, of which the accused is and should remain ignorant. Again, counsel on both sides may wish to discuss with the judge whether it would be proper, in a particular case, for the prosecution to accept a plea to a lesser offence. It is, of course, imperative that, so far as possible, justice must be administered in open court. Counsel should, therefore, only ask to see the judge when it is felt to be really necessary and the judge must be careful only to treat such communications as private where, in fairness to the accused person, this is necessary.
4. The judge should, subject to the one exception referred to hereafter, never indicate the sentence which he is minded to impose. A statement that, on a plea of guilty, he would impose one sentence but that, on a conviction following a plea of not guilty, he would impose a severer sentence is one which should never be made. This could be taken to be undue pressure on the accused, thus depriving him of that complete freedom of choice which is essential. Such cases, however, are in the experience of the court happily rare. What on occasions does appear to happen, however, is that a judge will tell counsel that, having read the depositions and the antecedents, he can safely say that, on a plea of guilty, he will for instance, make a probation order, something which may be helpful to counsel in advising the accused. The judge in such a case is no doubt careful not to mention what he would do if the accused were convicted following a plea of not guilty. Even so, the accused may well get the impression that the judge is intimating that, in that event, a severer sentence, maybe a custodial sentence, would result, so that again he may feel under pressure. This accordingly must also not be done. The only exception to this rule is that it should be permissible for a judge to say, if it be the case, that, whatever happens, whether the accused pleads guilty or not guilty, the sentence will or will not take a particular form, eg a probation order or a fine, or a custodial sentence. Finally, where any such discussion on sentence has taken place between judge and counsel, counsel for the defence should disclose this to the accused and inform him of what took place.
Appeal allowed. New trial ordered.
Solicitors: Morris, Williams & Co (for the appellant); Solicitor, Metropolitan Police.
N P Metcalfe Esq Barrister.
Fisher-Bendix Ltd v Secretary of State for Employment and Productivity
[1970] 2 All ER 286
Categories: TAXATION; Other Taxation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND PHILLIMORE LJJ
Hearing Date(s): 12, 13, 24 MARCH 1970
Selective employment tax – Appeal – Proper industrial classification – Point of law – When tribunal’s decision may be interfered with.
Selective employment tax – Refund – Repair of washing machines – Repair by manufacturers from after-sales establishments – Standard Industrial Classification – Whether repair properly classified under heading 820(5), heading 349(3) or heading 365 – Selective Employment Payments Act 1966, s 1(2).
Selective employment tax – Standard Industrial Classification – Construction – Introduction to classification.
The appellants were manufacturers of washing-machines at a factory in Liverpool. They sold the machines to wholesalers who in turn sold them to retailers for sale to the public. The machines were mainly bought for domestic use at home but were also sold to commercial firms for use at launderettes. The appellants themselves provided an after-sales service from establishments in several cities one of which was Cardiff where they had an office with a manager and three office staff to which were attached a team of 12 engineers headed by a technical supervisor. The engineers spent most of their time repairing the washing-machines in customers’ homes, either under a maintenance contract for regular servicing or only when the machines went wrong, and sometimes they installed new machines. Accordingly, more than half the employees at the Cardiff establishment were employed on repair worka. The Industrial Tribunal by a majority, the chairman differing in his view, held that the Cardiff establishment qualified for repayment of selective employment tax under s I (2)b of the Selective Employment Payments Act 1966, as the activities carried on there came within heading 349(3)c of the Standard Industrial Classification. The chairman took the view that the activities came within heading 820(5)d of the classification which would not qualify the appellants to a repayment of the tax. On the question what was the proper heading in the classification under which to place the repair of washing-machines,
Held – (i) The question in dispute, being the proper classification of an activity, was one of law on which an appeal lay to the Court of Appeal, but although the court would not interfere with the tribunal’s decision on the question of classification where it was unanimous, unless the decision was unreasonable, where the tribunal were divided on the question the court would treat it as open and if it favoured the minority view would not hesitate to accept it (see p 289 g, and p 291 e, post);
Page 287 of [1970] 2 All ER 286
Dicta of Lord Wilberforce and Lord Pearson in Secretary of State for Employment and Productivity v C Maurice & Co Ltd [1969] 2 All ER at 41, 45 followed.
(ii) The appropriate heading in the classification under which to place the activity of repairing washing-machines was heading 820(5), which included within the heading the ‘repair of … domestic appliances’, because an establishment must be classified according to its own activities and not those of its proprietor so that repair of domestic appliances could come within heading 820(5) even if the work was not carried out in connection with the retail trade, or by a retailer; accordingly, the appellants, in respect of their Cardiff establishment, did not qualify under s 1(2) of the 1966 Act for repayment of selective employment tax (see p 290 j to p 291 b, p 292 f and j and p 293 f, post).
Per Widgery LJ. To place all repair of domestic appliances under heading 820(5) whatever the circumstances in which the work was done gives the language [of the heading] a precision and rigidity which should be avoided if possible. The phrase ‘The … repair of furniture and domestic appliances are included’ [in heading 820(5)] is for the avoidance of doubt and to show that those activities are not excluded from the ‘retail distribution’ of furniture and domestic appliances. Hence heading 820(5) is always open to consideration when such repair activity is to be classified, but any other appropriate headings must also be considered (see p 292 g, post).
(iii) Since the repair of washing-machines came clearly within heading 820(5)—
(a) such repair should not be put under heading 365e, ‘manufacturing … washing machines’, which was less apt and specific, since no general principle was imported into the classification by the Introduction to it, in particular para 8 (c)f, that where repair work was carried out by the manufacturer it was to be classified under manufacturing, for the Introduction merely set out the principles on which the classification was compiled and was merely a guide to its interpretation; and (per Widgery LJ) the important consideration whether repair was associated with manufacture was whether the work required factory facilities and in the present case the repair work did not require such facilities as it was carried out in the customer’s home (see p 290 e, p 292 c and h, and p 293 f, post).
(b) nor should the repair of washing-machines be put under heading 349(3), although (per Lord Denning MR) it was capable of being brought thereunder, since this heading also was less apt and specific than heading 820(5) (see p 290 f and g, p 292 j and p 293 f, post).
Notes
For Selective Employment Tax, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 479A.
For the Selective Employment Payments Act 1966, s I, see 12 Halsbury’s Statutes (3rd Edn) 352.
Cases referred to in judgment
McGuire v Minister of Labour 1968 ITR 24.
Rank Xerox Ltd v Minister of Labour 1968 ITR 399.
Secretary of State for Employment and Productivity v C Maurice & Co Ltd [1969] 2 All ER 37, [1969] 2 AC 346, [1969] 2 WLR 797.
Appeal
This was an appeal by leave of the Divisional Court by Fisher-Bendix Ltd from the decision of that court (Lord Parker CJ, Melford Stevenson and Cooke JJ), dated 10 July 1969, allowing the appeal by the Secretary of State for Employment and Productivity against the decision of the Industrial Tribunal (the Right Hon Sir John Clayden PC, chairman), given on 14 February 1969, in proceedings under the Selective Employment Payments Act 1966, whereby by a majority the tribunal held that
Page 288 of [1970] 2 All ER 286
the activities carried on at the appellants’ establishment at Cardiff, where they carried out repairs to washing-machines manufactured by them, were activities which qualified the appellants to a repayment of selective employment tax and a premium under s 1 of the 1966 Act. The Divisional Court held that the activities came within an industrial classification which did not qualify the appellants to a repayment of the tax and premium. The facts are set out in the judgment of Lord Denning MR.
F P Neill QC and K S Rokison for the appellants.
P E Webster QC and T H Bingham for the Secretary of State for Employment and Productivity.
Cur adv vult
24 March 1970. The following judgments were delivered.
LORD DENNING MR. This is another case in which the courts have to rule on selective employment tax. This time it is in connection with repair work. Nowadays repairs are often done by the manufacturers who make the things. These manufacturers set up separate establishments to do the repairs. The question is: do they have to bear selective employment tax on the staff employed in these establishments, or do they get a refund of it?
The manufacturers here are Fisher-Bendix Ltd, the appellants. They make washing-machines at a large factory in Liverpool. They sell these washing-machines to wholesalers, who in turn sell them to retailers, who in turn sell them to the public. The machines are bought by ordinary folk for use at home and also by commercial firms for use in launderettes.
The appellants also provide an after-sales service. They have establishments in several large cities from which they run the after-sales services. Take Cardiff, for example. The appellants have an office there with a manager and three office staff. Attached to the office they have a team of 12 engineers headed by a technical supervisor. These engineers spend all their time in going out to the houses of people who have bought washing-machines. Sometimes the engineers install new machines. But for the most part they repair existing machines which have already been installed. During 1968 they worked 19,770 3/4 hours, of which 18,326 1/2 were spent on repairs. Sometimes they work under a maintenance contract repairing the machines regularly. At other times they are only called in when the machine goes wrong. They do some work for commercial firms, but for the most part they work in ordinary houses. They repair the washing-machines used by the housewives.
In all cases of selective employment tax one has to do these things. First, one must get clear what is the ‘establishment’ with which one is dealing. It is usually all the employer’s premises at a particular address within the curtilage of one particular site. See s 10(2) of the Selective Employment Payments Act 1966. In this case the ‘establishment’ is the Cardiff office. Secondly, one must see what are the activities which are carried on, in or from that address, specifying the various activities on which the establishment is wholly or partly engaged, see s 1(2)(a) of the 1966 Act. In this case there are only two activities, namely, the installing of washing-machines, and the repair of washing-machines. Everything else is incidental to those two. Thirdly, one must put each of those activities under its proper heading in the Standard Industrial Classification, and see whether it is an activity which qualifies the employer to a refund, or not. In this case there is a dispute on this point. The appellants say that the repair of washing-machines is a qualifying activity; but the Minister says it is not. Fourthly, if and insofar as the activities are qualifying activities, one must make sure that more than half of the people at the establishment are wholly or mainly employed in them, see s 1(2)(b) (i) of the 1966 Act. In the present case more than half of the employees at Cardiff are mainly engaged in repairing washing-machines.
Going through those four things, there is only one matter in controversy. What
Page 289 of [1970] 2 All ER 286
is the proper heading under which to place the ‘repair of washing-machines’? Is it an activity which qualifies the employer to a refund of selective employment tax, or not? Three headings have been canvassed.
1 Minimum List Heading 349(3)
‘349 Other Mechanical Engineering not elsewhere specified … (3). Other mechanical engineering
Establishments manufacturing machinery parts not elsewhere specified, or undertaking general sub-contract or repair work … ’
2 Minimum List Heading 365
‘365 Domestic Electric Appliances
Manufacturing electric vacuum cleaners, washing machines, food mixers, hair clippers, and dry shavers, cookers, radiators, toasters, irons and other domestic-type electric appliances, except refrigerators, which are classified in Heading 339.’
3 Minimum List Heading 820(5)
‘820 Retail Distribution …
5. Household Goods
Retailers of new or second-hand furniture (including antiques), floor coverings, pianos and other musical instruments, hardware and ironmongery (including tools), wallpaper, paint and varnish, cutlery, china and glassware, radio and television, electrical appliances and supplies, other household appliances and perambulators. The hiring and repair of furniture and domestic appliances are included.’
The appellants say that their activity of repairing washing-machines comes either under heading 349(3) as ‘repair work’ or under heading 365 as ‘manufacturing … washing machines’. If it is under one or other of those, they are entitled to a refund of selective employment tax. But the Minister says that it comes under heading 820(5) as the ‘repair of … domestic appliances’, in which case the appellants are not entitled to a refund.
All three members of the Industrial Tribunal rejected heading 365 because this activity was not ‘manufacturing’ washing-machines. It was ‘repairing’ them. The two lay members put this activity under heading 349(3) as ‘repair work’. But the legal chairman dissented. He put it under heading 820(5) as the ‘repair of … domestic appliances’.
Seeing that the facts are not in dispute, but only the proper classification, I think that the question is one of law on which an appeal lies to the court. Nevertheless, when the tribunal are unanimous, the court will hesitate to interfere. It will not do so unless their decision is unreasonable. See Secretary of State for Employment and Productivity v C Maurice & Co Ltd ([1969] 2 All ER 37 at 41, [1969] 2 AC 346 at 361) per Lord Wilberforce and per Lord Pearson ([1969] 2 All ER at 45, [1969] AC at 365). But when the tribunal are divided in opinion, the court should treat the question as open. If the court should favour the minority view, it should not hesitate to accept it. A dissenting judgment is just as likely to be right as a majority one; and when it is given by a man of quality, more likely.
I will consider the three competing headings in order.
Minimum List Heading 365
Counsel for the appellants argued persuasively in favour of heading 365. This activity comes, he said, within the category of ‘manufacturing … washing machines’. Although ‘manufacture’ does not include ‘repairing’, counsel says that it is brought in by the Introduction of the Standard Industrial Classification. He seeks to derive from it this general principle: in the absence of express provision in the classification,
Page 290 of [1970] 2 All ER 286
where repair work is carried out by a manufacturer, it is to be classified to manufacturing; and when it is carried out by a retailer, it is to be classified to distribution. At Cardiff the repair work is carried out by a manufacturer. It is, therefore, to be classified with ‘manufacturing … washing machines’ which comes under heading 365. In short, ‘manufacturing’ in heading 365 includes, he says, ‘repairing washing machines’.
I cannot accept this argument. I do not think that any such principle is to be found in the Introduction. As I read the Introduction, the compilers were concerned only to explain the way in which they had compiled their classification. They took the structure of industry and trade as it existed in 1958 and classified the activities under various headings. (There is a new one now in 1968.) When they came to establishments which specialised in repair work, they classified these according to the branch of industry with which they had the closest connection. For example, ship-repairing was classified with shipbuilding (manufacturing, heading 370); and watch-repairing with retail sales of watches (distribution, heading 820(6)). But they did not stick rigidly to this distinction. When they came to boot and shoe repairs they did not classify them under ‘Retail Distribution’ (heading 820(4)), but under ‘Miscellaneous Services’, heading 888. The importance of the Introduction lies in the fact that in it the compilers have set out the principles on which they have worked in making their classification.
The compilers did not, in their Introduction, lay down the principles on which the classification was to be interpreted. They only explained the way in which they had worked when they included repair work, or excluded it. There is nothing in the Introduction which warrants the extension of the word ‘manufacturing’ in heading 365 so as to include ‘repairing’. I reject heading 365. I am glad that, in doing so, I am in agreement with all the members of the tribunal.
Minimum List Heading 349(3)
Alternatively, the appellants say that the activities come within heading 349(3) ‘Other mechanical engineering. Establishments … undertaking … repair work’. I think that the activities at Cardiff are capable of being brought within that heading. It seems to me that, when one has an establishment which specialises in repair work in the field of mechanical engineering, then it can properly be placed under heading 349(3) if there is no other place more appropriate for it. That was done in McGuire v Minister of Labour, when an establishment specialised in repairing industrial sewing-machines (not domestic appliances); and in Rank Xerox Ltd v Minister of Labour, when an establishment specialised in repairing Rank-Xerox copying-machines (not domestic appliances). But if the repair work is expressly mentioned in any other heading, I do not think that it should be put under heading 349(3).
Minimum List Heading 820(5)
This brings me to heading 820(5). I have come to the conclusion that this expressly covers this case. Suppose a retailer supplies radio or television sets, electric irons and washing-machines. His business is so large that he (the retailer) sets up a separate establishment to carry out repairs on them. That establishment is within the scale of heading 820(5)—‘the repair of … domestic appliances’. No one can deny it. Suppose now that a manufacturer takes over that selfsame repairing establishment and does the repair work himself. The establishment remains the same. The activities remain the same. Only the proprietor is different. That cannot alter the classification. It must remain the same no matter whether the proprietor be a manufacturer or retailer. It would be absurd if, by changing proprietors, one could get a refund of selective employment tax.
The majority of the tribunal thought that the words ‘repair of … domestic appliances’ were to be qualified by the heading ‘retail distribution’ and ‘retailers’. They
Page 291 of [1970] 2 All ER 286
read these words as if they meant ‘repair of domestic appliances are included if carried out by a retailer’. I do not accept this view. The establishment must be classified according to its own activities and not according to the activities of the proprietor. If its main activity is the repair of domestic appliances, it comes within heading 820(5), no matter whether it be owned by a retailer or a manufacturer.
Conclusion
In my opinion, the establishment of the appellants at Cardiff has, for its main activity, the repair of domestic appliances. That activity comes within heading 820(5). More than half the employees are engaged in it. It is not an activity which qualifies the employer to a refund of selective employment tax. I would dismiss the appeal, accordingly.
WIDGERY LJ. In the early cases decided under the Selective Employment Payments Act 1966, the courts tended to regard the Standard Industrial Classification as if it were a Schedule to the Act, and to be construed accordingly. It is now accepted that this is the wrong approach because the classification does not use the precise language of the Parliamentary draftsman and will not yield its true meaning to the application of rules of construction which assume that such precision was intended. In cases of doubt the primary concern is to give the words a meaning which is consistent with the general scheme of the Act and with the realities of the situation as understood by practical men with knowledge of industry. A decision of the Industrial Tribunal reached on these lines will not be upset by the court unless it is based on a misdirection or otherwise clearly unreasonable.
The important activity of ‘repair’ is dealt with in the classification in a number of different ways. First, one finds Minimum List Headings where repair is expressly included with manufacture. These include heading 370(ships and ships’ engines), heading 383(airframes and aircraft), heading 384(locomotives) and heading 385(railway rolling stock). In the main, these are the products of heavy engineering, the repair of which requires the same heavy plant and equipment as was used in manufacture, although, somewhat incongruously, wheelbarrows and bath chairs are similarly treated (heading 389). Secondly, there are instances where repair is expressly mentioned in association with retail distribution, namely heading 820(5) (retailers of furniture and domestic appliances), heading 820(6) (retailers of cycles, toys and watches) and heading 887(repair and distribution of motor vehicles).Thirdly, one heading deals exclusively with repair, namely heading 888(repair of boots and shoes). In this instance manufacture (heading 450) and distribution (heading 820) (4)) are separated from one another, and also from the activity of repair, the last named being placed logically enough under the general heading of ‘ORDER XXIII—MISCELLANEOUS SERVICES’. Fourthly, in the case of a substantial number of articles, manufacture and distribution are separately and expressly listed without any mention of repair at all. These include agricultural machinery (headings 331 and 832(5)) and machine tools (headings 332 and 832(5)). Fifthly, there is a somewhat obscure reference to repair in heading 349(3) which is included in Order VI (Engineering and Electrical Goods) under the title ‘Other Mechanical Engineering not elsewhere specified’. Heading 349(3) provides:
‘(3). Other mechanical engineering
Establishments manufacturing machinery parts not elsewhere specified, or undertaking general sub-contract or repair work, or whose products are of such a mixed character that they cannot be allocated elsewhere in Order VI.’
Counsel for the Secretary of State submits that the philosophy of this treatment of the activity of repair is to be found in para 8(c) of the Introduction to the Standard Industrial Classification which is as follows:
Page 292 of [1970] 2 All ER 286
‘(c) Repair work. Most kinds of repair work are associated with activities which are classified either to manufacturing or to distribution and in these cases the underlying principle of classification is that where the bulk of the repair work on goods of any particular type is carried out by manufacturers, any establishments specialising in the repair of these goods are classified to manufacturing. Where, however, most of the repairs are carried out at establishments whose main business is distribution the specialist repair establishments are also classified to distribution. Thus establishments repairing radio and television sets, watches and clocks, furniture etc., are classified to the distributive trades. Establishments engaged in the repair of ships, locomotives, aircraft and most kinds of plant and machinery are classified to manufacturing industry … ’
The terms of this Introduction may be used as a guide to the construction of the language of the classification itself. They contain both an explanation of the reasons which underlie that which is explicit in the classification, and guidelines to resolve ambiguities or repair omissions therein. In particular para 8 (c) will often be of assistance in determining whether repair should be associated with manufacture or with distribution when the repair of the article in question is not explicitly dealt with in the classification. The broad distinction seems to be between repairs normally carried out in establishments whose main business is manufacture and repairs normally carried out in establishments whose main business is distribution. The classification is concerned with ‘activities’ and ‘establishments’ rather than with personalities, and I do not think that para 8 (c) associates repair with manufacture merely because the manufacturer tends to do the work in practice. The important consideration is whether the character of the work is such that factory facilities are required to undertake it.
The majority of the tribunal in the present case decided that the repair of washing-machines did not come within heading 820(5) unless the work was carried out in connection with the retail trade, or by a retailer. In my opinion this was a clear misdirection in that it paid insufficient attention to the ‘activity’ and the ‘establishment’ and too much to the identity of the person actually responsible for the work in the particular case. The chairman of the tribunal, and the Divisional Court, took an extreme view in the opposite direction, holding, as I understand it, that the concluding words of heading 820(5) placed all repair of domestic appliances under that heading whatever the circumstances in which the work was done. I venture to think that this gives to the language a precision and rigidity which should be avoided if possible. In my opinion the phrase ‘the … repair of furniture and domestic appliances are included’ is for the avoidance of doubt and serves to show that those activities are not alien to, or excluded from, the ‘retail distribution’ of furniture and domestic appliances. Hence heading 820(5) is always open to consideration when such repair activity is to be classified, but any other appropriate headings must also be considered.
Of the other headings suggested, I consider that heading 365(manufacture of domestic electrical appliances) must be regarded as less apt and specific than heading 820(5). An after-sales service is not part of the operation of manufacture, and the repairs in question do not need factory facilities but are carried out in the customer’s own home.
The tribunal and the Divisional Court thought that a further possible alternative was heading 349(3), but this is a heading of last resort for ‘Mechanical Engineering not elsewhere specified’, which I take to mean ‘not otherwise provided for’. Since this activity can clearly be accounted for under heading 820(5), I do not think that heading 349(3) fell to be considered.
I therefore agree with the conclusion reached by the Divisional Court and would dismiss the appeal.
Page 293 of [1970] 2 All ER 286
PHILLIMORE LJ. The difficulty which has arisen in this case is really due to the fact that there has been a trade change in regard to the repair of washing-machines since the Standard Industrial Classification was drawn up. As Lord Parker CJ pointed out in his judgment, it is to be inferred that the repair of domestic appliances was put into heading 820(5) because at that time—1958—the bulk of such repair work was done either by the retailers or by specialist establishments employed by them.
In recent years, as was established by the evidence, many of the manufacturers of washing-machines have themselves set up an after-sales service at strategic centres all over the country. Thus the appellants’ establishment at Cardiff forms a headquarters from which a team of engineers go out to install, service and above all repair the appellants’ washing-machines at the homes of their owners. The service has obvious advantages both from the point of view of the public and that of the appellants’ themselves, but apart from the fact that they originally manufactured the machines, it has not got much to do with manufacture.
The fact is that the heading in the classification derives from the activity carried out at the establishment and this remains the same as it was in 1958 when the bulk of the work was organised by the retail distributors. Suppose that in 1958 there had been one or two establishments such as the appellants’ at Cardiff run by the manufacturers doing this work—the heading would have been the same.
It would be ridiculous if the incidence of purchase tax was different albeit the activity of repair was the same in the case of one establishment run by the manufacturers and another set up by a retail distributor.
The tax would, of course, be unworkable if an activity placed under one heading in 1958 in the light of the general practice at that time could be altered in 1959 in the light of evidence that the practice had altered, and then perhaps put back again in 1962 when it could be shown that the practice had reverted to that in force in 1958.
Thus is my judgment heading 820(5) remains the appropriate heading for this activity of repair notwithstanding the fact that the bulk of the work is now done by employees of the manufacturers in place of those of the retail distributors. The appropriate heading cannot be altered pending amendment of the classification.
I entirely agree that the other headings canvassed, namely headings 349(3) and 385, are to be regarded as less apt than heading 820(5).
Appeal dismissed. Leave to appeal to the House of Lords granted.
Solicitors: Linklaters & Paines (for the appellants); Solicitor, Department of Employment and Productivity.
Wendy Shockett Barrister.
Procedure Direction
(House of Lords: Scale: Brief fees on petitions for leave to appeal)
[1970] 2 All ER 293
Categories: PRACTICE DIRECTIONS
Court: HOUSE OF LORDS
Hearing Date(s): 14 MAY 1970
House of Lords – Scale of costs – Brief fees on petitions for leave to appeal.
David Stephens, Clerk of the Parliaments
The appeal committee of the House of Lords, with the approval of the Lord Chancellor, has authorised an increase in the figure in the House of Lords scale of costs relating to the brief fee on petitions for leave to appeal. This figure is raised from 7 guineas to 10 guineas.
Home Office v Dorset Yacht Co Ltd
[1970] 2 All ER 294
Categories: TORTS; Negligence: INSURANCE
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 23, 24, 25, 26 FEBRUARY, 2 MARCH, 6 MAY 1970
Negligence – Duty to take care – Borstal trainees – Escape of trainees from custody and control of officers – Trainees working on island – Trainees escaping at night and taking yacht – Collision with, and damage to, second yacht – Whether officers owed duty of care to owners of second yacht – Whether officers responsible for damage caused by act of third persons – Whether officers immune from liability on grounds of public policy.
Ten borstal trainees were working on an island in a harbour in the custody and under the control of three officers. During the night seven of them escaped. It was claimed that at the time of the escape the officers had retired to bed, leaving the trainees to their own devices. The seven got on board a yacht moored off the island and set it in motion. They collided with another yacht, the property of the respondents, and damaged it. The respondents sued the Home Office for the amount of the damage. A preliminary issue was ordered to be tried whether on the facts pleaded in the statement of claim the Home Office, its servants or agents owed any duty of care to the respondents capable of giving rise to a liability in damages with respect to the detention of persons undergoing sentences of borstal training, or with respect to the manner in which such persons were treated, employed, disciplined, controlled or supervised whilst undergoing such sentences. It was admitted that the Home Office would be vicariously liable if an action would lie against any of the borstal officers. On appeal against the decision of the preliminary point in favour of the respondents,
Held – (Viscount Dilhorne dissenting) The appeal would be dismissed because—
(i) (per Lord Reid, Lord Morris of Borth-y-Gest and Lord Pearson)
(a) the taking by the trainees of the nearby yacht and the causing of damage to the other yacht which belonged to the respondents ought to have been foreseen by the borstal officers as likely to occur if they failed to exercise proper control or supervision; in the particular circumstances the officers prima facie owed a duty of care to the respondents (see p 297 c, p 298 a, p 303 j to p 304 a, p 304 g and p 321 b, post); dictum of Lord Atkin in Donoghue (or M’Alister) v Stevenson [1932] All ER Rep at 11 applied;
(b) the fact that the immediate damage to the property of the respondents was caused by the acts of third persons, the trainees, did not prevent the existence of a duty on the part of the officers towards the respondents because (per Lord Reid) the taking of the yacht and the damage to the other was the very kind of thing which the officers ought to have seen to be likely, or (per Lord Morris of Borth-y-Gest and Lord Pearson) the right of the officers to control the trainees constituted a special relation which gave rise to an exception to the general rule that one person is under no duty to control another to prevent his doing damage to a third (see p 300 f and h, p 307 g and p 321 j, post); dictum of Dixon J in Smith v Leurs (1945) 70 CLR at 261, 262, applied;
(c) the fact that something was done in pursuance of statutory authority did not warrant its being done unreasonably so that avoidable damage was negligently caused (see p 301, b, p 305 c and p 322 c and g, post); dictum of Lord Blackburn in Geddis v Proprietors of Bann Reservoir (1878) 3 App Cas at 455 applied;
(d) there was no ground in public policy for granting complete immunity from liability in negligence to the Home Office or its officers (see p 302 j, p 309 f and p 323 b, post).
(ii) (per Lord Diplock) there was material, fit for consideration at the trial, for
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holding both that the officers were acting in breach of instructions and ultra vires and that they owed a duty of care to the respondents (see p 333 g and & p 334 j to p 335 a, post).
Decision of the Court of Appeal sub nom Dorset Yacht Co Ltd v Home Office [1969] 2 All ER 564 affirmed.
Notes
For negligence in relation to statutory functions, see 38 Halsbury’s Laws (3rd Edn) 6, 7, para 3, and for circumstances where the duty to take care arises, see ibid 7, para 4.
For the manner of exercise of statutory powers, see 30 ibid 688, 689, para 1327, and for the liability of public officers in tort, see 30 ibid 702, 703, paras 1346, 1347.
Cases referred to in opinions
Carmarthenshire County Council v Lewis [1955] 1 All ER 565, [1955] AC 549, [1955] 2 WLR 517, 119 JP 230, Digest (Cont Vol A) 1168, 569a.
Comr for Railways v Quinlan [1964] 1 All ER 897, [1964] AC 1054, [1964] 2 WLR 817, Digest (Cont Vol B) 558, 380a.
D’Arcy v Prison Comrs (1955) The Times, 15, 16, 17 November.
Davis Contractors Ltd v Fareham Urban District Council [1956] 2 All ER 145, [1956] AC 696, [1956] 3 WLR 37, Digest (Cont Vol A) 298, 3414a.
Deyong v Shenburn [1946] 1 All ER 226, [1946] KB 227, 115 LJKB 262, 174 LT 129, 34 Digest (Repl) 144, 987.
Donoghue (or M’Alister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, 101 LJPC 119, 147 LT 281, 36 Digest (Repl) 85, 458.
East Suffolk Rivers Catchment Board v Kent [1940] 4 All ER 527, [1941] AC 74, 110 LJKB 252, 165 LT 65, 105 JP 129, 41 Digest (Repl) 57, 370.
Edwards v West Herts Group Hospital Management Committee [1957] 1 All ER 541, [1957] 1 WLR 415, 121 JP 212, 34 Digest (Repl) 144, 988.
Ellis v Home Office [1953] 2 All ER 149, [1953] 2 QB 135, [1953] 3 WLR 105, Digest [Cont Vol A] 1167, 564a.
Geddis v Proprietors of Bann Reservoir (1878) 3 App Cas 430, 13 Digest (Repl) 318, 1266.
Greenwell v Prison Comrs (1951) 101 LJ 486.
Hadley v Baxendale (1854) 9 Exch 341, [1843–60] All ER Rep 461, 23 LJEx 179, 23 LTOS 69, 156 ER 145, 17 Digest (Repl) 91, 99.
Hay (or Bourhill) v Young [1942] 2 All ER 396, [1943] AC 92, 111 LJPC 97, 167 LT 261, 36 Digest (Repl) 16, 66.
Haynes v Harwood [1935] 1 KB 146, [1934] All ER Rep 103, 104 LJKB 63, 152 LT 121, 36 Digest (Repl) 151, 795.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, Digest (Cont Vol A) 51, 1117a.
Heaven v Pender (1883) 11 QBD 503, [1881–85] All ER Rep 35, 52 LJQB 702, 49 LT 357, 47 JP 709, 36 Digest (Repl) 7, 10.
Holgate v Lancashire Mental Hospitals Board, Gill and Robertson [1937] 4 All ER 19, 33 Digest (Repl) 711, 1679.
Indermaur v Dames (1866) LR 1 CP 274, [1861–73] All ER Rep 15, 35 LJCP 184, 14 LT 484; affd (1867) LR 2 CP 311, 36 Digest (Repl) 46, 246.
Kemp and Dougall v Darngavil Coal Co Ltd 1909 SC 1314.
Lickbarrow v Mason (1787) 2 Term Rep 63, [1775–1802] All ER Rep 1, 100 ER 35; on appeal sub nom Mason v Lickbarrow (1790) 1 Hy Bl 357; subsequent proceedings (1794) 5 Term Rep 683, [1775–1802] All ER Rep 1, 39 Digest (Repl) 750, 2279.
Lochgelly Iron & Coal Co Ltd v M’Mullan [1934] AC 1, 102 LJPC 123, 149 LT 526, 34 Digest (Repl) 709, 4852.
Lord v Pacific Steam Navigation Co Ltd, The Oropesa [1943] 1 All ER 211, sub nom The Oropesa, [1943] P 32, 112 LJP 91, 168 LT 364, 36 Digest (Repl) 231, 1231.
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Munday (J R) Ltd v London County Council [1916] 2 KB 331, [1916–17] All ER Rep 824, 85 LJKB 1509, 115 LT 99, 80 JP 403, 36 Digest (Repl) 195, 1028.
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126, Digest (Cont Vol A) 1148, 185a.
Palsgraf v Long Island Ry (1928) 248 NY 339.
Polemis and Furnes, Whithy & Co Ltd, Re [1921] 3 KB 560, [1921] All ER Rep 40, 90 LJKB 1353, 126 LT 154, 36 Digest (Repl) 38, 185.
Read v J Lyons & Co Ltd [1946] 2 All ER 471, [1947] AC 156, [1947] LJR 39, 175 LT 413, 36 Digest (Repl) 83, 452.
Rylands v Fletcher (1868) LR 3 HL 330, [1861–73] All ER Rep 1, 37 LJEx 161, 19 LT 220, 33 JP 70, 36 Digest (Repl) 282, 334.
Scott’s Trustees v Moss 1889 17 R (Ct of Sess) 32, 36 Digest (Repl) 196, * 1838.
Smith v Leurs (1945) 70 CLR 256.
Stansbie v Troman [1948] 1 All ER 599, [1948] 2 KB 48, [1948] LJR 1206, 36 Digest (Repl) 21, 87.
Thorne and Rowe v State of Western Australia [1964] WAR 147, Digest (Cont Vol B) 603, *60a.
Weld-Blundell v Stephens [1920] AC 956, [1920] All ER Rep 32, 89 LJKB 705, 123 LJT 593, 36 Digest (Repl) 201, 1064.
Williams v New York State (1955) 127 NE (2d) 545.
Appeal
This was an appeal by the Home Office from the order of the Court of Appeal (Lord Denning MR and Edmund Davis and Phillimore LJJ) dated 10 March 1969 and reported [1969] 2 All ER 564, dismissing the appeal of the Home Office from a judgment of Thesiger J dated 19 December 1968 who decided a preliminary issue on a point of law in favour of the respondents, the Dorset Yacht Co Ltd. The facts are set out in the opinion of Lord Reid.
The Attorney General (Sir Elwyn Jones QC), LJ Blom-Cooper QC and Gordon Slynn for the Home Office.
J R B Fox-Andrews QC and W A Macpherson for the respondents.
Their Lordships took time for consideration
6 May 1970. The following opinions were delivered.
LORD REID. My Lords, on 21 September 1962, a party of borstal trainees were working on Brownsea Island in Poole Harbour under the supervision and control of three borstal officers. During that night seven of them escaped and went aboard a yacht which they found nearby. They set this yacht in motion and collided with the respondents’ yacht which was moored in the vicinity. Then they boarded the respondents’ yacht. Much damage was done to this yacht by the collision and some by the subsequent conduct of these trainees. The respondents sue the appellant, the Home Office, for the amount of this damage.
The case comes before your Lordships on a preliminary issue whether the Home Office or these borstal officers owed any duty of care to the respondents capable of giving rise to a liability in damages. So it must be assumed that the respondents can prove all that they could prove on the pleadings if the case goes to trial. The question then is whether on that assumption the Home Office would be liable in damages. It is admitted that the Home Office would be vicariously liable if an action would lie against any of these borstal officers.
The facts which I think we must assume are that this party of trainees was
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in the lawful custody of the governor of the Portland Borstal Institution and was sent by him to Brownsea Island on a training exercise in the custody and under the control of the three officers with instructions to keep them in custody and under control. But in breach of their instructions these officers simply went to bed leaving the trainees to their own devices. If they had obeyed their instructions they could and would have prevented these trainees from escaping. They would therefore be guilty of the disciplinary offences of contributing by carelessness or neglect to the escape of a prisoner and to the occurrence of loss, damage or injury to any person or property. All the escaping trainees had criminal records and five of them had a record of previous escapes from borstal institutions. The three officers knew or ought to have known that these trainees would probably try to escape during the night, would take some vessel to make good their escape and would probably cause damage to it or some other vessel. There were numerous vessels moored in the harbour, and the trainees could readily board one of them. So it was a likely consequence of their neglect of duty that the respondents’ yacht would suffer damage.
The case for the Home Office is that under no circumstances can borstal officers owe any duty to any member of the public to take care to prevent trainees under their control or supervision from injuring him or his property. If that is the law then enquiry into the facts of this case would be a waste of time and money because whatever the facts may be the respondents must lose. That case is based on three main arguments. First, it is said that there is virtually no authority for imposing a duty of this kind. Secondly, it is said that no person can be liable for a wrong done by another who is of full age and capacity and who is not the servant or acting on behalf of that person. And thirdly, it is said that public policy (or the policy of the relevant legislation) requires that these officers should be immune from any such liability.
The first would at one time have been a strong argument. About the beginning of this century most eminent lawyers thought that there were a number of separate torts involving negligence each with its own rules, and they were most unwilling to add more. They were of course aware from a number of leading cases that in the past the courts had from time to time recognised new duties and new grounds of action. But the heroic age was over, it was time to cultivate certainty and security in the law; the categories of negligence were virtually closed. The learned Attorney General invited us to return to those halcyon days, but, attractive though it may be, I cannot accede to his invitation.
In later years there has been a steady trend towards regarding the law of negligence as depending on principle so that, when a new point emerges, one should ask not whether it is covered by authority but whether recognised principles apply to it. Donoghue v Stevenson may be regarded as a milestone, and the well-known passage in Lord Atkin’s speech ([1932] AC at 580, [1932] All ER Rep at 11) should I think be regarded as a statement of principle. It is not to be treated as if it were a statutory definition. It will require qualification in new circumstances. But I think that the time has come when we can and should say that it ought to apply unless there is some justification or valid explanation for its exclusion. For example, causing economic loss is a different matter; for one thing it is often caused by deliberate action. Competition involves traders being entitled to damage their rivals’ interests by promoting their own, and there is a long chapter of the law determining in what circumstances owners of land can, and in what circumstances they may not, use their proprietary rights so as to injure their neighbours. But where negligence is involved the tendency has been to apply principles analogous to those stated by Lord Atkin ([1932] AC at 580, [1932] All ER Rep at 11) (cf Hedley Byrne & Co Ltd v Heller & Partners Ltd). And when a person has done nothing to put himself in any relationship with another person in distress or with his property mere accidental propinquity does not require
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him to go to that person’s assistance. There may be a moral duty to do so, but it is not practicable to make it a legal duty. And then there are cases, eg with regard to landlord and tenant, where the law was settled long ago and neither Parliament nor this House sitting judicially has made any move to alter it. But I can see nothing to prevent our approaching the present case with Lord Atkin’s principles ([1932] AC at 580, [1932] All ER Rep at 11) in mind.
Even so it is said that the respondents must fail because there is a general principle that no person can be responsible for the acts of another who is not his servant or acting on his behalf. But here the ground of liability is not responsibility for the acts of the escaping trainees; it is liability for damage caused by the carelessness of these officers in the knowledge that their carelessness would probably result in the trainees causing damage of this kind. So the question is really one of remoteness of damage. And I must consider to what extent the law regards the acts of another person as breaking the chain of causation between the defendants’ carelessness and the damage to the plaintiff.
There is an obvious difference between a case where all the links between the carelessness and the damage are inanimate so that, looking back after the event, it can be seen that the damage was in fact the inevitable result of the careless act or omission, and a case where one of the links is some human action. In the former case the damage was in fact caused by the careless conduct, however unforeseeable it may have been at the time that anything like this would happen. At one time the law was that unforeseeability was no defence (Re Polemis and Furness, Whithy & Co Ltd). But the law now is that there is no liability unless the damage was of a kind which was foreseeable (Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound).
On the other hand, if human action (other than an instinctive reaction) is one of the links in the chain, it cannot be said that, looking back, the damage was the inevitable result of the careless conduct. No one in practice accepts the possible philosophic view that everything that happens was predetermined. Yet it has never been the law that the intervention of human action always prevents the ultimate damage from being regarded as having been caused by the original carelessness. The convenient phrase novus actus interveniens denotes those cases where such action is regarded as breaking the chain and preventing the damage from being held to be caused by the careless conduct. But every day there are many cases where, although one of the connecting links is deliberate human action, the law has no difficulty in holding that the defendant’s conduct caused the plaintiff loss.
‘There are some propositions that … are … beyond question in connection with this class of case. One is that human action does not per se sever the connected sequence of acts. The mere fact that human action intervenes does not prevent the sufferer from saying that damages for injury due to that human action, as one of the elements in the sequence, is recoverable from the original wrongdoer.’
(per Lord Wright in Lord v Pacific Steam Navigation Co Ltd, The Oropesa ([1943] 1 All ER 211 at 214, [1943] P 32 at 37)). What then is the dividing line? Is it foreseeability or is it such a degree of probability as warrants the conclusion that the intervening human conduct was the natural and probable result of what preceded it? There is a world of difference between the two. If I buy a ticket in a lottery or enter a football pool it is foreseeable that I may win a very large prize—some competitor must win it. But, whatever hopes gamblers may entertain, no one could say that winning such a prize is a natural and probable result of entering such a competition. In Haynes v Harwood ([1935] 1 KB 146 at 156, [1934] All ER Rep 103 at 107), Greer LJ said:
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‘If what is relied upon as novus actus interveniens is the very kind of thing which is likely to happen if the want of care which is alleged takes place, the principle embodied in the maxim is no defence. The whole question is whether or not, to use the words of the leading case, Hadley v Baxendale, the accident can be said to be “the natural and probable result” of the breach of duty.’
There is a well-known Scottish case, Scott’s Trustees v Moss, which so far as I am aware has received no adverse comment and which I can cite as an authority because the Scots and English law of negligence are the same. The pursuers occupied land near a place where the defender, a promoter of entertainment, had advertised that a balloon would descend. It descended in the pursuers’ field and a crowd who had gathered burst into that field and caused considerable damage. The defender being sued for that damage pleaded unsuccessfully that the pursuers’ averments were irrelevant. The Lord President (Lord Inglis) said (1889 17 R (Ct of Sess) at 36):
‘This was an exhibition of an entirely different character from an ordinary balloon ascent, in which the balloon travels where the wind carries it and makes its descent just where it is possible for it to do so. Here the descent was to be at the Hawkhill Recreation Grounds. A number of people were assembled there, and were charged for admission—and that makes it all the more clear that the descent was to be at or in the immediate vicinity of the Hawkhill Grounds. Otherwise, those who paid for admission to view the descent would not have seen it—if the descent had taken place at a distance, or at a spot which was uncertain. But in addition to the spectators who were inside the grounds, the advertisement most naturally attracted the attention of the populace generally, and as a balloon can be seen to ascend, and also the aeronaut to descend out of it, although the public are not within a particular enclosure, of course a crowd of people came to the neighbourhood. This was quite to be expected; nothing else could be expected; and they stood in the roads and other places adjoining the recreation grounds and witnessed the descent. The descent took place in a field upon the adjoining farm of Lochend, which was in the occupation of the pursuers, and there was no doubt that the natural consequence of the descent taking place there was that all the crowds of people in the neighbourhood immediately rushed to the field in order to see what had happened or was going to happen.
‘The complaint made by the pursuers is that these people entered the field and broke down the gates and fences and destroyed the crops, and the case made against Mr Moss is that he ought to have foreseen that the descent would be made in some field adjoining the recreation grounds, and that the natural and almost inevitable consequence of that would be that the crowd would break into the field and destroy the crops. No doubt it could not easily be foreseen that the descent would be made in that particular field—but, on the other hand, the recreation grounds were surrounded by cultivated land, and it could be very easily foreseen that the descent would take place on some piece of cultivated ground in the immediate vicinity.’
Lord Shand said (1889 17 R (Ct of Sess) at 37):
‘I agree that in the ordinary case the mere bringing of a crowd together does not lead to the inference that the person who has been instrumental in assembling the crowd is answerable for its actings. I think the principle which ought to receive effect is that if the collection of the crowd, and the actings of the crowd,
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are the natural and probable consequence of the action of the defender—a consequence which the defender ought to have foreseen,—then the case is relevant; for in that case the pursuer undertakes in effect to show that the defender’s proceedings were the direct cause of the damage done, and I think this record now states a case of that class. No doubt, nice questions of fact may arise in the inquiry which will take place. The defender says that he did not desire the presence of the crowd; but, on the other hand, if the presence of the crowd was the natural consequence of his advertisement, he cannot disconnect himself from the gathering. Then the defender may maintain that he did not anticipate that the descent would take place in the pursuers’ field. But the pursuers undertake to show that it was quite probable that the descent should occur there. Again, the defender says that he cannot be held answerable for the damage done by a crowd of outsiders. But the reply is that it was only to be expected that the crowd would rush into the field in which the descent should occur, and that the result would be the damage of which he complains. If it can be shown on the evidence that the defender was the proximate cause of the damage, that it was owing to his action that the crowd assembled, and that the garden was invaded and injury done, then the pursuers would be entitled to a verdict upon the issue. If these results were not such as should reasonably have been anticipated from the action of the defender, then the verdict should be in his favour.’
These cases show that, where human action forms one of the links between the original wrongdoing of the defendant and the loss suffered by the plaintiff, that action must at least have been something very likely to happen if it is not to be regarded as novus actus interveniens breaking the chain of causation. I do not think that a mere foreseeable possibility is or should be sufficient, for then the intervening human action can more properly be regarded as a new cause than as a consequence of the original wrongdoing. But if the intervening action was likely to happen I do not think it can matter whether that action was innocent or tortious or criminal. Unfortunately tortious or criminal action by a third party is often the ‘very kind of thing’ which is likely to happen as a result of the wrongful or careless act of the defendant. And in the present case, on the facts which we must assume at this stage, I think that the taking of a boat by the escaping trainees and their unskilful navigation leading to damage to another vessel where the very kind of thing that these borstal officers ought to have seen to be likely.
There was an attempt to draw a distinction between loss caused to the plaintiff by failure to control an adult of full capacity and loss caused by failure to control a child or mental defective. As regards causation, no doubt it is easier to infer novus actus interveniens in the case of an adult but that seems to me to be the only distinction. In the present case on the assumed facts there would in my view be no novus actus when the trainees damaged the respondents’ property and I would therefore hold that damage to have been caused by the borstal officers’ negligence.
If the carelessness of the borstal officers was the cause of the respondents’ loss what justification is there for holding that they had no duty to take care? The first argument was that their right and power to control the trainees was purely statutory and that any duty to exercise that right and power was only a statutory duty owed to the Crown. I would agree but there is very good authority for the proposition that, if a person performs a statutory duty carelessly so that he causes damage to a member of the public which would not have happened if he had performed his duty properly, he may be liable. In Geddis v Proprietors of Bann Reservoir ((1878) 3 App Cas 430 at 455, 456) Lord Blackburn said:
‘For I take it, without citing cases, that it is now thoroughly well established that no action will lie for doing that which the legislature has authorized, if it
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be done without negligence, although it does occasion damage to anyone; but an action does lie for doing that which the legislature has authorized, if it be done negligently.’
The reason for that is, I think, that Parliament deems it to be in the public interest that things otherwise unjustifiable should be done, and that those who do such things with due care should be immune from liability to persons who may suffer thereby. But Parliament cannot reasonably be supposed to have licensed those who do such things to act negligently in disregard of the interests of others so as to cause them needless damage.
Where Parliament confers a discretion the position is not the same. Then there may, and almost certainly will, be errors of judgment in exercising such a discretion and Parliament cannot have intended that members of the public should be entitled to sue in respect of such errors. But there must come a stage when the discretion is exercised so carelessly or unreasonably that there has been no real exercise of the discretion which Parliament has conferred. The person purporting to exercise his discretion has acted in abuse or excess of his power. Parliament cannot be supposed to have granted immunity to persons who do that. The present case does not raise that issue because no discretion was given to these borstal officers. They were given orders which they negligently failed to carry out. But the county court case of Greenwell v Prison Comrs was relied on and I must deal with it. Some 290 trainees were held in custody in an open borstal institution. During the previous year there had been no less than 172 escapes. Two trainees escaped and took and damaged the plaintiff’s motor truck; one of these trainees had escaped on three previous occasions from this institution. For three months since his last escape the question of his removal to a more secure institution had been under consideration but no decision had been reached. The learned judge held that the authorities there had been negligent. In my view, this decision could only be upheld if it could be said that the failure of those authorities to deal with the situation was so unreasonable as to show that they had been guilty of a breach of their statutory duty and that this had caused the loss suffered by the plaintiff.
Governors of these institutions and other responsible authorities have a difficult and delicate task. There was some argument whether the present system is fully authorised by the relevant statutes, but I shall assume that it is. That system is based on the belief that it assists the rehabilitation of trainees to give them as much freedom and responsibility as possible. So the responsible authorities must weigh on the one hand the public interest of protecting neighbours and their property from the depredations of escaping trainees and on the other hand the public interest of promoting rehabilitation. Obviously there is much room here for differences of opinion and errors of judgment. In my view there can be no liability if the discretion is exercised with due care. There could only be liability if the person entrusted with discretion either unreasonably failed to carry out his duty to consider the matter or reached a conclusion so unreasonable as again to show failure to do his duty. It was suggested that these trainees might have been deliberately released at the time when they escaped and then there could have been no liability. I do not agree. Presumably when trainees are released either temporarily or permanently some care is taken to see that there is no need for them to resort to crime to get food or transport. I could not imagine any more unreasonable exercise of discretion than to release trainees on an island in the middle of the night without making any provision for their future welfare.
We were also referred to Holgate v Lancashire Mental Hospitals Board, Gill and Robertson where the alleged fault was in releasing a mental patient. For similar reasons
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I think this decision could only be supported if it could be said that the release was authorised so carelessly that there had been no real exercise of discretion.
If the Home Office is right in saying that there can never be a right in a private individual to complain of negligent exercise of a duty to keep a prisoner under control, I do not see how Ellis v Home Office can be correct. The plaintiff was in prison and on one occasion, as he alleged, owing to inadequate control by warders another prisoner assaulted and injured him. It was assumed that he had a right of action, and the learned Attorney General did not challenge this. But when the other prisoner assaulted Ellis he was not in fact under control or he would not have been permitted to carry out the assault. It would be very odd if the only persons entitled to complain of negligent performance of the statutory duty to control prisoners were other prisoners. If the main argument for the Home Office was right, I think it necessarily involves holding that Ellis v Home Office was wrong.
It was suggested that a decision against the Home Office would have very far reaching effects; it was indeed suggested in the Court of Appeal ([1969] 2 All ER 564, [1969] 2 QB 412) that it would make the Home Office liable for the loss occasioned by a burglary committed by a trainee on parole or a prisoner permitted to go out to attend a funeral. But there are two reasons why in the vast majority of cases that would not be so. In the first place it would have to be shown that the decision to allow any such release was so unreasonable that it could not be regarded as a real exercise of discretion by the responsible officer who authorised the release. And secondly it would have to be shown that the commission of the offence was the natural and probable, as distinct from merely a foreseeable, result of the release—that there was no novus actus interveniens. Greenwell’s case received a good deal of publicity at the time; it was commented on in the Law Quarterly Review (Vol 68, p 18). But it has not been followed by a series of claims. I think the fears of the Home Office are unfounded; I cannot believe that negligence or dereliction of duty is widespread among prison or borstal officers.
Finally, I must deal with public policy. It is argued that it would be contrary to public policy to hold the Home Office or its officers liable to a member of the public for this carelessness—or indeed any failure of duty on their part. The basic question is who shall bear the loss caused by that carelessness—the innocent respondents or the Home Office who are vicariously liable for the conduct of their careless officers? I do not think that the argument for the Home Office can be put better than it was put by the Court of Appeals of New York in Williams v New York State ((1955) 127 NE (2d) 545 at 550):
‘… public policy also requires that the State be not held liable. To hold otherwise would impose a heavy responsibility upon the State, or dissuade the wardens and principal keepers of our prison system from continued experimentation with “minimum security” work details—which provide a means for encouraging better-risk prisoners to exercise their senses of responsibility and honour and so prepare themselves for their eventual return to society. Since 1917, the Legislature has expressly provided for out-of-prison work, Correction Law, § 182, and its intention should be respected without fostering the reluctance of prison officials to assign eligible men to minimum security work, lest they thereby give rise to costly claims against the State, or indeed inducing the State itself to terminate this “salutary procedure” looking toward rehabilitation.’
It may be that public servants of the State of New York are so apprehensive, easily dissuaded from doing their duty, and intent on preserving public funds from costly claims, that they could be influenced in this way. But my experience leads me to believe that Her Majesty’s servants are made of sterner stuff. So I have no hesitation in rejecting this argument. I can see no good ground in public policy for giving this immunity to a government department. I would dismiss this appeal.
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LORD MORRIS OF BORTH-Y-GEST. My Lords, the claim which the respondents advanced in launching this litigation was that their property had been damaged by persons who were in charge of servants or agents of the Home Office and that the damage was the result of the negligence of those servants or agents in permitting or in not preventing the occurrence of the damage. Apart from other defences it was pleaded that in any event no duty of care was owed to the respondents. The facts have not yet been ascertained. It was thought fit, however, to direct that there should be a preliminary trial of a question of law. That was presumably on the basis that it would be of no advantage to investigate the facts that are alleged if, on the assumption that they could all be established, and on the further assumption that if established they suggested careless conduct, there could even so in no circumstances be success in the litigation for the reason that no duty of care was owed to the respondents.
It is important to observe the precise point of law which has been presented for determination. Assuming that all the facts in the statement of claim are proved would there be owed to the respondents ‘any duty of care … capable of giving rise to a liability in damages’? The words ‘any’ and ‘capable of’ are to be noted. If it is held as a matter of law that in the circumstances there was a duty of care owed to the respondents, it would not follow that proof of the facts alleged in the statement of claim would necessarily result in victory for the respondents. Assuming that some duty of care was owed to the respondents being a duty of care with respect to the detention of those in charge and to ‘the manner in which such persons were treated, employed, disciplined, controlled or supervised’, it would not be until all the relevant facts and circumstances had been examined that it could be determined: (a) what was the exact nature and quality and extent of the duty that was owed; and (b) whether there was or was not a breach of the duty as it was found to be. Questions as to resulting or recoverable damage would of course further arise.
It is therefore, in my view, important to remember that we are only asked to decide whether, on proof of the facts pleaded, there was some duty of care. We are not asked to say, and could not say, that if the facts pleaded are proved then breach of a duty owed would automatically be proved. We are not asked to say that the conduct alleged must be held to have been careless conduct. We are only asked to say whether, assuming the facts to have been as pleaded, there was a duty of care owed to the respondents which could or might result in their being able to recover some damages.
The significant facts (ie the alleged facts) can shortly be summarised. Seven boys who had been sentenced to borstal training were (with probably a few others) on an island in Poole Harbour. They had been working there under control and supervision. They were boys whose records included convictions for breaking and entering premises, for larceny and for taking away vehicles without consent. Five of them had a record of previous escapes from borstal institutions. Lying at moorings off the island was a yacht. There was another yacht nearby. There was no barrier which was effective to prevent the boys from gaining access to the yachts. The boys were in the charge of three officers.
On these facts a normal or even modest measure of prescience and prevision must have led any ordinary person, but rather specially an officer in charge, to realise that the boys might wish to escape and might use a yacht if one was near at hand to help them to do so. That is exactly what it is said that seven boys did. In my view, the officers must have appreciated that either in an escape attempt or by reason of some other prompting the boys might interfere with one of the yachts with consequent likelihood of doing some injury to it. The risk of such a happening was glaringly obvious. The possibilities of damage being done to one of the nearby yachts (assuming that they were nearby) were many and apparent. In that situation and in those circumstances I consider that a duty of care was owed by the officers to the owners of the nearby yachts. The principle expressed in Lord Atkin’s classic words in his
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speech in Donoghue v Stevenson ([1932] AC 562 at 580, [1932] All ER Rep 1 at11) would seem to be directly applicable. If the principle applied, then it was incumbent on the officers to avoid acts or omissions which they could reasonably foresee would be likely to injure the owners of yachts. They were persons so closely and directly affected by what the officers did or failed to do that they ought reasonably to have been in the contemplation of the officers.
It has been generally recognised that Lord Atkin’s statement of principle ([1932] AC 562 at 580, [1932] All ER Rep 1 at 11) cannot be applied as though his words were contained in a positive and precise legislative enactment. It cannot be, therefore, that in all circumstances where certain consequences can reasonably be foreseen a duty of care arises. A failure to take some preventive action or rescue operation does not of and by itself necessarily betoken any breach of a legal duty of care. It has in consequence been suggested that in situations where reasonable foresight can be in operation the decision of a court whether a duty of care existed is in reality a policy decision. So it was strongly urged that, in the circumstances of a case such as the present, there are reasons of public policy which should induce a court to hold that no duty of care arises which is separate from the duty owed by the officers to those by whom they were employed.
It is also always to be remembered that Lord Atkin’s speech was made in the affirmation of the proposition that a manufacturer of products which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will lead to an injury to the consumer’s life or property owes a duty to the consumer to take that reasonable care.
It is to be remembered that it is a notable and laudable feature of the system of borstal training that it aims to achieve all-round development of character and capacities. ‘It is based on progressive trust demanding increasing personal decision, responsibility and self-control’; it ‘is not compatible with the maintenance of “safe custody” as an overriding consideration’a. In keeping with the policy which has been most carefully and constructively evolved it is inevitable that close and constant supervision of each person under training is neither planned nor desirable. The aim is to train to educate and to direct. The hope is to bring about the result that those under training will return as honest and useful members of society. All this is relevant when considering the measure of any duty of care which the officers might owe to the respondents and whether they failed to do what in the circumstances they ought to have done; but it in no way determines the question whether the officers did owe some duty of care.
The conclusion that I have reached is that the officers owed a duty to the respondents to take such care as in all the circumstances was reasonable with a view of preventing the boys in their charge and under their control from causing damage to the nearby property of the respondents if that was a happening of which there was a manifest and obvious risk. If in the daytime the officers saw that the boys in their charge and under their control were deliberately setting out to damage a nearby yacht or were in the act damaging it and if the officers could readily have caused the boys to desist, the facts would warrant a conclusion that there was a failure to take reasonable care. In other circumstances and having regard in particular to the fact that the officers were operating a system which was legitimately designed to give a measure of freedom to those undergoing training, it might well be that the happening of events such as escapes or the causing of damage would not suffice to prove that there had been a failure to exercise due and reasonable care. If the point of law now raised is decided in favour of the respondents it does not involve that proof of an escape would necessarily be proof of want of care amounting to a breach of duty towards a neighbour. Nor does the point of law involve that any duty of care
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owed to the respondents need be defined or limited (when the facts ultimately are ascertained) by reference to preventing the escape of boys in training. The concern of the respondents is for their property. There might be escapes which would be of no concern whatsoever to the respondents. There might be damage to their property which was unrelated to any escape. In the present case the alleged damage to property is said to have been in connection with or following on escapes. But the duty which the respondents in this case claim was owed to them was a duty to take reasonable care in the exercise of powers of control over the boys so as to prevent loss and damage being sustained by the respondents.
It has not been contended that the respondents had any right of action on the basis of any breach of statutory duty imposed either on the Home Office or on the borstal officers. The duty of care which was owed to the respondents was a duty which arose from the facts and which was quite independent of any statutory obligations. There are statutory powers which authorise detention in Borstal institutions. But the fact that something is done in pursuance of statutory authority does not warrant its being done unreasonably so that avoidable damage is negligently caused: see Geddis v Proprietors of Bann Reservoir ((1878) 3 App Cas 430 at 455, 456).
The duty of care now being considered will to a large extent be conditioned by the duty owed by the officers to their employers and by the instructions given by the employers. Provided instructions are lawful ones they must be obeyed by the officers to whom they are issued. It could not be held that a duty of care owed by the officers to the respondents required an exercise of control over the boys which was more stringent than or which ran counter to the instructions issued to the officers as to the way in which their duties were to be discharged. But the duty of care which is owed to the respondents is a separate duty from that owned by the officers to their employers. The respondents sue in their own right and for a wrong done to them and not (to use a phrase of Cardozo J in Palsgraf v Long Island Ry) ‘as the vicarious beneficiary of a breach of duty to another’.
The allegations of fact which are made in the statement of claim are such that, if there is any liability in the Home Office, it is on the basis of vicarious liability for the acts or omissions of the officers as their servants or agents. For the reasons which I have given I consider that the officers could not be held to have been under any duty to the respondents to control the boys in some way which conflicted with the directives of the Home Office. Insofar as the statement of claim may allege liability other than on the basis of vicarious liability different considerations arise. Thus there is an allegation that there was a failure to give any or any adequate instructions to the officers for maintaining effective watch and control over the boys at night. That may mean that it is proposed at the trial to express criticism of the system which was in operation. That, however, was a matter which was in the discretion of those who had to decide how best to regulate the conditions under which borstal training should take place. We are not in the present case concerned with a decision to release a boy from training. It might well happen that unfortunate consequences followed a release. A boy might commit crimes shortly afterwards. But the decision would be one made in the exercise of a discretion by someone acting within his powers. Nor is the present case to be compared with Greenwell v Prison Comrs which was decided in 1951. It is not said in the present case that the boys never ought to have been where they were. In Greenwell’s case two boys went away from an ‘open’ borstal institution to which they had been sent. It was held that in regard to one of the boys there was liability for damage locally done. The basis appears to have been that, having regard to the record of that particular boy, it was not reasonable to have him and to keep him in an ‘open’ institution where he would be under no restraint. While I would agree with the general statement of the learned
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judge in that case to the effect that a duty was owed to a nearby resident to take reasonable care to prevent injury being done to his property by the boys at the institution, the judgment is not precise as to where the breach of duty lay. The particular institution was a completely open one. There were no physical barriers of any kind to prevent escape. It was accepted that it would have been very difficult to take steps to prevent ‘escapes’. It does not appear from the judgment that there was any finding of carelessness or neglect on the part of the officers in their care of the boys at the institution. But the boy who did damage in respect of which it was held that there was liability had a bad record. He had three times previously gone away from this institution. I prefer so to describe his movements because where effective steps to limit movements can be ruled out as being impracticable the word ‘escape’ does not seem to be the appropriate word. After the last time when the boy had gone away or ‘escaped’ from the institution (which was in the month of October 1949, some three months before the ‘escape’ in January 1950 which gave rise to the claim) it is recorded in the judgment that ‘the question of his removal had arisen’. The basis of the judgment seems to have been expressed in the following words:
‘Having regard to the great number of escapes taking place to the crimes being committed, and particularly to Lawrence’s record of previous escapes, I cannot think it was reasonable to have this boy in this Institution, under no restraint whatever so that he could as easily escape for the fourth time on January 31 1950 as he had done on previous occasions. Moreover the question of his removal had been outstanding for a long time, indeed ever since his previous escape in October 1949 and yet he was still there … The plain fact is, I think, that the Defendants and their Governor found Lawrence such a challenge to their sincere desire to reform him that they forgot or overlooked, perhaps temporarily, their duty to their neighbours such as the Plaintiff.’
Who then was negligent? It is rather vague. The view that there was a failure to give consideration to the case was a surmise. It may be that someone made a decision that Lawrence was for the time being to remain at the institution but that the matter was later to be reconsidered.
Whatever was the right result in that particular case, I think that it is important to point out that liability should not be held to result from what might be an error of judgment on the part of someone making a decision which it is within his powers and his discretion to make. The evidence in Greenwell’s case was that from a reformatory point of view the results have been considerably better where training has been in open institutions, rather than in closed institutions. As the whole system of borstal training aims at reform and rehabilitation, it is clear that decisions of policy will have to be made on a weighing up of the balance of competing considerations as to the appropriate course to be followed in particular case. There should not be liability merely because unfortunate consequences have followed on a decision which someone has in his discretion made while acting within his powers.
If A can reasonably foresee that some act or omission of his may have the result that loss or damage may be suffered by B who is someone who would be closely and directly affected by the act or omission there will be some circumstances in which a legal duty will be owed by A to B and some in which it will not. The question arises what is the dividing line and on which side does the present case fall? The fact that the immediate damage suffered by B may have been caused by C does not affect the question whether A owed a duty to B; such fact would only relate to a question whether the act or omission of A did result in damage to B. Some act on the part of C might be the very kind of thing which would be likely to happen if there was a breach of duty by A.
In answering the question which I have posed help will sometimes be derived by
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considering the way in which claims arising in particular cases have been dealt with by the courts. Particular decisions in relation to claims arising from sets of facts comparable to those being investigated may if approved give guidance. But precedents do not fix the limits of what may be called duty situations; they illustrate them. If there are no clear-cut precedents the court may have to reach decision whether, once the facts and circumstances of a situation are ascertained, it can be said that it was a ‘duty situation’. What should be the basis for a decision? Lord Atkin in his speech in Donoghue v Stevenson ([1932] AC at 580, [1932] All ER Rep at 11) said:
‘At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. The liability for negligence, whether you style it such or treat it as in other systems as a species of “culpa”, is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy.’
At the conclusion of his speech Lord Atkin said ([1932] AC at 599, [1932] All ER Rep at 20) that it is advantageous if the law ‘is in accordance with sound commonsense’.
I consider that the feature in the present case that there was a right to exercise control over the boys makes the present case sufficiently analogous with cases in which it has been held that there was a duty situation as to make it reasonable so to hold here. In his judgment in Smith v Leurs ((1945) 70 CLR,256 at 261,262), Dixon J said:
‘But, apart from vicarious responsibility, one man may be responsible to another for the harm done to the latter by a third person; he may be responsible on the ground that the act of the third person could not have taken place but for his own fault or breach of duty. There is more than one description of duty the breach of which may produce this consequence. For instance, it may be a duty of care in reference to things involving special danger. It may even be a duty of care with reference to the control of actions or conduct of the third person. It is, however, exceptional to find in the law a duty to control another’s actions to prevent harm to strangers. The general rule is that one man is under no duty of controlling another to prevent his doing damage to a third. There are, however, special relations which are the source of a duty of this nature.’
In the present case there was, I think, a special relation of this nature.
There was a special relation in that the officers were entitled to exercise control over boys who to the knowledge of the officers might wish to take their departure and who might well do some damage to property near at hand. The events that are said to have happened could reasonably have been foreseen. The possibility that the property of the respondents might be damaged was not a remote one. A duty arose. It was a duty owed to the respondents. It was not a duty to prevent the boys from escaping or from doing damage but it was a duty to take such care as in all the circumstances was reasonable in the hope of preventing the occurrence of events likely to cause damage to the respondents.
Apart from this I would conclude that in the situation stipulated in the present case it would not only be fair and reasonable that a duty of care should exist but that it would be contrary to the fitness of things were it not so. I doubt whether it is necessary to say, in cases where the court is asked whether in a particular situation a
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duty existed, that the court is called on to make a decision as to policy. Policy need not be invoked where reason and good sense will at once point the way. If the test whether in some particular situation a duty of care arises may in some cases have to be whether it is fair and reasonable that it should so arise the court must not shrink from being the arbiter. As Lord Radcliffe said in his speech in Davis Contractors Ltd v Fareham Urban District Council ([1956] 2 All ER 145 at 160, [1956] AC 696 at 728), the court is ‘the spokesman of the fair and reasonable man’.
If someone chooses to keep a wild animal it would, by common assent, be assumed that he is under a duty to prevent its escape. If a person who is in lawful custody has made a threat, accepted as seriously intended, that if he can escape he will injure X, is it unreasonable to assert that in those circumstances a duty is owed to X to take reasonable care to prevent escape? Other situations will present lesser perils. It will be universally known that the movements and activities of young children may lead to perils not only for them but for others. Consequently there may be a duty of care which may be owed to any one of a class of persons; it could be owed to all persons who could reasonably be foreseen as being liable to be injured by a failure to exercise reasonable care. That was the position in Carmarthenshire County Council v Lewis. The duty owed by the nursery school who had a four-year old boy in their care was held to include a duty to users of a nearby highway. The lorry driver who, swerving to avoid the boy, was killed when his lorry struck a telegraph post was, prior to that time, an unidentified member of a class of persons to whom a duty of care was owed. In that case it was argued that, though the education authority owed a duty to the child, they owed no duty to other users of the highway. In rejecting that contention Lord Reid said in his speech ([1955] 1 All ER at 572, [1955] AC at 565):
‘If the appellants are right, it means that, no matter how careless the person in charge of a young child may be and no matter how obvious it may be that the child may stray into a busy street and cause an accident, yet that person is under no liability for damage to others caused solely by the action of the child, because his only duty is towards the child under his care.’
A similar consideration would arise in the present case. If the Home Office is right in the present case it would mean that, however careless the officers in charge might be and however obvious it might be that the boys in their charge might do damage to some nearby property which by reasonable care the officers could prevent, there could in no circumstances be liability to the owners of that property because the only duty owed by the officers would be to their employers and to the boys.
In his speech in Hay (or Bourhill) v Young ([1942] 2 All ER 396 at 404, [1943] AC 92 at 107) Lord Wright considered whether the general concept of reasonable foresight as the criterion of negligence or breach of duty may be thought to be too vague. He said, however, that negligence is a fluid principle which has to be applied to the most diverse conditions and problems of human life. ‘It is a concrete not an abstract idea. It has to be fitted to the facts of the particular case.' In that case it was held that the motor cyclist (who had driven negligently) had owed no duty to a lady who suffered fright and nervous shock because she was not within the area which he ought reasonably to have contemplated as the area of potential danger. Lord Thankerton quoted ([1942] 2 All ER at 399, [1943] AC at 98) words used by Lord Johnston in Kemp and Dougall v Darngavil Coal Co Ltd (1909 SC 1314 at 1319) in reference to the proposition that a man cannot be charged with negligence if he has no obligation to exercise diligence, viz—
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‘… the obligee in such a duty must be a person or of a class definitely ascertained, and so related by the circumstances to the obligor that the obligor is bound, in the exercise of ordinary sense, to regard his interest and his safety. Only the relation must not be too remote for remoteness must be held as a general limitation of the doctrine.’
Those who use the highway must clearly take reasonable care for the safety of all other users of the highway. Someone who by negligence created a dangerous situation by leaving horses unattended in a busy street where mischievous children might cause the horses to run away was held to have owed a duty to a police officer who suffered injury in stopping the horses when they did run away; it ought to have been contemplated that in such a situation there would be an attempt to stop the horses (Haynes v Harwood). These and other cases are but illustrations of the range and extent of what ought reasonably to have been contemplated; other cases illustrate the variety of situations in which a duty of care may be owed. If someone is serving a sentence of imprisonment and consequently is not free to order his own movements, I would think it eminently reasonable to hold that those in charge of the prison owed him a duty to take reasonable care to protect him from being assaulted by a fellow prisoner who might have shown himself to be one who might cause harm (Ellis v Home Officer; D’Arcy v Prison Comrs). In each of those two cases the defendants had the power to control the persons who caused injury to the respective plaintiffs. The defendants were not under a duty to ensure that no prisoner would be hurt by a fellow prisoner and the mere occurrence of such an event did not by itself prove that there had been a failure of duty. The circumstances under which the injuries were caused were, however, such as to make it eminently appropriate to hold that a duty of care arose. Without expressing any view as to the facts in Holgate v Lancashire Mental Hospitals Board, Gill and Robertson, I consider that in a comparable situation a duty of reasonable care would be owed to those whose safety, as reasonable foresight would show, might be in jeopardy.
Insofar as any submission involved that if on principle a duty of care was owed to the respondents there should be immunity from liability because of the problems and difficulties which face the Home Office (and all those for whom it is liable) in connection with the administration of the system of borstal training I can see no possible reason for creating or recognising any such immunity.
For the reasons that I have given I would dismiss the appeal.
VISCOUNT DILHORNE. My Lords, in this appeal we have to decide as a preliminary issue whether on the facts alleged in the statement of claim any duty capable of giving rise to a liability in damages was owed by the appellant, the Home Office, to the respondents, the Dorset Yacht Co Ltd. It appears that ten youths who had been sentenced to borstal training and who had been detained in the Portland Borstal Institution, a ‘closed’ borstal, were in September 1962, on Brownsea Island in the custody of three officers. They all slept in an empty house on the island and it is alleged that on the night of 21st or 22 September 1962, seven of them escaped while the three officers were asleep. All seven had criminal records including convictions for breaking and entering premises, larceny and taking away vehicles without the owner’s consent. Five of the seven had a record of previous escapes from a borstal institution. There were yachts moored off the island. The seven got on board one and then there was a collision with another, the property of the respondents. The
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youths boarded that yacht and cast her adrift. The respondents’ claim is for the cost of repairing the damage done to their yacht, most, if not all, of which was caused by the collision.
It cannot, in my view, be disputed that if the three officers and their superiors had directed their minds to the likely consequences of an escape from the island by any of the youths who were there in custody, they would have foreseen the probability that those escaping would endeavour to seize a vessel to get to the mainland and the likelihood that damage would be done to the vessel seized. In these circumstances the respondents allege that there was a duty of care owed to them by the three officers, that there was a breach of it and consequently that the Home Office, the successor of the prison commissioners, is vicariously liable to them for the damage done by the youths to their yacht.
The respondents also allege that there was negligence on the part of the prison commissioners in failing to exercise any effective control or supervision over the youths and in permitting them to escape, in failing to make any or any effective arrangements for keeping the boys under control at night, in failing to give any or any adequate instructions to the three officers for maintaining effective watch or control over the boys at night and in failing to take any or any adequate steps to check the movements of the boys when they knew that there were vessels moored offshore and that there was no effective barrier in the way of the boys to prevent them from gaining access to them.
If there was a duty of care owed to the respondents by the prison commissioners or by the three officers, breach of which would give rise to liability to pay damages in the circumstances of this case, then I can see no reason for concluding that a similar duty of care is not owed in respect of those detained in prisons, detention centres and approved schools who escape therefrom and do damage which is reasonably foreseeable. Apart from one decision in the Ipswich county court in 1951 to which I shall refer later, among the thousands of reported cases not a single case can be found where a claim similar to that in this case has been put forward. No case in this country has been found to support the contention that such a duty of care exists under the common law.
Reliance was placed by the respondents on the classic passage in Lord Atkin’s speech in Donoghue v Stevenson ([1932] AC 562 at 580, [1932] All ER Rep 1 at 11). It should be remembered that the question for decision in that case was not so much as to the existence of a duty of care but to whom it was owed. The question was whether a duty was owed by the manufacturer of ginger beer to the ultimate consumer. Lord Atkin, after pointing out ([1932] AC at 579, [1932] All ER Rep at 11) how difficult it was to find in the English authorities statements of general application, said ([1932] AC at 580, [1932] All ER Rep at 11):
‘And yet the duty which is common to all the cases where liability is established must logically be based upon some element common to the cases where it is found to exist. To seek a complete logical definition of the general principle is probably to go beyond the function of the judge, for the more general the definition the more likely it is to omit essentials or to introduce non-essentials …
‘At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances … The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who are so
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closely and directly affected by my act that I ought reasonably to have them in contemplation … when I am directing my mind to the acts or omissions which are called in question.’
Lord Atkin in defining the elements common to all cases where a breach of a duty of care gives rise to liability cannot have intended his words to mean that in every case failure to take reasonable care to avoid acts or omissions which could reasonably be foreseen as likely to injure one’s neighbour as defined by him was actionable. He cannot, for instance, have meant that a person is liable in negligence if he fails to warn a person nearby whom he sees about to step off the pavement into the path of an oncoming vehicle or if he fails to attempt to rescue a child in difficulties in a pond. In both these instances—and they could be multiplied—it can be said that he could reasonably have foreseen that they would be likely to suffer injury by his omission to take action and that they were so closely and directly affected by his omission to do so that he ought to have had them in contemplation.
If, applying Lord Atkin’s test ([1932] AC at 580, [1932] All ER Rep at 11), it be held that a duty of care existed in this case, I do not think that such a duty can be limited to being owed only to those in the immediate proximity of the place from which the escape is made. In Donoghue v Stevenson the duty was held to be owed to consumers wherever they might be. If there be such a duty, it must, in my view, be owed to all those who it can reasonably be foreseen are likely to suffer damage as a result of the escape. Surely it is reasonably foreseeable that those who escape may take a succession of vehicles, perhaps many miles from the place from which they escaped, to make their getaway. Surely it is reasonably foreseeable that those who escape from prisons, borstals and other places of confinement will, while they are on the run, seek to steal food for their sustenance and money and are likely to break into premises for that purpose.
If the foreseeability test is applied to determine to whom the duty is owed, I am at a loss to perceive any logical ground for excluding liability to persons who suffer injury or loss, no matter how far they or their property may be from the place of escape if the loss or injury was of a character reasonably foreseeable as the consequence of failure to take proper care to prevent the escape.
Lord Atkin’s answer to the question ([1932] AC at 580, [1932] All ER Rep at 11) ‘Who, then, in law is my neighbour?’ while very relevant to determine to whom a duty of care is owed, cannot determine, in my opinion, the question whether a duty of care exists. I find support for this view in the observations of du Parcq LJ in Deyong v Shenburn. There the plaintiff had been employed in a theatre by the defendant. Some of his clothing had been stolen from his dressing room due, it was alleged, to the negligence of the defendant. du Parcq LJ said ([1946] 1 All ER at 229, [1946] KB at 233):
‘It is said that this is a case of tort, and we were reminded of observations which are very familiar to lawyers in Heaven v. Pender and Donoghue v Stevenson. I do not think I need cite them in terms. There are well known words of LORD ATKIN in Donoghue v. Stevenson ([1932] AC at 580, [1932] All ER Rep at 11), as to the duty towards one’s neighbour and the method of ascertaining who is one’s neighbour. It has been pointed out (and this only shows the difficulty of stating a general proposition which is not too wide) that unless one somewhat narrows the term of the proposition as it has been stated one would be including in it something which the law cannot support. It is not true to say that wherever a man finds himself in such a position that unless he does a certain act another person may suffer, or that if he does something another person will suffer, then it is his duty in the one case to
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be careful to do the act and in the other case to be careful not to do the act. Any such proposition is much too wide. One has to find that there has been a breach of a duty which the law recognises, and to see what the law recognises one can only look at the decisions of the courts. There has never been a decision that a master must, merely because of the relationship which exists between a master and servant, take reasonable care for the safety of his servant’s belongings in the sense that he must take steps to insure, so far as he can, that no wicked person shall have an opportunity of stealing the servant’s goods. That duty is the duty which is contended for here, and there is not a shred of authority which suggests that any such duty exists or ever has existed.’
This was cited and followed by Hodson and Morris LJJ in Edwards v West Herts Group Hospital Management Committee ([1957] 1 All ER 541 at 545, 547, [1957] 1 WLR 415 at 420, 422).
In Comr for Railways v Quinlan the question was considered whether on the facts of that case and on the principle of Donoghue v Stevenson a general duty of care and liability for negligence for its breach existed in relation to a trespasser. Viscount Radcliffe, delivering the judgment of the Board, said ([1946] 1 All ER at 902, [1964] AC at 1070):
‘… such a duty, it was suggested, might be founded on a general principle derived from the House of Lords’ decision in Donoghue v. Stevenson. Their lordships think this view mistaken. They cannot see that there is any general principle to be deduced from that decision which throws any particular light on the legal rights and duties that arise when a trespasser is injured on a railway level crossing where he has no right to be … ’
Later he said ([1964] 1 All ER at 912, [1964] AC at 1084):
‘… passages occur in one or two of the other judgments that suggest that a trespasser can somehow become the occupier’s “neighbour”, within the meaning of the somewhat overworked shorthand of Donoghue v. Stevenson … ’
In the light of these passages I think that it is clear that the Donoghue v Stevenson principle cannot be regarded as an infallible test of the existence of a duty of care; nor do I think that if that test is satisfied, there arises any presumption of the existence of such a duty.
The county court case to which I have referred is Greenwell v Prison Comrs. Two boys escaped from the ‘open’ Hollesley Bay Borstal Institution and damaged the plaintiff’s truck. It was the fourth escape of one of the two boys. Despite his record he had not been kept under any restraint and was as free to abscond as he had been on the three previous occasions. The judge based his decision in favour of the plaintiff on Lord Atkin’s words cited above ([1932] AC at 580, [1932] All ER Rep at 11). He held that a duty of care was owed by the prison commissioners to the plaintiff, a duty to take reasonable precautions to prevent him being injured by the depredations of boys escaping. He found that they had been negligent with regard to the escape of the boy who had previously escaped but not with regard to that of the other boy.
If there was a duty to take reasonable precautions to prevent the plaintiff being injured by the depredations of boys escaping, it is not easy to see why he held that the prison commissioners were not negligent in relation to the escape of the other boy. Both had criminal records. One, it is true had escaped before. It was an ‘open’
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borstal from which many escapes had been made. Nor is it clear from the report of the case in what respects the judge found that the prison commissioners had failed in their duty, but it would seem to have been in keeping the boy who had previously escaped in this institution and without taking any steps to prevent him escaping again. It was for the prison commissioners to decide to which borstal institution a boy sentenced to borstal training should be sent and to decide whether he should be moved from one institution to another. The judge appears to have held that it was negligence on their part to have allowed him to remain at Hollesley Bay. Apart from that case in which Donoghue v Stevenson was applied, no shred of authority can be found to support the view that a duty of care, breach of which gives rise to liability in damages, is under the common law owed by the custodians of persons lawfully in custody to anyone who suffers damage or loss at the hands of persons who have escaped from custody.
Lord Denning MR in the course of his judgment in this case said ([1969] 2 All ER at 566, [1969] 2 QB at 424) that he thought that the absence of authority was ‘because, until recently, no lawyer ever thought such an action would lie’ on one of two grounds, first that the damage was far too remote, the chain of causation being broken by the act of the person who had escaped; and, secondly, on the ground that the only duty owed was to the Crown.
Whatever be the reasons for the absence of authority, the significant fact is its absence and that leads me to the conclusion, despite the disclaimer of counsel for the respondents of any such intention, that we are being asked to create in reliance on Lord Atkin’s words ([1932] AC at 580, [1932] All ER Rep at 11) an entirely new and novel duty and one which does not arise out of any novel situation.
I, of course, recognise that the common law develops by the application of well established principles to new circumstances but I cannot accept that the application of Lord Atkin’s words ([1932] AC at 580, [1932] All ER Rep at11), which, though they applied in Deyong v Shenburn and might have applied in Comr for Railways v Quinlan, were not held to impose a new duty on a master to his servant or on an occupier to a trespasser, suffices to impose a new duty on the Home Office and on others in charge of persons in lawful custody of the kind suggested.
No doubt very powerful arguments can be advanced that there should be such a duty. It can be argued that it is wrong that those who suffer loss or damage at the hands of those who have escaped from custody as a result of negligence on the part of the custodians should have no redress save against the persons who inflicted the loss or damage who are unlikely to be able to pay; that they should not have to bear the loss themselves whereas if there is such a duty, liability might fall on the Home Office and the burden on the general body of taxpayers. However this may be, we are concerned not with what the law should be but with what it is. The absence of authority shows that no such duty now exists. If there should be one, that is, in my view, a matter for the legislature and not for the courts.
A considerable number of cases were referred to in the course of the argument, and to some of them I must refer. In Smith v Leurs the parents of a boy of 13 were sued for negligence, it being alleged that they had failed to exercise reasonable care over the use of a catapult by the boy. Dixon J said ((1945) 70 CLR at 261, 262):
‘… apart from vicarious responsibility, one man may be responsible to another for the harm done to the latter by a third person; he may be responsible on the ground that the act of the third person could not have taken place but for his own fault or breach of duty. There is more than one description of duty the breach of which may produce this consequence. For instance, it may be a duty
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of care in reference to things involving special danger. It may even be a duty of care with reference to the control of actions or conduct of the third person. It is, however, exceptional to find in the law a duty to control another’s actions to prevent harm to strangers. The general rule is that one man is under no duty of controlling another to prevent his doing damage to a third. There are, however, special relations which are the source of a duty of this nature. It appears now to be recognised that it is incumbent upon a parent who maintains control over a young child to take reasonable care so to exercise that control as to avoid conduct on his part exposing the person or property of others to unreasonable danger.’
It is to be observed that Dixon J did not suggest that there was any special relationship between a person in custody and his custodian which constituted an exception to the general rule enunciated by him.
In Carmarthenshire County Council v Lewis the county council was held liable in negligence for damages arising out of an accident caused by a young child who had escaped from a school adjoining a highway. He was when at the school under the care and control of the county council. The duty owed by the county council appears to me analogous to that owed by a parent to which Dixon J referred. An instance where the act of a third person could not have taken place but for another’s fault or breach of duty is to be found in Stansbie v Troman where the duty arose out of contract.
The facts in Thorne and Rowe v State of Western Australia more nearly resemble those of this case. Mrs Thorne claimed damages in respect of injuries she had sustained as a result of an assault by her husband after his escape from prison. He had been convicted of a number of offences arising out of an incident in which his wife was involved. On his way to prison he had said that he would ‘get out and fix her’. She and another alleged negligence in allowing him to escape. In the course of his judgment Negus J said ([1964] WAR at 151):
‘I emphasize that a mere breach of their duty to the Crown to keep prisoners in safe custody could not give the plaintiffs a right of action. The plaintiffs must establish they had a special duty to Mrs Thorne and failed in that duty. The existence of such a special duty, assuming the facts of this case provide an exception to the general rule, that one man is under no duty of controlling another to prevent his doing damage to a third (per Dixon, J., as he then was, in Smith v. Leurs ((1945) 70 CLR at 261, 262)) depends on their knowledge that Thorne had a propensity and intention or was likely to attack his wife.’
He held that although the warders knew of the threat, it could not be inferred from the fact of the threat that Thorne had that propensity and intention. Negus J did not suggest that there was any common law duty of care to prevent the escape of prisoners when it was reasonably foreseeable that damage might ensue. He decided the case on the assumption that there was a special duty of care owed to Mrs Thorne if Thorne’s propensity and intention was known to the warders, and holding that it was not known it was not necessary for him to decide that such a special duty of care existed. This case is no authority for the proposition that there is a common law duty of care owed by custodians where it is reasonably foreseeable that damage is likely to follow if through negligence persons are allowed to escape; nor, indeed, is it any authority for saying that such a duty arises if the custodians have knowledge of a prisoner’s particular propensities.
There are two English cases in which the Home Office and the prison commissioners respectively have been held liable in damages for injuries suffered by a
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prisoner at the hands of fellow prisoners. In Ellis v Home Office the plaintiff when a prisoner in Winchester prison suffered injuries as a result of an assault by another prisoner. He sued the Home Office for damages for negligence. In the course of his judgment Singleton LJ said ([1953] 2 All ER at 154):
‘The duty on those responsible for one of Her Majesty’s prisons is to take reasonable care for the safety of those who are within, and that includes those who are within against their wish or will, of whom the plaintiff was one.’
In D’Arcy v Prison Comrs, the plaintiff while in prison in Parkhurst suffered injuries at the hands of fellow prisoners. He alleged negligence and the prison commissioners did not deny that they were under a duty to take reasonable care. The jury found for the plaintiff.
The Attorney General did not seek to challenge that a duty of care for their safety and welfare was owed by the Home Office to prisoners in a prison. He was not prepared to concede that such a duty was owed to visitors to the prison although it is not easy to see why it is not. But ‘Matters happening within one’s own bounds are one thing and matters happening outside those bounds are an entirely different thing’ as Lord Uthwatt said in Read v J Lyons & Co Ltd ([1946] 2 All ER 471 at 484, [1947] AC 156 at 186). The duties owed by the occupiers of premises to those lawfully on them are well established. The fact that a duty of care is owed by prison authorities to prisoners within a prison to protect them from injury at the hands of fellow prisoners who are under their control does not lead to the inference that there is a similar duty of care owed by prison and borstal authorities to prevent injury or loss being suffered by persons outside the prison or borstal institution at the hands of those who have ceased to be under the control of the authorities. If in the latter case there is no such duty, I do not think it follows that Ellis and D’Arcy were wrongly decided.
The Attorney General contended that public policy demanded that the borstal authorities should be immune from actions of the kind brought by the respondents in this case. He drew attention to the following paragraphs in the booklet ‘Prisons and Borstals’b issued by the Home Office in 1960:
‘20. The system of training in each borstal seeks the all-round development of character and capacities … It is based on progressive trust demanding personal decision, responsibility, and self-control … The conditions of a borstal must then be as unlike those of a prison as is compatible with compulsory detention, but they must be various and elastic to suit different stages of development …
‘21. Borstal training in the sense above described is not compatible with the maintenance of “safe custody” as an over-riding consideration, and it is inevitable that a proportion of those under training of this sort find that it makes too great demands of them, and seek to solve their problems by escaping. Nevertheless, the proportion, given the nature of these restless adolescents, is not high, amounting on average to less than one in five of the whole. This absconding is, too often, a serious nuisance to the police in the neighbourhood of the borstals and, where offences are committed by the absconders, to the public also: its reduction is therefore a matter of constant care and effort by the administration … ’
and contended that, if such actions lay, it would have an inhibiting effect on those responsible for the training and reformation of those sentenced to borstal training. While I would not wish to question that the methods now used are in accordance with public policy, it does not follow that public policy requires that losses suffered
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by individuals at the hands of absconders should be borne by those individuals. If there is such a duty under the common law, the creation of such an immunity is a matter for Parliament.
It has been suggested that a duty of care if owed by those responsible for the administration of the borstal system may be reduced in extent or indeed extinguished if it conflicts with the exercise of powers or of discretion vested by Parliament in those responsible for the administration. If, for instance, the three officers in this case had been told not to take any steps to prevent the youths escaping in order to test their responsibility, it is, I gather, suggested that that would negative the existence of a duty of care in this case. If, for instance, the Home Office decided that a boy who had previously escaped from a borstal institution should remain in an ‘open’ borstal where no steps were taken to prevent his escape, there would be no liability for foreseeable damage done by him after his escape. If this is right, and the decision to leave the boy who had escaped in the Hollesley Bay Institution was a deliberate decision of the prison commissioners, it would seem to follow that Greenwell v Prison Comrs was wrongly decided.
The respondents do not claim to be entitled to damages for breach of a statutory duty. If Parliament has authorised a particular course of action, no action at common law can succeed if the damage suffered follows from the pursuit of that course. Similarly, if Parliament has vested a discretion in the authorities, no action will lie in respect of the consequences of the exercise of the discretion. If such a duty of care can be owed, it would be open to the courts to conclude that a particular exercise of discretion was so unreasonable and so careless as not to constitute any real exercise of discretion. If such a duty of care can be owed, and its existence and extent depends on what has been done in the administration of the borstal system, the way in which the authorities have exercised their powers and discretion would be called into question in the courts and I agree with the Attorney General in thinking that this might well have an inhibiting effect.
The statute which now governs borstal institutions and borstal training is the Prison Act 1952, amended in certain respects by the Criminal Justice Act 1961. Section 43(1) of the 1952 Act gives the Secretary of State power to provide—
‘(c) Borstal institutions, that is to say places in which offenders … may be detained and given such training and instruction as will conduce to their reformation and the prevention of crime.’
Section 45 provides:
‘(1) A person sentenced to Borstal training shall be detained in a Borstal institution …
‘(2) A person sentenced to Borstal training shall be detained in a Borstal institution for such period … as the [Secretary of Statec] may determine, and shall then be released … ’
Section 46 expressly provides for temporary detention until arrangements can be made to take a person so sentenced to an institution and s 22(2) (applied to those sentenced to borstal training by s 43(3)(b)) inter alia gives the Secretary of State power to order such a person to be taken in certain circumstances to a place, eg for medical treatment, and provides that, unless the Secretary of State otherwise directs, he is to be kept in custody while he is being taken there, while he is there and ‘while being taken back to the [borstal institution] in which he is required in accordance with law to be detained’. Section 47(5) gives power to make rules for the temporary release of persons sentenced to borstal training.
From these provisions it would appear to be the case that the Prison Act 1952
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requires that persons sentenced to borstal training be detained, while they are serving their sentences, in borstal institutions until they are released or taken temporarily away therefrom under s 22. If this be so, one wonders what statutory authority there was for the ten youths residing on Brownsea Island.
A borstal institution is a place in which a person sentenced to borstal training ‘may be detained and given such training and instruction as will conduce to’ his ‘reformation’. This appears to imply that the training and instruction will take place within the institution.
Section 13(2) (which applies to those sentenced to borstal training by virtue of s 43(3)(c)) provides:
‘A prisoner [borstal detainee] shall be deemed to be in legal custody while he is confined in, or is being taken to or from, any prison [borstal institution] and while he is working, or is for any other reason, outside the prison [borstal institution] in custody or under the control of an officer of the prison [borstal institution].’
This implies that a borstal detainee may be required to do work outside an institution but it is one thing to do work outside it and another to be allowed to reside outside it.
Under s 47(1) the Secretary of State may make rules for the regulation and management of borstal institutions ‘… and for the classification, treatment, employment, discipline and control … ’ of persons required to be detained in borstal and rules providing for the training of particular classes of persons and their allocation to borstal institutions. Rules so made cannot amend the provisions of the Act or reduce or limit the mandatory provisions requiring detention in a borstal institution.
Whether or not there was statutory power sanctioning the detention of the ten youths on Brownsea Island, they were by virtue of s 13(2) to be deemed to be in custody while there. If it be the case that a duty of care such as that alleged in this case can exist, then it would seem very desirable that the powers and discretion to be exercised by those responsible for the borstal system should be defined more specifically and with more precision than at present.
In Geddis v Proprietors of Bann Reservoir ((1878) 3 App Cas 430 at 455, 456) Lord Blackburn said:
‘For I take it, without citing cases, that it is now thoroughly well established that no action will lie for doing that which the legislature has authorized, if it be done without negligence, although it does occasion damage to anyone; but an action does lie for doing that which the legislature has authorized, if it be done negligently. And I think that if by a reasonable exercise of the powers, either given by statute to the promoters, or which they have at common law, the damage could be prevented it is, within this rule, “negligence” not to make such reasonable exercise of their powers.’
In that case it could not in my view be disputed that the defendants owed a duty to the plaintiff to take care to prevent the flooding of his land. They had statutory powers the exercise of which would have prevented that. Their failure to exercise them was held to be negligence.
If those responsible for the administration of the borstal system do what the legislature has authorised negligently, then an action will lie but negligence in this context must involve a breach of a duty owed to the person who has suffered damage This is illustrated by the decision in East Suffolk Rivers Catchment Board v Kent. A high tide had made a breach in a seawall and in consequence the respondent’s land was flooded. The appellants had statutory powers to repair the wall. They carried out the work so inefficiently that the flooding continued for 178 days. The breach of the wall could have been repaired in 14 days. It must have been reasonably
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foreseeable that delay on their part in the exercise of their statutory powers would cause damage to their neighbour, the respondent. Nevertheless it was held that as they were under no obligation to repair the wall or to complete the work after having begun it, they were under no liability to the respondent. Viscount Simon LC in the course of his speech said ([1940] 4 All ER at 532, [1941] AC at 86, 87) in reference to Lord Blackburn’s words in Geddis’s case ((1878) 3 App Cas at 455, 456):
‘… LORD BLACKBURN would certainly not wish to be understood as saying that such an action would lie in the absence of proof that the defendant’s negligence caused damage. Indeed, negligence in such a connection involves the twofold conception of want of care on the part of the defendant and the consequential infliction of loss upon the plaintiff. As the EARL OF READING, L.C.J. observed in J. R. Munday Ltd. v. London County Council [[1916] 2 KB 331 at 334, [1916–17] All ER Rep 824 at 826], “Negligence alone does not give a cause of action, damage alone does not give a cause of action; the two must co-exist“. A third essential factor is the existence of the particular duty. As LORD WRIGHT expressed it in Lochgelly Iron & Coal Co. Ltd. v. M’Mullan [[1934] AC 1 at 25] “In strict legal analysis, negligence means more than heedless or careless conduct, whether in omission or commission: it properly connotes the complex concept of duty, breach, and damage thereby suffered by the person to whom the duty was owing … ”’
It is this third essential factor that, in my opinion, is absent in this case. There is no authority for the existence of such a duty under the common law. Lord Denning MR in his judgment in the Court of Appeal, I think, recognised this for he said ([1969] 2 All ER at 567, [1969] 2 QB at 426): ‘It is, I think, at bottom a matter of public policy which we, as judges, must resolve’ and ([1969] 2 All ER at 567, [1969] 2 QB at 426) ‘What then is the right policy for the judges to adopt?’ He went on to say ([1969] 2 All ER at 567, [1969] 2 QB at 426):
‘Many, many a time has a prisoner escaped—or been let out on parole—and done damage. But there is never a case in our law books when the prison authorities have been liable for it. No householder who has been burgled, no person who has been wounded by a criminal, has ever recovered damages from the prison authorities; such as to find a place in the reports. The householder has claimed on his insurance company. The injured man can now claim on the compensation fund. None has claimed against the prison authorities. Should we alter all this? I should be reluctant to do so if, by so doing, we should hamper all the good work being done by our prison authorities.’
Where I differ is in thinking that it is not part of the judicial function ‘to alter all this’. The facts of a particular case may be a wholly inadequate basis for a far reaching change of the law. We have not to decide what the law should be and then to alter the existing law. That is the function of Parliament.
As in my opinion no such duty can exist now under the common law my answer to the question raised in this preliminary issue is in the negative and I would allow the appeal.
LORD PEARSON. My Lords, an order was made that—
‘The following question of law be tried as a preliminary issue before the trial of the action, viz whether on the facts pleaded in the Statement of Claim the [Home Office its] servants or agents owed any duty of care to the [respondents]
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capable of giving rise to a liability in damages with respect to the detention of persons undergoing sentences of Borstal training or with respect to the manner in which such persons were treated, employed, disciplined, controlled or supervised whilst undergoing such sentences.’
The form of the order assumes the familiar analysis of the tort of negligence into its three component elements’ viz the duty of care, the breach of that duty and the resulting damage. The analysis is logically correct and often convenient for purposes of exposition, but it is only an analysis and should not eliminate consideration of the tort of negligence as a whole. It may be artificial and unhelpful to consider the question as to the existence of a duty of care in isolation from the elements of breach of duty and damage. The actual damage alleged to have been suffered by the respondents may be an example of a kind or range of potential damage which was foreseeable, and if the act or omission by which the damage was caused is identifiable, it may put one on the trail of a possible duty of care of which the act or omission would be a breach. In short, it may be illuminating to start with the damage and work back through the cause of it to the possible duty which may have been broken.
I will not set out the whole of the statement of claim but only those facts, alleged or to be inferred from allegations in the statement of claim, which are of special importance on my view of the case. There are of course no findings of fact. (1) The borstal boys had been working at Brownsea Island under the control and supervision of the Home Office’s officers. (2) Presumably the boys had been brought to the island from a borstal institution, and were being kept on the island, by officers of the Home Office for the purposes of borstal training. (3) The respondents’ motor yacht, the Silver Mist, was lying at moorings off Brownsea Island. (4) The other yacht, the Diligence of Marston, was presumably also lying at moorings off Brownsea Island or at any rate was somewhere in the vicinity. (5) The borstal boys made their way to and presumably boarded the Diligence of Marston and caused her to collide with the Silver Mist, and they then boarded the Silver Mist and cast her off and caused her considerable damage. (6) The three officers of the Home Office who had charge of the boys failed to keep any watch or exercise any control over them at the material time but retired to bed leaving them to their own devices. (7) None of those three officers was on duty at the material time. (8) They failed to make any or any effective arrangements for keeping the boys under control at night. (9) Knowing that there were craft such as the Silver Mist off-shore and that there was no or no effective barrier in the way of the boys gaining access to such craft they failed to take any adequate steps to check the movement of the boys.
The respondents are thus complaining of the injurious interference by the borstal boys with boats moored off Brownsea Island. As these were borstal boys under detention for compulsory training and the boats were easily accessible and constituted a natural temptation, it can at any rate be argued that interference by the boys with the boats was eminently foreseeable as likely to happen unless the Home Office’s officers took precautions to prevent it. According to the allegations in the statement of claim no precautions were taken, no care was exercised and no arrangements were made for safeguarding the boats against such interference. It would seem therefore that according to the allegations the injurious interference with the boats was caused by the acts and omissions of the Home Office’s officers in bringing the borstal boys to Brownsea Island and keeping them there under detention for compulsory training and yet taking no care for the safety of the respondents’ boat and the other boat or boats in the immediate vicinity of the place where the boys were being kept. If the Home Office had any duty to take care for the safety of the boats, then on the facts alleged in the statement of claim it would seem that there was a breach of the duty causing the damage of which the respondents complain.
What would be the nature of the duty of care owed by the Home Office to the respondents if it existed? In my opinion, the Home Office did not owe to the
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respondents any general duty to keep the borstal boys in detention. If the Home Office had, in the exercise of its discretion, released some of these boys, taking them on shore and putting them on trains or buses with tickets to their homes, there would have been no prospect of damage to the respondents as boatowners and the respondents would not have been concerned and would have had nothing to complain of. Again the boys might have escaped in such a way that no damage could be caused to the respondents as boatowners; for instance, they might have escaped by swimming ashore or by going ashore in a boat belonging to or hired by the borstal authorities or by having their friends bring a rescue boat from outside and carry them off to a refuge in the Isle of Wight or Portsmouth or elsewhere. On the other hand the boys might interfere with the boats from motives of curiosity and desire for amusement without having any intention to escape from borstal detention. The essential feature of this case is not the ‘escape’ (whatever that may have amounted to) but the interference with the boats. The duty of care would be simply a duty to take reasonable care to prevent such interference. The duty would not be broken merely by the Home Office’s failure to prevent an escape from borstal detention or from borstal training. Performance of the duty might incidentally involve an element of physical detention, if interference with the boats by some particular boy could not be prevented by any other means. But if some other means—such as supervision, keeping watch, dissuasion or deterrence—would suffice, physical detention would not be required for performance of the duty.
Can such a duty be held to exist on the facts alleged here? On this question there is no judicial authority except the one decision in the Ipswich county court in Greenwell v Prison Comrs. In this situation it seems permissible, indeed almost inevitable, that one should revert to the statement of basic principle by Lord Atkin in Donoghue v Stevenson ([1932] AC 562 at 580, [1932] All ER Rep 1 at 11):
‘At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care of which the particular cases found in the books are but instances. The liability for negligence, whether you style it such or treat it as in other systems as a species of “culpa”, is no doubt based upon a general public sentiment of moral wrong-doing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.’
Reference can also be made to Hay (or Bourhill) v Young. Lord Thankerton cited ([1942] 2 All ER at 399, [1943] AC at 98) words of Lord Johnston in Kemp and Dougall v Darngavil Coal Co Ltd (1909 SC 1314 at 1319):
‘… the obligee in such a duty must be a person or of a class definitely ascertained, and so related by the circumstances to the obligor that the obligor is bound, in the exercise of ordinary sense, to regard his interest and his safety.
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Only the relation must not be too remote, for remoteness must be held as a general limitation of the doctrine.’
Lord Thankerton then said ([1942] 2 All ER at 399, [1943] AC at 98):
‘… I doubt whether, in view of the infinite variation of circumstances which may exist, it is possible or profitable to lay down any hard and fast principle, beyond the test of remoteness as applied to the particular case.’
It seems to me that prima facie, in the situation which arose in this case according to the allegations, the respondents as boatowners were in law ‘neighbours’ of the Home Office and so there was a duty of care owing by the Home Office to the respondents. It is true that the Donoghue v Stevenson ([1932] AC at 580, [1932] All ER Rep at 11) principle as stated in the passage which has been cited is a basic and general but not universal principle and does not in law apply to all the situations which are covered by the wide words of the passage. To some extent the decision in this case must be a matter of impression and instinctive judgment as to what is fair and just. It seems to me that this case ought to, and does, come within the Donoghue v Stevenson ([1932] AC at 580, [1932] All ER Rep at 11) principle unless there is some sufficient reason for not applying the principle to this case. Therefore, one has to consider the suggested reasons for not applying the principle here.
Proximity or remoteness. As there is no evidence, one can only judge from the allegations in the statement of claim. It seems clear that there was sufficient proximity; there was geographical proximity and it was foreseeable that the damage was likely to occur unless some care was taken to prevent it. In other cases a difficult problem may arise as to how widely the ‘neighbourhood’ extends, but no such problem faces the respondents in this case.
Act of third party. In Weld-Blundell v Stephens ([1920] AC 956 at 986, [1920] All ER Rep 32 at 47) Lord Sumner said:
‘In general (apart from special contracts and relations and the maxim Respondent superior), even though A. is in fault, he is not responsible for injury to C. which B., a stranger to him, deliberately chooses to do.’
In Smith v Leurs ((1945) 70 CLR 256 at 261, 262) Dixon J said:
‘… apart from vicarious responsibility, one man may be responsible to another for the harm done to the latter by a third person; he may be responsible on the ground that the act of the third person could not have taken place but for his own fault or breach of duty. There is more than one description of duty the breach of which may produce this consequence. For instance, it may be a duty of care in reference to things involving special danger. It may even be a duty of care with reference to the control of actions or conduct of the third person. It is, however, exceptional to find in the law a duty to control another’s actions to prevent harm to strangers. The general rule is that one man is under no duty of controlling another to prevent his doing damage to a third. There are, however, special relations which are the source of a duty of this nature. It appears now to be recognised that it is incumbent upon a parent who maintains control over a young child to take reasonable care so to exercise that control as to avoid conduct on his part exposing the person or property of others to unreasonable danger. Parental control, where it exists, must be exercised with due care to prevent the child inflicting intentional damage on others or causing damage by conduct involving unreasonable risk of injury to others.’
In my opinion, this case falls under the exception and not the rule, because there was a special relation. The borstal boys were under the control of the Home Office’s
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officers, and control imports responsibility. The boys’ interference with the boats appears to have been a direct result of the Home Office’s officers’ failure to exercise proper control and supervision. Problems may arise in other cases as to the responsibility of the Home Office’s officers for acts done by borstal boys when they have completed their escape from control and are fully at large and acting independently. No such problem faces the respondents in this case.
Statutory duty. Not only with respect to the detention of borstal boys but also with respect to the discipline, supervision and control of them the Home Office’s officers were acting in pursuance of statutory duties. These statutory duties were owed to the Crown and not to private individuals such as the respondents. The respondents, however, do not base their claim on breach of statutory duty. The existence of statutory duties does not exclude liability at common law for negligence in the performance of the statutory duties. In Geddis v Proprietors of Bann Reservoir ((1878) 3 App Cas 430 at 455, 456) Lord Blackburn said:
‘For I take it, without citing cases, that it is now thoroughly well established that no action will lie for doing that which the legislature has authorized, if it be done without negligence, although it does occasion damage to anyone; but an action does lie for doing that which the legislature has authorized, if it be done negligently. And I think that if by a reasonable exercise of the powers, either given by statute to the promoters, or which they have at common law, the damage could be prevented it is, within this rule, “negligence” not to make such reasonable exercise of their powers.’
Similar reasoning will be found in the speech of Lord Hatherley ((1878) 3 App Cas at 438, 448, 449). He said ((1878) 3 App Cas at 449):
‘We are not bound, nor entitled, to suppose that they will wilfully do injury by the exercise of the legislative powers which have been given to them; but it appears to me clearly and plainly that they should use every precaution, by the exercise either of their powers created by the Act of Parliament itself, or of their common law powers, to prevent damage and injury being done to others through whose property the works or operations are to be carried on … ’
In my opinion, the reasoning applies to the present case. Be it assumed that the Home Office’s officers were acting in pursuance of statutory powers (or statutory duties which must include powers) in bringing the borstal boys to Brownsea Island to work there under the supervision and control the Home Office’s officers. No complaint could be made of the Home Office’s officers doing that. But in doing that they had a duty to the respondents as ‘neighbours’ to make proper exercise of the powers of supervision and control for the purpose of preventing damage to the respondents as ‘neighbours’.
Public policy. It is said, and in the absence of evidence I assume (and perhaps it is common knowledge and can be judicially noticed) that one method of borstal training, which is employed in relation to boys who may be able to respond to it, is to give them a considerable measure of freedom, initiative and independence in order that they may develop their self-reliance and sense of responsibility. This method, at any rate when it is intensively applied, must diminish the amount of supervision and control which can be exercised over the borstal boys by the Home Office’s officers, and there is then a risk, which is not wholly avoidable, that some of the boys will escape and may in the course of escaping or after escaping do injury to persons or damage to property. There is no evidence to show whether or not this method was being employed, intensively or at all, in the present case. But supposing that it was, I am of opinion that it would affect only the content or standard and not the existence of
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the duty of care. It may be that when the method is being intensively employed there is not very much that the Home Office’s officers can do for the protection of the neighbours and their property. But it does not follow that they have no duty to do anything at all for this purpose. They should exercise such care for the protection of the neighbours and their property as is consistent with the due carrying out of the borstal system of training. The needs of the borstal system, important as they no doubt are, should not be treated as so paramount and all-important as to require or justify complete absence of care for the safety of the neighbours and their property and complete immunity from any liability for anything that the neighbours may suffer.
In answer to the question of law which I have set out at the beginning of this opinion, I would say that the Home Office owed no duty to the respondents with regard to the detention of the borstal boys (except perhaps incidentally as an element in supervision and control) nor with regard to the treatment or employment of them, but the Home Office did owe to the respondents a duty of care, capable of giving rise to a liability in damages, with respect to the manner in which the borstal boys were disciplined, controlled and supervised.
I would dismiss the appeal.
LORD DIPLOCK. My Lords, this appeal is about the law of negligence. Regrettably, as I think, it comes before your Lordships’ House on a preliminary question of law which is said to arise on the facts pleaded in the statement of claim. This makes it necessary to identify the precise question of law raised by those facts which are very summarily pleaded. Some of them relate to the acts of seven youths undergoing sentences of borstal training, others relate to the acts and omissions of persons concerned in the management of borstals and, in particular, to the acts and omissions of three officers of the Portland Borstal. It is alleged and conceded that the appellant, the Home Office, is vicariously responsible for the tortious acts of the three borstal officers and any other persons concerned in the management of borstals. It is not contended that the Home Office is vicariously liable for any tortious acts of the youths undergoing sentences of borstal training.
At the relevant time, the seven youths were taking part in a working party on Brownsea Island in the custody and control of the three officers. One night the youths escaped from the island and caused damage to the respondents’ yacht which was moored off-shore of the island. In causing the damage the youths were themselves guilty of trespass to the respondents’ goods. The three officers did not take any or any effective steps to prevent the youths from escaping from the island. Although it is not stated in express terms, it is implicit in the language of the pleading that by the time the youths committed the damage they had successfully eluded the custody and control of the officers and had reached a place where it was not physically possible for the officers or anyone concerned with the management of borstals to exercise any control over the youths’ actions.
The only cause of action relied on is the ‘negligence’ of the officers in failing to prevent the youths from escaping from their custody and control. It is implicit in this averment of ‘negligence’ and must be treated as admitted not only that the officers by taking reasonable care could have prevented the youths from escaping, but also that it was reasonably foreseeable by them that if the youths did escape they would be likely to commit damage of the kind which they did commit, to some craft moored in the vicinity of Brownsea Island.
The specific question of law raised in this appeal may therefore be stated as: is any duty of care to prevent the escape of a borstal trainee from custody owed by the Home Office to persons whose property would be likely to be damaged by the tortious acts of the borstal trainee if he escaped? This is the first time that this specific question has been posed at a higher judicial level than that of a county court.
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Your Lordships in answering it will be performing a judicial function similar to that performed in Donoghue v Stevenson and more recently in Hedley Byrne & Co Ltd v Heller & Partners Ltd, of deciding whether the English law of civil wrongs should be extended to impose legal liability to make reparation for the loss caused to another by conduct of a kind which has not hitherto been recognised by the courts as entailing any such liability.
This function, which judges hesitate to acknowledge as law-making, plays at most a minor role in the decision of the great majority of cases, and little conscious thought has been given to analysing its methodology. Outstanding exceptions are to be found in the speeches of Lord Atkin in Donoghue v Stevenson and of Lord Devlin in Hedley Byrne & Co Ltd v Heller & Partners Ltd. It was because the former was the first authoritative attempt at such an analysis that it has had so seminal an effect on the modern development of the law of negligence.
It will be apparent that I agree with Lord Denning MR ([1969] 2 All ER at 567, [1969] 2 QB at 426) that what we are concerned with in this appeal ‘is … at bottom a matter of public policy which we, as judges, must resolve’. He cited in support Lord Pearce’s dictum in Hedley Byrne & Co Ltd v Heller & Partners Ltd ([1963] 2 All ER at 615, [1964] AC at 536).
‘How wide the sphere of the duty of care in negligence is to be laid depends ultimately on the courts’ assessment of the demands of society for protection from the carelessness of others.’
The reference in this passage to ‘the courts’ in the plural is significant for—
‘As always in English law the first step in such an inquiry is to see how far the authorities have gone, for new categories in the law do not spring into existence overnight;’
per Lord Devlin ([1963] 2 All ER at 608, [1964] AC at 525).
The justification of the courts’ role in giving the effect of law to the judges’ conception of the public interest in the field of negligence is based on the cumulative experience of the judiciary of the actual consequences of lack of care in particular instances. And the judicial development of the law of negligence rightly proceeds by seeking first to identify the relevant characteristics that are common to the kinds of conduct and relationship between the parties which are involved in the case for decision and the kinds of conduct and relationships which have been held in previous decisions of the courts to give rise to a duty of care.
The method adopted at this stage of the process is analytical and inductive. It starts with an analysis of the characteristics of the conduct and relationship involved in each of the decided cases. But the analyst must know what he is looking for; and this involves his approaching his analysis with some general conception of conduct and relationships which ought to give rise to a duty of care. This analysis leads to a proposition which can be stated in the form: ‘In all the decisions that have been analysed a duty of care has been held to exist wherever the conduct and the relationship possessed each of the characteristics A, B, C, D etc, and has not so far been found to exist when any of these characteristics were absent.’
For the second stage, which is deductive and analytical, that proposition is converted to: ‘In all cases where the conduct and relationship possess each of the characteristics A, B, C, D etc, a duty of care arises.' The conduct and relationship involved in the case for decision is then analysed to ascertain whether they possess each of these characteristics. If they do the conclusion follows that a duty of care does arise in the case for decision.
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But since ex hypothesi the kind of case which we are now considering offers a choice whether or not to extend the kinds of conduct or relationships which give rise to a duty of care, the conduct or relationship which is involved in it will lack at least one of the characteristics A, B, C or D etc And the choice is exercised by making a policy decision whether or not a duty of care ought to exist if the characteristic which is lacking were absent or redefined in terms broad enough to include the case under consideration. The policy decision will be influenced by the same general conception of what ought to give rise to a duty of care as was used in approaching the analysis. The choice to extend is given effect to by redefining the characteristics in more general terms so as to exclude the necessity to conform to limitations imposed by the former definition which are considered to be inessential. The cases which are landmarks in the common law, such as Lickbarrow v Mason, Rylands v Fletcher, Indermaur v Dames, Donoghue v Stevenson, to mention but a few, are instances of cases where the cumulative experience of judges has led to a restatement in wide general terms of characteristics of conduct and relationships which give rise to legal liability.
Inherent in this methodology, however, is a practical limitation which is imposed by the sheer volume of reported cases. The initial selection of previous cases to be analysed will itself eliminate from the analysis those in which the conduct or relationship involved possessed characteristics which are obviously absent in the case for decision. The proposition used in the deductive stage is not a true universal. It needs to be qualified so as to read: ‘In all cases where the conduct and relationship possess each of the characteristics A, B C and D etc, but do not possess any of the characteristics Z, Y or X etc, which were present in the cases eliminated from the analysis, a duty of care arises’. But this qualification, being irrelevant to the decision of the particular case, is generally left unexpressed.
This was the reason for the warning by Lord Atkin in Donoghue v Stevenson ([1932] AC at 583, 584, [1932] All ER Rep at 13) itself when he said:
‘… in the branch of the law which deals with civil wrongs, dependent in England at any rate entirely upon the application by judges of general principles also formulated by judges, it is of particular importance to guard against the danger of stating propositions of law in wider terms than is necessary, lest essential factors be omitted in the wider survey and the inherent adaptability of English law be unduly restricted. For this reason it is very necessary in considering reported cases in the law of torts that the actual decision alone should carry authority, proper weight, of course, being given to the dicta of the judges.’
The respondents’ argument in the present appeal disregards this warning. It seeks to treat as a universal not the specific proposition of law in Donoghue v Stevenson which was about a manufacturer’s liability for damage caused by his dangerous products but the well-known aphorism used by Lord Atkin to describe ([1932] AC at 580, [1932] All ER Rep at 11) a ‘general conception of relations giving rise to a duty of care’:
‘You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation … when I am directing my mind to the acts or omissions which are called in question.’
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Used as a guide to characteristics which will be found to exist in conduct and relationships which give rise to a legal duty of care this aphorism marks a milestone in the modern development of the law of negligence. But misused as a universal it is manifestly false.
The branch of English law which deals with civil wrongs abounds with instances of acts and, more particularly, of omissions which give rise to no legal liability in the doer or omitter for loss or damage sustained by others as a consequence of the act or omission, however reasonably or probably that loss or damage might have been anticipated. The very parable of the good Samaritan (Luke x, verse 30) which was evoked by Lord Atkin in Donoghue v Stevenson illustrates, in the conduct of the priest and of the Levite who passed by on the other side, an omission which was likely to have as its reasonable and probable consequence damage to the health of the victim of the thieves, but for which the priest and Levite would have incurred no civil liability in English law. Examples could be multiplied. One may cause loss to a tradesman by withdrawing one’s custom although the goods which he supplies are entirely satisfactory; one may damage one’s neighbour’s land by intercepting the flow of percolating water to it even though the interception is of no advantage to oneself; one need not warn him of a risk of physical danger to which he is about to expose himself unless there is some special relationship between one and him such as that of occupier of land and visitor; one may watch one’s neighbour’s goods being ruined by a thunderstorm although the slightest effort on one’s part could protect them from the rain and one may do so with impunity unless there is some special relationship between one and him such as that of bailor and bailee.
In Hedley Byrne & Co Ltd v Heller & Partners Ltd, which marked a fresh development in the law of negligence, the conduct in question was careless words not careless deeds. Lord Atkin’s aphorism ([1932] AC at 580, [1932] All ER Rep 11), if it were of universal application, would have sufficed to dispose of this case, apart from the express disclaimer of liability. But your Lordships were unanimous in holding that the difference in the characteristics of the conduct in the two cases prevented the propositions of law in Donoghue v Stevenson from being directly applicable. Your Lordships accordingly proceeded to analyse the previous decisions in which the conduct complain of had been careless words, from which you induced a proposition of law about liability for damage caused by careless words which differs from the proposition of law in Donoghue v Stevenson about liability for damage caused by careless deeds.
In the present appeal, too, the conduct of the Home Office which is called in question differs from the kind of conduct discussed in Donoghue v Stevenson in at least two special characteristics. First, the actual damage sustained by the respondents was the direct consequence of a tortious act done with conscious volition by a third party responsible in law for his own acts and this act was interposed between the act of the Home Office complained of and the sustension of damage by the respondents. Secondly, there are two separate ‘neighbour relationships’ of the Home Office involved, a relationship with the respondents and a relationship with the third party. These are capable of giving rise to conflicting duties of care. This appeal, therefore, also raises the lawyer’s question ‘Am I my brother’s keeper’? A question which may also receive a restricted reply.
I start, therefore, with an examination if the previous cases in which both or one of these special characteristics are present. In the county court case of Greenwell v Prison Comrs both were present as was the characteristic of physical proximity of the plaintiff’s property in the relationship between the plaintiff and the defendant. If this decision is right the respondents are entitled to succeed. But the county
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court judge simply treated the case as governed by Lord Atkin’s aphorism in Donoghue v Stevenson ([1932] AC at 580, [1932] All ER Rep at 11) and for reasons already stated I do not think that this approach to the problem is adequate.
In two cases, Ellis v Home Office and D’Arcy v Prison Comrs, it was assumed, in the absence of argument to the contrary, that the legal custodian of a prisoner detained in a prison owed to the plaintiff, another prisoner confined in the same prison, a duty of care to prevent the first prisoner from assaulting the plaintiff and causing him physical injuries. Unlike the present case, at the time of the tortious act of the prisoner for the consequences of which it was assumed that the custodian was liable the prisoner was in the actual custody of the defendant and the relationship between them gave to the defendant a continuing power of physical control over the acts of the prisoner. The relationship between the defendants and the plaintiffs in these two cases too bore no obvious analogy to that between the respondents and the Home Office in the present case. In each of the cases the defendant in the exercise of a legal right and physical power of custody and control of the plaintiff had required him to be in a position in which the defendant ought reasonably and probably to have foreseen that he was likely to be injured by his fellow prisoner.
In my view, it is the combination of these two characteristics, one of the relationship between the defendant custodian and the person actually committing the wrong to the plaintiff and the other of the relationship between the defendant and the plaintiff which supply the reason for the existence of the duty of care in these two cases—which I conceded as counsel in Ellis v Home Office. The latter characteristic would be present also in the relationship between the defendant and any other person admitted to the prison who sustained similar damage from the tortious act of a prisoner, since the Home Office as occupier and manager of the prison has the legal right to control the admission and the movements of a visitor while he is on the prison premises. A similar duty of care would thus be owed to him. But I do not think that, save as a deliberate policy decision, any proposition of law based on the decisions in these two cases would be wide enough to extend to a duty to take reasonable care to prevent the escape of a prisoner from actual physical custody and control owed to a person whose property is situated outside the prison premises and is damaged by the tortious act of the prisoner after his escape.
We have also been referred to a number of cases decided in the State courts of New York and California dealing with the liability of the various authorities for physical injuries caused by prisoners who have been negligently released on parole, or on bail or who have been permitted to escape. I do not find them helpful, as this is a field of law in which the modern development in the various jurisdictions of the United States of America has been on different lines from its development in England.
There is also a decision of Negus J in the Supreme Court of Western Australia, Thorne and Rowe v State of Western Australia, dismissing an action for negligently allowing a prisoner to escape and cause physical injury to the plaintiffs. It is not a decision that any duty of care to prevent escape was owed to the injured persons. The judgment was mainly concerned with the topic of vicarious liability; the most that can be said is that the learned judge was prepared to assume, without deciding, that such a duty might exist since he found on the facts, perhaps surprisingly, that due care had been taken.
I will refer briefly to a few other previous decisions in which the conduct and relationships involved possessed one or other of the characteristics of the conduct and relationships with which the present appeal is concerned, but also possessed
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other characteristics which, in my view, deprive these decisions of relevance to the issue of law in the present appeal.
There are two cases in which a plaintiff has recovered against a custodian damages for injuries sustained as a consequence of the subsequent act of a human being whom the custodian has carelessly failed to keep in his custody and control. In neither case was the custody penal custody or the human being who did the act causing the damage one who was regarded in law as responsible for his actions. In Holgate v Lancashire Mental Hospitals Board, Gill and Robertson, tried with a jury on assize, the human being causing the damage was of unsound mind. It was held that the doctors had been negligent in allowing him to be released on a visit. Only the summing-up of Lewis J is reported. I reserve my opinion whether this decision was right. The second case which was in your Lordships’ House, Carmarthenshire County Council v Lewis, concerned a child of four who ran out into the road from a school maintained by the defendant and caused an accident on the highway to a driver trying to avoid him. The defendant was held liable for not taking reasonable care to keep the gate shut. The headnote reports the ratio decidendi as based on the duty of an occupier of premises adjacent to a highway and Lord Goddard did found his judgment on this. There seems to me to be a clear and relevant distinction between the responsibility of a custodian for acts which are done after escaping from custody by a human being who is not a reasonable man and so not responsible in law for his own acts, on the one hand, and for acts of conscious volition which are done by a responsible human being on the other hand. Furthermore, in the Carmarthenshire case there was no possible conflict between the duty of the defendant council to the child and its duty to users of the adjacent highway.
There are other cases in which parents have been held liable for the acts of older children, but these can, in my view, be classified as depending on the duty of the defendant to exercise due care in the control of things involving special danger. As is so often the case in the law of tort the basis of this liability is helpfully expounded in a judgment of Dixon J in the High Court of Australia, Smith v Leurs.
I do not find it useful to refer to the many other cases cited in which the damage to the plaintiff was not caused by an act of conscious volition of a responsible third person whose conduct the defendant had a legal right to control. The result of the survey of previous authorities can be summarised in the words of Dixon J in Smith v Leurs ((1945) 70 CLR at 262):
‘The general rule is that one man is under no duty of controlling another man to prevent his doing damage to a third. There are, however, special relations which are the source of a duty of this nature.’
From the previous decisions of the English courts, in particular those in Ellis v Home Office and D’Arcy v Prison Comrs, which I accept as correct, it is possible to arrive by induction at an established proposition of law as respects one of those special-relations: viz A is responsible for damage caused to the person or property of B by the tortious act of C (a person responsible in law for his own acts) where the relationship between A and C has the characteristics: (1) that A has the legal right to detain C in penal custody and to control his acts while in custody; (2) that A is actually exercising his legal right of custody of C at the time of C’s tortious act; and (3) that A if he had taken reasonable care in the exercise of his right of custody could have prevented C from doing the tortious act which caused damage to the person or property of B; and where also the relationship between A and B has the characteristics;
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(4) that at the time of C’s tortious act A has the legal right to control the situation of B or his property as respects physical proximity to C; and (5) that A can reasonably foresee that B is likely to sustain damage to his person or property if A does not take reasonable care to prevent C from doing tortious acts of the kind which he did.
On the facts which your Lordships are required to assume for the purposes of the present appeal the relationship between the Home Office, A, and the borstal trainees, C, did possess characteristics (1) and (3) but did not possess characteristic (2); while the relationship between the Home Office, A, and the respondents, B, did possess characteristic (5) but did ot possess characteristic (4). What your Lordships have to decide as respects each of the relationships is whether the missing characteristic is essential to the existence of the duty or whether the facts assumed for the purposes of this appeal disclose some other characteristic which if substituted for that which is missing would produce a new proposition of law which ought to be true.
As any proposition which relates to the duty of controlling another man to prevent his doing damage to a third deals with a category of civil wrongs of which the English courts have hitherto had little experience it would not be consistent with the methodology of the development of the law by judicial decision that any new proposition should be stated in wider terms than are necessary for the determination of the present appeal. Public policy may call for the immediate recognition of a new sub-category of relations which are the source of a duty of this nature additional to the sub-category described in the established proposition; but further experience of actual cases would be needed before the time became ripe for the coalescence of sub-categories into a broader category of relations giving rise to the duty, such as was effected with respect to the duty of care of a manufacturer of products in Donoghue v Stevenson. Nevertheless, any new sub-category will form part of the English law of civil wrongs and must be consistent with its general principles.
Since the tortious act of the borstal trainees took place after they had ceased to be in the actual custody of the borstal officers, what your Lordships are concerned with in the relationship between the Home Office and borstal trainees is the responsibility of the Home Office to detain them in custody. To detain them at all would be to commit a civil wrong to them unless the legal right to detain them were conferred on the custodians by statute or at common law. In the case of borstal trainees that right is conferred by statute, viz s 13 of the Prison Act 1952. This makes lawful their detention within the curtilage of the borstal institution and outside its curtilage in the custody or under the control of a borstal officer. This section does not impose on the borstal officers or on the Home Office (to which, by an Order in Councild made under s 24 of the Criminal Justice Act 1961, the responsibility for the administration of borstal training was transferred) any responsibility to continue to keep trainees in custody. Whatever responsibility it has to do so is imposed by s 45 of the 1952 Act (as amended by ss 1–11 of the Criminal Justice Act 1961), of which the relevant provision is:
‘A person sentenced to Borstal training shall be detained in a Borstal institution for such period, not extending beyond two years after the date of his sentence … as the [Secretary of Statee] may determine, and shall then be released … ’
There are also extended powers of release conferred on the Home Secretary. The only statutory reference to the purpose of borstal training is to be found in the definition of borstal institutions in s 43(1)(c), viz—
‘… places in which offenders not less than fifteen but under twenty-one years of age may be detained and given such training and instruction as will conduce to their reformation and the prevention of crime’.
But s 47(1) gives to the Home Secretary very wide power to make rules—
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‘… for the regulation and management of … Borstal institutions … and for the classification, treatment, employment, discipline and control of persons required to be detained therein’
includingf rules for the temporary release of persons ‘serving a sentence of … Borstal training’.
The Act from which the right to detain is derived thus only gives the broadest indication of the purpose of the detention and confers on the Home Secretary very wide powers to determine by subordinate legislation the way in which the powers of custody and control of borstal trainees should be exercised by the officers of the prison service. In exercising his rule-making power, at any rate, it would be inconsistent with what are now recognised principles of English public law to suggest that he owed a duty of care capable of giving rise to any liability in civil law to avoid making a rule the observance of which was likely to result in damage to a private citizen. For a careless exercise of his rule-making power he is responsible to Parliament alone. The only limitation on this power which courts of law have jurisdiction to enforce depends not on the civil law concept of negligence, but on the public law concept of ultra vires.
The statutory rules in force at the relevant time which deal with discipline and control limit themselves to laying down the general principles to be observed, vizg—
‘the purpose of borstal training requires that every inmate, while conforming to the rules necessary for well-ordered community life, shall be able to develop his individuality on right lines with a proper sense of personal responsibility. Officers shall therefore, while firmly maintaining discipline and order, seek to do so by influencing the inmates through their own example and leadership and by enlisting their willing co-operation.’
If these instructions with their emphasis on co-operation rather than coercion are to be followed in a working party outside the confines of a ‘closed’ borstal or in an ‘open’ borstal they must inevitably involve some risk of an individual trainee’s escaping from custody and indulging again in the same kind of criminal activities that led to his sentence of borstal training and which are likely to cause damage to the property of another person. To adopt a method of supervision of trainees still subject to detention which affords them any opportunity of escape is as Viscount Dilhorne has pointed out an act or omission which it can be reasonably foreseen may have as its consequence some injury to another person. But the same is true of every decision made by the Home Office, through the appropriate officers of the borstal service, in the exercise of the statutory power to release a borstal trainee from detention in less than two years from the time of his being sentenced or to release him temporarily on parole.
If one accepted the principle laid down in relation to private Act of Parliament in the passages already cited by your Lordships from Geddis v Proprietors of Bann Reservoir ((1878) 3 App Cas 430 at 455, 456), as a proposition of law of general application to modern statutes which confer on government departments or public authorities a discretion as to the way in which a particular public purpose is to be achieved, the courts would be required, at the suit of any plaintiff who had in fact sustained damage at the hands of a borstal trainee who had been released, to review the Home Office decision to release him and to determine whether sufficient consideration had been given to the risk of his causing damage to the plaintiff.
A private Act of Parliament in the nineteenth century of which that under consideration of Geddis v Proprietors of Bann Reservoir was typical, conferred on statutory undertakers powers to construct and maintain works which interfered with the
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common law proprietary rights of other persons. The only conflict of interests to which the exercise of these powers could give rise was between the interests of the undertakers in achieving the physical result contemplated by the private Bill they had promoted and the interests of those other persons whose common law proprietary rights would be affected by the exercise of the powers. In construing a statute of this kind it can be presumed that Parliament did not intend to authorise the undertakers to exercise the powers in such a way as to cause damage to the proprietary rights of private citizens that could be avoided by reasonable care without prejudicing the achievement of the contemplated result. In the context of proprietary rights, the concept of a duty of reasonable care was one with which the courts were familiar in the nineteenth century as constituting a cause of action in ‘negligence’. The analogy between the careless exercise of statutory powers conferred by a private Act of this kind and the careless exercise of powers existing at common law in respect of property was close and the issues involved suitable for decision by a jury, on evidence admissible and adduced in accordance with the ordinary procedure of courts of law. There was no compelling reason to suppose that Parliament intended to deprive of any remedy at common law private citizens whose common law proprietary rights were injured by the careless, and therefore unauthorised, acts or omissions of the undertakers.
But the analogy between ‘negligence’ at common law and the careless exercise of statutory powers breaks down where the act or omission complained of is not of a kind which would itself give rise to a cause of action at common law if it were not authorised by the statute. To relinquish intentionally or inadvertently the custody and control of a person responsible at law for his own acts, is not an act or omission which, independently of any statute, would give rise to a cause of action at common law against the custodian on the part of another person who subsequently sustained tortious damage at the hands of the person released. The instant case thus lacks a relevant characteristic which was present in the series of decisions from which the principle formulated in Geddis v Proprietors of Bann Reservoir was derived. Furthermore, there is present in the instant case a characteristic which was lacking in Geddis v Proprietors of Bann Reservoir. There the only conflicting interests involved were those on the one hand of the statutory undertakers responsible for the act or omission complained of and on the other hand of the person who sustained damage as a consequence of it. In the instant case, it is the interest of the borstal trainee himself which is most directly affected by any decision to release him and by any system of relaxed control while he is still in custody that is intended to develop his sense of personal responsibility and so afford him an opportunity to escape. Directly affected also are the interests of other members of the community of trainees subject to the common system of control; and indirectly affected by the system of control while under detention and of release under supervision is the general public interest in the reformation of young offenders and the prevention of crime.
These interests, unlike those of a person who sustains damage to his property or person by the tortious act or omission of another, do not fall within any category of property or rights recognised in English law as entitled to protection by a civil action for damages. The conflicting interests of the various categories of persons likely to be affected by an act or omission of the custodian of a borstal trainee which has as its consequence his release or his escape are thus of different kinds for which in law there is no common basis for comparison. If the reasonable man when directing his mind to the act or omission which has this consequence ought to have in contemplation persons in all the categories directly affected and also the general public interest in the reformation of young offenders, there is no criterion by which a court can assess where the balance lies between the weight to be given to one interest and that to be given to another. The material relevant to the assessment of the reformative effect on trainees of release under supervision or of any relaxation of control while still under detention is not of a kind which can be satisfactorily elicited by the adversary
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procedure and rules of evidence adopted in English courts of law or of which judges (and juries) are suited by their training and experience to assess the probative value.
It is, I apprehend, for practical reasons of this kind that over the past century the public law concept of ultra vires has replaced the civil law concept of negligence as the test of the legality, and consequently of the actionability, of acts or omissions of government departments or public authorities done in the exercise of a direction conferred on them by Parliament as to the means by which they are to achieve a particular public purpose. According to this concept Parliament has entrusted to the department or authority charged with the administration of the statute the exclusive right to determine the particular means within the limits laid down by the statute by which its purpose can best be fulfilled. It is not the function of the court, for which it would be ill-suited, to substitute its own view of the appropriate means for that of the department or authority by granting a remedy by way of a civil action at law to a private citizen adversely affected by the way in which the discretion has been exercised. Its function is confined in the first instance to deciding whether the act or omission complained of fell within the statutory limits imposed on the department’s or authority’s discretion. Only if it did not would the court have jurisdiction to determine whether or not the act or omission, not being justified by the statute, constituted an actionable infringement of the plaintiff’s rights in civil law.
These considerations lead me to the conclusion that neither the intentional release of a borstal trainee under supervision, nor the unintended escape of a borstal trainee still under detention which was the consequence of the application of a system of relaxed control intentionally adopted by the Home Office as conducive to the reformation of trainees, can have been intended by Parliament to give rise to any cause of action on the part of any private citizen unless the system adopted was so unrelated to any purpose of reformation that no reasonable person could have reached a bona fide conclusion that it was conducive to that purpose. Only then would the decision to adopt it be ultra vires in public law.
A Parliamentary intention to leave to the discretion of the Home Office the decision as to what system of control should be adopted to prevent the escape of borstal trainees must involve, from the very nature of the subject-matter of the decision, an intention that in the application of the system a wide discretion in the application of the system may be delegated by the Home Office to subordinate officers engaged in the administration of the borstal system. But although the system of control, including the sub-delegation of discretion to subordinate officers, may itself be intra vires, an act or omission of a subordinate officer employed in the administration of the system may nevertheless be ultra vires if it falls outside the limits of the discretion delegated to him—ie if it is done contrary to instructions which he has received from the Home Office.
In a civil action which calls in question an act or omission of a subordinate officer of the Home Office on the ground that he has been ‘negligent’ in his custody and control of a borstal trainee who has caused damage to another person the initial inquiry should be whether or not the act or omission was ultra vires for one or other of these reasons. Where the act or omission is done in pursuance of the officer’s instructions, the court may have to form its own view as to what is in the interests of borstal trainees, but only to the limited extent of determining whether or not any reasonable person could bona fide come to the conclusion that the trainee causing the damage or other trainees in the same custody could be benefited in any way by the act or omission. This does not involve the court in attempting to substitute, for that of the Home Office, its own assessment of the comparative weight to be given to the benefit to the trainees and the detriment to persons likely to sustain damage. If on the other hand the officer’s act or omission is done contrary to his instructions it is not protected by the public law doctrine of intra vires. Its actionability falls to be determined by the civil law principles of negligence, like the acts of the statutory undertakers in Geddis v Proprietors of Bann Reservoir.
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This, as it seems to me, is the way in which the courts should set about the task of reconciling the public interest in maintaining the freedom of the Home Office to decide on the system of custody and control of borstal trainees which is most likely to conduce to their reformation and the prevention of crime, and the public interest that borstal officers should not be allowed to be completely disregardful of the interests both of the trainees in their charge and of persons likely to be injured by their carelessness, without the law providing redress to those who in fact sustain injury.
Ellis v Home Office and D’Arcy v Prison Comrs are decisions which are consistent with this principle as respects the initial inquiry. In neither of them was it sought to justify the alleged acts or omissions of the prison officers concerned as being done in compliance with instructions given to them by the appropriate authority (at that date the prison commissioners) or as being in the interests of the prisoner whose tortious act caused the damage or of any other inmates of the prison. If the test suggested were applied to acts and omissions alleged in those two cases they would in public law be ultra vires.
If this analogy to the principle of ultra vires in public law is applied as the relevant condition precedent to the liability of a custodian for damage caused by the tortious act of a person (the detainee) over whom he has a statutory right of custody, the characteristic of the relationship between the custodian and the detainee which was present in those two cases, viz that the custodian was actually exercising his right of custody at the time of the tortious act of the detainee, would not be essential. A cause of action is capable of arising from failure by the custodian to take reasonable care to prevent the detainee from escaping, if his escape was the consequence of an act or omission of the custodian falling outside the limits of the discretion delegated to him under the statute.
The practical effect of this would be that no liability in the Home Office for ‘negligence’ could arise out of the escape from an ‘open’ borstal of a trainee who had been classified for training at a borstal of this type by the appropriate officer to whom the function of classification had been delegated, on the ground that the officer had been negligent in so classifying him or in failing to reclassify him for removal to a ‘closed’ borstal. The decision as to classification would be one which lay within the officer’s discretion. The court could not inquire into its propriety as it did in Greenwell v Prison Comrs in order to determine whether he had given what the court considered to be sufficient weight to the interests of persons whose property the trainee would be likely to damage if he should escape. For this reason I think that Greenwell v Prison Comrs was wrongly decided by the county court judge. But to say this does not dispose of the present appeal for the allegations of negligence against the borstal officers are consistent with their having acted outside any discretion delegated to them and having disregarded their instructions as to the precautions they should take to prevent members of the working party of trainees from escaping from Brownsea Island. Whether they had or not could only be determined at the trial of the action. But this is only a condition precedent to the existence of any liability. Even if the acts and omissions of the borstal officer alleged in the particulars of negligence were done in breach of their instructions and so were ultra vires in public law it does not follow that they were also done in breach of any duty of care owed by the officers to the respondents in civil law.
It is common knowledge, of which judicial notice may be taken, that borstal training often fails to achieve its purpose of reformation, and that trainees when they have ceased to be detained in custody revert to crime and commit tortious damage to the person and property of others. But so do criminals who have never been
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apprehended and criminals who have been released from custody on completion of their sentences or earlier pursuant to a statutory power to do so. The risk of sustaining damage from the tortious acts of criminals is shared by the public at large. It has never been recognised at common law as giving rise to any cause of action against anyone but the criminal himself. It would seem arbitrary and therefore unjust to single out for the special privilege of being able to recover compensation from the authorities responsible for the prevention of crime a person whose property was damaged by the tortious act of a criminal, merely because the damage to him happened to be caused by a criminal who had escaped from custody before completion of his sentence instead of by one who had been lawfully released or who had been put on probation or given a suspended sentence or who had never been previously apprehended at all. To give rise to a duty on the part of the custodian owed to a member of the public to take reasonable care to prevent a borstal trainee from escaping from his custody before completion of the trainee’s sentence there should be some relationship between the custodian and the person to whom the duty is owed which exposes that person to a particular risk of damage in consequence of that escape which is different in its incidence from the general risk of damage from criminal acts of others which he shares with all members of the public.
What distinguishes a borstal trainee who has escaped from one who has been duly released from custody, is his liability to recapture, and the distinctive added risk which is a reasonably foreseeable consequence of a failure to exercise due care in preventing him from escaping is the likelihood that in order to elude pursuit immediately on the discovery of his absence the escaping trainee may steal or appropriate and damage property which is situated in the vicinity of the place of detention from which he has escaped.
So long as Parliament is content to leave the general risk of damage from criminal acts to lie where it falls without any remedy except against the criminal himself, the courts would be exceeding their limited function in developing the common law to meet changing conditions if they were to recognise a duty of care to prevent criminals escaping from penal custody owed to a wider category of members of the public than those whose property was exposed to an exceptional added risk by the adoption of a custodial system for young offenders which increased the likelihood of their escape unless due care was taken by those responsible for their custody.
I should therefore hold that any duty of a borstal officer to use reasonable care to prevent a borstal trainee from escaping from his custody was owed only to persons whom he could reasonably foresee had property situate in the vicinity of the place of detention of the detainee which the detainee was likely to steal or to appropriate and damage in the course of eluding immediate pursuit and recapture. Whether or not any person fell within this category would depend on the facts of the particular case including the previous criminal and escaping record of the individual trainee concerned and the nature of the place from which he escaped.
So to hold would be a rational extension of the relationship between the custodian and the person sustaining the damage which was accepted in Ellis v Home Office and D’Arcy v Prison Comrs as giving rise to a duty of care on the part of the custodian to exercise reasonable care in controlling his detainee. In those two cases the custodian had a legal right to control the physical proximity of the person or property sustaining the damage to the detainee who caused it. The extended relationship substitutes for the right to control the knowledge which the custodian possessed or ought to have possessed that physical proximity in fact existed.
In the present appeal the place from which the trainees escaped was an island from which the only means of escape would presumably be a boat accessible from the shore of the island. There is thus material, fit for consideration at the trial, for holding that the respondents, as the owners of a boat moored off the island, fell within the
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category of persons to whom a duty of care to prevent the escape of the trainees was owed by the officers responsible for their custody.
If therefore it can be established at the trial of this action: (1) that the borstal officers in failing to take precautions to prevent the trainees from escaping were acting in breach of their instructions and not in bona fide exercise of a discretion delegated to them by the Home Office as to the degree of control to be adopted: and (2) that it was reasonably foreseeable by the officers that if these particular trainees did escape they would be likely to appropriate a boat moored in the vicinity of Brownsea Island for the purpose of eluding immediate pursuit and to cause damage to it, the borstal officers would be in breach of a duty of care owed to the respondents and the respondents would, in my view, have a cause of action against the Home Office as vicariously liable for the ‘negligence’ of the borstal officers.
I would accordingly dismiss the appeal on the preliminary issue of law and allow the case to go for trial on those issues of fact.
Appeal dismissed.
Solicitors: Treasury Solicitor; Ingledew, Brown, Bennison & Garrett (for the respondents).
S A Hatteea Esq Barrister.
Vandyke v Fender and another (Sun Insurance Office Ltd, third party)
[1970] 2 All ER 335
Categories: TORTS; Negligence: INSURANCE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND KARMINSKI LJJ
Hearing Date(s): 3, 4, 5, 6, 9 FEBRUARY, 5 MARCH 1970
Road traffic – Negligence – Driving of motor vehicle – Liability of employers – Loan of car by employers to employee on condition that fellow employee be given lifts to work – Car driven for employer’s purposes – Driver employers’ agent.
Insurance – Employers’ liability – Construction of policy – Injury ‘arising out of and in the course of employment’ – Loan of car by employers to employee on condition that fellow employee given lifts to work – Fellow employee injured by negligent driving of employee – Whether employers entitled to indemnity under policy.
Insurance – Motor insurance – Third-party risks – Loan of car to employee on condition that fellow employee given lifts to work – Whether fellow employee passenger in car ‘by reason of or in pursuance of contract of employment’ – Whether insurance compulsory – Acceptance of liability by Motor Insurers’ Bureau – Road Traffic Act 1960, s 203(4).
As an inducement to the plaintiff and the first defendant to take up employment at the second defendants’ foundry, a car belonging to the second defendants was lent to the first defendant and weekly payments were made to him for petrol on the understanding that, if he used it to go to and from work, he would bring the plaintiff and two other employees of the second defendants with him. The plaintiff and the first defendant took turns in driving and at the weekend the first defendant kept the car at his home and used it as he wished. Another car owned by the company secretary of the second defendants was later substituted, but the plaintiff and the first defendant were led to believe that this also belonged to the second defendants. While driving the plaintiff to work in the company secretary’s car, the first defendant negligently collided with another car and the plaintiff was injured. The company secretary’s car was insured for anyone driving with his permission for social, domestic and pleasure purposes, but not business purposes. The insurance company which provided cover for third party liability to the first defendant was in liquidation. The second defendants were insured by the third party under an employers’ liability
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policy against injury to any person under a contract of service with the second defendants provided that the injury arose ‘out of and in the course of such person’s employment’ with them. The Agricultural and General Insurance Society Ltd, nominated by the Motor Insurers’ Bureau to meet liability, undertook that if the court ruled that there was a Road Traffic Act risk and not an employers’ liability risk, the judgment, including the plaintiff’s costs, would be met.
Held – (i) The second defendants were liable to the plaintiff for the negligence of the first defendant, because he was driving the car for their purposes, in that he was using it to bring his fellow employees and himself to work, and was therefore acting as their agents, whether or not he was driving in the course of his employment (see p 339 c, p 342 d to f and p 346 j, post).
Ormrod v Crosville Motor Services Ltd [1953] 2 All ER 753 followed.
(ii) The second defendants were not entitled to an indemnity, in respect of the plaintiff’s claim under their employers’ liability policy with the third party, because
(a) the plaintiff was not under an obligation by the terms of his employment to travel in the motor car and accordingly the injury sustained by the plaintiff on the public road on his way to work did not arise ‘out of and in the course of [his] employment’ within the meaning of those words in the policy interpreted in accordance with the construction which had been put on the like words used in the Workmen’s Compensation Acts (see p 340 g, p 341 c, p 344 j to p 345 c and p 346 j, post); St Helens Colliery Co Ltd v Hewitson [1923] All ER Rep 249 and Weaver v Tredegar Iron and Coal Co Ltd [1940] 3 All ER 157 applied;
(b) section 9(1)a of the National Insurance (Industrial Injuries) Act 1946 altered the interpretation of the words ‘in the course of his employment’ only for the purposes of industrial injuries legislation and was not otherwise intended to alter the common law or the effects of proviso (i) to s 36(1)(b)b of the Road Traffic Act 1930 (now s 203(4)c of the Road Traffic Act 1960) (see p340 j to p 341 a, p 345 f and g and p 346 j, post).
Per Sachs and Karminski LJJ. The agreement between the plaintiff and the first and second defendants did not cause the employment of the plaintiff and the first defendant to start before they reached the second defendants’ premises, nor was it a contract to employ them to drive the motor car on the way to those premises (see p 346 e and j, post).
(iii) On the true construction of the proviso to s 203(4)d of the Road Traffic Act
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1960 the plaintiff was a passenger in the car ‘by reason of or in pursuance of a contract of employment’ (which words were much wider than the words ‘in the course of his employment’), because (per Lord Denning MR and Karminski LJ) such a contract was a cause or one of the causes of his being carried in the car (see p 341 e and p 346 j, post), or (per Sachs and Karminski LJJ) the plaintiff was being carried for sufficient practical or business reasons (see p 343 a and p 346 j, post), and in either case the car was regularly used for carrying the plaintiff and his fellow employees to and from their work (see p 341 e, p 342 j and p 346 j, post); accordingly, the plaintiff’s injuries were sustained in circumstances in which it was by virtue of the Road Traffic Act 1960 compulsory for the first defendant to be insured and therefore the amount of the judgment in favour of the plaintiff and costs would be met by the Agricultural and General Insurance Society Ltd in accordance with its undertaking.
Decision of Paull J [1969] 3 All ER 1291 affirmed as to the first defendant and the second defendants and reversed as to the third party.
Notes
For the meaning of the course of employment in respect of accidents arising therein, see 27 Halsbury’s Laws (3rd Edn) 804–807, paras 1418–1421 and for cases on the subject, see 34 Digest (Repl) 384–387, 2868–2885.
For compulsory insurance in respect of passengers carried by reason of or in pursuance of a contract of employment, see 22 Halsbury’s Laws (3rd Edn) 368, 369, para 757, and for cases on the subject, see 29 Digest (Repl) 547–549, 3723–3731.
For the National Insurance (Industrial Injuries) Act 1946, s 9, see 16 Halsbury’s Statutes (2nd Edn) 816–817. This section has now been replaced by the National Insurance (Industrial Injuries) Act 1965, s 8, for which see 45 ibid 1102–1.103.
For the Road Traffic Act 1930, s 36, see 24 ibid 605, and for the Road Traffic Act 1960, s 203, see 40 ibid 885.
Cases referred to in judgments
Black v Aitkenhead & Son 1938 SC 291, 34 Digest (Repl) 388, * 1561.
Connell v Motor Insurers’ Bureau [1969] 3 All ER 572, [1969] 2 QB 494, [1969] 3 WLR 231.
Cremins v Guest, Keen & Nettlefolds Ltd [1908] 1 KB 469, 77 LJKB 326, 98 LT 335, 34 Digest (Repl) 384, 2871.
Hardy v Motor Insurers’ Bureau [1964] 2 All ER 742, [1964] 2 QB 745, [1964] 3 WLR 433, Digest (Cont Vol B) 462, 3703a.
Hilton v Thomas Burton (Rhodes) Ltd [1961] 1 All ER 74, [1961] 1 WLR 705, 34 Digest (Repl) 175, 1239.
Izzard v Universal Insurance Co Ltd [1937] 3 All ER 79, [1937] AC 773, 106 LJKB 460, 157 LT 355; rvsg [1936] 2 All ER 1565, [1936] 2 KB 555, 29 Digest (Repl) 547, 3725.
Lister v Romford Ice & Cold Storage Co Ltd [1957] 1 All ER 125, [1957] AC 555, [1957] 2 WLR 158, 121 JP 98, 29 Digest (Repl) 546, 3720.
Ormrod v Crosville Motor Services Ltd [1953] 2 All ER 753, [1953] 1 WLR 1120, Digest (Cont Vol A) 1166, 522a.
R v Industrial Injuries Comrs, ex parte Amalgamated Engineering Union [1966] 1 All ER 97, [1966] 2 QB 31, [1966] 2 WLR 97, Digest (Cont Vol B) 540, 2905a.
St Helen’s Colliery Co Ltd v Hewitson [1924] AC 59, [1923] All ER Rep 249, 93 LJKB 177, 130 LT 291, 34 Digest (Repl) 385, 2874.
Vandervell Trusts, Re, White v Vandervell Trustees Ltd [1969] 3 All ER 496, [1970] Ch 44, [1969] 3 WLR 958.
Weaver v Tredegar Iron and Coal Co Ltd [1940] 3 All ER 157, [1940] AC 955, 109 LJKB 621, 164 LT 231, 34 Digest (Repl) 386, 2877.
Cases also cited
Brydon v Stewart (1855) 2 Macq 30.
National Coal Board v England [1954] 1 All ER 546, [1954] AC 403.
Page 338 of [1970] 2 All ER 335
Priestley v Fowler (1837) 3 M & W 1, [1835–42] All ER Rep 449.
Wilsons & Clyde Coal Co Ltd v English [1937] 3 All ER 628, [1938] AC 57.
Appeal
This was an appeal by the first and second defendants, William Henry Fender and Reddington Foundries Ltd respectively, and the third party, the Sun Insurance Office Ltd, from a judgment of Paull J, given on 19 May 1969 and reported at [1969] 3 All ER 1291, awarding the plaintiff, Sidney Ernest Vandyke, damages in respect of injuries received as the result of negligent driving by the first defendants. The facts are set out in the judgment of Lord Denning MR.
P B B Mayhew and G R Sankey for the plaintiff.
Tudor Evans QC and D S Perrett for the first defendant.
A R A Beldam QC for the second defendants.
Hugh Griffiths QC and John Griffiths for the third party.
Cur adv vult
5 March 1970. The following judgments were delivered.
LORD DENNING MR. This case raises an important point. When a company provides a car for its employees to come and go to and from work, and there is an accident on the road, is the risk to be borne by the employers’ liability insurance, or by the road traffic insurance?
1. The facts
The facts of this case itself are somewhat special. The first defendant, Mr Fender, and the plaintiff, Mr Vandyke, are skilled moulders. They are cousins. Up till 1965 they worked in a small factory at Lewisham. But in 1965 a Mr Simmons persuaded them to come and work at a foundry at Maidstone which was run by his company, the second defendants, Reddington Foundries Ltd. It was agreed that the two of them should continue to live at Lewisham and travel each day to Maidstone and back. It was 30 miles each way. It was a journey which could be done by train but it was much more convenient by car. So Mr Simmons told them that he would lend to the first defendant one of the second defendants’ cars and pay him 10s a day to cover the cost of the petrol. The second defendants had two other employees living near Lewisham. The understanding was that the first defendant would use the second defendants’ car and he would pick up, not only the plaintiff, but also these other two employees and take them to their work at Maidstone and back. It was too much for the first defendant to drive both ways. So it was arranged for the first defendant to drive going and the plaintiff coming back or vice versa. The first defendant kept the car at his home over the weekends and used it as he wished. The judge ([1969] 3 All ER 1291, [1969] 2 QB 581) found that the arrangement for the car was part of the first defendant’s contract of service, but that it did not mean that he was obliged to use the car, or that it was a term of the contract that he must use it. He was not bound to use it if it was foggy or for any other reason he did not want to use it. But it did mean that, if he used the car, he was to bring the other three if they desired to come by car. Again, the plaintiff was not obliged to go by the car. He could have gone by train if he wanted. So with the other two.
The arrangement was put into effect. Each morning the first defendant did the round and collected the other three men, and drove them to work. Each evening the plaintiff drove back. Each week the second defendants paid the first defendant the petrol money, £2 10s or £3, according to whether it was a five-day or six-day week. There were three different cars provided in turn. The first was a Cortina registered in Mr Simmons’s name. The second was a Morris 1100. The third was a Cortina owned by a Mr Read who was the secretary to the second defendants. Neither
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the first defendant nor the plaintiff realised that it was Mr Read’s car. They only knew that it was provided by the second defendants for their use.
On 7 December 1965, when they were driving to work in Mr Read’s car, there was an accident. The first defendant was driving. The plaintiff was severely injured. The judge ([1969] 3 All ER 1291, [1969] 2 QB 581) found that it was due to the first defendant’s negligence. He assessed the damages to the plaintiff at £5,750 general damages, and £556 special damages.
2. Damages
There is an appeal as to the amount of damages. [His Lordship considered the plaintiff’s injuries, and continued:] I think the award made by the judge of £5,750 general damages was on the high side, but not so entirely erroneous that we should interfere.
3. The liability of the second defendants to the plaintiff
The first defendant was not a paid driver. He was not driving this car as the servant of the second defendants. But he was driving it for their purposes—so as to bring himself and his fellow employees to their work. He was the agent of the second defendants. They are, therefore, liable for his negligence, see Ormrod v Crosville Motor Services Ltd; and can claim over against the first defendant, see Lister v Romford Ice & Cold Storage Co Ltd.
4. The insurance policies
The second defendants were insured with the third party, the Sun Insurance Co Ltd, against employers’ liability risks. The car and its driver were insured against road traffic risks. The question is whether the damages payable to the plaintiff should be borne by the employers’ liability insurance or by the road traffic insurance? The risks were covered as follows.
(i) The driver of the car, the first defendant, was covered for third-party liability by the Fire Auto & Marine Insurance Co in respect of his own car. His policy covered him also when he was driving someone else’s car. It covered him for passengers carried by reason of or in pursuance of a contract of employment. But the Fire Auto & Marine Insurance Co had been liquidated. So there was nothing to come from that policy.
(ii) The owner of the car, Mr Read, was covered for third-party liability by the Agricultural & General Insurance Society Ltd in respect of its use by him, or anyone driving with his permission, for social, domestic and pleasure purposes; and also use by Mr Read in person in connection with his business of a buyer. But it did not cover use by anyone else in connection with business. So it did not cover this case.
(iii) Although the road traffic policies did not cover this case, nevertheless if it was a case where the injury should have been covered by road traffic insurance (in accordance with the compulsory insurance provisions of the statute) the Motor Insurers’ Bureau will guarantee payment in accordance with the agreement set out in the note to Hardy v Motor Insurers’ Bureau ([1964] 2 QB 745 at 770).
This brings me to the crucial point in the case. The Road Traffic Acts did not require the injury to the plaintiff to be covered by the motor car insurance if it was an injury sustained by him ‘arising out of and in the course of his employment’; see s 36(1)(b)(i) of the Road Traffic Act 1930 and s 203(4)(b) of the Road Traffic Act 1960. The reason why it was not made compulsory in that case was, no doubt, because the legislature expected an injury ‘arising out of and in the course of his employment’ to be covered by the employers’ liability policy.
(iv) There was one employers’ liability policy in force. The second defendants were insured with the third party for employers’ liability insurance. The policy stated that—
‘… if any person under a contract of service or apprenticeship with the insured
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shall sustain bodily injury or disease caused during any period of insurance and arising out of and in the course of such person’s employment by the insured in the business … ’
the third party will indemnify the insured against liability at law for damages and costs.
(v) The upshot of it all is this: if the injury to the plaintiff arose ‘out of and in the course of his employment’ by the second defendants, it was covered by the employers’ liability policy with the third party. If it did not arise ‘out of and in the course of his employment’ it ought to have been covered by the road traffic policies.
Seeing that the Motor Insurers’ Bureau was so much concerned, we were glad to have the assistance of counsel for the first defendant on its behalf, and to treat it as if it had been a party to the proceedings. This is in accordance with the useful practice approved in Re Vandervell Trusts, White v Vandervell Trustees Ltd.
5. ‘Arising out of and in the course of his employment’
The words injury ‘arising out of and in the course of his employment’ were used in the old Workmen’s Compensation Acts from 1897 to 1945. The selfsame words have been used in the Road Traffic Acts 1930 and 1960. They have also been used in employers’ liability policies. In my opinion they should receive the same interpretation in all three places for they are all so closely connected that they ought, as matter of common sense, to receive the same interpretation in each. The words were construed and applied in thousands of cases under the Workmen’s Compensation Acts and I think we should follow those cases. The two leading cases, most apposite for present purposes, are St Helen’s Colliery Co Ltd v Hewitson and Weaver v Tredegar Iron and Coal Co Ltd. They show, to my mind quite conclusively, that when man is going to or coming from work, along a public road, as a passenger in a vehicle provided by his employer, he is not then in the course of his employment—unless he is obliged by the terms of his employment to travel in that vehicle. It is not enough that he should have the right to travel in the vehicle, or be permitted to travel in it. He must have an obligation to travel in it. Else he is not in the course of his employment. That distinction must be maintained, for otherwise there would be no certainty in this branch of the law.
Applying those cases, it is plain that the plaintiff was not injured ‘in the course of his employment’. He was not under any obligation to ride in the car. The judge ([1969] 3 All ER at 1299, 1300, [1969] 2 QB at 595, 596) so found and it was expressly conceded by counsel for the plaintiff. ‘There was no term’, said his counsel, ‘that he must go in the car’. Seeing that he was under no obligation, the cases under the old Workmen’s Compensation Acts show that he was not in the course of his employment. But the judge ([1969] 3 All ER at 1299, 1300, [1969] 2 QB at 595, 596) held that those cases were no longer applicable. The interpretation of the words had been changed, he said, by s 9(1) of the National Insurance (Industrial Injuries) Act 1946. It provides:
‘An accident happening while an insured person is, with the express or implied permission of his employer, travelling as a passenger by any vehicle to or from his place of work shall, notwithstanding that he is under no obligation to his employer to travel by that vehicle, be deemed to arise out of and in the course of his employment, if—(a) the accident would have been deemed so to have arisen had he been under such an obligation … ’
That subsection was clearly passed with the workmen’s compensation cases in mind. It said that a man was deemed to be ‘in the course of his employment’ even though he was under no obligation to travel by that vehicle. The judge thought that the subsection altered the interpretation for all purposes. But I do not think so. I
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think it only altered the interpretation for the special purposes of the 1946 Act. It did not alter it for any other purpose. The word ‘deemed’ in this context is used so as to produce a result which would not otherwise be produced. I m confirmed in this view by looking at s 36(1)(b)(i) of the Road Traffic Act 1930, especially at the words ‘arising out of and in the course of his employment’. They were clearly used there to mean the same as in the workmen’s compensation cases. (At that time in 1930 there was no 1946 Act.) The same words are repeated verbatim in s 203(4)(b) of the Road Traffic Act 1960. In neither of those Acts was there a ‘deemed’ provision. In the absence of it, we should go still by the workmen’s compensation cases.
I hold, therefore, that the injury to the plaintiff did not arise ‘out of and in the course of his employment’. It follows that the second defendants are not entitled to indemnity under their employers’ liability policy. They cannot recover from the third party.
6. The claims against the Road Traffic Act insurers
Seeing that the injury to the plaintiff did not ‘arise out of and in the course of his employment’, one would expect that it ought to be covered by the Road Traffic Acts. And such is, I believe, the case. The plaintiff was a passenger in this car. A private car is not usually compelled to be insured against liability to passengers. But it is so compelled if it is a vehicle in which passengers are carried ‘by reason of or in pursuance of a contact of employment’, see the proviso to s 203(4) of the Road Traffic Act 1960. Those words are much wider than the words ‘in the course of his employment’. I think that passengers are carried in a vehicle ‘by reason of’ a contract of employment whenever such a contract is the cause, or one of the causes, of their being carried. If they are carried in it habitually or as a matter or practice, the vehicle must be covered in respect of them, see Connell v Motor Insurers’ Bureau. This car undoubtedly falls within this description. It was regularly used to carry these men to and from their work. There should, therefore, have been an insurance policy in existence covering the owner and the driver against liability to passengers
It appears that there was no effective policy covering these passengers. The first defendant had his Fire Auto policy, but that is no good. Mr Read has his Agricultural policy, but that contained exclusions so that it did not cover these passengers. So it is a case where the Motor Insurers’ Bureau comes in. It guarantees that the liability will be met. The liability is covered by the agreement by the bureau with the Minister. The bureau has nominated the Agricultural & General Insurance Society Ltd as the insurers who are to meet the liability. So they must pay.
7. Conclusion
In my opinion this is a case which falls under road traffic insurance and not under employers’ liability insurance. I think the judgment against the third parties should be set aside. The judgment against the first defendant and the second defendants will stand. This judgment will be met by the Agricultural & General Insurance Society Ltd in view of the undertaking given to the court by counsel for the first defendant. He gave an undertaking on behalf of the society that, if the court rules that there is a Road Traffic Act risk, and not an employers’ liability risk, the judgment in favour of the plaintiff will be met and will include his own costs and any liability for costs.
I would allow the appeal of the third party to this extent.
SACHS LJ. In this case the liabilities of all concerned turn on the effect in law of an agreement made in July 1965 Between the second defendants and two moulders who became employees of the second defendants and who under that agreement were provided with a car to drive to the second defendants’ factory at Maidstone. Those two employees were the first defendant who was the driver and the plaintiff
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who was the passenger. The car having been negligently driven by the first defendant whilst on the way to Maidstone, his co-employee, the plaintiff, suffered injuries for which £6,306 damages were awarded by the trial judge ([1969] 3 All ER 1291, [1969] 2 QB 581). With regard to liability, the issues which need to be considered in turn are: first, the nature of the liability of the second defendants to the plaintiff; secondly, whether the damages were such as had to be covered by a motor insurance policy having regard to the provisions of the Road Traffic Acts; and finally, whether the third party is liable to the second defendants under the terms of an employers’ liability policy. With regard to the second point, it is the Motor Insurers’ Bureau which is concerned and the Agriculture & General Insurance Society Ltd which, by counsel for the first defendant, has represented the bureau’s interests. On the society giving an undertaking in the following terms:
‘The Insurers undertake that if the Court rules that there is a Road Traffic Act risk and not an Employers’ Liability risk, the judgment, including the Plaintiff’s costs will be met.’
and upon the agreement of the other parties before this court, it was permitted to be heard on the principles referred to in Re Vandervell Trusts, White v Vandervell Trustees Ltd.
Regarding the liability of the second defendants for the first defendant’s negligence, counsel for the second defendants urged that there could be no such liability unless at the time of the accident the first defendant was driving in the course of his employment as part of his duties under the contract under which he was employed; in no other way he maintained could the first defendant in this case be said to be the agent of the second defendants. That submission plainly fails. Ever since the decision of this court in Ormrod v Crosville Motor Services Ltd it has been considered clear that where the owner of the car has authorised a driver to drive a car, and has an interest in one of the objects of the particular journey, the driver is his agent when driving. Here the object of the use of the second defendants’ car for the journey was to assist four of the second defendant’s employees to arrive at work on time, and the first defendant was thus the second defendants’ agent quite apart from any question of whether he was driving in the course of his employment. Hilton v Thomas Burton (Rhodes) Ltd, which counsel for the second defendants prayed in aid, was in essence a case in which the driver had been on a frolic of his own. If, which I doubt, any of the observations in the judgment in that case run counter to the Ormrod case (which does not appear to have been cited) they may well have been per incuriam and in any event cannot stand.
Next it is convenient to consider the question whether the plaintiff’s injuries were sustained in circumstances in which it was, by virtue of the provisions of s 203 of the Road Traffic Act 1960, compulsory for the driver to be insured. If it was thus compulsory then the Motor Insurers Bureau is in practice bound to ensure that the plaintiff is paid if no other insurance policy covers the accident—and its interests are represented before this court in the manner already mentioned. This issue of liability turns on the construction of the provisions of s 203(4) of the Act. Was the car in the instant case ‘a vehicle in which passengers are carried … by reason of … a contract of employment’? If it was the bureau is potentially liable; if it was not the bureau cannot be liable. Leading counsel for the first defendant correctly submitted that on the authorities as they stand the plaintiff must establish first that the car was a ‘vehicle’ within the meaning of the proviso, secondly, that it habitually carried passengers who came within the proviso, and thirdly, that the plaintiff was being carried ‘by reason of his employment’. He rightly felt unable to argue that either the first or second points should be decided in favour of the bureau if the third was, contrary to his contentions, resolved in favour of the plaintiff.
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As to the third point it is, of course, obvious that the relevant phrase is not coterminous with ‘arising out of and in the course of his employment’ as used earlier in s 203(4). ‘By reason of his employment’ embraces a wider category of employees. The essence of the test formulated in the speech of Lord Wright in Izzard v Universal Insurance Co Ltd ([1937] 3 All ER 79 at 83, [1937] AC 773 at 782), was whether the passenger was being carried on the insured vehicle ‘for sufficient practical or business reasons’. In that case an employee had (See [1937] 3 All ER at 80, [1937] AC at 778) arranged with his employers that he should be able after he had finished his work for the week to go home, after working hours if he so wished, in some vehicle which they would provide. An accident occurred when he was under that arrangement thus going home in a van owned and insured by a third party. It was held he was being carried by reason of his employment though the van did not belong to his employer. In the instant case the plaintiff is in a markedly stronger position as regards being carried ‘by reason of his employment’. It follows that the contention put forward on behalf of the bureau fails and that they are under a potential liability.
There remains the issue whether the employers’ liability insurance policy of the third party covers the second defendants’ liability to the plaintiff. The policy was signed on 22 February 1965, for a premium of £46 16s. Its terms so far as relevant state:
… If any person under a contract of service … with the insured shall sustain bodily injury … arising out of and in the course of such person’s employment by the Insured in the Business, The Company will … indemnify the Insured against liability at law for damages … in respect of such injury … ’
The issue, of course, is whether the accident occurred in the course of the plaintiff’s employment. Counsel for the second defendants, supported by counsel for the plaintiff and the bureau, pressed two lines of argument, one on a broad basis that embraced all cases in which an employee when journeying to or from his work was using transport facilities provided by an employer, and the other on a narrow basis which related to the special terms of the agreement between the plaintiff and the second defendants in the present case.
In relation to the broader basis two main questions were raised. First, should the plaintiff be held at common law to be travelling in the course of his employment, if one disregarded the provisions of the National Insurance (Industrial Injuries) Act 1946? Secondly, even if the plaintiff failed on the first point, did the provisions of that 1946 Act bind the courts to hold that he was thus travelling?
With regard to the first point, the salient facts to be noted at the outset are that the accident occurred in the course of a journey to the place of employment before the plaintiff’s work there commenced, and that the accident, although in a car provided by the second defendants, was on a highway as opposed to being in some place owned by the second defendants or one over which there was special non-public access to the second defendants’ premises. Against that background the conflicting submissions, cogently and lucidly pressed by all counsel concerned, may be summarised as follows. Starting from the common ground that in order to be in the course of employment it was necessary to show that what was being done was ‘reasonably incidental’ to that employment, the submissions then diverged. On behalf of the third party it was pointed out that in a long line of decisions relating to travel to and from work a distinction was drawn between accidents which occurred on the premises of the employer or on premises over which the employees had special access, and accidents which occurred on the highway or in trains running on lines used in the public service. In particular, reliance was placed on St Helen’s Colliery Co Ltd v Hewitson, where the plaintiff failed when injured whilst on a special collier’s train in which he had no obligation to travel, and Black v Aitkenhead & Son
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(decided in the Second Division of the Court of Session) where the plaintiff was travelling in a lorry provided by the employers in which again he was not bound to travel, although he would not have accepted the employment if no such transport had been made available. The effect of those and other authorities was (see, for instance, in Hewitson’s case the speeches of Lord Buckmaster ([1924] AC at 67, [1923] All ER Rep at 254) and Lord Wrenbury ([1924] AC at 95, [1923] All ER Rep at 268)) that the employee was not acting in the course of his employment when he used facilities provided by his employer unless he was under an obligation so to do.
Against that, counsel for the second defendants submitted that the real test was whether the plaintiff was travelling ‘qua employee’, in other words, whether he was in the car only because he was such an employee exercising his rights and that it mattered not whether that car was supplied by the second defendants or some third party or whether he was under any obligation to use it. He boldly argued that as from the date of Weaver v Tredegar Iron and Coal Co Ltd there had been a change in the approach of the courts to the whole question of what was ‘in the course of the employment’; prayed in aid passages in the judgments of this court in R v Industrial Injuries Comrs, ex parte Amalgamated Engineering Union, a case in which, however, an employee who sustained an injury when unduly extending his tea break, failed to establish his claim; and finally submitted that this court should conclude that nowadays Hewitson’s case and Black v Aitkenhead would have been differently decided in the House of Lords and the Court of Session respectively, and that Cremins v Guest, Keen & Nettlefolds Ltd (overruled in Hewitson’s case) should now in effect be restored. It mattered not, ran the argument, whether the facilities used by the employee as of right (though under no obligation so to use them) were on the highway or on a railway track used for transport of the public; indeed if in a train one carriage was reserved for employees, those in them were covered, though those who chose to travel in a different part of the train were not.
Those submissions, however, ignored the fact that in Weaver’s case (where the employee was before boarding a public train injured by what happened on a platform provided by the employers and forming part of their premises—as a result of which he was pushed into the path of the train) three members of the House made it clear that they regarded Hewitson’s case as as rightly decided (see Lord Atkin ([1940] 3 All ER at 167, [1940] AC at 971), Lord Wright ([1940] 3 All ER at 171, [1940] AC at 977) and Lord Porter ([1940] 3 All ER at 180, [1940] AC at 990)). It is indeed appropriate to cite the passage in which Lord Porter sets out his view:
‘In the ordinary case, when a workman is employed on his master’s premises, he ceases to be in the course of his employment when he has left those premises and has reached the public street. Equally, he may have left those premises if he reaches a place which is not public, but from which he, like others who are not engaged in the same employment, can proceed to his home. Nor, in my view, does it make any difference that, when he reaches the public street, he is conveyed from the premises in a coach provided by his employer, nor that, when he reaches the place which is not public, he is carried in a railway train or other conveyance for the provision of which his employer has made the necessary arrangements. In either of the latter cases, he is not in the course of his employment, though he is using facilities for reaching his home which are granted to him by his employer.’
Moreover though this question of an employee’s position when travelling to his work over highways and on trains has now been litigated for over half a century, counsel for the second defendants was unable to point to a single decision (other than those
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overruled by a higher court) in which it has been held that an employee was travelling in the course of his employment when he was not under an obligation to use the particular vehicle or mode of transport which he was using.
I have no hesitation in accepting the submissions made by counsel for the third party, and thus reject the contrary submissions made for the second defendants. The distinction has long been clear at common law between the position of an employee on the highway when on the way to work, and the position when he reaches the employer’s premises (or any non-public access thereto); equally clear is the distinction between the position in the period on the way to work and that when the period of work commences. The authorities are plain and avoid any tendency to confusion. It is only necessary to envisage the position of employees provided with special facilities to attend sporting events, to reach special recreation grounds, or go on holiday, to appreciate the difficulties which some other line of approach might entail. Accordingly unless the position has been altered by the National Insurance (Industrial Injuries) Act 1946, counsel for the second defendants’ submissions as to the common law fail.
That is a conclusion reached by me without regret. It would be a disservice to the common law as a whole unnecessarily to blur the line between the period of road and rail travel to the place of employment and the period of employment itself. After all, the average man appreciates the distinction between being on the way to work and being at work—and it is not for the common law to produce confusion. Similarly it would be a disservice to the insurance world unnecessarily to blur the line between road traffic risks and employment risks. Moreover anyone disposed to look with a seeing eye at the relatively small premium paid in the present case for the employees’ liability policy may reasonably wonder whether such a disservice would not in the end also react to the detriment of the price paying community.
The next question is whether s 9(1) of the National Insurance (Industrial Injuries) Act 1946, hanged the common law as from the date it came into force. Having read as a whole the preamble to that Act and the relevant sections as cited to this court, my definite conclusion is that the Act changed neither the pre-existing common law nor the ambit of the responsibilities imposed by s 36 of the Road Traffic Act 1930(the relevant terms of which cannot be distinguished from those of s 203(4) of the Road Traffic Act 1960). The object of the 1946 Act was to set up a ‘system of insurance’ against certain categories of injuries and disease and to define what injuries and disease were to be covered. It was neither its object nor its effect to alter the common law or the ambit of the responsibilities imposed by the then current Road Traffic Act. Being fully in agreement with the reasoning in the judgment of Lord Denning MR, it is not necessary for me to say anything further as regards the unsuccessful arguments put forward against the third party on a broad basis.
The submissions made on the broad basis having failed, there remains the question whether the special and rather unusual terms of the agreement made in July 1965, between the second defendants and their two employees, the plaintiff and the first defendant, were such as to lay on the latter particular obligations which if he chose to use the car resulted in the accident arising out of their employment. That question seemed to me to be difficult, and I confess that my mind fluctuated in the course of the submissions made by each counsel in turn. Of the various ways of putting the matter in favour of the existence of such an obligation the most cogent ran thus. It is true there was no obligation always to use the second defendants’ car, but this was a tripartite agreement between the second defendants and the plaintiff and the first defendant under which they could only use the car to come to work if they also brought in it two other employees; that accordingly they were obliged if they used the car at all to act in the interest of the second defendants as chauffeurs for the other two; that the car was supplied by the second defendants in lieu of paying the plaintiff and the first defendant extra wages; and that accordingly when it was in
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use they were both under an obligation which formed part of their terms of employment.
(In parenthesis, the above proposition assumes as a fact that they were contractually bound to carry the two other employees if they used the car at all. There is no specific finding by the trial judge on this issue, on which there was a conflict of evidence between Mr Simmons for the second defendants on one side and the plaintiff and the first defendant on the other. The two other employees were not called on the point whether or not their train travel allowance was stopped as soon as the second defendants provided the relevant car which was one of the points of conflict. In these circumstances, having regard to the strong criticisms by the trial judge on the evidence of Mr Simmons, I have assumed the facts were as stated by the plaintiff and the first defendant.)
Against the above contentions the submissions for the third party took the following form. At highest the carriage of the two other employees was a condition precedent to the right to use the car on any individual day, as opposed to imposing a contractual obligation to drive them. If, however, it was such an obligation the contract was collateral to and not part of the contract of employment. In any event any such obligation was not one which brought into being the relationship of master and servant quoad the driving of the car. In aid of the last point, reference was made to the plaintiff’s answer—‘I did not go there to be employed as a driver, I went as a skilled moulder’.
In the end my conclusion is that whatever be the correct view of the legal effect of the tripartite arrangement (which I am inclined to think was a collateral agreement) it was not an agreement which caused the employment of the plaintiff and the first defendant as moulders to start before they reached the second defendants’ premises nor was it a contract to employ them to drive the car on the way to those premises. It would be unrealistic to hold that they, when driving this car, were in effect employed as chauffeurs by the second defendants. Moreover so to hold would lead to the introduction of fine distinctions into the sphere of travelling to employment, so many are the varieties of arrangements in which employees nowadays get to their work with some aid from their employers. A contract which gives rights to use travel facilities should not lightly be construed as one of employment. Counsel for the second defendants’ narrow basis submission thus also fails. From the above series of conclusions it follows that the third party are not liable on their policy and that their appeal in the third party proceedings succeeds.
Finally, I turn to the second defendants’ assertion that the award of £5,750 for general damages is so excessive that this court should interfere. [His Lordship said that on the particular facts of the case the award was in his view definitely within that bracket which must always exist between reasonable awards given by individual judges. His Lordship described the effects of the plaintiff’s injuries, and continued:] Looking at these various matters as a whole, there seems to me to be no ground on which the award can be criticised and a fortiori no ground for disturbing it.
In the result I agree that the appeal of the second defendants as to the quantum of damages fails, the appeal of the third party on the issue of their liability succeeds, and the contentions advanced on behalf of the bureau fail.
LORD DENNING MR. Karminski LJ is unable to be here this morning, but he authorises me to say that he has read both the judgments which have been delivered and he agrees with them and has nothing that he wishes to add.
Appeals of first and second defendants dismissed. Appeal of third party allowed against second defendant. Leave to appeal to the House of Lords.
Solicitors: W H Thompson (for the plaintiff); R I Lewis & Co (for the first defendant); Tuck & Mann & Geffen & Co (for the second defendant); Berrymans (for the third party).
G R A Argles Esq Barrister.
Hobbs v C G Robertson Ltd
[1970] 2 All ER 347
Categories: CONSTRUCTION
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES AND WINN LJJ AND SIR FREDERIC SELLERS
Hearing Date(s): 8 APRIL 1970
Building – Construction regulations – Eyes – Protection – Provision of goggles – Breaking … stone, concrete, slag or similar materials – Demolishing brickwork – Brick dust entering employee’s eye – Exclusion of brick from regulations – Construction (General Provisions) Regulations 1961 (SI 1961 No 1580), reg 52, Schedule, para (2).
In connection with the removal of a chimney breast in the sitting room of a small house, the plaintiff was employed to demolish an area of brickwork with a hammer and chisel. While he was breaking some brickwork out, brick dust got into his right eye and the eye ultimately had to be removed. On the question whether the defendant employers were liable in that the plaintiff was required by regulations to be provided with goggles,
Held – The plaintiff’s claim would be dismissed because reg 52 of the Construction (General Provisions) Regulations 1961 requiring the provision of goggles in a process consisting of ‘Breaking, cutting, dressing or carving of stone, concrete, slag or similar materials by means of a hand tool’ (see Schedule, para (2), to those regulations) did not apply to brick which was not ‘similar materials’ within the regulations, it being unthinkable that the commonest of building materials should not have been specifically named if intended to be included (see p 350 a and h to p 351 a and p 351 j to p 352 a, post).
Dictum of Brabin J in Littler v G L Moore (Contractors) Ltd [1967] 3 All ER at 803 disapproved.
Per Winn LJ. I think that it is open to some doubt whether the regulation was intended to refer to a temporary short-term activity such as this task of destruction of the brickwork of the chimney breast … The intention of Parliament, as I see it, is at least primarily to provide for the manner in which and the precautions subject to which certain forms of employment which are themselves expected to continue for an appreciable period of time, shall be carried out by workers on behalf of their employers (see p 352 d and f, post).
Notes
For safety regulations for work in building operations, see 17 Halsbury’s Laws (3rd Edn) 125–128, para 206, and generally as to actions for breach of statutory duty, see ibid 9, 10, para 10, and for cases on civil liability for breach of safety enactments, see 24 Digest (Repl) 1048–1060, 175–245.
For the Construction (General Provisions) Regulations 1961, reg 52, see 8 Halsbury’s Statutory Instruments (First Re-Issue) 278.
Case referred to in judgment
Littler v G L Moore (Contractors) Ltd [1967] 3 All ER 801, [1967] 1 WLR 1241., Digest Supp.
Appeal
This was an appeal by John Richard Arthur Hobbs, the plaintiff, against an order of James J made on 30 June 1969 on the ground, inter alia, that the judge was wrong in law in holding that reg 52 of the Construction (General Provisions) Regulations 1961 did not apply to the work being performed by the plaintiff. The defendants were the plaintiff’s employers, C G Robertson Ltd.
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J P Comyn QC and J L E MacManus QC for the plaintiff.
P H Ripman for the defendants.
8 April 1970. The following judgments were delivered.
SIR FREDERIC SELLERS delivered the first judgment at the request of Davies LJ. As far back as 12 July 1963, while the plaintiff was acting as a labourer with the defendants on some work in a private house, he most unfortunately got some brick dust in his right eye. Although a writ claiming damages was issued in this case in 1964, the matter did not become completed and ready for trial until much later, and did not come for consideration before the court until it came before James J on 30 June 1969. In the meantime, between the accident and the issue of the writ, the eye had been giving trouble, so that the plaintiff had the great misfortune in 1967 to lose his eye entirely—it had to be removed. The question for consideration before the learned judge was solely one whether the defendants should be held responsible for that very serious loss to the plaintiff, the damages having been agreed in the sum of £3,000 in the event of liability.
James J gave a judgment in favour of the defendants, and from that judgment this appeal comes to this court. It has been forcefully and persuasively presented by counsel for the plaintiff but notwithstanding those submissions I am of the opinion that the learned judge dealt with all the arguments that were advanced before him, and the particular arguments which have been pressed before us further on this appeal, adequately and fully and satisfactorily, and it has the misfortune, of course, that the plaintiff has no redress for this serious loss. I find it difficult, indeed impossible, to improve on the way the learned judge has dealt with the matters which arose in fact before him and the submissions which were made to him in law.
The work in hand was of a most simple character. The defendants had the task of removing a chimney breast in a sitting room in a small house in Guildford. It was a room which was not very high—8 feet 1 inch or 8 feet 2 inches; and the chimney breast had to be removed from perhaps one brick from the top; ie starting to make the incision to remove it some 4 or 5 inches below the level of the ceiling.
The defendants had gone there with four men altogether, but the only two with whom we are concerned are two labourers, the plaintiff and a Mr Hepburn who was in charge of the whole operation. Trestles had been provided, but they were too high when erected in their normal way to give proper access to the work—indeed, they probably almost touched the ceiling; and therefore they were laid on their sides with their narrower end (that is the top part as it would normally be when it was properly erected). In that way they gave a height from the ground of about 1 foot 8 inches, or perhaps a little more because they were on a slope, and as one came towards the rear the width of the trestle increased to the extent of 2 feet 4 inches. The two were put together, and two planks side by side (probably inch planks) were placed on them, not perhaps right to the end close to the wall, but a little further back; and on this the plaintiff stood as a platform, he being a man of some 5 feet 7 inches, and his task was to use a hammer and chisel provided by the defendants to break down or demolish this small area in the chimney breast. Unfortunately, he so positioned himself (and I think that this is how the learned judge viewed it) that, while he was knocking some stuff out, he being quite unable after this length of time, or even indeed at a closer period of time, to say precisely what he was doing, he found that some of the debris (and that is called ‘brick dust’) came into his right eye so that he had to give up work and was examined by his colleagues.
That is the accident. As I say, unfortunately it resulted in the loss of that eye after some years of trying to preserve it. It is said that the defendants should be held liable because, first of all, there were breaches of duty at common law, and secondly, because there had been breaches of some of the Construction (General Provisions) Regulations 1961a, which undoubtedly apply to this type of work. The main burden
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of the argument on the common law before the learned judge, and I think before this court, was that this was a risk which should not have been imposed on the plaintiff, that some provision should have been made by the provision of goggles; and secondly, although particularly perhaps at the end of the argument in this court, emphasis was laid on the fact that the platform was inadequate for the work. But it was not the platform slipping, or anything like that, that brought about this unfortunate accident. It is true that the platform was to an extent improvised, but it was improvised in a way which was safe; and the only expert evidence that was called, and indeed the plaintiff’s evidence as well, was that it was quite secure. It made a platform for the work, and the only question is whether it was of the relevant height.
The learned judge uses the expression somewhere in his judgment that a good deal was within the sphere of the workman himself. For my part, I should have thought that the judge was right when he said that. The platform could have been turned round the other way, to the greater height of the length side of the two trestles, if he wanted it higher; or another plank could perhaps have been put on the one he was standing on so as to make it double the height. It could have been adjusted; and the more important thing is that it was within the sphere of the plaintiff so to place himself that the inevitable dust which must have come out while he was hacking away at the brick or mortar in order to loosen these bricks should not fall on him, or on to his face, or in his eye.
That, I think, is a sufficient answer to the claim that at common law there was some breach of duty. I find no breach of duty, either in the provision of the platform or in the failure to provide any goggles, which is the other serious allegation of a breach of duty at common law, because in this type of case, although one cannot say that there is no risk (because in this particular case it happened), there is no risk which, in the ordinary and reasonable conduct of this trade, is the subject of this precaution of goggles. Indeed, it is not without significance that there are regulations with regard to goggles which deal with the more serious incidents in which goggles should be provided; and on the evidence of Mr Hunt—and I see no reason for it to be rejected by the learned judge, who thought well of Mr Hunt’s evidence and accepted it—it is really one might say unheard of that in this type of task goggles are in the ordinary way provided for this work.
Many regulations were relied on but were rejected by the learned judge, and I think quite rightly; and although one which was not pleaded in the notice of appeal was sought to be revived here, it has I think been abandoned although leave was given to add reg 46, which is headed ‘Protection from falling material’, to the argument which was to be advanced. I think quite clearly that that regulation does not apply to the circumstances of this case, and I say no more about it.
The regulation which was persisted in before this court was reg 52, which provides:
‘Protection of the eyes. Where there is carried on any process specified in the Schedule to these Regulations suitable goggles or effective screens shall be provided to protect the eyes of persons employed in the process, and no person so employed shall carry on, or be required or permitted to carry on, any such process, without utilising such goggles or screens.’
And the only relevant process in the Schedule is admitted to be:
‘(2) Breaking, cutting, dressing or carving of stone, concrete, slag or similar materials by means of a hand tool (other than a trowel) or a portable tool driven by mechanical power.’
The learned judge held that that regulation did not apply to this case, and in that I am in agreement with the learned judge and with the reasons which he gives. It has been submitted that a brick ought to be included in the expression ‘or similar
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materials’. It would be a most remarkable construction, I think, of this provision in the Schedule that whereas ‘brick’ is not expressly stated when ‘stone, concrete, slag’ are expressly stated, that one should include ‘brick’ in ‘similar materials’. It may be a very homely approach to the construction of this regulation, but bricks are so well known to be the commonest of building materials, where ‘Breaking, cutting, dressing’ does take place in relation to them, that it would be unthinkable that bricks should have been left out, and only have to be brought in under the heading of ‘similar materials’. I think that nothing would be more misleading to a contractor than to say that ‘brick’ was not mentioned there and yet it was to be brought in in that very indirect way. I think that the learned judge took the right view of this regulation, on its construction and also on the evidence.
Reliance was sought to be placed in the argument on the decision of Brabin J in Little v G L Moore (Contractors) Ltd, to which I think learned counsel on the other side drew the attention of the learned judge. But that is a different case, and I am not prepared to say whether the learned judge rightly applied the provisions in that case or not. It was a case dealing with the use of a hammer and chisel on a glazed earthenware drainpipe and part of the metal from one of the tools flew into his eye. It was not apparently the material itself, but part of the tool which flew into the eye and brought forth the injury. Brabin J in the course of his judgment makes this observation ([1967] 3 All ER at 803, [1967] 1 WLR at 1244):
‘The purpose of this regulation is to protect the eyes of men working in certain processes. It will be seen that when a trowel is being used as a hand tool, goggles are not required. When it is remembered that this process relates to building work and building materials the use of the trowel which most readily comes to mind is that by the bricklayer cutting his bricks by means of the trowel. Bricks are another kind of building material. Sometimes, as the evidence shows, bricks have to be cut by means of a hammer and chisel. If as I think it does, the exclusion from the processes covers the use of a trowel for cutting bricks, it is a short step to include within the processes the cutting of an earthenware pipe by means of a hammer and chisel. There are dissimilarities between an earthenware pipe and stone, concrete and slag, but there are also similarities between them. They are all liable to splinter, they are all used in building; they all at some time require cutting.’
I do not find that of any value in deciding this case. The learned judge does not go so far as to say that he did not think that the cutting of ordinary bricks with a hammer and chisel, as distinct from a trowel, came within that regulation. In my view, it does not. For these reasons I think that the learned judge came to the right conclusion on liability, and I would dismiss the appeal.
DAVIES LJ. I agree, and only desire to add a word or two on the question of the Construction (General Provisions) Regulations 1961b and the Schedule to the regulation. The regulation and the Schedule have been read by Sir Frederic Sellers, and I will not read them again. For myself, I doubt whether the process on which the plaintiff was employed when he met with his accident was within the words ‘Breaking, cutting, dressing or carving’. But whether his work did come within those words or not, I find myself quite satisfied that ordinary domestic bricks do not come within the description ‘stone, concrete, slag or similar materials’. As Sir Frederic Sellers has said, bricks being the most common building materials, one would have thought that, if the legislature or the makers of the regulations wished
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to include bricks within it, they would have used the word ‘bricks’ expressly. They did not. For the reasons indicated by the learned judge in his judgment, bricks are of an entirely different nature. They are soft compared with the categories of article which appear in para (2) of the Schedule.
Then, with regard to the decision of Brabin J in Littler v G L Moore (Contractors) Ltd, to which Sir Frederic Sellers has referred, James J quite rightly said that the observations made in that case by Brabin J with regard to bricks were obiter. They clearly were obiter, and in my opinion Brabin J was wrong in including bricks within para (2) of the Schedule. Whether he was right in deciding, as he did decide, that a glazed earthenware drainpipe was within the Schedule, I do not think it is necessary to decide. But that the judgment was obiter with regard to bricks I am wholly satisfied.
In the passage in his judgment which Sir Frederic Sellers has read he said ([1967] 3 All ER at 803, [1967] 1 WLR at 1244):
‘Sometimes, as the evidence shows, bricks have to be cut by means of a hammer and chisel. If as I think it does, the exclusion from the processes covers the use of a trowel for cutting bricks, it is a short step to include within the processes the cutting of an earthenware pipe by means of a hammer and chisel’
I do not quite see the logic of that. If the cutting of bricks by a trowel is excluded from the regulation, then why is not the cutting of bricks by hammer and chisel also excluded? I cannot see the logic of including one and excluding the other. That is another reason why I think that Brabin J’s digression into the question of bricks in the regulation, quite apart from being unnecessary, resulted in his giving a wrong opinion on that part of the case.
I do not think I desire to add anything else in the course of this judgment, agreeing as I do fully with everything that has been said by Sir Frederic Sellers, save possibly, on the matter which I have been principally discussing, to refer to the words that the learned judge in the present case used with regard to Brabin J’s decision, with which plainly he did not agree. He said this:
‘Insofar as the learned judge in that case speaks to the cutting of bricks as being within reg 52 and the Schedule, his words are obiter. He was dealing with a case in which a glazed earthenware pipe was concerned, not with bricks. Further, I do not think it is sufficient to bring them within the words “or similar materials” to establish that bricks are building materials and so is stone, so is concrete. The words “or similar materials” have to be construed in the light of the preceding words, “stone, concrete, slag”, and indeed in the light of all those matters which are within paras (1) and (5) of that Schedule. The Schedule is dealing with various processes in all of which quite clearly there is a liability of particles flying off with a greater or a lesser force; they are not processes which create dust. I accept the evidence of Mr Hunt that household bricks are not hard materials. I do not think household bricks do come within the words “or similar materials” in para (2) of the Schedule. I emphasise in so finding I am not in any way dealing with the question of whether any other type of brick would be within that paragraph.’
I entirely agree with those observations of the learned judge in this case, and I, too, would dismiss the appeal.
WINN LJ. I agree with both the judgments delivered by my Lords and have little that I would wish to add for myself. I specifically agree that such bricks as
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were present in this chimney breast are not to be regarded as included in para (2) of the Schedule to the Construction (General Provisions) Regulations 1961c. That must be the case in my opinion, when the brick is one of the household type and not, for example, a refractory brick which might well have different characteristics which would call for quite separate consideration.
I agree, too, with what Davies LJ has just said in his judgment about the obiter dictum of Brabin J in Littler v G L Moore (Contractors) Ltd ([1967] 3 All ER 801 at 803, [1967] 1 WLR 1241 at 1244). It appears to me that, while it may or may not be the case that the decision there was perfectly well-founded on the facts of the case in relation to the drainpipe with which that case was concerned, all the learned judge is recorded as having said about bricks is not only obiter but erroneous. I do not think that bricks are materials of a kind similar to the materials referred to specifically in paras (1) and (2) of the Schedule.
I would add, also, since sooner or later that decision of Brabin J, and it may be the decision in this case, are bound to come for further consideration by some court, that I for myself rather doubt whether the job (I deliberately use the word ‘job’) on which the plaintiff was engaged at the time when he suffered his most unfortunate accident—for which one feels great sympathy for him—was within reg 52 at all. I think that it is open to some doubt whether the regulation was intended to refer to a temporary short-term activity such as this task of destruction of the brickwork of the chimney breast. Regulation 52 applies—and I quote: ‘Where there is carried on any process specified in the Schedule to these Regulations … ”, and the processes specified are, for example, ‘Dry grinding of surface of metal’ and other things; and then ‘Chipping or scaling of painted or corroded metal surfaces or wire-brushing’—I do not read them all. When one relates that regulation to the section of the Factories Act 1961 itself, s 65, from which indirectly the regulation is clearly derived, and compares it also with the Protection of Eyes Regulations 1938d made by the Minister, one sees that what is contemplated is the employment of persons in factories (in the case of the section itself) to perform processes such as may be specified by regulations of the Minister, on the ground that he considers them to be a process which involves a special risk of injury to the eyes from articles or fragments thrown off in the course of the process. The intention of Parliament, as I see it, is at least primarily to provide for the manner in which and the precautions subject to which certain forms of employment, which are themselves intended to continue for an appreciable period of time, shall be carried out by workers on behalf of their employers.
For those additional reasons, but mainly for the reasons given by my Lords, I agree that this appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Barlow, Norris & Jenkins, Guildford (for the plaintiff); Blount, Petre & Co (for the defendants).
F A Amies Esq Barrister.
Pugh v Savage
[1970] 2 All ER 353
Categories: LAND; Property Rights
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, SALMON AND CROSS LJJ
Hearing Date(s): 13, 14 JANUARY 1970
Easement – Right of way – Prescription – Pleadings stating that way ‘enjoyed without interruption … for over 30 years immediately prior to commencement of these proceedings’ – Whether pleadings confined dominant owner to claim under Prescription Act 1832 – Whether claim based on common law prescription or lost grant also open.
Easement – Right of way – User shown for 36 years – Letting of servient tenement eight years after commencement of user – Whether letting prevented acquisition of right of way.
Easement – Right of way – Intervening land between dominant and servient tenements – Whether existence of intervening land prevented acquisition of right – Effect of purchase of dominant tenement by owner of intervening land.
A lane (along which there was a public footpath) ran from a road alongside two fields to the edge of field 457. All three fields were part of a farm which had been owned by R, the plaintiff’s predecessor in title, from 1940 to 1950. During that period R had let field 457 on an oral tenancy to his son. The plaintiff had owned and occupied the farm since 1950. The public footpath continued over 457 and an adjoining field, 547, to Bentley’s Field. From 1932 to 1966 B, the tenant of Bentley’s Field, had regularly used the lane and footpath over 457 and 547 with vehicles to go to and from Bentley’s Field. P, the tenant of 547 until 1966, had always consented to B doing so. In 1966, the owner of 547 bought Bentley’s Field and let both fields to the defendant who continued to use the lane and footpath over field 457 with vehicles until, in 1968, the plaintiff prevented him from so doing. The plaintiff knew of the user of the footpath with vehicles but from the commencement of the defendant’s tenancy in 1966, disputed the defendant’s claim so to use it. In 1968, the plaintiff brought an action claiming, inter alia, an injunction to restrain the defendant from trespassing on his land. In the pleadings the defendant alleged that he had a right of way with or without vehicles which arose by prescription because it ‘has been enjoyed without interruption by the defendant and his predecessors the occupiers of [Bentley’s Field] … and his or their workmen for over 30 years immediately prior to the commencement of these proceedings’. The plaintiff was granted an injunction. On appeal,
Held – The injunction should be discharged, because—
(i) the existence of a tenancy of field 457 between 1940 and 1950, although it was to be taken into account, did not constitute a fatal objection to the defendant’s claim as—
(a) the user of field 457 proved began against a fee simple owner in or about 1932, and continued for eight years before the tenancy came into existence (see p 358 g, p 359 d and p 361 g and j, post) (Palk v Shinner (1852) 18 QB 568 and dictum of Littledale J in Cross v Lewis (1824) 2 B & C at 690 applied);
(b) on the true construction of the defendant’s pleadings the defendant in claiming the right of way was entitled to rely not only on the Prescription Act 1832, but also on other modes of prescription, namely common law prescription or prescription by means of a lost grant; accordingly, it was not necessary to decide whether, if he had been entitled to rely only on the Prescription Act 1832, his claim might have been defeated by showing that there had been a tenancy of field 457 at the beginning of the 20–year period for the purposes of that Act, ie in 1948, even though there had been no such tenancy at the beginning of the user (see p 359 g and j and p 361 e and j, post);
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(ii) the fact that the user of field 457 proved was user by tenants of Bentley’s Field (and not by the owner in fee simple) did not prevent the establishment of a prescriptive right of way because a tenant can by user over the land of a stranger gain such a right of way in fee for his landlord which he can use while he is tenant and which his landlord can grant to a subsequent tenant (see p 356 h, p 360 h and p 361 j, post);
(iii) even if between 1936 and 1966 no right of way had been acquired in favour of Bentley’s Field over field 547 and the user of field 547 was only by consent, this would not prevent the acquisition of a right of way over field 457 because a right of way may exist for the benefit of the owner of a dominant tenement although between the dominant tenement and the servient tenement there is intervening land (see p 357 b, p 360 h and p 361 j, post) (Todrick v Western National Omnibus Co Ltd [1934] All ER Rep 25 applied);
(iv) the purchase of Bently’s Field by the owner of field 547 did not destroy any right of way acquired in favour of Bently’s Field over field 457, although the purchase could not enlarge the area of the dominant tenement (see p 357 j to p 358 a, p 360 h and p 361 j, post).
Per Cross LJ. Where long user—here user for 36 years—of a way has been shown, I think that the law should support it if it can, and that we ought to presume in the absence of evidence to the contrary, that the owners of 457 in the period 1932 to 1940 knew of the user and that [the plaintiff’s predecessor] knew of it (see p 359 f, post).
Notes
For rights of way claimed under the Prescription Act 1832, see 12 Halsbury’s Laws (3rd Edn) 576, para 1251, and for creation of easements by prescription based on presumed grant, see ibid 544–546, paras 1179–1183, and for cases on the subject, see 19 Digest (Repl) 57, 58, 313–320.
Cases referred to in judgments
Cross v Lewis (1824) 2 B & C 686, 2 LJOSKB 136, 107 ER 538, 19 Digest (Repl) 72, 406.
Damper v Bassett [1901] 2 Ch 350, 70 LJCh 657, 84 LT 682, 19 Digest (Repl) 78, 444.
Palk v Shinner (1852) 18 QB 568, 17 Jur 372, 22 LJQB 27, 19 LTOS 228, 19 Digest (Repl) 80, 460.
Todrick v Western National Omnibus Co Ltd [1934] Ch 561, [1934] All ER Rep 25, 103 LJCh 224, 151 LT 163, 19 Digest (Repl) 100, 600.
Appeal
This was an appeal by the defendant, John Savage, tenant of Factory Farm, Loppington, near Wem, Shropshire, against the order of his Honour Judge Burrell QC, made at Shrewsbury County Court on 5 March 1969, granting George Arnold Pugh, owner of Church Villa Farm, Loppington, an injunction restraining the defendant from trespassing on the plaintiff’s land, and £11 5s damages, and dismissing the defendant’s counterclaim for obstruction of the right of way with vehicles which the defendant claimed over the plaintiff’s land to Bentley’s Field, ordance survey number 548, which field formed part of the defendant’s farm. The facts are set out in the judgment of Cross LJ.
D M Thomas for the defendant.
W R Stewart-Smith for the plaintiff.
14 January 1970. The following judgments were delivered.
CROSS LJ delivered the first judgment at the invitation of Harman LJ. This is an appeal from an order of his Honour Judge Burrell QC made in the Shrewsbury County Court on 5 March 1969. The plaintiff, George Arnold Pugh, who is the respondent to the appeal, owns a farm called Church Villa Farm at Loppington, near Wem, in Shropshire. He bought that farm in 1950 from one Ralphs and has farmed it himself ever since then. The farm includes a field, 457 on the ordance
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survey, which until recently was always pasture; but recently, owing to the foot-and-mouth disease, the plaintiff has given up keeping cattle on it and has ploughed it up.
Access to the field is obtained along a lane which runs southwards from a point opposite the Blacksmith’s Arms inn, just outside Loppington, on the south-west; and before it reaches the north end of the field, that lane abuts on its west side on ordance survey 454 and 458, which are also fields belonging to Church Villa Farm. So the plaintiff presumably owns half the soil of the lane along that boundary. The lane ends at the north of 457, and thence a path runs, or used to run, diagonally across the field in a southerly direction to a gate 9 or 10 feet wide, with a stile beside it, between 457 and another field 547, which is not part of Church Villa Farm. The path then runs on across 547 to yet another field, 548, known as Bentley’s Field. To the north-west of 547 there is a large field, 459, which has a long frontage to the highway, some distance to the south-west of the Blacksmith’s Arms. Fields 459 and 547 have at all material times formed part of a farm known as Factory Farm, owned by the Dickens Estate, and the tenant of those fields for many years prior to 1966 was a man also called Pugh, who was a relative of the plaintiff; but until 1966, Bentley’s Field formed part—as I understand, an isolated part—of yet another farm, Church Farm, which belonged to Major Dickens personally and later for a short time to his daughter. The tenant of that farm from 1936 to 1966 was one Burden. In 1966, the Dickens Estate bought the freehold of Bentley’s Field and threw it into Factory Farm. At the same time Mr Pugh and Mr Burden gave up their respective tenancies; and the defendant John Savage, who was a stranger to the district, became tenant of Factory Farm, which then included 459 and 547, as it always had, and also Bentley’s Field. It is common ground that there is a public right of way on foot across 457 and then over the stile across 547 on to Bentley’s Field and beyond.
When he took the tenancy of Factory Farm, the defendant was told by the agent of the Dickens Estate that in his capacity as tenant of Bentley’s Field he would be entitled to a private right of way with vehicles over 457 and down the lane to the main road. But the plaintiff, while not denying the existence of the public footpath, disputed the defendant’s right of way with vehicles. The defendant exercised his supposed right of way in 1966 and 1967, despite the plaintiff’s protests that he was not entitled to such a right; but by 1968 the plaintiff had ploughed up 457, and the defendant alleges that he had obstructed the lane where it abutted on 454 and 458 with hedge cuttings which made it impossible or at all events difficult to pass over it with vehicles. In order, as he says, to overcome these difficulties, the defendant took vehicles which had come down the lane from the main road over parts of 454 and 458 on lines marked on the plan annexed to the particulars of claim.
The plaintiff thereupon brought this claim in the Shrewsbury County Court in August 1968 alleging trespass and claiming an injunction and damages. The defendant admitted that he had crossed the plaintiff’s land as alleged. He claimed that he had a right of way for vehicles down the lane and along the line of the path across 457. He sought to justify his deviation from that line by reason of the alleged obstructions by the plaintiff, and he counterclaimed for damages. He did not state in his defence on what he based his claim to a right of way, and so he was asked for particulars. On 25 October 1968, he was asked to state the facts which were relied on to establish the alleged right of way; if the right was alleged to arise under a deed, identifying it and giving details of the form of grant; and if the right was alleged to arise by prescription, giving details of the acts relied on to establish that right. As he refused to give those particulars, an order was made by the registrar on 13 December 1968 ordering him first to state on what grounds he alleged that he had a right of way, to which he answered: ‘The Defendant’s right of way arises by prescription’; and secondly, if he relied on prescription, saying on what grounds the right was said to arise by prescription, to which the answer was:
‘A right of way with or without vehicles over the Plaintiff’s land as shown by
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brown dotted lines on the plan attached to the Defence has been enjoyed without interruption by the Defendant and his predecessors the occupiers of [Bentley’s Field] shown on the said plan and his or their workmen for over thirty years immediately prior to the commencement of these proceedings.’
The plan on the defence shows that the right claimed is along the lane and along the line of the footpath from the end of the lane to the gate between 457 and 547.
At the trial, the plaintiff and an employee of his gave evidence to the effect that prior to the defendant becoming the tenant of Factory Farm no vehicles coming from Bentley’s Field or going to Bentley’s Field had crossed 457 and come up the lane; but the judge did not accept that evidence. On the contrary, he accepted evidence given by the defendant’s witnesses to the effect that from about 1932 to 1966 the tenant of Bentley’s Field, who in 1932 was one Burks and from 1936 to 1966 was Mr Burden, had regularly used the lane and the path over 457 with vehicles. The judge found that there were indeed only two ways in which a tenant or owner of Bentley’s Field could get to the road with vehicles. One was across 547 and then through the gate over 457 and the lane; the other way was to go into 547 and then to branch to the left, north-westwards, over 459. The evidence showed that the latter route was sometimes used, but only with the consent of Mr Pugh, the tenant of 547 and 459, whose consent was by no means always forthcoming. On the other hand, Mr Pugh never raised any objection to vehicles passing to and from Bentley’s Field over 547 and thence to 457, nor did the owner or occupier of 457, who, of course, from 1950 to 1966 was the plaintiff himself, ever raise any objection.
The judge expressed his view on the evidence as to facts of user as follows:
‘As far as facts are concerned, I have no hesitation in coming to the conclusion that the right to a way by prescription, as asserted by the defendant, had been fully made out if all that had to be considered was adequacy of the established user.’
But he went on to hold (as he said, with regret) that, as a matter of law, the user proved did not establish a right of way in the defendant. So he granted the plaintiff the injunction which he asked for, and £11 5s damages, which was a little more that the £10 which the defendant had paid into court to answer damages; and he dismissed the counterclaim. The defendant appeals from that order.
I turn now to the legal position. One point of law to which the judge alludes in his judgment as possibly presenting a difficulty to the defendant (though he does not purport to base his judgment on it) was that the user proved was all user by tenants of the dominant tenement, Bentley’s Field. In my view, there is nothing in that point, and indeed counsel for the plaintiff did not himself seek to support it. Of course, a tenant cannot by user gain a prescriptive right of way for himself as tenant; but by user over land of a stranger he can gain a prescriptive right of way in fee for his landlord which he can use while he is tenant and which his landlord can grant to a subsequent tenant. Of course, a tenant cannot gain a prescriptive right for anyone by user over land which itself belongs to his own landlord, bur here the acts of user by Mr Burden from 1936 to 1966 were over 547, which belonged not to his landlord Major Dickens but to the Dickens Estate, and over 457 which belonged from 1950 to 1966 to the plaintiff; from 1940 to 1950 to Mr Ralphs; and in the 1930s to some person or persons unknown.
A second point, which was not taken before the judge but which counsel for the plaintiff took before us, was that there was no evidence on which the judge could properly find—and further that, on a true reading of his judgment, he did not find—that any right of way had been acquired between 1936 and 1966 for the benefit of Bentley’s Field over 547, since, for all that appeared, Mr Pugh was all that time giving his consent to the user. On that footing, counsel argued that a right of way over 457 and the lane could not have been acquired, since the owner of Bentley’s
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Field would have had no right to get to the terminus of that way at the gate between 457 and 547, but depended on getting the consent of the tenant of 547. As I read the judge’s judgment, he did find that a right of way over 547 would have been acquired but for the supposed legal difficulties, and I think that there was evidence on which he could so find. But, assuming that that is not so, Todrick v Western National Omnibus Co Ltd shows that a right of way may exist for the benefit of a dominant tenement although between the dominant tenement and the servient tenement there is some intervening land. In the Todrick case itself, that intervening land was in fact owned by the owner of the dominant tenement, But all three members of the court expressed the view that, providing that the dominant owner was able to get across the intervening land, though only by the consent of a third party, the way claimed might still be a good right of way if it was sufficiently close to the dominant land to be sensibly described as appurtenant to and for the benefit of the dominant land.
Lord Hanworth MR said ([1934] CH at 574, [1934] All ER Rep at 28):
‘The fact that he [the dominant owner] may have some difficulty in obtaining access to some intervening portion ought not to militate against his enjoyment of a right which is of such a nature that it is beneficial to the blue land which he occupies, and has a natural connection with the property as being for its benefit … ’
Romer LJ said ([1934] CH at 580, [1934] All ER Rep at 31):
‘Supposing that that right be a right to maintain some erection such as a sign upon a servient tenement, I see no reason why that should not be a good easement merely because to get to the servient tenement the owner of the dominant tenement has to go over land which does not belong to him, if and so long as he can get a right or permission to go to the servient tenement.’
And finally Maugham LJ said ([1934] CH at 590, [1934] All ER Rep at 36):
‘Can an owner of land not acquire a right of way leading to his tenement over two fields belonging to different owners? [That is what was claimed here.] I should imagine that such a right of way is constantly being acquired, and I can see no reason in common law why such an easement should not be acquired; but I am unable to see how, if the proposition to its full extent is to be accepted [that is the proposition that the terminus of the way must abut on the dominant tenement], such a right could be properly granted, because the way over the further field would not lead to the dominant tenement, but to another right of way [then Maugham LJ added the significant words] which might be, of course, of a precarious character’.
So, even if Mr Burden was passing over 547 with the consent of Mr Pugh, that would not be fatal to the claim to a right of way over 457.
Then another possible legal objection was adverted to, which perhaps I should mention, though I do not think that the point commended itself to counsel for the plaintiff. When the Dickens Estate purchased Bentley’s Field in 1966, any right of way over 547 which had previously been enjoyed by Bentley’s Field necessarily came to an end, since both plots came into the ownership of the same person. It was suggested in argument that that fact might have automatically put an end to any right of way acquired by the owner of Bentley’s Field over 457 and the lane. I do not think that that point is sound. Of course, the purchase of Bentley’s Field by the owner of 547 could not enlarge the dominant tenement. It remained only Bentley’s Field, but equally that purchase did not destroy the right of Bentley’s Field, as the dominant tenement, to pass over 457 and the lane. It continued, in my judgment,
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to subsist (subject to the final point which I am coming to), though the dominant owner could, during the unity of ownership, get to the terminus of the right of way over his own land.
Now, at long last, I come to the point on which the judge decided the case against the defendant. Although no evidence was given about it, it was apparently agreed between the representatives of the parties in the county court, who were the solicitors for the parties and not the counsel appearing before us, that Mr Ralphs shortly after he had bought 457 in 1940 granted some sort of oral tenancy of it to his son, who made some payments of rent to him, and that this tenancy continued until 1950, when the son surrendered the tenancy at the time of the purchase of the farm by the plaintiff from his father. We do not know the terms of the tenancy; we do not know whether the father had power to resume possession at any moment; we do not know whether he lived in the neighbourhood and knew of Mr Burden’s acts. The judge, in view of that admission and in reliance on a passage in Megarry’s Manual of the Law of Real Propertya, held that the existence of this tenancy, which he described as ‘invading the prescription period’, was necessarily fatal to the defendant’s claim. It is not clear whether, by those words ‘invading the prescription period’, the judge was referring to the period from 1932 or 1936 to 1968, or whether he was referring to the period of 20 years from 1948 to 1968.
In fact, the law on this subject is put in a different way in the most recent edition of Megarry and Wadeb, where it is stated:
‘The user must be by or on behalf of a fee simple owner against a fee simple owner. “The whole theory of prescription at common law is against presuming any grant or covenant not to interrupt, by or with anyone except an owner in fee.” An easement of profit for life or for years, for example, may be expressly granted but cannot be acquired by prescription, for the theory of prescription presumes that a permanent right has been duly created at some unspecified time in the past. A claim by prescription must therefore fail if user can be proved only during a time when the servient land was occupied by a tenant for life or for years. But if it can be shown that user as of right began against the fee simple owner, it will not be less effective because the land was later settled or let.’
Since, in this case, the user proved began against a fee simple owner in or about 1932 and so continued for eight years before this rather nebulous tenancy came into existence, it may well be that if the judge had had the latter work referred to him, he would have reached a different conclusion from that which he did reach; but, of course, we must go behind the textbook and consider the relevant cases. The case which is referred to in connection with the last sentence which I have read is Palk v Shinner. There, after user against an owner in fee since 1811, the land over which the right of way was claimed was demised in 1831 for a term of 14 years, and again in 1838, on surrender of that lease, by a fresh lease, for a term of eight years, ending in 1846. In 1851, the way was obstructed and proceedings were brought. The action was tried by Erle J at the Execter Assizes; and the judge left it to the jury to say whether or not the plaintiff had enjoyed the right of way from time immemorial or for 20 years, as of right; and, as to the 20 years, he told them that the fact of such lease having existed during part of that period would not defeat the plaintiff’s right of user, under the Act. The jury found that there had been a 20 years’ user, and gave a verdict for the plaintiff. The argument before the court in banc turned on whether ss 7 and 8 of the Prescription Act 1832 or either of them, applied to the case; and the court held, as Erle J had held at the trial at nisi prius, that they had no
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application. Those points, of course, have no bearing on this case at all; but all three judges said that as those sections did not apply, the matter had to be decided as it would have been under the old law and that, if the case had arisen before the Act, there would have been good evidence to go to the jury of a user as of right for 20 years from which they could infer a lost grant notwithstanding the existence of the tenancy for years. The same view was expressed by Littledale J in Cross v Lawis ((1824) 2 B & C 686 at 690), a case before the 1832 Act, were he said:
‘… it was proved, that the windows had existed for thirty-eight years, and [the] tenancy for twenty. How the land was occupied for eighteen years before that time did not appear. I think that quite sufficient to found the presumption of a grant … ’
That a distinction may be drawn between cases where the tenancy was in existence at the beginning of the period of user and cases where the tenancy came into existence in the course of the period of user, is surely only common sense. If a tenancy is in existence at the beginning of a period of user, it may well be unreasonable to imply a lost grant by the owner at the beginning of the user. He might not have been able to stop the user, even if he knew about it. If, on the other hand, one has a period of user against an owner or owners without any evidence that they did not know about it when they were in possession, and then afterwards the grant of a tenancy, though undoubtedly such a tenancy during the period of user is a matter to be considered, it would be quite wrong to hold that it is a fatal objection to presuming a grant, or to a claim under the Prescription Act 1832.
In this case there might have been evidence that the owner or owners of the plaintiff’s land in the 1930s did not know what Mr Burks and Mr Burden were doing. There might have been evidence that Mr Ralphs did not know what Mr Burden was doing, either in 1940 when he bought or between 1940 and 1950; but the facts proved were simply user for eight years or so against owners in fee; then this nebulous tenancy during a period of ten years, during which Mr Ralphs senior may very well have known all about it and indeed may have been able to stop it if he had wished; and then a period of user for 18 years against an owner in fee in occupation. When long user—here user for 36 years—of a way has been shown, I think that the law should support it if it can, and that we ought to presume, in the absence of any evidence to the contrary, that the owners of 457 in the period 1932 to 1940 knew of the user and that Mr Ralphs knew of it. Indeed, counsel for the plaintiff candidly admitted that that would have been the position on these facts before 1832, and that if it is competent for the defendant to rely on the doctrine of lost grant, as opposed to the Prescription Act 1832, then the judge’s decision was wrong. But he argued that, on the pleadings, the defendant has limited himself to a claim under the Prescription Act 1832, and he submitted that in considering a claim under the Act the court can only look at the condition of affairs at the beginning of the 20–year periodc; and that, on the facts of this case, there was in 1948 a tenancy in existence which continued for a further two years. The court, that is to say, must shut its eyes (the claim being simply under the Prescription Act 1832) to the earlier user from 1932.
Speaking for myself, I doubt very much whether that is so and I observe that—according to the report in the Jurist—the lease in Palk v Shinner was granted in June 1831 whereas the 20–year period did not start until September 1831. But it is not a point on which it is necessary to express a concluded view, because, as it seems to me, in this case the defendant is, on the pleadings, entitled to rely not only on the Prescription Act 1832, but on other modes of prescription, namely, common law prescription or prescription by means of a lost grant.
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In his answers to the order for particulars, the defendant first said that he claimed a right of way by prescription, which, standing alone, would cover all three modes of prescription. But it is said that the answer to the second part of the order cut that down, because there he said that he and his predecessors had exercised the right for over 30 years immediately prior to the commencement of the proceedings. The number 30 years certainly does not lead one to think of the Prescription Act 1832, where the periods for rights of way are 20 and 40. So the argument really is that the addition of the words ‘immediately prior to the commencement of these proceedings’ is an unequivocal reference to the Act and cuts down the prima facie wide meaning of the word ‘prescription’ in the answer to the first part of the order. That argument does not appeal to me.
Counsel referred us to a case in the Chancery Division before Joyce J, Damper v Bassett, as authority to induce us to hold that the defendant here is limited to a defence under the Prescription Act 1832. But I cannot think that it would be right for us to deal with particulars of defence ordered in the Shrewsbury County Court in 1969 by the standard applied to Chancery pleadings in the year 1901.
It was further urged that the county court judge had dealt with the matter solely under the Prescription Act 1832; but I am far from convinced that that was so. The evidence was directed to the whole period from 1932 to 1966. The passage which I quoted from the judgment, ‘invading the prescription period’, is ambiguous, but I think is more likely to mean the period from 1932 to 1966 than the period from 1948 to 1966, and I very much doubt whether the distinction between the two possible modes of claiming a right by prescription was present to the minds of the solicitors arguing the case, or, indeed, to the judge.
Therefore, as I see it, having regard to the findings of fact which he made as to the user of the way, the judge was wrong in concluding that he was precluded in law from holding that he defendant had made out his case for a right of way. It follows that he was wrong in granting an injunction to the plaintiff. It does not, on the other hand, follow that he was wrong in granting damages to the plaintiff. That would depend on whether or not the admitted deviation from the right of way over 454 and 458 was or was not justified. The judge did not really direct his mind to that point. He said that the difficulty of getting down the lane was caused partly by clippings from the hedge which had been thrown into the lane, or allowed to fall into the lane, by the plaintiff, and partly by standing water, for the presence of which the plaintiff is not in any way responsible. He did not decide whether or not, if there had only been the clippings, and not also the water, the defendant could or could not have got through.
So, as it seems to me, the question of those damages and of any damages that the defendant may have suffered, which he claims by his counterclaim, and also the question of costs below, will have to go back to the county court judge for him to decide. But, to the extent of the injunction, my view is that this appeal should succeed.
HARMAN LJ. I agree. The learned county court judge felt himself bound in law to refuse to the defendant a grant of a right of way, which he thought proved in fact by user, because of his view of the law. That has been the burden of the present appeal.
I am not going to restate the facts. They are very confusing, owing to the way HM ordance numbers fields, and I have never been able to be sure that I am talking about the right one. But the user was admitted on the plaintiff’s part to be enough to justify the judge’s decision on the facts; and, therefore, with that, I leave it.
It was said that the judge decided the matter on the view that what he called ‘the
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period of prescription’ was interrupted by a letting which was conceded apparently during the course of the hearing in a way I can only regard as too indulgent, even for the laxity of procedure in the county court. What sort of concession was made, what sort of a tenancy was intended, who knew of it, who was bound by it, for how long it lasted—all these things were completely unknown. Nevertheless, the judge held that there was from 1940 to 1950 a period during which the field 457 was let, and he concluded that therefore there could not run a period of prescription. It is not easy to see on what basis he arrived at that conclusion. The edition of the book on which he relied has been superseded, and the passage which Cross LJ has read does not seem quite consistent with it. But, nevertheless, I think that he must have come to the conclusion that, as a claimant must prove either as freeholder or on behalf of a freeholder and against a freeholder that if there is no freeholder in possession at the time when the period of prescription should begin, he cannot start getting any advantage from it because the person against whom it would be made has not of necessity any knowledge of it, or, indeed, any power to prevent it, he being out of possession. If the case be limited in its effect to the Prescription Act 1832, I think there is a great deal to be said for that proposition, and it was the chief point made by the plaintiff here, that on the pleadings as they stood, the defendant had nailed his flag to the one mast, namely, the pRescription Act 1832, and could not rely on any other.
I follow Cross LJ in holding that, at any rate in a county court, where ideal pleadings are not to be expected (when I was young, very often there used not to be any at all), the particulars given are sufficient to allow the defendant to rely on any mode of prescription which the law allows him; that is to say, prescription at common law, from time immemorial, prescription on the theory of a fictitious lost grant, or thirdly prescription under the 1832 Act.
Palk v Shinner cited by Cross LJ, satisfies me that if the claim were made under the lost grant theory, the fact that there had been an interruption by a tenancy such as the present would in effect have been put to the jury as one of the matters for them to consider but did not debar them from coming to the conclusion, taking all facts into consideration and considering the period before as well as after the date when the tenancy existed, there ought to be held to have been at some time or other a grant in the terms necessary to provide the way. Therefore, it seems to me that the learned county court judge, who did not consider this point, has misdirected himself to that extent, and that he was not precluded by the existence of the ten-year period of tenancy from holding what otherwise he would have held on the facts as he found them, as has been admitted he would have been justified in doing.
I would, therefore, agree with Cross LJ in discharging the injunction and remitting the case to the county court judge to settle the matters of damages between the parties on the basis that it is still uncertain whether or no the acts of deviation admittedly committed by the defendant were justified by the state of things which he found before him. One may hope, with perhaps not very sanguine feelings, that the parties will feel they have had enough litigation and they had better get on with their job and agree between themselves. But, if they cannot do that, the only thing to do is to send the case to the judge; and, to that extent, the case must go back, the injunction being discharged. That is all the order we make.
SALMON LJ. I agree with both judgments that have been delivered, save that, like Cross LJ, I doubt whether the learned judge’s judgment was founded on the Prescription Act 1832. Like Cross LJ, I incline to the view, on the note of what happened in the county court, that neither of the solicitors concerned, nor the learned judge, really drew any precise line between a way acquired under the Prescription
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Act 1832 or at common law or by the presumption of lost grant. Indeed, I think that when the learned judge talked about the prescriptive period being invaded by the lease, the very nebulous lease which appears to have run between 1940 and 1950, he was referring to the period of prescription from 1932 to 1968. On the law as set out in the second edition of Megarry’s Manual of the Law of Real Propertyd which was the only edition which was before the learned county court judge, I can quite understand how the learned judge came to the decision at which he arrived. I am confident that if he had had the benefit of having Megarry and Wadee before him, he would have decided the case in the same way as this court has decided it. I agree that the appeal should be allowed.
Appeal allowed. Injunction discharged. Case remitted to the county court on question of damages.
Solicitors: Peacock & Goddard agents for J C H Bowdler & Sons, Shrewsbury (for the defendant); Isadore Goldman & Son agents for Henry Lee, Bygott & Eccleston, Wem (for the plaintiff).
Henry Summerfield Esq Barrister.
Gaiman and others v National Association for Mental Health
[1970] 2 All ER 362
Categories: COMPANY; Incorporation, Other Company
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 2, 3, 4, 5, 6, 25 MARCH 1970
Company – Articles of association – Form in accordance with Tables B, C, D and E – ‘Form’ – Companies Act 1948, s 11.
Company – Articles of association – Form in accordance with Tables B, C, D and E – Article not corresponding to any provision in relevant table – Whether article invalid.
Company – Ultra vires – Expulsion from membership – Company limited by guarantee – Power of expulsion provided for in articles – Direct power.
Natural justice – Expulsion from company – Express power of expulsion – Intention that power exercisable unfettered by natural justice.
Natural justice – Expulsion from company – Company limited by guarantee – Power to expel contained in articles – Membership subject to power of expulsion – Relevance of contractual term.
Natural justice – Expulsion from company – Express power of expulsion – Unrestricted power militating against implication of natural justice.
Natural justice – Expulsion from company – Company limited by guarantee – Property rights, livelihood or reputation not infringed by expulsion.
Natural justice – Expulsion from company – Absolute and unfettered discretion – Whether principles of natural justice apply.
Natural justice – Expulsion from company – Ouster of natural justice by express term – Public policy.
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The association, a company limited by guarantee, was a highly reputable charitable body concerned with, inter alia, the preservation and development of mental health and the prevention and treatment of mental disorders. The association had a council of management comprising the chairman, vice-chairman and honorary treasurer together with a number of ordinary members elected by the association. One-third of the ordinary members retired each year but were eligible for re-election and there was power to co-opt additional members to the council. The articles of association provided, inter alia, that (art 7): ‘A member of the Association shall forthwith cease to be a member … (B) If he is requested by resolution of the Council to resign, but so that a member so requested to resign may within seven days after notice of the resolution shall have been given to him … appeal against such resolution to the Association in General Meeting … and in the event of the appeal being successful, the resolution requesting the member to resign shall be void ab initio’. Article 28 provided that at a general meeting each member present had one vote on a show of hands or on a poll; there was no provision for voting by proxy. Article 35(vii) provided that notice of intention to propose a candidate for election to the council must (unless the candidate were recommended by the council) be left at the registered officer of the association not less than three nor more than 21 days before the date appointed for the meeting. The articles in general followed the form of Table C of the Companies Act 1948 although there was in that table no provision corresponding to art 7 (B). The membership of the association (at the end of 1968) stood at just under 2,000 ordinary members living in many parts of the country. On average, there were ten to 15 applications for membership each month. The annual general meeting was usually attended by some 200 to 250 persons; less than half of these were ordinary members who had votes, the remainder being representatives of affiliated bodies. For five years there had been a state of hostility between the association and members of the Church of Scientology, and articles in a periodical published by the association had resulted in two actions by Scientologists against the association for libel. The Scientologists had attacked the association in various publications.
In 1969, the rate of applications for membership of the association increased to about 20 per month. In October, however, 227 applied; the council accepted these applications. No applications after 31 October, however, were accepted, including 135 applications made in November. It was noticed that many of the November applications appeared to have connections with Scientology. Notice was given of the annual general meeting of the association to be held on 12 November. On 7 November, a bundle of nominations was handed in to the association’s registered office. The nominations included the nominations of the plaintiffs as chairman and ordinary members of the council. All nominees, proposers and seconders appeared to be Scientologists. On 10 November, the council, acting under art 7 (B), expelled 302 members of the association who were suspected of being Scientologists. On 12 November, a writ and notice of motion were issued by the plaintiffs. The notice of motion, later expanded, sought a mandatory injunction requiring the association to afford to the plaintiffs, until trial of the action, all rights of membership. Alternatively, prohibitory injunctions were sought. On the motion for interlocutory relief,
Held – (i) Article 7(B) was not invalid by reason of its not being contained in Table C, because—
(a) s 11a of the Companies Act 1948 was concerned with the form of the articles, and in that context ‘form’ did not embrace content; accordingly, the draftsman of articles, provided that he followed the general form of the relevant table, was free to add, subtract or vary the articles as circumstances required (see p 371 h, post); and
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a Section 11 is set out at p 371 c and d, post
(b) there was nothing in s 11 which indicated that, if the articles were not as near to the form of the relevant table as circumstances admitted, and offending provisions in the articles should be deemed invalid or which made it necessary for those who sought to support such provisions to adduce evidence which would establish that at the time when the articles were adopted there were circumstances which in some way required a deviation from the table (see p 371 j to p 372 a, post).
(ii) There were no grounds for the court to intervene to prevent all alleged abuse of power by the council since the power to deprive a member of his membership was a direct power (see p 373 j to p 374 a, post) (Hogg v Cramphorn Ltd [1966] 3 All ER 420 distinguished) and the evidence did not disclose that it had been exercised otherwise than in good faith and in what were believed to be the best interests of the association and members as a whole (see p 374 c, post).
(iii) The principles of natural justice did not apply to the expulsion of membersb, eg so as to afford them a right to be heard before expulsion, because there were circumstances sufficient to prevent the application of the principles, in that—
b In the alternative Megarry J held that the injunctions sought would be refused as a matter of discretion (see p 381 b, post)
(a) the council owed the association a duty to exercise their powers bona fide in the interests of the association; this duty might require a power to be exercised at great speed (whereas natural justice might require delay); this in itself indicated that the council was intended to be able to exercise its powers unfettered by the principles of natural justice (see p 378 g and h, post);
(b) the right of the association, a company limited by guarantee, to expel members could not be less than that of a company limited by shares (in respect of which articles relating to expropriation or expulsion were valid) since, in general, the element of expropriation was lacking from an expulsion; a person becoming a member of the association did so on the terms, inter alia, of art 7 (B) and his right to membership was accordingly subject to termination by the council acting bona fide in what they believed to be the interests of the association; the contractual terms must be of some importance (see p 378 j to p 379 a, post);
(c) the wording of art 7 (B) gave the council an unrestricted power and this militated against any principles of natural justice being implied (see p 379 b and c post); and
(d) membership of the association involved no real interest in property and no question of livelihood or reputation; accordingly, it was not prima facie a matter in respect of which the principles of natural justice applied (see p 379 e, post).
Quaere. (1) Whether, where an absolute and unfettered discretion (as opposed to a discretion merely exercisable for cause) to expel had been conferred, the principles of natural justice would apply to an expulsion in the absence of any charge (see p 379 e to p 380 e, post).
(2) Whether there is any rule of public policy which prevents the principles of natural justice from being ousted by an express term which excludes them (see p 380 f, post).
Notes
For rules of natural justice, see 30 Halsbury’s Laws (3rd Edn) 718, 719, paras 1368, 1369, and for cases on the subject, see 38 Digest (Repl) 102, 103, 731–736.
For the Companies Act 1948, s 11 and Table C, see 5 Halsbury’s Statutes (3rd Edn) 129, 459.
Cases referred to in judgment
Borland’s Trustee v Steel Brothers & Co Ltd [1901] 1 Ch 279, 70 LJCh 51, 9 Digest (Repl) 231, 1501.
Coalport China Co, Re [1895] 2 Ch 404, 64 LJCh 710, 73 LT 46, 9 Digest (Repl) 394, 2529.
Cohen v National Union of Tailors and Garment Workers (1962) The Times 13 January.
Page 365 of [1970] 2 All ER 362
Cotman v Brougham [1918] AC 514, [1918–19] All ER Rep 265, 87 LJCh 379, 119 LT 162, 9 Digest (Repl) 76, 303.
Dawkins v Antrobus (1881) 17 Ch D 615, [1881–85] All ER Rep 126, 44 LT 557, 8 Digest (Repl) 652, 21.
Durayappah v Fernando [1967] 2 All ER 152, [1967] 2 AC 337, [1967] 3 WLR 289, Digest Supp.
Greenhalgh v Arderne Cinemas Ltd [1950] 2 All ER 1120, [1951] Ch 286, 9 Digest (Repl) 594, 3930.
Gresham Life Assurance Society, Re, ex parte Penney (1872) 8 Ch App 446, [1861–73] All ER Rep 903, 42 LJCh 183, 28 LT 150, 9 Digest (Repl) 218, 1384.
Harman Pictures NV v Osborne [1967] 2 All ER 324, [197] 1 WLR 723, Digest Supp.
Hogg v Cramphorn Ltd [1966] 3 All ER 420, [1967] Ch 254, [1966] 3 WLR 995, Digest (Cont Vol B) 98, 1903a.
John v Rees [1969] 2 All ER 274, [1969] 2 WLR 1294.
Lawlor v Union of Post Office Workers [1965] 1 All ER 353, [1965] Ch 712, [1965] 2 WLR 579, Digest (Cont Vol B) 718, 1214a.
Phillips v Manufacturers’ Securities Ltd (1917) 116 LT 290, 86 LJCh 305, 9 Digest (Repl) 418, 2708.
Punt v Symons & Co Ltd [1903] 2 Ch 506, 72 LJ Ch 768, 89 LT 525, 9 Digest (Repl) 302, 1900.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, [1963] 2 WLR 935, 127 JP 295, 37 Digest (Repl) 195, 32.
Russell v Norfolk (Duke) [1948] 1 All ER 488, affd CA [1949] 1 All ER 109, 12 Digest (Repl) 693, 5321.
Sidebottom v Kershaw, Leese & Co Ltd [1920] 1 Ch 154, 89 LJCh 113, 122 LT 325, 9 Digest (Repl) 595, 3933.
Weinburger v Inglis [1919] AC 606, 88 LJCh 287, 121 LT 65, 44 Digest (Repl) 391, 13.
Wood v Woad (1874) LR 9 Exch 190, [1874–80] All ER Rep 408, 43 LJEx 153, 30 LT 815, 8 Digest (Repl) 656, 35.
Motions
The plaintiffs, David Gaiman, Leslie Lee, Joe King, Patricia Webster, Monica Askey, Peter Stumbke, Derek Colley and Peter Ginever (the last-named suing on behalf of himself and all other members of the National Association for Mental Health who by resolutions of the council of management thereof passed on 10 November 1969 had been requested to resign) moved for interlocutory injunctions against the association. The form of the injunctions sought is set out at p 370 d to h, post). The facts are also set out in the judgment.
Peter Pain QC and P B Creightmore for the plaintiffs.
F P Neill QC and O Weaver for the association.
Cur adv vult
25 March 1970. The following judgments were delivered.
MEGARRY J read the following judgment. I have before me certain motions brought by the eight plaintiffs in an action against the National Association for Mental Health; I shall call this body ‘the association’. The eighth plaintiff is expressed to be suing on behalf of himself and all other members of the association who by resolution of the council of management thereof passed on 10 November 1969 have been requested to resign; no doubt the words of representation should be amended by excluding the other seven plaintiffs who, of course, need no representation. The eight plaintiffs are all members of a body known as the Church of Scientology of California, or, more popularly, as the Scientologists. The Church of Scientology is a corporation incorporated under the laws of the State of California and registered in England. The first-named plaintiff, Mr David Gaiman, is a deputy guardian of the church and its public relations officer.
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The association is a company limited by guarantee, with a licence from the Board of Trade to omit the word ‘Limited’ from its name; for under para 9 of the memorandum of association the property of the association is not distributable among the members on a winding-up. The association was incorporated under the Companies Act 1929 on 25 November 1946, and under a special resolution passed on 3 September 1965 a number of important changes were made in its articles. I shall refer to the articles as they stand in their amended form. The association was formed to take over three other bodies, and its long list of objects includes the following:
‘(2) To work for and promote the preservation and development of mental health and the prevention and treatment of mental disorders and defects among both adults and children:
‘(3) To work for and promote the study of and research into mental health and mental disorders and defects and to obtain and make records of and disseminate information concerning the same: …
‘(7) To carry on, assist or promote the establishment, support, provision and maintenance of clinics, schools, homes, hostels, places for observation or boarding out of patients, hospitals, institutions, workshops, libraries and other places in connection with the furtherance of the objects of the Association or any of them, and to provide services at or in connection with such places, either gratuitously or otherwise.’
Apart from a president and a number of vice-presidents, the association has a council of management consisting of the chairman, vice-chairman and honorary treasurer of the association (who under art 42 are elected annually), and not less than six nor more than 18 ordinary members elected by the association, with power to co-opt not more than six members. One-third of the ordinary members retire each year, but are eligible for re-election. Membership of the association is governed by art 6. Article 7 provides as follows:
‘A member of the Association shall forthwith cease to be a member:— (A) If he shall resign by giving notice in writing to the Association of his intention so to do, in which case he shall cease to be a member upon receipt of the notice by the Association. (B) If he is requested by resolution of the Council to resign, but so that a member so requested to resign may within seven days after notice of the resolution shall have been given to him by notice in writing to the Secretary of the Association appeal against such resolution to the Association in General Meeting, in which case the Council shall with all reasonable despatch convene a General Meeting to consider the matter, and in the event of the appeal being successful, the resolution requesting the member to resign shall be void ab initio.’
It is art 7 (B) to which much of the argument has been directed. Article 9 provides that—
‘No member or associate on ceasing to be a member or associate shall be entitled to be repaid any subscription to the Association previously paid by him or any part of such subscription.’
The present annual subscription is 2 guineas. At general meetings of the association each member present has one vote either on a show of hands or on a poll, and voting by proxy is not allowed: see art 28.
The present chairman of the association is Lord Balniel MP, who has held office since 1964. Towards the end of 1968, there were just under 2,000 ordinary members of the association, living in many parts of the country. At the annual general meetings the usual attendance was some 200 to 250; but of these, less than half were ordinary
Page 367 of [1970] 2 All ER 362
members who had votes, the others being representatives of affiliated bodies, The association receives an annual grant of £10,000 from the Ministry of Health, and its annual expenditure is now nearly £400,000. I do not think that it is disputed that the association is generally recognised as a highly reputable charitable body which makes an important contribution in the field of mental health. In addition to promoting research and enquiry in this field, it is responsible for some ten institutions caring for over 200 persons suffering from some form of mental or emotional disorder.
Over the last five years or more, there has been a state of hostility between the Scientologists and the association. The association publishes a periodical called ‘Mental Health’, and in its autumn issues for 1966 and 1968 it set forth statements which engendered two actions for libel by the Scientologists against the association. In the first action, the solicitors for the Scientologists sent with a letter of 16 January 1968 a memorandum which, said the letter, the Scientologists ‘insist on being served as additional particulars of the Statement of Claim’.
The memorandum contains 21 paragraphs. I think I can sufficiently indicate the tone of the document by reading half a dozen of these, correcting the spelling mistakes.
‘4. Becoming a party to a conspiracy to bring about a reign of terror in the land by discrediting any peaceful, rational and law abiding approach to the State’s problems with the sick and insane, the Defendant seeking to discredit the right of others to approach the problem and so discover an unsavoury condition of wilful injury and murder for profit, advocated and conducted by the Defendant for their own gain, thus damaging others like the Plaintiff who urge a humane approach to he problem but which would deny the Defendant revenue from brutal treatments and extortion …
‘10. Becoming, knowingly or unknowingly, party to a conspiracy to deny the State data and skills of vital use in the country’s defences by seeking to discredit the Plaintiff …
‘12. The Defendant did insinuate one of its officers, Kenneth Robinson, into the Government to use his position to: (a) Attempt to secure a monopoly for the friends of and for psychiatry. (b) Attempt to foster legislation to secure monopolies. (c) To misappropriate public funds for the use of the private association. (d) To further the clientele of the said Defendant by providing it with Ministry officers who could procure new patients for the Defendant under threat of electric shocks and other tortures, and (e) To rid the Defendant and its friends of rivals of whatever kind, the said officer having no qualifications or skill in the field of healing.
‘13. The Defendant did pretend charitable offices and actions in registering but in actual practice hides the unfit children and insane relatives of the aristocracy at enormous charges and is no institution of the people, thus bringing harm to the Plaintiff and other innocent actual institutions …
‘15. The Defendant has brought and advocated injury, brutality and murder into the field of mental healing, injuring any bona fide activity in the general field of the mind and human betterment by invidious comparison and public hatred thus injuring the business of the Plaintiff who also works in the field of the mind but not with the insane or ill …
‘21. The Defendant, using its false name and charitable registration, acts as an advertising agency for a minority school of mental healing and pours out literature using its false and misrepresenting name to stimulate business and pour funds into the pockets of this group, thus attempting a monopoly to the harm of the Plaintiff.’
I should also refer to a three-page circular letter dated 5 February 1969 and signed by the first plaintiff, which was sent to the public relations officer of the association. The first page of this letter reads as follows:
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‘Dear Opposite Number: How does it feel to be hit? The public sentiment against psychiatry has been bad for years. Lately it has worsened. I have a good idea that it will get much, much worse. Raping women patients, murdering inmates, castrating men, committing without real process of law— the psychiatrist has been a very bad boy. You exist, of course, to get psychiatry its percent of the mental healing market. Psychiatrists and psychologists have only 16 percent. The GP medical doctor has 28%. It is very dull to attack Scientology. It has exactly NO percent of your market. Its organisations draw the line at mental patients. Medical doctors don’t like psychiatrists. They are very obliging in turning in factual case histories concerning psychiatric murders; for they protect their 28% of the market.’
This provides an example of the epistolatory style of the plaintiff who was later to be put forward for the office of chairman of the association. In March 1969, on two occasions, about ten people who appeared to be Scientologists demonstrated outside the association’s offices, with banners reading ‘Crossman backs legal murder’, ‘Psychiatrists make good butchers’, ‘Buy your meat from a psychiatrist’, and so on.
There have also been put in evidence copies of seven issues of a publication entitled ‘Freedom Scientology’. Each is stated to be published either by the Church of Scientology or by the Hubbard College of Scientology, each of Saint Hill Manor, East Grinstead, Sussex. Each copy is marked ‘Copyright 1969 by L. Ron Hubbard’. Many of the articles are stated to be by him. There are nearly 20 somewhat crude cartoons, many of them depicting the shrouded figure of death, bearing a scythe inscribed ‘Psychiatry’ which is sometimes dripping with what may well be blood. A smaller number of cartoons depict psychiatrists dictating (sometimes with instruments of torture) to members of Parliament.
Again, I give only brief extracts:
‘Concerning Ely and Other Psychiatrist Death Camps—The instigators of these Death Camps is a private psychiatric front group of which Lord Balniel is an officer. Kenneth Robinson was a Director of it. Scientologists have found they instigate these Death Camps throughout the U.S. and Commonwealth. They control large sections of Governments and attack anyone who opposes their new fascist state. They seek the right to seize and kill any man, woman or child who opposes them. Cecil King was one of them. He was to be the new Hitler in England. Immigration and Health Ministries were totally controlled by them throughout Commonwealth and U.S. Nelson Rockefeller through his US Foundation was to be the new Fuehrer in the U.S. These people are merciless and seek to destroy and opposition with Death Camps.’
Then there is a further paragraph (and I do not know whether it belongs to the one that I have read) which runs as follows:
‘The public can expect Cardiff Hospital Staff to get sacked and blamed while they were only following orders. Lord Balniel, Kenneth Robinson, Cecil King and all the very posh overlords of this conspiracy will crucify their henchmen to try to keep their own shirts clean. Death Camp orders come from the very top. A psychiatrist Dr Watt, once told me years ago he would be sacked if he refused to follow Health Ministry orders to torture and kill patients. He gave me the data on what was happening in these Death Camps. When he protested his orders from superiors he himself died, and I was never satisfied by official accounts of his death. This goes to the very top of society. The names connected with these atrocities are astonishing … ’
That appears to be signed ‘L. Ron Hubbard’.
A further extract reads:
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‘A psychiatrist kills a young girl for sexual kicks, murders a dozen patients with an ice pick, castrates a hundred men. And they give him another million appropriation. One can only conclude that psychiatric terrorism is not limited to the families of mental patients. It must extend all the way to the top. Extortion, kidnapping, murder—these are crimes. Yet where are the Security Forces? Thousands of miles away tending to other people’s business.’
That comes from an article signed ‘L. R. Hubbard’. Finally, there is an extract which reads:
‘There are no insane. There are only the physically ill. “Insanity” is a non-existent malady invented to mystify and horrify the public. Any person who looks or acts irrational is either: (a) physically ill and in suppressed pain and agony or, (b) is in terror at being declared “insane“. There is no illness one could call “insanity“. To “treat” it by electric shocks or brain operations is only to brutalize a person suffering from easily recognizable medical symptoms or to confirm his terrors.’
The publications also contain a number of derogatory references to the association.
It is against that background that I have to consider the events of October and November 1969. The average rate of applications for membership of the association was formerly somewhere between ten and 15 a month. In the first nine months of 1969 the rate quickened a little to about 20 a month. In October, however, 227 joined; and the council accepted all those applications. However, no applications made since midday on 31 October have been accepted, and the 135 applications made in November, with others, still await consideration by the council. It was observed that many of the applications in November were made in circumstances suggesting some connection with Scientology.
The annual general meeting of the association had been duly convened for 2.00 pm on Wednesday, 12 November. Under art 35(vii), a notice of intention to propose a candidate for election as an ordinary member of the council must (unless the candidate is recommended by the council) be left at the registered office of the association not less than three nor more than 21 days before the date appointed for the meeting. On Friday, 7 November, five days before the meeting, a bundle of nominations was delivered at the association’s registered office by solicitors. These included a nomination of the first plaintiff as chairman, and nominations of the second to seventh plaintiffs (inclusive) as members of the council. There were also nominations of a Dr West as vice-chairman and a Mr Small as honorary treasurer. In every case, I think, the person proposed, the proposer, and the seconder was a person who had joined the association in 1969, many of them in October. All appear to be Scientologists.
In those circumstances the council met at short notice on Monday, 10 November, after weekend consultations. The council decided to take action under art 7 (B) in respect of 302 members of the association ‘known or reasonably suspected of being Scientologists’, as Lord Balniel puts it. The first plaintiff accepts that about 150 Scientologists joined the association in 1969, but that there may be others. On that day, two forms of letter were sent out to the 302. One was sent to those who had been proposed for office and the other was sent to those who had not. I need read only the first of these forms, as the one difference is that it is only in this form that the last three sentences appear. The letter reads:
‘Dear … At a meeting of the Council of Management which was duly convened and held today at 12 noon at 39 Queen Anne Street, London, W.1., it was resolved that, in accordance with the provisions of regulation 7(B) of the Articles of Association (a copy of which is enclosed), you be requested to resign as a member of the Association. I was instructed by the resolution to give you this notice in writing of the resolution of the Council of Management, and I
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have to draw your attention to the right of appeal which is open to you under the terms of regulation 7(B) of the Articles of Association. As you are aware, the Association have received a nomination, in accordance with regulation 35(vii) of the Articles of Association, for your name to be put before the twenty third Annual General Meeting of the Association to be held on 12 November, for election as an ordinary member of the Council of Management of the Association. In accordance with the provisions of the Articles of Association you cease to be a member of the Association on the posting of this letter and thereby automatically cease to be eligible for such election. I have accordingly sent a copy of this letter to the sponsors of your nomination.’
It is then signed by the general secretary of the association.
In those circumstances, two days later, on Wednesday, 12 November, the writ and notice of motion were issued. On that morning I granted an ex parte injunction restraining the holding of the meeting save for the purpose of adjourning it; and adjourned it has stood ever since. The original motion, relating to the meeting of 12 November, has now become inappropriate, and the motion has been argued on the footing of an expanded notice of motion, claiming injunctions under four heads. They are directed to the association by its council of management servants agents or howsoever. The first is mandatory, ordering the association—
‘… to afford to the plaintiffs and the persons represented by the Eighth Plaintiff until the trial of this action or further order all rights of membership of the Defendant Association.’
Alternatively, three prohibitory injunctions are claimed, restraining the association—
‘… from proceeding with their adjourned Annual General Meeting unless the Plaintiffs and the persons represented by the Eighth Plaintiff are given notice thereof and of any adjournment thereof and permitted to attend and vote thereat’;
restraining them—
‘from proceeding with the elections for Council members and for Vice Chairman unless the persons duly nominated for such offices are allowed to go forward as candidates’;
and finally, restraining them—
‘from holding any meeting or engaging in any other of its objects or activities without affording to the Plaintiffs and the persons represented by the Eighth Plaintiff the same rights (if any) in respect thereof as they afford to undisputed members of the Association.’
The writ, I may say, claims a declaration, two injunctions and a representation order.
With that outline of the facts, I now turn to the contentions. Counsel for the plaintiffs put his case under four heads; and counsel for the association was content to meet him on the same footing. First, said counsel for the plaintiffs, art 7 (B) was void as being in conflict with the Companies Act 1948, s 11. If that is right, of course, the council had no power to do what it did. Second, either art 7 (B) was void as conflicting with the requirements of natureal justice, or else the action of the council was invalid in that the provisions of art 7 (B) had been applied without complying with the principles of natural justice, and, in particular, without giving the members affected a hearing. Third, on the true construction of the articles, the council’s letters to the 302 did not forthwith terminate their membership, but left them members while they pursued their right of appeal, which some had exercised, including all the plaintiffs. Fourth, the council had acted in breach of its fiduciary duty of
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acting for the benefit of the association as a whole, and either the expulsions were invalid, or else, if valid, the court would nevertheless intervene to restrain the council from abusing its powers.
Of these four heads, the major bone of contention has been the complex of issues that developed concerning natural justice. Most of the 40 or 50 authorities put before me related to this, and I must consider this head at some length. I therefore propose to deal with the other three issues first; for they may be disposed of with relative brevity, even though much of the territory appears to be untrodden.
I accordingly turn to the validity of art 7 (B). Counsel for the plaintiffs’ submission was based on s 11 of the Companies Act 1948. I may say that s 11 of the Companies Act 1929 is identical, so that nothing turns on which Act applies. Section 11 provides as follows:
‘The form of—
(a) the memorandum of association of a company limited by shares;
(b) the memorandum and articles of association of a company limited by guarantee and not having a share capital;
(c) the memorandum and articles of association of a company limited by guarantee and having a share capital;
(d) the memorandum and articles of association of an unlimited company having a share capital;
shall be respectively in accordance with the forms set out in Tables B, C, D and E in the First Schedule to this Act, or as near thereto as circumstances admit.’
When one turns to Table C, which is the relevant table, one finds articles which contain nothing resembling art 7 (B). Therefore, says counsel for the plaintiffs, these articles are not in accordance with the form set out in Table C. Furthermore, there is not a shred of evidence to show that circumstances required by departure from Table C, and in the absence of any such evidence, art 7 (B) must fall to the ground as failing to comply with the requirements of the Act.
This is a corner of the law which seems to be unblessed by authority. Table C, I may observe, contains not a skeleton but substantially completed copies of a memorandum and articles of association. They are concerned with establishing a school, and all seven named subscribers to the memorandum are schoolmasters. Table B, for a steam packet company, and Table D for a hotel company, each has seven gentlemen of the same name; but there they are all merchants. Table E, for a company making stereotype plates, also has seven merchants, six of the same name as in the other tables, and one of a different name. These gentlemen are long lived, for they were all at work in the Acts of 1929 and 1908, and maybe earlier than that. Table C was for a school in 1929, but in the corresponding form in the 1908 Act it was for a mutual ship insurance company. Even a cursory survey of the provisions of Tables B, C, D and E indicates that they were intended to provide models and not strait-jackets. Section 11 is in terms concerned with the form of the articles, and I cannot conceive that ‘form’ was here intended to embrace content. In my judgment, it is for the draftsman to mould his articles to the needs of the company as the promoters see it at the time. He should bear in mind what he finds in Table C, as well, of course, as the terms of the Act. But provided he follows the general form of the relevant table, setting out matters in numbered paragraphs and dividing the subject-matter between memorandum and articles in the manner suggested by the table, I cannot see why he should not be free to add, subtract or vary as the needs of the case suggest.
A further consideration is that there is nothing in s 11 to indicate what are to be the consequences if the articles are not as near to the form set out in Table C as circumstances admit. There is no provision corresponding to the words in, for example, s 21(1), which in terms enacts that certain provisions in the memorandum and articles ‘shall be void’. I should be very slow to impute to the language of s 11 an
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intent to strike with invalidity any provisions in articles which do not comply with such indefinite requirements, or to make it necessary for those who seek to support such articles to adduce evidence which would establish that at the time when the articles were adopted (which might be many years back) there were circumstances which in some way required a deviation from Table C. In my judgment the words of s 11 are merely directory in their effect.
Counsel for the association drew my attention to the form of articles of a society limited by guarantee without a share capital set out in Palmer’s Company Precedentsc, relating to a committee of management. This gives the committee a discretionary power to admit to membership, and a power to require a member to withdraw, with a cessation of membership one month thereafter. Such provisions have no counterpart in Table C; and the same applies to many other provisions contained in this section of Palmer. The views of a draftsman of precedents, however eminent, cannot of course override the provisions of a statute; but in construing a statutory provision which seems to be devoid of any direct authority on the point, I think that I am entitled to pay some regard to a book of precedents of high repute which must have provided a foundation for a very large number of sets of articles now in use. At all events, it does not seem to me that the view that I take is out of accord with the practice of draftsmen.
Counsel for the association also relied on the effect of s 15 of the Companies Act 1948, when read with ss 6, 10 and 20, as establishing the validity of the articles. Section 15(1) provides as follows:
‘A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Act.’
Basing himself in the main on a passage in Lord Wrenbury’s speech in Cotman v Brougham ([1918] AC 514 at 522, 523, [1918–19] All ER Rep 265 at 269, 270), dealing with a memorandum of association, counsel for the association contended that the registrar’s certificate of incorporation established that the articles were at all events valid as to form. However, he accepted, as I think he had to, that this could not cure any failure to comply with a statutory requirement as to substance; and on that footing I do not think that the argument provided much of a defence to an attack based on non-compliance with the requirements of s 11. The same applies to s 20(1), making the articles, when registered, bind the company and the members to the same extent as if they had been signed and sealed by all members, and so on. In any case, I should be most reluctant, without a clear mandate from Parliament, to impose on the registrar the duty of considering all deviations from Table C, and enquiring whether the circumstances required such a deviation, on the footing that every failure to comply with the Act which he failed to detect would be cured by his certificate. I do not have to decide this point and, having expressed my doubts, I refrain from deciding it. It suffices for me to say that for the reasons which I have given, art 7 (B) is in my judgment not invalidated by s 11 of the Act, and so does not need to be validated by s 15 or anything else. Counsel for the plaintiffs’ first point accordingly fails.
Omitting the question of natural justice for the moment, I turn to counsel for the plaintiffs’ third point, to the effect that the 302 remained members of the association despite the letters from the council which were despatched on 10 November. He submitted that on the true construction of art 7 (B), a member to whom a request was made under the article remained a member for seven days and, if he appealed within the seven days, until the appeal was decided. As I have mentioned, all the
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plaintiffs have in fact appealed within the seven days. Counsel for the plaintiffs’ chosen instrument for mitigating the effect of the word ‘forthwith’ in art 7 was art 7 (A), which showed, he said, that ‘forthwith’ could not mean ‘immediately’. He also stressed that the word used in art 7 (B) was ‘resign’ and so, he said, there could be no cessation of membership until the member affected in fact resigned. A provision for forfeiture required clear language, and here the language had tied itself in knots. The words ‘ab initio’ at the end of art 7 (B) were virtually unnecessary. Thus ran the argument.
These contentions seem to me to be wholly untenable. As I read art 7, a member of the association forthwith ceases to be a member if he is requested by the council to resign. What terminates his membership is the request, and not any consequent or supervening resignation. The word ‘resign’ is used in art 7 (B) in a somewhat euphemistic sense. If under art 7 (A) the member gives notice of resignation, then he ceases to be a member forthwith on receipt of the notice by the association. I can see nothing in art 7 (A) to negative the natural operation of the word ‘forthwith’ on art 7 (B). Furthermore, the result of a successful appeal is that the resolution requesting the member to resign becomes ‘void ab initio’, and this form of expression, as counsel for the association rightly pointed out, emphasises that the member had ceased to be a member instanter. In my judgment there is nothing in the point taken by the plaintiffs under this head save a demonstration of the ingenuity of counsel.
That brings me to counsel for the plaintiffs’ fourth point. The first limb of this soon disappeared, never to re-emerge. If the council had acted in breach of its fiduciary duty towards members of the association, this could hardly mean that the council’s acts were invalid. A breach of trust is not a nullity but a ground for complaint. Accordingly, it was on the second limb, that the court would intervene to prevent the council from abusing its powers, that the argument turned. The council, said counsel for the plaintiffs, had exercised its powers without considering the interests of the Scientology section of its membership; instead, the council had acted in the interests of its non-Scientological members. In his reply, counsel for the plaintiffs relied heavily on Hogg v Cramphorn Ltd. In that case, an issue of shares with special voting rights which would alter the balance of power was set aside on the ground that it was an exercise of a fiduciary power with an improper motive, and, being so, it was immaterial that the directors believed in good faith that the issue was in the interests of the company. Without attacking the honour of the members of the council, counsel for the plaintiffs contended that they had acted with improper motives; and he said that if the power exercised was a fiduciary power, it mattered not whether the object of the improper exercise of the power was to provide reinforcements for those exercising it or to decimate the opposition.
This contention ignores, as it seems to me, an essential distinction in the powers. In a passage in Punt v Symons & Co Ltd ([1903] 2 Ch 506 at 515), cited by Buckley J in Hogg v Cramphorn Ltd ([1966] 3 All ER at 427, [1967] Ch at 267) Byrne J pointed out that the directors’ power to issue shares was primarily given to them for the purpose of enabling them to raise capital when required for the purpose of the company. The issue of shares with the object not of raising capital needed by the company, or any other proper purpose, but of affecting the balance of voting power, is thus an exercise of powers made with a purpose that is ulterior, and not a purpose for which the power was intended. In such a case, no genuine belief in the propriety of the act done can cure the defect. In the present case, the power is a direct power to deprive a member of his membership; it is not a power to reduce capital (if that could be good) which is being employed with the ulterior purpose of depriving a member of his membership.
The question, then, is whether that power of deprivation of membership has been
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exercised by the council in good faith for the purpose for which it was conferred. Such a power is, I think, plainly conferred in order that it may be exercised in the best interests of the association. The association is, of course, an artificial legal entity, and it is not very easy to determine what is in the best interests of the association without paying due regard to the members of the association. The interests of some particular section or sections of the association cannot be equated with those of the association, and I accept the interests of both present and future members of the association, as a whole, as being a helpful expression of a human equivalent: see Palmer’s Company Lawd, and for a possible alternative expression see Greenhalgh v Arderne Cinemas Ltd ([1950] 2 All ER 1120 at 1126, [1951] Ch 286 at 291). In this sense, did the council act as they did in the bona fide belief that it was in the best interests of the association?
I think the answer is plainly ‘Yes’. Lord Balniel in terms deposes that the decision of the council was taken in good faith and in what were believed to be the best interests of the association and the members as a whole; and this is not impugned. The basic reason for the decision is stated to be ‘the threat that Scientology posed to the Association and all that it stood for’; and various other factors are set out, including the loss of moral and active support for the association, loss of revenue, and the association’s responsibility to those in its charge. The evidence before me provides ample grounds for saying that at the very lowest this is a possible view to hold. Accordingly, in my judgment the plaintiffs’ fourth point also fails.
Let me add this. I am not in the least concerned with the question whether, for instance, it is the views held by psychiatrists or those held by Scientologists which are right. That is in no way before me for decision. Nor am I concerned with the right of those who believe in Scientology to consort together and to propagate their views by any lawful means. I am concerned with an entirely different and much narrower question, namely, the right of the council of the association to use art 7 (B) to exclude from the association those who are known or reasonably suspected of being Scientologists. It is beyond question that Scientologists have for long been attacking the association in a variety of ways. The attacks have been virulent, and like the sentiments, the language, I think, speaks for itself. I need say no more about it than that much of it cannot be described as moderate and reasoned argument designed to convert those who hold what are conceived to be erroneous views.
At the same time, I must bear in mind that it has not been established how far each of the plaintiffs before me subscribes to the acts done and the language used. One may support a club, an association, a political party or any other group of persons without thereby agreeing with every word that other members use. Indeed, such is the variety of human opinions that it would often be impossible to do so. Furthermore, even if the plaintiffs fully supported all that has been said and done in the name of Scientology, they are persons who are, like all others, entitled to justice according to law. The more extreme their views, the more they are likely to need what the law can give them.
I should also say that counsel for the association made some comment about the Scientologists having made a ‘take-over bid’ for the association. Counsel for the plaintiffs, on the other hand, said that it was no ‘take-over bid’, but merely an attempt to get the voice of Scientology heard within the association, and to ‘make a splash’, after previous attempts to have discussions with the association had failed. No contention, I may say, has been advanced that the Scientologists were seeking to join the association only to destroy it. Furthermore, in his affidavit sworn on 8 December the first plaintiff says that as he has a reasonable prospect of being elected chairman and this might damage the association in the present climate of public opinion, he is prepared to withdraw his candidature for the chairmanship, and that Mr Small is prepared to withdraw his candidature for the office of honorary treasurer.
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This is done without prejudice to the plaintiffs’ contentions. These considerations, it seems to me, have little to do with what I have to decide. It matters not whether a plaintiff is a new member or an old, whether he joins by himself or with cohorts of his fellow believers, or whether he remains inert or at once becomes active in his membership. A member is a member, and has his rights as such.
I now turn to the second of counsel for the plaintiffs’ points, and the last that I have to deal with, namely, that of natural justice. The first limb of this is one that I can dispose of quite shortly. The contention was that art 7 (B) was void as being contrary to natural justice. I have heard nothing which seems to me to provide any real support for that contention. To say that the powers conferred by the article can be exercised only in accordance with natural justice is one thing; to say that the article is void in toto is very much another. The former proposition leaves the power of expulsion in being but regulates its exercise. The latter proposition strikes out the power of expulsion altogether. Indeed, at one stage, counsel for the plaintiffs accepted that it did not matter to him which proposition was right, provided that one of them was. I have been able to perceive nothing in any of the authorities cited, or in any submissions put forward, which indicates that even on the most liberal interpretation the principles of natural justice could invalidate the power. I accordingly reject that contention.
That leaves me with the second limb of the argument of the principles of natural justice; and this is much more substantial. If these principles apply, it seems to me plain that the plaintiffs have been denied their rights. They were given no warning, informed of no charge, and afforded no opportunity of speaking in their own defence. The council simply passed the resolutions and the plaintiffs were expelled. They have not been accorded even the most elementary form of natural justice. The question, then, is whether the principles of natural justice apply at all in the circumstances of this case.
Counsel for the plaintiffs said that art 7 (B) was subject to an implied term to the effect that every member had a right to be heard before being expelled. Furthermore, he contended that this was a term which could not be excluded by any provision to the contrary. In support of his contention he led me through many of the leading authorities on the subject, emphasising those that supported him and distinguishing or criticising those which were less favourable, or positively adverse. In response to a question from the Bench, he confessed that he had been unable to find any authority of the application of the principles of natural justice to a company limited by guarantee.
Counsel for the association’s basic submissions, in their simplest form, were as follows. First, the principles of natural justice had found no foothold in company law, and did not apply to companies, including a company limited by guarantee. The directors are not, however, unfettered in their powers. They are subject to their duty under company law to exercise their powers in what they bona fide believe to be the interests of the company; but that is all. There is no superadded obligation to observe the principles of natural justice. Second, even if the principles of natural justice can apply to a company limited by guarantee, they are confined to cases where the article in question is phrased in terms not of confiding an unlimited discretion to the directors, but of giving a power to exclude a member for some stated reason or reasons, eg for misconduct. Only in the latter case is there an issue which is justiciable according to the rules of natural justice. Accordingly, since art 7 (B) is expressed in unlimited terms, the principles of natural justice do not apply. There were a number of subsidiary propositions, but I think that I have sufficiently indicated the line of argument.
In spite of the assistance of counsel, I have found this a difficult part of the case. Nothing has been put before me to show what test has to be applied to determine whether or not the principles of natural justice apply to any particular decision. It is clear that these principles are not universal in their embrace. It has long been
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accepted, for example, that a master may dismiss his servant instanter without affording him the opportunity of saying a word in his defence. The contract of service is terminated forthwith, and the servant is left to any remedy that he may have for wrongful dismissal: see generally Ridge v Baldwin ([1963] 2 All ER 66 at 71, [1964] AC 40 at 65), per Lord Reid. Again, local planning authorities refuse thousands of planning applications each year without giving the applicant any hearing, leaving him to his remedy by way of appeal to the Minister, when a full hearing is given; yet I know of no suggestion that local planning authorities are thereby universally acting in contravention of the principles of natural justice. Marshall’s Natural Justicee contains the most valuable examination and classification of the many cases on the subject that I have seen; but I have been unable to find in it any satisfactory test for determining whether a case is one in which the principles of natural justice apply. It may be that there is no simple test, but that there is a tendency for the court to apply the principles to all powers of decision unless the circumstances suffice to exclude them. These circumstances may be found in the person or body making the decision, the nature of the decision to be made, the gravity of the matter in issue, the terms of any contract or other provision governing the power to decide, and so on: and consider Durayappah v Fernando ([1967] 2 All ER 152 at 156, [1967] 2 AC 337 at 349). This, of course, does little by way of providing a clear test: but as the authorities stand, it may not be possible to do much more than say that the principles of natural justice will apply unless the circumstances are such as to indicate the contrary. Certainly I would say that the cases show a tendency to expand the scope of natural justice rather than constrict it. The ambit of natural justice is indeed a subject worthy of further academic research.
Now although neither counsel for the plaintiffs nor counsel for the association could refer me to any case deciding whether or not the principles of natural justice apply to companies limited by guarantee, counsel for the association did put before me a line of cases which he said showed that those principles appeared not to apply to companies limited by shares. Some of these cases related primarily to the exercise of discretionary powers in relation to the transfer of shares to an assignee, so that the main question was that of the admission of a new member; but it was urged that these cases also related to the cessation of membership, in that the transferor was seeking to cease to be a member.
I did not find this point very impressive, since it did not involve stripping a man of his rights against his will. Re Gresham Life Assurance Society, ex parte Penney, fell into that category, establishing that under a provision that a share was not to be transferred ‘… without the special leave of the board of directors’, the members of the board need not disclose their reasons for rejecting a transferee; if they had fairly considered the question, then in the absence of evidence to the contrary the court would assume that they had acted fairly and bona fide. Re Coalport China Co, appears to extend that principle to a case where the right to refuse to register a transfer is confined to certain stated grounds, including the directors being of opinion that ‘the proposed transferee is not a desirable person to admit to membership’.
Borland’s Trustee v Steel Brothers & Co Ltd, however, seems to be a little more in point. There, the articles provided that, with certain exceptions, the directors might give any shareholder notice requiring him to transfer his shares, and that if he did not do so within 14 days, he was to be deemed to have given a transfer notice. The effect of the transfer notice was to create an obligation to transfer that shares to a manager or assistant in the company at a fair price not exceeding their par value A directors’ notice was given when the shares were, it was said, worth about four
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times their par value. Even though the article was confiscatory in its effect, and many objections were urged, no point seems to have been taken on natural justice, and Farwell J upheld the transaction.
I turn to Phillips v Manufacturers’ Securities Ltd. This is a case which may be said to have been reported somewhat distributively; the judgment of Peterson J is to be found in the Law Times Reports, there is a statement of the facts and a report of the arguments in the Court of Appeal in the Law Journal Reports, and the judgments of the Court of Appeal appear in both series. It is a striking case. The company was formed in aid of a trade federation which had the object of protecting the trade of manufacturing bedsteads and preventing price cutting. The articles provided that the company in general meeting, by a three-quarters majority, might determine that the shares of a member should be offered for sale to other members, and that the price paid to the member should be not less than is per share. A resolution was passed requiring a member’s shares to be sold for Is a share, although each share was then admittedly worth at least £1. It was accepted that this resolution was passed in order to punish the member for leaving the federation. The Court of Appeal unanimously affirmed the decision of Peterson J holding that the attack on the transaction had failed. Running through the judgments is the principle that no more had been done than had been authorised by the articles to be done. Fraud, mala fides and oppression were discussed and dismissed, but there is nothing to indicate that the issue of natural justice was raised. Further, as the member was, in fact, given notice of the meeting and of the resolution proposed to be passed, I cannot attach any great significance to the decision as an authority on natural justice, even sub silentio. Its importance, I think, is as an illustration of the extent to which the courts will go in enforcing the articles of a company even if they appear capable of working harshly.
The last case cited to me in this line is Sidebottom v Kershaw, Leese & Co Ltd, in which the Phillips case was followed. The main question was that of the validity of a special resolution inserting into the articles a provision which enabled the directors to give a notice to any shareholder who carried on any business in direct competition with the business of the company, or who was a director of any company carrying on such a business. The notice was to require him forthwith to transfer all his shares in the company, and he was thereupon to be bound to transfer the shares to any person nominated by the directors, on payment of the par value of the shares as ascertained under the articles. The Court of Appeal held that as a provision for buying out or expelling a member might have validly been inserted in the original articles (as the Phillips case showed), it could therefore be inserted into the articles by amendment, provided that insertion was made bona fide for the benefit of the company as a whole. The court also rejected the contention that because it was to the detriment of a member to be bought out or expelled, this process could not be said to be for the benefit of the company as a whole, in that it was detrimental to at least one of the corporators.
I cannot see that the authorities cited by counsel for the association either collectively or individually establish his proposition. They are not concerned with an instantaneous expulsion; companies limited by guarantee are not necessarily in the same category as companies limited by shares; and in any case the authorities do not in terms deal with natural justice. That, however, does not dispose of the matter; a proposition is not necessarily wrong merely because it is not established by the authorities cited. Counsel for the plaintiffs, of course, contended that it was wrong. On the footing that the principles of natural justice do not apply to a company limited by shares but do apply to clubs and trade unions, he said that the right course was to
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add companies limited by guarantee to the second category rather than the first, particularly as in such companies the emphasis is on membership rather than the ownership of a share. In any case, he said, it would be odd if a club, to which the principles of natural justice apply, could be stripped of those principles merely because the club had been turned into a company limited by guarantee.
I do not think that counsel for the plaintiffs is right in these submissions. In the case of a company, whether limited by shares or guarantee, a new legal entity comes into existence, namely, the company; and many of the powers have to be exercised for the benefit of that entity. This distinguishes a company from an ordinary club, which is not a legal entity distinct from its members; and although a trade union, of course, possesses some of the characteristics of corporate personality, it is not a corporation either. The conversion of a club into a limited company, too, is no mere formality, but a change of substance. Where there is corporate personality, the directors or others exercising the powers in question are bound not merely by their duties towards the other members, but also by their duties towards the corporation. These duties may be inconsistent with the observance of natural justice, and accordingly the implication of any term that natural justice should be observed may be excluded. Furthermore, Parliament has provided a generous set of statutory rules governing companies and the rights of members, as contrasted with the exiguous statutory provisions governing trade unions and the even more exiguous provisions governing clubs. Yet again, the authorities cited by counsel for the association although not establishing his proposition, do indicate the extent to which the courts will go in enforcing the provisions of the articles, even where those provisions appear to operate harshly or unjustly. These considerations seem to me to militate against the application of the principles of natural justice in this field.
I turn from that to a case which seems to me to be of a special value in relation to the implication of terms in relation to natural justice. In Russell v Duke of Norfolk, there was a power for the stewards of the Jockey Club to withdraw or suspend a licence ‘in their absolute discretion’. Both Lord Goddard CJ ([1948] 1 All ER at 490,491), and Tucker LJ ([1949] 1 All ER at 114, 115) held that this language made it impossible to imply a term that the rules of natural justice had to be observed. It may indeed be that the courts are ready to imply a term that natural justice is to be observed, even in cases where this cannot be said to be necessary in order to enable the contract to be carried out (see John v Rees ([1969] 2 All ER 274 at 306, 307, [1969] 2 WLR 1294 at 1332, 1333)); but I do not think that the courts will do this in the teeth of sufficient indications that the principles of natural justice are not to apply.
In the present case, my conclusion is that there are indications a-plenty to exclude any implication of the requirements of natural justice. First, as I am concerned with a corporation, there is the duty owed by the council to the corporation to exercise their powers in what they bona fide believe to be the interests of the corporation. The power under art 7 (B) is one which must be exercised thus, and the exercise of this power is one in which the question that may arise is not only whether it is to be exercised, but when. Where, as in the present case, their duty may impel the council to exercise the power with great speed, whereas natural justice would require delay, I think that this indicates that the council is intended to be able to exercise its powers unfettered by natural justice.
Secondly, the cases on companies limited by shares indicate that provisions in the articles of a company for expropriation or expulsion are valid, even though they deprive the member of valuable property rights. Companies limited by guarantee are, in a sense, in a position a fortiori; for the element of expropriation is lacking, at any rate to any appreciable extent. A member who joins does so on the terms of the
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articles, including art 7 (B), so that what he gets is not an absolute right of membership, nor a right of membership until expelled for misconduct, but a right of membership until that membership is terminated by the council acting bona fide in what they believe to be the interests of the association. The terms of the contract which bind the members must at least be of some importance.
Thirdly, the wording of art 7 (B) seems to me to militate against the implied term. True, it lacks any phrase like ‘in their absolute discretion’, such as appeared in Russell v Duke of Norfolk: but it is a wholly unrestricted power, not confined to cases of misconduct, and so on. In other words, if the power had been confined to cases of misconduct or the like, that would have been some indication that the principles of natural justice ought to apply; for since there could be expulsion only if misconduct were established, not only would the machinery of natural justice in making and adjudicating on the charge be readily applicable, but also reputation might well be at stake. It is otherwise where, as here, the power given is absolute in its terms.
Fourthly, the cases in which the principles of natural justice have been held to be applicable have in the main been cases in which what was at stake was liberty, property or a means of livelihood (as in the trade union cases). That does not exhaust the field. Thus in Cohen v National Union of Tailors and Garment Workers, what was in issue was not membership of a trade union but the right to hold office in a trade union; and on motion Plowman J held that the principles of natural justice applied. But I think that one of the elements which points to the applicability of the principles of natural justice is the importance and gravity of what is at stake. The mere membership of the association, involving no real interest in property, and no question of livelihood or reputation, does not seem to me to be prima facie a matter in respect of which there is any strong claim to have the principles of natural justice applied, at any rate on motion.
As I have indicated, one of the more difficult problems of the doctrine of natural justice is to determine what cases fall within its ambit; and despite the extensive citation of authority before me, I certainly cannot say that I have explored every possibility. All that I can say is that I do not consider this to be a case in which the doctrine applies. In saying that I have to some extent been proleptic; for I have borne in mind the second point made by counsel for the association. When one examines the cases cited by counsel for the plaintiffs on the application of natural justice, says counsel for the association, one finds that some are cases in which the rules conferred a discretion which was not absolute but merely exercisable for cause. No case was cited, he said, where the principles of natural justice had been applied to expulsion under a rule conferring an absolute discretion. This distinction is taken in Citrine’s Trade Union Lawf. The rule may provide for expulsion either without restriction, giving an absolute discretion, or it may provide for expulsion only for some stated cause, such as misconduct. The principles of natural justice, which apply where the rule is of the latter type, do not apply where it is of the former type, subject to the possible qualification that if the power is exercised on some stated ground which impeaches the character or conduct of the member and is intended as a penalty for it, he must be given notice and a hearing. It is conceivable that this qualification applies where the ground is not stated but is established by evidence aliunde. It has not been suggested that this qualification applies in the present case, and so I can deal with the primary distinction between an unrestricted power of expulsion and one that is restricted.
Of the cases relied on by counsel for the plaintiffs, I may mention that in Wood v Woad, the power was exercisable ‘if the committee shall at any time deem the conduct of any member suspicious, or that such member is for any other reason
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unworthy of remaining in the society’. Again, in Dawkins v Antrobus, where in fact the court did not interfere, the phrase was ‘conduct of any member … shall … be injurious to the character and interests of the club’. Weinburger v Inglis, discussed in Citrineg, was a case of the exercise not of a judicial power of expulsion but an administrative power of annual re-election. The line between expulsion and non-re-election may be thin; but although some authorities have placed reliance on the views of Lord Birkenhead LC ([1919] AC at 616), and Lord Parmoor ([1919] AC at 637), it seems to me that these are fully countered by the views of Lord Buckmaster ([1919] AC at 621), Lord Atkinson ([1919] AC at 626) and Lord Wrenbury ([1919] AC at 640, 641). These views show, I think, that in such a case the power may be exercised without observing the principles of natural justice.
I do not propose, however, to attempt a comprehensive survey of all the relevant authorities. I readily acknowledge that I have had a sufficiency of them put before me; and all, I think, that I need say is that after considering these authorities, with some others, I have reached the conclusion that there is a substantial body of authority in support of the distinction urged by counsel for the association. There are also, let me say, some authorities the other way. But on the view that I take of this case that does not, I think, affect the result. For this is a motion for interlocutory injunctions, not the trial of the action, and there is a limit to the extent to which on motion it is right to attempt a final resolution of a difficult point of law, enmeshed in a complex of authorities. For the purposes of the motion, I would merely say that I tend towards accepting the distinction. If the discretion conferred is absolute and unfettered, and no charge is made, then I find it difficult to see how there could be any requirement to provide what Lord Hodson in Ridge v Baldwin ([1963] 2 All ER at 114, [1964] AC at 132) regarded as two of the three outstanding features of natural justice, namely, ‘the right to have notice of charges of misconduct’ and ‘the right to be heard in answer to those charges’. But these are deep waters which one day will no doubt be better charted than they are today.
A further point put before me was whether there is any rule of public policy which prevents the principles of natural justice from being ousted by an express term which excludes them. On this, too, some authorities were cited to me; and I see from Citrineh that there are a number of others. Support may be found for either view. I observe that in Citrinei there is the statement that on this point—
‘In Lawlor v Union of Post Office Workers Ungoed-Thomas J studiously avoided adjudicating between the conflicting opinions.’
I propose to follow my brother’s example. For the purposes of this motion I am content to assume that such a term cannot exclude the application of the principals of natural justice. On that footing, I still have to consider whether the case before me is one in which the principles apply at all; only if they do can the question arise whether they have been ousted by an express term. In deciding whether the circumstances are such as to exclude those principles, I do not think that I am required to omit from consideration the language of the articles here in question, and in particular that of art 7 (B); as it seems to me, I ought to consider it in conjunction with all other
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relevant factors. However, if I am required to ignore it, or to ignore art 7 (B), I think that I should still reach the same conclusion.
In the result, then, I consider that on the law this is not a case in which the principles of natural justice have any application. That being so, no question of art 7 (B) being void as being contrary to those principles can arise, nor can there be any implied term that those principles shall apply. I base my decision on the existence of circumstances sufficient to prevent the application of those principles, and in particular on the company being a company limited by guarantee. It follows that in my judgment the injunctions sought must be refused. If I am wrong in that, then I consider that the injunctions should be refused as a matter of discretion. For it is plain that I do not regard the plaintiffs as having shown a strong prima facie case for the existence of the right claimed or that they are likely to succeed: see Harman Pictures NV v Osborne ([1967] 2 All ER 324 at 336, [1967] 1 WLR 723 at 738), per Goff J. Nor do I think that the balance of convenience lies in favour of granting the injunctions. There is evidence of the prospect of serious damage to the association, in the form of loss of valuable support, staff and revenue, if the injunctions are granted; and there is no countervailing evidence on the plaintiffs’ part. Nor can I regard the loss of an opportunity of ‘making a splash’ as being of any great weight. Whatever success the plaintiffs may have at the trial of the action, I do not think that they are entitled to interlocutory relief, and I therefore dismiss the motion.
I cannot part with the case, however, without mentioning one other matter. This is a case of a block expulsion of 302 members, all of whom, I presume, have duly paid their subscription of 2 guineas. I understand that at least one of the 302 has asked for a return of his subscription, only to be met with a refusal based on art 9, which says that he is not entitled to be repaid the subscription or any part of it. Included among the 302 there are probably many who joined only a short while before their expulsion, as in the case of those who joined in October 1969, when the association admitted 227 new members. Of these, there may well be some who, although ‘reasonably suspected of being Scientologists’, in fact have nothing to do with Scientology. Suspicions that are honestly held may yet be wholly unfounded. My enquiry on the matter was met by counsel for the association’s answer that he would advise the association to consider the matter of offering to repay the subscriptions, or part of them, but that it was relevant that the association had been put to great expense by the action of the Scientologists.
Whatever may be the position of avowed Scientologists, I cannot but view with distaste the possibility of the association accepting in October a member who in fact was unconnected with Scientology, taking his 2 guineas from him, expelling him in November and not offering to repay any of the money. Under the articles a member may not be entitled to be repaid anything; but whether in good conscience the association can insist on its right to keep the money is another matter. The expense to which the association has been put is at least in part due to the council having admitted in October over ten times the usual number of members. Had the council not done this, the need for wholesale expulsions would probably never have arisen. However, this matter is not before me for decision, and I say no more than that the reputation of the association is in the hands of its council and members; and to their sober reflections this matter may be consigned.
Motion dismissed.
Solicitors: Lawrence Alkin & Co (for the plaintiffs); Bird & Bird (for the association).
R W Farrin Esq Barrister.
Denyer (suing by his father and next friend) v Charles Skipper & East Ltd
[1970] 2 All ER 382
Categories: CRIMINAL; Health and safety at work
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES AND WINN LJJ AND SIR FREDERIC SELLERS
Hearing Date(s): 22 APRIL 1970
Factory – Cleaning machinery – Young person – ‘Moving part’ – Roller partially rotated for cleaning – Factories Act 1961, s 20.
In the process of cleaning the impression roller and a blanket roller of a lithograph printing machine the main current of the machine was turned off, and when one length of the roller had been cleaned with the cleaning rag it had to be turned some 4–6 inches by means of an inching button to expose a further part for cleaning. When pressing the inching button with his left hand for this purpose, the plaintiff, a youth of 17 employed by the defendants, gave a rub across the roller with his right hand and put his hand too close to the roller, with the result that the cleaning rag was caught, his fingers were dragged in and he lost the tips of the right index and middle fingers.
Held – The defendants were liable to the plaintiff for damages for breach of their statutory duty under s 20a of the Factories Act 1961 not to employ a young person (under 18) on cleaning a part of any machine if the cleaning would expose him to risk of injury from any moving part, because—
(a) the rollers when being inched by the inching button for even the short distance of 4–6 inches were moving parts of the machinery (see p 383 j, p 384 j, and p 385 a, post); Kelly v John Dale Ltd [1964] 2 All ER 497 approved;
(b) the plaintiff was cleaning the rollers at the relevant time although then actually moving them to expose a further part (see p 384 a and j and p 385 a, post);
(c) the breach of statutory duty was a cause of the accident. The default of the plaintiff in not seeing whether the roller had stopped when he was about to clean it was not co-extensive with the fault of the defendants and was not the cause of their breach of statutory duty (although it constituted contributory negligence) (see p 384 d and j and p 385 a, post.
Notes
For the prohibition of cleaning of machinery by young persons, see 17 Halsbury’s Laws (3rd Edn) 79, para 132.
For the Factories Act 1961, s 20, see 13 Halsbury’s Statutes (3rd Edn) 424.
Cases referred to in judgment
Kelly v John Dale Ltd [1964] 2 All ER 497, [1965] 1 QB 185, [1964] 3 WLR 41, Digest (Cont Vol B) 301, 242b.
Appeal
The plaintiff, Michael Charles Denyer, an infant who sued by his father and next friend, appealed against an order of his Honour Judge Lee, made at Basingstoke County Court on 8 August 1969, dismissing the plaintiff’s action for damages for negligence and breach of statutory duty. The facts are set out in the judgment of Davies LJ.
Barry Chedlow QC and SJ Sedley for the plaintiff.
C Fawcett QC and Hugh Carlisle for the defendants.
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22 April 1970. The following judgments were delivered.
DAVIES LJ. This is an appeal by the plaintiff from a judgment of his Honour Judge Lee, given at Basingstoke County Court on 8 August 1969, whereby he dismissed the plaintiff’s claim for damages for personal injuries sustained in an industrial accident while in the employment of the defendants on 13 October 1967. The accident occurred this wise. The plaintiff, who was a young man of 17 at the time (and his age is, of course, of cardinal importance in this case, turning, as it largely does, on the provisions of s 20 of the Factories Act 1961) was employed in the lithograph printing department of the defendants, who, it would appear, are substantial printers. He had been in their employment for something over 12 months, had been indentured to the defendants in January 1967 and had been working in this particular department for some five months before the accident. At the time of the accident he was engaged in cleaning a lithograph printing machine,and he was cleaning it by means of using the inching button. The photographs, I am afraid, are not of any great assistance in this case. But there is an admirable little sketch drawn by the plaintiff himself which really describes his account of the accident. He was cleaning the impression roller or cylinder and a blanket roller or cylinder. The roller had to be turned round for him to clean the different parts of the roller, and the method which he used, according to the evidence (the main current of the machine having been turned off) was to use his cleaning rag, and once one length of the roller had been cleaned he used the inching button to move the roller around some 4–6 inches and then he cleaned the next part, which had thereby become exposed to view. Unfortunately, when he used this inching button at the moment of the accident, having pressed it with his left hand, and having carried his right hand over in order to give a rub across the roller, he put his hand too close to the roller, the rag became caught, his fingers were dragged in, and he lost the tips of the right index and middle fingers. This is as short a description as possible of how the accident occurred.
There was a claim at common law, and it was sought to be established on behalf of the plaintiff at the hearing that the lithograph printing machine was defective. The judge entirely negatived that allegation, and I say no more about it; it is perfectly clear on the evidence that the judge was right.
The main plank in the plaintiff’s case was s 20 of the Factories Act 1961, as I have already said. The material part of that section is in these terms:
‘A … young person [and a ‘young person’ is a person under 18, which the plaintiff was] shall not clean any part of … any machine if the cleaning thereof would expose the … young person to risk of injury from any moving part either of that machine or of any adjacent machinery.’
We were referred in the course of the argument, as was the learned county court judge, to the decision of Winn J in Kelly v John Dale Ltd ([1964] 2 All ER 497 at 503, [1965] 1 QB 185 at 196), where in the course of his judgment Winn J fully discussed the meaning of the phrase ‘moving part’ and clearly set out the reasons why, in his view, ‘moving part’ in s 20 of the Act has an entirely different meaning from that given to the description of a machine being in motion under s 16.
All I desire to say about that decision, with respect, is that I entirely agree with it. I am quite satisfied that these rollers, when being inched by the use of the inching button, were moving parts of the machinery. I am also equally satisfied that there obviously was a risk of injury to anyone cleaning the machine when the rollers were being moved, even such a short distance as 4–6 inches by getting a finger caught in the nip between the rollers. Counsel for the defendants sought to argue to the effect, as I understood it, that, as the plaintiff was not at the moment of his accident actually cleaning any part of the machine, but was merely moving the machine to expose another part of it for cleaning, he could not be said, within the meaning of the section,
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to be cleaning a part of the machine. I am quite unable to appreciate the logic of that suggestion, with all respect to learned counsel. If I am cleaning a motor car and I turn aside to get a fresh bucket of water, or indeed to pick the wash leather out of the bucket of water which I have got, I am quite obviously cleaning the car. I am not taking an interval, any more than the plaintiff was taking an interval from cleaning the machine when he was causing the rollers to move round. I am, therefore, completely satisfied on the evidence here that there was a breach of s 20; and there really was a flagrant breach, since the defendants put the plaintiff to work on cleaning the machine in flat defiance of the provisions of the section. The learned judge, with some little hesitation, came to the same conclusion as to the application of s 20; he held that there was a breach; but he went on to hold that that breach was not a cause, or was not the cause, of the accident, and that the whole cause of the accident was that the plaintiff did not keep his wits about him and by inadvertence got his hand caught in the rollers.
In my view, it is quite impossible for defendants in such circumstances to say that, although they were in breach of their statutory duty, that default did not amount to a cause of the accident. This case is entirely different, in my view, from the kind of case we are all too familiar with of the man who takes a guard off the machine and then gets his hand into it or causes himself some other injury. The default of the plaintiff, which I will examine in a moment or two, was not, in my view, co-extensive with the fault of the defendants. It was not the plaintiff who caused the defendants to be in breach of their statutory duty; it was the defendants themselves, by putting this boy to work there. But that, of course, is not an end of the case. Although the plaintiff was only 17 and although the defendants were, as I have indicated, in breach of their duty, there was a great deal of evidence here that the plaintiff had been instructed, had been supervised and had been watched very often when he was doing this job of cleaning. At the particular moment of the accident he was not being watched, and it may be that it happened so quickly that, even if he had been under direct supervision, the accident would not have been prevented. But the plaintiff, who seems to have been a very honest young man, gave a good deal of evidence, particularly in cross-examination, as to how the accident happened and that evidence, to my mind, establishes that he was guilty of a considerable degree, considering the tuition which he had had, of contributory negligence. He said:
‘Rag did not get caught up before I put my hand down. I put my hand down before cylinder had stopped moving. It had not stopped moving before I put my hand on it. Clearly this was against my instructions … I ought to have looked to see if cylinder had stopped before I moved my hand down from bar … I should have seen cylinder moving below. I thought movement of cylinder would have stopped. I anticipated the stopping.’
Those very honest answers, to my mind, established that a substantial cause of this accident was the plaintiff’s own carelessness and his own disobedience to the instructions which he had received and hitherto had been carrying out.
We have had an argument from counsel for the defendants as to what would be appropriate proportions. These are all matters of first impression, and I do not think that one can get any assistance from the proportions which Winn J on different facts, decided in Kelly’s case ([1964] 2 All ER at 505, [1965] 1 QB at 200). Doing the best I can in the matter I conclude that the proper proportions in this case are 50:50 and that the appeal should be allowed and that the plaintiff should have judgment for half of the agreed sum of damages, which was £159, ie £79 10s. I would allow the appeal accordingly.
WINN LJ. I agree and have nothing to add.
Page 385 of [1970] 2 All ER 382
SIR FREDERIC SELLERS. I also agree.
Appeal allowed. Judgment for plaintiff for £79 10s.
Solicitors: W H Thompson (for the plaintiff); Brain & Brain, Reading (for the defendants).
F A Amies Esq Barrister.
Note
R v Goody
[1970] 2 All ER 385
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, WIDGERY LJ AND BRIDGE J
Hearing Date(s): 7 APRIL 1970
Criminal law – Sentence – Extended term of imprisonment – Principles to be applied when imposing an extended sentence – Criminal Justice Act 1967, ss 37(2), (4), 59.
Notes
For extended sentences, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 932A and for release on licence, see Supplement to 30 ibid, para 1188A.
For the Criminal Justice Act 1967, s 37, see 8 Halsbury’s Statutes (3rd Edn) 600, and for s 59, see 47 ibid (2nd Edn) 1178.
Application
This was an application by Thomas Daniel Goody for leave to appeal against an extended sentence of nine years’ imprisonment imposed on him on 8 October 1969 at Hastings Quarter Sessions after he had pleaded guilty to dishonestly obtaining a motor car by deception, and had asked for nine other cases to be taken into consideration. The facts are set out in the judgment of the court. The hearing of the application was treated as the hearing of the appeal.
The applicant did not appear and was not represented.
7 April 1970. The following judgments were delivered.
LORD PARKER CJ delivered the judgment of the court. At Hastings Quarter Sessions on 8 October 1969, the applicant pleaded guilty to dishonestly obtaining a motor car by deception. Nine further cases having been taken into consideration, he was sentenced to nine years’ imprisonment which was certified as an extended sentence. He now renews his application for leave to appeal after refusal by the single judge. This was an impudent fraud. On 14 August 1969, the applicant stole a brief case in which there was a cheque book. In August, a firm advertised a Mercedes motor car for sale in The Times and thereupon the applicant, using the name of Gee got in contact with the firm land, through the firm, with one of its directors. As a result of 27 August the director went to dinner with the applicant and a woman who pretended to be his wife and, after taking them for a drive in the Mercedes, agreed to sell it to the applicant for £2,400. Thereupon the applicant wrote out a cheque from the stolen cheque book in that sum, handed it to the director, and the director very trustingly accepted it and left the Mercedes car in the applicant’s hands. The applicant was later arrested in Leeds. The nine other offences taken into consideration consisted two of stealing and seven of obtaining goods by deception, the total amount involved being some £580.
Page 386 of [1970] 2 All ER 385
The applicant is 54 years of age and has a considerable record, though not perhaps one of the longest that we see in this court. It began in 1955 when he was fined for larceny as a servant, and after various other larcenies he was in September 1964 sentenced to four years’ imprisonment for four cases of false pretences, two others being taken into consideration involving no less than £4,400. Finally, in June 1967 for larceny of car, larceny and receiving, he being then an absconder from the hostel scheme in a prison, he was sentenced to a consecutive term of two years’ imprisonment, from which he was released in May 1969, the present offences being committed in August. The requisite notices for the imposition of an extended sentence were served and the offences proved. In the result the recorder, as this court thinks quite rightly, certified an extended sentence. This was clearly a case that fell fairly and squarely within the wording of s 37(2)a of the Criminal Justice Act 1967 in that by reason of the applicant’s previous conduct and the likelihood of his committing further offences it was expedient to protect the public from him for a substantial time. The only question is whether nine years, which was the extended sentence certified, is too much in all the circumstances. The court has come to the conclusion that it is. No doubt the recorder was acting as in the old days of preventive detention when eight or nine years was the sentence usually imposed in such circumstances. But under the Criminal Justice Act 1967 the whole object of an extended sentence, and the protection of the public, is to be found not merely in the length of the sentence imposed, but also in the licensing provisions contained in s 59 and the subsequent sections of the Criminal Justice Act 1967. Bearing that in mind, the court thinks on the whole that an extended sentence in the present circumstances of seven years rather than nine is more appropriate. Accordingly the application for leave to appeal will be granted, this will be treated as the hearing of the appeal and an extended sentence of seven years’ imprisonment will be substituted.
Appeal allowed. Sentence varied.
N P Metcalfe Esq Barrister.
Note
Re Idenden (a bankrupt), ex parte the trustee of the property of the bankrupt v Bateman & Co Ltd and another
[1970] 2 All ER 387
Categories: BANKRUPTCY
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 23 FEBRUARY, 23 MARCH, 1 MAY 1970
Bankruptcy – Fraudulent preference – Joinder of parties – Bankrupt’s account guaranteed by surety – Payments to creditor when bankrupt unable to pay debts – Proceedings by trustee in bankruptcy for a declaration of fraudulent preference – Court’s determination might affect surety – Whether surety ought to be joined as party to the proceedings.
Notes
For fraudulent preference in bankruptcy, see 2 Halsbury’s Laws (3rd Edn) 553–561, paras 1098–1112.
For the Bankruptcy Act 1914, ss 1, 44, see 3 Halsbury’s Statutes (3rd Edn) 38, 95.
Motion
A receiving order was made against the bankrupt, a coal and coke merchant, on 13 October 1966 on his own petition. He was adjudged bankrupt on the same day and later died. The statement of affairs showed assets of £197 against debts of £6,836. By motion the trustee in bankruptcy sought a declaration that certain payments made to the first respondent, Bateman & Co Ltd, by the bankrupt when he knew he was unable to pay his debts were fraudulent preferences under ss 1(1)(c) and 44 of the Bankruptcy Act 1914, and thereby void as against the trustee. The bankrupt obtained his supplies from the first respondent on credit and his account was guaranteed by a Mr Ayre (the surety) up to £2,000. On the motion heard on 23 February 1970, Stamp J held that the surety should have been joined as a party to the proceedings as he, as surety, was likely to be directly affected by the decision of the court. The motion was adjourned for the surety to be joined.
N E Wiggins for the trustee in bankruptcy.
R A Morritt for the first respondent.
H J Byrt for the surety.
Cur adv vult
1 May 1970. The following judgment was delivered.
STAMP J read his judgment in which he held that the payments were not fraudulent preferences and continued: Where as here the surety would be directly affected by the determination of the question whether a payment made to the creditor is a fraudulent preference the surety ought, in my judgment, to be made a party to the proceedings. It would be quite contrary to principle to decide the question without giving the surety the opportunity of adducing such evidence as he had and making such submissions as appear to him appropriate.
Solicitors: Braby & Waller (for the trustee in bankruptcy); Pendrigh & Pendrigh, Croydon (for the first respondent); Bolton & Lowe (for the surety).
Richard J Soper Esq Barrister.
Note
Saines v Woodhouse
[1970] 2 All ER 388
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 21, 22 APRIL 1970
Road traffic – Tyres – Single user on road with defective tyres – Whether separate information required in respect of each wheel used with defective tyre – Road Traffic Act 1960, s 64 – Motor Vehicles (Construction and Use) Regulations 1969 (SI 1969 No 321), reg 83(1)(a), (f), (4).
Notes
For requirements concerning maintenance of tyres on motor vehicles, see 33 Halsbury’s Laws (3rd Edn) 484, 485, para 821.
For the Road Traffic Act 1960, s 64, see 40 Halsbury’s Statutes (2nd Edn) 762.
Case stated
This was a case stated by justices for the borough of Colchester in respect of their adjudication as a magistrates’ court, sitting at Colchester on 25 November 1969, dismissing one of two informations preferred by the appellant, Ian Roy Saines, against the respondent, Phillip Andrew Woodhouse, under the Motor Vehicles (Construction and Use) Regulations 1969, reg 83(1), and the Road Traffic Act 1960, s 64. The facts are set out in the judgment of Bean J.
D H Farquharson for the appellant.
The respondent did not appear and was not represented.
22 April 1970. The following judgments were delivered.
BEAN J delivered the first judgment at the invitation of Lord Parker CJ. This is an appeal by way of case stated from an adjudication of justices for the borough of Colchester made by them on 25 November 1969. It raises an interesting point on the Motor Vehicles (Construction and Use) Regulations 1969a and has been well argued by counsel for the appellant. The point arises in this way. On 3 November 1969, two informations were preferred by the appellant against the respondent in respect of the use by the respondent of a motor car on a road on 18 September 1969. The first information alleged faulty treated pattern in the rear nearside tyre, contrary to reg 83(1) (f) of the 1969 regulationsb, and s 64 of the Road Traffic Act 1960. The second information alleged that the rear offside tyre was unsuitable for reasons set out, contrary to reg 83(1) (a) of the 1969 regulations. At the hearing before the justices, the respondent pleaded guilty to the first of those informations and not guilty to the second. The justices accepted the guilty plea and were then advised that both informations related to the same user of the one vehicle. Having heard argument they formed the opinion that only one offence could be committed under reg 83(1) on a single user of a motor vehicle on a road and, since they had convicted the respondent on the first information, the justices dismissed the second information. The question for this court is whether they came to a correct decision.
Section 64c of the Road Traffic Act 1960 provides:
‘(1) The Minister may make regulations generally as to the use of motor vehicles and trailers on road, their construction and equipment and the conditions under which they may be so used … [then there are set out particular
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matters in respect of which regulations may be made] (2) Subject to the provisions of this section, a person—(a) who contravenes or fails to comply with any such regulations as aforesaid; or (b) who uses on a road a motor vehicle or trailer which does not comply with any such regulations or causes or permits the vehicle to be used; shall be liable on summary conviction to a fine not exceeding £50.’
The latest regulations made by the Minister are the Motor Vehicles (Construction and Use) Regulations 1969, Part III of which deals with the use on the roads of motor vehicles and trailers. Regulation 83 covers the condition and maintenance of tyres. Paragraph (1) provides:
‘Save as provided in paragraph (2) of this Regulation, no person shall use or cause or permit to be used on a road any motor vehicle or trailer a wheel of which is fitted with a pneumatic tyre, if … ’
and there follow in sub-paras (a) to (f) six different ways in which a tyre can be so defective that its use on a wheel is prohibited. Regulation 83(3) deals with recut tyres, and reg 83(4) contains the wording of the old appropriate regulations before the details of defects in tyres were introduced. It provides:
‘Without prejudice to paragraphs (1) and (3) of this Regulation, all the tyres of a motor vehicle or trailer shall at all times while the vehicle or trailer is used on a road be maintained in such conditions as to be fit for the use to which the vehicle or trailer is being put, and as to be free from any defect which might in any way cause damage to the surface of the road or danger to persons on or in the vehicle or to other persons using the road.’
It does not need much imagination to see the scope for argument on the interpretation of the words a ‘defect which might in any way cause … danger to persons on or in the vehicle or to other persons using the road’.
The Minister, no doubt to help both the motorist and the police, has now laid down standards which are readily recognisable. It may be that, perhaps by a deeming clause, he could have qualified what is now reg 83(4) and so made it possible to lay a single information for defective tyres in respect of any one user. But he has chosen to set out in the new reg 83(1) the respects in which the tyre on each wheel of a motor vehicle or trailer can be defective. It seems to me, therefore, that if someone uses on the road a motor car on which, say, the tyres of three wheels are defective under reg 83(1), then a separate information has to be laid in respect of each wheel. One sympathises with the broad approach of the justices in this case, who felt that a single user with bad tyres meant a single offence, but just as user with, say, faulty brakes and inefficient windscreen wipers would require the laying of two informations, so a separate information is now required for each wheel that is used with a defective tyre. It follows that the justices were wrong and this appeal must be allowed, and the case remitted to the justices with a direction that they should hear the second information.
BRIDGE J. I agree.
LORD PARKER CJ. I also agree.
Appeal allowed. Case remitted.
Solicitors: Sharpe, Pritchard & Co agents for T Hambrey Jones, Chelmsford (for the appellant).
N P Metcalfe Esq Barrister.
Re Craig (deceased)
Meneces and another v Middleton and others
[1970] 2 All ER 390
Categories: EQUITY
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 2, 3, 4, 5, 8, 9, 10, 11, 12 DECEMBER 1969, 5 FEBRUARY 1970
Equity – Undue influence – Presumption – Employment of secretary/companion by donor – Donor 84 years of age – Gifts totalling £27,000 in 4 1/2 years – Position of trust and confidence – Donor’s total dependence on donee – Requirements to raise presumption of undue influence – Rebuttal of presumption – Consideration of evidence as whole – Whether full, free and informed thought about gifts.
In order to raise the presumption of undue influence there must be proved, first, a gift so substantial (or otherwise of such a nature) that it cannot prima facie be reasonably accounted for on the ground of the ordinary motives on which ordinary men act; secondly, a relationship between donor and donee in which the donor has been confidence and trust in the donee as to place the donee in a position to exercise undue influence over the donor in making such a gift (see p 395 h, post) In deciding whether such a presumption has been rebutted, the court must consider the evidence as a whole, bearing in mind all the circumstances including, in particular, the number and amount of the gifts, the degree of trust and confidence reposed by the donor in the donee in their relationship and such evidence as appears to show that the donor acted only after full, free and informed thought about it (see p 397 g, post). Subject to the requirements to raise the presumption of undue influence, there is no requirement of some special species of evidence to establish that a gift has been obtained by undue influence (see p 409 f, post).
C’s wife died in 1958 leaving her entire estate to C who then worth some £40,000. Two months later, in January 1959, C employed the defendant, Mrs M, as secretary/companion. At that time C was nearly 84 years of age and, according to the general consensus of evidence, was a very gentle, kind and generous old man who was also vulnerable and having led a sheltered life, was in need of and dependent on women’s support. Mrs M was then unemployed and without means, middle aged, an able and competent woman of a managing disposition and strong personality. From the beginning she occupied a position of trust, and in addition to running the house she took a confidential part in running C’s affairs. Within one month of her being employed C gave to Mrs M £1,000 defence bonds and before the end of 1959 he made her gifts of over £13,600 including £7,950 for the purchase of a house and £4,000 cash. In 1960 his gifts of shares to her amounted to over £5,000 and in 1961 to over £8,500. In 1963–64 there were further gifts amounting to over £650. The total value of the gifts between Mrs M’s employment and C’s death in August 1964 was £27,951 5s 8d, his estate having fallen in value to £9,500. At the time that five of the gifts were made at least one third party knew of the gift but C received no free and independent advice from the third party and there was no discussion of the advisability of making the gift. In an action by the residuary legatees of C for an order setting aside the gifts to Mrs M on the ground of undue influence, evidence was adduced that on two occasions Mrs M threatened to leave C if she did not get her own way and on various other occasions she upset him in order to have her own way,
Held – (i) All the gifts complained of were such as to satisfy the requirements to raise the presumption of undue influence, namely, that they could not be accounted for on the ground of the ordinary motives on which ordinary men act and, secondly, that the relationship between C and Mrs M involved such confidence by C in Mrs M
Page 391 of [1970] 2 All ER 390
as to place her in a position to exercise undue influence over him (see p 408 c and d, post).
(ii) Mrs M failed to discharge the onus on her of establishing that the gifts were only made after ‘full, free and informed discussion’ so as to rebut the presumption of undue influence (see p 408 p, post). The gifts would, therefore, be set aside.
Dictum of Lindley LJ in Allcard v Skinner [1886–90] All ER Rep at 98 explained.
Griffiths v Robins (1818) 3 Madd 191, Billage v Southee (1852) 9 Hare 534, Re Coomber [1911] 1 Ch 723, and Tufton v Sperni [1952] 2 TRL 516 considered.
Dictum of Lord Evershed MR in Zamet v Hyman [1961] 3 All ER at 938 followed.
(iii) Even if the case had not fallen within those of relations of trust and confidence in which the presumption of undue influence arose, the amount of the gifts and the circumstances in which they were made proved that were it not for undue influence by Mrs M the gifts would never have been made (see p 409 h, post).
Notes
For undue influence, see 14 Halsbury’s Laws (3rd Edn) 478, para 909, and 17 ibid 672–681, paras 1297–1312, and for cases on the subject, see 12 Digest (Repl) 111–126, 657–786, and 25 ibid 273–287, 813–925.
Cases referred to in judgment
Allcard v Skinner (1887) 36 Ch D 145, [1886–90] All ER Rep 90, 56 LJ Ch 1052, 57 LT 61, 12 Digest (Repl) 111, 659.
Billage v Southee (1852) 9 Hare 534, 21 LJ Ch 472, 68 ER 623, 12 Digest (Repl) 121, 719.
Commber, Re, Coomber v Coomber [1911] 1 Ch 723, 80 LJ Ch 399, 104 LT 517, 12 Digest (Repl) 116, 683.
Griffiths v Robins (1818) 3 Madd 191, 56 ER 480, 25 Digest (Repl) 275, 836.
Huguenin v Baseley (1807) 14 Ves 273, [1803–13] All ER Rep 1, 33 ER 1, 33 ER 526, 12 Digest (Repl) 111, 657.
Inche Noriah v Shaik Allie Bin Omar [1929] AC 127, [1928] All ER Rep 189, 98 LJPC 1, 140 LT 121, 25 Digest (Repl) 278, 851.
Rhodes v Bate (1866) 1 Ch App 252, [1961–73] All ER Rep 805, 35 LJCh 267, 13 LT 778, 12 Digest (Repl) 125, 765.
Tate v Williamson (1886) LR 1 Eq 528, 14 Lt/ 163; affd 2 Ch App 55, 15 LT 549, 12 Digest (Repl) 125, 766.
Tufton v Sperni [1952] 2 TRL 516, [1952] WN 439, 25 Digest (Repl) 287, 925.
Zamet v Hyman [1961] 3 All ER 933, [1961] 1 WLR 1442, Digest (Cont Vol A) 276, 711a.
Cases also cited
Antony v Weerasekera [1953] 1 WLR 1007.
Lewis v Pead (1789) 1 Ves 19.
Action
This was an action commenced by writ issued on 29 March March 1966 by the plaintiffs Major-General Ambrose Trelawney Meneces and Elsie Meneces, his wife, against the defendants (1) Winifred Maud Middleton, (2) Barclays Banks Ltd and (3) John Richardson White Cutler, whereby the plaintiffs claimed as residuary beneficiaries under the will dated 24 February 1960 of Alfred Ernest Beeching Craig, deceased, against Mrs Middleton personally, and against the bank and Mr Cutler as personal representatives of the deceased. By their statement of claim Major-General and Mrs Meneces claimed, inter alia, an order setting aside for undue influence gifts made by the deceased to Mrs Middleton from 1959 until his death on 8 August 1964. By her defence Mrs Middleton claimed that as to the gifts (other than the gifts of the purchase moneys for the house ‘Kennet’) made more than four years before the death of the deceased, the same were made with the knowledge and on
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the advice of the deceased’s solicitor, Mr Guy Leggatt, and with the knowledge and approval of Mr Skinner, his bank manager. As to the remaining gifts, she admitted that the deceased never formally sought or received professional advice in respect thereof but alleged that they were made openly and with the full knowledge of Mr Leggatt, Mr Skinner and Mr Cutler, his stockbroker, none of whom considered him to be in need of independent advice in relation thereto, and in the premises denied that Major-General and Mrs Meneces were entitled to relief. The facts are set out in the judgment.
Jeremiah Harmon QC and C G Heath for Major-General and Mrs Meneces.
H E Francis QC and P J Millett for Mrs Middleton.
Allan Heyman QC and M K I Kennedy for Barclays Bank Ltd and Mr Culter.
Mr Cutler has died since the action was brought.
Cur adv vult
5 February 1970. The following judgments were delivered.
UNGOED-THOMAS J read the following judgment. I am sorry that this judgment has been so long delayed due to circumstances outside my control. It was to have been delivered as arranged before the end of last sitting. I hope that the delay has not caused the parties too much inconvenience.
This action is to set aside gifts on the ground that they were obtained by undue influence. The action is in the estate of the donor, Alfred Ernest Beeching Craig. The plaintiffs are Major-General Meneces, Mr Graighs stepson, and Mrs Meneces his wife. They are the residuary legatees under his will. The defendants are Mrs Middleton, the donee and Barclays Bank Ltd and Mr Cutler, Mr Craig’s personal representatives. Mr Cutler has died since the action was brought.
In 1934 Mr Craig, a bachelor, married Major-General Meneces’s mother, who was and old friend of his. She died in November 1958 at the age of 71. By her will, made under an arrangement with her husband for mutual wills, she left all her estate of nearly £18,000, subject to duty, to Mr Craig. As a result, Mr Craig was worth about £40,000. Two months after his wife’s death, namely, in January 1959, Mr Craig employed Mrs Middleton as a secretary/companion. He was then nearly 84 years of age. Within a month of her being employed Mr Craig gave her £1,000 defence bonds, and before the end of the year he had made her gifts to a total value of over £13,600. In 1960, his gifts to her amounted to over £5,000 and in 1961 to over £8,500. There were further gifts to her amounted to over £650 in 1963 and 1964. The total of these gifts from the time of Mrs Middleton’s engagement in 1959 to Mr Craig’s death in August 1964 was £27,951 5s 8d. He also made her gifts of much smaller amounts from time to time which are not the subject of claim by the plaintiffs. He had to some extent lived on capital in his last years, and the value of his estate had fallen from £40,000 in 1959 to £9,500 in 1964, or to just over £8,000 after payment of duty. It is in these circumstances that this action is brought.
I will deal first with the relevant law on undue influence and then with the facts of the case.
There are two well-established classes of undue influence. The first is where the donee stands in such a fiduciary relation to the donor that a presumption of undue influence arises which prevails unless rebutted by the donee; and secondly, where undue influence is established independently of such a presumption. The law has been the subject of argument in this case. In particular, Mrs Middleton contends that the presumption of undue influence arises only where the relationship imposes on the donee a duty to advise the donor or to take care of the donor in the management and disposal of his property. But Major-General and Mrs Meneces submit that it arises whenever there is a relationship of trust and confidence by the donor in the donee.
The elementary fundamental proposition is that on an issue of undue influence the question, in the words of Lord Eldon LC in Huguenin v Baseley ((1807) 14 Ves 273 at 300, [1803–13] All ER Rep 1 at 13):
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‘… is, not, whether she [that is the donor in that case] knew what she was doing, had done, or proposed to do, but how the intention was produced … ’
I only mention this because it seemed that there might have been some misunderstanding about it earlier in the present dispute. In Allcard v Skinner ((1887) 36 Ch D 145 at 181, [1886–90] All ER Rep 90 at 98) Lindley LJ distinguished the two classes of undue influence. In referring to the class of cases where the presumption of undue influence arose, he said:
‘The second group consists of cases in which the position of the donor to the donee has been such that it has been the duty of the donee to advise the donor, or even to manage his property for him.’
This is the basis of the defendants’ contention that the presumption of undue influence is limited to the position where the donee is under a duty to advise the donor or to take care of the donor in the management and disposal of his property. But Lindley LJ in so identifying the first group merely did so in an analysis ((1887) 36 Ch D at 181, 182, [1886–90] All ER Rep at 98, 99) of the cases which he was there considering. But he then continued as follows ((1887) 36 Ch D at 182, 183, [1886–90] All ER Rep at 99, 100):
‘I have not been able to find any case in which a gift has been set aside on the ground of undue influence which does not fall within one or other or both of the groups above mentioned. Nor can I find any authority which actually covers the present case. But it does not follow that it is not reached by the principle on which the Court has proceeded in dealing with the cases which have already called for decision. They illustrate but do not limit the principle applied to them. [Those are the vital observations.] The principle must be examined. What then is the principle? Is it that it is right and expedient to save persons from the consequences of their own folly? or is it that it is right and expedient to save them from being victimised by other people? In my opinion the doctrine of undue influence is founded upon the second of these two principles. Courts of Equity have never set aside gifts on the ground of the folly, imprudence, or want of foresight on the part of donors. The Courts have always repudiated any such jurisdiction … On the other hand, to protect people from being forced, tricked or misled in any way by others into parting with their property is one of the most legitimate objects of all laws; and the equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud. As no court has ever attempted to define fraud so no Court has ever attempted to define undue influence, which includes one of its many varieties. The undue influence which Courts of Equity endeavour to defeat is the undue influence of one person over another; nor the influence of enthusiasm on the enthusiast who is carried away by it, unless indeed such enthusiasm is itself the result of external undue influence. But the influence of one mind over another is very subtle, and of all influences religious influence is the most dangerous and the most powerful, and to counteract it Courts of Equity have gone very far. They have not shrunk from setting aside gifts made to persons in a position to exercise undue influence over the donors, although there has been no proof of the actual exercise of such influence; and the Courts have done this on the avowed ground of the necessity of going this length in order to protect persons from the exercise of such influence under circumstances which render proof of it impossible. The Courts have required proof of its non-exercise, and, failing that proof, have set aside gifts otherwise unimpeachable.’
So it is quite clear that Lindley LJ was deliberately penetrating beneath the facts
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of the cases which he was considering, the facts of a relationship imposing on the donee the duty of advice and of management of the donor’s property to ascertain the underlying principle and to apply that principle to facts outside the facts of those existing cases.
Billage v Southee was a case where the presumption arose from a doctor and patient relationship. In that case Sir George Turner V-C, thus stated the principle ((1852) 9 Hare at 540):
‘No part of the jurisdiction of the Court is more useful than that which it exercises in watching and controlling transactions between persons standing in a relation of confidence to each other; and in my opinion this part of the jurisdiction of the Court cannot be too freely applied, either as to the persons between whom, or the circumstances in which, it is applied. The jurisdiction is founded on the principle of correcting abuses of confidence, and I shall have no hesitation in saying it ought to be applied, whatever may be the nature of the confidence reposed or the relation of the parties between whom it has subsisted. I take the principle to be one of universal application, and the cases in which the jurisdiction has been exercised—those of trustees and cestui que trust, guardian and ward, attorney and client, surgeon and patient—to be merely instances of the application of the principle.’
In Griffith v Robins, decided as long ago as 1818, a deed of gift was ordered to be delivered up because it was obtained by undue influence. Leach V-C in giving judgment stated ((1818) 3 Madd at 191, 192):
‘It appears that Mary Morris [that was the donor] was upwards of eighty-four years of age; and at the period in question, blind or nearly so, and altogether dependent on the kindness and assistance of others. Thomas Griffiths had married the niece of Mary Morris. She had entire trust and confidence in them; and it may be stated that they were the persons upon whose kindness and assistance she depended. They stood, therefore, in a relation to her, which so much exposed her to their influence that they can maintain no deed of gift from her unless they can establish that it was the result of her own free will, and effected by the intervention of some indifferent person.’
The relationship of the donor and the donee there fell into no such recognised category of relationship as doctor and patient. The relationship of aunt and niece does not of itself raise the presumption, but the presumption nevertheless arose because on the facts of that case the donor imposed such trust and confidence in the donees, and was so dependent on them, that they were in a position to exercise undue influence over her.
However, although the relationship which raises the presumption is not limited to specified particular relationships such as solicitor and client or doctor and patient, yet it does not arise whenever any relationship of trust or confidence exists. In Re Coomber, Coomber v Coomber ([1911] 1 Ch 723 at 728, 729) Fletcher Moulton LJ said:
‘Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations, and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there
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arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. [Then came the summarising observation.] The nature of the fiduciary relation must be such that it justifies the interference.’
In Tufton v Sperni Morris LJ quoted with approval the statement by Sir William Page Wood V-C in Tate v Williamson ((1866) LR 1 Eq 528 at 536, 537) and what the latter called the ‘broad principle’. Morris LJ said ([1952] 2 TLR at 533):
‘” … wherever there exists such a confidence, of whatever character that confidence may be, as enables the person in whom confidence or trust is reposed, to exert influence over the person trusting him, the Court will not allow any transactions between the parties to stand, unless there has been the fullest and fairest explanation and communication of every particular resting in the breast of the one who seeks to establish a contract with the person so trusting him.” The central issue in the case is whether the plaintiff proved that on August 10 and thereafter there was a fiduciary relationship between him and the defendant with the result that the latter had the influence inevitably stemming therefrom.’
Lindley LJ in Allcard v Skinner ((1887) 36 Ch D at 185, [1886–90] All ER Rep at 100, 101) further illuminated the law. He said:
‘Where a gift is made to a person standing in a confidential relation to the donor, the Court will not set aside the gift if of a small amount simply on the ground that the donor had no independent advice. In such a case, some proof of the exercise of the influence of the donee must be given. The mere existence of such influence is not enough in such a case; see the observations of Lord Justice Turner in Rhodes v. Bate [(1866) 1 Ch App 252 at 258, [1861–73] All ER Rep 805 at 809]. But if the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift. So, in a case like this, a distinction might well be made between gifts of capital and gifts of income, and between gifts of moderate amount and gifts of large sums, which a person unfettered by vows and oppressive rules would not be likely to wish to make. In this case the Plaintiff gave away practically all she could, although, having a life interest in another property, she did not reduce herself to a state of poverty.’
So it seems to me on these authorities that the underlying purpose of the Courts of Equity in raising a presumption of undue influence in certain cases is to prevent victimisation by influence over the mind of another in circumstances where proof of the exercise of such influence may be impossible, and that they do so by requiring proof of the removal of that influence.
What has to be proved to raise the presumption of undue influence is first a gift so substantial (or doubtless otherwise of such a nature) that it cannot prima facie be reasonably accounted for on the ground of the ordinary motives on which ordinary men act; and secondly, a relationship between donor and donee in which the donor has such confidence and trust in the donee as to place the donee in a position to exercise undue influence over the donor in making such a gift. This is just plain common sense to which the ordinary man in the street would readily arrive. In order to provide remedies for abuses of relations of trust and confidence where from the nature of the relationship proof of abuse might be difficult, if not impossible, lawyers established a strong foundation for the presumption of undue influence on public
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policy. But the courts have refused, rightly in my respectful opinion, to define either undue influence or such relationships of trust and confidence. To do otherwise would be to assume a power of divination more than human, and might exclude from relief for undue influence cases where such relief should readily be available to serve the purpose of the law. Thus both undue influence and those relationships of trust and confidence which raise the presumption are left, unlimited by definition, wide open for identification on the facts and in all the circumstances of each particular case as it arises. As the law has been developed and become established, the presumption seems to me in general at any rate to amount substantially in practice now to no more than the passing of the onus of proof where the amount (or nature) of the gift and the relationship of trust and confidence would, in the ordinary course of a trial, pass, independently of any special formulation of the raising of the presumption.
What is required to rebut the presumption? The onus of rebutting it is, of course, on the donee. Lord Evershed MR in Zamet v Hyman ([1961] 3 All ER 933 at 938, [1961] 1 WLR 1442 at 1446) thus concisely summarised the onus which passes as:
‘… an onus on the party benefited of proving that the transaction was completed by the other party only after full, free and informed thought about it.’
Earlier cases amplify what is thus summarised. In Re Coomber ([1911] 1 Ch at 730) Fletcher Moulton LJ, in dealing with competent and independent advice, said:
‘All that is necessary is that some independent person, free from any taint of the relationship, or of the consideration of interest which would affect the act, should put clearly before the person what are the nature and the consequences of the act. It is for adult persons of competent mind to decide whether they will do an act, and I do not think that independent and competent advice means independent and competent approval. It simply means that the advice shall be removed entirely from the suspected atmosphere; and that from the clear language of an independent mind, they should know precisely what they are doing.’
In Inche Noriah v Shaik Allie Bin Omar ([1929] AC 127 at 133, [1928] All ER Rep 189 at 192) Lord Hailsham LC quoted Cotton LJ’s words in Allcard v Skinner ((1887) 36 Ch D at 171, [1886– 90] All ER Rep at 93):
‘“In such a case the Court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justify the Court in holding that the gift was the result of a free exercise of the donor’s will.”’
Lord Hailsham LC then observed ([1929] AC at 135, 136, [1928] All ER Rep at 193, 194):
‘But their Lordships are not prepared to accept the view that independent legal advice is the only way in which the presumption can be rebutted; nor are they prepared to affirm that independent legal advice, when given, does not rebut the presumption, unless it be shown that the advice was taken. It is necessary for the donee to prove that the gift was the result of the free exercise of independent will. The most obvious way to prove this is by establishing that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of
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any influence from the donee and with the full appreciation of what he was doing; and in cases where there are no other circumstances this may be the only means by which the donee can rebut the presumption. But the fact to be established is that stated in the judgment already cited of Cotton L.J., and if evidence is given of circumstances sufficient to establish this fact, their Lordships see no reason for disregarding them merely because they do not include independent advice from a lawyer. Nor are their Lordships prepared to lay down what advice must be received in order to satisfy the rule in cases where independent legal advice is relied upon, further than to say that it must be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.
‘In the present case their Lordships do not doubt that Mr. Aitken acted in good faith; but he seems to have received a good deal of his information from the respondent [the donee]; he was not made aware of the material fact that the property which was being given away constituted practically the whole estate of the donor, and he certainly does not seem to have brought home to her mind the consequences to herself of what she was doing, or the fact that she could more prudently, and equally effectively, have benefited the donee without undue risk to herself by retaining the property in her own possession during her life and bestowing it upon him by her will. In their Lordships’ view the facts proved by the respondent are not sufficient to rebut the presumption of undue influence which is raised by the relationship proved to have been in existence between the parties; and they regard it as most important from the point of view of public policy to maintain the rule of law which has been laid down and to insist that a gift made under circumstances which give rise to the presumption must be set aside unless the donee is able to satisfy the Court of facts sufficient to rebut the presumption.’
In Billage v Southee ((1852) 9 Hare 534 at 540) Sir George Turner V-C dealt with the suggestion that the donor intended to be liberal. He said:
‘It is said that he intended to be liberal, and that this Court would not prevent him from being so: and no doubt it would not if such were his intention; but intention imports knowledge, and liberality imports the absence of influence … ’
In any trial the onus of proof, in a sense, may be considered as passing back and forth between one side and the other as the evidence may appear from time to time to tip the scales one way or the other. But at the end of the day, when the evidence is closed, what has to be considered is the evidence as a whole, bearing in mind all the circumstances, including, in particular, the number and amount of the gifts, the kind of degree of trust and confidence reposed by the donor in the donee in their relationship and such evidence as appears to show that the donor acted only after ‘full, free and informed thought about it’.
I come now to the facts in this case, and I will refer first to the principal witnesses. The principal witnesses for the plaintiffs were the plaintiff Major-General Meneces, Dr Gabb and Mrs Polly. Major-General Meneces is a doctor and he attained his high rank in the Royal Army Medical Corps. He was rightly accepted by the defendant’s counsel as ‘of the highest probity and integrity’. He was scrupulously truthful. Inevitably, after the passage of years his recollection was not always clear, although in his anxiety to avoid any possibility of his recollection being mistaken he perhaps on occasion gave the impression of being less convincing than his recollection merited. Dr Gabb, a general practitioner, was Mr Craig’s doctor from 1960 until his death. He was a very helpful and reliable witness, and I shall refer to his
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evidence in some detail. Mrs Polly was a daily domestic worker for Mr and Mrs Craig from the spring of 1958 until Mrs Craig’s death in the following November, and then for Mr Craig alone until he moved from his home at St Leonard’s to Cooden late in 1959. She was brought to court on subpoena and seemed to me somewhat reluctant at first to be involved in the case and a little overawed in the unaccustomed atmosphere of the court; but as the case proceeded her attention became directed to the evidence and she got over these initial difficulties. She was completely truthful, and on occasion when her evidence was called in question she was obviously genuinely appalled at the suggestion that she might not be speaking the truth. She was a simple, unsophisticated, practical, down-to-earth witness, not given to speculation and imaginings, who stated carefully and factually what she heard and saw. She was remarkably objective and fair-minded. She was a reliable and valuable witness. There were direct conflicts of evidence between her and Mrs Middleton, and where there was such conflict I have no hesitation in preferring her evidence.
The plaintiffs’ witnesses also included the plaintiff, Mrs Meneces, and Mrs Kite. It appeared almost at once that Mrs Meneces was, unhappily, not well enough to give evidence, and that she had only been called because the effect of her deterioration in health between the time when she made her proof of evidence and the trial had not been fully appreciated. So by common consent such little evidence as she gave was rightly disregarded. Mrs Kite was an old friend of Mr Craig’s who formed an unfavourable view of Mrs Middleton, and, as she was an honourable and forthright lady who did not mince her worlds, she was apt to give perhaps an exaggerated impression of lack of objectivity in arriving at her view. But, despite this lack of objectivity affecting her opinions and impressions, she was truthful and her statements of fact were generally reliable.
The principal witnesses for the defence were Mrs Middleton herself, Mr Leggatt and Mr Skinner. Mrs Middleton is a middle-aged woman at the height of her powers. She is markedly able and competent, of a managing disposition and strong personality. Indeed, in the early stages of her evidence she was inclined to conduct her own examination. She is physically and mentally tough and powerful, and combines these formidable qualities with a charming manner. It is perfectly clear, and not disputed, that she looked after Mr Craig’s physical well-being competently and successfully, and contributed by her companionship to ease his old age. It is not at all surprising that there were those, who saw little of her or accepted her as she socially appeared to them, who approved of her and of her care of Mr Craig, as appeared from their evidence adduced before me. On occasion her answers were fencing, prevaricating, misleading and quite unacceptable. On occasion, too, there appeared a bitterness which led her when in difficulty to make utterly unjustifiable allegations, as when she said that Major-General Meneces was extremely unkind to Mr Craig and told him that if it had not been for Mrs Craig making homes for Mr Craig, of which they had had many, she would not have had a stroke and died. This accusation outraged Major-General Meneces and he strongly repudiated it, and counsel for Mrs Middleton, rightly accepting Major-General Meneces as ‘of the highest probity and integrity’, rightly did not rely on it in any way. I find this understandable and said for, as will appear when I come to the evidence, Mrs Middleton lacked the security of upbringing in a happy home, and she had to make her own way in life. But my task is to decide whether the gifts complained of were made under her undue influence, and, therefore, inevitably how far her evidence before me is reliable.
Mr Leggatt was an honest witness. He was admitted as a solicitor in 1933; he spent a number of years in local government. In the light of this case it may have been unfortunate that he was on occasion solicitor to Mr Craig and on occasion to Mrs Middleton too; and I will deal with the difficulties that arose when I come to consider the evidence in detail. Mr Skinner was from 1955 to the end of 1962 the
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clerk in charge of the St Leonard’s Silverhill Branch of Barclays Bank Ltd where Mr Craig was a customer from September 1957. He was a very reliable and helpful witness—honest, objective, exact and with a good memory.
I will deal now with Mr Craig’s health and character. The plaintiffs do not found their case on any mental ailment of Mr Craig or on his complete incapacity to manage his own affairs. But, subject to this, Mr Craig’s health, as well as his character, is material in assessing his relationship with Mrs Middleton and his dependence on her. The most valuable evidence on Mr Craig’s health is that of Dr Gabb the general practitioner, who attended him from May 1959 until his death. Until 1963 Dr Gabb visited him regularly once a month, and thereafter more frequently. He did not have clinical notes about Mr Craig but he was able to refresh his memory by referring to his answers given to a questionnaire in 1964 when he still had his clinical notes available. To quote Dr Gabb, Mr Craig was not ‘gag’ at all. The picture is of a very gentle, dependent and vulnerable old man, deteriorating as he aged and eventually dying of that deterioration. Part of my notes of Dr Gabb’s evidence read:
‘Mr. Craig was very elderly, weak, a little vacant, courteous, introspective, depressed at times—a gentle old man. His memory was not worse than many people of that age. He suffered from thickening of arteries and blood pressure and mild congested failure controlled by drugs. He had had a prostate removed and there was evidence that it was malignant, but if the diagnosis was correct he did well and he took drugs for that. I do not think those drugs and afflictions for which they were given affected him mentally. He worried very much over health.’
Again in cross-examination he said:
‘It is not true that for a man of his age he was remarkably fit and active. He had many disabilities. Generally speaking, he was a happy man up to a point; mildly depressed at times; just debility.’
Mr Craig’s doctor before Dr Gabb was a Dr Broadribb, who had attended Mrs Craig as well as Mr Craig. The change was made because when called in on one occasion early in 1959 Dr Broadribb said that Mr Craig’s trouble was senility. Mrs Middleton resented this, and her evidence was that Mr Craig knew of it and resented it too. At any rate, the evidence is clear that that was Dr Broadribb’s view. In such circumstances of deterioration it is not surprising that Dr Gabb found difficulty in saying now at what point Mr Craig ceased to be capable of managing his own affairs, whether in detail, or, more stringently, even broadly, or when he had reached a stage of not knowing what he was doing. He said that even from 1959 he did not think him capable of managing his own affairs in detail; and he could not say with confidence that he was capable of managing his own affairs in April 1961; but that he thought that if Mr Craig made a gift to Mrs Middleton in 1961 he would have known what he was doing, and that if he made such gift in 1960 he thought that he would have made it because he wanted to make it. This evidence was not directed to how Mr Craig’s intention was produced. He was sufficiently concerned about Mr Craig moving house from St Leonard’s to Cooden in 1959, and Mrs Middleton’s influence over Mr Craig, to take steps to satisfy himself that Mr Craig wanted to go there.
The rest of the evidence as to Mr Craig’s health and character was generally in keeping which the evidence of Dr Gabb. Major-General Meneces said that in 1959 Mr Craig’s judgment was impaired, but he could not say to what degree. Mr Mace, a local bank official who knew Mr Craig up to the end of 1959, said that he would have thought that he was in possession of his mind and faculties when he knew him. Mrs Polly, who knew Mr Craig from March 1958 and worked for him until he went to Cooden early in November 1959, said that during this period he became less alert, a bit forgetful and came to rely more on things being done for him; that his
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eyesight got very bad, and that he read the newspaper through a magnifying glass. Mr Skinner was concerned that authorities given by Mr Craig in 1959 to Mrs Middleton to draw on his bank account should not be invalidated by Mr Craig’s mental incapacity, and he remained satisfied about this. But he did not have Dr Gabb’s qualifications to estimate this, and no such advantageous regular opportunities, at any rate, after the move to Cooden.
Mrs Rosewarne, Mr Craig’s sister, who was not on meeting terms with Mrs Meneces and whose evidence was admitted under the Civil Evidence Act 1968, and was not cross-examined, said that up to the time of his death Mr Craig was in full possession of his faculties. But I cannot attach weight to this evidence against other evidence, particularly that of Dr Gabb. And the evidence of General and Mrs Thomas, that Mr Craig had all his wits about him on the occasion of their visit to him in September 1961, also admitted under the Civil Evidence Act 1968 without cross-examination, cannot prevail against Dr Gabb’s detailed, careful and professional opinion insofar as it does not accord with it. Mrs Middleton placed Mr Craig’s deterioration from Christmas 1962, when, she said, Mr Craig found that he could not walk and the doctor was called in. But this does not accord with Dr Gabb’s evidence. Dr Gabb certainly attributed no such significance to any such occurrence.
There was a general consensus about the kind of person that Mr Craig was— a very gentle, kind and generous old man who had led a sheltered life with servants in the house, and he was throughout in need of and dependent on women’s support for his comforts. He disliked being alone at any time, and after his wife’s death even got Mr Mace, the bank official, to sleep at his house. He belonged to a generation and a class which had been brought up in comfort, but with strict codes. He had been a chartered accountant and had the orderliness and precision expected of that profession. He resented any interference or intrusion into his affairs, although he would take advice from such as he might choose to advise him. This double aspect of dependence and independence was perhaps best expressed by Mr Skinner. He said that he was a placid man who would do anything for a quiet life, but that if he made up his mind about anything he would stick his toes right in and you could not move him. Mrs Middleton described him as ‘very old, very selfish, very demanding, very generous.' She was the only one who found him selfish.
I come now to Mrs Middleton’s engagement and relationship with Mr Craig in general, apart from those gifts which are the subject of this action, and I will then deal with those gifts.
Mrs Middleton was born in 1916 and, as she said: ‘I had no father’, and her mother never wanted to see her. She became a Birmingham manufacturer’s personal secretary for seven years, and she married a man in the Royal Air Force in 1940 when she was 24. He remained in this country throughout the war, and she got jobs near her husband when she could. In 1944 she got a job at Newmarket. In 1945, her husband was demobilised, and Mrs Middleton said that he returned to his mother because he was attached to her apron strings and his mother wanted him back. She had various jobs at Newmarket, mainly as a hotel receptionist, until 1953, and from then on she had several jobs on the south coast. In 1956, there was a divorce between her and her husband. She was unemployed and without means when in 1959 she answered a newspaper advertisement by Mr Craig for a secretary/companion. On Wednesday 7 January 1959, she called on Mr Craig. She said that he said the job was only temporary as he intended going to an hotel as a permanent guest as soon as he could sell the house and his wife’s clothes and the furniture; and that he thought that an ideal way of living. No other witness who knew Mr Craig gave such evidence, and it hardly fits in with the picture of the home-loving man which the evidence gave. He said that the remuneration would be £4 a week and board, and Mrs Middleton accepted the job. However, she got a letter from a Newmarket hotel suggesting an interview for a job there as a receptionist. So on Friday 9 January, she went for an interview and was offered the job at £9 a week and
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gratuities. She said that she had accepted a job with Mr Craig and that she would discuss it with him. When she saw Mr Craig on the Saturday he said he was very upset that she preferred to go to ‘the racing fraternity’ and asked her to change her mind. Mrs Middleton added that Mr Craig said that she was free to go, but that he would not take ‘No’ for an answer. She said Mr Craig added that he would give her an annuity, but that she was indignant to think that he could attract her from the job by any annuity; and she said she was not interested in it, but would think over what to do. Mrs Polly corroborated that Mr Craig was very upset afterwards and was in tears. It is clear that Mrs Middleton realised that Mr Craig was very upset. She said that on Sunday, the next day, she agreed to go to him, but not to have the annuity.
This evidence about an annuity, which is a recurring theme in her evidence, seemed odd when she very soon had no hesitation in accepting large sums from him, which she described as ‘very much nicer’. And despite her evidence about the annuity, she decided to take the job at an admittedly low wage when she had available a job which she regarded as substantially more remunerative. But from the beginning, or at any rate from very early days of her employment, Mr Craig, in addition to Mrs Middleton’s salary, paid her 25s a week for a bed-sittingroom which she had, and which she kept available for herself throughout, and premiums at the rate of 36s a week on an endowment policy which she had, making a total with her salary of £7 1s a week. The explanation that she gave for her decision on the Sunday, as I noted it, was this:
‘I changed my mind because he was charming and a gentleman and he needed someone. I am not a religious person, and it was the only good thing I had ever come across and I thought it worth while doing.’
This is an appealing explanation, but, as I saw and heard her give it, I found it quite unconvincing; although I have no doubt that she had a pretty accurate impression of Mr Craig’s character and needs. After a little further hesitation she started her job on Tuesday 13 January. At the end of a week, however, she said that she promised to stay permanently because Mr Craig asked her to. So at this early stage any contemplated move by Mr Craig into an hotel disappeared.
Mrs Middleton said that from the first he called her ‘Sally’, though not in front of people, because, she explained, ‘the old school’ do not talk like that. Mrs Polly gave evidence that Mrs Middleton called Mr Craig ‘Ernest’. On the other hand, Mrs Middleton said that she called him ‘Mr Craig’, and after a long time ‘Craigie’, but never ‘Ernest’, and explained this by saying that he did not like being called ‘Ernest’. But his friends and relations called him ‘Ernest’, he signed letters ‘Ernest’, and in his diary he referred to himself as ‘E’. All this Mrs Middleton said was exceptional and she was the rule with regard to using the name Ernest. This evidence of hers seems quite unacceptable.
Certainly Mr Craig’s friends of 50 years, Mr and Mrs Kite, who lived nearby at Eastbourne, and Major-General Meneces felt that Mrs Middleton was estranging Mr Craig from them; the only old friend who remained in close touch with him was an old gentleman of his own age who visited him weekly, although other relations less close to Mr Craig did occasionally visit him and admired Mrs Middleton’s care of him. Mrs Rosewarne reported to Mrs Middleton and Mr Craig some disapproval of him in a conversation between Mrs Kite and Mrs Meneces. The evidence about this has varied in important respects and is vague in material particulars; but as a result Mrs Middleton and Mr Craig in conversation with Major-General Meneces accused Mrs Meneces of searching through Mr Craig’s cheque stubs. Certainly after Mrs Middleton’s cross-examination little basis appeared for such an accusation. Major-General Meneces was appealed at the accusation and most strongly repudiated and resented it. It contributed to some cooling of the relationship between the Menecess and the Kites, on the one hand, and Mr Craig, on the other
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hand, although Major-General Meneces and Mr Craig afterwards continued to meet on terms of affection. Mrs Kite said that she telephoned Mr Craig regularly every Sunday morning at his request and at a regular hour, but that Mrs Middleton kept her waiting up to a quarter of an hour before Mr Craig came to the telephone. Mrs Middleton explained this by Mr Craig’s difficulty of getting to the telephone on account of his debility. But this, again, I find quite unconvincing. Mrs Middleton said that when they moved to the house Kennet at Cooden in November 1959, ‘we decided to make a complete change and have new friends’. Far and away the most frequent visitor at Kennet was a Mr Wells, who visited every Sunday morning and once or twice a week and whenever Mrs Middleton wanted him in an emergency. He was friend of long-standing of Mrs Middleton and only met Mr Craig through her. Mrs Middleton when pressed further about visitors being limited said that Mr Craig did not want visitors.
Mrs Middleton clearly occupied a position of trust from the start, and her status and its confidential nature rapidly increased. This covered not only the running of the house, but also a considerable and confidential part in running Mr Craig’s business affairs. She opened all his letters and read them. She at first typed his letters from dictation, and later composed them. She was entrusted with the disposal of Mrs Craig’s clothes and jewellery, and it was in accordance with her suggestions that they were distributed. She was authorised to draw on Mr Craig’s account, and even to overdraw on it. She found Kennet and negotiated its price, and she instructed and dealt with the builders who attended to it. She fixed the price at which the St Leonard’s house was to be sold and chose and instructed the estate agents. Mr Leggatt’s firm communicated through her about Mr Craig’s income tax, and she took to Mr Leggatt instructions about Mr Craig’s will, which she put in draft form, to which she had added a gift in blank form of the chattels at Kennet, of which she became legatee. She attended shareholders’ meetings on behalf of Mr Craig. She said: ‘Stocks and shares were our hobby. We just thought of nothing else.' Later she added: ‘I kept all his cheques for sentimental value.' She became not only ‘the lady of the house’, as she recognised, but, in the words of counsel for Major-General and Mrs Meneces, ‘Mr Craig’s amanuensis and woman of business.' I am satisfied that there was nothing of his affairs which he did not discuss with her and for which he did not rely on her for assistance and, more, cooperation. As Mrs Middleton herself said in cross-examination: ‘He could not have done without me in relation to anything.’
Instances of her influence on Mr Craig and its exercise was the subject of illuminating conflict of evidence between Mrs Middleton and Mrs Polly. Mrs Polly said that on one occasion when in the kitchen she heard Mr Craig and Mrs Middleton arguing in the dining room. When it was put to Mrs Polly that she could not hear them from the kitchen she explained that the dining room was across a short passage from the kitchen, and that the kitchen door was partly open. When it was put to her that she could not know that they were arguing she replied: ‘By the tone of their voices you can tell when people are arguing, can’t you?’ She said that Mrs Middleton came in the kitchen and said that Ambrose (that is Major-General Meneces’s Christain name) ‘wants the tea-set and he is not to have it’. She explained that it was a silver tea-set which had belonged to Mrs Craig, Major-General Meneces’s mother. It was also put to Mrs Polly that the word ‘Ambrose’ was not used. Mrs Polly was quite certain about that. Mrs Middleton swore positively and repeatedly that she never used the word ‘Ambrose’ of the Major-General, and that she spoke and wrote of him as Major-General. But in Mr Craig’s diary, in which she and Mr Craig made entries, there were entries by her referring to the Major-General as ‘Ambrose’. She could only explain them as ‘a slip of the pen’. There are also references in the diary in Mrs Middleton’s writing to Mrs Meneces as ‘Elsie’. Mrs Polly added that Mrs Middleton said that she would marry Mr Craig for his name so that Ambrose should not have the tea service. Mrs Middleton denied saying this, but she said that
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she would have married him if he had asked her. She was sufficiently riled against the Meneces to refer to them in the diary as ‘Mr and Mrs Meneces’. Nor is it inconceivable that, if Mrs Middleton was sufficiently roused, she acted as Mrs Polly said. I certainly prefer the evidence of Mrs Polly to that of Mrs Middleton.
Mrs Polly said that Mrs Middleton used to upset Mr Craig to get her own way. More particularly, she referred to occasions on which she said Mrs Middleton threatened Mr Craig to leave him to get her own way with him. She said that she first heard such a threat in the dining room during the first months of Mrs Middleton’s employment, when Mrs Middleton said that she was not going to have wages but a monthly bonus of £50, and that Mrs Middleton came out in the kitchen and repeated this to her. There appears to be confusion here about the £50 bonus. Mrs Middleton was not paid at that rate, at any rate, throughout 1959, although she did receive both in April and in May of that year a payment of £50 which was unexplained (in addition to two payments of £50 each for a holiday in London and £100 to make investments, all in May) and a change was made from the payment for her services being weekly to their being made at the end of the year. The relevance of this evidence lies, however, in the threat to leave if Mr Craig did not agree to what Mrs Middleton wanted, and I am satisfied that such a threat was made. The second occasion was before Mr Craig and Mrs Middleton went in June 1959 on holiday to Brighton. Mrs Polly heard no threat on that occasion, but Mr Craig told her that if he did not go to Brighton Mrs Middleton was going to leave, and he was going to keep Mrs Middleton with him. And it is Mrs Middleton’s own evidence that Mr Craig normally went to Brighton in November, which was the time that he preferred there, but that on this occasion he went in June. He went to an hotel which she found. It certainly would not be surprising that Brighton in November would be more congenial to Mr Craig and Brighton in June to Mrs Middleton. But Mrs Middleton said that Mr Craig on this occasion wanted to go in June. At Brighton in June a photograph was taken of Mr Craig and Mrs Middleton with a stuffed donkey and a huge bottle of Guinness—a photograph which does not accord with the impression I have of the kind of man Mr Craig was. Mr Craig was anxious that it should not be shown to the Kites. And Mr Craig, in addition to paying the bill for the hotel en pension cashed a cheque for £250. Mrs, Middleton said: ‘We obviously spent it. I have no explanation whatsoever of this.' The whole holiday certainly smacks much more of Mrs Middleton than of Mr Craig.
On both of these occasions Mrs Polly said that Mrs Middleton took her suitcases out of the bedroom where she kept them and put them on the floor in the work-room where Mr Craig could see them when he went to his study, and she inferred that Mrs Middleton put them there to show that she was leaving if she did not get her own way; and that Mr Craig was upset when he saw them there. Mrs Middleton said that her suitcases were always kept in the work-room. She acknowledged that Mrs Polly cleaned the work-room and was in and out of it every day. Mrs Polly said that she had no grudge against Mrs Middleton; and Mrs Middleton said Mrs Polly liked her to the end, and she liked Mrs Polly: ‘We were the greatest of friends’, she said. But she said that this evidence about threats to leave was ‘pure lies’. She at first said that Mrs Polly made this up, and then that Mrs Polly had been approached by Major-General Meneces to strengthen his case. Later, when pressed, she said that Major-General Meneces would not do such a thing, but someone must have approached Mrs Polly. She said that she knew it was a crime to get someone to swear falsely. Finally, she said that Mrs Polly could not have imagined what she said, and somebody must have said something to her. I accept Mrs Polly’s evidence.
A pathetic picture of Mr Craig’s relations with Mrs Middleton after the move to the house Kennet, at Cooden, a gift by Mr Craig to Mrs Middleton, appears from Mrs Middleton’s cross-examination. When it came to filling in some government form Mr Craig was entered as ‘lodger’, and this Mrs Middleton said was ‘horrible’ for him. And she added: ‘He did at one time suggest entering as “paying guest”,
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but I would not hear of it’, and so he continued to be entered as ‘lodger’. When it was put to Mrs Middleton that Mr Craig was entirely at her mercy, she replied: ‘I do not think he was entirely at my mercy.' I, for my part, do.
I come now to the gifts complained of. Mrs Middleton at different times gave different reasons for these gifts: that Mr Craig wanted to keep her and feared she might leave; that they would be compensation for the annuity which Mr Craig had at the time of her engagement talked of buying; that they were made because he could not afford a larger salary; and because she had not taken a better paid job. No other witness can speak directly to the reasons for the gifts. The reasons were confined within the confidence encasing Mr Craig and Mrs Middleton. Apart from the professional persons who had to know in professional confidence of the gifts, no one even knew of their existence before they were made, not even Mr Craig’s oldest friends. Mrs Meneces only discovered them from enquiries made because of the substantial fall in Mr Craig’s estate since his wife’s death. The reason Mrs Middleton gave for this secrecy was that the others would be jealous—which may be some indication that she was perfectly well aware of the unusual nature of the gifts.
The first gift was of £1,000 defence bonds on 7 February 1959. Mrs Middleton said that this was given because Mr Craig wanted to buy an annuity, and he said he would think of another way to make the gift. So, she said, Mr Craig asked her to find out all about defence bonds, which she did. She brought a purchase form from the Post Office to Mr Craig. Mrs Middleton went with Mr Craig to the Post Office to get the bonds, and Mr Craig signed the cheque for them, as for all the other gifts. The only person who knew of this purchase was the postmistress.
In August came the purchase of the house Kennet. It originated in Mrs Middleton’s friend, Mr Wells, telephoning her to say that it was for sale— the house which she said Mr Wells had always liked and called his ‘dream house’. So Mr Wells and Mrs Middleton went to look at it together from outside. Mrs Middleton then mentioned to Mr Craig that Kennet was for sale, and told him it was ‘marvellous’. Mr Craig had contemplated moving to a bungalow before his wife’s death, but the idea of moving had apparently been abandoned, and Mrs Middleton said that he never mentioned selling the St Leonard’s house until after Kennet had been purchased. So it was the discovery that Kennet was for sale which originated the purchase of another house, which in turn led to the sale of the St Leonard’s house. Mrs Middleton made arrangements for Mr Craig and herself to inspect Kennet. Mrs Middleton’s account is that when returning in the train from their inspection Mr Craig said: ‘Do you like it as much as I do?’ She said: ‘I love it.' He then said: ‘You can have it.' Her evidence was that this was ‘a bombshell’. Mrs Middleton then got in touch with the estate agents and Mr Leggatt. Mrs Middleton said that she and Mr Craig visited the estate agents and looked for other cheaper houses—though why they should look at other houses if the objective was not just some house, but Kennet, which she said she had already been given, was not explained. Mrs Middleton negotiated about the price. She said that she succeeded in getting the furniture included for the price asked because she knew the owner, a race-horse trainer at Newmarket; although in cross-examination she admitted, that she did not mention that she knew the Newmarket owner until after the offer had been accepted. On 13 August 1959, Mr Craig signed a cheque for a deposit of £795 Which he gave to Mrs Middleton. Mr Craig told her to go ahead with the purchase, and Mrs Middleton instructed Mr Leggatt. On 11 September, Mr Craig signed a cheque for £7,155, the balance of the purchase money, in favour of the vendor’s and purchaser’s solicitors’ and on 111th September 1959 Mrs Middleton signed the contract. Later Mr Craig gave Mrs Middleton a cheque for £251 6s 6d for costs and stamp duty, which was paid on 12 October. On 6 November, Mr Craig and Mrs Middleton moved from St Leonard’s to Kenner at Cooden.
In addition to the evidence of Mrs Middleton we have some evidence from four others on the purchase of Kennet: Dr Gabb, Mrs Polly, Mr Skinner and Mr Leggatt.
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Dr Gabb said that at some time, but he could not say when, he learned that the house was being bought in Mrs Middleton’s name. He was told that a lawyer was looking after things, but forgot by whom he was told this. But he was concerned from a medical point of view, as Mr Craig’s doctor, whether Mr Craig really wanted to move. He said that Mr Craig had second thoughts about the move; and this agreed with Mrs Polly’s evidence, that just before the move Mr Craig mentioned it to her and said that he was not very keen on going, but that Mrs Middleton thought it would be best. Dr Gabb said that he knew that Mrs Middleton was in favour of going to Kennet; that he had the impression from Mrs Middleton and Mr Craig that Mrs Middleton was very eager to go there; that he was satisfied eventually that Mr Craig wanted to move there, but he did not know if Mrs Middleton had so persuaded him.
Mr Skinner said that he agreed at Mr Craig’s request to provide bridging finance for the purchase of Kennet pending the sale of the St Leonard’s property. He was surprised that Mr Craig was buying Kennet for Mrs Middleton in view of the short time that Mrs Middleton had been with Mr Craig. He described Mr Craig and Mrs Middleton as inseparable, and he was sufficiently perturbed to take advantage of an opportunity to speak to Mr Craig alone to ask him if he was sure he was doing the right thing. Mr Craig resented this and told him that it was a private and personal matter. Not surprisingly, Mr Skinner never courted such a rebuff again. Mr Leggatt was told by Mrs Middleton that Mr Craig was providing the purchase money, and he said: ‘I was naturally surprised at that.' And he added: ‘I did nothing about it.' He said he was satisfied that Mr Craig was doing it of his own free will, but that he had no specific reason for being so satisfied apart from his knowledge, such as it was, of the parties. He could not recollect seeing Mr Craig during the transaction and in his proof he said that he did not think he had so seen him. He recognised Mrs Middleton as his client in the purchase, and he said that improper pressure never occurred to him, nor did the desirability of Mr Craig having independent advice.
Mrs Middleton at one stage said that Mr Craig told Mr Cutler before the purchase that the was buying Kennet, but, although her evidence was somewhat contradictory, I understand the upshot of it to be that he did learn that it was bought for Mrs Middleton, but not until after the purchase had been completed. Mrs Middleton said that Mr Wells was also told by her of the purchase. But there is no suggestion of independent advice by Mr Wells to Mr Craig, or that Mr Craig even knew that Mrs Middleton had told Mr Wells. I have not had the advantage of any evidence from Mr Wells.
At Kennet Mr Craig paid the rates and outgoings and household expenses, as at St Leonard’s.
Whilst the gift of Kennet was proceeding, Mr Craig on2 September 1959 made Mrs Middleton a quite separate gift of 154 ordinary shares in Marks and Spencer to the value of £473 11s. Mrs Middleton said there was a rights or bonus issue—probably a bonus issue—of these shares, and that the letter of allotment came through the post, and that Mr Craig said to her: ‘You can have them, my dear’, and he signed the renunciation in her favour.
Then in the next month, on 27 November, Mr Craig gave Mrs Middleton £4,000 cash. Aspects of this gift are illuminating. On 11 September, Mr Craig’s bank account was debited £7,155 for the purchase of Kennet, and because of this the account became overdrawn by £6,472. On 19 September, Mr Craig’s brokers paid into the account £1,072, and on 7th October £4,240, and the overdraft on 7th October was down to £1,132. By that time the St Leonard’s house had been sold, and payment of its proceeds of sale amounting to approximately £3,750 was expected—enough to put the account about £2,650 in credit. Mrs Middleton said that she must have known, and it must have been obvious, that there would shortly be a credit balance in the account. On 23 October, however, when the overdraft
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was just over £1,400, Mr Craig wrote personally to Mr Cutler for advice on selling investments, ‘as I still have an overdraft at the bank’ and ‘I want to raise about £2,000 to reduce the bank overdraft’. This is open to the comment that it was strange that a chartered accountant, as precise as Mr Craig was said to be, should refer to £2,000 reducing the overdraft when it would clear it by a comfortable margin. And it is odd that he should be concerned to clear the overdraft by a sale of investments which could not produce cash for some little time when payment of the proceeds of sale of the St Leonard’s house was expected. In fact, the house proceeds of £3,791 were paid into the account on 18 November, resulting in a credit balance of £2,199 before the investment proceeds of £2,202 were paid in on 20 November. So the investment proceeds did not result in clearing. Still less in reducing the overdraft, but in swelling the credit in the account; and this, although Mrs Middleton’s evidence was that Mr Craig detested money lying idle at the bank. The next entry in the account is the payment of the £4,000 gift by Mr Craig to Mrs Middleton. Counsel for Major-General and Mrs Meneces brought these facts home to Mrs Middleton and she then said that it had just dawned on her that Mr Craig must have sold the shares to give the £4,000 to her. The evidence of Mrs Middleton was quite unconvincing. Counsel for Major-General and Mrs Meneces very understandably then asked Mrs Middleton whether Mr Craig’s letter to Mr Cutler was based on a complete misunderstanding of the position, to which she answered ‘No’—or on a false excuse for the sale, to which she answered ‘No’. He then asked her what reason she gave for the letter, to which she replied: ‘No reason whatsoever.' If the letter was based on a complete misunderstanding, then it would appear difficult to maintain that Mr Craig was capable of appreciating the full significance of what he was doing. If he was putting forward a false excuse for the sale, then he was for some reason acting completely out of character, for which perhaps not the least unfavourable explanation might be the weakness of old age.
Mrs Middleton explained the gift by saying that Mr Craig was still talking about an annuity for her, which she did not want, and about giving her a car, which she did not want. She said that he knew her salary was inadequate, and she said it was reduced from £4 to £3 10s a week, to be paid annually. The cheque paid for salary on 5 November 1960, exactly at the end of one year after the move on 6 November 1969 to Kennet, was in fact for £208. She said at first that it was for a year’s wages; but when it was pointed out to her that £208 represented 52 weeks at £4 a week, not £3 10s, she said it included arrears of wages at St Leonard’s, an explanation that I find difficult to accept, particularly as the difference between the 52 weeks at £3 10s and £4, namely, £26, is not a multiple of either £3 10s or even of the £4 payable at Cooden, and as she herself had written at the time on the paying-in slip ‘1 year’s salary’ She said the £4,000 was for the house, not for a nest egg, though she invested a substantial part of it—she could not say how much. She stated that ‘Mr Craig did not seem to think it was wrong to give it to me’. And she added: ‘He had the money in hand.’—and he had the money in hand in circumstances which we have seen. Mr Skinner was the only person to know of this payment. He only knew of it because it passed through Mr Craig’s bank account. He was surprised to see such a large sum paid to her, but in view of his previous rebuff by Mr Craig over the purchase of Kennet he did not make any enquiries about it.
Then in 1960 came a succession of gifts of shares and of cash: on 2 May, 125 Hoover Ltd ‘A’ ordinary shares of a value of £300 15s; 1 June, £130 Tube Investment ordinary stock to a value of £499 13s; 7 June, 2,600 Timothy White and Taylors ordinary shares to a value of £2,990; 4 August, £560 cash, which Mrs Middleton said was for the central heating at Kennet, which had begun to be installed, but not completed, before the move from St Leonard’s; 28 November, £72 10s Woolworths ordinary stock to the value of £754; and on 2 June 1961, a gift of the same category was made—£24 ICI stock of the value £89 8s. The gifts of shares arose from bonus or rights issues. Mrs Middleton said that Mr Craig would say when he
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received the relevant documents: ‘Here’s one for your collection’, although she added ‘I didn’t always get his scrip issues’. When asked if she ever refused to take any gifts from him she replied: ‘Oh, no; I considered everything he gave me was appreciation of what I was doing for him.' Then she went on amplifying her explanation in terms which for the only time in her evidence bordered on incoherence and revealed some embarrassment. She said:
‘I always thought he was most generous, but I mean I did not sort of say “I won’t have it” because it was done to the knowledge of people. You know if there had been anything said, sort of “Look here, old boy, she is fleecing you of what you have got”, because there were people who were keeping an eye on his accounts.’
This might suggest that she regarded the knowledge of the gifts by others as justification for accepting them. The three she mentioned as keeping an eye on the accounts were Mr Cutler, the broker and defendant in this action, Mr Skinner, the bank official, and Mr Leggatt, the solicitor. Of these three, the only one who knew of the transfer to the entitlement of these shares was Mr Cutler.
On 28 April 1961, Mr Craig gave Mrs Middleton four different holdings of shares of a total value of £8,427 2s. Mrs Middleton said that she believed that these were shares which originally belonged to Mrs Craig. Nevertheless, despite this and the size of the gift, she said she did not remember any conversation with Mr Craig about the gift. Again she invoked her evidence that Mr Craig wanted to give her an annuity and said that the gift of shares would make up for it. Somewhat contrary to this evidence, she said a little later that Mr Craig told her that he was making the gift—‘He loved doing things for people’—but that he gave no reason for doing it.
Mr Cutler, who had been engaged in the transfer of the other shares was not engaged in the transfer of these shares. Mrs Middleton at the time of the gift went alone to Mr Skinner and asked him, without mentioning details, if he would arrange a transfer of shares. He suspected that the transfer was to her, and understandably suggested that it would be better if a solicitor attended to it. So by a letter of 21 April, typed by Mrs Middleton and signed by Mr Craig, Mr Craig instructed Mr Leggatt to carry out the transfer. Mr Leggatt said that he had a conversation in general terms about a gift inter vivos and about its being made foolproof against being upset. According to Mr Leggatt’s impression, the feared upset was in Mr Craig’s lifetime and not after his death. Mr Craig’s letter itself refers to a telephone conversation with Mr Leggatt about a gift inter vivos, and it is probable that that is how this conversation Mr Leggatt mentioned took place. Mr Legatt prepared the transfer, and he made a point of seeing Mr Craig alone and attesting the transfer himself. He pointed out to Mr Craig that the gift would reduce his income by one-third, and that with the gift of Kennet he would have made Mrs Middleton gifts amounting to about £16,000 in 18 months. Mr Leggatt did not know about the other gifts which he had made to her which brought the amount up to £27,000. Mr Craig told Mr Leggatt that he had only left her £200 in his will, and that with the possibility of having to pay estate duty she would have no funds to maintain the house and would have to sell it on his death. Mr Craig did not mention the other gifts which he had made to Mrs Middleton, and there is no specific explanation in evidence for this omission. Mr Leggatt took the view that Mr Craig knew what he was doing and fully intended to do it. However, it seems to me that for Mrs Middleton to keep on such a house could hardly be regarded as a normal course to adopt after Mr Craig’s death, at any rate just as a residence for herself; and still less for him to make provision for her doing so. And Mr Leggatt, apparently, no more now than on the occasion of the purchase of Kennett, addressed his mind to the possibility of undue influence and limited his outlook to Mr Craig’s mental capacity and whether he intended to do what he was doing. The stamp duty of £178 on the transfer was also paid by Mr Craig. The last of the gifts were cash
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payments of £163 in June 1963 and £492 10s in August 1964. These were payments for a bath and other improvements to Kennet.
What then is the position, having regard to these facts and the law on undue influence? First, does the presumption of undue influence arise? The very first gift of £1,000 defence bonds within one month of Mrs Middleton being engaged cannot, in my view, be reasonably accounted for on the ground of the ordinary motives on which ordinary men act even if it is considered in isolation; and still less if the gifts have to be considered, as in my view they should be, as part of a pattern of giving, so that the later gifts are material to whether the earlier gifts can reasonably be accounted for. And even if the later gifts should be excluded in considering the earlier gifts, yet as gift piled on gift the existence of the earlier gifts certainly are relevant when considering whether the later gifts can reasonably be accounted for. All the gifts complained of are, in my view, such as to satisfy the first requirement to raise the presumption; namely, that they cannot reasonably be accounted for on the ground of the ordinary motives on which ordinary men act.
Is the second and only other requirement to raise the presumption satisfied, namely, a relationship between Mr Craig and Mrs Middleton involving such confidence by Mr Craig in Mrs Middleton as to place her in a position to exercise undue influence over him? The evidence in favour of this requirement being established is over-whelming. The second requirement is to my mind established even if it were limited as contended for by Mrs Middleton. Mr Craig was dependent on Mrs Middleton for his comforts and emotionally for her companionship and for her participation in his business affairs which he discussed with her. He was a failing and vulnerable old man and she was a person in whom he placed trust and confidence in all aspects of his life, including decisions in disposing of his property. In my view, she had a duty in the circumstances to advise him, and if not to advise him at any rate to take care of him, in the management and disposal of his property.
Has Mrs Middleton, then, discharged the onus which lay on her of establishing that the gifts were made after ‘full, free and informed discussion’ in the sense required by the authorities to show the removal of her influence in relation to the gifts? The only gifts of which anyone other than Mr Craig and Mrs Middleton knew at any relevant time were: (1) the gift of defence bonds known to the postmistress; (2) the gifts of shares other than those of the value of over £8,000 made in April 1961, which were known to Mr Cutler; (3) the cash gift of £4,000 in November 1959, which was known to Mr Skinner; (4) the gift of Kennet, which was known to Mr Wells, Dr Gabb, Mr Skinner and Mr Leggatt—Mr Cutler only knew of it after it was made; (5) the gift of shares of the value of over £8,000 made in April 1961, which was known to Mr Leggatt. It is not suggested that the knowledge of the postmistress or Mr Wells was relevant, and it clearly was not.
Mr Cutler said in answer to a questionnaire admitted to evidence that he was never called on to advise Mr Craig regarding gifts to third parties; and the evidence before me accorded with this reply. His knowledge is of no assistance to Mrs Middleton. Mr Skinner’s knowledge of the £4,000 gift was obtained from the entries in Mr Craig’s bank account. It was knowledge that was sterile—it did not even lead to his making any enquiries about it. This leaves only Dr Gabb’s, Mr Leggatt’s and Mr Skinner’s knowledge of the gift of Kennet and Mr Leggatt’s knowledge of the gift of the investments in April 1961. Dr Gabb was told that a lawyer was looking after things. Dr Gabb’s concern was merely, as a doctor, whether Mr Craig really wanted to go to Kennet, and he satisfied himself about that eventually. And that was all. He did not even know if Mrs Middleton had persuaded him to it.
Mr Leggatt had as his client in the purchase of Kennet Mrs Middleton, and not Mr Craig. Even if he could properly be regarded as acting for both, his advice to Mr Craig could not be independent advice. It is not established that he even saw Mr Craig during the transaction. He appears never to have directed his mind to the question of undue influence, although he said in evidence that he was satisfied
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from his knowledge of the parties that Mr Craig was making the gift of his own free will. This knowledge seems to have been quite inadequate for such a conclusion. Nor is it suggested that he advised Mr Craig about the gift, or suggested any alternative method of securing any objective that Mr Craig might have—for example, bigger pay, or a gift by will or otherwise to take effect on his death. Mr Skinner did his best by asking Mr Craig if he was sure that he was doing the right thing. A rebuff by Mr Craig ended his intervention. So the knowledge of Dr Gabb, Mr Leggatt and Mr Skinner did not lead to anything of any material assistance to Mrs Middleton in discharging her onus.
On the gift of investments in April 1961 Mr Leggatt pointed out to Mr Craig, as I have said, that the gift, together with the gift of Kennet, would amount to gifts of £16,000 being made to her in 18 months and would reduce his income by one-third; but because of his ignorance of the other gifts, he did not tell him that the gifts would bring the total value of the gifts not to £16,000 but to £27,000. Nor did he discuss other possible ways of benefiting Mrs Middleton and providing for Mr Craig’s security. He apparently saw him only on the occasion when the transfer was executed, and again he does not appear to have addressed his mind to the possibility of undue influence, but rather to Mr Craig’s capacity and intention to make the gift. This is very far short of the ‘full, free and informed thought’ and removal of the donee’s influence that is required.
My conclusion, therefore, is that Mrs Middleton fails to remove the onus arising from the presumption of undue influence.
However, there is the question whether Major-General and Mrs Meneces even without the aid of the presumption, have established the exercise of the necessary undue influence by Mrs Middleton. There is no direct evidence of pressure being specifically brought to bear directly by Mrs Middleton to produce any particular gift to her by Mr Craig. There is no evidence, for example, to the effect that ‘If you do not make me the gift I will leave you’. But there is the evidence of Mrs Polly of direct pressure being exercised by Mrs Middleton to get her own way in other respects, as I have described in detail, and, as I have said, I accept that evidence. Nor is there any requirement that evidence of a gift being obtained by undue influence has to be established by some special species of evidence which distinguishes it from the ordinary evidential methods of discharging burdens of proof. The onus of establishing such behaviour as the exercise of undue influence is heavy, because the more objectionable the behaviour the more unlikely normally is it to occur, and, therefore, the heavier the onus of establishing it. But at the end of the day the finder of fact, whether jury or judge, has to review the evidence as a whole and conclude whether undue influence, unlikely though it normally be, is established. The absence of direct evidence of a gift being obtained by undue influence in circumstances such as those in this case is far from indicating that it did not occur. For my part, the amount of the gifts, the circumstances in which they were made, the vulnerability of Mr Craig to pressure by Mrs Middleton, the evidence of the direct exercise of that pressure on other occasions and for other purposes, the knowledge of Mr Craig and Mrs Middleton of his utter dependence on her, and the whole history of the relationship of Mr Craig and Mrs Middleton persuade me that were it not for undue influence by Mrs Middleton the gifts would never have been made. This is my conclusion even if, contrary to my view, this case does not fall within those of relations of trust and confidence in which the presumption of undue influence arises as established by the authorities to which I have referred.
Judgment for Major-General and Mrs Meneces.
Solicitors: Ward, Bowie & Co (for Major-General and Mrs Meneces); M A Jacobs & Sons agents for Stone, Simpson & Hanson, Tunbridge Wells (for Mrs Middleton); Maples, Teesdale & Co (for Barclays Bank Ltd and Mr Cutler).
Jacqueline Metcalfe Barrister.
Sunair Holidays Ltd v Dodd
[1970] 2 All ER 410
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 22 APRIL 1970
Trade description – False trade description – Hotel accommodation – Description in travel agent’s brochure – Rooms with terraces – Contract in existence by travel agents with hotel to keep such rooms for their clients – Acceptance of offer contained in brochure by holidaymakers – Holidaymakers given rooms without terrace – Alleged default of travel agents in checking accommodation – Any such default of travel agents subsequent to booking – Whether offence committed – Trade Descriptions Act 1968, s 14(1)(b)(2).
The appellants, a firm of travel agents, advertised in a holiday brochure offering facilities at a hotel in Majorca where it was stated that all twin-bedded rooms had ‘private bath, shower, W.C. and terrace’. The appellants had a contract with the hotel whereby the twin-bedded rooms which the hotel management kept available for the appellants to offer to their clients, were rooms with these amenities, including a terrace. Two holidaymakers and their wives saw the brochure and booked twin-bedded rooms at the hotel but when they arrived there they found that their rooms had no terrace. The appellants were charged in two informations with recklessly making a statement in their trade or business as travel agents which was false as to the amenities of accommodation provided, contrary to s 14(1)(b)a of the Trade Descriptions Act 1968. The justices found that the appellants had shown negligence in not ensuring that the accommodation booked by the holidaymakers complied with the advertisement and that that amounted to recklessness within the provision of s 14(1) and (2)b. They found that the appellants had not satisfied the statutory defence in s 24c and convicted the appellants. On appeal,
Held – The appeals would be allowed and the convictions quashed, because at the time when the statement was made in the brochure it was perfectly accurate, there were twin-bedded rooms with a terrace at the hotel and the appellants had contracted with the hotel management that such rooms were to be kept for the appellants’ clients. Any negligence by the appellants in failing to ensure that such rooms were in fact allocated to their clients after the statement was made had no bearing on the matter whether the statement was false or recklessly made (see p 412 e, h and j and p 413 a, post)
Notes
For false or misleading statements as to services under the Trade Descriptions Act 1968, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314c, 3.
For the Trade Descriptions Act 1968, ss 14, 24, see 48 Halsbury’s Statutes (2nd Edn) 604, 610.
Case referred to in judgment
Derry v Peek (1889) 14 App Cas 337, [1886–90] All ER Rep 1, 58 LJCh 864, 61 LT 265, 54 JP 148, 9 Digest (Repl) 127, 685.
Case stated
This was a case stated by justices for the county borough of Brighton acting in and for the petty sessional division of Brighton in respect of their adjudication as a magistrates’
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court sitting at Brighton on 2 October 1969 when they convicted the appellants, Sunair Holiday Ltd, on two informations under s 14(1) (b) of the Trade Descriptions Act 1968. The facts are set out in the judgment of Lord Parker CJ.
C Lawson QC and D L Prebble for the appellants.
R A Headridge for the respondent.
22 April 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county borough of Brighton in respect of two informations preferred by the respondent against the appellants, Sunair Holidays Ltd, in each instance for and offence contrary to s 14(1) (b) of the Trade Descriptions Act 1968. The two informations are in form exactly the same though relating to two different families. The first related to a statement in regard to accommodation for a Mr and Mrs Welling, and the second for a Mr and Mrs Harold John Townsend. It is, I think, of some importance to read the actual form of the information, and I will refer to that in respect of Mr and Mrs Welling. It is in this form:
‘An information was preferred by the Respondent against the Appellants that they on the 13th day of January 1969, being a person who in the course of a trade or business at the Prestige Travel Agency, 41 Bond Street in the said County Borough, did recklessly make a statement which was false as to the amenities of accommodation provided at the Hotel Costs Azul, Palma, Majorca, for Mr. and Mrs. G. Welling, namely that such amenities did not accord with the description given in its 1969 holiday brochure that such accommodation was provided with a terrace overlooking the harbour at Majorca, contrary to Section 14(1)(b) of the Trade Descriptions Act, 1968.’
Before going into the details of the facts, it is convenient to look at the legislation so far as it is relevant. Section 14 of the Trade Descriptions Act 1968 deals with false or misleading statements as to services, etc, and provides:
‘(1) It shall be an offence for any person in the course of any trade or business … (b) recklessly to make a statement which is false; as to any of the following matters, that is to say—(i) the provision in the course of any trade or business of any services, accommodation or facilities … (v) the location or amenities of any accommodation so provided.
‘(2) For the purposes of this section … (b) a statement made regardless of whether it is true or false shall be deemed to be made recklessly, whether or not the person making it had reasons for believing that it might be false.’
In other words this by statute is importing the common law definition of ‘recklessly’ as laid down in Derry v Peek and adopted ever since.
Section 24 of the 1968 Act provides a defence, in other words when an offence is prima facie proved under s 14(1), there can be a defence in the circumstances laid down in s 24(1) which provides:
‘In any proceedings for an offence under this Act it shall, subject to subsection (2) of this section, be a defence for the person charged to prove—(a) that the commission of the offence was due to a mistake or to reliance on information supplied to him or to the act or default of another person, an accident or some other cause beyond his control; and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control.’
To return to the case stated, the justices found, and I will again take the case of
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Mr and Mrs Welling, that they were shown a brochure printed by the appellants which described the facilities offered at the hotel as inter alia ‘all twin-bedded rooms with private bath, shower, W.C. and terrace’. Mr and Mrs Welling, and indeed Mr and Mrs Townsend, accepted an offer from the appellants to go and stay at the hotel, and they arrived, and they were indeed the only arrivals during night hours by coach. The hotel staff, much to the holidaymakers’ disgust, and one sympathises with them, put them into accommodation which was not as described in that the rooms had no terrace or balcony at all, and we are told that in one case the windows were barred. It was as a result of their complaint that happily the appellants compensated them, and the hotel in fact compensated the appellants.
The way the justices dealt with this was to consider s 24 in the first instance, and they came to the conclusion that the defence under that section was not made out, because the practice was to take steps, through the appellants’ couriers, to check the accommodation, first 21 days before the arrival, again the morning prior to the arrival, and shortly again at the time of the arrival, three checks which were normally done. But the courier in question was not called to give evidence, and the burden of proof being on the appellants to bring themselves within s 24, the justices held that s 24 had not been satisfied. They went on to say that the failure to check, and the failure as they put it to tell these unfortunate holidaymakers of the name of the courier, although he was only 100 yards away, was negligence on the part of the appellants, and they then held that the negligence in not ensuring compliance with the advertised brochure amounted to recklessness within s 14(1). That as I understand it was the approach of the justices. For my part I cannot see how negligence long after the statement complained of can prove that the statement made earlier was made recklessly regardless of its truth or falsity, and if it was not made recklessly, one never gets as far as considering the defence under s 24.
Before us, counsel for the respondent, puts the matter in a way in which I am by no means convinced was the way in which it was put before the justices. What he says is this: if one looks at the brochure—and we have been invited to do so—it will be found under the heading ‘Hotel Costa Azul’ there is categorically stated ‘all twin-bedded rooms with private bath, shower, W.C. and terrace’. He says that the fact that one or both of these couples did have in fact twin-bedded rooms, and that they did not have terraces, shows that that statement in the brochure was false. For my part I cannot read it that way. It seems to me that the brochure was intended to convey and does convey to the prospective holidaymaker, that the twin-bedded rooms that we can offer you at this hotel have those amenities. Looked at in that way, that statement when it was made was perfectly true. This was not the typical case of a brochure advertising accommodation which did not exist, having a swimming bath that was not constructed, or of hotel accommodation where a hotel was not opened. At the time when the statement was made it was perfectly accurate that the accommodation that they were offering existed. Not only did it exist, but the appellants had a contract with the hotel—I need not go into it—whereby the only twin-bedded rooms which they kept available for the appellants, and were offering to the appellants’ clients, were rooms with these amenities, including a terrace. Accordingly, when it was made, it was in my judgment completely accurate.
Counsel for the respondent has rather faintly suggested that really this statement is a continuing statement, and that it existed when these couples arrived at the hotel. For my part I am quite unable to accept that. This is a statement made on 13 January or at some later date after the brochure had been shown to them, and they had accepted the offer contained in it, and nothing that happened after that can affect the matter one way or the other whether that statement was false and made recklessly. In my judgment this appeal succeeds, and the conviction in both cases should be quashed.
BRIDGE J. I agree.
Page 413 of [1970] 2 All ER 410
BEAN J. I also agree.
Appeals allowed. Convictions quashed. On 1 May 1970, leave to appeal to the House of Lords refused.
Solicitors: Francis Basham & Co (for the appellant); W O Dodd, Brighton (for the respondent).
N P Metcalfe Esq Barrister.
R v Freeman
[1970] 2 All ER 413
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SACHS AND WIDGERY LJJ AND BRABIN J
Hearing Date(s): 17 FEBRUARY 1970
Firearms – Starting pistol capable of firing bullets by drilling barrel – Barrel partially drilled – Whether firearm – Firearms Act 1968, ss 1(a), 57(1)(b).
The appellant was charged with the possession of a firearm without a certificate contrary to s 1(1)(a)a of the Firearms Act 1968. The subject-matter of the charge was a.38 starting pistol of solid construction with a revolving chamber. The pistol could be adapted to firing bulleted ammunition by drilling. The barrel had been partly drilled.
Held – (i) No relevant distinction could be drawn between the wording of the definition of ‘firearm’ in s 57(1)b of the 1968 Act and the definitions in earlier firearms legislation since 1920(see p 416 c, post).
(ii) For the purposes of earlier legislation a subject-matter indistinguishable from that under consideration had been held to be a ‘firearm’ (see p 415 a, post).
(iii) By re-enacting the definition of ‘firearm’ substantially unchanged in the 1968 Act Parliament must be taken to have adopted in the Act the interpretation which had been placed on the definition (see p 415 h and p 416 d, post).
(iv) Accordingly, the starting pistol was a firearm for the purposes of s 1(1)(a) of the 1968 Act (see p 416 e, post).
Cafferata v Wilson [1936] 3 All ER 149 applied.
Notes
For the restrictions on purchase and possession of firearms, see 10 Halsbury’s Laws (3rd Edn) 593–595, para 1107, and for cases on the subject, see 45 Digest (Repl) 389, 390, 72–79.
For the Firearms Act 1968, ss 1, 57, see 8 Halsbury’s Statutes (3rd Edn) 729, 764.
Cases referred to in judgment
Cafferata v Wilson, Reeve v Wilson [1936] 3 All ER 149, 155 LT 510, 100 JP 489, 45 Digest (Repl) 390, 75.
Muir v Cassidy 1953 SLT (Sh Ct) 4.
R v Steel (1968) The Times, 19 June.
Read v Donovan [1947] 1 All ER 37, [1947] KB 326, [1941] LJR 849, 176 LT 124, 111 JP 46, 15 Digest (Repl) 804, 7645.
Case also cited
Bryson v Gamage Ltd [1907] 2 KB 630.
Page 414 of [1970] 2 All ER 413
Appeal
This was an appeal by the appellant Brandford Augustus Freeman against his conviction, on 28 July 1969, at the North East London Sessions before the chairman (J F Marnan QC) and a jury, on three counts. The first and second counts involved the possession of dangerous drugs. The third count was possession of a firearm without holding a firearm certificate. The appellant applied for leave to appeal against his conviction and sentence on the first and second counts and appealed on a point of law against his conviction on the third count. The appeal is reported only on the third count. The facts, so far as they relate to the third count, are set out in the judgment of the court.
J H E Mendl for the appellant.
J W McDonald for the Crown.
17 February 1970. The following judgment was delivered.
SACHS LJ delivered the judgment of the court. After stating the facts and that the applications for leave to appeal on the first and second counts would be dismissed, he continued: It is now right to return to the point of law which relates to the third count. The subject-matter of the charge has been described in this court as a.38 starting pistol with a revolving chamber and of solid construction in the sense that it was not merely something like a lightweight toy. The subject-matter was also described in a report of a senior experimental officer of the Metropolitan Police Forensic Science Laboratory from which it is convenient to read the material extracts:
‘The firing chambers had constructions in the front ends and the barrel was solid but for an exhaust port on top for the escape of gas. These features were intended to prevent the discharge of missiles but readily could be removed by drilling, when the revolver would be capable of firing bulleted ammunition with lethal force. Part of the barrel of the revolver … had been drilled at the muzzle end and up to where the drill had broken through the top at the rear of the front sight.’
The charge was under s 1(1) of the Firearms Act 1968, which provides:
‘Subject to any exemption under this Act, it is an offence for a person—(a) to have in his possession, or to purchase or acquire, a firearm to which this section applies without holding a firearm certificate in force at the time … ’
The word ‘firearm’ is defined in s 57(1):
‘In this Act, the expression “firearm” means a lethal barrelled weapon of any description from which any shot, bullet or other missile can be discharged and includes … (b) any component part of such a lethal or prohibited weapon … ’
Those provisions in the 1968 Act are the latest of a series which have appeared in Firearms Acts since 1920. It is thus convenient at this stage to read s 12(1)c of the Firearms Act 1920:
‘In this Act, unless the context otherwise requires—The expression “firearm” means any lethal firearm or other weapon of any description from which any shot, bullet, or other missile can be discharged, or any part thereof … ’
The direction give to the jury by the learned chairman ran thus:
‘… the barrel was blocked up. An inch of it is still solid. And you may say to yourself, “That is not a revolver, it is really a starting pistol.” All I can say is, gentlemen, that an article like this, that can be adapted to fire bullets by drilling
Page 415 of [1970] 2 All ER 413
the barrel and making some other alterations, is a firearm under the meaning of the Act. This is the law … ’
In giving that direction he founded himself on and followed the judgment of the Divisional Court in Cafferata v Wilson, Reeve v Wilson, decided on 20 October 1936, by a Divisional Court consisting of Lord Hewart CJ and Branson and du Parcq JJ, sitting with him—a strong court. That case concerned a subject-matter which, as rightly conceded by counsel for the appellant, is quite indistinguishable from that in the instant case. It is thus appropriate to turn straightaway to the material part of the judgment of Lord Hewart CJ ([1936] 3 All ER at 150):
‘Everything turns on the definition of “firearms” in the Act of 1920. At the material time the article was incapable of being fired, but a part of it needed alteration to make it suitable for firing. The magistrate has held that the article as a whole is part of a firearm within the meaning of the definition. That is quite a tenable proposition. If something had had to be added to the dummy to make it into a complete revolver, the dummy might be said to be part of a revolver. It seems to make no difference that the decisive part was not to be an addition but an adaptation of what was already there. It is easier to support the decision from another point of view. The dummy contains everything else necessary for making a revolver except the barrel, and therefore all the other parts of it except those which required to be bored are “parts thereof” within the meaning of the section.’
It is to be observed that on the date that judgment was given there had already been passed, as was mentioned to the Divisional Court, the Firearms Act 1936, of which s 9(2) (repeated in s 4(3) of the 1968 Act) was concerned with conversions into weapons. The suggestion today that the appearance of s 4(3) in the 1968 Act raises some distinction on which the appellant can rely is thus shown to be ill founded.
From there the court turns to s 32(1)d of the Firearms Act 1937. There again one finds a definition of ‘firearm’. It is as follows:
‘… “firearm”, except where otherwise expressly provided, means any lethal barrelled weapon of any description from which any shot, bullet or other missile can be discharged and includes … any component part of any such lethal or prohibited weapon … ’
There has thus in this judgment been traced the history of the statutory definitions of ‘firearm’ from the 1920 Act to the 1968 Act. At no time since it was decided has any challenge been offered in any of the courts of this country, so far as can be ascertained from the authorities cited to us, to Cafferata’s case. On the other hand, we have been referred to a decision of 1953 in Scotland, Muir v Cassidy which shows quite plainly that Cafferata’s case was being considered as still governing the law at any rate in Scotland.
In the view of this court, the 1937 and 1968 Acts must each be deemed to have been enacted by a legislature acquainted with the actual state of the law and the practice of the courts as at the date when they were passed. The principle then applicable is as stated in Maxwell on Interpretation of Statutese:
‘… when the words of an old statute are either incorporated in, or by reference made part of, a new statute, this is understood to be done with the object of adopting any legal interpretation which has been put on them by the courts’.
Page 416 of [1970] 2 All ER 413
In slightly different language, it has been stated and restated in the course of many decisions that:
‘… Parliament has re-enacted the same words with full knowledge of that decision … It is perfectly clear that … this court, observing the intention and seeking to honour the intention of Parliament, must inevitably uphold the principle laid down in [the earlier decision].’
That quotation is from a passage in the judgment of Lord Parker CJ in R v Steel when dealing, of course, with a different statute.
Counsel for the appellant has sought in this court to do two things. First of all, he attempted to distinguish between the language in the 1968 Act and that in the 1920 Act, founding his submissions on the interposition in the relevant definition of the word ‘component’ between ‘any’ and ‘part’ and on the use there of the word ‘such’. In the view of this court that submission must fail. There is no real distinction between the relevant words used in the 1937 and 1968 Acts and those in the 1920 Act. His next submission was that this court should overrule the decision in Cafferata’s case. That submission is rejected for the reasons already given as to interpreting the intention of Parliament. It is the view of this court that the 1968 legislation was executed on the basis of the law being as stated in Cafferata’s case and in particular on the second of the two grounds which the court in that case adopted.
It follows that, Cafferata’s case having been thus embodied in the law, the judge’s direction was correct. It would indeed be unfortunate if an object, which by the use of an electrical drill of a type that can be bought at almost any general store in any High Street can be so easily adapted into a lethal weapon, should not come within s 1(1) of the 1968 Act.
In conclusion, there are two observations to be made. In this particular case the subject-matter of the charge was identical with that in Cafferata’s case. Other cases, of course, may arise when it is a question of fact and degree whether the subject-matter of the charge does or does not fall within the ambit of the Act and in such cases the issue must be left to the jury. It is also useful to remember, having regard to one of the submissions of counsel for the appellant, that it has been held in Read v Donovan, the case of a signal pistol, that the intention of the manufacturer of the subject-matter f the charge is irrelevant to the issue which a jury must try.
That being the decision of this court on the point of law and the question of guilt then falling to be decided on the same basis on the third count as it was on the first and second counts, the appeal is dismissed.
Appeal dismissed.
Solicitors: Bernard Solley & Co (for the appellant); Solicitor, Metropolitan Police.
S A Hatteea Esq Barrister.
Scm (United Kingdom) Ltd v W J Whittall & Son Ltd
[1970] 2 All ER 417
Categories: TORTS; Negligence: Nuisance
Court: QUEEN’S BENCH DIVISION
Lord(s): THESIGER J
Hearing Date(s): 9, 10, 16 MARCH 1970
Negligence – Duty to take care – Arising out foreseeable risk of injury – Electric cable which supplied plaintiffs’ factory but in which plaintiffs had no possessory or proprietary right – Cable severed by careless act of defendant contractors in roadway – Power failure in factory causing loss of production and damage to machinery – Physical damage leading to loss of profit – Whether defendants owed plaintiffs duty of care – Whether defendants liable for damage claimed.
Nuisance – Private nuisance – Isolated occurrence – Single negligent act causing physical damage to electric cable supplying plaintiffs’ factory – Whether actionable nuisance.
The plaintiffs were manufacturers of typewriters and copying machines. The defendants, who were building contractors, were carrying out construction works in the vicinity of the plaintiffs’ factory when they damaged a high voltage cable supplying the factory with electricity required for the operation of manufacturing machinery. The plaintiffs did not own or have any possessory or proprietary rights in the damaged cable. The damage to the cable caused a power failure at the factory. The plaintiffs alleged that the defendants knew or ought to have known of the presence and position of the cable and that it carried electric current to supply factories such as the plaintiffs’ with power for their plant and machinery; and that it was reasonably foreseeable by the defendants that if they damaged the cable the supply of electric current to the factories supplied by it would be likely to be interfered with and fail, and that, in that event, occupiers of premises such as the plaintiffs would be likely to suffer loss and damage including injury to their property. Paragraph 5 of the plaintiffs’ statement of claim stated: ‘In the circumstances the Defendants owed a duty to the Plaintiffs to take reasonable care when carrying out the said operations not to damage the said cable.' There was a further allegation that the defendants, by their operations and acts, unduly interfered with the plaintiffs’ enjoyment of their occupation and use of their premises and thereby caused a nuisance, and that the plaintiffs consequently suffered loss and damage. The plaintiffs claimed damages for loss of one day’s production of typewriters and copying machines, together with the value of certain items which were damaged by the solidification of raw materials in the machines at the time of the power failure. On the trial of a preliminary issue whether on the facts set out in the statement of claim the defendants were liable in law to the plaintiffs for the damages claimed,
Held – (i) The defendants were liable in negligence, as the plaintiffs were so closely affected by the act of the defendants in that particular place that the defendants, if they had directed their minds to their operations and to the cable, ought reasonably to have had the plaintiffs in contemplation as being likely to be affected in the way in which they alleged they were affected in the statement of claim (see p 434 j, post).
Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co (1959) 17 DLR (2d) 292, on appeal (1960) 21 DLR (2d) 264 and British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252 applied.
Weller & Co v Foot and Mouth Disease Research Institute [1965] 3 All ER 560, Margarine Union GmbH v Cambay Prince Steamship Co Ltd [1967] 3 All ER 775 and Electrochrome Ltd v Welsh Plastics Ltd [1968] 2 All ER 205 distinguished.
(ii) The defendants were not liable in nuisance, for while there was no doubt that a
Page 418 of [1970] 2 All ER 417
single isolated escape of material might cause damage which would entitle a plaintiff to succeed in private nuisance (if that nuisance arose from the condition of the defendant’s land, premises or property, or activities thereon), one negligent act which caused physical damage to an electric cable did not constitute a private nuisance; if the law limited liability for damage caused by negligence, the limitation could not simply be evaded by calling the negligence a nuisance (see p 430 f, post).
British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252 distinguished on the issue of nuisance.
Notes
For the duty to take care, see 28 Halsbury’s Laws (3rd Edn) 7, para 4, and for cases on the subject, see 36 Digest (Repl) 12–18, 34–79.
Cases referred to in judgment
AMF International Ltd v Magnet Bowling Ltd [1968] 2 All ER 789, [1968] 1 WLR 1028, Digest Supp.
British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252, [1969] 1 WLR 959.
Campbell v Paddington Corpn [1911] 1 KB 869, 80 LJKB 739, 104 LT 394, 75 JP 277, 26 Digest (Repl) 490, 1754.
Cattle v Stockton Waterworks Co (1875) LR 10 QB 453, [1874–80] All ER Rep 220, 44 LJQB 139, 33 LT 475, 39 JP 791, 1 Digest (Repl) 37, 277.
Clay v A J Crump & Sons Ltd [1963] 3 All ER 689, [1964] 1 QB 533, [1963] 3 WLR 866, Digest (Cont Vol A) 75, 4866.
Deyong v Shenburn [1946] 1 All ER 226, [1946] KB 227, 115 LJKB 262, 174 LT 129, 34 Digest (Repl) 144, 987.
Donoghue (or M’Alister) v Stevenson [1932] AC 562, [1932] All ER Rep 1, 101 LJPC 119, 147 LT 281, 36 Digest (Repl) 85, 458.
Electrochrome Ltd v Welsh Plastics Ltd [1968] 2 All ER 205, Digest Supp.
Elliott Steam Tug Co Ltd v Shipping Controller [1922] 1 KB 127, 91 LJKB 294, 126 LT 158, 17 Digest (Repl) 464, 212.
Hadley v Baxendale (1854) 9 Exch 341, [1943–60] All ER Rep 461, 23 LJEx 179, 23 LTOS 69, 156 ER 145, 17 Digest (Repl) 91, 99.
Hardaker v Idle District Council [1896] 1 QB 335, [1895–99] All ER Rep 311, 65 LJKB 363, 74 LT 69, 60 JP 196, 34 Digest (Repl) 33, 102.
Haseldine v Daw & Son Ltd [1941] 3 All ER 156, [1941] 2 KB 343, 111 LJKB 45, 165 LT 185, 36 Digest (Repl) 29, 125.
Hay (or Bourhill) v Young [1942] 2 All ER 396, [1943] AC 92, 111 LJPC 97, 167 LT 261, 36 Digest (Repl) 16, 66.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, Digest (Cont Vol A) 51, 1117a.
Liesbosch Dredger (Owners) v Steamship Edison (Owners) [1933] AC 449, 102 LJP 73; sub nom The Edison [1933] All ER Rep 144, 149 LT 49, 17 Digest (Repl) 93, 103.
London Graving Dock Co Ltd v Horton [1951] 2 All ER 1, [1951] AC 737, 36 Digest (Repl) 54, 296.
London Joint Stock Bank Ltd v Macmillan and Arthur [1918] AC 777, [1918–19] All ER Rep 30, 88 LJKB 55, 119 LT 387, 3 Digest (Repl) 181, 319.
Longmeid v Holliday (1851) 6 Exch 761, 20 LJEx 430, 17 LTOS 243, 155 ER 752, 35 Digest (Repl) 55, 483.
Lumley v Gye (1853) 2 E & B 216, [1843–60] All ER Rep 208, 22 LJQB 463, 118 ER 749, 17 Digest (Repl) 116, 285.
Margarine Union GmbH v Cambay Prince Steamship Co Ltd [1967] 3 All ER 775, [1969] 1 QB 219, [1967] 3 WLR 1569, Digest Supp.
Midwood & Co Ltd v Manchester Corpn [1905] 2 KB 597, 74 LJKB 884, 93 LT 525, 69 JP 348, 38 Digest (Repl) 43, 219.
Page 419 of [1970] 2 All ER 417
Miller v South of Scotland Electricity Board 1958 SC (HL) 20, 1958 SLT 229, 20 Digest (Repl) 237, *91.
Old Gate Estates Ltd v Toplis & Harding & Russell [1939] 3 All ER 209, 161 LT 227, 1 Digest (Repl) 790, 3180.
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126, Digest (Cont Vol A) 1148, 185a.
Polemis and Furness, Withy & Co Ltd, Re [1921] 3 KB 560, [1921] All ER Rep 40, 90 LJKB 1353, 126 LT 154, 36 Digest (Repl) 38, 185.
Quinn v Leathem [1901] AC 495, [1901–03] All ER Rep 1, 70 LJPC 76, 85 LT 289, 65 JP 708, 45 Digest (Repl) 280, 33.
Read v J Lyons & Co Ltd [1946] 2 All ER 471, [1947] AC 156, [1947] LJR 39, 175 LT 413, 36 Digest (Repl) 83, 452.
Rylands v Fletcher (1868) LR 3 HL 330, [1861–73] All ER Rep 1, 37 LJEx 161, 19 LT 220, 33 JP 70, 36 Digest (Repl) 282, 334.
Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co (1960) 21 DLR (2d) 264, [1959] OR 581; on appeal from (1959) 17 DLR (2d) 292, [1959] OR 177, 25 Digest (Repl) 538, *64.
Simpson v Thomson (1877) 3 App Cas 279, 58 LT 1, 1 Digest (Repl) 61, 452.
Southport Corpn v Esso Petroleum Co Ltd [1954] 2 All ER 561, [1954] 2 QB 182, [1954] 3 WLR 200, 118 JP 411; rvsd HL sub nom Esso Petroleum Co Ltd v Southport Corpn [1955] 3 All ER 864, [1956] AC 218, [1956] 2 WLR 81, 120 JP 54, Digest (Cont Vol A) 1213, 68a.
Stennett v Hancock and Peters [1939] 2 All ER 578, 36 Digest (Repl) 82, 447.
Wagon Mound (No 2), The, Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1966] 2 All ER 709, [1967] AC 617, [1966] 3 WLR 498, Digest (Cont Vol B) 555, 185b.
Weld-Blundell v Stephens [1920] AC 956, [1920] All ER Rep 32, 89 LJKB 705, 123 LT 593, 36 Digest (Repl) 201, 1064.
Weller & Co v Foot and Mouth Disease Research Institute [1965] 3 All ER 560, [1966] 1 QB 569, [1965] 3 WLR 1082, Digest (Cont Vol B) 554, 109c.
Woods v Duncan, Duncan v Hambrook, Duncan v Cammell Laird & Co Ltd [1946] 1 All ER 420 n, [1946] AC 401, [1947] LJR 120, 174 LT 286, 36 Digest (Repl) 52, 286.
Action
This was a trial of a preliminary issue, set down in the special papers list, whether on the facts set out in the amended statement of claim the defendants, W J Whittall & Son Ltd, were liable in law to the plaintiffs, SCM (United Kingdom) Ltd, for the damage claimed, pursuant to an order of Lawton J dated 23 May 1969. The facts are set out in the judgment.
Conrad Dehn QC and T H Bingham for the plaintiffs.
J P Gorman and G G D Flather for the defendants.
Cur adv vult
16 March 1970. The following judgments were delivered.
THESIGER J read the following judgment. On 23 May 1969, Lawton J with the consent of both parties ordered that—
‘… the question or issue whether on the facts set out in the Amended Statement of Claim the Defendants are liable in law to the Plaintiffs for the damage claimed … ’
be tried as a preliminary question of law before the trial of the action. It so happened that Lawton J had, about seven seeks earlier, on 2 April 1969, delivered a reserved judgment in favour of some plaintiffs on a preliminary issue which raised the same
Page 420 of [1970] 2 All ER 417
point of law on facts that were difficult to distinguish. See British Celanese Ltd v A H Hunt (Capacitors) Ltd. Lawton J gave leave to appeal in that case but there has been no appeal.
The facts set out in the amended statement of claim are to be found in paras 1 to 4, 6 and 7. These contain the following allegations:
‘1. The Plaintiffs are and were at all material times manufacturers of typewriters and copying machines carrying on business at their factory at Birmingham Road, West Bromwich in the County of Stafford.
‘2. At all material times electric power required for the Plaintiffs’ said factory and business and inter alia the manufacturing machinery thereat was supplied by or through an 11,000 volt cable running beside Birmingham Road aforesaid.
‘3. The Defendants are and were at all material times Building and Civil Engineering Contractors and in November 1967 were carrying out inter alia the engineering operations hereinafter referred to in Birmingham Road aforesaid and knew or ought to have known of the presence and position of the said cable and that it carried and/or was electrically connected to cables carrying, electric current to supply factories such as the Plaintiffs with power for their plant and machinery.
‘4. Further it was at all material times reasonable foreseeable by the Defendants that if they damaged the said cable the supply of electric current to factories supplied thereby or by cables electrically connected thereto would be likely to be interfered with and fail and that in that event occupiers of premises such as the Plaintiffs would be likely to suffer loss and damage including injury to their property.
‘6. On the 20th day of November, 1967, the Defendants their servants or agents were engaged in preparing to rebuild the boundary wall of Girling Limited when they negligently damaged the said cable which carried, and/or was electrically connected to cables carrying electric current to the Plaintiffs’ said premises whereby they caused a power failure at the said premises by reason whereof the plaintiffs suffered loss and damage as hereinafter appears.’
Then follow particulars of negligence. It is alleged that the defendants were negligent in that they failed to take sufficient steps to locate or inform themselves as to the whereabouts of the cable; that they carried out their operations in a manner such as to break or damage the cable; that they failed to take sufficient precautions to prevent damage while they were carrying out their operations and, in particular, that they hammered a metal tube into the bottom of a trench in the vicinity of the cable without ascertaining where it was or what it might do.
Then follow particulars of special damage. The original statement of claim read: ‘The current was cut off for 7 hours and 17 minutes approximately’. One full day’s production of typewriters and copying machines was then claimed, the particulars and figures being set out. By amendment, there was inserted after the allegation that the current was cut off for approximately 7 hours and 17 minutes—
‘Raw materials in injection moulding machines solidified (necessitating the stripping down of the machines and the chipping away and discarding of the material and the examination, re-assembly and testing of the machines), drills and taps on drilling and tapping machines sheared and had to be scrapped, milling cutters on milling machines were chipped, and components being plated with nickel, chrome and zinc were damaged beyond recovery. As a result the Plaintiffs lost the value of the said items (Full particulars whereof will be delivered) and the profit from [and then it continues as before] one full day’s production of typewriters and copying machines.’
Page 421 of [1970] 2 All ER 417
In para 7 an alternative claim is pleaded in these terms:
‘Further or alternatively by their said operations and acts the Defendants unduly interfered with the Plaintiffs’ enjoyment of their occupation and use of their said premises and thereby caused a nuisance and the Plaintiffs thereby suffered loss and damage as aforesaid.’
Paragraph 5 of the amended statement of claim sets out the vital contention in law and reads as follows:
‘In the circumstances the Defendants owed a duty to the Plaintiffs to take reasonable care when carrying out the said operations not to damage the said cable.’
The plaintiffs did not own or have any possessory or proprietary rights in the damaged cable. Until the statement of claim was amended the damage was alleged to be the cutting off of current causing loss of production and was thus ‘financial’ or ‘economic’ in contrast to ‘physical damage’.
The problem and the precedents have already been before the judges of this Division on four occasions; all reported, and on at least three occasions very fully argued. On those three occasions the problem came before the court by special case, and on at least two of those occasions leave to appeal was granted. The first occasion was in 1965. Widgery J tried a case listed as a special case—Weller & Co v Foot and Mouth Disease Research Institute. The relevant facts are set out thus ([1965] 3 All ER at 562, [1966] 1 QB at 571):
‘The plaintiffs’ claims are based both on breach of an absolute duty arising out of the escape of a dangerous thing from the defendants’ premises which the defendants kept at the said premises and on the negligence of the defendants, their servants or agents, in carrying out their work at the said place, and/or in or about the steps taken to prevent escape of the said virus. By their defence the defendants do not admit either the escape of the dangerous virus or any negligence on their part or on the part of their servants or agents. For the purpose of this Special Case only the court is asked to assume one or more of the following facts: (a) that foot and mouth disease virus escaped from the defendants’ said premises and infected cattle on neighbouring land which was not in the occupation of the plaintiffs; (b) that foot and mouth disease virus is a thing which is likely to infect cattle if it escapes; (c) that as a result of the outbreak of foot and mouth disease the Minister of Agriculture made the said order closing Guildford and Farnham Markets; (d) that the closure of the market caused loss of business to the plaintiffs; (e) that the defendants at all material times knew, or ought if they had given reasonable consideration to the matter to have known; (i) that the cattle in the said area or a large part thereof would in the normal course of events be sold by auction at Guildford and Farnham Markets; (ii) that in the event of foot and mouth disease occurring in the said cattle Guildford and Farnham Markets would be closed by order of the Ministry of Agriculture; that persons carrying on business as auctioneers at the said market would be likely to suffer loss by reason of the closure of the said markets; (f) that the defendants their servants or agents were negligent in some or one or more of the respects alleged in the statement of claim and that this negligence caused the escape of the virus.’
Widgery J said ([1965] 3 All ER at 563, [1966] 1 QB at 576, 577):
‘Counsel for the plaintiffs bases his contention on the well-known speech of LORD ATKIN in Donoghue (or McAlister) v. Stevenson ([1932] AC 562 at 580, [1932] All ER 1 at 11): “At present I content myself
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with pointing out that in English law there must be and is some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. The liability for negligence, whether you style it such or treat it as in other systems as a species of “culpa”, is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in law: You must not injure your neighbour, and the lawyer’s question: Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then, in law, is my neighbour? The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question“. Applying this principle, counsel for the plaintiffs says that, since the defendants should have foreseen the damage to his clients but nevertheless failed to take proper precaution against the escape of the virus, their liability is established. It may be observed that if this argument is sound, the defendants’ liability is likely to extend far beyond the loss suffered by the auctioneers, for in an agricultural community the escape of foot and mouth disease virus is a tragedy which can foreseeably affect almost all businesses in that area. The affected beasts must be slaughtered, as must others to whom the disease may conceivably have spread. Other farmers are prohibited from moving their cattle and may be unable to bring them to market at the most profitable time; transport contractors who make their living by the transport of animals are out of work; dairymen may go short of milk, and sellers of cattle feed suffer loss of business. The magnitude of these consequences must not be allowed to deprive the plaintiffs of their rights, but it emphasises the importance of this case. The difficulty facing counsel for the plaintiffs is that there is a great volume of authority both before and after Donoghue v. Stevenson to the effect that a plaintiff suing in negligence for damages suffered as a result of an act or omission of a defendant cannot recover if the act or omission did not directly injure, or at least threaten directly to injure, the plaintiff’s person or property but merely caused consequential loss as, for example, by upsetting the plaintiff’s business relations with a third party who was the direct victim of the act or omission. The categories of negligence never close, but when the court is asked to recognise a new category, it must proceed with some caution.’
Widgery J then carefully reviewed a number of cases, starting with Simpson v Thomson and he quoted fully from the speech of Lord Penzance ((1877) 3 App Cas at 289, 290). Widgery J said ([1965] 3 All ER at 567, [1966] 1 QB at 583), speaking of a case from which he had just been citing:
‘The decision in that case no doubt depended to some extent on its special facts, but in my judgment it supports the view that in an action of negligence founded on failure to take care to avoid damage to the property of another, only those whose property is injured, or is at least directly threatened with injury, can recover.’
Then Widgery J said ([1965] 3 All ER at 568, 569, [1966] 1 QB at 584, 585):
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‘As I have said, there are probably a dozen other case which could be cited to illustrate the application of that principle, but I am invited to consider those cases in the light of the more recent decision of the House of Lords in Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. That was a case in which an action was brought against a bank for having negligently given a reference as to the standing of one of its customers on which reference the plaintiffs were alleged to have acted to their detriment. No contract existed between the plaintiffs and the defendants and the claim was based on negligence at common law, the injury to the plaintiffs being the foreseeable consequence of the defendants’ failure to take care. The giving of the reference was not an act which could conceivably do direct injury to the person or property of anyone, and the claim was of a kind sometimes described as an action for negligent words rather than for negligent acts, and of a kind which had not previously been recognised in the absence of a contractual or fiduciary relationship between the parties. It is now submitted that the plaintiffs’ ultimate success in the House of Lords in Hedley Byrne & Co., Ltd v. Heller & Partners, Ltd. has swept away any existing notion that direct injury to the person or property of the plaintiff is necessary to support an action in negligence and that the door is now open for the plaintiffs in the present action to recover the indirect or consequential loss which they have suffered. I think it important to remember at the outset that in the cases to which I have referred, the act or omission relied on as constituting a breach of the duty to take care was an act or omission which might foreseeably have caused direct injury to the person or property of another. The world of commerce would come to a halt and ordinary life would become intolerable if the law imposed a duty on all persons at all times to restrain from any conduct which might foreseeably cause detriment to another, but where an absence of reasonable care may foreseeably cause direct injury to the person or property of another, a duty to take such care exists. It is against the background of this duty that the judgments to which I have referred must be considered. As LORD PEARCE put it in Hedley Byrne’s case ([1963] 2 All ER at 615, [1964] AC at 536): “The range of negligence in act was greatly extended in Donoghue v Stevenson on the wide principle of the good neighbour—sic urtere tuo ut alienum non laedas. It is argued that the principles enunciated in Donoghue v Stevenson apply fully to negligence in word. It may well be that WROTTESLEY ,J., in Old Gate Estates, Ltd v Toplis and Harding and Russell put the matter too narrowly when he confined the applicability of the principles laid down in Donoghue v. Stevenson to negligence which caused damage to life, limb or health. But they were certainly not purporting to deal with such issues as, for instance, how far economic loss alone, without some physical or material damage to support it, can afford a cause of action in negligence by act … “.’
Then Widgery J continued ([1965] 3 All ER at 570, [1966] 1 QB at 587):
‘In my judgment, the plaintiff’s failure in these earlier cases was not because this truth to which LORD DEVLIN refers had escaped the eminent judges who decided those cases, but because the plaintiff was regarded as being outside the scope of the defendant’s duty to take care. The duty of care arose only because a lack of care might cause direct injury to the person or property of someone, and the duty was owed only to those whose person or property were foreseeably at risk. The decision in Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. does not depart in any way from the fundamental that there can be no claim for
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negligence in the absence of a duty of care owed to the plaintiff. It recognises that a duty of care may arise in the giving of advice even though no contract or fiduciary relationship exists between the giver of the advice and the person who may act on it, and having recognised the existence of the duty it goes on to recognise that indirect or economic loss will suffice to support the plaintiff’s claim. What the case does not decide is that an ability to foresee indirect or economic loss to another as a result of one’s conduct automatically imposes a duty to take care to avoid that loss. In my judgment, there is nothing in Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. to affect the common law principle that a duty of care which arises from a risk of direct injury to person or property is owed only to those whose person or property may foreseeably be injured by a failure to take care. If the plaintiff can show that the duty was owed to him, he can recover both direct and consequential loss which is reasonably foreseeable, and for myself I see no reason for saying that proof of direct loss is an essential part of his claim. He must, however, show that he was within the scope of the defendant’s duty to take care. In the present case, the defendants’ duty to take care to avoid the escape of the virus was due to the foreseeable fact that the virus might infect cattle in the neighbourhood and cause them to die. The duty of care is accordingly owed to the owners of cattle in the neighbourhood, but the plaintiffs are not owners of cattle and have no proprietary interest in anything which might conceivably be damaged by the virus if it escaped. Even if the plaintiffs have a proprietary interest in the premises known as Farnham Market, these premises are not in jeopardy. In my judgment, therefore, the plaintiffs’ claim in negligence fails even if the assumptions of fact most favourable to them are made.’
Finally Widgery J cited ([1965] 3 All ER at 570, 571, [1966] 1 QB at 588) Blackburn J’s judgment in Cattle v Stockton Waterworks Co ((1875) LR 10 QB 453 at 457, [1874–80] All ER Rep 220 at 223) where he cited Coleridge J, who said, in Lumley v Gye ((1853) 2 E & B 216 at 252, [1843–60] All ER Rep 208 at 221), that courts of justice should not—
‘… allow themselves in the pursuit of perfectly complete remedies for all wrongful acts, to transgress the bounds which our law, in a wide consciousness, as I conceive, of its limited powers, has imposed on itself, of redressing only the proximate and direct consequences of wrongful acts.’
Now a similar point of law arose on very different facts to this case, or to the case before Widgery J in 1967, before Roskill J in Margarine Union GmbH v Cambay Prince Steamship Co Ltd. That case was also on the special paper, on an agreed statement of facts. Roskill J decided in favour of the defendants. He gave leave to appeal but there was apparently no appeal. In the course of a judgment in which he fully and most carefully reviewed many previous cases, Roskill J said ([1967] 3 All ER at 781, 782, [1969] 1 QB at 232–234):
‘Thus this point of law is raised: There being no privity of contract between the plaintiffs and the defendants, can the plaintiffs sue the defendants directly in tort for the damage which the defendants by their servants have caused to the goods which, though not the property of the plaintiffs at the time when they were damaged, were ultimately delivered damaged by the ship to the plaintiffs who received them in a damaged state and who had, of course, anticipated receiving the goods in undamaged condition? … it is admitted that the defendants were negligent. It is clear that as from the moment of delivery when these parcels
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were separated from the bulk at Hamburg, the plaintiffs obtained title to these damaged goods. It is not admitted (though it was not seriously challenged by counsel for the defendants) that the damage sustained was foreseeable. Thus, contend the plaintiffs, all the ingredients of a cause of action in tort are present. They acquired title to the goods. There was physical damage to the goods, and that physical damage to the goods was foreseeably caused by the negligence of the defendants. The plaintiffs have suffered (and this is also admitted) substantial financial loss (also foreseeable). It is said all the ingredients of a cause of action in tort are present. Counsel for the plaintiffs, therefore, submits that the plaintiffs are entitled to recover from the defendants damages for the defendants’ negligence. The argument is attractive and can be simply stated. Whether it is sound in point of law requires detailed and careful analysis. The argument the other way is this: Accept that it is foreseeable that this type of damage would be sustained. It is true that the plaintiffs ultimately had these damaged goods delivered to them and have thereby suffered financial loss. But it has always been the law of this country that before anyone can sue in tort for damage to goods he must prove that he was, at the time when the damage was suffered by the negligence complained of, the owner of those goods and, as such owner, had either a legal or possessory title to them; not only has that always been the law of this country, but that principle of law has been left wholly unaffected by the two famous decisions in the House of Lords: Donoghue v. Stevenson and Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. A problem not dissimilar to that which I have to consider recently came before WIDGERY, J., at first instance in Weller & Co. v. Foot and Mouth Disease Research Institute. Counsel for the defendants has contended that I could not, even if I were minded to do so, decide the present case in favour of the plaintiffs without holding that Weller & Co. v. Foot and Mouth Disease Research Institute (which was not taken by the unsuccessful plaintiffs to the Court of Appeal) was wrongly decided. In due course I shall have to refer to Weller’s case in some detail for it seems to me to have an immediate bearing (although technically it is not binding on me) on the problem which I have to decide. Counsel for the plaintiffs contended that Weller’s case, the correctness of which he accepted in this court, was distinguishable, because the plaintiffs, Messrs. Weller, at no time suffered any physical damage to their property and were thus endeavouring to recover mere pecuniary damage suffered owning to the negligence of the defendants, where in the present case all the legal prerequisites to a successful action in negligence are fulfilled because the plaintiffs have suffered physical damage to their goods. He also argued that it did not matter that that physical damage had been sustained by negligence which occurred in point of time long before the plaintiffs became the owners of the goods in question. Counsel for the plaintiffs put his initial argument in this way. He contended that since Donoghue v Stevenson and Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. It was enough for a plaintiff in this class of case to show that the damage suffered was of a kind which was foreseeable by a defendant as likely to follow from his negligence. He subsequently limited the full breadth of that proposition by saying that a defendant must foresee the consequences of his negligence at any rate as far as anyone who would be likely to buy the goods afloat on board that defendant’s ship, or if the goods were bought before they were afloat, if the goods afloat were subsequently appropriated to a sale and purchase contract. That was the first way in which he put his case. In other words—and this is important—he sought to limit what I might call the range of foreseeability which a shipowner must be taken to possess in the eyes of the law by saying that it did not extend beyond
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the last c.i.f. buyer who might buy those goods while they were still afloat. He expressly disclaimed any intention of contending that the range of foreseeability went so far as to cover, for example, a buyer who bought ex ship. Still less did he suggest that it would extend right down the line so that, for example, a merchant in a small country town who happened to have some cockroachridden copra in his warehouse could recover damages from the shipowner notwithstanding that it was the ship’s negligence which caused the copra in the warehouse to be riddled with cockroaches.’
Then, after citing a passage from the speech of Lord Penzance in Simpson v Thomson ((1877) 3 App Cas at 289, 290), Roskill J went on to say ([1967] 3 All ER at 784, [1969] 1 QB at 237, 238):
‘In Weller’s case ([1965] 3 All ER at 563, [1966] 1 QB at 577) … WIDGERY, J., after citing that passage and certain other cases which I will mention … drew attention to the consequences of the plaintiffs’ argument being sound.[He then cited that which I have already read from Widgery J’s judgment ([1965] 3 All ER at 563, [1966] 1 QB at 577).] Thus both LORD PENZANCE ninety years ago and WIDGERY, J., two years ago drew attention to the consequences to a modern community of allowing too great an extension of liability for the consequences of an ordinary act of negligence in every-day life.’
Then, after citing more passages from Widgery J’s judgment, Roskill J went on to say ([1967] 3 All ER at 794, [1969] 1 QB at 251, 252):
‘If I may respectfully say so, I agree with every word of that judgment and I would respectfully adopt it and its reasoning as part of my own judgment in this case so far as my own judgment covers the same ground as did WIDGERY J Counsel for the plaintiffs sought to distinguish that decision by saying that the fact that the plaintiffs’ goods suffered physical damage supplied the one feature which was lacking in Messrs. Weller’s claim. It is true the goods which the plaintiffs ultimately acquired were delivered to them damaged, but they were not the plaintiffs’ goods at the time when they were damaged and, in my judgment at least, the defendants owed no duty to the plaintiffs at the time when those goods were damaged. To hold the contrary would involve a departure from what I conceive to be the well-established principles of English law and if departure is to be made from those principles, it ought not to be made by a judge of first instance.’
Then Roskill J said ([1967] 3 All ER at 795, [1969] 1 QB at 254):
‘The truth is that English law does not recognise and never has recognised a duty of care on a shipowner to anyone who was not the owner of the goods at the time when the tort was committed. In the vast majority of cases the point is not of practical importance for the plaintiff will be the bill of lading holder, and as such has his rights in contract, including the rights to sue for an antecedent tort which are given to him by virtue of the provisions of the Bills of Lading Act, 1855. As counsel for the defendants said, however, the present case is on its facts a freak case.’
A little later, Roskill J said ([1967] 3 All ER at 795, 796, [1969] 1 QB at 254):
‘I hold that as the law stands in circumstances such as those in the present case there is no direct cause of action in tort by a person, such as the plaintiffs,
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who only acquires title to goods after they been discharged from the ship, against the shipowner in respect of negligence which was committed either before the goods were loaded on board or at least not later than the time of loading … I am satisfied that at no relevant time was there any breach of duty by the defendants towards the plaintiffs.’
In 1968 Geoffrey Lane J tried an action at Glamorgan Assizes, Electrochrome Ltd v Welsh Plastics Ltd. That case concerned the cutting off of supply, but it was a supply of water and not of electricity. Geoffrey Lane J said ([1968] 2 All ER at 206) that it was the knocking over of a hydrant which indirectly caused the water supply to be cut off from the plaintiffs’ factory and, having considered the evidence regarding the plaintiffs’ consequential loss, stated that the amount of the loss £29 10s, was conceded. He then said (1968] 2 All ER at 206):
‘I will now turn to examine the question, which is purely a matter of law, whether on the facts the plaintiffs are entitled to recover the £29 10s., or indeed anything, from the defendants. The circumstances in law can, perhaps, be put thus. With knowledge that the damage to this particular hydrant and damage to this particular water main might cause inconvenience or loss to other people on the industrial estate (that knowledge I assume against them for the purposes of argument) the defendants, through their servant, nevertheless damaged the hydrant. The hydrant and the water main did not belong to the plaintiffs; indeed, the plaintiff had no proprietary rights or possessory rights of any sort either in the hydrant or the main. That hydrant and that main, so far as I know—there has been no specific evidence to this effect—were the property of the industrial estate. If then damage was done to the property of the industrial estate, damage negligently done to that property, can the plaintiffs, whose property it was not, succeed in an action for damages for financial loss which they have suffered as a consequence of such damage?’
Geoffrey Lane J then quoted from Salmond on Tortsa; he quoted once again from the speech of Lord Penzanceb; he relied on the decision of Widgery J in Weller & Co v Foot and Mouth Disease Research Institute and decided in favour of the defendants.
As I have already said, Lawton J, who ordered this preliminary issue to be tried, himself decided a case, British Celanese Ltd v A H Hunt (Capacitors) Ltd, that arose because metal foil escaped from the defendants’ premises and caused the supply of electricity to the plaintiffs’ factory to be interrupted. Counsel for the plaintiffs before me had appeared for the plaintiffs before Lawton J who, in that case, decided in favour of the plaintiffs. Lawton J followed a case in Canada which he described as ([1969] 2 All ER at 1260, [1969] 1 WLR at 967) ‘A case which, on its facts, is similar to this one … ’ That case is Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co. The facts in the Seaway Hotels case and in the British Celanese case ([1969] 2 All ER at 1260, [1969] 1 WLR at 967) are very similar to the facts in this case. Indeed, it seemed to me that counsel for the defendants could not really distinguish the Seaway Hotels case.
Counsel for the plaintiffs in opening this case put forward an argument that may be summarised thus: there are three questions to be considered on the claim based on negligence: (i) Did the defendants owe a duty of care to the plaintiffs? (ii) Were they in breach of that duty? (iii) Is the damage too remote? As to the duty to take care, he submitted that subject to exceptions, which did not here apply, a person
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was under a duty to his ‘neighbour’ to take reasonable care to avoid acts which he could reasonably foresee would be likely to ‘injure’ his ‘neighbour’. ‘Neighbour’ meant any person he could reasonably foresee would be likely to be injured. ‘Injure’ meant injury at least to person or property. He submitted that the amended statement of claim alleged that it was reasonably foreseeable that damage to the cable was likely to injure the plaintiffs’ property. This case was not within any recognised exceptions. Therefore the defendants owed a duty to the plaintiffs to take care to avoid damage to the plaintiffs. He submitted that it was irrelevant that the first physical damage was to someone else’s property.
He submitted alternatively that, since the decision in the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd, reasonable foreseeability was the test even in the case of mere pecuniary loss, although the duty of care then might not be so wide as in the case of injury to person or property. He relied on Lord Atkin’s speech in Donoghue v Stevenson ([1932] AC at 579–581, [1932] All ER Rep at 11, 12), on Haseldine v Daw & Son Ltd ([1941] 3 All ER 156 at 171, [1941] 2 KB 343 at 358) and on Hay (or Bourhill) v Young, and, in particular, the speeches of Lord Russell of Killowen ([1942] 2 All ER at 400, [1943] AC at 101) and of Lord Wright ([1942] 2 All ER at 404, [1943] AC at 107). He also relied on Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) ([1961] 1 All ER 404 at 412, [1961] AC 388 at 421). The well-established exceptions, such as the limitations on the liability of occupier to trespasser and vendor to purchaser or lessee, did not here apply. As to the irrelevance of the fact that the damaged cable was not the plaintiffs’ property he referred to collision cases and to cases of negligent repair to cars, citing Stennett v Hancock and Peters ([1939] 2 All ER 578 at 582). He also cited Hardaker v Idle District Council ([1896] 1 QB 335 at 342, 349, [1895–99] All ER Rep 311 at 316, 320). He submitted that the British Celanese case before Lawton J and the Seaway Hotels case were of great persuasive authority and indistinguishable on the facts on the duty to take care owed by this defendant to this plaintiff. The Electrochrome case before Geoffrey Lane J was, he submitted, distinguishable as there was there no proof of injury to property nor of any allegation that the particular injury and damage was reasonably foreseeable. Moreover, the water undertaker decided to cut off the supply and so the defendants’ act did not directly cause the interruption of supply.
On his second point, he submitted, rightly in my view, that negligence was to be assumed at this stage in the proceedings. As to remoteness of damage, which was his third point or question, the damage claimed was duly alleged to be causally connected with the act of the defendants and was the type of harm, so he submitted, that anyone would foresee would result from that act. He submitted that even if physical damage to the plaintiffs’ property was not alleged and even if pecuniary loss by way of loss of profit from interruption of the supply of power was alone alleged, as it was in the original statement of claim, the plaintiffs could nevertheless now recover. That was the position, he submitted, since the decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd. He particularly relied on the speeches of Lord Hodson ([1963] 2 All ER at 595, [1964] AC at 505), Lord Devlin ([1963] 2 All ER at 602, 603, [1964] AC at 516, 517), Lord Pearce ([1963] 2 All ER at 616, [1964] AC at 538) and Lord Morris of Borth-y-Gest ([1963] 2 All ER at 589, 590, [1964] AC at 496).
Counsel for the plaintiffs conceded that the act that caused pecuniary loss must
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not be a justifiable act and, it seemed to me, also conceded that there must be some connection between plaintiff and defendant other than mere foresight of damages by way of pecuniary loss. In this particular case the plaintiffs and the defendants were, he submitted, in close proximity in days when industry depended on electricity in an industrial area and there was a duty to take care to avoid unjustifiable act which would lead directly to power being cut off without warning.
As to the claim based on nuisance, counsel for the plaintiff submitted that this was a case of private nuisance. He cited Clerk & Lindsell on Tortc. He also relied on The Wagon Mound (No 2), Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd ([1966] 2 All ER 709 at 716, [1967] AC 617 at 639). Midwood & Co Ltd v Manchester Corpn, was also relied on to support the allegation that the defendants were guilty of nuisance. Campbell v Paddington Corpn, he submitted, showed that pecuniary loss alone, ie loss of profit, was sufficient to sustain an action for damages for nuisance.
Counsel for the defendants submitted that Lord Atkin’s broad doctrine was limited not so much by established exceptions as by the policy of the law. He referred to Clerk & Lindsell on Tortd. Paragraph 868 states:
‘Existence of a duty-situation. At any given point of time the existence of a duty-situation is conditioned by legal recognition of the kind of damage, the careless infliction of it and the classes of persons injured and injuring. If a case falls outside this sphere, the submission of counsel should be that there is no duty.’
The paragraph concludes by the observation:
‘It will be evident, therefore, that there is no general duty of care. The limitations that need to be imposed on Lord Atkin’s wide proposition of Dongohue v. Stevenson are not only obvious but far-reaching. Yet it should on no account be disregarded. It is valuable whenever the courts with to expand the existing area of liability, and it will then utilised as being the ratio decidendi of that case. When, on the other hand, the courts do not wish to extend liability they will either ignore it or else relegate it to the status of a dictum.’
Counsel for the defendants submitted that the only interest of the plaintiffs was in the loss of their contracts with customers and not with the cable. He relied on Elliott Steam Tug Co Ltd v Shipping Controller ([1922] 1 KB 127 at 139) and on Deyong v Shenburn. The primary or direct damage was to the cable while the wasted material in the plaintiffs’ machines was really equivalent to the loss of the auctioneers’ fees in Weller & Co v Foot and Mouth Disease Research Institute. He submitted that the defendants were liable only for primary damage, that is for negligence leading directly to physical injury to the plaintiffs’ property or person, as opposed to that leading to injury to his business activities of his convenience. In Lawton J’s illustration, the person who put sugar in the petrol in a possible plaintiff’s car would not be liable to the possible passengers of that plaintiff for loss of profit through delay being caused to them. The particulars of damage in this case, he submitted, did not make it clear that the defendants would have foreseen that the amended particulars of damage would be likely to result from their act. Loss of profit alone could really be foreseen. If the plaintiffs were
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right, then in the well-known case of Hadley v Baxendale, Hadley could always have recovered from Baxendale in tort for loss from the careless delay in returning the mill shaft.
Counsel for the defendants relied on the decisions of Roskill J and Geoffrey Lane J to which I have referred, as well as that of Widgery J. He referred also to AMF International Ltd v Magnet Bowling Ltd for passages in Mocatta J’s judgment where the phrase ‘parasitic damage’ is quoted ([1968] 2 All ER at 807, 808, [1968] 1 WLR at 1050, 1051). Counsel submitted that so far as the claim in nuisance is concerned, this case is distinguishable from the British Celanese case before Lawton J. That was a true case of a defendant using his land in a way that affected the plaintiff. Counsel cited a passage in a judgment of Denning LJ— a dissenting judgment—in Southport Corpn v Esso Petroleum Co Ltd ([1954] 2 All ER 561 at 570, [1954] 2 QB 182 at 196). This passage was approved by Lord Radcliffe when the case reached the House of Lords ([1955] 3 All ER 864 at 871, [1956] AC 218 at 242). Denning LJ had said of nuisance:
‘In order to support an action on the case for a private nuisance, the defendant must have used his own land or some other land in such a way as injuriously to affect the enjoyment of the plaintiff’s land.’
To this, counsel for the plaintiffs replied that I must assume what is alleged in para 7 of the statement of claim to be true. If so, that enabled him to say that nuisance was pleaded and could perhaps have been proved if he had not succeeded in negligence. Counsel of course only resorted to his claim in nuisance, if it was necessary to do so in order to evade the alleged rule that a plaintiff who does not suffer actual physical injury to person or property cannot recover for negligent acts that the wrongdoer must have foreseen would deprive him of profit from business activities. So far as nuisance is concerned, I hold however that this case before me is distinguishable from the British Celanese case before Lawton J. In that case, the defendants stored the material so that it escaped and then cut off the supply of electricity to the plaintiff’s premises. While there is no doubt that a single isolated escape may cause the damage that entitles a plaintiff to sue for nuisance, yet it must be proved that the nuisance arose from the condition of the defendant’s land or premises or property or activities thereon that constituted a nuisance. I am satisfied that one negligence act that causes physical damage to an electric cable does not thereby constitute a nuisance. It also seems to me wrong to suppose that, if the law limits liability for damage caused by negligence, the limitation can simply be evaded by calling the negligence a nuisance in the circumstances of a case like this one before me. It is therefore essential for me to decide whether the defendants may be liable in negligence to the plaintiffs for the damage claimed in this action.
In order to succeed in an action for damages for negligence a plaintiff has to establish carelessness by the defendant causing loss or damage to the plaintiff. In order to limit liability, for the reasons given by Widgery J and others, from the days of Lord Penzance down to those of Geoffrey Lane J, courts sometimes say either that the damage claimed was ‘too remote’ or that it was not ‘caused’ by the defendant’s carelessness (as in Woods v Duncan) or that the defendant did not ‘owe a duty of care’ to the plaintiff. It also appears that damage or loss that might be too remote to be recovered if it stood alone can, oddly enough, be recovered by the plaintiff from the defendant if it can be described as ‘parasitics’ damages: Clerk & Lindsell on Torte. The parties are, as a rule, indifferent as to the phraseology used to decide
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a claim. In applying a rule as well as in ascertaining it, the words of Lord MacDermott may usefully be borne in mind. He said in London Graving Dock Co Ltd v Horton ([1951] 2 All ER 1 at 14, [1951] AC 737 at 761):
‘The matter cannot, of course, be settle merely by treating the ipsissima verba of WILLES, J.,f as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge, but the inquiry is to ascertain the applicable rule of the common law and cannot, as I regard the position, be confined to a problem of construction.’
Moreover, it is not always possible for the law to be logical. It has to evolve practical and workable rules in the light of experience. Counsel for the defendants himself indeed argued that this must be done in order that the law may draw a sensible line between, on the one side, liability to everyone who it could be foreseen might be affected and, on the other side, no liability to anyone except a person suffering immediate and direct trespass to land or person. On reflection, I am attracted by this argument because it is in accord with the way the common law has developed. I do not however believe that it is practicable to set out a list of exceptions or even to formulate a general rule for limiting the application of what may be called Lord Atkin’s principle in Donoghue v Stevenson. The common law has always developed by experience rather than logic and by dealing with situations as they arise in what seems a reasonable way. There seems to be abundant justification in the view of a number of judges for such an approach to the problem in this case. The casting vote, as it were, in Donoghue v Stevenson itself was given by Lord Macmillan. His speech seems to me to give the clue to the correct approach. He said ([1932] AC at 618, 619, [1932] All ER Rep at 29, 30):
‘The law takes no cognizance of carelessness in the abstract. It concerns itself with carelessness only where there is a duty to take care and where failure in that duty has caused damage. In such circumstances carelessness assumes the legal quality of negligence and entails the consequences in law of negligence. What, then, are the circumstances which give rise to this duty to take care? In the daily contacts of social and business life human beings are through into, or place themselves in, an infinite variety of relations with their fellows; and the law can refer only to the standards of the reasonable man in order to determine whether any particular relation gives rise to a duty to take care as between those who stand in that relation to each other. The grounds of action may be as various and manifold as human errancy; and the conception of legal responsibility may develop in adaptation to altering social conditions and standards. The criterion of judgment must adjust and adapt itself to the changing circumstances of life. The categories of negligence are never closed. The cardinal principle of liability is that the party complained of should owe to the party complaining a duty to take care, and that the party complaining should be able to prove that he has suffered damage in consequence of a breach of that duty. Where there is room for diversity of view, it is in determining what circumstances will establish such a relationship between the parties as to give rise, on the one side, to a duty to take care, and on the other side to a right to have care taken. To descend from these generalities to the circumstances of the present case, I do not think that any reasonable man or any twelve reasonable men would hesitate to hold that, if the appellant establishes her allegations, the respondent has exhibited carelessness in the conduct of his business’
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Lord Macmillan then went on to deal with particular facts from which he inferred a duty to take care, for he said ([1932] AC at 619, 620, [1932] All ER Rep at 30):
‘But, as I have pointed out, it is not enough to prove the respondent to be careless in his process of manufacture. The question is: Does he owe a duty to take care, and to whom does he owe that duty? [He reverted to the particular facts of that case and then gave this test.] Can it be said that he could not be expected as a reasonable man to foresee that if he conducted his process of manufacture carelessly he might injure those whom he expected and desired to consume his ginger-beer? The possibility of injury so arising seems to me in no sense so remote as to excuse him from foreseeing it.’
Lord Macmillan then gave an illustration and, pointing out that the law of Scotland and the law of England are similar, said ([1932] AC at 621, 622, [1932] All ER Rep at 31):
‘I am anxious to emphasize that the principle of judgment which commends itself to me does not give rise to the sort of objection stated by Parke B. in Longmeid v Holliday [(1851) 6 Exch 761 at 768]. [Lord Macmillan read a passage from Parke B’s judgment and continued:] I read this passage rather as a note of warning that the standard of care exacted in human dealings must not be pitched too high than as giving any countenance to the view that negligence may be exhibited with impunity. It must always be a question of circumstances whether the carelessness amounts to negligence, and whether the injury is not too remote from the carelessness … The burden of proof must always be upon the injured party to establish that the defect which caused the injury was present … and that the circumstances are such as to cast upon the defender a duty to take care not to injure the pursuer.’
Lord Macmillan also dealt with the practical application of principles in his speech in Read v J Lyons & Co Ltd ([1946] 2 All ER 471 at 478, [1947] AC 156 at 175).
Lord Denning in Miller v South of Scotland Electricity Board (1958 SC (HL) 20 at 37, 1958 SLT 229 at 238) is quoted by Davies LJ in Clay v A J Crump & Sons Ltd ([1963] 3 All ER 687 at 705, [1964] 1 QB 533 at 573). He quoted Lord Denning as saying:
‘“We are concerned with the duty of care that is owed by a person doing work—or anything else—on land: and that duty is today best found by resort to the general principle enunciated by LORD ATKIN in Donoghue v. Stevenson [[1932] AC at 580, [1932] All ER Rep at 11]. Such a person—be he occupier, contractor or anyone else … owes a duty to all persons who are so closely and directly affected by his work that he ought reasonably to have them in contemplation when he is directing his mind to the task“.’
Davies LJ, after citing two Irish decisions, dealt with the case by saying ([1963] 3 All ER at 707, [1964] 1 Q at 576):
‘Fortified by these authorities, I am of the opinion that on the learned judge’s finding the architect was and remained in proximity to the plaintiff … ’
He then dealt with the question of an intermediate examination.
Now, in between the first judgment of Ormerod LJ and Davies LJ’s judgment, there was a concurring judgment, approving both the one before and the one after, from Upiohn LJ who, referring to Donoghue v Stevenson, said ([1963] 3 All ER at 701, 702, [1964] 1 QB at 568):
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‘I respectfully agree that the real test must be a question of remoteness … This is largely a question of fact and degree … causation is almost entirely a question of fact in each particular case.’
Counsel for the plaintiffs cited Lord Wright’s speech in Hay (or Bourhill) v Young ([1942] 2 All ER at 406, [1943] AC 110) where he said ([1942] 2 All ER at 406, [1943] AC 110):
‘The lawyer likes to draw fixed and definite lines and is apt to ask where the thing is to stop. I should reply it should stop where in the particular case the good sense of the jury, or of the judge, decides.’
Lord Wright had already said in Liesbosch Dredger (Owners) v Steamship Edison (Owners) ([1933] AC 449 at 460, [1933] All ER Rep 144 at 158):
‘In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons.’
The Earl of Halsbury LC said in Quinn v Leathem ([1901] AC 495 at 506, [1901–03] All ER Rep 1 at 7):
‘… there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all.’
Scrutton LJ in Re Polemis and Furness, Withy & Co Ltd said ([1921] 3 KB 560 at 576, 577, [1921] All ER Rep 40 at 47):
‘The second defence is that the damage is too remote from the negligence, as it could not be reasonably foreseen as a consequence. On this head we were referred to a number of well known cases in which vague language, which I cannot think to be really helpful, has been used in an attempt to define the point at which damage becomes too remote from, or not sufficiently directly caused by, the breach of duty, which is the original cause of action, to be recoverable. For instance, I cannot think it useful to say the damage must be the natural and probable result. This suggests that there are results which are natural but not probable, and other results which are probable but not natural. I am not sure what either adjective means in this connection; if they mean the same thing, two need not be used; if they mean different things, the difference between them should be defined. And as to many cases of fact in which the distinction has been drawn, it is difficult to see why one case should be decided one way and one another. Perhaps the House of Lords will some day explain why, if a cheque is negligently filled up, it is a direct effect of the negligence that some one finding the cheque should commit forgery: London Joint Stock Bank v. Macmillan; while if some one negligently leaves a libellous letter about, it is not a direct effect of the negligence that the finder should show the letter to the person libelled: Weld-Blundell v. Stephens. In this case, however, the problem is simpler.
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Now, I respectfully accept completely Widgery J’s view that an ability to foresee indirect or economic loss to another as a result of one’s conduct does not automatically impose a duty to avoid that loss. But, apart from that, the fact of the matter is that some consequences are more readily foreseeable than others because they are more direct or less remote. If one wishes to be wedded to words, one can say (as has been said in the Law Quarterly Reviewg) that all consequences that can be foreseen are not always reasonably within one’s contemplation. I think that it follows from the observations of the Earl of Halsbury L C, Lord Wright, Scrutton LJ, Lord Macmillan and Upjohn LJ and others, that the proper approach at the present day is to ascertain first whether the plaintiffs’ loss was reasonably foreseeable. In this case I have to assume that; so I do not have to consider whether the loss has to be foreseen because it was ‘almost certain’ or merely ‘probable’, or was ‘a natural and probable’ or a ‘direct’ result of the act. But it is still useful to go on to consider to what extent the admittedly foreseeable loss can be described as the immediate or direct or natural and probable consequence of the defendants’ act. It is relevant to consider to what extent that act can be called the effective cause of any foreseeable damage complained of. The extent to which that damage should be described as remote and the proximity of the parties is also relevant.
Relevant also is the fact, if it be the fact, that the plaintiffs actually suffered what may be described as physical harm, which is really trespass, or something like trespass, to person or property. The actions based on allegations of negligence, or on the special rule in Rylands v Fletcher, or on the so-called rule in Donoghue v Stevenson, all develop from the original action of trespass. All these are useful tests but, I think, not exclusive tests. Of course, all these are also vague tests but that is the merit of the common law, as Lord Macmillan made clear.
If the plaintiff’s foreseeable loss was only due to the plaintiff being less able to enter into particular contracts with third parties, that must be a very relevant consideration tending to exclude liability. This is especially the case today in cases of interruption of electric supply to factories because often standby plant is kept available, as at many hospitals, to cope with power failure, especially when sudden power cuts will cause physical damage. So far as vagueness is concerned, the tests of ‘reasonable doubt’ or ‘balance of probability’, in criminal law and civil law respectively, are vague but nevertheless useful. One does not reach certainty by stating a principle in particular abstract terms such as ‘natural or probable’, ‘too remote’, ‘direct’, ‘indirect’, ‘effective’ or ‘proximate’ and then proceeding to construe the statement of principle and the particular terms used as if it was a section in a modern statutory code dealing with road safety, dangerous drugs or tax matters. Assuming, as I do, that what I have described is the proper approach, it seems to me useful to try to deal with the facts of this case, which (being stated as a special case) requires an express decision whether the particular defendants on particular facts owed a duty of care to the particular plaintiffs in the way in which Lord Macmillan dealt with the facts in Donoghue v Stevenson. One must have in mind too the comments of Upjohn LJ in Clay v A J Crump & Sons Ltd ([1963] 3 All ER at 701, 702, [1964] 1 QB at 568) and last, but by no means least, the warning of Lord Penzance and others over the last century or so against extending liability.
Now, in my judgment, the plaintiffs were so closely and directly affected by the act of the defendants in that particular place that the defendants, if they had directed their minds to their operations and to the cable, ought reasonably to have had the plaintiffs in contemplation as being likely to be affected in the way in which, according to the amended statement of claim, they allege they were affected. Subject to one
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consideration that I will mention later, I can contemplate someone in the circumstances using words to this effect: “Take care of the cable or you will cut off the current to that factory without warning, and so mess up their machinery.' It is much more difficult to contemplate someone saying: “Treat that test tube tenderly or many of the auctioneers in Surrey will find there is no stock to sell.' I find it difficult to contemplate an Indonesian chargehand using words to the effect: ‘Clean that corner out carefully or cockroaches will contaminate the copra and the consignee’s customers in Antwerp will complain, and that will cost the consignee money.' Nor is it likely that a passenger in a Welsh company’s van near Cardiff would have said: ‘Hold hard or you will hit that hydrant and the water board will turn off the water; the boilers will be let out; the factories will get cold and so production will stop.’
The one consideration that would make me hesitate in this case is one that was not put in argument before me because it does not arise at this stage. It is this. Lord Macmillan emphasised that the defendant in Donoghue v Stevenson for his own ends assumed and desired the relationship with the plaintiff and so intended and expected the defective article that caused the damage to leave himself and to reach the plaintiff unexamined and ready (like a bomb in a parcel, so fixed that it will go off when the parcel is opened) to do the damage. In the case of the interruption of the supply of electric power, on the other hand, many people now, owing to cuts in power through industrial action or inadequate production, provide standby plant as a precaution, and it may be reasonable to contemplate that prudent people would do that in order to meet the position if unexpected cuts that occur without warning would in fact damage their particular machinery. That is not, however, a point open to the defendants at this stage, which is the reason why it was not put before me.
At the present stage, I am satisfied that the cases decided in favour of the defendants by Widgery, Roskill and Geoffrey Lane JJ, fall on one side of a workable line limiting the duty to take care. The cases decided by the Canadian courts and Lawton J fall on the other side of that line. So does this one at present, on the allegations in the amended statement of claim, which I must assume are true. This damage was, on the amended statement of claim, not necessarily indirect in any relevant sense; the loss of profit is alleged to be due to damage done to the plaintiffs’ machinery and to have been foreseeable as likely to result from that; and the consequences of the act complained of were not necessarily too remote to preclude compensation for failure to comply with a duty to take reasonable care for the plaintiffs’ property.
I therefore answer the question put to me, whether on the facts set out in the amended statement of claim the defendants are liable in law to the plaintiffs for the damage claimed, in the affirmative, ie in favour of the plaintiffs.
Judgment for the plaintiffs. Leave to appeal granted.
Solicitors: Nabarro, Nathanson & Co (for the plaintiffs); Berrymans agents for T Haynes, Duffell & Son, Birmingham (for the defendants).
Euan Sutherland Esq Barrister.
General Reinsurance Co Ltd v Tomlinson (Inspector of Taxes)
Alherma Investments Ltd v Tomlinson (Inspector of Taxes)
[1970] 2 All ER 436
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 15, 16, 17 DECEMBER 1969, 27 JANUARY 1970
Income tax – Profits – Computation of profits – Dutch company resident in Netherlands carrying on business of reinsurance – Permanent branch in London – Accumulation by company of surplus sums from underwriting – Separate London portfolio of investments including dollar investments – Dollar investments vested in American trustees and earmarked for American claims – Whether realised profits on London portfolio and dividends and interest from dollar investments should be included in company’s profits under Sch D, Case I – Whether excluded from computation by reason of double taxation agreement with Netherlands – Income Tax Act 1952, s 123(Sch D, Case I) – Double Taxation Relief (Taxes on Income) (Netherlands) Order 1950(SI 1950 No 1196), art III, para (3).
Income tax – Profits – Computation of profits – Associated company – Business of acquiring and holding securities – Transfer of certain securities of company to associated company in consideration of shares in associated company – Whether transferor company dealing company – Whether securities trading stock of transferor company – Whether profits of associated company on realisation of securities acquired from transferor company taxable income – Income Tax Act 1952, s 143(4)(a) – Finance Act 1960, ss 25(1) (a), 43(4) (d).
In the first appeal, a Dutch company, resident in the Netherlands, carried on the business of reinsurance with overseas subsidiaries and had a permanent branch in London. Under its constitution it could be and was known in England as General Reinsurance Co Ltd (the first taxpayer company). It authorised a syndicate to transact reinsurance business on its behalf in London. In the course of its business the first taxpayer company accumulated substantial sums from its underwriting activities, which it placed on deposit or current account or used to purchase investments. The London branch had its own portfolio of investments (the London portfolio) which had been built up from the profits of the London business, and which consisted of United Kingdom investments and certain dollar investments. The London branch transacted United States business and it was a prerequisite of American business that the first taxpayer company should have a United States trust fund. Accordingly, the dollar securities were transferred to and were held by City Bank Farmers Trust Co of New York City as trustees, but were part of the London portfolio. That portfolio was regarded by the first taxpayer company’s directors as part of the overall investment portfolio of the first taxpayer company’s group of companies, and decisions to purchase and sell investments were taken at the first taxpayer company’s head office in Amsterdam. Sterling received in London was invested in sterling securities and dollar receipts were invested in dollar securities. Claims were normally paid out of current or deposit bank accounts, and investments were not often sold to meet claims. Sales were mainly effected to improve the first taxpayer company’s portfolio. A statement of account was prepared annually relating to the London branch. That showed in the balance sheet investments (including the United States trust fund) of moneys arising out of London branch underwriting and, in the profit and loss account, ‘Interest on Investments’ and ‘Profit on Sale of Investments’. The first taxpayer company was assessed to tax under Sch D, Case I, to the Income Tax Act
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1952 for 1960–61 in respect of realised profits on the London portfolio (including the United States trust fund) and income from dollar securities. The Special Commissioners held that the realised profits on the London portfolio and the income from dollar securities should be included in the assessment of the first taxpayer company’s profits and were not excluded by the Double Taxation Relief (Taxes on Income) (Netherlands) Order 1950.
In the second appeal, Alherma Investments Ltd (the second taxpayer company) had been incorporated in 1960 with the object (inter alia) of acquiring and holding shares and securities. In 1960 and 1961 certain securities were transferred by the first taxpayer company to the second taxpayer company at prevailing market values in consideration of the allotment to the first taxpayer company of shares in the second taxpayer company. The Special Commissioners held that the second taxpayer company was assessable to tax under the Finance Act 1960, s 25a, in respect of realised profits on the sale of certain of those securities acquired from the first taxpayer company.
The first taxpayer company and the second taxpayer company appealed against the decisions of the commissioners and, by agreement, both appeals were heard together.
Held – (i) The profits on the realisation of investments of the London portfolio (including the United States trust fund) and the dividends and interest from the dollar investments were to be included in the computation of the first taxpayer company’s profits under Case I of Sch D to the 1952 Act, because—
(a) enhanced values obtained from the realisation or conversion of securities might be assessable where what was done was not merely a realisation or change of investment, but an act done in what was the carrying on or carrying out of a business (see p 446 d, post); California Copper Syndicate (Limited and Reduced) v Harris (Surveyor of Taxes) (1904) 5 Tax Cas 159 and Punjab Co-operative Bank Ltd, Amritsar v Income Tax Comr, Lahore [1940] 4 All ER 87 followed; dicta in Inland Revenue Comrs v Scottish Automobile and General Insurance Co Ltd (1931) 16 Tax Cas at 388, 389 not followed;
(b) the commissioners were fully justified in coming to the conclusion on the facts that the realised profits and the dividends and interest from the dollar investments had been obtained in the carrying on of the first taxpayer company’s business (see p 446 g, post);
(c) even though the United States investments were specifically earmarked for possible American claims, the United States investments forward part of the London portfolio and were derived from the first taxpayer company’s London branch, so that no distinction could or should be made between the United States investments and the other investments in the London portfolio (see 446 j, post);
(d) the realised profits of the London portfolio and the dividends and interest from the dollar investments were not excluded from tax by the double taxation agreement with the Netherlands, since para (3) of art IIIb of the agreement provided that there must be attributed to the ‘permanent establishment’ the profits which it might be expected to receive in the United Kingdom if it were an ‘independent enterprise’ which the London branch was properly considered to be by the commissioners (see p 447 e, post).
(ii) The realised profits of the first taxpayer company having been held to be assessable as part of its trading profits, the first taxpayer company must be a dealing company within the Finance Act 1960, s 43(4)(d)c (see p 448 e, post); and the primary definition of ‘trading stock’ in the Income Tax Act 1952, s 143(4)(a)d, being ‘property
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such as is sold in the ordinary course of the trade’, the investments which were acquired from the first taxpayer company by the second taxpayer company were trading stock (so that a realised gain by the second taxpayer company was assessable to tax) (see p 448 f, post).
Notes
For taxation where part or whole of assets are disposed of, see 20 Halsbury’s Laws (3rd Edn) 117, 118, para 211.
For the taxation of dividends and interest from abroad, see 20 Halsbury’s Laws (3rd Edn) 266, para 485, and for cases on the subject, see 28 Digest (Repl) 204, 205, 858–861 and 212–215, 898–912.
For the Income Tax Act 1952, ss 123, 143, see 31 Halsbury’s Statutes (2nd Edn) 116, 140, and for the Finance Act 1960, ss 25, 43, see 40 ibid 442, 465.
In relation to the year 1970–71 and subsequent years of assessment the Income Tax Act 1952, s 123, has been replaced by the Income and Corporation Taxes Act 1970, s 109.
The finance Act 1960, s 25, except sub-s (4), ceased to have effect as respects transactions or events carried out or occurring after 15 April 1969(Finance Act 1969, s 32(15)).
Cases referred to in judgment
California Copper Syndicate(Limited and Reduced) v Harris (Surveyor of Taxes) (1904) 5 Tax Cas 159, 28 Digest (Repl) 60, *171.
Colonial Mutual Life Assurance Society Ltd v Federal Taxation Comr (1946) 73 CLR 604.
Davies (Inspector of Taxes) v Shell Co of China Ltd (1951) 32 Tax Cas 133, 28 Digest (Repl) 37, 166.
Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14, [1955] 3 WLR 410, 36 Tax Cas 207, 28 Digest (Repl) 397, 1753.
Gresham Life Assurance Society Ltd v Bishop (Surveyor of Taxes) [1902] AC 287, 71 LJKB 618, 86 LT 693, 4 Tax Cas 464, 28 Digest (Repl) 201, 841.
Inland Revenue Comrs v Scottish Automobile and General Insurance Co Ltd (1931) 16 Tax Cas 381, 1932 SC 87, 28 Digest (Repl) 45, *128.
Liverpool and London and Globe Insurance Co v Bennett (Surveyor of Taxes) [1911] 2 KB 577, 80 LJKB 1269, 105 LT 162, 6 Tax Cas 327; affd CA [1912] 2 KB 41, 81 LJKB 639, 106 LT 323, 6 Tax Cas 327; affd HL [1913] AC 610, 82 LJKB 1221, 109 LT 483, 6 Tax Cas 327, 28 Digest (Repl) 83, 317.
Northern Assurance Co v Russell (Surveyor of Taxes) (1889) 2 Tax Cas 551, 28 Digest (Repl) 39, *34.
Ostime (Inspector of Taxes) v Australian Mutual Provident Society [1959] 3 All ER 245, [1960] AC 459, [1959] 3 WLR 410, 38 Tax Cas 492, Digest (Cont Vol A) 898, 1350.
Punjab Co-operative Bank Ltd, Amritsar v Income Tax Comr, Lahore [1940] 4 All ER 87, [1940] AC 1055, 110 LJPC 9, 28 Digest (Repl) 29, 128.
Taxes Comr v Melbourne Trusts Ltd [1914] AC 1001, 84 LJPC 21, 111 LT 1040, 28 Digest (Repl) 38, *28.
Cases stated
The first taxpayer company, General Reinsurance Co Ltd, a Dutch company resident in the Netherlands but carrying on the business of reinsurance through a branch in London, appealed against a decision of the Special Commissioners confirming an assessment to income tax for 1960–61 in respect of realised profits on invested funds and income from dollar securities. The second taxpayer company, Alherma Investments Ltd, an associated company of the first taxpayer company, appealed against a decision of the same commissioners confirming an assessment to income tax for 1960–61 in respect of realised profits on securities which had been transferred to it
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by the first taxpayer company in exchange for its shares. The facts are set out in the judgment.
Hubert H Monroe QC and S J L Oliver for the taxpayer companies.
Heyworth Talbot QC and P W Medd for the Crown.
Cur adv vult
27 January 1970. The following judgment was delivered.
FOSTER J read the following judgment. These are two appeals under s 64 of the Income Tax Act 1952 from decisions of the Special Commissioners. They are interconnected since the result of the second appeal can turn on the result of the first.
The first appeal. The appellant in the first appeal (the first taxpayer company) is a Dutch company with a Dutch name, but under its constitution it can be and is known in England and in this appeal as General Reinsurance Co Ltd. The first taxpayer company was assessed to income tax under Case I of Sch D to the Income Tax Act 1952 in respect of the profits of the trade as a reinsurance company for the year 1960–61 on the profits for the year ending 31 December 1959, and included in those profits were certain profits and dividends to which I will refer later. The first taxpayer company carries on business in Amsterdam and has its head office there. It has overseas subsidiaries and a branch in London. The first taxpayer company’s trade is that of reinsurance, that is, part of the risks carried by insurers is passed to and accepted by the first taxpayer company which in turn may pass on part of the risk to other reinsurers. This reinsurance is of two kinds, namely (a) treaty reinsurance: this is reinsurance under a contract or treaty, usually for the term of the original insurance, and under the contract certain risks are accepted by the first taxpayer company as reinsurers; or (b) facultative reinsurance: which is reinsurance of risks under ad hoc agreements, but these are now less common than treaty reinsurances.
The first taxpayer company, which carried on business in London through a branch, authorised a company called ‘General Reinsurance Syndicate Limited’, a company registered in England and which I will call ‘Syndicate’, to act in effecting reinsurance on its behalf in London. For this purpose the first taxpayer company executed a power of attorney dated 24 September 1955 in favour of Syndicate. The activities carried out by Syndicate on behalf of the first taxpayer company’s London branch are that insurance brokers in London, who wish to interest the first taxpayer company’s London branch in reinsurance, offer business to an underwriter employed by Syndicate. The underwriter usually decides whether or not to accept the business and, although he does not have authority to sign the contract, if he regards it as satisfactory, he initials a ‘slip’ which contains the terms of the contract and this is generally regarded as binding on the first taxpayer company. The draft contracts are usually sent for examination to Amsterdam and, after scrutiny there, are completed in London. If enquiries are received by letter they are usually dealt with by the head office in Amsterdam and replies sent to the first taxpayer company’s London branch for signature. The premiums, which are received by the London branch, are paid into its bank account in London and its accounts are audited by English auditors who report to the head office’s Dutch auditors in Amsterdam. The head office also decides whether the risks reinsured should be laid off, that is, reinsured with other reinsurers.
Claims under policies in the United Kingdom are made to Syndicate where they are either accepted or, if disputed, referred to the head office in Amsterdam. It is fair to say that the first taxpayer company’s administration is as far as practicable carried out at its head office in Amsterdam where mechanised accounting and computer processes are available. In the ordinary course of its business the first taxpayer company accumulates substantial sums of money; these are not left idle, but are placed on current or deposit account, or used to purchase investments.
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These sums include surplus premium income arising from the activities of the London branch acting through Syndicate and other income. It is necessary for the first taxpayer company to have substantial reserves in order to meet possible claims and to present a satisfactory financial position to induce customers to do business. Claims are normally paid out of current or deposit bank accounts. Investments are not often sold to meet claims, and it is only about five or six times a year that short term bonds, which are held for this purpose, are sold.
Sales of investments are mainly effected in order to improve the first taxpayer company’s portfolio. The policy of investment is governed by three factors. First, there is the element of spreading the risk in case of a fall in value of one currency, and the policy there is to endeavour to cover the first taxpayer company’s possible liabilities for unexpired risks in various currencies with investments in a corresponding currency. Secondly, there is to be determined the proportion of equities and bonds (ie fixed interest securities) to be held (the ratio generally aimed at was 60:40). Thirdly, bonds had to be kept in suitable proportions, both long and short term, in relation to possible liabilities for unexpired risks. These proportions and ratios are determined in relation to the global requirements of the group as a whole and not in relation to the particular requirements of the branch by itself.
The London branch has a portfolio of investments, which I will call ‘the London portfolio’, which has been built up from the profits of its reinsurance business in London. This consists of United Kingdom investments and of certain dollar investments transferred to and held by the City Bank Farmers Trust Co of New York City under a trust to which I will later refer. The London portfolio is regarded by the first taxpayer company’s directors as part of the overall investment portfolio of the first taxpayer company’s group of companies with its headquarters in Amsterdam. The decision to purchase and sell investments is taken at the head office in Amsterdam and notified by telex to a bank or stockbroker in London. In the case of investments in the London portfolio, Syndicate is informed at the same time and, where the documents of title are in London, Syndicate is asked to release them. In the case of dollar investments, Mr Slager, who works at the head office in Amsterdam, makes contact with a London stockbroker who has correspondents in New York and the sale is effected there. The documents of title are then released on instructions from Amsterdam. If it is desired to purchase dollar investments for the London portfolio, Mr Slager communicates with the first taxpayer company’s London brokers. He informs Syndicate at the same time. The stock is then bought in New York and the documents of title are deposited with the First City National Bank to the account of the London branch. The reverse procedure is carried out in the case of sales. Mr Slager’s instructions are generally given by telex from Amsterdam.
Questions of policy regarding investments are discussed at meetings in Amsterdam. The day-to-day investment is handled by Mr Slager and Mr Jolles, who also works in Amsterdam. Mr Monic, the managing director of Syndicate, takes no part except on the rare occasions when Mr Slager and Mr Jolles disagree. The directors of the first taxpayer company originally thought that, owing to exchange control regulations, as interpreted by the Bank of England in negotiations with the first taxpayer company’s agents, it must keep the London branch funds in London, although balances could be retained in dollars where dollars had been earned. This was the reason for the existence of a London portfolio. Where sterling was received in London it was invested in sterling securities. Dollar receipts were invested in dollar securities. Mr Monic now believes that dollar receipts could have been converted into sterling and remitted to Amsterdam.
Prior to 1957 the first taxpayer company decided that, in order to attract North American business through the London branch, it would be necessary to establish a fund in the United States of America as security for obligations to American insurers. The establishment of a suitable trust fund is, in fact, an essential prerequisite to the writing of American insurance by foreign non-admitted companies in the United
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States by virtue either of market requirements or of legal requirements in a number of States. A trust deed dated 4 December 1956 was, accordingly, executed by Syndicate ‘For and on Behalf of GENERAL REINSURANCE COMPANY LTD., UNITED KINGDOM BRANCH’, appointing City Bank Farmers Trust Co trustee of a fund to be held as exclusively available for the payment of claims under American policies. $250,000 in cash was paid to the trustee by the first taxpayer company and the fund was subsequently increased to $500,000 by a transfer of further cash and securities. There were no specific requirements as to the type of investments to be held but, as a matter of investment policy, bonds were preferred to equities. There were normally no payments into or out of the fund as the first taxpayer company met claims out of other resources. If the fund were reduced it would have been necessary immediately to restore it as otherwise there was a danger of business falling off or of State insurance requirements being infringed.
Consolidated accounts of the first taxpayer company’s group of companies were published and accounts relating to all the activities of the first taxpayer company itself. These accounts were of importance in attracting business since they showed the available financial resources of the group as a whole. A statement of accounts was prepared annually relating to the London branch. This showed, in the balance sheet, investments (including the United States trust fund) of moneys arising out of the London branch underwriting and, in the profit and loss account, interest on investments and profit on sale of investments, which I will call ‘Realised profit’. The Special Commissioners decided that the realised profits on the London portfolio and the dividends and interest on the dollar investments should be included in the assessment as profits of the first taxpayer company’s trade under Case I of Sch D.
In the first appeal two questions arise which may be posed as follows: (i) should the realised profits on the London portfolio and the dividends and interest on the dollar investments in the portfolio be included in the computation of the first taxpayer company’s profits under Case I of Sch D to the Income Tax Act 1952? (ii) Should the realised profits and the dividends and interest arising from the dollar investments in the portfolio be excluded from the computation under Case I because of the provisions of a double taxation order to which I will refer later, and which I will call ‘the convention’?
On the first question, the first taxpayer company submitted that the profits which arose on the realisation of the investments in the London portfolio arose on capital account and were not the product of any trade carried on in the United Kingdom. They were merely a change of investments, and in particular the realised profits arising from the United States investments and the dividends and interest on those investments ought to be treated as capital since they were specifically earmarked under the trust. For the Crown it was submitted that the realised profits should be included as trading receipts in the computation of profits under Case I of Sch D because the sale or change of investment was an act done in the carrying on of business of the insurers and that this applied also to the profit and the dividends and interest arising from the dollar investments in the London portfolio.
The first question must be considered without reference to the provisions of the convention. In any case which is binding on me the question has never been decided though there are a number of English rulings to which I have been referred which bear on the question, and one Scottish and two foreign cases which have dealt with it. In Northern Assurance Co v Russell (Surveyor of Taxes) ((1889) 2 Tax Cas 551 at 578), a Scottish case, the Lord President returned the case to the commissioners with what he called ‘instructions’ of which there were five, the fifth being in these terms:
‘(5.) Where the gain is made by the Company (within the year of assessment or the three years prescribed by the Income Tax Act [1842], Schedule D.), by
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realising an investment at a larger price than was paid for it, the difference is to be reckoned among the profits and gains of the Company.’
In Californian Copper Syndicate (Limited and Reduced) v Harris (Surveyor of Taxes) ((1904) 5 Tax Cas 159 at 165, 166), another Scottish case, the Lord Justice Clerk said:
‘It is quite a well settled principle in dealing with questions of assessment of Income Tax, that where the owner of an ordinary investment chooses to realise it, and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit in the sense of Schedule D of the Income Tax Act of 1842 assessable to Income Tax. But it is equally well established that enhanced values obtained from realisation or conversion of securities may be so assessable, where what is done is not merely a realisation or change of investment, but an act done in what is truly the carrying on, or carrying out, of a business … What is the line which separates the two classes of cases may be difficult to define, and each case must be considered according to its facts; the question to be determined being—Is the sum of gain that has been made a mere enhancement of value by realising a security, or is it a gain made in an operation of business in carrying out a scheme for profit-making?’
In Liverpool and London and Globe Insurance Co v Bennett (Surveyor of Taxes), the House of Lords decided that, where an English company carrying on insurance business in this country and abroad invested sums of money abroad and the interest on those sums was not remitted to this country (it being then the law that foreign income was charged under Sch D only to the extent that the foreign income was remitted to this country), such interest formed part of the profits or gains of the company, assessable under the Income Tax Act 1842, s 100, Sch D, Case I. Hamilton J in that case said ((1911) 6 Tax Cas at 357, 358, cf[1911] 2 KB 577 at 589, 590):
‘There is another point with regard to the Insurance Company. It embarks its funds in its business simply by having money ready to pay its debts with. We are not here concerned with manufactories or the maintenance of a stock which is to be sold. The business of insurance consists in making promises to pay, by way of indemnity, in futuro and contingent sums in consideration of present payments of money, and the whole business therefore, apart from the wisdom and prudence with which it is conducted, consists in being ready to meet the liabilities if they accrue, and to the extent to which they accrue, out of one class of funds or another. Consequently the money is embarked in the business as soon as it is money which belongs to and is available to the Insurance Company. If they have paid it away in the shape of dividends, it is no longer available, but all their assets substantially are only possessed for the purpose of meeting the contingencies of losses on the policies if they should fall in. I am speaking of fire insurance only as an illustration, but I do not think that either indemnity business or, for this purpose, life business differs, although of course the calculation of risks and the mode of carrying out the transaction are enormously different.
‘Now, the practice of English Insurance Companies, which is found to be the practice of the companies in question here, has, as far as I know, always been to start from the very first accumulating large accessible funds for the purpose of meeting losses. The advantages are numerous. It renders the calling up of unpaid capital an extremely improbable event; it presents to the insuring world an enormous reserve of security; it assures within the company a uniform
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dividend and a uniform state of solvency apart from the changes and chances of a business which is essentially a business of hazards, and consequently it is the very pivot of the conduct of a fire insurance business to build up with prudence, by not distributing surpluses of premiums as and when they are received, large reserve funds and to invest them, of course, so that they may not be fruitless while they are held in hand. That is the policy that is pursued here under Class C, and thanks to it and thanks to the usual policy of not putting all the eggs in one basket, either with regard to the risks or the investments, the companies have under all imaginable contingencies large available funds in different parts of the world readily realisable in case of need. As it appears from the case of the Liverpool and London and Globe that emergency practically does not arise. But the funds received from the investments are just as much part of the receipts of the business, and the making of the investments is just as much part of the mode of conducting the business, as the taking of the risks, and except to the extent to which the current account at the bank, fed by premiums on the one side and depleted by losses paid on the other, is sufficient to carry on the business, all these funds in their several degrees may have to be called upon at some time or in some way or other.’
Sir Herbert Cozens-Hardy MR said ((1912) 6 Tax Cas at 369, [1912] 2 KB 41 at 52, 53):
‘In these circumstances, it is contended by the Crown, and has been decided by Mr. Justice Hamilton, that the interest or dividends form part of the amount of the balance of the profits or gains of the trade adventure or concern of the Company within Case I. In my opinion, this decision was perfectly right. It seems to me that with respect to “A” and “B”, those investments are required for the purposes of the business of the Company, and that the income thereof must be brought into the profit and loss account. The business could not be conducted at all without such investments being made. With respect to Class “C”, the case is scarcely less strong. The investments are made in order to secure the credit of the Company, and to enable it to discharge its obligations in the United States and the Dominion.’
Then Fletcher Moulton LJ said ((1912) 6 Tax Cas at 371, [1912] 2 KB at 55):
‘The formation of reserve funds out of the accumulations of premiums or otherwise so as to meet the demands made upon it under its policies is an essential part of the business of such a company, and the dividends and interest from such investments form an integral part of its business receipts. For this reason I decline to treat separately the three classes A, B and C, into which these deposits and investments are divided in the Case. They appear to me to be all equally investments made for the purposes of the business, and in the ordinary course of carrying it on and the return therefrom must equally be brought into account. And inasmuch as the point was raised in argument and should not be left undecided, I hold that as a matter of interpretation the words “in the nature of trade” only qualify the word “concern” that immediately precedes them. They cannot be taken to qualify all the preceding words, inasmuch as it would be absurd to speak of a “trade in the nature of trade”, and, therefore, they can only be construed as qualifying the last of these words. The word “adventure” therefore stands unqualified, and I hold that the whole business of this Company comes rightly within it and that the interests and dividends from these deposits and investments must be brought into account in ascertaining the balance of its gains and profits.’
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Buckley LJ said ((1912) 6 Tax Cas at 374, [1912] 2 KB at 60):
‘The question here, in my opinion, is not whether these dividends have been brought into account in the balance sheet, for that is not equivalent to a receipt in the United Kingdom if the Crown is proceeding under the Fourth Case, Gresham Life Assurance Society Ltd v. Bishop (Surveyor of Taxes), but whether the interest and dividends are profits of the business as fruit derived from a fund employed and risked in the business.’
Then in the House of Lords, Lord Shaw of Dunfermline said ((1913) 6 Tax Cas at 377, [1913] AC at 617, 618):
‘Further, my Lords, not only was the entire business one business, but in the present instance it was so in a very special sense. Of these investments abroad there were three classes. “A” was the class where the investments were actually required as a condition of the Company carrying on insurance business in the United States. This was also the case with Class “B” which applied to Canada. With regard to Class “C” that consisted of sums which the Company in its own interest, and not by reason of any legal obligation, invested in the United States, Canada and Australia. The Commissioners state, and the fact must be so accepted, that these sums “are available, like any other property owned by the Company, for any other purpose of the Company whenever the Company may think fit or necessary“. There can be no doubt whatsoever that these sums, one and all, whether invested in colonies or countries abroad by reason of an obligation to comply with local laws, or as a matter of business to add to the stability of the Company, its profit-earning, or its attractiveness to foreign and colonial insurers, were in every sense of the term a business investment, that is to say, an investment in the course of business and for the purpose of business. No accountant, auditor, or actuary could exclude the interest arising from such investments from the category of the earnings and profits of the Company. If the Company itself attempted to do so, it would quoad hoc sterilise that portion of the account, compelling the interests from investments not only to be piled up as part of accumulations of capital, but not to be accounted as profits of the business. It would be ceasing to conduct correct accounting, and by the device of treating the interest as no part of the profits of the year, it would be, so to speak, treating itself as out of business quoad these investments, and as treating the interest upon them as not arising from its own trade. The whole of this argument is a mass of confusion because it is founded upon unreality, the simple fact being that these interests are part of the profits of the Company. They are treated as such quite properly in its accounts, and they are divisible as such among its shareholders.’
That case was dealing with the income arising from investments and not with profit realised from the sale of investments. There are three cases dealing with such a position, one Scottish, one Indian, in the Privy Council, and one Australian. In Inland Revenue Comrs v Scottish Automobile and General Insurance Co Ltd, a Scottish case, the General Commissioners found as a fact that the net profit arising from realisation of investments in a particular year was not trading profit and the Court of Session held that there was evidence on which the commissioners could arrive at their conclusion of fact. In Punjab Co-operative Bank Ltd, Amritsar v Income Tax Comr, Lahore, the Privy Council, inter alia, decided that the realisation by the bank of some securities was a normal step in carrying on the banking business and the
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amount realised on the sale of the securities over the cost price was taxable as part of the profits of the business of the bank. Viscount Maugham said ([1940] 4 All ER at 93, 94, [1940] AC at 1070):
‘I come now to the appeal by the bank. It may be observed that the High Court rightly appreciated that the question was ultimately one of fact, to be decided on the findings of the commissioner under the Indian Income Tax Act, 1922, s.66(2), and that the appellant bank had to establish either that the commissioner had misdirected himself on some question of law or that there was no sufficient evidence to justify his findings. Their Lordships note that the High Court, in deciding that neither of these points had been made good, examined and considered a number of cases, most of which related to insurance companies and banks. Their Lordships do not propose to attempt to reconcile all these decisions and the various dicta which are to be found in the reports of them, which might, indeed, prove to be an impossible task, and they will add that the cases relating to insurance companies largely turn on the nature of the insurance business actually carried on and the way in which reserve funds have been set side and dealt with.’
Later, Viscount Maugham said ([1940] 4 All ER at 95, [1940] AC at 1072):
‘The principle to be applied in such a case is now well-settled. It was admirably stated in Californian Copper Syndicate (Limited and Reduced) v. Harris (Surveyor of Taxes), and the statement has been more than once approved both in the House of Lords and in the Judicial Committee: see, for example, Taxes Comr. v. Melbourne Trusts, Ltd. ([1914] AC 1001 at 1010) Some dicta which appear to support the view that it is necessary to prove that the taxpayer has carried on a separate or severable business of buying and selling investments with a view to profit in order to establish that profits made on the sale of investments are taxable, for example, the dicta in Inland Revenue Comrs. v. Scottish Automobile and General Insurance Co. Ltd. ((1931) 16 Tax Cas at 388, 389, 1932 SC at 92, 93) cannot now be relied on. It is well established that, to cite the exact words used in the Californian Copper case ((1904) 5 Tax Cas at 166): ” … enhanced values obtained from realisation or conversion of securities may be so assessable, where what is done is not merely a realisation or change of investment, but an act done in what is truly the carrying on, or carrying out, of a business“.’
In Colonial Mutual Life Assurance Society Ltd v Federal Taxation Comr, the High Court of Australia decided that, where a mutual life assurance company had realised a profit from the sale of its securities, such profit was assessable either under the Australian Act as a profit arising from the carrying on or carrying out of a profit making undertaking or as a profit according to ordinary usages and concepts. In the judgment of the court, which consisted of Latham CJ and Dixon and Williams JJ, it was said ((1946) 73 CLR at 619):
‘But an insurance company, whether a mutual insurance company or not, is undoubtedly carrying on an insurance business and the investment of its funds is as much a part of that business as the collection of the premiums. The purpose of investing the funds of the appellant is to obtain the most effective yield of income. The diminution or increase in the capital value of the investment
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between the date of purchase and that of maturity, and the apportionment and deduction or addition over the intervening period of that diminution from or increase to the interest actually payable on the investment is a material ingredient in the ascertainment of this yield. In Konstam, Law of Income Taxe, it is stated that “The buying and selling of investments is a necessity of insurance business; and where an insurance company in the course of its trade realises an investment at a larger price than was paid for it, the difference is to be reckoned among its profits; conversely, any loss is to be deducted“. This view is in line with that of the Privy Council in the case of a bank in Punjab Co-operative Bank Ltd., Amritsar v. Income Tax Comr., Lahore. In our opinion there is no substantial distinction between the business of an insurance company and that of a bank in this respect. The acquisition of an investment with a view to producing the most effective interest yield is an acquisition with a view to producing a yield of a composite character, the effective yield comprising the actual interest less any diminution or plus any increase in the capital value of the securities. Such an acquisition and subsequent realisation is a normal step in carrying on the insurance business, or in other words an act done in what is truly the carrying on of the business of the society.’
The principle stated and approved by the court in the Punjab case and the Californian Copper case that enhanced values obtained from realisation or conversion of securities may be assessable where what is done is not merely a realisation or change of investment but an act done in what is the carrying on or carrying out of a business, is, I think, the true principle to be applied in this case. It was submitted on behalf of the first taxpayer company that the question was a question of law, since it amounted to the court deciding whether the realised profit was capital or income, and reliance was placed on the judgment of Jenkins LJ in Davies (Inspector of Taxes) v Shell Co of China Ltd ((1951) 32 Tax Cas 133 at 151), when he said:
‘I think it is recognised that these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts … ’
In my judgment, the question of whether it is a question of law or fact has been authoritatively stated by Lord Radcliffe in his speech in Edwards (Inspector of Taxes) v Bairstow ([1955] 3 All ER 48 at 57, 36 Tax Cas 207 at 229), where he stated that, if the court concludes that the commissioners have drawn a wrong inference from the facts, the court can correct it as a matter of law. In this case the commissioners have come to the conclusion that the realised profits and the dividends and interest on the dollar securities have been obtained in ‘the carrying on of the [first taxpayer company’s] business’. In my judgment, the commissioners were fully justified in coming to that conclusion on the facts, and I think that their conclusion was, in fact, the only true and reasonable conclusion.
It is said on behalf of the first taxpayer company that, even if that is so, then at least the realised profit on the American investments should not be included in the first taxpayer company’s profits, since those investments were specifically earmarked for possible American claims. But the American business was done by the first taxpayer company in London, and it is common ground that the American investments formed part of the London portfolio and were derived from profits of the taxpayer company’s London branch. In those circumstances I do not think that any distinction can or should be made between the American investments and the other investments in the London portfolio.
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I turn to the second question in the first appeal. It is common ground that, by virtue of the Income Tax Act 1952, s 347, and the decision of the House of Lords in Ostime (Inspector of Taxes) v Australian Mutual Provident Society, the provisions of the Income Tax Acts are overridden by the provisions of a double taxation agreement. There is such an agreementf between the United Kingdom and the Netherlands, and it is necessary to consider that order to see if its provisions make any change in the position which arises if there had been no such order. This depends on the provisions of art III, paras (2) and (3), which are in these terms:
‘(2) The industrial or commercial profits of a Netherlands enterprise shall not be subject to United Kingdom tax unless the enterprise carries on a trade or business in the United Kingdom through a permanent establishment situated therein. If it carries on a trade or business as aforesaid, tax may be imposed on those profits by the United Kingdom, but only on so much of them as is attributable to that permanent establishment.
‘(3) Where an enterprise of one of the territories carries on a trade or business in the other territory through a permanent establishment situated therein, there shall be attributed to that permanent establishment the industrial or commercial profits which it might be expected to derive in that other territory if it were in independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm’s length with the enterprise of which it is a permanent establishment.’
It was submitted on behalf of the first taxpayer company that the effect of those paragraphs was that United Kingdom tax can only be charged on the profits attributable to the London branch, that the only activities of the London branch were those of underwriting and that the dividends and interest from the dollar investments and the realised profit on the investments by the London portfolio were not derived from the activities of the London branch since the investments were controlled in Amsterdam and not by the London branch. The difficulty of that argument is, in my judgment, in ignoring the requirements of para (3) that there shall be attributed to the permanent establishment the profits which it might be expected to receive in the United Kingdom if it were an independent enterprise. If the London branch were an independent enterprise, as it must be considered to be, it would be necessary for it to have a portfolio of investments in order to carry on its business. It might be difficult in other cases to decide what the size of that portfolio must be, but in this case we find the London portfolio was built up from the past profits of the business of the London branch, and there is nothing to suggest that the London portfolio is either too large or too small for the amount of business carried on by the London branch. I see no reason, therefore, to interfere with the decision which the commissioners reached on this question, and I agree with it.
The second appeal. The second taxpayer company, Alherma Investments Ltd, was incorporated on 27 June 1960, one of its objects being to acquire and hold shares and securities. At three meetings of the directors of the second taxpayer company, namely, on 30 June 1960, 22 December 1960 and 5 May 1961, it was resolved that certain securities should be transferred by the first taxpayer company to the second taxpayer company at prevailing market values in consideration of the allotment to the first taxpayer company of shares in the second taxpayer company. The question raised is whether the realised profits on the sale of certain of those securities acquired from the first taxpayer company by the second taxpayer company is assessable to tax under the Finance Act 1960, s 25. Section 25(1) provides that where:
‘… a company, not being a dealing company,—(a) acquires from an associated company, being a dealing company, any assets being trading stock of the dealing
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company … and subsequently disposes of those assets … any profit which the first-mentioned company makes out of the transaction shall be deemed to be income … of that company and chargeable with income tax under Case VI of Schedule D … ’
The Finance Act 1960, s 43(4), provides:
‘In this Part of this Act … (d) “dealing company” means a company dealing in securities … and includes any company whose profits on the sale of securities … are part of its trading profits … (h) “trading stock” has the same meaning as in section one hundred and forty-three of the Act of 1952.’
The Income Tax Act 1952, s 143(4), provides that:
‘… “trading stock”, in relation to any trade, means property of any description, whether real or personal, being either—(a) property such as is sold in the ordinary course of the trade … ’
It is agreed that the second taxpayer company is not a dealing company and that the first taxpayer company is an associated company within the meaning of the Finance Act 1960, s 25, since the first taxpayer company owned all the shares in the second taxpayer company. There are, therefore, two questions to be answered. First, is the first taxpayer company a ‘dealing company’? Secondly, if it is, are the investments and securities transferred to the second taxpayer company by the first taxpayer company ‘any assets being trading stock’ of the first taxpayer company? On the first question I have already decided that the realised profits of the first taxpayer company are assessable as part of its trading profits and, therefore, the first taxpayer company must, I think, be a dealing company within the Finance Act 1960, s 43(4)(d), since its profits on the sale of securities must be included as part of its trading profits. On the second question, at first sight it would not seem that the transferred investments can be aptly described as ‘trading stock’. But the Income Tax Act 1952, s 143(4)(a), provides that its primary definition is ‘property such as is sold in the ordinary course of the trade’, and again I think that it follows from my decision in the first appeal that these investments are within that definition and were, therefore, trading stock of the first taxpayer company, which has been acquired by the second taxpayer company.
I have, therefore, come to the conclusion that both the appeals should be dismissed.
Appeals dismissed.
Solicitors: Crawley & de Reya (for the taxpayer companies); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Practice Direction
(Divorce: Practice: Applications in trinity term relating to children)
[1970] 2 All ER 448
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
22 May 1970.
Divorce – Practice – Applications relating to children – Desirability of making applications early in Trinty term – Difficulty arising where applications not made until just before long vacation.
Practitioners are reminded that it is desirable to make early application in Trinity term where a summons in a matter relating to children is concerned. In past years many applications, which might have been issued earlier, were not issued until just before the long vacation, a time when many High Court judges are on circuit, with consequent difficulty in finding time in the lists. There is greater need to avoid this in 1970 due to the fact that fewer High Court judges will be available in London at the end of the Trinity term than in past years.
By direction of the President with the concurrence of the Lord Chancellor.
Compton Miller, Senior Registrar
Re Pergamon Press Ltd
[1970] 2 All ER 449
Categories: COMPANY; Other Company
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 7, 8, 9, 10, 24 APRIL 1970
Company – Investigation by Board of Trade – Evidence before inspectors – Refusal by directors to answer inspectors’ questions without assurances – Jurisdiction of court – Whether directors justified in their refusal – Natural justice – Insistence on assurances unjustified – Hypothetical circumstances – Companies Act 1948, ss 165(b), 167(3).
Pursuant to s 165(b)a of the Companies Act 1948, the Board of Trade appointed the applicants as inspectors to investigate the affairs of the company. The respondents, all of whom were either past or present directors of the company intimated at inquiries held by the inspectors that they were not prepared to answer the inspectors’ questions, the subject-matter of which was intimately connected with the of legal proceedings pending at the time in a district court in the USA, unless the inspectors gave the respondents certain assurances with regard to the procedure which would be adopted if certain contingencies should arise during the inquiry, in order to ensure that any report made by the inspectors would not prejudice the respondents in the legal proceedings pending in the USA. Two of the respondents later indicated their willingness to attend and answer questions unconditionally.
Held – (i) The jurisdiction of the court under s 167(3)b of the Companies Act 1948 was strictly limited to an enquiry into the case and, if it thought fit, to the punishment of any offender, who had refused to answer questions, in like manner as if he had been guilty of contempt of court (see p 457 h to p 458 a, post).
(ii) The respondents were not justified in their refusing to answer the inspectors’ questions, because—
(a) assuming that the rules of natural justice did apply, whatever their content in the context might have been, the respondents were not entitled to insist on the assurances which they sought before agreeing to answer questions (see p 458 b, post); and
(b) the matters raised by the respondents were hypothetical and they might never have arisen (see p 458 c, post).
Notes
For the investigation of a company’s affairs, see 6 Halsbury’s Laws (3rd Edn) 388–393, paras 753–760.
For the Companies Act 1948, ss 165, 167, see 5 Halsbury’s Statutes (3rd Edn) 243–244.
Cases referred to in judgment
Allied Produce Co Ltd, Re [1967] 3 All ER 399n, [1967] 1 WLR 1469, Digest Supp.
Gaumont-British Picture Corpn Ltd, Re [1940] 2 All ER 415, [1940] Ch 506, 109 LJCh 263, 163 LT 75, 9 Digest (Repl) 627, 4188.
McClelland, Pope & Langley Ltd v Howard (1966) [1968] 1 All ER 569n, Digest Supp.
Cases also cited
ABC Coupler and Engineering Co Ltd, Re (No 2) [1962] 3 All ER 68, [1962] 1 WLR 1236.
Ceylon University v Farnando [1960] 1 All ER 631, [1960] 1 WLR 223.
Comrs of Customs and Excise v Harz [1967] 1 All ER 177, [1967] 1 AC 760.
Page 450 of [1970] 2 All ER 449
Denby (William) & Sons Ltd v Minister of Health [1936] 1 KB 337.
Durayappah v Fernando [1967] 2 All ER 152, [1967] 2 AC 337.
Grosvenor and West End Railway Terminus Hotel Co Ltd, Re (1897) 76 LT 337.
H K (an infant) Re, [1967] 1 All ER 226, [1967] 2 QB 617.
Hearts of Oak Assurance Co Ltd v A-G [1932] AC 392, [1932] All ER Rep 732.
Kanda v Government of Malaya [1962] AC 322.
London and Globe Finance Co Ltd, Re (1901–02) 50 WR 253.
Parry-Jones v Law Society [1968] 1 All ER 177, [1969] 1 Ch 1.
Pett v Greyhound Racing Association Ltd [1968] 2 All ER 545, [1969] 1 QB 125.
Pett v Greyhound Racing Association Ltd (No 2) [1970] 1 All ER 243, [1970] 1 QB 46.
R v Gaming Board for Great Britain, ex parte Benaim and Khaida (1970) The Times, 23 March.
R v Manchester Legal Aid Committee, ex parte R A Brand & Co Ltd [1952] 1 All ER 480, [1952] 2 QB 413.
R v Registrar of Building Societies, ex parte A Building Society [1960] 2 All ER 549, [1960] 1 WLR 669.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40.
Rolls Razor Ltd, Re (No 2) [1969] 3 All ER 1386, [1970] 2 WLR 100.
SBA Properties Ltd v Cradock [1967] 2 All ER 610, [1967] 1 WLR 716.
Selangor United Rubber Estates Ltd v Cradock (No 2) [1968] 1 All ER 567, [1968] 1 WLR 319.
Travel & Holiday Clubs Ltd, Re [1967] 2 All ER 606, [1967] 1 WLR 711.
Wallingford v Mutual Society (1880) 5 App Cas 685.
Wiseman v Borneman [1969] 3 All ER 275, [1969] 3 WLR 706.
Motions
These were two originating motions, under s 167(3) of the Companies Act 1948, by the applicants, Rondle Owen Charles Stable QC and Ronald George Leach, inspectors appointed by the Board of Trade pursuant to s 165(b) of the Companies Act 1948 to investigate the affairs of Pergamon Press Ltd (the company) and to report thereon. The respondents, Cecil Thomas Clark, Edwin Sidney Street, Gilbert Frank Richards, Eric Joseph Buckley, Anthony John Wheaton and Robert Maxwell, were all either past or present directors of the company. The facts are set out in the judgment.
Edgar Fay QC and J P Warner for the applicants.
Michael Sherrard QC and Alexander Irvine for Mr Clark.
Patrick Phillips for Mr Street, Mr Richards, Mr Buckley and Mr Wheaton.
Morris Finer QC and S A Stamler for Mr Maxwell.
Cur adv vult
24 April 1970. The following judgment was delivered.
PLOWMAN J read the following judgment. These are two originating motions by Mr R O C Stable QC and Mr Leach, a chartered accountant, the inspectors appointed by the Board of Trade pursuant to s 165(b) of the Companies Act 1948 to investigate the affairs of Pergamon Press Ltd, which I will call ‘the company’, and to report thereon. The notice of motion asks in each case that, pursuant to s 167(3) of the Act as amended, the court may enquire into the respondents’ refusal to answer questions put to them by the applicants as such inspectors, with respect to the affairs of the company.
The first notice of motion is dated 1 January 1970 and the sole respondent to it is Mr C T Clark, a past director of the company. The second notice of motion is dated 3 February 1970. There are five respondents; two of them, namely Mr Robert Maxwell MP and Mr Street, are past directors of the company, the other
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three, Mr Richards, Mr Buckley and Mr Wheaton, being present directors of the company.
I should at this point refer to the relevant statutory provisions. Section 165 of the Companies Act 1948, as amended, provides:
‘Without prejudice to their powers under the last foregoing section, [that refers to an investigation on the application of members of a company], the Board of Trade—(a) shall appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the Board direct, if—(i) the company by special resolution; or (ii) the court by order; declares that its affairs ought to be investigated by an inspector appointed by the Board; and [this is the relevant part] (b) may do so if it appears to the Board that there are circumstances suggesting—(i) that its business is being or has beenc conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive of any part of its members or that it was formed for any fraudulent or unlawful purpose; or (ii) that persons concerned with its formation or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other midconduct towards it or towards its members; or (iii) that its members have not been given all the information with respect to its affairs which they might reasonably expect.’
It is to be noticed that the duty of the inspectors when appointed is to investigate, not the circumstances which have caused the Board of Trade to appoint them, but the affairs of the company. Section 167, as amended, provides:
‘(1) It shall be the duty of all officers and agents of the company and of all officers and agents of any other body corporate whose affairs are investigated by virtue of the last foregoing section to produce to the inspectors all books and documents of or relating to the company or, as the case may be, the other body corporate which are in their custody or power to attend before the inspectors when required so to dod and otherwise to give to the inspectors all assistance in connection with the investigation which they are reasonably able to give.
‘(2) An inspector may examine on oath the officers and agents of the company or other body corporate in relation to its business, and may administer an oath accordingly.
‘(3) If any officer or agent of the company or other body corporate refuses to produce to the inspectors any book or document which it is his duty under this section so to produce, refuses to attend before the inspectors when required so to doe or refuses to answer any question which is put to him by the inspectors with respect to the affairs of the company or other body corporate, as the case may be, the inspectors may certify the refusal under their hand to the court, and the court may thereupon inquire into the case, and after hearing any witnesses who may be produced against or on behalf of the alleged offender and after hearing any statement which may be offered in defence, punish the offender in like manner as if he had been guilty of contempt of the court.
‘(4) If an inspector thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be so examined, he may apply to the court and the court may if it sees fit order that person to attend and be examined on oath before it on any matter relevant to the investigation, and on any such examination—(a) the inspector may take part therein either personally or by solicitor or counsel; (b) the court may put such questions to the person examined as the court thinks fit; (c) the person examined
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shall answer all such questions as the court may put or allow to be put to him, but may at his own cost employ a solicitor with or without counsel, who shall be at liberty to put to him such questions as the court may deem just for the purpose of enabling him to explain or qualify any answers given by him;
and notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him: Provided that, notwithstanding anything in paragraph (c) of this subsection, the court may allow the person examined such costs as in its discretion it may think fit, and any costs so allowed shall be paid as part of the expenses of the investigation.
‘(5) In this section, any reference to officers or to agents shall include past, as well as present, officers or agents, as the case may be, and for the purposes of this section the expression “agents”, in relation to a company or other body corporate shall include the bankers and solicitors of the company or other body corporate and any persons employed by the company or other body corporate as auditors, whether those persons are or are not officers of the company or other body corporate.’
Section 168 provides:
‘(1) The inspectors may, and, if so directed by the Board of Trade, shall, make interim reports to the Board, and on the conclusion of the investigation shall make a final report to the Board. Any such report shall be written or printed, as the Board direct.
‘(2) The Board of Trade shall—(a) forward a copy of any report made by the inspectors to the registered office of the company; (b) if the Board think fit, furnish a copy thereof on request and on payment of the prescribed fee to any other person who is a member of the company or of any other body corporate dealt with in the report by virtue of section one hundred and sixty-six of this Act or whose interests as a creditor of the company or of any such other body corporate as aforesaid appear to the Board to be affected; (c) where the inspectors are appointed under section one hundred and sixty-four of this Act, furnish, at the request of the applicants for the investigation, a copy to them; and (d) where the inspectors are appointed under section one hundred and sixty-five of this Act in pursuance of an order of the court, furnish a copy to the court; and may also cause the report to be printed and published.’
Section 170, as amended, provides that the expenses of an investigation are to be borne in the first instance by the Board of Trade but that a person who is convicted on a prosecution initiated as a result of the investigation may be ordered to pay them or part of them.
Then there are sections in the Companies Act 1967 to which I should refer. Section 37 provides:
‘(1) If, from any report made under section 168 of the principal Act or from any information or document obtained under Part III of this Act or section 18 or 19 of the Protection of Depositors Act 1963 it appears to the Board of Trade that any civil proceedings ought in the public interest to be brought by any body corporate, they may themselves bring such proceedings in the name and on behalf of the body corporate.
‘(2) The Board of Trade shall indemnify the body corporate against any costs or expenses incurred by it or in connection with any proceedings brought by virtue of the foregoing subsection.
‘(3) Section 170(1) (a) of the principal Act shall have effect as if the reference to any person who is ordered to pay damages or restore any property in proceedings brought by virtue of section 169(4) of that Act included a reference to any person who is ordered to pay the whole or any part of the costs of proceedings
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brought by virtue of subsection (1) of this section, and section 170(3) of that Act shall have effect as if the references to subsections (4) and (5) of section 169, of that Act included references respectively to subsections (1) and (2) of this section.’
Section 41 of the 1967 Act provides:
‘An inspector appointed under section 164 or 165 of the principal Act may at any time in the course of his investigation, without the necessity of making an interim report, inform the Board of Trade of matters coming to his knowledge as a result of the investigation tending to show that an offence has been committed.’
Finally, s 50 provides:
‘An answer given by a person to a question put to him in exercise of powers conferred by—(a) section 167 of the principal Act (as originally enacted or as applied by section 172 of that Act or section 32 of this Act); or (b) general rules made under section 365(1) of the principal Act for carrying into effect the objects of that Act so far as relates to the winding up of companies; may be used in evidence against him, and a statement required by section 235 of the principal Act (statement of company’s affairs to be made to official receiver) may be used in evidence against any person making or concurring in making it.’
The inspectors in the present case were appointed on 9 September 1969. Their appointment stated:
‘IN THE MATTER OF THE COMPANIES ACT, 1948 and IN THE MATTER OF PERGAMON PRESS LTD. The Boad of Trade in pursuance of the powers conferred on them by section 165(b) of the Companies Act, 1948, as amended, hereby appoint Mr. Rondle Owen Charles Stable, Q.C., of 2 Crown Office Row, Temple, E.C.4., and Mr. Ronald George Leach, Chartered Accountant, of 11, Ironmonger Lane, London, E.C.2., to act as inspectors to investigate the affairs of the above-named company and to report thereon in such manner as the Board may direct. In particular and without prejudice to the foregoing the inspectors shall report whether or not, in their opinion, the members of the above-named company have been given all the information which they might reasonably expect with regard to (a) the company’s interest in and relation to International Learning Systems Corporation Ltd. and (b) the company’s transactions with Maxwell Scientific International Inc.’
I am told by counsel for Mr Maxwell that the initiator of the investigation was the City Take-over Panel whose attention was focused on para (iii) of s 165(b). But sufficient of the background of the present case will, I think, appear if I read part of a letter which the solicitors acting for the respondents, Mr Clark and Mr Maxwell, wrote to the inspectors on 26 November 1969. It is set out in the first of the inspectors’ certificates in this case and is as follows:
‘We refer to the Board of Trade investigation which you are conducting into the affairs of the above named Company and in which, as you are aware, we act for Mr. Robert Maxwell. You will recall that at the outset of the investigation Mr. Maxwell gave an assurance of his full co-operation, confirmed in his letter of 26th September, 1969 to you. We desire, at the outset, to stress that nothing in this letter is intended or should be construed to indicate any withdrawal or qualification of the assurances which have been given. But circumstances have arisen which make it imperative that in carrying out those assurances Mr. Maxwell should himself be assured of the safeguards which common justice requires if the investigation is to lead to results which shall not only be, but also be seen to be fair. We enclose a copy of a complaint which was filed on 3rd November, 1969 in the United States District Court, Southern District of New
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York, in which the Plaintiffs are Leasco Data Processing Equipment Corporation and Leasco World Trade Company (U.K.) Limited (Leasco) and the Defendants are Mr. Maxwell and other persons and companies whose conduct and affairs are directly involved in your investigation. The subject matter of the complaint is intimately connected with the matters you are investigating. You will observe, on the one hand, the extreme generality of the allegations made in the complaint, and on the other that it seeks judgment for no less a sum than $22,000,000. [Mr Maxwell] strenuously denies all of the allegations made and we understand a counterclaim has been filed in these proceedings. You will be aware of the fact that consequent upon the extraordinary general meeting of Pergamon which was held on 10th October, Leasco, who own a minority interest of some 38% of the issued shares of Pergamon, removed from office the then directors of that Company, including Mr. Maxwell and appointed a new Board. Several of the new directors are also directors of Leasco, and in fact from Monday, 1st December Mr. Peter Stevens, Chief Executive of Leasco is appointed Managing Director of Pergamon. This will give Leasco de facto management control of Pergamon. Our first concern is with the possibility that you may make, or may be directed by the Board of Trade to make, an interim report under Section 168 of the Companies Act, 1948, in which event it is provided by that Section that the Board of Trade shall forward a copy of the report to the registered office of the Company. This means (and the same would be true of a final report) that it is inevitable that the report would find its way into the hands of Leasco, and be available to them in their conduct of the proceedings in America. We are not aware of any precedent for the situation in which an Inspectors’ report may become available to parties in current litigation with persons and companies who are in the actual course of investigation by the Inspectors, and we venture to suggest that such a consequence was not contemplated by the provision to which we have referred. The position is all the more serious when the litigation is being conducted abroad in circumstances where it is uncertain what use of the report will be permitted, and where the consequences of an adverse judgment would be so disastrous. These factors lend even more weight to the necessity for ensuring that Mr. Maxwell has a full and fair opportunity to deal with any allegations which may be made against him in the course of your investigation and with any conclusions which you may provisionally reach on the evidence taken before you.’
Then certain proposals are put forward. Later on the letter states:
‘Mr. Clark adopts for himself the position of Mr. Maxwell as we have explained it in this letter.’
The gravamen of the matter is that as a result of s 168(2)(a) of the 1948 Act the inspectors’ report is bound to find its way into what I may call ‘the enemy’s camp’.
Having regard to this fact and to the fact that an inspectors’ report is capable of resulting in serious consequences for anyone against whom the adverse findings are made, the respondents all of whom, as past or present directors of the company, had been required to attend before the inspectors and give evidence, took the view that they were entitled to certain assurances before they answered questions. They therefore, and on advice, refused to answer questions without those assurances, which the inspectors refused to give, unless ordered by the court to do so. Since then two of the respondents, Mr Buckley and Mr Wheaton, have indicated their willingness to attend and answer questions unconditionally, although the remaining respondents maintain their objections. The question which I have to consider is whether this conditional refusal to answer questions was justified.
The question of the assurances which were asked for is summarised in the inspectors’ certificates. In their first certificate they state:
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‘4 … Mr. Sherrard [who was appearing for Mr Clark] addressed us … He asked us however to give assurances—(a) That we would permit Counsel to re-examine Mr. Clark (and in that connection to make plain in advance our attitude to any application that might be made for an adjournment); (b) That, if any allegation hostile to Mr. Clark should be made by any other witness before us, such witness would be recalled for cross-examination by Counsel on behalf of Mr. Clark (and that, if necessary to make clear the substance of the allegation, the transcript of such witness’s evidence would be made available to Mr. Clark’s advisers); and (c) That, at the end of our investigation, we would consider submissions made to us on behalf of Mr. Clark in relation to any matters that might form the subject matter of any finding or recommendation adverse to him in our report.
‘5. We replied that we were not prepared to tie ourselves down in advance as to our procedure in hypothetical circumstances. Thereupon, with our permission, Mr. Clark and his advisers again retired for a short time to discuss the position. When they returned Mr. Sherrard told us that, unless ordered by the Court to do so, Mr. Clark declined to answer our questions without being given the assurances he had asked for.
‘6. We proceeded with Mr Clark’s examination. He answered a few formal questions as to his name, profession and address, and as to the identity of his advisers, and, at our request, furnished us with a list of his past and present directorships. But thereafter he refused to answer any further questions. We accordingly adjourned his examination with a view to the matter being referred to this Court.’
In their second certificate the inspectors state:
‘2. On 31st December 1969 Mr. Street and Mr Richards attended before us at 11 Ironmonger Lane aforesaid with Counsel (Mr Patrick Phillips) and a representative of their Solicitors, Messrs Herbert & Gowers & Co. Before we put any questions either to Mr Street or to Mr Richards Mr Phillips addressed us on their behalf. He informed us that both witnesses would be taking the position that unless there was an intimation by us as to the conduct of the inspection thereafter they would refuse to answer questions in relation to the affairs of the Company. Mr Phillips indicated that the following assurances were sought in respect of each of Mr Street and Mr Richards:—(i) That he would be entitled to cross-examine any witness whose evidence was or tended to be accusative of him; (ii) That he would be given the opportunity of seeing the evidence of any witness whose evidence was or tended to be accusative of him; (iii) That he would be given the opportunity of perusing, and that there would be identified to him, all documents which might be said to be accusative; (iv) That, insofar as any evidence or any document tended to be accusative of him, he would have the opportunity to speak to both the evidence of the witness and the contents of the document even though he had already given evidence before us; and that he would have the opportunity in good time to consider the effect of those matters contained in evidence or in documents; (v) That he would be allowed to be re-examined by his representative on any matters; (vi) That he would be allowed to make submissions to us on any interim findings we might come to which might be adverse to him; and (vii) That he would be allowed to call witnesses and that such witnesses would be heard by us.
‘3. We replied that we wanted to be fair and had imposed on ourselves safeguards so that injustice should not be done to witnesses appearing before us. We had permitted from the start of our enquiry every witness who had appeared before us to be represented by Solicitor or Counsel if he wished. We had also said that every witness who appeared before us could have a copy of the transcript of his own evidence if he wanted it. We were not proposing to use the provisions of section 41 of the Companies Act 1967 or to criticise and individual in our
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report, be it an interim report or a final report, without telling him in the broad the nature of the criticism and giving him an opportunity of giving us his explanation. We would also permit reasonable re-examination of a witness by his representative. But, if we were to extend to Mr Street and Mr Richards all seven rights claimed on their behalf by Mr Phillips, we must likewise extend those rights to every other witness whose conduct might be open to criticism. To do so would involve our trying right out every matter of criticism and would make our task impossible. It would lengthen our enquiry to such an extent as to make our report useless. It would also involve—and this we were not prepared to do—giving witnesses undertaking touching hypothetical matters which had not arisen and might not arise. We accordingly proposed to continue with our enquiry.
‘4. Thereupon, with our permission, Mr Street and Mr Richards withdrew with their advisers to consider the position. When they returned Mr Phillips informed us that both witnesses felt they were unable to answer our questions. We proceeded with the examination of Mr Street and thereafter of Mr Richards. Both were sworn. Each of them answered questions as to his name and address but thereafter refused to answer any further questions. We accordingly adjourned the examination with a view to the matter being referred to this court.’
Later on in that certificate, the inspectors state:
‘12. On 8th January 1970 Mr Maxwell (accompanied by Mr David Freeman of Messrs. D.J. Freeman & Co.) attended before us at 11 Ironmonger Lane aforesaid as did Mr Buckley and Mr Wheaton with Counsel (Mr Patrick Phillips) and a representative of Messrs. Herbert & Gowers & Co. Mr Phillips said that so far as Mr Buckley and Mr Wheaton were concerned they were taking precisely the same points that he, Mr Phillips, had taken on behalf of Mr Richards and Mr Street and that he adopted the submissions he had made on their behalf. By way of clarification he added that he was not necessarily saying that all seven of the points he had made must necessarily be conceded by us, but that his clients wanted an indication from us that we would concede so many of those points as they thought sufficient to protect them. Mr Phillips further explained that, when addressing us on behalf of Mr Richards and Mr Street, he had not made reference to section 50 of the Companies Act 1967 but that he now adopted the submissions which had been made to us in relation to that section by Mr Michael Sherrard Q.C., when he had addressed us on behalf of Mr Cecil Thomas Clark. Mr Freeman said that on behalf of Mr Maxwell he adopted in toto the submissions which had been made to us by Mr Sherrard when he had appeared before us on behalf of Mr Clark. Mr Freeman said that he did not wish to add to or subtract from those submissions.
‘13. By way of reply we referred to our letter of 1st December 1969 to Messrs. D.J. Freeman & Co. and said that that letter summarised our attitude. We added that we proposed to continue the examinations of Mr Maxwell, Mr Buckley and Mr Wheaton, rather than hold up our enquiry while the question of Mr Clark’s refusal to answer was litigated in the Courts, because it would be a serious hold-up. Each of Mr Maxwell, Mr Buckley and Mr Wheaton was sworn, and each of them, after replying to questions as to his name and address, refused to answer further questions with respect to the affairs of the Company. We accordingly adjourned the examination with a view to the matter being referred to this Court.’
The refusal of each respondent to answer questions had no particular relevance to the question put at the point where he refused to answer. It was a block refusal. I have heard a great deal of argument on the question whether the rules of natural justice apply to an investigation under s 165 of the 1948 Act, and if so, to what extent.
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Counsel on behalf of the respondents submitted that the rules of natural justice did apply. Counsel for Mr Maxwell, urged that the fact that the appointment of inspectors had been made under s 165(b) raised an aura of suspicion against his client; that any answers which Mr Maxwell might give could be used in evidence against him; that an investigation was capable of resulting in a prosecution, in a liability for the costs of the investigation and in a liability to civil proceedings; that the inspectors’ report had an evidential value of its own (see Re Allied Produce Co Ltd and certain earlier casesf referred to in it) and that in the particular circumstances of this case the report would obtain currency by publication, if not to the world, to the persons suing Mr Maxwell in America on a claim intimately related to the very matters under investigation.
Fortified by copious references to authority, counsel for the respondents submitted that natural justice in the sense of ‘fair play in action’ (as it was described by Harman LJg) was imported as a matter of law into the investigation. At the same time counsel conceded that the court had to take into account the fact that the investigation was not a trial, that there was a need for expedition, and that the inspectors were men of competence, experience and integrity. It was a question of where one drew the line.
Counsel for the Board of Trade submitted that the rules of natural justice did not apply and that there was no reported case which decides that they do apply to a purely investigatory procedure which produces no consequences of its own; on the contrary, there were cases which decide that they do not. He urged that the investigation was not a judicial proceeding; there was no ‘lis’, no parties; the inspectors reached no decision, could make no order and had no sanctions at their disposal. He submitted that if, as counsel for Mr Maxwell had argued, an inspector’s report could be followed by disagreeable consequences, it was only as a result of some novus actus interveniens (to borrow the language of causation). Counsel for the Board of Trade, however, conceded that there was a point in the investigation at which the rules of natural justice might become operative, namely, when the inspectors came to put questions to witnesses, because a witness was entitled to refuse to answer on the ground of incrimination. So much was held by the House of Lords in McClelland, Pope & Langley Ltd v Howard.
The inspectors’ own view of the matter appears to have been that natural justice was a matter to which they were bound to have regard. Let me assume, as Lord Upjohn who delivered the leading speech in McClelland v Howard appears to have done in that case, that at any rate at some point in their investigation the inspectors were concerned with principles of natural justice; what follows? It was suggested on behalf of the respondents that I must then consider the content of those principles and the question whether what the inspectors in fact offered to do corresponds with what the law requires. I do not accept that this is so. In my judgment the question which falls to be decided in these proceedings is very much narrower than the range of the argument suggests. My jurisdiction under s 167(3) of the 1948 Act is strictly limited. I have no power to make any declaration (see Re Gaumont-British Picture Corpn Ltd ([1940] Ch 506 at 513).) I have no power to give directions to the inspectors; I have no power to lay down any code or regulations for the conduct of the investigation. My jurisdiction is to enquire into the case and, if I think fit, to punish the offender who has refused to answer questions in like manner as if he had been guilty of contempt of
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court. As I said earlier, what I am concerned with is the question whether the respondents were justified in refusing to answer. That is the question which Crossman J asked himself in the Gaumont-British case ([1940] 2 All ER 415 at 417, [1940] Ch at 511).
I can express my opinion of the matter in a sentence: assuming that the rules of natural justice do apply, and whatever their content in this context may be, in my judgment the respondents were not entitled to insist on the assurances which they sought before agreeing to answer questions. I consider that the inspectors were perfectly entitled to say, as they did in fact say, that they were not prepared to bind themselves in advance as to their procedure in hypothetical circumstances.
The objections taken on behalf of the respondents were, in my judgment, premature. The matters raised were, and still are, hypothetical, and they may never arise. In the circumstances the respondents were not, in my judgment, justified in their refusal to answer the inspectors’ questions, but I propose to do no more than order them to pay the costs of this application.
Finally, in fairness to the respondents, I want to make it clear that although this investigation has been ordered by the Board of Trade, and although I have held that they were not justified in their refusal to answer questions, nothing that has happened in this court casts and reflection on their good names. Discreditable conduct on the part of any respondent has not been either charged or investigated before me, and if the possibility of charges has been mentioned, it has only been for the purpose of putting forward a hypothesis and pointing an argument.
Order accordingly.
Solicitors: Solicitor, Board of Trade; Lewis Silkin & Partners (for Mr Clark and Mr Maxwell); Herbert & Gowers & Co (for Mr Street, Mr Richards, Mr Buckley and Mr Wheaton).
Jacqueline Metcalfe Barrister.
R v Parker
[1970] 2 All ER 458
Categories: CRIMINAL; Sentencing, Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND CROSS LJJ AND O’CONNOR J
Hearing Date(s): 14 APRIL 1970
Criminal law – Appeal – Sentence – Handling stolen goods – Relation of sentence to facts of particular charge – Disparity of sentence between co-offenders.
Criminal law – Appeal – Right of appeal – Compensation order – Theft Act 1968, s 28(1), (5) – Criminal Appeal Act 1968, s 30(4).
Criminal law – Compensation – Compensation order – Stolen goods – Goods in respect of which accused convicted all recovered – Order made in respect of other goods not subject of charge – Annulment of order – Theft Act 1968, s 28(1) – Criminal Appeal Act 1968, s 30(4).
One ton of tea was stolen from a supermarket. The appellant and his co-accused were stopped by the police, while driving in a van several hours after the theft, and questioned. The appellant gave a false name and ran away. He was chased and caught in a garden where the next day the police found his wallet which contained £118 10s. Investigation revealed that the appellant and his co-accused had transported one-half ton of the tea in the van to a third man who was later charged and convicted of handling stolen goods and was fined £50. The appellant and his co-accused were convicted of handling the half ton of tea. The half ton of tea, in respect of which the convictions were obtained, was recovered. The co-accused, who had played only a minor part, had a sentence of imprisonment made concurrent to a substantial
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term that he was already serving and, in effect, received an additional custodial sentence of only a little over nine months. In sentencing the appellant to two years’ imprisonment, the court made reference to the fact that possibly the money found in the possession of the appellant and his co-accused represented the proceeds of the sale of the other half of the stolen tea. A compensation order was made under s 28(1)(c)a of the Theft Act 1968 against the appellant on the basis of the £118 10s found by the police.
Held – (i) The appellants’ guilt and sentence should have been related to the handling of the one-half ton of tea without reference at all to the fact that the other tea had been stolen at the same time; further, this was a case where disparity of treatment in sentencing could properly be considered, and the sentence of two years’ imprisonment was out of scale when compared with sentences imposed on the co-accused and the recipient of the tea; accordingly, the sentence would be reduced to bring the appellant on a par with the other sentences (see p 460 j to p 461 a and p 461 f, post).
(ii) On the true construction of s 28(5)b of the Theft Act 1968 and s 30(4)c of the Criminal Appeal Act 1968, the appellant had a right of appeal against and order for compensation under s 28(1)(c) of the Theft Act 1968(see p 462 e, post).
(iii) Even if it were to be assumed that for the purposes of s 28(1)(c) the £118 10s had been taken out of the appellant’s possession on his apprehension, the order for compensation under s 28(1)(c) was wrongly made and would be annulled under s 30(4) of the Criminal Appeal Act 1968, because, since the whole of the tea in respect of which the appellant was convicted had been recovered, it was an incorrect exercise of any discretion which existed under s 28 to make the appellant pay compensation in respect of goods which were not the subject of the charge against him (see p 462 j to p 463 a, post).
Notes
For compensation in respect of stolen goods, see Supplement to 10 Halsbury’s Laws (3rd Edn), para 1583A.
For the Theft Act 1968, s 28, see 8 Halsbury’s Statutes (3rd Edn) 800, and for the Criminal Appeal Act 1968, s 30, see ibid 710.
Appeal
This was an appeal by Harry Parker against his sentence of two years’ imprisonment imposed on 26 September 1969 at West Riding Quarter Sessions by the deputy chairman (S S Gill Esq) for handling stolen goods and an order for compensation in respect of stolen goods not the subject-matter of the charge against him. The facts are set out in the judgment of the court.
E Lyons for the appellant.
The Crown was not represented.
14 April 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. The appellant pleaded guilty at West Riding Quarter Sessions to handling a quantity of stolen tea. He had been charged with burglary of and stealing a quantity of tea (about twice the amount which he was alleged to have handled) but he pleaded not guilty to that charge and his plea was accepted by the prosecution. One must approach this case, therefore, on the footing that he was guilty, and guilty only, of handling approximately one-half of the total quantity of stolen goods. In respect of that offence he received a sentence of two years’ imprisonment and he was also ordered under s 28(1)(c) of the Theft Act 1968 to make compensation in the sum of £118 10s, which, it was submitted by the prosecution, had been taken out of his possession on his apprehension.
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The case is a somewhat difficult one which raises points on the comparatively recent Theft Act 1968, and, therefore, the circumstances must be dealt with in a little detail. The burglary and stealing occurred at about 6.00 pm or thereafter on 24 June 1969. The premises broken into were a supermarket in Wakefield called the Queen’s Supermarket. The goods stolen were approximately one ton of tea, the value of which was something over £950. It was said by the prosecution, no doubt rightly, that this was a large well-organised theft involving a number of people. The interest of the appellant in the matter was, on the facts before quarter sessions, confined to the following. At about 11.00 pm that night he was seen driving a white Ford transit van and in the back was a man called Lucas. The van was stopped by the police and in the van was a number of small articles of no great significance in themselves, but which were proved to have come from the supermarket theft and immediately implicated the van, if not Mr Lucas and the appellant, in the affairs of that evening. When stopped the appellant gave a false name and ran away. He was chased by the police and arrested in a garden nearby, and the following day the police found in that garden a wallet containing £118 10s, which was the appellant’s wallet. It was that money which formed the basis of the order for payment of compensation to which I have already referred, because it was treated rightly or wrongly as money which had been taken from the appellant on his apprehension within the meaning of the section.
To go on with the story, further investigation disclosed that a part, approximately one-half ton of the stolen tea, worth a little over £500, had been transported in this van by Mr Lucas and the appellant to a man called Goldberg, and Mr Goldberg had taken charge of the goods. No doubt some transaction of sale and purchase with Mr Goldberg was involved, but that half ton was traced and recovered, and eventually returned to its original owner. Mr Goldberg not unnaturally was charged with handling, but by a piece of good fortune on his part was dealt with by the magistrates and fined £50. That is a matter to which attention must be paid hereafter because one of the arguments raised in this appeal is the disparity between the sentence passed on the appellant and the sentence passed on Mr Goldberg.
Going back again to the van, the story that emerged was that Mr Lucas, who was co-accused, was disqualified from driving and the appellant had been brought into this affair for the relatively simple purpose of driving the van a short distance through Leeds and transporting in it one-half ton of tea on its way to its intended recipient, Mr Goldberg. His case, as presented below, was that he had received a small payment for this relatively small service of driving the van for a short distance, that he had not been concerned, of course, with any of the remaining stolen tea, but only with the half ton which was in the van, and that he had played a relatively minor part in the affair, less significant than that of Mr Lucas, who seems to have been in charge of the consignment en route, and certainly less significant than that of Mr Goldberg, who was the purchaser of this half ton of tea.
The matters which arise before this court today fall into two divisions. The first question we have to consider is whether a sentence of two years’ imprisonment was a proper sentence for the part played by the appellant in the offence itself, and, secondly, whether the order for payment of compensation was a proper order under the powers in the Theft Act 1968. The court will deal with those two matters separately.
So far as the sentence of imprisonment is concerned, the appellant is a man of 26, who had a number of convictions for dishonesty beginning in 1957 when he was aged 14 and finishing in 1966 when he was sent to prison for three months in respect of two cases of larceny. Since 1966 he had not been in trouble and he seems to have been a good worker and to have provided for those dependent on him. Perhaps more significant is the fact that there was some confusion in the court below with regard to the extent to which he should be considered to be implicated in the original theft of one ton of tea. The prosecution having agreed to accept his plea of not guilty to the
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burglary, and he having been convicted only of handling one-half of the total quantity stolen, it seems clear to this court that his guilt and sentence should have been related to the handling of that one-half without reference at all to the fact that other tea had been stolen at the same time. However, this is not what happened because in opening the case, counsel for the prosecution referred to the money found in the wallet to which I have already made mention and also referred to a sum of £204 found on Mr Lucas. It was then pointed out by counsel for the prosecution that these two sums together might well have amounted to the purchase price of the other half ton of tea with which, on the appellant’s plea, he was totally unconnected. That error having been introduced into the proceedings by counsel in opening the case, it was picked up, if I may use the expression, by the deputy chairman when sentencing because, in setting out the considerations which had moved the court to impose the sentence which it did, reference was made to the fact that money possibly representing the other half of the proceeds of the theft was found on the appellant and Mr Lucas. That was a conclusion which was not open to the deputy chairman in the circumstances. He should have totally disregarded it, and this court is left with the clear impression that that factor may have influenced the totality of the sentence passed, and, if it did, that influence was wrongly exerted.
Furthermore, this is one of those comparatively rare cases where there is something to be said on the disparity of treatment between the three persons to whom I have referred. This court listens to many arguments on disparity which are wholly without foundation, but this is not one of those cases. It is to be observed here that Mr Goldberg, who was, we think, probably more culpable, perhaps considerably more culpable, than the appellant, only received a £50 fine, and Mr Lucas, although he had nominally received a sentence of three years, had that sentence made concurrent with a substantial sentence that he was already serving, so that in effect the additional custodial sentence resulting to Mr Lucas for this affair was a little more than nine months. When one has regard to that treatment of Mr Goldberg and Mr Lucas, it becomes apparent at once that two years’ imprisonment was out of scale for the appellant, and we think perhaps that the reason why things went wrong was that the deputy chairman was misled into thinking that the balance of the stolen goods in some way affected the appellant’s culpability.
Having listened to the argument of counsel for the appellant, and having regard to the considerations which I have set out, we think that the appeal should be allowed so far as the sentence is concerned, and for the sentence of two years’ imprisonment which was then imposed we shall substitute such sentence of imprisonment as will result in the appellant being released tomorrow. We do that on the basis that he has already served the equivalent of some nine or ten months’ imprisonment, assuming he is entitled to remission, and that is sufficient to bring him on to a par with Mr Lucas.
The court must now go on to deal with the other quite difficult question of the order of compensation to which I have referred. Section 28(1) of the Theft Act 1968 provides:
‘Where goods have been stolen, and a person is convicted of any offence with reference to the theft (whether or not the stealing is the gist of his offence), the court by or before which the offender is convicted may on the conviction exercise any of the following powers:—(a) the court may order anyone having possession or control of the goods [that is the stolen goods] to restore them to any person entitled to recover them from him; or (b) on the application of a person entitled to recover from the person convicted any other goods directly or indirectly representing the first-mentioned goods (as being the proceeds of any disposal or realisation of the whole or part of them or of goods so representing them), the court may order those other goods to be delivered or transferred to the applicant; [neither of those paragraphs has any relevance to the present case] or (c) on the application of a person who, if the first-mentioned goods were in
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the possession of the person convicted, would be entitled to recover them from him, the court may order that a sum not exceeding the value of those goods shall be paid to the applicant out of any money of the person convicted which was taken out of his possession on his apprehension.’
Before considering whether the deputy chairman acted rightly in using that power in the way in which he sought to do, the first question that we have to consider is whether a right of appeal exists to this court against the order at all. I say that because the matter has arisen once before in this court and was left undecided on the footing that there might be some doubt. We feel unable to avoid a resolution of this difficulty and must proceed to do our best on it. Section 28(5) provides in terms that:
‘Any order under this section shall be treated as an order for the restitution of property within the meaning of sections 30 and 42 of the Criminal Appeal Act 1968(which relate to the effect on such orders of appeal).’
Section 30(4) of the Criminal Appeal Act 1968 provides:
‘The Court of Appeal may by order annul or vary any order made by the court of trial for the restitution of property to any person, although the conviction is not quashed; and the order, if annulled, shall not take effect and, if varied, shall take effect as so varied.’
Looking at that language and giving it a plain and ordinary meaning, we think the proper conclusion is that it does give a right of appeal to a person such as the appellant in the situation which he is in in this case. Hence the first hurdle, if one may so describe it, is surmounted.
The next question logically is whether the money found in his wallet in the garden was money which was taken out of the possession of the appellant on his apprehension. We recognise that there may be arguments on both sides on this issue, but in view of the conclusion which we have reached on the next succeeding point, we think it unnecessary to express a final view on that. We proceed, therefore, for the purposes of this judgment on the assumption that this money was within s 28(1)(c) of the Theft Act 1968 on the footing that it was taken out of his possession on his apprehension. Then, having reached that point, what is the position in regard to the making of this order? One argument put forward by counsel for the appellant is that on the proper construction of this section and in the circumstances of this case the goods initially referred to in s 28(1) are confined to the goods which the appellant was convicted of handling; in other words, that the goods are only the one-half ton which the appellant handled. Of course, if that construction is right, it follows that the orders under s 28(1)(a), (b) and (c) would be similarly limited, and that since all the goods which the appellant handled were recovered, there could be no justification for the making of an order under the section at all.
The alternative argument is that, even if that be wrong and even if the language of the section properly construed would permit the making of this order in the circumstances of this present case, yet, in fact, to make such an order would of necessity be an incorrect exercise of the discretion in the court below in that it cannot be right, so the argument goes, that an accused who can show that all the goods which he was responsible for handling have been recovered, should nevertheless be made to make compensation in respect of other goods which were not the subject of his conviction at all.
This being, as I have said, an early case under the Theft Act 1968, we are not anxious to commit ourselves precisely at this stage to the meaning of the language in sub-s (1), but we are quite satisfied that on the facts of this case the order for compensation was wrongly made. If an accused is charged with handling stolen goods and the whole of the goods in respect of which he had been convicted are recovered, then it must, we hold, be an incorrect exercise of any discretion which exists under the
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section to make him pay compensation in addition in respect of other goods which are not the subject of a charge against him.
For those reasons we are satisfied that this compensation order was wrongly made and we accordingly annul it under our powers in s 30(4) of the Criminal Appeal Act 1968.
Appeal allowed. Sentence varied.
Solicitor: Registrar of Criminal Appeals (for the appellant).
S A Hatteea Esq Barrister.
Charles Clay & Sons Ltd v British Railways Board
[1970] 2 All ER 463
Categories: LANDLORD AND TENANT; Tenancies
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 16, 29 APRIL 1970
Landlord and tenant – Notice to quit – Validity – Periodic tenancy – Written agreement – Notice to be three months either way – Proviso that landlord might give notice only if premises required for specified purposes – Whether proviso repugnant to nature of tenancy – Whether proviso rendered agreement void.
The tenancy agreement in force between the board and the tenants stipulated that the periodic tenancy might be determined by either party on giving to the others three months’ notice in writing provided that the board should not so determine the tenancy until it required the premises for specified purposes. The board gave notice to the tenants purporting to terminate the tenancy although the board admitted that it did not require the premises for any purpose specified in the agreement.
Held – Since the board did not so require the premises, the notice was invalid and of no effect, because—
(a) parties who agree to a periodic tenancy of premises may contract as between themselves that the notice to quit must be in terms agreed between them, and not in accordance only with the notice which the law would otherwise imply (see p 466 f, post); and, accordingly,
(b) the proviso was not repugnant to the nature of the tenancy; nor did the proviso make the whole tenancy agreement void (see p 466 g, post).
Breams Property Investment Co Ltd v Stroulger [1948] 1 All ER 758, Simonds (H & G) Ltd v Heywood [1948] 1 All ER 260 and Wallis v Semark [1951] 2 TLR 222 followed.
Doe d Warner v Browne (1807) 8 East 165 and Cheshire Lines Committee v Lewis & Co (1880) 50 LJQB 121 distinguished.
Notes
For the determination of periodic tenancies generally, see 23 Halsbury’s Laws (3rd Edn) 530, 531, para 1185, and for cases on the subject, see 31 Digest (Repl) 480, 6055–6062.
Cases referred to in judgment
Breams Property Investment Co Ltd v Stroulger [1948] 1 All ER 758, [1948] 2 KB 1, [1948] LJR 1515, 31 Digest (Repl) 154, 2918.
Page 464 of [1970] 2 All ER 463
Cheshire Lines Committee v Lewis & Co (1880) 50 LJQB 121, 44 LT 293, 45 JP 404, 31 Digest (Repl) 62, 2187.
Doe d Warner v Browne (1807) 8 East 165, 103 ER 305; subsequent proceedings sub nom Browne v Warner 14 Ves 156, (1808) 14 Ves 409, 31 Digest (Repl) 64, 2212.
Simonds (H & G) Ltd v Heywood [1948] 1 All ER 260, 31 Digest (Repl) 48, 2067.
Wallis v Semark [1951] 2 TLR 222, Digest (Cont Vol A) 1026, 6349a.
Cases also cited
Forbes v Git [1922] 1 AC 256.
Gladstone v Bower [1960] 3 All ER 353, [1960] 2 QB 384.
Lace v Chandler [1944] 1 All ER 305, [1944] KB 368.
Adjourned summons
This was an application by Charles Clay & Sons Ltd, the tenants under an agreement with the predecessors to the British Railways Board, for a declaration on the construction of the agreement that the notice given by the board dated 9 September 1969 and purporting to determine the agreement was invalid and of no effect. The facts are set out in the judgment.
T L G Cullen for the tenants.
V G Wellings for the board.
Cur adv vult
29 April 1970. The following judgment was delivered.
FOSTER J read the following judgment. The facts in this case lie in a narrow compass and are not in dispute. By an agreement dated 9 December 1920 and made between the Midland Railway Co (the company), of the one part, and Charles Clay & Sons Ltd (the tenants), of the other part, the company agreed to let and the tenants agreed to take certain land at Luton shown on the plan from 10 June 1920 for one half year—
‘1. … and so on from half year to half year until the said tenancy shall be determined at the yearly rent of One Pound (£1) payable half yearly and the first payment to be made on the tenth day of December next.
‘2. This agreement may be determined by either party on giving to the other three months notice such notice to be in writing and to expire at any time here-after without reference to the commencement of the Tenancy. The Tenants shall have no claim upon the Company for any damage or loss that he may sustain by giving up the said Premises pursuant to such Notice (except the reasonable value of any growing crops which may be then unfit to get) and shall pay a proportionate part of the said rent for the fraction of the current half year up to the day of the expiration of such notice. Provided that this Agreement shall not be so terminated by the Company until they shall require the said premises for the purposes of their undertaking.’
On 9 September 1969, the British Railways Board (the board), the successors to the company, gave to the tenants a notice under s 25 of the Landlord and Tenant Act 1954 purporting to terminate the tenancy on 25 March 1970 and not opposing an application to the court under Part II of the Act for the grant of a new tenancy.
It was admitted by the tenants that if the board could give a notice under the tenancy agreement this notice was a valid one, even though purported to be given under s 25. The board admitted that it did not require the premises for the purposes of their undertaking, but only wished after 50 years to obtain an economic rent. For the board it was submitted, first, that the tenancy was void because the effect of the proviso to para 2 was to make the tenancy one of uncertain duration, since the board might never require the premises for the purposes of its undertaking, and secondly, that the proviso was in any event void as it was repugnant to the nature of a
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periodic tenancy, in that it not only confers a fetter but also nullifies the board’s right to terminate the periodic tenancy unless and until it requires it for the purposes of its undertaking and therefore converted the periodic tenancy into a tenancy for an uncertain duration, and that the proviso was therefore repugnant and void.
The board relied on two cases, Doe d Warner v Browne and Cheshire Lines Committee v Lewis & Co. In my judgment the first case is distinguishable from the present case on its facts. In that case the landlord’s right to give a notice to quit was entirely dependent on the conduct of the tenant since the landlord agreed not to turn out the tenant:
‘… so long as the rent is duly paid quarterly, and he [the tenant] does not expose to sale or sell any article that may be injurious to [the landlord] in his business.’
Lord Ellenborough CJ said ((1807) 8 East at 167):
‘… here it is entirely repugnant to the nature of a tenancy from year to year, such as this is contended to be, that the option of determining it should rest solely with the tenant.’
The board submits that the Cheshire Lines Committee case exactly covers the present case. In that case the landlords had signed a letter to the tenant in these terms ((1880) 50 LJQB at 123): ‘Gentlemen, You may have the premises as per agreement signed by you until the railway company require to pull them down.' Lush J said ((1880) 50 LJQB at 124):
‘There is this difference between the two cases, that in Doe d Warner v. Browne the lessor engaged not to turn out the tenant so long as he observed the conditions, and in this case Radcliffe engages that the tenant shall hold until the company require to pull down the buildings. But, as that is an event which may never happen, the distinction is merely between the contingency of the tenant breaking the conditions and the contingency of the company wanting the premises in order to pull them down. The restriction is as repugnant to the nature of the tenancy in the one case as in the other. It is therefore no legal answer to the ejectment to say that the contingency provided for has not happened.’
The majority of the Court of Appeal, Bramwell and Baggallay LJJ decided the case on the footing that the letter setting out the restrictions on the landlord’s right to give a notice to quit was not part of the agreement between the parties, the letter being merely a statement of the landlord’s intention. Brett LJ however, upheld the ratio decidendi of Lush J’s judgment. Brett LJ said ((1880) 50 LJQB at 128, 129):
‘I think the case of Browne v Warner is directly in point to shew that the stipulation, if interpreted so as to diminish the right to give a week’s notice, is repugnant and inconsistent with that right, and therefore void. It is said that there is created a weekly tenancy not pure and simple, but of some other kind, by virtue of the stipulation. I know of no such thing as a tenancy from week to week not pure and simple, but only from week to week, until something happens which enlarges the term. A tenancy from week to week implies that a week’s notice may be given by either party, and, moreover, in the first document here there is an express provision to that effect. I think the subsequent stipulation is inconsistent with that provision, and if not inconsistent the lease is void, because not made by deed. This case is the same as Browne v Warner;
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and when that case came before Lord Eldon in Chancery, he said that, if the document came before him as an existing lease, Lord Ellenborough’s interpretation in the common law Court was right; that he would have construed it in the same way, and that he could have given no relief. Therefore, both upon principle and authority, if both documents are to be taken as constituting a lease, the defence fails.’
That case does not, therefore, decide that a clause restricting the landlord’s power to give a notice to quit, such as the present, is repugnant.
On behalf of the tenants, on the other hand, it was submitted that the modern cases show a much less rigid attitude to the rights of one party, to terminate a periodic tenancy, being varied by the terms of the tenancy agreement from the usual right implied by law, ie a period of notice being of the same length as the period of the tenancy and ending on a date when the tenancy would terminate. Reliance was particularly placed on three cases. In H & G Simonds Ltd v Heywood Lynskey J decided that a tenancy agreement was a tenancy for 15 months certain and thereafter a yearly tenancy and held that the parties could agree that three months’ notice to quit by either party was a valid term. In Breams Property Investment Co Ltd v Stroulger the Court of Appeal, consisting of Scott, Bucknill and Asquith LJJ, decided that a clause which suspended the landlords’ quarterly right to give notice for the first three years, except in the event of the landlords’ requiring the premises for their own use, was not repugnant to the nature of a quarterly tenancy. Although both Doe d Warner v Browne and the Cheshire Lines Committee case were referred to in argument, the cases were not commented on in any of the judgments. In Wallis v Semark the Court of Appeal, consisting of Somervell, Denning and Birkett LJJ, held that a clause whereby the tenants could give a one month’s notice to quit and the landlord had to give a two years’ notice to quit was valid, and was not repugnant to the nature of the tenancy. These cases show that in modern times the parties who agree to a periodic tenancy of premises can contract as between themselves that the notice to quit can be in terms agreed between them, and not in accordance only with the notice which the law would otherwise imply.
I can see no reason why the landlord should not agree that his right to give notice to quit should be restricted as in the present agreement, or why such a proviso is repugnant to the nature of the tenancy. Certainly it seems impossible to conclude that it makes the whole agreement void. In my judgment the tenancy agreement is not void, the proviso is not repugnant but is valid and, as it is agreed that the board does not require the premises for the purposes of its undertaking, the board is precluded from giving the notice, and I propose to declare that the notice given by the board, dated 9 September 1969, is invalid and of no effect.
Declaration accordingly.
Solicitors: Joynson-Hicks & Co, agents for Waltons, Luton (for the tenants); Evan Harding (for the board).
Jacqueline Metcalfe Barrister.
Welsby v Welsby
[1970] 2 All ER 467
Categories: FAMILY; Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): CAIRNS J
Hearing Date(s): 9 DECEMBER 1969
Divorce – Foreign decree – Recognition by English court – Basis of recognition – Residence – Decree granted to wife by foreign court – Residence of wife in territory of foreign court for less than three years preceding application for divorce there – Jurisdiction of foreign court founded on lesser residential period – Substantial period of actual residence – Residence likely to be permanent – Avoidance of limping marriages – Recognition of foreign decree.
The parties were married in 1957 and lived together in England until 1964. The wife then went to America, and, when she had been living in Washington, District of Columbia for about two and a half years, she was granted a decree of divorce in the court of the District of Columbia on the jurisdictional ground that she had been resident there for more than one year. The wife was still residing in Washington. On the petition of the husband, a domiciled Englishman, for a declaration that the marriage had been validly dissolved by the court of the District of Columbia,
Held – Where a foreign court founded jurisdiction in divorce on a residential period of less than three years, and the period of actual residence was substantial and it appeared that the residence was intended to be more or less permanent, the English court, seeking to limit the number of marriages valid in one country and not in another, should recognise the jurisdiction of the foreign court; accordingly, the court would recognise the validity of the decree of the court of the District of Columbia (see p 470 d and e, post).
Indyka v Indyka [1967] 2 All ER 689 considered.
Notes
For the recognition by English courts of foreign decrees of divorce, see 7 Halsbury’s Laws (3rd Edn) 112, 113, para 200, and for cases on the subject, see 11 Digest (Repl) 481–483, 1079–1097.
Cases referred to in judgment
Indyka v Indyka [1967] 2 All ER 689, [1969] 1 AC 33, [1967] 3 WLR 510, Digest Supp.
Robinson-Scott v Robinson-Scott [1957] 3 All ER 473, [1958] p 71, [1957] 3 WLR 842, Digest (Cont Vol A) 246, 1097c.
Travers v Holley and Holley [1953] 2 All ER 794, [1953] p 246, [1953] 3 WLR 507, Digest (Cont Vol A) 240, 1023a.
Petition
This was a petition by the husband, F W Welsby, for a declaration that the American decree of divorce granted to the wife, S C Welsby, validly dissolved his marriage, or alternatively, for a divorce on the ground of the wife’s desertion.
Douglas Hogg for the husband.
The wife did not appear and was not represented.
9 December 1969. The following judgment was delivered.
CAIRNS J. In this case, the husband petitions for a declaration that his marriage has been validly dissolved by decree of the court of the District of Columbia on 27 April 1967, or alternatively, if that decree does not validly dissolve the marriage in English law, then he asks for a decree of divorce on the ground of desertion.
The marriage was on 14 September 1957. There are no children. The parties
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lived together until April or May 1964, when the wife told the husband that she was going to leave him the next day, and she did. For some six months before that time they had really been living at arm’s length in the same house. She had said that she was in love with an American airman and that she wanted to go and live with him in the United States. The husband has not seen the wife again since she left, but it happens that his mother and the wife’s mother are neighbours and he knows from what is really hearsay evidence that the wife is still in Washington, District of Columbia, and is corresponding from there with her mother. That seems to show that she has now been there for some 5 1/2 years. She started her divorce proceedings in the District of Columbia on 22 December 1966, and her complaint was served on the husband. He did not defend the proceedings. They came on for hearing on 27 April 1967, when a divorce was pronounced, and I am satisfied that this was of the nature of a decree absolute; it was a decree which then and there dissolved the marriage on the ground of voluntary separation for a period of more than a year, and the ground on which jurisdiction was based by the court was that the wife had been resident in the District of Columbia for a period of more than a year. I am satisfied that according to the law of that place there was a valid ground of jurisdiction and a valid ground of divorce, and that from the point of view of the law of the District of Columbia the marriage was brought to an end on 27 April 1967.
The question is whether that divorce can be recognised here, and I have very little doubt that if this case had been heard before the decision of the House of Lords in Indyka v Indyka the decision would have been that the divorce could not be recognised here, because the view that then held the field was that either the parties must be domiciled in the State whose court granted the divorce or else the jurisdiction must be founded there on a ground which would provide jurisdiction in this country. That was the result of Travers v Holley and Holley, and the reason why that doctrine is not effective here to make the divorce valid in English law is that the wife had not been resident in the District of Columbia for as long as three years; she had been resident there for about two years and seven months. I should add that the parties here are domiciled, and always have been domiciled, in England. Putting it very briefly, the actual decision in Indyka v Indyka was that a divorce could be recognised by our courts if the petitioner had a real and substantial connection with the country whose court granted the divorce. The various speeches in the House of Lords deal at some length with what can be regarded as a real and substantial connection, and several of the speeches deal with the particular point of residence. Thus Lord Reid said ([1967] 2 All ER at 702, 703, [1969] 1 AC at 68):
‘I find much more difficulty in accepting the view that if a wife parts from her husband and goes to live by herself in a new jurisdiction, her residence there, whether for three years or any other period, must necessarily be accepted as sufficient to require us to recognise a decree granted to her. It would certainly be reasonable that, where such a wife is habitually resident within that jurisdiction and has no present intention of leaving it, we should recognise a decree granted to her there … ’
I think that that statement covers the situation in this case, because the wife at the time of the decree had certainly been habitually resident in Washington for some 2 1/2 years, and the fact that she has remained there for about another 2 1/2 years is an indication that she had no present intention at the time of the decree of leaving the United States. I think possibly that statement of Lord Reid’s is the most helpful one to the petitioner in this case.
I should read one or two other passages which counsel for the husband has helpfully
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referred me to. Lord Pearce referred to a decisiona of Mr Commissioner Latey QC and said that the learned commissioner had adopted the view obiter ([1967] 2 All ER at 716, [1969] 1 AC at 89):
‘… that the fact that in a foreign court some lesser period [that is less than three years] suffices to found jurisdiction is beside the point if in fact there had been, say, two years’ residence or more, or even less, and the residence is genuine and bona fide and not merely for the purpose of getting a divorce in a convenient court.’
That view did not commend itself to Karminski J in Robinson-Scott v Robinson-Scott ([1957] 3 All ER 473 at 478, [1958] P 71 at 87) who thought that three years’ residence before the proceedings was essential. Lord Pearce said that he would ([1967] 2 All ER at 716, [1969] 1 AC at 89, 90) ‘prefer to keep that matter open to be worked out by the courts, since there is something to be said for either view’. So that Lord Pearce was leaving it open, without expressing any view one way or the other whether habitual residence for something under three years could be sufficient to provide jurisdiction. Lord Wilberforce referred to two ways in which the law might develop, and it is the second one which is relevant ([1967] 2 All ER at 726, [1969] 1 AC at 104):
‘Recognition might be given to decrees given on a residence basis, either generally, or in the particular case of wives living apart from their husbands where to subject them uniquely to the law of their husband’s domicil would cause injustice, and where the jurisdiction of the court of the country of residence is appropriate.’
Later he said in regard to that ([1967] 2 All ER at 726, [1969] 1 AC at 105):
‘… although it may be possible without any general change in the law by Parliament for judicial decision to allow recognition generally to decrees based on the non-domiciliary residence of the spouses, to do so in the present context appears to me to go further than is justified by the considerations advanced before us.’
So, if anything, Lord Wilberforce is rather less inclined to concede jurisdiction on this basis. Finally, Lord Pearson said ([1967] 2 All ER at 731, [1969] 1 AC at 112):
‘As to the validity in England of divorces granted in other countries on the basis of a merely residential qualification, I feel that there is a difficulty. As a matter of general principle, I would have thought that mere residence, falling short of domicil according to the less exacting definition, ought not to be a sufficient qualification. The broad distinction is between a person who makes his home in a country and a person who is a mere sojourner there … The principle of Travers v. Holley and Holley then requires that a divorce obtained in a foreign country by a wife who has resided in that country for three years or more should be recognised as valid in England. On the facts of this case the question of whether recognition should be extended to a divorce granted on the basis of any other residential qualification—for example a husband’s residence for three years or more, or a wife’s residence for some period less than three years—does not need to be decided and I prefer to express no opinion on it except that there is a difficulty.’
Page 470 of [1970] 2 All ER 467
So that Lord Pearson really leaves the matter wide open, although I do find one sentence there which is helpful to the husband here, where Lord Pearson said: ‘The broad distinction is between a person who makes his home in a country and a person who is a mere sojourner there.’
I am satisfied that in this case the wife had made her home in the United States. She could not, of course, during her marriage acquire a domicil there because the English rules relating to domicil do not enable a wife during her marriage to have a domicil separate from that of her husband. But she was clearly something much more than a mere sojourner there. This is not in any sense the case of a person who has gone to a country, where divorce is easy, for the purpose of obtaining a divorce. The question is whether it is still necessary for the courts to say that until a full three years’ period of residence has expired jurisdiction cannot be established in the foreign country.
Taking a very broad view of Indyka v Indyka, it seems to me clear that the House of Lords took the view that the basis of jurisdiction in another country should not be held to be based on anything of a technical character and, after all, it may be said that to insist on a period of three years or more is relying on a somewhat technical feature of the English law. Obviously the purpose of the English law is to provide a remedy for a wife who, by a reasonably long period of residence in this country, has acquired such a connection with the country as to make it just that she should be able to bring divorce proceedings here, and where a foreign court itself founds jurisdiction on a residential period of less than three years, when the period of actual residence is a substantial one and when it appears that the residence was taken up with a view to remaining there more or less permanently with, as Lord Reid put it, no present intention of leaving, then (although it seems to me that it is an extension of what was laid down in Indyka v Indyka counsel for the husband has not been able to find any case previously in which this particular extension has been made) I think that at this date, and bearing in mind always that one seeks to limit the number of limping marriages—marriages which are valid in one country and not in another—in my view, this court should recognise, on such facts as exist here, the jurisdiction of the foreign court. I therefore declare that the marriage was validly dissolved on 27 April 1967 by the Court of the District of Columbia.
Having regard to what I have decided about the validity of the divorce decree, the alternative prayer in the petition does not require any decision, but since I have heard evidence of the circumstances of the parting and the subsequent history of the husband and wife, I can say without difficulty that if I had formed the view that the marriage was still in being, I should have found that the wife deserted the husband and remained in desertion for a period of more than three years up to the presentation of the petition, and I should have been prepared to grant a divorce on that ground.
Declaration accordingly.
Solicitors: Beardall, Fenton & Co, agents for Elliott & Buckley, Manchester (for the husband).
Alice Bloomfield Barrister.
Sykes and others v Midland Bank Executor & Trustee Co Ltd and others
[1970] 2 All ER 471
Categories: PROFESSIONS; Lawyers: TORTS; Negligence
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, SALMON AND KARMINSKI LJJ
Hearing Date(s): 19, 20, 21, 22, 23 JANUARY, 13 MARCH 1970
Solicitor – Negligence – Duty to client – Negotiation of grant of underlease to architects – Unusual covenants in underlease restricting user – Omission of solicitor to advise and/or warn client on effect – Whether solicitor negligent.
Damages – Measure of damages – Negligence – Solicitor – Failure to advise on clause in lease – Amount of rent under lease greater than current market rent – Burden on plaintiffs to prove that negligent advice was one of the causes of their entering into leases at rents reserved.
Solicitor – Duty – Advice to partnership – Duty only to advise partner who has matter in hand on behalf of partnership.
The plaintiffs were partners in a firm of architects and quantity surveyors practising in Hull. In 1963, they entered into negotiations for a ten-year underlease of rooms in a building in London, in relation to which R (in Hull) acted as their solicitor. The immediate lessors held the lease from superior landlords, and the proposed underlease contained a user clause (cl 2(xi)) under which the plaintiffs covenanted not to use the premises other than as offices in connection with ‘the lessees’ business of architects and surveyors or as offices and showrooms in connection with any other business for which the permission in writing of the lessor and the superior lessors had first been obtained such permission by the lessor not to be unreasonably withheld’. A later clause (cl 2(xiii)), contained a covenant against assigning or parting with possession without the prior written consent of the lessors and superior lessors, and by virtue of s 19(1)(a) of the Landlord and Tenant Act 1972a this covenant was subject to a proviso that such consent was not to be unreasonably withheld by any lessor in the chain. There was no similar proviso relating to the withholding of consent by superior lessors in the case of change of user. R knew that the plaintiffs might during the term want to sublet or assign the whole or a part of the premises, but R did not draw the attention of any of the partners to the effect of the wording to cl 2(xi), either as bearing on the right effectively to assign or sublet, or otherwise. The market value of the underlease with cl 2 (xi) was 27 1/2 per cent less than the rent actually reserved on the underlease which equalled the current market rent for premises in respect of which consent to a change of user could not be unreasonably withheld by any lessor in the chain. The plaintiffs entered into the underlease and also in 1964 entered into a second underlease of further rooms in the same building on similar terms. In 1965, the plaintiffs sought to sublet or assign part of their premises for the rest of their term, but the superior landlords for nearly three years refused consent to any proposed charge of user to other professional offices. In an action for damages the plaintiffs contended that R’s omission to advise them on the legal effect of cl 2 (xi) constituted professional negligence.
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Held – (i) R had been negligent because he had not fulfilled the duty of a solicitor asked to advise on a leasehold title to call his client’s attention to clauses in an unusual form (which cl 2(xi) was) which might have affected the interests of his client as he knew them (see p 475 h and j, p 477 g, p 478 b and p 481 a, post).
(ii) The plaintiffs were entitled only to 40s nominal damages for breach of contract, because on the evidence they had not discharged the burden of proving that it was probable that R’s negligence was at least one of the causes of their entering into the underleases at the rents reserved thereby and that if they had received proper advice they would not have entered into the underleases at those rents (see p 476 b, p 478 e, p 479 b, p 480 b and j and p 482 f, post).
Chaplin v Hicks [1911–13] All ER Rep 224, Otter v Church, Adams, Tatham & Co [1953] 1 All ER 168 and Philips v Ward [1956] 1 All ER 874 distinguished.
Per Curiam. Except in the most exceptional circumstances a solicitor advising a partnership has no duty to communicate his advice to all the partners, he only has to advise the partner who has the matter in hand on behalf of the firm (see p 476 a, p 477 e, and p 481 c, post).
Decision of Paull J [1969] 2 All ER 1238 affirmed as to liability but varied as to damages.
Notes
For the liability of solicitors for negligence in non-contentious matters, see 36 Halsbury’s Laws (3rd Edn) 99–104, paras 135, 136, 138, and for cases on the subject, see 43 Digest (Repl) 97, 98, 835–857, and 106–121, 953–1098.
Cases referred to in judgments
British Transport Commission v Gourley [1955] 3 All ER 796, [1956] AC 185, [1956] 2 WLR 41, Digest (Cont Vol A) 462, 28a.
Chaplin v Hicks [1911] 2 KB 786, [1911–13] All ER Rep 224, 80 LJKB 1292, 105 LT 285, 17 Digest (Repl) 89, 96.
Hall v Meyrick [1957] 1 All ER 208, [1957] 2 QB 455, [1957] 2 WLR 458; rvsd CA [1957] 2 All ER 722, [1957] 2 QB 455, [1957] 3 WLR 273, 43 Digest (Repl) 108, 979.
Otter v Church, Adams, Tatham & Co [1953] 1 All ER 168, [1953] Ch 280, [1953] 1 WLR 156, 43 Digest (Repl) 120, 1097.
Philips v Ward [1956] 1 All ER 874, [1956] 1 WLR 471, 47 Digest (Repl) 564, 35.
Appeal
Ronald William Sykes, Arthur Johnson, Charles Edward Tooley and Michael Needham, partners in a firm of architects and surveyors, claimed damages for negligence and breach of duty against the defendants, Midland Bank Executor & Trustee Co Ltd, William Horner Hall and Donald Patrick Shackles, the executors of George Thomas Rignall, deceased, formerly the sole member of the firm Mainprize & Rignall, solicitors of Hull. The action concerned two ten-year underleases which the plaintiffs had taken in 1963 and 1964 at Roxburghe House, Regent Street, London, and in respect of which the late Mr Rignall had acted as their solicitor. The plaintiffs alleged that Mr Rignall had failed properly to advise them about the terms of the lease. On 19 March 1969, Paull J reported at [1969] 2 All ER 1238, found that Mr Rignall had negligently failed to advise the plaintiffs properly and that as a result the plaintiffs had suffered substantial damage by entering into the underlease at the rents payable thereunder, and gave judgment for the plaintiff for £9,000 damages and costs. The defendants now appealed. The facts are set out in the judgment of Harman LJ.
A L Price QC and P M J Slot for the defendants.
J G Le Quesne QC and Alan Fletcher for the plaintiffs.
J A Brightman QC and J L Jopling for the Law Society.
Page 473 of [1970] 2 All ER 471
Cur adv vult
13 March 1970. The following judgments were delivered.
HARMAN LJ whose judgment was read by Karminski LJ). This is an appeal from a decision of Paull J ([1969] 2 All ER 1238, [1969] 2 QB 518), dated 19 July 1969 whereby he awarded a sum of £9,000 to the plaintiffs by way of damages for the negligence of their solicitor.
The plaintiffs were and are a firm of architects and surveyors practising in Hull. Shortly before the year 1960 they took in a new partner, one Needham, a quantity surveyor, and their business being on the upgrade decided to acquire a branch office in London. This they did by an underlease of 16 May 1960, whereby the plaintiffs acquired a suite of offices at 27 Maddox Street, W1, for a term of five years expiring in June 1965 at a rent of £750 a year. The lease contained a number of covenants on the sublessees’ part of which I notice in particular cl 2 (10), a covenant not without the previous consent in writing of the lessors and the superior lessors to carry on on the premises any trade or business other than as offices in connection with the lessees’ (that is, the plaintiffs’) business of architects and surveyors. Clause 2(12) contained a prohibition against any alterations without the previous consent in writing of the lessors and the superior lessors. Clause 2(13) prohibited advertisements or signboards. Clause 2(15) forbade underletting or parting with possession or assigning any part of the demised property without the consent in writing of the lessors and the superior lessors, which consent should so far as the lessors were concerned not be unreasonably withheld in the case of a respectable or responsible tenant or assignee. Clause 2(18) contained a similar prohibition against making alterations.
This document shows that albeit for a term of five years an absolute prohibition against charge of use was no deterrent to the plaintiffs. Similarly cl 2(13) prohibiting advertisements or signboards. Clause 2(15) forbade underletting or parting with possession or assigning without the consent of the lessor or superior lessors, which consent so far as the lessors were concerned should not be unreasonably withheld. Here and elsewhere is a distinction drawn between the lessor and the superior lessors, the lessor alone being bound not unreasonably to withhold his consent and this may have some bearing on the document in question. These premises and some further rooms, taken in 1962 on terms which I need not particularise, were intended to be merely stop-gaps until the firm could find more suitable quarters in London. Mr Needham was the partner permanently working in London. The senior partner, Mr Elsworth Sykes, remained in Hull and his son Mr Ronald Sykes journeyed between the two.
The defendant in the action as originally constituted was one Rignall, a solicitor practising under the style of Mainprize & Rignall and housed in the same building in Hull as the plaintiffs, whom he had long advised. It is an unfortunate feature of the case that both Mr Rignall and Mr Elsworth Sykes died before the action came to trial, with the result that what passed between them is unknown. The suit as now constituted is between two of the present partners of the firm, Mr Ronald Sykes and Mr Needham, as plaintiffs, and the personal representatives of Mr Rignall as defendants.
During 1963, Mr Needham was on the look-out for more suitable London offices for the firm and in May 1963, thought he had found suitable accommodation in a block called Roxburghe House, Regent Street, London W1, and in February 1963, terms had been agreed with the estate agents for two suites on the third floor for a term of ten years at a rent of 28s per square foot, which amounted with service charges to £3,545, subject to formal contract to be approved by the parties’ solicitors and to certain internal alterations. This offer was communicated by Mr Needham to Mr Rignall and he was instructed to advise accordingly and is found on 28 February
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1963, writing to Mr Ronald Sykes on the details of the proposed underlease. The solicitors to the immediate lessors, Morohan Ltd, who occupied other rooms in the same building and were architects, were D J Freeman & Co, and they sent a draft of the lease for approval to Mr Rignall on 7 March 1963. He sent copies both for Mr Ronald Sykes and Mr Needham and it was understood that the matter should be dealt with expeditiously.
There was a meeting at the Hull office of the plaintiffs at which the whole matter was apparently discussed, there being present Mr Rignall, Mr Elsworth Sykes, Mr Ronald Sykes and Mr Needham, and as a result on 20 March Mr Rignall sent to D J Freeman & Co a letter raising several points on the draft. The plaintiffs did not consider the state of repair satisfactory and they were in fact allowed into possession early in April 1963 for the purpose of making the required alterations and redecorations. The rent was made to run from 8 April, from which day the plaintiffs may be taken to be in full possession, and the underlease was engrossed and in fact signed by all the partners by 21 May and a counterpart sent to D J Freeman & Co Thereafter there was some confusion in Mr Rignall’s office and the underlease was mislaid and not in fact exchanged with the counterpart till 1964.
In January 1964, the plaintiffs agreed to take a new lease of a further suite of offices on the fourth floor in Roxburgh House at a rent of £1,820, plus a service charge, but otherwise containing the same covenants as the earlier document. This second underlease was dated 27 April 1964. In 1965, the plaintiffs found themselves overhoused and decided to underlet the fourth floor but on applying to the agents for the head landlords, Regional Properties Ltd, for a change of user on the proposed underletting they were greatly surprised to be confronted with a blank refusal on the part of the freeholders. In the events which happened, the plaintiffs did not succeed in underletting the fourth floor premises until March 1968 but by that time the freeholders had consented to the change of user desired and the new underletting was at a profit rental.
The negligence here alleged against Mr Rignall consists in the fact that when advising on the underleases he did not draw the attention of the plaintiffs to the fact that there was an absolute right in the freeholder to refuse his consent to a change of user, and it is said that this omission was a breach of contract by the solicitor in that he fell short of his duty to advise the plaintiffs of all the provisions in the underlease which might be of importance to them and might influence them in deciding whether or no to accept the terms offered. This necessitates a careful examination of the terms of the underlease and of the only draft of it now available to the court, which is in the form of a completed draft with marginal notes.
The underlease is expressed to be made on 27 April 1964 between Morohan Ltd, defined as ‘the Lessor’, and certain partners in the plaintiffs’ firm described as practising together under the name and style of Elsworth Sykes & Partners—
‘hereinafter called “the Lessees” which expression shall where the context so admits include their successors in title and permitted assigns.’
It contained a demise of a suite of rooms on the third floor of Roxburghe House from Lady Day 1963 for ten years less the last ten days at a rent of £3,010 and a service charge of £535 a year. Clause 2 contained various covenants by the lessees of a usual kind, of which (viii) is not to make alterations without the previous consent in writing of the lessors and superior lessors, such consent not to be unreasonably withheld. Clause 2(xi) was in these terms:
‘Not to use the demised premises otherwise than as offices in connection with the Lessees’ business of Architects and Surveyors or as offices and showrooms in connection with any other business for which the permission in writing of the Lessor and the Superior Lessors has first been obtained such permission by the Lessor not to be unreasonably withheld.’
Page 475 of [1970] 2 All ER 471
Clause 2(xiii) is a covenant not to assign or part with possession without first obtaining the written consent of the lessor and the superior lessors.
A draft of this document was furnished to both Mr Ronald Sykes and Mr Needham with a number of marginal comments by Mr Rignall. The drafts were returned to him with comments by the underlessees as a result of which some alterations were made in the document.
It is to be observed that cl 2 (xi) has no marginal note against it and the judge found that it was not discussed between the partners and Mr Rignall. This clause is to a lawyer perfectly clear. It distinguishes between the superior lessors and lessor and shows that in the case of an application for change of user the superior lessors, of whom there were two and a freeholder, had an absolute right to withhold their consent although the immediate lessor could not unreasonably withhold his consent. The plaintiffs appear to have received the impression that in that clause consent by the superior lessors could not be unreasonably withheld and they seem to have signed and executed the lease still under that impression. The negligence alleged is that Mr Rignall failed to warn them either by a written comment in the margin or otherwise that they ran the risk that one of the superior lessors might withhold his consent to a change of user although in the case of an assignment or underletting to a permitted assign, that is to say a person carrying on the same trade as themselves, consent to assignment or underletting could not by virtue of s 19(1)(a) of the Landlord and Tenant Act 1927 be withheld unreasonably. They were therefore greatly surprised when in 1965 they were informed that the freeholders refused to consent to a change of user and a proposed underletting could not therefore go forward.
The judge held that the question of the plaintiffs’ rights under cl 2 (xi) was never discussed between them and Mr Rignall, and I think that he was well justified in coming to that conclusion not only because of the witnesses but because it appears from a letter written by Mr Rignall when the question arose that he ws himself under a misapprehension and though that not only in the case of assignment but in the case of change of user, that is to say under both cl 2 (xi) and cl 2 (xiii), consent could not be unreasonably withheld. If this was his impression he would see no need for a marginal comment or a warning. Clause 2(xi) is in an unusual form but the strangeness consists in that it relaxes in the case of the immediate lessor the stringency of the change of user clause in the form to which the plaintiffs were accustomed, that is to say it is less severe. The judge held ([1969] 2 All ER at 1242, [1969] 2 QB at 526) that it was a trap in that a layman might, when reading the permission of the lessors ‘not to be unreasonably withheld’, conclude that this word ‘lessor’, in spite of the definition clause, might include superior lessors. It was argued that a careful reader could not or would not make this mistake, but it seems to me clear that he might, having regard to the views expressed by the judge and the misunderstanding of Mr Rignall. This misreading was described by the expert witness called by the defendants as rank carelessness, and so in my opinion it was; but if owing to his carelessness Mr Rignall did not give any warning on the subject he did, in my judgment, fall short of his duty. When a solicitor is asked to advise on a leasehold title it is, in my judgment, his duty to call his client’s attention to clauses in an unusual form which may affect the interests of his client as he knows then. This clause would and did affect the interest of the plaintiffs; Mr Rignall knew that they might want to sublet, and having regard to the unusual terms in which the clause is couched he should at least have drawn attention to it and, in my judgment, in addition to have pointed out that it gave superior lessors an absolute right to refuse consent to a change of user. If this be right, Mr Rignall committed a breach of the contract of duty which he owed to the plaintiffs and they are entitled as a result to at least nominal damages, and I would so hold.
The learned judge seems to have been ambitious to construct a code of conduct as between a solicitor advising on a lease and the partnership firm who are his clients. For myself I think it is a pity to try to go into details on this matter beyond what
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I have said. In particular I disagree with the judge in holding that it is the solicitor’s duty to communicate his advice to all the partners. This would often be quite impossible in a modern partnership, where there may be 20 partners, half of them abroad, and it seems to me quite enough for the solicitor to advise the partner who has the matter in hand on behalf of the firm.
Whether the plaintiffs are entitled to anything more than nominal damages remains to be considered. The plaintiffs’ claim is that Mr Rignall’s omission was a breach of duty which he owed to them, that following on this breach they did enter into the underlease, and that therefore the damage was the consequence of the breach of duty. This appears to me to beg the question, for, as it seems to me, it is necessary for the plaintiffs to prove something more, namely, that the solicitor’s omission did make a difference to them and was at least one of the elements, though there may be others, which influenced their minds to enter into the underlease.
Now the testimony on this point is unequivocal. Mr Ronald Sykes, who alone was questioned, very honestly answered that he did not know. The learned judge was not unnaturally anxious to hear the answer to this question and indeed pressed the witness on three occasions on the matter, but he could never get an affirmative answer. On the first occasion Mr Ronald Sykes said ‘I really do not know’; on the second, ‘It is a difficult question to answer’; and on the third, ‘I am sorry, I cannot answer’. The furthest he went was prompted by the judge and the passage went as follows:
‘Q Now, the point has been taken to you that I may have to consider rather seriously. Just assume that your solicitor had said “This is the snag”, the same as you knew the Manchester lease was a snag, would it really have made any difference to you? I know it is very difficult to answer, is it not? A I am sorry, I really do not feel I can give an honest answer to that.
‘Q Yes, all right, that is the answer. “I cannot say whether it would have made any difference to me“. You are always in this position, are you not? It is no good negotiating about it for the simple reason that it depends entirely on the terms of the lease between the freeholder and the original lessee and then between that lessee and the first underlessee. So you cannot negotiate about it. You are faced then with the question “Do I take the risk or do I not?” A Yes, indeed.
‘Q One of the things I may have to put my mind to is, would you have said “Right, we must just take the risk“. That is the difficulty; do you follow? A I think what would have weighed with us is the length of this particular lease; it is a much longer lease and the outgoings to which we were committing ourselves were far greater in both respects than the other leases.
‘Q Very well; that may be an answer to it. “Was much longer lease and liabilities were much greater”: is that what you say? A Yes.
‘Q And I think you say [he had not said it] “We would at any rate have paused” A I feel we would have done for those reasons’.
The judge may be criticised for pressing the witness so hard, but however that may be it cannot be said that he got an affirmative answer. I have searched for a contemporary indication of the way in which the plaintiffs’ minds worked and I have found almost nothing and am of opinion that on a balance of probability it is more likely than not that the warning which Mr Rignall was bound to give would have made no impact on the plaintiffs’ mind and that they would have disregarded it. If that be so it is, in my judgment, an end of the case and I would allow the appeal.
This point was clearly taken in the court below ([1969] 2 All ER 1238, [1969] 2 QB 518) but little was made of it and the judge makes no reference to it in his judgment. I think he was distracted by the way the case was argued before him, based, as it was, on the well-known case of Chaplin v Hicks. This seems to me to be irrelevant to the present case, for in that case there
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was no doubt that the plaintiff had entered the competition in reliance on the defendant’s representation that her case would be considered. The only question therefore was—what was the chance of success? The question of burden of proof of reliance on the representation never arose because it was conceded. Here the whole point is whether the plaintiffs did rely on the absence of warning which was tantamount to a representation that there was no problem to consider. The cases on this subject are further discussed in the judgments about to be delivered by my brethren and I say no more on this topic.
SALMON LJ. It is unnecessary for me to repeat the facts which have been so lucidly stated by Harman LJ. In my view, it is quite impossible to lay down any code setting out the duties of a solicitor when advising his client about a lease. A great deal depends on the facts of each particular case. A solicitor’s duty is to use reasonable care and skill in giving such advice as the facts of the particular case demand. I doubt if the learned judge intended to do more than decide this particular case. If, however, he was attempting to lay down a code of general application, I am afraid that I cannot accept it. There is a passage in the judgment which has given some concern because it has been understood to mean that whenever a solicitor acts for a firm he must bring home his advice to each member of the firm. I doubt whether the learned judge meant to say anything of the sort. Certainly no such duty exists. In any ordinary case it is enough for a solicitor to tender his advice to the partner of the client firm who is dealing with the relevant matter; it would be absurd to expect the solicitor to do more. It may be that, most exceptionally, some altogether extraordinary circumstance might arise in which it would be the duty of a solicitor to go to one or more of the other partners. It is difficult to imagine such circumstances save perhaps if the partner whom the solicitor was advising appeared to be going out of his mind. Certainly no one could criticise the late Mr Rignall for the having brought his advice home to enough of the partners in the plaintiffs’ firm.
The question, and the sole question, on the issue of negligence or no negligence in the present case is whether the circumstances demanded that in the exercise of reasonable care and skill Mr Rignall should have brought home to Mr Ronald Sykes or Mr Needham the contents of cl 2 (xi) of the underleases relating to the third and fourth floors of Roxburghe House, in Regent Street. Reluctant though I am to find any negligence against a dead man who enjoyed the highest professional reputation, I feel myself driven to the conclusion that Mr Rignall was negligent in overlooking this clause and failing to bring it to the plaintiffs’ attention. The common law, of course, recognises no degrees of negligence, but I should like to say that, in my view, the degree of blame in the present case was slight. It was the sort of negligence many a competent professional man may have committed on some isolated occasion in the course of his career. When Mr Rignall returned the original draft he annotated a good many of the terms of the lease which were no more important and certainly no more obscure than those contained in cl 2 (xi). It may be that it would have been enough if he had drawn the plaintiffs’ attention to the existence of that clause. I am inclined to think, however, that he should have pointed out that the clause gave power to the superior lessors arbitrarily to refuse their consent to any change of use Counsel for the defendants has argued that this leaps from the page and that it would be plain to any educated man. I am afraid I do not agree. I think that any layman might easily miss its full implication, particularly if his attention was not drawn to it by the solicitor to whom he had taken the draft lease for advice. Indeed, Mr Rignall himself completely misunderstood the effect of cl 2 (xi) when he again considered it after the trouble had arisen in 1965—as his letter of 22 June 1965 makes plain. I am confirmed in the view that Mr Rignall should have drawn the plaintiffs’ attention to the paragraph I have mentioned by the evidence of Mr George, the solicitor
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called by the defendants to speak as to the usual and established practice of the profession. He said that he would generally draw the attention of his client to the effect of such a clause. He says he would have done so even if his client were a barrister or a solicitor. For some reason which he does not make clear and which I cannot accept, he seems to have considered that it would be unnecessary to do so if his client were an architect. I am afraid that Mr Rignall was negligent. He failed, although only by a little, to exercise reasonable care and skill in relation to the advice he gave, or rather did not give, to the plaintiffs.
The question then arises: are the plaintiffs entitled to recover any damages in respect of this negligence? The duty of care in this case arose out of the solicitor-and-client relationship. It was an implied term of the contract between Mr Rignall and the plaintiffs that he should exercise reasonable care and skill in advising them. A breach of this term by itself, entitles the plaintiffs to no more than nominal damages. In order to recover anything more, the onus is on the plaintiffs to show that the breach caused substantial damage. The damages claimed are £9,000. It has been agreed between the surveyors for both parties that this sum represents the capitalised equivalent of a 27 1/2 per cent reduction in the rents reserved by the underleases computed over the whole of the terms granted by them. The surveyors agreed that the rents reserved were the market rents if the head landlords’ consent to a change of user could not be unreasonably withheld, but that, as the head landlord could arbitrarily withhold his consent to a change of user, surprisingly (to me, at any rate) the market rents were 27 1/2 per cent less than the rents reserved. It was for the plaintiffs to show that it was probable that if they had received proper advice they would not have entered into the underleases, at any rate not at the rents reserved. In my opinion they completely failed to prove anything of the kind. No doubt it would have needed very little evidence to establish this fact. Mr Ronald Sykes and Mr Needham were the only two remaining partners in the plaintiffs’ firm at the time of the trial. They had both been concerned in deciding whether or not the partnership should enter into the underleases. Had either of them said that probably they would not have entered into the underleases or at any rate not at the rents reserved had they had advice from their solicitors that the underleases empowered the head landlord arbitrarily to refuse consent to a change of user, this appeal could never have got on its feet. Mr Needham was not asked any question on this point. As appears from the passages in Mr Ronald Sykes’ evidence set out by Harman LJ, he was given every encouragement by the learned judge to give the vital evidence. Indeed it appears that he was pressed to do so. Certainly had some of the questions which the learned judge asked been asked by counsel for the plaintiffs, objection could have been taken to them. Nevertheless Mr Ronald Sykes was a remarkably candid witness. He, no doubt disappointingly, would not say that it would have made any difference had the proper advice been given. Certainly he refused to say that he would not have taken the risk of the head landlord refusing permission for a change of user. At the end of his evidence it was plain that in his view it was as likely as not that the plaintiffs would have acted just as they did even if they had had proper advice about the effect of cl 2 (xi) of the underleases.
In these circumstances, it seems to me impossible for a court (which cannot hope to know the plaintiffs’ business as well as Mr Ronald Sykes knew it) to hold that the plaintiffs would probably not have taken the risk of entering into these underleases. Mr Ronald Sykes would not say so. It might be different if there were any facts or contemporaneous documents pointing in the plaintiffs’ favour—but there are none. On the contrary, all the known facts and documents strongly suggest that the plaintiffs would have taken the risk of entering into these underleases even if they had been properly advised by Mr Rignall. The correspondence shows that before going to their solicitors the plaintiffs had agreed, subject to contract, to take the suites at Roxburghe House at the rents reserved and were anxious to get in expeditiously. They had agreed the rents, which were the equivalent of 28s per square foot and 5s per square foot for service charges, without apparently having taken any advice on
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market rents. A covenant giving the head landlord an unfettered right to refuse permission for a change of user is by no means uncommon. Indeed, both before and after the Roxburghe House underleases, the plaintiffs took leases, albeit for less rent and shorter terms, containing similar provisions. There is no evidence to suggest that the plaintiff might have taken professional advice as to the market rent of the premises had the clause in question been drawn to their attention. It was a clause which obviously they could not have negotiated with their immediate landlord. Equally obviously it would have caused delay to approach the head landlord, who in any event would have had no reason to give up the absolute right to refuse permission for a change of user. I can see no evidence on which a court could properly hold that on a balance of probabilities the plaintiff would not have taken the risk of entering into the underleases at the rents reserved, had they been advised of the true effect of the clauses in question.
A long, elaborate and recondite argument appears to have been addressed to the learned judge on behalf of the defendants with a view to diminishing any damages to which the plaintiffs might be entitled. The argument was based on Chaplin v Hicks, Otter v Church, Adams, Tatham & Co and other cases to which I need not refer for none of them in my view can possibly be relevant. The defendants’ argument was also based on a proposed substantial extension of British Transport Commission v Gourley about which also it is unnecessary for me to express any opinion. This argument for diminishing the damages may I think have distracted the learned judge’s attention from the real point, which was whether the plaintiffs had proved that the negligence had caused them any damage at all.
The learned judge concluded that ([1969] 2 All ER at 1249, 1250, [1969] 2 QB at 535):
‘On the ultimate analysis it was that act of sending the leases to be signed without any warning of the consequences of signing them which led to the partners executing the leases.’
For the reasons which I have already indicated, I am afraid that I can find no evidence to support this conclusion.
Out of respect for counsel for the plaintiffs’ very able argument in this court, I should mention that he sought to persuade us that the evidence showed that Mr Rignall’s wrong advice or lack of advice about the material clause in the underleases was a cause of the plaintiff executing the underleases. I cannot accept this argument because, as I have already indicated, the evidence did not show that if the plaintiffs had received proper advice they would probably have acted in any way contrary to the way in which they did act. Indeed in my view the probabilities are that they would have acted just as they did. Counsel for the plaintiffs relied on Philips v Ward. In that case the plaintiff instructed the defendant, a surveyor, to report on the structural condition of a house which the plaintiff proposed to buy, and also on the value of the house. The defendant reported that the house was in excellent structural condition and was worth £25,000 to £27,000. The plaintiff bought it for 25,000. The house turned out to be in bad condition and, accordingly, worth only £21,000 on the open market. The plaintiff brought an action for damages. The case proceeded on the basis that the plaintiff bought the house for £25,000 on the faith of the defendant’s report. Accordingly the point that arises for decision in the present case was not in issue. The only point was whether the damages should be assessed at £4,000 or £7,000, the cost of putting the house into good repair.
Counsel for the plaintiffs also sought to turn Chaplin v Hicks and Otter v Church, Adams, Tatham & Co to his own advantage. He contended that even if it were
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probable that the plaintiffs, if properly advised, would have executed the underleases, yet if there were a chance, however slim, that they would not have done so, the plaintiffs were entitled to some damages for the loss of the chance. I cannot accept that proposition, attractively though it was put. It would lead to the strange result that unless the defendants could prove with certainty that they had not caused damage, they would be liable for the remote chance that they may have done so. This seems to me to turn the onus of proof on its head. In my view the plaintiffs cannot succeed unless they can prove that the negligence was probably a cause of their executing the underleases. Since they failed to do so, their claim does not get off the ground.
Chaplin v Hicks was a very different case from the present. That was a case in which the plaintiff contracted for a chance to win a benefit in a competition. The defendant in breach of contract deprived the plaintiff of that chance. This court held that if the chance was capable of valuation (as they concluded it was) the plaintiff was entitled to substantial damages for being deprived of it.
Otter v Church, Adams, Tatham & Co was a strange case. Michael Otter attained the age of 21 in 1944. He was then on active service with the Royal Air Force in India. He had an equitable interest in certain settled property in tail male with the remainder over to his uncle. The defendant negligently advised him through his mother, the plaintiff, who later became his sole administratrix, that no steps need be taken by him to make the settled property his own until his return to England. The defendant failed to advise him that he ought to execute a disentailing assurance or will if he wished to ensure that the settled property should form part of his estate on his death. In May 1945, Michael Otter was killed. He died a bachelor, intestate and without having executed a disentailing assurance relating to the settled property. This property accordingly passed to his uncle and did not fall into his estate. The learned judge held that in all probability Michael Otter would have made a will or disentailing assurance if he had been properly advised. The value of the settled property was in excess of £7,000. The learned judge concluded that although Michael Otter suffered only nominal damages as a result of the defendant’s negligence his estate could nevertheless recover substantial damages. It is unnecessary for me to express any view on that perhaps surprising conclusion. The learned judge thought, however, that there was just a possibility that, even if properly advised, the deceased might not have made a will or disentailing assurance before he died and therefore allowed the defendants a small discount, awarding £6,500 damages to the plaintiff. Although it is unnecessary to express any concluded view on the point, I have very grave doubts whether any discount was permissible if damages were recoverable by the estate. If advice given negligently or in breach of contract has on a balance of probability caused the plaintiff to act to his detriment, I have never before heard it suggested that the degree of that probability has anything to do with the assessment of damage. To hold that it has would, in my view, be contrary to principle and authority. Otter v Church, Adams, Tatham & Co cannot help the plaintiffs because clearly the learned judge in that case came to the conclusion that it was overwhelmingly probable that damage had been caused to the estate by the defendant’s breach of contract to exercise reasonable care and skill. In the present case it was not proved that Mr Rignall’s failure to exercise reasonable care and skill was a cause of the plaintiffs’ executing the underleases. I accordingly agree that the appeal should be allowed.
KARMINSKI LJ. I have had the advantage of reading the judgments both of Harman and of Salmon, LJJ, and I entirely agree with them; but as this is an unusual case and of some general interest, I propose to add some observations of my own.
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So far as the issue of negligence on the part of Mr Rignall is to be considered I have no doubt at all that the finding of negligence made against him by Paull J ([1969] 2 All ER 1238, [1969] 2 QB 518) was correct. Mr Rignall should have expressly drawn to the plaintiffs’ attention that the freeholders had an absolute right to refuse consent to a change of user. Clients rely on their solicitors to draw their attention to unusual clauses or dangers in conveyancing matters. This is so even if the clients concerned are experienced professional men, including architects and surveyors. The solicitor is consulted as an expert in conveyancing matters. Those in other professions have usually no knowledge or experience in this field; that is why they consult solicitors. I have no doubt at all that Mr Rignall’s failure to call the plaintiffs’ attention to cl 2 (xi) was in breach of his duty as a solicitor to these clients, and therefore negligent. Paull J in his judgment expressed the opinion that Mr Rignall was under a duty to inform all the partners in the respondents’ firm of the meaning and importance of cl 2 (xi). In my view the judge was wrong in so holding. It is in my opinion sufficient for a solicitor to give his advice to the partner who has consulted him on behalf of the partnership as a whole. Any other course would often indeed be impracticable where a large number of partners constitute a firm.
The real issue here is whether or not damage flowed from Mr Rignall’s negligence. The burden of proving damage must be on the plaintiffs to satisfy the court that on the balance of probabilities damage flowed from the defendants’ negligence. By the time of the trial both Mr Elsworth Sykes and Mr Rignall were dead. Mr Ronald Sykes and his partner, Mr Needham, gave evidence as to what they might or might not have done had they been properly advised on the meaning of cl 2 (xi) by Mr Rignall. Both Mr Ronald Sykes and Mr Needham were very careful and honest witnesses. Neither of them would commit themselves as to what they would have done had they been properly advised. In cross-examination Mr Ronald Sykes was asked by the judge whether he would have taken the risk and answered ‘I really do not know’. Mr Ronald Sykes was much pressed in a number of questions by the judge to give a definite answer, but he refused to commit himself. Asked by the judge whether if the solicitor had pointed out the snag it would have made any difference to him Mr Sykes answered ‘I am sorry, I really do not feel I can give an honest answer to that’. The farthest he would go was to say that he would have paused. Mr Needham was equally cautious. Asked by counsel whether he had noticed cl 2 (xi), Mr Needham answered that he did not particularly notice it as he was looking for other things. He added:
‘I can suppose that had I seen it I would have said that we did not intend to use it ourselves, other than as architect and surveyors because this is what we practised as.’
On the evidence as a whole there is a possibility that the plaintiffs might have turned down the lease for these premises at Roxburghe House. On the other hand the premises were obviously suitable in every way for their London practice, and I am inclined to think that they would have been very reluctant to lose these premises. Alternatively, the plaintiffs might have tried to get a reduction in rent, but there is nothing to indicate the likelihood of the freeholders agreeing to such reduction. If they had had their attention drawn to this clause the plaintiffs might have made enquiries as to the general practice of these particular freeholders in giving or refusing permission for change of user. It is to be observed that the plaintiffs had also premises in Maddox Street in London and in Manchester the leases of which contained similar restrictive clauses. Lastly, it is at least possible on the evidence that the plaintiffs might have taken a chance on the attitude of the freeholders if a change of user was intended and gone ahead with a subletting.
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The judge found ([1969] 2 All ER at 1251, [1969] 2 QB at 537) that damages flowed from the plaintiffs’ liability to pay rent at what was on the facts an excess over the market rent for premises with this restriction as to user. The judge then capitalised what he estimated to be the damage in the sum of £9,000. It is to be observed that in this case there was not a clause prohibiting absolutely any change of user, but merely one giving the freeholders an absolute right to refuse consent. A number of authorities were quoted to us by counsel on the question of what damage might be suffered as a result of being deprived of the chance of not entering into the lease. I have not myself found great assistance from the authorities. I agree with Salmon LJ’s comments on Chaplin v Hicks, and Philips v Ward. Otter v Church, Adams, Tatham & Co was decided on very different facts. There a solicitor negligently failed to advise a young man who had just attained the age of 21 what steps he might take to execute a disentailing assurance or will. The solicitor knew that the young man concerned was at that time engaged in flying duties with the Royal Air Force on active service abroad, a course of duty highly honourable but extremely precarious. In fact the young man was killed before he had taken any steps to execute the deed. The question there was whether if he had received proper advice he would have taken the necessary steps to preserve the property for himself or his sister instead of letting it pass to an uncle. Upjohn J expressed the view that it was perhaps rather unlikely that he would have thought it right to allow the property to devolve on his uncle and cousins. On the facts of that particular case weighing the probabilities he awarded substantial damages against the solicitor. On my view of the facts of the present case, I have come to the conclusion that the facts here are so different from those in Otter’s case that that case can be properly distinguished on the facts.
Hall v Meyrick was again decided on quite different facts. There a solicitor negligently failed to warn the plaintiff that wills made by herself and her future husband before their marriage and not expressed to be in contemplation of marriage were revoked by subsequent marriage by operation of law. As a result of the failure of the solicitor to give proper advice the husband of the plaintiff had died intestate with subsequent loss to the plaintiff. There is was clear on the findings of the trial judge ([1957] 1 All ER 208, [1957] 2 QB 455) that damage had flowed directly from the negligence of the solicitor. On the facts of the present case I am quite unable to find that the plaintiffs have discharged the burden of proof on them of establishing on the balance of probabilities that any damage at all flowed from the negligence of Mr Rignall. In my view having failed to establish that Mr Rignall’s negligence was a cause of the plaintiffs executing the underleases, no damage has been shown to have been caused to the plaintiffs. I agree that this appeal must be allowed.
Appeal allowed. Judgment for plaintiffs for 40s. Leave to appeal to the House of Lords refused.
Solicitors: Hewitt, Woollacott & Chown (for the defendants); Herbert Smith & Co (for the plaintiffs); Solicitor, Law Society.
Henry Summerfield Esq Barrister.
Barnes and another v Barratt and another
[1970] 2 All ER 483
Categories: LANDLORD AND TENANT; Rent
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND CROSS LJJ
Hearing Date(s): 15, 16 MARCH 1970
Rent restriction – Rent – Exclusive use of part of house given in return for services – No money rent or monetary quantification of services – Whether performance of services constituting rent – Whether tenancy or licence to occupy – Whether protected tenancy.
The defendants occupied part of a house which was let to C. The defendants had exclusive use of three rooms and the kitchen while C had similar use of two rooms. The bathroom was shared. In return for their use of the above-mentioned accommodation the defendants cleaned C’s part of the house, cooked for him and paid the electricity, gas and fuel bills for the whole of the house. On more than one occasion C refused to accept any payment of rent. This arrangement continued from 1951 until C’s death in February 1969. The interests held by C in the house were then surrendered to the plaintiffs who were the landlords. The plaintiffs claimed possession of the whole house. The county court judge ruled that the defendants were tenants within the protection of the Rent Acts, and not licensees, since the services rendered by the defendants constituted rent.
Held – (i) The defendants were granted only the personal privilege of occupation and not a tenancy (see p 487 h and p 488 e and h, post).
(ii) Even if there was a tenancy, the Rent Acts did not apply to it, because there was no agreed monetary quantification of the rent nor any agreed method of quantification (see p 486 j to p 487 a, p 488 f and p 488 j to p 489 a, post).
Hornsby v Maynard [1925] 1 KB 514 applied.
Notes
For control of premises where rent payable in kind, see 23 Halsbury’s Laws (3rd Edn) 756–758, para 1517.
For the distinction between a licence and a lease, see 23 Halsbury’s Laws (3rd Edn) 427–433, paras 1022–1028, and for cases on the subject, see 30 Digest (Repl) 527–529, 1649–1670.
Cases referred to in judgment
Booker v Palmer [1942] 2 All ER 674, 30 Digest (Repl) 539, 1737.
Errington v Errington [1952] 1 All ER 149, [1952] 1 KB 290, Digest (Cont Vol A) 992, 1684a.
Hornsby v Maynard [1925] 1 KB 514, 94 LJKB 380, 132 LT 575, 31 Digest (Repl) 677, 7708.
Montague v Browning [1954] 2 All ER 601, [1954] 1 WLR 1039, Digest (Cont Vol A) 1080, 7662a.
Appeal
This was an appeal by the plaintiffs, Madge Isobel Barnes and Brenda Elizabeth Carter, form an order of his Honour Judge Trapnell, made on 14 July 1969 in the Bromley County Court, dismissing their claim for possession of 7 Amesbury Road, Bromley, and for mesne profits against the defendants, Joseph E Barratt and his wife Edith H Barratt. The facts are set out in the judgment of Sachs LJ.
S W Templeman QC and J E L Brice for the plaintiffs.
J E Artro-Morris for the defendants.
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16 March 1970. The following judgments were delivered.
SACHS LJ delivered the first judgment at the invitation of Russell LJ. This is an appeal from a judgment given in Bromley County Court by his Honour Judge Trapnell on 14 July 1969. The action was brought by the plaintiffs for the possession of that part of a house, known as 7 Amesbury Road, Bromley, which was in occupation of the defendants, Mr and Mrs Barratt. The learned county court judge held that they were tenants of the relevant premises at a rent exceeding two-thirds of the relevant rateable value; that they were thus protected by the Rent Acts; and that the plaintiffs’ claim should accordingly be dismissed. The plaintiffs now appeal. On their behalf counsel has raised three points: first, was there a tenancy or were the defendants licensees as opposed to tenants; secondly, did they, even if they were tenants, pay rent within the meaning of the Rent Acts; and thirdly, if they did pay such rent, did it exceed two-thirds of the relevant rateable value?
7 Amesbury Road, as a whole, had a net annual value for rating purposes of £94. Its gross value for the purposes of the Rent Act 1957 was £45. In 1946, the house, as a whole, was let to a Mr Constable on a quarterly tenancy, originally at £12 per quarter. Mr Constable died in February 1969 by which time the rent had risen to £37 10s per quarter. In 1951, when he was a widower, Mr Constable had found the house larger than was needed for his personal occupation. In that year he made an arrangement with the defendants which has been the subject of conflicting submissions in this court. In effect, the defendants were to come into the house and occupy part of it and, in return, were to look after Mr Constable.
According to the findings of the county court judge the defendants were to have exclusive use of three rooms and the kitchen; Mr Constable was to have similar use of two rooms; the bathroom was to be shared. In return for their use of the above accommodation the defendants were to clean Mr Constable’s part of the house; the second defendant was to shop for him and cook for him; and they were to provide him with light and warmth, paying the electricity, gas and fuel bills for the house as a whole. It was clear that the second defendant was not to become, and did not become, an employee of Mr Constable; nor did the first defendant. It is material to note that both the defendants, in their evidence, each emphasised that they had exclusive occupation of the kitchen. The learned county court judge so found when he stated:
‘They were to come and live there … with the exclusive occupation and Interest in the whole of the house except for 2 rooms, which were to remain Mr Constable’s. They had joint use of the Bathroom with Mr Constable … ’
It is his finding that they went there as his sub-tenants which is now in issue.
There was no question of there being a rent book nor was any monetary rent agreed. The services of the defendants were to suffice in return for the accommodation they were to get. The parties, according to the defendants’ evidence, which was accepted by the county court judge, spoke in terms of a tenancy using words such as ‘rent’ and ‘sub-tenant’. On the other hand, Mr Constable on more than one occasion refused to accept any payment of rent. In those circumstances the defendants’ case was put by the second defendant as ‘my services constituted rent’. That arrangement was put into effect. All three concerned were, for a considerable number of years, in happy co-occupation of this house as a result. This, indeed, continued until Mr Constable died. Then the interest in the house, previously held by Mr Constable, was in due course surrendered to the plaintiffs who have brought these proceedings. It is convenient first of all to deal with the issue whether, assuming there was a tenancy, the defendants did pay rent within the meaning of that word in the Rent Acts. The county court judge held that the services rendered by the defendants in caring for Mr Constable, cooking for him and providing him with warmth and light did constitute such rent. That the rendering of services can constitute rent at common law is well settled but whether it can, when there has been no quantification of their value, constitute rent under the Rent Acts is a different
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question. It was answered 45 years ago in Hornsby v Maynard by a Divisional Court particularly experienced in dealing with the manifold problems then regularly being raised by the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, the Act from which so much of the later rent legislation is derived. In that case, a tenant allowed his landlord the use of two rooms and the unquantified value of that user was alleged to constitute rent.
The headnote of that case states, as regards the relevant holding, as follows ([1925] 1 KB at 514):
‘… (1.) that the right given by the tenant to the landlady to use the two rooms was not “rent” within the meaning of the Increase of Rent and Mortgage Interest (Restictions) Act, 1920, that term there denoting rent in money only, and, consequently, that that right could not be taken into account in considering whether or not the agreed rent exceeded the standard rent by more than the permitted amount … ’
Shearman J, in the course of giving his judgment, said ([1925] 1 KB at 524):
‘On the true construction of the provisions of the Act it seems to me that the term “rent” in s.1 and the other sections in which it occurs means rent payable in money and in money alone.’
Salter J referred to this issue of what was ‘rent’ within the meaning of the Acts as being ([1925] 1 KB at 525) ‘The most important of the points taken on behalf of the defendant … ’ and prefaced his decision by reference to instances such as allowing the landlord the use of part of the house rent free; taking the landlord as a lodger; or rendering him services. He then said ([1925] 1 KB at 525):
‘The question is whether or not “rent” in s.1 and the other sections of the Act refers only to money. At common law the term “rent” was not restricted to pecuniary rent … In this Act, however, having regard to its own provisions and to the authorities decided upon it to which our attention has been called, I think that the term “rent” applies only to pecuniary rent.’
It is to be observed that Salter J referred (as also by inference did Shearman J) to the provisions of the 1920 Act, in other words the structure of that Act, as leading to the result already specified. That is a point to which I shall return.
In the decades that immediately followed this clear decision, and indeed the decades which subsequently transpired, there were passed a whole series of Acts which adopted the 1920 Act as the principal Act and brought into operation extensive amending provisions, using, in every case the same phraseology so far as was relevant to the meaning of the word ‘rent’. In none of those Acts was that word given a fresh definition, nor has it been given any fresh definition in the Rent Act 1968. In such circumstances it is axiomatic that the legislature must normally be taken to have been aware of the courts’ well-established view of the meaning of a specific word and to have embodied that meaning in the succeeding Acts. That, in itself, would be a good ground for holding that the Hornsby v Maynard interpretation of the word ‘rent’ continues in force in essence. However, if one turns to look at the structure of the Rent Acts as a whole, it is equally clear that their provisions with regard to rent restriction can only, in practice, be operated if that interpretation is correct. The effective basis of the restrictions turns on there being quantified sums to which the provisions of the Acts can apply. It is not necessary to proceed in detail through those provisions, though we were most helpfully guided by counsel amongst them from s 1 of the 1920 Act onwards. It is sufficient to refer to two of them. The first relates to the sole permissible method of increasing rents. This was laid down
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in the 1920 Act by s 3(2); in the 1968 Act by s 26. In each and every Rent Act from 1920 onwards the same pattern has been adopted as regards the increasing of rents. It has always been made mandatory to use forms of notice of increase which are prescribed by the statutes. The first of these forms is to be found in Sch 1 to the 1920 Act. Each form in turn is based on the existence of a quantified rent at the time when the notice is served. Moreover, one glance at it is sufficient to show how ill-adapted it would be to the present case if, for instance, the defendants and Mr Constable had, in the middle of their occupation, agreed that the second defendant should also wash Mr Constable’s linen or that the first defendant should clean his car.
The second set of provisions to be noted are those which are to be found in s 14 of the 1920 Act, of which the lineal successor is s 33 of the 1968 Act. Section 14 provides for the recovery by the tenant of ‘any sum’—and it is to be observed that the word ‘sum’ is used—‘paid on account of any rent’ to the landlord which was ‘irrecoverable by the landlord’, ie the amount by which the payment exceeded the permitted rents whether that rent was permitted in the original tenancy or in a later supervening statutory tenancy. So if, as seems probable, the value of the defendants’ services at times exceeded the permitted rent, how, in this case, could the provisions of those sections in practice be operated? The answer, to my mind, is that they could not. Moreover, what would be the position as regards the ‘irrecoverable’ part of the services when once the parties had come to arm’s length on such a matter? Could the second defendant be held, as from the date when the point was raised, to be liable only to do the cooking on three days out of every seven and, if so, on which days? It suffices to say that the good sense of the decision in Hornsby v Maynard is patent; it was correctly decided. Moreover, counsel was unable to point to any case which has come before the courts over the last 50 years in which unquantified services of this type have been held to produce a tenancy within the ambit of the Acts.
From there it is right to turn to the case of Montague v Browning a case decided in this court on somewhat special facts. There it had been agreed, between a caretaker and his employers, that the appropriate rent for premises which they let to him was £66 per annum and that as regards payment, he could set against that sum his wages which were at the same time agreed at £40 a year. Thus he actually only needed to pay the balance of £26 a year. (Some complications, which are irrelevant, arose when his wages were raised by 10s a week.) The Court of Appeal in that case, reversing the county court judge, held that the tenancy fell within the Rent Acts. That was a case of an agreed monetary rent with a set-off. On those facts it was, of course, unnecessary for the appellant tenant to argue in this court that Hornsby v Maynard had been wrongly decided. Incidentally, counsel for the plaintiffs, who on that occasion appeared for the appellant tenant, has informed us that no such submission was made. Singleton LJ, when giving the leading judgment, said ([1954] 2 All ER at 604, [1954] 1 WLR at 1044): ‘I do not think that the decision of the Divisional Court in Hornsby v Maynard affects the case before this court in any degree’. Denning LJ carefully restricted ([1954] 2 All ER at 604, [1954] 1 WLR at 1045) his judgment to cases where the parties had, by agreement, quantified the rents in terms of money and both he and Morris LJ refrained expressly from giving any general or final opinion on Hornsby v Maynard. It is true that each of the members of the court, not having heard full argument on the matter, did obiter express the view that Hornsby v Maynard might have to be further considered but plainly, when one looks at their judgments as a whole, they neither purported to overrule that case, not did they overrule it. It is indeed not entirely easy to see how the learned county court judge misled himself into saying that he thought it had inferentially been overruled. Accordingly, in the present case, even if there was a tenancy, the Rent Acts could not apply to it. At no time was there any agreed monetary quantification of the rent,
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nor was there any agreed method of quantification, nor was there any Act which provided a substitute for an agreed method of quantification. There is thus no need to discuss difficulties such as those which could occur if, for instance, an agreed valuation was found to be well below the manifestly true value of the services. Nor is this a case where there was a master and servant relationship agreement, in other words, what is normally referred to as a service tenancy.
I now turn to the task of considering the finding of the county court judge that the arrangement of 1951 resulted in a tenancy. Whether any given arrangement does, in law, produce a tenancy or, on the other hand, a licence, is rarely ease to determine although perhaps not so difficult as it was some 20 years ago. In this case, as always, it is necessary to give weight to the fact that exclusive possession has been given to the defendants. That, however, is a factor which is no longer conclusive and indeed appears nowadays to have diminishing weight. Weight has also to be given to the words of potential technical import used by the parties. But again these are not conclusive either when written or spoken. In the end it is the substance of the transaction to which the court must have regard and when deciding its intended effect it applies to that substance the law and not the label of either of the parties. In this way the law has adapted itself so as to deal with the complexities of the Rent Acts without causing patently unintended injustice to landlords, whilst guarding against improper avoidance by the latter of the provisions of those Acts. Using that approach, it becomes apparent, with all respect to the learned county court judge, that he has misdirected himself when finding that the arrangement of 1951 was intended to produce, and did produce, a tenancy and not a licence. What, for instance, did the parties intend if the second defendant ceased to cook for Mr Constable through permanent illness, death or mere lack of wish to do so, or if Mr Constable happened to have taken a dislike to her cooking? In each of those cases was it intended by either party that he (Mr Constable) was to be left not only without a cook but even without a kitchen—for the kitchen was held to be exclusively for the use of the defendants? That, of course, would be absurd and that of itself is enough. To hold that the parties entered into a class of legal relationship having that effect would infringe what Lord Greene MR spoke of as a golden rule when in Booker v Palmer ([1942] 2 All ER 674 at 677) he said:
‘To suggest there is an intention there to create a relationship of landlord and tenant appears to me to be quite impossible. There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and the conduct of the parties negative any intention of the kind.’
On top of that argument there was a lack of many of the normal incidents of a tenancy. There was no fixed amount of rent; it would presumably vary from quarter to quarter with the fuel bills. There was no term, fixed or periodic. Moreover, as contracts for personal services cannot be assigned there would be no estate that could be assigned on the basis which had been the foundation of its original existence. In truth, the arrangement was one by which the defendants, in return for the personal and unassignable obligation of looking after Mr Constable, obtained the personal and unassignable privilege of occupying rooms in his house. The result in law was that the defendants were granted the ‘personal privilege’ of occupation but no interest in the premises, to quote the words of Denning LJ in Errington v Errington ([1952] 1 All ER 149 at 155, [1952] 1 KB 290 at 298). From another angle, the situation created by the 1951 arrangement was closely akin to those produced by family arrangements to share a house and that, in its turn, would produce the same result—a personal licence to occupy.
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The learned county court judge thus misled himself by paying too much attention to the words ‘rent’ and ‘tenancy’ which he considered were used in 1951. These are words which laymen are apt to use for any payment in respect of accommodation and any arrangements to occupy accommodation. The 1951 arrangement thus, in law, results in the defendants having a personal licence which was terminable at reasonable notice and not in their having a tenancy.
The first and second points raised by counsel for the plaintiffs having been determined in favour of the plaintiffs, it is not necessary to deal with the third. Suffice it to say that I would be reluctant to decide in their favour on that point, ie their allegation that the value of the defendants’ services was not in excess of two-thirds of the relevant rateable value. True there is no evidence of that rateable value, nor any as to the value of the defendants’ services. Nor is it at all clear what is the date at which one has to look to ascertain the relevant rateable value. Prima facie, however, no assessment of the defendants’ services could be so low as to be less than the maximum figure at which two-thirds of the rateable value could be assessed. At best, however, the plaintiffs would have been entitled to ask for this issue to be remitted to the county court.
The success of the plaintiffs accordingly on the first two points raised in this appeal results in the appeal being allowed, despite the sympathy that one naturally has for the estimable qualities of the defendants and their position after 19 happy years in that house. I am only sorry that their hopes have been falsely raised and their anxiety prolonged by an initial decision in their favour.
CROSS LJ. Although the parties spoke of a sub-tenancy, the nature of the arrangement into which they entered shows, to my mind, that what Mr Constable granted the defendants was not an interest in land but merely a personal right to occupy the rooms in question. That is to say (although he may not have known the word) a ‘licence’. If, contrary to my view, Mr Constable did grant the defendants some species of common law tenancy of the greater part of his house, including the kitchen, at a rent consisting of the services to be rendered by the second defendant and free lighting and heating of the rooms retained by him, then that tenancy in my judgment was not a tenancy within the Rent Acts. The county court judge was wrong in thinking that the decision of the Divisional Court in Hornsby v Maynard to the effect that ‘rent’ in the Rent Acts means a money rent, had been overruled by the decision of this court in Montague v Browning. In that case the house was let at a money rent but, by arrangement, originally part and later the whole of that rent was treated as covered by certain services to be rendered by the tenant.
I agree that this appeal must be allowed.
RUSSELL LJ. I also agree. The learned county court judge purported to find as a fact that the parties created a tenancy. With respect to him, it is not a question of fact but a question of law, whether it is tenancy or a mere licence. I agree that this is a case in which, in all the circumstances, and despite the language which was used as given in evidence, the parties are not to be taken as having agreed a tenancy. If they had, however, it is quite plain to my mind, first of all, that Hornsby v Maynard was not inferentially overruled in Montague v Browning and secondly, that Hornsby v Maynard quite correctly decided, as a matter of law, that where, as here, one has a case in which there has been no attempt to assess or evaluate either the services to be rendered or the rental worth of the premises, the case is established under the relevant section of the relevant Act that no rent is payable.
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For the same reasons I also agree that the appeal must be allowed
Appeal allowed. Order for possession suspended for three months on condition that the sum of £2 per week by way of mesne profits continues to be paid by the defendants.
Solicitors: Van Sandau & Co, agents for Latter & Willett, Bromley (for the plaintiffs); Judge & Priestley, Bromley (for the defendants).
S A Hatteea Esq Barrister.
Re Clanchy’s Will Trusts
Lynch and another v Edwards and others
[1970] 2 All ER 489
Categories: SUCCESSION; Wills
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, RUSSELL AND PHILLIMORE LJJ
Hearing Date(s): 8, 9 APRIL 1970
Will – Class gift – Time of ascertainment of class – Gift to next-of-kin ‘who shall be living at the death of both’ testator’s two daughters – Next-of-kin at dates of will and testator’s death the two daughters – Clear intention to exclude daughters from gift to next-of-kin – Class to be ascertained at death of surviving daughter.
Will – Gift – Pecuniary legacy – Gift of £200 out of half of trust fund ‘in the event of the death of either of my … daughters … without leaving issue’ – Remainder of that half of fund to accrue to other daughter and her issue – Successive deaths of both daughters without either leaving issue – £200 payable on each death.
In 1916 a testator with two unmarried daughters, several brothers and a sister, died leaving a will which set up a trust fund, gave a life interest in half the fund to each daughter, and then provided ‘that in the event of the death of both my said daughters without leaving issue then my trustees shall stand possessed of the trust fund in trust for my next-of-kin (other than my brother Charles and my sister Elizabeth Bull) who shall be living at the death of both my said daughters and if more than one in equal shares’. The elder daughter died a spinster in 1964; the younger daughter died married but without issue in 1967.
Held – As the terms of the will made it clear that the testator did not intend ‘next-of-kin’ to include his two daughters, who were his sole next-of-kin both at the date of the will and at his death, the class of next-of-kin was to be ascertained at the death of the survivor of his two daughters in 1967 (see p 492 a, b, f and g, p 493 g and p 494 b and h, post).
Re Winn [1908–10] All ER Rep 593 distinguished.
The will also contained clauses whereby on the failure of the bequest to either daughter there was to be an accruer to the other daughter and her issue. A codicil to the will recited the accruer clause and then provided ‘that in the event of the death of either of my said daughters … without leaving issue my trustees shall pay out of the share of such deceased daughter the following legacies free of legacy duty viz:—the sum of Two hundred pounds to each one respectively of [five brothers] and subject to such payment my trustees shall hold such share and the income thereof upon the trusts’ declared by the accruer clause.
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Held – The recital of the accruer clause was not enough to contradict the clear words of the codicil, and so each of the five £200 legacies was payable twice; once on the death of the first daughter without leaving issue in 1964, and again on the death of the second daughter without leaving issue in 1967(see p 493 d and p 494 d, g and h, post).
Notes
For the time when the class of next-of-kin to whom a gift is given by will ascertained, see 39 Halsbury’s Laws (3rd Edn) 1042, 1043, para 1564, and for cases on the subject, see 49 Digest (Repl) 794–796, 7467–7484.
Cases referred to in judgments
Winn, Re, Brook v Whitton [1910] 1 Ch 278, [1908–10] All ER Rep 593, 79 LJCh 165, 101 LT 737, 49 Digest (Repl) 795, 7483.
Appeal
The fourth defendant, Mabel Clanchy, who was one of the next-of-kin of the testator, Alfred Clanchy, deceased, at the death of his surviving daughter in 1967, if his next-of-kin were to be ascertained at that date, appealed against the decision of Burgess V-C, sitting in the Chancery Court of the County Palatine of Lancaster on 27 January 1969, on a petition for the construction of the testator’s will and two codicils presented by his trustees, the plaintiffs Stephen Ratcliff Lynch and Sidney Francis Bell. The defendants to the petition (other than the fourth defendant) were (1) Francis Harrington Edwards, (2) Anthony Bradshaw Bowles, (3) Midland Bank Executor & Trustee Co Ltd and (5) Anthony Norman Barlow. The facts are set out in the judgment of Harman LJ.
H E Francis QC and Michael O’Donoghue for the fourth defendant.
J D Newton for the plaintiffs.
S W Templeman QC and J Turner for the first, second and third defendants.
N Micklem for the fifth defendant.
9 April 1970. The following judgments were delivered.
HARMAN LJ. This is an appeal from a decision of Burgess V-C in the Chancery Court of the County Palatine of Lancaster, which was given as long ago as 27 January 1969, and which raised two questions, both I think of some difficulty, on the will of a certain Alfred Clanchy, a citizen of Liverpool, who died in 1916, having made his will in 1910, and two codicils to it, one of which we shall have to consider in due course.
The testator had two daughters, who were both at the date of his will and at the date of his death, spinsters; they were then in their twenties. Obviously the testator’s chief ambition was to provide for them, and to provide for them to the maximum of security so as to prevent their squandering whatever wealth he was going to leave them, however constituted. The result is that at the death of the last of those to die there is a considerable estate, and the question is on whom that estate devolves. The elder daughter died a spinster in 1964; the younger daughter died, married but without issue in 1967. I think the second question is quite separate from the first and I shall deal with it separately.
By the will the testator appointed executors in the ordinary way and he appointed the plaintiffs as the trustees of that will. He left directions about his house, with which I need not trouble; he made a devise of furniture to his trustees and directed a conversion in the usual way and a division of the trust fund. This was divided into two equal parts, of which the first was devoted to his elder daughter, Ethel May; she was to have the life interest and also, at a later stage in the will, there was a spendthrift clause and the remainder was to go to her children or remoter issue as
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she appointed and in default to her children equally; and in the event of the failure of that bequest there was to be an accruer to the other daughter and her issue, and the disposition in respect of the second daughter, Mrs Donald, was exactly corresponding to that.
He then provided for the event of neither daughter leaving issue in these words:
‘And I hereby further declare that in the event of the death of both my said daughters without leaving issue then my trustees shall stand possessed of the trust In fund trustfor my next-of-kin (other than my brother Charles and my sister Elizabeth Bull) who shall be living at the death of both my said daughters and if more than one in equal shares.’
That raises the question: who, for this purpose, are the next-of-kin other than his brother and sister whom he expressly excepted? ‘Next-of-kin’ means in the ordinary way what it says; that is to say, a man can only have one set of persons as next-of-kin. These people, who are the nearest relatives when he dies, are not the same as the next-of-kin according to the statute because there is no representation; it means those who are nearest in blood to him. There have been many cases cited to us, with which I do not propose to deal, but I think it convenient to cite a passage from the decision of Parker J in Re Winn, Brook v Whitton ([1910] 1 Ch 278 at 286, [1908–10] All ER Rep 593 at 596, 597):
‘Of course, in every case of a gift “to my next-of-kin”, or “my nearest relations”, or any gift of that kind, prima facie the rule is, and I think it is not only a rule of construction, but the natural meaning of the words, that the class is to be ascertained at the death of the testator. When the testator dies, certain people answer the description of his relatives, or his next-of-kin, or his nearest in blood, or any of those expressions; and it is difficult to see in the present case, if I am right in the construction I put on the words, namely, that he is contemplating a class some of whom may survive, and some of whom may die before a certain period, at what other time the class is to be ascertained than at the date of the testator’s death. Thus it appears to me that the most natural construction, apart from authority, and apart from those particular circumstances to which I have already referred, is that this is a gift to the next-of-kin, to be ascertained at the testator’s death, but that any one of the class so ascertained, in order to take under the ultimate gift, has to survive that period.’
Then, after saying that he is not going to deal with the cases, Parker J said ([1910] 1 Ch at 289, [1908–10] All ER Rep at 598):
‘Where there is a gift to next-of-kin, or nearest of blood, or any similar gift, the time at which the class is to be ascertained is the death of the testator. It is always possible for a testator to say that the class is to be ascertained at a later time, and if the testator makes a gift to a tenant for life, and “after the death of the tenant for life to the persons who shall then be my relatives or my next-of-kin”, it is perfectly clear that, apart from any reference to the Statute of Distributions ((1670) 22 & 23 Car 2 c 10), the class is to be ascertained at the death of the tenant for life in accordance with the express language of the testator. But where a testator, referring to his statutory next-of-kin, uses expressions such as “the persons who shall then be entitled by virtue of the Statute of Distributions”, the ordinary rule which would have ascertained the class at the time to which the word “then” points, is or may be rebutted … ’
Parker J then held that in the case before him the class had to be ascertained at the
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death of the testator but that any who died before distribution date dropped out of it and so far as they were concerned they ceased to be members of the class.
In the present case, at the date of the will and at the date of the death, the sole next-of-kin of the testator were his two daughters. One thing that is clear is that he did not intend his daughters to be able to touch the capital of his property. It is an ironic result, it is suggested, that that is the very thing that he meant to avoid if the daughters died childless, namely that they should come in. It seems to me to be clear that he did not intend the gift here to be a gift to his daughters. It is moreover perfectly clear by the express words that he used, that he contemplated quite a different class, a class which included brothers and sisters, because he excludes a brother and a sister on the footing that if he had not so excluded them they were, or might be, members of the class of what he meant by ‘next-of-kin’.
So therefore he has constituted an artificial class; the question is: what class? Counsel for the fourth defendant says that the testator merely meant that in the event of the failure of his issue the property was to go to those who should be his nearest relatives when the time came and that the words are patient of that meaning, ‘my next-of-kin … who shall be living at the time of the death of both my said daughters’, and that therefore it has to go to those who, when the time comes, are nearest in blood to him. Of those there are I believe four, and one of them is the fourth defendant, Mabel Clanchy; she represents that class.
The alternative view taken is either that we must construe it as the learned vice-chancellor did and say that ‘next-of-kin’ means next-of-kin at the death—that is to say, the daughters—and therefore the whole thing fails; or, it means the class or persons who would have been next-of-kin at the testator’s death if one excepts the daughters; this too results in intestacy. I myself can see no justification for that; the class of brothers and sisters were never next-of-kin of the testator at any time. They could only have been that if the daughters had both predeceased them. Therefore I cannot see that the testator can have meant brothers and sisters, and the mere fact that he excepted two of them does not seem to me to indicate that he meant that the rest of them should constitute the class, because after all ‘next-of-kin’ does not mean next-of-kin other than somebody not mentioned, namely the two daughters, so I think there are no real competing words and that one is forced to the view, of which as I say the words are patient, that the class intended was a class to be ascertained at the critical date, namely 1967.
I would therefore so hold, contrary to the view of the learned vice-chancellor, who declared that the next-of-kin were to be constituted at the date of the death and that therefore the result was an intestacy. The form of the declaration can be considered, but I think the class who take under this disposition are his closest blood relatives living at the date of the death of his second daughter, and I would so declare.
The second point arises under the codicil. This codicil, after giving a gift to a housekeeper, starts by reciting the accruer clause in the will. One wonders why the codicil does that, except in order to draw attention to the fact that what the testator is going to give is something out of an accruer. The codicil states:
‘Now I hereby declare that in the event of the death of either of my said daughters Ethel May Clanchy and Emma Daisy Clanchy without leaving issue my trustees shall pay out of the share of such deceased daughter the following legacies free of legacy duty viz:—the sum of Two hundred pounds to each one respectively of my brothers James Clanchy William Clanchy Frederick Clanchy Frank Clanchy and Harry Clanchy and subject to such payment my trustees shall hold such share and the income thereof upon the trusts hereinbefore mentioned concerning the same’.
which is a reference to the accruer which he has recited.
On the death of the first daughter in 1964 these five legacies undoubtedly became
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payable because here was a case of one of his daughters dying without leaving issue. In 1967, another of his daughters died without leaving issue and it is said on behalf of the estates of the legatees—that is to say, the brothers—that another legacy becomes payable, and so the vice-chancellor has held. The reasons for his decision is not stated, but I think it must be that any one of those named persons or his representative can come to the executors and say ‘The event has happened; here is a daughter, Mrs Donald, who has died without leaving issue—pay me my legacy’; and if he be answered ‘Oh, but you’ve already had a legacy’, he will retort ‘Well, that’s quite irrelevant; it is quite true that another daughter died without leaving issue, but this one also has died without leaving issue, and it says “either”; it doesn’t say “one of them”; it doesn’t say “both” but it says “either”, that is to say, that whenever one or other of these daughters dies without leaving issue, a legacy shall become payable’; and I think therefore the legatee has fulfilled the exact words of the codicil. But, it is said, that makes nonsense of the recital in the codicil, because that recital seems to show that the gift of the legacy is bound up with the working of the accruer, and that is why the accruer clause is recited. This is a view that I was rather inclined to favour at first; but on the whole I think it is not enough to contradict the words of the codicil, which do exactly fit the events which have happened, and I therefore agree with the learned vice-chncellor in this respect and hold that a second set of legacies became payable in the event which has happened.
I would therefore allow the appeal on the first point and dismiss it on the second point.
RUSSELL LJ. It is accepted on behalf of the fourth defendant that prima facie where there is a disposition in favour of a class described as ‘the next-of-kin’—that is, the nearest in blood relationship to the testator—the class is to be ascertained at the death of the testator, and that this so even where the disposition is to take effect after a life interest and also even where the disposition is restricted to those of the described class living at the date of distribution. It is, however, clear that a testator may so express himself as to indicate that the time when those nearest in blood to him are to be ascertained is the date of distribution. One example would be if the testator in terms made a disposition in favour of ‘persons who shall be my next-of-kin at the death of the life tenant’. That of course is not this case, but clearly there may be other ways in which a testator may indicate the same intention.
In the present case I dismiss at once the suggestion that the testator meant to refer to his two daughters who were in fact his nearest blood relations, both at the date of the will and at the date of death, when he referred in the proviso to his next-of-kin. Firstly, it would mean that the proviso was itself necessarily stillborn because ex hypothesi the daughters could not be next-of-kin living at their own death; secondly, the exception in parentheses which has already been referred to shows that he considered that his brother and sisters were capable of taking under the disposition.
This leaves us with two possibilities. For the fourth defendant it is said that ‘next-of-kin’ means nearest in blood. Since the nearest in blood, if the death of the testator is the relevant time, were the daughters, and since the daughters are out of the picture, the only way of applying accurately the phrase ‘next-of-kin’ is to relate it to the distribution date; the prima facie approach is thus displaced.
For the plaintiffs and the other defendants it is contended that ‘next-of-kin’ is to be construed in this will, having regard to the naming of the brother and sister, as next-but-one of kin, ascertained at the testator’s death according to the prima facie approach. I do not myself view with favour the application of a prima facie view when next-of-kin should be ascertained, to a case when the next-of-kin are not in question. Moreover on the one hand the plaintiffs and the other defendants contend for a false meaning of ‘next-of-kin’; on the other hand the fourth defendant contends for a true meaning of ‘next-of-kin’. It was said for the plaintiffs and the other
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defendants that the fourth defendant’s construction of ‘next-of-kin’ is also false, or artificial, because it was said that ‘next-of-kin’ means nearest in blood at death. I do not myself accept that criticism; ‘next-of-kin’ means ‘nearest in blood’. The prima facie rule does not affect the meaning of the phrase, but only the time at which it is to be applied. Accordingly, preferring as I do to construe ‘next-of-kin’ as ‘nearest in blood’ rather than as ‘nearest-but-one in blood’, I find in this will sufficient indication that the testator was pointing to the time of distribution as the moment when the class of beneficiaries is to be constituted.
We were, as Harman LJ has remarked, referred to a number of cases, but to my mind none of them indicates that the present will should be construed in a sense contrary to that which I favour. Re Winn, Brook v Whitton had very special features, which were remarked on by Parker J in his judgment, and which are absent here. There were words of exception in that case of persons who were not next-of-kin; but it was considered that no weight should be attached to them in that particular will, having particular regard to the form of the settled legacy of £5,000 which was given to one Tatton. Moreover there were six settled legacies of £15,000 in Re Winn, of which five were given by referential trusts referring to the first; and to ascertain the next-of-kin otherwise than at the death of the testator in that case would involve potentially a different class for each legacy of £15,000—a most unlikely outcome of a referential trust. On the first point I would accordingly also allow the appeal.
On the second point I have come to the conclusion, with some hesitation, that the appeal fails. The operative, or dispositive, part of the first codicil reads:
‘… in the event of the death of either of my daughters [naming them] without leaving issue my trustees shall pay out of the share of such deceased daughter the following legacies free of legacy duty … ’
If that stood alone, it seems to me that quite plainly the £200 legacies would be payable, not only on the death of the first daughter but also on the death of the second daughter; but it is said that the recital and the provision at the end of the codicil show that legacies are only payable on the occasion of an accruer of a daughter’s share to the other daughter’s share. Counsel for the fourth defendant argued cogently that the recital of the provision for accruer is otiose if the legacies are payable on a death without an accruer, and that is true; further, he says that the direction at the end that the trustees ‘shall hold such share and the income thereof upon the trusts hereinbefore mentioned concerning the same’ subject to such payment, also shows that the disposition is limited to the occasion of such an accruer. I see the force of those points, but as I say, with some hesitation I do not myself think that the clear language of the dispositive part of the codicil is restricted with sufficient clarity.
I would therefore dismiss the appeal on the second point.
PHILLIMORE LJ. I agree with both the judgments that have been delivered and I cannot usefully add anything.
Appeal allowed on first point but dismissed on second point.
Solicitors: H B Wedlake, Saint & Co (for the fourth defendant); F Murphy & Son, Liverpool (for the plaintiffs); Bremner, Sons & Corlett, Liverpool (for the first, second, third and fifth defendants).
Henry Summerfield Esq Barrister.
Povey v W E & E Jackson (a firm)
[1970] 2 All ER 495
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): EDMUND DAVIES AND WIDGERY LJJ AND SIR FREDERIC SELLERS
Hearing Date(s): 23, 24 MARCH 1970
Damages – Assessment – Appeal – Principle on which appellate court will intervene – Damages for effects of brucellosis – General damages assessed too low, special damages too high, but global award fair and proper – Whether appeals as to quantum should be directed to one item only in total award.
Observations on appeals as to quantum of damages.
Notes
For the principles on which the Court of Appeal acts on appeals from assessments of damages in actions tried without a jury, see 11 Halsbury’s Laws (3rd Edn) 312, para 508, and for cases on the subject, see 17 Digest (Repl) 193, 194, 913–918.
Case cited
Baker v Willoughby [1969] 3 All ER 1528, [1970] 2 WLR 50.
Appeal
The plaintiff, Clarence Povey, contracted brucellosis in December 1966 as a result of the negligence and breach of contract of the defendant firm, W E & E Jackson, who had sold him milk. He suffered from depression, psychological inertia and irritability and did not return to work until May 1968. He brought an action against the defendant for damages, and signed judgment in default of defence for damages to be assessed. These were assessed on 16 July 1969 at the Manchester District Registry by the assistant district registrar (M A W Grundy Esq) at £1,540 special damages and £250 general damages. The plaintiff appealed against the assessment of general damages and the defendants cross-appealed against both general and special damages. The facts are set out in the judgment of Edmund Davies LJ.
F Reynold for the plaintiff.
B R Duckworth for the defendants.
24 March 1970. The following judgments were delivered.
EDMUND DAVIES LJ. This appeal relates solely to damages, and indeed, as launched, to the general damages of £250 awarded to the 46–year old plaintiff by the learned registrar at Manchester in July 1969. As a general observation, a party who is considering appealing on quantum is unwise to concentrate simply on one item of damage. A more prudent course is to look at the damages awarded as a whole and not to seek to impeach a particular item unless it is, after careful consideration, demonstrably manifest that the global sum awarded ought not to stand. In this case, for reasons which will become obvious, the plaintiff has sought to attack simply the award of general damages, which he alleges was too little. The registrar in addition awarded the sum of £1,540 by way of special damages. He did that on the basis that the incapacity extended from about 1 December 1966 to 31 May 1968; that is a period of 77 weeks. The agreed rate of special damages being £20 a week, he arrived at a figure of £1,540. In the result he awarded the plaintiff a sum of £1,663 4s 9d, which represented the combination of £250 general damages and £1,540 special damages, less half the statutory benefits received. The defendants have belatedly cross-appealed. Unlike the plaintiff, they have not been content to attack the general damages awarded, but have said initially that both the general and the special damages should have been less than was awarded. The plaintiff says that the general damages should have been not £250 but in the region of £1,000.
The very short facts are that about 1 December 1966, the plaintiff contracted brucellosis owing to the negligence of the defendants, and for a substantial period of time thereafter he was incapacitated from work. He had very distressing symptoms which were itemised by the learned registrar, symptoms not simply of a physical
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character but having psychological accompaniments of a distressing and disturbing kind. The two questions that arise here are, first of all, how long did those symptoms continue and in what degree, and accordingly to what general damages ought the plaintiff to be entitled; and secondly, what special damages should he be awarded for the period of time during which he was incapacitated from work?
The learned registrar has, if I may respectfully say so, prepared a quite admirable note of his judgment, giving the reasons whereby he arrived at the global figure of £1,790.
There was one complication in the case. The condition of brucellosis having been diagnosed about 13 January 1967, in Easter the plaintiff had a coronary attack, and there is no doubt that to some degree (impossible to define with any precision) that coronary attack, not caused by the brucellosis, did operate to retard to some extent the recovery from the brucellosis condition. The registrar said that he thought that the plaintiff was incapacitated from work not, as has been urged by the defence, up to about November 1967, but for a substantially longer period, namely until May 1968; not simply and solely because of the enduring physical results of the contraction of this disease but because of what one might call the nervous debility which had been induced, a disinclination for work which was not due entirely to physical incapacity to work. Coming to the conclusion that the plaintiff was not, in his view, to be regarded as unreasonable in not going back to work by the end of May 1968, the registrar calculated the special damages of £1,540 on the basis of the 77 weeks to which I have already referred.
My own view is that in that respect the registrar was probably being somewhat over-kind to the plaintiff. I would myself, on the whole of the evidence, have thought the plaintiff could reasonably have been expected to make a better effort to apply himself rather more vigorously and to have started work somewhat earlier; but on any basis he had a distressing experience for a substantial period of time and I would have thought that £250 did not represent fair compensation for the unfortunate experience which, on any view, he underwent. I would accordingly have been inclined to award him by way of general damages more than that; but I ask myself: was the global sum right, or is it demonstrably wrong? Is it, as the plaintiff has urged, clearly wrong, and ought the general damages to go up to £1,000, leaving the special damages at £1,540? Are, as counsel for the defendants has contended, the special damages clearly wrong? The answers that I have returned to both those questions are that whereas I think that the general damages were on the low side and, if they stood alone, would call for interference by this court, so also the special damages were on the high side to a degree which, had they stood alone, would have called for interference by this court. But, ending this short judgment where I began, I think that parties who are appellants solely on the quantum of damages are ill advised by concentrating only on various items which make up the global sum. The final sum arrived at in this case was fair and proper. Certainly it has not to my satisfaction been demonstrated to be so wrong as to call for interference, and I would accordingly decline to do so. In the result, I would dismiss both the appeal and the cross-appeal.
WIDGERY LJ. I entirely agree, and there is nothing which I wish to add.
SIR FREDERIC SELLERS. I also agree.
Appeal and cross-appeal dismissed.
Solicitors: Smiles & Co, agents for Whitworths, Manchester (for the plaintiff); Hatchett Jones & Co, agents for Hodgson & Sons, Preston (for the defendants).
Henry Summerfield Esq Barrister.
Price v Price
[1970] 2 All ER 497
Categories: FAMILY; Divorce
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 14 JULY 1969
Divorce – Desertion – Need to prove both factum and animus – Wife forming intention to leave husband – Continuing residence in matrimonial home – Husband forming intention to leave wife – Departure from matrimonial home – No desertion by wife.
After many rows and other dissensions between a married couple with three children, whilst the husband was in hospital, the wife decided never to live with him again and to take proceedings for a divorce and the decision was communicated to the husband through a psychiatrist or welfare officer. The husband during his stay in hospital formed the intention communicated to his son of finishing with the family and never living with them again and on coming out be went to the matrimonial home, took his things away and never returned to live there again. The wife then on a short holiday returned to the matrimonial home to find the husband gone and she continued to live there. On petitions for divorce by the wife on grounds of cruelty and desertion and answers by the husband alleging desertion by the wife, the judge found that neither party had given the other grave and weighty cause for leaving, but held that each became a deserter when they communicated their respective intentions not to live with each other, and he accordingly pronounced decrees of divorce on the ground of desertion on both petition and answer.
Held – The decree in favour of the husband would be set aside because desertion involved two elements, the intention to desert and the fact of desertion, and whereas the husband had made up his mind not to live with the wife and had carried out his intention by taking his clothes away and never going back, the wife had only formed the intention of leaving and had not carried it out before the husband left and so she was never in desertion (see p 500 g and h, p 501 c and p 502 b, post).
Decision of Wrangham J [1968] 3 All ER 543 reversed in part.
Notes
For the constituent elements of desertion, factum and animus, see 12 Halsbury’s Laws (3rd Edn) 243, 244, para 456, and for cases on the subject, see 27 Digest (Repl) 334, 2783–2785.
Cases referred to in judgment
Lang v Lang (1953) The Times, 7 July.
Appeal
The wife, Mary Christina Elizabeth Maud Price, appealed against an order of Wrangham J made at Birmingham Assizes on 4 July 1968 and reported at [1968] 3 All ER 543. Wrangham J held that the wife had not proved her case of cruelty against the husband, Harry Price, and granted mutual decrees to both parties on the ground of desertion. The grounds of appeal were: (i) that the finding as to cruelty was perverse, contrary to the weight of the evidence and inconsistent with the husband’s admissions; and (ii) that mutual decrees (if admissible in law) were inappropriate in that the husband’s conduct had caused the break-up of the marriage.
D A Fairweather for the wife.
Yetta Frazer for the husband.
14 July 1969. The following judgments were delivered.
Page 498 of [1970] 2 All ER 497
DAVIES LJ. This is an appeal by a wife petitioner against a decision of Wrangham J ([1968] 3 All ER 543, [1968] 1 WLR 1735) given at Birmingham on 4 July 1968. The proceedings consisted of a petition by the wife on the ground of cruelty and an answer by the husband denying cruelty. At the hearing the husband was allowed to amend his answer to allege desertion, and the wife was allowed to file a fresh petition on the ground of desertion. The learned judge in the event rejected the wife’s charges of cruelty, but on the husband’s amended answer and on the wife’s new petition pronounced, somewhat unusually, decrees in favour of both the husband and the wife, each decree being on the ground of desertion.
The question whether in any circumstances cross-decrees on the ground of desertion can in law be pronounced has been much discussed, as the learned judge in the court below said, both in authorities and in textbooks; but there is no binding authority on the point. For the purposes of the present appeal, I have come to the conclusion that it is, perhaps fortunately, quite unnecessary for us to embark on those troubled waters, and I propose to say nothing whatsoever about the point.
It is not necessary, in the view that I take of this case, to give a long judgment. It will be sufficient if I first of all recite shortly the general history of the marriage and then deal with the point on which, in my view, this case falls to be decided. The parties were married in June 1938, the husband being then 27 and the wife 20. There have been three children: a boy called Harry, born in 1941, Margaret in 1946, and Joy in 1947. The marriage had not apparently been particularly happy, as can be seen from the allegations of cruelty which the wife makes in her petition. I think it is preferable really that I should not say anything about those allegations. There are some allegations of violence; there are some rather more unpleasant allegations. But at the end of it all the learned judge found that the charge of cruelty was not made out.
There was one matter on which some reliance was placed by the husband. In the 1950s the wife apparently fell in love with another man and associated with him for many years, until after the parting between these parties, which took place on 1 July 1964. There was never any allegation of adultery; and in the event nothing much turns on that association, save that of course it shows that if the husband was moody, as is said by the wife and the children, and disagreeable at times, and at times took his meals by himself, he no doubt had some justification, with the wife admittedly being in love with this other man and indeed on one occasion at a family conference discussing whether there should not be a divorce so that they could get married.
However that may be, I think that it is only necessary to come to the circumstances which led up to the parting. Apparently, on or about 23 June 1964, there was another of the great many rows that took place in this family from time to time. On this occasion it concerned Margaret, who, it would appear, had been rude to her mother, and the husband came in, took the mother’s side about this and told Margaret to go to bed. Instead of going to bed, Margaret went over to her maternal grandfather, who had come over to live with these people from Northern Ireland. The grandfather joined in the row; and when the husband told Margaret to go to bed, the maternal grandfather called the husband a very filthy name, referring to an unfortunate incident in the husband’s history in or about the year 1953.
Apparently that row distressed the husband very much indeed. The parties did not speak during the next week; and, on 29 June, in circumstances which are somewhat obscure, the husband took a substantial overdose of sleeping tablets. He said only three, but I think that the learned judge found that it must have been more. Anyway, he was unconscious and he was taken off to hospital, where he was detained for a month under a 28–day order. The wife did not go and visit him in hospital at all, but apparently at some stage she communicated either to a psychiatrist
Page 499 of [1970] 2 All ER 497
in the hospital or to a welfare officer the decision at which she had arrived never to live with her husband again and to take proceedings for a divorce. This information was communicated to the husband, but it is not clear from his evidence—indeed, it is far from clear—whether his own declared intention, which he made to his son, who visited him several times in hospital, that he was finished with his family and would never live with them again, was made before or after he received the intimation as to his wife’s intentions. For myself, I do not think, although this matter was enquired into with some detail but little result, that it matters really one way or the other.
What in fact happened was this. While the husband was in hospital, the wife went off for a short holiday, for a little over a week I think. Where she went, we do not know, and it is not really quite clear who was with her. While she was away on holiday, the husband was discharged from hospital on or about 28 July. What he in fact did was to go, it would appear, straight to his house, to the matrimonial home, and he says that he found some doors open. Whether that was so or not does not matter. He went in, he packed all his things and he took them away and he has never lived there since. When the wife came back, accompanied by Harry, they say that they had difficulty in getting in. The suggestion is that the locks had been changed in some way and that the son had to climb in through a window. It is doubtful, I think, whether the locks had been changed; but it is plain that some fortnight or so later the wife did have the locks changed, for the husband went back once, according to him, and once only—we do not know for what purpose—and found that his key would not turn the lock.
Now, that is the skeleton of this case. I have not dealt with the allegations of cruelty. It is not necessary to do so, for the judge rejected them, and I can see no conceivable ground on which this court could properly be asked to come to any different conclusion on that matter.
So far as the separation was concerned, I would like to refer to one or two passages from the learned judge’s judgment. He said ([1968] 3 All ER at 544, [1968] 1 WLR at 1738):
‘The next question is whether either of these two had just cause or grave and weighty cause, whichever it be called, for coming to the decision which he or she came to. I do not think that either of them did. It was in one sense sensible enough for either of them to put an end to what had become a very unhappy married life. But the unhappiness was not due to misconduct on the part of the one or the other alone. It was due to the reaction of each on the other. The wife was in love with another man. The husband had shaken the married life to the core by the disgrace of his conviction in 1953. In those circumstances, I do not think that it can be said that either had given the other grave and weighty cause for leaving, because that must mean really misconduct on the part of the one out of proportion to the conduct of the other. I think that each of these two contributed to the marital unhappiness by the way they had been behaving for years to each other.’
It seems to me that that is a very proper estimation of the conduct of these two spouses. But it is plain that the judge is there saying that, if either of these people was guilty of simple desertion, it could not be constructive desertion the other way round, since there was no just cause for either to separate from the other.
I am taking these points in a somewhat different order from that in which the judge took them. He referred to the question whether the doors were locked and he said, as I have just said ([1968] 1 WLR at 1738, cf [1968] 3 All ER at 543, 544):
‘I do not think it matters in the least whether they were locked or whether the keys were changed afterwards. The fact is that on her own evidence it is
Page 500 of [1970] 2 All ER 497
abundantly plain that while the wife was away on holiday, and indeed even before she went on holiday, certainly while the husband was in hospital, she had made up her mind to get rid of the husband. The husband, as soon as he was fit to do it in hospital, had made up his mind to get rid of the wife. Each, I think, decided to get rid of the other independently of the other. Neither obtained or sought to obtain the consent of the other. Neither thought that he or she had the consent of the other, or cared whether the other consented or not. Consent was, in other words, to both of them a wholly irrelevant factor which never entered the problem at all.’
So there is the judge saying that this was not a consensual separation. And, as I have already said, he had found that there was no just cause entitling the other to go.
The learned judge, having considered the authorities as to the problem which on his finding he had to consider—viz whether both parties in such a case can be granted a decree—said ([1968] 3 All ER at 544, 545, [1968] 1 WLR at 1739):
‘If one takes the cases one by one, taking the case of the husband first, it seems to me to be plain that, when the wife determined, at a time when she was already by external circumstances separated from her husband, never to go back to him at all, she became, at least as soon as that determination was communicated to her husband, a deserter. She would not have been a deserter if she had had good cause to do that, but I do not think that she did have sufficient cause to do that, and I think, therefore, that she was a deserter. What applies to her applies equally to the husband. It seems to me that, when he was in hospital, separated from his wife by force of circumstances, determined never to have anything to do with his family again, he equally became a deserter. The fact that he removed his belongings from the house might be said to be explained by the fact that by that time he knew that his wife was also going to get rid of him.’
In my judgment, the learned judge fell into error in that last passage. He is there, it would appear, deciding that as soon as the wife had made up her mind never to live with the husband again she became, at least as soon as the husband was informed of that, a deserter. In my view, that is not the law. It is elementary that to constitute desertion, as was pointed out by learned counsel and as is well known, two elements are necessary: (i) the intention to desert; and (ii) the fact of desertion. Let us assume that each of these two people had the intention to leave each other. The wife never carried it out. To use a phrase, the husband had already ‘jumped the gun’. He made up his mind not to live with her, and he carried out his intention by going to the house and taking his things away and never going back or offering to go back to live there again. The wife, however, possibly by good luck—for there is nothing to choose between the conduct of these two people—found, when she came back to the matrimonial home, where, it is to be observed, she is still living to this day, that the husband had gone away and had deserted her. It seems to me that in those circumstances it cannot be said, on the facts of this case, that the wife ever factually carried out her formed intention to desert the husband. She did not. She went back to the home, and the bird had already flown.
Those reasons are not perhaps very fully expressed. But, in the end of it all, in my view, this is a very short case indeed. The judge did not have to go into the difficult problem whether spouses can be said, on the same facts, each to have deserted the other, because in my view, for the reasons that I have attempted to express, the desertion here was carried into effect by the husband, so that there was nothing left in that regard for the wife to do.
Page 501 of [1970] 2 All ER 497
Other points arose in this case which I do not think that it is necessary to consider. Counsel for the wife sought to disturb the judge’s finding on cruelty and sought to argue that there was some cruelty. He argued that, although it may very well have been condoned, the husband’s conduct in deserting the wife revived that cruelty, as of course it would have done if there had been any cruelty. But, as I have already indicated, I see no reason to differ from the judge’s finding in that regard. And the ground on which I would allow this appeal is that the learned judge, on the facts and the evidence in this case, was wrong in holding that the wife deserted the husband. I would accordingly allow the wife’s appeal and set aside the decree granted to the husband.
SACHS LJ. I am in full agreement with the judgment of Davies LJ, and there is but little that I wish to add. I would however venture to underline that, so far as future ancillary proceedings may develop, the responsibility for the break-up of the marriage appears to me to be equally divided between the two parties—a view that Davies LJ has already stated. As regards the decision as to who is to have a decree, this appears to me, on analysis, to be a standard case where one of two spouses who had been living in considerable discord takes the course of leaving the matrimonial home intending not to return. Thus to leave the home is an act of desertion, and the party who gives effect to his intentions by such an act puts himself in the wrong, according to the matrimonial law as it at present stands: that, in this case, as in so many cases, is an end of the matter.
As regards the vexed question whether there may be rare cases when both parties can be said simultaneously to be in desertion over a period of three years, like Davies LJ, I see no need to discuss the issue. I would, however, add that it would need persuasive argument before I was prepared to hold that the views expressed in turn by all three judges of this court in Lang v Lang (see Rayden on Divorcea) were wrong and that there could be twin decrees for desertion. I would agree to the order proposed by Davies LJ.
PHILLIMORE LJ. I also agree, and I would for myself seek to repeat what my Lords have said, to the effect that this was a case where there was not very much to choose, by the summer of 1964 when this marriage broke up, between these two parties. Each had matters, and grave matters, of which to complain against the other. But the years had passed, and some of them, particularly the conduct of the husband, must have ceased to bulk as large as they did at the time. The marriage, in effect, in the summer of 1964, after some 26 years, during the last ten of which at all events the parties had ceased to have sexual intercourse, had long ceased to be in any sense a happy marriage; and, of course, the question of who was in fact the deserter here becomes in such circumstances somewhat technical, albeit viewed in the present state of the law.
The learned judge clearly founded his judgment that each was a deserter on the analogy of the law of domicil. It is well established, of course, that if a spouse leaves his or her country of domicil and, having left it for another country, decides to make that his permanent home, he acquires a new domicil of choice, that intention is decisive. So here, in effect, the learned judge has said that these two parties being separated at the time, the husband in hospital and she on holiday, and having each formed the intention not to live with the other in future, so each became thereupon a deserter of the other, certainly as soon as that intention had been communicated to the other. So far as the husband was concerned, he knew of the wife’s
Page 502 of [1970] 2 All ER 497
stated intention through either the welfare officer or the medical staff at the hospital, who told him that his wife was taking divorce proceedings.
I entirely agree with Davies LJ that that was where the learned judge fell into error. Under the law, in order to establish desertion, it was further necessary to show that a party, having formed that intention, had in fact taken the step of leaving the other in pursuance of it. The husband clearly did so, whereas the wife returned to the matrimonial home which, as it happened, belonged to the husband, and she has been there ever since. He has never tried to return, or sought to effect any reconciliation. I agree that this appeal by the wife must be allowed and that the decree in favour of the husband must be set aside.
Appeal allowed. Decree in favour of husband set aside.
Solicitors: Philip Baker & Co, Birmingham (for the wife); Bartlett, Walters & Parry, Loughborough (for the husband).
F A Amies Esq Barrister.
Re W
[1970] 2 All ER 502
Categories: HEALTH; Mental health: FAMILY; Divorce
Court: COURT OF PROTECTION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 19, 20, 26 FEBRUARY, 19 MARCH 1970
Mental health – Divorce – Application by Official Solicitor for leave to present petition for divorce on behalf of patient – Court of Protection – Scope of word ‘benefit’ in Mental Health Act 1959 – Factors to be considered in assessing whether or not petition was for the benefit of the patient – Whether application should be granted – Mental Health Act 1959, ss 102, 103(1) (h).
Mental Health – Divorce – Extent to which information of patient’s condition should be provided without authority to spouse contemplating proceedings against patient.
The patient, a woman 51 years of age, was married in 1939 and had two sons, the first born in 1946 and the second in 1950. In 1942, she was admitted to hospital as a certified patient, and was in and out of a mental hospital as a certified or as a voluntary or informal patient until she was last admitted in January 1964. In June 1966, her affairs were put under the care of the Court of Protection. She was discharged from the mental hospital into an after-care home in April 1968, where she remained subject to the statutory protection of the Court of Protection. Later in 1968, her husband contemplated petitioning for divorce on the grounds of the patient’s incurable unsoundness of mind. In view of the patient’s discharge from hospital, however, he was not able to establish as was required by s 1(1)(a) (iv) of the Matrimonial Causes Act 1965, that she had, for five years preceding the petition, been under continuous care and treatment without a break exceeding 28 days, and, consequently, in 1969, he sought to get the patient to divorce him on the grounds of his own adultery. The Official Solicitor accordingly applied to the Court of Protection, under s 103(1)(h)a of the Mental Health Act 1959, for leave to present and prosecute proceedings for divorce on the patient’s behalf. The patient’s marriage had irretrievably broken down, the parties not having lived together since January 1964. The medical evidence was that the patient’s condition was irreversible. The husband wished to marry another. The patient, so far as capable of forming a rational view, wished to present a petition for divorce and had
Page 503 of [1970] 2 All ER 502
expressed no conscientious objection to divorce on religious or other grounds. A divorce would not be contrary to the interests of the family, and the children favoured divorce. Financially, the patient risked loss in respect of costs in divorce proceedings and in respect to maintenance, pension and having to compete with a widow of the husband for statutory provision out of his estate.
Held – The application on behalf of the patient should be granted, subject to approval by the court of financial arrangements with the husband for submission to the divorce court, because—
(i) on the true construction of the provisions of the Mental Health Act 1959, s 102b, conferring power on the court to act for the benefit of the patient and members of the patient’s family, the scope of the word ‘benefit’ was not restricted to material benefit, but was of wide significance comprehending whatever would be beneficial in any respect, material or otherwise, and in the reference to the requirements of the patient in s 102(2) c the word ‘requirements’ similarly bore a correspondingly wide prima facie meaning (see p 505 c and f, post);
(ii) when considering the benefit of the patient under s 102(1)(a)d and of members of the patient’s family under s 102(1)(b)e, the court ought to have regard primarily to the requirements of the patient and, subject to her requirements and benefit and the benefit of the family, to making provision for the patient’s obligations although they were not legally enforceable (see p 505 g, post);
(iii) after the various factors of break-down of marriage, religion, public policy, the patient’s children, and the financial consequences of divorce and the remarriage of the husband had been taken into consideration in assessing the benefit of the patient, it was better that the patient should petition for divorce under the present known and established practice of the divorce court without the danger of uncertainties under the Divorce Reform Act 1969(see p 509 b, post).
Observations on how information of the principles on which the Court of Protection acts, and their manner of application, should be publicly made available (see p 509 g and j, post), on the exclusive jurisdiction of the Court of Protection over all the property and all the affairs of a patient in all aspects (see p 511 e, post), and on the practice of giving information about a patient’s condition without the authority of the court to another contemplating divorce proceedings against the patient (see p 512 d, f and g, post).
Notes
For powers of the judge in relation to the property and affairs of a patient, see 29 Halsbury’s Laws (3rd Edn) 573, 574, para 1051, and 577, 578, para 1056.
For the Mental Health Act 1959, ss 102, 103, see 39 Halsbury’s Statutes (2nd Edn) 1049, 1050.
Cases referred to in judgment
Blunt v Blunt [1943] 2 All ER 76, [1943] AC 517, 112 LJP 58, 169 LT 33, 27 Digest (Repl) 429, 3589.
C L, Re [1968] 1 All ER 1104, [1969] 1 Ch 587, [1968] 2 WLR 1275, Digest Supp.
Johnson v Johnson [1901] P 193, 70 LJP 44, 84 LT 725, 27 Digest (Repl) 421, 3521.
Marshall, Re, Marshall v Whateley [1920] 1 Ch 284, [1920] All ER Rep 190, 89 LJCh 204, 122 LT 673, 33 Digest (Repl) 601, 177.
T B, Re [1966] 3 All ER 509, [1967] Ch 247, [1967] 2 WLR 15, Digest (Cont Vol B) 525, 710b.
Walker, Re [1905] 1 Ch 160, 74 LJCh 86, 91 LT 713, 33 Digest (Repl) 601, 176.
Page 504 of [1970] 2 All ER 502
Cases also cited
Baker v Baker (1880) 5 PD 142.
Parnell v Parnell (1814) 2 Hag Con 169.
R H C, Re [1963] 1 All ER 524, [1963] 1 WLR 1095.
Tumath v Tumath [1970] 1 All ER 111, [1970] P 78.
W J G L, Re [1965] 3 All ER 865, [1966] Ch 135.
Woodgate v Taylor (1861) 30 LJPM & A 197.
Summons
This was an application by the Official Solicitor for leave to present and prosecute a petition for divorce on behalf of the patient, Mrs W. The summons was heard, and judgment delivered, in open court.
Lionel Swift for the Official Solicitor.
Anthony Ewbank for the Attorney General as amicus curiae.
Cur adv vult
19 March 1970. The following judgment was delivered.
UNGOED-THOMAS J read the following judgment. This is an application to present and prosecute proceedings for divorce on behalf of Mrs W, a patient whose affairs are subject to the jurisdiction of the Court of Protection. The Official Solicitor acts for the patient and counsel appears for her. As the application raises matters of importance, the Attorney General is represented before me as amicus curiae to enable these matters to be fully argued.
The patient is now 51 years of age. She was married on 30 October 1939 and she has two sons, the first born in 1946 and the second in 1950, so that they are both now of age. In September 1942, the patient was admitted to hospital as a certified patient and from then on she was in and out of a mental hospital as a certified or as a voluntary or informal patient until she was last admitted to hospital as an informal patient on 13 January 1964. On 24 June 1966, her affairs were put under the care of the Court of Protection as those of a person within Part VIII of the Mental Health Act 1959 ‘… incapable, by reason of mental disorder, of managing and administering [her] property and affairs’. On 8 April 1968, she was discharged from the mental hospital into an after-care home of a charitable organisation, where she has since remained. Later in 1968 the husband contemplated petitioning for divorce on the grounds of the patient’s incurable unsoundness of mind. For this the petitioner must establish that the other spouse has for five years preceding the petition been under continuous care and treatment without a break exceeding 28 days (Matrimonial Causes Act 1965, s 1(1)(a) (iv)). In view of the patient’s discharge from hospital, the husband was not in a position to establish this; so in 1969 he sought to get the patient to divorce him on the grounds of his own adultery. It is in these circumstances that this application is made.
I will refer first to the law, insofar as relevant to the case before me. Sections 102 and 103, which come in Part VIII of the Mental Health Act 1959, are the most immediately relevant statutory provisions. They provide:
‘102. (1) The judge may, with respect to the property and affairs of a patient, do or secure the doing of all such things as appear necessary or expedient—(a) for the maintenance or other benefit of the patient, (b) for the maintenance or other benefit of members of the patient’s family, (c) for making provision for other persons or purposes for whom or which the patient might be expected to provide if he were not mentally disordered, or (d) otherwise for administering the patient’s affairs.
‘(2) In the exercise of the powers conferred by this section regard shall be had first of all to the requirements of the patient … but subject to the foregoing provisions of this subsection the judge shall, in administering a patient’s affairs,
Page 505 of [1970] 2 All ER 502
have regard to … the desirability of making provision for obligations of the patient notwithstanding that they may not be legally enforceable.
‘103. (1) Without prejudice to the generality of the foregoing section, the judge shall have power to make such orders and give such directions and authorities as he thinks fit for the purposes of that section, and in particular may for those purposes make orders or give directions or authorities for—… (h) the conduct of legal proceedings in the name of the patient or on his behalf, so however that an order, direction or authority to present a petition in the name or on behalf of the patient for divorce or nullity of marriage … shall be made or given only by the Lord Chancellor or nominated judge … ’
It is under that paragraph that this application comes before me as a nominated judge.
The first question which arose on these sections was the scope of the word ‘benefit’. It seems clear to me that it is not restricted to material benefit, but that it is of wide significance comprehending whatever would be beneficial in any respect, material or otherwise. The word ‘benefit’, prima facie, carries such wide significance; it is not limited to any particular aspect of benefit, nor does the context here limit it. On the contrary, the direction at the end of s 102(2) that, subject to the foregoing provisions for securing ‘benefit’, the judge shall have regard to the desirability of making provisions for obligations of the patient although not legally enforceable, indicates that ‘benefit’ at the least includes recognising and providing for obligations beyond those that are legally enforceable even though to do so might not be materially or financially beneficial. In Re C L ([1968] 1 All ER 1104 at 1109, [1969] 1 Ch 587 at 597) it was recognised that it is for the benefit of the patient that the court should do what it is satisfied he would have done, although it be not for his financial or material benefit. And in Re T B ([1966] 3 All ER 509 at 513, [1967] Ch 247 at 253), I ventured to indicate that the court in applying s 102(1)(c) would act as a properly advised decent sane person in the patient’s position would act. I do not conceive that the court could ever be expected or intended by anyone, including the legislature, to exercise its discretion under Act otherwise and, as the opening words of s 103 make clear, the particularised powers under that section have to be exercised to achieve the ‘benefit’ indicated in s 102. It also seems to me that ‘requirements’ ‘which must in its context be requirements that are of ‘benefit’) must similarly and correspondingly bear its wide prima facie meaning.
The question then arises whose ‘benefit’ has to be considered. So far as we are concerned in the case before me, it is under s 102(1)(a), the benefit of the patient; and, under s 102(1) (b), the benefit of members of the patient’s family. But, as provided by s 102(2), ‘regard shall be had first of all to the requirements of the patient’. Therefore, the judge must have regard primarily to the requirements of the patient, but also to the ‘benefit’ of the patient’s family and (subject to the requirements and benefit of the patient and benefit of the family) to making provision for the patient’s obligations, although not legally enforceable.
I was referred to a passage in Heywood & Massey’s Court of Protection Practice8th Edn, p 237, to the effect that in an application to institute divorce proceedings this court is concerned:
‘… not so much with the establishment of the matrimonial offence complained of … as with whether or not the suit can be said to be in the true interests of the patient.’
It was suggested that that passage may be taken to indicate that ‘the true interests of the patient’ is the test. The passage might be helpful as a rough indication of what, in contrast with a matrimonial offence, has to be established; and doubtless it was
Page 506 of [1970] 2 All ER 502
so intended. But, of course, if it is taken as a meticulous statement, then it leaves open to question what is meant by ‘true interests’ and does not, with strict accuracy, reflect the provisions of the Act which I have just considered. Matters which should be regarded by the court in deciding whether divorce proceedings should be brought on behalf of a patient were considered by the Court of Appeal and by the Master of the Rolls and Lords Justices in 1940f. That was before the Mental Health Act 1959, and when the Master of the Rolls and Lords Justices still were the judges in lunacy, the predecessors of the present nominated judges under the 1959 Act. As far as I know the only publication of their decision and directions appears on the page of Heywood & Massey to which I have already referred. I was questioned before me whether the reference to the test being, the ‘true interests of the patient’, was included in what the Lords Justices laid down. I did not so read it and I verified from the records of the Court of Protection that it was not so included. What is published in the textbook contains in general a valuable summary of what was said; but, nevertheless, a summary with variations which particularly affect paras (2) (c) (d) and (e) g. It is preferable to have the original wording, which I respectfully adopt as applicable at the present day. It is thus recorded, so far as relevant:
‘A short time ago a case was before the Court of Appeal in which incidentally the question came up about divorce proceedings on behalf of lunatics. We all thought that great care should be taken to make certain, if the patient should be in a position to form a rational opinion, that it was his or her wish that proceedings should be taken, and not merely that of the family … Before giving leave there should be a report on these matters: (1) Is there a real chance of the patient’s recovering, and if so, within what time? (2) Is the patient in a state to be able to appreciate what the proceedings involve, and if so, does she appear to desire a divorce? It must be made clear to her [the patient in that case was a woman] that she will not be given custody of the children, nor is it absolutely certain that they will be taken from their father if he desires to keep them, though it is possible that the custody will be given to one of her relations. I think the most satisfactory course will be for the patient to be seen by one of the Chancery visitors (Medical) and he should be asked to report on these matters … This matter has been considered at a meeting of the Master of the Rolls and the Lords Justices. As in their opinion important and difficult questions of principle are involved they direct that the application be made to the court. The Receiver should be authorised to instruct counsel to support the application. He should be told that their Lordships will require information as to the financial results which might follow if a divorce is granted. Thus, they will require to know if there is a marriage settlement and what the husband’s interest is thereunder and if the patient has made a Will. They may also require information, as far as the Receiver can give it, as to the husband’s means. They will also want to know what order, in the event of leave to bring proceedings being granted, will be sought with regard to the children and the reasons, as of course no court would give custody to the patient.’
It was suggested to me that, in the light of experience and to avoid raising any false hopes of the custody of the children being given to the patient’s relations, it would be desirable that the direction about informing the patient on their future custody should be amended to read—
‘It must be made clear to her that she will not be given custody of the children and what the prospects are for their future custody.’
I, for my part, agree.
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Various aspects of ‘benefit’, or factors in assessing ‘benefit’, were discussed before me: (1) breakdown of marriage; (2) religion; (3) public policy; (4) children; (5) financial consequences; (6) the effect of the Divorce Reform Act 1969. These are of course all clearly factors to be taken into consideration in deciding whether or not, on balance, the presentation of a petition is for the ‘benefit’ of the objects sought by the Act to be benefited, having regard to the order of priority laid down by the Act. The weight to be attached to the different factors will vary with the circumstances as variously as the circumstances themselves will vary; and it seems to me most important that the discretion of the court should not be limited beyond what the Act itself lays down. Thus break-down of a marriage might be of greater weight in some cases than in others. The weight to be attached to the religious views of the patient might similarly vary according to the kind and degree of the patient’s religious convictions. But I find quite unacceptable the suggestion that, because marriage in the Church of England is itself a marriage recognised by the State without requiring State registration, then special weight should be attached by the court to the vows then given and the sanctity of the marriage thus entered into. The State itself, which recognises such marriage, provides for divorce for the parties to it, despite marriage vows and the sanctity of marriage; and it does this in terms identically applicable to all forms of marriage. It seems to me that religion, like every other factor for consideration is to be considered only so far as it is relevant to the test of the ‘benefit’, which is the test laid down in the Act; and in particular and primarily to the benefit of the patient.
Similarly, public policy seems to me relevant only insofar as it is relevant to the test of ‘benefit’. It suggested on the one hand that public policy favoured the sanctity and maintenance of marriage and, on the other hand, favoured the dissolution of marriages which have irretrievably broken down. I was referred to Blunt v Blunt and Johnson v Johnson, where, in divorce proceedings, the court had regard to public policy considerations. In divorce the status of the parties is involved and the State is concerned; and, therefore, public policy considerations are directly material. But the Court of Protection is only concerned with the question whether the patient should petition for divorce. The Mental Health Act 1959, which provides for such a petition by the patient, does not make any such selected and contradictory pieces of public policy as were urged on me as a test, but only the ‘benefit’. Public policy considerations would only be relevant insofar as they might conceivably go towards establishing what is reasonable, or what the patient might be held to favour, if she were able to form a reasonable opinion. The benefit of children and others of the patient’s family is a consideration within the express words of the Act, including the benefit of children of age. They are thus entitled directly to consideration independently of the patient, although subject to prior consideration being given to her benefit. It was questioned whether the respondent to the contemplated divorce petition is a member of the family within the meaning of s 102(1)(b). However, in the circumstances of this case it is not necessary for me to pause over this; or to consider how far he could alternatively invoke in his aid s 102(1)(c) of the Act.
So I come to what is frequently an important factor for consideration, viz finance. Since s 4 of the Matrimonial Causes Act 1963, came into operation (now replaced by s 5 of the Matrimonial Causes Act 1965), it has been possible for a petitioner and respondent to place before the divorce court financial arrangements for that court’s approval. So it seems to me that, should I favour a petition for divorce by the patient subject to financial provision being made for her by the respondent, then any order which I make should provide that proceedings by the patient for divorce should be subject to such proper financial provision approved by this court being provisionally agreed with the respondent and being submitted to the divorce court for its approval.
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The Divorce Reform Act 1969 comes into operation on 1 January 1971 and it contains, particularly in ss 1, 2, 4 and 6 provisions which are material to be considered on this application. In accordance with the submissions of both counsel before me, the effect of these provisions can be stated very shortly and roughly, but I trust sufficiently for present purposes. The patient might have difficulty in obtaining divorce under the new Act, whereas under it the husband would normally be entitled to divorce, subject to his satisfying the divorce court that he had made proper provision for the patient. But, in view of the wide powers which the divorce court now has to provide financially for the petitioner, the financial advantage to the patient, as far as can be foreseen in the circumstances of this case, seems to be very evenly balanced between proceedings now and proceedings under the 1969 Act.
The position of the patient on this application to present and prosecute divorce proceedings on her behalf is, in the light of the relevant considerations, as follows: (1) The marriage has irretrievably broken down. The parties have not lived together since January 1964. The patient’s view, so far as she is capable of a rational view, is that she could never return to her husband. The medical visitor says that the patient’s condition is irreversible. The husband says that he wishes to marry another. (2) The patient, so far as capable of forming a rational view, wishes to present a petition for divorce. (3) No conscientious objection to divorce on religious or other grounds has been expressed by the patient. Nor, particularly in view of her favouring divorce, am I prepared to infer such an objection from her marriage having been in the Church of England. (4) A divorce would not be contrary to the interests of the family; and it seems to me that the proper inference is that it would be in the family’s interest. Clearly it would be in the interests of the husband, so far as he is within the ‘family’ under s 102(1)(b). Nor does it seem to me to be in the interests of the children that their father should be tempted to continue adultery. I understand that the children do in fact favour divorce. (5) Financially the patient risks loss in respect of costs in divorce proceedings, and in respect of maintenance, pension and having to compete with a widow of her present husband for statutory provision out of his estate. I need not consider such risks of loss in detail now, as she is far from well off and clearly she should be safeguarded against such loss. Any order would, therefore, as I have already indicated, be subject to this court approving financial arrangements with the husband for submission to the divorce court.
On the first four points there is the evidence of the report, dated 13 March 1969, of the Official Solicitor’s representative and an account of a recent visit by him to the patient; and there is also the medical visitor’s report of 26 June 1969. The Official Solicitor’s representative reports of the patient that she said:
‘I could never go back to him [that is the husband] as I realise I could never properly look after him and my two sons. He has had a very unhappy life because of my illness and it is only fair that if he now has someone whom he wants to marry and who will look after him that there should be a divorce … I do not mind for myself, but I think it fair that he should be allowed to re-marry and I would like a Petition presented.’
The medical evidence is:
‘The patient understands the meaning and significance of an action for divorce. Allowing for a certain scatter and impairment of mental attitudes, it is my opinion that on balance she would prefer her marriage to be legally terminated. Incidentally, she has no special religious attitudes to a divorce. She did not think that a divorce would upset or be disturbing to her sons and she herself did not think that the process of divorce would be disturbing or particularly worrying to her. These responses arose from direct questioning by me. I have doubts whether or not on her own initiative she would decide to take proceedings for divorce, but since the issue has been put to her she accepts that a divorce would
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not only be in her interests, but also in the interests of the family situation. On the point of recovery it is my opinion that the impairment of intellect and personality are of an irreversible nature.’
Taking all the factors into consideration, both counsel submit that, subject to proper financial arrangements with the husband being approved by this court for submission to the divorce court, it is better that the patient should petition for divorce under the present known and established practice of the divorce court without the danger of uncertainties under the 1969 Act and that, so subject, this application should be granted. I agree.
I come now to two matters which have come to my notice in the course of these proceedings. The first raises the question how information of the principles on which this court acts, and their manner of application, should be made publicly available. The second raises the question how far and how information about the patient’s condition should be provided to the patient’s spouse contemplating divorce proceedings.
The first question arose out of the judicial decision and directions summarised in Heywood & Masseyh, as I have mentioned. It is clearly most important that such decision and directions should be publicly known and readily available and the textbook certainly helped to achieve this. It is also important that they should be immediately available, not merely to some persons, but to the public generally and without having to wait and rely on textbook publication. Publication, however, is now governed by the Mental Health Act 1959, the Court of Protection Rules 1960i, made under it, and the Administration of Justice Act 1960. It is provided by the combined effect of rr 2, 5 and 45 that, except in the case of an originating application, every summons, such as the one before me in this case, shall be heard in chamber; unless in the case of a summons for hearing by the judge the judge otherwise directs, as I have in fact directed in this case. Section 12 of the Administration of Justice Act 1960 provides, in effect, that it shall be a contempt of court to publish information relating to proceedings in chambers under Part VIII of the Mental Health Act 1959, other than the text or summary of an order of the court which does not prohibit its publication; and in this section the court includes any person exercising the function of a court or judge. The position, therefore, is that it is contempt of court to publish any information about proceedings on a summons in the Court of Protection, subject to two exceptions: (1) a text or summary of the order of the court whose publication is not prohibited by the court; and (2) in the case of a summons for hearing by the judge which he directs to be heard otherwise than in chambers.
So the question arises how the public should be kept immediately informed of the principles on which the court acts and their application. The principles are laid down in cases which are brought before the judge for hearing. In this country principles are not laid down by academic discussion, divorced from the reality and difficulties of fact, but they emerge from decisions made to solve the problems which really happen in life. And from these decisions, resulting from real occurrences, practical principles emerge. It follows from this that, although some cases are more relevant to the principles than others, there cannot be just occasional statements of legal principle issued for publication. The difficulty of keeping the public informed of the principles on which the court acts is substantially solved, to the extent to which at any rate judgments on summonses, involving questions of principle, are given in public. This also makes it easier for practice directions in the light of the judge’s decisions to be formulated and issue. These are all matters relevant to the decision, entrusted under the Court of Protection Rules 1960 to the judge in each particular case, how far the hearing shall be in chambers or in public; and they are, of course, matters well present to every judge’s mind.
Page 510 of [1970] 2 All ER 502
I come now to the question how and how far information about the patient’s condition should be provided to another contemplating divorce proceedings against the patient. This question came before me in the circumstances which I will give in some detail to show how confusion about it arose in this case and is apt to arise in similar cases. I wish, however, to make it unmistakably clear at the outset that I do not attach any blame to anyone concerned. It would be unjust to do so without hearing others than the parties before me. Further, I have no doubt that all concerned were only anxious to do their best for the patient and to be as helpful as possible. The confusion arises essentially from difficulties in appreciating the significance of some of the statutory provisions and from the practice which has consequently arisen in endeavouring to apply them. The difficulties were doubtless the greater in this case, because there had appeared no need for the appointment of a receiver and the court was not aware of any proceeding on foot or in contemplation which alone would enable the patient to be represented by the Official Solicitor at the relevant time.
It is essential to bear in mind throughout that, although the patient was discharged from a mental hospital on 8 April 1968, she remained subject to the statutory protection of the Court of Protection. The Mental Health Act 1959 provides by s 100(2) that:
‘There shall continue to be an Office of the Supreme Court called the Court of Protection, for the protection and management, as provided by this Part of this Act, of the property of persons under disability.’
It makes no reference to the protection of the person, corresponding to the reference to the custody of the person in the Lunacy Act 1890j. The part of the 1959 Act which provides for the protection and management of the property is Part VIII in which ss 101 to 103 appear. Section 101 provides that the functions of the judge under Part VIII shall be exercisable where:
‘… he is satisfied that a person is incapable, by reason of mental disorder, of managing and administering his property and affairs … ’
So this section introduces the word ‘affairs’; and it goes on to define ‘patient’ as, ‘… a person as to whom the judge is so satisfied … ’, ie that he is so incapable of managing and administering ‘his property and affairs’. ‘Affairs’, prima facie, has a wider and more general meaning than ‘property.' The coupling of the two words in the section emphasises a difference of meaning; and the substance of the section indicates that the only object of referring to the patient’s incapacity as extending to affairs as well as property is to give the Court of Protection jurisdiction for the protection and management of the patient’s ‘affairs’ as well as ‘property’.
The opening words of s 102(1) provide expressly that, ‘The judge may, with respect to the property and affairs of a patient, do … ’ what is there specified; and s 102(2) refers to the judge administering a patient’s ‘affairs’. Section 103(1) enacts that:
‘… the judge shall have power to make such orders and give such directions and authorities as he thinks fit for the purposes of the section [ie s 102], and in particular … for … (h) the conduct of legal proceedings in the name of the patient or on his behalf, so however that an order, direction or authority to present a petition … for divorce … shall be made or given only by the Lord Chancellor or a nominated judge … ’
The conduct of legal proceedings, and in particular of divorce, may involve far more than the management, protection or administration of property, which may indeed form an insignificant aspect of the proceedings. Nor does it seem to me conceivable
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that the court, in considering legal proceedings, should consider that merely as an aspect of administering the patient’s property; otherwise other aspects of such proceedings of no property significance would not receive their proper consideration. Nor, I would emphasise, particularly in view of references in the correspondence before me to the ‘financial affairs’ of the patient being in the hands of the Court of Protection, in contrast with the personal care of the patient being in the hands of the mental after-care home, is the court’s protection of the patient’s affairs limited to her financial affairs. There is no such limitation to ‘affairs’ in the Act.
Where a patient is ‘… incapable, by reason of mental disorder, of managing and administering his property and affairs … ’ it seems to me to follow ex hypothesi, that he is, or is treated by the Mental Health Act 1959 as being, similarly incapable as part of such management and administration of appointing anyone to act for him in the course of such management and administration. The whole scheme of Part VIII appears to me to confer that power and responsibility on the Court of Protection. For anyone else to exercise any such power and responsibility would involve serious risks of conflicts in such exercise and be quite inconsistent with the power and responsibility entrusted to the Court of Protection (and see the judgments in Re Walker and Re Marshall, Marshall v Whateley). It follows that the Court of Protection has exclusive power and responsibility for the protection and management of the patient’s property and affairs.
So my conclusion is, in particular with regard to legal proceedings including divorce proceedings, that the Court of Protection is not limited in its jurisdiction to dealing with the patient’s property or financial affairs, nor limited to dealing with such other matters as may be within its jurisdiction in their property or financial aspects, but that it has exclusive jurisdiction over all the property and all the affairs of the patient in all their aspects; but not to the management or care of the patient’s person.
I come now to what happened in the case before me and I can limit this to what appears in some of the letters in the exhibited correspondence. On 17 December 1968 the doctor, who had been in charge of the patient within the hospital from which she had been discharged, answered questions from the solicitors to the husband who was at that time wanting to petition for divorce. The doctor answered giving, in particular, details of his patient’s mental condition and details of her treatment and stated his fee for providing the information. He did this, although he at the same time gave particulars showing that the necessary five-year period of continuous care and treatment to found a petition had not elapsed. On the same day the doctor also wrote to the senior social worker of the patient’s mental care home, in answer to a letter from her forwarding to him a letter from the husband’s solicitors similar to their letter to the doctor. In his letter to the senior social worker, the doctor suggested that he would attend to letters to the patient from the husband’s solicitors if the patient so wished. He also wrote on the same day to the Official Solicitor, who had on an earlier occasion represented her, stating that the patient had been discharged from hospital on 8 April 1968 ‘considered recovered’, and asking whether he, her former doctor, or the Official Solicitor should act for the patient. On 15 January 1969, the Official Solicitor replied to the doctor that he assumed (erroneously I would observe) that his statement that the patient was discharged, ‘considered recovered’, meant that the patient was now capable of managing her own affairs and (correctly I observe) that he, the Official Solicitor, had no locus standi to act for her. To this the doctor apparently did not reply.
However, the doctor received a letter dated 21 January 1969 from the husband’s solicitors, stating that the husband was able to give evidence of his adultery and asking the doctor to see the patient and ask her if she would take divorce proceedings against him. On 30 January 1969, the doctor wrote to the senior social worker of the home,
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stating his belief that the marriage had come to an end, suggesting that the senior social worker should approach a solicitor to act for the patient and, when he had obtained the husband’s evidence, that then only should the patient be approached ‘… to get her barest formal consent to her bringing divorce proceedings against the husband’. On 2 February 1969, the senior social worker, in a letter giving commendably full information to the Official Solicitor, stated that she understood (correctly I observe) that the patient was ‘… incapable of managing her own affairs’. So on 11 February 1969, the Official Solicitor quite rightly wrote to the doctor that, for the patient to present a petition, leave of the judge in the Court of Protection was necessary.
The doctor was clearly concerned to protect the patient from being unduly bothered about the divorce proceedings. It seems, too, that until February, none of the correspondents appreciated that the conduct of any legal proceedings of the patient was subject to the jurisdiction of the Court of Protection. However, the doctor made disclosures about the patient’s mental condition and treatment, whilst under his medical care, to her husband who was wanting divorce and who, in the initiation and in the course of divorce proceedings, might have interests adverse to her own; and the doctor seems to have gone beyond what was of merely medical concern in furthering divorce.
I am informed that it has been the practice for the doctor in charge of a patient to give information of the patient’s condition and prognosis to the legal advisers of the patient’s spouse making bona fide enquiries for purposes of divorce or nullity on the ground of the patient’s mental condition, but only with the consent of the guardian ad litem where a petition has been presented, and of the patient where the patient is capable of expressing a rational opinion. It does not appear that in this case the patient’s consent was sought before the information was provided to the husband’s solicitors; and the doctor’s action went beyond providing information of the patient’s condition and prognosis. So what the doctor did was not confined within the practice. The practice has apparently and understandably arisen with a view to enabling the doctor to state before proceedings what he would be compellable to disclose in the course of proceedings and thus perhaps avoid proceedings or save time and expense. But the dangers of such a practice being extended beyond its bounds are sufficiently illustrated by this case. Nor does there appear any authority for such a practice. It seems to me that a patient disabled from managing his own affairs should have that legal protection which a litigant could provide for himself; and that when litigation is contemplated the patient should have the advantage of its being considered by those qualified to conduct litigation before any step is taken that might affect it. The Court of Protection is expressly entrusted by Parliament to ensure that very protection. For others to impinge on it might be prejudicial to the patient, would trespass on the jurisdiction of the court and would be contrary to what Parliament has enacted.
Order accordingly.
Solicitors: Official Solicitor; Treasury Solicitor.
Jacqueline Metcalfe Barrister.
Cook v J L Kier & Co Ltd
[1970] 2 All ER 513
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, RUSSELL AND PHILLIMORE LJJ
Hearing Date(s): 6 MARCH 1970
Damages – Personal injury – Amount of damages – Disabilities resulting from brain injury – Loss of sense of taste and smell – Sexual impotence – Ten per cent risk of epilepsy – Some loss of control of limbs – Depression.
Interest – Damages – Personal injury – Amount of damages increased on appeal – Interest on increase to run from date of trial – Rate of interest.
As the result of the negligence of the defendants a 3lb spanner was dropped from a tower building in the course of construction causing the plaintiff a severe head injury. Owing to the brain damage resulting from this injury the plaintiff, who was 38 at the time of the accident, lost his sense of taste and smell and was rendered sexually impotent. He was also unable to control his limbs properly with resulting difficulty in driving and curtailment of physical activities. He tended to become very tired and suffered from headaches and depressions. There was a 10 per cent risk of epilepsy. As a result he had to give up his job as a foreman and accept one in which he was paid £14 less per week. Also he had to limit his former recreational activities. The trial judge awarded the plaintiff a total sum of £9,589 10s 10d damages being as to £765 10s agreed special damages, £5,824 in respect of loss of future earnings on the basis of a multiplier of eight years at £14 per week, and as to £3,000 general damages in respect of pain and suffering.
Held – (i) The total awarded should be increased to £15,045 10s 10d, because—
(a) the multiplier of eight years at £14 per week was too low and should be increased to ten years at £14 per week, making the total awarded in respect of loss of future earnings the sum of £7,280 (see p 514 j and p 515 d, post); and
(b) the figure of £3,000 in respect of pain and suffering was much too low and should be increased to £7,000 to take into account especially the plaintiff’s sexual impotence for which the wife could not recover damages but which could be represented in an award to the plaintiff for his loss and for the effect on his family life which took the wife into account (see p 515 c and d, post).
(ii) Interest on the amount by which the award had been increased should be granted at the rate of 6 per cent per annum from the date of the judgment in the court below but credit was to be allowed as against it for the interest at 4 per cent per annum payable under the Judgments Act 1838 on that amount (see p 515 j, post).
Notes
For damages recoverable in respect of personal injuries, see 11 Halsbury’s Laws (3rd Edn) 255, 256, para 427, and 258, 259, para 430.
For interest on damages, see 27 Halsbury’s Laws (3rd Edn) 10, 11, paras 10, 12, and for cases on the subject, see 35 Digest (Repl) 211, 212, 179–182.
Cases referred to in judgment
Kearns v Higgs & Hill Ltd (1968) 4 KIR 393.
Case also cited
Jefford v Gee [1970] 1 All ER 1202, [1970] 2 WLR 702.
Appeal
This was an appeal on the quantum of damages by the plaintiff, George Cook, from the judgment of Melford Stevenson J made on 25 March 1969 awarding the plaintiff the sum of £9,589 10s 10d damages in respect of personal injuries received
Page 514 of [1970] 2 All ER 513
due to the negligence of the defendants, J L Kier & Co Ltd. The facts are set out in the judgment of Lord Denning MR.
R I Kidwell QC and John Griffiths for the plaintiff.
Patrick Bennett QC and Philip Otton for the defendants.
6 March 1970. The following judgments were delivered.
LORD DENNING MR. On 18 June 1966 the plaintiff, Mr George Cook, suffered a severe injury. Whilst he was working on a big tower building, a 3lb spanner dropped from a height. It came down on to his head, and crashed into his skull. He was rendered unconscious. Bits of his skull had to be taken out. His brain was damaged. He was only in hospital for some days, but he was off work for some nine months. He claimed damages against the defendants, the company who employed the man who dropped the spanner. Melford Stevenson J awarded him a total sum of £9,589 10s 10d. Now he appeals to this court, saying that sum is too low.
The serious injury was to his brain. The nerve filaments which underlie the frontal lobes were torn and shattered. This has affected the whole of his nervous and sensory system. The consequences are threefold. First, he has completely lost his sense of taste and of smell. He is unable to detect such odours as leaking gas, petrol fumes, or the like. He cannot taste anything, except the fact that there is a dry tang if he takes neat lemon juice. He is quite unable to detect large quantities of sugar, or of salt in his mouth. The degree of sensory loss, say the doctors, was exceptionally great. The second serious consequence is that he has been rendered sexually impotent. This impotence is not psychological or hysterical. It was the result of the damage to his brain. A doctor stated:
‘Although the precise mechanism cannot be explained I consider it entirely attributable to the effects of the accident and the head injury and consider the chance of any material recovery to be poor.’
That complete sexual impotence gravely affected, not only his enjoyment of life, but also his wife’s too. The third consequence is that he cannot use his limbs properly. The damage on the left side of his brain has affected all the nerves going down his right arm and leg. He cannot, he says, give orders from his brain to his arm and leg. They do not obey him. When he drives a car, he has had to put a piece of wood between two of the pedals so that he does not press one by mistake for the other. He has serious lack of control.
Such being the consequences, it has made a great difference to his life. He was a foreman with an important firm dealing in cables, with 50 men under him. He was very active, climbing ladders and so forth. He enjoyed his work and had extra benefits, such as cruises, in connection with his work. He had many recreations, such as snorkel diving, swimming, dancing. As a result of the accident he has been rendered incapable of much that makes life worthwhile. He cannot swim as he did. He gets exceedingly tired. He suffers from headaches and depressions. He cannot do his previous work at all. He has obtained work with another firm as an inspector of components. It is a sitting-down job. It is agreed that his loss of future earnings is some £14 a week. Furthermore, there is the risk of epilepsy. It is not so great as it at first appeared, but it is put by the doctors at 10 per cent risk of epilepsy.
The question is: what should the damages be? The special damages are agreed at the sum of £765 10s up to the date of trial, which was 25 March 1969. The plaintiff was 38 at the time of the accident, and 41 when it came to trial, with many years of working life before him. The loss of earnings was agreed at £14 a week. The judge took only eight years as the multiplier of £14 a week. He awarded £5,824 for loss of future earnings. I think that multiplier is too low. I would increase it to ten years. That is, £7,280 altogether for loss of future earnings.
Then we come to the general damages for pain and suffering. The judge only
Page 515 of [1970] 2 All ER 513
awarded the sum of £3,000. I must say that I think that is entirely inadequate. Take first the loss of taste and smell. There have been few cases to give guidance. There has been one casea in which Sachs LJ indicated that the sum £2,000 might be appropriate for loss of taste and smell complete. Next take sexual impotence. Husband and wife are not equal in this respect. If the wife is rendered impotent, a husband can get damages for loss of consortium. But, if a husband is rendered impotent, the wife cannot claim damages. But, although the wife cannot claim herself, the husband can get damages for the loss to him, which is grievous. And he can get damages for the effect on his family life which takes her into account. Finally, take the loss of control of his limbs. This has grievously affected his enjoyment of life.
It seems to me that the figure of £3,000 was much too low. I think it should be increased to a total sum of £7,000. The items which I have taken together come to £15,045 10s 10d. I would allow the appeal and order judgment to be entered for that figure
RUSSELL LJ. I agree and I would only add one comment, that this particular plaintiff was obviously a man with a tremendous zest for life, including the work he was formerly, and is now no longer, capable of doing.
PHILLIMORE LJ. I also agree.
R I Kidwell QC and John Griffiths for the plaintiff asked for interest to be awarded on the amount by which the court had increased damages. Interest was not asked for at the time of the trial; but according to the principles subsequently stated in Jefford v Gee, if interest had been asked for, it would have been a proper exercise of discretion to grant it, even though at the date of the trial the provisions of the Administration of Justice Act 1969 rendering the granting of interest mandatory were not in force. Interest at the rate of 6 per cent from the date of the judgment below should be awarded on the whole of the increase of damages, including the increase in respect of loss of future earnings. The basis of the decision in Jefford v Gee, so far as it ruled out interest on damages for future loss, was that such damages were fixed by reference to the date of trial, and that basis did not apply to an increase in respect of future loss awarded by the Court of Appeal, when the plaintiff had in effect been kept out of the increase since the date of trial.
Patrick Bennett QC and Philip Otton for the defendants drew attention to the fact that interest at 4 per cent on the total amount of the increased award would run automatically from the date of the original judgment under the Judgments Act 1838 and that the effect of the making of an order such as had been asked for on behalf of the plaintiff might be that interest at 10 per cent would in effect be paid on the increase.
LORD DENNING MR. We will award interest on the amount by which we increased the judgment. The effect of our decision is that the damages are increased from £9,589 10s 10d to £15,045 10s 10d. The increase of £5,456 dates back to the date of the judge’s judgment on 25 March 1969. Under the Judgments Act 1838 interest will run at 4 per cent on the total sum from 25 March 1969. We think that interest should be awarded at the rate of 6 per cent on the sum by which we have increased the award, that is, on £5,456, from the date of judgment 25 March 1969 until today; but credit is to be given, as against it, for the 4 per cent which would automatically be running from the date of judgment.
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RUSSELL LJ. It is a very special point. It is not really special under the Administration of Justice Act 1969. We do not think, in the climate of the 1969 Act and the new interest rates, that 4 per cent for the extra time taken up by coming to this court to get it put right is enough. That is all there is to it.
Appeal allowed. Award varied to £15,045 10s 10d with interest.
Solicitors: W H Thompson (for the plaintiff); Hewitt, Woollacott & Chown (for the defendants).
G R A Argles Esq Barrister.
Munt v Munt
[1970] 2 All ER 516
Categories: FAMILY; Divorce
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): WRANGHAM J
Hearing Date(s): 13 MARCH 1970
Divorce – Foreign decree – Recognition by English court – Basis of recognition – Domicil – Decree granted to husband, an Englishman by origin, in State of Virginia – Failure by husband to prove acquisition of domicil of choice in Virginia – Husband resident in Virginia for more than one year at time of petition – Expressed intention of husband to stay in Virginia – Real and substantial connection of husband with State of Virginia – Whether decree should be recognised.
The husband and the wife, both of whom were domiciled in England, were married in November 1967. They left almost immediately to live in Virginia in the United States of America. The husband had been in Virginia for substantial periods during the two years previous to the marriage, preferred life there and intended to settle there. By the end of November the marriage had broken up and the husband sent the wife back to England. He remained in Virginia and in December 1968 obtained a decree of divorce from the Virginian court. The wife, whose connection with England had been interrupted only for the brief duration of her marriage, petitioned the English court for a declaration of the validity of the Virginian divorce decree. The husband’s petition to the Virginian court had alleged that he had resided and been domiciled in the State of Virginia for more than one year immediately preceding the institution of the suit. Expert evidence was given that although the Virginian courts had the same definition of domicil as in England, in practice they regarded residence as sufficient for domicil. On the question whether the court would recognise the decree granted in Virginia.
Held – (i) The husband had not proved to the satisfaction of the court that he had acquired Virginian domicil of choice at the time of the proceedings (see p 518 d, post).
(ii) Nevertheless, the husband’s connection with the State of Virginia was so real and so substantial that a divorce granted to him in that State ought to be recognised in England (see p 518 g, post).
Blair v Blair and Barlie [1968] 3 All ER 639 applied.
Notes
For recognition by English courts of foreign decrees of divorce, see 7 Halsbury’s Laws (3rd Edn) 112, 113, para 200, and for cases on the subject, see 11 Digest (Repl) 481–483, 1079–1097.
Case referred to in judgment
Blair v Blair and Barlie [1968] 3 All ER 639, [1969] 1 WLR 221, Digest Supp.
Page 517 of [1970] 2 All ER 516
Petition
This was a petition by the wife S A Munt, seeking a declaration that a decree of dissolution of marriage granted to the husband, R T Munt, by the Corporation Court of the city of Alexandria in the Commonwealth of Virginia, USA, on 10 December 1968 validly dissolved her marriage. The facts are set out in the judgment.
M P Picard for the wife.
The husband did not appear and was not represented.
13 March 1970. The following judgment was delivered.
WRANGHAM J. In this undefended suit, Mrs Munt prays for a declaration that her marriage was validly dissolved by a decree of dissolution of marriage pronounced by the Corporation Court of the city of Alexandria in the Commonwealth of Virginia in the United States of America. The facts are not in dispute. The wife, before her marriage in the year 1967, met the husband, an Englishman, when he was working in the same firm as herself in England. He went off to the United States a couple of times in the year 1966 for some substantial period. On his return, a close friendship grew up between the wife and the husband, and in May 1967, she went off to the United States on his invitation to be with him. After two or three weeks, they became engaged to be married. He had previously been married, but his marriage had by then been terminated. They returned to England and went through a form of marriage at the register office in Working on 17 November 1967. There are no children. On 23 November, they went off to Virginia, where the husband had been living. He apparently much preferred life in the United States of America. But, five days later, he told the wife that they had made a mistake, that he would be unable to treat her as his wife and in spite of her protests, he bought her an air-ticket and packed her off two or three days later back to England. They have never lived together since.
That was November 1967. Correspondence took place between the parties as to what they were to do. It was, of course, a material consideration for both of them that in England the marriage they had contracted on 17 November 1967 could not be dissolved for some three years, until late in 1970. No such restriction was effective in the United States of America, certainly not in Virgina. No doubt it was for that reason that the husband started divorced proceedings by a petition dated 25 September 1968, in the Corporation Court of the city of Alexandria in Virginia, which was duly sent to the wife and has been produced in this court. It is a petition which alleges that the husband was—
‘a bona-fide resident of and domiciled in the City of Alexandria in Virginia, and has resided and had been domiciled in the State of Virginia for more than one year immediately preceding the institution of the suit.’
He had indeed been living in the city of Alexandria in Virginia for more than a year before the petition, and in the correspondence it had been asserted on his behalf that he intended to make Virginia his permanent home, that being the place where he really wanted to live. Up to that time, of course, he had been a domiciled Englishman, as the wife had been a domiciled Englishwoman. The ground alleged for relief was that the wife ‘had wilfully and voluntarily abandoned and deserted the husband, without just cause or excuse’. That, according to what the wife said, was, of course, a complete and absolute falsehood. However, for reasons that I can understand, the wife chose not to take any steps in the American proceedings and allowed a decree to be pronounced, as on 10 December 1968 it was pronounced, on the ground of this wholly false charge. The decree was served on the wife in due course in this country and has been produced before me.
There can be no question that the wife’s connection with England, which has existed since her birth, has never been interrupted, except insofar as it was interrupted
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by her marriage with the husband. In those circumstances, I am satisfied first of all that she has a right to petition the court for the declaration for which she prays.
Now comes the question whether this court would recognise the decree granted in the United States of America. It would clearly recognise that decree if the husband was, at the time of granting the decree, domiciled in Virginia. The position about that is wholly obscure. The judgment of the Virginian court recites that he was in fact domiciled in Virginia. The expert, who has given evidence before me, has told me that the definition of domicil in Virginia is the same as the definition of domicil in this country. In those circumstances, if there were no more than that, I should find no difficulty in coming to the conclusion that the husband was in fact domiciled in Virginia at the time of the decree, inasmuch as the Virginian court had said so and particularly as it was consistent with what had been asserted on his behalf in previous correspondence. But Mr Crane, the expert on the law of Virginia, felt obliged as a matter of candour to tell me that his experience was that it was not the practice in the courts of Virginia to apply the strict definition of domicil to the requirement of the law that the person applying for a divorce should have been domiciled for one year before the hearing. He told me that in fact what was absolutely required was that there should be residence for that period, and that it was the practice to treat domicil as really no more than residence in this particular context.
In those circumstances, it seems to me impossible for me to find that the husband was, within the meaning of English law, domiciled in Virginia at the time of these proceedings. He may, or he may not have acquired a domicil of choice at that stage, but it is certainly not proved to my satisfaction that he has. However, it has been contended by counsel for the wife, that the absence of a finding of a domicil of choice in these circumstances is by no means fatal. He has referred to Blair v Blair and Barlie in which Cumming-Bruce J, on facts, of course, quite different to the facts in this case, found that a husband who was not domiciled in Norway had nevertheless a sufficiently close connection with Norway for the court here to be able to recognise a divorce granted to him by a Norwegian court. Counsel contended that the connection here between the husband and the Virginian court was as close and real and substantial as the connection shown before Cumming-Bruce J in Blair v Blair and Barlie.
As I have said, no one case is like any other from this point of view and no useful purpose would be served by a detailed comparison of the facts in the case before Cumming-Bruce J with the facts in the case before me; but I accept the argument of counsel for the wife that the connection of the husband with the State of Virginia was so real and so substantial that a divorce granted to him in that State ought to be recognised in this country. He has, after all, expressed a view that he wants to continue to live there. I see no reason to disbelieve the truthfulness of that assertion. He has continued to live there. He has married a young woman who was certainly living in Virginia in the short time that the wife went there rather more than a year ago. There is no information to suggest that he has left the city of Alexandria and Virginia since.
In those circumstances, I have legitimate reason to take the same view in this case as Cumming-Bruce J took in Blair v Blair and Barlie. I accordingly declare that the decree of dissolution pronounced by the Corporation Court in the city of Alexandria in the Commonwealth of Virginia on 10 December 1968 validly dissolved the wife’s marriage of 17 November 1967.
Declaration accordingly.
Solicitor: Stanley Jarrett & Co (for the wife);
Alice Bloomfield Barrister.
Rose v Humbles (Inspector of Taxes)
Aldersgate Textiles Limited v Inland Revenue Comrs
[1970] 2 All ER 519
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 4, 5, 6 MARCH 1970
Income tax – Appeal – Appeal against additional assessment under Sch E – Adjournment of appeal – Assessment made in respect of unexplained increase in taxpayer’s wealth – Increase alleged by Crown to represent payments from undisclosed profits of company of which taxpayer director – Claim by taxpayer that increase arose from betting winnings – Issue turning largely on evidence and credibility of taxpayer – Taxpayer unable owing to illness to attend hearing first fixed or adjourned hearing of appeal – Refusal of further adjournment by commissioners – Appeal determined without hearing taxpayer – Whether further adjournment should have been granted – Whether appeal should be remitted to different panel of commissioners for rehearing – Income Tax Act 1952, s 64(6).
Income tax – Income – Emoluments – Moneys alleged to have been improperly paid to taxpayer out of undisclosed profits of company of which taxpayer director – Additional assessment under Sch E on taxpayer – Whether, if moneys improperly paid, taxpayer held moneys as trustee for company – Whether taxpayer could in law have received moneys as emoluments.
Profits tax – Appeal by company against assessments to profits tax and excess profits tax – Assessments linked with Sch E assessment on director – Order for rehearing of appeal of director against Sch E assessment – Success of director’s appeal would destroy substructure of assessment on company – Appeals by company remitted to be heard by same panel of commissioners as director’s appeal.
In July 1951, R (the taxpayer in the first appeal) bought a considerable quantity of stocks and shares the dividends from which were included in his tax return for 1952–53. This resulted in enquiries being made by the Revenue as to the source of the purchase money. Additional assessments under Sch E were made on him for 1942–43 to 1950–51 in an aggregate sum of £29,000 in respect of remuneration or emoluments alleged to have been received by him from a company (Aldersgate) (the taxpayers in the second and third appeals) of which R was principal shareholder and a director, along with his wife and son H. Assessments to profits tax and excess profits tax were also made on Aldersgate, which were linked to the Sch E assessments on R, on the footing that Aldersgate had made profits which were not disclosed by its books out of which the remuneration or emoluments of R had come. R claimed that he had been very successful in betting and that the source of the increase in his wealth was betting winnings, and he and Aldersgate appealed to the General Commissioners.
The appeals were first due to be heard on 9 February 1967, but at that time R was ill and the hearing was adjourned to 15 June 1967. When the appeal came on for hearing on 15 June R was still unwell and unable to attend but was making satisfactory progress. The inspector of taxes gave evidence for the Crown, and R’s doctor, his accountant and his son gave evidence for R. In addition to the oral evidence the commissioners considered tables of figures which had been prepared by the Revenue from information obtained as a result of correspondence with R’s accountant and at interviews with R. These tables showed that after deducting £29,843, the aggregate amount of net gains on betting transactions supported by documentary evidence, there remained a sum of £35,327 to be explained. R’s counsel then asked for an
Page 520 of [1970] 2 All ER 519
adjournment, but the commissioners refused the application and made certain findings. They did not accept that during the period under review R made any net gain from betting and they held that sums totalling £65,171 were the concealed profits of Aldersgate which had been diverted to R and were assessable under Sch E as constituting remuneration received by him from Aldersgate. They also found that the books of Aldersgate were very well kept and that H had no knowledge of any profits having been diverted from Aldersgate. They determined the assessments in the sum of £62,114.
Held – The cases would be remitted for further hearing by a fresh panel of commissioners, because—
(i) although the adjournment of a hearing by any tribunal was a matter prima facie for the decision of the tribunal, and an exercise of that discretion would not be interfered with by an appellate court in normal circumstances, if the discretion were exercised in such a way as to cause what could properly be regarded as an injustice to any of the parties affected, then the proper course for an appellate court to take would be to ensure that the matter was further heard (see p 523 f); Maxwell v Keun [1927] All ER Rep 335 and Dick v Piller [1943] 1 All ER 627 followed;
(ii) having regard to the importance of R’s own evidence and the fact that, on one footing, the whole outcome of his case depended on whether he was to be believed in regard to his claim to have made winnings from betting which accounted for the whole of the unexplained increase in his wealth, the case was one in which the commissioners ought to have allowed an adjournment, and their refusal to do so resulted in R’s suffering a substantial injustice (see p 523 j, post);
(iii) if Aldersgate had made profits of £65,171 which never appeared in its books and those profits had improperly found their way into R’s pocket, it followed as a matter of law that R, being a director of Aldersgate and owing to it a fiduciary obligation to preserve its assets, at all times held the £65,171 as a trustee for the company, so that R could not have received the moneys from Aldersgate as a form of emolument or remuneration (see p 524 b and f, post);
(iv) although it was very desirable when cases were stated under the Income Tax Act 1952, s 64a, that the commissioners should explicitly say what question of law they considered arose for the opinion of the court, the court was not confined to considering the question of law so stated, but could ‘determine any question … of law arising on the case’ and the question whether or not an adjournment should have been allowed in the present case was such a question (see p 525 g, post);
(v) since R had been anxious to give evidence before the commissioners to show that none of the £65,171 had at any time belonged to Aldersgate and it was right that the Crown should have the opportunity of cross-examining him, it would not be proper to allow R’s appeal there and then but the appeal would be remitted for rehearing (see p 524 h, post);
(vi) it would not be satisfactory in the circumstances to send R’s appeal back to the same panel of commissioners as heard it before but the court had jurisdiction under the Income Tax Act 1952, s 64(6) to remit the case to another panel of commissioners (see p 525 a and f, post);
(vii) the failure of the commissioners to allow an adjournment for R to give evidence also vitiated Aldersgate’s appeals, since, if R made good his claim that he made profits out of betting which amounted to £65,000 odd, the whole substructure of the assessments on the company would disappear; accordingly the two appeals of Aldersgate would be remitted to be heard by the same panel of commissioners which heard R’s appeal (see p 526 e, post).
Notes
For the law relating to additional assessments, see 20 Halsbury’s Laws (3rd Edn)
Page 521 of [1970] 2 All ER 519
669–672, paras 1314–1319; and for cases on the subject, see 28 Digest (Repl) 386–388, 1687–1695.
For the Income Tax Act 1952, s 64, see 31 Halsbury’s Statutes (2nd Edn) 66.
With effect from 6 April 1970, s 64 of the Income Tax Act 1952 is replaced by s 56 of the Taxes Management Act 1970.
Cases referred to in judgment
Blaise v Blaise [1969] 2 All ER 1032, [1969] P 54, [1969] 2 WLR 1047, Digest Supp.
Dick v Piller [1943] 1 All ER 627, [1943] KB 497, 112 LJKB 410, 169 LT 26, 13 Digest (Repl) 437, 620.
Maxwell v Keun [1928] 1 KB 645, [1927] All ER Rep 335, 97 LJKB 305, 138 LT 310, 30 Digest (Repl) 149, 32.
Walker v Walker [1967] 1 All ER 412, [1967] 1 WLR 327, Digest Supp.
Case stated
This was an appeal by David Rose against additional assessments made on him under Sch E, and by Aldersgate Textiles Ltd against assessments to profits tax and excess profits tax which were related to the assessments on Mr Rose. The case stated is substantially set out in the judgment.
R A Watson QC and D G H Braham for the taxpayers.
J R Phillips QC and P W Medd for the Crown.
6 March 1970. The following judgment was delivered.
BUCKLEY J. There are three appeals now before the court. The first is by Mr David Rose (to whom I shall refer as ‘Mr Rose’) in respect of assessments made on him under Sch E for the financial years 1942–43 to 1950–51 in an aggregate amount of £29,000 in respect of remuneration or emoluments which it is said he received from a company, Aldersgate Textiles Ltd (which I shall call ‘Aldersgate’), in which he was the principal shareholder, holding 80 of the 100 issued shares of the company, and one of the directors, the other two shareholders being his wife and son, Harry Rose, both of whom were directors of the company. The other two appeals are appeals by Aldersgate against assessments to profits tax and excess profits tax, which are linked with the Sch E assessments on Mr Rose himself because it is said that the company had profits which were not disclosed by its books out of which the remuneration or emoluments of Mr Rose came.
The assessments came to be made in the first place as the result of enquiries launched by the Revenue authorities consequent on the purchase by Mr Rose of some investments in July 1951. These investments and the consequent disclosure to the Revenue of the dividends on them alerted the Revenue to the possibility that Mr Rose might have acquired wealth as the result of income of which he had made no disclosure to the Revenue, and investigations were accordingly put in train, as the result of which it was discovered that Mr Rose had in fact received over the years large sums of cash which required explanation. In the course of these enquiries, Mr Rose claimed that he had been very successful in betting, and he produced various documents—very numerous documents, it seems—which indicated that over the eight years from 1945 to 1952 he had had betting operations which had resulted in his making a net profit of £25,819. That figure of course assumes that the documents disclosed at that stage to the Revenue were in fact all the documents relating to all the betting transactions in which Mr Rose had been concerned during that period. As the investigations proceeded, it became apparent that the amount of unexplained increase in Mr Rose’s wealth was greater than the sum of £25,819; and at later stages he claimed that he had had winnings as a result of betting, first amounting to £55,000 and, later, to £70,000. These increases were not supported by documentary evidence in the way that the earlier transactions had been, and, not unnaturally, the Revenue
Page 522 of [1970] 2 All ER 519
regarded these explanations by Mr Rose of the moneys which he had accumulated with considerable suspicion. Eventually, assessments were made on him under both Sch D and Sch E. With the Sch D assessments I am not at present concerned; but the Sch E assessments, as I have said, amounted to £29,000.
Mr Rose appealed to the Commissioners for the General Purposes of the Income Tax for the Division of Central Manchester. The appeal was first due to be heard on 9 February 1967, but at that time Mr Rose was unfortunately ill, and the hearing was adjourned to 15 June. When the appeal came on for hearing on 15 June, Mr Rose was still unwell, and there was evidence called at the early stages of the hearing to the effect that Mr Rose had had a coronary thrombosis in December 1966 as a result of which he had been unable to attend the hearing in February, that he had been making a slow but good recovery from that trouble but had then had to undergo an operation in May 1967 and that he was then, in June 1967, making satisfactory progress. The evidence was that there was a good chance that he would be capable of travelling to Manchester and giving evidence within two or three months, and that so far as the doctor could tell he ought to get on well in his recovery from his operation.
When the case came on for hearing, counsel representing Mr Rose intimated that they would be unable to call Mr Rose to give evidence on account of his health, and that they might at a later stage in the hearing ask for an adjournment in order that Mr Rose’s evidence might be taken at a later date. The hearing proceeded, and, for the Crown, one of Her Majesty’s inspectors of taxes, a Mr Blower, was called; and, for Mr Rose, a Mr Lever, who was a partner in the firm of accountants, Messrs Lever Brothers & Co, who acted as accountants for Mr Rose and for Aldersgate, and Mr Rose’s son, Mr Harry Rose, were called. The comissioners having heard that evidence, as well as the evidence of the doctor whom I have already mentioned, were asked by Mr Rose’s counsel for an adjournment in order that Mr Rose’s evidence might be taken at a later date, and they refused that application. Accordingly, the matter was disposed of by the commissioners without ever having heard Mr Rose himself.
Having regard to the nature of the case put forward by Mr Rose and on his behalf—namely, that his funds were derived from betting transactions, a considerable part of which were not supported by any documentary evidence—it seems that Mr Rose’s own evidence must have been evidence which would have been very important to be considered by the commissioners, and his credibility would have been an important matter for them to consider. In the event, they never heard his evidence, and, of course, had no opportunity to consider his credibility except in the light of such evidence as was before them. In addition to the oral evidence which they heard, there were placed before the commissioners tables of figures which set out information with regard to Mr Rose’s bank accounts and other relevant matters relating to his financial position from time to time. Those tables had been prepared by the Revenue from information obtained as a result of correspondence with Mr Lever’s firm and at interviews with Mr Rose. Those tables indicated that there was a total of £65,171 to be explained; and if one deducted from that figure the sum of £29,843, which was the aggregate amount of net gains on betting transactions which were supported by documentary evidence of one kind or another, there still remained a balance of £34,300 odd to be explained. In these circumstances, it is not surprising, perhaps, that the commissioners took the view that the Crown had discharged the onus which rested on it of establishing that the taxpayer had been guilty of wilful default in failing to make proper disclosure of his income, that onus resting on the Crown by reason of the fact that the assessments were at any rate to some extent out of time.
The commissioners made certain findings. They did not accept that Mr Rose had, during the period under review, made any profit from his betting transactions; and they found that, during the period under review, he had received sums totalling
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£65,171 representing taxable income which he had not accounted for or disclosed to the Revenue. They further found that those sums represented concealed profits of Aldersgate which were diverted to Mr Rose and were assessable under Sch E of the Income Tax Act 1952 as constituting remuneration received by him from the company. They also found that the books of the company did not disclose any such profits. The actual language of the finding is ‘that the books of the [company] were kept very well and there was nothing in the general pattern of the [company’s] accounts to make [the company’s accountant] suspicious’. They also found that Mr Harry Rose, who was a fellow director of Aldersgate with Mr Rose, had no knowledge of any profits having been diverted from Aldersgate.
In these circumstances, it is submitted on Mr Rose’s behalf that the finding that the £65,171 was received by Mr Rose as remuneration from the company is a finding which cannot stand in law, for it is said that on the commissioners’ findings the moneys were improperly diverted from the company, that if they came into Mr Rose’s pocket then he as a director of the company must at all times have been a trustee of those moneys of the company for the company, and that it is impossible in law to regard him as having received the moneys as remuneration. On that ground it is said that the commissioners were wrong in holding that the moneys represented remuneration in respect of which Mr Rose was assessable to Sch E tax. What the commissioners ultimately decided was to discharge certain of the Sch D assessments and to determine the Sch E assessments in much larger figures in the aggregate than the original Sch E assessments. These assessments as determined by the commissioners amounted to £62,114.
On this ground Mr Rose now contends, through his counsel, that his appeal should be allowed and that the assessments under Sch E should be discharged on the basis that the findings are such that they lead to a legal result which is incompatible with assessment under Sch E. Alternatively, it had been contended that the commissioners’ refusal of an adjournment occasioned an injustice to Mr Rose of such a kind that this court ought not to allow their decision to stand, and ought to remit the matter for rehearing by either the same or another panel of commissioners. I have been referred to authorities—Maxwell v Keun and Dick v Piller—which I think indicate that, although the adjournment of a hearing by any tribunal is a matter prima facie for the discretion of the tribunal and an exercise of that discretion will not be interfered with by an appellate court in normal circumstances, if the discretion has been exercised in such a way as to cause what can properly be regarded as an injustice to any of the parties affected, then the proper course for an appellate court to take is to ensure that the matter is further heard.
It is difficult to see in this case why the commissioners thought it inappropriate to allow an adjournment for Mr Rose’s evidence to be taken. It is true that there had already been one adjournment of the matter, from February to June; but in the meantime the unfortunate Mr Rose had suffered further physical difficulties, and it is not suggested there was anything to be criticised in the medical evidence that the commissioners heard. I am led to think that they cannot really have given the application for an adjournment the consideration that it merited; and, having regard to the importance of Mr Rose’s own evidence in this case and to the fact that, on one footing, the whole outcome of the case depended on whether he was to be believed in regard to his claim to have made winnings from betting accounting for the whole of the unexplained increase in his wealth, I think that the case is one in which the commissioners ought to have allowed an adjournment, and that their refusal to allow an adjournment in fact resulted in Mr Rose suffering a substantial injustice. He was entitled to have his evidence heard and considered by the tribunal. Accordingly, unless the case is one in which I ought to allow Mr Rose’s appeal here and now, I am of the view that the right course would be to remit the case for further hearing.
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I turn back, therefore, to the argument that was presented which struck at the root of the commissioners’ decision; that is to say, the argument whether, on the commissioners’ own findings, these moneys could be regarded as remuneration on which Mr Rose could be assessed under Sch E. It seems to me that the findings which are to be found in the case stated indicate this position. The commissioners must have taken the view that, on the evidence, Aldersgate should be treated as having had profits of £65,000 odd which never appeared in its books; that those profits found their way into Mr Rose’s pocket; and that they did so without at any rate one of Mr Rose’s fellow directors, or the company’s accountants, knowing anything about either the existence of those profits or their diversion into Mr Rose’s pocket. From these three findings, which I think are implicit in the commissioners’ decision, the only possible inference that one can draw seems to me to be that Mr Rose had deceived his fellow director with regard to these profits, and that he, Mr Rose, had himself improperly diverted these moneys into his pocket.
It has been argued on behalf of the Crown that the commissioners must by inference be held to have found that Mr Rose had in some way or other authority to pay these moneys to himself for his own benefit; and counsel has drawn my attention to the fact that Mr Rose was a director of this company and the major shareholder in the company, and that it is possible that the day-to-day management of the company’s business may have been committed to him. He says that the maxim ‘omnia praesumuntur rite esse acta’ was a maxim on which the commissioners were fully entitled to rely for the view that Mr Rose, in paying these moneys to himself, was acting within his authority from the company. It seems to me that the circumstances are not such that that maxim can readily apply to this case, for when one finds that profits of the company of so large a size are not recorded in the company’s books at all and have found their way into the pocket of one of the company’s directors without the knowledge of another director of the company, there seem to me to be some grounds for supposing that omnia have not been rite acta. I reach the view that the only reasonable inference that one can draw from the facts as found by the commissioners is that Mr Rose wrongly diverted these moneys from the company, assuming always that they ever were moneys which belonged to the company. Now, if that were the position, it must I think as a matter of law follow that Mr Rose, as a director of the company, owing as he did a fiduciary obligation to the company to preserve its assets, at all times held these moneys as a trustee for the company; and that view would be inconsistent with any possibility that he received the moneys from the company as a form of emolument or remuneration.
This process of reasoning involves at any rate one important inference of fact, and it is an inference which, if Mr Rose himself had given evidence before the commissioners, might perhaps have been displaced. Mr Rose is anxious to give evidence before the commissioners in order to establish a different proposition—namely, that none of these moneys at any time belonged to the company in any way—and it seems to me that, if it is right that he should be heard in support of that part of his case, it is equally right that the Crown should have the opportunity to cross-examine him to see whether it can, out of his mouth, displace the inference which I consider arises on the footing that the moneys belonged to the company. It therefore seems to me that this is not a case in which it would be right to allow this appeal here and now, but that it would be right to remit it for rehearing or further hearing.
There has been debate about whether, in those circumstances, this case should go back to the same commissioners who heard it before or whether it should go to a different panel of commissioners. On the one hand, it is said that the commissioners who decided the appeal have formed a concluded view that Mr Rose is a dishonest man, and that therefore they are not a satisfactory tribunal before whom his evidence should now be adduced, because they have already formed that concluded view. The Crown, on the other hand, resists the suggestion that the matter should be remitted to a different panel of commissioners, mainly, I think, on the ground that
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if it goes to a new panel of commissioners the case will have to be reheard in its entirety, and greater expense in money and time will be involved. In my view, it would not be satisfactory in this case to send the case back to the same panel of commissioners as heard it before, and if I have jurisdiction to say that the case should go to a new panel of commissioners for rehearing I think that that is the proper course to take. It is undoubted, I think, that the commissioners who heard Mr Rose’s appeal can only have reached the conclusions which they did reach on the basis that they thought that Mr Rose was a man whose explanations to the Revenue had been entirely untrue—in other words, that he was a liar—and, although I have no doubt that they would do their best to listen to his evidence in an unbiased manner, I think it would be impossible in these circumstances for it to be clear that they had given an entirely open hearing to Mr Rose’s evidence without any preconceived idea whether it was likely to be credible or not. I have been referred to two cases in other fields of law where a case has been sent back to be tried by a tribunal differently constituted from that which had originally heard the case on rather similar grounds. One is Walker v Walker and the other is Blaise v Blaise. If I have jurisdiction in the present case to send Mr Rose’s appeal back to a new panel of commissioners, I think I should adopt the same sort of course as was taken in each of those cases, where the matter was referred to a fresh panel.
The jurisdiction which I am at present exercising is to be found in s 64(6) of the Income Tax Act 1952 which provides:
‘The High Court shall hear and determine any question or questions of law arising on the case, and shall reverse, affirm or amend the determination in respect of which the case has been stated, or shall remit the matter to the Commissioners with the opinion of the Court thereon, or may make such other order in relation to the matter as to the Court may seem fit.’
If it be assumed (as I am prepared to assume for present purposes) that the reference to ‘the Commissioners’ in that subsection is a reference to those commissioners who originally heard the case, I nevertheless have power, in my judgment, under the general words at the end of the subsection, which enable me to make ‘such other order’ as may seem fit, to remit the case to another panel of commissioners; and that, in my judgment, is the right course to take.
The case stated does not state that one of the questions of law on which the opinion of this court is required is whether an injustice was occasioned by the refusal of an adjournment; but, although it is no doubt very desirable that when cases are stated under s 64 of the Act the commissioners stating the case should explicitly say what question of law they consider arises for the opinion of the court, the court is not in my judgment confined to considering the question of law so stated, but can, in the terms of s 64(6) ‘determine any question … of law arising on the case’, and the question whether or not an adjournment should have been allowed is, in my judgment, in the present case, such a question. Accordingly, the course which I propose to take on Mr Rose’s appeal is to say that it should be remitted to another panel of commissioners, presumably for the same Division, for rehearing.
I now come to the two appeals by Aldersgate. In regard to these, counsel for Aldersgate has contended that the appeals should be allowed on the ground that the commissioners determined them on inadmissible evidence. That arises in this way. Aldersgate’s two appeals were heard on the same days as the appeal of Mr Rose. In fact, the evidence taken in Mr Rose’s appeal was treated as being evidence in Aldergate’s appeals; and, although perhaps it may not be technically right to say that the commissioners heard all three appeals together, in substance that was what happened. Now, I have already indicated what evidence was led in Mr Rose’s appeal. The statements of account put in during Mr Rose’s appeal were put in, as
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I understand it, by the inspector of taxes who was conducting the case. They were never formally sworn to by anyone but I think it can reasonably be taken to be the case that both parties to Mr Rose’s appeal, the Crown and the taxpayer, accepted for the purpose of that appeal that the figures and information contained in those accounts had been obtained from correspondence between the Revenue and Mr Rose’s accountant and as the result of interviews between the Revenue and Mr Rose himself. Therefore, in the case of Mr Rose’s appeal, it is perhaps not inappropriate to regard what is in those statements as being in the nature of admissions to some extent, though not formal admissions, by Mr Rose or his accountant acting on his behalf. Some of the figures in those statements were explicitly not admitted by Mr Rose’s representatives before the commissioners, but otherwise it would not be unreasonable to regard those figures as going in, in Mr Rose’s appeal, as figures which, except for those explicitly not admitted, were not dissented from.
But in that respect Mr Lever was, I think, clearly acting as Mr Rose’s accountant and not as an accountant for Aldersgate; and Mr Rose was acting in his own capacity, and not as a director of Aldersgate. It therefore seems to me that there is force in the submission that, in Aldersgate’s appeals, all the information contained in those statements was technically inadmissible as being hearsay evidence, neither strictly proved nor admitted. But, says counsel for the Crown, if the matter were remitted for rehearing on that ground, all of that evidence would now be admissible under the Civil Evidence Act 1968, and no useful purpose would be served by sending the matter back for rehearing merely on the ground that evidence which was at the time not strictly admissible was treated as admissible in Aldersgate’s appeals.
But there is another ground for thinking that the disposal of Aldersgate’s appeals was unsatisfactory, and that is the same ground which vitiated the hearing of Mr Rose’s appeal; namely, the failure of the commissioners to allow an adjournment for Mr Rose’s evidence to be taken, for the fate of Aldersgate’s appeals turns on precisely the same basic considerations as the fate of Mr Rose’s appeal. If in fact Mr Rose were to make good his claim that he made profits out of betting amounting to £65,000 odd, the whole substructure of the assessments on Aldersgate would disappear, for those assessments depend on its being held that the £65,000 in fact represented moneys which belonged to Aldersgate and were profits on which Aldersgate ought to be taxed.
Accordingly, to seems to me that the right course is to remit these two appeals also, with Mr Rose’s appeal, to be heard by the same panel of commissioners who rehear Mr Rose’s appeal, so that the whole of the matters can be disposed of together and coherently. Accordingly, that is the way in which I will deal with all three appeals.
Cases remitted to different panel of commissioners for rehearing.
Solicitors: Beer & Co (for the taxpayers); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Note
Re Fletcher’s Application
[1970] 2 All ER 527
Categories: ADMINISTRATIVE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND KARMINSKI LJJ AND SIR GORDON WILLIMER
Hearing Date(s): 16 FEBRUARY 1970
Parliamentary Commissioner for Administration – Mandamus – Failure of commissioner to investigate complaint – Whether jurisdiction to order commissioner to investigate – Discretion of commissioner – Whether leave would be given for mandamus against commissioner – Parliamentary Commissioner Act 1967, s 5.
Notes
For investigation of complaints by the Parliamentary Commissioner for Administration, see Supplement to 28 Halsbury’s Laws (3rd Edn) para 450A.
For mandamus to compel the performance of public duties, see 11 ibid 91–93, para 172.
For the Parliamentary Commissioner Act 1967, s 5, see 6 Halsbury’s Statutes (3rd Edn) 825.
Appeal
This was an appeal by Simon William Peel Vickers Fletcher from the refusal of a Divisional Court of the Queen’s Bench Division (Lord Parker CJ and Ashworth and Talbot JJ) on 26 January 1970 to grant him leave to apply for an order of mandamus requiring the Parliamentary Commissioner for Administration to investigate an allegation of neglect of duty against the Official Receiver acting as liquidator of a company.
The appellant appeared in person.
16 February 1970. The following judgment was delivered.
WINN LJ after stating that the decision of the court would merely be announced as a decision and not a reasoned judgment, stated that the decision was that the appellant should not have leave to move for an order of mandamus.
Leave to move refused. Leave to appeal to the House of Lords refused.
On 28 April 1970, the appeal committee of the House of Lords (Lord Reid, Viscount Dilhorne and Lord Diplock) refused leave to take the application to the House of Lords on the ground that there was no jurisdiction to order the commissioner to investigate a complaint because s 5(1) of the Parliamentary Commissioner Act 1967 (which provides that the commissioner ‘may’ investigate certain matters) conferred on him a discretion whether to investigate or not.
Henry Summerfield Esq Barrister.
R v Gaming Board for Great Britain, ex parte Benaim and another
[1970] 2 All ER 528
Categories: LEISURE AND LICENSING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, LORD WILBERFORCE AND PHILLIMORE LJ
Hearing Date(s): 16, 17, 18, 23 MARCH 1970
Gaming – Licence – Certificate of consent for purposes of application for licence – Whether Gaming Board for Great Britain bound to observe rules of natural justice – Duties of board on consent application – Whether board bound to give reasons for decision – Gaming Act 1968, Sch 2, para 4(5), (6).
In considering whether to issue a certificate of consent under the Gaming Act 1968, Sch 2, para 4(5) and (6)a, the Gaming Board for Great Britain are bound to observe the rules of natural justice (see p 533 e and p 535 g, post); they must give the applicant an opportunity of satisfying them of the matters specified in para 4(5), and must let him know what their impressions are so that he can disabuse them although they need not quote chapter and verse against him. The board can, and should, investigate the credentials of those who make application to them; they can, and should, receive information from the police in this country or abroad, who know something of them; they can, and should, receive information from any other reliable source; and the applicants must be given a chance of answering though the board need not tell them the source of their information, if that would put the informant in peril or otherwise be contrary to the public interest (see p 534 b and c and p 535 g, post).
Dicta of Eyre CJ and Buller J in R v Hardy (1794) 24 State Tr at 808 and 818, and Lord Parker CJ in Re K (H) (an infant) [1967] 1 All ER at 231, applied.
The Gaming Board are not bound to give their reasons for their decision or to submit to cross-examination as to any reasons in fact given (see p 534 h and p 535 d and g, post).
Notes
For consent of the Gaming Board for Great Britain to applications for licences, see Supplement to 18 Halsbury’s Laws (3rd Edn) para 370E, 2.
For the Gaming Act 1968, Sch 2, para 4, see 14 Halsbury’s Statutes (3rd Edn) 752.
Cases referred to in judgment
A-G v Briant (1846) 15 M & W 169, 15 LJEx 265, 6 LTOS 394, 10 JP 518, 22 Digest (Repl) 389, 4171.
Cooper v Wandsworth Board of Works (1863) 14 CBNS 180, 32 LJCP 185, 2 LT 278, 143 ER 414, 26 Digest (Repl) 585, 2450.
Durayappah v Fernando [1967] 2 All ER 152, [1967] 2 AC 337, [1967] 3 WLR 289, Digest Supp.
K (H) (an infant), Re [1967] 1 All ER 226, [1967] 2 QB 617, [1967] 2 WLR 962, Digest Supp.
Kanda v Government of Malaya [1962] AC 322, [1962] 2 WLR 1153, 37 Digest (Repl) 189, *8.
Marks v Beyfus (1890) 25 QBD 494, 59 LJQB 479, 63 LT 733, 55 JP 182, 22 Digest (Repl) 389, 4174.
Nakkuda Ali v M F de S Jayaratne [1951] AC 66, 8 Digest (Repl) 802, 562.
R v Hardy (1794) 24 State Tr 199, 22 Digest (Repl) 389, 4169.
R v Metropolitan Police Comr, ex parte Parker [1953] 2 All ER 717, [1953] 1 WLR 1150, 117 JP 440, 45 Digest (Repl) 155, 619.
Page 529 of [1970] 2 All ER 528
R v Northumberland Compensation Appeal Tribunal, ex parte Shaw [1952] 1 All ER 122, [1952] 1 KB 338, 116 JP 54, 35 Digest (Repl) 817, 104.
Ridge v Baldwin [1963] 2 All ER [1964] AC 40, [1963] 2 WLR 935, 127 JP 295, 37 Digest (Repl) 195, 32.
Russell v Duke of Norfolk [1949] 1 All ER 109, 25 Digest (Repl) 507, 602.
Cases also cited
Board of Education v Rice [1911] AC 179, [1911–13] All ER Rep 36.
Capel v Child (1832) 2 Cr & J 558.
De Verteuil v Knaggs [1918] AC 557.
General Medical Council v Spackman [1943] 2 All ER 337, [1943] AC 627.
Greene v McElroy (1959) 630 US 474.
Liversidge v Anderson [1941] 3 All ER 338, [1942] AC 206.
Local Government Board v Arlidge [1915] AC 120, [1914–15] All ER Rep 1.
Maradana Mosque Trustees v Mahmud [1966] 1 All ER 545, [1967] 1 AC 13.
Nagle v Fielden [1966] 1 All ER 689, [1966] 2 QB 633.
Official Solicitor v K [1963] 3 All ER 191, [1965] AC 201.
Padfield v Ministry of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997.
R v Deputy Industrial Injuries Comr, ex parte Moore [1965] 1 All ER 81, [1965] 1 QB 456.
R v Metropolitan Police Comr, ex parte Blackburn [1968] 1 All ER 763, [1968] 2 QB 118.
R v Sykes (1875) 1 QBD 52.
Schmidt v Home Office [1969] 1 All ER 904, [1969] 2 Ch 149.
Univesity of Ceylon v Fernando [1960] 1 All ER 631, [1960] 1 WLR 223.
Weinberger v Inglis [1919] AC 606.
Wiseman v Borneman [1969] 3 All ER 275, [1969] 3 WLR 706.
Motion for certiorari and mandamus
This was an application by the applicants, Gilbert Jacob Benaim and Youssef Khaida, for an order of certiorari to quash a decision of the Gaming Board for Great Britain made on 9 January 1970 refusing to issue a certificate of consent to the applicants under the Gaming Act 1968, and for an order of mandamus requiring the board to provide the applicants with sufficient information to enable them to answer the case against them and to reconsider the application in the light of any further evidence or representations. The facts are set out in the judgment of Lord Denning MR.
Quintin Hogg QC and Anthony Lester for the applicants.
R I Kidwell QC and L F Read for the board.
Cur adv vult
23 March 1970. The following judgments were delivered.
LORD DENNING MR. Crockford’s is one of the famous gaming clubs in London. It has premises of distinction at 16 Carlton House Terrace, which it holds from the Crown Estate Commissioners. It seeks a certificate to enable it to apply for a gaming licence. The Gaming Board have refused their consent. So Crockford’s is faced with extinction. It applies to this court to quash the decision of the Gaming Board. It says that they did not act in accordance with the rules of natural justice.
Three years ago, in 1967, the gaming clubs in England were having a very profitable time. They had found a way to avoid the Betting and Gaming Act 1960 and the Betting, Gaming and Lotteries Act 1963. The courts had let through their devices. So much so that the police had given up any effort to enforce the law. The prospects were so promising that new clubs were springing up all the time. It was in this climate that in October 1967 two Frenchmen came to England. They made a bid to take over Crockford’s. Their names were Gilbert Benaim and Youssef Khaida, the applicants. They had vast experience; for they had run gaming clubs in Algiers
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and in Paris. They obtained work permits from the Home Office. They became joint managing directors of Crockford’s. They agreed to pay £185,000 for the shares to control it. They sought permission from the Bank of England to carry through the deal. But then there came a hitch. The Treasury were not prepared to grant permission at that stage. But this disappointment did not deter them. They went ahead with their plans. They still ran Crockford’s. In the next year, 1968, things changed. First, the House of Lords declared that the device of ‘offering the bank’ to be illegalb. Next, this courtc warned the gaming clubs: ‘No longer will we tolerate these devices.’ Finally, the police declared that they would enforce the law. But the gaming clubs, or, at any rate, some of them, took no notice. They tried other devices, such as marker chipsd, or ‘kittyscoop’e. But the courts soon declared these to be illegal also. Crockford’s themselves were among the transgressors. On 24 January 1969, they were summoned at Bow Street and fined £200 and costs.
Parliament itself also intervened. ‘Enough’, it said, ‘of these devices. We are tired of this continual battle between the gaming clubs and the law—with the clubs always one jump ahead. We will try a new way altogether’. So Parliament enacted the Gaming Act 1968. By this Act there was to be no gaming at all except in premises licensed for the purpose; but, once licensed, gaming can take place without hindrance. The licence will be granted by the licensing justices; but, before any person can even apply for a licence, he must be certified as one who can be trusted. He must go before a responsible body, the Gaming Board, set up for the purpose. He must get a ‘certificate of consent’ from the board. Else he cannot apply for a licence.
On 28 February 1969, Crockford’s applied to the board for a certificate of consent. They filled in all the forms. They set out the games which they wished to play. We are by now familiar with them, chemin-de-fer, baccarat, roulette, blackjack, and craps. They also set out the stakes. They were high enough. They gave all the particulars about the applicants and others who would be concerned in running the club. At first they put in the application in the names of two limited companies, who were legally the owners of the club; but, on 12 November 1969, at the suggestion of the board, they amended the application so as to name Mr Benaim and Mr Khaida as the applicants.
On 11 December 1969, there was a meeting of the Gaming Board. It was a responsible body. There were present Sir Stanley Raymond, the chairman of the board, Sir Ranulph Bacon (former deputy commissioner of police of the metropolis), Mr Usherwood (deputy chairman of the Prudential Assurance Company), Mr Ravenscroft, the accountant for the board, and Mr Saunders, the secretary. There came to the meeting the applicants and Captain Black, all representing Crockford’s. The chairman told them that they could be legally represented if they wished, but they did not so desire. The meeting lasted four hours. It was soon apparent that the board had gathered together a lot of information about Crockford’s. They did not tell from whom they go it. But it is a fair guess that they had got a good deal from the police; and no doubt other sources. They said that they were troubled about it. They asked questions concerning it. This is how the applicant, Mr Benaim, described it in his affidavit:
‘… we were questioned about the circumstances in which the application came to be made, our residence in the United Kingdom, our previous experience of the management of gaming clubs, our motives in wishing to purchase and run Crockford’s, the staff whom we proposed to employ at Crockford’s, certain
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transactions involving the taking abroad of cheques drawn on foreign banks, the expropriation of our assets in Algeria, our commercial interest and activities in France, and our relations with and the background of several named individual proposed employees and acquaintances. We answered all these questions in considerable detail to the best of our knowledge, information and belief. At the end of the meeting, the … Chairman … added that if we considered that there was any further information which we should supply, we should do so within twenty-one days.’
In pursuance of that invitation Captain Black wrote a letter of 12 December 1969, covering some points which, he said, ‘were not fully answered yesterday’; and on 31 December he wrote on behalf of the applicants offering to give assurances to the board.
On 9 January 1970, the board came to their decision. They refused their consent. The secretary wrote to Captain Black stating:
‘When [the applicants] attended with you for interview on 11 December last the matters troubling the Board were discussed and their representations noted. Your letters of 12 December and 31 December have also been considered by the Board who, however, have decided not to issue a Certificate of Consent in this case.’
The applicants at once consulted their solicitors. On 14 January 1970, the solicitors wrote asking the board to re-open the case. On 21 January 1970, the board replied that they would not re-open it. They stated they were not prepared ‘to entertain any new or amended application in respect of [Crockford’s] for the present round’. On 13 February 1970, the solicitors wrote again asking for the reasons for the board’s decision. On 24 February 1970, the board replied in a letter which I must read, for it is a summary of the matters enquired into:
‘As [the applicants] are aware, the matters discussed with them at the interview on 11 December 1969, were:—
‘(a) the association of [the applicants] with certain persons who are of unacceptable background and reputation, especially with Marcel Paul Francisci, Roland Francisci, and Amede Darlay (or Attal).
‘(b) the Board’s doubts as to the capacity of [the applicants] to control the club effectively, having regard to the extent of their business interests outside Great Britain, the time they spend outside Great Britain, and their imperfect command of the English language.
‘(c) the misgivings raised by certain transactions involving the taking abroad of cheques drawn on foreign banks. The Board sought to satisfy themselves that this was not done with the object of evading exchange control.
‘(d) the uncertainty as to the legal ownership of Crockford’s. While [the applicants] appeared to be the de facto owners, it was necessary to establish their effective and lawful ownership, and to explore the circumstances of the purchase.
‘(e) the doubt thrown on the character of [the applicants] by their operations as hoteliers and casino managers in Algeria during and before the civil war in that country and their subsequent expulsion.
The Board made clear that these were the matters troubling them, and [the applicants] showed by their replies that they understood this. They were given every opportunity to answer at length and at the end of the interview they were invited to make further representations in writing concerning any of these matters within 21 days, and were told that the Board would then determine the application. Further representations were received in letters dated 12 and 31 December. These were considered by the Board and their decision that the applicants did not satisfy the requirements of Paragraph 4(5) and (6) of Schedule 2 to the Gaming Act 1968 was conveyed by … letter of 9 January.’
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The solicitors were still not satisfied. On 25 February, they wrote asking the board to indicate which of the matters set out in paras (a) to (e) were still troubling the board. To this the board replied at once, on the same date, stating:
‘The Board are not obliged to give their reasons for the decisions they reach and it is not their practice to do so. They are not prepared to indicate to what extent they are still not satisfied in regard to any of the specific matters mentioned at (a) to (e) in the second paragraph of my letter of 24 February. They are, however, prepared to consider further written representations on any of these matters if [the applicants] wish to put further evidence before them.’
Crockford’s were aggrieved by this refusal. Counsel for the applicants now moves the court for an order of certiorari to quash the decision of 9 January 1970. He said that the board had not observed the rules of natural justice. He also asked for an order of mandamus requiring the board to give sufficient information to enable them to answer the case against them. He said that the board were quite wrong to make the charges in paras (a) to (e) and not specify which of them remained. It was asking the applicants, he said, to find a needle in a haystack or several needles in several haystacks.
Such being the facts, I turn to the law. To what extent are the board bound by the rules of natural justice? That is the root question before us. Their jurisdiction is countrywide. They have to keep under review the extent and character of gaming in Great Britain; see s 10(3) of the 1968 Act. Their particular task, in regard to Crockford’s, is to see if the applicants are fit to run a gaming club; and, if so, to give a certificate of consent. Their duty is set out in Sch 2, para 4(5) and (6), to the 1968 Act:
‘(5) … the Board shall have regard only to the question whether, in their opinion, the applicant is likely to be capable of, and diligent in, securing that the provisions of this Act and of any regulations made under it will be complied with, that gaming on those premises will be fairly and properly conducted, and that the premises will be conducted without disorder or disturbance.
‘(6) For the purposes of sub-paragraph (5) … the Board shall in particular take into consideration the character, reputation and financial standing—(a) of the applicant, and (b) of any person (other than the applicant) by whom … the club … would be managed, or for whose benefit … that club would be carried on, but may also take into consideration any other circumstances appearing to them to be relevant in determining whether the applicant is likely to be capable of, and diligent in, securing the matters mentioned in that sub-paragraph.’
Note also that Sch 1, para 7, gives the board power to regulate its own procedure. Accordingly, the board has laid down an outline procedure which they put before us. It is too long to read in full. So I will just summarise it. It says that the board will give the applicant an opportunity of making representations to the board, and will give him the best indications possible of the matters that are troubling them. Then there are these two important sentences:
‘In cases where the source or content of this information is confidential, the Board accept that they are obliged to withhold particulars the disclosure of which would be a breach of confidence inconsistent with their statutory duty and the public interest …
‘In the course of the interview the applicant will be made aware, to the greatest extent to which this is consistent with the Board’s statutory duty and the public interest, of the matters that are troubling the Board.’
Counsel for the applicants criticised that outline procedure severely. He spoke as if Crockford’s were being deprived of a right of property or of a right to make a living. He read the applicant, Mr Benaim’s affidavit stating that:
Page 533 of [1970] 2 All ER 528
‘Crockford’s has been established for over a century and is a gambling club with a world-wide reputation for integrity and respectability. The assets and goodwill … were valued at about £185,000 … ’
Counsel said that they ought not to be deprived of this business without knowing the case they had to meet. He criticised especially the way in which the board proposed to keep that confidential information. He relied on some words of mine in Kanda v Government of Malaya ([1962] AC 322 at 337), when I said:
‘… that the judge or whoever has to adjudicate must not hear evidence or receive representations from one side behind the back of the other.’
Counsel for the applicants put his case, I think, too high. It is an error to regard Crockford’s as having any right of which they are being deprived. They have not had in the past, and they have not now, any right to play these games of chance—roulette, chemin-de-fer, baccarat and the like—for their own profit. What they are really seeking is a privilege—almost, I might say, a franchise—to carry on gaming for profit, a thing never hitherto allowed in this country. It is for them to show that they are fit to be trusted with it.
If counsel for the applicants went too far on his side, I think that counsel for the board went too far on the other. He submitted that the board are free to grant or refuse a certificate as they please. They are not bound, he says, to obey the rules of natural justice any more than any other executive body, such as, I suppose, the Board of Trade, which grants industrial development certificates, or the Television Authority, which awards television programme contracts. I cannot accept this view. I think that the board are bound to observe the rules of natural justice. The question is: what are those rules?
It is not possible to lay down rigid rules as to when the principles of natural justice are to apply; nor as to their scope and extent. Everything depends on the subject-matter; see what Tucker LJ said in Russell v Duke of Norfolk ([1964] 1 All ER 109 at 118) and Lord Upjohn in Durayappah v Fernando ([1967] 2 All ER 152 at 156, [1967] 2 AC 337 at 349). At one time it was said that the principles only apply to judicial proceedings and not to administrative proceedings. That heresy was scotched in Ridge v Baldwin. At another time it was said that the principles do not apply to the grant or revocation of licences. That, too, is wrong. R v Metropolitan Police Comr, ex parte Parker and Nakkuda Ali v M F de S Jayaratne () are no longer of authority for any such proposition. See what Lord Reid and Lord Hodson said about them in Ridge v Baldwin ([1963] 2 All ER at 79, 80, 115, [1964] AC at 77–79, 133). So let us sheer away from these distinctions and consider the task of the board and what they should do. The best guidance is, I think, to be found by reference to the cases of immigrants. They have no right to come in, but they have a right to be heard. The principle in that regard was well laid down by Lord Parker CJ in Re K (H) (an infant) ([1967] 1 All ER 226 at 231, [1967] 2 QB 617 at 630) when he said:
‘… even if an immigration officer is not acting in a judicial or quasi-judicial capacity, he must at any rate give the immigrant an opportunity of satisfying him of the matters in the subsection, and for that purpose let the immigrant know what his immediate impression is so that the immigrant can disabuse him. That is not, as I see it, a question of acting or being required to act judicially, but of being required to act fairly.’
Page 534 of [1970] 2 All ER 528
Those words seem to me to apply to the board. The Act provides in terms that, in determining whether to grant a certificate, the board ‘shall have regard only’ to the matters specified. It follows, I think, that the board have a duty to act fairly. They must give the applicant an opportunity of satisfying them of the matters specified in Sch 2, para 4(5). They must let him know what their impressions are so that he can disabuse them. But I do not think that they need quote chapter and verse against him as if they were dismissing him from an office (Ridge v Baldwin), or depriving him of his property, as in Cooper v Wandsworth Board of Works. After all, they are not charging him with doing anything wrong. They are simply enquiring as to his capability and diligence and are having regard to his character, reputation and financial standing. They are there to protect the public interest, to see that persons running the gaming clubs are fit to be trusted.
Seeing the evils that have led to this legislation, the board can, and should, investigate the credentials of those who make application to them. They can, and should, receive information from the police in this country or abroad, who know something of them. They can, and should, receive information from any other reliable source. Much of it will be confidential. But that does not mean that the applicants are not to be given a chance of answering it. They must be given the chance, subject to this qualification: I do not think that they need tell the applicants the source of their information, if that would put their informant in peril or otherwise be contrary to the public interest. Even in a criminal trial, a witness cannot be asked who is his informer. The reason was well given by Eyre CJ in R v Hardy ((1794) 24 State Tr 199 at 808):
‘… there is a rule which has universally obtained on account of its importance to the public for the detection of crimes, that those persons who are the channel by means of which that detection is made, should not be unnecessarily disclosed … ’
And Buller J added ((1794) 24 State Tr at 818):
‘… if you call for the name of the informer in such cases, no man will make a discovery, and public justice will be defeated.’
That rule was emphatically re-affirmed in A-G v Briant and Marks v Beyfus. That reasoning applies with equal force to the enquiries made by the board. That board was set up by Parliament to cope with disreputable gaming clubs and to bring them under control. By bitter experience it was learned that these clubs had a close connection with organised crime, often violent crime, with protection rackets and with strong-arm methods. If the board were bound to disclose their sources of information no one would ‘tell’ on those clubs, for fear of reprisals. Likewise with the details of the information. If the board were bound to disclose every detail, that might itself give the informer away and put him in peril. But, without disclosing every detail, I should have thought that the board ought in every case to be able to give to the applicant sufficient indication of the objections raised against him such as to enable him to answer them. That is only fair. And the board must at all costs be fair. If they are not, these courts will not hesitate to interfere.
Accepting that the board ought to do all this, when they come to give their decision the question arises, are they bound to give their reasons? I think not. Magistrates are not bound to give reasons for their decisions; see R v Northumberland Compensation Appeal Tribunal, ex parte Shaw ([1952] 1 All ER 122 at 130, 131, [1952] 1 KB 338 at 352). Nor should the board be bound. After all, the
Page 535 of [1970] 2 All ER 528
only thing that they have to give is their opinion as to the capability and diligence of the applicant. If they were asked by the applicant to give their reasons, they could answer quite sufficiently: ‘In our opinion, you are not likely to be capable of or diligent in the respects required of you.' Their opinion would be an end of the matter.
Tested by those rules, applying them to this case, I think that the board acted with complete fairness. They put before the applicants all the information which led them to doubt their suitability. They kept their sources secret, but disclosed all the information. Sir Stanley Raymond said so in his affidavit; and it was not challenged to any effect. The board gave the applicants full opportunity to deal with the information. And they came to their decision. There was nothing whatever at fault with their decision of 9 January 1970. They did not give their reasons. But they were not bound to do so.
But then complaint is made as to what happened afterwards. It was said that the board did not pin-point the matters on which they thought that the explanations were not satisfactory. They did not say which of the matters in paras (a) to (e) they were not satisfied about. But I do not see anything unfair in that respect. It is not as if they were making any charges against the applicants. They were only saying that they were not satisfied. They were not bound to give any reasons for their misgivings. And, when they did give some reasons, they were not bound to submit to cross-examination on them.
Finally, complaint was made that the board refused to consider a new or amended application in respect of these premises of Crockford’s in the current round. They refused to consider application in other names or in new names. But, here again, I see nothing unfair. Crockford’s had full opportunity of putting their application in the first instance. If there had been a technical defect in it, I feel sure that the board would have allowed an amendment. But, if the application fails in matters of substance, that should be the end of it. There must be an end to the claim to ‘cut and come again’.
In all the circumstances, I think that all the criticisms of the board’s conduct fail, and in my opinion the application should be dismissed.
LORD WILBERFORCE. I agree.
PHILLIMORE LJ. I also agree.
Application dismissed. Leave to appeal to the House of Lords Refused.
Solicitors: Theodore Goddard & Co (for the applicants); Gregory, Rowcliffe & Co (for the board).
G R A Argles Esq Barrister.
Note
R v March and others
[1970] 2 All ER 536
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SACHS AND WIDGERY LJJ AND BRABIN J
Hearing Date(s): 20 FEBRUARY 1970
Criminal law – Sentence – Suspended sentence – Consecutive sentences – Two sentences of six months consecutive – Mandatory requirement that sentences be suspended – Court on appeal against sentence not entitled to deal with appellant more severely than he was dealt with by court below – Order that sentences stand but be suspended – Criminal Justice Act 1967, s 39(3) – Criminal Appeal Act 1968, s 11(3).
Notes
For suspended sentences, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 922A, 1.
For the Criminal Justice Act 1967, s 39, see 8 Halsbury’s Statutes (3rd Edn) 603.
For the Criminal Appeal Act 1968, s 11, see ibid 697.
Cases referred to in judgment
R v Kirkham (October 1968) unreported.
R v Taylor [1969] Crim LR 206.
Cases also cited
R v Flanders [1968] 3 All ER 534, [1969] 1 QB 148.
R v Hussain [1962] Crim LR 712, 106 Sol Jo 722.
Appeals
These were appeals by Raymond March, and three other appellants against sentences imposed on them on 28 November 1969 at North East London Quarter Sessions (G F Mason QC, deputy chairman). All four appellants pleaded guilty to two counts of possessing a scheduled substance contrary to s 1 of the Drugs (Prevention of Misuse) Act 1964. The appellant March and one of the others pleaded guilty to another offence of possessing a scheduled substance, and the appellant March to a further offence of driving a motor vehicle when unfit to do so through drugs. The appellant March was sentenced to six months’ imprisonment consecutive on the first two counts, three months’ imprisonment concurrent on the third count of possessing a scheduled substance and three months’ imprisonment, also concurrent, for the driving offence. The other appellants were also sentenced to consecutive terms of imprisonment on different counts but in the case of each of them terms exceeding six months were included in their sentences.
P M Herbert for the appellants.
The Crown did not appear and was not represented.
20 February 1970. The following judgment was delivered.
BRABIN J delivered the judgment of the court. After stating that the appeals of the appellants other than March were dismissed, he continued: A different situation exists with regard to the appellant March. He was sentenced in all to 12 months’ imprisonment in respect of four counts, the basic sentences being two of six months and six months consecutive. The point is taken on behalf of the appellant March—and this court considers that it is a valid point—that by virtue of the restrictions placed on a court when passing a sentence of six months’ imprisonment, each of
Page 537 of [1970] 2 All ER 536
those consecutive sentences should have been suspended. By s 39(3)a of the Criminal Justice Act 1967, there are tabulated under paras (a) to (e) the grounds which must exist before a sentence of six months’ imprisonment is not suspended.
This court has power under s 11 of the Criminal Appeal Act 1968 in certain circumstances to alter sentences which have been passed for it is there set out:
‘(3) On an appeal against sentence the Court of Appeal, if they consider that the appellant should be sentenced differently for an offence for which he was dealt with by the court below may—(a) quash any sentence or order which is the subject of the appeal; and (b) in place of it pass such sentence or make such order as they think appropriate for the case and as the court below had power to pass or make when dealing with him for the offence; [but then there is a restrictive power within the section which provides] … the Court shall so exercise their powers under this subsection that, taking the case as a whole, the appellant is not more severely dealt with on appeal than he was dealt with by the court below.’
Although, as this court has said and considered, an overall sentence of 12 months’ imprisonment passed on the appellant March would have been the most appropriate sentence in his case, he is fortunate in being able to invoke the terms of s 11 because the learned deputy chairman chose to pass consecutive sentences, achieving the result which he could properly have achieved if he had passed concurrent sentences. This particular matter has been before this court twice now, in October 1968 in R v Kirkhamb, and in December 1968 in R v Taylorc. Unfortunately, if the information given to this court is right, neither of those two decisions was reported other than that R v Taylord is reported in the Criminal Law Review. This court merely mentions that because the facts of this case show that the results of those earlier cases do not appear at any rate to be as well known as they ought to be.
In those circumstances, the appellant March can consider himself very fortunate and in place of the sentences of six months and six months consecutive passed on him in respect of counts 1 and 2 of this indictment, the court must order that those sentences stand but that they be suspended in each case. In addition, the sentences of three months and three months concurrent to the others will also in the circumstances have to be suspended, and the order of the court is that they should be made so. Those sentences will be suspended for two years.
Appeal by the appellant March allowed. Appeals by the other appellants dismissed.
Solicitors: Registrar of Criminal Appeals (for the appellants).
Rosalie Long Barrister.
Note
Re Frost’s Application
[1970] 2 All ER 538
Categories: LANDLORD AND TENANT; Leases
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 2 FEBRUARY 1970
Landlord and tenant – Long leasehold – Application under Leasehold Reform Act 1967 – Identity of freeholder unknown – Tenant under long lease wishing to acquire freehold – Rent reserved under lease of 1869 at 1d per annum in respect of greater area than that held by tenant – Determination of amount to be paid into court in respect of rent unpaid – Form of order – Leasehold Reform Act 1967, s 27(5).
Notes
For the Leasehold Reform Act 1967, s 27, see 18 Halsbury’s Statutes (3rd Edn) 682.
Cases referred to in judgment
Robertson’s Application, Re [1969] 1 All ER 257n, [1969] 1 WRL 109, Digest Supp.
Adjourned summons
This was an ex parte application by originating summons issued on 26 February 1968 By George Frost, the tenant and lessee of 25 York Road, Acton, under the Leasehold Reform Act 1967, s 27. He sought the following relief: ‘that such order may be made as the court thinks fit with a view to the above-named house and premises being vested in him for an estate in fee simple and/or that such directions may be given as the court deems proper.’
R J S Thompson for the applicant.
2 February 1970. The following judgment was delivered.
BUCKLEY J. This is an application under s 27 of the Leasehold Reform Act 1967, by an applicant who is the tenant in occupation of the premises referred to in the title to the proceedings, which he has occupied for the appropriate period as his residence. The application is made ex parte under s 27 because the identity of the landlord is unknown. The applicant is in possession, in the events which have happened, under a lease which was granted on 7 October 1869, for a term of 99 years from 25 March 1869. The contractual term under that lease came to an end in March 1968, but by operation of the Landlord and Tenant Act 1954, s 3, the lease must be treated as having continued until the present time.
The lease of 1869 contained a considerably larger area of land than the area which is now in the occupation of the applicant. The rent reserved under that lease was at the rate of 1d per annum in respect of the whole of the land comprised in the lease. I am told—although there is no evidence about this before the court—that there are now some 24 houses standing on the whole of that land, and it is only one of these houses in respect of which the present application is made.
Under s 27, an applicant, if the court thinks fit to accede to his application, has to pay into court a sum of money representing the purchase price of the freehold reversion expectant on the tenancy under which the applicant is in possession, treated as extending for a period of 50 years from the end of the term of that tenancy, plus the amount, or estimated amount, remaining unpaid, as determined by the court, of
Page 539 of [1970] 2 All ER 538
any pecuniary rent payable for the house and premises up to the date of the conveyance to the applicant. In the peculiar circumstances of this case, I have reached the conclusion that the appropriate figure to determine as the amount, or estimated amount, of rent remaining unpaid in respect of the house and premises is the sum of 1d. In these circumstances, the form of order which I propose to make, which is to some extent based on what was done by Megarry J in Re Robertson’s Application ([1969] 1 All ER 257n, [1969] 1 WLR 109) is as follows. Before I go through the terms of the minute of order, I propose to say this, that the distinction between that case and the present case is that in the Robertson case ([1969] 1 All ER 257n, [1969] 1 WLR 109) the property was subject to a peppercorn rent, and as there was no monetary rent payable the learned judge made a declaration to the effect that there was no amount, or estimated amount, remaining unpaid for the purpose of s 27(5), whereas in the present case there is a monetary rent, although it is of an extremely nominal character.
The order, after the formal part, will contain a recital that the court is satisfied that the applicant is a tenant of the property and has a right under the Act to acquire the freehold and is prevented from giving notice, in accordance with the Act, of his desire to have the freehold because the identity of the person to be served with such notice cannot be ascertained. I shall designate the master who is concerned in this case as the person to execute the conveyance in favour of the applicant and I shall direct that the form of the conveyance be settled by the judge. The order will then proceed to declare that the estimated amount of the pecuniary rent payable for the property by the applicant as tenant thereof under the lease, as continued by s 3 of the Landlord the Tenant Act 1954, which remains unpaid and will remain unpaid up to 1 May 1970, is the sum of 1d. On the conveyance will be the date of 1 May 1970, as being a date by which I think it is reasonable to suppose that the form of conveyance will have reached its final stage and the conveyance will be ready for execution.
The order will then go on to provide that the applicant be at liberty, on or before 1 May 1970, to lodge in court, as directed by the schedule to the order, a sum of £705 0s 1d, being as to £705, the amount certified as provided by s 27(5) of the Act to be the price to be paid for the property, and 1d, the estimated amount of rent which will remain unpaid. The order will direct, in the schedule, that the sum so paid, be invested and accumulated, and that, on such lodgment, the master do execute the conveyance in favour of the applicant.
Order accordingly.
Solicitors: W A G Davidson & Co (for the applicant).
Richard J Soper Esq Barrister.
R v Merthyr Tydfil Licensing Justices, ex parte Duggan
[1970] 2 All ER 540
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 20 APRIL 1970
Licensing – Justices – Hearing of application for licence – Provisional licence – Full off-licence sought for supermarket – Supermarket in course of construction – Provisional licence only capable of being granted – Failure to specify in application that provisional licence sought – Whether necessary to apply specifically for provisional licence – Justices’ finding that application a nullity – Whether mandamus to justices lay – Licensing Act 1964, ss 1(3), 6(1), Sch 2, para 4(d) – Finance Act 1967, s 5, Sch 7, para 1.
The applicant, a director of a supermarket firm whose premises were in the course of construction, applied in advance for a justices’ off-licence. Under s 6(1)a of the Licensing Act 1964, any such licence, if granted, would have had to have been provisional. The application did not specifically ask for a provisional licence and the justices took the view that the omission made the application a nullity. On an application for an order of mandamus to the justices requiring them to hear and determine the application for the licence,
Held – The requirement of Sch 2, para 4(d)b, to the 1964 Act that an application for a new licence should state the kind of licence, referred merely to the general type of licence (eg as to the description of liquor to be supplied) as enumerated in s 1(3)c (see p 542 j and p 543 e and h, post); accordingly there was nothing in the provisions of the Act to make it mandatory that the application should state expressly that it was for a provisional licence (although it was certainly expedient that the application should make this clear), and an order of mandamus would issue (see p 542 h and j and p 543 d and h, post).
Notes
For application for provisional grant of a justices’ licence, see 22 Halsbury’s Laws (3rd Edn) 545, para 1078.
For the Licensing Act 1964, ss 1, 6, Sch 2, see 17 Halsbury’s Statutes (3rd Edn) 1059, 1065, 1230.
For the Finance Act 1967, s 5, Sch 7, see ibid 1258, 1261.
Cases cited in argument
R v Kingston-upon-Thames Confirming Authority, ex parte Scales [1933] 1 KB 535, [1932] All ER Rep 843.
R v Staffordshire Justices [1898] 2 QB 231, 62 JP 741.
Motion for mandamus
James Francis Duggan, a director of Tesco Supermarkets Ltd, moved for an order or mandamus that the licensing justices for the county borough of Merthyr Tydfil,
Page 541 of [1970] 2 All ER 540
hear an application made on 10 December 1969 for the grant of a full justices’ off-licence in respect of premises in the course of construction at the St Tydfil Shopping Centre (Unit 39), Merthyr Tydfil, Galmorgan. The grounds on which relief was sought were: (1) that on 5 January 1970 the licensing justices refused to hear an application by the applicant on the ground that the notice of application did not state in terms that the application was one for the provisional grant of a justices’ licence; and (2) that although the premises in respect of which the licence was sought were then in the course of construction and had not been completed the licensing justices were wrong in law, having regard to the provisions of ss 1, 3 and 6 of and Sch 2 to the Licensing Act 1964, in holding that it was a condition precedent to the hearing of the application by them that the notice of application should state that the provisional grant of such a justices’ licence was being sought. The facts are set out in the judgment of Lord Parker CJ.
H J Lloyd for the applicant.
The justices did not appear and were not represented.
20 April 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings, counsel for the applicant, James Francis Duggan, a director of Tesco Supermarkets Ltd, applies for an order of mandamus directed to the licensing justices for the county borough of Merthyr Tydfil, requiring them to hear and determine an application by the applicant for the grant of a justices’ full licence in respect of premises situated at St Tydfil Shopping Centre (Unit 39), Merthyr Tydfil in the county of Glamorgan, and intended to be known as Tesco, in accordance with an application made by him on 10 December 1969.
What has given rise to this application is that Tesco were building premises at Merthyr Tydfil and were minded to apply in advance before the construction was completed for an off-licence. The application was made on 10 December 1969. All the preliminaries by way of advertisement were complied with, and the matter came on for hearing on 5 January 1970. When it came on for hearing the justices took the point, no doubt advised by their clerk, that as the building had not been completed the application could not be for a final licence but only for a provisional licence, and that in form the application had not stated expressly that what was required was a provisional licence. In those circumstances, the justices came to the conclusion that the application was a nullity and they refused to consider it, intimating no doubt that the matter could be made the subject of a further application.
The Licensing Act 1964, by s 1d, deals with the grant of justices’ licences, justices’ on-licences and justices’ off-licences, and by sub-s (3) provides: ‘A justices’ licence shall be in such form as the Secretary of State may prescribe … ’ and, in the case of a justices’ off-licence, may authorise the sale of intoxicating liquor of all descriptions or of beer, cider and wine only. In other words, those are the kinds of off-licence that can be granted. The provisions for the manner of application are to be found in Sch 2, to which I must refer in a moment. The position when premises are not completed or are in the course of alteration is covered by s 6 which provides:
‘(1) Where licensing justices are satisfied, on application made by a person interested in any premises which are—(a) about to be constructed or in the course of construction for the purpose of being used as a house for the sale of intoxicating liquor (whether for consumption on or off the premises); or (b) about to be altered or extended or in the course of alteration or extension for that purpose (whether or not they are already used for that purpose); that the premises, if completed in accordance with plans deposited under this Act, would be such that they would have granted a justices’ on-licence or a justices’ off-licence for
Page 542 of [1970] 2 All ER 540
the premises, they may make a provisional grant of such a licence for those premises.
‘(2) [which may have given rise, in conjunction with the Schedule, to the decision of the justices] Any such application may be made either for the provisional grant of a new licence or for a provisional removal of a licence to the premises, and the grant may be made accordingly …
‘(5) If on an application for the provisional grant of a justices’ licence the applicant deposits, instead of plans of the premises, a plan sufficient to identify the site of the premises … [the subsection goes on to provide what may happen in regard to that].’
Schedule 2 which deals with applications for licences, whether what is to be granted is a definitive or a provisional licence, provides in paras 1 and 2 for advertisement, and so on, and in para 3 states that:
‘With the notice given under sub-paragraph (a) of paragraph 1 of this Schedule to the clerk to the licensing justices there shall be deposited a plan of the premises to be licensed, if the application is—(a) for the grant of a new justices’ on-licence or of an ordinary removal of a justices’ on-licence; or (b) for the provisional grant of a new justices’ off-licence or of an ordinary removal of a justices’ off-licence … ’
Paragraph 4 provides certain matters which must be done:
‘A notice under this Schedule—(a) shall be signed by the applicant or his authorised agent; (b) shall state the name and address of the applicant … (c) shall state the situation of the premises to be licensed … (d) [which is the subparagraph which may have influenced the justices here] in the case of a new licence, shall state the kind of licence for which application is to be made.’
Finally, the form set out in Paterson’s Licensing Actse, Form 12, is headed ‘Notice of application for provisional grant of a new justices’ licence or ordinary removal of a justices’ licence’, and in the main part it provides:
‘… I, A.B., now residing at … being a person interested in the premises … give notice that it is my intention to apply … for the provisional grant to me of … a justices’ licence … ’
No doubt the form and the wording of s 6(2) and (5) of the 1964 Act coupled with Sch 2, para 4, referring to the fact that the kind of licence applied for should be stated, led the justices to think that because the application here did not specifically say that what was applied for was a provisional licence, therefore it was a nullity and they could not embark on a consideration of it. In my judgment, one has only to read the statutory provisions here to make one realise that there is nothing which would make it mandatory—and failing which the notice is a nullity—that it should be stated that it is for a provisional licence. If the premises are not completed then all the justices can grant is a provisional licence, but there is nothing here in my judgment which makes it imperative that the application should state expressly that it is for a provisional licence. I would only add that if and insofar as Sch 2, para 4(d) was relied on, the kind of licence there referred to is in my judgment the kind of licence referred to in s 1(3) of the 1964 Act itself, namely the type or kind from the point of view of the description of liquor to be supplied.
Having said that, however, it does seem to me, as is stated in the note to Paterson’s Licensing Actsf, that it is certainly expedient that the application should make it clear that it is an application for a provisional licence. No doubt in a case such as the present, the police, the fire service, and others will realise that the premises
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are not completed and that accordingly all that can be granted is a provisional licence, but there may well be other cases where the form of application might mislead objectors. It can well be said, as was said here, that the fire service and the police should see the plans—and there is no statutory provision which provides for plans being sent to the police or the fire service. Indeed, what happened here was that the justices’ clerk suggested to the applicant that plans should be provided for that purpose. For some reason unknown, he failed to provide them, and to that extent the justices may well have got themselves into the present difficulty, but the fact that the police and the fire service have not seen the plans is clearly no ground for the justices refusing to enter on the hearing of the application. What no doubt they should have done was to commence the hearing, and if the police or the fire service complained that they had not seen the plans it would be open for the justices to adjourn the case so that plans could be provided. So far, however, as the strict position in law is concerned, the justices in my judgment were bound to entertain the application, and in those circumstances I would allow the order of mandamus to issue.
BRIDGE J. I agree, and I add a word only because we are differing from the view taken by the justices, and presumably their clerk, on the construction of the Act. As Lord Parker CJ has pointed out, the requirements of the statutory notice of application for justices’ licences are to be found in Sch 2, para 4, to the Licensing Act 1964. The only language from which, within those requirements, one might be able to extract a statutory requirement that the notice shall state whether the application is or is not for a provisional grant is the phrase in Sch 2, para 4 (d) ‘shall state the kind of licence of which application is to be made’. Like Lord Parker CJ, I feel no doubt that the words ‘kind of licence’ there are a reference to the different types of licence enumerated in s 1(3) of the 1964 Act. An application for a provisional grant of, say, a full justices’ on-licence is still an application for the same kind of licence as an application for a definitive grant of a full justices’ on-licence. But if I felt any doubt as to that being the proper construction of the language itself, I should resolve that doubt in the same sense for this reason: under s 6 of the Act an application may be made not only for a provisional grant of a new licence, but also for a provisional removal of an existing licence, to premises which are to be constructed or in the course of construction. Now when one comes to the notice requirements in Sch 2, para 4, and reaches para 4 (d), para 4 (d) only applies in the case of an application for a new licence. If, therefore, the justices’ view of the construction of these provisions were right, it would throw up what to my mind would be the absurd anomaly that the public and the various persons for whose benefit these notices are required to be given would have to be informed in the case of an application for a new licence that the application was for a provisional grant but would not have to be so informed in the case of an application for a provisional removal. For those reasons, I agree that mandamus should go.
BEAN J. I agree with both of the judgments delivered by Lord Parker CJ and Bridge J.
Order for mandamus.
Solicitors: Hextall, Erskine & Co, agents for Cartwright, Taylor & Corpe, Bristol (for the applicant).
N P Metcalfe Esq Barrister.
Morgan v Odhams Press Ltd and another
[1970] 2 All ER 544
Categories: TORTS; Defamation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE LJ AND SIR GORDON WILLMER
Hearing Date(s): 17, 18, 19, 20 FEBRUARY 1970
Libel – Innuendo – Article in newspaper – Nothing in article itself pointing to plaintiff – Inference that article referred to plaintiff based on extrinsic evidence – Whether article could constitute libel on plaintiff.
Libel – Innuendo – Interlocutory decision – Particulars – Particulars of plaintiff’s claim relied on to show that words complained of referred to him – Interlocutory application to strike out particulars of claim – Decision of Court of Appeal that particulars should not be struck out as claim arguable – Whether trial judge bound by reason of decision to leave case to jury – Duty of trial judge after hearing argument and evidence to rule whether words reasonably capable of being understood to refer to plaintiff.
The second defendant wrote, and the first defendant published on 8 November 1965, a newspaper article which stated: ‘A girl who is likely to be a key witness in a dog-doping scandal went into hiding yesterday after threats were made on her life. [M] left her lodgings in Elsham Road, Shepherds Bush, accompanied by two men … [M] … was kidnapped last week by members of the gang when they heard she had made a statement to the police. She was kept at a house in Finchley but was eventually allowed to leave … ’ No one was mentioned by name in the article except M. The plaintiff, in whose flat at Willesden M had stayed from 26 October to 1 November 1965, brought proceedings for libel against the defendants. In interlocutory proceedings the defendants sought to have struck out the plaintiff’s amended particulars in his statement of claim on which he relied to show that the words in the article relating to doping and kidnapping referred to him. The Court of Appeal refused to strike them out, stating that it was arguable that, if the amended particulars were proved, the words were reasonably capable of being understood to refer to the plaintiff. At the trial six men who had seen the plaintiff with M on 28 October 1965 gave evidence that they thought that the article of 8 November referred to the plaintiff. The witnesses knew that the date at which they had seen M with the plaintiff was before the week in which she was alleged to have been kidnapped, that the plaintiff’s flat was at Willesden and not Finchley, and that she had been going about freely with him when they had seen her. The trial judge ruled that, in view of the refusal of the Court of Appeal to strike out the particulars in the statement of claim he was bound to regard the case as being arguable and to allow the case to go to the jury. The jury awarded damages to the plaintiff. The defendants appealed.
Held – The judge ought to have withdrawn the case from the jury and given judgment for the defendants, because—
(i) all that the Court of Appeal had decided was that on the pleadings the plaintiff’s claim was arguable, leaving the point to be argued out fully before the trial judge on the evidence as it was given before him; it was for the trial judge to rule after hearing the argument and evidence whether the words complained of were or were not reasonably capable of being understood to refer to the plaintiff (see p 547 j, p 550 j, and p 552 j to p 553 b, post);
(ii) the words complained of were not defamatory of the plaintiff since—
(a) no person knowing what each of the six witnesses would have known and reading the article with care would have reasonably understood the words complained of to refer to the plaintiff or could have reasonably understood the plaintiff to be a
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kidnapper or involved in dog doping (see p 548 j, p 552 d and p 554 c, post); and
(b) libel being an action for words the defamation must be found in the words themselves and not in the facts extrinsic to them; it might be express or implied; but whichever it was, there must be something in the words themselves which pointed to the plaintiff and was defamatory of him (see p 548 j to p 549 a, p 550 d, p 552 g and p 553 d, post).
Astaire v Campling [1965] 3 All ER 666 followed.
Cassidy v Daily Mirror Newspapers Ltd [1929] All ER Rep 117 and Hough v London Express Newspaper Ltd [1940] 3 All ER 31 distinguished.
Per Lord Denning MR. The two cases of Cassidy v Daily Mirror Newspapers Ltda and Hough v London Express Newspaper Ltdb were … very special. They may perhaps be explained by the relationship of husband and wife. A reference to a man may include his wife also. At any rate they no application here (see p 550 e, post).
Notes
For reference to the plaintiff in action for libel, see 24 Halsbury’s Laws (3rd Edn) 17–19, paras 37, 38.
Cases referred to in judgment
Astaire v Campling [1965] 3 All ER 666, [1966] 1 WLR 34, Digest (Cont Vol B) 490, 969a.
Bourke v Warren (1826) 2 C & P 307, 32 Digest (Repl) 18, 82.
Cassidy v Daily Mirror Newspapers Ltd [1929] 2 KB 331, [1929] All ER Rep 117, 98 LJKB 995, 141 LT 404, 32 Digest (Repl) 67, 898.
Hough v London Express Newspaper Ltd [1940] 3 All ER 31, [1940] 2 KB 507, 109 LJKB 524, 163 LT 162, 32 Digest (Repl) 69, 921.
Cases also cited
Bruce v Odhams Press Ltd [1936] 1 All ER 287, [1936] 1 KB 697.
Hulton (E) & Co v Jones [1910] AC 20, [1908–10] All ER Rep 29.
Lewis v Daily Telegraph Ltd [1963] 2 All ER 151 [1969] AC 224.
Van Ingen v Mail & Express Publishing Co (1898) 156 NY 376.
Appeal
This was an appeal by the defendants, Odhams Press Ltd and Peter Campling, from a judgment and verdict of O’Connor J and a jury given on 12 May 1969 by which the plaintiff, Johnny Morgan, was awarded damages in respect of statements contained in an article contained in The Sun of 8 November 1965, written by the defendant, Peter Campling and published by the defendants, Odhams Press Ltd. The facts are set out in the judgment of Lord Denning MR.
Sir Joseph Molony QC and H M Davidson for the defendant.
Colin Duncan QC and R L C Hartley for the plaintiff.
20 February 1970. The following judgments were delivered.
LORD DENNING MR. Mr Johnny Morgan, the plaintiff, brings a libel action against the defendants, Odhams Press Ltd, who were the publishers at the material time of The Sun newspaper, and Peter Campling, who was journalist who wrote an article in it.
In the spring of 1965, a girl called Margo Murray came under the notice of a journalist called Michael Gabbert, who worked for The People. The People newspaper is also published by the defendants, Odhams Press Ltd. Miss Murray had
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come from Canada and was employed as a kennel maid at a greyhound stadium. She told Mr Gabbert that she used to ‘dope’ dogs with drugs so as to make them run slow or fast. She said that she did 20 dogs in one day. But she came under the notice not only of the journalist, but of the police as well, and a detective inspector Peter Segrou took charge of the police enquiries. She made a statement to the police. In consequence, it was decided to prosecute a gang of men who were supposed to be behind this dog doping. One in particular was called Peter Hubbard, and another Ronald Maxwell. Miss Murray was to be a witness for the prosecution. Those about her realised that, if it was discovered that she was to be a witness for the prosecution, she might be in danger from members of the gang. She might be kidnapped or ‘got at’ in some way. So the journalist, Mr Gabbert, arranged for her accommodation. He found her a room in Elsham Road, Shepherds Bush. He paid the rent of the room and gave her a little pocket money, and did all he could to see that she was not approached by members of the gang. He had someone stationed at her house for hours on end. He did this with the approval of the police. About Tuesday 26 October 1965, however, Miss Murray left the house in Elsham Road, Shepherds Bush, and Mr Gabbert lost her. She telephoned him two or three days later, and he met her in a cafe; but she did not come back then. She was away for six days. He found her again on Monday 1 November 1965. He took her once more under his care. He found her fresh accommodation, and moved her from place to place all over the country. She was an important witness for the prosecution, and he did not want to lose her. The expenses were borne in part out of public funds. In May 1966, two of the members of the gang, Peter Hubbard and Ronald Maxwell, were prosecuted at the Old Bailey. Miss Murray gave evidence for the prosecution. They were convicted and sentenced each to five years’ imprisonment. Miss Murray went back to Canada. That is the end of the story so far as she is concerned.
It is obvious why the journalist, Mr Gabbert, took all this interest in the girl. He wanted to get a story for his newspaper. In the midst of all those happenings, he thought that he had collected enough material. So he wrote an article for The People. It appeared on Sunday 7 November 1965. It was blazoned with headings and filled the front page and inside pages too. It was headed:
‘Dog Racing Sensation. We name the dopers. These men boss the gang. By Michael Gabbert.
‘Today we are able to unmask the most highly-organised gang of dog dopers in the history of British Greyhound Racing.’
Later on in the article he named some of the gang, in particular Peter Hubbard and Ronald Maxwell. On one of the inside pages there was a photograph of a woman with a dog. It was not a clear photograph. It would be difficult to recognise who it was. Above it there was the caption: ‘Once I did twenty dogs in one day]’; and underneath it the words: ‘Margaret Murray: she was worked into the Walthamstow Kennels via the Labour Exchange.’
No one complained of that article in The People. But the next day, Monday 8 November 1965, The Sun published the article complained of. The plaintiff says that it is a libel against him. He is not named in it. But he says that it bears an innuendo against him. This is it:
‘DOG-DOPING GIRL GOES INTO HIDING
By Peter Campling
‘A girl who is likely to be a key witness in a dog-doping scandal went into hiding yesterday after threats were made on her life.
‘Margo Murray left her lodgings in Elsham Road, Shepherds Bush, accompanied by two men.
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‘It is estimated that the doping gangs have made more than £250,000 in the last few months with coups all over the country. They are known to have operated at tracks in Ramsgate, Slough, Reading and the Midlands.
‘Many arrests are expected in the next few weeks.
‘Miss Murray, a 25–year-old Canadian, was kidnapped last week by members of the gang when they heard she had made a statement to police.
‘She was kept in a house in Finchley, but was eventually allowed to leave when she promised that she would return to Canada.
‘Before she went into hiding following an exposure of the doping gang in The People yesterday, Miss Murray said: “I told the police everything. The gang got me to dope more than twenty dogs at Walthamstow one night.”
‘Scotland Yard’s Flying Squad went to several houses, in the Hammersmith, Kilburn and Finchley areas.’
That is the article which the plaintiff says is a libel on him. There is one further article to which I must refer. It appeared on the following Sunday 14 November, in The People, but it is not complained of as a libel. It is only material here because it mentions a man called Colin Donelan. The People gave a photograph of Mr Donelan, and with it the statement:
‘Colin Donelan showed The People investigators how he could collect drugs suitable for doping dogs from a willing chemist … Donelan admitted to The People that he was a close associate of Hubbard, and other dog dopers.’
It appeared from the evidence that Mr Donelan had a long criminal record with many convictions for dishonesty. He was described as the ‘local villain’.
There is no mention in any of those articles of the plaintiff. So let met turn to him. He has had a varied career. He has been a boxer and a wrestler. He retired from wrestling in 1964 and became a novelist. He has written books. Early in 1965 he was in touch with the defendants. He wished to write about his experiences on cruises. In this connection he met Mr Gabbert of The People. The plaintiff had also met Mr Donelan. He had bought a car through him, and knew something of his character. The plaintiff suggested to Mr Gabbert that it might be possible to get material from Mr Donelan for an article on prison security.
Such is the background. Now I turn to the point in the case. Were the words in The Sun reasonably capable of being understood to refer to the plaintiff? There was no reference to him in the article itself so the plaintiff had to rely on extrinsic circumstances. The plaintiff in his statement of claim gave particulars of the facts and matter on which he relied to show that the words were understood to refer to him. The first group of particulars were held by this court to be insufficient for the purpose. He then delivered amended particulars. These came up again to this court. It was held that these amended particulars should not be struck out. It was arguable, said the court, that, if those amended particulars were proved, the words were reasonably capable of being understood to refer to the plaintiff. The case went for trial. At the trial O’Connor J seems to have thought that, on the second interlocutory appeal, this court had ruled that the words were so capable, and that he was bound by the decision of this court to leave the case to the jury. I am afraid that he misunderstood the ruling of this court. All that it decided was that it was ‘arguable’, leaving the point to be argued out fully before the judge on the evidence as it was given before him. So the judge ought to have ruled himself whether the words were so capable or not. We should have liked to have had his own opinion on it, but we have not the benefit of it. So we have to take the task on ourselves. We have to see whether, in the light of all the evidence, the words were, or were not, reasonably capable of being understood to refer to the plaintiff.
These facts were proved in evidence: on Tuesday 26 October 1965, the plaintiff fetched Miss Murray from her lodging in Elsham Road, Shepherds Bush; she went
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with him to his flat at 5 Heathfield Park, Willesden, and stayed in the flat from 26 October to 1 November, sleeping there at night and going out with him in the daytime. None of that helps his case, because up to that point no one else knew of it. So the plaintiff relies on the events of Thursday 28 October, when six men saw him in the company of Miss Murray. These six men were called as witnesses, and said that they understood the words in The Sun to refer to the plaintiff. So I must describe what happened on that day.
On that day, 28 October, the plaintiff was lunching in the El Rio restaurant in Walm Lane, Willesden, with Miss Murray and Mr Donelan. In came the first of the six. He was Mr Peter Wood, a detective constable. The plaintiff introduced the girl to him, and she told him the story about the dog doping. As she told it, she was crying and dabbing her eyes with her handkerchief. Then came up the second of the six. He was Mr Young, the manager of the restaurant. He came over and asked if he could do anything for the young lady. A little later the detective went out into the street and stopped a car in which the third of the six was driving. He was Sgt Horne, a sergeant of police. They arranged to meet, with the girl, in about half-an-hour, in the plaintiff’s flat. It was quite close. The party then left the restaurant. As they were leaving they were seen by the fourth of the six. He was a Mr Martin, who kept a barber’s shop opposite. They went to the plaintiff’s flat. There the girl repeated her story to Sgt Horne. She was very distressed; she sobbed and seemed to be very frightened. The plaintiff asked the sergeant whether it was wise for her to stay in the flat. The police sergeant said that he saw no reason why she should not do so. Whilst they were talking, the fifth of the six came to the flat. He was Mr Baker, who had been a policeman, but was now the licensee of a public house, The White Horse. He saw Miss Murray crying and dabbing her eyes with a handkerchief. Then there came in the sixth of the six. He was the landlord, Mr Reed. He saw that the girl was very distressed. Eventually they all left and the plaintiff took Miss Murray out to dinner.
Those six men all gave evidence. They said that they read the article in The Sun and thought that it referred to the plaintiff. Most of them said that they thought that it meant that he was involved in the kidnapping. But one or two of them realised that that was rubbish; they knew she was not kidnapped, because there she was openly going about freely.
Whatever they thought, the question is: could these words reasonably be understood to refer to the plaintiff when he was not mentioned at all? In answering this question, we must, I think, envisage a person who reads the article with care, and knew all the facts which these six men had. No such person could reasonably understand the article to refer to the plaintiff. Take the first phrase of the article on 8 November 1965: ‘… [she] went into hiding yesterday.' That would mean that she went into hiding on 7 November. Then a little further on: ‘Miss Murray … was kidnapped last week by members of the gang.' In that phrase ‘last week’ would be the week of 1 to 7 November. These six men had seen her in the previous week, between 26 October and 1 November, with the plaintiff, going about openly with him, so that they knew that she was not kidnapped in that week while in the plaintiff’s company. Then the article states: ‘She was kept in a house in Finchley.' That could not refer to the plaintiff’s house. He has a flat at 5 Heathfield Park, Willesden, which is three miles away from Finchley. I do not think that anyone reading this article with care could reasonably have understood that the plaintiff was being accused of being a kidnapper, or being involved in dog doping. If a reader jumped to the conclusion that he was, it was quite unreasonable so to do. The judge ought to have ruled that this article was not capable of reasonably being understood to refer to the plaintiff. He ought to have withdrawn it from the jury and given judgment for the defendants.
There is, moreover, another ground on which the judge ought to have withdrawn
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the case from the jury, and that is on a principle which was first stated in Astaire v Campling. It is a fundamental principle and comes to this: libel is an action for words. The defamation must, therefore, be found in the words themselves and not in facts extrinsic to them. It may be expressed or implied; but, whichever it is, there must be something in the words themselves which points to the plaintiff and is defamatory of him. Some readers may draw adverse conclusions from the words—when combined with other facts known to them—but that it not sufficient by itself. Diplock LJ expressed the principle in these words ([1965] 3 All ER at 668, 669, [1966] 1 WLR at 44):
‘… the statement must itself contain, whether expressly or by implication, a statement of fact or expression of opinion which would lower the plaintiff in the estimation of a reasonable reader who had knowledge of such other facts, not contained in the statement, as the reader might reasonably be expected to possess.’
Diplock LJ made that statement with regard to the issue whether the words were, or were not, capable of being understood as being defamatory of the plaintiff. I think that the same principle applies to the issue whether the words are, or are not, capable of being understood to refer to the plaintiff. There must be some key or pointer in the article itself indicating that it refers to the plaintiff. If the reader draws his adverse conclusion from other facts, and not from the words complained of, then it is no libel. In Astaire v Campling, the disparaging statements were contained, not in the article complained of, but in other publications. It was held to be no libel. In Bourke v Warren, two of the witnesses drew their inferences, not from anything in the words, but from another source. Abbott CJ told the jury to put their evidence on one side.
The only cases, of which I know which are inconsistent with this principle are Cassidy v Daily Mirror Newspapers Ltd and Hough v London Express Newspaper Ltd, which followed it. In Cassidy’s case, the Daily Mirror published a photograph of ‘Mr M. Corrigan [a name used by Mr Cassidy], the racehorse owner, and Miss [X], whose engagement has been announced’. Thereupon the true Mrs Cassidy brought a libel action alleging that it meant that she had been living with Mr Cassidy as his mistress. The majority of the court held that it was capable of that meaning. Greer LJ dissented. He stated the principle in these words ([1929] 2 KB at 344, [1929] All ER Rep at 122):
‘… it is not sufficient to establish liability for a witness to prove that by reason of some fact to which the libel refers he draws an unfavourable inference against the plaintiff. That is not sufficient to justify a verdict that the words … are libellous. The jury must be satisfied by evidence that, on a reasonable interpretation of the words used, the innuendo is proved to be an implicit part of the statement made by the defendants.’
On that principle (which is a foretaste of that stated by Diplock LJ), Greer LJ would have rejected Mrs Cassidy’s claim. There was nothing in the words themselves which pointed to her. The readers drew their adverse inference, not from anything in the words, but from other facts known to them. In Hough’s case ([1940] 3 All ER at 35, 36, [1940] 2 KB at 516) Goddard LJ intimated that he agreed with Greer LJ. So do I.
Some illustrations of the principle were given in the argument before us. Suppose a newspaper publishes the words: ‘John Smith was murdered in his bed last night.' A neighbour reads it and says to himself: ‘I saw Brown leaving Smith’s house at
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3.00 am with a gun in his hand. It must have been Brown who murdered John Smith.' That does not give Brown an action for libel against the newspaper. The reason is because there was nothing in the words to point to Brown. The neighbour drew his inference not from anything in the words themselves, but from other facts known to him. In order to be a libel, there must be something in the words themselves to point to the plaintiff. Suppose the newspaper published the words: ‘John Smith was murdered last night by the man who lived next door to him.' Evidence could be given by readers that Brown lived next door and they inferred that it was Brown who committed the murder. In that case Brown would have an action for libel. So here when the newspaper said: ‘Miss Murray was kidnapped last week’, that does not give rise to a libel action by anyone who was seen out walking with her last week. To be a libel, there must be some key or pointer in the words themselves which indicates the plaintiff, such as, ‘she was kidnapped by a man who took her out to lunch at the El Rio restaurant’, and then evidence to show that readers knew that the plaintiff was that man.
In my opinion, therefore, in order to be actionable at the suit of a plaintiff, there must be something in the words themselves which point to him. There must be some words, some initials, some asterisks, some reference or other to him, such that the pleader can insert in these days, as he always did in the old days, the key words in brackets ‘(meaning thereby the plaintiff).’ The statement of claim in this case did not contain any such words.
The two cases of Cassidy and Hough were, as counsel for the defendant said, very special. They may perhaps be explained by the relationship between husband and wife. A reference to a man may include his wife also. At any rate, they have no application here. Disregarding those two cases, and applying the general principle, it is plain that the six men in this case came to their conclusion (that the article referred to the plaintiff), not from anything in the article itself, but from the facts and circumstances known to them of 28 October, the day when the plaintiff took Miss Murray out to lunch. That does not give him an action for libel. To be a libel, the words themselves must point to the plaintiff.
In my opinion the verdict cannot stand for two reasons: first, the words were not reasonably capable of being understood to refer to the plaintiff, secondly, there was no key or pointer in the article itself which indicated that it referred to him.
I would, therefore, allow the appeal, set aside the verdict, and give judgment for the defendants.
PHILLIMORE LJ. I agree. When the plaintiff’s case ended at the trial, counsel for the defendants invited the learned judge to withdraw the case from the jury on the ground that there was no evidence on which it could reasonably be said that this plaintiff was libelled by this article. Counsel for the plaintiff submitted to the learned judge that he was bound by the previous decision of the Court of Appeal which had refused in July 1967, to strike out the vital paragraphs in the statement of claim. The learned judge accepted that submission and ruled that he was bound to regard the case as being arguable and accordingly it must go on and must go to the jury. In my judgment he was wrong in so deciding. This court refused to strike out these vital passages in the statement of claim because, of course, it is well established that the court will only take that course where it is clear that the matter to be struck out is frivolous or vexatious or an abuse of the process of the court. Unless this is absolutely plain, the case is allowed to go forward; but, of course, at the conclusion of the plaintiff’s case the question of what had been shown did not depend on what was contained in the particulars of the statement of claim; it depended on the evidence, as indeed Salmon LJ indicated when he gave the leading judgment in July
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1967. He said then that all the court was concerned with at that stage was whether it was arguable that the words could be understood to refer to the plaintiff. He said: ‘Much will depend upon the evidence.’
Now, what was the evidence? It showed this background—the immediate background to the article which appeared in The Sun on 8 November. Apparently the plaintiff had driven to the lodgings of Miss Murray in Shepherds Bush on 26 October and he had then driven her to his flatlet in Heathfield Park, which is in Willesden Green; and she had remained there with him until 1 November, during which time, as Lord Denning MR has already described, she had been out to shops and restaurants with him; she had met police officers—senior police officers; Sgt Horne had been to the flatlet and had heard her description of what she had done in the course of doping these dogs. She had been seen, of course, by a number of people who knew the plaintiff in his company, not only in these restaurants and shops, but in the street also. On Monday 1 November, she left the plaintiff’s flatlet. In fact, as was subsequently established, Mr Gabbert, having found out where she was, had persuaded her to accompany him, and he had then taken her to an address where she was kept away from anyone who had been connected with this dog doping until she came to give her evidence in the court. It does not fit very well with the description in the article to the effect that she left her lodgings at Shepherds Bush ‘yesterday’ after a threat made against her life and in company with two men. It does not fit very well with her having been kidnapped ‘last week’, that is to say, between 1 November and Sunday 7 November, when the article appeared in The People, and ‘kept in a house in Finchley’. Indeed if that allegation or statement was read carefully, it would seem to suggest that her disappearance from the plaintiff’s flatlet was because she had been kidnapped by the gang; and, far from pointing to him as a member of the gang, it pointed in exactly the opposite direction. And what did the witnesses say—the six important witnesses? Their evidence as to what they thought the article meant can be summarised very briefly. First of all, detective constable Wood said that he concluded that the two men referred to as having accompanied Miss Murray when she left her lodgings at Shepherds Bush were the plaintiff and Mr Donelan. He thought from the article that the plaintiff was involved in dog doping, but he paid no attention to the suggestion of kidnapping. Sgt Horne, on the contrary, said that when he read the article he was convinced that in substance it referred to the plaintiff—that he thought that the phrase ‘kidnapped’ referred to action taken by him. He in fact thought that the allegation of kidnapping was rubbish, because, of course, he had seen Miss Murray while she was living in the plaintiff’s flatlet and seen her in his company. Mr Baker, who had formerly been in the CID, but who was at this time the licensee of The White Horse, said that he thought that the reference to the two men referred to the plaintiff and Mr Donelan. I pause to comment: suppose it did—there does not seem to be anything defamatory of either of the two men in accompanying Miss Murray when she wanted to leave her lodgings, as it was said she did, after receiving threats against her life. One would think just the reverse; it was creditable conduct. Mr Baker said that he thought that the two men were intended to be ‘baddies’, that is to say, bad men. He agreed that it read as though the two men were taking a protective measure, and when he was cross-examined, he eventually agreed that it did not suggest anything discreditable of either of them. Well, then there was Mr Martin, who ran the barber’s shop opposite the El Rio restaurant. He read the article. He said that he had no doubt that it referred to the plaintiff. When asked why he thought that, he said ‘Because I had seen him with this girl’. He said that he was convinced that the whole lot—the whole article—referred to him; and then said ‘I thought he was involved somewhere—involved in kidnapping and dog doping’.
Mr Young, the proprietor of the restaurant El Rio, said that when he read it he wondered if the plaintiff was involved in it. Presumably that meant dog doping and kidnapping. When he was asked why he thought that, he said from the fact
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that he had seen him at his restaurant with Miss Murray. He said: ‘I thought the whole thing reflected on him. I wondered whether he had got her in hiding.' He said that he did not get the impression that Miss Murray when with him had been there against her will; but he did think from the article that the plaintiff must be involved in the doping; he had done something; he had been involved in some way in some devious matter. And finally, Mr Reed, who ran the toy shop nearby and was also the landlord of the plaintiff in Heathfield Park, said that immediately he read the article he thought that it referred to the plaintiff. What made him think so was the bit about the flying squad raiding houses in Kilburn and Finchley. Well, again it was said that the flying squad had raided these houses yesterday, that is to say, on 7 November. He said that the police were there, that is at the plaintiff’s flatlet, on 8 November for rather a long time; and he thought—this again was the real substance of it—that it was rather strange that the plaintiff should be associating with Miss Murray, and he wondered what he was doing.
Now, there they are. Those are their reasons—all rather different. Some thought that the article suggested that he was a member of the gang; some that he was a kidnapper; some that he was one of the two men. In my judgment, if it is to be said that a person has drawn a reasonable inference from an article such as this, he must at least read it with reasonable care. The reference to Miss Murray leaving her lodgings on Sunday 7 November, did not in any way fit with the knowledge of these witnesses of her association with the plaintiff during not the previous week but the week before that. And anyhow, as Mr Baker for one ultimately admitted, the words clearly were not defamatory of the two men; they were doing something that was creditable. Again as I have already said, reference to kidnapping ‘last week’ did not point to the plaintiff; it pointed away from him. And so in my judgment it cannot be said that the inferences that these witnesses drew to the effect that this article was defamatory of the plaintiff were reasonable. They were not reasonable at all. They could only be drawn if the article was read without any care whatever. Of course, the only matter that the article added to what had already been said in The People, or was to be said subsequently, was this suggestion of kidnapping, and there, as I have indicated, only one of the witnesses was really saying that he thought that that was what the article said the plaintiff had done. That was Sgt Horne, and he was saying he regarded it as rubbish, and indeed he knew it was, having seen the circumstances in which Miss Murray was staying with the plaintiff. I would agree with Lord Denning MR that there must be something in the article which pointed to the plaintiff. He was not named; there was no description; and the truth of the matter is that these witnesses merely thought that he might in some way be referred to because they had seen him associating with Miss Murray, and now that they knew she was a dog doper, they were in effect saying to themselves: ‘Well, there is no smoke without fire, and he would not be associating with her unless he had got something to do with dog doping.’
In my judgment, for these reasons this appeal must be allowed.
SIR GORDON WILLMER. After a certain amount of vacillation, I have come to the same conclusion. The main ground of appeal is that the learned judge ought never to have allowed this case to go to the jury at all. Insofar as he did so because he held himself bound by the decision of the Court of Appeal on 7 July 1967, I am satisfied that he fell into error, and this point at least is one about which I have not any doubt whatever. I reach that conclusion for two reasons. First, I think that we must have regard to what was actually said by Salmon LJ, who gave the leading judgment. What he then said was that ‘it is arguable that a jury could come to the conclusion’ that the article referred to the plaintiff. He said substantially the same thing again later in his judgment. It seems to me quite plain that what Salmon LJ meant was that it was arguable that the article complained of was capable of being defamatory of the plaintiff; but it remained, as I understand his judgment, a point
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to be argued, and after such argument it would be for the trial judge to rule whether or not the words were capable of bearing a meaning defamatory of the plaintiff. That is one reason why I say that the learned judge was plainly in error. My other reason is that by the time the learned judge came to rule the case had passed beyond the stage of mere pleadings and particulars, which was the state in which it was in 1967. Copious evidence had been given on behalf of the plaintiff and it was the duty of the judge to rule on the question, having regard to all the evidence which had been given up to date, that is to say, on the case as it stood at the moment. It was nihil ad rem to say that, on the particulars which had been delivered up to 1967, the Court of Appeal had come to this or that conclusion. That being so, it seems to me that it is now wide open for this court to reconsider the question whether, on the case as it stood at the conclusion of the plaintiff’s evidence, it ought to have been ruled that there was a case to go to the jury. To that question I now address myself.
As has been observed by Lord Denning MR and Phillimore LJ, the article complained of nowhere mentions the plaintiff by name. Nor does it contain any material which would enable readers to identify the plaintiff by description. Indeed the only person who is named in the part of the article complained of is the girl, Miss Murray; and there is nothing in the article itself to connect the plaintiff in any way with her. I accept the submission that before ruling that the words are capable of referring to the plaintiff, the court must be satisfied that there is something in the article itself to serve as a peg on which to hang the alleged identification of the plaintiff as the person referred to—something, in other words, which expressly or by implication points to the plaintiff. I do not enlarge on this point because I find myself wholly in agreement with what has been said by Lord Denning MR. I only add that any such peg or pointer is conspicuously absent from the article in The Sun which is now under consideration. The plaintiff’s case was that he was identified as the person referred to in the article by reference to the evidence of the six witnesses who were called, who spoke to their observation of his association with Miss Murray, over a period of days during the last week of October 1965. As has been pointed out by Lord Denning MR most of their evidence related to what took place on Thursday 28 October, the day on which the plaintiff and Miss Murray, in the presence of most of the witnesses concerned, were lunching in the El Rio restaurant. It is not in dispute, and never has been in dispute, that during the last week of October, and indeed for a period of about six days, Miss Murray was actually residing with the plaintiff in his flat in Willesden Green, and was openly going about with him. She was seen with him in restaurants, in shops and in the street. There was no secret about their association. Insofar as the witnesses sought to connect the plaintiff with the article in The Sun, it would seem to me that what they were relying on was nothing more than their own observation of the fact that the plaintiff was associating with Miss Murray. It is not to be forgotten that the story about Miss Murray had broken only on the previous day, as the result of an article in The People, which identified her both by name and by a photograph, as having been involved in the dog-doping gang. Perhaps therefore it was not unnatural for people living in Willesden Green, who had seen the plaintiff openly associating with Miss Murray during those last days of October, to form the view that the plaintiff had something to do with the doping gang. But at first sight, it would not seem that anything contained in the article in The Sun—the article complained of—added anything to assist them in arriving at that conclusion.
When, however, I put that very point to learned junior counsel for the plaintiff in the course of his very helpful argument, he replied that the thing which the article in The Sun added to the previous fund of knowledge was the allegation that Miss Murray had been kidnapped. That, it was said, was a direct pointer to the plaintiff, who had over this period of six days or so been seen to be associating with Miss Murray. That is a point which I confess has caused me some difficulty. The question is whether 12 reasonable jurymen, reading the article in The Sun, could properly come to the conclusion that the plaintiff was a party to the alleged kidnapping, and
Page 554 of [1970] 2 All ER 544
therefore presumably a person who was himself mixed up in some way with the doping gang. No doubt that question has to be viewed against a background of knowledge that the plaintiff was associating during the last week of October, and associating very closely and quite openly, with Miss Murray. There is, however, no evidence of any continuing association after 1 November.
That being so I turn to examine what is actually said in the article in The Sun about the alleged kidnapping. The article was published on Monday 8 November, and it alleged: ‘Miss Murray … was kidnapped last week by members of the gang when they heard she had made a statement to the police.' It alleged that she was kept in a house in Finchley. For reasons which have already been fully stated by Phillimore LJ, it seems to me that the allegations in the article just do not fit with what is now known to the court, and was known to the six witnesses called, with regard to the movements of the plaintiff. Reference to the kidnapping ‘last week’ could not be a reference to the fact of Miss Murray living with the plaintiff during the week previous to that, namely, the last week of October. Nor would the conditions under which she was then seen to be associating with the plaintiff be in any way consistent with any suggestion that she had been kidnapped. But in any case, it is the wrong period of time that is referred to. Equally, the reference to Finchley points away from the plaintiff rather than towards him. The plaintiff had no connection with Finchley, which is quite remote from Willesden. It has never been suggested that the plaintiff ever had any association with Finchley. It is certainly never suggested that he had a house there. I am disposed in the end to agree with the view expressed by Phillimore LJ that, having regard to the period when it was said that Miss Murray was kidnapped, the article points away from the plaintiff rather than towards him. It looks more like an allegation that she was kidnapped and taken away from the plaintiff, with whom previously she had been quite openly and legitimately associating. On the whole, therefore, although as I have said, not without some hesitation, I have come to the conclusion that there really was no case to go to the jury. Accordingly I agree that this appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords refused.
On 28 April, the appeal committee of the House of Lords granted the petition for leave to appeal.
Solicitors: Simmons & Simmons (for the defendants); Oswald Hickson, Collier & Co (for the plaintiff).
G R A Argles Esq Barrister.
Re Remnant’s Settlement Trusts
Hooper and another v Wenhasten and others
[1970] 2 All ER 554
Categories: TRUSTS
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 8 APRIL 1970
Trust and trustee – Variation of trusts by the court – ‘Benefit’ – Not restricted to financial, educational and social benefit – Forfeiture clause – Forfeiture on practising Roman Catholic faith – Variation of Trusts Act 1958, s 1(1).
Trust and trustee – Variation of trusts by the Court – Fair and proper – Defeat of testator’s intentions not conclusive that arrangement not fair and proper.
The testator R who died in January 1968 made provision under his will and codicil for his two daughters D and M and their children by means of a residuary trust fund. The children of R’s nephew and of R’s niece were beneficiaries under an ultimate default trust. The trust fund was of approximately £62,000 and was held in two unequal shares, five-eighths as to D and three-eighths as to M. D and M enjoyed the income of their respective shares during their individual lives. Thereafter the
Page 555 of [1970] 2 All ER 554
capital and income was held on trust for their children. By a forfeiture clause any of R’s grandchildren ‘practising Roman Catholicism’ at or after their mother’s death (depending on their age at that time) forfeited their share. D’s children had a real and substantial chance of taking the whole of M’s children’s share under the forfeiture provisions. The parties sought the court’s assistance under the Variation of Trusts Act 1958 to vary the terms of the residuary and default trusts by deleting the forfeiture clause, and by advancing the interests of the children of D and M in two sums of approximately £10,000 set aside equally out of D’s share and M’s share. In addition the sum of £1,000 was provided equally by D and M for the benefit of the children of R’s nephew and niece who were beneficiaries under the default trust. On the question whether the proposed arrangement was for the ‘benefit’ of the infant children and unborn children and whether the arrangement was a fair and proper one.
Held – (i) A broad view should be taken of what is meant by ‘benefit’ in s 1(1)a of the Variation of Trusts Act 1958, and the interpretation of the word should not be restricted merely to financial, educational and social benefit but benefit of any other kind (see p 559 d and e, post).
Dictum of Lord Denning MR in Re Western’s Settlements [1968] 3 All ER at 342 explained.
(ii) A court may approve an arrangement for a variation of a trust which defeats the intention of the testator provided that the arrangement is for the benefit of the beneficiaries and is a fair and proper one to make (see p 559 h and j, post).
Notes
For variation of trusts by the court, see 38 Halsbury’s Laws (3rd Edn) 1029, 1030, para 1772, and for cases on the subject, see 47 Digest (Repl) 332–338, 2993–3018.
For the Variation of Trusts Act 1958, s 1(1), see 38 Halsbury’s Statutes (2nd Edn) 1130.
Case referred to in judgment
Weston’s Settlements, Re [1968] 3 All ER 338, [1969] 1 Ch 223, [1968] 3 WLR 786, Digest Supp.
Adjourned summons
By an originating summons dated 11 February 1970 the plaintiffs, Dawn Hooper and Merrial Crosthwaite, daughters of the testator who died in January 1968 and beneficiaries under a residuary trust of his will, sought to vary the terms of that trust There were joined as defendants the two trustees, the infant children of the plaintiffs who were also beneficiaries under the trust and subject to the forfeiture clause, and the infant children of the testator’s nephew, Lord Remnant, and of the testator’s niece, Mrs Tyser, whose children were beneficiaries under an ultimate default clause. All the parties were agreed on the terms of the variation sought. The facts are set out in the judgment.
A L Price QC and Sarah Cockburn for the plaintiffs.
O M W Swingland for the trustees.
J H Hames for Mrs Hooper’s children and Mrs Crosthwaite’s children by her first marriage.
P S A Rossdale for Mrs Crosthwaite’s daughter by her second marriage.
M Bowles for the children of Lord Remnant and Mrs Tyser.
8 April 1970. The following judgment was delivered.
PENNYCUICK J. I have before me a summons under the Variation of Trusts Act 1958 relating to the will and codicil of the Hon Peter Farquharson Remnant, to whom I will refer as ‘the testator’.
Page 556 of [1970] 2 All ER 554
The testator made his will on 19 December 1966, and a codicil on 20 January 1967. The position of his family at the date of the will and codicil was as follows. He had two daughters. The elder, Dawn, was married in 1951 to Mr Antony Stewart Hooper. By him she has three children, all daughters, born in 1952, 1953 and 1956 respectively. The other daughter, Merrial, had at the date of the will and codicil been married twice, first to a Mr Wesley-Smith, by whom she has two daughters, Shane and Linda, born in 1955 and 1957, and secondly, to Mr Stockley, by whom she has a daughter, Marian Julia, born in 1963. I mention in parenthesis that Mr Stockley has since died and she has now married for the third time a Mr Ivor Crosthwaite.
That being the position at the date of his will, the testator made provision for his two daughters and their children through a residuary trust fund. The relevant provisions of the will are as follows. By cl 7 he constituted his residuary trust fund. The following clause provides:
‘8 My Trustees shall stand possessed of five eighths (hereinafter called “Dawn’s Fund”) of my Residuary Trust Fund upon the following Trusts that is to say:—a. To pay the income thereof to my said daughter Dawn Hooper during her lifetime b. Subject thereto and subject also to the provisions of Clauses 10 and 12 hereof to hold the capital and income thereof upon trust for all or any of the children or child of the said Dawn Hooper who shall attain the age of Thirty years and if more than one in equal shares c. Subject thereto to hold the capital and income thereof upon the trusts herein declared of and concerning Merrial’s Fund.
‘9 My Trustees shall stand possessed of the remaining three eighths (herein called “Merrial’s Fund”) of my Residuary Trust Fund upon the following trusts … [there follow trusts identical mutatis mutandis with those applicable to Dawn’s Fund].
‘10 If at the time of the death of my said daughter Dawn any child of hers shall be:—(a) Over the age of Thrty years and at that time practising Roman Catholicism such child shall forfeit all right to the whole or any share of the capital and income of Dawn’s Fund (b) Under the age of Thity years but over the age of Twenty-two years and at that time or at any time thereafter before attaining the age of Thirty years be practising Roman Catholicism such child shall thenceforth forfeit all right to the whole or any share of the capital and income of Dawn’s Fund (c) Under the age of Twenty-two years and shall at any time after attaining the age of Twenty-two years be practising Roman Catholicism such child shall thenceforth forfeit all right to the whole or any share of the capital and income of Dawn’s Fund and I declare that any interest forfeited hereunder shall go to the other person or persons entitled to Dawn’s Fund as if the person incurring such forfeiture had not been included as a beneficiary thereof.
‘11 [contains forfeiture provisions in identical terms mutatis mutandis, apart from a slip which is corrected in the codicil, in respect of Merrial’s Fund.]
‘12 For the purposes of the last preceding clause hereof a grandchild of mine shall be deemed to be practising Roman Catholicism if he or she shall:—(a) Be a member of the Roman Catholic Faith or (b) Have attended a Roman Catholic Church for worship at least once within the previous year or (c) Be married to or living as man and wife with a member of the Roman Catholic Faith.’
The younger daughter’s second husband, Mr Stockley, was a Roman Catholic and Merrial herself had become a Roman Catholic in the autumn of 1966, that is, shortly before the date of the will. Her two elder children, those by Mr Wesley-Smith, were baptised as Protestants. The younger child, Marian, Mr Stockley’s daughter, was baptised a Roman Catholic.
Page 557 of [1970] 2 All ER 554
By the codicil the testator made an ultimate default trust of his residuary trust fund in favour of the children of his nephew, James Wogan Remnant, who is now the third Lord Remnant, and his niece, Susan Frances Remnant, who is now Mrs Tyser. He added a proviso that—
‘if any such child or children shall at the time of becoming absolutely entitled to any interest in my Residuary Trust Fund under this Clause be practising Roman Catholicism then such child or children shall forfeit all right to any interest in my Residuary Trust Fund … ’
and there is then a provision for accrual.
The testator died on 31 January 1968. The present position as regards religion is that the whole of the Hooper family are Protestants, Mrs Merrial Crosthwaite is a Catholic, her youngest child was, as I have said, baptised a Catholic and is being brought up as a Catholic, and the two elder girls, although they were baptised as Protestants, attend a Roman Catholic church. All the adult members of the family, that is in effect, Mrs Crosthwaite, Mrs Hooper, Lord Remnant and Mrs Tyser, wish to get rid of the forfeiture provisions in respect of which they are more or less likely to benefit. It is for that purpose that the arrangement under the Variation of Trusts Act has been formulated.
The point raised is, as far as I am aware—and as far as any counsel concerned is aware—a completely novel one in the sense that the court has not previously been, as far as anyone knows, invited to approve an arrangement of this character, or anything like this character. It is for that reason that I am giving a formal judgment on the summons.
The terms of the proposed arrangement are first, the deletion of the forfeiture provisions throughout. Then it is proposed that out of Mrs Hooper’s share, ie the share called ‘Dawn’s share’, the sum of approximately £10,000 shall be set aside on accelerated trusts for her children. Equally, out of Mrs Crosthwaite’s share, that is ‘Merrial’s share’, the sum of approximately £10,000 shall be set aside on accelerated trusts for her children. Finally, the sum of £1,000 shall be contributed equally by Mrs Hooper and Mrs Crosthwaite to be set aside for the benefit of the children of Lord Remnant and Mrs Tyser. The total value of the fund is approximately £62,000: £39,000 representing Mrs Hooper’s share, and £23,000 representing Mrs Crosthwaite’s share.
I should at this stage read a passage from the affidavit sworn by Mrs Hooper. She states:
‘Both my sister Merrial and I are troubled by the forfeiture provisions contained in Clauses 10 to 12 of the Testator’s Will. I do not think it is in the interest of my children to be in the invidious position of having to choose between religious faith and taking benefits under the Will. First I want my children to face up to religious questions sincerely and honestly without the pressure of financial self-interest at work. Secondly I want them to marry and live happily with their spouses without the risk of forfeiture due to the religious faith of their spouses. Thirdly I believe that the forfeiture provisions at present applicable could be the occasion of dissension and dissatisfaction not merely among my own children and my sister’s children but also as between my children and those of James Wogan Baron Remnant of Wenhaston and Susan Frances Tyser (my two cousins). Unless the trusts are varied so as to strike out these invidious provisions it may in addition be necessary to seek the determination of the Court of the question whether they are in fact valid. Even this question will stir up pressures and currents which might have a harmful effect on the stability of our respective families and I respectfully submit that it would be most desirable to cut out the forfeiture provisions, notwithstanding the fact that if all the interests under the
Page 558 of [1970] 2 All ER 554
Will were forfeited under Clauses 10 and 12 of the Will and Clause 2 of the Codicil there would be an intestacy which would benefit Merrial and myself.’
Mrs Crosthwaite confirms her sister’s anxiety about the continuing existence of the forfeiture provisions and states:
‘I do not think that these provisions are in the interest of my children for the reasons which are set out in paragraph 19 of my sister’s Affidavit.’
Section 1(1) of the Variation of Trust Act 1958, so far as material, provides:
‘Where property, whether real or personal, is held on trusts arising, whether before or after the passing of this Act, under any will, settlement or other disposition, the court may if it thinks fit by order approve on behalf of—(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting, or … (c) any person unborn … any arrangement (by whomsoever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts: Provided that except by virtue of paragraph (d) of this subsection the court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.’
It is clear that before the court can approve an arrangement but before it under that section the court must first be satisfied that the carrying out of the arrangement is for the benefit of every person on whose behalf the court is concerned to approve the arrangement, and secondly, having so satisfied itself must further be satisfied that the arrangement is in its nature a fair and proper one.
I will first consider the arrangement now proposed from the angle of benefit, ie is the carrying out of the arrangement for the benefit of each infant concerned and also of each unborn child of the four parties whose children are interested under the will? There is no difference in interest between the existing infant children and unborn children. It is clear that from this angle of benefit different considerations arise as regards the three classes of children, namely: (1) Mrs Hooper’s children; (2) Mrs Crosthwaite’s children; and (3) Lord Remnant’s and Mrs Tyser’s children.
I will first consider Mrs Crosthwaite’s children. As far as these are concerned, it seems to me clear that the arrangement is for their benefit on a simple financial basis, quite apart from the acceleration of their interests in £10,000 and quite apart from non-financial considerations. That applies particularly to the youngest child, Marian, who has actually been baptised a Catholic, but it also applies to the two elder children who, as I understand it, are being brought up as Catholics. In the nature of things it must be much more likely that Marian will forfeit her interest than that the Protestant Hooper children will do so, and considerably more likely that the two elder girls will forfeit their interest than will the Protestant Hooper children. It stands to reason that in those circumstances all those three children will be better off from the exclusion of the forfeiture provisions. I do not think that it would be profitable to go into the position as between the two elder girls on the one hand and Marian on the other, although obviously the advantage is greatest to Marian.
The real difficulty arises as regards Mrs Hooper’s children. Plainly since they are Protestants—and there is no reason to suppose that any of them will become a Roman Catholic—and since the Crosthwaite children may well all be Roman Catholics at the relevant time, the Hooper children have a real and substantial chance of taking under the forfeiture provisions the whole of the Merrial share. So, leaving other considerations apart, the deletion of the forfeiture provisions must be detrimental to them. However, that is by no means the end of the matter. In the first
Page 559 of [1970] 2 All ER 554
place they are being given an accelerated interest in £10,000. Then there are the non-financial considerations which seem to me to loom large in this matter.
The three considerations set out by Mrs Crosthwaite, and elaborated by counsel, are these: first, that the forfeiture provisions represent a deterrent to each of the Hooper children from adopting the Roman Catholic faith should she be minded to do so; secondly, that they operate as a deterrent to each of the Hooper children in the selection of a husband when the time comes; and thirdly, that the forfeiture provisions represent a source of possible family dissension. I am not sure that there is very much weight in the first of those considerations because there is no reason to suppose that any of these children has any particular concern with the Roman Catholic faith. On the other hand, I do think that there is very real weight in the second and in the third consideration. Obviously a forfeiture provision of this kind might well cause very serious dissension between the families of the two sisters. On the best consideration I can give it I think that the deletion of the forfeiture provisions on the terms contained in the arrangement, including the provision for acceleration in £10,000, should be regarded as for the benefit of the three Hooper children.
I have not found this an easy point, but I think that I am entitled to take a broad view of what is meant by ‘benefit’, and so taking it, I think that this arrangement can fairly be said to be for their benefit.
On that last point I was referred to the recent case of Re Weston’s Settlements ([1968] 3 All ER 338 at 342, [1969] 1 Ch 223 at 245), where Lord Denning MR said:
‘I think it necessary, however, to add this third proposition: (iii) the court should not consider merely the financial benefit to the infants or unborn children, but also their educational and social benefit.’
I do not think that Lord Denning MR intended to use the words ‘educational’ and ‘social’ in any restrictive sense. I think that the court is entitled and bound to consider not merely financial benefit but benefit of any other kind.
It remains to consider the children of Lord Remnant and Mrs Tyser. They are, of course, in an entirely different position because they can take nothing anyway, unless all the children of both the testator’s daughters die young, or unless, alternatively, all the children of the testator’s daughters incur a forfeiture. In their case I doubt whether the non-financial considerations, except perhaps the bar to family unity, are of any real significance. It must be very unlikely that any child of Lord Remnant would be influenced in his choice either of a religion or of a spouse by the possibility of receiving this extremely remote interest. It seems to me, however, that the small financial benefit which has been provided for these children is sufficient to represent a benefit to them in all the circumstances of the case. I need hardly say that the view which I have taken as regards benefit has been advanced by counsel for each class of infant concerned.
I conclude then that the carrying out of this arrangement will be for the benefit of all persons born and unborn on whose behalf I am concerned to approve the arrangement.
It remains to consider whether the arrangement is a fair and proper one. As far as I can see, there is no reason for saying otherwise, except that the arrangement defeats this testator’s intention. That is a serious but by no means conclusive consideration. I have reached the clear conclusion that these forfeiture provisions are undesirable in themselves in the circumstances of this case and that an arrangement involving their deletion is a fair and proper one. I propose accordingly to approve the arrangement with one or two modifications which are not material to this judgment.
I would only like to add this word of caution. The effect of any particular forfeiture provision must depend on the nature of the provision itself and on the circumstances
Page 560 of [1970] 2 All ER 554
in which it is likely to operate. A forfeiture provision is by no means always intrinsically undesirable. Again, one may have the position that a forfeiture provision benefits exclusively one or the other party concerned, and in that case it might be very difficult to say that the deletion of the provision was for the benefit of that party, unless there was the fullest financial compensation. However, I am not concerned to go further into those matters. It is sufficient for me to say that on the facts of this particular case the deletion of the forfeiture provisions, on the terms of the arrangement, is for the benefit of everyone concerned and that the arrangement is a fair and proper one.
Order accordingly.
Solicitors: Stileman, Neate & Topping (for all parties).
Richard J Soper Esq Barrister.
Milliken-Smith v Milliken-Smith
[1970] 2 All ER 560
Categories: FAMILY; Ancillary Finance and Property
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN AND RUSSELL LJJ
Hearing Date(s): 17, 20 APRIL 1970
Divorce – Maintenance of wife – Assessment – Factors to be considered – Care and control of children awarded to wife – Separate maintenance for children – Conduct of wife cause of divorce – Whether assessment on basis of remuneration for housekeeper.
The husband obtained a divorce on the ground of the wife’s adultery. The wife was, however, granted the care and control of the children of the marriage for whom separate maintenance was awarded. On the question of maintenance for the wife,
Held – The husband should provide for the maintenance of the wife who was looking after the children but it would be wrong to assess the amount of the maintenance on the basis of how much it would cost to employ a housekeeper to look after the children (see p 561 e and p 563 f, post).
Notes
For provision for guilty wife, see 12 Halsbury’s Laws (3rd Edn) 433, 434, para 975, and for cases on the subject, see 27 Digest (Repl) 614, 615, 5749–5753.
Appeal
This was an appeal by John Michael Milliken-Smith, the husband, against an order of Ormrod J, dated 2 March 1970 who ordered that £10 a week maintenance be paid by the husband to Margaret Jane Milliken-Smith, the wife. The facts are set out in the judgment of Harman LJ.
K M Willcock for the husband.
M B Connell for the wife.
20 April 1970. The following judgments were delivered.
HARMAN LJ. This is an appeal against an order of Ormrod J, dated 2 March 1970, by which he ordered maintenance of £10 a week in respect of the wife in a divorce suit. The parties were married in April 1959. There are two children born in 1961 and 1963. The husband was employed by BOAC in a civilian capacity, and he had, in the course of his duties, to spend much of his time abroad. When he did
Page 561 of [1970] 2 All ER 560
so, he had his lodging and his living at the expense of the company. His salary was about £2,000 a year.
In 1967, the wife paid a visit to Cornwall and in the course of that visit it was said by the husband that she committed adultery. He brought a petition against her which came to hearing in April 1968, when the learned judge dismissed the petition on the ground that he was not satisfied that the adultery was proved, that of course being a high degree of proof. That decision was reversed by the Court of Appeal. There were subsequent proceedings about custody and control of the two boys and the husband, not being in a position to look after them himself owing to the fact that he spent so much of his time abroad, did not object to the care and control going to the wife, against whom, as a mother, I gather nothing much was to be said.
There had been a matrimonial home in the joint names of the parties, and by way of compromise the wife received out of the proceeds £3,000. It was intended that that should be devoted to the purchase of a new house, where she might look after the two boys. She purchased a house, which cost £2,500, and there were some extra costs, of course. The house is in Winchester. She found, so she told the court, that she could not get part-time work in Winchester, because she had to be at home at tea times when the boys came back from school and had to be with them to look after them in the holidays.
A petition for maintenance came before the learned judge, not, as is usual, before the registrar, and £5 a week for each boy was awarded. There is not any quarrel about that. But, in addition, the learned judge ordered £10 a week to be paid for the wife and he did that, I think, on the footing that that is what it would cost the husband to employ a housekeeper if the wife had not been there. I am not sure that I like that way of looking at it. The wife is not entitled, as a kind of professional matter, to look after the children, but the children do need looking after, and it cannot be in their interests that the person who does the looking-after should be reduced to penury or have no means of subsistence at all. She must be kept alive and fit in order to perform her function as a mother. Therefore, the learned judge was quite justified, in my opinion, in awarding a sum for her.
It is said by the husband that if one adds up the two budgets, and if the £10 a week be given to the wife, on her side she and the children will have more than the husband will, and what he would be left with does not amount to the expenditure he has shown in his budget. He himself has purchased a small house. This is a matter of quantum. It is said: ‘Oh, well, the Court of Appeal does not interfere if a mere amount is at stake, unless there is something so wrong with the amount given as to show that the judge has exercised his discretion improperly.' Here the amount which the husband says that the wife ought to have is £3; she says that she ought to have the £10.
I do not think that we ought to give her a sum which, so to speak, will show her remuneration for looking after her own children. I think that we ought to some extent to reduce the amount. The amount which I think that the wife ought to receive is an amount which will subsist her without leaving any margin, and the quantum, according to my view, is £7 10s a week instead of the £10, that being the top amount, as I understand it, which can be paid under a small maintenance order without deduction of tax by the payer. Accordingly, I would vary the learned judge’s order by ordering the payment of £7 10s in lieu of the £10.
RUSSELL LJ. I agree, and as we are differing from the learned judge I would wish to add a judgment of my own.
The wife is looking after the two small boys of the marriage in her small house in Winchester, which she bought with her agreed share of £3,000, the proceeds of sale of the matrimonial home. That is the last matrimonial home that was in their joint names. The marriage was ended by a decree of divorce on the husband’s
Page 562 of [1970] 2 All ER 560
petition on the ground of her adultery, an issue which she successfully contested at the trial, but on which the husband succeeded on appeal.
Shortly after the decree absolute, on 19 November 1968, on application to the judge, the care and control of the boys was given to the wife, and a welfare officer’s report was called for. An order was made for the payment of £5 a week by the husband in respect of each boy, substantially, I gather, by consent. Maintenance for the wife was not then asked for at all. She was the guilty party, without any cross-charges against the husband, although that does not mean that the court has no power to make an order for her maintenance.
In December 1969, the husband and the wife met and discussed finance. She said that she was finding it difficult to manage with no income except the boys’ £10 a week maintenance, and 18s a week family allowance. He on that occasion paid her about £380, some part being to help her with the removal expenses to Winchester, and the bulk being for alimony pendente lite under an order for £7 weekly over a period of nine months which the husband had not paid because shortly after that order she had got a job as a full-time ground hostess at, I think, Heathrow at £20 weekly. At that time she was not tied by having to look after the boys. On this same occasion in December 1969, the husband said that he would see what he could do about the income situation.
The custody summons was due for further hearing, together with the welfare officer’s report, on 9 February 1970. In the meantime, on 1 January 1970, the wife’s solicitors wrote to the husband on this topic and also on the question of maintenance for the wife. They enclosed a list of the wife’s estimated expenditure on acquiring and fitting up the Winchester house, which accounted for most of the £3,000. They also estimated her annual expenditure, an estimate which had been prepared by her in July 1969, and compared it with her sole income of £10 weekly maintenance for the boys and 18s weekly family allowance, she having a total income under those heads of £566 per annum, and no other source of income. The estimated annual expenditure amounted to about £650 per annum. I need not itemise it. It included £34 for car insurance and tax, and £16 for telephone rental. I mention those specifically because it was suggested that if cutting down was needed it was not essential for them to have a car, or indeed a telephone. The cost of taking the children to school by car was put at 29s weekly. The elder boy’s school is four miles away on a bus route; the younger is quite close. It is said that the bus fare would in fact be more than 29s a week.
The other items I need not particularly comment on, but at the end of the itemisation of expenditure there was this note:
‘This does not include the extra expenses during holiday time when the children are at home all day, nor does it include the [wife’s] expenses.’
By that I take it that she meant the expenditure referable solely to herself, other than one item of the national insurance stamp, because obviously she was benefiting from other items of expenditure necessarily and incidentally because she was looking after the boys in the house.
When the custody summons came before the same judge, he gave custody and care and control to the wife. On that occasion the question of maintenance was raised. The husband suggested that it should be dealt with by the registrar in the ordinary way, an appointment having already been fixed for 17 February, but the learned judge insisted on dealing with it himself, and adjourned the matter to 2 March for the husband to file an affidavit as to his means. The wife had filed a short affidavit verifying the solicitors’ letter of 1 January 1970 and the enclosed financial statement, saying that she could not keep herself and the children on the £10 18s a week. The solicitors’ letter had stated that as a result of having care and control the wife was unable to obtain any employment, and had contended that she ought to
Page 563 of [1970] 2 All ER 560
be compensated for being precluded thus from earning her living. The letter had also stated:
‘She has made various attempts in obtaining employment on all of which occasions she has been turned down solely because she could not work in school holidays and had to be available for the children when they come home from school.’
The husband is employed by BOAC as a job analyst, and according to his affidavit his gross salary is £2,077. He states his annual outgoings under various heads, none of which in my view can be criticised. I comment that there was no cross-examination of either party. Included in those items is the figure of £240 for income tax. The figures do not include anything for his clothing or other incidental personal expenditure, and the total of his estimated expenditure is £1,700. He lives alone in a two-bedroomed house in Cranford, Middlesex, which cost £5,000. He hopes for staying access, which will require the second bedroom. He has inherited investments worth about £4,000, but he owes, or will owe, £1,750 or more in the costs of the matrimonial proceedings which have been necessitated by the conduct of the wife, and he owes another £500 to his mother. That reduces his investments to an income-producing asset of the order of an income of £100 per annum gross, but of course received under deduction of tax at source.
It seems to me that an additional £10 weekly, such as the learned judge ordered will impose far too great a burden on the husband, having regard to his financial situation, even allowing for the fact that there would as a result of that order be some reduction in his overall tax liability, which is included at the moment at £240 a year. The learned judge considered, according to the notes of his judgment, that £10 was the right figure, because if the boys were with the husband, in his care and control, he would not be able to get a housekeeper to look after them for less than £10 a week.
I agree with Harman LJ; I do not think that that is a right approach to draw any parallel between the mother of children, looking after them, and a paid house-keeper. I regard this as a case in which if the wife is to look after the children, then there must be provided a bare minimum to sustain the wife, not as payment for looking after them, but indirectly as in effect contributing to the maintenance of the children. I also would fix the figure at £7 10s weekly for the wife, in addition to the £10 for the children.
If any expenditure has to be trimmed, I have already remarked on the point made by counsel for the husband as to the cost of the car and telephone. The figure of £7 10s will bring an extra £390 a year into the Winchester household, making a total of £956 a year. They ought to be able to manage on that. It will give the maintained wife a considerable incentive to seek diligently some means of augmenting the household income by finding some part-time work. Her evidence of having sought for such work in vain so far is really very skimpy. The learned judge apparently considered that because during the marriage she would never have gone out to work after the children were born she should not be expected to do so now. I frankly cannot understand that at all. It seems to me to be a non sequitur, having regard to her responsibility for the new situation. For those reasons, I agree with Harman LJ that the appeal be allowed to that extent.
Appeal allowed. Order in respect of wife’s maintenance varied.
Solicitors: Gregory, Rowcliffe & Co (for the husband); Ward, Bowie & Co (for the wife).
S A Hatteea Esq Barrister.
Mourton v London Borough of Hounslow
[1970] 2 All ER 564
Categories: LOCAL GOVERNMENT: LAND; Property Rights
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 28, 29 APRIL, 15 MAY 1970
Rates – Rateable occupation – Former matrimonial home – Wife in occupation by agreement – Husband agreeing to pay rates – Nature of wife’s right to occupation – Licensor/licensee relationship – Actual and exclusive occupation.
The appellant had divorced the husband (J) and was living in the former matrimonial home with a child of the marriage. J was living abroad. On an application for maintenance by the appellant, J, by consent order, agreed to allow the appellant and the child to reside in the former matrimonial home, to pay the rates on the house, and to maintain the appellant. After paying the rates on the house for some time J defaulted, and the rating authority sought to collect the arrears of rates from the appellant and also amended their records to substitute the appellant for J as the rateable occupier. On the question whether the appellant was in rateable occupation,
Held – The appellant was the rateable occupier, because—
(i) J’s common law duty of providing a home for the appellant ceased on dissolution of the marriage (see p 568 b, post);
(ii) the appellant’s right to be in occupation of the former matrimonial home, after the dissolution of the marriage, was of a different character; ie arising out of the agreement (see p 568 g, post);
(iii) the effect of the agreement was to create a relationship of licensor and licensee between J and the appellant and to grant an exclusive right of occupation to the appellant (see p 568 j, post); dictum of Lord Upjohn in National Provincial Bank Ltd v Ainsworth [1965] 2 All ER at 484, 485 applied;
(iv) accordingly the appellant was in actual and exclusive occupation of the former matrimonial home (see p 569 d, post); John Laing & Son Ltd v Kingswood Assessment Committee [1949] 1 All ER 224 applied; Cardiff Corpn v Robinson [1956] 3 All ER 56, Malden and Coombe Corpn v Bennett [1963] 2 All ER 527 and Des Salles d’Epinoix v Royal Borough of Kensington and Chelsea [1970] 1 All ER 18 distinguished.
Semble. Where a father, after a divorce, provides a home for his children in which the mother lives as the person having either custody or care and control of the children the father would be the rateable occupier (see p 569 e, post).
Notes
For the meaning of rateable occupation, see 32 Halsbury’s Laws (3rd Edn) 16, para 16, and for cases on the subject, see 38 Digest (Repl) 478, 479, 20–29.
For rateable occupation by spouse, see 32 Halsbury’s Laws (3rd Edn) 20, 21, para 23, and for cases on the subject, see 38 Digest (Repl) 482, 52, 509, 216–219.
Cases referred to in judgment
Cardiff Corpn v Robinson [1956] 3 All ER 56, [1957] 1 QB 39, [1956] 3 WLR 522, 120 JP 500, 38 Digest (Repl) 482, 52.
Des Salles d’Epinoix v Royal Borough of Kensington and Chelsea [1970] 1 All ER 18, [1970] 1 WLR 179.
Laing (John) & Son Ltd v Kingswood Assessment Committee [1949] 1 All ER 224, [1949] 1 KB 344, 113 JP 111, 38 Digest (Repl) 496, 147.
London County Council v Wilkins (Valuation Officer) [1956] 3 All ER 38, [1957] AC 362, [1956] 3 WLR 505, 120 JP 481, 38 Digest (Repl) 478, 29.
Malden and Coombe Corpn v Bennett [1963] 2 All ER 527, [1963] 1 WLR 652, 127 JP 411, Digest (Cont Vol A) 1278, 52a.
Page 565 of [1970] 2 All ER 564
National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, [1965] AC 1175, [1965] 3 WLR 1 Digest (Cont Vol B) 343, 621l.
Cases also cited
Glasgow Corpn v Johnstone [1965] 1 All ER 730, [1965] AC 609.
Key v Ampthill Rural District Council (1947) 18 DRA 133.
Robinson v Taylor [1948] 1 All ER 291, [1948] 1 KB 562.
Case stated
This was a case stated by justices for the Middlesex area of Greater London acting in and for the petty sessional division of Brentford in respect of their adjudication as a magistrates’ court sitting at Brentford on 14 November 1969.
On 8 August 1969, a complaint was preferred by the council of the London Borough of Hounslow, as the rating authority for the London Borough of Hounslow, against the appellant, Susan Porteous Mourton, charging that she being a person duly rated and assessed in the rating authority’s area in respect of a general rate made on 18 March 1969 in the sum of £30 6s 4d (being the first instalment of the rate for the year commencing on 1 April 1969) had not paid that sum or any part thereof.
The following facts were found. By letter dated 21 August 1968, one Hammett, borough treasurer for and on behalf of the rating authority, informed the appellant that in his opinion the appellant should be shown in his records as the rated occupier of a house and garage within the rating authority’s area, known as 105 Berkeley Avenue, Hounslow, Middlesex, and should accordingly be liable for payment of the outstanding amount of £56 10s 6d and future rates as they became due. On 11 April 1969, a complaint was preferred by the rating authority against the appellant that she being a person duly rated and assessed to the rate made on 19 March 1968 in the sum of £53 10s and in respect of arrears of £29 8s 6d in respect of the year commencing on 1 April 1967 had not paid that sum or any part thereof. On 25 April 1969, justices sitting at the magistrates’ court for the petty sessional division of Brentford found the complaint proved and issued a distress warrant against the appellant on the rating authority’s application. The rating authority then applied to the court for a warrant for the appellant’s committal to prison in respect of the sum, and a summons issued in the court on 11 July 1969 for the appellant to appear in the court for enquiry to be made as to her conduct and means. On 14 November 1969, the justices adjourned the hearing of the summons sine die. The rating authority duly demanded from the appellant as occupier of the house and garage payment of the sum of £30 6s 4d in respect of the first instalment of the general rate payable on 1 April 1969, but the appellant had not paid the sum or any part thereof. At all material times the house and garage were owned by one James Laurence Mourton (‘James’) and his father John James Mourton. On 20 December 1941, the appellant was married to James in Blackpool. In or about 1951, the appellant and James moved into the house with their three children and made it their home. In 1962, James left the appellant and has not since lived in the house. She continued to reside in the house with one of the children. She presented a petition for divorce on 7 November 1962 which was heard on 25 February 1963. On that date she was granted a decree nisi divorce on the grounds of James’s adultery. The decree was made absolute on 27 May 1963. On 9 July, the appellant’s application for maintenance was heard by Mr Registrar Long sitting in chambers. The learned registrar made the following order:
‘Upon hearing Counsel for the [appellant] and the Solicitor for [James] and on reading the affidavit of the [appellant] sworn on the 3rd day of June 1964 and subject to [James] continuing to pay the outgoings on 105, Berkeley Avenue, Cranford, Middlesex and allowing the [appellant] and the child Ian James
Page 566 of [1970] 2 All ER 564
Mourton to reside there IT IS ORDERED, that the above-named [James] do pay or cause to be paid to the above-named [appellant] as from the 27th day of May 1963, Maintenance for herself during their joint lives until further order at the rate of 1s per annum payable monthly.’
The order, which further contained provision for the maintenance of the child, was made by consent and is still in force. The appellant continued to reside in the house with her child. James was and remained on the rating authority’s records as the rated occupier of the house and garage until on or about 21 August 1968. He had been responsible for and had paid the rates on the house while he and the appellant lived together and continued to pay the rates on the house until in or about 1967. In or about 1963 he moved to Italy and had since resided there. On or about 11 September 1969, the appellant’s solicitors received a letter dated 6 September 1969 from James in which he stated that he did not challenge his responsibility for proper, unpaid rates and asked that a full statement of arrears be sent to him and that future demands also be sent to him at the address which he gave, namely Via Quattro, Fontane 21a, Rome, Italy. The appellant’s solicitors promptly sent to the rating authority a copy of the letter, and the rating authority wrote to James at that address by letters dated 18 September and 21 October 1969, but had received no reply thereto, nor had James made any payment.
It was contended for the rating authority that although the principle was clear from the decided cases that where a husband and wife had separated, and the husband, as the former rateable occupier, allowed the wife to continue to reside in the former matrimonial home, then the husband remained the rateable occupier, that principle arose out of the special relationship of husband and wife and must be considered in the light of the facts of each individual case. In the present case, the special facts were that the parties were not only separated, but divorced, and that James then resided abroad. The principle could not be applied to that case, and should not be applied to any case where the parties were divorced. The rating authority did not rely on the concept of joint rateable occupation, but on the facts of the present case James had ceased to be the rateable occupier and the appellant had become the rateable occupier.
It was contended for the appellant that the principle laid down in the decided cases was that where a husband by allowing his wife to remain in the former matrimonial home was discharging wholly or in part his obligation to maintain her, he was deriving a beneficial use from the house, and thereby remained liable for the rates. They also decided that, in such a case, the wife did not become a joint rateable occupier. Although the obligations to maintain did not necessarily survive after divorce, in the present case it was clear that it had. In all cases, when a husband and wife separated and the husband left the wife in the matrimonial home, there was a presumption that he was allowing her to remain there in part discharge of his obligation to maintain her. In any event the appellant’s evidence showed that that was the position in this case. James was discharging his maintenance obligation toward the appellant by allowing her to remain in the house and by paying the outgoing thereon; thereby he (James) continued to derive a beneficial use from the house, since if he had not agreed to discharge his obligation in this manner, he would have had to pay her a much greater sum in maintenance. Since the principle was based on the obligation to maintain, the fact that James was now abroad was irrelevant, and the mere fact of divorce did not of itself, alter the position, where as in this case, that obligation remained. In the present case, James admitted his liability for the rates. James had remained and still remained in rateable occupation by reason of his beneficial use of the house, and the appellant had never become the rateable occupier of the house, either solely or jointly.
The justices granted the rating authority’s application for a distress warrant. The appellant now appealed.
Page 567 of [1970] 2 All ER 564
M A de Navarro for the appellant.
T H Bingham for the rating authority.
Cur adv vult
15 May 1970. The following judgment was delivered.
BRIDGE J who read the judgment of the court at the invitation of Lord Parker CJ, stated the facts and continued: In the present proceedings it was contended for the appellant that James, not the appellant, has throughout been and still remains in rateable occupation of the house. The justices rejected that contention, holding the appellant to be the occupier. The question of law for this court is whether they were right.
Counsel for the appellant relies on the line of authority which establishes that a husband who leaves his wife in his house does not by his own absence from the house avoid his liability to be rated as the occupier. In Cardiff Corpn v Robinson, the husband had left his wife, agreeing to let her continue to live rent-free in a house belonging to the husband’s father and to pay her a weekly sum for her maintenance. Lord Goddard CJ said ([1956] 3 All ER at 57, [1957] 1 QB at 44):
‘The respondent having left his wife and children is under an obligation to maintain them and, among other things, he is under an obligation to provide a roof over their heads. He has done that by telling his wife that she may go on occupying this house which he occupied as a licensee. Obviously the respondent has made this provision for his wife as part of the obligation which he is under to maintain her. He is using the house in the most beneficial way he can, for the purpose of housing his wife and children. It is agreed that if the respondent goes out of the house and leaves his furniture in it, he is liable so long as his furniture is there to pay the rates because there is then a beneficial occupation. If he chooses to leave the house and leave his wife and family there, why is it any different from leaving his furniture there? He may come to an arrangement between himself and his wife under which his wife agrees to pay the rates. That may be, but the local authority are not bound by any arrangement of that sort. The only question here is: has the respondent got a beneficial occupation? I think that he has … because it enables him to provide for his wife and family who, if they had to provide a home for themselves would naturally require more money from him.’
The same principle was applied in Malden and Coombe Corpn v Bennett where in a similar situation the rating authority sought to make the wife liable as joint occupier with her husband. It was held that there was no joint occupation and that the husband remained solely liable. No question of joint occupation has been argued in this appeal. Both parties before us accept that the rateable occupier here must be either the appellant or James.
Finally in Des Salles d’Epinoix v Royal Borough of Kensington and Chelsea, this court again held that the husband was the rateable occupier of a maisonette de facto occupied by his wife, notwithstanding that during the period of assessment in question divorce proceedings were on foot, in which the husband had given an undertaking to the court not to return to the maisonette, and which resulted in a decree nisi in favour of the wife which was not, however, made absolute until after the end of the relevant period of assessment. On those facts the point we have to decide did not arise, and it is to be observed that the decision in that case turned on a somewhat narrow question of onus of proof.
From the judgments in those cases counsel for the appellant claims to extract the principle that a husband is a rateable occupier whenever, by allowing his wife
Page 568 of [1970] 2 All ER 564
to remain in his house, he is discharging pro tanto his obligation to maintain her. Exactly the same principle, he submits, applies as between ex-husband and ex-wife and he relies on the form of Mr Registrar Long’s order as showing that the appellant’s occupation of the house in this case is pro tanto in discharge of James’s obligation to maintain her. The parallel is attractive at first blush and certain passages from the judgments in the cases referred to are certainly wide enough to support it, but it cannot in our judgment survive the critical analysis to which it has been subjected in counsel’s helpful argument for the rating authority.
The manifold common law duties of a husband to his wife are not exclusively, or even primarily, financial in character. They are obligations, reflecting in the legal sense the premises in the marriage service, to make provision for the wife’s welfare in every department of life. The provision of the matrimonial home is one of the most fundamental of such obligations. But this obligation and the wife’s corresponding right of occupation being derived from the status of marriage itself, cannot survive the dissolution of the marriage. Although not specifically referred to in argument, a passage from the opinion of Lord Upjohn in National Provincial Bank Ltd v Ainsworth ([1965] 2 All ER 472 at 484, 485, [1965] AC 1175 at 1232) is most apt in this context. He said:
‘My lords, I think that a great deal of the trouble that has arisen in this branch of the law is by reason of attaching to the wife the label of “licensee“. A wife does not remain lawfully in the matrimonial home by leave or licence of her husband as the owner of the property. She remains there because, as a result of the status of marriage, it is her right and duty so to do and, if her husband fails in his duty to remain there, that cannot affect her right to do so. She is not a trespasser, she is not a licensee of her husband, she is lawfully there as a wife, the situation is one sui generis. She may be described as a licensee if that word means no more than one who is lawfully present, but it is objectionable for the description of anyone, as a licensee at once conjures up the notion of a licensor, which her deserting husband most emphatically is not.’
Lord Upjohn added ([1965] 2 All ER at 485, [1965] AC at 1233):
‘Finally, any right on the part of the deserted wife to remain in occupation terminates when the marriage terminates.’
It follows that if the wife acquires any right to continue in occupation of the former matrimonial home after the marriage has been dissolved, it is a right of a new and different character. It may arise under an order of the court or by agreement. Superficially it may appear to resemble the former right, especially if the dissolution of the marriage has been preceded by a period of separation during which a similar order or agreement may have been operative. But to extend the principle of the Cardiff Corpn v Robinson line of cases across the watershed of divorce, although logically plausible on the widest view of what is meant by the obligation to maintain to which those cases refer, would in our judgment be to introduce a large and unjustifiable element of fiction into this branch of the law of rating.
In the present case the words in Mr Registrar Long’s order ‘… subject to [James] continuing to pay the outgoings on 105, Berkeley Avenue … and allowing the [appellant] and the child Ian James Mourton to reside there … ’ represent no more than the recital of an agreement between the parties. The effect of the agreement, so long as it subsists, must be to constitute James, unlike the deserting husband referred to by Lord Upjohn, a true licensor and the appellant his licensee with an exclusive right of occupation. For James’s breach of the agreement at least one remedy available to the appellant must be to apply to the court for a variation of
Page 569 of [1970] 2 All ER 564
the 1964 order. As we know nothing of the present-day circumstances of the parties, what might result from such an application is, so far as this court is concerned, a matter of pure speculation. At least one possibility, however, is that the court might order James to pay to the appellant by way of maintenance a sum sufficient to provide for all the outgoings in respect of the house. It would be strange if she then still remained immune to liability for rates, but stranger still if such a variation of the order had to be considered as converting her into a rateable occupier if she was not one before.
Counsel for the rating authority invites our attention to the four classic criteria of rateable occupation adopted by the Court of Appeal in John Laing & Son Ltd v Kingswood Assessment Committee and approved by the House of Lords in London County Council v Wilkins (Valuation Officer). He submits they can only apply to the appellant and not to James. We accept that submission. The husband and wife cases refer in terms to the absent husband’s beneficial occupation. They must be taken to hold equally that the husband was in actual occupation which was exclusive for his own purposes. If there is an element of fiction even in this, it is at least a readily intelligible fiction in the light of the common law position of deserted wife and deserting husband in relation to the matrimonial home and can again be supported by reference to the opinions in National Provincial Bank Ltd v Ainsworth. But in this case the conclusion is inescapable that it is the appellant, not James, who is in actual and exclusive occupation of the house. I cannot then be disputed that her occupation is beneficial and has the necessary degree of permanence.
It is right to add one word of reservation. While the common law duties of a husband to his wife terminate on termination of the marriage, the common law duties of a father to his children clearly do not. It is certainly possible to envisage a situation where a father may, after divorce, provide a home for his children in which the mother will live as the person having either custody or care and control. In such a situation it might well be held that the father was the rateable occupier. That, however, is not this case. It was not suggested to use in argument that any significance was to be attached to the reference in the 1964 order to the son, Ian James Mourton, or to his continued presence in the house today. The case stated contains no finding of fact as to his present circumstances. He may now be, for all we know, a fully self-supporting adult.
In a subordinate argument which was not strongly pressed, counsel for the appellant submitted that, even if James and the appellant must be regarded as strangers in law, save for their relationship as licensor and licensee of the house, the appellant might nevertheless escape liability for rates on the ground that she is no more than a guest in the house. It is sufficient to say that in our judgment that is quite contrary to the realities of the case.
We think that the justices came to the right conclusion and accordingly dismiss this appeal.
Appeal dismissed.
Solicitors: Baileys, Shaw & Gillett (for the appellant); M W Coupe, Hounslow (for the rating authority).
N P Metcalfe Esq Barrister.
Singette Ltd and others v Martin
[1970] 2 All ER 570
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 22, 23 APRIL 1970
Gaming – Pool betting – Football pool betting scheme – Necessity for element of skill in forecasting to comply with statutory requirements – Scheme providing option to exercise skill – Exercise of skill by only 1 per cent of participants – Whether statutory requirement complied with – Betting, Gaming and Lotteries Act 1963, s 4(3), Sch 2, paras 13(a),29(2).
Gaming – Lottery – Football pool betting scheme – Exercise of skill by only 1 per cent of participants – Whether scheme a lottery – Betting, Gaming and Lotteries Act 1963, s 42.
The appellants, the first of whom was a registered pool promoter, were promoters and administrators of a scheme to raise money for cancer research, which took the form of football pool betting. Each member of the Cancer League Club received a membership card containing four numbers. Every week a number was appropriated to each home team from a certain list of teams. A member’s teams for the week were ordinarily determined by relating his membership card numbers to the numbers assigned to the various home teams. The prize winners were determined by calculations made from the results of matches. Each member had the option of choosing for a particular week (in substitution for the numbers on his card) the numbers which had been assigned for that week to particular teams. Ninety-nine per cent of the members, however, remained passive in any given week and retained the numbers on their membership cards, without making a new choice. The members were not required by the appellants at any time to complete coupons, in order to participate in the scheme. The appellants were convicted under the Betting, Gaming and Lotteries Act 1963 on 29 informations, the first five of which related to an allegation that certain of the appellants were carrying on the business of pool betting, contrary to s 4(3)a and paras 13(a)b, 29(2)c of Sch 2, while the remaining 24 informations related to offences against s 42(1)(b), (c) and (f)d of the Act, in that it was alleged that the scheme was a lottery, that the appellants were offering distribution of tickets in a lottery, that they had in their possession for the purpose of distribution, tickets in a lottery and were using premises in connection with the promotion and conduct of a lottery.
Held – (i) The appellants were in breach of the provisions of the Betting, Gaming and Lotteries Act 1963 relating to the conduct of pool betting business, because—
(a) in para 13(a) of Sch 2 which required such business to take the form of the promotion of competitions for prizes for ‘making forecasts as to sporting or other events’ the natural meaning of the words connoted the exercise of some degree of skill; that this was the correct meaning was made clear by the presence in the Act of Part III dealing with lotteries (see p 574 b, and p 576 a and g, post);
(b) it was impossible to say that by reason of the option to change numbers which was exercised by 1 per cent only of the members each week the scheme became one of forecast with an element of skill (see p 575 f, and p 576 a and g, post)
Dictum of Lord Hewart CJ in Challis v Newman (27 April 1937) unreported, applied.
Page 571 of [1970] 2 All ER 570
(ii) The appellants were in breach of s 42 of the Act because the scheme was a plain lottery since the prizes were distributed by lot or chance and no element of skill was in fact involved (see p 574 c, p 575 h, and p 576 a and g, post).
Per Curiam. It cannot be supposed that Parliament intended that there be read into Sch 2 to the Betting, Gaming and Lotteries Act 1963 an enactment that, if a scheme which takes the form of a football pool competition is conducted in accordance with the provisions of Sch 2, it is lawful even though it may also amount to a lottery (see p 576 f and g, post; and cf p 574 d, post and p 575 j, post).
Notes
For requirements as to the conduct of pool betting and offences, see 18 Halsbury’s Laws (3rd Edn) 230, 231, para 443, and 235, para 453.
For lotteries, see ibid 238–241, paras 460–462, and for cases on the subject, see 25 Digest (Repl) 488–495, 498–528, and 511–513, 614–622.
For the Betting, Gaming and Lotteries Act, 1963, ss 4, 42, Sch 2, paras 13, 29, see 14 Halsbury’s Statutes (3rd Edn) 546, 583, 622, 627.
Cases referred to in judgment
Barker v Mumby [1939] 1 All ER 611, 160 LT 284, 106 JP 125, 25 Digest (Repl) 489, 508.
Challis v Newman (27 April 1937) unreported.
Cases also cited
Boucher v Rowsell [1947] 1 All ER 870.
Director of Public Prosecutions v Bradfute and Associates Ltd [1967] 1 All ER 112, [1967] 2 QB 291.
Hall v Cox [1899] 1 QB 198.
Turner v Chief Constable of Liverpool (1965) 115 LJo 71.
Case stated
This was a case stated by the stipendiary magistrate for the city of Cardiff (J C Rutter Esq) in respect of his adjudication as a magistrates’ court sitting at Cardiff on 23, 24 September and 1 October 1969, when on 29 informations preferred by the respondent, Frederick Martin, against the appellants, Singette Ltd, Marlo Carlo Carpanini, Brian Goode, James Lynch, Kenneth Henry Welsher and ABC Pools Ltd, he convicted the appellants (other than ABC Pools Ltd) of offences contrary to s 4(3) of, and paras 13(a), 29(2) of Sch 2 to, the Betting, Gaming and Lotteries Act 1963, and also convicted the appellants of offences contrary to s 42 of the Act. The facts are set out in the judgment of Lord Parker CJ.
T Watkins QC and T M Evans for the appellants.
A M Jones for the respondents.
23 April 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of the stipendiary magistrate for the city of Cardiff, who convicted the six appellants of a number of offences against the Betting, Gaming and Lotteries Act 1963. The short facts giving rise to these proceedings were that, if I may say so, a very laudable scheme was devised for raising money for cancer research. A person became a member for the payment of a comparatively small sum, of the Cancer League Club. A company called ABC Pools Ltd, one of the appellants, whom I may call the administrators of the scheme, exacted is per week from each member, of which 2d was paid over to the Cancer League Club and the rest went towards the payment of dividends on football competitions and in gifts and prizes, and in expenses and reserves. The football competitions which were devised took the form of football pool betting. The first appellant, Singette Ltd, were pool promoters, and were, as they had to be when they operated off a course, registered. The second and third appellants, Marlo Carlo Carpanini and Brian Goode were directors of the appellants
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Singette Ltd, and the fourth and fifth appellants, James Lynch and Kenneth Henry Welsher, were directors of the appellants ABC Pools Ltd Each member of the Cancer League Club received a membership card, and on that card were four separate numbers between 1 and 55. Each week a number between 1 and 55 was appropriated to each of the home teams in a list of 55 association football fixtures in the national league. A member’s team for the week’s football was determined by relating the membership card numbers to the appropriate numbers assigned to the various home teams. To win, a member’s four teams had all to win, and that was itself not enough, because his prize or proportion of the pool depended on those four who had won having scored the highest total number of goals. Each member was informed of an option which he had, at any time and from time to time, to choose numbers in substitution for the numbers on his membership card. In other words he had the option of choosing the number for the week which was assigned to his favourite football team which he hoped would win or expected would win, and so on with the second, third and fourth teams. But in fact, as the magistrate found, in any given week 99 per cent of the participants remained passive and continued to retain the four numbers on their membership cards. Finally, participants did not have to do anything in the sense of filling up any coupon at all.
It was in these circumstances that the magistrate found all the appellants guilty on 29 different informations; 24 of those, and I am taking it quite generally, related to offences against s 42 of the Betting, Gaming and Lotteries Act 1963 on the basis that what took place was a lottery, and that the appellants were offering distribution of tickets in lotteries, or had in their possession, for the purpose of distribution, tickets in a lottery or were using premises in connection with the promotion and conduct of a lottery. The first five informations related to an allegation that the appellants were carrying on the business of pool betting without conforming to the particular legislation relating to pool betting.
With that introduction, I turn to the legislation in the matter. So far as the pool betting legislation is concerned, that is to be found in s 4 of the Betting, Gaming and Lotteries Act 1963 and Sch 2. Section 4(2) provides:
‘No person shall carry on any pool betting business otherwise than on a track unless he is a registered pool promoter, that is to say, a person who is registered for the purpose and whose registration is for the time being in force; and any person who carries on any business in contravention of this subsection shall be guilty of an offence … ’
pausing there, there is no question of an offence against that subsection, because the appellants, Singette Ltd, were duly registered pool promoters. Section 4(3) provides:
‘Schedule 2 to this Act shall have effect for the purposes of the registration of a person as, and the conduct of his pool betting business by, a registered pool promoter.’
One therefore then turns to Sch 2; and para 13 of that Schedule deals with the conduct of registered pool promoters’ businesses, and the relevant provisions of that paragraph are as follows, subject to certain paragraphs of the Schedule:
‘… the pool betting business carried on by any registered pool promoter shall comply with the following requirements—[there follows some six requirements, the only relevant one being] (a) it shall take the form of the promotion of competitions for prizes for making forecasts as to sporting or other events, the bets being entries in the competitions and the winnings in respect of the bets being the prizes or shares in the prizes … ’
Finally para 29(2) of Sch 2 provides:
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‘If any registered pool promoter fails to comply with any duty imposed upon him by this Schedule or if any of the provisions of this Schedule, except so far as they impose duties on the accountant or the registering authority, are contravened in the case of the business of any registered pool promoter, the registered pool promotor shall be guilty of an offence.’
Accordingly, the prosecution in the first five informations were in effect saying that para 13(a) had not been complied with, and that accordingly the appellants were by reason of para 29(2) guilty of an offence.
The other directly relevant provisions in the Betting, Gaming and Lotteries Act 1963 concern lotteries, and lotteries are dealt with in the fasciculus of sections beginning in Part III of the Act, s 41 which provides:
‘Subject to the provisions of this Act, all lotteries are unlawful.’
Section 42(1) provides:
‘Subject to the provisions of this section, every person who in connection with any lottery promoted or proposed to be promoted either in Great Britain or elsewhere—[then a number of things are set out, including printing and distributing tickets, using premises and having tickets in their possession, etc] shall be guilty of an offence.’
When s 41 states: ‘Subject to the provisions of this Act,’ that is a clear reference to the following ss 43, 44 and 45 which are dealing with special forms of lotteries, such as for charitable purposes, private lotteries, small lotteries and the like.
The magistrate in the present case came to the conclusion, after hearing considerable argument, as follows:
‘I was of opinion that, looking at the realities and at what in fact happened with regard to these competitions, that is to say that in any given week 99% of the participants retained the identical four numbers that they had had in the preceding weeks without taking action to make any forecast whatsoever for themselves, such competitions did not involve any real element of forecasting skill but were ones of pure chance. Accordingly, I entered convictions on the Informations set out in the Schedule.’
Before this court counsel for the appellants’ first argument was that the magistrate was wrong in that he, counsel, would have said that para 13(a) was complied with although the forecast made was not accompanied by any degree of skill whatever. Accordingly, so far as the first five informations are concerned, he submits that there should be no conviction. On s 42, the lotteries point, counsel goes on to say that, as he would put it, the legislation dealing with pool betting and with lotteries is quite separate, in watertight compartments, and if what took place is legal under the provisions of pool betting, then it cannot be a lottery.
For my part I am unable to accept counsel for the appellants’ argument and, if I may say so, I do so with reluctance because, as I said at the beginning, this is a scheme serving an admirable purpose, and something which probably in this day is very much needed. But nevertheless, one has to apply the law. As it seems to me, reading para 13(a), the natural meaning of the words ‘… making forecasts as to sporting or other events … ’ connotes the exercise of some degree of skill in the forecasting. No one, I think, would suggest that in pool betting in connection with racing, at any rate, a forecast of winners would not involve some element of skill, and albeit that there may be a number of unskilled people who will choose a number and bet throughout the day, we will say, on 7, regardless of the horse or its form. Again, if one takes the ordinary form of pool betting so well known in this country, it is difficult to say, and I do not think that it really has ever been said, that it does not involve an element of skill. The chances against winning, whatever skill is used,
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may be enormous; it may be that somebody will go through the weeks and years by filling up a coupon with certain numbers based on their birthdays or something of that sort. But equally it is difficult to say that there is no element of skill when many, and I am not considering proportions for the moment, will approach the matter in the way of choosing rightly or wrongly, say three of four winners which form the bankers around which they enter a number of other teams in various permutations.
Ignoring for a moment the option to change, which is the subject of a separate argument, what happens here is that no coupons are filled up, but the participants just partake, without exercising any skill in forecasting, according to the numbers assigned to them on their membership card. There is here, therefore, no element, as it seems to me, of skill whatever looked at in that way. Moreover, as it seems to me, while ‘… making forecasts as to sporting or other events … ’ in its natural meaning connotes some degree of skill, that is made clear when in this same Act there is Part III dealing with lotteries. Looking at the matter from the opposite point of view, a lottery according to its well-known definition is a distribution of prizes by lot or chance, and if one forgets for one moment the words ‘pool betting’ and ‘registered pool promoters’ and the sections dealing with pool betting, if ever there was a lottery one could say that it was this. Here were numbers assigned to different people; according to the results those people would get certain prizes, and there was no degree of skill involved. Accordingly, if counsel for the appellants is right, it produces what to my mind is rather the surprising result that you can have something which is pure lottery and yet completely legal merely because it can be given the name of pool betting. I am quite satisfied that the magistrate was right, and that to comply with para 13(a) the forecast as to sporting or other events must involve an element of skill.
I turn therefore to the second argument that there was in fact an element of skill here because of the option which the member had at any time to change his numbers and substitute other numbers for the numbers on his card. Counsel for the appellants said that that makes the scheme one which involves an element of skill, and that the fact that only 1 per cent availed themselves of this chance makes no difference. He would add: well, if he is wrong about 1 per cent as the percentage, where does one get to? So far as this argument is concerned, for my part I fear that it is completely covered, albeit in a somewhat different connection, by the case which, true, was before the legislation in question of Barker v Mumby. It is unnecessary to read the facts of that case because in fact it was treated as an a fortiori case to one previously decided by Lord Hewart CJ who sat in both cases with Singleton J albeit the third member of the court on the two occasions was different. The case previously decided, which although unreported is quoted in Barker v Mumby is Challis v Newman. The consideration there was, before the pool betting legislation, whether the scheme was a lottery or not. I think that it is worth reading the full passage set out in Barker v Mumby (See [1939] 1 All ER at 612, 613). It states:
‘It is quite obvious, when one reads this ticket, that the primary, and almost main, purpose of the ticket is to sell for the sum of 3d. a chance in a lottery—that is to say, in a scheme for distribution of prizes by lot or chance. A man pays his 3d. He afterwards finds, when he has opened out the ticket, that he has some sort of chance of winning some money on the results then to be ascertained in a series of football matches. He has nothing whatever to do with the matter except to pay his 3d. … . and take his chance, but there is added to the ticket something which is called an optional bet. Provision is made that the man into whose hands the ticket comes may, if he pleases, make another bet
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of his own. The argument which was presented in the court below was that the presence of that alternative so redeemed the whole scheme as to prevent this ticket from being a ticket for use in a lottery. It is a little difficult to follow the argument. The two schemes of this ticket are separate and distinct. The first, and the main, one—the one which obviously this ticket is intended to provoke and encourage—is a lottery, pure and simple. A man pays 3d., with a blind chance of something over which he has not the faintest control, but it is said that, because, side by side with that scheme, another and alternative scheme is indicated, there may be an element of skill that will save the first scheme from being a lottery. It is a little difficult to follow the conception. Counsel seems to put it in one way, and the magistrate has chosen to look at it in another way. The argument of counsel seems to be that here are two schemes side by side. One is obviously a lottery, and the other may conceivably, if it is acted upon, involve a certain degree of skill. Therefore, the hypothetical and contingent degree of skill of the second scheme takes away from the first scheme its character of a lottery. The magistrate, to do him justice, has not found quite that. He has found, if I may say so with the greatest possible respect, a more ingenious alternative. I will read again what he says: “I was of opinion that, as the purchaser of a coupon was entitled to exercise his own skill and judgment in either accepting the teams stamped upon his coupon or substituting for these teams of his own selection, the scheme was not a distribution of prizes by mere chance, and was not a lottery“. In other words, the ingredient of skill which is to redeem the lottery is derived, not from any skill exercised by a person in pursuance of the alternative scheme, but from the skill which a person shows in deciding not to try the lottery. There are offered to him two things—one a lottery, and the other a puzzle in respect of which he may exercise some skill. If he chooses to take the puzzle instead of the lottery, the judgment which he shows in that act redeems the lottery and makes the lottery itself a game of skill.’
Accordingly, the conviction was upheld.
It seems to me that that, which was applied to a lottery, is equally applicable here when one applies it to the compliance or non-compliance with para 13(a) of Sch 2. Bearing that in mind, it is quite impossible to say that, by reason of this option exercised in 1 per cent only of these cases, the scheme became one of a forecast with an element of skill in regard to football and other sporting events.
For my part I think the approach in these cases is to look at the scheme: what is the promoter promoting, what is he inviting people to do? If he is inviting people to fill up coupons, forecasting the success of sporting events which, as I have said, may in most cases involve some degree, albeit small, of skill, then quite clearly para 13(a) is complied with and the scheme is not a lottery. But if as happened in the present case, participants are invited not to fill up any coupon, not to use any element of skill whatever, but merely to take their chance on the numbers assigned to them on a membership card, then that is a plain lottery and outside the ambit of para 13(a) of Sch 2. When that occurs, as it seems to me, a defendant can only get out of his difficulty, if he can, by showing that such a number of persons do in fact use the optional scheme whereby they exercise some element of choice, such a number on such a scale that it can be, as a matter of fact and degree, said that this is no longer a lottery but is a compliance with para 13(a) of Sch 2.
I would only add that counsel for the appellants has taken us through the history of the legislation in this matter. I do not propose to go through it myself, but having done so I can see no reason for reading, as he would, ss 41 and 42 of the 1963 Act, dealing with lotteries, as being both subject to what otherwise would be a lottery, were it not for the legislation in regard to pool betting. In my judgment the magistrate was correct and I would dismiss this appeal.
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BRIDGE J. I agree that this appeal should be dismissed for the reasons given by Lord Parker CJ and I do not desire to add anything on the second point whether or not the appellants’ football pool competition was a lottery, but only a short word which I add out of deference to counsel for the appellants’ interesting wider argument inviting us to conclude that by implication the provisions of Sch 2 to the 1963 Act make lawful a lottery which takes the form of a football pool competition conducted in accordance with the provisions of that Schedule.
I share Lord Parker CJ’s reluctance at reaching a conclusion against the appellants, not only because of the laudable causes which their money-raising activities are designed to serve, but also because I feel the force and attraction of that part of counsel for the appellants’ argument which draws our attention to the artificiality of many of the distinctions which the law appears to make in the field of football competitions between what is and what is not permissible, at all events as the law is applied in practice. But, however strong the attraction of that argument may be, it must not lead us into the temptation to legislate where Parliament has not legislated. To my mind it would be almost inconceivable that Parliament should legislate in such an important matter as authorising the carrying on of lotteries in such a large new field by implication and without using clear and express language. It is instructive, I think, to look at the provisions of Part II of the Betting, Gaming and Lotteries Act 1963, which is the part relating to gaming and which contains certain provisions authorising the carrying on of gaming activities under stringent conditions, just as the provisions of Sch 2 authorise the carrying on of football pool competitions under stringent conditions. But in Part II one finds in s 38(2)e this provision:
‘Nothing in section 41 of this Act [which is of course the prohibition of lotteries] shall make unlawful any gaming conducted in such circumstances that no offence under this Part of this Act is committed.’
In other words, if gaming is conducted in accordance with the provisions of Part II of the Act, it is not unlawful by reason of the fact that it also amounts to a lottery. Counsel for the appellants’ argument invites us to say that we can read the provisions of Sch 2 as if an enactment corresponding to s 38(2) were to be found there; there is no such enactment; it cannot be supposed in my judgment that Parliament intended that such an enactment should be read into the Act by implication.
BEAN J. I agree with both judgments delivered by my Lords.
Appeal dismissed with costs. On 5 May 1970, leave to appeal to the House of Lords was granted, the court certifying under s 1 of the Administration of Justice Act 1960 that the following points of law of general public importance were involved: (1) Must a competition for prizes conducted by a registered pool promoter for making forecasts as to sporting events contain an element of skill to be lawful under para 13(a) of Sch 2 to the Betting, Gaming and Lotteries Act 1963? (2) If such a competition conducted by a registered pool promoter is otherwise lawful under para 13, is it an unlawful lottery under s 41 of the Act if it does not require the exercise of skill?
Solicitors: Swepstone, Walsh & Son, agents for Gaskell, Rhys & Otto-Jones, Cardiff (for the appellants); R H C Rowlands, Cardiff (for the respondent).
N P Metcalfe Esq Barrister.
National Dock Labour Board v John Bland & Co Ltd
[1970] 2 All ER 577
Categories: EMPLOYMENT; Other Employment: SHIPPING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND MEGAW LJJ
Hearing Date(s): 14, 15, 16 APRIL, 6 MAY 1970
Employment – Regulation – Dock labour scheme – ‘Dock work’ – Whether first piling of timber in importers’ yard lying within the vicinity of the port but outside the area of the dock estates was ‘dock work’ – Whether yard within the ‘port’ – Dock Workers (Regulation of Employment) Act 1946, s 6 – Docks and Harbours Act 1966, s 58 – Dock Workers (Regulation of Employment) (Amendment) Order 1967 (SI 1967 No 1252), Sch 2, cl 1(3), App 1.
Cargo – Meaning – Dock Workers (Regulation of Employment) Act 1946, s 6 – Docks and Harbours Act 1966, s 58(1).
The respondents were timber importers whose timber yard lay just outside the area of the dock estates of the port of Cardiff and Penarth, but within the vicinity of the dock estates. The procedure at the port was for imported timber to be unloaded from the ship, landed on to bearers on the quayside and then moved by forklift to the storage area, adjoining the quayside, of F Ltd (a company set up by timber importers to provide storage space). Timber remained in this storage area for periods of 24 hours to three months and was then loaded on to lorries provided by the importer and driven away by the importer’s servant or agent, either to the importer’s yard or direct to his customer, who might be many miles away. Delivery had been taken by the consignee and the transit from abroad was complete when the timber had been stacked in F Ltd’s storage area and was held by them to the consignee’s order. On the question whether the operation of receiving and ‘first piling’ timber in the respondents’ yard, on delivery from the storage area, was ‘dock work’ within the Docks and Harbours Act 1966a, and the Dock Workers Employment Scheme 1967b,
Held – (Lord Denning MR dissenting) the operation was not ‘dock work’ within the 1966 Act and the 1967 scheme, because—
(i) goods ceased to be ‘cargo’c within the definition of that word in the 1966 Act and the 1967 scheme when their transits and storage ancillary to sea transit had ended which, in the present case, occurred when the timber had been stacked in F Ltd’s storage area; accordingly, the timber had ceased to be ‘cargo’ when it was received and first piled in the respondents’ yard (see p 583 e, and p 586 a and d, post); National Dock Labour Board v Parker Packing Co Ltd 1969 ITR 215 considered;
(ii) work was ‘dock work’ at the port of Cardiff and Penarth if, and only if, it was carried on within the area of the dock estates, and not the dock estates and their vicinity, since the definitions of ‘port’, made applicable to the port of Cardiff and
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Penarth by App 1 to the Dock Workers (Regulation of Employment) (Amendment) Order 1967d, and contained in the dock labour and port registration schemes for Cardiff and Penarthe, stated that ‘port’ included and comprised the whole of the dock estates, and these being an exhaustive and limiting definitions, they were not extended by the restrictive proviso to cl 1(3)f of the 1967 scheme; thus ‘port’ in relation to Cardiff and Penarth did not include any area, such as the respondents’ yard, which was outside the dock estates although in their vicinity (see p 584 a and e, p 586 f, and p 586 j, to p 587 a, post).
Decision of the Queen’s Bench Divisional Court [1969] 3 All ER 815 affirmed in part, reversed in part.
Notes
For dock workers generally, see 38 Halsbury’s Laws (3rd Edn) 455–463, paras 782–792.
For the Docks and Harbours Act 1966, s 58, see 12 Halsbury’s Statutes (3rd Edn) 347.
Cases referred to in judgment
National Dock Labour Board v Parker Packing Co Ltd 1969 ITR 215.
Appeals
This was an appeal by the National Dock Labour Board, from the judgment of the Divisional Court (Lord Parker CJ, Melford Stevenson and Cooke JJ) dated 9 July 1969 and reported [1969] 3 All ER 815, dismissing the appellants’ appeal from the decision of the Industrial Tribunalg at Cardiff, given on 3 February 1969, in a reference under s 51 of the Docks and Harbours Act 1966, whereby it was decided that the operation of receiving and first piling timber, delivered from storage adjoining the quayside of the port of Cardiff, in the yard of the respondents, John Bland & Co Ltd, which lay in the vicinity of the port but outside the area of the dock estates, was not ‘dock work’ within the 1966 Act and the Dock Workers Employment Scheme 1967, and that subsequent operations in the yard were not ‘dock work’; and a cross-appeal by the respondents against that part of the Divisional Court’s judgment holding that the operation of receiving and first piling timber was work on ‘cargo’ within the meaning of the 1966 Act and the 1967 scheme. The facts are set out in the judgment of Lord Denning MR.
A E J Diamond for the appellants.
A P Leggatt for the respondents.
Cur adv vult
6 May 1970. The following judgments were delivered.
LORD DENNING MR. In running a port, it is important to know whether any particular kind of work is ‘dock work’. Much depends on it. Dock workers have to be registered, their employers have to be licensed, and so forth. This case concerns the port of Cardiff. Three of the timber importers have their timber yards inside the docks area; four others have their timber yards just outside. One of these ‘outsiders’ is John Bland & Co Ltd, the respondents. They want to know whether any work in their timber yard is ‘dock work’, so they have referred the matter to the Industrial Tribunal. This procedure is permitted by s 51(3)(a) of
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the Docks and Harbours Act 1966. The question thus propounded gives rise to two others. The first is the ‘vicinity’ point. It arises because the respondents’ yard is not within the docks estate which is owned by the British Transport Docks Board. It lies just outside the legal boundary. The respondents said that, on this account, none of the work in their yard is ‘dock work’, whereas the National Dock Labour Board, the appellants, said that the yard is ‘in the vicinity of’ the docks estate and that, on this account, all the work in the yard is ‘dock work’, provided that it has the quality of dock work. The second is the ‘cargo’ point. It arises because the timber is not carried direct from the ship to the respondents’ yard. It is stacked for a time at the back of the quay; and is afterwards taken by lorry to the respondents’ timber yard and piled up there. The respondents said that it ceases to be ‘cargo’ as soon as it is stacked at the back of the quay, whereas the appellants said that it remains ‘cargo’ up to the time when it is put in a pile in the respondents’ yard. Hence, the respondents said that none of the work done in their yard is ‘dock work’, whereas the appellants said that it is ‘dock work’.
The tribunal (1969 ITR 173) decided in favour of the respondents on both points. The Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) decided the ‘vicinity’ point in favour of the respondents and the ‘cargo’ point in favour of the appellants. Each appeals to this court.
I propose to deal first with the ‘vicinity’ point. It is a difficult point, because it involves threading one’s way through a veritable jungle of statutory provisions. It is so complicated that I do not propose to set them all out. I turn only to the definition ‘dock work’. It is in s 58(1) of the 1966 Act:
‘“dock work”, in relation to any port, means work which is treated for the purposes of any labour scheme as dock work at that port … ’
I turn next to the labour scheme for Cardiff and Penarth, and particularly to the proviso to cl 1(3) of the 1967 schemeh, which repeats a similar provision in the 1947 schemei. It provides that the scheme—
‘… shall not apply to a dock worker at any port unless he is employed or registered for employment in, or in the vicinity of, that port … ’
I read those words ‘shall not apply … unless’ as equivalent to ‘shall apply if’. The double negative is used to express an alternative; it is an extending and not a limiting provision. So the scheme applies to any man if he is employed in, or in the vicinity of, the port. Furthermore, in every relevant Act, the word ‘port’ is extended so as to include any place ‘in the vicinity of’ it. I refer particularly to the definition of ‘dock workers’ in s 6 of the Dock Workers (Regulation of Employment) Act 1946 and also to s 58(1) of the 1966 Act. Taking all these points together, I think that ‘dock work’ at the port of Cardiff and Penarth includes work done in a place ‘in the vicinity of’ the port. Cooke J took a different view. He found it ([1969] 3 All ER at 819, [1969] 3 WLR at 1071)—
‘… very difficult to see any possible criterion of how far beyond the dock estates the port of Cardiff and Penarth is to extend.’
But that difficulty is resolved by the 1966 Act itself. Section 51(3)(b) enables the tribunal to determine ‘whether any place is in, or in the vicinity of, a port to which a labour scheme for the time being applies’.
In this case the respondents admit that their yard is ‘in the vicinity of’ the dock estates at Cardiff. Being in the vicinity, it comes within the Act. The work in it is
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‘dock work’ if it has the quality of dock work. This conclusion seems to me to be in accordance with the intention of Parliament. One has only to look at the planj. It shows the respondents’ yard (outside the dock estates), but it is cheek by jowl with May & Hassell Ltd’s yard (inside the dock estates). It would be absurd if one timber yard was within the Act and the other outside it. The work done is the same in each; the employers and dock workers should be treated the same in each. There is no rhyme or reason for distinguishing between them. This result is achieved by holding that the port includes a place ‘in the vicinity of’ it.
The second point is the ‘cargo’ point. It arises in this way. The 1967 scheme providesk:
‘“Dock work” means operations at places or premises to which the Scheme relates, ordinarily performed by dock workers of the classes or descriptions to which the Scheme applies … ’
This takes us to the definition of ‘dock worker’ in the 1946 Actl, which is in these words:
‘“dock worker” means a person employed or to be employed in, or in the vicinity of, any port on work in connection with the loading, unloading, movement or storage of cargoes, or work in connection with the preparation of ships or other vessels for the receipt or discharge of cargoes or for leaving port.’
That definition speaks of cargoes and the 1946 Act () provides that: ‘“Cargo” includes anything carried or to be carried in a ship or other vessel’. To ascertain the scope of ‘dock work’, we have therefore to find the meaning of ‘cargo’. A man is a ‘dock worker’ only when he is employed in connection with a ‘cargo’ or ‘cargoes’. Once a cargo is split up and the goods are distributed to distant points, the goods cease to be a ‘cargo’ or part of a ‘cargo’. The men who work at distant points are not ‘dock workers’. But where is the dividing line? At Cardiff, before 1965, the timber was unloaded from the ships by cranes and put straight into railway trucks. It stayed in those trucks until it was despatched in those very trucks either to its ultimate destination far away or to the timber yard. When it went to the timber yard, it was unloaded and stacked in the ‘first piling’. This was in the docks area or in the vicinity. It was clearly ‘cargo’ up to that time. All that work up to and including the ‘first piling’ was ‘dock work’ and all the men employed in it were ‘dock workers’. But when the timber was despatched to a destination far away from the port it ceased to be ‘cargo’ from the time of despatch. Since 1965 the timber has been unloaded from the ships on to bearers at the dockside. It is then taken by forklift to a storage area behind the wharves and stacked in a pile. I propose to call that the ‘preliminary stacking’. It is then loaded on to lorries and taken either to its ultimate destination far away or to a timber yard in the docks or its environs. When it goes to a timber yard, it is unloaded from the lorries and stacked in a pile. This piling is still called the ‘first piling’, although there is now the ‘preliminary stacking’ beforehand. The work is done in the docks area, or in the vicinity.
The tribunal held that before 1965 the work up to and including the ‘first piling’ was work in connection with the ‘loading, unloading, movement or storage of cargoes’; and that all the workers up to that point were dock workers. So far I agree. But the tribunal held that after 1965 only the work up to and including the ‘preliminary stacking’ was work in connection with ‘cargoes’; and that the rest of the work from the ‘preliminary stacking’ to the ‘first piling’ was not work in connection
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with ‘cargoes’; and the workers in it were not ‘dock workers’. The Divisional Court ([1969] 3 All ER at 821, [1969] 3 WLR at 1073) reversed that decision and held that, even after 1965, the work up to and including the first piling was work on ‘cargo’; and that the workers in it were ‘dock workers’. Many tests were canvassed before us about the meaning of ‘cargo’. I do not find them helpful. I find most assistance from the context, which speaks of the ‘loading, unloading, movement or storage of cargoes’. Take the phrase ‘storage of cargoes’. It seems to me plain that before 1965 the men engaged in ‘first piling’ were employed in the storage of cargoes. If such was the case before 1965, it must be the same after 1965. The men were still employed in the storage of cargoes. Their work was just the same after 1965 as before 1965. The timber they handled was just as identifiable after 1965 as before 1965. If it was ‘cargo’ before 1965, it was also ‘cargo’ after 1965. The only difference was that after 1965 it came to the timber yards via the ‘preliminary stacking’ and not via the railway trucks. I cannot think that that makes any difference.
The question was asked: when does a cargo cease to be a cargo? I do not think that that is quite the right question. The question rather is: was the ‘first piling’ the storage of cargo? I think that it was, just as much after 1965 as before. It is rash perhaps to attempt a definition, but I should have thought that ‘storage of cargoes’ includes the storing of goods which have been unloaded from a ship and deposited in a place, in the port or its environs for safe custody pending onward transit from the port to some distant place. ‘… Work in connection with the … storage of cargoes … ’ includes the work of receiving the goods into that place for safe custody and delivering them out of it. It is significant too that ‘storage’ of cargo is different from ‘processing’ it. That distinction is apparent from the Dock Workers (Regulation of Employment) Order 1947m as amended in 1961 n: ‘Processing includes sawing, planning, cutting, pointing, ripping and splitting’; but it does not include ‘receiving and delivering’. If the goods are delivered to a place in the port or its environs, not for safe custody but for ‘processing’, for example, sawing or planning, the delivery to that place is the ‘movement of cargo’, but the subsequent work of processing is not storage. Conversely in regard to goods which are to be loaded into a ship. When they are deposited in a place, within the port or its environs, for safe custody pending loading into the ship, that is the ‘storage of cargo’; and ‘work in connection with it’ includes receiving the goods into the place and delivering them to the loading point.
I find myself, therefore, in agreement with the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063). I think that all men are ‘dock workers’ when they are employed in the port or its environs on the storage of cargo, ie on the storage of goods which are identifiable as coming from or destined for a ship, and in the receiving and delivery of those goods into or out of store, and in the movement of them between store and ship. It would, I think, be absurd to draw a distinction between the men who do the ‘preliminary stacking’ and those who do the ‘first piling’. The work is the same. If the one group are ‘dock workers’, so are the others. Indeed, the same men may be employed on both operations at different times in the day. They are ‘dock workers’ all the time.
I would, therefore, allow the appeal of the appellants on the first point and dismiss the cross-appeal of the respondents on the second point.
FENTON ATKINSON LJ. The respondents are timber importers whose timber yard lies just outside the port of Cardiff and Penarth. The question for the tribunal was whether the ‘first piling’ in their yard of imported timber, previously
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unloaded from a ship at that port, is ‘dock work’ within the Docks and Harbours Act 1966, and the Dock Workers Employment Scheme 1967o.
The answer depends on two points: first, it is common ground between the parties that this work can only be ‘dock work’ if such timber when being piled in their yard is still ‘cargo’. If it is still ‘cargo’ at that stage, then the second point arises: is the work of piling such timber ‘dock work’ when it is being done in a yard in the vicinity of the port but outside the actual port area? The definition of ‘cargo’ in the Dock Workers (Regulation of Employment) Act 1946, the Docks and Harbours Act 1966 and the Dock Workers Employment Scheme 1967p is as followsq: ‘“Cargo” includes anything carried or to be carried in a ship or other vessel’.
The tribunalr, in considering this point, attached great importance to the history of the changes in the method of handling timber at Cardiff Docks over the years. The vital change for the purposes of this case in their opinion came in 1965. Before 1965 timber was lifted in slings by crane from the decks or holds of ships into open box-like railway trucks, which thereafter, often after substantial delay, conveyed the timber either direct to customers or more often to the importers’ yard for stock. Delays in transit were a bone of contention between the importers and the railway company. At that time the loading into the trucks and unloading at the importers’ yard was done by registered dock workers. Since 1965 the procedure for imported timber at Cardiff has been that the timber is unloaded from the ship, landed on to bearers on the quayside, moved by fork lift to the storage area of Fletchers Wharves Ltds, where it remains for periods as short as 24 hours or as long as three months. It is then loaded on to the lorries provided by the timber importers and driven away by the importers’ servants or agents either to their own yards or direct to a customer, who may be many miles away. Up to and including the loading on to the lorries, all the work of loading, unloading, moving or storing of the timber is done by dock workers. Thereafter the timber had been handled by the importers’ own employees, who are members of the same union as the dock workers and paid at exactly the same rate for this work. As the tribunal (1969 ITR at 181) put it, the—
‘essential difference [is that] timber (before 1965) lying in open trucks was merely suffering a delay in transit, whereas nowadays delivery has been taken by the consignees and the transit from abroad is complete when the timber has been stacked in Fletchers’ storage area and is being held by them to the consignees’ order. That difference is in our view critical.’
It was said by counsel for the appellants that so long as imported timber is identifiable as having been carried on a ship, it is to be regarded as cargo. Counsel for the respondents said that imported timber is only to be regarded as cargo so long as operations incidental to the carriage of goods by ship—such as loading, unloading, moving and storage—continue, and that once such timber has been loaded on to the consignees’ lorry and driven away by their driver it has plainly ceased to be cargo on any ordinary understanding of that word.
The tribunalt accepted counsel for the respondents’ submission; the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) rejected it. Although conscious of the apparent absurdity of still describing
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as cargo, timber unloaded from a ship in Cardiff, when later on it reached, eg Birmingham or Manchester, on the consignees’ lorry in charge of their servant, the Divisional Court felt that no absurdity arose in this context because of other restrictions on what amounts to ‘dock work’. I find some assistance from certain passages in a tribunal decision, National Dock Labour Board v Parker Packing Co Ltd. Sir John Clayden, in giving the tribunal’s decision in a somewhat comparable case, said (1969 ITR at 222):
‘From the statutory definition of “cargo”, and its ordinary meaning “cargo” must bear some relationship to a ship or other vessel. There must come a time when the goods which have been in a ship cease to be its cargo. The goods in their landing from the ship on to land or vehicle, or in a transfer to a barge, are obviously still part of the cargo. Goods delivered inland by rail or road do not continue to be “cargo” because they have reached the country by sea.’
He went on to reject the identifiable test which counsel for the applicants advanced in that case also and accepted an alternative test put forward by counsel as the proper one, namely: ‘Have the transits and storage ancillary to sea transit ended and other transit or storage begun?’
That is counsel for the respondents’ submission in the present case, and I think that it is right. It seems to me that it cannot be right to treat the words of the definition ‘anything carried … in a ship … ’u as meaning: ‘anything which can be identified as having been at one time carried in a ship’. If it is right, as I think it is, that a time must be reached when goods carried into this country in a ship cease to be cargo either within the definition or on any ordinary understanding of that word, then I think the dividing line must come when after storage at Fletchers Wharves Ltd’s storage area the timber is loaded on to the consignees’ vehicle and driven away by their employees. Circumstances will differ widely at different ports. I am only considering the problem on the evidence of this particular type of cargo at this particular port. With all deference, I am unable to agree with Lord Denning MR or the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) on the ‘cargo’ point. I agree with the tribunal (1969 ITR 173) for the reasons I have endeavoured to state and I agree fully with the judgment on this point of Megaw LJ which I have had the advantage of reading.
There remains the ‘vicinity’ point. Here again I regret that I cannot agree with Lord Denning MR, finding myself in full agreement with the tribunal and the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063). Cooke J, who delivered the first judgment, in my opinion picked his wayv unerringly through the morass of referential statutory provisions which I do not propose to repeat in full. One starts from the Docks and Harbours Act 1966, which makes it a criminal offence to employ anybody as a ‘dock worker’ unless the employer is licensed under the Actw. The respondents are not so licensed. ‘Dock worker’ meansx ‘a person employed or to be employed on dock work’. At this point the problem begins. What is ‘dock work’ and, be it stressed, what is ‘dock work’ at Cardiff and Penarth? ‘Dock work’ in relation to any port is defined by s 58(1) of the 1966 Act as meaning ‘work which is treated for the purposes of any labour scheme as dock work at that port’. To discover what is a labour scheme, one is sent to the Dock Workers (Regulation of Employment) Act 1946, which sends one on to the scheme now in force in Sch 2 to the Dock Workers (Regulation of
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Employment) (Amendment) Order 1967y. That order z applies the scheme to the port of Cardiff and Penarth and states in clear terms that: ‘In this appendix port means the area of that port as … ’ defined in certain earlier dock labour or port registration schemes. One finally gets back to the dock labour and port registration schemes for Cardiff and Penarth made in 1941 and, I think, 1940 respectivelyaa, and continued inforce by later orders. The first of these states that the port of Cardiff and Penarth includes the whole of the dock estates, the second, the port registration scheme, defines the port of Cardiff as comprising the whle of the dock estates of Cardiff and Penarth. I agree with Cooke J ([1969] 3 All ER at 819, [1969] 3 WLR at 1071) that these are exchaustive and limiting definitions.
The Minister, if he had chosen, could have included importers’ yards in the vicinity of the dock estates area of Cardiff and Penarth in the scheme of 1967, but in my view he has not done so. There may be no logical reason why importer A, with a yard inside the area, should be subjected to the penal provisions of the 1966 Act while importer B, with a yard just outside the area, should not, but the line has to be drawn somewhere; in a statute with penal sanctions it should be a clear line, and it seems to me that the result which is produced by the relevant provisions is to draw that line round the boundary of the dock estates area. Section 58(4) of the 1966 Actbb , which counsel for the appellants sought to rely on in this court (although not before the tribunal or Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063)), does not help him, in my view, because the subsection does not apply to s 2(2) of the Act which provides:
‘For the purposes of this Act the area of a port shall … be taken to be the area of the port as designated for the purposes of any labour scheme for the time being applicable to the port.’
Further s 58(4) does not apply to the definition of ‘dock work’ in s 58(1). Counsel for the appellants, in the end, was driven back to the proviso to cl 1(3) of the 1967 scheme, which Lord Denning MR has already quoted. Here again, I agree entirely with Cooke J that for the reasons he gave ([1969] 3 All ER at 819, 820, [1969] 3 WLR at 1072), and which I do not repeat, this is a restrictive provision and cannot be used to turn work in the respondents’ yard into ‘dock work’ if it is not ‘dock work’ within the relevant statutory provisions.
It follows that I think that the tribunal which originally heard this matter was right on both points. I would dismiss the appeal of the appellants on the ‘vicinity’ point and allow the cross-appeal of the respondents on the ‘cargo’ point.
MEGAW LJ. I agree on both points with the conclusions and the reasons for those conclusions expressed in the judgment of Fenton Atkinson LJ. Since this involves differing from the view of the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) and that of Lord Denning MR, I think it right to add some words of my own.
The first and most important question which arises on this appeal involves the meaning to be given to the word ‘cargo’. Section 6 of the Dock Workers (Regulation
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of Employment) Act 1946 sets out the meanings of ‘cargo’, ‘dock worker’ and ‘port’, for the purposes of the Act, as follows:
‘“cargo” includes anything carried or to be carried in a ship or other vessel; “dock worker” means a person employed or to be employed in, or in the vicinity of, any port on work in connection with the loading, unloading, movement or storage of cargoes, or work in connection with the preparation of ships or other vessels for the receipt or discharge of cargoes or for leaving port; … “port” includes any place at which ships are loaded or unloaded.’
The tribunal decided that the operation of receiving and first piling timber in the respondents’ yard at East Moors, Cardiff, on delivery from storage adjoining the quayside, is not ‘dock work’, and that subsequent operations in the respondents’ yard are not ‘dock work’, within the meaning of that phrase in the Docks and Harbours Act 1966 See s 58(1). In the reasons given by the tribunal there is the following passage (1969 ITR 173 at 181, 182):
‘Broadly speaking, the work which distinguishes a dock worker is work on cargoes and work on ships. We are concerned solely with the former. Within that class of work, if goods are not “cargo” at the time when any given operation is performed on them, they cannot then be the subject of “dock work”: therefore that operation itself is not “dock work” … ’
In my view, that analysis is right. I think, indeed, that it is accepted by both sides; hence the rival submissions as to what is meant by ‘cargo’ in this context.
With great respect to the view expressed by the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) on this point and to counsel for the appellants’ persuasive arguments in support thereof, I find myself unable to agree that any chattel or collection of chattels is ‘cargo’ for this purpose merely because it can be proved, or is admitted, that at some time in the past it was carried in a ship. (For simplicity, I ignore the corresponding problems which arise in connection with what I may call ‘prospective’ cargo, ie chattels which it is contemplated will at some time in the future be carried in a ship or vessel). It is true that in order to be cargo it must have been carried in a ship. It is not true, in my judgment, that merely because it has once been carried in a ship it remains cargo for ever after, whatever may have happened to it and wherever it may be.
The meaning assigned to the expression ‘cargo’ in s 6 of the 1946 Act emphasises the essential element of carriage by ship. That element is carried through into the meaning given to ‘dock worker’: ‘… work in connection with the loading, unloading, movement or storage of cargoes’. The unloading of a cargo is, and is confined to, the operation of unloading from the particular ship in which it has been carried as cargo. It would be fantastic, in my view, to suggest that by this definition it was intended to give the characterisation of ‘… work in connection with the … unloading … of cargoes … ’ to the operation of unloading from a lorry or a railway wagon in Machester a parcel of timber or a bag of rice which had, perhaps months before, been unloaded from a ship in the port of London. Yet if ‘cargo’ is anything which can be identified as ever having been carried in a ship, this operation would constitute the unloading of cargo within the definition. I think that the unloading of cargo is the operation of unloading from the carrying ship, not some other unloading which has no real connection with the antecedent carriage by sea. So also with the other operations referred to ‘… movement or storage of cargoes … ’ It is not any movement or any storage, at any subsequent time, of goods which have once been carried by ship. It is a movement or storage which has a real connection with the antecedent carriage by sea. Otherwise it is not movement or storage of a cargo; it is movement or storage of goods which once, for the purposes of ‘dock work’, constituted ‘cargo’, but which have now ceased to be ‘cargo’.
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I would accept the test suggested by counsel for the respondents as a general statement of the principle to be applied: cargo ceases to be cargo when the incidents of the sea transit are over; when the operations which can fairly and sensibly be regarded as incidental to the carriage of goods by ship have come to an end. That is, in essence, the same test as was accepted and applied by the tribunal in the reasons for its decision. I quote the words (1969 ITR at 182) in which the test was defined:
‘… we have settled to our own satisfaction, on the materials before us, at what time it is proper to speak of the timber as being no longer “cargo” within the meaning of the Act of 1946. We think it is when the oversea transit has ended … ’
I do not think that that statement can be said to constitute a misdirection. On the contrary, I think that it was completely right. If that be so, the court should be slow to hold that the tribunal reached a wrong decision on the facts. It is to the tribunal that the task of decision has been entrusted under s 51 of the Docks and Harbours Act 1966, and clearly the tribunal is in a better position than the court to judge on a matter such as this, which is a question of fact and degree. The tribunal, having stated the test in the words which I have quoted, then, in the latter part of the same sentence (1969 ITR at 182), stated its conclusion on the basis of that test:
‘… and that is when the timber has been taken back to storage by Fletchers and is held at the order of the consignee.’
Later the tribunal said (1969 ITR at 182): ‘We are content to say that the timber had ceased to be “cargo” when stacked in the off-quay storage area’. I do not think that this conclusion can or should be disturbed. It cannot, in my view, be faulted by reference to the distinction which, for reasons explained by it, the tribunal drew between the systems which prevailed before and after 1965. The tribunal, perfectly logically, applies the same test in each case: when has the overseas transit ended?
The other, less important, question is whether the respondents’ yard is in the area to which the Dock Workers Employment Scheme 1967cc applies. On that issue, I agree in its entirety with the reasoning in the judgment of Cooke J ([1969] 3 All ER at 819, 820, [1969] 3 WLR at 1072). In the end, the argument to the contrary really depends on the submission that the proviso to cl 1(3) of the 1967 scheme is to be given appropriate effect as though it were written: ‘Notwithstanding anything hereinbefore contained, the scheme shall apply to a dock worker at any port if he is employed … in, or in the vicinity of, that port’. For myself, I see no good reason for so interpreting the proviso.
Counsel for the respondents did not, as I understand his argument, suggest that the 1946 Act could have no application, so that no scheme could lawfully be made, in respect of anything other than the defined area of the port. The 1946 Act and the 1966 Act and many of the statutory instruments contain express references to ‘the vicinity’ of a port. Counsel for the respondents fully accepted that the Minister could lawfully make a scheme which is applicable to an area which comprises: (a) a port defined by reference to geographical boundaries; and (b) the vicinity of that port. If such a scheme is made, it is not ultra vires because it includes ‘the vicinity’. The provisions in the Acts and instruments relating to ‘the vicinity’ are all included as giving rise to, or with reference to, this possibility. Indeed, if I understand correctly, we were told that in at least one instance a scheme expressly includes what I may call “vicinity’ extensions. The question in the present case is not what is the meaning of ‘port’ in any particular Act; it is whether the particular work is ‘dock work’. When one has made the tortuous journey through the fantastic labyrinth of statutory instruments one finds in the end that, for the purposes of the 1966 Act and the 1967
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scheme, work is ‘dock work’ at the port of Cardiff and Penarth if, and only if, it is carried on within the area of the dock estates; not the dock estates and their vicinity. There is no statutory provision which requires, or enables, work outside the dock estates, albeit in the vicinity, to be treated as ‘dock work’ for that purpose. The obscure s 58(4)dd of the 1966 Act, to which the Divisional Court’s attention was not directed, does not, in my view, so require or enable. It purports to apply to ‘… the next following section … ’ Counsel were unable to suggest what that meant. It is expressed not to apply to s 2(2), which itself defines what is to be the area of a port ‘For the purposes of this Act’. It does not apply to Part IV of the Act, and hence does not apply to the definition in s 58(1) of ‘dock work’, which definition includes the word ‘port’. In the end, as I understand it, counsel for the appellants, wisely I think, did not rely very strongly on s 58(4).
I would hold that the decision of the tribunal as set out in the third paragraph of this judgment was right. I disagree with the decision of the Divisional Court ([1969] 3 All ER 815, [1969] 3 WLR 1063) on the ‘cargo’ point but agree with its decision on the “vicinity’ point.
Appeal dismissed; cross-appeal allowed. Leave to appeal to the House of Lords.
Solicitors: Hill, Dickinson & Co (for the appellants); Clifford-Turner & Co (for the respondents).
Wendy Shockett Barrister.
Woodhouse & Co Ltd v Kirkland (Derby) Ltd
[1970] 2 All ER 587
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 21, 22, 23, 24, 28 APRIL 1970
Easement – Right of way – Excessive user – Prescriptive right of way – User by plaintiffs as occupiers of dominant tenement for business purposes – Whether right of user extended to plaintiff’s customers – Whether identity of persons using way for business purposes material – Whether increase in number of customers using way rendered user excessive.
Easement – Right of way – Extent – Derogation from grant – Right of way enjoyed by plaintiffs over defendants’ land – Sale by defendants to plaintiffs of strip of land – Sale for purpose of widening plaintiffs’ gateway at end of right of way – Whether implied grant of wider right of way – Erection of posts narrowing entry to plaintiffs’ land – Whether derogation from grant.
Since 1925 the plaintiffs, who were plumbers’ merchants, and their suppliers, and to a much lesser extent their customers had used the defendants’ passageway as an alternative way in and out of the plaintiffs’ yard. At all material times, the plaintiffs maintained a gate separating their yard from the defendants’ passageway and until 1963 this gate was generally kept locked. After 1963, however, the plaintiffs’ business increased and the gate was left open during business hours with the result that greater use was made of the defendants’ passageway by the plaintiffs’ customers. The plaintiffs negotiated with the defendants with a view to obtaining improved access to their yard at the top end of the passageway where it joined the yard. In 1965, a small piece of land, 16 feet long by 2 1/2 feet wide at the top of the passageway was conveyed by the defendants to the plaintiffs who then installed new gates taking in the width of land which they had acquired. After the defendants had objected to the use of the right of way by the plaintiffs’ customers the plaintiffs issued their writ in August 1966. In May 1967, the defendants deliberately erected two substantial rolled steel posts just within their boundary, the upper post being only 14 inches from the new
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gates, in order to make it more difficult for the plaintiffs’ large lorries to get into and out of the yard. The defendants also from time to time locked a gate halfway down the passageway which had always been kept open, except at night, and obstructed the plaintiffs’ right of way with motor cars and they erected a further two steel posts at the bottom end of the passageway on their own land.
Held – (i) The plaintiffs were entitled to a right of way for business purposes over the defendants’ passageway because there had been a sufficiently continuous user of the passageway by the plaintiffs’ suppliers, and in a minor degree their customers, to satisfy the statutory conditions of the Prescription Act 1832 (see p 589 j to p 590 a, post).
(ii) The right of way extended to the plaintiffs’ customers, because once the plaintiffs had established a right of way for their reasonable business purposes, the identity of the persons using it for those purposes was immaterial; further, the increase in the number of customers using the right of way did not constitute an excessive user within the principle that the owner of the dominant tenement was not entitled to increase the burden on the servient tenement, since a distinction had to be drawn between a mere increase in user and a user of a different kind or for a different purpose (see p 590 f and h, post).
Dicta of Harman and Davies LJJ in British Railways Board v Glass [1964] 3 All ER at 428, 429, 432 applied.
Quaere. Whether an increase in user, if very great, can ever of itself amount to excessive user (see p 592 a, post).
(iii) The 1965 conveyance to the plaintiffs did not operate as an implied grant of an extended right of way because such a positive right could not be acquired under the doctrine forbidding derogation from grant; (see p 593 d, post).
Cable v Bryant [1904–07] All ER Rep 937 considered.
(iv) The plaintiffs were entitled to an injunction to restrain the defendants from locking the gate halfway down the passageway and from deliberately obstructing the right of way with motor cars which was wrongful action on the part of the defendants (see p 593 j, post).
Per Plowman J. The erection of the two posts at the top of the passageway amounted to a derogation from the grant (although no cause of action arose until after the issue of the writ and the plaintiffs were not entitled to complain of the matter in the instant action) because the posts rendered the land comprised in the conveyance materially less fit for the purpose for which the grant was made, namely to provide improved access to the plaintiffs’ yard; but this was not a derogation from which any sensible injury arose since the two further posts erected by the defendants at the bottom end of the passageway prevented the plaintiffs’ lorries needing the wider access at the top from getting in at the bottom (see p 593 e to g, post).
Notes
For excessive user of right of way, see 12 Halsbury’s Laws (3rd Edn) 581, 582, para 1260, and for cases on the subject, see 19 Digest (Repl) 116, 117, 714–723.
For derogation from grant, see 12 Halsbury’s Laws (3rd Edn) 538–543, paras 1165–1176, and for cases on the subject, see 19 Digest (Repl) 40–41, 210–215.
Cases referred to in judgment
British Railways Board v Glass [1964] 1 All ER 418, [1964] 1 WLR 294; affd CA [1964] 3 All ER 418 [1965] Ch 538, [1964] 3 WLR 913, Digest (Cont Vol B) 231, 744a.
Cable v Bryant [1908] 1 Ch 259, [1904–07] All ER Rep 937, 77 LJCh 78, 98 LT 98, 19 Digest (Repl) 191, 1318.
Williams v James (1867) LR 2 CP 577, 36 LJCP 256, 16 LT 664, 19 Digest (Repl) 116, 714.
Wimbledon and Putney Commons Conservators v Dixon (1875) 1 ChD 362, [1874–80] All ER Rep 1218, 45 LJCh 353, 33 LT 679, 40 JP 102, 19 Digest (Repl) 14, 37.
Page 589 of [1970] 2 All ER 587
Cases also cited
Dalton v Angus (1881) 6 App Cas 740, [1881–85] All ER Rep 1.
Guest’s Estates Ltd v Milner’s Safes Ltd (1911) 28 TLR 59.
Hollins v Verney (1884) 13 QBD 304.
Hulley v Silversprings Bleaching and Dyeing Co Ltd [1922] 2 Ch 268, [1922] All ER Rep 683.
Jelbert v Davis [1968] 1 All ER 1182, [1968] 1 WLR 589.
Lock v Abercester Ltd [1939] 3 All ER 562, [1939] Ch 861.
Pettey v Parsons [1914] 2 Ch 653.
Pollard v Gare [1901] 1 Ch 834.
R P C Holdings Ltd v Rogers [1953] 1 All ER 1029.
Sloan v Holliday (1874) 30 LT 757.
Sturges v Bridgman (1879) 11 ChD 852.
Todrick v Western National Omnibus Co Ltd [1934] Ch 190; rvsd [1934] Ch 561, [1934] All ER Rep 25.
Action
The plaintiffs, Woodhouse & Co Ltd, sought a declaration that they were entitled to a right of way over certain land of the defendants, Kirkland (Derby) Ltd, and an injunction restraining the defendants from obstructing the right of way. The facts are set out in the judgment.
Raymond Walton QC and C M G Butterfield for the plaintiffs.
G T Hesketh for the defendants.
28 April 1970. The following judgment was delivered.
PLOWMAN J. This is a dispute about a right of way. The plaintiffs are lessees and occupiers of property known as 110 Friar Gate, Derby, where they carry on business as plumbers’ merchants. The property consists of offices and showrooms with a yard and buildings in the rear, the rear buildings being used for garaging the plaintiffs’ vehicles and for storage. Those premises are the alleged dominant tenement. I should describe them in rather more detail. Friar Gate is a busy main road in the centre of Derby and the principal access to the plaintiffs’ premises is a passage leading off Friar Gate. Various buildings lie on the righthand side of the passage as one enters from Friar Gate and halfway along is the plaintiffs’ trade counter. This passage leads to the plaintiffs’ yard and various other of the plaintiffs’ buildings are dotted round the yard. There has been no material change in the dominant tenement or its user for at least the last 45 years. There is another access to the plaintiffs’ yard and this is the alleged servient tenement. It is a passage belonging to the defendants and leading to the plaintiffs’ yard from Curzon Street. This passage is about 150 feet long and rather wider than the other passage. The defendants, whose business is that of builders, bought the premises, 34 and 36 Curzon Street, with the builder’s yard in the rear in 1959, and included in that purchase was this passage which leads not only to the plaintiffs’ yard but also to the defendants’ builder’s yard.
In 1969, the defendants acquired the premises 30 Curzon Street, which lie on the other side of the defendants’ passage, and 30 Curzon Street includes a strip of land which is now concreted, which lies alongside this passage, but is not subject to the right of way which the plaintiffs claim in this action. It came into being as a result of setting back the flank wall of 30 Curzon Street in 1950. There is some evidence that a right of way over the defendants’ passageway for the benefit of the plaintiffs’ property or part of it already existed as long ago as 1924, but this evidence is inconclusive and in this action the plaintiffs rely on the prescriptive right of way based on user for 20 years prior to action brought. They say that from at any rate 1925 until August 1966, when the writ in this action was issued, they and their suppliers, and to a much lesser extent their customers, used the defendants’ passageway with vehicles, horse-drawn in the earlier days and mechanised later, and did so nec vi, nec clam, nec precario. I am satisfied on the evidence and find as a fact that there was a suffiently continuous user of the defendants’ passageway during the relevant period by
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the plaintiffs’ suppliers, and in a minor degree their customers, to satisfy the statutory conditionsa of the Prescription Act 832 and to entitle the plaintiffs to a right of way over the defendants’ passageway to and from their premises for business purposes. But this is not the main matter of dispute in this action which centres on two other matters, first, the question of the plaintiffs’ customers. Does the right of way extend to the plaintiffs’ customers as well as to themselves and their suppliers and, if so, has there been excessive user by the plaintiffs’ customers? Secondly, what is the width of the right of way at the top end where the defendants’ passage meets the plaintiffs’ yard?
As to the first matter, the facts giving rise to this question are these: at all material times the plaintiffs maintained a gate separating their yard from the defendants’ passageway and until 1963 this gate was kept locked in order to exclude pilferers from the plaintiffs’ yard. Anyone wanting to get into or out of the plaintiffs’ yard via the defendants’ passage had to get hold of the key to the gate. But in February 1963 a new manager of the plaintiffs’ business at Friar Gate was appointed, a Mr Cousins, and before long he initiated the policy of keeping the gate unlocked and open during business hours, ie from 8.00 am to 5.30 pm. His reason for doing this was that customers calling at the trade counter were in the habit of parking their cars or light vans in the main entrance to the plaintiffs’ premises, ie in the passageway from Friar Gate, with the result that other vehicles could not get into or out of the yard via the passageway. Mr Cousins therefore had a notice put up indicating that customers should drive through into the yard in order to park their vehicles, and he opened the gate in the yard as a means of egress for the customers when the Friar Gate entrance was blocked. This, coupled with the fact that the turnover of the plaintiffs’ business was rapidly increasing resulted in the plaintiffs’ customers using the defendants’ passageway to a much greater extent that previously, and this undoubtedly at times caused some inconvenience to the defendants. They took the view that the plaintiffs’ customers were not entitled to use the passageway and they even wrote to some of them—five in all, I think, to tell them so.
One of the matters which I have to decide, therefore, is whether the plaintiffs’ right of way extends to their customers who, as I have said, made minimal use of the passage before the plaintiffs’ gate was left open. In my judgment it does. Once the plaintiffs have established a right of way for their reasonable business purposes, the identity of the persons using if for those purposes is in my judgment immaterial. It seems to me that the defendants’ suggestion to the contrary might lead to absurd results. Suppose, for example, that access to a private house lay over a path in a different ownership and the evidence was that during the statutory period the path had been used as access to the house by the occupiers and the postman and trades people, could it be said that the gardener or the doctor or the builder were excluded from going to the property via the path simply because there was no evidence of user by gardeners, doctors or builders during the 20–year period? In my judgment clearly not. If, then, the plaintiffs’ customers are entitled to use the defendants’ passage, is it an objection that the number of such users considerably increased after 1963? Is this excessive user within the principle that the owner of the dominant tenement is not entitled to increase the burden on the servient tenement? Again, in my judgment, the answer is ‘No’. A distinction has to be drawn between a mere increase in user and a user of a different kind or for a different purpose. The former is not, in my judgment, within the principle, the latter is.
The difference may be illustrated by British Railways Board v Glass. Part of the headnote of that case states ([1965] Ch at 540):
‘That the defendant had acquired by prescription a right to use the crossing
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for the purposes of the caravan site, and, it having been admitted by the plaintiffs on the pleadings that the whole of the field to the north of the crossing, the blue land, constituted a caravan site, and no radical change having occurred in the character of the dominant tenement, the mere increase in the number of caravans using the site and the consequent increase in the user of the crossing did not amount to an excessive user of the prescriptive right, and the judge was therefore correct in holding that there had been no such increase in the burden of the easement as would justify the plaintiffs in seeking an injunction.’
Lord Denning MR delivered a dissenting judgment. Harman LJ had this to say about the matter ([1964] 3 All ER at 428, 429, [1965] Ch at 562, 563), after referring to the case of Williams v James:
‘Applying that to the present case, one must do what the judge did (See [1964] 1 All ER 418 at 428, 429, [1964] 1 WLR 294 at 308), namely, base one’s conclusion on a consideration of what must have been the supposed contents of the lost grant on which the prescription rests. If this be supposed to be a grant of the right to use the blue land as a caravan site, then it is clear that a mere increase in the numbers of the caravans using the site is not an excessive user of the right. A right to use a way for this purpose or that has never been to my knowledge limited to a right to use the way so many times a day or for such and such a number of vehicles so long as the dominant tenement does not change its identity. If there be a radical change in the character of the dominant tenement, then the prescriptive right will not extend to it in that condition. The obvious example is a change of a small dwelling-house to a large hotel, but there has been no change of that character according to the facts found in this case. The caravan site never became a highly organised town of caravans with fixed standings and roads and all the paraphernalia attendant on such a place and, in my opinion, the judge was right in holding that there had been no such increase in the burden of the easement as to justify the plaintiffs in seeking as they did by injunction to restrict the user to three caravans or six or to prevent its use as what in the statement of claim is called “a caravan camp or site“.’
Then Davies LJ after referring to the judgments in Wimbledon and Putney Commons Conservators v Dixon said ([1964] 3 All ER at 432, [1965] Ch at 567, 568):
‘None of those learned judges were, as I think, considering a mere increase in the use of a right of way. An increase of burden in this context must, I think, be taken to mean a different or additional burden. If there is a right of way to and from a particular house, it does not seem that the owner of the servient tenement could successfully complain if the number of persons living in the house was greatly increased, or if the occupier of the house chose to use the right of way very much more frequently than previously. Suppose, as was said in the argument, a golf club were entitled to a right of way over adjoining land: if such a club were to double its membership, the burden on the servient tenement would be greatly increased, but it is impossible to think that the owner of the servient tenement could prevent such user. So, here, once it is admitted, as it has been admitted, that the blue land as a caravan site acquired by prescription a right of way, it does not seem to me that the plaintiffs can prevent a mere increase in the number of caravans on the site and the consequent increase in the use of the right of way. An increase in the number of caravans on a site is quite a different thing from the erection of a number of new houses, though no doubt from the point of view of the servient tenement the effect is somewhat similar.’
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In my judgment the plaintiffs in the present case have not been guilty of excessive user of their right of way. It is unnecessary to consider whether an increase in user, if very great, can ever of itself amount to excessive user because that case is not this case.
The other matter in dispute is the width of the servient tenement at the top end. The area of dispute is illustrated by two plans. The plaintiffs’ plan annexed to the writ shows a right of way expanding to a width of 10 feet 6 inches at the point where it meets the plaintiffs’ yard. The defendants’ plan shows it rather more than 2 feet narrower at that point. The reason for the difference is this, in 1963 the plaintiffs and the defendants were in negotiation with a view to the plaintiffs’ obtaining improved access to the plaintiffs’ yard at that point so that larger lorries belonging to the plaintiffs’ suppliers could more easily manoeuvre into and out of the plaintiffs’ yard. There is some conflict of evidence whether this was to be limited to lorries of two particular suppliers, but I am satisfied that it was not, and that their names were mentioned only by way of example. Ultimately it was agreed that the defendants would sell to the plaintiffs a small piece of land 16 feet long and 2 1/2 feet wide and this was conveyed to the plaintiffs by a conveyance dated 26 August 1965. The plan attached to that conveyance shows the position on the ground, as then existing, and the position as proposed, and the latter indicates new gates to be erected at the top end of the passageway with a total width of 10 feet 6 inches, 2 feet 6 inches of which was to be formed by the width of the land being purchased. Those gates were duly erected in September or October 1965. In May 1967, however, some nine months after the issue of the writ, the defendants erected two substantial rolled steel posts just within the boundary of their yard, the upper of those posts being only 14 inches from the plaintiffs’ new gates. The defendants did this deliberately in order to make it more difficult for the plaintiffs’ lorries to get into and out of the plaintiffs’ yard. The result has been to cut off so much of the entry to the plaintiffs’ yard as was provided by the 2 feet 6 inches dimension of the land comprised in the 1965 conveyance. The plaintiffs’ case is that this is a derogation from the grant contained in that conveyance, that the doctrine of derogation from grant operates by way of implied grant, and that the defendants must therefore be taken to have increased the width of the plaintiffs’ right of way to the extent shown on the plan annexed to the writ, ie by opening it out to a width at the top of 10 feet 6 inches.
Accordingly it was said that the plaintiffs are entitled to a declaration that such is and was, when this action started, their right of way. In support of his submission that the doctrine of derogation from grant operates by way of implied grant counsel for the plaintiffs cited Cable v Bryant, which is conveniently summarised in Gale on Easementsb. What is said there is:
‘In Cable v. Byrant the owners of a stable and an adjoining yard, subject, as to the yard, to a lease, let the stable, in which were two windows or ventilators, to the plaintiff. A few months later they conveyed the yard to the defendant, the lessee joining to surrender the lease. The defendant then erected a hoarding in the yard close to the stable, so blocking the windows or ventilators; and the plaintiff obtained an injunction. The immunity, so recognised, from interference with air and light appears to have had the characteristics of an easement, but it was argued that as the yard was let when the plaintiff took his lease, no implication of the grant of an easement could arise, because the easement could not have taken effect in possession. Neville J. expressed no opinion as to this, and decided the case on the principle of non-derogation from grant, that is, on the ground that the lessor, having let the stable, was under an obligation not to interfere with its reasonable use for the purposes of a stable for which it was granted.
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It was further decided that the rule against derogation from grant does not depend on implied covenant but is a rule of law, and that the obligation to which it gives rise affects a successor in title, with or without notice.’
Counsel for the plaintiffs submitted that covenant and grant cover the whole field and as the doctrine does not depend on implied covenant, it must depend on implied grant. I am not satisfied that this is so. A passage in Gale on Easementsc suggests that it is not. I find this sentence under the heading ‘Special immunities under the doctrine of non-derogation from grant’:
‘The same situation as if an easement had been created, although none has been, can arise from the principle thatd “if a grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit to be used for the particular purpose for which the grant or demise was made“.’
I draw attention to the words ‘The same situation as if an easement had been created, although none has been … ’ It may be, I think, that a purely negative right over the servient tenement or quasi servient tenement such as a right of light can be acquired under the doctrine forbidding derogation from grant in a manner which is indistinguishable from an implied grant, but I am not satisfied that this is true of a positive right such as a right of way. I was not referred to any authority establishing that that is true and I am unable to accept counsel for the plaintiffs’ argument on this point.
If I am right in thinking that the 1965 conveyance did not operate as an implied grant of an extended right of way, then no cause of action in respect of the erection of the posts, to which I have referred, arose until after the writ was issued and the plaintiffs are therefore not entitled to complain of the matter in this action. I have been asked, however, in any event to express my opinion on the question whether the erection of the two posts amounts to a derogation from the grant and I will do so. In my judgment it does, in that the posts render the land comprised in the 1965 conveyance materially less fit for the purpose for which the grant was made, namely, to provide improved access to the yard. That, however, is subject to the consideration that the defendants have erected two additional posts on their land by the bottom or Curzon Street end of their passageway and have positioned those posts in the concrete strip to which I have already referred. No complaint is made of this in this action, but the result has been to prevent lorries needing the wider access at the top from getting in at the bottom, and consequently the derogation from grant is not one from which any sensible injury arises.
The final matter which I should mention is the obstruction of the plaintiffs’ right of way. There is really no dispute about this. The defendants have from time to time locked a gate halfway down the passageway which was formerly always kept open except at night and by doing so have prevented access to and egress from the plaintiffs’ yard, and in addition to that they have on a number of occasions deliberately obstructed the plaintiffs’ right of way with motor cars in protest against what they considered unauthorised user by the plaintiffs’ customers. That was wrongful action on the defendants’ part and in my judgment the plaintiffs are entitled to relief accordingly.
Order accordingly.
Solicitors: Stanley & Co (for the plaintiffs); Gregory, Rowcliffe & Co, agents for Randolph Eddowes & Co, Derby (for the defendants).
Jacqueline Metcalfe Barrister.
R v Stone
[1970] 2 All ER 594
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, SACHS LJ AND EVELEIGH J
Hearing Date(s): 7 MAY 1970
Criminal law – Sentence – Recall of prisoner to increase or decrease sentence – Accused pleading guilty – Plea in mitigation – Accused giving evidence against co-accused – Whether power to recall if evidence differs from plea in mitigation.
An accused who intended to plead guilty and was likely to be called, after sentence, to give evidence for the prosecution against his co-accused was warned by counsel that if his evidence (in the trial of his co-accused) differed from the evidence raised in his mitigation he was liable to be recalled and have his sentence increased.
Held – Although a judge of assize or quarter sessions had power to recall an accused after sentence in order to increase or decrease the sentence already imposed on him, he could not so recall the accused after he had pleaded guilty and had given evidence for the prosecution on the ground that the evidence which he gave was not the same as was raised by way of mitigation in his own trial (see p 596 c, post).
Notes
For sentencing in advance a co-accused who is to give evidence for the prosecution, see 10 Halsbury’s Laws (3rd Edn) 435, para 804, and 481, para 879, and for a case on the subject, see 14 Digest (Repl) 285, 2610.
Appeal
This was an appeal by Geoffrey Leslie Stone from a conviction at Brighton Quarter Sessions on 17 September 1969 before the recorder (C J A Doughty QC) and a jury on a charge of burglary. The appellant was found guilty and was sentenced to borstal training. He appealed by leave of the single judge. The facts are set out in the judgment of the court.
R G Hawkins for the appellant.
A B Hidden for the Crown.
7 May 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On a night in July 1969 a burglary occurred at an antique dealer’s shop in Brighton; the front window was broken with a milk bottle and two table lamps worth some £82 10s were stolen. In addition the value of the broken window was bout £50, and there was some £500 worth of damage to other items in the window display which were broken beyond repair. The burglary was discovered the next day in the early hours of the morning, about 5.45 am. The police at 9.20 am went to an eating house, the ‘Matador’ in Brighton and found that the premises were locked. They rang, but for several minutes they failed to gain admittance. Thereupon they went away in search of the owner of the premises, a Mr Bennett. At 9.50 am they returned with Mr Bennett, who let them in, and there in the basement sleeping on the floor was the appellant, a man called Cook and a man called Weaver. Beside them were articles consisting of a torch, a screwdriver, a wrench, a Chubb key, a length of wire and a pair of gloves, clearly implements capable of being housebreaking implements. There was a jacket there belonging to the appellant which was wet—it had been raining that night—and in another basement room were the two stolen lamps. All three of the men denied that the lamps were theirs. Two of them, Mr Cook
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and Mr Weaver, had no business to be in those premises. The appellant, however, had been working for Mr Bennett for some period before the burglary, and Mr Bennett had allowed him to sleep in the basement.
On that night, or the early hours of the morning, Mr Bennett closed up the ‘Matador’, gave the appellant and the co-accused Weaver, who had been a customer at the eating house, a lift to a club, and in order that he might get in, Mr Bennett gave the appellant one of the front-door keys. It was as a result of that that these three men were arraigned at Brighton Quarter Sessions in September 1969 in each case on two alternative charges of burglary and of handling. The co-accused Cook pleaded guilty and gave evidence for the prosecution and in due course the appellant and the co-accused Weaver were convicted of burglary and the appellant was sentenced to borstal training. He now appeals against his conviction by leave of the single judge.
[His Lordship, having considered the direction given by the recorder in regard to corroboration, continued:] An important matter raised by this case concerns the inducement which the co-accused Cook might have had for giving evidence against the appellant. No direction as to corroboration was given to the effect that corroboration was needed because of possible inducements operating on the co-accused Cook’s mind, and indeed in an earlier passage the recorder had conveyed to the jury that the co-accused Cook was not suffering under any inducement whatever; indeed it could be said that he almost withdrew from the jury any consideration of an inducement operating on the co-accused Cook’s mind. He said:
‘Now Cook was a young man of seventeen. The prosecution, during the course of the case, decided to call him. Before a fellow prisoner is called, the law says, and I certainly follow that practice, that he must be sentenced beforehand. The reason for that is obvious, no inducement to him to help the prosecution with a view to getting a lesser sentence. That is the course I took, and what sentence he got is entirely my affair, having heard his counsel and such witnesses in mitigation that counsel called. I do not know whether either counsel were insinuating that he got a lighter sentence as a kind of inducement to give evidence for the prosecution. If so, that was a most improper suggestion and one that I ask you to reject.’
In regard to those two matters, that direction and the absence of warning as to inducement in regard to the co-accused Cook’s evidence, one must look at the background here. The co-accused Cook had given two statements, one at the outset fully implicating the appellant and the co-accused Weaver, and that was the version which he gave in evidence to the court. It was on that version that mitigation on behalf of the co-accused Cook was based, to the effect that he, a young man of 17 was operating under older and more hardened criminals, that induced the recorder to give him, the co-accused Cook, a light sentence. He had, however, a day or two later, having seen and talked to the other co-accused, made a second statement in which he went back on his first statement. Since it was being considered that the co-accused Cook might be called for the prosecution, the recorder decided to deal with him first following the general, although not universal, practice. In mitigation, counsel informed the recorder that he, counsel, was satisfied that the first statement contained the true version and mitigated on that basis. A time came when the recorder said: ‘Supposing later on to-day [that is clearly a reference to when he gave evidence] he says that everything he said was quite untrue’ in other words following the second statement. Thereupon counsel said:
‘This is the difficulty of the case. I can tell the court this, that I have told him about the powers of the court where that sort of thing happens. He has told me, and I think it is proper for me to tell you this, that the truth of the whole matter is contained in his first statement and that is the basis of the evidence
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which he will give when he comes into the witness box. He knows the court has wide powers if he gave false evidence. I think you have power, so far as the alteration of sentence is concerned, to increase the sentence and it has been made quite plain to him what the position is.’
This statement in open court reveals the fact that counsel, not merely in this case but no doubt quite generally, are advising their clients in a position such as this that if they do not adhere to the story on which counsel has mitigated and obtained a lenient sentence, that if he goes back on that, then there is power in the court to have the prisoner back and to give him a more severe sentence. That there is power in a judge of assize or quarter sessions to have a prisoner back and increase the sentence or decrease the sentence is abundantly true, but this case raises really the propriety of enabling an increase to take place merely because the prisoner does not give in evidence the same evidence as was raised by way of mitigation in his own trial.
The court would like to say that they, in their experience, have never come across a case where a judge has had a prisoner back and increased the sentence because of a change in his evidence. Indeed, the court has come to the conclusion that it would be wrong. The court thinks that for the future it should be understood as a matter of practice that in the case of a co-accused who pleads guilty and is going to give evidence for the prosecution, there should be a restriction on the judge’s legal right, and that he should never have a prisoner back to increase the sentence. It follows if that is understood that counsel for the future will never be able to give that advice to his client. The reason why the court is satisfied that this course is necessary is this. The whole object of sentencing in advance a co-accused who is going to give evidence for the prosecution, is that there should be no suggestion that he is under any inducement whatever to give evidence which will result in his getting a less sentence than otherwise, and if this power is allowed to remain and counsel can give this advice, it will mean that the whole object of sentencing him in advance is defeated, because it could always be said that he was under an inducement, indeed a threat, that if he did not adhere to the story he would be brought back and given a more severe sentence. Accordingly, for those reasons this court is satisfied that there must be a restriction on what is really the power of a judge to have a prisoner back in these circumstances and increase his sentence.
Having said that, it would follow that in the present case the co-accused Cook might well be under an inducement in his own interest to give the evidence in accord with the first statement. Not only that, but as already stated it could be said that the question of any inducement operating on his mind was nearly, if not wholly, removed from the jury. But having said that, this court has come to the conclusion that this is quite clearly a case for the application of the provisoa. It is impossible to think that a jury on a proper direction, that is to say warned of the inducement that might be operating on the co-accused Cook’s mind, warned of the fact that the object of corroboration was to help the jury to be sure that no inducement was operating on the co-accused Cook’s mind, and finally told that there was abundant evidence capable of amounting to corroboration, to the keys and all the circumstances of the case, would not have convicted the appellant. In those circumstances and for the reasons given, this court would dismiss this appeal.
Appeal dismissed.
Solicitors: Howard, Johnson & McCabe, Brighton (for the appellant); W O Dodd, Brighton (for the Crown).
Jacqueline Charles Barrister.
Eichner v Midland Bank Executor & Trustee Co Ltd
[1970] 2 All ER 597
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND MEGAW LJJ
Hearing Date(s): 23 APRIL 1970
Landlord and tenant – New tenancy – Business premises – Opposition by landlord – Breach of covenant – Judge taking into account matters not specified in notice of opposition – Whether judge could take into account tenant’s general conduct towards obligations under tenancy – Landlord and Tenant Act 1954, s 30(1)(a), (b), (c).
The tenant applied for a new lease under Part II of the Landlord and Tenant Act 1954. The landlords’ notice of opposition specified certain breaches of covenant amongst which were the carrying on of a business manufacturing plastic foam and a translating business in breach of a covenant to use the premises as a private dwellinghouse only and the parting with possession of part of the premises without the landlords’ consent. The county court judge refused to grant a new tenancy, holding that, although the only substantial breach of covenant was the setting up of the translation business, the general relationship of the parties (which included a history of litigation between them and difficulties over payment of rent) had been such that the tenant’s behaviour fell below that required for a tenant applying for a new tenancy under the Act. On the question whether the judge was entitled to take into account these matters which were not stated in the notice,
Held – Under s 30(1)(a), (b) and (c)a of the Landlord and Tenant Act 1954 the judge was entitled to consider all the circumstances in connection with the breaches of covenant and to consider the conduct of the tenant as a whole in regard to his obligations under the tenancy; the judge was accordingly not confined only to those breaches specified in the landlords’ notice of opposition (see p 599 h and p 600 a, post).
Dictum of Ormerod LJ in Lyons v Central Commercial Properties Ltd [1958] 2 All ER at 774 applied.
Notes
For the grounds of opposition to the grant of a new tenancy under Part II of the Landlord and Tenant Act 1954, see 23 Halsbury’s Laws (3rd Edn) 892, 893, para 1716.
For the Landlord and Tenant Act 1954, s 30, see 18 Halsbury’s Statutes (3rd Edn) 565.
Cases referred to in judgment
Lyons v Central Commercial Properties Ltd [1958] 2 All ER 767, [1958] 1 WLR 869, Digest (Cont Vol A) 1060, 7417sb.
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Appeal
This was an appeal by the tenant, Manfred Joseph Eichner, from a decision of his Honour Deputy Judge Stucley at East Grinstead County Court on 30 July 1969 dismissing the application for new tenancy under the Landlord and Tenant Act 1954. The landlords were the Midland Bank Executor & Trustee Co Ltd (executors and administrators of the estate of Charles Taylor Craig deceased).
M S Rich for the tenant.
G H Hodgson for the landlords.
23 April 1970. The following judgments were delivered.
LORD DENNING MR. This is a claim for a new lease. The premises consist of a house called The Rocks at Ashurst Wood, near East Grinstead, together with a building called The Barn, and another building called The Reading Room. The original lease was for 21 years. It came to an end in September 1968. It contained a covenant by the tenant that he—
‘WILL occupy and use the said premises as a private dwellinghouse only and not for any business and in particular will not use the same as a tea garden hotel or club but the Lessee shall be permitted to have a private workshop and/or laboratory together with a study for his own personal use for his own profession as a Chemist in the building known as The Barn.’
The tenant is a skilled chemist. He used part of the premises for the profession of a chemist. But he went further. He manufactured there a material called plastic foam. He also carried on a translation business which he called Interlingua Translations, in which he employed 15 to 25 people. It was, so to speak, a central receiving and despatching station, with translators working in the surrounding country. By July 1966 this was a business that was ‘going great guns’.
Towards the end of the lease the landlords gave a schedule of dilapidations for repairs, and, when the term expired, they claimed possession. They issued a writ in October 1968. The tenant claimed that he was using the premises for business purposes and was entitled to a new lease. Thereupon the landlords did not proceed with the action for possession. They treated the tenant as having continued under the Landlord and Tenant Act 1954. They gave him notice in accordance with s 25 to terminate the tenancy, and added:
‘We would oppose an application to the Court under Part II of the Act for the grant of a new tenancy on the ground that:—(a) you ought not to be granted a new tenancy in view of the state of repair of the holding such state resulting from your failure to comply with the repairing obligations of the current tenancy. (b) you ought not to be granted a new tenancy in view of your substantial breaches of obligations under the current tenancy in that in breach of covenant to use the holding as a private dwelling house only and not for any business … you have been and are permitting or carrying on the following businesses on the holding (i) the trade of manufacturing plastic foam for sale by a business known as Rocks Plastic Foam Company Limited. (ii) the trade or employment of translating foreign languages under the business name of Interlingua Translations and further that in breach of covenant not to assign transfer underlet or part with possession of the holding or any part thereof or part with or share the possession or occupation thereof or any part thereof without the consent of your landlords you have parted with possession or share possession of part of the holding with Rocks Plastic Foam Company Limited and/or one Martin.’
The tenant applied for a new lease, and the landlords opposed it on those grounds which they had put in their notice of opposition. The county court judge found that the dilapidations had been remedied. He said that the parting of possession to a
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sub-tenant was not serious and that the manufacturing of plastic foam was not serious enough for the court to refuse a new lease. But the thing which he did find was a substantial breach was this:
‘… the … Interlingua Translations Organisation was set up without telling the Landlord, which I consider is an extraordinary user of a landlord by a tenant and goes far beyond the normal limits of a Landlord and Tenant relationship.’
If the judge had refused a new lease on that ground, there could be no possible ground of appeal to this court. But counsel for the tenant said that the judge did not put it only on that ground. He put other grounds into the scale. The judge said:
‘What I do consider very important is the relationship between the Landlord and the Tenant. This has been very unhappy for at least 11 years, and this is admitted by [the tenant]. This unhappy relationship has therefore existed since 1958. There is evidence of a great deal of litigation in the past, in 1958, 1959, 1961, 1965 and the present year … It must be considered very carefully whether it is fair to saddle the landlord with a tenant with whom he is in constant litigation.’
The judge also referred to the payment of rent. He said:
‘… in considering the picture as a whole I must consider [the tenant’s] history of paying rent and ability to pay the rent, in the future.’
Counsel for the tenant submitted that the judge ought not to have taken those other grounds into consideration, because they were not stated in the notice. He refers to s 30(1) of the 1954 Act which says that the landlord may oppose the new tenancy on the grounds stated in the notice, and, inferentially, not on any other grounds. If the landlords had wished to include those other grounds they should have specified them in their notice as ‘any other’ reasons ‘connected with the tenant’s use or management of the holding’ under s 30(1) (c). The landlords not having put them in the notice, counsel for the tenant submitted that they should not be taken into account. For this he relied on a sentence of Harman J in Lyons v Central Commercial Properties Ltd ([1958] 2 All ER 767 at 775, [1958] 1 WLR 869 at 880), in which he said:
‘In my judgment, the discretion vested in the court under s 30(1)(a), (b) and (c) is narrow. It is limited to the question whether, having regard only to the grounds set out, a new tenancy “ought not” to be granted.’
But Ormerod LJ did not restrict the discretion so narrowly. He said ([1958] 2 All ER at 774, [1958] 1 WLR at 878):
‘Without attempting to define the precise limits of that discretion, the judge, as I see it, may have regard to the conduct of the tenant in relation to his obligations … ’
I prefer the view of Ormerod LJ. I think that the judge here was not confined to the breach of the tenant in carrying on the translation business of the Interlingua Organisation. It was, I think, open to him to look at all the circumstances in connection with that breach; also, I may add, to look at the conduct of the tenant as a whole in regard to his obligations under the tenancy. The judge was not limited to the various grounds stated in the notice.
In any case, it seems to me that, if the judge had limited himself to this one substantial breach in connection with Interlingua Translations, he would have held that the tenant ought not to be granted a new tenancy.
I see no reason for interfering with the judgment of the county court judge, and I would dismiss the appeal.
Page 600 of [1970] 2 All ER 597
FENTON ATKINSON LJ. I would like to pay tribute to the argument of counsel for the tenant; but I am wholly unconvinced by what he has said, and I agree that this appeal fails.
MEGAW LJ. I also agree.
Appeal dismissed.
Solicitors: Cooke, Matheson & Co agents for Frederick Turner & Jones, East Grinstead (for the tenant); Ernest W Long & Co (for the landlords).
Rosalie Long Barrister.
London and County (A & D) Ltd v Wilfred Sportsman Ltd (Greenwoods (Hosiers and Outfitters) Ltd, third party)
[1970] 2 All ER 600
Categories: LANDLORD AND TENANT; Leases
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DONOVAN, RUSSELL AND MEGAW LJJ
Hearing Date(s): 25, 26, 27 FEBRUARY, 2, 3 MARCH, 15 APRIL 1970
Landlord and tenant – Lease – Assignment – Covenant by assignor with landlord – Covenant to pay rent in event of non-payment by assignee – Mortgage of lease by assignee – Non-payment of rent by assignee – Payment by assignor under guarantee – Order for possession against assignee granted to mortgagee – New lease granted to assignor by head landlord subject to and with benefit of assignee’s lease – Whether receipt of payments from assignor under guarantee waived landlord’s rights to forfeit assignee’s lease – Whether right to forfeit waived by making new lease subject to assignee’s lease – Whether assignor as reversioner to assignee’s lease entitled to forfeit that lease for rent in arrear when assignor became reversioner.
On 1 August 1961a, the landlords leased two adjoining properties, 5 and 6 High Street, Bargoed, to H Ltd for 21 years from 29 September 1960. The lease of 5 contained a proviso for re-entry if the rents should at any time be unpaid for 21 days. On 18 September 1961, H Ltd assigned the two leases to the third party who on 20 September 1961 granted a sublease of 6 to the defendant. On 20 June 1963, the landlords granted a licence to the third party to assign the lease of 5 to M; by the licence the third party covenanted to pay and make good to the landlords any losses resulting from the defaults of M or his successors. On 19 August 1963, the third party assigned the leases of 5 and 6 to M, the latter property being subject to the defendant’s sublease. M, on the same day mortgaged the lease of 5 to the plaintiff. In March 1964, M defaulted in payment of the rent due under the leases of 5 and 6 and the landlords called on the third party under the guarantee in the licence and the defendant paid rent under the sublease to the third party having been authorised by M so to do. The third party paid the rent under the covenant and continued to do so until they obtained the grant of a lease direct from the landlords. The last such payment under the covenant was made on 24 June 1965 in respect of rent due on that date. In March 1965, the plaintiff obtained an order for possession of 5 because M had defaulted in payments due under the mortgage. M gave up occupation in May and the defendant moved into 5 (as well as 6) at the
Page 601 of [1970] 2 All ER 600
instance of the third party. It was proposed that the third party would grant new subleases to the defendant when the third party had obtained new head leases of the properties which had been agreed to in principle. On 31 August 1965, the landlords sent the leases dated 2 August 1965, of 5 and 6 to the third party, the leases being for a term of 21 years and seven days from 29 September 1960, and expressed to be ‘subject to and with the benefit’ of the lease of 1 August 1961. The plaintiff wrote on 13 September 1965 asking the defendant to take steps to give vacant possession of the property. Counsel’s opinion was sought and the defendant having been advised that the third party were legally landlords and the defendant legally in possession displayed a notice in November 1965 to the effect that the premises had been re-entered on the ground of non-payment of rent. On the question whether the third party, as reversioner to M’s lease of 5, had ever been in a position to forfeit that lease and, if so, whether the third party had re-entered so as to effect that forfeiture.
Held – (i) Even if the demand and receipt by the landlords from the third party of payments under the covenant in the licence operated as a waiver of previous occasions of forfeiture of M’s lease, the occasion of forfeiture which arose by virtue of the non-payment for 21 days by M of the rent due in June 1965 could not have been so waived, because the payment of an equivalent sum from the third party had been received by the landlords on 24 June whereas the occasion of forfeiture did not arise until 15 July (see p 606 g and p 608 d and h, post).
(ii) There was no waiver of the right to forfeit M’s lease by the inclusion in the lease sent to the third party on 31 August 1965 of the phrase ‘subject to and with benefit’ of M’s lease because a statement or act by the landlord which is neither communicated to the tenant nor can have any impact on the tenant could not be taken to be an election to waive the forfeiture (see p 604 b and p 608 d and h, post).
Davenport v Smith [1921] 2 Ch 270 disapproved.
(iii) The language of s 141b of the Law of Property Act 1925 indicated plainly that an assignee of the reversion might sue and re-enter for rent in arrear at the date of assignment even where the right of re-entry had arisen before the assignment (see p 606 d and p 608 d and h, post); accordingly the third party could and did in fact forfeit M’s lease and had re-entered to effect the forfeiture.
Rickett v Green [1910] 1 KB 253 approved.
Flight v Bentley (1835) 7 Sim 149 disapproved.
Decision of Buckley J [1969] 3 All ER 621 reversed.
Notes
For waiver of forfeiture, see 23 Halsbury’s Laws (3rd Edn) 671–674, paras 1396–1399, and for cases on the subject, see 31 Digest (Repl) 555–557, 6741–6768.
Cases referred to in judgments
Atkin v Rose [1923] 1 Ch 522, 92 LJCh 209, 128 LT 653, 31 Digest (Repl) 161, 2981.
Baylis v Le Gros (1858) 4 CBNS 537, 31 LTOS 215, 22 JP 482, 140 ER 1201, 31 Digest (Repl) 354, 484b.
Davenport v Smith [1921] 2 Ch 270, 91 LJCh 225, 126 LT 184, 31 Digest (Repl) 539, 6631.
Doe d Bryan v Bancks (1821) 4 B & Ald 401, 106 ER 984, 31 Digest (Repl) 524, 6471.
Flight v Bentley (1835) 7 Sim 149, 4 LJCh 262, 58 ER 793, 31 Digest (Repl) 258, 3939.
Hunt v Bishop (1853) 8 Exch 675, 22 LJEx 337, 21 LTOS 92, 155 ER 1523, 31 Digest (Repl) 526, 6494.
Hunt v Remnant (1854) 9 Exch 635, 23 LJEx 135, 22 LTOS 350, 156 ER 271, 31 Digest (Repl) 527, 6495.
Page 602 of [1970] 2 All ER 600
King (decd), Re, Robinson v Gray [1963] 1 All ER 781, [1963] Ch 459, [1963] 2 WLR 629, Digest (Cont Vol A) 1023, 5986a.
Matthews v Smallwood [1910] 1 Ch 777, [1908–10] All ER Rep 536, 79 LJCh 322, 102 LT 228, 31 Digest (Repl) 419, 5483.
Moore v Greg (1848) 2 Ph 717, 18 LJCh 15, 12 LTOS 169, 41 ER 1120, 31 Digest (Repl) 449, 5768.
Moores v Choat (1839) 8 Sim 508, 8 LJCh 128, 59 ER 202, 31 Digest (Repl) 449, 5767.
Pellatt v Boosey (1862) 31 LJCP 281, 31 Digest (Repl) 557, 6766.
Rickett v Green [1910] 1 KB 253, 79 LJKB 193, 102 LT 16, 31 Digest (Repl) 258, 3940.
Shepherd v Berger [1891] 1 QB 597, 60 LJQB 395, 64 LT 435, 55 JP 532, 31 Digest (Repl) 519, 6418.
Webb v Russell (1789) 3 Term Rep 393, 100 ER 639, 31 Digest (Repl) 240, 3744.
Appeal
This was an appeal by the third party, Greenwoods (Hosiers & Outfitters) Ltd, and the defendant, Wilfred Sportsman Ltd, against the judgment of Buckley J dated 24 April 1969 and reported [1969] 3 All ER 621 whereby he held that the plaintiff, London and County (A & D) Ltd was entitled to possession of the premises 5 Upper High Street, Bargoed, Glamorganshire from the defendant and ordering an enquiry as to mesne profits. The facts are set out in the headnote.
P R Oliver QC and V G Wellings for the third party.
J A R Finlay for the defendant.
L A Blundell QC and G Avgherinos for the plaintiff.
Cur adv vult
15 April 1970. The following judgments were delivered.
RUSSELL LJ. The facts in this case are to be found in the report of the hearing below ([1969] 3 All ER 621, [1969] 1 WLR 1215) and I need not lengthen this judgment by their repetition. The basic question is whether the third party as reversioner to Mr Miah’s lease of 5 Upper High Street, Bargoed, Glamorganshire, has ever been in a position to forfeit that lease, and if so whether the third party has re-entered so as to effect that forfeiture. The plaintiff denies both those propositions and contends that Mr Miah’s lease, which is charged to the plaintiff and which the plaintiff wishes to sell in order to realise the charge, is still subsisting, and that the third party and the defendant have no right to possession or occupation of the premises.
It will simplify consideration of what rent has not been paid under Mr Miah’s lease which should have been paid, if I observe at the outset that no rent has been payable on any footing ever since the third party became reversioner on 31 August 1965, since the occupation of 5 Upper High Street by the defendant would (if not a re-entry) necessarily exclude the lessee from occupation or possession, and that occupation being at the instance of the landlord no rent would be payable under the lease during it. We are therefore not concerned with rent default for the 1965 September quarter and subsequently.
The plaintiff first says that all Mr Miah’s rent from his first direct default on the March quarter day 1964 up to and including the June 1965 quarter day has in fact been paid, inasmuch as the payments by the third party, to Mr Miah’s then landlord, under the guarantee must be considered as made in satisfaction of Mr Miah’s rent or on behalf of Mr Miah. Consequently there has never been an occasion of forfeiture. The judge ([1969] 3 All ER 621, [1969] 1 WLR 1215) did not accept that proposition, and neither do I. The payments were of sums under the liability assumed by the third party when it guaranteed to the
Page 603 of [1970] 2 All ER 600
landlord that Mr Miah would fulfil his obligations under the lease. Of course, they were payments made because of Mr Miah’s failure (or expected failure) to meet his rent obligations, and in that sense were made in respect of Mr Miah’s rent. But in law they were nothing but payments under the guarantee in satisfaction of the third party’s contractual obligation thereunder and it is not possible to infer that they were made or accepted as agent for Mr Miah so as to release Mr Miah from his obligation to pay rent as such to his landlord. Our attention was drawn by the plaintiff to phrases in solicitors’ letters which, they said, supported the submission that the payments were made in satisfaction of rent or on behalf of Mr Miah, but I do not consider that the use of such phrases in such correspondence can define the legal characteristics of such payments. We were referred to Pellatt v Boosey, not as covering this case, but as indicating that there may be circumstances in which payment by a third party stranger to the lease may be taken as a payment of rent or in satisfaction of rent under the lease. Maybe so, but the case is of no assistance to the plaintiff here, and I need not analyse the facts which were wholly different. Consequently, in my judgment, the rent under Mr Miah’s lease was at all relevant times unpaid.
The plaintiff next contended that the language of the lease that created in the third party on 31 August 1965, a reversion to Mr Miah’s lease operated as a waiver by the lessor of all previous occasions of forfeiture for non-payment of rent, by unequivocal recognition that Mr Miah’s lease was then still in existence. The demise was expressed to be ‘subject to and with the benefit of’ Mr Miah’s lease. Reliance was placed on Davenport v Smith, which if correctly decided would seem to justify the plaintiff’s contention. That case has not been received with universal acclaim. The late Mr F E Farrer roundly submitted that it was ‘manifestly erroneous’: see Key & Elphinstone’s Precedents in Conveyancingc. P O Lawrence J, in Atkin v Rose, regarded it with reserve. In Rickett v Green the mortgagee of the head lease assigned the premises to the plaintiff ‘subject to’ the defendant’s tenancy at a time when a quarter’s rent was in arrear and unpaid for the period of 14 days requisite for forfeiture, and shortly thereafter by supplemental instrument assigned also the benefit of the tenancy agreement. It was essential to the decision in favour of the plaintiff that (inter alia) the right to re-enter in respect of that occasion of forfeiture should have survived. It was assumed on all hands, the contrary not being suggested, that the right of re-entry was not waived by the reference in the assignment to the tenancy or its benefit; the whole argument was whether, by force of the then equivalent of s 141 of the Law of Property Act 1925, the right of re-entry passed with the reversion. That case was not brought to the attention of Astbury J in Davenport’s case. He relied on an extract from Hunt v Remnant which it seems to me was on another point altogether, and perhaps also on a bare dictum in Hunt v Bishop. He referred also to a general statement in Matthews v Smallwood on the waiver effect of unequivocal acts recognising the continued existence of the lease. In my judgment Davenport’s case was wrongly decided. Such a reference in an habendum is not to be taken as an unequivocal act of recognition so as to operate as a waiver. Reference must be made to the lease as Mr Farrer pointed outd as a commonplace requirement of conveyancing; it has not actually been terminated. I do not see that the addition suggested in Wolstenholme & Cherry’s Conveyancing Statutese of words such as
Page 604 of [1970] 2 All ER 600
‘so far only as subsisting’ can be regarded as necessary to avoid waiver. The suggestion would never have been made but for the decision in Davenport’s case. Moreover the use of the phrase in the lease to the third party was the merest res inter alios acta, and should not be taken as an unequivocal recognition of the continuance of the lease so as to waive forfeiture, any more than a reference to a lease as such in a letter from the landlord to his solicitor, or to his wife. The landlord has an election whether to waive or to forfeit, and it seems to me as at present advised that a statement or act by the landlord which is neither communicated to the tenant nor can have any impact on the tenant should not be taken to be an election to waive the forfeiture.
The plaintiff’s next contention was that the right of re-entry, being a right of re-entry for non-payment of rent, did not pass to the third party on 31 August 1965, when he became reversioner. This raises the question debated in Re King (decd), Robinson v Gray on the effect of s 141 of the Law of Property Act 1925. I have already referred to Rickett v Green in the Divisional Court. That was a decision that under the then legislation a right of re-entry for non-payment of rent existing at the date of the assignment of the reversion passed to and could be relied on by the new reversioner; although it is to be noticed that there was a supplemental express assignment of the quarter’s rent then in arrear. Under Mr Miah’s lease rent was reserved payable quarterly on the usual quarter days and the lessee covenanted, inter alia, to pay the rent thereby reserved on the days and in the manner aforesaid. And there was of course the proviso for re-entry (inter alia) should the rent reserved be unpaid for 21 days after becoming payable.
Section 141 of the Law of Property Act 1925 provides:
‘(1) Rent reserved by a lease, and the benefit of every covenant or provision therein contained, having reference to the subject-matter thereof, and on the lessee’s part to be observed or performed, and every condition of re-entry and other condition therein contained, shall be annexed and incident to and shall go with the reversionary estate in the land, or in any part thereof, immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate.
‘(2) Any such rent, covenant or provision shall be capable of being recovered, received, enforced, and taken advantage of, by the person from time to time entitled, subject to the term, to the income of the whole or any part, as the case may require, of the land leased.
‘(3) Where that person becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him notwithstanding that he becomes so entitled after the condition of re-entry or forfeiture has become enforceable, but this subsection does not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesaid.
‘(4) This section applies to leases made before or after the commencement of this Act, but does not affect the operation of—(a) any severance of the reversionary estate; or (b) any acquisition by conveyance or otherwise of the right to receive or enforce any rent covenant or provision; effected before the commencement of this Act.’
Taking the language of the section I find it difficult to see how it can be said that rent due and unpaid by Mr Miah for the quarters from March 1964 to June 1965 inclusive was not rent reserved by his lease, and accordingly annexed by the section
Page 605 of [1970] 2 All ER 600
and by the section made incident to and to go with the reversionary estate in the land on 31 August 1965. Similarly it seems to me that the condition for re-entry for failure to make those payments of rent is apparently so annexed and made incident and to go. Equally it would seem correct to say that s 141(2) provides that the third party, as the person after the assignment of the reversion entitled to the income of the land, is entitled to recover that same rent and enforce its payment. Similarly s 141(3) appears to me to provide that that person may recover that rent notwithstanding that he became entitled after the condition of re-entry or forfeiture had become enforceable unless it had previously been waived. That last subsection seems to me in terms to refer to entitlement to rent that had accrued due and payable before the assignment of the reversion, being indeed so much in arrears as to have produced an occasion of forfeiture. In Re King (decd) a question for decision was whether s 141 operated to confer on an assignee of the reversion the right to damages for breach of a covenant to rebuild a factory, which covenant had already been breached by the lessee before the assignment, or whether the assignor retained the right to sue for damages for such breach. It was held that s 141 did so operate and that the assignor did not retain such a right. The case was therefore not concerned with rent in arrear at the date of the assignment of the reversion, nor with the applicability of s 141 to such a case. Lord Denning MR however, in the course of an historical review of the matter expressed the opinion ([1963] 1 All ER at 785 et seq, [1963] Ch at 477 et seq) that an assign of the reversion could not sue for nor otherwise enforce payment of rent in arrear at the date of the assignment. He went in part by analogy with the case of the death of the reversioner and the inability of the heir-at-law to claim rent in arrear at the death, following the statement of Lord Kenyon in 1789f that a statute (32 Hen c 34) gave to assignees of the reversion the same position as was occupied by heirs-at-law. He relied on a decision of Shadwell V-C in Flight v Bentley ((1835) 7 Sim 149 at 151) who, after discussion with some of the common law judges, ruled as a minor point in the case that a purchaser of the reversion whose conveyance was executed in July 1832 could not sue for the previous June quarter’s rent, but only the vendor, on the ground that that rent had been severed from the reversion and was a mere chose in action. (I observe that it was a condition of the auction sale in March that the purchaser should take all profits and bear all outgoings from 25 March and the conveyance purported to operate from 25 March.) Lord Denning MR considered ([1963] 1 All ER at 789, [1963] Ch at 482, 483) that the Conveyancing Act 1881, s 10g (and s 141 of the Law of Property Act 1925), had not changed the law in any manner relevant to the subject under discussion.
Upjohn and Diplock LJJ were of opinion that the question was one simply of the construction of s 141 the language of which they found clear and that authorities prior to s 10 of the 1881 Act were of no assistance and (per Upjohn LJ ([1963] 1 All ER at 793, [1963] Ch at 490)) should all be put on a shelf marked ‘Not to be looked at again’. Upjohn LJ pointed out ([1963] 1 All ER at 792, [1963] Ch at 488) that the right to sue thereon was an integral part of the benefit of the covenant to reinstate and could not be severed from it. He pointed out that the reasoning of the judges as to rent in Flight v Bentley could not apply to a covenant; the covenant in the case was of course clearly a covenant ‘having reference to the subject-matter’ of the lease
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within the language of s 141(1). Upjohn LJ ([1963] 1 All ER at 792, [1963] Ch at 488) looked somewhat askance at Flight v Bentley—which of course he had consigned to the forbidden bookshelf. He disagreed with Lord Denning MR’s view that the 1881 Act was merely declaratory of the existing law. Finally, he said ([1963] 1 All ER at 794, [1963] Ch at 491):
‘It follows from what I have said that I would regard it as open to any court, if satisfied that s. 141 leads to a different result (a matter on which I express no opinion), to say that Flight v. Bentley (assuming it correctly to interpret the law before 1881) no longer represented the law as to arrears of rent’.
Diplock LJ did not refer to the problem of arrears of rent as such, although in considering the scope of the language of s 141 he drew particular attention ([1963] 1 All ER at 798, [1963] Ch at 497) to the fact that sub-s (3) in terms envisaged cases in which a right of re-entry had arisen before the assignment of the reversion, and as I have remarked, that sub-section includes a reference to rent.
In my judgment the view expressed in Flight v Bentley on this matter is not now the law. The language of s 141 (substantially re-enacting the earlier legislation from 1881 onwards) is such as in my judgment to indicate plainly that an assignee of the reversion may sue and re-enter for rent in arrear at the date of the assignment when the right of re-entry has arisen before the assignment. The decision in Rickett v Green was therefore correct, and the express assignment of the quarter’s rent in arrear was not necessary to the decision. The other and major part of the decision in Flight v Bentley many years ago suffered an ignominious fate: see Moores v Choat and Moore v Greg, and now the minor part is in my judgment to be disregarded.
The plaintiff’s next point is that the demand and receipt of payments under the guarantee operated as waiver of previous occasions of forfeiture as being unequivocal recognitions that at the time Mr Miah’s lease was subsisting, the obligations of the guarantor third party being related to obligations of Mr Miah under his lease. So far as is known—and quite a lot is not known in this case, no party having called any evidence—these transactions, or at least the more recent ones, were not communicated to Mr Miah. But it may be said that they affected or had an impact on Mr Miah because from time to time they increased the obligation of Mr Miah to the third party, Mr Miah having covenanted with the third party that he, Mr Miah, would observe and perform the covenants in the lease. I am prepared for the purposes of the case to assume waiver resulted. But this cannot have operated to waive the occasion of forfeiture that arose 21 days after the June quarter day, for the receipt on 24 June of an equivalent sum from the third party under the guarantee (paid then in justifiable anticipation of default by Mr Miah on 25th) could not be taken as recognition of the continued existence of Mr Miah’s lease on any date later than that date. The plaintiff contended as to this that if the landlords could not be said to have thus waived the forfeiture in respect of the June quarter’s rent, there was something special about this payment on the actual quarter day which made it truly in satisfaction of Mr Miah’s rent, or that the fact that rent was payable quarterly in advance somehow prevented an occasion of forfeiture arising on 15 July. I am afraid I did not appreciate these points during the argument, and I do not now.
Next the plaintiff says that even if the June quarter default would otherwise be available as an occasion of forfeiture by the landlord, the third party cannot so use it, for to do so would be for the third party to take advantage of its own wrong; the wrong lying in this, that ever since shortly after 15 May 1965, the third party has been responsible for the occupation of 5 Upper High Street by the defendant as
Page 607 of [1970] 2 All ER 600
trespasser. But Mr Miah before 15 May had removed himself (and I dare say his restaurant effects) from 5 Upper High Street. There is not the slightest indication that by the occupation by the defendant Mr Miah was in fact deprived, or that but for it he would or could have paid the June quarter rent by 15 July. On the contrary, the only reasonable inference is that the third party was not in any degree responsible for the relevant rent default of Mr Miah in respect of the June quarter, and the suggestion that by seeking to forfeit the third party was seeking to take advantage of its own wrong is misconceived.
Finally, the plaintiff argued that there was in fact here no re-entry. There could be none by the third party until the reversion was vested in it on 31 August 1965. Prior to that date the situation was that 5 Upper High Street was being occupied by the defendant at the instance of the third party in trespass against Mr Miah as the lessee. Mere continuation of that situation (it was argued) could not operate as a re-entry. It would have been necessary for the third party and the defendant in some way to withdraw from the premises and then return physically in order to achieve a re-entry. As it was put, the trespass must be discontinued before there can be forfeiture by re-entry. I am not able to accept that argument. I see no point in the law requiring what was described in Baylis v Le Gros as an ‘idle ceremony’—a case in which there was sufficient re-entry by acceptance of a sub-tenant already in occupation as tenant of the forfeiting landlord. Before 31 August 1965 the third party was supporting the defendant in occupation in trespass against Mr Miah. Thereafter the third party was reversioner, entitled to forfeit, and by asserting the right in law to keep the defendant in occupation as tenant of the third party could only be understood in law to be asserting the determination of Mr Miah’s lease by reason of a forfeiture. If a situation can be referred to a legal basis I see no reason to go out of the way to refer it to an unlawful basis. For these reasons I would hold that Mr Miah’s lease was determined after 31 August 1965, and that the appeal should be allowed.
I wish, however, for completeness to refer to two other arguments advanced on behalf of the third party or the defendant. The proviso for re-entry used the words:
‘… if the rents hereby reserved … shall at any time be unpaid for twenty one days after becoming payable … then … it shall be lawful for the lessors at any time thereafter to re-enter … ‘
It was argued that the words that I have stressed had the effect of making any apparent waiver ineffective, the breach of obligation being in a sense a continuing breach. Reliance for this proposition was placed on Shepherd v Berger. There the proviso for re-entry was on the express condition that ‘“if and whenever” any one quarter’s rent should be in arrear for twenty-one days and no sufficient distress could be levied’. The first quarter’s rent was paid in June 1889 but not the next three quarters’. The landlord distrained for the three quarters and the distress raised only enough for less than two quarters, and on the landlord seeking to forfeit it was argued that the distress had operated as a waiver. The landlord was held entitled to forfeit. That case seems readily distinguishable. There was no right of re-entry at all unless and until it was shown that distress was an insufficient remedy, and it could not be said that the very prerequisite of the right destroyed the right. Moreover, the passage ([1891] 1 QB at 599) where it is pointed out that the landlord had appropriated the proceeds of the distress to the first two quarters’ rent is irrelevant except on the footing that appropriation to the third quarter’s rent would have operated to waive forfeiture for the earlier quarters’ defaults which would be inconsistent with the argument now under discussion. Doe d Bryan v Bancks also relied on was also a different case. There
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was there truly a continuing obligation to work the mine and proviso for re-entry whenever it could be asserted that in the previous two years no working had taken place. The form of the proviso in the present case is perfectly common, and the particular words relied on do not in my judgment have the effect suggested. I am fortified in this view by the fact that in Key & Elphinstone’s Precedents in Conveyancing,h, form 2 contains the words ‘if at any time’, and whereas form 3 does not contain them, it is nonetheless described as ‘The same. Short form’.
The other argument put forward was that there can never be waiver by recognition of the continued existence of the lease of forfeiture for non-payment of rent because, as has often been said, a right of re-entry for non-payment of rent is a mere security for the payment. I am not aware of any authority for this proposition and I see no justification in principle for making this distinction between a default in an obligation to pay rent and any other obligation. Of course, rent may be demanded after the forfeiture days are passed, and indeed part payment accepted on account without waiving the forfeiture; this does not recognise the continued existence of the lease beyond the date when that rent was payable. I refer in this connection also to the passage of Shepherd v Berger ([1891] 1 QB at 599) which appears to me inconsistent with the proposition advanced.
I would accordingly allow the appeal.
LORD DONOVAN (whose judgment was read by Megaw LJ). I agree.
With regard to the plaintiff’s suggestion that there never was a re-entry by the third party after 31 August 1965, since it had been in possession (albeit trespassory possession) since 15 May 1965. I should find the argument more persuasive if the plaintiff had been able to indicate clearly what the third party should have done. If it had turned the defendant out for a day, that would have interrupted the defendant’s occupation, but left the third party still in possession. Should the third party then have assigned its lease to someone else for 24 hours and re-entered afterwards? Seeing that Mr Miah had paid no rent for the preceding 18 months or so, and removed himself from 5 Upper High Street three months before, and that all the circumstances seem to show that Mr Miah could not care less what happened to the premises, it would indeed seem strange if the third party, which had borne the burden of Mr Mich’s defaults for practically a year and a half, had to put on such an act. What it did instead was to maintain the defendant in possession and in November 1965 put a notice on the premises to the effect that the third party had re-entered on the ground of non-payment of rent and that Mr Miah’s lease had been forfeited. In the circumstances I do not see what more it could reasonably have been expected to do effectively to exercise its right and to demonstrate its re-entry.
MEGAW LJ. For the reasons given in both the judgments which have been delivered, I agree that this appeal should be allowed.
Appeal allowed.
Solicitors: Ward, Bowie & Co agents for Lee & Priestley, Bradford (for the third party); Pritchard & Co agents for Sidney Isaacs, Seligman & Co, Cardiff (for the defendant); Brian H Taub & Co (for the plaintiff).
S A Hatteea Esq Barrister.
Taylor v Taylor (Taylor intervening, Holmes cited)
[1970] 2 All ER 609
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, FENTON ATKINSON AND PHILLIMORE LJJ
Hearing Date(s): 27, 28, 29, 30 APRIL 1970
Burden of proof – Civil action – Conviction as evidence – Upsetting conviction – Burden of proof on person seeking to upset conviction – Weight to be given to jury’s verdict – Civil Evidence Act 1968, s 11(1), (2).
Document – Admissibility in evidence – Transcript of criminal proceedings – Proceedings generally – Whether admissible in subsequent civil proceedings – Civil Evidence Act 1968, ss 2(1), 4(1).
Document – Admissibility in evidence – Trranscript of criminal proceedings – Summing-up – Whether admissible in subsequent civil proceedings – Civil Evidence Act 1968, s 4(1).
Where in civil proceedings, other than an action for defamation, conviction of an offence is proved and is admitted as evidence under s 11(1) and (2),a of the Civil Evidence Act 1968 that the offence has been committed, the onus of proof in relation to the effect of that evidence is on the person seeking to upset it, and very great weight should be given to the verdict of the jury in the criminal trial (see p 612 c and d and p 615 d and e, post).
J W Stupple v Royal Insurance Co Ltd [1970] 1 All ER 390 approved.
In civil proceedings the shorthandwriter’s transcript of previous criminal proceedings is admissible (except possibly insofar as it relates to the judge’s summing-up) both under s 2(1)b and under s 4(1)c of the Civil Evidence Act 1968; insofar as it is a transcript of the summing-up, it may perhaps not be covered by s 2(1), because that subsection deals with statements of which direct oral evidence by the maker would be admissible and the judge cannot give evidence, but the summing-up is probably admissible under s 4(1), because the transcript is a record compiled by the shorthandwriter in his capacity as such (see p 614 e and p 615 d and e, post).
Notes
For the admissibility of criminal convictions in subsequent civil proceedings, see Current Service to Halsbury’s Laws (3rd Edn), Vol 15, para 630A.
For the Civil Evidence Act 1968, ss 2, 4 and 11, see 12 Halsbury’s Statutes (3rd Edn) 911, 913, 922.
Case referred to in judgments
Stupple (J W) v Royal Insurance Co Ltd [1970] 1 All ER 390, [1970] 2 WLR 124.
Appeals
The petitioner wife, Jean Taylor, and the party cited, Laurence Holmes, appealed against an order made on 11 September 1969 by Mr Commissioner Jackson QC sitting at Newport, Monmouthshire, granting the husband, Ivor Lorencer Taylor, a decree nisi on the ground of the wife’s adultery. The facts are set out in the judgment of Davies LJ.
Page 610 of [1970] 2 All ER 609
K Bruce Campbell QC and R J Maddocks for the wife and the party cited.
Roger Gray QC and T R Crowther for the husband.
30 April 1970. The following judgments were delivered.
DAVIES LJ. This is an unusual and unfortunate case. It is an unusual case because the learned commissioner who tried it had to decide whether or not a husband who had been found guilty of incest on his 14–year-old daughter was rightly convicted. It is an unfortunate case because one of the main grounds of complaint of the hearing before the learned commissioner was a criticism—in my opinion a well-founded criticism—of the manner in which the learned commissioner conducted the hearing.
It is an appeal against a decision of Mr Commissioner Jackson QC given at the Newport Assizes on 11 September 1969. He had before him a petition by the wife, Mrs Taylor, for dissolution of marriage on the ground of adultery and also of cruelty, though the cruelty does not come into it since the alleged cruelty is based on the adultery. The adultery alleged by her was incestuous adultery with their daughter Eileen in May 1962, when, as I have said, Eileen was 14 years old. The husband denied that adultery and cross-prayed for dissolution of the marriage, also on the ground of adultery with three men; one was a man called Ginger Davies and that adultery was admitted by the wife in her discretion statement; and the other two were men named respectively Holmes, the party cited, and Jones. The incest which the wife alleged had been the subject of criminal proceedings at the Newport Assizes on 20 and 21 November 1962, when, before Thesiger J and a jury, the husband was found guilty on four counts of incest, on 2, 3, 4 and 15 May 1962. He was, as I say, convicted, and he was sentenced to three years concurrent on each count. He had, of course, by the time the matter came before Mr Commissioner Jackson QC, served the appropriate part of his sentence. It is to be observed that, after the conviction in November 1962, he applied for leave to appeal against his conviction. The matter was before the Court of Criminal Appeal, constituted by Lord Parker CJ, Ashworth and Winn JJ, on 5 March 1963, when the court refused leave to appeal against the conviction and directed that 42 days of the time he had been in prison should not count against his sentence.
The history of the matter is this. The husband and the wife were married on 25 June 1940, he being then 22 and she being 19. At all material times they lived in or near Abertillery. There were three children of the marriage, a girl born in 1942, a boy born in 1943, and the girl Eileen, to whom I have referred, born on 9 March 1948. There was another child, Sandra, born on 25 August 1961, who was admittedly not begotten by the husband. The husband is a man of fairly considerable criminal record, and I will advert to that later on. On 5 December 1960, the wife petitioned for divorce on the ground of cruelty. She had legal aid. In that petition she did not ask for the discretion of the court to be exercised in her favour. She says in her discretion statement in the present suit that she did commit adultery with Ginger Davies, and she says that Sandra is the offspring of that union. Perhaps I might read now (I will have to come back to it) the material paragraph in her discretion statement. She says that she was extremely despondent after the husband had been sent to prison. Then she states:
‘It was while I was in this depressed and despondent mood that shortly before Christmas 1960 I met “Ginger” Davies. He brought presents for the children and entertained them and he was very sympathetic and helpful. On this festive occasion we were in a convivial mood, at my house, when in a moment of weakness I permitted him to have intercourse with me. My husband was still in prison. A child was born as a result of the adultery.”
As I say, that child was born on 25 August 1961. On 27 May 1961, the husband
Page 611 of [1970] 2 All ER 609
was released from prison. Before that the wife had left home and gone to live in the house of Mr Holmes, the party cited. She said and he said that at all times there was nothing improper between her and the party cited. She said, rightly or wrongly, that she went to him, then being several months pregnant, because the husband had written to her from prison saying that he did not want her with him when he came out. However, shortly before the birth of Sandra—some week or so—she went back to the matrimonial home, and there the child was born. They having resumed cohabitation in September 1961, the divorce petition, to which the husband had put in an answer denying the wife’s charges, alleging condonation and praying for restitution of conjugal rights, was by consent dismissed.
We move on now to May 1962. The wife apparently had owed a debt, or the balance of a debt, in the sum of £4. There must have been a judgment summons taken out and, as a result, for non-payment of that sum she was committed to Cardiff gaol, where she was incarcerated from 1 to 7 May 1962. Eileen was at the matrimonial home, and was there with Sandra. Eileen’s evidence, both in the criminal trial of November 1962 and the hearing of this suit nearly seven years later—she now, of course, had grown up and was about 21—was that the husband had sexual intercourse with her probably four times, on 2, 3 and 4 May 1962, which she described in great detail, and also on a subsequent occasion on a settee in the house on 15 May, when, of course, the wife was no longer in Cardiff and would be somewhere about the house. The husband and wife were on bad terms. It had been suggested by the husband—and counsel for the husband has made some play with this matter this morning, it being one of the few points that he could possibly take in this case—that the wife had infected him with venereal disease in the autumn of 1961 and also in the following year. On 22 May 1962, the wife left, having intercepted Eileen when she was on her way back from school, and they returned to the party cited’s house. Eileen, then, and there is a great deal of dispute as to how it came out, told her mother and the party cited of the incest which she alleged that the husband had committed on her. On 23 May, the next day, the party cited went to the police, and I shall be reading shortly the evidence which the police officer gave as to the enquiries that he made of the husband in consequence. As I have already indicated, the husband was subsequently prosecuted and was committed for trial at Newport Assizes, where he was convicted.
When he was in prison the wife, in March 1963, went back to the matrimonial home at 15 Tillery Street, and subsequently petitioned for dissolution. Pleadings took place. There was a great deal of delay in hearing the suit, a fact which enraged the commissioner to a considerable degree, as a result of which he eventually sent the papers to the Law Society. At the end of it all the commissioner found that the husband had not had intercourse with his daughter. He said that there was what he described as a ‘coldly calculated conspiracy’ between the wife and Eileen (though he did not find that the party cited was a party to it) to give false evidence and to bring a false charge against the husband. Curiously enough, the motive which was suggested at the hearing of the divorce suit for this conspiracy was that it was by way of revenge because the husband had not paid the £4 which would have stopped the wife from being committed to Cardiff gaol. At the criminal trial the suggested motive was a quite different one, a rather odd one, as Thesiger J pointed out in his summing-up, namely, to threaten him (and it was said that he was threatened) with this prosecution unless he was prepared to make over the house to the wife. Those are the main dates and the history of the case.
There are two short matters of law to which I think I should refer before going any further. The first is as to the provisions of the Civil Evidence Act 1968, s 11, which was in force at the time of the divorce hearing. Section 11 provides as follows:
‘(1) In any civil proceedings the fact that a person has been convicted of an offence by or before any court in the United Kingdom or by a court-martial
Page 612 of [1970] 2 All ER 609
there or elsewhere shall (subject to subsection (3) below) be admissible in evidence for the purpose of proving, where to do so is relevant to any issue in those proceedings, that he committed that offence, whether he was so convicted upon a plea of guilty or otherwise and whether or not he is a party to the civil proceedings; but no conviction other than a subsisting one shall be admissible in evidence by virtue of this section.
‘(2) In any civil proceedings in which by virtue of this section a person is proved to have been convicted of an offence by or before any court in the United Kingdom or by a court-martial there or elsewhere—(a) he shall be taken to have committed that offence unless the contrary is proved … ’
That section obviously, in contradistinction to s 13 of the 1968 Act, which deals with the effect of convictions when they fall to be considered in an action of defamation, means that the onus of proof of, as it were, upsetting the previous conviction is on the person who seeks to upset it. It is probable, though I do not want to make any particular pronunciamento about it at the moment, that that is an onus of proof on balance of probabilities. But, having said that, it nevertheless is obvious that, when a man has been convicted by 12 of his fellow countrymen and countrywomen at a criminal trial, the verdict of the jury is a matter which is entitled to very great weight when the convicted person is seeking, in the words of the statute, to prove the contrary.
This was the view taken by Paull J in the recent case of J W Stupple v Royal Insurance Co Ltd. That was a case where a man who had been convicted of robbery and had subsequently been ordered to make partial restitution by order of a court of summary jurisdiction, sued the insurance company for the recovery of the sum so ordered to be paid. The insurance company not unnaturally counterclaimed for the very large sum of money, £80,000 or more, which had been the proceeds of the robbery. Paull J expressed some doubt whether he himself would, if he had been a member of the jury which had tried and convicted Mr Stupple, have come to the same conclusion as did the jury; but he, in my view rightly, said, without prejudice to what may be said in that case if it comes to this court, that quite obviously the most serious consideration and the heaviest weight should be given to the fact of the conviction in the criminal court.
The judgment in this case, however, was most extraordinary in that regard. It consisted of a cavalier and airy dismissal of the result of the criminal proceedings and, indeed, of the appeal to the Court of Criminal Appeal. I will read a passage from the judgment, where the commissioner said:
‘On the 21st November, 1962, the [husband] was found guilty at Monmouthshire Assizes on four counts of having sexual intercourse with his daughter, Eileen, contrary to the Sexual Offences Act [1956], and he was sentenced to three years’ imprisonment on each charge concurrently. At that trial he was represented. His daughter, Eileen, gave evidence at the magistrates’ court for the prosecution, but it is not known to me whether or not she gave oral evidence at the Assize hearing or whether the evidence that she gave was accepted without challenge. Unfortunately the documents in question, relating to the hearing, are not available to this court, and the [husband’s] recollection is that Eileen did not go into the witness-box at the Assize Court. Be that as it may, the [husband] was found guilty. Apparently there was some form of appeal, and again I do not know the details of that, and that appeal was dismissed. The [husband], in effect, is saying now, and has always said, that he was wrongly convicted.’
It is perfectly true that there was not before Mr Commissioner Jackson QC the transcript of the proceedings at the criminal trial. Whether there could have been
Page 613 of [1970] 2 All ER 609
or not is a matter that I shall consider in a moment. At any rate we had it before us. But how in the world he could content himself with, apparently, the depositions only, and content himself with saying that he did not know whether she gave oral evidence at the assizes or whether her evidence was accepted without challenge defeats me. If he had wanted to know, even without the transcript, he could have had the detective who was in charge of the case and also gave evidence before him, to tell him. There is another matter. Without knowing what evidence there was given at the criminal trial, the learned commissioner ventured this observation:
‘It is a very serious matter to have to come to a different conclusion from that of the criminal court where there was a judge and a jury, but on the evidence before me—and it is probably fuller and different from that before the criminal court, I find that [the husband] was innocent of the charges of incest.’
How he could know that the evidence before him was fuller, I do not know. Then finally on this part of the case there is an interesting passage. The husband was being cross-examined.
‘Q Were you represented at your trial at the assizes? A Yes.
‘Q And did Eileen go into the box to give evidence? A No. [That was quite wrong, of course.]
‘Q Eileen did not give evidence at the assizes? A No, they took what she said at the magistrates’ court to the best of my knowledge.’
That, of course, is a reference to the depositions. ‘Were you there, Mr Maddocks’?, said the commissioner. Mr Maddocks, counsel for the wife and the party cited, said: ‘I was not there’. The commissioner went on:
‘In the absence of the record I am afraid we are stuck with that answer. It may be correct, of course.
(Counsel (to the witness)): She did not give evidence? A To the best of my knowledge she was not even there either.’
Then the commissioner made a very astonishing remark:
‘How would you know, were not you in gaol? A Yes, but they fetched me back into the court [which was no doubt a true answer].
‘Q Do not speculate, just say what you actually know. A I know that they did not call her into the witness box at all and to the best of my knowledge she was not even in the court.’
That was complete and utter rubbish, of course; and how the commissioner could have supposed that the trial, although it was for a misdemeanour, would be going on without the husband being in the dock it is difficult to imagine.
How different was the commissioner’s approach from that of Paull J to a conviction by a jury. The commissioner’s approach I regard as undesirable and unsatisfactory. He was not giving his mind to the problem—the difficult problem—that was in hand. As I have said, he did not have the transcript of the criminal trial before him; and it is obviously a question of some doubt whether strictly that transcript would have been admissible in evidence before 1 October 1969d, which, of course, was after the date of the hearing of this suit. It could, of course, have been obtained by either party and could have been used for the purpose of cross-examination; but it was not.
However, the law is now different in view of the coming into force of Part I of the
Page 614 of [1970] 2 All ER 609
Civil Evidence Act 1968, to which I have already referred. Sections 2(1) and 4(1) of that Act are relevant and apply to the hearing of this appeal, as is conceded by counsel for the husband, they being procedural sections. Section 2(1) provides:
‘In any civil proceedings a statement made, whether orally or in a document or otherwise, by any person, whether called as a witness in those proceedings or not, shall, subject to this section and to rules of court, be admissible as evidence of any fact stated therein of which direct oral evidence by him would be admissible.’
Section 4(1) provides:
‘Without prejudice to section 5 of this Act, in any civil proceedings a statement contained in a document shall, subject to this section and to rules of court, be admissible as evidence of any fact stated therein of which direct oral evidence would be admissible, if the document is, or forms part of, a record compiled by a person acting under a duty from information which was supplied by a person (whether acting under a duty or not) who had, or may reasonably be supposed to have had, personal knowledge of the matters dealt with in that information and which, if not supplied by that person to the compiler of the record directly, was supplied by him to the compiler of the record indirectly through one or more intermediaries each acting under a duty.’
I will come to the rules of court in a moment. In my view, the transcript would be admissible under either of those sections. It may be, though I express no direct opinion on this, that the summing-up of the judge might not be covered by s 2(1), because that is dealing with a statement in evidence, and, of course, the judge cannot give evidence. But I think that the summing-up would probably be admissible under s 4(1), since that is a record compiled by the shorthandwriter in his capacity as such.
Counsel for the husband referred us to the Rules of the Supreme Court (Amendment) 1969e, which contains the rules made under the Act to which I have just referred. The relevant rules in that instrument are as follows. First (and I need not read this in full), r 21(1) provides that notice of intention to give such statements in evidence shall be given at certain times prior to the hearing. Rule 29(1) provides:
‘… the Court may, if it thinks it just to do so, allow a statement falling within section 2(1), 4(1) or 5(1) of the Act to be given in evidence at the trial or hearing of a cause or matter notwithstanding—(a) that the statement is one in relation to which rule 21(1) applies and that the party desiring to give the statement in evidence has failed to comply with that rule … ’
In other words, the court can waive the necessary requirement of giving notice in advance. Then, importantly, r 28 provides:
‘Where a party to a cause or matter has given notice in accordance with rule 21 that he desires to give in evidence at the trial or hearing of the cause or matter—(a) a statement falling within section 2(1) of the Act which was made by a person, whether orally or in a document, in the course of giving evidence in some other legal proceedings (whether civil or criminal), or (b) a statement falling within section 4(1) of the Act which is contained in a record of direct oral evidence given in some other legal proceedings (whether civil or criminal), any party to the cause or matter may apply to the Court for directions under this rule, and the Court hearing such an application may give directions as to whether, and if so on what conditions, the party desiring to give the statement in evidence will be
Page 615 of [1970] 2 All ER 609
permitted to do so and (where applicable) as to the manner in which that statement and any other evidence given in those other proceedings is to be proved.’
It was contended by counsel for the husband that, in those circumstances, the transcript was not admissible or ought not to be admitted. But I have not the least doubt, especially in view of the terms of r 28, which I have just quoted, that the transcript is admissible; and we accordingly decided to admit the transcript of the criminal proceedings, some parts of which were referred to by counsel for the wife, and one part of the summing-up was referred to by counsel for the husband. [His Lordship reviewed the conduct of the trial, held that the husband had failed to prove that he had not committed incestuous adultery with his daughter Eileen of which he had been convicted with the consequence that the wife’s charge of adultery had been proved, and that the wife was not shown to have committed adultery with the party cited or Mr Jones. He continued:] I would, therefore, allow the appeal against the learned commissioner’s findings. I would reject the prayer in the husband’s answer. And I would grant to the wife, in the exercise of the discretion of the court in respect of her adultery with Mr Davies, a decree nisi.
FENTON ATKINSON LJ. I agree. [His Lordship reviewed the conduct of the trial, held that the husband had failed to prove that he did not commit the crimes of which he was convicted, and agreed with Davies LJ on the issue of the wife’s adultery and with the orders that he proposed.]
PHILLIMORE LJ. I agree. [His Lordship held that the husband had failed to discharge the onus on him of showing that he had been wrongly convicted, and there was no material to justify a finding of adultery by the wife with the party cited or with Mr Jones and that the court ought to exercise its discretion in favour of the wife for her admitted adultery with Mr Davies.]
Appeal allowed. Decree nisi granted to wife.
Solicitors: Haymon & Walters agents for Emmanuel Marks & Cocker, Abertillery, Mon (for the wife and the party cited); Lyndon, Moore & Co Newport, Mon (for the husband).
F A Amies Esq Barrister.
Engineering Industry Training Board v Foster Wheeler John Brown Boilers Ltd
[1970] 2 All ER 616
Categories: CONSTRUCTION
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, LORD WILBERFORCE AND PHILLIMORE LJ
Hearing Date(s): 19, 20 MARCH 1970
Industrial training – Levy – Activities of industry – Engineering industry – Erection of steam generating plant at thermal power station – Whether activity fell within engineering or construction – ‘Civil engineering work’ – ‘Installation’ – ‘Structures forming part of a building’ – Industrial Training (Engineering Board) Order 1968 (SI 1968 No 1333 as amended by SI 1969 No 1376), Schedule, paras 1 (h), 2(d), 3.
The appellants were engaged in the erection of steam generating apparatus on the sites of thermal power stations. They suspended the boiler which consisted chiefly of 200 miles of piping and a steel drum from a steel framework 200 feet high and 100 feet wide. They also put in furnaces, a chimney, lifts, stairs and other apparatus used in connection with the steam generating plant of the power station. Of the parts used the steel drum arrived at the site in prefabricated form. The steel framework from which the boiler was suspended and the cladding surrounding it were erected and installed by another firm. The appellants were assessed to industrial training levy by the training board pursuant to the Industrial Training Act 1964 and the Industrial Training (Engineering Board) Order 1968 in respect of their activities in erecting the steam generating apparatus. The Industrial Tribunal set aside the assessment on the grounds that the appellants’ activities were taken out of the sphere of the engineering industry by para 2(d)a of the Schedule to the 1968 order and accordingly came within the construction industry, because they were within the definition of ‘civil engineering work’ in para 3b, as being the construction of thermal power stations. The tribunal held that such activities were not excluded from the definition of civil engineering work by the concluding words of the definition excepting certain specified activities. The Divisional Court held that the appellants’ activities were within the words of exception at the end of the definition in para 3, namely, ‘the installation … of … plant’, and restored the board’s assessment. On appeal.
Held – (i) The erection of the steam generating apparatus by the appellants came within the construction industry, because the construction of thermal power stations was expressly included in the definition of ‘civil engineering work’ in para 3 of the Schedule to the 1968 order, thus taking it out of the engineering industry (see p 619 d and e, p 620 e and p 622 f, post).
(ii) None of the exceptions in the concluding words of the definition in para 3 applied, because—
(a) (per Lord Denning MR and Lord Wilberforce) ‘installation’ meant bringing
Page 617 of [1970] 2 All ER 616
an entire component to the site and putting it in position, whereas what the appellants had done was to piece the steam generating apparatus together until it was a whole (see p 619 b, p 620 j and p 621 b, post);
(b) (per Lord Denning MR and Phillimore LJ) if the appellants’ work was the installation of plant then 90 per cent of the activity involved in building thermal power stations would fall outside the definition of ‘civil engineering work’ which would defeat the object of the Schedule (see p 619 and p 622 e, post); (per Lord Wilberforce) it would take all significant content from the words ‘construction … of a … thermal power station’ to construe the words of exclusion at the end of para 3 as negativing the inclusion of thermal power stations in civil engineering work (see p 620 f and p 621 f, post);
(c) (per Lord Denning MR and Lord Wilberforce) the appellants were engaged on the erection of a structure ‘forming part of a building’ which was not within para 1(h)(ii)c of the Schedule and consequently not within the exception of activities to which para 1 (h) applied contained in the concluding words of para 3 (see p 619 e, p 620 c, and p 621 e, post).
Observations on the respect to be afforded by appellate courts to the findings of an industrial tribunal (see p 619 h, and p 622 a, post).
Decision of the Queen’s Bench Divisional Court [1970] 1 All ER 490 reversed.
Notes
For industrial training boards, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 690A.
Case referred to in judgments
Winnipeg (City) v Brian Investments Ltd (1953) 1 DLR 270, (1952) 7 WWR (NS) 241, 60 Man R 416, 38 Digest (Repl) 602, *688.
Cases also cited
Cardiff Rating Authority v Guest Keen Baldwins Iron & Steel Co Ltd [1949] 1 All ER 27, [1949] 1 KB 385.
Elms v Foster Wheeler Ltd [1954] 2 All ER 714, [1954] 1 WLR 1071.
Prestcold (Central) Ltd v Ministry of Labour [1969] 1 All ER 69, [1969] 1 WLR 895.
Appeal
This was an appeal by Foster Wheeler John Brown Boilers Ltd against a decision of the Queen’s Bench Divisional Court (Lord Parker CJ, Willis and Bridge JJ) given on 5 December 1969 and reported [1970] 1 All ER 490, allowing in part the appeal of the respondents, the Engineering Industry Training Board, from a decision of the Industrial Tribunal (chairman Rt Hon Sir John Clayden PC) given on 2 July 1969, setting aside the board’s assessments of the appellants to levies for the fiscal years 1966–67 and 1967–68. The Divisional Court dismissed the appeal of the board in respect of the decision as to the assessment for the year 1966–67 and there was no appeal against the court’s decision on this point. The second assessment was made under the Industrial Training Levy (Engineering) (No 2) Order 1967 (SI 1967 No 1427) as amended
Page 618 of [1970] 2 All ER 616
by SI 1968 No 1477 and amounted to £147,045. The appeal related to the court’s decision as to that assessment. The facts are set out in the judgment of Lord Denning MR.
R A MacCrindle QC and N J Inglis-Jones for the appellants.
Norman C Tapp QC and M F Gettleson for the board.
20 March 1970. The following judgments were delivered.
LORD DENNING MR. Under the Industrial Training Act 1964, several training boards have been set up. One is for the engineering industry, and another for the construction industry. Each board imposes a levy on employers in its industry. The amount of the levy varies from industry to industry. For instance, if an employer is engaged on work which falls in the engineering industry, he has to pay a much higher levy than if he is engaged in the construction industry. It is as 2·5 to 1.
Foster Wheeler John Brown Boilers Ltd, the appellants, are erecting, or helping to erect, thermal power stations at several places. They put in the steam generating apparatus. Does this work come within the engineering industry or the construction industry? If it comes in the engineering industry, the levy may be £100,000; but, if in the construction industry, it is only £40,000.
To decide this question I must first describe the nature of the work done by the appellants. Some other firm erects a big metal framework, 200 feet high and 100 feet wide, to contain the apparatus. The appellants then come along and put inside this framework a tremendous set of pipes—200 miles of piping—which constitute the boiler. It is suspended from the top of the framework. They also put in furnaces, a chimney, lifts, stairs, and so forth. After they have put all in, the other firm comes back and completes the outer framework and covers it all up with a cladding so that it is all one huge building. The Industrial Tribunal, presided over by Sir John Clayden, put the steam generating apparatus into the construction industry. The Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) put it into the engineering industry. Now there is an appeal to this court.
Everything depends, of course, on the interpretation of the statutory instruments which define these two industries. They are the Industrial Training (Engineering Board) Order 1968d; and the Industrial Training (Construction Board) Order 1967e. One thing is quite clear: this steam generating apparatus must be put into one industry or the other. It cannot be put into both. There can be no overlapping. No employer is bound to pay two levies.
I will not read out the relevant paragraphs of the orders and the Schedules to them. That would be too tedious. Broadly speaking, the engineering industry is concerned with making metal articles, and metal framework; whereas the construction industry is concerned with erecting buildings and structures. But that broad distinction does not help much in this case. We have to get down to the Schedules. They put ‘building work and civil engineering work’ into the construction industry and not into the engineering industry. In the 1968 order, Schedule, para 3, there is a definition of ‘civil engineering work’ which provides:
‘… “civil engineering work” means the construction or demolition of a railway-line, siding or monorail, the construction, structural alteration, repair or demolition of any aerodrome … road … chimney, furnace … nuclear or thermal power station … but does not include any activities to which paragraph 1(h) of this Schedule applies or the installation, testing, inspection or repair of machinery or plant, not being contractors’ plant … ’
Page 619 of [1970] 2 All ER 616
At first sight this steam generating apparatus would seem to fall within the express words ‘thermal power station’, but the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) held that the steam generating apparatus was ‘installation of plant’ and thus within the exception at the end of the definition. It was, therefore, not ‘civil engineering work’. I cannot agree with this view. I am prepared to accept that the steam generating apparatus may properly be described as ‘plant’, but I do not think that the work done by the appellants is the ‘installation’ of plant. The word ‘installation’ in this context means the bringing of an entire piece of plant on to a site and putting into position on the site. It does not mean that putting together of parts, as is done here, piece by piece, pipe by pipe, bolt by bolt, weld by weld, until it gradually becomes one whole. If the words ‘installation of plant’ were given the wide meaning which the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) gave to it, the result would be to take nearly the whole of this thermal power station out of ‘civil engineering work’. Taking their meaning of ‘instal’ it would follow that the work done on the turbines, the furnace, the chimney, were all ‘installation of plant’. It would mean that 90 per cent of this thermal power station was excepted from civil engineering work as being ‘installation of plant’. That cannot be right.
The plain fact here is that a ‘thermal power station’ is expressly included in the definition of ‘civil engineering work’. That express inclusion must carry with it all the essential parts of a thermal power station, including the steam-generating apparatus. It cannot be excluded by reason of the general words ‘installation of plant’. Special provisions always take priority over general provisions. I hold, therefore, that the work of erecting the steam generating apparatus comes within ‘civil engineering work’ and is within the construction industry.
That is enough to decide the case, but, as some other points were canvassed, I would say that I do not regard this apparatus as an ‘article’; nor is the erection of it the installation or assembly of an ‘article’. It is, I think, the erection of a ‘structure’, but it is a structure ‘forming part of a building’. It is, therefore, not within sub-para 1 (h). I hold, therefore, that the work is not within the engineering industry, but within the construction industry, and that the appellants need only pay the levy appropriate to the construction industry.
I would allow the appeal, accordingly, and restore the order of the tribunal.
LORD WILBERFORCE. This appeal depends on the construction of the Industrial Training (Engineering Board) Order 1968f. This order, like others in the same field, raises questions of construction of a special and difficult character. It endeavours to bring within general expressions and definitions, which are rather fluid and loose in texture, types of industry and industrial activity of a varied and complex character which can seldom be accurately brought within any of them. In this respect it rather resembles legislation concerning the selective employment tax. The great variety of combinations which are dealt with can be seen by a glance at the order itself and its various paragraphs and the tables, and I need not expand on them. So when one is trying to interpret an order like this the processes of strict analysis are seldom conclusive and indeed they often lead to confusion. The answer tends to depend much more on what one may call impression—certainly a cultivated and experienced impression; but still impression; and that is why they are committed in the first instance to an industrial tribunal; and that is why respect has to be paid to the findings of this body.
The 1968 order in its key paragraph uses words with which the courts are familiar enough in many contexts—such words as ‘article’, ‘manufacture’, ‘instal’, ‘erect’, ‘structure’, ‘plant’—none of which is very precise. I have been very much helped by the tribunal’s explanation of these words in their context; but I think that the
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decision must ultimately be made on rather broader ground. In the first place, it is essential to construe this order and its Schedule as a whole. One cannot start with para 1 and go through it and then proceed to exceptions. I think that one wants to look with a comprehensive glance at para 1, which defines the engineering industry, and para 3, which sets out what may not fall within the engineering industry; because the question here is whether the appellants’ activities in respect of this thermal power station fall within the general field of engineering or within the particular field of civil engineering and so of construction. These are, as Lord Denning MR has pointed out, the subject of separate orders and there are separate boards to administer them. The orders dealing with each of these separate branches of industry have been drafted with some care so as to separate the two fields. One must recognise that there is a continuous shading between engineering, on the one hand, civil engineering, on the other hand, and ultimately, construction. I do not propose to attempt any precise analysis of the words ‘manufacture’, ‘article’, ‘erection’, or at this point ‘installation’ or ‘structure’, although I agree entirely with what Lord Denning MR has said. I prefer to go straight to the definition of ‘civil engineering’ in para 3 of the Schedule, noting—which seems to me to be important—that these words are introduced by para 2(d) which states that there is an exception of ‘any operations in … civil engineering work’, and I underline the words ‘any operations’. When one comes to ‘civil engineering work’ as defined in para 3, one finds an explicit reference to construction, amongst other things, of a thermal power station. These words exactly fit what the appellants are doing and have done. What they have constructed is a thermal power station, and what they have done could not to my mind be better described than by ‘construction’. Here, among all the obscurities, one has an indication of transparent clarity, and for my part I am inclined to cling to it. Any operations—so says para 2(d)—in this matter, whatever the operations are, thus apparently come within ‘civil engineering work’ and not within engineering; and the only question or the primary question, at any rate, is whether they are taken out by the words of exclusion in the last three lines.
These words—and I do not read them again—are very general. If they are widely construed—if they are construed as the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) did, they take away almost all significant content from the words ‘construction … of a … thermal power station’. Counsel for the appellant has argued that these are not really words of exception at all but that they are a separate statement of something else. If a thing (he says) is clearly one of the specific matters mentioned, the final words do not take it away by calling it a structure or calling it an installation. That is an attractive way of presenting it, but I am content to treat the words as an exception, construing them so far as possible with what goes before and so as not to eliminate the greater portion of what does go before, and I look at the two exceptions with which we are concerned. First, installation—‘installation … of machinery or plant’. Now, ‘installation’ is a metaphorical word. It is not a word of any great precision. It was well put in the Court of Appeal in Manitoba in City of Winnipeg v Brian Investments Ltd ((1953) 1 DLR 270 at 275, (1952) 7 WWR (NS) 241 at 246) by Coyne J when he said:
‘“Installed” is not a word of art nor a word of precision. Indefiniteness gives it, as it gives any word, a chameleon-like character so that associate words show through and give their colour and meaning to it.’
It conveys putting in place something already made so that it can be used. There may be an element of assembly required; but basically a thing installed is ready to work when it is put in its place and, if necessary, connected up. Here I think it would be a complete misdescription to say that the boiler is installed in the framework or in this building. It is the other way round; the framework is there
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to hold and cover the boiler. They form one unit which is a thermal power station. There is not one thing installed in another; the boiler has no previous existence. It exists before the appellants start work on it, no doubt in a designer’s mind and probably on some plan or specification; and the steam drum, which is a very large component, is premanufactured and brought to the site; but what is then done by the appellants is the construction—and I use the word deliberately—on the spot out of manufactured elements—one million feet, if my arithmetic is right, of tubes or piping, plus a vast assembly of other connections: burners, conductors, etc; and one would be surprised if there were not modifications made as the work goes on. Installation seems to me to be very far from the reality of the facts, and I cannot agree with the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) in the finding that it is. I think it is truly construction.
Then as to the second limb of the exception. This refers us back to the Schedule, para 1 (h), which talks about ‘structures consisting wholly or mainly of metal, not being … structures forming part of a building’, I agree with counsel for the board that to construe these words again is largely a matter of impression. One has these words, ‘erection’, ‘structure’, ‘building’, all of which are difficult and imprecise; and a similar argument to what I have stated about installation applies here; that if one gives too literal an interpretation to this exception of para 1(h), little would be left of the specific item, the thermal power station which is mentioned under ‘civil engineering’. Both the Industrial Tribunal and the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) said that this part of the exception did not apply—for different reasons. For my part, I prefer the reasons given by the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) and by Lord Denning MR, and I am satisfied that we ought not to construe these words under ‘civil engineering’ as taking out the thermal power station because of para 1(h)(ii).
I have not overlooked counsel for the board’s argument that these words at the end of ‘civil engineering work’ take their origin from the Industrial Training (Construction Board) Order 1967g, where they appear under the word ‘Notwithstanding’, and he says that that makes them an overriding exception; but I think that that argument is difficult to put too precisely because of the form of this Schedule. One notes that para 2 of the Schedule to the 1968 order states ‘Notwithstanding anything contained in this Schedule … ' One gets here so many exceptions on exceptions that it is very difficult to say which overrides which. But even giving the words with which we are concerned here—the last three lines under ‘civil engineering work’h—the force of an exception, one still has to interpret them, and I do not find it sensible to give them a meaning which for practical purposes negatives the inclusion in ‘civil engineering work’ of the thermal power station. I do not think that counsel for the board met this argument, and I do not find that the Divisional Court’s judgment ([1970] 1 All ER 490, [1970] 1 WLR 538) did so either. For that reason I would hold that the exception does not apply. If if does not, then there can be no doubt that this work is civil engineering work and is not within the provisions of the 1968 order, and that the decision of the Industrial Tribunal was right.
I would also allow the appeal and restore the tribunal’s order.
PHILLIMORE LJ. The tribunal held that the work of setting up this immense furnace was work of construction—civil engineering. The Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538), having invoked the assistance of what was described in the judgment as ‘the intelligent man in the street’, came to the conclusion that it was engineering work. As Lord Denning MR has said, this is to a great extent a matter of impression and a matter for the
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informed judgment of those accustomed to the expressions used to describe categories of industrial activities; and indeed this case demonstrates yet again how careful an appellate court should be before it disturbs the decisions of this particular tribunal.
The orders in question are framed in a particular way. Each order has a Schedule, and in para 1 there is a description of the activities which come within the particular industry with which the order is dealing. Paragraph 2 sets out the activities which are close to those but do not come within the activities of the particular industry. Then para 3 sets out a series of definitions. So here, where one is dealing with the marginal territory between engineering, civil engineering and construction, the Industrial Training (Engineering Board) Order 1968i sets out in para 1 the activities which are engineering, and in para 2 those which are not and which are to be treated as civil engineering or as construction. Likewise if one goes to the Industrial Training (Construction Board) Order 1967j, para 1 sets out the matters which are construction—civil engineering, and para 2 sets out those which are not; they are engineering proper. So in the 1968 order covering the engineering industry para 2 sets out the matters which do not come within it, reciting, inter alia, any operation of civil engineering and, when one comes to the definition of civil engineering work in para 3, it describes the construction, structural alteration, repair or demolition of various plants, including in particular a thermal power station. And then there are words which have been treated as words of exception in the definition, excluding the erection of structural metalware, for example, in para 1(h) of the Schedule, and the installation of plant.
Learned counsel are agreed that if it is to be said that the erection of this heating plant, the furnaces and so on, is covered by the exception, as being the installation of plant, then in truth and in fact 90 per cent of what is described as a thermal power station, and indeed everything that is essential to it, will have been taken out of civil engineering work and classed as engineering, in other words, the whole object of the Schedule will have been defeated. When that is stated it is really obvious that this appeal must succeed. It is said that a thermal power station is civil engineering; and then the Divisional Court ([1970] 1 All ER 490, [1970] 1 WLR 538) in effect have said that 90 per cent of it—everything that makes it a thermal power station—is not civil engineering at all, but is to be treated as engineering. It makes complete nonsense of the whole order.
Accordingly I agree that the appeal must be allowed.
Appeal allowed.
Solicitors: Bristows, Cooke & Carpmael (for the appellants); I L Tibbs (for the board).
G R A Argles Esq Barrister.
Wilson v Croft
[1970] 2 All ER 623
Categories: AGRICULTURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, SACHS LJJ AND CUMMING-BRUCE J
Hearing Date(s): 15, 16 APRIL 1970
Agriculture – Agricultural worker – Tied cottage – Possession – Suspended order for possession – Costs – Special reasons for making order for costs – Generosity of landlord in allowing service occupant to stay on without payment for period after termination of employment – Rent Act 1965, s 33(b).
The defendant, a 73–year old farm worker, had been employed by the plaintiff, a farmer, and before that by the plaintiff’s father, and had occupied a cottage on the farm rent free, since 1958. The defendant’s grown-up son and daughter lived with him in the cottage, and paid him for their board and lodging. In May 1969, the plaintiff gave the defendant notice to terminate his employment at the end of May 1969, and to leave the cottage by 1 July 1969. The defendant did not leave, so on 4 August 1969 the plaintiff commenced county court proceedings against the defendant for possession of the cottage. By his defence, dated 29 August 1969, the defendant admitted the plaintiff’s claim for possession, but claimed the protection afforded by s 33a of the Rent Act 1965. The plaintiff did not claim mesne profits for the period between the termination of employment and the hearing of the case, which took place on 6 October 1969. The county court judge made an order for possession, which he suspended for two months, ordered the defendant to pay £3 per week mesne profits while in occupation during those two months, and £6 5s towards the plaintiff’s costs. On appeal by the defendant against the order to pay costs.
Held – (i) When an order for possession was suspended by virtue of s 33 of the Rent Act 1965, it was for the owner who had asked for an order for costs to satisfy the court of the existence of the special reasons for making an order for costs which were required by s 33(6) (see p 625 j to p 626 a, p 629 f and p 630 d, post).
(ii) The special reasons for making an order for costs were required to relate to conduct of the owner or occupier relating to the occupation of the premises, ie to some generous conduct on the part of the owner or some intransigent or unmeritorious conduct on the part of the occupier (see p 626 a, p 629 e and g and p 630 d, post).
(iii) The plaintiff’s generosity in giving the defendant over one month before 1 July to find alternative accommodation, and in asking for no payment for the defendant’s occupation from the end of May to 6 October, was a special reason for ordering the defendant to pay some of the plaintiff’s costs; accordingly the appeal would be dismissed (see p 626 f, g and h, p 627 h, p 629 j to p 630 a and p 630 d, post).
Per Curiam. In the absence of special circumstances, if an occupier whose licence is determined takes no steps to find alternative accommodation, that would constitute a reason for making an order for costs against him (see p 627 e, p 629 b and h and p 630 d, post).
Notes
For suspended possession orders in the case of premises occupied by employees in agriculture, see Supplement to 1 Halsbury’s Laws (3rd Edn) para 606A.
For the Rent Act 1965, s 33, see 18 Halsbury’s Statutes (3rd Edn) 624.
Cases referred to in judgments
Jones v Savery [1951] 1 All ER 820, 13 Digest (Repl) 390, 181.
Page 624 of [1970] 2 All ER 623
Sheffield Corpn v Luxford, Same v Morrell [1929] 2 KB 180, [1929] All ER Rep 581, 98 LJKB 512, 141 LT 265, 93 JP 235, 13 Digest (Repl) 389, 172.
Appeal
G S Croft, the defendant to an action for possession of his cottage brought by his former employer, Alec James Wilson, appealed against that part of the order made on the trial of the action at Bromley County Court by his Honour Judge Trapnell on 6 October 1969, which ordered the defendant to pay £6 5s towards the plaintiff’s costs. The facts are set out in the judgment of Salmon LJ.
A C B M David for the defendant.
Paul de la Piquerie for the plaintiff.
16 April 1970. The following judgments were delivered.
SALMON LJ. The plaintiff, Mr Alec James Wilson, farms Mace Farm, Cudham, near Sevenoaks in the county of Kent. He has farmed that farm since 1963 and his father farmed it for many years before him. The defendant, Mr Croft, entered into the service of the plaintiff’s father as an agricultural worker in 1958. After the father died in 1963 and the farm passed to the plaintiff, the defendant continued in the plaintiff’s employ. All the time he had been working on the farm he occupied a cottage called 3, Mace Farm Cottages. He has occupied that cottage rent free and there has been no deduction from his wages in respect of his occupancy. His wages appear to have been something in the region of £10 per week. He had his family living with him in the cottage. There were two grown-up sons and at least one grown-up daughter; one of the sons for some years prior to 1969 had been working for the plaintiff as a tractor driver on the farm. The plaintiff had no fault to find with the defendant, but he considered that the son was a rather slovenly and careless worker and as a result he parted company with the son in May 1969 when the son ceased to work for the plaintiff and went out of the cottage.
The plaintiff required to find another farm worker; he had to accommodate him because otherwise he would not have found anyone willing to enter his employment. He wanted to use 3, Mace Farm Cottages as he had done for many years, to accommodate two agricultural workers, but so long as the defendant occupied it that would be impossible. Accordingly, the plaintiff gave the defendant notice to terminate his employment at the end of May 1969; he also determined his licence to occupy the cottage by a notice which became effective on 1 July. The defendant however, remained on in the cottage after 1 July with one grown-up son and one grown-up daughter, who were working elsewhere. Accordingly, on 4 August, the plaintiff issued these proceedings in which he claimed possession of the cottage and costs. The defendant, in his defence, admitted the plaintiff’s claim for possession of the cottage but claimed the benefit of the protection accorded to him by s 33 of the Rent Act 1965.
The case came before the learned county court judge on 6 October; he made an order for possession which he suspended for two months, that is to say, until 6 December, and ordered that the defendant should pay as much as £6 5s towards the plaintiff’s costs, and mesne profits whilst he remained in occupation, from 6 October to 6 December, at £3 per week. The defendant now appeals against that part of the judge’s order which ordered that he should pay £6 5s towards the costs. No one supposes that either of these parties would have incurred the expense of an appeal to this court for the purpose of saving themselves £6 5s or for the privilege of giving their names to a leading case. But it has been thought by the defendant’s trade union, and no doubt by the farmer’s union, that this case raises a point of law which may be of general importance to farmers and their employees.
We are particularly concerned with the construction of s 33(6). Before I read that subsection it is necessary however, to look at a little of the rest of the Act so that the subsection in question may be seen in its context. Section 32 provides:
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‘(1) Where any premises have been let as a dwelling under a tenancy which is not a statutorily protected tenancy within the meaning of this Part of this Act and—(a) the tenancy … has come to an end; but (b) the occupier continues to reside in the premises … it shall not be lawful for the owner to enforce against the occupier, otherwise than by proceedings in the court, his right to recover possession of the premisesb.
‘(2) For the purposes of this Part of this Act a person who, under the terms of his employment, had exclusive possession of any premises otherwise than as a tenant shall be deemed to have been a tenant and the expressions “let” and “tenancy” shall be construed accordingly.’
As will be seen, this was an entirely general section, which had no special application to agricultural employees, and its effect was that the owner could not get rid of anyone remaining in occupation of the owner’s premises without legal right, by the expedient of putting him and his furniture into the streets; he could only get rid of such an occupier by due process of law. That was an incursion into the former common law rights of an owner whose premises were unlawfully occupied; he could, if he were imprudent enough to take the risk, get rid of the trespasser without use of more force than was reasonably necessary.
Section 33 of the Act applies to agricultural employees. I think that before I come to s 33(6), I need only refer to s 33(1), (3) and (5). Section 33(1) makes it plain that the section applies to agricultural employees. Section 33(3), (5) and (6) reads:
‘(3) Without prejudice to any power of the court apart from this section to postpone the operation or suspend the execution of an order for possession, if in proceedings by the owner against the occupier the court makes an order for the possession of the premises the court may suspend the execution of the order on such terms and conditions, including conditions as to the payment by the occupier of arrears of rent, mesne profits and otherwise as the court thinks reasonable …
‘(5) In considering whether or how to exercise its powers under this section the court shall have regard to all the circumstances and, in particular, to the following, that is to say—(a) whether other suitable accommodation is or can be made available to the occupier; (b) whether the efficient management of any agricultural land or the efficient carrying on of any agricultural operations would be seriously prejudiced unless the premises were available for occupation by a person employed or to be employed by the owner; and (c) whether greater hardship would be caused by the suspension of the execution of the order than by its execution without suspension or further suspension.
‘(6) [the vital subsection] Where in proceedings for the recovery of possession of the premises the court makes an order for possession but suspends the execution of the order by virtue of this section, it shall make no order for costs, unless it appears to the court, having regard to the conduct of the owner or of the occupier, that there are special reasons for making such an order.’
Normally costs follow the event; and unless there are some special reasons, the successful party usually obtains an order for costs against the unsuccessful party. This section obviously effects a change in the law; it indicates that in the circumstances to which it refers, that is to say the owner succeeding in obtaining an order for possession the execution of which is suspended, there shall be no order for costs unless it appears to the court, having regard to the conduct of the owner or the occupier that there are special reasons for making such an order.
The first thing I want to observe about that section is that it must be for the owner who is asking for an order for costs to satisfy the court that there are special reasons
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for making the order; there is, as I read the section, no onus of any kind on the defendant. The special reasons must relate to the conduct of the owner or the occupier. The sort of conduct which in my view is contemplated by the legislature is some generous conduct on the part of the owner—or some intransigent or unmeritorious conduct on the part of the occupier. This conduct must relate to the occupation; the fact that the owner is a public-spirited and highly charitable man who has always conducted himself in his life according to the highest standards, would be wholly irrelevant. Equally the fact that the occupier may in many respects have conducted himself badly is again quite irrelevant unless the conduct could reasonably be related to his occupation of the premises. I do not think that the intention of the legislature in conferring the benefits of this section on agricultural workers was to enable an agricultural worker, once his licence to occupy his cottage is terminated, to sit tight in the confident expectation that in no circumstances could he be ordered to pay the costs of such proceedings as the owner might be driven to bring in order to obtain his legal rights. Similarly I do not think that the legislature intended that in the ordinary run of case the owner should be awarded any costs once he had obtained an order for possession, the execution of which had been suspended. I think that the clear intention of the Act was for the court to look at the conduct of the owner and of the occupier and balance one against the other, and then to decide whether the owner had proved, on a balance of probabilities, that there were special reasons which made it just that the occupier should pay the costs or some part of them.
I now consider the facts of this case which are relevant to the considerations to which I have referred. First of all I must observe that the notes of the evidence are very abbreviated, as is usual and entirely proper in county court proceedings. The note of the judgment is more tenuous still, but no complaint can be made of that. I look at what are the incontestable facts. When the plaintiff gave his notice, he was voluntarily giving the defendant more than one month to find alternative accommodation. The notice was given some time in May; history does not relate precisely when in May, but it was to expire on 1 July and the defendant was doing no work from 30 May on. The plaintiff was asking for no payment in respect of the defendant’s occupation of his cottage. The defendant stayed on with his grown-up son and daughter, who were earning money and paying him for their board and lodging.
Then 1 July came and went, but the defendant did not—he stayed on. Still the plaintiff held his hand and waited for another month when, on 4 August 1969, he commenced these proceedings. He must have recognised that he would be a very lucky man if he was to be able to obtain an order for possession before the following October. He must also have recognised that the odds were that the defendant would stay on during the whole of that time. Yet, when he commenced the proceedings, he made no claim in respect of mesne profits up to 4 August; nor did he claim any mesne profits from 4 August to the date of the trial. It seems to me that that can properly be characterised as considerate and generous behaviour on the part of the plaintiff and I would have thought that the court was entirely justified in taking the view that this would form a special reason for making an order for costs against the defendant; indeed, it seems to me that the plaintiff, having allowed the defendant to stay on without any shadow of suggestion of payment for some four months up to 6 October, it cannot be said to be in any way unjust—indeed it cannot be anything other than obviously just—that the defendant should pay something towards the costs. Those costs, amounting to £6 5s are a very small part of the mesne profits which the plaintiff could have claimed had he chosen to do so.
The judge, in giving his reasons, seems to have put the matter rather the other way round. It is possible to read the judgment as basing the order for costs on a criticism of the attitude adopted by the defendant. For my part, unless the conduct of the plaintiff, to which I have referred, made it plain that there was a special reason for considering it just that the defendant should pay something towards the costs,
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I would not have considered that the plaintiff had established that there was anything unmeritorious about the defendant’s behaviour which would have justified the order for costs. No doubt there is plenty of room for suspicion. One may suspect that the defendant, who was an elderly man of 73, took advice from his union or from their solicitors and decided to sit tight for as long as he could and make no effort whatever to find alternative accommodation until driven to do so by an order of the court. I cannot, however, find any evidence at all that this was the attitude which the defendant adopted. We have been referred to some correspondence between his solicitors and the Bromley Council, which correspondence started after the issue of the proceedings. The Bromley Council, on being asked to supply the defendant with a council house, made the reply which we are told is almost always made by councils in similar cases, namely, that they would wait until after the court order and that when it became a matter of urgency they would do their best to rehouse him. We know that they did so after the order for possession had been made and before the extension expired. There is, however, nothing to show that the defendant had not been to any council prior to the commencement for the proceedings and done his best to get accommodation; indeed, there is a reference in the notes of the evidence to the defendant having been to the Lewisham Council.
As I have said, it was for the plaintiff, if he were relying on any unmeritorious conduct on the part of the defendant, to prove it. The defendant went into the witness box. He could have been cross-examined as to the steps, if any, which he took from May onwards to find alternative accommodation, and I have no doubt that in the ordinary case, if a defendant who has his licence determined takes no steps at all to find alternative accommodation, that could be ground for the learned judge thinking that there was a special reason for making an order of costs against him. I do not say it always would be—much would depend on the circumstances of the case—but as a rule I should have thought that if he made no effort and just sat tight, never mind what inconvenience there was to the man who had sought possession, that would have been a proper basis for the court to say that there were special reasons for making an order for costs against him. I want to make it quite clear that I am not saying it is an invariable rule, because there are cases where the local circumstances make it plain to everyone that there is not a hope of finding alternative accommodation or he may be too ill to do so or he may be an exceptionally stupid man who does not know what to do.
However, in this case I do not base my judgment on any failing on the part of the defendant, but on the generous conduct of the plaintiff. As a result of that conduct, the defendant was enabled to remain in occupation of these premises for many months without paying a penny for the privilege. As I have said, he had a grown-up son and daughter living with him both of whom were earning money and paying him for their board and lodging. I make no criticism of the defendant; since he was not asked for any rent, I would hardly expect him to run after the landlord and say: ‘Please take rent or mesne profits from me.' Whilst I do not count it against him that he did not make an offer, I do count it in the plaintiff’s favour that he was willing to allow the defendant to stay on in these circumstances and for this length of time, without paying a penny. Although it is perhaps a little difficult to see from the notes of judgment precisely the ground on which the learned judge considered that he was entitled to make an order for costs, the facts to which I have alluded are not in doubt.
To my mind the only proper inference that can be drawn from the facts is that in the circumstances of this case the plaintiff’s conduct was generous and, accordingly, reason and justice demand that the defendant should make some contribution towards the costs. The conduct of the plaintiff supplied a special reason for making the order; the order that the defendant should pay £6 5s consisting I think of £2 for the solicitors’ charges and £4 5s for the court fee, is exceedingly moderate and reasonable.
I would dismiss the appeal.
Page 628 of [1970] 2 All ER 623
SACHS LJ. In the course of this century the relative position of landlords and tenants has, as is well known, become transposed. Sixty years ago the rigours of the common law were such that landlords were only too often able by their acts to bear harshly on their tenants. Today the successive and cumulative complexities of the Rent Acts have in many ways reversed that position. The court nowadays, however, are in certain respects given discretionary powers to hold a fair balance as between the parties and then, in exercising those powers, to be equally watchful to avoid injustice and hardship to either party.
The present case is a good example both of that transposition and of an occasion when the discretionary power must be carefully considered. The defendant was in 1958 let into possession of 3, Mace Farm Cottages by virtue of his employment as an agricultural worker. He paid no rent and nothing was deducted from his wages in respect of his occupation, so for 11 years he in practice occupied the premises rent free. During that period he was in law a licensee, and not a tenant. Then on 30 May 1969, he ceased to be employed and his licence came to an end. The plaintiff, no doubt recognising the difficulties that would face a man of his age, gave him permission to continue to occupy the cottage free until 1 July. As from that date he had no defence to an action for possession and no right of possession. But the defendant, although a widower with no infant children, did in fact stay on much longer although without possession of the cottage the plaintiff was unable to get a replacement employee essential to the working of the farm. Indeed, I have been unable to trace any evidence of the defendant having sought alternative accommodation during the three months before 1 September, by which time the plaintiff had had to resort to proceedings commenced on 1 August; it is to be noted that even in those proceedings the latter claimed no mesne profits (which are in effect damages for trespass) up to the return date of the summons.
The defendant’s defence, dated 29 August read in full states:
‘The defendant admits the plaintiff’s claim for possession of premises known as 3, Mace Farm Cudham Sevenoaks in the County of Kent but claims the benefit of the protection afforded to him by Section 33 of the Rent Act 1965.’
Turning first to s 32(2) of that Act, this puts the defendant for the purposes both of that section and of s 33, in the position of being ‘deemed to have been a tenant’. Then by s 33(3) power is given to the court to ‘suspend the execution of an order for possession’. When, however, one looks at the latter section as a whole there is really no indication as to the grounds on which the discretion it gives should be exercised, save insofar as can be gathered from the paragraphs of s 33(5) which have already been read by Salmon LJ, but s 33(5) contains the phrase ‘the court shall have regard to all the circumstances’ and the paragraphs refer only to particular circumstances. Therefore the section itself sets no limits to the circumstances; nor does it limit the term of suspension, although as regards the latter account must always be taken of the factors referred to in Sheffield Corpn v Luxford ([1929] 2 KB 180, [1929] All ER Rep 581) and Jones v Savery ([1951 1 All ER 820), which indicate the views of this court on such extensions.
Section 33(6) deals with the costs of orders for possession when coupled with a suspension of execution and of orders which may subsequently be made if a tenant asks for extensions of such a suspension. Today this court is only directly concerned with s 33(6). In order, however, to determine what is intended by its provisions it is important to consider what is the proper approach to an application to suspend execution. It is only when that is correctly understood that the court’s subsequent approach to the incidence of costs can be appropriately assessed. Despite the width of the terms of the discretion given to the court under s 33, that discretion is clearly a judicial discretion. Naturally it is neither possible nor desirable to seek to define the circumstances in which it can be exercised; but the divergent submissions for
Page 629 of [1970] 2 All ER 623
the defendant and the plaintiff in the present appeal show how essential it is to say something about the principles involved.
A key submission for the defendant was that the defendant in remaining in possession after 1 July was merely ‘acting in accordance with his rights’. In other words, it was suggested that he had a right to remain as tenant until the court ordered him out. That is a fundamentally wrong conception. When the licence was determined, his right to remain also ended; he was remaining in occupation by wrong and not by right. The effect of ss 32 and 33 is simply to confine the landlord to one method of enforcing his rightful claims.
The view propounded for the defendant would enable a solicitor to advise tenants in effect: ‘Whatever your opportunities to rehouse yourself, you stay put; you have a right so to do.' That would be quite wrong and one can only hope that it is not the advice that any solicitors have been giving in such cases in general or in this case in particular. If acted on by the tenant, it would certainly constitute a special reason for an adverse order as regards costs. Moreover, it is worth mentioning as relevant to this and other cases that a landlord who has obtained a judgment for possession is manifestly in a different position from one who has not. It is thus wrong to regard the tenant as being in the same position as if he held a protected or regulated tenancy when in fact there has been a judgment against him. The onus must always lie on whoever seeks to say that a judgment to which the landlord has shown himself entitled should not be enforced, to show good grounds for a suspension of execution. Moreover, what he says, or fails to say, when discharging that onus, may in appropriate cases naturally be taken into account when considering costs.
In the light of that approach, what is the meaning to be attributed to the words ‘special reasons’ in s 33(6)? To what classes of ‘conduct’ can regard be had? Clearly the special reason must relate to the particular facts of the case. For instance the mere fact that a landlord has to attend the court on the first occasion when suspension of execution is sought and has had to do so solely because a tenant reasonably seeks to bring himself within the provisions of s 33, for some specified and appropriate term, cannot be a ‘special reason’—however hard it may seem that a landlord should have to incur costs when it is sought to deprive him for at any rate some period of the benefit of a judgment. Moreover, the onus lies on the party asserting that a special reason exists, to show that there exist facts to justify that assertion, although, as previously indicated, reliance may be placed, inter alia, on what the opposite party has said or failed to say in relation to the claim for suspension.
Conduct refers not only to conduct that can properly be criticised, but to conduct that can be particularly commended. The tenant who has made unusually strenuous efforts to help the landlord in his difficulties, eg by offering some place in the premises for temporary use by a replacement employee, and the landlord who has been particularly generous, can each in their turn pray those facts in aid. Broken promises and failing to comply with court orders can rank the other way; so can neglect to take reasonable steps as soon as practicable to seek fresh accommodation. The tenant who deliberately and without justification sits tight on the basis that he is acting in accordance with his rights is specially vulnerable. Experienced county court judges can normally assess special reasons without any difficulty. Indeed, in the course of the pressure of their work, in practice they do so almost automatically as the case develops, taking of course cognisance of the totality of the facts before them.
In the present case the learned judge was clearly not conscious of any difficulty; indeed he specifically says: ‘I don’t recollect any argument of consequence on costs’. He could not be expected to take any but brief notes or, when the time came later to put his judgment in writing, to produce a close body of reasons in the same way as would be expected of an appellate court. For my part I am not prepared to dissect such material as is before us, either as regards notes of evidence or notes of judgment, on the basis of a microscopic examination. Suffice it to say that I agree with Salmon LJ
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that on the evidence the plaintiff has behaved particularly well and that that can be, and is, enough for the purposes of this particular case. I am prepared, like Salmon LJ, to rest my judgment on that basis.
It is, however, to be noted that this is a case where on the face of the notes of evidence there is no trace of reciprocal action in the shape of any special effort to meet the plaintiff’s dilemma and indeed no sign of any attempt to obtain lodgings of the type to which it seems the learned county court judge at one stage in his judgment rightly addressed his mind as providing potential suitable accommodation, at any rate temporarily, for someone in the position of a single man. Indeed, had the county court judge found that the defendant fell in the category of those who neglected to take steps to that end, I would not have been surprised. However, there was no such finding and I agree with Salmon LJ that it does not seem right in those circumstances for the court so to hold. There was enough evidence before the learned judge without that.
I see no reason to suppose that this experienced county court judge approached the matter on an erroneous footing, and I would dismiss the appeal.
CUMMING-BRUCE J. I agree.
Appeal dismissed.
Solicitors: Waterhouse & Co agents for T G Baynes & Sons, Dartford (for the defendant); Adam Burn & Metson (for the plaintiff).
Henry Summerfield Esq Barrister.
Dunk v George Waller & Son Ltd
[1970] 2 All ER 630
Categories: EMPLOYMENT; Contract of service
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 27, 28 APRIL 1970
Master and servant – Apprenticeship – Dismissal of apprentice – Breach of contract by employers – Damages – Apprentice entitled to damages for diminution of future prospects as well as for loss of earnings and training during remainder of term of apprenticeship – Assessment of damages.
In breach of an agreement of apprenticeship for four years as an engineering technician, the employers terminated the apprentice’s agreement when it still had 15 months to run. The apprentice was paid £10 a week under the agreement and in addition was entitled to training, instruction and the benefit of experience in the employers’ works. If he had served the full apprenticeship, he would have been entitled to a certificate that he had served the full period and this would have given him a better start to his career in that, at any rate for two years, he would have earned more than those who had never served an apprenticeship; but because he was not very able he might, thereafter, have earned only the same as those others. On the question of the damages to which the apprentice was entitled for breach of the agreement, the trial judge having awarded nominal damages only.
Held – Since the object of an apprenticeship agreement was to enable the apprentice to fit himself to get better employment and wages, he was entitled to damages for the diminution of his future prospects by the loss of the benefit of the training for which he had stipulated, in addition to damages for loss of earnings and training during the remainder of the agreement; and in the present case, allowing him £2 a week for
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the best part of two years, the apprentice was entitled to £180 damages for loss of future prospects (see p 633 j, to p 634 a, and p 634 d and g, post).
Addams v Carter (1862) 6 LT 130 and Parker v Cathcart (1866) 17 ICLR 778 overruled.
Addis v Gramophone Co Ltd [1909] AC 488 distinguished.
Notes
For termination of apprenticeship, see 25 Halsbury’s Laws (3rd Edn) 493–497, paras 949–958, and for cases on the subject, see 34 Digest (Repl) 323, 324, 2423–2436.
Cases referred to in judgments
Addams v Carter (1862) 6 LT 130, 34 Digest (Repl) 324, 2433.
Addis v Gramophone Co Ltd [1909] AC 488, [1908–10] All ER Rep 1, 78 LJKB 1122, 101 LT 466, 34 Digest (Repl) 131, 891.
Parker v Cathcart (1866) 17 ICLR 778, 34 Digest (Repl) 324, * 1369.
Cases also cited
Chaplin v Hicks [1911] 2 KB 786, [1911–13] All ER Rep 224.
Maw v Jones (1890) 25 QBD 107.
Appeal
This was an appeal by the apprentice, Robert John Dunk, from so much of the judgment of Dunn J, given on 15 July 1969, at the trial of the apprentice’s action for damages for breach of a contract of apprenticeship with George Waller & Son Ltd, the employers, as adjudged that the apprentice should be awarded only nominal damages in respect of the breach. The employers gave notice of grounds additional to those relied on by the court below, on which they contended that Dunn J’s judgment should be affirmed, namely that the apprentice had elected to treat his contract as still subsisting; that he was not entitled to reside from that election; that he had wrongfully absented himself from work from 2 October 1967; that he ought to have accepted the offer contained in the employers’ letter of 27 September 1967 a and that the judge should have taken into account the fact that the apprentice found suitable employment but left it of his own accord and failed to mitigate his damage in that respect. The facts are set out in the judgment of Lord Denning MR.
a
J F A Archer for the apprentice.
C R Jervis for the employers.
28 April 1970. The following judgments were delivered.
LORD DENNING MR. This is an action by the apprentice for breach of an agreement of apprenticeship. The agreement was made on 3 June 1966. The apprentice was Mr Robert John Dunk, who was then 18 years of age. The firm which engaged him as an apprentice was George Waller & Son Ltd, of Phoenix Ironworks at Stroud, in Gloucestershire. Under the apprenticeship agreement it was agreed that the apprentice would for four years, from 7 December 1964, serve as an apprentice, obey the lawful orders of the employers, and so forth. The employers promised to receive the apprentice into their service and pay him the proper amount and also permit him to enjoy the advantage of being in the works and acquiring a practical knowledge as an engineering technician. There was an express clause enabling the employers to determine the agreement if the apprentice was guilty of misconduct or disobeyed lawful orders. That clause, admittedly, does not apply here, because the apprentice was guilty of no misconduct whatsoever.
We have reports as to his progress. In 1965 and 1966, he went through several shops: the fitting shop, the foundry, the drawing office, the machine shop, and so forth. The records show him to have been a reasonably obliging lad and behaving quite well. On one occasion he had to be reprimanded for lack of effort, but otherwise he was
Page 632 of [1970] 2 All ER 630
quite an ordinary apprentice. He also went to the Mid-Gloucestershire Technical College and tried to pass the Ordinary National Certificate. He failed in Part 1 for the first year, but he passed it in his second year. Then he tried for Part 2, and I am afraid that he did badly. His mathematics were particularly bad. The reports showed that he would not have much chance of passing on a second attempt. So the employers decided that they would terminate the apprenticeship. They had no right to do so. He had not been guilty of misconduct, or anything of that kind. His apprenticeship ought to have continued for the four years. Instead the employers terminated it by a letter of 4 September 1967, written by the works manager:
‘We confirm today’s conversation when we stated that owing to your unsatisfactory report from the Technical College and your lack of initiative at work, we have no alternative but to terminate your apprenticeship. You will appreciate that this is not a decision that has been easy to make and a great deal of consultation has taken place before reaching it. However, we feel that you will agree we have been left with no alternative as you have stated you do not wish to be employed in the factory, this being the only employment open to you with your present qualifications.’
That letter of termination was a breach of the apprenticeship agreement. On getting that letter, the apprentice took legal advice. He was advised that the employers had no right to terminate his apprenticeship. He asked for an interview. He had an interview with the employers on 26 September. He told them that he had no intention of terminating the agreement. After that interview the employers wrote to him on 27 September 1967:
‘Further to your interview with the Managing Director, Training Officer and the undersigned on Tuesday, September 26th, we confirm that you stated you had no intention of terminating your employment with the above Company at the end of this present month. With this in mind, and your stated intention of not leaving the Company, provisions have been made for you to commence work in the Fitting Shop as from Monday, October 2nd your hours of work being as at present.’
That work in the fitting shop, we have been told, was work in the factory which he had previously declined.
It was suggested that that letter was an offer by the employers to continue his apprenticeship. I do not think that it was. It was badly worded. The managing director admitted as much. He said that there is sometimes a ‘lack of communication’ in the engineering works. The judge found that it was not an offer to continue the apprenticeship but only an offer of work in the factory. At any rate it was ambiguous. The apprentice did not know what to make of it. On the Friday, the next day after he received it, he went to the employers and asked to see the managing director. He got a point-blank refusal. So that letter remained unexplained. Thereupon the apprentice did not go on the Monday morning. Instead he went to the local employment exchange and asked for unemployment pay, which eventually he was awarded. Now he brings this action for damages.
Dunn J felt he was entitled to damages, but he thought that he should only get nominal damages, two guineas. The apprentice appeals on damages. The employers put in a cross-notice. They said they were not in breach, or, at any rate, that the apprentice ought to have accepted the offer of work in the fitting shop. I think that this cross-notice fails. It seems to me plain that the first letter of September 1967 was not a breach of the apprenticeship agreement. The employers terminated it when they had no right to do so. Their offer on 27 September was note a clear offer to continue the apprenticeship. The apprentice was not bound to accept it. The
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judge was quite right in holding that the employers were in breach and liable in damages.
Now, as to the damages. An apprenticeship agreement is of a special character. The apprentice accepted much less wages during the apprenticeship agreement than he would have received if he had gone into the open market as a labourer. At the material time under the apprenticeship agreement he was getting £10 a week. If he had been an unskilled labourer outside in a factory he would have got £20 a week. The difference should have been made up to him by the benefits of apprenticeship, such as the benefit of training, instruction and experience in the various departments of the works. He has been deprived of those benefits for the remaining 65 weeks of the agreement. In order to mitigate the damage, he sought employment elsewhere. He applied for positions as a representative, and so forth, which he did not get. Perhaps he was aiming too high. For 57 weeks he was out of work, receiving unemployment pay. For the last eight weeks he got employment in a slipper factory at £20 per week.
In my opinion he is entitled to damages for his loss of earnings and of training during the remainder of the term of the apprenticeship agreement and also for the diminution of his future prospects. If he had been allowed satisfactorily to complete his apprenticeship he should have got a better post and better wages thereafter. We were referred to some old cases; Addams v Carter, and Parker v Cathcart, which suggest that an apprentice, who has been wrongly dismissed, can only sue for his damage up to the date of his action brought. They are not good law today.
We were also referred to Addis v Gramophone Co Ltd ([1909] AC 488 at 491, [1908–10] All ER Rep 1 at 3), when it was said that an employee cannot get compensation—
‘… for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.’
I do not think that that applies in the case of an apprenticeship. The very object of an apprenticeship agreement is to enable the apprentice to fit himself to get better employment. If his apprenticeship is wrongly determined, so that he does not get the benefit of the training for which he stipulated, then it is a head of damage for which he may recover. If the apprentice had continued as an apprentice until the end of his time for the next 15 months, he would have been entitled to a certificate at the end of the apprenticeship agreement certifying that he had served his full period of apprenticeship. That would have given him a better start so that he would earn more than others at any rate for the first year or two.
The damage which the apprentice has suffered can be divided into two parts: first, his loss during the remaining period of his four years’ apprenticeship (the short-term loss); secondly, his loss during the period after the four years had expired (the long-term loss). These losses must be calculated in pounds, shillings and pence. The short-term loss was for the 65 weeks unexpired. Over the first 57 weeks he lost the £10 a week which he would have received as an apprentice. That is £570. But against that he has received £272 by way of unemployment insurance. (During the last eight weeks he got work at £20 a week, so for that period he lost nothing.) That makes about £300 for the short-term loss. He was also put to expense in trying to get other work. He asked a great deal too much in his claim. The judge reduced it to £20, and I see no reason to alter that figure.
Next, the long-term loss. He lost the better wages which he would have had. He would have been able to earn a pound or two more than he would have done if he had never served as an apprentice, at any rate for a year or two. But this betterment might not have lasted very long. He was not very able and might soon have
Page 634 of [1970] 2 All ER 630
been on the same level as men who had never served an apprenticeship. It would seem appropriate if he were allowed £2 a week for the best part of two years. That would come to £180. So, taking the three items all together, £300 for the short term, £20 expenses and £180 for the future term, the total sum of damages would amount to £500.
I would, therefore, allow this appeal and increase the damages to the sum of £500.
WIDGERY LJ. I agree with the order proposed by Lord Denning MR and with the reasons by which he supports it.
A contract of apprenticeship is significantly different from an ordinary contract of service if one has to consider damages for breach of the contract by an employer. A contract of apprenticeship secures three things for the apprentice: it secures him, first, a money payment during the period of apprenticeship, secondly, that he shall be instructed and trained and thus acquire skills which would be of value to him for the rest of his life, and, thirdly, it gives him status, because the evidence in this case made it quite clear that once a young man, as here, completes his apprenticeship and can show by certificate that he has completed his time with a well-known employer, this gets him off to a good start in the labour market and gives him a status the loss of which may be of considerable damage to him.
It seems to me, therefore, that in this case not only must we say that the apprentice is to be compensated for the loss of wages during the remainder of his apprenticeship contract but that we must also give him something in respect of the loss of training and loss of status which has also resulted. For a time during the argument I was troubled on this aspect of the case because, like the learned trial judge, I find it very difficult to see that any positive loss of earnings (after the period of the apprenticeship) can be proved in this case to be attributable to the premature determination of the apprenticeship agreement. If I had been satisfied that such actual loss could be proved, the damages might have been significantly higher; but, even though I agree with the judge that there is really no proved loss of earnings attributable in the future after the expiration of the apprenticeship period in this case, I am satisfied that a sum, difficult though it may be to assess, is properly to be awarded for the loss of teaching, the loss of instruction and the loss of status.
I agree that the appeal should be allowed and judgment entered for the plaintiff for £500.
KARMINSKI LJ. I agree. The most difficult aspect of this case so far as I have been concerned is to assess the amount of damage, if any, in respect of what Lord Denning MR has referred to as the long-term future loss. I accept at once that the apprentice has lost the benefit of receiving teaching because his apprenticeship was prematurely determined through no misconduct of his own. Further he has lost the status of a man who has completed an apprenticeship, which might be important in acquiring a new job. It is clearly impossible to produce an exact formula by which to measure damage, as it is sometimes possible in a sale of goods case where the contract price is known and the price of buying similar goods on the market can also be ascertained. But the fact that there are difficulties in this sort of case does not excuse the court from doing its best to measure the damage as best it can on the information and evidence available.
I agree in this case that the figure of £180 is appropriate and right on the material before us, and I agree that this appeal must be allowed and a total of £500 damages awarded.
Appeal allowed; £500 damages awarded.
Solicitors: Whaterhouse & Co agents for Rickerbys, Cheltenham (for the apprentice); Wellington & Clifford, Stroud (for the employers).
Wendy Shockett Barrister.
Easiwork Homes Ltd v London Borough of Redbridge
[1970] 2 All ER 635
Categories: LOCAL GOVERNMENT
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 20, 21 APRIL 1970
Rates – Unoccupied property – Resolution for rating of unoccupied property – Premises being modernised – Premises not only unoccupied but also incapable of occupation – Whether liable to rates – General Rate Act 1967, s 17(1), Sch 1.
In an area where a resolution has been passed under s 17(1)a of the General Rate Act 1967 that the provisions of Sch 1b to that Act should apply with respect to the rating of unoccupied property, the owner of property may be rateable in respect of it notwithstanding that it is not only unoccupied, but also incapable of occupation because of work, which is being done to it (see p 637 j, p 639 d, and p 640 f and h, post).
Notes
For the rating of unoccupied property, see Supplement to 32 Halsbury’s Laws (3rd Edn) para 51A.
For the General Rate Act 1967, s 17, Sch 1, see 47 Halsbury’s Statutes (2nd Edn) 1234, 1353.
Case referred to in judgments
Arbuckle Smith & Co Ltd v Greenock Corpn [1960] 1 All ER 568, [1960] AC 813, [1960] 2 WLR 435, 124 JP 251, Digest (Cont Vol A) 1278, 13a.
Case stated
This was a case stated by justices for the petty sessional division of Beacontree in respect of their adjudication as a magistrates’ court sitting at Barking on 15 October 1969 on a complaint made by the rating authority, the London Borough of Redbridge, against the appellant company, Easiwork Homes Ltd, for non-payment of rates. The justices issued a distress warrant in respect of the sum unpaid. The facts are set out in the judgment of Bridge J.
L J Blom-Cooper QC for the appellant company.
C S Fay for the rating authority.
21 April 1970. The following judgments were delivered.
BRIDGE J delivered the first judgment at the invitation of Lord Parker CJ. This is an appeal by case stated from a decision of justices for the petty sessional division of Beacontree, sitting at Barking, who on the complaint of the London Borough of Redbridge in its capacity as rating authority ordered the issue of a distress warrant under s 97 of the General Rate Act 1967, in respect of the sum of £340 4s 6d alleged to be rates due and owing from the appellant company, Easiwork Homes Ltd.
The appeal raises a novel point and a point of some general importance on certain statutory provisions in the law of rating which first reached the statute book in the Local Government Act 1966, and are now to be found in the consolidating General Rate Act 1967. It is of course well known that up to 1966 liability to pay rates depended on occupation, and over the course of many years the courts have built up an elaborate and sophisticated body of doctrine defining what does and what does not constitute rateable occupation of premises. The 1966 Act introduced into the law of rating for the first time in this country the possibility of property becoming
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chargeable to rates notwithstanding that it was unoccupied. It is with those provisions that we are concerned, and it will be convenient to refer to the principal provisions as they appear in the 1967 Act, before going to the facts of the case. By s 2(4) of the 1967 Act, it is provided:
‘Subject to the provisions of this Act, the general rate for any rating area—(a) shall be a rate at a uniform amount per pound on the rateable value of each hereditament in that area … [subject to an exception which I need not read]; (b) shall be made and levied in accordance with the valuation list in force for the time being … [again subject to an exception immaterial for present purposes].’
Section 17(1) of the 1967 Act provides:
‘A rating authority may resolve that the provisions of Schedule 1 to this Act with respect to the rating of unoccupied property—(a) shall apply, or (b) if they for the time being apply, shall cease to apply, to their area, and in that case those provisions shall come into operation, or, as the case may be, cease to be in operation, in that area on such day as may be specified in the resolution.’
Then before turning to the provisions of Sch 1, I would refer in passing to the definition of ‘hereditament’ in the interpretation section, s 115, where, unless the context otherwise requires, ‘hereditament’ is to mean—
‘property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list.’
Then Sch 1, para 1, provides:
‘(1) Where, in the case of any rating area in which, by virtue of a resolution under section 17 of this Act, this Schedule is in operation, any relevant hereditament in that area is unoccupied for a continuous period exceeding three months, the owner shall, subject to the provisions of this Schedule, be rated in respect of that hereditament for any relevant period of vacancy; and the provisions of this Act shall apply accordingly as if the hereditament were occupied during that relevant period of vacancy by the owner.
‘(2) Subject to the provisions of this Schedule, the amount of any rates payable by an owner in respect of a hereditament by virtue of this paragraph shall be one-half of the amount which would be payable if he were in occupation of the hereditament … ’
Then in order to understand the meaning of those two sub-paragraphs, one turns to the definitions in para 15 of the two phrases ‘relevant hereditament’ and ‘relevant period of vacancy’:
‘“relevant hereditament” means any hereditament consisting of, or of part of, a house, shop, office, factory, mill or other building whatsoever, together with any garden, yard, court or other land ordinarily used or intended for use for the purposes of the building or part;
‘“relevant period of vacancy”, in relation to any relevant hereditament, means [subject to a paragraph that is not material], any period beginning with the day following the end of a period of three months during which the hereditament has been continuously unoccupied and ending with the day preceding that on which the hereditament becomes or next becomes occupied or ceases to exist.’
Now the facts of the matter are within a short compass. In February 1968, the rating authority passed the necessary resolution under s 17 of the 1967 Act to apply the provisions of Sch 1 to the Act to its area with effect from 1 April 1968. The appellant
Page 637 of [1970] 2 All ER 635
company are the owners of an old-fashioned block comprising 16 flats in the borough known as Eagle Court, Hermon Hill, Wanstead, E11. Each flat appears in the current valuation list presumably with its appropriate rateable value entered against it. We are not told precisely what description is applied to each flat in the list, probably ‘residential flat’, nor are we told the figure of rateable value, because no dispute arises as to quantum. In respect of each flat, the rating authority has duly demanded payment of rates for a certain period—again we are not told what the period was but must take it that it was a period during which the flats had been unoccupied in each case for more than three months, so as to produce, if the provisions of Sch 1 are applicable in the circumstances of the case, a relevant period of vacancy in relation to each flat. Now during the period, in addition to being in fact unoccupied, it is found in terms in the case that the flats had become unfit for occupation either as dwelling-houses or otherwise, but the reason for that is stated in the case in these terms:
‘In the case of each flat the plumbing work had been removed, toilet fittings were being replaced, water supplies, gas appliances, electrical wiring were being renewed, and even in some cases flooring was being relaid.’
These works were being undertaken by the appellant company in the course of a systematic modernisation of the whole block of flats.
It was argued before the justices that on the true construction of the provisions of the General Rate Act 1967, the liability to pay rates imposed in respect of unoccupied property by the provisions of Sch 1 could not apply to any property which for the time being was not only de facto unoccupied but in a condition which rendered it physically incapable of occupation. The justices rejected that submission and expressed their conclusion shortly in these terms:
‘We were of the opinion that while the sixteen flats known as Eagle Court appear on the valuation list they are rateable, and if the provisions of Schedule 1 and Section 17 to the General Rate Act have been applied by the rating authority then the appellant company are liable to pay rates. We therefore issued a distress warrant in accordance with Section 97 General Rate Act, 1967.’
For my part, I should like to express my indebtedness to counsel on both sides for the careful arguments of which we have had the benefit in this court in relation to what is certainly not an easy point of construction.
The point at which I would start is an examination of the language of the provisions of the Act to which I have already referred. It is clear to my mind, as counsel for the rating authority has submitted, that the provisions of s 2(4) of the Act are mandatory. Again, it is clear that on the face of it each of the flats with which the court is concerned falls fairly and squarely within the general definition, in s 115 of the Act, of ‘hereditament’. Each of those flats is a unit of property which is shown as a separate item in the valuation list. Again, when one comes to para 1 in Sch 1, each flat is a hereditament which has been unoccupied for a continuous period exceeding three months and, as it seems to me, each flat continues to exist as a relevant hereditament within the meaning of the definition in para 15. Prima facie, therefore, the provisions of Sch 1 are applicable to the case unless it can be said that one should read para 1 of Sch 1 subject to an implied term, as if the draftsman had said ‘any relevant hereditament being capable of occupation but unoccupied for a continuous period exceeding three months’ etc.
The first way in which counsel for the appellant company puts his argument is to submit that if one looks at the general principles of rating law applicable before 1966, one finds two distinct principles governing the question of liability to pay rates. First, he says, before in the pre-1966 law there could be liability to pay rates there had to be a property capable of occupation. Secondly, as a separate principle,
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it had to be shown that the property was actually occupied. In support of that submission he relies first on a short passage from the current edition of Ryde on Ratingc, to the following effect:
‘Buildings and works in course of construction or alteration are not rateable, because there is no occupier of them within the meaning of the General Rate Act, 1967.’
Then he refers us to the familiar decision of the House of Lords in Arbuckle Smith & Co Ltd v Greenock Corpn. That was a case where the issue arose in a Scottish appeal as to whether the owners of a warehouse were liable to pay rates in respect of it during a period when alterations to the warehouse were being undertaken by way of bricking up doors and windows to convert it from an ordinary warehouse into a suitable building to be used as a bonded warehouse for customs purposes. Their Lordships approached the matter on the footing that the Scottish law differed in no way from the English law on the subject, but, with the exception of a single sentence to which counsel for the rating authority very properly drew our attention in the speech of Lord Keith of Avonholm ([1960] 1 All ER at 575, [1960] AC at 830), it does not appear to me that that case supports the dichotomy of principles which counsel for the appellant company seeks to establish. The essential question with which, in my judgment, their Lordships were there concerned was the question whether the de facto physical presence on the premises of the workmen who were engaged in carrying out the structural alterations was itself a rateable occupation of the property. Insofar as it is correct to say that there was in the pre-1966 law a separate and distinct principle requiring that property should be capable of beneficial occupation before liability to pay rates could arise, that principle in my judgment went to the question of valuation rather than to the question of occupation, because it is true that before a value can be attached to premises for rating purposes the premises must be such as to be capable of attracting a rent from the hypothetical tenant who represents the criterion of rating valuation. But so far as that matter is concerned, I do not see that we can derive any assistance from it if only because it is in terms provided in s 67(6) of the 1967 Act that:
‘Subject to subsection (7) of this section [which is immaterial], the valuation list in accordance with which … any rate falls … to be made, as in force … at the date of the making of the rate, shall be conclusive evidence for the purposes of the levying of that rate of the values of the several hereditaments included in the list.’
I therefore approach the matter of construction on the footing that there was no such pre-existing principle relevant to the point we have to decide as that for which counsel for the appellant company had contended.
The next way in which he puts his argument is to say in effect that, at the material time in respect of which the rating authority seeks to levy rates on the appellant company, the hereditaments in question, these flats, had ceased to exist. Of course, if that is right, then the ‘relevant period of vacancy’ would have come to an end, or indeed there would never have been a ‘relevant period of vacancy’ attracting liability to rates under the provisions of Sch 1. The cases were postulated in the course of argument of houses being destroyed by fire or earthquake or some disastrous air crash, and I can well see that in such cases it might be a plain conclusion of fact that a particular hereditament had ceased to exist as a ‘relevant hereditament’ within the meaning of the definition in Sch 1 which it will be remembered requires that there be in existence a house, shop, office, factory, mill or other building or some other part thereof. But the question whether or not a hereditament has in that
Page 639 of [1970] 2 All ER 635
sense ceased to exist must to a substantial extent be one of fact and degree, and I would only observe first that the justices were never asked to find that these flats had ceased to exist and, even if they had been, could not in my judgment properly have so found on the basis merely of the works which were being undertaken as described in the case.
The most attractive way in which, as it seems to me, counsel for the appellant company’s argument is put is to invite the court to look at the mischief at which this Act was plainly aimed. Counsel submits that the object of the new provisions in effect was to penalise property owners who, to the detriment of the community, for the purposes of capital gain or otherwise, keep their properties unoccupied for long periods when they might be providing useful accommodation which is so much needed. But it seems to me that that consideration is to a large extent counter-balanced by the counter-argument advanced by counsel for the rating authority that if the Act is to be construed so as to exclude liability under these provisions in respect of property which for the time being is incapable of occupation, it would open the door to widespread abuse in that it would be open to any property owner anxious to keep his property unoccupied for a substantial period of time simply to remove, say, the sanitary fittings and part of the plumbing in order to be able to say that the property was for the time being incapable of occupation.
I come back therefore to the language of the Act, and I pose the question: are there any other provisions in Sch 1 or in the Act itself which would support such an implied term in para 1 of Sch 1 as is necessary to sustain counsel for the appellant company’s argument? So far from finding any such other provisions, if one looks at the other provisions of Sch 1 they are to my mind strong pointers against the implied term for which counsel contends. First, there is provision in para 2 of Sch 1 for exemption from liability in a large number of cases, details of which I need not go into; they are, to put the matter quite generally, properties subject to some legal disability; it is sufficient as an illustration to refer to para 2 (a) which exempts from liability under these provisions an owner who is prohibited by law from occupying the hereditament or allowing it to be occupied. The fact that this list of exemptions does not in terms include an exemption for property physically incapable of occupation is of course in no sense conclusive against counsel for the appellant company’s argument, but insofar as it points one way or the other, to my mind, it points against the implied term rather than in its favour.
The provisions, however, from which I derive most assistance in this matter are the provisions of paras 7 to 10 of Sch 1 which is a fasciculus of paragraphs with the heading ‘Completion of newly erected or altered buildings’. Paragraph 7 provides:
‘For the purposes of paragraph 1 of this Schedule, a newly erected building which is not occupied on the date determined under the subsequent provisions of this Schedule as the date on which the erection of the building is completed shall be deemed to become unoccupied on that date.’
Then there are some rather complicated provisions in para 8 which I need not read, but the effect of which shortly is this: when the rating authority has seen that a building under construction is nearing completion, and in particular when it is able to say, having regard to the stage which the construction has reached, that it can reasonably be expected that the building will be completed within three months, it is empowered under para 8 of Sch 1 to serve a notice referred to as a ‘completion notice’ specifying the date when the building shall be deemed to have been completed and, subject to various rights of appeal which are given to the property owner, when such a notice takes effect then the building is to be deemed to have been completed, on the date specified in the notice, even though in fact it may not have been completed. That provision of itself clearly contemplates a situation in which the owner of an incomplete building which because it is incomplete may be incapable of occupation
Page 640 of [1970] 2 All ER 635
will nevertheless because he has delayed completion beyond the date when he might have effected it be liable to pay rates as the owner of an unoccupied property under the provisions of para 1 of Sch 1, and that is clearly against the contention which counsel for the appellant company advances.
But finally, in my judgment, the matter is really put beyond doubt when one comes to the provisions of para 10, which is dealing specifically with the case of structural alterations and is in these terms:
‘Where by reason of the structural alteration of any building a relevant hereditament becomes or becomes part of a different hereditament or different hereditaments, the relevant hereditament shall be deemed for the purposes of this Schedule to have ceased to exist on the date (as determined in pursuance of the foregoing provisions of this Schedule) of the completion of the structural alteration and, in particular, to have been omitted on that date from any valuation list in which it is then included; but nothing in this paragraph shall be construed as affecting any liability for rates under paragraph 1 of this Schedule in respect of the hereditament for any period before that date.’
That paragraph seems to me to be saying clearly: where a structural alteration is being undertaken of a sufficiently radical character to produce at its end the disappearance of one hereditament and the emergence of a new one—as it might be in the case where internal walls between two separate flats are demolished in order to turn two pre-existing flats into one larger flat—then the pre-existing hereditaments are not only to be deemed to continue in existence until the date when the whole structural alteration has been completed, but also liability under para 1 in respect of the unoccupied pre-existing hereditaments may continue until that date. If that is the principle expressly applied by Sch 1 to the case of structural alterations which are sufficiently radical and extensive as to produce a change in the identity of the hereditament or hereditaments concerned, a fortiori it seems to me the draftsman of the Act must be taken to have contemplated that liability to pay rates in respect of unoccupied property might attach to an owner during the carrying out of such less radical alterations and improvements to property as are here involved where there is no question of producing new flats but the existing flats are merely being improved.
I reach this conclusion not without reluctance. It may well be that Sch 1 as so construed will produce cases of hardship, but for the reasons I have sought to explain, it seems to me clear that that is Parliament’s intention as expressed in the Act, and it has to be borne in mind, of course, that every property owner has a locus poenitentiae of at least three months before his liability to pay rates in respect of unoccupied property can arise.
I think the justices here came to the right conclusion, and in my judgment this appeal should be dismissed.
BEAN J. I agree.
LORD PARKER CJ. I also agree.
Appeal dismissed.
Solicitors: Tobin & Co (for the appellant company); K F B Nicholls, Ilford (for the rating authority).
S A Hatteea Esq Barrister.
R v Nottingham County Justices, ex parte Bostock
[1970] 2 All ER 641
Categories: FAMILY; Children
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 28 APRIL 1970
Affiliation – Evidence – Admissibility – Evidence of welfare worker – Conversations with respondent and his solicitor – Conversations exploring possibilities of adoption of unborn child – Alleged admissions that respondent might be father – Whether conversations without prejudice – Whether disclosure against public policy – Whether conversations rendered confidential by rule relating to adoption proceedings – Adoption (Juvenile Court) Rules 1959 (SI 1959 No 504 as amended by SI 1965 No 2072), r 30.
The applicant made a complaint under the Affiliation Proceedings Act 1957 that the respondent was the father of her child. She sought to call as a witness R, a case worker employed by a diocesan board of moral welfare acting for an adoption society. The suggestion was that R would speak to two conversations, one with the respondent’s solicitor and one with the respondent himself and his solicitor, in which words were alleged to have been used showing that the respondent admitted that he might be the father of the child. The purpose of the conversations was to explore the possibility of the adoption of the child. Objection was taken to the hearing of R’s evidence on the grounds that the conversations were on a ‘without prejudice’ basis, that the hearing of the evidence would be contrary to public policy, and that the conversations fell within r 30a of the Adoption (Juvenile Court) Rules 1959 and 1965 which provided for information obtained in the course of or relating to adoption proceedings to be treated as confidential. The justices refused to hear the evidence.
Held – An order for mandamus would issue to the justices to hear the evidence, because—
(i) R was not acting in any way as the authorised agent of the applicant with a view to compromising proceedings when the conversations took place and it was impossible to say that the conversations were without prejudice (see p 642 e and p 643 a, post);
(ii) there was no ground of public policy to prevent the evidence being given as the only real aspect of public policy involved was that no man should evade his responsibility (see p 642 f and p 643 a, post);
(iii) there were no proceedings whatever at the time of the conversations to which r 30 could apply (see p 642 j and p 643 a, post).
Notes
For evidence in affiliation proceedings, see 3 Halsbury’s Laws (3rd Edn) 120, 121, paras 184, 185, and for cases on the subject, see 3 Digest (Repl) 452–454, 412–428.
Motion for mandamus
This was an application by Sylvia Penelope Bostock, an infant, through her father and next friend, George Edward Bostock, for an order of mandamus directing the justices for the county of Nottingham sitting at Nottingham to admit and to hear certain evidence tendered on the applicant’s behalf in the hearing of a complaint made by her pursuant to s 1 of the Affiliation Proceedings Act 1957. The facts are set out in the judgment of Lord Parker CJ.
J D A Fennell for the applicant.
B Woods for the respondent.
Page 642 of [1970] 2 All ER 641
28 April 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel for the applicant moves on behalf of one Sylvia Penelope Bostock for an order of mandamus requiring justices for the county of Nottingham sitting at Nottingham to hear certain evidence tendered on behalf of the applicant in the hearing of a complaint made by her in October 1969 under the Affiliation Proceedings Act 1957. The matter arises in this way: the applicant here gave birth to a female child on 11 July 1969 and alleged that the respondent, Frederick Arthur Bladon, was the father of that child. She gave evidence and called a witness. A time came when she sought to call a Mrs Ruth Mary Robertson, who was a case worker employed by the Southwell Diocesan Board of Moral Welfare acting for an adoption society. What exactly Mrs Robertson would say if called is of course not known for certain, but the suggestion is that she will speak to two conversations, one with the respondent’s solicitor on 14 March 1969, and a second conversation on 9 May 1969 with the respondent himself and his solicitor. In both cases the suggestion is that words were used which show that the respondent was admitting that he might well be the father of the child. Objection was taken; the justices refused to hear the evidence, and the matter was adjourned in order that these proceedings might be taken. The importance, of course, of this evidence is that in this case it is or would be the only evidence capable of amounting to corroboration.
As I understand it, counsel for the respondent succeeded before the justices on three arguments which he now advances in this court. The first is that in some way the conversations took place on a ‘without prejudice’ basis with a view to some compromise. For my part I have great sympathy with the solicitor concerned, and indeed with the respondent, who clearly understood that the sole object of the meeting with Mrs Robertson was in order that she could explore with them the possibility of the adoption of this child. The respondent was quite willing to help in any way he could. However, I find it impossible to say that there is something ‘without prejudice’ here. Mrs Robertson was not acting in any way as the authorised agent of the applicant with a view to compromising the proceedings, and in my judgment it is impossible to say that the conversation was without prejudice.
The second way in which it is put is really on the grounds of public policy as I understand it. For my part the real aspect of public policy that is involved in this case is that no man should evade his responsibility if he has one. I can see no grounds of public policy which prevent this evidence being given.
Finally, counsel for the respondent relies on the Adoption (Juvenile Court) Rules 1959b and 1965c made under the Adoption Act 1958. These rules, as appears from r 36, apply only to proceedings under Parts I and III of the Adoption Act 1958 before magistrates’ courts, but we have been told, and it is no doubt correct, that the same provisions are made in regard to adoptions in county courts and in the Chancery Division. Rule 30 provides:
‘Any information obtained by any person in the course of, or relating to, proceedings under Part I of the Adoption Act, 1958, shall be treated as confidential and shall be disclosed if and only if … ’
A limited number of occasions for disclosure are then given. Granted that the words ‘or relating to’ are wide, nevertheless it seems to me from the very wording that the rule is providing that the information relating to the proceedings must be treated as confidential in those proceedings. Here there were no proceedings whatever; indeed these enquiries were made some four months before the child was born, and in those circumstances it does not seem to me that counsel for the respondent is entitled to rely on r 30.
For my part I think the justices should hear this evidence. It will be of course for them to judge what weight to put on it in all the circumstances of the case.
Page 643 of [1970] 2 All ER 641
BRIDGE J. I agree.
BEAN J. I also agree.
Order for mandamus.
Solicitors: Church, Adams, Tatham & Co agents for Healey & Smith, Nottingham (for the applicant); Field, Fisher & Co agents for Moss, Toone & Deane, Loughborough (for the respondent).
S A Hatteea Esq Barrister.
John v Matthews
[1970] 2 All ER 643
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ BRIDGE AND BEAN JJ
Hearing Date(s): 23 APRIL 1970
Club – Members’ club – Transactions with members – Application of Trade Descriptions Act 1968.
Trade description – False indication as to price – Offence committed only in relation to trade or business – Trade Descriptions Act 1968, s 11.
Trade description – False indication as to price – Price less than real price – ‘Offering to supply any goods’ – Trade Descriptions Act 1968, s 11(2).
The Trade Descriptions Act 1968 relates to transactions of a commercial nature and does not apply to transactions with members in members’ clubs.
Section 11 of the Trade Descriptions Act 1968 is to be read as if it contained some words such as ‘in the course of trade or business’.
Observations on the meaning of the expression ‘offering to supply any goods’ in s 11(2)a of the Trade Descriptions Act 1968.
Notes
For false or misleading indication as to price of goods, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314c.
For the Trade Descriptions Act 1968, s 11, see 48 Halsbury’s Statutes (2nd Edn) 602.
Case stated
This was a case stated by justices for the borough of Swindon acting in and for the petty sessional division of the borough of Swindon in respect of their adjudication as a magistrates’ court sitting at Swindon on 1 and 24 October 1969. On 6 August 1969, an information was preferred by the appellant, David Murray John, against the respondent, Alfred Henry Matthews, that he wilfully obstructed Terence Ian Pollard (the inspector), an officer employed by the Swindon Borough Council, which is a local weights and measures authority, while acting in pursuance of the Trade Descriptions Act 1968, contrary to s 29(1)(a) of that Act.
The following facts were found. Terence Ian Pollard was a duly accredited inspector of weights and measures employed by the Swindon Borough Council which was a weights and measures authority. The respondent was the secretary of the Gorse Hill Working Men’s Club which was a private members’ club, being a working men’s club affiliated to the Working Men’s Club and Institute Union Ltd and registered under the Friendly Societies Acts. The club was well known, was well conducted,
Page 644 of [1970] 2 All ER 643
and had approximately 1,200 members. On 18 May 1969, a member of the club, Mr James Charles Francis Cowley asked his friend Mr John Woolford, also a member of the club, to obtain for him a packet of 20 Kensitas cigarettes, and handed Mr Cowley the sum of £1 0s 2d for the purpose. Mr Woolford obtained from the club bar a packet of 20 Kensitas cigarettes the outer cellophane wrapping of which had stamped on it the words ‘3d off’ and was handed some change the amount of which he did not check. He handed the cigarettes and the change to Mr Cowley who said he received 15s change; and accordingly the cigarettes cost Mr Cowley the sum of 5s 2d. The recommended price of 20 Kensitas cigarettes was 5s 2d and therefore Mr Cowley did not receive ‘3d off’ the recommended price of the cigarettes; the club had received these cigarettes so marked by the manufacturers, and none of the club officials had noticed the ‘3d off’ prior to this incident. Mr Cowley reported the matter to the inspector. On 20 May 1969, the inspector went to the club where he interviewed the respondent. He told the respondent the nature of the complaint which he had received and the reason for his visit. The respondent told the inspector that the steward and barmaid were off duty and would not be available until Thursday, and that he wished to take advice from the Working Men’s Club and Institute Union Ltd as to the inspector’s rights. The inspector then decided to return on Thursday, 22 May 1969. By appointment on 22 May 1969, the inspector again went to the club in order to see the steward and barmaid to make enquiries as to the complaint and met the respondent who out of courtesy allowed him into the hall but refused to allow him to enter the club premises any further, and said that he did so on the advice of the Working Men’s Club and Institute Union Ltd, on the grounds that the inspector had no right to enter private members’ clubs. The inspector was seeking to obtain access to the club premises because he wished to enquire whether an offence under the Trade Descriptions Act 1968, s 11(2), had been committed there and the respondent’s refusal to allow him to enter the said club was deliberate and intentional. The inspector knew that Mr Woolford and Mr Cowley were members of the club.
It was contended by the appellant that there were reasonable grounds for the inspector to believe that an offence contrary to s 11(2) of the Trade Descriptions Act 1968, had been committed at the club in that there had been an offer to supply goods as to which a false indication as to price had been given. It was further contended that by refusing the inspector access to the club the respondent had wilfully obstructed him from making proper enquiries to ascertain whether an offence under the 1968 Act had been committed.
It was contended by the respondent that the respondent was entitled to refuse the inspector access to the club which was a private members’ club since no offence of ‘offering to supply’ goods to which a false indication as to price had been given could be committed on the club premises where the goods were club property and were supplied to a club member.
After the evidence had been heard, in answer to the justices’ specific enquiry, the prosecuting solicitor said that in the case the prosecution accepted that it was necessary for him to prove that an offence contrary to s 11(2) of the 1968 Act could have been committed in relation to the transaction involving Mr Cowley, and that in this case he did not rely on any matters outside that transaction to give the right to enter the club.
A F B Scrivener for the appellant.
Hugh Griffiths QC and John Griffiths for the respondent.
23 April 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the borough of Swindon who dismissed an information preferred by the appellant against the respondent that he, the respondent, wilfully obstructed
Page 645 of [1970] 2 All ER 643
an officer employed by the Swindon Borough Council, which is a local weights and measures authority, while acting in pursuance of the Trade Descriptions Act 1968, contrary to s 29(1)(a) of that Act. The short facts were that a Mr Pollard was a duly accredited inspector of weights and measures employed by the Swindon Borough Council. The respondent is the secretary of the Gorse Hill Working Men’s Club, which is a private members’ club, being a working men’s club affiliated to the Working Men’s Club and Institute Union Ltd and registered under the Friendly Societies Acts. By virtue of those Acts, what is at common law the joint property of the club is vested in trustees. This particular club was well conducted, well known in the town, had some 1,200 members, and the rules show that it was a perfectly proper, well conducted club.
The reason for the inspector coming to this club was that a member of the club, a Mr Cowley, got a friend, another member of the club, to obtain for him a packet of 20 Kensitas cigarettes. The friend, Mr Woolford, went to the club bar, got a packet of cigarettes, handed it to Mr Cowley and gave him certain change which showed that he had been charged what is called under the Act the recommended price, the manufacturer’s price for the cigarettes, whereas the packet disclosed on the outside a statement to the effect: ‘3d off’. Mr Cowley, instead of taking it up with the club committee, the club secretary or even the barman, went off and complained to the inspector. As a result of that, the inspector felt that it was his duty to visit the club, and when he arrived there the secretary very politely told him that although he could come into the hall and talk about it, he would not be allowed further into the club. It was as a result of that, that the prosecution was brought under s 29(1)(a) of the Trade Descriptions Act 1968. Section 29(1) provides:
‘Any person who—(a) wilfully obstructs an officer of a local weights and measures authority or of a Government department acting in pursuance of this Act … shall be guilty of an offence … ’
The powers of an inspector under the Act are to be found in the preceding section, s 28, and the relevant part for this purpose is s 28(1)(a). Section 28(1) provides:
‘A duly authorised officer of a local weights and measures authority or of a Government department may, at all reasonable hours and on production, if required, of his credentials, exercise the following powers, that is to say,—(a) he may, for the purpose of ascertaining whether any offence under this Act has been committed, inspect any goods and enter any premises other than premises used only as a dwelling … ’
It was conceded at the trial and before this court that, before it could be said that the inspector here was exercising his power for the purpose of ascertaining whether any offence had been committed, it must first be determined whether in fact any offence could be committed, and the only offence which the inspector was looking into, or the possibility of which he was looking into, is that set out in s 11(2), which provides:
‘If any person offering to supply
Page 646 of [1970] 2 All ER 643
any goods gives, by whatever means, any indication likely to be taken as an indication that the goods are being offered at a price less than that at which they are in fact being offered he shall, subject to the provisions of this Act, be guilty of an offence.’
If there was any offence disclosed by Mr Cowley’s complaint, it was to be found in s 11(2), and accordingly the question arises whether, in the circumstances of this case, the handling of that packet of cigarettes by the club barman on behalf of the committee of management, and in turn on behalf of the trustees acting as agents for all the members of the club, constituted an ‘offering to supply any goods’ within s 11(2). It is by no means to determine to what the words ‘offering to supply any goods’ refer. Wherever the words are mentioned, and they are mentioned in the earlier sections of this Act dealing with false trade descriptions, it is in reference to price, and as the all-embracing s 6 shows, the exposing of goods for supply or having goods in one’s possession for supply, and indeed under s 11(3) (d), advertisement of goods as available for supply is to be deemed to be an ‘offering to supply’. It may well be that that phrase was used to get over the difficulties which had arisen in connection with other legislation whether goods were exposed for sale so as to constitute an offer for sale or whether in fact their exposure was merely an offer to negotiate or an offer to treat. It may be that it was to get rid of those troubles that this phrase ‘offering to supply’ was used.
On the other hand, and for my part I do not wish to come to a decided conclusion in the matter, it may well have been deliberately widened to cover, amongst other things, hire-purchase agreements. I do not propose to decide exactly what it means for this reason, but I cannot bring myself to think that any of the offences constituted under the Trade Descriptions Act 1968 arise in the case of what I may call domestic bodies or households. The object of the 1968 Act surely is to protect the public, not a husband from his wife, or a club from a member of the club. It seems to me that that is clear when one reads the Act as a whole, which in section after section, beginning with s 1, continually deals with circumstances constituting an offence which arises in the course of a trade or business. Those words ‘Any person who, in the course of trade or business … ’b does this or that run right through this Act with the curious exception of the section with which we are dealing, s 11.
Counsel for the appellant very naturally pointed to that distinction, and said that that is a deliberate omission, but when one looks at the mischief aimed at by the Act and the scheme of the Act as a whole, it seems to me much more likely that those words did not appear in s 11 because it was so clear on the layout of the Act that they were to be implied. As was said in the course of argument, one would reach this absurd result if counsel for the appellant were right, that, for instance in this case the club would be liable for the offence under s 11 in relation to the 3d off which was not allowed, whereas it would be wholly immune if it applied to cigarettes or wines or anything else, a completely false description under s 1.
In these circumstances it seems to me clear that whatever the word ‘supply’ means, the Act does not deal with the ordinary members’ club, and that it only relates to transactions of a commercial nature. In those circumstances I think that the justices came to a right conclusion and I would dismiss this appeal.
BRIDGE J. I entirely agree.
BEAN J. I also agree.
Appeal dismissed.
Solicitors: Sharpe, Pritchard & Co agents for D Murray John, Swindon (for the appellant); Hewitt, Woollacott & Chown (for the respondent).
S A Hatteea Esq Barrister.
R v Hassard
R v Devereux
[1970] 2 All ER 647
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, WINN LJ AND TALBOT J
Hearing Date(s): 16 JANUARY 1970
Criminal law – Forgery – Cheque – Bank account opened in fictitious name – Cheque drawn on account signed in fictitious name – Whether cheque forgery – Forgery Act 1913, ss 1(2)(b), 2(2)(a).
D opened a bank account under the fictitious name A in order to pay into it stolen cheques crossed ‘Account payee only’ and already altered by another person so as to be payable to A. The cheques were handed to D by H. D drew one cheque on the account for £80 in favour of H and in respect of that transaction D was convicted of the forgery of a valuable security and H of uttering the forged valuable security in that he presented the cheque to his bank for collection. On the question whether D’s action in drawing a cheque in the assumed name A amounted to forgery within the meaning of ss 1(2)(b) and 2(2)(a) of the Forgery Act 1913a.
Held – Since D had assumed the name A solely for the purpose of opening a bank account into which the stolen cheques could be paid and obtaining a cheque book with which to draw on that account, she had perpetrated a fraud on the bank, when she drew the cheque she was continuing the fraud and the case fell fairly and squarely within ss 1 and 2 of the Act (see p 649 h, post).
Notes
For forgery of valuable securities, see 10 Halsbury’s Laws (3rd Edn) 844, 845, paras 1627, 1628, and for cases on the subject, see 15 Digest (Repl) 1231–1234, 12564–12, 610.
For the Forgery Act 1913, ss 1, 2, see 8 Halsbury’s Statutes (3rd Edn) 258, 259.
Appeals
On 3 June 1969, at the Central Criminal Court before the common sergeant (J M G Griffith-Jones Esq) and a jury, the appellant Patrick Hassard was convicted of three counts of receiving (counts 4, 8 and 13) and two of uttering a forged valuable security (counts 10 and 14), and sentenced to concurrent terms of three years’ imprisonment. On the same day, the appellant Zena Mary Devereux was convicted on one count (count 9) of forging a valuable security and one count (count 15) of uttering a forged valuable security and was sentenced to two years’ imprisonment suspended for two years on count 15 and fined £200 on count 9 with 12 months’ imprisonment in default. The appellant Hassard appealed against his conviction on count 10 and applied for leave to appeal against his sentence generally. The appellant Devereux appealed against her conviction on count 9 and applied for leave to appeal against her fine of £200 on that count. The facts are set out in the judgment of the court.
S Seuffert QC and Valerie Pearlman for the appellant Devereux.
Valerie Pearlman for the appellant Hassard.
E M Hill for the Crown.
16 January 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. This case discloses a serious plot. A man called Southwell was a book-keeper to a company called Comerfords Ltd; he was a man of some 62 years of age. From 1965 to 1968 he proceeded to draw some 21 cheques worth approximately £6,000 all in favour of
Page 648 of [1970] 2 All ER 647
BSA, which was the name of one of the company’s customers. Having got the director’s signature, however, to these cheques, Mr Southwell altered them so as to make them payable to B S Andrews, an entirely fictitious person. Mr Southwell was friendly with the appellant Hassard, and he passed these cheques over to him, asking him to get them cashed. Indeed, Mr Southwell’s statement, which the appellant Hassard never had an opportunity of challenging, suggested that the whole scheme was devised by the appellant Hassard; at any rate they were working together. The appellant Hassard in turn had a friend in a lady, the appellant Devereux. He apparently had from time to time borrowed money from her, and when he had got payment he would hand a cheque to her and she would reimburse herself and pay him the difference. He conceived the idea of handing over these cheques which he got from Mr Southwell to the appellant Devereux. It may well be, indeed it looks from the jury’s findings as if for a time at any rate she did not realise that anything was wrong. She had an account with, I think, the Westminster Bank and he proceeded to pay these cheques into that account and the bank for some reason accepted them, notwithstanding that they were marked ‘Account payee only’, which meant that they could only properly go into an account in the name of B S Andrews.
The manager of the bank having drawn the appellant Devereux’s attention to this, she proceeded, whether at the suggestion of the appellant Hassard or Mr Southwell or both is not clear, to persuade another branch of the bank to open an account in the name of B S Andrews, posing herself as B S Andrews although giving her true address. An account was duly opened and she received a cheque book. Thereafter she paid in some six cheques worth over £5,000 in all made out to B S Andrews into that account. Having got these substantial sums of money into the account, she proceeded to pay considerable quantities of that either in cheque or in cash to the appellant Hassard, although it is to be noted she also drew moneys on that account in favour of the Postmaster General, the South Eastern Electricity Board and others.
This fraud resulted in these three, Mr Southwell and the appellants Hassard and Devereux, appearing at the Central Criminal Court in June 1969, when the appellant Hassard was convicted on three counts of receiving, two counts of uttering a forged valuable security, and was sentenced to three years’ imprisonment. Mr Southwell was also dealt with and does not appeal. He also was sentenced to three years’ imprisonment. On the same day the appellant Devereux was convicted of one count of forging a valuable security and another of uttering a forged valuable security. In respect of the uttering she received two years’ imprisonment and in respect of the forgery, which was count 9, she was fined £200 with 12 months’ imprisonment in default of payment by 3 June 1970.
Now the appellant Devereux appeals by leave of the single judge against her conviction on count 9 alone, that is the forgery of a valuable security, and if that conviction is quashed it would follow that one of the charges against the appellant Hassard, namely that in regard to count 10, which related to the uttering of that alleged forged valuable security, would also fall to the ground. The appellant Devereux in addition appeals against her fine of £200 on count 9, and the appellant Hassard appeals generally against his sentence of three years.
It will be seen that the only question here in regard to conviction concerns the two counts 9 and 10, count 9 affecting the appellant Devereux, count 10 affecting the appellant Hassard. Count 9, the alleged forgery, was a cheque drawn by the appellant Devereux on the account that she had opened in the name of B S Andrews. It was a cheque in which B S Andrews appeared as the drawer; it was for £80, and it was in favour of the appellant Hassard. Count 10 which affected the appellant Hassard consisted in his uttering that cheque by handing it to his bank for collection. What is said here on behalf of the appellant Devereux is quite simply this, that if one looks at this cheque, it appears to be a perfectly genuine document; it was drawn by the appellant Devereux herself and that all that she did in doing so was to
Page 649 of [1970] 2 All ER 647
draw it in the name which she had assumed. The court is asked to say that in those circumstances this case is really no different from any other case of a man or woman who draws a cheque in a nom de plume, a name which he or she has assumed, of which there are many many cases. It is further said that in any event there was no intent to defraud; certainly the appellant Hassard was not being defrauded, and it is suggested that the bank was not being defrauded because here was a cheque drawn on the account which it had in the name of B S Andrews, and one which it had to honour.
In the opinion of this court the case is not as simple as that, and before stating why, it is convenient to look at the Forgery Act 1913 itself. The offence here was laid under s 2(2) which provides:
‘Forgery of the following documents, if committed with intent to defraud, shall be felony … (a) Any valuable security … ’
Forgery is defined in s 1, and it is sufficient for this purpose to refer to s 1(2) which provides:
‘A document is false within the meaning of this Act if the whole or any material part thereof purports to be made by or on behalf or on account of a person who did not make it nor authorise its making … and in particular a document is false:—… (b) if the whole or some material part of it purports to be made by or on behalf of a fictitious or deceased person … ’
As I have said, the argument for the appellants is simple. It is said that this document was not made otherwise than by the authority of the person who made it, namely the appellant Devereux in her assumed name, and that this is not a case of it being made by or on behalf of a fictitious person. Apart from that, the argument is that there was no intent to defraud.
In the opinion of this court one has to look at the reality of the position here. Here were cheques which when they were passed to the appellant Devereux by the appellant Hassard were made out to a fictitious payee, B S Andrews, marked ‘Account payee only’. They could only therefore go into an account of B S Andrews and here we find the appellant Devereux going to her bank and assuming for this purpose only the fictitious name of B S Andrews in order to get the bank to open an account in her name and to give her a cheque book. She is perpetrating a deception, and indeed a fraud on the bank at that stage. When she comes to draw the cheques, she is continuing that fraud and indeed a fraud on the bank, by signing a cheque, as she has to, in the name of B S Andrews. It is, in the opinion of this court, quite impossible to say that this is a case of a woman who has assumed a name different from her own, and assumed that name, as it were, at large. This is merely a case where she had adopted for the purposes of this fraud the fictitious name of B S Andrews. In these circumstances it seems to this court that the case falls fairly and squarely within ss 1 and 2 of the Forgery Act 1913. The appeal of both appellants accordingly against conviction on these two counts fails.
[His Lordship reduced the appellant Devereux’s fine to £100 and six months’ imprisonment in default of payment and dismissed the appellant Hassard’s application for leave to appeal against sentence.]
Appeals against conviction dismissed.
Solicitors: Registrar of Criminal Appeals (for the appellants); Solicitor, Metropolitan Police.
N P Metcalfe Esq Barrister.
George Cohen 600 Group Ltd v Hird
[1970] 2 All ER 650
Categories: TRANSPORT; Road
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND BRIDGE JJ
Hearing Date(s): 3 JUNE 1970
Road traffic – Heavy motor car – Abnormal indivisible load – Notification to highway and bridge authority – Failure to notify – Whether power to dispense wholly with notice – Motor Vehicles (Authorisation of Special Types) General Order 1969 (SI 1969 No 344), art 28(2).
The appellants were convicted under s 64(2)a of the Road Traffic Act 1960, as amended, of breaches of the Motor Vehicles (Construction and Use) Regulations 1969b in relation to the use on the road of a goods vehicle with an abnormal indivisible load the weight of which exceeded the limit laid down in the regulations. The justices found that the appellants had failed to bring themselves within the authorisation provided for by art 20c of the Motor Vehicles (Authorisation of Special Types) General Order 1969 because they had failed to notify the highway and bridge authority, in accordance with art 28(2)d of the order, of their intention to use the vehicle. The authority had never before required notification by the appellants, nor had it prosecuted them for failure to notify in the past. On the question whether the authority had power to dispense altogether with the requirement to give notice,
Held – There was no power in art 28(2) to dispense altogether with notice (see p 653 a, c and h, post).
Notes
For vehicles authorised to carry or draw abnormal indivisible loads, see 33 Halsbury’s Laws (3rd Edn) 662–664, paras 1119–1123, and for cases on the subject, see 45 Digest (Repl) 68–70, 198–204.
Case stated
This was a case stated by justices for the Middlesex Commission Area of Greater London, acting in and for the petty sessional division of Uxbridge in respect of their adjudication as a magistrates’ court sitting at Uxbridge on 13 November 1969.
On 3 October 1969, three informations were laid by the respondent, Henry Hird, against the appellants, George Cohen 600 Group Ltd, that the appellants on 18 June 1969 at Willow Tree Lane, Hayes: unlawfully used a six-wheeled articulated goods vehicle, index number 212 ML on a road for the conveyance of goods of which the total weight transmitted to the road surface by two wheels in line transversely exceeded 9 tons by 3 tons 11 cwt, contrary to reg 71(1) of the Motor Vehicles (Construction and Use) Regulations 1969 and s 64(2) of the Road Traffic Act 1960, as amended; unlawfully used a six-wheeled articulated goods vehicle index number 212 ML on a road for the conveyance of goods of which the total laden weight exceeded 24 tons by 7 tons 10 cwt, contrary to reg 74(1) (b) of the Motor Vehicles (Construction and Use) Regulations 1969 and s 64(2) of the Road Traffic Act 1960, as amended; unlawfully used a six-wheeled articulated goods vehicle index number 212 ML on a road the laden weight of which when transmitted by more than two wheels to any strip of the road surface on which the vehicle rested contained
Page 651 of [1970] 2 All ER 650
between any two parallel lines drawn on that surface at right angles to the logitudinal axis of the vehicle exceeded 11 tons by 4 tons 16 cwt, contrary to reg 75(a) of the Motor Vehicles (Construction and Use) Regulations 1969 and s 64(2) of the Road Traffic Act 1960, as amended.
With the agreement of the appellants and respondent all three informations were heard together and the following facts were found. On 18 June 1969, the appellants’ Scammell Highwayman tractor with a semi-trailer index number 212 ML was being driven along Willow Tree Lane, Hayes, with an 18–ton crane on the semi-trailer. Willow Tree Lane, Hayes, was within the area for which the Greater London Council was the highways and bridge authority. When the tractor and semi-trailer were being driven along Willow Tree Lane, Hayes, the total weight transmitted to the road surface by two wheels in line transversely exceeded 9 tons by 3 tons 11 cwt, the total laden weight of the tractor and semi-trailer exceeded 24 tons by 7 tons 10 cwt and the laden weight of the tractor and semi-trailer when transmitted by more than two wheels to any strip of the road surface on which the vehicle rested contained between any two parallel lines drawn on that surface at right angles to the longitudinal axis of the vehicle exceeded 11 tons by 4 tons 16 cwt. The crane was an abnormal indivisible load within the meaning of art 19 of the Motor Vehicles (Authorisation of Special Types) General Order 1969. The weight and dimensions of the articulated goods vehicle and its load did not require notice to be given to the commissioner of police of the metropolis under art 27 of the order. The appellants gave no notice to the Greater London Council (‘the highway authority’) as the highway and bridge authority under the provisions of art 28 of the order, acting on advice and as a result of previous experience. There had been no previous prosecutions resulting from failing to give such a notice.
It was contended by the appellants that the highway authority did not in practice require notice under art 28 of the Motor Vehicles (Authorisation of Special Types) General Order 1969 in relation to this load. The highway authority had the power to dispense with the length of, form of and particulars of the notice under art 28 of the Motor Vehicles (Authorisation of Special Types) General Order 1969 which included the power to dispense with the notice altogether and the highway authority’s prior inaction in similar circumstances amounted to a tacit dispensation with the requirements to give notice in this case. It was contended by the respondent that in respect of the use of the vehicle referred to in the information there was no evidence that the highway authority had dispensed with or purported to dispense with the requirement of notice in art 28(2) of the order; although an authority for any road or bridge could dispense with the requirements contained in art 28(2) as to length of notice, or with any of the requirements applicable by virtue of art 28(3) as regards the form of notice or the particulars to be given, such authority could not dispense with the duty of the owner of a vehicle to which the article applied to give any notice at all under art 28(2).
The justices fined the appellants £10 on each summons and ordered the appellants to pay £9 towards the costs of the prosecution. The appellants now appealed.
J Lloyd-Eley QC for the appellants.
Gordon Slynn for the respondent.
3 June 1970. The following judgments were delivered.
COOKE J who delivered the first judgment at the invitation of Lord Parker CJ, read the informations as set out in the case stated and continued: It is clear in this case that on 18 June 1969, the day on which these offences were alleged to have been committed, the appellants did have a Scammell Highwayman tractor with a semi-trailer which was being driven along a road in the London area, and it is quite clear that as regards the offences alleged the prosecution have established that the specified weights were in each case exceeded, and that the offences were committed, unless the
Page 652 of [1970] 2 All ER 650
appellants could bring themselves within the authorisation provided for by the Motor Vehicles (Authorisation of Special Types) General Order 1969e. The sole question in this case is whether the material provisions of the order apply. Article 20 of the order provides:
‘The Minister authorises the use on roads of heavy motor cars and trailers specially designed and constructed for the carriage of abnormal indivisible loads … notwithstanding that such vehicles do not comply in all respects with the requirements of the Construction and Use Regulations, subject to the restrictions and conditions contained in [certain specified article of the order, and in particular art 28] … ’
There is a finding of fact by the justices that the crane which was being carried by the semi-trailer in this case was an abnormal indivisible load within the meaning of the 1969 general order. The question therefore resolves itself into this: were the restrictions and conditions contained in art 28 of the 1969 general order complied with? The material provisions of art 28 provide:
‘(2) … save in so far as the highway authority for any road or the bridge authority for any bridge on which it is proposed that the vehicle or, as the case may be, the vehicles, will be used dispenses, as respects the use of the vehicle or vehicles on that road or, as the case may be, on that bridge, with the requirements contained in this paragraph as to length of notice or with any of the requirements applicable by virtue of the following paragraph as respects the form of notice or the particulars to be given, the owner of the vehicle or, as the case may be, of the vehicles, before using the vehicle or vehicles on that road or that bridge, shall give … [and then the material words are these] at least six clear days’ notice as provided by the following paragraph and, in a case mentioned in sub-paragraph (b) of the foregoing paragraph, at least two clear days’ notice as so provided (in either case excluding Sundays, any bank holiday, Christmas Day or Good Friday) to the highway authority for any such road and to the bridge authority for any such bridge.
‘(3) The notice referred to in the foregoing paragraph shall, subject to any necessary modification, be in the form and shall contain the particulars specified in Part II of Schedule 2 to this Order. [Part II of Sch 2 prescribes a form of notice which requires considerable details to be given as to the vehicle or vehicles involved.]
‘(4) Before using the vehicle or, as the case may be, the vehicles on any road or bridge the owner of the vehicle or vehicles shall give to the highway authority for the road and to the bridge authority for the bridge an indemnity as provided by the following paragraph.
‘(5) The indemnity referred to in the foregoing paragraph shall be in the form specified in Part III of Schedule 2 to this Order.’
It is material to notice that in the form of indemnity prescribed in Part III these words are used:
‘… We hereby agree to indemnify you and each and every highway or bridge authority responsible for the maintenance and repair of any road or bridge on the journey to which the above notice relates in respect of any damage … ’
so that the form of indemnity presupposes that a notice has been given to the authority.
In this case it is said on behalf of the appellants that the highway authority had power under art 28(2) to dispense with the giving of a notice altogether, and counsel for the appellants puts this case in this way; he says that if an authority has power
Page 653 of [1970] 2 All ER 650
to dispense with requirements as to length of notice and as to form and as to particulars to be given, that power in sum and in total must amount to a power, if the authority is so minded, to dispense altogether with the giving of a notice. For my part I am unable to construe art 28(2) as giving power to dispense altogether with a notice. It seems to me that had it been intended to confer such a power, the simplest thing and the obvious course for a draftsman to take would have been to put that in terms in the forefront of the dispensing powers. In fact there is no provision expressly that the authority may dispense altogether with the giving of a notice, and in my view art 28(2) does not provide for that, but does provide simply for a shortening, if the authority is so minded, of the requirement of two days’ notice and a simplification, if the authority is so minded, of the particulars to be given and of the form.
A further consideration which has influenced me in coming to that conclusion is that, as I have already said, when one looks at the form of indemnity provided for in Part III of Sch 2, one finds that it presupposes that a notice has been given. There is no power in art 28 of the 1969 general order to dispense with the giving of an indemnity, and indeed in my view it would be very surprising if such a power existed. In my view the fact that the form of indemnity refers specifically to a notice having been given reinforces the view which I have formed independently of that consideration that the highway authority has no power to dispense entirely with the giving of a notice.
I say that I have come to that conclusion independently of the consideration relating to the form of indemnity. It is worth noticing that art 27 of the 1969 general order also provides for the giving of a notice in cases in which that article applies, and art 27(2) provides that the chief officer of police of any police area may dispense with the requirements of the article as to the length of notice or with any requirement applicable by virtue of art 27(3) as respects the form of notice or the particulars to be given. It is perfectly true that in the case of art 27 of the order there is no provision for an indemnity but in spite of that I should have come to the conclusion on the wording of art 27(2), which corresponds with the wording of art 28(2), that there is no power to dispense altogether with the giving of a notice.
In this case one may feel a certain sympathy with the appellants, because it appears that at any rate as far as their experience has extended, it has not been the practice of the highway authority in Greater London either to require them to give notices in accordance with art 28 of the 1969 general order, or to prosecute them in cases in which such notices have not been given. However, in my view once it is established that the highway authority has no power to dispense with the giving of a notice, it is impossible to say that there was any dispensation in this case. Accordingly the result must follow that the conditions prescribed by art 28 of the 1969 general order have not been complied with, and since those conditions have not been complied with, the authorisation contained in art 20 of the 1969 general order is not applicable. It follows that, the other elements of the offences having been established, the justices rightly convicted the appellants in these three cases. On those grounds I would dismiss this appeal.
BRIDGE J. I agree.
LORD PARKER CJ. I also agree.
Appeal dismissed. The court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely, whether under art 28(2) of the Motor Vehicles (Authorisation of Special Types) General Order 1969 there was power to dispense altogether with the giving of a notice, but refused leave to appeal to the House of Lords.
Solicitors: Hugh-Jones & Co (for the appellants); Treasury Solicitor.
N P Metcalfe Esq Barrister.
Corbett v Corbett (otherwise Ashley) (No 2)
[1970] 2 All ER 654
Categories: FAMILY; Other Family: ADMINISTRATION OF JUSTICE; Legal Aid and Advice
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): ORMROD J
Hearing Date(s): 14 MAY 1970
Nullity – Alimony – Pendente lite – Application to discharge order – Retrospective operation – Ground of nullity not a reason for discharging order ab initio.
Nullity – Alimony – Pendente lite – Application to discharge order – Order remaining effective after decree pending appeal – Discretion – Fair and reasonable.
Nullity – Practice – Amendment – Petition – Amendment after decree nisi – Amendment to include prayer for petitioner’s costs – Prayer omitted when petition settled because not then justified – Length and costs of suit unnecessarily increased by respondent – Whether respondent to be penalised in costs for taking advantage of rules of procedure.
Nullity – Costs – Security for costs – Order – Form – Petitioner resident out of jurisdiction – Uncertainty whether order made under Matrimonial Causes Rules 1968 (SI 1968 No 219), r 37, or RSC Ord 23 – Order to state rules under which made.
Legal aid – Costs – Order – Discretion – Exercise – Substantial justice between parties – Matrimonial proceedings – Legal Aid and Advice Act 1949, s 1(7)(b).
Legal aid – Costs – Security for costs – Discretion – Exercise – Substantial justice between parties – Matrimonial proceedings – Legal Aid and Advice Act 1949, s 1(7)(b).
The petitioner was ordered to pay the respondent alimony pending suit and to pay the sum of £1,000 into court as security for the costs of the respondent who was legally assisted. A decree of nullity of marriage on the ground that the respondent was a biological male from birth was later granted to the petitionera. The respondent filed a notice of appeal which had the effect of suspending the decree absolute and thus keeping on foot the order for alimony, which the petitioner sought to have discharged. The petitioner further sought leave to amend the prayer to the petition to ask for an order for costs against the respondent, since at the time the petition was settled a prayer for costs had not been justified. There were also cross-applications before the court relating to the sum of £1,000 which had been paid into court by the petitioner as security for the respondent’s costs. The respondent had earned £4,500 in less than four months since the hearing of the nullity proceedings.
Held – (i) The court had the power to award alimony to the respondent pending suit, because until the trial had been concluded the question whether the respondent was a male was still in issue and undetermined, and it would therefore have been no basis for refusing the order to say that the respondent could never in any circumstances have been a ‘wife’, but it was not fair and reasonable that the petitioner should have to continue to pay alimony to the respondent after the decree nisi; accordingly, the order would be discharged from the date of the decree (see p 656 f and g, post).
(ii) The petitioner would not be given leave to amend the prayer to the petition since, although the way in which the case for the respondent was conducted greatly increased both the length and costs of the suit, the respondent had done no more than take such advantages as the rules of court permitted, which was not a good ground for penalising the respondent in costs (see p 657 d and f, post).
Page 655 of [1970] 2 All ER 654
(iii) The discretion of the courtb to order a husband to pay the costs of the wife or to give security for them remained after the commencement of the Legal Aid and Advice Act 1949, s 1(7)(b)c, which required the court to continue to apply the principles on which the discretion was ‘normally’ exercised; but since an extremely high percentage of wives were latterly legally assisted persons (for whose solicitors’ costs no security was in fact required), the court should exercise its discretion in such a way as to do substantial justice between the parties in the conditions prevailing in the individual case, and ask itself whether it was just in all the circumstances that a husband should be ordered to pay the whole or part of the wife’s costs; accordingly, the petitioner ought not to be asked to pay anything more than his own costs, because since the respondent was legally aided and since the petitioner had had to bear a considerably greater burden of costs than was necessary, it would have been a real hardship on the petitioner to require him to pay a substantial sum in addition to his own costs (see p 659 j to p 660 a and f and p 661 b, post).
Dictum of Lord Denning MR in Norris v Norris [1969] 3 All ER at 134 applied.
Per Ormrod J. Where a petitioning husband is resident outside the jurisdiction, there should be included in any order for security of costs a statement whether it is made under the Matrimonial Causes Rules 1968d, or under RSC Ord 23 (see p 657 g and h, post).
Notes
For the power of the court to order alimony pending suit in nullity proceedings and to discharge its order, see 12 Halsbury’s Laws (3rd Edn) 346, para 733, and 352, para 749, and for cases on the subject, see 27 Digest (Repl) 491, 4293–4297, and 495, 4359–4361.
For the discretion of the court to order costs against a wife, see 12 Halsbury’s Laws (3rd Edn) 399, para 886, and for cases on the subject, see 27 Digest (Repl) 559, 560, 5106–5116.
For the effect of legal aid on security for wife’s costs, see 12 Halsbury’s Laws (3rd Edn) 359, para 768, and 30 ibid 502, para 932.
For the Legal Aid and Advice Act 1949, s 1, see 18 Halsbury’s Statutes (2nd Edn) 533.
Cases referred to in judgment
Carter v Carter, Carter v Carter and Cowan (or Cowen) [1964] 2 All ER 968, [1966] P 1, [1964] 3 WLR 311, Digest (Cont Vol B) 370, 5380b.
Gooday v Gooday [1968] 3 All ER 611, [1969] P 1, [1968] 3 WLR 750, Digest Supp.
Norris v Norris [1969] 3 All ER 134, [1969] 1 WLR 1264.
Stocken v Pattrick (1873) 29 LT 507, 27 Digest (Repl) 198, 1569.
Wigley v Wigley [1950] 2 All ER 1218, [1951] P 156, 50 Digest (Repl) 493, 1745.
Williams v Williams [1953] 2 All ER 474, sub nom Practice Note [1953] 1 WLR 905, Digest (Cont Vol A) 766, 4492a.
Cases also cited
Blackmore v Mills (falsely called Blackmore) (1868) 18 LT 586.
De Reneville v De Reneville [1948] 1 All ER 56, [1948] P 100.
Foden v Foden [1894] P 307.
S (otherwise B) v S [1944] 1 All ER 439, sub nom Stevenson (otherwise Bowerbank) v Stevenson [1944] P 52.
Interlocutory applications
By a judgment of Ormrod J given on 2 February 1970 and reported p 33, ante, the petitioner, Arthur Cameron Corbett, was granted a decree of nullity declaring
Page 656 of [1970] 2 All ER 654
that the marriage celebrated on 10 September 1963 between the petitioner and the respondent, April Corbett, was void ab initio. These were two applications by the petitioner first to discharge the order made against him on 22 May 1969 for the payment of certain alimony to the respondent, and secondly to amend the prayer to the petition to include costs against the respondent. Cross-applications by the petitioner and respondent relating to certain moneys paid into court by the petitioner as security for the respondent’s costs were also before the court. The facts are set out in the judgment.
Joseph Jackson QC and J C J Tatham for the petitioner.
Leonard Lewis QC and L R Sieve for the respondent.
Cur adv vult
14 May 1970. The following judgment was delivered.
ORMROD J read the following judgment. There are three separate matters before me, two of them relating to questions of costs which at the conclusion of my judgmente I adjourned for argument, and an application by the petitioner to discharge the order for alimony pending suit as from the date of the decree nisi, which has been adjourned by the registrar to me.
The questions relating to costs are, first, an application by the petitioner to amend the prayer to the petition by adding a prayer for costs against the respondent and, secondly, cross-applications relating to the sum of £1,000 which has been paid into court by the petitioner as security for the respondent’s costs under an order dated 9 July 1969 and made by Mr Registrar Caird. It will be convenient to deal with the first two matters which can be disposed of quite shortly. The question of the security for costs is more difficult.
So far as alimony pending suit is concerned, the position is that on 22 May 1969 an order was made at the rate of £6 per week. The order would normally continue in force until decree absolute, but the respondent has given notice of appeal which has the effect of suspending the decree absolute, and keeping alive the order for alimony unless some other order is made. Counsel for the petitioner has submitted that on the true view of the law there is no power to award alimony to the respondent in this case. While conceding that a ‘wife’ in a suit for nullity on the ground of bigamy, non-age, or because the parties were within the prohibited degrees, could be awarded alimony pending suit, he argued that the respondent, being a male, was in a different case and could never in any circumstances be a ‘wife’. While I fully appreciate the force of that submission, the difficulties which would follow, if it were to be accepted as correct, are considerable. Until the trial had been concluded this fact would be in issue and, therefore, undetermined at the time when interloctory orders of various kinds had to be made so that there would be no basis on which to make or refuse to make them. I cannot, therefore, accept this submission.
On the merits, however, the position is quite different. From the time of the so-called marriage, there was no dependency of the respondent on the petitioner at all. He never maintained her (I use the feminine gender because it is the gender which the respondent has assumed), and she never took any steps to claim maintenance, until the long-delayed and abortive proceedings under s 22 of the Matrimonial Causes Act 1965. In the witness box she expressly disclaimed any financial claims on the petitioner. In these circumstances, I doubt whether I would have made any order at all. Since the hearing the respondent has earned £5,000, less £500 for commission, from the Sunday Mirror newspaper for giving interviews and photographs so that she is not now in need of money. Counsel for the respondent has said that she did not receive this money which was paid to a company called Freshrise Ltd, with which she has a service agreement under which she is to be paid £60 a month, rising by stages to £200 a month. Fortunately, sitting in this Division,
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I need not pay an over-elaborate attention to the legal niceties of this situation and can approach the matter in a common sense way. I take the simple view that most people do not part with £4,500 in cash without receiving what they regard as £4,500 worth of assets, if they can help it. It is true that the petitioner has substantial means and can afford to make payments at the rate of £6, but the question is whether it is fair and reasonable that he should continue to do so after decree nisi. I do not think that it is. I shall, therefore discharge the order as from date of the decree nisi.
I now turn to counsel for the petitioner’s application for leave to amend the prayer to the petition to include a prayer for costs. The basis of his submission was that at the stage when the petition was settled by counsel it was clearly not a case in which a prayer for costs could be justified. It was always admitted by the petitioner that he brought this so-called ‘marriage’ on himself. But, counsel for the petitioner said, the way in which the case for the respondent was conducted greatly increased both the length and costs of the suit which his client has had to bear. He made several points by way of example, of which two will suffice. First, the respondent’s advisers resolutely declined to permit the petitioner’s experts to examine the case notes at the Walton Hospital referring to the respondent, until they were produced at the hearing on a subpoena duces tecum; and, secondly, the respondent gave equivocal answers about the date when she first began to take oestrogen. There are other complaints also. Counsel for the respondent, in reply, submitted that the respondent did no more than take such advantages as the rules of procedure permitted and that this was not good grounds for penalising her in costs. I again have much sympathy with the submission of counsel for the petitioner and take the view that the expense and length of the trial could have been considerably reduced in various ways by reasonable co-operation between the legal advisers. On the other hand, I do not intend any criticism of anyone. The case was extremely difficult for counsel and solicitors. Counsel had to get up and deploy a large body of difficult and specialised medical knowledge and both succeeded in doing so to a remarkable degree. Nonetheless, a great deal of the expert witnesses’ efforts and time could have been saved by exchanging proofs and other documentary material before the hearing. However, I accept the contention of counsel for the respondent on this aspect, but on this aspect only, and consequently do not think that I should give the petitioner leave to amend, to ask for an order for costs against the respondent.
The question of security for costs raises quite different and far-reaching considerations. There is one preliminary point which I should mention. There was some discussion during the hearing about the basis on which the order for security was made, and some difference of recollections whether it was intended to be an order in the traditional form in this Division, ie security for the whole or part of the respondent’s costs under the Matrimonial Causes Rules 1968f r 37, or whether it was intended to be an order under RSC Ord 23, the petitioner being resident out of the jurisdiction. The order itself is silent on the point and it may be that steps should be taken to prevent this difficulty arising in future by including in the order a statement of the basis on which it is made. If the order was made under RSC Ord 23, it will stand or fall on the order which is ultimately made on party and party costs. I shall assume, however, that it was made under r 37 and deal with the matter on this basis.
The power to order a husband to give security for his wife’s costs derives from the ecclesiastical courts which as a matter of practice required the husband to provide, in any event, for his wife’s costs unless she had separate estate (Shelford’s Marriage and Divorceg). The reason for it was that the wife’s property was vested in the husband, except insofar as it had been settled to her separate use, and he was liable for her necessaries. The passing of the Married Women’s Property Act 1882, removed the first of these reasons but the husband is still in law liable for necessaries. Before
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the passing of the Legal Aid and Advice Act 1949 this power, to provide for the wife’s costs in matrimonial cases, was an extremely important instrument without which justice could not have been done in many cases because the wife could not have obtained legal advice and representation, unless her solicitors were prepared to rely on the doctrine of necessaries. It is therefore, not surprising that this court has always jealously protected the position of the wife’s solicitor and has regarded the order for security as an order made, not so much for the benefit of the wife, but for the protection of her solicitor. Hence the practice developed under which the wife’s solicitor was not to be deprived of this security unless his conduct of the suit was open to criticism. ‘Wife’s costs up to security’ became the conventional order in all cases where the wife was unsuccessful. In more recent years the practice underwent a subtle change. Whereas formerly the court provided for the whole of the wife’s party and party costs at the end of the suit, latterly it became the rule that the solicitor to the unsuccessful wife got no more than the amount of security. He ultimately acquired something like a vested interest in this sum and, if no order for security was made, he got no costs.
The Legal Aid and Advice Act 1949 entirely altered the situation. The wife’s solicitor can now elect whether to conduct the case under a legal aid certificate, in which case he looks for his costs to the legal aid fund, or to undertake it on a paying basis relying on the order for security for costs. But the alternatives are not exclusive because the practice has grown up, as in this case, of combining the two, in which case the sum in court as security for costs enures to the benefit of the legal aid fund, and not to the protection of the wife’s solicitor. This matter was very carefully considered by Scarman J in Carter v Carter, a case which was wholly exceptional on its facts. It was a case of cross-suits by the husband and wife in which the wife was legally assisted and the husband was ordered to give security for her costs in the sum of £2,000. A reconciliation took place before the hearing and the wife declined to ask for an order for her costs. After hearing argument by counsel for the Law Society as amicus curiae, the learned judge held that the court, on its own motion, could order the husband to pay the wife’s costs up to security. In the course of his judgment he said ([1964] 2 All ER at 973, [1966] P at 11):
‘In my opinion the existence of legal aid leaves the practice and the discretion of the court untouched. Section 1(7)(b) of the Legal Aid and Advice Act, 1949, shows clearly that Parliament did not intend by the provision of legal aid to alter the principles on which the discretion of the court was normally exercised.’
After referring to Wigley v Wigley he continued ([1964] 2 All ER at 973, 974, [1966] P at 12):
‘I confess to no regret in reaching the conclusion that the old established practice of the divorce court in the matter of a wife’s costs has survived into the era of legal aid. To borrow [Kelly CB’s] phrase from Stocken v Pattrick, there is an obvious justice in requiring a husband rather than the taxpayer to pay, if he can, his wife’s reasonable costs incurred in matrimonial proceedings.’
I am bound to confess that, for my part, I do not find it easy to share, without qualification, the learned judge’s view of the justice of the situation. It appears to me that under contemporary social conditions it is anomalous, to say the least, that a husband who has succeeded against a wife in matrimonial proceedings should be called on to bear her costs, in whole or in part, when she is able to obtain the best
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legal assistance at small or no cost to herself with a legal aid certificate. It may be otherwise if her solicitors elect not to apply for a legal aid certificate. In fairness, however, to the learned judge it is right to point out that in the next sentence he said ([1964] 2 All ER at 974, [1966] P at 12):
‘A husband ought not, by deserting his wife, to be able to shift from his shoulders to the legal aid fund the burden of paying her proper costs.’
It may be that his earlier observations were made with a deserting husband in mind. His conclusion is based on the terms of s 1(7)(b) of the 1949 Act and on Wigley v Wigley.
There is another case in the Court of Appeal, Williams v Williams, in which reference is made to the effect of this subsection on applications for security for costs. In judgments which are very briefly reported, the court held that the fact that the wife was an assisted person did not relieve the husband from the liability to give security for the wife’s costs of his appeal which was ultimately fixed in the sum of £10. On the other hand, in a more recent case, Norris v Norris, the Court of Appeal refused a similar application for security, and indicated an entirely different approach to the subject. Lord Denning MR said ([1969] 3 All ER at 134, [1969] 1 WLR at 1265):
‘Before the days of legal aid, a wife often obtained an order for security of costs, because the costs were regarded as necessaries; and the solicitor was entitled to be protected when he was supplying necessaries to a wife. But in these days, when a wife is legally aided, there is no need for an order for security to protect the solicitor’s position. The solicitor looks to the legal aid fund for his costs.’
The court was referred to Williams v Williams but not to Wigley v Wigley or Carter v Carter and no specific reference was made in the judgment to s 1(7)(b) of the 1949 Act.
The institution of the legal aid scheme has, as a matter of fact, radically altered the position of the wife’s solicitor but the question is whether the true effect of s 1(7)(b) is to preserve the old practice as to security, and adapt it to a new purpose, ie of diminishing the liability of the legal aid fund in cases where assisted wives are unsuccessful, by preserving the husband’s liability for necessaries. Section 1(7)(b) provides:
‘the rights conferred by this Part of this Act on a person receiving legal aid shall not affect the rights or liabilities of another parties to the proceedings or the principles on which the discretion of any court or tribunal is normally exercised.’
The construction of this provision raises a number of difficulties. If it is interpreted literally, the effect of it would be to freeze the practice of the court and the principles on which its discretion is exercised as they were in 1949, and make it impossible for the court to adapt its practice to changing conditions. It would not, however, be accurate to refer to a wife having a ‘right’ to security for her costs or to a husband having a ‘liability’ for her costs. The court has always had a discretion to order the husband to pay her costs or to give security for them, and no doubt that discretion
Page 660 of [1970] 2 All ER 654
remains. The question therefore, is, whether this subsection obliges the court to exercise its discretion in a particular way.
The court is required to apply the principles on which the discretion is ‘normally’ exercised. But the norm has now changed because an extremely high percentage of wives who are parties to proceedings in this Division are legally assisted persons. Since the decision in Norris v Norris, there has been some conflict in the authorities as to how the court should approach this problem. In Wigley v Wigley ([1950] 2 All ER at 1220, [1951] P at 159) Singleton LJ said:
‘… I find nothing in the Act [the 1949 Act] or in the regulationsh which forces me to say that the long-standing practice under which an order for security for the wife’s costs has been made has been altered.
Birkett LJ, after referring to s 1(7)(b), said ([1950] 2 All ER at 1222, [1951] P at 166):
‘I am of opinion that the new Act has done nothing to prevent an assisted person coming to the court … to ask for security for costs.’
This case was heard immediately after the 1949 Act came into force and it was, in fact, a transitional case because the wife had originally been suing as a poor person under the old poor persons’ rules. The court, however, refused to extend the wife’s time for appealing from an order dismissing the wife’s application for security. The observations which I have cited are, therefore, strictly obiter. Williams v Williams is to the same effect but, as I have already pointed out, no reasoned judgments appear to have been given and the report contains no reference to the argument. These cases, and the judgment of Scarman J are inconsistent with Norris v Norris. In my judgment, however, the reasoning in Norris’s case is to be preferred. I do not think that the court ought to construe the provision in such a way as to freeze its practice, or the way in which its discretion is exercised, in the pre-1949 mould, but should, as indicated in Norris v Norris, exercise it in such a way as to do substantial justice between the parties in the conditions prevailing in the individual case, and ask itself whether it is just in all the circumstances that the husband should be ordered to pay the whole or part of the wife’s costs. That case and Gooday v Gooday show that this court is not to be fettered by a practice, which was once sound and necessary in the interests of justice in the then prevailing social conditions, but is now obsolescent if not obsolete. In other words, the necessity for ordering security, which was the protection of the wife’s solicitor, having gone, there is no longer any need to order it and no longer any justification for preserving the rule that, once security has been given, the wife’s solicitors have something approaching an indefeasible interest in it, subject only to their proper conduct of the proceedings.
I, therefore, propose to approach the question of the respondent’s costs in this case by asking myself whether, in all the circumstances of the case, the petitioner should be called on to bear a proportion of them. I have already referred to counsel for the petitioner’s comments on the background of the case and to the length and expense of the hearing. These criticisms, which I do not regard as material in this
Page 661 of [1970] 2 All ER 654
case to the question whether the respondent should pay the petitioner’s costs, become highly relevant when, as the unsuccessful party, she is asking for some provision for her costs from the petitioner. In such a case the party asking for such an order should take every possible step to reduce the overall costs to the minimum by simplifying the trial and not complicating it by taking advantage of procedural rules. I think that the petitioner has had to bear a considerably greater burden of costs in this case than was necessary and that it would be a real hardship on him if he were ordered to pay, in addition, a substantial sum towards the respondent’s costs. It is true that he brought the difficulties on himself in the first place, and in different circumstances there might have been a case for ordering him to make a contribution to the respondent’s costs but, for the reasons which I have given, I do not think that in the event he ought to be asked to pay anything more than his own costs.
The relative financial positions of the parties do not affect this view of the case. Had their financial positions been relevant, I could not have overlooked the fact that the respondent had received a windfall of £4,500 which could have been available to meet her own costs had she had to do so, and had she chosen to receive this money in the ordinary way.
I have not dealt in detail on this part of the case with the submission of counsel for the petitioner that, in principle, the respondent could never have been a ‘wife’ within r 37 of the Matrimonial Causes Rules 1968 because I have already referred to it in dealing with the alimony point.
I gave leave to the petitioner to appeal out of time from the order, under which he was required to provide £1,000 security for costs, in order that the whole question should be open in the argument before me and to avoid any possible procedural difficulties, but it is unnecessary to make a specific order in this respect. In my judgment the proper order is: ‘No order for party and party costs. The sum in court by way of security to be paid out to the petitioner’s solicitors. Respondent’s costs to be taxed for the purpose of the Legal Aid and Advice Act 1949.’
Order accordingly.
Solicitors: Crossman, Block & Keith (for the petitioner); Fallons (for the respondent).
Alice Bloomfield Barrister.
Breed v Cluett
[1970] 2 All ER 662
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND BRIDGE JJ
Hearing Date(s): 1 JUNE 1970
Trade description – False or misleading statement – Statement made after contract and after payment – Trade Descriptions Act 1968, s 14(1).
Trade description – False or misleading statement – Provision of services – Statement that services available under guarantee – Trade Descriptions Act 1968, s 14(1) (i).
On the true construction of s 14(1)a of the Trade Descriptions Act 1968 (false or misleading statements as to services, etc), a statement made after a contract has been completed and the price has been paid may constitute an offence (see p 663 j and p 664 d, post).
Semble. A statement that services will be available under a guarantee for a period of time may constitute a statement as to the provision of services for the purposes of s 14(1)(i) of the Trade Descriptions Act 1968 (see p 664 b and d, post).
Notes
For false or misleading statements as to services under the Trade Descriptions Act 1968, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314c, 3.
For the Trade Descriptions Act 1968, s 14, see 48 Halsbury’s Statutes (2nd Edn) 604.
Case stated
This was a case stated by justices for the county of Dorset acting in and for the petty sessional division of Sturminster in respect of their adjudication as a magistrates’ court sitting at Sturminster Newton on 23 October 1969.
On 7 August 1969, an information was preferred by the appellant, William Roger Breed, against the respondent, William John Cluett, charging that he on or about 23 April 1969 at King’s Stag, Lydlinch in the county of Dorset, in the course of a trade or business, recklessly made to Walter Frederick Karley of 3 High Ridge, Talaton, Exeter, Devon, a statement that a bungalow built by the respondent, at 1 Whitehart Close, King’s Stag, Lydlinch, Dorset, was covered by the National House-Builders’ Registration Council ten-year guarantee which statement was false as to the provision in the course of a trade or business of a service, contrary to s 14(1) of the Trade Descriptions Act 1968.
The following facts were proved or admitted. The bungalow, 1 Whitehart Close, King’s Stag, Lydlinch, Dorset, was built by the respondent’s company, but was never registered under the National House-Builders’ Registration Council scheme and certainly was not subject to a ten-year guarantee. The company went into liquidation on a date before 23 April 1969, and when the bungalow was still being finished off. On 3 April 1969, the respondent exchanged contracts for the sale of the bungalow with Walter Frederick Karley and Ivy Karley. On 23 April 1969, the respondent was engaged in his trade or business in that he was doing finishing off work to the bungalow. On 23 April 1969, the respondent stated to Mr Karley that the bungalow was covered by the National House-Builders’ Registration Council’s ten-year guarantee. The respondent was reckless when he made this statement to Mr Karley.
It was contended on behalf of the appellant that all the necessary ingredients required to succeed in a prosecution had been fulfilled. There was a reckless making of a statement in the course of trade or business which was false. The statement in
Page 663 of [1970] 2 All ER 662
question was made by the respondent when engaged in a trade or business and when the conversation took place it was ‘in the course of’ such trade or business. This particular section of the Act did not place any time limitation as to when the statement should be made and in the circumstances of this case it was still in the course of trade or business although the contract for sale had been exchanged 20 days previously. Section 14 made no mention of inducement to complete a sale and one could not read into the section words that were not there.
It was contended on behalf of the respondent that under the terms of the particular contract the purchaser was bound to complete and that in equity the property had already passed to the purchaser. The memorandum of the contract in order to satisfy s 40 of the Law of Property Act 1925 must specify any special terms which have been agreed on between the parties. The course of business between the respondent and Mr Karley must have concluded on 3 April 1969 and it was impossible to say that the statement, made on 23 April 1969, was in the course of business.
The justices were of opinion that the Trade Descriptions Act 1968 should be looked at as a whole to discover its intent and purpose. Nearly every section of the Act either stated or inferred that trade descriptions made before a sale, if false, were covered by the Act but in no instance could they find any inference that such a description could still be material after a sale had taken place. The effect of s 40 of the Law of Property Act 1925 was described to them and the special and relevant parts of the Law Society’s Conditions of Sale 1953 were pointed out to them together with cl 11(2) of the contract. A sale had taken place on the signing of the contract on 3 April 1969 and in the circumstances of this case the statement made by the respondent on 23 April 1969 could not be ‘in the course of’ trade or business. The justices therefore dismissed the case against the respondent. The appellant now appeals.
Quentin Edwards for the appellant.
J R Main for the respondent.
1 June 1970. The following judgments were delivered.
LORD PARKER CJ stated the facts and described the informations as set out in the case stated, and continued: Section 14(1) of the Trade Descriptions Act 1968 provides:
‘It shall be an offence for any person in the course of any trade or business—
‘(a) to make a statement which he knows to be false; or (b) recklessly to make a statement which is false;
‘as to any of the following matters, that is to say—(i) the provision in the course of any trade or business of any services, accommodation or facilities … ’
Here the allegation is that the respondent recklessly made a statement as to the provision in the course of any trade or business of a service. The justices dismissed the information on the ground that, the contracts having been exchanged on 3 April, there was a binding obligation. Whatever happened and whatever representations or statements were made thereafter, there was a binding contract which the vendor and purchaser had to complete, and accordingly the statement made on 23 April could not be an inducement to enter into or to complete a contract.
In my judgment, to approach the matter in that way is to give too narrow a construction to s 14 of the Act. The statements there referred to are not, as it seems to me, confined to statements inducing the entering into of a contract. There may well be statements made after a contract is completed, a contract for repairs to my motor car, a contract for repair to my roof, stating the effect of what has been done by way of repair which may constitute an offence if made recklessly, even though the contract has been completed and the payment has been made. It has, however, been urged in this court what was not urged below, that, first, s 14 has no application to the sale of land at all, and secondly, that, even if it has, the statement that the
Page 664 of [1970] 2 All ER 662
bungalow had been registered and was covered by the National House-Builders’ Registration Council ten-year guarantee could not be a statement as to the provision of a service. Those points were not taken below, and, as it seems to me, certainly as regards the second, that must depend on evidence. It may be that under this scheme of registration the builder enters into obligations to perform services over a ten-year guarantee period, and in those circumstances it may well be that the statement that the house was registered under this scheme would amount to a statement as to the provision of services in the future. I only mention that because, as it seems to me, it is impossible, as a matter of law, to say that the statement made was not a statement as to the provision of a service. Whether it was depended on the evidence, and as that point was never taken and no evidence was called, I would not think, myself, that it was right to allow the point to be taken in this court. Accordingly, it is enough to say in this case that the ground on which the justices dismissed the information was not justified and accordingly that this case should go back to them with a direction to convict the respondent.
COOKE J. I entirely agree.
BRIDGE J. I also agree.
Appeal allowed. Case remitted with direction to convict the respondent.
Solicitors: Sharpe, Pritchard & Co agents for K A Abel, Dorchester (for the appellant); Peacock & Goddard agents for W E Brennand & Wilson, Sturminster Newton (for the respondent).
N P Metcalfe Esq Barrister.
Re Dolphin’s Conveyance Birmingham Corporation v Boden and others
[1970] 2 All ER 664
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 17, 18, 19 FEBRUARY, 25 MARCH 1970
Restrictive covenant – Restrictive covenant affecting land – Enforceability – Conveyances of estate to purchasers in parcels – Covenants by purchasers to observe restrictions designed to maintain nature of estate – Covenant by vendor in each conveyance that same restrictions would be imposed on future purchasers – Common interest and common benefit – Conveyances equivalent to deeds of mutual covenant – Whether covenants enforceable by and against successors in title to original purchasers.
R D was the fee simple owner of some 30 acres of land known as the Selly Hill Estate. On his death in December 1870 the land passed under his will to his sisters A and M, as tenants in common. In the events that happened the unsold part of the estate became vested on 26 March 1876 in W for an estate in fee simple in possession. Between February 1871 and April 1877 the whole estate less some three acres was conveyed to purchasers in nine parcels, all nine conveyances being so far as material in identical form. The first conveyance dated 27 February 1871, between A and M of the one part and C of the other part, having recited that R D was seised in fee simple in possession of the Selly Hill Estate at his death and that he had agreed during his life to sell a certain part thereof to C, conveyed to C the piece of land described therein. It contained a covenant by C for himself his heirs and assigns that, inter alia, every dwelling-house to be erected on the land conveyed
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or part thereof should cost at least £400 and be detached, that it should have attached to it at least one-quarter of an acre of ground and that it should be built not less than 21 feet from the road; and the vendors covenanted for themselves, their heirs and assigns with the purchaser and his heirs and assigns that ‘on Sale or Lease of any other part of the Selly Hill Estate it shall be sold or leased subject to [the stipulations contained in C’s covenant] and that the vendors … will procure a covenant from each Purchaser or Lessee upon Selly Hill Estate to the effect of [the said] stipulations’. The last parcel of land comprised in the estate was sold by W in 1893, the purchaser covenanting in the terms set out above, but as there was no land remaining unsold there was no covenant by the vendor. The plaintiffs, the successors in title to C now sought a declaration that the land conveyed to C was no longer subject to the covenants entered into by C. The defendants as owners of other parties of the Selly Hill Estate claimed to be entitled to enforce the covenants against the plaintiffs.
Held – (i) The covenants contained in the conveyances were imposed for the common benefit of the vendors and the several purchasers who all had a common interest in their enforcement (see p 669 e and p 669 j to p 670 a, post).
(ii) There was an equity in the owner of each parcel of land to enforce the covenants against the owners of the other parcels arising out of the common interest and common intentions expressed in the conveyances which were to be equated with mutual covenants (see p 671 j and p 672 f and g, post).
Baxter v Four Oaks Properties Ltd [1965] 1 All ER 906 followed.
Notes
For restrictive covenants generally, see 14 Halsbury’s Laws (3rd Edn) 559–568, paras 1042–1057, and for the power of the court to declare whether or not land is affected by restrictions imposed, see ibid 571, 572, para 1062.
For cases on building schemes and restrictive covenants generally, see 40 Digest (Repl) 333–348, 2728–2812.
Cases referred to in judgment
Baxter v Four Oaks Properties Ltd [1965] 1 All ER 906, [1965] Ch 816, [1965] 2 WLR 1115, Digest (Cont Vol B) 641, 2428a.
Coles v Sims (1854) 5 De GM & G 1, 23 LJCh 258, 22 LTOS 277, 43 ER 768, 40 Digest (Repl) 345, 2794.
Elliston v Reacher [1908] 2 Ch 374, 77 LJCh 617, 99 LT 346; affd CA [1908] 2 Ch 665, [1908–10] All ER Rep 612, 78 LJCh 87, 99 LT 701, 40 Digest (Repl) 337, 2749.
Keates v Lyon (1869) 4 Ch App 218, 38 LJCh 357, 20 LT 255, 33 JP 340, 40 Digest (Repl) 343, 2780.
Mann v Stephens (1846) 15 Sim 377, 60 ER 665, 40 Digest (Repl) 344, 2784.
Marten v Flight Refuelling Ltd [1961] 2 All ER 696, [1962] Ch 115, [1961] 2 WLR 1018, Digest (Cont Vol A) 1315, 2885a.
Master v Hansard (1876) 4 Ch D 718, 46 LJCh 505, 36 LT 535, 41 JP 373, 19 Digest (Repl) 47, 254.
Nottingham Patent Brick and Tile Co v Butler (1885) 15 QBD 261; affd CA (1886) 16 QBD 778, [1886–90] All ER Rep 1075, 55 LJQB 280, 54 LT 444, 40 Digest (Repl) 343, 2781.
Renals v Cowlishaw (1878) 9 Ch D 125, [1874–80] All ER Rep 359, 48 LJCh 33, 38 LT 503; affd CA (1879) 11 Ch D 866, [1874–80] All ER 359, 48 LJCh 830, 41 LT 116, 40 Digest (Repl) 346, 2796.
Spicer v Martin (1888) 14 App Cas 12, [1886–90] All ER Rep 461, 58 LJCh 309, 60 LT 546, 53 JP 516, 40 Digest (Repl) 336, 2744.
Western v Macdermott (1866) 2 Ch App 72, [1861–73] All ER Rep 671, 36 LJCh 76, 15 LT 641, 31 JP 73, 40 Digest (Repl) 360, 2886.
Page 666 of [1970] 2 All ER 664
White v Bijou Mansions Ltd [1938] 1 All ER 546, [1938] Ch 351, 107 LJCh 212, 158 LT 338, 38 Digest (Repl) 881, 921.
Cases also cited
Kelly v Barrett [1924] 2 Ch 379, [1924] All ER Rep 503.
Lawrence v South Country Freeholds Ltd [1939] 2 All ER 503, [1939] Ch 656.
Osborne v Bradley [1903] 2 Ch 446, [1900–03] All ER Rep 541.
Reid v Bickerstaff [1909] 2 Ch 305, [1908–10] All ER Rep 298.
Torbay Hotel Ltd v Jenkins [1927] 2 Ch 225.
Wembley Park Estate Co Ltd’s Transfer, Re [1968] 1 All ER 457, [1968] Ch 491.
Adjourned summons
By an originating summons dated 22 July 1968 the plaintiffs, the Birmingham Corporation, sought a declaration that the freehold land comprised in two conveyances, dated respectively 27 February 1871 and 26 March 1877 were no longer subject to restrictive covenants contained in the conveyances on the part of E M Coleman, or alternatively for a declaration whether any or all of the restrictive covenants were now enforceable and if so by whom. The defendants, Frank Herbert Boden, Kenneth Eaton Bradley, Ronald Duncan Thomson Cape, and Edwin Douglas Ramsay Shearman, were representative owners of other lands within the Selly Hill Estate who sought to enforce the covenants. The facts are set out in the judgment.
G A Grove QC and Elizabeth Appleby for the plaintiffs.
George Newsom QC and G W Seward for the defendants.
Cur adv vult
25 March 1970. The following judgment was delivered.
STAMP J read the following judgment. This originating summons is concerned with some land forming part of an estate known, or formerly known, as the Selly Hill Estate. The estate is now within the area of the city of Birmingham. The plaintiffs’ predecessor in title, one Coleman, bought the land nearly 100 years ago subject to certain restrictions which Coleman covenanted to observe. That the plaintiffs bought their land with notice of these covenants, is not in question.
There are numerous persons who, being owners of the other parts of the Selly Hill Estate, claim to be entitled to enforce the covenants against the plaintiffs. The plaintiffs, by this summons, to which four representatives of the numerous persons have been made defendants, ask, in effect, for a declaration that no person is entitled to enforce them. They wish, as part of their housing programme, to redevelop their land in a way inconsistent with the restrictions which, on one view, are designed to secure the preservation of the Selly Hill Estate as an exclusively residential estate, to use modern parlance, of low density, and to that end provide that no building other than a detached dwelling-house shall be built on the estate, such detached dwelling-house having not less than one-quarter acre of land including the site of the dwelling-house.
One Robert Dolphin, who died on 19 December 1870, was a solicitor in Birmingham. He had had an estate of over 200 acres near Birmingham which included what came to be known as the Selly Hall Estate. Some years before his death Robert Dolphin had sold off all or the greater part of this estate under that name. The Selly Hall Estate or part of it, subsequently became the subject of proceedings in this Division before Swinfen Eady J and I have before me a transcript of his judgment. The relevance of the Selly Hall Estate to the present proceedings is that I have before me a conveyance dated 2 September 1861, on which there is a plan on which is shown, as is indicated in the body of that conveyance, the whole of the estate called the Selly Hall Estate and ‘certain lands adjoining thereto all belonging to the said
Page 667 of [1970] 2 All ER 664
Robert Dolphin’. The lands adjoining the Selly Hall Estate are clearly delineated on the plan. A part of them lay to the east and part to the west of the Selly Hall Estate. The part to the west was of an area of some 30 acres.
Robert Dolphin had two sisters, Ann Valerie Dolphin, and Mary Dolphin, and on his death on 19 December 1870, his real property passed to them under his will as tenants in common. Ann Dolphin died in 1873. The three Dolphins also had a nephew, John Edmund Watts. Perhaps by the joint effect of a devise in Ann Dolphin’s will, and the deed of gift of 25 March 1876, made between Mary Dolphin on the one part and John Watts on the other part, referred to in the covenant, for production of title deeds in a conveyance of part of the Selly Hill Estate, that estate or, to be more precise, the unsold part thereof, had, on 26 March 1876, become vested in John Watts for an estate in fee simple in possession.
Between about the end of February 1871, and about the beginning of April 1877, the greater part of the 30 acre parcel of land to the west of the Selly Hall Estate was conveyed to purchasers in parcels. Four of these parcels were conveyed by Ann and Mary Dolphin in February and March 1871, and immediately after the deed of gift to which I have referred, the remaining five parcels were sold and conveyed by John Watts in the last week of March and the first week of April 1877. Notwithstanding the length of time which has elapsed, the conveyances of all these nine parcels of land by the owner for the time being of the estate to the several purchasers, have been unearthed and are before me. These conveyances do not, if I may so put it, quite exhaust the 30 acre parcel of land to the west of the Selly Hall Estate. There is an area of about 3 acres in the north-west corner of which no conveyance has been found. There was also a small parcel which was not sold by the Dolphins or by Watts until 1893, it having apparently been retained for the use of the surviving Dolphin sister.
Each of the nine known conveyances was a conveyance containing a recital to the effect that the vendor was seised in fee simple in possession of the piece of land conveyed and which was described in the recital as forming part of an estate called ‘Selly Hill Estate’ and contained other references by name to ‘Selly Hill Estate’. The town clerk of the plaintiffs produces a plan in which is delineated the land to the west of the Selly Hall Estate to which I have referred and he says of it, in his affidavit, that that is the extent of Robert Dolphin’s Selly Hill Estate. He also says, in respect of the 3 acres also in the north-west corner, that from an examination of documents affecting that land he believes that the conveyances (by which he means the conveyances by the Dolphin family) were in a similar form to the nine conveyances to which I have referred. His conclusion to the effect that the Selly Hill Estate was identical with the parcel of land to the west of the Selly Hall Estate, shown on the plan on the conveyance of 2 September 1861, to which I have referred, is in my judgment, inescapable. I find, as a fact, that the references to the ‘Selly Hill Estate’ in the several conveyances by the Dolphins and their nephew, John Watts, are references to identified land; identified not in the sense that by looking at the conveyances one could, today, without researches, identify it because the conveyances contained no plan or description of it, but identified in the sense that a reference in a document to Richmond Park would be a reference to an identified piece of land, notwithstanding the absence of a plan on the document delineating Richmond Park. In this connection, I trespass for a moment outside my statement of the facts to refer to the judgment of Wilberforce J, in Marten v Flight Refuelling Ltd, where, in a somewhat different context and problem, he took the view ([1961] 2 All ER at 703, [1962] Ch at 131) that the situation of the land to be affected by a restrictive covenant need not be indicated in the conveyance provided it can be otherwise shown with reasonable certainty.
I find that all the conveyances of the several portions of the Selly Hill Estate by the Dolphin family, except the last, were, so far as material, in identical form. I will
Page 668 of [1970] 2 All ER 664
read the earliest of them, which was made on 27 February 1871, between Ann Dolphin and Mary Dolphin of the one part, and Edward Mountford Coleman of the other part, and was, in fact, not only the earliest of the known conveyances but one of those under which the plaintiffs derive their title. I will, for convenience, refer to it as ‘Coleman’s Conveyance’. It recited that Robert Dolphin was, at the time of his death, seised in fee simple in possession of the land thereafter described, that it formed part of an estate situate at Northfield in the county of Worcester called ‘Selly Hill Estate’, and that he had agreed in his lifetime to sell it to Coleman for £1,225. It recited the will of Robert Dolphin and his death, and by it there was conveyed to Coleman a piece of land situate in the parish of Northfield, in the county of Worcester, which was therein carefully described. It contained a recital, leading to a covenant for the production of title deeds, that those deeds related as well to the property thereby conveyed as to the remaining part of the Selly Hill Estate. It contained a covenant by the purchaser, Coleman, in the following terms:
‘AND the said Purchaser doth hereby for himself his heirs and assigns covenant with the said Vendors their heirs executors administrators and assigns as follows
‘FIRST THAT he or they shall not nor will at any time hereafter under any circumstances whatsoever make or allow to be made any bricks or tiles in or upon the said piece of land or any part thereof
‘SECONDLY AND that no noisy or offensive trade shall be carried on upon the said land and premises
‘THIRDLY AND that nothing shall be done upon the said piece of land or any part thereof which shall or may become a nuisance or damage to the Vendors their heirs or assigns or their Tenants or any of them Owners or Occupiers for the time being of the other land and hereditaments belonging to the Vendors and Purchasers from them adjoining or near to the said piece of land
‘FOURTHLY AND further that no public house Liquor Shop Retail Brewery of Shop of Manufactory or any kind or any buildings other than dwellinghouses with suitable outbuildings and offices shall be erected or allowed to be upon the said piece of land or any part thereof
‘FIFTHLY AND that every Dwellinghouse which shall be erected upon the said piece of land hereby conveyed as aforesaid shall cost at least the sum of Four hundred pounds sterling and shall not adjoin any other Dwellinghouse but shall be built detached from any other
‘SIXTHLY AND that every Dwellinghouse shall have attached to it at least one quarter of an acre of ground including the site of such Dwellinghouse
‘SEVENTHLY AND FURTHER that every Dwellinghouse or other erection or building (not being a boundary wall) to be erected on the said piece of land hereby conveyed or any part thereof shall be built not less than Twenty one feet from the road adjoining the land on which such Dwellinghouse and buildings shall be erected. AND the Vendors for themselves their heirs and assigns Covenant with the said Purchaser his heirs and assigns that on Sale or Lease of any other part of Selly Hill Estate it shall be sold or leased subject to the stipulations above mentioned numbered 1, 2, 3, 4, 5, 6, 7 and that the Vendors their heirs or assigns will procure a covenant from each Purchaser or Lessee upon Selly Hill Estate to the effect of those Seven stipulations.’
I conclude the narrative by saying that, on 24 June 1893, John Watts conveyed the small parcel which had not been sold, namely Selly Hill House itself, which had, at some time, been occupied by Miss Dolphin, to a purchaser—a man called Olivieri. By that conveyance the purchaser covenanted in the same terms as in the earlier nine conveyances, but, no doubt, because there was no part of the Selly Hill Estate then remaining unsold, there was no covenant by the vendor to subject the remaining parts to the restrictions.
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I must make it clear that the defendants do not assert, nor could they, that the benefit of the covenants by the several purchasers from the Dolphins was in terms expressed to be attached to the vendors’ land, and to each and every part of it, so as to pass without express assignment to a purchaser of the land to be benefited. Nor was there any express assignment of that benefit in the conveyances under which the defendants to this summons claim title. Nor is there any personal representative of any of the vendors in a position to enforce the covenants. But, to quote a passage in the judgment of Cross J in Baxter v Four Oaks Properties Ltd ([1965] 1 All ER 906 at 913, [1965] Ch 816 at 825):
‘… for well over one hundred years past where the owner of land deals with it on the footing of imposing restrictive obligations on the use of various parts of it as and when he sells them off for the common benefit of himself (in so far as he retains any land) and of the various purchasers inter se a court of equity has been prepared to give effect to this common intention notwithstanding any technical difficulties involved.’
It is the submission of the defendants that that was done by the vendors in the present case.
That it was the intention of the two Miss Dolphins, on the sale of the parcel comprised in Coleman’s conveyance, that there should be imposed on each and every part of the Selly Hill Estate the restrictions set out in the conveyance—precluding the erection of buildings other than dwelling-houses having the characteristics specified in the restrictions—cannot be doubted. And each conveyance evidenced the same intention. Nor can it be doubted that each purchaser, when he executed his conveyance, was aware of that intention. The covenant by the vendor in each conveyance, to the effect that the same restrictions would be placed on all future purchasers and lessees, makes this clear. Furthermore, I would, unless constrained by authority to the contrary, conclude as a matter of construction of Coleman’s conveyance, and of all the others, that the vendor was dealing with the Selly Hill Estate on the footing of imposing obligations for the common benefit, as well of himself, as of the several purchasers of that estate. It is trite law that if one finds conveyances of the several parts of an estate all containing the same or similar, restrictive covenants with the vendor, that is not enough to impute an intention on the part of that vendor that the restrictions should be for the common benefit of the vendor and of the several purchasers inter se; for it is at least as likely that he imposed them for the benefit of himself and of the unsold part of the estate alone. That is not this case. Here there is the covenant by the vendors that on a sale or lease of any other part of the Selly Hill Estate—
‘… it shall be sold or leased subject to the stipulations above mentioned numbered 1, 2, 3, 4, 5, 6, 7 and that the Vendors their heirs or assigns will procure a covenant from each Purchaser or Lessee upon Selly Hill estate to the effect of those Seven stipulations.’
What was the point of it? For what possible reason does a vendor of part of an estate who has extracted restrictive covenants from a purchaser, covenant with that purchaser that the other parts of the estate, when sold, shall contain the same restrictions, unless it be with the intention that the purchaser with whom he covenants, as well as he himself, shall have the benefit of the restrictions when imposed. In view of these covenants by the vendor in the several conveyances, I cannot do otherwise than find that the covenants were imposed, not only for the benefit of the vendors or of the unsold part of their estate, but as well for the benefit of the several purchasers. As a matter of construction of the conveyances, I find that what was intended, as well by the vendors as the several purchasers, was to lay down what has been referred to as a local law for the estate for the common benefit of all the several purchasers
Page 670 of [1970] 2 All ER 664
of it. The purpose of the covenant by the vendors was to enable each purchaser to have, as against the other purchasers, in one way or another, the benefit of the restrictions to which he had made himself subject.
Holding, as I do, that these covenants were imposed for the common benefit of the vendors and the several purchasers, and that they had a common interest in their enforcement, I must, in a moment, turn to consider what is, in my judgment, the separate and distinct question whether there is an equity in the owner of each parcel to enforce the covenants against the owners of the other parcels. But, before considering that question, I must advert to an argument advanced by counsel for the plaintiffs on the effect of the covenants themselves. He points out that the covenants by the purchasers are not expressed—as they would have been in a deed of mutual covenant—to be with the other purchasers, and that there is no covenant by the vendor to enforce the covenants which he has agreed to extract from the other purchasers. No doubt this is so; but, in my judgment, it does not lead to a result which assists the plaintiffs. Had the vendors covenanted to the effect that they would enforce the restrictions, it would, no doubt, have emphasised the intention that all the purchasers should benefit, but would also have shown, on the authority of White v Bijou Mansions Ltd, that the covenants were not intended to be enforceable by direct action by one purchaser against another. Counsel also urges that each purchaser was content to leave it to the vendors whether or not to enforce the obligations which they covenanted to impose on the other purchasers. I cannot accept this submission. If the vendors were to have no obligation to bring actions to enforce the restrictions—and I accept counsel’s submission that they had not—the covenant by the vendors to impose the conditions on the other purchasers was nothing more nor less than useless unless the purchaser himself was to have the right to do so. The absence of a covenant by the vendor to enforce the restrictions against the other purchasers leads to, and not away from the conclusion that each purchaser was to have reciprocal rights and obligations vis-a-vis the others. How otherwise could effect be given to the intentions?
As Cross J pointed out in the course of the judgment (See [1965] 1 All ER at 913, [1965] Ch at 825) to which I have already referred, the intention that the several purchasers from a common vendor shall have the benefit of the restrictive covenants imposed on each of them, may be evidenced by the existence of a deed of mutual covenant to which all the several purchasers are to be parties. That common intention may also be evidenced by, or inferred from, the circumstances attending the sales; the existence of what has often been referred to in the authorities as a building scheme. I have been referred to a considerable number of authorities where the court has had to consider whether there were, or were not, present in the particular case those facts from which a building scheme—and, therefore, the common intention to lay down a local law involving reciprocal rights and obligations between the several purchasers—could properly be inferred. In Elliston v Reacher ([1908] 2 Ch 374 dat 384) Parker J laid down the necessary concomitants of such a scheme. What has been argued before me is that here there is neither a deed of mutual covenant nor a building scheme. In the latter connection, it is pointed out that there was not a common vendor, for the parcels were sold off, first, by the Dolphins and then by John Watts. Nor prior to the sales had the vendors laid out the estate, or a defined portion of it, for sale in lots. Therefore, so it is urged, there were not present the factors which, on the authority of Elliston v Reacher, are necessary before one can find the existence of a building scheme.
In my judgment, these submissions are not well founded. To hold that only where one finds the necessary concomitants of a building scheme or a deed of mutual covenant can one give effect to the common intention found in the conveyances themselves, would, in my judgment, be to ignore the wider principle on which the building scheme cases are found and to fly in the face of other authority of which the clearest
Page 671 of [1970] 2 All ER 664
and most recent is Baxter v Four Oaks Properties Ltd. The building scheme cases stem, as I understand the law, from the wider rule that if there be found the common intention and the common interest referred to by Cross J the court will give effect to it and are but an extension and example of that rule. As Sir Charles Hall V-C said in Renals v Cowlishaw ((1878) 9 Ch D 125 at 129, cf [1874–80] All ER Rep 359 at 361)—
‘This right exists not only where the several parties execute a mutual deed of covenant, but wherever a mutual contract can be sufficiently established. A purchaser may also be entitled to the benefit of a restrictive covenant entered into with his vendor by another or others where his vendor has contracted with him that he shall be the assign of it, that is, have the benefit of the covenant. And such contract need not be express, but may be collected from the transaction of sale and purchase.’
That passage was quoted, with approval by Lord Macnaghten in Spicer v Martin ((1888) 14 App Cas 12 at 24, [1886–90] All ER Rep 461 at 466). (I ought, perhaps to mention that the word ‘contract’ in the last sentence I have quoted was substituted for the word ‘covenant’ in the errata in the volume of the Law Reports in which Renals v Cowlishaw is reported.) Moreover, where deeds of mutual covenant have fallen to be considered, effect has been given not to the deed of mutual covenant itself as such but to the intention evidenced by its existence. Baxter v Four Oaks Properties Ltd is such a case. As Parker J in Elliston v Reacher ([1908] 2 Ch at 384, 385) pointed out in a passage quoted by Cross J in Baxter v Four Oaks Properties Ltd ([1965] 1 All ER at 913, 914, [1965] Ch at 826, 827), the equity arising out of the establishment of the four points which he mentioned as the necessary concomitants of a building scheme has been sometimes explained by the implication of mutual contracts between the various purchasers and sometimes by the implication of a contract between each purchaser and the common vendor, that each purchaser is to have the benefit of all the covenants by the other purchasers, so that each purchaser is in equity an assign of the benefit of those covenants; but the implication of mutual contract is not always a satisfactory explanation. As Parker J said ([1908] 2 Ch at 385):
‘It may be satisfactory where all the lots are sold by auction at the same time, but when, as in cases such as Spicer v. Martin, there is no sale by auction, but all the various sales are by private treaty and at various intervals of time, the circumstances may, at the date of one or more of the sales, be such as to preclude the possibility of any actual contract.’
And he points out that a prior purchaser may be dead or incapable of contracting at the time of a subsequent purchase, that in any event it is unlikely that the prior and subsequent purchasers are ever brought into personal relationship, and yet the equity may exist between them.
There is not, therefore, in my judgment, a dichotomy between the cases where effect has been given to the common intention inferred from the existence of the concomitants of a building scheme and those where effect has been given to the intention evidenced by the existence of a deed of covenant. Each class of case, in my judgment, depends on a wider principle. Here the equity, in my judgment, arises not by the effect of an implication derived from the existence of the four points specified by Parker J (See [1908] 2 Ch at 384), or by the implication derived from the existence of a deed of mutual covenant, but by the existence of the common interest and the common intention actually expressed in the conveyances themselves.
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In Nottingham Patent Brick and Tile Co v Butler ((1885) 15 QBD 261 at 268, 269) Wills J, in a passage which I find illuminating and which was referred to with approval in the Court of Appeal ((1886) 16 QBD 778, [1886–90] All ER Rep 1075), put the matter thus:
‘The principle which appears to me to be deducible from the cases is that where the same vendor selling to several persons plots of land, parts of a larger property, exacts from each of them covenants imposing restrictions on the use of the plots sold without putting himself under any corresponding obligation, it is a question of fact whether the restrictions are merely matters of agreement between the vendor himself and his vendees, imposed for his own benefit and protection, or are meant by him and understood by the buyers to be for the common advantage of the several purchasers. If the restrictive covenants are simply for the benefit of the vendor, purchasers of other plots of land from the vendor cannot claim to take advantage of them. If they are meant for the common advantage of a set of purchasers, such purchasers and their assigns may enforce them inter se for their own benefit. Where, for instance, the purchasers from the common vendor have not known of the existence of the covenants, that is a strong, if not a conclusive, circumstance to shew that there was no intention that they should enure to their benefit. Such was the case in Keates v. Lyon; Master v Hansard; and Renals v. Cowlishaw. But it is in all cases a question of intention at the time when the partition of the land took place, to be gathered, as every other question of fact, from any circumstance which can throw light upon what the intention was: Renals v. Cowlishaw ((1878) 9 Ch D at 129, [1874–80] All ER Rep at 361). One circumstance which has always been held to be cogent evidence of an intention that the covenants shall be for the common benefit of the purchasers is that the several lots have been laid out for sale as building lots, as in Mann v Stephens; Western v Macdermott; Coles v. Sims; or, as it has been sometimes said, that there has been “a building scheme”: Renals v. Cowlishaw.’
I can approach the matter in another way. The conveyances of the several parts of the estate taking the form they do and evidencing the same intention as is found in a deed of mutual covenant, I equate those conveyances with the deed of mutual covenant considered by Cross J in Baxter v Four Oaks Properties Ltd; the deed which he did not treat for the purposes of his judgment as itself bringing all the successive purchasers and persons claiming through them into contractual relations one with the other, but as showing the common intention. So equating them, I follow what I conceive to be the ratio decidendi of Baxter v Four Oaks Properties Ltd and give effect to that intention by holding that the restrictive covenants are enforceable by the successors in title of each of the original covenantors against any of them who purchased with notice of those restrictions.
Declaration accordingly.
Solicitors: Sharpe, Pritchard & Co (for the plaintiffs); Bradley & Cuthbertson, Birmingham (for the defendants)
Richard J Soper Esq Barrister.
Rolloswin Investments Ltd v Chromolit Portugal Cutelarias e Produtos Metálicos SARL
[1970] 2 All ER 673
Categories: CONTRACT: SALE OF GOODS
Court: QUEEN’S BENCH DIVISION
Lord(s): MOCATTA J
Hearing Date(s): 3, 4, 5, 6, 9 FEBRUARY 1970
Sunday observance – Transaction of business – Contract between limited companies made on Sunday – Validity – Sunday Observance Act 1677, s 1 – Interpretation Act 1889, s 2(1).
Sunday observance – Tradesman – Meaning – Sunday Observance Act 1677, s 1.
Notwithstanding s 2(1) of the Interpretation Act 1889, a contract made between two limited liability companies is not rendered void or unenforceable under s 1 of the Sunday Observance Act 1677 by being made on a Sunday (see p 675 j to p 676 a, post).
Smith v Sparrow (1827) 4 Bing 84 considered.
Quaere. Whether in s 1 of the Sunday Observance Act 1677 ‘tradesman’ is limited in its application to persons engaged in the retail trade as distinct from wholesalers or merchants (see p 674 j and p 675 e, post).
Notes
For Sunday observance, see 37 Halsbury’s Laws (3rd Edn) 88–92, paras 155–160, and for cases on the subject, see 45 Digest (Repl) 240–245, 94–131.
For the Interpretation Act 1889, s 2, see 24 Halsbury’s Statutes (2nd Edn) 206.
For the Sunday Observance Act 1677, s 1, see 8 ibid (3rd Edn) 23.
Cases referred to in judgment
R v Cleworth (1864) 4 B & S 927, 9 LT 682, 28 JP 261, 122 ER 707; sub nom R v Silvester 33 LJMC 79, 45 Digest (Repl) 242, 105.
Smith v Sparrow (1827) 4 Bing 84, 5 LJOSCP 80, 130 ER 700, 45 Digest (Repl) 245, 127.
Preliminary issue
The plaintiff company, Rolloswin Investments Ltd, took out a summons seeking the appointment of an arbitrator under an agreement dated 20 October 1968, alleged to have been made between the plaintiff company and the defendant company, Chromolit Portugal Cutelarias e Produtos Metálicos SARL, a Portuguese company with limited liability, concerning a purchase of 100,000 sets of stainless steel cutlery, and to contain an arbitration clause. The agreement was alleged to be embodied in a document of which one copy was initialled on the first two pages and signed on the third by Mr Moschi, a director of the plaintiff company, while the other was signed by directors of the defendant company. The defendant company having disputed that there was ever a contract between the parties, a preliminary issue was ordered by a master to be tried whether a contract containing a submission to arbitration had been entered into. The summons was subsequently transferred by Mocatta J to the commercial list. Mocatta J held that document was a contract containing a submission to arbitration subject to whether it was enforceable or not by reason of the provisions of the Sunday Observance Act 1677, which point the parties agreed that the judge should decide. The case is reported on this point only.
J S Hobhouse for the plaintiff company.
A H M Evans for the defendant company.
Page 674 of [1970] 2 All ER 673
9 February 1970. The following judgment was delivered.
MOCATTA J stated the facts and finding in favour of the plaintiff company that there was a valid contract between the parties, continued: That leaves only for decision the question whether, by reason of the provisions of the Sunday Observance Act 1677, this document of 20 October 1968, which otherwise, if my holdings and findings are right, was a binding contract between the parties, is, by reason of the provisions of that Act, void. I would imagine that this ancient Act has, during the course of this hearing, made its first appearance in the Commercial Court during the 75 years of the existence of this court which we are shortly celebrating. Indeed, the fact that the Act has been relied on at all spotlights the weakness of the defendant company’s position on the other points argued. Nevertheless, the 1677 Act is still in force, and I must carefully consider whether it has any application here. As I have already said, the parties have agreed, notwithstanding that this matter is strictly speaking outside the preliminary issue as defined by the master’s order and my own order of transfer, that I should deal with it today. It is also agreed that if the Act does apply the effect of it is to make what would otherwise be a binding contract void. The relevant provisions of the Act provide:
‘1. For the better observation and keeping holy the Lords day commonly called Sunday bee it enacted by the Kings most excellent Majestie … that all the lawes enacted and in force concerning the observation of the Lords day and repaireing to the church thereon be carefully putt in execution. And that all and every person and persons whatsoever shall on every Lords day apply themselves to the observation of the same by exerciseing themselves thereon in the dutyes of piety and true religion publiquely and privately and that noe tradesman, artificer workeman labourer or other person whatsoever shall doe or exercise any worldly labour, busines or worke of their ordinary callings upon the Lords day or any part thereof (workes of necessity and charity onely excepted) and that every person being of the age of fourteene yeares or upwards offending in the premisses shall for every such offence forfeit the summe of five shillings, and that noe person or persons whatsoever shall publickly cry shew forth or expose to sale wares merchandizes, fruit, herbs goods or chattells whatsoever upon the Lords day or any part thereof upon paine that every person soe offending shall forfeite the same goods soe cryed or shewed forth or exposed to sale.’
It is clear that the social background of today is very different in relation to Sunday observance than it was first of all in 1677, when no doubt there was a political motive for that statute, quite apart from a religious one.
It was in 1827 when the interesting case of Smith v Sparrow was decided. At the latter date the Court of Common Pleas was whole-heartedly in favour of what they thought was the policy of the Act, but they interpreted that policy, as I read their judgment, as being purely a religious one without any political overtones or motives. No doubt there are in the books many cases which have been decided on this ancient Act. Save, however, for the one I have just mentioned, which counsel for the defendant company or those instructing him unearthed during the luncheon adjournment today just before I was about to begin this judgment, I have only been referred to relatively modern cases on the construction and application of that Act.
Counsel for the plaintiff company submitted in the first place that the authorities show that ‘tradesman’ not only means one who buys and sells but is limited in its application to persons engaged in the retail trade such as shopkeepers or persons of the type who in the old days might be expected to use a tradesmen’s entrance rather than the other entrance to a person’s dwelling place. The Act, counsel submitted, did not apply to wholesalers or to merchants; and he drew my attention to an extremely interesting case in the last century called R v Cleworth. In that case the question was whether a farmer, as distinct from a farm labourer, came within the
Page 675 of [1970] 2 All ER 673
mischief of the Act. It was held that he did not, and accordingly the Act could be said to have a certain class motive about it, quite apart from the problem in this court, or a religious motive. The Solicitor-General, in his argument in that case, as appears from the report, cited from Dr Johnson’s Dictionary in support of his argument that the substantives mentioned in the Act proceeded on what he called a descending scale. The substantives were ‘tradesman, artificer workeman labourer or other person whatsoever’. The definition of a tradesman in Dr Johnson’s Dictionary was ‘A shopkeeper. A merchant is called a trader, but not a tradesman; and it seems distinguished in Shakespeare from a man that labours with his hands’. In Murray’s English Dictionary there is a quotation, referring back to as long ago as 1622, from Malynes Ancient Law Merchant, as follows: ‘A trades-man’s shop, and a merchants warehouse is taken to be publicke and open at the appointed times’, drawing a distinction between the two.
Counsel for the plaintiff company accordingly argued that the plaintiff company could not in this case be considered as a tradesman within this section. I would add that it was common ground between counsel that it has been authoritatively decided that notwithstanding the otherwise apparently wide ambit of the phrase ‘or other person whatsoever’, the ejusdem generis rule does apply to this particular section.
In view of the late discovery in the course of the argument in this case of the decision in Smith v Sparrow and the fact that counsel, although they have taken more than twice as long in the presentation of this case as was estimated when it started, have not, admittedly—I would almost say confessedly—made an adequate study of the law on this matter, I do not think it would be right for me to express a final decision on whether the distinction, made by counsel for the plaintiff company, following Dr Johnson, between a tradesman and a merchant is relevant here, and, if so whether it would exempt the plaintiff company from the mischief of the Act. If I had thought it necessary to come to a final conclusion on this matter I would have adjourned the case, already prolonged far too far, until another date for further argument. The matter can, however, in my judgment, be decided without further adjournment for additional argument on the second basis on which counsel for the plaintiff company submitted that the Act had no application.
The plaintiff company here is a company incorporated under the Companies Acts. In 1677 so far as I know, although there were certain moves afoot in the direction of what has subsequently become the limited liability company, that creature of the law as we now know it just did not exist. There were corporations such as the Inns of Court and universities which were legal concerns although not actual persons as a result of grants made by royal charter. Accordingly, if this Act is to be applied to a modern company incorporated under the Companies Acts, it can only do so by virtue of the Interpretation Act 1889, s 2(1), which provides:
‘In the construction of every enactment relating to an offence punishable on indictment or on summary conviction, whether contained in an Act passed before or after the commencement of this Act, the expression “person” shall, unless the contrary intention appears, include a body corporate.’
In my judgment, it is clear from reading the Act that the contrary intention does appear. A limited company is incapable of public worship or repairing to a church or of exercising itself in the duties of piety and true religion, either publicly or privately, on any day of the week. Mr Moschi, when he negotiated and signed the contract, was acting not as a tradesman but as managing director of the plaintiff company. In my judgment, the Act had no application to what the plaintiff company, through the person of Mr Moschi, did that evening. Accordingly, in my judgment, there is nothing in this point, interesting though it is, that has been raised under the Sunday Observance Act 1967. It follows that I decide this issue in favour
Page 676 of [1970] 2 All ER 673
of the plaintiff company, that is to say that there was a submission to arbitration contained in an enforceable contract entered into between the parties. I also decide, for the reasons just given, that the Sunday Observance Act 1677 has no application to that contract.
Judgment for the plaintiff company on the preliminary issue. Case to be submitted to an arbitrator to be agreed between the parties.
Solicitors: Muscatt, Nelson & Co (for the plaintiff company); Stoneham & Sons (for the defendant company).
E H Hunter Esq Barrister.
Barclay v Barclay
[1970] 2 All ER 676
Categories: TRUSTS
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, EDMUND DAVIES AND MEGAW LJJ
Hearing Date(s): 26, 27 MAY 1970
Trust and trustee – Trust for sale – Realty – Express trust – Trust in will to sell and divide proceeds among beneficiaries – Nature of beneficiaries’ interests – Tenants in common of proceeds of sale – No interest in realty.
The testator’s will expressly directed that his bungalow should be sold by his executor and the proceeds divided in five equal shares between his sons and daughters-in-law, so that there was an express trust for sale and, under s 25(1) of the Law of Property Act 1925, an implied power to postpone sale. One of the sons, the defendant, lived at the bungalow with the testator, and after the testator’s death continued to live there. Subsequently, the plaintiff, one of the daughters-in-law, took out letters of administration to the testator’s estate thereby acquiring the legal title to the bungalow. She desired to sell the bungalow with vacant possession and to divide the proceeds in accordance with the will and she therefore brought an action for possession in the county court against the defendant, suing as administratrix of the testator’s estate. The judge, following Bull v Bull ([1955] 1 All ER 253), held that the plaintiff was not entitled to possession because the defendant was an equitable tenant in common with the other beneficiaries of the bungalow and could not be turned out of possession. The plaintiff appealed.
Held – Since the prime object of the trust under the will was the sale and division of the proceeds of the bungalow and none of the beneficiaries was given any right or interest in the bungalow itself, they were not tenants in common of the bungalow but only of the proceeds of sale (see p 679 a, d and h and p 680 e, post); accordingly the defendant did not have an equitable tenancy and had no right to remain in possession; and, as this was not a case of the refusal of any requisite consent to the sale, s 30a of the Law of Property Act 1925 did not apply and the plaintiff, as the trustee for sale, was entitled to claim, and would be granted, possession in the action for possession (see p 679 e and p 680 a and f, post).
Page 677 of [1970] 2 All ER 676
Dictum of Devlin LJ in Jones v Challenger [1960] 1 All ER at 789 applied.
Bull v Bull [1955] 1 All ER 253 distinguished.
Notes
For tenancy in common, see 32 Halsbury’s Laws (3rd Edn) 341, para 535, and for cases on the subject, see 38 Digest (Repl) 827–829, 396–417.
For the Law of Property Act 1925, s 30, see 20 Halsbury’s Statutes (2nd Edn) 483.
Cases referred to in judgments
Bull v Bull [1955] 1 All ER 253, [1955] 1 QB 234, [1955] 2 WLR 78, 38 Digest (Repl) 827, 398.
Jones v Challenger [1960] 1 All ER 785, [1961] 1 QB 176, [1960] 2 WLR 695, 47 Digest (Repl) 400, 3595.
Price, Re [1928] 1 Ch 579, 97 LJCh 423, 139 LT 339, 24 Digest (Repl) 935, 9473.
Cases also cited
Jacobs v Seward (1872) LR 5 HL 464.
Kempthorne, Re [1930] 1 Ch 269, [1929] All ER Rep 495.
Mayo, Re [1943] 2 All ER 440, [1943] Ch 302.
Rawlings v Rawlings [1964] 2 All ER 804, [1964] P 398.
Rooke’s Will Trusts, Re [1953] 2 All ER 110, [1953] Ch 716.
Appeal
This was an appeal by the plaintiff, Winifred Mary Nellie Barclay, widow, suing as administratrix de bonis non of the estates of Amy Mary Barclay and Andrew Adam Barclay, from the judgment of his Honour Judge Buckee sitting at Southend County Court, given on 3 October 1969, whereby it was held that the plaintiff was not entitled to an order for possession against the defendant, Allan Barclay, of premises known as Rosecot, Hilltop Avenue, Hullbridge, Essex, or to damages for the use and occupation of the premises by the defendant, and judgment was entered for the defendant. The facts are set out in the judgment of Lord Denning MR.
R A Henderson for the plaintiff.
G W Cheyne for the defendant.
27 May 1970. The following judgments were delivered.
LORD DENNING MR. On 13 August 1927, Mrs Amy Mary Barclay, the wife of Mr Andrew Adam Barclay, bought a bungalow called Rosecot, Hilltop Avenue, Hullbridge, Essex. It was her own property. She and her husband had three sons, Charles, Allan (the defendant) and Frank. Twenty-three years later, on 14 September 1950, Mrs Amy Barclay died without making a will. So her property went to her husband, Mr Andrew Barclay. But he did not take out any letters of administration, so his title was not perfected. Yet he lived on in the bungalow and treated it as belonging to him.
On 5 September 1953, Mr Andrew Barclay made a will. By this time his son Charles had died, leaving a widow. His son Frank had married and was living with his wife Winifred, the plaintiff. They were living at Ealing. The defendant had married but was separated from his wife. The defendant had come back to live with his father at the bungalow Rosecot. By his will, which was made in September 1953, Mr Andrew Barclay left his property to be divided in five equal shares to his surviving sons and daughters-in-law, namely, Charles’s widow, the defendant and his wife, and Frank and his wife. He made a homemade will on a printed form:
‘… I appoint Frank [that is his youngest son] … to be the Executors and Trustees of this my Will. I give and bequeath to my youngest son … my Grandfather Clock. [Then there were these important dispositions about the bungalow:] I direct that my bungalow “Rosecot” and everything else I possess to be sold by my executor and the proceeds divided as to one fifth … to the
Page 678 of [1970] 2 All ER 676
widow of my late son Charles … one fifth … to my son Frank … one fifth to [the plaintiff] … wife of Frank, … one fifth … to [the defendant] … of “Rosecot” … one fifth … to … Elsie … (legal wife of … [the defendant]).’
On 24 August 1954, Mr Andrew Barclay died. Soon afterwards, on 10 November 1954, Frank took out letters of administration to his mother’s estate, but he did nothing more about it, and the defendant stayed on in the bungalow.
Ten years later, on 23 September 1964, Frank died, leaving his widow the plaintiff the only person entitled to his estate. So she became entitled to his one-fifth as well as her own, making two-fifths altogether. Next year, on 28 February 1965, her solicitors gave notice to the defendant to vacate the bungalow, but he did not go. In 1966 she took out letters of administration to the estates of both Mr Andrew Barclay and Mrs Amy Barclay. It is admitted that the plaintiff, on taking out those letters of administration, acquired the legal title to the bungalow. She desired to sell the bungalow and divide the proceeds in accordance with the will. She wanted to sell with vacant possession. So she brought an action against the defendant for possession and for damages for use and occupation. He put in a defence in which he stated:
‘At all material times the Defendant has occupied and continues to occupy the said premises as tenant in common thereof pursuant to the terms of the said Will.’
He also raised the provisions of the Limitation Act 1939.
The county court judge felt himself bound by the decision in this court of Bull v Bull to hold that the defendant was an equitable tenant in common of the bungalow and could not be turned out by this action for possession. The plaintiff appeals to this court. The facts of Bull v Bull were these: a mother and son together bought a house. The legal title was taken in the son’s own name. Mother and son put up the money together, the son providing most of it. It was intended that the house should be a home for both of them. Four years later the son married and brought his wife there. The mother and daughter-in-law did not get on. The son gave his mother notice to go. This court held that mother and son were equitable tenants in common of the house. The son had no right to turn his mother out, because she had an equitable interest in the land which entitled her to remain. It could not be sold with vacant possession unless she agreed to it. If she unreasonably refused, he could go to the court under s 30 of the Law of Property Act 1925 and obtain an order for sale, and in aid of it the court could order the mother to go. In that case there was no express trust. The house was not expressed to be conveyed on trust for mother and son in undivided shares. Yet the court implied a trust so as to give effect to the intention of the parties. The son held the legal title on trust for himself and his mother; just as a husband often holds the matrimonial home on trust for himself and his wife. The trust was a trust for sale—see s 36(4) of the Settled Land Act 1925, with a power to postpone the sale: see s 25(1) of the Law of Property Act 1925.
In this present case there was an express trust for sale; and an implied power to postpone the sale: see s 25(1). That makes this case look, at first sight, like Bull v Bull. But I think that it is quite distinguishable. In Bull v Bull the prime object of the trust was that the parties should occupy the house together. They were entitled to the possession of it in undivided shares. That made them, in equity, tenants in common. An equitable tenancy in common arises whenever two or more persons become entitled to the possession of property (or the rents and profits thereof) in undivided shares. They may become so entitled by agreement, or under a will, or by inference, as often happens when husband and wife acquire their matrimonial home. The legal owner holds the legal estate on trust for them as tenants in common.
Page 679 of [1970] 2 All ER 676
The present case is very different. The prime object of the trust was that the bungalow should be sold. None of the five beneficiaries was given any right or interest in the bungalow itself. None of them was entitled to the possession of it. The testator, by his will, expressly directed that it was to be sold and the proceeds divided between them. In such a situation there was no tenancy in common of the bungalow itself, but at most in the proceeds of sale. The case falls within the words of Devlin LJ in Jones v Challenger ([1960] 1 All ER 785 at 789, [1961] 1 QB 176 at 184):
‘The conversion of the property into a form in which both parties can enjoy their rights equally is the prime object of the trust; the preservation of the house as a home for one of them singly is not an object at all. If the true object of the trust is made paramount, as it should be, there is only one order that can be made.’
So we have the clear distinction. In Bull v Bull the prime object was that the house should be occupied by them both. So they were tenants in common of the house itself. In the present case, the prime object of the testator was that the bungalow should be sold and the proceeds divided. So the beneficiaries were not tenants in common of the bungalow, but only of the proceeds after it was sold.
The main argument of counsel for the defendant before us was that there should be no order for possession. He said that the plaintiff was a trustee who should apply under s 30 of the Law of Property Act 1925, for directions. We have read through s 30 many times. It has no application to this case at all. The plaintiff, as trustee, has not refused to sell or to exercise any of her powers. It is not a case where a requisite consent cannot be obtained. This case does not come within that section at all. This is a plain case where the defendant has no interest in the bungalow. He has tried to assert an equitable tenancy by virtue of Bull v Bull, but that has no application to the present case. I think that the appeal should be allowed and judgment given for possession.
EDMUND DAVIES LJ. Bull v Bull is quite different, in its facts, from the present case, and the differences are important. The decision was said by Devlin LJ in Jones v Challenger ([1960] 1 All ER at 788, [1961] 1 QB at 182) to be one which—
‘… must be considered on the footing that the house was bought for the purpose of providing a home for mother and son and that as the mother was still residing there that purpose had not been brought to an end.’
Counsel for the defendant is here submitting that the defendant was an equitable tenant in common of the bungalow. I cannot accept this. It follows from the terms of the will itself, which have been quoted by Lord Denning MR, and from what Clauson J said in Re Price ([1928] 1 Ch 579 at 589) that the defendant never had any sort of estate in Rosecot itself but was merely entitled to an equitable interest in one-fifth of the proceeds of its sale, which was simply an interest in personal estate. Despite that equitable interest, he was no more entitled to occupy the bungalow than a stranger would be. The plaintiff, on the other hand, was not only entitled in equity to receive two-fifths of the proceeds of the sale but was also the legal owner, and was such nonetheless because her legal title was saddled with the express trust for sale created by the will. By virtue of that legal title she was in a position to secure, through due process of law, vacant possession of the bungalow, so that she could give effect to the trust to sell it and distribute the proceeds in the manner directed by the will.
Page 680 of [1970] 2 All ER 676
It follows that in my opinion these proceedings were properly launched, there was no need to resort to s 30 of the Law of Property Act 1925, and the plaintiff should have been granted possession against this defendant who was at all times claiming to be entitled to remain in sole occupation of the bungalow as tenant in common, and this (if the county court judge was right in also dismissing in toto the claim for damages for use and occupation at the weekly rate of £5) without rendering himself liable to pay anything by way of rent or otherwise for his occupation.
I would therefore concur in allowing the appeal and in the order proposed.
MEGAW LJ. Counsel for the defendant, in his very lucid and interesting argument stated quite succinctly the real issue in this case. He said that the question here is whether the plaintiff, the trustee, can get possession by an ordinary action for possession, such as this action is, or, as counsel for the defendant submits, she has to seek her remedy under the special provisions of s 30 of the Law of Property Act 1925. Under that section the court, he says, would have a discretion and could impose terms to give effect to that which was proper and just in the circumstances.
I think that s 30 of the Law of Property Act 1925, does not apply on the facts of this case. It could apply only if there were here a refusal of a requisite consent. Counsel for the defendant says there has been a refusal by the defendant of the requisite consent, namely, the consent of the defendant to the plaintiff, the trustee, to sell the bungalow with vacant possession. Assuming, as I am prepared to do, that there has been such a refusal, I do not think that the defendant had any legal or equitable right to remain in possession as against the trustee, and thus there could be no requisite consent to be given or refused by the defendant. The defendant’s claim of such right would have to be founded on the will. The will directs ‘that my bungalow “Rosecot” … be sold by my executor and the proceeds divided’ among five persons, one of whom is the defendant. That does not, in my view, give any of the five beneficiaries any right, without the consent of the trustee, to take possession of the bungalow, or to remain in possession having once taken such possession. Section 30 of the Law of Property Act 1925 does not apply. The ordinary action for possession is appropriate: that is, the action which was brought by the plaintiff in this case. That action should, in my view, succeed with its claim for possession, and I agree that the appeal should be allowed.
Appeal allowed, cross-appeal dismissed. Judgment for possession to be delivered up in three months. Question of damages for use and occupation of the property remitted to the county court judge.
Solicitors: Dale & Newbery (for the plaintiff); Wiseman & Greenman (for the defendant).
Wendy Shockett Barrister.
R V Sullivan
[1970] 2 All ER 681
Categories: CRIMINAL; Criminal Evidence
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SALMON AND PHILLIMORE LJJ AND NIELD J
Hearing Date(s): 1 JUNE 1970
Criminal law – Evidence – Admissibility – Alibi – Leave to call evidence – Grounds for refusing – Failure to give notice of particulars in prescribed period – Criminal Justice Act 1967, s 11(1).
Criminal law – Evidence – Admissibility – Alibi – Leave to call evidence – Application for leave resisted by prosecution – Particulars in notice (given out of time) disputed – Procedure – Criminial Justice Act 1967, s 11(1).
Criminal law – Evidence – Admissibility – Alibi – Notice of particulars – Prescribed period for giving notice – Waiver of period by prosecution – Criminal Justice Act 1967, s 11(1) and (8).
The mere failure to give notice of particulars of an alibi within the prescribed period does not, as a general rule, constitute grounds for the court to refuse leave under s 11(1)a of the Criminal Justice Act 1967 for the alibi evidence to be called (see p 684 d, post).
Per Curiam. Where, on an issue whether the court should give leave for alibi evidence to be called under s 11(1) of the Criminal Justice Act 1967, the case for the prosecution is that particulars relating to alibi evidence contained in a notice given out of time are spurious, the prosecution should call evidence to the effect (see p 685 c, post).
Semble. The prosecution might waive the requirements contained in s 11(1) and (8) of the Criminal Justice Act 1967 that notice of particulars of an alibi be given within seven days from the end of proceedings before the examining justices, eg by obtaining an adjournment to enable the particulars (contained in a notice given out of time) to be investigated (see p 684 h, post).
Notes
For notice of alibi, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 778A.
For the Criminal Justice Act 1967, s 11, see 8 Halsbury’s Statutes (3rd Edn) 588.
Appeal
This was an appeal by Colin Thomas Sullivan against his conviction on 1 July 1969 at Essex Quarter Sessions before the chairman (Roland Adams QC) and a jury of dangerous driving. He was fined £50 and disqualified for holding or obtaining a driving licence for 18 months, and a further six months’ disqualification was imposed consecutively under s 5(3) of the Road Traffic Act 1962. The facts are set out in the judgment of the court.
A F B Scrivener for the appellant.
I G Leach for the Crown.
1 June 1970. The following judgment was delivered.
SALMON LJ delivered the judgment of the court. The appellant was tried at the Essex Quarter Sessions on 1 July 1969 for dangerous driving. He desired to call certain witnesses to prove an alibi. The learned chairman refused permission for the defence to call those witnesses. The appellant was duly convicted. He now
Page 682 of [1970] 2 All ER 681
appeals against his conviction on the ground that the chairman wrongfully refused permission to call the witnesses to whom I have referred.
The offence of dangerous driving, according to the prosecution, was committed on 5 January 1969. It was a somewhat strange case. The appellant did not challenge any of the evidence as to the dangerous way in which a car was driven on that day. His defence was that he was not the man driving the car, and indeed that it was not his car that was being driven dangerously. He relied, or sought to rely, on evidence to show that at the time and place in question he was elsewhere than at the place where the offence occurred.
He received the notice of an intended prosecution on 10 January 1969, and he was seen by the police on 21 January 1969. On 13 March 1969, the case came before the justices. The appellant was not represented and the case was adjourned until 10 April 1969. When it then came before the justices, the appellant was again not represented, and was committed for trial. At the hearing on 10 April 1969 he was given the prescribed warning to the effect that he would not be permitted to give evidence of an alibi, or to call witnesses in support of an alibi at the trial, unless he first gave particulars of the alibi and the witnesses. He was told that he could give the particulars then and there, or he might give them to the solicitor for the prosecution not later than seven days from the end of the committal proceedings.
The provisions of the Criminal Justice Act 1967, s 11, provide:
‘(1) On a trial on indictment the defendant shall not without the leave of the court adduce evidence in support of an alibi unless, before the end of the prescribed period, he gives notice of particulars of the alibi [and the “prescribed period” is defined by s 11(8) as meaning “the period of seven days from the end of the proceedings before the examining justices”].
‘(2) Without prejudice to the foregoing subsection, on any such trial the defendant shall not without the leave of the court call any other person to give such evidence unless—(a) the notice under that subsection includes the name and address of the witness, or if the name or address is not known to the defendant at the time he gives the notice, any information is his possession which might be of material assistance in finding the witness; (b) if the name or the address is not included in that notice, the court is satisfied that the defendant, before giving the notice, took and thereafter continued to take all reasonable steps to secure that the name or address would be ascertained; … and (d) if the defendant is notified by or on behalf of the prosecutor that the witness has not been traced by the name or at the address given, he forthwith gives notice of any such information which is then is his possession or, on subsequently receiving any such information, forthwith gives notice of it.
‘(3) The court shall not refuse leave under this section if it appears to the court that the defendant was not informed in accordance with the rulesb under section 15 of the Justices of the Peace Act 1949 (rules of procedure for magistrates’ courts) of the requirements of this section.’
I pause here to say that this court does not consider s 11(3) is material in this case because there was nothing to make it appear to the court that the appellant had not been informed in accordance with the rules. Indeed, there was a certificate by the justices’ clerk stating that the appellant had been informed in accordance with the rules. There may, of course, be cases where the defendant raises the issue that he has not been informed and the it may be necessary to hear evidence on one side or another. Section 11(5) provides:
‘Any notice purporting to be given under this section on behalf of the defendant by his solicitor shall, unless the contrary is proved, be deemed to be given with the authority of the defendant.’
Page 683 of [1970] 2 All ER 681
This appellant certainly did not give any notice in accordance with the requirements of s 11 on 10 April 1969, nor within seven days of that date. As I have said, he was not then legally represented. He obtained a legal aid certificate for his defence on 9 June 1969. On that day, his solicitors wrote to the prosecuting solicitor giving the name and addresses of two witnesses whom they desired to call to prove an alibi, and the name but not the address of a third witness whom they also desired to call for the same purpose. Apparently, this was all the information that was in the possession of the appellant solicitors on that day. The information did not comply with the section because it did not state the particulars of the alibi, and as far as the third witness was concerned, it did not state his address.
However, on 11 June 1969—that is two days later—the appellant’s solicitors again wrote to the prosecuting solicitor in the following terms:
‘Will you please take this letter as formal notice that it is the intention of the [appellant] to call the following alibi witnesses:—Mr. Anthony Leonard Robinson of 2 Rowan Way, Chadwell Heath, Essex, who will give evidence that he arrived at the [appellant’s] place of business during the afternoon of the 5th January and remained there in the company of the [appellant] until 5.30 p.m. that day. Mr Terrence John Frederick Sheppard, 14 Naseby Road, Dagenham, will say that he is a partner of the [appellant’s] and that on Sunday the 5th January he and the [appellant] were at work at the Beckton Tyre Centre, East Ham, from 9 a.m. until 5.30 p.m. and the [appellant] did not leave the premises during that day. Mr. Ronald Fleming, 43 Leinster Terrace, W2, who will say that he called upon the [appellant] at his place of business about 5 p.m. on Sunday the 5th January to discuss the purchase of a vehicle and did not leave the [appellant’s] premises until 5.30 p.m. at which time the [appellant] was still at the premises at East Ham.’
It is admitted that that letter was received by the prosecuting solicitor. It crossed with a letter from the prosecuting solicitor in which he had written to the appellant:
‘I would be obliged if you would provide me with full particulars of the alibi, and the names, addresses and dates of birth [strangely enough] of the witnesses you propose to call in support.’
The case came on for hearing before the deputy chairman and a jury on 11 June 1969, the prosecuting solicitor then being in receipt of the letter from the appellant’s solicitors to which I have read. At that hearing we are told that counsel for the appellant said in open court that he had his alibi witnesses in court should the prosecuting solicitor desire to pursue any enquiries then and there. Not very surprisingly, the prosecuting solicitor through counsel said that that hardly gave time to make the necessary investigation and asked for an adjournment for the express purpose of allowing him to investigate the information relating to the alibi contained in the appellant’s solicitors’ letter of 11 June 1969. The case was adjourned on the application of the Crown for that very purpose.
It was adjourned until 1 July 1969 when it came on for trial before the chairman and a jury. Counsel, who was then appearing for the appellant, asked the court for permission to call the witnesses in support of the alibi to which I have referred. It was necessary to obtain permission of the court to call the witnesses because the necessary information in relation to the alibi evidence had not been notified to the prosecution within seven days of the termination of the committal proceedings. It will be remembered that under s 11(1)
Page 684 of [1970] 2 All ER 681
such alibi evidence cannot be called save with the permission of the court unless the necessary particulars have been supplied within that period.
What happened then was most unfortunate. It was argued before the learned chairman by counsel appearing for the Crown, who is not counsel now appearing on behalf of the Crown, that the real purpose, or one of the primary purposes, of s 11 of the Criminal Justice Act 1967 in requiring the information to be supplied within seven days of the termination of the committal proceedings was that defendants should have a limited time in which to exercise their ingenuity for the purpose of inventing an alibi. The chairman accepted that argument and refused permission to call the alibi witnesses on the ground that the information given on 11 June 1969 was too late and that there was, therefore, no reason why permission should be granted to call the alibi witnesses.
In the view of this court the period of seven days was inserted in the Criminal Justice Act 1967 because normally (although, of course, by no means always) a trial comes on within a reasonably short time after the termination of the committal proceedings. Therefore, if the prosecution obtains the information within the seven days, it gives them time in which to investigate the information. The legislature, however, fully realised that there may be circumstances when it would not be possible to give the information, or when there may be some reason why the information is not given within the seven days, but nevertheless justice demands that the alibi evidence shall be heard at the trial.
The court has a discretion to allow alibi witnesses to be called in such circumstances. That discretion must be exercised judicially. The mere fact that the necessary information has not been given within the seven days does not by itself, as a general rule, justify the court in exercising its discretion by refusing permission for the evidence to be called. The 1967 Act introduced a most salutary provision into the criminal law for the purpose of seeing that justice should be done. In the past some defendants had at the last moment produced seemingly reputable witnesses to speak to an alibi and thereby secured an acquittal. Subsequently, it was discovered that these seemingly respectable witnesses were, in fact, disreputable and that their evidence had been entirely false. There, so that the Crown might have an adequate opportunity of making enquiries as to the character and antecedents of the proposed alibi witnesses and also of investigating the story which they proposed to tell, this section was passed.
It is, however, very important that the safeguards contained in the 1967 Act shall be observed before the evidence of alibi witnesses is excluded. From the evidence which was before the court at the time when the chairman was asked to rule whether or not he would allow the alibi evidence to be called, it appeared that all the particulars required by the section had been supplied by the appellant’s solicitors to the prosecuting solicitor in their letter of 11 June 1969. It must be remembered that when the case was first called on for trial on 11 June, the Crown asked for an adjournment until 1 July 1969 for the purpose of investigating the information contained in the letter of 11 June 1969, and obtained an adjournment for that purpose until 1 July. In these circumstances this court considers that it was indefensible to refuse permission to call the witnesses on 1 July on the sole ground that the statutory information was not given until 11 June. If it was given late, then the delay was waived by the Crown when they asked for an adjournment until 1 July so that they might investigate the information. In any event it is plain that, the appellant being unrepresented until 9 June, it would be very difficult, if not impossible, to hold that the information supplied on 11 June was supplied so late that the delay in supplying it could justify the court exercising its discretion so as to refuse permission to call the alibi witnesses—especially as the Crown had been given the time for which they had asked in order to investigate the information. On the face of the only evidence before the chairman, this court has no hesitation in concluding that the chairman wrongly exercised his discretion in excluding the alibi evidence on the ground which he gave, namely, that it had been supplied too late.
The case, however, is disquieting for these reasons. Counsel for the Crown, who has given this court the greatest possible assistance, tells us, on instructions, that the
Page 685 of [1970] 2 All ER 681
first witness referred to in the letter of 11 June 1969 was approached by the police and an appointment was made to see him which he did not keep. Then another appointment was made for him to see the police which again he did not keep. Counsel for the Crown’s instructions are that as far as the second witness, Mr Sheppard, is concerned the address given was the address where he had formerly lived with his wife, that he had parted from his wife and could not be traced. As far as the third witness is concerned, counsel for the Crown’s instructions are that the address given was an entirely fictitious address. Counsel is also instructed that the police notified the appellant through his solicitors that they had been unable to trace or to interview any of the three alibi witnesses mentioned in the letter of 11 June and asked for further information, but that they were met with a blank refusal by the appellant’s solicitors to give any further information.
If, on the issue whether or not permission should be given to call alibi witnesses, the case for the Crown was that the information contained in the letter of 11 June was spurious or useless, the Crown should have called evidence to that effect. This would have given the defence the opportunity of cross-examining the witnesses who came to say that Mr Robinson had failed to keep an appointment with the police, and the witnesses who claimed that Mr Sheppard could not be traced and that Mr Fleming’s supposed address was fictitious. Moreover, it would have given the defence an opportunity of testing by cross-examination the very serious allegation which was made against the appellant’s solicitors, namely that they point-blank refused to give any further information, even after they had been told that the information in their letter of 11 June was wrong. Not only would the defence have had an opportunity of testing the evidence of the Crown, but they would also have had an opportunity of calling evidence of their own to refute the allegations being made by the Crown.
Section 11 of the Criminal Justice Act 1967 takes away what was formerly an absolute right of a defendant to call evidence to support an alibi. It took that right away for good reason, but it protected the defence by making sure that the defence could be deprived of that right only in the circumstances specified by the Act. In this case the appellant’s solicitors wrote the letter of 11 June which, on the face of it, gave the information required by the Act. If the Crown desired to exclude the evidence on the ground that the information was wrong, it was essential in the view of this court that the Crown should prove that the information was wrong. There was a vague suggestion that some of the information was inaccurate, but no attempt was made to call any evidence to prove that it was. Indeed the submission by the Crown was quite different. It rested on the rather bizarre contention that, although the trial had been postponed from 11 June to 1 July 1969 at the request of the prosecuting solicitor to enable him to have an opportunity of investigating the information, the fact that the information was given on 11 June put it so far outside the seven-day period contemplated by the Act that, on that ground alone, the court was justified in exercising its discretion to refuse leave to call the alibi evidence. Clearly, that ground cannot possibly be supported. As already indicated the case is somewhat disquieting because one cannot help being left with the suspicion that if the case for the Crown had been differently conducted and the evidence to which I have referred had been called, it may be—we express no view as to whether it would have been so—but it may be that the Crown could have proved that the information was indeed inadequate. However that may be, there was no evidence before the court to that effect. In these circumstances and for these reasons this court has come to the conclusion that the appeal must be allowed and the conviction quashed.
Since the serious suggestion has been made against reputable solicitors that they point-blank refused to give any further information to the prosecuting solicitor, we wish to make it plain that, according to instructions of counsel for the appellant, this suggestion was made for the first time today. We do not know who is supposed
Page 686 of [1970] 2 All ER 681
to have been spoken to in the office of the appellant’s solicitors or who it is who is alleged to have requested further information. There is certainly no evidence before this court which suggests that the appellant’s solicitors behaved otherwise than with complete propriety.
Appeal allowed. Conviction quashed.
Solicitors: John Ramage & Co (for the appellant); T Hambrey Jones, Chelmsford (for the Crown).
L J Kovats Esq Barrister.
Sloan v General Medical Council
[1970] 2 All ER 686
Categories: PROFESSIONS; Medical
Court: PRIVY COUNCIL
Lord(s): LORD HODSON, LORD GUEST AND LORD DONOVAN
Hearing Date(s): 16, 17 MARCH, 30 APRIL 1970
Privy Council – Medical Act appeal – Appeal from determination of disciplinary committee of General Medical Council – Natural justice before committee – Ambiguous charges preferred before committee – Charges leading to conviction whether true or false.
The appellant, a registered medical practitioner, prescribed tablets and administered injections for a fee each time to two women and represented to them that the tablets and injections were to procure a miscarriage. He also accepted money from each of the women for performing or arranging to perform an operation on each and for that purpose administered general anaesthetic and represented to each of the women on her recovery from the anaesthetic that the operation had been performed. The appellant also prescribed tablets and administered injections to a third woman for a fee each time and arranged for a urine test and informed her that she was pregnant. He was charged before the respondents, the disciplinary committee of the General Medical Council, that on those facts he had been guilty of infamous conduct in a professional respect. The charges were so framed that whether the representations made by the appellant to the three women were true or false the appellant would be equally guilty on the facts of infamous conduct in a professional respect. In fact the tablets and injections were not designed to procure a miscarriage and no operation was in fact performed nor was the third woman in fact pregnant. The appellant gave evidence that his actions were designed to prevent the women from going to a professional abortionist and were in conformity with his religious belief. The only conclusion which could be drawn from the evidence was that the appellant’s representations were false. The appellant was found guilty of infamous conduct, and the appellant’s name was directed to be erased from the register of medical practitioners. On appeal on the grounds (i) that the facts proved did not amount to infamous conduct and (ii) that the rules of natural justice were not observed in the conduct of the case against the appellant,
Held – (i) The preferment of ‘trap charges’ that would lead to a conviction irrespective of any explanation given was strongly to be deprecated; if it was desired to prefer alternative charges they should have been preferred in the recognised forms (see p 688 c, post).
(ii) There was no evidence that the pills and injections were intended to procure a miscarriage or that an illegal operation had been performed and the proper charge, therefore was one of false pretences (see p 688 e, post).
(iii) There were no closed categories of infamous conduct and in every case it was
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for the committee of members of the appellant’s own profession, to decide whether the facts were proved and whether they amounted to infamous conduct; since there was no evidence on which the committee could have found the appellant guilty of anything but false pretences there was no reason to think that he had been prejudiced by the form in which the charge was framed or that there had not been due enquiry; accordingly, the appeal would be dismissed (see p 688 f, and p 689 e, post).
Dictum of Lord Radcliffe in Fox v General Medical Council [1960] 3 All ER at 227 approved. Dictum of Lord Morris of Borton-y-Gest in Wiseman v Borneman [1969] 3 All ER at 278 applied.
Notes
For appeals from the disciplinary committee of the General Medical Council, see 26 Halsbury’s Laws (3rd Edn) 71, 72, para 149.
For the rules of natural justice in hearings before quasi-judicial tribunals, see 30 Halsbury’s Laws (3rd Edn) 718, 719, para 1368.
Cases referred to in judgment
Fox v General Medical Council [1960] 3 All ER 225, [1960] 1 WLR 1017, 124 JP 467, Digest (Cont Vol A) 521, 520a.
Wiseman v Borneman [1969] 3 All ER 275, [1969] 3 WLR 706., Digest Supp.
Appeal
This was an appeal by Henry James Sloan from a determination of the respondents, the disciplinary committee of the General Medical Council, made on 25 July 1969 wherein the appellant was adjudged to have been guilty of infamous conduct in a professional respect in relation to the facts proved against him and it was directed that the appellant’s name should be erased from the medical register. The charges which were found proved were that, being registered under the the Medical Acts, the appellant, when consulted during June and July 1967 by three women, H, S and L, with a view to the termination of their pregnancies, for a fee prescribed tablets and administered injections representing to the women that the purpose of the tablets and the injections was to procure a miscarriage; that in August 1967, the appellant accepted £50 from H and £60 from S in consideration of performing or arranging for some other person to perform an operation for the termination of pregnancy, and that the appellant subsequently administered a general anaesthetic to both women and on their recovery represented to them that such an operation had been performed, that the appellant arranged for a test of the urine of L and subsequently informed her that she was pregnant whereas in fact she was not, and ‘that in relation to the facts alleged [the appellant] has been guilty of infamous conduct in a professional respect’. The appellant stated in evidence that he was a member of the Greater World Church and that abortion was against the tenants of that religion.
M P Solomon and E Cotran for the appellant.
Robert S Alexander for the the respondents.
30 April 1970. The following judgment was delivered.
LORD GUEST after stating the facts continued: The grounds of the appeal are that the facts proved against the appellant as narrated in the charge did not amount to infamous conduct in professional respect. There is a further ground of appeal that in the circumstances the rules of natural justice were not observed in the conduct of the case against the appellant.
Their Lordships are able to deal with both points together. The objection which is taken to the conduct of the case is based initially on the form of the charges. These charges in effect allege that that the appellant represented to the girls that the purpose of the pills and injections was to procure a miscarriage and also represented that an operation for the termination of pregnancy had been performed and took money
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from them to that end. It is apparent from the statement of counsel for the respondents at the inquiry that the purpose of preferring a charge in this form was so that, whether it turned out in evidence that the representation was true or false, the appellant would equally be guilty of the facts stated in the charge which were were capable of amounting to infamous conduct in a professional respect. This impression gained from the transcript was confirmed by counsel for the respondents at the hearing before the Board when he quite frankly stated that the charge was deliberately framed in this way. He submitted that whether the representation was true or false, the facts relating to the charge would in either event amount to infamous conduct in a professional respect, thus reiterating his submissions to the committee.
Their Lordships cannot too strongly deprecate the preferment of charges in this form. If it is desired to prefer alternative charges then they should be preferred in the alternative in the recognised form leaving the committee to decide on the evidence which alternative has been established. In their Lordship’s view it is embarrassing to the appellant to prefer a charge which on the face of it is ambiguous and presents two alternatives for the committee’s consideration. This in fact was a ‘trap charge’ so that whichever explanation was given by the appellant he could not fail on the view of the respondents to be convicted. On the facts as known to the respondents before the charge was preferred it was reasonably plain on the evidence of the girls and on the statements made by the appellant to the police that the representations made by him were false, made by him for the designed purpose of preventing the girls going at an earlier stage to a professional abortionist and were made in conformity with his religious beliefs. In these circumstances their Lordships fail to understand why the charge initially was not one of making false representations that the pills and injections were given with the intention of procuring a miscarriage and that an operation to that end had been performed. There was evidence that the pills and injections were not intended to procure a miscarriage. There was no evidence that an illegal operation had been performed. Their Lordships hope that the practice of preferring charges in this way will not be continued.
However the rules of natural justice are not rigid and must depend in each case on the nature of the inquiry (Wiseman v Borneman ([1969] 3 All ER 275 at 278, [1969] 3 WLR 706 at 711) per Lord Morris of Borthy-y-Gest). The inquiry in the present case is before a disciplinary committee consisting of the members of the appellant’s own profession. There are no closed categories of infamous conduct and in every case it must be a question for the committee to decide first whether the facts alleged in the charge have been proved and second whether the appellant was in relation to those facts guilty of infamous conduct in a professional respect. If their Lordships had thought that the appellant had in any way been prejudiced by the form which the charges took the position might have been very different. But notwithstanding the statements made by counsel for the respondents on two occasions during the inquiry that the charges presented the alternatives of abortion or false pretences for the committee’s determination, the question of an illegal operation had completely disappeared from the case by the time the committee came to consider its determination. As already stated there was no evidence on which the committee could possibly hold that an illegal operation had been performed on either of the girls or that the pills or injections had been designed to procure a miscarriage. The appellant admitted that his representations as to pills, injections and operation were false and stated that no illegal operation had in fact been performed. No cross-examination was directed to the appellant by counsel for the respondents to suggest that an illegal operation had been performed and in the speeches of both counsel for the respondents and counsel for the appellant at the conclusion of the evidence there was no mention of an illegal operation. At the end of the day the committee was really only left with one question, whether on the evidence produced to the effect that the appellant had made false representations
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to these girls, this constituted infamous conduct. If the facts had supported an alternative view that an illegal operation had in fact been performed, there would have been great substance in the argument for the appellant that on the charge as framed it could not be known with certainty of what conduct the appellant had been convicted. But the only conclusion which could be made on the evidence was that the representations were false.
Their Lordships would desire to express their concurrence with the observations of Lord Radcliffie in Fox v General Medical Council ([1960] 3 All ER 225 at 226, 227, [1960] 1 WLR 1017 at 1020, 1021). Lord Radcliffe, after referring to the peculiar nature of the disciplinary committee in view of the fact that they gave no reasons for their decisions, said ([1960] 3 All ER at 227, [1960] 1 WLR at 1021):
‘Such considerations, which are unavoidable in appeals of this kind, do sometimes require that the Board should take a comprehensive view of the evidence as a whole and endeavour to form its own conclusion whether a proper inquiry was held and a proper finding made on it, having regard to the rules of evidence under which the committee’s proceedings are regulated. The validity of any determination by the committee is, certainly, dependent on the performance of its statutory duty to hold a “due inquiry” into the matter, and the Board will need to be satisfied as to this if it is challenged on an appeal.’
It follows from what their Lordships have already said that in their view the facts proved to the satisfaction of the committee were sufficient to justify the determination by the committee that the appellant had been guilty of infamous conduct in a professional respect. On the whole matter their Lordships are not able to say that the committee did not hold due enquiry into the facts. They will accordingly humbly advise Her Majesty that the appeal should be dismissed. There will be no order as to costs.
Appeal dismissed.
Solicitors: T L Wilson & Co (for the appellant); Waterhouse & Co (for the respondents).
S A Hatteea Esq Barrister.
Hannam v Bradford City Council
[1970] 2 All ER 690
Categories: ADMINISTRATION OF JUSTICE; Tribunals: EDUCATION: EMPLOYMENT; Contract of service
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SACHS, WIDGERY AND CROSS LJJ
Hearing Date(s): 9, 10 MARCH 1970
Tribunal – Membership – Bias – Inquiry into dismissal – Tribunal members also members of dismissing body – Tribunal members not present at meeting of dismissing body effecting dismissal – Local education authority staff sub-committee – Inquiry into dismissal of teacher by governing body of aided voluntary school.
Education – Teacher – Contract of service – Aided voluntary school – Employment by governors – Whether local education authority also party to contract.
The plaintiff, who was a schoolmaster at an aided voluntary school maintained by the council, absented himself on 6 October 1967 and refused to return to his duties at the school. On 19 December, his employment was terminated at a meeting of the school governors and he was given notice to take effect on 30 April 1968, being the required period of notice under his contract. On 18 January 1968, the staff sub-committee of the council met and held an inquiry whether the council should exercise its power under s 24(2)(a)a of the Education Act 1944 to prohibit the dismissal of the plaintiff. This power was crystallised in the school’s articles of government and the council’s conditions of service of teachers (which included provision for the plaintiff to be given a hearing). The meeting of the sub-committee did not take the form of an appeal by the plaintiff from the decision of the governors to dismiss him. Three of the ten members of the sub-committee were governors of the school; none of them, however, had attended the meeting of the governors of the school on 19 December. The staff sub-committee resolved not to prohibit the plaintiff’s dismissal, and this decision was later affirmed by the full council.
Held – (i) The decision of the staff sub-committee (which was admittedly exercising a quasi-judicial function) not to prohibit the dismissal of the plaintiff could not stand, because—
(a) the fact that there governors of the school sat on the sub-committee gave rise to the possibility of bias (see p 692 c, p 693 h, p 694 f, p 697 j to p 698 a and c and p 700, d, g and h, post); Metropolitan Properties Co (FGC) Ltd v Lannon [1968] 3 All ER 304, considered; and
(b) (per Sachs and Cross LJJ) no man could be a judge of his own cause; the three governors when acting as members of the sub-committee did not cease to be an integral part of the body whose action was being impugned, and it made no difference that they did not personally attend the meeting of the governors at which the plaintiff’s employment was terminated (see p 694 g and p 700 d, post).
(ii) (Sachs LJ dissenting) The plaintiff was nevertheless not entitled to recover against the council for breach of contract on the ground of the council’s failure to ensure that the hearing of the sub-committee was properly conducted, because—
(a) the initial contract of service of the plaintiff was a contract by which the plaintiff was employed by the governors and the governors alone and there was no tripartite agreement including the council (see p 699 h and p 700 e, post);
(b) (Sachs LJ concurring on this point) the plaintiff’s right of hearing before the sub-committee was conferred by the articles of government (see p 699 j to p 700 b and f, post; cf p 695 f and g, post); accordingly
(c) there was no contract, either initial or subsequent, between the plaintiff and the council and his claim for breach of the supposed contract was totally misconceived (see p 700 c and d, post).
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Per Widgery LJ. If the plaintiff had been minded promptly to move for mandamus, he might in theory at any rate have had an opportunity of having a rehearing of his complaint that he had been wrongly dismissed (see p 698 c, post).
Notes
For bias by interest, see 11 Halsbury’s Laws (3rd Edn) 67–69, para 123, and for cases on the subject, see 16 Digest (Repl) 478, 479, 2667–2974.
For dismissal of teachers, see 13 Halsbury’s Laws (3rd Edn) 663–665, paras 1371, 1372, and for cases on the subject, see 19 Digest (Repl) 633–636, 213–234.
For the Education Act 1944, s 24, see 11 Halsbury’s Statutes (3rd Edn) 183.
Cases referred to in judgments
Blanchard v Dunlop [1917] 1 Ch 165, 85 LJCh 791, 115 LT 467, 81 JP 9, 19 Digest (Repl) 621, 157.
Byrne Kinematograph Renters Society Ltd [1958] 2 All ER 579, [1958] 1 WLR 762, 45 Digest (Repl) 401, 147.
Metropolitan Properties Co (FGC) Ltd v Lannon [1968] 3 All ER 304, [1969] 1 QB 577, [1968] 3 WLR 694, Digest Supp.
R v Camborne Justices, ex parte Pearce [1954] 2 All ER 850, [1955] 1 QB 41, [1954] 3 WLR 415, 118 JP 488, 33 Digest (Repl) 157, 106.
R v Rand (1866) LR 1 QB 230, 35 LJMC 157, sub nom R v Rand, R v Bradford Justices 30 JP 293, 33 Digest (Repl) 155, 89.
R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256, [1923] All ER Rep 233, 93 LJKB 129, 88 JP 3, sub nom R v Hurst, ex parte McCarthy 130 LT 510, 33 Digest (Repl) 156, 104.
Appeal
This was an appeal by Bradford City Council, against a decision of his Honour Judge Hartley, dated 24th February 1969, awarding the plaintiff, Peter Hannam, initial damages of 40s, and holding that the assessment of further damages be adjourned, in the plaintiff’s claim for damages for breach of contractual obligation to ensure that an inquiry into his dismissal from his part as teacher in an aided voluntary school was heard before a properly constituted tribunal.
Colin Duncan QC and B Bush for the council.
The plaintiff did not appear and was not represented.
10 March 1970. The following judgments were delivered.
SACHS LJ. This is an appeal from a judgment of his Honour Judge Hartley given on 24 February 1969, at Bradford County Court. The plaintiff is a schoolmaster who from November 1962 to October 1967 taught physics at St Bede’s Grammar School, Bradford, an aided voluntary school maintained by the council, which is the local education authority.
On 6 October 1967, he absented himself from his duties without leave, in circumstances to which further reference will be made. He never returned to his duties. On 19 December, the school governors met and terminated his employment by giving him notice to take effect on 30 April 1968, thus giving him the length of notice required by his contract. They suspended him from his duties during that period. On 18 January, the staff sub-committee of the council met and held an inquiry whether the council should exercise its power stemming from s 24(2)(a) of the Education Act 1944 (crystallised in the school’s articles of government and the relevant conditions of service of teachers) to prohibit the plaintiff’s dismissal. It was resolved:
‘That the power of the Council, as the Local Education Authority, to prohibit the dismissal of the teacher by the Governors of the School, be not exercised.'
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This decision was affirmed by the full council on 22 February 1968. The plaintiff’s dismissal accordingly took effect on 30 April, up to which date he was paid his salary in full.
In his action, the plaintiff’s claim fell into two parts. First, he asserted that he had been wrongfully dismissed by the council. This claim was rejected by the county court judge on the ground that his contract of employment was with the governors of the school. There is no cross-appeal against that decision which was obviously correct. The second claim made was that, for a number of reasons, there had been a breach by the council of its contractual obligation to ensure that the inquiry of the staff sub-committee was conducted in accordance with the principles of natural justice and by persons who were property qualified and not liable to bias. Some eight grounds were put forward by the plaintiff as justifying the second claim. Of these, the learned county court judge rejected seven; and again, as to those, there in no cross-appeal. On the eighth, however, he found in favour of the plaintiff and decided that, as the staff sub-committee which determined the matter included three members likely to be biased, their decision could not stand. Having concluded that the defendants were thus liable for breach of contract, he ordered judgment to be entered for the plaintiff for an initial 40s damages and that the assessment of further damages be adjourned until it had been ascertained what might transpire as a result of the judgment. The council now appeals, alleging that there was no contract at all between it and the plaintiff touching such an inquiry; that if there was such a contract, it did not apply to a termination of employment by due notice; and that in any event there was no breach of that contract as regards the composition of the staff sub-committee. In the alternative, it alleges that the damages are, on the facts, limited to 40s.
In the course of the proceedings before this court, as in those before the county court, it became necessary to consider the interpretation of some far from clear provisions of the school’s articles of government which are expressed as having been made by the Minister of Education, and of the conditions of service of teachers adopted thereunder by the council. Of those points, some are of considerable general importance both to teachers and to those who employ them. It was thus with regret that this court was able to hear one party only, the council, owing to the failure of the plaintiff to appear. Having regard, however, to the history of the appeal, this court felt constrained to proceed in the plaintiff’s absence and not to leave the matter still further in abeyance, with the rights of the parties, which had been left somewhat fluid by the county court, undetermined. The appeal first came into the warned list on 11 November 1969, whereupon the plaintiff obtained an adjournment on the ground of illness supported by a medical certificate. Since then there has been extensive correspondence between the plaintiff and the appeal office. The appeal was stood out of the list at the beginning of this term and then further adjourned. The plaintiff, by successive letters from 9 January onwards, was informed that a medical certificate was required if adjournments after 26 January (and, later, after 9 March) were to be granted. A final warning was given at the end of February; but no medical certificate was received. Further, the adjournment was opposed by the council and thus could not be justified when, in the face of urgent letters and telegrams, no evidence supporting a need for an adjournment was forthcoming. Counsel for the council has, in the embarrassing circumstances, been of course meticulously careful to draw the court’s attention to all such points as the plaintiff could properly have wished to be put before the court, whether or not included in the four cross-notices which the latter has filed. Indeed, the plaintiff, who appeared in person at first instance, and was not instructing counsel in this court, may well have gained rather than suffered by his absence during the considerable period whilst this appeal was being canvassed before us.
It is convenient to turn to the points taken on behalf of the council in the order in which they were presented to this court. The first related to the decision of the
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county court judge that, the staff sub-committee being a quasi-judicial body, its decision could not stand because, when it sat on 18 January, three of its members were also members of the governing body whose action in dismissing the plaintiff was in effect being impugned. One of the three governors, indeed, acted as chairman of the staff sub-committee. It should be noted that there was an explicit finding by the county court judge that that decision was reached honestly and in good faith and that none of these three governors was actuated by bias. Article 6 of the articles of government starts by stating: ‘The appointment and dismissal of Assistant Masters shall conform to the following procedure … ’ and then provides, inter alia, that ‘… the Local Education Authority shall have power … to prohibit the dismissal of an Assistant Master without the consent of the Authority’. Part II of the conditions of service sets out the rights of the teacher to what is described therein as a ‘hearing’ before the staff sub-committee. The relevant parts read as follows, omitting only words that do not touch aided voluntary schools:
‘(1) … in the case of an Aided Voluntary School, before any decision is taken by the Council to give consent to the dismissal of a teacher (where such consent is required of the Council), the Council shall at his request grant the teacher a hearing, and at his option allow him to be represented by a friend. (2) At least seven days’ notice of the time, date and place of such hearing shall be given to the teacher by the Director, and if his dismissal is to be considered on the ground of some charge, complaint or adverse report affecting his conduct or capacity he shall at the same time be supplied in writing by the Director with a statement of such charge, complaint or adverse report. (3) The hearing shall take place before the Staff Sub-Committee of the Education Committee of the Council or before a Special Sub-Committee of such Sub-Committee appointed for the purpose.’
Counsel for the council rightly conceded that the staff sub-committee were exercising a quasi-judicial function at such a hearing. He submitted, however, that the presence of the three governors as members of the staff sub-committee of ten—the quorum was three—did not invalidate the proceedings. His case was that there was ‘no real likelihood’ of bias on their part, and he prayed in aid the fact that none of them attended the meeting of the governors on 19 December at which it was determined to dismiss the plaintiff.
At this point it is convenient to note the grounds for dismissal of the plaintiff. These were that as from 6 October 1967, he had consistently absented himself without leave from his duties because of what he referred to as slanderous statements touching his professional capacity made by one member of the staff in the presence of other members of the staff, but not in the presence of the headmaster. He had refused, in a high-handed manner (to which later reference will be made), to return to his duties unless the headmaster dealt with the matter in a particular way on which he insisted. At the staff sub-committee meeting it was thus the exercise of the governors’ discretion in dismissing the plaintiff in such circumstances that was in issue.
The learned county court judge applied the test whether ‘a reasonable man would say that a real danger of bias existed’. Counsel for the council asserted that that test was erroneous and that, anyway, no real danger existed. This court was referred to the well-known series of authorities, not all of which had been cited to the county court judge, ranging from R v Rand, through R v Camborne Justices, ex parte Pearce, to Metropolitan Properties Co (FGC) Ltd v Lannon, a recent decision of this court. It seems, however, only necessary to quote the following passages in the last-memtioned case, in which the authorities were reviewed. Lord Denning MR, after emphasising the
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importance in relation to the points in issue of Lord Hewart CJ’s celebrated dictum in R v Sussex Justices, ex parte McCarthy ([1924] 1 KB 256 at 259, [1923] All ER Rep 233 at 234), went on to say ([1968] 3 All ER at 310, [1969] 1 QB at 599):
‘The court looks at the impression which would be given to other people. Even if he [the chairman of the tribunal in that case] was as impartial as could be, nevertheless, if right-minded persons would think that, in the circumstances, there was a real likelihood of bias on his part, then he should not sit. And if he does sit, his decision cannot stand … The court will not enquire whether he did, in fact, favour one side unfairly. Suffice it that reasonable people might think he did. The reason is plain enough. Justice must be rooted in confidence; and confidence is destroyed when right-minded people go away thinking: “The judge was biased.”’
Danckwerts LJ propounded the question as follows ([1968] 3 All ER at 311, [1969] 1 QB at 601):
‘Must there be a real likelihood that the tribunal was biased, or is it sufficient that a reasonable person would think that the tribunal might be biased? And, how should the principle expressed by LORD HEWART, C.J.b, that “justice should both be done and be manifestly seen to be done” be applied in a matter of this kind?’
Then Danckwerts LJ decided the case on the basis ([1968] 3 All ER at 311, [1969] 1 QB at 602): ‘A person subsequently hearing of these matters might reasonably feel doubts, I think, of the chairman’s impartiality … ’ Edmund Davies LJ said ([1968] 3 All ER at 314, [1969] 1 QB at 606):
‘… I cannot bring myself to hold that a decision may properly be allowed to stand even although there is reasonable suspicion of bias on the part of one or more members of the adjudicating body.’
Those judgments involve, in effect, somewhat of a swing back towards the principle enunciated in the Sussex Justices case, which had to some account been discounted in some previous decisions. For my part, I doubt whether in practice materially different results are produced by the ‘real likelihood of bias’ test urged by counsel for the council or that adopted by the county court judge. If there is such a difference, I uphold the latter and respectfully adhere to the school of thought adopted in Lannon’s case, for the reasons there given by Lord Denning MR. I agree, too, that the county court judge applied the test correctly to the facts.
I would, however, add that there is a slightly different ground on which it was abundantly clear that the staff sub-committee decision could not stand. No man can be a judge of his own cause. The governors did not, on donning their sub-committee hats, cease to be an integral part of the body whose action was being impugned, and it made no difference that they did not personally attend the governors’ meeting of 19 December. The fallacy of any contrary view is exemplified by considering with the position would be if there had been a quorum meeting of three members of the staff sub-committee, all of whom had been governors. To say that a decision of such a trio could stand would be to produce an absurdity. There thus fails the argument that was put in the forefront of his case by counsel for the council in his attack on the decision on liability made at first instance by the county court judge.
Two further points were, however, argued, neither of them more than somewhat
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slightly, in counsel for the council’s first approach. The first of these was a submission that any obligation of the council to give a teacher a hearing before the staff subcommittee was limited to cases where there had been a dismissal for misconduct. In that behalf, counsel pointed to the fact that Part II of the conditions of service was headed ‘Dismissal’, whilst there was a Part IV headed ‘Termination of Appointment’. He had, however, rightly to concede that the word ‘dismissal’ in those paragraphs of Part II which have already been cited (as also the same word in arts 5 and 6 of the articles of government) must be interpreted in the same way as in s 24(2)(a) of the Education Act 1944. So far as relevant, s 24(2) provides:
‘… articles of government for every aided school—(a) shall make provision for the appointment of the teachers by … governors of the school, for enabling the local education authority to determine the number of teachers to be employed, and for enabling the authority … to prohibit the dismissal of teachers without the consent of the authority and to require the dismissal of any teacher … ’
It is plain beyond a peradventure that in that section the word ‘dismissal’ must include dismissal on proper notice. It is impossible to insert after it the words ‘for misconduct’ into the second. Moreover, the whole tenor of art 5, ‘Appointment and Dismissal of Head Master’, and art 6, ‘Assistant Masters’, of the articles of government, would be thrown into complete confusion if the interpretation originally propounded on behalf of the council was correct. Indeed, today counsel for the council felt it proper to resile from the contrary argument in view of some recently revised conditions of service that he had been able to peruse.
Next comes the suggestion that there was no contractual obligation binding the council to ensure that the plaintiff was given a proper hearing by the staff sub-committee, and indeed that the obligation to give the hearing was not contractual at all. Initially, counsel for the council said that he was not going to take that point, but later he resiled and pursued it. It is true that the learned county court judge appears not to have founded his decision as to the existence of the obligation on a correct ground. He seems to have held that the offer by the council of a hearing, coupled by an acceptance of that offer by the plaintiff, resulted in a contractual obligation to provide a proper tribunal. In so holding, he considered that he was following the view put forward by Harman J in Byrne v Kinematograph Renters Society Ltd ([1958] 2 All ER 579 at 599, [1958] 1 WLR 762 at 784). But, whether or not such a view is correct, it does not fit the facts of the present case, for the obligation to provide a hearing existed before the offer made by the council in December 1967, and was something which had already arisen independently of that offer.
The question is whether that obligation was one of which one can say that it stems from a statute or a statutory instrument so as to exclude there being any contractual obligation, or whether it is one that stems from a contract. In either event, it stems from the original terms on which the plaintiff entered into employment as a teacher at the school. One must accordingly look at the complete structure created by the articles of government and the conditions of service as a whole. Indeed, it was common ground at first instance that those were the documents which contained the terms of the contract under which the plaintiff was employed. Moreover, this appears from the statement under the Contracts of Employment Act 1963 given to the plaintiff in September 1964. One must thus look at the matter as though the teacher is handed those two documents as an offer of employment on the terms set out in them. On acceptance, a tripartite agreement results. The three parties are the plaintiff, the governors of the school, and those who so largely control the school, ie the council. The council controls the employment of teachers partly through being able to lay down the educational qualifications, party through laying down the
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establishment of the school, partly through being able to lay down the conditions of employment, including length of notice and holidays, and partly through having the power to require dismissal which stems from s 24(2)(a) of the 1944 act. In the main, of course, the relevant articles of government and conditions of service relate to obligations as between the governors and the teachers; but as a ‘safeguard’ (the word used by the council’s education officer in his letter of 17 November 1967) against unjust or capricious termination of an employment, a teacher obtains the right to have interposed between himself and the governors the need for the latter to obtain the ability of the council to prohibit his dismissal. In that general scheme, the council plays its part, and that part is offered to the teacher by the proffering—it matters not through whose hand—of the articles of government ad the conditions of service which it therein states that it has adopted. It is just as if the council had said to the teacher: ‘If you will enter into the employment of the governors, we offer you this safeguard.' That is what produced the agreement which can be styled tripartite or (so far as the council is concerned) collateral. The present case is thus far stronger than that considered by Harman J ([1958] 2 All ER 579, [1958] 1 WLR 762).
To the extent, at any rate of the grant of the right to the interposition of the council, the latter is a party to the agreement of the employment, and it follows that an obligation falls on it to ensure that the inquiry is conducted before a staff subcommittee so constituted as not to offend the rules of natural justice. Indeed, counsel for the council did not contest that, whatever be the origin of the obligation, its effect was as just stated. By the articles of government, the Minister provides for many matters which would otherwise be the subject of contractual arrangements inter se between the parties involved, the council, the governors, the headmaster, and the assistant masters; these, for instance, included length of service and of aggregate holidays. Assuming that to some extent and for some purposes the articles have a statutory effect, I can yet find no warrant for saying that there is anything to preclude appropriate provisions in those articles being included in relevant contracts between the parties. Statutes providing that terms be embodied in contracts do not normally make the resulting obligations any the less contractual. This line of reasoning applies even more strongly to the conditions of service. No question of quasicontract need thus arise.
On the above basis, of course, the plaintiff establishes that the obligation was as between himself and the council contractual, and that he is not limited to such rights as he might be able to enforce either by certiorari and mandamus or by obtaining an injunction against the school for acting without the proper procedure having been implemented. Indeed, in many cases, such can be the speed of events and such their sequence that he would in practice, as counsel for the council conceded, have no remedy against the council unless there was a contractual obligation; not an attractive position.
From that point one turns to the question: what has the plaintiff lost? To my mind, he has lost opportunity of obtaining the determination of a properly constituted staff sub-committee on the question of whether the council should prohibit the governors from dismissing him. He cannot put himself into a better position than that as regards damages in the present case by having refrained, whilst there was ample time, from seeking immediately after 18 January an order of certiorari or mandamus against the council, or an injunction against the governors restraining them from implementing the dismissal until a properly constituted staff sub-committee had come to a decision. If the chances of a properly constituted staff sub-committee prohibiting his dismissal were high, he might be entitled in certain circumstances to substantial damages. If the chances were low, the damages would be low. If the chances were nil, the damages would plainly be nominal. That leads to a consideration of those chances and at this stage, of course, one particularly
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regrets the absence of the plaintiff. There has been in this court a full examination of all the evidence adduced at trial. That includes all the correspondence in both the folders placed before the court. It includes the written submissions made at some length by the plaintiff to the staff sub-committee; and it includes the full notes which were taken by the learned county court judge of the submissions made for the plaintiff at trial. In essence, the relevant facts are to be collected from the correspondence up to the date of the council meeting of 22 February. They are set out in the careful and ample judgment of the county court judge. It would render no good service to the plaintiff to recapitulate them again in detail. Suffice to to say that his wrong-headed and threatening attitude in his dealings with all concerned, and especially with his headmaster, coupled with his complete refusal to return to his work when so directed before 19 December 1967, made it administratively impossible for the governors to act otherwise than they did. It is not conceivable that any properly constituted staff sub-committee of the council could have decided to prohibit the dismissal; and thus the damages are nominal.
The learned county court judge, to my mind, fell into error when he deferred the assessment of damages on the ground that there might still be a further hearing of this matter by a properly constituted staff sub-committee and that that would affect the measure of damages. There is no room for any such fresh hearing. One has to take the position as it stands. Accordingly, the damages recoverable are limited to the 40s for which judgment was entered. In my view, the appeal should be allowed only insofar as concerns the order that there should be an assessment of damages over and above the 40s. Otherwise it should stand.
WIDGERY LJ. Counsel for the council has conceded that when the staff subcommittee of the council met on 18 January 1968, to consider this matter, they were exercising a quasi-judicial function. I think that counsel was right to make that concession, although the point is not entirely free from difficulty.
The articles of government of this school give the council, the local education authority, the right to prohibit the dismissal of an assistant master; but, in my judgment, that provision is not intended primarily for the protection of the master in question. This was an aided voluntary school in which the board of governors and the council shared control over the school; and this provision is one of those which regulate the functions attributable to one authority as compared with the other. If in this case there had been no specific requirement for a hearing, I think that the result might have been the same as it was in Blanchard v Dunlop, namely, that there was no obligation to give a hearing at all. However, unlike Blanchard’s case, the articles in this case do provide for a hearing and, insofar as they provide for a hearing, they are intended, I think, for the protection of the teacher. It is said, rightly, that the hearing before the staff sub-committee was not strictly an appeal from the decision of the governors, but it was so regarded by everybody, and this was natural enough, because, whatever the nice theory of the matter may be, in substance nobody could get away from the fact that when appearances were made before the staff sub-committee in January 1968, the plaintiff was really trying to get a reversal of the decision of the governors to terminate his contract. For all those reasons, I am content to accept counsel for the council’s concession, and approach this case on the footing that the functions of the staff sub-committee were quasi-judicial.
So far as bias is concerned, I, like Sachs LJ, am satisfied that there was a real likelihood of bias in this case. I do not wish to add to the somewhat confusing welter of authority on what is meant by ‘bias’ in this connection by attempting any further definition myself, because I think that whichever of the tests adumbrated in Metropolitan Properties Co (FGC) Ltd v Lannon is properly to be applied in this case,
Page 698 of [1970] 2 All ER 690
the plaintiff had made out his allegation. I am much impressed by the fact that when the staff sub-committee sat down to consider what the plaintiff would regard as an appeal, the chairman was a member of the governors against whose decision this so-called appeal was being brought. I think that if it had been disclosed at the outset that no less a person than the chairman of the staff sub-committee was a member of the governors in question, the immediate reaction of everyone would have been that some real likelihood of bias existed. I say that with every respect to the distinguished gentleman who chaired the staff sub-committee on this occasion; but when one is used to working with other people in a group or on a committee, there must be a built-in tendency to support the decision of that committee, although one tries to fight against it, and this is so although the chairman was not sitting on the occasion when the decision complained about was reached. I therefore would find that the learned tried judge was right on both those points, namely, that the functions were quasi-judicial and that a real likelihood of bias existed. Accordingly, it seems to me that if the plaintiff had been minded promptly to move for mandamus, he might in theory at any rate have had an opportunity of having a rehearing of his complaint. I think in fact that such considerations are now academic, not only because over two years have expired since the decision complained of, but because the discretionary remedy of mandamus would not, I think, have been afforded to the plaintiff in this case when it is so abundantly clear, as Sachs LJ has demonstrated, that no committee of the council faced with this question could have reached a conclusion other than that which was reached in this case. I think that in those circumstances, if application for a mandamus had been made, it would have failed on the basis of its being a discretionary remedy unjustified in the circumstances; and the matter is a fortiori when one finds oneself in March 1970, with no action of this kind being taken.
The point at which, with diffidence, I differ from Sachs LJ is in his conclusion that the council are guilty of a breach of a contract with the plaintiff. The basis of Sachs LJ’s view, as I understand it, is that there was in this case initially a tripartite agreement between the governors, the council and the plaintiff, and that one of the terms of that tripartite agreement gave the plaintiff a right to a hearing on dismissal and, further, a right to an unbiased hearing. In considering whether there was or was not a contract of that kind, it is I think necessary to look once again, and rather closely, into the provisions which regulate the functions of the governors and the council in such a case as this. In the case of an aided voluntary school, s 17 of the Education Act 1944 provides that the Minister shall approve articles of government to be made in regard to the conduct of the school; and in s 24 of the 1944 Act provision is made whereby such articles of government shall make provision for the appointment of teachers, for the dismissal of teachers, and power is given to the council to require the dismissal of a teacher. Pursuant to those provisions, the articles of government, to which reference has already been made, were duly approved by the Minister in regard to St Bede’s Grammar School. The relevant parts of those articles are these: art 6 deals with assistant masters, it provides:
‘The appointment and dismissal of Assistant Masters shall conform to the following procedure:—(i) On the occurrence of a vacancy for an Assistant Master the Governors shall, if they think fit, advertise the post. The appointment, whether from the applications so received or otherwise, shall be made by the Governors to their service in consultation with the Head Master … [So we have it there clearly provided that it is the governors who make the appointment.] (ii) Appointments of Assistant Masters shall, subject to any provisions relating to retirement and except in the case of dismissal for misconduct or any other urgent cause, be determinable only upon two months’ notice in writing by either side taking effect at the end of a spring or autumn term, or upon three months’ notice in writing by either side taking effect at the end of a summer term: Provided that the Local Education Authority shall have power to require
Page 699 of [1970] 2 All ER 690
the dismissal of any Assistant Master and, except as otherwise provided in Section 28(2) of the Act, to prohibit the dismissal of an Assistant Master without the consent of the Authority. (iii) The procedure in connection with the termination of the employment, or the suspension, of Assistant Masters shall be the same as that hereinbefore specified for the Head Master, except that two meetings of the Governors shall not be required.’
When one turns back to art 5 (v) to see what are the conditions applicable to the headmaster, one finds:
‘Where a meeting of the Governors or of the Local Education Authority is held to consider the termination of the Head Master’s employment, the Head Master shall be entitled to appear, accompanied by a friend, at any such meeting: Provided that no such meeting of the Local Education Authority shall be held and no appearance shall be made by the Head Master at any such meeting, except in such circumstances and in accordance with such procedure as may be specified in the Regulations for the time being of the Local Education Authority.’
Against the background of those provisions, the learned trial judge found that the plaintiff was appointed by the governors, and that is unquestionably right. The plaintiff’s own evidence was that he was interviewed by the headmaster and hired by him. The judge found that the plaintiff was employed by the governors, and by the governors alone, namely, that no contract of employment existed between the plaintiff and the council. Indeed, that was a necessary and important finding, because, amongst other things, the plaintiff in this action had sought damages for wrongful dismissal from the council. The judge found—a finding against which there is no appeal—that the employment was with the governors only. So one asks oneself: at what point did the council come into the making of the contract for the original employment of the plaintiff? The only answer to that that I can find is that consequent on the proviso to art 5 (v), which I have read, the council has made regulations stipulating the circumstances in which a hearing shall take place. We have been referred to a document entitled ‘Conditions of Service of Teachers’, issued by the council. I confess that I have had difficulty in understanding the precise relevance of this document. It seems primarily to be concerned with laying down the terms of service of teachers in controlled schools where the appointment is made by the county council; but one thing is clear, namely, that under Part II, ‘Dismissal’, the provision for a hearing therein contained is to apply to masters of aided voluntary schools as well.
Accordingly, the terms of the plaintiff’s employment, as I understand it, are contained in the articles of government made by the Minister under the procedure which I have described, slightly embellished (if one may use the word) by the detailed provisions for a hearing contained in the council’s conditions of service for its teachers. I can find no trace of any contract between the plaintiff and the council at the time when his contract of service was made; and I think that the learned judge’s finding that the plaintiff was employed by the governors and the governors alone was a finding which excludes any possibility of a tripartite agreement bringing in the council and conferring on the plaintiff a right to a hearing by contract in the manner suggested.
Of course, that is not an end of the matter, because the learned judge found that there was another basis for a right in the plaintiff to have a hearing under a contract and, moreover, under a contract with the council. He did not support the view of an initial tripartite agreement to which the council was party, but found an ad hoc agreement constituted between the plaintiff and the council when the conditions for the hearing were being discussed. Like Sachs LJ, I find no substance at all in this suggestion that there was a separate agreement made between plaintiff and the council in regard to the conditions of the plaintiff’s particular hearing. The fundamental reason which, in my judgment, invalidates the county court judge’s view
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on this point is that, as I see it, the plaintiff’s right to a hearing was a right conferred by the articles of government. Those articles, as I have said, were made by the Minister under statutory powers, and I am inclined to think that they have the force of statute. I think that when this difficulty arose, the right which the plaintiff had to a hearing by the council was a right conferred under the those quasi-statutory provisions. If he had a right under those provisions to have a hearing of his complaint, then there is no room for any bargaining between himself and the council to create some new right which was unnecessary in the circumstances. I could understand the argument supporting some new contractual agreement for a hearing if the background had been that the plaintiff had no existing right to a hearing and was bargaining with the council for one to be provided. But I can see no ground at all for inferring any new contractual relationship when all that the plaintiff was doing was exercising the plain right to a hearing conferred on him by the articles of government.
It follows, in my judgment, that there was no contract, either initial or subsequent, between the plaintiff and the council entitling him to a hearing of any kind. It follows that his claim for damages for breach of that supposed contract was, in my view, to tally misconceived. I would allow this appeal and order that judgment be entered for the council.
CROSS LJ. I agree with the judgment given by Sachs LJ on all points except his view that the plaintiff was in contractual relations with the council. On that point I agree with the judgment of Widgery LJ.
I do not think that in this case there was a tripartite agreement. The contract of employment was, in my view, simply between the plaintiff and the governors. No doubt, by virtue of the Education Act 1944, and the articles of government made by the Minister under the powers given him by the Act, the plaintiff had the advantage that if his employment was determined by the governors, their decision could be nullified by the council, and the further advantage that when the council came to consider whether or not to nullify the decision of the governors, he was entitled, if he so chose, to be heard by the staff sub-committee. But those advantages, as I see it, do not arise out of any contract between him and the council. They flow from the contract between him and the governors by reason of the peculiar relations existing between the governors and the council under the Education Act 1944 and the articles of government.
I would just add a few words on the question of bias. To my mind, there really is little (if any) difference between the two tests which are propounded in the cases which have been cited to us. If a reasonable person who has no knowledge of the matter beyond knowledge of the relationship which subsists between some members of the tribunal and one of the parties would think that there might well be bias, then there is in his opinion a real likelihood of bias. Of course, someone else with inside knowledge of the characters of the members in question might say: ‘Although things don’t look very well, in fact there is no real likelihood of bias.' But that would be beside the point, because the question is not whether the tribunal will in fact be biased, but whether a reasonable man with no inside knowledge might well think that it might be biased.
I agree with Widgery LJ in thinking that this appeal should be allowed and the action dismissed.
Appeal allowed.
Solicitors: Wilkinson, Howlett & Durham agents for G C Moore, Bradford (for the council)
S A Hatteea Esq Barrister.
Hathaway v Hathaway
[1970] 2 All ER 701
Categories: FAMILY; Divorce
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P AND PARK J
Hearing Date(s): 29 APRIL 1970
Evidence – Admission – Adultery – Failure to deny adultery not constituting admission – Allegation of husband’s adultery investigated by inquiry agent – Husband cautioned by agent before being questioned – No denial of adultery by husband – Adverse inference not to be drawn from absence of denial.
An adverse inference is not, other than exceptionally, to be drawn against a spouse who, after being cautioned by an inquiry agent and asked to make a statement about his possible adultery, does not deny adultery (see j below, and p 702 b, post).
Notes
For evidence of adultery, see 12 Halsbury’s Laws (3rd Edn) 237–241, paras 446–452, and for cases on the subject of admissions of adultery, see 27 Digest (Repl) 323, 324, 2686–2693.
Appeal
This was an appeal by the wife, Dorothy Hathaway, from the decision of the Fareham justices, dated 8 December 1969, dismissing her proceedings for maintenance against the husband, Alfred Daniel Hathaway. The case is reported only with reference to whether an adverse inference ought to have been drawn from the refusal of the husband to deny adultery, after being cautioned by an inquiry agent. The facts are set out in the judgment of Sir Jocelyn Simon P.
Marjorie Gillespie for the wife.
The husband appeared in person.
29 April 1970. The following judgments were delivered.
SIR JOCELYN SIMON P. This is an appeal against the decision of the Fareham justices, dated 8 December 1969, dismissing a charge by the wife that the husband had committed adultery with a Miss Bowers at her house, 22 Burton Close, Park Gate, Hampshire, between 19 May and 5 November 1969. [His Lordship then outlined the history and nature of the proceedings and continued:] In May 1969 some information came to the wife about the husband’s association with Miss Bowers. Different stories were told to the justices about what happened in consequence. [His Lordship then reviewed the evidence relating to conversations between the husband and wife and continued:] On 4 October 1969, an inquiry agent, a Mr Elwood, instructed by the wife’s solicitors, visited the husband. The inquiry agent cautioned the husband and asked him if he was prepared to make a statement. The husband said that he was not going to make any statement and denied admitting to his wife that he had committed adultery with Miss Bowers. He did not deny spending every night at Miss Bowers’s house.
In the notice of appeal it is alleged that an adverse inference should be drawn against the husband because he did not deny adultery when he was asked about it by the inquiry agent. Undoubtedly a failure to deny a charge of adultery can be some evidence of adultery, if the failure to reply is made in such circumstances as would lead an ordinary reasonable person to expect a denial from an innocent man. But I do not think that that situation obtains when a caution is given; so to hold would really nullify the whole value of the caution. I know of no rule of law or practice which renders inadmissible an admission of adultery made to an inquiry agent unless a prior caution has been given; nor any rule of law or practice obliging
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an inquiry agent to give such a caution. Domestic proceedings are civil, not criminal; the situation is not analogous to that of a police officer in the circumstances covered by the Judge’s Rules. Nevertheless, as a matter of fairness, inquiry agents do habitually caution a person to be interviewed; and I desire to say nothing to discourage such a practice. But if an inquiry agent, or any other person, does state, ‘You need say nothing about this’, I cannot think that if the person who is being interviewed takes him at his word, and does say nothing, it would, other than exceptionally, be right to draw an inference adverse to that person.
[His Lordship then proceeded to consider alternative evidence, on which he held that the justices ought to have found that adultery had been proved.]
PARK J. I agree.
Appeal allowed. Case remitted on maintenance.
Solicitors: Gilmore, Tylee & Naylor agents for Brutton; Birkett & Walsh, Fareham (for the wife).
Alice Bloomfield Barrister.
Gray and another v Barr
(Prudential Assurance Co Ltd, third party)
[1970] 2 All ER 702
Categories: INSURANCE
Court: QUEEN’S BENCH DIVISION
Lord(s): GEOFFREY LANE J
Hearing Date(s): 27, 28, 29 APRIL, 1, 4, 5, 7, 8 MAY 1970
Insurance – Accident insurance – Liability to third parties – Extent of cover – Death resulting from deliberate and intentional assault and battery committed by insured – No intention to cause death – Whether death accidental – Public policy – Whether insured entitled to indemnity in respect of damages claimed by deceased’s estate.
The defendant and his wife lived near the deceased and his wife and family. In 1966, a liaison developed between the deceased and the defendant’s wife. In June 1967, the defendant, armed with a loaded shotgun, went to the house of the deceased where he mistakenly believed he would find his wife. He threatened the deceased, who was standing at the head of the stairs, with the gun and deliberately fired a shot into the ceiling to frighten him. The strong probability was that the deceased in self-defence grappled with the defendant which resulted in the defendant falling down the stairs and involuntarily firing the second barrel, thereby killing the deceased. The plaintiffs, who were respectively the father and the widow of the deceased and sued as administrators of the deceased’s estate, claimed damages against the defendant arising out of the deceased’s death which was caused by the defendant’s negligence. During the trial it was conceded on behalf of the defendant that he was liable to the plaintiffs in negligence. The third party had issued an insurance policy which indemnified the defendant against liability for ‘… all sums which [the defendant] shall become legally liable to pay as damages in respect of … bodily injury to any person … caused by accidents … ’ On the question whether the defendant was entitled to claim indemnity against his liability to the plaintiffs,
Held – (i) Since the second shot, which caused the death of the deceased, was neither intentionally aimed nor intentionally fired, however deliberate the actions which led up to it might have been, the death was accidental; although the word ‘accident’ might, according to the context, mean something done either without negligence
Page 703 of [1970] 2 All ER 702
or, alternatively, without intention, the latter meaning was in this case to be preferred, since otherwise the indemnity would have been practically useless (see p 709 g, post).
(ii) Nevertheless, as there was certainly a deliberate and intentional assault and probably also an unlawful battery committed by the defendant, which actions were an essential ingredient in the course of events leading to the death of the deceased, the court would not entertain the defendant’s claim against the third party for an indemnity, on the broad principle that no man should be allowed to profit at another’s expense from his own conscious and deliberate crime (see p 709 h, p 710 h and p 711 h, post).
In the Estate of Hall [1911–13] All ER Rep 381 and Beresford v Royal Insurance Co Ltd [1938] 2 All ER 602 applied.
Notes
For the meanings of accident in insurance policies, see 22 Halsbury’s Laws (3rd Edn) 293–297, paras 585–591, and for cases on the subject, see 29 Digest (Repl) 438–441, 3230–3251.
For public policy concerning criminal acts of the insured, see 22 Halsbury’s Laws (3rd Edn) 349, para 717.
Cases referred to in judgment
Askey v Golden Wine Co Ltd [1948] 2 All ER 35, 35 Digest (Repl) 64, 583.
Beresford v Royal Insurance Co Ltd [1938] 2 All ER 602, [1938] AC 586, 107 LJKB 464, 158 LT 459, 29 Digest (Repl) 397, 2995.
Candler v London & Lancashire Guarantee & Accident Co of Canada (1963) 40 DLR (2d) 408, [1963] OR 547, Digest (Cont Vol A) 943, *1240a.
Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147, [1891–94] All ER Rep 335, 61 LJQB 128, 66 LT 220, 56 JP 180, 48 Digest (Repl) 74, 535.
Crippen, In the Estate of [1911] P 108, [1911–13] All ER Rep 207, 80 LJP 47, 104 LT 224, 12 Digest (Repl) 273, 2099.
Daniels v Jones [1961] 3 All ER 24, [1961] 1 WLR 1103, Digest (Cont Vol A) 1205, 1163c.
Hall, In the Estate of, Hall v Knight and Baxter [1914] P 1, [1911–13] All ER Rep 381, 83 LJP 1, 109 LT 587, 58 Sol Jo 30, 48 Digest (Repl) 74, 537.
Hardy v Motor Insurers’ Bureau [1964] 2 All ER 742, [1964] 2 QB 745, [1964] 3 WLR 433, Digest (Cont Vol B) 462, 3703a.
Haseldine v Hosken [1933] 1 KB 822, [1933] All ER Rep 1, 102 LJKB 441, 148 LT 510, 29 Digest (Repl) 516, 3624.
James v British General Insurance Co Ltd [1927] 2 KB 311, [1927] All ER Rep 442, 96 LJKB 729, 137 LT 156, 29 Digest (Repl) 517, 3629.
Marles v Philip Trant & Sons Ltd (No 2) [1953] 1 All ER 651, [1954] 1 QB 29, [1953] 2 WLR 564, 2 Digest (Repl) 157, 1152.
R v Larkin [1943] 1 All ER 217, [1943] KB 174, 112 LJKB 163, 168 LT 298, 14 Digest (Repl) 331, 3221.
Taylor v O’Connor [1970] 1 All ER 365, [1970] 2 WLR 472.
Taylor v Taylor (Taylor intervening, Holmes cited) p 609, ante.
Tinline v White Cross Insurance Association Ltd [1921] 3 KB 327, 90 LJKB 1118, 125 LT 632, 29 Digest (Repl) 516, 3628.
Trim Joint District School Board of Management v Kelly [1914] AC 667, 83 LJPC 220, 111 LT 305, 34 Digest (Repl) 337, 2603.
Cases also cited
Blake v Bernard (1840) 9 C & P 626.
Fagan v Metropolitan Police Comr [1968] 3 All ER 442, [1969] 1 QB 439.
Hollington v Hewthorn & Co Ltd [1943] 2 All ER 35, [1943] 1 KB 587.
Hornal v Neuburger Products Ltd [1956] 3 All ER 970, [1957] 1 QB 247.
Mills v Smith [1963] 2 All ER 1078, [1964] 1 QB 30.
New Amsterdam Casualty Co v Jones (1943) 135 Fed Rep (2d) 191.
R v Church [1965] 2 All ER 72, [1966] 1 QB 59.
Page 704 of [1970] 2 All ER 702
R v Lipman [1969] 3 All ER 410, [1970] 1 QB 132.
R v St George (1840) 9 C & P 483.
Stephens v Myers (1830) 4 C & P 349.
Action
By a writ issued on 3 October 1968 the plaintiffs, George William Gray and Audrey Muriel Gray (widow), suing as the administrators of the estate of James Ian Gray deceased, claimed damages against the defendant George William Barr in respect of the deceased’s death as a result of an accident under the Fatal Accidents Acts 1846–1959 for the benefit of the dependants of the deceased, and under the Law Reform (Miscellaneous Provisions) Act 1934 for the benefit of the estate. The defendant, in third party proceedings, claimed against the third party, the Prudential Assurance Co Ltd, an indemnity in respect of any damages which he might be found liable to pay to the plaintiffs arising out of the death of the deceased. The facts are set out in the judgment.
M Stuart-Smith QC and D D H Sullivan for the plaintiffs.
Sir Peter Rawlinson QC and B H Anns for the defendant.
T Watkins QC and E A Machin for the third party.
8 May 1970. The following judgment was delivered.
GEOFFREY LANE J. The plaintiffs in this action, George William Gray and Audrey Muriel Gray, respectively being the father of the deceased and his widow, suing as administrators of the estate of James Ian Gray deceased, claim damages from the defendant, George William Barr, under the Law Reform (Miscellaneous Provisions) Act 1934 and the Fatal Accidents Acts 1846–1959, arising out of the death of James Ian Gray. They claim that that death was caused by the negligence of the defendant. The defendant, in his turn, by third party proceedings, claims from the Prudential Assurance Co Ltd, the third party, an indemnity in respect of any damages which he may be found liable to pay to the plaintiffs. That indemnity, it is said, arises under the terms of a hearth and home policy dated 12 October 1956, taken out by the defendant’s wife, which by its terms admittedly covered the defendant as insured against:
‘… all sums which [the defendant] shall become legally liable to pay as damages in respect of … bodily injury to any person … caused by accidents happening during the period of insurance within Great Britain.’
The circumstances giving rise to this action are as follows. The deceased lived with his wife, the second plaintiff, and his family, two children, a girl and a boy, at Farleigh Court Farm in Surrey. The defendant and his wife and his family, in about 1965, moved to a house a short distance away. The two families became friendly, they visited each other as one would expect, but within a comparatively short time, and certainly by about the middle of 1966, a liaison had sprung up between the deceased on the one hand, and the defendant’s wife on the other, which seriously threatened the stability of both those marriages.
The deceased, in July 1966, went to New Zealand. He went without any warning to the second plaintiff, or to the first plaintiff, his father, who was farming near Newport in Shropshire, and it is plain that whilst he was there, or possibly before he went, he had endeavoured to persuade the defendant’s wife to join him in New Zealand. He had, in fact, given or lent her some £260 to cover the cost of her air fare to New Zealand. She did not join him there and partly by reason of diplomatic pressures put on him by the first plaintiff, into which there is no need for me to delve, the deceased was persuaded to return to this country in October 1966. But the affair continued. In the spring of 1967, the deceased and the defendant’s wife went for a short time to Scotland together for a holiday. There they committed adultery as very probably they had done on previous occasions.
Page 705 of [1970] 2 All ER 702
When the defendant’s wife returned from Scotland she went for a time to stay with her mother at Croydon, some four miles away from her home. Eventually however, she was persuaded by the defendant to return home. Plainly, the situation between the defendant and his wife must have been fraught with difficulty. On 13 June 1967, according to the defendant, he and his wife had a long, earnest discussion about the matrimonial situation which existed between the two of them. That discussion was followed by, or continued through, dinner which they had together at a country club on the way back from London where they had been. The defendant’s wife, during the evening, apparently agreed, though not without some difficulty, to settle down with the defendant and to forget the deceased. It was, said the defendant, in the upshot and towards the end of it, at any rate, a happy evening. He and his wife walked from the car to their house hand in hand. However, soon after they got into the house, when he looked for his wife she had disappeared. Both he and his secretary, who was also his cousin, a Miss Milburn, searched the house for his wife but could not find her. The defendant took out his motor car. He searched on the road to Croydon, thinking perhaps that his wife was bent on walking to her mother’s. He drove to the gates of Farleigh Court Farm to see if he could see any lights on there which might provide him with a clue, but he saw nothing.
Events thereafter were described to the court by the defendant himself. He was, he said, in a highly emotional and very distressed state. ‘Distracted’ was the word he used. He came to the conclusion that there was only one solution to this disappearance of his wife, and that was that she must have gone to Farleigh Court Farm to join the deceased and to resume her liaison, despite what had been said between the two of them earlier that evening. This then was what he did. He went to the dining room of his own house. He there picked up a double barrelled shotgun, which ironically had been sold to him earlier by the deceased. He also picked up a handful of cartridges, some of which he put in his pocket, but two of which he inserted in the breach of the gun. He said that he knew nothing about the safety catch, whether it engaged safe on opening the breach as it was designed by the manufacturers to do; indeed, whether it worked at all or not. Miss Milburn, he conceded, told him not to take the gun. But he disregarded that sound advice because, he said, he wished to frighten the deceased.
At Farleigh Court Farm the front door was not locked. He left his motor car, be it noted with the engine running; the engine was found running still by the police when they came on the scene. Having left his motor car he walked in. As he entered, the deceased was at the top of the first flight of stairs on the little landing, which is shown both on the plan and in the photographs which are before me. And as he entered, or to be more accurate, after he entered, he was invited to come in by the deceased, who at that time obviously had not realised that the defendant was carrying a gun. The deceased at the top of the stairs had his arms outstretched, one on each side of his body resting against the wall on either side of the top of the stairs. The defendant asked if his wife was there and the deceased said: ‘No’. This was true. The defendant’s wife, it was later discovered, was at that time in a copse a short distance away from her own home, and had there attempted to take her own life.
The defendant walked up the stairs of this house, towards the deceased, holding the gun in front of him across his body, in what has been called the high port position, the muzzle being up to the left and the butt being down to the right at an angle of about 40 degrees across his body. He told the deceased that he was going to see for himself whether his wife was there. The deceased backed away across the landing and told him to put the gun down and to get out. At that point, said the defendant, he with one hand swung the muzzle of the gun back over his left shoulder telling the deceased to get out of the way, and plainly reinforcing that order with a threat to hit the deceased with the muzzle of the gun. This, incidentally, is confirmed by what the defendant told a Mr Harris, who was and is a claims inspector for the local
Page 706 of [1970] 2 All ER 702
office of the third party, when Mr Harris was making preliminary enquiries about this insurance claim in the summer of 1968, after the claim had first been intimated, and after the criminal trial had taken place. The defendant went on to say that the muzzle of the shotgun hit the horizontal beam at the head of the stairs with the result, he said, that the neck of the butt broke in his hand; one barrel fired by mistake into the ceiling; he was forced off balance by the recoil; he fell down the stairs and the other barrel accidentally discharged, without any pressure from him on the trigger, hitting the deceased in the front of the body. The deceased he said, immediately staggered down the stairs, clutching his stomach and collapsed dying in the hall. The defendant threw the gun to a point by the telephone cubicle downstairs, a position again illustrated in the plan and photographs, and rang for the police and ambulance, waiting there until the arrival of the police shortly afterwards. He did what he could for deceased, knelt over him, and indeed, became to some extent covered in the deceased’s blood in the process, but it was plain that the deceased was beyond the assistance of ambulance men or doctors.
The defendant was, in due course, tried at the Central Criminal Court on a charge of murder. He was acquitted by the jury, not only of murder, but also of the alternative offence of manslaughter. It is evident, and indeed, it is not now disputed, that on his own account he is liable to the plaintiffs in negligence for the death of the deceased. He broke almost every rule there is as to the safe handling of guns. Any reasonable man would have foreseen, and the defendant doubtless did foresee, that what he was doing was likely to cause injury to the deceased. He is accordingly liable to the plaintiffs in damages.
The next question is whether the third party is liable to indemnify the defendant in respect of those damages under the terms of the policy. There are two aspects to this problem. First of all, can this injury to the deceased properly be aid to have been caused by accident? And secondly, if it can, do the dictates of public policy allow a man to benefit from the terms of an indemnity policy such as this in the circumstances? Each of these questions depends to some extent on the determination of precisely what it was that the defendant did at Farleigh Court that night. His own account is demonstrably unreliable, whether that is due to amnesia caused by shock of the events, as was conceded to be possible by the pathologist, Dr Cameron, who gave evidence before me, or through a deliberate wish to mislead. To take two examples only: it was possible by examining damage done to a conduit pipe in the roof to ascertain the precise direction of travel of the shot, almost certainly the first shot, which hit and went through the plaster of the ceiling at the top of the stairs. Mr McCafferty, an expert on firearms, had had the opportunity of making certain calculations about the passage of that shot and the angle which made it possible to see the precise direction from which the shot had come. Furthermore, the size of the entry hole in the ceiling made it possible to calculate the distance which the muzzle of the gun must have been from that hole when the shot was actually discharged. Couple those two facts with the known length of the gun from muzzle to the heel of the butt and one is left with the heel of the butt in about the right-hand corner of the first step down from the landing at the top of the stairs at the moment the shot was fired. Maybe it was on the top step; maybe it was one step down. Mr McCafferty was not certain. But whichever it was, that is totally inconsistent with the defendant’s version, which would place the gun on the opposite side of the staircase altogether at the moment of discharge. Furthermore, the defendant’s account of how the deceased came down the stairs clutching his wounds, immediately after the second and fatal shot, is plainly wrong. Blood stains in the bedroom, illustrated plainly in the photographs before me, show that after the deceased had been shot he made his way to that bedroom; must have fallen on the floor with one hand extended palm downwards, because there is his right hand print on the carpet, visible in blood on the photograph; must have knelt down by the bed, because on the corner of the sheet of the bed is a pool of blood which must
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have come from his chest, and all those things he must have done before he made his way down the stairs to die.
There is some support for the defendant’s account of the muzzle hitting or touching the beam and the stucco by the side of the staircase because, on an examination of the tip of the muzzle of the gun in the area of the pin sight, Mr McCafferty found traces of cream paint and varnish which were too slight to analyse, and also there was found, at a point on the top left-hand side of the stairs, an indentation in the woodwork and an adjacent scrape in the cream stucco paint which could very well have been caused by the muzzle of the gun coming into contact, first with the varnished wood, and, secondly, with the wall. Such a blow would not be enough to break the stock of the gun at the neck. That the stock of the gun was broken, there is no doubt at all, because when the police arrived the gun was lying where it had been thrown by the telephone cubicle, with the neck of the stock broken in half, and the two halves held together solely by the metal trigger guard which was attached, of course, one end to one part and one end to the other. Very considerable force would be required to produce such a fracture. That much was agreed between Mr McCafferty and a Mr Pearce, a gunsmith called on behalf of the defendant. Likewise, it would require a considerable blow to the weapon to cause that weapon to discharge without the trigger being pressed. One must, therefore, look elsewhere for clues as to what really happened.
There were given in evidence the statements, both oral and written, said to have been made by the defendant to the police. To Pc Ferriman, who spent most of that night in the company of the defendant, he said, according to Pc Ferriman, ‘I fired a shot into the ceiling to frighten him’. Although Pc Ferriman only made up his notebook some days later, I believe that that was said to him by the defendant, and furthermore that it is true. This was the first occasion when Pc Ferriman had been faced with the task of sitting with a man who had already been, or was about to be, charged with the crime of murder, and I have no doubt at all that everything that was said to him was firmly printed on Pc Ferriman’s mind. In his written statement to the police, the defendant said, and agrees he said, these words, ‘I walked up to the top of the stairs and we got together. I had the gun like that, and it went off in the ceiling’. On the defendant’s own version of the facts, coupled with what he said to Mr Harris, the third party’s agent, there was, without any doubt, an assault on the deceased. He said, in terms, that he was not going to be prevented from entering the bedroom; that he was determined to get by the deceased, as the deceased stood at the head of the stairs; that he swung the gun back in one hand telling the deceased to get out of the way, and intending by that gesture to ensure that he did. This was a classic case of assault. He threatened violence with the intention and the effect of frightening the deceased. Moreover, again on his own story, everything else followed from that initial action on his part.
Despite the verdict of the jury at the Central Criminal Court, to which I pay proper regard, as I am enjoined to do by the judgment of the Court of Appeal in the recent case of Taylor v Taylor (Taylor intervening, Holmes cited) (Page 609, ante), it is, in my judgment, an inescapable conclusion that this death was the outcome of an unlawful assault involving a threat of violence by the defendant, a threat which the defendant must have realised was likely to result in some injury to the deceased. This was, accordingly, on the authority of R v Larkin ([1943] 1 All ER 217 at 219), manslaughter. Let me read from the judgment of Humphreys J as follows ([1943] 1 All ER 217 at 219):
‘If a person is engaged in doing a lawful act, and in the course of doing that lawful act behaves so negligently as to cause the death of some other person, then it is for the jury to say, upon a consideration of the whole of the facts of the case, whether the negligence proved against the accused person amounts to manslaughter, and it is the duty of the presiding judge to tell them that it will
Page 708 of [1970] 2 All ER 702
not amount to manslaughter unless the negligence is of a very high degree; the expression most commonly used is unless it shows the accused to have been reckless as to the consequences of the act. That is where the act is lawful. Where the act which a person is engaged in performing is unlawful, then, if at the same time it is a dangerous act, that is, an act which is likely to injure another person, and quite inadvertently he causes the death of that other person by that act, then he is guilty of manslaughter.’
It is, I need hardly say, a conclusion which one reaches with reluctance in the light of the outcome of the criminal trial, but, putting aside all sympathy and taking the facts at their most favourable to the defendant, there is no other proper answer on the evidence before this court, whatever the standard of proof is that one applies.
The strong probability is that after the defendant had intentionally fired the first shot into the ceiling, the deceased, to protect himself as he no doubt thought from death, grappled with the defendant, the defendant fell down the stairs, scraping the muzzle of the gun against the woodwork and the stucco, breaking the stock of the gun as he fell, and involuntarily firing the second barrel at the same time. I am reinforced in that view by certain allegations which were made in the defence in this case. Contributory negligence on the part of the deceased was abandoned as an issue at the outset of this hearing, but it had been alleged in the defence that the deceased attacked and/or struggled with the defendant well knowing that the defendant had a loaded gun in his hand. That allegation must have been made as the result of some information from the defendant himself, and it certainly fits in with the probabilities. On that version of the facts, the firing of the gun into the ceiling was a threat of violence to the deceased, intended to frighten and in fact frightening him so that he endeavoured to protect himself by struggling with the defendant, forcing him down the stairs with fatal results for himself. On this version the killing would similarly be manslaughter. I also have no doubt that the defendant was guilty of gross negligence in the sense set out by Humphreys J in R v Larkin ([1943] 1 All ER at 219). He acted with a reckless disregard for the safety of the deceased. Indeed, in the circumstances, one would scarcely expect the defendant to be solicitous of the deceased’s welfare, and he was not. It is true that the automatic safety catch on this weapon, designed to go on when the breach lever is operated, so that the breach can be opened, was found to be unserviceable when the gun was later examined. However, even on the assumption that that safety catch was broken before the shooting, which is very doubtful indeed, the defendant knew enough about small arms from his service in the armed forces to appreciate the importance of the safety catch. He could have applied it manually had he wished, but he did not. In these circumstances carrying a loaded shotgun into the house in his distracted and emotional state, and approaching the deceased with it as he did, was obviously courting the very type of disaster which in fact occurred.
Has it then been proved that the bodily injury and death of the deceased were caused by accident? It is submitted on behalf of the third party that once a chain of events is deliberately set in motion and carried out in circumstances of danger resulting in death, then that death is not caused by accident, although unintended, if it is a natural and probable consequence of the train of events. That proposition is suggested by a Canadian decision, Candler v London & Lancashire Guarantee & Accident Co of Canada, in a judgment of Grant J. That case involved the construction of an insurance policy covering death ‘… resulting directly and independently of all other causes from bodily injuries caused solely by accidental means’. The defendant insurers denied liability on the grounds that death did not so result and they further relied on a clause excluding their liability where the death was caused directly or indirectly by intoxicants. It will be seen how far the wording of the policy in that case differed from the present. In giving judgment for the insurers on both
Page 709 of [1970] 2 All ER 702
their contentions, the learned judge cited with approval a passage from Couch on Insurancea which states:
‘An “accident” within the meaning of policies of accident insurance, may be anything that begins to be, that happens, or that is a result which is not anticipated and is unforeseen and unexpected by the person injured or affected thereby—that is, takes place without the insured’s foresight or expectation and without design or intentional causation on his part. In other words, an accident is an undersigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.’
No doubt the definition of ‘accident’ in that passage was appropriate to the terms of the policy which Grant J was there considering. It is, however, a word with more than one interpretation. I was referred to the case, decided in the House of Lords in 1914, the Trim Joint District School Board of Management v Kelly. That was the well-known case where a master, at what was then called an industrial school, was set upon and killed by pupils, and his representatives claimed that that death was met by the master by accident arising out of and in the course of his employment in the words of the old Workmen’s Compensation Acts. I do not find the definitions of ‘accident’ contained in that case to be of very great help in the present, because there the decision of ‘accident’ or ‘no accident’ had to be made from the stand-point of the victim, namely, the master, whereas here it is the opposite. Earl Loreburn set out the difficulties which face a court in the interpretation of this word ‘accident’ as follows ([1914] AC at 681):
‘Now, there is no single rigid meaning in the common use of the word. Mankind have taken the liberty of using it, as they use so many other words, not in any exact sense but in a somewhat confused way, or rather in a variety of ways … In short, the common meaning of this word is ruled neither by logic nor by etymology, but by custom, and no formula will precisely express its usage for all cases.’
It seems to me that ‘accident’ may, according to the context, mean something either done without negligence on the one hand, or, on the other hand, something done without intention. In the context of the Policy in he present case it is the latter meaning which must be preferred, or otherwise, by the nature of things, the indemnity would be practically valueless. Was the injury, the shot in the chest, accidental in the sense of not intended? The answer on the facts proved is, in my judgment, ‘Yes’ however deliberate the actions which led up to it may have been. It was the second shot which caused death and the second shot was neither intentionally aimed nor was it intentionally fired.
It remains, then, to consider the further question of public policy. This doctrine is no easier to define than the meaning of the word ‘accident’. The board principle is the obvious one, that no man should be allowed to profit at another person’s expense from his own conscious and deliberate crime. Thus the murderer in In the Estate of Crippen and the felonious suicide in Beresford v Royal Insurance Co Ltd, or those claiming through them, have had their claims defeated on the grounds that it would be contrary to public policy to assist a personal representative to recover what were in fact the fruits of the crime committed by the assured person. In principle, the law first of all aims to deter the intending criminal by ensuring that no one shall indemnify him against loss he may incur as a result of his crime. It is
Page 710 of [1970] 2 All ER 702
true that in cases where the eventual injury is unintended the deterrent effect may be slight, but the principle remains. Secondly, it is no part of the court’s function to assist those who do commit deliberate crime to recover money to which they can lay claim only by proving the commission of that crime. On the other hand, it was held in Tinline v White Cross Insurance Association Ltd, that a man who pleaded guilty to a charge of manslaughter arising for the negligent driving of a motor car was entitled to enforce an indemnity against the defendants who had insured him in respect of accidental injury. That was a decision of Bailhanche J, and it was followed in 1927 by Roche J in James v British General Insurance Co Ltd (). In each of those cases it was made clear that if the occurrence had been due to an intentional criminal act on the part of the assured, the policy would not have protected him. These two decisions the subject of some criticism by Scrutton and Greer LJJ in Haseldine v Hosken. Greer LJ said ([1933] 1 KB at 838, [1933] All ER Rep at 8):
‘I agree with what Scrutton L.J. has said in reference to the two decisions in Tinline v. White Cross Insurance Association Ltd. and James v. British General Insurance Co. Ltd. I find it a little difficult to distinguish those cases from the present, but I do not wish a say anything to preclude their full consideration in a case which arises on facts similar to those in the two decisions mentioned. I can conceive it as desirable to draw a distinction between the class of case where the act to be indemnified by the policy is one intended by the law that people should insure against, and an act which is not the intentional doing of something against the law, but an act which by accident results in the death of some one, and which would only have been actionable civilly if the accident had not resulted in the death of the unfortunate person injured. There may be good reasons for distinguishing that class of case from the present case … ’
But the decisions in Tinline and James were expressly approved by Denning LJ in 1954 in Marles v Philip Trant & Sons Ltd (No 2) ([1953] 1 All ER 651 at 659, [1954] 1 QB 29 at 39, 40). If the decisions in Tinline and James are right, then certainly so far as manslaughter on the road by gross negligence is concerned, public policy does not prevent the enforcement of an indemnity. This may be on the grounds that the act to be indemnified in those cases was one intended by the law that people should insure against, in the words of Greer LJ already cited. That view was also held by Denning LJ in 1948 in Askey v Golden Wine Co Ltd ([1948] 2 All ER 35 at 39).
However, to confine the operation of public policy to cases where there was an actual intent to kill would be to exclude many cases of actual murder, ie those cases where the killing was done with intent to do grievous bodily harm, but not to kill. It would further include some cases of manslaughter, for example manslaughter where the killing was done intentionally but under the stress of provocation, or killing in pursuance of a suicide pact. The logical test, in my judgment, is whether the person seeking the indemnity was guilty of deliberate, intentional and unlawful violence or threats of violence. If he was, and death resulted therefrom, then, however unintended the final death of the victim may have been, the court should not entertain a claim for indemnity. This view is supported by the decision in In the Estate of Hall, Hall v Knight and Baxter. The court in that case was asked to decide whether a person guilty of manslaughter could take any benefit under the deceased
Page 711 of [1970] 2 All ER 702
person’s will. The precise facts of the killing do not emerge from the report, but Lord Cozens-Hardy MR had no doubt about the answer. He had no difficulty in deciding that public policy prevented such a result. He felt himself bound by the earlier decision in Cleaver v Mutual Reserve Fund Life Association. What he said was this ([1914] P at 6, 7, [1911–13] All ER Rep at 383):
‘“It is clear that the law is, that no person can obtain, or enforce, any rights resulting to him from his own crime; neither can his representative, claiming under him, obtain or enforce any such rights. The human mind revolts at the very idea that any other doctrine could be possible in our system of jurisprudence“.’
That was a quotation from Crippen’s case ([1911] P at 112, [1911–13] All ER Rep at 209) and Lord Cozens-Hardy MR continued ([1914] P at 6, 7, [1911–13] All ER Rep at 383):
‘I think it would be shocking if Jean Baxter, who was the cause of the death of this man, and was convicted of felony in respect of that, could come before the Court and claim an interest under any will made in her favour by the testator … ’
In Hardy v Motor Insurers’ Bureau the Court of Appeal considered a similar problem arising from the question whether s 203(3)(a) of the Road Traffic Act 1960 required a policy of insurance covering liability to a third party arising from an intentional criminal use of the vehicle on the road. In the course of his judgment Lord Denning MR said ([1964] 2 All ER at 746, [1964] 2 QB at 760):
‘If Phillips [that was the driver in the case] had taken out a policy of insurance in those terms, and had afterwards been guilty of murder by deliberately running down a police officer or, as here, had been guilty of maliciously causing grievous bodily harm with intent, what would the legal position be? Assume that he had been convicted of the felony and had been afterwards made to pay damages to the widow or to the person injured, could he have claimed indemnity under the policy? Clearly not, for the good and sufficient reason that no person can claim reparation or indemnity for the consequences of a criminal offence where his own wicked and deliberate intent is an essential ingredient in it … ’
and he cited Beresford v Royal Insurance Co Ltd, to which I have already referred. He went on ([1964] 2 All ER at 746, [1964] 2 QB at 760):
‘This rule is not restead on an implied exception in the policy of insurance. It is based on the broad rule of public policy that no person can claim indemnity or reparation for his own wilful and culpable crime. He is under a disability precluding him from imposing a claim.’
In the present case there was certainly a deliberate and intentional assault and probably also an unlawful battery committed by the defendant. The death of the deceased resulted from those action which were an essential ingredient in the course of events leading to the death and the defendant, therefore, is not entitled to the indemnity which he seeks from the third party.
Page 712 of [1970] 2 All ER 702
‘It was urged by counsel for the defendant that public policy should be applied not on any broad ground of principle, but according to the view taken by the court of the degree of culpability or wickedness of the claimant in any particular case. It was submitted, further, that in the present case the defendant’s actions, even on the assumption that they were criminal, were understandable and venial. I do not accede to either to those propositions. As to the former, however difficult it may be, nevertheless one must attempt to find some principle on which public policy can be based, and as to the latter, a husband who arms himself with a loaded shotgun, however outraged he may be, in order to search for his errant wife, is not easily to be forgiven. It was further suggested that the law intends that people should insure themselves against this type of occurrence, somewhat on the principle of the motor vehicle, as mentioned by Greer LJ in James’s case, that the shotgun, it was suggested, has now reached the status of the motor car in Tinline’s case, and that accordingly this indemnity should be enforced on a parity of reasoning with the motor manslaughter cases. That submission might be more attractive were this a case of death caused merely by negligence, however gross, but I do not consider that for this purpose the shotgun can yet be equated with the motor car.
The defendant must accordingly pay by way of damages the amount which the second plaintiff and children have lost through the death of the deceased.
[His Lordship then assessed damagesb payable to the plaintiffs in the sum of £6,115 12s 6d.]
Judgment for the plaintiff £6,115 12s 6d (apportioned as to £5,600 under the Fatal Accidents Acts 1846–1959 and as to £515 12s 6d under the Law Reform (Miscellaneous Provisions) Act 1934). Judgment for the third party.
Solicitors: Kenneth Brown, Baker, Baker (for the plaintiffs); Kingsley Napley & Co (for the defendant); C A Rutland (for the third party).
Janet Harding Barrister.
Leary v National Union of Vehicle Builders
[1970] 2 All ER 713
Categories: ADMINISTRATIVE: EMPLOYMENT; Industrial relations
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 11, 12, 13, 16, 17 FEBRUARY, 12, 20 MARCH 1970
Natural justice – Domestic tribunal – Deficiency of natural justice before trial tribunal – Curability – Sufficiency of natural justice in subsequent proceedings – Expulsion from trade union.
Meeting – Presence of non-member – Participation – Validity of decision reached by meeting.
Trade union – Elected officer – Dismissal – Restoration of officer pending trial – Interlocutory injunction.
The plaintiff had been a member of the defendant union for many years. For some 14 years had had been a full-time area organiser of the union, ie an official elected by members of the branches in his area and under the control of the national executive committee (NEC) of the union and the general secretary. The rules of the union contained a provision that if any member was in arrears of contributions for more than six months he might be excluded at the discretion of the branch committee (r 26(2)). At a meeting of the relevant branch (of which the plaintiff had not been given notice and which he did not attend) it was decided that he should be excluded on the allegation that he was six months in arrears with his contributions. A meeting of the branch committee (of which the plaintiff was given no notice and which he did not attend) was held shortly afterwards. There was conflicting evidence (at a later date) whether notice of the meeting had been received by two of the members of the committee. Another member of the committee who was indisposed purported to appoint W (who was not a member of the committee) to represent him at the meeting. W attended the meeting and, according to the minutes, a proposal was put to the meeting by W that the branch committee endorse the decision of the branch meeting to exclude the plaintiff from membership of the union. The proposal was accepted. The general purposes committee of the NEC held a meeting with the relevant branch officials and a second meeting attended by the plaintiff at which he was given an opportunity to answer the charge made against him and at which he claimed that he was not in arrears. The meeting was inconclusive. The NEC was empowered by r 2 (13) of the union rules to act in ‘all matters not herein provided for and pertaining to the general interest of the Union’ and its decision was stated to be binding. Under that power the NEC held an enquiry at which the plaintiff was present and he was invited to add or to clarify what he had said to the general purposes committee. At the conclusion of its inquiry the NEC decided to endorse the exclusion of the plaintiff but it granted permission for the plaintiff to lodge an appeal against its decision to the union’s appeals council (expressing its permission to be granted in accordance with r 2 (13)). The appeals council was empowered by r 6(1) of the union rules to ‘meet to adjudicate on any difference appertaining to the rules of the Union between the NEC and any branch or member’. The plaintiff presented his own case before the appeals council and his appeal was dismissed. The plaintiff thereupon sought declarations and an injunction. It was conceded that the decision of the branch meeting was insupportable as the branch had no jurisdiction to decide the points, and that the decision of the branch committee had been reached without regard to the requirements of natural justice. On the question whether the sufficiency of natural justice in the subsequent proceedings cured the deficiency before the branch committee (in which the discretion to exclude from membership on the grounds alleged resided),
Page 714 of [1970] 2 All ER 713
Held – (1) The only body with power to expel the plaintiff for being in arrears with his contributions was the branch committee, and the admitted deficiency of natural justice before that body had not been cured by the hearings before the NEC or the appeals council, because—
(a) a lack of natural justice before the trial body generally could not be cured by a sufficiency of natural justice before an appellate body (see p 720 c, post); and
(b) the NEC and the appeals council were probably in fact not exercising appellate functions (see p 720 j to p 721 a, post).
(2) Accordingly, the decision of the branch committee to expel the plaintiff was void and had not been validated or replaced by any valid decision (see p 723 f, post).
Denton v Auckland City [1969] NZLR 256 applied.
De Verteuil v Knaggs [1918] AC 557, Ridge v Baldwin [1963] 2 All ER 66 and King v University of Saskatchewan [1969] SCR 678, distinguished.
Per Megarry J. (i) If there is a defect of natural justice the proper course is for the body to which the jurisdiction is confided to rehear the matter de novo, rather than treat any further hearing as an appeal or, a fortiori, let the matter be consigned to some appellate tribunal or other body (see p 719 g, post).
(ii) Although a decision at a committee meeting is not invalidated by the mere presence of a person who is not a member of the committee, the decision is void if such a person participates in the deliberations and decisions of the committee; accordingly, the decision of the branch committee to expel the plaintiff was void on this ground also (see p 724 c to e and p 724 j to p 725 a, post).
Lane v Norman (1891) 66 LT 83 applied.
Quaere. Whether a committee meeting is invalidated if notice of the meeting is despatched to a member of the committee but not received (see p 723 h, post).
(iii) Even if an officer of a trade union who has been dismissed was an elected officer, if in his office he was responsible not merely to the members of his union but to committees or officers of the union, the court should be slow to grant him an interlocutory injunction which would in effect restore him to office pending the trial (see p 727 c, post).
Notes
For rules of natural justice, see 30 Halsbury’s Laws (3rd Edn) 718, 719, paras 1368, 1369, and for cases on the subject, see 38 Digest (Repl) 102, 103, 731–736.
Cases referred to in judgment
Annamunthodo v Oilfield Workers’ Trade Union [1961] 3 All ER 621, [1961] AC 945, [1961] 3 WLR 650, 45 Digest (Repl) 542, 1223.
Denton v Auckland City [1969] NZLR 256.
De Verteuil v Knaggs [1918] AC 557, 87 LJPC 128, 8 Digest (Repl) 691, 38.
Durayappah v Fernando [1967] 2 All ER 152, [1967] 2 AC 337, [1967] 3 WLR 289., Digest Supp.
King v University of Saskatchewan [1969] SCR 678, 6 DLR (3d) 120; affg (1969) 1 DLR (3d) 721, 67 WWR 126.
Lane v Norman (1891) 66 LT 83, 61 LJCH 149, 40 WR 268, 28 Digest (Repl) 920, 1539.
Lewis v National Union of General and Municipal Workers (1948) The Times, 31 July.
Posluns v Toronto Stock Exchange and Gardiner (1964) 46 DLR (2d) 210, [1964] 2 OR 547; on appeal CA (1965) 53 DLR (2d) 193, [1966] 1 OR 285; affd SCC [1968] SCR 330, 67 DLR (2d) 165, Digest (Cont Vol B) 665, *14a.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, [1963] 2 WLR 935, 127 JP 295, 37 Digest (Repl) 195, 32.
Shanks v Plumbing Trades Union (15 November 1967) unreported.
Tanner v National Union of Seamen (1928) The Times, 30 November.
Taylor v National Union of Seamen [1967] 1 All ER 767, [1967] 1 WLR 532., Digest Supp.
Young v Ladies’ Imperial Club Ltd [1920] 2 KB 523, [1920] All ER Rep 223, 89 LJKB 563, 123 LT 191, 8 Digest (Repl) 655, 319.
Page 715 of [1970] 2 All ER 713
Motion
By notice of motion dated 27 November 1969 the plaintiff, Arthur Leary, moved for an injunction against the National Union of Vehicle Builders under the heads set out at e and f, below. The facts are set out in the judgment.
D J Turner-Samuels for the plaintiff.
Peter Pain QC and S J Waldman for the union.
Cur adv vult
20 March 1970. The following judgment was delivered.
MEGARRY J read the following judgment. I have before me a motion brought by the plaintiff against the defendant, the National Union of Vehicle Builders, which I shall call ‘the union’. For many years prior to the events of 1969 the plaintiff had been a member of the union, and also one of the 15 full-time area organisers of the union. Latterly his branch in the union had been the Luton no 10 branch, and his work as an area organiser was centred on Luton.
It is common ground that as a result of certain decisions made by bodies in the union in 1969 the union has purported to expel the plaintiff, and that there has been a purported termination of his office or employment as organiser. The plaintiff contends that these steps were void, and by his writ and statement of claim he seeks certain declarations to that effect, and an injunction to restrain the union from acting on the decisions. What is before me is a notice of motion dated 27 November 1969, claiming an injunction under two heads. The first is to restrain the union—
‘… from acting on the purported exclusion of the Plaintiff from the defendant union by a decision of their Luton No. 10 branch made on 13th January, 1969 or by a decision of their Luton No. 10 branch committee made on or about 15th January, 1969 or by a decision of their National Executive Committee made on or about 12th April, 1969 or by a decision of their Appeals Council made on or about 18th July, 1969 … ’
The second injunction claimed is to restrain the union—
‘… from acting on the decision of their National Executive Committee made on or about 18th August, 1969, purporting to dismiss the Plaintiff from his office as Area Organiser of the Defendants.’
I must accordingly examine the evidence and contentions before me relating, first, to expulsion, and second, to exclusion from office.
The question of expulsion stems from r 26(2) of the union’s rules. This provides: ‘Members six months’ contributions in arrears shall be excluded at the discretion of the branch committee.' What is said against the plaintiff is that he, an area organiser, was in breach of this rule, and that he was accordingly rightly expelled. Five separate bodies of the union took part in he five successive stages under this head; and I shall take them in turn, merely saying that the third and fourth stages may perhaps be more properly regarded as forming two parts of the same stage.
First, on 13 January 19698 there was a branch meeting of the Luton no 10 branch. The plaintiff was not there and had had no notice that his delay in paying contributions was to be discussed. The relevant part of the minutes of that meeting reads as follows:
‘Other Business: Branch Sec informed Branch that all Collectors are being required to hand to him a list of any members being in arrears with contributions. Bro. Morgans then informed Branch that one of his members was in a arrears a Bro. A. Leary [the plaintiff]. [The plaintiff’s] position was fully discussed by members, the Branch was informed by Bros. Watts, Jackman, and Morgans, of efforts made to remind [the plaintiff] of these arrears, without success, after further discussions the Branch decided to act in accordance with Rule 26, Sec 2. This was carried with Two against. N.E.C. to be informed of decision.’
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The expression ‘N.E.C.’ refers to the national executive committee of the union. It will be observed that under R 26(2) the discretion to be exercised is that of the branch committee, and not that of the branch itself. What action the branch thought that it was taking under r 26(2) does not appear; and I refrain from comment on the process of dealing with such a matter under the heading ‘Other Business’.
Second, three days later, on 16 January 1969, there was a meeting of the Luton no 10 branch committee. The minutes of that meeting are as follows:
‘Members Present. Bros. Milson Tottenham Parker Jackman Hibbert Morgan Reed Watts.
Meeting declared opened by Chairman by Reading a letter from Bro. Murphy who is in Hospital with injuries received in Road accident whilst on his way home from work, he delegated (by) Bro. Watts to represent him during his absence, all agreed in Bro. Watts being delegated on to committee, the letter also referred to Bro. Murphy’s office as auditor of Branch it was agreed that Bro. Tottenham carried on as auditor on a temporary basis during Bro. Murphy’s absence. Chairman then informed members he had called meeting to discuss action taken by Branch on 13/1/69 in Reference to [the plaintiff]. A proposal was then put to Committee by Bro. Watts seconded by Bro. Tottenham, that this committee endorse the action of No 10 Branch, this was fully discussed and decided to except the proposal that this Branch excludes [the plaintiff] as in excess of 26 weeks in arrear with contributions this is in accordance with Rule 26 Sec 2. This matter being referred to N.E.C. for attention. This was carried with one against. There being no further business the meeting was declared closed at 9.15 a.m.’
By a letter to the national executive committee, dated the same day, the decision of the branch committee was recorded as follows:
‘At a meeting of the Branch Committee of Luton No. 10 Branch a decision was reached that [the plaintiff], Organiser East Midlands Area, a member of this Branch:—
“Be excluded from this date, as in excess of twenty-six weeks in arrears with his contributions to the National Union of Vehicle Builders.
That no monies will be accepted by this Branch From [the plaintiff] following the decision of this Branch Committee.”
The matter is submitted to the National Executive Committee for endorsement.’
Once again, the plaintiff knew nothing of the meeting, was not present, and had no opportunity of meeting any case against him. The committee, of course, is the body given the discretion to exclude members under r 26(2).
Pausing there, counsel for the union said that the branch meeting ought to be ignored, as the branch had no power to decide anything under r 26(2). He accepted that he could not seek to sustain the decision of the branch committee, for that plainly had been arrived at without regard to the requirements of natural justice. There had been no charge and no hearing, in a case in which the rule gave the committee a discretionary power of exclusion for a specific cause. But, said counsel, this defect was cured by what happened afterwards. To this contention I shall return.
The third stage consisted of two meetings of the general purposes committee of the union, on 23 January and 11 February 1969. The rules make no specific provision for this committee, but it is accepted on both sides that it is a recognised offshoot of the national executive committee. To the first of these meetings, the committee summoned officers from the Luton no 3 and no 10 branches; and there is only a brief record of what happened. To the second, the plaintiff was summoned. The committee consisted of four members and the general secretary, and was also attended by an observer. I have read what appears to be a careful and fairly full
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note of the proceedings, some 15 pages of typescript in single spacing. The plaintiff accepts this as a correct but abridged version of what occurred. The proceedings appear somewhat inconclusive, the main bone of contention being the plaintiff’s assertion that in October 1968 he had paid six months’ contribution (a sum of rather under £5) to a Mr Pearce, the secretary of Luton no 3 branch of the union, for transmission to the correct quarters, and he was consequently not in arrears with his contributions. Mr Pearce supported this contention, but accepted that he had given no receipt for the money and had kept it in his safe at home until the dispute arose in January 1969.
The fourth stage consisted of a meeting of the national executive committee on 12 April 1969, at which the plaintiff was present and was invited to add to or clarify what he had said to the general purposes committed. The national executive committee is constituted under r 2 of the union rules, and by r 2(13):
‘In all matters not herein provided for and pertaining to the general interests of the Union the N.E.C. shall have power to act and their decision shall be binding.’
There is a note of rather over three pages of typescript recording the proceedings and conclusions of this meeting. The NEC ‘felt there was considerable doubt as to the money being paid in October 1968 to Luton No 3 Branch Secretary’; and then eight reasons for this are set out. The decision of the NEC was recorded as follows:
‘Agreed—That N.E.C. endorse the decision of Luton No 10 Branch to exclude [the plaintiff] in accordance with Rule 26, Sections 2 and 9.
If [the plaintiff] so desires, N.E.C. in accordance with Rule 2, Section 13, grants permission for him to lodge an appeal against the decision of N.E.C. and to use the machinery provided in Rule 6. He be suspended from Trade Union duties in full pay pending such appeal being dealt with.
Notice of appeal to be given to the General Secretary within twenty-one days of this date.’
It will be observed that the decision referred to is not that of the branch committee, which had jurisdiction, but that of the branch, which had not. Rule 26(9), I should add, reads as follows: ‘Contributions shall only be recognised by payments being entered on pence cards or signed bills.' Rule 6 establishes an appeals council and lays down the procedure. Rule 6(1) provides:
‘There shall be an appeals council who shall meet to adjudicate on any difference appertaining to the rules of the Union between the N.E.C. and any branch or member. The N.E.C. and branch of member to be represented at the hearing.’
There was, it seems some doubt whether the matters in dispute fall within the phrase ‘any difference appertaining to the rules of the Union between the NEC and any branch or member’, and so the NEC was purporting to resolve the doubt by using its powers under r 2(13).
The fifth and last stage was the hearing by the appeals council on 17th and 18 July 1969. Ten members sat, with a secretary, and I have before me the verbatim transcript, 147 foolscap pages long, in single spacing. The plaintiff presented his case in person, and Mr Roberts, the general secretary of the union, presented the case against the plaintiff. Broadly speaking, the case was conducted in the form of an appeal with witnesses, the plaintiff opening to the appeal (after some preliminary matters) and then, after a speech by Mr Roberts, calling his evidence, with the witnesses exposed to cross-examination and to questions by the appeals council, and so on. On any footing, at this hearing there was a most ample opportunity for the plaintiff to say all that could be said on his behalf; and there was much controversy about the extent of the alleged arrears. Finally, after a retirement of one and a
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half hours on the second day, the appeals council announced its decision in the following terms:
‘The decision of the Appeals Council on the appeal of [the plaintiff] against the decision of the National Executive in confirming the decision taken by Luton No. 10 Branch in that they excluded [the plaintiff] being at that time 27 weeks in arrears, the decision of the Appeals Council is that the appeal be not upheld.’
Once again, it is to the decision of the branch rather than that of the branch committee that reference is made in the words of decision.
Now on these events, counsel took three main points on behalf of the plaintiff. First, he said, under the rules only the branch committee had power to expel the plaintiff for being in arrears with his contributions; the branch could not do this. Secondly, the requirements of natural justice were not observed either by the branch or by the branch committee; and this is a point which, as I have mentioned, counsel for the union concedes. Thirdly, the branch committee meeting was not properly constituted in that two members were never summoned to it, and in addition, one person, a Mr Watts, who was not a member, admittedly took an active part in the meeting. It was he who proposed the motion that the plaintiff be excluded for being over 26 weeks in arrears with contributions. I must deal with each of these points in turn; for although, as I have mentioned, counsel for the union concedes the failure to observe the rules of natural justice by the branch and the branch committee, he contends that this was cured by the proceedings before the NEC and the appeals council. If, however, the branch committee had no power to expel the plaintiff at its meeting on 16 January 1969, by reason of being improperly constituted, it has not been contended that there was anything which would cure this defect.
First, it seems quite plain from r 26(2) that the power to exclude a member for being six months in arrears with his contribution is vested in the branch committee, and not in branch. Indeed, as I have mentioned, counsel for the union contended that the decision of the branch was a nullity. It had no jurisdiction to do what it did. I have been referred to nothing in the rules which confers jurisdiction in such cases on any other body. There are various other provisions in the rules for the expulsion of members, expressed in a variety of ways. Sometimes it is ‘the N.E.C. may expel any member’ (that is, for some specified matter), sometimes it is ‘shall be expelled’ or ‘may be expelled’, simpliciter, without saying by whom, sometimes it is ‘with the approval of the N.E.C.’, again without saying by whom, and sometimes it is ‘at the discretion of the N.E.C.’: see rr 6(4), 25(5), 28, 39(4) and 46. The most explicit provision seems to be r 31(8), giving the branch committee power to expel a member ‘subject to the endorsement of N.E.C.’. These provisions all, however, relate to matters other than arrears of contributions. It was common ground that the power to exclude under r i6(2) is in essence a power to expel. I do not think that r 2(13) gives the NEC any reserve power of expulsion for arrears of contribution, for that rule applies only ‘in all matters not herein provided for’, and expulsion for being in arrears is expressly provided for by r 26(2). Accordingly, if the expulsion is to stand, what must be sustained is the decision of the branch committee.
Secondly, there is the question on which there appears to be no English authority; and I put it in general terms. Can a deficiency of
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natural justice before a trial tribunal be cured by a sufficiency of natural justice before an appellate tribunal? In the present case, the decision of the branch committee admittedly contravenes the rules of natural justice; but counsel for the union contends that this defect has been cured by the subsequent hearings by the NEC and by the appeals council. The latter admittedly complied with the rules of natural justice, and the former was at all events a perfectly proper administrative inquiry. In support of his contention, counsel for the union put before me authority to show that an initial deficiency of natural justice could be cured by a further hearing at which the requirements of natural justice were observed. In Ridge v Baldwin ([1963] 2 All ER 66 at 80, 81, [1964] AC 40 at 79) Lord Reid said:
‘Next comes the question whether the respondents’ failure to follow the rules of natural justice on Mar. 7 was made good by the meeting on Mar 18. I do not doubt that if an officer or body realises that it had acted hastily and reconsiders the whole matter afresh after affording to the person affected a proper opportunity to present his case, then its later decision will be valid. An example is De Verteuil v. Knaggs. But here the appellant’s solicitor was not fully informed of the charges against the appellant and the watch committee did not annul the decision which they had already published and proceed to make a new decision. In my judgment what was done on that day was a very inadequate substitute for a full rehearing. Even so, three members of the committee changed their minds, and it is impossible to say what the decision of the committee would have been if there had been a full hearing after disclosure to the appellant of the whole case against him. I agree with those of your lordships who hold that this meeting of Mar. 18 cannot affect the result of this appeal.’
In De Verteuil v Knaggs, an order was made by the acting governor of a colony without notice to the appellant. The acting governor then gave the appellant a fair hearing before the original order had been put into effect, and then decided not to cancel the order. After a further investigation, the acting governor uttered further words of decision, to an effect similar to that of the original order; and the Judicial Committee refused to interfere with the acting governor’s decision.
Counsel for the union accepted that both these cases differed from the present case in that the further hearing was before the original tribunal, and not before any appellate tribunal or other body. He also accepted that in Annamunthodo v Oilfields Workers’ Trade Union ([1961] AC 945 at 949), counsel for a union in an expulsion case had argued that a deficiency in natural justice before the general council of the union had been put right on an appeal to the union’s annual conference; yet the Judicial Committee held that the expulsion was invalid. Counsel for the union contended, however, that the plaintiff was better off in having his case considered by the uncommitted NEC and the appeals council rather than by the branch committee which had already committed itself.
In this connection I referred counsel to the decision of Gale J and the Ontario Court of Appeal (a decision, I now find, that was ultimately affirmed by the Supreme Court of Canada) in Posluns v Toronto Stock Exchange and Gardiner ((1964) 46 DLR (2d) 210 at 322/333, (1965) 53 DLR (2d) 193 at 212–214, (1968) 67 DLR (2d) 165). Coupled with the other authorities cited to me, this case leaves me in little doubt that if there is a defect of natural justice the proper course is for the body to which the jurisdiction is confided to rehear the matter de novo, rather than treat any further hearing as an appeal or, a fortiori, let the matter be consigned to some appellate tribunal or other body. No doubt if the trial body has a variable membership, so that the actual members sitting for the rehearing differ from those at the original hearing, this is all to the good. But this is not essential; nor is it essential (one possible reading of Lord Reid’s words notwithstanding) that there should be any formal annulment of the former decision before starting afresh. The sheet should be made as clean as possible; but I think that it should be the same sheet and not a different one. What is required is a venire de novo and not the process of appeal, whereby the person aggrieved may be treated as bearing the burden of displacing an adverse decision which, for lack of natural justice, ought never to have been reached. At the same time, like Gale J ((1964) 46 DLR (2d) at 333) and the
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Ontario Court of Appeal ((1965) 53 DLR (2d) at 213), I should be slow to regard references in the second hearing to it being an ‘appeal’ or ‘review’ as establishing that the second hearing was not a true rehearing. The question is whether it was in substance a rehearing, and not whether it was correctly described by laymen.
Now in the present case the hearing by the appeals council seems to me to have been in substance a complete rehearing, with the witnesses called and heard, and complete liberty of action for the plaintiff to present his case in full. Indeed, the members of the quite differently constituted branch committee might well have been put in some practical difficulty if they had been required to devote two days to disposing of the case. Nevertheless, it was not to the appeals council that the rules confided the issue of expulsion or no. It may be that the matter was properly brought before the appeals council by the combined effect of r 2(13), r 6(1) and the decision of the executive committee; but any such jurisdiction is merely appellate. If a man has never had a fair trial by the appropriate trial body, is it open to an appellate body to discard its appellate functions and itself give the man the fair trial that he has never had?
I very much doubt the existence of any such doctrine. Central bodies and local bodies often differ much in their views and approach; and the evidence before me certainly does not suggest that this is a union free from any such differences. Suppose the case of a member whose activities have pleased some of his fellow members in the locality but have displeased headquarters and other branches. Suppose further that in his absence, and so without hearing his explanations, a local committee is persuaded to expel him. Is it any answer to his complaint that he has not received the benefit of natural justice to say ‘Never mind, one of the central bodies will treat your appeal as if it were an initial trial’? Can he not say ‘I want to be tried properly and fairly by the only body with power under the rules to try me in the first place, namely, the local committee’? I appreciate that the appeals council is composed of members elected from each of the union’s 12 divisions, and is not an emanation of the NEC or other central body; but I do not think that this affects the point.
That is not all. If one accepts the contention that a defect of natural justice in the trial body can be cured by the presence of natural justice in the appellate body, this has the result of depriving the member of his right of appeal from the expelling body. If the rules and the law combine to give the member the right to fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal? Even if the appeal is treated as a hearing de novo, the member is being stripped of his right to appeal to another body from the effective decision to expel him. I cannot think that natural justice is satisfied by a process whereby an unfair trial, although not resulting in a valid expulsion, will nevertheless have the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivation would be a powerful result to be achieved by what in law is a mere nullity; and it is no mere triviality that might be justified on the ground that natural justice does not mean perfect justice. As a general rule, at all events, I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body
There is a further difficulty in this case. Under r 26(2), the power of expulsion in respect of six months’ contribution being in arrears is given to the branch committee, and neither that rule nor any other gives any right of appeal to the NEC or any other body. By r 6(1), the jurisdiction of the appeals council is ‘to adjudicate on any difference appertaining to the rules of the Union between the N.E.C. and any branch or member’. It is far from clear that the hearing by the appeals council in this case was in any true sense an appeal, whether immediate or ultimate, from the decision of the branch committee. At various stages in the hearing various expressions were used to indicate what the appeals council thought it was hearing; but having regard
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to the rules, I very much doubt whether it was doing more than hear an appeal from what had been in substance an administrative inquiry by the general purposes committee and the NEC, held under the general powers of the NEC. Indeed, counsel for the union accepted that what the NEC was doing was not hearing an appeal from the branch committee, but making an inquiry under the general powers to act under r 2(13) ‘in all matters not herein provided for and pertaining to the general interests of the Union’. In other words, the hearing by the appeals council was not the last link in a chain relating to the exercise of quasi-judicial functions. Instead, there were two separate stages, the branch committee stage (with the irregular decision of the branch meeting first), and the NEC stage; and while the former was, or should have been, quasi-judicial, the latter was merely an administrative inquiry into what was plainly an unsatisfactory state of union affairs in Luton. If that is right, as I think that it probably is, I do not see how a sufficiency of natural justice in the penultimate or last stage of an administrative inquiry can cure the defect of natural justice in a quasi-judicial determination.
That said, I must turn to the only authority of which I know which bears directly on the point. It did not come to my notice until after I had reached this stage in preparing my judgment. I thereupon informed counsel of it, and restored the case for further argument on the point. In King v University of Saskatchewan the Supreme Court of Canada had to consider the case of a university student who had been refused a degree. A special committee of the faculty council of the university was appointed to determine the student’s appeal from the decision of the law school refusing to accord him the standing which would entitle him to a degree. The student was asked to provide a ‘detailed brief’ in support of his appeal, and he did so, in some 9 1/2 closely typed pages. The special committee recommended the grant of the degree on compassionate grounds. However, an executive committee of the council rejected this recommendation, and instead recommended the council to refuse the degree; and the council accepted this recommendation. The student was not present at the meetings of either he executive committee or the council; indeed, he did not even have notice of the meeting of the executive committee. The student then appealed to the chancellor of the university, Culliton CJ of Saskatchewan. Under the statutes of the university senate, the chancellor appointed a senate appeal committee of five, including himself. This appeal committee afforded the student a full hearing, the student being both present in person and represented by counsel; but the committee dismissed the appeal. The Supreme Court of Canada, consisting of Cartwright CJC and Fauteux, Hall, Spence and Pigeon JJ, unanimously affirmed the decision of Johnson J and the Saskatchewan Court of Appeal ((1969) 1 DLR (3d) 721), dismissing the student’s application for mandamus to the university to hear and determine his appeal against the refusal to grant him a degree. The judgment of the court was delivered by Spence J. He said ([1969] SCR at 685) that the complaint of a denial of natural justice by the special committee was disposed of by that committee having recommended that the degree be granted. The decisions of the executive committee and the council, however, were adverse to the student, and Spence J said ([1969] SCR at 688, 689):
‘I have come to the conclusion, upon this examination of the facts, that there was no lack of natural justice before the senate appeal committee and that the proceedings in fact were carried out with the full knowledge and approval of the appellant and his counsel. It must be noted that the statutory duty of the faculty council as enacted by s 76(c) of the The University Act was expressly subject to appeal to the senate. Moreover, the senate, in the University of Saskatchewan as elsewhere, is the sole body determining to whom the degrees of the university may be granted. Any possible failure of natural justice before the special appeal
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committee, the executive committee, or the full faculty council, is quite unimportant when the senate, the appeal body under the provisions of The University Act, and also the body in control of the granting of degrees, has exercised its function with no failure to accord natural justice. If there were any absence of natural justice in the inferior tribunals, it was cured by the presence of such natural justice before the senate appeal committee.’
The learned judge then referred to Posluns’s case and Ridge v Baldwin, and went on ([1969] SCR at 689):
‘I am of the opinion that the situation here resembles that in Posluns v Toronto Stock Exchange, supra, and that the hearing before the senate appeal committee, a small and very able body, was such as accorded the appellant every advantage of natural justice and rendered nugatory any alleged earlier failure to accord him such natural justice in any of the earlier hearings.’
The case involved a number of other points; but the passages I have quoted provide at first sight strong persuasive support for counsel for the union’s contention that a sufficiency of natural justice in an appellate tribunal may cure a deficiency of natural justice in a lower tribunal. However, giving the case the full weight that it plainly deserves, I must, with the utmost respect, say that it fails to persuade me, so far as the case before me is concerned. There is nothing to indicate that any weight was given to the possible differences between the trial tribunal and the appellate tribunal; and in a university, the differences of approach between a faculty council and a senate tribunal may be striking. Nor is there any suggestion that there might be a significant difference between the right to a fair initial hearing with one or more fair rights of appeal, on the one hand, and, on the other hand, one or two hearings lacking in natural justice, with the requirements of natural justice fully observed only at the final appellate stage. In neither report ([1969] SCR 678 and 6 DLR (3d) 120), I may say, is the argument of counsel reported, so that one cannot tell how the case was put to the court. Furthermore, in King’s case the natural justice was supplied by an appellate tribunal that unmistakably lay in the direct line of appeal from the initial decision, whereas in the case before me I doubt very much whether the appeals council was exercising any appellate jurisdiction from the exercise of the branch committee’s quasi-judicial functions.
Yet again, as counsel for the plaintiff emphasised, in King’s case ([1969] SCR at 689) Spence J said, in a passage that I have already quoted, that the senate ‘is the sole body determining to whom the degrees of the university may be granted’. On this footing, in contrast with the case before me, the person aggrieved was accorded natural justice by a committee of the body with the sole power to decide the point in issue, namely, whether or not a degree should be granted. No doubt, as counsel for the union stressed, the relevant statute gave the council power to deal with, and, subject to an appeal to the senate, to decide on all applications and memorials by students and others in connection with any faculty. That, however, does not alter the fact that what was in issue, namely, the refusal of a degree, was within the competence of the senate.
I may add one further point on King’s case. Plainly it gives no countenance to any notion that, before refusing a degree, a university must give the candidate notice of the grounds of failure and offer him a hearing. But what does seem to have been assumed is that if after being refused a degree the candidate then seeks a reconsideration of the decision, the requirements of natural justice apply thereafter. If this, or something like it, had not been the tacit assumption, then I cannot see why the short answer to the whole of this part of the case should not have been that as there
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was no requirement of natural justice, it was idle to consider whether or not it had been accorded to the plaintiff at the various stages of the inquiry. To say that the requirements of natural justice do not apply is not, of course, to say that the university is free to trample on the student’s rights; for he is entitled to have his application duly considered by whatever bodies have the power of decision. But that right is by no means necessarily a right to have the type of hearing that might be appropriate in a case of expulsion. It may be that some explanation lies in the statutes governing universities in Canada, or that Canada has extended the concept of natural justice to territory in which it does not run in England. If so, one consequence may be that every student in Canada who is disappointed of his degree may, by the simple process of complaining of his disappointment, obtain one or more hearings according to the full process of natural justice. I can only say that even if this is the law of Canada, I cannot believe that it is the law of England.
In meeting King’s case, counsel for the plaintiff also relied on Denton v Auckland City. In that case, a hearing before a town planning committee lacked natural justice, and the unsuccessful objectors appealed to an appeal board. This heard the appeal in part, with no lack of natural justice, and then gave an interim decision, seeking the opinion of the court. Speight J held that as the decision of the committee lacked natural justice, it was a nullity, and so there was nothing on which the board could proceed. If there were a doctrine that natural justice in the board could supply the deficiency of natural justice in the committee, it is difficult to see how this decision, reached after an ample consideration of the authorities, could be supported. True, the suppose doctrine is not discussed in terms, and King’s case had not been decided when Denton’s case was heard; nevertheless, I find in Denton’s case some support for the view I take. I may add that for the purposes of the case before me I do not find it necessary to explore the use of the terms ‘void’ and ‘voidable’ in Durayappah v Fernando, which Speight J considered, and which was discussed at length by Professor H W R Wade in the Law Quarterly Reviewa.
In the result, I consider King’s case to be distinguishable. If I am wrong in this, then for the reasons I have given, I very respectfully decline to follow it, despite the high authority of the court that decided it. I therefore hold that the deficiency of natural justice in the trial body has not been cured by any subsequent fair hearing by an appellate body. The decision of the branch committee was bad, and has not been cured, even if it was curable; nor has it been replaced by any decision of the NEC or appeals council.
I turn, then, to the third point, the constitution of the branch committee. First, there is conflicting evidence before me as to whether two of the members of this committee, Mr Hall and Mr Slater, ever received notice of the meeting on 16 January. It is common ground that failure to give either of them notice would invalidate the meeting: see Young v Ladies’ Imperial Club Ltd. I cannot resolve this conflict on motion, even though the evidence of the two committee members that they received no notice is strong and clear. Counsel for the union urged that if notice was sent but failed to arrive, the meeting would not be invalidated. He could cite no authority for this contention, and I say no more than that at present I prefer, on the whole, the view stated in Sebag Shaw and Townsend’s Law of Meetingsb:
‘Prima facie, where notice is not effectively served, i.e. is not received by the intended recipient, the position corresponds to that in which no notice is given, and the meeting will in consequence be invalidated.’
The practical inconvenience of so strict a rule can be avoided, and often is, by inserting
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a provision modifying it in the rules. But I should require further argument before deciding the point.
The presence and active participation of Mr Watts is another matter. He was not a member of the committee, and it is not suggested that Mr Murphy (who was) had any power to authorise Mr Watts to attend in his place, or that the committee could authorise this. Citrine’s Trade Union Lawc states that the tribunal must be properly constituted, and then goes on:
‘Not only must there be a quorum (if one is fixed by the rules) of persons qualified to act, but the presence of a single person who is not qualified or not duly elected to the tribunal will render its decision invalid.’
I have now looked at the seven authorities cited in support of this sentence, but I must say that I cannot find in them any real support for the proposition that ‘the presence of a single person who is not qualified … will render its decision invalid’. The word ‘presence’ seems to me to be far too wide. It is a commonplace for persons who are not members of a committee to be in attendance at a meeting, or present for some limited purpose, and yet nobody would suggest that this invalidates the meeting.
Participation in the deliberations and the decisions of the committee is another matter; if one or more of those who do this are not members of the committee, then in my judgment this would invalidate the proceedings. The proposition is, I think, established by a case not cited by Citrine, Lane v Norman, which on this point seems to have dropped somewhat out of sight. That was a case of a committee concerned with a church school, with its membership prescribed by a deed. The issue was the committee’s purported dismissal of a teacher. North J said ((1891) 66 LT at 86):
‘… There has been a practice by reason of the difficulty in finding committeemen duly qualified to fill the office, of from time to time calling in persons who fill the well-known old office of sidesman to be present and assist. If they had been merely asked what their opinion was for the benefit of those who had to adjudicate, there might not have been much harm in it. But when persons who do not belong to the committee are summoned to attend the committee, to take part in the discussions which ensue, and to use their influence as to what the committee should do, and to vote upon the point, then in my opinion the body which is acting is not a committee duly appointed, but a committee with an unauthorised addition or additions made to it. In the present case I am not sure that both sidesmen were present, but at any rate one of them was. In my opinion, what was done was wrong: first, because there was no proper notice given to a person who ought to have had notice (it makes no difference that there would in any case have been a majority in favour of the course which was taken, because that gentleman, if he had been present or had had an opportunity of being present, would have had an opportunity of expressing his views and possibly influencing the persons who were present); and secondly, because another gentleman was present who ought not to have been. He took part in the discussion, and of course it is impossible to say what effect his views may have had upon the minds of the other persons who were present.’
I would respectfully adopt and apply this view of the matter. No doubt there may be cases in which it is not easy to draw the line between mere attendance on the one hand and participation on the other; but I do not think that this difficulty can affect the principle.
In these circumstances, it follows that I do not see how the decision of the branch
Page 725 of [1970] 2 All ER 713
committee can stand. Quite apart from the alleged failure to give notice of the meeting to two members of the committee (a matter which, on motion, I leave unresolved), there was the participation in the meeting by Mr Watts. The list of ‘members present’ in the minutes includes his name, and the minutes also record that he proposed a resolution, which was second by Mr Tolley, ‘that this committee endorse the action of No. 10 Branch’. This resolution was then ‘fully discussed’. The next words in the minutes are ‘and decided to except the proposal that this Branch excludes [the plaintiff] as in excess of 26 weeks in arrear with contributions this is in accordance with Rule 26 Sec 2’. Counsel for the union contended that these words referred to some other proposal, and that the resolution carried was not the one proposed by Mr Watts; but no indication is given of any member having proposed or seconded any other such proposal, and I think that really it must have been all one proposal. At any rate, the minutes clearly indicate that Mr Watts took part in the meeting, as if he were a member of the committee, in relation to the matter now directly in issue before me. In the passage that I have read from Lane v Norman ((1891) 66 LT at 86), North J referred to someone who is not a member of the committee taking part in the discussions, using his influence as to what the committee should do, any voting, and the impossibility of saying what effect his views may have had on the others. As the proposer of a resolution directly in point, Mr Watts cannot escape the impact of this language. In my judgment his participation in the meeting invalidated the resolution passed. I may add that the headnote to Lane v Norman ((1891) 66 LT at 83) in the Law Times report is misleading when it refers to the ‘presence’ of a sidesman at the meeting as being a fatal objection. The headnote to the Weekly Reporter report of the case ((1891) 40 WR 268) put matters correctly by using the phrase ‘having taken part’ in the resolution; and the Law Journal ((1891) 61 LJCH 149) is also accurate, although perhaps a little less clear, using the words ‘because of the unauthorised addition to the committee’.
From what I have said, it must be plain that the plaintiff has established at least a strong prima facie case that his expulsion was wrongful. I refrain from discussing the question as to how far, if at all, he was in arrears with his contributions. There seems to be a fair argument here, but I cannot resolve the point on motion. On the footing that prima facie the expulsion was wrongful, the question is whether the plaintiff ought to be granted the interlocutory injunction that he claims. Counsel for the union put forward a variety of objections. The plaintiff, he said, had deprived himself of any right to object to the expulsion on the grounds of natural justice or by reason of any defect in the composition of the branch committee by his failure to take these points on appeal. By doing this, it was said, he had agreed or promised not to take the points, or had estopped himself from doing so; and he could not both approbate and reprobate the decision. I do not propose to dignify these points by discussing them; in my judgment there is no more in them than there was in the somewhat similar point in Annamunthodo v Oilfields Workers’ Trade Union ([1961] 3 All ER at 625, [1961] AC at 956). Counsel for the union also contended that delay by the plaintiff in seeking an injunction ought to debar him from obtaining it. That is another matter; and I propose to consider it when I discuss the plaintiff’s other head of claim, namely, to an injunction in respect of dismissal from his office as an area organiser of the union.
I turn, then, to the second branch of this motion. For some 14 years the plaintiff has been a full-time area organiser of the union. Under r 14, an organiser is an official elected by members of the branches in his area, and he is under the control and direction of the NEC and general secretary. An organiser must be a member ‘of not less than 10 years’ consecutive membership when elected’: r 14(2). After the decision of the appeals council on 18 July 1969, the general secretary wrote on 22 July to all branches, referring to the decision and stating that the NEC would
Page 726 of [1970] 2 All ER 713
receive the decision of the appeals council at its meeting on 16 August. On 18 August, the general secretary wrote to the plaintiff, saying that the NEC had received the decision of the appeals council, and then stating:
‘Quite clearly the decision of the Appeals Council requires to be carried out, in which case you are ineligible to hold office under the rules of the union. NEC have therefore decided that your services as Organiser are terminated.
‘Arising from this the final payment of your salary will be sent to you for week ending Friday, 22 August, and your contributions to the full-time Officials Superannuation Fund will be returned, less income tax and graduated pension contributions.’
Not until 17 November, nearly three months later, was a letter to the general secretary of the union written on behalf of the plaintiff, complaining of a breach of the rules and a lack of natural justice. The letter contains this paragraph:
‘[The plaintiff] has been hoping that pressure within the Union would secure his re-instatement to membership and office, but he instructs us that he now understands that your Union proposes to take steps to fill his office. In these circumstances, [the plaintiff] will be obliged to take such proceedings as Counsel may advise to protect his membership in your Union and to recover his office of and salary due to him as organiser.’
Ten days later came the writ and notice of motion.
Counsel for the union said that the plaintiff was automatically disqualified from holding office by r 1(7)(d): ‘A member shall not hold office if he is 13 weeks in arrears with contributions.' I think that there is also an assumption running through the other rules that only a member can be an officer: see eg r 1(7)(b) and (c). There was much discussion before me of pure master and servant cases, of the holding of office, of status, and much else besides. Many authorities were put before me of cases in this field where there was the trial of an action, and a declaration was granted or refused. I am concerned only with the grant or refusal of an injunction on an interlocutory application, and I do not propose to decide more than I have to. The case most closely in point is an unreported decision of Buckley J, Shanks v Plumbing Trades Union a motion in which the only issue was removal from the office of district secretary of a union. Having reached the conclusion that the plaintiff had made out a prima facie case that he was likely to succeed in the action, Buckley J said:
‘It has been submitted on behalf of the Union that this is a case in which the Court ought not to grant the relief sought because that will be tantamount to specific performance of a contract of employment. It seems to me that very different considerations apply when one is dealing with an elected officer whom somebody other than those who elected him is seeking to remove from office, than apply in the ordinary case of employer and employee. In the circumstances, I propose to grant the plaintiff the injunction he seeks until judgment in the action.’
In that case, the plaintiff had been removed from office on a charge that he had failed in his duty of giving full information during an inquiry about the number of certain ballot papers that had been issued. On the basis of the plaintiff having established a prima facie case of being not guilty on the charge, the court restored him to office despite the lack of confidence that the union might feel in him; a prima facie case is not, of course, one that has been finally established.
Page 727 of [1970] 2 All ER 713
On the other hand, Citrined distinguishes between on the one hand the governing bodies and officers of a union who are responsible only to the membership that elected them, and not to any superior body in the union, and on the other hand officers who are employed under a contract of service. If wrongly excluded from office, the former can, in a proper case, obtain an injunction restoring them to office, whereas the latter will be left to their remedy in damages. Consider also Taylor v International Union of Seamen. Some of the cases cited in support of this distinction were cited to me, but unfortunately a number of them were only somewhat brief newspaper reports. Nevertheless, until I was referred to Shanks v Plumbing Trades Union, I think that I should have accepted the distinction made in Citrine. The question is what it is right to do in view of that decision.
I accept what Buckley J said about very different considerations applying to elected officers as contrasted with those employed under the ordinary relationship of employer and employee. It does not, however, appear from the judgment whether the cases relied on by Citrine were put before Buckley J, eg Tanner v National Union of Seamen and Lewis v National Union of General and Municipal Workers. Even if I assume that the case before me is one in which I have the power to grant the injunction sought, I feel much hesitation about whether it would be right to do so.
The union, I may say, has very properly been paying the plaintiff £20 per week under an undertaking given at an earlier stage of this motion. This comes to approximately his ‘take home pay’ as an area organiser. Counsel for the union has also offered an undertaking that the union will not hold an election for the plaintiff’s post as area organiser pending the trial of the action. In these circumstances, where does the balance of convenience lie? The union urges that there will be much embarrassment if the plaintiff is in effect restored to office. Some of that embarrassment is, I think, due to causes on which the union cannot properly rely. Counsel for the union accepts that he can place no reliance on any embarrassment due to any possible feelings of guilt within the union in having wronged the plaintiff. Further, an affidavit by the general secretary speaks of the decision to exclude the plaintiff, and ends by stating:
‘I verily believe that most members and officials are of the opinion that the Plaintiff ought to have accepted the decision of the National Executive Committee and of the Appeal Council.’
I cannot think that embarrassment felt because the plaintiff refused to accept what I have held to be at least prima facie an insupportable decision ought to be put in the scales against him; to protest at injustice is not morally wrong.
Even so, I think that there remains considerable cause for legitimate concern by the union on the score of embarrassment. Indeed, this must be implicit in many cases in which there is any question of what in effect is akin to the specific performance of a contract of service. For myself, I should be very slow to make any such order on motion, although in a clear and compelling case there is no doubt jurisdiction to do so. I do not think that this is a case of that sort. A union must of necessity depend in large measure on the loyalty and reliability of its officers in what is plainly often a difficult and controversial field of human activity. The union in this case is attempting to remedy defects of administration in the Luton area, which the plaintiff, says the union, had done nothing to put right. He was under the control of the NEC
Page 728 of [1970] 2 All ER 713
and had to work with other officers of the union; and things have been said on each side which cannot make the resumption of the former relationship an easy one. This is not a case like Shanks’s case in which there has been mere non-disclosure.
Furthermore, counsel for the plaintiff has failed to convince me that, in view of the payments being made and the undertaking offered, the plaintiff will suffer any real hardship from his exclusion from office continuing until the trial, at all events if the payments continue until then. In short, the balance of convenience seems to me to be in favour of refusing the injunction. I do not think that it would be right to force the plaintiff on to the union until the matter is finally resolved one way or the other. At the trial it will be possible to explore more fully the status of the plaintiff, and in particular whether the characteristics of his office as an area organiser leave him, despite the process of election which brought him to that office, substantially in the position of a servant, and so able to claim only damages for wrongful dismissal, or whether instead he is on the other side of the line and holds an office or status to which the court will secure his restoration by injunction or otherwise. On the facts as they stand before me on motion I will say only that I am not satisfied that this is a case for an interlocutory injunction.
That brings me to the last point, that of delay. One important factor is that during the four months after the decision of the appeals council and the three months after the decision of the NEC, the status quo ante has not been changed in any relevant degree. Thus no steps to fill the plaintiff’s office of area organiser have been taken. On the other hand, there is no explanation of the delay, other than the unsupported assertion in the letter of 17 November 1969 that I have read; and in relation to interlocutory proceedings periods of three or four months cannot be brushed aside as being merely trivial. In the end, after considering various passages in Kerr on Injunctionse, I have come to the conclusion that in a case of this sort I ought not to hold that there has been such delay as to bar relief. Accordingly, I hold that neither claim to an injunction is barred by delay; but as I have already held that I ought not to grant the injunction relating to the office, I hold that the plaintiff is entitled only to the first of the injunctions that he claims, and that must be subject to any points that there may be on the wording of it.
Order accordingly.
Solicitors: Seifert, Sedley & Co (for the plaintiff); Rowley Ashworth & Co (for the union).
R W Farrin Esq Barrister.
Roy v Prior
[1970] 2 All ER 729
Categories: CIVIL PROCEDURE
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD DIPLOCK
Hearing Date(s): 20, 21 APRIL 7 JULY 1970
Action – Immunity from civil action – Privilege of witness in court of justice – No immunity where gist of action malicious abuse of process of court – Action not defeated merely because alleged abuse included giving of false evidence – Evidence given by solicitor to support application for bench warrant – Action for malicious arrest against solicitor – Claim including allegation of perjury by solicitor – Refusal to strike out statement of claim.
The defendant, a solicitor acting for A (who had been charged with a criminal offence) issued a witness summons requiring the plaintiff to attend as a witness at A’s trial. The plaintiff failed to attend. After the defendant had stated on oath that the plaintiff was evading service of the summons, the plaintiff was arrested on a warrant issued by the trial judge and brought to court to give evidence. The plaintiff brought a civil action against the defendant for malicious arrest. The plaintiff claimed that the defendant did not take necessary or sufficient steps to inform the plaintiff of the issue of the witness summons or to serve it on the plaintiff. The plaintiff by his amended statement of claim further alleged that the defendant maliciously and without reasonable or probable cause instructed counsel to apply to the trial judge for a warrant to arrest the plaintiff and that in support of the application the defendant falsely stated on oath that the plaintiff was evading service of the witness summons, and caused and procured the issue of the warrant on which the plaintiff was arrested. On appeal against an order striking out the plaintiff’s statement of claim and dismissing his action, made on the ground that the arrest of the plaintiff was caused by the evidence given by the defendant in court and that a witness may not be sued for what he says in the witness box,
Held – The appeal would be allowed, because—
(i) the plaintiff was not suing the defendant on or in respect of the evidence which the defendant gave in court but because the plaintiff alleged that the defendant procured his arrest by means of judicial process which the defendant instigated both maliciously and without reasonable cause; in actions based on alleged abuses of the process of the court, the court would often have been induced to act by false evidence, but the actions were not brought on or in respect of any evidence given but in respect of malicious abuse of process (see p 731 a, p 733 f, p 733 j to p 734 b, p 735 j and p 736 f, post);
(ii) the existence of the well-settled rule that no action would lie against a witness for words spoken in giving evidence in court, even if the evidence was false and malicious, did not mean that an action brought in respect of an alleged abuse of process of court must be defeated if one step in the abuse of process involved or necessitated the giving of evidence (see p 731 a, p 733 g and j, p 735 h and j and p 736 a and f, post); Daniels v Fielding (1846) 16 M & W 200, Revis v Smith (1856) 18 CB 126, Melia v Neate (1863) 3 F & F 757 and Johnson v Emerson (1871) LR 3 Exch 329 applied;
(iii) (per Lord Wilberforce) the reasons of public policy for which immunity was traditionally conferred on evidence given in court did not apply to evidence given in support of a bench warrant, which was given ex parte and in circumstances in which the person against whom the warrant was sought had no means, and no other party had any interest, in challenging the evidence; so far from the public interest requiring that such evidence be given absolute protection, that interest required that it should have been given carefully, responsibly and impartially; to deny a person
Page 730 of [1970] 2 All ER 729
whose liberty had been interfered with any opportunity of showing that it was ill-founded and malicious was a far more serious denial than the denial of the right to attack a witness to an issue which had been tested and passed upon after a trial (see p 736 d and e, post).
Decision of the Court of Appeal [1969] 3 All ER 1153 reversed.
Notes
For malicious arrest, see 25 Halsbury’s Laws (3rd Edn) 370–372, paras 723–727, and for cases on the subject, see 33 Digest (Repl) 396–398, 95–110.
For the privilege of witnesses against actions for evidence given, see 24 Halsbury’s Laws (3rd Edn) 48, para 89, and for cases on the subject, see 32 Digest (Repl) 123, 124, 1440–1453.
Cases referred to in opinions
Daniels v Fielding (1846) 16 M & W 200, 16 LJEx 153, 8 LTOS 474, 11 JP 538, 153 ER 1159, 33 Digest (Repl) 406, 223.
Dawkins v Lord Rokeby (1873) LR 8 QB 255, 42 LJQB 63, 28 LT 134; affd HL (1875) LR 7 HL 744, [1874–80] All ER Rep 994, 45 JLQB 8, 33 LT 196, 4 JP 20, 32 Digest (Repl) 119, 1404.
Elsee v Smith (1822) 2 Chit 304, 33 Digest (Repl) 387, 5.
Hargreaves v Bretherton [1958] 3 All ER 122, [1959] 1 QB 45, [1958] 3 WLR 463, 1 Digest (Repl) 28, 278.
Johnson v Emerson (1871) LR 3 Exch 329, 40 LJEx 201, 25 LT 337, 33 Digest (Repl) 405, 199.
Marrinan v Vibart [1962] 1 All ER 869, [1963] 1 QB 234, [1962] 2 WLR 1224; affd CA [1962] 3 All ER 380, [1963] 1 QB 528, [1962] 3 WLR 912, Digest (Cont Vol A) 536, 4147a.
Melia v Neate (1863) 3 F & F 757, 33 Digest (Repl) 412, 297.
Revis v Smith (1856) 18 CB 126, 25 LJCP 195, 25 LTOS 106, 20 JP 453, 139 ER 1314, 32 Digest (Repl) 123, 1447.
Ross v Norman (1850) 5 Exch 359, 191 LJEx 329, 15 LTOS 208, 155 ER 157, 33 Digest (Repl) 417, 360.
Watson v M’Ewan, Watson v Jones [1905] AC 480, [1904–07] All ER Rep 1, 74 LJPC 151, 93 LT 480, 32 Digest (Repl) 126, 1476.
Whitworth v Hall (1831) 2 B & Ad 695, [1824–34] All ER Rep 484, 9 LJOSKB 297, 109 ER 1302, 33 Digest (Repl) 400, 143.
Appeal
This was an appeal by the plaintiff, Premananda Roy, from an order of the Court of Appeal (Lord Denning MR, Winn and Cross LJJ) dated 15 July 1969 and reported [1969] 3 All ER 1153, allowing the appeal of the defendant, Ronald Albert Prior, from an order of MacKenna J dated 25 June 1969 dismissing the appeal of the defendant from an order of Master Jacob dated 25 March 1969 refusing to strike out the statement of claim and dismiss the plaintiff’s action for damages for malicious arrest. The facts are set out in the opinion of Lord Morris of Borth-y-Gest.
Hugh Griffiths QC and E R Meyer for the plaintiff.
J Lloyd-Eley QC and R E Rhodes for the defendant.
Their Lordships took time for consideration
Page 731 of [1970] 2 All ER 729
7 July 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend Lord Morris of Borth-y-Gest I would allow this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, the appellant (the plaintiff) brought a civil action against the respondent (the defendant) claiming damages for malicious arrest. The plaintiff who is a medical practitioner alleges that the defendant who is a solicitor wrongly procured his (the plaintiff’s) arrest and imprisonment by instituting judicial process maliciously and without reasonable cause.
The defendant acted on behalf of a Mr Advani who was charged with a criminal offence and who was tried at the Central Criminal Court. Mr Advani had been a patient of the plaintiff. It was thought that the plaintiff could give medical evidence as to Mr Advani’s responsibility for his actions. The defendant on or about 27 May 1968 issued a witness summons requiring the plaintiff to attend as a witness at the trial of Mr Advani. The plaintiff claims that the defendant did not take the necessary steps to tell him (the plaintiff) of the issue of the summons or to serve it. The trial of Mr Advani took place some 16 days later, ie on 12 June 1968. The plaintiff claims that on that date the defendant, acting maliciously and without reasonable or probable cause, instructed counsel to apply to the trial judge for the issue of a warrant for the arrest of the plaintiff and that in support of the application he (the defendant) falsely stated on oath that the plaintiff was evading service. The result was that a warrant stated on oath that the plaintiff was evading service. The result was that a warrant was issued. At about 1.00 am on 13 June 1968 the plaintiff was arrested. He was then imprisoned and kept in custody until he was brought to court at 10.30 am. Later he gave evidence.
It is provided as follows by the Criminal Procedure (Attendance of Witnesses) Act 1965:
‘2. (1) For the purpose of any criminal proceedings before a court of assize or quarter sessions a witness summons, that is to say, a summons requiring the person to whom it is directed to attend before the court and give evidence or produce any document or thing specified in the summons, may be issued out of that court or out of the High Court …
‘3. (1) Any person who without just excuse disobeys a witness order or witness summons requiring him to attend before any court shall be guilty of contempt of that court and may be punished summarily by that court as if his contempt had been committed in the face of the court …
‘4. (1) If a judge of the High Court is satisfied by evidence on oath that a witness in respect of whom a witness order or witness summons is in force is unlikely to comply with the order or summons, the judge may issue a warrant to arrest the witness and bring him before the court before which he is required to attend:
‘Provided that a warrant shall not be issued under this subsection in the case of a witness subject to a conditional witness order unless notice has been given requiring him to attend the trial, nor in the case of a witness subject to a witness summons unless the judge is satisfied by such evidence as aforesaid that the witness is likely to be able to give material evidence or produce any document or think likely to be material evidence in the proceedings.
‘(2) Where a witness who is required to attend before a court of assize or quarter sessions by virtue of a witness order or a witness summons fails to attend in compliance with the order or summons, that court may—(a) in any case, cause to be served on him a notice requiring him to attend the court forthwith or at such time as may be specified in the notice; (b) if the court is satisfied that there are reasonable grounds for believing that he has failed to attend without just excuse, or if he has failed to comply with a notice under paragraph (a) above, issue a warrant to arrest him and bring him before the court.’
The facts have not yet been investigated. The reason for this is that a summons was taken out asking for an order that certain paragraphs of the plaintiff’s statement
Page 732 of [1970] 2 All ER 729
of claim should be struck out on the ground that they disclose no reasonable cause of action. The statement of claim was drafted by and was signed by the plaintiff himself. The summons asked that the action should be dismissed. The summons was taken out under the provisions of RSC Ord 18, r 19. No evidence was therefore admissible on the application. The sole question was whether on the assumption that the facts as alleged could be proved a reasonable cause of action was disclosed. We do not know whether the plaintiff is able to substantiate the allegations which he makes. The statement of claim as drafted by the plaintiff was as follows:
‘1. The Plaintiff is a general medical practitioner, living at 863 Finchley Road, London, N.W.11, carrying on medical practice mainly at 92 St. Stephens Gardens, London, W.2.
‘2. The Defendant is a solicitor of the Supreme Court and was employed by or on behalf of one Mr. T. Advani in connection with the defence of the said Mr. Advani in a criminal cause at the Central Criminal Court.
‘3. The said Mr. Advani, the Defendant’s client, had been registered as the Plaintiff’s patient under the National Health Services.
‘4. The Defendant, as the solicitor of the said Mr. Advani, issued a witness summons on or about 27th May 1968 requiring the Plaintiff to attend Mr. Advani’s trial as a witness.
‘5. The Defendant omitted to take necessary and sufficient steps to intimate the plaintiff about issue of the said witness summons; omitted to take necessary and sufficient steps to serve the witness summons on the Plaintiff; and thus failed to serve the witness summons altogether.
‘6. At the trial of Mr. Advani, on or about 12th June 1968, the defendant falsely alleged that he had taken proper steps to serve the said witness summons on the Plaintiff; accused the Plaintiff, maliciously and without reasonable or probable cause, of having wilfully evaded service of the witness summons; instructed Mr. Advani’s counsel to apply to the judge for the issue of a bench warrant for the arrest of the Plaintiff; and thus caused the judge to issue such a bench warrant.
‘7. In consequence of the said bench warrant, the Plaintiff was arrested, detained and produced in custody before the court.
‘8. The said judge, after having heard the evidence of both the Defendant and the Plaintiff on the question of non-attendance of the Plaintiff as a witness, decided to dismiss the charge of wilful evasion and discharged the Plaintiff.
‘9. The Defendant conducted himself negligently in respect of the Plaintiff in that, having omitted to take necessary and sufficient steps to intimate the Plaintiff about issue of the witness summons and to take necessary and sufficient steps to serve the witness summons on the Plaintiff, he the Defendant, being a solicitor failed to ascertain the reasons for the non-attendance of the Plaintiff as a witness; made unfounded allegations of wilful evasion against the Plaintiff; and thus improperly caused the arrest and detention of the Plaintiff.
‘10. The Plaintiff has thereby been injured in his reputation and has suffered injuries in respect of his and his wife’s health.’
The paragraphs which it was sought to strike out were paras 5, 6, 9 and 10.
The master made no order save that certain words in para 6 be struck out. The defendant appealed to the learned judge in chambers. The learned judge dismissed the appeal and restored the words which had been struck out. By leave, the defendant appealed to the Court of Appeal ([1969] 3 All ER 1153, [1970] 1 QB 283). The appeal was allowed; the statement of claim was struck out and the action was dismissed. Leave to appeal was refused. The plaintiff petitioned for leave to appeal. Leave was given on condition that the pleadings should be amended so as to disclose an allegation of malicious arrest.
Page 733 of [1970] 2 All ER 729
Paragraphs 11 and 12 were thereafter added to the statement of claim. Those paragraphs are as follows:
11. Further or in the alternative on the 12th June 1968 at the trial of Mr Advani the Defendant maliciously and without reasonable or probable cause instructed Mr. Advani’s Counsel to apply to His Honour Judge McKinnon Q.C. for a warrant to arrest the Plaintiff. In support of the said application the Defencant falsely stated on oath that the Plaintiff was evading service of the said witness summons and caused and procured His Honour to issue a warrant for the arrest of the Plaintiff. On the 13th June 1968 at about 1 am the Plaintiff was arrested under the said warrant and imprisoned until 10.30 am on the said date at which hour he was brought in custody before His Honour who after hearing the Plaintiff’s evidence in the matter discharged the Plaintiff from such custody. The Plaintiff states that his arrest and imprisonment were procured by the Defendant maliciously and without reasonable or probable cause by wrongful abuse of the process of court.
‘12. By reason of the premises the Plaintiff has suffered in body and mind and has been put to expense and inconvenience and has suffered loss and damages.’
The judgments in the Court of Appeal ([1969] 3 All ER 1153, [1970] 1 QB 283) were based on the ground that the arrest of the plaintiff was caused by the evidence which the defendant gave in court and that as a witness may not be sued for what he says in the witness box it followed that the action was not maintainable; if a civil action may not be brought in respect of what a witness says on oath in court neither, it was held, should an action lie in respect of instructions to apply for an arrest.
With every respect I consider that this reasoning fails to give due regard to the nature of an action for malicious arrest. What the plaintiff alleges is that the defendant acting both maliciously and without reasonable cause procured and brought about his arrest. The plaintiff is not suing the defendant on or in respect of the evidence which the defendant gave in court. The plaintiff is suing the defendant because he alleges that the defendant procured his arrest by means of judicial process which the defendant instituted both maliciously and without reasonable cause. The fact that in order to procure the arrest someone (who might or might not be the defendant himself) would have to give evidence on oath (see s 4 of the Criminal Procedure (Attendance of Witnesses) Act 1965) does not have the result that an action, if otherwise sustainable, could not be brought. The gist of the complaint, where malicious arrest is asserted, is not that some evidence is given (although if evidence is given falsely it may be contended that malice is indicated) but that an arrest has been secured as a result of some malicious proceeding for which there was no reasonable cause.
It is well settled that no action will lie against a witness for words spoken in giving evidence in a court even if the evidence is falsely and maliciously given (see Dawkins v Lord Rokeby and Watson v M’Ewan). If a witness gives false evidence he may be prosecuted if the crime of perjury has been committed but a civil action for damages in respect of the worlds spoken will not lie (see the judgment of Lord Goddard CJ in Hargreaves v Bretherton). Nor is this rule to be circumvented by alleging a conspiracy between witnesses to make false statements (see Marrinan v Vibart).
This, however, does not involve that an action which is not brought in respect of evidence given in court but is brought in respect of an alleged abuse of process of court must be defeated if one step in the course of the abuse of the process of the court involved or necessitated the giving of evidence. It must often happen that a
Page 734 of [1970] 2 All ER 729
defendant who is sued for damages for malicious prosecution will have given evidence in the criminal prosecution of which the plaintiff complains. The essence of the complaint in such a case is that criminal proceedings have been instituted not only without reasonable and probable cause but also maliciously. So also in actions based on alleged abuses of the process of the court it will often have happened that the court will have been induced to act by reason of some false evidence given by someone. In such cases the actions are not brought on or in respect of any evidence given but in respect of malicious abuse of process (see Elsee v Smith).
In Daniels v Fielding, a plaintiff succeeded in an action for malicious arrest. In the Exchequer Chamber Rolfe B said ((1846) 16 M & W at 207):
‘The action is in its character similar to an action for a malicious prosecution on a criminal charge, and the declaration ought therefore, in analogy to the course of pleading in such actions, to state what the false charge or statement was by which the judge has been misled.’
The fact that the false statement had been in an affidavit did not in any way debar the plaintiff from succeeding in his claim. In Ross v Norman, the declaration alleged that the defendant maliciously and without any reasonable or probable cause of action caused the plaintiff to be arrested. The arrest was brought about by procuring an order for a capias from a judge as the result of a false affidavit. Certain points were unsuccessfully argued on demurrer. One of the points raised in support of the demurrer was that the declaration had not shown that the affidavit was wilfully false within the defendant’s knowledge, but there was no suggestion that the action would not lie because the defendant was protected in respect of what he has sworn.
That the courts have distinguished between actions brought in respect of malicious process and those brought in respect of evidence given in proceedings was illustrated by Revis v Smith. The Court of Chancery ordered the sale of a testator’s real estate and the plaintiff, an auctioneer, was proposed to the court as a fit and proper person to be appointed by the court to sell the property. The defendant swore and filed an affidavit which seriously reflected on the plaintiff and which contained many defamatory statements. As a result the court did not appoint the plaintiff. He sued the defendant for damages. It was held that the action did not lie. In the Judgments a distinction was drawn between the claim them made and cases in which the process of the courts had been abused maliciously and without reasonable or probable cause. Jervis CJ held that no action for defamation would lie against the defendant.
In Melia v Neate there was a claim for damages for having maliciously and without reasonable or probable cause procured an order of a judge for the arrest of the plaintiff for an alleged debt. The action was brought against three persons: one was a builder, another was his attorney and the other was the attorney’s clerk. A contract for the erection of a church had been entered into between the plaintiff and the builder. The builder claimed that a sum for extras was due; the architect told the builder that no sum was due. The attorney on behalf of the builder then issued a writ against the plaintiff claiming that a sum was due; the writ was served by the clerk. There followed an application to a judge in chambers to arrest the plaintiff on the ground that he was about to leave England. The application was supported by an affidavit jointly made by the builder and the clerk. As a result the plaintiff was arrested. In the action which he later brought it was said that there was no justification for certain statements in the affidavit. These were fully considered and examined. The jury were directed that to sustain the action it was necessary to prove that the defendants had caused the arrest maliciously and without reasonable
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and probable cause. There was no suggestion that any immunity from liability could result from the fact that the arrest had been the result of the affidavit.
In Johnson v Emerson, a claim was brought against two persons for damages for falsely, maliciously, and without reasonable and probable cause procuring the plaintiff to be adjudicated bankrupt. It succeeded against one of them who appealed. In reference to him Cleasby B in the Court of Exchequer said ((1871) LR 6 Exch at 333):
‘It was hardly contested that the part taken by the defendant was such, that if he acted without reasonable and probable cause and was actuated by malice he would be responsible in this action, though he acted only as attorney.’
There had been answers given by the jury which showed that the defendant had acted personally in carrying on the proceedings and had acted of his own accord apart from the instructions of his client as to the steps taken. An affidavit in support of the petition for adjudication had been necessary. It had been prepared by the defendant and sworn to by a creditor. It was said to contain false suggestions and statements. All the facts relating to it were examined. One matter that was considered was therefore whether the adjudication was obtained on an affidavit which was untrue. Cleasby B in his judgment said ((1871) LR 6 Exch at 344):
‘I apprehend that, if three things concur, the person prosecuting the proceedings is liable to an action. First, if the proceeding be really without foundation; and this must be evidenced by the proceedings having finally terminated in favour of the plaintiff, whether the proceedings be in bankruptcy or by indictment (see Whitworth v. Hall ((1831) 2 B & Ad 695, [1824–34] All ER Rep at 484), where it is said that actions for malicious prosecutions, malicious arrests, and taking bankruptcy proceedings, stand upon the same foundation). Secondly, the proceeding must have been taken without reasonable and probable cause. And thirdly, lest persons should be deterred, by fear of the consequences, from enforcing the law with despatch upon bona fide suspicion, before a man can be made responsible it must be shewn that, in taking the proceeding, he was actuated by malice or by some bad motive.’
A point was taken in the present case that in paras 6 and 11 of the statement of claim are the words ‘at the trial’. It was contended that the defendant gave evidence on matters relevant to the defence of Mr Advani and that the defendant was therefore entitled to the immunity from action to which a witness is entitled. This, however, raises questions which can only be determined when the facts are ascertained. The only issue now arising is whether the claim of the plaintiff must at this stage be dismissed. Different considerations would apply if the claim was one for damages in respect of evidence given by a witness. The present claim is not such a claim. The gist and essence of the claim is that process was instituted as a result of which the court was induced to order the arrest of the plaintiff. It is alleged that this was done maliciously and without reasonable cause and that the giving of evidence was merely a step in bringing about the alleged abuse of process.
In my view the learned judge came to the correct conclusion in refusing to dismiss the action.
I would allow the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the speech of my noble and learned friend Lord Morris of Borth-y-Gest and for the reasons he has given I too would allow the appeal.
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LORD WILBERFORCE. My Lords, I have had the benefit of reading in advance the opinion prepared by my noble and learned friend Lord Morris of Borth-y-Gest. That opinion demonstrates that a man cannot be debarred from bringing an action for unlawful arrest by reason only of the fact that a step in procuring the arrest consisted of evidence given in court in the course of another person’s trial. I agree with this proposition but wish to add that I would disagree with the striking out of this action on another broader ground. Even if one concentrates attention on the evidence given by the defendant in the Central Criminal Court, I can see no reason of public policy for basing immunity from civil action on this circumstance. The reasons why immunity is traditionally (and for this purpose I accept the tradition) conferred on witnesses in respect of evidence given in court, are in order that they may give their evidence fearlessly and to avoid a multiplicity of actions in which the value or truth of their evidence would be tried over again. Moreover, the trial process contains in itself, in the subjection to cross-examination and confrontation with other evidence, some safeguard against careless, malicious or untruthful evidence.
But none of this applies as regards such evidence as was given in support of the application for a bench warrant. It was given ex parte; the plaintiff had no means, and no other party any interest, in challenging it; so far from the public interest requiring that it be given absolute protection, that interest requires that it should have been given carefully, responsibly and impartially. To deny a person whose liberty has been interfered with any opportunity of showing that it was ill-founded and malicious, does not in the least correspond with, and is a far more serious denial than, the traditional denial of the right to attack a witness to an issue which has been tested and passed upon after a trial. Immunities conferred by the law in respect of legal proceedings need always to be checked against a broad view of the public interest. So checked, the present case provides no justification for protecting absolutely what the solicitor said in the court. I need not add that I am not prejudging in any way whether what he said was well-founded or lacking in malice. That is for the action to decide.
LORD DIPLOCK. My Lords, I have read the speech of my noble and learned friend Lord Morris of Borth-y-Gest and agree with it in the order that he proposes.
Appeal allowed.
Solicitors: Francis & Solomons (for the plaintiff); Jas H Fellowes & Son (for the defendant).
S A Hatteea Esq Barrister.
Hastings and Thanet Building Society v Goddard
[1970] 2 All ER 737
Categories: LAND; Mortgages
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 13 MAY 1970
Mortgage – Possession of mortgaged property – Parties – Deserted wife in occupation of former matrimonial home – Default by husband in mortgage repayments unknown to wife – No notice to wife of proceedings for possession by mortgagee against husband until after judgment – Whether wife entitled to be joined as defendant in action against husband – Right of wife to pay off outstanding instalments herself – Matrimonial Homes Act 1967, s 1(5).
The defendant executed a legal charge of the matrimonial home (which was registered land) in favour of the plaintiffs. The legal charge was duly registered in the Land Registry on 22 November 1966. On 21 March 1969, the wife was deserted by the defendant. On 20 March 1969, immediately before the wife was deserted by the defendant, she registered a class F land charge under the Matrimonial Homes Act 1967. After the date of desertion the defendant, unknown to the wife, failed to pay the monthly instalments of capital and income due on the legal charge to the plaintiffs. The wife remained in the home with the three children of the marriage. On 30 September 1969, the plaintiffs issued proceedings against the defendant for possession in default. The wife was not given notice of the proceedings until she received advice from the sheriff that the plaintiffs had obtained an order for possession and that the warrant would be executed two weeks later.
Held – The wife was entitled to be joined as a defendant in the proceedings because she had a right to pay off the outstanding mortgage instalments herself under s 1(5)a of the Act although the land charge was not effective as against the plaintiffs as prior mortgagees (see p 739 f and j, and p 740 a, post).
Notes
For necessary parties to proceedings for delivery of possession of mortgaged premises, see 27 Halsbury’s Laws (3rd Edn) 363, para 685.
For the rights of a husband or wife to occupy the matrimonial home, see Supplement to 19 ibid, para 1388A.
For the Matrimonial Homes Act 1967, s 1, see 17 Halsbury’s Statutes (3rd Edn) 139.
Cases cited
Brighton and Shoreham Building Society v Hollingdale [1965] 1 All ER 540, [1965] 1 WLR 376.
Miles v Bull [1968] 3 All ER 632, [1969] 1 QB 258.
Motion
This was a motion by the plaintiffs, Hastings and Thanet Building Society, in an action by them against the defendant, Peter Ernest Goddard, for possession of his former matrimonial home, whereby the plaintiffs sought that an order made in the action (1) that Margaret Elizabeth Goddard, the deserted wife of the defendant who was still in occupation of the former matrimonial home should be made a defendant to the action and (2) that there should be a stay of execution of the warrant for possession, be discharged on the ground that the wife had not asserted or claimed any right against the plaintiffs entitling her to be joined as defendant in the proceedings.
Page 738 of [1970] 2 All ER 737
Hubert Picarda for the plaintiffs.
R E Hammerton for the wife.
13 May 1970. The following judgment was delivered.
FOSTER J. In this case the defendant made a legal charge on certain property at 64A Cairo Avenue, Peacehaven, Sussex, to the plaintiffs whereby he charged the land, which was registered land, for the sum of £4,975 and interest thereon which was repayable, both as to capital and income by monthly equal instalments of £36 2s. That charge was duly registered in the Land Registry on 22 November 1966.
At that time the defendant and the wife were living together on the premises but on 21 March 1969, the defendant deserted the wife, and the wife, no doubt knowing of the impending desertion, registered the day before, on 20 March 1969, a class F land charge which is a new land charge brought in under the Matrimonial Homes Act 1967. The defendant, up to that date, had paid all the instalments of capital and income under the legal charge but from then on failed to pay any instalments and the first instalment he failed to pay was due on 26 March 1969, just after he had deserted the wife. On 30 September 1969, the plaintiffs issued a summons for possession in default against the defendant because he was in default of the agreed payment of the capital and income, as I have said, from 26 March 1969. But the wife, who remained in the matrimonial home, or the former matrimonial home, had no notice of those proceedings whatever. Those proceedings went forward in the usual way. An order of Master Wakeford was made on 11 December 1969, giving the plaintiffs an order for possession within 28 days, and then proceedings went on to an order for possession and for a warrant. The first that the wife knew of these proceedings was on 16 March 1970 when she received a letter from the sheriff of Sussex in which he informed her that the plaintiffs had obtained an order for possession of the premises and that the warrant was to be executed on 1 April 1970. She then, I think, got in touch with the sheriff with the result that that warrant was not executed on 1 April 1970, and by a notice of motion dated 9 April 1970, she asked for this relief:
‘1. An Order be made that the [wife] be made a Defendant to this action;
‘2. Further or alternatively to the relief in paragraph 1 hereof that there may be a stay of execution of the Warrant for possession in this action; … ’
There was a third claim which is not now being proceeded with. This matter came before me on 14 April and I then made an order that the wife should be joined as a defendant, but the plaintiffs subsequently desired to appeal from that order and, as I had not heard a great deal of argument on the matter, I invited them, if they so wished, to apply that that order should be stayed or that it should be reversed, on the ground that the wife had not asserted or claimed any rights against the plaintiffs entitling her to be joined as a defendant in these proceedings.
My attention has been called to a note to RSC Ord 88, rr 2–8b, which states:
‘Parties in Possession Cases.—The usual principles apply: the plaintiff will join as a defendant and serve every person against whom he claims relief in the action and will normally be well advised to join and serve every person available to be sued, who might assert a right against him in respect of the property forming the subject matter of the action … ’
It is said on behalf of the plaintiffs that in her affidavit the wife does not assert any right of her own as against the plaintiffs. It is quite true that the registration of the class Fland charge does not take priority over the registration of the legal charge which was made on 22 November 1966, for the reason that the class F land charge under the Matrimonial Homes Act 1967 does not have any effect as against a prior mortgagee. Section 1 of the Matrimonial Homes Act 1967 provides:
Page 739 of [1970] 2 All ER 737
‘(1) Where one spouse is entitled to occupy a dwelling house by virtue of any estate or interest or contract or by virtue of any enactment giving him or her the right to remain in occupation, and the other spouse is not so entitled, then, subject to the provisions of this Act, the spouse not so entitled shall have the following rights (in this Act referred to as “rights of occupation”):—(a) if in occupation, a right not to be evicted or excluded from the dwelling house or any part thereof by the other spouse except with the leave of the court given by an order under this section …
‘(5)c Where a spouse is entitled under this section to occupy a dwelling house or any part thereof, any payment or tender made or other thing done by that spouse in or towards satisfaction of any liability of the other spouse in respect of rent, rates, mortgage payments or other outgoings affecting the dwelling house shall, whether or not it is made or done in pursuance of an order under this section, be as good as if made or done by the other spouse; and a spouse’s occupation by virtue of this section shall for the purposes of the Rent Act 1968 (other than Part VI thereof) be treated as possession by the other spouse … ’
The only other section I need refer to is s 2(6) which provides:
‘At the end of section 10(1) of the Land Charges Act 1925 which lists the classes of charges on, or obligations affecting, land which may be registered as land charges) there shall be added the following paragraph:—“Class F: A charge affecting any land by virtue of the Matrimonial Homes Act 1967”; and in the enactments mentioned in the Schedule to this Act there shall be made the consequential amendments provided for by that Schedule.’
That class F charge only takes priority over some person who is claiming through the spouse and is not effective as against a prior mortgagee, such as the plaintiffs are in this case. On the other hand, s 1(5) gives the wife a right to pay off the mortgage payments, and at the stage it got to when the class F land charge was registered on 20 March 1969, it meant that she was in a position to pay off, if she could find the money, the amount due to the plaintiffs on 26 March 1969. She could have applied to the Department of Health and Social Security for a grant to be made to her—whether it would have been successful I know not—for sufficient to enable her and the three children of the marriage, who have been deserted, to remain in the house.
She had no knowledge first of all that that payment, and the subsequent payments, had not been made by the defendant who had deserted her, nor did she have any notice of the proceedings which were taken for possession and to turn her and her family out until, as I have said, she got the letter stating that the sheriff was coming to turn her out of the house. She has also started proceedings in the divorce court against the defendant and on 20 May a summons is to be heard for alimony and the petition may be heard within three months.
In my judgment, the plaintiffs had notice because of the Class F Land Charge when they started the proceedings for possession that there was a deserted wife in the premises—I do not know whether they knew what the state of the family was—and no chance was given her to exercise the right she undoubtedly has under the Matrimonial Homes Act 1967 herself to pay off the instalments and the capital, if she had the money. In those circumstances, in my judgment, it is correct that she should now be given leave to come in as a defendant to the proceedings for, although she may be impecunious and it may be difficult in divorce proceedings to get sufficient money to pay off the whole of the charge or even to get sufficient from the Department of Health and Social Security to do so, one never knows. She may win a
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football pool tomorrow or get a large legacy and it would not be right, in those circumstances, that she, not having had any notice of the proceedings, should be unable to exercise the rights given to her by s 1(5) of the Act.
I therefore propose to make an order on the wife’s motion in the terms of paras (1) and (2), ie that she be made a defendant to the action and that an order for a stay of execution on the warrant for possession should be made.
Order accordingly. No order on plaintiffs’ motion. Leave to appeal.
Solicitors: Henry Boustred & Sons agents for Percy Walker & Co, Hastings (for the plaintiffs); E P Rugg & Co agents for F W A Cushman & Son, Brighton (for the wife).
Jacqueline Metcalfe Barrister.
Note
Re C M G
[1970] 2 All ER 740
Categories: EQUITY: HEALTH; Mental health
Court: COURT OF PROTECTION
Lord(s): STAMP J
Hearing Date(s): 2 FEBRUARY, 14 MAY 1970
Equity – Undue influence – Gift by patient to private independent mental hospital – Sanctioning of gift by Court of Protection – Presumption of undue influence from relationship of parties – Patient’s desire to make gift – Relevance of patient’s wishes in absence of evidence rebutting presumption – Whether patient might have been expected to provide such gift if mental disorder and influence terminated – Mental Health Act 1959, s 103(1) (d).
Notes
For powers of the judge in relation to the property and affairs of a patient, see 29 Halsbury’s Laws (3rd Edn) 573, 574, para 1051, and 577, 578, para 1056.
For the Mental Health Act 1959, s 103, see 39 Halsbury’s Statutes (2nd Edn) 1050.
Cases referred to in judgment
Allcard v Skinner (1887) 36 Ch D 145, [1886–90] All ER Rep 90, 56 LJCh 1052, 57 LT 61, 12 Digest (Repl) 111, 659.
Wright v Proud (1806) 13 Ves 136, 33 ER 246, 33 Digest (Repl) 592, 81.
Summons
This was an application by the receiver for authority to transfer certain investments belonging to the patient, C M G, who was living in a private independent mental hospital, to the board of governors of the hospital. The application which was heard and determined in chambers, was adjourned into court for the part of the judgment set out below. The facts are set out in the judgment.
R Cozens-Hardy Horne for the receiver.
14 May 1970. The following judgment was delivered.
STAMP J. This case raises a question of principle and I propose to give part of my judgment in court and then adjourn into chambers. This application is made pursuant to s 103(1)(d)a of the Mental Health Act 1959, by the receiver that he may be
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authorised in the name of and on behalf of the patient to transfer certain investments belonging to the patient to the board of governors of the private independent mental hospital where the patient is living, to be held on trust to apply the same in or towards the provision of facilities for a particular form of mental treatment. The patient has expressed the wish to make the gift which is a large one; but she suffers from chronic schizophrenia and has been described as facile, foolish, vain and fulsome.
In my judgment, the relationship between the authorities in charge of the mental hospital on the one hand and the patient residing there is one of those confidential relationships which fall within the doctrine of undue influence considered and discussed in Allcard v Skinner. If no receiver had been appointed and the gift now in contemplation had been made by the patient herself, it would have been presumed to have been induced by undue influence and could not stand: see Allcard v Skinner, Wright v Proud.
How then, in determining whether the patient should or should not make this gift, should this court, free from any influence, approach the matter? The court ought not, I think, pay regard to the undoubted fact that the patient desires the gift to be made unless it is quite satisfied by the evidence that the desire is spontaneous and uninspired by that influence which is by law presumed to have been brought to bear. There is in this case no such evidence, nor could there be in a case where the patient is in the condition of this particular patient. To give effect to the proposal merely because it reflected the wishes of the patient, induced by influence which ought not to be brought to bear, would be to countenance and not to deter the actual exercise of that influence and would ignore my duty to protect this patient and other patients from such influence.
In my judgment, I must approach the matter de novo. I am assisted to the conclusion that I ought to approach the matter de novo by the very terms of s 103(1)(d) itself which emplowers the judge to give directions for the gift of the property of the patient for any purpose which the patient might be expected to provide if she were not mentally disordered. It is thus, not because I am persuaded that the patient in her unhappily disordered mind wishes to give the property to the hospital, but because I come to the conclusion, if I do, that if she were not mentally disordered she might be expected to make it, that I may direct that the provision be made.
The question I must therefore ask myself if this: is the proposed gift such a gift as the patient might be expected to provide if she had ceased to be mentally disordered and was removed from any influence which may have been brought to bear on her in the past? The answer to that question involves no principle and at this point I will adjourn to chambers.
Solicitors: Rooks & Co agents for Thompson & Cooke, Stalybridge (for the receiver).
Richard J Soper Esq Barrister.
Robbins v Robbins
[1970] 2 All ER 742
Categories: FAMILY; Other Family
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P AND PARK J
Hearing Date(s): 23, 24 APRIL, 15 MAY 1970
Magistrates – Husband and wife – Matrimonial order – Interim order – Power to make interim order after a finding – Order for maintenance – Matrimonial Proceedings (Magistrates’ Courts) Act 1960, s 6.
On the hearing of a complaint under the Matrimonial Proceedings (Magistrates’ Courts) Act 1960, an interim order, eg for maintenance, can be made under s 6 after a finding has been made (see p 751 g, post).
Fulker v Fulker [1936] 3 All ER 636 approveda.
Notes
For orders which a magistrates’ court can make in matrimonial proceedings, see 12 Halsbury’s Laws (3rd Edn) 487–489, para 1087.
For the Matrimonial Proceedings (Magistrates’ Courts) Act 1960, s 6, see 17 Halsbury’s Statutes (3rd Edn) 255.
Cases referred to in judgment
Brown v Brown [1956] 2 All ER 1, [1956] P 438, [1956] 2 WLR 1000, 120 JP 201, Digest (Cont Vol A) 821, 6724Aa.
Churchman v Churchman [1945] 2 All ER 190, [1945] P 44, 114 LJP 17, 173 LT 108, 61 TLR 464, 27 Digest (Repl) 378, 3131.
Cohen v Cohen [1947] 2 All ER 69, [1947] P 147, [1947] LJR 1360, 111 JP 447, 27 Digest (Repl) 707, 6753.
Emanuel v Emanuel [1945] 2 All ER 494, [1946] P 115, 114 LJP 60, 173 LT 118, 61 TLR 538, 27 Digest (Repl) 393, 3236.
Fulker v Fulker [1936] 3 All ER 636, 155 LT 541, 101 JP 8, 27 Digest (Repl) 718, 6870.
Higgs v Higgs [1941] 1 All ER 214, [1941] P 27, 110 LJP 27, 165 LT 335, 105 JP 119, 27 Digest (Repl) 716, 6838.
Jenkins v Jenkins [1956] 2 All ER 596, [1956] P 458, [1956] 3 WLR 262, 120 JP 366, Digest (Cont Vol A) 821, 6724Ab.
R v Essex Justices, ex parte Final [1962] 3 All ER 924, [1963] 2 QB 816, [1962] 2 WLR 38, 127 JP 39, 33 Digest (Repl) 224, 745.
R v Lanyon (1872) 27 LT 355, [1861–73] All ER Rep 165, 3 Digest (Repl) 463, 470.
Richards v Richards [1952] 1 All ER 1384, [1952] P 307, 116 JP 358, [1952] 1 TLR 1321, Digest (Cont Vol A) 728, 2979a.
Cases also cited
Bond v Bond [1964] 3 All ER 346, [1967] P 39.
S (an infant) v Manchester City Recorder [1969] 3 All ER 1230, [1970] 2 WLR 21.
Webb v Leadbetter [1966] 2 All ER 114, [1966] 1 WLR 245.
Appeal
This was an appeal by the husband, R T Robbins, against a decision of the justices at Sturminster Newton, Dorset, whereby a separation order was made in favour of the wife, S J Robbins, on the ground of his adultery. The facts are set out in the judgment.
B Galpin for the husband.
D J Trenner for the wife.
Page 743 of [1970] 2 All ER 742
Cur adv vult
15 May 1970. The following judgment was delivered.
PARK J read the judgment of the court. This is an appeal by the husband against a decision of the justices at Sturminster Newton in the county of Dorset whereby a separation order was made in favour of the wife on the ground of his adultery. The custody of the child of the marriage was granted to her (a supervision order being made); and he was ordered to pay maintenance of £7 10s per week in respect of the wife and £2 10s in respect of the child. The appeal was entered out of time; but the delay was accounted for partly by a mistake as to the procedure on these appeals and partly by an error in legal aid assessment which had to be rectified; no objection was raised on behalf of the wife to our hearing the appeal out of time; and we thought that, in all the circumstances, justice demanded the extension of time.
The wife’s complaint was dated 20 March 1969 and alleged that the husband on a day in January 1969 and on divers days subsequent thereto at 443 High Street, Swanage in the county of Dorset, committed adultery with Valerie Joan Richings, The wife applied for an order that she no longer be bound to cohabit with the husband; that the custody of the child be committed to her; and that he should pay maintenance for herself and the child. The complaint came on for hearing before the justices on 10 April 1969. The wife was represented by a solicitor. The husband appeared in person. According to the note of evidence supplied to us, as certified by the clerk of the court, the proceedings went as follows. They started by the chairman of the court enquiring of each party whether there was any possibility of a reconciliation and whether either was prepared to seek the advice of the probation officer. The wife and her solicitor were willing to attempt reconciliation, but the husband was not. The note then proceeds:
‘The Chairman then pointed out to the [husband] that he was not legally represented and informed him of the provisions of the Legal Aid and Advice Acts, 1949 and 1960. The [husband] replied that he had applied for legal aid but his earnings were such that legal aid was not available and under no circumstances did he intend to pay for it himself. In spite of this the Chairman stated that if the [husband] wished to apply for an adjournment to obtain legal aid the Court would consider such application favourably but the [husband] was adamant that the case should proceed that day.’
Evidently it appeared to the court that the husband would not be able effectively to cross-examine the wife and any witness called on her behalf or to examine any witness called by him. Accordingly (pursuant to the court’s statutory duty under s 61 of the Magistrates’ Courts Act 1952), the clerk told the husband that he would assist him in the presentation of his defence. Before putting the complaint, he explained in simple language that the husband could deny the allegation of adultery, or, if he did not do that, that there were available to him the defences of condonation, connivance and conduct conducing. The husband said that he understood the clerk’s explanation, but that he did not wish to avail himself of these defences. The complaint was read to him and he admitted it.
The wife then gave evidence. The marriage took place on 26 December 1966, the husband being aged 22 and the wife 18. From the end of 1967 they lived at 1 Victoria Cottages, Sturminster Newton, which is a council house; and they were still living there at the time of the hearing. The child of the marriage, David Thomas, was born on 1 February 1968. The wife said that ‘things started going wrong just before Christmas, 1968’. The husband was then a member of a band called ‘the Night Riders Trio’, the other two members of it being (as now appears) his brothers. He was occupied with the band for three or four nights every week and was also out working on the remaining nights of the week. The husband said that the band obtained engagements as far north as Birmingham, where they were paid £30 per
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night. The wife said that over Christmas the trio managed to earn £130 between them. The husband’s main employment was then and still is on a mink farm, where (according to him) he earns £13 per week net (though his evidence was far from precise or convincing). Towards the end of January 1969, the wife found a hotel bill in her husband’s coat pocket. She produced it in court. It showed that, on the night of 24th–25 January 1969, a ‘Mr and Mrs Robbins’ had stayed at a hotel in Coventry. From that time, the wife said, ‘things have been most unsatisfactory between us’. No sexual intercourse had occurred since some time in January 1969, although they continued to live in the same house. The wife explained that there was nowhere else that she could live as her mother’s house was overcrowded, and that for a long time she had hoped that the husband would give up his association with the other woman and return to her. The wife was asked a few questions by the husband. These were directed to the manner in which she cared for the child and to her knowledge of his earnings from the band.
The wife had consulted solicitors. In consequence, on 6 March 1969 an inquiry agent instructed by them made an appointment to see the husband and Valerie Joan Richings. The inquiry agent gave evidence about the interview with them and produced written confessions after caution. The husband’s statement contained the following passages:
‘My marriage had never been completely successful and has got worse as time went on. There are a great many arguments between my wife and I.
‘In December 1968 I met a girl named Valerie Richings. This was while I was playing in the band.
‘I became fond of Valerie and asked her to go out with me. She accepted and we started to see each other about twice a week. I told Valerie that I was a married man from the first time we went out together.
‘Towards the end of January 1969 sexual intercourse took place between Valerie and I at her home at 442, High Street, Swanage, Dorset.
‘Valerie and I spent a night together at the Bradford Hotel in Coventry on the 25th January 1969. We registered as Mr. and Mrs. Robbins. Intercourse did not take place between us as Valerie was having a period at the time. We have continued to see each other fairly often from December 1968 onwards and sexual intercourse has taken place between us on a number of occasions. This has always taken place at Valerie’s home.
‘The last time intercourse took place between my wife and I was in April or May, 1968.
‘I feel now that there is no chance for my marriage and I would like my wife to divorce me.
‘Valerie only accepted to come out with me after I told her there was no love between my wife and I and that my marriage was finished as far as I was concerned.’
Miss Richings’s statement, made in the husband’s presence, had the following sentences:
‘I became fond of [the husband] and at the end of January 1969, I cannot remember the actual date, sexual intercourse took place between us at my home in Swanage.
‘We have continued to go out together and we now see each other about four times each week.
‘Sexual intercourse has taken place between us on a number of occasions now. It has always taken place at my home.’
The husband gave evidence. The clerk’s notes record him as saying this about the marriage:
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‘So far as the marriage is concerned I would like to point out that when we first got married we lived with her mother, and my wife has not told you the reason why we left. The reason was my wife did not do the things her mother wanted her to do. We had big rows. We were more or less kicked out of the place. We heard her parents say “they will have to go” and we moved to my mother’s place. Ever since we have been married we have never had a place to ourselves. There is no hope whatsoever of a reconciliation. It would not help if the probation officer was to intervene. I am not making any plans to move out of the matrimonial home.’
The greater part of the husband’s evidence, both in chief and under cross-examination, was concerned with the amount he earned as a member of the trio and with his concern for the manner in which the child was cared for by his wife. The notes record him as saying about his earnings from the trio:
‘We have no arrangement about how we are paid. We have just about £500 worth of equipment and we have to pay for that. We bought that just before Christmas … I do not have anything to do with the financial side … The books are kept in order by one of the other members of the group … Sometimes we get £30 per night. I do not know how much money we have in our bank. Each of our vehicles was bought by the group. They allowed us so much to pay for our cars … If I left the group tomorrow I would have no worries at all. The group goes on paying for the car I have got. We just get our money and travelling expenses. We also get beer money each week—a couple of pints each night. If I want a month’s rent, I ask them and they let me have it.’
(The rent was £2 2s 6d per week.) Under cross-examination, he said:
‘We keep some ready cash back. If I want a month’s rent, even down to borrowing a fiver, they let me have it. That represents part of my drawings from the group. It amounts to quite a considerable help. I don’t get much out of it. We get 12/6 per night plus two pints of beer. We have had some profit. If I want any money, I get it out of the group. I might borrow £5 once in every three months. We are all equal partners.’
After answering further questions about the child, the husband concluded his evidence by saying (presumably in answer to the clerk): ‘There is nothing else I wish to say and I have no witnesses to call.’
The Clerk’s notes then record what happened thereafter. It is clear that these notes must have been made after 10 April 1969, but there is no reason to suppose that they are, for that or any other reason, in any respect inaccurate.
‘Having considered the merits of the case the Bench announced that they found the complaint proved. However, in view of the complaints by the husband about the welfare of the child the Court adjourned the case under Section 4 of the Matrimonial Proceedings (Magistrates’ Courts) Act 1960 for a report from the Probation Officer before deciding the question of custody, access and supervision of the child. Also in view of the completely unsatisfactory explanation regarding the earnings of the Group the justices asked the Probation Officer to compile a report under Section 60 of the Magistrates’ Courts Act, 1952, as to the means of the parties and furthermore the Court asked the [husband] to produce the accounts of the group at the adjourned hearing in order that a true assessment of their earnings could be made. The case was then adjourned until Thursday, the 8 May and an interim order was made … ’
The justices’ reasons (in paras 3, 4 and 5) put the matter in much the same way. They stated:
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‘3. The evidence of adultery was both overwhelming and conclusive and the [husband] on Oath admitted committing adultery and never suggested or hinted that his wife’s conduct had conduced to his committing adultery.
‘4. We considered the various defences open to the [husband] but felt that none of them had any application to the facts in this case. There was no conflict whatsoever in the evidence and we therefore announced our decision that we found the complaint proved.
‘5. We considered that the question of the [husband’s] means required further information and we therefore requested that a Probation Officer’s report should be compiled in accordance with section 60(1) of the Magistrates’ Courts Act, 1952. To assist the Probation Officer we asked the [husband] to produce the accounts of the “Night Riders Trio” so that an accurate assessment of the [husband’s] earnings could be obtained.’
On 22 April 1969, the husband consulted a solicitor, Mr Best, who applied on his behalf for an emergency legal aid certificate, which was granted on 1 May 1969. Mr Best, having been told of the justices’ request for the trio’s books to be produced on the adjourned hearing, wrote to the clerk for the justices explaining that, as the books were at Bristol in connection with the affairs of another member of the group, it was unlikely that they would be available on the day fixed for the adjourned hearing, 8 May 1969. Later, Mr Best asked the husband to get authority from his brothers to disclose the books to the court.
The clerk’s notes also record what happened on 8 May, when the hearing was resumed. These notes, too, were obviously made at sometime after the date, but there is again no reason to doubt their accuracy. Paragraphs 6, 7 and 8 of the justices’ reasons describe what happened in much the same way as the notes. These paragraphs read as follows:
‘6. At the adjourned hearing the [husband] appeared with a solicitor who submitted that the case should be re-heard de novo on the ground that the [wife’s] conduct had conduced to the [husband’s] adultery. We had already announced that we had found the case proved in order to be able to obtain the Probation Officer’s report under Section 60(1) of the Magistrates’ Courts Act 1952. We considered that on the 10 April we had given the [husband] ample opportunity to apply for an adjournment or seek legal advice and in view of the fact that we had announced our decision it was not possible to re-hear the case.
‘7. At the hearing on the 8th May we read the Probation Officer’s report and asked the solicitor for the [husband] if the accounts of the “Trio” were available. The [husband’s] solicitor stated that such accounts were not forthcoming and he could express no opinion as to when such accounts would be available. On the [husband’s] own evidence the “trio” sometimes earned £30 os. od. per night and in the absence of the requested accounts we assessed the [husband’s] weekly earnings from this source at £10 os. od. per week. As the [husband] was also receiving approximately £14 os. od. per week from his regular employment we assessed the monetary side of our order on the whole of the evidence available to us at that time.
‘8. We therefore made a separation order granting custody of the child to the [wife] and reasonable access to the [husband]. We made a supervision order in respect of the child nominating the probation officer as the supervising officer and we ordered [the husband] to pay £7 10s. per week for his wife and £2 10s. od. per week for the child of the marriage. We also ordered that the [husband] should pay £10 10s. od. towards the [wife’s] costs.’
In an affidavit sworn on 7 November 1969, Mr Best gives his account of the proceedings on 8 May in these words:
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‘2. At the hearing on the 8th day of May, 1969, I submitted to the justices that since they had made an interim order on the previous occasion, it was still open to me to raise the defence of conduct conducing. The justices rejected this submission, holding that they were functi officio by reason of a purported finding of adultery made by them at the previous hearing.
‘3. Fulker v Fulker was cited to the justices, but they took the view that it was no longer good law. Through their clerk, they expressed the view that, having asked for a probation report, they were precluded by Higgs v Higgs from receiving further evidence as to the merits, and they also referred to R v Essex Justices, ex parte Final.
‘4. The question of whether, in their discretion, they would treat the [husband’s] case as closed and so refuse to hear further evidence, was not considered by the said justice.’
We refer to his para 5 later in this judgment. There does not appear to us to be any substantial inconsistency between these accounts of what happened on 8 May.
On 30 May 1969, the husband applied to the justices by way of complaint that the maintenance order dated 8 May 1969 should be varied by reducing the amount to be paid, on the ground that he had ceased to be a member of the Night Riders Trio on 12 May 1969 and had thereby suffered a loss of income. After some correspondence between the solicitors acting for the parties and the clerk to the justices, this application was adjourned by consent until after the determination of this appeal.
By his notice of appeal the husband asks this court to set aside or vary the justices’ order or in the alternative to remit the case to a fresh bench of justices for rehearing, on the ground that the justices were wrong in refusing to allow the husband to adduce evidence of conduct conducing on 8 May, and also on the ground that they never considered the question of conduct conducing in arriving at their decision to make the order. There are further grounds of appeal, to the effect that the amount of maintenance ordered was excessive having regard to the evidence of the husband’s means.
It is first necessary to consider what kind of order was made by the justices at the end of the hearing on 10 April 1969. If they made a matrimonial order within the meaning of the Matrimonial Proceedings (Magistrates’ Courts) Act 1960, it is conceded that, on 8 May 1969, they were functi offico and were, therefore, right in their decision to refuse to hear evidence of conduct conducing. By s 16(1) of that Act it is provided that: ‘“matrimonial order” means an order under section two of this Act … ’ Section 2(1) provides that, on hearing a complaint under s 1 (which sets out the various causes on which a complaint may be founded), the court may make a ‘matrimonial order’ containing one or more of a number of the provisions described in the subsection. The justices say that, on 10 April, they found the complaint proved and made an interim order. ‘Interim order’ is defined in s 6(1) as meaning ‘an order under section six of this Act … ’ The relevant part of s 6(1) provides:
‘Where in the case of any complaint made to a magistrates’ court under section one of this Act—(a) the magistrates’ court, at any time before making its final order on the complaint, adjourns the hearing of the complaint for any period exceeding one week … then, in a case falling within paragraph (a) … of this subsection the magistrates’ court … may make an [interim order].’
Section 6(2) provides that an interim order may contain, inter alia, a provision that a husband shall pay the wife a weekly sum. The justices’ interim order of 10 April was embodied in a printed from, which in its first paragraph set out the wife’s complaint, and then continued:
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‘On hearing the said complaint, it is hereby ordered that the hearing of the complaint be adjourned until the 8th day of May 1969. The [husband] shall until the date of a final order on or the dismissal of the complaint … pay … the weekly sum of £10 for the benefit of the [wife].’
The expression ‘final order’ is not defined in the Act. In s 4(1), the term used is ‘final order on any complaint’. From the context it appears to us that a final order on a complaint is an order which disposes by way of adjudication of all the allegations by way of complaint made in the summons, all defences thereto, and all the relief sought; and which also adjudicates on any child of the family whether relief in that respect is sought or not (see s 4). It is to be distinguished from a ‘matrimonial order’ (s 2) and from an ‘interim order’ (s 6). Clearly, a complaint has to be heard and determined before a matrimonial order can be made. ‘Complaint’, in this connection and also in s 6, means, in our view, the allegation of the ground for any relief and of the relief claimed.
According to the headnote in Fulker v Fulker ([1936] 3 All ER atr 636), the case cited by Mr Best, an interim order cannot be made where a finding has been made. The relevant portion of the headnote reads as follows:
‘(ii) if the original hearing terminated in a finding, the original order was wrong, as an interim order cannot be made upon a finding, and if the original order was bad, it could not be confirmed at the second hearing.’
In that case justices heard a wife’s summons for maintenance on the ground of the husband’s wilful neglect to provide reasonable maintenance for her. At the end of the first day’s hearing, they adjourned the case for three months and made an interim order by virtue of the power given to them by s 6 of the Summary Jurisdiction (Separation and Maintenance) Act 1925. When the case came on for hearing again, the court was differently constituted. The justices decided to allow the notes of evidence of the witnesses taken at the previous hearing to be read out. There was no fresh examination or cross-examination. At the end the justices purported to confirm an order which had been made at the previous hearing. They said (See [1936] 3 All ER at 638):
‘The case was adjourned 3 months ago in the hope that the parties would come together. They have not come together and the order will be confirmed.’
The husband appealed. Sir Boyd Merriman P, in the course of his judgment said ([1936] 3 All ER at 637), that at the first hearing the court could have done either of two things:
‘… they could have found the facts proved or disaproved as the case may be and made an order, or dismissed the case according to their decision, or, on the other hand, they could have adjourned the case and made an interim order for maintenance not exceeding 3 months in duration pending the resumption of the hearing.’
Later he said ([1936] 3 All ER at 637, 638);
‘They came to the conclusion that they should adjourn the case for 3 months and made an interim order on the ground of neglect to maintain. They purported to adjourn the case while at the same time purporting to find that there had been neglect to maintain which again only meant, once that finding had been made, not an interim order but a final order was made. In fact the formal order was drawn up in these words: “Upon hearing the said complaint is is adjudged that the same is true and it is hereby ordered that the defendant do pay a certain sum—” with a final clause showing that the interim order was to
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remain in force until Sept. 9, 1936. Now it is quite clear—and on consideration [counsel for the respondent] very wisely has not attempted of argue the contrary—that that is a complete confusion of the two functions which the magistrates were able to perform on that day … ’
Langton J in his judgment put the dilemma in this way ([1936] 3 All ER at 640):
‘As my Lord has pointed out if the original hearing terminated in a finding the original order was wrong because an interim order cannot be made upon finding. If the original order was bad it certainly cannot be confirmed as the chairman on Sept 9 purported to do. If, on the other hand, the original hearing terminated in an adjournment and not in any finding at all, there was no order at all upon which the magistrates at the second hearing could proceed, because there was nothing to confirm; a fresh finding was necessary.’
In Fulker v Fulker the justices did the converse of what was done by the justices in the instant case. They came to the conclusion at the first hearing that wilful neglect had been proved; their formal order embodied that decision, yet they purported to make an interim order. The justices in the instant case also found at the first hearing that the complainant had proved her case, though their formal order failed to record that fact. Instead of making a matrimonial order, as they might have done, they made an interim order, which, if the headnote in Fulker v Fulker represents the law, would suggest that they had not found on 10 April that the wife had established her case for a matrimonial order. If the headnote in Fulker v Fulker represents good law, the justices ought not to have made an interim order on 10 April if they adjudged the wife’s complaint to be true; if they did not, the interim order was properly made.
Fulker v Fulker on the face of it merely poses the dilemma that a purported finding that the complaint was proved could not stand along with an interim order. In it, in their reasons, the justices spoke both of the original hearing being adjourned and of confirming their previous order. The judgments in the Divisional Court did not expressly say that the finding that the complaint was proved should prevail over the interim order, or vice versa; they merely say that the two could not stand together. However, the interim order had been acted on, and part of the reasoning in the judgments does suggest that, where an interim order is made, there cannot be a valid finding. The fact that the court was differently constituted at the two hearings and that an incorrect procedure was followed was sufficient to invalidate the justices’ decision and to support the Divisional Court’s order for a rehearing. It is thus arguable that what was said about the incompatibility of a judgment on the complaint on the one hand and the making of an interim order on the other hand was obiter; it may be, however, that the Divisional Court was giving two concurrent reasons for its decision. Be that as it may, what was said about this icompatibility was thereafter treated as good law.
But if we are right in thinking that ‘final order on the complaint’ means an order made after adjudicating on (a) all alleged grounds of complaint, (b) all defences to any of the alleged grounds of complaint, (c) all relief claimed in the summons, and also on (d) the children, whether or not relief is claimed in respect of them, we do not see why a finding should not be made before an interim order. ‘Adjourns the hearing of the complaint’ then means that all the matters in (a), (b) and (c) are not dealt with. Merely, by way of example, and without intending to be exhaustive, the court may find the adultery proved, but adjourn the case for further hearing on questions of the complainant’s own alleged adultery, condonation, connivance or conduct conducing; or the court may find proved the adultery or wilful neglect complained of, and adjourn the case for further hearing on the question of persistent cruelty,
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also complained of; or the court may on a summons asking, inter alia, for custody, deal with everything except the questions of from full custody) and adjourn the case for consideration of those matters; or the court may have to adjourn the question of custody, and the question of maintenance cannot be dealt with until after the custody has been decided, because if the mother gets custody she cannot work, while if she does not get it she can work. In all these examples we see no reason why the court should not make an interim order, notwithstanding the existence of a prior finding or findings. What precludes an interim order (or, to put it another way, cannot stand along with one) are, on the one hand, a final order on the complaint and, on the other, a matrimonial order adjudicating on all grounds of complaint and all reliefs sought (because the complaint cannot then be said to be adjourned). We cannot find that the wording of the 1960 Act differs materially in this connection from the provision of the 1925 Act under which Fulker v Fulker was decided. For the foregoing reasons we have no doubt that Fulker v Fulker was correctly decided and is still good law; though the headnote (insofar as it refers to ‘findings’) does not, in our view, represent the law.
According to the clerk’s note, the justices announced at the conclusion of the hearing of 10 April that they found the offence proved. Though it was not embodied in the written and printed order drawn up, it was this oral finding which constituted the adjudication of the court (R v Lanyon and Cohen v Cohen). There are, moreover, two other indications that, on 10 April, the justices regarded themselves as having heard and determined the complaint. On that day, they asked for a report from a probation officer because they wished to have further information before making a decision about the custody of the child. In doing so, they acted on powers conferred on them by s 4 of the 1960 Act. Section 4(2) provides that the court may call for such a report—
‘… after it has made any decision which falls to be made on the complaint with respect to any provision such as is mentioned in paragraphs (a) to (c) of subsection (1) of section two of this Act … ’
Those provisions relate to the inclusion in a matrimonial order of provisions for non-cohabitation and for payment of maintenance by the husband to the wife and in certain circumstances by the wife to the husband. Thus, the justices’ decision to call for a report is to some extent, but not entirely (since they apparently announced no separation order on that day and their maintenance order was under s 6 not under s 2), consistent with their statement that they had found the complaint proved.
Also on 10 April they made use of the powers under s 60 of the Magistrates’ Courts Act 1952 to request a probation officer to investigate the means of the parties and to report the result of his investigations to the court in accordance with the provisions of that section. Section 60(1) envisages, first, a request by the court to investigate; there is a proviso that—
‘no direction to report to the court should be given … until the court has determined all issues arising in the proceedings other than the amount to be directed to be paid by such an order.’
However, s 4(8) of the 1960 Act provides that, in proceedings in which the powers conferred on the court by s 4(1) are or may be exercisable, the question whether or not or how those powers should be exercised are excepted from the issues mentioned in the proviso to s 60(1) of the 1952 Act. In other words, s 4(8) resolves in favour of s 4 the problem posed by the concurrence of s 4(2) of the 1960 Act and the proviso to s 60(1) of the 1952 Act, namely, which is to come last—a decision about children
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under s 4 or about all other matters except means under s 60(1). The justices’ decision to request an investigation into the husband’s means is, therefore, consistent with their view that they had reached their final decision on the complaint on 10 April, but had adjourned the proceedings further for reports on the child and means.
On the other hand, the first paragraph of the court’s order dated 8 May 1969 recites the wife’s complaint. Then there follow the words:
‘It is this day adjudged the the said complaint is true and it is ordered that the [wife] be no longer bound to cohabit with her husband … ’
The remainder of the order recites the provisions regarding custody, supervision and maintenance. The husband relies on the wording of that order as showing that the justices had not made a matrimonial order on 10 April—but had made an interim order. It is fair to say that the justices adopted a procedure followed by many magistrates’ courts in the country. It is a convenient procedure and is not likely to lead to any difficulty except in very rare circumstances like those obtaining in this case. We have no doubt that, on 10 April, the justices made a finding of adultery, as they say they did. We do not think, however, that they made a matrimonial order. We think that they were fully prepared to make, and intended to make, a matrimonial order at the adjourned hearing when the probation officer’s report would be before them, without hearing further evidence on the issue of adultery.
Having reached that conclusion, we turn now to consider Mr Best’s application on 8 May. He submitted that the husband as of right was entitled to have the whole case reheard by reason of the fact that an interim order only had been made on 10 April. In support of that submission, he cited Fulker v Fulker. The clerk referred to Stone’s Justices Manualb, which states:
‘It is appropriate to make an interim order wherever there is an adjournment, even if the court has reached a conclusion on the merits: the decision in Fulker v. Fulker which decided otherwise on the wording of a repealed enactment, is no longer good law.’
In Rayden on Divorcec, the editors express an opposite view, namely, ‘An interim order cannot be made where a finding has been made’, citing Fulker v Fulker in support. Both counsel have sought for authority to support the statement in Stone, but they have found none. For the reasons given earlier in this judgment, we think that an interim order can be made after a finding has been made. We think that the justices were wrong in holding that, having made a decision in the issue of adultery on 10 April, they were thereby prevented from hearing further evidence on that issue on 8 May. Having made no matrimonial order, there was nothing to prevent their hearing evidence relevant to whether they should make a matrimonial order, least of all evidence consistent with a finding of adultery, such as evidence of conduct conducing to adultery.
On the other hand, in our view, Mr Best was also wrong in his submission that he was entitled as of right to a rehearing of the whole case. Whether the complaint should be re-opened in any way was a matter for the exercise of the court’s discretion; the husband was not entitled to it as of right. We think that this follows partly from the Magistrates’ Courts Rules 1968d, r 14, partly from the course the proceedings had taken on 10 April, partly from the inherent right and duty of every court so to conduct its proceedings that justice may conveniently be done. Rule 14 of the Magistrates’ Courts Rules 1968 provides:
‘14 Order of evidence and speeches: complaint. (1) On the hearing of a
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complaint, except where the court determines under section 45(3) of the Act to make the order with the consent of the defendant without hearing evidence, the complainant shall call his evidence, and before doing so may address the court.
‘(2) At the conclusion of the evidence for the complainant the defendant may address the court, whether or not he afterwards calls evidence.
‘(3) At the conclusion of the evidence, if any, for the defence, the complainant may call evidence to rebut that evidence.
‘(4) At the conclusion of the evidence for the defence and the evidence, if any, in rebuttal, the defendant may address the court if he has not already done so.
‘(5) Either party may, with the leave of the court, address the court a second time, but where the court grants leave to one party it shall not refuse leave to the other.
‘(6) Where the defendant obtains leave to address the court for a second time his second address shall be made before the second address, if any, of the complainant.’
The husband on 10 April had been given every opportunity of an adjournment to secure legal aid; he refused it and insisted on the matter being immediately heard without legal representation on his part. The court performed its duty under s 61 of the Magistrates’ Courts Act 1952, including apprising him of the available defences of condonation, connivance and conduct conducing. The husband gave evidence, and thereafter closed his case as formally as it can be done by a litigant in person. Whether he should be allowed to re-open it, either on that day or after an adjournment (and we see no distinction in principle between such circumstances) was thereafter at the discretion of the justices. Unfortunately, it was not put to them as a matter of discretion. If it had been they would have had to weigh conflicting considerations.
On the one hand, the court and the wife and her solicitor would be of necessity involved in a good deal of inconvenience and the legal aid fund in additional expense, without any assurance that the findings of the justices at the previous hearing would be in any respect different. A date for yet another hearing might well have to be fixed. The interim order would have to be further extended. Witnesses might have to be recalled. The probation officer would have to attend again. And so on. In short, the proceedings of the court would be protracted; and delay and wasted expense in the administration of justice are inherently undesirable. (All this goes to bear out, moreover, our view that, in the circumstances, no such right existed as that claimed by Mr Best on 8 May.)
On the other hand, as the justices had not made a matrimonial order on 10 April, we have no doubt that, in the exercise of their discretionary powers, they ought to have listened to an application to call further evidence on any of the questions with which they were concerned before they made a matrimonial order on the ground of adultery. In this case, the application was made on behalf of a husband who, despite every invitation to the contrary, had insisted on conducting his own case; no one could be sure, therefore, that even with help he had done justice to it. In addition, sufficient was said by Mr Best to indicate that the particular issue to which new evidence would be directed would be that of conduct conducing; by s 2(3) of the 1960 Act, the court—
‘shall not make a matrimonial order containing a provision such as is mentioned in paragraph (a), (b) or (c) of subsection (1) of this section—(a) on the ground that the defendant has committed an act of adultery, unless the court is satisfied that the complainant has not condoned or connived at, or by wilful neglect or misconduct conduced to, that act of adultery … ’
bars which are consistent with (indeed presuppose) a finding of adultery.
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If the justices thought that the new evidence adumbrated by Mr Best when making his application might possibly cause them to wish to review the wife’s right to a matrimonial order, they ought in the interests of justice to have granted his application—not, indeed, to the extent claimed of hearing the case de novo; but at least to the extent of permitting him to re-call the husband and to adduce any further evidence he wished in support of the allegations of conduct conducing. In such case the wife’s solicitor should have been permitted to cross-examine the husband and the other witnesses, if any. After listening to the new evidence, the justices should then have decided whether it raised any doubts in their minds as to the correctness of the decision which they seem to have reached on 10 April, namely that the wife had not only proved her complaint but was entitled to a matrimonial order. If it did not, they should then have proceeded, as they in fact did, to the determination of the issues regarding custody and maintenance. On the other hand, if it did raise a doubt, then they should have given the wife’s solicitor an opportunity to re-call the wife and to adduce any other relevant evidence in rebuttal if necessary granting an adjournment. Then, having heard speeches and weighed all the evidence, the justices should have decided whether or not to make a matrimonial order.
In the events which have happened the questions for this court now are whether to send the case back to the justices with a direction that they should listen to Mr Best’s application and thereafter decide what course to take; or whether ourselves to exercise the discretion which the justices were not asked to exercise, but in our view could and should have exercised; and, if ourselves exercising it, to decide whether to order the justices to hear the new evidence. Counsel for the husband argued, as Mr Best had on 8 May 1969, that the husband had a right to re-open his case. Counsel for the wife supported the justices’ view that they had no right to allow the case to be re-opened. But both counsel urged us that, should this court take the view that the decision was not a matter of right on either side, but of discretion, we should ourselves exercise the discretion on the material before us, and decide whether or not the justices ought to hear the new evidence which Mr Best wished them to hear. Counsel drew our attention to RSC Ord 55, r 7(5), which now governs appeals from the matrimonial jurisdiction of magistrates’ courts. This provides:
‘The Court may give any judgment or decision or make any order which ought to have been given or made by the court, tribunal or person and make such further or other order as the case may require or may remit the matter with the opinion of the Court for rehearing and determination by it or him.’
We think that counsel are right in arguing that it is open to us to take the decision which the justices ought to have taken, notwithstanding that it is a discretionary one. Moreover, we think that we have adequate material to take it, and that the course proposed is on balance the most advantageous—not least in obviating further delay and expense. We are, therefore, prepared to follow the course urged by counsel. Accordingly, we turn to examine first the nature of the evidence which Mr Best desired to place before the justices in support of the application.
[His Lordship considered the nature of the evidence, held that there was nothing in it which suggested that the conduct described brought about the husband’s adulterye and said that, in all the circumstances of the case, it seemed to the court that no useful purpose would be served by remitting the question of conduct
Page 754 of [1970] 2 All ER 742
conducing to the justices for their consideration and the court exercised their discretion under RSC Ord 55, r 7(5), accordingly. His Lordship further held that the sum awarded by way of maintenance could not properly be criticised, and continued:]
We would dismiss the appeal.
Appeal dismissed.
Solicitors: Lovell, Son & Pitfield (for the husband); Batchelor, Fry, Coulson & Burder (for the wife).
Alice Bloomfield Barrister.
Associated Leisure Ltd and others v Associated Newspapers Ltd
[1970] 2 All ER 754
Categories: TORTS; Defamation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, EDMUND DAVIES AND MEGAW LJJ
Hearing Date(s): 27, 28 MAY 1970
Libel – Pleading – Amendment – Defence – Amendment to plead justification, at a late stage – Amendment allowed because in interests of justice – Any hardship to plaintiffs compensatable by increased damages if plea failed – Due diligence exercised by defendants in placing plea on the record.
Libel – Justification – Duty of defendant not to place plea on record until clear and sufficient evidence to support it.
On 6 December 1968, the plaintiffs, who carried on business as hirers and sellers of gaming machines, and had recently sought to acquire a controlling interest in Butlin’s Ltd, a big entertainment company, brought a libel action against the defendants in respect of a sentence in an article published in their newspaper on 5 December 1968, which stated that ‘It’s only a few weeks ago that a Mafia take-over bid to get hold of one of our big entertainment companies made the front-page headlines. Except that only a few people knew about the Mafia part of it’. The defence to the action, delivered promptly on 14 January 1969, simply denied that the words complained of were published of the plaintiffs or were defamatory of them. At the time the defence was delivered the defendants were advised that there was insufficient evidence to plead justification; and it was not until March 1970, after further enquiries had been made, that they were advised that there was sufficient evidence to place a plea of justification on the record. On receiving that advice the defendants applied for leave to amend the defence to plead justification, and also to plead fair comment. Their draft amendment contained over 30 paragraphs of particulars of justification. The plaintiffs resisted the application to amend. They wished to clear their character before an application by them to the Gaming Board for a certificate to supply gaming machines was heard in October 1970; and the action had been set down for trial on the original pleadings and was due to come on in the jury list in June 1970. On an appeal (heard at the end of May 1970) by the defendants against the refusal of the master and the judge in chambers to give leave to amend the defence,
Held – The amendment would be allowed although it came at a late stage, because—(i) the defendants had observed the duty not to put a plea of justification on the record unless there was clear and sufficient evidence to support it (see p 757 h to p 758 a, p 758 b and f and p 759 e, post);
Page 755 of [1970] 2 All ER 754
Gatley on Libel and Slander (6th Edn), para 1046, approved.
Roth v Odhams Press Ltd (20 December 1954) unreported explained.
(ii) applying well-settled principle, it was in the interests of justice that the allegations in the amendment and the reputation and character of the plaintiffs should be properly investigated and considered in the action provided the plaintiffs could be compensated for any hardship caused by the amendment, which could be done in the present case by the award of increased damages if the plea of justification failed (see p 757 b and c and p 759 b and e, post);
(iii) the defendants had exercised all due diligence in their enquiries and had put in the plea of justification as soon as it could properly be done (see p 758 e and f and p 759 e, post); and
(iv) the addition of the plea of fair comment should be permitted since the statement complained of might be regarded as comment, for a ‘Mafia take-over bid’ might be taken to mean take-over by people with or like the Mafia (see p 757 e, and p 759 d and e, post).
Notes
For amendment of pleadings, see 24 Halsbury’s Laws (3rd Edn) 96, para 173, and 30 ibid 33–36, paras 71–73.
For the defences of justification and fair comment, see 24 ibid 93–95, paras 167–170.
Cases referred to in judgments
Cropper v Smith (1884) 26 Ch D 700, 53 LJCh 891, 51 LT 729; on appeal sub nom Smith v Cropper (1885) 10 App Cas 249, 50 Digest (Repl) 102, 847.
O’Toole v Chambers (1924) unreported.
Roth v Odhams Press Ltd (20 December 1954) unreported.
Cases and authorities also cited
London Artists Ltd v Littler [1969] 2 All ER 193, [1969] 2 QB 375.
Plummer v Charman [1962] 3 All ER 823, [1962] 1 WLR 1469.
Slim v Daily Telegraph Ltd [1968] 1 All ER 497, [1968] 2 QB 157.
Duncan and Hoolahan on Defamation, p 40.
Gatley on Libel and Slander (6th Edn) paras 1056, 1057.
Supreme Court Practice 1970, vol 1, pp 315, 319.
Interlocutory appeal
This was an appeal by the defendants, Associated Newspapers Ltd, from an order of Cooke J, made on 30 April 1970, dismissing their appeal from the order of Master Hyamson, dated 20 April 1970, refusing their application for leave to amend their defence to the action for libel brought against them by the plaintiffs, Associated Leisure Ltd (formerly, Phonographic Equipment Co Ltd) and eight of its directors. In their original defence, delivered on 14 January 1969, the defendants had simply denied that the words complained of were printed and published of the plaintiffs or were defamatory of them. In their application to Master Hyamson the defendants sought leave to amend the defence to plead justification and fair comment on a matter of public interest. The draft amendment contained 33 paragraphs of particulars of the plea of justification. The facts are set out in the judgment.
Sir Peter Rawlinson QC and B H Anns for the defendants.
David Hirst QC and A T Hoolahan for the plaintiffs.
28 May 1970. The following judgments were delivered.
LORD DENNING MR. On 5 December 1968, the Daily Mail published an article headed ‘West End Mafia faces attack by Sir Rasher’, followed by the sentences:
Page 756 of [1970] 2 All ER 754
‘American gangsters could wind up owning London … Already it is thought the Mafia has quietly acquired interests in several London casinos and is working closely with others.’
The article described an interview with Sir Ranulph Bacon, one of the Gaming Board. Then there came a sentence which is said to be a libel:
‘It’s only a few weeks ago that a Mafia take-over bid to get hold of one of our big entertainment companies made the front-page headlines. Except that only a few people knew about the Mafia part of it.’
A company then called Phonographic Equipment Co Ltd, the plaintiff company, and its directors thought that that sentence referred to them. They were a company which dealt with gaming machines. They had, a few weeks before, sought to acquire a controlling interest in Butlins Ltd, which is, of course, one of our big entertainment companies. Their proposal had been noticed prominently in some of the newspapers. Accordingly, on the day after the article was published, on 6 December 1968, the plaintiff company, with eight of its directors, including in particular the plaintiffs, Mr Fine, chairman, and Mr Shack and Mr Marks, the joint managing directors, brought an action for libel against Associated Newspapers Ltd, the defendants, for publishing that article.
The statement of claim set out the sentence as a libel. No innuendo was pleaded. The plaintiffs relied on the natural and ordinary meaning of he words. They assumed that everyone knows what the ‘Mafia’ is. I suppose most people do. The Mafia, we are told, used to be the name of a Sicilian secret society, but it has now come to designate a gang of American criminals, some of whom are of Italian origin. The defence was delivered promptly on 14 January 1969. It simply denied that the words were printed and published of the plaintiffs, or were defamatory of the plaintiffs. It is doubtful whether that defence would get very far. The plaintiffs soon took out a summons for directions. An order was made for trial by jury. The case was set for trial. It was due to come on last term, but by agreement it was kept out of that term. It is now due to come on next month when the jury list is taken.
Meanwhile, an important thing has happened. In March 1970, the defendants sought to amend their defence. They wished to plead justification, so as to say that the words were true in substance and in fact. They drafted an amendment with many pages of particulars. They summarised it at the end by saying that the—
‘… attempted takeover was for the purpose of gaining for the Mafia a substantial interest in the gaming and leisure industry of the United Kingdom.’
This was, of course, a most serious allegation. The plaintiff company is an important public company. (It has since changed its name to Associated Leisure Ltd.) It is very serious to say it is controlled by, or associated with, the Mafia.
The plaintiffs resisted the amendment. They have applied to the Gaming Board for a certificate to enable them to sell and supply gaming machines, such as fruit machines, one-armed bandits, and the like. This application is necessary under the Gaming Act 1968. In determining whether to issue a certificate, the Gaming Board will have to have regard, and have regard only, to the question whether they are fit and proper persons to perform the functions of selling and supplying these machines. The application is due to be heard by October 1970. The plaintiff company wish to clear their character before the application is heard.
The application to amend came before the master and the judge. Both refused to allow it. It was made, they thought, too late. It came at the eleventh hour. If allowed, it would mean a very considerable delay. The case would not come on for trial, at the earliest, before the end of this year, or the beginning of next. It was, they thought in these circumstances, unjust to allow the amendment.
Page 757 of [1970] 2 All ER 754
I start with the principle, well settled, that an amendment ought to be allowed, even if it comes late, if it is necessary to do justice between the parties, so long as any hardship done thereby can be compensated in money. That principle applies here. I think that justice requires that the matters alleged in this amendment should be investigated in a court of law. It would, I think, be very strange if this libel action were to be tried next month and damages awarded on the basis that there was nothing whatsoever to be said against the plaintiffs; and yet, in October, the Gaming Board were to refuse them a certificate on the ground that they were not fit and proper persons to supply and sell gaming machines. It is in the interests of consistency and justice that the reputation and character of the plaintiffs should be properly considered in this action, provided always, as I have said, that any hardship to the plaintiffs can be compensated for in money. I think it can so be compensated. The defendants, in putting this plea of justification on the record, run a very grave risk. If it fails, the damages, which might otherwise have been modest, would now be colossal.
Counsel for the plaintiffs says, quite properly, that the pleading ought to be scrutinised closely. The defendants ought to give proper particulars. They ought not to be allowed to put in a loose, ineffective pleading at the last hour. I agree to this extent: there are two sub-paragraphs (para 7(11) and (12)a) which are not well pleaded. They go, so far as I can see, to credit, not to justification. They must come out. The remaining paragraphs are not yet as complete in particulars as they might be; but not so deficient as to require them to be struck out. Any deficiencies can be made good by an application for further particulars. Counsel for the plaintiffs criticised the plea of fair comment. He said, with some force, that the statements complained of were fact and not comment. But I think they might be regarded as comment. A ‘Mafia take-over bid’ might be taken to mean a takeover by people with or like the Mafia. There is just sufficient on which the judge might regard it as comment so as to warrant consideration by a jury. Save for para 7 (11) and (12), I think the amended pleading holds water.
Lastly, counsel for the plaintiffs relied on a decision by Devlin J 16 years ago, in Roth v Odhams Press Ltd. It is not reported anywhere. It is not noted in any of the textbooks. But we were supplied with a transcript of his judgment. Some words were used by Devlin J which can be read as meaning that if a defendant wishes to put in a plea of justification, but has not the evidence to warrant it, he ought to tell the plaintiff of his desire and apply for an extension of time before he puts it in a defence. Or, alternatively, that he ought to put a plea of justification on the record, with such particulars as he can muster, and then deliver further particulars afterwards. The defendant ought not to wait until he gets his evidence; for that would take the matter out of the control of the courts. Counsel for the plaintiffs described that case as ‘novel’; and so it is. It was not known to the profession until it was brought to light in this case. I do not think it warrants the wide interpretation which has been put on it. I am sure Devlin J did not wish in any way to detract from the rule, well settled, which I will read from Gatleyb:
‘A defendant should never place a plea of justification on the record unless he has clear and sufficient evidence of the truth of the imputation, for failure to establish this defence at the trial may properly be taken in aggravation of damages.’
I have always understood such to be the duty of counsel. Like a charge of fraud, he
Page 758 of [1970] 2 All ER 754
must not put a plea of justification on the record unless he has clear and sufficient evidence to support it. The defendants in their case have observed that duty. In their affidavits the defendants say that, from the very beginning, they took the advice of counsel. When the defence was first delivered on 14 January 1969, counsel said: ‘We cannot put it on now.’ They then set to work making enquiries all over the world; in France and Italy, and especially in the United States of America. It was not until March 1970 that counsel was able to say: ‘Well, at last there is evidence on which I feel justified in placing a plea of justification on the record.' As soon as it was obtained, they applied for leave to amend. That was, I think, the proper course for counsel to adopt.
But when the defendant seeks to plead justification at a late stage, his conduct will be closely enquired into. The court will expect him to have shown due diligence in making his enquiries and investigations. The court may well refuse him application if he has been guilty of delay or not made proper enquiries earlier. It was, I think, on some such ground that Devlin J refused the application in Roth’s case. That case turned on its particular circumstances. That is why it was never reported. By way of contrast, it is interesting that Mr Gatley notes a case in which he himself was counsel. It is O’Toole v Chambers. He statesGatley on Libel and Slander (6th Edn) para 1085, footnote 57:
‘… Talbot J. in chambers affirmed an order giving the defendant leave to amend by adding a plea of justification when the case was only five out of the list, and Horridge J. ordered the case to stand our for six weeks to enable the plaintiff to meet the amended defence … ’
That seems to me an exercise of discretion in that case which is similar to that which seems to me should be applied in this case. The defendants have exercised all due diligence in their enquiries and put in the plea as soon as it could properly be done. I think this amendment should be allowed, save for para 7 (11) and (12). The trial cannot take place next month. There will have to be discovery, further particulars, and so on.
I would allow the appeal accordingly.
EDMUND DAVIES LJ. I agree, and I add some very brief observations in this interlocutory appeal simply because we are differing from the learned judge, who obviously went into the matter with the greatest care. These courts are here to administer justice. The concept of justice is not confined to the interests of the particular litigants; it embraces and extends to the protection of the public weal. The issues involved in this litigation have an importance of direct concern to the community. The defendants rightly accept that by the words complained of here they make grave charges. They also accept that their application for leave drastically to amend their defence is very belatedly made. So it is. Even so, should it be granted?
The all-embracing principle applicable to such a case as the present was enunciated by Bowen LJ in Cropper v Smith ((1884) 26 Ch D 700 at 710, 711) in classic words:
‘… I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or grace … It seems to me that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the
Page 759 of [1970] 2 All ER 754
real matter in controversy, it is as much a matter of right on his part ot have it corrected, if it can be done without injustice, as anything else in the case is a matter of right.’
To that approach all other considerations must be subordinate. Applying it here, the machinery of the law having been set in motion by the institution of these proceedings, the real issues involved are of great importance to the community, and it is in the public interest that they should be properly ventilated notwithstanding the delay which will in consequence arise in bringing the matter to trial.
I confess to having had some difficulty in ascertaining the ratio decidendi of Roth v Odhams Press Ltd, or what principle it is supposed to enunciate. But with respect I say this: if anything in Roth’s case is to be interpreted as running counter to the fundamental principle that I have just been referring to, it is a decision which I must respectfully decline to follow.
As counsel for the defendants has accepted, there are particulars which need to be supplied, for there are lacunae in the draft amendment presented to this court. He agrees, also, that paras 7 (11) and (12) of the particulars in the amended defence will have to come out. They have no relevance to the plea.
I have had more difficulty, I think, than Lord Denning MR in relation to the plea of fair comment. But while I have my doubts about its validity, they are not of such strength as to persuade me that I ought to differ from the view Lord Denning MR has formed that the plea should at this stage be left in.
I agree that this appeal should be allowed.
MEGAW LJ. I also agree that this appeal should be allowed and that the order of the court should be as proposed by Lord Denning MR.
I desire to add only a word about the case cited to us by counsel for the plaintiffs, Roth v Odhams Press Ltd. Counsel for the plaintiffs has submitted with emphasis that that judgment laid down a novel principle. The principle which counsel contended was to be extracted from that judgment was that, as a matter of principle, the court will not allow a defendant to hold back a plea of justification when he has plainly intended to justify all along if he can get the necessary evidence; his proper course is to apply to the master for an extension of time for delivery of the defence so that the court can thereafter exercise control over the proceedings and prevent any excessive or unfair or onerous delay.
In my opinion when the judgment of Devlin J is read as a whole it does not lay down, or purport to lay down, such a principle. It appears to me that, looking at that judgment as a whole, it is a judgment on the particular facts of a particular case, and for that reason I think that it has rightly not been included in any series of law reports, or referred to in textbooks.
Appeal allowed; amended defence allowed with the exception of para 7 (11) and (12); plaintiffs to be at liberty to apply to strike out individual paragraphs in particulars, and to apply to the judge at trial not to leave fair comment to the jury, if they so wish.
Solicitors: Swepstone, Walsh & Son (for the defendants); Simmons & Simmons (for the plaintiffs).
Wendy Shockett Barrister.
Merritt v Merritt
[1970] 2 All ER 760
Categories: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 27 APRIL 1970
Contract – Intention to create legal relations – Presumption against intention – Presumption inapplicable – Husband and wife not living in amity – Evidence disclosing intention to create legal relationship – Agreement after separation – Husband providing for wife – Wife paying off mortgage on matrimonial home – Husband to transfer home to wife after mortgage redeemed.
The husband and wife were married in 1941 and had three children. In 1966, the husband became attached to another woman and left the matrimonial home to live with her. At that time, the matrimonial home, a freehold house, was in the joint names of the husband and wife, and was subject to an outstanding mortgage of some £180. The wife pressed the husband to make arrangements for the future, and on 25 May 1966, they met and talked the matter over in the husband’s car. The husband said that he would pay the wife £40 a month out of which she must make the outstanding mortgage payments on the house and he gave her the building society mortgage book. Before leaving the car the wife insisted that the husband should put down in writing a further agreement, and on a piece of paper he wrote: ‘In consideration of the fact that you will pay all charges in connection with the house … until such time as the mortgage repayment has been completed, when the mortgage has been completed I will agree to transfer the property in to your sole ownership.’ The husband signed and dated that agreement, and the wife took the piece of paper away with her. In the following months she paid off the mortgage, partly out of the husband’s monthly payment to her and partly out of her own earnings. When the mortgage was paid off the husband refused to transfer the house to the wife.
Held – The written agreement of 25 May 1966, was intended to create legal relations between the parties because the presumption of fact against such an intention where arrangements were made by a husband and wife living in amity did not apply to arrangements made when they were not living in amity but were separated or about to separate, when (per Lord Denning MR at p 762 a, post) it might safely be presumed that they intended to create legal relations; the surrounding circumstances in the present case showed that the parties did so intend; accordingly, the wife was entitled to sue on the agreement, and it being sufficiently certain and there being good consideration by the wife paying off the mortgage, she was entitled to a declaration that she was the sole owner of the house and to an order that the husband joining in transferring it to her (see p 761 j to p 762 a, p 762 d to g and p 763 b, d and h, post).
Balfour v Balfour [1918–19] All ER Rep 860, Jones v Padavatton [1969] 2 All ER 616, and Gould v Gould [1969] 3 All ER 728 distinguished.
Notes
For contracts between husband and wife, see 19 Halsbury’s Laws (3rd Edn) 871, 872, para 1435, and for cases on the subject, see 27 Digest (Repl) 202, 203, 1605–1614.
Cases referred to in judgment
Balfour v Balfour [1919] 2 KB 571, [1918–19] All ER Rep 860, 88 LJKB 1054, 121 LT 346, 27 Digest (Repl) 201, 1604.
Gould v Gould [1969] 3 All ER 728, [1970] 1 QB 275, [1969] 3 WLR 490, Digest Supp.
Jones v Padavatton [1969] 2 All ER 616, [1969] 1 WLR 328, Digest Supp.
Page 761 of [1970] 2 All ER 760
Appeal
This was an appeal by the husband, John Bertram Merritt, against the judgment of Stamp J, given on 14 May 1969, whereby he held that the wife, Millicent Joan Merritt, was entitled to a declaration that she was now the sole beneficial owner of the matrimonial home, a freehold property known as 133 Clayton Road, Hook, Surrey, and ordered the husband to join with the wife in transferring the property to her. Stamp J also dismissed the husband’s counterclaim that the property was owned by the parties in equal shares. The facts are set out in the judgment of Lord Denning MR.
A A R Thompson for the husband.
M G Johnston for the wife.
27 April 1970. The following judgments were delivered.
LORD DENNING MR. The husband and the wife were married as long ago as 1941. After the war, in 1949 they got a building plot and built a house. It was a freehold house, 133 Clayton Road, Hook, Chessington. It was in the husband’s name, with a considerable sum on mortgage with a building society. There they lived and brought up their three children, two daughters, now aged 20 and 17, and a boy now 14. The wife went out to work and contributed to the household expenses.
Early in 1966 they came to an agreement whereby the house was to be put in joint names. That was done. It reflected the legal position when a house is acquired by a husband and wife by financial contributions of each. But, unfortunately, about that time the husband formed an attachment for another woman. He left the house and went to live with her. The wife then pressed the husband for some arrangement to be made for the future. On 25 May, they talked it over in the husband’s car. The husband said that he would make the wife a monthly payment of £40 and told her that out of it she would have to make the outstanding payments to the building society. There was only £180 outstanding. He handed over the building society’s mortgage book to the wife. She was herself going out to work, earning net £7 10s a week. Before she left the car she insisted that he put down in writing a further agreement. It forms the subject of the present action. He wrote these words on a piece of paper:
‘In consideration of the fact that you will pay all charges in connection with the house at 133, Clayton Road, Chessington, Surrey, until such time as the mortgage repayment has been completed, when the mortgage has been completed I will agree to transfer the property in to your sole ownership.
Signed. John B. Merritt 25.5.66.’
The wife took that paper away with her. She did, in fact, over the ensuing months pay off the balance of the mortgage, partly, maybe, out of the money the husband gave her, £40 a month, and partly out of her own earnings. When the mortgage had been paid off, he reduced the £40 a month to £25 a month.
The wife asked the husband to transfer the house into her sole ownership. He refused to do so. She brought an action in the Chancery Division for a declaration that the house should belong to her and for an order that he should make the conveyance. The judge, Stamp J, made the order; but the husband now appeals to this court.
The first point taken on his behalf by counsel for the husband was that the agreement was not intended to create legal relations. It was, he says, a family arrangement such as was considered by the court in Balfour v Balfour and in Jones v Padavatton. So the wife could not sue on it. I do not think that those cases have any application here. The parties there were living together in amity. In such cases their domestic
Page 762 of [1970] 2 All ER 760
arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable understandings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations.
Counsel for the husband then relied on the recent case of Gould v Gould, when the parties had separated, and the husband agreed to pay the wife £12 a week ‘so long as he could manage it’. The majority of the court thought that those words introduced such an element of uncertainty that the agreement was not intended to create legal relations. But for that element of uncertainty, I am sure that the majority would have held the agreement to be binding. They did not differ from the general proposition which I stated ([1969] 3 All ER at 730, [1970] 1 QB at 280):
‘When … husband and wife, at arm’s length, decide to separate and the husband promises to pay a sum as maintenance to the wife during the separation, the court does, as a rule, impute to them an intention to create legal relations.’
In all these cases the court does not try to discover the intention by looking into the minds of the parties. I looks at the situation in which they were placed and asks itself: would reasonable people regard the agreements as intended to be binding?
Counsel for the husband sought to say that this agreement was uncertain because of the arrangement for £40 a month maintenance. That is obviously untenable. Next he said that there was no consideration for the agreement. That point is no good. The wife paid the outstanding amount to the building society. That was ample consideration. It is true that the husband paid her £40 a month which she may have used to pay the building society. But still her act in paying was good consideration. Counsel for the husband took a small point about rates. There was nothing in it. The rates were adjusted fairly between the parties afterwards. Finally, counsel for the husband said that, under s 17 of the Married Women’s Property Act 1882, this house would be owned by the husband and the wife jointly; and that, even if this house were transferred to the wife, she should hold it on trust for them both jointly. There is nothing in this point either. The paper which the husband signed dealt with the beneficial ownership of the house. It was intended to belong entirely to the wife.
I find myself in entire agreement with the judgment of Stamp J. This appeal should be dismissed.
WIDGERY LJ. I agree with Lord Denning MR’s judgment, feeling, as he does, that no criticism can be levelled at the finding of the learned judge below.
When a husband and wife are living together in amity it is natural enough to presume that their discussions about money matters are not intended to create legally binding contracts. As Atkin LJ said in Balfour v Balfour ([1919] 2 KB 571 at 579, [1918–19] All ER Rep 860 at 865):
‘The common law does not regulate the form of agreements between spouses. Their promises are not sealed with seals and sealing wax. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold Courts.’
But, of course, once that natural love and affection has gone, as it normally has when the marriage has broken up, there is no room at all for the application of such a presumption. Salmon LJ made this clear in Jones v Padavatton ([1969] 2 All ER 616 at 621, [1969] 1 WLR 328 at 332), to which reference has already been made, where he said:
Page 763 of [1970] 2 All ER 760
‘… as a rule when arrangements are made between close relations, for example, between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship. This is not a presumption of law, but of fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection.’
The experience of life and human nature which raises this presumption in the case of a husband and wife living together in amity does not support it when the affection which produces that relationship of confidence has gone.
I find it unnecessary to go so far as to say that there is a presumption in favour of the creation of legal relationships when the marriage is breaking up, but certainly there is no presumption against the creation of such legal relations as there is when the parties are living happily together.
I would dismiss this appeal.
KARMINSKI LJ. I agree, and only desire to add this. It is in my view of great importance, in considering whether or not an agreement of the kind which we have to consider here would create legal relations, to look at the surrounding facts. In the present case on 20 May 1966, the husband informed the wife that he was in love with another woman with whom he was living, and he added these words: ‘When the house is paid for I will consider signing over the other half to you.' That was followed five days later by the meeting in the motor car which resulted, after full discussion, in the signing of the agreement to which reference has already been made by Lord Denning MR. I do not propose to read it again.
In deciding therefore whether or not an agreement is intended to establish legal relations, it seems to me essential to look at the surrounding circumstances. In Balfour v Balfour the relevant facts were that the husband, who was employed in government service in Ceylon, had to return there in 1916. The wife could not join him there at any rate for the time being because of her own ill-health and the husband agreed to pay her £30 a month for her support. At that time therefore the agreement was a perfectly friendly one occasioned by a separation which was not, at any rate at that time, the desire of either of them.
In the present case it is manifest that the husband had left the wife by his own choice, because he preferred the company of another woman. He was therefore not only presumably committing adultery with her, but was also in desertion. The wife therefore had several grounds for which she could have commenced divorce proceedings, or taken such proceedings as she might have been advised for maintenance, either in a magistrates’ court or in the High Court, on the ground of desertion or wilful neglect to maintain. In fact no proceedings became necessary, because the husband arranged to pay £40 a month, and undertook that when she had discharged a small amount outstanding on the mortgage he would transfer the property to her sole ownership.
I have no doubt, therefore, that on the facts of this case Stamp J was perfectly correct in coming to the conclusion which he formed, and I agree that this appeal must be dismissed.
Appeal dismissed.
Solicitors: Wilkinson, Howlett & Durham (for the husband); C A Maddin & Co, Surbiton (for the wife).
Wendy Shockett Barrister.
Roberts (Inspector of Taxes) v Granada Tv Rental Ltd,
S & U Stores Ltd v Gordon (Inspector of Taxes)
[1970] 2 All ER 764
Categories: TAXATION; Income Tax; Capital Allowances
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 16, 17, 18 MARCH 1970
Income tax – Allowance – Investment allowance – Road vehicles – Vehicles ‘of a type not commonly used as private vehicles,’ etc – Light vans – Finance Act 1954, s 16(3) proviso.
Granada TV Rental Ltd (the first taxpayer) during the accounting period 28 September 1963 to 26 September 1964 purchased 243 Austin and Morris mini vans and five Morris 1000 vans. There was no material difference between the Austin and Morris mini vans. The Morris 1000 was a somewhat larger vehicle than the mini van but each was a familiar type of van with windows at the front and back but no windows at the side apart from those on either side of the driver’s seat. S & U Stores Ltd (the second taxpayer) carried on trade as a retail credit trader and general warehouseman, selling furniture, clothes, toys, etc. The second taxpayer bought in the years ended 31 March 1964, 1965 and 1966 for the use of its employees 950 new vans. The vans were Austin A35 vans and Bedford 6 cwt vans. The first taxpayer claimed investment allowances under the Finance Act 1954, s 16(3), in respect of the vans purchased during the period 28 September 1963 to 26 September 1964. The second taxpayer claimed investment allowances in respect of its vans for Sch D for 1964–65 and 1965–66 and for profits tax and then corporation tax for 1963 to 1966. The Crown put in evidence certain tables which showed the number of vans of types bought by the taxpayers which were registered as goods vehicles and the numbers of such vans which were registered in the category including private vehicles. The Crown contended that the registration statistics showed that the types of vans bought by the taxpayers were types commonly used as private vehicles and that they were prima facie suitable to be so used, and that such vans were consequently excluded from the application of s 16(3) by the provisoa to the subsection, which excluded vehicles unless they were ‘of a type not commonly used as private vehicles and unsuitable to be so used’. The Special Commissioners determined that the allowances should be granted to the first taxpayer but refused in the case of the second taxpayer. In the first case the Crown appealed and in the second case the taxpayer appealed. Both appeals were called on together and argued one after the other.
Held – Both taxpayers were entitled to the investment allowances, because—
(i) the interpretation of the registration statistics was highly uncertain; evidence which was equivocal or uncertain in its significance was evidence which carried little weight in support of what was merely one possible meaning; the distinction was between private vehicles and trade vehicles, and ‘private’ in the proviso to s 16(3) was used in the sense of domestic, pleasure or social purposes (see p 770 h and j and p 771 b, post).
(ii) in the proviso to s 16(3) ‘type’ was a word not used at any very high level of abstraction: instead of a few broad categories there might be many categories, with a vehicle moving from one to the other with comparatively small alterations; ‘suitable’ bore the meaning ‘fitted for’ ‘adapted’ or ‘appropriate’, and ‘unsuitable’ the opposite meaning, so that the commissioners’ finding of fact in the first case that the vehicles were unsuitable to be used as private vehicles was not displaced or destroyed by statistical evidence (see p 768 g and p 771 f, post); dictum of Buckley J
Page 765 of [1970] 2 All ER 764
in Bourne (Inspector of Taxes) v Auto School of Motoring (Norwich) Ltd (1964) 42 Tax Cas at 226 applied;
(iii) ’commonly’ in the proviso to s 16(3) meant ‘usually’, ‘ordinarily’ or ‘generally’ and the percentage of registrations approach taken by the Crown was not necessarily right; even if the statistical evidence amounted to what the Crown claimed for it, there was evidence on which the commissioners could have reached their decision in the first case, so that the court would not disturb it (see p 771 f, g and j, post);
(iv) in the second case the commissioners had misinterpreted the statutory language; a vehicle of a type unsuitable for use for a purpose might be suitable for adaptation so as to make it into a type suitable for that use, but the test was suitability or unsuitability of the type for use, not for adaptation (see p 773 b and e post).
Notes
For investment allowances relating to motor vehicles, see 20 Halsbury’s Laws (3rd Edn) 494, 495, para 947 and Supplement thereto para 951.
For the Finance Act 1954, s 16, see 34 Halsbury’s Statutes (2nd Edn) 291. The Finance Act 1954, s 16, was repealed by the Finance Act 1966, s 53(7) and Sch 13, Part IV.
Cases referred to in judgment
Bourne (Inspector of Taxes) v Auto School of Motoring (Norwich) Ltd (1964) 42 Tax Cas 217, Digest (Cont Vol B) 403, 480aa.
Laing v Inland Revenue Comrs (1967) 46 ATC 379.
Tapper (Inspector of Taxes) v Eyre [1967] 2 All ER 636, [1967] 1 WLR 1077, 43 Tax Cas 720, Digest Supp.
Taylor v Thompson [1956] 1 All ER 352, [1956] 1 WLR 167, 120 JP 124, 39 Digest (Repl) 276, 159.
Case stated
This was an appeal by the Crown against a decision of the Special Commissioners of Income Tax granting investment allowances in respect of motor vehicles to the first taxpayer, Granada TV Rental Ltd; and an appeal by the second taxpayer, S & U Stores Ltd, against a decision of a different panel of the commissioners refusing investment allowances in respect of motor vehicles. The vehicles were licensed as goods vehicles under Sch 4 to the Vehicles (Excise) Act 1962. The cases stated are substantially set out in the judgment. Both appeals were called on together and argued one after the other.
J R Phillips QC and P W Medd for the Crown.
Desmond C Miller QC and H H Lomas for the first taxpayer.
Heyworth Talbot QC and S I Simon for the second taxpayer.
18 March 1970. The following judgment was delivered.
MEGARRY J. I have before me two cases concerning companies which were called on together and argued one after the other. Each was a case stated by the Special Commissioners. In the first case (the Granada case), Granada TV Rental Ltd (the first taxpayer) won, and now seeks to hold the decision in its favour. In the second (the S & U case), S & U Stores Ltd (the second taxpayer) lost, and now seeks to have that decision reversed. The same counsel appears for the Crown in each case. Both cases turn in the main on the Finance Act 1954, s 16(3), proviso.
Section 16 provides for an ‘investment allowance’ in respect of capital expenditure on new assets incurred after 6 April 1654. By s 16(3) an investment allowance equal to one-fifth of the expenditure is to be made instead of an initial allowance under Chapter II of Part X of the Income Tax Act 1952 on the provision of new machinery or plant. This, however, is qualified by the proviso, which states:
Page 766 of [1970] 2 All ER 764
‘Provided that no investment allowance shall be made under this subsection in respect of expenditure incurred on the provision of road vehicles unless they are of a type not commonly used as private vehicles and unsuitable to be so used or are provided wholly or mainly for hire to or for the carriage of members of the public in the ordinary course of a trade.’
Accordingly, the benefits of s 16 are taken away from all road vehicles which do not fulfil the double condition of being ‘of a type not commonly used as private vehicles’ and also of being ‘unsuitable to be so used’, that is, as private vehicles. The remaining words of the proviso do not apply to the case before me. The argument has ebbed and flowed round a number of ordinary words in the English language, especially ‘type’, ‘commonly’, ‘private vehicles’ and ‘unsuitable.
I begin with the facts of the Granada case. What I have to consider is a purchase by the first taxpayer during the accounting period 28 September 1963 to 26 September 1964 of 243 Austin or Morris mini vans, and five Morris 1000 vans. It is accepted that so far as the mini vans are concerned, there is no material difference between the Austin and the Morris. All these vehicles were painted in a distinctive colouring and lettering, using the name ‘Granada’; and 22 of them had signs on the roof, ten of these being illuminated by fluorescent tubes and the order 12 unilluminated. The Morris 1000 was a somewhat larger vehicle than the mini van, but each was of a familiar type of trade van, with windows at the front and back but no windows at the side apart from those on either side of the driver’s seat.
The evidence relied on by the first taxpayer was unremarkable, whereas part of the evidence adduced by the inspector of taxes was somewhat less usual. The commissioners accepted the evidence of a Mr Griffiths, as an expert, called by the first taxpayer. He listed a number of disadvantages of using the mini van for private purposes, when compared with the corresponding mini saloon. These disadvantages included the following:
‘(a) Visibility was much more restricted by absence of side windows and smaller rear windows. (b) Hearing, de-misting, insulation and ventilation equipment was absent or less effective. (c) The driving seat was not so adjustable, not so well sprung and uncomfortable over anything but a short distance. (d) Speed was restricted to 40 m.p.h. (except on motorways). (e) Their power curve, gear ratios, suspension and less powerful brakes were designed for the carriage of goods, not passengers; also, their turning circle was greater. (f) Lack of sound-deadening material produced constant drumming noise; (g) Front passenger seats were optional extras. No rear seats. (h) Safety belts were not available for rear passengers.’
The commissioners accepted that:
‘Generally, mini vans were noisier, less comfortable, and more tiring to drive than their saloon counterparts, Putting a mini van to private use was a make-shift, when nothing better could be afforded … There was no market for second hand vans painted with advertising material. Removal of such material by paint stripper, followed by respray, would be expensive. A considerable amount of work by way of stripping and respraying would be necessary to make any of the [first taxpayer’s] said vans fit for resale.’
As a private vehicle this type of van was described by two of the witnesses as being ‘rock bottom’. There was also evidence, mainly of witnesses for the inspector of taxes, of those who had bought mini vans for private use, influenced mainly by the cheaper price, since there was no purchase tax. They had, they said, ignored or frequently disregarded the 40 mph speed limit which appears to apply even when the vans are used for private purposes. I trust that before giving this evidence they were duly informed of the privilege against self-crimination.
Page 767 of [1970] 2 All ER 764
Apart from the evidence given by four of the inspector’s witnesses of purchases of mini vans for private use, the main burden of the inspector’s case was some statistical evidence. This was taken from tables of the numbers of new vehicles first registered in the United Kingdom for the calendar year 1964, a year which includes about three-quarters of the period during which the first taxpayer purchased the vehicles in question. These tables embrace the mini vans, but not the Morris 1000 vans, the status of which accordingly rests only on the other evidence. The tables were compiled by reference to the first five Schedules to the Vehicles (Excise) Act 1962; and before referring to the tables I must accordingly briefly summarise the Schedules, which provide for the annual rate of duty on various vehicles.
Schedule 1 comprises certain vehicles not exceeding 8 cwt in weight unladen, such as bicycles and tricycles. Schedule 2 comprises hackney carriages, and Sch 3 tractors, and so on. It is common ground that none of these first three Schedules applies to the vehicles here in question. Schedule 4 lays down the annual rate of duty applicable to ‘a goods vehicle b , with Table A providing for the various classes of goods vehicle, such as electrically propelled goods vehicles, local authorities’ watering vehicles, and so on. Then by para 7, Table A provides for ‘Goods vehicles not included in any of the foregoing provisions of this Part of this Schedule’. By para 7(1) of Sch 4 itself:
‘… “goods vehicle” means a mechanically propelled vehicle (including a tricycle as defined in the First Schedule to this Act and weighing more than eight hundredweight unladen) constructed or adapted for use and used for the conveyance of goods or burden of any description, whether in the course of trade or otherwise … ’
There is thus the double requirement of being ‘constructed or adapted for use … for the conveyance of goods’ and also of being ‘used for the conveyance of goods’; and it is immaterial whether or not this is in the course of trade. However, para 2 of Sch 4 provides that:
‘Duty shall not be chargeable by virtue of this Schedule … (d) in respect of a vehicle of which the unladen weight exceeds twelve hundredweight and which, though constructed or adapted for use for the conveyance of goods or burden, is not used for the conveyance thereof for hire or reward or for or in connection with a trade or business (including the performance by a local or public authority of its functions).’
The restriction of weight, I may say, was later deleted by the Finance Act 1965.
Confining myself to what is relevant to this case, Sch 4 thus applies only if a vehicle (a) is constructed or adapted for use for the conveyance of goods, and also (b) is used for the conveyance of goods in connection with a trade or business, including in this term the performance by a local or public authority of its functions. A vehicle which is not used for the conveyance of goods, or which is used for the conveyance of goods otherwise than in connection with a trade or business, thus falls outside Sch 4. Schedule 5 applies to any mechanically propelled vehicle ‘in respect of which an annual rate is not specified in the foregoing Schedules to this Act.' It is thus an omnium gatherum Schedule, which catches (inter alia) the ordinary private motor car, as well as a number of other vehicles.
I can now turn to the tables. In 1964, 11,017 vehicles under codes 135 and 194 were registered under Sch 4, the goods vehicle Schedule. These codes include vans, pick-ups, lorries and trucks not exceeding 13 cwt, licensed as goods vehicles. Mini vans do not exceed 12 cwt. On the other hand, in 1964 19,662 vehicles under codes
Page 768 of [1970] 2 All ER 764
124 and 182 were registered under Sch 5. These codes include mini vans, mini pick-ups and mini mokes, with an engine capacity under 1,000 cc. The total number of mini mokes produced for the home market in 1964 was said to be less than 400, so that for all practical purposes Sch 5 registrations under these codes were in respect of mini vans and mini pick-ups. The total of these figures under the two Schedules is 30,679, so that Sch 4 had 36 per cent of the registrations and Sch 5 had 64 per cent. Much of the argument has turned on this statistical evidence, but before I consider it I must mention the three principal authorities on the proviso. They provide a certain amount of assistance, though not very much.
The most helpful authority is Bourne (Inspector of Taxes) v Auto School of Motoring (Norwich) Ltd. There, some private cars (mostly Ford Anglia saloons) had been fitted with dual control equipment for the purposes of the school of motoring carried on by the taxpayer, and also with name plates indicating the vehicles’ use in the taxpayer’s trade or business. The person sitting in what was normally the front passenger’s seat was thus able to use a second set of controls for the brake, the accelerator and, in some cases, the clutch. Buckley J said ((1964) 42 Tax Cas at 226):
‘Now, it seems to me that a car which has dual control equipment installed is in an important respect different from a car which has not got dual control equipment. I do not think that it is sensible to regard such cars as belonging to the same type of vehicle. The fact that by a certain amount of work a car with dual controls could be reconverted to a car of the ordinary conventional type by removing the dual control equipment seems to me, with respect to [counsel for the Crown], to be neither here nor there. At the moment that one has to consider whether the man who has provided the car for the purpose of his business has provided a vehicle of a type commonly used as a private vehicle and suitable to be so used, one has got to consider the vehicle in the state in which it is going to be put into use in the business of the motoring school, that is to say, in the adapted form. For my part, I should be very slow to say that a car which had got dual control equipment at the feet of what would normally be a passenger sitting in the nearside seat was a type of car which was suitable to be used as a private vehicle. Certainly, I would consider that it was a kind of vehicle not commonly used as a private vehicle.’
The learned judge thus dealt not only with the word ‘type’ but also with the words ‘commonly’ and ‘suitable. A private car without dual controls and a private car with dual controls are cars of different types, the latter being of a type not commonly used as private vehicles, and not suitable to be used as private vehicles. This indicates that ‘type’ is a word not used at any very high level of abstraction: instead of a few broad categories, there may be many categories, with a vehicle moving from one to the other with comparatively small alterations.
In Tapper (Inspector of Taxes) v Eyre, the case was argued for the inspector of taxes alone; the taxpayer did not appear and was not represented. The vehicle in question was an Austin mini van to which no modifications had been made, though there were advertisements on the side relating to the taxpayer’s business of a radio and television dealer and electrical engineer. The commissioners found in favour of the taxpayer, stating ([1967] 2 All ER at 638, 43 Tax Cas at 722):
‘We, the commissioners who heard the appeal, found that although many of these vehicles were used as private motor vehicles, they were primarily business vehicles. They were not subject to purchase tax and if members of the public took advantage of the regulations to acquire cheap vehicles, this
Page 769 of [1970] 2 All ER 764
should not deprive business users for whom the vehicles were intended of an investment allowance which had previously been granted for such vehicles.’
On appeal, the inspector tendered the same statistical evidence as is before me, and Stamp J allowed appeal. He said ([1967] 2 All ER at 638, 43 Tax Cas at 724):
‘With all respect to the commissioners, it does not seem to me that they had any evidence before them on which they could possibly hold that the vehicle in question was of such a type or had either of the qualities required in order to qualify for an investment allowance. On the contrary, such evidence as the commissioners had, it seems to me, in both respects, points entirely in the opposite direction.’
The evidence for the taxpayer was indeed slender, consisting only of that of a chartered accountant and the commissioners’ inspection of the van. On behalf of the inspector, there seems to have been in essence the same statistical evidence as to first registration as has been put before me; but there is nothing to indicate that this was analysed and discussed as it has been in this case. The commissioners’ findings, too, savour somewhat of what they considered the law ought to be, rather than of the construction and application of the statutes in point. In those circumstances, with the deficiencies of evidence on the taxpayer’s side and the uncriticised evidence given on behalf of the inspector, I am not surprised that Stamp J allowed the appeal; but I do not think that the decision can require me to disregard the quite different state of the evidence and argument in the case now before me.
Finally, there is Laing v Inland Revenue Comrs, a decision of the Inner House of the Court of Session. There, the commissioners decided in favour of the inspector. An electrical engineer had purchased a Ford 7 cwt van, and used it solely for his business. The makers advertised the van as being not only best for business, but ideal for private use in the evening and at weekends too. Whatever may be the implications of this claim, the court took it into account, and held that the question was essentially one of fact. There was evidence on which the commissioners could have reached their conclusion, and so the appeal should be dismissed.
I turn from the authorities to the contentions now before me. The case of counsel for the Crown really turns on the statistical evidence. Without it, he accepts that he would have a difficult task. The commissioners rejected it. They stated:
‘The Crown invited us to infer from the statistics that mini vans were commonly used as private vehicles. After due consideration we decline to draw any such inference. It seems to us that registrations as “other vehicles” under the Fifth Schedule to the Vehicles (Excise) Act, 1962, will embrace a variety of user, including user for private purposes, but also for business purposes, other than the carriage of goods. To infer that a major or substantial part of the 64% comprised registrations for use us private vehicles does not seem to us justified on the statistics alone, without further evidence in support. Indeed, the only other evidence, that of Mr. Griffiths and Mr. Broomhead, points the other way. Bearing in mind that the mini vans were designed as light commercial vans, we start with the inference that they would normally be used as such. Having derived little or no assistance from [the] statistics [relied on by the Crown] we are left with the evidence of the other witnesses as to the number of mini vans used for private purposes … On the evidence before us we find that mini vans were not of a type commonly used as private vehicles during the period in which the expenditure in question was incurred.’
As to suitability, they stated:
Page 770 of [1970] 2 All ER 764
‘Having decided that the statistics do not assist us, we turn to the remaining evidence, oral and documentary, which is considerable, both in general and technical data. On this evidence we find that the mini vans and the Morris 1000 vans were of a type unsuitable to be used as private vehicles.’
The question is whether the commissioners were justified in rejecting the inference from the statistical evidence that the inspector seeks to draw.
Much turns on the contents of Sch 5. It was, I think, accepted by counsel for the Crown that of the 19,662 vehicles first registered in 1964 which came within that Schedule, not all would be necessarily private vehicles in the sense of vehicles used for social, domestic or pleasure purposes. Some would be vehicles used for business or trade purposes other than the carriage of goods in connection with that trade or business. Thus, service or other industries, tempted by the saving of purchase tax, might use these vehicles for transporting their employees rather than for the carriage of goods. Other vehicles might be used for the carriage of goods not connected with any trade or business, a use which in some circumstances might be regarded as being a form of private use; or the vehicles might be used for certain mixed purposes, or for certain doubtful cases, to which I shall refer in a moment. Counsel could not say how many vehicles fell within each of these sub-divisions; he said that the court ought to infer that the great majority were used as private vehicles.
The category of mixed purposes was introduced by junior counsel for the first taxpayer when following on behalf of the first taxpayer. He pointed to s 10 of the Vehicles (Excise) Act 1962, where the combined effect of sub-ss (1) and (4) was that if a vehicle, though mainly used for Sch 4 purposes, was sometimes used for Sch 5 purposes, a penalty became payable, subject to the limited exception provided by sub-s (6). Accordingly, he said, the prudent owner who contemplated such mixed use would licence his vehicle under Sch 5. Schedule 5 would thus include a number of these mixed use vehicles. The argument, if I may say so, was ingenious, but it seemed to me to assume a greater knowledge of the provisions of s 10 than is likely to be found in most motorists; and in any case, as counsel for the Crown pointed out, the then current form of application for a vehicle licence does not seem to give any warning on this point. The doubtful cases constitute a category which emerges from a decision on the Road Traffic Acts, Taylor v Thompson. There, Lord Goddard CJ raised ([1956] 1 All ER at 354, [1956] 1 WLR at 170), without deciding, the question whether a shooting brake would be a goods vehicle if a doctor used it for carrying his instruments or a lawyer used it for carrying his books and professional robes. What was decided was that the brake was a goods vehicle when a director of a firm of photographic printers and free lance photographers used it to carry photographic equipment in connection with his business. The term ‘trade or business’, not for the first time, created obvious difficulties. Other difficulties might arise from vehicles owned by charities, such as certain schools, and so on.
Even if one discards the mixed purposes and doubtful cases, it is at least highly uncertain what proportion of the 19,662 vehicles were in fact used as private vehicles: in the absence of evidence, one can do no more than speculate. Counsel for the Crown contended that under the proviso the onus lay on the taxpayer and so the point should be resolved in the inspector’s favour. I do not, however, think that this is a question of the onus of proof. Evidence is of little weight if its relevance and import do not appear. Evidence which is equivocal or uncertain in its significance is evidence which necessarily carries little weight in support of what is merely one possible meaning. Counsel for the Crown did submit that the phrase ‘private vehicle’ in the proviso to s 16(3) of the Finance Act 1954 embraced all vehicles registered under
Page 771 of [1970] 2 All ER 764
Sch 5; but I do not think this can be right. If the draftsman had wished to provide for this result, he could easily have achieved it by an express reference to the then equivalent of Sch 5. Instead, he used the undefined term ‘private vehicles’; and in this context, where any allowances under s 16 have to be claimed by the taxpayer, I do not think that the term ‘private vehicles’ can have been used as comprehending all that fall within the residual net of Sch 5, many of which would not be regarded as private vehicles in common parlance. Schedule 5, indeed, seems to me somewhat of a blunt instrument for the purpose of the case before me. The distinction, I would say, is between private vehicles and trade vehicles, so that ‘private’ is used in the sense of domestic, pleasure or social purposes. Looking at the case as a whole, I think the commissioners were right in the view that they took of the statistical evidence, and I would uphold their decision. I cannot see that they have been guilty of any error of law.
If I am wrong about this, then the question is what is the effect of evidence that the greater part or perhaps all of the 19,662 vehicles were used as private vehicles. Counsel for the Crown argues that this shows not only that the mini vans are of a type commonly used as private vehicles, but also that they are prima facie suitable to be so used, so that the first taxpayer satisfies neither of the requirements for escape from the proviso. As to suitability, I think that the inference is one which cannot with safety be drawn, or, if drawn, is on the facts of the case rebutted. There are many reasons why men may use an article for a purpose for which it is not suitable. Economy is one obvious reason, the absence of a reasonable alternative another. Many a man ‘makes do’ with an object which, though not suitable for the particular purpose, can be used so as to achieve it. A substantial saving of purchase tax is an obvious explanation of why some may use for private purposes vehicles which are suitable for trade purposes but not suitable for private purposes. ‘Suitable’ seems to me to bear the meaning of ‘fitted for, adapted or appropriate’, and ‘unsuitable’ the opposite meaning. There was ample evidence before the commissioners to support a finding of unsuitability, and I cannot see that this is displaced or destroyed by the statistical evidence, even when read in the way which is most favourable to the inspector.
I am more troubled by the phrase ‘not commonly used’. ‘Commonly’ I take to mean ‘usually’ or ‘ordinarily’ or ‘generally’, though not necessarily in the sense of constituting a majority. Sixty-four per cent for 1964 is a substantial percentage for Sch 5 first registrations, and so are the 48 per cent and 44 per cent for 1965 and 1966. Further, 19,662 is a substantial number in itself, as are the numbers for 1965 and 1966. Yet these figures are merely the figures for first registrations; they say nothing of the vehicles first registered in earlier years and still in use in 1964. I may say that I must not be taken as accepting that the percentage approach is necessarily right. If only 50 vehicles of a particular type had been imported into this country, and 45 of them were used as private vehicles, I think it at least possible that it could be said of the other five that ‘they are of a type not commonly used as private vehicles’. One swallow does not make a summer, nor, it may be said, does the use of a mere 45 vehicles for a particular purpose amount to a common use for that purpose. But this point has been mentioned only very briefly and I say no more about it.
Looking at this part of the case as a whole, I have reached the conclusion that on the footing of the statistical evidence amounting to what the inspector claimed for it, there was evidence on which the commissioners could have decided the point in either sense. Accordingly, I do not think that I can disturb their decision, even if I thought it to be wrong. In conjunction with the views that I have taken on the other parts of the case, this means that I answer the question of law by saying that the decision of the commissioners was not erroneous in point of law.
I cannot, however, part from the case without saying something of a more general nature. Simplicity and common sense are, I accept, qualities which must be applied
Page 772 of [1970] 2 All ER 764
with caution in the construction of a taxing statute; and of course what I am concerned with is the language used by Parliament. Nevertheless, put simply, I think that what Parliament has said to those who engage in trade or business is that they can claim an investment allowance on road vehicles if these are of a type which is neither commonly used as private vehicles nor suitable for use as private vehicles. A trader who buys what I may call a genuine trade vehicle ought to get his allowance; one who, in the guise of buying a trade vehicle, buys what is no more than a disguised private vehicle, or a vehicle which is suitable for private use or is generally so used, ought not to get this allowance. The general purpose of the proviso seems to be to separate the genuine from the colourable. I would tend to read the proviso in this way, especially where, as here, there is no suggestion of any device or evasion of the Act. Despite the thousands of words of admirable argument that have been addressed to me, I doubt whether there is really very much more to the proviso than that. In particular, it would seem to be a bizarre result if a purchaser of genuine trade vehicles for trade purposes were to be deprived of his allowance merely because the financial inducements of the purchase tax system had proved sufficiently great to tempt thousands of motorists to use for private purposes identical vehicles which, though unsuitable for those purposes, are nevertheless usable for them. The language of the statute is, of course, capable of producing this result in a case in which there is clear evidence of common use as private vehicles, and in such a case effect must be given to what Parliament has decreed. A trader who buys vehicles which, though sold as trade vehicles, are generally or commonly used as private vehicles, should be warned by this general or common use that his investment allowance is in peril. Where, however, the use as private vehicles is not plainly and notoriously common, but merely arguably so, I should be slow to support a decision that this sufficed to deprive the trader of his allowance. However that may be, all that I need say is that in the Granada case I dismiss the appeal.
That said, I turn to the other case, that of S & U Srores Ltd. In view of the full argument in the Granada case, the S & U case was taken with appropriate brevity. Counsel for the second taxpayer in the main adopted the arguments of counsel for the first taxpayer. He was in the greater difficulty that the commissioners had decided against him, but he had the advantage that the percentages were more in his favour. The taxpayer carries on trade as a retail credit trader and general warehouseman, selling furniture, clothes, toys and so on. The basis of the trade is personal calls by the taxpayer’s servants at private residences. Some 900 or so are thus employed, and they carry samples in their vans. Some of these vans are their own vehicles, but others are provided by the taxpayer. The vehicles are Austin A35 vans and Bedford 6 Cwt vans. They are plain vans, in the sense that they are not painted with the taxpayer’s name or fitted with signs as in the Granada case. What is in issue is the capital expenditure on 950 vehicles for Sch D for 1964–65 and 1965–66, and profits tax and then corporation tax for 1963 to 1966; and all three taxes depend on the proviso. Schedule 5 registrations for the Austins of 1,000 to 1,200 cc were 4,241 for 1964 and 2,181 for 1965, giving percentages, when compared with Sch 4 registrations for Austins of 13 to 16 cwt, of 32·3 per cent and 28 per cent respectively. For the Bedfords, the corresponding figures, given only for 1965, are 25·4 per cent.
I need not repeat what I have already said about the uncertain significance of the statistical evidence. Further, even if all Sch 5 registrations are for private vehicles, I do not think it can be said that these figures show that these vans are of a type commonly used as private vehicles. Neither the percentages nor the absolute numbers seem to me to satisfy the word ‘commonly. The commissioners stated:
‘It had been argued that the fact that a sizeable minority of such vehicles were registered as private vehicles did not invalidate the proposition that they were of a type not commonly used as private vehicles. although on the evidence it would be right to say that the majority of such vehicles were registered as
Page 773 of [1970] 2 All ER 764
goods vehicles, we held that it could not be said that they were not often to be met with in use as private vehicles.’
I do not think the phrase ‘not often to be met with’ is a fair translation of the statutory ‘not commonly used’. On the statistics, such vehicles are of a type that is commonly used, in the sense of ‘usually’ or ‘ordinarily’ used, not as private vehicles but as trade vehicles. In my judgment, the commissioners have misinterpreted the statutory language.
On the score of suitability, the commissioners stated:
‘On the second test sought to be satisfied, viz., that the [second taxpayer’s] vehicles were of a type unsuitable to be used as private vehicles, we found that while the vans which the appeal was concerned did not afford the ideal solution for someone looking for a comfortable family car, they were not positively unsuitable for use as private vehicles.’
The phrase ‘not positively unsuitable’ seems to me to indicate a misinterpretation of the words ‘unsuitable to be so used’; for I think that it suggests a leaning towards impossibility rather than unsuitability in the sense of the reverse of ‘fitted for’ ‘adapted’ or ‘appropriate’. True, the vans are not unusable as private vehicles; but the evidence before the commissioners shows that those who had bought these vans for private use soon provided extra seats in them for passengers, and bearing in mind what Buckley J said in Bourne’s case ((1964) 42 Tax Cas at 226), this seems to me to amount to evidence of some weight as to the unsuitability of the type in its natural state for use as private vehicles. A vehicle of a type unsuitable for use for a purpose may, of course, be suitable for adaptation so as to make it into a type suitable for that use; but the test is suitability (or unsuitability) of the type for use, not for adaptation.
Counsel for the Crown and the second taxpayer each claimed that the evidence was all one way, though in opposite directions. Counsel for the second taxpayer relied on the manufacturers’ brochures for the vehicles (which were made available for the court by the commissioners, though not exhibited) as demonstrating the unsuitability of the vehicles for use as private vehicles. It seems to me that from the evidence of the witnesses, the brochures and the statistics the only reasonable conclusion is that the proviso, properly read, does not take away the taxpayer’s right to the allowance. I therefore answer the question asked by the commissioners by saying that I do not think there was evidence on which they could properly arrive at their decision, and accordingly I allow the appeal.
First appeal dismissed. Second appeal allowed.
Solicitors: Solicitor of Inland Revenue; Pearson & Skelton, Manchester (for the first taxpayer); Edge & Ellison, Birmingham (for the second taxpayer).
K Buckley Edwards Esq Barrister.
Farnworth Finance Facilities Ltd v Attryde and another
[1970] 2 All ER 774
Categories: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PENTON ATKINSON AND MEGAW LJJ
Hearing Date(s): 9, 10, 13 APRIL 1970
Contract – Breach – Fundamental breach – Affirmation of contract – Hire-purchase of motor cycle – Extensive use of motor cycle after some defects known – Repudiation of contract after further defects discovered – Defects rendering motor cycle unroadworthy – Agreement excluding conditions or warranties, express or implied.
By a hire-purchase agreement dated 24 July 1964 the first defendant agreed to buy a new motor cycle for £518 1s 10d, a deposit of £155 5s 10d was paid, the balance to be paid in monthly instalments. The agreement provided that the vehicle supplied was ‘subject to no conditions or warranties whatsoever express or implied’. The motor cycle was defective and was returned to the dealers, the second defendants, to correct the faults; subsequently it was returned to the manufacturers but not all the faults were remedied. In November 1964, the rear chain broke and damaged the crank case. The first defendant (who had paid four monthly instalments) repudiated the contract and the finance company, the plaintiffs, repossessed the motor cycle which they sold for £142 5s. The plaintiffs claimed £149 damages for breach of the hire-purchase agreement against the first defendant and by amendment from the second defendants. The first defendant pleaded fundamental breach and counterclaimed the amount paid by way of deposit and instalments. The county court judge held that the first defendant was entitled to reject the machine and had not affirmed the contract. Judgment was given for the plaintiffs against the second defendants and for the first defendant against the plaintiffs on the plaintiffs’ claim, with judgment for the first defendant against the plaintiffs on the counterclaim. The second defendants appealed.
Held – (i) The defects in the motor cycle were such as were likely to cause an accident or render the vehicle unsafe for use on the road and were accordingly fundamental breaches of the contract such as to disentitle the plaintiffs from relying on the exclusion clauses (see p 778 a and p 779 e and g, post).
Yeoman Credit Ltd v Apps [1961] 2 All ER 281, Astley Industrial Trust Ltd v Grimley [1963] 2 All ER 33 and Charterhouse Credit Co Ltd v Tolly [1963] 2 All ER 432 applied.
(ii) The first defendant had not affirmed the contract by using the motor cycle because he had not at that time elected to go on with the contract knowing the extent of the defects (see p 778 d, and p 779 e and g, post).
Notes
For exemption clauses in hire-purchase contracts, see 19 Halsbury’s Laws (3rd Edn) 531, 532, para 885, and for cases on the subject, see 26 Digest (Repl) 665, 666, 31–36.
For implied conditions and warranties and provisions as to exclusion of implied conditions and warranties in the case of hire-purchase agreements within the Hire-Purchase Act 1965, see ss 17, 18, 45 Halsbury’s Statutes (2nd Edn) 1430, 1431.
Cases referred to in judgments
Astley Industrial Trust Ltd v Grimley [1963] 2 All ER 33, [1963] 1 WLR 584, Digest (Cont Vol A) 645, 36ba.
Charterhouse Credit Co Ltd v Tolly [1963] 2 All ER 432, [1963] 2 QB 683, [1963] 2 WLR 1168, Digest (Cont Vol A) 649, 43b.
Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 All ER 225, [1970] 1 QB 447, [1970] 2 WLR 198.
Page 775 of [1970] 2 All ER 774
Karsales (Harrow) Ltd v Wallis [1956] 2 All ER 866, [1956] 1 WLR 936, 26 Digest (Repl) 666, 35.
Pollock & Co v Macrae 1922 SC (HL) 192, 1922 SLT 510, 39 Digest (Repl) 578, *566.
Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1966] 2 All ER 61, [1967] 1 AC 361, [1966] 2 WLR 944, Digest (Cont Vol B) 652, 2413a.
U G S Finance Ltd v National Mortgage Bank of Greece and National Bank of Greece SA [1964] 1 Lloyd’s Rep 446.
Yeoman Credit Ltd v Apps [1961] 2 All ER 281, [1962] 2 QB 508, [1961] 3 WLR 94, Digest (Cont Vol A) 648, 43a.
Appeal
This was an appeal by the second defendants, King’s Motors (Oxford) Ltd, against a decision of his Honour Judge Temple-Morris QC given at Cardiff County Court on 11 July 1969 whereby the county court judge held that the first defendant, Jack Frederick Attryde, was entitled to repudiate a contract dated 24 July 1964 with Farnworth Finance Facilities Ltd, the plaintiffs, for the hire-purchase of a motor cycle and was entitled to damages against the plaintiffs on his counterclaim and that the plaintiffs were entitled to be indemnified by the second defendants. The facts are set out in the judgment of Lord Denning MR.
A W Hamilton for the second defendants.
T J F Hobley for the plaintiffs
E S Cazalet for the first defendant.
13 April 1970. The following judgments were delivered.
LORD DENNING MR. The first defendant is a civil servant employed by the Ministry of Aviation at Aberporth in Cardiganshire. In 1964, when he was aged 23, he wanted a new motor cycle. He read an advertisement issued by the Enfield Cycle Co Ltd and decided to get a Royal Enfield Interceptor. He went to dealers, the second defendants, King’s Motors (Oxford) Ltd of Wolverhampton. They got a machine from the makers and supplied it to him on hire-purchase terms. The finance company was Farnworth Finance Facilities Ltd of Cardiff, the plaintiffs. The second defendants had the forms in their office at Wolverhampton. The first defendant signed them and took delivery of the machine. The cash price was £427 5s 10d. The finance charges were £89 16s. Add £1 option to purchase. Thus making a total hire-purchase price of £518 1s 10d. The first defendant paid £155 5s 10d down, with instalments payable over the next three years of £10 1s a month.
The first defendant took delivery of the machine on 11 July 1964. But he had a lot of trouble with it. He took it back to the second defendants. They tried to correct the faults, but did not succeed. So he took it back to the makers, the Enfield Cycle Co Ltd at Redditch. They had it for nine days—from 21 to 31 July 1964. They remedied some defects, but they did not succeed in remedying all the faults. On 13 August, the first defendant took it back again to the Enfield Cycle Co Ltd They had it this time for some weeks. He did not get it back until 15 October 1964. They had remedied some defects, but not all. He used it for five weeks, from 15 October to 23 November. But he found that there were still serious faults. The last straw was on Saturday, 21 November 1964. As he was turning out from a drive, the rear chain broke. The broken chain knocked a hole in the crank case and caused considerable damage. It would be a very expensive repair. He decided that he would not go on with it any further. He wrote on Monday, 23 November 1964:
‘I am not making any further effort to get Enfields or things to put things right. I have tried hard enough and got nowhere. Obviously I will not continue to pay hire charges for a machine I cannot use and which has been a troublesome burden ever sine I’ve had it. Please come and repossess the bike you will find it at the address given at the start of this letter.’
Page 776 of [1970] 2 All ER 774
That was his address in Cardiganshire. So being utterly disappointed, he rejected the machine.
It was a big loss to him: for he had paid £155 10s down. He had paid four instalments of £10 1s. So he had paid £195 14s. The plaintiffs, or someone on their behalf, came and took possession of the machine. They sold it for £142 5s. They then sued the first defendant for a further £149 1s. He no longer had the motor cycle, and he was now being sued for a further £149 1s. He resisted the claim on the ground that the plaintiffs had been guilty of a fundamental breach of their obligations under the contract. He put in a counterclaim for his own loss. The plaintiffs said that, if they were in breach, they could claim indemnity from the second defendants. So they joined them as defendants.
The action was tried by his Honour Judge Temple-Morris QC at Cardiff. He accepted the first defendant’s evidence in its entirety. The first defendant had written letters giving full details of all the troubles. These were quite accurate. The second defendants had not adduced any satisfactory evidence in answer. They had only called a spares manager who knew very little about the machine. He had only given it a road test. He had ridden it at 60 to 70 mph and said weakly that it was ‘not satisfactory’. In the light of all the evidence, the judge found that the machine was not roadworthy at the time of the purchase. The items of complaint, he said, made up a fundamental breach. He adopted the words of one of the witnesses that ‘it was disgusting for a new machine’. The judge found that the first defendant had not affirmed the contract and was entitled to reject the machine. He was not liable to the plaintiffs. On the contrary, he was entitled to damages against them on his counterclaim. He awarded him the money he had paid down—£155 5s 10d—and the four instalments of £10 1s. That is £195 9s 10d in all. The judge held that the plaintiffs were entitled to be indemnified by the second defendants.
Now the second defendants appeal to this court. They take up the cudgels for the plaintiffs. They say that the plaintiffs were not liable to the first defendant and so there is no call for an indemnity. The issues depend very much on the terms of the contract between the parties. The printed form contains two contracts. One is between the second defendants and the plaintiffs, whereby the second defendants sell the machines to the plaintiffs. The other is between the plaintiffs and the first defendant, whereby the plaintiffs let out the machine to the first defendant on hire-purchase terms.
The contract between the second defendants and the plaintiffs is at the bottom of the form:
‘We hereby offer to sell the said vehicle to you for the cash price stated above … The said vehicle conforms in all respects with statutory requirements and is in a roadworthy condition.’
That contract by the second defendants is clear and unequivocal. They promise that the machine is roadworthy.
The contract between the plaintiffs and the first defendant is at the top of the form. It contains several conditions purporting to exempt the plaintiffs. I will read the material ones:
‘… the [first defendant] further expressly acknowledges that: …
2. He has examined the said vehicle and found it in good order and condition …
4. The said vehicle is supplied to him subject to no conditions or warranties whatsoever expressed or implied save those (if any) that are implied where the Hire Purchase price does not exceed £300a by virtue of the Hire Purchase Acts.
Page 777 of [1970] 2 All ER 774
5. The said vehicle is not supplied subject to any condition that the same is fit for any particular purpose … ’
The schedule gave this description of the vehicle:
‘Royal Enfield Interceptor Motor Cycle c.c. 736 … New or Secondhand. [Answer] New.’
We have in this case to apply the principles about fundamental breach, which were recently considered by this court in Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd. The first thing to do is, no doubt, to construe the contract, remembering always the proposition of Pearson LJb which was approved by the House of Lords in Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale ([1966] 2 All ER 61 at 68, 75, 88, [1967] 1 AC 361 at 393, 405, 426):
‘… there is a rule of construction that normally an exception or exclusion clause or similar provision in a contract should be construed as not applying to a situation created by a fundamental breach of contract.’
The rule of construction applies here. It means that we must see if there was a fundamental breach of contract. If there was, then the exempting condition should not be construed as applying to it. We look, therefore, to the terms of the contract, express or implied (apart from the exception clauses) and see which of them were broken. If they were broken in a fundamental respect, the finance company cannot rely on the exception clauses.
As between the plaintiffs and the first defendant, there was no express term about the condition of the machine. But there were implied terms. It has been established by a series of cases in this court that, in a hire-purchase agreement of a motor vehicle there are a number of implied terms which are of fundamental importance. These cases are: Yeoman Credit Ltd v Apps, Astley Industrial Trust Ltd v Grimley and Charterhouse Credit Co Ltd v Tolly. These cases show that it is an implied condition that the machine should correspond with the description and that it should be reasonably fit for the purpose for which it was hired; which means, of course, that it should be roadworthy. In addition, the machine in this case was expressly described as ‘new’, which adds emphasis to the implied terms. A new motor cycle should at any rate be a workman-like motor cycle which is safe to be used on the roads.
There were clearly breaches of those implied terms. But were the breaches fundamental? Were they such as to preclude the plaintiffs from relying on the printed conditions which purported to exclude their liability? Counsel for the second defendants submitted that these breaches were much less serious than those in the earlier cases which have been before this court, such as Karsales (Harrow) Ltd v Wallis (where the vehicle had to be towed in) or Yeoman Credit Ltd v Apps (where it took 1 1/2 hours to get 3 or 4 miles). Counsel for the second defendants said that, although the defects here were such as to disappoint the first defendant, nevertheless they were not so grave as to amount to a fundamental breach. The judge held the contrary. I think he was right. Any defect is serious if it is likely to cause an accident or to render the vehicle unsafe on the road. It may be easily remediable, yet, until it is remedies, it is a serious defect. There were defects here which very nearly caused accidents. In August (before the return to the makers) a pannier fell off and caused
Page 778 of [1970] 2 All ER 774
the machine to slide about the road. A headlight failed at night and at speed because the dip switch was corroded. After the return from the makers, the machine was still unstable at high speeds. He had to use it without the pannier. The headlights failed twice more at night and at speed owing to the terminals coming off the wires. The lubricating system was still at fault. Finally the rear chain broke. It was only by good fortune that there was not a serious accident. In those circumstances, I think the breaches were fundamental. They went to the very root of the contract. They disentitled the plaintiffs from relying on their exception clauses, at any rate if the first defendant had not affirmed the contract. That is made clear by Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd.
The next question is whether the first defendant affirmed the contract. Counsel for the second defendants points out that the first defendant had ridden this bicycle for 4,000 miles. Even after he got it back from the makers on 15 October he had used it for five or six weeks till 23 November and had ridden 3,000 miles on it. Counsel said that by using it all that time the first defendant had affirmed the contract and it was too late for him to repudiate it. But as the argument proceeded, I think that counsel for the first defendant gave the right answer. He pointed out that affirmation is a matter of election. A man only affirms a contract when he knows of the defects and by his conduct elects to go on with the contract despite them. In this case the first defendant complained from the beginning of the defects and sent the machine back for them to be remedied. He did not elect to accept it unless they were remedied. But the defects were never satisfactorily remedied. When the rear chain broke, it was the last straw. It showed that the machine could not be relied on. This knowledge was not brought home to him until this last final incident. The first defendant was entitled to say then: ‘I am not going on with this machine any longer. I have tried it long enough.' After all, it was a contract of hiring. The machine was not his until the three years had been completed—and the price paid. Owing to the defects, the first defendant was entitled to throw up the hiring; to say he would have no more to do with it; and to claim damages. The judge found that the first defendant did not affirm the contract and I agree with him.
I may add that, even if the first defendant had affirmed the contract (so that he would be liable to pay the instalments), nevertheless counsel for the second defendants conceded quite rightly that the first defendant would still have been able to claim damages for the fundamental breach. The exception clauses would not protect the plaintiffs. But I need not go into that question because in my view there has been no affirmation. The first defendant was entitled to reject the machine and claim damages against the plaintiffs. I may say that the plaintiffs supported the first defendant. They were quite ready to admit that this machine was unroadworthy, but they claimed to be indemnified by the second defendants.
There is one other point, and that is on damages. Counsel for the second defendants said that the first defendant ought to give credit for the use which he had of the motor cycle for some 4,000 miles. He relied on Charterhouse Credit Co Ltd v Tolly when such a credit was allowed. But it seems to me that the value of any use had by the first defendant is offset by the great amount of trouble he had. So no credit need be given for the use. I see no reason for interfering with the award of the judge on damages.
So the plaintiffs are liable to the first defendant. But they are entitled to claim over against the second defendants on the express promise that the machine was in a roadworthy condition. They can recover against them the full amount of £149 1s, and for the £195 9s 10d that they have to pay the first defendant. The judge so ordered. I find that there is no fault to be found with the judgment of the judge in this case, and I would dismiss the appeal.
Page 779 of [1970] 2 All ER 774
FENTON ATKINSON LJ. I agree.
I only add a few words of my own out of deference to counsel for the second defendant’s very attractive and able argument. As I see it, the problem for the learned county court judge, on the authorities, was this: the motor cycle being undoubtedly a thoroughly unsatisfactory machine, could the plaintiffs rely on the exception clauses in the hire-purchase agreement, or, to use Lord Wilberforce’s words in Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale ([1966] 2 All ER 61 at 93, [1967] 1 AC 361 at 433) were the exception clauses inapplicable on the ground that the parties cannot be supposed to have contemplated such a misperformance, or to have provided against it without destroying the whole contractual substratum of the contract? Taking Lord Dunedin’s words in Pollock & Co v Macrae (1922 SC (HL) 192 at 200) to which Lord Denning MR has already referred:
‘Now, when there is such a congeries of defects as to destroy the workable character of the machine, I think this amounts to a total breach of contract, and each defect cannot be taken by itself separately so as to apply the provisions of the conditions of guarantee and make it impossible to claim damages.’
I think on the evidence this case did come very near the line; but there was a most formidable list of defects of one kind and another set out in the first defendant’s various letters. It was a question of fact and degree for the county court judge who really got no help at all from the plaintiffs, the second defendants or the manufacturers. No attempt was made in their evidence to explain or excuse the numerous faults complained of; and for my part I am not prepared to differ from the conclusion that he reached, that there was here a breach of a fundamental term and that this machine as delivered to the first defendant really was not a workable machine on a road.
On the other matters of affirmation and damages, there is nothing I wish to add. We heard interesting arguments on the true construction of cll 4 and 5 of the exception provisions of the hire-purchase agreement; but in the result those difficulties in my view do not have to be resolved. I would perhaps only say that for my part I think that cl 4 does not assist the first defendant, the hire-purchase price being over the £300c level; and certainly that the second defendants’ statement at the bottom of the document cannot form any part of the contract between the plaintiffs and the first defendant.
I quite agree that this appeal should fail.
MEGAW LJ. I agree.
Appeal dismissed.
Solicitors: Sinclair, Roche & Temperley agents for Vaughan & Roche, Cardiff (for the second defendants); Graeme Kemp, Cardiff (for the plaintiffs); Gwilym Richards & Co, Newcastle Emlyn (for the first defendant).
Rosalie Long Barrister.
Gissing v Gissing
[1970] 2 All ER 780
Categories: FAMILY; Ancillary Finance and Property
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 16, 17, 18, 19 MARCH, 7 JULY 1970
Husband and wife – Property – Matrimonial home – Husband sole owner at law – Wife paid for furniture and contributed to household expenses – Whether wife entitled to beneficial interest in house.
Husband and wife – Property – Matrimonial home – Husband sole owner at law – Claim by wife to beneficial interest – Basis of claim – Estate owner holding as trustee.
Husband and wife – Property – Matrimonial home – Both parties contributing to purchase – Direct and indirect contributions.
Husband and wife – Property – Matrimonial home – Husband sole owner at law – Intention that wife should enjoy beneficial interest – Evaluation of wife’s share – Application of maxim ‘equality is equity’.
Husband and wife – Property – Matrimonial home – Husband sole owner at law – Intention that wife should enjoy beneficial interest – Inference or imputation of intention.
The parties were married in 1935. In 1951, the matrimonial home was purchased for £2,695 and conveyed into the sole name of the appellant. The purchase price was raised as to £2,150 on mortgage repayable by instalments, as to £500 by a loan to the appellant by his employers, and the balance of £45 and the legal charges were paid by the appellant from his own money. At no time was there any express agreement as to how the beneficial interest in the matrimonial home should be held. The respondent (who was earning £500 per annum) made no direct contribution to the initial deposit or legal charges, nor to the repayment of the loan of £500 nor to the mortgage instalments. The respondent provided some furniture and equipment for the house and for improving the lawn and in all spent £220 on this. The respondent also paid for her and her son’s clothes and some extras. It was not suggested that either the respondent’s efforts or earnings made it possible for the appellant to raise the £500 loan or the mortgage. Nor was it suggested that the purchase of the respondent’s clothes, or her son’s was undertaken to assist the appellant in meeting the repayment of the loan or the payment of the mortgage instalments which he undertook. The appellant also paid the outgoings on the house and gave to the respondent a housekeeping allowance, and he paid for the holidays. In 1961, the marriage broke down and, in 1966, the respondent obtained a decree absolute. On the question whether the respondent had any beneficial interest in the former matrimonial home,
Held – On the facts it was not possible to draw an inference that there was any common intention that the respondent should have any beneficial interest in the matrimonial home (see p 782, a, p 784 b, p 786 j, p 788 e, p 794 j and p 795 b, post).
Per Curiam. (i) Where (a) both spouses contributed towards the purchase of the matrimonial home which was conveyed into the name of one spouse only, (b) there was no discussion, agreement or understanding between the spouses as to sharing the beneficial interest in the matrimonial home, and (c) the spouse in whose name the matrimonial home was purchased evinced no intention that the contributing
Page 781 of [1970] 2 All ER 780
spouse should have a beneficial interest therein, the question whether the contributing spouse is entitled to a beneficial interest in the matrimonial home is a matter dependent on the law of trust (see p 782 e, p 785 g, p 788 b and p 789 h, post).
(ii) There is no distinction to be drawn in law between the position where a contributing spouse makes direct contributions towards the purchase of the matrimonial home and where the contributing spouse makes indirect contributions, although in the latter instance the relevant share in the beneficial interest is likely to be less easy to evaluate (see p 782 g and j and p 788 d, and cf p 792 d and e, post); difficulty in evaluating the relevant share does not in itself justify the application of the maxim ‘equality is equity’ where the fair estimate of the intended share may be some fraction other than one-half (see p 782 j to p 783 b, p 788 c and p 792 j to p 793 a, post).
Observations on inferring and imputing an intention to former spouses.
Decision of the Court of Appeal [1969] 1 All ER 1043 reversed.
Notes
For property purchased partly with a wife’s money, see 19 Halsbury’s Laws (3rd Edn) 841, 842, para 1372, and for cases on the beneficial ownership of the matrimonial home, see 27 Digest (Repl) 264, 2130, and Digest (Cont Vol A) 692–695, 2130a-2130f.
Cases referred to in opinions
Bishop (decd), Re, National Provincial Bank Ltd v Bishop [1965] 1 All ER 249, [1965] Ch 450, [1965] 2 WLR 188, Digest (Cont Vol B) 347, 1112b.
Champman v Chapman [1969] 3 All ER 476, [1969] 1 WLR 1367, Digest Supp.
Dyer v Dyer (1788) 2 Cox Eq Cas 92, [1775–1802] All ER Rep 205, 30 ER 42, 25 Digest (Repl) 559, 84.
Eykyn’s Trusts, Re (1877) 6 Ch D 115, 37 LT 261, 27 Digest (Repl) 152, 1103.
Fowkes v Pascoe (1875) 10 Ch App 343, [1874–80] All ER Rep 521, 44 LJCh 367, 32 LT 545, 25 Digest (Repl) 568, 142.
Fribance v Fribance [1957] 1 All ER 357, [1957] 1 WLR 384, Digest (Cont Vol A) 693, 2130ab.
Gooch, Re, Gooch v Gooch (1890) 62 LT 384, 25 Digest (Repl) 566, 130.
Nixon v Nixon [1969] 3 All ER 1133, [1969] 1 WLR 1976, Digest Supp.
Pettitt v Pettitt [1969] 2 All ER 385, [1969] 2 WLR 966, Digest Supp.
Ulrich v Ulrich and Felton [1968] 1 All ER 67, [1968] 1 WLR 180, Digest Supp.
Wray v Steele (1814) 2 Ves & B 388, 35 ER 366, 47 Digest (Repl) 127, 926.
Young, Re, Trye v Sullivan (1885) 28 Ch D 705, 54 LJCh 1065, 21 LT 754, 27 Digest (Repl) 116, 854.
Appeal
This was an appeal by Raymond Clifford Gissing against an order of the Court of Appeal (Lord Denning MR and Phillimore LJ; Edmund Davies LJ dissenting) dated 18 February 1969 and reported [1969] 1 All ER 1043, allowing the appeal of the respondent, Emily Violet Gissing who was formerly the wife of the appellant, against an order of Buckley J made on 12 June 1968, declaring that the appellant was solely and beneficially entitled to the former matrimonial home, 28 Tubbenden Drive, Orpington, Kent. The proceedings were started by the respondent by originating summons.
J R Cherryman for the appellant.
M J Fox QC and Ian McCulloch for the Official Solicitor as amicus curiae.
The respondent did not appear and was not represented.
Their Lordships took time for consideration
7 July 1970. The following opinions were delivered.
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LORD REID. My Lords, I agree with your Lordships that this appeal must be allowed. But, as in Pettitt v Pettitt, much wider questions have been raised than are necessary for the decision of the case. I adhere to the views which I expressed in Pettitt’s case and I do not think that I am precluded from maintaining them by the decision in that case. But if I am then in my view the law is left in a very unsatisfactory position.
I take a common case where husband and wife agreed when acquiring the family home that the wife should make a financial contribution and the title to the house was taken in the husband’s name. That contribution could take one or other of two forms: the wife might pay part of the deposit and instalments or she might relieve the husband of some of his obligations, eg by paying household bills, so as to enable him to pay for the house. The latter is often the more convenient way.
It must often happen that in coming to and carrying out such an agreement or understanding neither spouse gives a thought to the legal position or the legal consequences. The law is terra incognita and rather frightening to many people. Spouses generally expect that, on the decease of one of them, his property will go to the other, and I strongly suspect that in a great many cases they do not think about what the position of the wife would be if there were a divorce or the husband became bankrupt, or at least they do not discuss those possibilities. So they do not discuss the question whether carrying out such an understanding will give the wife a share or beneficial interest in the house. If either of them gives a thought to the matter he or she may well think that the law will produce a just result without their assistance. Of course many people are more business-like but many are not.
If there has been no discussion and no agreement or understanding as to sharing in the ownership of the house and the husband has never evinced an intention that his wife should have a share, then the crucial question is whether the law will give a share to the wife who has made those contributions without which the house would not have been bought. I agree that this depends on the law of trust rather than on the law of contract, so the question is under what circumstances does the husband become a trustee for his wife in the absence of any declaration of trust or agreement on his part. It is not disputed that a man can become a trustee without making a declaration of trust or evincing any intention to become a trustee. The facts may impose on him an implied, constructive or resulting trust. Why does the fact that he has agreed to accept these contributions from his wife not impose such a trust on him?
As I understand it, the competing view is that, when the wife makes direct contributions to the purchase by paying something either to the vendor or to the building society which is financing the purchase, she gets a beneficial interest in the house although nothing was ever said or agreed about this at the time; but that, when her contributions are only indirect by way of paying sums which the husband would otherwise have had to pay, she gets nothing unless at the time of the acquisition there was some agreement that she should get a share. I can see no good reason for this distinction and I think that in many cases it would be unworkable. Suppose the spouses have a joint bank account. In accordance with their arrangement she pays in enough money to meet the household bills and so there is enough to pay the purchase price instalments and their bills as well as their personal expenses. They never discuss whose money is to go to pay for the house and whose is to go to pay for other things. How can anyone tell whether she has made a direct or only an indirect contribution to paying for the house? It cannot surely depend on who signs which cheques. Is she to be deprived of a share if she says ‘I can pay in enough to pay for the household bills’, but given a share if she says ‘I can pay in £10 per week regularly’?
It is perfectly true that where she does not make direct payments towards the purchase it is less easy to evaluate her share. If her payments are direct she gets
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a share proportionate to what she has paid. Otherwise there must be a more rough and ready evaluation. I agree that this does not mean that she would as a rule get a half share. I think that the high sounding brocard ‘Equality is equity’ has been misused. There will of course be cases where a half share is a reasonable estimation, but there will be many others where a fair estimate might be a tenth or a quarter or sometimes even more than a half.
But then it is said that there will be few deserving cases where the court cannot find enough in the evidence to justify a finding that there was at the time of acquisition some kind of agreement or understanding or intention that the wife should have a share. I do not agree. In evidence the husband will say truthfully that the matter was never discussed and that he never considered the question of her having a share. Even if in cross-examination he were to say that if he had been asked he might have been willing to make some arrangement, that would be quite irrelevant if the law requires a contemporary agreement. And a candid and honest wife would agree that the matter was never discussed, that her husband never indicated any intention to give her a share, and that she never thought about it. On such evidence no judge could possibly infer that on a balance of probability there was an agreement. On the other hand a more sophisticated wife who had been told what the law was would probably be able to produce some vague evidence which would enable a sympathetic judge to do justice by finding in her favour. That would not be a very creditable state in which to leave the law.
Returning to the crucial question there is a wide gulf between inferring from the whole conduct of the parties that there probably was an agreement, and imputing to the parties an intention to agree to share even where the evidence gives no ground for such an inference. If the evidence shows that there was no agreement in fact then that excludes an inference that there was an agreement. But it does not exclude an imputation of a deemed intention if the law permits such an imputation. If the law is to be that the court has power to impute such an intention in proper cases then I am content, although I would prefer to reach the same result in a rather different way. But if it were to be held to be the law that it must at least be possible to infer a contemporary agreement in the sense of holding that it is more probable than not there was in fact some such agreement then I could not contemplate the future results of such a decision with equanimity.
LORD MORRIS OF BORTH-Y-GEST. My Lords, on the facts as found by Buckley J, in his careful judgment I have no doubt that he came to the correct conclusion. As on the general questions which have been discussed I set out my views in Pettitt v Pettitt—there is little that I wish to add. When questions arise between spouses or between former spouses or in relation to the affairs of one or another of them concerning the beneficial ownership of property the task of a court will often be one of much difficulty. But this should not be because the principles of law are in any way obscure or in doubt. It will be because in the nature of things the evidence will often not be specific and precise. The court must do its best to ascertain all the facts and then reach conclusion.
In the infinite variety of circumstances that may arise there will be cases where there is separate ownership of property in a husband and cases where there is separate ownership in a wife and cases where there is joint ownership; there may be a payment which gives rise to a resulting implied or constructive trust; there may be a gift of money by one to the other; there may be a loan from one to another; there may be services rendered in respect of which some reward was expressly or impliedly promised; there may be services rendered without any contemplation of any such result; there may be services rendered or payments made without any thought
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that any property rights could be or would be in any way affected. When the full facts are discovered the court must say what is their effect in law. The court does not decide how the parties might have ordered their affairs; it only finds how they did. The court cannot devise arrangements which the parties never made. The court cannot ascribe intentions which the parties in fact never had. Nor can ownership of property be affected by the mere circumstance that harmony has been replaced by discord. Any power in the court to alter ownership must be found in statutory enactment.
Being in agreement with the conclusion reached by Edmund Davies LJ ([1969] 1 All ER 1043 at 1047, [1969] 2 Ch 85 at 94), I would allow the appeal.
VISCOUNT DILHORNE. My Lords, in this case the respondent claims to be entitled to a share in the beneficial interest in a house bought in 1951 and conveyed to the appellant, her former husband. They married in 1935 and were divorced on the respondent’s petition in January 1966. In February 1966 the respondent commenced these proceedings by originating summons. She claimed the entire beneficial interest in the house but at the commencement of the hearing, she reduced her claim to a one-half undivided share in the house. Its price was £2,695 of which £2,150 was raised on mortgage, and £500 by a loan made to the appellant. The balance of £45 and the legal charges were paid by the appellant from his own money. The appellant and the respondent were employed by the same company. The respondent gave up her employment in 1957.
Buckley J held that the loan of £500 was made to the appellant alone and that the repayment of the loan and the mortgage payments were made by him out of his own moneys, that he gave the respondent housekeeping money out of which she paid the housekeeping expenses, and that she paid out of her own money for her clothes and for those of their son and for various extras for the family’s benefit. The respondent provided some furniture and equipment for the house and paid £30 for having the lawn made. In all she spent about £220 on this. The appellant and respondent had separate accounts, one at the post office and the other at a bank, and each made savings. Buckley J held that the conduct of the respondent was
‘… quite insufficient to support the contention that this is a case in which some constructive trust should be erected on the circumstances attending the purchase of the house as a result of which she would have some equitable interest in the property.’
The Court of Appeal ([1969] 1 All ER 1043, [1969] Ch 85) by a majority (Lord Denning MR, Phillimore LJ; Edmund Davies LJ dissenting) held that the respondent was entitled to a half share in the house.
Lord Denning MR based his conclusion on the house being a ‘family asset’. After referring to Fribance v Fribance, and Diplock LJ’s judgment in Ulrich v Ulrich and Felton ([1968] 1 All ER 67 at 72, [1968] 1 WLR 180 at 189), he said ([1969] 1 All ER at 1046, [1969] 2 Ch at 93):
‘It comes to this: where a couple, by their joint efforts, get a house and furniture, intending it to be a continuing provision for them for their joint lives, it is the prima facie inference from their conduct that the house and furniture is a “family asset” in which each is entitled to an equal share. It matters not in whose name it stands: or who pays for what: or who goes out to work and who stays at home. If they both contribute to it by their joint efforts, the
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prima facie inference is that it belongs to them both equally: at any rate, when each makes a financial contribution which is substantial.’
Judgment in this case in the Court of Appeal ([1969] 1 All ER 1043, [1969] 2 Ch 85) was delivered before the opinions of your Lordships on Pettitt v Pettitt were given.
In the light of the views expressed in Pettitt v Pettitt the passage cited above cannot in my opinion be regarded as good law. My Lords, in my opinion the decision in Pettitt v Petttitt has established that there is not one law of property applicable where a dispute as to property is between spouses or former spouses and another law of property where the dispute is between others. In that case my noble and learned friend Lord Morris of Borth-y-Gest said ([1969] 2 All ER at 397, [1969] 2 WLR at 980):
‘The duty of the court in an application under s 17 will not differ from its duty in a situation where a question of title arises not as between husband and wife but by reason of an outside claim.’
any my noble and learned friend Lord Upjohn said ([1969] 2 All ER at 405, [1969] 2 WLR at 989):
‘… the rights of the parties must be judged on the general principles applicable in any court of law when considering questions of title to property … ’
Use of the expression ‘family assets’ was deprecated by my noble and learned friends Lord Hodson and Lord Upjohn in Pettitt v Pettitt as devoid of legal meaning and conducive to the error of supposing that the legal principles applicable to the determination of the interests of spouses in property are different from those of general application in determining claims by one person to a beneficial interest in property in which the legal estate is vested in another. Despite this criticism it has been used in later cases, Chapman v Champman and Nixon v Nixon. It is no doubt a useful loose expression to refer to the possessions of a family but family assets are not a special class of property known to the law. The motor car owned by a member of the family, the wife’s money and the husband’s, the television set and many other things are aptly covered by the expression but the application of this expression does not resolve the question to whom does a particular ‘family asset’ belong. Is it to the husband or the wife or to both jointly?
I agree with my noble and learned friend Lord Diplock that a claim to a beneficial interest in land made by a person in whom the legal estate is not vested and whether made by a stranger, a spouse or a former spouse must depend for its success on establishing that it is held on a trust to give effect to the beneficial interest of the claimant as a cestui que trust. Where there was a common intention at the time of the acquisition of the house that the beneficial interest in it should be shared, it would be a breach of faith by the spouse in whose name the legal estate was vested to fail to give effect to that intention and the other spouse will be held entitled to a share in the beneficial interest. The difficulty where the dispute is between former spouses arises with regard to proof of the existence of any such common intention. It may be, as in this case, that the claim to a share in the beneficial interest is not made until years after the acquisition of the property. It is most likely that there will be no documentary evidence pointing to the existence of any such intention. In a great many cases, perhaps in the vast majority, no consideration will have been given by the parties to the marriage to the question of beneficial ownership of the matrimonial home at the time that it is being acquired. If on the evidence that
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appears to have been the case, then a claim based on the existence of such an intention at the time must fail.
It may be that one spouse will say that if he or she had thought about it, he or she would have agreed to sharing the beneficial interest with the other, but that in my view will not justify or entitle the court to hold that they share the beneficial interest. As I read the opinions of the majority in Pettitt v Pettitt that was their conclusion. One cannot counteract the absence of any common intention at the time of acquisition by conclusions as to what the parties would have done if they had thought about the matter. If such a common intention is absent, in my opinion the law does not permit the courts to ascribe to the parties an intention they never had and to hold that property is subject to a trust on the ground that that would be fair in all the circumstances.
My Lords, in determining whether or not there was such a common intention, regard can of course be had to the conduct of the parties. If the wife provided part of the purchase price of the house, either initially or subsequently by paying or sharing in the mortgage payments, the inference may well arise that it was the common intention that she should have an interest in the house. To establish this intention there must be some evidence which points to its existence. It would not, for instance, suffice if the wife just made a mortgage payment, while her husband was abroad. Payment for a lawn and provision of some furniture and equipment for the house does not of itself point to the conclusion that there was such an intention. I appreciate that there may be very great difficulty in establishing such an intention where the dispute is between former spouses but that does not alter the question to be decided. In every case it has to be established that the circumstances are such that there is a resulting, implied or constructive trust in favour of the claimant to a beneficial interest or a share in it. In the case of former spouses that will ordinarily depend on whether it can be inferred from the evidence that there was such a common intention.
My Lords, I do not think that any useful purpose will be served by my expressing any views on what will suffice to justify the drawing of such an inference. In one case the evidence may just fall short of doing so; in another it may just suffice. But what is important is that it should be borne in mind that proof of expenditure for the benefit of the family by one spouse will not of itself suffice to show any such common intention as to the ownership of the matrimonial home. It may be regarded as unsatisfactory that one claim will fail for lack of evidence from which such an intention can be inferred and another similar claim where there is slightly more evidence succeed. But that can happen in all kinds of cases and the fact that it can happen in this class of case does not lead me to the conclusion that the state of the law with regard to the determination of rights to property is unsatisfactory. It may be that it is alleged that some time after the acquisition of the matrimonial home the spouses formed the intention of sharing the beneficial interest. It may well be difficult to establish this but if it was, for instance, proved that up to the time when such an intention is alleged to have been formed, the mortgage payments were made by one spouse and thereafter by the other, then proof of that, would tend to support the allegation.
In the course of this case it has been said that it is with regret that the conclusion has been reached that the respondent’s claims fails. I do not share that regret. In my opinion the evidence adduced by her utterly fails to show the existence of any common intention that she should share in the ownership of the house. As Lord Denning said in this case ([1969] 1 All ER at 1046, [1969] 2 Ch at 93):
‘The Divorce Division has ample power to do what is fair and reasonable, having regard to the conduct of the parties: whereas, the Chancery Division
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is asked only to answer the cold legal question: what interest has the wife in the house? without regard to the conduct of the parties.’
If the Divorce Division is not armed with adequate powers to make provision for the wife on the breakdown of the marriage, that is a matter for the legislature. Determination of the cold legal question is not in my opinion to be affected by the conduct of the parties during the marriage save and insofar as that may indicate an intention as to ownership.
I would for these reasons allow the appeal.
LORD PEARSON. My Lords, the respondent to this appeal, having been deserted by the appellant, and having divorced him, obtained an order for maintenance and can apply in the appropriate division of the High Court for an order for security or a lump sum payment. But this appeal is not concerned with any such application. It is concerned solely with a property claim arising in the sphere of property law as distinct from matrimonial law and contract law. The appellant is the owner of the legal estate in the house and prima facie the legal estate carries with it the whole beneficial interest. The respondent however claims that she has a partial beneficial interest to the extent of one-half or some lesser proportion.
If the respondent’s claim is to be valid, I think it must be one the basis that by virtue of contributions made by her towards the purchase of the house there was and is a resulting trust in her favour. If she did make contributions of substantial amount towards the purchase of the house, there would prima facie be a resulting trust in her favour. That would be the presumption as to the intention of the parties at the time or times when she made and he accepted the contributions. The presumption is a rebuttable presumption; it can be rebutted by evidence showing some other intention. The question as to what was the intention is a question of fact to be decided by the jury if there is one or, if not, by the judge acting as a jury.
That is what appears, in my opinion, from the cases cited by my noble and learned friend Lord Upjohn in Pettitt v Pettitt ([1969] 2 All ER 385 at 406, 407, [1969] 2 WLR 966 at 990, 991), namely Dyer v Dyer ((1788) 2 Cox Eq Cas 92 at 93, 94, [1775–1802] All ER Rep 205 at 206, 207), per Eyre CB, Re Gooch, Gooch v Gooch ((1890) 62 LT 384 at 387), per Kay J, Fowkes v Pascoe ((1875) 10 Ch App 343 at 349, [1874–80] All ER Rep 521 at 524) per James LJ and per Mellish LJ ((1875) 10 Ch App at 352, 353, [1874–80] All ER Rep at 527, 528), Re Eykyn’s Trusts ((1877) 6 Ch D 115 at 118) pe Sir Richard Malins V-C, Re Young, Trye v Sullivan ((1885) 28 Ch D 705 at 708) and Re Bishop (decd), National Provincial Bank Ltd v Bishop. There is also in Snell on Equitya a statement referring to the doctrine of resulting trust, that:
‘It also applies where two or more persons advance purchase-money jointly and the purchase is taken in the name of one only, in which case there is a resulting trust in favour of the other or others as to so much of the money as he or they advanced.’
This statement is borne out by the case cited in support of it, which is Wray v Steele ((1814) 2 Ves & B 388 at 390).
I think it must often be artificial to search for an agreement made between husband and wife as to their respective ownership rights in property used by both of them while they are living together. In most cases they are unlikely to enter into negotiations or conclude contracts or even make agreements. The arrangements which
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they make are likely to be lacking in the precision and finality which an agreement would be expected to have. On the other hand, an intention can be imputed; it can be inferred from the evidence of their conduct and the surrounding circumstances. The starting point, in a case where substantial contributions are proved to have been made, is the presumption of a resulting trust, although it may be displaced by rebutting evidence. It may be said that the imputed intent does not differ very much from an implied agreement. Accepting that, I still think it is better to approach the question through the doctrine of resulting trusts rather than through contract law. Of course, if an agreement can be proved it is the best evidence of intention.
I think also that the decision of cases of this kind has been made more difficult by excessive application of the maxim ‘Equality is equity’. No doubt it is reasonable to apply the maxim in a case where there have been very substantial contributions (otherwise than by way of advancement) by one spouse to the purchase of property in the name of the other spouse but the proportion borne by the contributions to the total price or cost is difficult to fix. But if it is plain that the contributing spouse has contributed about one-quarter, I do not think it is helpful or right for the court to feel obliged to award either one-half or nothing. Contributions are not limited to those made directly in part payment of the price of the property or to those made at the time when the property is conveyed into the name of one of the spouses. For instance there can be a contribution if by arrangement between the spouses one of them by payment of the household expenses enables the other to pay the mortgage instalments.
On the facts of the present case the learned judge, Buckley, J, decided in effect that the respondent had not made, either directly or indirectly, any substantial contribution to the purchase of the house, and therefore there was no resulting trust in her favour. I agree with him and would therefore allow the appeal.
LORD DIPLOCK. My Lords, the judgments of the Court of Appeal ([1969] 1 All ER 1043, [1969] 2 Ch 85) in the instant case were delivered while Pettitt v Pettitt was still pending in your Lordships’ House. It concerns a claim by a former wife, the respondent, to a proprietary interest in real property of which the legal estate in fee simple is vested in her former husband, the appellant, subject to a mortgage to a building society which has not yet been fully paid off. Her claim was not brought in the matrimonial proceedings for dissolution of the marriage nor was it instituted under s 17 of the Married Women’s Property Act 1882. It was made by an ordinary originating summons in the Chancery Division for a declaration that she was entitled to a beneficial interest in the house which had been the matrimonial home for some ten years before the appellant deserted her. Her original claim was to the whole beneficial interest, but at the hearing before Buckley J this was reduced to a claim to a one-half undivided share and her case has since proceeded on this basis. She founds her claim on the contention that she contributed substantially, though indirectly, to the payment by the appellant of the original deposit and the subsequent instalments payable under the mortgage which enabled him to acquire the fee simple in the house.
The actual decision of your Lordships’ House in Pettitt v Pettitt is thus not directly in point. That case was concerned with a claim made in proceedings brought under s 17 of the Married Women’s Property Act 1882, by a former husband who claimed that he was entitled to a beneficial interest in a house which had been the former matrimonial home. It was not disputed that at the time of the acquisition of the house, which was not purchased on mortgage, the sole beneficial interest in it as well as the legal estate was vested in the wife. The husband’s claim to a beneficial interest was based on the alleged that he had made considerable improvements
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to the house and garden which had enhanced its value. Your Lordships decided unanimously first, that s 17 of the Married Women’s Property Act 1882 was procedural only and did not entitle the court to vary the existing proprietary rights of the parties; and secondly, that on the facts disclosed by the evidence it was not possible to infer any common intention of the parties that the husband by doing work and expending money on materials for the improvement of the house should acquire any beneficial proprietary interest in real property in which the whole legal and beneficial interest had previously been vested in the wife.
But although, as a matter of decision, Pettitt v Pettitt does not govern the instant appeal, it entailed for the first time a survey by your Lordships of numerous decisions of the Court of Appeal during the past 20 years in which the beneficial interests of spouses in a former matrimonial home had been the subject of consideration not only in applications under s 17 of the Married Women’s Property Act 1882, but also in other kinds of proceedings. In the cases examined the practice had developed of using the expression ‘family asset’ to describe the kind of property about which disputes arose between spouses as to their respective beneficial interests in it. I myself adopted the expression as a convenient one to denote ([1969] 2 All ER at 410, [1969] 2 WLR at 994)—
‘… property, whether real or personal, which has been acquired by either spouse in contemplation of their marriage or during its subsistence and was intended for the common use and enjoyment of both spouses or their children, such as the matrimonial home, its furniture and other durable chattels,’
but without intending any connotation as to how the beneficial proprietary interest in any particular family asset was held. I did, however, differ from the majority of the members of your Lordships’ House who were parties to the decision in Pettitt v Pettitt in that I saw no reason in law why the fact that the spouses had not applied their minds at all to the question of how the beneficial interest in a family asset should be held at the time when it was acquired should prevent the court from giving effect to a common intention on this matter which it was satisfied that they would have formed as reasonable persons if they had actually thought about it at that time. I must now accept the majority decision that, but in this form at any rate, this is not the law.
In all the previous cases about the beneficial interests of spouses in the matrimonial home the arguments and judgments have been directed to the question whether or not an agreement between the parties as to their respective interests can be established on the available evidence. This approach to the legal problem involved is in most cases adequate, but it passes over the first stage in the analysis of the problem, viz the role of the agreement itself in the creation of an equitable estate in real property. In the instant appeal, I think it is desirable to start at the first stage.
Any claim to a beneficial interest in land by a person, whether spouse or stranger, in whom the legal estate in the land is not vested must be based on the proposition that the person in whom the legal estate is vested holds it as trustee on trust to give effect to the beneficial interest of the claimant as cestui que trust. The legal principles applicable to the claim are those of the English law of trusts and in particular, in the kind of dispute between spouses that comes before the courts, the law relating to the creation and operation of ‘resulting, implied or constructive trusts’. Where the trust is expressly declared in the instrument by which the legal estate is transferred to the trustee or by a written declaration of trust by the trustee, the court must give effect to it. But to constitute a valid declaration of trust by way of gift of a beneficial interest in land to a cestui que trust the declaration is required by s 53(1) of the Law of Property Act 1925, to be in writing. If it is not in writing it can only take effect as a resulting, implied or constructive trust to which that section has no application.
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A resulting, implied or constructive trust—and it is unnecessary for present purposes to distinguish between these three classes of trust—is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.
This is why it has been repeatedly said in the context of disputes between spouses as to their respective beneficial interests in the matrimonial home, that if at the time of its acquisition and transfer of the legal estate into the name of one or other of them an express agreement has been made between them as to the way in which the beneficial interests shall be held, the court will give effect to it—notwithstanding the absence of any written declaration of trust. Strictly speaking this states the principle too widely, for if the agreement did not provide for anything to be done by spouse in whom the legal estate was not to be vested, it would be a merely voluntary declaration of trust and unenforceable for want of writing. But in the express oral agreements contemplated by these dicta it has been assumed sub silentio that they provide for the spouse in whom the legal estate in the matrimonial home is not vested to do something to facilitate its acquisition, by contributing to the purchase price or to the deposit or the mortgage instalments when it is purchased on mortgage or to make some other material sacrifice by way of contribution to or economy in the general family expenditure. What the court gives effect to is the trust resulting or implied from the common intention expressed in the oral agreement between the spouses that if each acts in the manner provided for in the agreement the beneficial interests in the matrimonial home shall be held as they have agreed.
An express agreement between spouses as to their respective beneficial interests in land conveyed into the name of one of them obviates the need for showing that the conduct of the spouse into whose name the land was conveyed was intended to induce the other spouse to act to his or her detriment on the faith of the promise of a specified beneficial interest in the land and that the other spouse so acted with the intention of acquiring that beneficial interest. The agreement itself discloses the common intention required to create a resulting, implied or constructive trust. But parties to a transaction in connection with the acquisition of land may well have formed a common intention that the beneficial interest in the land shall be vested in them jointly without having used express words to communicate this intention to one another; or their recollections of the words used may be imperfect or conflicting by the time any dispute arises. I such a case—a common one where the parties are spouses whose marriage has broken down—it may be possible to infer their common intention from their conduct.
As in so many branches of English law in which legal rights and obligations depend on the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct. It is in this sense that in the branch of English law relating to constructive, implied or resulting trusts effect is given to the inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words or conduct and not to any subjective intention or absence of intention which was not made manifest
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at the time of the transaction itself. It is for the court to determine what those inferences are.
In drawing such an inference, what spouses said and did which led up to the acquisition of a matrimonial home and what they said and did while the acquisition was being carried through is on a different footing from what they said and did after the acquisition was completed. Unless it is alleged that there was some subsequent fresh agreement, acted on by the parties, to vary the original beneficial interests created when the matrimonial home was acquired, what they said and did after the acquisition was completed is relevant if it is explicable only on the basis of their having manifested to one another at the time of the acquisition some particular common intention as to how the beneficial interests should be held. But it would in my view be unreasonably legalistic to treat the relevant transaction involved in the acquisition of a matrimonial home as restricted to the actual conveyance of the fee simple into the name of one or other spouse. Their common intention is more likely to have been concerned with the economic realities of the transaction than with the unfamiliar technicalities of the English law of legal and equitable interests in land. The economic reality which lies behind the conveyance of the fee simple to a purchaser in return for a purchase price the greater part of which is advanced to the purchaser on a mortgage repayable by instalments over a number of years, is that the new freeholder is purchasing the matrimonial home on credit and that the purchase price is represented by the instalments by which the mortgage is repaid in addition to the initial payment in cash. The conduct of the spouses in relation to the payment of the mortgage instalments may be no less relevant to their common intention as to the beneficial interests in a matrimonial home acquired in this way than their conduct in relation to the payment of the cash deposit.
It is this feature of the transaction by means of which most matrimonial homes have been acquired in recent years that makes difficult the task of the court in inferring from the conduct of the spouses a common intention as to how the beneficial interest in it should be held. Each case must depend on its own facts but there are a number of factual situations which often recur in the cases. Where a matrimonial home has been purchased outright without the aid of an advance on mortgage it is not difficult to ascertain what part, if any, of the purchase price has been provided by each spouse. If the land is conveyed into the name of a spouse who has not provided the whole of the purchase price, the sum contributed by the other spouse may be explicable as having been intended by both of them either as a gift or as a loan of money to the spouse to whom the land is conveyed or as consideration for a share in the beneficial interest in the land. In a dispute between living spouses the evidence will probably point to one of these explanations as being more probable than the others, but if the rest of the evidence is neutral the prima facie inference is that their common intention was that the contributing spouse should acquire a share in the beneficial interest in the land in the same proportion as the sum contributed bears to the total purchase price. This prima facie inference is more easily rebutted in favour of a gift where the land is conveyed into the name of the wife; but as I understand the speeches in Pettitt v Pettitt four of the members of your Lordships’s House who were parties to that decision took the view that even if the ‘presumption of advancement’s as between husband and wife still survived today, it could seldom have any decisive part to play in disputes between living spouses in which some evidence would be available in addition to the mere fact that the husband had provided part of the purchase price of property conveyed into the name of the wife.
Similarly when a matrimonial home is not purchased outright but partly out of moneys advanced on mortgage repayable by instalments, and the land is conveyed into the name of the husband alone, the fact that the wife made a cash contribution to the deposit and legal charges not borrowed on mortgage gives rise, in the absence
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of evidence which makes some other explanation more probable, to the inference that their common intention was that she should share in the beneficial interest in the land conveyed. But it would not be reasonable to infer a common intention as to what her share should be without taking account also of the sources from which the mortgage instalments were provided. If the wife also makes a substantial direct contribution to the mortgage instalments out of her own earnings or unearned income this would be prima facie inconsistent with a common intention that her share in the beneficial interest should be determined by the proportion which her original cash contribution bore either to the total amount of the deposit and legal charges or to the full purchase price. The more likely inference is that her contributions to the mortgage instalments were intended by the spouses to have some effect on her share.
Where there has been an initial contribution by the wife to the cash deposit and legal charges which points to a common intention at the time of the conveyance that she should have a beneficial interest in the land conveyed to her husband, it would however be unrealistic to attach significance to the wife’s subsequent contributions to the mortgage instalments only where she pays them directly herself. It may be no more than a matter of convenience which spouse pays particular household accounts, particularly when both are earning, and if the wife goes out to work and devotes part of her earnings or uses her private income to meet joint expenses of the household which would otherwise be met by the husband, so as to enable him to pay the mortgage instalments out of his moneys, this would be consistent with and might be corroborative of an original common intention that she should share in the beneficial interest in the matrimonial home and that her payments of other household expenses were intended by both spouses to be treated as including a contribution by the wife to the purchase price of the matrimonial home.
Even where there has been no initial contribution by the wife to the cash deposit and legal charges but she makes a regular and substantial direct contribution to the mortgage instalments it may be reasonable to infer a common intention of the spouses from the outset that she should share in the beneficial interest or to infer a fresh agreement reached after the original conveyance that she should acquire a share. But it is unlikely that the mere fact that the wife made direct contributions to the mortgage instalments would be the only evidence available to assist the court in ascertaining the common intention of the spouses.
Where in any of the circumstances described above contributions, direct or indirect, have been made to the mortgage instalments by the spouse into whose name the matrimonial home has not been conveyed, and the court can infer from their conduct a common intention that the contributing spouse should be entitled to some beneficial interest in the matrimonial home, what effect is to be given to that intention if there is no evidence that they in fact reached any express agreement as to what the respective share of each spouse should be?
I take it to be clear that if the court is satisfied that it was the common intention of both spouses that the contributing wife should have a share in the beneficial interest and that her contributions were made on this understanding, the court in the exercise of its equitable jurisdiction would not permit the husband in whom the legal estate was vested and who had accepted the benefit of the contributions to take the whole beneficial interest merely because at the time the wife made her contributions there had been no express agreement as to how her share in it was to be quantified. In such a case the court must first do its best to discover from the conduct of the spouses whether any inference can reasonably be drawn as to the probable common understanding about the amount of the share of the contributing spouse on which each must have acted in doing what each did, even though that understanding was never expressly stated by one spouse to the other or even consciously formulated in words by either of them independently. It is only if no such inference can be drawn that the court is driven to apply as a rule of law, and not as an inference
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of fact, the maximum ‘equality is equity’, and to hold that the beneficial interest belongs to the spouses in equal shares.
The same result however may often be reached as an inference of fact. The instalments of a mortgage to a buildings society are generally repayable over a period of many years. During that period, as both must be aware, the ability of each spouse to contribute to the instalments out of their separate earnings is likely to alter, particularly in the case of the wife if any children are born of the marriage. If the contribution of the wife in the early part of the period of repayment is substantial but is not an identifiable and uniform proportion of each instalment, because her contributions are indirect or, if direct, are made irregularly, it may well be a reasonable inference that their common intention at the time of acquisition of the matrimonial home was that the beneficial interest should be held by them in equal shares and that each should contribute to the cost of its acquisition whatever amounts each could afford in the varying exigencies of family life to be expected during the period of repayment. In the social conditions of today this would be a natural enough common intention of a young couple who were both earning when the house was acquired but who contemplated having children whose birth and rearing in their infancy would necessarily affect the future earning capacity of the wife.
The relative size of their respective contributions to the instalments in the early part of the period of repayment, or later if a subsequent reduction in the wife’s contribution is not to be accounted for by a reduction in her earnings due to motherhood or some other cause from which the husband benefits as well, may make it a more probable inference that the wife’s share in the beneficial interest was intended to be in some proportion other than one-half. And there is nothing inherently improbable in their acting on the understanding that the wife should be entitled to a share which was not to be quantified immediately on the acquisition of the home but should be left to be determined when the mortgage was repaid or the property disposed of, on the basis of what would be fair having regard to the total contributions, direct or indirect, which each spouse had made by that date. Where this was the most likely inference from their conduct it would be for the court to give effect to that common intention of the parties by determining what in all the circumstances was a fair share.
Difficult as they are to solve, however, these problems as to the amount of the share of a spouse in the beneficial interest in a matrimonial home where the legal estate is vested solely in the other spouse, only arise in cases where the court is satisfied by the words or conduct of the parties that it was their common intention that the beneficial interest was not to belong solely to the spouse in whom the legal estate was vested but was to be shared between them in some proportion or other.
Where the wife has made no initial contribution to the cash deposit and legal charges and no direct contribution to the mortgage instalments nor any adjustment to her contribution to other expenses of the household which it can be inferred was referable to the acquisition of the house, there is in the absence of evidence of an express agreement between the parties, no material to justify the court in inferring that it was the common intention of the parties that she should have any beneficial interest in a matrimonial home conveyed into the sole name of the husband, merely because she continued to contribute out of her own earnings or private income to other expenses of the household. For such conduct is no less consistent with a common intention to share the day-to-day expenses of the household, while each spouse retains a separate interest in capital assets acquired with their own moneys or obtained by inheritance or gift. There is nothing here to rebut the prima facie inference that a purchaser of land who pays the purchase price and takes a conveyance and grants a mortgage in his own name intends to acquire the sole beneficial interest as well as the legal estate; and the difficult question of the quantum of the wife’s share does not arise.
In the instant appeal the matrimonial home was purchased in 1951 for £2,695
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and conveyed into the sole name of the appellant. The parties had by then been married for some sixteen years and both were in employment with the same firm, the appellant earning £1,000 and the respondent £500 per annum. The purchase price was raised as to £2,150 on mortgage repayable by instalments, as to £500 by a loan to the appellant from his employers, and as to the balance of £45 and the legal charges was paid by the appellant out of his own moneys. The respondent made no direct contribution to the initial deposit or legal charges, nor to the repayment of the loan of £500 nor to the mortgage instalments. She continued earning at the rate of £500 per annum until the marriage broke down in 1961. During this period the appellant’s salary increased to £3,000 per annum. The appellant repaid the loan of £500, and paid the mortgage instalments. He also paid the outgoings on the house, gave to the respondent a housekeeping allowance of £8 to £10 a week out of which she paid the running expenses of the household and he paid for holidays. The only contribution which the respondent made out of her earnings to the household expenses was that she paid for her own clothes and those of the son of the marriage and for some extras. No change in this arrangement was made when the house was acquired. Each spouse had a separate banking account, the wife’s in the Post Office Savings Bank, and each made savings out of their respective earnings. There was no joint bank account and there were no joint savings. There was no express agreement at the time of the purchase or thereafter as to how the beneficial interest in the house should be held. The learned judge was prepared to accept that after the marriage had broken down the appellant said to the wife: ‘Don’t worry about the house—it’s yours’; but this has not been relied on, at any rate in your Lordships’ House, as an acknowledgement of a pre-existing agreement on which the respondent had acted to her detriment so as to give rise to a resulting, implied or constructive trust, nor can it be relied on as an express declaration of trust as it was oral only.
On what then is the respondent’s claim based? In 1951 when the house was purchases she spent about £190 on buying furniture and a cooker and refrigerator for it. She also paid about £30 for improving the lawn. As furniture and household doorbells are depreciating assets whereas houses have turned out to be appreciating assets it may be that she would have been wise to have devoted her savings to acquiring an interest in the freehold; but this may not have been so apparent in 1951 as it has now become. The court is not entitled to infer a common intention to this effect from the mere fact that she provided chattels for joint use in the new matrimonial home; and there is nothing else in the conduct of the parties at the time of the purchase or thereafter which supports such an inference. There is no suggestion that the respondent’s efforts or her earnings made it possible for the appellant to raise the initial loan or the mortgage or that her relieving the appellant from the expense of buying clothing for herself and for their son was undertaken in order to enable him the better to meet the mortgage instalments or to repay the loan. The picture presented by the evidence is one of husband and wife retaining their separate proprietary interests in property whether real or personal purchased with their separate savings and is inconsistent with any common intention at the time of the purchase of the matrimonial home that the wife who neither then nor thereafter contributed anything to its purchase price or assumed any liability for it, should nevertheless be entitled to a beneficial interest in it.
Both Buckley J and Edmund Davies LJ, in his dissenting judgment in the Court of Appeal ([1969] 1 All ER at 1047, [1969] 2 Ch at 94) felt unable on this evidence to draw an inference that there was any common intention that the respondent should have any beneficial interest in the house. I think that they were right. Like them I, too, come to this conclusion with regret, because it may well be that had the appellant and the respondent discussed the matter in 1951 when the house was bought he would have been willing for her to have a share in it if she wanted to. But this is speculation, and if such an arrangement
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had been made between them there might well have also been a different allocation of the household expenses between them in the ensuing years. If, as I hold, she has no interest in the matrimonial home in which she is still living, this will no doubt affect her claim for maintenance under the Matrimonial Causes Act 1965.
I would allow the appeal and declare that the sole beneficial in the house is vested in the appellant, but would impose a stay on the sale of the house for three months to give the respondent an opportunity of applying in the matrimonial proceedings for appropriate relief. The appellant should have his costs before Buckley J and in the Court of Appeal.
Appeal allowed. Sale of the house stayed for three months to allow the respondent an opportunity to apply in matrimonial proceedings for appropriate relief.
Solicitors: Breeze, Benton & Co (for the appellant); Lovell, White & King agents for the Official Solicitor.
S A Hatteea Esq Barrister.
Canas Property Co Ltd v K L Television Services Ltd
[1970] 2 All ER 795
Categories: LANDLORD AND TENANT; Leases
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND MEGAW LJJ
Hearing Date(s): 8, 9, 13 APRIL 1970
Landlord and tenant – Lease – Forfeiture – Action for possession by lessor – Issue of writ not sufficient to bring about forfeiture – Service of writ necessary to effect forfeiture and terminate lease.
A lessor does not effect a forfeiture merely by issuing a writ for possession against a lessee or assignee who is in breach of covenant. It is the service, not the issue of the writ which is equivalent to re-entry and effects a forfeiture; and the lease is determined from the date of service (see p 799 b and h, and p 800 a, e and f, post).
Jones v Carter (1846) 15 M & W 718 and Scarfe v Jardine [1881–85] All ER Rep 651 applied.
Elliott v Boynton [1924] 1 Ch 236 not followed on this point.
Dicta of Grantham J in Ogan v Raite and Holt (1903) 67 JP Jo 100 and Clauson J in Woolwich Equitable Building Society v Preston [1938] 1 Ch at 131 disapproved.
Observations on the form of endorsement of a writ and variations to be made according to whether the rent is payable in advance or in arrear (see p 800 b, c and e, post).
Notes
For what amounts to re-entry, see 23 Halsbury’s Laws (3rd Edn) 669, 670, para 1395, and for cases on the subject, see 31 Digest (Repl) 528–530, 6504–6525.
Cases referred to in judgments
Baylis v Le Gros (1858) 4 CBNS 537, 31 LJOS 215, 22 JP 482, 140 ER 1201, 31 Digest (Repl) 528, 6505.
Car and Universal Finance Co Ltd v Caldwell [1964] 1 All ER 290, [1965] 1 QB 525, [1964] 2 WLR 600; affg [1963] 2 All ER 547, [1965] 1 QB 525, [1964] 2 WLR 600, Digest (Cont Vol B) 633, 1577.
Doe d Bennett v Roe (1849) 7 CB 127, 137 ER 52, 38 Digest (Repl) 921, 1141.
Elliott v Boynton [1924] 1 Ch 236, 93 LJCh 122, 130 LT 497, 31 Digest (Repl) 623, 7371.
Page 796 of [1970] 2 All ER 795
Ellis v Rowbotham [1900] 1 QB 740, [1900–03] All ER Rep 299, 69 LJQB 379, 82 LT 191, 31 Digest (Repl) 286, 4208.
Jones v Carter (1846) 15 M & W 718, 153 ER 1040, 31 Digest (Repl) 530, 6527.
Ogan v Raite and Holt (1903) 67 JP Jo 100, 31 Digest (Repl) 529, 6521.
R v Appeal Committee of County of London Quarter Sessions, ex parte Rossi [1956] 1 All ER 670, [1956] 1 QB 682, [1956] 2 WLR 800, 120 JP 239, 16 Digest (Repl) 473, 2929.
Scarfe v Jardine (1882) 7 App Cas 345, [1881–85] All ER Rep 651, 51 LJQB 612, 47 LT 258, 21 Digest (Repl) 299, 633.
Southport Tramways Co v Gandy [1897] 2 QB 66, 66 LJQB 532, 76 LT 815, 31 Digest (Repl) 623, 7372.
United Australia Ltd v Barclays Bank Ltd [1940] 4 All ER 20, [1941] AC 1, 109 LJKB 919, 164 LT 139, 3 Digest (Repl) 225, 542.
Woolwich Equitable Building Society v Preston [1938] 1 Ch 129, 107 LJCh 63, 158 LT 216, 7 Digest (Repl) 500, 141.
Works Comrs v Hull [1922] 1 KB 205, 91 LJKB 308, 126 LT 349, 31 Digest (Repl) 530, 6525.
Cases also cited
Borzak v Ahmed [1965] 1 All ER 808, [1965] 2 QB 320.
Cohen v Donegal Tweed Co Ltd (1935) 79 Sol Jo 592.
Dendy v Evans [1909] 2 KB 894, [1910] 1 KB 263, [1908–10] All ER Rep 589.
Driscoll v Church Comrs for England [1956] 3 All ER 802, [1957] 1 QB 330.
Grimwood v Moss (1872) LR 7 CP 360.
Hop and Malt Exchange and Warehouse Co, Re, ex parte Briggs (1866) LR 1 Eq 483.
Longman v Lord Hill (1891) 7 TLR 639.
Moore v Ullcoats Mining Co Ltd [1908] 1 Ch 575.
Serjeant v Nash, Field & Co [1903] 2 KB 304, [1900–03] All ER Rep 575.
Slough Estates Ltd v Slough Borough Council (No 2) [1969] 2 All ER 988, [1969] 2 Ch 305.
Appeal
This was an appeal by the defendants, K L Television Services Ltd, against the decision of his Honour Judge Herbert at Westminster County Court on 17 June 1969 whereby the defendants were ordered to pay the plaintiffs, Canas Property Co Ltd, the sum of £200 in respect of rent due for premises at 49/51 Wilmslow Road, Rusholme, Manchester.
K H Zucker for the defendants.
L A Blundell QC and B K Levy for the plaintiffs.
Cur adv vult
13 April 1970. The following judgments were delivered.
LORD DENNING MR. This case raises the question: if a landlord brings an action for forfeiture, when does the lease come to an end? Does it end immediately the writ is issued? or only when the writ is served?
The facts are simple. By a lease dated 15 July 1964, Five Counties Stores Ltd let a shop and dwelling-house, at 49/51 Wilmslow Road, Rusholme, Manchester, to K L Television Services Ltd, the defendants. The term was for 21 years from 15 July 1964. The rent was £800 a year, payable by equal quarterly payments in advance on the usual quarter days. There was a proviso for re-entry in the usual form in case the rent was in arrear for 21 days, whether legally demanded or not. It stated that in that event:
‘… it shall be lawful for the Lessor … to re-enter and the demised premises
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peaceably to hold and enjoy thence forth as if these presents had not been made … ’
Afterwards Five Counties Stores Ltd assigned the reversion to Canas Property Co Ltd, the plaintiffs, and the defendants then assigned the lease to one F Mohammed.
The assignee, Mr Mohammed, failed to pay the rent due in advance on 25 December 1967 and 25 March 1968. The plaintiffs waited for 21 days and then on 25 April 1968, issued a plaint in the Manchester County Court against Mr Mohammed claiming: (a) possession of the premises; (b) the rent of £400 due on 25 December 1967 and 25 March 1968; (c) liberty to apply for mesne profits from 24 June 1968 to the date of possession.
Seeing that those proceedings were in the county court, the plaintiffs’ solicitors did not themselves serve the process. They left it to the county court registrar. He acted under the County Court Rules and sent the summons by post to Mr Mohammed. He had gone away. So the postman brought it back. The registrar notified the plaintiffs on 14 May 1968 in these words:
‘TAKE NOTICE and the Summons in this Action has not been served, for the following reason:—Returned by GPO. Gone away.’
It was clear, therefore, that the summons had not been served, see R v Appeal Committee of County of London Quarter Sessions, ex parte Rossi.
Having got nothing by those proceedings against the assignee, Mr Mohammed, the plaintiffs did not go on with the proceedings against him. They sued the defendants, on the covenants in the lease, as, of course, they were entitled to do. On 5 July 1968, they issued a writ in the High Court in which they claimed, not only the two quarters rent due in advance on 25 December 1967 and 25 March 1968, but also the quarter’s rent due on 24 June 1968. The defendants admitted those first two quarters’ rent, but denied they were liable for the rent due on 24 June 1968. They said that the plaintiffs, by bringing the action against Mr Mohammed on 25 April 1968, had forfeited the lease on that date. So no rent was payable thereafter. Whereas the plaintiffs said that, as the summons was not served on Mr Mohammed, the lease was not forfeited on that day or at all.
The point is of considerable importance to the parties because, if the lease was forfeited by the issue of the summons, the plaintiffs cannot make the defendants liable for any rent after 25 April 1968 whereas, if it has not been forfeited, the defendants will be liable to pay the rent for the remainder of the term of 21 years. The point has never before come up for decision. Conflicting views were expressed on it in Car and Universal Finance Co Ltd v Caldwell. Sitting at first instance, I myself, giving judgment straight off the reel and having in mind Elliott v Boynton, said ([1963] 2 All ER 547 at 550, [1965] 1 QB at 532):
‘If a lessor elects to determine a lease for forfeiture, it is sufficient for him to issue a writ for possession. The forfeiture dates from the issue of the writ, not from the time it is served.’
But on appeal Lord Upjohn, giving a reserved judgment, said ([1964] 1 All ER at 297, [1965] 1 QB at 556):
‘… the election to determine arises only on service of the writ; until then the plaintiff may change his mind and tear it up.’
Which is right? On principle the forfeiture only dates from re-entry. The proviso says expressly that the lessor ‘may re-enter’. But there is a long line of authority
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which says that the bringing of an action recover possession is equivalent to an entry for the forfeiture. Hence it has often been said that the issue of a writ is sufficient to determine the lease. Counsel for the defendants has supported this view in a learned argument before us. He started with the old action of ejectment. It was commenced by a writ coupled with a declaration which assumed a fictitious entry and ouster. Hence counsel argued that the issue of the writ itself was tantamount to re-entry. I have looked up the procedure in ejectment. It is described by Blackstone in his Commentariesa and illustrated by the forms in his Appendix II; and it is explained by Maitland with is usual felicity in his lectures on the Forms of Action at Common Lawb. My researches lead me to believe that counsel’s argument is erroneous. It seems to me that the action of ejectment only started when the party claiming title delivered to the party in possession the declaration together with a notice purporting to be signed by the casual ejector ‘your loving friend William Stiles’. Until that moment all was fiction. Reality only started with delivery of the notice.
In any case, however, I think that counsel’s argument cannot stand in the face of Jones v Carter. A lease was made for 14 years from 29 September 1844, rent payable half-yearly. Rent was paid for the half-year up to 25 March 1845. On 19 May 1845, the lessor served on the lessee a declaration in ejectment. Nothing more of any consequence happened in those proceedings. The lessor did not take possession. In January 1846, the lessor sued for the half-year’s rent due on 29 September 1845. The Court of Exchequer held that, by service of the proceedings, the lessor had forfeited the lease and could not recover the rent falling due after the forfeiture. The judgment of the court was delivered by Parke B. He makes it clear that it was the service of the proceedings that effects the forfeiture. He said ((1846) 15 M & W at 726):
‘… we think that the bringing of an ejectment for forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it; and it would be unjust to permit the landlord again to charge his mind, and hold the tenant responsible for breach of duty, after that time.’
That is the case of the highest authority. Parke B emphasises that the forfeiture is brought about by the service of the proceedings, and not the mere issue of them. Forfeiture is thus very different from the Statute of Limitations. Under the Limitation Acts the issue of the writ is the thing. In forfeiture it is service.
This view is confirmed by Scarfe v Jardine in which Lord Blackburn took Jones v Carter as his authority for saying that an election is not final until it is communicated to the party concerned. He said ((1887) 7 App Cass at 360, 361, [1881–85] All ER Rep at 658):
‘… where a party in his own mind has thought that he would choose one of two remedies, even though he had written it down on a memorandum or has indicated it in some other way, that alone will not bind him; but so soon as he has not only determined to follow one of his remedies but has communicated it to the other side in such a way as to lead the opposite party to believe that he has made that choice, he has completed his election and can go no further … the fact of his having done that unequivocal act to the knowledge of the persons concerned is an election.’
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Although Lord Blackburn used the words ‘one of two remedies’, he was really speaking of one of two alternative rights, as Lord Atkin pointed out in United Australia Ltd v Barclays Bank Ltd ([1940] 4 All ER 20 at 37, 38, [1941] AC 1 at 30). A choice between forfeiture and waiver is a choice between alternative rights.
To my mind those two authorities carry the day; subject only to the qualification that, if one party cannot reasonably be expected to find or communicate with the other party concerned, the election may be complete without it, so long as it is clear and unequivocal. Such was the case in Car and Universal Finance Co Ltd v Caldwell.
The result is that, in my opinion a lessor does not effect a forfeiture merely by issuing a writ for possession against the lessee. He must go further and serve it. Then only does the lessee get to know of it. Then only does he become a trespasser. And, when I speak of the ‘lessee’, I include, of course, ‘the assignee’; for when a lease is assigned, the assignee is then the proper defendant, see Works Comrs v Hull. If the lessee has left the premises and cannot be found, service can be effected by affixing a copy of the writ to some conspicuous part of the land, see RSC Ord 10, r 4; and thereupon the lease comes to an end.
It remains only to deal with the cases to the contrary. Ogan v Raite and Holt in 1903 was decided by Grantham J. The report states: ‘… by the issue of the writ the plaintiff exercised his option to determine the lease.' That was wrong. But the decision is right. The landlord did not accept the rent. So the lease was forfeited when the writ was served. The defendants had to seek relief. Elliott v Boynton appears to decide that, in an action for forfeiture, rent is payable up to the date of the issue of the writ and mesne profits thereafter. But no point was taken as to the difference between the date of issue of the writ and the date of service of it. And there is an observation of Warrington LJ which shows that, if the point had been taken, he would have held that the mesne profits only ran from the date of service ([1924] 1 Ch at 250, 251).
‘The damages are given for … the withholding of possession after the determination of the lease, and this wrong was committed upon and not before the service of the writ.’
If Elliott v Boynton were right, it might produce considerable injustice. It often happens that mesne profits are higher than the rent. The landlord might issue his writ and delay serving it for a year. He ought not to get the high figure for mesne profits during that year. He ought only to get it from the date of service on the defendant, unless, of course, the defendant has been evading service or has gone away, or something of that sort, and service has to be effected on the premises. So I think Elliott v Boynton should not be followed on the ‘date’ point. Finally, in Woolwich Equitable Building Society v Preston ([1938] 1 Ch 129 at 131), Clauson J said:
‘… the issue of proceedings claiming possession simpliciter has precisely the same effect as re-entry … ’
That was, I think, an error. It is not the issue but the service which has the same effect on re-entry.
My conclusion is that where a tenant has been guilty of a breach which has not been waived, then, in order to effect a forfeiture, the lessor must actually re-enter, or do what is equivalent to re-entry, namely issue and serve a writ for possession on the lessee or assignee, as the case may be. If the lessee or assignee is a partnership
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firm (or joint tenants) service on one of them is enough for that purpose, see Doe d Bennett v Roe. The lease is determined as from the date when the writ is served. The rent is payable until the date of service. Mesne profits are payable after the date of service. The writ should be endorsed accordingly. Take an instance when the rent is payable quarterly (eg on 25 March 1968) and the writ for possession is issued and served during the quarter (eg on 25 April 1968). If the rent is payable in advance, the writ should claim for the whole quarter’s rent due in advance on 25 March 1968; see Ellis v Rowbotham; and mesne profits from 24 June 1968 to the date of delivery of possession. If the rent is payable in arrear, the writ should claim the last quarter’s rent due (eg on 25 March 1968), and then there should be a claim in words for ‘rent at the rate of … from 25 March 1968, to the date of service of the writ and mesne profits at the rate of … from the date of service of the writ till the date of delivery of possession’. The calculation of this sum should not give rise to any extra difficulty; for a calculation has always to be made in order to insert the proper figure in the judgment. It is not necessary for the plaintiff to bring a second action for the amount due after the writ. He has always been able to claim it down to the date of delivery of possession, see Southport Tramways Co v Gandy.
In the present case the plaintiffs issued the plaint in the county court, but they did not serve it. So there was no forfeiture. The lease continued. The plaintiffs were, therefore, entitled to the rent falling due thereafter. I think the judge was quite right. I would dismiss the appeal.
FENTON ATKINSON LJ. I agree that this appeal fails and there is nothing that I desire to add or can usefully add to Lord Denning MR’s judgment.
MEGAW LJ. I agree. We are here concerned with a case in which the fact alleged to have brought about the forfeiture of the lease is the bringing of legal proceedings by the plaintiffs. In such a case, on the authority of Jones v Carter and the observations of Lord Blackburn in Scarfe v Jardine ((1882) 7 App Cass 345 at 361, [1881–85] All ER Rep 651 at 658), it is the service rather than the issue of the proceedings which is relevant as constituting the notional re-entry.
We are not here concerned with cases in which the forfeiture of the lease is alleged to have been brought about in some other way; as, for example, by the lessor physically re-entering the demised premises or extending recognition to a person other than the lessee in actual occupation of the premises. For that reason Baylis v Le Gros, one of the authorities relied on by the defendants, is not relevant to the present case.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Offenbach & Co (for the defendants); G L Leigh (for the plaintiffs).
Rosalie Long Barrister.
Woodend (K V Ceylon) Rubber and Tea Co Ltd v Inland Revenue Commissioner
[1970] 2 All ER 801
Categories: TAXATION; Income Tax, Double Taxation: COMMONWEALTH; Commonwealth countries
Court: PRIVY COUNCIL
Lord(s): LORD HODSON, LORD GUEST, LORD DONOVAN, LORD WILBERFORCE AND SIR GORDON WILLMER
Hearing Date(s): 9, 10, 11 MARCH, 29 APRIL 1970
Privy Council – Ceylon – Income tax – Double taxation – Relief – Agreement with United Kingdom for relief – Subsequent Act taxing non-resident companies – Conflict between Act and agreement – General words in Act to be given full meaning – Agreement impliedly abrogated insofar as inconsistent with Act – Double Tax Relief Agreement with United Kingdom Treaty Series No 9(1950) – Income Tax (Amendment) Act, No 13 of 1959, s 53c (1).
In 1950, the government of Ceylon made the Double Tax Relief Agreement with the United Kingdom, Treaty Series No 9 (1950)a. That agreement was given the force of law in Ceylon by the Double Taxation (Relief) Act No 26 of 1950. The taxpayer company carried on an undertaking in Ceylon. Its operations were controlled by its head office in the United Kingdom. As a non-resident company for purposes of Ceylon income tax, the company was under s 53c (1)b of the Income Tax (Amendment) Act, No 13 of 1959, assessed to additional income tax in Ceylon for the years 1958–59 to 1961–62 inclusive, calculated in each year at 33 1/3 per cent of the aggregate amount of its remittances abroad during the preceding year. The taxpayer company claimed that the imposition of the additional tax was in breach of art vic of the 1950 agreement which prohibited the imposition on a non-resident company of taxation ‘chargeable in connection with or in lieu of the taxation of dividends, or any tax in the nature of an undistributed profits tax on undistributed profits of the company’, and further or alternatively that the imposition of the tax was a breach of art xviiid of the 1950 agreement as the tax was ‘other, higher or more burdensome’ than the taxation to which resident companies were subjected. By s 53B (1) of the 1959 Act a company resident in Ceylon was liable to an additional tax equal to 33 1/3 per cent of the aggregate amount of the gross dividends distributed by the company out of its profits. Agreed figures showed that the taxpayer company had in the relevant years paid Rs 35,893 by reference to its remittances whereas it would have had to pay Rs 159,580 if it had been a resident company and taxed by reference to its dividends.
Held – (i) The additional tax on remittances was not ‘chargeable in connection with or in lieu of the taxation of dividends’, because the tax at the corresponding rate charged on resident companies was not a tax on dividends but a tax on profits, the dividend being merely the condition of the tax being levied (see p 805 h and p 806 a post); (Allchin (Inspector of Taxes) v Coulthard (Treasurer of the County Borough of South Shields) [1943] 2 All ER 352 distinguished); nor was the additional tax a ‘tax in the nature of an undistributed profits tax on undistributed profits of the company’, as it was not a tax ‘on’ the remittances as such but on the taxpayer company’s taxable income whether distributed or not (see p 806 b, post).
(ii) The additional tax was not ‘higher or more burdensome’ than the taxation to which resident companies were subjected because the agreed figures showed that the taxpayer company would have had to pay more if it had been a resident company (see p 806 d and e, post).
Page 802 of [1970] 2 All ER 801
(iii) For the purposes of art xviii of the 1950 agreement, the additional tax was nevertheless ‘other’ taxation, because ‘other’ taxation in this connection did not mean only taxation other than income tax but included income tax on remittances which was special to non-resident companies (see p 806 j, post).
(iv) Accordingly there was a conflict pro tanto between s 53c of the 1959 Act and the 1950 Act and agreement. In the circumstances there was no evidence sufficient to justify the conclusion that the general expression ‘non-resident company’ in s 53c must be construed as excluding those non-resident companies which were within the scope of the 1950 agreement. The general words must therefore receive their full meaning, and be treated as abrogating pro tanto art xviii of the 1950 agreement (see p 808 j, post).
Collco Dealings Ltd v Inland Revenue Comrs [1961] 1 All ER 762 considered.
Notes
For relief from double taxation in relation to income tax, see 20 Halsbury’s Laws (3rd Edn) 455, 456, paras 855, 856.
Cases referred to in opinion
Allchin (Inspector of Taxes) v Coulthard (Treasurer of the County Borough of South Shields) [1943] 2 All ER 352, [1943] AC 607, 112 LJKB 539, 107 JP 191; sub nom Allchin v South Shields County Borough 169 LT 238, 25 Tax Cas 455, 28 Digest (Repl) 194, 802.
Collco Dealings Ltd v Inland Revenue Comrs [1961] 1 All ER 762, [1962] AC 1, [1961] 2 WLR 401, 39 Tax Cas 509, Digest (Cont Vol A) 898, 1350b.
Seward v The Vera Cruz (Owners), The Vera Cruz (1884) 10 App Cas 59, [1881–85] All ER Rep 216, 54 LJP 9, 52 LT 474, 49 JP 324, 1 Digest (Repl) 40, 289.
Sinclair (Inspector of Taxes) v Cadbury Brothers Ltd (1933) 18 Tax Cas 157; sub nom Cadbury Brothers Ltd v Sinclair (Inspector of Taxes) [1933] All ER Rep 218, 103 LJKB 29, 149 LT 412, 28 Digest (Repl) 108, 406.
Appeal
This was an appeal by the taxpayer company, Woodend (K V Ceylon) Rubber and Tea Co Ltd, from the judgment of the Supreme Court of Ceylon (Tambiah and Siva Supramaniam JJ) dated 18 December 1967 allowing the appeal of the Inland Revenue Commissioner, Colombo, from an order of the Board of Review dated 29 May 1966 allowing an appeal by the taxpayer company against a determination and assessment to tax made by the commissioner. The facts are set out in the opinion delivered by Lord Donovan.
E F N Gratiaen QC, H W Jayawardena (of the Ceylon Bar), John A Baker and M D Jones for the taxpayer company.
Hubert H Monroe QC, P M B Rowland and S Pasupathy (of the Ceylon Bar) for the commissioner.
29 April 1970. The following opinions were delivered.
LORD DONOVAN. The taxpayer company carries on and derives profit from an agricultural undertaking in Ceylon. The operations are, however, controlled from the United Kingdom where the taxpayer company’s head office is situated. For the purpose of Ceylon income tax the taxpayer company is therefore treated in Ceylon as a non-resident. Assessments to income tax were made on it in Ceylon for the years of assessment 1958–59 to 1961–62 inclusive. Being aggrieved by these assessments the taxpayer company appealed against them to the Commissioner of Inland Revenue (‘the commissioner’). He dismissed the appeal. The taxpayer company next appealed to the Board of Review which reversed the commissioner. He thereupon required the Board of Review to state a case for the opinion of the Supreme Court of Ceylon. This being done the case came before that court in September 1967; and in December 1967 judgment was delivered allowing
Page 803 of [1970] 2 All ER 801
the commissioner’s appeal. Against that decision the taxpayer company now appeals to the Board.
On 26 July 1950, the governments of the United Kingdom and Ceylon concluded a written agreement having as its object ‘The avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income’. This agreement (‘the 1950 agreement’) was of familiar pattern. It was designed to afford a measure of relief from income tax to residents of each of the contracting parties who might have income arising in the territory of the other. But for the agreement such residents might find themselves liable to income tax in full on the same income in both countries. The precise way in which relief was accorded under the 1950 agreement is not materials to this case. Normally, however, one country allows its own subjects to set-off against their tax bill the tax paid by them in the other country on the same income. The 1950 agreement was to continue indefinitely, but either government could give written notice to terminate it, but not before 30 June 1954. Article xx provides that each country should take steps to give the agreement the force of law in its own territory. Ceylon did this by the Double Taxation (Relief) Act, No 26 of 1950 (‘the 1950 Act’).
The following is an extract from the judgment of the Supreme Court against which this appeal is brought:
‘After the Kaldor Report was adopted with modification in Ceylon, the basis of taxation underwent radical changes. Profits tax was abolished and the simple provisions governing income tax, applicable both to persons and companies gave way to a more sophisticated method of taxation and the Income Tax Ordinance (Cap. 242) was accordingly amended by Act No 13 of 1959. So far as persons are concerned, the computation of taxation is based on family units. The husband, the wife, and four children are given certain units and the income tax is based on slabs ranging according to the units. So far as companies are concerned, the profits tax and all the provisions of the Income Tax Ordinance under which companies were taxed earlier, were repealed and Chapter VIIIA of the Income Tax Ordinance was introduced by the [Income Tax (Amendment) Act No 13 of 1959].’
It is the taxpayer company’s case the provisions of this amending Act of 1959 (‘the 1959 Act’) insofar as they relate to certain additional taxation imposed on non-resident companies such as itself, are a breach of either or both of two articles in the 1950 agreement, and are therefore to this extent contrary to the 1950 Act; that the assessments under appeal which purport to be made under the authority of the 1959 Act and which impose this additional taxation on it are accordingly excessive, and should be reduced.
The article of the 1950 agreement alleged to be so infringed are arts vi and xviii. They provide as follows:
‘ARTICLE VI
‘Where a company which is a resident of one of the territories derives profits or income from sources within the other territory, there shall not be imposed in that other territory any form of taxation on dividends paid by the company to persons not resident in that other territory, or any form of taxation chargeable in connection with or in lieu of the taxation of dividends, or any tax in the nature of an undistributed profits tax on undistributed profits of the company, whether or not those dividends or undistributed profits represent, in whole or in part, profits or income so derived.
‘ARTICLE XVIII
‘(1) The residents of one of the territories shall not be subjected in the other territory to any taxation or any requirement connected therewith which is
Page 804 of [1970] 2 All ER 801
other, higher or more burdensome than the taxation and connected requirements to which the residents of the latter territory are or may be subjected.
‘(2) The enterprises of one of the territories shall not be subjected in the other territory, in respect of profits attributable to their permanent establishments in that other territory, to any taxation which is other, higher or more burdensome than the taxation to which the enterprises of that other territory, and, in the case of companies, to which enterprises of that other territory incorporated in that other territory, are or may be subjected in respect of the like profits.
‘(3) In this Article the term “taxation” means taxes of every kind and description levied on behalf of any authority whatsoever … ’
The remainder of the article is not relevant to the present issues.
The provisions of the 1959 Act which are alleged to be a breach of these two articles are contained in s 53c(1) which provides as follows:
‘53c. (1) In respect of any year of assessment commencing on or after April 1, 1958, the tax to which a non-resident company shall be liable—(a) shall, where there are remittances of such company in the year preceding such year of assessment, consist of a sum equal to 45 per centum, and an additional 6 per centum, of the taxable income of such company for such year of assessment and a sum which shall, if the aggregate amount of such remittances is less than one third of such taxable income, be equal to 33 1/3 per centum of such aggregate amount and, if such aggregate amount is not less than one third of such taxable income, be equal to 33 1/3 per centum of one third of such taxable income; and (b) shall, where there are no such remittances, consist of a sum equal to 45 per centum, and an additional 6 per centum, of such taxable income.’
Remittances are defined in s 53c (2) in the following terms:
‘(2) In sub-section (1), “remittances”, with reference to a non-resident company, mean—(a) sums remitted abroad out of the profits of that company, (b) such part of the proceeds of the sale abroad of products exported by that company as is retained abroad, and (c) in respect of any products exported by that company and not sold in a wholesale market or not sold at all, such part of the profits deemed under section 38 to be derived from Ceylon as is retained abroad.’
No objection is raised by the taxpayer company to the tax equal to 45 per cent of its taxable income, nor to the additional tax of 6 per cent thereof. (The latter tax was preserved in the 1950 agreement, since the shares of companies such as the taxpayer company would not be movable property situated in Ceylon for the purposes of Ceylon estate duty.) The dispute is confined to the additional tax of 33 1/3 per cent which is payable when there are remittances in the year preceding the year of assessment. This further tax is alleged to be a tax ‘in lieu of the taxation of dividends, or any tax in the nature of an undistributed profits tax on undistributed profits of the company’ and its imposition a breach of art vi of the 1950 agreement. Further, or alternatively, this additional tax is alleged to be other, higher or more burdensome than the taxation to which the enterprises of Ceylon are subject, and its imposition a breach of art xviii of the 1950 agreement.
To understand these contention it is necessary to explain what income tax is imposed on resident companies in Ceylon. The relevant provisions are also to be found in the 1959 Act. So far as here material they provide as follows:
‘53B. (1) In respect of any year of assessment commencing on or after April 1, 1958 the tax to which a company resident in Ceylon in the year preceding such year of assessment shall be liable shall consist of—(a) a sum equal to 45 per centum of the taxable income of such company for such year of assessment, and (b) a sum equal to 33 1/3 per centum of the aggregate amount of the gross dividends
Page 805 of [1970] 2 All ER 801
distributed by such company out of the profits on which the taxable income of such company is computed for such year of assessment …
‘(3) In sub-section (1), “amount of the gross dividends” of a company means the amount of the dividends before such deductions as the company is entitled to make under this Ordinance for tax are made from the dividends …
‘53D. (1) Subject to the provisions of sub-section (2) and sub-section (3), every resident company shall be entitled to deduct, from the amount of any dividend which becomes payable during any year of assessment commencing on or after April 1, 1959, to any shareholder in the form of money or of an order to pay money, tax equal to 33 1/3 per centum of such amount …
‘(5) Every person who issues a warrant, cheque or other order drawn or made in payment of any dividend which becomes payable by a resident company during any year of assessment commencing on or after April 1, 1959, shall annex thereto a statement in writing showing—(a) the gross amount which after deduction of tax thereon corresponds to the net amount actually paid; (b) the sum deducted as tax; and (c) the net amount actually paid.
‘(6) Where the assessable income of a person includes a dividend from a resident company in the form of money or of an order to pay money, he shall be entitled, on production of a statement relating to such dividend made in accordance with sub-section (5), to a set-off against the tax payable by him of the amount of tax shown on such statement … ’
The taxpayer company’s allegation of a breach of art vi is met on the commissioner’s behalf by an argument which may be summarised thus: there is no income tax in Ceylon charged on dividends declared by companies resident in Ceylon. Accordingly, the additional tax payable by non-resident companies when there have been remittances abroad is not a tax “in connection with or in lieu of the taxation of dividends’ for there is no Ceylon tax of which it could be ‘in lieu’. Nor is the additional tax a tax on dividends or a tax in the nature of an undistributed profits tax.
The rival contentions thus raise a question of the true construction of the provisions of the 1959 Act set out above. Since these provide for: (a) payment of additional tax when a resident Ceylon company declares a dividend; (b) for the recoupment of that tax by the company by deduction at source on payment of the dividend; and (c) for a set-off by the taxpayer against his own liability of the tax so deducted, it is easy to regard the whole arrangement as the levying of tax on the dividends, and collection of that tax at source from the payer. This is, indeed how the taxpayer company wishes the relevant legislation to be construed, for counsel for the taxpayer company prayed in aid the language used by Viscount Simon LC in Allchin (Inspector of Taxes) v Coulthard (Treasurer of the County Borough of South Shields) ([1943] 2 All ER 352 at 354, 355, [1943] AC 607 at 619). In that case the liability to United Kingdom income tax on interest was concerned; and the provisions whereby the payer of interest deducted the tax at source, and in one way or another accounted for it to the Crown were treated simply as machinery for the easier collection of the tax. But in the United Kingdom income tax legislation a direct charge to tax on interest is imposed on the recipient; and if this were so under s 53B of the 1959 Act as regards dividends declared by a Ceylon resident company, the decision would be in point. It is, however, not so. The extra tax of 33 1/3 per cent is a tax to which the company is made liable when dividends have been distributed and is, as a matter of construction, a further tax on its profits additional to the 45 per cent. The dividend, in a sentence, is not the subject-matter of the extra tax, but the condition of its being levied; and this is so despite the provisions for recoupment by the company of the tax, and the set-off by the taxpayer. True it is, that the financial effect of the whole operation is the same as it would have been if the charge to tax had been directly on the dividend, and the section had made this tax
Page 806 of [1970] 2 All ER 801
collectable by the company. But the financial effect of an operation is not necessarily its legal effect. In their Lordships’ view the legal effect is as above expounded and leads to the conclusion that the extra tax paid by a non-resident company in Ceylon where it has made remittances abroad cannot be said to be ‘taxation chargeable in connection with or in lieu of the taxation of dividends’.
Nor, in their opinion is it a ‘tax in the nature of an undistributed profits tax on undistributed profits of the company’. Here again the language of s 53c (1) makes it clear that the additional tax in question is not a tax ‘on’ the remittances as such but on the company’s taxable income whether distributed or not, albeit that the additional tax is measured according to the remittances. And, for what it is worth, the definition of ‘remittances’ in s 53c (2) shows that they may consist of other things than taxable profits.
It may well be the case that this additional tax was provided for having regard to the circumstance that the Ceylon legislature could not effectively levy a tax in respect of dividends received by non-resident shareholders; but the arguments raised by the taxpayer company in relation to art vi of the 1950 agreement must be tested against the true construction of the relevant section in the 1959 Act. Their Lordships’ conclusion is that so tested the arguments fail.
Coming to art xviii, it will be convenient to consider first whether the additional income tax now in dispute is ‘higher or more burdensome’ than the taxation to which resident companies are subjected. The Supreme Court of Ceylon treated this as raising a question of quantum and looked at agreed figures showing what tax the taxpayer company would have paid following the distribution of the dividends it actually paid in the relevant years, had it been a company resident in Ceylon instead of being non-resident. On that footing the dividends would have led to the company paying a further Rs 159,580·00 as tax on its profits for the years of assessment under appeal. In fact as a non-resident company the remittances it made led to an extra tax for these years of Rs 35,893·00. Their Lordships see nothing wrong or unreasonable in testing the matter in this way. The result is to negative the taxpayer company’s argument on this part of art xviii.
Is the additional tax of 33 1/3 per cent which is leviable when remittances are made by a non-resident company nevertheless ‘other’ taxation within the meaning of that article, bearing in mind that it defines ‘taxation’ for the purpose of the article as meaning ‘taxes of every kind and description … ’? Here the Supreme Court accepted the argument for the commissioner that the extra tax levied on a non-resident where there have been remittances was still income tax and nothing else; that the resident companies were subjected to income tax and nothing else; and that accordingly there was no ‘other’ taxation in sight, despite any differences in the measures of liability which there might be as between residents and non-residents. This argument succeeded in the Supreme Court, but their Lordships have come to the conclusion that it involves too narrow a construction of the article.
Article 1 of the 1950 agreement provides that the taxes which are its subject-matter are income tax (including surtax and the profits tax) levied in the United Kingdom and income tax and profits tax levied in Ceylon. Profits tax was ended by s 33 of the 1959 Act as from 1 April 1958; and thenceforward the Ceylon tax with which the 1950 agreement was alone concerned for the purposes of relief was income tax. To speak in this context of ‘other’ taxation must, so it would seem to their Lordships, at least include some income tax other than the income tax to which resident companies are subjected. Resident companies are not subjected to additional income tax simply because they make remittances abroad. Non-resident companies are so subjected; and it seems to their Lordships more appropriate to the purpose of the 1950 agreement to construe this additional tax which is special to non-resident companies as ‘other’ taxation within the meaning of art xviii. It follows that in their view s 53C of the 1959 Act is pro tanto in conflict with the 1950 agreement.
What consequence follows? For the taxpayer company it is said that the 1950
Page 807 of [1970] 2 All ER 801
Act must prevail. Generalia specialibus non derogant. For the commissioner it is contended that the proper conclusion to be drawn is that any part of the 1950 Act which is inconsistent with the 1959 Act must be regarded as being impliedly repealed by the latter. The rule for resolving such a conflict is well settled:
‘… where there are general words in a later Act capable of reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so.’ [Per the Earl of Selborne LC in Seward v The Vera Cruz (Owners), The Vera Cruz ((1884) 10 App Cas 59 at 68, [1881–85] All ER Rep 216 at 220).]
‘If, however, “the provisions of a later enactment are so inconsistent with or repugnant to the provisions of an earlier one that the two cannot stand together”, the earlier is abrogated by the later.’ [Maxwell on Interpretation of Statutese and cases there cited.]
The rule is more easy to state than it is, on occasions, to apply; for in almost all cases the later Act will contain general words inconsistent with the words of the special Act—otherwise there would be no problem. In Sinclair (Inspector of Taxes) v Cadbury Brothers Ltd an Act of Charles IIf exempting certain lands from all manner of taxes thereafter to be imposed by Parliament or otherwise was treated as prevailing against the all-embracing language of the later Income Tax Acts which laid a tax ong ‘the property in all lands tenements hereditaments and heritages in the United Kingdom’. Indeed this was admitted by the Inland Revenue; although it is difficult to conceive an instance where a later enactment was more ‘inconsistent with or repugnant to’ the provisions of an earlier.
In the present case the 1950 agreement prohibits ‘other’ taxation etc. The 1959 Act imposes such ‘other’ taxation under s 53c. Again the inconsistency of repugnancy could not be more complete. Are there, however, other considerations which, when taken into account, tilt the balance in favour of the view that the 1950 Act should nevertheless prevail? The agreement to which it gave the force of law was to ‘continue in effect indefinitely’. If either of the contracting governments wished to end it, it was to give written notice to the other before 30 June in any calendar year not earlier than the year 1954(art xxi). This procedure was not followed in 1959. The 1950 agreement concerned Ceylon and the United Kingdom alone; and their Lordships were informed at the Bar that there were other countries with whom in 1959 there were no similar agreements. So that the general words of the 1959 Act could be given effect by confining them to the non-resident companies in Ceylon whose residence was in those other countries. The 1950 Act was expressly repealed in Ceylon but not till 1963.
On the other hand, in a radical change of the taxation system such as took place in Ceylon in 1959 under which resident companies, in addition to the 45 per cent tax on their profits, became liable to a further tax thereon equal to 33 1/3 per cent of the gross dividend distributed, it is not surprising to find an additional tax also laid on the profits of non-resident concerns if they made remittances abroad. What would perhaps be surprising would be an intention to exempt from this additional tax the non-residents of one country with extensive commercial interests in Ceylon.
A similar problem was considered by the House of Lords in Collco Dealings Ltd v Inland Revenue Comrs. There a double taxation relief agreement had been concluded
Page 808 of [1970] 2 All ER 801
between the United Kingdom and the Republic of Eire, and was confirmed by the Income Tax Act 1952. By a later enactment—the Finance (No 2) Act 1955, s 4(2)—repayments of income tax were denied to ‘a person entitled under any enactment to an exemption from Income Tax’ where certain defined circumstances existed. A company resident in Eire claimed that notwithstanding the existence of such circumstances in its own case, it was entitled to repayment of tax under the Income Tax Act 1952, on the ground that the later enactment must be regarded as leaving such entitlement unaffected. The House of Lords held otherwise. Lord Radcliffe said ([1961] 1 All ER at 768, 39 Tax Cas at 531):
‘The only one of the appellant company’s contentions that appeared to me to have any plausibility was that which sought to restrict the apparent range of s. 4(2) of the Finance (No. 2) Act, 1955, by the argument that, if applied to persons enjoying exemption as being resident in the Republic of Ireland but not also in the United Kingdom, it would contradict the provisions of the inter-governmental agreements about double taxation between the two countries. It is, no doubt, true that statutory words apparently unlimited in scope may be given a restricted field of application if there is admissible ground for importing such a restriction; and the consideration that, if not construed in some limited sense, they would amount to a breach of international law is well recognised as such a ground. But a supposed intention not to depart from observance of the comity of nations is a much vaguer criterion by which to determine the range of a statute; and when the departure consists in no more than a provision inconsistent with an inter-governmental agreement about taxation which by its own terms is subordinated to the approval of the respective legislatures of the countries concerned and persists only so long as its terms are maintained in force as law by those legislatures, I think that there is no useful aid at all to be obtained from this principle of interpretation. The principle depends wholly on the supposition of a particular intention in the legislature, and I do not think that in the case before us there is any reason to make the supposition which is suggested.’
The fact that in this case the later enactment was passed in order to frustrate the abuse represented by ‘dividend-stripping’ can make no difference to the question of construction.
Their Lordships have not found this question easy to resolve in the present case. In the end it is whether the Ceylon legislature must have intended the expression ‘non-resident company’ in s 53c (1) of the 1959 Act to apply to all non-resident companies or to be exclusive of those to whom the 1950 agreement applied. In reaching a decision their Lordships have borne in mind that, as already stated, the 1959 Act was an Act of very comprehensive character introducing a number of radical changes in the taxation laws of Ceylon. It is unlikely that in the course of preparing such a measure agreements such as the 1950 agreement would have been completely overlooked; and it may well be that the legislature considered that the provisions of the 1959 Act if given their full literal meaning would not be repugnant to the 1959 Act—as indeed the Supreme Court have held in this case.
Such a view would, of course, have a bearing on the legislature’s intention. But leaving aside all speculation on this point, their Lordships are unable to find in the 1959 Act or in the circumstances which bear on the present problem any evidence sufficient to justify the conclusion that while s 53c uses the general expression ‘non-resident company’ it must nevertheless be construed as embodying the very important exclusion of those non-resident companies who were within the scope of the 1950 agreement. It seems to them the general words must receive their full meaning.
Page 809 of [1970] 2 All ER 801
An argument was addressed to the Board by junior counsel for the commissioner to the effect that the 1950 Act on its true construction never at any time gave the force of law to arts vi and xviii of the 1950 agreement since these articles did not provide—
… for relief from income tax or profits tax, or for charging the profits of income arising from sources in Ceylon to person not resident in Ceylon … ’
(see s 2(1) 1950 Act). This argument, which was not advanced in the Supreme Court of Ceylon, was based on an interpretation of the two articles which their Lordships find altogether too superficial. They accordingly reject it.
In the result however they will for the reasons earlier indicated humbly advise Her Majesty that the appeal should be dismissed. The taxpayer company must pay the costs of the appeal.
Appeal dismissed.
Solicitors: Stephenson, Harwood & Tatham (for the taxpayer company); Hatchett Jones & Co (for the commissioner).
S A Hatteea Esq Barrister.
Pergamon Press Ltd v Maxwell
[1970] 2 All ER 809
Categories: COMPANY; Directors
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 26, 27, 28, 29 MAY 1970
Company – Director – Duty – Duty to exercise power in good faith in interests of company as whole – Power of director to call meeting.
Company – Director – Duty – Fiduciary power of discretionary nature – Unwillingness of court to direct particular exercise at instance of some only of members of company – Power of director to call meeting.
Company – Foreign company – Fiduciary power of discretionary nature vested in directors – Foreign court appropriate tribunal to control exercise of discretion.
Practice – Interlocutory proceedings – Cross-examination on affidavit – Further proceedings between parties pending in foreign court – Whether order would be made.
An English company (‘Limited’), owned a controlling interest in company incorporated in the State of New York (‘Incorporated’). The defendant was chairman and managing director of Limited and was president of Incorporated. At the annual general meeting of Incorporated in June 1969 resolutions altering Incorporated’s byelaws were passed by the use of a proxy vote given on behalf of Limited by the defendant. He had a general authority but no express authority to vote in favour of the resolutions. In particular, the alterations dispensed with the power of the majority stockholders to call a special meeting, leaving the power to the president and other officers and to a resolution passed by the board of directors. In October 1969, the defendant was removed from the board of Limited which then required the immediate resignation of most of Incorporated’s directors including the defendant. The defendant refused to resign. Limited, wishing to call a special meeting of Incorporated, took proceedings in a New York court for an order enabling a meeting to be called, but the proceedings failed. Limited then applied in the High Court for a mandatory injunction to order the defendant to call a special meeting of Incorporated for the purpose of removing certain directors (including the defendant)
Page 810 of [1970] 2 All ER 809
and reinstating the power of the majority stockholders to call a special meeting. There was also an application for the cross-examination of the defendant.
Held – (i) An order compelling the defendant to call a meeting of Incorporated would not be made, because—
(a) the power to call a special meeting was a fiduciary power of a discretionary nature vested in the defendant as an officer of Incorporated to whom alone the defendant owed a duty (see p 813 j and p 814 d, post); it was not open to an English court to control the exercise of such a power arising in the internal management of a foreign company and the court in New York was the only proper tribunal in which the members of Incorporated could seek to control the exercise of the power (see p 813 j to 814 a, post); and
(b) it would be contrary to the principles on which the court acted in controlling persons in the exercise of fiduciary discretionary powers to make at the instance of some only of the members of Incorporated an order directing the defendant to exercise his discretion in a certain manner (see p 814 a, post).
(ii) In the circumstances it was not a proper case for the court to exercise its discretion to allow cross-examination in interlocutory proceedings, since, whatever might be the finding of fact as a result of cross-examination, the court could not properly make the order sought, and such cross-examination could affect litigation pending between the defendant and Limited in the United States of America (see p 813 g and p 814 and g, post).
Notes
For the powers and duties of directors of companies registered in Great Britain, see 6 Halsbury’s Laws (3rd Edn) 293–295, paras 596, 597, and for cases on the subject, see 9 Digest (Repl) 497, 498, 3273–3284.
Case referred to in judgment
Moody v Cox and Hatt [1917] 2 Ch 71, [1916–17] All ER Rep 548, 86 LJCh 424, 116 LT 740, 43 Digest (Repl) 61, 506.
Case also cited
Smith & Fawcett Ltd, Re [1942] 1 All ER 542, [1942] Ch 304.
Motion
By a writ and notice of motion dated 11 December 1969 the plaintiff, Pergamon Press Ltd (Limited), a company incorporated in Great Britain, sought a mandatory injunction to order the defendant, Ian Robert Maxwell, the president of a company incorporated in the State of New York, Pergamon Press Inc (Incorporated), and a former chairman and managing director of Limited, to call a special meeting of Incorporated so as to replace certain directors including the defendant and to amend Incorporated’s byelaws. The facts are set out in the judgment.
R J Parker QC and D J Nicholls for Limited.
M Finer QC and S A Stamler for the defendant.
29 May 1970. The following judgment was delivered.
PENNYCUICK J. By this motion the plaintiff, Pergamon Press Ltd, seeks a mandatory order on the defendant, Mr Ian Robert Maxwell, to call forthwith a special meeting of the shareholders of Pergamon Press Inc for the purpose of passing resolutions for the removal of the defendant and certain others as directors of the latter company and the appointment of certain persons in their place, and also for the amendment of certain byelaws of the latter company.
The history of the matter may be shortly stated. The plaintiff company is an English company, referred to throughout the evidence as ‘Limited’. The defendant was the chairman and managing director of Limited, which, under his supervision, built up a major publishing business. In 1964, Limited acquired all the shares in Pergamon Press Inc. That is a company incorporated in the State of New York and
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referred to throughout the evidence as ‘Incorporated’. The defendant is the president of Incorporated, which has a number of other directors, two at least admittedly independent. Incorporated has likewise built up a major publishing business.
In 1968, Limited sold 30 per cent of the stock in Incorporated to members of the public, retaining the remaining 70 per cent of the stock. In the early summer of 1969, Leasco Data Processing Equipment Corpn entered into negotiation with Limited with a view to making an offer for the whole of the shares in Limited. At the annual general meeting of Incorporated held on 12 June 1969, a resolution was passed for the adoption of new byelaws in place of the existing byelaws. One of the new byelaws has given rise to the present action. The old byelaw provided:
‘Special Meetings Special meetings of stockholders may be called by resolution of the Board of Directors or by the president or any vice president, and shall be called at any time by the president or any vice president or the secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the company issued and outstanding and who would be entitled to vote at such meeting. Such request shall state the purpose or purposes of the proposed meeting.’
The new byelaw, which is numbered art l, s 1.02, provides:
‘Special Meetings Special meetings of the shareholders, for any purpose or purposes, may be called at any time by the President, any Vice-President, the Treasurer or the Secretary or by resolution of the Board of Directors. Special meetings of shareholders shall be held at such place as shall be fixed by the person or persons calling the meeting and stated in the notice or waiver of notice of the meeting.’
It will be observed that under the old byelaw the secretary was bound to call a special meeting at the request of stockholders owning a majority of the outstanding stock. Under the new byelaw, this provision disappears. Alike under the old and under the new byelaws, the president or any vice-president may call a special meeting.
The resolution for the alteration of the byelaws was passed by a proxy vote given on behalf of Limited. The defendant and another director, Mr Clark, each for safety’s sake signed a proxy. Limited did not give any express authority to the defendant or Mr Clark to vote in favour of the resolution, but the defendant had a general authority which would cover his so doing. It is not in dispute that the resolution was duly passed. I will return later to this resolution. On 17 June 1969, Leasco made a public announcement concerning its proposed offer for the shares of Limited. At that time Leasco already held 38 per cent of the shares in Limited. However, on 21 August 1969, Leasco withdrew. Subsequently there was a hearing by the city take-over panel, which accepted Leasco’s explanation.
On 10 October 1969, the defendant and others were removed from the board of Limited, which now consists of two independent directors, three directors nominated by Leasco, and three of the previous directors, one of whom represents the interests of the defendant. The new board of Limited, a few days after it came into office, proceeded to send telegrams to all but two of the directors of Incorporated, including the defendant, requiring their immediate resignation, but with one exception they have refused to comply. Limited then brought proceedings in the New York court, seeking an order enabling Limited to call a special meeting of Incorporated. The New York court was obviously the appropriate tribunal before which to seek that kind of relief in connection with a New York company. The proceedings failed and an appeal was dismissed. I should perhaps mention that an attempt was made by one Ross, a former vice-president of Incorporated, to call a meeting himself under the power contained in the byelaws, but the New York court held that he had
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ceased to a vice-president. The appellate court further found that he had been bribed by Limited to call the meeting. It is accepted on behalf of the defendant that no question of res judicata arises. In the result, Limited has, under the law of New York, no means of removing the existing directors of Incorporated and replacing them by its own nominees until the next annual general meeting of Incorporated, or, in default, at the end of a certain period specified under the law of New York. The next annual general meeting is due to be held next month, ie June 1970, but has not yet been convened. If no annual general meeting is convened, the period specified under the law of New York may amount to upwards of a year.
In these circumstances, Limited has brought the present action, seeking a mandatory order on the defendant. The writ was issued on 11 December 1969. I should, I think, read the claim on the writ. Limited’s claim is for:
‘1. An order that the above-named Defendant do forthwith call and convene in accordance with the by-laws of [Incorporated] a special meeting of shareholders of [Incorporated] for the purpose of considering and if thought fit passing the following resolutions: (1) a resolution or resolutions removing the following persons forthwith from their office as directors of [Incorporated]:—[there follow six names, that of the defendant being the first]. (2) a resolution or resolutions amending the by-laws of [Incorporated] by: (a) deleting the whole of the present section 1·02 and substituting therefor the following: ”1.02 Special Meetings Special meetings of stockholders may be called by resolution of the Board of Directors or by the president or any vice president, and shall be called at any time by the president or any vice president or the secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the company issued and outstanding and who would be entitled to vote at such meeting. Such request shall state the purpose or purposes of the proposed meeting.” (b) deleting the whole of the present section 2.05 and substituting therefor the following: “Removal Any director may be removed either for or without cause at any special meeting of stockholders by vote of a majority of the stockholders present and entitled to vote for the election of directors, provided that notice of such vote shall have been given in the notice calling such meeting. If the notice calling such meeting shall so provide, the vacancy caused by such removal shall be filled at such meeting by vote of a majority of the stockholders present and entitled to vote for the election of directors.” (3) a resolution or resolutions appointing the following persons to be directors of [Incorporated] until the next annual meeting of the shareholders of [Incorporated] … [then follow three names] … ‘
Notice of the present motion was given on the same date and is in terms identical with those endorsed on the writ.
Evidence of a fairly voluminous nature was filed on either side. Sir Henry d’Avigdor-Goldsmid, one of the new directors of Limited, sets out the history of the matter and summarises Limited’s contentions in his concluding paragraphs as follows:
‘In my respectful submission the inference to be drawn from the facts is that at [Incorporated’s] annual general meeting [the defendant] exercised Limited’s voting control in support of the resolution effecting the above referred to amendment of [Incorporated’s] by-laws; that he had no proper authority so to do, and this he knew; and that in purporting to exercise these votes in this way [the defendant] was doing so with a view to securing the position of himself and his associates on the Board of [Incorporated] and not for the benefit either of [Incorporated] or of Limited (of which company he then was, as he had been at all times since about 1951, the Chairman and Managing Director).
‘It is in these circumstances that (as [Limited contend]) [the defendant] having exercised Limited’s voting control of [Incorporated] in amending [Incorporated’s]
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by-laws in breach of the duties which he owed to Limited and in excess of his powers, he must, it is respectfully submitted, now restore the position to what it would have been had he not so acted: he must do so by now summoning a meeting of [Incorporated] in accordance with what would have been Limited’s rights under the by-laws had these not been amended at [the defendant’s] instance.’
The defendant’s deponents consist, so far as now material, of the defendant himself, other members of the board of Incorporated, and the New York lawyer who acted for Incorporated in connection with the adoption of the new byelaws. Their affidavits are directed to showing: (1) that the new byelaws were adopted as a matter of convenience, byelaw 1·02 being a common form in frequent use by American companies; (2) that the amendments emanated from the American lawyers and were in no way suggested or motivated by the defendant; and (3) that the board of Incorporated are acting in good faith in the interests of that company in refusing to comply with the request for resignation.
There is a conflict of evidence on a number of matters which can only be resolved by cross-examination. It would be impossible, on the affidavit evidence alone, to reach the conclusion that the defendant acted in breach of his duty to Limited in voting for the resolution of 12 June. On the other hand, it would be impossible, on the affidavit evidence alone, to reach the opposite conclusion. It is essential in this connection to bear in mind the distinction between the duty owed by the defendant to Limited in the casting of votes attached to its stock in Incorporated, on the one hand, and the duty owed by the defendant and his fellow directors to Incorporated in exercise of their powers as directors of that company, on the other hand. It is the former duty of which it is claimed that the defendant was in breach. I think that it is fair to say that when one looks at the affidavit evidence alone, Limited would be likely to experience considerable difficulty in establishing this breach of duty, and could only succeed on such admissions as it might extract from the defendant in cross-examination. But, as I have already said, it would be impossible to say positively that there is no arguable case against the defendant. In these circumstances, an application was made for the cross-examination of the defendant. For most practical purposes the hearing of this motion represents the trial of the action, and the usual objections to cross-examination on an interlocutory motion do not arise. On the contrary, if I had thought that a finding of fact favourable to Limited would justify making the order sought by it, I should have been disposed to give leave to cross-examine. It could not be right to let this matter stand over until the hearing of the action, which, in the nature of things, would probably be after or towards the end of the time during which the defendant was entitled effectually to remain in office as a director of Incorporated. It seems to me, however, that whatever might be the finding of fact as the result of cross-examination, I could not properly make the order sought by Limited.
Counsel for Limited contends that the defendant, by casting Limited’s votes in favour of the resolution of 12 June, has deprived Limited of a valuable right—ie the right to insist on the calling of a special meeting of Incorporated—and that he should now be ordered to restore the position by exercising his power under s 1·02 to call a meeting in his capacity as president of Incorporated. It seems to me that this contention is open to more than one fatal objection. It is accepted on behalf of Limited that the power under s 1·02 is a fiduciary power of a discretionary nature, vested in the defendant in the capacity of an officer of Incorporated. It follows that the defendant is bound to exercise that power in good faith in the interest of Incorporated as a whole. There is no suggestion that the law of New York is different in this respect from that of England. That being the position, it seems to me, in the first place, that the New York court is the only proper tribunal in which the members of Incorporated could seek to control the exercise of this power. It cannot be open to an
Page 814 of [1970] 2 All ER 809
English court to control the exercise of a fiduciary power of a discretionary nature arising in the internal management of a foreign company. But even if this difficulty were overcome, the court would not, at the instance of some only of the members of Incorporated, make a mandatory order on the defendant directing him to exercise his discretion in a certain manner. That would, I think, be contrary to the principles on which the court acts in controlling trustees or others in the exercise of fiduciary discretionary powers. I observe, in parentheses, that if this were an English company, other remedies might be available. In any event, it seems to me that Incorporated would be a necessary party to proceedings seeking such an order. It is beside the point for this purpose that ex hypothesi, the defendant has wrongfully deprived the 70 per cent holders of an alternative remedy.
Counsel for Limited put his contention in a variety of ways. I hope that I will be forgiven if I do not reproduce them all. Perhaps I may read one contention which I hope fairly summarises the arguments that he addressed on this point. He contended that the defendant’s fiduciary duty to Incorporated does not override his fiduciary duty to Limited if the power under the byelaw can be exercised in a way which cannot be held to be wrong. It seems to me that as regards this particular power the defendant owes a duty to Incorporated and to no one else, and that that is the end of the matter.
I was referred to Moody v Cox and Hatt, in the Court of Appeal, but that case is concerned with a different state of affairs, ie that in which someone assumes conflicting fiduciary duties to two persons in connection with the same transaction. Counsel was unable to refer me to any case on all fours with the present. I am only indirectly concerned with the question whether the New York court would give effect to the order now sought if it were made. On this point there is a difference of opinion between the American lawyers who have sworn affidavits on either side. I have no doubt that if the position were reversed and a foreign court directed one of its own nationals who was an officer of an English company to exercise in a certain manner discretionary power vested in him for the benefit of the English company, this court would not feel bound to give effect to the order.
Having reached the above conclusion, I think that it is clear that I ought not to allow cross-examination. Counsel for Limited pointed out that the Court of Appeal may take a different view from mine on the law. Should that happen, no serious inconvenience would arise if the Court of Appeal determined that the case should be remitted to this court for cross-examination, and I think it better to take the chance of that happening rather than to allow cross-examination which, on the view which I take, can lead nowhere.
It is important in this connection to bear in mind that other and much more extensive litigation between the same parties is pending in the United States. Counsel for Limited very properly offered an undertaking to limit his cross-examination to this particular issue, but that would not be a wholly satisfactory solution, since cross-examination would inevitably go to some extent to matters of credit. I should add that counsel accepted that this being an interlocutory application, I have a judicial discretion whether or not to allow cross-examination, ie the position is not on all fours with the final hearing of an action.
I propose, accordingly, to dismiss the present motion.
Motion dismissed.
Solicitors: Herbert Smith & Co (for Limited); Lewis Silkin & Partners (for the defendant).
Richard J Soper Esq Barrister.
Oxford Printing Co Ltd v Letraset Ltd
[1970] 2 All ER 815
Categories: COMPETITION
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 29 MAY 1970
Restrictive trade practices – Resale price maintenance – Withholding supplies – Presumption that supplies withheld by supplier because of price cutting by dealer – Whether supplier entitled to show other grounds for withholding supplies – Resale Prices Act 1964, ss 2(4), 4(4).
Where a dealer in goods seeks an injunction to restrain a supplier from withholding supplies, contrary to s 2 of the Resale Prices Act 1964 (which prohibits the withholding of supplies because of price cutting by the dealer), and a presumption arises by virtue of s 4(4)a that the supplies have been withheld on the ground of price cutting, the supplier may still prove under s 2(4)b that he has other grounds which, standing alone, led him to withhold the supplies (see p 817 g, post).
Notes
For the Resale Prices Act 1964, ss 2, 4, see 44 Halsbury’s Statutes (2nd Edn) 1275, 1277.
Case cited
Donmar Productions Ltd v Bart [1967] 2 All ER 338, [1967] 1 WLR 740.
Motion
The plaintiffs, Oxford Printing Co Ltd, sought an injunction to restrain the defendants, Letraset Ltd, until judgment in the action or further order, from withholding from the plaintiffs supplies of certain goods, in breach of the defendants’ duty to comply with the provisions of s 2 of the Resale Prices Act 1964. The facts are set out in the judgment.
A R Barrowclough for the plaintiffs.
D H Mervyn Davis QC and K W Rubin for the defendants.
29 May 1970. The following judgment was delivered.
PLOWMAN J. By this motion the plaintiffs complain that the defendants have cut off their supplies, and seek to have those supplies restored. The plaintiffs carry on business as printers and stationers with retail premises in the West End. The defendants’ business is described in the evidence as being that of suppliers of the products described in their current catalogue entitled ‘Letraset Instant Lettering Typefaces and Graphic Arts Products’ and in their leaflet ‘Spring Range Extension 1970’. Put rather simply, as I understand it, the defendants supply what amounts to transfers of letters.
The notice of motion asks for an order in these terms, that the defendants may—
‘… be restrained by injunction until judgment in this action or further order from withholding from the Plaintiffs, in breach of the Defendants’ duty to comply with the provisions of Section 2 of the Resale Prices Act 1964, supplies of the following goods or any of them that is to say the products described in … ’
the literature to which I have already referred. What the plaintiffs say, in effect, is that the defendants, on 5 May 1970, closed the plaintiffs’ account and are refusing to supply them with any more goods, and that the defendants’ reason for doing so
Page 816 of [1970] 2 All ER 815
is that they object to the plaintiffs’ admitted practice of selling Letraset products at a price which is less than the recommended price, although no question of a loss leader arises in this case, because the price at which the plaintiffs have been selling is in fact, although less than the recommended price, in excess of the price they pay.
The defendants say on this motion—and I will go into this in a little more detail in a moment or two—that the reason why they have closed the plaintiffs’ account has nothing to do with the fact that they, the plaintiffs, have been selling at reduced retail prices, but that it is on the ground that they find the plaintiffs’ selling methods objectionable.
At this point I should refer to certain section of the Resale Prices Act 1964, which is described as—
‘An Act to restrict the maintenance by contractual and other means of minimum resale prices in respect of goods supplied for resale in the United Kingdom … ’
It provides in s 1(1):
‘Subject to the provisions of this Act with respect to registration and to the powers of the Restrictive Practices Court thereunder [a matter with which I am not concerned here], any term or condition of a contract for the sale of goods by a supplier to a dealer, or of any agreement between a supplier and a dealer relating to such a sale, shall be void in so far as it purports to establish or provide for the establishment of minimum prices to be charged on the resale of the goods in the United Kingdom; and it shall be unlawful for any supplier of goods (or for any association or person acting on behalf of such suppliers)—(a) to include in any contract of sale or agreement relating to the sale of goods any term or condition which is void by virtue of this section; (b) to require, as a condition of supplying goods to a dealer, the inclusion in any contract or agreement of any such term or condition, or the giving of any undertaking to the like effect; (c) to notify to dealers, or otherwise publish on or in relation to any goods, a price stated or calculated to be understood as the minimum price which may be charged on the resale of the goods in the United Kingdom.’
I think that I need not read any more of s 1. I pause there merely to say that, for the purposes of the application before me, the defendants are suppliers within the meaning of the Act and the plaintiffs are dealers. Section 2 provides:
‘(1) Subject to the provisions of this Act with respect to registration, to the powers of the Restrictive Practices Court thereunder and to the next following section, it shall be unlawful for any supplier to withhold supplies of any goods from a dealer seeking to obtain them for resale in the United Kingdom on the ground that the dealer—(a) has sold in the United Kingdom at a price below the resale price goods obtained, either directly or indirectly, from that supplier, or has supplied such goods, either directly or indirectly, to a third party who had done so; or (b) is likely, if the goods are supplied to him, to sell them in the United Kingdom at a price below that price, or supply them, either directly or indirectly, to a third party who would be likely to do so.
‘(2) In this section “the resale price”, in relation to a sale of any description, means any price notified to the dealer or otherwise published by or on behalf of a supplier of the goods in question (whether lawfully or not) as the price or minimum price which is to be charged on or is recommended as appropriate for a sale of that description, or any price prescribed or purporting to be prescribed for that purpose by any contract or agreement between the dealer and any such supplier.
‘(3) For the purposes of this Act a supplier of goods shall be treated as withholding supplies of goods from a dealer—(a) if he refuses of fails to supply those goods to the order of the dealer; (b) if he refuses to supply those goods to the
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dealer except at prices, or on terms or conditions as to credit, discount or other matters, which are significantly less favourable than those at or on which he normally supplies those goods to other dealers carrying on business in similar circumstances; or (c) if, although he contracts to supply the goods to the dealer, he treats him in a manner significantly less favourable than that in which he normally treats other such dealers in respect of times or methods of delivery or other matters arising in the execution of the contract.
‘(4) For the purposes of this Act a supplier shall not be treated as withholding supplies of goods on any such ground as is mentioned in subsection (1) of this section if, in addition to that ground, he has other grounds which, standing alone, would have led him to withhold those supplies.
‘(5) In any case where, by virtue of this section, it would be unlawful for a supplier to withhold supplies of goods, it shall also be unlawful for him to cause or procure any other supplier to do so.’
I need not, I think, refer to s 3, but I should read s 4 in part. Section 4 provides:
‘(1) No criminal proceedings shall lie against any person on the ground that he has committed, or aided, abetted, counselled or procured the commission of, or conspired or attempted to commit or incited others to commit, any contravention of the foregoing provisions of this Act.
‘(2) The obligation to comply with the said provisions is a duty owed to any person who may be affected by a contravention of them, and any breach of that duty is actionable accordingly (subject to the defences and other incidents applying to actions for breach of statutory duty) …
‘(4) If in proceedings brought against a supplier of goods in respect of a contravention of section 2 of this Act it is proved that supplies of goods were withheld by the supplier from a dealer, and it is further proved—
(a) that down to the time when supplies were so withheld the supplier was doing business with the dealer of was supplying goods of the same description to other dealers carrying on business in similar circumstances; and
(b) that the dealer, to the knowledge of the supplier, had within the previous six months acted as described in paragraph (a) of subsection (1) of that section, or had indicated his intention to act as described in paragraph (b) of that subsection in relation to the goods in question,
it shall be presumed, unless the contrary is proved, that the supplies were with-held on the ground that the dealer had so acted or was likely so to act … ’
Then comes a proviso which I need not read. Two observations which I would make on s 4(4) are that, first of all, it seems to me that, in an appropriate case, there is still room for s 2(4) to operate, notwithstanding that the presumption is applicable, and secondly, that the facts of the present case are admittedly such as to bring the presumption into play.
I propose to say as little as possible about the facts of this case because, after all, this is only an interlocutory application and it may be that the facts, as proved at the trial, will, after cross-examination has been heard, turn out to be different from the facts as they appear in the present affidavits. Therefore any observations which I make about the facts are provisional only and made simply for the purposes of this interlocutory application. But briefly what the plaintiffs say in an affidavit is that since June 1969 they have been promoting their sales of the defendants’ products by selling certain of them at reduced retail prices, that the defendants have complained to them about this and have indicated their displeasure at the course of trading which the plaintiffs have been adopting in a number of ways: first of all, by imposing a credit limit on the plaintiffs and secondly, by delivering less than the amount of the plaintiffs’ orders and delaying deliveries in a manner in which they had not previously been delayed. The plaintiffs ask me to draw the
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inference, from the evidence which they adduce, that the defendants in closing the plaintiffs’ account were motivated by their dislike of the price cutting operations of the plaintiffs. The defendants, however, in their evidence put forward a different version of the reasons which led them to close the plaintiffs’ account. First of all, I should refer to the affidavit of Mr Reynolds, who is the United Kingdom sales manager for the Graphics Division of the defendants. He states:
‘Late in April 1970 I received the document which is exhibit “J.L.1” to the Affidavit of James Latto and was informed of the circumstances in which James Latto had been given this document.’
The document in question is a leaflet which is headed ‘Transprint’. ‘Transprint’, I understand, is a firm which is a competitor of the defendants, dealing in a similar sort of product. This pamphlet, after stating that the usual price for ‘Transprint’ is 5s a sheet, but that the plaintiffs’ price is 4s 6d or 4s if a greater number is ordered on all orders of 50 sheets and over, states:
‘… we will exchange an equivalent number of USED Letraset lettering sheets for NEW Transprint, on a 1 to 1 basis … [Examples are then given. I will just mention one of them:] 50 Transprint @ 4s. (costs £10) Plus 50 Used Letraset you get 100 Transprint worth £25.’
Mr Reynolds in relation to that pamphlet goes on to say:
‘“Transprint” is a competitor of [the defendants] producing a product similar to instant letting. This document seemed to me to be inviting [the defendants’] customers to use the product of our competitor and moreover was using [the defendants’] products to advance the sales of Transprint. I brought this document to the notice of Mr Waters and on his instructions I did not execute the Plaintiffs’ order dated the 20th April 1970 and I requested the secretary of [the defendants] to write the letter of the 5th May 1970 which is in exhibit “D.D.9” to the affidavit of Mr Dale.’
That letter is the letter closing the account and it simply states:
‘At the request of our U.K. Sales Manager, Mr. A. C. Reynolds, I write to confirm his advice to you that [the defendants have] decided forthwith to close [their] account with you.’
That letter is signed on behalf of the defendants by their secretary. Mr Reynolds then states:
‘I have known since May 1968 [which is, I think, a mistake for June 1969] that the Plaintiffs are selling [the defendants’] goods at lower than the recommended retail prices. I am equally aware that this has been and is being done by many others of the stockists of Letraset. It never has been and is not my intention nor as far as I am aware of [the defendants] to withhold supplies of goods from stockists who sell [the defendants’] products at less than the recommended prices. In the case of the Plaintiffs far from there being any withholding there has been a greatly increased supply. As I have already stated in the year up to May 1969 the amount of goods supplied to the Plaintiffs did not exceed £350. In the year May 1969 to May 1970 the Plaintiffs were supplied with goods for about £4,000.’
Then I should refer to the affidavit of Mr Waters, who is Mr Reynolds’ superior, being the general sales manager. In his affidavit he refers to that leaflet and states:
‘In the latter part of April 1970 the leaflet which is exhibit “J.L.1” to the affidavit of James Latto came into my possession. My initial reaction to that leaflet and my subsequent considered opinion was that the Plaintiffs were encouraging the Defendants customers to use a rival product “Transprint” and
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that the Defendants would be providing the Plaintiffs with ammunition to enable them to further sales of the rival product at the expense of the Defendants. I discussed this leaflet with John Glen Davies the Sales Director of the Defendant Company and also with John Arthur Chudley its Managing Director. Following these discussions I gave instructions that the Plaintiffs account with the Defendants was to be closed. It has not been and is not the policy of the Defendants ever to withhold supplies to stockists on the grounds that the latter re-sell such supplies at lower than the Defendants recommended retail prices. The Defendants are aware of the practice of many stockists other than the Plaintiffs who sell the Defendants products at lower than recommended retail prices, but in no instance have the Defendants closed an account because of such a practice.’
Counsel for the plaintiffs criticises the language in which those affidavits have been sworn and says that the defendants do not really say in terms that the reason which led them to close the plaintiffs’ account, was not that the plaintiffs were selling at less than the recommended prices, but that the defendants were objecting to the plaintiffs’ selling methods. Counsel says that that, in fact, is not stated on an analysis of the language used in the affidavits. But I think that I should also refer to a letter which the plaintiffs have put in evidence in reply. It is a letter written by the defendants’ solicitors on 12 May 1970 in reply to the plaintiffs’ solicitors’ letter before action. The defendants’ solicitors wrote:
‘We confirm our telephone conversations with you yesterday and again today when we advised you of our interest on behalf of [the defendants]. We have a copy of your letter of the 8th instant and while we are ignorant of the information supplied by [the plaintiffs] there is no question of [the defendants] withholding supplies by reason of the matters referred to in Section 2 of the 1964 Act. [The defendants] have been well aware of [the plaintiffs’] business methods for a long time past and have not raised any objection. What [the defendants] did not know until very recently was the nature of [the plaintiffs’] advertising, a form of which we enclose. [The plaintiffs] are in fact encouraging [the defendants’] customers to use the product of their competitors “Transprint” and [the defendants] are not prepared to provide [the plaintiffs] with ammunition to enable them to further the sales of this rival product at [the defendants’] expense. [The defendants] have acted on our advice and if [the plaintiffs] insist on taking proceedings as you state in your letter then such proceedings will be strenuously resisted.’
I have come to the conclusion that on a fair construction of the evidence, as it stands, there is a sufficient assertion on the part of the defendants that what motivated them in closing the plaintiffs’ account was not the fact that the plaintiffs were selling at reduced retail prices, but the leaflet relating to Transprint. The question of motive will have to be investigated in detail at the trial of the action. But as matters stand on the evidence, there is in my judgment, a clear conflict of evidence, because although the plaintiffs have got the statutory presumption in s 4(4) of the Act, the defendants have put in issue the question of motive and have claimed to have had a different purpose in mind in ceasing to trade with the plaintiffs. Where the truth lies beyond that is a matter which I feel is quite impossible to investigate on the hearing of this motion.
In the circumstances it seems to me that I am bound to dismiss the motion.
Motion dismissed.
Solicitors: Corner & Co (for the plaintiffs); W R Millar & Sons (for the defendants).
Jacqueline Metcalfe Barrister.
R v Ferguson
[1970] 2 All ER 820
Categories: CRIMINAL; Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SALMON AND PHILLIMORE LJJ AND NIELD J
Hearing Date(s): 11 JUNE 1970
Criminal law – Restitution order – Discretion – Statement by accused at trial that money belonged to a third party – No evidence or documents before court to prove that money belonged to accused – Whether order should be made – Theft Act 1968, s 28(1)(c), (4).
Criminal law – Restitution order – Safe deposit in accused’s name – Money taken from safe deposit after arrest – Whether money taken out of his possession on his apprehension – Theft Act 1968, s 28(1)(c).
On 24 April 1968, an armed gang robbed S’s van of some £40,000. Two days later the appellant was arrested and charged with the offence. On 7 May 1968, the police went to a store where the appellant had had a safe deposit box since January 1968, and appropriated the contents of the box, £2,000, as the suspected proceeds of theft. At the trial of the appellant evidence was given that the safe deposit box had not been opened between the date it had been deposited at the store and the appellant’s arrest, and could not, therefore, have contained part of the proceeds of the robbery. The appellant contended that the £2,000 was not the proceeds of any theft but belonged to his mistress who had asked him to look after it for her. The appellant was convicted, and at the conclusion of the trial a restitution order was made under s 28(1)(c)a of the Theft Act 1968 that the £2,000 found in the safe deposit box should be handed over to S. On appeal against the making of the restitution order,
Held – The £2,000 from the safe deposit was money which was ‘taken out of [the appellant’s] possession on his apprehension’ within the meaning of s 28(1)(c) (see p 821 j, post); but the issue had clearly been raised by the appellant that the money belonged to his mistress and not to him, and there were no documents or any other evidence given at the trial to show beyond a reasonable doubt that the money did belong to the appellant; accordingly the order would be set aside. Where such an issue is raised, it should, save in the clearest case, be decided in the civil and not in the criminal courts (see p 822 g to j and p 823 a, post)
Stamp v United Dominion Trust (Commercial) Ltd [1967] 1 All ER 251 applied.
Notes
For restitution orders under the Theft Act 1968, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1583A.
For the Theft Act 1968, s 28, see 8 Halsbury’s Statutes (3rd Edn) 800.
Case referred to in judgments
Stamp v United Dominion Trust (Commercial) Ltd [1967] 1 All ER 251, [1967] 1 QB 418, [1967] 2 WLR 541, 131 JP 177, Digest Supp.
Authorities cited
Griew, The Theft Act 1968, ch 10.
Smith, The Law of Theft (1968 Edn), ch xiii.
Appeal
On 12 March 1969 the appellant, John William Ferguson, and two other men were
Page 821 of [1970] 2 All ER 820
convicted at the Central Criminal Court before the common sergeant (J M G Griffith-Jones Esq) and a jury of robbery with aggravation. On 25 March 1969, the appellant was sentenced to 14 years’ imprisonment and a restitution order was made against him under s 28 of the Theft Act 1968 in the sum of £2,835. The appellant appealed against the restitution order on the ground that the common sergeant wrongly exercised his powers in making it. The facts are set out in the judgment of the court.
M Sherborne for the appellant.
B L Leary for the Crown.
11 June 1970. The following judgments were delivered.
SALMON LJ delivered the judgment of the court. On 12 March 1969, the appellant was sentenced to 14 years’ imprisonment for armed robbery. He had been a member of an armed gang which attacked a Securicor van and managed to escape with approximately £40,000. That armed robbery took place on 24 April 1968. Two days later the appellant was arrested. On 7 May 1968, the police went to Harrods, clothed with the necessary authority, and had a safe deposit box which was there in the name of the appellant opened. In that box there was £2,000. The police properly took possession of that money as the suspected proceeds of theft. It appeared from evidence at the trial that this safe deposit box had been in the appellant’s name since January 1968 and that it had not been opened between then and the day on which he was arrested for armed robbery in respect of which he was convicted. It is, therefore, plain that none of the money found by the police in the safe deposit box was the proceeds of that robbery.
At the conclusion of the proceedings at the Central Criminal Court, an application was made that the £2,000, which had been in the safe deposit box, should be handed over to Securicor. That application was made under s 28 of the Theft Act 1968. The application succeeded. The common serjeant ordered that the money should be handed over to Securicor, and it is from that order that the appellant now appeals.
I will read the relevant passages from s 28(1) of the Theft Act 1968:
‘Where goods have been stolen, and a person is convicted of any offence with reference to the theft (whether or not the stealing is the gist of his offence), the court by or before which the offender is convicted may on the conviction exercise any of the following powers:—… (c) on the application of a person who, if the first-mentioned goods were in the possession of the person convicted, would be entitled to recover them from him, the court may order that a sum not exceeding the value of those goods shall be paid to the applicant out of any money of the person convicted which was taken out of his possession on his apprehension.’
The ‘first-mentioned goods’ in (c) comprise any goods including money, that were stolen in the course of the theft for which the accused person was convicted.
It is apparent that, before an order can be made under this section, it has to be shown that the money in respect of which the order is made is the money of the convicted man and that it was taken out of his possession on his apprehension. In the view of this court, the £2,000 was in the possession of the appellant. It was in a safe deposit box which he had in his name at Harrods and of which he held the key. It is difficult to think of a clearer case of money being in the possession of a convicted man. It was taken out of his possession on 7 May. It is plain that, giving the words ‘on his apprehension’ a commonsense meaning, as in the view of this court the Theft Act 1968 requires, the money was indeed taken out of his possession on his apprehension.
The real point, however, on this appeal is whether or not there was sufficient material before the court to justify the common serjeant making the order on the basis that the money was the money of the convicted person; that is to say, that the
Page 822 of [1970] 2 All ER 820
money belonged to him. At the trial when he gave evidence he said, first, that the money had nothing to do with the proceeds of this robbery with which he was charged. Obviously that was correct. He said it had nothing to do with any thefts that had been committed in the past. He said that the woman with whom he had been living had obtained a sum in excess of £2,000 from an insurance company in respect of a claim which she had made, that she had handed £2,000 of this money to him for safe keeping and that he had put that money, which was hers, into his safe deposit box so that it would be secure. In other words, he was looking after her money for her. What he said about that money when he gave evidence does not perhaps match very well with what he said about it or what the police say that he said about it when the money was found after his arrest. This court cannot help but have the gravest doubts whether his explanation of the source from which the money was derived is true. It may be true. On the other hand, there is at any rate a real possibility that it may not be true. If, however, it is true, then this woman with whom he was living has a good claim to the money because it belongs to her. In this connection s 28(4) is important. It provides:
‘The court shall not exercise the powers conferred by this section unless in the opinion of the court the relevant facts sufficiently appear from evidence given at the trial or the available documents, together with admissions made by or on behalf of any person in connection with any proposed exercise of the powers; and for this purpose “the available documents” means any written statements or admissions which were made for use, and would have been admissible, as evidence at the trial … ’
The principles which should be followed in considering whether or not the discretion to make the order of restitution should be exercised are set out in Stamp v United Dominions Trust (Commercial) Ltd. It is true that that case was decided under s 45 of the Larceny Act 1916 which gave similar powers to make orders for restitution to those contained in s 28 of the Theft Act 1968, although no doubt the Theft Act 1968 extends those powers to some extent. The same principles, however, apply to how the discretion should be exercised. If there is any doubt at all whether the money or goods in question belong to a third party, the criminal courts are not the correct forum in which that issue should be decided. It is only in the plainest cases, when there can be no doubt that the money belonged to the convicted man, that the court would be justified in exercising its discretion in making an order for restitution. To do so in any case of doubt might cause the gravest injustice to a third party because the third party to whom the money may belong has no locus standi to appear before a criminal court. Nor is there any appropriate machinery available in the criminal courts for deciding the issue of who is the true owner. Discovery is sometimes a very important part of the necessary machinery for resolving issues of that sort, and discovery for this purpose can be obtained only in the civil courts. The civil courts are the correct forum for deciding matters of this kind.
In our view, having regard to the fact that the issue was clearly raised by the appellant that the money was not his but that it belonged to his mistress—there being no documents or indeed any other evidence to show beyond a reasonable doubt that the money belonged to the appellant—the order for restitution should have been refused. Securicor and the appellant’s mistress should have been left to take such action in the civil courts as they might be advised. We do not desire to express any opinion as to the effect of allowing this appeal. The police, Securicor and the appellant’s mistress and the appellant himself can all take advice as to what their respective civil remedies are, if any. This court is not deciding the issue as to whom the money
Page 823 of [1970] 2 All ER 820
belongs. All this court is deciding is that on facts such as these, it was wrong to make an order for restitution and the appeal will accordingly be allowed.
Appeal allowed. Restitution order set aside.
Solicitors: Registrar of Criminal Appeals (for the appellant); Director of Public Prosecutions.
N P Metcalfe Esq Barrister.
R v Peart
[1970] 2 All ER 823
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, SACHS LJ AND EVELEIGH J
Hearing Date(s): 14 MAY 1970
Road traffic – Motor vehicle – Taking and driving away without owner’s consent – Consent obtained by false pretence – Whether consent vitiated – Theft Act 1968, s 12(1).
On the true construction of s 12(1)a of the Theft Act 1968, the consent of the owner of a motor car to its use by another is not vitiated by the fact that that consent is obtained by a false pretence as to the destination and purpose of the journey (see p 825 j, post).
Quaere. Whether a fundamental misrepresentation (eg as to identity) could vitiate consent for the purposes of s 12(1) of the 1968 Act (see p 825 d, post).
Notes
For the taking of motor vehicles without consent or lawful authority, see 33 Halsbury’s Laws (3rd Edn) 631, 632, para 1065, and for cases on the subject, see 45 Digest (Repl) 103, 104, 331–340.
For the Theft Act 1968, s 12, see 8 Halsbury’s Statutes (3rd Edn) 790.
Case referred to in judgments
London Jewellers Ltd v Attenborough, London Jewellers Ltd v Robertsons (London) Ltd [1934] 2 KB 206, [1934] All ER Rep 270, 103 LJKB 429, 151 LT 124, 30 Digest (Repl) 214, 561.
Cases also cited
Du Jardin v Beadman Brothers Ltd [1952] 2 All ER 160, [1952] 2 QB 712.
Folkes v King [1923] 1 KB 282, [1922] All ER Rep 658.
Pearson v Rose & Young Ltd [1950] 2 All ER 1027, [1951] 1 KB 275.
Appeal
This was an appeal by Frank Peart against conviction at Northumberland Quarter Sessions on 19 January 1970 before the deputy chairman (E D Grierson Esq) and a jury on a charge of taking a motor vehicle without the consent of its owner. The facts are set out in the judgment of the court.
D A Orde for the appellant.
R A Percy for the Crown.
14 May 1970. The following judgments were delivered.
SACHS LJ delivered the judgment of the court. On 19 January 1970, at Northumberland Quarter Sessions, the appellant was convicted of taking an Austin motor van without the consent of its owner, a Mr Black. He was sentenced to six
Page 824 of [1970] 2 All ER 823
months’ imprisonment, and a suspended sentence of two years’ imprisonment which had been imposed on him earlier in the year was ordered to take effect consecutively.
The facts of the matter were as follows: on 17 May 1969, in the early afternoon the appellant came up to Mr Black and introduced himself. Then shortly afterwards, when an interval had passed during which he had gone away temporarily, he came back and, with every appearance of agitation, told Mr Black that if he did not get to Alnwick before 2·30 pm he would lose an important contract, and that for that purpose he needed a motor car urgently. Induced by that particular representation, Mr Black offered him the loan of the Austin van, subject to its being returned to him by 7·30 pm. The appellant assured him that it would be back by then and gave Mr Black £2 for the loan of the van. However, the van did not come back by 7·30 pm. It was later ascertained, and indeed it was common ground at the trial, that the appellant did not go to Alnwick at all; he had driven instead to Burnley, and about 9·00 pm had been stopped by the Burnley police, because of a defective exhaust. The appellant made a statement in the course of which he said:
‘I didn’t tell him [that is Mr Black] that I intended driving the car to Burnley because I didn’t think he would let me have the car to go that far, so I told him Alnwick instead.’
On those facts it is perfectly plain that Mr Black gave his consent to the appellant to take and drive the car in return for a payment of £2. The issue which is before the court is whether the fraud which undoubtedly induced that consent vitiated it so as to make the appellant liable to prosecution and conviction under s 12(1) of the Theft Act 1968, which, so far as material, provides:
‘… a person shall be guilty of an offence if, without having the consent of the owner or other lawful authority, he takes any conveyance for his own or another’s use … ’
That provision is the successor of s 217(1) of the Road Traffic Act 1960, which itself was the successor of s 28(1) of the Road Traffic Act 1930. So far as any issue relevant to the present case is concerned, this court is of the clear opinion that there are no material differences between the currently operating subsection of the Theft Act 1968 and those of the Road Traffic Acts 1930 and 1960 which have just been mentioned. It is, of course, well known that s 28 of the 1930 Act was introduced to provide a simple criminal remedy for the spate of occasions when cars were taken against the wishes of owners from the streets or from a garage without permanently intending to deprive the owner of that vehicle. It was intended in its very nature to deal with takings made without any reference to the owner. Forty years have gone by since the 1930 Act was passed, and this is, so far as this court is aware, the first time that it has been suggested that it should be applied to occasions when consent was obtained by false pretences.
The direction of the learned deputy chairman in regard to this particular offence was as follows:
‘What is consent here? I am going to say, members of the jury—and here I do not hide from you that I may be wrong; it may be that it can be put in a different way from this—that consent induced by dishonest statements is not a real consent; though it may be an apparent one. I am using certain words that have been used in textbooks, that have been used for offences of obtaining by using trickery, in the law on larceny: Was the consent obtained by [the appellant] obtained by the result of false statements made by [the appellant]?’
It is to be observed that this was the sole issue in effect left to the jury; there was no issue left to them whether, in this particular case, there could have been a fresh taking, within the meaning of the 1968 Act, of this particular van, at some time after
Page 825 of [1970] 2 All ER 823
it was originally driven away at 2·30 pm. The consent which has to be considered is thus a consent at that time to taking possession of the van with licence to drive and use it.
Whether fraudulent representations vitiate consent was the subject of considerable discussion in the days when there was a distinction between larceny by a trick and obtaining goods by false pretences. That discussion and the resulting decisions must have been known to those who framed and passed the 1930 Act. The principles applicable to consent in relation to obtaining property—and I use the word ‘property’ in its technical sense— thus seem to this court to be in general applicable to consent to obtaining possession with licence to take and drive. An example of a fraudulent representation which did not vitiate the consent is to be found in London Jewellers Ltd v Attenborough, decided after the passing of the 1930 Act. There have been other decisions since, but it is not necessary to cite them. In substance these decisions can be said to establish that there may well be a distinction between fraudulent representations of facts that are regarded as fundamental and of facts that are not; those regarded as fundamental fall within a somewhat narrow category, eg fraudulent representations as to identity or as to the nature of a transaction. These distinctions are of a kind which it would be unfortunate to introduce into the particular provisions under consideration, which were clearly intended to apply to offences of quite a simple type.
Whilst, however, reserving the point whether, in regard to s 12(1) of the Theft Act 1968, a fundamental misrepresentation can vitiate consent, this court has today to deal with a false pretence of the most usual category, no different in principle to the false pretences which come before the courts on a very great variety of occasions. If this court acceded to the submission put forward by the Crown, it would have some far reaching consequences which can hardly have been within the intention of the legislature. If, for instance, the fraudulent representation induced someone to enter into a hiring agreement or a hire-purchase agreement by reason of which alone the representor obtained possession of and licence to take away a vehicle, that would then result in an offence falling within the ambit of s 12(1).
That does not however appear to this court to be the mischief aimed at by the legislature. So to hold would in effect be inventing a fresh crime—obtaining possession by false pretences—an offence unknown to the law except when accompanied by intent to deprive the owner permanently of possession. It is a feature of the law of this country that, unless there is an intent permanently to deprive of possession, temporary deprivation of an owner of his property is in general no offence. It may perhaps be apposite to refer to what the Criminal Law Revision Committeeb said when considering whether such temporary deprivation should in general be made a crime:
‘Quarrelling neighbours and families would be able to threaten one another with prosecution. Students and young people sharing accommodation who might be tempted to borrow one another’s property in disregard of a prohibition by the owner would be in danger of acquiring a criminal record. Further it would be difficult for the Police to avoid being involved in wasteful and undesirable investigations into alleged offences which had no social importance.’
To introduce the offence of obtaining possession by false pretences as regards motor vehicles would obviously tend to produce disadvantages of the types recited and to induce considerable confusion into what has so far been an uncomplicated crime. For those reasons, this court is not prepared to hold that s 12(1) extends to cases where consent is obtained by the category of misrepresentation here under review.
Page 826 of [1970] 2 All ER 823
So far as the facts of the instant case are concerned, the essential false pretence relied on was that the car was going to be used to make a journey to Alnwick and not one to Burnley. There was also a pretence, which was false, as to the purpose for which this car was going to be used. Neither of those pretences can by any reasoning be made to fall within the concept of a fundamental misrepresentation within the narrow category to which reference has been made. In those circumstances, the sole issue left to the jury being that which has already been related, it seems to this court that there is no alternative but to quash the conviction, allowing the appeal.
LORD PARKER CJ. It follows that so far as this case is concerned at any rate, the appellant is discharged and the operational period of the suspended sentence was only two years, so that has expired.
Appeal allowed.
Solicitors: Registrar of Criminal Appeals (for the appellant); J W Cuthbertson & Co, Blyth (for the Crown).
Jacqueline Charles Barrister.
Smith and another v Baker
[1970] 2 All ER 826
Categories: FAMILY; Ancillary Finance and Property
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 28, 29 APRIL 1970
Husband and wife – Property – Matrimonial home – Husband sole owner at law – Home acquired by joint efforts – Wife contributing to purchase of plot, and abandoning her own work to help with building operations – Labour and materials paid for by husband’s mother – Wife’s work not mere leisure activity – Beneficial ownership in husband and wife jointly, in equal shares.
Most of the £95 for the purchase of a plot of land was contributed by the wife but the plot was conveyed into the husband’s name. The parties then built a bungalow on the land. They did not employ a building contractor but did a great deal of the work themselves and the wife gave up her own, paid, work to help with the building operations, helping her husband until the bungalow was built. The husband’s mother provided £2,500 to pay for labour and materials because of her affection for both parties, although the money was really intended for the husband’s benefit. On completion of the bungalow a loan of £1,000 was raised on it for the joint purposes of the husband and the wife, namely for a holiday and to pay off a car, the balance being put into a joint banking account. Subsequently, the wife divorced the husband. On a summons by the wife under s 17 of the Married Women’s Property Act 1882, the registrar determined that the bungalow belonged to the parties in equal shares. The husband appealed contending that the wife’s work on the bungalow had been simply an improvement to it, which should be disregarded and that the preponderant share belonged to the husband as the bungalow had been built with money provided by his mother.
Held – In determining the rights of husband and wife in the matrimonial home the first question was whether the home had been acquired by their joint efforts to provide the future family home; in the present case the bungalow had been so acquired; the wife’s abandonment of her own work to work on the bungalow was an
Page 827 of [1970] 2 All ER 826
important contribution to the parties’ joint efforts and was not mere leisure activity; accordingly, although the legal ownership was in the husband, the beneficial ownership was in the husband and wife jointly in equal shares in the absence of any other clear division (see p 828 c g and j, and p 829 a and e, post).
Jansen v Jansen [1965] 3 All ER 363 applied.
Pettitt v Pettitt [1969] 2 All ER 385 considered.
Notes
For the determination of rights to property between husband and wife, see 19 Halsbury’s Laws (3rd Edn) 900,901, para 1492, and for cases on the subject, see 27 Digest (Repl) 263–265, 2119–2133.
Cases referred to in judgments
Jansen v Jansen [1965] 3 All ER 363, [1965] P 478, [1965] 3 WLR 875, Digest (Cont Vol B) 344, 621s.
Pettitt v Pettitt [1969] 2 All ER 385, [1969] 2 WLR 966, Digest Supp.
Appeal
This was a appeal by the husband, Timothy Leonard Baker, from the order of the district registrar, made on 7 March 1969, at the final hearing of an application by the wife, Dulcie Alwyn Baker (now deceased, her personal representatives, Samuel Charles Smith and Elsie Maud Smith, being the respondents to the appeal), under s 17 of the Married Women’s Property Act 1882, whereby the district registrar held that the husband and wife were entitled to the matrimonial home, 27 Eveswell Park Road, Newport, Monmouthshire, in equal shares. The facts are set out in the judgment of Lord Denning MR.
Douglas Draycott QC and Patrick Eccles for the husband.
Kenneth Jones QC and J W M Turner for the personal representatives.
29 April 1970. The following judgments were delivered.
LORD DENNING MR. The husband and the wife married in 1957. They had been courting for five or six years before marriage and they had been saving up. The wife had a goodly sum in her savings account. They wanted to build their own house. They bought a plot of land in 1958 for £95. Most of it was the wife’s money. But the plot itself was conveyed into the husband’s name. They set to work to build a bungalow on it. It was to be their home, 27 Eveswell Park Road, Newport, in Monmouthshire. They did not employ a building contractor. They did a great deal themselves. They bought materials and employed labour. The wife gave up her own work for 15 or 16 months. She did it solely to help with the building operations, and she did it for the whole period during which the house was being built. She gave up her earnings of £10 a week for that period. She was on the spot most of the time. She even helped dig the foundations herself.
They needed money, of course, to pay for the labour and materials. Instead of raising money on mortgage, the husband’s mother provided the money. She provided a sum in all of £2,500. It was suggested that this £2,500 was a wedding present; but the registrar found that she gave it because she had a warm affection for both of them. Her generosity was really intended for her son’s benefit, although she was very happy if her daughter-in-law should benefit indirectly. So the house was completed. Later in the marriage a loan of £1,000 was obtained on it. Some of it was used for a holiday and some to pay off a car. There was £400 left. That was put into a joint account at the bank opened by them for the benefit of both.
Afterwards, unfortunately, the marriage broke up. In December 1966, the wife got a decree nisi on the ground of her husband’s adultery. The decree was made absolute in May 1967. There was a summons under s 17 of the Married Women’s Property Act 1882, to determine the rights of the husband and the wife in the house
Page 828 of [1970] 2 All ER 826
and furniture and other things. The only matter left for decision is the question of the house. The registrar, on 5 June 1968, determined that the house belonged to both in equal shares, although it stood in the husband’s name. But, before the order was drawn up, there was a sad event. The wife died on 16 December 1968. She died intestate. They had no children. If she was entitled to half, her half share would go to her parents as the next-of-kin.
The husband appeals to this court, saying that the registrar’s decision was wrong. Counsel for the husband says that the registrar’s decision would be perfectly right according to the law as it was understood before Pettitt v Pettitt in the House of Lords. But he says that that case has altered the law. He puts this case forward as a case where the house was built with moneys provided by the husband’s mother; and that the wife’s work on it was simply an improvement, which is to be disregarded. So the preponderant share should belong to the husband and very little to the wife.
I do not think that Pettitt v Pettitt has altered the law to any material extent. In all these cases, the first question is: was this a matrimonial home acquired by their joint efforts, intended to be the home for them and the children (if they had any) for the future as far as they could see? The answer here is clear. This home was acquired and built by the joint efforts of both of them as a continuing provision for the future. Each contributed a great deal in time and money. It was a joint enterprise. The wife contributed money for the plot, and money’s worth for her part in the building operations. The husband contributed by his work and his mother by £2,500. Their subsequent dealing throws a light on it. They raised money for their joint purposes and put the balance into a joint account. The registrar put it quite succinctly when he said:
‘It is quite clear that the parties “pooled” their income and, in my view, there was a general atmosphere of joint ownership to the income and capital of the parties.”
I think that the registrar directed himself quite rightly. This house was acquired by the joint efforts of both; it was joint property, although in the name of the husband only.
I would only add that the wife’s work here falls within Jansen v Jansen, which, in my judgment, is still good law. It was said to be correct in Pettitt v Pettitt ([1969] 2 All ER at 391, 416, [1969] 2 WLR at 974, 1001) by both Lord Reid and Lord Diplock. Lord Dipock said ([1969] 2 All ER at 415, [1969] 2 WLR at 1001):
‘Jansen v. Jansen falls into a different category. There it was not a case of leisure activities of the spouses. The husband in agreement with his wife had abandoned his prospects of paid employment in order to work on her property … ’
So here, the wife had abandoned her work for 14 months in order to work on the house. It was an important contribution to their joint efforts. The beneficial ownership was in both jointly.
The remaining question is: in what proportions? In most of these cases the parties do not get down to proportions. It is impossible to say what they would have agreed about it if they had thought about it. In the absence of any clear division, the only course that the court can take now, as it did before Pettitt v Pettitt, is to say that it should be half and half.
So I find no fault in the judgment, and I would dismiss the appeal.
Page 829 of [1970] 2 All ER 826
WIDGERY LJ. I entirely agree with the judgment of Lord Denning MR and do not propose to take time by attempting to go over the ground again.
To my mind there are really three essential points in this case. One starts with the fact that the legal title to the house is in the husband; but it is common ground between the parties in argument before us that some agreement whereby the wife acquired some beneficial interest is clearly established in this case. That being so, the only remaining question is: what share should be attributed to her? Should an attempt be made nicely to calculate what her share ought to be having regard to the amount that she put into the cost of the site and the value of her work subsequently, or ought one to approach the matter on the broader basis that the husband and wife are jointly entitled to the property, treating it not as being the subject of a mathematical division but as ‘ours’? In cases where their own understanding of the situation would be that the property is ‘ours’ then the conclusion ought to be that they have equal beneficial interests in it. It seems to me that any attempt in this case to follow counsel for the husband into a careful division of the supposed value of the house on a strict mathematical basis would be to fall into the error of which courts were sometimes guilty before Pettitt v Pettitt, namely to try to make what seems to be the fair agreement for the parties to make. The truth of the matter is that they would not have condescended beyond the fact that this was their joint property; and accordingly equal shares is the correct answer.
KARMINSKI LJ. I also agree. The most interesting and perhaps the most difficult point in this appeal is the question of proportion, to which both Lord Denning MR and Widgery LJ have referred. Applying, I hope, some measure of reality to what happens when a marriage is entered into and a home is bought, the spouses are creating a home for themselves, and probably, they hope, for a family. Nice questions of division are not applicable. In this kind of case where the means of the parties though considerable are somewhat limited, if they were asked the question at the time of the marriage: ‘To whom does the home belong?’ I agree with what Widgery LJ has just said, that the answer would undoubtedly be: ‘Ours.' ‘Ours’, therefore, implies no mathematical apportionment; but if they were pressed for an answer, they would almost undoubtedly say: ‘Ours, of course, equally.’
That is the position here, and I myself think that it would be quite wrong to try to apportion the interest other than as was done by the learned registrar, namely equally. I agree that this appeal must be dismissed.
Appeal dismissed.
Solicitors: Kinch & Richardson agents for Lloyd & Pratt, Newport, Mon (for the husband); Gartside & Rubin, Cwmbran, Mon (for the personal representatives).
Wendy Shockett Barrister.
Sulston v Hammond
[1970] 2 All ER 830
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND BRIDGE JJ
Hearing Date(s): 8 JUNE 1970
Road traffic – Notice of intended prosecution – Contravention of pedestrian crossing regulations – Obligation that notice be given – Road Traffic Act 1960, ss 14(1), 241 – Road Traffic Regulation Act 1967, s 23(1), (5) – ‘Pelican’ Pedestrian Crossings Regulations and General Directions 1969 (SI 1969 No 888).
The requirements of s 241a of the Road Traffic Act 1960(notice of intended prosecution) need not be complied with in the case of an information alleging contravention of reg 10 of the ‘Pelican’ Pedestrian Crossings Regulations and General Directions 1969 made under s 23b of the Road Traffic Regulation Act 1967, even though those requirements must be complied with if an offence under s 14(1)c of the Road Traffic Act 1960 is alleged (see p 832 d g and h, post).
Notes
For notice of intended prosecution under road traffic legislation, see 33 Halsbury’s Laws (3rd Edn) 646, 647, para 1092, and for cases on the subject, see 45 Digest (Repl) 110–114, 360–388.
For the Road Traffic Act 1960, ss 14, 241, see 40 Halsbury’s Statutes (2nd Edn) 723, 914.
For the Road Traffic Regulation Act 1967, s 23, see 47 Halsbury’s Statutes (2nd Edn) 1639.
Case stated
This was a case stated by justices for the county of Hertford acting in and for the petty sessional division of Cheshunt in respect of their adjudication as a magistrates’ court sitting at Cheshunt on 15 January 1970.
On 17 November 1969, an information was preferred by the appellant, Andrew Keith Sulston (a police constable of the Hertfordshire Constabulary), against the respondent, George John Kenneth Hammond, charging that he on 11 September 1969 at High Road, Wormley in the county of Hertford, being the driver of a motor coach caused the vehicle to proceed beyond the stop line or the vehicular traffic sign signal of a Pelican pedestrian crossing when the vehicular traffic light signal facing the driver on the side of the carriageway on which the vehicle approached the crossing was showing a red light, contrary to reg 10 of the ‘Pelican’ Pedestrian Crossings Regulations and General Directions 1969 and s 54 of the Road Traffic Regulation Act 1967(and s 23(5) of the Road Traffic Regulation Act 1967). The words in brackets were added with the consent of the respondent’s solicitor at the commencement of
Page 831 of [1970] 2 All ER 830
the hearing of the information before a plea of not guilty was tendered by the respondent.
The following facts were found. The respondent was not warned at the time the alleged offence was committed that the question of prosecuting him would be taken into consideration. A summons for the alleged offence was not served on the respondent within 14 days of the commission of the offence. A notice of intended prosecution was not served on the respondent within 14 days of the commission of the offence. The above facts were admitted by the appellant who conceded that the requirements of s 241 of the Road Traffic Act 1960 had not been complied with and such admission was formally made in evidence by Police Sgt Turner.
It was contended by the appellant that since the information was laid under the Road Traffic Regulation Act 1967 and the regulations made thereunder, the requirements of s 241 of the Road Traffic Act 1960 had no application to the case and that no notice of intended prosecution was necessary.
It was contended by the respondent that since the information alleged an offence involving failure to comply with a traffic direction, and since s 14(1) of the Road Traffic Act 1960 provided for offences of failing to comply with traffic directions, and since the requirements of s 241 of the Road Traffic Act 1960 applied to offences under s 14(1) of that Act, and no distinction could or should be drawn between the regulations under which the respondent was prosecuted and regulations made under s 14 of the Road Traffic Act 1960, therefore the requirements of s 241 of the Road Traffic Act 1960 applied to the present case.
The justices were of opinion that no distinction could be drawn between the regulations under which the respondent was prosecuted and regulations made under s 14 of the Road Traffic Act 1960 and that the requirements of s 241 of the 1960 Act applied to the present case. They therefore dismissed the information against the respondent. The prosecutor now appealed.
J T Turner for the appellant.
The respondent appeared in person.
8 June 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county of Hertford sitting at Cheshunt who on a preliminary point dismissed an information preferred by the appellant against the respondent. The information alleged that the respondent on a certain day, being the driver of a motor coach, caused the vehicle to proceed beyond the stop line or the vehicular traffic stop signal of a Pelican pedestrian crossing when the vehicular traffic light signal facing the driver on the side of the carriageway on which the vehicle approached the crossing was showing a red light, contrary to reg 10 of the ‘Pelican’ Pedestrian Crossings Regulations and General Directions 1969d and ss 23(5) and 54 of the Road Traffic Regulation Act 1967.
As I have said, a preliminary point was taken at the outset on behalf of the respondent that at the time of the offence he was not warned, and that no proceedings were taken against him or any notice of intended prosecution given within 14 days as required, so it was alleged, by s 241 of the Road Traffic Act 1960. The justices acceded to that submission and accordingly dismissed the information.
Section 241 of the Road Traffic Act 1960 provides that certain matters must be proved before a man can be found guilty of an offence, those broadly speaking being that he should have been warned at the time when the alleged offence was committed or that within 14 days thereafter a summons has been served on him or a notice of intended prosecution. By s 241(1) it is provided that: ‘This section applies to offences against any of the following provisions in this Act, namely … ’ and thereafter appears amongst other sections, s 14(1) dealing with compliance with traffic directions.
Page 832 of [1970] 2 All ER 830
I should say that s 241 has been amended by the Road Traffic Act 1962, but the amendment is quite irrelevant for this purpose. Section 14(1)e of the 1960 Act provides:
‘Where a police constable is for the time being engaged in the regulation of traffic in a road, or where a traffic sign, being a sign of the prescribed size, colour and type, or of another character authorised by the appropriate Minister under the provisions in that behalf of the Road Traffic Regulation Act 1967, has been lawfully placed on or near a road, a person driving or propelling a vehicle who—(a) neglects or refuses to stop the vehicle or to make it proceed in, or keep to, a particular line of traffic when directed so to do by the police constable in the execution of his duty, or (b) fails to comply with the indication given by the sign, shall be liable on summary conviction to a fine [of a particular amount].’
The information here alleged an offence not against s 14(1) of the Road Traffic Act 1960 but against s 23 of the Road Traffic Regulation Act 1967, and the appellant maintains that no notice of intended prosecution was necessary, and that it was immaterial that s 241 of the 1960 Act had not been complied with. The justices however came to the conclusion, as they put it, that no distinction could be drawn between the regulations under which the respondent was prosecuted and the regulations made under s 14 of the 1960 Act, and that therefore the requirements of s 241 of the Road Traffic Act 1960 applied to the present case.
I have come to the conclusion that the justices were wrong in the conclusion which they reached. It matters not how akin the two sets of regulations are or whether any distinction can be drawn between them. The fact of the matter is that they were made under different powers and constitute separate offences. Section 23 of the Road Traffic Regulation Act 1967 is a provision dealing with pedestrian crossing regulations, and s 23(5) states that:
‘A person who contravenes any regulations made under this section shall be liable on summary conviction to a fine not exceeding [so much].’
When one looks at the Road Traffic Act 1960 one finds that s 23 of the 1967 Act to which I just have referred, is verbatim what was set out in s 46 of the Road Traffic Act 1960. Nevertheless Parliament in 1960 did not consider that an offence contrary to s 46 of the Act required compliance with the provisions of s 241. Accordingly, as it seems to me, there is no reason whatever to suggest that s 241 applies in any way to an offence under s 23 of the 1967 Act. The regulation in question, which was reg 10, was made, as it is stated in reg 8, under that section, s 23. When s 46 of the 1960 Act was in force there was no need for any compliance with s 241. Accordingly, now its place is taken by s 23 of the 1967 Act, and the previous section, s 46 of the 1960 Act, is repealed, again there is no reason to apply the provisions of s 241. I would allow this appeal and send the case back to the justice with a direction that they should continue the hearing.
COOKE J. I agree.
BRIDGE J. I also agree.
Appeal allowed. Case remitted with direction to continue the hearing.
Solicitors: Breeze & Wyles, Enfield (for the appellant).
N P Metcalfe Esq Barrister.
R v Cascoe
[1970] 2 All ER 833
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SALMON AND PHILLIMORE LJJ AND NIELD J
Hearing Date(s): 9 JUNE 1970
Criminal law – Murder – Provocation – Direction to jury – Failure to direct on burden of proof as to provocation – Whether verdict of manslaughter should be substituted.
The appellant and F were on bad terms. F had attacked the appellant with a knife on one occasion. Very shortly after F arrived at a party, which was also attended by the appellant, the appellant shot F. The prosecution produced evidence that the appellant had gone to the party armed with a pistol. The appellant claimed that this allegation was untrue. He said that F approached him at the party and half drew a pistol from his pocket. The appellant claimed that he administered a karate chop to F’s wrist causing him to drop the pistol, but that, as the appellant was picking the pistol up from the floor, he saw four or five of F’s associates advancing towards him. The appellant alleged that, knowing that they were violent men who carried knives, in order to defend himself and to dissuade the men from attacking him, he fired the pistol at F and hit him with all seven shots, killing him. There was no suggestion by the appellant that he fired otherwise than with the intention of hitting F. At the trial of the appellant for murder, although the defence of provocation was not raised, in his summing-up, the recorder left the issue to the jury, but in doing so, he failed to direct them on the burden of proof in relation to provocation. The jury found the appellant guilty of murder. On appeal,
Held – The issue of provocation having rightly been left to the jury, it was essential that the recorder should have given them a correct direction on the law, particularly on the burden of proof. It was highly improbable that a jury properly directed would have found that there was provocation sufficient to make a reasonable man act as the appellant did, but they might have so found; since there had been an oversight in the summing-up, the appeal would be allowed and a verdict of manslaughter substituted for that of murder (see p 837 b and g, post).
R v McPherson (1957) 41 Cr App Rep 213 applied.
Notes
For provocation as a defence to murder, see 10 Halsbury’s Laws (3rd Edn) 710–713, paras 1362, 1363, and for cases on the subject, see 15 Digest (Repl) 938–943, 8980–9042.
For the Homicide Act 1957, s 3, see 8 Halsbury’s Statutes (3rd Edn) 461.
Cases referred to in judgment
R v Duffy [1949] 1 All ER 932, 15 Digest (Repl) 940, 9011.
R v McPherson (1957) 41 Cr App Rep 213, Digest (Cont Vol A) 373, 4777b.
Cases and authority cited
R v Biggin [1920] 1 KB 213, [1918–19] All ER Rep 501.
Bullard v R [1957] AC 635, [1961] 3 All ER 470n.
Archbold’s Criminal Pleading, Evidence and Practice (37th Edn) paras 2498, 2499.
Appeal
This was an appeal by Handel Barrington Cascoe against his conviction for murder at the Central Criminal Court on 10 June 1969 before the recorder of London (Sir Carl Aarvold) and a jury. He was sentenced to life imprisonment. The facts are set out in the judgment.
J F F Platts-Mills QC and C G Allen for the appellant.
B L Leary for the Crown.
Page 834 of [1970] 2 All ER 833
9 June 1970. The following judgments were delivered.
SALMON LJ delivered the judgment of the court. On 10 June 1969, at the Central Criminal Court the appellant was found guilty of murder and sentenced to imprisonment for life. He now appeals against that conviction.
Before considering the grounds of his appeal, it will be convenient to state the facts, which lie within a very short compass. At about 5.00 am on 19 January 1969 a party was still going on at a dance hall somewhere in north London. At that late or early hour a man called ‘Manny’ Francis, with three or four other guests, arrived at the party. The appellant had been there for some time. Very shortly after Mr Francis arrived, there was a good deal of evidence that the appellant shot Mr Francis. He was seen with a smoking pistol in his hand. The evidence showed conclusively that he shot Mr Francis no fewer than seven times and that as a result Mr Francis died.
According to the case for the prosecution, the appellant had come to that dance hall armed with the pistol. Evidence had been called of persons who had seen him with the pistol prior to 19 January 1969. The appellant, however, when he gave evidence, said that it was entirely untrue to say that he had ever possessed that pistol or any other. His case was that shortly after he arrived at the dance hall he saw Mr Francis, whom he had known for some two years and with whom he was on very bad terms owing to an association which the appellant had previously formed with Mr Francis’s stepdaughter. Indeed, on one occasion Mr Francis had attacked him with a knife. According to the appellant, Mr Francis came up to him, put his hand in his pocket as if to produce a pistol and then half drew a pistol from his pocket. The appellant, who said that he was a karate expert, acted very promptly. He administered what is called a karate chop just above Mr Francis’s right wrist which caused him to drop the pistol on the floor. The appellant then picked up the pistol. As he did so, so he said, he saw four or five of Mr Francis’s cronies advancing towards him. According to the appellant, he knew that they were all violent men and carried knives, whereupon in order to defend himself and to dissuade Mr Francis’s cronies from attacking him with their knives, he fired at Mr Francis and hit him with all seven shots. There was no suggestion by the appellant that he fired at Mr Francis other than with the intention of hitting him.
The defence that was run at the trial was based on three grounds: first of all, that the appellant was suffering from diminished responsibility; secondly, that he was acting in self-defence; thirdly, that if the actions which he took exceeded what could reasonably be done by way of self-defence, the jury would be entitled to find the appellant guilty of manslaughter.
The recorder in a very careful and thorough summing-up explained the elements of murder to the jury, and he dealt extremely fairly and very fully with self-defence. He was at pains to point out to the jury that the onus, so far as self-defence was concerned, rested from beginning to end on the Crown. It was not for the appellant to establish self-defence; it was for the Crown to negative self-defence. Unless the jury were satisfied beyond a reasonable doubt that self-defence had been negatived, then the appellant was entitled to be acquitted completely. No criticism is, or could have been, made of that part of the summing-up. The appellant now complains that the learned recorder did not deal with the third point which I have mentioned, namely, that although the jury rejected self-defence, they could find the appellant guilty of manslaughter if they came to the conclusion that, or were in doubt whether, he had used more force than was reasonably necessary. This court is not at all surprised that the learned recorder did not think it necessary to mention that point. In the circumstances of this case the point was wholly unarguable. No doubt there are cases where self-defence is raised and negatived by the jury in which it would be possible for the jury to return a verdict of not guilty of murder but guilty of manslaughter; for example if a man who is attacked draws a gun and fires it in the direction of his attacker not intending to shoot him, but only to frighten him, that is to say, intending to miss him, and nevertheless he kills him. The jury could
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in such a case conclude that self-defence was negatived. Of course, it was unreasonable to draw a gun to resist the kind of attack in question. The jury might be satisfied that it was criminally dangerous or negligent to fire the gun, but not satisfied that there was any intention to do grievous bodily harm, let alone kill. Therefore, although self-defence would be negatived, the accused would be guilty not of murder but only of manslaughter.
On the facts of this case such a finding would have been perverse. The appellant never challenged, indeed he asserted, that he fired at Mr Francis seven times intending to hit him and, therefore, necessarily to kill him or at least to do him grievous bodily harm. The only circumstances in which the jury could have brought in a verdict of manslaughter would have been if they had found diminished responsibility or provocation. Of course, if they found self-defence, he would have been entitled to a clear acquittal, but if they negatived self-defence and negatived provocation and did not accept diminished responsibility, the only possible verdict which they could have brought in was murder. So there is nothing in the view of this court in the third point made by counsel for the appellant, and I mention it first merely to dispose of it.
I should perhaps say that, so far as diminished responsibility is concerned, there is no appeal against the jury’s rejection of that defence. According to both counsel, the accused behaved in the oddest way in court, but the medical evidence that was called did not establish diminished responsibility. In his summing-up the recorder said:
‘Dr Neustatter … [said] that here there was a general grandiosity compatible with paranoid schizophrenia. There was a possibility that [the appellant’s] mental responsibility was diminished, but whether it was substantial it was impossible to say. In the end he came down to the view he did not think the mental responsibility of the defendant was diminished in the sense of the Homicide Act, 1957.’
Dr Blair said that there was evidence to suggest mental abnormality and that the appellant was suffering from delusions and there was a possibility or suspicion that there was a paranoid condition in the appellant’s mind. The conclusion he came to in the end was that it could not be proved that the appellant suffered from mental illness. It could not be proved that he was suffering from delusions. Maybe there was diminished responsibility, but he could not definitely state that. He could not say, even if there was such an abnormality, whether it was such as substantially to impair his responsibility for the killing. That being the medical evidence, it is not surprising that the jury did not accept the defence of diminished responsibility. It is worth noting, however, that since the appellant has been in prison he has been transferred to Broadmoor. This suggests that it may be that his symptoms had not manifested themselves clearly enough to be recognised by the doctors at the time of this trial; that is to say, that when he committed the crime he may indeed have been suffering from diminished responsibility in which event the proper verdict would have been manslaughter. In the view of this court, however, it would have made little practical difference because the only proper sentence would indubitably have been life imprisonment.
I now turn to the only real point made on behalf of the appellant on this appeal, and it concerns provocation. It should be noted that this was never run by the defence at the trial. Nevertheless, it is quite plain that, although the defence is not run at the trial, the judge, if he considers that there is evidence on which a jury might reasonably, and I repeat the word ‘might’, find provocation, has a duty to leave that issue to the jury. The learned recorder clearly thought that there was some evidence on which a jury might reasonably find provocation which would reduce the appellant’s crime from murder to manslaughter.
The complaint that is made of the recorder’s direction on provocation is as
Page 836 of [1970] 2 All ER 833
follows. Counsel for the appellant says that when the recorder came to deal with provocation, he explained the law in relation to provocation with complete accuracy except in one important respect. He failed to tell the jury, as he had done when he dealt with self-defence, that from beginning to end the onus lay on the Crown, that it was not for the appellant to prove provocation, but that if, at the end of the day, the jury were left in any reasonable doubt by the evidence whether the appellant had been provoked, then they should acquit him of murder and find him guilty of manslaughter.
The classic definition of provocation is to be found in the judgment of Devlin J in R v Duffya. It is as follows:
‘Provocation is some act, or series of acts, done by the dead man to the accused which would cause in any reasonable person, and actually causes in the accused, a sudden and temporary loss of self-control, rendering the accused so subject to passion as to make him or her for the moment not master of his mind.’
I should now read s 3 of the Homicide Act 1957 which provides:
‘Where on a charge of murder there is evidence on which the jury can find that the person charged was provoked (whether by things done or by things said or by both together) to lose his self-control, the question whether the provocation was enough to make a reasonable man do as he did shall be left to be determined by the jury; and in determining that question the jury shall take into account everything both done and said according to the effect which, in their opinion, it would have on a reasonable man.’
Counsel for the Crown says that there was no evidence of provocation to be left to the jury. The learned recorder, according to counsel, quite unnecessarily left this issue which was wholly irrelevant. Accordingly, any misdirection was equally irrelevant. He concedes, and rightly concedes, that if there was evidence of provocation, then there was a non-direction by the recorder in that he did not explain the burden of proof in relation to provocation.
It seems to this court that the evidence of provocation was extremely tenuous. On the other hand, we consider it impossible to say that there was no evidence of provocation. All matters of fact were for the jury to decide. We, of course, do not know whether, when they retired and found the appellant guilty of murder, they accepted his story of how he got possession of the gun, or thought that it might be true, or whether they accepted without question the story told by the prosecution witnesses, namely that he brought it to the dance hall with him. If they accepted the evidence of the prosecution witnesses, all the defences except diminished responsibility went out of the window. We in this court, however, as counsel for the Crown very fairly concedes, must approach the appeal on the basis that the jury were not satisfied by the evidence of the prosecution witnesses and thought that at any rate it was reasonably possible that the appellant’s account of how he came into possession of the gun was accurate. Here was a man who was on very bad terms with the gentleman known as ‘Manny’s Francis. He had been knifed by Mr Francis before. He saw Mr Francis reach for a gun and produce a gun. He certainly could not have thought that Mr Francis was taking the gun out of his pocket in order to show it to him. The same moment as he disarmed Mr Francis, he saw four or five of Mr Francis’s cronies, whom he believed to be carrying knives, advancing on him. It seems to this court that a jury might have come to the conclusion that acts done by Mr Francis in those circumstances so frightened and angered the appellant that
Page 837 of [1970] 2 All ER 833
he lost all control of himself and took up the gun, and in a passion fired it at Mr Francis. We are far from saying that it is probable that the jury would have taken that view. All that we conclude is that there was evidence on which they could have taken that view. If they could have taken that view, then the question whether the provocation was enough to make a reasonable man do as the appellant did had to be left to be determined by the jury. It was left, and no one in all the circumstances here can criticise the learned recorder for leaving that question to the jury. Having left it to the jury, it was essential that they should have been given a correct direction on where the burden of proof lay so far as provocation was concerned. In the view of this court it is highly improbable that a jury properly directed would have come to the conclusion that a reasonable man in the circumstances such as those in which the appellant found himself would have done as the appellant did. However, the jury might come to that conclusion.
R v McPherson is in some respects a very similar case to the present. That was a case in which the learned trial judge failed to explain to the jury that on the issue of provocation the onus of proof was on the Crown from beginning to end, nor did he tell them that if they were in any reasonable doubt whether there was provocation or not, the appellant was entitled to a verdict of manslaughter. Moreover, that was a case in which on the facts it was at least as improbable as it is in the present case that the jury, even if correctly directed on the onus of proof, would have returned a verdict of manslaughter. However, an exceptionally strong Court of Criminal Appeal, Lord Goddard CJ, Byrne and Devlin JJ, allowed the appeal. I need only cite one short passage from the judgment delivered by Lord Goddard CJ ((1957) 41 Cr App Rep at 215):
‘In all the circumstances, this court finds it exceedingly difficult to say that there was evidence of provocation … but, in the exercise of his discretion, the learned judge did leave the question of manslaughter to the jury, and, therefore, the issue having been once left to the jury, one has to see that the jury were properly directed.’
The only distinction between that case and the present is that in that case the issue of provocation was raised at the trial, whereas in the present case it was not. This, however, does not in the view of this court make any material difference. Whether the issue is raised at the trial or not, if there is evidence which might lead the jury to find provocation, then it is the duty of the court to leave that issue to the jury. The evidence in this case was very thin indeed. The very experienced recorder, however, considered that there was some evidence or he would not have left that issue to the jury. We cannot disagree with him in the view which he took on that point. It follows from what has been said that since there was the oversight in the summing-up to which reference has been made, the appeal must be allowed and a verdict of manslaughter substituted for the verdict of murder.
As for sentence, manslaughter is, of course, a crime which varies very, very greatly in its seriousness. It may sometimes come very close to inadvertence. That is one end of the scale. At the other end of the scale, it may sometimes come very close to murder. In the view of this court, this is about as serious a case of manslaughter as can be imagined. Indeed, it may be thought that even if the jury had had the correct direction on the onus of proof, the strong probability is that they would have convicted of murder notwithstanding. We cannot, however, say that it is beyond doubt that they would have done so. So we approach the case on the basis of manslaughter, a very grave case of manslaughter, indeed, as grave as any which can be imagined. In those circumstances it would be wholly wrong if this court were to impose any
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sentence other than a sentence of life imprisonment, and accordingly the sentence stands.
Appeal allowed. Conviction of murder quashed. Verdict of manslaughter substituted. Sentence to stand.
Solicitors: Bernard Solley & Co (for the appellant); Director of Public Prosecutions.
N P Metcalfe Esq Barrister.
Eagling and another v Gardner
[1970] 2 All ER 838
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 22, 23, 24 APRIL, 15 MAY 1970
Restrictive covenant – Restrictive covenant affecting land – Building scheme – Criteria necessary to establish – Effect of omission of restrictions from minority of transfers – Provision that covenants should enure for benefit of ‘remainder of … Estate of vendor’ – Whether ‘remainder’ meant unsold part.
Restrictive covenant – Restrictive covenant affecting land – Construction – Provision that covenant should enure for benefit of ‘remainder of … Estate of vendor’ – Meaning of ‘remainder of estate’ – Covenant not to erect buildings on property ‘except private dwelling-house’ – Dwelling-house already on properly at date of purchase – Whether covenant contemplated additional dwelling-house.
A common vendor, F, laid out an estate in clearly defined lots, each lot comprising a dwelling-house and garden. A printed contract for sale of one lot, made between F and a third party, admitted to be identical in all material terms to all other contracts, provided that: ‘The purchaser shall in the conveyance to him enter into the following covenants in respect of which the vendors reserve the right to make such variations modifications or exclusions in any or every case of other properties of the [estate] and in all cases to impose such covenants as they may deem fit and proper … ’ and there followed covenants not to erect on the site any building save a private dwelling-house, and to make no additions or alterations thereto without the written consent of the vendors. Out of 15 or 16 transfers of individual lots sold by F, all but one provided: ‘The (purchasers) further covenants with the Vendor to the intent that such covenants shall enure for the benefit of the remainder of the [estate] of the Vendor and as far as possible run with the land … ’ and there followed covenants in terms corresponding to those mentioned above. The vendor’s reservations in the contracts of the right to vary, modify or exclude was not included in the transfers.
The plaintiffs and the defendant’s predecessors in title purchased two adjoining lots, their transfers containing identical terms. The defendant, having acquired his lot now proposed to erect a dwelling-house in the garden of the existing house. In an action for an injunction to restrain him from building the house, the plaintiffs gave evidence that they were, at the time of their purchase, aware of the existence of the restrictions but they could not give evidence of the vendor’s intention.
Held – Applying the principles laid down in Elliston v Reacher ([1908] 2 Ch 374), the plaintiffs had established the existence of a building scheme, because—
(i) there was a common vendor who had laid out the estate for sale in lots subject to restrictions intended to be imposed on all the lots and consistent only with a general scheme of development (see p 844 c, post);
Page 840 of [1970] 2 All ER 838
(ii) the wording of the covenants and their inclusion in the great majority of the transfers established the vendor’s intention that the restrictions were to be for the benefit of all the lots (see p 846 e, post); and
(iii) the plaintiffs had notice of the matters referred to in holdings (i) and (ii), so that it could be inferred that they had bought on the footing that the restrictions were to enure for the benefit of the other lots (see p 847 a, post). The plaintiffs were, therefore, entitled to enforce the restrictions against the defendant.
Notes
For building schemes, see 14 Halsbury’s Laws (3rd Edn) 565–568, paras 1053–1057, and for remedy by way of injunction, see ibid 568, para 1058, and for cases on the subjects, see 40 Digest (Repl) 333–336, 2728–2745, and 361–362, 2888–2899.
Cases referred to in judgment
Elliston v Reacher [1908] 2 Ch 374, 77 LJ Ch 617, 99 LT 346; affd CA [1908] 2 Ch 665, [1908–10] All ER Rep 612, 78 LJCh 87, 99 LT 701, 40 Digest (Repl) 337, 2749.
Jeffs’ Transfer, Re, Rogers v Astley (No 2) [1966] 1 All ER 937, [1966] 1 WLR 841, Digest (Cont Vol B) 642, 2783b.
Reid v Bickerstaff [1909] 2 Ch 305, [1908–10] All ER Rep 298, 78 LJCh 735, 100 LT 952, 40 Digest (Repl) 341, 2770.
Renals v Cowlishaw (1879) 11 Ch D 866, [1874–80] All ER Rep 359, 48 LJCh 830, 41 LT 116, 40 Digest (Repl) 346, 2796.
Spicer v Martin (1888) 14 App Cas 12, [1886–90] All ER Rep 461, 58 LJCh 309, 60 LT 546, 53 JP 516, 40 Digest (Repl) 336, 2744.
Cases also cited
Baxter v Four Oaks Properties Ltd [1965] 1 All ER 906, [1965] Ch 816.
Kelly v Battershell [1949] 2 All ER 830.
Osborne v Bradley [1903] 2 Ch 446, [1900–03] All ER Rep 541.
Richard v Revitt [1877] 7 Ch D 224.
Selwyn’s Conveyance, Re [1967] 1 All ER 339, [1967] Ch 674.
Wembley Park Estate Co Ltd’s Transfer, Re [1968] 1 All ER 457, [1968] Ch 491.
White v Bijou Mansions Ltd [1938] 1 All ER 546, [1938] Ch 351.
Action
This was an action by the plaintiffs, Leslie George Eagling and his wife, Irene May Eagling, against the defendant, M E Gardner, for, inter alia, a declaration that they were entitled to enforce restrictions on the defendant’s use of his land and an injunction restraining the defendant from building on his land. The facts are set out in the judgment.
Walter Blum for the plaintiffs.
Gerald Godfrey for the defendant.
Cur adv vult
15 May 1970. The following judgment was delivered.
UNGOED-THOMAS J read the following judgment. The plaintiffs’ claim is to enforce a restrictive covenant not to build a house on that part which the defendant has bought of the garden of 93 Mimms Hall Road, Potters Bar, which is next to their own house, 2 Oulton Crescent. The plaintiffs rely primarily on a building scheme. There were some other matters in issue which can be conveniently and very shortly disposed of later.
The requirements of a building scheme are set out in the well-known judgment of Parker J in Elliston v Reacher, which was affirmed and approved in the Court of Appeal ([1908] 2 Ch 665, [1908–10] All ER Rep 612). Parker J said ([1908] 2 Ch 665, [1908–10] All ER Rep 612):
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‘In my judgment, in order to bring the principles of Renals v. Cowlishaw and Spicer v. Martin into operation it must be proved (1.) that both the plaintiffs and defendants derive title under a common vendor; (2.) that previously to selling the lands to which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3.) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit of other land retained by the vendor; and (4.) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into by the defendants or their predecessors with the common vendor irrespective of the dates of the respective purchases. I may observe, with reference to the third point, that the vendor’s object in imposing the restrictions must in general be gathered from all the circumstances of the case, including in particular the nature of the restrictions. If a general observance of the restrictions is in fact calculated to enhance the values of the several lots offered for sale, it is an easy inference that the vendor intended the restrictions to be for the benefit of all the lots, even though he might retain other land the value of which might be similarly enhanced, for a vendor may naturally be expected to aim at obtaining the highest possible price for his land. Further, if the first three points be established, the fourth point may readily be inferred, provided the purchasers have notice of the facts involved in the first three points; but if the purchaser purchases in ignorance of any material part of those facts, it would be difficult, if not impossible, to establish the fourth point.
The requirements do not themselves include rights or methods to enforce the restrictions, but on the contrary, the rights or methods to enforce them are a consequences which the law establishes when these requirements are fulfilled, ie the rights of enforcement are the legal consequence of and not part of the requirements.
It is clear and it is common ground that there was a common vendor, Fairway Homes Ltd; that the vendor laid out its estate which was clearly defined in lots; and that the estate and lots included 93 Mimms Hall Road, and 2 Oulton Crescent. Clearly too, the restrictions would be beneficial to the lots; nor do I understand this to be disputed. So the matters in substantial issue are: () were the ‘restrictions intended to be imposed on all the lots’ (within the meaning of the requirement (2))? (ii) Where the restrictions ‘intended by the common vendor to be … for the benefit of all the lots’ (within the meaning of requirement (3))? (iii) Did the plaintiffs buy 2 Oulton Crescent and the defendant’s predecessors in title buy 93 Mimms Hall Road from the common vendor ‘upon the footing that the restrictions subject to which the purchases were made were to enure for the benefit of the other lots … ’ (within the meaning of requirement (4))?
The plaintiffs’ witnesses themselves and a neighbour, Mr Richardson. The only witness for the defendant was a Mr Hall, an estate agent. The plaintiffs and Mr Richardson were honest and candid witnesses utterly without guile. They were
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without higher education and of moderate means. Although Mr Richardson had risen in the course of his long service with British Railways to be a catering manager, the plaintiffs’ witnesses seemed just very decent working people with self-respect and self-reliance, but hopelessly at sea and completely dependent on others in legal transactions.
The Mimms Hall Estate covers a substantial area, and includes several roads. The only roads to which I need refer are Mimms Hall and Oulton Crescent. Mr Richardson lives at 102 Mimms Hall Road, facing the end of Oulton Crescent. As one faces Oulton Crescent from Mimms Hall Road, 93 is on the left corner of the two roads and its garden runs along the left side of Outlon Crescent as far as 2 Oulton Crescent. The garden of 93 Mimms Hall Road is triangular with its apex at the house in Mimms Hall Road. It is part of the garden at the base of the triangle next to 2 Oulton Crescent that the defendant has bought. The base of the triangle runs along the side of the house and of part of the garden of 2 Oulton Crescent, and the rest of that side of the garden abuts on the end of the gardens of four other houses in Mimms Hall Road. On the other side of 2 Oulton Crescent lies 4 Oulton Crescent, with a common boundary for the whole of their length. At the bottom of these gardens there is a large open space. The houses on the estate are almost all, including 2 and 4 Oulton Crescent, semi-detached with similar gardens. They vary in value from about £5,000 to £7,000. 2 Oulton Crescent is amongst the most valuable of the houses.
The defendant’s predecessors in title obtained a transfer of 93 Mimms Hall Road from the common vendor on 9 September 1937. Mr Richardson contracted to buy his house on 20 May 1937, some months before the plaintiffs contracted to buy theirs. The plaintiffs obtained the transfer of their house from the common vendor on 12 August 1939. The plaintiffs and Mr Richardson had a brochure of the estate which contained a plan showing its boundaries and the layout of its roads, the site for a church and open spaces, including the open space at the bottom of the plaintiffs’ garden. The brochure emphasised and featured the rural spaciousness of the estate which was certainly an obvious attraction and beneficial to purchasers generally, including in particular, the plaintiffs, and Mr Richardson. The plaintiffs and Mr Richardson called separately at the vendor’s office on the estate and met there the vendor’s representative, a Mr Goodall. On the wall they saw a plan of the estate which was being developed, including the layout in roads and lots, with the position of the houses marked. At the time of the purchases by the plaintiffs and Mr Richardson, very roughly about three-quarters of the estate had been sold, and Mr Richardson testified that the lots sold were marked as sold on the plan.
The first plaintiff, Mr Eagling, said that Mr Goodall mentioned restrictions, and said that the same restrictions would apply to others as well as to the plaintiffs; but the first plaintiff’s recollection was hazy as to what restrictions they were, and he said that they did not discuss specifically the covenants to be entered into. The first plaintiff said that when he had the contract, he thought it easy to adhere to and that ‘I wasn’t worried about anything about the other side’, that is to say, as I understood it, about anything to which the vendor had to adhere. He said that when use of a house elsewhere in the estate as a repair shop arose, although he was sympathetic to such use, he assumed it should not be done because it was contrary to the covenant which applied to his house, and, he assumed, to the other houses on the estate too. The second plaintiff, Mrs Eagling, said that Mr Goodall at the office led her to believe that 2 Oulton Crescent would be better than a corner house (which they would have preferred), because the garden of 93 Mimms Hall Road would be a permanent open space.
The contract for purchase produced in evidence was that between Fairway Homes Ltd and Mr Richardson. It was a printed document which included the restrictions in print, but it had blank spaces for the particulars that would inevitably vary from purchaser to purchaser. Mr Richardson said that Mr Goodall took the contract
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form out from a folder of many of the same kind of documents which he kept in his drawer in accordance with what appeared to be normal practice. He noticed the covenant, imagined that others would sign the same kind of document, that the open space and surroundings would remain so, and he thought that it gave security because if other purchasers were under the same conditions, he felt that they would be adhered to. He said that he thought that the restrictions, were for the good of the estate at large to respect the amenities of the estate. He said that he thought that they were for the benefit of himself in particular and the estate as a whole, and that every person on the estate would have the same protection.
The first plaintiff and Mr Richardson stated in evidence who they thought, at the time of the purchase, could enforce the covenants, and I will refer to this evidence for the sake of completeness, although, as I have indicated, the right of enforcement is the consequence and not part of Parker J’s requirements. Mr Richardson said that if covenants were broken by other purchasers, he thought that the vendor or the building society would put it right; that it did not occur to him that he could take steps himself to put it right; but that if they did not put it right, he would go to the solicitors who acted on the sale of the house. The first plaintiff said that when he bought, he did not give any particular attention to his rights, but only to his responsibilities; that he did not give a moment’s thought to whether another owner could stop his building on his land; that if the covenant had been broken 30 years ago, he would have gone to the vendor to put it right; that he thought that when the defendant was building the house on the 93 Mimms Hall Road garden, the council was the custodian of the rights—that is to say, as I understand it, under the restrictive covenants. He did, however, go to a solicitor about the enforcement of the covenant, and it was then that it first occurred to him that he could stop building without the intervention of others. Clause 7 of the contract states:
“THE Purchaser shall in the conveyance to him enter into the following covenants in respect of which the vendors reserve the right to make such variations modifications or exclusions in any or every case of other properties of the Mimms Hall Estate and in all cases to impose such covenants as they may deem fit and proper:—Not to erect or set up on the site of the said property and buildings or other erections save and except a private dwellinghouse and that such private dwellinghouse shall not be used for any purpose of trade nor as a shop nor for the sale or manufacture of any spirituous liquor or intoxicating drink nor for any noisy noxious or offensive trade business or operations whatsoever. THAT he will nt make any alternation or addition to the property without the written approval of the plans and the written consent of the vendors or their agent for the time being first had and obtained. THAT he will not erect any structure of any description whether of wood brick or of any material whatsoever and whether constituting an alternation or addition to the house or not and which can be seen from any road on the Mimms Hall Estate nearer than 70 ft to any of the said roads without the previous written consent of the vendors or their agent first had and obtained.’
Mr Richardson had no recollection of the opening paragraph cl 7, but he thought that the restrictions applied to other purchasers. Both the plaintiff and Mr Richardson engaged the vendor’s solicitors to act for them. The first plaintiff remembers signing a document with the covenants, but could not say whether he signed the contract or the transfer. Mr Richarson’s evidence was that he only saw the solicitor once, that the solicitor asked if he had read the document to which he replied that he had. He said that the solicitor gave him no explanation of the document; certainly it does not appear that anything was said by the solicitor to the first plaintiff that left any impression on him.
The transfers, of which office copies were produced, were those of 9 September 1937 of Fairway Homes Ltd to the defendant’s predecessors in title, of 93 Mimms Hall
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Road, and of 12 August 1939 of Fairway Homes (Potters Bar) Ltd (which was the same transferor after a change of name), to the plaintiffs. Both were in printed form with blanks for particulars which would vary from purchaser to purchaser. They included as part of the printed form, a covenant in identical terms (except for the addition in type of the letter ‘s’ at the end of the word ‘purchaser in the plaintiffs’ transfer) as follows:
‘THE Purchasers further covenant with the Vendor to the intent that such covenants shall enure for the benefit of the remainder of the Mimms Hall Estate of the Vendor and as far as possible run with the land:—(1) That they will not erect or set up on the site of the said property any buildings or other erections save and except a private dwellinghouse and suitable appurtenances thereto and that neither such private dwellinghouse nor the appurtenances thereto shall be used for the purposes of any trade business or profession of any kind whatsoever (2) That they will not make any alteration or addition to the property nor erect any structure of any sort upon any part thereof whether temporary or permanent without the written approval of plans and the written consent of the Vendor or its agent first had and obtained.’
The covenants 1 and 2 in the transfers corresponded to the first two covenants in the contract, with variations. The third covenant in the contract was omitted from the transfer. Mr Richardson said that he noticed no difference in form of covenant between his contract and his transfer, and he said that the words in the transfer (which were not in the contract)—
‘to the intent that such covenants shall enure for the benefit of the remainder of the Mimms Hall Estate of the Vendor and as far as possible run with the land’
‘rang no bell with me’—which would not be surprising in the absence of any explanation by the solicitor.
As will have been appreciated, I did not have the advantage of the evidence of the solicitor who acted for the vendor and purchasers. The plaintiffs appear to have received no advice from him in a matter which he refers to in correspondence as ‘intricate’ and ‘complicated’; but in the solicitor’s absence I refrain from any comment on this. It was agreed between the parties that the statements in two letters dated 18 February 1970 and 13 April 1970 from the solicitor in answer to enquiries from the plaintiffs’ present solicitors should be admitted as true. The first letter, so far as material, states:
‘I do not think that my recollection as to the intention of the restrictive covenants can possibly be of any substantial effect. It is a matter of law which invariably is intricate. The only points to which I can usefully refer are:—(1) The covenants were identical in all the individual sales on the estate. This amounted to several hundreds. (2) Every set of covenants included a proviso giving to the developers a right to amend the same and to permit alterations. I have not before me the exact wording but no doubt this is in your possession. (3) I understand that in a few cases, particularly dealing with development on flank frontages, that Fairway Homes Ltd. have agreed to waive the covenants so far as they are concerned to permit such additional development.’
The second letter included the following paragraph:
‘With regard to your second paragraph, virtually the whole development of this estate was pre-war. The covenants of which you enclose a copy appear to be in line with the covenant imposed on the sale of properties. At this juncture, however, most of our files in connection with this estate have been destroyed and we cannot warrant that the precise form was used in every case, or that
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there was not some form of variation over the years of the development … There were a very small number of properties let on lease, but we have not any of the Leases or copies in our possession. From memory, the form of covenants were similar.’
nothing turns on the leases in the case as argued before me.
The evidence of the defendant’s witness, Mr Hall, the estate agent, was that the new house would double the extent to which the plaintiffs’ property was overlooked, and would be normally expected to increase the noise by 40 per cent, but he considered that the consequential financial loss in value would be offset by the fact that the new house would be detached and somewhat larger than its neighbouring houses.
It seems to me that, taking this evidence in isolation, it emerges clearly that the restrictions were ‘intended to be imposed on all the lots’ and further, ‘were consistent only with some general scheme of development.' This so clearly emerges that it seems quite unnecessary to swell this judgment by particularising the relevant elements of that evidence.
It was suggested, however, that the production by the plaintiffs of 15 or 16 transfers, of which one did not contain a covenant, vitiated this conclusion. It has to be borne in mind that Parker J’s second requirement especially provides for variation in detail where the restrictions are ‘consistent only with some general scheme of development’; and as is recognised by plaintiffs and defendant, the authorities establish that a building scheme is compatible with a power on the part of the vendor of exclusion of the restrictions in particular transfers. Thus, it appears to me that the inclusion of the covenants in 14 out of 15, or 15 out of 16 of the transfers, tends to establish rather than disprove the necessary intention. Nor do I consider that it is of any substantial significance, particularly after the passage of over 30 years since the material date, that the plaintiffs did not produce a witness able to give direct evidence of the vendor’s intention, and that the plaintiffs did not explain why such a witness was not called. The defendant did not call such a witness. I make my conclusions on the evidence as it stands.
So I conclude that Parker J’s second requirement is satisfied. I come now to the second matter in issue on the requirements; were the restrictions, and I quote ‘intended by the common vendor to be … for the benefit of all the lots intended to be sold’? Parker J said, in the passage which I have quoted, that ([1908] 2 Ch at 384)—
‘the vendor’s object in imposing the restrictions must in general be gathered from all the circumstances of the case, including in particular the nature of the restrictions [and that] if a general observance of the restrictions is in fact calculated to enhance the values of the several lots offered for sale, it is an easy inference that the vendor intended the restrictions to be for the benefit of all the lots … ’
It clearly appears from all the circumstances, including the nature of the restrictions, the matters conceded and the evidence which I have referred to that ‘the general observance of the restrictions is, in fact, calculated to enhance the value of the several lots’. It is therefore, an ‘easy inference’ that the vendor intended the restrictions to be for the benefit of all the lots. Here, no more than in considering the first matter in issue on the restrictions, does it appear necessary to particularise, from what I have already said, the matters which lead to this conclusion. The same evidence and the same considerations which lead to the conclusion in favour of the plaintiffs on the first issue, and the same matters to the contrary, apply substantially again on this issue.
Now, however, I come to a detailed consideration of the wording of the restrictions.
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In the contract, in the opening words of cl 7 which I have quoted, the vendors reserve the right to make variations in or exclusions from the restrictions, and in the case of ‘other properties on the Mimms Hall Estate’ and in all cases to impose such covenants as they might deem proper. Such a dispensing power can be called in aid, as it was before me, and as shown in Parker J’s judgment ([1908] 2 Ch at 389), in favour of, or against, a building scheme—in favour on the ground that it implies that without it there would be no dispensing right, and against on the ground that it was, ex abundanti cautela designed to exclude a building scheme. It was suggested for the defendant that the reservation of the rights to impose such covenants as they might deem proper, was surplusage; and that therefore it is easier to infer that the right to vary or exclude was surplusage; and so that the reservation did not imply a building scheme, but was merely inserted ex abundanti cautela to make clear that there was no building scheme. But the reference to imposing covenants might well have been directed to ensuring that such covenants should not be assailable on the ground that they were in some respect inconsistent with the building scheme. It appears from Elliston v Reacher ([1908] 2 Ch at 387), that in that case too, there was a power reserved to the vendors to deal with any portion of the estate not disposed of without reference to and independent of the restrictions (and in that case it was, of course, held that there was a building scheme).
There are in the contract no words expressly providing that the covenants were in favour of any particular part or parts of the Mimms Hall Estate. The restrictions in the transfer, however, are differently worded. The plaintiffs’ restrictive covenants are:
‘to the intent that such covenants shall enure for the benefit of the remainder of the Mimms Hall Estate of the Vendor and as far as possible run with the land.’
This clearly shows that the covenants were not just covenants for the benefit of the vendor personally, but of lots. But here (as Parker J in Elliston v Reacher ([1908] 2 Ch at 387), pointed out) the nature of the covenants is such, that if they were for the benefit of some lots, they must also be for the benefit of the lots offered for sale, and likely to enhance the value of those lots. So far therefore, it follows from within the covenant itself, that it is ‘an easy inference’ that the vendor intended the restrictions to be for the benefit of all the lots.
In the transfer there is no reservation of right to the vendor or power of exclusion or variation comparable with the provision in the contract, and the first covenant against building and user is absolute, and not subject to any consent on the part of the vendor. It has appeared from the evidence which I have referred to, that the covenants in the form in the transfer were generally imposed. The reservation in the contract of such a dispensing power as could be called in aid against a building scheme does not appear in the transfers made generally in pursuance of such contract. The omission runs counter to the argument against a building scheme founded on that reservation.
However, the defendant submits that, and I quote: ‘“The remainder of the Mimms Hall Estate of the Vendor” refers not to all the rest of the estate or lots (other than the lot sold to the covenantor), but to all the unsold part of the estate’. There is force in the suggestion that the insertion of the words ‘of the Vendor’, and indeed, of the words ‘the remainder of’ favours this submission, on the ground that the alternative meaning would be achieved without inserting those words, and that what had already been sold would not strictly be any estate of the vendor. Nevertheless, the phrase “the Mimms Hall Estate of the Vendor’ is capable of being read descriptively as a somewhat loose description of the estate sold or unsold, and the
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submission itself is open to a corresponding counter-attack for lack of precision on the ground that the phrase does not read ‘The Vendor’s remainder of the Mimms Hall Estate’.
Of course, the covenant could not be annexed by the vendor to land already sold; and it could only operate in favour of earlier purchasers if there were a building scheme. If ‘remainder’ refers to what is unsold, then if it refers to the unsold part as a whole, the covenant ceases to be enforceable on the first subsequent sale of a lot. This would hardly be in accord with any sensible intention when the estate was being sold piecemeal in lots. In Re Jeffs’ Transfer, Rogers v Astley (No 2) a covenant: ‘ … for the benefit of the remainder of [the estate] belonging to the vendor’ was construed as for the benefit of the unsold part of the estate as a whole in the particular circumstances of that case. In that case, however, there was an express provision excluding a building scheme. If, however, such ‘remainder’ is to be read as referring to the unsold part or any part thereof, then the purchaser of a lot would merely have a right to enforce the restrictions contained in earlier transfers and not those contained in later transfers. The first purchaser would have no right of enforcement against any other purchaser, and the last purchaser would have a right of enforcement against all other purchasers. The right of enforcement by a lot owner would be only against other lot owners who had no corresponding right of enforcement against him. The result would be that the right would arise where there was absence of mutuality—a building scheme in Alice’s Wonderland—and there might well be practical difficulties in ascertaining who could enforce against whom.
Therefore it seems to me that to interpret the covenants as an expression of a building scheme is to be preferred to interpreting them as covenants annexed to the whole of the estate unsold by the vendor or to such whole or any part thereof. Even if the covenant were to be annexed, I am not persuaded that this would prevent it being enforceable under a building scheme, but I need not pursue this. In the circumstances of this case, including the provisions of the contract and transfer, it seems to me that the ‘restrictions were intended by the common vendor to be … for the benefit of all the lots intended to be sold’.
I come now to the question whether Parker J’s fourth requirement is satisfied. All that is here required is that the plaintiffs and defendant, or their predecessors in title, should have purchased from the common vendor on the footing that the restrictions, subject to which they purchased, were to enure for the benefit of the other lots. There is no requirement that they purchased on the footing that any restrictions, subject to which others purchased, were to enure for the benefit of their own lots. Reference was made to Reid v Bickerstaff ([1909] 2 Ch 305 at 323, [1908–10] All ER Rep 298 at 302), where Bukley LJ said that it was one condition of a building scheme that:
‘… the nature and particulars of the scheme shall be sufficiently disclosed for the purchaser to have been informed that his restrictive covenants are imposed upon him for the benefit of other purchasers of plots within that defined estate with the reciprocal advantage that he shall as against such other purchasers be entitled to the benefit of such restrictive covenants as are in turn to be imposed upon them.’
I read, ‘with the reciprocal advantage’ in the sense of ‘carrying the reciprocal advantage’, and not as a requirement that the purchaser should be informed of the reciprocal advantage. If such information were a requirement, it would be contrary to Elliston v Reacher and, as far as I know, a solitary statement in favour of the requirement.
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As will have appeared from my references to the evidence and observations on the first three requirements, the plaintiffs had ‘notice of the facts involved in the first three points’, so that according to the passage which I have quoted from Parker J ([1908] 2 Ch at 385) ‘the fourth point may readily be inferred’; and I do infer it. Further, the evidence which I have mentioned establishes to my mind that the plaintiffs bought on the footing that their restrictions were of enure for the benefit of the other lots. And the common pattern of developing the estate and dealing with the lots, the contracts and the transfers satisfy me that the original purchasers of 93 Mimms Hall Road, bought on the same footing. I thus conclude that the plaintiffs have established the building scheme.
It was then argued for the defendant that there was no breach of covenant, on the ground that the breach complained of is building a dwelling-house, that there was a dwelling-house on the property at the date of the transfer, and that therefore the covenant not to erect a building, except a dwelling-house, means not to erect a building except one dwelling-house, additional to the dwelling-house on the property at the date of the transfer. It appears however, that there was no house, at any rate, on the plaintiffs’ lot, at the date of his contract, and the same restriction, so far as substantially material for present purposes, appeared in the contract and in the transfer. There is no suggestion that it was exceptional for a house to be built on a lot after the contract for its sale had been entered into, and I infer otherwise. This was an estate being sold in lots according to a layout of one house and garden per lot, so it seems to me that in all the circumstances, the covenant should not be construed in accordance with the defendant’s submission. This conclusion appears to be almost incontestably established in view of the provision in the covenant against certain user of ‘such private dwelling-house’ which, on the defendant’s construction, would apply to the second dwelling-house, but not to the first dwelling-house—a ridiculous result.
It was also suggested for the defendant that there was no damage and therefore there could be no injunction as claimed. The breach, however, is a direct breach of covenant, and in Elliston v Reacher itself, it was laid down that to obtain such an injunction as claimed in this case, there is no need to prove substantial damage. Further, the evidence, including that of the defendant’s own witness Mr Hall, establishes substantial damage. The defendant did not press this submission.
In the alternative to the building scheme, the plaintiffs relied on the covenant in the transfer to the defendant’s predecessors in title being annexed to every part of the common vendor’s land at the time the covenant was entered into. However, in view of my conclusion on the building scheme issue, there is no need to consider this.
My overall conclusion is that the plaintiffs are entitled to succeed on such claims in the action as have been made before me.
Declaration accordingly.
Solicitors: Batchelor, Fry, Coulson & Burder agents for Andrew Rowntree, Potters Bar (for the plaintiffs); Doyle, Devonshire, Box & Co agents for Hanchett Copley & Hails, Potters Bar (for the defendant).
Jacqueline Metcalfe Barrister.
Shell Petroleum Co Ltd v Carr (Inspector of Taxes)
[1970] 2 All ER 848
Categories: TAXATION; Income Tax, Corporation Tax
Court: CHANCERY DIVISION
Lord(s): BUCKLEY J
Hearing Date(s): 2, 3, 4, 25 MARCH 1970
Income tax – Corporation tax – Transitional relief – Existing company with overseas trading income – Overseas trade corporation in 1965–66 – Criteria for relief – Finance Act 1965, s 84 and Sch 20.
The taxpayer company was entitled to relief for the year of assessment 1966–67 under s 84 of the Finance Act 1965, which grants transitional relief (overspill relief), over the years 1966–67 to 1972–73 inclusive, to companies with overseas trading income which suffer foreign taxes in excess of corporation tax. The taxpayer company and its two subsidiaries, SET and Qatar, with other subsidiaries of the taxpayer company, together formed a group of companies for the purposes of Sch 20 to the Act (which inter alia modifies s 84 in its application to groups of companies), and there was no dispute that in principle the results of the overseas trading of SET and Qatar were to be taken into account in calculating the taxpayer company’s entitlement to relief. By reason of the history of SET and Qatar, however, questions arose as to the way in which the results of their trading should be taken into account.
SET was incorporated in Bermuda and was resident there until 1 October 1965 when the taxpayer company acquired the whole of its issued share capital, whereupon SET became resident in the UK for tax purposes. At all material times it had traded in Iraq and been liable to taxation there. From 1 October 1965 until 5 April 1966 SET qualified as an overseas trade corporation for the purposes of Part IV of the Finance Act 1957, and it was not chargeable to income tax, profits tax or corporation tax at any time before 6 April 1966. Qatar was incorporated in this country and had ever since been resident here for tax purposes. On 1 February 1964 it started trading in Qatar, since when it had been subject to Qatar tax on the profits of its trade there. It was chargeable to UK income tax for the years 1963–64 and 1964–65, but qualified as an overseas trade corporation for the whole of 1965–66 when it was consequently not chargeable to UK taxes on its undistributed overseas trading profits. By election Qatar was assessed to income tax for the year 1964–65 on its actual profits for that year. It would consequently have been assessed for 1965–66 on its actual profits if it had remained liable to UK income tax in that year. The taxpayer company contended, inter alia: (i) that for the purposes of s 84(1)(b) of the Finance Act 1965 (by which basic overspill is determined by the excess of credit for foreign tax in a ‘base year’ over corporation tax calculated on the income for that year) the effect of Sch 20, para 2a (which provides that a former overseas trade corporation shall be treated for purposes of s 84 as if it had never been such) was that the excess credit in respect of SET fell to be computed as if its income in the ‘base year’ (which in the case of SET was 1964–65) had been charged to income tax and profits tax and credit had been allowed for foreign tax equal to the sum of those taxes; (ii) that for the purposes of s 84(2) (which limits aggregate relief by reference to unused credits for foreign tax in ‘the related period’ of accounting), the effect of the definition of ‘the related period’ in s 84(8)(e)b, in relation to accounting periods of less than 12 months, was that ‘the related period’ in relation to the year 1966–67 for SET was the period of 12 months ending on 5 April 1966; and (iii) that ‘the related period’ for Qatar was the period of 12 months ending on 5 April 1966. The taxpayer company claimed to include for SET £5,307,997 in its excess credit for foreign tax in the base year, and to
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include £7,915,657 for SET and £247,962 for Qatar in its unused credit for foreign tax in the related period. The Special Commissioners were of opinion that there was no entitlement to include, in computing the excess credit for foreign tax in the base year, any sum for SET. They were further of opinion that for SET the related period was 1 October 1965 to 31 December 1965 and that Qatar had no related period in relation to the year 1966–67, and that accordingly in computing the taxpayer company’s unused credit in the related period only £1,978,914 should be included for SET, and nothing should be included for Qatar.
Held – The commissioners’ decision would be upheld, because—
(i) on its true construction para 2(1) of Sch 20 to the Finance Act 1965 did not require an overseas trade corporation to be treated as having been resident in the UK when it was not so, or as having been within the charge to income tax or profits tax at any time when, had it never been an overseas trade corporation, it would nevertheless not have been within the charge to those taxes (see p 855 g, post);
(ii) accordingly, in computing the excess credit for foreign tax in the ‘base year’ 1964–65 for the purpose of the taxpayer company’s claim to relief, SET should not be treated as if it had been given credit for foreign tax in that year and had had a basic overspill (see p 855 h, post);
(iii) in relation to the year 1966–67 the ‘related period’ for SET was the three months from 1 October 1965 to 31 December 1965 without any extension (see p 857 j, post);
(iv) Qatar had no accounting period ending at or before 6 April 1966 and no ‘related period’ in relation to the year 1966–67(see p 858 d, post).
Notes
For the law relating to transitional relief for existing companies with overseas trading income, see Supplement to 20 Halsbury’s Laws (3rd Edn), para 2050.
For the Finance Act 1965, s 84 and Sch 20, see 45 Halsbury’s Statutes (2nd Edn) 632, 742.
In relation to tax for the year 1970–71, and subsequent years of assessment, s 84(7) of the 1965 Act has been repealed (in part) by the Income and Corporation Taxes Act 1970, s 538(1) and Sch 16.
Case stated
This was an appeal by the taxpayer company, Shell Petroleum Company Ltd, against the refusal of the Special Commissioners to allow in full the taxpayer company’s claim to relief under s 84 of and Sch 20 to the Finance Act 1965. The facts are set out in the judgment.
Hubert H Monroe QC, M P Nolan QC and S J L Oliver for the taxpayer company.
E I Goulding QC, P W Medd and J P Warner for the Crown.
Cur adv vult
25 March 1970. The following judgment was delivered.
BUCKLEY J read the following judgment. This appeal relates to the operation of the transitional provisions contained in s 84 of and Sch 20 to the Finance Act 1965. By that Act a new system of taxation on companies’ profits and on distributions made by companies was instituted; corporation tax was substituted for income tax on the profits of companies, and companies were made accountable to the Revenue for income tax deducted from dividends and other distributions made by them. Under the previous system the Revenue received income tax at the standard rate on a company’s profits chargeable to tax, but received nothing more when the company paid a dividend subject to deduction of tax out of those profits which had already borne tax in the company’s hands. Under the new system the Revenue receives corporation tax on all the company’s profits wherever arising (subject to certain exceptions), and must pay to the Revenue the amount of any income tax deducted from dividends paid out of those taxed profits.
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The Act also made changes in the law relating to relief from double taxation, and abolished the special status of overseas trade corporations under the Finance Act 1957. Whereas under the Income Tax Act 1952, ss 347 and 348, a company resident in the United Kingdom and chargeable to UK income tax and profits tax was entitled to a credit for tax paid in a foreign country in respect of income arising there against income tax and profits tax chargeable in respect of that income, under s 64 of the 1965 Act such credit is allowed only against corporation tax. No credit is allowed against the income tax deducted from dividends and other distributions which under the 1965 Act the company must pay to the Revenue.
Under the 1957 Act an overseas trade corporation—ie a company resident in the UK and carrying on a trade outside the UK which qualified under s 23 of the 1957 Act—fell to be treated for income tax as if that trade was being carried on outside the UK by a person not resident in the UK. The profits of the trade, so far as they were not distributed, were consequently not chargeable to income tax. They were also excluded from the charge to profits tax. As a result, the company obtained no double taxation relief in respect of those profits, on which it had not in fact suffered double taxation. If and when tax became payable by reason of any such exempt trading income being distributed by way of dividend, the company could obtain double taxation relief in respect of that tax.
Section 64 of the 1965 Act, so far as relevant to this case, provides that Part IV of the 1957 Act which relates to overseas trade corporations shall not apply for purposes of corporation tax. Consequently, a company resident in the UK and carrying on a trade outside the UK, which under the earlier law would have escaped liability for income tax and profits tax on so much of the profits of its foreign trade as were not distributed, becomes liable under the 1965 Act to corporation tax on all the profits of that trade. Since the rate at which corporation tax was initially charged—namely 40 per cent—is less than the combined rates of income tax at the standard rate of 8s 3d in £1 and profits tax at 15 per cent obtaining in 1965–66—namely 56 1/4 per cent—the relief against double taxation in the form of a credit against corporation tax was less valuable than the credit previously available against income tax and profits tax in any case in which the foreign tax was at a rate greater than 40 per cent. Consequently, an overseas trade corporation lost not only the opportunity to escape UK taxes on exempt trading income but also the opportunity to obtain double taxation relief in excess of 40 per cent on any distributions made out of exempt trading income. So also a company which was not an overseas trade corporation but had an overseas source of trading income lost the opportunity to obtain double taxation relief in excess of 40 per cent on its income from that source which had borne foreign tax at a higher rate.
With these considerations, no doubt, in mind, the legislature inserted in the 1965 Act the provisions for transitional relief which are to be found in s 84 and Sch 20. Section 84 deals primarily with the case of a company resident in the UK which has an overseas source of trading income but is or was not an overseas trade corporation. Subsection (6) of that section makes the provisions of the section applicable to an overseas trade corporation with such modifications as are provided in Sch 20.
This appeal is concerned with two companies which are wholly-owned subsidiaries of the taxpayer company, Shell Petroleum Co Ltd. The two subsidiaries are called Shell Eastern Trading Co Ltd (which for simplicity I will call ‘SET’) and the Shell Co of Qatar Ltd (which I will call ‘Qatar’). The taxpayer company and these two subsidiaries, as well as numerous other subsidiaries, together form a group of companies for the purposes of Sch 20; and there is no dispute that the results of the overseas trading of these two subsidiaries should be taken into account under that Schedule in calculating the taxpayer company’s right to relief under the Act, nor as to how they should be taken into account, subject to the particular questions which arise on this appeal.
SET was incorporated in Bermuda and was resident there until 1 October 1965
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when the taxpayer company acquired the whole of its issued share capital. SET there-upon became resident in the UK for tax purposes. It has at all material times traded in Iraq and been liable to taxation there. From 1 October 1965 until 5 April 1966, SET qualified as an overseas trade corporation, and it was not chargeable to income tax, profits tax or corporation tax at any time before 6 April 1966.
Qatar was incorporated in this country, and has ever since been resident here for tax purposes. On 1 February 1964, it started trading in Qatar, since when it has been subject to Qatar tax on the profits of its trade there. It was chargeable to UK income tax for the years 1963–64 and 1964–65, but qualified as an overseas trade corporation for the whole of 1965–66, when it was consequently not chargeable to UK taxes on its undistributed overseas trading profits. By election under the Income Tax Act 1952, s 129(2), Qatar was assessed to income tax for the year 1964–65 on its actual profits for that year. It would consequently have been assessed for the year 1965–66 on its actual profits for that year, had it remained liable to UK income tax in that year.
The problem for consideration is how the 1965 Act, Sch 20, operates in relation to each of these companies. In the end, it amounts to two short questions of construction, short, but not easy. Unfortunately, they must, I think, be approached by what can only be a fairly lengthy analysis of both s 84 and Sch 20. I will consider first the effect of s 84 on a company which had an overseas source of trading income but was not an overseas trade corporation. Such a company, if it is entitled to relief under the section, receives it in the form of a payment out of moneys provided by Parliament (s 84(7)). What amount, if any, a company is to receive depends on the result of three somewhat complex calculations. For the first of these, the company must select at its own choice any one of the years 1962–63, 1963–64 and 1964–65 as what is termed its ‘base year’, which must have been a year in which the company had an overseas source of trading income. Relief may be claimed in respect of all or any of the seven years of assessment 1966–67 to 1972–73.
For the first calculation (under s 84(1)) there must be ascertained: (a) the amount of credit for foreign tax allowed to the company for the base year in respect of each of its overseas sources of trading income; and (b) the amount of corporation tax charged at the rate for corporation tax in the year of claim but calculated on the company’s income from that source in the base year, ie (see s 84(8)(a)) income as computed for income tax for that year. The excess or overspill of (a) over (b) (which I will call ‘basic overspill’) will be the maximum amount of relief recoverable for the year of claim in respect of that source. This calculation can be regarded as designed to ascertain either of two things: (a) what the overspill would have been in the base year had corporation tax been chargeable in that year at the rate for corporation tax in the year of claim and had it been the only tax against which credit for foreign tax could then be taken; or, which I think may be more relevant, (b) what the overspill would have been in the year of claim had the company’s income from the foreign source and the amount of foreign tax on it remained the same as in the period used for computing its income tax liability for the base year. It is noteworthy that, whereas the first element in this claculation is historical and actual, the second is artificial. The result of the calculation is the measure of relief which, other things being equal, Parliament thought appropriate for the year of claim.
But other things may not be equal, and the artificial assumptions which have to be made for the purposes of the first calculation may not fit the actual facts of the year of claim. The income from the overseas source in the year of claim may be greater or less than it was in the period used for computing the company’s liability to income tax for the base year. The foreign tax on it may have been at a higher or a lower rate. To prevent a company obtaining in a year of claim relief calculated in accordance with the first calculation which would be disproportionate to the actual state of affairs in the year of claim, the maximum relief calculated in accordance
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with the first calculation is subject to two controlling factors arrived at by the second and third calculations.
The second calculation (under s 84(2)) is to be made not in respect of the year of assessment in relation to which a particular claim to relief is made but in respect of what is termed ‘the related period’, which is defined in s 84(8)(e) as meaning in relation to any year of assessment the company’s accounting period ending at, or last before, the beginning of that year, or, if that accounting period is a period of less than 12 months, the 12 months ending with that period. I forbear for the moment to read the rest of the definition, to which I shall have to return later.
Corporation tax is charged on a company’s profits for a financial year, which means in the 1965 Act a year starting on 1 April, but assessments are made by reference to accounting periods and the amounts assessed are, where necessary, apportioned to the financial years in which the accounting period falls (see s 49(3) and s 89(2)(e)). Consequently, a related period for the purposes of the second calculation under s 84 will not be the same period as the year of assessment in respect of which relief is claimed, for it must have ended at or before the beginning of that year.
The object of the second calculation is to discover the aggregate amount (which I will call ‘current overspill’) in the related period of the unused credit for foreign tax in respect of the company’s income from all its overseas sources, ie the excess of foreign tax borne by that income over the amount of corporation tax on that same income. If in fact any of that income is not within the charge to corporation tax (as might be the case if in any part of the related period the income remained within the charge to income tax and profits tax) it is for the purpose of this calculation to be treated as nevertheless chargeable to corporation tax and not to income tax or profits tax. If the rate of foreign tax on income from any source is more than 56 1/4 per cent (which, it will be remembered, was the aggregate of income tax at the standard rate and profits tax in the year 1965–66) the excess is to be disregarded; and no deduction is to be made for unused credit. The related period will, normally at any rate, be the same period as the year which would have served as the basis of assessment to income tax under Sch D for the year of claim in respect of a company assessed on the preceding year basis, if income tax had remained chargeable in respect of that year instead of corporation tax. It will also be the same as what would have been the last chargeable accounting period for profits tax preceding the year of claim had profits tax remained chargeable.
If the income from an overseas source in the related period, being a period of 12 months, is less than the income from that same source in the base year but the rate of foreign tax remains constant, the second calculation will produce a lower result than the first, ie the basic overspill will exceed the current overspill. If, on the other hand, that income is greater than was the income for the base year, the second calculation will show a higher result than the first, ie the current overspill will exceed the basic overspill. If the rate of foreign tax in the related period is less than the rate in the base year but the amount of the income remains constant, the basic overspill will be the greater; but if the rate of foreign tax is greater, then the current overspill will be the greater. The relief granted for any year of claim is not to exceed whichever of the basic overspill and the current overspill is less.
The thinking which underlies these calculations seems to be: (a) that the rate of relief should primarily be ascertained in the light of the company’s financial position at the time when its right to double taxation relief was curtailed, save that, to avoid a possibility of the company being caught in a year in which the figures happened to be disadvantageous to it, the company should be allowed to choose any one of three years preceding the change to serve as the basis of calculation; but (b) the rate of relief should be corrected if in relation to the year in respect of which relief is claimed it can be shown that the company’s financial position has altered in such a way that in respect of that year the company has not suffered so severely as circumstances in the base year foreshadowed.
The third calculation is of quite a different kind. It is prescribed by s 84(3), the language of which I confess I find obscure. I think that questions of interpretation may arise on it in other cases, but fortunately not in the present case. Its object appears to me to be to ensure that the relief payable in respect of any year of claim shall not exceed so much of the tax deducted or deductible by the company from dividends paid in that year as it is appropriate to treat as deductible from that element in those dividends which should be attributed to receipts from overseas trading income. For this purpose it seems that the dividends are to be treated as payable primarily out of available franked investment income of the company and, as to any balance, rateably out of overseas trading income on the one hand and other income of the company which is not franked investment income on the other. For the purposes of the third calculation, as for the second, any income of the related period which is not subject to the charge to corporation tax is to be treated as though it were charged to that tax and not to income tax and profits tax, and no deduction is to be made for unused credit.
Under these provisions, a company cannot qualify for relief in respect of any particular year of claim unless it had an overseas source of trading income (a) in the base year and (b) in the related period for that year of claim. It need not, it seems, be the same source in each of those periods, and the company need not have had any overseas source of trading income in between. The significance of this appears to me to be that (a) establishes that the company was, at or about the time when the system of taxation changed, a company entitled to double taxation relief, and that (b) establishes that, but for the change, the company would have obtained double taxation relief in the year of claim. In relation to (a), s 84(1) provides a formula for calculating the maximum amount of permitted relief under the Act, but s 84(3) determines whether the company shall in fact receive in respect of the year of claim any relief, and, if so, how much, subject to he maximum. The relief is compensation for the loss of double taxation relief in the year of claim.
The relief payable in respect of any year of claim will be the lowest of the three amounts ascertained in respect of that year by these three calculations, subject in the fourth, fifth, sixth and seventh years of claim to a yearly increasing factor of reduction, which has the effect of tailing off the amount of relief over those four years (s 84(1), proviso).
I now come to Sch 20, which in conjunction with s 84(6) provides how and with what modifications s 84 is to apply to an overseas trade corporation. Paragraph 1 of Sch 20 provides, inter alia, that the Schedule has effect for the modification of s 84 in its application to companies which have been overseas trade corporations, and that references in the Schedule to a company apply, unless otherwise stated, only to companies resident in the UK. Paragraph 2 of Sch 20 is in the following terms:
‘(1) For purposes of the principal section [that is s 84] a company which has at any time been an overseas trade corporation shall be treated as if it had never been an overseas trade corporation and, subject to sub-paragraph (2) below, as if it had been charged to income tax and profits tax, or corporation tax, and been given credit for foreign tax accordingly.
‘(2) Where a company is an overseas trade corporation in the year 1965–66, then—(a) in respect of any amount taken into account by virtue of sub-paragraph (1) above as income in the base year there shall be treated as allowed credit for foreign tax equal to the income tax and profits tax treated by virtue of that sub-paragraph as charged in respect of it; and (b) in arriving for any year of assessment at the adjusted aggregate amount in the related period of the unused credit for foreign tax, the unused credit for foreign tax in respect of the income from each overseas source of trading income shall be computed as if the foreign tax were 56 1/4 per cent.’
The problem with regard to SET arises in this way. From 1 October 1965 but
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not before, SET was resident in the UK and from that date until 5 April 1966, it was an overseas trade corporation. Therefore, Sch 20 applies to it. It must therefore be treated as if it had never been an overseas trade corporation. So much is common ground. But then it is said on the part of the Revenue that it does not follow from this that SET must be treated as having been resident in the UK at any time before 1 October 1965; that it was not so resident in any of the three possible base years and was not chargeable to income tax or profits tax in any of those years; and that accordingly no credit for foreign tax was in fact allowed to SET as regards any of those years, nor would any such credit have been allowed if SET had never been an overseas trade corporation. Consequently, it is said, SET cannot, even on the hypothesis that it never was an overseas trade corporation, satisfy the requirement of s 84(1)(b), which is a prerequisite of a right to relief. This, it is suggested, is not surprising because it is reasonable that a company which became resident in the UK only after the end of the last possible base year should not qualify for relief.
According to this argument, Sch 20, para 2(1), puts an end to the fiction established by the 1952 Act in respect of an overseas trade corporation that it is a non-resident company, but does no more. The argument depends on construing para 2(1) as prescribing one statutory hypothesis and one only, viz that the company has never been an overseas trade corporation, and then stating the consequence of that hypothesis in the following words of the sub-paragraph.
On the other hand, for the taxpayer company it is said that in the year of claim 1966–67 SET was resident in the UK and liable to corporation tax. It would not have been liable to UK tax in that year as an overseas trade corporation but for the change in the law. Therefore, prima facie, SET is as much entitled to compensation as any other overseas trade corporation. In the base year 1964–65, which is the selected base year, SET had an overseas source of trading income—its business in Iraq. It was a non-resident company in that year, and consequently its position in relation to UK tax on its overseas trading income was the same as that of an overseas trade corporation in respect of its overseas trading income in that year. SET’s income from its Iraq trade in that base year can as appropriately be used as a basis for calculation under s 84(1) as the overseas trading income of a company which in its base year was an overseas trade corporation.
It is further said on the taxpayer company’s behalf that SET falls precisely within the language of Sch 20, para 2. According to this argument, para 2(1) prescribes two statutory hypotheses: (a) that SET had never been an overseas trade corporation; and (b) that it had been charged to income tax and profits tax at all relevant times and had been given credit for foreign tax accordingly.
I find it difficult to understand why para 2(2) applies only where a company is an overseas trade corporation in the year 1965–66, but in fact SET was an overseas trade corporation in that year. Accordingly, that sub-paragraph provides that in respect of its income from an overseas trading source in the base year 1964–65 (and it in fact had such income) credit shall be treated as allowed equal to the income tax and profits tax treated by virtue of para 2(1) as charged in respect of it. This does not resolve any ambiguity about the meaning of para 2(1), but it may be said to favour the view that in the case of an overseas trade corporation to which para 2(2) applies some credit is to be treated as allowed—ie that the company is to be treated as having been charged to income tax and profits tax in the base year, whether the company was then resident in the UK or not—and that para 2(2)(a) is merely concerned with placing a limit on the amount of the notional credit.
The Revenue’s argument would exclude from relief any company which became resident as an overseas trade corporation after the beginning of the year 1965–66; but why, it may be asked, should such a company which became resident on 6 April 1965, when the Finance Act 1965 was no more than a glint in the eye of the Chancellor of the Exchequer, supported perhaps by a sheaf of highly confidential draft clauses, be less deserving of relief than one which became resident on 4 April 1965 or some
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earlier date? On the other hand, a company with an overseas source of trading income which first became resident in the UK after 5 April 1965 and did not choose to be treated as an overseas trade corporation could not qualify for relief under s 84(1), and it may be said that it would be strange if the right to relief were to depend merely on whether such a company opted to be treated as an overseas trade corporation or not.
There is, I think, considerable force in the taxpayer company’s arguments having regard to the apparent general intention which, as I have tried to indicate, seem to me to underlie these provisions for transitional relief; namely, that where a company has been deprived of the privileges attaching to the status of an overseas trade corporation it should in any of the next seven years in which its overseas profits for that year justify relief be compensated in accordance with a measure which, so far as it relates to past history, is a purely artificial one importing a number of fictions. The question is, however, whether the language of the statute can support these arguments.
In my judgment, the safe and proper course is to pay close and careful attention to the language of Sch 20, para 2. This must, of course, be read in the context of the Act as a whole, but the natural primary meaning of the language of the paragraph, if it can be ascertained clearly, should not be departed from unless there is some context manifestly requiring this. I think that the use of the word ‘accordingly’ at the end of para 2(1) makes it clear that some part of the language of the sub-paragraph is stating a consequence which flows from adopting an hypothesis required by an earlier part of the sub-paragraph. The verb with which the word ‘accordingly’ is adverbally connected is, I think, the word ‘had’ in the passage ‘as if it had been charged’. ‘Had’ is not repeated before the words ‘been given credit’. In my judgement, the natural meaning of this language is that the sub-paragraph requires one statutory hypothesis only, viz that the company had never been an overseas trade corporation, and the words ‘and, subject to’ and all that follow them in the sub-paragraph merely state a consequence that follows. Or the position can be stated in another way: that the paragraph requires two statutory hypotheses, but the second of these is merely a consequential hypothesis following on the first, as the use of the word ‘accordingly’ indicates. In the very complex series of statutory provisions of which this sub-paragraph forms part I cannot find a context which clearly indicates that this interpretation does not give effect to the intention of the legislature, and accordingly it should in my judgment be adopted. It follows that, on the true construction of the sub-paragraph, it does not require an overseas trade corporation to be treated as having been resident in the UK when it was not so, or as having been within the charge to income tax or profits tax at any time when, had it never been an overseas trade corporation, it would nevertheless not have been within the charge to those taxes.
Accordingly, in my judgment, the commissioners were right in holding that, in computing the excess credit for foreign tax in the base year 1964–65 for the purpose of the taxpayer company’s claim to relief, SET should not be treated as if it had been given credit for foreign tax in that year and had had a basic overspill.
The next question is whether, in computing the taxpayer company’s aggregate relief for the year 1966–67 under s 84(2), the related period for SET was the 12 months ended 3ust December 1965, or the period from 1 October 1965 to 31 December 1965. This depends on the effect of the definition of ‘the related period’ contained in s 84(8)(e), the full terms of which are as follows:
‘“the related period” in relation to any year of assessment is the company’s accounting period ending at or last before the beginning of that year or, if that is a period of less than twelve months, the twelve months ending with that period (the necessary amounts for any such period of twelve months being found by
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division and aggregation or apportionment of amounts for accounting periods wholly or partly comprised in it).’
The expression ‘accounting period’ is not defined in the Act. The expression ‘period of account’ is defined in s 89(2)(a) thus:
‘“accounting date” means the date to which a company makes up its accounts, and “period of account” means the period for which it does so … ’
‘Accounting period’ in s 84(8)(e) must presumably be meant to bear some other meaning. The Crown contends that it here bears the same meaning as in s 51. Section 49(3) provides:
‘Corporation tax for any financial year shall be charged on profits arising in that year; but assessments to corporation tax shall be made on a company by reference to accounting periods, and the amount chargeable (after making all proper deductions) of the profits arising in an accounting period shall, where necessary, be apportioned between the financial years in which the accounting period falls.’
Section 51, which prescribes when an accounting period for this purpose shall begin and end, provides:
‘(1) Except as otherwise provided by this Part of this Act, corporation tax shall be assessed and charged for any accounting period of a company on the full amount of the profits arising in the period (whether or not received in or transmitted to the United Kingdom) without any other deduction than is authorised by this Act.
‘(2) An accounting period of a company shall begin for purposes of corporation tax whenever—(a) the company, not then being within the charge to tax, comes within it, whether by the coming into force of any provision of this Part of this Act, or by the company becoming resident in the United Kingdom or acquiring a source of income, or otherwise; or (b) an accounting period of the company ends without the company then ceasing to be within the charge to tax.
‘(3) An accounting period of a company shall end for purposes of corporation tax on the first occurrence of any of the following:—(a) the expiration of twelve months from the beginning of the accounting period; (b) an accounting date of the company or, if there is a period for which the company does not make up accounts, the end of that period; (c) the company beginning or ceasing to carry on any trade, or to be, in respect of a trade, within the charge to tax; (d) the company beginning or ceasing to be resident in the United Kingdom; (e) the company ceasing to be within the charge to tax.
‘(4) For the purposes of this section a company resident in the United Kingdom, if not otherwise within the charge to corporation tax, shall be treated as coming within the charge to tax at the beginning of the year 1966–67 or at the time when it commences to carry on business, whichever is the later … ’
I do not think that I need read the remainder of the sub-sections of that section.
On the Sch 20 hypothesis that SET was never an overseas trade corporation it would have first come within the charge to income tax when it became resident in the UK on 1 October 1965. The company’s period of account ended on 31 December in each year. The basis period for its assessment to income tax in respect of the year of assessment 1965–66 would have been the calendar year 1964. Accordingly, SET would, if resident in the UK, have come within the charge to corporation tax from the end of that calendar year (s 80(2)), whereupon its first accounting period for the purposes of corporation tax would have begun (s 51(2)). If, however, SET had, or is to be treated as having had, any accounting period before 1 October 1965, that period must have ceased on 1 October 1965 when the company began to be resident in the UK (s 51(3)(d)). A new period would then have begun (s 51(2)(b)) which
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would have ended on 31 December 1965, being an accounting date of the company (s 51(3)(b)). An alternative view, that SET should be treated as first coming within the charge to corporation tax on 1 October 1965, also results in the company being treated as having an accounting period starting on 1 October and ending on 31 December 1965. This would have been the company’s accounting period ending at or last before the year of assessment 1966–67.
The Crown contends that for SET that period is the only accounting period which is relevant to ascertaining the related period for the year of assessment 1966–67, and that in the circumstances that period cannot be extended to 12 months because SET had no earlier accounting period or periods from which the required additional nine months can be found in accordance with the bracketed words in s 84(8)(e). Alternatively, if for any reason the period from 1 October to 31 December 1965 ought to be extended back to 1 January 1965, this would have no effect for the purpose of discovering SET’s unused credit for foreign tax, because no credit for foreign tax would accrue to SET’s until it became resident within the UK.
The taxpayer company, on the other hand, contends that ‘accounting period’, being a term the meaning of which is undefined in the Act, must take its meaning in any context in which it is used in the Act from that particular context and the purpose for which it is there employed. The contention, as I understand it, is that, since until 6 April 1966 SET was not within the charge to corporation tax and would not have been within the charge to that tax even if it had never been an overseas trade corporation but would have been within the charge to income tax and profits tax, one must find the last period which could appropriately be called an accounting period in respect of income tax or profits tax which would have been chargeable on SET had it not been an overseas trade corporation and had it been chargeable to income tax and profits tax. This, it is said, would have been the 12 months ended on 31 December 1965, the last chargeable accounting period for profits tax before 6 April 1966. Alternatively, if the accounting period ending at or last before 6 April 1966 was the three months from 1 October 1965 to 31 December 1965, then, since this is less than 12 months, the ‘related period’ is the 12 months ending with that period, ie on 31 December 1965.
On this question, also, I prefer the argument of the Crown to that of the taxpayer company. Under s 84(2) unused credit for foreign tax is to be computed as though the company were chargeable to corporation tax in the related period even if in fact it is then chargeable to income tax and profits tax. It seems more appropriate, therefore, to look for a related period, and so for an accounting period, which is relevant to corporation tax than one appropriate to income tax or profits tax. Elsewhere in the Act—eg in s 46(3)—the term ‘accounting period’ may be used in another sense, but I find no difficulty in relating its use in s 84(8)(e) to what is to be found in s 51. Accordingly I think, as did the commissioners, that SET’s accounting period ending at or last before the beginning of the year 1966–67 was the period from 1 October 1965 to 31 December 1965. In my judgment, in the circumstances of SET’s case that period is incapable of extension to 12 months in accordance with s 84(8)(e).
Such extension can only be effected consistently with the bracketed words in s 84(8)(e) by finding the necessary additional nine months from some other accounting period or periods coinciding with or overlapping the 12–month period. Since SET was not resident in the UK before 1 October 1965, it had, in my judgment no such other accounting period. Nor, in my judgment, does the Sch 20 statutory hypothesis give rise to any notional accounting period before 1 October 1965, from which the gap can notionally be filled. I accordingly reach the conclusion that the commissioners were right in holding that in relation to the year 1966–67 the related period for SET was the three months from 1 October 1965 to 31 December 1965, without any extension.
I now come to the problem about Qatar. The taxpayer company does not claim
Page 857 of [1970] 2 All ER 848
that this company had any basic overspill. The Crown, on the other hand, does not argue that in consequence of this its current overspill in the related period, if there is such a period, cannot be brought into account by the taxpayer company in respect of its group claim. The question for consideration is whether Qatar can be said to have any related period in respect of the year of assessment 1966–67. The taxpayer company claims that the period 1 January 1966 to 5 April 1966 was such a period, and that this should be extended back to 6 April 1965 to make a 12–month period. The Crown contends that Qatar had no related period in respect of the year 1966–67.
It will be remembered that Qatar was an overseas trade corporation during the year 1965–66, although it was not so previously; and also that, had it not been an overseas trade corporation in that year, it would have been assessable to income tax for that year on its actual profits for that year and not on the profits for the preceding year. It did not in fact become chargeable to corporation tax until 6 April 1966 and under s 80(2) it would not have become chargeable to corporation tax before 6 April 1966, had it never been an overseas trade corporation. Consequently, Qatar’s first accounting period for the purposes of corporation tax began on 6 April 1966 (s 51(2)(a)) and would not have begun any earlier had it never been an overseas trade corporation. It follows from this that according to the construction which I have already put on s 84(8)(e) Qatar had no accounting period ending at or before 6 April 1966. For these reasons, I think that the Crown’s contention on this point is sound and that the commissioners were right in holding that Qatar had no related period in relation to the year of assessment 1966–67.
For these reasons, in my judgment, this appeal fails.
Appeal dismissed.
Solicitors: Allen & Overy (for the taxpayer company); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Penn v Dunn and another
[1970] 2 All ER 858
Categories: LANDLORD AND TENANT; Rent, Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, EDMUND DAVIES AND CROSS LJJ
Hearing Date(s): 13, 14 MAY, 24 JUNE 1970
Rent restriction – Possession – Order – Application to set aside – power to make – Application by wife – Matrimonial Homes Act 1967, s 1(1), (5) – Rent Act 1968, s 11(2).
Early in 1966 the tenant left his wife living in the matrimonial home of which he was the statutory tenant. He continued to pay the rent until January 1969, when he informed the landlord that he did not intend to pay any further rent but that it would be paid by his wife out of increased maintenance she was receiving. In county court proceedings against both the tenant and the wife, neither of whom attended, brought by the landlord, on the ground of non-payment of rent the court in March 1969 made an order for possession in 28 days against the tenant but made no order against the wife. In May, the landlord brought a fresh action for possession against the wife as a trespasser and the wife made an application to have the judgment against the tenant in March set aside. That application was refused and in October the wife made a further application for the suspension of the same order for possession which the court rejected on the ground that such an application could only be made by the tenant and not by the wife so that the court had no jurisdiction to entertain it.
Held – The court had no jurisdiction to entertain the application and it was therefore properly refused, because—
(i) by the Matrimonial Homes Act 1967, s 1(1), (5), the wife was entitled to pay the
Page 859 of [1970] 2 All ER 858
rent and keep the tenant’s statutory tenancy alive and herself remain in occupation; accordingly, if she had appeared at the hearing on the original order for possession in March 1969 she could have applied to the court to leave her in possession on terms (see p 861 f and p 864 b and c, post); nevertheless,
(ii) after the making of the order for possession in March 1969 the tenant had no rights in the house except during the ensuing 28 days and the wife’s statutory rights under the Act of 1967 had therefore also expired and the right to apply to the court to stay or suspend the execution of the order under s 11(2) of the Rent Act 1968 was conferred only on the tenant and not on the wife (see p 862 b to d, p 864 f to h, and p 865 d, post).
Notes
As to suspending orders for possession of controlled dwelling-houses see 23 Halsbury’s Laws (3rd Edn) 825, para 1609.
For the Matrimonial Homes Act 1967 s 1, see 17 Halsbury’s Statutes (3rd Edn) 139; and for the Rent Act 1968, s 11(2), see 18 ibid 802.
Cases referred to in judgment
American Economic Laundry v Little [1950] 2 All ER 1186, [1951] 1 KB 400, 31 Digest (Repl) 665, 7645.
Brown v Draper [1944] 1 All ER 246, [1944] KB 309, 113 LJKB 196, 31 Digest (Repl) 661, 7624.
King’s College, Cambridge v Kersham (1948) 64 TLR 547, 92 Sol Jo 603, 31 Digest (Repl) 695, 7870.
Middleton v Baldock [1950] 1 All ER 708, [1950] 1 KB 657, 31 Digest (Repl) 699, 7894.
National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, [1965] AC 1175, [1965] 3 WLR 1; rvsg sub nom National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] 3 All ER 93, [1964] Ch 665, [1964] 3 WLR 463, Digest (Cont Vol B) 343, 6216.
Old Gate Estates Ltd v Alexander [1949] 2 All ER 822, [1950] 1 KB 311, 27 Digest (Repl) 81, 620.
Sherrin v Branch (otherwise Phelps) [1956] 1 All ER 194, [1956] 1 QB 403, [1956] 2 WLR 131, Digest (Cont Vol A) 1078, 7645c.
Appeal
The wife, Yvonne Dunn, appealed against an order of his Honour Deputy Judge Stucley made in Watford County Court on 24 November 1969 dismissing an application made by the wife for an order that the order for possession made in favour of the landlord, Alfred John Penn OBE, against the tenant, Stanley George Dunn her husband, on 31 March 1969, might be suspended on such terms as might seem fit to the court. The wife sought an order that the order of the deputy judge be set aside and that a new trial of the application be ordered. The ground of appeal was that the deputy judge misdirected himself in holding that he had no power to make such an order on the wife’s application.
Jeffrey Burke for the landlord.
Jeremy Roberts for the wife.
Cur adv vult
24 June 1970. The following judgments were delivered.
SALMON LJ. The appellant, Mrs Yvonne Dunn, lives with her children in a house called Highfield, Cuckoo Hill, at Pinner. Formerly her husband, Mr Stanley George Dunn, had also lived there, but he left her and his children early in 1966. Mr Dunn was the tenant of the house and the plaintiff was the landlord. By an agreement in writing made between them on 25 November 1963, the tenant held the premises for a term of three years from 9 December 1963 at the yearly rental of £655 4s, payable in advance by equal quarterly instalments. The term duly expired in December 1966. The tenant, however, held over as a statutory tenant, continuing to
Page 860 of [1970] 2 All ER 858
occupy the house through his wife. From the day he left until 16 January 1969 the tenant continued to pay the rent to the landlord. By arrangement he paid the rent by weekly instalments of £12 12s each. On 16 January 1969, the tenant informed the landlord that he did not intend to pay any further rent, but that in future the rent would be paid by his wife out of some increased maintenance which he said that she was receiving from him.
The rent being in arrear, the landlord brought an action in Watford County Court, in February 1969, against both the tenant and the wife claiming possession of his house on the ground of non-payment of rent. The wife was no doubt joined as a defendant so that all issues which might arise could be decided in one action, and if an order for possession was made against her it could be enforced, and thus the necessity for bringing fresh proceedings to evict her as a trespasser would be avoided. This is the normal practice which has been followed at any rate since the observations of Lord Evershed MR in Middleton v Baldock ([1950] 1 All ER 708 at 710, [1950] 1 KB 657 at 661). On 31 March 1969, the action came on for hearing. Neither the tenant nor the wife attended court. The learned judge made an order against the tenant for possession in 28 days and arrears of rent and mesne profits; but he made no order against the wife. On 16 May 1969, the landlord brought a fresh action against the wife claiming possession on the ground that she was a trespasser with no right to occupy the house. The wife then made an application to have the judgment of 31st March 1969 set aside. That application was refused. Relying on s 11 of the Rent Act 1968 she made a further application dated 9 October 1969 for suspension of the order for possession made on 31 March of that year. Without deciding the merits of that application, the learned judge held that he had no jurisdiction to entertain it, because the wife was not the tenant, but only the former tenant’s wife, and because in his judgment s 11 of the Rent Act 1968 conferred no rights on anyone save the tenant himself. From that decision the wife now appeals.
I have, with some reluctance, come to the conclusion that the learned county court judge was right. I express no opinion on the merits of the present case, but there may well be cases in which a tenant’s wife would suffer real injustice in being unable to apply for relief under s 11 of the 1968 Act. Besides, it seems to me to be illogical that she has the right to be heard on a claim for possession brought by the landlord, and (contrary to the wishes of her husband, the tenant) to defeat that claim or obtain a stay of the order for possession, yet she cannot obtain any relief once the order is made and before it is executed. If she is in occupation of the home, unless the tenant provides her with another, she can take advantage of almost all the rights which the tenant has against the landlord before an order for possession is made. It seems anomalous that afterwards she has none of the rights that the tenant would then have.
Clearly, the Rent Act 1968 and the statutes it replaced did not by themselves directly confer any protection on anyone other than the tenant. The common law, however, applied the Rent Acts so that they indirectly afforded considerable protection to a tenant’s wife if she was in occupation of the matrimonial home. Her ‘occupation’ has been treated as the tenant’s so as to give her the benefit against the landlord of the tenant’s statutory protection: see National Provincial Bank Ltd v Ainsworth. This was achieved on the following basis: a husband owes his wife a duty to provide her with a home; therefore he cannot turn her out of the house she occupies unless he provides her with another; accordingly, a wife occupies the house on behalf of her husband and her occupation is deemed to be his occupation. The husband was still notionally in occupation of the house, even though he had left his wife and had no intention of returning to it and, indeed, was anxious for the landlord to resume possession. The husband as the statutory tenant cannot contract out of his rights under the Rent Acts. It follows that no order for possession could be made
Page 861 of [1970] 2 All ER 858
against him or his wife save on the grounds specified in the Rent Acts: see eg Old Gate Estates Ltd v Alexander. In that case, Denning LJ expressed the view that the wife could also pay current rent, and presumably the arrears due when the action was brought, and thereby keep the tenancy alive contrary to the wishes of both the landlord and her husband. This obiter dictum was tentatively approved by Lord Evershed MR in Middleton v Baldock ([1950] 1 All ER at 709, [1950] 1 KB at 667). Clearly the wife should have such a right, but I confess with diffidence to some doubt whether she had it in law until it was finally conferred on her by the Matrimonial Homes Act 1967, s 1. Subsection (1) of that section (omitting words irrelevant to the present case) reads as follows:
‘(1) Where one spouse is entitled to occupy a dwelling house by virtue of … any enactment giving him … the right to remain in occupation, and the other spouse is not so entitled, then … the spouse not so entitled shall have the following rights (in this Act referred to as ‘rights of occupation’):—(a) if in occupation, a right not to be evicted … from the dwelling house … by the other spouse except with the leave of the court given by an order under this section; (b) if not in occupation, a right with the leave of the court so given to enter into and occupy the dwelling house.’
Subsection (5) provides:
‘(5) Where a spouse is entitled under this section to occupy a dwelling house … any payment or tender made … by that spouse … in respect of rent … shall … be as good as if made … by the other spouse; and a spouse’s occupation by virtue of this section shall for the purpose of the Rent Acts … be treated as possession by the other spouse … ’
Prior to 31 March 1969, clearly the tenant was entitled as against the landlord to occupy Highfield. He was so entitled by virtue of an enactment, ie the Rent Act 1968. Accordingly, the wife acquired ‘rights of occupation’ against the tenant under s 1(1) of the Matrimonial Homes Act 1967; and s 1(5) of that Act conferred on her the right against the landlord to pay or tender the rent and thus to keep the tenant’s statutory tenancy alive; under this subsection her occupation of the house, for the purpose of the Rent Act, counted as if it were the tenant’s. It follows that had she appeared in court on 31 March she would have had the right to be heard and might have persuaded the judge to leave her, on terms, in occupation of her home.
After the order for possession in 28 days was made against the tenant on 31 March 1969, clearly he lost all his rights under the Rent Act 1968 save the right to apply for relief under s 11(2). He was, however, still entitled to remain in occupation until 28 April 1969. I incline to the view, without deciding the point, that he might properly be said to have been so entitled by virtue of an ‘enactment’, ie the Rent Act, and that accordingly the wife also had the right to occupy the house between 31 March and 28 April.
After 28 April 1969, the tenant undoubtedly lost all his rights to occupy Highfield. Indeed, the order of the court imposed a duty on him to yield up possession to the landlord. Since he was not then entitled to occupy the house, s 1 of the Act of 1967 ceased to apply, and the wife could obtain no benefit under it. She remained in actual occupation, may be, although I doubt it, on behalf of the tenant, but this occupation could confer no rights on her against the landlord either under the statute or at common law. After 28 April the only right that remained to the tenant under the Rent Act 1968 was a right under s 11(2) to apply, before execution of the order for possession, for a stay or suspension of the execution of that order or for postponement of the date of possession. If the tenant had made such an application the court would have had a discretion to grant a stay, suspension or postponement, subject to such
Page 862 of [1970] 2 All ER 858
conditions with regard to payment of rent, arrears of rent or mesne profits as it thought fit: see sub-s (2) and (3). If the court made such an order and such conditions were complied with, the court could rescind the order for possession: see sub-s (4).
It seems plain that after 28 April all rights of anyone save the landlord to occupy the house had evaporated. The only right that remained under the Rent Act was a right of the tenant to apply to the court to exercise its statutory discretion to restore his rights of occupation on such terms as the court might think fit. I cannot think that any such right accrued to the wife. As I have already indicated, the only benefit which she had derived from the Rent Act stemmed from the hypothesis that her occupation counted as the tenant’s occupation of the house; he was deemed to be in occupation through the wife. From that it followed that, as he could not contract out of his rights under the Act, the landlord could not obtain an order for possession against the tenant or the wife save on the grounds specified in the Rent Act. Once, however, an order for possession is lawfully made the whole of the protection formerly enjoyed by the tenant’s wife automatically disappears.
Since, in my view, the Rent Act by itself does not directly confer any rights on the tenant’s wife, it is impossible to read s 11 as giving her any independent right to apply to the court for relief. The Matrimonial Homes Act 1967 could—and if the matter had been thought of, perhaps might—have covered the present position by giving the tenant’s wife a right to apply for relief after an order for possession had been made and before it had been executed. But it did not do so.
The wife sought to rely on King’s College, Cambridge v Kershman. In my view, however, that authority is of no assistance to her. In that case the plaintiff brought an action for possession of a flat against Mr Kershman, the statutory tenant, and his wife and parents-in-law on the ground that the rent was upwards of £148 in arrear. Formerly all of them lived together in the flat, which was the matrimonial home. Some months prior to the proceedings, Mr Kershman left the flat without providing his wife with any alternative accommodation or maintenance. Mr Kershman did not resist an order for possession; indeed, he was anxious for his wife to be turned out. The county court judge made the order for possession, but in his discretion suspended it for three months. He also gave judgment against Mr Kershman for the arrears of rent and for mesne profits. The plaintiffs were content with this order, because presumably they were satisfied that Mr Kershman was good for the rent. Mr Kershman, however, appealed against the judge’s decision, contending that there should have been an order for immediate possession. The argument that Mrs Kershman should be turned out at once did not appeal to the county court judge, nor to this court, which refused to interfere with the county court judge’s exercise of his discretion and dismissed the appeal. Whatever principle may be derived from that case, it is certainly no authority for the proposition that, if the county court judge had made an order for immediate possession, or, say, an order for possession in one month, Mrs Kershman would have had any locus standi to apply for relief under s 5(2) of the Rent and Mortgage Interest (Restrictions) Act 1920, which is now replaced by s 11 of the Rent Act 1968. For these reasons, I would dismiss the appeal.
EDMUND DAVIES LJ. The starting point in considering this appeal is that on 31 March 1969 the landlord obtained against the tenant on valid grounds what has been called a ‘peremptory’ order for possession of the matrimonial home, expressed to take effect on 28 April. This fact distinguishes the present case from many of the decisions to which we were referred dealing with the position of the wife of a statutory tenant against whom no valid order for possession has been made.
Fortunately, much is common ground. It is accepted and indisputable that up to 31 March the statutory tenancy of the absentee tenant continued by virtue of the
Page 863 of [1970] 2 All ER 858
wife’s occupancy of the matrimonial home. But the making of the possession order on that date operated as an immediate termination of his statutory tenancy, even though it was not enforceable until 28 April: see Sherrin v Brand.
The legal position of the tenant during the 28–day breathing space allowed by the possession order was described by Jenkins LJ in American Economic Laundry v Little ([1950] 2 All ER 1186 at 1190, [1951] 1 KB 400 at 407)in this way:
‘That is not to say, however, that he is still a statutory tenant for all purposes, so as to be in the same position as if the order had never been made. He has nothing left but the limited interest granted to him by what may be described as the indulgence of the court under s. 5(2) [of the Act of 1920]. In effect, he has a period of grace.’
The last-mentioned provision has been replaced by s 11 of the Rent Act 1968. The ambit of that section constitutes the problem presented by this appeal, and to that I now turn.
Section 11 confers no proprietary or possessory rights, and this fact in itself serves to exclude the operation of s 1(1) of the Matrimonial Homes Act 1967. Entitled ‘Extended discretion of court in claims for possession of certain dwelling-houses’, it enacts that the court may adjourn actions for possession of dwelling-houses let on a protected tenancy or subject to a statutory tenancy (sub-s (1)). More important for present purposes is the provision that at any time before the execution of a possession order the court—
‘may—(a) stay or suspend the execution of the order, or (b) postpone the date of possession, for such period or periods as the court thinks fit’
(sub-s (2)). Finally, if the conditions on which an indulgence is granted under either sub-s (1) or sub-s (2) are complied with, the court may, if it thinks fit, discharge or rescind the order for possession (sub-s (4)).
The order made in the present case on 31 March 1969 was never executed. From this it follows that the tenant was at all material times entitled to apply for a stay or suspension of that order or to have the date of possession postponed from 28 April to some later date. During the course of the hearing of this appeal it appeared to me that at one stage the learned deputy county court judge was being criticised on the ground that he had held that the tenant had no entitlement after 28 April 1969 to make an application under s 11, and that, in consequence of this fact, the wife was equally debarred from applying thereunder. The following brief quotation from the judgment, however, demonstrates that no ground for such criticism exists:
‘I find as a matter of law that when an order for possession was made on 31st March 1969, the statutory tenancy then ceased to exist and the [tenant] was entitled under the Rent Act to remain in possession through the wife solely until 28th April 1969, but that after 28th April 1969 there was no right in the [tenant] and therefore could be no right in the wife because her right springs from him. He has made no application for a stay.’
A distinction was thus clearly being drawn between the tenant’s right to remain in possession until 28 April (ignoring what is for present purposes the academic question whether he had anything more than an indulgence during the 28 days following the making of the order) and his entitlement to make an application under s 11 at any time before the execution of the order.
As I read the judgment, the wife’s application under s 11(2) failed on the ground that the tenant had at no time made any such application, and that he was the only person
Page 864 of [1970] 2 All ER 858
entitled to make one. All that relates to the position after the order had been made. As to what might have happened in other circumstances, the deputy county court judge said:
‘… had she been present on 31st March 1969 probably no peremptory order for possession would have been made. She has incurred expenditure of £14 on beds. She has paid up under the court order. She is now able to pay and has paid.’
These were all matters which the court could, in the light of the authorities, properly have taken into account in proceedings brought (as these were) against both the tenant and the wife for possession of the matrimonial home. But the wife having elected not to appear (as the court found), and the order for possession having been made against the tenant, the deputy county court judge, in rejecting the wife’s application under s 11 of the Act of 1968, said:
‘I find however that her rights expired on 28th April, and I do not see how I have any power to make any further order. If I were to do so I should be creating an entirely new kind of tenancy.’
Was this right? It was suggested for the wife that the decision in King’s College Cambridge v Kershman in some way supported the submission made on her behalf that she could, independently of the tenant, make such an application as was here made. I do not find that decision of assistance in the present case, any more than that in Middleton v Baldock, where, although a possession order was made against the statutory tenant, his wife was given leave to be joined as a defendant for the purposes of the appeal and succeeded in getting the order set aside since no grounds for making it had ever existed.
The problem is whether the wife of an erstwhile statutory tenant shares his entitlement—and, indeed, independently of him—to apply for relief under s 11(2) at any time before execution of the possession order. The conclusion I have come to is that she does not. It is true that by a long line of cases protection has been extended by the courts to the deserted wives of statutory tenants of the matrimonial home. But, as Lord Wilberforce stressed in National Provincial Bank Ltd v Ainsworth ([1965] 2 All ER 472 at 497, [1965] AC 1175 at 1252)—
‘… in the rent cases, the wife’s occupation has been treated as the husband’s so as to give her the benefit, against the landlord, of the tenant’s statutory protection.’
But ex concessis the tenant’s statutory protection ceased in the present case on 31 March or, at latest, on 28 April. It seems to me that, while not in express terms so restricted, s 11(2) contemplates an application being made by the statutory tenant and by no one else. Although the idea that the wife of a statutory tenant is merely his licensee of the matrimonial home, enunciated by Lord Greene MR in Brown v Draper ([1944] 1 All ER 246 at 248, [1944] KB 309 at 314) has since been rejected—see eg Old Gates Estates Ltd v Alexander ([1949] 2 All ER at 825, [1950] 1 KB at 319) per Denning LJ and National Provincial Bank Ltd v Ainsworth—I hold, with respect, that Lord Greene MR was right in asserting ([1944] 1 All ER at 248, [1944] KB at 314) that the wife of a tenant ‘cannot in her own right claim the protection of the Acts’. Nor, in my judgment, can she of her own volition and solely on her own account make an application independently of the
Page 865 of [1970] 2 All ER 858
tenant that the court should exercise its discretion in her favour and in a manner unsought by the tenant himself.
In the result, I would dismiss this appeal. In so concluding, I have not referred to the merits, but it should not by any means be thought that I regard them as wholly one-sided and that a deserving wife has here been defeated by a mere technicality insisted on by an unfeeling landlord. On the contrary, my tentative views on the merits are of a different nature, but they do not call for present exposition.
CROSS LJ. If those who framed s 11(2) of the Rent Act 1968 had had in mind the provisions of s 1 of the Matrimonial Homes Act 1967 it may be that, even though the Rent Act was a consolidating Act, the section would have provided that the wife of the tenant in occupation of the house should have the same right as the tenant to apply to the court while the order for possession is unexecuted even after the time fixed by it for delivery of possession has expired.
It is illogical that she should not have such a right and (although this may not be such a case) it is not difficult to think of cases in which the absence of such a right would work injustice. But I agree with my Lords that in face of the wording of s 11(2) it is impossible to imply such a right and that accordingly this appeal must be dismissed.
Appeal dismissed.
Solicitors: Dawkins & Grove, Pinner (for the wife); W A G Davidson & Co, Ealing (for the landlord).
F A Amies Esq Barrister.
Re T (A J J) (an infant)
[1970] 2 All ER 865
Categories: FAMILY; Children
Court: COURT OF APPEAL
Lord(s): RUSSELL, WIDGERY AND CROSS LJJ
Hearing Date(s): 3, 4, 5, 19 JUNE 1970
Children and young persons – Fit person order – Wardship proceedings brought subsequently – Whether prerogative jurisdiction of court over ward of court ousted by statutory rights vested in local authority when nominated a fit person – Children and Young Persons Act 1933, ss 62(1) (b), 76(1) – Family Allowances and National Insurance Act 1956, s 5(1).
A child was boarded out with foster parents by a local authority to whose care she had been committed under a fit person order made pursuant to ss 62(1)(b)a and 76(1)b of the Children and Young Persons Act 1933. The local authority, exercising its discretion under s 5(1)c of the Family Allowance and National Insurance Act 1956, proposed to transfer the care of the child from the foster parents to the mother. The foster parents applied to make the child a ward of court. The Chancery judge decided that where a fit person order existed nominating a local authority as a fit person the court would not, in the exercise of its prerogative jurisdiction over wards
Page 866 of [1970] 2 All ER 865
of court, intervene in the exercise by the local authority of its discretions within the ambit of the order for lack of wisdom, but only for impropriety or breach of statutory duty. The foster parents appealed.
Held – The legislature had confided to the discretion of the administrative body all decisions as to the custody, care and control of the child, and the Chancery court would not, save in exceptional circumstances, intervene in the exercise of that discretion; in these respects there was no difference between the case of a child committed to the care of a local authority under a fit person order and that of a child in respect of whom a resolution had been passed by the local authority under s 2d of the Children Act 1948; accordingly the appeal would be dismissed (see p 867 a and b, p 869 d and p 870 d, post),
Re M (an infant) [1961] 1 All ER 788 applied.
Re G (infants) [1963] 3 All ER 370, Re R (K) (an infant) [1963] 3 All ER 337 and Re S (an infant) [1965] 1 All ER 865, distinguished.
Decision of Ungoed-Thomas J [1970] 1 All ER 512 affirmed.
Notes
For fit person orders, see 21 Halsbury’s Laws (3rd Edn) 258, 259, para 558, and for the reception of children into care by local authorities, see ibid, 275, 276, para 590, and for cases on the subject, see 28 Digest (Repl) 726, 727, 2326, 2327.
For the Children and Young Persons Act 1933, ss 62, 76, see 17 Halsbury’s Statutes (3rd Edn) 477, 486, and for the Children Act 1948, s 2, see ibid 542.
Section 5(1) of the Family Allowances and National Insurance Act 1956 has been replaced by s 13 of the Children Act 1948, as substituted by the Children and Young Persons Act 1969, s 49.
Cases referred to in judgment
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 55, 45 Digest (Repl) 215, 189.
G (infants), Re [1963] 3 All ER 370, [1963] 1 WLR 1169, 127 JP 549, Digest (Cont Vol A) 937, 2327a.
M (an infant), Re [1961] 1 All ER 788, [1961] Ch 328, [1961] 2 WLR 350, 123 JP 278, Digest (Cont Vol A) 936, 2326a.
R (K) (infant), Re [1963] 3 All ER 337, 128 JP 7, sub nom Re K R (infant) [1964] Ch 455, [1963] 3 WLR 991, Digest (Cont Vol A) 937, 2326b.
S (an infant), Re [1965] 1 All ER 865, [1965] 1 WLR 483, 129 JP 228, Digest (Cont Vol B) 443, 2326c.
Appeal
This was an appeal by foster parents from the decision of Ungoed-Thomas J, dated 29 July 1969 and reported [1970] 1 All ER 512, refusing an application for custody of a child. The appeal was heard in camera but judgment was delivered in open court. The facts are set out in the judgment.
Margaret Puxon and Margaret Higgins for the foster parents.
J D Waite and Elizabeth Appleby for the local authority.
J W Miskin QC and S B Thomas for the mother.
Cur adv vult
Page 867 of [1970] 2 All ER 865
19 June 1970. The following judgments were delivered.
RUSSELL LJ read the judgment of the court. The first question on this appeal is whether as a matter of law the Chancery judge in wardship proceedings can substitute his own views, as to the best course to be adopted in relation to the care and control of an infant, for the views of a local authority, when a fit person order has been made and remains in existence in respect of the infant by a juvenile court in favour of the local authority as the fit person, and the course proposed by the local authority is proposed pursuant to the powers and duties conferred and imposed in the event of such an order by the relevant statutory provisions. If the answer to that question is in the negative, then no purpose is served by investigation by the Chancery judge of the facts of the case. Since in our judgment the answer is in the negative, only the barest statement of facts will be necessary.
Fit person orders are made under s 62 of the Children and Young Persons Act 1933. That section empowers a juvenile court, if satisfied that a child or young person brought before it under the section is one in need of care and protection, to commit the child to the care of any fit person, whether a relation or not, who is willing to undertake the care of him. The court under the section may take a number of other steps, including sending to an approved school; but the committal to care is the only one now relevant. Children and young persons in need of care or protection were at the relevant time defined in s 61 as amended by subsequent legislation; they included those whose parents are unfit to exercise care and guardianship, those falling into bad associations, exposed to moral danger or beyond control. We need not list all the circumstances envisaged in the definition; the relevant definition on which the fit person order was based in this case was that the child was neglected in a manner likely to cause her unnecessary suffering. Section 76(1) of the Act provided that the local authority is deemed to be a fit person, and that accordingly a fit person order may be made in favour of the local authority which may undertake the care of the child. On 20 September 1962, the juvenile court made a fit person order in favour of the relevant local authority on the ground stated, in respect of the child in this case, who was born on 19 October 1960.
Section 75(4) of the Act provides that the person in whose favour a fit person order is made—
” … shall, while the order is in force, have the same rights and powers and be subject to the same liabilities in respect of [the child’s] maintenance as if he were his parent, and the [child] shall continue in his care notwithstanding any claim by a parent or any other person.’
Section 13 of the Children Act 1948 (replacing s 84(3) of the 1933 Act) empowered a local authority to discharge its duty to provide accommodation and maintenance for a child committed to its care under a fit person order by boarding him out with foster parents. In the present case the local authority did this with the appellants. A fit person order may be varied or revoked by a juvenile court: see s 84(6) of the 1933 Act, as amended by the Children and Young Persons Act 1963. By s 5(1) of the Family Allowances and National Insurance Act 1956 it was provided that where a fit person order has been made in favour of a local authority then—
‘… if it appears to the local authority that it will or may be for the benefit of [the child] so to do, the authority may … allow, until the authority otherwise determine, [the child] to be under the charge and control of a parent … [of the child.]’
Section 5(2) provided that if having so allowed the parent to have charge and control of the child it appears to the local authority that the fit person order is no longer necessary and might properly be revoked, the local authority shall apply under s 84(6) of the 1933 Act for such revocation. Since the hearing by the judge ([1970] 1 All ER 512, [1970] 2 WLR 433) s 13 of
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the Children Act 1948 and s 5 of the Family Allowances and National Insurance Act 1956 have been replaced by a new s 13 of the 1948 Act: see the Children and Young Persons Act 1969, s 49 and Sch 6. The new s 13 provides that the local authority shall discharge its duty to provide accommodation and maintenance for a child in its care under a fit person order by boarding him out or making other suitable arrangements, and also empowers the local authority in the course of discharging its duty to allow the child, either for a fixed period or until the local authority otherwise determine, to be under the charge or control of a parent.
In the present case the local authority required the foster parents, in accordance with the statutory undertaking necessarily given by them when the child was given to their charge, to return the child. The purpose and intention of the local authority was to act under s 5(1) of the 1956 Act, and is to act under the new s 13 of the 1948 Act, and to allow the child to be in the charge and control of the mother for a trial period, in the hope that a full mother and daughter relationship may be established, it appearing to the local authority that it will or may be for the benefit of the child so to do. The foster parents, taking a different view, refused to comply with their undertaking, and made the child a ward of court. The judge decided, following the principles set out in Re M (an infant) that the Chancery court would not intervene to assert its wardship jurisdiction in a case such as this where Parliament had confided to the local authority full competence and authority to decide on the care and control of the child. The judge did in fact receive full evidence on the matter, because it was suggested that there had been some impropriety or breach of statutory duty or lack of bona fides on the part of the local authority in arriving at its conclusion under s 5(1) of the 1956 Act, a suggestion which he summarily rejected. Moreover, having received full evidence he delivered judgment, in case it should be considered (contrary to his view of the law) that the Chancery court should impose its own opinion of the best interests of the child, on the merits of the case, and was in agreement with the view of the local authority. Accordingly, he rejected both on the law and on the facts the contention of the foster parents that the child should remain in their care and control. He did not end the wardship.
We have not set out fully the statutory provisions governing the powers and duties of a local authority in whose favour a fit person order has been made. Suffice it to say that further provision is made for matters of detail in Part II of the Children Act 1948, including s 13 already mentioned, specifying the duties of the local authority and conferring on the Home Secretary a rule-making and supervisory capacity. That Part II applies equally to children taken into care by a local authority under the 1948 Act.Re M (an infant) was a case of such a child, and in considering whether the principles of that decision are applicable to a fit person order under the 1933 Act it is of course highly relevant to notice similarities in the statutory codes applicable to the two cases.
We therefore proceed to notice the statutory provisions under the 1948 Act additional to the common ground under Part II thereof. By s 1 of the Children Act 1948 where it appears to a local authority that a child has no parent or guardian or has been abandoned or is lost, or that the child’s parents or guardian are incapable of providing for the child’s proper accommodation, maintenance and upbringing, and further that the intervention of the local authority under this section is necessary in the interests of the welfare of the child, then it becomes the duty of the local authority to receive the child into its care, and so to keep the child as long as the welfare of the child appears to require it. That section does not, however, authorise the local authority so to keep the child if a parent or guardian desires to take over the care. Under s 2, a local authority can pass a resolution in respect of a child so taken into care conferring on the local authority all the rights and powers of the parents or guardians of the child; such resolution can be passed if it appears to
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the local authority that the parents are dead and there is no guardian, of if a living parent or guardian has abandoned the child or is incapable of caring for the child or unfit to do so. Provision is made for notice of such a resolution to such parent or guardian, who may in a limited time object to the resolution; thereupon the resolution will lapse unless within a stated period the local authority brings the matter before a juvenile court. Section 3 provides that the resolution shall take effect according to its tenor, so that all parental rights and powers are thereby vested in the local authority. Section 3(3) provides that the resolution—
‘… shall not prevent the local authority from allowing, either for a fixed period or until the local authority otherwise determine, the care of the child to be taken over by, and the child to be under the control of, a parent … in any case where it appears to the authority to be for the benefit of the child.’
The resolution continues in force until rescinded by the local authority or by order of a juvenile court.
It is apparent from this summary that there is no difference of any substance between the rights, powers and duties of the local authority in relation to a child committed to its care under a fit person order and those in relation to a child in respect of whom a resolution has been passed by the local authority and not objected to. In each case the legislature has, it seems to us, confided to the discretion of the administrative body all decisions as to the custody care and control of the child, under the guidance of regulations on certain matters laid down by the Secretary of State.
In the case of Re M (an infant) this court held quite clearly that in wardship proceedings the court will not substitute its own view as to the appropriate steps to be taken in relation to the care and control of a child, concerning whom the local authority has passed a resolution (which has not been objected to) under s 2 of the 1948 Act, for that of the local authority, on the ground that the legislature has confided all such decisions in the most ample manner to the local authority, and the court will accordingly not interfere with any such decision. There is, of course, an obvious exception to this, which has been variously expressed, that the courts, and not least the Chancery court in wardship proceedings, will interfere with the exercise by an administrative body such as a local authority of the exercise of a discretion in a field committed to it by the legislature, on well-known principles for which we can conveniently and briefly refer to the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corpn ([1947] 2 All ER 680 at 682, 683, [1948] 1 KB 223 at 228, 229). Counsel for the foster parents sought to raise on this preliminary question of law, by last-minute further amendments of their grounds of appeal a number of matters with a view to suggesting that the views and proposals of the local authority were attackable on those lines. On the point of law, on which the judge delivered a separate judgment ([1970] 1 All ER 512, [1970] 2 WLR 433), these suggestions were not made below and we declined to allow the amendments, save on one point which really had nothing in it at all.
Our attention was drawn to a number of cases with a view to showing that the Chancery court would sometimes use its wardship jurisdiction when a child was in the care of the local authority. In Re G (infants) the Chancery judge gave directions as to the care and control of the ward who was a child taken into care under s 1 of the 1948 Act. But that was an instance of the court coming to the aid of the statutory jurisdiction; there was no resolution under s 2 and either parent could demand the child from the local authority.Re R (K) (an infant) was a similar case. Re S (an infant) in this court was another case of a child taken into care under s 1 of the 1948
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Act. It was held that the Chancery judge should have looked into the facts of the case and was wrong in thinking that his jurisdiction was ousted. There was no s 2 resolution and there was a parent. It is abundantly clear that the decision was arrived at entirely on the ground that the care of the local authority was transient, the parent being at any time entitled to end that care. If the local authority had passed a s 2 resolution not objected to, or if there had been no parent or guardian in existence, so that the local authority was, to repeat a phrase used in argument in the present case, firmly in the saddle, the decision in Re S (an infant) would have been the other way.
For the foster parents it was argued that there was an important distinction between a case under ss 1 and 2 of the 1948 Act and a case of a fit person order under the 1933 Act. The Chancery court, it was said, is always prepared in a suitable case to make a custodial order in relation to a ward differing from an earlier custodial order of another court or even another division of the High Court. We were referred to a number of authorities instancing that last proposition. But in our judgment that approach cannot be justified when the effect of the order is to bring into operation the whole apparatus, which was described in Re M (an infant) ([1961] 1 All ER at 792, [1961] Ch at 341) as a ‘clear and comprehensive scheme’, laid down by the Acts in the case of a fit person order in favour of a local authority. It would indeed be anomalous if the Chancery court were to decline jurisdiction in the one case but assert it in the other, when in each case the local authority is firmly in the saddle, merely because a different mounting block had been used. It was suggested that the seat was less firm in the fit person order case because a juvenile court can revoke the order; but a juvenile court can also determine a 1948 s 2 resolution—see s 4 of the 1948 Act. Our attention was drawn to the fact that under s 3 of the Matrimonial Proceedings (Magistrates’ Courts) Act 1960 the court may in matrimonial proceedings make an order committing a child to the care of the local authority; but in that case Part II of the 1948 Act operates and we would take the same view of the exercise of the wardship jurisdiction.
One aspect of this case has given us considerable concern. The judge held ([1970] 1 All ER 512, [1970] 2 WLR 433), and we uphold his view, that this was a case in which the Chancery court will not intrude. Yet some seven days were occupied with evidence below, because some suggestion was made that facts might exist which on any footing would justify the intervention of the court in the exercise of administrative discretion on the well-known principles already referred to. In our view it is important that the person seeking the intervention of the Chancery judge in cases such as the present on any of those grounds should be required at the outset on affidavit to state with particularity the precise grounds asserted and the facts alleged that are said to constitute those grounds. If possible the evidence should initially be confined to the question whether those grounds exist. Unless some such system is followed there is a danger that much time and expense will be wasted with a full enquiry into the whole case, as in an ordinary wardship case, when it may turn out, as in the present case, that no such special ground existed and that therefore it is not one in which the court will assert jurisdiction.
Accordingly the appeal is dismissed.
Appeal dismissed. Leave to appeal to the House of Lords was refused by the Court of Appeal and later by the Appeal Committee of the House of Lords.
Solicitors: Lovell, Son & Pitfield (for the foster parents); Sharpe, Pritchard & Co (for the local authority); Batchelor, Fry, Coulson & Burder (for the mother).
Euan Sutherland Esq Barrister.
Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd
[1970] 2 All ER 871
Categories: LANDLORD AND TENANT; Tenancies
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 19, 23, 24, 25 MARCH, 14 JULY 1970
Landlord and tenant – New tenancy – Business premises – Application by tenants for new tenancy – Filing of answer by landlords – Fixing of date for hearing – No objection made by landlords to validity of application till after time limits for application expired – Jurisdiction of court to hear application – Whether time limits procedural and capable of being waived – Landlord and Tenant Act 1954, s 29(3)
Landlord and tenant – New tenancy – Business premises – Application by tenants for new tenancy made prematurely – Landlords objecting to validity of application – Desirability of setting out objection in landlords’ answer.
Landlord and tenant – New tenancy – Business premises – Application by tenants for new tenancy made prematurely – Landlords objecting to validity of application – Effect of landlords deliberately withholding notice of objection until time limits for application expired.
The tenants of business premises under a lease expiring on 25 December 1968 made a request to the landlords on 2 August 1968 under s 26 of the Landlord and Tenant Act 1954 for a new tenancy. On 15 August 1968, the landlords gave notice that they would oppose the application. On 4 September 1968, the tenants applied to the county court for a new tenancy. The tenants’ application was premature because, by s 29(3)a of the Landlord and Tenant Act 1954, no application for the grant of a new business tenancy was to be entertained unless it was made not less than two nor more than four months after the tenant’s request for a new tenancy. On 19 September 1968, the landlords filed an answer to the tenants’ application in which they stated that they would oppose the grant of a new tenancy on the ground that, on the termination of the current tenancy, they intended to occupy the holding for the purposes of a business to be carried on by them. The answer contained no reference to the application having been made too soon. On 30 September 1968, the landlords’ solicitors wrote to the tenant’s solicitors stating that notice would have been received by the tenants’ solicitors of the grounds on which the application would be opposed, and offering compensation as provided in the Landlord and Tenant Act 1954 if the tenancy was terminated. On 9 October 1968, the landlords’ solicitors wrote to the tenants’ solicitors saying that it would be helpful to them if a special date, after 18 November 1968, could be fixed for the hearing of the application. On 17 October 1968, a letter on behalf of both parties was sent by the landlords’ solicitors to the registrar of the court asking if the hearing could be fixed for some date after 1 December 1968. It was admitted that, by 17 October 1968, the point as to the time limits for making the application had not occurred to anyone. On 2 December 1968, the four months referred to in s 29(3) of the 1954 Act expired, so that no fresh application for a new tenancy could thereafter be made by the tenants. On 5 December 1968, after the four months period for making the application had expired, the landlords’ solicitors wrote to the tenants’ solicitors that a preliminary objection would be taken that the application was invalid under s 29(3). It was not established that the landlords had
Page 872 of [1970] 2 All ER 871
become aware of the invalidity of the application in time to have informed the tenants before the expiry of the fourth month. On the questions whether the requirements of s 29(3) limited the jurisdiction of the court (so as absolutely to debar it entertaining an application made prematurely) or were merely procedural and capable of being waived, and whether, if capable of being waived, they had in fact been waived,
Held – (i)(Viscount Dilhorne dissenting) The requirements of s 29(3) imposing time limits were merely procedural and capable of being waived by the landlords (see p 876 b, p 877 f, p 878 g, p 889 j to p 890 a and p 894 c, post).
(ii) (Lord Reid and Lord Pearson dissenting) there had been no waiver on the part of the landlords because they had not done anything which debarred them from taking the point that the application was bad or which could be regarded as acquiescence in the validity of the application (see p 878 h, p 880 j, p 886 e, p 894 j to p 895 a, b and d and p 896 e, post).
Per Lord Morris of Borth-y-Gest. The landlords’ answer was in the form as prescribed. The form does not specifically require that a point such as that which the landlords took should be set out in the answer. It would, however, be quite simple to make some addition to the form and where appropriate it would be convenient and desirable that this should be done (see p 880 e, post).
Observations on the position which would have existed if notice that objection would be taken to the validity of the application had been deliberately withheld by the landlords from the tenants until the time for making a fresh application had expired (see p 885 d and e and p 896 b and c, post).
Decision of the Court of Appeal [1969] 3 All ER 1268 affirmed.
Notes
For application to court for new tenancy of business premises, see 23 Halsbury’s Laws (3rd Edn) 891, para 1714.
For the Landlord and Tenant Act 1954, s 29, see 18 Halsbury’s Statutes (3rd Edn) 564.
Cases referred to in opinions
Anismic Ltd v Foreign Compensation Commission [1969]1 All ER 208, [1969] 2 WLR 163, Digest Supp.
A-G v H R H Prince Ernest Augustus of Hanover [1957] 1 All ER 49, [1957] AC 436, 2 Digest (Repl) 210, 257.
Barton v Fincham [1921] 2 KB 291, [1921] All ER Rep 87, 90 LJKB 451, 124 LT 495, 85 JP 145, 31 Digest (Repl) 701, 7912.
Bidie, Re, Bidie v General Accident, Fire and Life Assurance Corpn Ltd [1948] 2 All ER 995, [1949] 1 Ch 121, [1949] LJR 386, 113 JP 22, 24 Digest (Repl) 688, 6730.
Central London Property Trust Ltd v High Trees House Ltd [1956] 1 All ER 256, [1947] KB 130, [1947] LJR 77, 175 LT 332, 31 Digest (Repl) 247, 2823.
Combe v Combe [1951] 1 All ER 767, [1951] 2 KB 215, Digest (Cont Vol A) 280, 1366a.
Devenport v Smith [1921] 2 Ch 270, 91 LJCH 225, 126 LT 184, 31 Digest (Repl) 539, 6631.
Debtor (No 335 of 1947), Re a, ex parte H M The King v The Debtor [1948] 2 All ER 533; affd CA sub nom Theophile v Solicitor General [1950] 1 All ER 405, [1950] AC 186, 4 Digest (Repl) 25, 207.
Fuller’s Theatre and Vaudeville Co v Rofe [1923] AC 435, 92 LJPC 116, 128 LT 774, 31 Digest (Repl) 421, 5499.
Graham v Ingleby and Glover (1848) 1 Exch 651, 10 LTOS 307, 44 Digest (Repl) 359, 1951.
Hodgson v Armstrong [1967] 1 All ER 307, [1967] 2 QB 299, [1967] 2 WLR 311, Digest Supp.
Matthews v Smallwood [1910] 1 Ch 777, [1908–10] All ER Rep 536, 79 LJCh 322, 102 LT 228, 31 Digest (Repl) 419, 5482.
Page 873 of [1970] 2 All ER 871
Warburton v Loveland (1832) 2 Dow & Cl 480, [1824–34] All ER Rep 589, 6 ER 806, 44 Digest (Repl) 221, 370.
Willmott v Barber (1880) 15 Ch D 96, 49 LJCh 792, 43 LT 95; on appeal (1881) 17 Ch D 772, 31 Digest (Repl) 431, 5579.
Appeal
This was an appeal by the tenants, Kammins Ballrooms Co Ltd, from an order of the Court of Appeal (Edmund Davies LJ and Sir Gordon Willmer; Sachs LJ dissenting) dated 30 July 1969 and reported [1969] 3 All ER 1268, dismissing the tenants’ appeal from a judgment of his Honour Judge Pratt dated 16 December 1966, dismissing the application of the tenants for a new lease pursuant to Part II of the Landlord and Tenant Act 1954 on the preliminary objection taken by the landlords, Zenith Investments (Torquay) Ltd, under s 29(3) of that Act that the court had no jurisdiction to entertain the application. The facts are set out in the opinion of Lord Pearson.
Ashe Lincoln QC and J E S Ricardo for the tenants.
Michael Albery QC and Oliver Lodge for the landlords.
Their Lordships took time for consideration
14 July 1970. The following opinions were delivered.
LORD REID. My Lords, in 1968 the appellants (the tenants) were carrying on business in premises in Torquay which they occupied under a lease which was due to expire on 25 December. They wished to obtain a new lease from the respondents (the landlords). It would seem that there were some negotiations but there is no evidence about that. Then the tenants invoked the provisions of the Landlord and Tenant Act 1954. Section 26 permits a tenant of business premises to make a request in the prescribed form for a new tenancy commencing not less than six months after the making of the request. On 2 August, the tenants duly made a request for a new tenancy to begin on 2 February 1969. The landlords then had two months in which to give notice that they would oppose an application for a new tenancy. Within a fortnight, on 15 August, they gave such a notice stating that they wished to occupy the premises for business purposes. The matter had to go before the county court. If the landlords were able to substantiate their objection, the tenants would not get a new lease but they might get compensation. If the landlords failed to do that, the tenants were entitled to a new lease on terms which failing agreement would be settled by the court.
The point at issue having thus been settled the next step in procedure was for the tenants to make an application to the court for a new tenancy. This the tenants did by filing an application in the Torquay county court on 4 September. Section 29 provides for the making of such an application as follows:
‘29.—(1) Subject to the provisions of this Act, on an application under subsection (1) of section twenty-four of this Act for a new tenancy the court shall make an order for the grant of a tenancy comprising such property, at such rent and on such other terms, as are hereinafter provided.
‘(2) Where such an application is made in consequence of a notice given by the landlord under section twenty-five of this Act, it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy.
‘(3) No application under subsection (1) of section twenty-four of this Act shall be entertained unless it is made not less than two nor more than four
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months after the giving of the landlord’s notice under section twenty-five of this Act or, as the case may be, after the making of the tenant’s request for a new tenancy.’
It will be observed that under sub-s (3) such an application must be made not less than two months after the making of the tenants’ request for a new tenancy. So this application was made too soon; it ought not to have been made until 2 October. We do not know why it was made so soon. The suggestion was made that both parties desired an early decision but there is no evidence or finding to that effect. The tenants say that the landlords have waived their right to object to the application having been made too soon. The landlords deny this but their first argument is that the terms of this section are so peremptory that an application made at the wrong time is a complete nullity so that no agreement or waiver could save it.
To understand why this point is of crucial importance it is necessary to see what happened after 4 September. On 19 September, the landlords filed an answer to the application in which they stated the ground of their opposition to the grant of a new tenancy. That answer contained no reference to the application having been made too soon. On 30 Septeber, their solicitors wrote offering compensation as provided in the Act if the tenancy was terminated. On 9 October, they wrote saying that it would be helpful to them if a special date could be fixed after 18 November. On 17 October, the parties concurred in asking the county court registrar to fix a date after 1 December and this was done. Still the landlords had made no reference to the tenants’ application having been made too soon. If they had done so before 2 December, the tenants could have made a fresh application within the time permitted by s 29.
Then, on 5 December, the landlords’ solicitors wrote that they had been advised by counsel to take a preliminary objection that the tenants’ application was invalid as having been made less than two months after the making of their request for a new tenancy. By that time it was too late to remedy this by making a new application. The landlords say and the tenants admit that the landlords’ solicitors had not acquainted themselves with the terms of s 29 and were unaware until they received the advice of counsel that the tenants’ application had been made too soon. There is no evidence or finding as to when they received the advice of counsel but it was admitted that this was after 17 October. So we do not know whether they could have informed the tenants before 2 December.
This may seem a technical and unmeritorious defence, but there is no doubt that the court has no power to dispense with these time limits if the defendant chooses to object at the proper time. The question is whether the defendant is entitled to agree not to insist on the observance of these time limits. The case for the landlords is simple: they say that the provisions of s 29 prohibit the court from entertaining any application made out of time even if both parties ask the court to deal with it.
If the words of an Act are so inflexible that they are incapable in any context of having any but one meaning, then the court must apply that meaning, no matter how unreasonable the result—it cannot insert other words. But such cases are rare because the English language is a flexible instrument. Before examining the words in question I must observe that, apart from a case where contracting out is clearly not permitted, no case was cited in which statutory time limits of this kind have been so interpreted and for reasons which I shall give in a moment I think that it would be quite unreasonable so to interpret these words in this context.
The words are that no application ‘shall be entertained’ unless it is made within the prescribed period. This cannot in my view be read literally. It must mean entertained by the court and the natural meaning of ‘entertained’ in this connection is ‘taken into consideration’. But the court must take the application into consideration before it can discover whether or not it is out of time. Often this may seem
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clear at a glance but even so the applicant is entitled to be heard. And there may be a substantial point to decide. For example, the date of the tenant’s request may be questioned, or some more complicated point may arise like the point in Hodgson v Armstrong. Such an expression as the ‘Court shall make no order’ may be clear and inflexible but this expression is not. Once it appears that some modification of the natural meaning is necessary why should we be bound to stop there when our object is, as it always must be, to find out what Parliament must have, or must be supposed to have, intended.
In the first place this would be something which Parliament never seems to have done before. By the earlier Act dealing with the subject, the Landlord and Tenant Act 1927b, the tenant was entitled in certain circumstances to claim a new lease and then he had to apply under s 4 in one class of case ‘not more than thirty-six nor less than twelve months before the termination of the tenancy’. There were no words there which could be read as a direction to the court prohibiting it from entertaining a claim made out of time; the section simply says ‘if a claim is made in the prescribed manner’. I would find it impossible to interpret these sections as preventing the court from dealing with a claim made out of time if both parties asked the court to do so. And in the sphere of limitation of actions there are many cases cited in this case by Sachs LJ ([1969] 3 All ER 1268 at 1271, [1969] 3 WLR 799 at 802, 803) where very strong words have not prevented the court from holding that the defendant has waived his right to object: such words as ‘all actions shall be commenced within’ a certain time, ‘no action shall lie or be instituted’, ‘no action shall be maintainable’, ‘no action shall be brought’. Moreover, as illustrated by a recent decision of this House in Anisminic Ltd v Foreign Compensation Commission (), there is a well-established principle that any provision ousting the jurisdiction of the court must be construed strictly, and I would think that the same applies to a provision that the court is not to have jurisdiction if an application is made too soon. That case also shows that where in a series of authorities words which might appear to exclude the jurisdiction of the court have been held not to do so, one is entitled to expect some very specific indication of an intention to make a new departure.
One argument was that Parliament has conferred a new right to apply for a new tenancy inherently qualified by a condition that the application must be made during the prescribed period. But in my view the right conferred is not the right to apply—it is the right to get a new tenancy if the landlord does not establish the ground of objection of which he has given notice. The application to the court is merely a step in procedure. And the subject-matter is not new, it is merely a more extended right than that conferred by the 1927 Act.
The landlords must establish that Parliament must be held to have altered the whole basis of the 1927 Act. Whereas then there was an ordinary time limit which the defendant could waive if he so chose, now some public interest must have induced Parliament to prevent that. But what public interest can there be in preventing parties, who want as speedy a decision as possible, from going to the court before a certain period has elapsed. The only suggestion was that difficulties might be caused if a tenant made his application long after the statutory period had elapsed on a trumped up case of waiver: a landlord is entitled to know where he stands after that time. This seems to me to be so improbable that it can really have no weight against the desirability of allowing parties to get on quickly if they want to. The Act contains nothing to indicate that contracting out is forbidden; on the contrary the parties are encouraged at every stage to come to an agreement. And
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there is another factor of some importance. If this is a direction to the court forbidding it to entertain applications made out of time, then it is the duty of judges to scrutinise the very numerous applications made under this section so as to satisfy themselves that they are made within the time prescribed. It is most unlikely that Parliament would put such a burden on judges without very good reason and I can find none. So I am satisfied that the time limits in s 29 are not essentially different in character from ordinary statutory provisions limiting the time during which various procedural steps can be taken.
If the parties can agree not to insist on a time limit then it was not disputed that one of them can waive his right to insist on it. I have read the speech to be delivered by my noble and learned friend Lord Pearson. I agree with what he says about waiver and I therefore agree that, by the letters to which he refers, the landlords waived their right to object to the validity of the tenants’ application.
I would allow this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, the first question which arises in this appeal relates to the provision contained in s 29(3) that no application under s 24(1) of the Act shall be entertained unless it is made within certain time limits. If a landlord gives a notice under s 25 to terminate a tenancy (ie a tenancy to which Part II of the Act applies) the tenant, if he applies under s 24 for a new tenancy must apply not less than two months after and not more than four months after the giving of the landlord’s notice. If a tenant makes (under s 26) a request for a new tenancy and follows it up by an application under s 24 his application must be not less than two months after and not more than four months after his request. Do these time limits rigidly limit and confine the jurisdiction of the court or do they have the character of statutory limitation provisions which a litigant may insist on but need not insist on and which he may decide to waive?
In the present case the tenant made a request for a new tenancy. The request was effectively made in prescribed form. It was made on 2 August 1968. The landlords then had two months (see s 26(6)) within which to give a notice to the tenants that they would oppose an application to the court for the grant of a new tenancy. The landlords knew exactly what they wanted. They wanted to carry on business themselves in the premises. So they did not need two months within which to give notice to the tenants that they would oppose and to state on which of the grounds mentioned in s 30 they would oppose. They gave such a notice on 15 August. The stage seemed all set for an application to the court. The tenants made an application by an originating summons dated 4 September. It may be that neither party remembered or noticed that the application ought only to have been made between two and four months after 2 August. It probably suited both parties to obtain early decision as to whether the tenants would or would not be granted a new tenancy. Matters then proceeded. The landlords delivered an answer which was dated 19 September. There was a date for a hearing in November. It was later altered to one in December. After a period of four months from 2 August had elapsed intimation came on behalf of the landlords that at the hearing which was to take place a few days later they would take the preliminary objection that the tenants’ application was invalid because prematurely made. It was then too late for the tenants to make a new application within the four months’ period. They could so easily have done so within that period if they had been made aware that it was going to be said that their speed in going to court had precluded the court from hearing them.
The word ‘entertained’ is used not only in sub-s (3) of s 29 but also in sub-s (2). If a landlord gives a notice of termination of tenancy to a tenant under s 25, the notice (see s 25(5)) must require the tenant to notify the landlord whether or not he will be willing to give up possession. The notification must be in writing. If in consequence of the landlord’s notice the tenant makes an application for a new tenancy
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then (see s 29(2)) the application ‘shall not be entertained unless the tenant has duly notified the landlord’ of his unwillingness to give up possession. If a tenant gave oral notification of his unwillingness and if the landlord expressly agreed with his tenant that a notification in writing as required by s 25(5) would not be insisted on by the landlord, is the effect of s 29(2) that the court could not recognise the parties’ agreement and would be bound against the will of the parties to hold that the court had no jurisdiction because the tenant had not ‘duly’ notified his landlord? That would be the situation if the words ‘it shall not be entertained’ are words of strict prohibition directed to the court. So also on that basis, as pointed out by Sachs LJ in his judgment ([1969] 3 All ER at 1269, [1969] 3 WLR at 801), if the tenant asked for and was given by the landlord the indulgence of a few days beyond the two months’ period stipulated by s 25(5), the effect would be that the court would be bound to say that there was no jurisdiction to hear the application. A similar position would arise under s 29(3) if the parties agreed that a tenant’s application made before two months had elapsed (after either a landlord’s notice under s 25 or a tenant’s request under s 26) need not be withdrawn and replaced by another application in exactly the same form.
The effect of s 24 of the Act is that a tenancy to which Part II applies does not come to an end unless terminated as provided by the Act. A tenant may apply for a new tenancy if the landlord has given a notice under s 25 to terminate the tenancy or if he (the tenant) has made a request for a new tenancy under s 26. On the making of an application the court must make an order for the grant of a new tenancy (see s 29(1)) unless the landlord successfully opposes the application on grounds on which in accordance with s 30th landlord is entitled to oppose. In that event the court must not make an order. (See s 31(1).) The application of the tenant is made under s 24 but it is ‘subject to the provisions’ of s 29. In this way the time limits set out in s 29 are introduced. In my view they are time limits which regulate procedure. They provide for an orderly sequence of procedural steps. A tenant who fails to keep within the prescribed time limits will fail at his peril. He may find that his landlord will insist, as insist he may, on strict observance. But if a landlord agrees to waive the strict observance of a time stipulation I do not consider that the language of s 29 makes it obligatory on the court to hold that in spite of the landlord’s agreement the court cannot and must not proceed.
If someone has an existing claim for money due or for damages he may be met by a plea that some statute has enacted that an action to enforce his claim must be brought within a certain period. Yet it has always been recognised that words such as ‘no action shall be brought’ are generally speaking not words which compel the court to hold that it lacks jurisdiction even if the party sued does not wish to rely on the statutory defence. The position is in my view similar in the case of a tenant who makes an application to the court for a new tenancy. He may be defeated if he has not applied within the statutory time limits. But if the landlord chooses not to insist on a strict compliance with those limits I do not consider that the court is devoid of jurisdiction.
It was strongly contended that the word ‘entertained’ is one that is directed to the court and that the word should be regarded as restricting the powers of the court even though the subsection does not in terms mention the court. While it is true that the word ‘entertain’ is one that is used in reference to the function of a court in hearing a case or an application, I do not consider that in the context of the Landlord and Tenant Act 1954 the word is used other than by way of introducing procedural time limits. The question now arising must be decided by considering and ascertaining the intention of Parliament. In the setting of the 1954 Act what meaning should be ascribed to the words in s 29?
Words proclaiming that after a certain lapse of time certain actions ‘shall not be brought’ are comparable. If an action must not even be brought or instituted
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unless within a certain time how, it might be asked, could the court hear it or have any concern with it once it was apparent that it was begun outside the statutory time limit? So also with such words as ‘no action shall lie or be instituted’. If an action does not lie or is not to be instituted, how, it might be asked, could a court countenance it and give judgment in it? The reason is that such statutory words are generally speaking not designed to oust the jurisdiction of the court but may, at the option of a party sued, be set up to bar a remedy.
The words now under consideration are to be contrasted with such words as ‘No order or judgment … shall be made or given unless … ’ (see Barton v Fincham) or with such words as ‘an order under this Act shall not be made save on an application made within six months from … ’ (see Re Bidie, Bidie v General Accident, Fire & Life Assurance Corpn).
In considering the meaning of s 26 it is helpful to examine the terminology which is employed in the Act. There are many indications which point to the fact that where there are directions which restrict the powers of the court they are explicit. Thus in s 29(1) there is the direction that on an application under s 24(1), but subject to the provisions of the Act, ‘the court shall make an order’. If the time limits denoted by the succeeding subsections of the same section, ie sub-ss (2) and (3), had been intended to be rigidly mandatory on the court it might have been expected that the language would have been that ‘the court shall not make an order’ unless the time limits were observed. An example of an explicit direction to the court is to be found in s 9(3), viz ‘the court shall not have power to determine that any initial repairs shall be carried out by the tenant except with his consent’. In s 13(2) is the direction that on being satisfied of certain matters ‘the court shall order’. A counterpart to s 29(1) may be found in s 31(1) where the words ‘the court shall not make an order’ are used. Under certain circumstances laid down in s 31(2) ‘the court shall make a declaration’ or ‘shall make an order’. In s 53(2) are the words ‘the court shall make a declaration accordingly’. Emphatic is the direction in s 57(5) that ‘the court shall not determine the application for the grant of a new tenancy until … ’ or that ‘the court that ‘the court shall on the application of the landlord determine … ’. In s 58(4) is the provision that ‘the court shall on the application of the landlord determine … ’; in s 60 it is laid down that in certain circumstances ‘the court shall determine that the terms of the tenancy shall include the terms specified in the certificate’. The proviso to para 1 of the Third Schedule lays down certain conditions under which ‘the court shall not make an order’.
For the reasons which I have given I consider that the court could deal with an application not made within the prescribed time limits if a landlord consented. On the facts of the present case there was certainly no express agreement made by the landlords that they would not rely on the terms of s 29(3). Prior to the letter dated 5 December 1968 with its notification that a preliminary objection would be taken that the tenants’ application was invalid there is nothing to suggest that the landlords had agreed that they would take no such point. Nor can I see any evidence which shows that the landlords made any representation to the tenants to the effect that their tackle was all in order and that they could rely on the landlords’ representation or assurance to that effect.
The correspondence between solicitors no doubt proceeded on the basis that at the hearing before the learned judge the issue would be whether the grounds of the landlords’ opposition were substantiated but this was only because for some time the point concerning the time of the application was overlooked by all concerned. At some date the point was appreciated by those advising the landlords. No evidence was given at the hearing but it has been accepted that that date was subsequent
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to the date of the landlords’ answer. Was there, then, some waiver by the landlords? Their answer to the originating summons was on 19 September 1968. They stated that they would oppose the grant of a new tenancy on the grounds which they had stated in their notice under s 26(6). The grounds were that on the termination of the current tenancy they intended to occupy the holding for the purposes or partly for the purposes of a business to be carried on by them in the premises. Their answer (filed by their solicitors) was followed by a letter (dated 30 September 1968) which began by a reference to the fact that notice would have been received ‘of the grounds upon which our Client Company will be opposing the application of your Client’. The letter was written in order to express willingness to pay appropriate compensation. It was contended that the letter amounted to a statement that opposition to the application would be limited to the stated ground, ie of intention of the landlords to occupy for their own purposes. I do not consider, however, that the landlords were making any admission as to the validity of the application. In stating the grounds on which they would oppose it they did not preclude themselves from taking the prior point that the application was not made within the statutory time limits. There is no evidence that the landlords ever made a decision to abandon any point which was open to them or adopted some course which was inconsistent with or which negatived their reliance on a time point under s 29(3) if and when they became alive to it.
The only other letters prior to the letter of 5 December were those of 9 October and 17 October. In the letter of 9 October from the landlords’ solicitors to the tenants’ solicitors reference was made to a conversation in which it had been agreed that in order to save expense it would be preferable if in the first instance the hearing was limited to the question whether the tenants were entitled to a new lease. If it was held that they were then there could be a later hearing which would be concerned with the question of rental. The letter concluded:
‘We understood you to say that you take this proposal to be a sensible one and in the circumstances we should be glad to receive your confirmation that the issues at the first hearing will be limited to the legal matters involved. At the same time we agreed with your proposal that the Court should be asked to fix a special date for this hearing as this will be more convenient to Counsel and perhaps you would be kind enough to request the Court to suggest a date for the hearing. It would be helpful to us if a special date could be fixed for some date after the 18 November next.’
It is not suggested that by 9 October the point as to the date of the initiation of the proceedings had occurred to anyone. There is no suggestion that the request for a date after 18 November was based other than on circumstances which concerned the solicitors personally. If a hearing date a few days after 18 November had been obtained from the court and if before such hearing the time point had been thought of and was at the hearing taken on behalf of the landlords I see no basis for a contention that the point had been waived by the landlords and so could not have been taken. Unless there was some procedural rule which precluded the taking of the point on the ground that it had not been pleaded, the point was I think open.
It would appear from the next letter that for reasons related to the convenience of legal advisers the suggestion of a date after 18 November was varied to a date after 1 December. So the letter of 17 October was addressed to the registrar of the court; it was sent on behalf of both parties. The letter stated:
‘We understand that the Court requires that this Application should be dealt with at a special hearing. In the circumstances we shall be glad if you will please confirm that the hearing will be adjourned and let us have a note of the date fixed. It would be of considerable assistance to both ourselves and Messrs
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Lee-Barber Goodrich & Co., if the hearing could be fixed for some date subsequent to the 1 December next.’
It is not suggested that by that date (17 October) the point as to the date of the initiation of the proceedings had occurred to anyone. So the letter was written in good faith and there was no misunderstanding between the solicitors. I see no basis for a contention that by writing the letter of 17 October the landlords waived the taking of any point that might later occur to anyone. Whether any point could be taken would depend on whether there was any procedural bar. I do not think that because of knowledge of facts and dates (a knowledge shared by both parties) some deemed understanding or appreciation of the time point is to be imputed to them but even if it were so the letters do not suggest or promise any limitation of the arguments which either party would decide to advance at the hearing either in support of or in opposition to the claim of entitlement to a new lease.
The learned judge, in his careful judgment, took the view that he could act on the principles of practice in the High Court; he said that had he considered that a procedural matter was involved he would have held that there had been waiver by the landlords because they had taken a great number of steps in the proceedings. The procedure in the county court in cases under the Landlord and Tenant Acts 1927 and 1954, is, however, governed by County Court Rules and the answer of a respondent to an originating summons is to be filed in a firm which is specified in the rules. The landlords’ answer was in the form as prescribed. The form does not specifically require that a point such as that which the landlords took should be set out in the answer. It would, however, be quite simple to make some addition to the form and where appropriate it would be convenient and desirable that this should be done. It is to be observed that in Hodgson v Armstrong, where a time point of rather a different nature arose, the landlords did raise in their answer the contention that the court had no jurisdiction to entertain the action; they set out that they would rely on s 29(3). In the present case, it being accepted that at the date of the landlords’ answer the time point had not been thought of, the question arises whether the landlords were for any reason precluded thereafter from raising the point. At the time when their answer was filed the date of the tenants’ request (2 August) was known, as also was the date of the tenants’ application by originating summons (4 September). It would not avail the landlords to say that they did not know the statutory provisions; nor would it avail them to say that they paid no heed to dates. So the issue is, I think, whether the landlords are in turn frustrated by some procedural rule from relying on the procedural mistake of the tenants. I do not think that any rules of practice in the High Court govern the position. If the rules concerning ordinary actions in the county court were to govern, then consideration would have to be given to the provisions of CCR Ord 9. Here, however, there was a special jurisdiction in the county court and certain rules were applicable. I can find nothing in any rule which would prevent the time point being raised at the hearing even though it was not specifically added to the landlords’ answer as a point in opposition additional to any point indicated in the form laid down by the rules.
It was submitted that the learned judge had in any event permitted the point to be raised. It was, however, primarily raised as a point going to jurisdiction. If it were such, then leave to raise it would have been unnecessary. Indeed the court would be bound to take notice of it. So far as the point was raised as a procedural bar on which the landlords could rely I am not persuaded that the special leave of the learned judge was necessary in order to raise it nor that any event had taken place which precluded the landlords from raising the point.
Not without a measure of regret I would dismiss the appeal.
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VISCOUNT DILHORNE. My Lords, the first question for determination in this appeal is whether the court had jurisdiction to entertain the tenants’ application for an order for the grant of a new lease. Their lease expired on 25 December 1968. On 2 August, they requested the landlords to grant them a new tenancy commencing on 2 February 1969. That request was made in conformity with the Landlord and Tenant Act 1954, s 26(2), which provides that a request for a new tenancy ‘shall be for a tenancy beginning with such date, not more than twelve nor less than six months after the making of the request, as may be specified therein’. The date specified by the tenants was thus the earliest date which complied with the requirements of that subsection.
The Landlord and Tenant Act 1927c gave the tenant of business premises a right to compensation for improvements and goodwill, and, by s 5, the right, where he claimed that the amount he would receive under the Act would not compensate him for his loss of goodwill, in lieu of claiming compensation to serve a notice on his landlord requiring a new lease of the premises. That notice had, in the case of a tenancy terminated by notice, to be given within one month of the notice terminating the tenancy and in every other case not more than 36 nor less than 12 months before the end of the tenancy (1927 Act, ss 5(1) and 4(1)). Section 5(2) of that Act gave the tribunal, ordinarily the county court, power to order the grant of a new tenancy if it considered that reasonable in all the circumstances—
‘on application being made for the purpose either by the landlord or by the tenant not less than nine months before the termination of the tenancy, or, where the tenancy is terminated by notice, within two months after the service of the notice.’
The court was thus for the first time given jurisdiction to order the grant of a new tenancy of business premises but it was a condition precedent to the exercise of that jurisdiction that the application should be made in accordance with the time limits imposed. No question appears to have arisen on this Act as to the power of the court to make such an order when the time limits had not been observed.
The Landlord and Tenant Act 1954, while conferring additional benefits on the tenants of business premises, followed a similar pattern. It provides that a tenancy to which Part II of the Act applies, shall not come to an end unless terminated in accordance with the provisions of the Act. A tenancy for a fixed term can end at the date provided in the lease, if not later than three months before that date the tenant gives notice in writing that he does not desire the tenancy to be continued (s 27(1)). Otherwise it can only be terminated by the landlord giving notice of termination under s 25, in consequence of a request by a tenant for a new lease (s 26(5)), and, where the tenancy was a fixed term continued by virtue of the Act, by three months’ notice by the tenant terminating on any quarter day (s 27(2)).
If the landlord gives notice of termination he has, for that notice to have effect, in that notice to require the tenant to notify him within two months whether or not he will be willing to give up possession (s 25(2)). If the landlord gives notice of termination, the tenant may apply to the court for a new tenancy (s 24(1)). He can also do so where no such notice has been given, by making a request for one (s 26). If he does so, then subject to s 36(2) and the provisions of Part IV of the Act as to the interim continuation of tenancies, the current tenancy will terminate immediately before the date specified in the request for the new tenancy (s 26(5)). Within two months of such a request the landlord may give notice of opposition to the application and state on what grounds he relies (s 26(6)).
The provisions to which I have referred deal with what a landlord has to do to bring a tenancy to an end or to oppose an application for a new tenancy and what
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a tenant must do if he wishes to obtain a new tenancy. Section 29, which appears under the cross-heading ‘Application to court for new tenancies’, appears to be directed primarily to the court. It reads as follows:
‘(1) Subject to the provisions of this Act, on an application under subsection (1) of section twenty-four of this Act for a new tenancy the court shall make an order for the grant of a tenancy comprising such property, at such rent and on such other terms, as are hereinafter provided.
‘(2) Where such an application is made in consequence of a notice given by the landlord under section twenty-five of this Act, it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy.
‘(3) No application under subsection (1) of section twenty-four of this Act shall be entertained unless it is made not less than two nor more than four months after the giving of the landlord’s notice under section twenty-five of this Act or, as the case may be, after the making of the tenant’s request for a new tenancy.’
So by sub-s (1) the court is given power to order the grant of a new tenancy but an application for one following on a landlord’s notice of termination shall not be entertained if the tenant has not within two months after the giving of the notice of termination said that he will not be willing to give up possession nor will any application be entertained if it is made less than two or more than four months after the giving of notice of termination or the making of the request for the new tenancy.
In this case case the request for the new tenancy was made on 2 August 1968. The application to the court was made on 4 September, less than two months later. The reason why the tenants failed to comply with the requirements of s 29(3) has not been disclosed. It has not been shown that they were led to do so by any action on the part of the landlords. No one reading s 29(3) could fail to appreciate that an application must be made within the prescribed time limits. The tenants’ request complied with s 26. It cannot have been more difficult to comply with s 29(3). That section does not say, as did s 5(2) of the 1927 Act, that the application should be made within certain time limits. It says that unless it does so, it shall not be entertained. By whom is it not to be entertained? The answer surely is, by the court. What is meant by not be entertained? Surely it is that the court shall not hear an application which does not comply with the requirements of s 29(2) and (3). The court may commence a hearing but once it becomes apparent that the subsections have not been complied with, can the court, as Parliament has said that the application which does not comply with them shall not be entertained, in any circumstances be entitled to hear the application? I think not. I recognise that the result may be that proceedings may be a nullity but I can see no ground for not giving these words their ordinary and natural meaning.
The contrast between the language of s 5(2) of the 1927 Act and that used in s 29 I regard as significant. In the 1954 Act Parliament has deliberately—I think that one is entitled to assume that—departed from the pattern of s 5(2). Section 29 could have said that the court could order the grant of a new tenancy on application being made not less than two or more than four months after notice of termination or the making of a request for a new tenancy. It does not. Instead language which is more emphatic and which is clear and explicit has been used, and language which can leave no doubt in the mind of anyone who reads it that an application to be effective must comply with the time limits imposed. If it was Parliament’s intention that the court should not hear an application made before or after the prescribed times, I can think of no language that could have been used to make that clearer.
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Our task is to interpret s 29(3) ‘according to the intent of them that made it’d. As Lord Greene MR said in Re a Debtor (No 335 of 1947), ex parte H M The King v The Debtor ([1948] 2 All ER 533 dat 536):
‘If there is one rule of construction for statutes and other documents, it is that you must not imply anything in them which is inconsistent with the words expressly used.’
The tenants’ contention here is that the words ‘No application … shall be entertained’ must be interpreted as meaning that an application shall in certain circumstances be entertained notwithstanding that it is made too early or too late. That seems to me to involve implying something wholly inconsistent with the words expressly used. True it is that English is a flexible language but that does not mean that one can disregard the natural and ordinary meaning of the words used unless it is apparent that some other meaning was intended. If language is clear and explicit, the court must give effect to it:
‘… for in that case the words of the statute speak the intention of the Legislature.’ [Warburton v Loveland, per Tindal CJ ((1832) 2 Dow & Cl 480 at 489, [1824–34] All ER Rep 589 at 591)]. ‘And in so doing it must bear in mind that its function is jus dicere, not jus dare: the words of a statute must not be overruled by the judges, but reform of the law must be left in the hands of Parliament.’ [Maxwell on Interpretation of Statutese].
Nevertheless, as Lord Simonds said in A-G v H R H Prince Ernest Augustus of Hanover ([1957] 1 All ER 48 at 55, [1957] AC 436 at 463) ‘it must often be difficult to say that any terms [of a statute] are clear and unambiguous until they have been studied in their context’. He made clear what he meant by ‘context’ when he said ([1957] 1 All ER at 58, [1957] AC at 461):
‘For words, and particularly general words, cannot be read in isolation: their colour and content are derived from their context. So it is that I conceive it to be my right and duty to examine every word of a statute in its context, and I use “context” in its widest sense … as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern the statute was intended to remedy.’
I cannot in this case find anything in the other provisions of the Landlord and Tenant Act 1954 or in the Act of 1927 or in the expressed objects of the Act of 1954 which leads me to the conclusion that the words of s 29(3) were not intended to have their ordinary and natural meaning.
Indeed, there are in my opinion indications that that was the intention. If the court can entertain an application made too early, it must follow that it can also entertain one which is too late. There are, I think, cogent reasons of policy why a landlord should know where he stands before the termination of the current lease. By virtue of s 29(3) he knows that if he has not received notice of an application within four months of his giving notice of termination or of the tenant’s request for a new tenancy, he can safely proceed to make fresh arrangements for the occupation of the property. If the court could entertain applications made later than that, a landlord might be seriously prejudiced. Parliament may well have thought it right to ensure that that did not happen.
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If the court can entertain an application made less than two months after such a request, then the application might precede the landlord’s notice under s 26(5). He can give his notice of opposition within two months of the request. If the court can entertain such an application made less than two months after the request, it presumably could entertain one made the day after or indeed on the same day as the request. The application might also precede, where there has been notice of termination by the landlord, the tenant duly notifying the landlord within two months of that, that he is not willing to give up possession.
Where as in this case the landlord has served a notice under s 26(5), it may be that he suffers no prejudice as a result of an early application. It may be that Parliament might have made provision for that and have provided that an application might be made after such a notice was given even if less than two months had passed since the making of the request. But Parliament has not done so and it is not, as I see it, for us to do so.
The Act provides that agreements may be made between landlord and tenant on many matters. Generally speaking the Act requires such agreements to be in writing (s 69(2)). They may agree to the grant of a new tenancy (s 28) in which case the current tenancy will continue until that commences. They may agree as to the property comprised in the tenancy (s 32(1)); as to the duration of the tenancy (s 33); as to the rent (s 34) and other terms (s 35) and thus relieve the court of work. They may also agree not to act on the order for the grant of a new tenancy (s 36(1)). But what the Act does not provide is that they can agree to dispense with the requirement that an application can only be entertained when s 29(2) and (3) are complied with. This omission I regard as significant. If these subsections were not intended to limit the jurisdiction of the court, there could be no reason why the parties should not be able to agree to the hearing of an application which did not comply with them. If that had been the intention of Parliament, when express provision was made for agreement on so many matters, surely Parliament would have given some indication of it.
Sachs LJ in his dissenting judgment in the Court of Appeal ([1969] 3 All ER at 1271, [1969] 3 WLR at 803, 803) drew attention to the fact that the language used in other Acts has not been construed as limiting the jurisdiction of the courts. He pointed out that in the Limitation Act 1623 and in the Civil Procedure Act 1833 the words used were ‘All actions … shall be commenced … within’, in the Public Authorities Protection Act 1893 no action shall ‘lie or be instituted’, in the Maritime Conventions Act 1911, s 8, ‘No action shall be maintainable’, and in the Limitation Act 1939 ‘No action shall be brought’. These words in these Acts appear to me to be directed not to the court but to the prospective plaintiff. It is for him to commence his action within the prescribed time; for him to institute an action; for him to maintain one and for him to bring one. The phrase ‘no action shall lie’ may be open to doubt but having regard to its conjunction with the words ‘or be instituted’ it may, I think, be legitimately interpreted as directed to the prospective plaintiff as opposed to the court. But I doubt very much whether the construction placed on other words in other Acts, words which no doubt derived their colour and their content from their context, is a reliable guide to the interpretation of different words in a modern Act. The words ‘no application shall be entertained unless made within’ are not to be found in any other Act. I cannot regard the departure from the language used in the Acts cited above and the departure from the language used in the Landlord and Tenant Act 1927, s 5(2), as not having significance.
The Landlord and Tenant Act 1954 laid down a code which Parliament intended to be followed. If a landlord does not give notice of termination as prescribed, the notice will be ineffectual. If a tenant does not comply with the requirements as to a request for a new tenancy and as to an application to the court for an order for the grant of
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one, he will not be entitled to an order for a grant of a new tenancy. That cannot be disputed. Parliament might have said, as it did in 1927, that the court might order such a grant if application was made for one within the prescribed time limits. It might have said ‘No application shall be made unless made within’. If Parliament had said that, it may well be that the court would have had jurisdiction to hear a premature or tardy application. By the use of the word ‘entertained’ Parliament has in my opinion made clear its intention that the court should not hear a tenant’s application which did not comply with s 29(2) and (3). For these reasons I would dismiss the appeal.
I have had the advantage of reading my noble and learned friends’ opinions in this case and I feel that I should express my opinion on the question whether, assuming the landlords could waive compliance by the tenants with s 29(3), they did so.
The tenants’ application was by way of originating summons. That disclosed the date of the request and the summons was also dated. The tenants should have appreciated that the summons was premature. On receipt of it, the landlords could have realised that it was. Neither did so. The breach of s 39(2) was first noted by counsel for the landlords. It was by letter dated 5 December 1968 that the landlords’ solicitors told the tenants’ that the point would be taken. The landlords’ solicitors must have been informed by counsel some time before 5 December, but how long before was not established. If they had deliberately withheld from the tenants notice that the point would be taken until after the time had expired within which the tenants might make a valid application, I would regard that as very reprehensible conduct deserving condemnation. But no evidence was given at the county court which would justify the conclusion that that was done and in the absence of proof, I am not prepared to assume that notification of the point was deliberately delayed until after the expiry of the time within which an application could be validly made.
On 30 September 1968, the landlords’ solicitors informed the tenants’ that they would be prepared to pay the compensation provided by the Act if the purpose of the proceedings was to obtain that. The solicitors agreed that the first hearing should be limited to the question of entitlement to a new lease so as to avoid the expense of the attendance of professional witnesses who might not be called that day. The date fixed originally for the hearing was 6 November. On 17 October, the landlords’ solicitors wrote to the court and said that it would be of considerable assistance to them and to the tenants’ solicitors if the hearing could be fixed for a date after 1 December, and the hearing was on 9 December. There was no suggestion that the statement that a hearing after 1 December would be of considerable assistance to the tenants’ solicitors was untrue. If true, that letter might equally well have been written to the court by them. If it had been, it could not have been suggested that by sending that letter, the landlords had waived their right to take the point.
The county court judge held that the landlords were not estopped from taking the point. He was not prepared to hold that the documents sent by or on behalf of the landlords contained by implication a statement that the tenants’ application was within the time limit laid down by s 29(3) or that it was valid, and he said that he could not come to the conclusion that the tenants relied on any statement which was made by the landlords. I agree with the county court judge as to this. He then said that if, contrary to his judgment, s 29(3) did not limit the jurisdiction of the court but was only procedural, the landlords had waived their right to take the point that the application was invalid by taking a great number of steps in the proceedings. In reaching this conclusion he based himself on ‘the principles of practice in the High Court’. Presumably he had in mind Ord 2, r 2, of the Rules of the Supreme Court but this rule only relates to non-compliance with the rules of court. I agree with my noble and learned friend Lord Diplock that it does not apply in relation to non-compliance with the requirements of a statute and is not relevant thereto.
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In Spencer Bower and Turner: Law Relating to Estoppel by Representationf, the following passage appears:
‘The truth is, perhaps, that whereas a fairly successful attempt may be made to state with precision what is meant by “estoppel” and by “election”, the term “waiver” when used in a similar connotation is not capable of exact definition in the light of the authorities. Possibly it may be regarded as usefully describing an end-result; but its application to the process by which that result is brought about is almost invariably attended with ambiguity as to the essential nature of that process. The term when so employed is used sometimes in one significance and sometimes in another, and the result is that its use has dangers which may be avoided only by foregoing it as a useful term when considering either estoppel or election. When it does appear in the authorities, however, it is submitted that it will more probably be found to conote “election” than “estoppel” … ’
In Matthews v Smallwood it was held that there was a right of re-entry under a lease in consequence of a breach of one of the covenants and the question fell to be considered whether that right had been waived. Parker J said ([1910] 1 Ch at 786, 787, [1908–10] All ER Rep at 542): ‘If, knowing of the breach, he [the landlord] does distrain, or does receive the rent, then by law he waives the breach … ’ As I understand it, he has done so as he has made an election to treat the lease as continuing.
In this case although the tenants and the landlords both knew the date of the request and the date of the application, until it was noticed by the landlords’ counsel neither was aware that there was a breach of s 29(3). Even if it had been established—which in my opinion is not the case—that the landlords were aware of the breach before then, I do not see how their conduct can be held to amount to an election between two courses of action open to them. They did not, in my opinion, do anything which precluded them from taking the point that the application was bad. Further I do not think that their conduct can be regarded as acquiescence in the validity of the application. No question was raised as to that until 5 December 1968.
In my opinion the landlords did not waive their right to take the point and for the reasons I have given I would dismiss the appeal.
LORD PEARSON. My Lords, under Part II of the Landlord and Tenant act 1954 either of two procedures may lead to an application by the tenant to the court under ss 24 and 29 for an order for the grant of a new tenancy. Under one procedure the landlord under s 25 gives notice to the tenant terminating the current tenancy at a future date. Section 25(5) provides:
‘A notice under this section shall not have effect unless it requires the tenant, within two months after the giving of the notice, to notify the landlord in writing whether or not, at the date of termination, the tenant will be willing to give up possession of the property comprised in the tenancy.’
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Section 29(2), referring to an application by the tenant to the court for a new tenancy, provides that:
‘Where such an application is made in consequence of a notice given by the landlord under section twenty-five of this Act, it shall not be entertained unless the tenant has duly notified the landlord that he will not be willing at the date of termination to give up possession of the property comprised in the tenancy.’
I think the word ‘duly’ must mean in compliance with the requirements referred to in s 25(5), which are that the notification must be in writing and that it must be given within two months after the giving of the landlord’s termination notice. Under the other procedure the tenant under s 26 makes a request to the landlord for a new tenancy. Subsection (6) provides:
‘Within two months of the making of a tenant’s request for a new tenancy the landlord may give notice to the tenant that he will oppose an application to the court for the grant of a new tenancy, and any such notice shall state on which of the grounds mentioned in section thirty of this Act the landlord will oppose the application.’
Then there is a provision which is common to both of the procedures. Section 29(3) provides:
‘No application under subsection (1) of section twenty-four of this Act shall be entertained unless it is made not less than two nor more than four months after the giving of the landlord’s notice under section twenty-five of this Act or, as the case may be, after the making of the tenant’s request for a new tenancy.’
It is easy enough to see why the application has to be made not more than four months after the landlord’s notice of termination or he tenant’s request for a new tenancy. The general object must be to enable the landlord to know, after the four months have expired without any application being made, that he can make his arrangements on the basis that the tenant is not applying for a new tenancy. On the other hand there seems to be no satisfactory explanation of the unqualified minimum requirement that the application must be made not less than two months after the landlord’s notice of termination or the tenant’s request for a new tenancy. It is true that the tenant has under s 25(5) two months for giving notice whether or not he is willing to give up possession, and the landlord has under s 26(6) two months for giving notice that he will oppose the application. The tenant or the landlord must not be deprived of his two months’ period, if he needs it. But when the tenant or the landlord has given his notice in less than two months—say in one month—why cannot the application then be made forthwith? There does not seem to be any sufficient reason for this delay being imposed in such a case.
However that may be, there is the statutory provision that no application for a new tenancy ‘shall be entertained’ unless it is made not less than two months after the giving of the landlord’s notice of termination or the making of the tenant’s request as the case may be.
The facts which are material for this appeal can be stated quite shortly. On 2 August 1968, the tenants made to the landlords their request for a new tenancy. On 15 August 1968, the landlords gave to the tenants notice that they would oppose an application for the grant of a new tenancy, and stated their ground of opposition. On 4 September 1968, the tenants applied to the court by originating summons for a new tenancy, and the originating summons was served on the landlords. On 19 September 1968, the landlords delivered to the tenants their answer to the application. On 30 September 1968, the landlords’ solicitors informed the tenants’ solicitors that the landlords would be willing to pay compensation. The compensation would have been payable under s 37, if the landlords had successfully opposed the application for a new tenancy on the ground stated in their answer, namely that they intended on the termination of the tenants’ current tenancy to occupy the holding for the purposes or partly for the purposes of a business to be carried on by the landlords therein.
On 9 October 1968, the landlords’ solicitors wrote to the tenants’ solicitors confirming a conversation in which they had agreed that the hearing should in the first instance be limited to the question whether or not the tenants were entitled to a new
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lease, and then the court should be asked to fix a special date for the hearing. They also said it would be helpful to them if a special date could be fixed for some date after 18 November 1968. On 17 October 1968, the landlords’ solicitors wrote to the registrar of the county court saying that it would be of considerable assistance both to them and to the tenants’ solicitors if the hearing could be fixed for some date subsequent to 1 December 1968. In pursuance of this request the hearing was fixed for 9 December 1968.
On or about 2 December 1968, the period of four months after the making of the tenants’ request for a new tenancy elapsed, and s 29(3) prevented the making of any fresh application to the court for a new tenancy. On 5 December 1968, the landlords’ solicitors notified the tenants’ solicitors that they had been advised by counsel instructed on behalf of the landlords that at the hearing of the application he would take a preliminary objection that the application was invalid under s 29(3) because it was made less than two months after the making of the tenants’ request for a new tenancy.
Two questions arise, viz: (1) whether the requirements of s 29(3) are jurisdictional, so that the court has no jurisdiction in any case to entertain an application made prematurely, or whether the requirements are only procedural, so that the landlords have a right to ignore or object to a premature application but can waive their right? (2) If the requirements are only procedural, did the landlords in this case by their conduct waive their right to ignore or object to the premature application?
On the first question, which is one of construction, the landlords rely on the wording of the provision. It says that a premature application ‘shall not be entertained’, and that is an instruction to the court and seems on the face of it to limit the jurisdiction of the court and not to make or allow for any exception for a case in which the landlords’ conduct might be held to amount to a waiver of the requirement. Undoubtedly that argument, which was accepted by the learned county court judge and by the majority of the Court of Appeal ([1969] 3 All ER 1278, [1969] 3 WLR 799), is formidable. There are, however, also formidable points taken on the other side by Sachs LJ. In his judgment he showed that strange results could ensue if the landlords’ argument on construction were correct. He said ([1969] 3 All ER at 1271, 1272, [1969] 3 WLR at 803, 804):
‘Had the tenants’ solicitor discovered on 4th October that he had commenced proceedings too soon, had he then asked the landlords’ solicitor whether the latter insisted on his abandoning the application and starting fresh proceedings, and had the latter sensibly and realistically said “Of course that is not necessary” the court would still have had no jurisdiction and would have been bound to dismiss the application even if both parties, as they would in honour be bound to do, asked him to continue and determine the matter. Indeed, if the county court judge had inadvertently not discovered the point and proceeded to judgment, it is asserted that that judgment would have been a nullity. It was part of the landlords’ case that it was the duty of the court to raise the point. A similar result would eventuate under s 29(2) … It is in that behalf asserted that, if the tenants’ solicitor had, for instance, asked if the landlords’ solicitor would accept notice three days out of time because the former’s partner had suddenly been taken to hospital and if that request had reasonably been accepted, again the court would have been left with no jurisdiction.’
Sachs LJ also referred to phrases which have been used in statutes of limitation and have been held not to limit the jurisdiction of the court, but to have the effect that, in a case where the period of limitation has expired, the defendant has the right to plead and prove that the plaintiff’s claim is statute-barred but if the defendant does not ‘plead the statute’ he loses his right. Instances of such phrases are ‘All actions …
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shall be commenced within’, no action shall ‘lie or be instituted’, ‘No action shall be maintainable’ and ‘No action shall be brought’. As Sachs LJ said ([1969] 3 All ERd at 1271, [1969] 3 WLR at 803): ‘ … the distinction between “no application shall be entertained” and “no action shall be maintainable” seems somewhat fine.’
There is, however, a reported case (although I think it was not cited in the argument) in which the statutory phrase, on the construction of which the decision turned, seems indistinguishable from ‘No application … shall be entertained’. The case is Graham v Ingleby and Glover. The Act 4 Anne c 16, s 11, enacted that:
‘No dilatory plea shall be received in any court of record, unless the party offering such plea do by affidavit prove the truth thereof, or shew some probable matter to the Court to induce them to believe that the fact of such dilatory plea is true’
The defendant pleaded in abatement, and purported to verify the plea by an affidavit, but the words ‘before me’ were omitted from the jurat. The plaintiff replied by traversing the plea, made up the issue and delivered it, with notice of trial for the ensuing Liverpool Assizes. Also both parties took further steps in the action. Pollock CB said ((1848) 1 Exch at 655):
‘The affidavit is bad, by reason of the omission of the words “before me” in the jurat. It is the same as if there had been no affidavit. With respect to the other question … suppose there had been no affidavit whatever, and the plaintiff had replied, joining issue, and a trial had taken place, the event of which was a verdict in favour of the defendant, upon which judgment was entered up, could the whole proceedings have been set aside because there was no affidavit? It is clear they could not. The question then is, what is the meaning of the statute of Anne? In my opinion, that act had not any public policy for its object, but solely the protection of plaintiffs against the delivery and effect of dilatory pleas. It enacts, that no such plea shall be received, unless verified by affidavit. If a plaintiff chooses to waive that provision, which is introduced for his benefit, he cannot afterwards sign judgment for want of such affidavit.’
Parke B said ((1848) 1 Exch at 655, 656):
‘I concur in opinion with the Lord Chief Baron … The present affidavit is equivalent to no affidavit. The question then is, what is the meaning of the statute of Anne, which requires an affidavit of verification as a condition precedent to a valid plea in abatement? If that enactment be intended for the sole benefit of plaintiffs, then the maxim applies “Quilibet potest renunciare juri pro se introducto“. It is evidence that the requirements of that statute are solely for the benefit of plaintiffs, and in order to prevent them from being delayed in their suits; and that they have no reference whatever to other suitors, or to the rest of the Queen’s subjects. It follows that, although an affidavit is so defective as to amount to no affidavit, a plaintiff may, if he choose, waive the benefit of his right, and join issue on the plea and go to trial; and if he does so, he cannot afterwards avail himself of the provisions of the statute. So, if he should demur to the plea, he would, in like manner, waive the benefit of the statute. If it were otherwise the inconvenience would be great, as already pointed out.’
Alderson B gave a judgment to the same effect and Platt B concurred. In my opinion that cogent reasoning of a strong court is applicable and should be applied in the
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present case to the construction of the phrase ‘No application … shall be entertained in s 29(3). The provision is solely for the benefit of landlords and not for the benefit of other suitors or the rest of the Queen’s subjects, and it has no discernible public policy for its object. Accordingly, I am of opinion that the requirements of s 29(3) are only procedural, and consequently the landlords had a right to ignore or object to the tenants’ premature application but could waive that right.
The remaining question is whether the landlords did by their conduct waive that right. When the landlords received the tenants’ application by originating summons for a new tenancy, there were two courses open to the landlords. They could treat the application as invalid, ignoring it or objecting to it as premature. Or they could treat the application as valid. In fact they did treat the application as valid by delivering their answer and taking further steps on the basis that the application was valid. But in order to establish a waiver by the landlords, the tenants have to show that the landlords at the material time had knowledge of the irregularity—of the defectiveness of the application. What is meant by the landlords having knowledge of the irregularity? Is it enough for the tenants to show that the landlords knew the relevant facts? If so, there is no difficulty on this point. Plainly the landlords did know the relevant facts; they knew the date of the tenants’ request, because it was made to them; they knew the date of their own notice of opposition (if this is relevant); and they knew the date of the application, being much less than two months after the date of the request. Do the tenants also have to show that the landlords appreciated the legal position resulting from the relevant facts, ie that the application was defective and that the landlords were entitled to treat it as invalid? If the tenants had to show that, it is at least doubtful whether they could succeed. They adduced no evidence of the date on which the landlords were advised by their counsel of the defectiveness of the application and their right to treat it as invalid. It appears from the judgment of Sachs LJ that information was given to the Court of Appeal ([1969] 3 All ER at 1270, [1969] 3 WLR at 802) that there was a period before 2 December 1968 when the landlords’ solicitors were aware of this point. But there is no indication as to the length of that period, and certainly nothing to indicate that the landlords’ solicitors were aware of this point when they wrote their letters of 30 September and 9th and 17 October 1968. Is it incumbent on the tenants to prove when the landlords’ solicitors received counsel’s advice as to the legal position? I do not see how they could prove it. Only the landlords and their legal advisers would have the information, and if they were asked to disclose it—whether by discovery of documents or by answer to interrogatories or by answers to questions in cross-examination—they would be entitled to refuse on grounds of legal professional privilege. I do not think that the law imposes on the tenants such an unreasonable burden of proof. In my opinion the knowledge which is required for waiver—that is to say the knowledge which the party alleged to have waived his right must be shown to have had at the material time—is only knowledge of the relevant facts. The party alleging waiver does not have to show that the party alleged to have waived his right appreciated the legal position resulting from the relevant facts. This conclusion is supported by well-established authority. In Matthews v Smallowood ([1910] 1 Ch at 786, 787, [1908–10] All ER Rep at 541, 542) Parker J said:
‘I think that the law on the subject of waiver is reasonably clear. The right to re-enter is a legal right which, apart from release or abandonment or waiver, will exist, and can be exercised, at any time within the period fixed by the Statutes of Limitation; and if a defendant in an action of ejectment based upon that right of re-entry alleges a release or abandonment or waiver, logically speaking the onus ought to lie on him to shew the release or the abandonment or the waiver. Waiver of a right of re-entry can only occur where the lessor, with knowledge of the facts upon which his right to re-enter arises, does some unequivocal act
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recognising the continued existence of the lease. It is not enough that he should do the act which recognises, or appears to recognise, the continued existence of the lease, unless, at the time when the act is done, he has knowledge of the facts under which, or from which, his right of entry arose. Therefore we get the principle that, though an act of waiver operates with regard to all known breaches, it does not operate with regard to breaches which were unknown to the lessor at the time when the act took place. It is also, I think, reasonably clear upon the cases that whether the act, coupled with the knowledge, constitutes a waiver is a question which the law decides, and therefore it is not open to a lessor who has knowledge of the breach to say “I will treat the tenancy as existing, and I will receive the rent, or I will take advantage of my power as landlord to distrain; but I tell you that all I shall do will be without prejudice to my right to re-enter, which I intend to reserve.” That is a position which he is not entitled to take up. If, knowing of the breach, he does distrain, or does receive the rent, then by law he waives the breach, and nothing which he can say by way of protest against the law will avail him anything. Logically, therefore, a person who relies upon waiver ought to shew, first, an act unequivocally recognising the subsistence of the lease, and, secondly, knowledge of the circumstances from which the right of re-entry arises at the time when that act is performed.’
This passage was referred to and followed by Astbury J in Davenport v Smith[1921] 2 Ch 270 at 274, 265 (). In Fuller’s Theatre and Vaudeville Co Ltd v Rofe ([1923] AC 435 at 443), Lord Atkinson delivering the judgment of the Judicial Committee said, with reference to this passage:
‘In Matthews v. Smallwood Parker J. laid down in terms which have often since been approved of, the law upon this question of waiver with his accustomed clearness and accuracy.’
In my opinion, therefore, for the purposes of waiver the landlords are shown by the evidence to have had sufficient knowledge of the irregularity. There is, however, a point to be considered under the County Court Rules. Order 9, r 8, provides that ‘the delivery of a defence shall not operate as a waiver of … any irregularity in the process’. The document in this case was not a ‘defence:, it was an ‘answer’ under Ord 40, r 8(2). I think that by virtue of Ord 48, r 2, the provisions of Ord 9, r 8, can be applied to this answer. If that is right, the delivery of the answer cannot be relied on as a waiver. But the subsequent correspondence—the landlords’ solicitors’ letters of 30 September and 9 and 17 October 1968—were further documents treating the application of 4 September 1968 as valid and having the effect of inducing the tenants’ solicitors to proceed in reliance on that application and to let the time go by for putting in any fresh application.
In my opinion the landlords by those letters waived their right to treat the application of 4 September 1968 as invalid. I would allow the appeal.
LORD DIPLOCK. My Lords, the closely balanced division of opinion in your Lordships’s House and in the Court of Appeal ([1969] 3 All ER 1268, [1969] 3 WLR 799) as to the effect of s 29(3) of the Landlord and Tenant Act 1954 reflects once more competing approaches to the task of statutory construction—the literal and the purposive approach. The words to be construed are:
‘No application under subsection (1) of section twenty-four of this Act [ie an application by a tenant to the court for a new tenancy] shall be entertained
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unless it is made not less than two nor more than four months after the giving of the landlords’s notice under section twenty-five of this Act or, as the case may be, after the making of the tenant’s request for a new tenancy.’
Upon the literal approach, semantics and the rules of syntax alone could never justify the conclusion that the words ‘No application … shall be entertained unless’ meant that some applications should be entertained notwithstanding that neither of the conditions which follow the word ‘unless’ was fulfilled. It is not the meaning of ‘entertained’ that makes this conclusion impossible. It would be equally impossible whatever verb in the passive voice were substituted. It can be justified only on the assumption that the draftsman of the Act omitted to state in any words he used in the subsection an exception to the absolute prohibition to which Parliament must have intended it to be subject.
A conclusion that an exception was intended by Parliament, and what that exception was, can only be reached by using the purposive approach. This means answering the questions: what is the subject-matter of Part II of the Landlord and Tenant Act, 1954? What object in relation to that subject-matter did Parliament intend to achieve? What part in the achievement of that object was intended to be played by the prohibition in s 29(3)? Would it be inconsistent with achievement of that object if the prohibition were absolute? If so, what exception to or qualification of the prohibition is needed to make it consistent with that object?
The subject-matter of Part II of the Landlord and Tenant Act 1954 is the mutual rights and obligations of the parties to tenancies of business premises. Its object is to give to one of those parties, the tenant, a right enforceable by him against the other party, his landlord, to the grant of a new lease of the premises when his current lease comes to an end. It contains consequential provisions for the continuation of the existing tenancy with the object of enabling this right to be exercised by the tenant effectively, and provides for the enforcement of the right by the High Court or county court on application by the tenant. The Act contemplates that the right to a new lease which it confers on the tenant may be given effect to by agreement between the parties (s 28). An application to the court to enforce it is needed only (1) where the landlord opposes the grant of a new lease to the tenant, which he can do only on the grounds specified in s 30; or (2) where the landlord, though willing to grant a new lease, does not reach agreement with the tenant as to all its terms; or (3) where the landlord, though entitled to refuse to grant a new lease, is liable to pay compensation to the tenant under s 37, and he and the tenant do not agree to settle that liability without an order of the court (see s 38(2)).
The general policy of the Act to encourage the parties to a business tenancy to give effect by agreement to the rights conferred on the tenant by Part II is again exemplified by the provisions in ss 31 to 35 which require the court to incorporate in the new lease that it orders any terms which the landlord and the tenant agree between themselves. By s 36 the landlord and the tenant may agree not to act on the order after it has been made; and the tenant may require the order to be revoked. The only express restriction on agreements between landlord and tenant is on those which purport to preclude a tenant from making a request, or an application to the court, for a new tenancy or in certain cases agreements to exclude or reduce compensation under the Act if they are made before the right to compensation has accrued.
In view of the detailed analysis to which ss 25 and 26 have already been subjected by your Lordships, I will not rehearse their provisions for the procedure and the time-tables to be followed by landlords who want to terminate tenancies and tenants who want new ones. Suffice it to say that there are several provisions which say that a landlords’s or a tenant’s notice, as the case may be, ‘shall not have effect unless’ certain specified requirements as to its contents or as to the time at which it is given are fulfilled. These requirements are clearly imposed solely for the benefit of that party to whom the notice is given, whether he be the landlord or the tenant. It
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would seem inconsistent with the intention to encourage agreement between the parties disclosed in the other sections of Part II of the Act to attribute to Parliament an intention to preclude the parties to a tenancy from agreeing that a notice given by one of them should have effect notwithstanding that the specified requirements were not fulfilled. And apart from this distinctive feature of this particular statute, where in any Act which merely regulates the rights and obligations of private parties inter se, requirements to be complied with by one of those parties are imposed for the sole benefit of the other party, it would be inconsistent with their purpose if the party intended to be benefited were not entitled to dispense with the other party’s compliance in circumstances where it was in his own interest to do so.
On the purposive approach to statutory construction this is the reason why in a statute of this character a procedural requirement imposed for the benefit or protection of one party alone is construed as subject to the implied exception that it can be ‘waived’ by the party for whose benefit it is imposed even though the statute states the requirement in unqualified and unequivocal words. In this context ‘waived’ means that the party has chosen not to rely on the non-compliance of the other party with the requirement, or has disentitled himself from relying on it either by agreeing with the other party not to do so or because he has so conducted himself that it would not be fair to allow him to rely on the non-compliance. This is the construction which has been uniformly applied by the courts to the unqualified and unequivocal words in statutes of limitation which prohibit the bringing of legal proceedings after the lapse of a specified time. The rule does not depend on the precise words of prohibition which are used. They vary from statute to statute. In themselves they contain no indication that any exception to the prohibition was intended at all. It is thus impossible to arrive at the terms of the relevant exception by the literal approach. This can be done only by the purposive approach, viz imputing to Parliament an intention not to impose a prohibition inconsistent with the objects which the statute was designed to achieve, though the draftsman has omitted to incorporate in express words any reference to that intention. Subsections (2) and (3) of s 29 deal with procedure in the lis resulting from an application by a tenant to the court for the grant of a new tenancy, and sub-s (3), with which this appeal is immediately concerned, is a statute of limitation incorporated in the Act. It prohibits the bringing of legal proceedings by the tenant before or after the period specified. It is imposed for the benefit of the landlord alone.
For my part I do not find any guide to the intention of Parliament in fine distinctions which can be drawn between the words ‘shall not be entertained’ and the corresponding words of prohibition in other statutes of limitation. This would be to use the literal approach. But if it were right to adopt the literal approach the impossibility of finding an exception to the prohibition would not turn on verbal differences such as these. For the same reason I do not find any significance in the prohibition being expressed as a prohibition on the court itself rather than on the litigant invoking its process. This was so in Graham v Ingleby and Glover, which my noble and learned friend Lord Pearson has cited in his speech.
To argue that a prohibition on the court deprives the court of ‘jurisdiction’ while a prohibition on a party seeking to invoke the court’s process does not, is merely another way of expressing a distinction which on the literal approach can be drawn between the precise words of prohibition used. This argument might be valid if the exception of ‘waiver’ by the party for whose protection or benefit a limitation period had been imposed in other statutes of limitation had itself been derived from a literal approach to the precise words of prohibition used in them; but the argument lacks validity if that exception was derived, as it can only have been, from a purposive approach to the objects of the statutes in which the prohibitions appeared.
Page 894 of [1970] 2 All ER 871
Finally, a distinction between the prohibition imposed by s 29(3) and the prohibitions imposed by other statutes of limitation is sought to be drawn on the purposive as distinct from the literal approach. Reliance is placed on the circumstance that in other statutes of limitation the prohibition relates to the enforcement of rights to which the litigant on whom the prohibition is imposed was entitled before the statute was passed, whereas Part II of the Landlord and Tenant Act 1954 itself creates the only rights in respect of which it imposes the prohibition. This is true, but on the purposive approach I can see no reason why this distinction leads to the conclusion that Parliament intended that procedural requirements in the enforcement of that right, imposed solely for the protection or benefit of one party to the proceedings for enforcement, should not be capable of being ‘waived’ by that party.
I would therefore hold in agreement with the majority of your Lordships that the requirement that the tenants’ application for the grant of a new tenancy should be made not less than two months after the tenants’ request for a new tenancy was capable of being ‘waived’ by the landlords.
So it becomes necessary to consider whether the landlords did waive this requirement. ‘Waiver’ is a word which is sometimes used loosely to describe a number of different legal grounds on which a person may be debarred from asserting a substantive right which he once possessed or from raising a particular defence to a claim against him which would otherwise be available to him. We are not concerned in the instant appeal with the first type of waiver. This arises in a situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be the legal consequence of what he did. He is sometimes said to have ‘waived’ the alternative right, as for instance a right to forfeit a lease or to rescind a contract of sale for wrongful repudiation or breach of condition; but this is better categorised as ‘election’ rather than as ‘waiver’. It was this type of ‘waiver’ that Parker J was discussing in Matthews v Smallwood ([1910] 1 Ch at 786, 787, [1908–10] All ER Rep at 541, 542). The second type of waiver which debars a person from raising a particular defence to a claim against him, arises when he either agrees with the claimant not to raise that particular defence or so conducts himself as to be estopped from raising it. This is the type of waiver which constitutes the exception to a prohibition such as that imposed by s 29(3) of the Landlord and Tenant Act 1954 and other statutes of limitation. The ordinary principles of estoppel apply to it.
The county court judge was not prepared to find that the landlords were estopped from relying on their objection that the tenant’s application to the county court was out of time. He would however have been prepared to hold that they had ‘waived’ the objection if he had thought that he had jurisdiction to entertain the application at all. So would the Court of Appeal. He considered that the fact that they had taken a number of steps in the proceedings was in itself sufficient to amount to a ‘waiver’ by the landlords of any objection that the application was not properly brought. He relied on the practice of the High Court which is applicable in county court proceedings to matters which are not specifically dealt with in the County Court Rules. No doubt he had in mind, in particular, RSC Ord 2, r 2. But Ord 2 deals only with the effect of non-compliance with the requirements of rules of court. It has nothing to do with non-compliance with requirements imposed by a statute, and is in my view of no relevance in determining what constitutes a ‘waiver’ of the requirement contained in s 29(3).
My Lords, I think that the only kinds of ‘waiver’ that could avail the tenants in the instant case are either an estoppel in the strict sense of the term or a quasi-estoppel
Page 895 of [1970] 2 All ER 871
arising under the doctrine of promissory estoppel laid down in Central London Property Trust Ltd v High Trees House Ltd and Coombe v Coombe or under the older doctrine of ‘acquiescence’ expounded by Fry J in Willmott v Barber ((1880) 15 Ch D 96 at 105). I should be only too glad if I could find in the evidence before the county court judge material which would justify a finding of estoppel or quasi-estoppel on any of these grounds, but as to each of them it seems to me that the tenants have failed to establish at least one essential element.
As respects estoppel in the strict sense it is difficult to find in the conduct of the landlords in the proceedings or in the letters which their solicitors wrote any representation of an existing fact. Their answer to the tenants’ application and their letters prior to 5 December 1968 fairly bear the inference, as was the fact, that the only defence on which they then intended to rely was that arising under s 30(1) of the Act. But no inference can be drawn from this that they would not change their minds before the hearing and even if it could this would only operate as a promise which might possibly give rise to a promissory estoppel but not to an estoppel in the strict sense. Treated as a mere statement of the landlords’ present intention it would operate to estop them from denying that they had that intention at the time the letters were written; but that does not help the tenants on this appeal.
Whatever may be the other limits of a High Trees promissory estoppel it cannot arise unless there is a promise intended by the promisor to affect his existing legal relationship with the promisee on the faith of which the promisee has acted. I cannot spell out of the conduct and correspondence of the parties any promise by the landlords that they would never take the point that the tenants’ application was out of time, nor can I infer from what they did or said any intention on their part to affect their existing legal relationship with the tenants as lessors and lessee. Furthermore the tenants called no evidence to suggest that they themselves thought that the landlords were making any promise of this kind on which the tenants acted. So the tenants, in my view, also fail to establish the essential elements of any promissory estoppel.
Finally, as to ‘acquiescence’ it was as a result of agreement between the parties that the hearing of the tenants’ application was postponed until a date in December when it would be too late for the tenants to correct their error by making a fresh application. If the landlords had known of their own right to raise the objection that the application was out of time when they agreed to the December date of the hearing they would have been debarred by ‘acquiescence’ from relying on that right. The essential elements of quasi-estoppel by acquiescence are stated in Willmot v Barber ((1880) 15 Ch at 105). As respects the party relying on the acquiescence he must be mistaken as to his legal rights and must have done some act on the faith of his mistaken belief. These conditions are satisfied by the tenants, who agreed to the postponement of the hearing in the mistaken belief that they had a legal right to proceed to an adjudication on the application they had already made. One of the essential elements as respects the quasi-estopped by acquiescence is that he must have encouraged the other party to act as he did; and this encouragement may be active, as in the instant case by agreeing to the postponed date, or passive by refraining from asserting his own inconsistent legal right. But in contrast to estoppel in the strict sense of the term the party estopped by acquiescence must, at the time of his active or passive encouragement, know of the existence of his legal right and of the other party’s mistaken belief in his own inconsistent legal right. It is not enough that he should know of the facts which give rise to his legal right. He must also know that he is entitled to the legal right to which those facts give rise.
Page 896 of [1970] 2 All ER 871
My Lords, the only evidence as to the landlords’ knowledge of the existence of their own legal right to object to the application as being out of time is that they knew of it at the time they wrote their letter of 5 December 1968, by which date the tenants had already lost their own right to make a fresh application. Had there been evidence that the landlords acquired the knowledge of their right to take the objection, at some time before 22 December 1968, which was the last day on which the tenants could have made a fresh application, the question would have arisen whether their failure to inform the tenants of this constituted such passive encouragement of the tenants’ mistaken reliance on the validity of their existing application as would amount to ‘acquiescence’ in its validity. In view of the active part which the landlords had played in arranging for the date of the hearing to be postponed until after 2 December 1968, I have no doubt that their failure to inform the tenants with reasonable promptitude that their existing application was invalid would constitute passive encouragement of the tenants’ reliance on its validity and provide the necessary element for the quasi-estoppel of acquiescence.
So the date on which the landlords acquired that knowledge is crucial. If, as we have been informed and the letter itself suggests, the point was first appreciated by the landlords’ counsel, the landlords would be prevented from relying on the point unless they drew the attention of the tenants to it as soon as reasonably possible after their solicitors had received counsel’s opinion and has a reasonable opportunity to obtain the landlords’ instructions. But the onus lay on the tenants to establish acquiescence and to prove facts on which this defence to the preliminary point could be founded. They made no attempt to do so and the county court judge was left in the dark as to the date at which the landlords first became aware of their legal right to rely on the preliminary point.
Your Lordships must, I think, resist the temptation to fill this fatal gap in the tenants’ evidence by speculation. Though I do so with reluctance, I for my part feel compelled to dismiss this appeal.
Appeal dismissed.
Solicitors: Bridges, Sawtell & A J Adams (for the tenants); Ward Bowie & Co (for the landlords).
S A Hatteea Esq Barrister.
Volume 3
Simms v Moore
[1970] 3 All ER 1
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 14, 15 APRIL 1970
Magistrates – Clerk – Examination of witnesses by – Inherent power of justices to permit – Prosecution not legally represented at trial – Prosecution witness examined by clerk – Whether defendant prejudiced – Magistrates’ Courts Rules 1968 (SI 1968 No 1920), r 13.
Magistrates – Clerk – Examination of witnesses by – Written statement of witness made available to clerk – Statement to be made available to defence.
Magistrates – Clerk – Examination of witnesses by – General principles.
At the trial of the appellant before the justices on a charge of having an offensive weapon with him in a public place, the respondent, who had laid the information against the appellant and was a possible witness, was not legally represented; he handed to the justices’ clerk copies of the prosecution witnesses’ statements so that the clerk could examine the witnesses, which the clerk proceeded to do. The appellant, who was represented by counsel, objected to this course on the ground that the only person entitled to examine the prosecution witnesses was the respondent or his legal representative.
Held – (i) Justices have always had an inherent power to regulate the procedure in their courts in the interests of justice and a fair and expeditious trial, and, on its true construction, r 13 of the Magistrates’ Courts Rules 1968 dealt only with the order of the proceedings, in its provision that the prosecutor shall call the evidence for the prosecution; accordingly, since the respondent was the officer in charge of the case and a possible witness, it was clearly open to the justices to take the view that it would be better for the examination of the prosecution witnesses to be taken out of the respondent’s hands (see p 3 c and g and p 4 h, post).
Dictum of Lord Pearson in O’Toole v Scott [1965] 2 All ER at 247 applied.
(ii) Although, where witnesses’ statements were handed in, the other party should be allowed to see them and should preferably be handed a copy, in the present case counsel for the appellant could have seen the statements if he had so desired, and it was clear that there could be no valid suggestion that there had been other than a fair trial, or that the appellant had been prejudiced in anyway (see p 3 j to p 4 a and h, post).
Principles applicable to the examination of witnesses by the justices’ clerk (see p 4 b to h, post).
Notes
For the examination of witnesses by magistrates’ courts, see 25 Halsbury’s Laws (3rd Edn) 209, para 381.
Cases referred to in judgment
Hobby v Hobby [1954] 2 All ER 395, [1954] 1 WLR 1020, 118 JP 331, Digest (Cont Vol A) 829, 6843a.
O’Toole v Scott [1965] 2 All ER 240, [1965] AC 939, [1965] 2 WLR 1160, Digest (Cont Vol B) 512, * 1208Aa.
Page 2 of [1970] 3 All ER 1
Case stated
This was a case stated by justices for the Middlesex area of Greater London, acting in and for the petty sessional division of Edmonton, in respect of their adjudication as a magistrates’ court sitting at the Court House, Tottenham, on 10 October 1969.
On 15 May 1969, an information was preferred by the respondent, Christopher Moore, against the appellant, Walter George Simms, that he on 11 May 1969 without lawful authority or reasonable excuse had with him in a public place an offensive weapon, namely an iron bar at Beaufoy Road, N 17, contrary to s 1(1) of the Prevention of Crime Act 1953. The following facts were proved or admitted. On 11 May 1969, at 3.45 am a Mr Ratajckak saw the appellant in his motor car drive past Mr Ratajckak’s home at 37 Penshurst Road, looking towards it. The appellant stopped his car in Beaufoy Road, got out and walked towards 37 Penshurst Road, stopped and went back to his car. There had been bad feeling between Mr Ratajckak and the appellant because of the appellant’s association with Mrs Ratajckak. Pc Anderson was called to 37 Penshurst Road and after speaking to Mr Ratajckak went to the appellant’s car in the front of which he found the iron bar under the floor mat. The iron bar which was about 1 foot 6 inches long was an offensive weapon in that it was intended by the appellant for use for causing injury to the person. The appellant had no lawful authority or reasonable excuse for its possession.
The appellant was represented by counsel but the respondent was not represented. The respondent called the first witness, Mr Ratajckak, and then handed a copy of his statement to the clerk of the court so that he might question the witness.
It was contended on behalf of the appellant that the clerk of the court should not examine the respondent’s witness, although the respondent was not legally represented. It was submitted that the only person entitled to examine witnesses was the informant or his legal representative.
The justices were of the opinion that in the interests of justice, the prosecution not being represented, their clerk should question the prosecution witnesses from their statements to ascertain the truth. Accordingly they rejected the submission and after hearing all the evidence convicted the appellant and ordered him to pay a fine of £20 and the offensive weapon to be destroyed. The appellant now appealed.
N O G Murray for the appellant.
D H Farquharson for the respondent.
15 April 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal from a decision of justices for the Middlesex area of Greater London sitting at Tottenham, who convicted the appellant of having with him in a public place an offensive weapon, namely an iron bar, without lawful authority or reasonable excuse.
The short facts were that in May of last year there was ill-feeling between the appellant and a Mr Ratajckak. On 11 May, Mr Ratajckak claimed that he had seen the appellant drive past his house, stop his car and get out, and walk towards Mr Ratajckak’s house and then go back to his car. He was suspicious of the activities of the appellant, and thereupon rang up the police. A Pc Anderson then called at Mr Ratajckak’s house, and having spoken to him, went to the appellant’s car; in that car he found under the floor mat an iron bar about 1 foot 6 inches long. The justices found that that was an offensive weapon in that it was intended by the appellant for use for causing injury to the person, and they also found that the appellant had no lawful authority or reasonable excuse for possession of the iron bar, hence the conviction.
What has given rise to this appeal, however, is the course taken at the trial in regard to the examination of the prosecution witnesses. The respondent was not legally represented, and handed to the justices’ clerk copies of the witnesses’ statements so that he, the clerk, could examine the witnesses, which he proceeded to do. The appellant, on the other hand, was represented by counsel, and counsel objected
Page 3 of [1970] 3 All ER 1
to this course, submitting that the only person entitled to examine the prosecution witnesses was the respondent or his legal representative. This submission was based both at the trial and before this court mainly on the provisions of the Magistrates’ Courts Rules 1968a, r 13(1), which provides:
‘Order of evidence and speeches: information.—(1) On the summary trial of an information, where the accused does not plead guilty, the prosecutor shall call the evidence for the prosecution, and before doing so may address the court.’
Accordingly it was submitted that no one other than the prosecutor or his legal representative (see s 99 of the Magistrates’ Courts Act 1952) was entitled to examine the prosecution witnesses. For my part I am quite unable, as were the justices, to accede to that submission. Justices have always had an inherent power to regulate the procedure in their courts in the interests of justice and a fair and expeditious trial. It is unnecessary to go through the history of the matte, and for my part I would only refer to a passage in the advice given by the Judicial Committee in O’Toole v Scott ([1965] 2 All ER 240 at 247, [1965] AC 939 at 958, 959) where Lord Pearson said:
‘There remains for consideration the appellant’s alternative contention to the effect that, if the magistrate has a discretionary power to permit some person, not being the informant or his counsel or attorney, to conduct the case for the informant, such power is properly exercisable only on the facts of a particular case where for some special reason it is necessary for the administration of justice that such permission be given … There is however no sound basis for either point. There is no statutory limitation of the discretion; the discretion is not conferred by statute, but is an element or consequence of the inherent right of a judge or magistrate to regulate the proceedings in his court. There is no reason in principle for limiting the discretion as suggested. It can be exercised either on general grounds common to many cases or on special grounds arising in a particular case. Its exercise should not be confined to cases where there is a strict necessity, it should be regarded as proper for a magistrate to exercise the discretion in order to secure or promote convenience and expedition and efficiency in the administration of justice.’
No statute, whether the Summary Jurisdiction Act 1848 or the Magistrates’ Courts Act 1952, has abrogated that right. True, rights of representation have been expressly given, but not so as to prevent the justices from allowing someone else, as in this case, to examine the witnesses. Rule 13, which was so much relied on, clearly deals only with the order of the proceedings, but even if it purported to do more, it must be read, in my opinion, as merely directory and not mandatory. In fact, the respondent was the officer in charge of the case, and a witness, or a possible witness. In these circumstances it was clearly open to the justices to take the view that it would be better for the examination of the prosecution witnesses to be taken out of his hands.
Before this court, counsel for the appellant made a further submission based on the fact that the witnesses’ statements were handed in. It was said that this was objectionable on the ground that it conflicted with the principle that justice must manifestly be seen to be done. I am clearly of the opinion that when this course is taken, and a course clearly convenient, the other party should be allowed to see the statement and should preferably be handed a copy. So far, however, as the present case is concerned, the appellant, as I have already said, was represented by counsel who could have seen the statements if he had so desired. I am quite clear that there can be no valid suggestion in the present case that there has been other than a fair
Page 4 of [1970] 3 All ER 1
trial, or that the appellant has been prejudiced in any way. Indeed, the matter was very frankly conceded by counsel for the appellant. Accordingly I would dismiss this appeal.
That is enough to decide the present case, but the court was informed by counsel on both sides that the examination of witnesses by the justices’ clerk was happening constantly at magistrates’ courts up and down the country, and this prompts me to add the following observations: (1) in general, neither the court nor the justices’ clerk should take an active part in the proceedings except to clear up ambiguities in the evidence. (2) So far as examining witnesses is concerned, this should never be done if the party concerned is legally represented; see Hobby v Hobby ([1954] 2 All ER 395 at 400, [1954] 1 WLR 1020 at 1024, 1025) where Sachs J said ([1954] 2 All ER 395 at 400, [1954] 1 WLR 1020 at 1024, 1025):
‘Both parties were represented at the trial by solicitors. Accordingly, neither of them was in need of assistance as to how to present the case to the court. Both parties were entitled, within the limits of relevancy and reasonableness, so to conduct their case as seemed best to their legal representatives in court. In those circumstances a justices’ clerk is no more entitled to step into the arena and conduct a litigant’s case for him than is a justice himsef. Indeed, it is important in the interests of justice that the clerk should not give even the appearance of seeking himself to conduct the case of either party or to limit the way in which that case is conducted.’
Nor in my opinion should this be done where a party, although unrepresented, is competent to and desires to examine the witnesses himself. (3) Where, however, the unrepresented party, whoever he may be, is not competent, through a lack of knowledge of court procedure or rules of evidence or otherwise, to examine the witnesses properly, the court can at its discretion permit the clerk to do so. (4) When this is permitted, there is no reason why the clerk should not do so by reference to a proof of evidence or statement handed in to him, provided always that an opportunity is given to the other side to see it or to have a copy. (5) Where notes of evidence have to be or are taken, care should be taken not to use the proof or statement as the basis of the notes; see Hobby v Hobby, already referred to. The best course is for it to be arranged that someone else, possibly a member of the court itself, should take the note. (6) Generally, the discretion in the court should be so exercised that examination of witnesses by the clerk should only be permitted when there are reasonable grounds for thinking that thereby the interests of justices would be best promoted, care being taken to see that nothing is done which conflicts with the rules of natural justice or the principle that justice must manifestly be seen to be done. (7) The foregoing propositions in no way derogate from the express provisions of s 61 of the Magistrates’ Courts Act 1952, governing procedure in domestic and bastardy proceedings. They might indeed be said to be an application, in a wide context, of the principles which underlie the provisions of that section.
BRIDGE J. I fully concur both in the dismissal of this appeal and in the general observations which have fallen from Lord Parker CJ.
BEAN J. I also agree.
Appeal dismissed.
Solicitors: Bishop & Co (for the appellant); Solicitor, Metropolitan Police (for the respondent).
Kaushalya Purie-Harwell Barrister.
Nutkins v Nutkins (Brown cited)
[1970] 3 All ER 5
Categories: FAMILY; Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): DUNN J
Hearing Date(s): 27 APRIL 1970
Divorce – Practice – Service – Substituted service – Judgment summons – Judgment summons in respect of arrears under order for interim maintenance – Matrimonial Causes Rules 1968 (SI 1968 No 219), r 87(5) – RSC Ord 65, r 4(1).
In a proper case an order may be made under RSC Ord 65, r 4(1)a, for the substituted service of a judgment summons in respect of arrears under an order for interim maintenance, notwithstanding the provision for personal service in r 87(5)b of the Matrimonial Causes Rules 1968(see p 6 h, post).
Dicta of Davies J in Worboys v Worboys [1953] 1 All ER at 859, 861 applied.
Notes
For substituted service in matrimonial proceedings, see 12 Halsbury’s Laws (3rd Edn) 333, 334, para 685, and for a case on the subject, see 27 Digest (Repl) 497, 4391.
Case referred to in judgment
Worboys v Worboys [1953] 1 All ER 857, [1953] P 192, [1953] 2 WLR 901, Digest (Cont Vol A) 766, 4522a.
Summons
This was an application by the wife, Carol Ann Brown (formerly Nutkins), for an order for substituted service of an order made by the registrar on 20 October 1969 whereby he directed the husband, Peter Frank Nutkins, to pay arrears of interim maintenance amounting to £52 10s. The case was heard in chambers but adjourned into open court for judgment.
H V Kahn, solicitor, for the wife.
The husband did not appear and was not represented.
27 April 1970. The following judgment was delivered.
DUNN J. This is an application for substituted service of a judgment summons on the husband who is alleged to be in arrears under an order for interim maintenance which was made on 20 October 1969. The arrears are said to be some £52 10s.
When the matter came before me last week I was told that a difficulty was felt in the registry because the view had been taken there in a previous case that under the Matrimonial Causes Rules 1968c there was no power to make an order for substituted service of a judgment summons. The matter arises in this way: the position was formerly governed by the Matrimonial Causes (Judgment Summons) Rules 1952d; under r 4 of those rules it was provided that unless othewise directed, a judgment summons should be served personally on the debtor and there were express provisions in r 4(2) for applications for substituted service; the Matrimonial Causes (Judgment Summons) Rules 1952 have now been superseded by the Matrimonial Causes Rules 1968; r 87(5) of those rules provides that every judgment summons shall be served on the debtor personally, and there is no provision in those rules for substituted service. The difficulty that was felt by the registry was that
Page 6 of [1970] 3 All ER 5
having regard to that amendment of the rules, the power to order substituted service had been removed.
It was submitted by the solicitor for the wife that the position was covered by a combination of r 3 of the Matrimonial Causes Rules 1968 and RSC Ord 65, r 4. Rule 3 is the rule which renders the Rules of the Supreme Court applicable, with the necessary modifications, to the practice and procedure in matrimonial proceedings. RSC Ord 65, r 4(1) provides:
‘If, in the case of any document which by virtue of any provision of these rules is required to be served personally on any person, it appears to the Court that it is impracticable for any reason to serve that document personally on that person, the Court may make an order for substituted service of that document.’
A somewhat similar point came before the court in Worboys v Worboys. The question in that case was whether the court had power to direct substituted service on a husband of an order to pay into court, or give security for, the wife’s costs. The situation under the rules was almost identical to the situation in relation to the service of judgment summonses under the present rules, because under r 62(2) of the Matrimonial Causes Rules 1950e, which were then in force, personal service of such an order was required. In his judgment Davies J held that the Rule of the Supreme Court relating to substituted service was incorporated into the Matrimonial Causes Rules 1950, so as to render it possible to make an order for substituted service in the case in question, notwithstanding the express provision in r 62(2) of the Matrimonial Causes Rules 1950 that the document should be served personally.
It is perfectly true that the Rules of the Supreme Court which were then applicable were in slightly different terms to the present RSC Ord 65, r 4, because under the previous rule which governed substituted service (which was in those days RSC Ord 67, r 6) it was provided that ‘Where personal service of any … order … is required by these rules or otherwise … ’ the court or a judge may make an order for substituted service. In the present rule the words ‘or otherwise’ do not appear; the rule simply provides:
‘… in the case of any document which by virtue of any provision of these rules is required to be served personally … the Court may make an order for substituted service … ’
In my judgment the omission of the words ‘or otherwise’ does not affect the meaning of the rule and, for what it is worth, in a note in the Supreme Court Practice 1970f it is said that:
‘The change in the wording of the new Rules makes no material change in the law or practice relating to substituted service.’
In this case, as Davies J held in Worboys v Worboys, I take the view that the case is covered by the present RSC Ord 65, r 4, and that therefore in a proper case an order for substituted service of a judgment summons may be made. I say ‘in a proper case’ because it is a matter for the discretion of the court in a particular case whether or not an order should be made, and that discretion is exercised on well-known principles. I would add that at the end of his judgment in Worboys v Worboys ([1953] 1 All ER at 859, [1953] P at 198), the matter having been argued very fully before him and a great number of authorities having been cited to him, the learned judge said:
‘On the authorities that were cited to me I am satisfied that for very many years it has been the practice of all Divisions of this court, in appropriate cases and where the facts justified it, to give leave for substituted service, not merely
Page 7 of [1970] 3 All ER 5
of orders such as these on which attachments may issue, but of the motion for attachment itself.’
Later he said ([1953] 1 All ER at 861, [1953] P at 202):
‘I am convinced, therefore, that when the change in the wording of r. 62(2) was made in the Matrimonial Causes Rules, 1947g, it was never intended to depart from that long-established and most useful practice or to deprive the court of its power to make orders for substituted service in such cases.’
I apply the reasoning of the learned judge to the change in the rules for the service of judgment summonses which has been incorporated into the Matrimonial Causes Rules 1968. I am quite certain that it was never intended that the power of the court to order substituted service of judgment summonses should be removed.
I have had put before me an affidavit setting out attempts to serve the husband, and it is perfectly plain to me that he is evading service. I accordingly make an order that the judgment summons may be served by sending copies thereof by first class, prepaid post addressed to the husband.
Order accordingly.
Solicitors: Cripps, Harries, Willis & Carter (for the wife).
Alice Bloomfield Barrister.
Fox v Stirk and another
Ricketts v Registration Officer for the City of Cambridge
[1970] 3 All ER 7
Categories: CONSTITUTIONAL; Elections
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 11, 12 MAY 1970
Elections – Parliamentary – Qualification to vote – Residence – Residence on qualifying date – University students in halls of residence or colleges on qualifying date – Whether ‘resident’ – Representation of the People Act 1949, ss 1, 4(1).
By s 1(1)a of the Representation of the People Act 1949, the persons entitled to vote at a Parliamentary election in any constituency were those who were ‘resident’ there on the qualifying date wich was 10 October in any year. On 10 October 1969, the appellants, who were students at the Universities of Bristol and Cambridge, were installed in their halls of residence or colleges, having arrived for the new academic year which had begun a day or two previously. They were entitled, and were required, to occupy their rooms in hall or college, where they lived and slept, for some 26 or 30 weeks in the ensuing year, that is druing term ime, but in practice many students were in residence for a great deal longer in order to pursue their studies. Students had, however, no right to occupy their rooms in hall or college for six weeks in the year, namely, a week at Christmas and at Easter and four weeks in the summer vacation and permission to occupy their rooms would not be given during those weeks; and during the rest of the vacations they had no right to occupy their rooms except with the permission of the authorities. The appellants appealed
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against decisions of the electoral registration officers for Bristol and Cambridge that they were not entitled to be entered on the 1970 register of electors for those places because, although otherwise qualified, they were not resident in Bristol or Cambridge within s 1 of the 1949 Act on the qualifying date, 10 October 1969.
Held – Having regard to the ordinary meaning of the word ‘resident’, and to s 4(1)b of the Representation of the People Act 1949, the following principles were applicable to the question of residence on the qualifying date for the purpose of s 1 of the 1949 Act: a person could have two residences and be resident in both (though he could only vote at one place); temporary presence at an address did not make a person resident there, but temporary absence did not deprive a person of his residence; and a person was properly ‘resident’ in a place when his stay there had a considerable degree of permanence (see p 11 h to p 12 a and c, p 12 j to p 13 a and e and p 14 f, post), Accordingly, the test whether students had a right to their rooms throughout the year did not apply to the 1949 Act, in which there was no qualifying period of residence but only a qualifying date (see p 11 g, p 12 h, and p 14 d and g, post); the appellants were not diqualified from voting at Bristol or Cambridge simply because their parental home was elsewhere in England for they could be ‘resident’ both at their homes and at Bristol or Cambridge; and on the facts, on the qualifying date, 10 October 1969, there was a sufficient degree of permanence in the stay of the appellants in Bristol or Cambridge to make them ‘resident’ there within the meaning of s 1 of the 1949 Act. The appellants were therefore entitled to be on the electoral registers for Bristol or Cambridge (see p 12 b, c and f, p 14 c and e and p 15 f, post).
Tanner v Carter (1885) 16 QBD 231 distinguished.
Dictum of Viscount Cave LC in Levene v Inland Revenue Comrs [1928] All ER Rep at 749 applied.
Notes
For the requirement of residence for registration as an elector, see 14 Halsbury’s Laws (3rd Edn) 13, 14, paras 17–19; and for cases on the subject, see 20 Digest (Repl) 11–13, 41–75.
For the Representation of the People Act 1949, ss 1, 4, see 11 Halsbury’s Laws (3rd Edn) 547, 550.
Cases referred to in judgment
Barlow v Smith (1892) 9 TLR 57, 20 Digest (Repl) 11, 47.
Ford v Hart (1873) LR 9 CP 273, 43 LJCP 24, 29 LT 685, 38 JP 216, 20 Digest (Repl) 13, 71.
Levene v Inland Revenue Comrs [1928] AC 217, [1928] All ER Rep 746, 97 LJKB 377, 139 LT 1, 13 Tax Cas 486, 28 Digest (Repl) 250, 1105.
Tanner v Carter, Banks v Mansell (1885) 16 QBD 231, 55 LJKB 27, 53 LT 663, 49 JP 790, 20 Digest (Repl) 13, 72.
Cases and authorities also cited
Baxter’s Case (1869) 20 LT 308.
Bond v St George, Hanover Square Overseers (1870) LR 6 CP 312.
Miesegaes v Inland Revenue Comrs (1957) 37 Tax Cas 493.
R v Exeter (Mayor), Westcomb’s Case (1868) LR 4 QB 110.
Maitland’s Constitutional History of England, p 352.
Appeals
The first appeal was an appeal by Julian Fox from the order of his Honour Judge Sheldon, made at Bristol county court on 11 February 1970, affirming the decision
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of the respondent, the electoral registration officer for the city and county of Bristol, that Mr Fox’s name should not be included in the 1970 register of electors for the Parliamentary constituency of Bristol North West because he was not resident in the constituency on the qualifying date, 10 October 1969; Peter Laurence Stirk, the original objector, was also a respondent to this appeal. The second appeal was an appeal by Hugh Nelson Ricketts from the order of his Honour Judge Gage, made at Cambridge county court on 19 February 1970, affirming the decision of the electoral registration officer for the city of Cambridge that Mr Ricketts’s name should not be included in the Parliamentary register of electors for the city of Cambridge because he was not resident there on the qualifying date, 10 October 1969.
The facts relating to the appeal of Mr Fox were as follows. He was one of 16 graduate and undergraduate students of Bristol University who appealed, pursuant to s 45 of the Representation of the People Act 1949, to the Bristol county court against the refusal of the electoral registration officer to include their names in the 1970 register of electors for the Bristol North West constituency because they were not, on the qualifying date, 10 October 1969, resident in the constituency within s 1 of the Representation of the People Act 1949, as amended by the Representation of the People Act 1969. On 29 January 1970, his Honour Judge Paton, exercising his powers under CCR Ord 43, r 8, and being satisfied that all the appeals involved the same point of law, directed that the appeal of one of the students, Mr English, should be heard as a test case. The other appellants, including the present appellant, Mr Fox, accepted this direction, and that an order similar to that made on the selected appeal would be made in each of their appeals. The following were the material facts common to all the appeals. Throughout the three academic terms of the university year which for the 1969–1970 academic year ran from 2 October to 12 December 1969 9 January to 20 March 1970 and 17 April to 19 June 1970, and amounted in the aggregate to 29 weeks and four days, each appellant lived in a hall of residence. Students were admitted to hall on an annual basis, and the warden’s permission had to be obtained for residence for a shorter or longer time than the normal period, or for absence for a night. Although no student had the right to reside in hall out of term time, permission to remain there during some part of the vacation would readily be granted to graduate students, and to a limited extent, to undergraduate students, if accommodation was available and the warden was satisfied that permission was necessary to pursue studies or for some other reason. As a general rule, however, each hall of residence was completely closed for about six or seven weeks during the year ie, for a week in the Christmas and Easter vacations and for four or five weeks in the summer; and the warden reserved the right to use or let rooms when students were not in residence to accommodate visitors attending vacation seminars or conferences. Although a student, even if not personally resident in hall during the Christmas or Easter vacations, was permitted to leave his personal effects in his room, he might be required to leave some drawer and cupboard space available for visitors; and at the end of the summer term he was required to remove all his belongings from his room. There was no certainty that a student would be allocated the same, or any, accommodation in hall during the following academic year. Each of the appellants was of voting age.
The facts regarding the appeal of Mr Ricketts were that 29 graduate and undergraduate members of Cambridge University appealed to the county court under s 45 of the 1949 Act from the electoral registration officer’s decision that they were not entitled to be put in the 1970 electoral register for the city of Cambridge because they were not resident there on the qualifying date, 10 October 1969, although otherwise qualified to be on the register. The county court judge did not, in these appeals, exercise his power to select a representative case as a test case but the parties agreed to select the case of Mr Ricketts, who was a member of Churchill College, to be heard as a typical case which would govern the other cases. The relevant facts were that undergraduate members of the university were required to spend 59
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nights in the Michaelmas term and the Lent term, and 52 nights in the Easter term in residence in college. In fact many undergraduates spent much more time than this in college, many of them being required, or choosing, to keep a vacation term in the long vacation. In the result, Mr Ricketts and most other undergraduates, spent over six months of the year in Cambridge. The rest of the year was not necessarily spent in the parental house because young men found it necessary to do some vacation work, or spent part of their term abroad. In Churchill College, undergraduates might, without permission, occupy their rooms during full term, but during the vacation it was necessary to get the permission of the college authorities if they wished to occupy their rooms. Such permission was readily granted if the authorities were satisfied that it was required to further studies, but the authorities could, if they thought it proper, refuse permission.
Quentin Edwards for the appellant Julian Fox.
L J Bromley for the appellant Hugh Nelson Ricketts.
N C H Browne-Wilkinson for the Bristol electoral registration officer.
M B McMullan for the Cambridge electoral registration officer.
Mr Peter Laurence Stirk did not appear and was not represented.
12 May 1970. The following judgments were delivered.
LORD DENNING MR. Some students at our universities claim to be placed on the register of electors. They all are over 18 years of age and are British subjects. So if they satisfy the requirement as to ‘residence’ they are entitled to be on the register.
The Representation of the People Act 1949,c s 1(1) provides:
‘… the persons entitled to vote as electors at a parliamentary election in any constituency shall be those who— a are resident there on the qualifying date … ’
The Act recognised that a person may be resident in more than one place on the qualifying date, and may be on the register for more than one constituency; but it is emphatic that at a general election no person can vote as an elector in more than one constituency. The ‘qualifying date’ is given by the Electoral Registers Act 1949, as amended by the Electoral Registers Act 1953d. It is the tenth day of October in any year. If a person is on the register, as being qualified on that date, he can vote at the polls within a period of 12 months of 16 February in the following year. Some of the appellants come from the University of Bristol, the others from the University of Cambridge. They were in their halls of residence or in their colleges on 10 October 1969. The question is whether they were ‘resident’ there on the qualifying date.
The electoral officers and the judges have considered these cases most carefully and given most helpful opinions on them, but have come to very different conclusions. The electoral officer at Bristol held that none of the students is entitled to be on the register there. The electoral officer at Cambridge held that scholars and exhibitioners are entitled to be on the register; that commoners are not entitled to be on the register if their parental home is in England, but are entitled if their parental home is not in England. (The electoral officer at Norwich held that all students there are entitled to be on the registere. This shows that there is much
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room for discussion. The Representation of the People Act 1949 tries to give guidance on the point. Section 4(1) provides:
‘… any question as to a person’s residence on the qualifying date for an election shall be determined in accordance with the general principles formerly applied in determining questions arising under the Representation of the People Act, 1918, as to a person’s residence on a particular day of the qualifying period, and in particular regard shall be had to the purpose and other circumstances, as well as to the fact, of his presence at or absence from the address in question.’
But that section does not help much, because there are no cases reported under the Representation of the People Act 1918. The only cases reported on the subject were in the middle of the last century under the previous Acts. They can, however, be looked at. There is one case which much influenced the judges below. It is Tanner v Carter, Banks v Mansell decided in 1885 when it was held that:
‘Students in the universities Oxford and Cambridge, who occupy rooms in their colleges under regulations which do not allow them to reside in or visit their rooms during the vacations without the express permission of the college authorities, are not entitled … to be registered as voters … ’
The judges below treated that case as establishing this general principle: a student has not the right to be on the register unless he has a right to occupy his rooms at all times throughout the year. Applying that principle, they found that students at Bristol and Cambridge have a right to occupy their rooms for only some 26 or 30 weeks in a year. They have no right to occupy their rooms in the vacations, except with the permission of the authorities. In any case they have no right to occupy their rooms for six weeks in a year, namely, a week at Christmas, a week at Easter and four weeks in the summer; and no permission will be given for those six weeks at all. On this account the judges held that the students were not resident. I may say, in parenthesis, that although the students were only entitled and bound to be in their rooms for the period of the academic terms, 26 or 30 weeks, nevertheless, in practice many of them stay there a great deal longer, especially the science students, who have to work in a laboratory. They must stay up for their studies.
I think the judges were in error in placing so much weight on Tanner v Carter. That case was decided under the Representation of the People Act 1867, which said in s 3(2) that in order to qualify a man had to be ‘during the whole of the preceding Twelve Calendar Months … an Inhabitant Occupier, as Owner or Tenant, of any Dwelling-house within the Borough’. Tanner v Carter was rightly decided under that Act. It has no application whatever to the present Act in which there is no qualifying period but only a qualifying date, namely, one day in a year, 10 October, I reject altogether the test of whether the students had a right to their rooms throughout the year. I prefer to go by the ordinary meaning of the word ‘resident’. I follow Viscount Cave LC in Levene v Inland Revenue Comrs ([1928] AC 217 at 222, [1928 All ER Rep 746 at 749), where he said:
‘… the word “reside” is a familiar English word and is defined in the Oxford English Dictionary as meaning “to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place“.’
I would also take into account, as the Act says, the general principles formerly applied and have regard to the purpose and other circumstances of a man’s presence at or absence from the address. Hence I derive three principles. The first principle is that a man can have two residences. He can have a flat in London and a house in the country. He is resident in both. The second principle is that temporary presence
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at an address does not make a man a resident there. A guest who comes for the weekend is not resident. A short-stay visitor is not resident. The third principle is that temporary absence does not deprive a person of his residence. If he happens to be away for a holiday or away for the weekend or in hospital, he does not lose his residence on that account. Applying these principles, I do not think these students are disqualified simply because their parental home is in England. They may be resident at their homes, but they may also be resident in Bristol or Cambridge. I would deplore any test by which a student is disqualified according to whether his parental home was in England or overseas. People who have houses or flats in London and houses in the country can be on the register for both, because they are resident in both, but they can only vote at one. So also with students; they can be on the register for their homes and for their university towns, but they can only vote in one.
I think that a person may properly be said to be ‘resident’ in a place when his stay there has a considerable degree of permanence. So I would apply the simple test: was there on 10 October 1969, a considerable degree of permanence in the stay of the appellants in Bristol or Cambridge? I think there was. They were living there and sleeping there. They were there for at least half the year—as a minimum. Many of them were there for much more, especially the science students, because they have to work in the vacations in the laboratories. There was certainly a sufficient degree of permanence to make them ‘resident’ in Bristol or Cambridge, as the case may be.
During the course of the argument I put the instance of the young man or young woman who is not actually in college, but in lodgings. The same applies to them. I have no doubt that the landlady filling in the form would fill it in for them in the same way as for any other lodger. A lodger who has a considerable degree of permanence, that is, who stays for six months or so, would certainly be entitled to be on the electoral register. I see no difference between the students who are in lodgings and the students who are in a college or hall of residence. It seems to me that they are resident within the Act on the qualifying date, 10 October 1969.
I would, therefore, allow these appeals and hold that the appellants are entitled to be on the electoral register.
WIDGERY LJ. As Lord Denning MR says, the only question arising in these appeals is whether the appellant student in each case was resident in the constituency in which he claims a vote on the qualifying date, 10 October 1969. We are enjoined by s 4 of the Representation of the People Act 1949, when considering questions of residence to apply the general principles formerly applied in determining questions of the same sort under the Representation of the People Act 1918, as to a person’s residence on a particular day, and the section goes on to say that “in particular regard shall be had to the purpose and other circumstances, as well as to the fact, of his presence at or absence from the address in question’. Although that subsection appears to indicate that the task of electoral registration officers shall be the same after 1949 as it was before, in fact that is not going to be the case. The 1949 Act has made a formidable change in the practice of compilation of electoral registers, because it has departed from the basis of a qualifying period and substituted a single qualifying day. The cases at which we have looked in the course of argument all show, as was natural, that under the earlier Acts, a qualifying period having been laid down, the enquiry was as to the conduct of the applicant during that period. The question was: did he reside at the relevant address during a given period of six months? This was a period in which his activities could be examined in detail, and the question whether or not he qualified was thus relatively easy. Now, the qualifying period having gone and the sole question being whether he was resident on the qualifying date, the electoral registration officers will be involved in the far more difficult question of trying to foresee in some measure what the future is going to be, because the degree of permanence to which Lord Denning MR has referred, and which I entirely agree
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is a necessary feature of that residence, can only be determined by to some extent casting one’s mind into the future to see what that is likely to hold.
The principles applicable under the old Acts and which survive for this purpose have already been discussed and dealt with. I also would begin, when considering what is meant by the word ‘reside,’ by observing Viscount Cave LC’s acceptance of the definition in the Oxford English Dictionary f, which Lord Denning MR has read, namely ‘to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place’. That definition is coloured and enlarged by numerous references in the authorities, such as by Lord Coleridge CJ in Barlow v Smith ((1892) 9 TLR 57 at 58), where he speaks of a man’s residence as being where he lives and has his home. There are other references to a man’s home, references which I find helpful, because, although I recognise that the word is in some ways an ambiguous word, I think it nevertheless follows that a man cannot be said to reside in a particular place unless in the ordinary sense of the word one can say that for the time being he is making his home in that place. With regard to the army officer in the case of Ford v Hart ((1873) LR 9 CP 273 at 275), it was said that when on service in Topsham Barracks he was living, sleeping and doing there all that constitutes residence. Indeed, this conception of residence is of the place where a man is based or where he continues to live, the place where he sleeps and shelters and has his home. It is imperative to remember in this context that ‘residence’ implies a degree of permanence. In the words of the Oxford English Dictionary, it is concerned with something which will go on for a considerable time. Consequently a person is not entitled to claim to be a resident at a given town merely because he pays a short, temporary visit. Some assumption of permanence, some degree of continuity, some expectation of continuity, is a vital factor which turns simple occupation into residence. Precisely how the electoral registration officers are to measure the degree of permanence which is required is a matter on which I would be very anxious to give assistance if I felt that it was within my power; but it is a matter on which it is exceedingly difficult for a court to give assistance. Sometimes the difference between a resident and a mere visitor is clear for all to see. In any seaside town in the summer the population divides itself into the residents who live there all the year round and the visitors who merely come for a period. The problems which face the electoral registration officers are not, I fear, going to be as easy as that to resolve. When one gets nearer to the borderline, one gets to the cases where the distinction is less clear to see; but it still has to be resolved by the ordinary understanding of men in the use of very ordinary words in the English language. I have no doubt that the question ‘resident or visitor?’ is a question which would be admirably dealt with by a jury if it ever came within their jurisdiction; and it is on that sort of common sense jury basis that the distinction has to be made in the more difficult cases.
In addition to the principles to which I have already referred, I must, in deference to counsel’s argument, say a word or two about the so-called doctrine of constructive residence. It has been pointed out that, if a man once establishes a residence, he doe not lose it by a temporary absence elsewhere. Indeed, the authorities reveal a number of cases in which, during the qualifying period, then material, a man, having been absent from the alleged residence for a period, might still claim to be constructively resident if he had an intention to return, and a right so to do. I shall say no more than that about the question of constructive residence, because it can only be material in a case where the man is not factually in residence and cannot claim factually to be in the relevant premises at the material date. In this case each of the appellants was factually in the premises on which his claim is based on the qualifying date. It is, therefore, wholly unnecessary to consider constructive residence in these instances.
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One comes, then, to the facts of these cases, which, for practical purposes, are the same. On 10 October 1969, the appellants were installed in their rooms. They had arrived for the new academic year, which had begun a day or two previously. They had the expectation that during the 12 months to come they would have to occupy these rooms as residents for something like 29 weeks in the year. It is also apparent from the agreed facts that there was at least a possibility that they might occupy them for longer than that. It is clear however that they could not occupy their rooms for every week of the ensuing 52 weeks, because there would be a period of at least six weeks in which the hall of residence would be closed. So one must ask oneself whether, with that prospect ahead of each appellant, it is right to say that not only was he making his home in the rooms in question, but that he had a prospect of a continuance of his occupation with a considerable degree of permanence, sufficient to satisfy the test laid down. Like Lord Denning MR, I have come to the conclusion in this case that there is a sufficient prospect of permanence here to turn simple occupation into residence,and in these cases I do not regard the situation of the appellants in regard to their parental homes as being of any materiality. I say that not because I regard such considerations as being irrelevant in such cases but because in these particular cases the facts are so clear that one is impelled to the conclusion that residence has been established regardless of what the circumstances in the individual parental home might be. Like Lord Denning MR, I think that the learned judges who have considered these matters in the courts below have been misled by the force and effect which they have attributed to Tanner v Carter, Banks v Mansell. We have not concerned ourselves with Tanner v Carter, because ours is not a case in which the necessity to prove residence throughout a qualifying period involves the application of the doctrine of constructive residence.
For the reasons which I have given I am satisfied that each of the appellants was a resident in the constituency in question on the qualifying date; and I, too, would allow these appeals.
KARMINSKI LJ. I agree, and desire to add a little of my own because we are differing from two very careful judgments of the county court judges and equally careful judgments from the electoral officers concerned.
I would first like to emphasise my complete agreement on the subject of Tanner v Carter, Banks v Morrell with what has been said both by Lord Denning MR and by Widgery LJ. Tanner v Carter has in a sense misled the learned judges below, and it is on that topic first and foremost that I think they went wrong; but there are other matters which are of importance here apart from Tanner v Carter.
Reference has been made to the opinion of Viscount Cave LC in Levene v Inland Revenue Comrs. He accepted the definition of ‘reside’ as set out in the Oxford English Dictionary, and I need not read that again. He added ([1928] AC at 222, [1928] All ER Rep at 749):
‘In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure.’
He quoted ([1928] AC at 222, [1928] All ER Rep at 749) as an example a master mariner from Glasgow who was at sea for most of the year, but when not at sea went home to his wife and family and was held to reside there. I pass to a passage from the opinion of Lord Warrington of Clyffe in the same case ([1928] AC at 232, [1928] All ER Rep at 753, 754). Lord Warrington of Clyffe abstained from giving any precise definition of the word ‘resident’, although he expressed the opinion that it had no
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special meaning for the purposes of the Finance Acts. He added that ‘resident’ preceded by the word ‘ordinarily’ had no technical or special meaning. He gave what is to me the interesting example of a member of their Lordship’s House who, he said, may well be understood to be ordinarily resident in London during the Parliamentary session and in the country during the recess. He added ([1928] AC at 232, [1928] All ER Rep at 754):
‘If it had any definite meaning I should say it means according to the way in which a man’s life is usually ordered.’
I have tried to apply those words to the way of life of a Welsh undergraduate at an English university, or a postgraduate student for three years or more. During term time, which is at least half the year, he lives in the university town, in some cases in college, where a collegiate system is in existence or at a hall of residence or in lodgings. In the university vacations he may in part reside at his university, and for the rest of the year he may travel or go to his home, if he has one in this country, or he may return from time to time to his home in the Commonwealth or abroad.
Great emphasis was laid here on the fact that a student in residence had no absolute right to reside in the hall of residence or college, or indeed in his lodgings, throughout the year. Indeed it seems to be common to most universities that for at least six weeks of the year he is absolutely debarred from residing there. That is for domestic reasons, as I understand it. But, as has been said already, there may frequently be good reasons for his wanting to reside at the university during university vacations, and in proper cases to obtain leave so to do. Whether that leave is sought seems to depend a good deal on what subject a student is pursuing at a university. If he is engaged in studying the sciences he may well, and probably does, require the use of a laboratory. If he is reading history or the classics, he may have less need to stay up, because library facilities may be available at or near his home.
But the question is: how do we construe ‘reside’? It is not an easy question, and I desire to abstain from attempting to lay down any kind of rule. Each case has to be looked at on the existing facts. But in the circumstances of these appeals. I have come to the conclusion that the test of residence was established and that these appeals should be allowed.
Appeals allowed. Orders, pursuant to RSC Ord 59, r 19(6), that the electoral register for Bristol be altered to include the names of Julian Fox and the other 15 appellants to Bristol county courtg; and that the electoral register for Cambridge be altered to include the names of Hugh Nelson Ricketts and the other 28 appellants to Cambridge county courth.
Solicitors: Adams, Brown & Co, Bristol (for the appellant Julian Fox); Vinters, Cambridge (for the appellant Hugh Nelson Ricketts). Robins, Hay, Long & Gardiner (for the Bristol electoral registration officer); Sharpe, Pritchard & Co (for the Cambridge electoral registration officer).
Wendy Shockett Barrister.
Vandervell Trustees Ltd v White and others
[1970] 3 All ER 16
Categories: CIVIL PROCEDURE: TAXATION; Income Tax
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD DIPLOCK
Hearing Date(s): 22, 23, 27, 29, 30 APRIL AND 15 JULY 1970
Practice – Parties – Joinder of parties – Necessary party – Consent to joinder – Joinder of Commissioners of Inland Revenue – Whether presence necessary to effectual and complete determination of matters – RSC Ord 15, r 6(2)(b).
Practice – Parties – Joinder of parties – Consent to joinder – Whether consent of all parties necessary.
Income tax – Determination of liability to tax – Dispute as to ownership of property – Assessment to tax dependent on ownership – Whether Crown could be joined – Consent of all parties.
In 1958 as part of a scheme for founding a Chair in Surgery, V gave 100,000 shares in his family company to the Royal College of Surgeons. Subsequently the trustees of V’s children’s settlement acquired an option to purchase the shares and exercised it on 11 October 1961. Between that date and 19 January 1965 dividends on the shares were paid to the trustees. On 19 January 1965, V executed a deed assigning to the trustees all his interest (if any) in the shares and in the dividends to hold on the trusts of the children’s settlement. V died in 1967. On the one hand the Commissioners of Inland Revenue assessed V’s executors to surtax on the dividends paid between 1961 and 1965 on the ground that V was beneficial owner of the shares; the assessment was now under appeal pending the present suit. On the other hand the executors commenced an action against the trustees claiming to be entitled to the dividends on the ground that they were the property of V during his life. The trustees appealed against an order of the Court of Appeal made under RSC Ord 15, r 6(2)(b)a, on the executors’ application, joining the Commissioners of Inland Revenue (who consented) as defendants to the action.
Held – On the true construction of the particular rule applicable to the case, ie RSC Ord 15, r 6(2)(b), the ‘matter in dispute’ was between the executors and the trustees and could be ‘effectually and completely determined and adjudicated upon’ in the absence of the Commissioners of Inland Revenue; it followed, therefore, that their presence was not ‘necessary’ and that they should not be joined as defendants to the action (see p 19 f, p 20 b, d and g, p 24 j, p 27 j to p 28 a and p 31 g, post).
Per Lord Morris of Borth-y-Gest and Lord Wilberforce. The High Court had jurisdiction to decide a suit between a subject and the Crown as to the ownership of property notwithstanding that an assessment to tax had been made, the validity of which might depend on that ownership, so that the question whether, where both Crown and subject consented, the Crown could be brought into litigation between subjects depended either on the consent of all parties being given or failing this (as in the present case) on the Rules of the Supreme Court (see p 20 g, and p 27 h, post; and cf p 23 f, and p 31 h, post).
Decision of the Court of Appeal sub nom Re Vandervell Trusts [1969] 3 All ER 496 reversed.
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Notes
For adding parties, see 30 Halsbury’s Laws (3rd Edn) 394, 395, para 735, and for cases on the subject see 50 Digest (Repl) 460–463, 1550–1575.
Cases referred to in opinions
Amon v Raphael Tuck & Sons Ltd [1956] 1 All ER 273, [1956] 1 QB 357, [1956] 2 WLR 372, 50 Digest (Repl) 452, 1489.
Argosam Finance Co Ltd v Oxby (Inspector of Taxes) [1964] 3 All ER 561, [1965] Ch 390, [1964] 3 WLR 774, Digest (Cont Vol B) 422, 1352c.
Asher v London Film Productions Ltd [1944] 1 All ER 77, [1944] KB 133, 113 LJKB 149, 170 LT 17, 28 Digest (Repl) 168, 675.
Barraclough v Brown [1897] AC 615, [1895–99] All ER Rep 239, 66 LJQB 672, 76 LT 797, 62 JP 275, 30 Digest (Repl) 175, 243.
Leek, Re, Darwen v Leek [1968] 1 All ER 793, [1969] 1 Ch 563, [1968] 2 WLR 1385, Digest Supp.
Norwich Corpn v Norwich Electric Tramways Co Ltd [1906] 2 KB 119, 75 LJKB 636, 95 LT 12, 70 JP 401, 38 Digest (Repl) 52, 270.
Pilkington v Inland Revenue Comrs [1962] 3 All ER 622, [1964] AC 612, [1962] 3 WLR 1051, 40 Tax Cas 416; rvsg sub nom Re Pilkington’s Will Trusts [1961] 2 All ER 330, [1961] Ch 466, [1962] 2 WLR 776, Digest (Cont Vol A) 922, 1132a.
Riches v Westminster Bank Ltd [1947] 1 All ER 469, [1947] AC 390, [1948] LJR 573, 176 LT 405, 28 Tax Cas 159, 35 Digest (Repl) 212, 181.
Soul v Inland Revenue Comrs [1963] 1 All ER 68n, [1963] 1 WLR 112, 40 Tax Cas 506, Digest (Cont Vol A) 540, 4575a.
Turner’s Will Trusts, Re, District Bank Ltd v Turner [1936] 2 All ER 1435, [1937] Ch 15, 106 LJCh 58, 155 LT 266, 28 Digest (Repl) 569, 843.
Vandervell v Inland Revenue Comrs [1967] 1 All ER 1, [1967] 2 AC 291, [1967] 2 WLR 87, 43 Tax Cas 519, Digest Supp.
Appeal
This was an appeal by Vandervell Trustees Ltd against an order of the Court of Appeal (Lord Denning MR, Sachs and Karminski LJJ) dated 22 May 1969 and reported [1969] 3 All ER 496, reversing the decision of Buckley J dated 30 January 1969 and reported [1969] 1 All ER 1056, and holding that the High Court had jurisdiction under RSC Ord 15, r 6(2)(b) to order the joinder of the Commissioners of Inland Revenue as a defendant in an action. The respondents were Gerald Wilfred White, Rudolph Edgar Francis de Trafford and Joseph Leonard Reed, the executors of the will of Guy Anthony Vandervell, and the Commissioners of Inland Revenue. The facts are set out in the opinion of Viscount Dilhorne
Viscount Bledisloe QC and M Miller for the appellants.
A J Balcombe QC and J M Chadwick for the first, second and third respondents.
J P Warner for the Commissioners of Inland Revenue.
Their Lordships took time for consideration
15 July 1970. The following opinions were delivered.
LORD REID. My Lords, this case raises a general question of procedure which is of considerable importance. I can state the question in general terms. The Crown claims surtax on certain income from A on the ground that it was his income. A third party B asserts that this income was his income. So the single issue to be decided is whose income it was when it accrued. It appears to me to be obvious that both justice and convenience require that this issue should be decided in proceedings to which all three, the Crown, A and B, are parties so that all shall be bound by the decision.
But the trustees maintain that all three parties cannot be joined in the same proceedings; the question between the Crown and A must be decided by the Special
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Commissioners and the question between A and B must be decided by the court. This would not only require unnecessary duplication of litigation and expense, but it might cause serious injustice. There is no appeal from the Special Commissioners on questions of fact, so if the ownership of the income depends on questions of fact there may be conflicting decisions both of which are final. A may be left in the position that by reason of the decision of the commissioners he has to pay the tax, but by reason of the decision of the court he cannot get the money in respect of which the tax is due.
The Revenue do not support the trustees’ argument. Quite properly they are not willing to accept as final in all cases the decision in an action between A and B to which they are not parties because that action may be of a ‘friendly’ character and the case for A may not have been properly developed. But they are willing at least in most cases to be joined as parties in such an action so that they can see that A’s case is properly presented. They agree that they will then be bound by the decision. This has in fact been done in a number of cases, but if the trustees’ main argument is correct I think this practice must now cease.
The trustees’ first argument was based on jurisdiction. It is trite law that the consent of parties cannot give jurisdiction where there is none and that, even where the parties consent, it is pars judicis to intervene and refuse to act where there is no jurisdiction. It is quite true that only the commissioners have any right or jurisdiction to alter an assessment to tax. But here there is no question of altering an assessment. What is sought is the determination by the court of a question which, if not already decided, the commissioners would have to decide before they could decide whether or not the assessment should stand. Cases may easily arise in which a court clearly has to decide such a question as between the Crown and the taxpayer. If after a man’s death the Crown claim from his executors both surtax and estate duty on the ground that certain property belonged to him and that income from it which had accrued before his death was his income, then as regards estate duty that issue must be decided by the court. Then the question would arise whether the commissioners in dealing with the surtax assessment are bound to accept the court’s decision as res judicata.
So the real question is not one of jurisdiction. It is whether the commissioners are subject to the ordinary rule of law of res judicata. I know of no other instance where a tribunal exercising functions of a judicial character is not so bound, and I find it incredible that Parliament can have intended to make an exception in this case. Of course if the relevant statutory words are incapable of any other construction then we must give them that construction. But if there is any other possible construction I would adopt it.
The relevant provision is s 52(5) of the Income Tax Act 1952, as amended by s 12 of the Income Tax Management Act 1964. Section 52(5) provides that if it appears to the majority of the commissioners ‘by examination of the appellant on oath or affirmation or by other lawful evidence’ that the appellant is overcharged by any assessment, the commissioners shall abate or reduce the assessment accordingly. This provision in substantially the same form goes back to the early days of income tax. I can see nothing in it which requires or permits the commissioners to disregard a decision of the court. The question is what is the proper construction of ‘other lawful evidence’. If that phrase is given a narrow meaning then the commissioners are bound not only to disregard decisions of the court but they are also bound to disregard agreements between the Crown and the taxpayer; they must be satisfied by evidence that the assessment is wrong. But I see no difficulty in interpreting ‘lawful evidence’ as including both a decision of the court which creates res judicata and an agreement between the Crown and the taxpayer as to some matter which the commissioners would have had to decide if there had been no agreement. If the taxpayer produces to the commissioners either such a decision or such an agreement—I can see no difference between the two—then the commissioners must accept
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that. I find it quite impossible to suppose that Parliament could have intended otherwise. This enactment originally applied to the General Commissioners who were busy men acting under a sense of public duty and it would have been absurd to require them to undertake such an unnecessary task and to prevent the taxpayer and the Crown from acting in a reasonable manner, and I find it equally impossible to suppose that the commissioners were given a discretion to accept or reject a decision of the court or an agreement, as they might see fit. I have therefore no hesitation in holding that the commissioners are bound to treat as res judicata any decision of a competent court to which the Crown were parties on any issue which may come before them.
I am fortified in my view by what was said in Asher v London Film Productions Ltd and the sequel to that case. Lord Greene MR said ([1944] 1 All ER at 77, 78, [1944] KB at 137, 138):
‘I have often thought that, in cases of this kind, it is extremely inconvenient that the Crown (which is vitally interested) cannot, under the existing procedure, be made a party or otherwise appear. The result is that the Crown is technically not bound by any decision which may be pronounced in its absence … I venture to suggest that the Inland Revenue authorities might usefully consider whether it might not be worth while approaching the Rule Committee with a view to obtaining enactment of a rule under which they could receive notice of litigation of this kind and should be given a right to attend and put forward any argument or facts they thought right. The corollary would be that they would be bound by the decision, and the whole matter would be cleared up between everybody concerned.’
Discussions took place and since then in one way or another the Crown have appeared in a number of cases. No one at any stage seems to have had any idea that there was any technical objection owing to the nature of the duties or powers of the Special Commissioners, or the phraseology of the Income Tax Management Act 1964. I find this so strange as to be inexplicable if it is not competent to make a rule of court bringing in the Crown and so preventing the same issue from being raised again before the Special Commissioners.
So I turn to the second question in this appeal—whether the existing rules of court are wide enough in their terms to warrant the course that has been taken in this case. Here I am under the disadvantage that I am not familiar with the practical operation of the English rules of court. Treating the matter as an ordinary question of construction I would have been inclined to agree with the decision of the Court of Appeal ([1969] 3 All ER 496, [1969] 3 WLR 458). But if your Lordships think otherwise I am not prepared to dissent on this matter, and this would be a sufficient ground for allowing this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, although the submissions in this case have ranged extensively the decision can rest on a consideration of the rule which is applicable. In agreement with Buckley J ([1969] 1 All ER 1056, [1969] 1 WLR 437), I do not think that this is a case which falls within RSC Ord 15, r 6(2)(b). It is not suggested that the Commissioners of Inland Revenue ‘ought to have been joined as a party’. The only question is whether their presence before the court is ‘necessary’—ie necessary ‘to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon’. I do not think that any process of giving a wide or liberal interpretation to the rule can be employed to alter it or to give it an enlarged meaning which, on a fair and reasonable interpretation, it does not bear.
As the executors have for the three years in question been served with notices of assessment to surtax (in respect of which they have pending appeals) they are
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naturally concerned to ensure that if they have to pay surtax they will have the income to which it relates. So in their action against the trustees the effective claim is for payment of the net sums which the trustees received. The trustees say that the late Mr Vandervell was never beneficially entitled to those sums and apart from this they rely on the terms and effect of the deed of 19 January 1965. The ‘matters in dispute in the cause or matter’ are the matters in dispute between the executors and the trustees. Their resolution calls for the application of legal principles to certain transactions and documents—the details of which do not appear to be in issue. It does not seem to me that the commissioners if present before the court could make any contribution to the determination or adjudication of the matters in dispute. If they wished to present argument that favoured the executors and which was adverse to the trustees they could add nothing to what could be said by those representing the executors. No question of revenue law is raised in the action. The commissioners do not assert any claim to the sums in question. They do not ask for any relief against either party. They did not seek to be joined. They could do nothing to ensure that the matters in dispute in the action brought by the executors against the trustees are ‘effectually and completely’ determined. The matters in dispute between the executors and the trustees can be effectively and completely determined and adjudicated on in the absence of the commissioners. It follows in my view that their presence was not shown to be ‘necessary’. As, in my view, the wording of the rule is clear I have not derived help from a consideration of cases decided in reference to situations and circumstances which much differ from those of the present case.
If the presence of the commissioners were necessary to ensure effectual and complete determination and adjudication of the matters in dispute between the executors and the trustees it would be open to the court of its own motion and on such terms as it thought just to order the commissioners to be added as defendants. In the situation of the present case I can see no reason at all why the court would contemplate such action. In circumstances where the court might act there is no provision making consent necessary before a party is added as a defendant. The commissioners, however, take their stand that it is only with their consent that they could be joined in the proceedings. If the matter is tested by considering the provisions of RSC Ord 15, r 4, and its supposition of separate actions being brought against two defendants giving rise to some common questions of law or fact I cannot contemplate an action being brought by the executors against the commissioners claiming a declaration that the trustees held the shares during the relevant period in trust for Mr Vandervell.
As in my view the rule, rationally applied, cannot support the joinder of the commissioners I would allow the appeal. If some new and enlarged procedure on lines adumbrated by Lord Greene MR in Asher v London Film Productions Ltd were thought to be desirable it would be for Parliament to devise and adopt it. On the wider issues as to jurisdiction I am in agreement with the conclusions of my noble and learned friend, Lord Wilberforce, whose speech I have had the advantage of reading in advance.
VISCOUNT DILHORNE. My Lords, the executors of the late Mr Vandervell, the first, second and third respondents, claim from the appellants, Vandervell Trustees Ltd, dividends received by the trustees on shares in Vandervell Products Ltd between 11 October 1961, and 19 January 1965. The dividends amounted to £1,256,458 gross and £765,016 after deduction of income tax.
In November 1958, Mr Vandervell transferred to the Royal College of Surgeons 100,000 ‘A’ shares in Vandervell Products Ltd. On 1 December 1958, the college gave the trustees an option to purchase the shares for £5,000. That option was exercised on 11 October 1961. On 19 January 1965, Mr Vandervell executed a deed which recited that doubts had arisen as to whether he had divested himself absolutely of all interests in the shares, and by which he, inter alia, assigned and released to the trustees
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such rights as he might have to or in the dividends from those shares. He had been assessed to surtax on the dividends received by the college on the ground that he had not absolutely divested himself of them. Those assessments were upheld in this House (Vandervell v Inland Revenue Comrs).
Assessments were made on his estate for surtax in respect of the dividends received by the trustees after the exercise of the option and prior to the deed of 19 January 1965, and notices of appeal against those assessments have been given. In this action the executors contend that during that period the trustees held the shares on trust for Mr Vandervell and that they are consequently entitled to the dividends which the trustees refuse to pay to them.
If the shares were held on trust for Mr Vandervell, then there would be liability to surtax on the dividends but it does not follow that there is surtax liability if they were not so held. If property or any income therefrom is or will or may become payable to him or applicable for his benefit in any circumstances, a settlor such as Mr Vandervell is not to be deemed to have divested himself absolutely of that property (Income Tax Act 1952, s 415(2)). If it is held in the action that Mr Vandervell was entitled to the beneficial interest in the shares prior to 19 January 1965, presumably the executors will not dispute liability to surtax and the appeals will be abandoned, for it would be very odd if the executors sought to contend before the Special Commissioners the contrary to their contention in the action. If it is held in the action that he was not so entitled, it does not follow that there is no surtax liability. If the Inland Revenue are a party to the action, they would be bound by the decisions reached in the action and not able to contend on the hearing of the appeals that Mr Vandervell had a beneficial interest in the shares if it was held in the action that he had not; but it would still be open to the Crown to contend that, even though he had no beneficial interest, he still had not divested himself absolutely of all interest in the shares and dividends. It is not, therefore, in my opinion accurate to say that the issues to be determined in the appeals are bound to be the same as those in the action.
If the Commissioners of Inland Revenue were made a party, then it would be in their interest to support the executors’ claim. If that failed at first instance, they might appeal though the executors might be prepared to accept the decision. They might pursue the appeal to this House. The trustees would be faced with a very different opponent. Instead of having to fight the executors alone, they would find aligned against them a government department with all its resources. And if the trustees ultimately succeeded in the action, that would not necessarily dispose of the surtax liability for they might succeed on the ground that the deed of 19 January 1965, entitled them to the dividends they had received and, if it were held that Mr Vandervell did not have the beneficial interest in the shares, the commissioners, though bound by that decision if a party to the action, could still contend that he had not absolutely divested himself of all interest in the shares and the dividends. Further, by the Income Tax Act 1952, s 52(5), to which I refer later, the duty is cast on the commissioners to satisfy themselves that the assessment is wrong before they alter it. It would be open to them to hold that the assessments were correct even though the Crown did not so contend.
With a view to securing that the Commissioners of Inland Revenue are bound by the judgment in the action the executors applied for an order under RSC Ord 15, r 6(2)(b), that they should be added as defendants. The commissioners consented to being joined and on 23 October 1968, an order joining them was made. The appellants then took out a summons to strike them out as defendants. That was adjourned into court and Buckley J ([1969] 1 All ER 1056, [1969] 1 WLR 437) ordered that they should be struck out. The Court of Appeal ([1969] 3 All ER 496, [1969] 3 WLR 458) (Lord Denning MR, Sachs and Karminski LJJ) reversed his decision, and the question now to be decided is whether they were right to do so.
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The trustees contend that RSC Ord 15, r 6(2)(b), precludes the joinder of the commissioners in this action and also that, apart from this rule, the High Court has no jurisdiction to do so as Parliament has entrusted exclusive jurisdiction with regard to appeals against assessments to the Special and General Commissioners.
Section 5(6) of the Income Tax Management Act 1964 reads as follows:
‘After the notice of assessment has been served on the person assessed the assessment shall not be altered except in accordance with the express provisions of the Income Tax Act.’
The following sections of the Income Tax Act 1952, as amended by the Income Tax Management Act 1964, are relevant. Section 51 gives a person aggrieved by an assessment a right of appeal to the General Commissioners and, where the assessment has been made by the Commissioners of Inland Revenue, to the Special Commissioner. Section 229(4) provides that assessments in respect of surtax shall be subject to appeal to the Special Commissioners and s 12(5) of the Income Tax Management Act 1964 provides that s 52 of the Income Tax Act 1952, is to apply in relation to appeals to the Special and General Commissioners under the Income Tax Acts. Section 52(5) and (6)b read as follows:
‘(5) If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other lawful evidence, that the appellant is overcharged by any assessment or surcharge, the Commissioners shall abate or reduce the assessment or surcharge accordingly, but otherwise every such assessment or surcharge shall stand good.
‘(6) If, on an appeal, it appears to the Commissioners that the person assessed or surcharged ought to be charged in an amount exceeding the amount contained in the assessment or surcharge, they shall charge him with the excess.’
These provisions confer jurisdiction on the Special and General Commissioners to determine the correctness or otherwise of an assessment. Save on cases stated by them under s 64 of the Income Tax Act 1964, the High Court is not given any jurisdiction with regard thereto. Tax questions may arise between subjects, as, for instance, with regard to the right to deduct income tax on making certain payments (Asher v London Film Productions Ltd; Riches v Westminster Bank Ltd. In such cases the jurisdiction of the High Court cannot be doubted, but where the correctness of an assessment, and so the liability to pay income tax or surtax, is challenged, that can only, in my opinion, be decided by the Special or General Commissioners.
I am, therefore, unable to agree with Lord Denning when he said in this case ([1969] 3 All ER at 500, [1969] 3 WLR at 464) that where the commissioners (the Commissioners of Inland Revenue) consent, the High Court has jurisdiction to decide questions as to liability to tax without going through the procedure of the Income Tax Acts, and with Sachs LJ ([1969] 3 All ER at 501, [1969] 3 WLR at 465) when he said that the subject and the Crown can waive their rights to the benefit of the income tax code. In my opinion, they cannot confer jurisdiction on the High Court by waiver or by consent to adjudicate as to liability of a taxpayer to income tax or surtax, for Parliament has prescribed the method and the only method by which an assessment and the taxpayer’s liability thereunder can be challenged. If, as I think is clearly the case, the High Court has not jurisdiction to determine liability to income tax and surtax, it follows that it has not jurisdiction to make declarations with regard
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thereto. To do so would be to impinge on the exclusive jurisdiction vested in the Special and General Commissioners.
In Argosam Finance Co Ltd v Oxby (Inspector of Taxes) the plaintiff took out an originating summons with an inspector of taxes as defendant, asking whether dividends received from certain shares should be included at their net amount, ie after deduction of income tax, for the purpose of calculating their profit or loss. The Finance Act 1953, s 15(4), provided that an objection to a claim by a taxpayer in respect of alleged trading losses was to be ‘heard and determined by the Commissioners … in like manner as … an appeal against assessment under Schedule D … ’ In the light of this provision Plowman J held that he had no jurisdiction to hear the summons. On appeal, Lord Denning MR while not wholly agreeing with him, said ([1964] 3 All ER at 564, 565, [1965] Ch at 423):
‘If the summons had been limited to question (a)—that is, to determine whether the company as entitled to relief under s. 341—I would agree that the courts would have no jurisdiction to determine it. The question is one which is entrusted by the legislature to the exclusive province of the commissioners, and the courts cannot entertain it.’
Diplock LJ agreed that the court had no jurisdiction with regard to that question ([1964] 3 All ER at 566, [1965] Ch at 425) ‘for that was a matter which Parliament has exclusively confided to the jurisdiction of the Commissioners’.
Under s 341 of the Income Tax Act 1952, a person who has sustained a loss in any trade, etc, can apply to the General or Special Commissioners for an adjustment of his liability by reference to the loss and to the aggregate amount of his income for that year. If the commissioners have exclusive jurisdiction as to this, it would, indeed, be odd if they did not also have exclusive jurisdiction with regard to alteration of an assessment and liability thereunder. In my opinion, the trustees’ contention that the Special and General Commissioners have exclusive jurisdiction with regard to assessments and liability thereunder is well founded, but I do not think that this conclusion establishes that the High Court has not got jurisdiction to add the Inland Revenue Commissioners as a party to a properly instituted action. Whether or not they are added, they, and, of course, also the Special and General Commissioners, will, like everyone else, be bound by any decision reached on a question of law. If added, they will be bound by findings of fact, but the Special and General Commissioners will not be.
Whether in this case the Commissioners of Inland Revenue should be added, in my opinion depends on RSC Ord 15, r 6(2)(b). So far as material, that rule provides as follows:
‘(2) At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either on its own motion or on application—… (b) order any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon be added as a party; but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised.’
If, under this rule, the Commissioners of Inland Revenue can be added as a party, their consent to that is not a condition precedent to that being done unless it is proposed to add them as a plaintiff. Their refusal of consent would be no bar to the exercise by the High Court of its jurisdiction to add them as a defendant. The many
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reported cases in which this rule has been considered were comprehensively reviewed by Devlin J in Amon v Raphael Tuck & Sons Ltd. He said ([1956] 1 QB 357 at 361):
‘There are two views about its scope; and authority can be cited for both. One is that it gives a wide power to the court to join any party who has a claim which relates to the subject-matter of the action … if it is right, it really kills any submission about jurisdiction. The court is hardly likely in the exercise of its discretion to join as a party somebody who has no claim relating to the subject-matter of the action; and if its powers extend to joining anyone who has, the question whether a particular intervener should be joined becomes virtually one of discretion.’
In this case the Court of Appeal held that there should be a wide interpretation of of the rule. Lord Denning MR said ([1969] 3 All ER at 499, [1969] 3 WLR at 464):
‘We will in this court give the rule a wide interpretation so as to enable any party to be joined whenever it is just or convenient to do so. It would be a disgrace to the law that there should be two parallel proceedings in which the selfsame issue was raised, leading to different and inconsistent results. It would be a disgrace in this very case if the Special Commissioners should come to one result and a judge in the Chancery Division should come to another result as to who was entitled to these dividends.’
Whether this interpretation is wider than that stated by Devlin J in the passage cited above, it is not necessary to consider. My difficulty about accepting Lord Denning’s wide interpretation is that it appears to me wholly unrelated to the wording of the rule. I cannot construe the language of the rule as meaning that a party can be added whenever it is just or convenient to do so. That could have been simply stated if the rule was intended to mean that. However wide an interpretation is given, it must be an interpretation of the language used. The rule does not give power to add a party whenever it is just or convenient to do so. It gives power to do so only if he ought to have been joined as a party or if his presence is necessary for the effectual and complete determination and adjudication on all matters in dispute in the cause or matter. It is not suggested that the Commissioners of Inland Revenue ought to have been joined.
All matters in dispute in the action will, it seems to me, be effectually and completely disposed of without the commissioners being added as a party. Their presence is not necessary to ensure that the court can effectually and completely determine whether Mr Vandervell was entitled to the beneficial interest in the shares and whether, if he was, the deed operated retrospectively so as to deprive his executors of a right to the dividends paid before its execution.
The rule does not provide that a party may be added on account of matters in dispute in another cause or matter. And even if it did, for the reasons I have given, it could not be said that the determination of the matters in dispute in this action would effectually and completely determine the liability to surtax. I do not regard the proceedings on the appeals against the assessments and this action as parallel proceedings, nor do I feel that it is accurate to say that the selfsame issue arises in both proceedings. On the appeals the question will be: did Mr Vandervell wholly divest himself of all interest in the shares and the dividends? In the action the issue is, who is entitled to the dividends and, as I have said, if the trustees are held entitled, it does not follow that there is no liability to surtax.
While there may be cases where, under the rule, the Commissioners of Inland Revenue can properly be joined as a party, this, in my opinion, is not one of them for, in my view, their presence is not necessary to ensure that the matters in dispute in the action are completely and effectually determined.
For these reasons, in my opinion, the appeal should be allowed.
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LORD WILBERFORCE. My Lords, this appeal arises out of certain dispositions made by the late Mr G A Vandervell which have already, in one aspect, been considered by this House. Considerable sums of money are involved and the disputes with regard to them are of importance to the parties. But the appeal also raises a question, or questions, of general application: whether, in a suit between subjects concerning the ownership of property, the Crown, represented by the Commissioners of Inland Revenue, can be brought in as an additional defendant against the wish of one of the original parties. At the present time there are few transactions of a commercial, or dispositive, character which do not have tax implications for one or more of the parties to them; so to admit that, when disputes as to these matters arise, the Crown can be brought in, either generally, or in specified cases, or at the discretion of the court, is to introduce a new dimension into litigation, which for one of the parties may have unwelcome consequences. To be faced, in addition to the selected private opponent, by the Crown, with all its resources, as an additional opponent, with rights of argument and appeal, may be a serious matter. It is said that this particular case is an exceptional one; so, in many respects, it is, but unless some limiting criterion can be found the decision establishes a new principle, to which, in turn, extensions are likely to be made. So we should be sure that we are on firm ground before permitting it.
It is not necessary to say much about the facts. Mr Vandervell was the controlling shareholder in a successful company, Vandervell Products Ltd. As part of a scheme for founding a Chair in Surgery (details can be found in Vandervell v Inland Revenue Comrs) the appellant company, which is a trustee company and the trustee of a settlement for Mr Vandervell’s children, acquired an opinion to purchase 100,000 ‘A’ shares in Vandervell Products Ltd. This option it exercised in 1961. Between 11 October 1961, and 19 January 1965, dividends on the shares, amounting to over £1,250,000(gross), were paid to the trustee company. On 19 January 1965, Mr Vandervell executed a deed assigning to the trustee company all his interest (if any) in the shares and in the dividends, to hold on the trusts of the children’s settlement. He died in 1967; the first three respondents are his executors.
These executors now claim against the trustees to be entitled to the dividends or to a sum equal in amount, contending that they belonged to Mr Vandervell. The trustees resist this claim on two main grounds: (a) that the dividends never belonged to Mr Vandervell; (b) that, in any event, the deed of 1965 had the effect of transferring Mr Vandervell’s interest in them to the trustees. The resolution of this dispute will inevitably have fiscal consequences. It may involve claims for estate duty; these we are not concerned with in this appeal. We are concerned with the possible liability of the executors for surtax. The commissioners have already assessed the executors to surtax as regards the dividends, on the ground, presumably, that Mr Vandervell was the beneficial owner or had not divested himself of the shares during the years in question; the assessment is formally under appeal pending the present suit. If the executors succeed in showing that they are entitled to the dividends, their assessment to surtax will inevitably stand. But this is the difficulty of their situation; if they lose against the trustees and if the commissioners are not bound by the decision to that effect, the executors still have to defend themselves against the assessment, and are at risk of being held liable to a large sum of surtax without having the dividends. It is to prevent this happening that they wish the commissioners to be joined in this action, so as to be bound by the decision. The situation is even more difficult than this. For if they lose against the trustees only on ground (b) above, ie that Mr Vandervell was the owner of, or interested in, the dividends up to 1965 but then disposed of them, they might still be liable for the surtax without the dividends. Joinder of the commissioners cannot help them over this difficulty; it arises out of the facts of the situation. So the position is that joining the commissioners
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may, but will not necessarily, save the executors from being assessed to surtax without having the dividends. In one event it will; in another not. But it would benefit the executors to have even this partial protection.
I must now refer to the position of the Commissioners of Inland Revenue. Their policy is not to seek to intervene in suits between subjects merely because tax consequences may arise; it was so stated to this House in Riches v Westminster Bank Ltd. It is not their policy to agree in advance to be bound by a decision in private litigation, nor, invariably, to agree to accept the consequences of a decision in private litigation, though in fact they frequently do so. They agree, and this practice goes back anyhow to 1937 (Re Turner’s Will Trusts, District Bank Ltd v Turner) in certain cases, mainly where questions of construction or law are involved, to be joined as defendants if all the parties consent to their joinder. This ‘consent procedure’ has proved useful; it is exemplified in Pilkington v Inland Revenue Comrs when the Crown was joined and given a right of appeal and Re Leek, Darwen v Leek and we were told of a number of pending cases where it is being used. But even in this procedure they do not agree to determination by the court directly whether a particular liability to tax arises. They assert the right to refuse to be joined in private litigation, at any rate (and this is the field under discussion) where a question affecting a party’s liability to income tax (including surtax) is concerned. The reason for this is, they submit, that a statutory code has been laid down for determining liability to this tax, by assessment, appeal to the Special Commissioners and, in certain circumstances, to the courts, of the benefit of which they (and they concede the same right for the taxpayer) cannot be deprived without their consent. As regards this particular matter, the commissioners adopt a neutral attitude although they have, by leave, lodged a printed case, to define their position.
I now come to the arguments on the appeal. The trustees put their contention—that joinder ought not to be allowed—on two main grounds: first that there is no jurisdiction in the High Court to join the commissioners as defendants; second, that if there is jurisdiction, their joinder is not permitted by the Rules of the Supreme Court. There is also formally a submission based on discretion, but this could not be pursued in this House. On the executors’ side there is a contention based on acquiescence but, even if they are at liberty to take the point, it has no substance in it.
The argument for lack of jurisdiction rests on the proposition that, where the legislature has by statute laid down a special procedure for the determination of any question, that special procedure is the only method by which such a question can be determined; and the ordinary jurisdiction of the courts is excluded. As regards income tax, a special procedure is prescribed by the Income Tax Act 1952. This argument was supported by authority: Barraclough v Brown, Norwich Corpn v Norwich Electric Tramways Co Ltd, Soul v Inland Revenue Comrs, Argosam Finance Co Ltd v Oxby. The last two cases were examples where it was sought to bring directly before the High Court a tax question without the consent of the Crown. They do not govern the present case, where the question is incidental, and the Crown consents. The first two depend on essentially the same principle, and it is sufficient to consider Barraclough v Brown, for this illustrates sufficiently the scope and limit of the proposition. The question related to the right of undertakers to recover expenses of
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removing a sunken vessel in the River Ouse from the owner of the vessel. The owner was under no liability at common law. The undertaker’s right to recover the expenses rested, and rested exclusively, on the provisions of a statute which provided that the expenses might be recovered in a court of summary jurisdiction. The undertakers sought to obtain a declaration of liability in the High Court, but it was held that this they could not do. Lord Herschell said ([1897] AC at 620, [1895–99] All ER Rep at 241):
‘I do not think the appellant can claim to recover by virtue of the statute, and at the same time insist upon doing so by means other than those prescribed by the statute which alone confers the right.’
The limits of this decision are obvious from these words. In order to compare (in fact to contrast) the situation under the Income Tax Acts, it is necessary to see precisely what it is that under that legislation has been made the subject of the statutory procedure. This is the validity and quantum of the assessment to tax which has been made on the subject. It is this which, when made, is the subject of appeal to the Special Commissioners under s 52(5) of the Income Tax Act 1952, and s 12(5) of the Income Tax Management Act 1964; it is the assessment which cannot be altered except in accordance with the Income Tax Acts (Income Tax Management Act 1964, s 5) and which ultimately becomes final and conclusive. All this is undoubted and, if necessary, the authority of Barraclough v Brown could be invoked to show that the High Court cannot interfere with assessments. But this is not sufficient to make good the trustees’ argument. In any but the simplest of cases of assessment to tax there may arise questions of fact or of law which have to be decided. The Special Commissioners can decide them. They may do so after examination of the appellant, or by other lawful evidence (Income Tax Act 1952, s 52(5)). But I see no reason why, if there is consent between the taxpayer and the Revenue, these questions should not be settled by agreement, by arbitration or even by decision of the court, whether before or after an assessment has been made, provided, of course, that it has not become final after appeal, or after the time for appeal has expired. There may be questions, in form suitable for decision by the court, which are in fact so close to the question of the assessment itself that the court ought not to entertain them but leave them to the statutory procedure. And nothing that I have said must be taken to imply that either the Crown, or the taxpayer, may not be entitled to insist that a particular question, as between them, be so decided. But I find nothing in the income tax legislation to justify the comprehensive proposition for which the trustees’ must contend, viz that the High Court is absolutely excluded from a vast range of issues of a kind normally justiciable by it, just because those questions arise between taxpayer and Crown and form a basis, even a necessary basis, for an income tax assessment.
I consider, therefore, that the High Court has jurisdiction to decide a question between a subject and the Crown as to the ownership of property, notwithstanding that an assessment to tax has been made, the validity of which may depend on that ownership. From this three things follow: (1) the consent procedure as heretofore adopted is perfectly valid in appropriate cases; (2) either the Crown, or the subject, has the right to insist that the statutory procedure for dealing with disputed assessments to income tax (and surtax) be followed; (3) the question whether, where both Crown and subject consent, the Crown can be brought into litigation between subjects depends either on the consent of all parties being given, or failing this on the Rules of the Supreme Court. The particular rule which has to be considered is RSC Ord 15, r 6.
As to this provision, though I am willing to give it a generous interpretation, I am in agreement with my noble and learned friend, Lord Morris of Borth-y-Gest, and
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with Buckley J ([1969] 1 All ER 1056, [1969] 1 WLR 437), that it does not enable the Crown to be brought into the present litigation. That it has not this effect was perceived in 1944 by Lord Greene MR in Asher v London Film Productions Ltd, and the view expressed in his judgment must have been confirmed by subsequent consultation with the Attorney General which failed to provide an agreed formula. I cannot agree with the Court of Appeal ([1969] 3 All ER 496, [1969] 3 WLR 458) that this situation, which the same court clearly thought to exist in 1944, has in some way altered since that time; the rule is in all essentials the same as it was then, and the only factor adduced as evidence for a change consists of the development of the consent procedure. (Pilkington v Inland Revenue Comrs was such a case where the commissioners were brought in with their consent and that of all parties; Riches’s case where the Crown appeared as amicus curiae.) But I do not see how any of this can affect the scope of the rule where no consent exists.
From one point of view, it would be convenient if procedure existed for enabling the Crown to be bound by inter-subject litigation, but so long as the Crown desires to retain freedom of choice this may be difficult to achieve, and whatever change were to be made would have to ensure that the other party is not prejudiced by the joinder.
In my opinion, the trustees’ objection is justified, and I would allow the appeal.
LORD DIPLOCK. My Lords, between July and October 1967, the executors of the late Mr Vandervell were served with notice of assessment to surtax for the years 1962–63, 1963–64 and 1964–65 on dividends which had been paid to Vandervell Trustes Ltd as trustees of a settlement made by Mr Vandervell in 1949. The assessments were made on the basis that the shares on which the dividends were paid were held by the trustees on a resulting trust in favour of Mr Vandervell. The executors have given notice of appeal against the assessments.
Section 5(6) of the Income Tax Management Act 1964, provides that after notice of assessment has been served ‘the assessment shall not be altered except in accordance with the express provisions of the Income Tax Acts’. The only way in which an assessment can be altered under the provisions of the Income Tax Acts is by the Special Commissioners on an appeal to them by the party assessed. The powers of alteration are conferred by s 52(5) and (6) of the Income Tax Act 1952, as amended by the Income Tax Management Act 1964, and made applicable to surtax assessments by s 229(4) of the Income Tax Act 1952. Section 52(5) and (6) providec as follows:
‘(5) If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other lawful evidence, that the appellants is overcharged by any assessment or surcharge, the Commissioners shall abate or reduce the assessment or surcharge accordingly, but otherwise every such assessment or surcharge shall stand good.
‘(6) If, on any appeal, it appears to the Commissioners that the person assessed or surcharged ought to be charged in an amount exceeding the amount contained in the assessment or surcharge, they shall charge him with the excess.’
The executors have not been paid the dividends. In 1968 they brought proceedings against the trustees to recover them. These were started by originating summons but are now being continued as a witness action with pleadings. Issues of fact as well as issues of law are involved. The trustees resist the claim on the ground that at the time the dividends were received the late Mr Vandervell had already parted with his beneficial interest in the shares or, if not in the shares, at any rate in he dividends
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declared on them. Alternatively, they say that Mr Vandervell disposed of his interest in the dividends in 1965 after they had been received by the trustees.
If the executors recover the dividends from the trustees or if they fail to recover because Mr Vandervell did not dispose of his interest in them until 1965, the estate of the late Mr Vandervell will be liable to surtax in the amounts assessed on the executors. It is only if Mr Vandervell was not entitled to the beneficial interest in the dividends at the time when they were received by the trustees that the executors would be entitled to have the assessments to surtax reduced by the Special Commissioners. But the onus of proving this to the satisfaction of the Special Commissioners would lie on the executors; and the Special Commissioners would not be bound by any findings of fact made by the court in the action between the executors and the trustees. As respects any ruling by the court on questions of law involved, the Special Commissioners would have to follow it, but it would be open to the Commissioners of Inland Revenue (whom I will call ‘the Board’) to appeal, by way of case stated and to carry that appeal to an appellate court which might not be bound by the ruling of the court in which the proceedings between the executors and the trustees terminated.
Theoretically, therefore, there is a risk that the executors might be faced by conflicting findings of fact or law in the action between them and the trustees. On the one hand, and in the proceedings in their surtax appeal to the Special Commissioners, on the other, which might have the result of their failing to recover the dividends from the trustees on the ground that Mr Vandervell was not beneficially entitled to them at the time they were received by the trustees, and yet also failing to have their assessment to surtax on the selfsame dividends set aside, because they had not succeeded in establishing this ground to the satisfaction of the Special Commissioners or of an appellate court on appeal by case stated.
It is in an endeavour to eliminate this theoretical risk, which I confess I regard as minimal in the actual circumstances of the instant case, that the executors have sought, against the opposition of the trustees, to join the board as additional defendants in their action against the trustees. The sole reason for joining the board, who do not themselves oppose this course, is in order that the board may be bound by any decision in the action as to who was entitled to the beneficial interest in the dividends at the time they were received by the trustees.
My Lords, it has been assumed, without any close analysis, that if the board are made parties to the action, the Special Commissioners who hear the executors’ appeals against their surtax assessments, will be bound to give effect to any decision of the court as to who was entitled to the beneficial interest in the dividends at the time they were received by the trustees. But a judgment in the action can only operate as an estoppel per rem judicatam between parties to the action; and in an action in which no express declaration of the executor’s liability to surtax is sought, the only estoppel against the board which could be relied on would be an issue estoppel. The only effect of an issue estoppel per rem judicatam is to prevent the party estopped from asserting in any subsequent civil litigation between the same parties in which the same issue arises, any claim or defence which would involve his contending that the previous decision on that issue was erroneous or his adducing evidence in support of any such contention. It is, therefore, necessary to consider what are the legal characteristics of the proceedings on appeal to the Special Commissioners against surtax assessment and what are the respective roles of the board and the Special Commissioners in such appeals.
The board, although entitled to be represented during the hearing and at the determination, are not necessary parties to an appeal. If they do not attend, the Special Commissioners must still be satisfied ‘by examination of the appellant on oath or affirmation, or by other lawful evidence’ that the appellant is overcharged by the assessment; and the Special Commissioners may increase the assessment proprio motu if they are satisfied that the appellant has been underassessed. If the
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board do exercise their right to appear, their role is restricted to that allotted to them by s 52(2)(b) and (c) of the Income Tax Act 1952, viz ‘to produce any lawful evidence in support of the assessment’, and ‘to give reasons in support of the assessment’. They have no right to adduce evidence or to give reasons for any increase in the assessment although the Special Commissioners have express power to make one. It is thus evident that the function of the Special Commissioners on an appeal against an assessment to surtax differs from that of a court of law on the hearing of a civil action, whether at first instance or on appeal. A court of law adjudicates on issues in dispute between the parties to the civil action which they have chosen to submit to the court’s adjudication. It is not entitled to adjudicate on any other issues or to make an order which none of the parties to the action has sought. In contrast to this, the Special Commissioners on an appeal against an assessment have to satisfy themselves by lawful evidence that the appellant has been overcharged, even though the board themselves do not dispute this on the appeal and they can make an order increasing the assessment although the appellant has not sought and the board are not entitled to seek or even to support the making of such an order.
Thus, even if the court in a civil action to which a taxpayer and the board were parties had jurisdiction to determine an issue of mixed fact and law which would also arise on the taxpayers’ appeal to the Special Commissioners against an assessment on him to surtax, the issue estoppel per rem judicatam resulting from the court’s determination of that issue, would prevent the board from producing any evidence before the Special Commissioners which conflicted with the court’s determination of fact or advancing any reasons to the Special Commissioners which conflicted with what the court had decided on that issue as a matter of fact or law. But it would do no more. The taxpayer would still have to satisfy the Special Commissioners that the assessment was wrong and, so far as it depended on facts, to do so by lawful evidence of them. The judgment of the court in the action would not be lawful evidence of the facts found therein. Those facts would have to be proved afresh by the taxpayer if the grounds on which he sought reduction of the assessment depended on the truth of those facts.
My Lords, I do not desire to say anything to discourage the sensible practice on appeals before the Special Commissioners of dispensing with proof by lawful evidence of facts which are agreed between the taxpayer and the Commissioners of Inland Revenue of which the latter do not wish to contest. The functions of the Special Commissioners have been substantially altered by the Income Tax Management Act 1964. They have become more judicial and less administrative, although the procedure on appeals to them laid down in s 52 of the Income Tax Act 1952, has not been amended to take account of this. Nevertheless, if with the consent of both the parties entitled to be heard on the appeal they determine it on facts which are agreed but not proved by evidence, this is irregularity in procedure which can be waived. The resulting assessment as altered or confirmed by the Special Commissioners would be valid and neither of the consenting parties would be able to object to it thereafter on the ground of irregularity.
No doubt the taxpayer and the board might also agree to accept as correct, for the purposes of the appeal, facts already found in any judgment of a court, whether or not the taxpayer or the board were themselves parties to that judgment. They might also, without any irregularity, agree not to appeal by way of case stated from any determination of the Special Commissioners which followed any ruling of law contained in the judgment. That is the purpose for which the executors and the board intend to make use of the judgment in the instant action. But the board are unwilling to do so unless they themselves are made parties to the action. My Lords, however, sensible this latter course may be, it would involve an irregularity in the procedure laid down by Parliament for the determination of surtax appeals. What the court is being asked to do, against the opposition of one of the parties to the action, is to give its aid to this proposed irregularity. I do not think that it can. The
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decisive question, as I see it, is whether the court has any jurisdiction after an assessment to surtax has once been made to adjudicate between the taxpayer and the Commissioners of Inland Revenue on the correctness of the assessment or on any underlying issue of fact on which the correctness of the assessment depends, where the board have no other interest in that issue except its effect on the taxpayer’s liability to surtax.
I think the court has no such jurisdiction. The provisions of s 5(6) of the Income Tax Management Act 1964, which I cited at the outset of my speech are clear and unequivocal. The power to alter an assessment once it has been made and served is conferred on the Special Commissioners to the exclusion of any court of law, except insofar as an appeal from a determination of the Special Commissioners on a point of law lies to the High Court under s 64 of the Income Tax Act 1952. It is not suggested that the court has any jurisdiction to entertain an action between the taxpayer and the board for a declaration that the taxpayer’s liability to surtax is different from that with which he is charged by the assessment. That would be to trespass on the jurisdiction to alter an assessment which Parliament has confided exclusively to the Special Commissioners. And I do not think that this statutory exclusion of the jurisdiction of the High Court can be circumvented by seeking a declaration on an issue whether of fact or of mixed fact and law on which the liability of the taxpayer to the amount of surtax with which he has been charged by the assessment depends. If the only interest of the board in that issue is the taxpayer’s liability to surtax, any relief granted by the court by way of declaration would either not be a declaration of any rights to which the taxpayer was entitled against the board or vice versa, or would be a declaration of his liability to surtax, and this lies within the excluded jurisdictional field.
If the court has no jurisdiction to grant relief by way of a declaratory judgment of this kind against the board at the suit of the taxpayer or against the taxpayer at the suit of the board, it cannot, in my view, acquire jurisdiction to do so merely because a declaratory judgment in similar terms is sought by one or other party in an existing action instituted for some other purpose between the taxpayer and some other person. It follows that if the commissioners were made parties to the instant action neither the executors nor the board would be entitled to claim any relief by way of declaration or otherwise against one another in that action. A party to an action must be a person who claims in that action some relief against another party to the action or against whom some relief is claimed by another party to the action. There is, in my view, no jurisdiction to add as a party to an existing action a person by and against whom no relief which the court has jurisdiction to grant can be claimed.
My Lords, I have deliberately confined my observations to cases such as the instant case where an assessment to surtax has already been made and is under appeal to the Special Commissioners. Much wider topics have been canvassed in argument, and your Lordships have been invited to express some general views as to the validity of what has been termed ‘the consent procedure’ in adding the Commissioners of Inland Revenue as parties to civil actions between subjects. Despite the helpful argument I do not feel qualified to do so. It seems to me that the problem would be more appropriately dealt with by Parliament itself rather than by attempting, by judicial decision, to reconcile a procedure of this kind with a whole variety of statutory procedures in fiscal matters which never contemplated it. But, for the reasons I have given, I would allow the instant appeal.
Appeal allowed.
Solicitors: Culross (for the appellants); Allen & Overy (for the first, second and third respondents); Solicitor of Inland Revenue.
S A Hatteea Esq Barrister.
Re Drake’s Will Trusts
Drake and another v Drake and others
[1970] 3 All ER 32
Categories: SUCCESSION; Wills
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, RUSSELL AND PHILLIMORE LJJ
Hearing Date(s): 9, 10, 29 APRIL 1970
Will – Issue – Male descendants – Whether including males descended through females.
‘Male descendants’ is not a legal term of art but a descriptive phrase; accordingly, in the absence of a context to the contrary, a disposition in favour of ‘the male descendants of’ a named person has its natural meaning of males however descended, whether through males or females, from the person named (see p 37 c, p 45 g and p 46 d, post).
Re Du Cros’ Settlement [1961] 3 All ER 193 considered.
Bernal v Bernal (1838) 3 My & Cr 559 overruled on this point, Oddie v Woodford (1821) 3 My & Cr 584 and Re Allen (1953) 89 CLR 152 distinguished.
Decision of Burgess V-C [1969] 3 All ER 1360 reversed.
Notes
For gifts to issue in a will, see 39 Halsbury’s Laws (3rd Edn) 1959, 1060, para 1584, and for cases on the subject, see 49 Digest (Repl) 760–7618 7119–7126.
Cases referred to in judgments
Allen, Re, Allen v Crane (1953) 89 CLR 152, [1953] ALR 959, 27 ALJ 538, 49 Digest (Repl) 733, * 2401.
Bernal v Bernal (1838) 3 My & Cr 559, 7 LJCh 115, 40 ER 1042, 11 Digest (Repl) 404, 593.
Clanchy’s Will Trusts, Re, Lynch v Edwards [1970] 2 All ER 489.
Du Cros’ Settlement, Re, Du Cros Family Trustee Co Ltd v Du Cros [1961] 3 All ER 193, [1961] 1 NLR 1252, Digest (Cont Vol A) 1319, 144a.
Lywood v Kimber (1860) 29 Beav 38, 54 ER 539; sub nom Lywood v Warwick 30 LJCh 507, 49 Digest (Repl) 773, 7254.
Oddie v Woodford (1821) 3 My & Cr 584, 40 ER 1052; affd HL (1825) 3 My & Cr 625, 49 Digest (Repl) 760, 7119.
Pelham-Clinton v Newcastle (Duke) [1902] 1 Ch 34, 69 LJCh 875, 83 LT 627; on appeal CA [1902] 1 Ch at 41; on appeal HL [1903] AC 111, 49 Digest (Repl) 771, 7233.
Sleeman, Re, Cragoe v Goodman [1929] WN 16, 167 LTJo 116, 67 LJo 163, 49 Digest (Repl) 857, 8045.
Thellusson v Rendlesham (Lord) (1859) 7 HL Cas 429, 28 LJCh 948, 11 ER 172; sub nom Thellusson v Roberts 33 LTOS 379, 49 Digest (Repl) 757, 7090.
Appeal
This was an appeal by the second defendant, Ian Drake Green, the son of a grand-daughter of the testator, Herbert Drake, deceased, against the decision of Burgess V-C in the Chancery Court of the County Palatine of Lancaster, given on 10 June 1969 and reported [1969] 3 All ER 1360. The respondents to the appeal were the first defendant, Arnold Drake, the son of a brother of the testator, who had been appointed by Burgess V-C to represent descendents in the exclusively male line, and the plaintiffs, Arthur Drake and Dennis Rodgers, the trustees of the will. The facts are set out in the judgment of Harman LJ. The third defendant, Francis Ernest Drake, also appealed, but did not pursue his appeal.
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A W Simpson for the second defendant.
D B Mallard for the plaintiffs.
P A Ferns for the first defendant.
Cur adv vult
29 April 1970. The following judgments were delivered.
HARMAN LJ. This is the second case to come recently before this court on appeal from Burgess V-C ([1969] 3 All ER 1360) in which questions of difficulty arise under wills which contain an ultimate gift in favour of kin of the testator. In Re Clanchy’s Will Trusts, Lynch v Edwards, recently decided, the critical words were ‘next-of-kin’. In the present case the words to be construed are ‘male descendants’ and the question is whether such descendants must take exclusively through the male line or whether they may claim through females.
The will was dated 1 February 1943 and the material clause is cl 4, which is in these terms:
‘I bequeath my Two Thousand Ordinary Shares of One Pound each in The Brittanic Assurance Company Limited or any increased or decreased holding therein to my Trustees upon Trust:—(a) to pay the income from one half part therefrom to my wife Hannah Drake during her life so long as she shall remain my widow; (b) to pay the remaining one half part of the income therefrom to my said son Arthur Drake, for his own use and benefit; (c) after the death or remarriage of my said wife Hannah Drake and after the death of my said son Arthur Drake; (d) to hold the said shares as to both capital and income upon trust to divide the same per capita between such of the male descendants of my father living at the death or remarriage of my said wife as to one half part thereof, and at the death of my said son Arthur Drake as to the remaining half part thereof who shall attain or shall have attained the age of twenty-one, and if more than one in equal shares.’
The testator died on 5 February 1943 and his will was was proved in the following month. The shares which are the subject-matter of the gift are now worth about £200,000. Hannah Drake, the testator’s widow, died in October 1966 so that under the somewhat inartistically drawn cl 4 (d) one-half of the shares then became distributable. Extensive enquiries have shown that at that date there were living ten legitimate male descendants of the testator’s father in the exclusively male line and at least 29 more legitimate male descendants who were sons of or issue of females. For the purpose of the present appeal the former class is represented by the first defendant, Arnold Drake, the son of a brother of the testator, and the larger class by the second defendant, Ian Drake Green, who is a son of a granddaughter.
Burgess V-C ([1969] 3 All ER 1360) decided in favour of the more restricted class. This he said conformed with the view which he would have taken unfettered by authority, but he did not decide in favour of his own view but on the footing that he ought to share the doubts expressed in a decision of Pennycuick J in Re Du Cros’ Settlement, Du Cros Family Trustee Co Ltd v Du Cros. In that case too the words to be construed were ‘male descendants’ and Pennycuick J expressed the view, contrary to the view of Burgess V-C, that unfettered by authority he would have decided that ‘male descendants’ meant all males who were in fact descendants from the propositus, that being, as he thought, the natural meaning of the words. This would be my own view also. Pennycuick J, however, did not rely on his own opinion but on a context provided by the will itself which document contained also a gift to the ‘male issue’ of the
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settlor, this being a term of art indistinguishable from the words ‘issue male’, and signifying descendants through the exclusively male line. Pennycuick J held that there being these two expressions, that is to say ‘male issue’ and ‘male descendants’ prima facie different classes were intended by the two and as the first was confined to the narrower class the second ought to be extended to the wider class. Pennycuick J expressed the view that had there not been this context he should have doubted whether he could decide that the words ‘male descendants’ included those taking through the female line and he to some extent discussed the authorities on the subject. Burgess V-C ([1969] 3 All ER 1360) found in the will before him no guiding context and he therefore shrank from doing what Pennycuick J had doubted he could do in the state of the authorities and decided in favour of the narrower class.
Oddly enough there appears to be no English authority on the subject later than the year 1838 when Bernal v Bernal was decided. By way of appendix to that case is reported Oddie v Woodford, decided 17 years earlier and preserved in a shorthand note on which there is no doubt that Lord Cottenham LC relied to a great extent in deciding Bernal v Bernal. It is necessary therefore to begin with a consideration of Oddie v Woodford. This was one of the facets of the Thellusson litigation and concerned the right to present to certain livings. The testator had been dead for some 25 years but the period of accumulation directed by the will and which had been declared valid by the House of Lords in the action, was still in being. The ultimate litigation was to the ‘eldest male lineal descendant’s of a relative of the testator and the plaintiff claimed the right to nominate although he was descended from the testator in the female line. This the House of Lords rejected and the sidenote reads: ‘The designation of “eldest male lineal descendant” held to be inapplicable to a male person claiming in part through a female’. Lord Eldon LC in a characteristic judgment, full of doubts and hesitations, inclined to the view that the right to nominate must be confined to persons claiming exclusively through males and the plaintiff appealed to the House of Lords. The report states the opinion given by the judges in answer to the questions proposed to them by the House and this was against the plaintiff and in favour of the strict construction. The passage reads ((1838) 3 My & Cr at 628):
‘… the judges, in answer to certain questions which had been proposed to them by the House [said] (1) We are of opinion that, in the case put in the first question, the grandson of the testator’s second son, being a male descendant through a male, would be entitled to nominate or present to the vacant living. We are of this opinion, because we think the words “eldest male lineal descendant” of his three sons respectively, according to the true construction of the testator’s will, designate male persons descended from such sons in the male line only. The other construction contended for is, that the testator meant to confer the power of nomination of the eldest male who was a descendant of his sons respectively, without regard to his being descended through males. If he had intended this, he would have pointed out in terms the eldest male descendant. That is the obvious and natural mode of expressing such intention. The word “lineal” would not have been introduced. On that construction it is totally useless. It was introduced, as it appears to us, in order to intimate the testator’s desire that the person to nominate should be a male descendant of a son in the male line. No sense or operation can, in phrase, be given to the word “lineal”, but by connecting it with “male”, and giving it the sense just stated.’
Then they referred to a context which, they said, strongly supported that view. It is clear that the reasoning depended largely on the presence of the word ‘lineal’ and the judges assumed, although of course they did not decide, that if this word had
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been absent the wider construction would, or at any rate might, have prevailed. The judges also relied on the context just referred to where the same expression was used in another part of the will where it undoubtedly referred to persons claiming through the male line exclusively. The report does not contain any account of their Lordships’ speeches and merely recites the order which, as appears from the headnote, was a decision excluding any male taking through the female line. In so deciding, the House of Lords accepted the judges’ advice.
In Bernal v Bernal the words ‘male descendants’ were held to mean descendants claiming through males only. This was a suit which had been going on for many years and concerned a will in Dutch of a Spanish Jew held to be domiciled in England in favour of ‘male children’. Those words had been held to mean ‘male descendants’ and it was decided that this limited claims to those descendants from the male line only. There had been a great number of orders made in the case, the testator having made his will as long ago as 1693 and died in 1696. Letters of administration were granted in England in 1722 and the earliest decree in the suit was in 1728. The case as reported is a decision of Lord Cottenham LC made on 28 February 1838. This order discharged earlier orders for the distribution of the income of the chargeable fund and was, so far as I can make out, a decision of Lord Cottenham LC sitting as the judge of first instance. I must read parts of the judgment ((1838) 3 My & Cr at 580):
‘The question, therefore, to be considered is, whether the testator intended that the qualification of persons to enjoy his bounty should be males descending through males, or descended through females. Both sets of Claimants are descended from Benjamin Bernal; but while the Petitioners derive their descent through males, the other Claimants derive through females. The testator names certain men and certain women of his family, and the children of the women, and in like manner the males children of the above-named men, who were his nephews. He afterwards directs the proceeds of the fund to be applied to those of the race of his father, and that the fund should be preserved for the comfort and succour of his family … The gift, therefore, is (taking the particular case which has occurred) to his nephew Benjamin Bernal, and his male descendants; and such the order of the 15th of August 1837 declares to be the construction; the law of Holland permitting this species of provision of families. It must be considered, for the purpose of ascertaining who are to take, in the nature of an inheritance; the qualification to take being derived from the parties’ descent; and that qualification is being male descendants. The general class is descendants; the qualification of the class is being male. To entitle any one to claim, he must shew that he is one of the favoured class; that is, one of the class of male descendants. A male, descended from a female of the family, would undoubtedly answer the description, as he would be a descendant and a male; but he would not be one of the class of male descendants. Such would be the ordinary acceptation of the terms. In speaking of a man and his male descendants, as a class, no one would conceive the son of a female descendant as included; and such is the construction which our law has put upon the words; as “issue male”, which is, in fact, the same thing as male descendants. The case of Oddie v Woodford appears to me to be a strong authority for the same purpose; for although the word “lineal” was much relied upon, the force of that word was to mark the class to which the party was to belong, in contra-distinction to the particular description of the individual. In no other sense could the term “lineal” be of any importance, as the party must have been lineally descended, whether descended through a male or a female; but considering the word “lineal” as
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indicating the class, and, therefore, as meaning a descendant of the male line rather than a male descendant, the House of Lords held the grandson of the testator’s second son (being the son of a daughter of the testator’s second son) not to be entitled. In this case, it is clear that the testator is speaking of and describing a class; which brings it directly within the principle of Oddie v Woodford. It appears to me, therefore, that the testator intended to designate the male line, as the class out of which the parties to be benefited were to be taken, and that such is the natural meaning of the terms used, explained by the other parts of the will: and such an intention appears to coincide with the views and natural object of the testator.’
There is no doubt that Lord Cottenham LC did rely on the decision in Oddie v Woodford and it is said that he mistook that decision which, but for the presence of the word ‘lineal’, would have been decided the other way and that therefore Bernal v Bernal is no authority for limiting the class of descendants. Lord Cottenham LC, after discussing the force of the word ‘lineal’, adds words ((1838) 3 My & Cr at 582) which show that in his view ‘descendants’ has the same meaning even in the absence of that word and the judges who gave their opinion is the House of Lords in Oddie v Woodford did not decide the contrary because that was not the point before them.
A kindred subject was discussed in the High Court of Australia in Re Allen, Allen v Crane. The words to be construed there were ‘male issue’ and it is a strong authority, the leading judgment being delivered by Dixon CJ. In his judgment he treats ‘male issue’, ‘male descendants’ and similar terms as all having the same meaning. Dixon CJ discusses the cases, and after having stated the passage from Lord Cottenham LC’s judgment very briefly, he continued ((1953) 89 CLR at 162):
‘“Issue male” possessed the same meaning. “I am satisfied … that these words must be construed in their strict technical sense, which means issue male claiming through males. I should be unsettling the settled rules of the Court if I gave any other meaning to these words, unless I found on the face of the will something to shew that he intended to use them in another sense”—per Sir John Romilly in Lywood v. Kimber. In Thellusson v. Lord Rendlesham, Lord St. Leonards examined the separate words making up the phrase “eldest lineal descendant“. When he came to the second word he said ((1859) 7 HL Cas at 512): “Then as to the word ‘male’, the meaning of that was thought for a long while to be very doubtful, but it has been held to mean males claiming through males.” The reason why the expressions “issue male”, “male descendants”, “male heirs” or what is the same thing “male heirs of the body”, bear a prima facie meaning which connotes persons claiming through the male line does not appear to be artificial.’
Then he dealt with questions about tail male which I need not read; then he said ((1953) 89 CLR at 163):
‘There can be no doubt that the prima-facie meaning restricting such expressions to descent by the male line may readily yield to a context. If there had been any indication in the will of an intention to extend the application of the words used to male descendants claiming through females the case might present a different aspect. But there is no such indication. Circumstances may be supposed to which a testator meant his will to apply that might suffice to control the meaning placed on expressions like “male issue“. But here there is nothing proved as to the state of his family or as to other circumstances which
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would affect the question … For the reasons I have given I think that a prima facie legal meaning attaches to such expressions as issue male, male issue, and male descendants because they are compound expressions apt to describe descendants by a male line. This meaning appears to me to be consistent with common understanding and, moreover, somewhat more probably, to represent the intention of the testator.’
This is a decision of a strong court, that in the absence of a context ‘male descendants’ ought to be treated as synonymous with ‘male heirs’ or ‘male issue’ and should signify those taking in the male line.
I have considered the judgment about to be delivered by Russell and Phillimore LJJ and on the whole I feel constrained to agree with them that ‘male descendants’ not being a term of art but a descriptive phrase, has as its natural meaning males however descended. I feel some reluctance in arriving at this conclusion because the decision in Bernal v Bernal has stood for so long and also because I consider that we ought to give great weight to the High Court of Australia’s decision in Re Allen, Allen v Crane. On the whole, however, I think that Bernal v Bernal was decided by Lord Cottenham LC on a mistaken view of Oddie v Woodford and that to extend the term of art ‘heirs male’ to a phrase which is not a term of art is an unjustifiable extension of a technical rule. The decision of the Australian court weighty though it is, is obiter, and I feel on the whole that we ought not to follow it.
I would therefore allow the appeal.
RUSSELL LJ. The testator’s widow, life tenant under the will dated 1943 as to half a block of shares of considerable value, having died in 1966, and the will having provided that on such event half of the shares should be divided in equal shares per capita ‘between such of the male descendants of my father [than] living … [attaining] the age of twenty-one … ’, the question is whether the class of beneficiaries includes descendants of the testator’s father in a female line, or is limited to male descendants in a male line only. There is no context giving guidance either way.
In Oddie v Woodford the question for decision was whether a nomination to a vacant advowson which the will conferred on—
‘… the eldest male lineal descendant of my three sons respectively, in the order and rotation aforesaid, … when the church becomes vacant … ’
conferred such a right on a descendant who, although male, descended through a female. Lord Eldon LC held that the provision was restricted to those descending through males only. In the course of a long judgment he in substance decided that the disposition of property (after the end of the accumulation period) in the earlier part of the will in favour initially of: ‘the eldest male lineal descendant then living … of my [respective sons (in thirds)]’ was thus limited in scope, and gave the same construction to the phrase in the advowson clause. On the earlier provision he advanced cogent reasons for his conclusion based on the subsequent entails male. But so far as presently concerned he pointed out ((1821) 3 My & Cr at 601) that the words were not ‘eldest male descendant’ but ‘eldest male lineal descendant’. Then he said ((1821) 3 My & Cr at 614):
‘The conveyance to be made is directed to be made in these words; and here I take notice again, in order that it may be seen whether I am accurate or not, that after the testator has once mentioned the words “eldest male lineal descendant”, in no part of his will, either before or after, does he ever use the words “eldest male descendant” only; but in every part of his will he inserts the word
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lineal” between “male” and “descendant“. Now I take it to do one rule in the construction of a will, that you are not to impute to a testator, unless the context requires it, that he uses additional words except for some additional purpose; that you are not to suppose he uses additional words for no purpose. I mention this, the rather because I see in one of the opinions which have been given upon this case, that an opinion is given on the effect of the words “eldest male descendant” without the words “eldest male lineal descendant”; and the difference may be important, if the word “lineal” is to have any meaning ascribed to it; because it is clear “eldest male descendant” would be quite sufficient to include all that is contended for on the part of those who insist that males claiming through females are to take, whether the word “lineal” was there or not; and, therefore, the question is whether the word “lineal” was not inserted for some purpose … ’
I do not know to what opinion Lord Eldon LC there referred. But he appears to me to express the clear view that had the words been only ‘eldest male descendant’ a descendant claiming through a female would have been included. Again he said ((1821) 3 My & Cr at 618):
‘Now, upon the best consideration that I can given this case, it does appear to me that “male lineal descendant” must mean a male descendant in the male line; “lineal” is otherwise altogether surplusage, and it is not only surplusage introduced into the clause, but in every word of this will where the male descendant is mentioned. If the person meant was a male descendant, whether of the male or female line, that intent would have been quite sufficiently expressed by the words “male descendant” only, without the word “lineal”, and yet that word is, as I have said, used in every clause of the will; and I do not think myself at liberty to hold that that word was not intended to have some additional meaning: if it is to have an additional meaning, it must be a distinct additional meaning, and the testator must have used it in order to express what the words “male descendant” alone would not have expressed. It is not sufficient to say here that “male lineal descendant” may mean nothing more than what “male descendant” would express, because the question is whether a testator who uses both words is not (if the context and provisions, and nature of the will require you to suppose he did) to be taken to mean something more than by the other words.’
This again is a perfectly clear expression of the view that without the word ‘lineal’ a descendant through a female would be included. I do not know if the contrary was argued; but I find it difficult to suppose that anyone who thought that the phrase without the word ‘lineal’ was confined to the male line would have thought it worth trying to argue that the full phrase was not so confined. The case was appealed to the House of Lords and the opinion of the judges was taken in 1825. That opinion stated, on the suggestion that descendants through females were included, that ((1821) 3 My & Cr at 628):
‘If [the testator] had intended this, he would have pointed out in terms the eldest male descendant. That is the obvious and natural mode of expressing such intention. The word ‘lineal’ would not have been introduced.’
To the judges accordingly the phrase ‘male descendant’ was the obvious and natural way of referring to any person who was a male and a descendant through either male or female. It is true to say that this was a decision that the full phrase was narrow in import. But the reasoning behind the decision was that it was the word ‘lineal’ in association with ‘male’ that carried with it a connotation of descent in the male line which without the word ‘lineal’ would not exist, the word ‘male’ linking with both ‘lineal’ and ‘descendant’ to point to a male line male descendant. Again I remark
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that either it was not argued that without ‘lineal’ the phrase would anyway have been restricted to the male line, because counsel assumed that it would not in a case not well known for concession of possible points of argument; or if it was argued the arguments were dismissed by Lord Eldon LC and the judges.
I have examined the record in the appeals to the House of Lords in Oddie v Woodford and there is nowhere any suggestion that the phrase ‘male descendant’ without the word ‘lineal’ would have not extended to descent in the female line. Every argument seems to rest on the contrary assumption. The appellant asserted that it was not denied that he was ‘the eldest male descendant’, and that it was clear that if the expression had been ‘male descendant’ it would apply to males descended in both male and female lines. The respondents’ first reason said: ‘… unless males claiming through females are excluded, the word “lineal” … would be without meaning’ without suggesting alternatively that it added nothing.
Then comes Bernal v Bernal, a decision of Lord Cottenham LC on a petition by two male line descendants. The testator by his will provided, in relation to a fund, that should it—
‘… happen to appear to my executors that any of the relations hereinafter named should be reduced to want … all the dividends or interest shall be applied to those in necessity, which are [J L] Ganez, [A and J] de Isaac Bernal, [I] de Jacob Bernal, [B] Bernal, and also Rachel Louzado, Leah de Castro, and Ester Franco, if they or their children shall come to want, and in like manner the male children of the above-named men [ie those with initials], also included in [this] clause; Leah, Rachel, and Esther [daughters] of Jacob Bernal my brother, and their children, whom God prosper, they may not come to want this.’
The testator died in the year 1696. For a great many years this disposition (which was considered in English law to be charitable), was construed and acted on on the footing that male descendants of the named nephews of the testator were included in the class of beneficiaries whether their descent was traced through males or females. The latest example was an order dated 25 March 1833 ((1838) 3 My & Cr at 566) for distribution among 19 persons who included (inter alios) four males called Genese and three males called Sanguinette whose respective mothers were daughters of a son of a son of the nephew B Bernal. The group included the two petitioners whose father was a son of a son of the same nephew B Bernal. (The group would seem to have included also females; but these may have been descended from nieces of the testator.) In 1834 one of the petitioners petitioned to Sir John Leach MR, who ((1838) 3 My & Cr at 567) appears to have directed the master to proceed with some reference and therein to have regard to the course which had been hitherto adopted as to the construction of the will. From this order of Sir John Leach MR the same one of two petitioners further on 31 October 1834 petitioned Lord Cottenham LC by way of appeal therefrom. After several references back to the master, Lord Cottenham LC by an order ((1838) 3 My & Cr at 575) on 15 August 1837, declared on that petition that the persons entitled to participate in the fund were ‘the male descendants’ of the five named nephews and ‘the male and female descendants’ of the three named nieces, or such of them as were reduced to want; and this order referred the matter back to the master to enquire and state who were the persons entitled. The master, on 31 January 1838, reported back the state of the family and submitted to the judgment of the court whether the male Geneses and Sanguinettes were or were not entitled to participate.
All the above facts were stated in the petition of the two petitioners that came before Lord Cottenham LC in 1838, so that it would appear that he was not then hearing the petition dated 31 October 1834 ((1838) 3 My & Cr at 567) on appeal against the order of Sir John
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Leach MR dated 25 June 1834. The prayer of the petition asked for an order that the order of 25 March 1833 (for distribution of income among the 19 persons named) be discharged or no longer acted on, and (in effect) for a declaration that only those males descended in an exclusively male line from the testator’s nephew, B Bernal, were entitled in accordance with the declaration contained in the order of Lord Cottenham LC dated 15 August 1837 ((1838) 3 My & Cr at 579). From all this it does not appear clearly whether on this petition Lord Cottenham LC was exercising original or appellate jurisdiction. He certainly was not dealing with the petition of 31 October 1834 of appeal from Sir John Leach MR, and there is nothing in the report to suggest that the petition before him was by way of appeal; nor does it appear whose order was that of 25 March 1833 mentioned in the prayer to the petition. I would not therefore approach our decision in the instant case on the footing that we are bound by Bernal v Bernal.
In the arguments as reported, counsel for the petitioners, asserting the male line only argument, merely referred to Oddie v Woodford. That case was not then reported, but I think that we should assume that Lord Cottenham LC had available to him in some form the judgment of Lord Eldon LC and the opinion of the judges. Oddie v Woodford was relied on by the female line claimants, on the lines already indicated in my extract of the views expressed in that case. Lord Cottenham LC in his judgment pointed out that the gift was (in effect): ‘… to his nephew Benjamin Bernal, and his male descendants … ’ He then said ((1838) 3 My & Cr at 581):
‘It [ie the gift] must be considered, for the purpose of ascertaining who are to take, in the nature of an inheritance; that qualification to take being derived from the parties’ descent; and that qualification is being male descendants. The general class is descendants; the qualification of the class is being male. To entitle any one to claim, he must shew that he is one of the favoured class; that is, one of the class of male descendants. A male, descended from a female of the family, would undoubtedly answer the description, as he would be a descendant and a male; but he would not be one of the class of male descendants.’
Lord Cottenham LC here appears to stress a distinction between a wider content of a description of a person at being a male descendant and a narrower content of a description of a class of persons as being male descendants—or at least of a description of a class of a man and his male descendants. He continued ((1838) 3 My & Cr at 582):
‘Such would be the ordinary acceptation of the terms. In speaking of a man and his male descendants, as a class, no one would conceive the son of a female descendant as included; and such is the construction which our law has put upon the words; as “issue male”, which is, in fact, the same thing as male descendants.’
I note that he again has in mind a reference to: ‘… a man and his male descendants, as a class.' But undoubtedly he quite clearly lays down his view that there is no difference between ‘issue male’ (which undoubtedly has acquired in law an underlying meaning of issue male in the male line) and ‘male descendants’. It is to me puzzling in the extreme that Lord Cottenham LC was able to be so dogmatic in the face of the plainly expressed opinions of Lord Eldon LC and the judges in Oddie v Woodford that the ‘eldest male descendant’ in that case, without the word ‘lineal’, would have required enquiry in a class including males descended in a female line; nor, so far as I am aware, had any other reported authority considered the content or ambit of the words ‘male descendants’. Nor am I any less puzzled when Lord Cottenham LC next proceeded as follows ((1838) 3 My & Cr at 582):
‘The case of Oddie v. Woodford appears to me to be a strong authority for
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the same purpose; for although the word “lineal” was much relied upon, the force of the word was to mark the class to which the party was to belong, in contra-distinction to the particular description of the individual. In no other sense could the term “lineal” be of any importance, as the party must have been lineally descended, whether descended through a male or a female; but considering the word “lineal” as indicating the class, and, therefore, as meaning a descendant of the male line rather than a male descendant, the House of Lords held the grandson of the testator’s second son (being the son of a daughter of the testator’s second son) not to be entitled. In this case, it is clear that the testator is speaking of and describing a class; which brings it directly within the principle of Oddie v. Woodford.’
I cannot myself see the justification for these comments as expository of the views and conclusions in Oddie v Woodford. With or without the word ‘lineal’ a class was indicated within which a particular person fell to be identified; the whole importance of the word ‘lineal’ was that it indicated a narrower class, the word ‘male’ being associated not only with the word ‘descendant’ but also and separately with the word ‘lineal’ so as to point to a male line of descent (see also per Bramwell B in Thellusson v Lord Rendlesham ((1859) 7 HL Cas 429 at 455)).
My conclusion thus far on these two cases is that we have strong expression of opinion, though strictly speaking obiter, on the meaning of ‘male descendants’ one way in Oddie v Woodford; and on the other hand an equally strong expression of opinion by way of decision not binding on us the other way, coupled with what seems to me a wholly unsatisfactory reliance on the former case, in Bernal v Bernal. The decision in Bernal v Bernal was not appealed.
We were referred next to a later—indeed the third—appearance of the Thellusson will in the House of Lords in Thellusson v Lord Rendlesham. This was on the question whether the provisions for allocation of capital and accumulations at the end of the accumulation were void for uncertainty, and what was meant by the word ‘eldest’. It will be recalled that this provision was for allocation of one-third in the first place to the ‘… eldest male lineal descendant then living’ of each of three sons of the testator in the tail male. It was decided that these provisions were not too uncertain, and further that ‘eldest’ was also associated with ‘lineal’ and referred not to the age of any person but to seniority in point of line. Some reference of course was made to the previous decision on the advowson point as determining that only male lineage was to be regarded, Bramwell B in particular, as previously remarked, stressing ((1859) 7 HL Cas 429 at 455) the function of the word ‘lineal’ in that connection. We were referred to an isolated passage in the opinion of Lord St Leonards ((1859) 7 HL Cas at 512) where, in dealing severally with the words ‘eldest’, ‘male’ and ‘lineal’ with a view to construing the word ‘eldest’, he said:
‘Then as to the word “male”, the meaning of that was thought for a long while to be very doubtful, but it has been held to mean males claiming through males. Full effect, therefore, must be given to that.’
In my judgment, no reliance for present purposes can be placed on that passage. It is an isolated passage in one opinion. It is not an echo of Bernal v Bernal which was not cited. Oddie v Woodford was extensively referred to and this passage cannot without more have been intended to deny the assumptions or dicta of Lord Eldon LC and the judges in that case. I take the passage to do no more than refer to the fact that in this will after much argument it had been finally decided that in its context ‘male’ imported the double idea of male by sex and male by line of descent. (It is of some interest to note that on a point not now relevant Lord St Leonards indicated ((1859) 7 HL Cas at 507) that he was aware that Lord Eldon LC disagreed with the opinion of the
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judges given to the House of Lords in Oddie v Woodford, but the report of that case does not suggest that any speeches were delivered.)
One other case was cited in support of Bernal v Bernal as being an authority approved by the House of Lords. That was Pelham-Clinton v Duke of Newcastle where the House of Lords approved the judgment of Buckley J ([1902] 1 Ch 34). There a devise was construed as a devise to: ‘[C] and such issue male as he may have by marriage with a fit and worthy gentlewoman and their male descendants … ’ and it was held to create an estate in special tail male in C. The words ‘and their descendants’ clearly could add nothing; the preceding words sufficed for such entail. All that Buckley J said ([1902] 1 Ch at 40) on these words was: ‘As regards the meaning of the words “male descendants” I may refer to the case of Bernal v Bernal’. Of course he was probably referring only to the view that a gift to ‘A and his male descendants’ imported descent in the male line only. The general approval of Bukley J’s judgment in the House of Lords does not assist, and I derive no assistance at all from Thellusson v Lord Rendlesham or Pelham-Clinton v Duke of Newcastle.
Next I come to a decision of the Australian High Court, reversing McLelland J that, in a will disposing of residue in trust for the testator’s son for life and after his death on trust for his (the son’s) male issue living to attain the age of 21 years and if more than one in equal shares, there was no difference between ‘issue male’ and ‘male issue’ and consequently only those in an exclusively male line could take, since it was established that ‘issue male’ had that connotation. This is Re Allen, Allen v Crane. I observe that of course the decisions of that court are not binding on us, and that in any event references in the judgments equating ‘male issue’ with ‘male descendants’ were obiter; but even obiter dicta from that source are entitled to the highest regard. In argument (as reported) for the appellant, reference was made to Bernal v Bernal as to ‘male descendants’, and it was suggested that ‘lineal’ in Oddie v Woodford was not necessary to the decision. The respondent argued the contrary. Dixon CJ throughout his judgment referred to ‘descendants’ as relevantly equivalent to ‘issue’, though it was not necessary for him to depart from the words in suit. He said ((1953) 89 CLR at 161):
‘However this may be, the interpretation of the provision must be approached by inquiring first whether, when used as words of purchase the phrase “male issue” has a prima-facie legal import so that you begin with a presumption as to its meaning and application, be it weak or be it strong. I think that in common with analogous expressions like “male descendants”, “issue male”, “heirs male”, and “male heirs”, the words “male issue” are to be understood, unless the contrary appears from the context or circumstances, as referring to descendants in the male line.’
It seems to me that the phrase ‘analogous expressions like “male descendants”’ assumes unnecessarily the question which we have to decide. Again he said ((1953) 89 CLR at 161):
‘But it is obvious that if it were true of such words as heirs male of the body, it must be even more true of untechnical or at least less technical expressions like “descendants” and “issue” when qualified by the word “male“.’
And of this I make the same comment. He then quoted a passage from Lord Cottenham LC in Bernal v Bernal ((1838) 3 My & Cr at 581, 581) already cited in relation to ‘male descendants’ without noticing the objections to it that I have stated. Dixon CJ next referred to the quotation from Lord St Leonards in Thellusson v Lord Rendlesham ((1859) 7 HL Cas at 512) which I have already noticed and remarked on. From then on Dixon CJ continued in his judgment to point to the
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compound phrase ‘issue male’ as connoting the male line only, as distinct from ‘issue who shall be male’, and to equate this phrase for this purpose with not only ‘male issue’ but also with ‘male descendants’, saying that in each case any other view would introduce an unreal distinction. He relied therefore on a special meaning to be attached to a compound phrase. Kitto J pursued the same course. He appears to have considered that ‘male descendants’ according to ordinary English usage imputed the notion of descent through the male line only. Taylor J agreed entirely with Dixon CJ.
This question came before Pennycuick J in Re Du Cros’ Settlement, Du Cros Family Trustee Co Ltd v Du Cros. In that case, by the settlement, during a period referable to lives, half the income of certain shares in a company was to be divisible equally among the living brothers of one settlor (the father) and the ‘male issue’ of brothers who should have died. The other half during the period was divisible in discretionary proportions among such of the ‘male descendants’ of the father of the same settlor as should for the time being be responsible for the active business of the company. It was held that ‘male issue’ was a term of art connoting male in line as well as male in sex, in the absence of contrary context. But ‘male descendants’ was not a term of art, and the general view of the judge that it was not limited to the male line derived support in the particular case from the contrast with ‘male issue’.
I should not conclude this review of authority without reference to a textbook to which our attention was drawn. Hawkins on Willsa cites Lord Cottenham LC in Bernal v Bernal ((1838) 3 My & Cr at 581) and next refers to Oddie v Woodford without noticing any difficulty in reconciling the views expressed in those cases. Though it does state the rule that ‘issue male’ means descendants in the male line only, it does not state the same of ‘male descendants’.
What then, at the end of the day, is the law to be on the question whether a disposition directly in favour of the male descendants of a named propositus is, without any context or circumstance pointing either way, to be taken to refer to all males who are descendants or to refer only to all males who are descendants in a male line? For myself, I start with the view that ‘male descendants’ means no less than it says, descendants who are male. That seems to me to be, as the judges in Oddie v Woodford indicated, the obvious and natural meaning of the words. But having regard to the lengths that the law has reached in connection with other phrases by way of limiting them to the male line, does it make sound law not to extend that limitation to the instant phrase?
It starts, in a sense, with this: prior to the Law of Property Act 1925, s 130, a testamentary disposition in favour of ‘A and his issue’ was equivalent to ‘A and the heirs of his body’—ie an entail in A; next, a disposition to ‘A and his issue male (or male issue)’ was equivalent to ‘A and the heirs male of his body’—ie an entail male in A; next, a disposition to ‘A and his descendants’ also conferred an estate tail on A; see Re Sleeman, Cragoe v Goodman. Presumably, although I know of no authority, a disposition to ‘A and his male descendants’ would confer an estate tail male. The law then takes an important step, but, as I see it, by analogy. It says that a disposition to ‘issue male of A’ imports not only the sex of the beneficiaries but also the sex of the line of descent. It has become a recognised term of art, although it departs from the natural meaning of the words. And I would respectfully agree with the High Court of Australia that it is right to make no distinction in this regard in the case of a disposition to ‘the male issue of A’.
But should the law take the further step, in departing from the natural meaning
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of words, of saying that a disposition to ‘the male descendants of A’ is to have the same double operation of the word ‘male’, as indicating the sex of the beneficiary and of the line of descent? In a sense it makes a neater picture to extend artificiality from artificiality. But then where does extension stop? Is it to be male line only if the propositus is a woman? Is it to be female line only if the disposition is to issue female of a man (or woman), or if to female descendants of a man (or woman)? For myself I would stop short in the progression and stick to the ordinary and natural meaning of ‘male descendants’. I do not feel compelled by the logic that says that the issue of a person are the descendants of that person (and vice versa); therefore ‘male descendants’ must (without some contrary indication) mean the same thing in law as ‘male issue’. Just because ‘issue male’ or ‘male issue’ has been given an artificial meaning in the past, the roots of the artifice being, as I think, in the construction of a testamentary devise to ‘A and his issue male’ as an entail and the nature of an entail male, it does not appear to me to be necessary in 1970 to give the same artificial meaning to different words. The views expressed by Lord Cottenham LC in Bernal v Bernal ((1838) 3 My & Cr at 581, 582)were in part based on the fact that the disposition included the propositus in the gift, so that it was akin to ‘A and his male descendants’. I would adhere to the views of Lord Eldon LC and the judges in Oddie v Woodford and accordingly also would allow the appeal and declare that the class of male descendants of the testator’s father mentioned in cl 4 of the will includes such descendants through females, and appoint the first defendant to represent those male descendants who are in the exclusively male line.
PHILLIMORE LJ. The question for decision is whether the phrase in the testator’s will ‘the male descendants of my father’ includes only those exclusively descended from the testator’s father in the male line—a class of about ten people—or whether it includes all descendants of the male sex irrespective of whether they derive from the male or female line—a class of about 40 in all. The fund to be apportioned as a result of the decision is of the order of about £200,000. Burgess V-C ([1969] 3 All ER 1360) decided that the words meant those who were exclusively descended in the male line.
The words ‘male’ and ‘descendants’ are simple and ordinary words and are clearly apt to describe a male descendant from a female herself descendant from ‘my father’, so that the judgment of Burgess V-C can only be supported if there is something in the particular context, or some authority for saying that these words when used in conjunction have a special meaning which restricts the class to those descended exclusively from the male line. It is conceded that there is no context here which could justify a special meaning. Is there any authority?
In 1821 Oddie v Woodford concerning the will of Peter Thellusson came before the court and it was held that the phrase ‘eldest male lineal descendant’ was inapplicable to a descendant claiming through a female. Apparently the case first went before Lord Loughborough LC sitting with Lord Alvanley MR and two puisne judges Lawrence J and Buller J. One of the two points which the court had to decide was whether the disposition to the eldest male lineal descendant was such as to render the will void for uncertainty. Apparently Lawrence J thought that it was premature to decide this point but the other three members of the court all held that there was no uncertainty, Buller J and Lord Alvanley MR both indicating that under it only males claiming through males could take. Lord Loughborough LC confined himself to agreeing with their decisions. In the course of an appeal to the House of Lords this particular point was not dealt with. The precise point then came before Lord Eldon LC who had become Lord Chancellor. His judgment is entirely clear—but
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for the word ‘lineal’, he would have held that a male descendant whether through the female or male line could take. The crucial passages in his judgment ((1821) 3 My & Cr at 614, 615 and 618, 619) have already been quoted by Russell LJ. In 1825, there was an appeal to the House of Lords who on this occasion invited the opinion of all the judges; this opinion will be found in the words ((1821) 3 My & Cr at 628) which have already been quoted by Harman LJ. Obviously the judges’ opinion turned on the word ‘lineal’, but for which they would have decided in favour of the larger class. It is apparent that the House of Lords accepted the opinion and acted on it.
There can thus be no question but that this case affords a powerful authority in favour of the appellant in the present case. It is true that the actual phrase the meaning of which was to be decided, was ‘eldest male lineal descendant’ but in order to determine its meaning the courts inevitably looked first to the meaning of the words ‘male descendant’ before the addition of the word ‘eldest’ or ‘lineal’. It was a vital step in the argument and in the decision itself. It would be in the highest degree artificial to describe their decision on the meaning of the phrase ‘male descendant’ as obiter.
A few years later in Bernal v Bernal, the words ‘male descendants’ were again considered by the courts. The will in question was in Spanish but had been translated into Dutch and it was a translation into English from the Dutch copy which was admitted to probate. The words in that copy as translated were ‘male children’. The case went before Lord Cottenham LC who decided that male children meant male descendants and that this phrase both in Dutch and English law meant descendants who were exclusively in the male line. As explained by Russell LJ, Lord Cottenham LC in so deciding was not exercising his appellate jurisdiction. Although counsel referred Lord Cottenham LC ((1838) 3 My & Cr at 579) to Oddie v Woodford and pointed out that the word ‘lineal’ had been the decisive factor in that case, Lord Cottenham LC in the course of his judgment expressed the view that the decision was a strong authority for confining male descendants to those descended in the male line and the equivalent of ‘issue male’. He also expressed the view that this would be the ordinary acceptation of the terms, presumably by the man in the street. He made no reference to the unanimous view of the judges as expressed in their opinion to the House of Lords or to the fact that the opinion was clearly accepted by the House of Lords.
It is, I think, clear that either Lord Cottenham LC had completely misunderstood the decisions in Oddie v Woodford and that his decision was per incuriam or that Bernal v Bernal has been misreported. Harman LJ has already read the passages from that case ((1821) 3 My & Cr at 581, 582). I would point out that there is no trace of any evidence as to the ordinary acceptation of the terms. The phrase ‘issue male’ is of course dignified by immemorial usage among lawyers as a term of art involving issue exclusively arising through the male line and I can see no justification for saying that it means the same thing as male descendants There was in Bernal v Bernal a context which strongly supported the actual decision but I can find no warrant for treating it as a general authority on the meaning of the words ‘male descendants’ or as in any way detracting from what I regard as the clear authority of Oddie v Woodford.
I turn to the other case on which the respondents rely, Re Allen, Allen v Crane, a decision of the High Court of Australia. In that case the court decided that ‘male issue’ meant males tracing their descent through males, ie the same as ‘issue male’. The English cases including Oddie v Woodford and Bernal v Bernal were all referred to by
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counsel, but the former was not specifically referred to in any of the judgments although Dixon CJ did refer to Thellusson v Lord Rendlesham, which was yet another decision on the Thellusson will in which their Lordships made it clear that they adhered to their previous decision in Oddie v Woodford. He treated Lord Cottenham LC’s decision in Bernal v Bernal as authority for the proposition that issue male is the same thing as male descendants and proceeded to speak of these and similar phrases as analogous, which of course begs the whole question. Again I cannot think that the court appreciated the force of the authority of Oddie v Woodford or the fact that, as reported, Lord Cottenham LC appears to have completely misunderstood it. No doubt there was strong ground, particularly in the context, for treating male issue as the equivalent of issue male but the observations on male descendants appear to me to be obiter, unsupported by evidence and devoid of authority other than the observations of Lord Cottenham LC. Again Kitto J makes no specific reference to Oddie v Woodford and I find it difficult to reconcile his observations on English usage of a century or more ago with the unanimous opinion of the judges in that case.
Finally we were referred to Re Du Cros’ Settlement, Du Cros Family Trustee Co Ltd v Du Cros, where the decision turned on the context, but it is to be observed that the learned judge would have been reluctant to restrict ‘male descendants’ to the smaller class if he had felt free to abstain from so doing.
I conclude as I began. The words are apt to describe a male who is descended from a male or female. In the absence of context or clear authority or evidence of popular meaning what is the justification for restricting the phrase to descendants through the male line only? Here there is no context to assist. Once it is realised that Bernal v Bernal was based on a flat misunderstanding of Oddie v Woodford there is no authority for the proposition of the respondents and indeed the latter case is a powerful authority in the opposite sense. As Dixon CJ says, the phrase ‘male descendants’ is not a technical phrase or term of art—it is not a lawyers’ phrase like ‘issue male’. It is the language of the ordinary man. Where is the evidence, apart from judicial assertions such as that made by Lord Cottenham LC, as to what the ordinary man means if and when he uses the phrase? In my judgment there is no such evidence.
I also would allow this appeal.
Appeal allowed. Declaration that the class of male descendants of the testator’s father mentioned in cl 4 of the will included such descendants, through females. Leave to appeal to the House of Lords. By consent, appeal of third defendant dismissed.
Solicitors: Bell, Brodrick & Gray, agents for Russell & Creswick, Sheffield (for all parties).
Henry Summerfield Esq Barrister.
Jones v Jones and another
[1970] 3 All ER 47
Categories: CIVIL PROCEDURE: PROFESSIONS; Lawyers
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, SACHS AND KARMINSKI LJJ
Hearing Date(s): 21, 22 APRIL 1970
Practice – Service – Writ – Time for service – Writ against two defendants – First defendant served within 12 months of issue of writ – Whether service on second defendant after expiry of 12 months valid – RSC Ord 6, r 8.
Writ – Extension of validity – Good and sufficient reason for extension – Discretion – Balance of hardship between parties – Writ not served within time on one of two defendants – Failure due to reasonable mistake of law by plaintiff’s solicitor – Plaintiff clearly entitled to remedy against one or other of defendants – No remedy available on facts against plaintiff’s solicitor.
Solicitor – Negligence – Delay in issuing and serving writ – Prejudice to client’s claim to interest on damages – Liability of solicitor to client.
On 19 July 1965, the plaintiff, while a passenger in a motor car driven by the first defendant, was injured in a collision with a car driven by the second defendant. On 13 June 1968, the plaintiff’s solicitor issued a writ against both defendants, which was validly served on the first defendant on 11 June 1969. The plaintiff’s solicitor reasonably, and without negligence (but mistakenly, as the court held) took the view that service of the writ on the first defendant within 12 months of its issue entitled him to serve it on the second defendant after the expiry of the 12 months. The writ was served on the second defendant on 3 July 1969. On 17 July 1969, the second defendant applied to set this service aside. On 29 July 1969, a master extended the validity of the writ on an ex parte application by the plaintiff and it was re-served on the second defendant on 19 August 1969, but this service and the extension of writ were set aside by a master on application by the second defendant on 12 November 1969. By the order of a judge in chambers the validity of the writ was later extended on application by the plaintiff. On appeal by the second defendant,
Held – (i) The service of the writ on the second defendant more than 12 months after its issue was not, under RSC Ord 6, r 8a rendered valid by the fact that the first defendant was validly served within the 12 months (see p 50 b and j, p 55 b and p 56 c, post).
(ii) There was good and sufficient reason for extending the time for service of the writ on the second defendant, because—
(a) the solicitor’s error was not unreasonable in the circumstances (see p 5o d, p 55 f, and p 56 d, post); consequently
(b) the plaintiff would have had no redress in negligence against his solicitor, if the second defendant had in fact been held solely to blame for the plaintiff’s injuries, but could not be served (see p 53 e, p 55 f, and p 56 c, post); and
(c) (Sachs LJ reserving his opinion on this point) the court was entitled, in exercising its discretion whether to extend validity of the writ, to balance the hardship to the plaintiff which would have followed had the validity of the writ not been extended against the hardship which the second defendant might have suffered through such extension (see p 54 b and p 55 j to p 56 a, b and f, post).
Battersby v Anglo-American Oil Co Ltd [1944] 2 All ER 387 and Baker v Bowketts Cakes Ltd [1966] 2 All ER 290 applied.
Per Salmon LJ. Since the decision in Jefford v Geeb by a solicitor who delays issue and
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service of a writ so as to prejudice his client’s claim to interest on the damages may be guilty of negligence (see p 53 j, post).
Per Karminski LJ. I find it most difficult to accept, as a valid reason for delay in serving a writ, the suggestion that service might prejudice the possibilities of a settlement of a claim with the insurance company or underwriters concerned (see p 56 g, post).
Notes
For time for service of writ, and renewal of writ, see 30 Halsbury’s Laws (3rd Edn) 303, para 558, and for cases on the subject, see 50 Digest (Repl) 291–293, 328–346.
Cases referred to in judgments
Allen v Sir Alfred McAlpine & Sons Ltd [1968] 1 All ER 543, [1968] 2 QB 229, [1968] 2 WLR 366, Digest Supp.
Baker v Bowketts Cakes Ltd [1966] 2 All ER 290, [1966] 1 WLR 861, Digest (Cont Vol B) 502, 2022a.
Battersby v Anglo-American Oil Co Ltd [1944] 2 All ER 387, [1945] KB 23, 114 LJKB 49, 171 LT 300, 50 Digest (Repl) 292, 336.
Brann v Glasspool (1969) 113 Sol Jo 982.
Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 All ER 143, [1969] 1 WLR 1, Digest Supp.
Hay-Kellie v Michaelides (1969) 113 Sol Jo 902.
Heaven v Road and Rail Wagons Ltd [1965] 2 All ER 409, [1965] 2 QB 355, [1965] 2 WLR 1249, 50 Digest (Repl) 292, 337.
Jefford v Gee [1970] 1 All ER 1202, [1970] 2 WLR 702.
Ward v James [1965] 1 All ER 568, [1966] 1 QB 273, [1965] 2 WLR 455, Digest (Cont Vol B) 219, 783a.
Cases also cited
Osborne v Distillers Co Ltd (1967) Times, 17 November.
Sheldon v Brown Bayley’s Steel Works Ltd [1953] 2 All ER 894, [1953] 2 QB 393.
Stevens v Services Window & General Cleaning Co Ltd [1967] 1 All ER 984, [1967] 1 QB 359.
World Harmony, The [1965] 2 All ER 139, [1967] P 341.
Interlocutory appeal
The second defendant, Ronald Arthur Allen, appealed against the order of Chapman J, made in chambers on 2 February 1970, extending the time for service on the second defendant of the writ issued on 13 June 1968 in this action by the plaintiff, Donald Jones, against the first defendant, Richard Garnett Jones, and the second defendant, for damages for personal injury suffered by the plaintiff, who was a passenger in the first defendant’s car in a collision between the first and second defendant’s cars on 19 July 1965. The facts are set out in the judgment of Salmon LJ.
Douglas Draycott QC and A N Fricker for the second defendant.
T Watkins QC and C R Oddie for the plaintiff.
22 April 1970. The following judgments were delivered.
SALMON LJ. As long ago as 19 July 1965 the plaintiff, Mr Donald Jones, was riding as a passenger in a car driven by the first defendant, Mr Richard Garnett Jones, when there was a collision between that car and another driven by the second defendant, Mr Ronald Arthur Allen. As a result of that accident the plaintiff suffered quite severe injuries. He consulted his solicitor. The solicitor seems to have had some fairly desultory negotiations with the first defendant’s insurers. Then, on 28 November 1966, about 16 months after the accident, the plaintiff’s solicitor for the first time wrote a letter to the second defendant suggesting that the accident and the injuries were due to his negligent driving. There was no reply to
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that letter. On 13 June 1968 (about five weeks within the expiration of the limitation period), a writ was issued by the plaintiff against the first and second defendants. On 9 May 1969, as the 12 months during which the writ could be served was about to expire, the plaintiff’s solicitor instructed a process server to serve the first defendant. He took the view (to which I will refer later), that if the first defendant was served within the 12-month period, then the law allowed him to serve the second defendant outside the 12-month period. Some difficulty was encountered in serving the first defendant, but eventually service was effected on 11 June 1969, so that it was in time by just a short head, because time expired on 12 June 1969.
On that latter date the plaintiff’s solicitor sent the writ to his London agents, with instructions to make arrangements to serve the second defendant. The time for serving the second defendant expired on that very day. This letter took a few days to reach the London agents who obviously had doubts whether they were within time to serve the second defendant, because they consulted a practice master as to whether the writ was valid for service on the second defendant. The practice master told them that in his view it was; and accordingly the writ was served on the second defendant on 3 July 1969. A week later he entered a conditional appearance. A week after that he issued a summons to set aside the service.
The plaintiff’s London agents then went back to the practice master (Master Ritchie) and, as a matter of precaution, asked him to renew the writ on an ex parte application. This he did. Accordingly, the renewed writ was re-served on 19 August 1969. The second defendant then applied to set aside that service and the renewal of the writ. On 12 November 1969, the second defendant was successful. The renewal and service of the writ were set aside by Master Elton.
The plaintiff appealed from that decision of the master to the learned judge, and the master came before Chapman J on 2 February 1970. Two points were argued before the learned judge. The first was that on a true construction of the rules the writ had been served in time; inasmuch as the service of the writ on the first defendant was within 12 months of the issue of the writ, it was legally possible to serve the writ on the second defendant after the expiration of the 12 months. The second point which was argued on behalf of the plaintiff was that, if he was wrong on the construction of the rules, then the learned judge in his discretion should renew the writ. The learned judge found it unnecessary to decide the point of law, although he expressed a provisional view that the construction for which the plaintiff contended was wrong. He did, however, consider that in all the circumstances of the case he should exercise his discretion by extending the time for service, and he did so; and against that decision of the learned judge the second defendant now appeals.
I think that it is necessary to deal with the point of construction. The rule in question is RSC Ord 6, r 8, which provides:
‘(1) For the purpose of service, a writ (other than a concurrent writ) is valid in the first instance for twelve months beginning with the date of its issue and a concurrent writ is valid in the first instance for the period of validity of the original writ which is unexpired at the date of issue of the concurrent writ.
‘(2) Where a writ has not been served on a defendant, the Court may be order extend the validity of the writ from time to time for such period, not exceeding twelve months at any one time … ’
I do not think that I need read the rest of that paragraph.
Counsel for the plaintiff, has argued with his usual resourcefulness, that if a writ is served on any defendant within 12 months after its issue, it is then a valid writ for the purposes of service on any other defendant who may be joined in the action. Persuasively as the argument is put, it seems to me to lead to the most startling results; but, of course, if the order does in fact mean on its face what counsel contended, we must give effect to it, however strange the results may be. Looking
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at the question as a pure point of construction, I cannot accept the argument. I think that the words which are important are these: ‘For the purpose of service, a writ … is valid’—those words are in r 8(1). Then r 8(2) goes on to say what happens if it is not served within the 12 months: ‘Where a writ has not been served on a defendant, the Court may by order extend the validity of the writ from time to time … ’
I read the rules as meaning that for the purpose of service on a defendant, a writ is valid in the first instance for 12 months, and that where the writ has not been served on that defendant the court may by order extend the validity of the writ from time to time for the purpose of serving it on him. It seems to me that it is only by reading the words ‘a defendant’ as ‘any defendant’ in r 8(2) that the argument on behalf of the plaintiff could get on its feet. In any event, even if one were to read the words ‘a defendant’ as ‘any defendant’, I still do not think that the argument could possibly succeed. I am confirmed in this view when I compare that rule with the rule which it replaced in 1964, namely, the old RSC Ord 8, r 1, which I ought to read:
‘No original writ of summons shall be in force for more than twelve months from the day of the date thereof, including the day of such date; but if any defendant therein named shall not have been served therewith, the plaintiff may, before the expiration of the twelve months, apply to the Court or a Judge for leave to renew the writ; and the Court or Judge, if satisfied that reasonable efforts have been made to serve such defendant, or for other good reasons, may order that the original or concurrent writ of summons be renewed … ’
Then the rule deals with the periods for which it may be renewed. Counsel for the plaintiff conceded that under the old rule, which I have just read, the fact that you have served one defendant within the 12 months does not make the writ valid for service on any of the other defendants outside the 12-month period. The reason for this, and the justice on which the old rule is founded, is obvious. Had the law been otherwise, it would have meant that, supposing, for the sake of argument, there were three defendants and you issued your writ and then served one of them within the 12 months, you might wait two, three or more years before you served the other defendants. You could serve them lawfully two or three years later; and that might be the first that they had ever heard of any action against them. It is not impossible, but it is fantastically unlikely that the rules committee intended to alter the law so that the very odd results, to which I have just referred, should be possible. I cannot think of any reason why they should have intended to do so. Had they intended to do so, I am certain that they would have used very much clearer language than is used in the new RSC Ord 6, r 8, for the purpose of expressing that intention. As I have already said looking at the language of RSC Ord 6, r 8, by itself, I do not think that it is reasonably capable of the construction for which counsel for the plaintiff contended.
It may be asked: what was the point of altering the old rule? The old rule had stood for many years in that form and there was a certain archaic ring about its language. There had also been some difficulties about its construction. So those anachronisms in the language of the old rule, and the difficulty which it created, were, so it was hoped, cleared up by the far simpler language of the present rule; but it does not, in my judgment, lead to what I regard as the startling result for which counsel for the plaintiff contended. That being so, it is quite plain that the writ was not valid for service after 12 June on the second defendant, unless it was renewed—that is to say, unless the time for service was properly extended. Whether it was properly extended depends on whether or not the learned judge correctly exercised his discretion.
This court no longer treats the discretion of the learned judge as sacrosanct in the
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way that it did for many years prior to Ward v James. We do not, however, lightly interfere with the discretion of the learned judge. We do not, for example, interfere if we think that maybe, on the whole, had we been sitting in chambers we would have decided the matter differently. This court in Ward v James laid down quite clearly that we interfere only if completely satisfied that the learned judge exercised his discretion wrongly. For my part, I am not so satisfied. There is a good deal of authority which has been relied on very properly by counsel for the second defendant, in which the courts have laid down guidelines as to how discretion should be exercised in a case such as the present, and I think that I must allude briefly to some of those cases.
The locus classicus is Battersby v Anglo-American Oil Co Ltd. In that case Lord Goddard, in delivering the judgment of the court said ([1944] 2 All ER at 391, [1945] KB at 32):
‘In every case care should be taken to see that the renewal will not prejudice any right of defence then existing, and in any case it should only be granted where the court is satisfied that good reasons appear to excuse the delay in service, as, indeed, is laid down in the order. The best reason, of course, would be that the defendant has been avoiding service, or that his address is unknown, and there may well be others. But ordinarily it is not a good reason that the plaintiff desires to hold up the proceedings while some other case is tried, or to await some future development.’
That case was decided before the rules were altered, but there are a number of cases in which this court has since affirmed the principles laid down by Lord Goddard and said that they apply today just as much as they did 25 years ago. In Baker v Bowketts Cakes Ltd ([1966] 2 All ER 290 at 292, [1966] 1 WLR 861 at 865), Lord Denning MR said:
‘In seeing whether the discretion should be exercised under that rule [that is RSC Ord 6, r 8(2)] we must remember the Limitation Act, 1939. A plaintiff in an action for personal injuries has three years to issue his writ. If he issues it within those three years, he has another twelve months within which he can serve the writ. If he requires to extend it for a further time before service, he ought to show sufficient reason for an extension of time.’
Lord Denning MR then referred to Lord Goddard’s judgment in Battersby’s case ([1944] 2 All ER at 391, [1945] KB at 32), and to what Megaw J said in Heaven v Road and Rail Wagons Ltd and went on ([1966] 2 All ER at 292, [1966] 1 WLR at 866):
‘In particular, when the Limitation Act, 1939, has run or is running in favour of a defendant, as here, the plaintiff who desires a further extension must show sufficient reason for an extension. These cases ought to be brought on for trial as soon as reasonably may be, while the facts are fresh in people’s minds and while medical evidence and so forth can be obtained. If the plaintiff delays until the very last minutes he has only himself to thank. If it is his solicitors’ fault, he can blame them; but he ought not to get an extension, to the prejudice of the defendants, except for good cause.’
So, as a rule, the extension will not be granted. It is for the person asking for it to show, as Lord Denning MR said, ‘sufficient reason’ or ‘good cause’, or as Lord Goddard said ‘good reasons … to excuse the delay’. I ought perhaps finally to refer
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briefly to Heaven v Road and Rail Wagons Ltd, the decision of Megaw J which was quoted with approval by Lord Denning MR in the passage in his judgment which I have just read in Baker’s case ([1966] 2 All ER 290 at 292, [1966] 1 WLR 861 at 865). The only part of Megaw J’s judgment which I need read is as follows ([1965] 2 All ER at 416, [1965] 2 QB at 366):
‘The rules of court provide twelve months—a not ungenerous time, it might be thought—within which the plaintiff can hold up proceedings by not serving his writ, Surely, beyond that period the same public policy requires that the court should ensure that it is only in really exceptional cases that the effective start of litigation should be yet further delayed; especially where the twelve months allowed for service extends beyond the end of the limitation period; and, above all, where the application is not made until after the period of twelve months, and with it the validity of the writ, has expired.’
Much depends on how the words ‘really exceptional cases’ are construed in relation to the other phrases I have already referred to—‘sufficient reason’ or ‘good cause’ or ‘good reason’. I suppose that it is only in an exceptional case that ‘sufficient reason’ or ‘good cause’ or ‘good reasons’ exists. It is of great importance that the rules should be observed. The writ should certainly be served within the 12 months, especially if it is not issued until just before the expiration of the three-year period, unless there is good cause for extending the time for service; and I hope that nothing that I say in this case will be construed as an encouragement for anyone to imagine that, even if he lets the 12-month period go by, he has only to come to the courts with some fairly plausible excuse, in order to get the time extended. Certainly anyone who takes that view would be disappointed.
The only question here is whether the learned judge could in his discretion properly take the view that there was ‘good cause’ or ‘sufficient reason’ for extending the time for service. He based his discretion on this consideration. He said:
‘I do not think the plaintiff ought to be prejudiced because his solicitor held a view being a view a reasonable person could not doubt hold, and therefore it was a proper case, for the extending of time.’
That conclusion of the learned judge depends on the evidence given by the plaintiff’s solicitor which I will paraphrase. I understand his affidavit as saying that his reading of RSC Ord 6, r 8, was that, provided he served the first defendant in time, then he could serve the second defendant after the expiration of the 12-month period. That was in my judgment a wrong view of the rules. Was it a view which any trained lawyer could reasonably take? I think that undoubtedly it was. For one thing, a very experienced practice master, when asked the question, rather late, obviously took the same view. It would be difficult for this court to say that the solicitor could not reasonably take the view which had been adopted by the practice master; and it must be remembered that, until this case, there had been no authority at all on the construction of RSC Ord 6, r 8(2). Moreover, the matter was canvassed before this court in an ex parte application, in Hay-Kellie v Michaelides. That was a case in which a writ was issued against the owner and the driver of a motor car for damages in respect of an accident in which the plaintiff sustained injuries in June 1964. The writ was issued in November 1965, and it was served on the owner of the car, the other defendant being the driver, on 28 February 1966. The driver had gone to Greece; no one knew where he lived, so the writ was not served on him. The action went on against the owner, and later on the owner said that he was not in the car
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at the time and the driver was not his servant or agent, and that he was not therefore liable. The plaintiff then, not unnaturally, wanted to seek out the driver and serve the writ on him. Up to that moment obviously there had been good cause for not serving the writ on the driver. The court extended the time and gave leave to serve the writ on the driver out of the jurisdiction, on the ground that it was a proper case in which its discretion ought to be so exercised. But this court also referred to RSC Ord 6, r 8, in these terms. Lord Denning MR said (Cf 113 Sol Jo 902):
‘It is a doubtful question whether a writ (which has been served on one defendant) need be renewed as against another defendant. RSC Ord 6, r 8(2) states that where a writ has been served on a defendant, the court may extend the validity of the writ by renewal or extension. It can well be said that once it has been served on a defendant—on any one of the defendants—it is good and it need not be renewed. But it may perhaps be argued that if a writ has not been served on each defendant, then it has got to be renewed so as to be available against each of them.’
Although it was unnecessary for this court in that case to construe the rule, and Lord Denning MR quite clearly intended to express no view on it one way or the other, he did say, without having heard the point argued, that it was a point about which two views were possible. In these circumstances, it seems to me impossible to hold that a country solicitor, looking at this rule, unaided by authority or any note in the Supreme Court Practice, is unreasonable if he takes the view that the writ may be validly served on the second defendant without renewal. Quite clearly, he was not being negligent in taking such a view.
If we were to reverse the decision of the learned judge, and it turned out in the end that the first defendant was blameless, and that the accident was caused by the negligence of the second defendant alone, the plaintiff would suffer great injustice. Not only would he have lost his cause of action against the second defendant, but in the circumstances of this case, he would have no redress against his solicitor in negligence. As this court pointed out in Allen v Sir Alfred McAlpine & Sons Ltd, when questions of this kind arise it is a material factor to take into account that if the action is dismissed, the innocent party, the plaintiff, will have no redress against anyone for the damages which he has suffered. In the present case the injured plaintiff was a passenger. He was clearly entitled to recover damages against one or other or both of the defendants. Should the order of the judge be reversed, the plaintiff might well be left ‘out in the cold’. That hardship must be balanced against the hardship which the judge recognised that the second defendant may suffer as a result of the long delay. Although there has been serious delay, for which I do not suppose that the plaintiff is to blame, the solicitors were in no way negligent before 12 June.
It has been rightly said again and again that solicitors ought to serve the writ promptly after it has been issued. The law allows three years in cases of this kind to elapse before a writ need be issued, and then a further 12 months for service. So if the solicitor took advantage of that period, although he might be criticised, there could be no question prior to 1970 of his being negligent.
The circumstances may be different since the recent decision of this court in Jefford v Gee. If the solicitor now drags his feet, he may prejudice his client’s claim to interest on the damages to which he is entitled; but the facts in the present case preceded Jefford v Gee, so that there was no negligence, although it is most unfortunate that there was the delay up to 12 June. Nor, for the reasons I have already indicated, was the solicitor negligent in mistakenly taking the view that he could properly serve the second defendant after 12 June without renewing the writ.
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Had the second defendant been served on 12 June, he could have had no legal objection, although no doubt at the trial he could have argued that he had been prejudiced by the unnecessary delay with which the plaintiff’s advisers had conducted the litigation. The writ was served on him, not validly, it is true, but it was served on him and he knew all about it on 3 July 1969; so on that basis he is only a few weeks worse off than he would have been if the writ had been served in time. The renewed writ was served on 19 August, validly, as it now turns out; so even then he was only about nine weeks worse off than he would have been on 12 June. I think that, balancing the hardship to the plaintiff which would have followed had the appeal been dismissed, against the hardship which the second defendant may now suffer, the learned judge was fully entitled to come to the conclusion that it was just and proper, that there was a good and sufficient reason, for extending the time for service of the writ on the second defendant.
I want to conclude by saying only this: on the view which I take of RSC Ord 6, r 8, the plaintiff’s solicitor made a mistake. It was, however, a mistake for which he ought not to be blamed, and for which no solicitor ought to have been blamed prior to today; but this case will no doubt be reported, and there will in future be no excuse for anyone being under any illusion as to the true meaning of RSC Ord 6, r 8. In the unlikely event of this mistake being made again, it certainly would not afford a ‘sufficient reason’ or ‘good cause’ for renewing the writ; nor do I think that the solicitor concerned would have any answer to a claim for negligence.
For these reasons I would dismiss the appeal.
SACHS LJ. It is convenient, first, to consider the question whether the service of the writ on the first defendant, within a year from its issue, results in that writ remaining valid for service against the second defendant after the expiration of the year in question. For the plaintiffs it has been submitted that that is indeed the effect of RSC Ord 6, r 8(2). If that submission is correct, it would be unnecessary to consider whether the court’s discretion should have been exercised in favour of renewing that writ. On this point there have been differing views hitherto within the profession, and it was regarded by Lord Denning MR in a casec already mentioned by Salmon LJ as an open question.
If the plaintiff’s submission is correct, then, once a writ which names a number of co-defendants is served on one of them it remains valid as regards service against others for an indefinite period that could run into years after the period prescribed by whatever provisions of a statute of limitation happen to be relevant. During that period, as Salmon LJ has pointed out, the other defendants might be wholly ignorant of the fact that the writ has been issued; they might thus have had no warning whatsoever enabling them to collect evidence to meet the claim. In Heaven v Road and Rail Wagons Ltd Megaw J referred to the principles that govern and explain the operation of statutes of limitation and then spoke of the public policy on which they are based. As regards the latter he said ([1965] 2 All ER at 416, [1965] 2 QB at 366):
‘The reasons of public policy are not far to seek. It is unfair to defendants, and it makes the administration of justice more uncertain, if litigation is delayed so that witnesses die or cannot be traced; or memories fade; and defendants are entitled to know definitely, at the expiry of some defined time, whether or not they are to be pursued in the courts.’
With that, as a general, although not necessarily exhaustive, statement of the relevant public policy, I respectfully agree.
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In the present case, we are in this court, on the first issue, concerned solely with the validity of a writ ‘for the purpose of service’—that is to say, for the purpose of making a defendant a party to the proceedings within the definition of that word in s 225 of the Supreme Court of Judicature (Consolidation) Act 1925. Naturally, if a person is not a party to the proceedings, then the plaintiff can have no remedy against him. To my mind, the same public policy as underlies statutes of limitation informs the content of RSC Ord 6, r 8. Its provisions should be construed on the basis referred to by Megaw J ([1965] 2 All ER at 416, [1965] 2 QB at 366). On that basis, it seems clear to me that the words in r 8(2) ‘a defendant’ do not mean ‘any of the defendants’ to an action, but must be construed as relating to the particular defendant whom it is being sought to treat as a party. So much, then, for the first issue in the case.
The second issue relates to the discretion exercised by Chapman J. It is for the plaintiff to show ‘good cause’ or ‘good reason’ why the writ should be renewed. I use the words ‘good cause’ and ‘good reason’ because the former is a phrase adopted by Lord Denning MR both in Baker v Bowkett’s Cakes Ltd and in a recent case, Brann v Glasspool decided on 12 November 1969. ‘Good reason’ is a phrase used by Lord Goddard in Battersby v Anglo-American Oil Co Ltd. For my part, I would prefer that no gloss be put on those two phrases, which have a precisely similar meaning.
Where it is desired to deprive a defendant of his ability to plead a statute of limitation, naturally the good cause to be put forward must be strong. It is quite impossible to define the circumstances which can constitute ‘good cause’. It is sufficient in the present case to say that here we find a most unusual set of circumstances. Probably they are and will remain unique. They cannot recur because, once this judgment has been reported, no solicitor can put up the same set of facts, or any parallel set of facts, as being ‘good cause’. The plain position is that the solicitor misled himself by relying on an erroneous view of the correct interpretation of RSC Ord 6, r 8. It was a misinterpretation which was not unreasonable, and indeed he erred in good company. In practice it would be extremely difficult to establish professional negligence against a solicitor who made an error of that particular type; it is, however, not necessary to rest my judgment on that point. To my mind, this is one of those cases in which it can properly be said that the misconception was ‘good cause’ for the present position arising, and it is not wrong for this court, in such circumstances, doing justice between both parties, to grant the plaintiff a renewal of the writ. In this class of case, where the effects of statutes of limitation have to be taken into account, it may very well be that the climate of opinion, both in the legislature and in the courts, is (as was indicated in the judgment of Lord Denning MR in Chatsworth Investments Ltd v Cussins (Contractors) Ltd) moving more towards an ascertainment of how lies the balance of justice between the parties. In that behalf, I venture to adhere to my views recorded in that case as to what is entailed by ‘the justice of the case’.
I would only add that having referred to the judgment of Megaw J in Heaven v Road and Rail Wagons Ltd on the first issue, it is perhaps as well in relation to the second issue to refer to that passage in the judgment ([1965] 2 All ER at 416, [1965] 2 QB at 366, 367) in which it was held that hardship suffered by a plaintiff could never be taken into account. I am conscious that on the important question as to whether in exceptional cases the court are entitled to balance the relevant hardships which will be sustained by the plaintiff and the defendant respectively somewhat differing views have been expressed in
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this court. For my part, though it may not be necessary in the present case to express a final opinion on this point, I am at present disposed to think that those stated in Allen v Sir Alfred McAlpine & Sons Ltd amount to a clear authority on the law on this point. Moreover I would in any event respectfully venture once more to support those views: they can particularly be applied, for instance, to cases where the lapse of time cannot materially affect the quality of the available evidence.
I, too, would dismiss this appeal.
KARMINSKI LJ. I agree. So far as the construction of RSC Ord 6, r 8, is concerned, I have nothing to add to what has fallen from Salmon LJ. I wish to emphasise that I entirely agree with his construction and with the reasons that he gave for that construction. So far as the learned judge’s discretion is concerned, I have myself come to the conclusion that it was rightly exercised.
The facts of the case, which have already been dealt with by Salmon and Sachs LJJ are unusual and perhaps unlikely to recur. The solicitor for the plaintiff here made what has turned out, in all the circumstances of this case, to be a wrong decision. He was not exclusively wrong, having taken the precaution of having considered the view held by Master Ritchie, and expressed by him soon after the service of the writ on the second defendant. We were told also that Master Ritchie was not alone in his view, that view being shared apparently by the district registrar at Newport. Last, but not by any means least, when a similar motion came before this court ex parte, the matter was stated by Lord Denning MRd to be one of some doubt.
The question is whether a writ which had been served on one defendant needs to be renewed against another defendant. In all these circumstances, in my view Chapman J was right in coming to the conclusion that he did. What the right test is in a matter of this kind is to some extent a matter of chronology. In my view, the real test is ‘good cause’ or ‘good reason’, which may be translated into the words ‘a sufficient reason or reasons’. Discretion in a matter of this kind, as in other matters, must be exercised judicially, that is by weighing all the circumstances on each side and balancing so far as possible the priorities and merits.
I wish to add one further observation of my own. The difficulty in this case has arisen through the delay in serving a writ. We were told in the course of argument that sometimes writs are not served because, rightly or wrongly, it is thought that it might prejudice the possibilities of a settlement of a claim with the insurance company or underwriters concerned. I find this most difficult to accept as a valid reason. Negotiations for a settlement remain a matter of commercial judgment, and I find it very difficult to accept that the susceptibilities of those who undertake this kind of insurance would be upset by the mere service of a writ on their assured.
I agree that this appeal must be dismissed.
Appeal dismissed.
Solicitors: T D Jones & Co, agents for Morgan Lloyd, Evans & Hughes, Cardiff (for the second defendant); Haymon & Walters, agents for Emmanuel Marks & Cocker, Abertillery (for the plaintiff).
Henry Summerfield Esq Barrister.
Re Jermyn Street Turkish Baths Ltd
[1970] 3 All ER 57
Categories: COMPANY; Shareholders
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK J
Hearing Date(s): 5, 6, 7, 8, 12, 13 MAY 1970
Company – Oppression – Petitioner – Administrators of deceased member – Registration of administrators as members of company – Whether ‘member of a company’ included representatives of deceased member – Companies Act 1948, s 210.
The company was incorporated in 1946 and represented a joint venture by L and S. In 1952, S transferred his shareholding to Mrs P who became a director of the company. L died in 1953 and thereafter Mrs P was mainly responsible for the company’s affairs. The petitioners were appointed administrators in L’s estate in 1960, and in 1961, at their request, the names of the petitioners were entered in the register of members of the company against the name of L as administrators of L. On the questions whether the entry constituted merely a note of the grant of administration or the registration of the petitioners as members, and whether the petitioners were members of the company for the purposes of presenting a petition under s 210a of the Companies Act 1948,
Held – The petitioners had locus standi as members of the company to present the petition, because—
(i) no particular form was required by statute or under the articles of the company for the registration of personal representatives in the register of members, and the petitioners had not merely requested that a note of the letters of the administration should be entered on the register, but to be registered themselves as members of the company (see p 64 j and p 65 a and d, post); alternatively,
(ii) even if the petitioners were not registered as members of the company, personal representatives of a deceased member must be regarded as members of the company for the purposes of s 210 (see p 65 d, post).
Notes
For the Companies Act 1948, s 210, see 5 Halsbury’s Statutes (3rd Edn) 280.
Cases referred to in judgment
Archbold v Scully (1861) 9 HL Cas 360, 5 LT 160, 11 ER 769, 47 Digest (Repl) 102, 735.
Bayswater Trading Co Ltd, Re [1970] 1 All ER 608, [1970] 1 WLR 343.
City of Glasgow Bank, Re, Buchan’s Case (1879) 4 App Cas 549 at 583; subsequent proceedings (1880) 14 Ch D 628, 9 Digest (Repl) 208, 1315.
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, [1874–80] All ER Rep 271, 48 LJ Ch 73, 39 LT 269, 9 Digest (Repl) 41, 175.
Lindsay Petroleum Co v Hurd (1870) LR 5 PC 221, 9 Digest (Repl) 43, 44.
Saunders (T H) & Co Ltd, Re [1908] 1 Ch 415, 77 LJ Ch 289, 98 LT 533, 9 Digest (Repl) 213, 1347.
Scottish Co-operative Wholesale Society Ltd v Meyer [1958] 3 All ER 66, [1959] AC 324, [1958] 3 WLR 404, Digest (Cont Vol A) 185, 5700a.
Weld v Petre [1929] 1 Ch 33, 97 LJ Ch 399, 139 LT 596, sub nom Weld-Blundell v Petre [1928] All ER Rep 564, 32 Digest (Repl) 591, 1781.
Cases also cited
Consolidated Nickel Mines Ltd, Re [1914] 1 Ch 883.
Duomatic Ltd, Re [1969] 1 All ER 161, [1969] 2 Ch 365.
Five Minute Car Wash Ltd, Re [1966] 1 All ER 242, [1966] 1 WLR 745.
Page 58 of [1970] 3 All ER 57
Harmer (HR) Ltd, Re [1958] 3 All ER 689, [1959] 1 WLR 62.
Hogg v Cramphorn Ltd [1966] 3 All ER 420, [1967] Ch 254.
Lundie Brothers Ltd, Re [1965] 2 All ER 692, [1965] 1 WLR 1051.
Petition
This was a petition, under s 210 of the Companies Act 1948, presented by David Gerald Littman, Peter Walter Littman, Roama Lillian Spears and Barbara Littman Greenfield, who were administrators of the estate of Joseph Aaron Littman, deceased, against the respondents, Josephine Peskoff, Arthur Charles Woodley and Michael Peskoff, who were present or sometime directors of the company, Jermyn Street Turkish Baths Ltd The facts are set out in the judgment.
A J Balcombe QC and P J Millett for the petitioners.
Paul V Baker for the respondents.
13 May 1970. The following judgment was delivered.
PENNYCUICK J. I have before me a petition under s 210 of the Companies Act 1948 relating to a company known as Jermyn Street Turkish Baths Ltd (to which I will refer as ‘the company’). I will at the outset read the relevant provisions of s 210:
‘(1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself) or, in a case falling within subsection (3) of section one hundred and sixty-nine of this Act, the Board of Trade may make an application to the court by petition for an order under this section.
‘(2) If on any such petition the court is of opinion—
(a) that the company’s affairs are being conducted as aforesaid; and
(b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up;
the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction accordingly of the company’s capital, or otherwise.’
The petition has been heard on affidavit evidence, with cross-examination of the principal witnesses. There has been discovery of documents as in an action. There have not been any pleadings or points of claim, which in certain respects has made the trial of the petition more difficult. The basic history of the present dispute is clear. I propose to find the facts, apart from certain vital inferences and conclusions which I will keep until a later stage.
The company was incorporated on 25 November 1946. It is a private company incorporating Table A under the Companies Act 1929, with amendments. The nominal capital is £1,000. The object of the company is: ‘To carry on the business of Turkish and Medical Baths and general bathing establishments.’ The company represented a joint venture by a Mr J A Littman, who was a property dealer, and a Mr J Stealey, his personal friend. Each of these gentlemen subscribed 50 £1 shares in the capital of the company. The company acquired the leasehold interest in certain turkish baths at 91 and 92 Jermyn Street and 12 to 14 Duke of York Street. They are held under a lease which expires on 25 March 1973, although it may be renewed. There are a number of flats above the baths. In addition, for some years the company ran a ladies’ bath and a bath at Brighton, both of which have now been closed for some time. Mr Littman and Mr Stealey from time to time
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advanced moneys to the company and also guaranteed the banking account. The guarantee has long since been cancelled. During the lifetime of the two founders, the affairs of the company were, it would seem, somewhat casually conducted.
The provisions of the company’s articles and those contained in Table A under the Companies Act 1929 should be looked at in detail. I will, however, only refer expressly to two or three of them:
‘Articles:
‘5. The shares shall be at the disposal of the Directors, and (save as otherwise directed by the Company in General Meeting) they may allot or otherwise dispose of them to such persons at such times and generally on such terms and conditions as they think proper …
‘15. The remuneration of the Directors shall from time to time be determined by the Company in General Meeting, and unless otherwise directed any such remuneration shall be divided amongst them as they may agree, or, failing agreement, equally.’
Table A under the 1929 Act:
‘20. The legal personal representatives of a deceased sole holder of a share shall be the only persons recognised by the company as having any title to the share. In the case of a share registered in the names of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the only persons recognised by the company as having any title to the share.
‘21. Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be properly required by the directors, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such a transfer of the share as the deceased or bankrupt person could have made …
‘22. A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company.’
In May 1952, Mr Stealey transferred his 50 shares to a lady called Mrs Josephine Peskoff, who is one of the respondents on the present petition. He also assigned to her £2,080 owing to him by the company on loan account. Thereupon Mrs Peskoff became a director of the company jointly with Mr Littman. So long as Mr Littman was alive, he in fact conducted the affairs of the company. However, Mr Littman died on 21 August 1953. At the date of his death the amount on his loan account with the company was £2,936. There were a number of disputes in connection with the estate of Mr Littman, and two gentlemen were appointed as administrators pendente lite on 21 November 1953, namely, a Mr Silver and a Mr Bourner. Since the death of Mr Littman, Mrs Peskoff has been mainly responsible for the conduct of the affairs of the company. For a short time in 1953 and 1954 her son Michael, who was just 21, was a director. Then in June 1954 he ceased to be a director and Mrs Peskoff appointed Mr Arthur Charles Woodley as a director to act jointly with her. Mr Woodley has some accounting qualification and was formerly employed at the Jermyn Street baths as a book-keeper. Mr Woodley remained in office until March 1961. Then Mrs Peskoff once again appointed her son Michael to be a director. Mr Michael Peskoff normally resides in the United States of America and has taken a more or less nominal part in the conduct of the affairs of the company. Mr Michael Peskoff and Mr Woodley are the other respondents on this petition.
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After the death of Mr Littman, Mrs Peskoff found that the company was in a parlous condition; it had debts amounting to something like £20,000, including substantial debts to the Revenue and to outside creditors, and the amounts owing on loan account to herself, and the personal representatives of Mr Littman. Mrs Peskoff was successful by her exertion and business acumen in pulling the business of the company round, and during the 1960s it was converted from an insolvent concern, which might have been wound up on a creditors’ petition at any time, into an extremely prosperous concern. It has made considerable profits for a number of years, and now has a substantial balance of assets over liabilities. That redounds much to the credit of Mrs Peskoff, and no one says otherwise.
Early in 1954, cash was urgently required to meet the liabilities of the company. Some of the creditors were, I think, pressing. Mrs Peskoff approached the administrators pendente lite mentioning a figure of £8,000 as being required by the company and inviting them to make an advance. The administrators were not willing to do so. In the event, Mrs Peskoff advanced a much lesser sum, namely £1,000, and was able to keep the company afloat with that further advance. She did not at any time mention to the administrators this much smaller figure or suggest an advance by them on that footing. On 28 January 1954, Mrs Peskoff took a debenture for £2,000 to secure money already owing to her, which represents, as I understand it, the loan which she had taken over from Mr Stealey. In addition, she took a debenture for £1,000 to secure the new money which she was then putting up. So far, no complaint is made against her. But, in addition, she and Mr Woodley, as the directors of the company, then issued a further 100 shares to Mrs Peskoff and one share to Mr Woodley. It is not suggested that these shares were worth more than par at the date of issue, but the effect of issuing the shares was to increase Mrs Peskoff’s interest in the company from one-half to three-quarters, with a corresponding reduction in the proportionate interest of Mr Littman’s estate. I need not trouble about Mr Woodley’s one share, although this will have to be mentioned when one comes to the order.
It is contended by the petitioners, who are the present administrators of the estate of Mr Littman, that Mrs Peskoff and Mr Woodley did not properly exercise their fiduciary power in issuing these 101 shares. In deciding to issue these shares Mrs Peskoff and Mr Woodley acted under the advice of Mr Rowberry. He is a solicitor who had previously been concerned with various transactions with Mr Littman. At this time he was acting on behalf of the directors of the company, and he is now acting for the respondents in these proceedings. I ought to read the precise terms of the resolutions passed on 28 January 1954, so far as they are in point. They are resolutions passed at a meeting of directors at which there were present Mrs Peskoff and Mr Woodley. Number 2 states:
‘It was resolved to increase the issued share capital of the Company to the sum of £201 by the issue of 101 ordinary shares of £1 each, which were allotted as to 100 to Mrs. Josephine Peskoff and 1 to Mr. Arthur Charles Woodley.’
Then, after another resolution dealing with the seal of the company, there was a resolution dealing with finance in these terms:
‘4. Finance. Mr. A. C. Woodley reported that as the result of the arrears of tax which had been allowed to accumulate without provision by the former directors and the heavy payments which had been made in respect thereof the Company was in need of additional share or loan capital to meet its obligations. The current income of the Company was not less than £2500 per month which as far as he could ascertain shewed a considerable surplus over current running costs, but insufficient to deal with accumulated liabilities. In his opinion the temporary difficulties of the Company could be met if a sum of not less than £1000 was borrowed. Mrs. Peskoff said that she decided on Mr. Stealey’s death
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to ask for payment of the £2080 owing to her by the Company and in the circumstances she would be willing to accept payment of this and to lend the sum of £2000 to the Company on having the sum secured by Debenture subject to the Bank’s security and to carry interest at 6%. It was Resolved to accept Mrs. Peskoff’s offer …
‘5. Finance—new loan. Mrs. Peskoff offered to lend the Company a further sum of £1000 upon having the same secured by Debenture subject to the prior charges with interest at 6% but subject to repayment upon 7 days’ notice and in such form as should be settled by the Company’s Solicitor. It was Resolved to accept Mrs. Peskoff’s offer … ’
I will return later on to the issue of the 101 shares.
On 17 October 1955, the directors purported to pass a resolution regulating their own salary and commission. That resolution was purported to be passed at a meeting of directors at which there were present Mrs Peskoff and Mr Woodley. It states:
‘10. Appointments. Resolved that the following directors appointments as from 1st. January 1955 be and are hereby confirmed: 1. Mrs. J. Peskoff to be Chairman & Managing director at a salary of £1560 per annum. 2. Mr. A. C. Woodley to be Secretary & Manager at a salary of £780 per annum.’
Then comes a resolution dealing with expenses. And then:
‘12. Bonuses. Resolved that bonuses be paid on the turnover of the Company (net cash receipts) in excess of £30000 per annum, the Brighton Baths receipts being excluded from the total receipts, as follows: Mrs. J. Peskoff to receive a bonus of twenty per cent, and Mr. A. C. Woodley a bonus of five per cent of the excess receipts as above, and that such bonuses shall be payable in respect of the financial year ending 31st. March 1955 and for each successive year as long as the respective directors shall hold the above offices … ’
This resolution was beyond the powers of the directors, since under the articles of the company the remuneration had to be determined by the company in general meeting. The resolution was never ratified by the company in general meeting. There was some discussion whether the resolution ought to be treated as having been ratified by the consent of all the members entitled to vote at general meetings; that is to say, on the footing that the administrators pendente lite were not so entitled to vote. I am not persuaded that that is right, but I do not intend to pursue the point since in the event it has proved to have little practical significance. Mrs Peskoff deposed in her affidavit that:
‘… the remuneration of the directors has never exceeded the amount which the said auditors Messrs Silver Altman and Company have advised to be reasonable having regard to the work done by the directors, the interests of the shareholders and the trading position of the Company. Such remuneration has been determined either at a general meeting of the Company or by agreement between all persons including the auditors entitled to be present at a general meeting.’
Two members of the firm of Messrs Silver Altman & Co gave evidence on subpoena: Mr Morris, who was the individual who carried out the duties of auditor until 1956, and Mr Goldwater, who carried out those duties thereafter. I am satisfied on their evidence that the auditors never advised that the amount of commission contained in this resolution was reasonable. They formed no such view and carried out only the duties which auditors do perform in connection with the accounts of a company. Still less did they agree the resolution, whatever precisely that may mean.
In 1959 the ladies’ bath in London was sold. On that sale being effected the
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directors, Mrs Peskoff and Mr Woodley, on 15 July 1959, passed a resolution in these terms:
‘Resolved that the commission payable in accordance with the minute 12 of 1st Jan 1955 be amended to be on receipts in excess of £24000 per annum, as from Oct 1st. 1958.’
The reference to ‘the minute 12 of 1 Jan 1955’ appears to be a simple error for minute 12 of 17 October 1955. It will be seen that the date 1 January 1955 appears in the first resolution under that minute. The effect and purpose of that resolution was to ensure that, notwithstanding an expected reduction in turnover as a result of the ladies’ bath being sold, the amount of commission receivable by the directors should be kept up to its former amount.
In 1960, the directors resolved to delete from the accounts the sum of £2,930 owing to Mr Littman’s estate. That was done by a resolution of the directors passed on 23 May 1960 in these terms:
‘That the sum previously shewn in the accounts as due to the late J. A. Littman be deleted from the accounts for year ending March 31st 1959 and all subsequent years as the debt is not acknowledged.’
This non-acknowledgement was not based on any ground of limitation, but apparently on the ground that the existence of the debenture was not made out from the documents. No satisfactory explanation was forthcoming either from Mrs Peskoff or from Mr Woodley why they took this view. The debt owing to Mrs Peskoff herself as assignee of Mr Stealey, now transmuted into a secured debenture of £2,000, was not similarly treated.
On 31 March, the company entered into an important agreement with a company called Nevilles Turkish Baths Ltd (to which I will refer as ‘the Neville company’). The Neville company belongs to Mrs Peskoff, Mr Woodley and his wife, Mrs Woodley, their proportion of shareholdings being, Mrs Peskoff 61,129, Mr Woodley 18,376 and Jeanne Constance Woodley 2,000. The Neville company had operated a turkish bath near London Bridge, but this had now been closed. The agreement contained the following provisions:
‘1. The Neville Company will forthwith transfer to the … Company the benefit of the goodwill and connection of the Neville Company in its business of Turkish Baths Proprietors formerly carried on at London Bridge as aforesaid and will use its best endeavours to introduce the customers and former customers of the Neville Company to the … Company
2. The … Company hereby appoints the Neville Company to be the general managers and controllers on behalf of the Savoy Company of the Turkish Bath business belonging to the … Company and carried on upon the ground floor and basements of the premises at Nos. 91 & 92 Jermyn Street as aforesaid TOGETHER with the hairdressing and allied businesses also carried on there by the Savoy Company and for the purpose of avoiding doubt it is declared that this appointment shall not extend to the control or management of the flats and apartments belonging to the … Company and situate above the ground floor of the … Company’s premises aforesaid
3. The appointment shall take effect from the First day of January One thousand nine hundred and sixty one and shall continue for the term of two years and thereafter from year to year until the same shall be terminated by either party giving to the other not less than six months notice …
4. The remuneration of the Neville Company shall be a fixed payment of One thousand four hundred and forty pounds per annum payable by monthly instalments of One hundred and twenty pounds on the First day of every month and the further sum payable monthly as before equal to five per cent of the
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gross receipts of the said business during the period when the same shall be under the control and the management of the Neville Company in pursuance of this Agreement …
5. The Neville Company shall have the complete management and control of the … Company’s business as aforesaid during the continuance of this Agreement and without derogating from the generality of the foregoing the Neville Company shall appoint and remunerate out of its own funds one or more competent persons to carry out the duties of the Neville Company under this Agreement and to attend to the day to day management of the business … ’
Since the date of that agreement the Neville company has managed the Jermyn Street Baths pursuant to the agreement. Again in accordance with the agreement, it has not taken over the management of the flats, which continues to be in the hands of the directors of the company. Mr Woodley’s commission, under the resolution dated 17 October 1955, ceased when he ceased to be a director in March 1961. Mrs Peskoff has continued to draw her full commission under the resolution dated 17 October 1955. Counsel for the respondents asserted that the 5 per cent commission payable to the Neville company under the 1961 agreement merely took the place of the 5 per cent commission payable to Mr Woodley under the 1955 resolution, with the consequence that the Neville agreement did not substantially increase the burden of the company in management expenses. This, so far as I can see, may be more or less the position. Counsel, however, was unable to supply figures to make good his assertion and I express no further view on this point.
What is perfectly clear is that with the mounting profits the remuneration taken by Mrs Peskoff over and above the amount payable to the Neville company for managing the turkish baths began during the 1960s to reach very large figures indeed. There has been prepared a schedule showing in columns the bath receipts, furnished letting rentals, total receipts, directors’ fees, management fees and expenses, salaries and net profits before tax for the years ended 31 March 1953 to 31 March 1967 inclusive. I will not read out the whole of those figures now. It is sufficient to say that the receipts from the baths increased rather steeply and progressively after 1961, but that the furnished letting rentals have remained more or less constant, representing now approximately something rather more than 10 per cent of the aggregate receipts from the baths and the furnished letting rentals. The proportion was higher in the earlier years. The management fees and expenses were something under £1,000 up to and including the year ending 31 March 1961. No point was taken on those fees and expenses up to that date. Then for the subsequent years, ie the years after the agreement with the Neville company in 1961, they are as follows: (for each respective year ending 31 March) 1962, £3,434; 1963, £3,608; 1964, £3,841; 1965, £3,938; 1966, £4,286; and 1967, £4,859. The amount payable under that head for those years represents the amount payable to the Neville company. Then, turning to the item directors’ fees, the amounts are as follows: (for each respective year ending 31 March) 1962, £6,115; 1963, £6,899; 1964, £7,683; 1965, £8,113; 1966, £9,146; 1967, £11,810. The figures for the year ending 31 March 1968 show the same pattern. Subsequent figures are not available. The amounts shown as directors’ fees went to Mrs Peskoff, as to the greater proportion, and in part to Mr Michael Peskoff.
Going back a little in time, on 25 March 1960, letters of administration were granted to the petitioners on the present petition. They are four children of Mr Littman. The petitioners, acting by their then solicitor, Mr Louis Littman, who was another child of Mr Littman, then took up the matter of the company with Mrs Peskoff and her solicitor, Mr Rowberry. At an early stage in the voluminous correspondence which took place between the petitioners, by their solicitor, and Mr Rowberry and other individuals concerned, the question arose of the registration of the petitioners in the books of the company. As an issue has been raised on this
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point, I will read certain passages from the correspondence. On 24 May 1961, Mr Woodley wrote to Mr Goldwater, the auditor, in these terms:
‘Mrs. Peskoff has ‘phoned me saying that Mr. L. Littman has requested you to let him have a copy of the accounts. I assume that this has to do with the estate of the late Mr. J. Littman and, if so, I think such a request should properly be made by the Administrators, together with formal proof of their authority to act, as from the Company point of view no official notification has been received of their appointment.’
On 19 July, Mr Rowberry wrote to Mr Louis Littman:
‘One point which Mr. Woodley raised some time since has not yet been cleared up, namely, no grant of representation has been registered with the Company in respect of your late Father’s shares and, in the course of a conversation which I had with Messrs. Silver Altman & Co., some time since, I did ask on behalf of the Executors that this should be done and may be you would like to deal with the point before going any further.’
Mr Louis Littman wrote to Mr Goldwater on 20 July:
‘I enclose a copy of a letter I have had from Mr. Rowberry. Can you register the shares held by my father in the names of the new Administrators?’
On 8 November, Messrs Silver, Altman & Co, ie Mr Goldwater, wrote to the directors of the company:
‘We have been requested to send you the enclosed copy of Probate in the Estate of J. A. Littman deceased and we shall be obliged if you would kindly register the Administrators in the Company’s books and return the Probate to us in due course.’
On 21 November, Mr Woodley, as secretary of the company, wrote to Messrs Silver, Altman & Co:
‘We thank you for yours of the 8th. inst., enclosing grant of letters of Administration in respect of J. A. Littman, deceased, which are returned herewith, and have duly registered the Administrators in the Company’s books.’
It is now necessary to look at the register of members kept by the company. Under the serial number 2, there was entered in 1946 the name of ‘Joseph Aaron Litman’, as the holder of 50 shares. Then in 1961 the company (ie I suppose Mr Woodley) caused to be written in, in red ink, on the same page of the register, the words: ‘The administrators of’ before ‘Joseph Aaron Littman’, and the words: ‘Decd 21st Aug 1953’; then the names and addresses of the four petitioners, and the words:
‘Letters of Administration dated 25th March, 1960, Registered 21st November, 1961. Solicitors to the administrators, Littman & Rossie, 22 Queen Anne Street, W.1.’
The point was taken by counsel for the respondents that, all that was done in the light of the correspondence and on the terms contained in the register of members was to make a note of the grant representation, and that the petitioners were not then, and never have been since, registered as members of the company. I am not able to accept that contention. No particular form is required by statute or under the articles of the company for registration of personal representatives in the register of members of the company. The nature of the entry in the company’s register must depend on the intention of the parties. To quote from the judgment of Earl
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Cairns LC in Re City of Glasgow Bank, Buchan’s Case ((1879) 4 App Cas 549 at 589) all that is required is: ‘… a distinct and intelligent request on the part of the executor … ’ In the present case, although no one’s mind may have been very clearly addressed to the distinction, I feel no doubt that what the petitioners requested was not merely that a note of the letters of administration should be entered on the register, but to be registered themselves as members of the company. I was referred to Re T H Saunders & Co Ltd, but that case only shows that executors are entitled to have their names on the register without reference to their representative capacity. It does not mean that if personal representatives request registration and do not get registration without such reference they are not registered at all. From beginning to end, no notice of general meetings of the company has been given to the personal representatives of Mr Littman, ie the administrators pendente lite, and now the present petitioners.
During the years 1961 until the presentation of this petition in 1969, there were prolonged negotiations between the parties for a settlement of their interests in the affairs of the company. The negotiations came to nothing, and at long last the petitioners presented the present petition on 6 May 1969.
Counsel for the respondents contended that the petitioners were not members of the company and have no locus standi to present this petition, bearing in mind that a petition under s 210 can only be presented by a member of the company. I have already held that the petitioners were duly registered as members of the company, and that, of course, is an answer to this contention. But even if that were not so, it seems to me that personal representatives of a deceased member must be regarded as members of a company for the purposes of s 210. I was referred on this point to the decision of Buckley J in Re Bayswater Trading Co Ltd ([1970] 1 All ER 608 at 609, [1970] 1 WLR 343 at 345) in which the learned judge held that for the purpose of s 353 of the Act the word ‘member’ must include representatives of a deceased member. It seems to me that s 210 requires that a similar meaning should be put on ‘a member’ in that section. Therefore, the petitioners had locus standi to present this petition.
As I have said, Mr Morris and Mr Goldwater gave evidence on subpoena. In addition, a number of witnesses were cross-examined on their affidavits, including Mrs Peskoff, Mr Woodley and Mr Rowberry, and also Mr Louis Littman. One or two other of the petitioners’ deponents were cross-examined, but these were really on side issues on which it is unnecessary for me to enter. Mr Rowberry and Mr Louis Littman gave evidence primarily with regard to the conduct of the negotiations, although Mr Rowberry was also concerned with the advice which he gave to Mrs Peskoff in the earlier years. I saw no reason to doubt those gentlemen; they gave truthful evidence to the best of their recollection. I should perhaps mention in passing that Mr Louis Littman was subsequently replaced as solicitor to the petitioners by another firm of solicitors who represent them in these proceedings. It remains to mention Mrs Peskoff and Mr Woodley. Mrs Peskoff’s evidence seemed to me to be totally unworthy of credence from start to finish, except when she was driven to make an admission. Mr Woodley was an elderly man and rather confused, and I did not find his evidence reliable. Neither gave a satisfactory explanation of their motives where it was necessary to establish a matter of motive.
Having concluded that statement of the history of the matter I must next decide whether the issue of 101 shares by the directors in January 1954 was properly made. It is well established that the power vested in directors to issue shares is a fiduciary power which must be exercised in good faith for the benefit of their company. I was referred to certain well-known cases on this point. I do not cite them because the principle is not in dispute. The cases are concerned for the great part with certain rather perplexing consequences of the application of the principle in particular
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circumstances which are not present in he present case, where the facts are of the utmost simplicity.
Mrs Peskoff in her affidavit made the following statement:
‘In January 1954 I deposited with the bank my last remaining assets consisting of National Savings Certificates valued at £800. and the lease of a house at Cardiff worth about £350. The bank allowed me to overdraw to a limit of £2000. on my own account. I was unwilling to provide further capital for the Company unless I could secure control of the Company and obtain a debenture to secure the whole amount of the money which I proposed to lend to the Company together with the amount of my then outstanding loan.’
In the course of her cross-examination it became clear to my mind beyond doubt that Mrs Peskoff and Mr Woodley, when they issued these new shares, did not do so in good faith for the benefit of the company. It is quite true that in 1954 the company needed money, and Mrs Peskoff quite properly advanced £1,000 of new money against debentures. But the sole purpose of issuing the new shares was not to raise another trifling sum, namely £100, but to increase Mrs Peskoff’s interest in the company as against the interest of Mr Littman’s estate. It never entered the heads of Mrs Peskoff and Mr Woodley that they were concerned to advance the benefit of the company or the shareholders collectively. On the contrary, their sole motive was to benefit themselves at the expense of the remaining shareholders. That that is the true view is borne out, if any corroboration is needed, by the form the resolution took. It will be remembered that the resolution to issue 101 shares came first, in complete isolation from the resolution to raise further finance by the issue of the new debenture. Unfortunately, on this point Mrs Peskoff was advised by Mr Rowberry, who thought, apparently, that this was a perfectly proper and effective course for her to take. I do not doubt that Mr Rowberry acted in perfectly good faith, but I must say that I think it was very unfortunate advice for him to have given her. There can be, I think, no doubt at all that the issue of the 101 shares could have been set aside in appropriate proceedings taken in 1954 or within some reasonable time thereafter. The only doubt which has troubled me is whether the lapse of time has been so considerable that an adjustment cannot now be made. I will come back to that point.
The issue of these shares in 1954 obviously does not of itself represent oppressive conduct continuing, in the present tense, at the date of the presentation of the petition. It does, however, represent the first of a chain of events which has continued right up to the date of the presentation of the petition. Of these acts by far the most important which is charged against Mrs Peskoff is the taking of excessive remuneration. It seems to me that that charge is manifestly well founded. It is accepted by counsel for the petitioners that the remuneration taken up to and including the year ended 31 March 1961, should not be treated as having been excessive, or at any rate not so excessive that any adjustment should be made. That corresponds to my own view. Until the agreement with the Neville company, Mrs Peskoff was conducting the affairs of this company more or less single-handed, with the assistance of Mr Woodley, and successfully, and it seems to me, that she was clearly entitled to be well paid for it. I do not think that remuneration at £5,655, £5,823, £6,104, £5,335 and £5,842 over the last five years before the Neville agreement was unreasonably high.
But after the making of the agreement with the Neville company in 1961, the remuneration taken by the directors of the company as such is grossly in excess of any reasonable return for their services in conducting the affairs of the company. The management of the baths, the company’s principal undertaking, had then been taken over by the Neville company, and all that they had to do was to manage the flats and carry out such general business as falls on directors. I have already referred to the figures; they speak for themselves. It will be borne in mind in this connection
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that there never was a valid resolution by the company in general meeting to pay any remuneration at all. It is accepted on behalf of the petitioners, notwithstanding the absence of such a resolution, that the directors should be treated as being entitled in any account to reasonable remuneration. Counsel for the petitioners suggests that it would be reasonable after the date of the agreement with the Neville company to allow £5,000 from the company and the Neville company together. With the best consideration that I can give it, I am prepared to put it at a figure of £6,000. Further than that I do not think that I could fairly go.
The other main cause of complaint is the total omission to give notice of meetings to the administrators pendente lite and the petitioners. This complaint is unanswerable since they were registered as members. It is fair to mention that, broadly speaking, information has been supplied and accounts provided. I should also mention specifically, as a cause of complaint, the deletion of the £2,935 odd from Mr Littman’s estate. Again, I think that that complaint is well founded.
It is clear in my view that the acts of Mrs Peskoff, in association with Mr Woodley and her son during their respective directorships, commencing with the issue of the 101 shares in January 1954, and continuing with the taking of excessive remuneration and omitting to give notice of meetings up to the date of the petition, represent conduct ‘in a manner oppressive to some part of the members’. I am further of the opinion that the conditions contained in s 210(2)(b) are complied with; that is to say, that to wind up the company would unfairly prejudice the petitioners, but that ‘otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up’. Section 210 gives the court an unlimited judicial discretion to make such order as it thinks fit with a view to bringing to an end the matters complained of, including an order for buying out one faction by the other. It is not disputed on behalf of the respondents that, in prescribing the basis on which the price on such a sale is to be calculated, the court can in effect provide compensation for whatever injury has been inflicted by the oppressors.
I was referred on this point to Scottish Co-operative Wholesale Society Ltd v Meyer in the House of Lords, and in particular to a paragraph in these terms ([1958] 3 All ER at 89, [1959] AC at 369):
‘One of the most useful orders mentioned in the section—which will enable the court to do justice to the injured shareholders—is to order the oppressor to buy their shares at a fair price; and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. Once the oppressor has bought the shares, the company can survive. It can continue to operate. That is a matter for him. It is, no doubt, true that an order of this kind gives to the oppressed shareholders what is, in effect, money compensation for the injury done to them; but I see no objection to this. The section gives a large discretion to the court, and it is well exercised in making an oppressor make compensation to those who have suffered at his hands.’
If I may say so, I find that a most helpful passage.
I was for some time troubled whether the lapse of time since the issue of the 101 shares in January 1954, might not be so great as to preclude an adjustment in this respect, but on consideration I am satisfied that that is not so. I was referred to Weld v Petre and in particular to a passage from the judgment of Lawrence LJ which I must read ([1929] 1 Ch at 50–52, [1928] All ER Rep at 568, 569):
‘In the absence of any statutory bar or of any presumption of a release the question in the present case resolves itself into whether the Court ought to
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refuse relief on the ground of acquiescence or laches. The difference between acquiescence and laches was clearly pointed out by the House of Lords in Archbold v. Scully ((1861) 9 HL Cas 360 at 383). I need only quote the following passage from the speech of Lord Wensleydale: “Where there is a Statute of Limitations, the objection of simple laches does not apply until the expiration of the time allowed by the statute. But acquiescence is a different thing; it means more than laches. If a party, who could object, lies by and knowingly permits another to incur an expense in doing an act under the belief that it would not be objected to, and so a kind of permission may be said to be given to another to alter his condition, he may be said to acquiesce; but the fact, of simply neglecting to enforce a claim for the period during which the law permits him to delay, without losing his right, I conceive cannot be any equitable bar.” In the present case the appellants have adduced no evidence whatever tending to show that either the mortgagee during his lifetime, or the appellants since his death, has, or have, altered his, or their, condition on the faith of the plaintiffs’ inaction. Had it been proved that any such alteration had taken place I am of opinion that a much shorter period of delay than the one in question here would have constituted a sufficient ground for refusing relief. In the absence of any such proof it is plain that the appellants cannot rely upon acquiescence as a defence to the plaintiffs’ claim, and I did not understand [counsel for the appellants] seriously to contend that they could. In the result the only ground upon which the appellants can found their argument against relief is delay or laches, which for present purposes I treat as synonymous terms. The principle applicable to a case where long delay is set up as a defence to equitable relief is stated in the following well known passage in the judgment of the Privy Council in Lindsay Petroleum Co v. Hurd ((1870) LR 5 PC 221 at 239): “Now the doctrine of laches in Courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”’
In Erlanger v New Sombrero Phosphate Co ((1878) 3 App Cas 1218 at 1279, [1874–80] All ER Rep 271 at 286) Lord Blackburn, after quoting the above passage, says:
‘I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think is inherent in the nature of the inquiry … ’
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In the present case there has certainly been an overlong delay in bringing this matter before the court. But the petitioners have never in any way given up their claim. On the contrary, throughout the intervening period there have been fitful and protracted negotiations. Moreover—and this is vitally important—apart from delay, nothing whatever has occurred which would make it unfair to Mrs Peskoff to give up the interest in the company represented by the 100 shares. Since 1954, she has simply continued to conduct the affairs of the company for her own exclusive benefit. It seems to me that, taking into account the length of the delay and the nature of the acts done during the interval, to quote the cases that I have just read, the balance of justice lies heavily in favour of compelling Mrs Peskoff to give up these shares which she never had any right to allot to herself.
In order to avoid misunderstanding, and having regard to certain discussions which took place in the course of the hearing, I should say that in my view the position as regards delay would be the same if the petitioners were now prosecuting not a petition under s 210 but a simple action to set aside the issue of these shares. I do not think that a different consideration can arise in respect of delay according to whether the remedy is sought by way of action or by way of adjustment on a petition under s 210. It is not disputed on behalf of the respondents that s 210, so far as jurisdiction is concerned, does authorise the court to make this sort of adjustment.
It remains to consider how the order should be worked out. It seems to me that Mrs Peskoff should be given the first opportunity of buying out the petitioners. She is the individual who has throughout had the conduct of the business and has brought it to its present prosperous condition. If, and only if, she is unwilling or unable to do so, then the petitioners should have the opportunity of buying her out. In either event the price will be calculated on the footing: (1) that Mrs Peskoff should be treated as owning a one-half interest in the company, and the petitioners be treated as owning the other half interest in the company—I mention, in passing, that Mr Woodley’s share will, of course, go out of the picture; (2) that the £2,935 owing to Mr Littman’s estate should be reinstated as a debt owed by the company; and (3) that Mrs Peskoff should be treated as accountable to the company for remuneration in excess of £6,000 for the years ended 31 March 1962, and subsequent years. For this purpose the sums paid to (a) the Neville company, and (b) to the respondents themselves, will be aggregated and the sum for which she will be accountable will be the excess over that aggregated sum.
I recognise that this order lays on Mrs Peskoff an extremely heavy burden. I have no idea whether her financial circumstances are such that she will be able to purchase if she is minded to do so. One cannot help feeling a certain amount of sympathy for her after all her efforts in bringing this company to prosperity, but I am afraid that she has overrreached herself in seeking to increase her own interest at the expense of Mr Littman’s estate with no valid justification and in taking this almost fantastically exaggerated remuneration.
Order accordingly.
Solicitors: Coward, Chance & Co (for the petitioner); Wedlake, Letts & Birds, agents for Rowberry, Morris & Co, Gloucester (for the respondents).
Richard J Soper Esq Barrister.
Procedure Direction
(House of Lords: Incompetent petitions for leave to appeal)
[1970] 3 All ER 70
Categories: PRACTICE DIRECTIONS
Court: HOUSE OF LORDS
Hearing Date(s): 23 JULY 1970.
House of Lords – Appeal to – Leave – Incompetent petitions for leave to appeal – Procedure where petition appears incompetent – Criminal petition for which no certificate granted under Administration of Justice Act 1960, s 1(2) – Petition where Court of Appeal refused to grant leave to appeal from High Court – Petition barred by Bankruptcy Act 1914, s 108(2) (b).
David Stephens, Clerk of the Parliaments
As from 1 October 1970, petitions for leave to appeal to the House of Lords which appear to be incompetent, in that they fall under the following headings, will be considered without a hearing by three Lords of Appeal who, if they are satisfied that the petition is incompetent to be received by the House, will certify accordingly and the Clerk of the Parliaments will then notify the parties: (1) criminal petitions for leave to appeal to the House of Lords in respect of which no certificate has been granted by the court below under s 1(2) of the Administration of Justice Act 1960; (2) petitions for leave to appeal to the House of Lords against a refusal of the Court of Appeal to grant leave to appeal to that court from the judgment of the High Court; (3) petitions for leave to appeal to the House of Lords barred by s 108(2)(b) of the Bankruptcy Act 1914.
In the event of one or more of the three Lords of Appeal expressing a doubt whether the petition in question is incompetent to be received by the House, it will be referred to the appeal committee for a hearing in the normal manner.
David Stephens, Clerk of the Parliaments
Practice Direction
(Land registration: Production of register of title)
[1970] 3 All ER 70
PRACTICE DIRECTIONS
QUEEN’S BENCH DIVISION
23 June 1970.
Land registration – Production of register of title – Order for production – Procedure – RSC Ord 32, r 1.
An application under the Land Registration Rules 1967a by a judgment creditor for an order that the Chief Land Registrar should produce to such judgment creditor the register of the title to land or a charge thereon which is registered under the Land Registration Acts 1925 to 1966b without the authority of the judgment debtor should be made by summons pursuant to RSC Ord 32, r 1, in the proceedings in which judgment was obtained supported by affidavit showing prima facie evidence that the judgment debtor is the proprietor (whether solely or jointly with some other person or persons) of the land in question or of a charge on the land.
This Practice Direction is made with the concurrence of the Chief Chancery Master.
W Russell Lawrence, Senior Master
Compagnie d’Armement Maritime SA v Compagnie Tunisienne de Navigation SA
[1970] 3 All ER 71
Categories: CONFLICT OF LAWS; CONTRACT: SHIPPING
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD DIPLOCK
Hearing Date(s): 30 APRIL, 4, 5, 6 MAY, 14 JULY 1970
Conflict of laws – Contract – Proper law of contract – Charterparty – Adapted standard form – Law of flag of vessels carrying goods – Arbitration clause providing for arbitration in London – Parties expecting goods to be carried under French flag – Goods carried under different flags – Intention of parties – Whether proper law French or English.
A contract negotiated in Paris between the appellants, a French company, and the respondents, a Tunisian company, provided for the carriage of crude oil in a number of vessels between Tunisian ports over a period of months. The oral negotiation of the outline terms was conducted in French, and for the written contract a standard charterparty form drawn in English was used with additional typed clauses. One of these (cl 28) provided that shipments were to be in tonnage owned, controlled or chartered by the appellants, and it was (as the arbitrators hereafter mentioned found) contemplated by the parties when the contract was negotiated that vessels owned by the appellants would be primarily used, but no vessel, or vessels, was specified in the contract. There was no discussion at any time of the law by which the contract was to be governed, but one of the printed clauses (cl 13) provided that the contract should be governed ‘by the laws of the Flag of the Vessel carrying the goods’, and cl 18 provided that any dispute arising should be settled in London, the appellants and the respondents each appointing an arbitrator. Of six vessels used to perform the first liftings none was owned by the appellants and only one was French. A dispute arose and proceeded to arbitration. The arbitrators stated a question of law whether the proper law applicable was French or English law.
Held – (i)(Lord Reid and Lord Wilberforce dissenting) Clause 13 of the contract, when read in conjunction with cl 28 and in the light of the intention to use primarily the appellants’ vessels, constituted an express agreement by the parties that the contract was governed by the laws of the flag of those vessels, ie by French law (see p 77 b, p 80 e, p 82 c and f, p 96 b, post).
(ii) In a case where the parties had not made an express choice as respects the proper law, an agreement by them to refer disputes to arbitration in a particular country was a strong indication that the law of the country was to be the proper law of the contract. Such an indication was not, however, conclusive or irresistible. The arbitration clause must be considered together with the rest of the contract and the relevant surrounding facts, and any implication from it could be negatived by an overwhelming implication from the other matters (see p 75 a, p 77 j to p 78 a, p 82 g, p 84 g to j, p 85 b, p 88 e, p 92 f, and p 93 d, post).
Tzortzis v Monark Line A/B [1968] 1 All ER 949 considered.
N V Kwik Hoo Tong Handel Maatschappij v James Finlay & Co Ltd [1927] AC 604 distinguished.
(iii) In the present case, even if the parties were not treated as having expressly agreed that the contract was to be governed by French law, consideration of all the relevant circumstances showed that the system of law with which the contract had the closest connection was French law, and French law was accordingly the proper law of the contract (see p 74 d and j, p 80 f, p 82 h, p 88 f, p 91 f and p 96 d and h, post).
Per Lord Reid. I wish to reserve my opinion how far in a case of this kind it is proper to disregard the fact that two countries are separate and independent countries, each
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with its own system of law, on the ground that those countries are or have recently been closely associated, or that their systems of law are very similar but both very different from English law (see p 74, post; and cf p 90 c, post).
Per Lord Wilberforce. The question of the proper law of a commercial contract ought to be regarded as primarily a matter to be found by arbitrators, for the question is one of estimating competing factors in the light of commercial intention (see p 88 g, post).
Decision of Court of Appeal sub nom Compagnie Tunisienne de Navigation SA v Compagnie d’Armement Maritime SA [1969] 3 All ER 589 reversed.
Notes
For the effect of a provision for arbitration in determining the proper law of a contract, see 7 Halsbury’s Laws (3rd Edn) 74, 75, para 140.
For the proper law governing contracts of affreightment, see ibid 77, 78, para 144, and 35 ibid 258, para 395, and for cases on the subject, see 11 Digest (Repl) 420–425, 715–734.
Cases referred to in opinions
Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1958] 1 All ER 725, [1959] AC 133, [1958] 2 WLR 688, [1958] 1 Lloyd’s Rep 75; rvsg sub nom Anglo-Saxon Petroleum Co Ltd v Adamastos Shipping Co Ltd [1957] 2 All ER 311, [1957] 2 QB 233, [1957] 2 WLR 968, [1957] 1 Lloyd’s Rep, 41 Digest (Repl) 315, 1198.
Bonython v Commonwealth of Australia [1951] AC 201, 35 Digest (Rep) 189, 33.
Dalrymple v Dalrymple (1811) 2 Hag Con 54, 161 ER 665; on appeal (1814) 2 Hag Con 137n, 22 Digest (Repl) 618, 7112.
Hamlyn & Co v Talisker Distillery [1894] AC 202, [1891–94] All ER Rep 849, 71 LT 1, 58 JP 540, 39 Digest (Repl) 794, 2657.
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, [1932] All ER Rep 494, 39 Digest (Repl) 448, 34.
Jacobs v Credit Lyonnais (1884) 12 QBD 589, 53 LJQB 156, 50 LT 194, 11 Digest (Repl) 432, 775.
Lloyd v Guibert (1865) LR 1 QB 115, 35 LJQB 74, 13 LT 602, 112 ER 1134, 41 Digest (Repl) 404, 1896.
Maritime Insurance Co Ltd v Union von Assecuranz 1865 (1935) 52 Lloyd LR 16, 79 Sol Jo 403, 11 Digest (Repl) 436, 796.
Miller (James) & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] 1 All ER 796, [1970] 2 WLR 728; rvsg sub nom Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd [1969] 2 All ER 210, [1969] 1 WLR 377.
N V H M Vulcaan v J Ludwig Mowinckels Rederi A/S (1938) 60 Lloyd LR 217.
N V Kwik Hoo Tong Handel Maatschappij v James Finlay & Co Ltd [1927] AC 604, 96 LJKB 902, 137 LT 458, 50 Digest (Repl) 343, 694.
Norske Atlas Insurance Co Ltd v London General Insurance Co Ltd (1927) 28 Lloyd LR 104, 2 Digest (Repl) 700, 2127.
Spurrier v La Cloche [1902] AC 446, [1900–03] All ER Rep 277, 71 LJPC 101, 86 LT 631, 2 Digest (Repl) 448, 174.
Tzortzis v Monark Line A/B [1968] 1 All ER 949, [1968] 1 WLR 406, Digest Supp.
United Railways of Havana and Regla Warehouses Ltd, Re [1960] 2 All ER 332, [1961] AC 1007, [1960] 2 WLR 969, Digest (Cont Vol A) 231, 862a.
Vita Food Products Inc v Unus Shipping Co Ltd [1939] 1 All ER 513, [1939] AC 277, 108 LJPC 40, 160 LT 579, 11 Digest (Repl) 421, 719.
Appeal
This was an appeal by Compagnie d’Armement Maritime SA from an order of the Court of Appeal (Lord Denning MR, Salmon and Karminski LJJ) dated 27 June 1969 and reported [1969] 3 All ER 589 in favour of the respondents, Compagnie
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Tunisienne de Navigation SA, allowing their appeal against the judgment of Megaw J dated 19 February 1969 and reported [1969] 1 WLR 449, deciding in favour of the appellants that the proper law of the contract was French law. The facts are set out in the opinion of Lord Reid.
Michael Kerr QC and K S Rokison for the appellants.
R L A Goff QC and B S Eckersley for the respondents.
Their Lordships took time for consideration
14 July 1970. The following opinions were delivered.
LORD REID. My Lords, in 1967, the respondents, a Tunisian company, wished to have a quantity of oil shipped from La Skhirra to Bizerta—both ports in Tunisia. They approached a firm of brokers in Paris who put them in touch with the appellants who are French shipowners. The parties negotiated a contract in Paris and it was left to the brokers to prepare the written contract. They selected an English printed form which appears to be often used abroad. This form was for a tanker voyage charterparty which required considerable adaptation because under the contract there were to be a number of shipments spread over nine months in vessels supplied as required by the appellants.
After six shipments a dispute arose and the respondents claimed damages. The contract provides that any dispute shall be settled in London, each party appointing a merchant or broker as arbitrator. Arbitrators were duly appointed and the first question which arose was as to the proper law of the contract. On this the arbitrators made an interim award adjudging that the proper law of the contract is French law and stating as a question of law for the decision of the court the question whether the proper law is French law or English law.
One of the printed clauses in the form deals with the proper law. Clause 13 reads:
‘This Contract shall be governed by the laws of the Flag of the Vessel carrying the goods, except in the cases of average or general average, when same to be settled according to the York-Antwerp Rules, 1950.’
This clause remains unaltered in the signed contract. The printed form, being for a charterparty, had blanks at the beginning for the insertion of the name of the shipowner’s tanker and its flag. These were left blank. Clause 28 provides:
‘… Shipments to be effected in tonnage owned, controlled or chartered by the Compagnie d’Armement Maritime S.A. of 16,000/25,000 tons 10% more or less at Owners’ option.’
The first question is whether it is possible to give any meaning to cl 13. The printed form, including cl 13, obviously contemplates that there is to be one vessel and one flag and that the law of that flag shall be the proper law. But under cl 28 there could be a variety of vessels with a variety of flags. Which is to be selected as determining the proper law? Even if one could hold that with regard to a dispute concerning a particular voyage the law of the flag of the vessel making that voyage should prevail, that would not provide for the dispute in this case which does not relate to any particular voyage. We do not know and cannot enquire as to why cl 13 was left unaltered. We have to construe it as we find it. Normally where a clause was drafted by the parties or their agents we can assume that they must have intended it to mean something. But we cannot make that assumption here. The broker, relying on the form having proved useful in the past, may never even have read cl 13 and the strong probability is that the parties, being faced with a form in a foreign language which they assumed or were assured by the broker embodied their previous agreement, would not scrutinise the printed matter. Indeed one can say with some confidence that if any of them had scrutinised cl 13 he would have seen that it required
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adaptation. But whether they read cl 13 or not the parties are bound by what they signed.
Even if it were relevant it would be useless to ask in this case what the parties in fact intended as to the proper law, because it is found as a fact in the interim award that there was no discussion at any time of the law by which the transaction was to be governed. But cl 13, like any other provision in a contract, must be construed in light of the facts known to both parties at the time when it was agreed. They knew that the appellants owned a number of tankers flying the French flag and it is found in the interim award that it was contemplated by both parties that vessels owned by the appellants would be used at least primarily to perform the contract. If the parties had contemplated that the appellants’ vessels would always be used except in some unforeseen circumstances I would have held that cl 13 could be held to mean that the contract was to be governed by the law of the flag of those vessels, ie the law of France. But in my opinion this finding is too indefinite to justify such a gloss. ‘Primarily’ might mean in the first instance or it might mean in the majority of cases. The parties must have known that many other tankers not owned by the appellants would be available on this route, and that, as the dates of shipment were to be determined by the respondents, vessels other than those belonging to the appellants might well have to be used. In my judgment cl 13 must in the circumstances be regarded as having failed in its purpose to determine the proper law of the contract.
If that is so then we are no longer concerned with the parties’ intention. In the absence of any positive indication of intention in the contract the law will determine the proper law by deciding with what country or system of law the contract has the closest connection. Here three countries are involved. The contract was negotiated and signed in France and the freight was payable in Paris in French francs. The contract was to be performed in Tunisia. The only connection with England was that any dispute was to be settled by arbitration in London. The contract is in the English language and in English form but it was not argued, in my view rightly, that any great importance should be given to this.
Until this case reached this House it appears to have been assumed that France and Tunisia could be treated as one country or as having the same system of law. It is stated in the interim award that: ‘The civil law of Tunisia (which until 1956 was a French colony) is based on the Code Napoleon’ and that ‘neither side contended for any other system of law’ than French or English law. On that basis when one comes to weigh the various factors which tell in favour of French or of English law being regarded as the proper law, the fact that Tunisia was to be the place of performance of the contract would be put in the scale for French law. Then it is clear that the balance comes down heavily in favour of French law. On the one hand, there are the place where the contract was negotiated and signed, the place of performance, the place where and the currency in which the freight was to be paid, and the place where the parties resided and carried on business; on the other hand, there is only the place where disputes were to be settled by arbitration. But I wish to reserve my opinion as to how far in a case of this kind it is proper to disregard the fact that two countries are separate and independent countries, each with its own system of law, on the ground that those countries are or have recently been closely associated, or that their systems of law are very similar but both very different from English law.
The respondents do not deny that if we are free to apply the general rule, that the proper law is the law of the place with which the contract is most closely associated, then the proper law would be French law. Their case is that that general rule does not apply where there is an arbitration clause requiring disputes to be settled by arbitration in England. They admit that such a clause does not prevent the parties from agreeing that some other law shall be the proper law, but they maintain that, if such an agreement cannot be deduced from the terms of the contract, then the arbitration clause is decisive as to the proper law and requires an English court to hold that the proper law is the law of England.
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Of course the fact that the parties have agreed that arbitration shall take place in England is an important factor and in many cases it may be the decisive factor. But it would in my view be highly anomalous if our law required the mere fact that arbitration is to take place in England to be decisive as to the proper law of the contract. For the reasons given by others of your Lordships I agree that this is not the law of England.
I would therefore allow this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, the parties to a contract for the carriage of a certain number of tons of light crude oil agreed that any dispute between them should be settled in arbitration proceedings in London. Disputes did arise. Arbitrators in London were duly appointed. They entered on the reference. Both parties wished first to have the question settled as to which system of law fell to be regarded as the proper law of the contract. The arguments before the arbitrators dealt exclusively with the question whether the proper law of the contract was French law or English law. Neither side contended for any other system of law. Both parties asked the arbitrators to state their decision as an interim award in the form of a special case. The arbitrators awarded and adjudged that the proper law of the contract is French law. They set out that the question of law for the decision of the court, as agreed between counsel for the parties, was whether on the facts found and on the true construction of the contract the proper law is French law or English law. The learned judge (Megaw J) ([1969] 1 WLR 449) upheld the award and decision of the arbitrators. The Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338) took the contrary view.
It is first necessary to consider whether the parties themselves made an agreement as to which system of law should govern the contract. If they did it is not suggested that any reason exists why their agreement should not determine the matter. So the contract has to be considered. It is a contract between a French company (a company of tanker owners) and a Tunisian company dated 27 February 1967. It is a contract for the carriage of ‘minimum 300,000/maximum 350,000 long tons of light crude oil’ from La Skhirra to Bizerta on terms and conditions set out in the contract. Both those ports are in Tunisia. The history of the matter is that brokers in Paris were instructed to secure tonnage for the transport of the oil, and oral negotiations took place in Paris in the French language between the respective presidents of the parties, though there was no discussion as to the law by which the transaction was to be governed. The contract that was signed was prepared by the brokers and for convenience a printed standard charterparty form (in the English language) was used. It is a form which is widely used for tanker fixtures not only in London but in other chartering centres.
The form is called a tanker voyage charterparty. The contract that was made was not of that description. Yet neither party has suggested or has wished to suggest that effect cannot be given to the contract that was made. Both parties agree that they made a contract and that they put it into operation. The printed form was in some places adapted and to it were added many typewritten clauses. Though appropriate additional alterations to the printed form clearly ought in many places to have been made yet they were not. In very many of the clauses the reference is to a single vessel. The parties well understood that the contract did not relate to a single vessel. They both understood, and by one of the additional clauses agreed, that many vessels and many voyages would be needed for the transport of the stipulated quantity of oil. The form of document was appropriate for use between the owner of one vessel and the charterers of it. The first clause begins with the words: ‘That the said vessel being tight, staunch and strong, and every way fitted for the voyage’. The respondents (Compagnie Tunisienne de Navigation) were
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described as ‘Charterers’. Further instances need not be given to demonstrate that on the assumption, which is common ground, that the parties made a contract which they could and did operate on terms which they could and did mutually understand a great deal of editing and of altering would have been necessary to make the written word accord accurately and neatly with the understood word. Yet neither party has wished that the law should be a destroyer of their bargain.
The arbitration clause which is being operated is one which comes into play if there is (under cl 18) ‘any dispute arising during execution of this Charter-party’. The contract is not invalidated because the parties chose to call their contract a charterparty when they or those acting for them knew that that was not an apt description. They were businessmen to whose arrangements the words of Lord Wright, in Hillas & Co Ltd v Arcos Ltd ((1932) 147 LT 503 at 514, [1932] All ER Rep 494 at 505) seem applicable:
‘But it is clear that the parties both intended to make a contract and thought the had done so. Business men often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat.’
A similar approach is mirrored in the speeches in Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd, where it was recognised that the words ‘This bill of lading’ should be treated as a misnomer for ‘This charterparty’.
The contract signed by the parties contains (in cl 13) the words:
‘This Contract shall be governed by the laws of the Flag of the Vessel carrying the goods, except in cases of average or general average, when same to be settled according to the York-Antwerp Rules, 1950.’
If it is common ground that other clauses in the contract are to receive a measure of rehabilitation so that they are in accord with the intention of the parties—is this clause alone to be excluded from such treatment? Is it to suffer total or partial extinction? I see no reason for such discrimination. The clause remained in the contract and formed a part of it. It is a clause which makes express provision as to the law which is to govern the contract. It expressly provides that the contract is to be governed by the ‘laws of the Flag of the Vessel carrying the goods’. The only problem therefore, is as to the meaning in the context of the contract of the words ‘Flag of the Vessel’. Although in so many clauses the word ‘vessel’ is used and though the printed form which was used was one in relation to a voyage charter, the adaptations clearly showed that many ships and many voyages were involved. Thus the printed provision (cl 21) that lay days were not to commence before a certain date was amended so as to be a provision relating to lay days ‘for 1st voyage’. The opening words of the contract as adapted read:
‘It is this day mutually agreed between CIE. D’ARMEMENT MARITIME S.A. Owners of the Tank Steamer/Motor Vessel called the … Flag, of … tons nett register, having a capacity of … of Oil, or thereabouts, and classed highest Bureau Veritas or equivalent now … see Clause 28 … and Compagnie Tunisienne de Navigation … Charterers of Tunis.’
When cl 28 is looked at it is seen that the ‘Charterers’ were to arrange for shipments to be evenly spread so that they would be of the order of 100,000 tons each quarter; they were to be between 1 March 1967 and 31 December 1967. As to the shipments by the ‘owners’, they were to be in tonnage owned, controlled or chartered
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by them of 16,000/25,000 tons 10 per cent more or less at owner’s option, as the arbitrators have held. Both parties contemplated, at the time when the contract was entered into, that vessels owned by the appellants (described in the contract as ‘owners’) would be used at least primarily to perform the contract. At the time the contract was entered into the ‘owners’ owned certain tank vessels which were within the 16,000/25,000 ton range and which were normally traded mainly in the Mediterranean and with north Africa (four of them being then in the Mediterranean in ballast) and which all flew the French flag. On these facts (which have been found by the arbitrators) I consider that by cl 13 the parties provided that the contract was to be governed by the laws of the flag of the ‘owners’ vessels, those being the vessels which as both parties thought would be the vessels which would primarily be the vessels carrying the oil. It follows, therefore, that by cl 13 the parties agreed that the contract was to be governed by French law. It is true that the ‘owners’ were given an option to use vessels chartered by them. In fact (though this can have no bearing on any question of construction) in the period between March and July of 1967 the ‘owners’ did furnish chartered vessels for the six liftings which were carried out. Those vessels which they chartered flew (between them) five different flags. It has not been contended that the law applicable in the case of any one voyage was to differ from that applicable in the case of any other voyage. The opening words of cl 13, ie ‘This Contract shall be governed by the laws of … ’ clearly indicate that the intention was that one law was to govern the whole operation of the contract.
As a matter of construction, therefore, and in agreement with Megaw J I consider that the decision of the arbitrators was correct and that their award should stand.
If, however, the view is held that the parties did not by cl 13 expressly agree that French law was to govern their contract I would still conclude that that law was the proper law of the contract. The general rule is that the proper law of a contract is that law by which the parties intended that their rights should be determined (see Re United Railways of Havana and Regla Warehouses Ltd). Parties may agree, either in express terms or in terms which can be inferred, to submit themselves to a particular system of law. If they have not done this, then the governing law will be that ‘by reference to which the contract was made or that with which the transaction has its closest and most real connexion’ (see Bonython v Commonwealth of Australia ([1951] AC 201 at 219)). It is contended by the respondents in the present case that cl 13 achieves nothing and should be disregarded and that there remains an implication, to be drawn from the agreement to settle disputes by arbitration in London, that English law was to govern; it is contended that in default of an express indication of some other system of law as the proper law of the contract, the choice by the parties of London as the arbitration forum necessarily carries with it an implied choice of English law. I cannot accept these contentions. Even if, contrary to my view, cl 13 should not be interpreted as an express agreement that French law was to govern, it should at least be regarded as having been designed to state what law was to govern. If it has failed to be clear and explicit it remains to negative any implication that might arise from the agreement to refer disputes to arbitration in London. While agreeing to such arbitration the parties set out to make express provision as to what law should apply; by so doing they showed that the governing law was not to be assumed to be the law of the place where arbitration was to be held. Any suggestion that by agreeing on arbitration in London they were by implication agreeing that English law was to govern their contract is therefore neutralised.
An agreement to refer disputes to arbitration in a particular country may carry with it, and is capable of carrying with it, an implication or inference that the parties have further agreed that the law governing the contract (as well as the law governing the arbitration procedure) is to be the law of that country. But I cannot agree that this is a necessary or irresistible inference or implication; there is no inflexible or conclusive
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rule to the effect that an agreement to refer disputes to arbitration in a particular country carries with it the additional agreement or necessarily indicates a clear intention that the law governing the matters in dispute is to be the law of that country. There might be such additional agreement or there might not. In many cases there might be. In many cases it will be reasonable to infer that the parties so agreed. In other cases the conclusion may well be that the parties placed confidence in the arbitrament of chosen commercial men in a particular country and in their methods and system while remembering that arbitrators may be accustomed to and competent to deal with disputes by the application of some system of law other than that of their own country.
In Hamlyn & Co v Talisker Distillery it was said that the provision for London arbitration was a clear indication of the intention of the parties in that case that their contract was to be governed by English law. But it was pointed out that all indications must be considered in deciding as to the intention of the parties. Lord Herschell LC said ([1894] AC at 207, 208, [1891–94] All ER Rep at 852):
‘Where a contract is entered into between parties residing in different places, where different systems of law prevail, it is a question, as it appears to me, in each case, with reference to what law the parties contracted, and according to what law it was their intention that their rights either under the whole or any part of the contract should be determined. In considering what law is to govern, no doubt the lex loci solutionis is a matter of great importance. The lex loci contractûs is also of importance. In the present case the place of the contract was different from the place of its performance. It is not necessary to enter upon the inquiry, which was a good deal discussed at the bar, to which of these considerations the greatest weight is to be attributed, namely, the place where the contract was made, or the place where it is to be performed. In my view they are both matters which must be taken into consideration, but neither of them is, of itself, conclusive, and still less is it conclusive, as it appears to me, as to the particular law which was intended to govern particular parts of the contract between the parties. In this case, as in all such cases, the whole of the contract must be looked at and the rights under it must be regulated by the intention of the parties as appearing from the contract.’
In delivering the judgment of the Privy Council in Spurrier v La Cloche Lord Lindley indicated various circumstances which in that case pointed to the conclusion that the intention of the parties was that their contract was to be governed by English law. He said ([1902] AC at 450, [1900–03] All ER Rep at 279):
‘The first question which arises is whether this is to be regarded as an English contract or as a Jersey contract. Their Lordships are of opinion that, although this policy was made in Jersey, and any money payable under it would have to be paid to the assured in Jersey, the nature of the transaction, the language in which the policy is expressed, and the terms of the agreement and of the conditions, all shew that the contract between the parties is an English contract, and that wherever sued upon its interpretation and effect ought, as a matter of law, to be governed by English and not by Jersey law. The intention of the parties is too plain to be mistaken; the contract to pay out of the funds of the company is of itself very significant; and the reference to the English Arbitration Acts shows that the arbitration proceedings were to be conducted according to English law and no other.’
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The case of N V Kwik Hoo Tong Handel Maatschappij v James Finlay & Co Ltd related to contracts made between Glasgow merchants with a branch house in Bombay and merchants in Hong Kong whereby the former were to purchase parcels of sugar from the latter. The contracts, three in number, were made through brokers in Java. The sugar was sugar which was to be shipped from Java to Bombay. The buyers were to open a confirmed credit in London. Any dispute was to be settled ‘by arbitration of London brokers in the usual manner’; and it was provided that ‘this submission may be made a rule of the High Court of Justice or any Division thereof’. The question that arose in an interlocutory appeal in respect of one of the contracts was whether the contract was ‘by its terms or by implication to be governed by English law’. In the Court of Appeal, dismissing an appeal from the judge, Bankes LJ said that an arbitration clause was ‘as capable as any other clause of providing by implication for the law which is to be applied’. He said:
‘In my opinion, having provided for a confirmed credit in London and for a reference to arbitration before brokers in London, the contract is by implication to be governed by English law.’
This view was upheld on appeal. Viscount Dunedin said ([1927] AC at 607) that the sole question was whether the words of the arbitration clause ‘lead by implication to suppose that the contract is to be regulated by English law’. Lord Phillimore referred ([1927] AC at 609) to the fact that what should be the law governing a contract was a matter to be regulated by the intention of the parties. I do not read that case as providing support for the contention that an agreement for arbitration in a particular country carries with it a conclusive implication that the law of that country is to be the substantive law governing the contract.
In Vita Food Products Inc v Unus Shipping Co Ltd there was an express clause which provided that the contracts should be governed by English law. Lord Wright pointed out ([1939] 1 All ER at 521, [1939] AC at 289, 290), that it was well settled that by English law the proper law of the contract is the law which the parties intended to apply. He said ([1939] 1 All ER at 521, [1939] AC at 290):
‘… but, where the English rule that intention is the test applies, and where there is an express statement by the parties of their intention to select the law of the contract, it is difficult to see what qualifications are possible, provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy.’
He then examined the reasons why it might have been said that in that case the choice of English law was not valid. He considered whether it could be said that the transaction in issue in that case contained nothing to connect it with English law. In pointing out that connection with English law is not, as a matter of principle, essential he said ([1939] 1 All ER at 521, [1939] AC at 291):
‘The provision in a contract (e.g., of sale) for English arbitration imports English law as the law governing the transaction, and those familiar with international business are aware how frequent such a provision is, even where the parties are not English and the transactions are carried on completely outside England.’
When read in their context and in their place in the reasoning which Lord Wright was developing I do not consider that the words ‘English arbitration imports English
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law’ should be taken as laying down that from an agreement for an English arbitration there arises a conclusive presumption that English law is to apply.
Tzortzis v Monark Line A/B arose out of a contract which was made in Stockholm for the sale of a ship. The sellers were Swedish. The buyers were Greek. Delivery was to be in Sweden. There was to be a deposit at a Stockholm bank—where payment (in sterling transferable to Swedish kroner) was to be made. The contract provided that any dispute in connection with its interpretation and fulfilment should be decided by arbitration in the city of London. Arbitrators were appointed. They stated an interim award in the form of a special case as to which system of law was to be regarded as the proper law of the contract. They held that it was English law. Donaldson J took the same view and his decision was upheld by the Court of Appeal. There being no express clause providing what the proper law was to be, that question fell to be decided as a matter of inference from all the circumstances of the case. The conclusion that English law was the proper law of the contract may well have been a reasonable one (though no occasion now arises to form any opinion as to this) but some of the statements concerning the inferences to be drawn from an arbitration provision are, in my view, expressed much too positively. The circumstance that parties agree that any differences are to be settled by arbitration in a certain country may and very likely will lead to an inference that they intend the law of that country to apply. But it is not a necessary inference or an inevitable one although it will often be the reasonable and sensible one. Before drawing it, all the relevant circumstances are to be considered.
My conclusion, therefore, is that cl 13 should be interpreted as containing an agreement that French law is to govern. If the clause has failed to be positive its existence at least negatives any inference that might otherwise have arisen from the terms of the arbitration clause. On that basis and on a consideration of all the relevant circumstances it should be held that French law is the governing law. The transaction had a much closer and more real connection with French law than with English law. The contract was negotiated in France in the French language through a French firm of brokers and was made in France. There was to be payment in France and in French currency. One party was a company incorporated in Tunisia. The other party was a company incorporated under French law which at the time was registered as a French company.
If I had been of the view that cl 13 ought to be regarded as non-existent then it would have been a matter for decision whether these and the other considerations already noted were not so weighty as to negative and supersede any inference that might be drawn from the terms of the arbitration clause if considered alone.
I would allow the appeal.
VISCOUNT DILHORNE. My Lords, I too think that this appeal should be allowed. In my opinion, the contract entered into shows, when properly construed, that the parties made a choice of the proper law. The printed form used was intended for use for a tanker voyage charterparty involving the use of one vessel. In this case it was used for a tonnage contract for the carriage of oil between two ports in Tunisia in a number of vessels. It contains an arbitration clause, cl 18, which provides that—
‘Any dispute arising during execution of this Charter-Party shall be settled in London, Owners and Charterers each appointing an Arbitrator—Merchant or Broker … ’
and that if they could not agree, they could appoint an umpire. Clause 13 reads as follows: ‘This Contract shall be governed by the laws of the Flag of the Vessel carrying the goods … ’
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The form thus contemplated that the proper law of the contract should not be English in consequence of the inclusion of cl 18 but that, although any arbitration would be in London, the law governing the contract should depend on the nationality of the ship employed. The first paragraph of the form reads as follows:
‘It is this day mutually agreed between … Owners of the Tank Steamer/Motor Vessel called the … Flag, of … tons nett register, having a capacity of … of Oil, or thereabouts, and classed … now … and … Charterers … ’
The names of the parties were inserted in the appropriate places but the spaces for the name and description and flag of the vessel were left blank. After the word ‘now’ the words ‘See clause 28’ were inserted in type. A number of alterations were made to the printed form. In two clauses words were struck out and others inserted. Additions were made to the printed clauses and also some clauses, of which cl 28 was one, were added.
Reading through the contract as executed by the parties it is apparent that considerable care was taken to adapt it to record properly the agreement reached. If the names of the vessels to be used and their flags had been inserted, it could not be disputed that, if they were of the same nationality, cl 13 operated and that the parties had made an express choice of the proper law to govern the contract. Clause 28 dealt with a number of matters. So far as material it reads as follows:
‘This Charter-Party covers the transport of minimum 300,000/maximum 350,000 long tons of light crude oil—exact quantity at Charterers’ option.—Shipments to be effected in tonnage owned, controlled or chartered by the Compagnie d’Armement Maritime S.A. of 16,000/25,000 tons 10% more or less at Owners’ option …
’Dates of shipment to be in accordance with Shippers/Receivers’ requirements.
’Charterers to do their utmost to arrange for shipments to be evenly spread and to effect approximately 100,000 tons each quarter and to give minimum 30 days notice of each shipment.
’Liftings to take place between the 1st March 1967 and the 31st December 1967.’
At the time of the contract the appellants owned four tankers, the smallest of which was 16,050 tons and the two largest of 22,000 tons. The fourth was 17,500 tons. They also controlled through a subsidiary company a tanker of 17,500 tons. All these vessels flew the French flag. The arbitrators found as a fact that:
‘It was contemplated by both parties at the time the contract was entered into that vessels owned by the [appellants] would be used at least primarily to perform the contract.’
One of the difficulties in this case is to know what the arbitrators meant by the words ‘at least primarily’. It is unfortunate that this finding was not more explicit. When a contract is entered into with a shipowner for the carriage of goods by him, one would expect it to be contemplated that the goods would be carried in his ships. If that was not so, then why enter into a contract of carriage with him? I interpret the arbitrators’ finding as meaning that it was contemplated by both parties that the appellants would use vessels owned or controlled by them if possible—and in that sense, ‘primarily’. If one of their ships was not available, then, by virtue of cl 28, they were at liberty to charter.
What was the object of the inclusion of the words ‘See clause 28’ in this part of the form? The non-insertion of the names and flags of the vessels to be used cannot, I think, have been inadvertent bearing in mind the care taken to alter or amend other provisions of the agreement. I see no ground for supposing that the person who prepared the agreement failed to appreciate that if the ships to be used were not specified sufficiently for their flags to be known, cl 13 would have no effect. I think that the insertion of ‘See clause 28’ can only have been made with that object. I can
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see no other reason for the insertion of those words. If cl 28 had merely said that shipment was to be effected in tonnage owned or controlled by the appellants, then as those ships were known and all carried the French flag, I do not think that it could be disputed that the ships and their flags were sufficiently identified for cl 13 to have effect and the effect when read with cl 28 of providing that French law governed the contract.
Is the position different in consequence of the appellants being able to charter ships? It is in this connection that the finding of the arbitrators is of such importance. If under the contract the appellants could use their own ships or chartered ships and were entirely free to choose, then it cannot be said that cl 28 identified the ships and their flags, in which case cl 13 had no effect. But it is found as a fact that both parties contemplated that the appellants would use their own ships ‘at least primarily’ and, if my interpretation of that finding is right, that means they were not to charter if one of their ships was available.
If cl 28 had said that the ships owned or controlled by the appellants were to be used and had then gone on to say that, in the event of their not being available, the appellants could charter, then I think the ships intended to be used would have been sufficiently identified for cl 13 to operate and, operating, to provide that French law governed the contract. I think the finding of fact must mean that it was the intention of the parties that this part of cl 28 should be so interpreted and, taking that into account, I have reached the conclusion that giving that meaning to that part of cl 28, the parties to the contract expressly provided that it should be governed by French law. Before the alleged repudiation of the contract oil was carried in six vessels, none of which was owned or controlled by the appellants, one Norwegian, one Swedish, one French, two Liberian and one Bulgarian. It cannot possibly have been intended that the law of the contract should vary according to the nationality of the vessel used on each voyage, and the subsequent conduct of the parties cannot be used as an aid to the interpretation of the contract (see James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd).
For the reasons I have given in my opinion the parties, the contract reveals, chose that French law should govern it. I am fortified in this view by the fact that Megaw J ([1969] 1 WLR 449), a judge of great experience in these matters, reached the same conclusion though it does not appear that he attached the importance I attach to the insertion of the words ‘See clause 28’.
The appellants argued that even if the contract properly understood did not specify the vessels sufficiently for cl 13 to operate, nevertheless the retention of this clause in the contract sufficed to negative any inference that the law governing the contract was English arising from the stipulation that any arbitration was to be in London. They further argued that if cl 13 had no effect and if the contract has to be read as if it did not include that clause, such an inference from the arbitration clause was not conclusive, and that the system of law with which the contract had the closest connection was French.
I have had the advantage of reading the opinion of my noble and learned friend, Lord Wilberforce, on these contentions. I entirely agree with it. I only desire to say in conclusion that it is, in my view, inconceivable that a French company registered in French Somaliland and a Tunisian company where the law is based on the Code Napoleon, having negotiated in French in Paris, could have intended that a contract for the carriage of oil between two Tunisian ports with the freight payable in francs should be governed by English law.
LORD WILBERFORCE. My Lords, two alternatives are put forward for the proper law of this contract, French law and English. I have no doubt that the decision should be in favour of the former.
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Briefly to recapitulate the facts: the contract is between a shipowning company incorporated under French law with a registered office, at the relevant time, in French Somaliland, whose ships carry the French flag and a company incorporated in Tunis, until 1956 a French protectorate, whose civil law is based on the Code Napoleon. It was for the carriage of a specified tonnage of oil between two Tunisian ports by ships to be provided by the appellant. Negotiations for the contract were conducted in Paris, in the French language, through Paris-Maritime, a French firm of brokers. Payment under it was to be made in France, in French currency. The contract was made on an English standard form, but one which, it was found, is frequently used for tanker fixtures in chartering centres outside London. It contained an arbitration clause providing for arbitration in London.
Disputes arose and the matter went to arbitration; each side appointed a very experienced London arbitrator. These arbitrators, without resorting to the appointment of an umpire, decide that the proper law was French law. The matter went to the High Court on a special case and was heard by Megaw J ([1969] 1 WLR 449) a judge of great experience in these matters. He upheld the arbitrators’ decision. One would think that this would be the end of the matter—all the more when it is appreciated what the nature of the dispute was. This was whether the respondents are entitled to damages for breach of contract according to the English law of anticipatory breach, or whether their right to damages is conditioned by certain requirements of French law as to matters to be done before damages in such a case can be claimed, and also whether any damages are to be limited as provided in s 1150 of the French Civil Code. To suppose that contracting parties, in the position of these companies, intended that their rights in this matter should be governed by English law seems a surprising proposition; yet this was so decided by the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338). The appeal committee of this House thought that this House ought to review the matter.
How, then, was a decision reached in favour of English law? Some reliance was placed on the use in the contract of English expressions, but this can be of little weight since in general they relate to maritime situations well known under all systems and, indeed, referred to in the Hague Rules. The main argument was based on cl 18 of the contract which, as stated, provides for arbitration in London. The existence of such a clause, failing an express choice of any other law, is said to give rise to a conclusive presumption that the parties intended English law to govern, however strongly other factors may point away from it. In so holding, the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338) was following its earlier decision in Tzortzis v Monark Line A/B where, though the contract was closely connected with Swedish law, the presumption in favour of English law arising from the arbitration clause was described by Salmon LJ as ‘irresistible’. There is no doubt that the strength of this so-called presumption has increased both in recent decisions at first instance and in certain, but not all, textbooks. Thus Professor Cheshire saysa that—
‘for better or for worse English law is committed to the view that qui elegit judicem elegit jus. An express choice of a tribunal is an implied choice of the proper law.’
The editors of Dicey and Morris Conflict of Lawsb are more circumspect: ‘usually permits the inference’. So, too, is Professor Wolff c.
I shall examine this doctrine in the light of authority, but before I do so there is a special argument to be considered, on the terms of the contract. This is based on cl 13 of the contract (cited by my noble and learned friend Lord Reid) and takes two
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alternative forms. (1) that the clause should be interpreted so as to amount to an express choice of law, sc French law; (2) that even if it is inept to do so, it has sufficient force to negative any implied choice of law through the arbitration clause. I do not deal at any length with either of these arguments. The first must command respect from its acceptance by Megaw J ([1969] 3 All ER 589, [1969] 1 WLR 1338). But I find the required process of adaptation, with the aid of a qualified finding of fact that it was contemplated that the appellant’s vessels would be primarily used, to pass beyond legitimate interpretation to a process of rewriting. With the exception of the reliance placed on subsequent actings, which I think inadmissible, I adopt the reasoning of the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338), particularly of Salmon LJ, on this point. The second argument seems to me much more dubious. It rests on the fact that this clause, on this hypothesis meaningless and incapable of adaptation, was not struck out of the contract. This shows, it is said, an intention to displace the law of the place of arbitration by some other law of the parties’ choice and this neutralising effect remains even though the choice is abortive. This is certainly an ingenious and subtle argument, too subtle and ingenious for me. To attribute a legal effect to a clause which is, on this hypothesis, meaningless, seems to me a remarkable acrobatic. To deny its normal effect to a clause (cl 18) because of the presence of some printed words of no effect—a corpse which the undertakers have not removed—is a stranger adventure than I can embark on. I cannot find in cl 13, either way, the solution to the case; this must be found in a proper evaluation of the arbitration clause.
My Lords, I am still of opinion that it is not necessary to embark on citation of authorities in order to establish how the proper law of a contract is to be arrived at. The law has been more than one in recent times stated in this House and if one desires a summary of the main principles the rules in Dicey and Morris’s digest are convenient. For myself I prefer the formulation in the 7th Edn (1958) which I find clearer and simpler. In the absence of an express choice of law, rule 148, sub-rule 2, applies as follows:
‘Where the intention of the parties to a contract with regard to the law governing the contract is not expressed in words, their intention is to be inferred from the terms and nature of the contract, and from the general circumstances of the case, and such inferred intention determines the proper law of the contract.’
Whether the result is a matter of ‘inferred intention’ or not may be open to jurisprudential discussion; but the advantage of this formulation is that (correctly in my opinion) it requires consideration together of the terms and nature of the contract and the general circumstances of the case. In certain recent judgments, particularly in relation to arbitration clauses, there is a tendency to split this into two stages: first, see if there is an arbitration clause; if so, that is conclusive, and the general circumstances (place of performance, money of payment, etc) are irrelevant. I think that this is wrong; all should be considered together as elements relevant to intention, inferred or presumed. I see no justification for giving a prerogative effect to one of these elements, to the extent of refusing even to consider others, whether within or outside the contract, which are just as relevant (though not necessarily as weighty) to the parties’ intention.
How strong, then, is the inference to be drawn from a (London) arbitration clause? That the selection of a certain place for arbitration and, by inference, of nationals or residents of that place, as arbitrators is an indication that the parties intended the law of that place to govern is a sound general rule. But it should not be treated as giving rise to a conclusive or irresistible inference, as recent pronouncements appear to suggest. One of the reasons commonly given for attributing overwhelming force to the clause is that arbitrators in London are only to be supposed to be conversant with
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English law (N V Kwik Hoo Tong v James Finlay & Co Ltd, per Viscount Dunedin) but I venture to think that in commercial matters, at the present time, this may give insufficient recognition to the international character of the city of London as a commercial centre—the reason, rather than any preference for English rules, for which arbitration in London is selected. In this case the arbitrators had no difficulty in finding for French law and I do not suppose they would find ascertainment of the French law as to damages any more difficult than the English law of anticipatory breach. So, unless otherwise constrained, I would regard the clause as a weighty indication, but one which may yield to others.
I do not find that the leading cases, when properly understood, suggest a different approach. For practical purposes these start in 1894, and one must approach them with caution—so great have been the changes in English private international law. Hamlyn & Co v Talisker Distillery, if carefully read, is a decision on the validity of the arbitration clause and on the law governing that clause. Their Lordships were most careful in their language to limit their decision as to the applicability of English law to the arbitration clause, whose validity was in question, and not to exclude the application of Scottish law, as the lex loci solutionis, to the rest of the contract. Thus Lord Herschell LC, whose language was invariably precise to the utmost, said ([1894] AC at 208, [1891–97] All ER Rep at 852): ‘They have indicated as clearly as possible their intention that that particular stipulation which is a part of the contract … shall be governed … ’ by English law; similarly throughout Lord Watson draws a clear distinction between the ‘domicile’ of a contract, and the curial rules of the forum—archaic language, but the argument is clear; Lord Ashbourne and Lord Shand similarly deal only with the clause. Thus the limitation of the opinions is clear. The case ought not to be cited as more than indirect authority on the proper law of a contract as a whole. It certainly lays down no conclusive rule as to the effect of an arbitration clause. Spurrier v La Cloche is a decision more in point. It supports Dicey and Morris’s rule 148(2). There was an arbitration clause which referred to the English Arbitration Act 1889, but Lord Lindley in considering whether the policy of assurance was an English contract or a Jersey contract, in the clearest manner reviews ([1902] AC at 450, [1900–03] All ER Rep at 279) all the relevant factors, including but not limited to the arbitration clause.
I can then pass to Kwik’s case which gives the respondent’s argument, for the conclusive effect of the arbitration clause, its strongest support. If it really established this important principle, it did so with surprising imprecision of language. The opinions can in fact hardly be understood, individually or collectively, without regard to the record and what was said in the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338). The appeal was interlocutory, and it is hardly unfair to the appellant company to say that its procedural demerits were overwhelming; counsel for the respondents were not called on, and two short opinions were given. The question was whether the contract which contained a London arbitration clause was by implication to be governed by English law so that a writ could be served out of the jurisdiction. Both Viscount Dunedin and Lord Phillimore gave reasons for holding that it was, but it is far from clear on what basis. Viscount Dunedin ([1927] AC at 608) referred first to the ‘law which was to regulate the decision’ (ie in any arbitration) and then says that this ‘does not mean that everything that would have to be decided would necessarily be decided by English law’. English law was the ‘underlying’ law but incidents of the contract might fall to be determined by a foreign law. This language is ambiguous. The ‘underlying’ law may mean the procedural law of the arbitration to which the parties had committed themselves, or it may mean the
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basic substantive law. A good deal of light on what he may have meant is provided by the judgment of Bankes LJ in the Court of Appeal, which contains this passage:
‘It is not often that the question what system of law is to govern the rights of the parties to a contract has to be answered by reference to an arbitration clause, but it is clear that an arbitration clause is as capable as any other clause of providing by implication for the law which is to be applied.’
He continues by saying that the arbitration was to be by brokers and that brokers in London decide, according to the custom of the English market, if the contract is to be performed in England but, if it is to be performed abroad, they ascertain the customs of the foreign country. Taking into account the London arbitration clause and the fact that a confirmed credit was provided for in London, he found that the contract was by implication to be governed by English law. A reference to the respondents’ printed case shows that they were contending that the contract was governed by English law because of (a) the arbitration clause, (b) payment in English currency by credits to be opened in London, and (c) the absence of any circumstances pointing to any other system of law. It seems reasonable to suppose that Bankes LJ, a judge of great experience in commercial matters, was accepting this line of argument and deciding that English law was the proper law on the basis of all the indications relied on by the respondents which included, but were not limited to, the arbitration clause. It seems also reasonable to interpret Viscount Dunedin’s words ([1927] AC at 608) as reflecting the same process of thought. If he had intended to go further, and attribute conclusive effect to the arbitration clause alone, surely he would have made his language more explicit.
Lord Phillimore’s opinion at first sight appears to be more strongly expressed. In his concluding sentence he said ([1927] AC at 609): ‘… the forum provided for the settlement of disputes is English, and therefore the contract is intended to be governed by English law’. But earlier he refers to ascertaining and applying foreign law, and quotes as classic the words of Sir W Scott in Dalrymple v Dalrymple. But Sir W Scott’s judgment, in a matrimonial suit, affords the clearest possible example of English law, as the lex fori, applying Scots law as the substantive law. Lord Phillimore continues by referring to the control of the High Court over the arbitration, by virtue of the Arbitration Act 1889, and says that Hamlyn & Co v Talisker Distillery is very much in point. It seems very clear from this that he was basing his decision on the arbitration clause itself, which, as in Hamlyn’s case, was governed by English law and the operation of which would be controlled by the English court, and that he was not committing himself to any view of the proper law of the contract as a whole. Earlier he had quoted Lloyd v Guilbert which contains in a judgment of Willes J an exhaustive comparison of all relevant factors.
I have discussed this case at, I fear, some length because it has, in my opinion, been misunderstood. Apart from the judgment of Bankes LJ it does not contain any direct or precise statement as to the proper law, and it would be a poor reflection on our system of precedent to regard it as authority for the attribution of a conclusive effect, as regards the proper law, to an arbitration clause. Such importance as it retains as an authority lies rather in the foundation it has laid for attribution of a preponderant effect, as regards determination of the proper law, to an arbitration clause. But the strength of that preponderance has now to be evaluated.
I can deal more briefly with the modern cases. Norske Atlas Insurance Co Ltd v London General Insurance Co Ltd is a case where MacKinnon J took into account all relevant indications and in that context, referred to the arbitration clause as ‘the
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clearest indication in the contract.' Maritime Insurance Co Ltd v Union von Assecuranz 1865 was concerned with a reinsurance treaty between an English company and a German company. There was a London arbitration clause. If English law was the proper law, the treaty was unenforceable. A dispute went to arbitration and the arbitrators (sensibly one would think) found that the proper law was German. On a case being stated Goddard J held the arbitrators were wrong, that the proper law was English and, consequently, that the treaty was unenforceable. He referred to the arbitration clause as ‘by far the most important and I think conclusive provision’. This is not a decision which gives much satisfaction either in its result or its reasoning. If the learned judge regarded the arbitration clause alone, to the exclusion of other factors, he was in my opinion departing from authority. If, on the other hand, as it seems reasonable to suppose, he considered the clause with the other factors, as a matter of commercial intention, his law would be correct but the conclusion of the arbitrators would seem to be more sensible. The case is one of doubtful authority.
N V H M Vulcaan v J Ludwig Mowinckels Rederi A/S is a decision of this house on the question whether English Statutes of Limitation should be applied in an arbitration held in England, so that the dispute related rather to the application of the lex fori than to a question of proper law. However, the speech of Lord Maugham LC contains this passage ((1938) 60 Lloyd LR at 223):
‘In this case, the Appellants being a Dutch company and the Respondents Norwegian shipowners, there was a good reason if not a necessity for selecting the law which should apply to any future disputes; and the submissions of such matters to the arbitration of two persons in London and of an umpire who in case of difference was to be nominated by the directors of the Baltic Mercantile and Shipping Exchange showed clearly that English law and procedure were to be applied.’
There is nothing here which requires qualification or explanation. I fully accept that, especially where the parties are of different nationality and there is no other relevant factor, a clause providing for arbitration in a third country is a strong indication which, because there is no other, may be called conclusive, in favour of the proper law of that country.
Lastly, I must refer to the well-known and important dictum of Lord Wright in the Privy Council case of Vita Food Products Inc v Unus Shipping Co Ltd. This is (amongst other things) a leading authority on the question to what extent parties to a contract are free to select for themselves the law which is to govern it. Lord Wright ([1939] 1 All ER at 521, 522, [1939] AC at 289–292) discussed this in an illuminating manner, and the passage contains these words ([1939] 1 All ER at 521, [1939] AC at 290): ‘The provision in a contract (eg, of sale) for English arbitration imports English law as the law governing the transaction.' The respondents in the present case are not the first to pick out these words as stating a definite rule. It would be surprising if they did, in view of Lord Wright’s observations on the same page that ‘in questions relating to the conflict of laws, rules cannot generally be stated in absolute terms but rather as prima facie presumptions’ (see also Wright: Legal Essays and Addresses, p 164). If this was his view in relation to a case where parties have expressly chosen the governing law, it would seem unlikely that he regarded an implied choice through an arbitration clause as having stronger effect. But it is clear enough what he is arguing. He is concerned to show that connection of the contract with English law is not essential, and the proposition is designed to illustrate this. The illustration is precisely
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as effective whether an arbitration clause is regarded as conclusive or strongly presumptive or weakly presumptive; there was no need for Lord Wright to commit himself to any one of these.
So I come, in conclusion, to the Tzortzis case and the present appeal; cases virtually identical in principle. In each case there were substantial foreign elements. In Tzortzis Lord Denning MR said ([1968] 1 All ER at 951, [1968] 1 WLR at 410):
‘If you read the contract apart from the arbitration clause, it is clear that it has its closest and most real connexion with Sweden. Sweden was the place of the contract. It was the place where the contract was to be performed both as to payment and as to delivery, but then comes the arbitration clause.’
Salmon LJ used even stronger language ([1968] 1 All ER at 953, [1968] 1 WLR at 412). In the present case, too, Lord Denning MR ([1969] 3 All ER at 591, [1969] 1 WLR at 1344) accepted that the system of law with which the contract has the closest and most real connection is French law. Similarly Salmon LJ, though he states this as a matter of concession. But in both cases the court held that this was overridden, not outweighed, by the arbitration clause. In Tzortzis ([1968] 1 All ER at 952, [1968] 1 WLR at 412) Lord Denning MR seems to have regarded the arbitration clause as a ‘very strong indication’, though he later quoted Professor Cheshire d who puts the matter more strongly still. Salmon LJ said ([1968] 1 All ER at 953, [1968] 1 WLR at 413) firmly that the choice of an English arbitration ‘raises an irresistible inference which overrides all the other factors’ and this is the approach followed in the present case.
My Lords, for the reasons given I am of opinion that this language is too strong, too absolute. Neither authority, nor commercial reality support the necessity for so rigid a rule. An arbitration clause must be treated as an indication, to be considered together with the rest of the contract and relevant surrounding facts. Always it will be a strong indication; often, especially where there are parties of different nationality or a variety of transactions which may arise under the contract, it will be the only clear indication. But in some cases it must give way where other indications are clear. It is not necessary to express an opinion as to the correctness of the result in the Tzortzis case; it is the process with which it is necessary to disagree. The right result was to be arrived at by weighing the important indications in favour of Swedish law against the indication from the arbitration clause and the different nationality of the parties. It is necessary to disagree with the result in the present case where every indication points so strongly to French law that this law must govern unless the inference from London arbitration is irresistible or conclusive.
One further observation. It is surely regrettable that, after a choice of English arbitrators, these foreign parties should have been subjected to litigation in three courts on top of the arbitration and that on a preliminary point. I venture to think that a question of the proper law of a commercial contract ought to be regarded as primarily a matter to be found by arbitrators; for, after all, the question is one of estimating competing factors in the light of commercial intention. As was said long ago ‘the only certain guide is to be found in applying sound ideas of business, convenience, and sense to the language of the contract’ (Jacobs v Credit Lyonnais ((1884) 12 QBD 589 at 601)). The expertise of city of London arbitrators (which motivates the use of London arbitration clauses) suggests that these considerations are best left to them and the proposition that this being a “matter of law’ is something better left to the courts is one the
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correctness of which is open on the record. If, for uniformity or otherwise, supervision by the courts is sometimes required, I cannot but think that, otherwise than in exceptional cases by leave, decision by the commercial judge should end the matter.
I would allow the appeal.
LORD DIPLOCK. My Lords, this appeal is about a ‘tonnage contract’ for the carriage by sea of 300,000/350,000 tons of light crude oil between two ports in Tunisia in shipments of 16,000/25,000 tons between March and December 1967. Performance of the contract might involve 12 to 22 separate voyages. The parties were a French company as carriers and a Tunisian company as shippers. The French company owned four tankers and through a subsidiary company controlled a fifth in the 16,000/25,000 ton range. All these vessels flew the French flag. The contract was negotiated in Paris at a meeting of the presidents of the two companies arranged by French shipbrokers employed by the Tunisian company. The negotiations were conducted in the French language. The written contract was prepared by the shipbrokers. They used for this purpose a printed form of tanker voyage charterparty in the English language which is widely used for tanker fixtures on the Baltic Exchange in London and in other chartering centres abroad. They adapted it to a ‘tonnage contract’ by adding typed clauses on an attached slip. The only attached clause which matters for the purposes of this appeal reads as follows:
‘28.—This Charter-Party covers the transport of minimum 300,000/maximum 35,000 long tons of light crude oil—exact quantity at Charters’ option.—Shipments to be effected in tonnage owned, controlled or chartered by the Compagnie d’Armement Maritime S.A. of 16,000/25,000 tons 10% more or less at Owners’ option.’
It was found as a fact by the arbitrators that it was contemplated at the time the contract was entered into that vessels owned by the French company would be used at least primarily to perform the contract.
The printed form of tanker voyage charterparty to which the slip was attached is intended for use for a single voyage charter in a named vessel flying a named flag and contains no provision for a substitute vessel. In it the French company were described as ‘Owners’ and the Tunisian company as ‘Charterers’ but the space for the name of the vessel and the nationality of the flag was not filled in. Instead there was a reference to cl 28. The other blanks in the printed form were filled in with appropriate typed words and some minor deletions and additions were made to some of the printed words themselves. Freight was payable in French francs in Paris. Clause 13 (the ‘proper law clause’) and cl 18 (the ‘London arbitration clause’) were left as printed. They read as follows:
‘13.—This Contract shall be governed by the laws of the Flag of the Vessel carrying the goods, except in cases of average or general average, when same to be settled according to the York-Antwerp Rules, 1950.
‘18.—Any dispute arising during execution of this Charter-Party shall be settled in London, Owners and Charterers each appointing an Arbitrator—Merchant or Broker—and the two thus chosen, if they cannot agree, shall nominate an Umpire—Merchant or Broker—whose decision shall be final. Should one of the parties neglect or refuse to appoint an Arbitrator within twenty-one days after receipt of request from the other party, the single Arbitrator appointed shall have the right to decide alone, and his decision shall be binding on both parties. For the purpose of enforcing awards this agreement shall be made a Rule of Court.’
The French company did not in fact use for the carriage on the first six voyages
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under the contract their own vessels or that of their subsidiary company, as had been contemplated at the time the contract was made. They chartered other vessels which flew a number of different flags. Only one was French. After the sixth voyage the Arab-Israeli war broke out and the French company ceased to perform the contract. This gave rise to disputes between the parties which were referred to two arbitrators in London under cl 18.
The rights of the parties in the event of repudiation of a contract are not the same under English law as they are under French law and other similar systems of law based on the Code Napoleon, such as the system which is in force in Tunisia. So a preliminary question was raised in the arbitration whether the substantive law applicable to the contract was English law or French law. Neither party sought at that stage to distinguish between French law and Tunisian law. In my view, this was right. The contract was a shipping contract and no one has been able in these proceedings to point to any relevant difference between the law of those two countries about carriage of goods by sea. For the purposes of a commercial contract of this kind I would be prepared to assume that the parties regarded France and Tunisia as subject to a common system of law.
The very experienced commercial arbitrators appointed by each party were in agreement that the substantive law to be applied was French law. They did not even find it necessary to refer the question to an umpire. They were asked to state their opinion as an award in the form of a special case. Their award was upheld by Megaw J ([1969] 1 WLR 449) sitting as judge in charge of the Commercial List. His judgment, however, was reversed by the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338). They held unanimously that the proper law of the contract was English law. Leave to appeal from their decision was refused by the Court of Appeal but was subsequently granted by your Lordships’ House.
The Court of Appeal treated the case as governed by the principle, which they had recently laid down in Tzortzis v Monark Line A/B, that when a contract contains a London arbitration clause the resulting implication that the parties intended that the substantive law applicable should be English law can only be rebutted by an express provision to the contrary. They considered that cl 13 of the printed form was inapplicable to a ‘tonnage contract’ that permitted performance by chartered vessels which might fly flags of a number of different countries. They accordingly treated cl 13 as non-existent and the contract was left with no express provision to contradict the implication resulting from the inclusion of the London arbitration clause.
In reaching this decision the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338) were clearly influenced—Lord Denning MR and Karminski LJ avowedly so—by the circumstance that, contrary to what was found to have been contemplated when it was entered into, the contract, up to the date of its repudiation, had in fact been performed with chartered vessels only which flew a variety of different flags. In using the subsequent conduct of the parties as an aid to the construction of the contract the Court of Appeal were following their previous decision in Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd. This was then under appeal to your Lordships’ House, but on the appeal ([1970] 1 All ER 796, [1970] 2 WLR 728) your Lordships held that a contract cannot be constructed by reference to the subsequent conduct of the parties. Its only relevance is to contention that the parties have agreed on a variation to the previous contract or have entered into a new contract collateral to it. No such contention has been made by either party in the instant case.
My Lords, I think that the Court of Appeal ([1969] 3 All ER 589, [1969] 1 WLR 1338) erred both in holding that cl 13
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was to be ignored, and in the conclusive effect on the proper law of the contract which they ascribed to the presence of cl 18, the London arbitration clause.
When parties enter into an agreement which they intend to give rise to legally enforceable rights and liabilities, they must ex necessitate contemplate that there will be some system of law by reference to which their mutual rights and liabilities will be determined, ie the substantive or ‘proper’ law of their agreement; and that the procedure by which disputes about their rights and liabilities will be resolved will also be regulated by some system of law, ie the curial law of their agreement. By ‘proper law’ in this context is meant the system of law which governs the interpretation and the validity of the contract and the mode of performance and the consequences of breaches of the contract. If English law is the ‘proper law’, the contract will be interpreted, if the language so permits, as requiring the mode of performance of any part of the contract to conform with the law of the country in which that part of the performance is to take place. This does not, however, mean that the English court is applying foreign law. It is applying an English rule of construction to the interpretation of the contract.
English law accords to the parties to a contract a wide liberty to choose both the proper law and the curial law which is to be applicable to it. If the parties exercise that choice as respects either the proper law or the curial law or both, the English courts will give effect to their choice unless it would be contrary to public policy to do so. But it is a liberty to choose—not a compulsion, and if the parties do not exercise it as respects the proper law applicable to their contract the court itself will determine what is the proper law.
The first stage, therefore, when any question arises between parties to a contract as to the proper law applicable to it, is to determine whether the parties intended by their contract to exercise any choice at all and, if they did, to determine what was the system of law which they selected. In determining this the English court applies the ordinary rules of English law relating to the construction of contracts. If, applying these rules, the court reaches the conclusion that the parties did not intend to exercise any choice of proper law, or is unable to identify what their choice was, it becomes necessary for the court to proceed to the second stage, of determining itself what is the proper law applicable. In doing so, the court applies the English rule of the conflict of laws relating to the proper law of the contract. This is that the proper law is that system of law with which the transaction has its closest and most real connection (Bonython v Commonwealth of Australia ([1951] AC 201 at 210)).
My Lords, this is applied as a positive rule of English law. It is applied not because it is the choice of the parties themselves but because they never intended to exercise their liberty to make a choice or, if they did, they have failed to make their choice clear.
Similarly with choice of curial law. This generally takes the form of a provision in the contract for submission to arbitration of disputes arising out of it; although parties may, and sometimes do, agree by their contract to submit disputes to the determination of the courts of law of a particular country to the exclusion of all other courts. An express choice of forum by the parties to a contract necessarily implies an intention that their disputes shall be settled in accordance with the procedural law of the selected forum and operates as if it were also an express choice of the curial law of the contract. If the parties have made no choice of forum, an English court can only apply English procedural law in any disputes under the contract in which it is invited to adjudicate.
My Lords, it is possible for parties to a contract to choose one system of law as the proper law of their contract and a different system of law as the curial law. Although they may want their mutual rights and obligations under the contract
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to be ascertained by reference to the system of law of a country with which the transaction has some close and real connection, they may nonetheless consider that the arbitral procedure adopted in some other country, or the high reputation and commercial expertise of arbitrators available there, make the curial law of that country preferable to the curial law of the country whose system of law they have chosen as the proper law.
It is not now open to question that if parties to a commercial contract have agreed expressly on the system of law of one country as the proper law of their contract and have selected a different curial law by providing expressly that disputes under the contract shall be submitted to arbitration in another country, the arbitrators must apply as the proper law of the contract that system of law on which the parties have expressly agreed. But the cases which have given rise to difficulty are those where the parties have made a choice of curial law by a clause of their contract expressly agreeing to arbitration in a particular country but have made no express provision as to the proper law applicable to the contract. The difficulty has, I think, arisen for two underlying reasons. The first is that after the decision of your Lordships’ House in NV Kwik Hoo Tong Handel Maatschappij v James Finlay & Co Ltd until the very recent decision in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd the distinction between the proper law and the curial law of a contract was overlooked. The second is failure to distinguish between the first and the second stage in the ascertainment of the proper law of a contract.
Where the only express choice of law in a contract is that of curial law, resulting from the inclusion in the contract of a provision for arbitration in a particular country, an intention of the parties to exercise their right also to choose the proper law of the contract and, if so, the proper law which they have chosen, can only be deduced by implication from what they have expressly agreed and the circumstances in and in relation to which their agreement was made. The fact that they have expressly chosen to submit their disputes under the contract to a particular arbitral forum of itself gives rise to a strong inference that they intended that their mutual rights and obligations under the contract should be determined by reference to the domestic law of the country in which the arbitration takes place, since this is the law with which arbitrators sitting there may be supposed to be most familiar. But this is an inference only. It may be destroyed by inferences to the contrary to be drawn from other express provisions of the contract or relevant surrounding circumstances, and those inferences may be so compelling as to lead to the identification of another system of law which the parties must have intended to be the proper law of the contract.
That the presence of an arbitration clause though powerfully persuasive was not conclusive of an intention to choose the curial law as the proper law of the contract was clearly recognised by your Lordships’ House in Hamlyn & Co v Talisker Distillery and was never doubted until after the Kwik Hoo Tong case in 1927. That case will, I think, on analysis be found to have been dealing only with curial law, but as a result of subsequent dicta of Lord Maugham in N V H M Vulcaan v J Ludwig Mowinckels Rederi A/S ((1938) 60 Lloyd LR 217) and of Lord Wright in Vita Food Products Inc v Unus Shipping Co Ltd ([1939] 1 All ER 513 at 521, [1939] AC 277 at 290) it has come to be treated, as it was by the Court of Appeal in Tzortzis v Monark Line A/B and in the instant case, as laying down a positive rule of English law that ‘an express choice of a tribunal is an implied choice of the proper law’.
My Lords, the application of a positive rule of English law as determinative of
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the proper law of a contract does not arise until the second stage, ie when the court has been driven to the conclusion that the parties themselves did not intend to exercise any choice of proper law or is unable to identify what their choice was. Yet the significance of an arbitration clause has always been dealt with in the first stage where its only role is as an indication of a choice of proper law which the parties themselves did intend to make. The language in which it has been referred to has always been that of actual intention. No doubt its significance as an indication of the actual intention of the parties has been greatly enhanced as the decisions and dicta to which I have referred have become familiar to persons engaged in international trade and their legal advisers, since they may well have drafted their contracts on the understanding that a London arbitration clause, which is a common feature of many standard forms of contract used in international trade, is of itself a sufficient manifestation of their intention to choose English law as the proper law of the contract as well as the curial law.
Nevertheless, strong though the implication may be, it can be negatived by the other terms of the contract when the contract, as it must be, is construed as a whole in the light of the surrounding circumstances. It is clearly negatived by an express term prescribing some other law than the curial law as the proper law, and it may also be negatived by an overwhelming implication from the other terms all pointing to one single other system of law as the proper law of the contract as distinct from the curial law. The decision in the Kwik Hoo Tong case is not, in my view, in conflict with this. It was a short interlocutory appeal which was heard in the Court of Appeal by Bankes and Sargant LJJ and in your Lordships’ House by Viscount Dunedin, Lord Phillimore and Lord Carson. The contract was for the sale of sugar cif Java for shipment to Bombay, payment to be made against presentation of documents in London under a confirmed credit. The sellers were Hong Kong merchants, the buyers a Scots firm with a place of business in Bombay, and the contract was made by brokers in Java. There were thus competing systems of law with which the transaction had connections independently of any provision for arbitration. The contract contained a clause:
‘Any dispute arising under this contract is to be settled by arbitration of London brokers in the usual manner, and this submission may be made a Rule of the High Court of Justice or any Division thereof.’
The dispute between the parties was whether the bills of lading presented against the credit were correctly dated to comply with the contractual requirement of a September shipment. The sellers relied on a custom of the port of shipment in Java. The only question on the interlocutory appeal was whether the contract was ‘a contract … by its terms or by implication to be governed by English law’ within the meaning of RSC Ord 11, r 1, so as to authorise service of a writ outside the jurisdiction.
The short judgments of the Court of Appeal are to be found only in the record of the proceedings in your Lordships’ House. Bankes LJ did not regard the arbitration clause as being of itself decisive of the proper law of the contract. He said:
‘Brokers in London decide according to the customs of the English market if the contract is to be performed in England, but if it is to be performed abroad they ascertain the customs of the foreign country.’
He relied as much on the requirement that the confirmed credit was to be opened in London and delivery of the documents was to be made there as on the London arbitration clause to give rise to the implication that the contract was to be governed by English law. He was clearly considering the proper law of the contract. Sargant LJ treated the effect of the arbitration clause as being the same as if it had said that
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disputes were ‘to be settled by the High Court of Justice in England’. He appears to have regarded the words ‘governed by English law’ appearing in a rule dealing with the assumption of jurisdiction by an English court as satisfied if the curial law of the contract were English law. And so, I think, did Viscount Dunedin and Lord Phillimore in this House. I find it difficult to explain otherwise Viscount Dunedin’s statement ([1927] AC at 608) that the parties’ choice of forum—
‘… does not mean that everything that would have to be decided would necessarily be decided by English law. It means that the underlying law was the law of England, but if by appropriate, that is to say relevant, averment, it was alleged that any incident of the contract fell to be determined by a foreign law, then the English tribunal would proceed to inquire into that law as a question of fact and give judgment accordingly.’
In this context by ‘underlying law’ he may well have meant no more than what I have called curial law. Lord Phillimore ([1927] AC at 609) adopted Sargant LJ’s analogy—
‘… if this passage [sc the arbitration clause] had run “to be settled by the High Court of Justice in England,” no one could have doubted that the parties had intended that the contract should be governed by that law which English courts administer, and administer none the less because in certain matters they have to ascertain and apply foreign law. The words of Sir W. Scott in Dalrymple v. Dalrymple ((1811) 2 Hag Con 54 at 59) on this subject are classic.’
The words I have italicised and the reference to Sir W Scott’s judgment in Dalrymple v Dalrymple ((1811) 2 Hag Con 54 at 59) strongly suggest that where at the end of his speech he said ([1927] AC at 609, 610)—
‘The result is that the forum provided for the settlement of disputes is English, and that therefore the contract is intended to be governed by English law … ’
he meant no more than that the requirement in RSC Ord 11 that a contract should be ‘governed by English law’ was satisfied if the curial law of the contract were English, irrespective of what the proper law might be.
The references to the effect of arbitration clauses as implying an intention by the parties to choose the law of the forum as the proper law of the contract which are to be found in Lord Maugham’s speech in the Vulcaan case and Lord Wright’s opinion in the Vita Food Products case are dicta only. It was common ground in the former case that the proper law of the contract was English law and in the latter case the contract under consideration had no arbitration clause but did contain an express provision that the contract should be governed by English law.
My Lords, statements, particularly if they are obiter, as to an implication about the intention of parties which is to be drawn from one of the many terms in a contract must always be read subject to the qualification that the implication may be rebutted by the other terms of the contract, for to hold otherwise would be contrary to the general English law of construction of contracts. So would it be to hold that the implication could never be rebutted except by an express term to the contrary in the contract, for to do so would be to abandon the attempt to ascertain the real intention of the parties and instead to apply a positive rule of English law to impose on them a proper law applicable to them however clear it was that they themselves intended to choose as the proper law some other system of law than that of the place of arbitration. That, in my opinion, was the error into which the Court of Appeal fell in founding
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themselves on these dicta, in their judgments in Tzortzis v Monark Line A/B, and is one of the errors into which they have fallen in the instant case.
I turn, then, to the first stage in the resolution of the instant appeal, ie to determine, by applying ordinary rules of construction of contracts, whether the parties intended to exercise any choice as to the proper law as distinct from the curial law of their contract and, if so, what their choice was. Although not in all respects apt for the purposes of a ‘tonnage contract’ they selected as appropriate to embody the terms on which they had agreed a printed form which included cll 13 and 18 providing for one system of law to be the proper law of the contract and another system of law to be curial law, and neither of these clauses did they strike out. Two things it seems to me are clear. First, that cl 18 was not intended to operate as a choice of the proper law of the contract but only as a choice of the curial law. Secondly, that cl 13, when the form was used for the purpose for which it was primarily designed, viz a single voyage charter, was intended to operate as a choice for the proper law of the contract of a system of law with which the transaction would have a close and real connection, viz the law of the flag of the carrying vessel. From this I conclude that the parties did not intend to choose as the proper law of the contract English law with which their transaction had no real connection whatever, apart from the arbitration clause itself; and also that the system of law which they did intend to choose as the proper law was one which would have a close and real connection with their transaction.
Whether they succeeded in expressing that choice in words which, when read in the light of the surrounding circumstances, are sufficiently clear to enable the court to identify it must be decided by applying the ordinary rules of construction of commercial contracts. If they have failed, then the court must proceed to the second stage of applying the positive rule of English law that, in the absence of choice by the parties themselves, the proper law of a contract is that system of law with which the transaction has its closest and most real connection. In determining this, the arbitration clause should be taken into consideration merely as indicating some actual connection which the transaction has with English law, and not as an exercise of a choice of English law as the proper law of the contract; for to treat it as that would be contrary to the intention of the parties.
My Lords, in commerce businessmen frequently find it convenient to use printed forms of contract with which they are familiar to record their agreements about transactions for which the printed clauses are not literally apt, as they were drafted for use as contracts about transactions which have somewhat different characteristics. If the law is to give effect to their intentions and not, in the words of Lord Tomlin, to ‘incur the reproach of being the destroyer of bargains’ (see Hillas & Co Ltd v Arcos Ltd ((1932) 147 LT 503 at 512, [1932] All ER Rep 494 at 499)), the court must construe the words of the printed form not exclusively literally but if necessary analogistically. If it is possible to identify the characteristic of the actual transaction for which the printed form has been used which corresponds with the characteristic of the kind of transaction for which the printed form was drafted, it is a legitimate method of construction to treat references in the printed terms to that characteristic as if they were references to the corresponding characteristic of the actual transaction.
By cl 13 when used for a single voyage charter the parties clearly intended to choose the system of law with which the contract had its connection through the nationality of the carrying vessel. Had the parties contemplated that the contract would be performed exclusively by vessels owned or controlled by the French company there could be no question but that the parties intended to choose French law as the proper law of their contract. Is the court to treat the clause as meaningless simply because, notwithstanding that they did contemplate that vessels owned by
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the French company would be used primarily to perform the contract, they also contemplated that there might be exceptional occasions on which chartered vessels might be used? It does not seem to me that from the business point of view this could make any significant difference so far as choice of proper law was concerned; and I accordingly agree with Megaw J ([1969] 1 WLR 449), that in its application to this tonnage contract cl 13 should be construed by analogy as if it read: ‘This Contract shall be governed by the laws of the Flag of the Vessels of the Owners, except, etc.' I recognise that this is a matter on which different conclusions may be reached, as the division of opinion among your Lordships shows. But if I am wrong, and the parties by using an inappropriate printed form have failed to make their actual choice of proper law clear, the same result is, in my view, reached by proceeding to the second stage of the enquiry and applying the positive rule of English law that, where the parties have not themselves exercised their choice, the proper law of a contract is the system of law with which it has it closest and most real connection.
As I have already said, for the purposes of this transaction France and Tunisia may be regarded as sharing a common system of law. That was the system of law of the place where each party resided, of the place where the contract was negotiated and made, of the ports of shipment and of discharge, of the place of payment and was the law of the flag of the vessels which the parties contemplated would be used at least primarily for the carriage. The only connection of the transaction with English law was provided by an arbitration clause which was intended to operate only as a choice of curial law. Clearly French law was the system of law with which the contract had its closest and most real connection.
My Lords, in the instant case any implication that the arbitration clause was intended to operate as a choice of proper law as distinct from curial law was negative by the retention in the contract of cl 13. I do not wish to throw any doubt on the proposition that an arbitration clause is generally intended by the parties to operate as a choice of the proper law of the contract as well as the curial law and should be so construed unless there are compelling indications to the contrary in the other terms of the contract or the surrounding circumstances of the transaction. The mere fact that there are other systems of law with which the transaction has a closer connection is not sufficient to rebut the implication. In international transactions, particularly on commodity markets where the same shipment of goods may be bought and sold many times before delivery of the actual goods to the last buyer, it is of great commercial convenience that all the contracts relating to such sales should be subject to the same proper law irrespective of the place of shipment or discharge, the residence or nationality of the parties, or the place where the contract was made. This is the basis on which commodity markets operate and the choice of arbitral form is understood as being intended as a choice of proper law.
But strong as the implication may be, it can be rebutted as other implications of intention can be rebutted. It is not a positive rule of law which is independent of the intentions of the parties. In the instant case I am satisfied that it has been rebutted, and I would allow the appeal.
Appeal allowed.
Solicitors: William A Crump & Son (for the appellants); Crawley & de Reya (for the respondents).
S A Hatteea Esq Barrister.
Director of Public Prosecutions v Bhagwan
[1970] 3 All ER 97
Categories: CRIMINAL; Criminal Law
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD HODSON, LORD GUEST AND LORD DIPLOCK
Hearing Date(s): 22, 23, 24 JUNE, 23 JULY 1970
Criminal law – Conspiracy – Conspiracy to commit act injurious to public interest – Conspiracy to evade controls on immigration – Evasion of examination on landing – Whether unlawful as tending to defeat intent and purpose of statute – Commonwealth Immigrants Act 1962, Sch 1, Part 1, para 1.
The respondent, a Commonwealth citizen to whom the provisions of the Commonwealth Immigrants Act 1962 applied, landed, with others, at a point on the English coast where there was no immigration officer so that he was not examined in accordance with para 1 of Part 1 of Sch 1 to the Acta. He was charged with conspiracy to evade the control on immigration of Commonwealth citizens into the UK in order that he might enter the UK without, on landing, submitting himself for examination.
Held – No offence had been committed by the respondent, because—
(i) there was under the 1962 Act no duty imposed by implication on a Commonwealth citizen to present himself to an immigration officer for examination on his arrival in the United Kingdom (see p 98 d to f and p 103 j, post);
(ii) although the landing of immigrants at a place where there was no immigration officer might defeat the intention of the Act, it could not be held to be a criminal offence for any person, whether or not he acted in concert with others, to do acts which were neither prohibited by Act of Parliament nor at common law and did not involve dishonesty or fraud or deception, merely because the object which Parliament hoped to achieve by the Act might be thereby thwarted (see p 98 d to f, p 105 b and p 106 g, post).
Per Curiam. It is not an offence at common law to agree to ‘act to the prejudice of the State’ unless the means adopted are unlawful or the prejudice likely to be caused falls within one of the established categories of public mischief which have been held by existing decisions of the courts to be so contrary to public policy as to justify the imposition of penal sanctions (see p 98 d to f, and p 105 j to p 106 a, post).
Re Yeoland’s Consols, Manley’s Case (1890) 2 Meg 74 and Shaw v Director of Public Prosecutions [1961] 2 All ER 446 distinguished.
Dictum of Lord Goddard CJ in R v Newland [1953] 2 All ER at 1072 criticised.
Decision of the Court of Appeal sub nom R v Bhagwan [1970] 1 All ER 1129 affirmed.
Notes
For conspiracy, see 10 Halsbury’s Laws (3rd Edn) 310–314, paras 569, 570, and for cases on the subject, sec 14 Digest (Repl) 121–125, 851–869.
For the examination of Commonwealth immigrants, see Supplement to 5 Halsbury’s Laws (3rd Edn) para 1514, and for offences in connection with the control of immigration, see ibid para 1515.
For the Commonwealth Immigrants Act 1962, Sch 1 (as originally enacted), see 42 Halsbury’s Statutes (2nd Edn) 21. The Commonwealth Immigrants Act 1962 has been amended by the Commonwealth Immigrants Act 1968.
Cases referred to in opinions
R v Newland [1953] 2 All ER 1067, [1954] 1 QB 158, [1953] 3 WLR 826, 117 JP 573, 37 Cr App Rep 154, 15 Digest (Repl) 913, 8787.
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Shaw v Director of Public Prosecutions [1961] 2 All ER 446, [1962] AC 220, [1961] 2 WLR 897, 125 JP 437, 45 Cr App Rep 113, Digest (Cont Vol A) 339, 919a.
Yeoland’s Consols, Re, Manley’s Case (1890) 2 Meg 74, 9 Digest (Repl) 269, 1694.
Appeal
This was an appeal by the Director of Public Prosecutions against an order of the Court of Appeal (Widgery and Cross LJJ and Brabin J) dated 17 February 1970 and reported [1970] 1 All ER 1129, allowing the appeal of the respondent Dharam Singh Bhagwan against his conviction at the Central Criminal Court (Judge Humphreys QC) on 22 October 1969 on his plea of guilty to a charge of conspiracy to evade the control on immigration imposed under the Commonwealth Immigration Act 1962. The facts are set out in the opinion of Lord Diplock.
R D L Du Cann for the Crown.
V K Winstain and D M Hogg for the respondent.
Their Lordships took time for consideration
23 July 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend, Lord Diplock, I would dismiss this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, for the reasons given by my noble and learned friend, Lord Diplock, I would dismiss this appeal.
LORD HODSON. My Lords, for the reasons given by my noble and learned friend, Lord Diplock, I would dismiss this appeal.
LORD GUEST. My Lords, for the reasons given by my noble and learned friend, Lord Diplock, I would dismiss this appeal.
LORD DIPLOCK. My Lords, the respondent, Mr Dharam Singh Bhagwan, was a Commonwealth citizen. This means that he was a British subject but, as he was a citizen of India and not a citizen of the United Kingdom and colonies and did not hold a United Kingdom passport, the Commonwealth Immigrants Act 1962 applied to him. As he did not hold an employment voucher issued for the purposes of the Act he was liable to be refused admission to the United Kingdom by an immigration officer, when he came here in 1967.
I am prepared to assume, for the purposes of this appeal, that there was a strong likelihood that, if he submitted himself to examination by an immigration officer, the respondent would be refused admission and that he was well aware of this. What he did was to arrange to be landed in this country (together with a number of compatriots) from a small vessel on a deserted beach and so avoided encountering an immigration officer within 24 hours of his arrival. Under the Act, as it then stood, he could not be refused admission unless, within 24 hours of landing, he had been required by an immigration officer to submit to examination. By avoiding such examination he has obtained the right to remain in this country permanently.
It is conceded that in landing in this manner the respondent committed no statutory offence under the Act, as it stood in 1967. To do so did not become an offence until the passing of the Commonwealth Immigrants Act 1968. It is not contended by the prosecution that the method of his entry, through clandestine, involved any deception, dishonesty or fraud. It must, however, have involved some anterior agreement between him and another person, if only with the master of the vessel which landed him. It was in respect of this agreement alone that he was charged. On 20 October
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1969, he was arraigned at the Central Criminal Court on the following indictment:
‘[The respondent] is charged with the following offence:—
Statement of Offence
CONSPIRACY TO EVADE THE CONTROL ON IMMIGRATION IMPOSED UNDER THE
COMMONWEALTH IMMIGRANTS ACT 1962.
PARTICULARS OF OFFENCE
‘[The respondent] between the 1st day of January and the 23rd day of October 1967 within the jurisdiction of the Central Criminal Court conspired with other persons to evade the control on the immigration of Commonwealth citizens into the United Kingdom in order that he, being a Commonwealth citizen and subject to such control, might enter the United Kingdom without, upon landing, submitting himself for examination by an immigration officer and medical inspector and without holding an employment voucher.’
At the trial, though not until the conclusion of the prosecution’s evidence, counsel for the respondent moved to quash the indictment on the ground that it did not disclose any offence known to the law. The presiding judge dismissed the motion; whereupon the respondent pleaded ‘Guilty’. He appealed to the Court of Appeal ([1970] 1 All ER 1129, [1970] 2 WLR 837) against the judge’s refusal to quash the indictment. On 17 February 1970, his appeal was allowed and the indictment quashed. On the application of the prosecution, the Court of Appeal certified that a point of law of general public importance was involved in their decision, namely:
‘Whether an indictment for conspiracy will lie against a Commonwealth immigrant who in combination with others entered the United Kingdom between 1962 and 1968 by evading examination by an immigration officer and a medical examination and without holding an employment voucher.’
They refused leave to appeal, but this was later granted by your Lordships’ House.
Prior to the passing of the Commonwealth Immigrants Act 1962, the respondent as a British subject had the right at common law to enter the United Kingdom without let or hindrance when and where he pleased and to remain here as long as he liked. That right he still retained in 1967 save insofar as it was restricted or qualified by the provisions of the Act. The only restriction which that Act imposed on his right to enter the United Kingdom is to be found in s 2. Subsection (1) provides:
‘Subject to the following provisions of this section, an immigration officer may, on the examination under this Part of this Act of any Commonwealth citizen to whom section one of this Act applies who enters or seeks to enter the United Kingdom,—(a) refuse him admission into the United Kingdom; or (b) admit him into the United Kingdom subject to a condition restricting the period for which he may remain there, with or without conditions for restricting his employment or occupation there.’
The subsequent subsections imposed limitations on the powers of immigration officers to refuse admission to or to impose restrictive conditions on various categories of Commonwealth immigrants. It is unnecessary to set them out, for it is not suggested that the respondent fell within any of these categories.
It is to be observed that there is nothing in this section which expressly limits the time or place at which a Commonwealth immigrant may enter the United Kingdom. This is in striking contrast with the only existing legislation which in 1962 was in pari material with the Act. That was the Aliens Order 1953b. Article 1 of that order provides:
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‘1. Restrictions on landing and embarkation.—(1) Subject to the provisions of this Order, an alien shall not land or embark in the United Kindgdom except with the leave of an immigration officer, and shall not so land or embark elsewhere than at an approved port or at such other place as an immigration officer may in any particular case allow …
‘(3) The Secretary of State shall by order designate the ports which are to be approved ports for the purposes of this Order; and any such order may specify in respect of any port so designated the limits of that port as an approved port.’
It is also to be observed that an immigration officer’s power to refuse admission to a Commonwealth immigrant was exercisable only on the examination of the immigrant under Part I of the Commonwealth Immigrants Act 1962. Examination was therefore all important. It was a condition precedent to any refusal of admission. Section 3 of the Act and Sch 1 dealt with examination. Section 3(1) provides:
‘The provisions of Part I of the First Schedule to this Act shall have effect with respect to—
‘(a) the examination of persons landing or seeking to land in the United Kingdom from ships and aircraft;
‘(b) the exercise by immigration officers of their powers of refusal of admission or admission subject to conditions under section two of this Act, and the cancellation, variation and duration of such refusals and conditions;
‘(c) the removal from the United Kingdom of Commonwealth citizens to whom admission is refused under that section;
‘(d) the detention of any such persons or citizens as aforesaid pending further examination or pending removal from the United Kingdom, and for other purposes supplementary to the foregoing provisions of this Act.’
The relevant paragraphs of Sch 1 dealing with examination provide:
‘1.—(1) Subject to the provisions of this paragraph, an immigration officer may examine any person who lands or seeks to land in the United Kingdom for the purpose of ascertaining whether that person is or is not a Commonwealth citizen subject to control under Part I of this Act, and if so for the purpose of determining what action, if any, should be taken in his case under the said Part I; and it shall be the duty of every such person to furnish to an immigration officer such information in his possession as that officer may reasonably require for the purpose of his functions under this paragraph.
‘(2) A person shall not be required to submit to examination under this paragraph after the expiration of the period of twenty-four hours from the time when he lands in the United Kingdom unless, upon being examined within that period, he is required in writing by an immigration officer to submit to further examination.’
It is to be observed, first, that an immigration officer’s power to require a person to submit to examination is discretionary; secondly, that it must be exercised, if at all, within 24 hours after the person to be examined has landed in the United Kingdom; thirdly, that the power of examination is exercisable in respect of any person and is not restricted to Commonwealth immigrants; and fourthly, that no express obligation is imposed on any person landing in the United Kingdom to present himself to an immigration officer for examination unless required to do so by the officer himself.
By s 16(1) and (3) of the Act immigration officers are to be appointed by the Secretary of State and are to act in accordance with such directions as he may give them. The instructions current at the date when the respondent entered the United Kingdom are published as a Command Paperc; but nothing turns on them in this appeal. Finally, the Act by s 4 creates a number of statutory offences which, by s 14, are
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punishable on summary conviction by fines up to £100 or imprisonment up to six months or both. Section 4 should be set out in full:
‘4.—(1) If any person being a Commonwealth citizen to whom section one of this Act applies—
‘(a) enters or remains within the United Kingdom, otherwise than in accordance with the directions or under the authority of an immigration officer, while a refusal of admission under section two of this Act is in force in relation to him; or
‘(b) contravenes or fails to comply with any condition imposed on him under that section or under Part II of the First Schedule to this Act,
he shall be guilty of an offence; and any offence under this subsection, being an offence committed by entering or remaining in the United Kingdom, shall be deemed to continue throughout any period during which the offender is in the United Kingdom thereafter.
‘(2) If any person knowingly harbours any person whom he knows or has reasonable grounds for believing to have committed an offence under subsection (1) of this section, being an offence committed by entering or remaining within the United Kingdom, he shall be guilty of an offence.
‘(3) If any person—
‘(a) makes or causes to be made to any immigration officer or other person lawfully acting in the execution of this Part of this Act, any return, statement or representation which he knows to be false or does not believe to be true; or
‘(b) refuses or fails to produce or furnish to any such officer or person any document or information which he is required to produce or furnish to that officer or person under this Part of this Act, or otherwise obstructs any such officer or person in the exercise of his functions thereunder; or
‘(c) without lawful authority, alters any voucher or other document issued or made under or for the purposes of this Part of this Act, or uses for the purposes of this Part of this Act, or has in his possession for such use, any forged or altered voucher, passport or other document, he shall be guilty of an offence.
‘(4) If any person acts in contravention of, or fails to comply with, any provision of the First Schedule to this Act, or of any order made, directions given or requirement imposed thereunder (not being a requirement comprised in conditions so imposed), he shall be guilty of an offence.’
It is to be observed, first, that it is an offence for a Commonwealth citizen to enter or remain within the United Kingdom only while a refusal of admission under s 2 of the Act is in force in relation to him, and not otherwise; and secondly, as conceded by the prosecution, that it is not an offence under sub-s (4) for any person to fail to submit himself to examination by an immigration officer unless he has been required by such an officer to do so.
That is why it is not contended by the Crown that the respondent’s own acts in landing on a lonely beach and so avoiding any encounter with an immigration officer until after he had been in the United Kigndom for more than 24 hours involved the commission of any criminal offence. What is contended is that his agreement with other persons to do those acts was a criminal conspiracy at common law. The Crown put their submissions on criminal conspiracy in two ways. First, they say that although the Act imposes no criminal sanction on a Commonwealth immigrant for failing to present himself to an immigration officer for examination within 24 hours of landing in the United Kingdom, and contains no express provision requiring him to do so, it nevertheless by necessary implication imposes on him a duty so to present himself; and that an agreement between two or more persons to carry out
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the purpose of enabling one of them to commit a breach of that implied statutory duty is a criminal conspiracy at common law.
Alternatively, they say that even if, on the true construction of the Act, no such duty is to be implied, the purpose which the Act was intended to achieve would be frustrated unless Commonwealth immigrants on landing in the United Kingdom did present themselves to an immigration officer for examination within 24 hours; and that an agreement to carry out the purpose of enabling a Commonwealth immigrant who would be likely to be refused admission to avoid examination by an immigration officer within 24 hours of arrival, has a tendency to frustrate the purpose of the statute and for that reason is a criminal conspiracy at common law.
The Crown’s first submission depends on one’s being able to construe the Act as imposing by necessary implication a duty on Commonwealth citizens to whom the Act applies to present themselves to an immigration officer for examination within 24 hours of landing in the United Kingdom, and consequently, a duty not to land at any place where this would be impracticable. For my part, I can find no such implication in the Act.
I find some initial difficulty in the very concept of a statutory duty owed by the subject to the Crown which attracts no sanctions either penal or civil for its breach. A statutory duty, even of this peculiar kind, to present oneself for examination by an immigration officer on arrival in the United Kingdom is one which, if it is to be implied from the express provisions of the Act relating to examination, derogates from the historic liberties of every British subject. It cannot be limited to those Commonwealth citizens only to whom admission to the United Kingdom may be refused; for under para 1 of Sch 1 every person who lands or seeks to land in the United Kingdom is liable to be examined to ascertain whether he is or is not a Commonwealth citizen subject to control under the Act. At such examination he must on the demand of an immigration officer submit to interrogation and to search of his person and his baggage—all of which he would at common law be entitled to refuse to do.
The express provisions of that paragraph give to an immigration officer the right to examine any person; they impose no duty on him to do so. They impose express duties on persons whom he in the exercise of his discretion chooses to examine. They impose none on any person whom he does not examine. The further duty which it is said is imposed by mere implication would involve an even graver derogation from the common law rights of British subjects, viz their right to enter the United Kingdom when and where they please and on arrival to go wherever they like within the realm. For since the Home Secretary has under the Act a discretion as to where immigration officers shall be stationed and the times when they shall be on duty, he could compel every British subject entering this country to make his way within 24 hours of his arrival to one or other of the places at which the Home Secretary had chosen to station an immigration officer, however few in number and however distant from his actual point of entry those places might be.
My Lords, the statement of these consequences compels the rejection of any implied duty on British subjects who are liable to be examined under the Act to present themselves to an immigration officer for examination without being required by him to do so. Even the Crown have hesitated to claim that the implied duty is imposed on British subjects other than Commonwealth citizens to whom admission to the United Kingdom may be refused under s 2 of the Act. But if the duty is to be so confined, the implication cannot arise from those express provisions of the Act which provide for the examination of ‘any person who lands or seeks to land in the United Kingdom’. It must arise, if at all, from some broader consideration of the purpose of the Act. The only legitimate way of ascertaining the purpose of the Act is by considering its language in the light of what the law was and of facts which were within the public knowledge at the time the Act was passed.
The purpose of Part I of the Act was described in the long title as being ‘to make temporary provision for controlling the immigration into the United Kingdom of
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Commonwealth citizens’ and by s 5 it was provided that Part I should expire on 31 December 1963, unless Parliament otherwise determined. The inference from this is that the method of control enacted was intended to be experimental. Parliament was to have an opportunity of seeing how it worked. The broad purpose of this Part of the Act as disclosed by ss 2 and 16(3) was to enable the Secretary of State to limit the numbers of Commonwealth immigrants entering this country who did not possess one or other of the qualifications specified in s 2. These appear to be based on either humanitarian or economic grounds. It was general public knowledge in 1962 that the problem was one of numbers.
In 1962, the relevant distinction between Commonwealth citizens and aliens as respects entry to the United Kingom was that all Commonwealth citizens could but aliens could not enter the United Kingdom without anyone’s leave at whatever place they chose. If it had been desired in either of these respects to assimilate Commonwealth citizens, to whom the Act applied, to aliens the legislative precedent was ready to the draftsman’s hands in art 1 of the Aliens Order 1953, which I have previously cited. Parliament’s failure to follow that precedent strongly suggests a legislative intention that Commonwealth citizens, even though liable to exclusion from the United Kingdom, should be subject to a less rigorous control on their entry than that which in 1953 was imposed on aliens. The initiative was placed on the Home Secretary to place immigration officers where they would meet Commonwealth citizens arriving in the United Kingdom and not on Commonwealth citizens to seek out an immigration officer for themselves. A further indication of this intention is to be found in para 8(2)(b) of Sch 1 which provides that a member of a crew of a ship who—
‘remains in the United Kingdom after his ship has left the port and without having been examined by an immigration officer under paragraph 1 of this Schedule’
shall be treated as if he had been refused admission into the United Kingdom. An analogous provision is applied to stowaways by para 9. There is no such provision as respects Commonwealth citizens who enter the United Kingdom otherwise than as members of the crew of a vessel or as stowaways on ships or aircraft. They are free to remain if they have not been examined by an immigration officer within 24 hours of arrival.
My Lords, in the face of what the Act states and, even more significantly, what it omits to state, it would, in my view, be quite unjustifiable to attribute to Parliament so devious an intention to impose by implication on Commonwealth citizens a duty in derogation of their common law rights as British subjects which it did not put into express words. A more rational and more creditable explanation of the absence of any provision in the Act requiring Commonwealth citizens to seek out an immigration officer and to present themselves for examination by him is that the problem being one of limiting the numbers of Commonwealth immigrants, Parliament considered that its purpose could be sufficiently achieved by leaving it to the initiative of the Home Secretary to place immigration officers at the places of entry to the United Kingdom at which the great majority of Commonwealth citizens might be expected to arrive in the United Kingdom. If that expectation were not to be fulfilled Parliament would have the opportunity of reconsidering the problem and of changing the method of control when the Act was due to expire on 31 December 1963.
I reject, therefore, the premise on which the Crown’s first submission was founded—that there was any duty on the respondent to seek out an immigration officer on his arrival in the United Kingdom and to present himself for examination. There remains, however, the alternative submission, which is not dependent on that premise, that the agreement between the respondent and the master and others concerned in enabling him to be landed on a deserted beach tended to frustrate the purpose of the Act and for this reason was a criminal conspiracy at common law.
My Lords, the disposition of the instant appeal does not, in my opinion, call for a
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general survey of the current role of criminal conspiracy in the common law. The least systematic, the most irrational branch of English penal law it still rests on the legal fiction that the offence lies not in the overt acts themselves which are injurious to the common weal but in an inferred anterior agreement to commit them. Your Lordships should not be zealous to use this legal fiction to create new offences of acts not previously recognised as criminal at common law which Parliament itself in intervening to change the common law has not expressly penalised. In the instant appeal we are not concerned with any acts which if done by a single person would have been ‘unlawful’ as constituting either a criminal offence or a civil wrong. We are concerned only with that part of the law of criminal conspiracy which deals with concerted action by more than one person to achieve a purpose contrary to public policy by acts which do not in themselves amount to either a crime or a tort on the part of the person who does them. They take their criminal colour solely from the common purpose they are calculated to achieve.
In past centuries the courts, as expositors of those parts of the common law of England in which Parliament had not yet chosen to intervene, had laid down a number of broadly described categories of purposes which they deemed socially injurious and had determined what were the legal consequences of agreements to achieve them. Those consequences varied with the view which the courts then took of the gravity of the social injury which would be involved if the purpose were achieved. Some purposes attracted no severer consequence than that the agreement to achieve them was void in civil law; but others, where the social injury was thought to be greater or other means of preventing it inadequate, attracted the penal consequences attaching to a misdemeanour at common law.
In Shaw v Director of Public Prosecutions when this branch of the law of criminal conspiracy was last considered in your Lordships’ House, I do not understand any of the speeches as asserting that it is still open to the courts to enlarge the number of categories of purposes which are so contrary to public policy that those who act in concert to achieve them are guilty of a criminal offence at common law. The matters debated were whether or not it was established by previous decisions of the courts that to corrupt public morals was such a purpose and, if so, how wide was its scope. It was held by a majority of your Lordships’ House to be established on the authorities that acting in concert for the purpose of corrupting public morals by encouraging prostitution was prohibited and punishable at common law and nonetheless so because the particular means adopted to achieve that purpose were novel. The offence, it was held, lay in a field in which Parliament had not yet intervened to supersede the common law. Accordingly, it still survived as part of the law of England. But what your Lordships are invited to do in the present case is the very antithesis of what was done in Shaw’s case. Before the passing of the Commonwealth Immigrants Act 1962, so far from its being contrary to public policy for a British subject, such as the respondent, to enter the United Kingdom without notice to any public officer or obtaining his consent, it was a right assured to him by common law, and any contract which he made with another person to enable him to do so, so far from being a criminal conspiracy, would have been enforceable by the courts at common law.
Parliament in 1962 chose to intervene to qualify this common law right of the respondent to the limited extent I have already indicated. It imposed on him specific obligations in derogation of his common law rights of entry and enacted statutory penalties for breach of those specific obligations. Of none of these statutory obligations was the respondent in breach. Furthermore, he cheated no one, he defrauded no one, he deceived no one in the course of gaining entry as he did. All that can be said against him and those who aided him is that, if a sufficient number of Commonwealth citizens adopted a similar method of entry, the system of control
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of entry of Commonwealth citizens provided by the Commonwealth Immigrants Act 1962, would fail to achieve what I am prepared to assume was the purpose that Parliament hoped and expected that it would achieve, viz of reducing the numbers of Commonwealth immigrants to this country and giving priority of admission to those thought to be most deserving for economic or humanitarian reasons.
My Lords, I know of no authority which would justify your Lordships in holding it to be a criminal offence for any person, whether or not acting in concert with others, to do acts which are neither prohibited by Act of Parliament nor at common law, and do not involve dishonesty or fraud or deception, merely because the object which Parliament hoped to achieve by the Act may be thereby thwarted. There are, however, some passages in the judgment of the Court of Criminal Appeal in R v Newland which at any rate as summarised in the headnote go further than was necessary for the decision in that case and, unless read in the context of its particular facts, in my view misstate the law. The accused were charged with conspiring ‘by fraudulent means to obtain and by dishonest devices to distribute to the home market, for eventual retail sale within the United Kingdom’ certain classes of domestic pottery which manufacturers and wholesalers were prohibited by an order under the Defence (General) Regulations 1936d from supplying except for export. Under these regulations penalties were imposed on manufacturers and wholesalers who supplied that class of domestic pottery otherwise than for export but no penalty was imposed on persons to whom it was supplied in contravention of the order. The accused had obtained the prohibited goods from manufacturers and wholesalers by falsely representing that they required them for export and disposed of them to retailers on the home market by means of bogus documents and false invoices. Their purpose was an unlawful purpose, viz of thereby inducing the manufacturers and wholesalers to contravene the provisions of the order, and the means adopted to achieve that purpose were fraudulent. In the course of the judgment of the court Lord Goddard CJ said ([1953] 2 All ER at 1072, [1954] 1 QB at 166):
‘… whether the matter is looked at simply as a conspiracy to effect an unlawful purpose or a conspiracy by dishonest devices to defeat the clear intention and purpose of an Act of Parliament or to work to the prejudice of the State, in our opinion, they disclose offences which have long been known to the common law of this country.’
My Lords, as far as these words refer to a conspiracy to effect an unlawful purpose they are unexceptionable. But the latter part of the statement is ambiguous in that it does not make it clear whether the use of dishonest devices, such as featured in Newland’s case itself, is an essential characteristic of a criminal conspiracy to work to the prejudice of the State as well as of a criminal conspiracy to defeat the intention of an Act of Parliament. In the form in which the statement is transcribed in the headnote this qualification does not apply to conspiracies to work to the prejudice of the State.
The actual decision in Re Yeoland’s Consols, Manley’s Case is no authority for the proposition that it can be a criminal conspiracy to defeat the intention of an Act of Parliament by using means which are neither prohibited by the Act itself nor criminal or tortious at common law. Nor should the decision be treated as authority for the proposition that it is an offence at common law to agree to ‘act to the prejudice of the State’ unless the means adopted are unlawful or the prejudice likely to be caused falls within one of the established categories of public mischief which have been held by previous decisions of the courts to be so contrary to public policy as to
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justify the imposition of penal sanctions. The public policy disclosed by an Act of Parliament, which derogates from the freedoms previously enjoyed by citizens of this country under the common law, cannot fall within any of these established categories, for ex hypothesi it is a new policy.
Under our system of Parliamentary government what Parliament enacts are not policies but means for giving effect to policies. Those means often involve imposing on private citizens fresh obligations or restrictions on their liberties to which they were not previously subject at common law. The constitutional function of the courts in relation to enacted law is limited to interpreting and applying it. It is the duty of the judge to ascertain what are the means which Parliament has enacted by the Act. In construing the enacting words he may take account of what the Act discloses as the purpose that those means were intended to achieve and, in the case of ambiguity alone, he may interpret them in the sense in which they are more likely to promote than hinder its achievement. But it is no function of a judge to add to the means which Parliament has enacted in derogation of rights which citizens previously enjoyed at common law, because he thinks that the particular case in which he has to apply the Act demonstrates that those means are not adequate to achieve what he conceives to be the policy of the Act.
To do so is not to carry out the intention of Parliament but to usurp its functions. The choice of means is itself part of the Parliamentary choice of policy. It represents the price, by way of deprivation of freedom to do or not to do as they wish, which Parliament is prepared to exact from individual citizens, to promote those objects to which the Act is directed. To raise the price is to change the policy—not to give effect to it. If the policy is to be changed it is for Parliament not the courts to change it—as Parliament has in fact changed the policy of the Commonwealth Immigrants Act 1962, by the amending Act of 1968 which makes it an offence for Commonwealth citizens to do what the respondent did in 1967. This is what Parliament has also done in numerous Finance Acts which have followed on decisions of your Lordships’ House in cases which have brought to light inadequacies in the enacted means of raising public revenue. In each of those cases the method adopted by the taxpayer of avoiding the incidence of taxation involved concerted action with at least one other person, and the decisions of your Lordships’ House in them are irreconcilable with the proposition for which the prosecution contends in the instant appeal.
My Lords, that proposition is not supported by the authority of any previous decision of the courts. It is no offence under the law of England to do or to agree with others to do acts which, though not prohibited by legislation nor criminal nor tortious at common law, are considered by a judge or by a jury to be calculated to defeat, frustrate or evade the purpose or intention of an Act of Parliament. If it were otherwise, freedom under the law would be but an empty phrase.
I would dismiss this appeal
Appeal dismissed.
Solicitors: Director of Public Prosecutions; Norman E Bell & Co (for the respondent).
S A Hatteea Barrister.
S v S
W v Official Solicitor
[1970] 3 All ER 107
Categories: FAMILY; Children
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MACDERMOTT, LORD MORRIS OF BORTH-Y-GEST, LORD HODSON AND LORD GUEST
Hearing Date(s): 8, 10, 15, 16, 17 JUNE, 23 JULY 1970
Divorce – Infant – Blood test – Paternity of child – Criterion whether test will be ordered – Whether interest of infant paramount.
In determining, in cases where a legitimacy issue is to be tried, whether or not to order that a blood test of an infant should be made, the High Court is not in general exercising its custodial jurisdiction where the interest of the infant is paramount (see p 112 c, p 117 g, p 124 b and p 125 a, post); but while the court must protect the interests of the infant it is entitled to look at all the evidence available including that of a blood test and need not be satisfied before ordering a blood test that the outcome thereof will be for the benefit of the infant (see p 113 a and c, p 118 c, p 120 d, p 124 d and p 125 a, post).
Per Lord Reid (Lord Hodson and Lord Guest concurring). Section 20(1) of the Family Reform Act 1969 provides that the court ‘may’ give directions for the use of blood tests. I do not think that that can possibly be intended to confer an unfettered discretion on county courts and magistrates’ courts. The Act gives no guidance as to the circumstances in which blood tests should be ordered, and I think that this must mean that superior courts are to settle principles insofar as it is necessary to disturb existing law in order to comply which the Act, and thereafter the lower courts are to apply those principles to cases which come before them (see p 113 f and g, p 124 h and p 125 a, post).
Decisions of the Court of Appeal sub nom S v McC (formerly S) and M (S intervening) [1970] 1 All ER 1162 affirmed and sub nom W v W [1970] 1 All ER 1157 reversed.
Notes
For the jurisdiction of the court to order blood tests in matrimonial proceedings, see Supplement to 21 Halsbury’s Laws (3rd Edn), para 428.
For the family Law Reform Act 1969, s 20, see 49 Halsbury’s Statutes (2nd Edn) 321.
Cases referred to in opinions
B v B and E (B intervening) [1969] 3 All ER 1106, [1969] 1 WLR 1800, Digest Supp.
B R B v J B [1968] 2 All ER 1023; sub nom B (B R) v B (J) [1968] P 466, [1968] 3 WLR 566, Digest Supp.
Bedmark v Bedmark [1940] 16 Atlantic 18 NJ Misc 633.
Edmeades v Thames Board Mills Ltd [1969] 2 All ER 127, [1969] 2 QB 67, [1969] 2 WLR 668, Digest Supp.
J v C [1969] 1 All ER 788, [1969] 2 WLR 540, Digest Supp.
L, Re [1968] 1 All ER 20, [1968] P 119, [1967] 3 WLR 1645; affg [1967] 2 All ER 1110, [1968] P 119, [1967] 3 WLR 1149, Digest Supp.
Official Solicitor v K [1963] 3 All ER 191, [1965] AC 201, [1963] 3 WLR 408, Digest (Cont Vol A) 933, 2149b.
Practice Direction [1968] 3 All ER 607, [1968] 1 WLR 1853, Digest Supp.
Ross v Tower Upholstery Ltd [1962] NI 3.
Page 108 of [1970] 3 All ER 107
W v W (No 4), [1963] 2 All ER 841; sub nom W v W [1964] P 67, [1963] 3 WLR 540; affg [1963] 2 All ER 386, [1964] P 67, [1963] 3 WLR 540, Digest (Cont Vol A) 703, 2267a.
Appeal
S v S
This was an appeal by the Official Solicitor as guardian ad litem of the infant intervener from an order of the Court of Appeal (Lord Denning MR and Karminski LJ; Sachs LJ dissenting), dated 3 February 1970 and reported sub nom S v McC (formerly S) and M (S intervening) [1970] 1 All ER 1162, dismissing an appeal by the Official Solicitor from an order in chambers of his Honour Judge Ingress Bell QC sitting as a special commissioner in divorce on 15 October 1969 that a blood test be taken of the infant to determine the question of her legitimacy in proceedings for divorce between the husband and wife. The facts are set out in the opinion of Lord Reid.
E Sanderson Temple QC, H A Kershaw and L Swift for the Official Solicitor as guardian ad litem of the infant intervener.
F P R Hinchliffe QC and T D T Hodson for the husband.
W v Official Solicitor
This was an appeal by the husband from an order of the Court of Appeal (Winn and Cross LJJ; Lord Denning MR dissenting), dated 4 November 1969 and reported sub nom W v W [1970] 1 All ER 1157, dismissing an appeal by the husband from an order of Sir Jocelyn Simon P, dated 9 May 1969, refusing to make an order that a blood test be carried out on P, an infant and child of the wife, in the issue of paternity of P. The facts are set out in the opinion of Lord Reid.
C J S French QC and Betty Knightly for the husband.
E Sanderson Temple QC, H A Kershaw and L Swift for the Official Solicitor as guardian ad litem of the infant.
Their Lordships took time for consideration
23 July 1970. The following opinions were delivered.
LORD REID. My Lords, these two appeals are concerned with the same question—whether in proceedings regarding the paternity or legitimacy of a child a blood test of the child should be ordered. In rather similar circumstances the Court of Appeal in S’s case ([1970] 1 All ER 1162, [1970] 1 WLR 672) decided by a majority (Lord Denning MR and Karminski LJ; Sachs LJ dissenting) that a test should be ordered, but in W’s case ([1970] 1 All ER 1157, [1970] 1 WLR 682) decided by a majority (Winn and Cross LJJ; Lord Denning MR dissenting) that a test should not be ordered. I do not think that it is possible to hold that both decisions are right.
In S’s case the spouses were married in 1946. There were three children born in 1947, 1952 and 1954. There is no doubt that they were legitimate. Then, on 15 December 1965, the wife bore another child. The husband denied paternity. On 4 March 1966, he petitioned for divorce on the ground of the wife’s adultery with a man, M, in and after August 1965. The suit was undefended and he obtained decree nisi on 17 May 1968. Then the commissioner had to be satisfied that proper provision had been made for the children of the marriage and the question arose whether the last child, D, was a ‘relevant child’, ie a child of the marriage. So the commissioner ordered the trial of an issue as to the legitimacy of this child and ordered a blood test of the husband, wife, M and the child. But M refused to consent. The husband
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and wife consented to have the test, and in October 1969, a new order was made for a blood test of the husband, wife and child. The Official Solicitor had been appointed guardian ad litem of the child and he objected to this order and appealed on the ground that it had not been shown that to have a blood test would be for the benefit of the child.
In W’s case the spouses were married in 1957 and they had two children born in 1959 and 1961. Then in 1963 the wife stayed with her mother from time to time when West Indian lodgers were staying in the mother’s house. The spouses continued to have sexual relations and apparently the husband did not suspect his wife of misconduct. Then in July 1963, the wife left her husband taking the two children with her and stayed with a man in Bristol acting as housekeeper. While there she gave birth to a child, P on 6 December 1963. On 8 February 1964, she petitioned for divorce on the ground of cruelty. Then in October 1966, the wife sent to the husband at his request a photograph of their three children. This photograph shows a great difference in appearance between the elder children and the youngest child and the husband at once asserted that the youngest child was not his child. He obtained a confession from his wife that she had committed adultery with a West Indian who has now disappeared, and on 17 December 1968, he obtained a decree nisi on the ground of this adultery. As in S’s case the Official Solicitor was appointed guardian ad litem of the child and an issue was ordered to be tried whether P is a child of the husband. The husband wished to have a blood test but this was refused by Sir Jocelyn Simon P and an appeal by the husband was dismissed.
I shall not deal further with the facts in these two cases. They will have to be fully investigated in the trials of the issues as to legitimacy. I will only say that on the material now available I am unable to forecast what the decisions would be if no blood tests are made. The law as to the onus of proof is now set out in s 26 of the Family Law Reform Act 1969, as follows:
‘Any presumption of law as to the legitimacy or illegitimacy of any person may in any civil proceedings be rebutted by evidence which shows that it is more probable than not that that person is illegitimate or legitimate, as the case may be, and it shall not be necessary to prove that fact beyond reasonable doubt in order to rebut the presumption.’
That means that the presumption of legitimacy now merely determines the onus of proof. Once evidence has been led it must be weighed without using the presumption as a make-weight in the scale for legitimacy. So even weak evidence against legitimacy must prevail if there is not other evidence to counterbalance it. The presumption will only come in at that stage in the very rare case of the evidence being so evenly balanced that the court is unable to reach a decision on it. I cannot recollect ever having seen or heard of a case of any kind where the court could not reach a decision on the evidence before it.
Before considering the arguments for or against ordering a blood test I think it is necessary to have in mind its evidential value. Blood tests have now been used extensively for many years in many countries and it is now generally recognised that if a test is properly carried out by a competent serologist, its results are fully reliable. I think that it is now common knowledge that blood is a very complex substance, that different persons’ blood may have a variety of different constituents or characteristics, and that those constituents or characteristics must have been derived from one or other parent. I suppose that there can be mutations of the kinds that are found throughout the animal and vegetable kingdoms. But mutations are so rare that their possibility can be neglected, because we are not looking for absolute certainty but only a sufficient degree of probability. So if it is found that a child’s blood has some constituent or characteristic that is absent from the blood of both husband and wife the husband cannot be the father; the child must have derived that constituent or characteristic from some other man who was its father.
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But that is not all. We have is S’s case an affidavit of a well-known serologist in which he states:
‘If blood from the mother, her child and the husband is examined there is, on average, a seventy per cent. chance of showing that he is not the father if he is in fact not the father.’
Averages are deceptive. No doubt in some cases the chance will be less and in others greater than 70 per cent. But if we have to consider the matter before any blood tests are taken this does at least tell us that there is a very good chance that if the husband is not the father a blood test will prove that he is not.
But what if the husband is the father; can a blood test then afford any evidence of that? In the affidavit to which I have referred it is further stated:
‘Such tests will indicate how wide the field is from which to choose the putative father. The width of the field depends on what happen to be the groups of the mother and child. That is, the tests will show that blood group genes the child must have inherited from its father and the proportion of men having the necessary combination of blood group genes to give can be calculated.’
I take that to be based on the fact that some blood groups or sub-groups or characteristics are much commoner than others. So if it were to appear from a blood test that the characteristics common to father and child could have been supplied by, say, any one of half the men in this country then the test would be of no value at all in helping to prove that the husband was the father. But, on the other hand, if these characteristics were so uncommon that if they were not derived from the husband they could only have been derived from one man in a thousand, then the result of the test would go a long way towards proving (in the sense of making it more probable than not) that the husband was in fact the father because it would be very unlikely that the wife had happened to commit adultery with the one man in a thousand who could have supplied this uncommon characteristic. And if it appeared that only one man in a hundred or one man in ten could have been the father, if the husband was not, that might go some way towards making it probable that the husband was the father. Such an inference ought not to be lightly drawn, but it should not be ruled out. This appears to be recognised by s 20(2)(b) and (c) of the 1969 Act.
The Official Solicitor argues on behalf of these children that no blood test of any child ought ever to be ordered unless it can be shown to be in the interest of the child that there should be a test. On the other hand, it is argued for each of the husbands that it would be unjust to deprive him of valuable evidence which is very likely to prove that he is not the father. Counsel were willing to modify this to the extent that there should be no blood test if taking a test could in any particular case be shown to be contrary to the child’s interest. At first sight it might seem that there is little difference between these positions, but in fact there is a very wide difference. In most case it is virtually impossible to determine at the time when the order is sought whether taking the test would or would not be in the child’s interest, so if the Official Solicitor is right there would only be blood tests in comparatively few cases. But if the husbands are right blood tests would be the rule rather than the exception.
I think that it was implicit in the argument of the Official Solicitor that to take a blood test is to imperil the child’s status of legitimacy. But that must be on an assumption that if the case was decided without the blood test it would be held that the child is legitimate. Now that this depends simply on balance of probabilities it is very often impossible to forecast how the case will go. If one knew or suspected that on the other evidence the child would be held to be illegitimate then it would be in the child’s interest to have a blood test because that would afford some chance that the decision would go the other way.
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But that is only one reason why it is so difficult to assess the child’s interest. On the one hand, it is said that with rare exceptions it is always in the child’s interest to have a decision that it is legitimate. On the other hand, it is said that the value to a child of a finding of legitimacy is now much less than it used to be, and that it is generally better for the child that the truth should out than that the child should go through life with a lurking doubt as to the validity of a decision when evidence, which would very likely have disclosed the truth, has been suppressed.
In former times it was plainly in the child’s interest to have a finding of legitimacy even where the presumption of legitimacy had been used to overcome evidence which without it would have pointed the other way. An illegitimate child was not only deprived of the financial advantage of legitimacy but in most circles of society, other than those considered disreputable, it carried throughout its life a stigma which made it a second class citizen. But now modern legislation has removed almost all the financial disadvantages of illegitimacy and it has become difficult to foretell how grave a handicap the stigma of illegitimacy will prove to be in later life. There are two aspects to this; how far will its neighbours look down on the child by reason of its illegitimacy and how far will the child itself feel a sense of inferiority. Doubtless there are still many circles where an illegitimate person is not well received. But there are many others, particularly in large towns, where nobody knows and nobody cares whether a newcomer is legitimate or illegitimate, and one hopes that prejudice against a person unfortunate enough to be illegitimate is decreasing. And one cannot say whether any particular child will grow up to be sensitive or resentful at having been born illegitimate. Some will. Others will not. Nor can one foretell what view the child will take about evidence having been suppressed. Some will resent that. Others will accept the decision at its face value.
Taking all these matters into account I accept the view that on average it is still a considerable disadvantage to be illegitimate. But I doubt whether, again on average this disadvantage would be greatly diminished by a decision in favour of legitimacy seen to have been based on inadequate evidence after refusal to allow a blood test. I think that the final abolition of the old strong presumption of legitimacy by s 26 of the 1969 Act shows that in the view of Parliament public policy no longer requires that special protection should be given by the law to the status of legitimacy.
I must now examine the present legal position with regard to blood tests. There is no doubt that a person of full age and capacity cannot be ordered to undergo a blood test against his will. In my view, the reason is not that he ought not to be required to furnish evidence which may tell against him. By discovery of documents and in other ways the law often does this. The real reason is that English law goes to great lengths to protect a person of full age and capacity from interference with his personal liberty. We have too often seen freedom disappear in other countries not only by coups d’état but by gradual erosion; and often it is the first step that counts. So it would be unwise to make even minor concessions. It is true that the matter is regarded differently in the United States. We were referred to a number of State enactments authorising the courts to order adults to submit to blood tests. They may feel that this is safe because of their geographical position, size, power or resources or because they have a written Constitution. But here Parliament has clearly endorsed our view by the provisions of s 21(1) of the 1969 Act.
But the position is very different with regard to young children. It is a legal wrong to use constraint on an adult beyond what is authorised by statute or ancient common law powers connected with crime and the like. But it is not and could not be a legal wrong for a parent or person authorised by him to use constraint to his young child provided it is not cruel or excessive. There are differences of opinion as to the age beyond which it is unwise to use constraint, but that cannot apply to infants or young children. So it seems to me to be impossible to deny that a parent can lawfully require that his young child should submit to a blood test. And if the parent can require that, why not the court? There is here no overriding requirement of public policy as there is with an adult.
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I shall not refer in detail to the authorities. They were all discussed at some length in argument. But I venture to think that there has been some error in applying to this subject principles and authorities which deal with the custody of children. There the questions is simple, though a decision may be very difficult—to whom shall the custody be entrusted? There is no competing question of general public interest, and it has long been well recognised that the paramount question is what is in the best interests of the child. But here there is or may be a conflict between the interests of the child and the general requirements of justice. Justice requires that available evidence should not be suppressed but it may be against the interests of the child to produce it.
The argument, as I understand it, is that a court can only order a blood test of a child in the exercise of the old Chancery jurisdiction acting on behalf of the Sovereign as parens patriae, and that when exercising that jurisdiction a court must act solely in the interests of the child disregarding all more general considerations. I greatly doubt that line of argument. Every court in any litigation must see that the interests of a child are not neglected. I am not at all certain that it is accurate to say that a court orders a blood test. What happens is that by appointing guardians ad litem and by a Practice Direction of the Probate Divorce and Admiralty Division of 21 October 1968, the court prevents parents who retain care and control of their children from exercising their right to have blood tests. Then, when an order for a test is sought the true position appears to me to be that the court is being asked to lift this ban. I do not see why any special jurisdiction is necessary either to impose the ban or to lift it, and if, in defiance of the ban, a parent should have his child’s blood tested, he might incur penalties, but, if it is the law that evidence is admissible though obtained by unlawful means, the court could not refuse to receive the result of such a test in evidence. No case has yet occurred in which a court has ordered a blood test to be carried out against the will of the parent who has the care and control of the child, and I am not at all certain that it would be proper to do that or that it will be possible to do that after Part III of the 1969 Act comes into operation.
But even if one accepts the view that in ordering, directing or permitting a blood test the court should go no further than a reasonable parent would go, surely a reasonable parent would have some regard to the general public interest and would not refuse a blood test unless he thought that would clearly be against the interests of the child? I cannot assume that in the present cases the husbands are acting in selfish disregard of these children’s interests in asking for blood tests.
The problem of reconciling the interests of justice with the interests of a child is not novel, and I think that guidance can be found in Official Solicitor v K. There the judge received a report from the Official Solicitor and held that it would harm the interests of the child if it were shown to the mother. The mother justly argued that it was contrary to the ordinary principles of justice for a judge to take into account as evidence anything which a party was not allowed to see and therefore prevented from challenging by cross-examination or by the production of other evidence. But this House held that in the circumstances of that case the interests of the child must prevail. Lord Evershed said ([1963] 3 All ER at 197, [1965] AC at 219):
‘… the judge must plainly have in mind that if (as in the present case) information is withheld from a parent, he or she will or may go from the court with a sense of grievance which may well be to the real disadvantage of the infant. It must, therefore, follow that a judge should not reach such a conclusion without the relevant disclosure to the party or parent save in rare cases and where he is fully satisfied judicially that real harm to the infant must otherwise ensue.’
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That appears to me to be equally applicable where the question is whether important and possibly vital evidence should be suppressed in the interests of the infant—because to prevent a blood test is to suppress the evidence which it would yield. Lord Evershed referred to a parent going from the court with a sense of grievance. The person most affected by the refusal is the husband who denies paternity. Suppose the case goes against him in the absence of a blood test. He will still maintain that he is not the father and may well refuse to do more for the child than the law compels him to do. But suppose a blood test shows that he can be, or probably is, the father. One might reasonably hope that in that event he would accept the decision and treat the child as his child. I would, therefore, hold that the court ought to permit a blood test of a young child to be taken unless satisfied that that would be against the child’s interest. I say a young child because as soon as a child is able to understand these matters it would generally be unwise to subject it to this operation against its will. The court must protect the child, but it is not really protecting the child to ban a blood test on some vague and shadowy conjecture that it may turn out to be to its disadvantage; it may equally well turn out to be for its advantage or at least do it no harm.
I must add that we were invited by counsel to give some guidance as to the operation of Part III of the Family Law Reform Act 1969. It has not yet been brought into force but it may come into force even before proceedings in these two cases are concluded. Apart from one matter I am unwilling to do this because there appear to me to be several matters which may not be easy of solution, and it would be wrong to deal with matters which have not been and could not be fully argued in these cases. I would only say that if the views which I have expressed are right the solution of those matters may prove to be easier than if they are wrong.
But there is one matter on which I think it desirable to say something in order to avoid possible confusion when county courts and magistrates’ courts begin to apply these provisions. Section 20(1) provides that the court ‘may’ give directions for the use of blood tests. I do not think that that can possibly be intended to confer an unfettered discretion on these courts. That would lead to endless argument and to very undesirable differences between one court and another, and if the matter be one of discretion the scope for appeal would be very limited. The Act gives no guidance as to the circumstances in which blood tests should be ordered, and I think that this must mean that superior courts are to settle principles insofar as it is necessary to disturb existing law in order to comply with the Act, and thereafter the lower courts are to apply those principles to cases which come before them.
On the whole matter, I would dismiss the appeal in S’s case and allow the appeal in W’s case.
LORD MACDERMOTT. My Lords, before coming to the facts of these two appeals it will be convenient to consider three prefatory questions which are relevant to each of them. These are:
1. Has the High Court jurisdiction to order that a blood test be taken of a person who is sui juris and a party to proceedings before it?
There can be no doubt today that samples of blood, when subjected to skilled scientific examination, can often supply helpful, and sometimes cogent, evidence on various issues arising in various types of litigation. But I think it must be accepted that, save where Parliament has otherwise ordained, the High Court has no power to direct that a person who is sui juris is to have a blood test taken against his will. That seems to have been the main reason, why in W v W (No 4), Cairns J and the Court of Appeal (Willmer, Danckwerts and Diplock LJJ) held that the court had no power to order blood tests for the purpose of determining the paternity of a child. But this lack of power on the part of the court to enforce its order physically without
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consent does not mean that the question under discussion must be answered in the negative; for much of the jurisdiction of the High Court can only be made effective by indirect means—such as a stay of proceedings, attachment or the treatment of a refusal to comply as evidence against the disobedient party. This is very much the case in one branch of the jurisdiction of the High Court, namely, its inherent jurisdiction to make interlocutory orders for the purpose of promoting a fair and satisfactory trial. I do not think there is now any question about the existence of this jurisdiction, which I shall refer to as the ‘ancillary jurisdiction’. It may be procedural in character, but it is much more than that. It is a jurisdiction which confers power, in the exercise of a judicial discretion, to prepare the way by suitable orders or directions for a just and proper trial of the issues joined between the parties. It was a jurisdiction known to the ecclesiastical courts and to the superior courts before the Supreme Court of Judicature Act 1873. By that time interrogatories and discovery of documents were well-established examples; the court for divorce and matrimonial causes frequently ordered medical inspections in nullity suits raising issues of incapacity; and, perhaps the commonest instance of all, the courts would assist parties by granting subpoenas to secure the attendance of witnesses. This ancillary jurisdiction is, of course, subject to the limitations and modifications imposed by Parliament and, in particular aspects, it has been codified and replaced by rules of court. But that is not to say it has vanished. The rule book naturally tends to lag behind new methods of proof and ascertainment, and the essential purpose of this ancillary jurisdiction means that it cannot be tied to what is old or outmoded. For example, the increasing number of claims which put in issue the bodily condition of a party have in recent years produced what is now a very common demand by defendants, namely that the claimant shall submit to a medical examination. There is nothing about this in the rules of court; but the jurisdiction of the High Court to order such an examination cannot in my view, be questioned in this day and age. See, for a recent example, (Edmeades v Thames Board Mills Ltd), where the Court of Appeal ordered a stay until the plaintiff, seeking damages for personal injuries, submitted himself to a medical examination. Lord Denning MR stated the principal thus ([1969] 2 All ER at 129, [1969] 2 QB at 71):
‘I do not think legislation is necessary. This court has ample jurisdiction to grant a stay whenever it is just and reasonable so to do. It can, therefore, order a stay if the conduct of the plaintiff in refusing a reasonable request is such as to prevent the just determination of the cause. The question in this case is simply whether the request was reasonable or not.’
See also the decision of the Court of Appeal in Northern Ireland in Ross v Tower Upholstery Ltd.
If such be the character of this ancillary jurisdiction, I know of no reason why the High Court should not in a proper case order a party who is sui juris to submit to a blood test. The probative value of such a test may vary according to circumstances and the nature of the material issue; and the relief sought is only to be granted in the exercise of a judicial discretion. But today there can be no valid distinction in principle between a blood test and a clinical examination, and no doubt that one as well as the other may be a powerful factor in determining the truth. In my opinion, this jurisdiction exists and applies to blood tests. I would therefore answer this question in the affirmative.
2. If so, has the High Court jurisdiction to order that a blood test be taken of an infant?
I can find no reason for thinking that what I have called the ancillary jurisdiction becomes a dead letter simply because the person, whose physical state (including
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the state or grouping of his blood) is in issue, happens to be an infant. Take, by way of illustration, the case of a plaintiff seeking damages for negligence causing personal injuries, including a specific form of ill-health which he alleges is a result of the injury-producing event. The defendant, contending that this particular condition is of long standing and was present before that event, satisfies the court that a blood test is likely to show whether or not this contention is well-founded. If the plaintiff is sui juris and I am right in the answer to question 1, the court’s jurisdiction to order such a test in the exercise of its discretion is clear. If, on the other hand, the plaintiff is an infant, that in itself would seem insufficient to oust the ancillary jurisdiction since, were it otherwise, the fact of infancy would endow the plaintiff with a special immunity which might very well work an injustice on the defendant. I would therefore answer this question also in the affirmative. But accepting that the court in virtue of its ancillary jurisdiction has power to order an infant to be blood tested, does the fact of infancy govern the manner in which the court’s discretion should be exercised? That brings me to the third question.
3. Must the court, before exercising its jurisdiction to order a blood test to be taken of an infant, be satisfied that it is in the best interests of the infant that it should do so?
The duty of the High Court as respects the affairs and welfare of infants falls into two broad categories. There is, first of all, the duty to protect the infant, particularly when engaged or involved in litigation. This duty is of a general nature and derives from the Court of Chancery and to some extent also, I believe, from the common law courts which were merged along with the Court of Chancery in the High Court of Justice by the Act of 1873. It recognises that the infant, as one not sui juris may stand in need of aid. He must not be allowed to suffer because of his incapacity. But the aim is to ensure that he gets his rights rather than to place him above the law and make his rights superior to those of others. I shall refer to this duty and the powers of the court relative thereto as the ‘protective jurisdiction’. Exercising it the court will be alert to see that the infant is separately represented where his interest so requires, and to change his next friend or guardian ad litem if not acting with due diligence and in a proper manner. Other examples of the protective jurisdiction are—the payment into court and investment of moneys recovered by an infant in litigation, the appointment of the Official Solicitor to act on his behalf in matters of special difficulty, and the approval of compromises and settlements entered into on the infant’s behalf.
In exercising what I have called the ancillary jurisdiction in relation to infants the court must also observe and, if need be, exercise its protective jurisdiction. For instance, if the court were satisfied that—as might possibly be the case on rare occasions—a blood test would prejudicially affect the health of the infant it would, no doubt, exercise its discretion against ordering the test. And, again, if the court had reason to believe that the application for a blood test was of a fishing nature, designed for some ulterior motive to call in question the legitimacy, otherwise unimpeached, of a child who had enjoyed a legitimate status, it may well be that the court, acting under its protective rather than its ancillary jurisdiction, would be justified in refusing the application. I need not, however, pursue such instances as they do not arise on these appeals. The point to be made is that the protective jurisdiction, if of the nature I have described, would not ordinarily afford ground for refusing a blood test merely because it might, in revealing the truth, prove the infant’s illegitimacy in duly constituted paternity proceedings.
The Official Solicitor, however, relied on something more than the protective jurisdiction. He relied on what was commonly referred to as the ‘custodial jurisdiction’—the second of the broad categories which I have mentioned already. This is an aspect of the prerogative and paternal jurisdiction of the former Court of Chancery which has now passed to the several Divisions of the High Court. It is derived mainly from the administrative functions of the Court of Chancery in which that court had to make a choice between conflicting claims as to the custody and upbringing of
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the infant or the management of his affairs, or to determine the course to be taken in such matters even when not in actual dispute. The development of this jurisdiction has been traced in this House in J v C and its present scope and nature may now be taken as declared by the following words from s 1 of the Guardianship of Infants Act 1925:
‘Where in any proceeding before any court (whether or not a court within the meaning of the Guardianship of Infants Act, 1886) the custody or upbringing of an infant, or the administration of any property belonging to or held on trust for an infant, or the application of the income thereof, is in question, the court, in deciding that question, shall regard the welfare of the infant as the first and paramount consideration … ’
My Lords, in its substance the submission made on behalf of the Official Solicitor in opposing a blood test in each of the cases under appeal was that the court in ordering a blood test or in consenting on behalf of the infant to have a blood test—which seems to me to come to very much the same thing—had to follow the criterion laid down in s 1 of the 1925 Act and find as a preliminary that the test and its consequences would be in the best interests of the infant. This, of course, would be in conflict with the purpose of the ancillary jurisdiction as I have attempted to describe it; but if the criterion of the custodial jurisdiction applies that purpose may have to yield since, under s 44 of the Supreme Court of Judicature (Consolidation) Act 1925, the rules of equity are to prevail.
In the relatively short period during which the powers of the court to order that an infant be blood-tested have been in debate, there has been a marked divergence of judicial opinion. In Re L, the trial of a paternity issue having been ordered in divorce proceedings, a further issue as to custody and access was raised. Ormrod J held that there should be a blood test of the child involved (in certain events) and, as I read his valuable judgment, he based this on the view that the custodial jurisdiction applied and that ([1967] 2 All ER at 1121, [1968] P at 136) the interests of the child were the paramount but not the exclusive consideration. On appeal, the Court of Appeal ([1968] 1 All ER 20, [1968] P 119) affirmed the decision. Lord Denning MR held ([1968] 1 All ER at 25, [1968] P at 157, 158)—
‘… that in proceedings relating to the custody of a child, any judge of the High Court can order a test to be taken of the child’s blood. So also in a paternity issue, or any proceedings where it is in the best interests of the child to have its paternity settled one way or the other, the court can order a blood test. Even in a petition for divorce on the ground of adultery, the judge can in my view order a blood test on the child, for there too the child is vitally affected by the outcome.’
Willmer LJ was not prepared to go so far and said ([1968] 1 All ER at 34, [1968] P at 466):
‘… I confine my judgment with regard to the court’s power to order a test of a child’s blood to cases arising, as this case does, within the court’s custodial jurisdiction. I am not, as at present advised, prepared to hold that such a power exists in a paternity issue, and still less on a petition for divorce on the ground of adultery.’
And Davies LJ concurred in this reservation.
Then, in B R B v J B, the Court of Appeal (Lord Denning MR, Diplock and
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Sachs LJJ) held that the jurisdiction to order a blood test on a child derived from the paternal jurisdiction of the Court of Chancery and could be exercised not only in custodial cases but in other proceedings where it was in the best interests of the child that his paternity should be known.
In S’s case, now before your Lordships, Lord Denning MR, having held that it was in the infant’s interest to have a blood test, added ([1970] 1 All ER at 1165, [1970] 1 WLR at 676):
‘Finally, I must say that, over and above all the interests of the child, there is one overriding interest which must be considered. It is the interests of justice. Should it come to the crunch, then the interests of justice must take first place … . In my opinion, when a court is asked to decide whether a child is legitimate or not, it should have before it the best evidence which is available. It should decide on all the evidence, and not on half of it. There is at hand in these days expert scientific evidence—by means of a blood test—which can in most cases resolve the issue conclusively. In the absence of strong reason to the contrary, a blood test should be made available. The interests of justice so require,’
Karminski LJ agreed with the conclusion reached by Lord Denning MR and said that ([1970] 1 All ER at 1170, [1970] 1 WLR at 681) ‘… the first concern and the most important, though not the only one, is the interests of the child itself.’
Sachs LJ dissented. I think that the heart of his judgment is to be found in the passage ([1970] 1 All ER at 1167, [1970] 1 WLR at 678):
‘On the authorities that I have seen to date, one should look at what are the paramount interests of the child; other interests are subordinate, unless they either coincide with them or unless there is some exceptional reason for giving effect to them.’
In the other appeal—the case of W—Lord Denning MR ([1970] 1 All ER at 1158, [1970] 1 WLR at 683) was for allowing the blood test on grounds similar in nature to those he later stated in the case of S Winn and Cross LJJ came to the other conclusion. Winn LJ was of opinion that ([1970] 1 All ER at 1160, [1970] 1 WLR at 685, 686) ‘ … the question before this court today must be determined by applying the sole criterion: what is in the best interests of this infant?’ And Cross LJ, after saying that it might perhaps be wrong to treat the child’s interest as paramount, proceeded ([1970] 1 All ER at 1161, [1970] 1 WLR at 686): ‘The question in the appeal is, therefore, whether it was in [P’s] interest that a blood test should be ordered.’
My Lords, having considered these as well as the other decisions which were cited in argument, I have reached the conclusion that in most cases, and certainly in those which now await your Lordships’ determination, the question whether the High Court should exercise its discretion in favour of ordering the blood-testing of a child lies outside the custodial jurisdiction and within what I have termed the protective and ancillary jurisdiction of the court. The question raised by a blood test application is quite distinct from the question of custody and the other questions mentioned in s 1 of the Guardianship of Infants Act 1925. It is true that in deciding as to the custody of a child its welfare may depend on the weighing and assessment of various factors, including the rights and wishes of the parents, and that the question of paternity may therefore not only arise but be very relevant. But that is not to make the question of paternity a question of custody. It is only part of the process for determining the facts to be considered in deciding the ultimate and paramount question, namely what is best for the welfare of the child. It would be a backward step to start to whittle down the effect of s 1, but it would be just as
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bad to have to apply its final criterion on a finding of fact which was not reached on the best available evidence, and even worse if that had to happen because the court, having sped a paternity issue, considered that it should not be fully explored.
My Lords, I find the views just expressed supported by two further considerations. First of all, if what I have called the ancillary jurisdiction—the inherent jurisdiction of the High Court to provide in its discretion for a fair and satisfactory trial—were to give place to the suppression for the benefit of the infant of a means of finding the truth, the conflict between the interests of justice and the advantage of the infant would become too acute to be tolerable or to find justification on the strength of the decision of this House in Official Solicitor v K, a decision on very special facts. And secondly, to ascertain whether a full investigation of a necessary paternity issue will be in the best interests of the infant, must by its very nature be so difficult and conjectural as to become an impossible task more often than not.
For these reasons I would answer question 3 by saying that while the court should be alert to exercise its protective jurisdiction on behalf of an infant, it does not need to be satisfied before ordering a blood test that the outcome thereof will be for the benefit of the infant. My Lords, I confess I have come to this last conclusion without any certain view as to its ultimate, general effect. I suppose this conclusion and s 26 of the Family Law Reform Act 1969, which has reduced the presumption of legitimacy to a matter of probability, might together bring about more paternity issues and thus produce an increase in the number of bewildered and unhappy children. I hope not. I do not regard such a deplorable consequence as inevitable. But if it happens, I venture to think that the underlying cause will not be the use of serological science to get at the truth; and that it is far more likely to be found in the changes which have occurred in the standards of marriage and family relationships, and in the legislation which has reflected those changes. This is not to suggest that the plight of the children has been ignored. Parliament has done much for them, but it has been a salvage operation.
It remains to consider the cases now before your Lordships in the light of the views I have expressed.
S v S
Here the special commissioner was bound in the exercise of his statutory duty to order the trial of an issue as to the legitimacy of the child in question. In my opinion, the facts made it little more than guesswork to say where the child’s interests lay; but apart from this, the application for a blood test was a proper step to procure the best evidence. The infant’s position was adequately protected, and I can see no reason why the order for a blood test should not have been made. I would therefore dismiss the appeal.
W v W
In this divorce suit Sir Jocelyn Simon P directed the trial of an issue as to whether the infant concerned was a child of the husband, but refused to order a blood test of the child. It was clearly proper that such an issue should be tried and there is no suggestion that the child suffered any lack of protection in the progress of the case. Again, I find it impossible to tell with any certitude what effect on the infant’s interests a blood test might have. But this also is, in my opinion, a case where the best evidence should be available. I think a blood test ought to have been ordered and I would therefore allow the appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, in these two appeals your Lordships are asked to give guidance in regard to the considerations which should weigh with a court in determining, in cases where a legitimacy issue is to be tried, whether or not to order that a blood test of an infant should be made. I use those
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words because they are to be found in the order of the court now under appeal in S’s case—viz: ‘IT IS ORDERED that a blood test be made of the [husband], [the wife] … and [D]’ These imperative words do not, however, involve that powers of compulsion are to be employed. More realistic is the language of s 20(1) of the Family Law Reform Act 1969, that a court may ‘give a direction for the use of blood tests’. That section will come into force on a date to be appointed.
The present position in the S case may be briefly described. In his petition for divorce the husband averred that he was not the father of the child, D, born on 15 December 1965, and had not accepted her as a member of the family. He alleged that the child was conceived some months after he and his wife had ceased to have sexual intercourse with one another and at a time when his wife ‘was associating with another man or men’. In addition to alleging that his wife had between December 1964 and August 1965, committed adultery with a man unknown, he alleged that his wife had frequently committed adultery with one M (the co-respondent) and specifically so on frequent occasions between July 1965 and March 1966. The wife in her answer averred that her husband was the father of the child in question (D) and she prayed that an issue should be tried as to the paternity of the child. She asked for the custody of the child as well as of two of the three children of the marriage in regard to whom no question arose. The child became an intervener in the suit with the Official Solicitor as her guardian ad litem. In her answer (by her guardian ad litem) she averred that she is a child of the family.
The petition was heard on 17 May 1968. It was not contested. There was a decree nisi of dissolution of the marriage. It was made on the ground that since the marriage the wife had committed adultery with M, the co-respondent. The husband was given custody of one of the acknowledged children; the question as to the custody of another was adjourned to chambers. That left another question for decision. Was D a child of both parties to the marriage? If she was, then the wife claimed custody and claimed payment from her husband by way of child maintenance. The court, for the purpose of observing the terms of s 33 of the Matrimonial Causes Act 1965 would need to know whether D was a ‘relevant child’ (see s 46). So it was inevitable that the status of D had to be settled. By consent an order was made for a separate trial of the issue as to her legitimacy. The order for the trial of that issue recited that the husband does not admit that D is ‘a child of the family’ and the order recited that the wife is asking for custody of her and maintenance in respect of her. The questions of custody and maintenance do not call for decision in the legitimacy issue. They will or will not arise for decision according to how the legitimacy issue is resolved.
When the legitimacy issue is tried, the court will have to come to a conclusion on the basis of all the available evidence. If evidence as to the blood-grouping of the various persons involved could be valuable evidence and could assist the court to arrive at a correct conclusion, then on principle it would seem appropriate and desirable that the court should have that assistance. An application was made to the court and there was an order ‘that a blood test be made’ of the husband, the wife, the co-respondent and of D. That order was made subject to the consent of the co-respondent. But he did not consent. A later order was made on 15 October 1969. It was in the terms that I have recited. It was upheld by a majority in the Court of Appeal ([1970] 1 All ER 1162, [1970] 1 WLR 672) (Lord Denning MR and Karminski LJ., Sachs LJ dissenting).
What, then, should have been the approach of the court in deciding whether or not to say that there should be a blood test of D? The position was that the husband was willing that his own blood should be group-tested. The mother was, for herself, similarly willing. Furthermore, the mother was willing that there should be a test of D who is in her mother’s care and control. The husband and the mother could not have arranged a blood test of D without giving notice to the Official Solicitor
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(as guardian ad litem). (See the Practice Direction issued by Sir Jocelyn Simon P on 21 October 1968.) D is a separate party in the issue which is to be tried. Her position and her future are at stake. The interests of the other parties must not be advanced by those other parties so as to prejudice or to dominate over the interests of D. So the Official Solicitor, whose concern it will be to see that all relevant facts and considerations are before the court, in effect is asking the court for a ruling whether consent on behalf of the infant should or should not be given.
I do not consider that any rigid form of words need be used in outlining the approach, the function and the duty of the court. The court will want to consider every aspect of the matter; it will recognise that if it has been ordered that an issue must be decided then it is desirable that it should be correctly decided and that, to bring about such result, the best evidence should, if possible, be completely available; but it will also steadfastly have in mind that the interests and the welfare of infants are always to be zealously protected and safeguarded. The interests of an infant must be considered in all their present and future aspects. A court will have to decide whether, having regard to the facts and circumstances of a particular case, an infant’s interests are such that their protection necessitates the withholding from a court of evidence which may be very material. At the end of the day, after weighing and then balancing all the considerations, the court will pose and then answer the question whether there should or should not be a direction for the taking of a blood sample.
The relevant considerations will greatly vary according as the facts and events of particular situations will differ. Thus, if a case be supposed in which it can with assurance be said that the father of a child is either A or B, and if both A and B would welcome and accept a finding so that one or other of them could and would assume the full responsibilities consequent on a finding, and if all concerned were willing to co-operate in submitting to blood tests so that, if the blood groups of all were known, it could be established whether the father was A or was B, the circumstances would point to the desirability of having a test of the blood of the child.
Other sets of circumstances will present a court with differing considerations. Thus, if the father of a child might be the husband A or might be B or might be some unknown person, and if the husband and the wife were willing to be tested while B was not, a blood test of the child might show that A was not the father or might, on the other hand, merely show that A could be the father just as very many other men could be. In such a case it is said that it would not be desirable to have a blood test of a child because, while a test could not conclusively establish legitimacy, it might conclusively establish illegitimacy. So it is argued that the advantage to a child resulting from the presumption of legitimacy should not be withdrawn. The matter is not, however, so seemingly straightforward as this argument would suggest. It has to be remembered that the issue as to legitimacy has to be resolved after a consideration of all the relevant evidence. If there were no other evidence than that a child was born during wedlock then legitimacy would not be assailed. But in cases where paternity is repudiated by a husband there will be much evidence. The spouses themselves may give specific evidence. Older rules by which they were restricted have been abrogated. On a weighing of all the evidence a court will have to decide. The presumption of legitimacy will merely have been at the starting point. Once that is left behind it is the effect and the weight of all the evidence that will count. It is now laid down by s 26 of the Family Law Reform Act 1969, that any presumption of law as to the legitimacy or illegitimacy of any person may in any civil proceedings be rebutted by evidence which shows that it is more probable than not that that person is illegitimate or legitimate. Proof beyond reasonable doubt is not necessary to rebut the presumption of legitimacy. The result is that if a husband repudiates the paternity of a child born during wedlock
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and if evidence is given on the trial of an issue as to legitimacy the court will weigh the evidence and will have to decide on a balance of probabilities whether illegitimacy is established.
It may, of course, be that in a given case the general evidence taken by itself would not be sufficient to show that a child is illegitimate, but that the evidence that would result from having a blood test of the child would show that the child was illegitimate. In such a case, ought it to be said that the interests of the child had been jeopardised by the making of a court direction for a blood test? In considering this question it is to be remembered that in many, or possibly in most, cases (though there certainly need not be rigidity of practice as to this) a decision whether to direct the blood test of an infant will have to be made before the trial of a legitimacy issue begins and before, therefore, any assessment can be made as to what the likely outcome will be if evidence is not available as to the blood group of the infant. I am assuming that a court, in considering whether to give a direction, would always wish to know as to the willingness or unwillingness of the various other people who are involved to submit to tests.
Accepting that there might be cases in which the making of a direction for a blood test of an infant might in the result mean that there was a declaration of illegitimacy which might not have been made had there been no direction, how should this consideration influence a court? It may be remembered that in recent years there have been many changes in the law affecting the position of those who at birth were illegitimate. Thus, by the Legitimacy Act 1959, a child will become legitimate as the result of the subsequent marriage of its natural parents even though one of them or each of them was married to another at the time of the birth of the child. Changes have been made so that certain financial disadvantages which formerly resulted from illegitimacy no longer operate. It is today recognised that it is quite unfair to regard someone who is illegitimate (the reasons being manifestly wholly beyond his control) as subject to the reproach of being some kind of inferior person who is only to be accepted by an exercise in benevolent toleration. At the same time, it must be appreciated that this unfair attitude will often be found. It may be very wounding for the person concerned. He may be deprived of those feelings of assurance and security which are the normal birthright in families where any doubt as to legitimacy would be unthinkable. So even after recent legislative reappraisals there must enure some elements of misfortune if there is a finding of illegitimacy.
While acknowledging all this, the general desirability of arriving at the truth when an enquiry is to take place points, in my view, to the further desirability of having the best evidence available. In a case where a husband repudiates the paternity of a child of his wife and where (as in the S case) an issue as to legitimacy has perforce been ordered and, therefore, must be tried, it has regrettably become a fact in the child’s life that its legitimacy is in doubt. It is not as though, when considering whether to direct a blood test, a suggestion of illegitimacy is then or thereby first being raised. It is not as though the tranquil air is then or thereby first being clouded. The events in relation to the child’s birth will already have been matters of dispute and controversy. The presumption of legitimacy cannot be invoked so as to screen and protect the child from being involved. The court will have been obliged to order the trial of an issue, and on the trial of it the court must reach a conclusion. In the interests of justice, the right conclusion ought to be reached. Is it in the long term in the interests of the child that any obstacle should be placed in the way of the ascertainment of the truth? Will it be in the interests of the child to have a conclusion expressed which the husband (if held to be the father) will never accept and which he will feel was given without evidence which would have supported his case? It will not advantage the child to have such a ‘father’. It will be no benefit to the child to have a ‘father’ from whom no recognition, no affection and no benevolence will come. Will it be in the interests of the child if relatives and friends of those concerned feel that the big doubt which was raised has been unsatisfactorily
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left by the law so that, though a conclusion has been expressed, the doubt still remains so that it will loom over the whole of the child’s future life? Will it be in the interests of the child if, because the court was hampered by not having all the reasonably available evidence, a conclusion is expressed which as the years go on may be demonstrated to have been erroneous and which will command neither confidence nor respect? I would think that in most cases comparable to the present one the interests of a child are best served if the truth is ascertained.
It was suggested in S’s case that if a blood test showed that the husband was not the father the mother’s prospects in her affiliation proceedings against M would be advanced and that this circumstance suggests that it would be in the child’s interests that there should be a blood test. I have not been assisted or influenced by this suggestion in reaching my conclusion. Approaching the matters on the lines that I have indicated, I consider, in agreement with the majority of the Court of Appeal ([1970] 1 All ER 1162, [1970] 1 WLR 672), that on a balancing of all the relevant considerations it was right to have approved of having a blood test of the child. I would therefore dismiss the appeal.
Somewhat comparable questions arise in W’s case, though naturally against the background of different facts. The marriage in that case was on 12 October 1957. The wife had three children: a girl born in 1959, a boy born in 1961 and another boy who was born on 6 December 1963. The husband denies that he is the father of that second boy. The wife petitioned for dissolution on the ground of cruelty and desertion. The husband, by his answer, denied these charges and alleged that the wife had committed adultery with a named man (the party cited) from 5 July 1963 to 15 May 1964. The wife amended her petition to ask for the exercise of the court’s discretion. The husband, by his amended answer, disputed that he was the father of the boy born in December 1963 (and whom he had never seen), and he further alleged that the wife had committed adultery (in or about January 1963, until in or about May 1963), with another man (the second party cited) who was a West Indian and who, he alleged, was the father of the boy born in December 1963. On 17 December 1968, the husband was given a decree on the ground of the wife’s adultery with the second party cited; the court had dispensed with service on him. The first party cited was dismissed from the suit. The Official Solicitor was appointed to represent the boy. It is said that the boy has physical features which differ from those of the other two children. On 9 May 1969, Sir Jocelyn Simon P ordered that there should be an issue for trial whether the boy is a child of the husband. The Official Solicitor submitted that in the circumstances it was not in the interests of the boy that his blood should be tested. No order to that effect was made. The father and mother were for themselves each willing to submit to a blood test and each was willing for the boy’s blood to be tested. The Court of Appeal ([1970] 1 All ER 1157, [1970] 1 WLR 682) (Winn and Cross LJJ; Lord Denning MR dissenting) dismissed the husband’s appeal from the order refusing a blood test.
On the hearing of the paternity issue will, as the judgments in the Court of Appeal show, be much available evidence which will be of relevance. The court will have to consider it all and decide whether it is more probable than not that the child is illegitimate. The enquiry cannot be avoided. It must take place. The husband’s repudiation of paternity cannot be suppressed or treated, on the basis of a legal presumption, as though it had never been made. The most legitimate and most ardent wish to safeguard a child’s interests cannot alter the fact that an issue as to paternity has arisen and must be decided. That if possible the court should have available the best evidence is self-evident. Having full regard to the duty of a court to protect and safeguard the interests of the child concerned, should the availability of some relevant and valuable evidence be precluded? Approaching the matter on the lines that I have endeavoured earlier to set out I consider that on the facts and in the situation of W’s case it would have been right to give a direction and, accordingly, in that case I would allow the appeal.
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LORD HODSON. My Lords, the conflict which has arisen in these two appeals relates to the question which has of late years become prominent, namely in what circumstances should the court make an order for blood tests so as to prove with more or less certainty, according to the data available, the paternity of a child?
No one doubts that so far as adults are concerned the law does not permit such an operation to be performed against the wishes of the patient. I quote from an American decision in Bedmark v Bedmark. The court said: “To subject a person against his will to a blood test is an assault and battery, and clearly an invasion of his personal privacy.' The Court of Appeal in this country reached a like conclusion in W v W (No 4).
The decision of a child is different. Here the court is occupying the position of the parent and must act as the judicial reasonable parent. The parent is not guilty of assault if he physically interferes with his child by way of reasonable restraint or chastisement or for therapeutic reasons. There is, therefore, not the same objection to taking a blood test from a child. So far as health is concerned it has not been suggested that the taking of a minute drop of blood from the human body is likely to be attended with danger, even in the case of haemophiliacs when proper precautions are taken. It has not been suggested that there are religious or ethical objections to such a course. The only disadvantage to the child which is put forward as an argument against the use of a blood test, not for therapeutic purposes but to ascertain paternity, is that the child is exposed to the risk that he may lose the protection of the presumption of legitimacy.
Without seeking to depreciate the value of this presumption it is, I think, fair to say that whatever may have been the position in the past the general attitude toward illegitimacy has changed and the legal incidents of being born a bastard are now almost non-existent. I need not dilate on this, for I recognise that it is impossible to say that there is no stigma of bastardy even though it be no more than the indirect stigma of the imputation of unchastity to the mother of the child so described. On the other hand, it is difficult to conceive of cases where, assuming illegitimacy in fact, it is to the advantage of the child that this legal status of legitimacy should be preserved only perhaps to be displaced by firm evidence of illegitimacy decided later in his or her life from a blood test.
The interests of justice in the abstract are best served by the ascertainment of the truth and there must be few cases where the interests of children can be shown to be best served by the suppression of truth. Scientific evidence of blood groups has been available since the early part of this century and the progress of serology has been so rapid that in many cases certainty or near certainty can be reached in the ascertainment of paternity. Why should the risk be taken of a judicial decision being made which is factually wrong and may later be demonstrated to be wrong? Failure to submit the child to a blood test may eventually lead the child to unnecessary doubt as to his paternity and the chance of removing that doubt may be lost in the passing of time. There may be genetic consequences in some cases which could have been avoided if a blood test had been taken.
It is necessary to remember the circumstances in which the claim for a blood test is made in these two cases. Parliament has provided that the court must be satisfied ‘as respects every relevant child’ that proper arrangements had been made for his care and upbringing. This cannot be done unless the paternity of the child is settled. Hence an issue is directed. This is an issue as to paternity, not an issue as to custody. There is no dispute as to where the child should live or with whom. The question at issue is one of paternity only.
The official Solicitor, representing the child in each of these cases, has maintained that the correct test to be applied, when considering whether or not to order a
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blood test to be carried out on a child, is whether or not it is in the best interests of the child and that no other interests are relevant save insofar as they have a bearing on the interests of the child. This is to assimilate the issue of paternity to the issue which arises in custody cases where there is a dispute usually between the parents of a child as to where the child is to spend his or her life until old enough to be able to make his or her own choice. The court, in loco parentis, has to make the choice and, as the authorities clearly establish, the interests of the child are paramount (see the Guardianship of Infants Act 1925, s 1, and the speeches in your Lordships’ House where that section was considered). See in particular the speech of my noble and learned friend, Lord MacDermott, in J v C ([1969] 1 All ER 788 at 820, 821, [1969] 1 WLR 540 at 564, 565). In custody cases the child’s welfare is the governing consideration when all relevant facts, claims and the wishes of parents are taken into account.
I am not persuaded that the position is the same where a paternity issue has to be tried. True that, as in all cases where infants are concerned, the court will see that the infant is protected. This is an every-day practice where, for example, the court is asked to approve a settlement of an action on behalf of an infant. The court in ordering a blood test in the case of an infant has, of course, a discretion and may make or refuse an order for a test in the exercise of its discretion, but the interests of other persons than the infant are involved in ordinary litigation. The infant needs protection but that is no justification for making his rights superior to those of others. Protection may be needed for health reasons, but the scope of the power to order a blood test if available for therapeutic reasons should equally be made available for forensic purposes unless the court comes to the conclusion, as for example it did in B v B and E (B intervening), that it would be unjust to order a test for a collateral reason to assist a litigant in his or her claim, thus unfairly exposing the infant to risk of losing the presumptive legitimacy which he had up to that time enjoyed.
In paternity cases such as those under consideration by your Lordships the court is not truly exercising the custodial jurisdiction in which the interests of the child are paramount but the duty of arbitrament between parties in which their interests are relevant and must be considered as well as the interests of the infant whose body it is sought to examine. Were it otherwise I think that the task of the court in deciding whether or not to order a blood test in the case of a child would in many, perhaps in most, cases be exceedingly difficult. Who is to say what is in the interests of the child and whether knowledge of true paternity would or would not favour his or her future prospects in life? How are these interests to be assessed? I find these questions especially difficult to answer in view of the fact that it must surely be in the best interests of the child in most cases that paternity doubts should be resolved on the best evidence, and, as in adoption, the child should be told the truth as soon as possible.
Leaving these speculative questions on one side I see no reason why, in the case of S an order for a blood test should not be made, and would dismiss the appeal. In the case of W, I am in a like position in that I cannot say what effect on the child’s future a blood test might have, and I would also order a blood test in order that the best evidence may be available, and, therefore, would allow the appeal.
I agree with the observations in the speech of my noble and learned friend, Lord Reid, directed to the question of directions to be given by the court under s 20(1) of the Family Law Reform Act 1969, and I think it follows from what I have already said that I am in general agreement with his opinion and that of my noble and learned friend, Lord MacDermott, on the whole topic under discussion. In arriving at a conclusion in these cases I should express my indebtedness to the helpful study of the topic contained in the judgment of Ormrod Ja.
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LORD GUEST. My Lords, I have had the advantage of reading the speech delivered by my noble and learned friend, Lord Reid. I agree with it and I have nothing to add.
Appeal dismissed in S v S. Appeal allowed in W v Official Solicitor.
Solicitors: Official Solicitor; Gregory, Rowcliffe & Co, agents for Ramsbottom, Liddle & Co, Blackburn (for the husband in S v S); Godfrey Davis & Baldwin, Mitcham (for the husband in W v Official Solicitor).
S A Hatteea Barrister.
Maredelanto Compania Naviera SA v Bergbau-Handel GmbH The Mihalis Angelos
[1970] 3 All ER 125
Categories: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, EDMUND DAVIES AND MEGAW LJJ
Hearing Date(s): 2, 3, 4, 5 JUNE, 1 JULY 1970
Contract – Repudiation – Charterparty – Undertaking by owners as to expected readiness of vessel – Owners unable to provide vessel at expected date – Whether expected readiness clause condition of contract so as to entitle charterers to repudiate.
Contract – Repudiation – Anticipatory breach – Charterparty – Option to cancel if vessel not available at specified date – Construction – Vessel obviously not going to be available at specified date – Whether charterers entitled to cancel before specified date.
Contract – Breach – Damages – Anticipatory breach – Charterparty – Undertaking by owners as to expected readiness of vessel – Charterers cancelling before date when option to cancel became exercisable – Whether owners entitled only to nominal damages.
By a charterparty dated 25 May 1965, it was provided by cl 1 that the vessel M A ‘now trading and expected ready to load under this charter about 1 July 1965’ (the expected readiness clause) would proceed to Haiphong and there load a cargo of apatite. By cl 11 it was provided: ‘Should the vessel not be ready to load … on or before the 20 July 65 Charterers have the option of cancelling this contract … ’ The vessel arrived at Hong Kong on 23 June but did not complete discharging until 23 July. She had to have a special survey of two days. It would have taken a further two days to sail to Haiphong. Meanwhile the charterers had experienced troubles. Events for which the charterers were not responsible prevented the transport of apatite to Haiphong. On 17 July, the charterers informed the owners that they cancelled the charter on the grounds of force majeure. The owners accepted that information as a repudiation and on 29 July contracted to sell the vessel in Hong Kong. It was found on arbitration that the charter was not frustrated before 17 July, but that, at the date of the charter, the owners could not reasonably have estimated that the vessel would arrive at Haiphong ‘about 1 July 1965’. It was further found that, had the vessel ultimately proceeded to Haiphong, the charterers would have cancelled in any event on the grounds of delay.
Held – (i) The expected readiness clause was properly to be described as a condition of the charterparty and an assurance by the owners that they honestly expected on reasonable grounds that the vessel would be ready to load on 1 July; accordingly, when the charterers discovered the falsity of the owners’ assurance, they were entitled to terminate the charter forthwith (see p 129 c and g, p 134 e and c and p 138 d to f, post).
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Finnish Government (Ministry of Food) v H Ford & Co Ltd (1921) 6 Lloyd LR 188 and Samuel Sanday & Co v Keighley, Maxted & Co (1922) 91 LJKB 624 applied.
Per Megaw LJ. An expected readiness clause in a charterparty ought to be regarded as being a condition of the contract, in the old sense of the word ‘condition’, ie that when it has been broken, the other party can, if he wishes, by intimation to the party in breach, elect to be released from performance of his further obligations under the contract; and that he can validly do so without having to establish that, on the facts of the particular case, the breach has produced serious consequences which can be treated as ‘going to the root of the contract’ or as being ‘fundamental’, or whatever other metaphor may be thought appropriate for a frustration case (see p 138 f, post).
(ii) (Lord Denning MR dissenting) The charterers could not have relied on cl 11 to justify cancellation of the charterparty on 17 July because on a strict construction of the clause, the option to cancel under cl 11 was not exercisable before 20 July although it had become apparent before that date that the vessel would not be ready to load on 20 July (see p 134 h and p 140 d and f, post).
The Helvetia-S [1960] 1 Lloyd’s Rep 540 and The Madeleine [1967] 2 Lloyd’s Rep 224 approved.
(iii) Even if the charterers had not been entitled by virtue of cl 1 to terminate the charter on 17 July, the owners would have been awarded only nominal damages for the wrongful repudiation by the charterers, because the charterers would later have become entitled, under cl 11, to cancel, and would have cancelled, for delay, which contingency had to be taken into account as reducing the owners’ loss (see p 131 c and e, p 136 g and h and p 142 e, post).
Decision of Mocatta J [1970] 1 All ER 673 reversed.
Notes
For anticipatory breach of contract by repudiation, see 8 Halsbury’s Laws (3rd Edn) 203, 204, para 344, and for cases on the subject, see 12 Digest (Repl) 380–382, 2973–2982.
For the effect of anticipatory breach and remedies therefore, see 8 Halsbury’s Laws (3rd Edn) 205, para 346.
Cases referred to in judgments
Abrahams v Herbert Reiach Ltd [1922] 1 KB 477, 91 LJKB 404, 126 LT 546, 17 Digest (Repl) 98, 146.
Associated Portland Cement Manufacturers (1900) Ltd v Houlder Brothers & Co Ltd (1917) 86 LJKB 1495, 118 LT 94, 22 Com Cas 279, 14 Asp MLC 170, 41 Digest (Repl) 325, 1262.
Behn v Burness (1862) 1 B & S 877, rvsd (1863) 3 B & S 751, 32 LJQB 204, 8 LT 207, 122 ER 281, 41 Digest (Repl) 182, 220.
Boone v Eyre (1779) 1 Hy Bl 273n, 12 Digest (Repl) 472, 3526.
British & Beningtons Ltd v North Western Cachas Tea Co Ltd [1923] AC 48, [1922] All ER Rep 224, 95 LJKB 62, 128 LT 422, 39 Digest (Repl) 664, 1643.
Corkling v Massey (1873) LR 8 CP 395, 42 LJCP 153, 28 LT 636, 2 Asp MLC 18, 41 Digest (Repl) 182, 221.
Cutter v Powell (1795) 6 Term Rep 320, [1775–1802] All ER Rep 159, 2 Smith LC 1, 12 Digest (Repl) 130, 810.
Finnish Government (Ministry of Food) v H Ford & Co Ltd (1921) 6 Lloyd LR 188.
Frost v Knight (1872) LR 7 Exch 111, [1861–73] All ER Rep 221, 41 LJEx 78, 26 LT 770, 12 Digest (Repl) 380, 2973.
Helvetia-S, The [1960] 1 Lloyd’s Rep 540.
Hochaster v De la Tour (1853) 2 E & B 678, [1843–60] All ER Rep 12, 22 LJQB 455, 22 LTOS 171, 118 ER 922, 17 Digest (Repl) 103, 174.
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474, [1962] 2 QB 26, [1962] 2 WLR 474, [1961] 2 Lloyd’s Rep 478, 41 Digest (Repl) 363, 1553.
Jackson v Union Marine Insurance Co (1874) LR 10 CP 125, [1874–80] All ER Rep 317, 44 LJCP 27, 31 LT 789, 41 Digest (Repl) 185, 239.
Page 127 of [1970] 3 All ER 125
Lavarack v Woods of Colchester Ltd [1966] 3 All ER 683, [1967] 1 QB 278, [1966] 3 WLR 706, Digest (Cont Vol B) 535, 894e.
MacPherson Train & Co Ltd v Howard Ross & Co Ltd [1955] 2 All ER 445, [1955] 1 WLR 640, 39 Digest (Repl) 521, 522, 606.
Madeleine, The [1967] 2 Lloyd’s Rep 224.
Mathisens v Smith [1922] 13 Lloyd LR 212.
Mersey Steel and Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434, [1881–85] All ER Rep 365, 53 LJQB 497, 51 LT 637, 12 Digest (Repl) 378, 2966.
Moel Tryvan Ship Co Ltd v Andrew Weir & Co [1910] 2 KB 844, 79 LJKB 898, 103 LT 161, 12 Digest (Repl) 343, 2662.
Sanday (Samuel) & Co v Keighley, Maxted & Co (1922) 91 LJKB 624, 127 LT 327, 15 Asp MLC 596, 10 Lloyd LR 738, 41 Digest (Repl) 183, 225.
Tarrabochia v Hickie (1856) 1 H & N 183, 26 LJEx 26, 156 ER 1168, 41 Digest (Repl) 181, 216.
Universal Cargo Carriers Corpn v Citati [1957] 2 All ER 70, [1957] 2 QB 401, [1957] 2 WLR 713; affd CA [1957] 3 All ER 234, [1958] 2 QB 254, [1958] 3 WLR 109, 41 Digest (Repl) 341, 1355.
Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003, 79 LJKB 1013, 103 LT 118; on appeal HL [1911] AC 394, 12 Digest (Repl) 471, 3509.
Appeal
The charterers, Bergbau-Handel G m b H, appealed against the decision of Mocatta J dated 15 December 1969 and reported [1970] 1 All ER 673, on a special case stated by two arbitrators in an arbitration of a claim by the charterers against the owners of the Mihalis Angelos, Maredelanto Compania Naviera SA, under a charterparty in the Gencon form, dated 25 May 1965. Mocatta J had set aside the award of the arbitrators and awarded the owners £4,000 damages, with interest thereon from 3 August 1965 at the rate of 6 per cent per annum. The facts are set out in the judgment of Lord Denning MR.
M J Mustill QC and M O Saville for the charterers
R L A Goff QC and Brian Davenport for the owners.
Cur adv vult
1 July 1970. The following judgments were delivered.
LORD DENNING MR. The material facts are these. On 25 May 1965, the owners let the vessel Mihalis Angelos to the charterers for a voyage from Haiphong, in North Vietnam, to Hamburg, or other port in Europe In cl 1 of the charterparty the owners said that she was ‘expected ready to load under this charter about 1 July 1965’. The vessel was to proceed to Haiphong and then load a cargo of apatite and carry it to Europe. There was a cancelling clause in case the vessel was not ready to load by 20 July 1965.
The owners were quite wrong in saying that she was ‘expected to load on 1 July’ at Haiphong. They had no reasonable grounds for any such expectation. On 25 May 1965, the date of the charter, the vessel was in the Pacific on her way to Hong Kong. She was not expecting to reach Hong Kong until 25 or 26 June. She would need 14 days to discharge, thus taking it to 9 or 10 July. She had to have a special survey of two days. That took it to 11 or 12 July. She would take two days from Hong Kong to Haiphong. So she could not reasonably be expected to arrive at Haiphong until 13 or 14 July. Yet the shipowners, quite wrongly, said that she was expected to arrive on 1 July. In point of fact, she made up time across the Pacific, and arrived at Hong Kong on 23 June; but the discharge at Hong Kong was unexpectedly prolonged. She did not complete it until 23 July. Meanwhile, however, the charterers had their own troubles. They discovered that there was no apatite ore available at Haiphong. They though that it was due to the war in North Vietnam. It was said that the Americans had bombed the railway line to the port. On 17 July 1965, the charterers cancelled the contract as a case of
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force majeure. The shipowners accepted this information as a repudiation of the contract. They did not charter the vessel to anyone else. Instead they sold her on 29 July, as she lay in Hong Kong.
The arbitrators found that if the ship, after discharge at Hong Kong, had proceeded to Haiphong, the charterers would, beyond doubt, have cancelled the charter on the ground that the ship had missed her cancelling date. So the owners, in fact, lost nothing; but they claimed damages on the footing that they lost the charter on 17 July and were entitled to £4,000 damages. The arbitrators rejected the claim but the judge ([1970] 1 All ER 673, [1970] 2 WLR 907) allowed it.
The first point arises on the clause by which the charterers said that the vessel was ‘expected to arrive ready to load about 1st July 1965’. The charterers said that this was a condition of the contract and that it was broken because the owners had no reasonable grounds for any such expectation. The arbitrators found that:
‘… on 25th May 1965 the Owners could not reasonably have estimated that the “MIHALIS ANGELOS” could or would arrived at Haiphong about 1st July 1965.’
The charterers did not take this point on 17 July 1965 when they cancelled the charter. They put it on the ground of force majeure; but the owners admit that, if this point is a good one, the charterers can rely on it. The fact that a contracting party gives a bad reason for determining it does not prevent him from afterwards relying on a good one when he discovers it: see British & Beningtons Ltd v North Western Cachas Tea Co Ltd ([1923] AC 48 at 71, 72) Per Lord Sumner.
The contest resolved itself simply into this: was the ‘expected ready to load’ clause a condition, such that for breach of it the charterers could throw up the charter? Or was it a mere warranty such as to give rise to damages if it was broken, but not to a right to cancel, seeing that cancellation was expressly dealt with in the cancelling clause? Sir Frederick Pollock divided the terms of a contract into two categories conditions and warranties. The difference between them was this: if the promisor broke a condition in any respect, however slight, it gave the other party a right to be quit of his future obligations and to sue for damages, unless he by his conduct waived the condition, in which case he was bound to perform his future obligations but could sue for the damage he suffered. If the promisor broke a warranty in any respect, however serious, the other party was not quit of his future obligations. He had to perform them. His only remedy was to sue for damages.
This division was adopted by Sir Mackenzie Chalmers when he drafted the Sale of Goods Act, and by Parliament when it passed it. It was stated by Fletcher Moulton LJ in his celebrated dissenting judgment in Wallis, Son & Wells v Pratt & Haynes ([1910] 2 KB 1003 at 1012), which was adopted in its entirety by the House of Lords ([1911] AC 394). It would be a mistake, however, to look on that division as exhaustive. There are many terms of many contracts which cannot be fitted into either category. In such cases the courts, for nigh on 200 years, have not asked themselves: was the term a condition or warranty? But rather: was the breach such as to go to the root of the contract? If it was, then the other party is entitled, at his election, to treat himself as discharged from any further performance. That is made clear by the judgment of Lord Mansfield in Boone v Eyre, and by the speech of Lord Blackburn in Mersey Steel and Iron Co v Naylor, Benzon & Co ((1884) 9 App Cas 434 at 443, 444, [1881–85] All ER Rep 365 at 370), and the notes to Cutter v Powell ((1795) 2 Smith LC 1 at 16–18). Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd is a useful reminder of this large category.
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Although this large category exists, there is still remaining a considerable body of law by which certain stipulations have been classified as ‘conditions’ so that any failure to perform, however slight, entitles the other to treat himself as discharged. Thus a statement in a charterparty on 19 October 1860, that the ship is ‘now in the port of Amsterdam’ was held to be a ‘condition’. On that date she was just outside Amsterdam and could not get in owing to strong gales; but she got in a day or two later when the gales abated. The Court of Exchequer Chamber held that the charterer was entitled to call off the charter; see Behn v Burness, overruling the Court of Exchequer ((1862) 1 B & S 877).
The question in this case is whether the statement by the owner ‘expected ready to load under this charter about 1st July 1965’ is likewise a ‘condition’. The meaning of such a clause is settled by a decision of this court. It is an assurance by the owner that he honestly expects that the vessel will be ready to load on that date and that his expectation is based on reasonable grounds; see Samuel Sanday & Co v Keighley, Maxted & Co. The clause with that meaning has been held in this court to be a ‘condition’ which, if not fulfilled, entitled the other party to treat himself as discharged; see Finnish Government (Ministry of Food) v H Ford & Co Ltd. Those were sale of goods cases; but I think that the clause should receive the same interpretation in charterparty cases. It seems to me that, if the owner of a ship or his agent states in a charter that she is ‘expected ready to load about 1st July 1965’, he is making a representation as to his own state of mind, ie of what he himself expects; and, what is more, he puts it in the contract as a term of it, binding himself to its truth. If he or his agent breaks that term by making the statement without any honest belief in its truth or without any reasonable grounds for it, he must take the consequences. It is at lowest a misrepresentation which entitles the other party to rescind and at highest a breach of contract which goes to the root of the matter. The charterer who is misled by the statement, is entitled, on discovering its falsity to throw up the charter. It may, therefore, properly be described as a ‘condition’.
I am confirmed in this view by the illustration given by Scrutton LJ himself in all the editions of his work on Charterpartiesa:
‘A ship was chartered “expected to be at X about the 15th December … shall with all convenient speed sail to X“. The ship was in fact then on such a voyage that she could not complete it and be at X by 15th December. Submitted, that the charterer was entitled to throw up the charter.’
I do not regard Associated Portland Cement Manufacturers (1900) Ltd v Houlder Brothers & Co Ltd as any authority to the contrary. The facts are too shortly reported for any guidance to be got from it.
I hold, therefore, that on 17 July 1965 the charterers were entitled to cancel the contract on the ground that the owners had broken the ‘expected ready to load’ clause.
In case I am wrong, however, I go on to consider the charterers’ second point. They say that they were entitled to cancel on that day under the cancelling clause, which reads:
‘II. Should the vessel not be ready to load (whether in berth or not) on or before the 20th July 65 Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading.’
The charterers said that on 17 July 1965 it was plain that the vessel would not be ready to load on or before 20 July 1965 and that on that account they were entitled
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to cancel the charter; but the owners said that the charterers could not exercise the option until 20 July 1965, after office hours on that day. We were referred to the antecedents of this clause. The part ‘… such option to be declared … ’, etc was inserted to modify the decision of this court in Moel Tryvan Ship Co Ltd v Andrew Weir & Co. We were also referred to The Helvetia-S ([1960] 1 Lloyd’s Rep 540 at 551), and to The Madeleine, where the judges said, of a somewhat similar clause, that a charterer cannot exercise the option to cancel before the cancelling date. That is simply not true of this present clause. Suppose that the vessel was delayed, so that she was not expected to arrive at the port of loading until 21 July, and that on 15 July the owners told the charterer: ‘She will not be able to arrive until 21st July. Please declare your option’. The charterer would be bound, under this clause, to declare his option at least by 19 July. So on those facts the charterer would not only be entitled, but would be bound to exercise it before the cancelling date. Seeing that result, it seems to me that the clause is a concise way of expressing this meaning: ‘Should the vessel not be ready to load (whether in berth or not), or be in such a position that she will not be ready to load on or before 20th July 1965, charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading.' So expanded, the clause means that the charterers have the option of cancelling the contract as soon as it becomes plain that the vessel cannot possibly be ready to load on or before 20 July 1965. This is a sensible interpretation because, as a matter of commercial convenience, it is better for both sides that, when it is obvious that the vessel will not arrive in time, the charterer should be able to cancel. The charterer can then engage another vessel and the owner can use his ship elsewhere.
I limit myself, of course, to saying that the charterer is entitled to exercise his option before the cancelling date; not that he is bound to exercise it before that date, save in the circumstances described in the second part of the sentence. The Moel Tryvan Ship Co Ltd case still holds good to show that the charterer is not bound to exercise it.
Counsel for the owners submitted that in any case the charterers cannot rely on the clause, for this reason: they did not exercise the option given to them by the clause. They did not cancel on the ground that the vessel would not be ready to load on or before 20 July 1965. They cancelled on the ground of force majeure, ie that they themselves could not load the vessel. But I think that the principle stated by Lord Summer in British & Beningtons Ltd v North Western Cachas Tea Co Ltd ([1923] AC 48 at 71, 72) applies here also. If they had a right to cancel on 17 July, they can rely on it, although they gave a wrong reason for it. I would hold, therefore, that the charterers on 17 July were entitled to cancel under the cancelling clause.
In case I am wrong on this second point, I come to the third point. It proceeds on the footing that the charterers were wrong in cancelling on 17 July 1965. If so, their cancellation was a renunciation of their contract to load the vessel when she arrived at Haiphong. The shipowners accepted this renunciation and called off the charter. They are entitled to damages, but what are the damages? The arbitrators found that, if the vessel had sailed to Haiphong, the charterers would beyond doubt have cancelled the charter, and would have been within their rights then in so doing. So the shipowners suffered no loss. The arbitrators on this account awarded the shipowners only nominal damages; but the judge, with regret, found that they were entitled to damages of £4,000. The reason, as I understand it, was as follows: the shipowners are entitled to damages for ‘anticipated breach’ of contract. The court must, therefore, accept that there would inevitably have been a breach by the charterers if the contract had run its full course. The court cannot listen to any argument which says that the charterers would have committed no breach, not even in reduction of damages. This reasoning was supported by the statement of
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Sir Alexander Cockburn CJ in Frost v Knight ((1872) LR 7 Exch 111 at 114, [1861–73] All ER Rep 221 at 225): ‘… the eventual non-performance may therefore, by anticipation, be treated as a cause of action … .’, and of Devlin J in Universal Cargo Carriers Corpn v Citati ([1957] 2 All ER 70 at 85, [1957] 2 QB 401 at 438): ‘… the injured party is allowed to anticipate an inevitable breach’. I think that the argument is rooted in fallacy. The words ‘anticipatory breach’ are misleading. The cause of action is not the future breach. It is the renunciation itself. I venture to quote the notes to Cutter v Powell ((1795) 2 Smith LC at 30):
‘It is of the essence of every contract that each party thereto should have the right to consider it as of binding force from the moment it is made and should have the right to base his conduct on the expectation of its being fulfilled by the other party. If, therefore, the other side by an unqualified refusal to perform his side of the contract, destroys that expectation, he destroys that which is the basis of the contract: and his conduct may be treated as a breach going to the whole of the consideration.’
Seeing that the renunciation itself is the breach, the damages must be measured by compensating the injured party for the loss he has suffered by reason of the renunciation. One must take into account all contingencies which might have reduced or extinguished the loss. That is made clear by the very first case in which that doctrine of anticipatory breach was established, Hochster v De la Tour itself. It follows that if the defendant has, under the contract, an option which would reduce or extinguish the loss, it will be assumed that he would exercise it. Again, if it is reasonable for him to take steps to mitigate his loss, he must do it. And so forth. In short, the plaintiff must be compensated for such loss as he would have suffered if there had been no renunciation, but not if he would have lost nothing. Seeing that the charterers would, beyond doubt, have cancelled, I am clearly of opinion that the shipowners suffered no loss and would be entitled at most to nominal damages. On this point the two experienced arbitrators (one on each side) were quite agreed. I agree with them. I would allow the appeal and restore the award, which adjudged that the claim of the owners failed.
EDMUND DAVIES LJ. The two broad questions raised by this appeal may be thus stated: (1) on 17 July 1965, did the charterers of the vessel Mihalis Angelos commit an anticipatory breach of their contract with the shipowners? (2) If they did, are the owners entitled to recover more than nominal damages?
By their admirable clear and helpful award, the arbitrators answered the first question in the affirmative; but they considered that the second question called for a negative answer and, as the charterers had tendered £5 at a sufficiently early date, they held that the owners’ action failed. The learned judge ([1970] 1 All ER 673, [1970] 2 WLR 907) upheld their finding in relation to the first question but held that the second question must be answered in the affirmative and awarded the owners £4,000 damages. While these two questions summarise the basic matters raised by this appeal, they have been considered before us under three heads, and it seems right that I should indicate my conclusions regarding each of them.
Issue A. Clause 1 of the charterparty of 25 May 1965 stated that the vessel was ‘… expected ready to load under this Charter about 1st July 1965 … ’ These words mean that, in the light of the facts known to the owners at the time of making the contract, they honestly expected that the vessel would be ready as stated and, further, that such expectation was based on reasonable grounds: Sammuel Sanday & Co v Keighley, Maxted & Co. It is undisputed that in the present case the owners
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had no reasonable grounds to expect that their ship would be ready to load ‘about 1st July 1965’. That cl 1 was a contractual term is not in issue, and is, in any event, established by Corkling v Massey. But what is in dispute is its legal nature. In other words, was it a condition of the contract, a breach of which entitled the charterers to repudiate? Or was it a term which, if broken, restricted the charterers to claiming damages? The owners urge the latter, and rely on Associated Portland Cement Manufacturers (1900) Ltd v Houlder Brothers & Co Ltd ((1917) 22 Com Cas 279 at 281) where Atkin J said:
‘The obligation of the defendants to be ready to load on May 25th by reason of the definite alongside date having been given to the plaintiffs is not in my opinion one which it was of the essence of the contract for them to perform … I think the plaintiffs are merely entitled to recover such damages as in fact they suffered by reason of the defendants’ delay … ’
But as to this counsel for the charterers makes two cogent observations: (a) it does not appear to have been a term of the contract itself that the ship should be ready to load on 25 May; and (b) the quoted observation of Atkin J was obiter, inasmuch as the only question there arising was as to damages for one day’s delay, and whether the term was a condition or not made no difference, as the plaintiffs never sought to treat the term as a condition entitling them to cancel. This last-mentioned case may be contrasted with Mathisens v Smith, where the charterparty contained the following clause as to the vessel’s position: ‘Now leaving to-day Birkenhead for Flushing for orders, and expecting to load June 28–29.' Greer LJ said ((1922) 13 Lloyd LR at 215, 216):
‘There can be no question that the words “leaving Birkenhead for Flushing for orders” are not mere terms or an independent term of contract, but they are a condition of the contract which gives the charterer every right to say he can cancel … They were untrue, that is to say inaccurate, at the time of the signing if the charter-party, and on that ground the charterers were entitled to cancel, as they did, after they had ascertained the facts.’
It was strenuously argued by counsel for the owners, that, in the light of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, the long-standing dichotomy between conditions and warranties should no longer persist and that, as Diplock LJ put it ([1962] 1 All ER at 487, [1962] 2 QB at 70):
‘There are, however, many contractual undertakings … which cannot be categorised as being “conditions” or “warranties” … Of such undertakings, all that can be predicated is that some breaches will, and others will not, give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend on the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a “condition” or a “warranty“. For instance, to take the example of BRAMWELL, B., in Jackson v. Union Marine Insurance Co. ((1874) LR 10 CP 125 at 142, [1874–80] All ER Rep 317 at 321), by itself breach of an undertaking by a shipowner to sail with all possible despatch to a named port does not necessarily relieve the charterer of further performance of his obligation under the charterparty, but, if the breach is so prolonged that the contemplated voyage is frustrated, it does have this effect.
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In that case the Court of Appeal held that, although the owners were in breach of the clause in the charterparty relating to seaworthiness, the vessel being unseaworthy on delivery by reason of an incompetent engine room staff, seaworthiness was not a condition of the charterparty a breach of which entitled the charterer at once to repudiate. Upjohn LJ said ([1962] 1 All ER at 483, [1962] 2 QB at 63):
‘It is open to the parties to a contract to make it clear either expressly or by necessary implication that a particular stipulation is to be regarded as a condition which goes to the root of the contract, so that it is clear that the parties contemplate that any breach of it entitles the other party at once to treat the contract as at an end. That matter is to be determined as a question of the proper interpretation of the contract.’
He then went on to recall Bramwell B’s warning in Tarrabochia v Hickie against the dangers of too readily implying such a condition, but continued ([1962] 1 All ER at 484, [1962] 2 QB at 63):
‘Where, however, on the true construction of the contract, the parties have not made a particular stipulation a condition, it would be unsound and misleading to conclude that, being a warranty, damages is a sufficient remedy.’
In other words, breach of a stipulation which is not a condition strictly so called may nevertheless be such as, in certain circumstances, to entitle the innocent party to treat the contract as at an end. In that case the Court of Appeal held that the initial unseaworthiness did not go so much to the root of the contract that the charterers were then and there entitled to treat the charterparty as at an end, for, being due to the insufficiency and incompetence of the crew, the parties must have contemplated that in such an event the crew could be changed and augmented.
An undertaking as to seaworthiness being of obvious importance and yet, in the circumstances of the Hong Kong Fir Shipping Co Ltd case, being found not to amount to a ‘condition’ the breach of which entitled the charterers at once to repudiate, counsel for the owners has urged how much less does cl 1 of the present charterparty import such a condition. With respect, I do not find such an approach convincing, for as Williams J said in Behn v Burness ((1863) 3 B & S 751 at 759):
‘For most charters, considering winds, markets and dependent contracts, the time of a ship’s arrival to load is an essential fact, for the interest of the charterer … Then, if the statement of the place of the ship is a substantive part of the contract, it seems to us that we ought to hold it to be a condition … unless we can find in the contract itself or the surrounding circumstances reason for thinking that the parties did not so intend.’
How ought this matter to be resolved? Notwithstanding the observations in the Hong kong Fir Shipping Co Ltd case, if the fact is that a provision in a charterparty such as that contained in cl 1 in the present case has generally been regarded as a condition, giving the charterer the option to cancel on proof that the representation was made either untruthfully or without reasonable grounds, it would be regrettable at this stage to disturb an established interpretation. The standard textbooks unequivocally state that such a clause as we are here concerned with is to be regarded as a condition; see, among others, Chitty on Contractsb and Carverc. Even more impressive is the fact that, certainly from the 10th edition and onwards of Scrutton
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on Charterparties, the learned author and his successive editors have ‘submitted’ that such a clause, as we are presently concerned with, is one the breach of which entitles the charterer to throw up the charter. In sale of goods cases the courts have for many years held that an analogous provision imported a condition; see eg Finnish Government (Ministry of Food) v H Ford & Co Ltd and MacPherson, Train & Co Ltd v Howard Ross & Co Ltd; and it is difficult to see on what ground a distinction should be drawn in the case of charterparties.
On these grounds, and particularly having regard to the importance to the charterer of the ability to be able to rely on the owner giving no assurance as to expected readiness save on grounds both honest and reasonable, I would be for holding that cl 1 in the present case imported a condition. That the owners were in breach of it is common ground. It is equally undisputed that, if, as I think, the circumstances entitled the charterers to repudiate on 17 July, the fact that they did so by reliance on an untenable plea of force majeure does not invalidate their act of cancellation. In the result, I would be for reversing the finding of the arbitrators and of the learned judge on the first question and for holding that on 17 July 1965 the charterers were entitled to cancel the charterparty, as they in fact purported to do.
If I am right in so holding, that is an end of this case. But, out of respect for the able argument of learned counsel, I feel that I ought to express the views I have formed regarding the two other questions canvassed before us.
Issue B. This relates to the proper construction of cl 11 of the charterparty, which provides as follows:
‘Should the vessel not be ready to load (whether in berth or not) on or before the 20th July 65 Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading. Should the vessel be delayed on account of average or otherwise, Charterers to be informed as soon as possible, and if the vessel is delayed for more than 10 days after the day she is stated to be expected ready to load, Charterers have the option of cancelling this contract, unless a cancelling date has been agreed upon.’
The question that here arises is whether, assuming that the charterers were not entitled to cancel for the owners’ breach of cl 1, they could nevertheless cancel on 17 July because the circumstances (although unbeknown to them) were such that the vessel could not possibly be ready to load at Haiphong on 20 July? That they did not purport to invoke cl 11, either expressly or impliedly, is clear, but they nevertheless claim to have been entitled to do so. This point was not argued below. Having had the advantage of reading in advance what Megaw LJ has to say on this issue, I am in agreement with the reasons he has given for holding that this question should be answered in a manner adverse to the charterers. I accept this view all the more readily because I think that it is one likely to arise only with extreme rarity. Furthermore, to hold the charterers bound by the strict terms of cl 11 does them no harm; for if circumstances become known to them which make it clear or probable that the vessel cannot be ready to load on or about the specified date, it is always open to the charterers to communicate forthwith to the owners their intention to exercise their power of cancellation on the date fixed by the charterparty and that they will meanwhile be making alternative chartering arrangements. It was submitted in argument that good sense demanded that the charterer should have the right to cancel before the date specified in the charterparty, but, for the reason I have given, I see no reason for not adopting the contrary view expressed by Pearson J
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in The Helvetia-S ([1960] 1 Lloyd’s Rep 540 at 551), and by Roskill J in The Madeleine ([1967] 2 Lloyd’s Rep 224 at 241). The latter felicitously expressed all that I want to say on this aspect of the appeal in these words ([1967] 2 Lloyd’s Rep 224 at 241):
‘For my part, I have great difficulty in seeing how, where there is an express right given to cancel if the vessel is not delivered by May 10th, an implied right can concurrently exist to cancel under the clause at some earlier point of time, namely, when it becomes inevitable that the stated cancelling date will not be able to be attained by the ship … I would say that, however reasonable it might be to imply a term such as [counsel for the charterers] sought to imply, it cannot be said to be necessary so to do for the purpose of giving business efficacy to the contract because the contract gives an express right to cancel at a certain date and not at any earlier time.’
Issue C. The final issue raised in the appeal was this: assuming that the purported cancellation by the charterers on 17 July was invalid, to what damages are the owners entitled? The starting point must, I think, be the finding by the arbitrators that:
‘The charterers would beyond doubt … have cancelled the charter, on the ground that the ship has missed her cancelling date.’
Proceeding therefrom, they held that the owners were only entitled to be put in the position of having their ship on a charter which, as soon as she got to Haiphong, could legally and would actually have been cancelled. They accordingly concluded that, although they had found the charterers in breach of the charterparty by an invalid purported cancellation on 17 July 1965, the owners were entitled only to nominal damages in respect of what, in the circumstances, was none other than a worthless charterparty.
I am bound to say that this conclusion has throughout seemed to me both reasonable and ineluctable. Indeed, I confess that I would have regarded the contrary view as unarguable, had we not had presented to us by counsel for the owners, an argument so skilful that he actually succeeded in persuading Mocatta J ([1970] 1 All ER 673, [1970] 2 WLR 907) that his clients should recover £4,000 damages, a conclusion at which the learned judge nevertheless arrived with confessed reluctance. The stages in the argument of counsel for the owners are these: in Frost v Knight, where the defendant had promised to marry the plaintiff as soon as the defendant’s father died but nevertheless married another during his father’s lifetime, it was held that the plaintiff was entitled to recover damages while the father was still alive, Sir Alexander Cockburn CJ observing ((1872) LR 7 Exch at 114, [1861–73] All ER Rep at 225)—
‘The contract having been thus broken by the promisor, and treated as broken by the promisee, performance at the appointed time becomes excluded, and the breach by reason of the future non-performance becomes virtually involved in the action as one of the consequences of the repudiation of the contract; and the eventual non-performance may therefore, by anticipation, be treated as a cause of action, and damages be assessed and recovered in respect of it, though the time for performance may yet be remote.’
Counsel for the owners next relies on the observations of Devlin J in Universal Cargo Carriers Corpn v Citati, founding himself largely on Hochster v De la Tour, that a renunciation, when acted on, became final, and that is is essential to the concept of anticipatory breach that ([1957] 2 All ER at 85, [1957] 2 QB at 438)—
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‘… the injured party is allowed to anticipate an inevitable breach … So anticipatory breach means simply that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited.’
On this basis counsel for the owners skilfully constructed an elaborate submission that, since one is proceeding here on the basis that on 17 July 1965 the charterers committed an anticipatory breach of the charterparty, it was no longer open to them to assert that, on the very belated arrival of the vessel at Haiphong, they could invoke the right to cancel conferred by cl 11. In other words, one is driven to assume an actual breach of the charterparty being committed by the charterers, and the submission made was that this involved assuming that the charterers, being obliged to load a cargo of apatite, wrongfully refused to load any cargo at all. Influenced by counsel’s persuasive argument for the owners, Mocatta J ([1970] 1 All ER at 684, [1970] 2 WLR at 922) said:
‘Once there is a renunciation and an acceptance of it, there is in the eyes of the law a breach and the contract is at an end, but the assumed and in law inevitable failure to perform is one at the date in the future when performance would have been required had there been no anticipatory breach. It is in relation to that assumed future breach of contract, which by law is anticipated, that damages have to be assessed. Here, on the facts, the assumed breach can only be a failure to load; omission to exercise an option to cancel can never be a breach of contract.’
I am afraid that it has to be said, although with the greatest respect, that this approach leads to a result so manifestly unrealistic that there must surely be something wrong with it. And so there is, in my judgment. As counsel for the charterers clearly brought out, the underlying fallacy is in assuming that the anticipatory breach was one which presupposes that the right to cancel will not be exercised—in other words, that you must always anticipate not only a breach, but the worst breach. But the true test in a case of anticipatory breach is: what would the position of the parties have been if the defendant had not wrongly announced his refusal to fulfil his part of the contract when the time for performance arrived? One must look at the contract as a whole, and if it is clear that the innocent party has lost nothing, he should recover no more than nominal damages for the loss of his right to have the whole contract completed. The assumption has to be made that, had there been no anticipatory breach, the defendant would have performed his legal obligation and no more. ‘… a defendant is not liable in damages for not doing that which he is not bound to do’, per Scrutton LJ in Abrahams v Herbert Reiach Ltd ([1922] 1 KB 477 at 482), cited with approval by Diplock LJ in Lavarack v Woods of Colchester Ltd ([1966] 3 All ER 683 at 690, [1967] 1 QB at 293). In the light of the arbitrators’ finding, it is beyond dispute that, on the belated arrival of the vessel at Haiphong, the charterers not only could have elected to cancel the charterparty, but would actually have done so. The rights lost to the owners by reason of the assumed anticipatory breach were thus certain to be rendered valueless. It follows from this that, in my judgment, the arbitrators were right in holding that, in the circumstances, the claim of the owners for damages should be dismissed.
As to the appeal as a whole, for the reasons given in relation to issue A, I concur in holding that it should be allowed and judgment entered for the charterers.
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MEGAW LJ. As a result of the admirable clarity and precision of the arbitrators’ award, there is no doubt or ambiguity about the facts relevant to this appeal. They may be summarised as follows: the charterers and the owners made a contract in the form of a charterparty on 25 May 1965. By that charter, the owners agreed that the vessel, ‘now trading and expected ready to load under this charter about 1st July 1965’, should proceed to Haiphong, in North Vietnam, and there load 9,500 tons of a mineral called apatite and should carry that cargo to a port in northern Europe. It was provided that lay days should not commence before 1 July 1965. The first sentence of the cancelling clause, cl 11, reads:
‘Should the vessel not be ready to load (whether in berth or not) on or before the 20th July 65 Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading.’
On 25 May 1965, the date of the charter, the owners could not reasonably have estimated that the vessel could or would arrive at Haiphong about 1 July 1965. The arbitrators have expressly so found, and that finding of fact is binding and conclusive. The vessel in fact reached Hong Kong on 23 June, but the time of discharge of cargo there, which could have been expected to take 14 days, was substantially and unexpectedly prolonged. Discharge at Hong Kong ended on 23 July 1965.
Meanwhile other events had happened which have led to this litigation. The charterers found, possibly because of warlike activities in and over North Vietnam, that the intended cargo of apatite was not going to be available at Haiphong. On 17 July 1965, the charterers, through their agents, informed the owners, through their agents, that they cancelled the charterparty. They gave as their reason ‘force majeure’. The owners, rightly as is now accepted, denied that the charterers were entitled to cancel the charterparty for ‘force majeure’, whether or not that phrase meant, or was intended to include, frustration of the contract. There was, it is now accepted, no case of frustration. The owners treated the charterers’ intimation of cancellation as being a wrongful repudiation of the contract, and on the same day notified the charterers of their acceptance of it as terminating the contract, leaving the owners, so they claimed, with the right to recover damages because of the alleged wrongful repudiation by the charterers. The owners sold the vessel in Hong Kong. They were however, able to provide evidence which satisfied the arbitrators that, if instead of selling the vessel, the owners had sought to employ the vessel on a substituted voyage to a north European port, in place of the cancelled charterparty voyage, the owners would, as a result of the prevailing freight market, have suffered a loss of profit of £4,000 on that notional substituted voyage, as compared with the profit obtainable on the voyage which the charterers had refused to carry out. The only other finding of fact of the arbitrators to which reference need be made is this:
‘We find that if the ship, after discharge at Hong Kong, had proceeded to Haiphong, the Charterers would beyond doubt (there having, on this assumption, been none of this business of anticipatory repudiation) have cancelled the charter, on the ground that the ship had missed her cancelling date.’
The owners dispute the relevance of that finding. If relevant, its conclusiveness as a finding of fact by the arbitrators cannot be disputed.
Three issues of law have been argued on this appeal.
The first is whether the charterers were entitled to treat the breach by the owners, now conclusively established by the arbitrators’ findings of fact, of the contractual term contained in the wordsd: ‘expected ready to load under this charter about
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1st July 1965’ as putting an end to their, and the owners’, future obligations under the charter. Of course, before the breach could produce that result, the charterers had to notify the owners that they, the charterers, were treating the contract as at an end. But it has been accepted, for the purposes of this case, that such a notification by the charterers would not be ineffective merely because it was accompanied by a statement of the wrong reason, if in fact there was then in existence a right reason. Hence the charterers’ notification of 17 July 1965 would be effective, despite the fact that the purported cancellation was expressed to be on the basis of ‘force majeure’, if in fact the owners’ breach of the ‘expected ready to load’ term of the charter entitled the charterers to treat the contract as terminated. If so, there could be no question of a wrongful repudiation by the charterers or of any damages being payable by them to the owners, as was claimed in the arbitration. Therefore the crucial question on the first issue is whether the charterers were entitled, because of that breach, to treat the charterparty as at an end.
It is not disputed that when a charter includes the words: ‘expected ready to load … ’ a contractual obligation on the part of the shipowner is involved. It is not an obligation that the vessel will be ready to load on the stated date, nor about the stated date, if the date is qualified, as here, by ‘about’. The owner is not in breach merely because the vessel arrives much later, or indeed does not arrive at all. The owner is not undertaking that there will be no unexpected delay, but he is undertaking that he honestly and on reasonable grounds believes, at the time of the contract, that the date named is the date when the vessel will be ready to load. Therefore in order to establish a breach of that obligation the charterer has the burden of showing that the owner’s contractually expressed expectation was not his honest expectation, or, at the least, that the owner did not have reasonable grounds for it.
In my judgment, such a term in a charterparty ought to be regarded as being a condition of the contract, in the old sense of the word ‘condition’, ie that when it has been broken, the other party can, if he wishes, by intimation to the party in breach, elect to be released from performance of his further obligations under the contract; and that he can validly do so without having to establish that, on the facts of the particular case, the breach has produced serious consequences which can be treated as ‘going to the root of the contract’ or as being ‘fundamental’, or whatever other metaphor may be thought appropriate for a frustration case.
I reach that conclusion for four interrelated reasons. First, it tends towards certainty in the law. One of the essential elements of law is some measure of uniformity. One of the important elements of the law is predictability. At any rate in commercial law, there are obvious and substantial advantages in having, where possible, a firm and definite rule for a particular class of legal relationship, eg as here, the legal categorisation of a particular, definable type of contractual clause in common use. It is surely much better, both for shipowners and charterers (and, incidentally, for their advisers) when a contractual obligation of this nature is under consideration, and still more when they are faced with the necessity for an urgent decision as to the effects of a suspected breach of it, to be able to say categorically: ‘If a breach is proved, then the charterer can put an end to the contract’, rather than that they should be left to ponder whether or not the courts would be likely, in the particular case, when the evidence had been heard, to decide that in the particular circumstances the breach was or was not such as to go to the root of the contract. Where justice does not require greater flexibility, there is everything to be said for, and nothing against, a degree of rigidity in legal principle.
Secondly, it would, in my opinion, only be in the rarest case, if ever, that a shipowner could legitimately feel that he had suffered an injustice by reason of the law having given to a charterer the right to put an end to the contract because of the breach by the shipowner of a clause such as this. If a shipowner has chosen to assert contractually, but dishonestly or without reasonable grounds, that he expects his vessel to be ready to load on such and such a date, wherein does the grievance lie?
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Thirdly, it is, as Mocatta J held ([1970] 1 All ER at 677, [1970] 2 WLR at 915), clearly established by authority binding on this court that where a clause ‘expected ready to load’ is included in a contract for the sale of goods to be carried by sea, that clause is a condition, in the sense that any breach of it enables the buyer to reject the goods without having to show that the dishonest or unreasonable expectation of the seller has in fact been prejudicial to the buyer. The judgment of Bankes LJ in which Warrington and Atkin LJJ concurred, in Finnish Government (Ministry of Food) v H Ford & Co Ltd is in point. The clause there was ‘Steamers expected ready to load February and/or March 1920’. Bankes LJ said ((1921) 6 Lloyd LR at 189):
‘I come to the conclusion therefore that this clause is one containing a contract. It is a contract which is in its nature a condition … ’
That authority is not only binding on this court, but is, I think, completely and desirably in conformity with the line of cases which have decided—and the law in that respect is now accepted as being beyond dispute—that a statement in a contract of sale as to the loading period is a condition in the sense which I have indicated. If the contract says ‘loading to be during July’, the buyer can reject the goods if the loading was not complete until midday on 1 August. He is not limited to claiming damages; he is not obliged to show that he has suffered any damage.
It would, in my judgment, produce an undesirable anomaly in our commercial law if such a clause—‘expected ready to load’—were to be held to have a materially different legal effect where it is contained in a charterparty from that which it has when it is contained in a sale of goods contract. True, in the latter case the relevant ‘expectation’ is that of the seller of the goods, who may himself be the charterer; whereas in the former case the relevant ‘expectation’ is that of the shipowner. But I do not see that that fact is sufficient to warrant the making of a distinction between the two. True, also, as was stressed by counsel for the owners, the charterparty will almost invariably include a cancelling clause; and it is argued that that fact justifies the drawing of a distinction. Again, I think not, for various reasons. One of them is that the date before which the cancelling clause cannot be exercised (this involves the argument for the owners on the second issue, to be considered hereafter) is itself normally fixed by reference to the date of expected readiness to load, and on the assumption that that is an honest and reasonable expectation.
The fourth reason why I think that the clause should be regarded as being a condition when it is found in a charterparty is that that view was the view of Scrutton LJ, so expressed in his capacity as the author of Scrutton on Charterparties. The 10th edition of the work, for which the Lord Justice was personally responsible, contained the same expression of opinion as is still to be found in the 17th edition (Page 79, case 4) as follows:
‘A ship was chartered “expected to be at X about the 15th December … shall with all convenient speed sail to X“. The ship was in fact then on such a voyage that she could not complete it and be at X by December 15th. Submitted. that the charterer was entitled to throw up the charter.’
In the footnote to that passage reference is made to, amongst other cases, Corkling v Massey. The facts in the passage are the facts of Corkling v Massey. In Corkling v Massey the question whether the clause operated as a condition was left undecided by a Division Court. Scrutton LJe, in the sentence: ‘Submitted … ’, indicated how he would have decided it.
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Mocatta J reached a different conclusions on this issue because, I think, he considered that some observations of Upjohn LJ in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd ([1962] 1 All ER 474 at 483, [1962] 2 QB 26 at 63), with a citation from the judgment of Bramwell B in Tarrabochia v Hickie ((1856) 1 H & N 183 at 188), were at least persuasive authority in that direction. Those observations were very general in their effect. I do not think, myself, that Upjohn LJ would have intended that they should be treated as derogatory from the principle applicable to the present type of case to be deduced from a passage in the judgment of the Exchequer Chamber in Behn v Burness ((1863) 3 B & S 751 at 759) which Edmund Davies LJ cited in his judgment and which I need not, therefore, repeat. It is true that that case was concerned with the words (now in the port of Amsterdam’. But in my opinion the principle stated is applicable.
If this first issue be decided, as I think it should be decided, in favour of the charterers, then the appeal succeeds and the other two issues do not need to be decided. Nevertheless, as they were argued fully, it seems desirable that they should be determined by this court.
The second issue is a question of construction of the cancelling clause, cl 11. The charterers say that even if they were wrong on the first issue, they were entitled, on 17 July 1965, to exercise their option under cl 11 to cancel the charterparty. True, they purported to cancel because of ‘force majeure’; but the fact that they gave the wrong reason is, they say, not relevant. The owners say that the charterers cannot rely on cl 11 for two reasons. First, the clause by its terms does not permit of the exercise of the option before 20 July; secondly, the purported cancellation of the contract could not be treated as an exercise of the option under cl 11 since the charterers expressed their notification of purported cancellation as being on a wholly different ground. We do not have the advantage of the views of Mocatta J or of the arbitrators on this issue, since the charterers reserved their argument below and adduced it for the first time in this court. Their reason for taking that course was that there are decisions, or dicta, adverse to them by Pearson J in The Helvetia-S ([1960] 1 Lloyd’s Rep 540 at 551), and by Roskill J in The Madeleine ([1967] 2 Lloyd’s Rep 224 at 241).
Respectfully disagreeing on this issue with Lord Denning MR, I am comforted by finding myself in agreement with Edmund Davies LJ. I am of opinion that the first answer given by the owners must be right. If it were wrong, the second answer would not avail the owners. The construction of the clause proposed in the first answer, accords with the view expressed in the cases I have mentioned, which, whether they be dicta or more than dicta, are, I respectfully think, right. There is nothing in the different wording of the clauses in those two cases which affects the applicability of the reasoning to the present clause.
The owners’ proposition is quite simple. The clause begins with the words: ‘Should the vessel not be ready to load … on or before the 20th July 65 … ’ Those words govern and control the clause. The charterers are given an option, for their own benefit. This option is exercisable, and exercisable only, when the condition is fulfilled, namely that on 20 July the vessel is not ready to load.
The charterers’ contention is that the opening words should be interpreted as though they read: ‘Should the vessel not be ready to load, or should she be in such a position that she will not be ready to load, on or before 20th July 1965 … ’ On 17 July the vessel was still unloading at Hong Kong. There was no possibility, as is now known, of her being able to reach Haiphong by 20 July. Hence the charters (although in fact it did not occur to them to do so) could lawfully have exercised their option under this clause, although 20 July had not yet come. It might perhaps be
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permissible to give the charterers’ construction to the words of the clause, although I think that it would properly be described as a bold construction, if so to do would make the clause a substantially more sensible instrument for carrying out the general purpose for which it was introduced; but I think that counsel for the owners is right in his submission that the bold construction—the reading in of the words which are not there—does not have that effect. It involves reading in also a thought which was not present to the minds of the parties and which in my view is not necessary to give the clause sensible legal and practical effect. If the charterers are confident that the vessel is going to miss her cancelling date, and for some reason are minded to put an end to the charterparty before that date has arrived, there is nothing whatever to prevent them from asking the owners to agree that the charterparty should be cancelled. That does not require cl 11. If the owners do agree, cl 11 neither helps nor hinders. There is no need to read into it words that are not there to achieve that which can be achieved by mutual consent. If the owners do not agree, is there any possible advantage to the charterers in reading these suggested words into the clause? In the absence of agreement by the owners, the charterers are no better off as a result of the rewriting of the clause. Without any forced construction of the clause, the charterers can, if they are confident of the non-arrival of the vessel by the cancelling date, go ahead and make whatever arrangements they wish in anticipation of exercising their option under the clause when the cancelling date arrives. Of course, if they prove wrong in their forecast of the vessel’s arrival, and if the vessel in fact, after all, makes the cancelling date, the charterers will be in trouble if they have already made other arrangements. But that is not a good ground for giving a bold interpretation to the clause. It is really in only a very odd and exceptional case, such as the present, that the suggested extension of meaning could be of any importance; and here, if it were important, it would only be of importance because the charterers misinterpreted their rights under other provisions of the charterparty. No conceivable harm would have been done to them if they had waited until 20 July and then invoked the cancelling clause. The bold construction is called for by the charterers, not because the natural construction leads to practical difficulty, but in order to try to save themselves from the consequences of their own error.
I think that the owners are right on the second issue.
The third issue is as to damages, assuming that there was, as I think there was not, a breach of contract by the charterers. The owners suffered no loss. The arbitrators held that their entitlement was nominal damages only. Long before the arbitration took place, the charterers had tendered £5 to the owners in full settlement of their claim. The arbitrators expressed their conclusion in this way in the award:
‘29. We think the right view is that when a contract is repudiated, the repudiation accepted, the innocent party can truly say the contract is at an end: its performance is no longer binding but it (or its ghost) must survive as the datum line for measuring the damages: the innocent party is entitled to be put, financially, in the same position as, but in no better position than, that in which he would have been if the contract had not been repudiated but had come on for performance: and his claim for damages must be based on that method of performing the contract which would have been least profitable to him.
‘30. We find that if the ship, after discharge at Hong Kong, had proceeded to Haiphong, the Charterers would beyond doubt (there having, on this assumption, been none of this business of anticipatory repudiation) have cancelled the charter, on the ground that the ship had missed her cancelling date.
‘31. We hold in those circumstances that the Owners are only entitled to be put in the position of having their ship on a charter, which, as soon as she got to Haiphong, could legally have been, and would have been, cancelled: and are entitled to nominal damages accordingly and no more.’
In my judgment, the arbitrators’ conclusion is right, as are also their reasons.
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The contrary view was put forward in a most attractive argument by counsel for the owners. It was an argument which persuaded Mocatta J reluctantly to the conclusion that the law is such as to require the award of £4,000 damages in a case such as this, even though not one penny of damage was suffered. When a logical argument leads to such a conclusion, one is bound to consider whether the premise is sound. The premise here, based on some passages in the judgment of Cockburn CJ in Frost v Knight and on the judgment of Devlin J in Universal Cargo Carriers Corpn v Citati, is that where there is an anticipatory breach of contract the law assumes that, when the time for performance of the contract by the shipowners would have come, the repudiator will commit a breach of the contract. The law assumes that there will be a breach. Hence it is not open to the repudiator to say that no breach would then have taken place, although there is a term of the contract which provides that, in the events which would necessarily have happened, he would have been excused further performance under a term of the contract. It would follow that if a contract of sale provided for the delivery of a maximum of 5,000 tons and a minimum of 1,000 tons, the seller, having committed an anticipatory repudiation which had been duly accepted, would be liable for damages on the minimum quantity of 1,000 tons only; whereas if the option were for the seller to deliver no goods at all in certain events, which events, it could be proved, were at the date of the repudiation bound to happen, the seller would be liable for damages on the basis of non-delivery of the whole 5,000 tons.
In my view, where there is an anticipatory breach of contract, the breach is the repudiation once it has been accepted, and the other party is entitled to recovery by way of damages the true value of the contractual rights which he has thereby lost, subject to his duty to mitigate. If the contractual rights which he has lost were capable by the terms of the contract of being rendered either less valuable or valueless in certain events, and if it can be shown that those events were, at the date of acceptance of the repudiation, predestined to happen, then in my view the damages which he can recover are not more than the true value, if any, of the rights which he has lost, having regard to those predestined events.
I would allow the appeal. In the absence of agreement between the parties, I would remit the matter to the arbitrators as they request, so that they can bring the matter to finality.
Appeal allowed. In absence of agreement matter remitted to arbitrators. Leave to appeal to the House of Lords.
Solicitors: Hill, Dickinson & Co (for the charterers);Richards, Butler & Co (for the owners).
Henry Summerfield Esq Barrister.
Manfield & Sons Ltd v Botchin
[1970] 3 All ER 143
Categories: LANDLORD AND TENANT; Tenancies
Court: QUEEN’S BENCH DIVISION
Lord(s): COOKE J
Hearing Date(s): 7, 8, 15 APRIL 1970
Landlord and tenant – Tenancy – Tenancy at will – Express agreement for tenancy at will of business premises – Whether protected tenancy.
Landlord and tenant – Business premises – Tenancy – Effect of provision purporting to exclude statutory protection of tenancy.
The landlords were the owners of three shops. From 1963 onwards they were anxious to obtain planning permission to redevelop the site of the shops, but applications for such permission were refused or granted subject to unacceptable conditions. On 21 December 1964, the landlords entered into an agreement with the tenant. The agreement contained a recital referring to ‘a tenancy at will of [one of the shops] … until such time as the [landlords] shall require possession for the purpose of carrying out [redevelopment]’. The agreement provided by cl 1 that the landlords should let and tenant should take ‘the premises on a tenancy at will commencing from the 5th day of December 1964 at a rental to be calculated at the rate of £1,560 per annum and paid on demand at such time or times as the [landlords] may think fit Provided always that if the [landlords] should demand the aforesaid rent at fixed periods such demand or acceptance of rent shall not be deemed to create any periodic tenancy’. The agreement contained, inter alia, in cl 2 a covenant by the tenant that the tenancy at will should be personal to him and that he would not part with or share occupation of the premises, and in cl 3 an acknowledgement by the tenant that the tenancy at will had been granted on the express understanding that his occupation should not be such as was protected by Part 2 of the Landlord and Tenant Act 1954 and on vacating the premises he should not be entitled to compensation under that Act. No provision was made for re-entry on breach of any of the covenants contained in cl 2. The tenant remained in possession of the premises for over 4 1/2 years. Demands and payments of rent were made each (lunar) month with a few exceptions. In May 1969, the landlords obtained planning permission to carry out a scheme of development satisfactory to themselves on the sites of the three shops. On 28 August 1969, the tenant was given a notice to quit on 6 September. The tenant remained in occupation of the premises. On the question whether the tenancy was a yearly tenancy or a tenancy at will, and, if it was the latter, whether the tenant could claim the protection of Part 2 of the Landlord and Tenant Act 1954,
Held – (i) The agreement was at all times a tenancy at will, because—
(a) the tenant was aware at the time of signing the agreement that he was only getting a tenancy at will and the expressed intention of the parties to this effect was not defeated by the reservation of rent at an annual rate and was wholly consistent with the other terms of the agreement (and with the absence of any provision relating to a right of re-entry) (see p 147 h and p 148 b and e, post); and
(b) there were no grounds for concluding that subsequent to the agreement the parties had changed their relationship and agreed on a yearly or other periodic relationship since neither the duration of the tenancy nor the regular demands for rent were inconsistent with the agreement (see p 148 j and p 149 a, post).
Per Cooke J. Had there been a settled practice in demanding and paying rent monthly in advance, it would be questionable whether it would have involved such a departure from the provisions of the agreement as to lead to the conclusion that the parties had changed their relationship and agreed on a yearly or other periodic tenancy (see p 149 c, post).
(ii) It was clear that, on looking at the Act as a whole, Parliament did not intend
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Part 2 of the Landlord and Tenant Act 1954 to cover tenancies at will (see p 153 d, post); accordingly, the landlords could claim possession from the tenant.
Dicta of Lord Cohen, Lord Somervell of Harrow and Lord Morton of Henryton in Wheeler v Mercer [1956] 3 All ER at 638, 639 and 635 followed.
Per Cooke J. In considering whether the tenant’s tenancy is protected by Part 2 of the Act, I have treated as totally inoperative the provisions of cl 3 of the agreement whereby the tenant acknowledges that the tenancy has been granted to him on the express understanding that his occupation shall not be such as is protected by Part 2 of the Act and whereby he renounces any claim to compensation since it is not open to the parties to an agreement to determine whether the tenancy falls within the protection of the Act (see p 153 g, post). This conclusion could be reached quite independently of s 38(1); but the terms of that subsection also clearly avoid the provisions of cl 3 (see p 153 h, post).
Notes
For tenancies at will, see 23 Halsbury’s Laws (3rd Edn) 505–509, paras 1150–1157, and for cases on the subject, see 31 Digest (Repl) 32–42, 1890–2003.
For the Landlord and Tenant Act 1954, ss 25, 69, see 18 Halsbury’s Statutes (3rd Edn) 559, 605.
Cases referred to in judgment
Doe d Bastow v Cox (1847) 11 QB 122, 17 LJQB 3, 11 LTOS 132, 116 ER 421, 31 Digest (Repl) 32, 1892.
Facchini v Bryson [1952] 1 TLR 1386, Digest (Cont Vol A) 1073, 7602a.
Joseph v Joseph [1966] 3 All ER 486, [1967] Ch 78, [1966] 3 WLR 631, Digest (Cont Vol B) 481, 6890a.
Morgan v William Harrison Ltd [1907] 2 Ch 137, 76 LJ Ch 548, 97 LT 445, 31 Digest (Repl) 35, 1914.
Samrose Properties Ltd v Gibbard [1958] 1 All ER 502, [1958] 1 WLR 235, Digest (Cont Vol A) 1081, 7662b.
Wheeler v Mercer [1956] 3 All ER 631, [1957] AC 416, [1956] 3 WLR 841, Digest (Cont Vol A) 1058, 7417q.
Action
This was an action by the landlords, Manfield & Sons Ltd, claiming possession from the tenant, Harry Botchin, of premises at 46 Commercial Road, Bournemouth. The facts are set out in the judgment.
E J Prince for the landlords.
E A Bramall for the tenant.
Cur adv vult
15 April 1970. The following judgment as delivered.
COOKE J read the following judgment. The landlords are, and have been since 1963, if not earlier, the owners in fee simple of three shops, 42, 44 and 46 Commercial Road, Bournemouth. In 1963, 42 was occupied by the landlords themselves and was a shoe shop; 44 was a fancy goods shop; 46 had at one time been occupied by a dairy company but, by the autumn of 1964, it was, and had for some time been, unoccupied.
From 1963 onwards the landlords had been anxious to obtain planning permission to redevelop the site of these three shops in accordance with a scheme satisfactory to themselves. They had made an application for planning permission to carry out a scheme of redevelopment in March 1963; that application was refused. In September 1963, they applied for planning permission to carry out a different scheme; that application was granted subject to a condition which was not acceptable to the landlords. In October 1963, the landlords applied for planning permission to carry out yet another scheme; that application was refused in December 1963, and from that refusal the landlords in due course appealed to the Minister. The Minister’s
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decision on the appeal was not given until January 1965; it was to allow the appeal, but subject to conditions as to the manner in which the proposed development should be carried out. In the meantime the landlords were receiving no benefit from their ownership of the shop at 46, and were not unnaturally anxious to find a tenant for the shop until such time as they had received planning permission for a scheme of development which they regarded as satisfactory. Equally, of course, the landlords were anxious if possible to be in a position to resume possession of the shop as soon as they might require it in order to proceed with a development scheme.
In the autumn of 1964, the tenant desired to open a gift shop and a shop for the sale of antiques, and he wished to obtain a tenancy of 46 for that purpose. On 23 November 1964, the tenant wrote to the landlords’ agents offering to accept a weekly tenancy of 46 and enclosing a cheque for £120 as an advance payment for four weeks’ rent at the rate of £30 a week. On 11 December 1964, the landlords’ agents wrote to the tenant returning his cheque and saying:
‘I now have pleasure in returning herewith your cheque for £120, as your solicitors will no doubt be advised by my clients’ solicitors over the question of payment of rent. I understand that the respective lawyers are in touch with each other and I do trust that this matter will be shortly concluded should it not have already been.’
It was indeed the case that the landlords’ solicitors and the tenant’s solicitors were in touch with each other, and as a result of their consultations a tenancy agreement was prepared. This agreement was in due course executed by the landlords and the tenant. This agreement is dated 21 December 1964 and by it the landlords purport to grant to the tenant the tenancy at will of 46 Commercial Road, commencing on 5 December 1964. It is necessary to refer to some of the provisions of the agreement in detail. The recitals read:
‘1. The company [ie the landlords] is the freeholder of the premises known as 42, 44 and 46 Commercial Road in the County Borough of Bournemouth and intends to demolish or reconstruct the same as soon as possible but is unable to proceed with this work at present.
‘2. [The tenant] has requested the company to grant him a tenancy at will of 46 Commercial Road aforesaid (hereinafter called ‘the said premises’) until such time as the company shall require possession of the same for the purpose of carrying out the work hereinbefore mentioned.’
Clause 1 of the agreement reads:
“The [landlords] shall let and [the tenant] shall take the said premises on a tenancy at will commencing from the 5th day of December 1964 at a rental to be calculated at the rate of £1560 per annum and paid on demand at such time or times as the company may think fit Provided always that if the company should demand the aforesaid rent at fixed periods such demand or acceptance of rent shall not be deemed to create any periodic tenancy.’
Clause 2 sets out a number of covenants into which the tenant enters. Clause 2 provides:
‘(b) To keep the said premises in as good a state of decorative repair as the same now are in and in such state to yield up the said premises on determination of the tenancy at will with all additions and improvements thereto except the occupier’s trade fixtures and fittings and to make good any damage caused by the occupier to the said premises …
‘(d) That the said tenancy at will should be personal to [the tenant] who shall not part with or share occupation of the premises or any part thereof to or with any other person …
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‘(1) Not to use or permit the premises or any part thereof to be used for any trade or business of a similar nature to that carried on by the [landlords] at any adjoining or neighbouring premises or as a dwelling or sleeping apartment but to use the said premises only for the purposes of a high class gift shop and for the sale of antiques.’
It is noteworthy that the agreement contains no provision for re-entry by the landlords on breach of any of the tenant’s covenants. Clause 3 of the agreement provides:
‘[The tenant] hereby acknowledges that the aforesaid tenancy at will has been granted at his request and on the express understanding that his occupation shall not be such as is protected by Part 2 of the Landlord and Tenant Act 1954 and on vacating the premises he shall not be entitled to any compensation under Section 37 of the said Act.’
It is an agreed fact in this case that no conversation took place between the tenant and the landlords’ managing agents or solicitors after the writing of the tenant’s letter of 23 November 1964, in which he offered to take the shop on a weekly tenancy. It is also an undoubted fact that when the tenant accepted the tenancy, which was created by the agreement of 21 December 1964, he had available to him the independent advice of his own solicitors, and I think that it is a fair inference that the tenant as well as his solicitors, understood perfectly well that what the landlords were intending to grant to him by that agreement was not a periodic tenancy but a tenancy at will determinable at any time by either party.
By the terms of the agreement the rent reserved was to be calculated at the rate of £1,560 per annum and paid on demand at such time or times as the landlords might think fit. Paragraph 6 of the agreed statement of facts in this case includes the following:
‘Between January 1965 and August 1969 the [landlords] demanded and the [tenant] paid rent at the rate of £1,560 per annum. Demands and payments were made lunar monthly with a few exceptions.’
The demands have not been preserved, but I have had before me a schedule showing the dates of the payments, the amount of each payment, and the period in respect of which each payment was made.
The tenant remained in possession of the shop on this basis for a period of over 4 1/2 years. In May 1969, the landlords obtained planning permission to carry out a scheme of development satisfactory to themselves on the site of the three shops. On 4 August 1969, the landlords’ solicitors wrote to the tenant intimating that the landlords would shortly be requiring him to vacate 46 Commercial Road and endeavouring to consult his convenience as to the date of vacation. Having had no reply to this letter, or to subsequent letters written on 13 August 1969 and 18 August 1969, the landlords’ solicitors on 28 August 1969 gave notice to the tenant to quit the premises on 6 September. That notice has not been complied with and the tenant remains in occupation of 46 Commercial Road. He now contends that his tenancy is a yearly tenancy and not a tenancy at will. He further contends that whether the tenancy be a yearly tenancy or a tenancy at will, it is a tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies.
It is common ground that if the tenancy is a yearly tenancy it is one to which Part 2 of that Act applies. The questions which I have to decide are therefore two in number: first, what is the true nature of this tenancy? Is it a yearly tenancy or a tenancy at will? Secondly, if it is a tenancy at will does Part 2 of the 1954 Act apply to it?
A tenancy at will arises where one person rents land to another to hold at the will of the lessor. Such a tenancy is determinable at any time either by the lessor or the lessee. Tenancies at will commonly arise by implication from the acts of the parties as, for example, where a tenant whose lease has expired is permitted to continue in
Page 147 of [1970] 3 All ER 143
possession pending the conclusion of negotiations for a further lease, or where a prospective purchaser of land is admitted into possession before completing. It is, however, entirely clear that a tenancy at will may be created by express agreement, even though such cases may be rare; see, for example, Morgan v William Harrison Ltd. The first question may therefore be resolved into two elements. First, was the effect of the agreement of 21 December 1964 to create a tenancy at will? Secondly, if the answer to that is in the affirmative, has anything subsequently occurred to alter the nature of the tenancy and convert it into a periodic or some other kind of tenancy? I deal first with the agreement of 21 December 1964.
I entirely accept that in considering the effect of that agreement, particularly in the context of remedial legislation designed to give protection to tenants, I am free and, indeed, obliged to look at the true nature of the agreement and am not bound to accept without question the legal label which the parties have chosen to attach to the relationship which the agreement creates. I think, however, that I must at any rate start from the fact that the agreement by its terms purports to create a tenancy at will; nor is this a case where the parties have combined to set up a sham form of agreement in order to disguise the true nature of the agreement between them, for there is not the slightest doubt that the intention of the landlords at any rate was to create a tenancy at will and no other kind of tenancy—and in describing the tenancy as a tenancy at will the landlords at least were in earnest. Nevertheless, if, on a true analysis of the agreement, it creates not a tenancy at will but some other kind of tenancy, the description used by the parties must give way to the reality. If authority is required for the proposition that in the context of legislation designed for protection of tenants the courts will look at the substance of the relationship between the parties to a transaction, it will be found in judgments in the Court of Appeal in Facchini v Bryson and in the observations of Lord Evershed MR in Samrose Properties Ltd v Gibbard ([1958] 1 All ER 502 at 503, [1958] 1 WLR 235 at 238, 239).
In the Samrose case the question was whether the tenancy was one to which the rent restriction legislation applied. That in turn depended on whether the sum of £35 expressed to be paid as consideration for a promise to grant a lease for one year at a quarterly rent of one guinea was in truth and in fact no more than an advance payment of rent under the lease. The Court of Appeal held that the reality of the matter was that the £35 was a payment by way of rent and that the tenant was accordingly entitled to the protection of the rent restriction legislation.
Now in the present case it is true that the agreement reserves a rent, and quite a considerable rent, which is to be calculated on an annual basis. It is, however, clear law that when the agreement between the parties expressly creates a tenancy at will the fact that the agreement reserves a rent on a yearly basis would not, or at any rate not necessarily, override the expressed intention of the parties to create a tenancy at will and no more: see Doe d Bastow v Cox. In my view, the fact that rent was reserved at an annual rate is not in the present case sufficient to override the expressed intention of the parties to create a tenancy at will. The agreement does not provide for the payment of rent at fixed times, but only on demand. It is questionable whether the terms of this provision would strictly empower the landlords to demand rent in advance. If, however, the provision does empower the landlords to demand rent in advance, it seems to me that any advance payment made on such a demand would of necessity be a provisional payment only, and if during the period for which an advance payment had been made, either the landlords or the tenant were to exercise the right to determine the tenancy forthwith, an appropriate adjustment would have to be made.
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Looking at the tenant’s covenants in cl 2 of the agreement, they do not appear to me to be inconsistent with a tenancy at will, and the covenant in cl 2(d) in particular is of a kind which is peculiarly appropriate to a tenancy at will. As I have already said, there is no express provision for re-entry on breach of any of the covenants of cl 2, and this is entirely intelligible on the basis that the tenancy is a tenancy at will because of course in the case of such a tenancy the landlords are entitled to re-enter at any time without cause assigned. On the other hand, if the tenancy were a periodic tenancy—certainly if it were a tenancy from year to year—I would expect to find an express provision for re-entry on breach of at any rate some of the covenants of cl 2.
It may be said that the rent is a large one for a tenant to pay when there is no security of tenure. It is in fact at the same rate as the tenant was in November 1964 prepared to pay for a weekly tenancy. But it is also necessary to bear in mind that at the time when the tenancy was created the landlords were experiencing frustration in their attempts to obtain planning permission for a scheme of development which they regarded as satisfactory, and the tenant may well have thought that it was worth his while to accept a tenancy at will in the expectation that there might be a considerable period of delay before redevelopment took place. Moreover, the tenant’s own venture in opening this shop was a new venture, and for such a venture he might well have been unwilling to commit himself to a long tenancy. In fact, the tenancy that he was proposing in November 1964 was a weekly tenancy only.
As I have already said, when the tenant signed the agreement of 21 December 1964, I do not think that he can have been in any doubt that the landlords were unwilling to grant him a periodic tenancy and all that he was getting was a tenancy determinable at any time by either party.
Looking now at the recitals to the agreement, the first recital is entirely in accordance with the facts and is not in any way inconsistent with the creation of a tenancy at will. The second recital begins by stating: ‘[The tenant] has requested the company to grant him a tenancy at will … ’ There is no evidence of such a request and, indeed, the facts as set out in the agreed statement are inconsistent with the tenant himself having made such a request to the landlords or to their managing agents or solicitors. On the other hand, it is clear enough that the tenant through his solicitors was agreeing to accept the tenancy at will, and I do not think that any inaccuracy that there may be in the opening words of the second recital are of any assistance to me in determining the questions which I have to decide. The recital goes on to state that the tenant’s request was for a tenancy at will until such time as the landlords shall require possession of the premises for the purposes of demolition or reconstruction. There is plainly a contradiction here because, of course, if the tenancy is to be a tenancy at will, the landlords are free to determine it at any time whether or not they require the premises for the purposes of carrying out works. However, it is not suggested by the tenant in this case that the tenancy was to subsist until such time as the landlords should require the premises for the purposes of carrying out works; what the tenant is contending is that the agreement is a yearly tenancy. I fail to see that the contradiction in the recital is of any assistance to him in that contention. In any event, any contradiction in the recital would be resolved by plain words in the operative provisions of the agreement. In my view it is plain when one looks at the operative provisions of the agreement that the agreement reads tenancy at will, and not a yearly or other periodic tenancy.
Has, then, anything occurred since the date of the agreement which has altered the relationship of the parties? The tenant relies on the fact that the tenancy subsisted for nearly five years before the landlords purported to determine it. I cannot think that there is a circumstance which indicates that the parties have altered their relationship since the agreement was made. There is nothing in the actual duration of the tenancy which is inconsistent with the agreement which the parties made, for under the agreement the duration of the tenancy is wholly indeterminate.
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Then the tenant relies on the fact that, in the main, rent was regularly demanded and paid on a monthly basis. I find nothing in this fact which indicates an alteration in the relationship between the parties. Regular demands for and payment of rent are not in themselves inconsistent with a tenancy at will, and indeed in this case they are actually contemplated by the agreement itself, just as they were contemplated in Doe d Bastow v Cox.
There remains, however, the fact that some—although by no means all—of the payments included an element of rent in advance. As I have said, I have not seen the demands for the rent but it is no doubt reasonable to infer that some of the demands also included an element of rent in advance. I have used the expression ‘an element of rent in advance’ because in most, if not all, the cases some part of the payment relates to a period earlier than the date of the payment itself. I find it impossible to infer that there was any settled practice in demanding and paying rent monthly in advance; even if there had been such a settled practice, it would be questionable whether it involved such a departure from the provisions of the agreement as to lead to the conclusion that the parties had changed their relationship and agreed on a yearly or other periodic tenancy. As there was no such settled practice the question does not arise.
The tenancy, therefore, having been at all times a tenancy at will by express agreement, I now turn to the second main question—which is whether such a tenancy is within the terms of Part 2 of the Landlord and Tenant Act 1954. Section 23 of the Act provides:
‘(1) Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.’
Section 69 of the Act defines ‘tenancy’ as follows:
‘“tenancy” means a tenancy created either immediately or derivatively out of the freehold, whether by a lease or underlease, by an agreement for a lease or underlease or by a tenancy agreement or in pursuance of any enactment.’
Section 69 also defines the expression ‘notice to quit’:
‘“notice to quit” means a notice to terminate a tenancy (whether a periodical tenancy or a tenancy for a term of years certain) given in accordance with the provisions (whether express or implied) of that tenancy.’
Section 24(1) of the Act provides that a tenancy to which Part 2 of the Act applies, shall not come to an end unless the tenancy is in accordance with the provisions of Part 2 of the Act. Section 25 of the Act provides that the landlord may determine the tenancy to which Part 2 of the Act applies by giving to the tenant a notice in accordance with the provisions of the section. Section 25(3) and (4) is in these terms:
‘(3) In the case of a tenancy which apart from this Act could have been brought to an end by notice to quit given by the landlord—(a) the date of termination specified in a notice under this section shall not be earlier than the earliest date on which apart from this Part of this Act the tenancy could have been brought to an end by notice to quit given by the landlord on the date of the giving of the notice under this section; and (b) where apart from this Part of this Act more than six months’ notice to quit would have been required to bring the tenancy to an end, the last foregoing sub-section shall have effect with the substitution for twelve months of a period six months longer than the length of notice to quit which would have been required as aforesaid.’
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‘(4) In the case of any other tenancy, a notice under this section shall not specify a date of termination earlier than the date on which apart from this Part of this Act the tenancy would have come to an end by effluxion of time.’
In Wheeler v Mercer, a tenant whose lease had been determined by notice to quit remained in possession with what Viscount Simonds described as the positive assent of the lessor pending negotiation for the grant of a new lease. She thus became a tenant by implication of law and the question before the House of Lords was whether she was entitled to the Protection of Part 2 of the 1954 Act. Lord Simonds, with whose opinion Lord Keith of Avonholm agreed, referred to s 25(3) and (4) of the 1954 Act, and after pointing out that a tenancy at will did not fall within sub-s (3) and did not appear to fall within sub-s (4) continued ([1956] 3 All ER at 633, [1957] AC at 425):
‘The other sub-sections of this section do not help, and I find, therefore, in the section which is a vital part of the machinery of the Act a significant omission of any provision which covers the case of a tenancy at will.’
Later Lord Simonds referred to the definition of ‘tenancy’ in s 69 of the Act, and continued ([1956] 3 All ER at 634, [1957] AC at 426):
‘Can a tenancy at will be thus described? And, if it might in another context be so described, is the description itself at least ambiguous so that its meaning may be influenced by the context of the Act? I do not find these easy questions to answer. It may, I think, be truly said that, since a tenant at will is regarded at law as being in possession by his own will and at the will express or implied of his landlord, he is a tenant by their mutual agreement, and the agreement may, therefore, be called a tenancy agreement. He is distinguished from a tenant at sufferance in that such a tenant is said to be in possession without either the agreement or disagreement of the landlord. But, my Lords, though, on a logical analysis, it is possible to regard a tenancy at will as a “tenancy created by a tenancy agreement”, I am not satisfied that, according to the ordinary use of language, even apart from any context, it would b so described. A tenancy at will, though called a tenancy, is unlike any other tenancy except a tenancy at sufference to which it is next of kin. It has been properly described as a personal relation between the landlord and his tenant. It is determined by the death of either of them, or by any one of a variety of acts, even by an involuntary alienation, which would not affect the subsistence of any other tenancy. It is true that, in some cases, the relation of tenant at will may be expressly created by contract: see, e.g., Morgan v. William Harrison, Ltd., but this is an exceptional case and I do not exclude the possibility of such a contract being a “tenancy agreement” even if a tenancy at will arising by implication of law is not. If I am right in concluding, as I do, that “tenancy agreement” is itself an expression which is ambiguous in its scope, I am led by the context of the Act which I have examined in some detail to the further conclusion that it does not cover a tenancy at will arising by implication of law.’
Lord Simonds therefore expressly left open the question which I have to decide, that is to say, whether a tenancy at will arising by express agreement falls within the ambit of Part 2 of the Act. The ambiguity which he found in the definition of ‘tenancy’ related to a tenancy at will arising by implication of law, and that was the ambiguity which he resolved by reference to the other provisions of the Act including the machinery provisions of s 25. Lord Cohen defined the ambiguity in a somewhat different way. He said ([1956] 3 All ER at 638, [1957] AC at 432):
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‘I am prepared to accept that the expression “a tenancy agreement” may comprise a tenancy at will, but I think that it might also be the apt language to use where the draftsman had in mind only a tenancy for a fixed term and a periodical tenancy. The question of the sense in which it is used in a particular statute must be answered by construing the statute as a whole, and, in my opinion, the language of s.25 is consistent only with the adoption of the narrower construction I have indicated. It is, I think, clear, reading sub-s. (2), sub-s. (3) and sub-s. (4) together, that sub-s. (3) and sub-s. (4) are intended to comprise all the tenancies to which the Act applies. Sub-section (3) deals only with tenancies which could be determined by notice to quit, and it was common ground between the parties that a tenancy at will is not such a tenancy, since a tenancy at will is determined not by a notice to quit but, e.g., by death, bankruptcy or a demand for possession. Sub-section (4) is to apply “in the case of any other tenancy“. This is an omnibus phrase covering all tenancies to which the Act applies, except such as are determinable by a notice to quit. It is clear, however, from the language of the sub-section that it cannot comprise a tenancy at will, because such a tenancy could never come to an end by effluxion of time.’
It seems to me to be clear that if I were to apply the reasoning of Lord Cohen to the problem before me, I would reach the conclusion that no tenancy at will, however created, falls within the ambit of Part 2 of the Act. Lord Somervell of Harrow said ([1956] 3 All ER at 639, [1957] AC at 434):
“The question remains whether a tenancy at will is within the Landlord and Tenant Act, 1954. If the definition of “tenancy” in s. 69(1) plainly excluded a tenancy at will, that would be an end of the case. I do not think it does. Nor do I think it plainly includes it. Tenancies at will have such special characteristics that it would be convenient if definitions expressly stated whether they were included or excluded. One turns, therefore, to the other provisions of the Act. Section 25, in my opinion, makes it clear that tenancies at will are excluded. Sub-section (3) and sub-s. (4) provide, in effect, that the statutory notice must not take effect at a date earlier than that on which the tenancy would end or could be ended. The opening words of sub-s. (4) show that all tenancies covered by this Part of the Act are covered by these two sub-sections. Tenancies at will are not brought to an end by a notice to quit and are, therefore, outside sub-s. (3), nor by effluxion of time and are, therefore, outside sub-s. (4). They are, therefore, outside the Act. HODSON, L.J., clearly felt that these sub-sections created a considerable difficulty. He thought, and here I differ, with respect, that tenancies at will were clearly within the definition That being so, he felt that s. 25 could not, except by express words, exclude them. It left them “in the air“. If, as I think, the definition is at best ambiguous, the effect of s. 25 is to resolve the ambiguity.’
Lord Morton of Henryton thought that there was much to be said for the view that the respondent in that case was a tenant on sufference and not a tenant at will. He said ([1956] 3 All ER at 635, [1957] AC at 428):
‘I find it unnecessary to form a concluded opinion on this point, for, in my opinion, the respondent is not protected by the Act of 1954, even if she is a tenant at will. I think that s. 69(1) of the Act of 1954, read by itself, gives rise to a very real doubt whether a tenancy at will is, or is not, “a tenancy created … out of the freehold … by a tenancy agreement” within the meaning of the definition of “tenancy” in that section. This being so, it is right to seek enlightenment on the point from the rest of the Act, and, in my view, a study of s. 23 to s. 29 inclusive, and, in particular, sub-s. (3) and sub-s. (4) of s. 25 leads inevitably
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to the conclusion that a tenancy at will is not within the Act. I agree with everything which has been said from the Woolsack as to this group of sections.’
Counsel for the tenant of course relies on the fact that Lord Simonds and Lord Keith expressly confine their opinion to tenancies at will arising by implication of law. As regards the opinions of the other members of the House of Lords, counsel says that they must be read in the light of the subject-matter and similarly confined. He says that a tenancy at will created by express agreement falls clearly within the terms of the definition and that this being so, no defect of machinery can exclude it from the scope of Part 2 of the Act. He accepts, as I think he must, in the light of the opinions in the House of Lords in Wheeler v Mercer, that s 25 of the Act provides no machinery whereby a tenancy at will may be determined by the landlord. If that is right, that a tenancy at will created by express agreement is nevertheless within the scope of Part 2 of the Act, the consequence would apparently be that such a tenancy could not be determined by the landlord at all. That is a result which I cannot regard with complacency, even though tenancies at will created by express agreement may be comparatively rare.
It seems to me that to hold that tenancies at will created by express agreement are within the scope of Part 2 of the Act would be inconsistent with the reasoning on which Lord Morton of Henryton, Lord Cohen and Lord Somervell of Harrow based their opinions; although it would not be inconsistent with the reasoning of Lord Simonds, it would, as it seems to me, lead to an anomalous and unsatisfactory result because, although such tenancies would be within the scope of Part 2, the Act would provide no means whereby such a tenancy might be determined by the landlord. I do not think that the carefully chosen words of Lord Simonds were intended to provide great encouragement to those who might seek to argue that tenancies at will created by express agreement were within the scope of Part 2 of the Act. The lack of machinery for dealing with tenancies at will, to which Lord Simonds referred, extends to all tenancies at will and not only to those arising by implication of law. That must, in my view, be a relevant consideration in determining the scope of Part 2 of the Act, even in the case of a tenancy which prima facie falls within the definition of ‘tenancy’ in s 69.
When counsel for the tenant says that a tenancy at will created by express agreement falls clearly within that definition, he has the advantage of being able to appeal to the golden rule. But there is another rule of construction, which is that the intention of an Act of Parliament—like that of any other instrument—is to be gathered from its terms as a whole. In my view, when this Act is considered as a whole, it is plain that a tenancy at will created by express agreement is not within the scope of Part 2. It urged that this construction of the Act would enable landlords freely to evade the provisions of Part 2 of the Act by refusing to let business premises except on tenancies at will. Where a question of construction is in doubt I appreciate the importance of avoiding the construction which, in the words of Russell LJ in Joseph v Joseph ([1966] 3 All ER 486 at 493, [1967] Ch 78 at 93) could ‘lead to destruction of the impact of the statute on this branch of the law.' In the same case Diplock LJ referred ([1966] 3 All ER at 491, [1967] Ch at 88) to the importance of having regard to the policy of the Act. In Joseph v Joseph the Court of Appeal had before them an agreement whereby on one view of the matter the tenants undertook to surrender their tenancy at a future date earlier than the date on which it was due to expire by effluxion of time. The question there was whether such agreement was voided by s 38 of the 1954 Act which reads:
‘(1) Any agreement relating to a tenancy to which this Part of this Act applies
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(whether contained in the instrument creating the tenancy or not) shall be void … in so far as it purports to preclude the tenant from making an application or request under this Part of this Act or provides for the termination or the surrender of the tenancy in the event of his making such an application or request or for the imposition of any penalty or disability on the tenant in that event.’
The argument turned on the question whether the expression ‘purports to’ in the subsection meant ‘professes to’ or ‘has the effect of’. In holding that the expression had the wider meaning both Diplock ([1966] 3 All ER at 491, [1967] Ch at 88) and Russell ([1966] 3 All ER at 493, [1967] Ch at 93) LJJ were influenced by the considerations relating to the policy of the Act to which I have referred.
I am by no means convinced, however, that the construction that I have put on this opens serious possibilities of evasion of the Act. The tenancy at will which was created in this case was created in special circumstances, and in the absence of special circumstances I am doubtful whether any prospective tenant of business premises would be willing to accept them on a tenancy at will, or whether any prospective landlord would be anxious to create such a tenancy bearing in mind that a tenancy at will is at the will of both parties.
The question I am concerned with in this case is a broad question, namely whether a particular type of tenancy falls within the scope of Part 2 of the Act at all. The tenancy at will is a perfectly well-known type of tenancy, and the fact that such a tenancy can be created by express agreement is equally well known. The draftsman of the Act clearly intended s 25(3) and (4) to cover all tenancies to which Part 2 of the Act applied; and he cannot have been in any doubt that they did not cover tenancies at will. The inference which I draw is that Parliament did not intend Part 2 of the Act to cover such tenancies. If hereafter it should appear that the policy of the Act was being evaded by the creation of tenancies at will of business premises. it will be for Parliament to determine whether such tenancies should be brought within the scope of the Act and, if so, on what terms.
Meanwhile, I do not think that the tenant in the present case is deserving of any particular degree of sympathy, for he knew what was being offered him and why no more was being offered, and having accepted was was offered he now seeks to use the machinery for the Act to obtain more.
Finally I should say this. In considering whether the tenant’s tenancy is protected by Part 2 of the Act, I have treated as totally inoperative the provisions of cl 3 of the agreement whereby the tenant acknowledges that the tenancy has been granted to him on the express understanding that his occupation shall not be such as is protected by Part 2 of the Act, and whereby he renounces any claim for compensation under s 37 of the Act. It is not for the parties by their agreement to determine whether the tenancy falls within the protection of the Act. That is a matter which depends on the terms of the Act itself and on the true nature of the tenancy; and if on the true construction of the Act a particular tenancy does fall within that protection, I do not think that any agreement between the parties can produce a comparable result or deprive the tenant of his right to compensation under s 37. I should have so held quite independently of s 38(1) of the Act, but the terms of that subsection also, in my view, clearly avoid the provision in cl 3 of the agreement to the effect that the tenant’s occupation should not be such as is prohibited by Part 2 of the Act. In the result I have come to the conclusion that the landlords are entitled to possession of these premises.
Judgment for the landlords.
Solicitors: Titmuss, Sainer & Webb (for the landlords);Gouldens, agents for Ellis, Belcher & Co, Bournemouth (for the tenant) A3.
Janet Harding Barrister.
Smith and another v Blandford Gee Cementation Co Ltd
[1970] 3 All ER 154
Categories: EMPLOYMENT; Contract of service
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, BRIDGE AND BEAN JJ
Hearing Date(s): 14, 15, 16 APRIL 1970
Master and servant – Contract of service – Construction of signing-on form – Whether signing-on form constituted contract of service with one master – Servant treated in practice as employee of another master – Dismissal of servant by other master – Entitlement to redundancy payment.
Estoppel – Estoppel in pais – Estoppel by conduct – Written particulars of terms of employment under Contracts of Employment Act 1963.
The respondent company was a contractor which had been engaged over a period to assist in carrying out certain works for the National Coal Board at a number of the board’s collieries. From 1953 until April 1959, the first appellant (to whose case the principal evidence was directed as differing in no significant respect from that affecting the second appellant) was in all material senses an employee of the respondent company engaged in contract work on behalf of the National Coal Board at its Welbeck colliery. In April 1959, the first appellant was transferred to the National Coal Board’s Clipstone colliery and, on 18 April, he signed a signing-on form which stated, inter alia: ‘I … agree with the National Coal Board … to serve the said Board from … [18 April 1959] at Clipstone Colliery upon the terms and conditions set forth in the Contract Rules for the time being in force at the Board’s Collieries … ’ The signing-on form also contained a schedule, part of which was headed ‘Capacity in which engaged’, where it was stated: ‘Underground waller for [the respondent company] … ’ In the case of the first appellant and other men working for the respondent company at the Clipstone colliery, the respondent company, and not the National Coal Board, continued to exercise the ordinary functions of employer, such as hiring, firing, payment and day-to-day control; and the men working for the respondent company were in a number of respects, eg wage negotiations and claims on National Coal Board houses, treated differently from those who were unquestionably employees of the National Coal Board. In particular, although under the contract rules in force at the board’s collieries the first appellant was entitled to the benefits of membership of the district miners’ pension scheme, he did not participate in the scheme. Instead, the respondent company itself operated a scheme to provide certain benefits, analogous to pension rights, but very much less valuable than those available under the miners’ pension scheme. When the Contracts of Employment Act 1963 came into operation, no statutory notice setting out terms of employment, was given to the first appellant by the National Coal Board, but in January 1967 the first appellant received a notice from the respondent company in the following terms: ‘Your employment with [the respondent company] commenced on … [a date in September 1953].' In October 1968, after the National Coal Board had decided to dispense with the services of the respondent company as its contractor, the respondent company gave notice to the first appellant terminating his employment with the respondent company. The first appellant applied to the Industrial Tribunal for redundancy payment from the respondent company. On the question whether the respondent company was the employer of the first appellant,
Held – (i) As at 18 April 1959, there came into existence a contract of service between the first appellant and the National Coal Board; there was no real ambiguity or repugnancy in the terms of the signing-on form, the sole task of the court being
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to look at the form and construe its effect; the language of the document was perfectly intelligible on the footing that the National Coal Board and the first appellant entered into a contract of service, but it was indicated as one of the terms of the contract that the board’s intention, having taken the appellant on as its employee, was that it would make his services available to the respondent company at the Clipstone colliery (see p 160 a and b and p 163 a and e, post).
(ii) The respondent company was estopped from denying that, despite the contract of 18 April 1959, it was the first appellant’s employer, by reason of the notice given to him under the Contracts of Employment Act 1963 in January 1967, which was a plain representation to him that the respondent company was his employer (see p 160 j, p 163 d and p 164 c, post).
(iii) It was no answer to the estoppel to say that the detriment to the first appellant, arising from his inaction to enforce his pension rights, occurred before the notice of January 1967 was issued, because—
(a) it would have been wrong to limit the ambit of the estoppel to that notice alone (see p 162 e, p 163 d and p 164 c, post); and
(b) the conduct of the respondent company from 1959 onwards must have induced in the first appellant a belief that he was the employee of the respondent company and not of the National Coal Board (see p 162 g, p 163 d and p 164 c, post); alternatively,
(c) even if it were not right to enlarge the ambit of the matters on which the first appellant could properly rely as founding the estoppel against the respondent company to include the respondent company’s earlier conduct leading the first appellant to suppose that he was employed by the respondent company, the grave prejudice arising from the first appellant’s inaction to enforce his pension rights was clearly a continuing detriment arising from his continued inaction, which was sufficient to lead to the conclusion that the respondent company was estopped, by the notice of January 1967, from denying that it was the first appellant’s employer, when it gave notice to determine the employment at the end of 1968 (see p 162 h and j, p 163 d and p 164 c, post).
Notes
For contracts of hiring and service, see 25 Halsbury’s Laws (3rd Edn) 448, para 872, and 455–457, paras 884, 885, for employment of other persons’ servants, see 25 ibid 501–505, paras 965–968, and for cases on the subject, see 34 Digest (Repl) 16–27, 1–67.
For estoppel by statement, see 15 Halsbury’s Laws (3rd Edn) 232–235, paras 436–439, and for cases on the subject, see 21 Digest (Repl) 404–408, 1281–1309.
Cases referred to in judgments
Denham v Midland Employers’ Mutual Assurance Ltd [1955] 2 All ER 561, [1955] 2 QB 437, [1955] 3 WLR 84, 29 Digest (Repl) 511, 3606.
Maritime Electric Co Ltd v General Dairies Ltd [1937] 1 All ER 748, [1937] AC 610, 106 LJPC 81, 156 LT 444, 20 Digest (Repl) 228, * 54.
Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd and Mcfarlane [1946] 2 All ER 345, [1947] AC 1, 115 LJKB 465, 175 LT 270, 34 Digest (Repl) 180, 1279.
Cases also cited
Donovan v Laing, Wharton & Down Construction Syndicate Ltd [1893] 1 QB 629, [1891–94] All ER Rep 216.
Freeman v Cooke (1848) 2 Exch 654.
Miller (James) and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] 1 All ER 796, [1970] 2 WLR 728.
Montreal Locomotive Works v Montreal and A-G for Canada [1944] 1 DLR 173.
Ready Mixed Concrete (East Midlands) Ltd v Yorkshire Traffic Traffic Area Licensing Authority [1970] 1 All ER 890, [1970] 2 WLR 627.
Short v J & W Henderson Ltd 1945 SC 155.
Page 156 of [1970] 3 All ER 154
Appeal
This was an appeal from a decision of the Industrial Tribunal, given on 19 September 1969, dismissing applications by the first and second appellants, Albert Edward Smith and Donald Frank Prince for redundancy payments against the respondent company, Blandford Gee Cementation Co Ltd The facts are set out in the judgment of Bridge J.
Anthony Lester for the first and second appellants.
P H Milmo for the respondent company.
16 April 1970. The following judgments were delivered.
BRIDGE J delivered the first judgment at the invitation of Lord Parker CJ This is an appeal from a decision of the Industrial Tribunal given on 19 September 1969, whereby it dismissed applications by the two appellants for redundancy payments against the respondent company, Blandford Gee Cementation Co Ltd The respondent company’s case in effect was that it had never been the employer of the appellants, and that was the conclusion at which the tribunal arrived, and that was the basis of its dismissal of the two applications. The appellants stood in a similar situation vis-a-vis the respondent company to a number of other men, and a number of similar applications for redundancy payments were pending at the time the appellants’ applications were heard; these applications both before the tribunal and in this court, were and are treated as test cases.
The background of the matter was that the respondent company was a contractor which had been engaged over a period to assist in carrying out certain underground repair works for the National Coal Board at a number of the National Coal Board’s collieries. The case of the first appellant was that to which the principal evidence at the hearing before the tribunal was directed, and it will be sufficient to refer to the evidence as regards his position, without going into the evidence, insofar as it differs (and I say in parenthesis that it differs in no significant respect), affecting the second appellant. It is common ground that from 1953 until 1959 the first appellant had been in all material senses an employee of the respondent company engaged in contract work on behalf of the National Coal Board as its Welbeck colliery. But in 1959 the first appellant was transferred to the National Coal Board’s Clipstone colliery, and indeed the second appellant, and all the other applicants for redundancy payments, in respect of which the present appeal is to be treated as a test case, were also, to use a neutral term, workers at the Clipstone colliery at the material date. On commencement of work at the Clipstone colliery, the first appellant was required to and did sign a document, which was an exhibit in the case, which has been referred to as a signing-on form. So far as material, that document is in these terms:
‘I, the undersigned, agree with the National Coal Board … to serve the said Board from … [18th April 1959] at Clipstone Colliery upon the terms and conditions set forth in the Contract Rules for the time being in force at the Board’s Collieries and subject also to the Coal Mines Acts 1911 and Regulations … the Board agree to engage me on the said terms and conditions subject to the said Acts and Regulations.’
There is good deal more which I need not read, and at the bottom of the document there is a schedule. In column 6 of the schedule, which is headed ‘Capacity in which engaged’, the following words appear in manuscript, the earlier parts of the form, to which I have referred, being printed. The words appearing in manuscript are: ‘Underground waller for B/GEE [B/GEE is a reference to the respondent company] Former employment: H. M. Army and Welbeck colliery for B/GEE.’
Some years prior to the first appellant’s commencement of work at Clipstone colliery, the respondent company had entered into an agreement with the National Coal Board, which has been referred to in this appeal as the ‘task work agreement’.
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I need not read its terms in detail; it will be sufficient to say that its general effect is to provide that the respondent company shall act in effect as the agents of the National Coal Board in employing a number of men on the repair work to be undertaken by the respondent company for the National Coal Board underground at the board’s collieries, the remuneration provided for the respondent company being on the basis of a percentage to be added to the aggregate of the wage bill, which the respondent company, in its capacity as agents for the employing board, will pay to the men who are employed. In all the years which elapsed from the first appellant’s original signing on at the colliery, until the events on which he relies as showing a termination of his employment by the respondent company, the existence of the ‘task work agreement’ was unknown to him, to any of his colleagues in a similar situation to him, or to any union representatives concerned with the interest of these men at the Clipstone colliery. So far as the conduct of the parties, and by ‘the parties’ I now refer to the employed men, the respondent company, and the National Coal Board, between 1959 and 1968 is concerned, one might say, in a nutshell, that all three parties behaved towards each other precisely as they would have been expected to do if the men in question had been in all senses the employees of the respondent company, and not the employees of the National Coal Board.
One may in particular examine the matter by reference to what the authorities concerned with questions as to contracts of service treat as the classic indicia of such contracts, namely hiring, firing, payment and control. So long as one ignores the ‘task work agreement’, it seems clear that the conduct of the parties indicated that the hiring, the firing, the payment and the day-to-day control of the men who were doing the contractors’ work were all functions exercised by the contractors and not by the National Coal Board. It is found in terms in the tribunal’s decision that the men were recruited by Mr Jack Smith, who was the respondent company’s managing director; there were only two instances in the material period of men being sacked, but one of those was a man who was sacked by Mr Goddard, who was the respondent company’s foreman, and another man who was found asleep in the pit by the colliery manager, and had to be sacked, was sacked at the instance of the colliery manager, that is to say at the instance of the National Coal Board, but it was not any official of the National Coal Board who communicated to the man the fact that he was being dismissed; the National Coal Board insisted that the dismissal should in fact be effected by the respondent company. The National Coal Board, of course, were keenly interested, because their financial liability under the task work agreement was, on the percentage basis which I have mentioned, in the amount of the men’s wages, and in that sense it is true that no wage increase, for instance, was ever agreed on without the prior approval of the National Coal Board. But in the sense in which, as I understand, the question who was the paymaster is to be considered, in a practical sense, the paymaster of these men was the respondent company; the amount of their pay was calculated at the respondent company’s office at Doncaster where their pay packets were made up; they were then sent to the respondent company’s foreman at the Clipstone colliery site and he it was who handed the men their pay packets.
When one comes to the final, and what has often been treated as the crucial factor by which a contract of service is to be recognised, namely the question of day-to-day control of how a man does his work, it is plainly to be inferred from the tribunal’s findings that control of that kind was exercised over the men by the respondent company’s foreman, albeit that the foreman himself would receive, as the senior representative of the respondent company on the site, general instructions from the National Coal Board officials as to the nature of the work to be carried out.
In a number of other respects, the men working for the respondent company, including the first appellant, were treated throughout the period 1959 to the end of 1968 quite separately, and in a different fashion from those who were unquestionably employees of the National Coal Board at the same colliery during the same period. Their wages were the subject of separate negotiations. They enjoyed a lower priority,
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if I may so put it for the sake of brevity, than employees of the National Coal Board in respect of claims on National Coal Board houses. The National Coal Board, at a number of collieries, including this, among the fringe benefits it provides for its employees is able in some instances to provide housing, no doubt at very modest rents, but such houses were rarely—I think that there were some exceptions—provided for the men who working for the respondent company, because the union representatives concerned regarded the claims of National Coal Board employees as having priority over those of the respondent company’s men. It may be a small point, but there were separate bathing facilities for the men who worked for the respondent company. Those may not be matters of great importance, but there was one matter of very great importance, in respect of which these men were differently treated from men who were undoubted National Coal Board employees. Under the contract rules which are referred to as the basis of the agreement between the first appellant and the National Coal Board in the document dated 18 April 1959, to which I have already made reference, the first appellant was entitled to enjoy the benefits of membership of the Nottinghamshire district miners’ pension scheme, and indeed in a part of the document which I did not read, he had authorised the National Coal Board to deduct from his wages the appropriate contributions payable by him and no doubt contributions were also payable by the board to ensure his membership of that scheme. In fact no such contributions were ever made, and throughout the material period he did not participate in that pension scheme. Instead the respondent company itself operated a scheme to provide certain supplementary benefits of the nature of or analogous to pension rights, for the men who were working for them, with the Norwih Union Insurance Co, and for that purpose made deductions from the men’s wages. We have been told, indeed it appears by inference, if not expressly from the terms of the tribunal’s decision, that the benefits under the respondent company’s scheme with the Norwhich Union Insurance Co were very much less valuable than the benefit to which the first appellant would have been entitled had he been made a member, as his original agreement with the National Coal Board entitled him to be, of the miners’ pension scheme. It is right to mention in passing, and I shall have to refer to it again later as an important factor in the case, that the tribunal found in terms that the first appellant was gravely prejudiced by what had been done, or more accurately perhaps, omitted to be done with regard to his pension rights.
When the Contracts of Employment Act 1963 came into operation and imposed on employers an obligation to give to their employees notice in statutory form setting out the terms of their contracts of employment, no such notice was ever given to the first appellant, or the other men in a like position to him, by the National Coal Board, but in due course such a notice was given by the respondent company, through the agency of Mr Jack Smith, their managing director. That document is in evidence before the court, as it was before the tribunal. It is headed: ‘CONTRACTS OF EMPLOYMENT ACT 1963. PARTICULARS OF TERMS OF EMPLOYMENT.' The date of the notice given to the first appellant was 18 January 1967. It is addressed to the first appellant and reads: ‘From:—THE BLANDFORD-GEE CEMENTATION CO LTD. [and the address of their registered office follows, and it reads:] ‘Your employment with The Blandford-Gee Cementation Co Limited commenced on’ a date in September 1953 which was the commencement of the first appellant’s employment at the Welbeck colliery. Then the document sets out the details, largely by reference to other documents, of his entitlement to remuneration, hours of work, holidays, pay during sickness and so forth.
Finally, on 21 October 1968, after the National Coal Board had decided to dispense with the services of the respondent company as its contractor in respect of the underground repair work, and had decided in effect to do that works itself by direct labour, and had given the respondent company notice to that effect, the respondent company
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gave notice to all the men who had been working for them, including the first appellant, which was in these terms:
‘Dear Mr. [Smith], We have been given notice that our Taskwork Agreement with the National Coal Board at Clipstone Colliery will be terminated by the Board on 28th December 1968. This means that after 28th December 1968 you will no longer be under the control of this Company at Clipstone Colliery but the Board will ensure continuity of employment at rates of pay and conditions no less favourable than those you now enjoy. The Board will be writing to you about this. Any questions which may arise regarding Graduated Pensions Contributions, S.I.B. payments, etc. will be explained to you as soon as the details have been resolved. We take this opportunity of thanking you for your loyal services … ’
The letter is signed on behalf of the respondent company by Mr Jack Smith, the managing director.
As the tribunal itself said, if one ignores the task work agreement and the original signing-on form, and looks at all the other circumstances in this case affecting the first appellant from 1953 through to 1968, when the respondent company at all events purported to determine his employment by it, there really could not be any doubt or argument that the first appellant was, throughout the period, an employee of the respondent company in every sense of the term. However, one cannot of course, disregard the two crucial documents, and it is on the effect of those two documents that the tribunal based itself in reaching the conclusion that the first appellant had never been an employee of the respondent company, but a all material times from 1959 to 1968 had been an employee of the National Coal Board, and it is on the effect of those two documents that much, although not the whole of the argument, in the appeal before this court has turned. The first appellant’s case, with regard to the signing-on form, to which I have already made reference, was that he had regarded it in effect as no more than a formality; he had not supposed, he said, that when he signed this document he was in any real sense entering into a contract of employment with the National Coal Board. There are indeed indications in the case which might at least give rise to a reasonable suspicion that the object of requiring the respondent company’s men to sign such a document when they were going to work underground at one of the board’s collieries, was primarily, at all events, to secure that the board would have suitable control over the those men in regard to the performance of the board’s statutory duties to ensure that they were suitably trained and so forth.
However that may be, such a document having been signed by the first appellant (who admitted in evidence that he had read it and understood it so that there can be no suggestion, for example, that he supposed he was signing a document of quite a different kind from the document he was signing), the task of the court in my judgment is to look at the document and construe its effect. Counsel for the appellants, in a cogent and attractive argument, submits that there is a patent ambiguity in the document, in that whereas the printed words purport to effect an agreement between the first appellant and the National Coal Board that the appellant was to serve the board under a contract of service, when one comes to the schedule, the manuscript words in the column headed ‘Capacity in which engaged’ are the words already referred to: ‘Underground waller for B/GEE’. I am not sure that counsel for the appellants would not put his argument even higher and say that there is something in the nature of a repugnancy between these two provisions. At all events, whether on the basis that there is an ambiguity or repugnancy, counsel for the appellants invites us to say that the conflict between the two provisions allows the true effect of the document to be ascertained, not from within its four corners, but by looking at all the extrinsic evidence of what happened both before and after the document was signed. If there were a true ambiguity or repugnancy, that submission
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might be very appealing. But in my judgment there is no real difficulty in construing this document on its face; there is no real ambiguity or repugnancy in its terms, and the sole task for the court is to construe it. The language of the document is perfectly intelligible on the footing that the National Coal Board and the first appellant entered into a contract of service, but it was indicated as one of the terms of the contract that the board’s intention, having taken the appellant on as its employee, was that it would make his services available to the respondent company for work as an underground waller at the Clipstone colliery. The tribunal, therefore, in my judgment was right to conclude that, as at 18 April 1959, there came into existence a contract of service between the first appellant and the National Coal Board.
The next issue, however, to which the tribunal directed its mind was whether the subsequent events occurring between 1959 and 1968 showed that there had been a transfer of the services of the first appellant and others in a like situation from the National Coal Board to the respondent company. The tribunal looked at the four classic indicia, hiring, firing, payment and control, to which I referred earlier in this judgment, and in substance by reference at all points to the terms of the task work agreement, a document which was never disclosed to the men concerned, came to the conclusion that in all essential respects the indicia showed that the National Coal Board and not the respondent company remained throughout the employers, the other party to the contract of service. I am far from satisfied that in considering whether there had been a novation, a determination by mutual consent of the men’s contract of employment with the National Coal Board on the one hand, and the conclusion, to be inferred from conduct, of a new contract of service between the men and the respondent company, it was legitimate for the tribunal to make the references and place the reliance which it did make and place on the task work agreement. To my mind it runs counter to a fundamental principle that a man’s contractual position, particularly in such a vital matter as the identity of the master whom he is to serve, shall be crucially affected by an agreement between two other parties, the terms of which are never communicated to him.
If one looks at the facts to which I have earlier made a brief reference, independently of the task work agreement, it seems to me that the evidence is exceedingly cogent as pointing in the direction of a novation. Apart from the circumstance, to which I have already adverted, that the functions of hiring, firing, payment and control de facto throughout appear to have been exercised by the respondent company—not by the National Coal Board, one could fairly say, in the light of the other matters to which I have referred, and particularly in the light of the National Coal Board’s omission to take action on the men’s behalf to contract them into the pension scheme, that from a very early stage, indeed from immediately after the conclusion of the contract of 18 April 1959, between the first appellant and the National Coal Board, both parties, the first appellant on the one side and the National Coal Board on the other, treated the contract as being a dead letter. But in the event I find it unnecessary for my own part ot reach a firm conclusion on the difficult question how far the task work agreement can and should be considered in deciding whether or not there was a true novation as between these three parties, for the final point, on which the first appellant relies in this court is a point of estoppel, and it is on that point, and on that point alone, in the last analysis, that I would decide this appeal.
It was argued before the tribunal that the respondent company was estopped from denying that it was the first appellant’s employer, by reason of the notice given to him under the Contracts of Employment Act 1963 in January 1967, which was a plain representation to him that the respondent company was indeed his employer. In this court counsel for the respondent company, very properly in my judgment, concedes that this was a representation of fact capable of founding an estoppel against the respondent company, and further that if Mr Jack Smith, the respondent company’s managing director, did not have a positive objective intention that the representation should be acted on, at all events it was a representation of such a kind, made
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in such a way, that a reasonable man would be expected to act on it, and accordingly he concedes the existence of the necessary elements of estoppel, save that he disputes that the first appellant, or any of the other respondent company’s men, ever acted on the representation in any way to their detriment.
The tribunal dealt with the issue of estoppel at a number of points in its lengthy statement of its reasons in the following way. It referred first to the contracts of employment notice:
‘On 18th January 1967 Mr Jack Smith took it upon himself to issue the men seconded to him with a statement of the particulars of the terms of employment under the Contracts of Employment Act 1963, giving, in the case of Mr A E Smith … full particulars of his “employment” with Blandford Gee. The fact that this document, which one might expect to emanate from an employer, was given to the men by the respondents while no corresponding document had ever been given them by the Board has had considerable repercussions in the case. [The notice] itself has been surrounded by controversy. Possibly it was no more originally than a well meaning if thoughtless gesture by the respondents. Mr Jack Smith’s evidence suggests that to have been the case. Mr. Cowling [he was the advocate for the appellants before the tribunal] not unreasonably, relies on it as evidence that by that time, if not before, the respondents had assumed the role of employer towards these men.’
Then the tribunal said this, again with reference to the evidence given by Mr Jack Smith about the document:
‘He undoubtedly regarded himself in the position of having to give such a document to his men. He thought it was his responsibility to do so … The controversial aspect of this document has been discussed. Even accepting Mr Jack Smith’s explanation it is evidence of great weight and should not be under-estimated. Mr Cowling went so far as to submit that by reason of this document, in conjunction with [the notice of the termination of employment with the respondent company] the respondent was estopped from denying that he was the [appellant’s] employer. Mr Jack Smith’s understandable concern for his men however stopped short of any intention, so he said, of being their employer, so the submission was not persisted in; it clearly was not without substance.’
I feel bound to say that I do not understand that sentence; there appears to be a complete non sequitur between the premise and the conclusion, but it is unnecessary to dwell on it because counsel for the appellant has told us from the bar, and counsel for the respondent company has frankly accepted it, that there certainly was no withdrawal on behalf of the first appellant of any argument based on an estoppel arising from the Contracts of Employment Act notice, which had been addressed to the tribunal. This again is supported by the other reference to this point, albeit only an oblique reference, to be found in the tribunal’s reasons, whereas, it seems to me, one comes to grips with the fallacy which eventually misled the tribunal into reaching a wrong conclusion on this point. The tribunal said:
‘In the absence of any particular contract of employment with Blandford Gee on this site the full effect of [the notice under the Contracts of Employment Act 1963] is denied to the [appellant]. If the [appellant] believing this document to be a genuine statement of the position, had acted upon it in any way to his detriment it is possible that Mr Smith’s concern for his men in this respect might have rendered him liable to the [appellant] in an action for breach of warranty of capacity for falsely holding himself out as employer.’
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I may pause there to say that that appears to me to be fallacious. There was no question but that Mr Jack Smith, as the respondent company’s managing director, had full authority to act on behalf of the respondent company, and if all the elements of estoppel, including the necessary action or inaction by the representee to his detriment in reliance on the representation, were present, there would not be any question of an action for breach of warranty against Mr Jack Smith, but the respondent company, on whose behalf he made the representation, would be estopped. Then the tribunal continued:
‘So far as we can see, however, any damage that occurred in this case by reason of these various sins of commission and omission by both the board and the respondents took place long before [the notice under the Contracts of Employment Act 1963] saw the light of day.’
In my judgment, in referring there to ‘any damage that occurred in this case’ the tribunal must be taken to have had in mind at the very least the grave prejudice which it had earlier found had been suffered by the first appellant and the other respondent company’s men through the non-enforcement of their contractual rights under the original contract with the National Coal Board in respect of pensions.
There are two reasons why, in my judgment, it is no answer to the first appellant’s submission that the respondent company is estopped, to say that the damage suffered, the prejudice to his interests, occurred before the Contracts of Employment Act notice was issued to him. The first is that, in my judgment, although the matter may not have been put precisely in this way by the advocate who appeared for the appellants before the tribunal, it would be wrong to limit the ambit of the estoppel on which the first appellant relies to the document of 18 January 1967 alone. If, as well may be the case as I have said earlier, the existence of the task work agreement prevents the earlier history leading to the conclusion that there had been indeed a novation, so that the services of the first appellant and his fellows had truly been transferred from the National Coal Board to the respondent company, nevertheless if one looks at the whole history of the matter from 1959 onwards and looks at the conduct of the parties independently of the task work agreement, which as I have said was never disclosed to the appellant, then that conduct itself of the part of the respondent company must have induced a belief in the first appellant and others similarly placed that they were the employees of the respondent company and not the employees of the National Coal Board. It is inconceivable to my mind that, if the true position had been known to him, and if he had had, as to doubt he would have had, sound advice from his union representatives, he would not through his union representatives have insisted on performance by the National Coal Board of the board’s obligations with regard to pensions under his contract of service with the board. But in any event, even if it were not right to enlarge the ambit of the matters on which the first appellant can properly rely as founding an estoppel against the respondent company, to include the whole of the respondent company’s earlier conduct, leading the first appellant and his colleagues to suppose that they were employed by the respondent company, the tribunal’s reasoning is secondly fallacious in my judgment because the detriment to the first appellant, the grave prejudice referred to by the tribunal arising from his inaction to enforce his pension rights, was clearly a continuing detriment arising from his continued inaction, and that inaction is sufficient to lead to the conclusion that the respondent company was estopped by that notice of 18 January 1967 from denying that it was the first appellant’s employer when it gave notice to determine the employment at the end of 1968.
For those reasons, in my judgment, this appeal should be allowed, the decision of the tribunal set aside, and a decision substituted that the appellants are entitled to redundancy payments of the appropriate amount—and I know not if there is a dispute as to that—from the respondent company.
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BEAN J. I agree. I add one word out of deference to a tribunal which really took great pains in dealing with a difficult matter. There appears to have been a misunderstanding by the tribunal, whether estoppel was being relied on, at the end of the day, at the hearing before them. In their reasons, in the passage already referred to by Bridge J, the tribunal said: ‘the submission [ie the submission that the respondent company was estopped by the contracts of employment letter of January 1967] was not persisted in; it clearly was not without substance.' When one looks at the record of the proceedings, there are two references to estoppel; in the course of the cross-examination of Mr Jack Smith, the managing director of the respondent company, it seems that Mr Cowling, who was then solicitor appearing on behalf of the appellants, raised estoppel, and the note reads: “Estoppel mentioned. Mr Cowling submits Jack Smith bound by document.' Again, in the record of the argument, there is a reference to estoppel, but no reference to the point being abandoned. Unfortunately, the tribunal then had to adjourn for want of time, and when it resumed on a different date, Dr Griffin, who was appearing on behalf of the respondent company, then began his argument. I feel, having regard to the great care the tribunal has given to this case, that had the estoppel point been argued before it with the same thoroughness that it has been developed before this court, the tribunal may well have found itself arriving at the same conclusion as this court. For the reasons already given by Bridge J, I agree that this appeal should be allowed.
LORD PARKER CJ. I also agree and would only add a word or two on two points. The tribunal rightly, in my view, came to the conclusion that what has been referred to as the signing-on form constituted an agreement of service between the first appellant and the National Coal Board, the agreement of service being on the basis that the National Coal Board proposed to loan the first appellant’s services to what has been referred to throughout as B/GEE, the respondent company. Having got that far, the tribunal at great length and with great care proceeded to ask itself the question whether the appellants had discharged what has been referred to throughout the cases as a heavy burden, of showing that the employee had become the servant of the temporary employer, as opposed to that of the general employer, so as to make the former vicariously liable for the employee’s torts. Reference was made to a number of well-known cases in that regard which show that that burden is indeed a heavy burden, and the tribunal held that it was not discharged. I only mention that because it is from this point that I differ from the tribunal. I do not think myself that it became a question of considering the matter from that angle at all. The contract of service cannot be assigned unilaterally; there must be a discharge of the old agreement of service and a novation, a new contract formed. When one is considering the question of whether there was evidence to support a new contract, I do not think that one approaches the matter on the same lines as one does in considering vicarious liability. There is no such heavy burden. This distinction was referred to by Denning LJ in Denham v Midland Employers’ Mutual Assurance Ltd. It is unnecessary to go through the fact of that case, and I would only read a passage from his judgment where he said ([1955] 2 All ER at 564, [1955] 2 QB at 443):
‘Much of the difficulty which surrounds this subject arises out of the nineteenth century conception that a servant of a general employer may be transferred to a temporary employer so as to become for the time being the servant of the temporary employer. That conception is a very useful device to put liability on the shoulders of the one who should properly bear it. But it does not affect the contract of service itself. No contract of service can be transferred from
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one employer to another without the servant’s consent: and this consent is not to be raised by operation of law but only by the real consent in fact of the man, express or implied … In none of the transfer cases which have been cited to us [and in that connection there had been cited a number of the well-known cases, including Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd and McFarlane] has the consent of the man been sought or obtained. The general employer has simply told him to go and do some particular work for the temporary employer and he has gone. The supposed transfer when it takes place is nothing more than a very convenient and just device to put liability on to the temporary employer. In recent years this device has been very much restricted in its operation.’
For my part, I think that when one looks at the conduct of the parties, namely the first appellant himself, the National Coal Board and the respondent company, there is evidence on which one would be entitled to imply that a new contract of service with the respondent company had been entered into. However, like Bridge J, I feel that the safer manner in which to dispose of this case is based on estoppel. I entirely agree with what Bridge J has said and would only mention in deference to counsel for the respondent company that he did at the end take a further point, which he referred to, I think, as his long stop, that in any event, as he put it, estoppel cannot be used to get a statutory benefit. As I understand his point, it is that since the employer, whoever it may be, will to some extent be indemnified out of public funds, for some reason a man cannot be estopped from giving evidence that he is not an employer. I am quite unable to accept that submission. It was based on a principle that where a duty is imposed by statute, an estoppel cannot be set up to prevent the performance of that duty, and Maritime Electric Co Ltd v General Dairies Ltd was referred to. In my judgment that is a completely different case which has no application in the present circumstances. In the result I agree that this appeal should be allowed.
Appeal allowed.
Solicitors: Sharpe, Pritchard & Co, agents for Hopkin & Sons, Mansfield (for the first and second appellants); Church, Adams, Tatham & Co (for the respondent company).
Kaushalya Purie-Harwell Barrister.
British Oxygen Co Ltd v Minister of Technology
[1970] 3 All ER 165
Categories: ADMINISTRATIVE
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD DIPLOCK
Hearing Date(s): 6, 7, 11, 12 MAY, 15 JULY 1970
Trade – Investment grants – Machinery and plant – Vehicle – Articulated vehicle with tank and tanker lorry – Tanks integral part of vehicle – Industrial Development Act 1966, s 13(1).
Trade – Investment grants – Machinery and plant – Vehicle – Trailer with battery of detachable cylinders – Cylinders in practice not detached – Primary use of cylinders for delivery rather than storage – Cylinders integral part of vehicle – Industrial Development Act 1966, s 13(1).
Trade – Investment grants – Discretion – Application of rule applying limit of cost below which no grant to be made – Whether proper exercise of discretion – Industrial Development Act 1966, s 1(1).
Trade – Investment grants – Qualifying industrial process – Storage – Storage ceasing when cylinders used for storage despatched for delivery of product to customer – Industrial Development Act 1966, s 1(3).
Trade – Investment grants – Machinery and plant – Dual purpose plant – One purpose to which plant used eligible, other purpose not eligible – Whether competent for Minister to approve grant in respect of expenditure referable to eligible purpose.
Trade – Investment grants – Discretion – No obligation to make grant in respect of each eligible product – Industrial Development Act 1966, s 1(1).
The appellants manufactured atmospheric gases and hydrogen. The atmospheric gases were delivered by the appellants to their customers in liquid form at very low temperatures under pressure. The hydrogen was delivered at ordinary temperature under very high pressure. Delivery was effected, so far as the liquid gases were concerned, in tankers. One type of tanker was an articulated vehicle; a four-wheeled tractor supported one end of a long tank which was mounted at the other end on a double bogey. The other type of tanker was a four-wheeled lorry chassis on to which was mounted a tank. The tank part was welded on to the chassis. Hydrogen was delivered to the appellants’ customers by means of cylinders. The first type of cylinder was mounted in batteries of nine (with various controls) on a trailer. The cylinders could be readily detached and used separately but in practice were only detached from the trailer for maintenance and inspection purposes. The appellants’ customers might transfer the hydrogen at once to their own storage units or might retain the trailer for a while, drawing hydrogen therefrom as required. A second type of cylinder was in effect a returnable container. The appellants would deliver such cylinder to a customer and collect it for refilling when the customer had used the contents. These individual containers cost £20 each and the appellants purchased a large number of them at a total cost of over £4,000,000. The appellants applied to the Board of Trade for investment grants under the Industrial Development Act 1966 in respect of the tanks used to convey the liquid gases and the cylinders. The Board of Trade refused to make grants stating, inter alia, that there was a lower limit of £25 of cost for single items eligible for grants. The appellants sought declarations, inter alia: that the tank and pump portions of the tankers, the hydrogen gas trailer and the individual cylinder were capable of being approved capital expenditure within the meaning of ss 1(1)a and
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13b of the 1966 Act; that the Board of Trade was not entitled to decline to make a grant towards the bulk capital expenditure on the individual cylinders on the sole ground that each cost less than £25; and that, if any of the items were approved capital expenditure, s 1(1) of the Act imposed a duty on the Board of Trade to make a grant towards those items. (In 1969, the functions of the Board of Trade under Part I of the Act were transferred to the Minister of Technologyc)
Held – (i) The tanks used for the storage of the atmospheric gases were properly regarded as parts of the vehicles to which they were attached and were not to be regarded as notionally separable; accordingly, they were excluded from grant by s 13(1) (see p 169 c, p 171 f, p 172 j to p 173 b, p 175 j and p 176 a, post); alternatively (per Viscount Dilhorne), putting liquefied gas into tankers (and putting hydrogen gas into cylinders on trailers) for distribution to the appellants’ customers could not be a process incidental to the liquefaction of the gas (or the making of hydrogen gas); accordingly, if the tankers (and trailers) were not vehicles and came within the definition of new machinery or plant, they were not for use in a process for or incidental to the making of the liquefied gas (or of the hydrogen) (see p 173 f, post).
(ii) The hydrogen cylinders fixed on the trailer were parts of the trailer and thus excluded from grant by s 13(1), because—
(a) (per Lord Reid; Lord Morris of Borth-y-Gest, Lord Wilberforce and Lord Diplock concurring) although a storage tank built on wheels for convenience might not be regarded as a vehicle if its real purpose was storage rather than transportation, the primary purpose to which the appellants put the hydrogen cylinders on the trailer appeared to be for delivery and not for storage (see p 169 d, p 171 f, p 175 j and p 176 a, post);
(b) (per Lord Reid; Lord Morris of Borth-y-Gest, Lord Wilberforce and Lord Diplock concurring) although the cylinders were detachable from the trailer (and accordingly might be regarded as a load rather than an integral part of the trailer) in practice the cylinders were never detached in use (see p 169 e, p 171 f, p 175 j and p 176 a, post); and
(c) (per Viscount Dilhorne) the trailer was a vehicle adapted for the conveyance of hydrogen gas and contained the gas just as the tank of the tankers contained the liquid; no distinction could be drawn between them (see p 173 d, post); alternatively,
(d) (per Viscount Dilhorne) if the trailer carrying the cylinders was not to be regarded as a vehicle, for the reasons set out in the alternative in holding (i) above, it was not used in a process for or incidental to the making of the hydrogen (see p 173 f, post).
(iii) A declaration would not be made to the effect that the Minister was not entitled to decline to make a grant towards bulk capital expenditure on the individual cylinders on the sole ground that each cylinder cost less than £25, because the discretion conferred was unqualified and the Minister was accordingly not precluded from making such a rule or policy provided that he did not refuse to listen to an application for the exercise of his discretion (see p 170 j to p 171 a and f, p 175 e and j and p 176 a, post)
Dictum of Bankes LJ in R v Port of London Authority, ex parte Kynoch Ltd [1919] 1 KB at 184 considered.
(iv) Insofar as the individual cylinders (which were new plant for use in Great Britain) were used to receive gases when ‘made’, they were used in a process incidental to the ‘making’ of the gases; if the gases were only pumped in at a later stage then they might be used for storage within the meaning of s 1(3) (that being deemed to be a process incidental to the making). Storage meant, however, keeping in store and the gases were no longer kept in store when they were sent in cylinders for delivery to customers. In the case of such dual purpose plant it would be competent for the Minister (should he change his mind on the £25 rule or policy) to
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approve such part of the capital expenditure as might be held to be appropriate for the eligible purpose (see p 171 c to f, p 174 c to e, p 175 j and p 176 a, post).
(v) The Minister was not bound under s 1(1) to pay a grant to every person who was eligible to receive a grant (see p 169 h, p 171 f, p 174 j, p 175 j and p 176 a, post).
Decision of the Court of Appeal sub nom British Oxygen Co Ltd v Board of Trade [1969] 2 All ER 18 affirmed with slight variation of the order of the court.
Notes
For investment grants, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 240A.
For the Industrial Development Act 1966, ss 1 and 13, see 46 Halsbury’s Statutes (2nd Edn) 820 and 832.
Cases referred to in opinions
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997, [1968] 2 WLR 924, Digest Supp.
R v Port of London Authority, ex parte Kynoth Ltd [1919] 1 KB 176, 88 LJKB 553, 120 LT 177, 83 JP 41, 16 Digest (Repl) 327, 1056.
Appeal
This was an appeal by British Oxygen Co Ltd from an order of the Court of Appeal (Harman, Russell and Karminski LJJ) dated 14 February 1969 and reported [1969] 2 All ER 18, affirming in part and reversing in part the decision of Buckley J made on 10 April 1968 and reported [1968] 2 All ER 177. The facts are set out in the headnote.
J A Brightman QC, P R Oliver QC and P E Whitworth for the appellants.
M Finer QC and J P Warner for the Minister.
Their Lordships took time for consideration
15 July 1970. The following opinions were delivered.
LORD REID. My Lords, the appellants seek declarations that certain items of their industrial plant are eligible for grants under the Industrial Development Act 1966. Until that year taxpayers could claim investment allowances as of right. But that system was replaced by the provisions of the 1966 Act which empowered the Board of Trade, and now the Minister of Technology, to make grants if the conditions laid down in the Act apply.
The appellants produce in saleable form the atmospheric gases oxygen, nitrogen and argon and also other substances including hydrogen. The atmospheric gases are delivered to customers in liquid form at very low temperatures and under little more than atmospheric pressure. The hydrogen is delivered at ordinary temperature but under very high pressure. The plant with which this case is concerned is used to effect such delivery. It includes two types of tanker and two types of cylinder for containing gas under pressure.
The large tanker consists of a Foden four-wheeled tractor which supports the front end of a long tank of some 400,000 cubic feet capacity, the other end being attached to a double bogey. The smaller tanker consists of a tank about half that size mounted on an ordinary four-wheel lorry chassis. These transport the liquid gases in vacuum-insulated containers and have elaborate and expensive components; the tanks alone cost over £15,000 and £11,000 respectively. Outwardly they look much the same as tankers seen daily on the public roads transporting liquids such as petrol, oil or milk.
The first type of cylinder is used for delivery of hydrogen at very high pressure.
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Batteries of nine cylinders with various controls are mounted on trailers. The cylinders can readily be detached and they could be used separately. But in practice they never are used separately and they are only detached from the trailers very seldom for maintenance and inspection. When hydrogen is delivered to customers in these cylinders sometimes it is at once transferred to the customers’ storage plant but sometimes the trailer is left with the customer for a time and he draws hydrogen from the cylinders as he needs it. The appellants use very large numbers of the second type of cylinder each of which is a separate unit. It is delivered full of oxygen or some other gas. The customer uses the contents as required and the cylinder is then collected by the appellants and refilled. It is really a type of returnable container.
I must now set out the relevant parts of the 1966 Act:
‘1. (1) Subject to the provisions of this section, the Board of Trade (hereafter in this Act referred to as “the Board”) may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure incurred by that person in providing new machinery or plant for use in Great Britain—(a) for carrying on a qualifying industrial process in the course of that business; …
‘(2) For the purposes of this section a qualifying industrial process is a process for or incidental to any of the following purposes, that is to say—(a) the making of any article …
‘(3) For the purposes of this section—
‘(a) the repair or maintenance in the course of a business of an article which is used in the course of that business for carrying on a process or incidental to any of the purposes mentioned in subsection (2) of this section;
‘(b) the storage in the course of a business of anything which is to be used in the course of that business for carrying on any such process or which is to be or has been subjected to, or has resulted from, any such process carried on in the course of that business; and
‘(c) the packing in the course of a business of anything which is to be or has been subjected to, or has resulted from, any such process carried on in the course of that business,
shall each be treated as a process incidental to that purpose, but, save as aforesaid, repair, maintenance, storage of packing shall not be treated as a process incidental to any of the purposes mentioned in subsection (2) of this section …
‘(6) Subject to any order under section 7 of this Act, the amount of any grant under this section shall be twenty per cent. of the expenditure in respect of which it is made, except that it shall be forty per cent. of the said expenditure so far as it qualifies as development area expenditure in accordance with Schedule I to this Act.’
’Machinery or plant’ is defined in s 13(1):
‘“machinery or plant” includes part of any machinery or plant but does not include a computer, ship or aircraft or any vehicle except—(a) a vehicle constructed or adapted for the conveyance of a machine incorporated in or permanently attached to it and of no other load except articles used for the purposes of the machine; (b) a vehicle constructed or adapted for the conveyance or haulage of loads in or about private premises, including the site of building or civil engineering operations … ’
The Minister maintains that the tanks and hydrogen cylinders are parts of the vehicles to which they are attached and are therefore excluded from eligibility for grant by s 13. The appellants maintain that they ought to be regarded as separate items of plant and they rely in particular on the first exception from the exclusion of vehicles. That exception broadly applies to machines on wheels; it does not
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apply to plant on wheels. But the appellants rely in particular on the words ‘and … no other load’. They argue that these words show that ‘vehicle’ is intended to have a narrow meaning and to apply only to a chassis. If a machine is incorporated in or permanently attached to a chassis, the chassis and machine together would normally be regarded as being a vehicle; to call such a machine a ‘load’ requires the notional separation of the two. If ‘vehicle’ has this narrow meaning then the chassis and plant permanently attached to it must also be notionally severable. Logically this argument may be attractive but I think that it puts much too much weight on the draftsman’s use of the word ‘load’. This provision does not differentiate between parts of the vehicle; the whole vehicle including the machine is made eligible for grant. So the provision read as a whole affords no support for the appellants’ contention that the tank can be notionally separated from the chassis where in fact the two are clearly part of a single unit. The whole tanker is a vehicle; it is designed for use as such and is in fact used as a single unit for transporting the liquefied gases.
But the hydrogen cylinders are in a somewhat different position. Two arguments are open to the appellants which would not apply to the tankers. In the first place it could be said that the whole unit is not a vehicle. For some purposes anything on wheels is a vehicle. But the word could have a narrower meaning of something used to carry goods (or people) from one place to another. So a storage tank built on wheels for convenience might not be regarded as a vehicle if its real purpose was storage rather than transportation. But the primary purpose of the hydrogen cylinders with the trailer appears to be for delivery and not for storage of the hydrogen. The second possible argument is that in fact the cylinders are not part of the vehicle but are a load carried by the vehicle; it is true that they are readily detachable and if they were in fact detached in the course of use they might be regarded as a load. But they are in fact never detached in use. The line between what is a load and what is a part of the vehicle may sometimes be difficult to draw, but here on the facts I think that the cylinders must be regarded as parts of the vehicle, and therefore as excluded from eligibility for grant.
The single gas cylinders raise different and more far-reaching issues. They cost about £20 each and in the three years after the 1966 Act came into force the appellants purchased a very large number of them at a cost of over £4,000,000. The appellants complain that the Minister has made a rule not to pay grant on any item of plant costing less than £25, at least unless it is used in conjunction with other items. So it is necessary to consider what is the duty of the Minister in administering the Act and what rights, if any, the Act confers on those eligible for grants.
Section 1 of the Act provides that the Board of Trade ‘may’ make grants. It was not argued that ‘may’ in this context means ‘shall’, and it seems to me clear that the Board were intended to have a discretion. But how were the Board intended to operate that discretion? Does the Act read as a whole indicate any policy which the Board is to follow or even given any guidance to the Board? If it does then the Board must exercise its discretion in accordance with such policy or guidance (Padfield v Minister of Agriculture, Fisheries and Food). One generally expects to find that Parliament has given some indication how public money is to be distributed. In this Act Parliament has clearly laid down the conditions for eligibility for grants and it has clearly given to the Board a discretion so that the Board is not bound to pay to every person who is eligible to receive a grant. But I can find nothing to guide the Board as to the circumstances in which they should pay or the circumstances in which they should not pay grants to such persons.
The relevant part of the long title is ‘An Act to provide for the making of grants out of moneys provided by Parliament towards expenditure on the provision of new business assets’. There is no guidance there. Then s 1(6) deals with eligibility and provides that the amount of any grant shall be 20 per cent of the expenditure in
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respect of which it is made. Sections 2 to 6 deal with special cases. Section 7 is a general power to vary the rate of grant by order. None of these throws any light on this matter, nor does s 8 which deals with conditions to be imposed in making grants. Section 11 and 12 are perhaps more relevant. Section 11 provides for the appointment of committees to advise the Board on the administration of the Act and it could be taken as an indication that otherwise the Board’s discretion is unlimited. Section 12 provides for an annual report to Parliament so that Parliament can ex post facto consider the way in which this discretion has been exercised. Section 13 is a definition section. ‘Approved capital expenditure’ is to mean ‘expenditure appearing to the Board to be of a capital nature and approved by them for the purposes of the grant’. This again gives no guidance as to reasons for which approval can be given or withheld.
I cannot find that these provisions give any right to any person to get a grant. It was argued that the object of the Act is to promote the modernisation of machinery and plant and that the Board were bound to pay grants to all who are eligible unless in their view particular eligible expenditure would not promote that object. That might be good advice for an advisory committee to give but I find nothing in the Act to require the Board to act in that way. If the Minister who now administers the Act, acting on behalf of the government, should decide not to give grants in respect of certain kinds of expenditure, I can find nothing to prevent him. There are two general grounds on which the exercise of an unqualified discretion can be attacked. It must not be exercised in bad faith, and it must not be so unreasonably exercised as to show that there cannot have been any real or genuine exercise of the discretion. But apart from that if the Minister thinks that policy or good administration requires the operation of some limiting rule, I find nothing to stop him.
It was argued on the authority of R v Port of London Authority, ex parte Kynoch Ltd that the Minister is not entitled to make a rule for himself how he will in future exercise his discretion. In that case Kynoch owned land adjoining the Thames and wished to construct a deep-water wharf. For this they had to get the permission of the authority. Permission was refused on the ground that Parliament had charged the authority with the duty of providing such facilities. It appeared that before reaching their decision the authority had fully considered the case on its merits and in relation to the public interest. So their decision was upheld. Bankes LJ said ([1919] 1 KB at 184):
‘There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case. I think counsel for the applicants would admit that, if the policy has been adopted for reasons which the tribunal may legitimately entertain, no objection could be taken to such a course. On the other hand there are cases where a tribunal has passed a rule or come to a determination, not to hear any application of a particular character by whomsoever made. There is a wide distinction to be drawn between these two classes.’
I see nothing wrong with that. But the circumstances in which discretions are exercised vary enormously and that passage cannot be applied literally in every case. The general rule is that anyone who has to exercise a statutory discretion must not ‘shut [his] ears to the application’ (to quote from Bankes LJ ([1919] 1 KB at 183)). I do not think that there is any great difference between a policy and a rule. There may be cases where an officer or authority ought to listen to a substantial argument reasonably presented urging a change of policy. What the authority must not do is to refuse to listen at all. But a Ministry or large authority may have had to deal already with a multitude of
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similar applications and then they will almost certainly have evolved a policy so precise that it could well be called a rule. There can be no objection to that provided the authority is always willing to listen to anyone with something new to say—of course I do not mean to say that there need be an oral hearing. In the present case the Minister’s officers have carefully considered all that the appellants have had to say and I have no doubt that they will continue to do so. The Minister might at any time change his mind and therefore I think that the appellants are entitled to have a decision whether these cylinders are eligible for grant.
They appear to involve capital expenditure—although that is for the Minister to decide—and they are new plant for use in Great Britain. It is not suggested that the production of these gases is not the making of an article and they cannot be produced in saleable form unless they are immediately enclosed in a suitable container. So, insofar as these cylinders are used to receive the gases when ‘made’, they are in my view used in a process incidental to the ‘making’ of the gases. If the gases are only pumped into them at a later stage then they may be used for storage within the meaning of s 1(3), and that is deemed to be a process incidental to the making. But I would hold that storage means keeping in store and the gases are no longer kept in store when they are sent out in the cylinders for delivery to customers. I do not think it necessary to consider the meaning of packing because on my view it will add nothing on the facts of this case.
If the cylinders are used partly for storage and partly for delivery of the gas and storing it on the customers’ premises, then it is necessary to consider the position of plant which has a dual purpose. It was suggested in argument and I do not think that it was denied that in such a case it is competent for the Minister to approve such part of the capital expenditure as may be held to be appropriate for the eligible purpose. I do not find it possible on the facts which we have to make any definite finding which could be incorporated in a declaration but this does mean that to a small extent the appellants are successful. I would dismiss the appeal with a slight variation of the order of the Court of Appeal ([1969] 2 All ER 18, [1969] 2 Ch 174) and award to the Minister three-quarters of his costs in this House.
LORD MORRIS OF BORTH-Y-GEST. My Lords, I have had the advantage of reading in advance the speech of my noble and learned friend Lord Reid and I agree with it and the order proposed.
VISCOUNT DILHORNE. My Lords, the Industrial Development Act 1966 came into force on 12 August of that year. By that Act, the Board of Trade, now the Minister of Technology, was given power to make grants towards approved capital expenditure incurred in providing new machinery or plant for use in Great Britain for carrying on a qualifying industrial process in the course of that business (s 1(1)). A white paper ‘Investment Incentives’d was published on 17 January 1966 and by virtue of s 13(5) of the Act, a grant may be made in respect of expenditure incurred after that date.
On 9 May 1966, the appellants wrote to the Board of Trade sending the Board some notes—
‘of certain categories of plant assets in use within our organisation which do not appear immediately to come within the definition of manufacturing assets and therefore entitled to enjoy the new cash grants.’
They contended that all these assets constituted part of the manufacturing activity and qualified for cash grants. The Board of Trade replied at length on 20 July 1966. In the course of that letter in relation to stand-by equipment they made the
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following statement to which in the course of this litigation great importance has been attached: ‘In this case, as in all others, the £25 lower limit of cost for single items eligible for grants would apply.' On 11 August, the day before the Act came into force, the appellants wrote to the Board with regard to three classes of equipment, tankers ‘hydrogen trailers’ and cylinders.
Section 13(1) of the Act, inter alia, states that—
‘“machinery or plant” includes part of any machinery or plant but does not include a computer, ship or aircraft or any vehicle except—(a) a vehicle constructed or adapted for the conveyance of a machine incorporated in or permanently attached to it and of no other load except articles used for the purposes of the machine; (b) a vehicle … ’
On 23 September, the Board replied saying that in their view tankers taken as a whole are vehicles and ineligible for grants; that the essential function of the cylinders was one of distribution and that ‘No grants are payable under the Act on containers in any form’; and that the purpose of the hydrogen trailers appeared to be similar to that of containers, namely, distribution and storage. On 7 July 1967, the appellants issued an originating summons seeking the determination of the court of the questions raised in this correspondence. On 24 October 1967, the Board wrote to the appellants saying:
‘It has occurred to the Board’s legal advisers that you may not appreciate the significance of the Government policy underlying the investment grants scheme. The Board take the view that it would be inconsistent with such policy to make grants in the case of any equipment such as that in dispute, which the Board regard as serving primarily a distributive function, even if, which is not admitted, the payment of those grants would be authorised by the Act. For this reason, even if your clients were successful in obtaining declarations favourable to them on the questions raised in the Summons, the Board would nevertheless, in the exercise of their discretion, feel bound to refuse to make a grant.’
In consequence of this letter the appellants amended the summons to claim the following declarations:
‘4. A declaration that (a) the tank and pump portions of the said gas tankers (b) the said hydrogen gas trailer and (c) the metal cylinder … are capable of being approved capital expenditure within the meaning of sections 1(1) and 13 of the Act nothwithstanding that each (1) is a form of container or (2) serves a distributive function.
‘5. A declaration that the Board of Trade is not entitled to decline to make a grant towards bulk capital expenditure on the said metal cylinders on the sole ground that each cylinder costs less than £25.
‘6. If any of the said items are approved capital expenditure as aforesaid a declaration that section 1(1) of the Act imposes on the Board of Trade a duty to make a grant towards the same.’
Photographs of the tankers in question were produced at the hearing. They are of two types, a large tanker in which liquid oxygen, argon and nitrogen are conveyed and a smaller tanker also used for the carrying of liquefied gas. The tank part is welded to the chassis. Counsel for the appellants contended that the tank part and the pumping equipment attached thereto did not become part of a vehicle by that attachment; that in s 13(1) a distinction was drawn between a vehicle and its load and that in construing ‘a vehicle’ one should have regard to the scope and object of the Act. The scope of the Act clearly excludes vehicles other than those which come within paras (a) and (b) of the definition of machinery or plant. I see no reason for saying that it was not one object of the Act to exclude them. Even if the inference can be drawn from the wording of para (a) that the machine incorporated in or
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permanently attached to a vehicle is a load, it does not follow that a tanker whether it be for the carrying of liquid or gas can be regarded as anything other than a vehicle. But I read the words of this paragraph not as meaning that a machine incorporated in or permanently attached to a vehicle is a load but as providing that on such a vehicle only articles used for the purposes of the machine may be carried as a load. In my opinion the photographs produced are really conclusive on this question. They show the tankers to be similar to many other tankers which travel on our roads and it would in my opinion be wrong to treat the tank part as not forming part of the vehicle.
The ‘hydrogen trailers’ consist of a number of cylinders fixed on a trailer. When detached from its motive part, the trailer has one axle at the rear. When the motive part is attached, the front end of the trailer rests on the rear end of the motive part. The trailer is thus similar to many other trailers in use on the highways and whether or not attached to the motive part, cannot in my opinion be properly described otherwise than as a vehicle. The question here is whether the cylinders on the trailer do or do not form part of the vehicle. They are filled with gas on the appellants’ premises and then taken to the premises of one of the appellants’ consumers. The trailer may be left there until the gas is used. It is then brought back to the appellants’ premises and the cylinders are refilled. The cylinders are fixed on the trailer and are only taken off it at intervals for the purpose of testing the cylinders. The ‘hydrogen trailer’ is in my opinion a vehicle adapted for the conveyance of hydrogen gas. The cylinders contain the gas just as the tanks of the tankers contain the liquid I cannot draw any distinction between them. They are in my opinion all vehicles excluded by s 13 from the scope of the Act.
A grant can only be made towards approved capital expenditure incurred in providing new machinery or plant ‘(a) for carrying on a qualifying industrial process in the course of that business; or (b) … ’ (s 1(1)). ‘A qualifying industrial process’ is defined in s 1(2) as a process for or incidental to any of five specified purposes, the first of which is ‘the making of any article’ and that is the only purpose with which we are concerned in this case. Putting liquefied gas into tankers and hydrogen gas into cylinders on the trailers for distribution to the appellants’ customers cannot in my opinion be regarded as a process either incidental to the liquefaction of gas or to the making of hydrogen gas. If the tankers and hydrogen trailers are not vehicles and come within the definition of new machinery or plant, they are not in my opinion for use in a process for or incidental to the making of the liquefied gas or of the hydrogen. On this ground too in my opinion the appellants’ claim in relation to this equipment fails.
The metal cylinders, which vary in size, are also used to contain gases. Those filled with hydrogen are filled directly from the process plant. When filled, they are kept on the appellant’s premises until the gas is required to fulfil an order. Oxygen, nitrogen and argon are produced initially in liquid form, the liquid being stored in bulk storage tanks. The liquid is converted into gas which is fed directly into the cylinders. Nitrous oxide, dissolved acetylene and other gases are also put into cylinders. They are kept on the appellants’ premises until the gas is required by customers. Section 1(3) of the Act, so far as material, reads as follows:
‘(3) For the purposes of this section—
‘(a) …
‘(b) the storage in the course of a business or anything which is to be used in the course of that business for carrying on any such process or which is to be or has been subjected to, or has resulted from, any such process carried on in the course of the business; and
‘(c) the packing in the course of a business of anything which is to be or has been subjected to, or has resulted from, any such process carried on in the course of that business …
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‘shall each be treated as a process incidental to that purpose, but, save as aforesaid, repair, maintenance, storage or packing shall not be treated as a process incidental to any of the purposes mentioned in subsection (2) of this section.’
So new machinery and plant for use for storage or packing is not to be treated as used for carrying on a qualifying industrial process unless the storage comes within para (b) and the packing within para (c). If machinery or plant is used for storage or packing in the course of the appellants’ business of anything which has resulted from a process for or incidental to the making of liquefied gas or gas, then that machinery or plant is eligible for a grant. The Act nowhere says that no grant is payable on containers in any form.
The cylinders are clearly plant. They form no part of the end-product of the processes applied in the appellants’ works. They contain those products. They are not plant used for packing those products but are they not and can they not be used for storing them? If used for storage of the end-products, then the storage is to be treated as a process incidental to the making of the liquid gas and the gases put in them and the cylinders are eligible for grant.
On the facts, so far as they are known to us, it appears that these cylinders serve a dual purpose, for containing the gases and liquids when gas is being delivered to a customer and for storage on the company’s premises until the gas is required by a customer. The tanks in which liquid oxygen, nitrogen and argon are stored in bulk are clearly eligible for grant. If instead of being put into tanks, the liquid is put into cylinders which are kept on the premises until the gas is wanted, the cylinders are used as storage and are in my opinion eligible for grant. Cylinders filled from these tanks and those filled directly from the process plant and kept on the premises are also used for storage. The storage ends when delivery to a customer begins. The Act does not say that only plant used solely for storage can qualify. In my opinion cylinders used for storage are not disqualified if they are also used for delivery.
A grant may be made towards ‘approved capital expenditure’ incurred in providing new machinery or plant’. “Approved capital expenditure’ is expenditure which appears to the Board to be of a capital nature and which is approved by them for the purposes of the grant (s 13(1)). Section 1(1) says not that the Board shall make a grant if the necessary conditions are fulfilled but that the Board may make one. No duty is imposed on the Board to make a grant. The Act gives it power to do so if it thinks fit. Some argument was directed to the question whether the Act gives the Board two discretions: first, to decide whether the expenditure is capital and whether to approve it for a grant; and secondly, to decide whether to make a grant. I am not sure that discretion is the right word to use. As I read the Act, Parliament has given the Board power to make a grant if it chooses towards capital expenditure that it has approved incurred on plant or machinery which qualifies under the Act. If the Board has approved capital expenditure for the purposes of a grant, it is most unlikely that the Board will not exercise its power to make one. However, circumstances might arise after approval of the expenditure which would render the making of a grant inadvisable, eg a manufacturer going bankrupt or a business closing. I see nothing in the Act which prohibits the Board from deciding not to make a grant towards expenditure which it has approved.
The first declaration sought by the appellants is a declaration that the pieces of equipment therein mentioned are capable of being approved capital expenditure. In my opinion only expenditure on the cylinders is capable of being approved. The third declaration sought is that if any of the items are approved capital expenditure, the Act imposes a duty on the Board to make a grant. In my opinion the Act imposes no such duty on the Board. The Board has not approved of any of the expenditure on the items in question.
The appellants also contend that the Board is not entitled to decline to make a grant towards ‘bulk capital expenditure’ on the cylinders ‘on the sole ground that
Page 175 of [1970] 3 All ER 165
each cylinder costs less than £25’. The contention appears to be that because the appellants buy large quantities of cylinders, a grant should not be excluded because each cylinders costs less than £25. If this contention was well founded, it would follow that grants might be obtainable for purchases in bulk but not obtainable by those who purchased the same articles in smaller quantities. Parliament cannot have intended any such distinction.
The appellants also contended that the Board was not entitled to make it a rule not to make a grant in respect of an item costing less than £25. They found support for this contention in a passage in the judgment of Banks LJ in R v Port of London Authority where he said ([1919] 1 KB 176 at 184):
‘There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case. I think counsel for the applicants would admit that, if the policy has been adopted for reasons which the tribunal may legitimately entertain, no objection could be taken to such a course. On the other hand there are cases where a tribunal has passed a rule, or come to a determination, not to hear any application of a particular character by whomsoever made. There is a wide distinction to be drawn between these two classes.’
Banks LJ clearly meant that in the latter case there is a refusal to exercise the discretion entrusted to the authority or tribunal but the distinction between a policy decision and a rule may not be easy to draw. In this case it was not challenged that it was within the power of the Board to adopt a policy not to make a grant in respect of such an item. That policy might equally well be described as a rule. It was both reasonable and right that the Board should make known to those interested the policy that it was going to follow. By doing so fruitless applications involving expense and expenditure of time might be avoided. The Board says that it has not refused to consider any application. It considered the appellants’. In these circumstances it is not necessary to decide in this case whether, if it had refused to consider an application on the ground that it related to an item costing less than £25, it would have acted wrongly.
I must confess that I feel some doubt whether the words used by Bankes LJ in the passage cited above are really applicable to a case of this kind. It seems somewhat pointless and a waste of time that the Board should have to consider applications which are bound as a result of its policy decision to fail. Representations could of course be made that the policy should be changed.
I cannot see any ground on which it could be said that it was ultra vires of the Board to decide not to make grants on items costing less than £25 nor on which it could be said to be ultra vires to decide not to make a grant in respect of plant used for a dual purpose, one of which qualifies, if in its opinion the main purpose of the plant was for making delivery to customers. The Act gives no guidance to the Board nor to the Minister as to the policy to be pursued in deciding whether or not to make a grant. It is left to the Board to decide how to exercise the power given to it. No doubt that exercise will be in accordance with the policy of the government of the day. An annual report has to be made to Parliament (s 12) and that will no doubt reveal the manner in which the power has been used.
In my opinion this appeal should be dismissed.
LORD WILBERFORCE. My Lords, I have had the benefit of reading in advance the opinion of my noble and learned friend, Lord Reid. I agree with it and find it unnecessary to add any observations of my own.
Page 176 of [1970] 3 All ER 165
LORD DIPLOCK. My Lords, I think that this is a plain and simple case. There is nothing I can usefully add to the speech of my noble and learned friend, Lord Reid. I agree with it and with the order that he proposes.
Appeal dismissed.
Solicitors: Stafford Clark & Co (for the appellants; Solicitor, Board of Trade.
S A Hatteea Esq Barrister-at-Law.
Practice Direction
(Probate: Grant: Solicitor’s office reference)
[1970] 3 All ER 176
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (PROBATE)
1 August 1970.
Administration of estates – Grant of administration – Solicitor’s office reference.
Probate – Grant – Solicitor’s office reference.
Where a solicitor informs a probate registry, at the time of application for a grant, that he wishes his office reference to the case included on the grant, the probate registry concerned will add the reference following the solicitor’s name at the foot of the grant.
Compton Miller, Senior Registrar
Practice Direction
(Decimilisation: Practice: Probate and divorce registries)
[1970] 3 All ER 176
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (PROBATE AND DIVORCE)
5 August 1970.
Decimalisation – Practice – Probate and Divorce Registries – Decimal Currency Act 1969, Sch 1.
1. As from 15 February 1971 (‘D’ day) the Probate and Divorce Registries will use the Whole Penny Conversion Table in Sch 1 to the Decimal Currency Act 1969a.
2. All documents, save Inland Revenue affidavits and forms, lodged in the above registries on and after 1 October 1970 will be accepted provided that they are expressed in both £ s d and decimal currency. Exceptionally, a bill of costs prepared in £ s d only will be accepted if lodged up to 15 May 1971, provided that the total of the summary in such a bill is also shown in decimal currency.
3. As from 1 October 1970, all orders, warrants, writs and allocaturs will be expressed in £ s d followed by the decimal equivalent in brackets.
4. Grants of representation will be expressed in £ s d only up to and including 12 February 1971.
5. On and after ‘D’ day all orders, warrants, writs, allocaturs and grants of representation will be expressed in decimal currency only.
By direction of the President.
Compton Miller, Senior Registrar
Schioler v Westminster Bank Ltd
[1970] 3 All ER 177
Categories: BANKING AND FINANCE
Court: QUEEN’S BENCH DIVISION
Lord(s): MOCATTA J
Hearing Date(s): 28, 29, 30 APRIL, 27 MAY 1970
Bank – Duty of care – Contractual duty to customer to exercise care and skill – Collection of bills – Implied authority to realise foreign dividend warrant in England – Customer only resident in England – Customer liable to United Kingdom income tax on realisation in England – Realisation in England only available method to bank of crediting customer in sterling – Whether bank required to confer with customer before realising warrant in England.
In May 1962, the plaintiff who was domiciled in Denmark but resident in England, opened an account with the defendant bank’s branch in Guernsey. The plaintiff gave instructions to a Malaysian company to forward the dividends, to which she was entitled from her shareholding in that company, to the bank’s Guernsey branch, for the credit of her account. From June 1962 until June 1967, the dividends were so forwarded in sterling and the plaintiff’s account was credited with the appropriate sum without deduction of United Kingdom income tax. In June 1968, however, a dividend warrant in Malaysian currency was received by the bank for the plaintiff’s credit. The securities clerk forwarded the warrant to the bank’s stock officer in England for realisation. The bank was aware that the plaintiff was resident in England and that the use of her account with its Guernsey branch was almost entirely for the purposes of her dividends from the Malaysian company. The Guernsey branch also had knowledge of the plaintiff’s special tax position, as the branch had previously been asked for details of any remittances made by the plaintiff to the United Kingdom, in respect of other matters. The remission of the warrant by the bank for realisation in England resulted in the plaintiff’s becoming liable as a resident to UK income tax on the proceeds, which tax the bank was obliged to and did deduct. The plaintiff pleaded, inter alia, that in forwarding the warrant to its stock officer in England the bank acted without authority and in breach of its duty as a banker, thereby rendering the plaintiff liable to UK income tax on the proceeds of the warrant.
Held – (i) Although there was no evidence of any special terms on which the plaintiff’s account with the bank was originally opened, the plaintiff had instructed the Malaysian company to forward her dividends to the bank’s Guernsey branch and must be taken to have impliedly given that branch authority to credit such dividends to her account, since the collection of bills for its customer’s accounts was part of the contractual duties, which applied equally to dividend warrants, undertaken by a bank to its customer (see p 181 j to p 182 a, post).
Dictum of Atkin LJ in Joachimson v Swiss Bank Corpn [1921] All ER Rep at 100 applied.
(ii) In the absence of express instructions from the plaintiff, the bank was not in breach of its duty to the plaintiff, because in sending the dividend warrant to England for realisation in sterling, the bank was not doing anything unusual and there was no alternative method available to it for crediting the plaintiff’s account (see p 183 f and g, post).
Notes
For banking practice in respect of dividend warrants, see 2 Halsbury’s Laws (3rd Edn) 188, 189, para 355, and for cases on the subject, see 3 Digest (Repl) 177–183, 289–327, 231, 232, 584–587.
Cases referred to in judgment
Joachimson v Swiss Bank Corpn [1921] 3 KB 110, [1921] All ER Rep 92, 90 LJKB 973, 125 LT 338, 3 Digest (Repl) 193, 376.
Page 178 of [1970] 3 All ER 177
Taxation Comrs v English, Scottish and Australian Bank Ltd [1920] AC 683, 89 LJPC 181, 123 LT 34, 3 Digest (Repl) 181, 317.
Action
The plaintiff, Ursula Valborg Schioler, claimed that: she was and had at all material times been a Danish citizen ordinarily resident in England; the Westminster Bank Ltda at all material times had by advertising held itself out as skilled in income tax matters; she had for some years had an account at the bank’s branch at St Peter Port, Guernsey, Channel Islands, and the bank was at all material times well aware that the plaintiff was a Danish citizen ordinarily resident in England; in June 1968, the bank (on behalf of the plaintiff) received from a company incorporated in the States of Malaya a dividend warrant for (Malaysian) $17,848·80 and valued in sterling at the current rate of exchange at £2,412 7s 6d; wrongfully, negligently and without any authority from the plaintiff, the bank remitted the dividend warrant to London and by so doing the sum of £2,412 7s 6d became liable to UK income tax at the standard rate of 8s 3d in £1, and the bank thereupon deducted tax at such rate amounting to £995 2s 1d; the bank by so acting was in breach of contract with the plaintiff in that it remitted the dividend warrant to London without the authority of the plaintiff; the bank acted negligently and in further breach of contract in that it owed a duty to the plaintiff to exercise reasonable skill in dealing with her affairs and the bank knew or ought to have known that by remitting the warrant to London it would cause the money to attract UK income tax; further, and in the alternative, the bank had wrongfully and without cause deducted the sum of £995 2s 1d from the plaintiff’s account at its Guernsey branch. The plaintiff sought, inter alia, a declaration that her account at the bank’s branch in Guernsey should be credited with the sum of £995 2s 1d, or in the alternative, damages in the sum of £995 2s 1d.
T I Payne for the plaintiff.
R M Yorke for the bank.
Cur adv vult
27 May 1970. The following judgment was delivered.
MOCATTA J read the following judgment. The claim in this action arises out of somewhat novel facts and raises questions of importance to the parties of some difficulty.
The plaintiff, a married woman, is of Danish nationality. She resides in Hampshire, but is domiciled in Denmark. In May 1962 she opened an account with the bank’s branch in St Peter Port, Guernsey. It appears that from then onwards, until the crucial events of June and July 1968, substantially the only sums paid into that account derived from dividends to which she was entitled from her shareholding in a company called United Plantations Ltd carrying on business in Malaysia, with its registered office at Teluk Anson in the States of Malaya. At some date unknown to me, but presumably in 1962, she gave instructions to the Malaysian company to forward her dividends to the bank’s Guernsey branch for the credit of her account there. From June 1962 until June 1967, dividends were so forwarded in sterling either in the form of a banker’s draft drawn on the Hong Kong and Shanghai Banking Corpn in London, or occasionally in the form of cheques in the plaintiff’s favour drawn by the company on the same bank and sent to Guernsey by the plaintiff. In all these cases her account in the bank’s Guernsey branch was duly credited with the appropriate sterling sum without deduction of UK income tax. At some time in 1968 the Malaysian company converted its shares from £1 units into units of (Malaysian) $10 each. At the same time it appears to have changed its name from United Plantations Ltd to United Plantations Berhad. (I take it that the latter word is the equivalent in Malay of ‘corporation’ or ‘limited company’.) On 15
Page 179 of [1970] 3 All ER 177
June 1968, the Malaysian company sent to the bank’s Guernsey branch for the account of the plaintiff a dividend voucher in respect of the year ending 31 December 1967, with dividend warrant attached for (Malaysian) $17,848·80, a sum arrived at after deduction of Malaysian income tax at 40 per cent. I have not seen the warrant, but it appears to have been a draft drawn by the Malaysian company on the Hong Kong and Shanghai Banking Corpn, Teluk Anson, for (Malaysian) $17,848·80. It seems likely that the draft was made payable to bearer, although there was no direct evidence of this.
The voucher and warrant were received by the bank in Guernsey on 19 June 1968 and were on the same date sent by the securities clerk in the branch to the bank’s stock office at Crawley for realisation. This was done under cover of one of the bank’s printed forms filled in, so far as the branch could, with details of the draft and the account, but leaving blank spaces for the sterling equivalent of the gross dividend for deduction of UK tax thereon. The form contained on its face the following:
‘This Certificate when signed on the reverse will be accepted by the Inland Revenue as evidence of payment of the Income Tax shown.’
The bank’s stock office at Crawley provides any services which the bank’s numerous branches may require in relation to stocks and shares. The stock office sold the draft in London to an appropriate bank operating in Malaysia for £2,412 7s 6d, deducted UK income tax at 8s 3d in £1, totalling £995 2s 1d, and returned the form to Guernsey as a credit for the net sum of £1,417 5s 5d. The plaintiff’s account was credited with this sum by the Guernsey branch on 2 July 1968. When the plaintiff discovered that £995 2s 1d had been deducted in respect of income tax, she and her accountant, Mr Littledale, complained to the branch manager on the grounds that, not being domiciled in the United Kingdom, she was not liable to income tax on income derived from the Malaysian company save insofar as any part of that income was remitted to the United Kingdom: see Income Tax Act 1952, s 132(2) and (3). The manager at first took the view that he had been mistaken, apologised and credited the plaintiff’s account with £995 2s 1d. Subsequently, after communicating with the bank’s stock office, he took the view that the deduction had been correctly made and the plaintiff’s account was in consequence debited with £995 2s 1d. It is not now suggested that these changes of view and the cross credits and debits on the plaintiff’s account have any bearing on the claim in this action.
The plaintiff claims damages in breach of contract from the bank in the sum of £995 2s 1d in that in breach of its duty as a banker to take due care of the dividend warrant received by it on her behalf it remitted it to London, thereby subjecting it to a deduction of income tax at 8s 3d in £1, without first obtaining specific instructions. This was the gist of the final argument for the plaintiff although other matters were also pleaded. Thus it was alleged in para 2 of the points of claim that the bank had by advertising held itself out as skilled in income tax matters. This was not followed up later in the pleadings and can be disregarded, save that it was proved that a separate company called Westminster Bank Executor and Trustee Co (Channel Islands) Ltd does for an appropriate charge give advice on income tax matters, but not to persons who employ an accountant, as did the plaintiff. It was also alleged that the bank ought to have purchased the dividend warrant from the plaintiff in Guernsey or should have remitted it for exchange to a country where the plaintiff would not have become liable thereon for English income tax. Nothing was made of the former point in argument; clearly the bank could not have been obliged to purchase the warrant if it was, as was the case, unwilling to do so and it is unnecessary to deal further with this. As regards the latter point it was not seriously argued that if the plaintiff could not succeed in the first way in which she put her case, she could, independently of that, succeed on this alternative basis.
Page 180 of [1970] 3 All ER 177
The bank denied that it had been in any way negligent in dealing with the dividend warrant or had acted without authority. It pleaded that there were no facilities in Guernsey for converting a draft in Malaysian dollars into sterling, that it remitted the warrant to London for collection in the ordinary course of business, and had the plaintiff’s authority so to act, and that its Guernsey branch was under no duty to the plaintiff either to consider whether or not remittance of the warrant to the United Kingdom would expose her to any liability to UK income tax or so to deal with the warrant as not to expose the plaintiff to liability to such tax. The bank further pleaded that in any event the plaintiff had failed to mitigate her damages, if any, by seeking relief from double taxation under the Double Taxation Relief (Taxes on Incomes) (Malaysia) Order 1967b, or otherwise. I was told by counsel for the plaintiff that despite all efforts by the plaintiff’s accountant, Mr Littledale, she had been unable to obtain any relief. It was agreed between counsel that consideration of this matter should be adjourned until after I had given my decision on the main issue whether there had been any breach of contract by the bank.
No oral evidence was called on behalf of the plaintiff. Counsel for the plaintiff relied on the facts appearing from the agreed bundle of documents and on some of the oral evidence given by the witnesses called by the bank, who were Mr Michell, manager of the Guernsey branch from 1 April 1965 until 31 July 1968; Mr Crawford, senior supervisor of the bank’s stock office at Crawley; and Mr Palframan, a divisional manager within the bank’s overseas branch in London.
It is desirable that I should now state a number of additional facts and matters that are not in dispute. In the first place it is clear from the documents that the plaintiff, although resident in Hampshire was domiciled in Denmark, and that the provisions of s 132(2) and (3) of the Income Tax Act 1952 applied in her case, so that her income from the Malaysian company was only liable to income tax pursuant to those subsections to the extent that it was received in the United Kingdom in the year preceding the year of assessment. This was made clear to the then manager of the bank’s Guernsey branch in letters from the plaintiff and Mr Littledale to him dated 13th and 16 November 1964, in which the assistance of the manager was requested as to the details of any remittances from the plaintiff’s account to the United Kingdom in previous years, required for a hearing before the appropriate tax commissioners. These two letters remained on the plaintiff’s file kept by the Guernsey branch. Secondly, it was common ground between counsel that, pursuant to the provisions of s 189(b) of the Income Tax Act 1952, the bank was obliged to deduct income tax at the standard rate from the proceeds of the sale of the dividend warrant in London and account therefor to the Inland Revenue. Section 190 provides for exemption for the dividends of non-residents, but this was not of course applicable to the plaintiff. The bank’s branches, when forwarding dividend warrants in foreign currencies to the stock office, mark such warrants with the word ‘exempt’ when the customer has established his entitlement to exemption with the inspector of foreign dividends. In December 1968, the bank’s stock office was prepared, on the basis of the plaintiff’s being domiciled in Denmark, to seek a special concession on behalf of the plaintiff and secure refund of the tax, but in February 1969, consequent on a ruling by the Board of Inland Revenue in the early part of 1968, the bank took the view that it could not assist in securing a refund. I was told by counsel for the plaintiff that she had been advised by her accountant that she could not obtain a refund. Thirdly, I was told that the plaintiff had been able in respect of her 1969 dividend from the Malaysian company to avoid the incidence of UK income tax as the result of opening an account with an Irish bank in Cork into which the dividend was credited.
I am quite satisfied on the evidence that there are no facilities in Guernsey for negotiating drafts in a foreign currency and that the practice of the bank’s branch
Page 181 of [1970] 3 All ER 177
when receiving such drafts for collection, on behalf of one of its customers, is to act as was done in this case and send the draft to the stock office at Crawley for realisation. The branch has many expatriate accounts and frequently has to collect dividends in foreign currencies for the credit of such accounts On any one day the branch might have to collect the proceeds of up to 20 instruments in foreign currencies, although not all for expatriate accounts, and has invariably dealt with them as was done in this case without any subsequent complaint. The branch had about 5,000 customers at the time.
Mr Michell, on appointment as manager of the branch in April 1965, read through the plaintiff’s file and would therefore have read the correspondence I have referred to of November 1964. Since then, however, neither he nor anyone in the branch had received any information whether the status of the plaintiff as regards liability to UK income tax had remained unchanged or had altered. He had, however, from time to time written to the plaintiff at the same address in Fareham as that from which she had written to the branch in 1964. He had no knowledge of the plaintiff having any business interests in Guernsey or of her ever having even visited the island. He believed that most, but not all, of the payments out of her account were for the purpose of transmitting money abroad. He knew, as is common knowledge, that a bank in Guernsey attracts many accounts for the purpose of avoiding or lessening the impact of UK income tax. He said that he did not know that the plaintiff’s account had been opened for this purpose, but agreed that it very probably was. He said that he would be anxious not needlessly to take any steps which would render one of his customers liable to income tax and that when this particular warrant was sent to the stock office in Crawley by his securities clerk he did not know whether the consequence would be that the proceeds would or would not be subject to deduction of income tax. His view was that it was no part of his duty or that of his staff to enquire into a customer’s income tax position. I should add two further matters in relation to income tax. The securities clerk at the branch was, according to Mr Michell, aware of a decision of the inspector of foreign dividends of the Inland Revenue, contained in a letter of 26 October 1966, that provided dividends came to the United Kingdom solely by reason of a bank’s machinery for currency realisation and not in any way as a result of any action by or instruction from the customer concerned, they could, if the proceeds were sent abroad after realisation, be regarded as not remitted to the United Kingdom and therefore as not liable to UK tax in the hands of persons, like the plaintiff here, assessed on a ‘remittance basis’. The letter specified the action to be taken in order to obtain the authority necessary to bring a particular case within this decision. No such action had ever been taken in the case of the plaintiff prior to the receipt of the dividend warrant in this case. It would of course have been unnecessary since all previous dividends had been in sterling. This decision was apparently overruled by the Board of Inland Revenue in the early part of 1968, but neither Mr Michell nor his staff had been informed of this. Secondly, when the bank’s Guernsey branch had its attention drawn to what the plaintiff and her accountant claimed to be the unjustified deduction of income tax, Mr Michell’s successor as manager wrote on 19 August 1968, explaining that as the bulk of their correspondence with the plaintiff had been conducted through an English address, the bank had regarded her as a resident of the United Kingdom for income tax purposes. Counsel for the plaintiff placed some reliance on this as showing that the branch did have some regard to the tax position of its customers. There was no evidence either oral or documentary of any special terms on which the plaintiff’s account with the bank was originally opened in May 1962. As, however, she had instructed the Malaysian company to forward her dividends to the bank’s Guernsey branch, she must be taken to have impliedly given that branch authority to credit such dividends to her account.
The collection of bills for its customer’s account is part of the contractual duties
Page 182 of [1970] 3 All ER 177
undertaken by a bank to its customer: see per Atkin LJ in Joachimson v Swiss Bank Corpn ([1921] 3 KB 110 at 127, [1921] All ER Rep 92 at 100), and this must apply to dividend warrants. I have no doubt that a bank in the discharge of such a duty must act with reasonable care. The crucial question here is whether the bank failed to discharge that duty. Except for the well-known passage in the judgment of Atkin LJ ([1921] 3 KB 110 at 127, [1921] All ER Rep 92 at 100), to which I have just referred, the only authority cited to me of any relevance on the special facts here was Taxation Comrs v English, Scottish and Australian Bank Ltd. There the somewhat different question was considered whether, under the Australian equivalent of s 82 of the Bills of Exchange Act 1882, the respondent bank had received payment for a customer of a crossed cheque without negligence. Lord Dunedin said ([1920] AC at 688) that in determining this matter regard must be had to ‘circumstances antecedent and present’ in relation to the paying in of any given cheque. He also said ([1920] AC at 689) that the question whether there had been negligence or not was a question of fact and that it was ([1920] AC at 690)—
‘really impossible to lay down rules or statements which [would] determine what is negligence and what is not. Each case must be determined on its own circumstances.’
He did, however, add that ([1920] AC at 689): ‘If, therefore, a standard is sought, it must be the standard to be derived from the ordinary practice of bankers.’ In the case in question, however, the courts below and the Privy Council itself appear to have decided the issue on the facts without the assistance of banking evidence of the ordinary practice of bankers. Mention was, however, made ([1920] AC at 690) of not requiring such a thorough enquiry as to the history of the cheque in question as to ‘render banking business as ordinarily carried on impossible … ’
Counsel for the plaintiff did not argue that there was any duty on the bank to give the plaintiff advice on her tax position. It would in my judgment be placing an impossible burden on a bank and, therefore, unreasonable to imply such a duty from the facts here. Counsel for the plaintiff argued, however, that the bank should not have sent the dividend warrant to the Crawley stock office without first having communicated with the plaintiff or her accountant to ask for instructions. Mr Michell said in evidence that had he known of the Board of Inland Revenue’s ruling given early in 1968, he might, as a matter of courtesy, have telephoned the plaintiff or her accountant before acting. This is what counsel for the plaintiff argued that he should have done. The facts ‘antecedent and present’ relied on as leading to this conclusion were: (i) the branch was in Guernsey, a haven well known for avoiding tax liability; (ii) the residence of the plaintiff in England to the knowledge of the branch and her lack of any known connections with Guernsey; (iii) the use of the account almost entirely for the purpose of her dividends from the Malaysian company; (iv) the earlier knowledge by the branch of her special tax position; (v) the probability that she was using her account with the branch to lessen her tax liability; and (vi) the receipt on 19 June 1968 by the branch for the first time of a dividend warrant for her, other than in sterling. To these may be added knowledge by the branch that the plaintiff was not, on their records, entitled to have the word ‘exempt’ marked on her dividend warrants and that, in the absence of such entitlement, as the bank’s form described earlier indicated, there was, to put it no higher, a real possibility that UK income tax would be deductible from the sterling proceeds of the warrant. The argument assumes that if the bank’s Guernsey branch had communicated with the plaintiff or her accountant, it would have been instructed to hold the warrant until the tax position had been investigated and that eventually
Page 183 of [1970] 3 All ER 177
a means would have been found, perhaps by sending it to Cork to be credited to an account to be opened there by the plaintiff, by which the plaintiff could have had the benefit of the equivalent of the Malaysian dollars without suffering a deduction for UK income tax. This assumption may not be unreasonable, but no evidence was adduced in support of it.
Counsel for the bank, on the other hand, argued that the failure to consult the plaintiff or her accountant before sending the warrant to England for realisation in sterling could not amount to negligence. Unless special arrangements were made with a customer or special instructions given by him, a bank could not, in discharge of its contractual duties in crediting an account with a dividend, be obliged to consider the tax implications to the customer or consult him before acting in accordance with its ordinary practice. To hold a bank obliged to do this would come near to holding that a bank must gratuitously give its customers tax advice. It might also lead to considerable delays in realising the foreign currency concerned, with possible consequent losses due to exchange fluctuations. The plaintiff’s account in Guernsey was and could only be in sterling and the bank had adopted the only way available to it of converting the dividend warrant into sterling in order to credit the plaintiff’s account with the proceeds. So far as the evidence before me went, there was in truth no other way in which this could be done, and it is noteworthy that the plaintiff solved her difficulties in the following year by opening an account in Cork with an Irish bank.
I have found this a difficult issue to determine and feel considerable sympathy for the plaintiff. I would much have welcomed the guidance of some authority nearer to the facts here than the two cases mentioned. I accept that some banks in similar circumstances might have taken the course suggested by counsel for the plaintiff before sending the dividend warrant to England for realisation in sterling. It is, however, quite another matter to hold that the bank was under a contractual obligation so to do. It had implied authority and a contractual duty to credit the plaintiff’s account with dividends received by it on her behalf. In sending the dividend warrant to England for realisation in sterling, it was, on the evidence, not doing anything unusual and there was no alternative method available to it of crediting the plaintiff’s account. I think that there is great force in the argument that to hold that it was negligent in acting as it did without first consulting the plaintiff or her accountant, because of the possible tax repercussions, would be to place an impossible and unreasonable burden on banks generally. In the absence of any express instructions to the bank on the matter, I find myself unable to hold that, in acting as it did, it was negligent or exceeded its implied authority.
Accordingly there must be judgment for the bank.
Judgment for the bank.
Solicitors: Ralph Bond & Rutherford (for the plaintiff); Waltons, Bright & Co (for the bank).
Janet Harding Barrister.
Re A (infants)
[1970] 3 All ER 184
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, RUSSELL AND MEGAW LJJ
Hearing Date(s): 5, 6, 7 MAY 1970
Ward of court – Jurisdiction – Forum conveniens – Interim care and control – Family resident in Jersey – Visit by children to England by agreement for agreed time – Decision by father during that time not to return children to mother in Jersey – No fraud – Father returning to reside in England – Application by father to make children wards of court and keep them in England – Whether English court should order return of children to Jersey.
The parents, who were English, had two children, one born in England in 1964 and the other in Jersey in 1966. By 1969, when they were living in Jersey where they had gone in 1965 and where the mother’s parents had been living since they had settled there before the marriage, and where the father, a doctor, was employed in a hospital, the marriage became very unhappy, and the mother left the matrimonial home (of which she was the legal owner) and took the children to live with her at her parents’ home. The parties agreed that, pending divorce proceedings, the mother should have care and control of the children but that, when the divorce went through, the father should have their permanent care and control. In January 1970, by agreement between the parties, both children were sent to stay with the father’s parents at their home in Winchester until the end of the month. While the children were in England, the father changed his mind and decided not to send them back to Jersey because he did not trust the mother. He agreed to her visiting the children in Winchester, which she did intending to take charge of the children and take them back to Jersey, but the father prevented this. In wardship proceedings the father, who had relinquished his Jersey hospital appointment and returned to reside in England where he was about to take up another medical appointment, asked that both children remain wards of court and remain residing with his parents in Winchester, and the mother asked that both children be handed over to her, that she should be at liberty to take the children home with her to Jersey, and that the wardship should be ended when they left England. On the question whether the court should assume jurisdiction or should order the return of the children to Jersey,
Held – As the children were not in England as the result of some deceit or wrongdoing, as they were in need of protection (as shown by the mother’s attempt to remove them), and as the father was now resident in England and the mother had the means to come here, the court should not decline jurisdiction but should investigate fully what was best for the children (see p 187 b to d, h and j, post).
Notes
For custody disputes affected by conflict of laws, see 7 Halsbury’s Laws (3rd Edn) 126, 127, para 227, and for cases on the subject, see 11 Digest (Repl) 499–501, 1185–1195.
Cases referred to in judgment
E (an infant), Re [1967] 2 All ER 881; sub nom Re E (D) (infant) [1967] Ch 761, [1967] 2 WLR 1370, Digest Supp.
H (infants), Re [1966] 1 All ER 886, [1966] 1 WLR 381, Digest (Cont Vol B) 132, 1185b.
P (G E) (an infant), Re [1964] 3 All ER 977, [1965] Ch 568, [1965] 2 WLR 1, Digest (Cont Vol B) 442, 2159a.
T (infants), Re [1968] 3 All ER 411, [1968] Ch 704, [1968] 3 WLR 430, Digest Supp.
Case also cited
McKee v McKee [1951] 1 All ER 942, [1951] AC 352.
Page 185 of [1970] 3 All ER 184
Appeal
The mother of two children, who had become wards of court as a result of the issue of a summons on 10 February 1970, appealed against an order of Plowman J made on 4 March 1970, acceding to the application of the father to continue the wardship of the children and their residence with the father’s parents in England, and refusing her application that the children be handed over to her, that she be at liberty to take them to her home in Jersey and that the wardship of the children be ended when the children left England. The facts are set out in the judgment of Harman LJ.
P J Millett for the mother.
J A R Finlay for the father.
7 May 1970. The following judgments were delivered.
HARMAN LJ. This is a dispute between the father and mother of two little girls as to their immediate future, care and control. The parties are two comparatively young people and the children are the offspring of their marriage, which was celebrated in England in 1961. The mother was then a trainee nurse and the father was also doing some medical studies at an English hospital. After the marriage the father was commissioned in the RAMC and went to Germany for some time, coming back to England in 1963. The elder child was born in 1964, and in 1965 the two young people went to Jersey, the mother’s parents, who are wealthy retired people, having gone there in about 1957 and having settled there. The mother’s parents bought a house which they conveyed into the mother’s name; presumably it was a gift to her, but one does not know. The second girl was born there in 1966. The marriage was not very smooth at any time, but troubles became acute in 1969. The mother had an affair with another man; there was a brawl between the father and the other man and the mother left at the beginning of January and went away from the house, which had been put into her name, to her parents’ house with her children. Both sides consulted Jersey advocates as to their domestic differences; there were discussions which were of a comparatively inconclusive nature between them and their advisers, as a result of which it seems to have been agreed that provisionally the mother should have care and control of the children pending matrimonial proceedings—apparently the mother desired a divorce because she was very much in love with the other man, although apparently he did not intend to marry her. It was also agreed that, when the divorce went through, the father would have the permanent care and control of the children.
While these disputes were proceeding it was proposed, I think by a children’s care officer on the island, that it would be better to get the children out of the way of the trouble and that they should go and visit their paternal grandparents at Winchester, where there was ample accommodation for them. On 5 January 1970, they came to England, the understanding on both sides being that they should go back at the end of the month.
Meanwhile, at the suggestion of the Jersey advisers, a document was drawn up by the father for signature by the mother, in which he demanded various terms as to how she should live, with whom she was to associate and so forth, during the interim period before divorce or other proceedings came to fruition. That agreement was put before the mother on 27 January but she was unwilling to sign it. It is fair to say that it contained fairly extreme restrictions on her, and certainly by the end of January, when the children were due to go back, she had not signed it. The father, owing to things that had been said to him (whether justifiable or not I do not pause to consider) came to the conclusion that the mother would not keep her word even if she gave it and, in the circumstances, he was not willing that the children should go back to her in Jersey, so they did not go back on 30 January. But on 5 February the mother did unwillingly sign this document. She sent it to the father with a note in her own hand, which I think at this juncture I need not read out. The children were not sent back, the father having changed his mind and decided that he was not going to send
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them back to Jersey because he did not trust the mother. On 9 February, the mother came back to England; she telephoned the father asking him whether he objected to her going to see the children at Winchester. He said that he did not object, and on 9 February she took a car and went to Winchester. She took with her three detectives—she said that she only wanted one, but at any rate she had three—and she intended to take charge of the children and to take them willy-nilly back with her to Jersey. But the father was there on the spot; he went to the police station and nothing came of it.
On 10 February, both parties issued proceedings in this court. The father moved for an ex parte injunction to restrain the mother from interfering with the children and he obtained relief of that sort over the next few days; he then moved that the then situation should be continued and that the children should be left residing with his parents at Winchester. At the same time the mother took out a summons which asked that the children should be handed over to her; that she should be at liberty to take them over to her home in Jersey and that the wardship should be ended when they left this country. An order on the father’s motion was made by Plowman J on 4 March, in which he acceded to the father’s application and refused the mother’s. She now appeals.
The ground of the appeal has been opened to us that this was in fact what is called a kidnapping case. Kidnapping is much in the air at the moment; one sees stories about it in the newspapers every day and it is sometimes carried out with dreadful results. But in this court ‘kidnapping’ has a rather different meaning; there has been a series of at least four cases a what is called the kidnapping variety, which really consist of this: that when a child, or children, have a settled home in one jurisdiction—anyhow any foreign jurisdiction—and one of the parents, by fraud or stealth, removes them from this jurisdiction and makes them wards of court, the court will not countenance that procedure and will, if it is satisfied that no harm will come to the children if they are returned to the jurisdiction where they belong, send them back there without further investigating the matter. I need not mention the casesa they are mentioned in the learned judge’s judgment, and they started with a case where there was an order in the native jurisdiction of the children which was flouted and they have extended to a case where there has been no order in the original jurisdiction; but nevertheless the same principle applies.
It seems to me that this motion is an attempt still further to extend this principle. It is said that if one parent, by unilateral action, keeps the children out of the jurisdiction where they are at home or where they belong, then the court will not countenance that but will send them back to be dealt with in the jurisdiction where their settled home is. So it is said here that these children were born in Jersey—or if not born there, spent the whole of their lives there; that they belong there where the mother’s home is and that they ought to go back there. It is said that there will be no serious suggestion of harm to them in the interim and that, therefore, the court ought not to take it on itself to investigate the rights and wrongs of the matter here and ought, without more ado, to terminate the wardship and send them back to the mother’s care where it is said they belong.
For my part, I do not regard this as a kidnapping case at all. There was no removal of the children by stealth; the children were brought here by agreement of both parties. It is true that they were brought on the understanding that they should remain here for a fortnight and that, in the normal course of events, they would be returned at the end of that time; but what happened was that the father, apparently owing to the delay in signing the agreement and owing to things he had heard, changed his mind and decided that he ought not to send them back and that it would not be
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in their best interests if they did go back. It was not as if the father had, so to speak, by fraud induced the mother to agree that they should come over here and had then suddenly sprung on her the idea that they would not go back. At the beginning the father certainly intended that they should go back and had made arrangements for that purpose; but he changed his mind, saying that it would not be right, without enquiring into the truth of the matter as to the justification of the opinion he had formed, to send the children back to a foreign jurisdiction which, admirable though it may be, might never operate in the matter at all.
In my judgment, the children not being here as the result of some deceit or wrongdoing, it is quite unheard of that this court should decline jurisdiction and say that it will have no more to do with them. Such a thing was never heard of before the so-called kidnapping cases came into being. In my judgment, the jurisdiction of the court—which, incidentally, I think is not disputed—results in the fact that the children are plainly now in need of protection. That they are in need of protection is proved by the fact that the mother was willing to move them from their paternal grandparents’ care. I think, therefore, that the learned judge was perfectly right in saying that he would not refuse the jurisdiction which was his, but that he would entertain a proper enquiry into what the future of these children ought to be.
The matter has somewhat changed its complexion since he heard the case, in that the father, who had an appointment at a month’s notice at a Jersey hospital, has relinquished that appointment and is now in England; so it is not a case, as it looked to be at one time, that the children would be in one jurisdiction and both parents in another. The father is now residents in England; the mother has the means, if she chooses, to come to England—she is a woman not without means—and it appears to me probable (although of course I do not decide anything more) that the domicil of the parties is in England and that the matrimonial proceedings will be started, if they are started, in this country and not in Jersey, the courts there having no jurisdiction to decide them.
Accordingly, I think Plowman J was perfectly justified in the course he took, and that the originating summons ought to be allowed to take its proper course, which I hope will not be too long, and that the matter of these children’s future should be investigated here by the Court of Chancery.
Accordingly, I would dismiss the appeal.
RUSSELL LJ. It is important to bear in mind that this is a case only of an interlocutory application. It is submitted that the proper course that the judge should have taken was that, without hearing the full evidence about these wards of court, he should have sent them back to Jersey and de-warded them. That summary course has been adopted in certain cases, which are generally referred to as the ‘kidnapping’ cases and it has been suggested that the present case is analogous to such cases. For my part, I can only say that I entirely disagree. The parents in this case are English; they have lived for five years in Jersey, where the father had a medical position, and he is now living in England, about to take up a medical position here. The judge decided that this was not a case in which he was prepared to make this summary order, and I think, in the circumstances of this case, that he was well entitled to take that view.
I, too, would dismiss the appeal.
MEGAW LJ. I agree.
Appeal dismissed.
Solicitors: Shepheards & Bingley (for the mother); Church, Adams, Tatham & Co (for the father).
Henry Summerfield Esq Barrister.
Ford v Ford and Stanford
[1970] 3 All ER 188
Categories: FAMILY; Divorce
Court: HAMPSHIRE ASSIZES
Lord(s): LANE J
Hearing Date(s): 11, 12 MAY 1970
Divorce – Condonation – Condonation by husband – Adultery by wife – Husband with knowledge of adultery continuing to share bed with wife – No intercourse – Husband’s offer of forgiveness rejected – Husband epileptic and partly crippled – Husband unable to see way to separate himself from wife – No proper matrimonial cohabitation – Whether condonation.
The husband and wife were married in 1955. The marriage was a happy one until 1964 when the husband, who was an epileptic and had a crippled arm and leg, found that for the sake of his health he had to have less frequent sexual intercourse with the wife. This offended the wife, and by 1965 all sexual intercourse ceased permanently. In 1967, although the parties had been accustomed to go out together, the wife increasingly went out alone. In February 1967, the wife began to associate with a man and she became pregnant. She did not tell the husband until he observed her pregnancy in August. In December 1967, the wife gave birth and the husband, who had done nothing about the situation, offered to forgive her and to accept the child as the child of the family. The wife completely rejected the offer. At the end of December the husband consulted solicitors, but it was not until May 1968, when he claimed to have seen a packet of contraceptives in the wife’s handbag, that he ceased to pay her any maintenance and she ceased to perform domestic services for him. In October 1968, the husband filed a petition for divorce on the ground of the wife’s adultery. In her reply, the wife alleged, inter alia, condonation. Throughout the marriage and up to the date of the hearing, the parties had lived in the same house and had shared the same bed.
Held – The husband had not condoned the wife’s adultery, because—
(i) It was essential that any forgiveness should have been mutual; and although the husband had been willing after the birth of the child to forgive the wife and had hoped for a full reconciliation the wife had not wished to be forgiven (see p 193 g and p 194 e and j to p 195 a, post); and
(ii) there had been no resumption of what could properly be described as matrimonial cohabitation, the reason that the husband was apparently content, knowing of the wife’s adultery, to continue to accept wifely services from her and to sleep in the same bed, being his inability to see a way out of his difficulties which another abler man would have been able to find (see p 194 b and j to p 195 a, post).
Dictum of Lord Pearce in Blyth v Blyth [1966] 1 All ER at 538 applied.
Notes
For condonation, see 12 Halsbury’s Laws (3rd Edn) 302, 307, paras 599–610, and for cases on the subject, see 27 Digest (Repl) 395–403, 3254–3320.
Cases referred to in judgment
Blyth v Blyth [1966] 1 All ER 524, [1966] AC 643, [1966] 2 WLR 634, Digest (Cont Vol B) 360, 3344a.
Hearn v Hearn [1969] 3 All ER 417, [1969] 1 WLR 1832, Digest Supp.
Tynan v Tynan and Waldock and Good [1969] 3 All ER 1472, Digest Supp.
Petition
This was a petition by the husband, John Sturgess Ford for a decree of divorce on the ground of adultery by the wife, June Joyce Ford.
Page 189 of [1970] 3 All ER 188
Anthony Bird for the husband.
Kenneth C L Smithies for the wife.
The party cited appeared in person.
12 May 1970. The following judgment was delivered.
LANE J. This is a husband’s petition on the ground of adultery. The wife admits that she has committed adultery, but in her pleadings relies on the discretionary and absolute bars, namely conduct conducing, connivance and condonation. As part of her case of conduct conducing and connivance she alleges an association between the husband and the party cited, a woman named Patricia Stanford, but there is no cross-prayer for dissolution. The wife thinks or says that she thinks that the husband has committed adultery, but there is no pleading to that effect and no other ground of relief that the wife has put forward.
The husband in his petition does not ask for the discretion of the court, and I may say here and now that so far as the evidence goes, he has no need to do so. The marriage took place on 16 July 1955; the certified copy of the marriage certificate gives the month as June. Both parties are agreed that this is an error, and the probability is that they are right, and that the month was July. At that time the husband was 32 years of age and the wife 23. The only child of either party is a son of the wife born on 1 December 1967 of whom admittedly the husband is not the father. The matrimonial home has always been at 90 Locksley Road, Eastleigh, in Hampshire. Before the marriage, this house was owned by the wife’s brother and in it lived her parents and she herself was there. At the time of the marriage, the brother sold the house to the husband, the house being subject to a mortgage. The understanding plainly was that the house should continue to be a home for the wife’s parents as well as for the husband and wife, and thereafter the wife’s parents paid the rates. The wife’s mother is still living in the house and her father lived there until his death earlier this year.
Much more remarkable is the fact that both the husband and the wife are still living in the house; not only that, but sharing the same bed. It is common ground that until the year 1964 this was a happy marriage in which both parties seemed to have been satisfied with their sexual relations. Until that year, 1964, sexual intercourse was taking place at the weekends and during the week, but there came a time when the husband found that the mid-week sexual intercourse was too much for him. He is an epileptic; he is also, as I may mention from my own observation, severely crippled in one arm and leg. He found that the mid-week sexual intercourse was resulting on the following day when he was at work in a feeling of giddiness, which he regards as showing the likely occurrence of an epileptic episode. His evidence is that he told the wife that that was why he did not want to have mid-week sexual intercourse with her. The wife denies this, and says that he gave her no explanation of why the relationship was no longer taking place on a working day. The wife does not pretend that she asked her husband why it was getting less frequent, and I think that the commonsense and the probability of the matter is that he told her why, else surely she would, she must, have asked him. Weekend sexual intercourse continued until some time in 1965. It is common ground that all intercourse ceased in that year. I have no doubt that the wife in 1964 was anxious for more intercourse than was taking place; she appears to have been offended by the lessening of the husband’s requirements. He was no doubt very wise in his own interests to reduce the occasions of intercourse. The way in which the wife showed that she was offended was, as the husband put it, to half turn her back on him, on such occasions as for example when they were sitting side by side in an omnibus, or indeed when they were walking along the street together. There was one occasion when the wife asked the husband: ‘Don’t you want me any more?’ The husband told me that he did not understand that she meant thereby: ‘Do you not want me sexually?’ but he tells me, and I accept, that his answer was: ‘Of course I do’. From
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1964 there is no doubt that conversation between the parties diminished, although up until probably about 1966 they exchanged a kiss when the husband returned from work and on retiring for the night. From about that latter year (it is impossible for the court to be certain when) there were greetings, but there were no signs of affection of any sort, although they continued to share the same bed and for a time to go out for what appears to have been almost their sole pleasure, a weekly visit to the cinema together.
The way in which the parties eventually ceased to go out to the cinema together appears to have been this: the husband was at all material times employed by Remploy, where he earned £10 or £11 a week net. Of this he gave the wife £7 15s a week for housekeeping and a further 5s for electricity. One week he found that out of the modest sum which remained to him he had not enough money for the two of them to go to the cinema, and he told the wife that this was so. Either then, or on some subsequent occasion (I am not sure which) he says that, as he had not enough for two to go on the outing, he told the wife that she had better go alone and gave her 10s for the purpose, so she went by herself. There were other occasions subsequently when they went together, but there was probably more than one instance when he gave her 10s to go alone. I may be mistaken about that; there may have been only one, but from that time which was in 1967, she wife increasingly went out alone. On a number of occasions the husband asked her if she would go out with him and she replied: ‘No’, she was sorry, she had made arrangements to go elsewhere, so that by some time in 1967, probably the spring, the last link in their matrimonial life broke.
Nevertheless, they continued to share the same bed, and he continued to provide the money; she continued to do the cooking, washing and so on for him in the house. But from that time onward there was nothing between them in the way of real companionship and by 1967 we have reached virtually the end of the marriage as a live relationship. Looking over the period of those three years from 1964 to 1967 I think that it may be summarised in this way: because of his health, the husband offended the wife by his failure to have mid-week sexual intercourse with her. She from that time onward became increasingly cold towards him. This offended him, and the increasing estrangement between them resulted in the following year, 1965, in intercourse ceasing altogether. There was left only the tenuous arrangement of the cinema which broke down in 1967.
In 1967, in February or March (probably the earlier of these two months) the wife began to associate with the father of her child. He has not been named in the husband’s petition. Leave was granted to that end because it was impossible for the husband to be sure of the identity of the male adulterer. Within a very short period after starting her association with this man whose identity has been partially established (though not his name) during the hearing, and who has been referred to as ‘the coalman’, the wife was committing adultery and became pregnant. She said not one word to the husband about her pregnancy, and it was not until about August 1967 that he realised from his own observation that she was pregnant. Then he asked her if his suspicions were correct; she said that they were. In her evidence, the wife said that the husband also asked her who the father was, and that she refused to say. The husband did nothing when he found that the wife was pregnant. They continued to live exactly as they had been doing before. The husband did not know the expected date of the birth of the child until a matter of minutes before the ambulance came to take the wife to the maternity hospital. When she told him that she was going into hospital, all that he did was to make a remark about something for his sandwiches for the next day. The child was born on 1 December 1967. On a Friday a week or ten days later the wife returned to, I hesitate to call it the matrimonial home, but for want of a better term I will do so; the husband said nothing. That night, and on the following two nights the parties retired to the same bed, nothing being said between them about the situation, but by the following Monday
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the husband had screwed himself up to say what he wanted to say, and said: ‘What is going to happen to us now there is the child?’ or words to like effect. The wife made no answer; her only response was to take the child to her mother in another part of the house.
The child slept in the bedroom which the parties used, but while the husband was there it was never in the living room. Still nothing was said between them until 20 December by which time the husband had consulted solicitors, whose first letter was written then. Not one word is said about her adultery or the child. The letter begins:
‘We have been consulted by your husband concerning the present matrimonial difficulties which have arisen between you and him [a vague term which might mean anything]. We have advised our client in accordance with his instructions and at this stage we write to inform you that your husband is not prepared to allow your brother, Harry Cyril Coombes, to enter the premises. You should not therefore invite him to the premises nor allow him to enter the premises at any time in the future except with the leave of your husband. Yours faithfully … ’
There had been trouble over the wife’s brother, because he had, as I find, the habit of coming to the house sometimes late in the evening and staying until anything up to 1.00 am or thereabouts, which meant that the wife did not come to bed until that hour, and the husband either could not or would not go to bed until she had done so; he was losing needed sleep, but when he protested to her, the only answer he got was that he should mind his own business. That appears to have been one of the wife’s favourite answers, one which for example she gave when the husband on occasions asked her where she had been when she had been out without him. So far as the correspondence shows, the letter of 20 December 1967 remained unanswered. The next letter is from the wife’s solicitors dated 23 May 1968 and reads:
‘We have been consulted by Mrs. June Joyce Ford who we understand was interviewed by your Mr. A. C. Clements on behalf of her husband Mr John Ford and that your Client desires the dissolution of the marriage.’
Mr Clements was an inquiry agent who gave evidence here, and who by that time had been instructed to find out what he could of the wife’s conduct. The letter continues:
‘We shall be pleased to learn whether or not your Client is prepared to make a confession statement as to his adultery in order that proceedings can be taken. We are instructed that your Client is not maintaining his wife or child and we shall be grateful if we could be informed of what arrangements are to be made for their maintenance.’
This letter gives us the date to which both parties agree when there was a change in the relationship between them. In May 1968, the husband ceased to pay the wife any maintenance though he discharged the outgoings of the house. She ceased to cook for him, do any washing for him or otherwise perform any domestic services. The wife was at a loss to explain to the court how it came about that the husband ceased to pay her maintenance. The best she could do was to say that he had complained about the food with which she was supplying him, and said that thereafter he would look after himself. The husband gives a different account. He says that one day about the month of May 1968 he observed the wife taking the contents of one of her handbags and putting them in another, and saw that one of the objects so transferred was a packet of contraceptives. I have no doubt that the husband genuinely thought that this was what it was, and he may have been right, but his
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opportunity for observation was so brief that I should hesitate to find as a fact that it was. This, however, in my view was the reason why he stopped paying maintenance, which was, in turn, the reason why the wife went to her solicitors.
The answer written on behalf of the husband, dated 28 May, read:
‘Thank you for your letter of the 23rd instant. We are not aware that our client has committed adultery. Is your client suggesting that he has? We are in fact seeing our client on Wednesday of this week and will write to you again thereafter.’
There came a reply from the wife’s solicitors dated 8 July:
‘We refer to your letter of the 28th May, 1968, and we are in possession of a letter written to your Client by a woman who we have reason to believe is employed at his place of work, and the contents of which appear to suggest some close relationship. Since your Client is still living in the matrimonial home and sleeping with his wife perhaps you will let us know if your Client intends to leave. We shall also be pleased to learn what arrangements your Client is making as to maintenance.’
I do not think that I need read the further correspondence; the answer was in brief that he was not making any arrangement for maintenance and in fact he did not do so until the order for alimony pendente lite was subsequently made in these proceedings. Still nothing further happened between the parties until on 17 October 1968 the husband’s petition was filed.
So far as the living arrangements were concerned, these persisted as I understand and still persist to this day, as they had been since 1967, save for the change in May 1968 as to finance and the wife looking after the husband.
In support of her allegations of conduct conducing and connivance, the wife seeks to set up what was referred to as the husband’s neglect of her and also of his association with the party cited. The wife gave evidence about that: she said that as early as 1966 she had reason to believe that the husband was already associating with the party cited. The husband’s evidence is that he did not meet the party cited until she (also being an epileptic) came to work at Remploy in November or December 1966, and the he did not go out or associate with her in any way until about September 1967, which was, of course, after he knew that the wife was pregnant. I accept from the husband that he did not even know the party cited in 1966. It may be that his date of September 1967 for their first excursion together is wrong. I say this, because there was called on behalf of the wife a nephew of hers who seemed to be sure that by the end of July 1967 he had seen the husband and the party cited together on the common. It may be that he is mistaken as to the date, and not the husband; but whichever be right I am quite satisfied that there was no friendship and no association of any kind between the husband and the party cited before the wife had committed adultery, which means that so far as his conduct with the party cited affecting the wife’s conduct is concerned, the allegation completely fails. There was nothing in his behaviour with any other woman to justify the wife in concluding that he was interested in anyone else, and so far as his alleged neglect of her is concerned, she was in my judgment at least as much to blame as he for the cooling off between them. The allegation of connivance also fails.
The wife’s allegation of condonation requires much more serious consideration. I have been referred by both counsel to authorities as to the meaning of condonation. It is unnecessary (and this has long been established) to condonation that there should be a resumption of sexual intercourse between the parties, so that the lack of any sexual intercourse after the husband knew of the wife’s pregnancy does not mean that he cannot have condoned what she did. Condonation has been the subject of many decisions and dicta in the courts. Counsel for the wife relies on two authorities,
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Hearn v Hearn, a Divisional Court case, and the decision of Wrangham J in Tynan v Tynan and Waldock and Good. Counsel for the wife read me the relevant passages from both decisions. I do not propose to re-read all those passages which are freshly in my mind, but in Hearn v Hearn ([1969] 3 All ER at 422), in the first judgment which was given by Cains J, he quotes the statement in Rayden on Divorcea and says of it that it is in the view of that court an accurate summary of what the authorities decide. I should perhaps read that quoted passage:
‘Nevertheless, forgiveness must be understood, not in any psychological or theological sense implying that no resentment at the wrong is any longer felt, but in the legal sense as implying merely that the legal remedy for the wrong is waived … ’
There is a short passage in the judgment of Wrangham J in Tynan v Tynan and Waldock and Good to which I should particularly refer ([1969] 3 All ER at 1473) viz: ‘It follows that there are two elements in condonation, the first being forgiveness, and the second being reinstatement.' I need not read the rest of the passage.
Counsel for the husband referred me to the case in the House of Lords of Blyth v Blyth, and read a passage in the speech of Lord Pearce ([1966] 1 All ER at 538, [1966] AC at 671) which states:
‘Forgiveness and reinstatement involve matters of the mind. When men and women of self-control have intercourse in normal circumstances, there is a very strong inference that their bodies go with their minds and set the seal on reconciliation and forgiveness. But the divorce courts have to deal very often with persons who have little self-control, and those minds and bodies are not always co-ordinated. In dealing with such persons one has to be careful not to cause injustice by drawing mental inferences more suitable to persons who are better co-ordinated and more self-controlled.’
I find assistance in that passage, particularly in this way: the law is the same for all men, but not all men react alike to similar situations. I have never heard of a decree being granted in a case where for months, years and even at the date of the hearing, the parties were maintaining the same sort of life together as before adultery was committed, or at any rate known, and where the parties were still sleeping in the same bed. Such facts normally would point irresistibly to condonation. Ordinarily, a husband who is content, knowing of his wife’s adultery, to go on accepting wifely services from her, to go on paying her housekeeping money, to share a bed with her, must be taken, I think, to have condoned her offence, subject to this, that there must be some mutuality in the matter of condonation, and I know of no authority which says that condonation may be found against a husband in respect of a wife who does not want to be forgiven. That was the situation in this case.
The husband in fact would have liked to live a life more separated from the wife than he believed to be possible. The way he looked at it was this: ‘My wife won’t leave; I wish she would; I cannot, because so small are my earnings that I cannot afford to pay the mortgage instalments, repairs, the outgoings on my house for which I am liable, and at the same time pay for lodging.' These considerations prevented him from leaving the house.
The next question that must be asked is: ‘If you thought you could not go, why did you not at least sleep apart from your wife?’ I have no doubt that the detailed reasons which the husband gave as to the impossibility of putting another bed else-where in the house for him to sleep in were reasons in which he genuinely believed. This house had four rooms—five counting a small boxroom. Two of these
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were in the occupation of the wife’s mother, and her father for so long as he was alive. The parties only had a living room and a bedroom. The boxroom was of such a size that, as the husband put it, if he had erected the bed that was in there, the door would not have closed or opened. I do not think for a moment that he wanted to go on sleeping with the wife, particularly when she inconvenienced him by coming to bed later than he wished to retire, but being the man he is, he was unable to see any way of resolving his difficulties and of separating himself from her, such as another and abler man would no doubt have found. I am satisfied that at the time when he spoke to the wife, after her return from hospital, to which I have already referred, he was willing to offer her forgiveness; willing to accept the child as a child of the family, and I reject the wife’s statement that she did not think that he was prepared to do so. The wife refused this offer out of hand, and I may remark that by so doing hopelessly prejudiced any right she might have to pursue a claim for maintenance hereafter. What she wanted above all, and she is frank about this if not about certain other matters, was to keep the house. She was content to receive maintenance from and perform services for the husband and to continue at least to see the father of her child. Although she has been careful to tell me that the only occasions on which she has seen him in the last year or two were those on which the inquiry agent or the husband happened to see her, it seems to me to be a remarkable coincidence that she was observed on the only occasions when she was out with that man, and that the probability is that she has seen and perhaps continues to see a good deal more of him than she is willing to admit.
In those circumstances, is the court to say that the husband has forfeited his right to a decree—has he by his conduct waived his legal right to seek relief? In my judgment he has not. Until the child was born, I think that he had not made up his mind what he wanted to do. He was waiting to see what happened, and it ought not to be held, indeed it cannot in my judgment be held, against him that he suspended all action until the child was born. Then, as I have said, he was willing to forgive and had he done so, I have no doubt that he would, in time, have offered the wife something more than the barren life that they had been living together. At the time when he offered forgiveness, he cannot long have been associating with the party cited. Perhaps I should add, in case there be misunderstanding, that when I use the word ‘associating’ here, it is not in the sense that that word is often used in this Division of maintaining an adulterous association, for as I have indicated earlier in my judgment, there was, so far as I can judge, no adultery between the husband and the party cited. It is true that by about the end of 1967 there must have been such a friendship between them that the party cited at any rate was hoping for a closer association still, and probably for marriage. I say this because of the letter which the wife found and copied, the copy being before the court, in which the party cited reproached the husband for not going to a solicitor, and said:
‘… if you do not go to a solicitor John, well I am sorry that I must cut off with you straight away as I do not want to lead a miserable life all the time, as you know I have had a miserable life long enough already. And if you do not go to one this week do not come up to see me any more, otherwise it only makes me worry like it did last night and have more turns like I did last night. Cheerio for now.’
Probably the husband was something less than frank when he told the court that he really did not know what the party cited was talking about in that letter. He must have known, but the reason for his going to a solicitor after he knew of the birth of the child was, as I think, because he still hoped for a reconciliation with the wife, and thereafter, as I have already indicated more than once, there was no forgiveness; there was only a continuation of a life which bore of the signs of matrimonial cohabitation, save for the sharing of the bed. The husband’s explanation of why
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those circumstances continued must be accepted as genuine and sufficient. It would be a grave injustice in this case in my judgment to hold that in law the husband is not entitled to the decree which he seeks. He is entitled to that decree.
Decree nisi.
Solicitors: Bernard Chill & Axtell, Southampton (for the husband); Slater & Gibbons, Winchester (for the wife).
Deirdre McKinney Barrister.
Rowland v Thorpe
[1970] 3 All ER 195
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 9, 10 JULY 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen for laboratory test – Reasonable excuse – Embarrassment, physical injury, mental condition – Road Safety Act 1967, s 3(3).
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen for laboratory test – Reasonable excuse – Excuse relating to urine specimen only insufficient – Road Safety Act 1967, s 3(3).
Whether embarrassment, physical injuries or mental condition can provide the basis for a reasonable excuse for failure to provide a specimen for a laboratory test under s 3(3) of the Road Safety Act 1967 is a matter of fact and degree. Mental condition or physical injuries must be of a very extreme character to constitute a reasonable excuse (see p 196 g and p 197 e, post).
A reasonable excuse for failure or refusal to provide a specimen of urine cannot establish a reasonable excuse for failure to provide a specimen for a laboratory test under s 3(3) of the Road Safety Act 1967, if there is no reasonable excuse for refusal to provide a specimen of blood (see p 196 h and p 197 e and f, post).
Notes
For failure to provide a specimen of blood or urine for a laboratory test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 3.
For the Road Safety Act 1967, s 3, see 47 Halsbury’s Statutes (2nd Edn) 1558.
Case stated
This was a case stated by justices for the county borough of Luton in respect of their dismissal of an information charging the respondent, Joan Miller Mitchell Thorpe, with failing, without reasonable excuse, to provide a specimen for a laboratory test contrary to s 3(3) of the Road Safety Act 1967. The facts are set out in the judgment of Lord Parker CJ.
I T R Davidson for the appellant.
The respondent was not represented.
10 July 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county borough of Luton who dismissed an information preferred by the appellant against the respondent that she failed to provide a specimen for a laboratory test, contrary to s 3(3) of the Road Safety Act 1967.
Page 196 of [1970] 3 All ER 195
Putting it quite shortly, police officers were summoned to a certain residence as a result of a domestic incident. When they got there the incident had ended but they saw the present respondent, who had been involved in a fight of some sort there, getting into a car and driving away. They followed her, they stopped the car, and, suspecting alcohol, they asked her to give a breath test. She refused. Pausing there, there was another information alleging that she had failed to give that breath test and to that she pleaded guilty. They then took her to a police station, gave her the opportunity of taking another breath test, which she refused, and then they required her to give a specimen for a laboratory test. The warnings were given, the procedure which has to take place before it can be said that there had been a failure to provide a specimen was complied with and in the end she was charged with failing to give a specimen for a laboratory test.
Having said that, there are certain specific findings, to which one should draw attention, which were made by the justices. They found that the respondent at the police station at the time of the request gave no reasons for her refusal to give either a specimen of blood or of urine. They found that the respondent had been involved in a fracas during the evening in which she had been injured. They found that the respondent’s injuries consisted of cuts, scratches and bruises on her face, arms and legs. They found that the respondent was in a nervous and distressed state at the police station which should have been apparent to the police officers present. They found that there was no doctor or policewoman present at the time when the requirement was made, and finally, that the respondent was or might have been embarrassed by the request to supply a sample of urine inasmuch as there were present at the time only male members of the Bedfordshire and Luton constabulary.
When this matter came, as it did, earlier before this court, the question arose as to what was the nature of her distress and her physical injuries and the question whether they could, as the justices held, amount to a reasonable excuse for not providing a specimen. The matter was sent back to the justices. The justices have not made any further findings in fact but have merely attached the notes of evidence. They put their opinion in this form:
‘We were of the opinion that the Respondent had, or might have a reasonable excuse for failing to provide a specimen of urine, by reason of the fact that she was, or might have been, embarrassed by the said request. We were of the opinion that the Respondent had, or might have had a reasonable excuse for failing to provide a sample of her blood or urine, because of her physical and mental condition and also because no doctor or policewomen was present.’
As I see it, the first question that arises is whether any of the matters referred to, embarrassment, physical injuries or mental condition, could provide the basis for a reasonable excuse. In my judgment, it must be in every case a matter of fact and degree although I would unhesitatingly say that the mental condition or the physical injuries must be of a very extreme character to constitute a reasonable excuse. So far as embarrassment is concerned, the only embarrassment which the justices feel here might be the basis of a reasonable excuse was the embarrassment of giving urine when there was no woman police officer present. In my judgment, even if that did amount to a reasonable excuse, that was no reasonable excuse for not providing a blood sample as opposed to a urine sample. As far as the physical injuries are concerned and the mental condition, one only has to read the evidence here to make one realise that those could not properly in the present case be said to form the basis of a reasonable excuse. When the respondent got to the police station (I am considering at the moment the police evidence) she was quite clearly the worse for drink. True, she was untidy, dishevelled and obviously had these cuts on her face, but she never suggested that she had any reasonable excuse for not giving a sample. Indeed she adopted an attitude of aggression and was aggressive towards the police officers. At one stage she grabbed a bottle and threw it against the window, breaking
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it. She was violent. She had to be placed in a cell, and so on. That was the evidence of more than one police officer and it was evidence which was never challenged. It was never challenged that she had behaved in an abusive and violent way and had to be put into a cell.
All that happened was that when the respondent herself gave evidence she said what was no doubt true: that she was terribly upset and shaky when she got to the police station. She said she was scared, emotionally upset, ‘I was in a highly emotional state’. Then she goes on to deal with embarrassment and her embarrassment, according to the embarrassment which she said that she had, was because neither a doctor nor a woman police officer was present. She said that that caused an embarrassment not merely with regard to the giving of urine but the giving of blood and she went on to say, ‘I consider embarrassment is a reasonable excuse’.
Of course, once the defence is raised of reasonable excuse, it is for the prosecution in every case to negative it, and really the question one asks oneself in the present case is this: had the prosecution on the evidence negatived the possibility of reasonable excuse? In all the circumstances here, bearing in mind the conduct of the respondent, the fact that she never gave any explanation of her refusal, her behaviour in the police station, the evidence she gave as regards embarrassment, there was nothing, as it seems, to me, sufficient to raise in the court any reasonable doubt; in other words, it inevitably followed that the prosecution had discharged the burden on them of satisfying the court that there was no reasonable excuse.
I would allow this appeal and send the case back to the justices with a direction to convict.
COOKE J. I agree.
FISHER J. I agree. Section 3(6) of the Road Safety Act 1967 provides that a person shall not be treated for the purposes of s 2(1) of the Road Traffic Act 1962 or of s 3(3) of the 1967 Act as failing to provide a specimen unless he is first requested to provide a specimen of blood and refuses, is then requested to provide specimens of urine and fails or refuses to provide them, and then again is requested to provide a specimen of blood and refuses to do so. It seems to me that even if a person has a reasonable excuse for failing or refusing to provide a specimen of urine, he cannot establish a reasonable excuse for failure to provide a specimen if he has no reasonable excuse for refusing to provide a specimen of blood.
As to the evidence, I entirely agree with what Lord Parker CJ has said. It seems clear that in her evidence the respondent was not alleging her physical or mental condition as a ground for refusing to give a specimen of blood, but in relation to a blood specimen as well as to a urine specimen was relying on embarrassment.
I agree that the appeal should be allowed.
Appeal allowed.
Solicitor: Machin & Co, Luton (for the appellant).
J O Thompson Esq Barrister.
Note
R v Concannon
[1970] 3 All ER 198
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND JAMES J
Hearing Date(s): 18 JUNE 1970
Criminal law – Sentence – Extended term of imprisonment – Notice of previous conviction or sentence – Procedure – Criminal Justice Act 1967, s 38(3).
Notes
For extended sentences, see Supplement to 10 Halsbury’s Laws (3rd Edn), para 932A.
For the Criminal Justice Act 1967, ss 37 and 38, see 8 Halsbury’s Statutes (3rd Edn) 600, 602.
Appeal
This was an appeal by John William Concannon against an extended term of five years’ imprisonment imposed on him on 8 January 1970 by the deputy chairman (Willis J) at East Suffolk Quarter Sessions. He qualified for an extended sentence under s 37 of the Criminal Justice Act 1967. There was, however, no proof that the requisite notice had been given to the appellant under s 38(3)a of the 1967 Act, although his counsel admitted receipt of it.
L A F Borrett for the appellant.
The Crown was not represented.
18 June 1970. The following judgment was delivered.
LORD PARKER CJ delivering the judgment of the court, varied the sentence by making the extended sentence concurrent with a term of 12 months’ imprisonment and concluded: Before leaving this case, the court would draw the attention of courts to the importance of putting to the accused the notice which has to be served before an extended sentence could be given. All that happened in this case was that the deputy chairman, who was minded at an early stage to impose an extended sentence, said to counsel: ‘[The appellant] has received various notices in relation to a possible extension of sentence?’ and the answer was ‘Yes’. The court thinks that the proper course is for the court to ask the accused concerned whether he has been served with a notice with a view to the possibility of an extended sentence, and whether he admits the offences there set out which are supposed to be the qualifying sentences to enable the court to impose an extended sentence. If that is done, as it should be done also in the case of probation, then there can be no confusion, and secondly it will result in those concerned with the matter looking at the notice itself and making sure that what is set out in the notice are qualifying convictions.
Appeal allowed in part. Sentence varied.
Solicitor: Registrar of Criminal Appeals (for the appellant).
N P Metcalfe Esq Barrister.
Irani Finance Ltd v Singh and others
[1970] 3 All ER 199
Categories: CIVIL PROCEDURE: LAND; Property Rights: EQUITY
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, WIDGERY AND CROSS LJJ
Hearing Date(s): 10, 11, 12, 22 JUNE 1970
Execution – Charging order – Interest in land – Property held legally and beneficially by joint tenants – Whether interest in land – Administration of Justice Act 1956, S 35(1).
Joint tenants in land at law and in equity to not hold any ‘land or interest in land’ within the meaning of s 35(1)a of the Administration of Justice Act 1956, their beneficial interest being in the proceeds of sal of the land and the net rents and profits until sale and not in the land itself; accordingly, charging orders over the ‘land or interest in land’ of such joint tenants in favour of judgment creditors made under s 35 of the 1956 Act were ineffective to create any charge on the joint tenants’ interests.
J Bibby & Sons Ltd v Wawrszkowicz (1957) unreported approved.
Thomas v Cross (1865) 2 Drew & Sm 423 and Re No 39 Carr Lane, Acomb, Stevens v Hutchinson [1953] 1 All ER 699 applied.
Bull v Bull [1955] 1 All ER 253 explained.
Dictum of Lord Denning MR in Barclay v Barclay [1970] 2 All ER at 678 disapproved.
Decision of Buckley J [1969] 3 All ER 1455 affirmed.
Notes
For charging orders on land and interests in land, see 16 Halsbury’s Laws (3rd Edn) 100, 101, para 154.
For the Administration of Justice Act 1956, s 35, see 18 Halsbury’s Statutes (3rd Edn) 21.
Cases referred to in judgment
Barclay v Barclay [1970] 2 All ER 676, [1970] 3 WLR 82.
Bibby (J) & Sons Ltd v Wawrszkowicz (1957) unreported.
Buchanan-Wollaston’s Conveyance, Re, Curtis v Buchanan-Wollaston [1939] 2 All ER 302, [1939] Ch 738, 108 LJCh 281, 160 LT 399, 38 Digest (Repl) 822, 348.
Bull v Bull [1955] 1 All ER 253, [1955] 1 QB 234, [1955] 3 WLR 78, 38 Digest (Repl) 827, 398.
Carr Lane (No 39), Acomb, Re, Stevens v Hutchinson [1953] 1 All ER 699; sub nom Stevens v Hutchinson [1953] Ch 299, [1953] 2 WLR 545, 21 Digest (Repl) 781, 2652.
Cook v Cook [1962] 2 All ER 811, [1962] P 235, [1962] 3 WLR 441, Digest (Cont Vol A) 799, 6101b.
Cooper v Critchley [1955] 1 All ER 520, [1955] Ch 431, [1955] 2 WLR 510, 40 Digest (Repl) 21, 81.
Georgiades v Edward Wolfe & Co Ltd [1964] 3 All ER 433, [1965] Ch 487, [1964] 3 WLR 653, Digest (Cont Vol B) 618, 925b.
Kempthorne, Re, Charles v Kempthorne [1930] 1 Ch 268, [1929] All ER Rep 495, 99 LJCh 177, 142 LT 111, 20 Digest (Repl, 359, 850.
Thomas v Cross (1865) 2 Drew & Sm 423, 34 LJCh 580, 12 LT 293, 62 ER 682, 21 Digest (Repl) 769, 2546.
Appeal
This was an appeal by the plaintiff company, Irani Finance Ltd, from the decision of Buckley J, dated 8 October 1969 and reported [1969] 3 All ER 1455, dismissing a claim by the plaintiff company for a declaration, inter alia, that it was entitled as judgment creditor, in whose favour charging orders had been made, inter alia, to redeem a legal charge on 11 Cambridge Road, Southall. The charge had been
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created by the first and second defendants, Terlochan Singh and Gursewak Singh, and had been transferred subsequently to the third defendant, Montex Ltd The facts are set out in the judgment of the court.
John Mills QC and R R F Scott for the plaintiff company.
G B H Dillon QC and M A F Lyndon-Stanford for the third defendant.
Cur adv vult
22 June 1970. The following judgment was delivered.
CROSS LJ read the judgment of the court at the invitation of Russell LJ.
This is an appeal from an order of Buckley J ([1969] 3 All ER 1455, [1970] 2 WLR 117) made on 8 October 1969, dismissing a summons by the plaintiff company, Irani Finance Ltd, which asked for a declaration that it was entitled to redeem a legal charge dated 3 January 1964, on 11 Cambridge Road, Southall, and an account of what was due under it. The facts are very simple. On 3 January 1964, the house in question (the title to which is registered at the Land Registry) was bought by the first and second defendants, two brothers, Terlochan Singh and Gursewak Singh, with the aid of a building society mortgage and was conveyed to them as joint tenants at law and in equity. It does not appear whether the transfer contained an express trust for sale. If it did, not, then a trust for sale was imposed by s 36(1) of the Law of Property Act 1925. In either case the beneficial interests of the transferees were an equitable joint tenancy in the proceeds of sale and in the net rents and profits until sale.
The evidence does not show for what purpose the first and second defendants bought the house, but in January 1969, when the originating summons was issued, the first defendant was apparently living in it while the second defendant was living at another address in Southall. At some date after the purchase, the mortgage was transferred to the third defendant, Montex Ltd On 5 August 1968, the plaintiff company recovered judgment in the Queen’s Bench Division against the first defendant for £1,472 1s and on 22 August it obtained a charging order directing that—
‘… the following land or interest in land of the [first defendant] namely 11, Cambridge Road, Southall in Greater London stand charged with the payment of £1,472–1–0. the amount due from the said [first defendant] to the [plaintiff company], on a judgment of the High Court of Justice dated 5th day of August 1968 … together with … ”
the further sums mentioned. On 12 September 1968, the plaintiff company recovered judgment against the second defendant for £1,072 14s 2d and on 7 November 1968, it obtained another charging order directing that—
‘… the following land or interest in land of the [second defendant] namely one-half share in 11, Cambridge Road, Southall, in Greater London stand charged with the payment of £1072.14.2. the amount due from the said [second defendant] to the [plaintiff company] on a judgment of the High Court dated the 12th day of September 1968 … together with … ’
the further sums therein mentioned. Having obtained these charging orders the plaintiff company took the view that it was entitled to redeem the mortgage of the legal estate of 11 Cambridge Road, vested in the third defendant, but the third defendant challenged its right to do so and accordingly on 16 January 1969, the plaintiff company issued this summons in the Chancery Division. Buckley J held ([1969] 3 All ER 1455, [1970] 2 WLR 117) that the plaintiff company had no locus standi to redeem the mortgage and this appeal is brought from that decision.
In the course of the argument the court asked counsel for the third defendant why the third defendant objected to having its mortgage paid off by the plaintiff company. The answer given was that the third defendant wished to realise its security as soon as it could and that it saw no reason why it should submit the accounts
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between itself and the first and second defendants to the scrutiny of the plaintiff company which, it considered, had no right to see them, although it recognised that, if the plaintiff company obtained the appointment of receiver by way of equitable execution under the judgments, it would be its duty not to pay over any surplus proceeds of sale to the first and second defendants but hold it for the plaintiff company.
The answer to the question at issue depends on the construction of s 35(1) and (3) of the Administration of Justice Act 1956, but those provisions cannot in our view be construed without reference to the earlier law. The history of charges in favour of judgment creditors on the land of judgment debtors starts, for present purposes, with s 13 of the Judgments Act 1838, which enacted that:
‘a Judgment already entered up or to be hereafter entered up against any Person in any of Her Majesty’s Superior Courts at Westminster shall operate as a Charge upon all Lands, Tenements, Rectories, Advowsons, Tithes, Rents, and Hereditaments (including Lands and Hereditaments of Copyhold or Customary Tenure) of or to which such Person shall at the Time of entering up such Judgment, or at any Time afterwards, be seised, possessed, or entitled for any Estate or Interest whatever, at Law or in Equity, whether in Possession, Reversion, Remainder, or Expectancy.’
In 1865, Kindersley V-C held in Thomas v Cross that the judgment debtor’s interest in the proceeds of sale of land subject to a trust for sale was not charged by the section. The Land Charges Act 1900, s 2, provided that a judgment should not operate as a charge on land or on any interest in land unless or until a writ or order for the purpose of enforcing it was registered under the Land Charges Registration and Searches Act 1888. Section 13 of the Judgments Act 1838, and s 2 of the Land Charges Act 1900, were repealed in 1925 and replaced by s 195 of the Law of Property Act 1925. Section 195(1) provided:
‘Subject as hereinafter mentioned a judgment entered up in the Supreme Court (whether before or after the commencement of this Act) against any person (in this section called a “judgment debtor”) shall operate as an equitable charge upon every estate or interest (whether legal or equitable) in all land to or over which the judgment debtor at the date of entry or at any time thereafter is or becomes—(a) beneficially entitled; or (b) entitled to exercise a power of disposition for his own benefit … ’
and s 195(3) (i) contained a proviso that—
‘A judgment … shall not operate as a charge on any interest in land or on the unpaid purchase money for any land unless or until a writ or order, for the purpose of enforcing it, is registered in the register of writs and orders at the Land Registry.’
In Re No 39 Carr Lane, Acomb, Stevens v Hutchinson Upjohn J held (inter alia) that the interest of a judgment debtor under a trust for sale of land was not subjected to a charge by s 195. He pointed out ([1953] 1 All ER at 702, [1955] Ch at 306) that an interest under a trust for sale of land, although within the definition of ‘equitable interest’ in the Law of Property Act 1925, s 205, was not within the definition of ‘equitable interest in land’ in that section, and further that no writ or order for the purpose of enforcing a charge on an interest under a trust for sale of land could be registered under the Land Charges Act 1925, since s 6(1)(a), which was the relevant provision, referred only to writs or orders affecting ‘land’, and ‘land’ was defined by s 20(b) in such a way as to exclude interests in proceeds of sale of land held on trust for sale. Where the title to the land was
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registered the position was the same. Section 59(1) of the Land Registration Act 1925 provides that:
‘A writ, order, deed of arrangement … or other interest which in the case of unregistered land may be protected by registration under the Land Charges Act, 1925, shall, where the land affected or the charge securing the debt affected is registered, be protected only by lodging a creditor’s notice, a bankruptcy inhibition or a caution against dealings with the land or the charge.’
The definition of ‘land’ in s 3 (viii) of this Act is in the same terms as that in the Land Charges Act 1925.
Counsel for the plaintiff company did not submit that Re No 39 Carr Lane, Acomb, Stevens v Hutchinson was wrongly decided on this point, and in fact the decision was referred to with approval by this court in Georgiades v Edward Wolfe & Co Ltd.
Section 195 of the Law of Property Act 1925, was repealed in its turn by the Administration of Justice Act 1956, s 35 of which, so far as relevant, provides:
‘(1) The High Court and any county court may, for the purpose of enforcing a judgment or order of those courts respectively for the payment of money to a person, by order impose on any such land or interest in land of the debtor as may be specified in the order a charge for securing the payment of any moneys due or to become due under the judgment or order …
‘(3) The Land Charges Act, 1925, and the Land Registration Act, 1925, shall apply in relation to orders under subsection (1) of this section as they apply in relation to other writs or orders affecting land issued or made for the purpose of enforcing judgments, but, save as aforesaid, a charge imposed under the said subsection (1) shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand … ’
Counsel for the plaintiff company submitted that, although the description of the property subjected to the charge in s 35(1) of the 1956 Act did not differ in any material respect from the description contained in s 195(1) of the 1925 Act, yet we ought to hold that, whereas under the earlier Act no interests under trusts for sale of land were included, some such interests at all events were covered by the 1956 Act. He pointed out that, whereas under the 1925 Act it was a condition precedent to the arising of a charge on an interest in land of the judgment debtor that a writ or order for the purpose of enforcing it had been registered, under the 1956 Act the charge on the land specified in the order was created when the order was made, whether or not any writ or order for the purpose of enforcing it was subsequently registered. He further pointed out that an interest under a trust for sale of land may, in an appropriate context, be described as an ‘interest in land’; and in that connection he referred us to Copper v Critchley, where this court expressed the opinion ([1955] 1 All ER at 524, [1955] Ch at 439), albeit by way of dictum only, that an interest under a trust for sale of land was an ‘interest in land’ for the purpose of s 40 of the Law of Property Act 1925. Again counsel pointed out that one of the results of the property legislation of 1925 was to subject to statutory trusts for sale a great deal of land, in particular dwelling-houses purchased by more than one person, which were intended to be enjoyed ‘in specie’ and where no sale was in reality in contemplation. He submitted that a comparison of Bull v Bull with the recent case of Barclay v Barclay showed that the law recognised a distinction between cases where the trust for sale was a reality and where it was not, and that in the latter case the interests of the beneficiaries were properly to be called equitable interests in land. In dealing with s 35(3) of the 1956 Act counsel did not, as we
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understood his argument, go so far as to say that the charges on the interests of the first and second defendants which arose in favour of the plaintiff company under s 35(1) because those interests were ‘interests in land’, were capable of being protected under s 59 of the Land Registration Act 1925. His submission here was that the first half of sub-s (3) meant no more than that, if a charge created under sub-s (1) was of such a nature as to be capable of registration, it should not be registered as a general equitable charge but should continue to be registered as a writ or order affecting land.
We cannot accept these arguments. In the first place, the suggested construction of sub-s (3) is to our minds most unnatural. When it is said that the Land Charges Act 1925, and the Land Registration Act 1925, are to apply to orders under sub-s (1) as they apply to other writs or orders affecting land, the natural assumption is that all orders creating charges under sub-s (1) will be writs or orders affecting land, and this conclusion is supported by the fact that the second half of sub-s (3) undoubtedly refers to all charges created under sub-s (1). On this footing, under the 1956 Act as under the 1925 Act, a charge cannot be created under sub-s (1) which is not registrable under the Land Charges Act 1925 or the Land Registration Act 1925.
But even if one accepts that the plaintiff company’s construction of sub-s (3) is a possible one, it is to our minds incredible that Parliament should have made so considerable a change in the law in so obscure a fashion. The words ‘interest in land’ are no doubt capable in an appropriate context of including interests under trusts for sale of land, and although there is no need for us to express a concluded opinion on the point, we certainly do not wish to be taken to be casting any doubt on the correctness of the dicta in Cooper v Critchley, but for 100 years before 1956 the words, or equivalent words, have been held in this field not to include interests arising under trusts for sale. If it had been the intention of Parliament in 1956 to subject interests or some interests arising under trusts for sale of land to charges for judgment debts, it would surely have done so in clear terms.
To turn finally to Bull v Bull and Barclay v Barclay ([1970] 2 All ER at 678, [1970] 3 WLR at 85), in the judgments in Bull v Bull, and in Cook v Cook in which the principle laid down in Bull v Bull was applied, the beneficiaries are in places described as ‘equitable tenants in common’ of the house in question. But the use of these words—what are apt enough to describe the physical situation—does not, we think, necessarily imply that the court considered that the interests of the beneficiaries were interests in realty and not interests in personalty. It is true that in his judgment in Barclay v Barclay ([1970] 2 All ER at 678, [1970] 3 WLR at 85) Lord Denning MR referred to the interests of the beneficiaries in Bull v Bull as equitable interests in land, but that expression of opinion was not necessary to the decision in any of the cases and, with respect, we cannot agree with it. No doubt such tenants in common are interested in the land in the general sense, as was remarked by Russell LJ in Re Kempthorne, Charles v Kempthorne ([1930] 1 Ch 268 at 292, [1929] All ER Rep 495 at 501). But that is not the same thing as their being owners of equitable interests in the realty. The whole purpose of the trust for sale is to make sure, by shifting the equitable interests away from the land and into the proceeds of sale, that a purchaser of the land takes free from the equitable interests. To hold these to be equitable interests in the land itself would be to frustrate this purpose. Even to hold that they have equitable interests in the land for a limited period, namely until the land is sold, would, we think, be inconsistent with the trust for sale being an ‘immediate’ trust for sale working an immediate conversion, which is what the Law of Property Act 1925 envisages (see s 205(1) (xxix)); although of course, it is not in fact only such a limited interest that the plaintiff company is seeking to charge. Cases where the arrangement or intention is that there shall be occupation by a
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beneficiary or beneficiaries, pending a sale, are commonly cases where the beneficiaries are also the joint owners of the legal estate, and, if the sale with vacant possession is mooted by one, the jurisdiction under s 30 of the Law of Property Act 1925, must be invoked, in which case the principles of Re Buchanan-Wollaston’s Conveyance, Curtis v Buchanan-Wollaston ([1939] 2 All ER 302, [1939] Ch 738) will be applied. In a case such as Bull v Bull ([1955] 1 All ER 253, [1955] 1 QB 234), the mother, although not one of the trustees for sale, was in occupation pursuant to the arrangement between mother and son. It should in our judgment be regarded as a decision that in such a case an equitable tenant in common should by virtue of her possession under the arrangement be considered to be a person whose consent to a sale with vacant possession is necessary, so that the jurisdiction of the court under s 30 of the Law of Property Act 1925, cannot be sidestepped by treating her as a mere trespasser. It is not to be taken as establishing that a person in the mother’s position has an equitable interest in the land for the purpose of a charging order.
In Barclay v Barclay ([1970] 2 All ER 676, [1970] 3 WLR 82) there was no ground on which the brother who was in actual occupation could claim that his consent to the sale was necessary. It appears indeed from the reports so far availableb that the house formed part of an estate which was still unadministered, and if that be so, then on general principles no beneficiary had any interest in any specific asset; but the result would have been the same if the house had been specifically given to trustees on trust for sale and the executors had assented to the devise.
For these reasons we think that the decision of Buckley J ([1969] 3 All ER 1455, [1970] 2 WLR 117) and the decision of Diplock J in J Bibby & Sons Ltd v Wawrszkowicz ((1957) unreported), to which he referred were correct and that this appeal must be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Muscatt, Nelson & Co (for the plaintiff company; Samuel Dalton (for the third defendant).
Euan Sutherland Esq Barrister.
R v Treacy
[1970] 3 All ER 205
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, KARMINSKI LJ AND JOHN STEPHENSON J
Hearing Date(s): 23, 29 JULY 1970
Criminal law – Jurisdiction – Blackmail – Unwarranted demand – Demand by letter – Letter posted in England – Addressed to person abroad – Demand made within jurisdiction – Theft Act 1968, s 21(1).
Criminal law – Blackmail – Unwarranted demand – Nature of demand – Theft Act 1968, s 21(1).
Criminal law – Blackmail – Unwarranted demand – Demand by letter – Time when demand made – Theft Act 1968, s 21(1).
When a person, with a view to gain for himself or another or with intent to cause loss to another, makes an unwarranted demand with menaces by letter posted in England and addressed to an intended victim abroad, that person can be tried in England on a charge under s 21(1)a of the Theft Act 1968(see p 208 f, post).
A person makes a demand contrary to s 21(1) when he utters threatening words (or makes threatening gestures) addressed to another person with the necessary intent or object (see p 207 e, post). When the demand is by letter, the demand is made when it leaves the demander beyond recall on its way to the intended victim, e g on posting the letter (see p 207 e and f, post).
Notes
For Blackmail, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1543A.
For the limits of criminal jurisdiction, see 10 Halsbury’s Laws (3rd Edn) 316–319, paras 577, 579, 581, and for cases on the subject, see 14 Digest (Repl) 126, 877, 147–149, 1101–1123.
For the Theft Act 1968, s 21, see 8 Halsbury’s Statutes (3rd Edn) 795.
Cases referred to in judgment
Board of Trade v Owen [1957] 1 All ER 411, [1957] AC 602, [1957] 2 WLR 351, 121 JP 177, 41 Cr App Rep 11, Digest (Cont Vol A) 341, 1110a.
R v Brixton Prison Governor, ex parte Rush [1969] 1 All ER 316, [1969] 1 WLR 165, 133 JP 153, Digest Supp.
R v Clear [1968] 1 Al ER 74, [1968] 1 QB 670, [1968] 2 WLR 122, 132 JP 103, 52 Cr App Rep 58, Digest Supp.
R v Harden [1962] 1 All ER 286, [1963] 1 QB 8, [1962] 2 WLR 533, 126 JP 130, 46 Cr App Rep 90, Digest (Cont Vol A) 342, 1213a.
R v Moran [1952] 1 All ER 803, 116 JP 216, 36 Cr App Rep 10, 14 Digest (Repl) 653, 6640.
Appeal
This was an appeal by Eugene Anthony Treacy against his conviction at the Central Criminal Court of making an unwarranted demand with menaces with a view to gain for himself, contrary to s 21 of the Theft Act 1968. He was sentenced to 3 1/2 years’ imprisonment and he applied for leave to appeal against conviction and sentence. The facts are set out in the judgment of the court.
M Graham for the appellant.
J H E Mendl for the Crown.
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29 July 1970. The following judgment was delivered.
JOHN STEPHENSON J delivered the judgment of the court at the invitation of Lord Parker CJ. On 4 December 1969, the appellant pleaded not guilty at the Central Criminal Court to blackmail. The charge was that on 1 July 1969 within the jurisdiction of the Central Criminal Court with a view to gain for himself, he made an unwarranted demand of £175 from Mrs X with menaces, contrary to s 21 of the Theft Act 1968.
On the third day of the trial, counsel for the appellant submitted that the court had no jurisdiction to try the case because the offence was committed outside England. The learned judge rejected that submission and the trial went on. On the fifth day of the trial, the appellant changed his plea to guilty but preserved his objection that his offence was committed outside the jurisdiction of the court. He was sentenced to 3 1/2 years’ imprisonment. He appeals to this court by leave against that conviction and sentence.
The circumstances of the offence charged were that on 1 July 1969 the appellant posted in the Isle of Wight a letter written by him and addressed to Mrs X in Frankfurt, Germany. The letter read:
‘Dear Mrs X, This is a note asking you for the loan of one hundred and seventy five pounds (£175) in return for keeping my mouth shut about you and Kane. If the money does not arrive by the 10th July I will send the photos of you and Kane to your husband Rod at Liverpool. I just want one payment of £175 in an ordinary letter sent to John Jones, c/o 101 Star Street, Paddington, London W.2. Remember 10th July Deadline.’
Mrs X received the letter in Germany and, through a friend, the police in England were informed. The address mentioned in the letter was an accommodation address at a tobacconist’s shop, and when the appellant came to collect his mail there, the police arrested him. The appellant maintained that Mrs X, who had been connected with a company which had employed him as a book salesman, owed him money which he was desperate to obtain, but there was no evidence supporting his claim.
On the appeal against conviction the question for this court is whether the court of trial had jurisdiction to try the offence, as the judge held, or whether it was committed outside the jurisdiction, namely in Germany, as counsel for the appellant has submitted both to the trial judge and to this court. Section 21(1) of the Theft Act 1968 provides:
‘A person is guilty of blackmail, if, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces; and for this purpose a demand with menaces is unwarranted unless the person making it does so in the belief—(a) that he has reasonable grounds for making the demand; and (b) that the use of the menaces is a proper means of reinforcing the demand.’
The appellant admitted that he made a demand which was unwarranted with menaces and with a view to gain for himself and his appeal against conviction therefore turns on the true answer to the question ‘where did he make his demand?’
The Crown alleges that he made it in England, namely in the Isle of Wight, when he posted the letter there on 1 July 1969. The defence contend that he made it in Germany, namely in Frankfurt, when Mrs X received it there, presumably a day or two later. Counsel for the appellant relies, first, on the general rule that English criminal law is applied on the territorial principle and no conduct constitutes an offence unless it occurs in the territory of England and Wales. Secondly, he says that the place where a crime is committed is determined by deciding where the last constituent element of the offence occurred. Thirdly, he submits that the last constituent element in the offence created by s 21 of the Act—or the gist of the offence—is the communication of the demand to the victim.
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The general rule needs no authority and it appears that the present weight of English authority generally supports his second proposition: see the Law Commission Published Working Paper No 29b, para 86. In an article in the Law Quarterly Reviewc on Venue and the Ambit of the Criminal Law, Professor Glanville Williams has given reasons for deploring what he calls ‘the terminatory theory of jurisdiction’ and preferring ‘the initiatory theory’, that the crime is committed where the offender is; and the Law Commissiond has put forward provisional proposals in the same paper that—
‘… it should be enacted that where any act or omission or any event, constituting an element of an offence, occurs in England or Wales that offence shall be deemed to have been committed in England or Wales even if other elements of the offence take place outside England and Wales.’
Even if this court is not bound to go with the current of existing authority against the initiatory theory, we are willing to assume for the purpose of this appeal that the last constituent element does determine the place where the offence is committed.
Where then is the offence of making a demand completed? Where the person to whom it is addressed is? and if so, when effectively communicated to the victim (like an offer) or at some earlier stage? Or where the demander is? and if so, when first formulated or expressed by him or at some later stage? The answer depends on the natural and ordinary meaning of ‘makes any … demand’; and in our judgment a person may make a demand from another without communicating it to that other. He makes a demand contrary to the section when he utters threatening words (or makes threatening gestures) addressed to another person with the necessary intent or object. When the demand is by letter he makes it, unless there are exceptional circumstances, when he posts the letter.
When the demand is made by word of mouth it is usually made at one time and place. If the intended victim is too deaf to hear it or unable to understand it, it is nonetheless made. Alternatively, a demand may be made orally over the telephone. In that case it is made and received simultaneously and it may be right to regard it as made at one time but in two places, as counsel for the Crown suggested. When the demand is made in writing, as in this case, it will usually be made at one time and place and received at another time and place. If the intended victim is blind or illiterate, the demand is nonetheless made and first made, in our opinion, not when it reaches the victim but when it leaves the demander beyond recall on its way to the intended victim whom it will reach in the ordinary course of things.
We say ‘first made’, because it may be right to regard the demand as continuing until it is received, or as repeated when received. On that view the appellant’s demand was made both in England and in Germany, but he would still be triable for the offence in England although he might also be triable for an offence in Germany. The demand is not made when the threatening letter is written because it may never be sent and the writer may have no firm intention to gain anything by it or to cause any loss by it. But once the letter is posted the demand is completed and the offence of blackmail is committed. The blackmailer has then made his demand, whether or not the letter goes astray or is read by the intended recipient. To make a demand is not the same thing as to make it known.
A contrary view has been expressed, for instance by Professor Glanville Williams, who writes in the article already quoted thate:
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‘… the essence of this crime (blackmail) is the making of a demand with menaces, and there is no “demand’ until the demanding letter is received, so that the offence is regarded as committed at the place of receipt … ”
citing as authority cases of sending a letter with menaces and uttering a forgery. Mr Edward Griew in his book on the Theft Actf, to which counsel for the Crown referred us, expresses the opinion that the full act of making a demand with menaces probably involves the effective communication of the demand in the sense that the victim must actually receive the demander’s letter or hear his words or observe his gestures; but he is willingg to regard the question what amounts to making a demand as an open one, so far as the spoken word is concerned, but not apparently so far as the written word is concerned. He treats the sending of a letter which does not arrive as an attempt to make a demand, and criticises the view of the court in R v Moran ([1952] 1 All ER 803, 36 Cr App Rep 10 at 12) that there cannot be an attempt to demand; there is a demand or there is not.
That view is, however, consistent with the nature of the offence now defined by s 21 and of the mischief aimed at by it and by the statutory provisions which preceded it. We would apply to s 21 the view of Professor Glanville Williams in the same articleh that in a sense, the substantive mischief aimed at by ss 29 to 31 of the Larceny Act 1916 was the obtaining of property by blackmailing threats, but that that Act—
‘… is worded as creating a kind of inchoate crime, and there is clearly an element of mischief in the mere utterance of the threat. There can be no doubt, therefore, that a blackmailing threat uttered in England with a view to obtaining property abroad would be justiciable here.’
Bearing in mind that those sections of the Larceny Act 1916 made ‘every person who—(1) utters … any letter or writing demanding of any person with menaces … ’ (s 29) or ‘who … demands of any person … ’ (s 30) or ‘who … publishes or threatens to publish … ’ (s 31), we see no reason why a person like the appellant who posts a letter in this country should not be thought to have ‘uttered’ the letter here or made a demand here which is justiciable here, notwithstanding that, in Professor Glanville Williams’s words, ‘some further extra-territorial mischief is in view’, namely its receipt by the person outside the jurisdiction to whom it is addressed as well as her compliance with it by paying £175.
We can find no authority which prevents us from giving the words of the section this meaning and we consider our view of them at least consistent with the interpretation put by this court on s 30 of the 1916 Act in R v Clear. R v Harden, Board of Trade v Owen and R v Brixton Prison Governor, ex parte Rush are in our view of no assistance to the appellant. In particular, there is a world of difference between obtaining money by false pretences or deception and demanding it by menaces or threats.
Blackmail is in substance an attempt to obtain money. Making a demand resembles making a false pretence or a false statement. Indeed it is making a statement in a peremptory and often interrogative form. It cannot of course be an offence if made to the winds. Although the new section does not say in terms that the demand must be made from any person, it must be addressed or directed to another person, and if unwarranted and made with menaces and with one of the specific intents
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or objects it is blackmail within the section, whether or not it reaches its destination or is understood by the addressee.
For those reasons we consider that the appellant was rightly charged with making an unwarranted demand on the date the letter was posted and that the ruling of the trial judge that the offence was complete when the last irrevocable step was taken in the making of the demand was right. That ruling recognised the inchoate nature of the offence and its similarity to an attempt. The appeal against conviction is therefore dismissed. As to the appeal against sentence, the appellant is a young man now 22 years of age and he has one previous conviction in 1968 when he was bound over for housebreaking and larceny. He has worked in various employments; when arrested he was working as a kitchen porter in a holiday camp on the Isle of Wight. The attempt to extract money from this lady was a crude attempt, and the trial judge was satisfied that not only was he not owed money by the company which he claimed owed him money, but it was the other way round, he owed that company money. Bearing in mind the seriousness of the offence of blackmail, this court sees no reason to interfere with the sentence passed by the learned judge and his appeal against that sentence is likewise dismissed.
Appeal dismissed. Leave to appeal to the House of Lords, the court certifying under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely: whether, when a person with a view to gain for himself or with intent to cause loss to another, makes an unwarranted demand with menaces by letter posted in England and received by the intended victim in West Germany, the person can be tried in England on a charge under s 21 of the Theft Act 1968.
Solicitors: Quirke & Co (for the appellant); Director of Public Prosecutions.
Jacqueline Charles Barrister.
Wright v Wright
[1970] 3 All ER 209
Categories: FAMILY; Ancillary Finance and Property
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WIDGERY LJ AND SIR GORDON WILLMER
Hearing Date(s): 20 MARCH 1970
Divorce – Collusion – Agreements and arrangements – Financial arrangements – Arrangement approved by court that wife would not apply for maintenance unless unforeseen circumstances rendered it impossible for her to work at all or otherwise maintain herself – Subsequent application by wife for maintenance, despite lack of such circumstances – Whether wife entitled to apply for maintenance – Matrimonial Causes Act 1965, s 5(2).
In January 1966, when a defended divorce suit with cross charges of cruelty was about to be heard, the parties made an arrangement through their legal advisers, which was duly reported to the trial judge and approved by him pursuant to the Matrimonial Causes Act 1965, s 5(2)a. By the arrangement, the husband agreed not to proceed with his charges of cruelty against the wife but to allow the wife to proceed in an undefended suit on her cross charges of cruelty. In return the wife, as her counsel told the trial judge, agreed that ‘no further order should be made at the present moment in respect of maintenance’ and, as part of the arrangement, through her counsel, stated to the trial judge that it was her ‘present intention not to apply for further maintenance, unless there is any unforeseen circumstance making it impossible for her to work at all, or otherwise to maintain herself’. The marriage was dissolved and the husband remarried. In 1969, the wife, whose living
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expenses had increased and who, therefore, found it more difficult to maintain herself, even though she had not become unable to work, applied for maintenance.
Held – The wife was not entitled to apply for maintenance because, although an agreement made under s 5 could not deprive the court of its right to review the question of maintenance for the wife (Hyman v Hyman [1929] All ER Rep 245 applied) (see p 213 b and p 214 f, post), and although the agreement was not to be construed like a statute or as absolutely forbidding any possible award of maintenance, except on the strictest proof of the circumstances mentioned, the existence of the agreement, having regard to the circumstances in which it was arrived at, at least made it necessary for the wife, in order to obtain an award of maintenance, to offer prima facie proof that there had been unforeseen circumstances which made it impossible for her to work or otherwise maintain herself, which she had not given (see p 214 b and c, and p 215 a, post).
Notes
For agreements not to sue for maintenance, see 12 Halsbury’s Laws (3rd Edn) 438, 439, para 985.
For the Matrimonial Causes Act 1965, s 5, see 17 Halsbury’s Statutes (3rd Edn) 165.
Case referred to in judgment
Hyman v Hyman [1929] AC 601, [1929] All ER Rep 245, 98 LJP 81, 141 LT 329, 93 JP 209, 27 Digest (Repl) 235, 1888.
Interlocutory appeal
This was an appeal by the wife, Janet Pearl Wright, from a judgment of Brandon J given in chambers on 13 February 1970, allowing an appeal of the former husband, Adrian Wright, against an order of Mr Registrar Russell, made in chambers on 15 January 1970, that the husband pay the wife maintenance at the rate of £3 10s per week. The facts are set out in the judgment of Sir Gordon Willmer.
J J Dean for the wife.
B H Anns for the husband.
20 March 1970. The following judgments were delivered.
SIR GORDON WILLMER delivered the first judgment at the invitation of Widgery LJ. This is an appeal from a judgment given by Brandon J on 13 February 1970, on a claim for an award of maintenance by a divorced wife. The matter had previously been before Mr Registrar Russell on 15 January 1970, and he made an award in favour of the wife at the rate of £3 10s per week. The learned judge, however, allowed an appeal from the registrar’s order, and dismissed the wife’s claim for maintenance in circumstances with which I shall have to deal in a moment.
The parties had been married in March 1962, but unhappily the marriage was not a success. In early 1965 the wife instituted proceedings before the justices, but they never came to trial because the husband intervened by launching a petition for divorce on 7 April 1965. The husband accused the wife of cruelty, and the wife by her answer carried the war into the husband’s camp and in turn accused him of cruelty. The matter accordingly came on as a defended cause on 26 January 1966 before Latey J. Right up to the door of the court the parties were maintaining their respective allegations of cruelty; but at the door of the court, as does sometimes happen, the parties, through their legal advisers, came more or less to terms, and an arrangement was made which was duly reported to the learned judge, in pursuance of the practice which is now enshrined in s 5 of the Matrimonial Causes Act 1965. The gist of the arrangement which was made, so far as it is relevant for present purposes, was that the husband agreed not to proceed with his charges of cruelty against the wife, but to allow the wife to proceed in an undefended suit on her cross charges of cruelty. In return for that the wife, through her advisers, purported to surrender in one way or another her right to maintenance. I express myself in that
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way because I think that it is important to refer to the transcript of what was actually said in court in order to see exactly what the arrangement was. Counsel who was then appearing for the wife, having referred to the necessity to terminate the order for alimony pending suit, went on to record that it had been agreed ‘to make no further order at the present moment in respect of maintenance’. He went on—
‘My Lord, it is the [wife’s] present intention not to apply for further maintenance, unless there is any unforeseen circumstance making it impossible for her to work at all, or otherwise to maintain herself.’
That suggested arrangement was approved by the learned judge. The trial proceeded undefended and the wife obtained a decree nisi. So far as maintenance was concerned, the result was that nothing whatsoever was ordered at the time of the trial with respect to maintenance, and the decree which was subsequently granted as a result of the trial did not make any reference to the subject of maintenance at all. The situation, therefore, is—and I emphasise this because some reliance was placed on this fact—that there never has been an order in respect of maintenance in this case until the present proceedings were started.
At this stage I think that it would be convenient to refer to the relevant statutory provisions. Section 5(2) of the 1965 Act, which replaces the previous provisions contained in the Matrimonial Causes Act 1963, provides:
‘Provision may be made by rules of court for enabling the court, on application made either before or after the presentation of the petition, to take into consideration for the purposes of this section any agreement or arrangement made or proposed to be made between the parties and to give such directions in the matter as the court thinks fit; but nothing in this subsection affects any duty of the parties to disclose to the court any agreement or arrangement made between the parties in contemplation of or in connection with the proceedings.’
That, it will be appreciated, was enacted in pursuance of Parliament’s intention to relax the law with regard to collusion. It made it possible for parties to reach a sensible arrangement between themselves before the trial of a suit provided that such arrangement is brought into the light of day and submitted for the approval of the court. I understand that it is a provision of which wide use has been made during the years that have followed the passing of the enactment. It was in pursuance of that power that the arrangement in the present case was made, and the promise was given on behalf of the wife not to apply for further maintenance except in the circumstances mentioned. The next section to which I ought to refer is s 16, which provides for the making of maintenance orders in cases of divorce. Subsection (1) provides:
‘On granting a decree of divorce or at any time thereafter (whether before or after the decree is made absolute), the court may, if it thinks fit and subject to subsection (3) of this section, make one or more of the following orders—(a) an order requiring the husband to secure to the wife, to the satisfaction of the court, such lump or annual sum for any term not exceeding her life as the court thinks reasonable having regard to her fortune (if any), his ability and the conduct of the parties; (b) an order requiring the husband to pay to the wife during their joint lives such monthly or weekly sum for her maintenance as the court thinks reasonable; (c) an order requiring the husband to pay to the wife such lump sum as the court thinks reasonable.’
I pause there to remark that it has been held by this courtb that the word ‘reasonable’, where it appears in para (b) and (c), is to be construed in the same way as the word when it appears in para (a); ie, it is to be understood as meaning reasonable ‘having
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regard to her fortune (if any), his ability and the conduct of the parties’. I do not think that it has ever been suggested that this was a case for secured maintenance under s 16(1)(a). I apprehend that any order for maintenance would be for periodical payments such as are envisaged in s 16(2)(b). I should also record the fact that, by s 31, Parliament has made provision for the variation of maintenance orders in appropriate circumstances. But I do not think that anything turns on that in the present case.
What has happened in the years succeeding the granting of the decree is that the husband married again in 1967; he has acquired a child by that marriage, and I gather that, within a very short time in the future, a second child of that marriage is expected. So it may be said that he altered his position, and it can not doubt be urged on his behalf that he did so at least in part on the faith of what he believed was the wife’s promise not to apply for maintenance, except in unforeseen circumstances of the kind mentioned in counsel’s statement at the trial.
The wife, on the other hand, went to live with her mother and brother and set up house with them. They bought a house, sharing the costs between them. Subsequently, however, the wife’s brother put an end to that arrangement, I rather think because he wanted to get married himself, leaving the wife and her mother to occupy the house and virtually requiring them to buy him out. For that purpose they had to resort to a mortgage which has involved the wife in additional expense. It is not suggested, however, that the wife has become unable to work, which was one of the possible circumstances envisaged in the statement of counsel at the trial; but it is alleged on her behalf that, in the events which have happened, coupled, of course, with the inevitable increase in the cost of everything, it has become very difficult for her to maintain herself. I do not think that it is necessary for me to go into the figures put forward on behalf of the wife for the purposes of the present proceedings. I would agree with what has been submitted by counsel for the husband, namely, that, if this appeal were to be allowed, the proper course would be to sent the case back to the learned judge for the whole question of maintenance to be looked at again. The reason for that is, as counsel for the husband has submitted, that he has not so far had a proper opportunity of inviting the court to consider the conduct of the parties, which is one of the matters referred to as relevant to maintenance in s 16, which I have read.
Exactly on what ground the learned registrar arrived at his conclusion that maintenance ought to be awarded to the wife we do not know, because we have no record of any reasons given for his decision. Presumably he took the view that he was not in any way bound by anything which was said at the time when the court approved the arrangement made between the parties at the trial. We do know, however, what the learned judge’s reasons were, for he delivered a reasoned judgment, albeit in chambers. In effect he said that the circumstances envisaged in the statement made by counsel on behalf of the wife had not arisen, since there were no unforeseen circumstances making it impossible for the wife to work, nor were the circumstances such as to make it otherwise impossible for her to maintain herself. Accordingly, the eventuality envisaged by what was arranged at the trial and approved by the court had not arisen; and no case had been shown for awarding maintenance to the wife now, or indeed, to depart in any way from the arrangement made at the time of the trial in January 1966.
That approach to the case has been severely criticised by counsel for the wife, who said that it was such too legalistic. He reminded us that we are not here construing the words of a statute or of a formal deed. All we have is the shorthand writer’s transcript of what was said orally, although of course on instructions, by counsel at the time of the trial. That could at best be regarded only as something quite informal, and not such as to warrant the effect which the learned judge gave to it in delivering his judgment. Let me say at once that I fully appreciate the force of that argument.
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It would be a grave mistake to try to construe an informal statement of that sort as though we had a statute or a formal deed before us.
There is, of course, no doubt but that no agreement made inter partes can ever deprive the court of its right to review the question of maintenance for a wife, as was decided by the House of Lords in Hyman v Hyman. I do not think that anything contained in the new provisions of the Matrimonial Causes Act 1965, giving the court the power to approve reasonable arrangements between the parties, is such as to cast any doubt at all on the continuance in force of the doctrine enunciated by the House of Lords in Hyman v Hyman. There is, therefore, scope for two diametrically opposite views. On the one hand it may be said that the court has an absolute right to go behind an agreement between the parties so far as the question of maintenance for a wife is concerned. On the other hand, there is the learned judge’s approach to the problem, ie that whether there is an agreement between the parties approved by the court effect must be given to it. Under the one view, the right to award maintenance would be completely uninhibited, whereas under the other it would be strictly curtailed by the arrangement made between the parties and approved by the court at the time of the trial.
Counsel for the wife, as I understood his argument, contended for an intermediate position between those two extremes. As I followed him, he said that the fact of this arrangement having been made and having been approved by the court is merely one factor amongst the numerous factors that have to be taken into consideration when the court is called on to award maintenance to a wife following a divorce case. I suppose that the result of this argument would be to limit or inhibit to some extent the generosity of the registrar or judge in making an award of maintenance; that is to say, supposing he would, without any such arrangement having been made, have been disposed to award X per week, he must now in deference to the arrangement made between the parties, to which some effect must be given, award only X minus Y. The difference between that and the learned judge’s view is that the learned judge held that it would not be right, in the absence of proof of any unforeseen circumstances of the kind envisaged by the arrangement, to make any award of maintenance at all.
The learned judge’s conclusion was vigorously defended by counsel for the husband who said, and said very forcibly, that this was a perfectly valid agreement between two parties, both sui juris, arrived at with the assistance they got from their legal advisers and approved by the court. It was, therefore, something to which effect ought to be given unless compelling reasons to the contrary were shown. He added (I think with a good deal of force) that the fact that the court had given its approval to the proposed arrangement had put the stamp of reasonableness on the arrangement which was then being made, viz that there should be no maintenance.
That leads me to mention a further argument put on behalf of the wife, arising from what I may describe as the tailpiece of the learned judge’s judgment, in which, having decided that it would be contrary both to the letter and to the spirit of the arrangement made to award maintenance now, he in effect went on to express regret that he had to reach that conclusion, and suggested for the consideration of the husband had his legal advisers that, as a matter of humanity, they might think well of making some ex gratia payment for the maintenance of the wife. That was fastened on by counsel for the wife as affording evidence to show that the conclusion at which the learned judge actually arrived was in his own view an unreasonable result, in that it denied the wife the money which she ought reasonably to receive by way of maintenance.
I hope that I have now fairly outlined the case put forward by the two parties. It only remains to say that, as far as I am aware, in our search for the right answer to the problem in this case we are not in any way embarrassed by the existence of any
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authorities. There are none—at least none have been brought to our attention—which I think in any way relevant to the precise question which we have here, namely, the effect to be given to an arrangement inter partes of this sort made in pursuance of s 5 of the Matrimonial Causes Act 1965.
I think for my part, approaching it de novo and in the absence of authorities, that the proper view is to say that this was an agreement entered into with fully knowledge of all the circumstances and with the advice of both parties’ legal advisers. It is, therefore, something to which considerable attention must be paid. I accept that it would not be right to say that it has to be construed like a statute, or that it absolutely forbids any possible award of maintenance, except on the strictest proof of the existence of the circumstances mentioned. If and insofar as the learned judge so decided I would not agree wholly with his conclusion; but I do not think that he did go so far as that. I think that he was thinking along the same lines as I myself think, namely, that the existence of this agreement, having regard to the circumstances in which in was arrived at, at least makes it necessary for the wife, if she wants to justify an award of maintenance, to offer prima facie proof that there have been unforeseen circumstances, in the true sense, which make it impossible for her to work or otherwise maintain herself. If that be right, then I think that it is quite plain that the wife here did not ever give such prima facie proof.
In those circumstances, I am not persuaded to the view that the learned judge came to the wrong conclusion. It may seem hard on the wife, but she is not a woman who is in any sense destitute. She is not well off, it is true. No doubt she finds it hard work to make both ends meet; but equally I think that it might very well be an appreciable hardship to the husband, faced with the financial burdens of a new and increasing family, if he now had to start contributing to the maintenance of the wife. I think that a case can be made for hardship on both sides; but, in the circumstances, I do not think that any order can properly be made, and I would, accordingly, dismiss the appeal.
WIDGERY LJ. I agree, and would support my judgment on the same reasons as those already given by Sir Gordon Willmer. The wife in her notice of appeal complains that the learned judge erred in construing her expression of intention at the time of the decree of divorce as meaning that she would only apply for further maintenance in the event of unforeseen circumstances making it impossible for her to maintain herself at all. It is, of course, true that the language used by counsel when this arrangement was being discussed before the learned trial judge is not the language of a contract. He said, as Sir Gordon Willmer has pointed out, that it was the wife’s present intention not to apply for further maintenance, and the argument has been brought before us that that language should not have contractual force, and should not have the effect of binding the wife to the terms which she then expressed to be her present intention. I have no difficulty about this point, because it is quite clear that the learned judge was satisfied that this was part of the arrangement under s 5 of the Matrimonial Causes Act 1965 which he was being asked to approve. He says so in terms on the first page of his judgment, and on this point he had the advantage of having before him the same counsel who had appeared at the trial, and if counsel then appearing for the wife had thought it possible, on his instructions and recollection when he was before Brandon J, to contend that this was not regarded as part of the overall arrangement I feel quite confident that he would have done so and the result would have appeared in the learned judge’s judgment, which it has not.
One starts, then, as I see it, with this obligation or restraint on the wife being part of the overall arrangement approved by the judge, being valid at law by virtue of that approval and the statutory authority which admits that approval, and being
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a part of a contract by him and his wife, a consideration having passed to support her promise.
In all these circumstances, like Sir Gordon Willmer, I find it very difficult to believe that a wife in that position would be able after such a short time to come forward and seek to assert a right different from that which she had accepted in the arrangement. For these reasons, and those given by Sir Gordon Willmer, I, too, would dismiss this appeal.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Field, Fisher & Co, agents for Berkson & Berkson, Birkenhead (for the wife); Druces & Attlee (for the husband)
Henry Summerfield Esq Barrister.
R v Fennell
[1970] 3 All ER 215
Categories: CRIMINAL; Police
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND FENTON ATKINSON LJJ AND EVELEIGH J
Hearing Date(s): 9, 21 JULY 1970
Police – Constable – Assault on, in execution of duty – Assault to free son from custody – Son’s arrest lawful – Whether genuine belief that son’s restraint unlawful a defence – Police Act 1964, s 51(1).
The appellant was charged with assaulting a police constable in the execution of his duty, contrary to s 51(1)a of the Police Act 1964. A fight had broken out outside a public house between 30 and 40 youths in which the appellant’s son had become involved. A police officer had tried to arrest the son who had become violent. The appellant asked a police sergeant who was present to release him as he had done no wrong, and, according to the sergeant, he replied that the son had been arrested and would have to be taken to a police station, whereas according to the appellant the sergeant told him to take his son home. The appellant also said that the officers were using excessive force on his son. The appellant told one of the officers that he would hit him if the son was not released, and, as the officer did not respond, the appellant hit him a deliberate blow on the jaw. The jury were directed that the appellant’s defence that, even if the officers had not, in fact, exceeded their powers, the appellant genuinely believed on reasonable grounds that the restraint of his son was unlawful and that he was thus justified in using reasonable force to free him, could not in law amount to a defence to the charge. On appeal against conviction.
Held – The appeal would be dismissed because, as the son’s arrest was proved to be lawful, the appellant’s use of force could not be justified (see p 217 f, post).
Per Curiam: Where a person honestly and reasonably believes that he or his child is in imminent danger of injury, it would be unjust if he were deprived of the right to use reasonable force by way of defence merely because he had made some genuine mistake of fact. On the other hand, if the child is in police custody and not in imminent danger of injury, there is no urgency of the kind which requires an immediate decision, and a father who forcibly releases the child does so at his peril (see p 217 e, post).
Page 216 of [1970] 3 All ER 215
Notes
For self-defence and defence of others, see 10 Halsbury’s Laws (3rd Edn) 743, para 1429, and for cases on the subject, see 15 Digest (Repl) 995, 9780–9784.
For the Police Act 1964, s 51, see 44 Halsbury’s Statutes (2nd Edn) 924.
Case referred to in judgment
R v Chisam (1963) 47 Cr App Rep 130, Digest (Cont Vol A) 432, 9541a.
Cases also cited
R v Duffy [1966] 1 All ER 62, [1967] 1 QB 63.
R v Forbes and Webb (1865) 10 Cox CC 362.
R v Maxwell and Clanchy (1909) 2 Cr App Rep 26.
R v Osmer (1804) 5 East 304.
R v Prince (1875) LR 2 CCR 154, [1874–80] All ER Rep 881.
R v Rose (1884) 15 Cox CC 540.
R v Waterfield, R v Lynn [1963] 3 All ER 659, [1964] 1 QB 164.
Robson v Hallett [1967] 2 All ER 407, [1967] 2 QB 393.
Appeal
This was an appeal by Owen Fennell against his conviction at Portsmouth Quarter Sessions on 19 January 1970 before the deputy chairman (C M Lavington Esq) and a jury of assault on a police constable. He also appealed against a sentence of six months’ imprisonment imposed on him. The facts are set out in the judgment of the court.
R K Bain for the appellant.
JJ Smyth for the Crown.
Cur adv vult
21 July 1970. The following judgment was delivered.
WIDGERY LJ read the judgment of the court. The appellant was convicted at Portsmouth Quarter Sessions of assault on a police constable and sentenced to six months’ imprisonment. He appeals against conviction and sentence by leave of the single judge.
On a Staurday night in September 1969, at about 11.15 pm, fighting broke out amongst 30 to 40 youths outside a public house in Portsmouth. Two policemen attempted to break up the fight and they were later reinforced by others. The police attempted to make arrests but were hampered by interference from other participants in the fighting. The appellant and his son, Clive, were present at the scene and in due course Clive became involved in the fighting. A police officer tried to arrest Clive, but said that he was very violent, kicking out in all directions, and even at one stage kicking his own mother when she tried to calm him. The appellant had lost sight of Clive for a few moments and came upon him when he was being restrained by two or more officers. The appellant spoke to a police sergeant, telling him to release Clive as the latter had done no wrong, and there was a conflict of evidence as to the sergeant’s reply. According to the sergeant, he said that Clive had been arrested and must go to the station, whereas the appellant said the sergeant had told him to take Clive home. The appellant also said that the officers were using excessive force on Clive, and the upshot of it was that the appellant approached one of the officers and told him that the appellant would hit him unless Clive was released. As the officer did not respond, the appellant hit him a deliberate blow on the jaw.
The appellant seems to have run a number of defences at the trial contending that he was justified in using reasonable force, either to secure the release of his son because
Page 217 of [1970] 3 All ER 215
the initial arrest was unlawful, or in defence of his son at a time when the latter was in imminent danger of being injured by use of excessive force. The jury rejected these two defences and no further question arises on them. A further defence which the appellant wished to raise was that, even if the officers had not, in fact, exceeded their powers, he genuinely believed on reasonable grounds that the restraint of his son was unlawful and was thus justified in using reasonable force to free him. The deputy recorder ruled that this could not amount in law to a defence to the charge, and the question for this court is whether this ruling was correct.
It was accepted in the court below that, if the arrest had been, in fact, unlawful, the appellant would have been justified in using reasonable force to secure the release of his son. This proposition has not been argued before us and we will assume without deciding it, that it is correct. Counsel for the appellant referred us to a number of authorities concerned with the use of force in self-defence, and pointed out that a sufficient justification was there established if the accused genuinely believed on reasonable grounds that a relative or friend was in imminent danger of injury, even though that belief was based on an honest mistake of fact: R v Chisam. Counsel then contended that, by a parity of reasoning, a father who used force to effect the release of his son from custody was justified in so doing if he honestly believed on reasonable grounds that (contrary to the fact) the arrest was unlawful. We do not accept that submission. The law jealously scrutinises all claims to justify the use of force and will not readily recognise new ones. Where a person honestly and reasonably believes that he or his child is in imminent danger of injury, it would be unjust if he were deprived of the right to use reasonable force by way of defence merely because he had made some genuine mistake of fact. On the other hand, if the child is in police custody and not in imminent danger of injury, there is no urgency of the kind which requires an immediate decision, and a father who forcibly releases the child does so at his peril. If in fact the arrest proves to be lawful, the father’s use of force cannot be justified. In our view, therefore, the deputy recorder gave a correct ruling and we dismissed the appeal against conviction.
We see no reason to doubt the propriety of the sentence of six months’ imprisonment or of the deputy recorder’s reasons for imposing it. The appellant had, however, served the greater part of this sentence and, as there was a possibility that it would be completed before this appeal was heard, he was granted bail. In these circumstances, it would be unduly harsh to require him to return to prison for the short period remaining unserved, and on this account alone we decided to allow the appeal, to set aside the sentence originally imposed, and to substitute such a sentence of imprisonment as would result in his immediate release.
Appeal against conviction dismissed. Sentence varied. The court refused leave to appeal to the House of Lords but certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely, whether it was a defence for a father charged with assault on a constable in the due execution of his duty contrary to s 51 of the Police Act 1964, that the force was used to release his son in an honest belief on reasonable grounds that (contrary to the fact) the restraint of the son by the constable was unlawful.
Solicitors: G H King & Franckeiss, Portsmouth (for the appellant); P K L Danks, Winchester (for the Crown).
N P Metcalfe Esq Barrister.
R v Pursehouse
[1970] 3 All ER 218
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND FENTON ATKINSON LJJ AND EVELEIGH J
Hearing Date(s): 27 JULY 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen of urine – Request to supply not in accordance with statutory provisions – Road Safety Act 1967, s 3(6)(b).
The applicant was properly required to provide a specimen for a laboratory test. He agreed to provide a specimen of blood but almost at once changed his mind and said ‘I’m not giving anything’. He was then asked ‘If you won’t give blood will you give a urine sample?’ He refused and also refused when, in accordance with s 3(6)(c)a of the Road Safety Act 1967, he was again asked to supply a specimen of blood.
a
Held – Where there had been a clear unequivocal refusal first to give any specimen and then to give a specimen of urine it was not incumbent on the police to specify in detail exactly what was required by s 3(6)(b)a in respect of the two specimens of urine within one hour of the request (see p 219 f, post).
Notes
For the requirement to provide a specimen of blood or urine for a laboratory test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 3.
For the Road Safety Act 1967, s 3, see 47 Halsbury’s Statutes (2nd Edn) 1558.
Application for leave to appeal
This was an application by Ronald Pursehouse for leave to appeal against his conviction on 6 March 1970 at Sheffield City Quarter Sessions before the recorder (H C Scott Esq QC) for failing without reasonable excuse to provide a specimen for a laboratory test, contrary to s 3(1) of the Road Safety Act 1967.
P M Baker for the applicant.
F C J Radclife for the Crown.
27 July 1970. The following judgment was delivered.
FENTON ATKINSON LJ delivered the judgment of the court. This is one more attempt to escape from the provisions of the Road Safety Act 1967. On 6 March 1970 at Sheffield City Quarter Sessions before the recorder the applicant was convicted of failing without reasonable excuse to provide a specimen for a laboratory test, and he was sentenced to a fine and disqualification. There is no application as regards sentence.
The matter arises under s 3 of the 1967 Act and the material subsection for these purposes is sub-s (6) which provides:
‘A person shall not be treated for the purposes of section 2(1) of the 1962 Act or subsection (3) of this section as failing to provide a specimen unless—(a) he is first requested to provide a specimen of blood, but refuses to do so; (b) he is then requested to provide two specimens of urine within one hour of the request, but fails to provide them within the hour or refuses at any time within the hour to provide them [in our view that subsection contemplates one request]; and (c) he is again requested to provide a specimen of blood but refuses to do so.’
Page 219 of [1970] 3 All ER 218
The only evidence tendered at the trial was the statement of Pc Lowe, and that was read. There ws no challenge about it. There was no evidence from the applicant. The evidence showed, first of all, that the breathalyser on the road proved to be positive. Then at the police station the opportunity of the second breathalyser being offered, it was, in fact, refused. Then we come to the vital part of the evidence. Perhaps I should start where Pc Lowe said: ‘I require you to take a second breath test.' The applicant answered: ‘I’m not giving another.' Then Pc Lowe said:
‘You are required by law to provide a specimen for laboratory test. The specimen may either be blood or urine. If you provide a specimen I will supply you with a part of it in a suitable container. I must warn you that failure to provide such specimen renders you liable to imprisonment, fine and disqualification.’
Probably Pc Lowe was reading that off a card and that seems so far to be entirely correct. Then, according to the evidence, the applicant said: ‘Yes, I’ll give blood.' Arrangements were made for the police surgeon to attend to take the blood specimen, but after a very short time, only some three minutes later, arrangements were cancelled because the applicant said: ‘I’ve changed my mind. I’m not giving anything.' Then Pc Lowe said: ‘If you won’t give blood will you give a urine sample?’ and the applicant said ‘No’. Then Pc Lowe complied with s 3(6)(c) by saying ‘Will you give a blood specimen?’ The answer was ‘No’.
What is said by counsel for the applicant is that the police here went wrong because under s 3(6)(b) whether had gone before by way of refusal, Pc Lowe should have requested the applicant to provide two specimens of urine within the hour. The prosecution at the trial said, in effect—indeed, I think they said expressly—that that was absolute nonsense in the circumstances of a case like this, and in our view once there had been, and there had been here twice, a quite clear unequivocal refusal first of all to give anything at all and then to give urine, when that had been repeated twice, we cannot think it was incumbent on Pc Lowe to go on and specify in detail exactly what was required by s 3(6)(b) in respect of the two specimens of urine within one hour of the request.
The applicant had quite clearly refused any sort of co-operation at all, and we cannot think that it was necessary for Pc Lowe then to go on, having had these two quite flat refusals, to say: ‘Well you know what the Act says. I want two specimens within the hour.' In our view there is nothing in this application and it is refused.
Application dismissed.
Solicitors: Ashton, Hewitt, Barlow & Wise, Sheffield (for the applicant); Town Clerk, Sheffield (for the Crown).
L J Kovats Esq Barrister.
Construction Industry Training Board v Labour Force Ltd
[1970] 3 All ER 220
Categories: EMPLOYMENT; Contract of service
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 14 JULY 1970
Master and servant – Contract of service – Incidents of contract – Agreement by one with another to provide services to a third – Whether contract of service or contract sui generis.
The respondents were engaged in supplying labour to the construction industry. When building contractors required labour, the respondents agreed with the contractors to supply workmen at certain rates payable by the contractors to the respondents. The workmen were paid by the respondents on the basis of information relating to the times worked provided by the contractors, but the respondents had no control over the work carried out by the workmen for the contractors and the contractors had the right to terminate any workman’s engagement. On being allotted to particular contractors the workmen received from the respondents an ‘Information Card’, containing terms and conditions of employment, on the back of which was a declaration made by the workmen, which in each case contained the following term: ‘I hereby certify that I am engaged by [the respondents] on a Sub-Contract Basis. I further declare that I shall be responsible for my own and any of my employees’ P A Y E Income Tax Returns, National Insurance Contributions and Holiday with Pay payments or stamps.' On the question of the nature of the contractual relationships in existence between the respondents, the workmen and the contracts,
Held – (i) No contract of any kind was made between the contractors and the workmen who were supplied by the respondents to the contractors (see p 223 c, p 225 h, and p 226 g, post).
(ii) As no contractual relationship was formed between contractors and workmen, the respondents were not acting as an employment agency; the respondents contracted as principals with the workmen, who were to be paid on agreed terms for the work carried out by them for the contractors (see p 223 g, p 225 h and p 226 g, post).
(iii) In all the circumstances of the case the contracts into which the workmen entered with the respondents were not contracts of service (see p 224 g and h, p 225 d and h, and p 226 e f and g, post).
(iv) Alternatively, the contracts entered into by the workmen were not contracts of service or contracts for services but contracts sui generis, since the workmen had agreed with the respondents to render services to third persons, the contractors (see p 225 f and h, and p 226 g, post).
Notes
For contracts of service generally, see 25 Halsbury’s Laws (3rd Edn) 455–459, paras 884–889, and for cases on the subject, see 34 Digest (Repl) 43–55, 179–278.
Case referred to in judgment
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433 [1968] 2 QB 497, [1968] 2 WLR 775, Digest Supp.
Appeal
This was an appeal by the Construction Industry Training Board from a decision of the Industrial Tribunal (chairman Rt Hon Sir John Clayden), dated 12 February
Page 221 of [1970] 3 All ER 220
1970, allowing an appeal by the respondents, Labour Force Ltd, against their assessment by the board to an industrial training levy of £12,000 under the Industrial Training Levy Construction Board Order 1966. The facts are set out in the judgment of Cooke J.
A A Grant for the board.
R J S Harvey QC and A H Ismail for the respondents.
14 July 1970. The following judgments were delivered.
COOKE J delivered the first judgment at the invitation of Lord Parker CJ. This is an appeal by the Construction Industry Training Board from a decision of the Industrial Tribunal sitting in London. The board is an industrial training board established under the Industrial Training Act 1964. Section 4 of that Act empowers the Ministera to make orders authorising an industrial training board to impose levies on employers in the industry with which the board is concerned. Pursuant to that Act, the Minister made the Industrial Training Levy (Construction Board) Order 1966b. Purporting to act under the powers conferred by that order, the board assessed Labour Force Ltd, the respondents, to a levy of £12,000 for what is called in the order the ‘second levy period’, ie the period beginning on 31 August 1966 and ending on 5 April 1967. From that assessment the respondents appealed to the Industrial Tribunal, which set aside the assessment. The appeal now before this court is an appeal by the board from that decision of the tribunal.
It is unnecessary for the purposes of this appeal to refer to the order in detail. Article 4(2) of the order provides that the amount of the levy, imposed in respect of a construction establishment for the second levy period, shall be equal to 1 per cent of the total emoluments of the persons employed by the employer at or from that establishment in the second base period, ie the period of 12 months beginning on 6 April 1965. ‘Employer’ is defined by art 2 of the order simply as meaning an employer in the construction industry. The same article provides that ‘emoluments’ mean all emoluments assessable to tax under Sch E (other than pensions), being emoluments from which tax under that Schedule is deductible. It is common ground in this appeal that as a result of that definition, the only emoluments on which the levy can be assessed are emoluments payable under a contract of service. It is the contention of the respondents that, during the second base period, the workmen who were employed under the arrangements, which I shall describe in a moment, were not employed by them, and in particular were not employed by them under contracts of service. Those contentions were upheld by the tribunal. The tribunal went on to hold that even if the board were entitled to make an assessment on the respondents, the evidence before the tribunal was insufficient to establish any figure in which the assessment should be made. Accordingly it set the assessment aside.
It is plain that the business in which the respondents were engaged during the second base period was that of suppliers of labour to the construction industry. That involved them in relationships with contractors in the construction industry on the one hand, and with workmen in the industry on the other. I deal first with their relationships with the contractors. Briefly the evidence came to this: contractors in need of workmen were encouraged to apply to the respondents stating their requirements in terms of numbers of men in particular trades, and to ask the respondents to supply those men for work at a named site. The nature of the scheme was described in a circular issued by the respondents to contractors. On receipt of an application from a contractor for a supply of workmen, the respondents would send to the contractor a document, which we have seen called ‘confirmation of acceptance’, stating the
Page 222 of [1970] 3 All ER 220
number of men to be supplied in each trade, and stating the rates and allowances payable by the contractor. Those rates and allowances were payable by the contractor to the respondents. On the back of the confirmation of acceptance were printed conditions, of which I need to refer to a few only. The first provides that supervision of all labour supplied by the respondents is entirely the employer’s responsibility. The ‘employer’ in this context is the person whom I have referred to as the contractor. Condition 4 provides:
‘4. To terminate any man’s hire it is required that three clear days’ notice in writing is given, except in the event of misdemeanour, when the right to have the person or persons removed from the site forthwith applies. But on doing so we request that a written report, signed by a responsible person, is sent immediately to our office.’
Condition 7 provided that the respondents’ week commenced on a Wednesday morning and terminated on a Tuesday evening. The respondents’ office would contract the site by telephone each Wednesday morning and would obtain the times of the respondents’ men. The contractors would be invoiced on this time. Condition 9 provides:
‘All payments under the Holiday with Pay Scheme, National Insurance Stamps, P.A.Y.E., to be our responsibility and a certificate will be issued, at your request, certifying this fact.’
On Wednesday of each week the contractor notified the respondents of the times worked by the men during the week ending on the Tuesday. On the basis of this information the respondents rendered their invoice to the contractor and also made up pay packets for the men which were sent to the contractor and distributed by him on the Thursday.
To carry out these arrangements with contractors, the respondents built up a register of men who were willing to accept the work under such arrangements. An application to be entered on the register was made by the workmen on a form. Men on the register would inform the respondents of their availability for work, and from the men so available the respondents would choose men to send to a contractor to satisfy his requirements. We have before us a form which was used on the first occasion on which the respondents assigned a man to a job. The upper part of the form was retained by the respondents. On the front of the upper part of the form there were entered particulars of the reporting site and the pay and conditions. On the back of the upper part of the form was a declaration signed by the workman which read as follows:
‘I [and the name and address are given] hereby certify that I am engaged by [the respondents] on a Sub-Contract Basis. I further declare that I shall be responsible for my own and any of my employees’ P.A.Y.E. Income Tax Returns, National Insurance Contributions and Holiday with Pay payments or stamps.’
Pausing there, it appears clear on the evidence that in fact a person who was sent to work for a contractor under these arrangements was sent as an individual, and there was no question of his being sent as the employer of other men who were sent with him. The declaration goes on:
‘I shall be paid on the basis of the terms set out below such money to be paid to me weekly.’
Then there is a reference to the amount of the payments, and confirmation that he has read and understood the terms and conditions of his employment. The lower part of the form was given to the workman. On the back of it were directions as to the site to which he was to report. On the front, under the heading ‘Terms and Conditions of Employment’, these provisions appear:
Page 223 of [1970] 3 All ER 220
‘You are engaged by [the respondents] under terms and conditions contained in the declaration and lodged in our office and your money is paid by us. Money is made up exactly on the hours reported to us by the site. In the event of dispute you must refer the matter to us. Your hourly payment is an inclusive flat rate for all Overtime, Travelling Time and Expenses, Site Conditions, Clothing Allowances, Wet Time, etc The week starts Wednesday and ends Tuesday evening. Your money will be sent to site either Thursday afternoon or Friday morning or you may collect from the office Thursday morning 10.0–12.0 a.m., providing you give 24 hours’ notice.’
The workman was paid by the respondents at the rate agreed between him and them, and the profit of the respondents was derived from the difference between the sums which they paid to the workmen and the sums which they received from the contractor.
Against that background, I can turn to the findings of the tribunal. The tribunal dealt first with the question whether the contractor was the employer of the workman or had any contract with the workman. It came to the conclusion that there was no contract of any kind between the contractor and the workman. It is sufficient to say that in my judgment that conclusion was right. The tribunal next considered whether in its relations with the workman, the respondents were an employment agency. As to that, the tribunal said:
‘There is similarity with the employment agency in that [the respondents] found work for persons wishing to work and found workmen for those with work to be done. But other than that there is not similarity. The contractor and the workman were not brought into contractual relationship for reasons already set out. When the workman agreed to work he entered into a contract with someone to do work and be paid for it. That person we think was Labour Force Ltd [ie the respondents]. After agreeing to accept work at the place and for the hours and for the pay suggested, a contract came about between the workman and [the respondents], that if he did the work [the respondents] would pay him. The full terms and nature of this contract will later be dealt with, but when it is found that the so-called agent is itself the principal in the contractual relationship, argument that there is only agency is we think wrong.’
In my judgment it is plain that when the workman agreed to work on a particular site at a particular rate of pay, he was agreeing so to do with the respondents as principals. That in my judgment is sufficient to dispose of the view that the respondents were merely acting for the workman as an employment agency. They were contracting with the workman as principals.
That brings me to the third question considered by the tribunal, namely whether the workmen were the respondents’ employees under contracts of service or, as the tribunal put it, were self-employed persons who agreed with the respondents to do work for the contractors. As to the terms and circumstances of the contract between the workmen and the respondents, the tribunal made these findings, all in my judgment amply justified by the evidence:
‘(ii) The workman contracted only with [the respondents]. (iii) The workman was in the construction industry. (iv) [The respondents were] liable to pay the workman the agreed rate per hour for the hours worked and did so even when the contractors defaulted in payments to [them]. There was no overtime rate. (v) [The respondents] had no control over the workman, even as to the place of work which had to be accepted by the workman. (vi) The contractors had all control over the workman with regard to the work to be done and the manner of doing it. (vii) The contractor could end the work, even summarily for misconduct to him. [The respondents] could not put an end to the work by any
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express provision. (viii) [The respondents] under the agreement with the workman [were] not responsible for deduction of P.A.Y.E. tax, National Insurance Contributions or holiday with pay, payments or stamps, and did nothing in those regards. (ix) [The respondents] paid nothing when the workman was not working; [they] paid no sick pay and [they] paid no holiday pay. (x) There is no obligation on the workman to work only for [the respondents] or to work for [the respondents] at all unless he agreed to the work suggested.’
In approaching the question whether the workmen were employees of the respondents under contracts of service, the tribunal sought to apply the familiar tests which have been used to distinguish contracts of service from contracts for services. In that connection it is, I think, important to bear in mind that the sole question which the tribunal had to determine in this case was whether the contracts in question were contracts of service. If they were not, then it followed that the board must fail on a crucial point, and it mattered not whether the contracts in question were contracts for services or some third variety of contract which was neither a contract for services nor a contract of service. I will return to that hereafter.
Nevertheless, the tests which have been formulated for the purposes of distinguishing a contract for services from a contract of service are obviously of value in determining whether a particular contract is a contract of service, and I do not think that the approach adopted by the tribunal can be said to have been wrong. The tests which have been so formulated have been referred to in a number of recent cases, including Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance, a decision of MacKenna J. These tests are now so familiar that in my judgment it is unnecessary to set them out in detail. I merely observe this. First, that no list of tests which has been formulated is exhaustive, and that the weight to be attached to particular criteria varies from case to case. Secondly, although the extent of the control which the alleged employer is entitled to exercise over the work is by no means a decisive criterion of universal application, it is likely in many cases to be a factor of importance. On the one hand, the tribunal pointed out that an hourly paid workman has no opportunity to deploy managing skills or make money by so doing. On the other hand, the tribunal took account of the undeniable fact that in the building industry there are many self-employed persons. I think that in the circumstances of this case, the tribunal was entitled to take account of that. The tribunal was asked to consider the nature of the contracts entered into by a large and indeterminate group of workmen in the industry. It was entitled, as it seems to me, to use its own knowledge of the undoubted fact that many of the workmen in the industry are self-employed. The tribunal referred to the declaration signed by the workman in which he purports to certify that he is employed on a subcontract basis. Quite rightly, in my judgment, the tribunal held that this did not preclude it from enquiring into the true nature of the contractual relationship. On the other hand, it pointed out that the declaration contains terms which are undoubtedly terms of the contract, eg those in regard to times and amounts of payments. It was, in my judgment, entitled to have regard to that, and it was also entitled to have regard to the workman’s promise, because that is what it amounted to, to be responsible for his own income tax returns, national insurance contributions and holiday with pay payments. I agree with the tribunal when it said:
‘It may be that if the contract in law is one of service, the term will not protect the employer who by statute is liable as employer, but that the parties did contract to bring about the position that employers’ obligations of this type did not lie on [the respondents] cannot be ignored.’
In my view, the fact that the parties have in express terms sought to make a contract
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of a particular kind, while it does not bind the courts to hold that they have succeeded, is a factor which can be considered in determining the true nature of the contract. The tribunal expressed their conclusions in these terms:
‘Considering all the facts set out, and mainly because there was no control lying with [the respondents] at all, no continuity of contracts, no ordinary responsibility of an employer at all such as for sick pay or holidays, no bar on the workman working for others when he liked, we think that the proper decision is that the contracts entered into between [the respondents] and the workman, from time to time as he worked, were contracts to provide services to agreed persons in return for an hourly payment for hours worked paid by [the respondents]. We do not consider that [the respondents were] the employer of these men. That means that in so far as [the respondents were] assessed on moneys paid to the workmen who worked for contractors, the assessment was not justified.’
In my judgment, in reaching that conclusion the tribunal applied proper tests in a proper way. I can see no ground on which we could hold that the conclusion was wrong in law. In particular, in the circumstances of this case I think that the tribunal was right in attaching considerable weight to the fact that the respondents had no control at all over the work. In this case I think that that particular feature was a strong indication that the contracts were not contracts of service. I think, however, that it is at any rate possible that the tribunal might have reached the same result in a simpler way. The sole question before the tribunal on this part of the case was, as I have said, whether the contracts were contracts of service. These contracts were contracts whereby the workman contracted with the respondents to do work for a third party, the contractor. It was not a question of the respondents’ lending the services of one of their own employees to the contractor, because the workman never contracted to render services to the respondents at all. I think that there is much to be said for the view that, where A contracts with B to render services exclusively to C, the contract is not a contract for services, but a contract sui generis, a different type of contract from either of the familiar two. Had it been necessary, I should have been prepared to uphold the decision of the tribunal on that ground.
As it is, I prefer, for my part, to rest my view on the ground which I first stated, which is that in my judgment the tribunal applied proper tests in a proper way, and that there is no ground for saying that it misdirected itself in law. It follows that in my view the assessment made by the board was made on a wrong basis, and having been so made, in my judgment it cannot stand but should be set aside. In those circumstances it does not, as it seems to me, become necessary to consider the question whether, had the assessment been rightly made, it was made in the proper amount.
I would dismiss this appeal.
FISHER J. I agree. The question on this appeal, as Cooke J has said, is whether the respondents are employers in the construction industry, and whether the sums paid by them to the workman are emoluments of persons employed by them as such employers. It is common ground that that can only be so if the workmen are employed by them under contracts of service.
An appeal to this court from a decision of the Industrial Tribunal lies only on a question of law, and it has been many times held, in decisions which are binding on this court, that (save in the case where the contract is wholly contained in a document or documents) the question whether a contract is one of service or is a contract for services is a question of fact. It is, however, a question of law what are the right tests to be applied in determining whether a contract falls into the one or the other class, and a decision of the tribunal could be upset by this court if it was of
Page 226 of [1970] 3 All ER 220
the opinion that the tribunal had applied the wrong tests, in other words had misdirected itself in law, and, of course, a decision of a tribunal may be such that the court will say that it could not possibly have come to their decision of fact unless it had misdirected itself in law, and in those circumstances also this court could interfere.
In my judgment, it is really not possible, in Mr Atiyah’sc words to lay down:
‘… a number of conditions which are both necessary to, and sufficient for, the existence of … [a contract of service]. The most that can profitably be done is to examine all the possible factors which have been referred to in these cases as bearing on the nature of the relationship between the parties concerned. Clearly not all of these factors will be relevant in all cases, or have the same weight in all cases. Equally clearly no magic formula can be propounded for determining which factors should, in any given case, be treated as the determining ones. The plain fact is that in a large number of cases the court can only perform a balancing operation, weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction. In the nature of things it is not to be expected that this operation can be performed with scientific accuracy.’
I am satisfied that in this case none of the considerations which the tribunal took into account was a consideration which it should not in law have taken, and that it has not omitted any relevant considerations. The question of what weight should be given to the various factors is one for it. I would only comment on one of the matters with which Cooke J has dealt, and that is the term in the contract between the respondents and the workmen, by which the workman declares that he will be responsible for his own PAYE income tax returns and National Insurance contributions. As counsel for the board has pointed out, if this is in fact a contract of service such a provision would be contrary to law and of no effect. It seems to me that this was a legitimate factor for the tribunal to take into account, and is a pointer in the direction of a form of contract under which that condition will be valid, rather than a form of contract under which it will be void and of no effect. I agree that the appeal should be dismissed.
LORD PARKER CJ. I agree that this appeal should be dismissed. I am quite satisfied that the tribunal here has not erred in law; indeed, I think that it deserves to be congratulated on the care with which it has gone into the matter and the clarity of its reasoning.
Appeal dismissed.
Solicitors: Frere, Cholmeley & Co (for the board); Bull & Bull (for the respondents).
J O Thompson Esq Barrister.
Regis Property Co Ltd v Lewis & Peat Ltd
[1970] 3 All ER 227
Categories: LANDLORD AND TENANT; Rent
Court: CHANCERY DIVISION
Lord(s): STAMP J
Hearing Date(s): 26 MAY, 5 JUNE 1970
Landlord and tenant – Rent – Interim rent of business premises – Determination of rent – Landlord and Tenant Act 1954, s 24A (3) (added by Law of Property Act 1969, s 3(1)).
On the determination by the court of an interim rent of business premises under s 24Aa of the Landlord and Tenant Act 1954, s 24A (3) does not contemplate a reconciliation of two elements or an adjustment of the rent ascertained by the formula at the end of sub-s (3) by reference to the existing rent mentioned at the beginning of the subsection. The process of determination is to be a single process under which s 34(1) and (2) is to be applied, but just as the court is enjoined under s 34(1) to have regard to the terms of the new tenancy, under s 24A (3) it is to have regard to the terms of the existing tenancy, but in the latter case including and not excluding the term as to rent; accordingly, the court is not precluded, in determining the rent at which the holding might reasonably be expected to be let on a tenancy from year to year, from such assistance as it may derive from the fact that at such and such a time the rent was agreed at £X (see p 228 j and p 229 f, post).
Notes
For continuation of business tenancies, see 23 Halsbury’s Laws (3rd Edn) 887, 888, para 1709.
For the Landlord and Tenant Act 1954, s 24A, see 18 Halsbury’s Statutes (3rd Edn) 559.
Case cited in argument
R v South Staffordshire Waterworks Co (1885) 16 QBD 359.
Adjourned summons
Under a lease dated 1 August 1966 the landlord, Regis Property Co Ltd, demised to the tenant, Lewis & Peat Ltd, office accommodation at Plantation House, Mincing Lane, London EC3, under a lease which expired on December quarter day 1969. The rent payable for a new business tenancy from a date not before September 1970 having been determined by the court in earlier proceedings, the applicant by originating summons dated 2 March 1970 sought a determination of the rent payable for the interim period between December 1969 and September 1970 under s 24A or the Landlord and Tenant Act 1954, as added by the Law of Property Act 1969.
C B Priday for the landlord.
G Avgherinos for the tenant.
Cur adv vult
5 June 1970. The following judgment was delivered.
STAMP J read the following judgment. On 8 May 1970, on an application by the tenant for a new tenancy of its offices and basement at Planation House, Mincing Lane, I determined, pursuant to s 34(1) of the Landlord and Tenant Act 1954, that the rent at which, having regard to the agreed terms of the new tenancy, the office premises with which I am concerned might reasonably be expected to be
Page 228 of [1970] 3 All ER 227
let in the open market by a willing lessor was £7 15s per sq ft. To this there fell to be added the agreed rent of the basement giving an aggregate figure of £65,741. If there is no appeal the rent so determined will become payable under the new lease which will take effect from 19 September next. But for the provisions of s 3 of the Law of Property Act 1969, the existing tenancy would continue until that day at the existing rent which is £9,884. The present application is an application by the landlord to determine what I will call the interim rent under s 24A of the Landlord and Tenant Act 1954, which was introduced into that Act by s 3(1) of the 1969 Act. Section 24A provides:
‘(1) The landlord of a tenancy to which this Part of this Act applies may,— a if he has given notice under section 25 of this Act to terminate the tenancy … apply to the court to determine a rent which it would be reasonable for the tenant to pay while the tenancy continues by virtue of section 24 of this Act, and the court may determine a rent accordingly.
‘(2) A rent determined in proceedings under this section shall be deemed to be the rent payable under the tenancy from the date on which the proceedings were commenced or the date specified in the landlord’s notice or the tenant’s request, whichever is the later.
‘(3) In determining a rent under this section the court shall have regard to the rent payable under the terms of the tenancy, but otherwise subsections (1) and (2) of section 34 of this Act shall apply to the determination as they would apply to the determination of a rent under that section if a new tenancy from year to year of the whole of the property comprised in the tenancy were granted to the tenant by order of the court.’
At he outset I am presented with a question of construction of sub-s (3) of that section. Pointing to the fact that what has to be determined is a rent which it would be reasonable for the tenant to pay, it is submitted that the court, by the effect of the introductory words of sub-s (3), must have regard to the rent payable under the existing tenancy as one of the elements which has to be taken into account for determining the interim rent, and also, by the effect of the latter part of the subsection, ascertain as another element, and by applying s 34(1) and (2), the rent which, if the tenancy were a new tenancy from year to year, is the rent at which the holding might reasonably be expected to be let in the open market by a willing lessor. The former element is, so the argument runs, a cushion to protect the tenant from the rigour of the formula provided by the latter. Counsel for the tenant, in face of what was I think conceded on both sides to be a somewhat obscure subsection, found difficulty in indicating what weight should be given to the existing rent. Having had regard to an existing rent of £x and having determined, by applying s 34(1) and (2), that the rent if a new tenancy from year to year was granted under that section is £y, how and by what principle or in accordance with what formula does the court determine the rent which it is reasonable for the tenant to pay? Counsel for the tenant would have me answer that question by submitting that it has been left to the court to determine what is reasonable. If there is a construction of sub-s (3) which leads to a more satisfactory result I must, I think, adopt it; for otherwise, notwithstanding the formula prescribed by the second limb of sub-s (3), the rent will in the end be fixed by the length of the judge’s foot. I cannot infer, unless compelled to do so, that the legislature, having laid down the formula at the end of sub-s (3), intended to enable the court to depart from it to an unspecified and arbitrary extent
I have come to the conclusion, not without hesitation, that sub-s (3) does not contemplate a reconciliation of two elements or an adjustment of the rent ascertained by the formula at the end of the subsection by reference to the existing rent mentioned at the beginning of the subsection. The process contemplated by the subsection is, in my judgment, a single process to be carried out by applying s 34(1) and (2), but by applying those subsections with a modification of their language.
Page 229 of [1970] 3 All ER 227
The clue is, in my judgment, to be found in the wording of s 34(1). Under that subsection, the court, in determining what I might call the permanent rent, is to determine the rent—
‘… at which, having regard to the terms of the [new] tenancy (other than those relating to rent), the holding might be expected to be let in the open market … ’
In relation to the determination of a rent under a new tenancy the phrase ‘having regard to the terms of the [new] tenancy’ would be nonsensical if there were not excluded from it the terms relating to rent. The words which are in parenthesis (‘other than those relating to rent’) are there inserted to make it sensible. Section 24A, however, is not concerned with the rent under a new tenancy but with a rent to be paid under an existing tenancy; and although often the rent under the existing tenancy will like other terms of the tenancy be no guide and will be irrelevant in determining at what rent the holding might reasonably be expected to be let on a tenancy from year to year, it may sometimes be a relevant consideration for that purpose. It would, for example, be relevant if the property had been let on a tenancy from year to year at a rent of £x and there was evidence that, since the creation of the tenancy, there had been a rise of 20 per cent in rents of comparable properties. The existing rent would be relevant if the holding and another comparable holding had been let on the same day at the same rent and the comparable holding had lately been let on a tenancy from year to year. If s 34(1) had been applicable without modification to the determination of the interim rent, the court would, in relation to both examples, have been precluded from looking at a rent which would in those cases be a fact leading to the elucidation of the problem.
The introductory words of s 24A (3) are, in my judgment, designed to introduce that modification. The process of determination is to be a single process under which s 34(1) is to be applied, but just as the court is enjoined under that subsection to have regard to the terms of the new tenancy, under s 24A(3) it is likewise to have regard to those terms of the existing tenancy, but in the latter case including and not excluding the term as to rent. So construed, sub-s (3) becomes sensible and the court is not to be precluded, in determining the rent at which the holding might reasonably be expected to be let on a tenancy from year to year, from such assistance as it may derive from the fact that at such and such a time the rent was agreed at £x. If, as I think, the introductory words of sub-s (3) do no more than, in effect, strike out the words in parenthesis in s 34(1) and substitute for those words the words ‘including those relating to rent’, then it follows that, if the existing terms as to rent throw no light on the rent at which the holding might reasonably be expected to be let under a tenancy from year to year, one is no more bound to take the actual rent into account as a relevant element in determining the rent than one would an irrelevant covenant such as a covenant in a lease of office tenancies against assignment without the consent of the landlord. On finding that some of the terms of the existing tenancy and the existing rent do not on the facts of a particular case assist one in determining what the interim rent ought to be, one ignores them.
I am assisted to my conclusion as to the true construction of sub-s (3) by the words ‘but otherwise’, which suggest to me that s 34(1) and (2) is to apply with the modification that the rent payable is not to be disregarded for they are words which, in my judgment, would be quite inappropriate if two processes were contemplated. I am also assisted by the consideration that, unless the introductory words of sub-s (3) operate in the way that I think they do, one is faced with a contradiction; for under the introductory words one is to have regard to the existing rent, whereas in applying s 34(1) one is precluded from doing so.
It is not suggested that the fact that the holding with which I am concerned was let at such a rent and such a time assists in the determination of the rent at which the holding might reasonably be expected to be let in the open market on a
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tenancy from year to year; and, accordingly, in my judgment I ought to take no account of it.
[His Lordship considered the evidence of the professional witnesses as to the amount of the interim rent and having said that he preferred the evidence given on behalf of the tenant, continued:] Applying s 24A (3), I determine the interim rent of the office premises to be £7 15s per sq ft less 33 1/3 per cent.
Order accordingly.
Solicitors: Markbys (for the landlord); Coward, Chance & Co (for the tenant).
Richard J Soper Esq Barrister.
J W Stupple v Royal Insurance Co Ltd
S M Stupple v Royal Insurance Co Ltd
[1970] 3 All ER 230
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND BUCKLEY LJJ
Hearing Date(s): 23, 24, 25 JUNE, 3 JULY 1970
Burden of proof – Civil action – Conviction as evidence – Upsetting conviction – Burden of proof on person seeking to upset conviction – Weight to be given to conviction – Civil Evidence Act 1968, s 11(2) (a).
On 27 September 1963, a bullion van containing bank notes was ambushed and some £87,000 was stolen from it. Four days later some £1,000 of the stolen money was found in S’s possession and he could give no acceptable explanation to the police of how he came by it. At his trial S put forward an alibi which was not accepted, and on the jury’s unanimous verdict, he was convicted of armed robbery of the £87,000. The Court of Appeal, Criminal Division refused leave to appeal against the conviction. By order made under the Police (Property) Act 1897, the £1,000 found in S’s possession was paid to the defendants, the insurance company who had indemnified the bank against the loss of the £87,000, and who were the assignees of the bank’s right of action for conversion of the notes. S brought an action against the defendants claiming the £1,000 in which the defendants alleged that the money was stolen from the bullion van and counterclaimed for the whole of the £87,000 as damages for conversion. By s 11(1)a of the Civil Evidence Act 1968, S’s conviction was admissible in evidence in the action to prove that he had committed the offence of robbery. In the action S sought to prove that he was innocent of the robbery by adducing fresh evidence and evidence repeating that given at the criminal trial. On appeal by S against the dismissal of his claim and judgment against him on the counterclaim,
Held – Under s 11(2)(a)b of the Civil Evidence Act 1968, the effect of admitting in evidence a conviction in a civil action was to shift the legal burden of proof from the party who would otherwise have to prove the offence to make good his claim to the
Page 231 of [1970] 3 All ER 230
party who had been convicted who must prove, on the balance of probabilities, that he was innocent and who, unless he discharged that burden, must be treated for all relevant purposes as having committed the offence of which he was convicted; but in determining whether the party convicted had discharged that burden of proof it was not the function of the judge to consider what view he himself might have taken of the criminal trial had he sat on it as juryman or judge (see p 235 c, p 236 c, p 238 d and j, and p 239 a, post). On the evidence before him, the judge in the civil action had come to the right decision in concluding that S had not discharged the burden on him under s 11(2) (a) of proving that he was innocent of the robbery (see p 237 f, p 238 f, and p 240 a, post).
Observations of Lord Denning MR on the weight to be given to the conviction in deciding whether the burden of proof under s 11(2)(a) has been discharged (at p 235 j, and 236 f to j, post), from which Buckley LJ differed (see p 239 b, post) and on which Winn LJ expressed no opinion.
Decision of Paull J [1970] 1 All ER 390 affirmed.
Notes
On the weight to be given to the conviction in discharging the burden of proof resting on the person seeking to upset the conviction, cf Taylor v Taylor [1970] 2 All ER 609.
For the admissibility of criminal convictions in subsequent civil proceedings, see Supplement to 15 Halsbury’s Laws (3rd Edn) para 630A.
For the distinction between the legal burden of proof and the burden of proof as a matter of adducing evidence, see 15 Halsbury’s Laws (3rd Edn) 267, 268, para 489.
For the Civil Evidence Act 1968, s 11, see 12 Halsbury’s Statutes (3rd Edn) 922.
Cases referred to in judgment
Hollington v F Hewthorn & Co Ltd [1943] 2 All ER 35, [1943] KB 587, 112 LJKB 463, 169 LT 21, 22 Digest (Repl) 244, 2412.
Irving v National Provincial Bank Ltd [1962] 1 All ER 157, [1962] 2 QB 73, [1962] 2 WLR 503, 126 JP 76, 46 Digest (Repl) 522, 671.
Public Prosecutor v Yuvaraj [1970] 2 WLR 226.
R v Bainbridge [1959] 3 All ER 200, [1960] 1 QB 129, [1959] 3 WLR 656, 123 JP 499, 43 Cr App Rep 194, Digest (Cont Vol A) 336, 709a.
R v Fallon (1963) 47 Cr App Rep 160, Digest (Cont Vol A) 404, 6931a.
R v Loughlin (1951) 35 Cr App Rep 69, 15 Digest (Repl) 1136, 11,431.
R v Seymour [1954] 1 All ER 1006, [1954] 1 WLR 678, 118 JP 311, 38 Cr App Rep 68, 14 Digest (Repl) 261, 2280.
Cases and authority also cited
Sutton v Sutton [1969] 3 All ER 1348, [1970] 1 WLR 183.
Taylor v Taylor [1970] 2 All ER 609, [1970] 1 WLR 1148.
Wauchope v Mordecai [1970] 1 Al ER 417, [1970] 1 WLR 317.
Cross on Evidence (3rd Edn) 92.
Appeals
These were appeals by William John Stupple and Sheila Margaret Stupple from the judgment of Paull J given on 13 October 1969, and reported [1970] 1 All ER 390, whereby it was adjudged that William John Stupple’s claim against the respondents, Royal Insurance Co Ltd, for the sum of £755 10s be dismissed and that he be ordered to pay the sum of £84,908 claimed by the respondents in their counterclaim as damages for conversion, and that Sheila Margaret Stupple’s claim for £230 against the respondents be dismissed. The facts are set out in the judgment of Lord Denning MR.
Lewis Hawser QC and Barbara Calvert for Mr and Mrs Stupple.
J D May QC and E A Machin for the Royal Insurance Co.
Page 232 of [1970] 3 All ER 230
Cur adv vult
3 July 1970. The following judgments were delivered.
LORD DENNING MR. On Friday, 27 September 1963, near Longfield in Kent, a gang of robbers laid in wait for a bullion van. It was about midday. They had come down from London in convoy. They were in a Land Rover, a Dormobile and a lorry. All three vehicles had recently been stolen. Whilst waiting for the bullion van, they went on to a village green and kicked a ball about. It was a red plastic ball. The local folk saw them. Soon afterwards the gang left. They got themselves ready, They had iron bars in their hands. One had an Indian club. They ambushed the bullion van. They must have known its movements. It belonged to Martins Bank and had been round the branches collecting money. One was the branch at Welling. The robbers stopped the van and overcame the driver and guard. They stole £87,300 10s, and went off.
Four days later, on Tuesday, 1 October 1963, police officers went to a house in East London, where there lived Mr William John Stupple and his wife. He was only 35, but he had a criminal record, including stealing and taking motor vans. His last serious conviction had been in 1956, when he was sentenced to five years’ imprisonment for two cases of stealing from the person £800 and £900. But he had not been in much trouble since. It was very early in the morning when the police went to the house. Mr and Mrs Stupple were still abed. The police officers had a warrant to search the house for the stolen notes. They went into the bedroom and found, on the dressing table, two rolls of money, one for £500 in £5 notes, the other for £200 in £5 notes. One of the police officers asked him: ‘How did you come to have that much money?’ Mr Stupple replied: ‘I always carry it for trading.' The police officer asked: ‘What is your job?’ He said: ‘A wholesaler.' ‘What sort of wholesaler?’ ‘General wholesaler.' ‘What do you deal in?’ ‘Anything.' ‘Have you any more money in the house?’ ‘Yes’. Mr Stupple went to the wardrobe and took out a bag. In it was another bag, and in that bag yet another bag. It contained £250 in £5 notes. The police officers next found a lady’s handbag. It contained £65 in £5 notes. Mrs Stupple said it belonged to her. Mr Stupple had £35 10s in this trousers pocket.
The police took all the money. It came to £1,050 10s. Mr Stupple asked for it to be put in a parcel and sealed up. He explained why. He was afraid that the police might ‘plant’ other notes among them so as to incriminate him. He said: ‘I do not want you putting any of your notes in them so the bank can identify them. I want them sealed so it is opened when my solicitor is present.' This mention of ‘the bank’ came first from Mr Stupple. The police officers had not mentioned it. Mr Stupple wrapped the notes up in a parcel and stuck it up with Sellotape. The police officers took it away. They also went into another bedroom. In it they found a red plastic ball. Was it the ball with which the robbers were playing on the Friday before? That would be guessing; and lawyers must not guess, at any rate not in a criminal case.
The bank notes were examined. Some of them had figures written on them. Cashiers in banks often put bank notes into bundles, and write on the top note the number in the bundle. Fifty-three of the notes had handwritten numbers on them. The police got into touch with the cashiers of all the banks at which the bullion van had called on that Friday. On the very next day, they showed them to one of the permanent cashiers at the Welling bank, a Mr Ford. He identified five of the notes as having his figures on them. He said that on Tuesday, 24 September, he had made up bundles to go off when the bullion van called; and these would have gone on to the van. Later on, the police saw the relief cashiers who had worked at Welling during the previous weeks. One of them, Mr Richardson, had been on temporary duty at the Welling branch on several days in September. He identified four of the
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notes as being marked by him. Another cashier, Mr Collins, who had been on relief duty at the Welling branch for three days in August, identified one of them as being his.
On this evidence the police felt justified in charging Mr Stupple. On 20 February 1964, he was indicted with other men at the Kent Assizes at Maidstone before Thesiger J and a jury. The trial lasted for four and a half weeks. Mr Stupple put forward an alibi. He had not mentioned it before the trial. (There was, at that time, no obligation on him to do so.) He said that on Friday, 27 September 1963, he was at a café in the Old Kent Road about 200 yards from his home. He had his office on the first floor. He said he was in the cafe with his cousin, Mr Allpress. The café proprietor was a Mr Cappuccini. A pin-table machine had gone wrong. Mr Strupple said he had spent all the morning repairing it. It took him until 12.45 pm. So he could not have been at Longfield at 12.10 pm when the van was ambushed. Although Mr Stupple said he was in the café with his cousin, Mr Allpress, he did not manage to get Mr Allpress to give evidence for him at the criminal trial. Small wonder. Mr Allpress was a known criminal who was fearful of being arrested. He was convicted a little later for another bank robbery and sentenced to 15 years. Nor did Mr Stupple call Mr Capuccini to support his alibi. He called Mrs Cappuccini, and his cousin Mr John Stupple (Big John), a Mr Forsyth, a docker, and a Mr Farrow, a greengrocer.
In addition to the alibi, Mr Stupple gave his explanation of the money. He said that £380 of it was money belonging to him and Mr Allpress jointly; and that Mr Allpress had given it to him the night before. Also that £320 of it came from the sale of two machines to a Mr Coombes (which he had changed at the bank the day before); and that £230 in the wardrobe belonged to Mrs Stupple.
Such being the nature of the evidence submitted to the jury, Thesiger J summed up. On 19 March 1964, Mr Stupple was convicted of armed robbery and sentenced to 15 years’ imprisonment. The certificate of conviction is of importance. It was as follows:
‘THESE ARE TO CERTIFY that at the Assizes and General Gaol Delivery of our Lady the Queen holden at Maidstone in and for the County of Kent on Thursday, the nineteenth day of March in the year of our Lord one thousand nine hundred and sixty-four
William John Strupple
was in due form of law tried and convicted upon indictment for that he on the 27th day of September 1963 in the County of Kent together with other persons unknown being armed with offensive weapons namely iron bars Indian Clubs pickaxe handles sticks and bricks robbed Albert Leslie Henry Thorne of £87,300 10. 0. and six suitcases.
‘IT WAS THEREUPON ORDERED BY THE COURT that the said William John Stupple be imprisoned for fifteen years.’
Three other men named Shaw, Curbishley and Hall were convicted at the same time. All applied for leave to appeal from the conviction. On 13 May 1964, their applications were refused. As to Mr Stupple, Lord Parker CJ said:
‘The court has considered the arguments put forward; they have come to the conclusion that there was evidence here which would enable the jury properly directed to find and feel sure that Stupple was a robber, and having considered the judge’s direction and the whole summing-up they feel that the matter was properly left to the jury.’
On 23 July 1964, the police applied to the magistrates at Dartford for an order for the disposal of the money found in Mr Stupple’s house. By this time the bank had been indemnified by the Royal Insurance Co Ltd, who had paid them the full £87,300 10s which had been stolen. The magistrates ordered that the £65 found in Mrs Stupple’s
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handbag be returned to her; but that the money found on the dressing table (£700) and in the wardrobe (£250) and on Mr Stupple himself (£35 10s) be paid to the Royal Insurance Co This order was made under the Police (Property), Act 1897. The money was paid over to the Royal Insurance Co. Under the Actc, Mr and Mrs Stupple had six months in which to claim it back; but, in any such claim, the burden would be on them to prove that they were the lawful owners: see Irving v National Provincial Bank Ltd.
Each took proceedings within the six months. On 11 January 1965, Mrs Stupple claimed £230 from the Royal Insurance Co, being the money in the wardrobe which she said was hers. On 20 January 1965, Mr Stupple claimed £755 10s from the Royal Insurance Co, being the money on the dressing table and in his pocket. The Royal Insurance Co defended on the ground that the money had been stolen from the bullion van. They took an assignmentd from the bank and gave notice of the assignment to Mr Stupple. They counterclaimed against Mr Stupple £87,300 10s as damages for conversion. If the cases had come on for trial within the next three or four years, they would have had to be fought out without regard to the fact that Mr Stupple had been convicted of the robbery. The law then was that the conviction was not admissible in evidence in the civil proceedings: see Hollington v F Hewthorn & Co Ltd. But in September 1967, the Law Reform Committee presented a reporte out of which sprang the Civil Evidence Act 1968, ss 11, 12 and 13. It made a conviction admissible in evidence in civil proceedingsf; and it enacted that a man who is convicted of an offence shall be deemed to have committed that offence until the contrary is provedg. These provisionsh were brought into force on 2 December 1968i. These actions came on for trial before Paull J ([1970] 1 All ER 390, [1970] 2 WLR 124), in July and October 1969. The conviction was, accordingly, put in evidence against Mr Stupple.
In the civil action, Mr Stupple sought to show that he was not guilty of the robbery. He had by this time obtained some important fresh evidence. He had written from prison to various banks so as to find out when the notes were issued. He received a letter from the Westminster Bank showing that one of the notes, numbered A76921601, was sent from their head office to the City Road branch on 24 September 1963. So it could not, on that day, have been in the hands of Mr Ford at Welling, as Mr Ford had said. So Mr Ford must have been mistaken about that note. Mr Stupple had also obtained the help of a handwriting expert who examined the bank notes (or rather, photographs of them, because the originals had gone back into circulation). This expert said that the notes (which Mr Ford said were marked by him) were in several different handwritings. Mr Stupple also got additional evidence to support his alibi. He not only got his original witnesses, Mrs Cappuccini, Big John, Mr Forsyth and Mr Farrow. He also got Mr Allpress, who was now serving 15 years for another robbery. Also Mr Cappuccini. Also two of the other men who were convicted of this robbery, Mr Shaw and Mr Hall. They said that Mr Stupple had nothing to do with it.
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The judge in the civil action was not impressed with the evidence adduced by Mr Stupple in support of his alibi. He said ([1970] 1 All ER at 402) he would pay no attention to the evidence of Mr Allpress, Mr Cappuccini, Mrs Cappuccini or Big John. He felt that he could not rely to any very great extent on the evidence of Mr Farrow or Mr Forsyth because too long a time had passed. He did not think ([1970] 1 All ER at 403) the evidence of the other two convicted men could be accepted as having any great weight. The judge was impressed, however, by the letters produced by Mr Stupple about the date of issue of one of the bank notes. He thought that Mr Ford might have made a mistake and that it was not marked by him at all. But he thought that the other four (of which Mr Ford spoke) were identified by him, as well as those spoken to by Mr Richardson and Mr Collins.
The judge then asked himself what he would have done on all this evidence if he had been sitting as a juryman. In other words, what he would have done apart from the conviction. I doubt whether he was wise to ask himself that question. Before the 1968 Act, it might have been material. After the 1968 Act it was immaterial. And his answer to it has given rise to much perplexity. He said ([1970] 1 All ER at 407, [1970] 2 WLR at 134) that he would not be satisfied beyond all doubt that Mr Stupple was one of the robbers, but he would be satisfied that he received the notes of £700, £200 and £250 knowing them to have been stolen. The judge had suggested at one time that Mr Stupple might have received the notes because he helped the robbers, for example by providing a stolen car, but in the end the judge thought he might just have been helping to get rid of ‘hot’ money ([1970] 1 All ER at 407, [1970] 2 WLR at 134, 135).
Now here comes the point: although the judge thus took a view different from that of the jury at the criminal trial, he did not think it right to give effect to it in this civil action. He said ([1970] 1 All ER at 407, [1970] 2 WLR at 135):
‘… If feel the weight of the fact that he has been convicted, and that the conviction has been affirmed by the Court of Criminal Appeal, must be taken from a practical point of view to be conclusive.’
He dismissed the claim of Mr and Mrs Stupple and he gave judgment against Mr Stupple, on the counterclaim, for £84,908 10s.
It is apparent that, if the judge’s view was right (that Mr Stupple was not guilty of the robbery but only of receiving the £985 10s) the sentence of 15 years might be excessive. In consequence, the Home Secretary has, we are told, referred the whole case to the Court of Appeal under s 17(1)(a) of the Criminal Appeal Act 1968. That reference has not yet come on for hearing. I wish that it had come on before this civil appeal. Suppose that, on the reference, the Court of Appeal should set aside the conviction of robbery, it would make a great difference to the civil action. Yet we have to approach this appeal on the footing that the conviction is good. No application was made to adjourn this appeal pending the reference, and I feel we must deal with it as it stands. As such, it raises important points under the Criminal Evidence Act 1968.
Counsel for Mr Stupple, submitted that the only effect of the Act was to shift the burden of proof. He said that, whereas previously the conviction was not admissible in evidence at all, now it was admissible in evidence, but the effect was simply to put on the man the burden of showing, on the balance of probabilities, that he was innocent. He claimed that Mr Stupple had done so. I do not accept counsel’s submission. I think that the conviction does not merely shift the burden of proof. It is a weighty piece of evidence of itself. For instance, if a man is convicted of careless
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driving on the evidence of a witness, but that witness dies before the civil action is heard (as in Hollington v F Hewthorn & Co Ltd) then the conviction itself tells in the scale in the civil action. It speaks as clearly as the witness himself would have done, had he lived. It does not merely reverse the burden of proof. If that was all that it did, the defendant might well give his own evidence negativing want of care, and say: ‘I have discharged the burden. I have given my evidence and it has not been contradicted.' In answer to the defendant’s evidence, the plaintiff can say to him: ‘But your evidence is contradicted. It is contradicted by the very fact of your conviction.’
In addition, counsel for Mr Stupple sought, as far as he could, to minimise the effect of shifting the burden. In this, too, he did not succeed. The Act does not merely shift the evidential burden, as it is called. It shifts the legal burden of proof. I explained the difference long ago, in 1945, in an article in the Law Quarterly Reviewj. Take a running-down case where a plaintiff claims damages for negligent driving by the defendant. If the defendant has not been convicted, the legal burden is on the plaintiff throughout. But if the defendant has been convicted of careless driving, the legal burden is shifted. It is on the defendant himself. At the end of the day, if the judge is left in doubt the defendant fails because the defendant has not discharged the legal burden which is on him. The burden is, no doubt, the civil burden. He must show, on the balance of probabilities, that he was not negligent: see Public Prosecutor v Yuvaraj ([1970] 2 WLR 226 at 231) in the Privy Council quite recently. But he must show it nevertheless. Otherwise he loses by the very force of the conviction.
How can a man, who has been convicted in a criminal trial, prove his innocence in a subsequent civil action? He can, of course, call his previous witnesses and hope that the judge will believe them now, even if they were disbelieved before. He can also call any fresh witnesses whom he thinks will help his case. In addition I think he can show that the witnesses against him in the criminal trial were mistaken. For instance, in a traffic accident he could prove that a witness who claimed to have seen it was miles away and committed perjury. This would not, of course, prove his innocence directly, but it would do so indirectly by destroying the evidence on which he was convicted. So in this case he could prove that Mr Ford was mistaken.
In any case, what weight is to be given to the criminal conviction? This must depend on the circumstances. Take a plea of guilty. Sometimes a defendant pleads guilty in error; or in a minor offence he may plead guilty to save time and expense, or to avoid some embarrassing fact coming out. Afterwards, in the civil action, he can, I think, explain how he came to plead guilty. Take next a case in the magistrates’ court when a man is convicted and bound over or fined a trifling sum, but had a good ground of appeal, and did not exercise it because it was not worthwhile. Can he not explain this in a civil court? I think he can. He can offer any explanation in his effort to show that the conviction was erroneous; and it is for the judge at the civil trial to say how far he has succeeded. In my opinion, therefore, the weight to be given to a previous conviction is essentially for the judge at the civil trial. Just as he has to evaluate the oral evidence of a witness, so he should evaluate the probative force of a conviction.
If the defendant should succeed in throwing doubt on the conviction, the plaintiff can rely, in answer, on the conviction itself; and he can supplement it, if he thinks it desirable, by producing (under the hearsay sections) the evidence given by the prosecution witnesses in the criminal trial, or, if he wishes, he can call them again. At the end of the civil case, the judge must ask himself whether the defendant has succeeded in overthrowing the conviction. If not, the conviction stands and proves the case. Such being the principles, I turn to apply them to the present case. We have the conviction of Mr Stupple for armed robbery. We have the circumstances from which it arises. They were: (1) the fact that a bullion van was
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ambushed on 27 September 1963, and £87,000 in notes were stolen from it; (2) the fact that four days later Mr Stupple was found in possession of nearly £1,000 of the stolen notes; (3) the fact that he gave no acceptable explanation of how he came by them; (4) the fact that he put forward an alibi which was not acceptable. On those facts it was open to the jury, at the criminal trial, to find that he was guilty, not merely of receiving but of the robbery itself. I remember well that at one time it was thought that recent possession of stolen goods, without more, justified only a conviction for receiving and not for the theft itself. But Lord Goodard CJ scotched that fallacy in R v Loughlin and R v Seymour. It is open to the jury to convict of the theft itself. And in this regard recent possession of stolen money bears a stronger colour than recent possession of stolen goods. ‘Hot money’ travels fast; but usually into the hands of those who have helped to get it. Phillimore J put it thus to a jury in a robbery case, R v Fallon ((1963) 47 Cr App Rep 160 at 165):
‘When it comes to money, what is the natural view, the ordinary view, where somebody has got £100, the proceeds of a robbery, within a few hours of the robbery? I suppose it is possible that a thief may have come to him and said: “This is hot money, and if you give me £20 for it, I will give you £100.” But the natural thing would be, you may think, that a man who has got proceeds in the shape of money, when it is a money snatch, was probably involved in the actual robbery.’
He may not have been present at the robbery itself but he may have been the brains behind it, he may have helped organise it, or he may have provided the tools with which to do it. It matters not which. The money gets to him as his share. In any of those cases he would be an accessory before the fact and as much guilty of robbery as if he had been at the scene itself: see R v Bainbridge.
I regard the conviction of Mr Stupple in these circumstances, after a four and a half weeks trial, by a jury who were unanimous, as entitled to great weight in this civil action. It is not conclusive. It can be rebutted. But how does Mr Stupple seek to prove that he was innocent of the robbery? He adduces some fresh material. In particular, evidence to show that Mr Ford may have been mistaken in his identification of the notes; and evidence of the other convicted men, who say that Mr Stupple was not present at the robbery and had nothing to do with it. Otherwise the evidence was little more than a repetition of the evidence at the criminal trial, plus Mr Allpress and Mr Cappuccini, who did not count for much. All of this fell far short of discharging the burden on Mr Stupple to prove that he was innocent of the robbery. The conviction stands firm. It means that Mr Stupple was a party to robbing the bank of £87,300 10s and is liable in that sum for damages for conversion; and, of course, he cannot recover the sum of £755 10s, which was part of it.
Mrs Stupple claimed that £230 in the wardrobe was her money. But, seeing that an order had been made under the Police (Property) Act 1897, the burden was on her to prove it. She failed to do so. The police officers said that she did not claim it at the time. I think it goes with the rest of the notes. It was part of the stolen property.
I would, therefore, dismiss these appeals.
WINN LJ. The appellant, John William Stupple, was convicted in 1964 at Maidstone Assizes, with others, of an armed robbery which occurred on 27 September 1963, near Welling in Kent; a vehicle carrying some £87,000 in banknotes, mostly of £5 denomination, was attacked and the money stolen. He had pleaded not guilty and
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set up an alibi; the case against him rested mainly on evidence that some £5 notes which were found by the police in his bedroom early on 1 October 1963, had been in Martins Bank, Welling, from which the bulk of the £87,000 had been collected, shortly before 27 September 1963. The implication of guilt from this circumstantial evidence, the strength of which depended on the validity of identifications affirmed by a witness, one Ford, of numbers marked on some of the notes was somewhat strengthened by the fact that the appellant told lies to the police, and his position was not improved by the rejection of his alibi. In the action in which the instant appeal arose it was rightly accepted as common ground that if Mr Stupple committed the robbery, as distinct from being a receiver of part of the proceeds, he could not succeed on his claim and would be liable on the counterclaim to the Royal Insurance Co as assignee of the bank’s right of action, for conversion of the whole £87,000.
It is provided by the Civil Evidence Act 1968, s 11(2), that:
‘In any civil proceedings in which by virtue of this section a person is proved to have been convicted of an offence by or before any court in the United Kingdom or by a court-martial there or elsewhere—(a) he shall be taken to have committed that offence, unless the contrary is proved … ’
In my opinion the learned judge was right to hold that this enactment meant that, unless Mr Stupple proved on a balance of probability—viz by a civil standard of proof—that he was innocent, he must be treated for all relevant purposes as having committed the offence of which he was convicted. I do not myself think that it was any requisite, or, indeed, any proper, part of the function of the judge to consider what view he himself might have taken of the case had he sat on it either as juryman or judge; nor was it on a correct view relevant to his decision whether there had been an unsuccessful application to the Court of Appeal for leave to appeal against the conviction. Notwithstanding that the judge gave himself a great deal of avoidable trouble, effort and anxiety, he reached a conclusion which the 1968 Act justified, and I see no reason to suppose that his decision, which was of a very limited scope, was wrong.
I would dismiss the appeal of Mr Stupple; also that of his wife, who failed to discharge a different statutory onus of proofk.
BUCKLEY LJ. If, before 1968, A sued B for an act of B’s of which B had earlier been convicted in criminal proceedings, evidence of B’s conviction was inadmissible in A’s action. It merely demonstrated that another court had, on the material and arguments before it, concluded that B was guilty of the act with which he was charged in the criminal proceedings. It did not prove any of the matters proved in the criminal proceedings, nor anything which A would need to prove to make good his civil claim. Proof of B’s conviction was accordingly irrelevant to A’s action, and so was inadmissible: Hollington v F Hewthorn & Co Ltd.
The Civil Evidence Act 1968, has changed this. Section 11(1) makes proof of B’s conviction admissible in evidence for the purpose of proving that B did the act of which he has been convicted. If s 11(1) stood alone it would be clear that proof of the conviction would be some evidence of B’s act; it would not be clear what weight it should be given. Under s 11(2) (a), however, if in A’s action B is proved to have been convicted he is to be taken to have committed the offence of which he was convicted unless the contrary is shown. The effect of proof of the conviction under this subsection is, as Lord Denning MR has said, to shift the ‘legal’ burden of proof in respect of B’s act or alleged act from A, who would otherwise have to prove it to make good his claim, to B, who must disprove it to avoid the presumption of his having
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committed the offence prevailing. Once the conviction has been proved the task of the court, instead of being, as would otherwise be the case, to decide whether A has successfully shown that on a balance of probability B did the act, becomes to decide whether B has successfully shown that, on a balance of probability, he did not do the act. The learned judge in the present case rightly recognised that this was his function.
There remains, however, the problem of what weight, if any, should be accorded to the proved fact of conviction in deciding whether any other evidence adduced is sufficient to discharge the onus resting on B. In my judgment no weight is in this respect to be given to the mere fact of conviction. If, as seems to be the case, I differ from Lord Denning MR in this respect, I do so with the greatest diffidence. The effect of the bare proof of conviction is, I think, spent in bringing s 11(2)(a) into play. But very much weight may have to be given to such circumstances of the criminal proceedings as are brought out in the evidence in the civil action. Witnesses called in the civil proceedings may give different evidence from that which they gave in the criminal proceedings. Witnesses may be called in the civil proceedings who might have been but were not called in the criminal proceedings; or vice versa. The judge may feel that he should take account of the fact that the judge or jury in the criminal proceedings disbelieved a witness who is called in the civil proceedings, or that the defendant pleaded guilty or not guilty, as the case may be. Many examples could be suggested of ways in which what occurred or did not occur in the criminal proceedings may have a bearing on the judge’s decision in the civil proceedings; but the judge’s duty in the civil proceedings is still to decide that case on the evidence adduced to him. He is not concerned with the evidence in the criminal proceedings except so far as it is reproduced in the evidence called before him, or is made evidence in the civil proceedings under the Civil Evidence Act 1968, s 2, or is established before him in cross-examination. He is not concerned with the propriety of the conviction except so far as his view of the evidence before him may lead him incidentally to the conclusion that the conviction was justified or is open to criticism; but even if it does so, this must be a consequence of his decision and cannot be a reason for it. The propriety or otherwise of the conviction is irrelevant to the steps leading to his decision.
It was suggested in argument that so to view s 11 would result in the issues in the criminal proceedings being retried in the civil proceedings, and that this would be contrary to an intention on the part of the legislature to avoid this sort of duplication. I do not myself think that this would be the result in most cases, and I do not discern any such general intention in the section. If the fact of conviction were meant to carry some weight in determining whether the convicted man has successfully discharged the onus under s 11(2)(a) of proving that he did not commit the offence, what weight should it carry? I cannot accept that this should depend on such considerations as, for instance, the status of the court which convicted, or whether the decision was a unanimous or a majority verdict of a jury. I cannot discover any measure of the weight which the unexplored fact of conviction should carry. Although the section has made proof of conviction admissible and has given proof of conviction a particular statutory effect under s 11(2)(a), it remains, I think, as true today as before the Act that mere proof of conviction proves nothing relevant to the plaintiff’s claim, and it clearly cannot be intended to shut out or, I think, to mitigate the effect of any evidence tending to show that the convicted person did not commit the offence. In my judgment, proof of conviction under this section gives rise to the statutory presumption laid down in s 11(2)(a), which, like any other presumption, will give way to evidence establishing the contrary on the balance of probability, without itself affording any evidential weight to be taken into account in determining whether that onus has been discharged.
With respect to the learned judge, I think that he was unnecessarily alarmed at the possibility of his reaching a different conclusion from the conclusion reached at the criminal trial, where both the burden of proof and the standard of proof differed
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from those in the action, and by the Court of Criminal Appeal. The conclusion which he did reach was one which, I think, was clearly open to him on the evidence before him, and I see no reason to disturb it.
I agree that the appeal should be dismissed.
Appeals dismissed. Leave to appeal to the House of Lords refused.
Solicitors: B M Birnberg & Co (for Mr and Mrs Stupple); Hair & Co agents for Bracher, Son & Miskin, Maidstone, Kent (for the Royal Insurance Co).
Wendy Shockett Barrister.
Practice Direction
(Land: Recovery of possession: Procedure)
[1970] 3 All ER 240
PRACTICE DIRECTIONS
CHANCERY DIVISION
31 July 1970.
Land – Recovery of possession – Summary proceedings – Originating summons – Procedure – RSC Ord 113.
1. When an originating summons for possession of land is issued under RSC Ord 113a the master shall fix a return date, regardless of the state of his list and if necessary out of the normal hours for hearing summonses, on such date as shall be designed to allow not less than three clear days between the expected date of service and the hearing unless the plaintiff is proposing to apply to the judge under r 6(1) to abridge the time within which an order may be made, in which case an earlier date may be given.
2. An application by the plaintiff for such earlier date or for special directions for service under r 4 shall be made ex parte to the master.
3. When the originating summons is heard by the master he may, if he thinks fit, adjourn the same for the addition of parties or further evidence.
4. Subject to para 3 the master shall, unless he is satisfied by affidavit or otherwise that there is a triable issue whether the defendants or any of them have or has a subsisting licence or other title to remain in possession adjourn the originating summons into court.
5. (1) An originating summons adjourned into court shall be specially listed for hearing on the appropriate Wednesday by the judge who is taking the non-witness list of the group concerned.
(2) The appropriate Wednesday for the purposes of this rule shall be: (a) where the plaintiff is proposing to apply to the judge under r 6(1) to abridge the time within which an order may be made, the first Wednesday which shall be at least one clear day after the adjournment; (b) in any other case the Wednesday specified in sub-rule (a) or the first Wednesday which shall be not less than seven clear days after the date of service, whichever shall be the later.
6. An application for abridgment of time for the purposes of r 6(1) shall be made to the judge at the hearing in court and if the judge does not allow such abridgment the matter shall be adjourned to such date as the judge shall direct.
7. If the master shall be satisfied that there is such triable issue as aforesaid he shall give such directions as to the conduct and trial of the action or of any issue as he may think necessary or appropriate.
By the direction of the Vice-Chancellor.
R E Ball, Chief Master
R v Pontypool Gaming Licensing Committee, ex parte Risca Cinemas Ltd
[1970] 3 All ER 241
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND JAMES J
Hearing Date(s): 30 JUNE, 8 JULY 1970
Gaming – Licensing of premises – Bingo club licence – Application for licence – Failure to comply with statutory provisions as to time limit – Whether statutory provisions mandatory or declaratory – Gaming Act 1968, Sch 2, paras 8 to 11.
The code in paras 8 to 11 of Sch 2 to the Gaming Act 1968 must be treated as a whole, and in it Parliament has laid down the entire procedure, with specific limits of time prescribed in respect of each of the steps in that process and these time limits are mandatory (see p 243 j to p 244 a, e and h, post).
Dictum of Grove J in Barker v Palmer (1881) 8 QBD at 11 applied.
Notes
For licensing of premises under the Gaming Act 1968, see Supplement to 18 Halsbury’s Laws (3rd Edn) para 370E.
For the Gaming Act 1968, Sch 2, see 14 Halsbury’s Statutes (3rd Edn) 751.
Case referred to in judgment
Barker v Palmer (1881) 8 QBD 9, 51 LJQB 110, 45 LT 480, 13 Digest (Repl) 425, 508.
Motion for mandamus
This was an application by way of motion on behalf of Risca Cinemas Ltd for an order of mandamus that the respondents, the gaming licensing committee of the justices for the petty sessional division of Pontypool, should hear and determine an application by the applicant for a bingo club licence in respect of the Coliseum Bingo and Social Club, Blaenavon, Monmouth. The facts are set out in the judgment of Megaw LJ.
A M Jones for the applicant.
Gordon Slynn as amicus curiae.
The gaming committee did not appear and were not represented.
Cur adv vult
8 July 1970. The following judgments were delivered.
MEGAW LJ read the first judgment at the invitation of Lord Parker CJ. The applicant, Risca Cinemas Ltd, is desirous of obtaining a bingo club licence, as defined in para 2(2) of Sch 2 to the Gaming Act 1968, in order to enable the applicant on and after 1 July 1970 to provide facilities for the playing of the game of bingo in premises known as the Coliseum Bingo and Social Club, Blaenavon, in the county of Monmouth. Without such a licence, by virtue of the provisions of that Act, such facilities cannot lawfully be provided.
In Sch 2 to the Act a code of provisions is set out in respect of, inter alia, the granting of such a licence. The relevant licensing authority is the gaming licensing committee of the justices for the petty sessional division of Pontypool. Paragraphs 5 and 8 of Sch 2 set out the general provisions in respect of an application for the grant of a licence. The provisions with which this court is directly concerned, however, are the provisions in respect of what is described as the ‘initial period’, ie the period of the first six months beginning with the date appointed under s 54(4) of the Act.
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Apart from differences in the dates and periods of time provided for the various steps in the making of an application and its consideration, and substance of the general provisions for the initial period is the same.
The code set out in paras 8 to 11 is as follows. By para 8, the application may be made at any time during the six months’ period. It must specify the name and description of the club and other particulars and it must be accompanied by a certificate of consent issued by the gaming board. Not later than seven days after the date on which the application is made, the applicant has to send a copy of the application to five named authorities. It is conceded on behalf of the applicant that in this provision ‘Not later than … ’ is mandatory, in the sense that, if the required copy is not sent to each of the specified authorities within the seven days, the application is invalid. It cannot be granted.
By para 10(1), it is provided that not later than 14 days after the making of the application the applicant shall cause notice of the making of the application to be published by means of an advertisement in a newspaper circulating in the authority’s area. It is conceded on behalf of the applicant that, again, ‘Not later than’ is mandatory in the sense above stated. By para 10(2), there is provision as to the contents of the notice which is to be published. The notice, it is stipulated, shall state that any person who desires to object to the grant of the licence shall send two copies of the statement in writing of the grounds of his objection to the clerk to the licensing authority before such date (not being earlier than 14 days after the publication of the advertisement) as may be specified in the notice. It is conceded that, if the published notice were to state a date earlier than 14 days, the application would be invalid. By para 10(3), it is provided that not later than 14 days before the date specified in the published notice the applicant shall cause a like notice to be displayed outside the entrance to the premises in respect of which the licence is required. It is conceded that the application would be invalid if the notice were to be displayed for the first time later than the required date.
Then comes para 11(1). Since the present application to this court relates to the effect of that sub-paragraph, it is desirable to set it out verbatim. It provides:
‘Not later than seven days after the publication of the newspaper containing the advertisement required by the last preceding paragraph, the applicant shall send a copy of that newspaper to the clerk to the licensing authority; and the licensing authority shall not consider the application earlier than fourteen days after the date specified in the advertisement.’
Paragraph 11(2) provides that, on or after the date specified in the advertisement, the clerk to the licensing authority is to send notice in writing of the date, time and place of the meeting of the authority at which the application will be considered, to the applicant, to the five authorities already mentioned and to any objector.
The relevant facts are short and simple. The applicant’s application dated 7 March 1970 was received by the clerk to the licensing authority on 11 March 1970. It was in order. The notice required by para 10(1) was published in an appropriate newspaper on, it may be assumed for present purposes, 11 March. It was, therefore, published ‘Not later than fourteen days after the making of the application … ’, as is required by para 10(1). A copy of it was not, however, sent to the clerk to the licensing authority not later than seven days after the publication of the newspaper containing the advertisement, as required by para 11(1). In fact, a copy of the newspaper was not sent. By a letter dated 16 March, but postmarked 24 March and received on 26 March, the applicant sent to the clerk a cutting from a newspaper, consisting of the advertisement constituting the notice. On 26 March, the clerk wrote to the applicant, in the following terms:
‘Re Coliseum Bingo and Social Club, Blaenavon
‘Today I have received your letter dated 16th March, together with a newspaper clipping which appears to relate to the above mentioned Club.
Page 243 of [1970] 3 All ER 241
‘May I remind you that Paragraph 11 of Schedule 2 says that you shall send a copy of the newspaper containing the advertisement required by Paragraph 10 of the same Schedule. In addition, the newspaper must be sent to my office not later than seven days after its publication. In the circumstances I cannot see that what you have sent me complies with the Schedule to the Act.’
On 28 May 1970, the applicant appeared, by counsel, before the gaming licensing committee. There were no objections to the grant of the bingo club licence. Counsel for the applicant admitted that the requirement of para 11(1) had not been complied with. The newspaper (or at any rate an extract from the newspaper containing the advertisement) had been sent to the clerk on the 13th day after publication, instead of ‘Not later than seven days after that publication’. But counsel submitted that para 11(1) was, as he put it, declaratory, and not mandatory, and that, therefore, the application could proceed, notwithstanding the failure to comply with the statutory provision. The gaming licensing committee rejected that submission. They held that:
‘… the proper legal interpretation of the Gaming Act 1968 and the Schedules thereto leads to a firm conclusion that failure to conform with the initial statutory requirements made the application a “non-application“.’
In other words, the committee held that it was not a matter of discretion, but that, by reason of the failure of the applicant to observe one of the statutory requirements as to time, it had no jurisdiction to entertain that application.
The applicant, through its counsel, applies to this court for leave to apply for an order of mandamus that the gaming licensing committee do hear and determine the application for a bingo club licence. The committee were not represented on this application, but the court has had the valuable assistance, not only of the arguments of counsel on behalf of the applicant, but also of counsel who appeared at the request of the court as amicus curiae.
For the applicant it was conceded, as has already been mentioned, that all the other provisions, at least as to time, of paras 8 to 11, introduced by the words, ‘Not later than’, as well as the corresponding provisions in paras 5 to 7, are mandatory. That is, that a failure by an applicant to conform with the time limits stated would necessarily be fatal to the application. The licensing authority would not have a discretion. It would have no power, if it were minded so to do, to hold that the failure wax excusable or insignificant, or that no one was, or could be, prejudiced. (As counsel as amicus curiae pointed out, where the duty to act within a specified time is on the clerk, and not on the applicant it could not be said that the application would necessarily be rendered abortive by the clerk’s failure; but that does not arise here.) For the applicant it was, however, contended that, although all the other ‘Not later than’ obligations imposed on the applicant under this code were mandatory, this particular provision contained in the first half of para 11(1) should be construed as having a different effect. It should be treated as ‘declaratory’, in the sense that a failure to comply was not necessarily and in all circumstances fatal; the licensing authority should have a discretion, and, mandamus being granted, they should be required to exercise that discretion. Counsel for the applicant submitted that, in contrast with the other ‘Not later than’ stipulations, a failure to observe this particular requirement of sending a copy of the advertisement within seven days of its publication does not necessarily cause prejudice to anyone. Indeed, he submitted, it is difficult to see how it could cause more than slight administrative inconvenience. If there were deliberate delay, or inordinate delay so as to cause serious administrative inconvenience, or any kind of prejudice to any other person than the applicant himself, the licensing authority could, in the exercise of its discretion, reject the application on that ground.
I do not accept that submission. I think that this code in paras 8 to 11 must be
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treated as a whole. Parliament has laid down the entire procedure, with specific limits of time prescribed in respect of each of the steps in that process. In relation to any other of those steps it could be said, as the applicant says in relation to this requirement: ‘Well, but there is not likely to be any real prejudice to anyone if the applicant is a day or two out of time.' For example, if the applicant is two or three days outside the seven days in sending the required copy of his application to the appropriate officer of police, any difficulty could easily be overcome by the clerk fixing the hearing of the application for a date two or three days later than it might otherwise have been fixed. Yet it is conceded that such non-compliance would be fatal. I can see no logical or practical reason for treating the words ‘Not later than’ as having a different effect in respect of this one provision of the code in the first half of para 11(1). This view is, I think, supported by authority—a case cited by counsel as amicus curiae. In Barker v Palmer ((1881) 8 QBD 9 at 11), Grove J, dealing with a case of time limits imposed by the County Court Rules, said:
‘It is impossible for the Court to speculate upon the reasons for legislation in the way suggested, or to dissect an Act of Parliament and say upon those reasons that part of the enactment is directory and part obligatory. The reasons suggested might be wholly wrong, and to act upon them here would be practically to abrogate the rule. The words of the rule are peremptory, … ’
The conclusion that all these time limits are mandatory is confirmed by a factor which, rightly as I think, influenced the committee in reaching its decision. Schedule 2 to the Licensing Act 1964 contains a similar type of code in respect of applications for justices’ licences for the sale of intoxicating liquor. There are in that Schedule time limits of a similar type for a similar purpose, introduced by such words as ‘… not more than twenty-eight days … ’ Paragraph 7 of that Schedule expressly confers on the justices a discretion where the applicant has—
‘… through inadvertence or misadventure, failed to comply with the requirements of the preceding paragraphs of this Schedule … ’
In the procedural code comprised in paras 8 to 11 of the Schedule now in question, no such dispensing power has been included by Parliament. Moreover, and perhaps of even greater significance, in other parts of this very Schedule, Parliament has expressly included such a dispensing power. For example, in para 12(2), relating to applications for the renewal of a licence, the licensing authority is empowered to entertain an application made after the prescribed date if it is satisfied of certain matters therein specified. So, also, in para 15, in relation to notices of objection received out of time. The inference is that, where Parliament has laid down time limits and has not seen fit to reserve expressly a dispensing power in the event of non-compliance, no such dispensing power may properly be implied.
I would refuse this application.
JAMES J. I agree with the terms of the judgment just delivered, and also would refuse the application.
LORD PARKER CJ. I also agree.
Application dismissed.
Solicitors: Montague Gardner & Howard, agents for Crowley, Grossman & Hermer, Cardiff (for the applicant); Treasury Solicitor.
N P Metcalfe Esq Barrister.
SCM (United Kingdom) Ltd v W J Whittall & Son Ltd
[1970] 3 All ER 245
Categories: TORTS; Negligence
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND BUCKLEY LJJ
Hearing Date(s): 16, 17, 18, 19 JUNE, 17 JULY 1970
Negligence – Duty to take care – Arising out of foreseeable risk of injury – Breach of duty – Consequential loss to plaintiffs from damage to property of another – Electric cable severed causing power failure in plaintiffs’ factory – Cable not property of plaintiffs – Physical damage leading to loss of profit.
Damages – Remoteness of damage – Negligence – Foreseeability – Economic loss not consequent on physical damage – Electric cable severed causing power failure in plaintiffs’ factory – Remoteness of economic loss as head of damage.
The plaintiffs were manufacturers of typewriters and copying machines. The defendants, who were building contractors, were carrying out construction works in the vicinity of the plaintiffs’ factory when they damaged a high voltage cable supplying the factory with electricity required for the operation of manufacturing machinery. The plaintiffs did not own or have any possessory or proprietary rights in the damaged cable. The damage to the cable caused a power failure at the factory. The plaintiffs alleged that the defendants knew or ought to have known of the presence and position of the cable and that it carried electric current to supply factories such as the plaintiffs’ with power for their plant and machinery; and that it was reasonably foreseeable by the defendants that if they damaged the cable the supply of electric current to the factories supplied by it would be likely to be interfered with and fail, and that, in that event, occupiers of premises such as the plaintiffs would be likely to suffer loss and damage including injury to their property. Paragraph 5 of the plaintiffs’ statement of claim stated: ‘In the circumstances the Defendants owed a duty to the Plaintiffs to take reasonable care when carrying out the said operations not to damage the said cable.' The plaintiffs claimed, inter alia, damages for loss of one day’s production of typewriters and copying machines, together with the value of certain items which were damaged by the solidification of raw material in the machines at the time of the power failure. Counsel for the plaintiffs gave an assurance to the court that he confined the claim to the material damage to the machines and to the loss of production consequent on that damage.
Held – The defendants were in breach of the duty of care which they owed to the plaintiffs not to damage the cable because they knew that the cable supplied electricity to the plaintiffs’ factory and that if they damaged the cable the electricity would be cut off, which would cause damage to the plaintiffs; accordingly, the defendants were liable to the plaintiffs for all the material damage suffered by them and any loss of profit consequent thereon (see p 249 h to p 250 a, p 252 h, p 258 e and p 262 c, post).
Dictum of Lord Atkin in Donoghue v Stevenson [1932] All ER Rep at 11 applied.
Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co (1959) 17 DLR (2d) 292(so far as it concerned the spoiling of the food), on appeal (1960) 21 DLR (2d) 264 and British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252 approved.
Per Lord Denning MR. In actions of negligence, when the plaintiff has suffered no damage to his person or property, but has only sustained economic loss, the law does not usually permit him to recover that loss. Although the defendants owed the plaintiffs a duty of care, that did not mean that additional economic loss which was not consequent on the material damage suffered by the plaintiffs would also be recoverable; in cases such as Weller & Co v Foot and Mouth Disease Research Institute ([1965] 3 All ER 560) and Electrochrome Ltd v Welsh Plastics Ltd ([1968] 2 All ER 205), the plaintiffs did not recover for
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economic loss because it was too remote to be a head of damage, not because there was no duty owed to the plaintiffs or because the loss suffered in each case was not caused by the negligence of the defendants (see p 250 b, c and f, p 251 c and p 257 f, post).
Per Winn LJ. Apart from the special case of imposition of liability for negligently uttered false statements, there is no liability for unintentional negligent infliction of any form of economic los which is not itself consequential on foreseeable physical injury or damage to property (see p 258 b, post).
Decision of Thesiger J [1970] 2 All ER 417 affirmed.
Notes
For the duty to take care, see 28, Halsbury’s Laws (3rd Edn) 7, para 4, and for cases on the subject, see 36 Digest (Repl) 12–18, 34–79.
Cases referred to in judgments
Blake v Crowcarry Co (1960) unreported.
Bourhill v Young [1942] 2 All ER 396, [1943] AC 92, 111 LJPC 97, 167 LT 261, 36 Digest (Repl) 16, 66.
British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252, [1969] 1 WLR 959, Digest Supp.
Candler v Crane, Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, 36 Digest (Repl) 17, 75.
Cann v Willson (1888) 39 Ch D 39, 57 LJCh 1034, 59 LT 723, 35 Digest (Repl) 33, 246.
Cattle v Stockton Waterworks Co (1875) LR 10 QB 453, [1874–80] All ER Rep 220, 44 LJQB 139, 33 LT 475, 39 JP 791, 1 Digest (Repl) 37, 277.
Clay v A J Crump & Sons Ltd [1963] 3 All ER 687, [1964] 1 QB 533, [1963] 3 WLR 866, Digest (Cont Vol A) 75, 4866.
Clayton v Woodman & Son (Builders) Ltd [1962] 2 All ER 33, [1962] 2 QB 533, [1962] 1 WLR 585; rvsg [1961] 3 All ER 249, [1962] 2 QB 533, [1961] 3 WLR 987, Digest (Cont Vol A) 75, 486a.
Derry v Peek (1889) 14 App Cas 337, [1886–90] All ER Rep 1, 58 LJCh 864, 61 LT 265, 54 JP 148; rvsg (1887) 37 Ch D 541, 35 Digest (Repl) 27, 187.
Donoghue v Stevenson [1932] AC 562, [1932] All ER Rep 1, 101 LJPC 119, 147 LT 281, 36 Digest (Repl) 85, 458.
Electrochrome Ltd v Welsh Plastics Ltd [1968] 2 All ER 205, Digest Supp.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, Digest (Cont Vol A) 51, 1117a.
Home Office v Dorset Yacht Co Ltd [1970] 2 All ER 294, [1970] 2 WLR 1140; affg [1969] 2 All ER 564, [1964] 2 QB 412, [1969] 2 WLR 1008.
Inland Revenue Comrs v Hambrook [1956] 3 All ER 338, [1956] 2 QB 641, [1956] 3 WLR 643, 34 Digest (Repl) 225, 1632.
King v Phillips [1953] 1 All ER 617, [1953] 1 QB 429, [1953] 2 WLR 526, Digest (Cont Vol A) 1189, 1039.
Le Lievre v Gould [1893] 1 QB 491, 62 LJQB 353, 68 LT 626, 57 JP 484, 35 Digest (Repl) 28, 189.
Liesbosch Dredger (Owners) v Steamship Edison (Owners) [1933] AC 449, 102 LJP 73; sub nom The Edison [1933] All ER Rep 144, 149 LT 49, 17 Digest (Repl) 93, 103.
Ministry of Housing and Local Government v Sharp [1970] 1 All ER 1009, [1970] 2 WLR 802.
Morrison Steamship Co Ltd v The Greystoke Castle (Cargo Owners) [1946] 2 All ER 696, [1947] AC 265, [1947] LJR 297, 176 LT 66, 41 Digest (Repl) 514, 2887.
Old Gate Estates Ltd v Toplis & Harding & Russell [1939] 3 All ER 209, 161 LT 227, 1 Digest (Repl) 790, 3180.
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126, Digest (Cont Vol A) 1148, 185a.
Remorquage à Hélice (Société Anonyme de) v Bennetts [1911] 1 KB 243, 80 LJKB 228, 36 Digest (Repl) 198, 1044.
Page 247 of [1970] 3 All ER 245
Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co (1960) 21 DLR (2d) 264, [1959] OR 581; on appeal from (1959) 17 DLR (2d) 292, [1959] OR 177, 25 Digest (Repl) 538, *64.
Simpson v Thomson (1877) 3 App Cas 279, 58 LT 1, 1 Digest (Repl) 61, 452.
Ultramares Corpn v Touche (1931) 174 North Eastern Rep 441, 255 NY Rep 170.
Weller & Co v Foot and Mouth Disease Research Institute [1965] 3 All ER 560, [1966] 1 QB 569, [1965] 3 WLR 1082, Digest (Cont Vol B) 554, 109c.
Appeal
The defendants, W J Whittall & Sons Ltd, appealed against an order made by Thesiger J, on 16 March 1970, and reported [1970] 2 All ER 417, on a preliminary issue in which the plaintiffs, SCM (United Kingdom) Ltd, claimed that: 1. they were and had at all material times been manufacturers of typewriters and copying machines carrying on business at their factory at Birmingham Road, West Bromwich in the county of Stafford. 2. At all material times electric power required for the plaintiffs’ factory and business and, inter alia, the manufacturing machinery was supplied by or through an 11,000-volt cable running beside Birmingham Road. 3. The defendants were and had at all material times been building and civil engineering contractors, and in November 1967 were carrying out, inter alia, engineering operations in Birmingham Road and knew or ought to have known of the presence and position of the cable and that it carried, and/or was electrically connected to cables carrying, electric current to supply factories such as the plaintiffs’ with power for their plant and machinery. 4. Further it was at all material times reasonably foreseeable by the defendants that if they damaged the cable the supply of electric current to factories supplied thereby or by cables electrically connected thereto would be likely to be interfered with and fail and that in that event occupiers of premises such as the plaintiffs would be likely to suffer loss and damage including injury to their property. 5. In the circumstances the defendants owed a duty to the plaintiffs to take reasonable care when carrying out the operations not to damage the cable. 6. On 20 November 1967, the defendants their servants or agents were engaged in preparing to rebuild the boundary wall of Girling Ltd when they negligently damaged the cable which carried, and/or was electrically connected to cables carrying, electric current to the plaintiffs’ premises whereby they caused a power failure at the premises by reason whereof the plaintiffs suffered loss and damage.
R I Kidwell QC and J P Gorman for the defendants.
Conrad Dehn QC and C H L Bathurst for the plaintiffs.
Cur adv vult
17 July 1970. The following judgments were delivered.
LORD DENNING MR. This is a preliminary question of law. We have to assume these to be the facts. On 20 November 1967, the defendants, a firm of building contractors, were working in a road in West Bromwich, called Birmingham Road. There were several factories in the road. The task of the defendants was to rebuild the boundary wall of one of the factories next to the road. They dug a trench and one of their men was hammering a metal tube into the bottom of the trench. He hit a brick but did not stop his hammering. He went on and cut into an electric cable which was running alongside the road. It was an 11,000-volt cable owned by the electricity board and supplying electric current to many factories in the road. The workman damaged it so badly that there was a power failure. The current was cut off for about 7 hours and 17 minutes. Some of the factories were put out of action. One of them was a factory in Birmingham Road at which the plaintiffs, SCM (United Kingdom) Ltd manufactured typewriters and copying machines. They suffered particularly because they had molten materials in their machines. These materials solidified owing to lack of electric heat. The plaintiffs were put to much trouble in getting the machines clear. They had to strip them down, and chip away the solidified
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material, and reassemble the machines. It took them much of the time while the current was cut off. In addition, some parts of the machines were damaged beyond recovery. The plaintiffs lost the value of those items and also the profit from one full day’s production. They claim damages from the defendants for all that loss. It must be accepted that the defendants were negligent in damaging the cable and that they ought reasonably to have foreseen that, if they damaged the cable, the supply of current to factories would be likely to be interfered with and that the occupiers, such as the plaintiffs, would be likely to suffer loss and damage, including injury to their property.
During the course of the argument a question arose whether the loss of production was due to the shutting down of the works (thus causing economic loss only), or whether it was due to the physical damage to the machines which had to be repaired. Counsel for the plaintiffs made enquiries of the plaintiffs and assured the court that he confined the claim to the material damage done to the machines, plus the loss of production consequent on that damage. This was an important assurance. It is well settled that when a defendant by his negligence causes physical damage to the person or property of the plaintiff, in such circumstances that the plaintiff is entitled to compensation for the physical damage, then he can claim, in addition, for economic loss consequent on it. Thus a plaintiff who suffers personal injuries recovers his loss of earnings. A shipowner, whose ship is sunk or damaged, recovers for his loss of freight. If and insofar as counsel for the plaintiffs is entitled to claim for the material damage, then he can claim for the loss of production which was truly consequential on the material damage. But, if the loss of production was really due to the cutting-off of the electricity for 7 hours and 17 minutes—and the plaintiffs took the opportunity during that time of remedying the physical damage—then the claim for loss of production would depend on whether, in this type of case, economic loss is recoverable.
Counsel for the plaintiffs did not wish to discuss whether economic loss is recoverable. That was good strategy on his part. He did not want to fight on that battlefield. But I do not think that his strategy should divert us from doing so. Damage was done to many factories by the cutting-off of the electricity supply. Those who had a stand-by system would not suffer loss. But all others would suffer loss of production and loss of profit. This could be reasonably foreseen. Some of the factories may have suffered material damage as well. But that should not give them a special claim. Either all who suffered loss of profit should get damages for it, or none of them should. It should not depend on the chance whether material damage was done as well.
The principle at stake is an important one. The plaintiffs rely on the law of negligence as enunciated in modern times. First, they were ‘neighbours’ within the principle stated by Lord Atkin in Donoghue v Stevenson ([1932] AC 562 at 580, [1932] All ER Rep 1 at 11), because they were so closely and directly affected by the work that the defendants ought reasonably to have had them in contemplation. Secondly, the damage done to them was reasonably foreseeable and is, therefore, recoverable within the principles stated in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound). Thirdly, there is no difference in principle between economic loss and material damage. If the defendants could reasonably foresee that their negligence might cause economic loss, it is recoverable just as material damage is recoverable. They rely on what Lord Devlin said in Hedley Byrne & Co Ltd v Heller & Partners Ltd ([1963] 2 All ER 575 at 603, [1964] AC 465 at 517).
Counsel for the defendants sought to answer those contentions by saying that, in order to make a defendant liable for negligence, one must first find that he owed a duty of care; and he submitted that the contractors here owed no duty of care to the factory owners. To support his proposition that the defendants owed no duty,
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counsel for the defendants relied very much on the judgment of Widgery J in Weller & Co v Foot and Mouth Disease Research Institute. He gleaned from it the proposition that a duty of care only extends to those whose person or property is liable to be directly injured and then only when such injury can reasonably be foreseen. Reasonable foresight, he said, is a necessary condition in order to impose liability, but it is not sufficient unless it is foresight of direct injury to the person or property of another. To use the words of Widgery J himself ([1965] 3 All ER at 569, [1966] 1 QB at 588): ‘… where an absence of reasonable care may foreseeably cause direct injury to the person or property of another, a duty to take such care exists’. Applying this proposition, counsel for the defendants said that the defendants here owed a duty of care to the electricity board which owned the cable, because its cable was liable to be directly injured and the defendants ought reasonably to have foreseen it. But the defendants, he said, owed no duty to the plaintiffs because their factory was not liable to the directly injured, but only indirectly (by having the current cut off). He admitted that the injury to them might reasonably be foreseen, but nevertheless said that the defendants were under no duty to avoid it. Counsel for the defendants carried this proposition to its logical conclusion. He said that British Celanese Ltd v A H Hunt (Capacitors) Ltd was wrongly decided. In that case the defendants collected on their premises long strips of metal foil. They negligently failed to keep them safe, and they were carried by the wind on to an electricity substation owned by the electricity board, thus causing a power failure over a wide area. The defendants ought reasonably to have foreseen this, because it had happened before and they had been warned about it. The plaintiffs were the owners of a nearby factory who suffered physical damage to their materials by the cutting-off of the current. They were injured indirectly and not directly. This indirect injury could reasonably be foreseen. Lawton J held that the defendants were under a duty of care to the factory owners and were liable for the material damage and the loss of profit consequent thereon. I think that Lawton J was right. I cannot accept counsel for the defendants’ proposition. The distinction between ‘direct’ and ‘indirect’ has been attempted before, but it has proved illusory. It was decisively rejected in a parallel field in The Wagon Mound and should not be revived here. The cases, too, do not warrant the distinction. A man may owe a duty of care to those who he foresees may be indirectly injured, as well as to those who he foresees may be directly affected. A good example is wilful damage done by an escaping borstal boy. Such damage is as indirect as can be, but, being reasonably foreseeable, a duty of care is owed to those in the neighbourhood who may be injured by it: see Home Office v Dorset Yacht Co Ltd. Another example is the injury caused by a negligent reference given by a banker. The man who acts on it suffers damage which is quite indirect but, being foreseeable, a duty of care is owed to him: see Hedley Byrne & Co Ltd v Heller & Partners Ltd.
I put on one side, therefore, the distinction between direct and indirect, and ask myself simply: did the defendants owe a duty of care to the plaintiffs? I think it plain that they did. They were working near an electric cable which they knew, supplied current to all the factory owners in the neighbourhood. They knew that, if they damaged the cable, the current would be cut off and damage would be suffered by the factory owners. Those simple facts put them under a duty to take care not to injure the cable. This was a duty which they owed to all the factory owners in the vicinity. It comes straight within the principle laid down by Lord Atkin in Donoghue v Stevenson ([1932] AC at 580, [1932] All ER Rep at 11). Applying that case, I hold that the defendants are liable for all the
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material damage done to the plaintiffs and any loss of profit consequent thereon. The British Celanese case was rightly decided, following, as it did, the Canadian case of Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co, to which I would subscribe so far as it concerned the spoiling of the food.
But I cannot stop there. I must deal with counsel for the defendants’ argument. He said that, if there was a duty of care, it meant that economic loss would be recoverable as well as material damage. No distinction could be made between the two kinds of damage. Lord Devlin himself said: ‘I can find neither logic nor commonsense … ’ in making a difference between them: see Hedley Byrne & Co Ltd v Heller & Partners Ltd ([1963] 2 All ER at 602, [1964] AC at 517). There may be no difference in logic, but I think that there is a great difference in common sense. The law is the embodiment of common sense; or, at any rate, it should be. In actions of negligence, when the plaintiff has suffered no damage to his person or property, but has only sustained economic loss, the law does not usually permit him to recover that loss. The reason lies in public policy. It was first stated by Blackburn J in Cattle v Stockton Waterworks Co ((1875) LR 10 QB 453 at 457, [1874–80] All ER Rep 220 at 223), and has been repeated many times since. He gave this illustration: when a mine is flooded by negligence, thousands of men may be thrown out of work. None of them is injured, but each of them loses wages. Has each of them a cause of action? He thought not. So here I would ask: when an electric cable is damaged and many factories may be stopped from working, can each of them claim for its loss of profit? I think not. It is not sensible to saddle losses on this scale on to one sole contractor. Very often such losses occur without anyone’s fault. A mine may be flooded, or a power failure may occur by mischance as well as by negligence. Where it is only mischance, everyone grumbles but puts up with it. No one dreams of bringing an action for damages. So also when it occurs by negligence. The risk should be borne by the whole community rather than on one pair of shoulders, ie on one contractor who may, or may not, be insured against the risk. There is not much logic in this, but still it is the law. As Lord Wright said in the Liesbosch Dredger (Owners) v Steamship Edison (Owners) ([1933] AC 449 at 460, [1933] All ER Rep 144 at 158):
‘In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but for practical reasons.’
In other words, the economic loss is regarded as too remote to be recoverable as damages.
Thus far I have spoken only of accidents which affect a whole community, but the principle has been applied to cases where only one or two persons suffer economic loss. Take the case where a tug was towing a ship. The defendants’ vessel approached so negligently that she sank the ship; but the tug was not damaged. The owners of the tug lost the remuneration which they would have earned on the towage contract. The defendants clearly owed a duty of care to the tug as well as to the tow. If the tug had been physically damaged, her owners could have recovered for it but, as their loss was only economic loss, Hamilton J held that the tug could not recover for it: see Remorquage à Hélice (Société Anonyme de) v Bennetts. Now apply that case to an ordinary road accident, where a haulage contractor is carrying goods under contract to be delivered urgently by a specified time. He is driving the lorry and his servant is sitting beside him in the cab. The defendant negligently drives into the lorry. The lorry is damaged. The employer is killed. But the servant is not injured. Nor are the goods. Yet the servant loses his employment; and the goods are delayed for many hours so that the owner of the goods is held up and loses production. Applying Remorquage à Hélice (Société Anonyme de) v Bennetts, it seems clear that the
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servant cannot recover for his loss of wages; nor can the owner of the goods recover for his loss of profit. Suppose next, that the servant is injured and the employer is not, but the employer suffers damage owing to the loss of his services. He cannot recover from the wrongdoer: see Inland Revenue Comrs v Hambrook. Yet in all these instances the wrongdoer was certainly under a duty of care to everyone concerned, ie, to the employer, to the servant, and to the owner of the goods. If there had been physical damage to any of them, the defendant would have been held liable for the physical damage and the loss of earnings consequent thereon. Yet, when there is no physical damage, the defendant is not liable. His breach of duty is the same, no matter whether the damage is physical injury or only economic loss. Only the damage is different. If you refuse to allow the plaintiff in such cases to recover for economic loss, it is not because there is no duty owed to him, nor because it was not caused by the negligence of the defendant, but simply because it is too remote to be a head of damage. It is rather like the cases on nervous shock where a bystander fails to recover. The reason is, not because there is no duty to him, but because the damage is too remote: see King v Phillips ([1953] 4 All ER 617 at 622, [1953] 1 QB 429 at 439, 440).
I regard the case of Weller as depending on remoteness also. The negligence of the defendants caused foreseeable damage to the auctioneers—in the shape of loss of business—but it was held that they could not recover. Widgery J put the practical reasons ([1965] 3 All ER at 563, [1966] 1 QB at 577):
‘… if this argument is sound, the defendants’ liability is likely to extend far beyond the loss suffered by the auctioneers, for in an agricultural community the escape of foot and mouth disease virus is a tragedy which can foreseeably affect almost all businesses in that area. The affected beasts must be slaughtered, as must others to whom the disease may conceivably have spread. Other farmers are prohibited from moving their cattle and may be unable to bring them to market at the most profitable time; transport contractors who make their living by the transport of animals are out of work; dairymen may go short of milk, and sellers of cattle feed suffer loss of business.’
Widgery J used those as reasons for saying that the defendants owed no duty to the auctioneers, but I look on them as reasons for saying that the damage claimed was too remote. Similarly with Electrochrome Ltd v Welsh Plastics Ltd. A lorry negligently driven by the defendants knocked down a fire hydrant. In consequence, the water supply was cut off from the plaintiffs’ factory. They lost a day’s work and claimed damages. They failed, and for good reason. If the plaintiffs’ factory could claim, so could all the other factories whose water supply was cut off. Such should not be permitted. The real reason was again, I think, that the economic loss was too remote.
I must not be taken, however, as saying that economic loss is always too remote. There are some exceptional cases when it is the immediate consequence of the negligence and is recoverable accordingly. Such is the case when a banker negligently gives a good reference on which a man extends credit, and loses the money. The plaintiff suffers economic loss only but it is the immediate—almost, I might say, the intended—consequence of the negligent reference and is recoverable accordingly: see Hedley Byrne & Co Ltd v Heller & Partners Ltd. Another is when the defendant by his negligence damages a lorry which is carrying the plaintiffs’ goods. The goods themselves are not damaged, but the lorry is so badly damaged that the goods have
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to be unloaded and carried forward in some other vehicle. The goods owner suffers economic loss only, namely, the cost of unloading and carriage, but he can recover if from the defendant because it is immediate and not too remote. It is analogous to physical damage; because the goods themselves had to be unloaded. Such was the illustration given by Lord Roche in Morrison Steamship Co Ltd v The Greystoke Castle (Cargo Owners). Likewise, when the cargo owners have to pay a general average contribution. It is not too remote and is recoverable. Seeing these exceptional cases one may well ask: ‘How are we to say when economic loss is too remote or not? Where is the line to be drawn?’ Lawyers are continually asking that question. But the judges are never defeated by it. We may not be able to draw the line with precision, but we can always say on which side of it any particular case falls. The same question might be asked in the case of the escaping borstal boys. If their housemasters are negligent, and they escape and do damage, the Home Office is liable to persons in the neighbourhood, but not to those far away. Where, again, is the line to be drawn? Only ‘where in the particular case the good sense of the … judge, decides’. That is how Lord Wright put it in the case of nervous shock in Bourhill v Young ([1942] 2 All ER 396 at 406, [1943] AC 92 at 110), and I do not think that we can get any nearer than that. But, by building up a body of case law, we shall give guidance to practitioners sufficient for all the ordinary cases that arise.
In this case I think that the defendants are liable for the material damage done to the plaintiffs and the loss of profit truly consequent thereon; but not for any other economic loss. I would dismiss the appeal.
WINN LJ. This appeal was brought against a ruling by Thesiger J ([1970] 2 All ER 417, [1970] 1 WLR 1017) given on a preliminary question—
‘Whether on the facts set out in the Amended Statement of Claim the Defendants are liable in law to the Plaintiffs for the damage claimed … ’
He answered affirmatively.
This question, as only too commonly occurs when a preliminary or other issue is ordered to be tried on assumed facts, gave rise to not inconsiderable discussion as to its meaning and scope. Rather unusually it was not the defendants but the plaintiffs who were concerned to narrow that issue and accordingly submitted that by the particulars of special damage set out in their statement of claim, which after some hesitation and deliberation counsel for the plaintiffs declined to amend, they had limited any claim to recover loss, conveniently described as economic loss, namely purely monetary detriment, to any such loss as was truly consequential on the material damage to machinery and other articles of property alleged in the principal sentence of those particulars. Counsel for the plaintiffs ultimately made it plain beyond doubt that he was not seeking, on the present state of the pleadings, to assert any claim to recover any economic loss on the basis that it had been foreseeable that unless due care were taken such loss would be suffered, save insofar as he might be able to establish foresight of damage to property as a further result of which economic loss followed, itself foreseeable so as to be within the ambit of recoverable damage defined by Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound).
Counsel for the defendants, on the other hand, in an interesting and forceful submission, sought to persuade the court that it was incumbent on it to decide whether or not economic loss suffered without any damage to property, or otherwise than in consequence of damage to property, was in law recoverable where the
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defendant foresaw or should have foreseen that lack of reasonable care on his part might inflict such loss. He further submitted that it was impracticable, if not impossible, to discuss usefully the concept of recoverable or actionable damage in a context of developed industrial relations without considering economic loss, and the part, if any, which such loss plays in the totality of modern rules of liability for negligence.
It is because I am reluctantly constrained to agree with the latter part of his submission, and not because I think that the pleadings raise the matter, that I feel it is inevitable that the court should in this particular appeal step somewhat outside the confines of strict relevance and to some extent touch, albeit necessarily obiter, on the principles which regulate legal liability for damage caused by negligent conduct. As it happens several of the references to economic loss to be found in decided cases were obiter dicta. In general it may be said that it is axiomatic, in modern times, that whoever sets in motion or launches any thing or process or mechanism with foresight that it is capable, by reason of its nature or of motion imparted to it, of causing injury to person or property, owes a duty to all persons foreseeably susceptible of harm to take reasonable care to obviate injury. There is equated with actual foresight of danger any situation which should lead a reasonable person to foresee the danger, and with positive imparting of motion, any failure to prevent escape of deleterious matter brought on to a man’s land in the course of some unnatural user of it, even where harm is not foreseeable. Obvious instances of conduct raising a duty of care of this character are driving a vehicle on a public highway of firing a gun where there are or may be persons within its range or setting in distribution food or drink or drugs. It may be a somewhat different question whether liability arises without some form of invasion or affront of a trespassory kind. The main question raised by the instant appeal is: what kind of ‘harm’ must be contemplated, or properly be assumed to have been contemplated, before a duty to take reasonable care to avoid it can be said as a matter of law to have arisen?
In some senses and for some purposes the law of torts can be defined as the complexus of civil liabilities for wrongs done by one person to another. But for the purposes of the instant case it may be better to regard it as the the source of all the rights afforded by way of protection against civil wrongs or to secure compensation for such wrongs. In much the same way as a body of law has grown up affording protection against infringement of rights to the enjoyment of property in land or chattels or reputation or certain monopolies, the law of torts affords immunity, to the extent that it can protect against wrongful injury to body or wrongful damage to property. The main question raised by the instant appeal is whether it affords a man, also in a direct sense, protection against prejudice to his economic interests, where such prejudice is caused by negligent conduct. In highly succinct form an essential element in this problem may be stated thus: does the law recognise as actionable any harm negligently inflicted unless the same harm deliberately inflicted would give rise to a cause of action for damages? I think not. Even in the special case of advice negligently given, cf Hedley Byrne & Co Ltd v Heller & Partners Ltd, it is plain that intentional deceit by false advice would be actionable. The particular tort of unintentionally causing damage (usually monetary or economic only) by negligent misstatements had a history of development of its own which was discussed by the court in Candler v Crane, Christmas & Co. Asquith LJ started his analysis ([1951] 1 All ER at 437, [1951] 2 KB at 186) of the authorities with Derry v Peek. In that action the claim was for damages for deceit without any independent alternative claim for negligence or innocent misrepresentation. In the House of Lords it was held, reversing the Court of Appeal ((1887) 37 Ch D 541), that it was no
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sufficient ground for recovery to establish that the directors, responsible for the issue of the prospectus in question, had no reasonable grounds for believing the statement which they made, since fraud necessarily connoted dishonesty and no degree of mere stupidity could serve in its place. Asquith LJ added ([1951] 1 All ER at 437, [1951] 2 KB at 186):
‘The notion that [Donoghue v Stevenson] was intended parenthetically or sub silentio to sweep away this substratum of Derry v. Peek seems to me quite unconvincing.’
Before the reversal of the Court of Appeal’s decision in Derry v Peek, Chitty J decided Cann v Willson in favour of a plaintiff who had claimed damages in respect of a negligent non-fraudulent misrepresentation. This decision was expressly overruled by the Court of Appeal in Le Lievre v Gould. As Asquith LJ expressly stated, this decision was binding on the court when it had to consider Candler’s case. In Gould’s case ([1893] 1 QB at 498) it was decided, in the words of Lord Esher—
‘All that [the defendant] had done was to give untrue certificates negligently. Such negligence, in the absence of contract with the plaintiffs, can give no right of action at law or in equity.’
Asquith LJ in Candler’s case ([1951] 1 All ER at 438, [1951] 2 KB at 188) recognised that although Lord Atkin in Donoghue’s case had referred to Gould’s case without suggesting that it was inconsistent with his own classical formula there stated about negligence, it was arguable that the formula was logically inconsistent with Gould’s case. However, Asquith LJ said ([1951] 1 All ER at 439, [1951] 2 KB at 189) that he could not believe that Lord Atkin had intended so broad an application as would conflict with the decision in Gould’s case.
Cohen LJ in Candler’s case ([1951] 1 All ER at 443, [1951] 2 KB at 196) said that in Donoghue’s case:
‘… and in the all the other cases to which our attention was called, the breach of duty alleged has been one which has resulted in damages to the person of the plaintiff … ’
In Candler’s case ([1951] 1 All ER at 447–450, [1951] 2 KB at 202–207) interesting references are made to a judgment of Cardozo CJ in Ultramares Corpn v Touche ((1931) 174 North Eastern Rep 441 at 444, 255 Ny Rep 170 at 179), in the course of which he said (see Candler’s case ([1951] 1 All ER at 448, [1951] 2 KB at 204, 205)):
‘In the field of the law of torts a manufacturer who is negligent in the manufacture of a chattel in circumstances pointing to an unreasonable risk of serious bodily harm to those using it thereafter may be liable for negligence though privity is lacking between manufacturer and user … A force or instrument of harm having been launched with potentialities of danger manifest to the eye of prudence, the one who launches it is under a duty to keep it within bounds … Even so, the question is still open whether the potentialities of danger that will charge with liability are confined to harm to the person, or include injury to property … In either view, however, what is released or set in motion is a
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physical force. We are now asked to say that a like liability attaches to the circulation of a thought or a release of the explosive power resident in words.’
This distinction between physical injury and mere financial loss caused in either case by negligent mis-statement was recognised by Salmon J in Clayton v Woodman & Son (Builders) Ltd. Although the decision was reversed ([1962] 2 All ER 33, [1962] 2 QB 533), this point did not arise on the appeal.
In the decision in the Hedley Byrne case, far-reaching though it was, it does not seem to be implicit that all monetary loss inflicted in any manner or any circumstances in which this consequence was foreseeable should be actionable. I find no indication that the court even contemplated such an implication when deciding a case which was in fact one of personal injuries, Clay v A J Crump & Sons Ltd. It is true that Lord Devlin in Hedley Byrne ([1963] 2 All ER at 602, [1964] AC at 517) did say, wholly obiter it seems—
‘The interposition of the physical injury is said to make a difference of principle. I can find neither logic nor commonsense in this.’
On an analysis of the relevant decisions of the House of Lords, he could support this view only by that of Morrison Steamship Co Ltd v The Greystoke Castle (Cargo Owners), a rather special case of maritime principle. Lord Pearce said ([1963] 2 All ER at 615, [1964] AC at 536) that, whereas Wrottelsley J might have put the matter too narrowly when he said in Old Gate Estates Ltd v Toplis & Harding & Russell that the principles of Donoghue v Stevenson applied only to negligence causing damage to life, limb or health, those principles ([1963] 2 All ER at 615, [1964] AC at 536):
‘… were certainly not purporting to deal with such issues as … how far economic loss alone without some physical or material damage to support it, can afford a cause of action in negligence by act … ’
In Ministry of Housing and Local Government v Sharp Salmon LJ, when he referred ([1970] 1 All ER at 1027, [1970] 2 WLR at 824) to the Hedley Byrne case, was concerned only to demonstrate, as was plainly correct, that the case with which he was dealing fell within the ambit of the decision of the House of Lords. It was, therefore, wholly obiter when he added ([1970] 1 All ER at 1027, [1970] 2 WLR at 824):
‘So far, however, as the law of negligence relating to civil actions is concerned, the existence of a duty to take reasonable care no longer depends on whether it is physical injury or financial loss which can reasonably be foreseen as a result of a failure to take such care.’
I must respectfully indicate that I am unable myself to concur in the full breadth of that remark. There is nothing in Home Office v Dorset Yacht Co Ltd as I read it, which touches on the question whether or not there is an important distinction, in relation to claims to recover damages for negligence, between foresight of physical injury or damage to property on the one hand, and foresight of economic loss alone on the other. The negligence for which liability was imposed in this case consisted of failing to take due care to prevent borstal boys, under the control of the defendants’ officers, from causing damage to the property of the plaintiffs.
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It must be recognised that Lawton J in British Celanese v A H Hunt (Capacitors) Ltd, held that a cause of action in negligence arose where the defendants failed to take reasonable care to prevent strips of metal foil being blown about in such a way as to foul the bus-bars of an electricity sub-station, not the property of the plaintiffs, with the result that the supply of electricity was cut off from the plaintiffs’ factory causing them mere economic loss as a result of loss of production. I think that this must have been intended by the learned judge as part of his ruling, although it is to be observed that he said that he read the re-amended statement of claim as alleging more than mere economic loss. He said ([1969] 2 All ER at 1258, 1259, [1969] 1 WLR at 965, 966):
‘There is, in my judgment, an averment that the defendants at the very least ought reasonably to have foreseen that their conduct was likely to cause injury to the plaintiffs’ property and that it in fact did so … I can see no difference in principle between this case, raising as it does an allegation of physical injury with consequential loss of profits, and the ordinary accident case in which a plaintiff alleges that he has suffered some physical injury whereby he has lost earnings.’
and he apparently disclaimed any intention to attempt to elucidate the problem whether mere economic loss is irrecoverable in an action for negligence.
In the instant appeal, as well as in the British Celanese action, the plaintiffs relied on a Canadian case Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co ((1960) 21 DLR (2d) 264 at 266), in which Laidlaw J said:
‘… [the] injury [loss of food spoiled by the weather and early closing down of dining room and bars] ought reasonably to have been foreseen by the defendants. I am satisfied that the defendants would know that interference with the duct … and … with the supply of electrical energy through the duct would cause damage to the persons entitled to receive that supply of electrical energy … Upon that finding, the judgment … is correct.’
I would not myself, however, apply that decision in any such case as the instant.
Easily the most exhaustive, interesting and valuable discussion of the relevant problem has been contributed by Widgery J in Weller & Co v Foot and Mouth Disease Research Institute. This case arose from an infection of foot and mouth disease of cattle in the neighbourhood of Guildford and Farnham markets as a result of an escape from the premises of the defendants of an African virus which they had imported for the purposes of experiment. The plaintiffs were auctioneers who carried on business at the cattle markets in the district. They suffered loss, albeit they did not own any cattle, nor did they have any proprietary interest in the market or in any premises which were damaged by the virus. The learned judge, after noting the breadth of the formula pronounced by Lord Atkin as a definition of negligence in Donoghue v Stevenson, said ([1965] 3 All ER at 563, [1966] 1 QB at 577):
‘… there is a great volume of authority both before and after Donoghue v. Stevenson to the effect that a plaintiff suing in negligence for damages suffered as a result of an act or omission of a defendant cannot recover if the act or omission did not directly injure, or at least threaten directly to injure, the plaintiff’s person or property but merely caused consequential loss as, for example, by upsetting the plaintiff’s business relations with a third party who was the direct victim of the act or omission. The categories of negligence never close, but when the court is asked to recognise a new category, it must proceed with some caution.’
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He proceeded to consider all the known decisions possessing relevance but it is unnecessary to follow him through his survey of them; it may suffice to know that he properly attached importance to the decision of the House of Lords, in Simpson v Thomson, that insurers did not obtain an independent cause of action, otherwise than by subrogation, when a chattel insured by them was negligently damaged, and that his reference quoted above to threatened injury, as distinct from actual injury, is accounted for by a gloss, sound or unsound, which he put on The Greystoke Castle case. He said ([1965] 3 All ER at 570, [1966] 1 QB at 587):
‘In my judgment, there is nothing in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. to affect the common law principle that a duty of care which arises from a risk of direct injury to person or property is owed only to those whose person or property may foreseeably be injured by a failure to take care.’
For my part I express my respectful and complete agreement with that expression of opinion; it is not wholly clear to me why the learned judge should have added in the next sentence ([1965] 3 All ER at 570, [1966] 1 QB at 587): ‘For myself I see no reason for saying that proof of direct loss is an essential part of his claim.' It may be that this addition is less plain to me than the principal pronouncement on which it is grafted, because of uncertainty which often arises about the meaning to be given to the adjective ‘direct’ in such a context.
The decision of Widgery J was applied and followed by Geoffrey Lane J in Electrochrome Ltd v Welsh Plastics Ltd, and was referred to without dissent by Lawton J in the British Celanese case. In the Electrochrome case ([1968] 2 All ER at 206) the learned judge, after reciting the facts that a water main hydrant had been damaged by careless conduct of the defendant, posed for himself the question:
‘… can the plaintiffs, whose property it was not, succeed in an action for damages for financial loss which they have suffered as a consequence of such damage?’
He answered correctly, as I think, in the negative, but he would, I fancy, be the first to agree with my view that in declaring that there may sometimes be damnum sine injuria he was fortifying rather than rationalising his decision. He might have said, I think, that no injuria had been established because no duty had been breached. The true problem is not whether separation of the identities of those who (a) own damaged property, and (b) suffer consequential financial loss, is important: it is whether mere (non-consequential) economic loss constitutes actionable damage.
Having regard to the comparatively limited scope of the instant appeal it would be inappropriate, I think, to consider at all closely or attempt to discuss comprehensively the policy implications which would be involved in any extension by the courts of the kinds of danger which should render actionable any conduct committed with foresight of such damage. They would be enormous. It is sufficient probably, for the time being, to remark that liability for pure economic loss, negligently caused without foresight of any physical injury or damage to property, from which such loss might consequentially arise, would logically involve, inter alia, liability to all persons dependent on the survival of a particular individual, whose death is caused by a negligent act or omission, and liability to employers for incapacitating injuries
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negligently inflicted on their servants (contrary to the decision in Inland Revenue Comrs v Hambrook), and to all consumers of electric power or water, etc, within a wide geographical area. The suppliers themselves have by statute far less onerous liabilities.
It seems to me that it is far more satisfactory in a sociological sense, and is in accordance with the present law, to say that apart from the special case of imposition of liability for negligently uttered false statements, there is no liability for unintentional negligent infliction of any form of economic loss which is not itself consequential on foreseeable physical injury or damage to property. I would only add, out of deference to the enthusiasm with which counsel for the defendants made the submission, that I am unable to accept his suggestion that liability for negligence, being as he said, or I understood him to say, a particular instance of liability for trespass, cannot arise in the absence of some form of invasion or penetration into the plaintiff’s property or on his physical person. I cannot myself accept this distinction, since it seems to me that for very many years it has been recognised that there may be liability for omissions as well as for commissions, and I do not think that cutting off a supply of a commodity should be regarded as in this respect materially different from causing a supply to be altered or diverted to the prejudice of the recipient. As a particular example, it does not seem to me that withdrawal of power known to be required, eg to maintain refrigerators, is materially different from an interference with the characteristics of the supply which might produce an explosion or other destructive process. A man in an iron lung might resent cesser of power.
In the result it seems to me that such regard as I have had to the broader problem, which counsel for the defendants maintained was involved in this appeal, has really thrown no light on the more limited issues which are properly raised by it. It does not seem to me, after again reading the last passage in the judgment of Thesiger J in this case ([1970] 2 All ER at 435, [1970] 1 WLR at 1036), that he intended to give any decision on any wider issue than that set out at the beginning of this judgment. Within that limited scope, and without referring at all to any observations of the learned judge which have a more extensive effect, as (eg) when he embarked on a consideration of the proposition ([1970] 2 All ER at 428, [1970] 1 WLR at 1029) that the plaintiffs could recover even if pecuniary loss from interruption of the supply of power were alone alleged, I am of the opinion that this appeal should be dismissed.
BUCKLEY LJ. These proceedings are in effect demurrer proceedings. The court has directed that the following question be tried as a preliminary point:
‘Whether on the facts set out in the Amended Statement of Claim the Defendants are liable in law to the Plaintiffs for the damage claimed … ’
If the answer to that question be ‘No’, then the action must fail; otherwise it must go to trial. We are not concerned with quantum but only with the question of liability.
The facts, as pleaded, can be shortly stated as follows. The plaintiffs manufacture typewriters and copying machines at a factory in Birmingham Road, West Bromwich. The machines in their factory are powered by electricity supplied by or through an 11,000-volt cable running beside Birmingham Road. The defendants are civil engineering contractors. In November 1967, they were carrying out certain engineering operations in Birmingham Road in the course of which, on 20 November 1967 they, by one of their employees, damaged the cable and so caused a power failure at the plaintiffs’ factory, by reason of which the plaintiffs suffered damage. The power was cut off for 7 hours 17 minutes or thereabouts. Raw materials in the plaintiffs’ machines solidified, necessitating the stripping down of the machines and the chipping away
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and discarding of the material, and the examination, reassembly and testing of the machines. Drills and taps on drilling and tapping machines sheared and had to be scrapped. Milling cutters on milling machines were chipped, and components being plated with nickel, chrome and zinc were damaged beyond recovery. As a result, the plaintiffs suffered damage including loss of profit from one full day’s production. The amended statement of claim alleges that the defendants knew or ought to have known of the presence and position of the cable and that it carried, or was electrically connected to cables carrying, electric current to supply factories such as the plaintiffs’ with power for their plant and machinery. It also alleges that it was at all material times reasonably foreseeable by the defendants that if they damaged the cable the supply of electric current to factories supplied thereby, or by cables electrically connected thereto, would be likely to be interfered with and fail and that in that event occupiers of premises such as the plaintiffs’ would be likely to suffer loss and damage including injury to their property. It avers that in the circumstances the defendants owed a duty to the plaintiffs to take reasonable care when carrying out their operations in Birmingham Road not to damage the cable, and that the defendants in damaging the cable acted negligently. It is on these assumed facts that the question of liability must be decided.
The plaintiffs rely on the principle enshrined in Lord Atkin’s well-known statement in Donoghue v Stevenson ([1932] AC 562 at 580, [1932] All ER Rep 1 at 11), that ‘You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour’, and he defined neighbours as:
‘… persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.’
Thesiger J ([1970] 2 All ER 417, [1970] 1 WLR 1017) has decided in their favour. The defendants appeal against his decision. Counsel for the defendants has contended that special considerations apply where the act complained of has resulted in an interruption of the supply or delivery of a commodity or service. He points out that damage to an electric cable may injure a very large number of persons who receive their supply of electricity through that cable over a very wide area, and his contention is that the duty of care, which arises in circumstances of the kind contemplated by Lord Atkin, ought not to apply to such a case. He said that the principle has not been so widely applied hitherto and that the court ought not to extend its application, because it is socially unacceptable that anyone should be exposed to a risk involving a possibility of so many claims and of such magnitude.
The damages which are claimed by the plaintiffs in the present case are confined to damage to physical property of the plaintiffs and to economic loss directly consequential on that physical damage. There was some discussion, in the course of the argument, whether a plaintiff in a case of this character can claim economic loss which is not consequential on physical damage, but that point does not arise in this case and I for my part would prefer not to express any concluded opinion on it. Counsel for the defendants does not dispute that, if the plaintiffs are entitled to recover damages in respect of physical injury suffered as the result of the defendants’ act, they are also entitled to recover damage of an economic character directly flowing from that physical injury. The question for consideration may therefore be formulated thus: is there a duty in law not to interrupt the supply or delivery of a commodity or service to a person by a careless act in circumstances where it is foreseeable that such interruption will result in physical damage to property? On the facts as pleaded, the defendants must be taken to have been able to foresee that, if they damaged the cable, the
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supply of electricity to the plaintiffs’ factory would be likely to be interfered with and that in that event the plaintiffs would be likely to suffer damage to their property. The case therefore falls within the principle enunciated by Lord Arkin unless there is validity in counsel for the defendants’ argument that there is something special about the interruption of such a supply as this which takes it out of the general principle. He says that this is so for reasons which I have already mentioned and also because the cable is not the property of the plaintiffs, and the defendants’ act in damaging the cable did not constitute a trespass on the plaintiffs’ property or any quasi-trespassory interference with their property.
There are two reported decisions in this country which relate to negligent damage to public utility supplies. In Electrochrome Ltd v Welsh Plastics Ltd, the defendants’ servant negligently drove their lorry so as to collide with and damage a fire hydrant near the defendants’ factory. Water escaped and the supply of water through the main had to be stopped for some hours. As a result the plaintiffs’ factory had its water supply cut off and this caused the loss of a day’s work at their factory. The damaged hydrant was not the property of the plaintiffs but of the industrial estate on which the defendants’ factory and the plaintiffs’ factory were both situate. Geoffrey Lane J, who tried the case on assize, stated the question in this way ([1968] 2 All ER at 206):
‘If then damage was done to the property of the industrial estate, damage negligently done to that property, can the plaintiffs, whose property it was not, succeed in an action for damages for financial loss which they have suffered as a consequence of such damage?’
He then referred to a passage in Salmon on Tortsa under the heading ‘Damnum suffered by one person and injuria by another’, cited a passage from Lord Penzance’s judgment in Simpson v Thomson ((1877) 3 App Cas 279 at 289), and said ([1968] 2 All ER at 208):
‘It is perfectly true that it may seem inequitable that a person who has undoubtedly suffered loss in this manner should have no right of action against the person who started off the train of events, which first put a match to the blue touch-paper, but one only has to consider the possible results if such an action succeeded to realise that this is one of the cases where public convenience and interest demand that the right of action must stop short. In the case of water being cut off in this manner one can imagine a whole series, maybe hundreds, of actions being brought against the defendants based on this type of negligence and, as LORD PENZANCE said, the complexity of society would mean in effect that there might be no end to the concatenation of resulting damage. However, whatever the reasons behind it may be, it is perfectly plain to me that for the reasons which I have given English law does not allow the plaintiffs in circumstances such as these to succeed.’
He felt himself to be fortified in that view by the judgment of Widgery J in Weller & Co v Foot and Mouth Disease Research Institute, where Widgery J held that, although the defendants owed a duty to the owners of cattle in the neighbourhood of their establishment to take care not to allow foot and mouth virus to escape, since it might infect cattle and cause their deaths, they owed no such duty to the plaintiffs who were auctioneers and owned no cattle or other proprietary interest in anything which could be damaged by the escape of the virus. In both the Electrochrome case and in Weller’s case the court was concerned with a claim to economic damage which was not consequential on damage to property. Although Widgery J, in the latter case, was
Page 261 of [1970] 3 All ER 245
certainly concerned with the application to the facts before him of the Donoghue v Stevenson principle and decided the case as he did on the ground that no foreseeable damage to property was involved, it does not seem that Geoffrey Lane J in the Electrochrome case really considered this principle at all. He decided the case, I think, on the ground that in his view the plaintiff had suffered damnum sine injuria. From the passage I have cited from his judgment, however, it is clear that he was impressed by arguments of the same kind as those which counsel for the defendants has presented in this case. In British Celanese Ltd v A H Hunt (Capacitors) Ltd, the plaintiffs and the defendants had factories in close proximity to one another. Light and power was supplied to both factories from an electricity supply sub-station owned and operated by a third party which was close to both factories. The plaintiffs alleged that metal foil strips were blown from the defendants’ factory in the direction of this sub-station and that a piece of metal foil came into contact with the exposed bus-bars of the substation, causing a power failure, which brought the plaintiffs’ machines to a halt, as the result of which the plaintiffs suffered damage of a somewhat similar nature to the damage alleged by the plaintiffs in the present case. In that case, like the present, the question of liability was directed to be tried as a preliminary issue and Lawton J held that the defendants owed the plaintiffs a duty to take reasonable care to prevent the metal foil from being blown about in such a way as to foul the bus-bars, and that on the facts alleged they were liable accordingly. He made it plain ([1969] 2 All ER at 1258, [1969] 1 WLR at 965), I think, that in his view the pleadings alleged damage to property and consequential economic loss.
In Canadian case of Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers’ Gas Co, a contractor laying a gas main for a gas undertaking damaged an electrical feeder line which carried electricity to an hotel about a mile away with the result that the electrical supply to the hotel was interrupted, food which could not be kept adequately refrigerated spoiled and had to be thrown away, and the dining room and cocktail bars at the hotel had to be closed some hours before the usual time. The gas undertakers were held to have acted negligently in not warning the contractors of the existence of the feeder line of which they knew. The point was taken by the defendants that what was physically damaged was the electric feeder line, which was not the property of the plaintiffs but of the electricity undertakers. The court however held that the defendants were liable.
It is not therefore altogether accurate to say that the courts have not considered the application of the doctrine at present under consideration to damage occasioned by interference with the supply of some service; nor in my opinion can it be supposed, as I understood counsel for the defendants to suggest, that the paucity of reported cases of this kind indicates that the courts have discouraged claims for damages for negligent interruption of delivery or supply of commodities or services. The British Celanese case was such a case and was in my opinion rightly decided. Seaway Hotels Ltd v Cragg (Canada) Ltd was also such a case and was in my opinion rightly decided, at least so far as damage to spoiled food was concerned. An unreported case of Blake v Crowcarry Co, decided in February 1960, was a similar case. There the driver of a lorry negligently damaged an electric control box in a street when the wheel of his lorry mounted the pavement. The effect of this damage was to increase the voltage received at a consumer’s premises some distance away. Later in the day, an electrician working at those premises burnt his hand badly when withdrawing a fuse, and the employers of the lorry driver were held to be liable. Indeed it would be wrong, in my judgment, to lay down any such general limitation as counsel for the defendants
Page 262 of [1970] 3 All ER 245
suggests in relation to the interruption of deliveries or supplies. Every case must, I think, be considered on its own facts to determine (as a matter of fact) whether in that case the plaintiff was a person whom the defendant ought, fairly to both the plaintiff and himself, to have had in contemplation as a person to whom he owed a duty to take care not to cause him damage by a careless act of the kind complained of. It may be that if, for example, an electric generating station or main cable or a principal water main, serving a large number of consumers over a wide area, were put out of action by the negligent act of someone who enjoyed no statutory immunity, the court might, on the facts of that case, properly reach the conclusion that no claimant for damages could successfully assert that the offender ought to have had him in contemplation as a person to whom he owed a duty of care. On the other hand, and by way of contrast, where, as in the Seaway case ((1960) 21 DLR (2d) 264), the damaged cable supplied only one establishment, I see no reason for excluding a duty of care merely because what has caused the damage has been an interference with an electrical supply. In the present case we must accept the pleaded allegation that it was reasonably foreseeable by the defendants that damage to the cable would be likely to interfere with the supply of electric current to the plaintiffs’ factory and that in that event the plaintiffs would be likely to suffer damage to their property, from which, in my judgment, in the absence of any fact negativing the conclusion (and none is pleaded), a duty of care should be held to follow.
I feel unable to accept counsel for the defendants’ argument that the act here complained of, having taken place off the plaintiffs’ property, is an act of a kind in respect of which no duty of care arises because it is not a trespass or a quasi trespass, whatever the latter term may mean. The law of trespass and the law of negligence are distinct. The doctrine with which we are concerned is not a consequence of a property owner’s right to immunity from invasion of his property; it is a consequence of a right to be protected against damage by the careless act of one who owes a duty to take care. It matters not where the careless act was done provided: (a) that it was an act of a kind in respect of which a duty of care existed; and (b) that the damage flowed directly from it. In Home Office v Dorset Yacht Co Ltd, some borstal boys, who were working on an island under the control and supervision of three officers, left the island at night and boarded, cast adrift and damaged the plaintiffs’ yacht, which was moored off shore. The plaintiffs claimed damages against the Home Office alleging negligence. Counsel for the defendants said, I think, that this is a case of quasi trespass because the boys entered the plaintiffs’ property, that is to say their yacht, and damaged it; but the negligence complained of by the plaintiffs was not committed on the yacht. It was committed by the officers on the island in allowing the boys to escape. That the boys, in order to make good their escape, would be likely to attempt to make use of the yacht was a foreseeable risk in respect of which Thesiger J, who was upheld in the Court of Appeal ([1969] 2 All ER 564, [1969] 2 QB 412) and by the House of Lords, held that the officers owed the plaintiffs a duty to take such care as was reasonable in all the circumstances.
In my judgment in the present case the same learned judge was right in holding, as he did, that on the facts alleged in the amended statement of claim, the defendants are liable in law to the plaintiffs for the damage claimed. From that it follows that the action must go to trial. It does not follow that at the trial, when the facts have all been fully investigated, the same view will necessarily prevail. I agree that this appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Berrymans, agents for T Haymes, Duffell & Son Birmingham (for the defendants); Nabarro, Nathanson & Co (for the plaintiffs).
Rosalie Long Barrister.
R v James
[1970] 3 All ER 263
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND JAMES J
Hearing Date(s): 29 JUNE 1970
Criminal law – Sentence – Youthful offender – Borstal training for substantive offence – Conditional discharge and probation orders outstanding – Nominal concurrent prison sentence impossible – Nominal fine – Criminal Justice Act 1948, s 17.
Where an offender under the age of 17, who has previously been subject to probation orders or conditional discharge orders, is sentenced to a period of borstal training for a substantive offence and the outstanding orders cannot, by reason of the offender’s age (s 17a of the Criminal Justice Act 1948), be dealt with by a nominal concurrent sentence of one day’s imprisonment, a nominal fine should normally be imposed in respect of them (see p 265 h, post).
R v Fry [1955] 1 All ER 21 applied.
Notes
For power of court on commission of further offence during period of order of probation or conditional discharge, see 10 Halsbury’s Laws (3rd Edn) 504, para 918 and for cases on the subject, see 14 Digest (Repl) 573, 5738.
For the Criminal Justice Act 1948, s 17, see 8 Halsbury’s Statutes (3rd Edn) 354.
Cases referred to in judgment
R v Calvert [1962] 3 All ER 1028, [1963] 1 WLR 151, 127 JP 61, 47 Cr App Rep 26, Digest (Cont Vol A) 386, 5738f.
R v Fry [1955] 1 All ER 21, [1955] 1 WLR 28, 119 JP 75, 38 Cr App Rep 157, 17 Digest (Repl) 563, 5626.
Appeal
This was an application by William John James for leave to appeal against a sentence of borstal training and a nominal concurrent sentence of one day’s imprisonment imposed at Essex Quarter Sessions on 18 March 1970, which it was agreed, with the approval of counsel, should be dealt with by the court as the hearing of the appeal. The facts are set out in the judgment.
D A Jeffreys for the applicant.
J G Connor for the Crown.
29 June 1970. The following judgment was delivered.
MEGAW LJ delivered the judgment of the court. This is an application by William John James, now aged 16 years and eight months, for leave to appeal against a sentence of borstal training which was passed on him on 18 March 1970 at Essex Quarter Sessions. The application has been referred to the full court by the single judge particularly because of technical difficulties which have arisen regarding previous conditional discharges and orders for probation, which in this case were dealt with by quarter sessions by a nominal sentence of one day’s imprisonment.
The history of the matter is this: on 26 April 1969, when the applicant was 15 1/2 years of age, he pleaded guilty at the South West London Magistrates’ Court to stealing a motor bicycle and using it without insurance and while disqualified by
Page 264 of [1970] 3 All ER 263
reason of age. He was fined £50 and disqualified for three years on the theft charge, he was conditionally discharged for two years for using the motor bicycle without insurance, and he was fined £10 on the charge of driving while not qualified. These offences had occurred on 8 April 1969.
Four days later, on 30 April 1969, at Lambeth Juvenile Court, he pleaded guilty to theft of a wrist watch. That offence had been committed either on or before 31 March and therefore at least eight days before the offences for which he had been dealt with on 28 April. It may be because of that timing that he was placed on probation for a period of two years. Next, on 23 July 1969, at Westminster Juvenile Court he was committed to Ardale Approved School and was disqualified from driving for a further year for four cases of taking conveyances without authority, driving whilst disqualified and having no insurance. On 20 August 1969, again at Lambeth Juvenile Court, he pleaded guilty to burglary and theft, the property involved being worth £158; also to taking a motor bicycle without authority, having no insurance and driving while disqualified. Those offences, it would seem, were committed on 24 July, the day after his appearance at Westminster Juvenile Court. He was given a conditional discharge for 12 months, probably because he had already been committed to an approved school. He was admitted to Ardale Approved School on 13 August 1969. On 30 August he absconded; he committed further offences; for one of these, at Tunbridge Wells Juvenile Court on 10 September 1969, namely an offence of driving whilst disqualified by reason of age, he was given a conditional discharge for one year. For the other offences, which were more serious, he was given three months’ detention; they included the stealing of a motor car which apparently overturned and ended up as a complete wreck.
He was released from detention in November 1969, and went back to the approved school. There he appeared at first to make good progress, and because of that he was given certain privileges. Unfortunately, the improvement was not sustained. Because of the privileges, he was allowed to go out with others to a youth club. He took advantage of this privilege to take a car; that was on 1 February 1970. On 6 February he took the same, or it may be another car, breaking into it through the quarter light by using his shoe, obtaining a key to fit the ignition, and using the car. He parked that car near the school on 6 February. On 9 February he took some of the other members of the school for a ride in it. He was caught by the police on the way to Southend with, I think, one of the other boys driving at the time. For those matters he was brought before Grays Magistrates’ Court on 19 February 1970. He was committed under s 28 of the Magistrates’ Court Act 1952 to Essex Quarter Sessions, having pleaded guilty to theft of a car and having no insurance. At quarter sessions on 18 March 1970, he asked for two other offences to be taken into consideration, stealing screwdrivers and taking a car without authority; that was the incident of 1 February. He was sentenced to borstal training. In addition, and this is the technical matter to which reference has been made, he was sentenced to one day’s imprisonment to run concurrently for the various offences for which he had at various times been given a conditional discharge, that was three instances, and placed on probation, one instance.
As regards that part of his application for leave to appeal which relates to the sentence of borstal training, the substantive sentence, it is said by counsel for the applicant that really the proper and desirable course in the interests of the applicant, as well as serving the interest of the public, would be to send him back to an approved school. There was before quarter sessions some report which, perhaps not very whole-heartedly, recommended that course. There were other reports which clearly did not so recommend. In the view of this court, having regard to the applicant’s record and history, there can be no doubt whatever but that quarter sessions were right in taking the course that they did in sentencing this boy to borstal training, and so far as that part of the application for leave to appeal is concerned, there is nothing that can or should be done.
Page 265 of [1970] 3 All ER 263
There remains the technical question that has arisen here, and which this court understands has given rise to difficulty in the past in cases where persons under the age of 17 have been sentenced to borstal training after having previously been subject to probation orders or conditional discharge. It is a common and useful practice where a custodial order is imposed for a substantive offence, for such outstanding order to be dealt with by a nominal sentence of one day’s imprisonment, concurrent with the principal custodial sentence. That practice was referred to by the Court of Criminal Appeal in R v Fry, and again in the case to which we were referred by counsel for the applicant, R v Calvert. In the latter case it was made clear that the purpose of dealing with the orders for conditional discharge or probation in such a way was two-fold. If such order, involving at any rate a nominal sentence, is not passed, then the conditional discharge or the probation order, as the case may be, is not a conviction for the purposes of subsequent record; so that if the accused is thereafter convicted of other offences, it would not be a matter to be taken into account as part of the record, although for common sense reasons it ought to be so available to be taken into account. It is not infrequently in the interests of the accused himself that, where the matter is dealt with, as here, by a sentence of borstal training, conditional discharges and probation should not be left, as it were, hanging over his head undealt with. It may also involve difficult situations for the probation officer. Therefore it is desirable that such a course should be followed. In cases such as the present, however, unfortunately that course (the imposition of one day’s imprisonment), sensible though it would otherwise be, for technical reasons cannot be followed. It cannot be imposed because the applicant is under 17, and s 17 of the Criminal Justices Act 1948 prescribes that imprisonment may not be imposed at such an age. Even a purely technical sentence of one day’s imprisonment would thus be precluded.
There is no simple and obvious solution. Section 109 and 110 of the Magistrates’ Courts Act 1952 do not provide a solution, since the short period of detention there contemplated may only be imposed where imprisonment might be imposed. Nor is a solution provided by s 54 of the Children and Young Persons Act 1933, as substituted by Sch 4 to the Criminal Justice Act 1961, since the committal to a remand home as contemplated by that section is inappropriate where borstal training is the effective order. Nor can quarter sessions deal with the earlier orders by imposing concurrent sentences of borstal training, for by s 8(6) of the Criminal Justice Act 1948, quarter sessions is limited so that it may not deal with the offender, in respect of the offence for which the order of probation or conditional discharge was originally made, in any manner different from the manner in which the court of summary jurisdiction could deal with him if he had just been convicted of that offence. The courts of summary jurisdiction could not have imposed borstal training. Nevertheless, it is clearly desirable for the reasons already given that, at least normally, in cases such as this, the probation order and conditional discharges should be dealt with.
While in general nominal fines are not desirable, just as it was said in R v Fry that in general nominal sentences of imprisonment are not desirable, it is the view of this court that in such cases as the present, outstanding probation orders and orders for conditional discharge which for technical reasons cannot be dealt with by sentences of one day’s imprisonment, should normally be dealt with by the imposition of a nominal fine, which will achieve the same purpose.
In the present case, therefore, this court will grant leave to appeal, and counsel having accepted that the court should deal with this as being the hearing of the appeal, the order for borstal training will stand. The order insofar as it provides for one day’s imprisonment concurrent will be quashed. On the offence for which
Page 266 of [1970] 3 All ER 263
the applicant was given a conditional discharge at South West London Magistrates’ Court on 26 April 1969, there will be imposed a fine of £1. For the offence for which he was placed on probation for two years at Lambeth Juvenile Court on 30 April 1969, there will be a fine of £1. For each of the four offences for which he was given a conditional discharge at Lambeth Juvenile Court on 20 August 1969, there will be a fine of 5s for each offence, and, for the offence for which he was given a conditional discharge at Tunbridge Wells Juvenile Court on 26 September 1969, there will be a fine of £1.
Appeal allowed in part. Sentence varied.
Solicitors: Eric Hauser & Co (for the applicant); T Hambrey Jones, Chelmsford (for the Crown).
L J Kovats Esq Barrister.
Director of Public Prosecutions v Burgess
[1970] 3 All ER 266
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JAMES AND COOKE JJ
Hearing Date(s): 6 JULY 1970
Criminal law – Gross indecency – With or towards a child under 14 – Consent of Director of Public Prosecutions required to institute proceedings – Indecency with Children Act 1960, s 1(1) – Sexual Offences Act 1967, s 8.
Criminal law – Gross indecency – With or towards a child under 14 – ‘With or towards’ – One offence – Gross indecency involving a child – Indecency with Children Act 1960, s 1(1).
On a charge, under s 1 (1)a of the Indecency with Children Act 1960, of gross indecency towards a child under the age of 14, the consent of the Director of Public Prosecutions is required, under s 8b of the Sexual Offences Act 1967, to institute proceedings (see p 268 c and p 269 d and e, post).
There are not two offences of gross indecency, one of gross indecency with a child and one of gross indecency towards a child, under s 1(1) of the 1960 Act but one offence of gross indecency involving a child, for the words ‘with or towards’ in that subsection must be read as a single phrase (see p 269 b and e, post). The 1967 Act was intended and does deal with offences, including those under the 1960 Act, between persons, whether adult or children, of the same sex (see p 268 h and p 269 e, post).
R v Hall [1963] 2 All ER 1075 applied.
Notes
For gross indecency with a young child, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1284A.
For requirement of consent of Director of Public Prosecutions to initiate proceedings for sexual offences, see ibid, para 1280.
For the Indecency with Children Act 1960, s 1, see 8 Halsbury’s Statutes (3rd Edn) 486.
For the Sexual Offences Act 1967, s 8, see ibid 581.
Page 267 of [1970] 3 All ER 266
Cases referred to in judgment
R v Assistant Recorder of Kingston-upon-Hull, ex parte Morgan [1969] 1 All ER 416, [1969] 2 QB 58, [1969] 2 WLR 246, 133 JP 165, 52 Cr App Rep 96, Digest Supp.
R v Hall [1963] 2 All ER 1075, [1964] 1 QB 273, [1963] 3 WLR 482, 127 JP 489, 47 Cr App Rep 253, Digest (Cont Vol A) 422, 8700a.
Case stated
This was a case stated by justices for the county borough of Wigan in respect of their adjudication as a magistrates’ court sitting at Wigan on 5 January 1970. On 18 December 1969, an information was preferred by Ernest Weaver, a police sergeant, against the respondent, David John Burgess, charging that he on 27 November 1969 in Wigan committed an act of gross indecency towards a boy, a child under the age of 14, namely of the age of 11 years, contrary to s 1(1) of the Indecency with Children Act 1960.
The justices heard that information summarily (in accordance with ss 18 and 25 of the Magistrates’ Courts Act 1952) and at the conclusion of the case for the prosecution upheld a submission that there was no case to answer. The following facts were found: in the evening of 27 November 1969 the boy, aged 11 years, went into the shop where the respondent worked. After showing him photographs of naked women, the respondent then exposed and handled his penis, which was erect, drew the boy’s attention to it and said ‘Look at the size of that’. During the same evening the respondent showed the photographs to the boy’s elder brother, aged 12 years. On being interviewed by the police two days later the respondent at first denied having committed an act of gross indecency towards the boy, and then admitted that he was the man implicated by the boy’s allegations. In a written statement which we ruled to be admissible the respondent admitted the exposure of his erect penis to the boy and the use of words to the effect ‘Look at the size of that’.
It was contended on behalf of the respondent that there was no evidence that the proceedings had been instituted by or with the consent of the Director of Public Prosecutions and that such consent was required by s 8 of the Sexual Offences Act 1967.
It was contended on behalf of the Crown that s 8 requires consent to proceedings for an offence of gross indecency with another man and for certain other offences, but does not include and has no reference to gross indecency towards another man, and consequently the Director of Public Prosecutions’ consent was not required for these proceedings.
The justices considered that s 1(1) of the Indecency with Children Act 1960 provided for two different classes of offence: (1) gross indecency involving a child under the age of 14; and (2) incitement to commit such an act, and they noted that the offence of incitement was of a different nature from those for which the Director of Public Prosecutions’ consent was required by s 8 of the Sexual Offences Act 1967. They were of the opinion that in respect of a child under the age of 14, to whose protection the 1960 Act was specially directed, the full offence of committing an act of gross indecency was committed when a grossly indecent act was committed either with or towards such a child, and that any such full offence was within the term ‘gross indecency with another man’ in s 8. Accordingly they concluded that, in the absence of consent by the Director of Public Prosecutions, the proceedings instituted by Sergeant Weaver for an offence of gross indecency towards a child of 11 were rendered null by s 8 of the Sexual Offences Act 1967, and they dismissed the information. By a letter dated 28 January 1970 addressed to their clerk by a representative of the Director of Public Prosecutions, the justices were informed that the Director of Public Prosecutions had decided to exercise his powers under the Prosecution of Offences Acts 1879–1908 and the Prosecution of Offences Regulations 1946c to intervene in this matter in order to prosecute an appeal.
Page 268 of [1970] 3 All ER 266
N A Miscampbell for the Crown.
W A Limont for the respondent.
6 July 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices of the county borough of Wigan, who dismissed an information preferred by the police against the respondent. The offence in question was that the respondent, on a certain day in November 1969 in Wigan, committed an act of gross indecency ‘towards’ a child under the age of 14, the child being a male child under the age of 14, namely of the age of 11 years, contrary to s 1(1) of the Indecency with Children Act 1960. The justices dismissed the information on the ground that at the time the matter was before them, the Director of Public Prosecutions had not given his consent to the proceedings under s 8 of the Sexual Offences Act 1967. That is undoubtedly true; but the Director of Public Prosecutions has in fact taken over this appeal because of his anxiety at the decision, which no doubt will involve him in a considerable amount of labour.
The relevant legislation is as follows. Section 1(1) of the Indecency with Children Act 1960 provides:
‘Any person who commits an act of gross indecency with or towards a child under the age of fourteen, or who incites a child under that age to such an act with him or another, shall be liable on conviction on indictment to imprisonment for a term not exceeding six months, to a fine not exceeding one hundred pounds, or to both.’
Section 8 of the Sexual Offences Act 1967 provides:
‘No proceedings shall be instituted except by or with the consent of the Director of Public Prosecutions against any man for the offence of buggary with, or gross indecency with, another man, for attempting to commit either offence, or for aiding, abetting, counselling, procuring or commanding its commission where either of those men was at the time of its commission under the age of twenty-one … ’
Two points are taken by counsel for the Crown in this appeal. His first point is a broad one, namely that ‘man’ in s 8 of the Sexual Offences Act 1967, although in the ordinary way it would include a male child, does not do so in this context. The reason put forward for that is that when one looks at the Indecency with Children Act 1960, ‘child’ there would cover not only a male child but a female child. Accordingly it is said that if one gives ‘man’ the natural meaning of including a male child one gets the so-called anomalous position that s 8 of the Sexual Offences Act 1967 operates in the case of a male child but not in the case of a female child. For my part I feel that there is nothing in that argument because it is quite clear that the 1967 Act was intended to and does deal with homosexual offences, that is to say, with offences between persons whether adult or children of the same sex.
The second point is narrow one. It is said that s 1(1) of the Indecency with Children Act 1960 deals with three separate offences: it deals with an act of gross indecency with a child, with an act of gross indecency towards a child, and with inciting a child to commit such an act; and that when one looks at s 8 of the Sexual Offences Act 1967, it only operates in the case of one of those offences, namely the offence of gross indecency with another man. It is quite clear that incitement is a separate offence which is not the subject of s 8 of the Sexual Offences Act 1967. That was decided in R v Assistant Recorder of Kingston-upon-Hull, ex parte Morgan. But neither of the present points were of course in the court’s mind in giving the decision in that case.
Page 269 of [1970] 3 All ER 266
All that case is authority for is that, at any rate, s 8 does not operate in the case of the offence instituted by incitement.
In my judgment there are not two offences of gross indecency in s 1(1) of the Indecency with Children Act 1960, but one, namely the committing of an act of gross indecency involving a child, that is to say, one reads ‘with or towards a child’ as a phrase ‘with or towards’; that as it seems to me is the natural meaning because it is impossible in any particular case to say quite definitely that this is a case of gross indecency with, and not a case of gross indecency towards, or vice versa. Indeed the case to which this court has been referred of R v Hall although dealing with a very different situation, really supports this view because it was there held that the word ‘with’ in this connection does not mean ‘with the consent of’, but has a looser meaning of ‘against or directed towards’. In other words, as it seems to me, the words ‘or towards’ may be said to be explaining the word ‘with’. That this is the true view is I think put beyond all doubt by s 1(1) itself, because when one gets to the alternative offence of incitement, the incitement is ‘who incites a child under that age to such an act with him’. If ‘towards him’ was a separate offence, one would expect in the case of incitement to have the incitement operating not only in the case of an act with, but in the case of an act towards. As it seems to me, there is only one offence of gross indecency ‘with or towards a child’, in other words, involving a child. For those reasons I think that the justices came to a correct decision here, and I would dismiss this appeal.
JAMES J. I agree.
COOKE J. I agree.
Appeal dismissed.
Solicitors: Director of Public Prosecutions; S Eversley & Co, agents for G Gerald Strong, Liverpool (for the respondent).
N P Metcalfe Esq Barrister.
R v London (Metropolis) Licensing Planning Committee, ex parte Baker
[1970] 3 All ER 269
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 15 JULY 1970
Licensing – Certificate of non-objection – Number, nature and distribution of licensed premises – Conduct of premises an extraneous consideration – Licensing Act 1964, s 119(2).
The applicant (a theatre manager) formerly held a justices’ on-licence subject to five conditions, condition 4 of which provided that no intoxicating liquor should be sold when the premises were being used for continuous performances. He applied to a sub-committee of the licensing planning committee for a new certificate of non-objection under s 123 of the Licensing Act 1964, omitting condition 4 on his application on the ground that it was difficult in practice to enforce, particularly as it was the intention to convert the premises into two cinemas. The sub-committee recommended to the main committee that a certificate of non-objection should be granted subject to conditions 1, 2, 3 and 5 only. The main committee intimated
Page 270 of [1970] 3 All ER 269
that it was not prepared to grant a certificate of non-objection in the terms suggested by the applicant, but he refused to amend his application to include condition 4. The licensing planning committee thereupon issued a certificate of objection. On the question whether the licensing planning committee had taken into account matters extraneous to those laid down by s 119(2)a of the Licensing Act 1964,
Held – The content of condition 4 was not a matter going to the nature of the premises, but to the conduct of the premises, ie something which was entirely a matter for the licensing justices and extraneous to the consideration and duties of the licensing planning authority under s 119(2) (see p 272 e and f, post).
Notes
For general duties of licensing planning committee, see 22 Halsbury’s Laws (3rd Edn) 643, para 1353.
For the Licensing Act 1964, s 119, see 17 Halsbury’s Statutes (3rd Edn) 1168.
Authority cited in argument
Paterson’s Licensing Acts (1970 Edn) pp 1024, 10268, 1028.
Motion for mandamus
This was an application on behalf of Oscar Merton Baker for an order for mandamus to the London (Metropolis) Licensing Planning Committee to hear and determine according to law an application by the applicant for a certificate of non-objection to the grant of a new justices’ on-licence in respect of the Warner Theatre, Leicester Square, London WC2, of which the applicant was the theatre manager. The grounds on which relief was sought were: (1) that the committee acted ultra vires in seeking to impose any condition on a certificate of non-objection: (2) that the committee acted ultra vires in seeking to impose on the applicant a condition to be attached to a new justices’ on-licence which related to the conduct of the premises under the licence; and (3) that the committee took into account considerations extraneous to those laid down by s 119(2) of the Licensing Act 1964. The facts are set out in the judgment of Lord Parker CJ.
D W T Price for the applicant.
A R Vandermeer for the licensing planning committee.
E G Wrintmore for the United National Temperance Council (as interested parties).
15 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of one Oscar Merton Baker, the theatre manager of the Warner Theatre at Leicester Square, for an order for mandamus directed to the London (Metropolis) Licensing Planning Committee to hear and determine according to law an application by the applicant for a certificate of non-objection to the grant of a new justices’ on-licence in respect of the Warner Theatre.
Before dealing with the facts, it is convenient to remind oneself briefly of the relevant provisions. It is of course well known that the grant of a new justices’ licence is a matter for licensing justices, and under s 4 of the Licensing Act 1964 they may grant a new justices’ licence and may attach to it such conditions governing the tenure of the licence and any other matters as they think proper in the interests of the public. By s 4(2) they are also concerned with whether the premises are structurally adapted. But before an applicant for a new justices’ licence can go before the licensing justices, he must under s 123 of the 1964 Act obtain from the licensing planning committee for the area what is called a certificate of non-objection, a certificate
Page 271 of [1970] 3 All ER 269
that that committee have no objection to the grant of a justices’ licence. What happened in the present case was that the applicant had at one time a justices’ on-licence from the licensing justices for the South Westminster Division, and it was subject to five conditions:
‘1. No off sales. 2. No sales of intoxicating liquor except to persons admitted by ticket to the premises or to those persons for whose admission payment has been made. 3. Sale and consumption of intoxicating liquor to be confined to the bars. 4. No intoxicating liquor to be sold when the premises are being used for continuous performances. 5. No direct access from the street to any bar.’
An application was later made in 1967 to the sub-committee of the licensing planning committee for a new certificate omitting the fourth condition. It was said that the fourth condition, no intoxicating liquor to be sold when the premises are being used for continuous performances, was difficult in practice and particularly so as they were getting permission to convert the Warner Theatre into two separate cinemas. On 4 May 1970, the north western sub-committee of the licensing planning committee considered an application which had been made in which the applicant had deleted, as it were, the fourth condition. He said that he wanted the justices’ on-licence and he agreed that it should be on the terms set out in conditions 1, 2, 3 and 5. The sub-committee recommended to the main committee that a certificate of non-objection on those terms should be given. But when the matter came before the main committee and there was a hearing, it was clear that they would not grant a certificate of non-objection in the terms applied for by the applicant. When the applicant refused to amend his application, to include and restore this fourth condition, the main committee issued a certificate of objection.
It is in those circumstances that this order for mandamus is moved, and it is said in the first instance that the licensing planning committee had no power to impose any condition on a certificate of non-objection. Alternatively it is said that it had no power to impose a condition which related to the conduct of the premises. Counsel for the applicant has pointed out that nowhere in this legislation is the power given to a licensing planning committee to grant a certificate of non-objection on condition, unless it is a case which comes within s 121 dealing with the submission and confirmation of proposals for the removal of licences where the sections specifically provide for the making of conditions. For my part I am quite satisfied here that this is not a question of imposing conditions at all. If it were, I do not think that there was any power. All that has happened is that an application has been made in which the applicant says that he proposes to apply to the licensing justices eventually submitting to four conditions. The licensing planning committee then say: if that is all you are asking for we must grant a certificate of objection; we think that you should amend by restoring the fourth condition, and when that is refused a certificate of objection is given. If, of course, the licensing planning committee had at that stage given a certificate of non-objection and itself inserted this fourth condition, then truly it would be imposing a condition which it had no power to do.
The real question here concerns a third ground on which this mandamus is moved, namely that in issuing that certificate of objection the committee were taking into account an extraneous matter. It is important in considering that to look and see what the duties quite generally of these licensing planning committees are. The duties are to be found in s 119(2) of the Licensing Act 1964. That provides:
‘It shall be the duty of every licensing planning committee to review the circumstances of its area and to try to secure, after such consultation and negotiation as it may think desirable, and by the exercise of the powers conferred on it by this Part of this Act, that the number, nature and distribution of licensed
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premises in the area, the accommodation provided in them and the facilities given in them for obtaining food, accord with local requirements, regard being had in particular to any redevelopment or proposed redevelopment of the area.’
The reason why a certificate of objection here was issued was, as I have said, because the applicant would not agree to making an application including the fourth condition, that is: ‘No intoxicating liquor to be sold when the premises are being used for continuous performance.' For my part try as may be I am quite unable to see that such a matter had got anything whatever to do with the number, the nature, or the distribution of licensed premises. It may well be that for instance condition 1 on which this application was made, which is ‘No off sales’ would be a very important consideration. The licensing planning committee no doubt have to sub-divide the licensed premises in their area into various categories, and from time to time in deciding whether or not to give a certificate of non-objection have to have regard to the number of the category already in existence. To refuse to give a certificate of non-objection on the grounds that an applicant would not agree to a condition that there should be no off-sales may be perfectly in order and in no way extraneous. Similarly it might be in regard to condition 2, namely that it would be important to them to know whether the licensed premises were going to be used as open to the public in general or only to a limited class of the public, namely those who were admitted by ticket only.
But so far as this condition is concerned, the failure of the applicant to insert it being the reason for the certificate of objection it is to my mind a quite extraneous consideration. It is not a matter going to the nature of the premises but going to the conduct of those premises, something which is, as it seems to me, entirely a matter for the licensing justices and quite extraneous to the considerations and duties of the licensing planning committee. In my judgment this application succeeds and an order for mandamus should go to the licensing planning committee to reconsider the matter according to law in the light of the opinion of this court.
COOKE J. I agree.
FISHER J. I also agree.
Order for mandamus.
Solicitors: Denton, Hall & Burgin (for the applicant); Sharpe, Pritchard & Co (for the licensing planning committee); Mills, Curry & Gaskell, Kenton (for the United National Temperance Council).
N P Metcalfe Esq Barrister.
Leconfield Estate Co (now Egremont Estate Co) v Inland Revenue Comrs
[1970] 3 All ER 273
Categories: TAXATION; Surtax
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 23, 24, 25 MARCH, 27 APRIL 1970
Surtax – Investment company – Controlled investment company – Actual income from all sources – Estate or trading income – Income which not estate or trading income – Whether capital allowances and reliefs within meaning of ‘outgoings’ – Income Tax Act 1952, s 262(4).
Surtax – Investment company – Controlled investment company – Actual income from all sources – Estate or trading income – Income which not estate or trading income – Capital allowances and loss reliefs – Apportionment – Income Tax Act 1952, s 262(4).
The taxpayer company was a controlled unlimited company and was at all material times an investment company within s 257 of the Income Tax Act 1952. Under ss 245 and 262 of the Act it was subject to surtax directions in respect of such part of its ‘actual income from all sources’ as was not ‘estate or trading income’ within the meaning of s 262(8). The income of the company consisted of ‘estate or trading income’ and ‘other’ income. A direction had been given in respect of the other income but not in respect of the estate or trading income. All the shares of the company, except one, were held by E, and it was to him that income which was the subject of directions fell to be apportioned under s 248(1) of the Act. It was thus in E’s interest that as large a part as possible of any reliefs and allowances available should be set against the other income. Section 262(4)a of the Act applied where part only of the income was estate or trading income and empowered the Special Commissioners to treat ‘outgoings’ as being attributable to the estate or trading income or to the other income as considered ‘appropriate’. The actual income of the taxpayer company from all sources, having deducted all allowances and reliefs, was £8,316 for the year 1957–58. The method of computing in dispute was how two of the allowances and reliefs, namely (a) a balance of £9,724 (capital allowance for agricultural expenditure under s 314) in respect of which the taxpayer company had made an election under the proviso to s 324(1) of the Act that it was to be deducted from or set-off against income other than agricultural or forestry income; and (b) three items of loss under s 341 of the Act amounting in all to £10,758, should be divided for the purposes of determining what part of the actual income of the taxpayer company was other income. The Special Commissioners had held that those reliefs and allowances should be set against estate or trading income and on that basis had apportioned £3,800 of the £8,316 to estate or trading income and £4,516 to other income. The taxpayer company claimed that, since in the relevant parts of the Income Tax Acts there was nothing pointing to an allocation of the s 314 allowance or s 341 relief either to estate or trading income or to other income, those allowances and reliefs should be allocated rateably; alternatively, that, if the reliefs and allowances were outgoings within s 262(4) proviso (ii), they should be allocated rateably. On the basis of a rateable allocation of those reliefs and allowances, £6,610 of the £8,316 would be estate or trading income and £1,706 other income.
Held – (i) Although the word ‘outgoings’ in s 262(4) proviso (ii) was one of great amplitude of meaning, neither the s 341 loss relief nor the s 314 allowances could be
Page 274 of [1970] 3 All ER 273
comprised within the meaning of the term (see p 282 e, post). Nevertheless, the wide and indefinite meaning of ‘outgoings’ in s 262(4) proviso (ii) indicated that Parliament did not intend the term to be a touchstone for determining whether a different system of division, eg a rateable division, should apply (see p 282 h, post) and, in the absence of specific statutory guidance as to the method of apportionment, the word ‘appropriate’ in that proviso was helpful as an indication of what the legislature had in mind (see p 281 f, post).
(ii) Since the s 314 allowance and the s 341 relief arose solely in relation to what consisted of estate or trading income, it would not be appropriate for those allowances and reliefs to be treated as reducing income which was not estate or trading income (see p 283 d, post).
Quaere. Whether, if reliefs and allowances arising in respect of estate or trading income were to exceed that income, the balance should be set against income which was not estate or trading income (see p 283 f, post).
Notes
For surtax directions as to undistributed profits of companies, see 20 Halsbury’s Laws (3rd Edn) 547–571, paras 1063–1111, and for cases on surtax directions, see 28 Digest (Repl) 369–374, 1614–1632.
For the Income Tax Act 1952, s 262, see 31 Halsbury’s Statutes (2nd Edn) 252.
In relation to the year 1970–71 and subsequent years of assessment the Income Tax Act 1952 has been replaced by the Income and Corporation Taxes Act 1970 and intermediate changes had previously occurred. For s 245, 257, 262 and 341 of the 1952 Act see ss 289 and 290 of the 1970 Act and for ss 314 and 324 of the 1952 Act see ss 68 and 71 of the Capital Allowances Act 1968.
Case referred to in judgment
Tubbs v Wynne [1897] 1 QB 74, 66 LJQB 116, 40 Digest (Repl) 137, 1057.
Case stated
1. (1) At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 9 October 1968, the Egremont Estate Co (which was then called the Leconfield Estate Co) (the taxpayer company) appealed against directions made on it under ss 245 and 262 of the Income Tax Act 1952, and apportionments under s 248(1) for the years 1957–58 to 1962–63. (2) At the hearing of the appeal no issue was raised concerning the directions; the dispute concerned the amount of the income of the company included in the apportionments under appeal, which was as follows: 1957–58, £4,512; 1958–59, £5,518; 1959–60, £588; 1960–61, £6,113; 1961–62, £9,438; and 1962–63, £5,677. (3) Shortly stated, the question in issue was the method of determining, for the purpose of s 262(4)(a) of the Income Tax Act 1952, what part of the actual income of the taxpayer company was not estate or trading income. (4) By agreement between the parties, the appeal was argued by reference to the actual income from all sources of the taxpayer company for 1957–58, it having been agreed that a decision relative to that year would govern all the years to which the appeal related.
2. (1) The taxpayer company was an unlimited company having a capital divided into 400,000 shares of £1 each. It was incorporated on 3 January 1925. (2) The issued shares in the taxpayer company were at material times held as follows: 1956 to 1960: 278,699 shares held by the executors of the third Lord Leconfield (these shares had been specifically bequeathed to Lord Egremont by the third Lord Leconfield’s will subject to payment of duty); 5,000 shares held by Lord Egremont (then the Hon John Edward Reginald Wyndham); and one share held by Lady Egremont (then Pamela Wyndham). 1961 to date: 283,699 shares held by Lord Egremont (the executors having transferred to him the shares which had been in their names); and one share held by Lady Egremont. (3) The taxpayer company was at all material
Page 275 of [1970] 3 All ER 273
times an ‘investment company’ within the meaning of s 257 of the Income Tax Act 1952, and subject to direction in respect of such part of its actual income from all sources as was not estate or trading income, under ss 245 and 262 of the Act. (4) Lord Egremont was at all material times the person beneficially entitled to any income distributed by the taxpayer company and the person to whom any actual income in respect of which directions were made fell to be apportioned under s 248(1) of the Act. (5) A statement showing the several sources of the taxpayer company’s income, the amount of income from each source estimated in accordance with the provisions of the Income Tax Act 1952 relating to the computation of income from that source by reference to the income for the year 1957–58, and the items in respect of which reliefs or allowances were given for tax purposes in that year, was annexed. (6) In each of the years 1957–58 to 1962–63, inclusive, part of the taxpayer company’s actual income from all sources was ‘estate or trading income’, as defined in s 262(8) of the Income Tax Act 1952, and part was other income. Directions were given under ss 245 and 262 of the Act that such part of the taxpayer company’s actual income for each of those years as was not estate or trading income should be deemed to be the income of the members of the taxpayer company, and the whole of that income was apportioned to Lord Egremont under s 248(1), in the amounts shown in column (a) below, which were subsequently revised to the amounts shown in column (b).
(a) (b)
1957-58 £4,512 £4,516
1958-59 £5,518 £6,838
1959-60 £588 £476
1960-61 £6,113 £6,113
1961-62 £9,438 £9,438
1962-63 £5,677 £5,677
(7) The taxpayer company gave notice of appeal against all these directions and apportionments; but the only issue between the parties was whether the amounts of actual income apportioned had been properly computed in accordance with the requirements of the Act, and in particular whether certain statutory reliefs and allowances should have been deducted from the estate or trading income on the one hand or other income of the taxpayer company on the other hand. (8) A statement showing the alternative bases of allocating the various reliefs and allowances to which reference was made above for which the parties contended, was annexed. (9) (a) As appeared from that statement, there was no dispute that the following reliefs and allowances should be allowed against estate or trading income: maintenance relief under s 101; void relief under s 107; capital allowances for plant and machinery; and such part (£9,054) of the capital allowances for agricultural expenditure as was available to be set-off against agricultural income by reference to s 324(1). (b) It was not disputed that the following should be allocated rateably between estate or trading income and other income: management expenses relief under s 425; bank interest relief under s 200; annuities under s 169; and estate duty interest. (c) The dispute concerned the following, which the Crown claimed should be allowed against estate or trading income, and the taxpayer company claimed should be allocated rateably: loss relief under s 341; and such part (£9,724) of the capital allowances for agricultural expenditure as regards which an election had been made pursuant to the proviso to s 324(1). (10) A statement containing a summary of actual income for the years 1957–58 to 1962–63 on those alternative bases was annexed.
3. The taxpayer company’s detailed contentions were as follows: (1) that the reliefs and allowances should be brought into account in determining the actual income from all sources of the taxpayer company; (2) that it was the actual income so determined of which part had to be ascertained under s 262(4); (3) that there was nothing in the relevant parts of the Income Tax Acts pointing to an allocation of the s 341 relief or of the balance of the s 314 relief either to estate or trading income
Page 276 of [1970] 3 All ER 273
or to other income, and that in the circumstances they should be allocated rateably; (4) alternatively, that if the said reliefs were ‘outgoings’ within s 262(4) proviso (ii), they should be allocated rateably; and (5) that the taxpayer company’s basis of computation in the statement referred to in para 2(8) should be adopted.
4. The Crown contended as follows: (1) that where part only of the income from all sources of a s 245 company as estate or trading income, s 262(4) required that the company surtax provisions should be applied separately to the estate and trading income and the other income, as if each were the whole income of the company; (2) that in computing the whole income of a company from estate or trading sources account should have been taken not only of profits computed in accordance with the provisions of the Act, but also of losses similarly computed, as was approved in F P H Finance Ltd (in liquidation) v Comrs of Inland Revenueb; (3) that the s 341 relief therefore fell to be taken into account in computing the estate or trading income of the taxpayer company, and on the same principle the balance of the s 314 relief should also have been set against that income; (4) that neither s 341 loss relief nor s 314 allowances were ‘outgoings’ within the meaning of proviso (ii) of s 262(4), but as the losses in the one case and expenditure in respect of which allowances were given in the other were outgoings of an estate or trading nature, it would have been unreasonable in any event to attribute any part of them to pure investment income rather than estate or trading income; and (5) that the Crown’s basis of computation in the statement referred to in para 2(8) should therefore have been adopted.
5. The Commissioners gave their decision as follows:
‘1. It is common ground that in computing the actual income from all sources of the [taxpayer] company there falls to be deducted (1) Section 341 loss relief, and (2) An amount of Section 314 allowances as regards which an election has been made pursuant to the proviso to Section 324(1) that it should be deducted from or set off against the [taxpayer] company’s income other than agricultural income or forestry income.
‘2. For the purpose of Section 262(4)(a) we have to determine the amount of such part of the actual income from all sources of the [taxpayer] company as is not estate or trading income, and the question is whether there should, or should not, be allowed in ascertaining the said part a rateable proportion of the two deductions above mentioned.
‘3. The amount of “the actual income from all sources” (about which there is no dispute) less such part thereof as is not estate or trading income must necessarily be “estate or trading income”, and such income is defined by Section 262(8), as meaning income of the kinds specified therein. Section 341 relief to which a person is entitled for any year was allowed “by reference to the loss and to the aggregate amount of his income for that year estimated according to this Act“. Section 314 relief allowed pursuant to the Section 324(1) election is given (see paragraph 1(2) above) against income other than agricultural or forestry income.
‘4. Section 262 includes, in proviso (ii) to subsection (4), provisions as to the attribution of outgoings to estate or trading income or income other than estate or trading income, but there is not in our view (see paragraph 6 below) any sufficient ground for regarding either of the two deductions as within the ambit of the word “outgoings” in that proviso. We have carefully reviewed all the other statutory provisions to which we were referred, but we have not found any of them not mentioned herein of any assistance in relation to the question of how the two deductions should be attributed in ascertaining what is not, or is, estate or trading income.
‘5. Viewing the matter generally, the income tax treatment of the deductions
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involves their attribution only to aggregated income, or income other than agricultural or forestry income, and if there were no other considerations bearing on the matter a rateable attribution of the deductions in ascertaining what is not, and what is, estate or trading income would doubtless be in order. It is, however, apparent that the Section 341 relief stems from losses on trading ventures which, had they yielded profits, would have produced estate or trading income as defined, and that the Section 314 relief stems from capital expenditure incurred for the purposes of husbandry or forestry, that is to say, activities which, had they yielded profits, would also have produced estate or trading income as defined. It would, we think, be unrealistic to regard these last-mentioned considerations as unimportant. Indeed it seems to us not only that they should be taken into account, but that on the whole they provide a better pointer than any other to the resolution of the matter. On this footing we are of opinion, and hold that both deductions should be made not by being allocated rateably, but wholly in ascertaining estate or trading income.
‘The appeal therefore fails in principle, and we leave figures to be agreed accordingly.
‘6. In the foregoing, we have approached the question before us upon the footing that it does not fall to be decided by reference to proviso (ii) to Section 262(4). To our minds, the word “outgoings” in the context is not an appropriate word to embrace either of the deductions in question. We would however add that if we were dealing with the matter by reference to that proviso we would consider it appropriate to reach the same conclusion for the same reasons.’
Agreement of the figures on the basis of the commissioners’ decision having been reported to them, they determined the amounts of the actual income (other than estate or trading income) as follows: 1957–58 increased to £4,516; 1958–59 increased to £6,838; 1959–60 reduced to £476; 1960–61 confirmed at £6,113; 1961–62 confirmed at £9,438; and 1962–63 confirmed at £5,677.
Hubert H Monroe QC and S T Bates QC for the taxpayer company.
C N Beattie QC, P W Medd and J P Warner for the Crown.
Cur adv vult
27 April 1970. The following judgment was delivered.
MEGARRY J read the following judgment. This is an appeal by way of case stated from a decision of the Special Commissioners. It concerns certain apportionments for the years 1957–58 to 1962–63 made on the taxpayer company under the Income Tax Act 1952, s 248(1). By agreement, the appeal has been argued in relation to the income for 1957–58, it being accepted that the decision on that year would govern all the other years under appeal. The taxpayer company is an unlimited company in which Lord Egremont holds all the shares apart from one that is vested in his wife; and this has in effect been the position at all material times, although prior to 1961 the bulk of the shares were held by the executors of the third Lord Leconfield subject to a specific bequest of them to Lord Egremont. The taxpayer company has at all material times been an investment company within the meaning of s 257 of the Income Tax Act 1952, and under ss 245 and 262 it was subject to directions in respect of such part of its actual income from all sources as was not estate or trading income. Lord Egremont has at all material times been beneficially entitled to any income distributed by the taxpayer company, and it was he to whom any income which was the subject of directions fell to be apportioned under s 248(1). The dispute has arisen in respect of certain reliefs and allowances, the issue being as to what income they should be set against.
The sections of the Income Tax Act 1952 with which I am primarily concerned are contained in Chapter III of Part IX of the Act. Part IX, consisting of ss 229 to 264,
Page 278 of [1970] 3 All ER 273
is concerned with surtax, and Chapter III, consisting of ss 245 to 264, relates to surtax on the undistributed income of certain corporations. It would, incidentally, be a considerate act on the part of those who compile collections of statutes if they would, in the heading on each page, set out the Part, Chapter or other division of the statute which contains the sections on that page, thereby readily making intelligible references such as ‘For the purposes of this Part of the Act’ or ‘the provisions of this Chapter’. Section 245 gives the Special Commissioners power to give a direction in respect of a closely controlled company which has not distributed a reasonable part of its actual income from all sources; and for surtax purposes the result of such a direction is that the income is deemed to be the income of the members of the company. The computation of the income is dealt with by s 255(3), which provides:
‘In computing, for the purposes of this Chapter, the actual income from all sources of a company for any year or period, the income from any source shall be estimated in accordance with the provisions of this Act relating to the computation of income from that source, except that the income shall be computed by reference to the income for such year or period as aforesaid and not by reference to any other year or period.’
These last words make the requisite adaptation in respect of the appropriate year for surtax as compared with income tax.
The discretionary power of the Special Commissioners is supplemented by the provisions of s 262, dealing with the case of an ‘investment company’. By s 257 this means a company with mainly an investment income, that is, income which in the case of an individual would not be earned income. In the case of an investment company, s 262(1) requires the commissioners to give a direction under s 245 in respect of the whole of its income from all sources, without considering whether or not the company has distributed a reasonable part of its income. Such a direction is usually called an automatic direction.
Special provisions, however, are made for a company with ‘estate or trading income’, a term defined by s 262(8) to mean:
‘income chargeable to income tax under Schedule A or Schedule B, income arising in respect of the ownership or occupation of land which is chargeable to income tax under Schedule D, and income which is not investment income.’
I need not read the definition of ‘land’ which follows. First, the provisions for an automatic direction are excluded where the whole of the income is estate or trading income; for s 262(3) provides:
‘The preceding provisions of this section shall not apply to an investment company the whole of the actual income whereof from all sources is estate or trading income.’
Second, where part only of the income is ‘estate or trading income’, s 262(4) takes effect. Broadly speaking, this severs the income of the company from all sources into two segments, and for the purposes of Chapter III requires each segment to be treated as if it were the whole of the income of the company. The first segment consists of all the income except the estate or trading income; and for this there is to be an automatic direction. The second segment is the estate or trading income; and this is subject to the Special Commissioners’ discretionary power to give a direction. The two types of income may conveniently be called the ‘other’ income and the ‘estate or trading’ income, respectively.
The case before me turns on this division; for no direction has been given under the discretionary power in respect of the estate or trading income. Accordingly, everything that falls within the heading ‘other’ income is subject to an automatic direction and so is deemed to be Lord Egremont’s income for surtax purposes, whereas
Page 279 of [1970] 3 All ER 273
everything that falls within the heading ‘estate or trading’ income is free from any direction. It is thus in Lord Egremont’s interest that of the reliefs and allowances available, as large a part as possible may be set against the ‘other’ income, thus reducing it, as opposed to being set against the ‘estate or trading’ income. What has happened is that the Special Commissioners have held that the Crown’s contentions were right, and that the disputed reliefs and allowances should be set against the ‘estate or trading’ income alone. In doing this, they rejected the taxpayer company’s contention that these reliefs and allowances should be allocated rateably between the two types of income.
Before I go further, I think that I ought to read s 262(4) in its entirety. It provides:
‘Where part only of the actual income from all sources of an investment company to which section two hundred and forty-five of this Act applies is estate or trading income, the provisions of this Chapter shall have effect as follows:—
‘(a) in the first place, they shall have effect as if such part of the actual income from all sources of the company as is not estate or trading income were the whole of the income of the company, and directions shall be given by virtue of subsection (1) of this section accordingly as respects that part; and
‘(b) in the second place and separately (but without prejudice to the treatment of the company as an investment company for the purposes of the said provisions), they shall have effect as if such part of the actual income from all sources of the company as consists of estate or trading income were the whole of the income of the company, and, if the circumstances warrant that course, directions may be given accordingly as respects that part otherwise than by virtue of the said subsection (1):
‘Provided that—
‘(i) any income distributed by such a company to its members in such manner that the amount distributed falls to be included in the statements to be made by the members of their total income for the purposes of surtax shall, to the extent of the actual income from all sources of the company other than estate or trading income, be deemed for all purposes to have been distributed out of that other income and not out of the estate or trading income, and be left out of account accordingly in considering whether a reasonable part of the estate or trading income has been so distributed;
‘(ii) subject as aforesaid, any outgoings of the company of such a nature as to be capable of being taken into account in computing the amount of the actual estate or trading income of the company, in considering whether the company has so distributed a reasonable part of its estate or trading income, or in computing the amount of the actual income from all sources of the company other than estate or trading income, shall be treated as attributable to the estate or trading income or to the income other than estate or trading income, as the case may be, only to the extent that the Special Commissioners consider appropriate.’
It will be observed that proviso (ii) gives the Special Commissioners power to treat ‘outgoings’ as being attributable to the ‘estate or trading’ income or to the ‘other’ income as they consider ‘appropriate’; and some question has arisen whether or not the disputed reliefs and allowances are comprehended within the term ‘outgoings’. The Special Commissioners held that they were not, but added that if this was wrong, then they would have reached the same conclusion, namely, that they should be allocated wholly to the ‘estate or trading’ income.
I turn, then, to the disputed reliefs and allowances. They form part of a series of reliefs and allowances about which there is no issue. It was not disputed that four categories of reliefs and allowances should be set wholly against ‘estate or trading’
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income. These four were maintenance relief under s 101; void relief under s 107; capital allowances for plant and machinery under Part X; and capital allowances for agricultural expenditure under s 314. This last head, however, was limited in the following respect. The total amount of relief was £18,778. Under s 324, only £9,054 of this was available as agricultural relief, for the other allowances and reliefs appropriate to the agricultural income fell short of it by only £9,054. As to the balance of £9,724 the taxpayer company has made an election under the proviso to s 324(1), whereby that balance was to be deducted from or set off against income other than agricultural or forestry income. That balance of £9,724 is one of the two disputed heads of allowance or relief.
There were also four heads of reliefs and allowances which it is not disputed should be allocated rateably between ‘estate or trading’ income and ‘other’ income. They are management expenses under s 425; bank interest relief under s 200; annuities under s 169; and estate duty interest. That leaves the two disputed heads, first, the £9,724 that I have already mentioned, and second, a group of three items under s 341, amounting in all to £10,758. Section 341 relates to losses sustained in a trade, profession, employment or vocation or in the occupation of woodlands, and gives the taxpayer the right to have his tax liability adjusted by reference to the loss and to the aggregate amount of his income for the year. The constituent parts of the £10,758 are £246 in respect of an iron room, £2,906 in respect of gardens, and £7,606 in respect of woodlands. In terms of money, the difference between the rival methods for 1957–58 is as follows. The actual income from all sources is agreed at £8,316. On the basis of the rateable allocation of the disputed reliefs or allowances for which the taxpayer company contends, £6,610 of this is ‘estate or trading’ income, and only £1,706 is ‘other’ income which for surtax purposes is to be deemed Lord Egremont’s. On the basis of allocating the whole of the disputed reliefs or allowances to the ‘estate or trading’ income for which the Crown contends, only £3,800 of the £8,316 is ‘estate or trading’ income, whereas £4,516 is ‘other’ income. There is thus a difference of £2,810 between the rival figures of ‘other’ income.
The Special Commissioners found no assistance in a number of statutory provisions to which they were referred, and as I have indicated they held that the disputed items were not ‘outgoings’ within the proviso (ii) to s 262(4). Accordingly, they dealt with the matter on a somewhat general basis. The essence of their decision is in the following paragraph:
‘Viewing the matter generally, the income tax treatment of the deductions involves their attribution only to aggregated income, or income other than agricultural or forestry income, and if there were no other considerations bearing on the matter a rateable attribution of the deductions in ascertaining what is not, and what is, estate or trading income would doubtless be in order. It is, however, apparent that the Section 341 relief stems from losses on trading ventures which, had they yielded profits, would have produced estate or trading income as defined, and that the Section 314 relief stems from capital expenditure incurred for the purposes of husbandry or forestry, that is to say, activities which, had they yielded profits, would also have produced estate or trading income as defined. It would, we think, be unrealistic to regard these last-mentioned considerations as unimportant. Indeed it seems to us not only that they should be taken into account, but that on the whole they provide a better pointer than any other to the resolution of the matter. On this footing we are of opinion, and hold, that both deductions should be made not by being allocated rateably, but wholly in ascertaining estate or trading income.’
Before me, it was common ground between counsel for the taxpayer company and counsel for the Crown that the point was devoid of any direct authority. I was, however, referred to a substantial number of statutory provisions which it was contended ought to persuade me in one direction or the other; and of some of these
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I must say something in due course. For the moment, however, I begin with the firm ground to be found in s 262. It is beyond argument that I am concerned with an item of ‘actual income from all sources’ which, for 1957–58, is agreed to amount to £8,316. It is common ground that the figure of £8,316 has been reached by deducting the whole of the disputed items, as well as a number of others. What s 262(4) requires to be done is that the ‘actual income from all sources’, namely the £8,316 which has been thus ascertained, should be dissected into two parts, the part that is ‘not estate or trading income’ and the part which ‘consists of estate or trading income’. The question is not one of determining in the abstract what income is ‘estate or trading income’ and what is not, but of dividing a figure which has already been ascertained by taking into account all deductions. In the absence of any specific statutory direction on the point, I think that the question must be how much of the £8,316 can fairly be said to be ‘estate or trading’ income and how much can fairly be said to be ‘other’ income.
For one class of deduction, namely, any outgoings of such a nature as to be capable of being taken into account in computing either type of income, whether ‘estate or trading’ or ‘other’, statute has expressly dealt with the point. For by proviso (ii) to s 262(4), these deductions are to be treated as attributable to one type of income or the other, as the case may be, ‘only to the extent that the Special Commissioners consider appropriate’. Outgoings that arise exclusively in respect of ‘estate or trading’ income I should expect the Special Commissioners to consider appropriate only to the ‘estate or trading’ income. Outgoings that arise in respect of both types of income I would expect the Special Commissioners to consider appropriate to both types; and in the absence of any other basis of division, a rateable division between the two types of income could hardly be said to be inappropriate. The pattern thus set for outgoings at least indicates an approach that accords with the Crown’s contentions. I am not, of course, saying that in the case of items that are not ‘outgoings’ the Special Commissioners are given by analogy a statutory jurisdiction akin to that given them by the proviso for ‘outgoings’. What I am saying is that I find the word ‘appropriate’ in the proviso helpful as an indication of what Parliament had in mind.
One of the main disputes before me was whether for surtax purposes relating to investment companies s 262 provides what for brevity may be described as a self-contained code, as counsel for the Crown contended, or whether, as counsel for the taxpayer company contended, one must look at the other provisions of the Act in relation to each type of relief or allowance, and attempt to distil from these the guidance in the interpretation of s 262(4) that the legislature has failed to provide in explicit terms. In support of his contention, counsel for the taxpayer company took me on a guided tour of many of the sections of the Act relating to reliefs and allowances, as well as some others. The two disputed heads arise under s 314, as applied by ss 324(1) and 341. Section 314(1) provides:
‘Subject to the provisions of this section, where, in the year preceding any year of assessment, the owner or tenant of any agricultural or forestry land incurs any capital expenditure on the construction of farmhouses, farm or forestry buildings, cottages, fences or other works (not being expenditure which could, or, in the case of expenditure by a tenant, could, if he had been the owner, be taken into account for the purposes of section one hundred and one of this Act), he shall be entitled to an allowance for that year of assessment and each of the succeeding nine years of assessment equal to one-tenth of that expenditure.’
The remainder of the section makes various qualifications to this provision. In essence, the allowance is thus an amount equal to one-tenth of the capital expenditure on agricultural works.
Section 341 provides:
‘(1) Where any person sustains a loss in any trade, profession, employment or
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vocation, carried on by him either solely or in partnership, or in the occupation of woodlands in respect of which he has elected to be charged to tax under Schedule D, he may, upon giving notice in writing to the surveyor within one year after the year of assessment, apply to the General Commissioners or to the Special Commissioners for an adjustment of his liability by reference to the loss and to the aggregate amount of his income for that year estimated according to this Act.
‘(2) The Commissioners shall, upon proof to their satisfaction of the amount of the loss and of the payment of tax upon the aggregate amount of income, give a certificate authorising repayment of so much of the sum paid for tax as would represent the tax upon income equal to the amount of the loss, and the certificate may extend to give any exemption or relief depending upon total income authorised by this Act. Upon the receipt of the certificate the Commissioners of Inland Revenue shall cause repayment to be made in conformity therewith … ’
In essence, the relief is simply the amount of any trade loss (using ‘trade’ to embrace profession, employment and vocation) or loss in the occupation of woodland within Sch D.
Can these allowances and reliefs be said to be ‘outgoings’ within proviso (ii) to s 262(4)? The term ‘outgoings’ is one of great amplitude of meaning, as every conveyancer knows. In the phrase of Collins J in Tubbs v Wynne ([1897] 1 QB 74 at 78) it is ‘the largest word which can be used’. The learned judge also observed that it was not very easy to collect a definite principle from the decisions, an observation which is readily confirmed by a perusal of the entries under the word in Stroud’s Judicial Dictionaryc and Words and Phrases Judicially Defined (1st Edn, 1944, an edition which I have found more useful than the second edition (1969), which omits some two-thirds of the material to be found under this head in the first edition). Yet however wide the meaning of the word ‘outgoings’, I find it difficult to see how the two heads of allowance and relief with which I am concerned could be comprised within that meaning. Certainly a trade loss may in greater or less degree be the consequence of the discharge of outgoings; but it can hardly itself be an outgoing. Capital expenditure on agricultural works may indeed be an outgoing, but a tax allowance equal to one-tenth of the expenditure does not itself seem to be an outgoing, even though it is computed by reference to a fraction of what may be an outgoing. I therefore do not think that the matter can be resolved by simply holding that the disputed items are outgoings which fall within proviso (ii).
That, however, does not mean that the proviso is wholly irrelevant. It lays down a rational and understandable system for the attribution of ‘outgoings’ to ‘estate or trading’ income or ‘other’ income as the Special Commissioners consider ‘appropriate’. If what is not comprised within the term ‘outgoings’ is likewise to be attributed on a similar basis, then it does not much matter that the word ‘outgoings’ is of somewhat indefinite content. If, on the other hand, other items are to be allocated on a different basis, such as a rateable division, then the scope of the word ‘outgoings’ becomes a matter of great importance. The wider and more indefinite the meaning of the word ‘outgoings’ the less likely it seems to be that Parliament intended it to be the touchstone for determining which of two different systems was to apply. At least the proviso seems to me to be consonant with the contentions of the Crown, and of somewhat awkward import if the taxpayer company is right.
In the end, it seems to me that I am left with a figure of ‘actual income from all sources’ which has given full effect to the disputed items. The figure of income has been arrived at after taking into account not only all permissible expenses and outgoings but also all permissible reliefs and allowances. All have been swept into one common account and have played their full part in producing the final figure of
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‘actual income from all sources’. The one question is the method of carrying out the direction of s 262(4) that for surtax proposes that figure is to be divided into two parts. One part is to be composed of what is ‘not estate or trading income’, and the other part of what ‘consists of estate or trading income’. As the reliefs and allowances have already been treated as reducing the actual income which has to be apportioned, I do not think that one can say that in the process of apportionment one must, as it were, not merely extract the figures of reliefs and allowances but also restore them to their nature as reliefs and allowances for income tax purposes, thus starting again at the beginning, and examining what provisions the Act has made for giving effect to them for income tax purposes, with rateable division as the fate of all reliefs and allowances not specifically provided for. The reliefs and allowances have already been used to compute the actual income from all sources, and all that remains to be done is to obey the statutory requirement of dividing that income into the two special categories for surtax purposes.
The taxpayer company’s contention that the two disputed items should be allocated rateably seems to be capable of producing strange results. The contention is that part of an allowance equal to one-tenth of the capital expenditure on agricultural works, and a part of the relief to be allowed in respect of a loss on trade or woodlands, should be treated as reducing what is ‘not estate or trading income’, even though the allowance and the relief have nothing whatever to do with income which is ‘not estate or trading income’, and arise solely in relation to what ‘consists of estate or trading income’. I do not think that this can be right. If, for instance, after giving effect to an agricultural allowance under s 314 of £900, the actual income from all sources is £10,000 and of this £9,900 is investment income, I cannot think that it would be right to say that nearly all the agricultural allowance should, on a rateable basis, be set against the investment income, and that the estate and trading income should be treated as being nearly £1,000. On any fair reading of s 262(4), I should have said that the part of the £10,000 that can be called ‘estate or trading income’ is £100, and the part that is ‘other’ income is £9,900; in other words, the allowance of £900 should be set wholly against the estate or trading income to which it is appropriate. It may be that if the reliefs and allowances arising in respect of the estate or trading income were to exceed that income, then the balance ought to be set against the ‘other’ income. But apart from possible cases such as that, I do not think that any segment of the ‘actual income from all sources’ can fairly be said to be ‘estate or trading income’ until it has taken into account any reliefs or allowances already reflected in the computation of the ‘actual income from all sources’ to which the taxpayer is entitled in respect of items comprised in ‘estate or trading’ income; and correspondingly for ‘other’ income.
I have not found the case easy, but in the end I have reached the conclusion that the decision of the commissioners was right. I do not think that I need explore in any detail the other statutory provisions to which counsel for the taxpayer company referred, as I do not think that they affect the case. Nothing that I heard persuaded me that any of them modified the effect of what appeared to me to be the fair meaning of s 262(4). I can follow his contention on s 270, for example, to the effect that expenses are part of the process of arriving at profits, and that allowances are made after having arrived at the profits. Yet I am concerned here not with the ordinary rules for assessing income tax but with a special provision for dividing, for surtax purposes, a figure for the ‘actual income from all sources’ which has been arrived at after taking reliefs and allowances into account. Again, I have not overlooked the company’s election made under the proviso to s 324(1) in relation to the balance of the capital allowances for agricultural land; but although that balance is to be deducted from or set-off against income other than agricultural or forestry income, I do not think that this shows that it is not to be set against that part of such other income as is ‘estate or trading’ income under s 262(4). What s 262(4) is concerned with is a statutory division from which consequences flow for surtax purposes, and not the
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method of granting an allowance. As for s 262(8), I do not think that this does more than indicate the nature of the constituent parts of the ‘estate or trading income’; I do not read it as incorporating the whole of the income tax code, including the system of reliefs and allowances, and thus as modifying the system of division for surtax purposes laid down by s 262(4). Indeed, I found for the taxpayer company’s contentions based on the predominance of the income tax method of according reliefs and allowances somewhat unreal in the light of the starting point of s 262(4). That starting point is, as I have already said, the ‘actual income from all sources’ in which those reliefs and allowances have already been taken into account; and I certainly do not think that sub-s (8) negatives the contention that sub-s (4) lays down its own self-contained code, imperfect though it may be, for dividing that actual income. In my judgment, such considerations as these do not affect the conclusion that I have reached on the construction of sub-s (4), and accordingly the appeal fails and must be dismissed.
Appeal dismissed.
Solicitors: Farrer & Co (for the taxpayer company); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
R v Hamilton
[1970] 3 All ER 284
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, KARMINSKI LJ AND JOHN STEPHENSON J
Hearing Date(s): 28 JULY 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Specimen for laboratory test – Test relating to proportion of alcohol at time of driving – Drink consumed after driving ceased before specimen provided – Road Safety Act 1967, s 1(1).
The certificate provided by an analyst for the purposes of proceedings brought under s 1(1) of the Road Safety Act 1967 is designed to show the alcohol content at the time of driving and an analyst’s certificate of blood when alcohol has been obtained after the driving is not an analyst’s certificate of blood at the time of driving (see p 285 f, post).
R v Durrant [1969] 3 All ER 1357 followed.
Notes
For the offence of driving a motor vehicle with an undue proportion of alcohol in the blood, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A.
For the Road Safety Act 1967, S 1, see 47 Halsbury’s Statutes (2nd Edn) 1557.
Case referred to in judgment
R v Durrant [1969] 3 All ER 1357, [1970] 1 WLR 29, 54 Cr App Rep 24, Digest Supp.
Appeal
On 12 November 1969, at Bedfordshire Quarter Sessions the appellant, Edward Hamilton, was convicted before the chairman (Robert Lymbery QC) and a jury by a majority verdict of driving with an undue proportion of alcohol in his blood, contrary to s 1(1) of the Road Safety Act 1967. He was sentenced to a fine of £25 and was disqualified for 12 months. The facts are set out in the judgment.
J R Macgregor for the appellant.
Eric Stockdale for the Crown.
Page 285 of [1970] 3 All ER 284
28 July 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court.
On 12 November 1969, at Bedfordshire Quarter Sessions the appellant was convicted of driving with an excessive blood-alcohol concentration contrary to s 1(1) of the Road Safety Act 1967. It was not considered a very serious offence, he was only fined £25, and, of course, he had to be disqualified for 12 months. He now appeals against his conviction under a certificate granted by the chairman and applies for leave to appeal against sentence. Three points were raised by the chairman’s certificate, but in fact only one has been pursued in this court. Quite shortly that concerns the effect of evidence which is believed and accepted that the appellant had taken drink between the time of his driving and the time when the first breathalyser test was administered. What happened in the present case was that the appellant was involved in an accident, and so shaken was he that he went into a nearby public house and consumed three whiskies. When the police arrived on the scene, the appellant was clearly in a panic and he gave a false name. When asked when he had last been drinking, he did not mention the public house but said that he had his last drink some six hours earlier. As a result a breath test was taken, the usual procedure was adopted, and the analyst’s certificate disclosed 159 milligrammes of alcohol per 100 millilitres of blood. That he had had a drink after driving was really admitted because the Crown called the licensee of the public house who served him with the whiskies. But what the Crown did thereafter was to call forensic evidence to say that even accounting for the three whiskies that the appellant had had in the public house, he would still have been over the prescribed limit. The question is whether that evidence was properly admissible and if not what the consequences are.
This court is satisfied that they are bound by and must follow another decision of this court, R v Durrant. That was a case which was very much the same as the present case save that in fact no forensic evidence was called as to the effect of, in that case, a double brandy consumed after the accident. But it was left to a jury to decide on their own motion what they thought the result of that would be. However, the decision in R v Durrant was not based on that, but was really based on this, that the analyst’s certificate is designed to show the alcohol content at the time of driving, and that an analyst’s certificate of blood when alcohol has been obtained after the driving is not an analyst’s certificate of blood at the time of driving. In other words no adjustments can be made for something which has happened after the driving. Whether that decision is right or wrong this court is clearly bound by it; there is no possibility of distinguishing it and in those circumstances this appeal must be allowed and the conviction quashed.
Appeal allowed. Leave to appeal to the House of Lords, the court certifying under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether for the purpose of the Road Safety Act 1967, s 1(1), the proportion of alcohol in the blood of a person driving a motor vehicle may be ascertained from a laboratory test for which he subsequently provided a specimen by adjustment of the result of that test in the light of evidence as to the effect of alcohol consumed after driving has ceased and before the specimen was provided.
Solicitors: E T Ray & Co, Leighton Buzzard (for the appellant); Machin & Co, Luton (for the Crown).
L J Kovats Esq Barrister.
Bosley v Long
[1970] 3 All ER 286
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JAMES AND COOKE JJ
Hearing Date(s): 7, 8 JULY 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Specimen for laboratory test – Hospital patient – Specimen to be provided at hospital – Road Safety Act 1967, s 3(2).
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Specimen for laboratory test – Hospital patient – Right of medical practitioner to object – Continuing right – Road Safety Act 1967, s 3(2).
A specimen for a laboratory test required from a person while he is at a hospital as a patient (under s 3(2)a of the Road Safety Act 1967) must be provided at the hospital (see p 288 e and g, post).
The right of the medical practitioner in immediate charge of the case to object to the provision of a specimen under s 3(2) is a continuing one and is not restricted to the time at which he is first notified of the proposal to make the requirement (see p 288 e and g, post).
Notes
For the provision of a specimen for a laboratory test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 3.
For the Road Safety Act 1967, s 3, see 47 Halsbury’s Statutes (2nd Edn) 1558.
Cases cited in argument
Butler v Easton [1970] RTR 109.
Campbell v Tormey [1969] 1 All ER 961, [1969] 1 WLR 189.
Director of Public Prosecutions v Carey [1969] 3 All ER 1662, [1969] 3 WLR 1169.
R v Chapman [1969] 2 All ER 321, [1969] 2 QB 436.
Rooney v Haughton [1970] 1 All ER 1001, [1970] 1 WLR 350.
Case stated
This was a case stated by justices for the county of Somerset acting in and for the petty sessional division of Williton in respect of their adjudication as a magistrates’ court sitting at Minehead on 5 February 1970. On 12 December 1969, an information was preferred by the respondent, Maurice Page Long, against the appellant, Kenneth Geoffrey Bosley, charging that on 16 November 1969 at Washford, Somerset, he drove a motor car on a road (A39, Bridgwater to Minehead road) having consumed alcohol in such quantity that the proportion thereof in his blood as ascertained by a laboratory test for which he subsequently provided a specimen under s 3 of the Road Safety Act 1967 exceeded the prescribed limit at the time he provided the specimen, contrary to s 1(1) of the 1967 Act.
The following facts were found (and were not disputed). At 12.20 am on 16 November 1969, Pc Acland went to the scene of an accident on the A39 Bridgwater
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to Minehead road involving two vehicles, a Mini pick-up and a Ford Zephyr saloon. The appellant was in the driver’s seat of the Mini pick-up and admitted that he had been driving. He was injured and taken to hospital. At 12.50 the same morning Pc Disney went to the casualty department of the Minehead and West Somerset Hospital and saw the appellant lying on the operating table. The appellant admitted that he was the driver of the vehicle involved in the accident. After notifying the doctor in charge of what he was about to do, and after reading the Alcotest (R) 80 instructions to the appellant, the constable applied the breath test which proved positive. The constable then read to the appellant the formula regarding giving a blood specimen and informed the doctor of his requirements. The doctor raised no objection. The appellant refused saying ‘I want it taken by my own doctor’. The constable informed him that it could only be taken by the police surgeon appointed, whereupon the appellant refused to agree to that. At 1.32 am the same day the appellant was asked by the constable to provide a urine specimen and he replied ‘You will be lucky. I can’t chum’. At 2.05 am the same day the appellant discharged himself from the hospital having refused all forms of medical treatment. At that time he was told by the constable that he was under an obligation to provide two samples of urine in the hour and suggested that he should go to the police station to complete the procedure, pointing out that failure to provide a specimen was an offence. The appellant agreed and at the station agreed to provide a blood sample. At 3.00 am Dr Ross took a specimen of blood, which was divided and sealed. Offered one of the samples the appellant replied ‘I think I can trust you’. On analysis it was found that the blood specimen contained not less than 149 milligrammes of alcohol in 100 millilitres of blood.
It was contended by the appellant that there was no case to answer in that the prosecution had failed to establish that the appellant had been arrested, and that the procedure for taking a specimen for a laboratory test in accordance with s 3 of the Road Safety Act 1967 depended on the appellant being arrested after failing the breath test.
It was contended by the respondent that the request to give a specimen had been properly made at the hospital while the appellant was a patient, and the fact that he left did not absolve him from any obligation. It was, therefore, unnecessary to prove that he had been arrested.
The justices convicted the appellant, fined him £25, disqualified him from holding or obtaining a licence for 12 months and ordered his licence to be endorsed.
The appellant now appealed.
J A Cox for the appellant.
David Calcutt for the respondent.
8 July 1970. The following judgments were delivered.
COOKE J delivering the first judgment at the invitation of Lord Parker CJ set out the facts and continued: The point taken on behalf of the appellant before the justices and in this court is that the specimen of blood was not provided in accordance with the provisions of s 3 of the Road Safety Act 1967, and that accordingly the result obtained on an analysis of the specimen could not form the foundation of a prosecution under s 1(1) of that Act. It is said that if a patient in hospital is required under s 3(2) of the Act to provide at the hospital a specimen for a laboratory test, then the specimen, in order to comply with the requirements of the Act, must be taken in the hospital. It is said that if he leaves the hospital before the specimen is so taken and does not return to it, then the only manner in which the requirements of the Act can be complied with as regards the taking of a specimen from him is to put into operation the procedure of s 3(1). This would involve arresting him under s 2(4), taking him to a police station, and there giving him the opportunity of providing
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a second specimen of breath before requiring him to provide a specimen for a laboratory test. Section 3(2) of the Act does not in terms provide that the specimen for a laboratory test must be taken at the hospital. It is therefore said on behalf of the prosecution that providing that a person who is in hospital as a patient is required to provide a specimen at the hospital, it matters not for the purposes of the Act if he in fact provides it after leaving the hospital. The prosecution go further and say that if the original requirement is to provide a specimen at the hospital, it matters not if the second and subsequent requests provided for by s 3(6) are made after he has left the hospital. The prosecution say that once the procedure of s 3(2) has been embarked on while the person concerned is a patient in a hospital, the police are entitled to complete the procedure whether he remains in the hospital or not.
There is obviously much to be said for the arguments of the prosecution on grounds of simplicity and administrative convenience. It seems to me, however, that to accede to those arguments would involve a departure from the intentions of Parliament as they appear from the Act. The requirement under s 3(2) must be a requirement to provide a specimen at the hospital. Failure to comply with that requirement is an offence. What the prosecution are saying is that a requirement to provide a specimen at the hospital may be complied with by providing a specimen elsewhere. In my view that involves a departure from the provisions of the Act, and a departure which may have the effect of withdrawing some of the safeguards for which s 3(2) provides. The subsection provides that a person shall not be required to provide a specimen if the medical practitioner in immediate charge of the case objects to the provision of a specimen on certain grounds of a medical nature. I do not think it is satisfactory to say that the only time at which the doctor may object is the time at which he is first notified of the proposal to make the requirement. The safeguard is, in my view, a continuing one, and in my view the existence of this continuing safeguard shows that it was the intention of s 3(2) that the specimen should be provided at the hospital. If the specimen is not provided at the hospital, then it seems to me that the only other manner in which it can be provided under s 3 of the Act is by following the procedure laid down by s 3(1). Where the patient has left the hospital, I see no reason why in the ordinary case there should be difficulty in following the procedure of s 3(1). This is not a case of a lacuna in the Act; it is merely a case where, if one of the two procedures provided is not carried to a conclusion, the other must be followed. On those grounds I would allow this appeal and quash the conviction.
JAMES J. I agree.
LORD PARKER CJ. I also agree.
Appeal allowed. Conviction quashed.
Solicitors: Peacock & Goddard, agents for Bowmans, Minehead (for the appellant); Gregory, Rowcliffe & Co, agents for Moger & Couch, Wiveliscombe (for the respondent).
N P Metcalfe Esq Barrister.
Poppett’s (Caterers) Ltd v Maidenhead Borough Council
[1970] 3 All ER 289
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND BUCKLEY LJJ AND SIR GORDON WILLMER
Hearing Date(s): 15 JUNE 1970
Landlord and tenant – New tenancy – Business premises – Opposition by landlord – Intention to demolish or reconstruct the premises – Local authority landlord – No resolution passed expressing intention – Intention inferred from relevant evidence – Landlord and Tenant Act 1954, s 30(1) (f).
A resolution, expressing the intention of a local authority landlord to demolish or reconstruct premises on the termination of a lease, is not necessarily essential to establish the existence of that intention as a ground of opposition to the grant of a new tenancy of business premises under s 30(1) (f) of the Landlord and Tenant Act 1954. The intention with which a local authority (or any other corporate body) acts is an intention which can be ascertained by any relevant evidence. It can be clearly established by a resolution passed by the body to the effect that its intention is such as set out in the resolution, but the circumstances may be such that, as a clear matter of inference, the intention with which the body is acting can be discovered without any resolution having been passed (see p 292 e, p 293 f, and p 294 b, post).
Warwick Rural Distict Council v Miller-Mead [1962] 1 All ER 212 applied.
Princes Investments Ltd v Frimley and Camberley Urban District Council [1962] 2 All ER 104 considered.
Notes
As to proposed demolition or reconstruction as a ground of opposition to the grant of a new business tenancy, see 23 Halsbury’s Laws (3rd Edn) 893, para 1717; and for cases on the subject, see Digest (Cont Vol A) 1051–1055, 7417p–7417pkc.
For the Landlord and Tenant Act 1954, s 30(1)(f), see 18 Halsbury’s Statutes (3rd Edn) 565.
Cases referred to in judgments
Princes Investments Ltd v Frimley and Camberley Urban District Council [1962] 2 All ER 104, [1962] 1 QB 681, [1962] 2 WLR 940, 126 JP 256, 41 Digest (Repl) 51, 343.
Warwick Rural District Council v Miller-Mead [1962] 1 All ER 212, [1962] Ch 441, [1962] 2 WLR 284, 126 JP 143, Digest (Cont Vol A) 1219, 605a.
Appeal
This was an appeal by the applicants, Poppett’s (Caterers) Ltd, tenants under a lease granted by Maidenhead Corporation of premises in a warehouse in West Street, Maidenhead, against the decision of his Honour Judge Duveen QC at Slough County Court on 8 December 1969 on a preliminary issue, whereby their application for the grant of a new tenancy of the premises under Part 2 of the Landlord and Tenant Act 1954 was dismissed and it was certified that the court was precluded from making an order for the grant of a new tenancy by reason of one or more of the reasons specified in, inter alia, para (f) of s 30(1) of the Act. The facts are set out in the judgment of Buckley LJ.
M S Rich for the applicants.
M H Spence for the local authority.
Page 290 of [1970] 3 All ER 289
15 June 1970. The following judgments were delivered.
BUCKLEY LJ delivered the first judgment at the invitation of Winn LJ. In this case the court is concerned with an appeal from his Honour Judge Duveen QC of 8 December 1969, on a point arising under the Landlord and Tenant Act 1954. Under a lease dated 19 January 1965, made between the local authority, of the one part and the applicants, Poppett’s (Caterers) Ltd, of the other part, the applicants became tenants of certain premises known as 1, 2, 3, 4, 5, 6, 7, 8, and 8A in a warehouse situate between West Street and Kidwells Park Drive, Maidenhead, for a term of five years from 1 January 1965, which was accordingly due to expire by effluxion of time on 31 December 1969. On 13 June 1969, the town clerk, acting on the local authority’s behalf, served a notice on the applicants under s 25 of the Act terminating the tenancy and requiring a notice under the Act, and giving as the reason why the local authority would oppose application to the court under Part 2 of the Act for the grant of a new tenancy the ground that—
‘on the termination of the current tenancy, the [local authority] intend to demolish or reconstruct the whole or a substantial part of the premises.’
I need not read the rest of the paragraph.
The site in question consisted of a building, formerly used as a warehouse and now used by the applicants for the purposes of their business as caterers in some way, and an open site which gives access to the various chambers in the building. It lies between West Street and Kidwells Park Drive, and a short distance to the west of it there is a telephone exchange belonging to the Post Office which the Post Office was anxious to extend in an easterly direction. The proposals which the Post Office eventually produced involved the demolition of some part of the building which I will refer to as Webber’s Depository. This project was one which goes back a little way in time, for it appears from the documents before the court that by a minute of the town development committee of the local authority it is recorded that:
‘The Ministry of Works have advised the [local authority] that it will be necessary to make substantial extensions to the telephone exchange in the next few years, and that there would be a considerable advantage if the exchange could be extended adjoining the present exchange into which all main telephone cables are fed. The Ministry of Works are endeavouring to acquire other property in the area and have enquired whether the [local authority] would be prepared to make available to them in due course the site in West Street known as Webber’s Depository.’
Then there follows a resolution of the town development committee:
‘Resolved: That the Ministry be advised that the [local authority] would be prepared to negotiate for the disposal of this property in due course, provided that the plans for development are shown to be acceptable.’
That minute of the town development committee was confirmed by the local authority on 27 July 1965.
On 5 August 1966, the matter came before another committee of the local authority, the development and planning committee, and this minute recites:
‘Proposals have been submitted by the Ministry of Public Buildings and Works (in accordance with Circular 100 procedure) for extensions to the Maidenhead Telephone Exchange on land fronting West Street and Kidwells Park Drive. The proposal provides for two new buildings, one of three storeys and the other of six storeys. The site includes the land at present occupied by the former Webber’s Depository’
and the resolution of the development and planning committee reads:
Page 291 of [1970] 3 All ER 289
‘(a) That the proposal be approved in principle subject to the [local authority] being given an opportunity of considering the elevational treatment in view of the prominent position and nature of the development; and (b) that the Town Development Committee be asked to consider the problems caused by the displacement of organisations occupying the former Webber’s Depository, particularly the Maidenhead Drama Guild.’
That minute of the development and planning committee was confirmed by the local authority on 18 October 1966.
On 6 December 1966, the project again came before the town development committee, and this minute recites as follows:
‘Further to Minute 336, the Town Clerk reported on discussions with the Ministry of Works regarding the proposed extensions to the Telephone Exchange. The Ministry wish to site one of the proposed new buildings on the northern part of the site at present occupied by the former depository. They would like authority to discuss with the [local authority’s] lessees possible relocation within that section of the site not immediately required. If these negotiations were successful, the Ministry would take over the whole site from the [local authority] subject to revised leases.
‘Resolved: That the Ministry be authorised to approach the [local authority’s] lessees regarding possible relocation.’
That minute was confirmed by the local authority on 17 January 1967. We know of no other minutes of the local authority or of any committee relating to this matter and the notice determining the applicants’ tenancy was given on 13 June 1969.
The case which has been propounded by the applicants is that the question raised by this appeal is a pure point of law, namely whether a local authority landlord can form an intention to demolish property without passing a resolution to that effect? Alternatively, it is said that the only competent form of evidence of the fact that such a landlord had formed such an intention is a formal resolution. The question which we have to consider is whether either of those propositions is sound in law. If they are sound in law it is unnecessary to look at any other evidence that was before the learned judge because it is common ground that the local authority never passed a resolution formally expressing an intention to demolish any part of Webber’s Depository.
The ground on which the appeal is based in the notice of appeal is that there was no evidence on which the learned county court judge could be satisfied that the local authority had, at the date of the hearing, formed an intention to demolish the premises at the termination of the current tenancy, and that it was admitted that no proposal to demolish the premises had been considered by the local authority or any committee thereof. There is a third ground of appeal contained in the notice, but counsel for the applicants has not sought to urge his appeal on that ground and, accordingly, I need say no more about it.
Reliance has been placed on certain authorities and in particular on Princes Investments Ltd v Frimley and Camberley Urban District Council and Warwick Rural District Council v Miller-Mead. In the former of those cases the court was concerned with a question which arose on the effect of ss 37 and 38 of the Public Health Act 1936. The question was whether a local authority’s engineer and surveyor, having said that certain proposed sewerage was in accordance with his requirements, was in fact formulating a requirement within the meaning of the section on behalf of his employing authority, and whether from that fact an undertaking on behalf of the authority to pay the expenses of connecting the sewers should be inferred. In my judgment, that case is one which is really of no assistance in the present case for it turns on the
Page 292 of [1970] 3 All ER 289
terms of the particular Act there under consideration and I do not think that it helps us to resolve the problem put before us by the applicants in the present case.
In the Warwick Rural District Council case solicitors, acting on behalf of the plaintiff authority, had commenced an action ostensibly under s 100 of the Public Health Act 1936, which is a section which authorises a local authority to institute proceedings with a view to restraining a statutory nuisance notwithstanding that the authority can show no special damage, and the condition of that power is that the local authority should be of opinion that summary proceedings would afford an inadequate remedy. At the date when the writ was issued the Warwick Rural District Council had not passed any resolution to the effect that summary proceedings would in that case afford an inadequate remedy for the nuisance which was the subject-matter of discussion but such a resolution was passed three days later. The majority of the Court of Appeal—Willmer LJ dissenting—held that on the evidence before the court it was established that at the date when the writ was issued the authority in fact held the necessary opinion. The case was decided on alternative grounds: first, that it was established that at the time when effective steps were taken in the proceedings the authority held such an opinion; but, as a second alternative, both Lord Evershed MR and Danckwerts LJ held that the evidence justified the conclusion that the authority already held that opinion at the date when the writ was issued notwithstanding that no resolution had been passed, and that case, I think, is of more assistance to the local authority here than to the applicants.
In my judgment, the intention with which a local authority or any other corporate body acts is an intention which can be ascertained by any relevant evidence. It can no doubt be clearly established by a resolution passed by the body to the effect that its intention is such as is set out in the resolution, but the circumstances may be such that as a clear matter of inference the intention with which the body is acting can be discovered without any resolution having been passed at all. For myself I see no logical ground for saying that when the intention of a corporate body is in question such intention can only be discovered from a resolution passed by that body.
I do not pause to consider cases decided in relation to companies incorporated under the Companies Acts because in the case of such companies the directors of the company normally have a very wide delegated authority and can act as the company with the full force and authority of an act of the company itself. I am considering cases where that sort of situation does not exist but where the question is whether a corporate body, such as the local authority in the present case, has acted with a particular intention.
In the present case the minutes to which I have referred demonstrate, in my judgment, that this was a project which had been maturing for a long time and which had not only been before the relevant committees of the local authority, but the local authority had confirmed the decisions of those committees on the three occasions I have mentioned, and the notice given by the town clerk determining the applicants’ tenancy would appear to have been in pursuance of that maturing project. When one comes to read the learned judge’s note of the oral evidence given before him one finds that that, in fact, is what the witnesses say was the position.
Evidence was given by the deputy borough engineer, who stated in his evidence-in-chief that the local authority’s intention was to clear the site. He said that they had a demolition contract in being for the demolition of all properties required to be demolished for the construction of the Post Office exchange. It should be made clear, however, as counsel told us, that that was a contract which did not initially include the site with which we are now concerned, but it was intended to introduce the demolition of Webber’s Depository into that project in due course, although I think that no formal step had been taken to implement that intention. In cross-examination the evidence of the witness is recorded in the judge’s note in the following terms:
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‘The property cannot be demolished until there is authority of the [local authority]. I can say there is no possibility of the [local authority] not passing resolution for the demolition of the property. Question of demolition is a delegated items which will be reported to the works committee and the town development committee. In my view there is no possibility of those committees not passing the necessary resolution. In previous reports to the committees by my officers, it has been made quite clear, that the intention of the [local authority] is to demolish the property. These were verbal reports.’
We are told by counsel for the applicants that at the trial he protested against that evidence being introduced without minutes being produced substantiating the fact that such reports were made to the committees. He did not, as I understand it, however, object that had such minutes been produced the evidence would not have been admissible on the ground that it would be hearsay. If the evidence could be satisfactorily confirmed or strengthened by minutes, then, as it seems to me, it is equally admissible if it is merely oral evidence of oral reports, and that was the evidence which the learned judge had before him.
Of course, I have not referred to all the evidence which was before the judge but I have referred to what I think is the most material part of it, and on that evidence the learned judge decided against the applicants. In the note at the end of his judgment he stated:
‘I accepted the evidence of the witnesses for the [local authority]. I was satisfied that on the termination of tenancy [the local authority] intended to demolish the premises in question and that they could not reasonably do so without obtaining possession of the premises.’
In my judgment, the learned judge had before him evidence on which he could properly find that conclusion and there is no reason why we should disturb his decision. For my part I would dismiss the appeal.
SIR GORDON WILLMER. I have reached the same conclusion and would only add a few words. This, being an appeal under the Landlord and Tenant Act 1954, is an appeal from a county court, and it is well to remember that appeals from the county court are strictly regulated by statute. It is, indeed, accepted in this case that there is no right of appeal on fact, and that the only right of appeal is under s 108 of the County Courts Act 1959, namely on the ground of an error of law.
The question of law sought to be put before this court arises from the submission that there was no evidence to support the conclusion which the learned judge reached. That is always a difficult submission to substantiate, particularly in relation to an appeal from a county court, where there is no transcript of either the evidence or the learned judge’s judgment. In this case we are fortunate in that the learned judge has taken what is obviously a very careful note of the evidence given before him. We must remember, however, that it is only such a note as he was able to take in longhand while the evidence was being given. In such circumstances it is never easy to establish the proposition that there was no evidence on which the learned judge could reach the conclusion which he did. In this case, for the reasons already given by Buckley LJ, I am satisfied that there was evidence. I think that the record kept by the learned judge discloses some evidence. I further think that evidence to support the judge’s conclusion is to be found in the minutes of the committee meetings, which were confirmed by the local authority, and in some of the letters passing between various officials, all going to show that there was in fact an intention to demolish the premises. I agree that the evidence given by the two witnesses who were called at the trial, even standing alone, was evidence on which the learned judge could find that there was an intention on the part of the local authority to demolish these premises. At
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least, I am not prepared to say that there was no evidence, and unless that could be established to our satisfaction the appeal could not succeed. I, too, would dismiss the appeal.
WINN LJ. I agree with both judgments delivered by my Lords and for that reason need add very little indeed. As I said in the course of the very interesting submission of counsel for the applicants, he unfurled a standard (which he was not prepared to nail to his mast) when he said that the only competent, effective and adequate form of evidence to establish the intention of an authority was a formal resolution passed by that authority and produced to the court. If he made that submission with any serious intent I am bound to say that I reject it. However, I think that really he resiled from that, if he meant it at all, and concentrated, as I understood him, on saying that there was no evidence, or perhaps no admissible evidence, that the intention was ever formed by the local authority in the sense of being an intention to be found in the minds of the members of the council—which he rightly said was the intention which it was relevant for the court to consider. I myself, after careful consideration, am unable to accept that submission and I think, for the reasons given by my Lords, that there was evidence here of an intention of the local authority to demolish these premises.
Warwick Rural District Council v Miller-Mead, to which close attention was properly given, seems to me to show that Lord Evershed MR, in that case entertained, at least as an alternative ground, the opinion which I have just stated. Lord Evershed MR is recorded as having said ([1962] 1 All ER at 218, [1962] Ch at 456):
‘… if I were wrong in that view, I think that, on the facts of the present case, including the recorded minutes of July 24, [24th July was three days following the issue of the writ in that action] the court should properly hold that the opinion formally expressed [and, again, I point out it was ‘formally expressed’ and not expressed in a resolution] on July 24 had been held in truth three days before; and that the council so intended to record.’
That seems to me to be equivalent to saying: we have a formal expression of opinion made on 24 July of an intention then held and that is sufficient evidence that the council, on 24 July, intended by their resolution to record that they had entertained the same intention on and before 21 July. That is a decision that an expression of opinion that an intention was not only entertained but was held made otherwise than by the contents of a resolution could be admissible evidence. I agree that this appeal should fail.
Appeal dismissed.
Solicitors: Paisner & Co (for the applicants); Town Clerk, Maidenhead.
Rosalie Long Barrister.
Spens v Inland Revenue Comrs
Hunt v Inland Revenue Comrs
[1970] 3 All ER 295
Categories: TAXATION; Other Taxation: TRUSTS
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 18, 19, 20 MARCH 1970
Surtax – Settlement – Life tenant absolutely entitled to income – Trustees applying income under purported advancement to life tenant’s son – Whether life tenant liable to surtax.
Res judicata – Issue estoppel – Scheme for variation of trusts – Scheme applying to part only of original trust fund – Other part subject to disposition subsequently found to be void – Whether parties to scheme estopped from asserting against trustees that income of other part had been paid to wrong persons.
In 1932, T settled a fund of pure personalty (Mrs P’s fund) for the benefit of, inter alia, the first taxpayer and her issue. Under these trusts the first taxpayer took a life interest on protective trusts under the Trustee Act 1925, s 33. After her death the capital and income were to go to such of her children or remoter issue as she appointed by will, and in default there was a trust for her children who attained 21 years of age or married under that age in equal shares. The first taxpayer had one child, D, born in 1940. On 19 March 1952, the first taxpayer’s father, Mr P, settled £50 on trust for the benefit of D and his issue, with the same persons as trustees as had then become the trustees of the 1932 settlement. D and his issue constituted the discretionary class, and the primary trust was for such of the discretionary class as the trustees should by deed appoint during ‘the income period’, namely from the execution of the settlement until 21 years after D’s death. On 20 March 1952, the trustees of the 1932 settlement purported to exercise the statutory power of advancement with the written consent of the first taxpayer. The advancement consisted of part of Mrs P’s fund and the investments concerned (the advanced fund) were transferred to the trustees of the 1952 settlement and were treated in all respects as part of the trust fund under the settlement, ie the income was applied by the trustees for the benefit of D. In 1960, an order was made under the Variation of Trusts Act 1958 respecting the 1932 settlement which defined ‘the settled share’, the trusts of which were varied, by reference to a list of investments which excluded the advanced fund. D, the trustees of the 1932 settlement and the other beneficiaries under it were made respondents to the originating summons in those proceedings. As a result of the decision in Pilkington v Inland Revenue Comrsa, the first taxpayer was assessed to surtax for the five years 1955–56 to 1959–60 in respect of the income of the advanced fund, the trusts under the 1952 settlement being, quoad the advanced fund, void for perpetuity. On appeal against the assessment the first taxpayer claimed: (i) that the income of the advanced fund, even if income to which she was entitled, had not been paid to her but had been paid or applied by the trustees under the 1952 settlement and that she was not liable to surtax in respect thereof; and (ii) that by the doctrine of estoppel per rem judicatam the order of 1960, in which it was implicit that the income of the advanced fund had been properly paid or applied, bound all parties to the 1960 proceedings.
Held – The appeal would be dismissed, because—
(i) although the income of the advanced fund had not been paid to the first taxpayer, nevertheless, where a trustee who received income from investments held those investments on trust for a life tenant, each sum received by the trustee was for surtax purposes the income of the life tenant as soon as it was received, for it
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was forthwith under the life tenant’s control (see p 299 b, post); Inland Revenue Comrs v Hamilton-Russell Executors [1943] 1 All ER 474 and Dreyfus v Inland Revenue Comrs (1963) 41 Tax Cas 441 applied; Dewar v Inland Revenue Comrs [1935] All ER Rep 568 distinguished.
(ii) the order may by the court in the exercise of its paternal and administrative jurisdiction under the Variation of Trusts Act 1958 had merely approved an arrangement relating to the settled share and was in no way concerned with the question of entitlement to the income of the advanced fund, a matter barely incidental or collateral to the order; accordingly the claim based on estoppel per rem judicatam failed (see p 301 b e and j, post); dicta of Evershed LJ in Re Koenigsberg (decd) [1949] Ch at 364 and Lord Reid and Lord Upjohn in Carl-Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER at 554, 573 applied; Spencer-Bower and Turner, Doctrine of Res Judicata (2nd Edn), pp 181, 182, para 211, approved.
Notes
For the vesting period in the rule against perpetuities, see 29 Halsbury’s Laws (3rd Edn) 281–283, paras 567–571, and for cases on the subject, see 47 Digest (Repl) 55, 56, 1–13.
For the meaning of res judicata, see 15 Halsbury’s Laws (3rd Edn) 184, 185, para 357, and for prevention of estoppel because matter on record not then in issue, see ibid, 207, para 387, and for cases on res judicata, see 21 Digest (Repl) 225, 226, 225–233.
For the the Trustee Act 1925, s 33, see 26 Halsbury’s Statutes (2nd Edn) 102.
Cases referred to in judgment
Ball’s Settlement, Re [1968] 2 All ER 438, [1968] 1 WLR 899, Digest Supp.
Carl-Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] 1 AC 853, [1966] 3 WLR 125, Digest (Cont Vol B) 249, 278b.
Cohen’s Settlement Trusts, Re, Eliot-Cohen v Cohen [1965] 3 All ER 139, [1965] 1 WLR 1229, 47 Digest (Repl) 335, 3001.
Dewar v Inland Revenue Comrs [1935] 2 KB 351, [1935] All ER Rep 568, 104 LJKB 645, 153 LT 357, 19 Tax Cas 561, 28 Digest (Repl) 333, 1475.
Dreyfus v Inland Revenue Comrs (1963) 41 Tax Cas 441.
Holmden’s Settlement Trusts, Re, Inland Revenue Comrs v Holmden [1968] 1 All ER 148, [1968] AC 685, [1968] 2 WLR 300, Digest Supp.
Holt’s Settlement, Re, Wilson v Holt [1968] 1 All ER 470, [1969] 1 Ch 100, [1968] 2 WLR 653, Digest Supp.
Hoystead v Taxation Comr [1926] AC 155, [1925] All ER Rep 56, 95 LJPC 79, 134 LT 354, 21 Digest (Repl) 249, 330.
Inland Revenue Comr v Hamilton-Russell Executors [1943] 1 All ER 474, sub nom Hamilton-Russell Exceutors v Inland Revenue Comrs 25 Tax Cas 200, 28 Digest (Repl) 348, 1540.
Koenigsberg (decd), Re, Public Trustee v Koenigsberg [1949] 1 All ER 804, [1949] Ch 348, [1949] LJR 1098, 39 Digest (Repl) 185, 659.
Pilkington v Inland Revenue Comrs [1962] 3 All ER 622, [1964] AC 612, [1962] 3 WLR 1051, 40 Tax Cas 433, Digest (Cont Vol A) 922, 1132a.
Thoday v Thoday [1964] 1 All ER 341, [1964] P 181, [1964] 2 WLR 371, Digest (Cont Vol B) 365, 4179a.
Whitworth Park Coal Co Ltd v Inland Revenue Comrs, Ramshaw Coal Co Ltd v same, Brancepeth Coal Co Ltd v Same [1959] 3 All ER 703, [1961] AC 31, [1959] 3 WLR 842, 38 Tax Cas 531, Digest (Cont Vol A) 882, 709.
Cases stated
These were appeals by Mrs Eileen Patience Spens (the first taxpayer) and Mrs Olive Holdsworth Hunt (the second taxpayer) against decisions of the Special Commissioners of Income Tax on 8 July 1968 that the taxpayers were liable to surtax in
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respect of income under the trusts of a settlement. The facts, identical in both cases, are set out in the judgment.
M Browne for the taxpayers.
H E Francis QC, P W Medd and J P Warner for the Crown.
20 March 1970. The following judgment was delivered.
MEGARRY J. I am here concerned with one of the many aftermaths of the decision of the House of Lords in Pilkington v Inland Revenue Comrs. The question is whether it is an aftermath that is, if I may so put it, fruitful for the Revenue.
There were two settlements, the 1932 settlement and the 1952 settlement. The 1932 settlement was a voluntary settlement of pure personalty made by Alfred Tyrer. Under this, a substantial fund called Mrs Paul’s fund was settled on certain trusts for the benefit of, inter alia, the first taxpayer and her issue. She is a grandchild of the settlor and one of Mrs Paul’s daughters. Under these trusts, the first taxpayer took a life interest on protective trusts under the Trustee Act 1925, s 33. After her death, the capital and income were to go to her children or remoter issue as she appointed by will, and in default there was a trust for her children who attained 21 years of age or married under that age, in equal shares. The first taxpayer has had one child, a son, David, born on 5 July 1940.
The 1952 settlement was, as it were, one generation further on. It was made by the first taxpayer’s father, Mr Paul, on 19 March 1952, and settled a mere £50 on trust for the benefit of his grandson David and his issue, with the same persons as trustees as had then become the trustees of the 1932 settlement. David and his issue constituted ‘the discretionary class’, and the primary trust was for such of the discretionary class as the trustees should by deed appoint during the ‘income period’, namely, from the execution of the settlement until 21 years after David’s death. Subject to this, during the income period the trustees were to pay or apply the income to or for members of the discretionary class, and had power to pay or apply capital to or for them. There was power to release or restrict the power of appointment, and there was a trust when the income period ended for the members of the discretionary class then in existence, in equal shares.
On 20 March 1952, the day after the 1952 settlement was executed, the trustees of the 1932 settlement purported to exercise the statutory power of advancement, with the written consent of the first taxpayer. The advancement consisted of about £20,000 worth of investments forming part of the trust fund under the 1932 settlement, and these investments were stated to be transferred to the trustees of the 1952 settlement to be treated in all respects as part of the trust fund under that settlement. A memorandum to this effect was endorsed on the 1952 settlement. I shall call the assets thus advanced ‘the advanced fund’. Thereafter, the income from the advanced fund has been paid or applied by the trustees of the 1952 settlement to or for the benefit of David. It is this income with which I am concerned.
Pausing there, it will be seen that the effect of the Pilkington decision had, very understandably, not been foreseen by the legal advisers of the parties. For the purposes of the perpetuity rule, a power of advancement must, speaking broadly, be treated as the equivalent of a power of appointment, so that the lives in being have to be ascertained not in 1952, when the advancement was made, but in 1932, when the 1932 settlement was executed and so the power of advancement was created. David, born in 1940, was not a life in being in 1932, and so the trusts of the 1952 settlement, declared in relation to a period ending 21 years after David’s death, were, quoad the advanced fund, void for perpetuity.
Thus far, it seems plain that the income of the advanced fund was at all material times not the income of David, as was thought before the decision in Pilkington’s case, but the income of the first taxpayer. The Commissioners of Inland Revenue
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have now assessed the first taxpayer to surtax for the five years 1955–56 to 1959–60 in respect of this income, and after appealing unsuccessfully to the Special Commissioners, the first taxpayer now appeals to this court. The appeal is based on an event which occurred in 1960, towards the end of the last year of assessment with which I am concerned.
On 20 January 1960, Cross J made an order under the Variation of Trusts Act 1958. This was in respect of the 1932 settlement; neither the 1952 settlement nor the advancement was mentioned. However, the arrangement approved by the court defined ‘the settled share’, the trusts of which were being varied, by reference to an appendix which listed the investments; and these, of course, did not include the investments comprised in the advanced fund. David and the other beneficiaries under the 1932 settlement, and also the trustees of that settlement, were made respondents to the originating summons. The arrangement was in a not unfamiliar form. The first taxpayer agreed to effect, out of her own moneys and in favour of the trustees, a single premium policy of insurance on her life for the payment of £17,200 to the trustees if she died within five years, with a provision for increasing this if the settled share proved more valuable than a stated amount. The capital of the settled share was divided into three unequal parts. One part went forthwith to the first taxpayer absolutely; another part was to go to her after providing an indemnity against any death duties not covered by the policy; and the remaining part, the ‘reversionary share’, was to be held on the trusts of the settlement which would have taken effect after her death, though with two variations. By one of these, the first taxpayer’s testamentary power under the settlement to appoint to her issue was extinguished, and in its place she was given a similar power of appointment by deed in relation to the reversionary share, although this was exercisable only within five years from the operative date for the arrangement. The second variation extinguished, in relation to the reversionary share, the power which the first taxpayer had under the 1932 settlement to appoint income on protective trusts for a husband who survived her.
The main point before me is the effect of the 1960 order. What the first taxpayer claims is that by means of the doctrine of estoppel per rem judicatam, this order bound all parties to the proceedings, and in particular barred any contention that the income of the advanced fund was still the income of the first taxpayer for surtax purposes, the Pilkington case notwithstanding. However, in the course of argument a further point emerged which it is convenient to consider first. This point arose out of a counter-notice served by the Commissioners of Inland Revenue in these proceedings, to the effect that even if the 1960 order gave rise to the estoppel for which the first taxpayer argued, it would be contended that this could not affect her liability to surtax on income arising before the date of that order. In other words, there was to be an alternative contention that only the last of the five assessments, that for 1959–60, could be affected by any estoppel, the four earlier years of assessment having ended before the 1960 order was made. In meeting this argument, counsel for the first taxpayer put forward a contention which, in its developed form, applied to all five years; and on behalf of the Commissioners of Inland Revenue counsel took no objection to the contention being advanced in this wider form, even though the point had not been taken before the Special Commissioners.
The contention was short and simple. Trading apart, surtax is payable on income actually received, and not on income which is merely receivable. On the footing that the income of the advanced fund was in law income to which the first taxpayer had always been entitled, it had nevertheless not been paid to her, but had been paid or applied by the trustees under the 1952 settlement; and she could not be liable for that. In support of this contention, counsel for the first taxpayer cited Dewar v Inland Revenue Comrs. There, the Court of Appeal held that a legatee was
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not liable to surtax on interest on his legacy to which he was entitled but which he had not claimed or received; and I was referred to much of the judgment of Lord Hanworth MR, and the language of Romer and Maugham LJJ ((1935) 19 Tax Cas at 579, 580, [1935] All ER Rep at 576, 577).
To this short and simple submission counsel for the Crown replied with a submission which was not only equally short and simple but also, in my judgment, unanswerable into the bargain. In Dewar’s case the true point was that no identifiable income had come into existence. No income had been segregated by the executors as being the interest which the legatee could claim. On the other hand, where a trustee who receives income from investments holds those investments on trust for a life tenant, each sum received by the trustee is for surtax purposes the income of the life tenant as soon as it is received, for it is forthwith under the life tenant’s control. The point, I think, is amply established by the decision of the Court of Appeal in Inland Revenue Comrs v Hamilton-Russell Executors ([1943] 1 All ER 474 at 476, 477, 25 Tax Cas 200 at 207, 208) and by the decision of Pennycuick J in Dreyfus v Inland Revenue Comrs ((1963) 41 Tax Cas 441 at 448), and particularly by the authorities which he cited. Passages in the judgments in Dewar’s case ((1935) 19 Tax Cas at 573, 575, 577, [1935] All ER Rep at 573, 574, 575) show that this view is fully consistent with that decision.
In his reply, counsel for the first taxpayer attempted a gallant riposte based on the decision of the House of Lords in Whitworth Park Coal Co Ltd v Inland Revenue Comrs. That, however, was not a case of a trust; and, as counsel for the Crown pointed out in his helpful rejoinder, one cannot derive from the various cases under the various Schedules in the Income Tax Acts any general principle as to whether liability for income depends on payment being made or whether some earlier date is to be taken. All that I am concerned with here is payment in respect of a trust, and I say nothing as to other cases. Nor do I explore the difference between equitable ownership, on the one hand, and the right to claim a debt, on the other, or the difference between owing and owning.
I turn, then, to the question of estoppel. The only form of estoppel in question is estoppel per rem judicatam; counsel for the first taxpayer has expressly disclaimed any argument based on an estoppel in pais. It seems plain that if any estoppel per rem judicatam arises from the 1960 order, it must be of the type conveniently named in the judgment of Diplock LJ, in Thoday v Thoday ([1964] 1 All ER 341 at 351, 352, [1964] P 181 at 197, 198), as ‘issue estoppel’ rather than ‘cause of action estoppel’; for whatever the 1960 order did, it did not adjudicate on a cause of action as to the right to receive the income of the advanced fund. What counsel for the first taxpayer says is that it is implicit in the 1960 order that the income of the advanced fund had been properly paid or applied, and that all concerned, including the first taxpayer, were estopped from asserting the trustees that they had paid it to the wrong person or persons. He based this contention on three main points.
First, the arrangement approved by the court defined the ‘settled share’ that was being dealt with as:
‘The investments and money described in the Appendix hereto (being the settled share of [the first taxpayer] under the trusts of the Settlement) and the property for the time being representing the same.’
’The Settlement’, of course, is the 1932 settlement. This, said counsel for the first taxpayer, showed that all concerned were accepting that the investments and money described in the appendix correctly represented the first taxpayer’s share under the 1932 settlement, and therefore that the investments comprised in the advanced
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fund, which were not mentioned in the appendix, were no longer part of the first taxpayer’s share under the 1932 settlement.
Secondly, there is the provision contained in cl 2(D) of the arrangement. In relation to the sum of £17,200 to be assured on the death of the first taxpayer within five years, this sub-clause provides:
‘For every complete one per centum by which the value of the Settled Share shall at the date of this Order exceed the sum of £118,837 the said sum of £17,200 shall be increased by the same percentage.’
This, said counsel for the first taxpayer, showed that the value of the settled share was a material factor as being liable to alter the rate or amount of estate duty.
Thirdly, he said that under cl 3(A) of the arrangement the extinguishment of the testamentary power of the first taxpayer to appoint to her issue would operate so as to extinguish the power in relation to the advanced fund as well as the settled share. As a matter or construction I do not think that this can be right. I had better read the whole of this part of the arrangement:
‘(3) From and after the Operative Date the Trustees shall hold the Reversionary Share and the intermediate income thereof upon the trusts and with and subject to the powers and provisions affecting the Settled Share and expressed by the Settlement to take effect after the death of [the first taxpayer] save and except that (A) in place of the power given to [the first taxpayer] by the Settlement to appoint by Will or Codicil the capital and income in favour of her children or remoter issue which power shall be extinguished there shall be substituted in relation to the Reversionary Share a like power for [the first taxpayer] to appoint by any deed or deeds revocable or irrevocable executed within five years from the Operative Date (and so that a recoverable appointment made within the said five years shall not be revoked after the expiration of the said five years).’
It will be observed that it is only the reversionary share, defined as being a part of the settled share, which with its intermediate income is to be held with the variations made by para (A), and that the substitution is expressed to be merely ‘in relation to the Reversionary Share’.
Counsel for the first taxpayer’s argument rested on factors such as these, indicating that the whole basis of the arrangement was that it did not relate to the advanced fund at all, and that this was an assumption fundamental to the decision of the court in approving the arrangement. I followed his submissions as best I could, and I feel that it is only too probable that my attempts to summarise his submissions have not done him justice. For the whole concept seemed to me to be somewhat unreal. Let me take the points in turn, as they were put forward by counsel for the Crown.
First, an order made under the Variation of Trusts Act 1958 seems to me unlikely to form a stable foundation for any form of estoppel per rem judicatam. I do not say that there are no circumstances in which it can do so; thus, as counsel for the first taxpayer suggested, an order might estop one of the trustees from denying his trusteeship. But apart from cases such as that, I think that the circumstances would have to be somewhat exceptional. Under the Act, the court decides so little. It is now well settled that in approving the arrangement on behalf of infants, the unborn, and so on, the court is in substance doing no more than supplying the binding consent that they cannot give. This appears from Re Cohen’s Settlement Trusts, Eliot-Cohen v Cohen, Re Holt’s Settlement, Wilson v Holt ([1968] 1 All ER 470 at 478, [1969] 1 Ch 100 at 120), Re Holmden’s Settlement Trusts, Inland Revenue Comrs v Holmden ([1968] 1 All ER 148 at 150, 156, 157, 159, [1968] AC 685 at 701, 710, 711, 713) and Re Ball’s Settlement ([1968] 2 All ER 438 at 442, 443, [1968] 1 WLR 899 at 905), to take the four recent cases in
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chronological order. What varies the trusts is not the order of the court but the agreement or consents of the beneficiaries. The court is merely concerned to consider whether the proposed arrangement will be for the benefit of those on whose behalf approval is being given, apart from one category for which it is not necessary: see the proviso to s 1(1). I wholly fail to see how the expression of satisfaction on this score (together with the order to the trustees to endorse on the settlement a note or memorandum of the order) can provide a foundation for the estoppel claimed. Without pleadings, without any real issue, the court is exercising a jurisdiction which at least in part is paternal and administrative rather than contentious; and this is thin soil on which to cultivate such an estoppel. Furthermore, the estoppel is said to arise on a point which was present to the mind of none. It is not a case of failure to take a point on a matter which was in issue; it is a case of the matter never being in issue at all. A doctrine of estoppel per incuriam is one which I would regard with some caution. There is nothing to suggest that judge, counsel, solicitors or anyone else had the least idea that what was being done involved in any way the right to the income of the advanced fund, standing as it did wholly outside the proceedings.
Counsel for the first taxpayer relied on Hoystead v Taxation Comr for the proposition that an estoppel of this type will apply not only to what is expressly decided but also to what is assumed and admitted but is fundamental to what is decided. The distinction between what is fundamental to the decision and what is ‘merely incidental or collateral’ to it (in the phrase of Lord Shaw’s ([1926] AC at 171, [1925] All ER Rep at 65)) may no doubt often be difficult to make: see, for example, Spencer Bower and Turner, Doctrine of Res Judicatab. There it is said that one must enquire with ‘unrelenting severity’ whether the determination on which it is sought to found the estoppel is ‘so fundamental to the substantive decision that the latter cannot stand without the former. Nothing less than this will do’. I cannot see how the question who is entitled to the income of the advanced fund can begin to satisfy this test where the court has done no more than approve an arrangement relating to a different fund. The question, indeed, barely seems to be even incidental or collateral.
I also bear in mind the words of Evershed LJ in Re Koenigsberg (decd), Public Trustee v Koenigsberg ([1949] Ch 348 at 364, [1949] 1 All ER 804 at 810), to which the Special Commissioners referred. There he said of the doctrine that in a case and circumstances such as were before the court, ‘I approach the problem feeling that the court should be clearly satisfied of the application of the doctrine before saying that it should be applied’. This is not language which suggests that the doctrine should readily be extended into new and untrodden territory. I also bear in mind the warnings by Lord Reid and Lord Upjohn to be found in Carl-Zeiss Stiftung v Rayner & Keeler Ltd (No 2) ([1966] 2 All ER 536 at 554, 573, [1967] 1 AC 853 at 917, 947). I may add that some small but obvious slips appear in the report of Re Koenigsberg (decd). The case concerned the words ‘any provision … was made’ in the Finance Act 1941, s 25(1); and in that context, in phrases such as ‘a will was made when it was executed’ and ‘a will was made at the date of a testator’s death’, the word ‘will’ obviously should be ‘provision’, with minor consequential changes. This involves making two corrections in the headnote, and three elsewhere ([1949] Ch at 348, 351, 357).
Accordingly, for the reasons I have given I hold that the claim based on estoppel per rem judicatam fails. In my judgment, the Special Commissioners were right, and the appeal must be dismissed. The point raised by the counter-notice accordingly
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does not arise. I can see much force in counsel for the Crown’s submissions, but if it were necessary to decide the point I should wish to hear further argument.
There is one other case before me in which it is agreed that the documents, the issues and the decision of the Special Commissioners are, mutatis mutandis, identical. The trusts concern the second taxpayer, who is the sister of the first taxpayer, and the second taxpayer’s daughter. It is agreed that what is decided in the first taxpayer’s case must also apply in the second taxpayer’s case, and I accordingly dismiss the appeal in that case also.
Appeals dismissed.
Solicitors: Macfarlanes (for the taxpayers); Solicitor of Inland Revenue.
K Buckley Edwards Esq Barrister.
Cumings and others v Birkenhead Corporation
[1970] 3 All ER 302
Categories: EDUCATION
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 10, 11, 12, 15 JUNE, 2 JULY 1970
Education – Local education authority – Regard to wishes of parents – Authority giving effect to wishes subject to limitation – Restriction on choice of secondary schools – Parents with children at Roman Catholic primary schools restricted to choice from Roman Catholic secondary schools – Sufficient places at non-Roman Catholic secondary schools only for children from non-Roman Catholic primary schools – Education Act 1944, s 76.
The defendants, the local education authority for the area concerned, sent a circular in 1968 to parents of pupils at primary schools in the area who would be leaving the primary schools at the end of the academic year and entering secondary schools at the commencement of the next academic year. The circular, inter alia, invited parents (on an attached application form) to state their choices of secondary schools for their children in order of preference. There were three Roman Catholic secondary schools listed and it was stated that places at these were available only to pupils attending Roman Catholic primary schools (the places at the non-Roman Catholic secondary schools being available only to pupils attending non-Roman Catholic primary schools). It was further stated, in the circular itself, that pupils attending Roman Catholic primary schools would be considered only for Roman Catholic secondary schools and that parents of such children could not opt for places at non-Roman Catholic secondary schools; the circular continued: ‘This is because, in the long term, maintained County Secondary Comprehensive Schools will only have sufficient accommodation for pupils from County and [Church of England] Primary Schools’. A circular, similar in form, was sent out by the defendants in 1969; although it contained some differences in wording these did not represent any change in the defendants’ policy and were not of significance. The plaintiffs, parents of children allocated places at Roman Catholic secondary schools in the area and ratepayers, objected to the restriction imposed by the circulars on the expression of their wishes which they maintained was contrary to the provisions of s 76a of the Education Act 1944. The plaintiffs did not make objection to the schools to which any of their children had been allocated by the defendants on any religious, scholastic or other
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grounds; nor did they dispute that any secondary school provided proper educational facilities in accordance with s 8b of the 1944 Act; and none complained that a pupil had been allocated to a secondary school repugnant to his religion. On the question whether the defendants were entitled to restrict the expression of the parents’ wishes; and whether the restriction amounted to discrimination or whether it was contrary to public policy on religion in education,
Held – (i) Section 76 imposed a general principle to which a local education authority had to have regard in exercising its powers and performing its duties; accordingly, s 76 could only operate in conjunction with a power or duty to which it was applicable, eg the duty imposed by s 8 to provide sufficient schools. The general principle imposed on a local education authority by s 76 was to have regard to the wishes of parents; but this did not preclude regard being had to other matters; nor did it preclude the local education authority from deciding, in all the circumstances of the exercise of a particular duty, not to give any effect to the wishes of the parents or, a fortiori, to give effect to those wishes subject to limitations (see p 309 g and p 310 b to d, post).
Dictum of Denning LJ in Watt v Kesteven County Council [1955] 1 ALL ER at 476 applied.
(ii) The restriction imposed on the expression of the plaintiffs’ wishes by the circulars, by reason of the insufficiency of accommodation at non-Roman Catholic secondary schools, might be a good or bad reason for imposing a limitation on choice but it nevertheless amounted to a limitation within the scope of holding (i) above and, accordingly, did not amount to a breach of duty arising out of the effect of s 76 considered in conjunction with s 8 (see p 310 e, post).
(iii) Although it might well have been preferable that the defendants should have given all parents choice between all schools without restriction and complied with their wishes insofar as there were cross-applications for schools, the restriction on choice imposed by the circulars was not ultra vires the defendants nor unreasonable by reason of having taken factors into account which ought not to have been taken into account or by reason of having reached a conclusion which no reasonable authority could ever have reached (see p 311 g and j, post).
(iv) The plaintiffs’ claim as ratepayers also failed because the limitation of the parents’ choice of schools did not involve discrimination between ratepayers; the discrimination alleged was not breach of the fiduciary duty on which the rates were held but was as between classes of parents and children, independently of the application of the rates (see p 312 d, post).
(v) As there had been no violation of the principle that religion was totally voluntary, the restriction was not contrary to public policy in education (see p 313 e, post).
Notes
For the general principle that in the performance of statutory education functions regard is to be had to the wishes of pupils’ parents, see 13 Halsbury’s Laws (3rd Edn) 547, para 1168, and for a case on the subject, see 19 Digest (Repl) 598, 42.
For the Education Act 1944, s 76, see 11 Halsbury’s Statutes (3rd Edn) 233.
Cases referred to in judgment
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1947] 2 ALL ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 55, 45 Digest (Repl) 215, 189.
Board of Education v Rice [1911] AC 179, [1911–13] All ER Rep 36, 80 LJKB 796, 104 LT 689, 77 JP 393, 19 Digest (Repl) 630, 206.
Bradbury v London Borough of Enfield [1967] 3 All ER 434, [1967] 1 WLR 1311, 132 JP 15, Digest Supp.
Page 304 of [1970] 3 All ER 302
Ching v Surrey County Council [1910] 1 KB 736, [1908–10] All ER Rep 305, 79 LJKB 481, 102 LT 414, 74 JP 187, 33 Digest (Repl) 120, 775.
Gateshead Union v Durham County Council [1918] 1 Ch 146, 87 LJCh 113, 117 LT 796, 82 JP 53, 19 Digest (Repl) 594, 25.
Prescott v Birmingham Corpn [1954] 3 All ER 698, [1955] Ch 210, [1954] 3 WLR 990, 119 JP 48, 33 Digest (Repl) 100, 623.
Pyx Granite Co Ltd v Ministry of Housing and Local Government [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, 123 JP 429, 45 Digest (Repl) 336, 37.
Reffell v Surrey County Council [1964] 1 All ER 743, [1964] 1 WLR 358, 128 JP 261, Digest (Cont Vol B) 235, 121a.
Roberts v Hopwood [1925] AC 578, [1925] All ER Rep 24, 94 LJKB 542, 133 LT 289, 89 JP 105, 33 Digest (Repl) 23, 107.
Watt v Kesteven County Council [1955] 1 All ER 473, [1955] 1 QB 408, [1955] 2 WLR 499, 119 JP 220; affg [1954] 3 All ER 441, [1955] 1 QB 408, [1954] 3 WLR 729, 19 Digest (Repl) 598, 42.
Wilford v County Council of West Riding of Yorkshire [1908] 1 KB 685, 77 LJKB 436, 98 LT 670, 72 JP 107, 19 Digest (Repl) 618, 142.
Cases also cited
Brown v Board of Education of Topeka (1954) 347 US Rep 483.
Chapman v Essex County Council [1956] 55 LGR 28.
Lee v London Borough of Enfield (1967) 66 LGR 195.
Morris v Carnarvon County Council [1910] 1 KB 840.
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997.
Wood v London Borough of Ealing [1966] 3 All ER 514, [1967] Ch 364.
Preliminary issue
The plaintiffs, Gordon Cumings, Patrick Joseph Butler and William Henry Mighall, by writ of summons dated 4 December 1969, sought declarations that: (1) the defendants, Birkenhead Corporation, had been in breach of their statutory duties under ss 8 and 76 of the Education Act 1944 in sending circulars (the contents of which are referred to in the headnote) to the plaintiffs; (2) the defendants’ actions were unlawful and ultra vires; (3) the defendants were bound, in carrying out their duties under the Education Act 1944, to pay no regard to the religious affiliation of pupils except insofar as this related to the wishes of the parents of such pupils; and (4) the plaintiffs were entitled to express a preference for secondary schools for their children unfettered by any question of religious affiliation, and that their children were entitled to an opportunity of being considered for the purpose of being allocated or transferred to one or other of such schools irrespective of their religious affiliation. On 4 March 1970, a preliminary issue was ordered to be tried: whether, on the facts as pleaded, the defence alleged in para 14 of the defence disclosed a good defence in law. Paragraph 14 of the defence read as follows:
‘If, which is denied, the Defendants are in breach of any of the duties imposed on them by sections 8 and 76 of the Education Act, 1944 or if the Defendants have acted unreasonably with respect to the exercise of any power conferred or the discharge of any duty imposed on them by the said Act the Plaintiffs have no cause of action against them in respect thereof; the Plaintiffs’ only remedy lies in complaint to the Secretary of State for Education and Science under section 99 or section 68 of the said Act, as the case may be.’
The facts are set out in the judgment.
Andrew Rankin QC and Anthony Lester for the plaintiffs.
S W Templeman QC and Julian Byng for the defendants.
Cur adv vult
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2 July 1970. The following judgment was delivered.
UNGOED-THOMAS J read the following judgment. In this action the plaintiffs claim declarations based on their allegations that the defendants have in the circumstances denied to the plaintiffs the opportunity of applying for, and their sons the opportunity of being considered for, allocation to non-Roman Catholic secondary schools. The defendants are the local education authority and the plaintiffs claim as parents and as ratepayers in the defendants’ borough.
The declarations which the plaintiffs claim are, under claims (1) and (2), that the defendants have so acted in breach of their statutory duties under ss 8 and 76 of the Education Act 1944 and unlawfully and ultra vires; under claim (3), that the defendants are bound under the 1944 Act to pay no regard to the religious affiliation of pupils, except insofar as this relates to the wishes of their parents; and under claim (4), that the plaintiffs are entitled to express a preference for secondary schools for their children unfettered by any question of religious affiliation and that the children are entitled to be considered for such schools irrespective of their religious affiliation. The case comes before me now on a preliminary issue:
‘Whether upon the facts pleaded in Paragraphs 1 to 14 inclusive of the Statement of Claim the defence alleged in paragraph 14 of the Defence discloses a good defence in law to all the claims and causes of action pleaded by the Plaintiffs in their Statement of Claim.’
Paragraph 14 of the defence states:
‘… the Plaintiffs’ only remedy lies in complaint to the Secretary of State for Education and Science under section 99 or section 68 of the said Act, as the case may be.’
The ‘said Act’ referred to is the Education Act 1944.
The statement of claim contains a fifteenth paragraph alleging that ‘In the premises the Defendants acted unlawfully and ultra vires and in breach of their statutory duties’ and giving what are called ‘Particulars’. It was, however, common ground that para 15 added nothing to the facts in paras 1 to 14 inclusive. The order directing the preliminary issue raised further questions, but it became doubtful at a very early stage how far they were required, and it seems now that all the matters raised are properly covered by the question which I have read.
It will be convenient to refer immediately to sections of the Act providing for the general scheme of education under the Act, so far as relevant:
‘1(1) c. It shall be the duty of the Secretary of State for Education and Science … to secure the effective execution by local authorities, under his control and direction, of the national policy for providing a varied and comprehensive educational service in every area.
‘7. The statutory system of public education shall be organised in three progressive stages to be known as primary education, secondary education, and further education; and it shall be the duty of the local education authority for every area, so far as their powers extend, to contribute towards the spiritual moral, mental and physical development of the community by securing that efficient education throughout those stages shall be available to meet the needs of the population of their area.
‘8. (1) It shall be the duty of every local education authority to secure that there shall be available for their area sufficient schools … (b) for providing secondary education, that is to say, full-time education suitable to the requirements of senior pupils [senior pupils are, as shown elsewhere in the Act, children between the ages of 12 and 19] … and the schools available for an area shall not
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be deemed to be sufficient unless they are sufficient in number, character, and equipment to afford for all pupils opportunities for education offering such variety of instruction and training as may be desirable in view of their different ages, abilities, and aptitudes, and of the different periods for which they may be expected to remain at school, including practical instruction and training appropriate to their respective needs.’
I will summarise s 8(2). It states that in fulfilling their duties under the section the local education authorities shall in particular have regard to the need for primary and secondary schools being provided in separate schools, for provision of nursery schools or nursery classes, for providing, either in special schools or otherwise, education by special method appropriate for persons suffering from disability and the expedience of securing the provision of boarding accommodation. It will be noted that there is nothing in sub-s (2) which refers to religion at all. The next relevant sections are:
‘9. (2) Primary and secondary schools maintained by a local education authority, not being nursery schools or special schools, shall, if established by a local education authority or by a former authority, be known as county schools and, if established otherwise than by such an authority, be known as voluntary schools:
‘25. (3) It shall not be required, as a condition of any pupil attending any county school or any voluntary school, that he shall attend or abstain from attending any Sunday school or any place of religious worship.
‘(4) If the parent of any pupil in attendance at any county school or any voluntary school requests that he be wholly or partly excused from attendance at religious worship in the school, or from attendance at religious instruction in the school, or from attendance at both religious worship and religious instruction in the school, then, until the request is withdrawn, the pupil shall be excused from such attendance accordingly.
‘(5) Where any pupil has been wholly or partly excused from attendance at religious worship or instruction in any school in accordance with the provisions of this section, and the local education authority are satisfied:—
‘(a) that the parent of the pupil desires him to receive religious instruction of a kind which is not provided in the school during the periods during which he is excused from such attendance;
‘(b) that the pupil cannot with reasonable convenience be sent to another county or voluntary school where religious instruction of the kind desired by the parent is provided; and
‘(c) that arrangements have been made for him to receive religious instruction during school hours elsewhere,
the pupil may be withdrawn from the school during such periods as are reasonably necessary for the purpose of enabling him to receive religious instruction in accordance with the arrangements … ’
Then there follows a proviso which I do not think I need read.
The breaches of statutory duties complained of were of those claimed to be laid down by s 8, which I have just read, and s 76. Section 76d provides:
‘In the exercise and performance of all powers and duties conferred and imposed on them by this Act the Secretary of State and local education authorities shall have regard to the general principle that, so far as is compatible with the provision of efficient instruction and training and the avoidance of unreasonable public expenditure, pupils are to be educated in accordance with the wishes of their parents.’
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The remedies which the defendants contend are the only remedies arise under ss 68 and 99e, which, so far as relevant, provide:
‘68. If the Secretary of State is satisfied, either on complaint by any person or otherwise, that any local education authority … have acted or are proposing to act unreasonably with respect to the exercise of any power conferred or the performance of any duty imposed by or under this Act, he may … give such directions as to the exercise of the power or the performance of the duty as appear to him to be expedient …
‘99. (1) If the Secretary of State is satisfied, either upon complaint by any person interested or otherwise, that any local education authority … have failed to discharge any duty imposed upon them by or for the purposes of this Act, the Secretary of State may make an order declaring the authority … to be in default in respect of that duty, and giving such directions for the purpose of enforcing the execution thereof as appear to the Secretary of State to be expedient; and any such directions shall be enforceable, on an application made on behalf of the Secretary of State, by mandamus.’
The plaintiffs’ complaint originated in two circulars sent by the defendants to them shortly before their sons were due to go from their primary schools to secondary schools. The first circular was sent to the first plaintiff in 1968 and the second circular to the second and third plaintiffs in 1969. It was not suggested that there was any material difference in these circulars, except as I shall indicate. The first circular, so far as material, states:
‘You are aware, I am sure, that at the end of the current school year your son will proceed to the secondary stage of his education. In order that the Education Committee may determine the type of secondary education from which he will best be able to profit, a Classification Examination will be held [on dates specified] … 2. DIRECT GRANT SCHOOLS. In addition to the places in the Birkenhead County Secondary Academic Schools, a limited number of “free” places in Birkenhead School and in St. Anselm’s College (Roman Catholic) is made available to the Education Committee … (3) … It is of the utmost importance, therefore, that parents should indicate on the attached Application Form their first, second and third choice of Roman Catholic Secondary Schools. It is emphasised that pupils who attend Roman Catholic Primary Schools will be considered only for Roman Catholic Secondary Schools; so that parents of these children will not be able to opt for maintained County Secondary Schools. This is because, in the long term, maintained County Secondary Comprehensive Schools will only have sufficient accommodation for pupils from County and C.E. Primary Schools [‘C.E.’ meaning Church of England.] 4 … A boy classified by the Local Education Authority as suitable by ability and aptitude for a secondary academic course will be allocated to a place in one of the town’s County Secondary or Direct Grant Schools and, as far as possible, due attention will be paid to his parent’s choice of school, but you will appreciate that the demand for places in some schools greatly exceeds the number available for distribution, and consequently the first choice of every parent cannot be met … 5 … A pupil, other than one attending a Roman Catholic Primary School, who is classified as suitable for a secondary general course, is allocated to the County Secondary (General) School within whose delineated area his parent or guardian normally resides … A pupil in attendance at a Roman Catholic Primary School so classified will go to the Roman Catholic Secondary (General) School to which the children from that primary school normally proceed … ’
I now refer to the application form which was sent with that circular. Paragraph 8 of that form states:
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“The schools providing secondary academic or technical courses are listed below. Those on the right-hand side are available only for candidates attending Roman Catholic Primary Schools.’
Then it gives directions as to the manner of indicating priority of choice between the schools on the left-hand side and right-hand side, as the case may be. Those on the left-hand side are headed by ‘Direct Grant School: Birkenhead School’ and then there follow four maintained schools. On the right-hand side under the heading ‘Roman Catholic Schools’ there comes first ‘Direct Grant School: St. Anselm’s College’, and then there follow under the heading ‘Voluntary Schools’ two other schools.
Therefore pupils in Roman Catholic primary schools will be considered only for Roman Catholic secondary schools and will go to secondary schools to which children from their primary schools normally proceed, and pupils in non-Roman Catholic primary schools will be considered only for non-Roman Catholic secondary schools and will go to secondary schools within whose area their parents reside.
The only differences which I need mention in the 1969 circular are that the paragraph which I read from para numbered 3 states:
‘Pupils who attend Roman Catholic Primary Schools will normally be expected to attend Roman Catholic Secondary Schools. In the long term, maintained County Secondary Comprehensive Schools may only have sufficient accommodation for pupils from County and C.E. Primary Schools.’
and that in para 8 of the application form, which I have read, the word ‘only’ is omitted. However as the application is effectively similarly limited by para 8 of the application form in each circular these differences appear to me to be without significance—certainly without any significance that would be brought home to the ordinary parent of a primary school child reading them; and it was fairly stated for the defendants that the difference did not represent any change in policy.
The first and third plaintiffs accordingly confined their choices to the listed Roman Catholic secondary schools and their sons were allocated to and have since attended Roman Catholic secondary schools. The second plaintiff disregarded the limitation in the circular and chose in order of preference St Anselm’s Roman Catholic College and two non-Roman Catholic schools. His son was allocated to another Roman Catholic school, but the second plaintiff sent his son as a fee-paying pupil to St Anselm’s where he has been since September 1969.
It is desirable, in the light of the argument, to make quite clear at the outset what this case is not about. It is not about whether a boy is to have religious instruction or worship against his parents’ wishes; or whether he is to attend a school to which his parents object on religious grounds; or whether the school to which the boy goes is in any way inadequate or open to objection for him scholastically or indeed on any other ground. The plaintiffs make no objection at all on any religious, scholastic or other ground to the school to which their sons have been allocated. In particular, it should be made unmistakably clear that none of the parents has pleaded or in any way suggested that he has religious or conscientious objection to his son attending a Roman Catholic school. This is not a case of a local education authority overriding the religious conviction of a parent to force him to send his child to a school religiously repugnant to him. Nor is there any suggestion whatsoever of lack of good faith on the part of the defendants. The plaintiffs’ objections are exclusively based on the restriction, in accordance with the circulars, of the expression of the parents’ wishes and of their sons’ allocation accordingly. I will deal with the plaintiffs’ complaints first as parents and then as ratepayers.
It seems desirable, in view of the course of some of the argument, to state what appear to me to be established propositions of law and relate them to the authorities referred to. (1) If a right exists independently of statute, then no person will be
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deprived by statute of that right or the remedy for it, except by clear words: Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1959] 3 All ER 1 at 6, [1960] AC 260 at 286, 287). (2) If something is done which is prohibited by statute, or which is ultra vires a statute, then remedy is available in the courts, eg by injunction: Bradbury v London Borough of Enfield ([1967] 3 All ER 434 at 442, 445, 446, 449, [1967] 1 WLR 1311 at 1326, 1330, 1331, 1334), Wilford v County Council of West Riding of Yorkshire ([1908] 1 KB 685 at 698, 699), Gateshead Union v Durham County Council ([1918] 1 Ch 146 at 147); and the observations of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corpn ([1947] 2 All ER 680 at 682, 683, [1948] 1 KB 223 at 228, 229). (3) If a duty is created by statute and no remedy is provided by the statute for its breach, then persons damnified by its breach have a corresponding right of civil action: Watt v Kesteven County Council ([1954] 3 All ER 441 at 445, [1955] 1 QB 408 at 414); Ching v Surrey County Council ([1910] 1 KB 736 at 739–741), appears to fall within this principle. (4) If a statute creates a duty with a remedy for its breach, then persons damnified by its breach have nevertheless a right of civil action if the remedy provided is inadequate for the protection of the person injured, the injury is such as the statute was intended to prevent and the persons are those for whose benefit the duty was imposed: Watt’s case ([1954] 3 All ER at 445, [1955] 1 QB at 415), Reffell v Surrey County Council ([1964] 1 All ER 743 at 746, 747, [1964] 1 WLR 358 at 362, 363), and see Bradbury’s case ([1967] 3 All ER at 449, [1967] 1 WLR at 1334). This principle can apply under the Education Act 1944 as between local authority and parent: Bradbury’s case ([1967] 3 All ER at 449, [1967] 1 WLR at 1334) and Watt’s case ([1955] 1 All ER 473 at 477, 480, [1955] 1 QB at 425, 430). Of these propositions those that are relevant for our purposes are the second, third and fourth.
How far are the third and fourth propositions applicable to any duties arising under ss 8 and 76 and any remedies under ss 68 and 99? It was argued that ss 68 and 99 give no sufficient remedy because they only provide that the Secretary of State ‘may’ and not ‘must’ take the courses there open to him. So far as this may have suggested that there was in the Act no sufficient sanction to enforce its provisions, this was a reflection of the argument in Watt’s case, which was rejected by Ormerod J at first instance ([1954] 3 All ER at 445, [1955] 1 QB at 415) and which, although therefore, present to the mind of the Court of Appeal ([1955] 1 All ER 473, [1955] 1 QB 408) in that case, yet was not adopted by them. I respectfully agree that it is a remedy, although through Ministerial discretion. Insofar as the submission was directed to the remedy being inadequate in our particular case, it is considered elsewhere in this judgment in conjunction with the nature of the complaint for which the remedy is sought. If the breach complained of is a breach of s 76 then the breach is a breach of omission, and is therefore a non-feasance for which s 99 provides an adequate remedy; and in the course of the plaintiffs’ argument this was expressly conceded.
But is there a breach of s 76? What s 76 does is to lay down a ‘general principle’ to which the local education authority must ‘have regard’ in exercising its powers and performing its duties. Section 76, therefore, can only operate in conjunction with a power or duty to which it is applicable, which in this case it is submitted arises under s 8. So the plaintiffs say, so far as I understand the argument, that a breach of s 76 is a breach of the duty in conjunction with which it operates because it is a breach of the way of carrying out that duty and is, therefore, not a non-feasance and, therefore, not a breach for which s 99 provides a remedy. But if s 76 imposes a duty at all, then it seems to me that what is complained of is a breach of that duty—the non-feasance
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of not having such regard to the parents’ wishes as is enjoined. Nor is the observance of s 76 made a condition precedent to the performance of any duty, so as to make its performance, without complying with the condition, invalid or a breach of duty and a misfeasance. So either s 76 imposes a duty whose non-performance is a non-feasance for which s 99 is a remedy, or its non-observance does not occasion a breach of duty at all. Further, however, s 76 only lays down a general principle to which the local education authority must have regard.
‘This leaves it open to the county council [which was the local education authority] to have regard to other things as well, and also to make exceptions to the general principle … ’
Watt’s case ([1955] 1 All ER at 476, [1955] 1 QB at 424) per Denning LJ, and see Parker LJ ([1955] 1 All ER at 479, [1955] 1 QB at 429), with whose judgments Birkett LJ ([1955] 1 All ER at 474, [1955] 1 QB at 421) agreed.
So although the parents’ wishes be ‘free and unfettered’, as emphasised for the plaintiffs, yet to have regard to wishes is not to make wishers choosers nor freed from exception. So the local education authority may have regard to other things than parents’ wishes and may, in all the circumstances of the exercise of a particular duty, decide not to give any effect to the parents’ wishes or a fortiori to give effect to those wishes subject to limitations. That is what the circular relied on and pleaded in the statement of claim shows was done in this case. Expression of parents’ wishes was made subject to limitations because
‘… maintained County Secondary comprehensive schools will [or ‘may’ in the 1969 circular] only have sufficient accommodation for pupils from County and C.E. Primary Schools.’
This may be a good or bad reason for thus imposing the limitation, but it is not a breach of duty arising out of what is now being considered, namely the effect of s 76 (requiring regard to be had to parents’ wishes) considered in conjunction with s 8.
Again, the duty imposed by s 8 is a duty to provide ‘sufficient schools’ within the meaning of the section. The section is directed (so far as relevant to our case) to securing ‘sufficient schools’ for secondary education in the local education authority’s area, that is, sufficient schools generally without regard to their religious differences. The only remedy for breach of that duty is under s 99: see Watt’s case ([1954] 3 All ER at 445, [1955] 1 QB at 415) per Ormerod J and per Denning ([1955] 1 All ER at 477, [1955] 1 QB at 425) and Parker LJJ ([1955] 1 All ER at 480, [1955] 1 QB at 430), Birkett LJ concurring. Nor did I understand this eventually to be contested. It was conceded that ‘sufficient schools’, in the sense which I have indicated, were made available by the local education authority, and that, even if the duty to provide such sufficient schools had not been complied with, s 99 would provide the only remedy. Therefore, in my view, what is alleged does not constitute a breach of duty under s 76 or of s 8 (whether considered separately or together) for which remedy is available in the courts.
It was then submitted that, even if there were no breach of the express provisions of s 8 on its own, or of s 76 read in conjunction with those express provisions, yet s 8 disclosed criteria as the only criteria for allocating a child to a secondary school; that the local education authority was under a duty under s 8 to apply such criteria only; and that in acting in accordance with the circulars the local education authority had acted in breach of s 76 and ultra vires and unreasonably in purported execution of that duty. The criteria claimed to be thus disclosed by s 8 were age, ability, aptitude and needs mentioned in the last paragraph of s 8(1). The needs mentioned in that
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paragraph are not needs at large but needs for ‘practical instruction and training’. It was not disputed that all the secondary schools, Roman Catholic and non-Roman Catholic, provided education in accordance with all these criteria, except for such restriction of parents’ expression of wishes and children’s allocation as was made in accordance with the circulars. So the complaint of ultra vires, unreasonableness and breach of s 76 are all based exclusively on such restriction.
Of course, the criteria mentioned in s 8 are not directed by the section to allocation of pupils to schools at all, but only to whether the schools are ‘sufficient’. Even assuming, however, that the criteria for allocation are laid down by s 8, such criteria are not mentioned in the section as exclusive criteria for any purpose at all—not even for sufficiency of schools. Nor does the exclusiveness of such criteria for purposes of allocation withstand examination. It would be difficult to resist the conclusion—and it was not resisted in argument—that such criteria might well result in the best pupils going to the best schools, yet it was conceded that the Act is not concerned with competition between pupils for schools at all. Nor does s 76, taken in conjunction with any duty of allocation, strengthen the plaintiffs’ case—for reasons already canvassed in considering this section in conjunction with the express provisions of s 8.
So, on the footing that there was a duty of allocation, I come to the submission that the defendants in purported exercise of that duty acted ‘ultra vires and unlawfully’, in the words of the statement of claim, or ‘arbitrarily and capriciously’, as stated in argument. This part of the case was founded on the observations of Lord Greene MR in the Wednesbury Corpn case (mentioned in proposition (2) earlier in this judgment). In that case the statute provided no remedy; and the claim was for a declaration that the local authority, in exercising its statutory power to grant licences for cinematograph performances ‘subject to such conditions as the authority think fit to impose’, had in imposing a certain condition acted ultra vires and unreasonably. The submission there ([1947] 2 All ER at 682, [1948] 1 KB at 227, 228) was that the act was ultra vires because unreasonable. Lord Greene MR said ([1947] 2 All ER at 682, 684, 685, [1948] 1 KB at 229, 233, 234) that the court would interfere if it were shown that the local authority had contravened the law, that is, as he explained, acted ‘unreasonably’, including, so far as relevant for our purposes, taking into account what ought not to be taken into account (eg dismissing a teacher because she had red hair) or coming to a conclusion that no reasonable authority could ever have come to. In our case it might well have been preferable that the defendants should in their circulars have given all parents choice between all schools without restriction. If, then, parents of children from non-Roman Catholic primary schools wanted their children to go to Roman Catholic secondary schools or vice versa then it might well have been better that their wishes should have been complied with so far as possible, eg to the extent perhaps, to which the cross-applications balanced each other. As in our case it is not disputed that the schools, either Roman Catholic or non-Roman Catholic, provide proper secondary educational facilities and none of the plaintiffs complains that his child was allocated to a school repugnant to his religion, the course taken by the defendants might appear to be a convenient method of allocation of children, in accordance with what could reasonably be assumed to be and, in the case of the plaintiffs, successfully assumed to be acceptable to, or at any rate not repugnant to, parents’ religious views; and without danger of any of the schools not providing proper secondary education. Despite any such preference against the restriction, it seems to me well removed from contravention of the law on ultra vires or that order and kind of unreasonableness to which Lord Greene MR referred. Any such complaint as might be justified by this way of presenting the plaintiffs’ case seems to me to fall within the remedy provided by s 68.
I come now to the plaintiffs’ claim founded on their being ratepayers. There is
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not in the statement of claim any claim formulated in terms that either expressly or necessarily impliedly, appears as a claim by ratepayers. There is no allegation or suggestion in the statement of claim that the defendants had wasted or misspent ratepayers’ money or discriminated financially in any way between ratepayers. The submission made before me was that, by limiting the expression of parents’ choice of schools, the defendants discriminated unfairly as between different classes of ratepayers; but, as appears from an intervention of junior counsel for the plaintiffs’ during reply, this was rightly sought to be framed as applying rates on such services unreasonably, ie with discrimination as between ratepayers. But no unreasonable or discriminatory application of rates appeared at all, nor, what is material, was it alleged. Ratepayers pay rates and the local authority hold the rate fund in a fiduciary capacity to apply impartially to the services to which it is applicable. Such fiduciary duty is analogous to a trust and is owed to the ratepayers. This appears to me to summarise, so far as relevant for present purposes, the effect of Board of Education v Rice, Roberts v Hopwood and Prescott v Birmingham Corpn. The plaintiffs’ submission appears to me to confuse the discriminatory application of rates to or within school services (there being no such discrimination in our case) with discrimination, not in the application of rates to or within the school services at all, but in the course of acting as the local education authority in exercising statutory duties and powers under the Education Act 1944. The discrimination alleged in our case is no breach of the fiduciary duty on which rates are held; but is, as between classes of parents and children, independently of the application of the rates. So in my view this submission fails too.
It was also submitted in argument that the restrictions of expression of parental wishes and allocation in accordance with the circulars was against public policy. This was not expressly pleaded. In the course of this submission reference was made to the defendants as the rating authority and again as the local education authority. For reasons already given, this submission hardly seems applicable to the defendants as rating authority; but as the submission is at least equally applicable and indeed, as argued, exclusively applicable to the defendants as the local education authority, nothing turns on the distinction, either between the defendants as rating authority and local education authority or between the plaintiffs as ratepayers and parents. The submission was brief and confined within a small ambit in analysis and development. It can, perhaps, be expressed most favourably to the plaintiffs as a submission that the restriction based on whether the child had attended a Roman Catholic or non-Roman Catholic school was contrary to public policy on religion in education. The gravamen of the plaintiffs’ case as presented was—and here I follow the terms of the argument closely—that the restriction constituted ‘involuntary segregation’, involuntary ‘educational apartheid’, on religious grounds, contrary to the ‘great principle that religion is totally voluntary’ embodied in s 25(3).
Of course it is a great principle that religion (at any rate in the sense of belief, instruction or practice) is totally voluntary. But has there been any violation of that principle? That principle is expressed and applied in the Act in the terms of its provisions. As the plaintiffs submitted, ss 25 to 30 of the Act provide a religious code headed ‘Religious Education in County and Voluntary Schools’. For present purposes I need only refer to s 25. Counsel for the plaintiffs expressly referred to s 25(3) which I have already read and which provides that it shall not be a condition of a child attending any county or voluntary school that he should attend or not attend a place of religious worship. Subsection (4) provides that a parent is on request entitled to have his child excused from religious worship at school and have such religious worship during school hours as the parent wishes; and sub-s (5) provides that where
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a local education authority is satisfied that a parent objects to the religious worship and instruction provided by his child’s school and wishes him to receive another kind of religious instruction, he is entitled to have him sent to a reasonably convenient school providing such instruction; or, failing that, that effect shall be given to appropriate arrangements made for him to receive such religious instruction. Thus, for example, in our case, if any parent wanted his child to have Roman Catholic instruction, if not provided by a county school to which, apart from the restriction, he might have been sent, then the local education authority could have sent him to a reasonably convenient Roman Catholic school; and in that event, so far from the allocation to a Roman Catholic school being in breach of any such principle as suggested, it would be an application of it as provided for in the Act. Thus the policy of the Act on religious education, as expressed in its code, and in particular in s 25 on which the plaintiffs specifically relied, is to comply with the requirements of the parents with regard to the religious worship and instruction of their children. No complaint whatsoever is made by the parents that, in being sent to a Roman Catholic school, their children are allocated to a school contrary to their religious requirements. Their objection is not a religious objection, meaning an objection based on religious conviction. Indeed, one of the plaintiffs sends his son to the Roman Catholic school, which was his first choice, even though he disregarded the restriction; and all the plaintiffs formulate their case in precisely the same way. There is here no failure whatsoever to observe the ‘great principle that religion is totally voluntary’, as is recognised and provided for by the Act.
But is the restriction, nevertheless, contrary to public policy on religion in education? This covers the suggestion that the restriction involves segregation in education on religious grounds. Yet it was part of the plaintiffs’ own complaint, in the course of the case, that the restriction, in being made according to the nature of the primary school, was not made according to the plaintiffs’ religion as a parent’s religious requirements might have changed before the child was allocated to a secondary school. Insofar as the latter complaint is correct, it is contrary to the plaintiffs’ present submission; and insofar as it is incorrect, it is subject to what I have already said on religion being voluntary. However, on the assumption that the allocation of a child to a school by the defendants in accordance with the circulars is according to the parents’ religion, the plaintiffs concede and indeed contend that such allocation is contrary to public policy, whilst allocation of the very same child to the same school, in accordance with the parents’ religious wishes, is not. But both such allocations ex hypothesi are according to the parents’ religion and offend no religious considerations, and the result of both allocations is segregation according to religion. The difference lies neither in religion nor in segregation but in parental wishes; and that is the nub of the plaintiffs’ submission. The place of parental wishes in the Act I have already dealt with, consistently, I trust, with the valuable religious principles embodied in it and invoked by the plaintiffs.
I venture to observe that the subject-matter of this action is apt to impinge on sincere, conflicting and sensitive convictions which should evoke warm sympathy. It also requires cool understanding in law and in politics alike. So I trust that some of the terms appearing in this judgment will not be treated as bearing the emotive and loaded significance which they now commonly have. I wish that they could have been avoided altogether.
The overall result is that the remedies for such causes of complaint as the plaintiffs may have are those provided by ss 68 and 99, and must be sought through the Secretary of State.
Question answered in affirmative.
Solicitors: Markbys, agents for D P Roberts & Co, Birkenhead (for the plaintiffs); Sharpe, Pritchard & Co, agents for Ian G Holt, Birkenhead (for the defendants).
Jacqueline Metcalfe Barrister.
Barker and another v O’Gorman and others
[1970] 3 All ER 314
Categories: ECCLESIASTICAL
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 11, 12, 15, 16 JUNE 1970
Ecclesiastical law – Union of churches – Anglican-Methodist union – Approval by Methodist Church conference – Whether approval ultra vires – Methodist Church Union Act 1929, s 8(2), (6).
The Methodist Church, as at present constituted, was formed in 1932 on the execution of a deed of union in accordance with the provisions of the Methodist Church Union Act 1929. Under s 33a of the Act and cl 36 of the deed, the annual conference of the Methodist Church was empowered to unite with other churches by a certain procedure. By the proviso to s 8(2) of the Act and cl 31(a) of the deed, the conference was prohibited from altering or varying the entrenched provisions in the deed of union, which defined the doctrinal standards of the Methodist Church. Section 8(6)b of the Act and cl 31(b) of the deed, however, provided that the conference should be ‘the final authority within The Methodist Church with regard to all questions concerning the interpretation of its doctrines’. In 1956, formal consultations began between representatives of the Methodist Church and the Church of England concerning the possibility of unity. In 1963, a joint report by the two churches was published containing proposals for a scheme towards union in two stages. The first stage was to be one in which the two churches would remain distinct but enter into full communion with each other, coupled with the obligation of accomplishing full union in due course, as envisaged by the second stage. In 1965, a more detailed scheme was prepared on this basis. On 8 July 1969, the annual conference of the Methodist Church, pursuant to s 33 of the Act, resolved to approve stage one of the scheme which resolution required confirmation by the 1970 conference. At this time it became known that a resolution corresponding to that passed by the conference had failed to achieve the requisite majority in the Church of England. There was, therefore, no likelihood of immediate implementation of the scheme. Further, in view of the constitutional position of the Church of England, an Act of Parliament was required to authorise either stage of the scheme. On 8 September 1969, the plaintiffs issued their originating summons in a representative capacity as a minister and a layman of the Methodist Church who opposed the scheme, against the defendants who were the president, vice-president and secretary of the conference, seeking the determination of the following questions: (i) whether the resolution passed by the conference on 8 July 1969 was ultra vires and not capable of being confirmed by the 1970 conference (as required by s 33); (ii) whether the conference had power to appoint any Methodist minister to be a bishop, as provided for in stage one of the scheme; and (iii) whether the funds and property of the Methodist Church and the services of its officers might be used for obtaining legislation authorising the conference to proceed with the scheme.
Held – (i) In answer to the first question in the summons, the resolution passed on 8 July 1969 was not contrary to or inconsistent with the entrenched doctrinal standards and was not ultra vires the conference, because—
(a) in expressing approval of the scheme, the conference necessarily approved the doctrines within that scheme, which was of fundamental importance in relation to s 8(6) and cl 31(b) since, if the conference came to the conclusion that, on the true interpretation of doctrinal standards, the appointment of certain ministers to
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be bishops did not contravene those standards, then within the Methodist Church that question had been determined by the final authority (see p 322 a to c, post);
(b) the Act and the deed of union ought both to bear the same construction, and as the Act suggested and the deed made plain, the conference was not only the final authority as to the interpretation of ‘doctrine’ by reference to the unchangeable ‘doctrinal standards’, but also of those standards themselves, which were embraced by the larger term ‘doctrine’, and were no more than doctrines with a special status and function (see p 322 j to p 323 a and h, post);
(c) the plain purpose of the provisions contained in s 8(6) of the Act and cl 31(b) of the deed of union was to achieve finality in the interpretation of the doctrine of the Methodist Church for which task the conference was well fitted and the courts far less so; accordingly, if there were two possible constructions which might fairly be placed on the language used, the court ought to be ready to adopt that which conferred jurisdiction on the conference, being the body most fitted to exercise it (see p 324 b, post); and
(d) the resolution did no more than establish that the inauguration of stage one of the scheme (which in any event could not commence until Parliament had enacted the necessary statute required by the Church of England), would not be inconsistent with the doctrinal standards of the Methodist Church (see p 324 g, post).
(ii) The court would not give a formal answer to the second question in the summons because it was not more than a future or hypothetical question, as there was no likelihood of immediate implementation of the scheme; the court had gone far towards answering the question in the affirmative in its consideration of the first question (see p 325 b and c, post).
(iii) In answer to the third question in the summons, there was nothing objectionable in the proposed use of the funds and property of the Methodist Church, and the services of its officers, for obtaining legislation to determine conclusively the matters raised by the first question, but as it was difficult to define the precise ambit within which the funds might be employed, the court would not make a formal order (see p 326 b, post).
Case referred to in judgment
A-G v London and Home Counties Joint Electricity Authority [1929] 1 Ch 513, 98 LJCh 162, 140 LT 578, 93 JP 115, 20 Digest (Repl) 210, 40.
Adjourned summons
By an originating summons the plaintiffs, the Rev Bernard Barker and Henry Charles Wanstall (on behalf of themselves and all the ministers and members of the Methodist Church except the defendants) sought an answer to certain questions, the text of which is set out at p 318 b and c, post, on the construction of the Methodist Church Union Act 1929 and the deed of union dated 20 September 1932. The defendants were the Rev Brian Stapleton O’Gorman, Thomas Kenneth James Leese, and the Rev Eric Wilfred Baker (sued as the president, vice-president and secretary of the Methodist conference on behalf of themselves and for and on behalf of the Methodist Church). The facts are set out in the judgment.
J G Le Quesne QC, A A Baden Fuller and N F Moody for the plaintiffs.
George Newsom QC and P G Clough for the defendants.
16 June 1970. The following judgment was delivered.
MEGARRY J. I have before me an originating summons raising questions concerning the proposed union between the Methodist Church and the Church of England. The Methodist Church as at present constituted was formed in 1932 by a union of the Wesleyan Methodist Church, the Primitive Methodist Church and the United Methodist Church, which itself had been formed from a union of three
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churches. The Methodist Church Union Act 1929, contained provisions enabling the union to be effected by means of a deed poll; and on 20 September 1932, such a deed, called the deed of union, was duly executed in accordance with the Act. Power to amend the deed of union was conferred on the annual conference of the Methodist Church (normally called ‘the conference’), and various amendments have in fact been made which do not affect the issues before me. However, the deed of union laid down certain doctrinal standards, and under the deed and the Act these were made immune from alteration or variation by the conference. The basic question before me is whether a resolution of the conference passed on 8 July 1969, and approving stage one of the proposals for union is contrary to these entrenched doctrinal standards.
Let me say at the outset that in discussing doctrinal matters of some complexity I necessarily do so with a relative brevity; and if in so doing I falter, or express myself with less than accuracy, or with a want of felicity, it must be remembered that in considering ecclesiastical doctrines a lawyer untrained in theology may find himself in seas as heavy as those likely to be encountered, if I may say so, by theologians who embark on a discussion on the arcana of the law. Furthermore, in view of an impending meeting of the conference at which these matters will be considered, and hence a natural desire on the parties to have a decision without delay, I am delivering judgment without the advantage of having reserved it. It is, perhaps, hardly necessary to say that I approach my task in this case with reverence and humility, and nonetheless so as a grandson of one who at different stages of his life was a Methodist minister and then a clerk in holy orders in the Church of England.
Over the last three decades, there have been various discussions between representatives of the Methodist Church and the Church of England, exploring the possibility of a union. Formal consultations began in 1956, and in February 1963 a joint report of some 60 pages, including a dissent, was published under the title Conversations between the Church of England and the Methodist Church; I shall call this the ‘Conversations’. The proposal put forward was that there should be two stages. Putting the matter very broadly, the first stage was to be one in which the two churches would remain distinct but would enter on full communion with each other, coupled with the obligation, after growing together and learning how to achieve unity, of accomplishing in due course the second stage, that of union in one church. The Conversations were mainly concerned with proposals for stage one. While there is much in common between the two churches, there are also differences between them, and the Conversations were directed to providing the means for achieving ultimate union, those differences notwithstanding. The principal differences are those relating to episcopacy and the priesthood. The Church of England has the succession of bishops known as the historic episcopacy, whereunder, so far as history goes back, bishops consecrated by bishops have succeeded each other, and bishops can be consecrated only by bishops. The Methodist Church in Great Britain has no bishops. In the Church of England, priests can be ordained only by bishops, and only priests or bishops may celebrate Holy Communion. The Methodist Church, on the other hand, holds the doctrine of the priesthood of all believers, and rejects any priesthood of a particular order or class of men. Instead, the Methodist Church has ministers ordained by the president of the conference or his deputy, and permits Holy Communion to be celebrated not only by ministers but also by those believers who are not ministers but to whom the conference has granted an authorisation or dispensation.
In 1965, the Convocations of the Church of England and the conference of the Methodist Church gave conditional acceptance to the proposals in the Conversations, and set up an Anglican-Methodist Unity Commission to prepare a detailed scheme. This commission was to revise the service of reconciliation outlined in the Conversations and prepare an ordinal for the use of both churches from the beginning of stage one. In 1968 the commission published its final report in two parts. Part 1
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was the ordinal and Part 2 the scheme; in all, the report was some 230 pages long. The services of reconciliation consist, first, of a central service, and second, of local services. In each, there is a reciprocal laying on of hands on the bishops and priests of the Church of England and the ministers of the Methodist Church, and a welcoming of each into the ministry of the church of the other, to preach the word of God and to minister the holy sacraments. In this way, the faithful of one church may recognise and accept the status and authority of the bishops, priests and ministers of the other church. The ordinal seeks to establish a common form for the ordination of deacons, presbyters and bishops. ‘Presbyter’, I should say, is the term used for the second order of ministry instead of the Anglican term ‘priest’, a word which here might have divided rather than united. In view of the constitutional position of the Church of England, an Act of Parliament is requisite to authorise even stage one of the scheme, and accordingly Part 2 of the scheme sets out a draft of a Bill. On at any rate one view, there is no need for legislation by Parliament so far as the Methodist Church is concerned, although as there must be legislation for the Church of England, it may be desirable for that legislation to deal with certain matters, relating to the Methodist Church. It is contemplated that within defined limits there will be a considerable degree of latitude of interpretation in doctrinal matters both in the united church and in the progress towards union.
On 8 July 1969, the conference passed the resolution to which I have referred by 524 votes to 153 votes, a majority of rather over 75 per cent. The resolution reads as follows:
‘1. That this Conference, affirming its faith that the Holy Spirit will lead us into a new Church, gives its approval to the inauguration of Stage One of the Anglican/Methodist proposals, provided that effect shall only be given to this resolution if it receives the approval of 75% of the members of this Conference present and voting thereon.’
’Stage One’ refers to the stage one that I have already mentioned. There were two other resolutions on the order paper, but these were not put to the vote because by the time they were reached it was known that a resolution corresponding to that passed by the conference had failed to achieve the requisite majority in the Convocations in the Church of England. In the Upper Houses of Canterbury and York, the respective votes in favour were 93 per cent and 78 per cent, but in the Lower Houses they were only 67 per cent and 68 per cent. The two resolutions that were not put read as follows:
‘2. That this Conference directs the legislation necessary for the inauguration of Stage One to be prepared in co-operation with the Church of England and hereby request the President to appoint a Commission for that purpose and generally for the purpose of formulating the steps to be taken to inaugurate Stage One; and that if the resolution approving the inauguration of Stage One shall be duly confirmed the Commission shall report to the meeting of Conference at which such resolution is confirmed. 3. That if the first of the foregoing resolutions and this resolution shall be duly confirmed in accordance with Standing Order 32 the approval so given shall thereupon become final and the subsequent steps required to bring Stage One into effect shall not be regarded as new legislation within that Standing Order.’
The conference for 1970 is due to be held very shortly, and I understand that at some future time there will be a further attempt in the Church of England to secure approval of the scheme. The conference will have before it the views of the synods and circuits of the Methodist Church on the 1969 resolution.
In those circumstances the originating summons in this case was issued on 8 September 1969, in a representative action by a minister and a layman of the Methodist
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Church who oppose the scheme, with the president, vice-president and secretary of the conference as defendants on behalf of the Methodist Church, in accordance with s 22 of the Act of 1929. Certain heads have been abandoned and others amended, and as the summons now stands, it asks three questions:
‘1. Whether upon the true construction of the above mentioned Act and Deed of Union the resolution passed by the Methodist Conference on the 8th July 1969 giving its approval to the inauguration of Stage 1 of the Methodist/Anglican proposals was ultra vires and not capable of being confirmed by the 1970 Conference. 2. Whether upon the true construction of the said Act and Deed of Union the Methodist Conference has power to appoint any Methodist Ministers to be Bishops as provided for in Stage 1 of the said proposals. 3. Whether the funds and property of the Methodist Church and the services of the officers of the Methodist Church may be used for obtaining legislation authorising the Conference to proceed with the said Proposals.’
I shall deal with these questions in turn.
On behalf of the plaintiffs, counsel’s attack on the resolution centred round the entrenched doctrinal standards of the deed of union. These are set out in cl 30 of the deed; and in reading this, I insert, for ease of reference, numbers for each paragraph. Clause 30 reads thus:
‘The doctrinal standards of The Methodist Church are as follows: (1) The Methodist Church claims and cherishes its place in the Holy Catholic Church which is the Body of Christ. It rejoices in the inheritance of the Apostolic Faith and loyally accepts the fundamental principles of the historic creeds and of the Protestant Reformation. It ever remembers that in the Providence of God Methodism was raised up to spread Scriptural Holiness through the land by the proclamation of the Evangelical Faith and declares its unfaltering resolve to be true to its Divinely appointed mission. (2) The Doctrines of the Evangelical Faith which Methodism has held from the beginning and still holds are based upon the Divine revelation recorded in the Holy Scriptures. The Methodist Church acknowledges this revelation as the supreme rule of faith and practice. These Evangelical Doctrines to which the Preachers of The Methodist Churh both Ministers and Laymen are pledged are contained in Wesley’s Notes on the New Testament and the first four volumes of his sermons. (3) The Notes on the New Testament and the 44 Sermons are not intended to impose a system of formal or speculative theology on Methodist Preachers, but to set up standards of preaching and belief which should secure loyalty to the fundamental truths of the Gospel of Redemption and ensure the continued witness of the Church to the realities of the Christian experience of salvation. (4) Christ’s Ministers in the Church are Stewards in the household of God and Shepherds of His flock. Some are called and ordained to this sole occupation and have a principal and directing part in these great duties but they hold no priesthood differing in kind from that which is common to all the Lord’s people and they have no exclusive title to the preaching of the gospel or the care of souls. These ministries are shared with them by others to whom also the Spirit divides His gifts severally as He wills. (5) It is the universal conviction of the Methodist people that the office of the Christian Ministry depends upon the call of God who bestows the gifts of the Spirit the grace and the fruit which indicate those whom He has chosen. (6) Those whom The Methodist Church recognises as called of God and therefore receives into its Ministry shall be ordained by the imposition of hands as expressive of the Church’s recognition of the Minister’s personal call. (7) The Methodist Church holds the doctrine of the priesthood of all believers and consequently believes that no priesthood exists which belongs exclusively to a particular order or class of men but in the exercise of its corporate life and worship
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special qualifications for the discharge of special duties are required and thus the principle of representative selection is recognised. (8) The Preachers itinerant and lay are examined tested and approved before they are authorised to minister in holy things. For the sake of Church Order and not because of any priestly virtue inherent in the office the Ministers of The Methodist Church are set apart by ordination to the Ministry of the Word and Sacraments. (9) The Methodist Church recognises two sacraments namely Baptism and the Lord’s Supper as of Divine Appointment and of perpetual obligation of which it is the privilege and duty of Members of The Methodist Church to avail themselves.’
The entrenchment of these standards is achieved by cl 31(a) of the deed and the proviso to s 8(2) of the Act of 1929, which in their essentials are in identical terms. I read cl 31(a) of the deed:
‘The Conference shall not have any power to alter or vary in any manner whatsoever the clauses contained in this Deed which define the doctrinal standards of The Methodist Church.’
There is a further provision that I should mention here, which appears in identical language in s 8(6) of the Act and cl 31(b) of the deed:
‘The Conference shall be the final authority within The Methodist Church with regard to all questions concerning the interpretation of its doctrines.’
The reference in the doctrinal standards to Wesley’s Notes on the New Testament are to his Explanatory Notes upon the New Testament, of which the preface was dated January 4th 1754. The copy before me, printed in 1966, is rather over 1,000 pages long, and consists of the text of the New Testament with extensive annotation by John Wesley. The reference in the doctrinal standards to the Forty Four Sermons is to sermons which were originally published in four volumes in 1746, 1748, 1750 and 1760; and the edition before me, printed in 1967, is a little under 600 pages long. An example of the exercise of the power of the conference to interpret the doctrines of the Methodist Church is in a statement rather over seven pages long that was approved by the conference in 1960 (to which I shall refer as the ‘1960 statement’).
Section 33 of the Act and (in closely similar terms) cl 36 of the deed confer a power on the Methodist Church to unite with other churches. Section 33 provides:
‘The Methodist Church may by a resolution of the conference passed and confirmed as in this section provided unite or amalgamate with any other church or religious body or association upon such terms and conditions as the Methodist Church by a resolution of the conference passed and confirmed as in this section provided may determine Provided that the power conferred by this section shall not be exercised except subject to and in conformity with such provisions (if any) relating to such union or amalgamation as aforesaid as shall be contained in the deed of union or in any alteration or amendment thereof made or new provisions adopted under any power in that behalf contained in the deed of union Provided also that notwithstanding any provision to the contrary contained in the deed of union or in any such alteration amendment or new provision as aforesaid every resolution to which this section refers shall be passed in one year by the votes of not less than three-fourths of the members of the conference of that year present and voting upon such resolution and confirmed in the next subsequent year by a resolution of the conference of that year similarly passed.’
This, said counsel for the plaintiffs, must be read subject to the proviso to s 8(2), entrenching the doctrinal standards. In other words, the power to unite confers no power to vary the doctrinal standards. By virtue of the proviso, the conference was powerless to adopt any doctrine or practice inconsistent with the entrenched doctrinal standards. Of these standards, paras (4), (5), (7) and (8) were crucial, for they showed
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that ministers had no priesthood or priestly virtues special to them, as compared with the priesthood of all believers. Counsel for the plaintiffs accepted that para (4) did not in terms establish that any believer could administer the sacraments, but he said that this was the inference. It was as a matter of church order, and not by reason of any priestly virtue, that there was a distinction between ministers and other believers, in that ministers had a permanent authority to administer the sacraments, whereas laymen required an authorisation or dispensation to do this. Members and laymen differed in what they were authorised to do, but not in what they could be authorised to do. Authority to administer the sacraments was at present frequently given to probationers for the ministry (who were not ordained) and relatively infrequently to others who were not ministers: but the scheme as a matter of doctrine laid it down that, apart from small transitional exceptions, no layman could be authorised to administer the sacraments, and this conflicted with the entrenched doctrinal standards. In referring to the sacraments, I should add that it was not suggested that any difficulty arose about baptism.
This difference as to the sacraments, said counsel for the plaintiffs, exemplified the fundamental difference as to the nature of the ministry. The doctrinal standards made it plain that a minister had no priestly virtue that a layman lacked. The Methodist process of ordination was a recognition by the church that the minister had the call of God to the ministry as his sole occupation, whereas in the Church of England, and in the proposed ordinal of the scheme, some power was conferred in ordination which would not otherwise be conferred. In the preface to the proposed ordinal, in Part 1 of the scheme, there is this paragraph:
‘Ordination is a solemn act by which one who is acknowledged to have received God’s call is brought into a particular Order of Ministry within the Church. Central to it is the action of the Holy Spirit in bestowing upon the person being ordained that which makes him a minister. The words of the Ordination Prayer indicate what that is in respect of each Order. As Hooker says: “The power and authority delivered with these words is itself charisma, a gracious donation which the Spirit of God doth bestow.” Those who voice the prayer are themselves already ministers with authority to ordain, and they accompany it by laying their hands on those who are being ordained. Both Churches present their candidates in the belief that the Holy Spirit will act in response to this prayer. Thus, for both, prayer with the laying on of hands is the outward sign whereby the ordinand receives the gift of the Spirit making him a minister. Both Churches regard ordination as for life, and in neither is ordination to any particular Order ever repeated.’
Counsel for the plaintiffs also referred to certain passages of the ordinal. First, there were the words uttered by the bishop:
‘Send down thy Holy Spirit upon thy servant N. for the office and work of a Presbyter in thy Church … Pour forth thy grace upon these thy servants, we beseech thee, O Lord, that within the royal priesthood of thy People they may faithfully fulfil this their priestly ministry … Make them worthy to offer with all thy People spiritual sacrifices acceptable in thy sight, and to minister the Sacraments of thy New Covenant.’
After delivering a Bible to each of the new Presbyters, the bishop says:
‘Take this Book, a token of the authority which you have received from God to preach the Gospel of Christ and to minister the Sacraments of the New Covenant in the congregations to which you shall be appointed … ’
Finally, there is a prayer:
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‘O God, by whose command all times and seasons run their course: Look graciously upon thy servants, whom thou has made thy Ministers this day … ’
Counsel for the defendants pointed to the existing Methodist ordinal, parts of which are set out in the 1960 statement. These words, which appear as part of the minutes of the 1960 conference, are to be found there.
‘Then after continued prayer the President or his representative, and the assisting Ministers, lay their hands on the Candidates one by one with the words “Mayest thou receive the Holy Spirit for the office and work of a Christian Minister and Pastor, now committed unto thee by the imposition of our hands. And be thou a faithful Dispenser of the Word of God, and of His Holy Sacraments, in the name of the Father and of the Son and of the Holy Ghost“. A Bible is given to each Candidate with the words “Take thou authority to fulfil the office of a minister in the Church of Christ“.’
Then the president or his representatives declare the candidates ‘to be ordained to the office of the Holy Ministry’. Of this, I think that I need say no more than that these words appear to me to go somewhat beyond a process of mere earthly recognition. The essential point here seems to be the proposed abandonment by the Methodist Church of any power to authorise laymen to administer the sacraments.
Counsel for the plaintiffs also emphasised the changes that the introduction of bishops into the Methodist Church would bring about, with the restriction to bishops of the power to ordain; and this, he said, was inconsistent with the entrenched doctrinal standards, which recognised only one ministry. He accepted that cl 30 of the deed did not in terms say that there could be only one order of ministers, but he said that this was implicit. I may say that he accepted that the order of deacons occasioned little difficulty, as they corresponded to probationers, although deacons would be ordained, whereas probationers are not. Wesley himself seems to have ordained deacons, as I observe from the Proceedings of the Wesley Historical Societyc, exhibited to the affidavit of Mr Beckerlegge on behalf of the plaintiffs. It was the presence of bishops in the three-fold order of the ministry that was the real difficulty. Counsel for the defendants, on the other hand, contended that the entrenched doctrinal standards contained nothing to exclude the division of the ministry into two or more grades or ranks, and that if the conference decided to do so, this would in no way conflict with the standards.
The consequence of these conflicts, counsel for the plaintiffs urged, was that the inauguration of stage one would be ultra vires the conference and unlawful, since doctrinal changes would take place at stage one, and stage one was also an essential on the road to stage two, or full union. Approval of the scheme would also be ultra vires the conference, because approval of the scheme involved approval of the doctrine that it included, and the conference could not approve doctrines inconsistent with the entrenched doctrinal standards. He further contended that it was irrelevant that the scheme admittedly could not be implemented without legislation by Parliament. This was no mere case of a resolution to seek Parliamentary approval, such as might have been lawfully made if only the second resolution had been put to and passed by the 1969 conference. This was a resolution unlawful per se, in that the conference approved what it had no power to approve; and it was unlawful although, as the plaintiffs accepted, the resolution would not in fact inaugurate stage one. In the alternative, counsel for the plaintiffs contended that the resolution was a step in an unlawful process, and so, even if lawful per se, it fell as being part of an unlawful process. When the conference expressed its approval of the scheme, it adopted the doctrine of the scheme, and that was what was obnoxious.
It seems to me, if I may say so, that this argument has within it the seeds of its own
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destruction. Counsel for the plaintiffs emphasised, more than once, that in expressing approval of the scheme, the conference necessarily approved the doctrines within that scheme. This is of fundamental importance in relation to s 8(6) of the Act of 1929 and cl 31(b) of the deed. By these, the conference is made ‘the final authority within the Methodist Church with regard to all questions concerning the interpretation of its doctrines’. There is no question of bad faith, of course, in this case, and there is no doubt that the problems of the scheme are problems which have for long been fully considered and much discussed within the church. If, then, the conference came to the conclusion that on the true interpretation of the doctrinal standards the appointment of certain ministers to be bishops did not contravene those standards, then it seems to me that within the Methodist Church that question has been determined by the final authority. If the resolution had in terms stated that the doctrines of the church do not prohibit the creation of bishops, then that, within the church, would have been final; and approval of stage one necessarily involved, on the plaintiffs’ own argument, the same conclusion.
In his reply, counsel for the plaintiffs sought to meet this point by pointing to a contrast of wording between s 8(2) and s 8(6), a contrast which of course also exists between cl 31(a) and cl 31(b) of the deed. What the entrenching provisions of s 8(2) and cl 31(a) put beyond power of alteration or variation by the conference is ‘the doctrinal standards’. What the conference is given final authority to interpret within the Methodist Church is ‘its doctrines’. ‘Doctrinal standards’ and ‘doctrines’ are, it is said, two different things. In its developed form, this submission took the following shape. Suppose that there are two doctrines, A and B, which are put forward within the church on a particular subject-matter. Three propositions then follow. First, the conference can decide whether or not either or both doctrines conform to the doctrinal standards. This decision, however, is not made final by s 8(6), and it is for the courts to decide the matter finally. Second, if both doctrines are held to conform with the doctrinal standards, the conference can decide whether doctrine A or doctrine B is the doctrine of the church; and as this is a process of interpreting doctrine, the decision of the conference is made final by s 8(6). On this view, a statement of new doctrine is part of the process of interpreting the doctrine of the church. Third, if questions then arise on the interpretation of doctrine A (assuming that to be the doctrine adopted under the second step), that also can be interpreted by the conference, and the decision of the conference is made final by s 8(6). On this submission, with doctrines distinct from doctrinal standards, each doctrine of the church falls to be tested by reference to the unchangeable doctrinal standards. Although the final authority as to the interpretation of doctrines in this sense, the conference is given no special powers to interpret doctrinal standards. Therefore, any decision by the conference that the scheme conforms with the doctrinal standards is a matter which falls within the first head, and s 8(6) does not apply.
I did not find this point altogether easy. There is indeed a verbal contrast; and if Parliament had not intended any distinction between ‘doctrinal standards’ and ‘doctrines’, it is not obvious why the different language was employed. On the other hand, I find it difficult to see why, if Parliament had any intention to make such an important distinction, it should entrust this intention to so frail a carrier as this unexplained verbal contrast. Nor do I see why finality should be conferred on the conference for the lesser, the unentrenched doctrines, whereas competence but not finality should be conferred on the conference for the greater, the entrenched doctrinal standards. Theological interpretation is a matter for which an expert body such as the conference is far better qualified than the courts; yet on this submission the final word on the more important matter is to be entrusted to the less skilled body. Even if the Act stood alone, I think that I should, although after some hesitation, reject counsel for the plaintiffs’ submission in favour of counsel for the defendants’ simpler interpretation, put forward in the reply that I invited him to make because counsel for the plaintiffs
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had unleashed his contention for the first time in his reply. Counsel for the defendants submitted, quite simply, that ‘doctrine’ was a larger term that embraced the whole of the doctrinal standards, as well as other matters of doctrine not laid down in those standards. In other words, the doctrinal standards were no more than doctrines with a special status and function. The contents of the inner circle, that of doctrinal standards, were entrenched; but all of the larger circle of doctrines, which included the inner circle of doctrinal standards, were within s 8(6) and so subject to the final authority of the conference in their interpretation.
The Actd, which is a private Act, was passed in 1929. It contemplated the preparation and execution of the deed of union, which in fact was executed over three years later. I do not know how far it is legitimate in such circumstances to look at the deed as an aid to interpreting the Act, whether under the doctrine of contemporanea expositio or otherwise. It will be observed that cl 30 of the deed begins by stating that: ‘The doctrinal standards of the Methodist Church are as follows … ' Paragraph (2) begins:
‘The Doctrines of the Evangelical Faith which Methodism has held from the beginning and still holds are based upon the Divine revelation recorded in the Holy Scriptures.’
Later on in this paragraph, there is a reference to ‘Evangelical Doctrines’; and para (7) begins: ‘The Methodist Church holds the doctrine of the priesthood of all believers … ' The deed is thus in these respects laying down the doctrinal standards in terms of doctrines, and this ill-accords with the suggested distinction between them. Furthermore, even if the Act cannot be construed by reference to the deed, the deed contains cl 31, which of its own force makes the conference the final authority within the Methodist Church with regard to all questions concerning the interpretation of its doctrines. Counsel for the plaintiffs, indeed, was constrained to assert that cl 30, the initial words of which professedly state that what follows are the ‘doctrinal standards’, in fact contains a mixture of doctrines, doctrinal standards and mere rules of practice; and he gave the first sentence of para (8) as an example of the last category. Be that as it may, what is made unalterable is not merely the doctrinal standards, but the clauses contained in the deed which define the doctrinal standards, so that even if any of the contents of such a clause are described as a ‘doctrine’, they are unalterable. As under cl 31(b) the conference is made the final authority as to the interpretation of the doctrines of the Methodist Church, it would be odd if that meant that the conference could provide a final interpretation of those parts of the unalterable doctrinal standards in cl 30 which were called ‘doctrines’, but not any other part of cl 30.
I face a problem in statutory interpretation which, so far as I know, has no peer. As I have said, looking at the Act alone, I think, after some hesitation, that I would hold counsel for the defendants’ interpretation of s 8(6) to be right. On the construction of the deed, I think that interpretation to be plainly right. Putting the Act and deed together, as impelled by common sense and, I trust, at least permitted by law in this somewhat special case, I feel no doubt that both should bear the same construction, and that is the one urged on me by the defendants, namely, that the finality of interpretation accorded to the conference embraces the doctrinal standards. In obedience to cl 38 of the deed, as to marginal headings, I ignore the fact that the heading to cl 30, immediately preceding the phrase ‘The doctrinal standards’, is ‘Doctrine’.
On this point, counsel for the plaintiffs made an alternative submission which, if right, made it unnecessary for him to rely on any distinction between doctrinal standards and doctrines. It was that the purpose and effect of s 8(6) and cl 31(b) was not to oust the jurisdiction of the courts where they applied, but merely to ensure that on questions concerning the interpretation of doctrines there should be within the
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Methodist Church no authority higher than the conference. The phrase is ‘the final authority within the Methodist Church with regard to all questions concerning the interpretation of its doctrines’, and not ‘the final authority with regard to all questions within the Methodist Church concerning the interpretation of its doctrines’, so that the finality is merely within the church, and not a general finality. As a matter of grammar I can see the force of this; but grammar is not all. The plain purpose of these provisions is to achieve finality in the interpretation of the doctrines of the Methodist Church. This is a task for which, as I have said, the conference is well fitted and the courts far less so; and in those circumstances, if there are two possible constructions which may fairly be placed on the language used, I think that the courts should be ready to adopt that which confers the jurisdiction on the body most fitted to exercise it, here the conference. Further, there is nothing before me which suggests that there was ever any suggestion that there should be any body superior to the conference in the interpretation of doctrine. The Act contemplated the conference as being the highest body in the Methodist Church, and the deed carried out that contemplation. A provision in the Act directed to excluding the non-existent danger of an attempt to erect some superior body would have been strange enough, but a provision to that effect in the deed which constituted the conference as the governing body of the Methodist Church (see cl 3(1)) and created no rival body seems to me an extravagance. In those circumstances, this contention fails. As I read s 8(6) and cl 31(b), when the conference was given final authority within the Methodist Church with regard to all questions concerning the interpretation of its doctrines, all within the church became bound by any exercise of that final authority.
I turn from that to a further point. What s 8(2) of the Act and cl 31(a) of the deed provide is that the conference ‘shall not have any power to alter or vary in any manner whatsoever’ the clauses in the deed defining the doctrinal standards of the Methodist Church. If a resolution of the conference were passed which purported to delete one of the clauses laying down those standards, or to change words in it, or to insert additional words, then in each case the resolution would, as it seems to me, plainly be void. This is what the conference cannot do; and counsel for the plaintiffs did not suggest that anybody has purported to do any of these things. What has been approved by the resolution is merely ‘the inauguration of stage one’; and it is common ground that stage one cannot commence until Parliament has enacted the necessary statute required by the Church of England. Parliament may refuse to do this, or the Church of England may refuse to proceed with the scheme; and in any event, some time must pass before any effective change is made. In the meantime, I cannot see what operative change has been made within the Methodist Church. Its members have not been told to alter in any way the doctrines in which they believe, or the actions which they perform. Counsel for the plaintiffs urged that doctrinal changes had been made; but I do not think that in this respect the resolution does more than establish that the inauguration of stage one, if it ever takes place, will not be inconsistent with the doctrinal standards of the Methodist Church. The resolution clears the way for the changes which may or may not take place, and which in any event will need further resolutions to carry them through. In short, I cannot see how the resolution can be said to amount to the exercise of a ‘power to alter or vary in any manner’ the clauses contained in the deed which define the doctrinal standards.
Counsel for the plaintiffs, however, said that the vice of the resolution is that it is inconsistent with the doctrinal standards, and that it is an essential implication from providing these standards that the doctrines of the church will comply with them. Let that be so; yet the body with final authority has passed the resolution, and in so doing has necessarily decided that the resolution is not inconsistent with the doctrinal standards. It seems to me that this applies to all that is involved in the resolution, whether the power to appoint bishops, the proposed requirement of episcopal ordination, the proposed abandonment of the power of dispensation, or any of the other matters discussed before me. Although the resolution may lead to changes in the
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practice of the Methodist Church, I do not think that it can be said to be ultra vires the conference or incapable of being confirmed by the 1970 conference. In those circumstances, subject to any submissions by counsel on the form of order, I propose to answer ‘No’ to question 1 in the summons.
I turn to question 2. I cannot see that this is more than a future or hypothetical question. There is no suggestion of any present proposal to appoint bishops. If the conference approves the scheme by the requisite majority at the 1970 conference, and if Convocations do the same, and if Parliament passes the necessary legislation, the question may become a present one; but it is not so now. It may never become a present question, either because the scheme never goes through, or because the legislature puts the matter beyond doubt in some Act of Parliament. However, I have gone far towards answering the question in the affirmative in considering question 1, and I propose to leave matters there, without formally answering the question.
I may add that in sermon 34e, on the ‘Catholic Spirit’, published in 1750 John Wesley, who, of course, lived and died an episcopally ordained clergyman of the Church of England, said:
‘Hold you fast that which you believe is most acceptable to God, and I will do the same. I believe the Episcopal form of church government to be scriptural and apostolical. If you think the presbyterian or Independent is better, think so still, and act accordingly.’
It is accepted, too, that John Wesley never condemned episcopacy. Two passages in the Explanatory Notes upon the New Testamentf show that John Wesley’s views were that bishops and presbyters (or elders) were words that were used interchangeably in early days; but of course in his sermon John Wesley was speaking of his then present belief. An inability to prove that the episcopate has an apostolic succession does not seem to me to vitiate the statement in the sermon. Furthermore, in 1947 the conference endorsed the approval that it had previously given to a union of churches to form the United Church in South India. One of the churches included in that union was the Methodist Church in India. That United Church is in full fellowship in communion with the Methodist Church, even though part of the basis of union was an acceptance of the historic episcopacy, including the requirement that presbyters should be ordained by bishops, and that bishops should be consecrated by the laying on of hands of at least three bishops. In effect, counsel for the plaintiffs submitted that that was a wrong decision of the conference, and that two wrongs do not make a right. However, even allowing for certain other matters relevant to this issue, I find it difficult to see how it can be said to be a doctrine of Methodism that there must be no bishops in the church.
I turn, then, to question 3, dealing with the use of the funds and property of the church and the services of its officers. On the basis of my answer to question 1, the conference has power to proceed with the scheme. If I am right in this, then it may well be that no legislation is necessary from the point of view of the Methodist Church. However, the decision of a judge at first instance is not final, and even if this case is carried to the House of Lords, it may well leave unresolved many question of possible controversy in the scheme which are not covered by the decision. Legislation alone can put the matter beyond doubt. In those circumstances, is it to be said that the funds and property of the church, and the services of its officers, may not be used for the purpose of setting at rest any doubts that there may be on this matter of high importance? I say nothing about a possible case in which the conference might seek legislation which would clearly alter or vary any of the entrenched doctrinal standards. If the conference resolves to seek the authority of Parliament to alter any of these,
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entrenched as they are by the Act of 1929, then I can well see that there will be a strong argument that the funds of the church and the services of its officers ought not to be so employed; consider, for example, A-G v London and Home Counties Joint Electricity Authority and the cases there cited. But that is not this case. Counsel for the plaintiffs very properly accepted that under this head he must satisfy the court that there is an inconsistency between the powers conferred and the powers sought, and that it would not suffice to establish a mere uncertainty as to the ambit of the powers, to be cured by legislation. He has not satisfied me of this, and it accordingly seems to me that there is nothing objectionable in the proposed use of the funds and property of the Methodist Church or the services of its officers. I am not sure, however, that it would be right simply to answer ‘Yes’ to question 3, in view of its width, and I shall therefore seek the assistance of counsel on this point. [His Lordship, having conferred with counsel, concluded that it was difficult to define the precise ambit within which the funds might be employed, and that no formal order should be made in answer to question 3.]
Order that the answer to question 1 in the summons be ‘No’. The court did not think fit to make any order on questions 2 and 3.
Solicitors: H C Wanstall, Southend-on-Sea (for the plaintiffs); Pothecary & Barratt (for the defendants).
R W Farrin Esq Barrister.
London Borough of Hounslow v Twickenham Garden Developments Ltd
[1970] 3 All ER 326
Categories: CONSTRUCTION: CONTRACT: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 13, 14, 15, 16, 17, 20, 21, 22 APRIL, 13 MAY 1970
Licence – Licence to occupy land – Contractual licence – Nature of contractual licence.
Licence – Licence to occupy land – Contractual licence – Enforcement of rights by licensor – Equitable remedies.
Licence – Licence to occupy land – Contractual licence – Irrevocable licence – Implied term that licensor would not revoke licence during term of contract.
Injunction – Interlocutory – Mandatory injunction – Discretion – Reluctance of court to grant except when success at trial probable.
Building contract – Architect – Architect’s notice – Requirements of natural justice – RIBA contract, Local Authorities Edition with Quantities 1963, condition 25.
A licence to enter land is contractual licence if it is conferred by a contract; it is immaterial whether the right to enter the land is the primary purpose of the contract or is merely secondary. A contractual licence is not an entity distinct from the contract which brings it into being but merely one of the provisions of the contract. The willingness of the court to grant equitable remedies in order to enforce or support a contractual licence depends on whether or not the licence is specifically enforceable. But even if a contractual licence is not specifically enforceable, the court will not grant equitable remedies to procure or aid a breach of the licence (see p 343 d to f, post).
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By a contract which incorporated the RIBA conditions with some variations dated 9 August 1966, the defendant contractor was employed by the borough to construct the substructure, viz roads, sewers, drains, car parks etc, on a site of some 27 acres for the borough. Condition 25(1)(b) provided that if the contractor ‘fails to proceed regularly and diligently with the Works’ the architect might give him notice specifying the default and if the default continued for 14 days the borough might by notice, determine the contractor’s employment. The date for completion of the contract was stated to be four years from 19 September 1966 but this was later extended by two months. There were labour troubles in 1968 and 1969 and the entire site was shut down by a strike from 8 November 1968 until the end of June 1969. When the strike ended and work was resumed in July 1969 the borough complained that the work on the site was not sufficiently vigorous. After some contentious correspondence as to the slow progress of the work, the architect gave notice on 15 December 1969 under condition 25(1) that as the contractor had failed to proceed with the work regularly and diligently the borough were entitled, after 14 days, to determine the contractor’s employment. By letter dated 19 January 1970 the borough gave notice again under condition 25 determining the contractor’s employment. The contractor wrote refusing to accept repudiation of the contract and elected to proceed with the work in accordance with the contract. On 3 March 1970, the borough issued a writ claiming, inter alia, damages for trespass and failure to vacate the site and an injunction to restrain the contractor from trespassing on the site. By notice of motion of the same date the borough claimed an order restraining the contractor from entering, remaining or otherwise trespassing on the site or from interfering in any way with the borough’s lawful possession of the site.
Held – (i) The licence given to the contractor to carry out the works on the site was not a separate entity but was created by and formed part of the contract (see p 336 b, post); it was by its terms irrevocable in that there was an implied obligation on the borough not to revoke it while the period of the contract was running and equity would not assist the borough to revoke the licence in breach of its contract (see p 337 b and h, post) (dictum of Lord Greene MR in Millenium Productions Ltd v Winter Garden Theatre (London) Ltd [1946] 1 All ER at 680 followed; Thompson v Park [1944] 2 All ER 477 not followed). Accordingly, if the borough failed to establish the validity of the notices given by itself and the architect, it was not entitled to the injunctions sought (see p 338 c, post).
(ii) The validity of the notices depended on disputed matters of fact, ie whether or not the work had been regularly and diligently proceeded with, and before granting injunctions which would be partly mandatory in effect, the court on motion must feel a high degree of assurance that these disputed matters would at the trial of the action be resolved in favour of the borough; and as the court felt no such assurance the injunctions would not be granted (see p 355 g and p 356 g, post).
Per Megarry J. The principles of natural justice do not apply to an architect’s notice under condition 25 of the RIBA contract (Local Authorities Edition with Quantities, 1963 edition) (see p 348 b, post).
Notes
For contractual licences, see 23 Halsbury’s Laws (3rd Edn) 430–432, para 1026, and for cases on licences, see 30 Digest (Repl) 526–550, 1635–1830.
For the grant of mandatory interlocutory injunctions, see 21 Halsbury’s Laws (3rd Edn) 369, para 774, and for cases on the subject, see 28 Digest (Repl) 773, 774, 246–264.
Cases referred to in judgment
Anisminic Ltd v Foreign Compensation Commission [1969] 1 All ER 208, [1969] 2 AC 147, [1969] 2 WLR 163, Digest Supp.
Page 328 of [1970] 3 All ER 326
Armstrong v Sheppard & Short Ltd [1959] 2 All ER 651, [1959] 2 QB 384, [1959] 3 WLR 84, 46 Digest (Repl) 393, 355.
Bickerton (T A) & Son Ltd v North West Metropolitan Regional Hospital Board [1969] 1 All ER 977; affd HL sub nom North West Metropolitan Regional Hospital Board v T A Bickerton & Son Ltd [1970] 1 All ER 1039, [1970] 1 WLR 607.
Birmingham & District Land C v London & North Western Ry Co (1888) 40 Ch D 268, [1886–90] All ER Rep 620, 60 LT 527, 31 Digest (Repl) 565, 6856.
Buchanan-Wollaston’s Conveyance, Re, Curtis v Buchanan-Wollaston [1939] 2 All ER 302, [1939] Ch 738, 108 LJCh 281, 160 LT 399; affg [1969] Ch 217, 38 Digest (Repl) 822, 348.
Carpenters Estates Ltd v Davies [1940] 1 All ER 13, [1940] Ch 160, 109 LJCh 92, 162 LT 76, 40 Digest (Repl) 332, 2723.
Cork Corpn v Rooney (1881) 7 LR Ir 191, 7 Digest (Repl) 427, * 799.
Cowell v Rosehill Racecouse Co Ltd (1937) 56 CLR 605, 30 Digest (Repl) 541, * 551.
Dean v Prince [1954] 1 All ER 749, [1954] Ch 409, [1954] 2 WLR 538, 9 Digest (Repl) 589, 3898.
Denton v Auckland City [1969] NZLR 256.
Donmar Productions Ltd v Bart (1964) [1967] 2 All ER 338n, [1967] 1 WLR 74on, Digest Supp
Durayappah v Fernando [1967] 2 All ER 152, [1967] 2 AC 337, [1967] 3 WLR 289, Digest Supp.
Equitable Trust Co of New York v Dawson Partners Ltd (1926) 27 Lloyd LR 49.
Errington v Errington [1952] 1 Al ER 149, [1952] 1 KB 290, Digest (Cont Vol A) 992, 1684a.
Feltham v Cartwright (1839) 5 Bing NC 569, 9 LJCP 67, 132 ER 1219, 31 Digest (Repl) 580, 7005.
Foster and Dicksee v Hastings Corpn (1903) 87 LT 736, 2 Digest (Repl) 449, 177.
Gaiman v National Association for Mental Health [1970] 2 All ER 362, [1970] 3 WLR 42.
Garrett v Banstead & Epsom Downs Ry Co (1864) 4 De GJ & Sm 462, 12 LT 654, 46 ER 997, 7 Digest (Repl) 426, 346.
Harman Pictures NV v Osborne [1967] 2 All ER 324, [1967] 1 WLR 723, Digest Supp.
Hatrick (AC) (NZ) Ltd v Nelson Carlton Construction Co Ltd [1964] NZLR 72.
Hickman & Co v Roberts [1913] AC 229, 82 LJKB 678, 108 LT 436n, 7 Digest (Repl) 361, 101.
Hurst v Picture Theatres Ltd [1915] 1 KB 1, [1914–15] All ER Rep 836, 83 LJKB 1837, 111 LT 972, 30 Digest (Repl) 540, 1742.
John v Rees [1969] 2 All ER 274, [1970] Ch 345, [1969] 2 WLR 1294, Digest Supp.
Jones (James) & Sons Ltd v Earl of Tankerville [1909] 2 Ch 440, 78 LJCh 674, 101 LT 202, 2 Digest (Repl) 119, 878.
Kerrison v Smith [1897] 2 QB 445, [1895–99] All ER Rep 215, 66 LJQB 762, 77 LT 344, 30 Digest (Repl) 539, 1732.
Munro v Wivenhoe & Brightlingsea Ry Co (1865) 4 De GJ & Sm 723, 12 LT 655, 46 ER 1100, 7 Digest (Repl) 426, 345.
Page v Llandaff & Dinas Powis Rural District Council (1901) 2 Hudson’s BC (4th Edn) 316, (8th Edn) 239, 7 Digest (Repl) 366, 115.
Panamena Europea Navigaction (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428, [1947] LJR 716, 176 LT 524, Digest (Cont Vol B) 36, 289f.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, [1963] 2 WLR 935, 37 Digest (Repl) 195, 32.
Shepherd Homes Ltd v Sandham [1970] 3 WLR 348.
Thompson v Park [1944] 2 All ER 477, [1944] KB 408, 113 LJKB 561, 170 LT 207, 46 Digest (Repl) 357, 65.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 2 All ER 657, [1955] 1 WLR 761, Digest (Cont Vol A) 1250, 1872a.
Vaughan v Hampson (1875) 33 LT 15, 46 Digest (Repl) 424, 688.
Westminster City Council v J Jarvis & Sons Ltd [1970] 1 All ER 943, [1970] 1 WLR 637.
Page 329 of [1970] 3 All ER 326
White & Carter (Councils) Ltd v McGregor [1961] 3 All ER 1178, [1962] AC 413, [1962] 2 WLR 17, Digest (Cont Vol A) 291, 3043a.
Winter Garden Theatre (London) Ltd v Millenium Productions Ltd [1947] 2 All ER 331, [1948] AC 173, [1947] LJR 1422, 177 LT 349; Millenium Productions Ltd v Winter Garden Theatre (London) Ltd [1946] 1 All ER 678, 115 LJCh 297, 175 LT 434; (1946) 115 LJCh 185, 175 LT 434, 45 Digest (Repl) 201, 83.
Wolverhampton Corpn v Emmons [1901] 1 KB 515, 70 LJKB 429, 84 LT 407, 7 Digest (Repl) 416, 306.
Wood v Leadbitter (1845) 13 M & W 838, [1843–60] All ER Rep 190, 14 LJEX 161, 4 LTOS 433, 9 JP 312, 153 ER 351, 30 Digest (Repl) 542, 1771.
Wood v Manley (1839) 11 Ad & El 34, [1835–42] All ER Rep 128, 9 LJQB 27, 113 ER 325, 39 Digest (Repl) 673, 1707.
Motion
By writ issued on 3 March 1970 the London Borough of Hounslow claimed damages from Twickenham Garden Developments Ltd (the contractor) for breach of contract and for trespass and failure to vacate the building site on which the contractor had been working under the contract; the borough also sought an injunction to restrain the contractor from trespassing on the building site. On the same date, the borough served notice of motion seeking an order restraining the contractor until judgment in the action or further order from entering, remaining or otherwise trespassing on the building site or any part of it or from interfering in any way with the borough’s lawful possession of the site. The facts are set out in the judgment.
Jeremiah Harman QC, I N Duncan Wallace and Elizabeth Appleby for the borough.
F P Neill QC and K S Rokison for the contractor.
Cur adv vult
13 May 1970. The following judgment was delivered.
MEGARRY J read the following judgment. This motion raises a number of questions of some difficulty and importance, especially on the law of licences to occupy land and on the construction and effect of one of the standard forms of building contracts, the form usually but perhaps not accurately called the RIBA form. The motion is brought by the plaintiff, the London Borough of Hounslow; I shall call it ‘the borough’. The defendant is a company named ‘Twickenham Garden Developments Ltd’, a subsidiary of the Turriff Construction Corpn Ltd. The defendant company carries on the work of building contractors, and I shall call it ‘the contractor’. The dispute arises over a building site in Hounslow of some 27 acres called the Ivybridge site; and on this site it is proposed to construct rather over 1,000 dwelling units, mostly in the form of flats and maisonettes, including four tall buildings. The land was formerly owned by the parent company, but by a contract dated 17 November 1964, that company agreed to sell it to the Borough of Heston and Isleworth (a predecessor of the borough) for £1,000,000, the purchaser giving the parent company a letter of intent under which the parent company was to carry out the development of the site.
In the event, the borough entered into two contracts with the contractor, the first dated 9 August 1966 in respect of the substructure, and the second dated 10 February 1967 in respect of the superstructure. I shall refer to these respectively as ‘the substructure contract’ and ‘the superstructure contract’. The substructure contract, I may say, covered matters such as roads, sewers, drains, car parks, underground services and street lighting. The contract price under the substructure contract was £1,233,827 18s 6d and under the superstructure contract was £3,473,449 16s 8d, so that, with the price of land, rather over £5,700,000 was involved. Each contract incorporated the RIBA conditions with certain variations, using the 1963 edition of
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what is called the ‘Local Authorities Edition with Quantities’. The date for completion of the substructure contract was stated in the appendix to the contract to be four years from the date of possession, and the date for possession was ‘to be agreed (not being earlier than the execution of a performance bond)’. The date for completion of the superstructure contract was stated in the appendix to the contract to be four years from 19 September 1966, with the date for possession expressed in the same terms as under the other contract.
During 1968 and 1969 there were labour troubles on the site, and from 8 November 1968 until the end of June 1969 there was a strike which shut down the entire site. While the strike was still in existence, the contractor gave the borough written notice dated 22 May 1969, to determine the superstructure contract forthwith, on the ground that the whole or substantially the whole of the uncompleted works had been suspended for a continuous period of one month by reason of force majeure. Such a notice is provided for by condition 26(1)(c)(i) of the contract, when read with the appendix, although at the time it was hotly contested whether the strike constituted force majeure. Three months later, after some sturdy correspondence, a letter from the borough dated 25 August 1969 informed the contractor that the borough regarded the contract as having been repudiated by the contractor; and it is not disputed that the borough has accepted that repudiation. With that, the superstructure contract was at an end, and disappeared from the foreground of what I have to decide, although no doubt remaining for combat hereafter. No new contractor for the superstructure contract has yet been appointed. The issue before me arises out of the substructure contract, which continued in force despite the termination of the superstructure contract.
With the end of the strike, the contractor resumed work on the site under the substructure contract at the beginning of July 1969. However, this resumption, says the borough, was not sufficiently vigorous; and this is one of the main factual bones of contention. The performance of the substructure contract was affected to some extent by an ‘instruction order’, numbered 245 and dated 16 July 1969, given to the contractor by the architect. This divided the work remaining to be done under the substructure contract into two phases, the second of which was to be deferred until the architect gave instructions, and when it was required by the general contractor on the superstructure contract, when there again was one. The deferred phase included work such as horticultural work, playgrounds, grassing, trees, finishing road surfaces and so on. There still remained, however, a substantial volume of work to be done in phase I. A personal letter dated 21 November 1969 from the architect to Mr Turriff expressed concern at the slow rate of progress. The letter referred to the contractor’s failure to provide the labour force of 45 men which, on the re-opening of the site, the contractor is said to have estimated as being able to complete the work in 39 weeks. This, said the architect, was a low labour force and a correspondingly long period of time. To this letter the contractor replied on the 2 December, referring (inter alia) to the contractor’s policy of not increasing the labour force because of the ‘militant and disruptive element’ contained in it.
By a letter dated 15 December 1969, the architect purported to give notice bringing condition 25(1) of the contract into operation. The letter referred to a contract dated ‘9 August 1969’, whereas the date of the substructure contract was 9 August 1966. No argument based on false demonstration has been put forward, and counsel for the borough from the outset accepted that as a notice this letter was abortive. The contractor commented adversely on the letter in a long letter to the architect dated 22 December, delivered by hand, and on 23 December the architect sent another letter to the contractor, identical with the previous notice save as to the date of the notice and the alteration of ‘1969’ to ‘1966’. Before I read it, I think that I should read condition 25(1):
‘If the Contractor shall make default in any one or more of the following respects, that is to say:—(a) If he without reasonable cause wholly suspends the
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carrying out of the Works before completion thereof, or (b) If he fails to proceed regularly and diligently with the Works, or (c) If he refuses or persistently neglects to comply with a written notice from the Architect/Supervising Officer requiring him to remove defective work or improper materials or goods and by such refusal or neglect the Works are materially affected, or (d) If he fails to comply with the provisions of either clause 17 or clause 17A of these Conditions, then the Architect/Supervising Officer may give to him a notice by registered post or recorded delivery specifying the default, and if the Contractor either shall continue such default for fourteen days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the [borough] without prejudice to any other rights or remedies, may within ten days after such continuance or repetition by notice by registered post or recorded delivery forthwith determine the Employment of the Contractor under this Contract, provided that such notice shall not be given unreasonably or vexatiously.’
The letter giving notice (which I shall call the ‘architect’s notice’) is as follows. It is addressed to the contractor and is headed with a reference to the contract. It runs:
‘I acknowledge your letter of the 2nd December, 1969 replying to my letter of the 21st November 1969. I regret that I am not satisfied with the reasons which you give for the low productivity on site, or with the present productivity. I therefore hereby give you notice under Clause 25(1) of the Contract dated the 9th August 1966, between [the borough] and [the contractor] … that in my opinion you have failed to proceed regularly and diligently with the works and, unless within fourteen working days after the receipt of this letter, there is an appreciable improvement in the progress of the works, the [borough] will be entitled to determine your employment in accordance with Clause 25(1) of the Contract.’
Another letter from the architect to the contractor on the same date was as follows:
‘We acknowledge your letter of the 22nd December, in reply to our letter of 15th December 1969. The many points which you raise will be discussed with the Borough and a reply sent as soon as possible. In reference to your sub-paragraph (1) at the bottom of sheet 4, I withdraw my notice of the 15th December 1969, which should be destroyed.’
After some further correspondence, the architect sent the borough a letter dated 19 January 1970, stating that since his notice of 23 December 1969 the contractor had ‘failed to proceed with the works regularly and diligently’. By a letter of the same date to the contractor the borough, after referring to the contract, stated:
‘Pursuant to Clause 25(1) of the Contract Conditions, the Architect having given you notice under sub-clause (1)(b) of that clause and having informed the [borough] that you have continued the default referred to in the said notice, I hereby give you notice on behalf of the [borough] determining [the contractor’s] employment under the above Contract.’
I shall call this the ‘borough’s notice’. The reply from the contractor’s solicitors on 20 January said that there was no justification for the borough’s notice, that it constituted a repudiation of the contract, and that the contractor would defer a decision whether or not to accept the repudiation. After some further correspondence, on 9 February the solicitors again wrote to the borough, saying that the contractor would not accept the repudiation of the contract and elected to proceed with the work in accordance with the contract. On 12 February they wrote again complaining of fencing work being done at the site by the borough, and on 14 February they complained of an attempt to seize possession of the site (which failed) made by
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security officers on behalf of the borough. At this stage the borough was insisting on its right to possession of the site and the contractor was denying that right and saying that the matter should be dealt with by the High Court. Finally, on 3 March the borough issued the writ and on the same day served the writ and notice of motion.
The writ claims damages for breach of the superstructure contract based on wrongful refusal to perform it. It also claims damages for trespass and failure to vacate the site on which the contractor was working under the substructure contract. Finally, it claims an injunction to restrain the contractor from trespassing on the site. The notice of motion claims an order restraining the contractor until judgment or further order from ‘entering, remaining or otherwise trespassing’ on the site or any part of it, or from ‘interfering in any way’ with the borough’s lawful possession of the site.
The overall picture as to time may be summarised as follows. The contractor was given possession on 19 September 1966, and the completion date was thus four years later, on 19 September 1970. However, before the strike occurred, a two months extension of time was given under the contract by the architect, and so the latter date became 19 November 1970. Of the resulting contract period of four years and two months, nearly two years and two months had elapsed before the strike began on 8 November 1968: the strike lasted nearly eight months, until 30 June 1969; and there were then nearly 17 months left until the completion date on 19 November 1970. A little over half the contract period had elapsed before the strike occurred, and in that time, out of a contract price of about £1,250,000, rather over £800,000 worth of work under the contract, representing nearly two-thirds of the total, had been certified by the quantity surveyor and paid for by the borough. I shall have to return to some of these figures in due course.
Later in this judgment I shall refer to other facts and other provisions of the contract; the evidence, I may say, took over a day to read. But this summary will, I hope, make the salient features of the argument intelligible. Counselfor the contractor had a somewhat different approach from that of counsel for the borough, but I think that the principal issues may be reduced to three main heads. First, counsel for the borough contended that whether or not the architect’s notice and the borough’s notice were valid and effective, the borough was entitled to possession of the site as against the contractor. The contractor was no more than a licensee whose licence had been revoked by the borough, and the contractor had had an ample ‘packing-up period’. Apart from its intrinsic interest, this submission was of importance in that, if it succeeded, it relieved the borough from any dependence on disputed issues of fact relating to the validity of the notices which might not or could not be resolved on motion. This part of the argument, of course, traversed controversial territory long associated with the names, inter alia, of Wood v Leadbitter, and Hurst v Picture Theatres Ltd. Counsel for the borough also contended that the substructure contract was not specifically enforceable, whereas counsel for the contractor contended to the contrary, and, relying on White & Carter (Councils) Ltd v McGregor, said that the contractor was entitled to insist on performing the contract notwithstanding what, on the contractor’s contention, was a repudiation by the borough. Secondly, counsel for the borough contended that the architect’s notice and the borough’s notice were both valid and effective notices, so that the employment of the contractor under the contract had been determined. Counsel for the contractor, on the other hand, attacked the notices (and especially the architect’s notice) under a wide variety of heads, and contended that the contractor’s employment under the contract was still in being. Thirdly, there was the question whether, if the borough made out its case, it would be right on motion to grant the injunction sought. Counsel for the borough and counsel for the contractor each claimed that the balance of
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convenience lay with him; and there was, of course, considerable discussion on whether damages could be a sufficient remedy. I shall consider these three heads in turn.
First, then, there is the question whether the borough is entitled, irrespective of the validity of the notices, to evict the contractor and resume possession of the site. Counsel for the borough says that all that the contractor had was a bare licence to occupy the land. It was not a licence coupled with an interest, for the contractor had no interest. Nor was it a contractual licence, for although the licence arose under the contract, the contractor was not paying for any right to go on the land; instead, he was being paid by the borough to work on the borough’s land. A licence, he contended, amounted to a contractual licence only if the right to go on the land was the primary purpose of the contract, and here the contractor’s occupation of the land was merely a secondary or ancillary purpose. The argument placed heavy reliance on the decision in Thompson v Park which, although cited in argument in Winter Garden Theatre (London) Ltd v Millenium Productions Ltd, was not mentioned in any of the speeches. The emphasis was on the decision of the Court of Appeal in the former case in contrast with dicta in the House of Lords in the latter case. Further, it was said that the contract was not specifically enforceable, and so the court should not hesitate to evict the contractor, even though that would prevent him from performing his contract.
Counsel for the contractor on the other hand, urged that the contractor had a licence coupled with a variety of interests. In any case, he said, the licence was a contractual licence, and since the Winter Garden case the court would protect a contractual licensee against premature eviction. The distinction between primary purposes and secondary or ancillary purposes was unreal and wrong, for it was a fundamental of the contract that the contractor was to execute the works on this particular site. Whether or not the contract was specifically enforceable was irrelevant; in fact, it was specifically enforceable, but even if it were not the court would not grant an injunction at the behest of a party to the contract who was seeking to break his contract.
The threefold classification of licences is well known. There are licences coupled with an interest, contractual licences, and bare licences. A licence to go on land to sever and remove trees or hay, or to remove timber or hay that have already been severed, are accepted examples of a licence coupled with an interest: see eg Wood v Manley. Such a licence is irrevocable. The other two forms of licence, however, have been held to be revocable. Wood v Leadbitter, the Doncaster racecourse case, is the foundation for the doctrine that the licensor may effectually revoke such a licence even if it is a breach of contract to do so. The licensee may sue the licensor in contract for that breach, but apart from that cannot complain if, refusing to leave, he is forcibly evicted. That doctrine was emphatically reaffirmed by the Court of Appeal in Thompson v Park.
In the meantime, Hurst v Picture Theatres Ltd (which does not seem to have been mentioned in Thompson v Park) had been decided. In that case the majority in the Court of Appeal held that a ticket holder in a cinema who was forcibly evicted before the conclusion of the performance was entitled to damages for assault, on the basis that the right to see the performance amounted to a grant or interest. The decision has been criticised, and one of the grounds of criticism has been that for the purpose of deciding whether there is a licence coupled with an interest or grant, the right to see a performance cannot fairly be described as an interest or be the subject-matter of a grant. No authoritative definition of what suffices as an interest for this purpose
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ever seems to have been given. The examples usually put forward are proprietary in nature, such as the rights that I have mentioned to enter and sever growing timber or crops, to take away timber or crops already severed, and so on.
Vaughan v Hampson, however, carries the idea further. There, a solicitor acting under a proxy from a creditor attended a general meeting of creditors convened by the debtor at his solicitor’s office. During the course of the meeting the debtor’s solicitor asked the creditor’s solicitor to leave and, on his refusing to do so, molliter manus imposuit etc. The ejected solicitor thereupon sued the debtor’s solicitor for assault, and succeeded on demurrer. The case was so plain to the Court of Exchequer that despite the argument of Herschell QC, relying inter alia on Wood v Leadbitter, counsel for the plaintiff was not called on. Cleasby B said ((1875) 33 LT at 16):
‘The question is whether or not the plaintiff was a trespasser on the occasion in question. We are of opinion that he was not. He was, on the contrary, one of a number of persons who went to the defendant’s office by invitation to attend a meeting of creditors, in order to discuss what steps should be taken in the matter of the liquidation proceedings against the bankrupt, for some of whose creditors the plaintiff was acting as the solicitor and duly appointed proxy on the occasion. The defendant has given the plaintiff leave and licence to be present, and the latter therefore had a right, coupled with an interest, entitling him to be on the defendant’s premises.’
Pollock B entirely agreed, saying ((1875) 33 LT at 16): ‘In the present case there was, as my brother Cleasby has said, a right coupled with an interest in the plaintiff to be where he was.' Amphlett B concurred, adding ((1875) 33 LT at 16) ‘… if we could come to any other conclusion I think it would be a great scandal to the law’. The plaintiff there plainly had no shred of proprietary interest in the defendant’s land or any chattels on it; yet he was held to have a right coupled with an interest which prevented him from being a trespasser, despite the revocation of any licence to be on the premises. No question of any packing-up period could very well arise on those facts.
That unanimous decision of the Court of Exchequer has been somewhat neglected by the courts and the books. It might well have provided support for the majority in Hurst’s case, had it been cited. In Cowell v Rosehill Racecourse Co Ltd ((1937) 56 CLR 605 at 608) it was cited in argument as being ‘not expressly put on equitable grounds’, on the erroneous basis that it was the first case decided after the Supreme Court of Judicature Act 1873, whereas in fact it was decided over nine months before that Act came into force; and the judgments ignore it. In the Winter Garden case it was not even suggested that the licence was coupled with a grant: see per Lord Greene MR ([1946] 1 All ER at 685), and the argument of counsel for the respondents in the House of Lords ([1948] AC at 182) (apparently assuming that only an interest in land sufficed).
If for this purpose ‘interest’ is not confined to an interest in land or in chattels on the land, what does it extend to? If a right to attend a creditor’s meeting or to see a cinema performance suffices to constitute an interest, can it be said that the right and duty to do works on land fall short of an interest? I cannot see why it should. Yet if this is right, it is not easy to see any fair stopping place in what amounts to an interest, short of any legitimate reason for being on the land. In the present case, counsel for the contractor deployed before me a whole network of rights under the
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contract capable, he said, of constituting an interest, both individually and collectively. They included possession of the site under condition 21(1) (when read with conditions 9, 10 and 16), an insurable interest in executed works, goods and materials under condition 20(1), (2), and a number of other rights. At least counsel for the contractor could assert that the contractor had rights on the land that were no less weighty than the right to see films or watch horse-racing.
There is, however, an alternative route to irrevocability, namely, by means of a contract. Let it be assumed that there is no ‘interest’ which can be coupled with a licence, but merely a contract. This, per se, may preclude revocation. In Hurst’s case ([1915] 1 KB at 10, [1914–15] All ER Rep at 841), Buckley LJ put the point shortly:
‘There is another way in which the matter may be put. If there be a licence with an agreement not to revoke the licence, that, if given for value, is an enforceable right. If the facts here are, as I think they are, that the licence was a licence to enter the building and see the spectacle from its commencement until its termination, then there was included in that contract a contract not to revoke the licence till the play had run to its termination. It was then a breach of contract to revoke the obligation not to revoke the licence, and for that the decision in Kerrison v. Smith is an authority.’
This point was developed further in the Winter Garden case in the Court of Appeal. In that case, there had been a grant of a licence to use a theatre for plays and so on in return for certain payments, with an option for the licensees to extend the licence, and this had been duly exercised. The licensors later purported to determine the licence, and there were cross-claims for declarations as to the effectiveness of this revocation. The House of Lords ([1947] 2 All ER 331, [1948] AC 173) reversed the decision of the Court of Appeal in favour of the licensees, the difference between the two decisions being essentially one of construction. The Court of Appeal held that the licensors had no power to revoke the licence, whereas the House of Lords ([1947] 2 All ER 331, [1948] AC 173) held that they had that power. Nothing that I can see in the speeches in the House of Lords ([1947] 2 All ER 331, [1948] AC 173) suggests that the Court of Appeal was wrong in the law which that court applied to an irrevocable licence. Indeed, Lord Uthwatt confessed ([1947] 2 All ER at 343, [1948] AC at 202) that he found Lord Greene MR’s propositions of law unanswerable.
Lord Greene MR first disposed of any concept that a contractual licence was an entity distinct from the contract ([1946] 1 All ER at 680):
‘Counsel for the respondents put in the forefront of his argument a proposition of this nature. There is a thing called a licence, which is something which, so to speak, has a separate existence, distinct from the contract which creates it; and there is a rule of law governing that particular thing which says that a licence is determinable at will. That seems to me to be putting the matter on the wrong footing. A licence created by a contract is not an interest. It creates a contractual right to do certain things which otherwise would be a trespass. It seems to me that, in considering the nature of such a licence and the mutual rights and obligations which arise under it, the first thing to do is to construe the contract according to ordinary principles. There is the question whether or not the particular licence is revocable at all and, if so, whether by both parties or by only one. There is the question whether it is revocable immediately or only after the giving of some notice. Those are questions of construction of the contract. It seems to me quite inadmissible to say that the question whether a licence is
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revocable at all can be, so to speak, segregated and treated by itself, leaving only the other questions to be decided by reference to the true construction of the contract. As I understand the law, rightly or wrongly, the answers to all these questions must depend on the terms of the contract when properly construed in the light of any relevant and admissible circumstances.’
Whereas in equity, at all events, a contract may be regarded as bringing into being some estate or interest in the land, separate from the contract that creates it, a licence is no separate entity but merely one of the manifestations of the contract. I think that the speech of Viscount Simon in the House of Lords ([1947] 2 All ER 335–337, [1948] AC at 189, 191) is at least consistent with this view.
Secondly, Lord Greene MR said ([1946] 1 All ER at 684, 685):
‘The respondents have purported to determine the licence. If I have correctly construed the contract their doing so was a breach of contract. It may well be that, in the old days, that would only have given rise to a right to sue for damages. The licence would have stood revoked, but after the expiration of what was the appropriate period of grace the licensees would have been trespassers and could have been expelled, and their right would have been to sue for damages for breach of contract, as was said in Kerrison v. Smith. But the matter requires to be considered further, because the power of equity to grant an injunction to restrain a breach of contract is, of course, a power exercisable in any court. The general rule is that, before equity will grant such an injunction, there must be, on the construction of the contract, a negative clause express or implied. In the present case it seems to me that the grant of an option which, if I am right, is an irrevocable option, must imply a negative undertaking by the licensor not to revoke it. That being so, in my opinion, such a contract could be enforced in equity by an injunction. Then the question would arise, at what time can equity interfere? If the licensor were threatening to revoke, equity, I apprehend, would grant an injunction to restrain him from carrying out that threat. But supposing he has in fact purported to revoke, is equity then to say: “We are now powerless. We cannot stop you from doing anything to carry into effect your wrongful revocation”? I apprehend not. I apprehend equity would say: “You have revoked and the licensee had no opportunity of stopping you doing so by an injunction; but what the court of equity can do is to prevent you from carrying that revocation into effect and restrain you from doing anything under it.” In the present case, nothing has been done. The appellants are still there. I can see no reason at all why, on general principles, equity should not interfere to restrain the licensors from acting upon the purported revocation, that revocation being, as I consider, a breach of contract. Looking at it in that rather simple way, one is not concerned with the difficulties which were suggested to arise from the decision of this court in Hurst v. Picture Theatres, Ltd.’
James Jones & Sons Ltd v Earl of Tankerville does not appear to have been cited, but the views of Parker J ([1909] 2 Ch at 443) seem to have been similar.
Quite apart, then, from the question whether the contractor has a licence coupled within an interest, there is the question whether the contractor has a contractual licence which either expressly or by implication is subject to a negative obligation by the borough not to revoke it. If this is so, then on the law laid down by the Court of Appeal, equity would interfere to prevent the borough from revoking the licence
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or, if it had been revoked, from acting on the revocation. A fortiori, equity would refuse to grant the borough an injunction to enforce the revocation.
Now in this case the contract is one for the execution of specified works on the site during a specified period which is still running. The contract confers on each party specified rights on specified events to determine the employment of the contractor under the contract. In those circumstances, I think that there must be at least an implied negative obligation of the borough not to revoke any licence (otherwise than in accordance with the contract) while the period is still running, just as in Hurst’s case there was an implied negative obligation not to revoke the licence until the performance had concluded: see per Buckley and Kennedy LJJ ([1915] 1 KB at 10, 13, [1914–15] All ER Rep at 841, 842).
Again, in the Winter Garden case ([1946] 1 All ER at 685), Lord Greene MR, on the view that the contract conferred an irrevocable licence (a view which the House of Lords held to be wrong), said that the grant of such a licence ‘must imply a negative undertaking by the licensor not to revoke it’. In the House of Lords, Lord Simon said of Hurst’s case that the licence in such a case is ([1947] 2 All ER at 336, [1948] AC at 189)—
‘… granted under contractual conditions, one of which is that a well-behaved licensee shall not be treated as a trespasser until the event which he has paid to see is over, and until he has reasonable time thereafter to depart … ’
Lord Porter, too, accepted the view ([1947] 2 All ER at 338, [1948] AC at 194) that the contractual licence for the purpose of doing an act or a series of acts was not revocable once the performance of a particular act had begun. Lord Uthwatt said ([1947] 2 All ER at 343, [1948] AC at 202):
‘The settled practice of the courts of equity is to do what they can by an injunction to preserve the sanctity of a bargain. To my mind, as at present advised, a licensee who has refused to accept the wrongful repudiation of the bargain which is involved in an unauthorised revocation of the licence is as much entitled to the protection of an injunction as a licensee who has not received any notice of revocation … ’
The case of building operations is really a fortiori a cinema performance, because it must be obvious to all from the outset that far more is involved in the building contractor moving his equipment on to a site, hiring his labour, making his subcontracts and so on, and then in putting a stop to all operations, than is involved in a member of a cinema audience going in, sitting down, and then getting up and leaving. The views expressed by Farwell J in Foster and Dicksee v Hastings Corpn ((1903) 87 LT 736 at 739), a case on a building or engineering contract, also seems to support this conclusion; and I have heard nothing in argument which appears to me to oust the implication of a negative obligation.
There is a further consideration of some importance. This is not a case in which the issue is merely one of damages, as in Wood v Leadbitter, Hurst’s case or Cowell’s case. The borough is seeking equitable relief, namely, an injunction to expel what on one view may be a trespasser and on another view may be someone with a contractual right to remain; and on the latter view the borough is asking the court to assist it in breaking its contract. I do not think that the court will do this. As Farwell J said of a plaintiff in one case—
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‘The relief which he seeks he can obtain only in the Court of equity and that Court will not extend relief to one who is putting forward a claim to equitable assistance merely to enable him thereby to escape from his contractual obligations’:
see Re Buchanan-Woolaston’s Conveyance, Curtis v Buchanan-Woolaston ([1939] Ch 217 at 223, 224), affirmed by the Court of Appeal ([1939] 2 All ER 302, [1939] Ch 738). That was a very different type of case, but I think that the principle must be general. Equity will not assist a man to break his contract. Here, the borough is in effect saying to the court, ‘You should grant an injunction to evict the contractor even if in so doing you would be helping me to break my contract’. I do not think that equity is any more ready to help an applicant who says that it does not matter whether or not he is breaking his contract than one who is avowedly doing so.
Accordingly, if the borough has not validly determined the employment of the contractor under condition 25, the contractor has two grounds on which to resist an injunction to leave the site: first, that the contractor has a licence coupled with an interest; and second, that the borough is seeking to evict the contractor in breach of contract. That brings me to Thompson v Park, more fully reported in the All England Law Reports ([1944] 2 All ER 477) and the Law Times ((1944) 170 LT 207), and most fully, I think, in the Law Journal ((1944) 113 LJKB 561). There, a schoolmaster who held the school premises under a lease had entered into an arrangement to allow another schoolmaster (whom I shall call ‘the licensee’) to carry on his school on the same premises, the two schools to be united for some purposes and separate for others. The licensee later gave the lessee notice to determine the arrangement, and the lessee accepted this. Subsequently it was disputed whether or not that notice had been merely provisional; and for the purposes of the interlocutory proceedings the Court of Appeal assumed that the agreement had not been terminated. The lessee then removed the licensee’s furniture and equipment from the school and stored it in out-buildings; and the licensee subsequently forcibly and riotously reinstated himself in the school. The lessee then sought an interlocutory injunction to restrain the licensee from trespassing; and although Asquith J refused to grant it, the Court of Appeal, consisting of Goddard and du Parcq LJJ, reversed his decision. In essence, what the Court of Appeal decided was that a landowner was entitled to an injunction to exclude a licensee even though the licence was unrevoked; and this proposition is very much in point in the case before me.
The judgment of Goddard LJ, with which du Parcq LJ agreed, referred to Wood v Leadbitter, Kerrison v Smith, and a passage from Salmond on Tortsa. I can see no trace of any argument that the licensee had a licence coupled with an interest. It was plainly argued that the licensee had a contractual right to be there, but this argument was rejected. The basis of the decision appears to have been the old distinction set out in Salmondb between the licensor’s power to revoke the licence effectively and his right or liberty to do it lawfully. He had the power; he did it; if he did it wrongfully he may have to pay damages; but still he did it. The passage cited from Salmond simply sets out in broad terms the doctrine of Wood v Leadbitter; and on this the court relied. Yet the very next sentence in Salmond isc:
‘Since the fusion of law and equity by the Judicature Act, however, the rule
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in Wood v. Leadbitter has apparently to a very large extent, even if not wholly, ceased to be in force.’
No mention of this sentence, or of what follows afterwards, appears in the judgment. Salmond continuesd:
‘The reason given for this change is that a licence granted for a fixed period is in all ordinary cases specifically enforceable—an injunction being obtainable to prevent an act based upon its premature revocation. A licensee, therefore, cannot be now treated as a trespasser because of doing an act which the licensor may be compelled by a decree of specific performance to allow him to do.’
There is then a discussion of Hurst’s case.
I confess to feeling great difficulty about the grounds given for the decision in Thompson v Park. The court there relied on a case which the Court of Appeal had previously held to be no longer law, without mentioning that decision of the Court of Appeal, even though it was binding on it. The court also cited and approved a passage in a textbook which, in a passage not mentioned, that book said was no longer in force. The judgment of Goddard LJ is understandably pungent, and it might be suspected that the case was decided quasi in furore; the licensee’s high-handed and riotous behaviour was such as to make any court ready to condemn his conduct.
A judge of first instance is placed in a position of some difficulty when he is faced, as I am, with decisions of the Court of Appeal and dicta in the House of Lords which it seems impossible to reconcile. But while preserving to the full the respect due to superior courts, I think that it is my duty to do the best I can to resolve the conflict so far as that is necessary for the purposes of this case. I would only utter the traditional prayer that on what I say (I hope with due humility) about these and other decisions of higher courts, the most favourable construction will be placed. It seems to be that the actual result in Thompson v Park could be amply supported merely by saying that if a person forcibly and riotously breaks into a building in the occupation of the landowner, the court will grant to that landowner an interlocutory injunction expelling the intruder, even though the intruder has acted under a disputed claim to a subsisting licence to share the occupation of the building with the landowner. As Goddard LJ pointed out (See (1944) 113 LJKB at 564, 565), the status quo to be preserved was not that which existed after the intruder’s illegal and criminal acts, but that which existed before they were committed. If Thompson v Park is read in that somewhat restricted sense, much of the difficulty disappears. Further, the fact that the only licence claimed was a licence to share and not a licence for exclusive occupation seems to me to be of importance. As Goddard LJ said ([1944] KB at 409, [1944] 2 All ER at 479) ‘The court cannot specifically enforce an agreement for two people to live peaceably under the same roof’. If the courts sought to enforce a licence to share, a multitude of practical problems would arise which would be absent if the licence was for exclusive occupation. I may also mention that in Errington v Errington ([1952] 1 All ER 149 at 155, [1952] 1 KB 290 at 298, 299) Denning LJ plainly regarded Thompson v Park as having lost its force as regards revocation of the licence.
I have said little about Cowell v Rosehill Racecourse Co Ltd, where the High Court of Australia, with Evatt J dissenting, followed Wood v Leadbitter in preference to Hurst v Picture Theatres Ltd. The case concerned the eviction from a racecourse of a racegoer who had bought a ticket which entitled him to be there; and his claim
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for damages for assault was dismissed. I, of course, am concerned not with the law of Australia but with the law of England, and it is only in that respect that I say anything about the case. One sentence in the dissenting judgment of Evatt J seems to me of high significance. He said ((1937) 56 CLR at 652):
‘I Think the fallacy in the criticism of Hurst’s case lies in the continuous insistence upon discovering a proprietary right as a condition of equitable intervention.’
He might, perhaps, with justice have added that the judgment in Hurst’s case did much to attract this criticism, although the alternative basis of contractual rights was by no means undiscoverable. But with all the advantage that the Winter Garden case gives me I would respectfully say that the law in England is that to be found not in Cowell’s case, but in Hurst’s case when viewed in the light of the Winter Garden case. If I may add to the melancholy list of cases on this breach of the law that were not cited, Cowell’s case does not appear to have been cited in any of the three stages of the Winter Garden case.
There was considerable argument on the question whether or not the contract in the case before me is specifically enforceable. If it is, then of course this greatly strengthens the contractor’s claim to retain possession of the site; an injunction to evict the contractor could scarcely be granted if the contractor is entitled to a decree of specific performance to compel performance of the contract. If the contract is not specifically enforceable, then the contractor must resist the injunction on some other ground. In Hurst’s case ([1915] 1 KB at 8, 9, [1914–15] All ER Rep at 840) Buckley LJ seems to have attached considerable importance to specific performance. On the view that I take, in the present case it does not matter whether the contract is or is not specifically enforceable; the court will not assist the borough in a breach of contract. But I was referred to Wolverhampton Corpn v Emmons, and Carpenters Estates Ltd v Davies, and I must say that I cannot at present see why this contract should not be held to be specifically enforceable by the borough against the contractor. The work to be done is sufficiently defined, I do not think damages would be adequate compensation, and the contractors obtained possession of the land under the contract: see also Fry’s Specific Performancee. No doubt the doctrine of mutuality is subject to many exceptions, but if in the present case the contract is specifically enforceable by the borough, it is not easy to see why it should not also be specifically enforceable by the contractor. I accept that there might well be difficulties in relation to matters such as the due provision of architect’s certificates and so on, but I do not think that those difficulties would prove insuperable. However, as I have indicated, I do not consider that this point has to be decided, and I do not do so.
Apart from any question of specific performance, counsel for the contractor strongly contended that the contractor had a right not merely to refuse to accept the borough’s alleged repudiation of the contract as determining it, but also a right to insist on continuing to perform the contract, despite the protests of the borough. He based his contention on White & Carter (Councils) Ltd v McGregor, a striking decision of the House of Lords. It was a Scottish appeal, but I do not think that it was suggested that English law was any different on the point. The sales manager of a garage
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contracted with advertising agents for the local display of advertisements of the garage on litter bins on lamp posts three years from the first exhibition of the advertisement. Immediately after the contract had been made, the garage proprietor wrote to the agents cancelling the order; but the agents refused to accept the cancellation, and sued the proprietor for the sums due under the contract. By a majority, with Lord Morton of Henryton and Lord Keith of Avonholm dissenting, the House of Lords held that the agents were not obliged to accept the repudiation by the proprietor, with merely the right to sue him for damages, but were entitled to perform the contract and sue for the contract price.
Lord Hodson, with whom Lord Tucker concurred, rested his decision on the broad principle that repudiation of a contract by one party does not discharge it, and that whether or not the contract is specifically enforceable, the contract survives. Lord Hodson said ([1961] 3 All ER at 1193, [1962] AC at 445):
‘When the assistance of the court is not required the innocent party can choose whether he will accept repudiation and sue for damages for anticipatory breach or await the date of performance by the guilty party. Then, if there is failure in performance, his rights are preserved.’
As stated in Lord Hodson’s speech, this principle was subject to no qualification. The question is whether, as counsel for the contractor claims, this principle applies to the case before me, so that if the borough has not lawfully terminated the contract but has repudiated it, the contractor can insist on retaining possession of the site and completing the contract.
A number of examples were discussed in argument in addition to the example given by Lord Keith in his dissent ([1961] 3 All ER at 1190, [1962] AC at 442), and mentioned by Lord Reid ([1961] 3 All ER at 1181, [1962] AC at 428) and Lord Morton ([1961] 3 All ER at 1184, [1962] AC at 432). Lord Keith took the case of a contract by a man to go to Hong Kong and produce a report for a fee of £10,000. Before he goes, the other party repudiates the contract. Nevertheless, on the majority view the man is entitled to go to Hong Kong, produce the unwanted report and claim the £10,000. The examples discussed in argument before me applied the doctrine to cases concerning land. A contract to erect buildings on land is let; a few days later the landowner unexpectedly learns that he can obtain a far more advantageous planning permission for developing the land, and he thereupon repudiates the contract; but the contractor insists on performing it, even though the landowner must then either abandon the more valuable development and accept the far less profitable buildings or else pull those buildings down when they have been completed and then carry out the more fruitful scheme. Another landowner lets a contract to erect an extravagant building which his wealth can afford; before much work has been done his fortune collapses, and he can pay for the building only by using all that is left to him; yet the contractor insists on performing the contract. A third landowner contracts with an artist to paint extensive frescoes in a new building over a period of two years; the landowner then receives a handsome offer for the unadorned building, provided vacant possession is delivered forthwith; yet the artist insists on painting on for the rest of the two years.
Examples such as these suggest that there may well be limits to the doctrine. Lord Morton and Lord Keith both stressed the duty to mitigate damages; and he who is bound to mitigate can hardly be entitled to insist on aggravating. However, these were dissenting speeches which rejected the doctrine in toto. Accordingly, I must turn to the speech of Lord Reid. Although it was his voice, with the voices of Lord Tucker and Lord Hodson that carried the day, two important limitations
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appear in Lord Reid’s speech. First, he pointed out that the peculiarity of the case was that the agents could perform the contract without any co-operation by the proprietor. He said ([1961] 3 All ER at 1182, [1962] AC at 429):
‘Of course, if it had been necessary for the defender to do or accept anything before the contract could be completed by the pursuers, the pursuers could not and the court would not have compelled the defender to act, the contract would not have been completed, and the pursuers’ only remedy would have been damages.’
This, I think, was in effect an acceptance of the argument to which Lord Reid had referred ([1961] 3 All ER at 1181, [1962] AC at 428):
‘… the respondent points out that in most cases the innocent party cannot complete the contract himself without the other party doing, allowing or accepting something, and that it is purely fortuitous that the appellants can do so in this case. In most cases by refusing co-operation the party in breach can compel the innocent party to restrict his claim to damages.’
The other limitation, cautiously expressed ([1961] 3 All ER at 1183, [1962] AC at 431), was that ‘it may well be’ that if a person has no legitimate financial or other interest in performing the contract rather than claiming damages, ‘he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself’; and this principle might apply to the example of the expert report. However, no such absence of a legitimate interest in the agents had been established, and so the possible principle did not apply.
It seems to me that the decision is one which I should be slow to apply to any category of case not fairly within the contemplation of their Lordships. The case before me is patently one in which the contractor cannot perform the contract without any co-operation of the borough. The whole machinery of the contract is geared to acts by the architect and quantity surveyor, and it is a contract that is to be performed on the borough’s land. True, the contractor already has de facto possession or control of the land; there is no question of the borough being required to do the act of admitting the contractor into possession, and so in that respect the contractor can perform the contract without any ‘co-operation’ of the borough. But I do not think that the point can be brushed aside so simply. Quite apart from questions of active co-operation, cases where one party is lawfully in possession of property of the other seem to me to raise issues not before the House of Lords in the White case. Suppose that A, who owns a large and valuable painting, contracts with B, a picture restorer, to restore it over a period of three months. Before the work is begun, A receives a handsome offer from C to purchase the picture, subject to immediate delivery of the picture in its unrestored state, C having grave suspicions of B’s competence. If the work of restoration is to be done in A’s house, he can effectually exclude B by refusing to admit him to the house; without A’s ‘co-operation’ to this extent B cannot perform his contract. But what if the picture stands in A’s locked barn, the key of which he has lent to B so that he may come and go freely, or if the picture has been removed to B’s premises? Can B insist in these cases in performing his contract, even though this makes it impossible for A to accept C’s offer? In the case of the barn, A’s co-operation may perhaps be said to be requisite to the extent of not barring B’s path to the barn or putting another lock on the door; but if the picture is on B’s premises, no active co-operation by A is needed. Nevertheless, the picture is A’s property, and I find it difficult to believe that Lord Reid intended to restrict the concept of ‘co-operation’ to active co-operation. In the White case, no
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co-operation by the proprietor, either active or passive, was required; the contract could be performed by the agent wholly without reference to the proprietor or his property. The case was far removed from that of a property owner being forced to stand impotently aside while a perhaps ill-advised contract is executed on property of his which he has delivered into the possession of the other party, and is powerless to retrieve.
Accordingly, I do not think that the White case has any application to the case before me. I say this, first, because a considerable degree of active co-operation under the contract by the borough is requisite, and second, because the work is being done on property of the borough. I doubt very much whether the White case can have been intended to apply where the contract is to be performed by doing acts to the property owned by the party seeking to determine it. I should add that it seems to me that the ratio of the White case involves acceptance of Lord Reid’s limitations, even though Lord Tucker and Lord Hodson said nothing of them; for without Lord Reid there was no majority for the decision of the House. Under the doctrine of precedent, I do not think that it can be said that a majority of a bare majority is itself the majority.
Even when I discard those matters which do not seem to me to arise for decision, I cannot say that I find the subject an easy one; but doing the best I can, I would summarise the position relating to contractual licences as follows:
(1) A licence to enter land is a contractual licence if it is conferred by a contract; it is immaterial whether the right to enter the land is the primary purpose of the contract or is merely secondary.
(2) A contractual licence is not an entity distinct from the contract which brings it into being, but merely one of the provisions of that contract.
(3) The willingness of the court to grant equitable remedies in order to enforce or support a contractual licence depends on whether or not the licence is specifically enforceable.
(4) But even if a contractual licence is not specifically enforceable, the court will not grant equitable remedies in order to procure or aid a breach of the licence.
To that summary I must add four points. First, as regards a licence coupled with an interest, I feel great doubt whether the word ‘interest’ means anything more than an interest in property, although it matters not whether that property is real or personal, or legal or equitable. Today, with contractual licences recognised as being capable of being made irrevocable in their own right, there is no need to torture the word ‘interest’ into embracing miscellaneous collections of rights. I do not have to decide whether Vaughan v Hampson is good law today, and I do not do so. Counsel for the borough described it as ‘a curiosity’; and I do not dissent. I merely say that I should hesitate long before holding that a licence was coupled with an interest unless that interest was an interest in property, and that I doubt very much whether in this case the contractor’s licence is coupled with any interest.
Second, I have said nothing about an ejected licensee’s right to claim damages for assault, for such issues do not arise in this case. All that I need say, in order to avoid possible misunderstanding, is that in the light of the Winter Garden case I find it difficult to see how a contractual licensee can be treated as a trespasser so long as his contract entitles him to be on the land; and this is so whether or not his contract is specifically enforceable. I do not think that the licence can be detached from the contract, as it were, and separately revoked; the licensee is on the land by contractual right, and not as a trespasser. I may add that I say nothing about the rights of licensees against third parties.
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Third, there may be another road to the irrevocability of a licence, namely, the doctrine of a licence acted upon. This was not a topic that was discussed before me, and I do not rely on it for my decision. But in Feltham v Cartwright, a case which seems to have dropped rather out of sight, it was plainly laid down that the licence there in question, ‘having been acted on, was not revocable’, to use the words of Vaughan J ((1839) 5 Bing NC at 572). There, a landlord distrained on the premises demised. The tenant then signed a document undertaking to give the landlord possession of the premises within a week, in consideration of the landlord giving her the furniture distrained for rent. This agreement was treated as conferring on the landlord a licence to enter the premises at the end of the week; but when he did this, the tenant sued him in trespass. The Court of Common Pleas held that the landlord was no trespasser. Tindall CJ said ((1839) 5 Bing NC at 572):
‘The agreement was acted on for the Plaintiff sold some of the furniture on her own account, and knew that a person sent by her landlord was working in the garden’:
and he, Vaughan and Coltman JJ all in terms said that the licence could not be revoked after it had been acted upon. I do not propose to say more about this case than that the apparent omission to consider it in Wood v Leadbitter cannot add to the stature of that case. It was not cited in the Winter Garden case, either; but I observe that Lord Porter said ([1948] AC at 194, [1947] 2 All ER at 338):
‘If the contention that licences given for a consideration are not revocable were confined to a limited licence to do a particular act or series of acts, I do not think I should disagree provided the performance of a particular act had been actually begun.’
Plainly the doctrine of a licence acted upon is not confined to cases such as Armstrong v Sheppard & Short Ltd ([1959] 2 All ER 651 at 658, [1959] 2 QB 384 at 399) where the act authorised by the licence has been completed.
Fourth, counsel for the borough cited certain cases on building contracts for the proposition that the court would not restrain the building owner from exercising a power of determining the contractor’s employment, even if that determination was wrongful. The cases are not overtly decisions on the revocability of licences, but they were discussed under this head, and I propose to say something of them here. Two decisions that counsel for the borough relied on strongly were Garrett v Banstead & Epsom Downs Ry Co, and Munro v Wivenhoe & Brightlingsea Ry Co, each decided by the Court of Appeal in Chancery. In the former case, the court refused the contractor an interlocutory injunction to restrain the building owner from acting on a clause which enabled the engineer to take the work out of the contractor’s hands for failing in the due performance of the contract, even though the contractor disputed the failure. Damages, it was held, were an adequate remedy for the contractor if the owner was wrong. Knight Bruce LJ said ((1864) 4 De GJ & Sm at 465):
‘… to suppose, in a case like this, where, if the company are wrong, ample compensation in damages may be obtained by the contractor, that the company are liable to have a person forced on them to perform these works, to whom they
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reasonably or unreasonably object, whereas there would be no reciprocity if the wrong were on the other side for the purpose of compelling the performance of the works, is more than I am able to do.’
The Munro case was to a similar effect, although the facts and the judgments were rather more complex. On the other hand, in Foster and Dicksee v Hastings Corpn, in which these cases were cited, Farwell J granted an interlocutory injunction against the building owner, although this was in a case in which the learned judge said ((1909) 87 LT at 737) that he was not satisfied as to the bona fides, that is, of the building owners’ engineer.
These, however, are all cases in which the injunction was sought by the contractor. I do not see how they bear on the converse case of an injunction sought by the building owner. To say that the court will not grant the contractor an injunction restraining the building owner from acting on his powers in a disputed case does not establish that in such a case the building owner is entitled to an injunction against the contractor to enforce the exercise of these powers. There are many cases in which it is not appropriate to grant either party any injunction. The only instance put before me of the converse case was Cork Corpn v Rooney. There, Chatterton V-C granted the building owner an interlocutory injunction restraining the contractor from preventing the building owner from taking up and completing the works and using the plant and material on the site. Under the contract, the building owner’s powers were exercisable if ‘in the opinion of the engineer’ the contractor failed to use sufficient diligence or make sufficient progress; and the building owner was subject to a statutory time limit of six years for the completion of the works, of which nearly 5 1/2 had elapsed when the engineer formed his opinion that the contractor had not made sufficient progress. As Chatterton V-C pointed out ((1881) 7 LR Ir at 205), he was bound to assume the correctness of the engineer’s decision as to the lack of sufficient progress; and he referred ((1881) 7 LR Ir at 206) to the ‘conclusive decision’ of the engineer. That being so, I do not think that the decision helps me in a case in which the contractor’s default is strongly contested and under the contract the question is the factual issue whether the contractor ‘shall make default’ in that he ‘fails to proceed regularly and diligently with the works’, and not an issue whether ‘in the opinion of the architect’ this is so: see condition 25(1)(b). A decision on an incontestable default is not a decision on a hotly disputed default.
One other matter that I must mention is whether the contractor had what was in law ‘possession’ of the site. This was discussed at some length. Counsel for the borough contended that in law the borough remained in possession of the site, and that the contract gave the contractor no more than a licence entitling the contractor to the unimpeded use of the site. The references in the contract to ‘possession’ by the contractor counsel for the borough explained as being the inexact terminology of what was not a lawyer’s document; and in support he referred to some comminatory language of Sachs LJ in T A Bickerton & Son Ltd v North West Metropolitan Regional Hospital Board ([1969] 1 All ER 977 at 979, 989). If the provisions of the so-called RIBA form are ‘unnecessarily amorphous and tortuous’ and ‘deviously drafted with what in parts can only be a calculated lack of forthright clarity’, then, said counsel for the borough, a little matter like the misuse of the word ‘possession’ was only to be expected. The lack of enthusiasm for the form shown by the House of Lords on the further appeal ([1970] 1 All ER 1039, [1970] 1 WLR 607) and in Westminster City Council v J Jarvis & Sons Ltd adds point to the comment. Counsel for the borough also referred me to various statements in textbooks and to cases on the Occupiers Liability Act 1957. He developed, too, a contention that if in law the
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contractor had possession, he could then proceed to let completed parts of the property to tenants, which would be absurd, or unjust, or both.
I do not think that I have to decide these or a number of other matters relating to possession. First, I am not at all sure that the matter is determined by the language of the contract. It is a standard form, and may be used in a wide variety of circumstances. In some, the building owner may be in manifest possession of the site, and may remain so, despite the building operations. In others, the building owner may de facto, at all events, exercise no rights of possession or control, but leave the contractor in sole and undisputed control of the site. Second, in recent years it has been established that a person who has no more than a licence may yet have possession of the land. Although one of the badges of a tenancy or other interest in land, possession is not necessarily denied to a licensee.
Accordingly, although of course I should give effect to any clear provision of the contract, I do not feel called on to construe it minutely so as to determine, for example, whether the provisions of condition 9 giving access to the architect is an indication that, but for the condition, he would be dependent on the contractor’s grace for access, so that possession must be in the contractor rather than in the building owner. The contract necessarily requires the building owner to give the contractor such possession, occupation or use as is necessary to enable him to perform the contract, but whether in any given case the contractor in law has possession must, I think, depend at least as much on what is done as on what the contract provides; and in relation to this aspect of the case the evidence before me on what was done is somewhat scanty. Such indications as there are suggest to me that the contractor was in fact in possession, and if this was so, I do not think that there is anything in the contract to show that the contractor was wrongly in possession. Even if in law possession is in the borough, I do not think that the borough is entitled to an injunction to exclude those alleged to be trespassers if they entered lawfully and have a valid contractual right to remain. Beyond that, I propose to say no more on the point.
On this branch of the case I have therefore reached the conclusion that counsel for the borough’s contentions fail. I hold that without establishing the efficacy of the notices given under condition 25, the borough is not entitled to the injunctions sought. I must therefore turn to consider those notices. I have to consider separately the architect’s notice and the council’s notice, as the attacks on them were not the same; and I will take the architect’s notice first.
Counsel for the contractor attacked the architect’s notice on a wide front; and for convenience I will consider his criticisms in a rather different order from that which he took. He contended that the notice was void or ineffective on five main grounds. First, the notice was void as having been given in breach of the principles of natural justice. Second, it was void because the architect had considered irrelevant factors and excluded relevant factors. Third, it was not in fact given by the architect. Fourth, it failed to specify the default, both by lacking particularity and also by failing to state what the conditionf required. Fifth, it lacked a factual basis. I shall consider these points in turn. Counsel for the contractor submitted that what was involved was a forfeiture, and that as the court leans against forfeitures, the court should be slow to hold that the contract had been terminated. I feel considerable hesitation in applying the principles developed by the courts in relation to the forfeiture of interests in property to the exercise of a contractual power of determination in a contract, although I accept that any such exercise must be established to the satisfaction of the court.
First, do the principles of natural justice apply to an architect’s notice under condition 25? Counsel for the contractor accepted that the point was novel, and lacked authority; but he contended that those principles did apply, so that the architect was bound to give the contractor notice of the ‘charge’, tell him the substance of the
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case against him and consider his representations before deciding whether or not to issue the certificate. As he had failed to do these things, the notice was null and void, in accordance with the majority view in Ridge v Baldwin, the case concerning the former Chief Constable of Brighton.
If the principles of natural justice apply, then I think the result is that the decision impugned is a nullity: see per Lord Reid ([1963] 2 All ER at 81, [1964] AC at 80, 81), per Lord Morris of Borth-y-Gest ([1963] 2 All ER at 104, 106, 110, [1964] AC at 117, 119, 125), and per Lord Hodson ([1963] 2 All ER at 116, [1964] AC at 135). Lord Devlin, however, agreed with Lord Evershed that the decision was only voidable ([1963] 2 All ER at 120, [1964] AC at 142). It is true that in Durayappah v Fernando ([1967] 2 All ER 152 at 159, [1967] 2 AC 337 at 354) Lord Upjohn, speaking for the Judicial Committee, said that Lord Morris ‘reached the conclusion that the order of the watch committee was voidable and not a nullity’: and the footnote refers to Ridge v Baldwin ([1963] 2 All ER at 106, [1964] AC at 119). There, Lord Morris twice said that it should be declared that the termination of the appellant’s appointment was ‘void’; and Speight J in Denton v Auckland City ([1969] NZLR 256 at 268) flatly said that this passage in the Judicial Committee’s decision is ‘erroneous’. However, the next few sentences indicate that the Judicial Committee must have had in mind a further passage in Lord Morris’s speech ([1963] 2 All ER at 110, [1964] AC at 125) where he makes it clear that although the court will declare the decision to be ‘invalid and of no effect and null and void’, this would be done only if the appellant took the necessary action, so that in this limited sense the decision ‘could be said to be voidable’. A decision reached by a tribunal wholly outside its jurisdiction and in complete defiance of natural justice is about as void as anything can be; but if nobody who is entitled to challenge or question it chooses to do so, it remains in being. Yet to describe such a decision as being ‘voidable’ is to use that word in a sense that is not only very special but also liable to mislead. It seems to me that despite what was said in the Durayappah case, both the language used by Lord Morris and the ratio of his speech show that he was holding that the decision reached in defiance of natural justice was void and that this was accordingly the majority view in the House of Lords.
The real question for me, however, is whether the principles of natural justice apply to an architect’s notice at all. Counsel for the contractor’s sheet anchor was Hickman & Co v Roberts. That was a case of an architect who misapprehended his position. He allowed his judgment to be influenced by the building owners, and improperly delayed issuing his certificates, in accordance with their instructions. Throughout the speeches in the House of Lords there are references to the arbitrator as a ‘judge’, with a ‘judicial position’, a ‘judicial attitude’ and so on. If an architect abdicates his somewhat special and delicate position of independence, and becomes an instrument of the building owner, then I can well see that the building owner cannot rely on the architect’s certificate. That, however, does not carry the point that in all the decisions that he makes, and in particular in issuing certificates, anything that he does without observing the rules of natural justice is null and void. The question is whether that ought to be the rule.
I think the answer must be ‘No’. The principles of natural justice are of wide application and great importance, but they must be confined within proper limits and not allowed to run wild. This case is another illustration of what I said in Gaiman v National Association for Mental Health ([1970] 2 All ER 362 at 376, [1970] 3 WLR 42 at 57) about the need for further research on the
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ambit of natural justice. Not all that is done even by the courts of law themselves accords with the rules of natural justice. Many an ex parte injunction is granted against a person who has no notice of the charge and no opportunity of being heard; and when in the Court of Appeal counsel for the contractor assails the learning and competence of a trial judge, asserting his law to be unsound and his findings of fact unwarranted, I am sure that he will not be deterred by the thought that the judge will not be heard in his own defence.
It seems to me that an architect under a building contract has to discharge a great number of functions, both great and small, which call for the exercise of his skilled professional judgment. He must throughout retain his independence in exercising that judgment; but provided he does this, I do not think that, unless the contract so provides, he need go further and observe the rules of natural justice, giving due notice of all complaints and affording both parties a hearing. His position as an expert and the wide range of matters that he has to decide point against any such requirement; and an attempt to divide the trivial from the important, with natural justice applying only to the latter, would be of almost insuperable difficulty. It is the position of independence and skill that affords the parties the proper safeguards, and not the imposition of rules requiring something in the nature of a hearing. For the rules of natural justice to apply, there must, in the phrase of counsel for the borough, be something in the nature of a judicial situation; and this is not the case.
My view is fortified by two decisions, not cited in argument, which seem to me to be adverse to counsel for the contractor’s submissions. First, there is Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd. In this, Lord Thankerton, with whom the other Lords of Appeal agreed, indicated the true basis of the decision in Hickman & Co v Roberts, the limits of which, he said, had been misapprehended. The decision was based on the fact that the architect ([1947] AC at 438)
‘… had referred to the owners for instructions and had accepted and acted on their instructions in reference to the matters submitted to him as arbitrator, regardless of his own opinion.’
The Panamena case concerned a contract for the repair of a ship under the supervision of the shipowner’s surveyor, and it is clear from Lord Thankerton’s speech ([1947] AC at 444) that the House of Lords did not regard certain discussions between the shipowner and the surveyor, and certain expressions of opinion by the surveyor about what he would later have to certify, as being improper conduct.
Secondly, there is the New Zealand decision in A C Hatrick (NZ) Ltd v Nelson Carlton Construction Co Ltd. That concerned a certificate given by an engineer under a building contract, certifying that in his opinion the contractor had ‘failed to make such progress with the works’ as the engineer deemed sufficient to ensure their completion within the period specified in the contract. In a long and careful reserved judgment, Richmond J considered, inter alia, a submission based on Ridge v Baldwin and the applicability of the rules of natural justice. The observations of Channell J in Page v Llandaff & Dinas Powis Rural District Council to the effect that if the architect hears one side, he must also hear the other, were duly cited ([1964] NZLR at 84), but in the end the judge rejected the submission. The architect must be impartial and independent; but unless the contract so requires, expressly or by implication (and Richmond J stressed the importance of the terms of the contract), the architect is not required to hold anything in the nature of a hearing.
In taking the view that the rules of natural justice do not apply, I bear in mind the
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effect of the notice under condition 25. In one sense it is a mere warning; it does not determine the contract, and it gives the contractor an opportunity of mending his ways. On the other hand, the notice has a continuing effect; for even if the contractor puts matters right within 14 days the building owner may without any further architect’s notice give notice determining the contractor’s employment if the contractor ‘shall at any time thereafter repeat such default (whether previously repeated or not).' Even so, the notice determines nothing; the notice loads the pistol, but unless something else occurs, the pistol cannot be discharged and the contract remains afoot. Further, by condition 35(1), any dispute or difference as to (inter alia) the rights and liabilities of the parties under condition 25 is subject to arbitration. These factors seem to me to indicate that the decision to give an architect’s notice is not one which ought to be subject to the rules of natural justice. It is not a decision of the quality to call for such treatment, and the contract makes other provision. Taken as a whole, I can see nothing in the contract to import the requirement of observing the principles of natural justice; and even if those principles will be imported unless the contrary is indicated (a submission based on John v Rees ([1969] 2 All ER 274 at 307, [1970] Ch 345 at 400)), I think that the contrary is indicated here. Accordingly, in my judgment the architect’s notice is not invalidated by any failure to comply with these principles. Counsel for the contractor, I should add, made it clear that although he was critical of the architect in certain matters, he was not asking me to hold that the architect had been improperly influenced by the borough.
I turn, then, to the allegation that the architect’s notice is void because in giving it the architect took into account what he ought to have excluded and excluded what he ought to have considered. This submission was based on Anisminic Ltd v Foreign Compensation Commission. That case concerned a statutory commission which misconstrued the provisions of the statute defining its jurisdiction. The statute provided that a determination of the commission ‘shall not be called in question in any court of law’; but by a majority the House of Lords held that the court was not precluded from inquiring whether the order was a nullity, and held that it was. The commission had rejected the claim on a ground which they were not entitled to take into account. This appeared from the reasons which the commission gave.
Now a decision professedly based on a reason which is excluded from a tribunal’s competence is one thing; it may very well be another merely to show that the tribunal listened to what it ought to have excluded, or that it excluded what it ought to have listened to, or even that it harboured some erroneous idea, if the default is not shown to have affected the decision. Lord Reid gave examples ([1969] 1 All ER at 213, [1969] 2 AC at 171) of decisions that were nullities. These include cases where the tribunal refused to take into account something which it was required to take into account, or based its decision on some matter which, under the provisions setting it up, it had no right to take into account; and Lord Pearce and, I think, Lord Wilberforce and Lord Pearson as well, expressed similar views ([1969] 1 All ER at 233, 246, 250, [1969] 2 AC at 195, 210, 215).
If applied in its full width, this principle may be far-reaching in its consequences. Where a claimant who has been offered £25,000 is seeking £50,000 and after ten days battle before a tribunal he is awarded £47,500, it seems that the compensating body could then turn round on the delighted claimant and say that the decision is a nullity because it appears that the tribunal would have awarded £48,000 had it not deducted £500 for something that it had no right to take into account. A nullity is a nullity; and as Lord Reid said ([1969] 1 All ER at 213, [1969] 2 AC at 170), ‘There are no degrees of nullity’. Again, where all save one of the issues before the tribunal are determined with impeccability, the illicit
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inclusion or exclusion of some matter on that one issue may, it seems, strike the whole determination with nullity. No doubt the doctrine will be refined and developed so as to deal with cases such at these. I need only say that in this case I fortunately do not have to determine them. My concern is whether the doctrine applies to the facts of this case.
Now an architect is not a statutory tribunal, and so one way in which counsel for the contractor sought to bring the Anisminic decision into play was by referring to Dean v Prince. That concerned a valuation of shares in a private company made by the company’s auditor for the purposes of a sale in accordance with the articles by a deceased director’s executrix to the surviving directors. Denning LJ held that the court would interfere with such a valuation not only on the ground of fraud but also for mistake or miscarriage ([1954] 1 All ER at 758, [1954] Ch at 427):
‘For instance, if the expert added up his figures wrongly, or took something into account which he ought not to have taken into account, or conversely, or interpreted the agreement wrongly, or proceeded on some erroneous principle … ’
These words are not far removed from those used in the Anisminic case; and counsel for the contractor urged that the principle of that case should be applied to the architect in this case.
Counsel for the contractor’s contention is that in giving his notice the architect wrongly took into account a refusal by the contractor to issue a programme of his work, and wrongly formed the view that the contractor was not entitled to any extension of time for completing the contract by reason of the prolonged strike. The first complaint is in the main based on paras 7 and 8 of the second affidavit of Mr Mathews, the architect; and as I read these paragraphs, he is doing no more than explaining why, in deciding to issue his notice, he was forced to rely on his personal assessment. Counsel for the borough also contended that a refusal to issue a programme may be some indication that the contractor was failing to proceed ‘diligently’ with the works under condition 25(1)(b). Be that as it may, I cannot see that it has been demonstrated that in the decision to issue his notice the architect took into account anything which he had no right to take into account. If it had been shown that he had based his decision wholly or in part on an illicit consideration, that might be another matter; but that has not been done here.
As for the architect’s views on an extension of time, his duty is laid down by condition 23. The relevant part of this condition provides that:
‘Upon it becoming reasonably apparent that the progress of the Works is delayed, the Contractor shall forthwith give written notice of the cause of the delay to the Architect/Supervising Officer, and if in the opinion of the Architect/Supervising Officer the completion of the Works is likely to be or has been delayed beyond the Date for Completion stated in the appendix to these Conditions or beyond any extended time previously fixed under either this clause or clause 33(1)(c) of these Conditions … (d) by reason of civil commotion, local combination of workmen, strike or lockout affecting any of the trades employed upon the Works or any of the trades engaged in the preparation manufacture or transportation of any of the goods or materials required for the Works, … then the Architect/Supervising Officer shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works. Provided always that the Contractor shall use constantly his best endeavours to prevent delay and shall do all that may reasonably be required to the satisfaction of the Architect/Supervising Officer to proceed with the Works.’
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It will be seen from this that provided the contractor has given written notice of the cause of the delay, the obligation to make an extension appears to rest on the architect without the necessity of any formal request for it by the contractor. Yet he is required to do this only if in his opinion the completion of the works ‘is likely to be or has been delayed beyond the Date for Completion’, or any extended time for completion previously fixed. If a contractor is well ahead with his works and is then delayed by a strike, the architect may nevertheless reach the conclusion that completion of the works is not likely to be delayed beyond the date of completion. Under condition 21(1), the contractor is under a double obligation: on being given possession of the site, he must ‘thereupon begin the Works and regularly and diligently proceed with the same’, and he must also complete the works ‘on or before the Date for Completion’, subject to any extension of time. If a strike occurs when two-thirds of the work has been completed in half the contract time, I do not think that on resuming work a few weeks later the contractor is then entitled to slow down the work so as to last out the time until the date for completion (or beyond, if an extension of time is granted) if thereby he is failing to proceed with the work ‘regularly and diligently’.
I am not, of course, deciding whether or not the contractor in this case was entitled to an extension of time; that does not arise for decision. Whether or not the contractor was so entitled, I cannot see that there is anything to show that the architect’s failure to grant an extension in respect of the strike, or his views on this subject so far as they emerge from the evidence, have tainted his decision to issue the notice. Let me assume, as counsel for the contractor urges, that in considering whether or not the contractor is proceeding ‘regularly and diligently with the Works’, the architect must look at the work done and to be done, the time available, the labour and other problems, and the capacity or ability of the contractor to work. Assume all that, and I still cannot see that it has been established that in making his decision the architect failed to take into account what he ought to have taken into account, or took into account what he ought not to have taken into account. The existence of a mere possibility of such an error is not the demonstration that such error exists; and it seems at any rate to be arguable whether under the contract the contractor is entitled to an extension.
Some eight months of strike is, of course, a long period, and at one time, at all events, the borough seems to have accepted that the contractor was entitled to an extension: see para 3 of the third affidavit of Mr Coupe, solicitor to the borough. Nevertheless, this is a matter confided to the opinion of the architect in accordance with condition 23; and I need not repeat what I have said about the import of this condition. Further, despite Dean v Prince, I also feel considerable doubt about the applicability of the Anisminic dicta to an architect’s notice under condition 25, for the reasons I have mentioned in relation to natural justice. Decisions of statutory tribunals with limited powers do not necessarily apply to individuals exercising limited powers under contracts, in a field not reached by certiorari. Accordingly, I hold that on the evidence before me the architect’s notice is not a nullity on this ground.
Counsel for the contractor’s third attack on the architect’s notice was that it was not in fact given by the architect. It is common ground that although initially another person was ‘the architect’ under the contract, at all material times from April 1968 the architect has been the firm of Mathews Ryan Simpson, Mr Mathews being the senior partner in that firm. Counsel for the contractor’s point is short. The architect’s notice is signed by Mr Mathews alone, followed by the words ‘Architect to the London Borough of Hounslow for said Contract’; and it is phrased throughout in terms of ‘I’ and not ‘we’. He accepts that there is nothing in the contract to require the notice to be signed, and that at times the contractor has in correspondence referred to Mr Mathews as being ‘the Architect’; but he says that it is not
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‘the Architect’ within the meaning of the contract who has ‘given’ the notice under condition 25. One partner is not the firm.
There is nothing in this point. The only question is whether the words ‘the Architect may give to him a notice’ are satisfied. The piece of paper dated 23 December 1969 is undoubtedly a notice, and so all that I need ask is whether it was given to the contractor by the firm. As counsel for the borough pointed out, it came on the firm’s headed note paper, and was signed by the senior partner who had throughout dealt with the contract himself. In those circumstances it seems to me quite unreal to say that it was not given by the firm. A partner who has power to bind the firm has power to give a notice on behalf of the firm.
Counsel for the contractor’s fourth point was that the notice failed to specify the default, in that it lacked particularity and also that it failed to state what condition 25 required. As regards the first limb, that of want of particularity, he said that the words ‘specifying the default’ were not satisfied by merely repeating the relevant words of the condition, simply saying ‘You have failed to proceed regularly and diligently with the works’. The notice, he said, must give details of what is wrong, stating, for instance, that for the three months preceding the notice the contractor has had only two men and a dog on the site. He did not, however, contend that the notice must specify what must be done to put matters right. Counsel for the borough pointed to the absence of any requirement in the contract to the effect for which counsel for the contractor contended, such as would have appeared if the language had been ‘specifying the default and the facts constituting that default’.
I have considered a number of the authorities cited in Stroud’s Judicial Dictionary under ‘specified’ and ‘specify’, but I have found none of them persuasive. I think that condition 25(1) sufficiently provides its own dictionary. The opening words refer to the contractor making ‘default in any one or more of the following respects’; and then four categories of default are set out in paras (a) to (d). If, as counsel for the contractor contends, the notice must specify (to take his example) that for the three months preceding the notice the contractor has had only two men and a dog on the site, then I find difficulty in applying the words ‘continue such default’ sensibly, and greater difficulty in applying the words ‘repeat such default’. Plainly the ‘default’ is the default specified. If, then, the contractor augments or diminishes his labour force on the site by one man (to say nothing of the dog), is it to be said he is not continuing ‘such default’? And if the default specified is for the period of three months prior to the giving of the notice (say, from 23 September to 23 December), can the default thus specified be literally continued after 23 December, or, indeed, repeated? If, on the other hand, all that is required is to make it plain to the contractor under which head of condition 25(1) the complaint falls, then none of these somewhat captious and literal difficulties arises. I do not read the condition as requiring the architect, at his peril, to spell out accurately in his notice further and better particulars, as it were, of the particular default in question. All that I think the notice need do is to direct the contractor’s mind to what is said to be amiss; and this I think was done by this notice. If the contractor had sought particulars of the alleged default and had been refused them, other considerations might have arisen. But as it stands I think that here, too, there is nothing in the point.
The second limb of counsel for the contractor’s attack under this head was based on the insertion of the words ‘in my opinion’ in the notice. Unlike various other cases cited, including Cork Corpn v Rooney and Foster and Dicksee v Hastings Corpn, where the contract provided for determination if in the ‘opinion’ or ‘judgment’ of the engineer there was a failure by the contractor to use sufficient dispatch and so on, in this case condition 25(1) is purely factual: the words are ‘if the Contractor shall make default’. The two types of clause may for brevity be called ‘opinion’
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and ‘factual’ clauses respectively. As counsel for the contractor pointed out, there are many opinion clauses in the contract (see eg cll 15(1), 15(4), 16(c), 22, 23, 24), and a factual clause such as cl 25(1) ought not to be weakened by implying words of opinion that a draftsman who well knew how to use them had refrained from inserting. From that the argument was that nothing would satisfy condition 25(1) except a factual allegation, positively asserting as a fact that the requisite event had occurred. Counsel for the contractor fortified this submission by reference to some words of Lord Sumner, uttered in Equitable Trust Co of New York v Dawson Partners Ltd ((1926) 27 Lloyd LR 49 at 52) to the effect that requirements as to documents must be strictly observed, and that ‘there is no room for documents which are almost the same, or which will do just as well’. That was a commercial case concerning a confirmed credit relating to a shipment of Java vanilla beans, sound, sweet and of prime quality. On arrival, the shipment was found to consist of less than 1 per cent vanilla beans, the rest being old iron, wood and rubbish. The credit provided for a certificate of quality ‘issued by experts who are sworn brokers’, and a certificate signed by only one sworn broker was held to be no substitute. There, of course, the difference was one of substance; one sworn broker is not the same as two or more.
However, even if one applies to the case before me a dictum from so far afield, I think that one comes back to the language of condition 25(1). The words ‘You have failed to proceed regularly and diligently with the works’ are plainly factual, and would clearly satisfy this branch of counsel for the contractor’s argument. The question is whether they are deprived of this effect merely because they are prefaced by the words ‘in my opinion’, the opinion being that of the architect. I cannot think that they are. The essence of a notice is to convey information in a definite form, and I do not see why the notice should be any the less one ‘specifying the default’ because it is expressed as being the architect’s opinion. No intelligible reason was suggested for making a distinction of this sort, and I can see none. I do not think that if I were to say to counsel for the contractor ‘In my opinion your submission is wrong’ he would regard these words as being any the less decisive than the more abrupt and less courteous assertion, ‘Your submission is wrong’. I need say no more than that I reject the submission.
That brings me to the fifth and last submission under this head, namely, that the notice lacked the necessary factual basis. In other words, counsel for the contractor said that there had in fact been no failure to proceed regularly and diligently with the works which would justify the architect’s notice. I propose to postpone the consideration of this head until I have considered the submissions made on the borough’s notice. There were four of these. First, it was said that the borough’s notice was bad because it was not preceded by a valid architect’s notice; and I need say nothing about this save that the borough’s notice plainly cannot take effect unless the architect’s notice is valid. Second, it was said that there was not in fact any continuing default; and I shall consider that when I consider the factual basis of the architect’s notice.
Third, it was said that several words in the architect’s notice had curtailed the borough’s rights. These words are:
‘… unless within fourteen working days after the receipt of this letter, there is an appreciable improvement in the progress of the works, the [borough] will be entitled to determine your employment in accordance with clause 25(1) of the contract.’
Ergo, it was said, a representation had been made that if there was an ‘appreciable improvement’ of this sort, then the borough would not be entitled to determine the contractor’s employment, even if that improvement fell short of putting an end to the failure to proceed ‘regularly and diligently’ with the works. In support,
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counsel for the contractor cited the familiar proposition enunciated by Bowen LJ in Birmingham & District Land Co v London & North Western Ry Co ((1888) 40 ChD 268 at 286, [1886–90] All ER Rep 620 at 627):
‘… if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before.’
Despite this representation, the borough’s notice was then given not on the footing of ‘no appreciable improvement’ but on the footing that the architect had informed the borough that the contractor had continued the default. The architect’s letter to the borough on which the borough’s notice was based in terms states factually that ‘the Contractors have failed to proceed with the Works regularly and diligently’. In short, having represented one thing, the borough proceeded to act on another. That was the contention.
The architect’s notice is certainly not very happy in its drafting; but that is not the question. I very much doubt whether the words relied on really amounted to any such representation as is alleged. With condition 25(1) before him, I find it hard to believe that the contractor was misled into thinking that all that needed to be done was to make an appreciable improvement, even if that did not suffice to lift performance of the contract into the sphere of proceeding regularly and diligently. Nor do I perceive any satisfactory evidence that the contractor has acted on the alleged representation; for as Lord Simonds has pointed out, the concluding words in the passage that I have cited from the judgment of Bown LJg emphasise that the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position: see Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd ([1955] 2 All ER 657 at 660, [1955] 1 WLR 761 at 764); and see per Lord Cohen ([1955] 2 All ER at 685, [1955] 1 WLR at 799). If there had been evidence to the effect that the contractor had, relying on the architect’s notice, carefully calculated what would amount to an ‘appreciable improvement’, without worrying whether or not it would suffice to comply with the obligation to proceed regularly and diligently with the works, I should have perused it with some interest; the calculation might have been nice. Nor am I sure how far a representation by the architect is to be treated as a representation by the borough. In sum, there seems to me to be an air of high unreality about the submission; and I reject it.
Counsel for the contractor’s fourth submission on the borough’s notice was that it was given unreasonably or vexatiously, and so contravened the concluding words of condition 25(1). In support of this contention he pointed to some allegations made by the contractor to the effect that the borough wished to make arrangements with other contractors, and that the borough wanted the contractor off the site so that the other contractors would be willing to begin work there; and he urged that these allegations had not been answered. However, even if one accepts that to the full, I do not see how it establishes that the borough’s notice was given unreasonably or vexatiously. A building owner may have a dozen reasons, all extraneous to the contract, for wishing to terminate it. But if he has one good and reasonable ground for determining the contract, that suffices, and is not invalidated by the existence of the dozen reasons. I remain wholly unconvinced that there was anything unreasonable or vexatious in the giving of the notice by the borough.
That brings me to the two submissions that I have postponed. First, was the architect’s notice bad as lacking the necessary factual foundation of the contractor’s default in failing to proceed regularly and diligently with the works? Second, was the
Page 355 of [1970] 3 All ER 326
borough’s notice bad as lacking the necessary factual foundation of a continuance of that default by the contractor for 14 days after receipt of the notice? These are largely matters of disputed fact which have to be resolved against the somewhat general terms of the contract; and they are therefore not easy to decide on motion.
I have felt some difficulty in determining the standard to be applied in considering these questions. Counsel for the contractor referred me to Donmar Productions Ltd v Bart as establishing that the borough must show a strong prima facie case for the existence of the right, namely, that the licence had been duly determined, either because the employment of the contractor under the contract had been effectually determined, or because no such determination was necessary. I have already rejected the latter alternative, so that it is only the former that is in point. Counsel for the borough, I think, accepted that the standard to be applied was that of a strong prima facie case, and he put his argument on that basis. In ordinary cases, the plaintiff must also establish a case of infringement of that right that is reasonably capable of succeeding, and then, although the court will have regard to the balance of convenience, the governing principle is the maintenance of the status quo: I refer to Harman Pictures NV v Osborne ([1967] 2 All ER 324 at 336, [1967] 1 WLR 723 at 738), the case to which a note of the Donmar case is appended.
Now in the present case, the status quo is that for a long while the contractor has been in occupation of the site. This is no case of someone forcibly entering the premises, so that (as in Thompson v Park) the status quo to be maintained is that which existed before the forcible entry. The borough admitted the contractor to the site in 1966, and the contractor has been there ever since. In those circumstances, the injunction sought on this motion, if not mandatory, at least has a mandatory element in it. If the contractor is restrained from ‘entering, remaining or otherwise trespassing’ on the site, then although the injunction is prohibitory in its language, it is at least in part mandatory in its substance and effect. The contractor is in de facto control of the site, and whether or not that control amounts in law to possession, the injunction would in effect expel the contractor from the site and enable the borough to reassert its rights of ownership. This aspect was not discussed in argument, but it seems to be of some importance, in that on motion a far stronger case must be made for a mandatory order than for a prohibitory order; and see Kerr on Injunctionsh as to the grant of injunctions restraining trespass pending trial. It so happens that a few days ago I gave judgment on a motion (Shepherd Homes Ltd v Sandham) in which I had to consider the principles applicable to interlocutory applications for mandatory injunctions. For the reasons stated in that judgment, I think that before granting a mandatory injunction on motion the court must feel a high degree of assurance that at the trial a similar injunction would probably be granted. The disruption to the contractor that would flow from the grant of the injunction sought in this case, both directly and in relation to the sub-contractors, would in all probability be considerable. The question, then, is how strong is the borough’s case.
[His Lordship considered affidavits as to progress of work on the site and minutes as to the labour force at various periods and continued:] I do not propose to attempt to summarise all the charges and counter-charges, and all the divergences of view. I cannot resolve such disputed facts on motion, nor am I concerned, I am glad to say, with questions such as whether the contractor has been and is adopting a wise policy in relation to the labour force on the site. On the factual basis for the architect’s notice, I am concerned with a quite different matter, namely, the strength of the borough’s case that the contractor has made default by failure to ‘proceed regularly
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and diligently with the works’, within the meaning of condition 25(1), so that the employment of the contractor under the contract has been validly determined. In deciding that question I must not only consider the facts but also construe the contract. In particular, what is the meaning of the words ‘regularly’ and ‘diligently’?
These are elusive words, on which the dictionaries help little. The words convey a sense of activity, of orderly progress, and of industry and perseverance; but such language provides little help on the question of how much activity, progress and so on is to be expected. They are words used in a standard form of building contract in relation to functions to be discharged by the architect, and in those circumstances it may be that there is evidence that could be given, whether of usage among architects, builders and building owners or otherwise, that would be helpful in construing the words. At present, all that I can say is that I remain somewhat uncertain as to the concept enshrined in these words; and this necessarily increases the task of counsel for the borough in establishing a strong case that the contractor has failed to proceed regularly and diligently with the works, so that the architect’s notice is good.
I turn to the borough’s notice. Assuming that the architect’s notice was good, is there a sufficient factual foundation for the allegation that what has happened satisfied the words ‘if the contractor either shall continue such default for 14 days after receipt of such notice or shall at any time thereafter repeat such default’?
[His Lordship considered labour force figures and certificates of work done and continued:] In the event, my conclusion is that although the borough has established some sort of a case for having validly determined the contract, that case falls considerably short of any standard on which, in my judgment, it would be safe to grant this injunction on motion. What is involved is the application of an uncertain concept to disputed facts. As is so often the case on motion, the court is faced with a choice of evils. I fully accept the importance to the borough, on social grounds as well as others, of securing the due completion of the contract, and the unsatisfactory nature of damages as an alternative. But the contract was made, and the contractors are not to be stripped of their rights under it, however desirable that may be for the borough. A contract remains a contract, even if (or perhaps especially if) it turns out badly. The borough may indeed be able at the trial to make out a formidable case in support of its contentions, just as the contractor may be able to make out a formidable case in reply; and with the full procedure of the trial, and in particular with the advantage of seeing and hearing the witnesses, and the testing process of cross-examination (not least on any expressions of expert opinion), the court may well be able to reach a firm conclusion on one side or the other. But I lack these advantages, and with so much turning on disputed questions of fact, and inferences from the facts, I cannot say that the borough has made out its case for the injunction that it seeks.
In those circumstances I do not think that I need say much about the various grounds for refusing an injunction on which counsel for the contractor relied if all else failed. In addition to the balance of convenience, which I have to some extent considered, he referred to the borough’s attempt in February to seize the site; to delay, consisting of the period between the notice of determination and the service of the writ and notice of motion (a period of about six weeks between 19 January and 3 March); to a question of copyright in the plans; and to certain prejudicial matters that had been mentioned. I do not think that there is anything of substance under any of these heads that requires discussion, and if the injunction would otherwise have issued, I think that I would have found no obstacle in these objections. However, for the reasons that I have given, I do not think that any injunction should be granted. Accordingly, the motion fails, and I dismiss it.
Motion dismissed.
Solicitors: Sharpe, Pritchard & Co, agents for M W Coupe, Hounslow, Middlesex (for the borough); Beddington, Hughes & Hobart (for the contractor).
R W Farrin Esq Barrister.
Tesco Supermarkets Ltd v Nattrass
[1970] 3 All ER 357
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 14, 15 JULY 1970
Trade description – Defence – Reasonable precautions, etc – Responsibility for avoidance of offence delegated to employee – Default by employee – Liability of employer – Trade Descriptions Act 1968, s 24(1) (b).
A poster displayed in a supermarket owned by the appellants read ‘Radiant 1s. off Giant Size 2s. 11d.' On the occasions of such special offers it was customary to remove all ordinary stock of the product and to display only stock in reduced-price packets. An assistant, R, one evening found that none of the reduced-price packets remained on display and filled the fixture with ordinary packets marked with the ordinary price (3s 11d); she did not, as she was required to do in such circumstances, report either the shortage of reduced-price packets or what she had done to C, the manager of the store. On the following day a customer looked for the reduced-price packets and failed to find them; he took an ordinary packet and was charged the full price for it (3s 11d). An information was preferred against the appellants that they had given an indication by means of the poster that the goods were offered at a price less than that at which they were in fact offered, contrary to s 11(2)a of the Trade Descriptions Act 1968. At the hearing the justices found, inter alia, that the appellants exercised all due diligence in devising a proper system for the operation of the store and by securing as far as was reasonably practicable that it was fully implemented; that the store was managed by C who was responsible for the manner and extent of the display both of the poster and of goods for sale and of marking of prices on goods; that had C realised that the store had sold out of reduced-price packets he would have removed the relevant portion of the poster or have reduced the price of the ordinary packets; and that the original act or default was that of R and the act or default of C was in his failure to instruct or supervise R. On the question whether the defence under s 24b was open to the appellants,
Held – (i) C, as manager of the store, could be ‘another person’ for the purposes of s 24(1)(a) (Beckett v Kingston Bros (Butchers) Ltd [1970] 1 All ER 715 followed; R C Hammett Ltd v Crabb, R C Hammett Ltd v Beldam [1931] All ER Rep 70 applied) but before the appellants could succeed in the defence under s 24(1) they had also (under s 24(1)(b)) to establish, that they had taken all reasonable precautions and exercised all due diligence to avoid the commission of an offence under the Act (see p 365 h and p 368 f, post).
(ii) The 1968 Act created a number of offences of strict or absolute liability and in such cases where the responsibility for performance of duties (breach of which would constitute an offence) had been delegated by an employer to an alter ego, eg C, if the alter ego should fail in his duty the employer would be liable; accordingly, the appellants having delegated their duty of taking all reasonable precautions and exercising all due diligence to avoid the commission of an offence to C (and C having failed properly to carry out his part in the operation of the system), were in breach of s 11(2) and could not establish a defence under s 24(1) (see p 365 j, p 367 d and p 368 b and f, post).
Series v Poole [1967] 3 All ER 849 applied.
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Notes
For defences under the Trade Descriptions Act 1968, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314F.
For the Trade Descriptions Act 1968, s 24, see 48 Halsbury’s Statutes (2nd Edn) 610.
Cases referred to in judgment
Beckett v Kingston Bros (Butchers) Ltd [1970] 1 All ER 715, [1970] 1 QB 606, [1970] 2 WLR 558.
Hammett (R C) Ltd v Crabb, R C Hammett Ltd v Beldam (1931) 145 LT 608, [1931] All ER Rep 70, 95 JP 180, 25 Digest (Repl) 150, 623.
Hammett (R C) Ltd v London County Council (1933) 97 JP 105, 49 TLR 209, 25 Digest (Repl) 151, 624.
Registrar of Restrictive Trading Agreements v W H Smith & Son Ltd [1969] 3 All ER 1065, [1969] 1 WLR 1460 Digest Supp.
Series v Poole [1967] 3 All ER 849, [1969] 1 QB 676, [1968] 2 WLR 261, Digest Supp.
Cases also cited
Hall v Farmer [1970] 1 All ER 729, [1970] 1 WLR 366.
Melias Ltd v Preston [1957] 2 All ER 449, [1957] 2 QB 380.
Walkling Ltd v Robinson (1929) 99 LJKB 171, [1929] All ER Rep 658.
Case stated
This was a case stated by the justices for the petty sessional division of Northwich in respect of their adjudication as a magistrates’ court sitting at Northwich on 3 February 1969.
On 5 November 1969, the respondent, William Kenneth Nattrass, preferred an information against the appellants, Tesco Supermarkets Ltd, charging that they on 26 September 1969 at Northwich in the county of Chester in offering to supply goods, namely a packet of Radiant washing powder, gave an indication by means of a notice bearing the statement ‘Radiant 1s. off Giant Size 2s.11d.' that the goods were offered at a price less than that at which they were in fact being offered, namely 3s 11d, contrary to s 11(2) of the Trade Descriptions Act 1968. On 23 January 1970, the appellants gave notice pursuant to s 24(2) of the 1968 Act to both the respondent and one John Reginald Clement of Tesco Supermarkets Ltd, 42 Witton Street, Northwich, that at the hearing of the summons against them under s 11(2) of the 1968 Act the appellants intended to rely on the contention that the contravention in question was due to the act or default of Mr Clement and that the appellants had used all due diligence to secure compliance with the provisions in question.
The following facts were found. At about 10.00 am on 26 September 1969 and for a number of days prior thereto, the appellants were displaying affixed to the window of their store in Witton Street, Northwich, a large poster divided by a horizontal line into two: the upper part bore the legend ‘Radiant 1s. off Giant Size 2s. 11d.’; the lower part bore another legend referable to another product. The appellants had caused an advertisement to the same effect to be included in local and national newspapers. Prior to that time on that date at the store, and for a number of days prior thereto, the appellants displayed for sale on a separate fixture a number of giant size packets of Radiant each bearing on it the legend in prominent lettering ‘1s. off recommended price’; such packets were known in the trade as flash packs and one was produced in evidence; the recommended retail price of giant size packets of Radiant during the week in question was 3s 11d. At that time on that date at the store the appellants had no flash packs of Radiant on display. At that time on that date at the store the appellants were displaying for sale a number of giant size packets of Radiant washing powder each bearing on it a single price marking of 3s 11d but no other marking referable to its price and each standing on a shelf which itself bore a price marking of 3s 11d.
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The appellants intended the relevant part of the poster only to apply to the flash packs of giant size Radiant. At that time on that date at the store Thomas Coane, an old-age pensioner, searched the store for a giant size packet of Radiant priced at 2s 11d expecting to find a packet at a reduced price such as the flash pack produced in evidence, but was able to find only the packets marked with the price of 3s 11d. He selected one of these and on enquiring the price of the cashier was informed that there were no giant size packets of Radiant in stock for sale at the price of 2s 11d. He was accordingly charged the price of 3s 11d. Mr Coane immediately complained to David John Sprake Hughes, inspector of weights and measures and an officer authorised by the weights and measures authority under the 1968 Act. Mr Hughes visited the store at 10.20 am on that date and interviewed Mr Clement and Miss Winifred Rogers, an assistant in the store, whose duty it was to replenish the soap powder fixtures. Mr Clement explained to the inspector that all packs marked with the normal price were removed from display during the period of a special offer and that his assistants were required to inform him if any special offer stock were sold out so that he could remove any display notices. Miss Rogers told the inspector that on the evening prior to that date, she had discovered that no flash packs of Radiant remained on display and that she had thereupon filled the soap fixture with giant size packets of Radiant, each marked with a price of 3s 11d but had not reported the dearth of flash packs or her action to Mr Clement. Mr Clement also informed the inspector that, although at that time on that date there was no flash pack of Radiant on display, he was expecting a further 50 cases from the manufacturer during that day. He added that if Mr Coane had questioned him about the display notice, he would have allowed him to purchase a giant size packet of Radiant marked at 3s 11d for 2s 11d. The store was managed by Mr Clement who was responsible for the manner and extent of the display of the poster and the manner and extent of the display of items including packets of Radiant within the store and for the marking of prices on goods and display equipment therein. The appellants were a nationally known public company who owned many hundred stores including at least 230 in the north, each of which was under the control of a separate manager; the system of selection of managers was careful and reasonable; Mr Clement had had long experience in the food trade; the selection of Mr Clement as manager of the store was reasonable. The appellants provided adequate staff and equipment for the running of the store. Mr Clement received instruction from the appellants in the running of the store: by attending on a comprehensive six day management course 3 1/2 years previously on his appointment as manager and a further half day course devoted to the 1968 Act provided by the appellants for managers; orally from a branch inspector employed by the appellants who attended at the store every week for the purposes of ensuring that the store was properly managed; orally from an area controller employed by the appellants who attended at the store regularly although less frequently than the branch inspector; from a regional director employed by the appellants who attended at the store occasionally; from up-to-date and regular price lists and amendments thereto issued by the appellants specifying the price at which each item for sale was to be sold; copies of the relevant price lists for giant size Radiant obtaining for the whole of the week including 26 September were produced in evidence; from literature relevant to particular promotions including the promotion of the flash packs of giant size Radiant, a copy of the literature relevant to which promotion was produced in evidence; from sundry notices issued by the appellants including four notices under the heading ‘Trade Descriptions Act’ which four notices issued respectively in March, April, July and August 1969 were produced in evidence; from a manual entitled Store Operating Manual delivered to Mr Clement at least a week before 26 September 1969 which included a section entitled Bulletin 20 which contained detailed provisions particularly relevant to securing compliance with the provisions of the 1968 Act; a copy of the manual was produced in evidence; and orally from the appellants’ highly qualified hygiene executive on the subject of
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hygienic requirements and steps necessary to secure compliance with all relevant statutory requirements. That executive last attended at the store on 29 July 1969. The appellants exercised supervision over Mr Clement and proper running of the store: by the regular attendance of the branch inspector who was responsible only for some six to eight stores and whose duties were solely those of supervision; by the regular attendance of the area controller who was responsible for some three or four branch inspectors and some 24 stores and whose duties were those of supervising the branch inspectors as well as the managers and the operation of the stores; by the appointment of a regional director responsible for a number of stores and the supervision of the area controllers, branch inspectors and managers of them; by visits from the hygiene executive; by requiring Mr Clement to carry out himself regular checks on certain aspects of the operation of the store including the display of special offers and to record such checks in a book entitled ‘Weights and Measures Book’ which was inspected by the branch inspector and the area controller and which was produced in evidence; the entry therein for 26 September 1969 ‘All special offers O.K.' was made before 10.00 am on that day; the entries to the same effect in respect of earlier days that week were made after 10.00 am on 26 September after complaint had been made by the weights and measures inspector. The store on the relevant date was displaying for sale many thousands of different lines including many containing flash offers. Mr Clement overestimated his stock of flash packs of giant size Radiant in that he thought that four empty cases were in fact full. The flash packs of giant size Radiant had sold at a rate must higher than the appellants had or could reasonably have foreseen. Mr Clement did not realise the store had sold out of flash packs of giant size Radiant; had he so realised he would either have cut the poster in half and removed that portion relevant to Radiant or have reduced the price of the standard packets of giant size Radiant to 2s 11d. Mr Clement had not checked the soap powder fixture on the relevant date notwithstanding the entry in his ‘Weights and Measures Book’ for that morning—‘All special offers O.K.’. Mr Clement had under him an assistant manager, various section heads and other staff totalling in all some 60 persons. The ladder of responsibility from Mr Clement upwards was: Mr Clement—the branch inspector—the area controller—the regional director—the board of directors. It was the practice in the grocery trade for all stores whether large or small to be under the immediate direction of a shop manager.
In order to assist the parties just prior to the conclusion of the evidence of what transpired to be the last witness called by the appellants and having heard a considerable body of evidence called on behalf of the defence the justices indicated that subject to argument it appeared to them that the appellants had established that the commission of the offence was due to the act of Mr Clement and that they had satisfied the provisions of s 24(1)(b) of the 1968 Act but that the justices were not satisfied that Mr Clement was another person within the meaning of s 24(1)(a).
It was contended on behalf of the respondent: that the poster displayed in the window of the store was, in the words of s 11(2) of the 1968 Act, likely to be taken as an indication that all giant size packets of Radiant were being offered for supply at a price of 2s 11d each. Mr Coane had interpreted the poster in that way. Members of the public could not reasonably be expected to assume that the poster refered only to the flash packs of Radiant. That the facts disclosed that the offence was due primarily to the act or default of the shop assistant, Miss Rogers, in stocking her soap powder fixture with non-flash packs of Radiant and failing to inform Mr Clement that the special offer was exhausted. That whilst Mr Clement may have been at fault in not checking the soap powder fixture on the morning of the relevant date, it was unreasonable of the appellants to expect him to have time himself to comply with all the instructions issued to him, and check all the shelves of goods and flash offers each morning. That the principle underlying Beckett v Kingston Bros (Butchers) Ltdc, was
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distinguishable from the present case. In Beckettd, a special instruction had been given to a shop manager in relation to one commodity. The defendant company in that case clearly contemplated that the action specified in the instruction would be carried out by the manager personally. In his judgment Bridge J distinguished the facts from those of R C Hammett Ltd v London County Councile in that in Beckettf the act or default was that of the manager himself whereas in Hammettg it was that of a junior employee whom the manager had failed to supervise. In the present case, Mr Clement had failed to supervise the action of Miss Rogers and following Hammetth the failure to exercise due diligence by Mr Clement was the responsibility of the appellants; in short that Mr Clement was the alter ago of the appellants in relation to the act or default of junior employees. That the decision in Becketti took no account of the principle laid down in Walkling Ltd v J Robinsonj which did not appear to have been cited in argument in Beckettk. Although the wording of s 24(1) of the 1968 Act differed somewhat from s 12 of the Sale of Food (Weights and Measures) Act 1926 and s 26(1) of the Weights and Measures Act 1963, Walkling Ltd v Robinsonl laid it down that the statutory defence that the offence was due to the default of a person under the defendant’s control had no application where that person was in the defendant’s employment. Section 24(1) of the 1968 Act might have been intended to compress into one subsection the two defences afforded by s 12(2) and (5) of the 1926 Act and ss 26(1) and 27(1) of the 1963 Act, but the reference to the default of a defendant’s employee in a passage in the judgment of Lord Hewart CJ in Walkling Ltd v Robinsonm suggested that the decision in that case would have been the same if the two defences in the 1926 Act had been included in one subsection. Lord Hewart CJ referring to s 12(2), statedn:
‘Those words seem to me to have no relation to a case where it is a defect of the machinery or a default of the persons under the defendant’s control which is responsible for the mischief.’
The Hall v Farmero in following Walking Ltd v Robinsonp indicated that the principle of that case still applied to the statutory defence in s 26(1) of the Weights and Measures Act 1963 and, by implication, s 24(1) of the 1968 Act notwithstanding the different wording. The reference in s 24(1) to ‘or to the act or default of another person, an accident or some other cause beyond his control’ suggested that each of those three alternatives was to be interpreted ejusdem generis and related to a situation beyond a defendants control. That offences under s 11(2) of the 1968 Act were absolute as had been conceded by the appellants. Traders had an implied absolute duty under s 11(2) to ensure that indications as to the prices of goods were not in contravention of the subsection and on the authority of Series v Pooleq if a trader delegated the fulfilment of his absolute duty to an employee he remained liable for his employee’s failure to fulfil that duty if it were due to the employee’s own failure to exercise due diligence.
It was contended on behalf of the appellants that: the poster displayed was intended to and would only be taken as an indication that there were certain identifiable packets, namely the flash packs of giant size Radiant offered for sale at 2s 11d; the poster was not likely to be taken as an indication that standard packets, ie non-flash packs of giant size Radiant were being offered for sale at 2s 11d; so long as some identifiable packets of giant size Radiant, ie flash packs were offered for sale at 2s 11d it did not constitute an offence if different packets, even if containing the identical commodity and so described were offered for sale at a higher price than the poster indicated so long as that higher price was clearly marked on those other packets;
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if the above contention was correct no offence would be committed simply because the appellants had sold out of stock of the packets selling at 2s 11d but had continued to sell packets as 3s 11d if such selling out had occurred sooner than they could reasonably have foreseen; in the premises no offence under s 11 of the Act had been proved. If an offence under s 11 were proved then the appellants had proved that: (a) the commission of the offence had been due to the act or default of Mr Clement in miscalculating the quantity of flash packs of giant size Radiant available in the store on the morning of the relevant date; in allowing, contrary to the appellants’ instructions, flash packs and standard packets of the same article to be on sale at the same time; in failing to remove that part of the poster relevant to Radiant when the stock of flash packs was sold out; in failing to exercise proper supervision; (b) the appellants had taken all reasonable precautions and exercised all due diligence in providing a properly equipped store; by properly selecting Mr Clement to manage it; by providing a proper detailed and adequate system and instructions as to how the system and the store were to be operated; by providing adequate and proper supervision to see that the appellants’ system was followed and their instructions observed; (c) Mr Clement was another person within the meaning of s 24(1)(a) and the appellants relied on Beckett v Kingston Bros (Butchers) Ltdr as authority for the proposition that in general an employee and in particular a manager could be another person within the meaning of s 24(1)(a); that Hammett v London County Councils could be reconciled with Beckett’s caset in that the result in Hammettu might have been different if the manager and not a mere junior employee had been blamed; that even if the immediate act or default was that of one or more junior employees a more senior employee only could be blamed under s 24(1)(a) and the defence yet succeed if the act or default of that senior employee was either co-extensive with that of the junior employee or was comprised in the failure to correct that of the junior employee; that where a defendant was a limited company any employee could be another person within s 24(1)(a) who was not the alter ego of the company and that generally only the directors and perhaps the secretary could be the alter ego of a company although particular facts in a particular case might show another person so to be; that the manager in the present case could in no circumstances be said to be the alter ego of the appellants; that the appellants adopted in argument the whole of the comment to Beckett’s casev contained in the Criminal Law Review; that Hall v Farmerw relied on by the respondent on its proper meaning (contrary to the respondent’s contentions) supported the contention that an employee could be another person within the meaning of the Weights and Measures Act 1963 there being considered; that Series v Poolex relied on by the respondent had not relevance as that case turned on the question whether a person on whom there lay a statutory duty to do an act could show he exercised due diligence to secure that duty was performed simply by reasonably delegating the fulfilment of that duty to a third person; that Walkling Ltd v Robinsony relied on by the respondent could be distinguished in that it was not there considered whether an employee could be ‘another person’ as the defence was based on different grounds; (d) in the premises the appellants had proved that Mr Clement was another person within the meaning of s 24(1)(a).
The justices were of the opinion that the poster was likely to be taken as an indication that the standard packets of giant size Radiant were being offered for sale at 2s 11d being a price less than they were in fact being offered for sale, namely 3s 11d, and that in consequence an offence under s 11(2) of the Act had been made out. The commission of the offence was due to the act or default of Mr Clement by his
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failure to see that the appellants’ policy was correctly carried out and/or to correct the errors of the staff under him. The appellants had exercised all due diligence in devising a proper system for the operation of the store and by securing so far as was reasonably practicable that it was fully implemented and thus had fulfilled the requirements of s 24(1)(b). The appellants could not rely on the act or default of Mr Clement as he was not ‘another person’ within the meaning of s 24(1)(a); the justices’ reasons for this were that they distinguished the case of Beckettz cited to them on the ground (i) that there a single definite instruction was given to each shop manager calling on him to take specific action on a specific occasion whereas the appellants were relying on general instructions and (ii) that there only the act or default of the manager was proved, whereas in the present case the justices were satisfied that Miss Rogers and Mr Clement were both at fault; as compared with the manager in Beckett’s caseaa Mr Clement had a larger staff working under him whereas in the Beckett casebb it was otherwise and indeed one of the learned judges suggested that one at least of the managers might have had no staff at all. In the result the justices reached the conclusion that the original act or default was that of Miss Rogers and the act/or default of Mr Clement was in his failure to instruct or supervise her. Mr Clement represented the appellants in his supervisory capacity and for his lack of due diligence, the appellants were responsible on the principle laid down in Hammettcc . Accordingly Mr Clement was not ‘another person’ for the purposes of s 24(1)(a) of the Act. The appellants had failed to establish the defence provided by s 24 and accordingly the justices convicted them and fined them £25 and ordered them to pay an advocate’s fee of 15 guineas.
The questions for the opinion of the High Court were whether on the above statement of facts the justices came to a correct determination in point of law in concluding that: an offence under s 11(2) of the 1968 Act had been made out; and Mr Clement was not another person within the meaning of s 24(1)(a). The appellants now appealed.
J P M Phillips for the appellants.
R M Yorke for the respondent.
15 July 1970. The following judgments were delivered.
FISHER J delivered the first judgment at the invitation of Lord Parker CJ. Tesco Supermarkets Ltd, the appellants, were convicted of an offence under s 11(2) of the Trade Descriptions Act 1968 for that they, on 26 September 1969 at Northwich in the county of Chester, in offering to supply goods, namely a packet of Radiant washing powder, gave an indication by means of a notice bearing the statement ‘Radiant 1s. off Giant Size 2s 11d.' that the goods were offered at a price less than that at which they were in fact being offered, namely 3s 11d, contrary to s 11(2) of the Act. They sought to rely on s 24(2) of the Act, and on the contention that the contravention in question was due to the act or default of one John Reginald Clement the manager of the shop and that they, the appellants, had used all due diligence to secure compliance with the provision in question.
The justices for the petty sessional division of Northwich before whom the information came heard it on 3 February 1970; they found the offence proved and they further found that the appellants had failed to establish the defence under s 24 on the ground that Mr Clement was not ‘another person’ within the meaning of s 24. They accordingly convicted the appellants, who now appeal by way of case stated on two grounds: first that the justices were wrong in law in holding that the offence had been made out; and secondly that they were wrong in holding that Mr Clement was not ‘another person’ within s 24.
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As the hearing of the case proceeded it became apparent that although the justices had gone extremely carefully into the matters raised before them, they had not really applied their minds to the question which as it seems to this court arises on the facts of this case; that question being whether in the light of a finding that Mr Clement had been guilty of a failure in his duty of supervision, it was open to the justices to find that the appellants had taken all reasonable precautions and exercised all due diligence to avoid the commission of an offence under the Act.
The court has been invited to deal with the real question arising even though it is not one of the questions of law raised in the case stated, and it seems to us that the facts found by the justices are quite sufficient to enable that question to be decided. The relevant sections of the Act provide:
‘11. (2) If any person offering to supply any goods gives, by whatever means, any indication likely to be taken as an indication that the goods are being offered at a price less than that at which they are in fact being offered he shall, subject to the provisions of this Act, be guilty of an offence.
‘23. Where the commission by any person of an offence under this Act is due to the act or default of some other person that other person shall be guilty of an offence, and a person may be charged with and convicted of the offence by virtue of this section whether or not proceedings are taken against the first-mentioned person.
‘24. (1) In any proceedings for an offence under this Act it shall, subject to subsection (2) of this section, be a defence for the person charged to prove—(a) that the commission of the offence was due to a mistake or to reliance on information supplied to him or to the act or default of another person, an accident or some other cause beyond his control; and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control.
‘20. (1) Where an offence under this Act which has been committed by a body corporate is proved to have been committed with the consent and connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly.’
It is clear that the word ‘manager’ in s 20 refers to someone in a position of managing the affairs of the company, and would not extend to include a person in the position of Mr Clement, and if authority be needed for that proposition, I refer to Registrar of Restrictive Trading Agreements v W H Smith & Son Ltd.
The facts of the present case are as follows. Displayed in the shop on 26 September 1969 was a poster which read ‘Radiant 1s. off Giant Size 2s. 11d.' Prior to that date packets bearing the legend ‘1s. off recommended price’ had been on sale in the shop, but the shop had run out of such packets, and on 26 September none was on display. There were, however, on display ordinary packets of Radiant for sale at 3s 11d. A Mr Coane came into the shop and read the poster; he looked around for reduced-price packets, could find none, and so took an ordinary packet and was charged 3s 11d. The explanation given to the respondent, the inspector who brings the proceedings, was that normally all packets marked with the normal price were removed from display during the period of a special offer, but that on this occasion an assistant named Miss Rogers had on the previous evening discovered that none of the special reduced-price packets remained on display; she had filled the fixture with ordinary packets marked with the price of 3s 11d, but she had not reported either the shortage of the special packets, or what she had done, to Mr
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Clement. Mr Clement told the respondent that further supplies of the special packet were expected that day. The justices found that Mr Clement was responsible for the manner and extent of the display both of the poster and of goods for sale, including packets of Radiant, and for marking of prices on goods. They found that the appellants are a nationally known public company who own many stores, that the system of selection of managers was careful and reasonable, that Mr Clement had long experience, and that the selection of him as manager of the store was reasonable and that adequate staff and equipment were provided for the running of the store. Evidence was called as to the instructions given by the appellants to Mr Clement, and the supervision carried out. The justices found that the appellants had exercised all due diligence in devising a proper system for the operation of the store and by securing as far as was reasonably practicable that it was fully implemented. What went wrong, so they found, was that Mr Clement did not realise that he had run out of the special packets; if he had realised, he would have removed the poster. They further found that on 26 September he did not check the soap fixture. The justices found that both Mr Clement and Miss Rogers were at fault, and that the commission of the offence was caused by Mr Clement’s act or default, but they held that by reason of certain earlier decisions of the court the appellants were not entitled to rely on Mr Clement’s act or default in failing properly to instruct or supervise Miss Rogers as the ‘act or default of another person’ under s 24.
Before I turn to the main issue which arises on this appeal, I should dispose shortly of the first point which was argued, namely that on the facts found it was not open to the justices to find that an offence had been committed. Putting it very shortly, the argument of the appellants was that the poster would be understood only to mean that the special packets of Radiant were being sold at 2s 11d, and would not be understood to mean that giant size packets of Radiant generally were being offered for sale at 2s 11d. It seems to me that that is really a quite unarguable contention, and that the finding of the justices that the poster would be taken as an indication that all giant sized packets of Radiant were being offered for sale at 2s 11d was an inevitable one and was clearly right.
I turn then to the second point. It is clear that in order to establish a defence under s 24, a defendant has to establish the matters set out in both the paragraphs in s 24(1). There are in para (a) five alternative matters on which a defendant can rely, but in this case the only one sought to be relied on was ‘the act or default of another person’. It is common ground in this court, and counsel for the respondent has not sought to argue to the contrary, that any person can for the purpose of that paragraph be ‘another person’ provided that in a case where the defendant is an individual such person is someone other than the individual, and in a case where the defendant is a company or other corporate body, he is some person not being a person within s 20 carrying out functions as such person. That a manager of a shop can be ‘another person’ for the purpose of that paragraph, where the act or default of his which it is sought to rely on is something actually done by him, was decided by this court in Beckett v Kingston Bros (Butchers) Ltd, and in the earlier case of R C Hammett Ltd v Crabb, R C Hammett Ltd v Beldam.
The justices were therefore wrong in concluding that a defence under s 24(1) in the present case failed because Mr Clement could not be ‘another person’ within para (a). But the appellants, in order to succeed in that defence, had also to establish that they had taken all reasonable precautions and exercised all due diligence to avoid the commission of an offence under the Act. The Trade Descriptions Act 1968, creates a number of offences which are offences of strict or absolute liability. Liability is imposed on the principal, the company, even in the absence of any fault on the part of the directors unless they can make good a defence under s 24. That section
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requires that the person charged, in this case the company, should have taken all reasonable precautions and exercised all due diligence to avoid the commission of an offence under the Act.
The taking of such precautions and the exercise of diligence involves, or may involve, two things. First of all, it involves the setting up of an efficient system for the avoidance of offences under the Act. Secondly, it involves the proper operation of that system. Inevitably the second part, the operation of the system, will in most cases have to be delegated by the company to employees falling outside those mentioned in s 20. The question which this court has to consider is whether a company can be said to have satisfied the requirements of s 24(1)(b) if it satisfies the justices that it has set up an efficient system, or a system which cannot be criticised, or whether it is deprived of the defence under that section if it is shown that there has been a failure by someone to whom the duty of carrying out the system was delegated properly to carry out that function.
In Series v Poole this court had to consider the obligation under the Road Traffic Act 1960 to keep records of the driving periods of drivers. Section 186(1) of the Road Traffic Act 1960 provideddd :
‘… the holder of a carrier’s licence shall keep, or cause to be kept, in accordance with regulations made for the purpose of this section, current records … ’
showing certain things and a person who fails to comply with the section is made liable on summary conviction to a fine. Section 20 of the Road Traffic Act 1962 providedee :
‘In any proceedings under subsection (6) of section one hundred and eighty-six of the principal Act against the holder of a carrier’s licence for failure to comply with the provisions of that section or of regulations made for the purposes thereof it shall be a defence to prove that he used all due diligence to secure compliance with those provisions.’
In Series v Poole it was found that the respondent had delegated to a secretary the duty of keeping the records, and it was further found that the defendant had properly supervised and instructed the secretary, but that she had failed to carry out her duties correctly. Lord Parker CJ giving the principal judgment said ([1967] 3 All ER at 852, [1969] 1 QB at 683):
‘… can a holder of a carrier’s licence establish a defence merely by proving that he has devised a good system under which a person trained and, apparently, completely competent is put in charge of the checking of records? In my judgment, the justices here, no doubt out of sympathy for the respondent, came to a wrong decision in law. If I can go by stages, the absolute obligation, … under s.186(1) of the Act of 1960 is a personal obligation, personal in this sense, that if he, acting perfectly reasonably, puts some competent person in charge to perform his, the employer’s duty, the employer remains liable if the servant fails in his duty. Sometimes it is said that it is a matter of vicarious liability, though vicarious liability is really a term unknown to the criminal law in its strict sense. Rather it derives from the fact that, if Parliament has put an absolute duty on some individual, he cannot evade that duty by delegating it to somebody else. Now the position is that, if he seeks to perform that duty himself, he may find himself liable through no fault of his own. He may take all the steps to instruct the driver. He may take all the steps to check the records to see that the drivers are observing those instructions, and yet he may fail in his duty because of
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some act on the part of the driver. In such a case, it is quite clear that s.20 of the Act of 1962 comes to his rescue if, despite all due diligence on his part, he nevertheless finds that what constitutes an offence has been committed. He may, as I have said, acting perfectly reasonably, appoint somebody else to perform his duty, his alter ego, and in that case, as it seems to me, if the alter ego fails in his duty the employer is liable. Equally, if the employer seeks to rely on the defence under s.20, he must show that the alter ego has observed due diligence. It is quite plain in the present case that the secretary completely failed over the relevant period to exercise any due diligence in the matter. In my judgment, in those circumstances, the respondent cannot rely on s.20 of the Act of 1962.’
Under the Road Traffic Act 1960, as under the Trade Descriptions Act 1968, the offence created was an absolute one, and the difference in wording between s 20 of the Road Traffic Act 1962 ‘prove that he used all due diligence to secure compliance with those provisions’ and the wording of s 24 of the Trade Descriptions Act ‘prove … that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence’ does not seem to me to be a relevant difference. In my judgment the reasoning of that decision applies to the present case, and it seems to me that if it be the case that Mr Clement was a person to whom the appellants had delegated in respect of that particular shop their duty to take all reasonable precautions and exercise all due diligence to avoid the commission of such an offence, and if Mr Clement had failed properly to carry out that duty, then the appellants are unable to show that they have satisfied s 24(1)(b).
The justices, although as I have said their minds were not specifically directed to this point, have made a number of findings which are relevant to the question of due diligence. They state:
‘In order to assist the parties just prior to the conclusion of the evidence of what transpired to be the last witness called by the Appellants and having heard a considerable body of evidence called on behalf of the Defence we indicated that subject to argument it appeared to us that the Appellants had established that the commission of the offence was due to the act of the said Clement and that they had satisfied the provisions of Section 24(1)(b) of the said Act but that we were not satisfied that Mr. Clement was another person within the meaning of Section 24(1)(a) … the commission of the offence was due to the act or default of the said Clement by his failure to see that the Appellants’ policy was correctly carried out and/or to correct the errors of the staff under him; the Appellants had exercised all due diligence in devising a proper system for the operation of the said store and by securing so far as was reasonably practicable that it was fully implemented and thus had fulfilled the requirements of Section 24(1)(b).’
Then in the course of their discussion the words ‘another person’ the justices state:
‘In the result we reached the conclusion that the original act or default was that of Miss Rogers and the act or default of the said Clement was in his failure to instruct or supervise her. The said Clement represented the Appellants in his supervisory capacity and for his lack of due diligence, the Appellants were responsible on the principle laid down in Hammett.’
That is a reference to a second case involving Hammetts Ltd, R C Hammett Ltd v London County Council. That case is not altogether easy to follow, but in the light of the view to which this court has come, I do not consider that it is necessary to discuss it in any detail. Suffice it to say that there is nothing in that decision which is in any way
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inconsistent with the defendant in the later case of Series v Poole or with the application to the present case of the principle laid down in Series v Poole.
It seems to me that the justices, although their mind was not specifically directed to this point, have made specific findings relating to the two matters which arise under s 24(1)(b). First of all, they have found that the system which the appellants set up for securing that there was no offence under the Act was a proper one; but they have then gone on to find that Mr Clement had failed properly to carry out his part in the operation of that system. It seems clear to me that a person in the position of Mr Clement, the manager of a shop, a supermarket, is properly to be considered as being a person to whom the appellants had, so far as concerned that shop, delegated their duty of taking all reasonable precautions and exercising all due diligence to avoid the commission of an offence; and it seems to me that in the light of the findings which I have just read, it was impossible for the justices to find that the appellants had satisfied the requirements of s 24(1)(b).
The conclusion which the justices drew from the findings which I have stated was a non-sequitur and was an incorrect conclusion, mainly the conclusion that Mr Clement was not ‘another person’ for the purposes of s 24(1)(a) of the Act. But it seems to me that if their minds had been directed to s 24(1)(b) and to the proper construction of that paragraph, they would inevitably have found that the appellants had not satisfied the requirements of that paragraph. In my judgment, therefore, although the reasons which the justices give for their decision are wrong in law, it is clear from the facts which they have found and set out in the case stated that the decision to which they came was the right one for reasons other than those which they gave, being reasons which I have endeavoured to set out in this judgment, and accordingly in my view this appeal should be dismissed.
COOKE J. I agree.
LORD PARKER CJ. I also agree.
Appeal dismissed. On 17 July 1970, the court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether a person charged with an offence under s 11(2) of the Trade Descriptions Act 1968 in a retail shop owned by him would have a defence under s 24(1) of the Act if: (a) he instituted an efficient system to avoid the commission of offences under the Act by any person under his control; (b) he reasonably delegated to the manager of the shop the duty of operating the system in that shop; (c) the manager failed to perform such duty efficiently; (d) the offence charged was committed by reason of such failure; (e) such failure by the manager is the ‘act or default of another person’ relied on under s 24(1)(a); and granted leave to appeal to the House of Lords.
Solicitors: Alsop, Stevens, Batesons & Co, Liverpool (for the appellants); Gregory, Rowcliffe & Co, agents for John K Boynton, Chester (for the respondent).
N P Metcalfe Esq Barrister.
R v Robinson and others
[1970] 3 All ER 369
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND FENTON ATKINSON LJJ AND O’CONNOR J
Hearing Date(s): 20 JULY 1970
Criminal law – Forcible entry and detainer – Force – Barricades erected to prevent entry of lawful owner – Forcible Entry Act 1429.
Although the barricading of the building would itself in many cases be conclusive of forcible detention under the Forcible Entry Act 1429, not every use of barricading which caused the true owner to use force in removing the barricades necessarily amounts to the use of force in retention. Much depends on the facts in each individual case, particularly on the degree of barricading, the time and effort which had been spent on it, and the effect of the barricades generally (see p 372 j to p 373 a and d, post).
Dictum of Abbott CJ in Milner v Maclean (1825) 2 C & P at 18 approved.
Russell on Crime (12th Edn) 1964, vol 1, p 286, para 4 (part), approved.
Notes
For the offence of forcible entry and detainer, see 10 Halsbury’s Laws (3rd Edn) 590–593, paras 1100–1106, and for cases on the subject, see 15 Digest (Repl) 795–801, 7493–7599.
For the Forcible Entry Act 1429, see 18 Halsbury’s Statutes (3rd Edn) 408.
Case referred to in judgment
Milner v Maclean (1825) 2 C & P 17, 15 Digest (Repl) 796, 7505.
Appeals
At the East Sussex Quarter Sessions at Lewes (transferred from the Inner London Sessions) on 2 February 1970 before the deputy chairman (R E Seaton Esq) and a jury the appellants Michael Thomas Robinson, Andrew Langford (alias Dennis Barlow), Gabriel John Almy (or Elmey) and Denise Elizabeth Halloran were indicted together with four other accused, inter alia, on conspiracy to contravene the Forcible Entry Act 1429. On that count all appellants were convicted and sentenced. The facts are set out in the judgment.
B Sinclair for the appellants.
M D L Worsley for the Crown.
20 July 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. The four appellants were convicted at the East Sussex Quarter Sessions of one count of conspiracy to contravene the Forcible Entry Act 1429. As the charge is a somewhat unusual one, I think it is perhaps desirable to read the terms in which it was laid, namely—
‘… that on divers days between the 17th September, 1969 and the 26th September, 1969, in the Inner London Area, you did conspire together and with other persons to contravene the Forcible Entry Act, 1429, by unlawfully entering land and premises known as the St. Giles-in-the Fields School situate in Endell Street, London, W.C.2, and the freehold title to which was vested in the London Diocesan Board of Education (Incorporated) and by keeping the said Board and its agents put out of possession of and by holding the said land and premises in a forcible manner, to wit with a strong hand and with a multitude of people.’
On that count the four appellants were convicted and sentences were imposed of three months’ detention on the appellant Robinson and a similar sentence on the appellant Langford. The appellants Halloran and Almy were sentenced to imprisonment for periods of 12 months and nine months respectively, each suspended. Very
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considerable and voluminous grounds of appeal were submitted by each of the appellants designed to show that the conviction and/or sentence were wrong, but these were reduced on an earlier application to this court on 12 May 1970 when Kilner Brown J, giving the judgment of the Court, granted leave to appeal to investigate three matters which are succinctly stated in his judgment. Two deal with alleged misdirections by the learned chairman, to which I must turn in a moment and one concerns the question whether the sentences on the appellants Almy and Halloran were unlawful by reason of non-compliance with s 3 of the Criminal Justice Act 1961.
The circumstances of this case, if I can attempt to state them compactly, were these. There had been a number of people who, in the modern vernacular, and I use it without desiring to give offence, are referred to as squatters who had occupied a building at 144 Piccadilly and whose occupation of that building had a good deal of publicity in the press. The police in due course obtained possession of 144 Piccadilly, and it is clear that in the minds of some of those inside at any rate this was done by means of an unfair trick. Some of the squatters leaving the Piccadilly address moved to the school which is the subject-matter of the present count, where, no doubt, they were joined by others.
Documents found in the school after possession had ultimately been obtained clearly indicated that in the minds of some of the leaders at any rate a firmer effort was going to be made to retain possession of the school than had been made in the case of 144 Piccadilly. Indeed one document referred to—
‘… precautions against a possible bust [police break-in] are still being continued, and by the time they are completed this building will be as impregnable as a fortress.’
Another document which sets the tone of the situation, although, of course, the individual author is not identified, was a document which set out the wording of the Forcible Entry Act 1381 and went on to state:
‘This Statute effectively denies entry to these premises to the owners or their representatives, the Police, workmen, etc., and to any other person who is not a member of the London Street Commune or who is not there at the invitation of the Commune.
‘We hereby claim squatters’ rights, and the full protection of the law in the execution of these rights. Any attempt to enter these premises by forcible means will be considered outwith the law, and will be treated in like manner.’
I stress that one does not attempt to associate either of those documents with individual accused, but they do set the tone and atmosphere of the occupation of the school as it began.
The owners of the school decided to try and obtain possession through the medium of a High Court order, and the first step towards that was to give notice to the occupants of the building that such an order was to be applied for. Accordingly, on 18 September, two process servers with a chief superintendent of police went to the building and gave notice that High Court proceedings were to be undertaken. They were not allowed to go into the premises. I do not mean by that that they were forcibly stopped, but they were not invited in and they received no indication that their presence would be welcome, and they said their reception was not friendly. But at any rate they succeeded in giving notice that the proceedings in the High Court were about to be undertaken. This was duly done. A High Court order was made on 25 September ordering the possession of the building to be delivered up, and on that day representatives of the landlords, supported by a very substantial force of police under a chief-superintendent, went to the premises to obtain possession.
The evidence of the police officers, and it is subject to challenge only in detail, was that when they arrived there the premises had been barricaded to prevent entry. There is an issue whether the barricades extended to every external door or not, and
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it is quite clear that much of the barricading was concerned with internal passages and doors rather than external doors. But the overall impression with which the court is left by the evidence is that by and large the external doors had been barricaded in such a way as to prevent, or at least to embarrass, those who sought to enter. The police, in fact, made their principal entry, as we understand it, by going over the roof and obtaining access through a window. When they got into the building they found a substantial quantity of barricading of internal doors and the like, and they described how about 30 people were in room 3, the door of which room was barricaded and entry into it could only be obtained by piercing the wall with an iron bar.
It is right at once to say that no sort of physical resistance was offered to the police by any of those present and also that they had taken the precaution, according to the evidence, of throwing out of the building before the police arrived anything in their possession which might conceivably be regarded as an offensive weapon. Nail files, domestic knives and forks and the like were apparently put into a sack and thrust away to make it perfectly clear that no offensive weapons were to be involved. Nevertheless, they were there in considerable numbers. There were the barricades which I have endeavoured fairly to describe, and when the police arrived possession was obtained without any fighting or use of individual force on the part of those present.
That means, of course, that in this court we are really concerned only with three rather cold points of law. The first point taken on behalf of the appellants, and listed by Kilner Brown J as one of the matters proper for consideration in detail by this court, is a submission that the learned chairman misdirected the jury in regard to the constituents of the offence of conspiracy. He was, on a number of occasions, at pains to explain that conspiracy involved two or more persons and to point out that as a result a single person could never be convicted of conspiracy with himself. He said:
‘You cannot convict one of the accused and acquit all the others, because this is a conspiracy which charges them all; so, unless you are satisfied that two or more were concerned, then your verdict would be one of not guilty in respect of them all.’
Objection is taken to that direction and others in a somewhat similar vein which appear in the summing-up, and it is said that the jury might have been misled into thinking that if one or two were convicted, ie if the jury were satisfied as to the guilt of one or two, they ought then to convict all the others. In other words, it is said that this direction may have produced a complete reversal of the normal direction given in these circumstances and that which the learned chairman contemplated. We have considered this submission with care, but we do not think that there really can be any substance in it at all. It is often the case that a single sentence lifted from the summing-up can, in isolation, give a false impression, but it is well established that one must look at the summing-up as a whole and, looked at as a whole, we do not think that this misunderstanding could have been engendered in the jury’s mind. The learned chairman told them that they must consider each case separately. They were addressed by no less than six counsel, and it seems impossible for us to believe that this matter was not also adequately stressed in those speeches. Against that background we do not think that there is any real possibility that any apparent ambiguity in the sentences which I have read could have misled the jury or made the verdict unsafe or unsatisfactory.
The second point is perhaps more difficult, and indeed perhaps rather more important. It is said that the learned chairman misdirected the jury as to the meaning of force, it being clear, of course, that the substance of the case against the accused was that they had agreed to use force in resisting an attempt to evict them. In a passage, which is the one principally relied on by counsel for the appellants on this aspect of the case, the learned chairman said:
‘Did these people agree, any two or more of them, to keep out the landlords
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from their property by the use of force? Then there is another matter: Force, of course, can be the delivery of blows or the use of implements. A great deal has been made in this case that a collection was made on the 24th September on nail files, knives and forks and other things, which were all put into a sack and thrown out of the building, so that there could be no risk of the occupants being found in possession of offensive weapons. But if you came to the conclusion that this school was barricaded up so that it required force to get in, then that would be the use of force—passive force, you may think, but nonetheless force. So you will consider that aspect of the matter when you come to consider the facts.’
The chairman went on then to deal with other aspects of the matter, including the two documents to which I have referred.
The first question, of course, is to ascertain exactly what is meant by force in this context, the context being the use of force to prevent the true owner from recovering possession of his property, and I turn to Russell on Crimea where this passage appears:
‘Forcible detainer is where a man, who enters peaceably, afterwards detains his possession by force; and the same circumstances of violence or terror which will make an entry forcible will also make a detainer forcible. It seems to follow that whoever keeps in his house an unusual number of people, or unusual weapons, or threatens to do some bodily hurt to the former possessor, if he dare return, is guilty of a forcible detainer, though no attempt is made to re-enter … ’
With the assistance of counsel we have checked the authorities from which that passage is derived, and it clearly contains a correct statement of the law as it stands, and that means that accumulating an unusual number of people or unusual weapons, or making other preparations of such a kind which indicate in themselves that any attempt to enter will be opposed by force may amount to the use of force in detaining the premises even though the owner is deterred and never makes the attempt at all.
Even more conveniently is the matter summed up in a judgment of Abbott CJ in Milner v Maclean. I do not find it necessary to deal with the headnote or the facts of the case, and I cite it simply for the statement of principle which is attributed to Abbott CJ. He said ((1825) 2 C & P at 18):
‘In this case there was, it is true, no one assaulted, nor is it necessary that there should be, to constitute a forcible entry; for, if persons either take or keep possession of either house or land, with such number of persons, and show of force, as is calculated to deter the rightful owner from sending them away, and resuming his own possession, that is sufficient in point of law to constitute a forcible entry, or a forcible detainer.’
So preparations of that kind which, in Abbott CJ’s words, are ‘calculated to deter the rightful owner from sending them away’ can on that authority amount to forcible detainer.
We are quite satisfied that that is a proper statement of the law and one which we are required to adopt, so I come back to the passage complained of to see how it stands in the light of those authorities. Here again as in the previous point one can take an isolated phrase or sentence out of the learned chairman’s direction and say that it amounts to a proposition that any barricading which requires force to get in is itself the use of force in retention. If we came to the conclusion that that was in substance the direction in this case, we should not be able to go so far with it. We would not be prepared to state as a simple and bare proposition of law that any barricading of the building which caused the true owner to use force in removing the barricades
Page 373 of [1970] 3 All ER 369
necessarily amounted to the use of force in retention. So much would depend on the facts in each individual case, particularly on the degree of barricading, the time and effort which had been spent on it, and the effect of the barricades generally, because, if one was not careful, a proposition stated in those words might reach the almost ridiculous conclusion that a tenant who merely turned the key in the lock and thus caused the landlord to break in, breaking down the doors, would himself be using force to retain property from the landlord.
We are certainly not prepared to go as far as that in the present case and we think that the passage that I have referred to does contain, if broken down into detail, certain phrases which might in isolation create that impression; but again, at the risk of repeating myself, one has to look at the summing-up as a whole, and it is undoubtedly true, in our view, that the erection of substantial barricades may be a very potent piece of evidence to indicate an intention to use force or to deter the true owner from resuming possession of the property. Whether they suffice in isolation depends on the facts of the case, but substantial barricades would be of a most potent value in deciding whether those inside were intending to use force. For why? As O’Connor J pointed out in the course of argument, barricades from the very earliest days have been an adjunct used by defenders in order to improve the effectiveness of such force as they can use against the attackers, and in a great many cases the presence of barricades would be of perhaps a conclusive effect on an issue of this kind.
But in this case it is quite clear that the learned chairman was not inviting the jury to decide this case on barricades alone. He said ‘so you will consider that aspect of the matter when you come to consider the facts’, and he invited them to consider the existence of barricades in conjunction with all the rest of the background in the case and to decide whether that shows an intention to use force within the term to which I have referred. We have come to the conclusion here also that there is no error of law disclosed in the learned chairman’s direction and that there is again here no substance in the plea that the conviction should be set aside.
There remains the question of sentence, and on the face of it this turns on really a very short and simple point. The appellants Halloran and Almy were sentenced to 12 months and nine months respectively, each suspended. Possibly unknown to the learned chairman, although it matters not, they were both under 21, and consequently under the terms of s 3 of the Criminal Justice Act 1961 it was not open to the court in law to impose a sentence of imprisonment in excess of six months but under three years. It is a trap, if one may so describe it, with which courts administering criminal law are very familiar. It is quite evident, therefore, that the sentences in those two cases must be declared invalid because they are invalid in law.
The question is what should we substitute in their place. It has been suggested by counsel for the appellants that taking a fresh look at this case that sentences of imprisonment for these two appellants were wrong in principle anyway and that there ought to have been probation orders. There are difficulties in that course because the two appellants on the face of it not require the support of a probation officer, and indeed the appellant Halloran was disinclined to see the probation officer with a view to the preparation of a social inquiry report.
We do not think that it would be appropriate to substitute probation, but we certainly must substitute a sentence which is lawful in place of that which is unlawful, and we think that the fairest way to deal with that is to reduce each of these sentences to sentences of six months. The sentences will be suspended as before, but their term will be six months in each case rather than 12 and nine months respectively.
Appeals against conviction dismissed. Appeals against sentence allowed in part.
Solicitors: Dawson, Hart & Co, Uckfield (for the appellants Robinson and Langford); Anthony Young (for the appellant Halloran); Sears, Simons & Co (for the appellant Almy); Director of Public Prosecutions.
L J Kovats Esq Barrister.
Re Westbourne Galleries Ltd
[1970] 3 All ER 374
Categories: COMPANY; Insolvency
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 7, 8, 9, 10, 14 JULY 1970
Company – Winding-up – Compulsory winding-up – Contributory’s application – Just and equitable – Company in substance a partnership – Provision in articles for removal of directors – Petitioner removed from board and excluded from any part in management of company – Abuse of power and breach of good faith partners owed to each other – Whether petitioner entitled to winding-up order.
For many years the petitioner and N were equal partners in a business. In 1958, the company was incorporated with the petitioner, N and N’s son, G, as directors. They were in substance partners in the business carried on by the company. There was provision in the articles of association for the company by ordinary resolution to remove a director before the expiration of his period of office. Differences arose between the petitioner and N, with whom G sided, about the running of the business. At a general meeting of the company in January 1969, N and G used their majority shareholding to remove the petitioner as secretary of the company and in August 1969, at an extraordinary general meeting, the petitioner was removed from the office of director and excluded from any share in the conduct of the company’s business. The petitioner applied, inter alia, for a winding-up order, the court holding, on the evidence, that he had failed to make out a case on his alternative claim for an order under s 210.
Held – The removal of the petitioner as a director of the company, although done lawfully and in accordance with the articles of the company, was an abuse of power and a breach of the good faith which the partners owed to each other having embarked on the business venture on the basis that all should participate in its management; accordingly a winding-up order would be made (see p 384 b to d, post).
Re Yenidje Tobacco Co Ltd [1916–17] All ER Rep 1050, Re Davis and Collett Ltd [1935] All ER Rep 315 and Re Lundie Brothers Ltd [1965] 2 All ER 692 applied.
Re Cuthbert Cooper & Sons Ltd [1937] 2 All ER 466 and Re Expanded Plugs Ltd [1966] 1 All ER 877 distinguished.
Notes
For grounds for winding-up by the court, see 6 Halsbury’s Laws (3rd Edn) 531, 532, para 1031, for the alternative remedy in cases of oppression, see ibid 542, 543, para 1044, and for cases when it is ‘just and equitable’ for an order to be made, see 10 Digest (Repl) 856–866, 5638–5694.
For the Companies Act 1948, ss 184, 210, see 5 Halsbury’s Statutes (3rd Edn) 255, 280.
Cases referred to in judgment
Chase Plastics Ltd, Re (1966) 110 Sol Jo 564.
Cooper (Cuthbert) & Sons Ltd, Re [1937] 2 All ER 466, [1937] Ch 392, 106 LJCh 249, 157 LT 545, 10 Digest (Repl) 857, 5645.
Davis and Collett Ltd, Re [1935] Ch 693, [1935] All ER Rep 315, 104 LJCh 340, 153 LT 329, 10 Digest (Repl) 857, 5644.
Elder v Elder & Watson Ltd 1952 SC 49, 10 Digest (Repl) 857, *2438.
Expanded Plugs Ltd, Re [1966] 1 All ER 877, [1966] 1 WLR 514, Digest (Cont Vol B) 112, 5800a.
Harmer (H R) Ltd, Re [1958] 3 All ER 689, [1959] 1 WLR 62, Digest (Cont Vol A) 185, 5700b.
Page 375 of [1970] 3 All ER 374
Loch v John Blackwood Ltd [1924] AC 783, [1924] All ER Rep 200, 93 LJPC 257, 131 LT 719, 10 Digest (Repl) 856, 5643.
Lundie Brothers Ltd, Re [1965] 2 All ER 692, [1965] 1 WLR 1051, Digest (Cont Vol B) 110, 5645a.
Thomson v Drysdale 1925 SC 311, 10 Digest (Repl) 864, *2462.
Yenidje Tobacco Co Ltd, Re [1916] 2 Ch 426, [1916–17] All ER Rep 1050, 86 LJCh 1, 115 LT 530, 10 Digest (Repl) 863, 5683.
Petition
This was a petition, under s 210 of the Companies Act 1948, by Shokrollah Ebrahimi, a contributory and former director of Westbourne Galleries Ltd (‘the company’). The relief sought in the petition was an order that the personal respondents, Asher Nazar Achoury (‘Mr Nazar’) and his son George Alexander Nazar Achoury (‘George’), be ordered to purchase the petitioner’s shares in the company, alternatively, that the company should be wound up. The facts are set out in the judgment.
Raymond Walton QC and R H W Marten for the petitioner.
A J Balcombe QC and W F Stubbs for the respondents.
14 July 1970. The following judgment was delivered.
PLOWMAN J. This is a petition under s 210 of the Companies Act 1948, part of which I had better read. Section 210 provides:
‘(1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself) or, in a case falling within subsection (3) of section one hundred and sixty-nine of this Act, the Board of Trade, may make an application to the court by petition for an order under this section.
‘(2) If on any such petition the court is of opinion—(a) that the company’s affairs are being conducted as aforesaid; and (b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction accordingly of the company’s capital, or otherwise … ’
The relief in fact sought on this petition is an order that the personal respondents, Mr Nazar Achoury, whom I will call Mr Nazar, and his son George Achoury, whom I will call George, may be ordered to purchase the petitioner’s shares in the respondent company, Westbourne Galleries Ltd. Alternatively, the petitioner asks for a winding-up order. It is common ground that the company is solvent. The petitioner and the personal respondents are of Persian origin. For many years the petitioner and Mr Nazar have been engaged in the business of carpet dealers, and that is the business of the company. In 1945, Mr Nazar and Mr Fahimian were dealing in carpets in Nottingham under the style of ‘Oriental Carpet Company’, and in that year the petitioner joined them in partnership as a one-third partner. In 1946, Mr Fahimian left to set up business on his own account and the petitioner and Mr Nazar carried on as equal partners. In 1953, Mr Nazar acquired a property in London, 220 Westbourne Grove, and in 1956 the business in Nottingham was closed down and transferred to that address where Mr Nazar and the petitioner traded under the name of Westbourne Galleries, paying a rent to Mr Nazar.
There was no partnership deed and Mr Nazar has always maintained and continued
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to do so in the witness box, that the petitioner was not his partner but a mere employee who has throughout been dependent on Mr Nazar’s ‘grace and favour’. I should have had little hesitation in rejecting that contention, but I need not go into the evidence about it, as counsel for the respondents very properly conceded the point. There is no doubt, however, that Mr Nazar’s view of the matter has coloured the relations between himself and the petitioner and George has naturally sided with his father.
In December 1958, the company was incorporated to continue the business of Westbourne Galleries. The authorised capital of the company was £2,000 divided into 2,000 shares of £1 each. Its issued capital has at all times been £1,000. Its first directors were the petitioner and Mr Nazar, George being appointed a director shortly afterwards. The 1,000 shares were issued as follows: Mr Nazar 400, the petitioner 400 and George 200. It was alleged by Mr Nazar that the shares were a gift from him to the petitioner, but there is no doubt that the petitioner in fact paid for them in account and I understand Mr Nazar now to accept this. There is a dispute whether the initial intention of the petitioner and Mr Nazar was that George should have a stake in the company, but I do not think that this affects anything that I have to decide. On this point I should say that the company has never paid a dividend, the profits being distributed as directors’ remuneration. So far as the petitioner and Mr Nazar are concerned, this was done on a basis of equality. In recent years the net profits of the company before directors’ remuneration, have been of the order of £6,000.
In 1961, the company acquired shop premises at 15 Notting Hill Gate and since then that has been the company’s principal place of business. In June 1964, so much of the company’s business as was still carried on at 220 Westbourne Grove was transferred to premises which the company acquired at 209 Kensington Church Street, because Mr Nazar wanted the Westbourne Grove premises for his own purposes. Mr Nazar has always had a number of business interests outside the company including that of an antique dealer, while the petitioner’s sole business enterprise was, until the matter complained of in these proceedings, with the company. His part in the management of the company’s affairs had consisted mainly in selling carpets in the shop. The business of the company consists in part of dealing in Persian carpets and in part in dealing with other floor carpets, eg English Wilton carpets. The Persian carpet part of the business accounts, I understand, for about 50 per cent of it and the other floor coverings for the other 50 per cent. Paragraph 7 of the petition states this, and it is not disputed:
‘The majority of the Persian carpets which the Company sells are bought in Persia by Mr. Nazar, who spends many weeks of each year in Persia. He buys them in his own name, and up to 1965 his practice was to invoice such carpets to the Company and enter them in the Company’s books at a figure representing cost price plus transport, customs duty, purchase tax, and other expenses, with a percentage for his personal profit. [The] Petitioner acquiesced in this practice.’
The petition then goes on to deal with the petitioner’s complaints and it is important, I think, that I should read them, because it is common ground that the petition must stand or fall, to use the old phrase, secundum allegata et probata. The petition states:
‘8. In 1965 Mr. Nazar altered his practice and began to delay the invoicing of his carpets to the Company until after their resale by the Company. He then invoiced the carpets to the Company at purely arbitrary prices, which yielded substantial profits (on occasions up to 200 per cent) for himself and little or no gross profit to the Company. On some occasions prices for carpets have been quoted by Mr. Nazar to the Company before re-sale and the price has
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been altered and increased after the sale by the Company. [The] Petitioner has constantly protested against these practices on the part of Mr. Nazar but without result.
‘9. The Company pays the rent and other outgoings of the said premises at 209 Kensington Church Street, and the wages of a full-time employee who works there. These expenses amount, in all, to about £3,000 a year. The said premises are in fact used mainly for an antique business which Mr. Nazar carries on personally. Originally it was agreed that the Company should take half the gross receipts as consideration for the use of the said premises and the services of the employee but in October 1964 Mr. Nazar without [the] Petitioner’s consent reduced the Company’s share to 10 per cent of the gross receipts. He increased this to 15 per cent in March 1968. This falls far short of the expenses and the Company is in fact currently making a loss in the region of £1,500 a year in respect of the said premises.
‘10. The Company has in recent years been making a net profit before providing for directors’ remuneration of about £6,000 a year (after such provision there is a small loss). This profit has arisen substantially as a result of profits on the sale of British and other European manufactured and Eastern handmade carpets. The Company’s profits would have been considerably larger if Mr. Nazar had charged no more than a reasonable profit on the Persian carpets which he sold to the Company and if the Company had not incurred losses in the running of the said premises at 209 Kensington Church Street. Mr. Nazar has secured for himself unreasonable and improper profits both on his sales of carpets to the Company and through the subsidy in effect provided by the Company for his antique business. [The] Petitioner has protested against his conduct but owing to the majority of the shares held by Mr. Nazar and [George] the Petitioner’s protests have had no effect.
‘11. At a General Meeting of the Company held on 15th January 1969 [the] Petitioner was removed as Secretary of the Company, and it was further resolved to sell the lease of the Company’s premises at 209 Kensington Church Street, London, W.8. In due course through [the] Petitioner’s endeavours a purchaser was found, but the said Mr. Nazar thereupon refused to conclude the transaction contrary to the said resolution and to the interests of the Company.
‘12. By a Notice dated 30th June 1969 purporting to be issued by order of the Board an extraordinary general meeting of the Company was convened for 29th July 1969 for the purpose of passing an ordinary resolution removing [the] Petitioner from his office as a director of the Company. [The] Petitioner received no notice of the purported Board meeting at which the said order was purported to have been made, and the said Notice was accordingly invalid. This irregularity was subsequently regularised by a Notice dated 14th July 1969, and [the] Petitioner was removed from office as a Director at an extraordinary general meeting of the Company held on the 12th August 1969.
‘13. Mr. Nazar and [George] have, by removing [the] Petitioner from office as a Director, excluded him from any share in the conduct of the Company’s business. [The] Petitioner apprehends that their motive in so acting was to preserve the personal benefits which Mr. Nazar has improperly obtained from the Company and to secure for themselves the whole of the Company’s profits.’
From those paragraphs which I have read it will be seen that there are, in substance, four matters complained of: (1) the petitioner’s removal as a director of the company; (2) the sale of carpets to the company by Mr Nazar at arbitrary prices yielding substantial profits for him and little or none for the company; (3) that the respondents are improperly causing the company to subsidise Mr Nazar’s antique business at 209 Kensington Church Street; and (4) that the personal respondents refuse to
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concur in the sale of the company’s lease of those premises after the company had resolved that they be put up for sale. I must deal with these matters in turn.
First, as to the petitioner’s removal from the board and his subsequent exclusion from any part in the management of the affairs of the company, counsel for the petitioner submits that this is what may compendiously be described as a partnership case and that the removal of the petitioner from the board is sufficient of itself to entitle the petitioner to a winding-up order on the just and equitable ground, on the authority of such well-known cases as Re Yenidje Tobacco Co Ltd and Re Davis and Collett Ltd. Counsel for the petitioner concedes that in order to succeed under s 210 he must go further and, in relation to the petitioner’s position as a shareholder, establish some lack of probity on the part of the respondents within the principles stated by Lord Shaw of Dunfermline in Loch v John Blackwood Ltd. Lord Shaw said ([1924] AC at 788, [1924] All ER Rep at 203):
‘It is undoubtedly true that at the foundation of applications for winding up, on the “just and equitable” rule, there must lie a justifiable lack of confidence in the conduct and management of the company’s affairs. But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company’s business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company’s affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up.’
Counsel for the respondents while not, as I understand it, disputing that this is a partnership case, submits that the removal of a director under the powers conferred by the articles under s 184 of the Companies Act 1948, is never itself a ground for a winding-up order even in a partnership case. He concedes further that if I should find a lack of probity, especially in relation to the other complaints relied on, the requirement of oppression in s 210 would be satisfied.
I turn then to the cases which were cited to me. In Re Yenidje Tobacco Co Ltd Lord Cozens-Hardy MR said this in a much-quoted passage ([1916] 2 Ch at 430, [1916–17] All ER Rep at 1051):
‘In those circumstances, supposing it had been a private partnership, an ordinary partnership between two people having equal shares, and there being no other provision to terminate it, what would have been the position? I think it is quite clear under the law of partnership, as has been asserted in this Court for many years and is now laid down by the Partnership Act [1890], that that state of things might be a ground for dissolution of the partnership for the reasons which are stated by Lord Lindley in his book on Partnershipa in the passage which I will read, and which, I think, is quite justified by the authorities to which he refers: “Refusal to meet on matters of business, continued quarrelling, and such a state of animosity as precludes all reasonable hope of reconciliation and friendly co-operation have been held sufficient to justify a dissolution. It is not necessary, in order to induce the Court to interfere, to show personal rudeness on the part of one partner to the other, or even any gross misconduct as a partner. All that is necessary is to satisfy the Court that it is impossible for the partners to place that confidence in each other which each has a right to expect, and that
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such impossibility has not been caused by the person seeking to take advantage of it“.’
The next case is Re Davis and Collett Ltd, which I have already mentioned. The headnote of that case reads ([1935] Ch at 693):
‘By s. 168 of the Companies Act, 1929: “A company may be wound up by the court if … (6) the court is of opinion that it is just and equitable that the company should be wound up.” Where the capital of a private company is so owned as to make the company in substance a partnership and one director has purported by means of irregularities to acquire complete control of the company and to exclude the other director or directors from the management of it, it may be “just and equitable” within the meaning of the section that the company should be wound up.’
Crossman J said ([1935] Ch at 701, [1935] All ER Rep at 317):
“It seems to me that, in deciding whether it is just and equitable that the company should be wound up, I am left really to consider in the widest possible terms what justice and equity require: and it is with due regard to that consideration that I must form an opinion of what was being and what is being done. I find that the company is a private company in the fullest possible sense, and that the petitioner and the respondent hold the capital of the company substantially in equal shares. On the authorities, and particularly Re Yenidje Tobacco Co Ltd., I am bound now to consider the position in the same way as I should consider it if the question arose as to the right of one of two partners in a private partnership to have the partnership dissolved. The same circumstances which entitle a partner to require the dissolution of a partnership entitle a person who is equally interested with one other person in a company to have that company wound-up on the ground that the circumstances render it just and equitable. That, I think, is the effect of Re Yenidje Tobacco Co Ltd., and I think that the principles apply here. I take that case, not because the facts in it exactly agree with those in this case, but because of the principles there laid down, where the statement of the law in Lindley on Partnership is applied to a company.’
After considering the facts, Crossman J said ([1935] Ch at 702, [1935] All ER Rep at 318):
‘I do not think it is necessary for me to go into the details of the evidence here or to try to sum up the evidence; but I find that this is a case where, if it was a case between partners, I should be bound to come to the conclusion that there ought to be a dissolution of the partnership.’
Certain limits on the partnership doctrine are indicated by Re Cuthbert Cooper & Sons Ltd. I will read the headnote. It states ([1937] Ch at 392):
‘A private company was formed in 1913 with a capital of 10,000l. in 1l. shares, half of which belonged to C.C. and half to his two elder sons. C.C. and his two elder sons were the first directors of the company and continued to be so until 1930, when C.C. died, leaving his two elder sons sole directors. By his will
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C.C. appointed his three younger sons, who were employed in the business but were not members of the company, executors thereof and bequeathed his 5000 shares equally between them. The articles of the company provided that the directors might in their absolute discretion refuse to register any transfer of shares, and without assigning any reason for such refusal, and that this power should extend to the registration of the personal representatives of a deceased shareholder. The directors refused to register the executors in their capacity of beneficiaries under the will as members of the company. Subsequently the directors dismissed the executors from their employment with the company and refused to supply them with copies of the balance-sheet and accounts for the year ending June 30, 1936. The executors presented a petition for the winding-up of the company on the ground that in the circumstances above stated it was just and equitable that the company should be wound up:—Held, that though the principles applicable to the case were those which would be applied in an action for dissolution of partnership, there were no grounds shown in the petition on which it would be “just and equitable” within the meaning of s.168 of the Companies Act, 1929, to make a winding-up order.’
Simonds J said ([1937] Ch at 398, [1937] 2 All ER at 468):
‘It has been pressed on me in considering this case that I am to be guided by the principles which influence the Court in determining whether or not a partnership shall be wound up. I propose faithfully to follow that injunction, laid down as it is by the Court of Appeal in Re Yenidje Tobacco Co Ltd., and followed recently in Re Davis and Collett, Ltd. by Crossman J. Whether it be a matter of articles of association or articles of partnership the rights of the parties are determined by those articles, and the question whether it is right for me applying here the principles of partnership to the question of dissolution to wind up this company or not largely depends on what are the contractual rights of the parties as determined by the articles of association in this case. Accordingly, when I come to consider the allegations which are made in the petition, I must be guided by what are the legal rights of the parties as determined by the bargain into which they entered.’
That was not a case of the exclusion of a partner from the partnership business, but one where a deceased partner’s successors were trying to succeed to his position as a working partner.
A case which was one of the exclusion of a director is Re Lundie Brothers Ltd, a case of my own. I said ([1965] 2 All ER at 697, 698, [1965] 1 WLR at 1055–1057):
‘I propose to consider first whether the facts of this case are such as to justify the winding-up order on the ground that it is just and equitable. That matter is common both to the claim under s. 210 and to the claim under s. 222. As I have already said, this, in my judgment, is in substance a partnership case, and the principles to be applied in a case of that sort are well settled. I would refer first to Re Yenidje Tobacco Co., Ltd. The passage to which I propose to refer is a passage in the judgment of LORD COZENS-HARDY, M.R. What he says is this ([1916] 2 Ch at 430, [1916–17] All ER Rep at 1051): [and then I quoted a passage which I have already read. I went on to say] As I understand those last words [those last words being “and that such impossibility has not been caused by the person seeking to take advantage of it”], they mean
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that such impossibility has not been caused exclusively by the person seeking to take advantage of it. In that case, the Court of Appeal decided that in a case where in substance a partnership existed between the persons who were carrying on the business of the company, any ground which would justify an order for the dissolution of a partnership, had it been a partnership, would justify an order for the winding-up of the company. The second case to which I refer is the decision of CROSSMAN, J., in Re Davis and Collett, Ltd. In that case it was held that where the capital of a private company is so owned as to make the company in substance a partnership and one director has purported by means of irregularities to acquire complete control of the company and to exclude the other director or directors from the management of it, it may be “just and equitable” within the meaning of s. 222 that the company should be wound up. Re Yenidje Tobacco Co., Ltd. was considered and its principles were applied. CROSSMAN, J., after stating the facts, said this [and I cited the passage which I have already read from Re Davis and Collett, Ltd. ([1935] Ch at 701, [1935] All ER Rep at 317), and I went on:] Bearing in mind those principles, if this were a partnership and not a company I should have no hesitation in concluding that Mr. Blackmore is entitled to an order for dissolution on the ground that the termination of his employment as a working partner was an unjustified exclusion of him from the partnership business. The trouble, I think, was that the Lundie brothers were too inclined to regard the business as their business, perhaps not unnaturally. They started the business: they were responsible for the formation of the company, and the company bore their name. In law, however, Mr. Blackmore had an equal right in the business as being in substance a partner in it.’
Then I said ([1965] 2 All ER at 698, 699, [1965] 1 WLR at 1057, 1058):
‘As I have said, I am satisfied that Mr. Blackmore has made out a case for saying that he is entitled to a winding-up order on a just and equitable ground. That does not mean, however, that he is entitled to succeed in so far as his claim rests on s. 210. He has to go further and satisfy me that at the date of the presentation of this petition the affairs of the company were being conducted in a manner oppressive to him as a member of the company. “As a member of the company” means, of course, as a shareholder of the company. The distinction between the sort of case which a petitioner has to make out in order to establish a claim for dissolution on a just and equitable ground, in a partnership case, and the sort of case which he has to establish to succeed under s. 210 was mentioned by LORD KEITH in his judgment in the Scottish case of Elder v. Elder & Watson, Ltd. (1952 SC 49 at 60) and the passage I have in mind is a passage which was adopted by JENKINS, L.J., in the case of Re H.R. Harmer, Ltd. The passage is this ([1958] 3 All ER at 701, [1959] 1 WLR at 78): “It is not lack of confidence between shareholders per se that brings s. 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company’s affairs, and oppression involves, I think, at least an element of lack of probity or fair dealing to a member in the matter of his proprietary right as a shareholder. Cases like that of Loch v. John Blackwood, Ltd. and Thomson v. Drysdale. might, I think, readily have come under s. 210. I doubt whether a case like Re Yenidje Tobacco Co., Ltd. could be brought under
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the section“. In other words, Mr. Blackmore has to go beyond making out a case for winding-up on the principle of Re Yenidje Tobacco Co., Ltd., and has to establish some element of lack of probity or fair dealing to him in his capacity as a shareholder in the company.’
Counsel for the respondents pertinently points out that Re Cuthbert Cooper & Sons Ltd was not cited to me in Re Lundie Brothers Ltd, and I must consider how far that affects the decision. If it does not affect it, counsel for the petitioner is entitled to rely on it as entitling him to a winding-up order. Counsel for the respondents referred to the Companies Act 1948, Sch 1, Table A, art 96, which the company’s articles incorporated. It provides:
‘The company may by ordinary resolution, of which special notice has been given in accordance with section 142 of the Act, remove any director before the expiration of his period of office notwithstanding anything in these regulations or in any agreement between the company and such director. Such removal shall be without prejudice to any claim such director may have for damages for breach of any contract of service between him and the company.’
Counsel for the respondents also referred to s 184(1) of the 1948 Act which, so far as material, provides:
‘A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him.’
Counsel for the respondents submitted that Re Yenidje Tobacco Co Ltd was based on deadlock, which admittedly does not apply here, and he referred to what Warrington LJ said ([1916] 2 Ch at 435, [1916–17] All ER Rep at 1053):
‘… the Court has in more cases than one expressed the view that a company may be wound up if, for example, the state of things is such that what may be called a deadlock has been arrived at in the management of the business of the company. I am prepared to say that in a case like the present, where there are only two persons interested, where there are no shareholders other than those two, where there are no means of overruling by the action of a general meeting of shareholders the trouble which is occasioned by the quarrels of the two directors and shareholders, the company ought to be wound up if there exists such a ground as would be sufficient for the dissolution of a private partnership at the suit of one of the partners against the other. Such ground exists in the present case. I think, therefore, that it is just and equitable that the company should be wound up.’
But, although Warrington LJ founded his judgment on the deadlock which existed in that case, Lord Cozens-Hardy MR said ([1916] 2 Ch at 432, [1916–17] All ER Rep at 1052):
‘If ever there was a case of deadlock I think it exists here; but, whether it exists or not, I think the circumstances are such that we ought to apply, if necessary, the analogy of the partnership law and to say that this company is now in a state which could not have been contemplated by the parties when the company was formed and which ought to be terminated as soon as possible.’
Pickford LJ agreed ([1916] 2 Ch at 433, [1916–17] All ER Rep at 1053) with the judgment of Lord Cozens-Hardy MR.
Page 383 of [1970] 3 All ER 374
In Re Davis and Collett Ltd Crossman J decided the case on grounds other than deadlock and in fact in an interlocutory observation, he said ([1935] Ch at 698): ‘I do not propose to decide this case on the question of deadlock.’
Counsel for the respondents also referred to Re Expanded Plugs Ltd, which was another decision of mine. So much of the headnote as is material is as follows ([1966] 1 WLR at 514):
‘The petitioner and L. were in substance partners in a business carried on by a company, and held between them the whole of the company’s share capital. The petitioner sought to wind up the company, inter alia, on the ground that it was “just and equitable” within section 222 of the Companies Act, 1948. It appeared from the evidence, although it was not alleged in the petition, that the company was insolvent:—Held … (2) That the rights of the quasi-partners must be determined in the light of the regulations governing that relationship, namely, the company’s articles of association; and, accordingly, the matters of which the petitioner complained having been carried out within the framework of the articles and bona fide in the interests of the company, the petition would be dismissed on that ground also.’
I said ([1966] 1 All ER at 884, 885, [1966] 1 WLR at 522):
‘In case, however, this matter should go further, I would briefly consider the second issue. As I have said, that is one of those cases which fall into the category of partnership cases. In the same way, however, that in a partnership action the rights of the parties must be determined in the light of their partnership articles so, in my judgment, must the rights of quasi-partners be determined in the light of the regulations which govern their relationship, namely, the company’s articles of association.’
Then I went on to quote the passage from Simonds J’s judgment in Re Cuthbert Cooper and Sons Ltd ([1937] Ch at 398, [1937] 2 All ER at 468) that I have already read.
Counsel for the respondents based his submission on Re Cuthbert Cooper & Sons Ltd and on Re Expanded Plugs Ltd, to which I will refer again in a moment. It is to be noticed that Re Expanded Plugs Ltd was not a case of the removal of a director. Counsel then referred to Re Chase Plastics Ltd. The case concerned a petition to wind up a company, the petitioner’s complaint being that his service agreement as manager had been wrongly terminated and that he was being unjustly excluded from the business of the company. The report discloses that the petitioner had been handed a letter saying that a board meeting had dismissed him not only from his position as manager, but also as a director. Pennycuick J said ((1966) 110 Sol Jo at 565):
‘So far as could be seen there was nothing to prevent a properly constituted board from terminating E’s employment. If that termination were a breach of contract E would have a claim to damages but it would afford no ground for a winding up. There was no sufficient evidence of exclusion, and whatever the position would have been if the company were solvent, the company being insolvent, as it clearly was, no order would be made for a winding up on a contributory’s petition.’
Page 384 of [1970] 3 All ER 374
Nothing is reported as having been said about the petitioner’s purported dismissal as a director and I suppose that this was because it was conceded that such dismissal, having been effected by the board and not by the company in general meeting, was bad. Rightly, I think, counsel does not place great reliance on that case.
As I have already said, counsel for the respondents submitted that s 184 gives an absolute right to shareholders to remove directors, that a director removed under that power is lawfully removed and that the lawful removal of a director cannot be a ground for a winding-up order even in a quasi-partnership case. I cannot accept that argument. The fallacy in it, in my judgment, is that while no doubt the petitioner was lawfully removed, in the sense that he ceased in law to be a director, it does not follow that in removing him the respondents did not do him a wrong. In my judgment, they did do him a wrong, in the sense that it was an abuse of power and a breach of the good faith which partners owe to each other to exclude one of them from all participation in the business on which they have embarked on the basis that all should participate in its management. The main justification put forward for removing him was that he was perpetually complaining, but the faults were not all on one side and, in my judgment, this is not sufficient justification. For these reasons, in my judgment, the petitioner therefore has made out a case for a winding-up order.
I next come to the allegations of lack of probity and first to the allegation that Mr Nazar sold carpets to the company at arbitrary prices yielding substantial profits to him, but little or no profit to the company. The change in practice referred to in para 8 of the petition, as a result of which Mr Nazar did not invoice carpets to the company until the company had sold them, was brought about at the petitioner’s own request. The previous practice resulted in the company becoming heavily in Mr Nazar’s debt and the petitioner did not like that; but, apart from the allegation that the petitioner constantly protested he has, in my judgment, wholly failed to prove the allegations in para 8 of the petition.
I pass to the next complaint, namely, that the company is improperly being made to subsidise Mr Nazar’s antique business at 209 Kensington Church Street, with the result that the company is making a loss in those premises in the region of £1,500 a year. It is common ground that the company pays the expenses of those premises, which amount to about £3,000 a year. It is also common ground that Mr Nazar maintains a display of antiques, mainly, I think, Persian ceramics, at the premises. Mr Nazar maintains that they are an attraction to the shop, that they lure in customers and encourage the sale of the Persian carpets which are kept there. The petitioner denies this, but it seems to me that this is a question about which opinions may honestly differ. If in fact that use of the premises for the sale of antiques were involving the company in substantial loss the position might be different; but, in my judgment, the petitioner has again wholly failed to prove that this is the case. One of his difficulties in substantiating the allegation arises from the fact that the buyers of the carpets sold in the main shop include people who have been sent there from the Kensington Church Street shop, which is more of a showroom and it is only a couple of minutes walk away. It is, therefore, often difficult to attribute sales to one shop rather than the other and the figure of £1,500 loss put forward by the petitioner depends on little more than his ipse dixit.
Finally, there is the allegation in para 11 of the petition that, despite the company in general meeting having resolved to sell its lease of the Kensington Church Street property, Mr Nazar changed his mind, contrary to the interests of the company. It is common ground that a resolution was passed that the lease should be put up for sale. Mr Nazar and George said that they agreed that this should be done for the sake of peace, because the petitioner was pestering them about it. I find that difficult to accept. Mr Nazar said that he intended to buy the lease himself, if it was sold. It is also common ground that although a possible purchaser, who was prepared to pay £5,000 conditionally on the lessors agreeing to the proposed user was found by
Page 385 of [1970] 3 All ER 374
the petitioner, the respondents changed their minds. The reason for this has not been explained to my satisfaction, but as an isolated incident it is not, in my judgment, sufficient ground for an order under s 210 which requires a course of oppressive conduct continued up to the date of the petition. For these reasons the petitioner has, in my judgment, failed to establish a case for an order under s 210.
In these circumstances, it is unnecessary for me to do more than mention one final matter touched on in the argument. An order under s 210 cannot be made unless the court is of opinion, and I quote, ‘that to wind up the company would unfairly prejudice that part of the members’. No evidence directed to this point has been led before me and counsel for the respondents submitted that for that reason alone the claim under s 210 would be bound to fail. Counsel for the petitioner on the other hand, in effect, suggested that it was a case of what might be called res ipsa loquitur. I need not decide which of those contentions is right. In the result, I make the usual winding-up order.
Order for winding-up.
Solicitors: Arbeid & Co (for the petitioner); Davenport, Lyons & Co (for the respondents).
Jacqueline Metcalfe Barrister.
Congresbury Motors Ltd v Anglo-Belge Finance Co Ltd
[1970] 3 All ER 385
Categories: LAND; Sale of Land
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, WIDGERY AND CROSS LJJ
Hearing Date(s): 15, 16, 29 JUNE 1970
Sale of land – Vendor’s lien – Subrogation – Mortgage unenforceable – Subrogation of vendor’s lien.
The defendant company agreed to lend to K, the promoter of the plaintiff company, the purchase price of certain property. The purchase money was paid to the vendors’ solicitors by the defendant company. The vendors conveyed the property to the plaintiff company on K’s authority and the plaintiff company executed a legal mortgage in favour of the defendant company. Since no note or memorandum was executed under the Moneylenders Act 1927 stating the date on which the loan was made, any contract by the plaintiff company for repayment of the money lent, and the mortgage, were made unenforceable by s 6(1) of the Act. On the question whether the defendant company was entitled by subrogation to a lien on the property for the money paid to the vendors,
Held – The application of the principle of subrogation in respect of a vendor’s lien did not conflict with the policy of the legislature of the protection of the borrowing public, that unless a note or memorandum was completed by a moneylender, obligations to repay money lent and any security supporting those obligations, should be unenforceable and of no effect (see p 389 j to p 390 a, post); accordingly the defendant company was entitled to subrogation to a lien on the property for the money paid.
Nottingham Permanent Benefit Building Society v Thurstan [1900–03] All ER Rep 830 followed.
Decision of Plowman J [1969] 3 All ER 545 affirmed.
Notes
For lien by subrogation, see 24 Halsbury’s Laws (3rd Edn) 163, para 305, and for cases on transfer of lien, see 32 Digest (Repl) 336, 337, 658–660.
Page 386 of [1970] 3 All ER 385
Cases referred to in judgment
Brocklesby v Temperance Permanent Building Society [1895] AC 173, 64 LJCh 433, 72 LT 477, 59 JP 676, 35 Digest (Repl) 431, 1235.
Capital Finance Co Ltd v Stakes, Re Cityfield Properties Ltd [1968] 3 All ER 625, [1969] 1 Ch 261, [1968] 3 WLR 899, Digest Supp.
Kasumu v Baba-Egbe [1956] 3 All ER 266, [1956] AC 539, [1956] 3 WLR 575, 35 Digest (Repl) 243, *232.
Thurstan v Nottingham Permanent Benefit Building Society [1901] 1 Ch 88; on appeal [1902] 1 Ch 1, 71 LJCh 83, 86 LT 35; on appeal sub nom Nottingham Permanent Benefit Building Society v Thurstan [1903] AC 6, [1900–03] All ER Rep 830, 72 LJCh 134, 87 LT 529, 67 JP 129, 32 Digest (Repl) 337, 660.
Appeal
This was an appeal by the plaintiff company, Congresbury Motors Ltd, from a decision of Plowman J, dated 23 June 1969, and reported [1969] 3 All ER 545, granting the defendant company, Anglo-Belge Finance Co Ltd, a declaration that it was entitled to a lien by subrogation over property of the plaintiff company. The facts are set out in the judgment of the court.
C Lawson QC and C G Allen for the plaintiff company.
J W Mills QC and J A R Finlay for the defendant company.
Cur adv vult
29 June 1970. The following judgment was delivered.
RUSSELL LJ read the judgment of the court. In 1964, a Mr Kodish wanted to buy through a company to be formed by him—it turned out to be the plaintiff company—a filling station and garage from the vendor owners at a price of £45,000. He approached the defendant company, a registered moneylender, and arranged that the defendant company would lend £46,000 for this purpose. On the signing of the contract for sale, the deposit of £4,500 was paid to the vendors’ solicitors as stakeholders; this sum was provided by the defendant company’s solicitor’s cheque in favour of the vendors’ solicitors, as part of the £46,000. Completion of the contract was by conveyance, on Mr Kodish’s authority, to the plaintiff company. Completion was attended by one of the vendors, the vendors’ solicitors, Mr Kodish’s solicitors who acted also for the plaintiff company, Mr Kodish, and the solicitor for the defendant company. A banker’s draft for £40,586 18s 5d was procured by the defendant company in favour of the vendors’ solicitors, making, together with the £4,500 deposit in the hands of the latter, the purchase price of £45,000 plus some incidentals. (The representative of the defendant company also gave a banker’s draft for the balance figure making up £46,000—some £900 odd—to the plaintiff company’s solicitors, who in turn gave their cheque to the defendant company’s solicitor for a lesser sum in respect of the defendant company’s costs of the preparation and stamping of the mortgage next mentioned. We are not, however, concerned with that balance figure.) As a consequence of these payments the vendors executed the conveyance to the plaintiff company, and the plaintiff company executed a legal mortgage in favour of the defendant company, with somewhat complicated terms as to interest rates at a high rate. The conveyance and the mortgage were of course handed to the defendant company’s representative.
As we have noticed, the defendant company was and is a registered moneylender. The judge held ([1969] 3 All ER 545, [1970] Ch 294) that there was no note or memorandum under s 6 of the Moneylenders Act 1927, stating the date on which the loan was made, and consequently any contract by the plaintiff company for repayment of the £46,000 lent and the mortgage were made unenforceable by s 6(1) of the Act. In effect there had not been fulfilled a statutory condition precedent to the enforceability of the contract for repayment and of the mortgage. From this finding the defendant company does not
Page 387 of [1970] 3 All ER 385
appeal. The judge however decided that the defendant company had acquired a lien on the property by subrogation to the lien which the vendors had over the property in respect of the whole purchase price of £45,086 18s 5d which had been at completion paid directly to the vendors (as to the deposit of £4,500 via the stakeholder) by the defendant company. In this he followed by analogy the steps of this court and the House of Lords in Thurstan v Nottingham Permanent Benefit Building Society. The order provided for interest at the rate of 5 per cent per annum on that sum from a date when the plaintiff company had stopped paying interest under the mortgage. From this decision the plaintiff company appeals, admittedly without any ethical merits, hoping to be in the position in law of having acquired the property for nothing with the defendant company’s money.
The plaintiff company argues that the payments by the defendant company remain a loan and any suggested lien by subrogation is no more than a suggested security for its repayment. It is said that authority shows that the courts will not go contrary to the policy of the Moneylenders Act 1927 by imposing terms on a borrower, for redemption of his title deeds from the moneylender, to repay the money lent with ordinary interest. On this reference was made to the Privy Council case of Kasumu v Baba-Egbe.
But, says the moneylender: ‘I am in no way seeking to enforce a contract for repayment of the money lent, nor a security for such repayment. I am necessarily by force of s 6 of the 1927 Act abandoning any contract by the borrower for repayment of money lent and the security given by him of the mortgage.' This is, it is said, no matter of repayment of any money lent. All that has happened is this: the vendors had a lien for unpaid purchase money. If someone in law steps into the shoes of the man with such a lien this must, it is said, be quite different from a contract by the borrower for repayment. Nor can the lien inherited, so to speak, from the vendors be a security for repayment as distinct from payment; and s 6 speaks only of a contract for repayment and security therefor. Let us accordingly look at Thurstan’s case in order to see whether it governs by analogy this case. That case involved the Infants Relief Act 1874. A married female member of a building society wanted a loan to acquire a property on which her builder husband proposed to erect houses for sale at profit. She was, unknown to the building society, an infant. She arranged for a loan to enable her to acquire the land, which cost £250, from the building society. The transaction was put through by payment by the lenders direct to the vendors of the purchase price, a mortgage being granted by the borrower. Subsequently further moneys were advanced on the mortgage to enable buildings to be erected. The building society later discovered that she was an infant, discontinued advances, took possession of the property and completed houses on it. On attaining 21, the borrower asserted that the mortgage was void against her under s 1 of the Infants Relief Act 1874, and claimed delivery up of the mortgage deed and title deeds and possession of the land. It was held that the mortgage was void and must be delivered up; that the building society had no lien on the title deeds for money expended by it on building on the land or for money advanced for such building to the borrower; but that it had such a lien on the £250 paid, on her behalf, to the vendor for the purchase price because, but for that payment, the vendor would have had an unpaid vendor’s lien, and the building society was entitled by subrogation to the same lien together with all the remedies inherent in it. Vaughan Williams LJ expressed himself thus ([1902] 1 Ch at 9, 10):
‘I think that the advances of money for building stand on a different footing from the 250l. paid by the building society for the purchase of the land and the
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expenses of conveyance. The money advanced for building was simply money lent, and the society has no security except the mortgage, which, in my judgment, is void as a contract for the repayment of money lent; whereas in the transaction of purchase the society acted as the agents of Mrs. Thurstan to carry through the purchase for her, by paying the purchase-money and obtaining a conveyance to her. In my opinion, Mrs. Thurstan could not adopt the act of her agents, and claim to have the title-deeds and conveyance handed over to her by the building society, without repaying to them the purchase-money which they paid to obtain the conveyance; and I think that, without any contract to that effect, the society have a lien or charge on the title-deeds and conveyance for the money which they paid to obtain the property, which Mrs. Thurstan now claims. If Mrs. Thurstan adopts the acts done by the society, she must discharge the cost and indemnify the society against the same. I thought during the argument that the only security which the building society held for the 250l. which they had paid for purchase-money was a lien upon and a right to retain the title-deeds and conveyance until the money had been repaid; but I am satisfied now, after discussing the matter with my brethren, that the society, having paid off the vendor, have a right to the remedies of the vendor—have a right, that is, to enforce the vendor’s lien. It is true that the society were not the vendors, but, having paid off the vendor, the society, as against the purchaser, stand in the place of the vendor.’
Romer LJ expressed himself thus ([1902] 1 Ch at 11):
‘Now, to the extent to which the money advanced by the defendant society went to complete the purchase by the plaintiff, I agree with Joyce J. ([1901] 1 Ch at 88) in thinking that the plaintiff cannot affirm the purchase and repudiate the advance. But for that advance the vendor would have had a vendor’s lien on the estate purchased for the amount of the purchase-money, and to that extent I think the defendant society can stand in the shoes of the vendor.’
Cozens-Hardy LJ said ([1902] 1 Ch at 13, 14):
‘The first was a contract for the purchase of the land. This was voidable only, and not void, and has been adopted and confirmed by the plaintiff since she attained twenty-one. Under this contract, and as a legal consequence of it, there arose a vendor’s lien for unpaid purchase-money. The second was a contract for the repayment of money lent and to be lent. This was absolutely void under the statute of 1874, and not capable of confirmation. The defendants are in no better position, and they ought not to be in a worse position, than if the plaintiff had been adult, but the mortgage deed were proved to be forged. Even in that case the defendants would be entitled to stand in the shoes of the vendor to the extent to which their money discharged the vendor’s lien: see Brocklesby v Temperance Permanent Building Society ([1895] AC 173 at 182). The result is that we must declare that the defendants had a charge for the amount paid by them to the vendor, with interest at 4 per cent.’
Now it is true to say that the following passage appears in argument for the borrower ([1902] 1 Ch at 5):
‘The payment of the 250l. by the society to the vendor of the land cannot entitle them to recover the advances which they made to the plaintiff subsequently. [VAUGHAN WILLIAMS L.J. Could the plaintiff maintain an action of trover for the title-deeds without repaying the 260l. to the society?] If that is all the relief sought, the plaintiff does not object to repaying that sum.’
Page 389 of [1970] 3 All ER 385
But the reasons of the court for upholding the lien were considered views in reserved judgments and we must follow them unless a valid distinction exists in the present case. The decision was upheld by the House of Lords ([1903] AC 6, [1900–03] All ER Rep 830) although there was no cross-appeal by the borrower against the finding of a lien for the purchase price. The House of Lords plainly considered the ground for the decision as to the £250 lien to be correct. The Earl of Halsbury LC said ([1903] AC at 10, [1900–03] All ER Rep at 832):
‘My Lords, under those circumstances it seems to me that there is no answer to the judgment of the Court of Appeal ([1902] 1 Ch 1) which affirms the subrogated right of the society to be repaid the money which they, standing in the shoes of the vendor, have a right to claim as a lien upon the property conveyed. On the other hand it is hopeless, as it appears to me, to try to get rid of the express language of the statute, which renders the loan, and the mortgage which was the security for the loan, absolutely and entirely void.’
Lord Shand said ([1903] AC at 10, [1900–03] All ER Rep at 832):
‘My Lords, I am of the same opinion. If feel that I am scarcely justified in interposing to add anything to what your Lordship has already said; but in a single word I should just like to say that I think the vendor’s lien to which this society succeeded, and to which it had the right to succeed, in respect of the payment they originally made, there was good ground of judgment so far as regards the sum paid for the purchase of the property. But I agree with your Lordship that, while the society will take the benefit of the payment in succeeding to the vendor’s lien, they cannot maintain what remains of their case.
Lord Davey agreed with the previous speeches and said ([1903] AC at 11, [1900–03] All ER Rep at 833):
‘It has already been pointed out, and it is only necessary to say, that the transaction between the vendor and the purchaser is one thing, and the transaction between the purchaser who has acquired the property and the mortgagees is another thing. The transaction appears to me to be simply this: A person without any means of her own contracts to buy a property; before the purchase is completed she is called upon to pay the purchase-money and she goes to a money-lender, or, as in the present instance, a building society, persons willing to advance the money on some terms, and she obtains a sufficient advance to enable her to complete the purchase. My Lords, that seems a very simple transaction. Then the loan is so framed as to include a further sum of money to enable the purchaser to commence building operations on the land also. The transaction with the vendor was complete when the purchase-money was paid him, and the transaction between the purchaser and mortgagee was one with which the vendor had no concern whatever.’
Lord Robertson entirely agreed ([1903] AC at 13, [1900–03] All ER Rep at 834).
It appears to us that the views of the law expressed in that case are equally applicable in the present case. We can see no relevant distinction. In Thurstan’s case ([1903] AC at 13, [1900–03] All ER Rep at 834) it was the policy of the legislature that for the protection of infants, obligations to repay money lent, and any security supporting those obligations should be void. And it was not thought that the application of the principle of subrogation to a vendor’s lien in respect of payments which purported to be by way of loan to the infant in any way conflicted with the legislation or its policy. So here it is the policy of the legislature for the protection of the borrowing public that unless certain conditions
Page 390 of [1970] 3 All ER 385
precedent be fulfilled, obligations to repay money lent by a moneylender, and any security supporting those obligations, shall be unenforceable and of no effect. It appears to us, similarly, that the application of the principle of subrogation in respect of a vendor’s lien in the present case in no way conflicts with the legislation or its policy.
It was submitted to us in argument that a distinction existed in that in Thurstan’s case the lender was ignorant of the fact of infancy, whereas the moneylender in the present case must be assumed to know that a condition precedent to the enforceability of the obligation to repay (and the security) had not been fulfilled. It was, it was said, the moneylender’s fault that it failed in its attempt to secure a contract for repayment of the loan and a valid security therefor. We observe the difference but do not accept that it is relevant distinction; and if we observe that an accusation of fault comes ill from a litigant avowedly devoid of ethical merit it must not be thought that this has blinded us to a genuine distinction.
An alternative submission was made to us—although we believe that it was not made below, and it is not to be found in the grounds of appeal. This was that, assuming that for a moment of time that theoretically elapsed between the completion of the purchase and the completion of the mortgage there was a subrogation to the vendor’s lien, the acceptance of the legal mortgage waived or abandoned or superseded or caused a merger of the lien. The short answer in our view is that the same point, if valid, was applicable in Thurstan’s case. To this it was replied that in that case the security was by statute expressed to be void, while here it is expressed to be unenforceable. We see no relevant distinction, particularly when it is for the court to take the point on the pleadings which must show, as could not here be done, that the relevant condition precedent to enforceability was not fulfilled. In each case the security is ineffective, and in our view ineffective for all purposes, including any question of nullifying the lien by subrogation. If indeed it is justly said that the moneylender is deemed to know of the defect in the mortgage, it may equally be said to be deemed not to waive or abandon the lien. Move into the world of deeming and the results may be unforeseen.
In this connection we were referred by the plaintiff company to Capital Finance Co Ltd v Stokes, Re Cityfield Properties Ltd. We need not analyse that case too closely; it concerned (inter alia) the overriding of either a vendor’s lien, or an equitable charge created by the contract for sale and purchase of land, by a legal charge which turned out to be unenforceable against the liquidator and creditors of the purchaser company for lack of registration within 21 days under s 95 of the Companies Act 1948. But there the legal charge was an effective charge in every respect until failure to comply with a condition subsequent, and, as against the company as a going concern, was always an effective charge. We were referred on this general point by counsel for the defendant company in rejoinder to a number of cases, but, being satisfied that the alternative way of putting the plaintiff company’s case is not sustainable, we need not discuss them.
In the result, in our judgment, the learned judge was correct in this conclusion and decision ([1969] 3 All ER 545, [1970] Ch 294), and the appeal is dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Tringhams (for the plaintiff company); McKenna & Co (for the defendant company).
Euan Sutherland Esq Barrister.
Birkenhead and District Co-operative Society Ltd v Roberts
[1970] 3 All ER 391
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 8 JULY 1970
Trade description – Defence – Mistake by person other than person charged – Mistake by servant or agent – Trade Descriptions Act 1968, s 24(1).
On the true construction of s 24(1)a of the Trade Descriptions Act 1968, the word ‘mistake’ means a mistake by the person charged and not a mistake by another person, eg a servant or agent (see p 393 j, p 395 f and p 396 h, post).
Walkling Ltd v Robinson [1929] All ER Rep 658 and Hall v Farmer [1970] 1 All ER 729 applied.
Notes
For the defence of mistake under the Trade Descriptions Act 1968, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314F, 1.
For the Trade Descriptions Act 1968, s 24, see 48 Halsbury’s Statutes (2nd Edn) 610.
Cases referred to in judgments
Hall v Farmer [1970] 1 All ER 729, [1970] 1 WLR 366.
Walkling Ltd v Robinson (1929) 99 LJKB 171, [1929] All ER Rep 658, 143 LT 105, 94 JP 73, 25 Digest (Repl) 133, 513.
Case stated
This was a case stated by justices for the county of Denbigh acting in and for the petty sessional division of Wrexham, in respect of their adjudication as a magistrates’ court sitting at Ruabon and Wrexham on 29 October 1969 and 2 February 1970. The respondent, David Cyril Edward Roberts, deputy chief inspector of weights and measures to Denbighshire County Council, laid an information alleging the commission by the appellants, the Birkenhead and District Co-operative Society Ltd, of an offence contrary to s 1(1) of the Trade Descriptions Act 1963. The justices convicted the appellants. The facts are set out in the judgment of Fisher J.
G H Wright for the appellants.
A F B Scrivener for the respondent.
8 July 1970. The following judgments were delivered.
FISHER J delivered the first judgment at the invitation of Lord Parker CJ. The appellants, the Birkenhead and District Co-operative Society Ltd, were, on 2 February 1970, convicted of an offence under s 1(1) of the Trade Descriptions Act 1968, the charge being that they, at their shop in Wrexham, in the course of trade as butchers, supplied to Mrs Huntbache a leg of lamb to which a false trade description, namely ‘For roasting English’ was applied when the leg of lamb was in fact of New Zealand origin. They now appeal against that conviction by way of case stated.
Section 1(1) of the Act makes it an offence for any person in the course of a trade or business to apply a false trade description to any goods, but that provision is subject to other provisions of the Act. There is no doubt that the appellants did in fact apply a false description to the goods in that there was stuck on the leg of lamb when Mrs Huntbache bought it a label attached to the outer cellophane wrapping bearing the words ‘For roasting English’ whereas, as the justices have found, the lamb was in
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fact of New Zealand origin. This matter came to the notice of the inspector of weights and measures on 19 May 1969, and in due course he commenced these proceedings against the appellants. The appellants sought to rely on the statutory defence under s 24 of the Act. That section provides:
‘(1) In any proceedings for an offence under this Act it shall, subject to subsection (2) of this section, be a defence for the person charged to prove—(a) that the commission of the offence was due to a mistake or to reliance on information supplied to him or to the act or default of another person, an accident or some other cause beyond his control; and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control.
‘(2) If in any case the defence provided by the last foregoing subsection involves the allegation that the commission of the offence was due to the act or default of another person or to reliance on information supplied by another person, the person charged shall not, without leave of the court, be entitled to rely on that defence unless, within a period ending seven clear days before the hearing, he has served on the prosecutor a notice in writing giving such information identifying or assisting in the identification of that other person as was then in his possession.’
I should also read s 23, which provides:
‘Where the commission by any person of an offence under this Act is due to the act or default of some other person that other person shall be guilty of the offence, and a person may be charged with and convicted of the offence by virtue of this section whether or not proceedings are taken against the first-mentioned person.’
The hearing before the justices commenced on 29 October 1969, and on that day evidence was called for the prosecution. It was then intimated by counsel then and now appearing for the appellants, that he wanted to seek to establish a defence under s 24, and there was some discussion as to the nature of the defence which he sought to raise. It certainly seems to have been the impression of the justices that counsel had nailed his flag to the mast of ‘mistake’, since in the case stated, the justices said:
‘Counsel stated at this stage that it was not his intention to rely on the evidence of “act or default of another person” but it was his intention to rely on “mistake“.’
That may or may not have been to some extent a misunderstanding, something to which I shall have to refer later. I should say that at this stage no notice under s 24(2) of the Act had been given.
Evidence was then called for the appellants, the witnesses being Mr Packer, the branch manager; Mr Williams, who was in charge of the butchering department; and Mrs Smith, who was Mr Williams’s assistant. The facts which the justice have found to have been proved were that the duty of cutting up carcasses and seeing to their packing, weighing and labelling was that of Mr Williams; he would cut up the carcasses, hand the joints to Mrs Smith and give her instructions as to the labelling of particular meat. It was further found that Mrs Smith would be given in advance booklets containing labels with backs which could be rendered adhesive, the labels containing certain wording, for instance as it might be ‘Roasting English’ or ‘Boiling English’, and it would be for her to attach the appropriate label after having first written on it any further matters necessary, and in particular the weight and the price. The justices found that on the day in question Mr Williams had been preparing joints of English meat and that Mrs Smith had been furnished with labels bearing the words ‘For roasting English’; that at some point during the day Mr Williams changed over to New Zealand lamb; that he instructed Mrs Smith accordingly, but that she by inadvertence used on this leg of New Zealand lamb one of the English labels which she
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had been quite properly using previously for the English meat; and it is found as a fact that the price which she wrote on the label was the correct price for New Zealand meat of the particular weight.
The justices found as a fact that the appellants had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence by their staff. At this stage in the proceedings the matter was adjourned in order that the clerk might consider what advice to give to the justices on the legal question whether the defence of mistake was available to the appellants, in other words whether the word ‘mistake’ in the section extends to a mistake by a servant. There was a lengthy adjournment; the hearing was resumed on 2 February 1970 when, on the advice of their clerk, the justices ruled that the defence of mistake was not available to the appellants. Counsel for the appellants then applied for leave to rely on the alternative defence that the commission of the offence was due to the act or default of Mrs Smith, and asked for leave to do so without having served the seven days’ notice on the respondent. The justices refused leave.
In this court counsel for the appellants has argued two matters, first that the justices were wrong in holding that the defence of mistake was not open to the appellants, and secondly and in the alternative, that they committed an error of law in refusing the appellants leave to raise the defence of ‘act or default of another person’ without having given the seven days’ notice.
In my judgment the right way to approach the first of these two points is as a matter of construction of s 24 itself. In sub-s (1)(a) of that section there are five alternatives which it is open to a defendant to seek to adduce, namely: (1) mistake, (2) reliance on information supplied to him, (3) the act or default of another person, (4) an accident, and (5) some other cause beyond his control. As a matter of construction it seems clear to me that Parliament intended that where the matter sought to be raised by way of defence was the act or default of another person, it was to those words that the defendant must look, and on which he must rely, bringing in as they do the requirement to give seven days’ notice under sub-s (2). It would seem to me in the highest degree anomalous that, where an act by another person could be said to be a mistake, it should be open to a defendant to rely on it as a mistake thereby avoiding the necessity for giving the notice.
Counsel for the appellants has argued that in this case what Mrs Smith did was innocent and could not constitute an offence under the Act, and that it is therefore wrong to refer to it as an act or default which, when one looks at s 23, so he submits, must plainly mean a wrongful act or default. But it seems to me first of all far from obvious that Mrs Smith’s action in applying this wrong label would have been held to be innocent if she had been prosecuted under the Act (as she can be under s 23) and the facts had been found, as they were found by justices in the present case. It would seem to me that plainly she did apply a false trade description and that even if she were able to say that it was a mistake on her part, it would be difficult for her to satisfy the justices that she took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by herself. Secondly, even if that were a matter which was in doubt, it would seem to me wrong that, as might occur, the respondent should be denied an opportunity of considering whether or not to bring proceedings against the person directly involved, as would be the case or might be the case if the appellants were entitled to rely on her act or default as ‘mistake’, and thereby be absolved from the necessity of giving notice.
In my judgment, simply construing s 24(1) as it stands, the word ‘mistake’ means a mistake by the person charged, and not a mistake by another person. That would be enough to dispose of the first point, but it seems to me that, still confining oneself to this Act, a finding in counsel for the appellant’s favour on that point would not help him, because even if the word ‘mistake’ includes mistake by a servant, the mistake in the present case was clearly also the act of another person. It seems to me that whether it be relied on by way of mistake or whether it be relied on by way of act or
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default, the case comes within sub-s (2) in that the defence involves the allegation that the commission of the offence was due to the act of another person, and therefore notice would have to be given.
I have approached the matter so far only by reference to this Act. There have been, of course, earlier statutes, and there are now in force other statutes containing similar although not exactly the same provisions, and cases have been decided on those other acts. Reference has been made in particular to the Weights and Measures Act 1963, under which, by s 26, it is open to a defendant to prove:
‘(a) that the commission of the offence was due to a mistake, or to an accident or some other cause beyond his control; and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence in respect of those goods by himself or any person under his control.’
Section 27(1) provides:
“A person against whom proceedings are brought for an offence under this Part of this Act or any instrument made thereunder shall, upon information duly laid by him and on giving to the prosecutor not less than three clear days’ notice of his intention to avail himself of the provisions of this subsection, be entitled to have brought before the court in those proceedings any other person to whose act or default he alleges that the commission of the offence was due; and if, after the offence has been proved, the original defendant proves that the commission thereof was due to an act or default of that other person—(a) that other person may be convicted of the offence; and (b) if the original defendant further proves that he exercised all due diligence to avoid the commission of the offence by him or any person under his control, the original defendant shall be acquitted of the offence.’
The earlier Act to which reference has been made is the Sale of Food (Weights and Measures) Act 1926b. Section 12(2) of that Act provided:
‘In any proceedings under this Act in respect of an alleged deficiency of weight or measure or number, if the defendant proves to the satisfaction of the Court that such deficiency was due to a bona fide mistake or accident, or other causes beyond his control, and in spite of all reasonable precautions being taken and all due diligence exercised by the said defendant to prevent the occurrence of such deficiency, or was due to the action of some person over whom the defendant had no control, the defendant shall be discharged from the prosecution.’
It will be noticed that in those Acts the provision entitling the defendant to rely on mistake, accident or some other cause beyond his control is not linked in one section with such words as ‘reliance on information supplied to him or to the act or default of another person’. They stand by themselves, and the reasoning which I have based on the actual words of s 24 of the Trade Descriptions Act 1968 is not open. Nonetheless, it has been held under the 1926 Act that the word ‘mistake’ does not extend to the conduct of a servant.
It is sufficient for me, I think, to refer to the recent case of Hall v Farmer, a case under the Weights and Measures Act 1963, in which the earlier case of Walkling Ltd v Robinson is referred to. In Hall v Farmer ([1970] 1 All ER at 731, [1970] 1 WLR at 368, 369), Lord Parker CJ said:
‘The first question is whether the respondent surmounted what I may call the first hurdle, that is s 26(1)(a) of the Weights and Measures Act 1963, by
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proving that the commission of the offence was due to a mistake or to an accident or to some other cause beyond his control. As I understand it, it was urged that the act or default of Mr Dunn was such a mistake, accident or at any rate a cause, outside the control of the respondent. For my part I have always understood that this provision and a similar provision in previous Act did not cover the act or default of a servant or agent, somebody who was under the control of the principals. Such a person would be a third person for the purposes of what I may call the third party proceedings, which in this Act appears in s 27. The case which is always quoted in this connection is Walkling Ltd v Robinson. There are two passages, the first in the judgment of Lord Hewart CJ, who in referring to s 12(2) of what was then the Sale of Food (Weights and Measures) Act 1926, said ((1929) 99 LJKB at 177, [1929] All ER Rep at 664): “Those words seem to me to have no relation to a case where it is a defect of the machinery or a default of the persons under the defendant’s control which is responsible for the mischief.” Talbot J said ((1929) 99 LJKB at 180, [1929] All ER Rep at 666): “I entirely agree with the construction which has already been explained of this sub-section taken in relation to sub-section 5 [Subsection (5) deals with what I may call the third party procedure], that this sub-section 2 deals with mistakes, accidents, or causes beyond the control of the employer, not being negligence or other conduct of his servants or persons within his control.” It is of course true, as counsel for the respondent has said, that the wording of s 12(2) of that 1926 Act differs somewhat from s 26(1) of the 1963 Act. But in my judgment the same principle applies here as under the earlier Act, and accordingly it follows that the respondent did not surmount that hurdle.’
Counsel for the appellant has argued that Walkling Ltd v Robinson has been misunderstood, and that in it the court intended to confine their observations to a case where the servant was guilty of negligence. But it seems to me that the wording was quite wide enough to exclude all cases where the matter sought to be relied on by the defendant was the act of his servant or agent. It has been, as Lord Parker CJ said in Hall v Farmer, so understood since 1929, and in my judgment rightly so understood. Accordingly, although the words on which I have placed reliance under the Trade Descriptions Act 1968 are not present, it seems to me that for the reasons given in that case, the word ‘mistake’ cannot be construed so as to cover the actions of a servant or agent. That is sufficient to dispose of the first point taken by counsel for the appellants.
I turn to the second point. The justices evidently gave careful consideration to the way in which they should exercise their discretion. The case stated records that counsel seeking the leave argued that it should be granted:
‘… because the evidence of the Respondent showed that he had throughout been aware that the offence arose by reason of the act of Mrs. Smith, admitted by the Respondent and because the Prosecution cannot be prejudiced in any way in that had notice been served in the due time and had proceedings been taken by the Respondent against Mrs. Smith, it was apparent that by reason of the findings of fact that we had already made, that lady would have had a defence under Section 24(1) of the Act.’
As I have already indicated, I doubt whether that is in fact a true statement. The case then goes on to recite the arguments put forward against the grant of leave, which were as follows:
‘(i) leave of the Court is a discretion of the Magistrates and must be exercised
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judicially; (ii) leave should not be given after all the evidence had been heard, and in particular Mrs. Smith had already given evidence as a witness in the case. (iii) In such circumstances, it would not be correct to make Mrs. Smith a Defendant since she had given evidence in the same case without any caution as to self incrimination. (iv) The Respondent would be deprived of the opportunity particularly of prosecuting the third party which is the object of giving notice. (v) The Appellants had ample opportunity of availing themselves of these statutory provisions. (vi) Counsel for the Appellants had told us at the opening of his case at the first hearing that he had not intended to rely on the “act or default” of Mrs. Smith.’
Counsel for the respondent conceded that if this court were satisfied that the justices had exercised their discretion on a wrong basis in that they had taken into account matters which they should not have taken into account, or failed to take into account matters which they should have taken into account, then it would be open to this court to review the exercise of their discretion and to reverse it as being wrong in law if so minded. It seems to me that, subject to one matter, no possible criticism can be addressed to the manner in which the justices exercised their discretion. The matters which they had before them and which they took into account were the right matters, and the decision which they came to was one which they were perfectly entitled to come to on the matters before them, and the case falls far short of one in which this court would intervene even if it thought that the discretion had been exercised.
The only matter which has given me any cause for thought is that counsel for the appellant has told us that the recital in the case of what happened at an earlier hearing does not represent the full story, and with the permission of the court he has read a passage from a verbatim transcript of the proceedings from which it appears that the question of a possible reliance on the act or default of Mrs Smith was canvassed, and indeed the idea of the service of a notice was discussed. That discussion, of course, took place before the justices and would have been in their minds when they came to exercise their discretion, although it is true it had taken place some months earlier. But having given full consideration to it, I do not consider that sufficient ground is raised to interfere with the manner in which the justices exercised their discretion.
The bald facts is that counsel for the appellant on that occasion did indicate his intention of proceeding on the basis of mistake, and did not, as he might have done, apply to the court for leave to dispense with the service of the notice in case it should be necessary for him to rely on the act or default of Mrs Smith, and for that reason in my judgment the appeal should be dismissed on both grounds.
COOKE J. I agree.
LORD PARKER CJ. I also agree.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: A Halsall & Co, Birkenhead (for the appellants); Sharpe, Pritchard & Co, agents for W E Bufton, Ruthin (for the respondent).
N P Metcalfe Barrister.
Re Trix Ltd
Re Ewart Holdings Ltd
[1970] 3 All ER 397
Categories: COMPANY; Insolvency
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 21, 22 JULY 1970
Company – Scheme of arrangement – Compromise with creditors – Machinery – Companies Act 1948, ss 206 and 245.
Where it is desired to distribute the assets of a company, otherwise than strictly in accordance with the creditors’ rights the proper way to do so is by scheme of arrangement under s 206 of the Companies Act 1948 and the court will not deprive the creditors of the protection afforded by s 206 by sanctioning on application by the liquidator a conditional agreement of compromise under s 245.
Re Edwin Walker & Co Ltd, Re George Parkin & Co Ltd, Re Barker & Hinchcliffe Ltd (1962) The Times, 17 October, followed.
Notes
For sanctioning of compromise or arrangement by the court, see 6 Halsbury’s Laws (3rd Edn) 764, 765, para 1548, and for compromises or arrangements sanctioned, see ibid 769–771, para 1555, and for cases on the subject, see 10 Digest (Repl) 1128–1130, 7852–7869.
For the Companies Act 1948, ss 206, 245, see 5 Halsbury’s Statutes (3rd Edn) 274, 305.
Case referred to in judgment
Edwin Walker & Co Ltd, Re, Re George Parkin & Co Ltd, Re Barker & Hinchcliffe Ltd (1962) The Times, 17 October, Guardian, 17 October.
Case also cited
Leeds and Hanley Theatres of Varieties Ltd, Re [1904] 2 Ch 45.
Summons
This was an application by summons dated 22 August 1967, as amended on 12 June 1970 by leave of Mr Registrar Berkeley, by the Official Receiver and liquidator of Trix Ltd, a company in compulsory liquidation, asking the court to sanction a conditional agreement of compromise. The facts are set out in the judgment.
Allan Heyman QC for Trix Ltd.
E W Hamilton for Ewart Holdings Ltd.
22 July 1970. The following judgment was delivered.
PLOWMAN J. This company is one of a group of 12 associated companies all of which have been in compulsory liquidation since 1958. The Official Receiver is liquidator of three of them, including that with which I am now concerned, and Mr J H Senior is liquidator of the other nine. In all of them, as I understand it, summonses have been issued (one in the matter of each company) asking the court to sanction a conditional agreement of compromise made between the Official Receiver as liquidator of his three companies and Mr Senior as liquidator of his nine, so as to enable the assets to be distributed in a way which may or may not be strictly in accordance with the respective creditors’ rights. For reasons into which I need not go, those rights, both in law and mathematically, are very difficult to ascertain with precision. Only two of the summonses have been adjourned to me, namely Trix Ltd and Ewart Holdings Ltd. The remaining ten stand over until the result of the present case is known.
It is elementary that if it is desired to distribute the assets of a company otherwise
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than strictly in accordance with the creditors’ rights, the proper way to do it is by a scheme of arrangement under s 206 of the Companies Act 1948. And it appears from the evidence that as long ago as 4 October 1967, Mr Registrar Berkeley expressed the view that this was a proper case for a scheme. But the warning was not heeded and the policy of the liquidators has been to avoid having a scheme of arrangement. Instead I am asked in effect to deprive the creditors of the protection afforded by s 206 and to sanction a conditional agreement of compromise under s 245.
Mr Williams, an assistant Official Receiver, in his affidavit of 12 June 1970, states, in para 7(b):
‘that the alternative to the compromise would be 9 schemes of arrangement, the costs of which would far outweigh any advantage which a particular group of creditors would hope to obtain if a different approach was used and furthermore as any scheme in one Company because of interlocking and overlapping interests must affect other group companies, it may be difficult to devise proposals to be put before the creditors of one company which would not affect the interests of the creditors of other group companies.’
In my judgment, that paragraph is misconceived. Only one scheme would be required relating to all the companies whose creditors are affected and that scheme could be quite simple, and in much the same terms as the conditional agreement itself.
The recitals to the agreement would in effect supply the preliminary to the scheme of arrangement and the operative part, the ‘scheme’ itself. Only one originating summons, issued in the matter of all the companies, would be required for leave to convene meetings, supported by one joint and several affidavit of the Official Receiver and Mr Senior. Only one order would have to be drawn up and one circular sent out to all creditors.
There have, in the past, been several schemes for pooling and distributing assets in groups of companies. They have not, so far as I am aware, created any difficulty and, in my view, a lot of unnecessary expense could have been saved and the distribution could have been effected years ago, if such a scheme had been embarked on in the first place here. I am therefore confronted with an important question of principle, namely whether it is right to authorise such a distribution as I am asked to do without either the consent of every creditor or a scheme of arrangement under s 206 which would bind apathetic creditors (of whom there are apparently a very large number here), and the dissentient minority, which in this case appears to be one.
In my judgment, it is not right. The matter is one which the creditors should decide for themselves and on which they are entitled to express their views at a meeting or in court. However convenient it may be for the liquidator to have a compromise sanctioned by the court, it is, in my judgment, wrong in principle to allow that course to be taken, for none of the persons affected has had any opportunity of being heard to challenge it—indeed the whole object is to preclude such a challenge.
On the other hand, if a scheme were brought in, every creditor would have an opportunity of voting for or against it, and, if he thought fit, of challenging it before the court when the petition to sanction it was heard. Furthermore, the creditors would have the protection of the court at an earlier stage in relation to proper notice of the meetings to consider the scheme and the circular explaining it. Last and not least, the court would not have to be involved in the merits of the scheme unless some creditor thought fit to appear and oppose it, in which case the court would have the benefit of argument and evidence on both sides.
The method which has been adopted here puts the burden on the court of deciding whether a particular method of distribution is fair in all the circumstances and should be accepted. In my judgment, this is an unjustifiable burden, first because, under the machinery provided by s 206, the creditors alone ought to be asked to decide it, and
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secondly because I have not had the benefit of hearing any alternative point of view. In my judgment, it would be unfair to non-assenting creditors to deal with the matter in the way proposed, since it deprives them of the opportunity of airing their views and of the protection of the court’s control over meetings, advertisement and circular under s 206.
As long ago as October 1962, I issued a warning against trying to deal with a matter of this sort otherwise than by a scheme under s 206. This was in Re Edwin Walker & Co Ltd, Re George Parkin & Co Ltd, Re Barker & Hinchcliffe Ltd. I reiterate that warning now.
In the result, I dismiss the summons.
Summons dismissed.
Solicitor: Sidney Pearlman (for the applicants).
Jacqueline Metcalfe Barrister.
R v Derby Justices, ex parte Kooner and others
[1970] 3 All ER 399
Categories: ADMINISTRATION OF JUSTICE; Legal Aid and Advice
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JOHN STEPHENSON AND COOKE JJ
Hearing Date(s): 22 JULY 1970
Legal aid – Criminal cases – Grant – Practice – Committal proceedings – Complete discretion – Criminal Justice Act 1967, ss 73(2), 74(1), (2).
Legal aid – Criminal cases – Grant – Practice – Committal proceedings – Murder – Legal aid should include representation by counsel – Criminal Justice Act 1967, s 74(2).
Subject to the limitations imposed by s 75a of the Criminal Justice Act 1967, justices have a complete discretion in the first instance under s 73(2) b and s 74(1) and (2)c of that Act whether or not to grant legal aid in criminal proceedings (see p 401 d, h and j, post); but in committal proceedings for alleged murder legal aid should include representation by counsel because a case of alleged murder, although not necessarily difficult, is undoubtedly grave (see p 401 g to j, post).
Notes
For legal aid in criminal cases, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1019A.
For the Criminal Justice Act 1967, ss 73, 74, 75, see 8 Halsbury’s Statutes (3rd Edn) 617, 619, 621.
Motion for mandamus
This was an application by way of motion by Clarence Wilfred Mascarenhas, solicitor, on behalf of Nirmal Singh Kooner, Sarwan Singh Kooner, Bhajan Singh Kooner, Gurdial Singh Birak and Darshan Singh Birak for an order of mandamus directed
Page 400 of [1970] 3 All ER 399
to two Derby justices to exercise their powers to grant, under s 74(2) of the Criminal Justice Act 1967, legal aid to enable the five accused to be represented by counsel as well as solicitor in committal proceedings in which they were charged, inter alia, with murder. At the hearing of the motion leave was given for the five accused to be substituted as applicants. The facts are set out in the judgment of Lord Parker CJ.
J F F Platts-Mills QC and V M Mascarenhas for the applicants.
The justices did not appear and were not represented.
22 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of five applicants for an order of mandamus directed to two justices of the peace for the county borough of Derby to exercise their powers to grant, pursuant to s 74 of the Criminal Justice Act 1967, legal aid to enable the applicants to be represented by counsel as well as by solicitor in committal proceedings.
It appears that the applicants amongst others, those others being represented by solicitor under legal aid and by counsel privately instructed, were charged with a number of offences arising out of an affray, including double murder and wounding with intent to do grievous bodily harm. Legal aid to include counsel having been refused by the justices, an informal application was made to this court on 26 June 1970 (The Times, 27th June 1970). The court then stated that they could not deal with the matter on such an application, but having been informed that the prosecution were represented by counsel, they intimated that it would be proper for the justices to grant legal aid covering counsel.
Mr Mascarenhas, solicitor to the applicants, thereupon instructed counsel himself, one on behalf of the Kooner applicants, one on behalf of the Birak applicants and a further application was made to the justices which was again refused. In the result a formal application was made ex parte on 10 July 1970 for leave to move for an order of mandamus. The court gave such leave and, in the hope that the hearing of the motion would be unnecessary, stated as follows:
‘Leave to appeal would be granted, bearing in mind that whether or not the case was unusually difficult, it was on the court’s understanding unusually grave, and that in the circumstances there was something to be enquired into as to whether the justices in the proper exercise of their discretion should not grant full Legal Aid in view of the terms of Section 74(2) of the Criminal Justice Act 1967.’
However, the justices have not resiled from their attitude, and have, as they are entitled to do, without appearing in this court, put in an affidavit. In that affidavit they draw attention to two matters, first that the prosecution were not in fact represented by counsel, the Director of Public Prosecutions having detailed a member of his staff who happened to be a barrister to conduct the proceedings. In this respect the court were undoubtedly misinformed. Secondly, that the two counsel instructed by the solicitor have in fact wasted time by unnecessary cross-examination, so much so that counsel representing the other accused disassociated himself from the manner in which the proceedings were being conducted. However much I sympathise with the justices, this of itself is no ground for the refusal of such legal aid if otherwise it would be proper to grant it.
Turning to the Criminal Justice Act 1967, it is provided by s 73(2) that:
‘Where a person is charged with an offence before a magistrates’ court or appears or is brought before a magistrates’ court to be dealt with, the court may
Page 401 of [1970] 3 All ER 399
order that he shall be given legal aid for the purpose of the proceedings before the court.’
Section 74 goes on to provide that:
‘(1) For the purposes of this Part of this Act legal aid, in relation to any proceedings to which a person is a party, shall be taken, subject to the following provisions of this section, as consisting of representation by a solicitor and counsel assigned by the court, including advice on the preparation of that person’s case for those proceedings.
‘(2) [this is the important provision] Notwithstanding anything in the last foregoing subsection legal aid ordered to be given for the purposes of any proceedings before a magistrates’ court shall not include representation by counsel except in the case of any indictable offence where the court is of opinion that, because of circumstances which make the case unusually grave or difficult, representation by both counsel and solicitor would be desirable.’
Accordingly, on reading those provisions it becomes clear that in the first instance there is a complete discretion in the justices whether or not to grant legal aid at all. When I say complete discretion, it is to be observed that it is subject to limitations imposed in s 75 where, incidentally, it is provided that:
‘(1) … a legal aid order shall be exercisable by a court having power under section 73 of this Act to do so where it appears to the court desirable to do so in the interests of justice, and a court having power to do so shall make such an order—(a) where a person is committed for trial on a charge of murder …
‘(5) Where a doubt arises whether a legal aid order should be made for the giving of aid to any person, the doubt shall be resolved in that person’s favour.’
I only mention that to show the approach that is made to the matter by the legislation where the committal is a committal for murder. So far as the present case is concerned no possible criticism can be made of the exercise of the discretion by the justices at that stage. They have very properly said that this is a case for legal aid.
The second question is whether that legal aid should include representation by counsel. That depends on whether in the opinion of the magistrates’ court such a course is desirable having regard to circumstances making the case unusually grave or difficult. In my opinion a case of alleged murder, although not necessarily difficult, is undoubtedly grave and no good reasons appear in the present case why representation by counsel is not desirable. Indeed, as I have already pointed out, when it comes to a trial there is a specific provision that it shall include counsel. I think that in the case of committal proceedings for alleged murder it should be recognised as a rule of practice that legal aid should include representation by counsel. Accordingly in my judgment an order of mandamus should issue.
JOHN STEPHENSON J. I agree and would only add that I do not think that the magistrates have been helped by the roundabout way in which provisions as to representation in unusually grave or difficult cases have been introduced into the Criminal Justice Act 1967.
COOKE J. I agree.
Order for mandamus.
Solicitors: C W Mascarenhas (for the applicants).
N P Metcalfe Esq Barrister.
Shepherd Homes Ltd v Sandham
[1970] 3 All ER 402
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 8, 11 MAY 1970
Injunction – Mandatory injunction – Discretion over grant of remedy – Interlocutory motion – Criteria for exercise of discretion.
The company had bought and developed a housing estate in Glamorganshire. The estate was designed on an open plan with no fences or other erections in front of the building line. The estate was divided into 89 plots on 82 of which stood leasehold houses held under 99-year leases. It was the intention that the remaining seven plots would be sold to purchasers to build their own houses. Each lease and conveyance contained a covenant prohibiting (inter alia) the erection of any fence or hedge in front of the building line. Early in September 1969, the defendant, who was the purchaser of one of the plots, on which he had built a house, erected a fence on his plot in front of the building line to prevent repeated incursions of sheep and some horses, which were causing considerable damage to his garden. On 11 September, the company’s solicitors wrote to the defendant’s solicitors to ask for the fence to be removed. On 23 October, the company issued a writ against the defendant seeking a mandatory injunction that he forthwith demolish the fence erected in breach of the covenant. The company did nothing further until 25 February 1970 when it gave notice of motion in the same terms. By cross-motion, the defendant subsequently moved for leave to apply to the Lands Tribunal under the Law of Property Act 1925, s 84a, and a stay of proceedings against him in the meantime.
Held – (i) Whilst the court would in a suitable case uphold a contract between the parties by means of a mandatory injunction, it would exercise its discretion, so as to withhold an injunction, more readily if it were mandatory than if it were prohibitory; even a blameless plaintiff could not as of right claim at the trial to enforce a negative covenant by a mandatory injunction (see p 411 j to p 412 a, post).
Dictum of Lord Cairns LC in Doherty v Allman (1878) 3 App Cas to 720 considered.
(ii) Although it might not be possible to state in any comprehensive way the grounds on which the court would refuse to grant a mandatory injunction in such cases at the trial, they at least included the triviality of the damage to the plaintiff and the existence of a disproportion between the detriment that the injunction would inflict on the defendant and the benefit that it would confer on the plaintiff; the basic concept was that of producing a fair result, and that involved the exercise of judicial discretion (see p 412 b, post).
Dicta of Astbury J in Sharp v Harrison [1922] 1 Ch at 515 and of Buckley J in Charrington v Simons & Co Ltd [1970] 2 All ER at 261 adopted.
(iii) On motion, as contrasted with the trial, the court was far more reluctant to grant a mandatory injunction; in a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this was a higher standard than was required for a prohibitory injunction (see p 412 c, post).
(iv) Accordingly, notwithstanding the breach of a contractual obligation by the defendant, the motion for a mandatory injunction would be refused, because—
(a) the company, without explanation, had delayed for more than five months
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after it learnt of the erection of the fence and before it gave notice of motion (see p 410 a, post); and
(b) the preservation of the status quo required the refusal rather than the grant of the mandatory injunction, since the status quo for any reasonable period prior to the service of the notice of motion was that of the defendant’s fence being in situ (see p 410 b, post).
Morris v Grant (1875) 24 WR 55 explained.
21 Halsbury’s Laws (3rd Edn), para 774 (part) criticised.
(v) Leave on the cross-motion to apply to the Lands Tribunal for the modification of the covenants would be granted to the defendant, together with a stay of all further proceedings pending determination of the application, because it was impossible to regard the proposed application as having on its merits no real chance of success, being a bona fide claim based on substantial grounds (see p 413 f, post).
Notes
For mandatory injunctions generally, see 21 Halsbury’s Laws 3rd Edn) 361–364, paras 757–762, and for cases on the subject, see 28 Digest (Repl) 775–777, 272–292 and 779, 780, 303–319.
The Law of Property Act 1925, s 84, is reprinted, as amended, in the Law of Property Act 1969, Sch 3, 49 Halsbury’s Statutes (2nd Edn) 1416.
Cases referred to in judgment
Agbor v Metropolitan Police Comr [1969] 2 All ER 707, [1969] 1 WLR 703, Digest Supp.
A-G v Mid-Kent Ry Co and South Eastern Ry Co (1867) 3 Ch App 100, 32 JP 244, 28 Digest (Repl) 776, 277.
Bowes v Law (1870) LR 9 Eq 636, 39 LJCh 483, 22 LT 267, 34 JP 436, 40 Digest (Repl) 350, 2821.
Charrington v Simons & Co Ltd [1970] 2 All ER 257, [1970] 1 WLR 725.
Cresswell v Proctor [1968] 2 All ER 682, [1968] 1 WLR 906, Digest Supp.
Doherty v Allman (1878) 3 App Cas 709, 39 LT 129, 28 Digest (Repl) 740, 14.
Elliston v Reacher [1908] 2 Ch 374, [1908–10] All ER Rep 612, 78 LJCh 87, 99 LT 701, 28 Digest (Repl) 825, 692.
Gale v Abbot (1862) 6 LT 852, 10 WR 748, 26 JP 563, 8 Jur NS 987, 28 Digest (Repl) 773, 244.
Ghey & Galton’s Application, Re [1957] 3 All ER 164, [1957] 2 QB 650, 40 Digest (Repl) 364, 2927.
Hampstead & Suburban Properties Ltd v Diomedous [1968] 3 All ER 545, [1969] 1 Ch 248, [1968] 3 WLR 990, Digest Supp.
Hanning v Gable-Jeffreys Properties Ltd [1965] 1 All ER 924, [1965] 1 WLR 1390, Digest (Cont Vol B) 643, 2925a.
Kilbey v Haviland (1871) 24 LT 353, 19 WR 698, 28 Digest (Repl) 806, 552.
Manners (Lord) v Johnson (1875) 1 Ch D 673, 45 LJCh 404, 40 JP 345, 28 Digest (Repl) 825, 687.
Morris v Grant (1875) 24 WR 55, 28 Digest (Repl) 774, 259.
Richardson v Jackson [1954] 1 All ER 437, [1954] 1 WLR 447, 40 Digest (Repl) 366, 2933.
Ridley v Taylor [1965] 2 All ER 51, [1965] 1 WLR 611, Digest (Cont Vol B) 644, 2927a.
Sharp v Harrison [1922] 1 Ch 502, 91 LJCh 442, 28 Digest (Repl) 826, 700.
Woodford v Smith [1970] 1 All ER 1091, [1970] 1 WLR 806.
Motions
The company, Shepherd Homes Ltd, sought a mandatory order that the defendant, William Sidney Sandham, forthwith pull down the fence, recently erected on his property known as Togwyrrd, Heol Clyd, Ty Isaf, Penyrheol, Caerphilly, Glamorganshire, which he had erected in front of the building line on the property in breach
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of a covenant contained in a conveyance, dated 5 November 1968, made between the company and the defendant. By a cross-motion the defendant moved for leave to apply to the Lands Tribunal under the Law of Property Act 1925, s 84 for modification of the covenant, and for an order that the proceedings be stayed in the meantime. The facts are set out in the judgment.
J H G Sunnucks for the company.
T L G Cullen for the defendant.
11 May 1970. The following judgment was delivered.
MEGARRY J. I have before me a motion and cross-motion concerning a house on a housing estate known as Ty Isaf, Penyrheol, Caerphilly, Glamorganshire. There are 89 plots on the estate. On 82 of them stand leasehold houses, held under 99-year leases; the remaining seven plots are freeholds, sold for the purchaser to erect his own house on the site. Four have been sold, and the remaining three, I understand, are under contract for sale. The motion is by the plaintiff company (which I shall call ‘the company’) which bought the estate in 1966, and has since laid it out and developed it. The estate is designed on what is called an ‘open plan’, with (inter alia) no fences or other erections in front of a building line formed by the front elevations of the houses; and the leases and conveyances contain covenants with the company to this effect. The possible existence of a scheme of development (in the Elliston v Reacher sense) has been mentioned but not discussed.
The defendant is a purchaser of a freehold plot on the estate under a conveyance dated 5 November 1968. The conveyance includes a covenant by the defendant to erect a house (which has since been built) and also the building line covenant to which I shall refer. The estate abuts on open land, and although no doubt this provides amenities in some respects, a serious disadvantage has now appeared, in that for some months there have been repeated incursions of sheep (and Welsh mountain sheep at that) into the gardens of the houses. Recently, the invading sheep have been augmented by some horses; and it seems clear that the damage to the gardens done by these animals is no trivial matter.
In August 1969 a number of residents on the estate signed a petition asking to be allowed to erect fences because of the damage done by the sheep. On 18 August, the company’s solicitors replied, suggesting proceedings against the farmers and stressing the desirability of the open plan, but saying that provided there was unanimity between the owners and occupiers of all the houses on the estate on all the details the company would allow a departure from the open plan. In the first few days of September the defendant erected a fence on his plot, the north-westerly part of which admittedly stands in front of the building line and so is in breach of his covenant. Although the defendant says that it was ‘in October’ that the company objected to his fence, it was in fact on 11 September that the company’s solicitors wrote to the defendant’s solicitors seeking the removal of the fence; and thereafter there were further exchanges of letters.
At some time in October the defendant obtained many signatures to a petition, stating that the signatory was a ‘resident’ on the estate, that he had been unduly inconvenienced by sheep roaming on to his property, and that ‘I have no objection to the fence erected around’ the defendant’s property. The defendant’s affidavit states that this signified the support of ‘every single one of the 79 owners of houses on the estate’, and he produces the document, ‘signifying’, he says, ‘the support of the said 79 owners, comprising every single house-owner on the estate’. The document is not altogether convincing. Eighty-six lines have been more or less completed, but one of these has, in the place for a signature, the words ‘not in’,
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and in about 10 cases there are two signatures for the same address: indeed, Mr T D Rogers, of 4 Bryn Siriol, appears to have signed twice, once on page 2 and once on page 4. It is, after all, a petition.
On 23 October, the company issued a writ against the defendant, seeking an order that he forthwith demolish the fence on his property recently erected in advance of the building line, but making no claim to damages. Thereupon, as counsel for the company was constrained to admit, nothing happened for four months. No statement of claim has yet been served, but on 25 February 1970 the company gave notice of motion, seeking an injunction in the same terms as that claimed by the writ. The motion came before Foster J on 17 March, and he stood it over to a date which, being originally 1 May, later became 8 May. The learned judge suggested certain steps that might be taken to obtain an agreed solution, but although these steps have been taken, unfortunately they have produced no agreement.
The company helpfully propounded two possible alternative solutions, with plans and explanations. The first was for uniform frontage fences and gates to be constructed between the footpaths and the frontages of the plots at an estimated cost of £7,700. The second was for the erection of a fence round the perimeter of the entire estate, with cattle grids or self-closing gates at the entrances, at an estimated cost of £5,200. These proposals were put forward by the company’s solicitors to the defendant’s solicitors in a letter dated 1 April 1970, to see if the unanimous approval of the plot owners and various authorities could be obtained. On 10 April, the company sent a circular letter to all the owners, explaining the scheme. With the letter a questionnaire was enclosed, with spaces to be ticked according to whether the owner would prefer, first, to leave the estate as it was and stock proof his rear garden at his own expense, or, second, to have the frontage fence scheme, or, third, to have the perimeter fence scheme. There was further provision on the questionnaire for ticks to indicate in which of four ways the cost of either the frontage fence or the perimeter fence was to be shared among the owners. Understandably, the company made no suggestion that any of the expense would be borne by the company, and counsel for the defendant, very properly accepted that there could be no question of requiring the company to bear any of the cost.
The questionnaire elicited 44 replies. Of these, 36 supported the proposal to leave the estate as it was, stock proofing the rear garden at the owner’s own expense. Several of those who expressed these views did so with some modification or reservation, but the great majority simply ticked this proposal. The replies bear various dates, ranging from 10 April to 20 April. Meanwhile, the defendant had organised a meeting of residents on 16 April, at which he says that 45 of the houseowners were present. He then sent out a circular letter dated 20 April, with a tear off slip, seeking agreement with the ‘general form of reply’ in a proposed letter to the company which he sent with his circular letter.
Putting it shortly, the letter to the company says that the unanimous agreement of all the residents at the meeting of 16 April was that a perimeter fence should be erected on two sides of the estate, but that ‘the original cost and maintenance of this partial perimeter fence’ must be the responsibility of the company. The letter alleges that the company had known of the problem of the sheep since receiving a petition dated August 1968, and describes the company’s conduct in allowing the completion of pending and future sales after August 1968 without drawing attention to this problem as ‘anything but HONOURABLE’. Counsel for the defendant accepted that there was no petition in August 1968, which was before the conveyance of the property to the defendant, and that the two references to August 1968 were mistakes for August 1969. Some expression of regret to the company for this mistake of a year would have lain well in the mouth of someone who says that he is a managing director of textile companies, after he has accused another of dishonourable conduct; but I heard none. The letter concluded that the points it makes ‘represent, in essence, the voice of the complete estate’. The defendant
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says that he received 61 replies, ‘of which 56 were in agreement without qualification, three were of qualified agreement and two were not in agreement’, and he exhibits these. Of those which he claims as being agreements without qualification, three are slips on which both the word ‘agree’ and the words ‘do not agree’ have been left standing, so that it is impossible to tell what the signatory meant; and one has had nearly all the relevant corner torn off, leaving only the tail end of the word ‘agree’ in the phrase ‘do not agree’ standing undeleted, so that unless the deletion of that phrase was very imperfect, the form is either neutral or a vote against the defendant. The defendant also says that ‘the reasons given by the two who disagreed were in matters of detail and not in general principle’. On three forms, in fact, the ‘I agree’ has been struck out, and the ‘I do not agree’ left standing, and one of these has nothing else written on it save the signature, address and date. There is also a form where both are struck out and the signatory says that he is quite satisfied with his own arrangements to combat the sheep. The defendant’s figures are thus in some degree questionable. The dates on the form, I may say, range from 20 to 29 April. The letter to the company for which approval was sought in this way was never, I understand, received by the company, and there was no evidence that it was ever in fact despatched to the company.
From what I have said, it is at least plain that there is no measure of general agreement among the owners and lessees on the estate. The circular sent by the company seems to me to be fair and straightforward in its terms, and this yielded a strong majority in favour of preserving the open plan and against any fencing. The petition and the responses to the circular sent by the defendant seemed to me to carry less weight, for the reasons that I have indicated, and not least because of the admittedly insupportable contention that the company should pay for the fence. It may well be that a number of residents have fluctuated in their opinions from time to time. The proposed letter to the company contained a paragraph to the effect that the letter ‘overruled’ any replies to the questionnaire to the contrary; and one of the residents described this paragraph as ‘impertinent’.
The defendant’s cross-motion is for an order giving the defendant leave to apply to the Lands Tribunal under the Law of Property Act 1925, s 84, and staying the proceedings herein in the meantime. Counsel for the defendant urged that the defendant had substantial prospects of obtaining a modification of the covenant under s 84 (as amended) so as to permit the retention of the fence that the defendant had erected, and that his application was one for which s 84(9) in terms provides. As amended by the Law of Property Act 1969, that subsection reads:
‘Where any proceedings by action or otherwise are taken to enforce a restrictive covenant, any person against whom the proceedings are taken, may in such proceedings apply to the court for an order giving leave to apply to the Lands Tribunal under this section, and staying the proceedings in the meantime.’
The substantive application, counsel for the defendant said, would be under s 84(1)(aa), as amplified by s 84(1A), on the ground that the continued existence of the covenant, unless modified, would impede the reasonable use of the land for private purposes, not securing to those entitled to the benefit of the covenant any practical benefits of substantial value or advantage to them. Counsel for the defendant also urged that under the Leasehold Reform Act 1967, s 10(4), some of the leaseholders would, by next year, be in a position to enfranchise their holdings, and so put an end to the covenant. That, of course, does not directly affect the defendant, who is a freeholder.
The company’s attitude is that it has leased and sold the plots on the estate on the basis of the open plan, and it is at any rate morally obliged to enforce the covenants for this purpose, thereby maintaining the value of the properties and protecting the estate from a motley appearance. The company is also concerned about its
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reputation as a developer. It was not suggested that the company was acting in an arbitrary or unfair way. The full wording of the covenant in the conveyance to the defendant is:
‘That he will at all times maintain keep as and use for an ornamental garden and entrance drive respectively that portion of the Property which lies in advance of the building line shown upon the plan which shall have been approved in writing by the Vendors (and being that line which (if drawn) would extend from and parallel with the front elevation of the dwellinghouse to be erected on the property to the boundaries of the said land) and without derogation from the generality of the foregoing will not:—(i) Build or erect or permit to be built or erected any building or erection in advance of the said building line (ii) Cut or permit to be cut any turf in advance of the said building line (iii) Erect or plant or grow or permit to be erected planted or grown any fence or hedge in advance of the said building line.’
Counsel for the defendant feelingly pointed to the initial words of the covenant and urged that from the entrance drive the defendant could hardly be expected to maintain the land in front of the building line as an ornamental garden if at the same time he was precluded by the latter part of the covenant from erecting a fence to keep the sheep and horses off that land.
Counsel for the company contended that all that the company was seeking to do was to enforce an express negative covenant inter partes, and that the well-known statement by Lord Cairns LC in Doherty v Allman ((1878) 3 App Cas 709 at 720), as applied to interlocutory applications by Hampstead & Suburban Properties Ltd v Diomedous, was directly in point. What Lord Cairns LC said was:
‘If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury—it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves.’
This submission raises the question how far the principle enunciated by Lord Cairns LC applies, or should be applied, to mandatory injunctions. Counsel were unable to put before me any clear authority or textbook statement on the point, and so I must consider it. What Lord Cairns LC said does not, I think, in terms apply to mandatory injunctions. A court of equity which says by way of injunction ‘that which the parties have already said by way of covenant, that the thing shall not be done’, is not thereby in the same breath adding ‘and, what is more, if it has been done, that it shall be undone’. The Hampstead case does not help much, because there the injunction was prohibitory, and the only point was whether in clear cases the principle applied to interlocutory injunctions as well as to final injunctions. Counsel for the company was pressed during argument with a number of points on the distinction between prohibitory injunctions and mandatory injunctions, but he maintained his submission that what Lord Cairns LC said applied also to interlocutory mandatory injunctions.
Counsel for the company was, of course, confronted by the greater reluctance of the court to grant an injunction on motion if it is mandatory than if it is prohibitory, as is exemplified by a passage in 21 Halsbury’s Laws (3rd Edn) p 369, para 774. There the matter is stated thus:
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‘A mandatory injunction can be granted on an interlocutory application as well as at the hearing, but, in the absence of special circumstances, it will not be granted on motion. If, however, the case is clear and one which the Court thinks ought to be decided at once, or if the act done is a simple and summary one which can be easily remedied, or if the defendant, after express notice, has committed a clear violation of an express contract, or where the defendant, on receipt of notice that an injunction is about to be applied for, hurries on the work in respect of which complaint is made, so that, when he receives notice of an interim injunction, it is completed, a mandatory injunction will be granted on an interlocutory application.’
The authority supporting the words ‘clear violation of an express contract’ in that passage is Morris v Grant, and counsel for the company relied heavily on that. In that case there was a freehold covenant against making or building certain alterations or erections on the premises. The freeholder sought the covenantee’s consent to making certain alterations and to erecting a porch. The covenantee refused consent for the porch, on the ground that it would interfere with the building line, and the freeholder then obtained the covenantee’s approval of plans for alterations which excluded the porch. Some six months after the refusal of the consent for the porch, the freeholder nevertheless erected it, and in the same month the covenantee filed a bill and shortly afterwards moved for a mandatory injunction for the removal of the porch. The judgment of Hall V-C, granting the injunction, is very shortly reported ((1875) 24 WR at 56). It seems to have been argued that the court would not grant a mandatory injunction on an interlocutory application, but Hall V-C said:
‘… in this case, in which there was a clear violation of an express contract after express notice, the defendant could not be allowed to shelter himself under any supposed rule to the contrary;’
and that, in effect, was all. If the only opposition to the injunction rested on a non-existent rule, it is easy to understand how the injunction came to be granted; and I must say that the conduct of the freeholder in obtaining the consent with the omission of the porch and then erecting the porch seems to have an unattractive element in it. Further, there was no suggestion of any valid reason for erecting the porch save the freeholder’s desire to have one; indeed, the freeholder filed no evidence. Again, the covenantee acted promptly; there was no unexplained inactivity for four months as there is in this case. I should be slow to subscribe to any doctrine that a covenantee who issues a writ for breach of covenant and then does nothing for four months can thereafter move at his will for a mandatory injunction as being something that he is entitled to almost as of right for the enforcement of the covenant.
Counsel for the company also relied on A-G v Mid-Kent Ry Co and South Eastern Ry Co ((1867) 3 Ch App 100 at 104), and Lord Manners v Johnson. The former case was one of the enforcement of a provision in a railway Act, and at the hearing Stuart V-C dismissed the application for a mandatory injunction for the removal of a slope up to a bridge that was steeper than the Act permitted. The Court of Appeal in Chancery ((1867) 3 Ch App 100) reversed this decision. Rolt LJ emphasised the distinction between cases depending on nuisance and those depending on contract, saying that ((1867) 3 Ch App at 104):
‘… where there is a contract, the Court cannot attach the same importance to the question whether the damage is serious or not, as it does in mere cases of nuisance, but that the main point is whether the contract has been broken.’
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The other member of the court, Lord Cairns LJ, said nothing on the point. It will be observed that the matter is one of emphasis, the phrases ‘the same importance’ and ‘main point’ showing that the rule is not absolute. In Lord Manners v Johnson Hall V-C considered the authorities (although not the Mid-Kent case ((1867) 3 Ch App 100 at 104)), and expressed similar views ((1875) 1 Ch D at 680). This case, however, to some extent recoiled on counsel for the company’s head, for it appears ((1875) 1 Ch D at 675) that the mandatory injunction obtained at the trial had previously been sought on motion, but had not been granted, the motion being stood over until the trial. So far as it goes, this is hardly in accord with any contention that there is a virtual right on motion to a mandatory injunction for the enforcement of a negative covenant.
As it seems to me, there are important differences between prohibitory and mandatory injunctions. By granting a prohibitory injunction, the court does no more than prevent for the future the continuance or repetition of the conduct of which the plaintiff complains. The injunction does not attempt to deal with what has happened in the past; that is left for the trial, to be dealt with by damages or otherwise. On the other hand, a mandatory injunction tends at least in part to look to the past, in that it is often a means of undoing what has already been done, so far as that is possible. Furthermore, whereas a prohibitory injunction merely requires abstention from acting, a mandatory injunction requires the taking of positive steps, and may (as in the present case) require the dismantling or destruction of something already erected or constructed. This will result in a consequent waste of time, money and materials if it is ultimately established that the defendant was entitled to retain the erection. As Kindersley V-C said in Gale v Abbot ((1862) 10 WR 748 at 750), an interlocutory application for a mandatory injunction was one of the rarest cases that occurred, ‘for the Court would not compel a man to do so serious a thing as to undo what he had done except at the hearing’. Even if today the degree of rarity of such applications is not quite so profound, the seriousness of such an order remains as an important factor. Another aspect of the point is that if a mandatory injunction is granted on motion, there will normally be no question of granting a further mandatory injunction at the trial; what is done is done, and the plaintiff has on motion obtained, once and for all, the demolition or destruction that he seeks. Where the injunction is prohibitory, however, there will often still be a question at the trial whether the injunction should be dissolved or continued; except in relation to transient events, there will usually be no question of the plaintiff having obtained on motion all that he seeks. I may add that I do not think that any question arises of the court refusing to grant an injunction on motion merely because that, in effect, constitutes the sole relief claimed, for there is no rule against making such a grant; see Woodford v Smith ([1970] 1 All ER 1091 at 1093, [1970] 1 WLR 806 at 817, 818).
The subject is not one in which it is possible to draw firm lines or impose any rigid classification. Nevertheless, it is plain that in most circumstances a mandatory injunction is likely, other things being equal, to be more drastic in its effect than a prohibitory injunction. At the trial of the action, the court will, of course, grant such injunctions as the justice of the case requires; but at the interlocutory stage, when the final result of the case cannot be known and the court has to do the best it can, I think that the case has to be unusually strong and clear before a mandatory injunction will be granted, even if it is sought in order to enforce a contractual obligation. If, of course, the defendant has rushed on with his work in order to defeat the plaintiff’s attempts to stop him, then on the plaintiff
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promptly resorting to the court for assistance, that assistance is likely to be available; for this will in substance be restoring the status quo, and the plaintiff’s promptitude is a badge of the seriousness of his complaint. In the present case the company knew of the erection of the fence by 11 September 1969 but did not launch its notice of motion until over five months later. In the absence of any explanation, I do not think it unfair to treat this tardiness as some measure of the company’s need for the injunction. Furthermore, the status quo for any reasonable period prior to the service of the notice of motion is that of the defendant’s fence being in situ, so that the injunction sought will disturb rather than preserve anything that can fairly be called the status quo. In Agbor v Metropolitan Police Comr, I may say, continuation in possession for four weeks was treated as the status quo that was to be preserved, and a mandatory injunction was granted on an application made the very day that the status quo was disturbed.
Apart from the principles applicable to mandatory injunctions, the realities of the case before me seem to point to the same direction. No attack is made on the open plan as such; but for the sheep and horses, there would have been no motion. What came as a surprise to all concerned, I think, was the existence and the extent of the peril. The enforcement of the open plan as a means of preserving values and amenities becomes quite unreal if that enforcement necessarily leads to a depreciation of values and amenities by reason of the animals. There may be questions at the trial of the extent and frequency of the invasions; but no suggestion has been made that there is not a substantial problem. If, for example, it is established at the trial that the values of the houses and the company’s reversion would be less on the open plan with sheep than with fencing and no sheep, I find it difficult to believe that the court would grant a mandatory injunction so as to prevent either the company or the defendant suffering an increase in the value of their respective interests. If the company can establish no damage to it flowing from the breach, it has a slender claim to a mandatory injunction.
During the argument, I put to counsel for the company the points that I have mentioned on the reluctance of the court to grant mandatory injunctions on motion, and the distinction between prohibitory and mandatory injunctions in relation to Lord Cairns LC’s statement of principle. On quarrying in the footnotes in the books, support for this approach may be found, I think, in the line of cases which includes Bowes v Law, Kilbey v Haviland and Sharp v Harrison. In Bowes v Law, James V-C, on a motion that had been stood over until the trial, refused a mandatory injunction for the demolition of an 11-foot wall and a vinery built in breach of covenant, granting a declaration instead, and 40s damages. That case, of course, was decided before Doherty v Allman, and so was Kilbey v Haviland. There, in flagrant breach of a covenant and without excuse, a covenantor had built on an estate a house in plain disconformity with the other houses. At the trial Bacon V-C, although roundly condemning the covenantor’s ‘inexcusable’ conduct, nevertheless refused to grant a mandatory injunction against him to pull down the house, and instead awarded the covenantees £10 damages.
Sharp v Harrison, however, was decided long after Doherty v Allman, and is particularly valuable in that Astbury J considered the application to mandatory injunctions of the principles stated by Lord Cairns LC. Having read Lord Cairns LC’s statement, he said ([1922] 1 Ch at 512):
‘Where, however, the act has been done, and the question is whether or not a mandatory injunction should be granted, slightly different considerations obviously apply.’
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In that case, the defendant, in breach of covenant, constructed a new window overlooking the plaintiff’s house, in the teeth of objections by the plaintiff; and at the trial the plaintiff sought a mandatory order for the removal of the window. Astbury J refused to grant the injunction, but made a declaration and awarded 40s damages. After considering the authorities, he said ([1922] 1 Ch at 515):
‘Prima facie, where a defendant commits a breach of a negative covenant with his eyes open, and after notice, the Court will grant a mandatory order, but there is, and must be, some limitation to this practice. Supposing that this defendant had taken a brick out of her south wall, and had put in an iron ventilator, that would have been a direct breach of this covenant, as far as breach is concerned, as direct as the particular breach in the present case; but it is idle to suppose that any Court would listen to an action claiming a mandatory injunction if those had been the facts. The reason is this, that if there is really no damage of any sort or kind suffered by a plaintiff by reason of the breach of a negative covenant of this character, and if the granting of a mandatory order would inflict damage upon the defendant out of all proportion to the relief which the plaintiff ought to obtain, the Court will, in my opinion, and ought, in my judgment, to refuse it.’
That is a passage to which the books, I think, have not given due attention.
Apart from these authorities, I found some assistance in a very recent case to which counsel for the company very properly referred me, accepting that it was somewhat against him. Charrington v Simons & Co Ltd was a decision of Buckley J on the trial of the action, and not on motion. He said ([1970] 2 All ER at 261, [1970] 1 WLR at 730):
‘Different considerations may, I think, arise in a case where the court has to consider whether a defendant should be compelled by a mandatory order to remedy a breach of contract which he has committed from those which would arise if the question were whether the court should restrain a threatened breach of contract. To the latter case the principle enunciated by Lord Cairns LC in Doherty v Allman ((1878) 3 App Cas at 720) may apply in its full rigour. Where a mandatory order is sought, the court must consider whether in the circumstances as they exist after the breach a mandatory order, and, if so, what kind of mandatory order, will produce a fair result. In this connection, the court must, in my judgment, take into consideration amongst other relevant circumstances the benefit which the order will confer on the plaintiff and the detriment which it will cause the defendants. A plaintiff should not, of course, be deprived of relief to which he is justly entitled merely because it will be disadvantageous to the defendant. On the other hand, he should not be permitted to insist on a form of relief which will confer no appreciable benefit on himself and will be materially detrimental to the defendant.’
That passage is valuable, if I may say so, both in its statement of the concept of a ‘fair result’ as the criterion, and also as necessarily indicating, I think, that the enforcement of a negative covenant at the trial by a mandatory injunction is far more a matter of judicial discretion and not of right than in the case of a prohibitory injunction.
I may summarise my conclusions as follows. First, Lord Cairns LC’s statement of principle prima facie applies to mandatory injunctions; but it does not apply in its full width. The matter is tempered by a judicial discretion which will be exercised
Page 412 of [1970] 3 All ER 402
so as to withhold an injunction more readily if it is mandatory than if it is prohibitory. Even a blameless plaintiff cannot as of right claim at the trial to enforce a negative covenant by a mandatory injunction. Second, although it may not be possible to state in any comprehensive way the grounds on which the court will refuse to grant a mandatory injunction in such cases at the trial, they at least include the triviality of the damage to the plaintiff and the existence of a disproportion between the detriment that the injunction would inflict on the defendant and the benefit that it would confer on the plaintiff. The basic concept is that of producing a ‘fair result’, and this involves the exercise of a judicial discretion.
Third, on motion, as contrasted with the trial, the court is far more reluctant to grant a mandatory injunction than it would be to grant a comparable prohibitory injunction. In a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this is a higher standard than is required for a prohibitory injunction. Fourth, it follows that the statement in 21 Halsbury’s Laws (3rd Edn) p 369, para 774, founded on Morris v Grant, namely:
‘… if the defendant, after express notice, has committed a clear violation of an express contract … a mandatory injunction will be granted on an interlocutory application’,
is too wide. Both the case itself and the statement founded on it have to be qualified in the light of the other authorities to which I have referred, especially Bowes v Law and Kilbey v Haviland (which, although decided earlier, do not seem to have been cited) and Sharp v Harrison. No doubt a mandatory injunction may be granted where the case for one is unusually sharp and clear; but it is certainly not a matter of course.
There is one further matter that I should mention, and that is counsel for the company’s contention that if no injunction were granted, the floodgates would be opened to a wholesale disregard of the covenants on the estate. This contention seems to me to be of little force. Now that the company has shown by this motion that it intends to act to enforce the covenant, then, provided it acts with reasonable promptitude, I should have thought that it would have excellent prospects of obtaining a prohibitory injunction against any would-be infringer. If, in the teeth of the warning given by these proceedings, any infringer rushes up a fence before the company can enjoin him, then that infringer would probably fall squarely within the line of cases relating to those who attempt to steal a march on the court, and so be subject (again, on prompt application) to a mandatory injunction. I bear counsel for the company’s contention in mind, but I cannot give it much weight. In saying that, I deal only with the company’s motion; the defendant’s cross-motion may result in practical difficulties, but I cannot enjoin the defendant merely because there may be those difficulties in relation to those who are not parties to these proceedings.
Looking at the case as a whole, it seems to me plain that it would be quite wrong on motion to grant the mandatory injunction sought. This is a delayed motion in a case where it is very far from clear that a mandatory order would be granted at the trial. Furthermore, there is counsel for the defendant’s cross-motion relating to the proposed application to the Lands Tribunal. The principle is that an application for a stay on this ground, if made with sufficient promptitude, should always be granted unless it is clear that the application to the Lands Tribunal for a discharge or modification has no real chance of success: Richardson v Jackson. Counsel for the
Page 413 of [1970] 3 All ER 402
company objected that in this case the application for a stay was not prompt, and that the writ had been issued over 4 1/2 months before the cross-notice of motion was given. However, as counsel for the defendant pointed out, in Richardson v Jackson the successful application for a stay was not made until over six months after the statement of claim had been served and the defendants had therefore learned definitely what was the complaint against them. Here, the defendant is applying before the company has even served a statement of claim.
Counsel for the company also objected that s 84 did not apply, and that even if it did, the application had no chance of success. In the face of Ridley v Taylor and Cresswell v Proctor, counsel for the company was unable to press his contention that s 84 did not apply to an application by an original covenantor; but he urged that these cases showed that any such applicant carried a heavy burden, especially if he had entered into the covenant recently. Here, of course, unlike those cases, there has been a marked change of circumstances in the shape of the waves of invading sheep and horses. Counsel for the company also relied on Re Ghey & Galton’s Application as showing that the Lands Tribunal could not modify a restrictive covenant so as to give a mere personal licence to the applicant to act in breach of the covenant; and he said that the defendant’s application fell within this principle, since a relaxation made on the application would not relax the covenant for the other houseowners on the estate. I do not think that there is anything in this point. I do not doubt that any relaxation obtained by the defendant would be not merely for the personal benefit of the defendant, but also for the benefit of all his successors in title, irrespective of their personal qualities. The case is thus quite different from Re Ghey & Galton’s Application. Furthermore, it is no contention of the defendant that the modification should be made for his land alone; his contention is that it ought to be modified for the whole estate of which his house forms part, although, of course, he can make an application only in respect of his own house.
On the general merits of the application for a stay I shall say no more than that it seems impossible to regard the proposed application to the Lands Tribunal as having no real chance of succeeding. I offer it, of course, no warranty of success; all that I can say is that on the material at present before me, it seems to be a bona fide claim based on substantial grounds. Accordingly, in addition to dismissing the company’s motion, I shall give the defendant leave to apply to the Lands Tribunal for the modification of the covenant in the way that counsel for the defendant has indicated, and I shall stay all further proceedings in this action pending the determination of that application. In doing this, I shall adapt what was said in Hanning v Gable-Jeffreys Properties Ltd, and as a condition of the stay require the defendant to make and prosecute his application to the Lands Tribunal with all due diligence and to notify the company promptly of the making and progress of the application. I shall give liberty to the company to apply on five clear days’ notice to the defendant to remove the stay if the defendant does not show the requisite diligence. It is, of course, entirely a matter for the Lands Tribunal when the application is heard, and as the defendant is at present protected from the sheep by his fence, I cannot see that he has any particular claim to an early hearing. But in the interests of the company and the other residents on the estate, an early hearing is plainly desirable, and accordingly a further term of the stay will be that the defendant will not oppose any application that may be made to the Lands Tribunal for an early hearing. If other residents on the estate were to join with the defendant in making the application for a modification, as might well be convenient, it will be in their interests to have an early hearing. In the circumstances of the case, I think that it might assist both the parties to any
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such application, and also the Lands Tribunal, if I were to say (as I do) that in my opinion the practical difficulties arising from unfenced plots on this estate fully justify an application to the Lands Tribunal for whatever degree of expedition of hearing it is possible to afford.
Company’s motion dismissed. Order for proceedings to be stayed pending application by defendant to Lands Tribunal for modification of covenant.
Solicitors: Theodore Goddard & Co, agents for Morgan, Bruce & Nicholas, Cardiff (for the company); Holman, Fenwick & Willan, agents for Lean & Lean, Cardiff (for the defendant).
R W Farrin Esq Barrister.
Jenkin R Lewis & Son Ltd v Kerman
[1970] 3 All ER 414
Categories: AGRICULTURE: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, WIDGERY AND CROSS LJJ
Hearing Date(s): 16, 17, 18, 29 JUNE 1970
Agriculture – Agricultural holding – Notice to quit – Validity – Notice given within three months of death of original tenant – Whether original tenancy agreement still in existence – Agricultural Holdings Act 1948, s 24(2)(g).
Landlord and tenant – Surrender of tenancy – Surrender by operation of law – Agreement between landlord and tenant for increase of rent – Whether agreement amounted to surrender of existing tenancy and grant of new tenancy.
In 1941, B entered into a tenancy agreement for certain farm land with the predecessor in title of the plaintiff company. In 1949, B assigned his tenancy to C who in 1957 assigned to the defendant. In 1961, the defendant and the then landlord entered into an agreement described as ‘for increase of Rent Part Scamperdale Farm Edenbridge’ and headed ‘Date of Tenancy Agreement 15 November 1941’. In 1965, a further agreement was executed, expressed to be supplemental to the 1941 and 1961 agreements, surrendering to the landlord a small portion of the farm land. In March 1968, the landlord and the defendant executed an agreement further increasing the rent in the same terms as the 1961 document. B died in June 1968. In September 1968, the plaintiff company served a notice to quit on the defendant, in accordance with s 24(2)(g) of the Agricultural Holdings Act 1948, which notice was expressed to be given by reason of the fact that B, with whom the 1941 tenancy agreement was made, had died within the previous three months.
Held – The notice to quit was a valid and effective notice given within three months after the death of B, at which time the tenancy agreement made with B in 1941 remained in existence, because—
(i) on the true construction of the 1961, 1965 and 1968 agreements, it was clear that the parties did not intend to terminate the 1941 contract, the leasehold interest created by which they considered still to be in existence (see p 419 e, post); alternatively,
(ii) although (as was common ground) it was the intention of the parties to increase the true rent, such provision in 1961 and 1968 for additional rent made no alteration in the nature of the pre-existing item of property and did not result in a surrender of
Page 415 of [1970] 3 All ER 414
the existing tenancy or convert the relationship from one by privity of estate between the parties, into that of contractual landlord and tenant, so as to constitute a new letting (see p 420 b and p 421 c, post); dicta of Goff J in Gable Construction Co Ltd v Inland Revenue Comrs [1968] 2 All ER at 971 approved, Donellan v Read [1824–34] All ER Rep 639 distinguished.
Per Curiam. Even if we had been constrained by authority to hold that in general the law is that an increase in rent does involve a new letting, we would have held that it was not applicable to the case of a letting subject to and within the statutory framework of the Agricultural Holdings Act (see p 421 e, post).
Decision of Buckley J [1970] 1 All ER 833 reversed.
Notes
For surrender by operation of law, see 23 Halsbury’s Laws (3rd Edn) 685–687, paras 1414–1415, and for cases on the subject, see 31 Digest (Repl) 569–575, 6900–6954.
For the operation of notices to quit agricultural holdings, see 1 Halsbury’s Laws (3rd Edn) 282–285, paras 599–601, and for cases on the subject, see 2 Digest (Repl) 14–16, 53–70.
For the Agricultural Holdings Act 1948, s 24, see 1 Halsbury’s Statutes (3rd Edn) 707.
Cases referred to in judgment
Baker v Merckel [1960] 1 All ER 668, [1960] 1 QB 657, [1960] 2 WLR 492, Digest (Cont Vol A) 1034, 6947a.
Doe d Monck v Geekie (1844) 5 QB 841, 13 LJQB 239, 114 ER 1466, 31 Digest (Repl) 248, 3830.
Donellan v Read (1832) 3 B & Ad 899, [1824–34] All ER Rep 639, 1 LJKB 269, 110 ER 330, 31 Digest (Repl) 573, 6939.
Gable Construction Co Ltd v Inland Revenue Comrs [1968] 2 All ER 968, [1968] 1 WLR 1426, Digest Supp.
Inchiquin (Lord) v Lyons (1887) 20 LR Ir 474, 31 Digest (Repl) 62, *694.
Savile Settled Estates, Re, Savile v Savile [1931] 2 Ch 210, [1931] All ER Rep 556, 100 LJCh 274, 145 LT 17, 31 Digest (Repl) 571, 6922.
Sellar v Read (1964) 193 Estates Gazette 19.
Appeal
This was an appeal from the decision of Buckley J, dated 11 December 1969, and reported at [1970] 1 All ER 833, refusing a declaration that the notice to quit, dated 5 September 1968, served by the plaintiff company, Jenkin R Lewis & Son Ltd, on the defendant, Isidore Kerman, was valid and effective to determine the defendant’s tenancy. The facts are set out in the judgment of the court.
J H Hames for the plaintiff company.
L A Blundell QC and J T Plume for the defendant.
Cur adv vult
29 June 1970. The following judgment was delivered.
RUSSELL LJ read the judgment of the court. The question in this appeal relates to s 24(2)(g) of the Agricultural Holdings Act 1948. In most cases of agricultural tenancies, if a landlord serves an otherwise appropriate notice to quit to determine the tenancy, the matter must be referred to a tribunal. This is not required and the notice to quit is effective, if (inter alia) it is served within three months of the death of the tenant with whom the contract of tenancy, current at the time when the notice was given, was made.
One Bush died on 16 June 1968. It is accepted before us that he was the tenant with whom a contract of tenancy entered into in 1941 was made, and that notice to quit was given within three months of his death. Mr Bush in 1949 assigned his term to one Courtney. In 1957 Mr Courtney assigned the term to the defendant. We omit from this statement of facts matters which it is not suggested introduced any new contract of tenancy, namely the reduction by agreement from time to time
Page 416 of [1970] 3 All ER 414
of the acreage comprised in the contract of tenancy and consequently the rent, whether by agreement with Mr Bush or with Mr Courtney, his assignee of the lease.
The question is whether a document between the defendant and the then landlord in 1961 increasing the rent, and/or a similar deed between the same parties in 1968, had the effect of creating a new contract of tenancy between those persons, and consequently a surrender and cesser of the 1941 contract of tenancy, making the death of Mr Bush accordingly an irrelevant event. It is first contended for the defendant that the documents on their true construction evince an intention to determine the 1941 contract of tenancy and to substitute a new one between the defendant and the then landlord. It is alternatively suggested for the defendant that the increase in rent in 1961 (and 1968) was intended to increase the true rent, and not merely to create a rentcharge of the amount of the increase as between the parties, and that the result in law of that, whatever the intention and (if it be the fact) contrary to the intention of the parties, was necessarily to create a new tenancy and to extinguish by surrender the 1941 tenancy. It is admitted for the plaintiff company that it was intended to increase the true rent; but the result in law is denied.
We look first at the documents in order to test the first contention of the defendant. The 15 November 1941 tenancy agreement was of some 107 acres of farm land at Edenbridge in Kent. The term was for three years from 29 September 1941, expressed as determinable on 29 September 1944 by not less than 12 months’ written notice by either party. It was of course a letting subjected to the Agricultural Holdings Act 1923 and one which would from time to time become subject to similar legislation. The rent reserved was £198 10s per annum payable on the usual quarter days in arrear. The tenant convenanted:
‘… to pay during the continuance of this Agreement the rent hereby reserved or any additional rents or any rent substituted therefor by agreement or by arbitration under the provision of Section 12 of the Agricultural Holdings Act 1923 … ’
There was provision against assignment without consent, such consent not to be unreasonably withheld. Other clauses seem not relevant. The agreement was in fact with two tenants; the other dropped out under a tripartite arrangement made in 1944 which the parties agree cannot affect the problem, and it is simpler for the purposes of this judgment to ignore the second original tenant.
In 1949, Mr Bush assigned his tenancy to Mr Courtney and in 1957 Mr Courtney assigned the tenancy to the defendant. There had been one or two express surrenders of parts of the holding with corresponding reductions in rent, but, as I have said, it is not contended that those events operated to determine the original contract of tenancy. In November 1961, accordingly, the defendant was tenant under the 1941 contract of tenancy of the greater part of the original holding at a rent less than the original rent. Between the defendant and the then landlord (the predecessor of the plaintiff company that bears his name) there was privity of estate but not privity of contract. If the original contract of tenancy was not put an end to, the landlord would on Mr Bush’s death in due course be able to determine the tenancy under s 24(2)(g) of the Agricultural Holdings Act 1948; and the defendant, should he assign the tenancy, would thereafter have no continuing contingent liability for the tenant’s obligations under the contract of tenancy.
The defendant and the landlord on 25 November 1961 signed a memorandum of agreement described as ‘for Increase of Rent Part Scamperdale Farm Edenbridge’ and headed ‘Date of Tenancy Agreement 15 November, 1941’. It recited that the landlord, claiming to be entitled under s 8(1) of the Agricultural Holdings Act 1948 to proceed to arbitration on the question of what rent should be payable in respect of the holding as from 29 September 1961, had waived his right to do so on the defendant agreeing to the increase of rent therein mentioned. The documents proceeded thus:
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‘… NOW in consideration of such waiver as aforesaid the [defendant] hereby agrees with the Landlord as follows: 1. As FROM the Twenty Ninth day of September One Thousand Nine Hundred & Sixty One the Tenancy Agreement shall be read and construed and shall have effect in all respects (and in particular and without prejudice to the generality of the foregoing so that the power of the Landlord to distrain upon the Holding for rent in arrear shall extend to the rent as hereby increased) as if the rent of Three Hundred & Eighteen Pounds Fifteen Shillings … were substituted in place of the present rent of One Hundred and Seventy Five Pounds now paid and the rent payable by the Tenant in respect of the Holding shall be increased accordingly. 2. NOTHING herein contained or implied shall preclude the Landlord from demanding a reference to arbitration under the said Section 8 of the question as to what rent should be payable in respect of the Holding after the expiration of three years from the date as from which the increase of rent hereby agreed takes effect nor from requiring at any time an increase of rent under Section 9 of the said Act for Improvements carried out by the Landlord.’
The last clause reflects the fact that s 8 precludes a further arbitration within three years and to that extent is superfluous.
Now it seems to us that the language of this document not only does not evince any intention to create a new contract of tenancy in substitution for that of 1941, but on the contrary is carefully drawn to achieve continuation of that of 1941, with its already varied content of parcels and rent, with a further and upward variation in the rent, so that with such further variation the relationship between landlord and tenant should remain one of privity of estate and not become a new one of privity of contract. The judge, in dealing with the 1961 and 1968 increase documents, said ([1970] 1 All ER 833 at 839, [1970] 1 WLR 378 at 384):
‘This formula constitutes a classical method of entering into a new agreement incorporating by reference such of the terms of an earlier agreement as are intended to remain in operation and specifying such new terms as are intended to displace terms of the earlier agreement … ’
With all respect we cannot agree at all with that statement. If a new tenancy agreement had been intended a very different form would have been adopted. The judge continued ([1970] 1 All ER at 839, 840, [1970] 1 WLR at 384, 385):
‘It is, I think, important to bear in mind that until 25th November 1961 there was no contractual relationship between the defendant and the then landlord, Mr Lewis. The defendant’s obligations to Mr Lewis in respect of the tenancy resulted from privity of estate alone. By the agreement of that date the defendant and Mr Lewis became contractually bound. The nature of their contract is of fundamental importance to the solution of the problem with which I am concerned. Did it amount to a new tenancy agreement? The plaintiff has naturally laid much stress on that use of language in the two agreements for increase of rents and in others of the documents in the case which appears to treat the 1941 agreement as still on foot, but it is, in my opinion, clear from the contexts that this language refers to that agreement as varied or transmuted from time to time. The tenancy in force on 11th March 1968 had its historical root in the 1941 agreement, whatever the legal effect of the intervening transactions may have been, but the references in the 1968 agreement to the holding then consisting of 75·254 acres, and to the rent then being paid as being £282 3s, make it clear that the reference at the head of that agreement to “Tenancy Agreement dated 15th November 1941” was not intended to be taken au pied de la lettre. The 1961 agreement contains no reference to any reduction in the
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acreage since 1941, but the holding was then about 85 acres, and it cannot have been the intention of the parties that about 22·5 acres, which had been surrendered, should be then brought back into the tenancy. It must also, I think, be borne in mind that the term of years created by the 1941 agreement had long since expired and that the tenancy had become a tenancy from year to year under the 1923 Act. When the agreements for increase of rents provided that as from a stated date the “Tenancy Agreement”—which must in each case be related back to the tenancy agreement as described in the heading as “Tenancy Agreement dated 15th November 1941”—should be read and construed and should have effect as if the increased rent were substituted in place of the rent currently payable, the reference to the “Tenancy Agreement” must in my judgment be taken to refer to those terms of the 1941 agreement as modified for the time being which then regulated the yearly tenancy. So read and construed, the agreements were to take effect as agreements that the landlord should let and the tenant should take the holding as it then existed from 29th September 1961 or 1968, as the case might be, from year to year until determined, the rent to be £318 15s or £450, as the case might be. So read, the agreements must in my judgment be construed as new tenancy agreements at new rents reserved by the landlord out of new terms then granted by the landlord, displacing the pre-existing tenancies by way of surrender by operation of law.’
It seems to us clear that the parties to the document were dealing with the situation of their privity of estate, which of course embodied all previous variations. The fact that from this estate parcels had been surrendered and rent accordingly reduced appears to us entirely consistent with a preservation of the situation as it then was, and in no way inconsistent with a continuance of the original contract of tenancy. With this the judge appears to have agreed; but he proceeded at once to conclude from this that ([1970] 1 All ER at 839, 840, [1970] 1 WLR at 384, 385) ‘the agreements were to take effect as agreements that the landlord should let and the tenant should take the holding as it then existed’ at the new rent. This phrase decides the question by saying in effect that there was a new contract of tenancy; and with this we cannot agree. It is then that the judge proceeded with what we, with respect, consider to be not a conclusion, but in fact a repetition ([1970] 1 All ER at 840, [1970] 1 WLR at 385):
‘So read, the agreements must … be construed as new tenancy agreements at new rents reserved by the landlord out of new terms then granted … displacing the pre-existing tenancies by way of surrender by operation of law.’
Our view, that the parties intended that the original contract of tenancy should remain in being after the 1961 document, is fortified by a deed dated 29 October 1965 between the defendant and the then landlord. It was in the following terms:
‘This deed is intended to be supplemental to a Memorandum of Agreement made 15th November, 1941 between Samuel J. Marsh of the one part and Col. Humphrey Ingram Robinson and Bernard Stephen Bush of the other part and to a Memorandum of Agreement dated 25th November 1961 and made between the Landlord of the one part and the [defendant] of the other part.
‘The reversion immediately expectant on the determination of the Tenancy created by the Memorandum of Agreement dated 15th November 1941 is vested in the Landlord and the premises demised thereby are now vested in the [defendant] for all the residue of the term created thereby … Now this deed witnesseth:—1. PURSUANT to the said Agreement and in consideration of the sum of £250 paid by the Landlord to the [defendant] … and of the release hereinafter contained the [defendant] as beneficial owner hereby conveys and surrenders to the Landlord ALL AND SINGULAR the part of the land demised by the said Agreement dated 15th November 1941, described in the Schedule
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hereto TO THE INTENT that the tenancy granted by the said Memorandum of Agreement [which refers, in our view, to the 1941 contract of tenancy] so far as it concerns the land hereby surrendered may merge and be extinguished in the freehold of the same.
‘2. IN consideration of the said Surrender the Landlord agrees that as from 29th September 1965 the yearly rent payable pursuant to the said Memoranda of Agreement shall be reduced to £282–3–0 which shall be payable in respect of the rent remaining subject to the said Tenancy at the time and in the manner at and in which the original rent was payable …
‘4. THE parties hereto agree and declare that all the covenants and conditions (other than the covenant for payment of rent) and the proviso for re-entry contained in the said Memorandum of Agreement of 15th November, 1941 as varied by the Memorandum of Agreement of 25th November, 1961 shall continue in force in relation to the said land remaining subject thereto as if such land had alone been comprised in the said tenancy.’
It is quite plain from this, as a matter of intention, that the parties regarded the leasehold interest or tenancy created by the 1941 agreement, notwithstanding the 1961 episode, as still in existence, and that they were consequently adhering to the relationship of privity of estate. We end this part of the case by saying that on 11 March 1968 the defendant and the landlord signed a memorandum of agreement increasing the rent yet further in terms not distinguishable from the 1961 document. We are consequently not able to construe the documents as showing an intention by the parties to put an end to the 1941 contract of tenancy and to enter into or create a new contract of tenancy between the defendant and the landlord in 1961 or 1968. Indeed we consider that the documents show the opposite intention.
The question then arises whether it is correct in law to say that a mere agreement by landlord and tenant for an increase in the rent reserved on a letting necessarily involves a new letting, despite their contrary intentions. If a tenant, holding land under a lease, accepts a new lease of the same land from his landlord, he is taken to have surrendered his original lease immediately before he accepts the new one. The landlord has no power to grant the new lease, except on the footing that the old lease is surrendered, and the tenant, by accepting the new lease, is estopped from denying the surrender of the old one. This ‘surrender by operation of law’ takes effect whether or not the parties to the new lease intend it to take effect. Moreover, even if there is no express grant of a new lease, the old lease will be surrendered by operation of law, if the arrangements made between the landlord and the tenant are such as can only be carried out so as to achieve the result which they have in mind, if a new tenancy is in fact created. If, for example, a tenant holds a lease of land for 20 years and he and his landlord wish the period of his right to hold the land to be extended by a further 20 years, their object can be achieved by the landlord granting the tenant a reversionary lease to take effect on the expiry of the existing lease, but if they wish a single term for the extended period to come into being, that result can only be achieved if the existing term is surrendered and a new term is created. It is not possible simply to convert the existing estate in the land into a different estate by adding more years to it, and even if the parties use words which indicate that this is what they wished to achieve the law will achieve the result at which they are aiming in the only way in which it can, namely by implying a fresh lease for the longer period and a surrender of the old lease. (See Re Savile Settled Estates, Savile v Savile and Baker v Merckel.)
Again, if the parties wish further adjoining land to be added to the existing holding and the rent to be increased, the transaction can, of course, be carried out by means of
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a separate lease of this fresh land at a separate rent. But if they wish there to be a single lease of all the land at an aggregate rent, the transaction may well amount in law to the granting of a new lease preceded by a surrender by operation of law of the old. However they express themselves, it may well be that they cannot convert a rent of £x issuing out of the original land into a rent of £x + £y issuing out of the aggregate land. The question which has been debated before us is whether it is possible simply to increase a rent of £x issuing out of land into a rent of £x + £y issuing out of the same land without there being in contemplation of law the grant of a new lease preceded by a surrender by operation of law of the old. Viewing the matter apart from authority, it is difficult to see why the fiction of a new lease and a surrender by operation of law should be necessary in this case; for by simply increasing the amount of the rent, and providing that the additional rent shall be annexed to the reversion one is not altering the nature of the pre-existing item of property. Further, if one looks to convenience, it would be most unfortunate if in these days, when arrangements for increase of rent are so common that the increase should be taken to involve of necessity a legal fiction which, although in most cases it may do no harm, may in some cases have serious repercussions. Unless therefore constrained by authority so to hold, we ought not to accept the defendant’s contentions.
Turning to the authorities, it is stated in Adams on Ejectmenta, a work of authority in its day, on the strength of a nisi prius decision in 1810, that a new tenancy is not necessarily created by a mere agreement between landlord and tenant for an increase of rent in the middle of a year of the tenancy. That view was adopted by the Court of Queen’s Bench in Doe d Monck v Geekie and by the Court of Appeal in Ireland in 1887 in Lord Inchiquin v Lyons. It is to be observed that in that case FitzGibbon LJ emphasised ((1887) 20 LR Ir at 484) that in his view the additional rent becoming payable by virtue of the agreement was a true rent, although no new tenancy was created.
Against these authorities we were pressed by counsel for the defendant with Donellan v Read. Buckley J in his earlier decision in Sellar v Read (of which we have seen the full transcript of the judgment), treated that case as authority for the proposition that an agreement for an increase in rent properly so called necessarily involved the creation of a new tenancy and a surrender of the old by operation of law, and in his judgment in this case he clearly still inclined to the same view of the law even after he had been referred to Lord Inchiquin v Lyons and Gable Construction Co Ltd v Inland Revenue Comrs. The facts in Donellan v Read were that the tenant held under a lease for a term of 20 years, of which some years were unexpired, at a rent of £50 a year. The landlord and tenant entered into an oral agreement that, in consideration of the landlord expending £50 in improvements, the tenant should pay an increased rent of £5 per annum during the rest of the term. The tenant having failed to pay, the landlord sued for the arrears, but was met with the defence that the agreement was an agreement for the purchase of an additional rent and required to be evidenced in writing. The court held that the agreement was not an agreement for payment of additional ‘rent’ in the true sense of the word but was an agreement collateral to the lease for payment of an annual sum which was only called ‘rent’ in an untechnical sense. The reason which the court gave for its decision was that the agreement could not have resulted in an increase in rent properly so called, unless it was treated as a grant of a new parol tenancy at will at the new rent and a surrender of the existing
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lease, a result which it was impossible to suppose the parties to have intended. But we agree with the view expressed by Goff J in Gable Construction Co Ltd v Inland Revenue Comrs ([1968] 2 All ER at 971, [1968] 1 WLR at 1432), that it would be wrong to deduce from the reasoning of the court that any agreement to increase rent properly so called must necessarily result in a surrender of the existing tenancy. In that case, as Goff J pointed out, the agreement being by parol could not operate to vary the existing lease. Therefore the only alternatives open were either a new parol lease and a surrender by operation of law, or a collateral agreement for payment of an annual sum which was not really rent. The court was not concerned to decide what the position would have been had the agreement for an increase in rent been by deed and we see no reason to treat the case as authority for the wide proposition for which counsel for the defendant used it and which brings it into conflict with the other authorities to which we have referred.
It was stressed before us that the present case is one in which in 1961 the then landlord and defendant for the first time entered into a contractual relationship as distinct from a relationship by privity of estate. But the fact that they agreed on a variation of this one aspect of their latter relationship does not in our view convert it into a relationship of contractual landlord and tenant so as to constitute a new letting. Accordingly, in our judgment, the contract of tenancy made with Mr Bush as tenant remained in existence at the time of his death and the notice to quit, given as it was within three months thereafter, came within s 24(2)(g) and was a valid and effective notice.
We would add that if we had been constrained by authority to hold that in general the law was otherwise, we would have held that it was not applicable to a case such as the present. This was a letting subject to and within the statutory framework of the Agricultural Holdings Act. When the 1948 Act came into operation the statutory situation applicable to this tenancy was that either landlord or tenant could seek arbitration for a revision of that rent either upwards or downwards. This possibility was inherent in the reddendum, quite apart from its language. Equally by the Act, the possibility was inherent in the reddendum that the landlord and tenant might in lieu of going to the expense of arbitration, or of fully fought arbitration, agree on a rent revision, which is what happened here. In those circumstances it appears to us that there is no need whatever to regard either a revision settled by an arbitrator, or a revision agreed in lieu of arbitration, as involving a new letting. Any variation would stem from something implicit in the reddendum, just as it would stem in a long lease in which there is expressly incorporated in the reddendum a provision for rent review (say) every seven years, the rent to be fixed from time to time by arbitration if not agreed.
Accordingly the appeal is allowed and, in lieu of the declaration in the judge’s order, it will be declared that the notice to quit was valid and effective to determine the tenancy in accordance with its tenor.
Appeal allowed. Leave to appeal to the House of Lords.
Solicitors: Kinch & Richardson, agents for Wheeler, John & Son, Oxted (for the plaintiff company); Forsyte, Kerman & Phillips (for the defendant).
Euan Sutherland Esq Barrister.
Rutherford v Rutherford
[1970] 3 All ER 422
Categories: FAMILY; Ancillary Finance and Property
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 14 JULY 1970
Husband and wife – Property – Matrimonial home – Land charge – Registration – Rights of occupation – Spouse not in occupation – Leave of court required before registration – Matrimonial Homes Act 1967, ss 1(1)(b), 2(6).
A spouse, who is not in occupation of the matrimonial home and who is not entitled to be in occupation by virtue of an estate or interest, must obtain the leave of the court under s 1(1)(b)a of the Matrimonial Homes Act 1967 in order to acquire a right of occupation before registering a class F land charge under s 2(6)b of the Act (see p 424 f, post).
Notes
For rights to occupy the matrimonial home, see Supplement to 19 Halsbury’s Laws (3rd Edn), para 1388A.
For the Matrimonial Homes Act 1967, ss 1, 2, see 17 Halsbury’s Statutes (3rd Edn) 139, 141.
Cases referred to in judgment
Baynham v Baynham [1969] 1 All ER 305, [1968] 1 WLR 1890, Digest Supp.
Heywood v BDC Properties Ltd [1963] 2 All ER 1063, [1963] 1 WLR 975, Digest (Cont Vol A) 1301, 926b.
Heywood v BDC Properties Ltd (No 2) [1964] 2 All ER 702, [1964] 1 WLR 971, Digest (Cont Vol B) 548, 285a.
Cases also cited
Taylor v Taylor [1968] 1 All ER 843, [1968] 1 WLR 378.
Thomas v Rose [1968] 3 All ER 765, [1968] 1 WLR 1797.
Motion
This was a motion by the wife, Josephine Mary Rutherford, for an order that the land charges register in respect of the freehold property known as ‘Roter Adler’, Thoroton in the county of Nottingham, be vacated in respect of the registration of a class F land charge made by the husband, Norman Sidney Rutherford, on or before 3 July 1970. The husband’s application of 3 July having been misdirected, registration had not in fact been made until 9 July.
Ian McCulloch for the wife.
Roger A Cooke for the husband.
14 July 1970. The following judgment was delivered.
FOSTER J. This motion concerns a house called ‘Roter Adler’ at Thoronton near Nottingham. On 10 September 1964, the husband gave the house, by way of deed of gift, to the wife. They lived together there until 27 February 1970, when the husband moved out of the matrimonial home. On 6 March 1970, the husband’s solicitors wrote to the wife’s solicitors setting out certain arrangements which were to be made between the parties. I will deal with the first two:
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‘1. [The wife] will make an admission of adultery and arrangements are being made to take a statement from her.
‘2. [The wife] will sell “Roter Adler” and out of the proceeds thereof discharge the existing Bank loan and also the outstanding debt of £1,000—.—. due to Fence Kit Company for work carried out to “Roter Adler“. We understand that you also act for Fence Kit Company.’
There are other items to which I need not refer. On 6 April, the wife’s solicitors replied to the husband’s solicitors in these terms:
‘1. [The wife] is prepared to make a Statement admitting to her adultery, and we should be obliged if you would arrange for your enquiry agent to see her at this office on a date not before the 16th April, during normal office hours.
‘2. [The wife] will discharge the existing bank loans and the debt of £1000 due to the Fence Kit Company out of the proceeds of sale of Roter Adler which is of course [the wife’s] property.’
And then on 10 April the husband’s solicitors wrote to the wife’s solicitors:
‘We refer to your letter of the 6th inst., for which we thank you, the contents of which we note and we are pleased to observe that most of the matters set out in our letter to you of 6th ult., are agreed and we are accordingly instructing Mr. R. P. Jackson to make arrangements for him to contact you to take a statement from [the wife] at your office.’
The wife arranged for the auction of the premises to take place on 16 July 1970 and she got wind that the husband was going back on the terms of that agreement, although in fact she had given the necessary instructions in regard to proving her adultery and the necessary admissions, and on 7 July I gave leave for short notice of motion and a writ was issued. On the same day the solicitors for the husband, who had got back the notice to register a class F land charge, sent it off again to the proper registry, and in fact on 9 July it was registered as a class F land charge, and that very day is the date of this notice of motion.
The first question which arises is whether the husband has any right which is registrable at all under the Matrimonial Homes Act 1967. It is said that he has a right as coming within s 1(1) of the Act, which provides:
‘Where one spouse is entitled to occupy a dwelling house by virtue of any estate or interest or contract or by virtue of any enactment giving him or her the right to remain in occupation, and the other spouse is not so entitled, then, subject to the provisions of this Act, the spouse not so entitled shall have the following rights (in this Act referred to as “rights of occupation”) … (b) if not in occupation, a right with the leave of the court so given to enter into and occupy the dwelling house.’
Before I pass from that section, it is to be noted that the person who has to bring himself within para (b) is ex hypothesi a person who is not entitled to occupy the dwelling-house and therefore the right which he is given is in my judgment a right to occupy it when he has obtained the leave of the court and not before. This is borne out by s 2(1), which provides:
‘Where, at any time during the subsistence of a marriage, one spouse is entitled to occupy a dwelling house by virtue of an estate or interest, then the other spouse’s rights of occupation shall be a charge on that estate or interest, having the like priority as if it were an equitable interest created at whichever is the latest of the following dates … ’
and then various dates are set out in the subsection. It seems to me that the husband
Page 424 of [1970] 3 All ER 422
in this case is not a person who is entitled to occupy the house until he has got the leave of the court.
This point was expressly left open by the Court of Appeal in Baynham v Baynham ([1969] 1 All ER 305 at 307, 308 [1968] 1 WLR 1890 at 1895) where Lord Denning MR said:
‘Second, the application under the Matrimonial Homes Act 1967. This is the first case to come before the court under this Act. Previously, a wife who herself left the home was not protected. The deserted wife’s equity, as it was called, only applied to a wife who was herself in occupation when the husband had deserted her. Here the wife herself left the matrimonial home. If she is to come back, she must obtain the leave of the court. Under s. 1(1)(b) of the Act a wife, if not in occupation, has “a right with the leave of the court” to enter into and occupy the dwelling-house. That is a conditional right to occupy, which is conditional on leave being obtained, and is complete when leave is given by the court. It may, perhaps, be registered as a Class F charge, even before leave is obtained. At any rate, the wife so registered it here.’
Although Lord Denning MR said that perhaps it might have been registered as a class F charge before the leave was obtained, it is quite clear from what he said there that he thought that there was no such right until two events had occurred, first, registration, and secondly, the leave of the court. Davies LJ said ([1969] 1 All ER at 308, 309, [1968] 1 WLR at 1896):
‘So far as I am concerned, nothing that the court has said and decided in this case must be taken as any authority one way or the other on the question whether a spouse not in occupation can register a land charge unless leave to enter has been given by the court. It may be that it is possible in law that he or even she can. It may be that in law such a person, whether a wife or husband, cannot. I merely guard myself by saying this in order that nobody may think that anything the court has decided in this case deals with that point one way or the other.’
Therefore, the question is open and I am not bound by that decision in coming to the conclusion that the husband, unless and until he has obtained the leave of the court, has no right to occupy and therefore is not a person who is able to register a class F land charge.
Having come to that conclusion I need not deal with an interesting question which may or may not arise in a future case, which is this: whether or not I have an inherent jurisdiction to remove a land charge or other charge which has been registered if I came to the conclusion that the registration was done in bad faith.
Finally, the question has been canvassed whether on a notice of motion of this sort I should or should not make the order but rather leave it to the trial of the action. I was referred to Heywood v BDC Properties Ltd, and Heywood v BDC Properties Ltd (No 2), and I think that this relief can be given on motion and I propose to grant it.
I therefore propose to order that the class F land charge be vacated.
Order accordingly.
Solicitors: Field, Fisher & Co, agents for Warren & Allen, Nottingham (for the wife); Ranger, Burton & Frost, agents for Acton, Simpson & Hanson, Nottingham (for the husband).
Jacqueline Metcalfe Barrister.
Crow v Wood
[1970] 3 All ER 425
Categories: LAND; Property Rights: ANIMALS: TORTS; Trespass
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, EDMUND DAVIES AND MEGAW LJJ
Hearing Date(s): 8, 9 JUNE 1970
Easement – Duty to fence – Duty to maintain fences and walls of farms adjoining a moor to keep out moorland sheep – Custom of moor to fence farms – Right to have other farms fenced enjoyed with each farm – Duty in nature of an easement, or an ‘advantage’, which passed on the sale of one of the farms by the common owner – Law of Property Act 1925, s 62.
Animal – Trespass – Cattle – Defence – Duty to fence – Farms adjoining moor – Duty in nature of an easement, or an ‘advantage’, passing on sale of one of farms by common owner – Law of Property Act 1925, s 62.
The farms adjoining a moor had been enclosed from the moor many years ago by the erection of stone walls. Until 1951 the whole of the moor and the adjoining farms were in common ownership. The common owner had let off the farms under tenancies granting to each tenant a right to stray sheep on the moor and imposing on each tenant the duty to keep his fences and walls in good repair. Further, it was the custom of the moor that each farmer adjoining the moor should fence his farm against the moorland sheep. In 1951, the common owner sold one of the farms, Stable Holme Farm, to F, the occupier, the conveyance carrying a right to stray sheep on the moor; subsequently, F agreed to let his right to stray sheep on the moor to the defendant, a neighbouring farmer. In 1956, another of the farms was sold by the common owner to the plaintiff’s husband and a further farm was sold by the common owner to the plaintiff in 1962; each of these conveyances carried the right to stray sheep on the moor. The plaintiff allowed the fences and walls of her farms to fall into disrepair so that the defendant’s sheep got into her farms from the moor. She sued the defendant for damages for cattle trespass and an injunction; his defence was that the plaintiff had a duty to keep up the fences and walls separating her farms from the moor for the benefit of the holders of grazing rights on the moor and that his sheep had entered her farms only because of breach of that duty.
Held – The right to have a fence or wall kept in repair by a neighbour was a right in the nature of an easement, or was an ‘advantage’, capable of being granted by law which could pass under s 62(1)a of the Law of Property Act 1925; in the circumstances of the present case, each farmer next to the moor had on the one hand a right to stray sheep on the moor, and on the other hand was under a duty to maintain his walls and fences to keep out the sheep of the other farmers, and those rights and advantages, being enjoyed with Stable Holme Farm when F bought it, passed to F under the 1951 conveyance, by virtue of s 62(1). Accordingly, the plaintiff being in breach of her duty to F (under whom the defendant was a licensee to graze sheep on the moor) to maintain her fences and walls, she was not entitled to complain of cattle trespass by the defendant’s sheep (see p 428 g, p 429 c to e and h, p 430 j and p 431 g to p 432 a, post).
Wright v Macadam [1949] 2 All ER 565, Phipps v Pears [1964] 2 All ER 35 and dicta of Willmer and Diplock LJJ in Jones v Price [1965] 2 All ER at 630, 634 applied.
Notes
For the nature of rights which can be created as easements, see 12 Halsbury’s Laws (3rd Edn) 533, para 1157, and for the effect of the Law of Property Act 1925, s 62, see ibid 535, 536, para 1161, and for cases on the subject, see 19 Digest (Repl) 6–8, 1–5, 22, 23, 89–94.
For the Law of Property Act 1925, s 62, see 20 Halsbury’s Statutes (2nd Edn) 559.
Page 426 of [1970] 3 All ER 425
Cases referred to in judgments
Austerberry v Oldham Corpn (1885) 29 Ch D 750, 55 LJCh 633, 53 LT 543, 49 JP 532, 40 Digest (Repl) 331, 2717.
Bolus v Hinstorke (1670) T Raym 192, 2 Keb 686, sub nom Polus v Henstock 1 Vent 97, 86 ER 67, 7 Digest (Repl) 298, 198.
Jones v Price [1965] 2 All ER 625, [1965] 2 QB 618, [1965] 3 WLR 296, Digest (Cont Vol B) 64, 126a.
Kilgour v Gaddes [1904] 1 KB 457, [1904–07] All ER Rep 679, 73 LJKB 233, 90 LT 604, 19 Digest (Repl) 59, 328.
Lawrence v Jenkins (1873) LR 8 QB 274, [1861–73] All ER Rep 847, 42 LJQB 147, 37 JP 357, sub nom Laurence v Jenkins 28 LT 406, 7 Digest (Repl) 298, 189.
Lewis v Meredith [1913] 1 Ch 571, 82 LJCh 255, 108 LT 549, 40 Digest (Repl) 302, 2507.
Phipps v Pears [1964] 2 All ER 35, [1965] 1 QB 76, [1964] 2 WLR 996, Digest (Cont Vol B) 232 1389a.
Wright v Macadam [1949] 2 All ER 565, [1949] 2 KB 744, 19 Digest (Repl) 39, 203.
Cases also cited
Goodwyn (Goodwin) v Cheveley (1859) 4 H & N 631.
Holgate v Bleazard [1917] 1 KB 443, [1916–17] All ER Rep 817.
Johns v Whitley (1770) 3 Wil 127.
Park v Jobson & Son [1945] 1 All ER 222.
Sutcliffe v Holmes [1946] 2 All ER 599, [1947] KB 147.
Ward v Kirkland [1966] 1 All ER 606, [1967] Ch D 194.
Appeal
This was an appeal by the defendant, Robin Stuart Wood, against the judgment of his Honour Judge Nevin, at Malton County Court, given on 24 September 1969, whereby judgment was entered for the plaintiff, Edna Jean Crow, for £205 on her claim for damages for cattle trespass and she was granted an injunction restraining the defendant by himself his servants or agents from causing or permitting his sheep to trespass on the plaintiff’s farms, Stone House Farm and Fangdale Beck Farm in Bilsdale, in the North Riding of Yorkshire. The defendant’s counterclaim for a declaration that the plaintiff was under a duty to maintain the walls, fences or hedges separating her farms from Bilsdale West Moor for the benefit of the defendant and the other holders of grazing rights on the moor was dismissed by the county court judge. The facts are set out in the judgment of Lord Denning MR.
J W Mills QC and H G Hall for the defendant.
J M Collins and C R Sinclair-Morris for the plaintiff.
9 June 1970. The following judgments were delivered.
LORD DENNING MR. We are here concerned with Bilsdale West Moor in the North Riding of Yorkshire. It is a big tract of land which is grazed by sheep. There are several farms adjoining it. These farms had been enclosed from the moor many years ago. Stone walls had been erected dividing the farms from the moor. Until 30 years ago the whole of the moor and the adjoining farms were owned by the Earls of Feversham. The earls had the rights of walking and depasturing sheep on the moor. They let off the farms to individual farmers and granted to each farmer a right to ‘stray’ a certain number of sheep on the moor. In each tenancy agreement the farmer agreed to keep the fences and walls in good repair.
In 1941, the trustees of the then Earl of Feversham sold the moor and the sheep rights and the farms to an insurance company. The deed set out the various farms, together with the number of sheep which each farm had the right to ‘stray’ on the moor. In 1944, the insurance company sold the whole, including the sheep rights, to a purchaser who in turn in 1947 sold the whole to another purchaser. In this latter sale the sheep rights were not expressly mentioned, but no doubt passed without mention.
Page 427 of [1970] 3 All ER 425
The whole moor and the adjoining farms remained in common ownership (with the farms let off to tenants) until on 11 July 1951 the common owner sold one of the farms called Stable Holme Farm to the farmer, Mr Featherstone. The conveyance did not in terms convey sheep rights over the moor but it is conceded that it carried a right to stray 40 sheep on the moor in respect of Stable Holme Farm (which is the number the farmer always had been entitled to stray there under his tenancy agreement). Subsequently Mr Featherstone agreed to let this sheep right to Mr Robin Wood, the defendant, a neighbouring farmer. He put 40 sheep on the moor in pursuance of it.
In February 1956, the common owner sold to Mr Crow another of the farms called Stone House Farm, together with a right to stray 50 sheep on the moor. In 1962, Mrs Crow, the plaintiff, bought another farm called Fangdale Beck, which carried a right to stray 80 sheep on the moor. But the plaintiff did not exercise those sheep rights for her two farms. She used the farms for corn and hay and cows. She had no sheep on the moor. The neighbouring farmers told her that it was her duty to keep up the fences and walls on her farms so as to keep the sheep out; and for the first ten years, from 1956 to 1966, she did so. But then in 1966 the plaintiff fought a case in the county court against another farmer, George Hull. She won it; and she assumed from it that she was not bound to fence her farms so as to keep out the sheep. This was not a correct assumption. That case turned on another point. Mr Hull had no right to stray his sheep on the moor next to her farms. But the plaintiff thenceforward contended that she was under no duty to fence her farms so as to keep out the sheep; but that it was the duty of the farmers (who let their sheep run on the moor) to keep the sheep within the moor and not allow them to get into her farms. So from 1966 she no longer kept up the walls or fences against the sheep. The result was that sheep got in. In particular, the defendant’s sheep often got into the plaintiff’s farms. She kept a note of all the occasions.
Eventually, on 15 July 1968, she sued the defendant for damages for cattle trespass and an injunction. The defendant put in a defence in which he said that the plaintiff was under a duty to keep up the fences and walls separating her farms from Bilsdale West Moor for the benefit of the holders of grazing rights on the moor; and that his sheep only entered her land because of her failure to keep them up. On 24 September 1969, the county court judge found in favour of the plaintiff. He awarded her £205 damages and an injunction restraining the defendant from causing or permitting his sheep to trespass on the plaintiff’s farms.
The judge did, however, find that there was a custom of Bilsdale West Moor by which each of the farmers adjoining the moor was bound to keep up the fences and walls of his own farm. Each farmer was bound to fence out sheep from the moor. The best statement of the custom was by Mr Dicker who was the agent for Lord Feversham 30 years ago. He said:
‘I know it was the practice for all farmers adjoining the moor to fence against the moorland sheep and so far as I am aware this custom was in existence for many, many years before my time. It is possible that the custom arose as and when land was enclosed from the moor. The cost of fencing the whole moor would be prohibitive. Most of the farms adjoining the moor had a right to graze a certain number of sheep on the moor. These farmers would only be responsible for fencing their own property adjoining the moor, which would be equitable.’
Then Mr Fawcett, the agent for Lord Ingleby, with 23 years farming practice, said: ‘Farmers having enclosed land are responsible for fencing out stock from moor.' Mr Garbutt, whose family had farmed there for three generations, said: ‘Farmers always fence to keep out moor stock.' One of the witnesses said of Stone House Farm, which was the plaintiff’s farm: ‘The previous tenants kept up the walls.
Page 428 of [1970] 3 All ER 425
Strangers coming in have different views.' No doubt the plaintiff was regarded as a stranger, although she had been there for 14 years.
The judge held that the custom was established. But this is not sufficient by itself to put an obligation on the plaintiff to fence her land. It appears from the old books that a right to have fences kept up does not arise by custom: see Bolus v Hinstorke. It can arise by prescription at common law: see Lawrence v Jenkins, but this is only of avail as between adjoining owners. It does not avail when the lands have been in common ownership, as here, until recent years: see Kilgour v Gaddes.
The custom is, however, of importance because of s 62(1) of the Law of Property Act 1925, to which I now turn. It follows s 6 of the Conveyancing Act 1881 in the selfsame words:
‘A conveyance of land shall be deemed to include and shall by virtue of this Act operate to convey, with the land, all buildings, erections, fixtures, commons, hedges, ditches, fences, ways, waters, watercourses, liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of conveyance, demised, occupied, or enjoyed with or reputed or known as part or parcel of or appurtenant to the land or any part thereof’.
Counsel for the defendant says that that section is to be applied to the conveyance of 11 July 1951, when the common owner sold Stable Holme Farm to Mr Featherstone. He says that at that time the right to stray 40 sheep on the moor, and the right to have the other farmers maintain their fences and walls, was an easement, right or advantage which was enjoyed with Stable Holme Farm and passed under the conveyance, although it was not expressly mentioned.
Section 62 has already been considered in this court, notably in Wright v Macadam and Phipps v Pears. It is clear from these cases that when land in common ownership is severed and one piece of it sold off (as in the present case) then by virtue of this section all rights and advantages enjoyed with that piece of land will pass to the purchaser provided that they are rights or advantages which are capable of being granted by law so as to run with the land and to be binding on successors. Thus a right to use a coalshed is such a right. It is in the nature of an easement and passes under s 62. But a right, given by contract, to have a road kept in repair, is not such a right. It is a positive covenant which does not run with the land and is not binding on successors: see Austerberry v Oldham Corpn.
The question is, therefore, whether a right to have a fence or wall kept in repair is a right which is capable of being granted by law. I think that it is because it is in the nature of an easement. It is not an easement strictly so called, because it involves the servient owner in the expenditure of money. It was described by Galeb as a ‘spurious easement’. But it has been treated in practice by the courts as being an easement. Professor Glanville Williams writes in his book on the Liability for Animalsc:
‘If we put aside these questions of theory and turn to the practice of the courts, there seems to be little doubt that fencing is an easement.’
In Jones v Price ([1965] 2 All ER 625 at 630, [1965] 2 QB 618 at 633), Willmer LJ said:
Page 429 of [1970] 3 All ER 425
‘It is clear that a right to require the owner of adjoining land to keep the boundary fence in repair is a right which the law will recognise as a quasi-easement.’
Diplock LJ pointed out ([1965] 2 All ER at 634, [1965] 2 QB at 639) that it is a right of such a nature that it can be acquired by prescription, which imports that it lies in grant, for prescription rests on a presumed grant.
It seems to me that it is now sufficiently established—or at any rate, if not established hitherto, we should now declare—that a right to have one’s neighbour keep up the fences is a right in the nature of an easement which is capable of being granted by law so as to run with the land and to be binding on successors. It is a right which lies in grant and is of such a nature that it can pass under s 62(1) of the Law of Property Act 1925.
Being such a right, did it pass in this case? Was it ‘enjoyed’ with Stable Holme Farm when Mr Featherstone bought it in 1951 from the common owner? I think that it was. All the tenants of the common owner had previously enjoyed this right. The custom of the moor was that each farmer enjoyed this right. It was obviously enjoyed with the land and reputed to appertain to it. The result is that, in my opinion, each farmer next to Bilsdale West Moor had, on the one hand, a right to put so many sheep on the moor to stray; and each farmer, on the other hand, was under a duty to keep up his own walls and fences so as to keep the sheep of the other owners out. Those were rights and advantages which passed in the conveyance of 11 July 1951, when the common owner sold Stable Holme Farm to Mr Featherstone. He (and the defendant under him) became entitled to keep 40 sheep on the moor and had the right to require the other farmers to keep up their fences.
I must mention, however, one suggestion made by counsel for the defendant. He suggested that, whilst Mr Featherstone acquired this right in 1951 against a common owner, and against the defendant who claimed from him, nevertheless the plaintiff had no such right against Mr Featherstone. He suggested that, inasmuch as in 1951 the common owner had not reserved any such right against Mr Featherstone, there was no longer any right which could be enforced against him; and that, as the plaintiff bought in 1956 from the common owner, she was in no better position than he. It is not necessary to rule on this point, but I must say that I should deplore any such result. I see that Professor Glanville Williams statesdLiability for Animals (1939) p 208: ‘… there may be a valid obligation to repair ancillary to an easement.' Applying this, I would say that in every conveyance it is implied that every farmer who has a right to put sheep on the moor and to have his neighbour repair fences, is under an obligation, ancillary to it, to keep up his own fences. This right and obligation extends to all the farmers who buy their farms from the common owner, no matter in what order they buy them. In this case therefore I hold that the plaintiff was under an obligation to fence her farms so as to keep out the defendant’s sheep. The result is that, if the defendant’s sheep get over the wall into her farm or knock the wall down, she cannot complain of cattle trespass; because she ought to have kept them out. Such is the custom of the moor. She abided by the custom for ten years. It is a pity she ever departed from it.
I would allow the appeal and enter judgment for the defendant.
EDMUND DAVIES LJ. It is beyond doubt that the tenancies granted by the trustees of the Earl of Feversham in respect of the farms abutting on Bilsdale West Moor on the one hand conferred on the tenants the right to pasture the specified number of sheep on the moor, and, on the other hand, imposed on each tenant the duty—
Page 430 of [1970] 3 All ER 425
‘To put maintain and keep all dead fences gates gateposts stiles and walls … in good and sufficient repair … ’
It was on these terms that Stable Holme Farm and Stone House Farm were at all material times let.
When, on 18 August 1941, the trustee severed the common ownership by selling off part of the Feversham estate, the rights of pasturing over the lands retained by the vendors remained—
‘… for the Purchasers and their successors in title the respective owners and occupiers for the time being of the several farms and lands specified … in common with all persons having a like right … restricted to the number of sheep specified … ’
The further severance, achieved on 18 August 1944, conveyed property to J W Tunnicliffe and Hird & Gibson Ltd, together with the right for them and—
‘… their respective successors in title and assigns the respective owners and occupiers for the time being of the several farms and lands hereby transferred in common with all persons having a like right at all times hereafter to use and enjoy in respect of and as annexed to each of such farms and lands respectively sheep rights … ’
as enumerated in the conveyance of 18 August 1941.
Mr J H Gill having acquired the title in October 1947, it is of importance to note that, as far as the parties to this litigation are concerned, the first disposition thereafter was of Stable Holme Farm in 1951 to the Featherstones, who were then apparently its occupiers. It is common ground that with this conveyance went the right to graze 40 sheep on Bilsdale West Moor and that the Featherstones effectively authorised the defendant to exercise that right by a licence granted to him on 1 September 1962. It was not until 8 March 1956, that the plaintiff acquired Stone House Farm from Mr Gill, the conveyance expressly passing to her the right to graze 50 sheep provided for under the conveyance of 18 August 1941. There is no doubt that at that time the farm was bounded by dry-stone walls and these were thereafter maintained (whether adequately or not is immaterial for present purposes) by the plaintiff. She claims that she continued to maintain them until 1966 in the belief that she was obliged to do this to keep out straying sheep; but the relevance or otherwise of this claim remains to be considered. In the circumstances that I have outlined, was the plaintiff in fact and in law obliged to keep out straying sheep? The learned county court judge held that she was not and although her walls seemed to have been allowed to become very defective in places, the defendant was in consequence obliged to compensate her for the damage done by his straying sheep.
That a duty to fence against trespassers can be created by express or implied grant seems clear. Whether, when such a duty exists, it is to be regarded as an easement (‘spurious’ or otherwise) or a quasi-easement has been much canvassed before us, but I am not satisfied that a final decision as to the exact legal nature of such a duty is presently called for.
I say that for this reason: s 62(1) of the Law of Property Act 1925, is so expansive in its terms that, in my judgment, when on 11 July 1951, the Featherstones acquired Stable Holme Farm, there also passed to them by virtue of that statutory provision as an ‘advantage’ appertaining thereto, the obligation imposed on the occupier of Stone House Farm and Fangdale Beck Farm to maintain their boundary walls. This aspect of the case was summarily dismissed by the learned county court judge, but in my judgment it constituted the kernel. Professor Glanville Williams hinted that a duty to fence might fall within the ‘general words’ of s 62(1) in his Liability
Page 431 of [1970] 3 All ER 425
for Animals e. Writing in 1939, he rightly said that ‘upon this question there is no authority’, but since then there have been decided the cases already referred to by Lord Denning MR.
The county court judge appears to have been strongly affected by the evidence, which satisfied him that (as he expressed it)—
‘… the plaintiff has repaired her boundary walls voluntarily, not as a matter of obligation or agreement, or as a result of requests’
and by his finding that ‘The plaintiff has for years protested against the incursion of sheep’. It may here be recalled that the plaintiff herself said that for ten years she maintained the walls because she believed that she was under a duty to do so. But the answer to all this seems to be that, whatever be the legal basis of a duty to fence, the balance of authorities for centuries favours the view that the obligation, when it exists, arises from proof that the land is accustomed to be fenced and that it is immaterial that a party has voluntarily fenced his premises simply for, it may be, his own protection—see the cases reviewed in Glanville Williamsf.
Since that learned work appeared in 1939, there have been at least two decisions of importance relating to the ambit of s 62. The first of these, Wright v Macadam, clearly laid down that, like its predecessor, s 6 of the Conveyancing Act 1881, s 62 was not confined simply to rights which, as a matter of law, were so annexed or appurtenant to the property conveyed as to make them actually legally enforceable rights. As was said by Neville J in the earlier case of Lewis v Meredith ([1913] 1 Ch 571 at 579)—
‘… “a right” permissive at the date of the grant may become a legal right upon the grant by force of the general words in s. 6 of the Conveyancing Act, 1881. From this point of view the circumstances under which the quasi right was enjoyed become immaterial so long as it was actually enjoyed and was of a nature which could be granted, that is to say, a right known to the law … ’
In Wright v Macadam ([1949] 2 All ER at 570, [1949] 2 KB at 750) Jenkins LJ said:
‘There is, therefore, ample authority for the proposition that a right in fact enjoyed with property will pass on a conveyance of the property by virtue of the grant to be read into it under s. 62 of the Act of 1925, even although down to the date of the conveyance the right was exercised by permission only, and, therefore, was in that sense precarious.’
In the circumstances of the present case it seems to me that a right to compel another to maintain fences is in the nature of an easement capable of arising from grant or implied grant and can pass under s 62. Furthermore, those same circumstances (which Lord Denning MR has already described in detail) in my judgment give rise to a ‘right or advantage appurtenant to each farmer to call upon others to maintain their fences’, and one which passed on the conveyance of Stable Holme Farm in 1951 to the Featherstones. It therefore follows that the plaintiff, being in breach of her duty to fence, had no entitlement to complain that the defendant’s sheep had strayed on her land, he being duly licensed to pasture them on the moor by the purchasers of Stable Holme Farm.
I would therefore concur in allowing this appeal.
Page 432 of [1970] 3 All ER 425
MEGAW LJ. I agree.
Appeal allowed. Leave to appeal to the House of Lords was refused by the Court of Appeal and on 23 July 1970 by the Appeal Committee of the House of Lords.
Solicitors: Church, Adams, Tatham & Co, agents for Crombie, Wilkinson & Robinson, York (for the defendant); Appleby, Hope & Matthews, Normanby (for the plaintiff).
Wendy Shockett Barrister.
R v Laverty
[1970] 3 All ER 432
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, KARMINSKI LJ AND JOHN STEPHENSON J
Hearing Date(s): 31 JULY 1970
Criminal law – Obtaining property by deception – Deception – False representation – Representation acting on mind of purchaser – Proof.
The onus of proving, on a charge of obtaining property by deception, that the false representation acted on the mind of the purchaser falls on the prosecution and in the ordinary way the matter should be proved by direct evidence (see p 433 h, post).
R v Sullivan (1945) 30 Cr App Rep 132 explained.
Note
For obtaining property by deception, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1586A.
Case referred to in judgment
R v Sullivan (1945) 30 Cr App Rep 132, 15 Digest (Repl) 1169, 11,808.
Appeal
This was an appeal by Charles Laverty from his conviction on 27 November 1969 at Aylesbury Quarter Sessions before the deputy chairman (L J Verney Esq) and a jury of obtaining £65 in cash and a valuable security, namely a cheque for £165, by deception. He was sentenced to six months’ imprisonment suspended for two years. The facts are set out in the judgment of Lord Parker CJ.
R F Woodhouse for the appellant.
J P Wadsworth for the Crown.
31 July 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On 27 November 1969 at Aylesbury Quarter Sessions the appellant was convicted of obtaining property by deception, the property being £65 in cash and a cheque for £165, and was sentenced to six months’ imprisonment suspended for two years. He now appeals against his conviction on a certificate granted by the deputy chairman.
The facts are in a very short compass. The car bearing number plates DUV IIIC, a Hillman Imp, was bought by a Mr Bedborough from the appellant, and a cheque was given as part of the price. In fact that car bearing those number plates was a car originally bearing number plates JPA 945C which had been stolen. According to the appellant when he got the car, and there was no question of his having stolen it, it was in a bad condition, he repaired it and he put on to it the chassis and rear number plates of DUV IIIC, those plates having been obtained from another source relating of course to another car.
The charge made in the indictment in count 3 took the form of alleging a false
Page 433 of [1970] 3 All ER 432
representation which here was by conduct. It was not a false representation that the appellant was the owner and had a good title to sell but the false representation was by purporting that a Hillman Imp motor car which the appellant sold to Roy Clinton Bedborough was the original Hillman Imp motor car, index number DUV 111C.
Although it was contested at the trial, it was conceded in this court that there was a representation by conduct that the car being sold to Mr Bedborough was the original Hillman Imp to which the chassis plate and rear plate which it bore had been assigned. It is conceded that such a representation was made by conduct; it is clear that that was false, and false to the knowledge of the appellant. The sole question was whether this false representation operated on Mr Bedborough’s mind so as to cause him to hand over this cheque.
As sometimes happens, in this case Mr Bedborough did not give the answers which were helpful to the prosecution, and no leading questions could be put. The nearest answer was ‘I bought this because I thought the appellant was the owner’. In other words Mr Bedborough was saying: ‘What induced me to part with my money was the representation by conduct that the appellant had a title to sell.' It was in those circumstances that at the end of the prosecution’s case a submission was made that there was no case to answer. The deputy chairman did not accede to that submission. The trial proceeded, and when he came to sum up to the jury, the deputy chairman said:
‘There is no evidence at all that anything was said by [the appellant] to that effect, but the prosecution is entitled to say that that representation can be made by conduct, and it is a matter for you whether you feel, in the circumstances of this case, a representation was made by conduct that the motor car in question was the original Hillman Imp, bearing in mind that there had been put upon it number plates with the registration number DUV 111C, one of which indeed had come off the original car, and that in due course a log book was produced; but it does not appear in the evidence that the log book was seen or relied on by Mr. Bedborough at the time when he handed over the cash and the cheque.
‘What is meant by “the original Hillman Imp” in this case? You may think that that means the car which was originally so registered, and it is a matter for you whether or not it is a necessary inference that a car offered for sale with the registration number upon it is the car for which that number was originally issued; if you think the answer to that is “yes” then you will have to consider: Is that an inference which must have been in the mind of the purchaser; is it something that must have operated on the mind of Mr. Bedborough and played its part in inducing him to hand over the cash and the cheque?’
The jury apparently were satisfied that that was the true inference and convicted the appellant.
The point really is whether there was any evidence here which enabled the jury to draw that inference. It is axiomatic that it is for the prosecution to prove that the false representation acted on the mind of the purchaser; and in the ordinary way, and the court emphasises this, the matter should be proved by direct evidence. However, it was said in R v Sullivan that the inducement need not be proved by direct evidence, and I quote from the headnote:
‘If the facts are such that the alleged false presence is the only reason that could be suggested as having been the operative inducement.’
And in the special facts of that case it was held that the prosecution had given sufficient proof, although it was made very clear that the proper way and the ordinary way of proving the matter was by direct evidence.
Counsel for the Crown submits, that when the court in R v Sullivan referred to the only reason that could be suggested, it was not emphasising that it was the only reason
Page 434 of [1970] 3 All ER 432
but that it was the only inference that could be drawn. He is saying here that the only inference in this case is that the false representation did operate on Mr Bedborough’s mind and the jury were fully entitled to come to the conclusion which they did.
This court is very anxious not to extend the principle in R v Sullivan more than is necessary. The proper way of proving these matters is through the mouth of the person to whom the false representation is conveyed, and further it seems to the court in the present case that no jury could say that the only inference here was that Mr Bedborough parted with his money by reason of this false representation. Mr Bedborough may well have been of the mind as he stated he was, namely that what operated on his mind was the belief that the appellant was the owner. Provided the appellant was the owner it may well be that Mr Bedborough did not mind that the car did not bear its original number plates. At any rate as it seems to the court it cannot be said that the only possible inference here is that it actuated on Mr Bedborough’s mind.
In those circumstances, although with some reluctance, this court feels that the proper course here is to allow the appeal and quash the conviction.
Appeal allowed. Conviction quashed.
Solicitors: Registrar of Criminal Appeals (for the appellant); Solicitor, Thames Valley Police Authority (for the Crown).
Euan Sutherland Esq Barrister.
R v Minister of Transport, ex parte Males
[1970] 3 All ER 434
Categories: TRANSPORT; Road
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 13 JULY 1970
Road traffic – Vehicle test – Authorised examiner – Withdrawal of authorisation – Discretion of Minister of Transport – Motor Vehicles (Tests) Regulations 1968 (SI 1968 No 1714), reg 26(3), Sch 3, para 2.
The applicant was an examiner authorised by the Ministry of Transport to conduct tests on vehicles. An official from the Ministry took a car to be tested at the applicant’s garage. Since the inspection pit and hoist at the garage were in use, the car was raised on a hydraulic jack for the undervehicle inspection. Following a complaint by the official, the applicant’s authorisation was withdrawn by the Minister on the ground that the test was not conducted properly in that a hoist or pit was not used and that there was no assistant present. Both the use of a pit or hoist and the presence of an assistant were described as the correct procedure for tests on the brakes and steering of a vehicle in the Tester’s Manual, a document issued in 1966 by the Minister for the guidance of those conducting tests. The Motor Vehicles (Tests) Regulations 1968 provided in Sch 3, Part I, para 2, that ‘the vehicle shall be placed over an inspection pit or elevated on a hoist or ramp or otherwise raised or suspended’. There was no provision in the regulations for the presence of an assistant. On the question whether the Minister had exceeded his powers under reg 26 para 3a of the regulations in revoking the applicant’s authorisation,
Held – (i) Under reg 26(3) the Minister had a complete discretion in the exercise of his power of revocation; he might revoke an authorisation for any reason relevant to his bona fide judgment in the matter (see p 437 g and p 438 h, post).
Page 435 of [1970] 3 All ER 434
(ii) Schedule 3, para 2, to the regulations meant no more than that for the efficient examination of a part, accessory or the equipment of a vehicle the method of raising or suspending should be used which was sufficient in each case (see p 438 b and j, post).
(iii) The provisions of Sch 3, para 2, being no more than general guidelines for the conduct of tests, it was in no way inconsistent with the regulations that the Minister had set a standard in regard to tests of brakes and steering which required the use of an inspection pit (see p 438 b and h, post).
Notes
For vehicle tests regulations, see 33 Halsbury’s Laws (3rd Edn) 470, para 796, and for termination of authorisation of examiner, see ibid 472, para 797.
Motion for certiorari
This was an application by way of motion by Jack Males for an order of certiorari to quash the decision of the Minister of Transport dated 12 August 1969, which was confirmed on appeal on 26 February 1970, that the authorisation issued to the applicant on 5 May 1969 under the Road Traffic Act 1960 and the Motor Vehicles (Tests) Regulations 1968b be withdrawn. The facts are set out in the judgment of Lord Parker CJ.
Gavin Lightman for the applicant.
Gordon Slynn for the Minister.
13 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of one Jack Males for an order of certiorari to quash a decision of the Minister of Transport and the confirmation of that decision, again by the Minister of Transport, on appeal, whereby his authorisation to act as an authorised examiner for the purpose of testing vehicles was withdrawn.
It appears that on 9 July 1969, an official of the Ministry made a visit to the garage run by the applicant who in fact had an authority from the Minister dated 5 May 1969 to test vehicles. The official arrived incognito, really to see what happened. The vehicle was duly tested by a tester employed by the applicant, a Mr Sumner, and immediately afterwards the official complained, first to Mr Sumner, then to the applicant’s brother. As a result, on 12 August 1969, a letter was written by a man calling himself the area mechanical engineer, clearly written on behalf of the Minister of Transport, referring to the fact that there had been this test, and stating:
‘The purpose of the test was to establish that authorised examiners conducted the tests in accordance with the regulations prescribed in the Motor Vehicles (Tests) Regulations, 1968c … The observations made at the time the test was conducted at your premises leave no room for doubt that the test was not conducted correctly. In that (a) a hoist or pit was not used for under the vehicle examination. (b) An assistant was not used when conducting the test.’
As a result of that, and it is unnecessary to read all the correspondence, the applicant objected that under the regulations in question it was not necessary only to use a hoist or pit, and that he in fact used a hydraulic jack; he further said that there was nothing in the regulations that required an assistant to be employed, but indeed an apprentice, a Mr Rawlinson, had been employed to move the brake pedals and lever and the steering wheel when the vehicle was being tested. As a result there was, as is provided for, a review by the Minister, who, on 26 February 1970, issued his decision. I must read certain paragraphs:
‘3. The Minister notes that [the applicant] admits that the undervehicle
Page 436 of [1970] 3 All ER 434
inspection was made without the use of pit or hoist and he also notes your contention that the regulations make no specific requirement for either of these facilities to be used. The Minister would point out that [the applicant’s] approved means of undervehicle inspection was pit or hoist and he considers that it is a requirement that the approved means of such inspection should always be used for testing. He does not, therefore, accept that a proper inspection was carried out by means of a trolley jack at the front of the vehicle concerned.
‘4. Nor can the Minister accept that the aid of an assistant to operate the steering wheel, hand and footbrake controls is not a requirement. The Minister considers that paragraph 28(3) of the Tester’s Manual requires foot and handbrake levers to be so operated during the undervehicle inspection of a vehicle’s braking system; in addition paragraph 29(2) of the Manual requires an assistant to work the steering wheel to and fro so that parts of the steering gear may be examined under load. In this respect the Tester’s Manual gives precise instructions on how and when assistance is required by a tester during a test, and authorised examiners are expected to ensure that such assistance is always readily available when required.
‘5. The Minister is satisfied that the test in this case was not conducted in accordance with the instructions laid down in the Tester’s Manual. He would point out that it was in the light of continuing complaints about the way in which testing was being carried out that the then Minister announced in Parliament in December 1967 that these checks of standards employed by testing stations would be made. This was in consultation with and with the co-operation of the Associations representing the garage trade. It was made quite clear that any shortcomings would, of necessity, be severely dealt with.’
Counsel for the applicant, as I understand it, takes as his first point here that the Minister’s only power to revoke the authorisation is where there has been a failure to perform obligatory requirements, namely something made obligatory by the regulations in question, the Motor Vehicles (Tests) Regulations 1968. He points out that, when one reads those regulations, there is nothing in them which states that only a pit or hoist is to be used. In particular he refers to Sch 3, Part I, which in para 2 provides:
‘In carrying out an examination of a motor vehicle in accordance with the following provisions of this Schedule, every part of the vehicle and its equipment and accessories to be examined shall be examined under a sufficient light and, where it is necessary to do so to enable any such part, equipment or accessory to be efficiently examined, the vehicle shall be placed over an inspection pit or elevated on a hoist or ramp or otherwise raised or suspended.’
Accordingly, says counsel, it was open to the applicant, as in fact his own pit and hoist were in use, to use as he did a hydraulic jack to raise or suspend the vehicle.
So far as the other ground of complaint, the non-availability or non-use of an assistant is concerned, he pointed out that there is nothing in Sch 3 to the regulations which provides for an assistant being employed. It is true that when one refers to the document, the Tester’s Manual, there is provision in para 28(3) in regard to brakes, that:
‘For the purpose of carrying out this examination the vehicle should be placed over an inspection pit or raised on a hoist, and adequate lighting, preferably in the form of a good inspection lamp, should be used where necessary. During the inspection the foot pedal and handbrake lever should be operated by an assistant as necessary.’
In regard to the steering, para 29(2) provides:
‘When the vehicle is over a pit or elevated on a hoist the tester should examine
Page 437 of [1970] 3 All ER 434
all parts of the steering gear that can be seen or felt, and an assistant should work the steering wheel to and fro so that the parts may be examined under load … ’
It is quite clear that the Tester’s Manual, which was produced in 1966, has no legal or binding effect; it does not purport to and could not vary the regulations, and the Road Traffic Act 1960. So, says counsel for the applicant, the provisions in the manual are not obligatory, they are not statutory, and accordingly if there was any breach of the provisions in the Tester’s Manual they do not justify the Minister in revoking the authorisation.
It is necessary in order to deal with this submission to look at the power of the Minister. It is to be found in reg 26, dealing with duration and withdrawals of authorisation, of the Motor Vehicles (Tests) Regulations 1968. In para (1) it deals with what one might call the automatic withdrawal or cessation of authorisation through backruptcy, dissolution of partnership, or winding-up in the case of a company. Paragraph (2) goes on to provide:
‘An authorised examiner [i e somebody in the position of the applicant] may at any time give notice to the Minister stating that after such date as may be specified in the notice that examiner does not propose to continue to act as an authorised examiner … ’
Paragraph (3), the important one, begins in much the same form, with the Minister giving notice. It provides:
‘The Minister may at any time give notice to an authorised examiner withdrawing either all the authorisations or that examiner, or such of them as may be specified in the notice … ’
Finally, in para (4) a provision is made for review. It provides:
‘If within fourteen days from the date of the giving of any such notice as is mentioned in the last foregoing paragraph the Minister receives from the authorised examiner to whom that notice is given, or from any person acting on behalf of that examiner, representations to the effect that any authorisation to which that notice relates should not have been or should not be withdrawn the Minister shall take such representations into consideration and make such investigations with respect thereto as he may think fit.’
It seems to me clear that the power of the Minister to revoke under reg 26(3) is not confined to the case where he finds that there has been a breach of any statutory obligation. Paragraph (3) gives the Minister a complete discretion; he may do it as a result of complaints that the authorised examiner gets drunk, is not civil, has not exercised the highest efficiency; indeed any matter relevant to his bona fide judgment in the matter.
In the present case it is quite clear what has happened. The regulations themselves dealing with authorised examiners in Sch 3 set out the general lines on which the tests are to be conducted. Quite clearly they cannot go into minute detail, nor can they be amended almost every day in the light of experience. What has happened is that the Minister has issued a tester’s manual setting out what he regards as the efficient and proper working of these tests, and has done so with the full co-operation and agreement of the trade. Accordingly, it seems to me that there can be no suggestion here that what the Minister did was beyond his power. Subject to this, counsel for the applicant says that even if that view of the matter is right, the exercise of his discretion must be limited to acting in a manner which is not inconsistent with the law, in other words, an exercise of discretion under a misunderstanding of the Act or the regulations would be a bad exercise of discretion. What he says is that whereas the Minister has purported to say that this should be done by pit or hoist, the
Page 438 of [1970] 3 All ER 434
regulations themselves in para 2 of Sch 3 which I have already read, say that it need not be done by pit or hoist, but can be done by ‘otherwise’ raising or suspending the vehicle. There would be much to be said for that argument if that were the true construction of the paragraph in question, but it seems to me perfectly clear that that paragraph is really stating this, and I paraphrase, that where it is necessary to examine the vehicle, its equipment and accessories, in order to enable that to be done efficiently the vehicle must be raised over an inspection pit or lifted with a hoist or ramp, or otherwise raised or suspended as the facts of each case require. Read in that way, there is nothing wrong in the Minister setting a standard in regard to brakes and steering which requires the use of a pit or hoist, and it is in no way inconsistent with the requirements of the Act.
Counsel for the applicant has three further points, in my view minor points. He says that if one takes the final letter of the Minister, that of 26 February 1970, there is a reference there to ‘[the applicant’s] approved means of undervehicle inspection’. He points out that the authorisation does not limit the inspection to an inspection by pit or hoist. The truth of the matter is that these so-called approved means were the means which the applicant stated that he was going to use or had available for use, namely pit or hoist, when he made his application to be authorised, and unless he had put in ‘pit or hoist’ no doubt he would not have got an authorisation. In that sense it could be said that they were his means of undervehicle inspection, and were indeed the means approved by the Minister.
Next counsel says that the Minister in this case, if he was not acting judicially, was at any rate bound to act fairly, and that in giving his final decision in February 1970, he took into consideration a matter which the applicant had not had a chance of dealing with. He refers in particular to the fact that in the final letter the Minister states that he does not accept that a proper inspection was carried out by means of a trolley jack at the back of the vehicle concerned. The appellant’s case is that the jack was used not merely in the front but also at the back, and that he never had an opportunity of dealing with that point. For my part I think that it is a very minor point, and that it could not possibly have affected the decision of the Minister in this case.
Finally it is said, as I understand it, that the regulations in question, which were the 1968 regulations and the Schedule therein set out, in any event superseded in some way the Tester’s Manual which was at any rate first introduced in 1966, and also a letter which the Minister circulated to the trade in December 1967, referring to the importance of this testing and the tightening up of provisions in regard thereto. For my part I cannot see how it could be said that the 1968 regulations which were dealing quite generally with the sort of examinations that were required could supersede what the Minister clearly intended to be the approved detailed methods of examination. Accordingly, it seems to me that the Minister was fully justified in coming to the decision which he did, and I would refuse the application.
COOKE J. I entirely agree.
FISHER J. I agree entirely with what Lord Parker CJ has said, but I might venture to give my own paraphrase of the latter part of para 2 of Sch 3 to the Motor Vehicles (Tests) Regulations 1968d. I should say that it means that such one of the alternatives shall be used as will be sufficient to enable the part, equipment or accessory to be efficiently examined.
Motion dismissed.
Solicitors: Pritchard, Englefield, Leader, Henderson, agents for Jackson, Barrett & Gass, Wilmslow (for the applicant); Treasury Solicitor.
N P Metcalfe Esq Barrister.
R v Wilkinson
[1970] 3 All ER 439
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND FENTON ATKINSON LJJ AND O’CONNOR J
Hearing Date(s): 20 JULY 1970
Criminal law – Sentence – Suspended sentence – Two or more suspended sentences – Sentences on same occasion – Decision whether sentences should run concurrently or consecutively to be made at time sentences imposed – Criminal Justice Act 1967, s 104(2).
At the time when two suspended sentences are imposed on the same occasion, it is imperative (eg for the purpose of s 104(2)a of the Criminal Justice Act 1967) that it should be stated whether the two sentences as between themselves are to be concurrent or consecutive (see p 440 h, post).
R v Blakeway [1969] 2 All ER 1133 distinguished.
Notes
For suspended sentences and subsequent conviction, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 922A 1, 2.
For the Criminal Justice Act 1967, s 104, see 8 Halsbury’s Statutes (3rd Edn) 637.
Cases referred to in judgment
R v Blackeway [1969] 2 All ER 1133, [1969] 1 WLR 1233, 133 JP 575, 53 Cr App Rep 498, Digest Supp.
R v Coleman [1969] 2 All ER 1074, [1969] 2 QB 468, [1969] 3 WLR 89, 133 JP 550, 53 Cr App Rep 455, Digest Supp.
R v Gall [1970] Crim LR 297.
Cases and authority also cited
Practice Direction [1962] 1 All ER 417, [1962] 1 WLR 191.
R v Towner [1970] Crim LR 358.
Archbold’s Criminal Pleading, Evidence and Practice (37th Edn) para 741.
Appeal
This was an appeal, with leave of the single judge, by George Wilkinson against a sentence of 27 months’ imprisonment passed on him on 18 December 1969 at Inner London Quarter Sessions by the chairman (his Honour Judge Hines). The facts are set out in the judgment of the court.
J E Bullen for the appellant.
W N Denison for the Crown.
20 July 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. The appellant pleaded guilty on 6 November 1969 at the Inner London Quarter Sessions to one offence of officebreaking with intent and one of burglary. He was sentenced to nine months’ imprisonment on the first count and 15 months’ imprisonment on the second count. The learned chairman ordered that both sentences should be suspended for two years, but he did not direct whether the two sentences were to be treated as concurrent or consecutive between themselves. It is quite clear that he took
Page 440 of [1970] 3 All ER 439
the view that it was not appropriate for him as the judge imposing the sentences to make a determination in that regard, thinking and expressing his thoughts to the effect that that would be a matter for the court implementing the sentence if such a question ever arose. It did arise because within a very short time this man was in trouble again.
On 6 December 1969, the appellant pleaded guilty at Bow Street to a variety of offences and was remanded in custody. On 18 December, he was sentenced to three months’ imprisonment in respect of the then instant offence (loitering with intent), and the learned chairman ordered that the two suspended sentences which he himself had imposed in November 1969 should take effect consecutively to each other and to the sentences then being imposed. In the result the court’s order was one for a total period of imprisonment of 27 months, being 24 months in respect of the two suspended sentences and three months in respect of the one imposed for the later offence.
The appellant appeals by leave of the single judge on the ground that the learned chairman misdirected himself in the application of ss 39 and 40 of the Criminal Justice Act 1967 in regard to suspended sentences. We think it quite clear that the chairman when originally deciding that he would not declare the sentences to be consecutive or concurrent was basing himself on R v Blackway. If one may say so without offence, the rather misleading headnote reads ((1969) 53 Cr App Rep at 498):
‘The time for deciding whether a suspended sentence should be concurrent or consecutive is the time when the matter comes before the court under section 40(1) of the Criminal Justice Act 1967 to be dealt with by way of implementation, not the time when the suspended sentence is passed. A suspended sentence cannot be made consecutive to another suspended sentence which is not at the time being put into force.’
If one looks at the facts of R v Blakeway, however, it is quite clear that there the two sentences which were suspended were imposed on different occasions. One had been imposed and suspended by a magistrates’ court on 11 April 1968. The second was imposed by the Warley Quarter Sessions in August 1968, and it is no doubt perfectly right that where two sentences imposed on different occasions are being separately and individually suspended, it is not the function of the court imposing the second sentence to say whether it should be consecutive or concurrent with the first. That is a matter, as the learned judge observed in this case, for the court which implements those sentences if implementation is subsequently required. But, as was pointed out by Lord Parker CJ giving the judgment of the court in the later case of R v Gall heard on 17 February 1970, an entirely different situation arises where a judge is imposing two suspended sentences on the same occasion. There it is imperative, in our judgment, that he should say whether those two sentences as between themselves are to be concurrent or consecutive, and amongst the many reasons which have been put forward which would make that desirable, the conclusive reason in our view is that in such a case by s 104(2) of the Criminal Justice Act 1967 sentences so imposed are to be treated for the purposes of that Act as a single sentence. And indeed the whole question of whether suspension is permissible or mandatory will depend on the length of the single sentence thus produced, a matter which was referred to in this court recently in R v Coleman.
It follows, in our judgment, therefore, that when the learned chairman in the present appeal imposed the two suspended sentences in November 1969 it was his duty, since he imposed them both on the same occasion, to say whether between
Page 441 of [1970] 3 All ER 439
themselves they should be concurrent or consecutive. Since he failed to do so, we think that the only fair course in this case is to assume that the they were made concurrent, and that means that when in December 1969, the question of implementing these sentences arose, the potential suspended sentence which was capable of being implemented was not 24 months but 15 months, in other words, the total of the original sentences running concurrently rather than consecutively. In the event, therefore, the total sentence imposed in December 1969 was excessive on that account and the order should have been a sentence of three months’ imprisonment for the loitering with intent and the existing suspended sentence of 15 months made to take effect consecutively to that. Mathematically the result will be a total of 18 months’ imprisonment instead of 27, and the court will allow the appeal and substitute those sentences accordingly.
Appeal allowed. Sentence varied.
Solicitors: Registrar of Criminal Appeals (for the appellant); Solicitor, Metropolitan Police.
N P Metcalfe Esq Barrister.
Practice Direction
(Decimilisation: Practice: Costs: Taxation)
[1970] 3 All ER 441
PRACTICE DIRECTIONS
SUPREME COURT TAXING OFFICE
31 July 1970.
Decimalisation – Practice – Costs – Taxation – Decimal Currency Act 1969, Sch 1.
1. In order to assist solicitors in the change-over to decimal currency on 15 February 1971, bills of costs lodged in the Supreme Court Taxing Office between 11 January 1971 and 14 May 1971 inclusive may be prepared in either £ s d or decimal currency. However, when £ s d is used, the total(s) in the summary of the bill must show the decimal equivalent(s). After 14 May 1971, only bills prepared in decimal currency will be accepted.
2. In converting items of costs from £ s d to decimal currency, the Whole Penny Table, as laid down in Sch 1 to the Decimal Currency Act 1969,a, should be used.
3. As from 1 October 1970, all allocaturs and certificates of taxation will show decimal equivalents in brackets until 15 February 1971 when all figures will be shown in decimal currency only.
4. The Whole Penny Table and examples of bill summaries will be displayed in all chambers as from 1 October 1970.
These directions are made with the approval of the Lord Chancellor.
Paul Adams, Chief Master
Baker v F Rendell & Sons Ltd
[1970] 3 All ER 442
Categories: CONSTRUCTION
Court: BRISTOL SUMMER ASSIZES
Lord(s): LLOYD-JONES J
Hearing Date(s): 21, 22 APRIL 1970
Building – Construction regulations – Eyes – Protection – Process requiring protection – Nailing wooden batten to concrete – Process of compression and not of breaking or cutting concrete – Batten in fact providing protection – Process literally divisible by batten – Fragment of metal hammer lodging in plaintiff’s eye – Construction (General Provisions) Regulations 1961 (SI 1961 No 1580), reg 52, Schedule, para (2).
The plaintiff was employed as an apprentice bricklayer by the defendants. On 30 March 1966, he was engaged in nailing a wooden batten to some concrete in order to affix a tile sill on an external window (a familiar and frequent piece of work carried out on building sites) when a piece of metal fragmented from his hammer and lodged in one eye. At the time of the accident the plaintiff had not been supplied with protective goggles by the defendants. On the question of the defendants’ liability for breach of statutory duty,
Held – The nailing of the batten to the concrete by the plaintiff was not a process within the meaning of the Construction (General Provisions) Regulations 1961, reg 52 and Schedule (under which the defendants were required to provide suitable goggles or effective screens to their employees who were engaged in the processes of ‘Breaking, cutting, dressing or carrying of … concrete’), because—
(a) although the plaintiff could not get the nail into the concrete without making some incision, the hammering of the nail was a process of compression and not a process of breaking or cutting the concrete (see p 446 g, post); Fallaize v Troughton & Young Ltd [1956] 3 All ER 127 distinguished;
(b) alternatively, on the true construction of the Schedule, only those processes where there was that sort of direct contact and direct danger which would prevail in the absence of goggles or a screen were within the meaning of the Schedule; accordingly, since the batten did in fact provide an effective screen, albeit it was not put there as such, the process was literally divisible by that screen and the plaintiff was not entitled to recover for injury sustained through the fragment of his hammer lodging in his eye (see p 447 h to p 448 a, post); Littler v G L Moore (Contractors) Ltd [1967] 3 All ER 801 distinguished.
Notes
For safety regulations relating to work in building operations, see 17 Halsbury’s Laws (3rd Edn) 127, 128, para 206.
For actions for breach of statutory duty generally, see ibid 9, 10, para 10, and for cases on civil liability for breach of safety enactments, see 24 Digest (Repl) 1048–1060, 175–245.
For the Construction (General Provisions) Regulations 1961, reg 52 and Schedule, see 8 Halsbury’s Statutory Instruments (First Re-issue) 278, 279.
Cases referred to in judgment
Fallaize v Throughton & Young Ltd [1956] 3 All ER 127, [1956] 1 WLR 1079, Digest (Cont Vol A) 605, 364a.
Grant v National Coal Board [1956] 1 All ER 682, [1956] AC 649, [1956] 2 WLR 725, 33 Digest (Repl) 901, 1332.
Littler v G L Moore (Contractors) Ltd [1967] 3 All ER 801, [1967] 1 WLR 1241, Digest Supp.
Page 443 of [1970] 3 All ER 442
Action
This was an action by Andrew Charles Baker, claiming damages against his employers, F Rendell & Sons Ltd, for injuries sustained on 30 March 1966, while he was employed as an apprentice bricklayer. The facts are set out in the judgment.
M J Turner for the plaintiff.
P Fallon for the defendants.
22 April 1970. The following judgment was delivered.
LLOYD-JONES J. This is an action brought by the plaintiff who is now of full age, although at the time the action was commenced he was an infant and he sued by his father and next friend.
The accident which the plaintiff sustained occurred on 30 March 1966. He was then an apprentice bricklayer, but apparently of a somewhat high order, employed by the defendants, and he used to attend classes, and still does, and he plainly was an intelligent person with ambitions to improve his status in the building trade. I am happy to think that he is still not only in the building trade and employed by the same employers, and on the evidence, as far as he suffers disability, inconvenience and annoyance because of the accident, it has not incapacitated him from work.
This case has travelled over a very interesting field, and, as was put by learned counsel, is of technicality both in science and in law; I hope that the distinction which I draw is not an entirely invidious one. The work that the plaintiff was doing at the time when he sustained this accident was, on the fact of it, a simple, familiar and frequent piece of work carried out on building sites. He was at a building site at a place called Enford and his particular job at the time was to nail a batten to some concrete in order that he might be able to affix what is known as a tile sill on an external window. The batten was, as he described it in his evidence, a piece of timber, 6 feet by 1 by 1 1/2 inches. He thinks that he had prenailed it up to a degree but thought that he was engaged, as far as he recalls, on driving a second nail into the concrete wall. That really was the job, and while he was engaged in driving in this nail—be it the second or the third, it does not really matter—something got into his eye which ultimately turned out to be a piece of metal. That is not in dispute, although it is not in terms conceded, but it is not in dispute; and a joint report prepared for both parties by Mr Thornton, a very highly qualified metallurgist, has made it quite plain that the piece of metal was in fact a piece which fragmented from the hammer being used by the plaintiff in doing his work. That hammer with which he drove in the nail ws known as a lump hammer or, I believe, it is called a club hammer, and it is made by well known makers. He says that it was a two pound hammer (although plainly it was four) although it does not matter.
The process of driving nails into concrete was not one unknown to the plaintiff, even in his own experience. He certainly knew it in relation to other people. He had never used this particular kind of nail before and I understood him to say that he had never driven them into concrete in the sense in which he was doing it on that day. He had been able to drive nails in the past into cement, which was easier to deal with; and it is obvious that a certain degree of force is necessary, although it would seem from the evidence that, with a certain type of nail in particular, it is not only advisable not to use very much force, but there are directions given how the work should be done, which point away from the exercise of great force.
I do not think that the plaintiff—and one cannot blame him at all—really recalls very clearly the circumstances attending this accident, and I do not think that his memory as to the degree of force he was applying is very reliable. He at one stage talked about presuming that he had used rather more force than he would normally have used in driving in a nail and he went on to say that he thought that it must be so, and indeed, he ‘rather recalled’ that it was. I do not think, however, that he recalls with at all a reliable memory what degree of force he was exerting and, as I find,
Page 444 of [1970] 3 All ER 442
and shall try to make plain, I do not think that it is a factor of much importance in this case.
The nail in question is known as a ‘Hilti’ nail and is one of the many varieties, as the court was told, of what are known as masonry nails. The ‘Hilti’ nail is made by a firm of that name and a representative, who is a technical manager, Mr Hemphill, was called and he described the process whereby the nail is made. It is made of high quality spring carbon and is subjected to a process known as austempering. That is a process which not only he, but Mr Thornton (who was called on behalf of the defendants and who made the joint report for both parties and who holds a position as a teacher in metallurgy at Bath University), knew about and agreed was a process which made for a toughening of the nail. I am satisfied and find that the ‘Hilti’ nail, whatever may be true of other nails used in this way for this kind of purpose, is a tough and strong nail, and is not brittle. I am satisfied on Mr Hemphill’s evidence coupled with that of Mr Thornton that, if used properly, this nail ought not to fracture. Any suggestion which crept into the case, not by any design, to give the court a false picture but possibly through a lack of appreciation of the relevance of toughness in this context, the the nail was brittle, has been completely disposed of and I have had a sample of a ‘Hilti’ nail subjected to hammer blows when held in a vice and it has not fractured. Mr Hemphill said that the only circumstances in which he could envisage that it would be liable to fracture was if someone had bent it and tried to straighten it out. That would lead to fatigue and it might then fracture, but I find that it is a very well made, though, hard nail, wholly suitable for this kind of work which it was being used for on this day. In passing, I can refer to the fact that another type of nail was put forward called the ‘Obo’—not to be confused with the musical instrument of that name—it does not have the final ‘e’. That is quite a different instrument. The makers of that nail give very careful directions as to how it should be used. Mr Hemphill said that his firm did not think it necessary and have never thought in terms of such directions because of the way their ‘Hilti’ nail is constructed.
I am satisfied on the evidence, and it has not been argued otherwise, that in driving the nail into concrete what really happens is that—I use here the language used under cross-examination by Mr Hayes (who is also a metallurgist, not a practical builder any more than Mr Thornton and not a person with practical engineering experience, but again a technical expert): ‘A nail driven in crates a hole not by extraction but by compression and the parties stay inside the hole’, and he accepted that there was a difference between using a cold chisel to cut and the use of a nail through the wooden batten. He said that a batten surrounds the hole, whereas if you were using a cold chisel you would be directly, so to speak, in contract with the work piece. In this case there was interposed between the nail and, if I may use a generic term, the hole, the wooden batten. The whole thing depended on driving the nails through the batten into the concrete, and I think that that piece of evidence which is completely supported by the evidence of Mr Thornton, that it is a process of compression and not extraction, is of importance, and of fundamental importance in this case. I will explain in a moment, when I come to the way in which the case is framed, why I think that it is of such basic importance.
The case put forward by the plaintiff was, first of all, a common law case and then, more particularly, as Mr Turner, who argued his case most admirably, properly made quite plain, the case rested on the statutory provision, which he alternatively relied on, being really the main ground on which he depended. He did not abandon his common law claim at all. Indeed, he argued it and gave very cogent reasons for saying that his client was entitled to succeed at common law; but I think that the convenient course for me to take now, having described the kind of process or the kind of work being done, is to look at the statutory provision relied on and the alleged breach by the defendants.
It is to be noted that the defendants in their defence have not suggested that the
Page 445 of [1970] 3 All ER 442
plaintiff was negligent in any respect. One does not really know how he did the work. As I have said, I do not think that his memory was very clear about it. One does not know how he struck the nail or with what force he struck it. I do not think, as I see the case, that those are important considerations. They might conceivably be, but I do not think that they are in this case, I think that he was doing the work to the best of his ability. He had seen this kind of work done. It is true that he had not on his own showing on that day, or ever at all, been given instructions specifically as to what his counsel called the technique of hammering these masonry nails into concrete, and there is no evidence to the contrary; but the plaintiff put his case on the language of the Construction (General Provisions) Regulations 1961 a, reg 52, which provides:
‘Where there is carried on any process specified in the Schedule to these Regulations suitable goggles or effective screens shall be provided to protect the eyes of persons employed in the process, and no person so employed shall carry on, or be required or permitted to carry on, any such process, without utilising such goggles or screens.’
I agree with counsel for the plaintiff that it is obvious that the purpose of that regulation is the protection of the eyes, but it is a non sequitur to say that it is of such wide application that it covers pretty well every case where anybody strikes a nail with a hammer. Indeed the whole thing turns plainly on the fact that reference is made to processes specified in the Schedule, and there are special processes set outb as follows:
‘Breaking, cutting, dressing or carving of stone, concrete, slag or similar materials by means of a hand tool (other than a trowel) or a portable tool driven by mechanical power.’
The case for the plaintiff was that what he was doing was a process within the meaning of that Schedule. It was said that it was either a breaking or a cutting, and counsel for the plaintiff said that he did not mind whether it was put on the basis of a breaking or a cutting but that it was certainly a process within reg 52 and the Schedule. It is to be observed that reg 52 itself provides for the supply of suitable goggles, or alternatively, effective screens; so that the employer is left with an alternative way of protecting the eyes when these processes, or any of them, are being carried out. The plaintiff said in the first place: ‘You didn’t supply me with goggles. This was a process within the Schedule. You did not supply me with goggles.' He by his evidence indicated, or sought to indicate, that goggles were only rarely supplied by the defendants—I think that he actually used the word ‘rarely’—and it emerged in his evidence, although not pleaded, that he thought that he had himself asked for goggles but could not remember whom he had asked, but he was told that there were not any available. I am not satisfied that he has established that he even asked for goggles. He certainly did not have any. I am not satisfied that there were not any available. The defendants have not brought any evidence on that at all and I do not think that in the circumstances they were called on to do so, but I think it right to indicate that the plaintiff did seek to strengthen his case not from the clearest of recollection by indicating that he had asked for goggles. He also indicated that he seemed to think that this was an operation or a piece of work fraught with some kind of danger to his eyes. It is difficult to see why he should have thought so unless he, like the two scientific witnesses, took the view that one can never tell with metal, however carefully it has been prepared, what may happen. There is always an academic possibility of something happening, but I doubt very much whether the plaintiff’s mind was occupied on that day with such an academic contingency.
The argument put forward, for the view that this was a process within the Schedule,
Page 446 of [1970] 3 All ER 442
was supported by counsel for the plaintiff by reference to two cases which I will take in the order of date. The first was Fallaize v Troughton & Young Ltd. That was a decision of the Divisional Court which arose out of proceedings before justices and was by way of case stated. The justices had dismissed the information. The case stated, which I do not propose to go into in any detail, makes perfectly clear what the particular instrument then being used was. It was a Kango hammer, a portable tool driven by an electric motor, and is further described in the case stated as follows ([1956] 3 All ER at 127, [1956] 1 WLR at 1080):
‘To perform the operation a chisel, pointed at the end, was fixed to the hammer. The chisel was fluted and had four cutting edges starting from the point and running down its sides.’
That is the description and I do not think that I need add any more to it. The Divisional Court held that in fact the process was within the Schedule, although it was under the predecessor of the present regulations; but the language is quite similar, if not in precisely the same terms. Lord Goddard CJ, in his characteristically concise judgment, dealt with it and said ([1956] 3 All ER at 128, [1956] 1 WLR at 1082):
‘… in this case … holes were being drilled into concrete by means of a straight tool having cutting edges. The justices thought that that process did not involve cutting. This court takes the view that it does involve cutting. The hole could not be made without cutting out the concrete. Counsel for the respondents concedes that the hole is cut but contends that what is done is to cut the surface and thereby make a hole because the hole is a void. I think that drilling holes in a concrete wall obviously involves cutting because the stone or concrete is cut out in order to put something else in. For these reasons, I think that the justices were wrong … ’
Ormerod and Donovan JJ agreed.
That was a case which plainly on the face of it appeared to be of assistance to counsel for the plaintiff, and I confess that I have considered it very carefully, and counsel argued that there is really no distinction at all between these cases, that in driving in the nail one is doing exactly the same thing as was done in Fallaize’s case. Counsel for the plaintiff treated the nail really as a tool. In my judgment there is a distinction, because the driving in of the nail is not, in the first place, for the purpose, as it was in Fallaize’s case, of placing in something. One is not, so to speak, making a void or hole or a cavity in order to fit in, as in Fallaize’s case, some Rawlplugs. To bang in the nail was a process of compression and not a process of moving the concrete, and that was conceded by Mr Hayes and supported by Mr Thornton. It is not parallel; and in Fallaize’s case, on the face of it, the instrument being used had cutting edges and the process was a cutting process. I am not of the opinion, and indeed I am unable to come to the view, that in driving in a nail in the instant case the plaintiff was either breaking or cutting the concrete. It is perfectly true that he could not get the nail into the concrete without making some incision, so to speak, into the concrete, but the process he was engaged in was not a process of cutting or breaking the concrete. He was engaged in affixing a batten to the concrete, and although counsel for the plaintiff passed on me, effectively up to a point, the view that this was really an indivisible process, that it is not right to think of it in two separate parts, one must take the whole of the operation or the work, and if one does that then one cannot escape the conclusion that this a case of cutting. I cannot take that view and I am not persuaded by that submission. If the plaintiff is not
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within the Schedule, then he fails on that statutory ground and in my judgment he does fail.
I have considered also the submission made by counsel for the defendants which fell into two parts. The first part of his submission was that the operations such as that in a later case, decided by Brabin J, which was also relied on, are clearly distinguishable. It was Littler v G L Moore (Contractors) Ltd. There the operation that was being carried out was described in the headnote as follows ([1967] 3 All ER at 801):
‘The plaintiff was at work on the site cutting a glazed earthenware pipe with a metal hammer and tiling chisel in the correct manner, when a fragment flew off and lodged in his eye.’
The fragment there again was found to be a fragment from the hammer which puzzled the persons examining the plaintiff’s eye and to their surprise it turned out to be a particle from the hammer. I am not sure that I am right in saying that. I think that it was either the hammer or the chisel but certainly not a part of the object, the work piece which he was working on. That case is important and I am not surprised that it was prayed in aid in the argument for the plaintiff, because Brabin J found that although the work, the process, on which the man was engaged, was the process of cutting this earthenware, glazed pipe, and the accident did not arise from the actual process of cutting as such, but from some apparent defect in either the hammer or the chisel. If I may say respectfully, he quite rightly said that that was a process within the Schedule and that it made no difference that in fact the accident was caused by a piece of the chisel or the hammer, and he supported that view by citing passages ([1967] 3 All ER at 804, [1967] 1 WLR at 1245), which I need not cite, from speeches by Lord Reid and Lord Tucker in Grant v National Coal Board ([1956] 1 All ER 682 at 687, 689, [1956] AC 649 at 660, 664).
It was conceded by counsel for the defendants that if counsel for the plaintiff could bring what the plaintiff was doing as a process within the Schedule, he could not argue that the fact that it was a fragment of the hammer which caused the damage, exonerated the defendants from liability, and I think that he was quite right in making, that concession. Counsel for the defendants also pointed out that, in his submission, Brabin J could not have found as he did, if there had been any evidence of any kind of shield or screen, and he chose the illustration of a perspex shield, where possibly a man could see what he was doing through the shield, and if that had been supplied different considerations would have come into play. There were no goggles in Brabin J’s case and that is why he found that there was liability.
I have some sympathy with the submission made by counsel for the defendants that, what in fact these processes in the Schedule envisage, are processes where, unless there is interposed some kind of shield or goggles, there is what he calls direct contact between the worker and the thing he is working on, and I think that he was right in saying that Brabin J could not have found as he found if there had been any kind of shield in that case. Counsel for the defendants further submits that in this case the batten did in fact provide a screen. It was not put there as a screen but in fact it did provide an effective screen and I think that that is, and must be, right and I cannot accept the argument that this is an indivisible operation. It can be divided. It can be divided literally by a screen. The processes, when one examines them, seem to me to be all processes where there is that sort of direct contact and direct danger unless you have goggles and unless you have a screen. I do not rest my judgment primarily on that, but if I were wrong on the earlier reasoning, I would also support my view on the line that in fact here one has got
Page 448 of [1970] 3 All ER 442
what was a screen and that the reason underlying Brabin J’s case would not be applicable.
I now turn to the common law aspect of the matter. I think that, as I have stated already, it was made reasonably plain that counsel for the plaintiff rightly thought that he was in greater difficulties in setting up a case at common law. What he relied on was a number of answers that he elicited about the dangers of striking two hard metallic surfaces, and he explored it at considerable length with Mr Thornton and got certain answers; but, as I understood Mr Thornton’s evidence, what he really said was that it is not good practice to strike hard metallic surfaces together, and he gave his reasons for that, but he was very anxious to qualify it and did qualify it by saying that one must always remember that the element of toughness in a metal is an extremely important one. In terms he said that one cannot equate toughness with brittleness and he said that the nails used in this particular case are a good illustration of that. They were not brittle but tough and he described processes whereby the toughening could go on. Counsel for the plaintiff invited the court to say that the very thing which happened in this case ought to have been foreseen would happen, from the fact that two objects, the hammer and the nail, both of strong construction and within very close limits of hardness, if that be the right way of putting it, under the various tests canvassed in the course of the evidence. I do not find that a possible conclusion on Mr Thornton’s evidence, which was mainly relied on by counsel for the plaintiff for this purpose.
Mr Hayes said that it was bad practice and went as far as to say that he thought that in this operation goggles were essential. That was not a view taken by the witnesses from the nail makers, Mr Hemphill, nor by Mr Thornton. Mr Thornton said that he did not think that they were. If one postulates, as one does in this case, a hammer which in normal circumstances satisfies standard requirements and one postulates a nail made according to the process described by Mr Hemphill, he said that he did not think that there was a risk, except the inevitable academic theoretical risk which unhappily is inherent and which one can never entirely exclude as possible; but for the purposes of a common law action I think that one cannot really travel into such refined realms as that. Here was a hammer which the plaintiff had used for a year. It was his own hammer, a perfectly proper hammer, normally used, accepted by those who understand these matters to be a perfectly proper hammer, a perfectly proper nail, and therefore, as Mr Thornton said—
‘I do not think there was any foreseeable risk involved in the striking of that nail with that hammer, provided it was struck with reasonable competence.’
and even then he did not say that that would lead to what happened in this case. But Mr Hayes really disposed of the common law argument himself when, in re-examination he said that, given a hammer in good condition—and there is no evidence that this was not in good condition, so far as any normal observation of the normal user was concerned—and a nail made properly, such as these nails are said and accepted to have been, one has got to think in terms of some unforeseen defect as the necessary cause of such an accident as that which happened in this case, and ‘unforeseen’ was his own word. I think, translating it, one can say: ‘Not reasonably foreseeable’. Nor do I think that there was anything in the evidence of Mr Thornton, when considered in its entirety, which in any way shows that this was a reasonably foreseeable risk. He made every concession which I think an honest, expert witness could make. He explained his reasons and all that he was anxious to preserve himself against was being made to say that one can absolutely guarantee and ensure that this kind of thing would not happen. He said that you can never exclude that possibility. It may be very remote and very academic but you cannot exclude it.
In my judgment, the claim also fails on the common law basis and I think that in the circumstances it is not profitable for me to say anything at all about the medical aspect of the case. It has been very fully dealt with in the reports of the two doctors,
Page 449 of [1970] 3 All ER 442
which were put before me as agreed reports, and if this matter should go further, the Court of Appeal would be in quite as good a position as I am to assess any damages that they thought proper to award.
Judgment for the defendants.
Solicitors: Lemon & Co, Swindon (for the plaintiff); F E Metcalfe & Co, Bristol (for the defendants).
Deirdre McKinney Barrister.
Falconer v Falconer
[1970] 3 All ER 449
Categories: FAMILY; Ancillary Finance and Property: LAND; Property Rights
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, MEGAW LJ AND SIR FREDERIC SELLERS
Hearing Date(s): 24 JULY 1970
Husband and wife – Property – Matrimonial home – Both parties contributing to purchase – House in wife’s name as sole mortgagor – Husband and his father sureties – Mortgage instalments paid by wife out of fund consisting of husband’s housekeeping allowance and wife’s earnings – Husband paid £105 towards building costs – Husband and wife beneficially entitled to house jointly, in equal shares – Principles applicable on beneficial ownership of matrimonial home.
Husband and wife – Property – Matrimonial home – Both parties contributing to purchase – Direct and indirect contributions.
Husband and wife – Property – Matrimonial home – Wife sole legal owner – Presumption of advancement – Financial contributions by husband – Presumption now rarely applicable where question arises of beneficial ownership of matrimonial home – Mortgage instalments for house in wife’s name paid out of fund partly comprising husband’s housekeeping allowance to wife – No presumption of advancement.
The husband and wife were married in 1960. In 1961, when they were living in a flat, they decided to buy a plot of land and build a house on it. The price of the plot was £525 of which the wife’s mother provided £80 and the balance was raised on mortgage with the wife as the mortgagor and the husband joining as surety. While the parties remained in the flat, before they started to build the house, the husband paid the wife £8 a week for housekeeping and she went out to work and earned a further £8 a week. Out of her wages the wife paid the mortgage instalments of £3 a week for the plot. In 1963, when they were ready to build the house, the wife paid off the balance on the mortgage for the plot by surrendering an insurance policy. In January 1964, the parties raised a further sum of £2,660 on a mortgage of the plot with the partially erected house on it. The wife again was the mortgagor but the husband stood surety and his father also guaranteed the mortgage repayments of £17 a month. The house was built, the husband paying £105 out of his own money for extras, and the parties went into it in March 1964. Thereafter the husband paid the wife £10 a week for housekeeping and she earned a further £10 a week. Out of the total of £20 the wife paid the mortgage instalments and the rates. In June 1965 the marriage began to break up; the husband continued paying the wife £10 a week for a while but then reduced it to £5 a week and in October 1965, he moved out of the house. For the next two years he paid one-half of the mortgage instalments and rates but from October 1967, the wife having committed adultery, he
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ceased to pay her anything and since then the wife had paid all the mortgage instalments and the rates but she had had the benefit of the whole house and had paid no rent for it. The house and land together were now valued at some £5,000 to £6,000 and the amount of the mortgage outstanding was £2,500. On a summons taken out to decide to whom the property belonged and in what shares, the judge held that the plot of land was obtained solely by the wife’s contributions and so belonged to her, but that the house was paid for by both parties and belonged to them jointly, in equal shares. On the wife’s appeal, contending that the presumption of advancement should be applied, and that the husband’s contributions were made in respect of housekeeping expenses and should be disregarded,
Held – The presumption of advancement, where the husband made financial contributions to a house in the wife’s name, rarely applied now to cases concerning beneficial ownership of the matrimonial home (see p 452 c, p 453 h and p 454 g, post); and the principles applicable to whether a matrimonial home standing in the name of the husband or the wife alone belonged to them both jointly (in equal or unequal shares) were that the law imputed to the husband and the wife an intention to create a trust for each other by way of inference from their conduct and the surrounding circumstances; an inference of trust would be readily drawn when each had made a substantial financial contribution to the purchase price or to the mortgage instalments, either directly, as where the contribution was stated to be such, or indirectly as where both parties went out to work and one paid the housekeeping and the other paid the mortgage instalments; but whether the parties held in equal shares would depend on their respective contributions (see p 452 e to g, p 453 d and p 454 g, post). The judge had correctly decided the present case on those principles and the wife’s appeal failed (see p 452 h and p 454 c and g, post).
Pettitt v Pettitt [1969] 2 All ER 385 applied.
Gissing v Gissing [1970] 2 All ER 780 explained.
Notes
For the determination of property rights between husband and wife, see 19 Halsbury’s Laws (3rd Edn) 899–901, paras 1490, 1492, and for cases on the beneficial ownership of the matrimonial home, see 27 Digest (Repl) 263–265, 2119–2133.
Cases referred to in judgments
Gissing v Gissing [1969] 1 All ER 1043, [1969] 2 Ch 85, [1969] 2 WLR 525; rvsd HL [1970] 2 All ER 780, [1970] 3 WLR 255.
Pettitt v Pettitt [1969] 2 All ER 385, [1969] 2 WLR 966, Digest Supp.
Appeal
This was an appeal by the wife, Maureen Jennifer Falconer, from the judgment of his Honour Judge Robson QC dated 24 November 1969, whereby he held, on a summons taken out under s 17 of the Married Women’s Property Act 1882, that the matrimonial home belonged to the husband, Stewart Falconer, and wife jointly in equal shares. The facts are set out in the judgment of Lord Denning MR.
Nancy Wilkins for the wife.
Yetta Frazer for the husband.
24 July 1970. The following judgments were delivered.
LORD DENNING MR. This is another case about the matrimonial home. It is Blue Shutters, Peckleton Lane, Desford, Leicestershire. It is the first we have had since the recent decision of the House of Lords in Gissing v Gissing. The husband and wife married on 17 September 1960. He was 24 and she was 22. They were divorced in 1969. They had no children.
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After their marriage they first lived with the wife’s parents. Next they moved into a flat. Whilst there, in March 1961, the wife saw a building plot. They liked it. They decided to buy it and build a house on it. The price was £525. The wife’s mother provided £80. The balance of £445 was borrowed on mortgage from a building society. The plot was conveyed into the wife’s name. She was the mortgagor. The husband joined as surety. The mortgage was repayable by instalments of £3 a week. They remained in the flat for a time before they started building the house. Whilst they were in the flat, the husband paid the wife £8 a week for housekeeping. She went out to work and earned about £8 a week. Out of her wages she paid the instalments of £3 a week for the plot.
In November 1963, they were in a position to build the house. To do this, the wife paid off the balance due for the plot. She did it by surrendering her insurance policy on which she received £66. Then they raised the sum of £2,660 on mortgage of the plot with the partially erected house on it. The repayments were to be £17 a month. The wife was the mortgagor as the plot was in her name. The husband stood surety. The husband’s father also guaranteed the repayments. The mortgage was executed in January 1964. The house was built. The husband paid the builder £105 for extras out of his own money. They went into it in March 1964. They called it Blue Shutters. After they got into the house the husband paid the wife £10 a week for housekeeping money. The wife went out to work and earned about £10 a week. Out of that total of £20 she paid the mortgage instalments of £17 a month, and also the rates.
Only 15 months later, in June 1965, the marriage began to go wrong. The parties withdrew from their common bedroom and had separate bedrooms. The husband went on paying the £10 a week for a while, but soon afterwards he said he was being treated like a lodger. So he reduced it to £5. Eventually in October 1965 he moved out of the house. His solicitor wrote to the wife’s solicitor:
“By reason of [the wife’s] desertion she forfeits the right to be maintained, but in view of the fact that [the husband] contends that he and his wife are jointly entitled beneficially to the matrimonial home, although it is in her name, he proposes to pay one-half of the instalments due to the Building Society and one-half of the Rates.’
From that time onwards for two years he paid one-half of the instalments and rates. The wife accepted it but said that she regarded it as maintenance. But she formed an association with another man and had a baby by him. When the husband asked for the name of the man, she refused to give it. So he stopped paying the half of the instalments and rates. He has not paid anything since October 1967. Since that time the wife has paid all the instalments and the rates. (I ought to say that at one point a sum of £500 was raised on the property by the husband for the purposes of his business, but that has been paid off and no question now arises about it.)
The house is now valued at some £5,000 or £6,000. The amount owing on mortgage is some £2,500. The summons has been taken out to decide to whom it belongs and in what shares. The judge held that the plot of land itself was obtained solely by the contributions of the wife. So he held that the land itself belonged to her. But he said that the building of the house and the mortgage (which was raised to pay for it) were on a different footing. He said that the husband had contributed a good deal. He had paid £105 to pay the builder, over and above the mortgage. His father had guaranteed the mortgage. The judge also said:
‘The husband was contributing more towards the general household expenses, and I am satisfied it was his money which was helping with the mortgage payments.’
So the judge held that the building on the land (as distinct from the land itself) belongs to each of them half-and-half. He made an order for a charge in favour of
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the husband and an enquiry to determine the amount. The wife appeals to this court.
In the notice of appeal the wife says that ‘the judge erred in not applying the presumption of advancement when all the relevant transactions were in the wife’s name’. If this case had come up for decision 20 years ago, there would undoubtedly have been a presumption of advancement; because at that time whenever a husband made financial contributions towards a house in his wife’s name, there was a presumption that he was making a gift to her. That presumption found its place in the law in Victorian days when a wife was utterly subordinate to her husband. It has no place, or, at any rate, very little place, in our law today, see Pettitt v Pettitt ([1969] 2 All ER 385 at 389, 404, 415, [1969] 2 WLR 966 at 971, 988, 1000) per Lord Reid, Lord Hodson and Lord Diplock. We have decided these cases now for some years without much regard to a presumption of advancement, and I think we should continue so to do. It is fair to say that counsel for the wife did not press the point.
The next point taken by the wife in the notice of appeal is that ‘while the parties lived together, the husband’s contributions were made wholly or mainly in respect of housekeeping expenses’; that, on this account, they should not be regarded as contributions to the house or to paying off the mortgage instalments. This sort of point was discussed in Gissing v Gissing, and I will try to distil what was said. The House did not overturn any of the previous cases in this court on the subject. They can, I think, still provide good guidance. But the House did make clear the legal basis for them. It stated the principles on which a matrimonial home, which stands in the name of husband or wife alone, is nevertheless held to belong to them both jointly (in equal or unequal shares). It is done, not so much by virtue of an agreement, express or implied, but rather by virtue of a trust which is imposed by law. The law imputes to husband and wife an intention to create a trust, the one for the other. It does so by way of an inference from their conduct and the surrounding circumstances, even though the parties themselves made no agreement on it. This inference of a trust, the one for the other, is readily drawn when each has made a financial contribution to the purchase price or to the mortgage instalments. The financial contribution may be direct, as where it is actually stated to be a contribution towards the price of the instalments. It may be indirect, as where both go out to work, and one pays the housekeeping and the other the mortgage instalments. It does not matter which way round it is. It does not matter who pays what. So long as there is a substantial financial contribution to the family expenses, it raises the inference of a trust. But where it is insubstantial, no such inference can be drawn, see the cases collected in the dissenting judgment in Gissing v Gissing ([1969] 1 All ER 1043 at 1049, 1050, [1969] 2 Ch 85 at 97) of Edmund Davies LJ, which was upheld by the House ([1970] 2 All ER 780, [1970] 3 WLR 255). The House did, however, sound a note of warning about proportions. It is not in every case that the parties hold in equal shares. Regard must be had to their respective contributions. This confirms the practice of this court. In quite a few cases we have not given half-and-half but something different.
It seems to me that the judge decided this case on those principles, even though he did so before the House decided Gissing v Gissing. He took the plot of land and found that it was paid for altogether by the wife or her mother. So the land itself should be regarded as hers. But he found that the building was paid for by both of them. The husband paid £105 to the builder. He and his father guaranteed the mortgage. His payments for housekeeping helped the wife a great deal to enable her to pay the mortgage instalments. So the judge decided that the building itself, as distinct from the land, should be regarded as belonging to them equally, half-and-half. The judge decided, of course, that the house and land would continue to be
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occupied by the wife or sold. So he gave the husband a charge and directed an enquiry to ascertain the figures. They would appear likely to work out something as follows: the value of the house and land together is £5,000 to £6,000. The mortgage outstanding is £2,500. That leaves an equity of £2,500 or £3,500. Out of it the wife will receive as the value of the land itself (apart from the building) the sum of £1,000 or more. The balance will be £1,500 or £2,500 to be divided half-and-half. So the husband will only have a charge for £750 to £1,250. That seems fair enough.
I ought to add that I was troubled by one point made by counsel for the wife. The husband stopped paying anything in October 1967. Since that time the wife has paid all the mortgage instalments and the rates. But I think that counsel for the husband gave the right answer. During that time the wife has had the benefit of the whole house, although it belonged in part to her husband, and she has paid no rent. So it evens out. I think the order of the judge was correct and I would dismiss this appeal.
MEGAW LJ. I agree. I propose to deal first shortly with the cross-appeal put forward on behalf of the husband by his counsel. She contended that, contrary to what the learned county court judge had held, the proper view is that the interests of the husband and the wife should be regarded as being equal in relation to the whole of the property, ie the land as well as the house; whereas the learned judge had found that in relation to the land the interest was in the wife and the wife alone. As regards the cross-appeal I would only say that it seems to me, despite everything that counsel for the husband has said, that there is no legitimate criticism of the view taken by the learned judge and expressed by him in the words of his judgment:
‘All those payments were made out of the wife’s money, ending with the £66 she obtained by surrendering her insurance policy. Up to that point it was entirely her enterprise.’
’Up to that point’ is the point when the building of the house began.
In relation to the appeal, counsel for the wife contends first that even in relation to the house the whole of the interest ought to be regarded as being in the wife; whereas the learned county court judge has held that the interest in the house should be treated as being half-and-half. Counsel for the wife’s submission on that point was really based on the proposition that there is here a presumption of advancement in relation to any contributions that may have come from the husband’s side towards the building. I think that the presumption of advancement in cases of this sort can rarely apply now. I would refer to a passage in the speech of Lord Diplock in the recent decision in Gissing v Gissing ([1970] 2 All ER 780 at 791, [1970] 3 WLR 255 at 269). Lord Diplock, having referred to the decision of the House of Lords in Pettitt v Pettitt, said that as he understood the speeches of four members of the House of Lords in that case they took the view that, even if the presumption of advancement as between husband and wife still survived today, it could seldom have any decisive part to play in disputes between spouses in which some evidence would be available in addition to the mere fact that the husband had contributed half of the purchase price of property conveyed into the name of the wife. I do not think that counsel for the wife can substantiate her criticism of the judgment on that score. Nor do I think that the learned county court judge arrived at his decision of half to the husband and half to the wife in relation to the house on the basis of the maxim to which he referred earlier in his judgment: equity is equality.
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In relation to that maxim, again, there was comment in the recent decision of Gissing v Gissing, and I would refer in this connection to a short passage in the speech of Lord Pearson, where he said ():
‘I think also that the decision of cases of this kind has been made more difficult by excessive application of the maxim “Equality is equity“. No doubt it is reasonable to apply the maxim in a case where there have been very substantial contributions (3therwise than by way of advancement) by one spouse to the purchase of property in the name of the other spouse but the proportion borne by the contributions to the total price or cost is difficult to fix. But if it is plain that the contributing spouse has contributed about one-quarter, I do not think it is helpful or right for the court to feel obliged to award either one-half or nothing.’
In the present case, as I say, the county court judge did award, in relation to the house, half-and-half. I think that proportion was right, not because of the maxim ‘equality is equity’, but because of the evidence which was before him. Like Lord Denning MR, I was impressed for a time by counsel for the wife’s submission that really there should be a greater proportion attributed to the wife because of the fact that it was she and she alone who had been bearing the burden of expenses in relation to the house since October 1967; and, like Lord Denning MR, also, I think that the answer given by counsel for the husband on that point was right: namely that it is, at any rate in some degree, balanced by the fact that during that period the wife has had the benefit of living in the house and the husband has not.
The only other matter to which I would refer is this: it may be that it would be possible in this case to avoid the delay and expense of the enquiry which was properly ordered by the county court judge in order to assess the value of the house and of the land respectively. It may be that commonsense would produce agreement between the parties on some such basis as taking the proportion of value of house and land at the present day as corresponding to the original cost of the two items respectively: the land in 1961 having cost £525, and the cost of the building, two or three years later having been, I think, £2,600.
I would dismiss the appeal and the cross-appeal.
SIR FREDERIC SELLERS. I agree with the judgments of both my Lords, except that I must say that I was not myself impressed with the argument of counsel for the wife which temporarily impressed both my brothers. Both for the reasons which they gave and other further reasons with which I need not deal, I would dismiss the appeal.
Appeal dismissed.
Solicitors: Peacock & Goddard, agents for R G Frisby & Small, Leicester (for the wife); Owston & Co, Leicester (for the husband).
Wendy Shockett Barrister.
R v Newsome
R v Browne
[1970] 3 All ER 455
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY AND FENTON ATKINSON LJJ AND MELFORD STEVENSON, O’CONNOR AND EVELEIGH JJ
Hearing Date(s): 29 JULY 1970
Criminal law – Sentence – Suspended sentence – Initial sentence attracting mandatory suspension – Variation of initial sentence to impose immediate custodial sentence – Whether court has power to vary initial sentence – Criminal Justice Act 1967, s 39(3).
Judgment – Judicial decision as authority – Stare decisis – Court of Appeal, criminal division – Sentencing – Recent direction by court of three on exercise of discretion not binding on later court of five.
The appellanta was convicted of causing death of dangerous driving and driving with a blood-alcohol concentration above the prescribed limit. The appellant was sentenced to a term of imprisonment of six months, which it was the intention of the court should take effect as an immediate custodial sentence. When, however, it was pointed out to the court by counsel that such a sentence attracted mandatory suspension by virtue of s 39(3)b of the Criminal Justice Act 1967, the matter was immediately reconsidered and a sentence of seven months, which did not involve a mandatory suspension, was imposed. On appeal against sentence,
Held – (i) Having determined that justice required an immediate custodial sentence to be imposed on the appellant, the court, in achieving the most appropriate and suitable order, was entitled to have regard to the fact that the term of six months attracted mandatory suspension while that of seven months did not and, accordingly, to impose the more severe term, if it was not excessive, for the particular offence of which the appellant had been convicted (see p 459 g, post).
(ii) The variation of the appellant’s sentence from six months to seven within a matter of seconds did not result in an error of principle, since the first sentence passed by the court was not necessarily to be regarded as the right sentence and could always be varied by the court within the period of the then current assize (see p 459 b, post).
R v Maylam (27 February 1970) unreported, disapproved.
(iii) When considering the principles to be applied in the exercise of discretion in sentencing, the criminal division of the Court of Appeal, sitting as a court of five, was not bound by its own previous direction, made by a court of three, especially where that previous direction was very recent and involved a matter in which the court did not hear argument from both sides (see p 458 c to j, post).
Dictum of Diplock LJ in R v Gould [1968] 1 All ER at 851 approved.
(iv) In the special circumstances of the case, however, the sentence imposed would be suspended, since there was no other way in which justice could be done to the appellant (see p 460 c, post).
Notes
For judicial decisions of the Court of Appeal as authority binding on the court subsequently, see 22 Halsbury’s Laws (3rd Edn) 799–801, paras 1687–1688, and for cases on the subject, see 30 Digest (Repl) 225–227, 689–715.
Page 456 of [1970] 3 All ER 455
For suspended sentences, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 922A.
For the Criminal Justice Act 1967, s 39, see 8 Halsbury’s Statutes (3rd Edn) 603.
Cases referred to in judgment
R v Corr [1970] Crim LR 238.
R v Gould [1968] 1 All ER 849, [1968] 2 QB 65, [1968] 2 WLR 643, 132 JP 209, 52 Cr App Rep 152, Digest Supp.
R v Maylam (27 February 1970) unreported.
R v Taylor [1950] 2 All ER 170, [1950] 2 KB 368, 34 Cr App Rep 138, 15 Digest (Repl) 888, 8558.
Young v Bristol Aeroplane Co Ltd [1944] 2 All ER 293, [1944] KB 718, 113 LJKB 513, 171 LT 113, affd HL [1946] 1 All ER 98, [1946] AC 163, 30 Digest (Repl) 225, 691.
Cases also cited
Boys v Chaplin [1968] 1 All ER 283, [1968] 2 QB 1.
Gallie v Lee [1969] 1 All ER 1062, [1969] 2 Ch 17.
Note [1966] 3 All ER 77, [1966] 1 WLR 1234.
R v Ettridge [1909] 2 KB 24, [1908–10] All ER Rep 848.
Valasquez Ltd v Inland Revenue Comrs [1914] 3 KB 458.
Vera Cruz (No 2), The (1884) 9 PD 96.
Appeals
These were appeals by Johnny Lee Newsome and Francis Harry Patrick Browne against sentences imposed on them. The appellant Newsome’s appeal was against a sentence of seven months’ imprisonment imposed at Suffolk Assizes on 27 May 1970 (Lord Parker CJ), following his conviction for causing death by dangerous driving and driving with blood-alcohol concentration above the prescribed limit and the appellant Browne’s appeal was against a sentence of imprisonment of six months and seven days, imposed at Inner London Quarter Sessions on 7 April 1970 (his Honour Judge Llewellyn), following his conviction for driving while disqualified. The facts relating to the appellant Newsome are set out in the judgment of the court.
A B Hidden for the appellant Newsome.
G W Cheyne for the appellant Browne.
F E Beezley as amicus curiae.
29 July 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. These two appeals have been heard together because they raise an identical point. Initially I will deal only with the appeal of the appellant Newsome. This appellant pleaded guilty before Lord Parker CJ at Suffolk Assizes on two counts both related to the same incident. One was causing death by dangerous driving and the other was driving with a blood-alcohol concentration above the prescribed limit. The appellant was sentenced to seven months’ imprisonment on the first indictment and one day concurrent on the second, and disqualified for 12 months. He appeals against sentence by leave of the single judge and has been on bail for a substantial period since the trial.
The issue in this case arises in a rather special way. The case was a bad case of causing death by dangerous driving. I do not propose to go through the details. It is sufficient for this purpose that counsel for the appellant does not seek to challenge the observation of Lord Parker CJ, when passing sentence, that this was the kind of case where, in respect of an Englishman or an Irishman serving in our own forces, he would unhesitatingly have sent the appellant to prison for 18 months. It was that kind of case. Sentencing, however, was complicated for two reasons both deriving from the fact that the appellant was a serving soldier in the US forces. The learned judge was told that the intention was that the appellant should return to the United States
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very shortly, and in those circumstances it was quite obvious to everybody at the trial that to pass a suspended sentence of imprisonment would readily be equivalent to an absolute discharge because the appellant would have left the country in a very short space of time and that he would, in fact, have suffered no penalty or sanction in respect of this offence.
Equally, it was very much in the mind of Lord Parker CJ, as his judgment discloses, that the appellant’s future might well be prejudiced as a result of the sentence passed on him, and he was clearly anxious to give the US military authorities the maximum scope to deal leniently with the appellant in their own field, if they could. When one has read the whole of what was said at the trial carefully, as we have, it becomes abundantly clear that Lord Parker CJ was minded to pass a custodial sentence, an immediate sentence of imprisonment, as being the only punishment meet for this case, but at the same time was anxious to make that sentence as lenient as he could, consistent with it taking effect in that way. What happened when he passed sentence initially was that he ordered imprisonment for a period of six months. No doubt in a moment of aberration, he had overlooked the fact that, under s 39 of the Criminal Justice Act 1967, a sentence of six months’ imprisonment attracts a mandatory suspension, and a mandatory suspension, for the reasons which I have already given, was clearly not thought appropriate in this case. Accordingly, having had the matter drawn to his attention by counsel for the appellant observing, as one would expect of him, his duty to the court in this regard, Lord Parker CJ immediately reconsidered the matter and imposed a sentence of seven months which, of course, did not involve a mandatory suspension.
The basis of the appeal is that, in making that adjustment, if that is the correct word, Lord Parker CJ committed an error of principle in that it is said that such an adjustment in the upward direction is not permissible when it is motivated by a desire to avoid the mandatory suspension, imposed by s 39, of a sentence of six months.
The first thing to observe in this case is that the point is not a novel one, and it is quite clear to us that this kind of momentary error is common all over the country for reasons which will be well appreciated, but further than that, that there are two earlier decisions of this court in which the matter was considered. The first is R v Corr, decided on 15 January 1970, and the second is R v Maylam, decided on 27 February 1970. For all practical purposes those cases were identical to the present. In each instance a sentence of six months was imposed and then corrected by the presiding judge for the same reasons as apply in the instant case, and both matters were the subject of appeal to this court and being appeals on sentence, of course, they were not argued on both sides. Indeed, it seems quite clear from reading the transcripts that on each occasion this court, sitting in its normal constitution of a division of three, regarded it almost as axiomatic that an adjustment of sentence in this way, although intended to correct a momentary error, was not permissible and, accordingly, in each case the sentence was quashed and a sentence of six months suspended was substituted.
Of course, the first matter which we have had to consider, with counsel for the appellant’s assistance, is whether it is open to us, albeit we are sitting as a court of five, to take a different view from that expressed in the two earlier cases. We have been reminded, so far as was necessary, of the basic principle of stare decisis applicable as it is to civil and criminal courts in this country. We have noted from the authorities, to which counsel for the appellant has referred, that there is discernibly a slight tendency in the civil division of this court to relax the fetters of the doctrine. However, we do not base our decision in this case on developments in the civil division, because they have certainly not reached the point at which it would be appropriate for us to regard them as in any sense binding on us. We do, however, recognise, as has been recognised for years, that the principle of stare decisis does not apply in its full vigour
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to decisions of the Court of Criminal Appeal, as it used to be, and the criminal division of this court, as it now is. We have been referred to R v Taylor, where a court of seven departed from a previous view assumed by the court, and declined to follow an earlier authority of this court. It is perfectly true that Lord Goddard CJ, in giving judgment in that case, ([1950] 2 All ER at 172, [1950] 2 KB at 371) justified the action of the court to a very large degree by the fact that in that case a departure from authority was necessary in the interests of the appellant. He took the robust principle that if a man be in prison, and in the judgment of the court wrongly in prison, it should not allow such matters as stare decisis to stand in the way. It is, however, also apparent that some importance, at any rate, was attached by Lord Goddard CJ to the fact that this was not a normal court of three but in that case a court of seven.
More convincingly on this subject is the more recent case of R v Gould, a decision of this court in its present form and a decision of a division of three judges. I cite it for a statement of principle by Diplock LJ, giving the judgment of the court. He said ([1968] 1 All ER at 851, [1968] 2 QB at 68, 69):
‘In its criminal jurisdiction, which it has inherited from the Court of Criminal Appeal, the Court of Appeal does not apply the doctrine of stare decisis with the same rigidity as in its civil jurisdiction. If on due consideration we were to be of opinion that the law had been either misapplied or misunderstood in an earlier decision of this court, or its predecessor the Court of Criminal Appeal, we should be entitled to depart from the view as to the law expressed in the earlier decision notwithstanding that the case could not be brought within any of the exceptions laid down in Young v. Bristol Aeroplane Co., Ltd. … ’
Counsel for the appellant says that the court there did not go further than it went in R v Taylor and that that dictum should be regarded as being qualified by R v Taylor. We do not so read it, and I subscribe to that view the more readily because I was a member of the court in R v Gould. We do not have in this case to go to extremes in this matter and, in particular, we do not have to consider to what extent a court of five can properly depart from an earlier decision of a court of three when the issue goes to guilt or innocence. One can well see, and these are matters which may have to be dealt with another day, tat where the question at issue determined whether an act is criminal or not, then even a court of five should at the very least have far greater reluctance in departing from an earlier decision than it would where such a fundamental issue did not arise.
The matter before us arises in a sphere which is peculiar to the criminal division of the Court of Appeal. It arises out of the well-known duty of this division to lay down principles and guidelines to assist sentencers of all grades in the application of the discretion which the imposition of sentence requires. And we are all entirely of the opinion that in the realm which was described by counsel for the appellant Browne as being a matter of discretion and not, as he said, a matter of practice and procedure, but as a matter of discretion peculiar to the criminal division in that area, we are satisfied that if the court of five is duly constituted to consider an issue of discretion and the principles on which discretion should be exercised, then that court ought to have the right to depart from an earlier view expressed by the court of three, especially where that earlier view is very recent and especially where it was a matter in which the court did not take the opportunity of argument on both sides. Accordingly, within that restricted sphere, which is the only sphere on which we have to pronounce today, we take the view that a court of five can, and indeed should, depart from an earlier direction on the exercise of a judge’s discretion if satisfied that the earlier direction was wrong.
Page 459 of [1970] 3 All ER 455
That brings the court to the merits of this particular matter. In the earlier cases the approach seems to have been that the first sentence passed by the judge must be regarded as the right sentence and that the second sentence passed by him must, therefore, be the wrong sentence. Indeed Lawton J said so almost in those terms in R v Maylam. With all respect to that opinion, we do not accept it. It seems to us to disregard the well-known proposition that a judge is entitled to vary a sentence which he has passed as long as he does so within the period of the then current assize. It is that power which is widely exercised, although normally one would say that it is exercised in favour of the accused and not against him, but the very existence of the power, which is not challenged, makes it perfectly clear that it is a wrong approach to talk about the first sentence being the right one and the second sentence being the wrong one. The initial words of the judge passing sentence do not acquire any special sanctity merely because they are his first pronouncement. Accordingly, it seems to us that any objection taken to the actions of Lord Parker CJ in the court below in this case must really be related to a very much deeper principle. We think that if objection is to be taken at all, it can only be on the footing that when a judge is passing a sentence of imprisonment be ought, when determining the length of the sentence, wholly to disregard the terms of s 39. In other words, we think that the substance of counsel for the appellant’s proposition really amounts to this, that when passing a sentence of imprisonment the sentencer should determine ‘the proper sentence’ without any regard to the statutory consequences in regard to suspension and then, as it were, break the seal of s 39 and see whether a suspension is discretionary or mandatory.
Counsel for the appellant, again as one would expect, recognises that in practice that kind of approach is unreal, and so it is. But we would all go further and say that it would be wholly undesirable. The primary function of a judge passing sentence is to achieve the order which is most suitable and appropriate for the case before him. We do not see how a judge can possibly hope to achieve that result and thereby do justice unless he considers every consequence which may flow from each of the alternative sentences which he has in mind. Only by considering every consequence can he possibly, as we see it, reach what, on any view, can be regarded as the right answer. We think, therefore, that it is inevitable when a judge is considering a term of imprisonment or considering alternative possible terms of imprisonment, that he should have in mind, if it be the fact, that one attracts a suspension and that the other does not. And if he considers that justice requires an immediate custodial sentence, and it lies in his power to impose a sentence in excess of six months, then as long as the total sentence imposed is not excessive for the offence, he is entitled to have regard to that and impose the more severe term.
It does not need to be emphasised, but we emphasise it again, that at the end of the day, of course, if the sentence is unduly severe for the offence, this court would not hesitate to set it aside, but no one can say in this case that seven months’ imprisonment was unduly severe for the offence, and consequently the present sentence cannot be attacked, and indeed is not sought to be attacked on that ground. If Lord Parker CJ had said initially: ‘I impose a sentence of seven months because that is the shortest sentence I can give you without being bound to suspend it, and I do that because it is clear in this case that a suspended sentence would be entirely wrong’, we do not see how that formula could have been faulted and we do not think that any difference occurs because by, as I have said, some momentary aberration the initial sentence passed was said to be only six months, it being corrected within a matter of seconds to the period of seven.
Accordingly, there is, in our judgment, no merit at all in this appeal and no reason to suggest that that which happened in the court of trial was in any sense incorrect or an error of principle.
Page 460 of [1970] 3 All ER 455
The second case, the case of the appellant Browne, I refer to in no detail because it is mutatis mutandis exactly the same case, and the reasons which I have given can be applied equally to either case. There again we find nothing wrong with the sentence as passed and no ground for allowing the appeal on that account.
But at the end of the day, it is of particular importance where the court is not following an earlier decision to see that the individual appellant who is the subject of the present appeal suffers no injustice as a result, and we are highly conscious of the fact that the two appellants should not be allowed to be prejudiced in the result merely because these lawyers’ battles have taken place over the cases in which they were concerned.
We think that, having regard to what has followed the trial, and all the circumstances which now stand before us, the only fair thing is to suspend the sentences which they received and we shall do that for that reason alone, not, as I stress, because there is substance in the appeal, but because there is no other way in which justice can be done to the appellants in the circumstances now prevailing. We adhere to the length of the sentence imposed in each case, we suspend it for two years and the operational period is to begin today.
Decisions affirmed. Sentences varied.
Solicitors: Slater, Fruitman & Co (for the appellant Newsome); T E Rudling & Co, Thetford (for the appellant Browne); Director of Public Prosecutions.
N P Metcalfe Barrister.
R v Hereford Corporation, ex parte Harrower and others
[1970] 3 All ER 460
Categories: LOCAL GOVERNMENT
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 17 JULY 1970
Local authority – Standing orders – Power to suspend – Exercise of power only by special resolution.
Local authority – Contract – Accordance with standing orders – Duty to make contract in accordance with standing orders – Local Government Act 1933, s 266(2).
Mandamus – Applicant – Sufficiency of interest – Ratepayer – Failure of local authority to comply with own standing orders.
The standing orders of a council provided, inter alia, that: every contract made by the council should comply with standing orders and no exception from any of the following provisions should be made otherwise than by direction of the council (standing order 50); ten days’ public notice should be given in one or more newspapers before any contract over £200 was placed for goods or materials or the execution of any work (standing order 52); no contract which exceeded £50 in value should be entered into unless tenders had been invited from a reasonable number of persons who supplied such goods or materials or executed such work and whose names appeared on the list of contractors (standing order 53); and certain exceptions to standing order 53 were provided for including when the work to be executed or the goods or materials to be purchased were a matter of urgency (standing order 53(d)).
Early in 1969, the council considered installing heating in certain flats in its area
Page 461 of [1970] 3 All ER 460
to avoid condensation and consulted representatives from the gas and the coal industries and the relevant electricity board about rival methods. The council did not go out to tender because they had no heating design engineer on their staff and were therefore unable to send out specifications for tender. In March 1970, it was decided to place the contract with the electricity board. The applicants, who were electrical contractors on the council’s approved list and some of whom were ratepayers in the council’s area, applied for an order of mandamus commanding the council to comply with standing orders 52 and 53.
Held – (i) The council had not complied with their own standing orders since the matter was not a matter of urgency within standing order 53(d) (see p 462 j and p 464 a, post) and the standing orders could not be suspended under standing order 50 merely by being ignored but only by special resolution (see p 463 b and p 464 a, post).
(ii) Although the standing orders themselves were merely directions as to the functions inter se of the council and its officers, s 226(2)a of the Local Government Act 1933 imposed a duty on the council to comply with standing orders as they existed at the time (see p 463 c and f and p 464 a, post).
(iii) The applicants had sufficient interest to apply to the court for an order of mandamus since some at least of them were ratepayers (see p 463 g and p 464 a, post).
R (McKee) v Belfast Corpn [1954] NI 122 applied.
(iv) Accordingly, the order for mandamus should go, but only issue if the council had no resolved to suspend its standing orders within 14 days (see p 463 j and p 464 a, post).
Notes
For the power of local authorities to enter into contracts, see 24 Halsbury’s Laws (3rd Edn) 628, 629, para 1147.
For sufficiency of interest to make application for mandamus, see 11 Halsbury’s Laws (3rd Edn) 105, 106, para 196, and for cases on the subject, see 16 Digest (Repl) 322, 323, 1007–1017.
For the Local Government Act 1933, s 266, see 19 Halsbury’s Statutes (3rd Edn) 550.
Case referred to in judgment
R (McKee) v Belfast Corpn [1954] NI 122, 13 Digest (Repl) 296, * 201.
Cases also cited
R v Lewisham Union [1897] 1 QB 498.
Watson v Hythe Borough Council (1906) 70 JP 153.
Motion of mandamus
This was an application by Alexander McCartney Harrower and six others for an order of mandamus directed to the mayor, aldermen and citizens of the city of Hereford commanding them, in respect of the proposed installation of block storage heaters and immersion heaters in flats known as Cornish Unit flats in the city of Hereford: (a) to invite tenders from a reasonable number of persons who executed such work and whose names appeared on the list of suitable contractors approved by the council before entering into any contract in respect of the said proposed installation; and (b) to give at least ten days’ public notice in one or more newspapers of any proposed contract in respect of the proposed installation before making any such contract. The facts are set out in the judgment of Lord Parker CJ.
J Hamilton for the applicants.
R A W Sears for the council.
Page 462 of [1970] 3 All ER 460
17 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of a number of applicants, all electrical contractor and all on what is called the approved list of contractors for the city of Hereford council. Their application is for an order of mandamus directed to the mayor, aldermen and citizens of the city of Hereford:
‘Commanding them, in respect of the proposed installation of block storage heaters and immersion heaters in flats known as Cornish Unit Flats in the City of Hereford … (a) to invite tenders from a reasonable number of persons who execute such work and whose names appear on the list of suitable contractors approved by the Council before entering into any contract in respect of the said proposed installation; and (b) to give at least ten days’ public notice in one or more newspapers of any proposed contract in respect of the said proposed installation before making any such contract.’
What given rise to this application is the fact that for some time now the council have been considering the installation of some form of heating in these Cornish Unit flats to avoid condensation. The matter came under consideration as long ago as early 1969. Various methods of heating were considered, and indeed the national gas industry, the national coal industry and the Midland Electricity Board were consulted as to rival schemes of installation.
A time case when it became known, and that was in March 1970, that the council proposed to place a contract for a very substantial sum of money with the Midland Electricity Board. The position today is that the contract has been drawn up, but it has not been signed. These electrical contractors complain that the standing orders of the council have not been observed, in particular standing orders 52 and 53. Standing order 52 provides that ten days’ public notice should be given in one or more newspapers before any contract over £200 is placed for goods or materials or the execution of any work. Standing order 53 goes on to provide that no contract which exceeds £50 in value shall be entered into unless tenders had been invited from a reasonable number of persons who supply such goods or materials or execute such work and whose names appear on the list of contractors, provided tenders shall not be required in certain circumstances, none of which except for one could be said to apply in the present case. The one that it is said does apply is standing order 53(d): ‘The work to be executed or the goods or materials to be purchased are a matter of urgency.’
So far as the facts are concerned, what is said on behalf of the council is contained in an affidavit from the town clerk. It is clear from that that throughout these early considerations and negotiations of the matter it has just been assumed that the standing orders do not apply, the reason being that it was impossible for the council to send out specifications for tenders and to invite tenders because they had no heating design engineer on their staff, and for that reason they assumed that it was unnecessary to go out to tender, and they never sought to do so. As far as that point is concerned, I can see no excuse for not complying with the standing orders merely because they have not got a heating design engineer on their staff.
The second point taken is a point which has not been put forward in this court, that two of the applicants were in fact asked if they wished to submit a price. That clearly cannot be an invitation to tender there having been no specification whatsoever. Then it is said that it is a matter of urgency which excuses tenders, in that if the particular form of electrical storage heater which was thought necessary for these flats was to be reserved for the work, the contract had to be entered into at an early date. That, however, does not come within the wording of standing order 53(d). Finally it is said that by their very conduct the council directed that the standing orders in question should not apply pursuant to standing order 50. Standing order 50 provides:
‘Every contract made by the Council shall comply with these Standing Orders
Page 463 of [1970] 3 All ER 460
and no exception from any of the following provisions shall be made otherwise than by direction of the Council.’
It is suggested that the very fact that the council proceeded in the way they did shows that they were directing otherwise. In my judgment that is an impossible contention. As counsel for the applicants put it, one cannot, by ignoring the standing orders which they did, claim to have suspended them. This is a clear case where, if standing orders 52 and 53 are to be suspended, it must be done specifically by special resolution.
So far, therefore, as the merits are concerned I am sorry to say that the council have not complied with their own standing orders. The only question is whether it is a case in which an order of mandamus should issue. As to that, counsel for the council says that it cannot issue for two reasons: the first, as he puts it, is that here there was no statutory duty whatsoever, in respect of which the council were in breach. For my part I am wholly unable to accept that. No doubt the standing orders themselves are merely directions as to the functions inter se of the council and its officers, but s 266(2) of the Local Government Act 1933 provides:
‘All contracts made by a local authority or by a committee thereof shall be made in accordance with the standing orders of the local authority … ’
True it goes on then to provide that in the case of contracts for the execution of works—
‘… the standing orders shall—(a) require that, except as otherwise provided by or under the standing orders, notice of the intention of the authority or committee, as the case may be, to enter into the contract shall be published and tenders invited; and (b) regulate the manner in which such notice shall be published and tenders invited … ’
Accordingly as it seems to me, it is quite clear there is a statutory duty on the authority to comply with standing orders as they exist at the time, and if those standing orders has not been suspended, then there is a duty to comply with them.
Lastly, and this is the real point as I see it in the case, counsel for the council raises the point whether the applicants had a sufficient interest to enable them to come to this court and apply for an order of mandamus. It has always been recognised that there is quite a different criterion of interest which would justify an application for certiorari and one which would justify an application for mandamus. It is said that a far more stringent test applies in the case of mandamus and that an applicant must have, as it is put, a specific legal right. The mere fact that the applicants were electrical contractors does not, in my judgment, of itself give them a sufficient right, but if as I understand, they or some of them are ratepayers as well, then as it seems to me there would be a sufficient right to enable them to apply for mandamus.
I am reinforced in that view by a judgment, to which counsel for the council has very properly referred us; that of Curran J in Northern Ireland in R (McKee) v Belfast Corpn. It is unnecessary to refer to that case save to say that that was an application for a mandamus to comply with standing orders, points were taken that there was no statutory duty and that the applicants had no legal rights. Curran J decided against them, although he in fact did not issue the order of mandamus but adjourned the case, bearing in mind that there, as here, it was open for the council at any time if they so decided to suspend the standing orders in question.
For my part I am quite satisfied that this is a case where both on the merits and on the law an order of mandamus should go in the terms prayed for in the statement, but bearing in mind the right of the council to suspend their own orders, I would allow the order for mandamus to lie in the office and only issue if, within 14 days the council have not resolved to suspend standing orders.
Page 464 of [1970] 3 All ER 460
COOKE J. I agree.
FISHER J. I agree.
Order for mandamus.
Solicitors: Withers & Co (for the applicants); Sharpe, Pritchard & Co, agents for H G Culliss, Hereford (for the council).
Euan Sutherland Esq Barrister.
Practice Direction
(Costs: Taxation: Documents)
[1970] 3 All ER 464
PRACTICE DIRECTIONS
SUPREME COURT TAXING OFFICE
31 July 1970.
Costs – Taxation – Documents – System of charging – Page basis method – International Standards Organisation paper sizes – RSC Ord 62, App 2.
The amendmenta of App 2 to RSC Ord 62, which comes into force on 1 October 1970, discontinues the use of folios as a method of calculating the length of documents (apart from official shorthand writers’ charges which will still be calculated on a folio basis) and for drawing and copying substitutes a system of charging on a page basis, the charge being according to the size of the page or the utilised part thereof.
The purpose of the proposed change is to dispense with the laborious task of counting folios. In case of disagreement, the yardstick on which the page basis is founded is that of 3, 5, 6 and 8 folios of 72 words respectively for quarto (A5) foolscap (A4) draft and brief (A3) sizes of paper.
When calculating the number of pages, care should be taken to ensure that the total charged is in accordance with the number of complete pages, fractions of pages being aggregated. Charges for documents copied by any photographic process will continue to be allowed on a whole page basis.
The amendments also take into account the International Standards Organisation sizes of paper, principally those known as A3, A4 and A5, which are becoming more widely used, and sets out the comparable present paper sizes, ie: A5=quarto; A4=foolscap; and A3=brief. Although the actual ISO paper sizes differ slightly from those now in use, the average content of each size is substantially the same as that of its present counterpart and is to be treated as equal for all purposes of taxation. The amendments also reclassify the charges for letters.
Accordingly, all work affected by the changes in the Appendix (preparation and perusal of documents, copies and letters) undertaken from 1 October 1970 should be charged at the new rates.
These directions are made with the approval of the Lord Chancellor.
Paul Adams Esq, Chief Master
Newall v Tunstall
[1970] 3 All ER 465
Categories: CIVIL PROCEDURE
Court: LIVERPOOL ASSIZES
Lord(s): ASHWORTH J
Hearing Date(s): 13 MAY 1970
Interest – Damages – Personal injury – Payment into court – RSC Ord 22, r 5 – Law Reform (Miscellaneous Provisions) Act 1934, s 3 (1A) (added by Administration of Justice Act 1969, s 22).
In an action for damages for personal injuries the defendant paid into court the sum of £1,300. The plaintiff was advised that that was the right sum and that she would be wise to accept it, but instead of accepting it pursuant to RSC Ord 22, r 3a, the plaintiff applied to the defendant for interest under s 3 (1A)b of the Law Reform (Miscellaneous Provisions) Act 1934 (as added by s 22 of the Administration of Justice Act 1969), but the application was refused. Thereupon the plaintiff applied to the court for leave to accept the sum of £1,300 pursuant to RSC Ord 22, r 5c. On the question whether the plaintiff would be entitled to interest on the sum under s 3 (1A),
Held – No award of interest could be made because the order enabling the plaintiff to take the sum of money out of court was not an order against the defendant and could not, therefore, be a judgment within the meaning of s 3 (1A) of the 1934 Act (see p 466 g and p 467 j, post).
Jefford v Gee [1970] 1 All ER 1202 applied.
Dictum in Jefford v Gee [1970] 1 All ER at 1211 considered.
Notes
For the award of interest on damages, see 27 Halsbury’s Laws (3rd Edn) 10–11, para 10, and for cases on the subject, see 35 Digest (Repl) 211, 212, 179–182.
For the Law Reform (Miscellaneous Provisions) Act 1934, s 3 (1A), as added by the Administration of Justice Act 1969, s 22, see 49 Halsbury’s Statutes (2nd Edn) 1364.
Case referred to in judgment
Jefford v Gee [1970] 1 All ER 1202, [1970] 2 WLR 702.
Application
This was an application by the plaintiff, Sheila Newall, for leave to accept the sum of £1,300 which was paid into court by the defendant, Thomas Tunstall, on 26 January 1970. The facts are set out in the judgment.
G P Crowe for the plaintiff.
R L Ward for the defendant.
13 May 1970. The following judgment was delivered.
ASHWORTH J. This matter comes before me in the shape of a two-fold application made on behalf of the plaintiff. One part of the application involves an application for leave to accept the sum of £1,300 which was paid into court on behalf of the defendant on 26 January 1970, and the other part of the application relates to the costs consequent on the acceptance of that sum of £1,300. The accident out of which the claim arose occurred on 22 December 1968, the writ was issued on 15 April 1969, the statement of claim was dated 29 April 1969 and the defence was dated
Page 466 of [1970] 3 All ER 465
15 May 1969. The action was set down on 20 June 1969 and appeared in the Autumn Assize list for 1969. It was not reached but it was warned in January 1970 that it might be heard in the assizes in the Hilary sittings, and some days after the case appeared in the warned list the defendant paid into court the sum of £1,300, namely on 26 January 1970. The plaintiff was advised that that sum was the right sum, and that she would be wise to accept it, and that in order to accept it and get the benefit of the acceptance, she had to comply with the conditions of RSC Ord 22, namely to act within 14 days after the receipt of the notice of payment in. If she had taken that course she could have had the money and her costs and the proceedings would have been stayed. That follows RSC Ord 22, r 3.
Instead of taking that course, the plaintiff through her solicitors applied to the defendant’s solicitor for interest. In the letter the plaintiff’s solicitors indicated their intention to treat the sum of £1,300 as the right sum, but they invited the defendant’s solicitor to agree to pay interest on it. The reason for that application is to be found in s 22 of the Administration of Justice Act 1969. As this present application is a matter, so I am told, of some importance, it is perhaps desirable that I should read the new sub-s (1A) which has been added to s 3 of the Law Reform (Miscellaneous Provisions) Act 1934 by s 22 of the 1969 Act.
‘Where in any such proceedings as are mentioned in subsection (1) of this section [that is to say proceedings tried in any court of record for the recovery of any debt or damages] judgment is given for a sum which (apart from interest on damages) exceeds £200 and represents or includes damages in respect of personal injuries to the plaintiff … then (without prejudice to the exercise of the power conferred by that subsection in relation to any part of that sum which does not represent such damages) the court shall exercise that power so as to include in that sum interest on those damages … unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.’
Section 3(1) of the 1934 Act was in this form:
‘In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment … ”
Pausing there, it seems to me to be quite plain from these sections that Parliament had in mind the distinction between an order and a judgment; secondly, it seems to me equally plain that the new sub-s (1A) only comes into operation if the judgment is given for a sum exceeding £200.
What counsel for the plaintiff says is that by obtaining the leave, which he now requires to take out the sum of £1,300 which was paid into court, he at least obtains an order, and that in the circumstances the order is equivalent to a judgment. Fortunately for me the whole topic of this new sub-s (1A) was considered by the Court of Appeal in Jefford v Gee. In that judgment the Court of Appeal dealt with the situation prevailing when money is paid into court. I do not propose to read it all, but it is important to note that the Court of Appeal expressly said that payment into court is not made and cannot be expected to be made in respect of interest. In the judgment it was said that the defendant is only allowed to make payment into court in satisfaction of the cause of action; interest being no part of the cause of action, he cannot make payment in respect of it. Then comes the material passage ([1970] 1 All ER at 1211, [1970] 2 WLR at 713):
Page 467 of [1970] 3 All ER 465
‘A defendant should, therefore, in future make his payment into court in the same way as he always has done, namely, an amount which he says is sufficient to satisfy the cause of action apart from interest. If a plaintiff recovers more (apart from interest) he gets his costs. If he recovers no more (apart from interest) he does not get his costs from the date of the payment in and he will have to pay the defendant’s costs. A plaintiff will … in either case, get the appropriate award of interest irrespective of the payment into court.’
It seems to me that this paragraph contemplates an action which proceeds to trial and results in a judgment, and that judgment may be for a sum greater than the payment in, or equal to the payment in, or less than the payment in. Whichever figure the court awards earns a rate of interest, because it is a judgment for an award of damages for personal injuries. It may be that if payment into court exceeds the amount of the judgment, there will be a fairly close balance between the interest which the plaintiff recovers under the subsection and the amount of costs which in the normal course he will have to pay the defendant in respect of the period after the payment in.
If the plaintiff takes money out of court in satisfaction of the claim, that is the end of the case. He gets no interest because there is no judgment. The 1934 Act only entitles a plaintiff to interest when he gets a judgment. That is considering two situations: one is the normal one when within 14 days the plaintiff accepts the sum paid in. RSC Ord 22, r 3(4), provides:
‘On the plaintiff accepting any money paid into court all further proceedings in the action or in respect of the specified cause or causes of action, as the case may be, to which the acceptance relates … shall be stayed.’
It is quite manifest that in that normal case there is not any judgment, because on the acceptance of the money the proceedings are stayed; but, says counsel for the plaintiff, the current situation is different because he did not adopt the normal procedure, for the plaintiff, of accepting the money within 14 days; it comes under RSC Ord 22, r 5—applying for leave to take money out—which provides:
‘If any money paid into court … is not accepted in accordance with Rule 3, the money remaining in court shall not be paid out except in pursuance of an order of the Court, which may be made at any time before, at or after the trial or hearing of the action … ’
Counsel for the plaintiff says that there is this difference, that in order to obtain the money he needs an order. So far so good, but he says that in obtaining an order that order is equivalent to a judgment, although he would have had no judgment if he had taken the money out in 14 days. If I make the order which he seeks, he will in effect have got a judgment. It is true that this particular situation is not directly covered by Jefford v Gee, and that that case only, in the terms which I have read, covers the case of the plaintiff taking money out of court in a normal case within 14 days. But I can see no possible ground for distinction between those two situations so far as a judgment is concerned.
What is required is an order. It is not an order against the defendant, it is an order enabling the plaintiff to take out a sum of money, and in my view, whatever the hardship may be said to be, and I am not at all sure that there is any, it is quite impossible for me to exercise the power which is said to reside in the court of awarding interest on this sum of £1,300. What one has to keep in mind all though this matter is the practical aspect of a payment into court. A payment into court may be regarded in a sense as insurance by the defendant. He insures in respect of his costs by making a payment into court which is in fact an offer, and if the plaintiff
Page 468 of [1970] 3 All ER 465
declines it and the action goes on, the defendant has insured against the costs which he might otherwise have to pay on the plaintiff obtaining judgment. It can also be regarded from the plaintiff’s point of view that payment into court is an offer made by the defendant. To quote an old saying—‘a bird in the hand is often worth two in the bush’, and that is what the plaintiff has to consider: shall he insure against possible ultimate failure in the action by taking out the money, or would he prefer to go on? It is a gamble whichever way one looks at it, and it is a gamble which is governed by rules of court and by statutory provisions. For my part I see no reason to be particularly tender to a plaintiff who has chosen not to accept an offer which was made, although her present application is not for a larger sum by way of damages but merely for the interest on the sum already paid in. To put it quite simply she wants more, and I see no reason whatever to interpret what is plain language in a way sympathetic towards a plaintiff who has not taken advantage of an offer which has been staring her in the face directly the money was paid into court.
It is true that in a later passage in Jefford v Gee ([1970] 1 All ER at 1211, [1970] 2 WLR at 713) the Court of Appeal suggests that a practical way of dealing with the type of situation which arose here is for the plaintiff to ask the defendant to pay half the interest, because in that way the defendant may escape the burden in regard to interest by halving it, and the plaintiff likewise may escape the burden of taxation which falls on interest payments. All that I would venture to say is that, while this is said to be the better course, I am not in the least surprised that the defendant in this case chose not to do it, and for my part I can visualise that in possibly most cases a defendant, who has made a payment into court by which a plaintiff is tempted, is best advised thereafter to stand on his position and make no increase at all. However, the particular passage is only so to speak a guidance about what may be better tactics in some cases. I am quite certain that it was not necessary for the defendant to take this course in this case, and I would not dream of criticising him or his advisers for not having done it.
Accordingly insofar as this application is one for interest, I must refuse it. Insofar as this application is for leave to take the money out of court, I grant it, because there is no objection to such an order. But this second part is linked with an application by counsel for the plaintiff in an alternative form, that he should have his costs notwithstanding the fact that he did not take the money out, or at least that he should not have to pay the defendant’s costs. Insofar as he is asking for an order now that the defendant should pay the costs, I would only say that the application lacks nothing in boldness. It is really asking a great deal for a plaintiff, who has declined what is admitted to be a sensible offer, to come and ask that the defendant should pay the costs of an unsuccessful application to increase it. Nor am I disposed to give the plaintiff any other costs which might have been incurred to date in the action since then. I was tempted for a moment to consider depriving the defendant of his costs since the payment in, but I believe that the true way of looking at costs since payment in is to say that they are directed mainly, if not entirely, to this interest application that I have been dealing with, and which the defendant has won, and I can see no reason why he should not have the costs following his success. Accordingly the order should be in the normal form—leave to the plaintiff to take the money out of court, the costs incurred since the date of payment in to be the defendant’s in any event.
Application to take £1,300 out of court granted. Application for interest dismissed.
Solicitors: E Rex Makin & Co, Liverpool (for the plaintiff); Campbell & Co, Liverpool (for the defendant).
K Buckley Edwards Esq Barrister.
R v Cardiff Coroner, ex parte Thomas
[1970] 3 All ER 469
Categories: ADMINISTRATION OF JUSTICE; Judiciary
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JAMES AND COOKE JJ
Hearing Date(s): 6 JULY 1970
Coroner – Inquest – Verdict of suicide – Application for certiorari to quash – Insufficient evidence of suicidal intent – Further evidence sought to be called – Whether new inquest should be ordered.
At the inquest of the deceased, evidence was given by a police sergeant of the discovery of the body in a river and a post mortem report showed that the condition of the body was such that it was impossible to ascertain the cause of death. The applicant, the deceased’s widow, gave evidence that although he had had a background of illness, the deceased’s pain was not particularly bad at the time before his death. The coroner recorded a verdict of suicide. The applicant applied for an order of certiorari to quash the verdict on the ground of lack of evidence of suicidal intent and for a fresh inquest to be ordered. The coroner sought to adduce further evidence in the form of affidavits by members of the deceased’s family, to the effect that the deceased was in pain and generally depressed, in order to show that if a fresh inquest were to be taken, the verdict would also be one of suicide.
Held – An order of certiorari would go to quash the verdict of suicide and a fresh inquest would be ordered because—
(i) satisfactory evidence of suicidal intent was always necessary to establish suicide as the cause of death, which requirement had not been altered by the passing of the Suicide Act 1961 (see p 470 j, p 471 h and p 472 f and g, post).
Dicta of Lord Cozens-Hardy MR and Fletcher-Moulton LJ in Southall v Cheshire County News Ltd (1912) 5 BWCC at 252, 253 applied.
(ii) once a prima facie case had been established for quashing a verdict on the ground of insufficiency of evidence, the court would not uphold the verdict merely because the coroner deposed that in view of fresh evidence contained in affidavits the verdict at a new inquest would be the same (see p 471 j to p 472 a, e and g, post).
Re Davis (decd) [1967] 1 All ER 688 explained.
Notes
For certiorari to quash a coroner’s inquisition, see 8 Halsbury’s Laws (3rd Edn) 582–532, paras 1001–1003, 1007, 1008, and for cases on the subject, see 13 Digest (Repl) 164–167, 302–339.
For the Suicide Act 1961, see 8 Halsbury’s Statutes (3rd Edn) 519.
Cases referred to in judgment
Davis (decd), Re [1967] 1 All ER 688, [1968] 1 QB 72, [1967] 2 WLR 1089, Digest Supp.
R v Huntbach, ex parte Lockley [1944] 2 All ER 453, [1944] KB 606, 113 LJKB 360, 13 Digest (Repl) 166, 325.
Southall v Cheshire County News Co Ltd (1912) 5 BWCC 251, 34 Digest (Repl) 472, 3372.
Motion for certiorari
This was an application by Doris Eileen Thomas, widow of the deceased, William David Thomas, for an order pursuant to s 6 of the Coroners Act 1887 and s 19 of the Coroners (Amendment) Act 1926 to quash an inquisition on the inquest of the deceased taken on 20 March 1969 before William Thomas Adams Esq, H M Coroner for the city of Cardiff, and to order another inquest be held touching the death of William David Thomas. The facts are set out in the judgment of Lord Parker CJ.
Page 470 of [1970] 3 All ER 469
M T Pill for the applicant.
E J Prosser for the coroner.
6 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel for the applicant moves for an order of certiorari to remove and quash an inquisition on an inquest held on 20 March 1970 by Her Majesty’s Coroner for the city of Cardiff, on the body of one William David Thomas, which was found in the River Taff on 14 March 1969, whereby the coroner recorded a verdict of suicide.
From the evidence given at the inquest, the true inference was that the deceased, who was on night shift at a sorting office, ending at about 7.00 am, entered the waters of the River Taff beside a bridge where a footpath led to the river, which was some 200 yards away from his home. The inference was that he was on his way home at the time, and indeed he had bought sausages on his way home.
The following matters emerge from the applicant’s evidence: there had been a background of illness; he had been wounded in the legs during the last war; he suffered from nervous eczema; and in addition he had a wart on his right foot which caused him considerable pain, indeed he found difficulty in sleeping, and had been taking sleeping tablets. According to the applicant, however, his pain was not particularly bad at the time, and indeed, according to her, he had been very happy and had been dancing about with his daughter the night before. There was a history of his having been to a hospital at Whitchurch some 17 years before, but since then he had not shown any sign of mental disturbance. According to the applicant he was from time to time worried about the River Taff flooding and causing damage to their home, and her suggestion was that he might have gone down to the river in order to see the height of the water. She also suggested that it was possible that he had been assaulted and robbed, but the evidence, if not then at any rate later, was that his full pay packet was on him at the time. Accordingly, this was a case of accident or of suicide.
It is urged by counsel for the applicant that there was no evidence for the coroner to bring in the verdict of suicide, the evidence before him consisting of the applicant’s evidence to which I have referred, the evidence of a police sergeant of the discovery of the body, and a post mortem report showing that the condition of the body was such that it was impossible to ascertain the exact cause of death. It is urged that on that evidence the coroner could not properly find a verdict of suicide. Suicide, it is said, is not to be presumed; indeed the presumption is against it, and it must be strictly proved, not merely as a matter of probability.
Reference in this connection is made to R v Huntbach, ex parte Lockley. According to the headnote, it was held that suicide is never to be presumed, and in that case the inquisition was quashed. In the course of giving judgment, Viscount Caldecote CJ referred to a number of cases, and said ([1944] 2 All ER at 456, [1944] KB at 608):
‘… it is not probability which determines verdicts but proved facts, and if the facts cannot be proved, there is no alternative but to return an open verdict.’
Reference was made, amongst other cases, to Southall v Cheshire County News Co Ltd, to which I must refer in a moment. That case was of course before the Suicide Act 1961, under which suicide ceased to be a crime, but in my judgment it is clear that the approach to the matter is exactly the same today. Indeed, that is to be deduced from the decision in Re Davis (decd), in the Court of Appeal, where Sellers LJ said ([1967] 1 All ER at 690, [1968] 1 QB at 82):
‘Suicide is not to be presumed. It must be affirmatively proved to justify the finding. Suicide requires an intention.’
Page 471 of [1970] 3 All ER 469
Perhaps the nearest case to the present is Southall v Cheshire County News Co Ltd () to which I have just referred. That was an appeal by employers from an award of a county court judge in regard to workmen’s compensation. The workman was found drowned in a canal 400 yards from his home, and the county court judge, in the light of a background of traumatic neurasthenia, found he had committed suicide. Lord Cozens-Hardy MR said ((1912) 5 BWCC at 252, 253):
‘Suicide is never to be presumed … The Judge seems to have thought it was more likely that the man committed suicide than anything else. The Judge is not entitled to act upon a surmise of that nature. It is not at all a case in which there are facts from which an inference may be drawn.’
Fletcher Moulton LJ put the matter very shortly, thus ((1912) 5 BWCC at 253):
‘The body of the man was found in the canal. There was no evidence to show how he came there. We should presume against suicide. It is quite clear that the evidence shows that the man had suffered from his accident and that it had affected his mind so that he was restless. The possibility that it might be suicide is much greater than it would be in an ordinary case; but it does not go beyond that. Even if we assume the man did go and walk along the bank of the canal, it is very possible he might have tripped his foot and fallen in. You have not excluded that as a reasonable possibility. Nobody suggests that the depression had ever taken any suicidal form. There was no evidence as to how he came by his death.’
Counsel for the coroner nevertheless, in the light of those authorities, says that in the present case the coroner was entitled to arrive at the verdict of suicide. It was said, in the first place, that he had himself local knowledge that any danger of flooding to which the applicant had referred had by that time ceased, and that measures had been taken against flooding, but in my judgment that does not dispose of the possibility that both the applicant and the deceased nevertheless thought that a danger of flooding still remained.
In those circumstances it does not seem to me that the local knowledge of the coroner of the factual position should be admitted. Finally it was said that the coroner had before him the statement which the applicant had made to the police earlier on, and that if one looks at that statement and compares it with her evidence at the inquest, there were discrepancies. I have considered both documents, the notes of evidence and the statement made to the police, and on the whole they are surprisingly alike. All that can be said is that when it came to giving evidence at the inquest, she, as it were, belittled the pain and suffering caused by the war wounds, the eczema and the wart on the right foot, whereas in her original statement to the police she had been inclined to emphasise those matters. In my judgment this is really a plain case in which the coroner said that because there was no satisfactory evidence of accident, therefore it must be a case of suicide, albeit that there was no satisfactory evidence of any suicidal intent. In my judgment that is a wrong approach to the matter, and accordingly prima facie an order of certiorari should go to quash this inquest.
The matter, however, does not rest there because the coroner states in his affidavit:
‘If the Court consider that there was insufficient evidence at the time of the Inquest to support the verdict of suicide then I ask the Court to say that in view of the fresh evidence contained in the Affidavits hereinbefore referred to if a fresh Inquest were now to be taken the verdict at such Inquest would also be the verdict of suicide … ’
Page 472 of [1970] 3 All ER 469
For my part, I cannot accept that that is the right approach to the matter. In the case of Re Davis (decd), to which I have already referred, there is no doubt that the court said that this court would only quash the inquisition and order a fresh inquest if it were probable that there would be a different verdict at the new inquest. In Re Davis (decd), the applicant sought to adduce the evidence of a doctor, and what the court said was: ‘If we accept all that the doctor says in his affidavit, that would not enable the coroner to come to any different conclusion.' Here the evidence is not to be adduced by the applicant but, as it were, to be called by the coroner in rebuttal of the applicant’s statements. No one can tell whether the witnesses will give the same evidence as appears on their affidavits. They may not go so far, they may go further. Those affidavits take the form largely of evidence from members of the deceased’s family to the effect that he was in pain, that he was depressed, that he was having difficulties at home and that he was extremely worried and depressed at the fact that the applicant went out to work and was, as he thought, neglecting the children.
This court has been asked to rule that such evidence would not affect the matter at all. It is said that that would only be evidence of a background of bad health and of domestic difficulty, and would not be sufficient to evince any suicidal intent. That may well be so, but until the witnesses have given their evidence, and it is seen how far they go in that evidence, it seems to me quite impossible for this court to rule in the matter at all. It follows, in my judgment, that an order of certiorari should go to quash this inquest, and that there must be an order for a fresh inquest which, to save the coroner embarrassment, had better be heard by a different coroner.
JAMES J. I agree that an order should go, that the inquest should be quashed and a further inquest ordered, probably before a new coroner. Suicide is voluntarily doing an act for the purpose of destroying one’s own life whilst one is conscious of what one is doing, and in order to arrive at a verdict of suicide, there must be evidence that the deceased intended the consequences of the act. If it be the case that questions of accident and questions of suicide arise, as arose here, the mere fact that accident was not established does not mean to say that suicide is established. This, for my part, I fear has been the approach of the coroner, and because there were indications in the evidence that militate against a finding of accident he therefore found suicide. I agree, as I say, that the order should go.
COOKE J. I agree.
Inquisition quashed and order for fresh inquest.
Solicitors: Gibson & Weldon, agents for Phillips & Buck, Cardiff (for the applicant); Adams & Black, Cardiff (for the respondent).
N P Metcalfe Esq Barrister.
Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd
[1970] 3 All ER 473
Categories: BANKING AND FINANCE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND BUCKLEY LJJ
Hearing Date(s): 25, 26, 29, 30 JUNE, 1, 29 JULY 1970
Bank – Lien – Cheque – Banker’s lien on cheque presented for collection – Customer having two accounts – Agreement that account in debit be frozen for four months in absence of materially changed circumstances – Voluntary liquidation after two months – Cheque received for credit of current account few hours before liquidation – Proceeds credited next day – Whether bank entitled to set-off credit balance in current account against account in debit.
The plaintiffs’ bank account with the defendant (‘the bank’) being in debit in the sum of £11,339, in April 1968 a no 2 account was opened as a new trading account. It was agreed, inter alia, on the opening of the no 2 account that the original trading account, the no 1 account, be frozen with no more transactions on it for four months unless there was a material change of circumstances. On 20 May 1968, the plaintiff called a meeting of creditors for 12 June to consider a resolution to wind up the company, and a notice of the meeting reached the bank. On the morning of 12 June, a cheque for £8,611 5s 10d drawn by G in favour of the plaintiffs was paid into a branch of the bank in another town for the credit of the plaintiffs’ no 2 account. In the afternoon of the same day, by a resolution duly passed at an extraordinary general meeting and confirmed at a meeting of their creditors the plaintiffs went into voluntary liquidation. G’s cheque was credited to the no 2 account on 13 June and cleared on 14 June, and other transactions took place in relation to the account as a result of which on 14 June there was a credit balance in the no 2 account of £8,634. The no 1 account was still overdrawn in the sum of £11,339. The liquidator claimed that the sum of £8,611 5s 10d in the no 2 account should be applied for the benefit of the general body of creditors and that the bank should prove in the liquidation for the £11,399. The bank claimed that it was entitled to take the £8,611 5s 10d to pay off pro tanto the indebtedness on the no 1 account saying that the agreement for keeping the two accounts separate came to an end on the liquidation and that it could exercise a banker’s lien on the £8,611 5s 10d or combine the two accounts. On appeal by the plaintiffs from an order of Roskill J,
Held – The liquidator of the plaintiffs was entitled to recover the amount of the credit on the no 2 account from the bank and the bank must prove in the liquidation for the amount due on the no 1 account, because—
(i) the agreement of April 1968 being to keep the accounts separate for four months unless the bank gave notice to determine it by reason of a material change of circumstances and the bank never having taken any steps to determine it, the agreement (per Lord Denning MR and Buckley LJ) remained in operation over the liquidation of the plaintiffs (see p 478 j to p 479 b and p 490 b, post) (British Guiana Bank v Official Receiver (1911) 104 LT 754 distinguished) or (per Winn LJ) until the rights of the plaintiffs passed to the liquidator when there were two accounts still in existence (see p 485 b and f, post);
(ii) (Buckley LJ dissenting) the provisions of the Bankruptcy Act 1914, s 31, as applied by the Companies Act 1948, s 317, did not apply because the agreement separated the no 1 account from the mutual dealings of the parties (see p 479 c and p 486 d, post).
Decision of Roskill J [1970] 1 All ER 33 reversed.
Page 474 of [1970] 3 All ER 473
Notes
For combination of different accounts, see 2 Halsbury’s Laws (3rd Edn) 172, 173, para 322, for a banker’s lien and its exercise, see ibid 210–213, paras 390–395, and for cases on the subject, see 3 Digest (Repl) 321–331, 992–1048.
Cases referred to in judgments
Arab Bank Ltd v Barclays Bank (Dominion, Colonial and Overseas) [1954] 2 All ER 226, [1954] AC 495, [1954] 2 WLR 1022, 3 Digest (Repl) 194, 384.
Bolland v Bygrave (1825) Ry & M 271, 171 ER 1017, 3 Digest (Repl) 321, 994.
Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833, 88 LJKB 85, 119 LT 727, 3 Digest (Repl) 296, 914.
Brandao v Barnett (1846) 3 CB 519, 12 Cl & Fin 787, [1843–60] All ER Rep 719, 7 LTOS 525, 136 ER 207, 3 Digest (Repl) 326, 1017.
British Guiana Bank v Official Receiver (1911) 104 LT 754, 3 Digest (Repl) 332, * 947.
Buckingham & Co v London and Midland Bank Ltd (1895) 12 TLR 70, 3 Digest (Repl) 238, 618.
Daintrey, Re, ex parte Mant [1900] 1 QB 546, 69 LJQB 207, 82 LT 239; affd CA [1900] 1 QB 571, 4 Digest (Repl) 423, 3749.
European Bank, Re, Agra Bank Claim (1872) 8 Ch App 41, 27 LT 732, 3 Digest (Repl) 328, 1029.
Garnett v McKewan (1872) LR 8 Exch 10, [1861–73] All ER Rep 686, 42 LJEx 1, 27 LT 560, 3 Digest (Repl) 243, 642.
Giles v Perkins (1807) 9 East 12, 103 ER 477, 3 Digest (Repl) 229, 565.
Greenhalgh (W P) & Sons v Union Bank of Manchester Ltd [1924] 2 KB 153, [1924] All ER Rep 338, 93 LJKB 844, 131 LT 637, 3 Digest (Repl) 180, 313.
Greenwood Teale (T & H) v William Williams, Brown & Co (1894) 11 TLR 56, 3 Digest (Repl) 331, 1046.
Joachimson (N) (a firm name) v Swiss Bank Corpn [1921] 3 KB 110, [1921] All ER Rep 92, 90 LJKB 973, 125 LT 338, 3 Digest (Repl) 193, 376.
Keever (a bankrupt), Re, ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd [1966] 3 All ER 631, [1967] Ch 182, [1966] 3 WLR 779, Digest (Cont Vol B) 59, 7903a.
Misa v Currie (1876) 1 App Cas 554, [1874–80] All ER Rep 686, 45 LJQB 852, 35 LT 414, 3 Digest (Repl) 327, 1021.
Morel (E J) (1934) Ltd, Re [1961] 1 All ER 796, [1962] Ch 21, [1961] 3 WLR 57, Digest (Cont Vol A) 50, 915a.
Mutton v Peat [1900] 2 Ch 79, 69 LJCh 484, 82 LT 440, 3 Digest (Repl) 305, 955.
Rolls Razor Ltd v Cox [1967] 1 All ER 397, [1967] 1 QB 552, [1967] 2 WLR 241, Digest Supp.
Young v Bank of Bengal (1836) 1 Moo Ind App 87, 1 Moo PCC 150, 18 ER 34, 3 Digest (Repl) 331, 1043.
Appeal
This was an appeal by the plaintiffs, Halesowen Presswork & Assemblies Ltd, from an order of Roskill J, dated 5 November 1969 and reported [1970] 1 All ER 33. The plaintiffs claimed the sum of £8,634 7s 4d, alternatively £8,611 5s 10d, as money deposited with the defendant bank, Westminster Bank Ltd, in one of two accounts maintained by the plaintiffs and over which the bank purported to exercise a right of lien on the plaintiffs’ voluntary liquidation on 12 June 1968. Roskill J held that the bank was entitled to set-off the credit balance on one account against the debit on the other account. The facts are set out in the judgment of Lord Denning MR.
Allan Heyman QC and M Kennedy for the plaintiffs.
R M Yorke and K H T Schiemann for the bank.
Cur adv vult
Page 475 of [1970] 3 All ER 473
29 July 1970. The following judgments were delivered.
LORD DENNING MR. The plaintiffs, Halesowen Presswork & Assemblies Ltd, were dealers in kitchenware. They were controlled by Mr Jack Lewis and his family. They carried on business in Halesowen, Worcestershire. They kept their trading account at Lloyds Bank, Halesowen, where they had a large turnover; but they had a loan account with the Westminster Bank at Colmore Row, Birmingham. The plaintiffs were closely associated with two other companies of the Lewis family. One was Lewis Distributors Ltd. The other was Jack Lewis Property (Halesowen) Ltd. These two companies also banked with the defendant Westminster Bank Ltd, but their accounts were kept at the Marble Arch branch in London.
In February 1968, the Westminster Bank was much concerned with the accounts of these three associated companies. It was disturbed at the size of the overdrafts. On 15 February 1968, the plaintiffs owed the bank a sum of £11,338 on the Birmingham account. The other two companies owed in £143,289 and £9,387 on the Marble Arch accounts. The bank put much pressure on the Lewis family to secure this indebtedness, but without success. A little later the three companies called in a chartered accountant, Mr Bernard Phillips, to help them sort out their affairs. Eventually an important meeting was held on 4 April 1968 between high officers of the bank and Mr Frank Lewis and Mr Bernard Phillips. At that date the overdraft at the Marble Arch branch was £146,288, owing by Lewis Distributors Ltd, and an overdraft at the Birmingham branch was £11,339, owing by the plaintiffs. At this meeting, the Lewis concerns wanted time to sort out their affairs. The bank wanted to get the plaintiffs to transfer the trading account which they had at Lloyds Bank, Halesowen, to the branch of the defendant bank at Colmore Row, Birmingham. It appeared that the plaintiffs had big cheques coming in regularly from a company called Girling Ltd, which amounted to as much as £15,000 at a time. The plaintiffs used to pay these cheques into their trading account at Lloyds Bank at Halesowen. That account was conducted on a credit basis, and they paid their wages out of it. At the meeting Mr Frank Lewis told the bank officers, quite frankly, that they did not pay their trading recipients into the defendant bank because they were afraid that the bank would seize on to them to meet the overdraft.
The upshot of the meeting was that the plaintiffs agreed to transfer their trading account from Lloyds Bank at Halesowen to the defendant bank at Colmore Row, Birmingham; so that, in future, there would be two accounts of the plaintiffs at Colmore Row, Birmingham. One of these was the existing account on which there was an overdraft of £11,339. This was to be frozen with no more transactions on it. It was to be the no 1 account. Then there was to be opened a new account into which were to be paid all the cheques coming in to the plaintiffs. This was to be the no 2 account, and was to be kept always in credit. It was to be debited with the interest on the overdraft on the no 1 account. These arrangements were to continue for the next four months unless there was a material change of circumstances.
On 17 April 1968, the bank sent a letter to the plaintiffs setting out the arrangements, including these important sentences:
‘So far as the existing account at our Birmingham Branch of [the plaintiffs] is concerned, this is to be frozen at its present figure and no further transactions save for permanent reduction are to take place thereon … As part of the arrangements it was agreed that all of the [plaintiffs’] business should be passed through [the bank], and I look to you, therefore, to arrange for the account with Lloyds Bank to be closed so that all transactions henceforward may be passed through a new account to be opened at Birmingham Branch. This new account is, of course, to be maintained strictly on a credit basis and you should bear in mind that the bank charges, including interest on the indebtedness at Birmingham, will, in the usual way, be debited to this new account … you undertook to come to a decision regarding a sale of [the plaintiffs] … within the next four months, and, in the absence of materially changed circumstances
Page 476 of [1970] 3 All ER 473
in the meantime we for our part will adhere to the present scheme of arrangements for this period of time.’
On 22 April 1968, the plaintiffs, by Mr Frank Lewis, replied: ‘I accept the conditions and arrangements that have been laid out.' Accordingly, there were thenceforward from 26 April 1968 two accounts of the plaintiffs at the Westminster Bank, Colmore Row, Birmingham. One was the no 1 account, which was frozen, with an overdraft of £11,339. The other was the no 2 account, which operated on a credit basis, so that the incoming cheques were always sufficient to cover the outgoings.
The plaintiffs, however, got further into the mire. Only one month later they decided to go into a creditors’ voluntary winding-up. On 20 May 1968, they called a meeting for 12 June 1968 to consider a resolution to wind up. They also gave a notice to the creditors, pursuant to s 293 of the Companies Act 1948, stating:
‘… a meeting of the Creditors of [the plaintiffs], will be held at The Hanover Grand 6 Hanover Street, London, W.1. on Wednesday, 12th June, 1968, at 2.30 o’clock in the afternoon, for the purposes mentioned in Section 294 and 295 of the said Act.’
One of those notices reached the bank. It might, at this time, have determined the arrangements with the plaintiffs because of a material change of circumstances, but it did not do so. It decided to continue the no 2 account, but to keep a close watch on it. It told the plaintiffs that they were to be kept in credit at all times.
Now we come to the crucial day, 12 June 1968. In the morning of that day, at about 12 noon, one of the staff of the plaintiffs went to the branch of the bank at Halesowen and paid in a cheque drawn by Girling Ltd in favour of the plaintiffs for £8,611 5s 10d. In the afternoon at 2.30 pm, the resolutions were passed for a creditors’ voluntary winding-up; and Mr Bernard Phillips was appointed liquidator. So the winding-up commenced at 2.30 pm. Nevertheless, the bank continued to operate the two accounts as before. On 12 June 1968, the cheque for £8,611 5s 10d was sent by the Halesowen branch to the branch at Colmore Row, Birmingham. It was credited to the plaintiffs’ no 2 account on the next day, 13 June 1968. It was cleared on 14 June 1968. The plaintiffs drew a wages cheque on the no 2 account for £1,075 which the bank honoured. There were one or two other items to the credit of the account. The result on 14 June 1968 was that the credit balance on the no 2 account was £8,634 7s 4d. But the plaintiffs then owed the bank an overdraft on the no 1 account—a sum of £11,339.
The liquidator claims that the sum of £8,611 5s 10d should be applied for the benefit of the general body of creditors and that the bank should prove in the liquidation for the £11,339. But the bank claims that it can take the £8,611 5s 10d to pay off pro tanto the indebtedness of £11,339 on the no 1 account. It says that the agreement for keeping the two accounts separate came to an end on the liquidation; and that it can exercise a banker’s lien on the £8,611 5s 10d, or, at any rate, it can combine the two accounts.
At the hearing before Roskill J ([1970] 1 All ER 33, [1970] 2 WLR 754), the liquidator asserted that, at the meeting of 4 April 1968, the bank positively agreed that it would under no circumstances seek to set-off any balance on the no 2 account against the frozen overdraft on the no 1 account. But the bank officers denied any such agreement. The judge found that there was no such agreement. There is no appeal against his finding on that point. So we are left with the agreement of April 1968 which I have stated, namely that no 1 account should be frozen; that no 2 account should be kept separate; and that the arrangement was to last for four months unless the circumstances materially changed. It is agreed that, when the notice was given under s 293 on 20 May 1968, the circumstances did materially change. So the bank could, if it chose,
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have terminated the arrangement then by giving reasonable notice. If it had done so, the plaintiffs would, of course, not have paid any more cheques into the no 2 account. They would have been at liberty to pay them once again into Lloyds Bank and would no doubt have done so. So the bank, for its own benefit, did not choose to terminate the arrangement. It had the benefit of continuing the no 2 account (into which incidentally was debited the interest on the no 1 overdraft). Yet the bank says that, at the moment of winding-up, the arrangement came to an end; with the result that it could then combine the two accounts.
Counsel for the bank relied on the specialities of banking law. He claimed that, as soon as the cheque for £8,611 5s 10d was handed to the branch at Halesowen, the bank had a lien on it. It could not, he said, exercise the lien before the liquidation; but at 2.30 pm, as soon as the winding-up commenced, it was entitled to exercise the lien on the cheque for the amount owing to it. I cannot help thinking that the use of the word ‘lien’ in this context is misleading. The lien which we call a ‘banker’s lien’ has no resemblance to any other kind of lien. In the ordinary way, a lien gives a creditor a right to retain possession of a thing until his account is paid. If the creditor lets it out of his possession he loses his lien. The creditor has no right to sell the thing or dispose of it. He is only entitled to retain possession. But when a banker has a lien over a cheque belonging to a customer or its proceeds, it means that the banker can retain the cheque or its proceeds until the customer has paid the banker the amount of his overdraft; and the banker can realise the cheque and apply the proceeds in discharge pro tanto of the overdraft. The banker does not lose the lien by allowing the customer to draw against the proceeds. That only means that he has released his lien to that extent. The result is that, in the ordinary way, when a customer has one account with the bank which is in credit, and another which is in debit, the banker has a ‘lien’ on the credit in the one account which entitles him to apply that credit in discharge of indebtedness on the other account. Seeing that the banker’s lien is no true lien, in order to avoid confusion, I think that we should discard the use of the word ‘lien’ in this context and speak simply of a banker’s right to combine accounts’; or a right to ‘set-off’ one account against the other.
Using this phraseology, the question in this case is: suppose a customer has one account in credit and another in debit. Has the banker a right to combine the two accounts so that he can set-off the debit against the credit, and be liable only for the balance? The answer to this question is: Yes, the banker has a right to combine the two accounts whenever he pleases, and to set-off one against the other, unless he has made some agreement, express or implied, to keep them separate. This principle was stated and applied in two cases decided on the same day—8 November 1872. One was Re European Bank, Agra Bank Claim in the Court of Appeal in Chancery. The other was Garnett v McKewan in the Court of Exchequer. It has been applied several times since, such as T & H Greenwood Teale v William Williams, Brown & Co and Re Keever (a bankrupt), ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd. Conversely, the customer has a right to call on the banker to combine the two accounts, and to set-off one against the other unless there is some agreement, express or implied, to the contrary: see Mutton v Peat.
In all the cases which I have just mentioned, there was no agreement to keep the accounts separate. They must be contrasted with another group of cases where the court has found an agreement to keep the accounts separate. A good instance is where a bank opens two accounts for a customer, one of which is a loan account on which the customer is allowed to borrow up to a named sum, and the other is a current account, which the customer agrees to keep in credit. In such a case there is
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usually an implied agreement that the bank will not combine the two accounts, or set-off one against the other, without the consent of the customer. That is shown by Bradford Old Bank Ltd v Sutcliffe ([1918] 2 KB 833 at 847), when Scrutton LJ said:
‘The sums paid into the current account are appropriated by the customer to that account, and cannot be used by the bank in discharge of the loan account without the consent of the customer. No customer could otherwise have any security in drawing a cheque on his current account if he had a loan account greater than his credit balance on the current account.’
Similarly, in Re E J Morel (1934) Ltd there was an implied agreement to keep them separate.
I would observe that, in W P Greenhalgh & Sons v Union Bank of Manchester Ltd ([1924] 2 KB 153 at 164, [1924] All ER Rep 338 at 343), Swift J gave voice to an important dictum. He said:
‘If a banker agrees with his customer to open two or more accounts, he has not, in my opinion, without the assent of the customer, any right to move either assets or liabilities from the one account to the other; the very basis of his agreement with the customer is that the two accounts shall be kept separate … ’
I do not think that that dictum is correct. It is quite contrary to the long line of cases which show that a banker is entitled to combine two accounts unless there is an agreement to keep them separate. One has to find an agreement to keep them separate. The mere opening of two accounts does not do it.
The question, therefore, in the present case is whether there was an agreement by the bank to keep the two accounts separate. Clearly there was. There was an agreement whereby, in consideration of the company taking its trading account from Lloyds and giving it to the bank, so as to become the no 2 account, the bank would honour all cheques on the trading account (no 2) and would not combine it with the loan account (no 1). If the bank had not agreed to this course, the plaintiffs would undoubtedly have continued their trading account at Lloyds. They would not have paid any of their cheques into the bank—and certainly not this cheque of £8,611 5s 10d—if they had thought that the bank would use it to pay off the £11,339 due on the loan account. They would have paid the £8,611 5s 10d into some other bank.
Counsel for the bank admitted that such an agreement was made and was operative so long as the plaintiffs were not in liquidation; but the agreement came to an end, he said, at the moment when the winding-up commenced (2.30 pm on 12 June 1968); and that the bank was then entitled to combine the accounts. He relied on a case in the Privy Council, British Guiana Bank v Official Receiver. He obtained the record of that case and supplied us with the judgments of the Supreme Court of Guiana. It appears to me that that case turned entirely on the true interpretation of the agreement there in question, as to which Lord McNaghten said that it was ((1911) 104 LT at 755) ‘intended to be operative so long as the accounts are alive, and no longer’; so that it did not operate after the company went into liquidation. But it seems to me that the agreement in the present case is entirely different. I think that the agreement here was to keep the accounts separate for four months—from April 1968—unless the bank gave notice to determine it by reason of a material change of circumstances. The bank could have given such a notice at any time after 20 May 1968, when the notice under s 293 was sent out. If it had given such a notice, the plaintiffs would no longer have been bound to pay in their trading cheques to the no 2 account of the
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bank. They would have paid them into some other bank, such as Lloyds. By abstaining from giving such a notice, the bank gained these advantages: (i) the plaintiffs remained bound to pay in their trading cheques to the no 2 account; and (ii) the bank could debit the interest on the no 1 account to the no 2 account. I do not think that the bank can, or should, be allowed to stand by and obtain these advantages, and then come down at the moment of liquidation on 12 June 1968 and seek to combine the accounts. The agreement was, I think, an agreement which continued over the liquidation of the plaintiffs, so as to prevent the bank from combining the accounts or setting-off an agreement the other—to the prejudice of the general body of creditors.
I must mention finally the section as to mutual credit and set-off which is contained in s 31 of the Bankruptcy Act 1914, and is applied to companies’ winding-up by s 317 of the Companies Act 1948. It has been held in this court that the parties cannot contract out of this section: see Rolls Razor Ltd v Cox. But still, in order that the section should apply, there must be ‘mutual dealings’; and one can look at the arrangements between the parties to see if they were ‘mutual’ or not. It seems to me that the ‘dealings’ here were not mutual. The arrangements were so special as to deprive them of mutuality. The reasoning on the first point disposes of this point also.
I would, therefore, allow this appeal and enter judgment for the plaintiffs.
WINN LJ. The essential features of this case are not complex and can be briefly stated insofar as they are of a factual character.
The plaintiffs had a banking account at the branch of the defendant bank in Colmore Row, Birmingham, but they operated for trading purposes of a routine character an account with Lloyds Bank at Halesowen; for some time before the crucial dates, which were in June 1968, the bank had observed, with some displeasure, that it was deriving no benefit from any movements of money of the plaintiffs. It is on record in a letter of 15 March 1968 that ‘the [plaintiffs’] accounts are being passed through Lloyds Bank, Halesowen’. In a contemporaneous internal memorandum of the bank it was noted—‘Lloyds Bank, Halesowen, have informed our Halesowen Branch that there is a turnover in excess of £1,000 per week and wages are drawn at Lloyds’.
A meeting took place on 4 April 1968 between representatives of the plaintiffs and of the bank with reference to which the learned judge said ([1970] 1 All ER at 36) that a certain Mr Gregory, a senior official of the bank, had stated in evidence:
‘“I was annoyed because we had not got the normal advantages on the trading account to watch the trading and to debit interest … If I find (such a situation) I insist so far as I can that the trading account is with the Bank which is lending the money.”’
The plaintiffs had an overdraft at the Colmore Row branch of the bank of some £11,000 which was extremely modest by comparison with the total overdraft of the associated group of companies with the London branch of the bank which amounted to nearly £150,000.
The learned judge found as a fact, as he was fully entitled to do, that, at the meeting of 4 April 1968, an express agreement was made, the material effect of which is correctly set out in letter of 17 April 1968 which was written by Mr Gregory to one Frank Lewis for the plaintiffs and was as follows:
‘So far as the existing account at our Birmingham Branch of [the plaintiffs] is concerned, this is to be frozen at its present figure and no further transactions
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save for permanent reduction are to take place thereon. I am asking [our manager] … to advise you separately of the amount of this indebtedness. As part of the arrangements it was agreed that all of the [plaintiffs’] current business should be passed through [the bank], and I look to you, therefore, to arrange for the account with Lloyds Bank to be closed so that all transactions henceforward may be passed through a new account to be opened at Birmingham Branch. This new account is, of course, to be maintained strictly on a credit basis and you should bear in mind that the bank charges, including interest on the indebtedness at Birmingham, will, in the usual way, be debited to this new account … within the next four months, and in the absence of materially changed circumstances in the meantime we for our part will adhere to the proposed scheme of arrangements for this period of time.’
By letter of 19 April 1968 the bank informed Mr Lewis that
‘The debt on the above account, which is now frozen, amounts to £11,338 19 … I request you to let me know when the account with Lloyds Bank had been closed … ’
By letter of 22 April, Mr Lewis accepted the conditions laid down by the letter of 17 April. As a result, the no 2 account at Colmore Row which was contemplated was opened as an account which was separate from the one that had theretofore been operated at that branch which was itself designated no 1, and the plaintiffs closed the account which they had had with Lloyds Bank and put all their monetary movements through this no 2 account.
Some six weeks or more elapsed before the all important date—12 June 1968. Before that date the plaintiffs had given notice on 20 May that a meeting of creditors of the plaintiffs would be held in London on that date, 12 June at 2.30 pm; it is on record that the bank received this notice on 24 May. The purpose of the meeting was expressly stated to be those purposes which are mentioned in the Companies Act 1948, ss 294 and 295, ie to consider winding-up. Before the meeting began, or, at any rate, before any resolution was passed at the meeting for winding-up, a cheque drawn by the well-known company Girling Ltd in favour of the plaintiffs for £8,611 odd was paid in at the Halesowen branch of the bank with an accompanying note that it was to be sent direct to the Colmore Row branch for the credit of the plaintiffs’ no 2 account at that branch. Although the exact moment at which that cheque came into the physical possession of the bank at the Halesowen branch was not fixed by the evidence, it was accepted, I have no doubt rightly, that that moment was earlier in time than the resolution.
A good deal of time was devoted during the hearing of the action and of the appeal to consideration of a question whether a ‘lien’ on this cheque arose in favour of the bank. For my part, I doubt whether this question was essential or even relevant in the instant proceedings. I very much prefer the approach of the learned judge who regarded the essential matter which he had to determine as being whether or not there existed in the material circumstances and at the material time a right in the bank to combine the no 1 and no 2 accounts in such a way as to bring about a set-off of the respective balances and establish a new net balance. He said in his judgment ([1970] 1 All ER at 38, [1970] 2 WLR at 760):
‘Sometimes that word [set-off] has … been used to describe the nature of a banker’s right in comparable circumstances. Sometimes the phrase used is a “right to combine two or more accounts“. Sometimes the phrase used is a “right to consolidate two or more accounts“. Sometimes the right is described as “the exercise of a banker’s lien”, a phrase which … counsel for the bank contended was the more accurate description of the right which the bank was claiming to exercise in this case.
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I consider, myself, that the main or primary question which has to be decided is whether, on 12 June of at any time within the ensuing few days during which the cheque was presented, cleared and, on 14 June, credited and ultimately claimed to have been set-off against the no 1 account indebtedness, the bank was entitled as against its customer, the plaintiffs or the liquidator of the plaintiffs, to insist on payment, by any method, of any part of the indebtedness on the frozen no 1 account.
For my part, I think that the facts found by the learned judge and established by the contemporaneous correspondence show that the bank had, for the motives already explained, validly contracted not to enforce payment of any part of the debit balance on the no 1 account which was frozen by the agreement until four months had elapsed, unless in the meantime there was a material change, ie a material change in the circumstances affecting the plaintiffs or the bank. As a matter of construction of the agreement, I do not think that it was determinable without notice, although I would not find it easy to say what period of notice would have been required. Compare the decision in Buckingham & Co v London and Midland Bank Ltd. I have no doubt that, if the bank had given notice on or soon after 24 May by reason of having received the notice of the calling of a meeting dated 20 May, it could have determined the agreement which it made with the plaintiffs on 4 April, but it did not do so; I cannot myself understand how the mere passing of a resolution to wind-up could itself operate to bring that agreement to an end immediately or on the expiry of any time shorter than the period of the actual winding-up.
However, I agree that the agreement was, as counsel for the bank contended in the course of his main submission, one which would endure and the effect of which would operate only so long as the relationship of banker and customer obtained between the bank and the plaintiffs; it was an agreement regulating and restricting the conduct of the bank qua banker. I accept counsel for the bank’s submission in this respect. I does not follow that the agreement did not apply to and control all the dealings with the cheque in question by the bank. I think that it did. The agreement not to enforce or insist on repayment of a debt must comprise a promise not to take any sum of money belonging to the customer and apply it in reduction of the debt; an agent who has in his hand cash belonging to his principal and is owed a debt by that principal is not entitled to pay himself out of that cash without authority, express or implied, from his principal; a fortiori this is the case if the ‘debt’ is not yet due and payable.
The proposition which I have just stated is illustrated by the decisions in: (i) Bradford Old Bank Ltd v Sutcliffe, in which the court consisted of Pickford, Bankes and Scrutton LJJ. Pickford LJ, after referring to an arrangement to keep the accounts distinct’, said ([1918] 2 KB at 839):
‘The effect of this arrangement is that payments to the credit of the current account are appropriated to that account and cannot be taken in reduction of the loan account.’
Scrutton LJ said ([1918] 2 KB at 847):
‘The sums paid into the current account are appropriated by the customer to that account, and cannot be used by the bank in discharge of the loan account without the consent of the customer.’
(ii) The second, W P Greenhalgh & Sons v Union Bank of Manchester Ltd is of considerably less weight although it is an emphatic dictum by Swift J that a banker is not entitled merely by reason of the relation of banker and customer to deal with two accounts opened between his customer and himself as though they were one
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whole account, entirely under his control, by reason of an alleged ‘lien’ over all the assets by virtue of which he might remove assets from one account to meet deficiencies in the other. The judge stated that, in his view, the only question which he had to decide was what was the agreement between the customer and the banker. (iii) The third case, Re E J Morel (1934) Ltd, was decided by Buckley J. In his judgment he said ([1961] 1 All ER at 803, [1962] Ch at 31, 32):
‘… there is an important difference between a case where a customer has several current accounts, and a case where a customer has an account which is not a current account, and one or more current accounts in the bank. In the first case … the banker can combine those accounts in whatever way he chooses, treating them all as being one account of his relationship with his customer. In the other case the accounts are of a different character, and the banker is not free to combine them in that way.’
This last decision, no less than that in the Bradford Old Bank case, rests on the existence of an agreement express or implied, held to be valid to control the relationship between customer and banker, that the banker should not for his own purposes treat two accounts as though they were one, or take moneys from one account to pay himself in respect of the other.
On the other hand, there are a series of cases which counsel for the bank cited in which various banks effectively combined or applied one account with or to another. These cases included the following, to all of which I have given close consideration; it seems to me that in every one of them there was the common characteristic of total absence of any contractual arrangement prohibiting or restricting combination of the accounts at the will of the banker.
In Re European Bank, Agra Bank Claim ((1872) 8 Ch App 41 at 44) James LJ said:
‘It is not open to the customer, in the absence of some special contract, to say that the securities which he deposits are only applicable to one account.’
Roskill J in the instant case, commenting on this decision, stated that he regarded it as involving ([1970] 1 All ER at 43, [1970] 2 WLR at 765)—
‘… the general principle that whatever number of accounts are kept they are but one account and that in the absence of a special contract the securities applicable to one account are applicable to all the accounts.’
Even if this be the right view, which I venture myself to doubt, it amounts to no more than a statement of principle (or perhaps of practice) which is controllable by any special contract; it is, perhaps, not of very great importance to decide whether in general a banker maintaining special accounts with his customer is prima facie entitled to combine those accounts for his own benefit if it be the law that he may be prevented from so doing by any express agreement with the customer or by any assumed or implied course of dealing arising from the character of the individual accounts and the reasons which brought into existence more than one account. It is more important to know whether the banker’s right is one which is capable of overriding any agreement which he may have with the customer. I do not so regard it.
Garnett v McKewan ((1872) LR 8 Exch 10 at 13, [1861–73] All ER Rep 686 at 688) was another case in which the court expressly stated, by the judgment of Kelly CB: ‘The plaintiffs might have ordered a transfer of their assets from one branch of the bank to the other’; by the judgment of Pigott B ((1872) LR 8 Exch at 14, cf[1861–73] All ER Rep at 690)—
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‘There is no duty on the part of the bank to keep the accounts separate … here there is nothing to prevent the banker from taking into account the state of the plaintiff’s balance as a whole; … ’
and by the judgment of Bramwell B ((1872) LR 8 Exch at 15, cf[1861–73 All ER Rep at 690, 691):
‘Nothing was said as to their [the two branches] being separate, and nothing should be implied. If indeed it was understood and agreed that the branches should be kept separate, then the plaintiff is right, but not otherwise … There is no duty … apart from usage or contract, on the part of the banker to honour cheques at one branch because the customer has a credit account there, if at another branch there is a countervailing debit.’
In T & H Greenwood Teale v William Williams, Brown & Co, the defendant bank claimed to set-off against a debit balance on a private account the credit balance standing on the office account of their clients, a firm of solicitors. Wright J said that no special agreement had been found and, as he understood the law, the banker with whom a customer opened several accounts had a lien on all of them where there was no special agreement. It may be noted that here there was an instance of this use of ‘lien’ clearly in the sense of a right to set-off the balance on one account against that on another. I am far from convinced that this is a proper meaning of the term, but feel that the instant case affords insufficient grounds for any firm pronouncement on this important topic.
In the earlier cases the banker’s lien seems to have been more narrowly described. In Giles v Perkins ((1807) 9 East 12 at 14), Lord Ellenborough CJ said:
‘If the banker discount the bill or advance money upon the credit of it, that alters the case; he then acquires the entire property in it, or has a lien on it pro tanto for his advance.’
In Bolland v Bygrave Lord Abbott CJ said:
‘… I think that a banker, who stands in this relation to a customer, has a lien upon any securities of that customer which may, for any purpose, be placed in his hands; and he has a right to retain them to countervail the liabilities he has so incurred on his behalf, till those liabilities have ceased.’
In Brandao v Barnett, a decision of the House of Lords (it will be recalled that this case was referred to by Ungoed-Thomas J in Re Keever (a bankrupt), ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd), the House decided that, on the facts found, the bankers concerned had no lien, but Lord Campbell, who delivered the first speech, stated categorically ((1846) 3 CB 519 at 530, [1843–60] All ER Rep at 722) that the House was entitled to take judicial notice of the general lien as part of the law merchant. Lord Campbell said ((1846) 3 CB at 531, [1843–60] All ER Rep at 722):
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‘Bankers, most undoubtedly, have a general lien on all securities deposited with them, as bankers, by a customer, unless there be an express contract, or circumstances which shew an implied contract, inconsistent with lien.’
He quoted an earlier decision of Lord Kenyon, where that learned judge had saida:
‘Bankers have a general lien on all securities in their hands for their general balance, unless there be evidence to shew that any particular security was received under special circumstances which would take it out of the common rule.’
Lord Lyndhurst LC, concurring, said ((1846) 3 CB at 535, [1843–60] All ER Rep at 724):
‘I think there is no question that, by the law-merchant, a banker has a lien upon the securities with him for his general balance. I consider this part of the established law of the country … ’
The existence of a banker’s lien and of the banker’s rights deriving therefrom was again emphasised by the House of Lords in Misa v Currie. Lord Hatherley spoke of ((1876) 1 App Cas at 567, [1874–80] All ER Rep at 690)—
‘… the lien which bankers have upon all documents which are placed in their hands, by customers who are indebted to them, in the course of their banking transactions … ’
Lord O’Hagan mentioned ((1876) 1 App Cas at 573, [1874–80] All ER Rep at 692) the banker’s lien in similar language.
All these last-mentioned cases are instances of retention of documents physically in the possession of the banker or of moneys derived from those documents. Even in those circumstances the extent and conditions of the right of retention are controllable by a special agreement, which may be express or implied from the way in which separate accounts have been set up and operated, and the character of those accounts; nor, as I think, could such a physical lien be asserted otherwise than as security for a debt which was immediately due and payable.
In Mutton v Peat, stockbrokers had a current account and a loan account with their bank. When they failed, their current account was in credit and the loan account in debit, and they had deposited to secure the latter account securities belonging to their clients. The bank was unaware that the securities did not belong to the brokers. Sir Nathaniel Lindlay MR said ([1900] 2 Ch at 85):
‘The important thing, and, to my mind, the key to the case, is this, that there was no agreement, at the time when the bonds were deposited, that the two accounts—the loan account and the current account—should be kept separate, so that the indebtedness for which the bonds were deposited should be ascertained by looking at the loan account alone.’
This, of course, is an instance of that kind of lien which consists in a right to retain possession of securities.
The most recent decision in this line of authority is that of Ungoed-Thomas J in Re Keever. The bank succeeded in asserting a right, described as a lien, to set-off the debit balance of a private account and that of a loan account against the credit balance of a third account maintained by the same customer known as the ‘George and Dragon’s account, and in retaining the proceeds of a cheque of £3,000 paid into the bank after the client had committed an act of bankruptcy. In the argument in that case, counsel maintained that a bank, although not entitled to combine the loan account with a current account whenever it liked, was bound to combine them on a bankruptcy or liquidation. It was held that the lien applied in respect of the balance
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on all accounts between the bank and the customer including a loan account, when bankruptcy of the customer had intervened.
As I have already indicated, in the instant case there was, in my opinion, an agreement between the bank and the plaintiffs effective to prevent the bank from combining the frozen no 1 account debit balance with the running no 2 account for the credit of which specifically the plaintiffs paid in the cheque to which this action relates. I think that that agreement was intended by the parties to operate and did operate so long as they were related to one another as banker to customer and customer to banker, but I agree not only that it was capable of being determined on notice, but that it must have been determined, in the sense that the plaintiffs could no longer require it to be observed, when the rights of the plaintiffs passed to a liquidator, as they did on his appointment on 12 June.
The learned judge rightly said ([1970] 1 All ER at 47, [1970] 2 WLR at 769) that the true nature in law of the ordinary banker/customer relationship was not finally and authoritatively defined until the decision of the Court of Appeal in N Joachimson (a firm name) v Swiss Bank Corpn. In that case and in Arab Bank Ltd v Barclays Bank (Dominion, Colonial and Overseas), it was established that a current account with a banker on which the customer is overdrawn can be converted into a debt by notice from the banker calling for payment; until such notice is given, there is no enforceable or recoverable debt. As I understand the effect of the agreement made in the instant case for the freezing of the existing account, and the naming of it as no 1, whilst a fresh no 2 was brought into existence on and by which all the trading of the plaintiffs was to be conducted, the effect was equivalent to calling in and requiring payment of the account followed by an express agreement that, provided the new no 2 account were to be actively operated and all the plaintiffs’ transactions were put through it, no step would be taken to insist on repayment of what was outstanding from the plaintiffs, which would be treated as a debt in respect of which credit would continue to be given. It follows in my opinion that, up to and including the moment of determination of the banker/customer relationship, the bank had no right to take for itself any money or cheque which it held on behalf of the plaintiffs; when the relationship was determined there were, I think, two accounts still in existence—the frozen no 1 account and the no 2 account on which there was a credit balance of some thousands of pounds.
The problem which the learned judge was called on to decide involved not only the obscure question whether a banker’s lien arose—which in itself involved the extremely difficult question on which there is a great scarcity of authority, what is a banker’s lien—but whether, having regard to the liquidation of the plaintiffs, s 31 of the Bankruptcy Act 1914, as applied to companies by s 317 of the Companies Act 1948, required the court to apply a set-off of the balance on the one account against that on the other. On this matter the learned judge received little assistance, since on the one hand counsel for the plaintiffs sought to rely on a contention to the effect that the bank had notice of inability to pay debts, which he subsequently abandoned, when it advanced credit to the plaintiffs, and, on the other hand, counsel for the bank stated that he was not relying on s 31 at all. It is, therefore, not surprising that the learned judge said ([1970] 1 All ER at 39, [1970] 2 WLR at 761): ‘I say no more about the point, which I only mention for the sake of completeness.’
However, in the Court of Appeal a good deal of discussion took place about this aspect of the matter. I would have felt happier had the court had the help of the learned judge’s great experience in relation to this aspect of the problem. For myself, I think that the essential feature and condition of the provisions of s 31 is that it applies only to cross-claims arising directly from dealings between a person
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who has become a bankrupt and another person all of which are properly called ‘mutual’. As I ventured myself to suggest in Rolls Razor Ltd v Cox ([1967] 1 All ER 397 at 406, [1967] 1 QB 552 at 574), it is possible, although it will not often be probable, that persons dealing one with another on a running account or in such a way that they are each from time to time delivering goods or rendering services the one to the other without specific payment for individual items, may separate out from such mutual dealings and agree to make the subject of separate payment some particular transaction or transactions of some particular aspect of their relations; thus, for example, a solicitor customer of a bank might expect to be paid in cash for professional services rendered to the bank notwithstanding the overdrawn condition of his personal account with the bank, or a bank might expect to be paid rent for an office over the bank premises notwithstanding the fact that the tenant customer might have a substantial credit balance on his personal account at that bank. Whilst I feel that the matter is by no means easy to decide, and I would have been grateful for the assistance which a through examination at first instance would have afforded, I am, on the whole, of the opinion that the arrangement made in the instant case between the bank and the plaintiffs comprised an understanding and an agreement that the debit balance on the frozen no 1 account should be treated as separated out from the future mutual dealings of the bank and plaintiffs, all of which were expressly to be effected and recorded on the no 2 account. When the time came for the bank to claim the balance owing on the no 1 account, it would do so qua banker; unless this balance was, by the agreement, to be kept separated out from the mutual dealings even in the event of bankruptcy, any credit arising on the no 2 account would be useless to the plaintiffs in that event. It follows that I think that the bankruptcy provisions requiring set-off did not apply in this particular case to the no 1 account.
In the result, I would allow this appeal.
BUCKLEY LJ. The result of this appeal must depend, I think, on the true effect of the agreement recorded in the letters of 17 and 22 April 1968, to which reference has already been made.
It was thereby agreed: (i) that the existing account of the plaintiffs with the bank should be frozen and that no further transactions should take place thereon except for permanent reduction; (ii) that the plaintiffs should open a new account with the bank through which all the plaintiffs’ current business should be passed, which involved the abandonment by the plaintiffs of their then existing account with Lloyds Bank; (iii) that this new account should be maintained strictly on a credit basis; and (iv) that, in the absence of material change in the circumstances, the arrangement should remain in force for a period of four months. The effect of this agreement has to be considered in relation to: (a) the period down to 12 June 1968 when the plaintiffs went into voluntary liquidation; and (b) the rights of the bank in the liquidation of the plaintiffs resulting from the application by s 317 of the Companies Act 1948 of s 31 of the Bankruptcy Act 1914 to the winding-up of the plaintiffs’ affairs.
For the plaintiffs, it has been contended that the effect of this agreement was to exclude any right which the bank might otherwise have had to set-off the credit on the no 2 account, ie the new account opened by the plaintiffs, against the plaintiffs’ indebtedness on their original account, the no 1 account. It is said that the agreement remained in full force and operation down to the moment when the resolution for voluntary winding-up of the plaintiffs was passed in the afternoon of 12 June 1968. It is common ground that it is as at the moment of the passing of that resolution that the question must be asked whether mutuality existed in respect of these two accounts of such a kind as to bring s 31 of the Bankruptcy Act 1914 into play. For the plaintiffs,
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it is said that the agreement negatives any such mutuality. It is said that, on the passing of the resolution, the rights of the bank in the liquidation of the plaintiffs crystallised with the result that the bank could not thereafter acquire any right in the nature of a lien or right of set-off or of combination of the two accounts which it did not possess immediately before the passing of the resolution. Consequently the agreement, it is suggested, excludes the bank from combining these two accounts for the purpose of ascertaining the amount for which it is entitled to prove in the liquidation of the plaintiffs either under the general law apart from the bankruptcy law applicable in the winding-up or under that bankruptcy law.
For the bank, it is contended that, in the absence of agreement to the contrary, the relationship which exists between a banker and customer, notwithstanding that it may take the form of a number of separate accounts, is one relationship and the indebtedness of one party to the other must be ascertained by consideration of all those accounts taken together. It is said that, if there is some special agreement between banker and customer that dealings on a particular account should be treated as separate from the other dealings between them, such agreement will not survive the stopping of the accounts unless this is clearly the intention of the parties either in express terms or as a result of necessary implication. It is said that the agreement in the present case was not inconsistent with a continuing right in the bank to have regard to both accounts taken together for the purpose of discovering the indebtedness of the plaintiffs to the bank, although during the continuance of the agreement the right of the bank to take advantage of this by discharging indebtedness on the no 1 account by transfer from any credit existing on the no 2 account was suspended. It is said that the services of the notices convening the meeting to pass the resolution for voluntary winding-up constituted a material change in the circumstances within the terms of the agreement and that, at any time thereafter, the bank could have demanded payment of the amount due on the no 1 account and could have thereupon transferred any credit on the no 2 account to the no 1 account in part satisfaction of that indebtedness.
Counsel for the bank contends that the effect of the winding-up resolution was to cancel the existing mandates in respect of the accounts, which were consequently stopped. Thereupon he says that the right of the bank to combine the two accounts became unfettered by any operation of the agreement with the consequence that, quite apart from the effect of s 31 of the Bankruptcy Act, the bank was entitled to discover the true indebtedness of the plaintiffs by combining the two accounts and proving in the winding-up for the net indebtedness. He contends, therefore, that, in the circumstances of the present case, s 31 of the Bankruptcy Act has no operation; but he says that, if he is wrong in that, then s 31 applies to the circumstances of this case.
Counsel for the bank, as I understand his argument, does not now rely on any lien which the bank may at any time have had on the cheque for £8,611 5s 10d which was paid by the plaintiffs into the no 2 account on 12 June 1968 earlier than the passing of the winding-up resolution. In this I think that he was right. When that cheque was cleared, as it was on 14 June 1968, it ceased to be a negotiable instrument and also ceased to be in the possession of the bank. Any lien of the bank on the cheque must thereupon have come to an end. The amount of the cheque was credited to the no 2 account on 13 June 1968. The money or credit which the bank obtained as the result of clearing the cheque became the property of the bank, not the property of the plaintiffs. No man can have a lien on his own property, and consequently no lien can have arisen affecting that money or that credit. The amount of the credit of the plaintiffs on the no 2 account was, of course, increased, but this credit represented indebtedness by the bank to the plaintiffs as its customer, and I cannot myself understand how it could be said with any kind of accuracy that the bank had a lien on its own indebtedness to the plaintiffs. It has, of course, long been recognised that a banker has a general lien on all securities deposited with him as
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banker by a customer unless there be an express contract or circumstances that show an implied contract inconsistent with lien: see Brandao v Barnett ((1846) 3 CB 519 at 531, [1843–60] All ER Rep 719 at 722), per Lord Campbell. The term ‘securities’ is no doubt used here in a wide sense, but does not, in my judgment, extend to the banker’s own indebtedness to the customer.
Where the relationship of the banker and customer is a single relationship such as I have already mentioned, albeit embodied in a number of accounts, the situation is not, in my judgment, a situation of lien at all. A lien postulates property of the debtor in the possession or under the control of the creditor. Nor is it a set-off situation, which postulates mutual but independent obligations between the two parties. It is an accounting situation, in which the existence and amount of one party’s liability to the other can only be ascertained by discovering the ultimate balance of their mutual dealings. The following cases are examples of such a situation: Garnett v McKewan, Re European Bank, Agra Bank Claim, T & H Greenwood Teale v William Williams, Brown & Co and Mutton v Peat. These authorities, however, demonstrate that, where there is a running account between the parties which in other respects is governed by the principle under discussion, a particular transaction or series of transactions can by agreement be segregated from the other dealings between the parties so as to give rise to a separate indebtedness which is not to be taken into account in arriving at the balance on the general running account between them. If the indebtedness on the running account is one way and that in respect of the segregated dealings is the other way, the one indebtedness may be capable of being set-off against the other, but the latter cannot be taken into account in ascertaining the amount of the former.
In the present case, so long as the agreement remained in force, the plaintiffs’ indebtedness on the no 1 account was, in my opinion, segregated from the dealings on the no 2 account. By necessary implication the bank was during the continuance of the agreement debarred from applying any credit on the no 2 account in discharge of the plaintiffs’ indebtedness on the no 1 account without the consent of the plaintiffs, and was bound to honour cheques on the no 2 account to the extent of the credit on that account without regard to the state of the no 1 account: see, in this connection, Bradford Old Bank Ltd v Sutcliffe and Re E J Morel (1934) Ltd.
The notice of 26 May 1968, in my opinion occasioned a material change in the situation. At any time after the receipt of it I think that the bank could have determined the agreement by notice, and I am inclined to think that a notice taking immediate effect might have sufficed, subject to the bank being obliged to honour any drafts on the no 2 account made by the plaintiffs before receipt of the notice; but no such notice was given. The agreement, I think, remained in force until and after the passing of the winding-up resolution. Consequently, in my judgment, at the commencement of the winding-up the liability of the plaintiffs on the no 1 account and the liability of the bank on the no 2 account were distinct.
The cancellation of the bank mandates which resulted from the passing of the winding-up resolution and the stopping of the accounts if the winding-up resolution had the effect of stopping them or either of them, made, in my opinion, no difference to this position. In this connection, counsel for the bank relied heavily on British Guiana Bank v Official Receiver. That was an appeal to the Privy Council from the Supreme Court of British Guiana. The appellant bank had entered into an agreement with a company called the British Guiana Ice Co Ltd of a rather similar nature to
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the agreement in the present case. An order was made for the compulsory winding-up of the company, and the question arose whether the bank was entitled to combine the company’s two accounts with the bank for the purpose of ascertaining the amount of the company’s indebtedness to the bank, thus obtaining the full advantage of the amount standing to the credit of one of the company’s accounts. The liquidator rejected the proof so framed, and on appeal to the court the learned judge dismissed the appeal. The bank appealed to the Supreme Court of British Guiana, where the appeal was again dismissed by a majority, Bovell CJ dissenting. The bank then appealed to the Privy Council, where the respondent liquidator was not represented, and the Privy Council consequently heard argument only on one side. The judgment is extremely short. It states that the case turned on the real meaning of the agreement between the company and the bank and that this was intended to be operative so long as the accounts were alive and no longer. Their Lordships expressed the view that there was nothing in the agreement to exclude the operation of the right of set-off and that Bovell CJ had been quite right. We were furnished with a copy of the judgment of Bovell CJ in that case. After discussing the question whether the parties had power to contract out of the statutory provisions of s 34 of the Insolvency Ordinance 1900 of British Guiana, which corresponded to s 31 of the Bankruptcy Act 1914, and reaching the conclusion that they had power to do so, Bovell CJ said:
‘The question remains: has the operation of the section been excluded in this case by the agreement between the Bank and the Company contained in the letter of the 9th May, 1905?’
He then referred to Re European Bank and certain other cases and went on in the following terms:
‘Hence in the absence of any agreement the two accounts of the Company with the Bank would have in reality formed but one account, and the Bank might at any time have appropriated the credit balance on the No. 2 account in reduction of the debit balance of the old account, and the two accounts being in reality one, no question strictly speaking of set-off or of mutual credit could have arisen. Such question could only arise after it was agreed the two accounts should not be treated as one. These were the circumstances at the time when the agreement contained in the letter of 9th May, 1905, was made, and the need of any provision against set-off or mutual credit would probably not at that time have been in the minds of the parties. The letter itself appears to me to provide simply for the two accounts not becoming one so long as they remained unclosed and the No. 2 account was being operated on. Thus it says “The Bank would not appropriate”—language suited to express an appropriation by the Bank itself, but hardly applicable to the set-off which without any action on the part of the Bank would take effect by operation of law under the mutual credit section if the Company became unable to pay its debts and were would up. The provision also that no appropriation should take place without “the knowledge and consent” of the Company points to the same conclusion for on a winding-up order being made neither the Company nor the liquidator could in my opinion have consented to an appropriation which, if (as is contended) the operation of the mutual credit section was excluded by the letter, would have had the effect of giving the Bank a preference over other creditors of the Company.’
It is, I think, clear that Bovell CJ was there considering only whether the agreement there in question was effective to take the case out of the provisions of s 34 of the
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Insolvency Ordinance 1900. He thought that it was, and this was the view which the Privy Council affirmed.
It has since been hed in this country in Rolls Razor Ltd v Cox that the operation of s 31 of the Bankruptcy Act 1914 cannot be excluded by agreement between the parties. The ground of the Privy Council decision in British Guiana Bank v Official Receiver is accordingly not available in this court.
The agreement in the present case was, on its true interpretation, in my view, to continue in force for four months unless effectively determined meanwhile. The bank never took any step to determine it and, in my judgment, it remained in operation notwithstanding the winding-up resolution, the cancellation of the bank mandates and any stopping of the accounts. Accordingly, unless s 31 of the Bankruptcy Act 1914 is applicable, the liquidator of the plaintiffs is entitled to recover the amount of the credit on the no 2 account from the bank and the bank must prove in the liquidation for the amount due on the no 1 account.
Is the expression ‘mutual credits, mutual debts or other mutual dealings’ in s 31 applicable in the present case? It is well settled that the expression ‘mutual credit’ here extends to cases where the party receiving the credit is not a debtor in praesenti to him who gave the credit (see per Lord Brougham in Young v Bank of Bengal, a passage cited in Williams on Bankruptcyb), provided that the credit is one which must eventually ripen into a debt presently due. A comparatively recent case of this kind is Rolls Razor Ltd v Cox ([1967] 1 All ER at 403, [1967] 1 QB at 569), already cited, where, as was pointed out by Lord Denning MR, the retention fund held by the plaintiff company on account of the defendant salesman was not payable at once but by three instalments. See also Re Daintrey, ex parte Mant, where the amount to be paid by Messrs Mant was not even ascertainable at the date of the receiving order.
In the present case it is, in my opinion, clear that, had the no 2 account not been opened and kept in credit, the bank would not have allowed the indebtedness on the no 1 account to remain outstanding, and that, had the bank not agreed to the freezing of the no 1 account, the no 2 account would never have been opened. The effect of the agreement was to postpone the right of the bank to require payment of the amount due on the no 1 account during the currency of the agreement. The debit on the no 1 account remained a debt owing by the plaintiffs to the bank, although it ceased to be presently payable. Each of the obligations on either side on the two banking accounts arose from the relationship between the parties as banker and customer. The existence of these obligations at the commencement of the winding-up was the consequence of the agreement under which each was consideration for the other. The agreement was intended to have a temporary effect only, at the end of which the parties contemplated that both accounts would become part of their general relationship as banker and customer. In my judgment, notwithstanding the fact that the agreement had the temporary effect of precluding the bank from appropriating any credit on the no 2 account towards discharging the debt on the no 1 account, the dealings giving rise to the obligations were ‘mutual’ dealings within the meaning of s 31 and the credits were ‘mutual credits’. Consequently, in my judgment, that section is applicable to the present case, and I would dismiss the appeal on this ground accordingly.
Appeal allowed. Leave to appeal to the House of Lords.
Solicitors: Landau & Co (for the plaintiffs); Waltons, Bright & Co (for the bank).
Rosalie Long Barrister.
Pais v Pais
[1970] 3 All ER 491
Categories: CIVIL PROCEDURE
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BAKER J
Hearing Date(s): 27, 28 JULY 1970
Evidence – Privilege – Confidential relationships – Marriage guidance – Privilege attaching to spouse.
Evidence – Privilege – Confidential relationships – Marriage guidance – Waiver – Waiver only by unmistakable and unequivocal pronouncement – Civil Evidence Act 1968, s 2(2)(a) – RSC Ord 38, rr 21 and 22.
Evidence – Privilege – Confidential relationships – Marriage guidance – Waiver – Waiver in part.
Communications between a marriage guidance counsellor and a spouse in the course of the counsellor’s endeavours to effect a reconciliation of matrimonial difficulties are privileged but the privilege attaches not to the marriage guidance counsellor (see p 493 h, post) but to the spouse (or spouses) (see p 494 a, post).
The despatch by the solicitors for one spouse to the solicitors for the other spouse of copies of letters with a statement that it is intended to apply for leave to read them and receive them in evidence in accordance with s 2(2)(a)a of the Civil Evidence Act 1968 and RSC Ord 38, rr 21 and 22, does not amount to waiver of privilege since there can be no waiver in matrimonial guidance cases unless the spouse, or counsel or solicitor on behalf of the spouse, waives the privilege in unmistakable and unequivocal terms (see p 495 d and e, post).
It is possible for privilege to be waived by a spouse in part only, eg as to who sought assistance from a marriage guidance counsellor and when (see p 495 g, post).
Notes
For privilege for communications with a view to reconciliation, see 12 Halsbury’s Laws (3rd Edn) 375, 376, para 818, and for cases on the subject, see 27 Digest (Repl) 368, 3044–3046.
Cases referred to in judgment
A-G v Mulholland, A-G v Foster, [1963] 1 All ER 767, [1963] 2 QB 477, [1963] 2 WLR 658, Digest (Cont Vol A) 539, 4460c.
McTaggart v McTaggart [1948] 2 All ER 754, [1949] P 94, [1949] LJR 82, 27 Digest (Repl) 368, 3044.
Cases also cited
Bostock v Bostock [1950] 1 All ER 25, [1950] P 154.
Henley v Henley (Bligh cited) [1955] 1 All ER 590, [1955] P 202.
Mole v Mole [1950] 2 All ER 328, [1951] P 21.
Theodoropoulos v Theodoropoulos [1963] 2 All ER 772, [1964] P 311.
Summons
This was a summons to set aside a subpoena served on behalf of the husband, J C Pais,
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on Father Francis James Handley, who claimed privilege for any communications made to him as a marriage guidance counsellor by one or both spouses.
J P Comyn QC and Paul Norris for the applicant.
T M Eastham QC and J M Bowyer for the husband.
Roger Gray QC and K M Willcock for the wife.
28 July 1970. The following judgment was delivered.
BAKER J. This is a summons to set aside a subpoena served on behalf of the husband on the applicant, Father Francis James Handley, who has met the subpoena and supported the summons by an affidavit of 27 July 1970, in which he states:
‘There is no evidence of any kind that I can give on behalf of the [husband] or [the wife] in this case other than evidence derived from them during my meetings with them as a Marriage Guidance Counsellor.’
In support of the summons to set aside the subpoena counsel for the applicant makes three submissions: first, that there is in the applicant himself a privilege when communications are made by one or both spouses to him, he acting as a conciliator, in an endeavour to achieve reconciliation of matrimonial difficulties. Secondly, counsel submits, and in this he is supported by counsel for the wife, although counsel for the wife has, says counsel for the husband, wavered a little on the waiver, that there is a privilege in the parties and that privilege has not been waived by the wife. Put in non-legal language the wife has not said to the court ‘I agree to what was said between me and the applicant being given in evidence to the court’. If the applicant has not himself a privilege, and the wife has agreed to the evidence being given, it follows that he is not only a competent but a compellable witness. Counsel for the husband submits that there has been a waiver by the wife, and that the evidence is admissible, and the applicant is a compellable witness. Thirdly, there is a refinement on the question of waiver. Counsel for the husband submits that even if he cannot obtain from the applicant evidence of the communications made to him by the wife because of privilege, at least he can obtain from him evidence of the dates on which he was seen by the wife and by the husband and, in particular, which of the two approached him first. Counsel for the wife, again after some hesitation, accepts that that evidence may be given. Counsel for the applicant, however, says ‘The umbrella covers the whole, and not only the part, namely the communications. The privilege covers all.' Then there is a fourth point which has arisen, namely that there came a time when the applicant was acting not as a conciliator but in another capacity. On that I shall receive evidence, because it is, I think, impossible to decide that question without finding the facts.
Now as to the first and novel point, namely whether there is a privilege in the priest himself; counsel for the applicant concedes that there is no authority on this. Further research has brought to light that the Morton Commissionb reported ‘That there should be such a privilege in Marriage Guidance Counsellors’; and indeed a Bill promoted in 1963 had as one of its objects, the provision of an absolute privilege to statements made to marriage guidance counsellors. That never became law and there is consequently no statutory provision in this country, although there is in the Australian (Matrimonial Causes) Act 1959c, s 12(1), a provision that a marriage guidance counsellor is neither competent nor compellable as a witness in respect of communications made to him in that capacity. This would seem to indicate that there is no such privilege attaching to a priest in this country, and there is judicial
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support fo this view in the judgment in McTaggart v McTaggart ([1948] 2 All ER 754 at 755, [1949] P 94 at 96) of Cohen LJ where he said:
‘The commissioner at first was reluctant to admit his evidence [i e the evidence of the probation officer], but in the end decided that he must do so in view of the conflict of evidence between husband and wife. In my opinion, the commissioner had no alternative. The privilege, if any, was the privilege of the parties, and they, having given evidence on the point, could not assert the privilege.’
And Denning LJ said ([1948] 2 All ER at 755, 756, [1949] P at 97):
‘The probation officer has no privilege of his own from disclosure any more than a priest, or a medical man, or a banker, and on that account it has been sometimes supposed that the court will compel a probation officer to give evidence of what took place in the course of a negotiation. That is a mistake. The law favours reconciliation, and the court will not take on itself a course which would be so prejudicial to its success. If a probation officer should be compelled to give evidence as to what was said in the course of negotiations, it would mean that … he would not be told the truth, or, at all events, not the whole truth.’
And again Lord Denning MR in A-G v Mulholland, A-G v Foster ([1963] 1 All ER 767 at 771, [1963] 2 QB 477 at 489) discussing the claim of a journalist to privilege by law to entitle him to refuse to give his sources of information said:
‘It seems to me that the journalist put the matter much too high. The only profession that I know which is given a privilege from disclosing information to a court of law is the legal profession, and then it is not the privilege of the lawyer but of his client. Take the clergyman, the banker or the medical man. None of these is entitled to reuse to answer when directed to by a judge.’
And then he goes on to indicate how judges will be slow to direct such persons to answer if they feel that their consciences require them to keep silent.
Finally, Professor Cross on his book on Evidenced lends support to the view where he writes:
‘So far as the reconciliation cases are concerned, it is often suggested that the privilege should be that of the mediator, at any rate when he is a marriage guidance officer. Should this ever come to be law, there would be even more to be said for dealing with the matter under the head of public policy.’
And when such a great authority (although happily still alive) as Professor Cross says that it is not yet the law, I do not think that I should say that it is the law, unless I am bound by a decision of a higher court. It may be that it would be very convenient and just that it should be the law, but in my judgment it is not the law of England and Wales that there is a privilege attaching to a priest or other professional man, or to any other marriage guidance counsellor as such. If anything further is needed to support this it is, I think, to be found in the argument of counsel for the husband when he said ‘Well if there is to be or is such a privilege of course that is putting the conciliator on a far higher and different plane from the lawyer’. The privilege of communications between lawyer and client is the privilege of the client, not the
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privilege of the lawyer. So too the privilege of communications between priest and spouse, and I am dealing only with the case of conciliation, is the privilege of the spouse, not the privilege of the priest.
The next question is whether there has been a waiver by the wife. This turns on a letter of 21 July 1970 written by the wife’s solicitors to the husband’s solicitors in which they write:
‘We also draw your attention to the copy letters which we enclose herewith, being letters from [the wife] to her parents, and also two certificates. It is intended to apply to the court for leave to receive and read these documents under Section 2 of the Civil Evidence Act, Rule 22 thereunder.’
The copy letters which the wife wrote to her parents, which are the documents which concern me, are, I am told, three letters in which she describes her version of some of the events at, and the advice from, the Catholic Marriage Advisory Council, and in these letters she names ‘a Father’—not the applicant—she names one lady, and she refers to an unnamed priest. That is all the information which I have about these letters. Counsel for the husband says ‘There is an application, an expression of intention, to put these letters in evidence before the court.' Section 2 of the Civil Evidence Act 1968 provides:
‘(1) In any civil proceedings a statement made, whether orally or in a document or otherwise, by any person, whether called as a witness in those proceedings or not, shall, subject to this section and to rules of court, be admissible as evidence of any fact stated therein of which direct oral evidence by him would be admissible.
‘(2) Where in any civil proceedings a party desiring to give a statement in evidence by virtue of this section has called or intends to call as a witness in the proceedings the person by whom the statement was made, the statement—(a) shall not be given in evidence by virtue of this section on behalf of that party without the leave of the court … ’
Then there are rules made under sub-s (1), namely RSC Ord 38, rr 21 and 22, which necessitate the giving of notice to the other side by serving notice of the desire to call such evidence. Rule 22 provides:
‘(1) If the statement is admissible by virtue of section 2 of the Act and was made otherwise than in a document, the notice must contain particulars of—(a) the time, place and circumstances at or in which the statement was made; (b) the person by whom, and the person to whom, the statement was made; and (c) the substance of the statement or, if material, the words used.
‘(2) If the statement … was made in a document, a copy or transcript of the document, or the relevant part thereof, must be annexed to the notice … ’
Counsel for the wife contends that the wife has not waived her privilege by giving the notice required by s 2 and the rules. He points out that the leave of the court to receive the documents is still necessary, and all that has been done is to take the preliminary step to asking for that permission to be granted.
Now basically the argument of counsel for the husband seems to come to this. ‘We have now obtained these letters. It does not matter how we obtained them, whether by mistake or even by illegal means [there is no suggestion that that is so here], the fact is we have obtained them, and they amount to a statement of what happened at meetings with the marriage guidance council and therefore it is open to us to call the applicant to give the true and exact detail of what took place.' In my view that is fallacious. I think that there is a misunderstanding here and that the well-known rules applicable to communications between a solicitor and client are
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being used mistakenly in relation to communications made to a marriage guidance counsellor, or a priest.
On many occasions there will have been three persons present, the marriage guidance counsellor himself, the husband and the wife. It is, of course, commonplace that on occasions the marriage guidance counsellor will ask one of the parties to go out of the room and he will be left with one spouse. On other occasions he may, either intentionally or because one spouse will not come, have to see one spouse alone. When two spouses are present of course each knows what happened, and unless both are prepared to waive the privilege it is useless for one to say ‘Well I know what happened therefore I am going to give evidence about this to the court’. Equally it seems to me that if one spouse has seen a marriage guidance counsellor and comes home and says to the other ‘This is what I was told and this is what the marriage guidance counsellor says I must do’ that is no waiver of the privilege, although it is putting into the hands or brain of the other spouse the detail of what took place. But if the rules applicable to solicitor and client privilege, and possibly to other privileges, were applied they would make what was said to the counsellor admissible in evidence. That would completely defeat the whole object of marriage guidance counselling. In the rather artificial circumstances which exist here, copies of letters having been sent to the other side, with the statement that it is intended to apply for leave to read them and to receive them in evidence, I do not think that there has been a waiver of the privilege. In my judgment there can be no waiver of the privilege in marriage guidance cases until the spouse, or counsel or solicitor on behalf of the spouse, says in unmistakable and unequivocal terms ‘I want the evidence to be given to the court of all that happened before the marriage guidance counsellor and therefore I am waiving the privilege’. That is not what has happened here and in my view the privilege remains.
There remains the refinement or gloss on that. After some hesitation counsel for the wife finally said that he would not object to evidence being given by the applicant as to dates and parties, ie who sought counsel, and when. In reply to a direct question asked by me for the second time he said that he is waiving such privilege as attaches to that part of the counselling. I should say that I myself think that the privilege does attach to it. Very often the question of privilege is not raised or insisted on and the evidence is given, but as it has been challenged here by counsel for the applicant I express my view: I think that there is a privilege but that it has been waived by counsel for the wife in express terms and, although I listened with interest to the argument of counsel for the applicant that counsel for the wife cannot waive a part, once he raises the umbrella he must keep it raised in whole, I do not think that that is right. I think that it is open to counsel for the wife to waive the privilege in relation to that evidence and that part alone. It follows, therefore, that the applicant will either be required to give evidence, or counsel for the applicant will supply the dates and times.
Solicitors: Arnold, Fooks, Chadwick & Co (for the applicant); Gillhams (for the husband); Ormerod, Morris & Dumont, Croydon (for the wife).
Alice Bloomfield Barrister.
Lever (Finance) Ltd v Westminster Corporation
[1970] 3 All ER 496
Categories: TOWN AND COUNTRY PLANNING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND MEGAW LJJ
Hearing Date(s): 21, 22 JULY 1970
Town and country planning – Development – Permission for development – Variation of detailed planning permission – Variation allowed by planning authority’s officer as being immaterial and not requiring further permission – Practice of planning authorities to allow their officers to decide on materiality of minor modifications to an approved plan – Matter within officer’s ostensible authority and his decision, acted on by developers, binding on planning authority – Delegation of function of determining applications – Variation in site of house – Town and Country Planning Act 1968, s 64.
Developers who proposed developing a piece of land by building 14 houses on it applied for planning permission to the local planning authority attaching to the application a detailed plan of the development showing one of the houses, house G, as sited 40 feet away from existing houses. Permission for the development in accordance with the detailed plan was given by the planning authority on 24 March 1969. A month later the developers’ architect made some variations to the detailed plan submitted to the authority. The variations included altering the site of house G so that it was sited only 23 feet away from the existing houses; and a further site plan showing this variation was sent to the planning authority. The authority’s planning officer who was dealing with the development had lost the file containing the original plan approved by the planning authority and because of this made a mistake and told the architect, in a conversation over the telephone, that the variation was not material and that no further planning consent was required. The telephone conversation took place in May 1969, shortly after s 64a of the Town and Country Planning Act 1968 had come into force. The developers acted on this representation and went ahead with the development, in particular, with the erection of house G, which was started in September 1969. The residents of the existing house made representations to the planning authority about the variation of the site of house G. The planning authority suggested to the developers that they should apply for planning permission for the variation. On 17 March 1970, the developers did so apply, the application being supported by the authority’s planning officer, but the planning authority refused the application; they also refused a further application, made in April 1970, to sanction a variation in the structure of house G, and resolved that an enforcement notice should be issued to take down the house. By this time house G, had been erected but not glazed. The developers brought an action against the planning authority claiming a declaration that they were entitled to complete the house on the site where it was, and an injunction restraining the authority from serving an enforcement notice. It was the practice of many planning authorities, after detailed planning permission had been given, to allow their planning officers to decide whether any proposed minor modifications to the detailed plan were material or not, and where the planning officer said that a variation was not material, for the developer to proceed with the work as varied without applying for any further permission.
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Held – There was a valid planning permission for the erection of house G on the site as varied, and an enforcement notice should not be served, because—
(i) (per Lord Denning MR and Megaw LJ) a planning permission covered work specified in the detailed plans and any immaterial variation therein and, having regard to the practice of planning authorities allowing their officers to decide on the materiality of minor alterations to an approved plan (a practice which should be affirmed), the planning officer’s decision that the variation of the site of house G was not a material variation was a representation within the officer’s ostensible authority, and having been acted on by the developers, it was binding on the planning authority (see p 500 f and g, p 501 c and p 504 c, post);
(ii) (per Sachs LJ) the continuance of the practice of allowing planning officers to decide whether an alteration in a detailed planning permission was material or not after the coming into force of s 64 of the Town and Country Planning Act 1968, resulted after that date in an implied delegation to the planning officer of power to deal with an application under s 43b of the Town and Country Planning Act 1962 as to whether any further planning permission was required; and the formalities for such an application under s 43 were sufficiently observed if the decision on the application was recorded by the respective parties (see p 503 h, and p 504 a, post).
Wells v Minister of Housing and Local Government [1967] 2 All ER 1041 applied.
Notes
For applications to determine whether permission is required, see 37 Halsbury’s Laws (3rd Edn) 273–275, para 372.
For the Town and Country Planning Act 1962, s 43, see 42 Halsbury’s Statutes (2nd Edn) 1013, and for the Town and Country Planning Act 1968, s 64, see 48 ibid 1630.
Cases referred to in judgments
Royal British Bank v Turquand (1856) 6 E & B 327, [1843–60] All ER Rep 435, 25 LJQB 317, 119 ER 886, 9 Digest (Repl) 660, 4374.
Southend-on-Sea Corpn v Hodgson (Wickford) Ltd [1961] 2 All ER 46, [1962] 1 QB 416, [1961] 2 WLR 806, 125 JP 348, 45 Digest (Repl) 346, 76.
Wells v Minister of Housing and Local Government [1967] 2 All ER 1041, [1967] 1 WLR 1000, 131 JP 431, Digest Supp.
Appeal
This was an appeal by the defendants, Westminster Corporation, from the judgment of Bridge J, dated 19 June 1970, declaring in favour of the plaintiff developers, Lever Finance Ltd, that there was a valid planning permission under the Town and Country Planning Act 1962, for the erection of the house known as G at 3 Hall Road, London NW8, on the site on which the house was now under construction. The facts are set out in the judgment of Lord Denning MR.
M L M Chavasse QC and A B Dawson for the planning authority.
C L Hawser QC and M Graham for the developers.
22 July 1970. The following judgments were delivered.
LORD DENNING MR. This is a case for expedition. It concerns a part of St John’s Wood in which there are many high class residences. Lever (Finance) Ltd
Page 498 of [1970] 3 All ER 496
are developers who propose to develop a piece of land. Their architect, Mr Rottenberg, made application for planning permission to the Westminster City Council. He attached a plan numbered 896SK6(c). It was not an outline plan. It was a detailed plan. It showed the site lying between Hall Road and Melina Place. It showed the proposed development as seven houses in a terrace, and seven detached houses. These 14 houses were designated by letters A B C D E F G H I J K L M and N. One of the detached houses, which was lettered G, was 40 feet distant from Melina Place. On 24 March 1969, the planning authority gave permission for that development in accordance with the detailed plan submitted. It permitted the erection of 14 two-storey houses with garages on the site. But it so appears that a month later, when the architect was getting out a further site plan, he made some variations. He did so because of the building line of Hall Road. It meant that the seven terraced houses had to be moved 5 feet along. At the same time he altered the site of house G. He thought that it would be better if it were in line with the other detached house F. So he moved house G a distance of 17 feet nearer to Melina Place. In the original plan which had been approved, house G was 40 feet away from the houses in Melina Place. In the further site plan which the architect now submitted, house G was only 23 feet away from the houses in Melina Place. This further site plan was on a scale twice as large as the original plan. The architect sent this further site plan to the planning authority’s officer, who had been dealing with all these matters, a Mr Carpenter. In a letter of 25 April 1969, the architect, Mr Rottenberg, wrote:
‘Dear Mr. Carpenter …
With further reference to the Town Planning consent for the erection of fourteen houses at the above, I would inform you that we had a meeting with the Engineer and have established the Building Line and, for your records, I am enclosing duplicate copies of the drawing No. 896/100B which indicates the actual setting out of the individual houses.’
He enclosed the new plan. It showed the altered situation of house G, so that it was no longer to be 40 feet, but only 23 feet distant from Melina Place. The new plan went to Mr Carpenter. Unfortunately, he had lost his file. He had not got before him the original plan which the planning authority had approved. After about 10 days Mr Carpenter telephoned to the architect, Mr Rottenberg, concerning the matter. There is a difference as to what took place. Both of them were perfectly honest. In the result, the judge held that Mr Rottenberg’s recollection was correct. I will read, if I may, Mr Rottenberg’s version as given in his affidavit. He stated:
‘I pointed out the amendments in the general layout but that the most important alteration concerned the setting out of house “G” the rear of which would now line up with the adjoining house on Plot “F“. I told Mr. Carpenter the reason for this alteration which was to achieve a better relationship between the individual houses as well as to ensure that the terraced houses complied with the daylighting code. I asked Mr. Carpenter if the proposals were satisfactory and he told me quite clearly that the alterations were not material, and that he therefore had no objection and no further consent was required. I made a note on the copy of the letter of the 25th April 1969, and I expressly asked Mr. Carpenter to make a note on his file that he was satisfied with the proposals. [Then Mr Rottenberg goes on to set out the two notes.]
‘My note which is contained on the said letter of the 25th April 1969 states: “Local Authority telephoned pointed out alterations to general layout—said it is O.K. Most important ‘G’ lines up with ‘F’.” Mr. Carpenter’s note is as follows: “Telephoned Mr. Rottenberg, who said above drawing was similar to that approved, except house G moved slightly towards house F. But relationship with s.e. boundary remains unchanged. Not material.”’
In the upshot, the judge preferred Mr Rottenberg’s recollection. In any case, Mr Carpenter, according to his own note, told Mr Rottenberg that the variations were
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not material. In this respect I fear that Mr Carpenter made a mistake. That variation was material. If Mr Carpenter had had the file before him, he would have seen it. But, not having the file, he said that it was not material.
Howsoever that may be, Mr Rottenberg acted on what he was told. He did not put in an application for further permission so as to sanction the variations. He accepted Mr Carpenter’s statement that they were not material. So he proceeded to get on with the work. Some of the houses were started in June. House G itself was started in September 1969. The foundations were set out. The houses started to go up. At that point some of the residents in Melina Place were disturbed. They had, apparently, been assured by the architect in the initial stages that house G would be 40 feet away. Now, seeing that it was only 23 feet away, they made representations to the planning authority. The officers of the planning authority were concerned about the position. They suggested to Mr Rottenberg that he should apply to the planning authority for planning permission for this variation. It would then be all in order. So, on 17 March 1970, Mr Rottenberg applied for permission for the variations. The planning officers supported the application. They reported to the committee:
‘Although it is unfortunate that the development has taken place in this form without the [planning authority’s] prior consent it is not considered that any valid planning objection can be raised to the siting of the houses as now being constructed, and permission is recommended to regularise the position.’
But the committee rejected this recommendation. It refused to sanction the variations. It did not grant the application. No doubt it felt that the residents in Melina Place had good cause for complaint.
So the position was very awkward. The house was still going up in a position that was not sanctioned. Mr Rottenberg then made another attempt to get over the difficulty. He suggested an alteration in the structure of house G. He proposed to remove the top storey over part of it. By so doing, the occupiers of house G would not overlook the houses in Melina Place. So on 29 April 1970, he made an application for this variation in house G. This application was again supported by the planning officer and by the director of architecture and planning himself. But the committee rejected this variation also. It must have felt that the neighbours had a legitimate grievance at the way things had been done. On 18 May 1970, the committee refused permission. It went further and resolved that an enforcement notice should be issued so as to prevent Mr Rottenberg and the developers going further with the house.
This put the developers in a quandary. The house was up. The roof was on. But the windows were not in. It had not been glazed. They did not know whether to take it down or not. So they moved the court urgently. Within two days, on 21 May 1970, they issued a writ against the planning authority claiming a declaration that they were entitled to complete the house on the site where it was. They asked for an injunction to restrain the planning authority from serving an enforcement notice. An interim injunction was obtained. The action was expedited. It was tried before Bridge J on 18 and 19 June 1970. He decided in favour of the developers. The planning authority appeal to this court. The appeal comes on within two months of the issue of the writ. It shows that the courts can act quickly when occasion so requires.
The judge made some important findings. He found that, after Mr Rottenberg submitted his further plan (which contained the variations), Mr Carpenter used language which led Mr Rottenberg to believe that the proposed variations were not material and that no further consent was required. The judge further found that, after detailed planning permission had been given, it is a common occurrence to find that minor modifications are needed; and that when the necessity does arise, the common practice—
‘… is for the developers’ architect to submit any such proposed minor modifications to the consideration of the planning officer … If, in that planning
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officer’s view the modification is not material … he says so, and … [the] development goes forward in accordance with the modified plans as approved in that sense by the planning officer, and nobody on either side considers it necessary to submit a further application … that is an eminently sensible practice.’
One of the witnesses to the practice was Mr Hirsch, who is the chief planning officer of the planning authority, and well qualified to speak of it. He told the judge that it frequently happens that there is minor variation from the plans; that it is discussed with the planning officer; that the planning officer says ‘in my opinion it is not material’; whereupon the work goes ahead without any formal application or permission. Mr Hirsch stressed that the officer should make it clear that it is only his opinion. He should always say: ‘In my opinion it is not material’; so as to make it clear that he is not committing the planning authority. I do not know whether planning officers always remember to say ‘in my opinion’. But the upshot of it all is that, if the planning officer tells the architect for the developer that in his opinion the variation is not material, then the developer goes on with the work as varied. He does not apply for any further permission.
Counsel for the planning authority accepted—as he must accept—that that is the practice. But he says that it is not binding on the planning authority. He says that Parliament has entrusted these important planning decisions to the planning authority and not to the planning officer of the council; and, no matter that the planning officers tell a developer that a variation is not material, it is not binding on the planning authority. They can go back on it. Counsel says that it is for the developer’s architect to shoulder the responsibility. He must make up his own mind whether it is material. He can take the opinion of the planning officer, but it is eventually the architect’s own responsibility. If the variation should turn out to be a material variation, and he has not got permission for it from the planning authority, then so much the worse for him. He ought not to have relied on the planning officer’s opinion. The planning authority, he said, are quite entitled to throw over the opinion of their planning officer.
I can see the force of counsel’s argument, but I do not think that it should prevail. In my opinion a planning permission covers work which is specified in the detailed plans and any immaterial variation therein. I do not use the words ‘de minimis’ because that would be misleading. It is obvious that, as the developer proceeds with the work, there will necessarily be variations from time to time. Things may arise which were not foreseen. It should not be necessary for the developers to go back to the planning authority for every immaterial variation. The permission covers any variation which is not material. But then the question arises: who is to decide whether a variation is material or not? In practice it has been the planning officer. This is a sensible practice and I think that we should affirm it. If the planning officer tells the developer that a proposed variation is not material, and the developer acts on it, then the planning authority cannot go back on it. I know that there are authorities which say that a public authority cannot be estopped by any representations made by its officers. It cannot be estopped from doing its public duty. See, for instance, the recent decision of the Divisional Court in Southend-on-Sea Corpn v Hodgson (Wickford) Ltd. But those statements must now be taken with considerable reserve. There are many matters which public authorities can now delegate to their officers. If an officer, acting within the scope of his ostensible authority, makes a representation on which another acts, then a public authority may be bound by it, just as much as a private concern would be. A good instance is the recent decision of this court in Wells v Minister of Housing and Local Government. It was proved in that case that it was the practice of planning authorities, acting through their officers, to tell applicants whether or not planning permission was necessary. A letter was written by the
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council engineer telling the applicants that no permission was necessary. The applicants acted on it. It was held that the planning authority could not go back on it. I would like to quote what I then said ([1967] 2 All ER at 1044, [1967] 1 WLR at 1007):
‘It has been their practice to tell applicants that no planning permission is necessary. Are they now to be allowed to say that this practice was all wrong and their letters were of no effect? I do not think so. I take the law to be that a defect in procedure can be cured, and an irregularity can be waived, even by a public authority, so as to render valid that which would otherwise be invalid.’
So here it has been the practice of the planning authority and of many others, to allow their planning officers to tell applicants whether a variation is material or not. Are they now to be allowed to say that that practice was all wrong? I do not think so. It was a matter within the ostensible authority of the planning officer; and, being acted on, it is binding on the planning authority.
I would only add this: the conversation with Mr Carpenter took place early in May 1969. At that date there had been in force for one month at least, since 1 April 1969, the provisions of the Town and Country Planning Act 1968. Section 64 enables a local authority as from 1 April 1969, to delegate to their officers many of their functions under the Town and Country Planning Acts. An applicant cannot himself know, of course, whether such a delegation has taken place. That is a matter for the ‘indoor management’ of the planning authority. It depends on the internal resolutions which they have made. Any person dealing with them is entitled to assume that all necessary resolutions have been passed. Just as he can in the case of a company: see Royal British Bank v Turquand. It is true that s 64(5) speaks of a notice in writing. But this does not alter the fact that much authority can now be delegated to planning officers.
I do not think that this case can or should be decided on the 1968 Act; for there was no notice in writing here. I think that it should be decided on the practice proved in evidence. It was within the ostensible authority of Mr Carpenter to tell Mr Rottenberg that the variation was not material. Seeing that the developers acted on it by building the house, I do not think that the planning authority can throw over what has been done by their officer, Mr Carpenter.
I can see how the trouble has arisen. Mr Carpenter had lost the file. He made a mistake. He told Mr Rottenberg that a variation was not material, when he ought to have told him that it was material and required planning permission. He made a mistake. That is unfortunate for the neighbours. They may feel justly aggrieved. But it is not a mistake for which the developers should suffer. The developers put up this house on the faith of this representation made to them. I do not think that an enforcement notice should be launched against them. I think that the judge was right and I would dismiss the appeal.
SACHS LJ. This case raises questions as to the effect in law of what the developers’ architect was told by one of the planning authority’s officers in the early part of May 1969. Those questions I have not found easy and indeed might well have preferred time to consider some aspects of the points raised, but for the fact that this case is a case in which there is urgent need for a speedy decision. On that decision depends whether the completion of a key house in a development scheme can proceed or whether it must stop for an enforcement notice to be served with a view to its being destroyed, as the planning authority appear to desire. On the facts before this court as found by the judge at first instance, one thing is clear: the planning authority’s attitude as put before this court is unfortunate and invites criticism. There
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may, before the trial took place at first instance, have been doubts in the planning authority’s mind as to what in fact took place at that conversation early in May 1969. Now, however, it has been determined—and it is a determination which is neither capable of being challenged nor has been challenged in this court.
The fact is that the developers’ architect, whose evidence was fully accepted, was given to understand that the planning authority were satisfied with the layout of the scheme as set out in the plan which has been referred to as plan 2; and that that scheme could go ahead on that basis. I need only repeat from the affidavit of the architect this passage:
‘I asked Mr. Carpenter if the proposals were satisfactory, and he told me quite clearly that the alterations were not material, and that he therefore had no objection and no further consent was required. I made a note on the copy of the letter of the 25th April 1969 and I expressly asked Mr. Carpenter to make a note on his file that he was satisfied with the proposals.’
The relevant work started in June 1969, and it proceeded without any complaint for many months. During that period officers of the planning authority were continually on the site, could see what was going on and had available to them, of course, the relevant plans. Then came the time about March 1970, when the matter was brought, at the planning authority’s request, before its committee. It came before it indeed twice in a short period. On each occasion very senior officers in the planning department of the planning authority reported: they gave as their views, that no alteration as between plan 2 and plan 1 was material (certainly not sufficiently material) adversely to affect the position from a planning point of view; they recommended that the scheme should proceed. Nonetheless, the committee decided that the house should not proceed and that an enforcement notice should be served.
It is to be noted that according to the architect the officers of the planning authority informed him that the reason that this had to go before the committee was because of outside pressure that had been imposed and had given a political aspect to a planning matter. With that point, of course, be it right or wrong, this court is not concerned. It is only concerned with the result of what happened when the matter came up for the decision of the committee. It threw overboard what its own officer had said in May 1969 although it was something which had been acted on and which had resulted in the house getting to an advanced stage. The exact stage may perhaps not be shown precisely in the evidence, but it was not far short of reaching roof level.
Now, in this appeal, once more the planning authority raises, as it raised in the court below, a series of technical objections relating to its right to delegate power to its officers to do something of a type which those officers had constantly been doing over many years—something on which it is now said that those who dealt with the planning authority could not rely. These points were pursued here despite the actions of the officers having been rightly found by the trial judge to be based on a practice which was both sensible and businesslike.
The attitude adopted in this court could naturally tend to undermine confidence between the planning authority and the professional men who deal with it. If the objections raised in this court on procedural points were strictly applied it would result in voluminous extra papers coming into being, which would provide an architect’s nightmare and a bureaucrat’s morass to the advantage of nobody.
On matters such as those raised in this appeal the court must, of course, hold a careful balance between two potentially conflicting principles. Both of these are illustrated in the judgments delivered in Wells v Minister of Housing and Local Government. On the one hand, the court must be careful to remember:
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‘the local planning authority is not a free agent to waive statutory requirements in favour of (so to speak) an adversary: it is the guardian of the planning system.’
(See the dissenting judgment of Russell LJ ([1967] 2 All ER at 1050, [1967] 1 WLR at 1015).) The planning authority’s ability to act in the public interest must not be impaired. Hence the attitude of the courts on the matter of estoppel. On the other hand, the courts must likewise take care that those who deal reasonably with the planning authority’s officers cannot afterwards be trapped by the planning authority saying: ‘You ought to have completed a series of procedural technicalities, and, although we by our officers normally do not insist on them, we can always turn round and say that what has happened as between us and yourselves is of no effect.' That is the basis on which Lord Denning MR said in the Wells case ([1967] 2 All ER at 1044, [1967] 1 WLR at 1007):
‘I take the law to be that a defect in procedure can be cured, and an irregularity can be waived, even by a public authority, so as to render valid that which would otherwise be invalid.’
The general position on the exercise in planning matters of powers by the officers of the corporation has, of course, been affected by s 64 of the Town and Country Planning Act 1968. That section gives power to delegate to officers of a planning authority where delegation was not previously possible. For my part, I do not wish to generalise as to when an officer can be deemed to have authority for the actions which he takes in the course of exercising what would appear to persons dealing with him to be a natural authority. In the present case one can look at the combined effect of past practice and the powers of delegation which have now been provided and see how the matter works in this particular instance, for we are now dealing with a conversation that took place just after s 64 came into operation. Before that date the position as regards minor alterations in a detail planning permission was referred to in the judgment in these terms:
‘Further, the common practice in Westminster … known to the planning authority and to developers alike … is for the developers’ architect to submit any such proposed minor modifications to the consideration of the planning officer concerned with the case. If, in that planning officer’s view, the modification in question is one which is not material … he says so, and when that happens the common practice then is that development goes forward in accordance with the modified plans as approved in that sense by the planning officer, and nobody on either side considers it necessary to submit a further application for a further formal approval of the details by any committee of the local planning authority.’
No change in that procedure was made when s 64 came into force. Whatever may have been the position before that date, the unimpeded continuance of a practice that had previously existed resulted after that date in an implied delegation no less than if there had been an express delegation.
In those circumstances in essence what technically happened was that there was a delegation of power to deal with an application under s 43 of the Town and Country Planning Act 1962, as to whether any further planning permission was required. For such an application it would be otiose to send in forms such as had previously been filled in, probably in triplicate, which were already available on the files of the planning authority and which would show all the material necessary for dealing with the case except the modification of the original plan which was set out in the amended plan—here plan 2. In those circumstances it would be appalling if every time there
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was such an application it was necessary to clutter the files of architect and planning authority alike with a mass of additional paper. Given good faith on the part of those concerned—and there is not the slightest suggestion that this is a case which was other than one of good faith—it is enough that the decision be recorded by the respective parties. I would, however, say for future reference that it would have been much better if there had been an exchange of short notes on the subject. But in practice the conversation of early May 1969 operated in the same way as if all s 43 formalities had been observed.
On those grounds accordingly I too would dismiss this appeal. I thus do not feel it necessary nor indeed do I feel qualified without further consideration to go into the other interesting points which have been raised by counsel for the planning authority.
MEGAW LJ. I agree that this appeal should be dismissed for the reasons which have been given in the judgment of Lord Denning MR.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: E Woolf (for the planning authority); Tringhams (for the developers).
Wendy Shockett Barrister.
Lord v Sunday Telegraph Ltd
[1970] 3 All ER 504
Categories: TORTS; Defamation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND MEGAW LJJ
Hearing Date(s): 20, 21 JULY 1970
Libel – Fair comment – Particulars – Defendant raising general plea of fair comment not required to particularise which of words complained of are fact and which are comment, but he must give particulars of the facts supporting the plea – RSC Ord 82, r 3(2), applicable only to rolled-up plea and not to a general plea of fair comment.
Where a general plea of fair comment is raised the defendant must give particulars of the basic facts on which he relies in support of his plea but he is not required to give particulars stating which of the words complained of are statements of fact and which are expressions of comment for RSC Ord 82, r 3(2)a, applies only to the ‘rolled-up plea’, ie to a plea appearing to roll up justification and fair comment together, and does not apply to a general plea of fair comment (see p 507 a, d and h, post).
Notes
For the defence of fair comment, see 24 Halsbury’s Laws (3rd Edn) 70, 71, para 123, 72, para 125, and for cases on pleading fair comment, see 32 Digest (Repl) 182, 183, 1955–1964.
Cases referred to in judgments
Aga Khan v Times Publishing Co [1924] 1 KB 675, 93 LJKB 361, 130 LT 746, 32 Digest (Repl) 182, 1958.
Cunningham-Howie v F W Dimbleby & Sons Ltd [1950] 2 All ER 882, [1951] 1 KB 360, 32 Digest (Repl) 183, 1964.
Hobbs v People Newspaper Publishing Co Ltd (1926) The Times, 30 March.
Page 505 of [1970] 3 All ER 504
London Artists Ltd v Littler [1969] 2 All ER 193, [1969] 2 QB 375, [1969] 2 WLR 409, Digest Supp.
Tudor-Hart v British Union for the Abolition of Vivisection [1937] 4 All ER 475, [1938] 2 KB 329, 107 LJKB 50, 158 LT 162, 32 Digest (Repl) 182, 1960.
Cases also cited
Burton v Board [1929] 1 KB 301, [1928] All ER Rep 659.
Fleming v Dollar (1889) 23 QBD 388.
Hunt v Star Newspaper Co Ltd [1908] 2 KB 309, [1908–10] All ER Rep 513.
Kemsley v Foot [1952] 1 All ER 501, [1952] AC 345.
Penrhyn v ’Licensed Victuallers’ Mirror’ (1890) 7 TLR 1.
Sutherland v Stopes [1925] AC 47, [1924] All ER Rep 19.
Interlocutory appeal
This was an appeal by the plaintiff, Cyril Lord, from the order of Bean J, dated 14 May 1970, dismissing the plaintiff’s appeal from the part of Master Bickford Smith’s order, dated 4 March 1970, in which he refused to order the defendants, the Sunday Telegraph Ltd, to serve on the plaintiff particulars of their plea of fair comment, stating which of the words complained of were alleged by the defendants to be statements of fact. The facts are set out in the judgment of Lord Denning MR.
M E I Kempster QC and D Browne for the plaintiff.
H M Davidson for the defendants.
21 July 1970. The following judgments were delivered.
LORD DENNING MR. On 17 November 1968, the defendants, the Sunday Telegraph Ltd, published an article in which they severely criticised the affairs of Cyril Lord Ltd, the carpet manufacturers. The article described an offer of shares in 1965, the decline of the company in 1968 and the retirement of the plaintiff, Mr Cyril Lord himself, to the Bahamas. It drew attention to ‘the way’—and I quote—‘in which shares from whatever source were sold around the City before [the plaintiff’s] retirement’. A fortnight later, on 2 December 1968, the plaintiff issued a writ against the defendants claiming damages for libel and served a statement of claim. The defendants delivered a defence in which they denied that the words were defamatory of the plaintiff. They went on to plead fair comment in the general form which has been accepted for many years. This is how it was pleaded:
‘… the said words … are fair comment made in good faith and without any malice upon a matter of public interest, namely the issue to the public of shares in Cyril Lord Limited, a public company of which the Plaintiff was at all material times the Chairman and Managing Director, and the subsequent record and fate of Cyril Lord Limited and the shares thereof, and the acts and transactions of the Plaintiff in relation to the said events.’
If the plea had stopped there, it would have been insufficient; for the simple reason that, in order to make a defence of fair comment, the facts on which the comment is based must be true. The plea must be read therefore as carrying with it, by implication, an allegation that the facts on which the comment was based were true (London Artists Ltd v Littler ([1969] 2 All ER 193 at 197, [1969] 2 QB 375 at 390).) The defendants realised this and gave particulars of the facts on which they based their comment, see Cunningham-Howie v F W Dimbleby & Sons Ltd. They set out in seven numbered paragraphs a whole series of facts which they intend to prove at the trial.
Now the plaintiff’s advisers seek to get more information from the defendants. They make an application for further particulars, asking the defendants to state ‘which
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of the words complained of the defendants allege to be statements of fact’. In other words, they want the defendants to go through the article and say which are statements of fact and which are expression of opinion. In support of this request they rely on RSC Ord 82, r 3(2), which provides:
‘Where in an action for libel or slander the defendant alleges that, in so far as the words complained of consist of statements of fact, they are true in substance and in fact, and in so far as they consist of expressions of opinion, they are fair comment on a matter of public interest, or pleads to the like effect, he must give particulars stating which of the words complained of he alleges are statements of fact and of the facts and matters he relies on in support of the allegation that the words are true.’
Counsel for the plaintiff says that the general plea of fair comment which I have read is a pleading ‘to the like effect’ within the meaning of that rule, so that he is entitled to the particulars for which he now asks, ‘stating which of the words … are statements of fact’.
I do not think that this rule applies to the general plea of fair comment. The rule applies only to what has been known for several years as the ‘rolled-up plea’, which has always run in these words:
‘In so far as the words complained of consist of statements of fact they are true in substance and in fact, and in so far as they consist of expressions of opinion they are fair comment made in good faith and without malice upon the said facts which are a matter of public interest.’
That was at one time a very popular plea, for the simple reason that the defendant could not be compelled to give any particulars of it. He could not be compelled to say which was fact and which was comment. The plea came under the criticism of Scrutton LJ in Aga Khan v Times Publishing Co ([1924] 1 KB 675 at 682), and of Atkin LJ in Hobbs v People Newspaper Publishing Co Ltd, quoted in Tudor-Hart v British Union for the Abolition of Vivisection ([1937] 4 All ER 475 at 477, [1938] 2 KB 329 at 336). Eventually in 1948 Lord Porter’s Committee on the Law of Defamation recommendedb that the law should be changed. They recommended in para 177 that:
‘Where a defendant pleads the rolled-up plea or any other plea to the like effect, the plaintiff should be entitled to particulars of the facts relied upon by the defendant in support of such plea.’
That recommendation was implemented in 1949 by the former RSC Ord 19, r 22A, which is now replaced by RSC Ord 82, r 3(2). But it is to be noted that when the rule-makers framed their rule, they went beyond the recommendations of the Porter Committee. Whereas the Porter Committee only required ‘particulars of the facts relied upon’, the rule-makers made this addition: ‘particulars stating which of the words complained of … are statements of fact’. So that the defendant has to say which are facts and which are comment. I do not think that that addition by the rule-makers serves any useful purpose. In many cases it is difficult to decide what is fact and what is comment. It is for the jury to decide it at the trial, subject, of course, to the direction of the judge. No defendant wishes beforehand to commit himself on it. If an order for particulars is made, as required by this addition, the defendant can easily get round it. He will go through the article, take each sentence or phrase and write against it ‘fact’ alternatively ‘comment’; or ‘comment alternatively fact’. Such particulars get a plaintiff nowhere.
Page 507 of [1970] 3 All ER 504
In any case, as I have already said, I think that the rule applies only to the rolled-up plea or its equivalent; ie to a plea which appears to roll up justification and fair comment together. It does not apply to a general plea of fair comment such as we have here. Under this general plea the defendant must give particulars of the basic facts on which he relies in support of his plea. Those particulars give the plaintiff notice of the case he has to meet. He is not entitled to more. If the plaintiff can at the trial point to defamatory facts in the article which are not covered by the particulars, he can take advantage of the omission. He can say that the defendant is liable for them as they are not covered by the plea. See London Artists Ltd v Littler ([1969] 2 All ER at 198, [1969] 2 QB at 391); but that is a matter for the trial and not for particulars beforehand.
I need only add that since this new rule the rolled-up plea has disappeared. There is nothing to be gained by it. The modern practice is simply to plead the plea of fair comment. I think that is enough. I think that the master was right not to order further particulars and I would dismiss the appeal.
SACHS LJ. I agree that this appeal should be dismissed. I would, however, like to emphasise the point that where a plea of fair comment is raised, the right of a plaintiff to particulars of facts alleged to be true and to support that comment does not differ according to the way in which that plea is formulated. It matters not whether the rolled-up plea, now in disuse, is revived and used; nor whether it is a plea as worded in the present case and in London Artists Ltd v Littler. In the rolled-up plea the allegation that the facts are true is specifically made; in the other the allegation is, of course, implied. In that behalf I would refer to the judgment of Denning LJ in Cunningham-Howie v F W Dimbleby & Sons Ltd ([1950] 2 All ER 882 at 882, 883, [1951] 1 KB 360 at 363). There he said:
‘Let us just see what the plea of fair comment entails. An essential part of it, and the proper preamble to it, is for the defendant to allege that the facts on which he comments are true. If that is expressly alleged, the plaintiff is clearly entitled to particulars of the facts. Even if it is not expressly alleged, it is still implicit in the plea, and, if the plaintiff is to know the case he has to meet, he must be given particulars of the facts which are relied on in support of the plea.’
That view was repeated by Lord Denning MR in London Artists Ltd v Littler ([1969] 2 All ER at 197, 198, [1969] 2 KB at 390, 391), where it was rightly pointed out that only on the basis of that implication is a plea in the present form unobjectionable. In both cases, the rolled-up plea and the present plea, the plaintiff is nowadays entitled to full particulars of any facts relied on as being true for the purpose of founding the defence of fair comment. In the present case those particulars have already been set out under para 4 of the defencec and the plaintiff has nothing about which he can justifiably complain.
MEGAW LJ. I agree that this appeal fails for the reasons given by Lord Denning MR.
Appeal dismissed.
Solicitors: Victor Mishcon & Co (for the plaintiff); Simmons & Simmons (for the defendants).
Wendy Shockett Barrister.
Malcolm and another v Broadhurst
[1970] 3 All ER 508
Categories: CIVIL PROCEDURE: TORTS; Negligence
Court: QUEEN’S BENCH DIVISION
Lord(s): GEOFFREY LANE J
Hearing Date(s): 16, 18 JUNE, 10 JULY 1970
Damages – Remoteness of damage – Negligence – Foreseeability – Husband and wife injured in same accident – Injuries causing personality change in husband – Wife suffering from pre-existing nervous condition – Husband’s changed behaviour affecting her personality and capacity to work – Whether foreseeable consequence of injury to husband.
Damages – Measure of damages – Loss of earnings – Part-time secretarial wages paid by husband to wife – Husband and wife both having cause of action for negligence against defendant – Husband’s injuries incapacitating him from self-employed work – Consequential loss of part-time secretarial wages to wife – Whether wife entitled to compensation for consequential loss.
In February 1967, the husband and wife were injured by the negligent driving of the defendant. Before the accident they and their children had had a happy home, the husband being a quiet and controlled person who got on well with the wife and children. The head injuries suffered by the husband resulted in his intellectual deterioration and a serious diminution of hearing power, and changed his personality and behaviour so that he became irritable in the home, easily provoked to bad temper and on occasion violent to the wife. This situation was unlikely to improve. The wife was fit for work so far as her physical injuries were concerned by June 1967, and a pre-existing nervous disturbance which had been intensified by the accident had improved by February 1968; but from February 1968 to September 1968 she was incapacitated from work solely because of the effect on her vulnerable personality of her husband’s changed behaviour. She returned to full-time office work in September 1968, but the medical view was that she would be likely to develop nervous symptoms from time to time due to the effect on her personality of the husband’s changed behaviour. Before the accident the wife, in addition to her full-time work, had been employed part-time by her husband as his secretary and after February 1968 (when she had recovered from her own injuries) she was prevented from doing this part-time work solely because her husband’s injuries had incapacitated him from self-employed work. The wife was unable to obtain similar part-time work outside the home because of the demands on her time from her full-time job and housework. On the question of the damages to which the wife was entitled in respect of her loss of wages from her full-time and part-time work and her nervous disability from February 1968,
Held – (i) The wife was entitled to compensation for her loss of wages from her full-time work from February to September 1968, and to a sum (assessed at £150) for her nervous disability over those months and the slight risk of future nervous trouble, because exacerbation of her nervous condition was a foreseeable consequence of injuring her since the defendant must take a plaintiff as he found her and there was no difference in principle between an egg-shell skull and an egg-shell personality, and it was reasonably foreseeable that if the husband was severely injured when the wife was temperamentally unstable, her instability might be adversely affected by the injury done to the husband (see p 511 e to h, post).
Love v Port of London Authority [1959] 2 Lloyd’s Rep 541 and Hughes v Lord Advocate [1963] 1 All ER 705 applied.
(ii) The wife was not entitled to compensation for the loss of her part-time secretarial wages after February 1968, notwithstanding that she herself had a cause of
Page 509 of [1970] 3 All ER 508
action against the defendant arising out of the same accident as injured the husband, because this loss was not foreseeable and it would be an unwarrantable extension of the law to require the defendant to take his victims as he found them not only in relation to their physical infirmities but also in relation to their infirmities of employment and to make him liable for the unforeseeable effects of the accident on the special and unforeseeable circumstances of the wife’s employment (see p 512 d and e post).
Notes
For measure of damages in tort for personal injury and for loss of earnings, see 11 Halsbury’s Laws (3rd Edn) 255, 256, 258, 259, paras 427, 430, and for cases on the subject, see 17 Digest (Repl) 101, 102, 155–168.
For remoteness of damage, see 11 Halsbury’s Laws (3rd Edn) 277–280, paras 458–461, and for cases on the subject, see 17 Digest (Repl) 115, 116, 277–283.
Cases referred to in judgment
Hughes v Lord Advocate [1963] 1 All ER 705, [1963] AC 837, [1963] 2 WLR 779, Digest (Cont Vol A) 1143, 89a.
Love v Port of London Authority [1959] 2 Lloyd’s Rep 541, Digest (Cont Vol A) 1194, 1060a.
Weller v Foot and Mouth Disease Research Institute [1965] 3 All ER 560, [1966] 1 QB 569, [1965] 3 WLR 1082, Digest (Cont Vol B) 554, 109c.
Action
This was an action by Ian James Malcolm and Jean Barbara Malcolm, his wife, against Charles Frederick Broadhurst for damages for personal injuries resulting from the negligent driving of the defendant. Negligence was admitted and the only question was the proper measure of damages. The facts are set out in the judgment.
F B Purchas QC and M C Parker for the plaintiffs.
J F A Archer for the defendant.
Cur adv vult
10 July 1970. The following judgment was delivered.
GEOFFREY LANE J read the following judgment. On 8 February 1967 the plaintiffs, husband and wife, were injured when the defendant, as he admits, negligently drove into the motor car in which they were travelling at Stansted. The court is asked to assess the proper measure of damages for those injuries and the consequential loss.
The husband suffered from the following physical injury: (1) concussion; (2) severe lacerations and bruising of the scalp; (3) severe comminuted fracture of the right femoral shaft; (4) fracture of the left tibia and fibula; (5) fracture of the right os calcis. He was severely shocked. Soon after he was admitted to hospital he developed a fat embolism. Complicated and painful procedures were carried out to assist the broken bones to mend. The right femur was on 20 February fixed with a plate and screws. He was discharged on 24 April 1967 but re-admitted a month later for bone-grafting of the tibia, and was kept in hospital for a further three weeks. The history of his progress is set out in the agreed reports and I need not repeat it. The position in 1970 is that the right femur has united well but with marked shortening of the leg necessitating a raised shoe. This produces abnormal symptoms in the right foot. The plate and screws are palpable and may have to be removed by operation. The left tibia and fibula were slow to unite. The scar is, and is likely to remain, sensitive and vulnerable. His fractured os calcis has mended leaving him with a supple but not normal foot. He will be likely to continue to experience discomfort when walking on rough ground and over long distances. He had an accident in 1958 which caused injury to the sciatic nerve and consequent foot-drop. This exacerbates his present symptoms.
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Unfortunately the head injury and the fat embolism have caused much more serious disabilities. He was before the accident a man who demanded of himself high standards of precision and efficiency, his memory was good, his behaviour was quiet and controlled and he got on well not only with the wife and children, but with those he met at work and socially. There has been since the accident an obvious intellectual deterioration and a serious diminution of learning power. He finds difficulty in concentrating for any length of time; he has no great love for people, his temper is uncertain, he is easily provoked, he has become very difficult to live with. The children irritate him and he is unable to conceal this irritation; this leads to friction in the home. He has on occasions treated the wife with violence and what was before the accident a happy home and family is now no longer so. What makes matters no better is that he has good insight into his own problems and is acutely aware of the man he ought to be and is not. This in its turn no doubt accentuates the unhappiness and frustration. The consultant neurologist views the future with some gloom, and understandably so. The husband has been deprived of much of the joy of life.
He has also been deprived, both by physical and temperamental defects, of the ability to carry on his pre-accident occupation. He was a self-employed free-lance aircraft fitter. He learnt his skills in the Royal Air Force and was under contract to Hayters Ltd who would send him out to repair or modify aircraft as occasion demanded, paying him a retaining fee during lulls between jobs, or sometimes finding him employment in factories. That sort of work is now closed to him; he has neither the necessary physical agility nor the temperamental reliability. He tried retraining as a book-keeper without success. He is now employed as a storeman. Before the accident, as his accounts show, he was earning on an average some £24 per week. It is conceded that the incidence of tax would have been heavier in subsequent years had he continued. On the other hand his rates of remuneration would have risen sharply. It is certainly doing no injustice to the defendant to take £24 as the husband’s pre-accident average weekly wage. His earnings now are about £16 per week on average with little or no prospect of advancement.
Despite his earlier accident and the resultant foot-drop I can see no reason to believe that he would have done other than continue successfully as a skilled aircraft fitter and I propose to apply a multiplier of ten years to his weekly loss of £8. There is a small agreed sum of £134 17s 6d in respect of sundry items. His loss of wages from the date of the accident to 16 June 1970 deducting his actual receipts and half the Ministry benefits is £3,064 15s and his future loss of wages at £8 per week for ten years is £4,160. To that total of £7,359 12s 6d must be added a sum to compensate him for his pain, suffering and loss of amenity; for his prospect of a comparatively miserable existence in the future and for his continuing physical disabilities. That sum I assess at £7,500, making a total of £14,859 12s 6d.
The wife’s injuries were less severe. As well as extensive bruising she suffered concussion, a fracture of the right ulna and crack fractures of two ribs. After ten days she was discharged from hospital with her arm in plaster. All these injuries resolved without untoward incident and she is now fully restored physically except for some stiffness in the right wrist, a small loss of rotatory movement in the arm, a slight alteration in sensation on the outer aspect of the left thigh, intermittent pain in the neck and some pain and swelling in the right toe. The neck pain is due to exacerbation in the accident of a pre-existing disc lesion. She will continue to suffer the loss of movement in the arm, the impaired sensation in the thigh and the intermittent pain in the neck. These are more of a nuisance than a disability.
She was fit for work so far as her physical condition was concerned by June 1967. However, before the accident she had for some years been under the care of her doctor for what he describes as nervous disturbance; this condition was intensified by the accident. She became more gloomy, irritable and quick tempered, subject to attacks of headaches and severe apprehension. This mental condition, brought
Page 511 of [1970] 3 All ER 508
about largely by the effect of the accident on a vulnerable personality, lasted until about February 1968. It is conceded by counsel for the defendant that her loss of wages during this period is the proper subject of compensation in the sum of £630, although there was an element of reactive depression caused by the husband’s behaviour.
From February 1968 until September 1968 she was incapacitated from work solely by reason of the effect on her of the husband’s changed behaviour. In September 1968 she returned to full-time work in a newspaper office and her previous troubles gradually subsided. By May 1970 she was back to normal. The doctor took the view in May 1970 that she would be likely to develop nervous symptoms from time to time due to the effect on her personality of the husband’s changed behaviour. Having heard her own up-to-date account, I consider the risk of this to be minimal. The effect on her of having to act as a peacemaker between the husband and the children has acted as a cure and there is no doubt that she has become much more psychologically resistant to stress. She is certainly entitled to damages in respect of her physical injuries and in respect of her nervous disability insofar as it was exacerbated by the accident from May 1967 when it started until February 1968.
What is not so certain is whether she is entitled to compensation for loss of wages between February and September 1968 and suffering over a slightly longer period with the slight possibility of future recrudescence, when those matters are caused not directly by the accident at all but by the effect of her husband’s abnormal behaviour on her vulnerable condition. No difficulty arises here such as that in Weller v Foot and Mouth Disease Research Institute because she has her cause of action against the defendant. Both damnum and injuria are present.
The defendant must take the wife as he finds her and there is no difference in principle between an egg-shell skull and an egg-shell personality, Love v Port of London Authority. Exacerbation of her nervous depression was a readily foreseeable consequence of injuring her. Does the fact that it was caused, or caused to continue, by reaction to the husband’s pathological bad-temper (itself the result of the defendant’s negligence) put a stop to the defendant’s liability? I think not. Once damage of a particular kind, in this case psychological, can be foreseen, as here it could, the fact that it arises or is continued by reason of an unusual complex of events does not avail the defendant, Hughes v Lord Advocate. Moreover, it is not beyond the range of reasonable anticipation to foresee that if one does severe injury to husband and wife, when the wife is temperamentally unstable, her instability may be adversely affected by the injury done to the husband. I do not derive any assistance from the ‘nervous shock’ cases; they are concerned with the effect of the sudden traumatic effect of witnessing or hearing of an accident and their somewhat special rules do not seem to me to be applicable to the present circumstances. The wife is therefore entitled to compensation for her loss of wages and disability from February to September 1968 at £12 per week, namely £360, and a sum which I assess at £150 for her nervous disability over those months and the slight risk of future nervous trouble.
The wife claims damages under one further head: before the accident she acted as part-time secretary to the husband, dealing with the routine parts of his paper work for him. For this she was paid by him a weekly wage which on average amounted to £2 17s 7d. She has not done this work since the accident. There are two periods to be considered. First, the time when she was incapacitated owing to her own injuries, namely from the accident until February 1968. It is conceded by counsel for the defendant that she is entitled to her loss of secretarial wages, namely £150 18s 4d, during this period. After February 1968 she was prevented from acting as a secretary, not by any disability of her own, but because the husband’s
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injuries were such that he could no longer continue to work as a self-employed man and consequently required no secretary. The wife is not able to obtain a similar part-time job elsewhere because she would be unable, as a matter of practical politics, to continue her outside job with the newspaper and her housework with any other employment which took her outside the home. Is the defendant liable for the resulting loss?
If the wife herself had not been injured there is no doubt that she would not have been entitled to recover under this head. The defendant could not reasonably have foreseen that by injuring the husband he would be depriving the wife of her only means of part-time employment. Does the fact that she herself has a cause of action against the defendant arising out of the same accident give her the right to recover? Since both the cause of action and the recoverability of damages depend on foreseeability, the answer logically should be the same in each case. Logic however is not always an infallible guide in problems of remoteness of damage. The ‘egg-shell skull’ principle itself, for example, is hard to reconcile logically with the foreseeability test.
It seems to me that the only way in which the defendant could be made liable under this head would be by saying that he must take his victims as he finds them not only in relation to their physical infirmities but also in relation to their infirmities of employment. That would be an extension, and in my judgment an unwarrantable extension, of the present law. To make the defendant liable for the unforeseeable effects of the accident on the special and unforeseeable circumstances of the wife’s employment would be to go beyond the proper limits of compensation. This part of the claim therefore fails.
Her general damages in respect of her injuries, physical and mental, I assess at £1,150 in all. She is entitled to a total of £2,317 12s 10d.
Judgment for the husband for £14,859 12s 6d; £9,500 in court to be paid out to husband’s solicitors in part satisfaction without further order. Judgment for the wife for £2,317 12s 10d; £2,250 in court to be paid out to wife’s solicitors in part satisfaction without further order. Interest on general damages at 6 1/2 per cent awarded from date of service of the writ to the date of the trial, not including any sums in respect of future loss of earnings. Interest on special damages at 3 1/4 per cent awarded from date of accident to date of trial.
Solicitors: Barlow, Lyde & Gilbert, agents for H Stanley Tee & Co, Bishop’s Stortford (for the plaintiffs); Nockolds & Sons, Bishop’s Stortford (for the defendant).
Janet Harding Barrister.
Hodgson v Marks and another
[1970] 3 All ER 513
Categories: TRUSTS : LAND; Land Registration, Property Rights
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 4, 5, 6, 7, 8, 11, 12, 13 MAY, 16 JUNE 1970
Trust and trustee – Creation of trust – Transfer of house – Oral arrangement that house to be held on trust for transferor – Whether competent to transferee to exclude oral evidence of trust – Absence of writing – Validity – Law of Property Act 1925, s 53(1) (b).
Land registration – Overriding interest – ‘Actual occupation’ – Occupation by act recognisable as such – Land Registration Act 1925, s 70(1) (g).
The plaintiff owned a freehold house in which she had lived since 1932, the property having been transferred to her and registered in her name on the death of her first husband in 1949. In April 1959, having lost her second husband, the plaintiff took as a lodger E, whom she soon came to regard as a man of substance, in whom she reposed the greatest trust and confidence and to whom she entrusted the management of her affairs. On 30 June 1960, the plaintiff transferred her house to E, the sole purpose of the transfer as known to her and orally stated between her and E, being to prevent her nephew turning E out of the house, and it being orally agreed between her and E that the house was to remain her house though in E’s name. Both the plaintiff and E continued living in the house as before the transfer. On 28 July 1964, E contracted to sell the house to the first defendant, the transfer being executed on 12 August and the first defendant being registered as proprietor on 1 September. On 12 August, the first defendant executed a charge on the house in favour of the second defendants to secure their loan of part of the purchase price, the charge being registered on 1 September. Before contract the first defendant had visited the house; he saw the plaintiff coming up the path but did not ascertain who she was. There was no evidence that before registration he knew or had reason to know that she had any interest in the house, nor, apart from his knowing that a separate bedroom was occupied by a woman, did he know or have reason to know that anyone other than E was in occupation of the house. E had told him that he was married. In about May 1965 the plaintiff first learnt that the first defendant had bought the house and the first defendant first learnt that the plaintiff claimed to be its owner. In an action for declarations that the first defendant, at the plaintiff’s request, was bound to transfer the property to her free from the charge to the second defendants, and that the plaintiff was entitled to be registered as proprietor of the property free from the charge, the court found, inter alia, that the transfer of the house by the plaintiff to E was made under an oral arrangement that E received no beneficial interest and held the house on trust for the plaintiff absolutely. The questions then arose whether the trust in favour of the plaintiff was void by reason of s 53(1)(b)a of the Law of Property Act 1925 and if not whether the plaintiff’s beneficial interest under the trust was a ‘right’ and whether she was in ‘actual occupation’ within the meaning of s 70(1) (g)b of the Land Registration Act 1925.
Held – (i) The defendants were not entitled to exclude parol evidence of the trust in the plaintiff’s favour because to do so was to use the statutory provision requiring writing, namely s 53(1)(b) of the Law of Property Act 1925, as an instrument of fraud (see p 521 h and p 522 f, post).
Principle of Rochefoucauld v Boustead [1897] 1 Ch at 206 applied.
(ii) Although the plaintiff was at all material times in physical occupation of the premises and had a right to occupy them, the phrase ‘actual occupation’ contained
Page 514 of [1970] 3 All ER 513
in s 70(1)(g) of the Land Registration Act 1925, connoted occupation by an act recognisable as such and apparent to a purchaser and the plaintiff’s occupation did not satisfy these requirements; therefore, although the plaintiff’s interest under the trust gave her the rights under s 70(1)(g), she was not in ‘actual occupation’ and her claim failed against both defendants (see p 524 f, p 527 g and h, and p 528 a, post).
Notes
For rights of purchasers for value without notice, see 14 Halsbury’s Laws (3rd Edn) 547, 548, para 1025, and for overriding interest of persons in actual occupation, see 23 ibid 182, para 348(8).
For the Law of Property Act 1925, s 53, see 20 Halsbury’s Statutes (2nd Edn) 551, and for the Land Registration Act 1925, s 70, see ibid 1002.
Cases referred to in judgment
Allcard v Skinner (1887) 36 Ch D 145, [1886–90] All ER Rep 90, 56 LJCh 1052, 57 LT 61, 12 Digest (Repl) 111, 659.
Caunce v Caunce [1969] 1 All ER 722, [1969] 1 WLR 286, Digest Supp.
Craig (decd) Re, Meneces v Middleton [1970] 2 All ER 390, [1970] 2 WLR 1219.
Daniels v Davison (1809) 16 Ves 249, [1803–13] All ER Rep 432, 33 ER 978; subsequent proceedings (1811) 17 Ves 433, 20 Digest (Repl) 347, 757.
Haigh v Kaye (1872) 7 Ch App 469, 41 LJCh 567, 26 LT 675, 20 Digest (Repl) 273, 183.
Hunt v Luck [1901] 1 Ch 45, 70 LJCh 30, 83 LT 479; affd CA [1902] 1 Ch 428, [1900–03] All ER Rep 295, 71 LJCh 239, 86 LT 68, 40 Digest (Repl) 168, 1309.
Inche Noriah v Shaik Allie Bin Omar [1929] AC 127, [1928] All ER Rep 189, 98 LJPC 1, 140 LT 121, 25 Digest (Repl) 278, 851.
Knight v Bowyer (1858) 2 De G & J 421, 47 Digest (Repl) 62, 454.
Lincoln v Wright (1859) 4 De G & J 16, 28 LJCh 705, 33 LTOS 35, 45 ER 6, 40 Digest (Repl) 42, 246.
Marlborough (Duke of), Re, Davis v Whitehead [1894] 2 Ch 133, 63 LJCh 471, 70 LT 314, 20 Digest (Repl) 273, 184.
National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, [1965] AC 1175, [1965] 3 WLR 1; rvsg [1964] 1 All ER 688, [1964] Ch 665, [1964] 2 WLR 751, Digest (Cont Vol B) 343, 621l.
Rochefoucauld v Boustead [1897] 1 Ch 196, 66 LJCh 74, 75 LT 502; subsequent proceedings [1898] 1 Ch 550, 47 Digest (Repl) 523, 4731.
Strand Securities Ltd v Caswell [1964] 2 All ER 956, [1965] Ch 373, [1964] 3 WLR 619; on appeal CA [1965] 1 All ER 820, [1965] Ch 958, [1965] 2 WLR 958, Digest (Cont Vol B) 619, 941a.
Taylor v Stibbert (1794) 2 Ves 437, [1775–1802] All ER Rep 382, 30 ER 713, 20 Digest (Repl) 319, 568.
Vandervell v Inland Revenue Comrs [1967] 1 All ER 1, [1967] 2 AC 291, [1967] 2 WLR 87, Digest Supp.
Zamet v Hyman [1961] 3 All ER 933, [1961] 1 WLR 1442, Digest (Cont Vol A) 276, 711a.
Cases also cited
Bridges v Mees [1957] 2 All ER 577, [1957] Ch 475.
Cave v Cave (1880) 15 Ch D 639.
Fowkes v Pascoe (1875) 10 Ch App 343, [1874–80] All ER Rep 521.
Grace Rymer Investments Ltd v Waite [1958] 2 All ER 77, [1958] Ch 831.
Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265.
Phillips v Phillips (1862) 4 De G F & J 208.
Tufton v Sperni [1952] 2 TLR 516.
Westminster Bank Ltd v Lee [1955] 2 All ER 883, [1956] Ch 7.
Page 515 of [1970] 3 All ER 513
Action
In this action the plaintiff, Beatrice Annie Hodgson, claimed as against Dennis David Marks the first defendant a declaration that he, on being requested by the plaintiff, was bound to transfer the property known as 31 Gibbs Green, Edgware, Middlesex, to the plaintiff free from charge to the second defendants, Cheltenham and Gloucester Building Society; and as against the second defendants, a declaration that the plaintiff was entitled to be registered as proprietor of the property free from the charge dated 12 August 1964 in favour of the second defendants. The facts are set out in the judgment.
H E Francis QC and Gerald Godfrey for the plaintiff.
D H Mervyn Davies QC and P R R Sinclair for the first defendant.
N Micklem for the second defendants.
Cur adv vult
16 June 1970. The following judgment was delivered.
UNGOED-THOMAS J read the following judgment. The plaintiff, Mrs Hodgson, claims declarations that the first defendant, Mr Marks, is bound at her request to transfer the property, 31 Gibbs Green, Edgware, Middlesex, to her free from charge to the second defendants, Cheltenham and Gloucester Building Society; and that she is entitled to be registered as proprietor of that property accordingly.
The plaintiff owned the property and occupied it and she then transferred the legal estate in it without financial consideration to a Mr Evans, who lodged with her there. He, in turn, transferred the property on sale to the first defendant, who executed a legal charge on it to the second defendants to secure a loan by it to him. The plaintiff claims that her transfer to Mr Evans was on oral trust for her absolutely beneficially and alternatively that the transfer was obtained by Mr Evans by undue influence over her. The case turns in the first place on these two allegations, coupled, in the case of the trust allegation, with the submission that the trust need not be in writing under s 53 of the Law of Property Act 1925. If either allegation is established, questions arise whether the plaintiff was in ‘actual occupation’ of the property within the meaning of s 70(1)(g) of the Land Registration Act 1925, after the transfer by her to Mr Evans (including in particular at the relevant date, the date of registration of the transfer to the first defendant); and, if so, whether such rights as the plaintiff had under the trust or by reason of the undue influence, as the case might be, were ‘rights’ within the meaning of that section. The defendants also relied on a plea of estoppel.
It will be convenient to deal first with the questions of trust and undue influence; and separately afterwards with the questions that arise under the Land Registration Act 1925; and finally, separately with estoppel. As it will be convenient to deal with the facts with regard to the trust and undue influence together, it is desirable first to refer to the law on undue influence.
I have recently had to consider the law on undue influence in Re Craig (decd), Meneces v Middleton. It would be supererogation to attempt to express in full the conclusions reached there. [His Lordship then read passages from his judgment in Re Craig (decd)c and from Lord Hailsham LC’s judgment in Inche Noriah v Shaik Allie Bin Omar ([1929] AC 127 at 136; [1928] All ER Rep 189 at 193) and then continued:]
I come now to the facts which bear on the creation of the trust and on undue
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influence. They include the evidence of the plaintiff, some undisputed occurrences and correspondence. The plaintiff is now 83 years old, but her understanding and faculties generally seem undiminished and are certainly vigorous. On some matters, particularly on dates, her recollection is hazy, but no more so than is common. She has had little money and appears to have lived all her life in a limited modest way and without business, or any other experience that matters, outside the home. She certainly lacked even the most elementary knowledge of legal and financial matters. She answered questions put to her factually without appreciation of their import. She was a truthful forthright witness.
With one short immaterial interlude the plaintiff has lived at 31 Gibbs Green since 1932. She was then married to a Mr Bond. The house was bought in 1939 out of her moneys and mortgage moneys and it was put in Mr Bond’s name. Mr Bond died in 1949 and she succeeded to all his estate; the house was transferred to her and registered in her name. In 1951, she married a Mr Hodgson, a cripple, who shortly afterwards went into a nursing home where he died some six years later, ie about 1957. The plaintiff then resumed the name of Bond and become known again as ‘Mrs Bond’. Shortly after Mr Hodgson went into the nursing home, the plaintiff took in a lodger, a Mr Kelly, who remained with her for some years, probably until about the middle of 1959. Then about April 1959, certainly when Mr Kelly was still a lodger, she was urged and she agreed, to have Mr Evans as a lodger too. Mr Evans was a very ingratiating person, tall, smart, pleasant, self-assured, 50 years of age, apparently dignified by greying hair and giving the impression to one of the defendants’ witnesses of a retired colonel. He told the plaintiff in due course that he was a security officer in a large company. He also told her that he was an insurance man. He certainly had considerable advantages in attracting trust and confidence, particularly perhaps from the plaintiff, who showed time and again in her evidence that she was a lonely woman and very responsive to small kindnesses and even to a kindly manner from, for example, such casual callers as a builder and a building society surveyor. The plaintiff said that Mr Evans was kind to her and used to bring her chocolates, flowers and fruit.
Shortly after Mr Evans arrived, Mr Kelly told the plaintiff, in Mr Evans’s hearing, that she should have the deeds of her house in the bank instead of leaving them with solicitors. Consequently the plaintiff obtained the deeds. She left them on the sideboard, where Mr Evans saw them. He put them in his pocket and told the plaintiff ‘I will look after them’; to which she said ‘not so quick’; and he put them back. So at this stage, all that Mr Evans suggested was that he would look after the deeds for her; and she was not agreeable to his doing so. About a fortnight later, Mr Evans approached the plaintiff again about the deeds. He told her that her nephew (who was in the Foreign Service and returned on six months’ leave from time to time) would or might turn him out of the house; and he asked her to make the deeds over to him. He was to keep the deeds in safekeeping for her. So again the deeds were to be held by him in safekeeping for her; but apparently he now obtained the deeds. It was about this time that Mr Evans told the plaintiff to get rid of Mr Kelly; and she did so. The plaintiff was of course some 22 years or so older than Mr Evans and I must make it unmistakeably clear that there is no foundation whatsoever for any suggestion that there was at any time any improper relationship between them. Clearly there was no such relationship.
Some time before the plaintiff made her will in October 1959, Mr Evans told her that he earned £2,500 a year and had a £16,000 insurance, out of which he would give her £8,000. She regarded him as a man of substance and, as she said, she thought him very well off; and why should he worry about the house she had?—by which I understood her to mean that she thought that he was not concerned to get any beneficial interest in the house.
By the end of October 1959, Mr Evans’s relationship with the plaintiff had advanced appreciably. The plaintiff had, in addition to the house, £3,000 in the bank and in the
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Post Office, a £100 annuity and an old age pension. Mr Evans persuaded her to give him money to invest for her in government securities at higher interest than she was obtaining. So she said that she took out £500 at a time from the Post Office, which she gave him to invest. She said that in total she gave him the £3,000. There is no such evidence as a Post Office Savings Bank book to establish with certainty when she first made payment out of her Post Office account to Mr Evans. But the £3,000 included her money at both the bank and the Post Office. She paid Mr Evans a cheque dated 26 October 1959 for £500, a cheque dated 17 June 1960 for £50, and later cheques until December 1963, which varied in amounts from £40 to £70, making cheques totalling £941 which left the balance of the £3,000 from other sources. In addition, she gave him her annuity and her old age pension as she received them, to invest for her. He paid her £8 a week for board and lodging, but out of this she gave him back £6 a week, which he was to use to pay her heavier bills and invest for her. This arrangement apparently started soon after he became a lodger and persisted throughout until he left in 1965. The dates of all these payments were subjected to meticulous examination, but, whatever the precise total amount of the payments by the plaintiff to Mr Evans at any particular date, it is clear that he had before the transfer of the house to him, established such a relationship of trust and confidence by her in him that she had handed over the deeds of the house to him for safekeeping and that she was making to him what were very substantial payments to invest for her. She was, before the transfer, entrusting the management of her money and affairs to him, because of her trust and confidence in him.
At some stage, although possibly not before the transfer to him, the plaintiff said that Mr Evans would not have anybody in the house and that if she went out shopping he followed her and would not let her talk to anybody.
In October 1959, Mr Evans told the plaintiff that he would make a will in her favour and the plaintiff then said that if he did so, she would make a will in his favour. She went to a solicitor, a Mr Semken, and made a will giving all her estate to Mr Evans, except for £25 each to two daughters of a nephew. She told Mr Semken that Mr Evans would come to him to make a will and she reported this to Mr Evans. Mr Evans replied that he did not think he would go to Mr Semken; and he did not. He did nothing about a will until June 1960 in circumstances which I shall mention. Nothing was said about the house in the context of the will, but in October the plaintiff also instructed Mr Semken to register it in her name of Hodgson instead of Bond. It does not appear whether this arose at Mr Evans’s instigation, or perhaps at Mr Semken’s suggestion when he made her will.
On 7 January 1960, Mr Semken wrote to the plaintiff enclosing the land certificate relating to the plaintiff’s house and saying that he would see Mr Evans on 23 January. On 12 January, Mr Semken wrote to the plaintiff that he had received her land certificate. The plaintiff apparently communicated with Mr Semken before 7 January and saw him at some time before 12 January. She said that the house was to be put in Mr Evans’s name and Mr Semken warned her of the danger of Mr Evans swindling her. In the letter of 12 January, Mr Semken wrote:
‘I am still very unhappy about your expressed wish to make a gift of this house and I want to have a talk with you on the subject.’
So it appears from this letter that Mr Semken was under the impression that the plaintiff was wanting to make a gift of the house to Mr Evans. But the plaintiff certainly on occasion spoke of giving in a loose sense, consonant with her retaining the beneficial interest—that she was giving the house to Mr Evans to have in his name. And Mr Semken’s statement, ‘I want to have a talk with you on the subject’, suggests that he had not gone into the matter as thoroughly as he would wish. Even so, the letter tells in favour of a gift. As a result of the letter the plaintiff telephoned Mr Semken. The plaintiff said that Mr Semken refused to draw a deed for her; that all she wanted
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was that Mr Evans should be nominal owner; and that Mr Evans thought her nephew would turn him out. This evidence was given immediately following her account of her seeing Mr Semken. But it would appear from the 12 January letter that Semken had not by then refused to draw any deed for her; and this refusal with the rest of this part of the evidence might well be part of the telephone conversation directed to explaining the ‘gift’ and trying to get Mr Semken to draw up the necessary documents.
There the matter rested until June. But over a period, although it does not appear for how long, Mr Evans pestered the plaintiff to transfer the house to him: ‘He talked me into things; there was no saying “No” to him.' She said that she made the transfer because of his kindness to her and his ‘doing everything’ for her as well as ‘for the sake of peace’.
But on what footing did she make the transfer? Her evidence about this, given in the context of what happened in June, is unshaken and appears in its significant aspects quite clear. In approaching this evidence, it is important to bear in mind that she thought then and at all relevant times that a person who made a will could not make another will in its place—that a will was irrevocable. She said time and again that Mr Evans said that her nephew would turn him out and that the transfer was made to prevent this. She agreed that the house was not the nephew’s, but she said that it was hers; and she agreed that she did not know how the transfer would prevent the nephew turning Mr Evans out. She seemed to me to be puzzled by it; and just accepted at that time, for some reason or other, that it would have that effect. Mr Evans, whom she trusted, certainly led her to believe that it would have that effect. She said that she could not say whether Mr Evans was afraid of being turned out in her lifetime or when she died; but she said that she thought that he was afraid of being turned out in her lifetime. She said that she did not intend to give it to him ‘to sell or anything like that’; that she did not intend to make a gift of the house to him. She said that she made it a condition that he would keep it for her as long as she lived and that Mr Evans said that he would look after her ‘until the end of the chapter’. She said that she signed the house over to him to keep until she died, that is, as I understand it, to keep for her. She said that she did not care what happened to the house after she died. She supposed that it would go to her executors and pass to Mr Evans. Later, she said ‘Mr Evans said this is your house until you die, but if you put it in my name your nephew can’t turn me out, that’s all’.
Mr Evans then went to solicitors who had had no connection whatsoever with him or the plaintiff. They left the matter to be dealt with by a managing clerk, Mr Goodland. On Mr Evans’s instructions he drew Mr Evans’s will in favour of the plaintiff and he, Mr Evans, executed it on 21 June 1960. The solicitor posted it to the plaintiff, who told Mr Evans that she had received it and he said ‘That’s all right’. That was all that was said between the plaintiff and Mr Evans about the will. Mr Evans, however, had also taken the plaintiff’s land certificate to the solicitors and instructed them to transfer the house to him. On 23 June, they sent the plaintiff a letter containing the following:
‘We were consulted yesterday by Mr John Evans and he handed to us the Land Certificate issued by H.M. Land Registry relative to 31 Gibbs Green. He instructed us that it is your wish that the property be transferred to him by you. In the Land Certificate your name is given as Beatrice Annie Hodgson and of course the Transfer would have to be made in that name. We arranged with Mr Evans for you to call here this morning to sign the Transfer. We have prepared the Transfer ready for your signature, but we would prefer that before you call you write to us confirming such instructions and at the same time advising us when you propose to call. You must appreciate that you are unknown to us and we met Mr Evans yesterday for the first time, and therefore, we feel that in your interests this letter should be written and acknowledged by you.’
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Mr Goodland said in evidence that he was concerned about a stranger ‘coming off the street’ with a land certificate, that ‘He might have found the land certificate and come to me with a story’, that ‘All we were concerned with was that she was a willing party to the transfer’. He had no recollection of an interview with the plaintiff. The plaintiff said that she saw a man at the solicitors’ office, who said ‘You know what you are doing’ and ‘I said Yes. He has been good to me’, and she said ‘That was that’. She did not think that this was a warning at the time, although she thinks so now. However, Mr Goodland does not suggest that he gave her any warning. She said that she did not tell the solicitors any details about the arrangement for the transfer. She executed the transfer at the solicitors’ office on what appears to have been her only visit to any solicitor, apart from such as took place months earlier to Mr Semken. Mr Goodland was emphatic that she was not their client; and in this he was clearly correct. But it also appears that he did not even suggest that she should be independently advised or take the most elementary precautions in her interest, not even apparently ascertaining whether the transfer was meant to be a beneficial gift. The insertion of ‘love and affection for John Evans’ as the consideration in the transfer clearly outraged the plaintiff’s sense of propriety; and she was obviously not aware of its existence, still less of any legal significance that might be sought to be attached to it. So it was that on 30 June 1960 the transfer was executed and in due course, on 1 September 1960, Mr Evans was registered as proprietor.
That is the end of the contemporary evidence on whether the transfer was subject to a trust for the plaintiff and whether it was obtained by undue influence. But further light is thrown on these questions by evidence of a meeting between the plaintiff, Mr Evans and the plaintiff’s solicitor, Mr Moeran, on 13 January 1964. At one stage, Mr Evans completely changed his attitude to the plaintiff and became unkind and even cruel to her and on two occasions hit her. Such behaviour apparently occurred or was repeated just before this meeting and was what led to it. Mr Moeran has been in practice since 1927 and acted for the plaintiff at least as early as the occasion of Mr Bond’s death. Mr Moeran was a model witness and clearly a most responsible and reliable solicitor. The plaintiff telephoned to him and he arranged to meet her and Mr Evans at her homed. On the same evening, he made a note of their conversation, which he produced and the accuracy of which he confirmed. It makes it clear that Mr Evans immediately agreed that all the plaintiff’s money, amounting to £3,100, had been given by the plaintiff to him to invest and that he volunteered to return the investments to her. It also makes it clear that he also immediately agreed that the house should be retransferred to her. Mr Evans never suggested that the house was transferred to him as a gift or that he had any right with regard to the house. Mr Moeran said that his impression at the interview was that there was no distinction between the way in which Mr Evans held the investments on the one hand and the house on the other hand; and that he saw at no time any distinction between the plaintiff’s entitlement to the house and to the investments. Mr Moeran said that it was clear at the interview that Mr Evans had no beneficial interest in the property.
Mr Evans did not carry out his promise to transfer the investments, nor his promise to retransfer the house to the plaintiff. So Mr Moeran tried to get instructions from the plaintiff to obtain their transfer. She said that Mr Evans was changed and was now kind to her and the she was emphatic to the point of offensiveness that he must not do anything further.
Some sentences in the plaintiff’s evidence, taken in isolation, may appear inconsistent with other sentences. But after hearing her and taking her evidence as a whole I am satisfied that she executed the transfer on 30 June 1960, because of her trust and confidence in Mr Evans—without that she certainly would not have done it—and out of misconceived gratitude to him and to end his pestering her for it; that the sole purpose of the transfer, as known to her and orally stated between her and Mr Evans, was to prevent her nephew turning Mr Evans out of the house; and that, as
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orally agreed between her and Mr Evans, the house was to remain her house, although in his name. She believed that when she died her will was bound to take effect, at any rate if he survived her; and that Mr Evans’s will would correspondingly be bound to take effect, at any rate if she survived him. The wills looked after the position after death; and the transfer was not intended or directed at all to deal with the beneficial interests after her death. Her will, which she thought irrevocable, governed that.
The undisputed evidence that Mr Evans held on trust for the plaintiff all investments of the plaintiff’s moneys handed to him, and Mr Moeran’s evidence that Mr Evans drew no distinction at all between his holding of them and his holding of the house transferred to him, support the plaintiff’s evidence to the effect that the property was to remain beneficially hers. So this evidence goes to establish that Mr Evans took no beneficial interest under the transfer, whether immediately and absolutely, or as was alternatively suggested for the defendants, subject to a beneficial life interest in the plaintiff. The strongest indication to the contrary appears to me to be Mr Semken’s letter of 12 January. But when this letter is considered in its context, as I have tried to do, it appears to me to be appreciably less reliable than might appear from the words alone. To make it conclusive against all the evidence pointing to the opposite conclusion would be to attach to it a certainty and weight that it cannot properly bear. In any case, this letter was six months before the transfer and the conversation and arrangement that led immediately to its execution. So it is not written with reference to what then occurred.
My conclusion, therefore, is that the transfer of the house by the plaintiff to Mr Evans was under an oral arrangement between them, under which no beneficial interest was to pass to Mr Evans, and was on trust for the plaintiff.
[His Lordship then considered the question whether the transfer was obtained by the undue influence of Mr Evans over the plaintiff and concluded hat it was. He continued:] The question now arises whether the trust in favour of the plaintiff, absolutely beneficially, under the oral arrangement in accordance with which the house was transferred to Mr Evans, is void or ineffective by reason of s 53 of the Law of Property Act 1925. Section 53 provides:
‘(1) Subject to the provisions hereinafter contained [they are contained in s 54] with respect to the creation of interests in land by parol—(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
‘(2) This section does not affect the creation or operation of resulting, implied or constructive trusts.’
Section 54(1) provides:
‘All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.’
The provisions of s 53 replace corresponding provisions of ss 3, 7, 8 and 9 of the Statute of Frauds 1677. As argued before me, nothing turns on s 54 or on there being any resulting implied or constructive trust within s 53(2). So the question as argued became: did the principle that the Statute of Frauds should not be used as an instrument of fraud, dispense with the writing that would otherwise be essential under s 53 to establish the trust in the plaintiff’s favour?
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In the leading case of Rochefoucauld v Boustead, the defendant bought property on an express oral trust for the plaintiff, subject to specified advances. The defendant subsequently spent money on developing the property. He also raised money for himself personally by mortgages of the property; and later he or his mortgagees sold the property without the plaintiff’s knowledge. Despite the absence of writing required by the Statute of Frauds, the plaintiff successfully contended that the property was bought in trust for her, subject to the specified advances and the defendant’s outlays on the property; and for an account on that footing. The purchaser and mortgagees, from whom the defendant raised money, for his personal purposes, were not parties to the proceedings. No order was made with regard to the property itself; and as the property is said to have been sold by the defendant or his mortgagees, presumably those mortgagees were paid off out of the proceeds of sale. The evidential character of the writing is emphasised ([1897] 1 Ch at 206):
‘But it is not necessary that the trust should have been declared by such a writing in the first instance; it is sufficient if the trust can be proved by some writing signed by the defendant, and the date of the writing is immaterial.’
Then the judgment goes on to state the principle on which oral evidence of the trust is admitted([1897] 1 Ch at 206):
‘It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself.’
It was submitted for the defendants that the principle was limited to cases in which the person relying on the statute was himself the person who had accepted the conveyance of the land as trustee and who nevertheless claimed the land free from the trust. The quoted statement of the principle is expressed in terms compatible with this submission and so lends colour to it. But such statements have to be considered in the light of their facts. In Rochefoucauld v Boustead the grantee who himself took the land on the oral trust had transferred the land in breach of the trust and in fraud of the plaintiff. So there was no occasion in that case to state the principle, except with reference to such a person. In Re Duke of Marlborough, Davis v Whitehead the principle was stated in terms to the same effect as in Rochefoucauld v Boustead but those who unsuccessfully relied on the statute in that case were not the original grantee-trustee but his executors. So either the principle applies to them as standing in the original grantee’s place or it is to be understood more widely than the defendants submit.
Whoever relies on the statutory requirement of writing is himself using the statute as an instrument to avoid cognisance being taken of the trust. This might occur in circumstances in which establishment of the trust would establish fraud, eg where, as here, a transfer on oral trust would be taken free of the trust. No other defence is in the least affected by thus dispensing with the statutory requirement of writing. The oral evidence in our case is directed to establishing the trust, ie the true nature of the transfer to Mr Evans, and does not affect such defences as those which have been based on what subsequently happened and estoppel. The statute is thus only a material defence when there is no other effective defence. So if there is other effective
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defence, the defendant is not defeated; and if there is none, then if he succeeds by relying on the statute, he succeeds only by excluding the evidence of the trust and thus of the fraud. This is so, whether the defendant be, for example, a volunteer or a purchaser for value without notice. So, to the extent to which a person relies on the statutory defence to exclude the establishment of fraud, he uses the statute as an instrument of fraud—to succeed by using the statute to exclude evidence of fraud.
In Rochefoucauld v Boustead such a case as that now before me was treated as falling exclusively within the section corresponding to s 53(1)(b) and the defendants did not attempt to rely on any of the other provisions of s 53 to escape the operation of the principle. It was further submitted for the defendants that the inclusion in the transfer by the plaintiff to Mr Evans of its being made in consideration of her love and affection for him excluded any resulting trust. Lord Upjohn’s observations in Vandervell v Inland Revenue Comrs ([1967] 1 All ER 1 at 8, [1967] 2 AC 291 at 312) were referred to. Those observations were made in reference exclusively to resulting trust; but, as I have said, the plaintiff expressly disclaimed relying on any resulting trust, It did not appear to me that the defendants relied on this reference to consideration of love and affection to defeat the admission of oral evidence of the trust, although the plaintiff did seem concerned at one stage to rebut such an argument. It seems to me that such a submission would be contrary to the well-established principle that extrinsic evidence is always admissible of the true nature of any transaction, eg to establish that conveyances, despite their terms, are according to the true nature of the transaction mortgages. Lincoln v Wright, itself a Statute of Frauds case, was a conveyance in form which it was agreed should operate as a mortgage. In Haigh v Kaye, a conveyance was expressed to be in consideration of a money payment and was of an estate described as absolute. There was in fact no consideration. (The plaintiff thus conveyed the estate, because he had feared an adverse decision in a pending suit, but it was held that that did not affect the position.) It was held that, although the defendant invoked the Statute of Frauds, the plaintiff was entitled to have the estate reconveyed to him. My conclusion therefore is that the defendants are not entitled to exclude parol evidence of the trust.
I come now to the questions that consequently arise under the Land Registration Act 1925: (1) was the plaintiff at the relevant time in ‘actual occupation’ of the house within the meaning of s 70(1)(g)e? (2) Was the plaintiff’s beneficial interest under the trust, on which Mr Evans held the property, or alternatively, if there were no trust, was the right which the plaintiff had by reason of the transfer being obtained by his undue influence over her, within the ‘rights’ mentioned in s 70(1)(g)?
I will refer first to the facts which may have some bearing on these questions. Evidence was given by the plaintiff and by the first defendant and his wife. The plaintiff was truthful, but confused about some matters. The first defendant had himself, even according to his own evidence, lied to his own solicitors and to the second defendants, the building society; and he prevaricated, and he was an unreliable witness. His wife was truthful and reliable, but unfortunately the matters to which she could depose were extremely limited.
On 28 July 1964, Mr Evans contracted to sell the property to the first defendant for a sum which, according to the written contract, was £6,000. The contract was for sale with vacant possession on completion, which was to be on 28 August. Completion took place earlier, namely on 12 August; and the transfer was thus executed on that date. The first defendant was registered as proprietor with title absolute on 1 September 1964. He purchased the property with the assistance of money lent by the second defendants; and, on 12 August 1964, he executed a charge in their favour to secure the loan. The charge was also registered on 1 September.
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Before contract, the first defendant visited the house with his wife and that was the only occasion on which he saw the plaintiff before contract; and that only when she came up the path to the house and without the first defendant or his wife learning who she was. Some time after a visit from the second defendants’ surveyor, ie after some date between 15 and 22 June, the first defendant had for a time frequent telephone conversations with the plaintiff; and I accept the plaintiff’s evidence that he thus ascertained that she was ‘Mrs Bond’. It is not clear whether he ascertained this before or after registration. However, the evidence does not directly establish that before registration he knew or had reason to know that she had any interest in the house, nor, apart from such reason as might be provided by his knowing that a separate bedroom in the house was occupied by a woman, did he know or have reason to know that anyone other than Mr Evans was in occupation of the house. The first defendant said that Mr Evans told him that he was married.
[His Lordship then considered the facts relating to the purchase price and the first defendant’s evidence on this point and the question of the vacant possession. He continued:] The first defendant thenf wanted vacant possession of 31 Gibbs Green, not for occupation, but for sale.
In May 1965, the plaintiff and Mr Evans still lived at the house, but builders came to the house to do work which the second defendants required to be done. About this time, which the first defendant placed at one stage of his evidence before and, at another stage, after the builders did their work, the first defendant called at the house and met the plaintiff, who was there alone. The plaintiff’s recollection was that this was the first time on which they had met. It seems clear from the evidence of both the plaintiff and the first defendant that this was the first occasion on which the plaintiff learnt that the first defendant had bought the house. He certainly showed and expressed the surprise to be naturally expected of one who then first heard that the plaintiff claimed to be its owner or to have any interest in it.
Such of the circumstances as I have referred to as are disturbing about the first defendant’s evidence and about what precisely happened between him and Mr Evans would not justify the conclusion that the first defendant knew or ought reasonably to have known before registration that the plaintiff might have any interest in the house or, except to the extent that he supposed her to be Mr Evans’s wife (which supposition was, of course, incorrect), that she lived there. Therefore, if this were unregistered land the first defendant would not have notice of the plaintiff’s beneficial interest in the house when he became its legal owner. So he would be purchaser for value of the legal estate without such notice (see the Law of Property Act 1925, s 199(1) (ii)).
So I come to the question whether the plaintiff was in ‘actual occupation’ of the house within the meaning of s 70(1)(g). It was common ground that from contract to registration the circumstances bearing on this question remained the same and that they remained the same at all possible relevant times. Possession and occupation have been susceptible of different meanings in different contexts and at different times. But now it appears that, generally at any rate, when possession and occupation are referred to (except perhaps in a loose popular sense) and, particularly when used in contrast with each other, possession signifies a present right; and occupation, including in particular actual occupation, is a physical fact. Certainly before me the argument has proceeded on the basis that actual occupation is a physical fact.
Actual occupation requires physical presence. It was suggested at one stage of the argument that the occupation had to be exclusive. But it has been established that ‘actual occupation may be shared with others or had on behalf of others’ (see Strand Securities Ltd v Caswell ([1964] 2 All ER 956 at 966, [1965] Ch 373 at 388, on appeal [1965] 1 All ER 820, [1965] Ch 958)). If occupation can be shared, then in the present case there was no advantage in maintaining that it nevertheless had to be exclusive;
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and this was not pressed. But it requires more than physical presence—a guest to dinner is not an occupier of the house or room in which he dines. Indeed the defendants submitted that mere personal residence does not constitute occupation; and I agree. The observations in the Strand Securities case ([1964] 2 All ER at 966, [1965] Ch at 388), which were referred to, clearly do not in my view establish the contrary.
So I will now come to the facts which bear on whether the plaintiff was, independently of the context of s 70(1)(g), in actual occupation in this case. Before the plaintiff’s transfer of the house to Mr Evans and its registration in his name, it is undisputed and indisputable that the plaintiff was in actual occupation of it. After the registration, she continued to live there to all appearances and as a physical fact in exactly the same way as before; and so did Mr Evans. They lived and ate and slept in the house exactly as before. The financial arrangements of payment by Mr Evans to the plaintiff for board and lodging and by the plaintiff to Mr Evans for investment for her and for the payment of bills continued unchanged. The plaintiff continued too as the rateable occupier. There was no change in the physical appearance of occupation nor was there any other change at all, except that the plaintiff transferred the house to Mr Evans on oral trust for herself and that Mr Evans was registered as proprietor. Except that Mr Evans held the legal estate on trust for the plaintiff, the transfer and registration made no difference as between the plaintiff and Mr Evans. She was absolutely beneficially entitled and could at any time call for a transfer of the legal estate and then be registered as proprietor. Mr Evans as bare trustee of the legal estate for the plaintiff was not entitled to occupy the house, but the plaintiff as absolute beneficial owner was so entitled. After as before Mr Evans’s registration, Mr Evans’s presence in the house was exclusively as lodger and the plaintiff’s presence was in virtue of being absolute owner, legally and beneficially before the registration, and beneficially afterwards. The plaintiff could terminate Mr Evans’s presence in the house after the registration just as she could before. As between the plaintiff and Mr Evans, her occupation and her dominion over the house was the same after the registration as before.
So at all material times, the plaintiff was in fact in physical occupation of the premises and, more, had the right to occupy them. It seems to me that in general (if this matter can be considered at all independently of context) such physical occupation, even apart from such right to occupy, would constitute what would be generally meant by actual occupation. But does it constitute ‘actual occupation’ within s 70(1)(g) of the Land Registration Act 1925? Section 70(1) provides:
‘All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act, (the is to say) … (g) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made or such person and the rights are not disclosed … ’
Counsel for the defendants accepted that his submission would be precisely stated if after the word ‘land’ in s 70(1)(g) there were inserted the words ‘or part thereof of which the vendor is not whether singly or otherwise in occupation’. This is, of course, exposed to the comment that if such was the intention, there was no difficulty in expressing it. To insert the words certainly makes not only a substantial limitation, but a limitation which is achieved by excluding every other person than the vendor as an occupier of what the vendor occupies. Further, this, on the face of it, appears to be quite contrary to the provision that ‘every person’ in actual occupation is to have his rights protected. So on the submission it may, I think, not be unfairly commented
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that the section expressly includes the protection of every such person and yet at the same time, if the vendor is in occupation, impliedly excludes every such person. It seems to me to require strong consideration to produce such an interpretation.
The Land Transfer Acts and the Land Registration Act 1925, were of course to facilitate the transfer of land. The 1925 Act is described in its heading as a consolidating Act: ‘An Act to consolidate the Land Transfer Acts and the statute law relating to registered land.' So they and in particular the 1925 Act must be approached both in the light of the past history of land transfer and the methods adopted by the Acts facilitating that transfer. Statutes were concurrently passed in 1925 for dealing with the transfer of registered and for dealing with the transfer of unregistered land. Both these categories of statute, dealing separately with registered and unregistered land, reflect the same general policy and approach towards improving land transfer. Nevertheless, the two categories of statute do not just duplicate each other, subject only to such differences as must necessarily follow from the difference between registration and non-registration of title, but extend to what may be regarded as methods of giving notice of rights subject to which transfer is affected. Thus, as Lord Denning MR pointed out in Strand Securities Ltd v Caswell ([1965] 1 All ER at 825] Ch at 980), by s 70(1)(g) itself transfer is expressly made subject to the rights of a person in receipt of rents and profits (save, of course, where enquiry is made of him and the rights are not disclosed) but in the case of unregistered land such rights are thus not protected (see Hunt v Luck, the Law of Property Act 1925, ss 198 and 199, the Conveyancing Act 1882, s 3).
Lord Wilberforce in National Provicial Bank Ltd v Ainsworth ([1965] 2 All ER 472 at 502, [1965] AC 1175 at 1259) agreed with Lord Denning MR ([1964] 1 All ER 688 at 696, [1964] Ch 665 at 689) that the subsection ‘is a statutory application to registered land of the well-known rule protecting the rights of persons in occupation’. Yet he referred to differences between the kinds of notice and enquiries which have to be made with regard to registered and unregistered land. He said ([1965] 2 All ER at 503, [1965] AC at 1261):
‘One may have to accept that there is a difference between unregistered land and registered land as regards what kind of notice binds a purchaser, or what kind of enquiries a purchaser has to make.’
The defendants relied on observations of Vaughan Williams LJ in Hunt v Luck ([1902] 1 Ch at 433, [1900–03] All ER Rep at 297) and the observations of Lord Loughborough LC in Taylor v Stibbert ((1794) 2 Ves 437 at 440, [1775–1802] All ER Rep 382 at 383), accepted by Lord Eldon LC in Daniels v Davison, to the effect that if a vendor is not in possession the purchaser must make enquiries of the person in possession or otherwise the property purchased will be subject to that person’s rights. But in all these cases the vendor was not in possession and the observations were thus attributable to the facts of those cases. There was no need to consider the case where, although the vendor resided on the property, another person was solely in occupation or shared the occupation with him. (In National Provincial Bank Ltd v Ainsworth the question was debated whether a deserted wife was in actual occupation of the matrimonial home. Actual occupation by her was assumed for the purposes of the case by Lord Hodson, Lord Cohen and Lord Guest, was favoured by Lord Upjohn and was left open by Lord Wilberforce.)
In Caunce v Caunce, it was held that a mortgagee of unregistered land in a husband’s sole name and in which his wife had an equitable interest, did not have notice of the wife’s equitable interest by reason of her living there with him. It appears that the
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ratio decidendi may be expressed as being or including the proposition that where a vendor or mortgagor appears to be in occupation or possession of the property, then the purchaser or mortgagee is not affected by notice of the equitable interests of any person whose presence on the property appears to be consistent with the mortgagor’s or vendor’s tile and occupation. I hope that I have not done an injustice to the judgment in thus summarising the ratio. However, there are a number of observations in the authorities that a wife’s presence in the matrimonial home, when living with her husband, is not her occupation but is attributable to her husband and to her matrimonial rights vis-a-vis him; and such a passage from the speech of Lord Wilberforce is quoted and relied on in Caunce v Caunce.
But, of course, the land in that case was not registered and the judgment was not concerned with s 70(1)(g). The Law of Property Act 1925, s 199(1) (ii) (a) and (b) (re-enacting provisions of s 3 of the Conveyancing Act 1882), applicable to unregistered land provides that a purchaser shall not be affected by notice of anything incapable of registration under the Land Charges Act 1925, unless it is within the knowledge of himself or his agent, or would have come to his knowledge ‘… if such enquiries and inspections had been made as ought reasonably to have been made by him’ or his agent. This wording contrasts markedly with the wording of s 70 and there is difficulty in accepting that the difference in wording of corresponding provisions relating to registered and unregistered land in these 1925 statutes was yet intended to produce the same result. Indeed, the notes of Sir Charles Fortescue-Brickdale and Sir John Stewart-Wallace to The Land Registration Act 1925g suggest that s 70(1)(g) would include—
‘… the rights of a person in occupation of an underground space, such as a tunnel or cellar only accessible from other land, or a mine, and whether the fact of such occupation was discoverable by an ordinary inspection of the property or not.’
Such occupation could hardly ‘reasonably’ give notice of such occupier’s rights. But s 70(1)(g) does not even expressly refer to ‘notice’ at all. It merely baldly and directly states that the registered land shall be subject to the rights of every person in actual occupation.
Section 70(1)(g) thus, on its literal interpretation, subjects the purchaser to rights of an occupier irrespective altogether of notice. On this interpretation the subsection is not a form of notice at all, but its negation. This, however, would be a fundamental departure from the conception of notice on which the preservation of occupiers’ rights has always been based. And it was so based because it was unfair and unjust that a purchaser should obtain the property free from the rights of an occupier—originally, free from the rights of a tenant. Such an occupier’s occupation was obvious on inspection and it was because it was so obvious that it followed that it was only fair that a purchaser should be fixed with notice of his rights. The protection given to an occupier was not extended beyond an occupying tenant by s 18(7) of the Land Transfer Act 1875, the predecessor of s 70(1)(g) of the 1925 Act. However, as long ago as 1858, Turner LJ considered that the principle was not limited to an occupying tenant, and, in accordance with the circumstances of the case before him, extended to a stranger ‘if found in the enjoyment of the estate’. (See Knight v Bowyer ((1858) 2 De G & J 421 at 449), in a passage quoted in Hunt v Luck.) So principle demanded that ‘actual occupation’ should not be limited to actual occupation of tenants but should extend to ‘actual occupation’ by others too. But this could only be because the actual occupation of the tenant and those others alike equally gave notice of their occupier’s rights, that is because the occupation was apparent. Unless the occupation is obvious, the whole equitable basis of notice from which s 70(1)(g) has grown collapses. The objection to such a
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departure weighs against the objection to departing from a literal interpretation of the subsection. So I turn again to the subsection with all these considerations in mind.
It seems to me that, on any showing, the subsection cannot be literally interpreted verbatim. ‘Every person’ must exclude the vendor, as it would be ridiculous for any transfer by him to be subject to all his rights because he was in occupation or in receipt of the rents and profits. It would be a contradiction, almost in terms, and not the less so—certainly as a matter of language not the less so—although the transferee would be able to defeat such rights of the transferor on other grounds. It would be equally ridiculous for ‘every person’ to include the vendor if the transfer is not subject to such rights. So every person must mean ‘every person other than the transferor’. And I would have no difficulty in deciding that ‘the land’ refers to ‘the land or any part thereof’ and not the whole land as ‘the land’ prima facie means; nor has this been disputed before me. If the subsection cannot be literally interpreted verbatim, then the true interpretation must depart from it; and the interpretation must be made in the context of a section whose words are not necessarily literally employed. The origin of this section in notice and fairness, the section’s repudiation of its ancestry by contradiction of notice and fairness if ‘actual occupation‘ is literally interpreted, are considerations favouring such a non-literal interpretation of those words as would preserve these fundamental conceptions of notice and fairness, provided that it kept within the words’ reasonably tolerable ambit. It seems to me that this would be achieved if ‘in actual occupation’ were treated as ‘in actual and apparent occupation’. Even if this could not be achieved without reading as an insertion into the subsection the words ‘and apparent’, this would appear to me in all the circumstances to be tolerable and, indeed, required. If such a course required to the question whether, regarding the section in its historical context, it is directed to apparent occupation, the answer ‘Of course, Yes’, I, for my part, would subscribe to that answer. However, it does not appear to me to be necessary even to insert those words if ‘actual’ is interpreted as, in my view, it should be in this historical context. The word comes from what was required under the old law based on notice and fairness. Farwell J in Hunt v Luck ([1901] 1 Ch at 49, 50), stated that the possession relied on to give notice in the cases which he reviewed was ‘the actual occupation’ of the land. It was an occupation which in fairness fixed the purchaser with notice of the occupier’s rights, and it could not do that unless on inspection the occupation was apparent. It had to be ‘actual’. Some notional occupation was not enough. It would not bring home to the purchaser that there was an occupation. It seems to me an essential element of ‘actual occupation’ under the law before this subsection that it should be apparent to the purchaser. ‘Actual’ in its most literal meaning connotes ‘in act’, and it seems to me that it is no strain of language to say that the continuous process of actual occupation or of occupation in act is an occupation where the act of occupying is recognisable as such. The words in the subsection ‘save where enquiry is made of such person and the rights are not disclosed’ indicate that the person in actual occupation is a person of whom it is possible to make enquiry and whose occupation is therefore recognisable as occupation. It would be absurd to contemplate enquiry on a non-ascertainable person. So I, for my part, would read ‘actual occupation’ as connoting occupation by act recognisable as such.
I appreciate that it could be urged that what I have said may not get over the difficulty that the person in receipt of the rents and profits need not be ascertainable and that, therefore, the person in actual occupation need not be ascertainable. It seems, however, as I have already indicated, arguable to the contrary that the words ‘where enquiry is made of such person’ show that a person in receipt of the rents and profits must also be ascertainable as such. But this difficulty has not been canvassed before me, and whatever the true answer to it may be, it does not appear to me to be
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a consideration which, having regard to all the circumstances bearing on ‘actual occupation’, should govern my conclusion on the meaning of those words. I have dealt fully with the main issues of fact and I have reached a conclusion of law on the meaning of ‘actual occupation’ which is decisive of this case in favour of the defendants. The remaining question raised can be disposed of briefly.
Are such rights as the plaintiff has in respect of the property ‘rights’ within s 70(1)(g)? It is conceded and indisputable that the plaintiff’s rights under the trust which I have found are such rights. Whether her right to have the transfer to Mr Evans set aside for undue influence was such a right was in issue, but in view of my earlier conclusions it is unnecessary to pursue this issue.
The first defendant pleaded that the plaintiff was estopped as against him, as a result of her conduct on his visits to the house before contract, from alleging that she had any rights in the property. There was no such conduct to provide a foundation for estoppel. The second defendants pleaded that it was within Mr Evans’s actual or ostensible authority to agree to sell the property with the vacant possession to the first defendant and to transfer it to him, and that the plaintiff was therefore estopped from relying on the trust. It was not within Mr Evans’s actual authority; was it within his ostensible authority? This came down to the question whether the transfer to Mr Evans, being expressed to be from natural love and affection, held out Mr Evans as having such ostensible authority. The title on which the second defendants relied did not include the transfer. They relied on the registration and not on the transfer and it was not suggested that the registered title held out Mr Evans as having such ostensible authority. And it was common ground that the second defendants and their representatives never saw the transfer. This seems fatal to the plea. It was also at one stage suggested that the second defendants were subrogated to the bank to whom Mr Evans had charged the property. But it emerged that the second defendant’s case under subrogation could at its highest not be any stronger than their case apart from subrogation, and this submission was rightly abandoned. The overall result is that the plaintiff in my view fails to establish her claims against the defendants.
This was a dispute which, in the interests of the parties, could have best been resolved by a compromise along lines that must readily have occurred to anyone acquainted with it. Despite the responsible efforts of counsel, and time being given during the hearing to arrive at a compromise, this was not achieved. Nobody in this case could have felt otherwise than extremely sorry and concerned for the plaintiff. The difficulties in the case are substantial and although I have come to a conclusion, I am as conscious of them now as before doing so. It is a case in which I, for my part, would be relieved if it had the advantage of consideration by a higher court.
Judgment for the defendants.
Solicitors: Edward Moeran & Partners (for the plaintiff); Felton & Co (for the first defendant); Curwen, Carter & Evans (for the second defendants).
Jacqueline Metcalfe Barrister.
Newman v Newman
[1970] 3 All ER 529
Categories: CRIMINAL; Sentencing
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): LANE J
Hearing Date(s): 26 JUNE 1970
Divorce – Infant – Relevant child – Whether child can be relevant child in second divorce suit to which only one parent a party – Matrimonial Causes Act 1965, s 46(2).
A child may be a ‘relevant child’ within the meaning of s 46(2)a of the Matrimonial Causes Act 1965 for the purposes of Part 3 of that Act in a second divorce suit to which only one of the parents is a party, and this is so whether or not there is in existence a custody or access order made in an earlier suit to which both parents were parties (see p 533 f, post).
Notes
For children of the family, see Supplement to 12 Halsbury’s Laws (3rd Edn) para 755.
For the Matrimonial Causes Act 1965, s 46, see 17 Halsbury’s Statutes (3rd Edn) 220.
Cases referred to in judgment
B v B and F [1968] 3 All ER 232, [1969] P 37, [1968] 3 WLR 1217, Digest Supp.
Bowlas v Bowlas [1965] 1 All ER 803, [1965] P 440, [1965] 2 WLR 1133; rvsd CA [1965] 3 All ER 40, [1965] P 450, [1965] 3 WLR 593, 129 JP 523, Digest (Cont Vol B) 383, 6756a.
Dixon v Dixon [1967] 3 All ER 659, [1968] 1 WLR 167, 132 JP 123, Digest Supp.
R v R [1968] 2 All ER 608, [1968] P 414, [1968] 2 WLR 1968, Digest Supp.
Petition
This was a petition by the husband for a decree of divorce against the second wife, who, by her answer, prayed for access to a child of the husband’s first marriage. The second wife not having proceeded with her answer, the husband was granted a decree nisi. The question of access was referred to chambers and Lane J gave the following judgment in open court.
A Lyell for the husband.
H J Byrt for the second wife.
26 June 1970. The following judgment was delivered.
LANE J. In this case, the husband petitioned on the ground of the second wife’s cruelty. She filed an answer denying cruelty and a supplemental answer alleging adultery and praying dissolution on that ground. In his reply, the husband denied adultery and did not seek the exercise of the discretion of the court in his favour. On the first day of the hearing, counsel informed the court that the second wife did not wish to pursue her denial of cruelty or her allegation of adultery. The case thereafter proceeded as undefended on the husband’s charge of cruelty. He established his case and a decree nisi was pronounced in his favour. The prayer for dissolution in the supplemental answer was rejected. In the petition the husband pleaded that there were no children of the family. A major part of his case of cruelty concerned the second wife’s behaviour in connection with and towards his two daughters by an earlier marriage who were at the time of his subsisting marriage about 6 1/2 and 4 1/2 years old respectively. In her answer, the second wife alleged that those two children were children of the family and she prayed for custody of them. Before me she intimated through her counsel that she was no longer seeking custody but merely access, and that only in respect of the younger child, the elder now being over 16 years of age. The husband strongly resists any such order for access being made.
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The husband’s first marriage was dissolved early in 1960 when he divorced the first wife on the ground of her adultery. He was awarded custody of both children and the first wife was granted access to them which she has had since the marriage of the husband and the second wife broke down. When, on 10 September 1960, the husband married the second wife, the children were at boarding school. Towards the end of 1960 or early in 1961, they left boarding school and went to live with the husband and the second wife in the matrimonial home. There they remained until the parties separated on or about 11 November 1967, that is to say, some seven years later.
Before I can consider whether or not to grant the second wife access to the children, it is necessary to determine whether they are relevant children for the purposes of s 34 of the Matrimonial Causes Act 1965. Section 46(2) of that Act contains the definition of the words ‘relevant child’. It provides:
‘In this Act … “relevant child” means a child who is—(a) a child of both parties to the marriage in question; or (b) a child of one party to the marriage who has been accepted as one of the family by the other party … ’
I need not read the rest of the definition. It is a definition which is material not only for the purposes of s 34, but also of other sections of Part 3 of the Act, all of which relate to children. Section 33 contains a restriction on the granting of a decree absolute unless the court has considered the arrangements for the children.
Counsel for the husband submitted that children cannot be children of a second family while their natural mother is alive, that is to say, that, having been children of the family of their parents, they cannot be children of a second family created by the remarriage of their father unless their natural mother be dead. I pause to say that, although he limited his submission in that way, counsel for the second wife argued, and I hold, that, if the principle for which counsel for the husband contended is valid at all, it must be equally so whether it be the mother or the father who is still alive when the other remarries. I can see no ground at all for drawing a distinction between them in this respect. Counsel for the husband argued that, if a child could be successively a child of two separate families, there would be a conflict of jurisdiction between the court which tried the first divorce suit and the court which tried a second; that, although it is not the case here, it could happen that one divorce suit was tried in the High Court and the other in the county court. He pointed out that the natural mother might only learn by accident, or might not know at all, of custody or access applications or orders being made in respect of her child in a second suit to which she would not be a party; and further, that the second court might make an order which would conflict with an order made in the first suit. In the present case, the husband does not need a custody order because he has already obtained such in the earlier suit. But counsel for the husband says that any order for access to the second wife which this court could make might conflict with the access granted to the first wife in the earlier suit. Counsel for the husband referred to the decision of Park J in R v R, where it was held, as appears from the headnote ([1968] P at 414):
‘… that the child of one party to a marriage could not be held to have been accepted by the other party unless it was shown, first, that the other party consented expressly or impliedly to receive the child as one of the family and, secondly, that that consent was given with knowledge of the material facts; accordingly, as the husband had refused to receive the child at the first opportunity with knowledge of the material facts, the child was not a “relevant” child.’
And Park J said ([1968] 2 All ER at 609, [1968] P at 417):
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‘Counsel for the petitioner, and counsel who, on the instructions of the Official Solicitor, appeared for the child both submitted that, in order to come within the Act of 1965, any acceptance must be an acceptance with full knowledge of the facts, and that there had been no such acceptance by the petitioner in this case. Counsel for the Official Solicitor also drew my attention to the definition of “accept” in the SHORTER OXFORD ENGLISH DICTIONARY. The first part of that definition reads as follows: “To take or receive what is offered one; to take or receive with a consenting mind“.’
Here counsel for the husband submitted that the husband was not in a position to offer the child to the second wife because the first wife with an access order in her favour was still alive. He took a second point: that, on the facts of this case, there was no such offer and acceptance as to make the child in question a child of the husband’s second family. I will return to this point later.
Counsel for the second wife argued that there is nothing in s 46(2), or in any authority, to restrict the operation of ss 33 and 34 of the Act to children the marriage of whose parents has not been the subject of a previous divorce suit; further, that to limit the duty towards children cast on the court by Part 3 of the Act would be contrary to its intention. It is curious that there appears to be no authority directly in point. Perhaps this is because, as counsel for the husband concedes, if his submission be correct, one would have to read into the definition contained in s 46(2) a great many words which are not there, which no court has yet attempted to do. However, there is one authority to which counsel for the second wife referred, and which counsel for the husband also mentioned, which appears to be of some assistance. This is Bowlas v Bowlas. It was a decision of the Court of Appeal on appeal from the Divisional Court ([1965] 1 All ER 803, [1965] P 440) in respect of a case in a magistrates’ court under the Matrimonial Proceedings (Magistrates’ Courts) Act 1960, s 2(1). That section, so far as material, provides:
‘… on hearing a complaint … the court may make an order … containing any one or more of the following provisions, namely … (h) a provision for the making by the defendant or by the complainant or by each of them, for the maintenance of any child of the family, of payments by way of a weekly sum …
‘(5) In considering whether any, and if so what, provision should be included in a matrimonial order by virtue of paragraph (h) of subsection (1) of this section for payments by one of the parties in respect of a child who is not a child of that party, the court shall have regard to the extent, if any, to which that party had, on or after the acceptance of the child as one of the family, assumed responsibility for the child’s maintenance, and to the liability of any person other than a party to the marriage to maintain the child.’
Section 16(1) of the same Act, so far as material, provides:
‘In this Act … “child of the family”, in relation to the parties to a marriage, means—(a) any child of both parties; and (b) any other child of either party who has been accepted as one of the family by the other party; … ’
A ‘child of the family’ for the purposes of that Act is, therefore, the same as for those of the 1965 Act. The headnote in Bowlas v Bowlas ([1965] P at 450, 451) reads as follows:
‘The parties were married in England on July 4, 1964. The wife had two children by her former marriage which took place and was dissolved in the United States of America. A maintenance order was made there in respect of the children but the wife stated that she was unable to enforce it. The husband
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knew that the wife had the two children living with her and received no maintenance for them. The parties never set up a matrimonial home and within a few days of the marriage the husband went away. On a summons taken out by the wife, the magistrates made an order on the ground of the husband’s desertion for £2 a week for the wife and £1 a week for each of the children of the former marriage in the exercise of their power under section 2 of the Matrimonial Proceedings (Magistrates’ Courts) Act, 1960. The husband appealed against the maintenance provisions in respect of the children. The Divisional Court dismissed his appeal. On the husband’s appeal:—Held, that for the magistrates to order the husband to pay maintenance for the wife’s children by a previous marriage under section 2 of the Act of 1960, it had to be shown first, that there was a family; secondly, that the children were accepted by the husband as children of the family; and, thirdly, under subsection (5), the extent, if any, to which the husband assumed responsibility for the children’s maintenance. While a family did come into existence at the moment of the marriage, and assuming that the right inference to be drawn in the circumstances of the instant case from the mere fact of the marriage was that the husband had accepted the children as members of the family, the magistrates nevertheless did not have sufficient regard to the matters to be considered under subsection (5), namely, the extent to which the husband assumed responsibility, and the liability of any person other than a party to maintain the children; and accordingly, the case should be remitted for a reconsideration of those matters.’
The headnote further sets out part of Salmon LJ’s judgment thus ([1965] P at 451):
‘It does not follow in every case that the mere fact that a man married a woman with children is evidence that he accepts those children as members of the family; the question depends on the circumstances of the case. The magistrates should have addressed their minds to the basis on which these two people married at the time of the marriage and not to the situation obtaining weeks before.’
The Court of Appeal, therefore, envisaged a situation in which the natural father of the children was still alive after his marriage to their mother had been dissolved yet the mother might be able to prove that the children had been accepted by her second husband. Willmer LJ in his judgment used this phrase ([1965] 3 All ER at 44, [1965] P at 457):
‘At the moment when this marriage took place a new social unit, in the shape of a new “family”, came into existence.’
It seems then that the Court of Appeal found no difficulty in the proposition that the children could be children of such a new social unit. Counsel for the husband’s point was, of course, not raised or adjudicated on in that case. Bowlas v Bowlas was applied by the Divisional Court in Dixon v Dixon which in turn was followed by Stirling J in B v B and F, which latter case was one under s 34 of the Matrimonial Causes Act 1965.
It seems to me that there are four categories of case in respect of which it would be necessary to consider whether children in any or all of them could be excluded from the jurisdiction of the court in a second divorce suit to which one parent was a party. The four categories are: (1) where the parent who was not a party to the second divorce suit had obtained a custody order in the first suit; (2) where such a parent had obtained care and control although custody was either awarded to the other party or not awarded at all; (3) where such a parent had obtained an order for access, custody being awarded to the other party, as in the present case; and
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(4) where such a parent had obtained no order at all. It appears unlikely that a child concerned in either of the first two categories would live with the parent who was a party to the second divorce suit, but a child in either the third or fourth categories might well do so. For the purposes of the present case, it would suffice for me to deal with the third category only, but a decision as to the third category would almost necessarily apply to the fourth also.
In my judgment, the wording of the relevant sections of the Matrimonial Causes Act 1965 cannot be interpreted or cut down to mean that the jurisdiction of the court is ousted in respect of children in the third or fourth categories or, for that matter, in respect of children within the first two categories, albeit, as I opine, no problem is likely to arise in respect of the first two. The intention of Part 3 of the 1965 Act is to enable and require a court to ensure as best it can the welfare of children and, so far as concerns children within categories (3) and (4), it is important that the court should be able to exercise its powers not only under ss 33 and 34, but also under ss 36 and 37, which give power respectively to commit children to the care of a local authority and to provide for their supervision. In a case where two successive marriages of a parent have broken down, it might be especially necessary that either of such powers should be exercised. As to counsel for the husband’s submissions concerning a conflict of jurisdiction and the danger of a parent who was not a party to a second divorce suit being overlooked or ignored, it seems to me that any difficulties of such a nature could easily be overcome. A court would be most unlikely to exercise its powers under ss 34, 36 or 37 without enquiry as to the existence and terms of any custody order made in the first suit, and as to the wishes or views of such a parent. Further, if that parent so wishes, it would be competent for him or her to issue a custody summons in the first suit, or alternatively to apply to intervene as to custody in the second suit. In the further alternative, as has happened here, that other parent could give evidence as to his or her wishes as a witness in the custody proceedings of the second suit. If one of the suits were in the High Court and the other in the county court, the latter could be removed into the High Court under r 91(1) of the Matrimonial Causes Rules 1968b.
I hold that a child may be a relevant child for the purposes of Part 3 of the Act in a second divorce suit to which only one of the parents is a party, and that this is so whether or not there is in existence a custody or access order made in an earlier suit to which both parents were parties.
I turn now to consider whether, on the evidence in this case, the younger child, born on 15 April 1956, became a child of the husband’s second family which came into existence on his marriage to the second wife. The husband’s evidence as to this is to the effect that, before marriage, he and the second wife had long discussions about the future, and that it was agreed that the children should live with them. The second wife knew the children before the marriage, although not well. The husband realised that, if the children came to live with them, the second wife would have to look after them. He told me in terms that he was hoping at the time of the marriage that they would be a family and that this was what he intended; further, that he had been content for the second wife to look after the children for the seven years for which his cohabitation with her endured. The husband and the second wife both hoped for children of their own, but unfortunately this hope was not fulfilled. Had it been, there can be little doubt that all the children would have been brought up together as one family. The second wife said in evidence that this would have been the case. She told me that, from the time the children came to live with her and the husband, they were, as she put it, ‘definitely part of the family’. She kept diaries; extracts therefrom which were read to me appear to show that she felt maternally disposed towards the children, and treated them as though they were her own. Further, a number of communications between the second wife and the
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younger child appear to show that the latter entertained a very real affection for the former and looked on her as a mother.
In support of the husband’s contention that the children were not children of the family, it was stressed that his case on cruelty was largely based on the second wife’s jealousy and ill-treatment of the children, allegations which I found to be proved. He told me that, during cohabitation with the second wife, he, to quote his own words, ‘often cooked, washed and looked after them more than she did’. He explained that the second wife had suffered from ill-health, although he thought that much of it was imaginary. He said that she often reminded him that the children were his and that she took no interest in their schooling. None of these matters appears to me to be in any way decisive of the question whether the children became children of the family. In my judgment, all the necessary elements were present for them to become such; there was a home and a family (see Bowlas v Bowlas); there was mutual agreement between the parties that the children should live with them, and there was implied, if not express, agreement that they should be treated as children of the family. No contrary inference should be drawn even if the husband was somewhat possessive: see Dixon v Dixon, to which I have earlier referred, and which contains the following passage in the judgment of Wrangham J:
‘Perhaps a word of warning is necessary. It would not be right to infer that such an arrangement was not made because subsequently the natural parent turned out to be unduly possessive of his or her child. Nor would it be right to infer that such an agreement was not made because the natural parent’s spouse was not being asked to undertake any substantial financial liability. These matters no doubt would be relevant, but it would be wrong, on the issue whether or not an arrangement had been made that the child should be accepted as a member of the family, to attach too much significance to either of the considerations I have referred to.’
There was no deception by either party such as to vitiate any apparent consent by the other: see R v R and B v B and F, which I also mentioned earlier. In all the circumstances, I have no doubt that these children were children of the family of the husband and the second wife, and that I have power to make an order for access in favour of the second wife.
I shall now deal with the second wife’s application for access. This will not affect what I have already decided, and will concern simply the facts of the particular application, and, as such an application is properly a chambers matter, I think it appropriate now to close the court again and deal with it in chambers.
Solicitors: Radcliffes & Co (for the husband); Lesser, Fairbank & Co (for the second wife).
Alice Bloomfield Barrister.
Re Pergamon Press Ltd
[1970] 3 All ER 535
Categories: COMPANY; Other Company
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND BUCKLEY LJJ
Hearing Date(s): 7, 8, 9, 10, 13 JULY 1970
Company – Investigation by Board of Trade – Evidence before inspectors – Natural justice – Characteristics of proceedings – Inspectors required to act fairly – Exercise of discretion – Refusal by company directors to answer questions without assurances as to procedure at investigation – Companies Act 1948, ss 165(b), 167(3).
In September 1969, the Board of Trade ordered an investigation under s 165(b)a of the Companies Act 1948 into the affairs of P Ltd and appointed inspectors. It was important in the public interest that the investigation should be completed speedily. In October 1969, the L corporation (which had a sufficient holding in P Ltd for the purpose) removed M and other directors from the board of P Ltd and in November 1969, began proceedings in the United States of America against M charging fraud and deceit in connection with the sale of shares in P Ltd and claiming $22,000,000. M and the other directors were apprehensive that the inspectors might make an interim report which could be used against them in the United States litigation, and that allegations might be made reflecting on their conduct. The inspectors wished to hear evidence in private from the directors who at the outset of the investigation asked for assurances that, if allegations were made against them, they should be allowed to read transcripts of the evidence adverse to them, to look at documents used against them, and to cross-examine witnesses. The inspectors were not prepared to allow the directors a right to peruse the transcripts of evidence but made it clear that no one would be criticised in any report without first being afforded the opportunity to give an explanation, that this involved that the person concerned should be told in general terms of the allegation against him, and that the inspectors would provide him with the purport of the relevant evidence and documents. The directors were not satisfied with these assurances and when called on to give evidence to the inspectors they refused to do so. An inspector’s report might lead to judicial proceedings or the winding-up of the company, and the report had to be put before the company and might, at the discretion of the board, be published to the public at large. The inspectors certified the directors’ refusal to give evidence to the court, pursuant to s 167(3)b of the 1948 Act, and the court having
Page 536 of [1970] 3 All ER 535
inquired into the case held that the directors were not justified in their refusal. On appeal by the directors,
Held – (i) Although the proceedings before the inspectors were only administrative, and not judicial or quasi-judicial, yet the characteristics of the proceedings required the inspectors to act fairly, in that if they were disposed to condemn or criticise anyone in a report they must first give him a fair opportunity to correct or contradict the allegation, for which purpose an outline of the charge would usually suffice (see p 539 d to g, p 541 j to p 542 a and p 545 f, post).
(ii) Save for the requirement to act fairly, the inspectors should not be subject to any set rules of procedure and should be free to act at their own discretion; accordingly, as the inspectors had shown that they intended to act fairly and had given every assurance that could reasonably be required, the directors’ refusal to give evidence was unjustified (see p 540 e, p 544 d and p 545 j to p 546 a, post).
R v Gaming Board for Great Britain, ex parte Benaim [1970] 2 All ER 528 applied.
Dicta of Tucker LJ in Russell v Duke of Norfolk [1949] 1 All ER at 118 and of Lord Reid, Lord Guest, Lord Donovan and Lord Wilberforce in Wiseman v Borneman [1969] 3 All ER at 277, 280, 283, 288 applied.
Decision of Plowman J [1970] 2 All ER 449 affirmed.
Notes
For the investigation of a company’s affairs, see 6 Halsbury’s Laws (3rd Edn) 388–393, paras 753–760.
For the Companies Act 1948, ss 165, 167, see 5 Halsbury’s Statutes (3rd Edn) 243, 244.
Cases referred to in judgments
Chatterton v Secretary of State for India in Council [1895] 2 QB 189, [1895–99] All ER Rep 1035, 64 LJQB 676, 72 LT 858, 59 JP 596, 32 Digest (Repl) 128, 1497.
Grosvenor and West End Railway Terminus Hotel Co Ltd, Re (1897) 76 LT 337, 9 Digest (Repl) 627, 4187.
Hearts of Oak Assurance Co Ltd v A-G [1931] 2 Ch 370; rvsd HL [1932] AC 392, [1932] All ER Rep 732, 101 LJCh 177, 147 LT 41, 16 Digest (Repl) 148, 307.
Home v Bentinck (1820) 2 Brod & Bing 130, 129 ER 907, 32 Digest (Repl) 128, 1500.
O’Connor v Waldron [1935] AC 76, [1934] All ER Rep 281, 104 LJPC 21, 152 LT 289, 32 Digest (Repl) 126, * 485.
Parry-Jones v Law Society [1968] 1 All ER 177, [1969] 1 Ch 1, [1968] 2 WLR 397, Digest Supp.
R v Gaming Board for Great Britain, ex parte Benaim [1970] 2 All ER 528, [1970] 2 WLR 1009.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40, [1963] 2 WLR 935, 127 JP 295, 37 Digest (Repl) 195, 32.
Russell v Duke of Norfolk [1949] 1 All ER 109, 32 Digest (Repl) 31, 187.
SBA Properties Ltd, Re [1967] 2 All ER 615, [1967] 1 WLR 799, Digest Supp.
Travel & Holiday Clubs Ltd, Re [1967] 2 All ER 606, [1967] 1 WLR 711, Digest Supp.
Wiseman v Borneman [1969] 3 All ER 275, [1969] 3 WLR 706, Digest Supp.
Cases also cited
ABC Coupler and Engineering Co Ltd, Re (No 2) [1962] 3 All ER 68, [1962] 1 WLR 1236.
Allied Produce Co Ltd, Re [1967] 3 All ER 399, [1967] 1 WLR 1469.
Ceylon University v Fernando [1960] 1 All ER 631, [1960] 1 WLR 223.
H K (an infant) Re [1967] 1 All ER 226, [1967] 2 QB 617.
Kanda v Government of Malaya [1962] AC 322.
R v Manchester Legal Aid Committee, ex parte R A Brand & Co Ltd [1952] 1 All ER 480, [1952] 2 QB 413.
Page 537 of [1970] 3 All ER 535
Re v Registrar of Building Societies, ex parte A Building Society [1960] 2 All ER 549, [1960] 1 WLR 669.
Schmidt v Secretary of State for Home Affairs [1969] 1 All ER 904, [1969] 2 Ch 149.
Appeals
These were appeals by the respondents, Cecil Thomas Clark, Edwin Sidney Street and Robert Maxwell, past directors of Pergamon Press Ltd, from the decision of Plowman J, dated 24 April 1970 and reported [1970] 2 All ER 449, that the directors were not justified in refusing to answer questions put to them by the inspectors, Rondle Owen Charles Stable QC and Ronald George Leach, appointed by the Board of Trade under s 165(b) of the Companies Act 1948 to investigate the affairs of Pergamon Press Ltd. The facts are set out in the judgment of Lord Denning MR.
Michael Sherrard QC and Alexander Irvine for Mr Clark.
Patrick Phillips for Mr Street.
Morris Finer QC and S A Stamler for Mr Maxwell.
Edgar Fay QC and J P Warner for the inspectors.
Cur adv vult
13 July 1970. The following judgments were delivered.
LORD DENNING MR. In the middle of 1969 there was an upset in the city of London. It concerned Pergamon Press Ltd, a public company, of which the leading figure was Mr Robert Maxwell, MC, MP. In June 1969, an American corporation called Leasco made a take-over bid for the shares of Pergamon Press Ltd. They bought many of the shares in Pergamon and made an offer to buy the rest, but on 21 August 1969, they withdrew the offer. The price of the shares slumped. Dealings were suspended. The City Take-over Panel looked into the happenings. They had misgivings, and made them known. In consequence, on 9 September 1969, the Board of Trade ordered an investigation under s 165(b) of the Companies Act 1948. They appointed two inspectors. One of them was eminent counsel; the other a distinguished accountant.
It was important in the public interest that the investigation should be completed as speedily as possible. Time was of the essence. Only thus could confidence be restored. At once Mr Maxwell, the most prominent member of the Pergamon board, assured the inspectors of his full co-operation. He sent a memorandum stating:
‘In the interests of clearing the Company’s good name and reputation and in the interests of getting the inquiry completed as speedily as possible, we promise the Inspectors full co-operation.’
So far so good. Soon afterwards, however, things happened which considerably affected the attitude of Mr Maxwell and his colleagues. On 10 October 1969, Leasco, which had a sufficient holding for the purpose, removed Mr Maxwell and some of the others from the board and appointed new directors in their stead. These new directors were Leasco men. On 3 November 1969, Leasco filed a suit in New York against Mr Maxwell and some of his companies, charging them with fraud and deceit in connection with the sale of shares in Pergamon. The claim was for $22,000,000. These events made Mr Maxwell and his colleagues apprehensive about the Board of Trade investigation. They were afraid that the inspectors might make an interim report which would find its way into the hands of Leasco and be used against them in the American litigation. They were also fearful least allegations should be made which would reflect on their conduct.
In November 1969, the inspectors informed each of the directors that they would
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like to hear evidence from them. They said that their hearings would be in private at the offices of the accountants. They added:
‘It is our intention to permit any witness who desires it, to be represented. Whilst information which you may be able to give us may be reflected in our report, it is right to tell you that any information which we receive will be treated by us as confidential save for the purpose of reporting to the Board of Trade, who may publish our report.’
The inspectors also stated that they would allow any witness to obtain a copy of his own evidence and give him an opportunity of supplementing it, if he desired. This did not satisfy Mr Maxwell and his colleagues. They decided to ask the inspectors for further assurances about the conduct of the inquiry. They wanted to be assured that, in case allegations were made against them, they should be given an opportunity to read the transcripts of the evidence and of meeting the allegations by evidence or by written or oral submissions. The inspectors replied on 1 December 1969, that they were—
‘… most anxious that no-one affected by our inquiries should feel that he has been unjustly treated at our hands and neither of us would be a party to acting under the provisions of section 41 in respect of anyone or to criticising anyone in either an interim report or a final report without first giving the person concerned an opportunity of giving us his explanation, which implicitly involves that he should be told in general terms of the allegation. We cannot, however, agree to allowing you a right to peruse the transcripts … ’
I will not read the letter in full. It was, to my mind, a very proper letter, giving every reasonable assurance. But these assurances did not satisfy Mr Maxwell and his colleagues. They demanded even more assurances. The inspectors declined to give them.
A little later the inspectors called on the directors to give evidence. Each of them refused. Typical was the attitude of Mr Maxwell himself. He came with his solicitor, Mr Freeman, to the place where the inspectors were meeting. He gave his name and address and said that he was the holder of the Military Cross and a member of Parliament. Then Mr Stable QC, one of the inspectors, asked him this simple question: ‘When did you first become associated with Pergamon Press Ltd?’ to which Mr Maxwell replied:
‘Mr. Stable, in view of the submissions made on my behalf by Mr. Freeman I respectfully refuse to answer any further questions unless and until I am ordered to do so by the Court.’
This attitude left the inspectors with no alternative but to report the refusal to the court. Accordingly, they gave a certificate under s 167(3) of the Companies Act 1948, and made an affidavit setting out the facts. The matter came before Plowman J on 24 April 1970 ([1970] 2 All ER 449, [1970] 1 WLR 1075). He held that the objections taken by the directors were premature; they were not justified in their refusal to answer the questions. He made no order against them save that they pay the costs of the application.
The directors appeal to this court. Counsel for Mr Maxwell claimed that they had a right to see the transcripts of the evidence of the witnesses adverse to them. Counsel for Mr Clark claimed a right to cross-examine the witnesses. Counsel for Mr Street claimed that they ought to see any proposed finding against them before it was included finally in the report. In short, the directors claimed that the inspectors should conduct the inquiry much as if it were a judicial inquiry in a court of law in which Mr Maxwell and his colleagues were being charged with an offence.
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It seems to me that this claim on their part went too far. This inquiry was not a court of law. It was an investigation in the public interest, in which all should surely co-operate, as they promised to do. But if the directors went too far on their side, I am afraid that counsel for the inspectors went too far on the other. He did it very tactfully, but he did suggest that in point of law, the inspectors were not bound by the rules of natural justice. He said that in all the cases were natural justice had been applied hitherto, the tribunal was under a duty to come to a determination or decision of some kind or other. He submitted that when there was no determination or decision but only an investigation or inquiry, the rules of natural justice did not apply. He cited Parry-Jones v Law Society to support his proposition. I cannot accept counsel for the inspectors’ submission. It is true, of course, that the inspectors are not a court of law. Their proceedings are not judicial proceedings: see Re Grosvenor and West End Railway Terminus Hotel Co Ltd. They are not even quasi-judicial, for they decide nothing; they determine nothing. They only investigate and report. They sit in private and are not entitled to admit the public to their meetings: see Hearts of Oak Assurance Co Ltd v A-G. They do not even decide whether there is a prima facie case, as was done in Wiseman v Borneman.
But this should not lead us to minimise the significance of their task. They have to make a report which may have wide repercussions. They may, if they think fit, make findings of fact which are very damaging to those whom they name. They may accuse some; they may condemn others; they may ruin reputations or careers. Their report may lead to judicial proceedings. It may expose persons to criminal prosecutions or to civil actions. It may bring about the winding-up of the company, and be used itself as material for the winding-up: see Re SBA Properties Ltd. Even before the inspectors make their report, they made inform the Board of Trade of facts which tend to show that an offence has been committed—see s 41 of the Companies Act 1967. When they do make their report, the board are bound to send a copy of it to the company; and the board may, in their discretion, publish it, if they think fit, to the public at large. Seeing that their work and their report may lead to such consequences, I am clearly of opinion that the inspectors must act fairly. This is a duty which rests on them, as on many other bodies, although they are not judicial, nor quasi-judicial, but only administrative: see R v Gaming Board for Great Britain, ex parte Benaim. The inspectors can obtain information in any way which they think best, but before they condemn or criticise a man, they must give him a fair opportunity for correcting or contradicting what is said against him. They need not quote chapter and verse. An outline of the charge will usually suffice.
That is what the inspectors here propose to do, but the directors want more. They want to see the transcripts of the witnesses who speak adversely to them, and to see any documents which may be used against them. They, or some of them, even claim to cross-examine the witnesses. In all this the directors go too far. This investigation is ordered in the public interest. It should not be impeded by measures of this kind. Witnesses should be encouraged to come forward and not hold back. Remember, this not being a judicial proceeding, the witnesses are not protected by an absolute privilege, but only by a qualified privilege: see O’Connor v Waldron. It is easy to imagine a situation in which, if the name of a witness were disclosed, he might have an action brought against him, and this might deter him from telling all that he knew. No one likes to have an action brought against him, however unfounded. Every witness must, therefore, be protected. He must be encouraged to be frank. This is done by giving every witness an assurance that his evidence will be regarded as confidential and will not be used except for the purpose of the report.
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This assurance must be honoured. It does not mean that his name and his evidence will never be disclosed to anyone. It will often have to be used for the purpose of the report, not only in the report itself, but also by putting it in general terms to other witnesses for their comments. But it does mean that the inspectors will exercise a wise discretion in the use of it so as to safeguard the witness himself and any others affected by it. His evidence may sometimes, although rarely, be so confidential that it cannot be put to those affected by it, even in general terms. If so, to should be ignored so far as they are concerned. For I take it to be axiomatic that the inspectors must not use the evidence of a witness so as to make it the basis of an adverse finding unless they give the party affected sufficient information to enable him to deal with it.
It was suggested before us that whenever the inspectors thought of deciding a conflict of evidence or of making adverse criticism of someone, they should draft the proposed passage of their report and put it before the party for his comments before including it. But I think that this also is going too far. This sort of thing should be left to the discretion of the inspectors. They must be masters of their own procedure. They should be subject to no rules save this: they must be fair. This being done, they should make their report with courage and frankness, keeping nothing back. The public interest demands it. The need have no fear because their report, so far as I can judge, is protected by an absolute privilege: see Home v Bentinck ((1820) 2 Brod & Bing 130 at 162), per Dallas CJ and Chatterton v Secretary of State for India in Council ([1895] 2 QB 189 at 191, [1895–99] All ER Rep 1035 at 1036) per Lord Esher MR.
On reading through the evidence in this case, I think that the inspectors acted perfectly properly. They made it quite clear that they intended to act fairly. They gave every assurance which the directors could reasonably require. Yet the directors were not satisfied. They demanded further assurances. They had no colour of right to demand them. They knew that speed was essential. They had promised full co-operation, yet when asked the simple question ‘When did you first become associated with Pergamon Press Ltd?' each of them refused to answer. No wonder the inspectors certified their refusal to the court. No wonder the court held their refusal to be unjustified. The judge was merciful to them. He did no more than order them to pay the costs of the application. If they should seek to take again such unwarranted points, they can expect no mercy. They will be treated in like manner as if they had been guilty of contempt of court.
The matter will be remitted to the inspectors, who should proceed with it with the utmost expedition. They should brook no further delay.
SACHS LJ. The proceedings that ensue from an appointment of inspectors made under s 165 of the Companies Act 1948, are of a somewhat special nature by reason of a combination of attributes. Of these the first to be noted is that the inspectors’ function is in essence to conduct an investigation designed to discover whether there are facts which may result in others taking action. It is no part of their function to take a decision whether action be taken, and a fortiori, it is not for them finally to determine such issues as may emerge if some action eventuates. On the other hand, at any rate when the appointment is made under s 165(b)—that is to say, ‘if it appears to the Board of Trade that there are circumstances suggesting’ the possibility of fraudulent and criminal conduct or a lack of compliance with the obligations imposed by the Companies Acts—then the appointment itself involves, at least in the eyes of the business world, proceedings of an accusatory nature. That aspect finds support from those provisions of s 170 of the Companies Act 1948 and ss 37, 41 and 50 of the Companies Act 1967, which point to the type of action which can be taken as the result of the report.
Next, the report is made by the inspectors in their ‘statutory fact-finding capacity’,
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to quote the phrase of Pennycuick J in Re Travel & Holiday Clubs Ltd ([1967] 2 All ER 606 at 608, [1967] 1 WLR 711 at 715), accepted by counsel for the inspectors as apt. Its findings can thus be used as prima facie evidence to support a winding-up petition, although not, so far as counsel could suggest, for any other purpose. Then it is to be observed that when the proceedings commence, the inspectors as a rule have initially no material whatsoever to work on and may thus have to gather information, often on a confidential basis, before being in any position to assess whether facts exist which could give rise either to criticism of any of the company’s officers or agents, or a fortiori, whether there is any prima facie case fit to be considered by the Board of Trade for action. Such matters can usually only be uncovered and examined by the aid of those books and such evidence as the inspectors are entitled to demand by virtue of the provisions of s 167 of the 1948 Act. Next is the factor that it may be vital for the protection of the general public, or for the protection of members of the company in question, that the inquiry produces at least an interim report with the utmost practicable speed, otherwise a main purpose of the proceedings may fail. The present case is one in which such speed was essential.
Last but not least, it is necessary to say something as to what may be contained in the reports and the extent to which they are published. I have had the advantage of seeing a number of these, and in particular some that have been published by the Stationery Office and put on sale to the general public at varying prices. Naturally, the contents and styles of such reports vary to a considerable degree according to the precise nature of the matter under examination and the individual approach of the inspectors to the problem in hand. It is, however, by no means uncommon, to find in these reports criticisms, sometimes stringent, of the way in which individual directors or agents of the company have acted in its affairs; and in that behalf one can in some of the reports come on specific assessments of the reliability or the reverse of witnesses who gave evidence. The contents of a report may thus in certain cases prove highly defamatory of persons who manage the affairs of the company, even if it does not disclose facts which are prima facie evidence of some criminal offence. As regards publication, the report is, of course, itself made direct to the Board of Trade, but publication to the company is enjoined by s 168(2)(a) of the 1948 Act. In addition, publication to members or the company and to certain creditors is obviously contemplated by s 168(2)(b). Moreover, many reports, as already indicated, are put on sale to the public.
To some of these attributes I will later return, but it has seemed best to mention them at the outset to emphasise the special nature of the proceedings, because it was at one stage suggested that this court might formulate some set of general rules for all investigatory proceedings which might lead to some further action by a third party. For my part, I would underline that there are a great many forms of investigatory procedure, which are utilised in highly varying circumstances, and that, accordingly, I would wish my own observations to be read as applying only to those we have under consideration. The researches of experienced counsel before us have indeed failed to discover any other investigatory proceeding which has all the attributes that have been recited.
The nature of the proceeding, the purposes for which the reports may be used, the matter which may be found in them and the extent of the publication being respectively as described, it seems to me, as well as to Lord Denning MR, very clear that in the conduct of the proceedings, there must be displayed that measure of natural justice which Lord Reid in Ridge v Baldwin ([1963] 2 All ER 66 at 71, [1964] AC 40 at 65) described as ‘insusceptable of exact definition but what a reasonable man would regard as fair procedure in particular circumstances’. To come to that conclusion it is, as recent decisions have shown, not necessary to label the proceedings ‘judicial’, ‘quasi-judicial’, ‘administrative’ or
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‘investigatory’; it is the characteristics of the proceedings that matter, not the precise compartment or compartments into which they fall—and one of the principal characteristics of the proceedings under consideration is to be found in the inspectors’ duty, in their statutory fact-finding capacity, to produce a report which may be made public and may thus cause severe injury to an individual by its findings. That characteristic is of itself sufficient to distinguish the position in the present case from that to which Lord Reid referred in Wiseman v Borneman ([1969] 3 All ER 275 at 277, 278, [1969] 3 WLR 706 at 710), when he said:
‘Every public officer who has to decide whether to prosecute or raise proceedings ought first to decide whether there is a prima facie case but no one supposes that justice requires that he should first seek the comments of the accused or the defendant on the material before him. So there is nothing inherently unjust in reaching such a decision in the absence of the other party.’
The reports of such officers are, of course, neither intended to be nor in fact are, made public.
To conclude that there must be an appropriate measure of natural justice, or as it is often nowadays styled ‘fair play in action’, in the present case is thus easy. That was indeed something which was well recognised by the inspectors, who expressly so stated more than once in the course of the proceedings. The real issue, however, is whether that measure should in relation to s 165 investigations generally, or, alternatively, as regards this particular investigation, be reduced by the courts to some set of rules, or whether it should be left to the inspectors, who are men of high professional qualifications, in their discretion to proceed with that fairness of procedure that is appropriate to the particular circumstances of the case as it may develop. In the application of the concept of fair play, there must be real flexibility, so that very different situations may be met without producing procedures unsuitable to the object in hand. That need for flexibility has been emphasised in a number of authoritative passages in the judgments cited to this court. In the forefront was that of Tucker LJ in Russell v Duke of Norfolk ([1949] 1 All ER 109 at 118), and the general effect of his views has been once again echoed recently by Lord Guest, Lord Donovan and Lord Wilberforce in Wiseman v Borneman ([1969] 3 All ER at 280, 283, 288, [1969] 3 WLR at 713, 716, 722).
It is only too easy to frame a precise set of rules which may appear impeccable on paper and which may yet unduly hamper, lengthen and, indeed, perhaps even frustrate (see per Lord Reid in Wiseman v Borneman ([1969] 3 All ER at 277, [1969] 3 WLR at 710)) the activities of those engaged in investigating or otherwise dealing with matters that fall within their proper sphere. In each case careful regard must be had to the scope of the proceeding, the source of its jurisdiction (statutory in the present case), the way in which it normally falls to be conducted and its objective.
Accordingly, it is convenient to say just a brief word about how inspectors appointed under s 165 in general have set about their tasks. This has already been touched on by Lord Denning MR, and he has emphasised, as I would emphasise, that for this purpose, starting very often with a blank sheet of knowledge, they have to call for information in whatever way it can best be obtained. That may be by interviews, it may be from statements obtained in writing, it may be from accounts and other documents, or it may be by their exercising their powers under s 167(3) to put questions to individuals, either on oath or not on oath. One way or another it may be a considerable time before the inspectors have before them sufficient information to see any pattern in the affairs of a company. Even when this pattern commences to take shape, they may need further material before the possibility emerges of any criticism attaching to individuals. Moreover, that possibility may derive from
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documentary evidence which is in substance uncontested, or it may derive from a matter on which there may be a conflict of evidence between some witness and the person to whom blame may be attributed. In the latter case there may come the stage when the inspectors have to decide whether simply to record that conflict or whether to seek to resolve it. The more complex the affairs of the company and the greater the number of subsidiary companies, the longer it may take before those respective stages are reached.
In the course of that investigation confidential information may have to be sought and may have to be examined. In such a case the inspectors are entitled to take into account that many men have deep-seated fears of becoming involved as defendants in defamation actions, for which there is no legal aid, at the suit of somebody with a long purse who may wish to stifle criticism. That is a general observation and is not intended to refer to any person concerned in the present case. It is simply something which has to be taken into account in view of the fact that statements made by witnesses to these inspectors are not the subject of absolute privilege. It is often difficult enough to persuade a citizen to given evidence in road accident cases. How much more reluctant may they well be to risk becoming themselves involved in litigation as the result of coming forward in the course of their public duty at an investigation unless they can be given protection. It can be in the public interest that such account be taken of the fears of potential witnesses. If authority is needed for so self-evident a proposition, it can be found in the judgment of Lord Hanworth MR in Hearts of Oak Assurance Co Ltd v A-G ([1931] 2 Ch 370 at 389).
Two things follow: first, that it may well only emerge at quite a late stage in the investigation whether there may be ground for criticising a director or other witness; secondly, that at all stages, and particularly at the stage of potential criticisms, the inspectors may be faced with difficult and delicate problems as to how to hold the balance between the public interest and that of an individual who may in due course be criticised. As regards the former, the need to preserve confidentiality unless and until the court proceedings eventuate and the need for speed are amongst the factors which the inspectors must prominently keep in mind.
So many are the permutations and combinations which may arise in an investigation that it seems to me quite plain that it is impracticable and, indeed, ill-advised to attempt to lay down a set of rules applicable to all witnesses at all times. In general, I fully endorse the view expressed by Mr Stable QC when he said:
‘We are not prepared to deal with hypothetical matters which haven’t yet arisen, nor are we prepared to tie ourselves down to a particular course in advance of a matter crystallising and ceasing to be hypothetical.’
Is there then anything about this particular case that renders it different to the normal run of cases? Counsel for Mr Maxwell submitted that there was a special factor, and he referred to the proceedings in the United States. In this behalf it is not necessary for me to go over the same ground as to the course of events which has already been covered by Lord Denning MR. This was a company in which the capital as valued on the London Stock Exchange ran into many millions of pounds. The take-over or merger bid involved £25,000,000. The dealings on the London Stock Exchange were suspended, and, what is more, we were informed in this court that they remain suspended. That is a matter that must be of grave importance to a large number of individual shareholders in Pergamon. Accordingly, the situation was one which called for as much speed as practicable in the investigation. The fact that Mr Maxwell is being sued for heavy damages in New York by Leasco and that the latter have now got control of Pergamon is not in point in relation to the interest of the many shareholders to whom I have referred, or to the public interest
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in a matter of great importance to the City of London. In particular, it did not affect the need for speed in the inspectors’ investigation.
The investigation was, however, halted at the outset by the raising of the issues with which we are concerned on the present appeal. No questions at all were answered by the directors. Nothing could have been clearer to the directors than that at the stage they refused to answer all questions, the inspectors could not possibly have come to a conclusion as to what issues would emerge or whether there would be anybody to whom blame might be attributable. The proceedings were thus brought to an abrupt halt, despite the inspectors having made it plain—
‘… that if after we have listened to the evidence and studied all the documents supplied to us we came to the conclusion that there were certain matters on which we thought certain individuals were at fault, it would be right to recall those individuals before us, put to them broadly what the criticism is and ask them if there is an explanation. I think that natural justice requires that.’
They went on to refer to providing such individuals with the purport of evidence and documents.
To my mind, inspectors, especially of the calibre of those concerned in this instance, ought not to be asked at the outset whether they will provide ‘fair play in action’. It should be assumed that they will. Moreover, the above-cited passage shows that they were going to do exactly what was right—to give at the appropriate later stage, to anyone in danger of being criticised, notice of the potential criticism in general terms sufficient to enable him to know what the allegation was and to enable him to give such explanation as he might wish. The precise form and manner of attaining this objective may vary greatly according to the circumstances and is a matter for the discretion of the inspectors.
The directors had no cause to over-step the boundary between legitimate enquiry as to the general procedure contemplated by the inspectors and that of in effect seeking to cross-examine them as to what exact course they would take in circumstances which might never arise and in which they surely could be trusted in their discretion to act fairly. It is a notable fact that although such investigations have been taking place for the best part of a century under varying conditions, there is no trace of any complaint ever having been pursued against the fairness of inspectors’ procedure, and we were informed that there was no trace of any such complaint in the reports which were presented by the committees presided over by Lord Greene, Lord Cohen and Lord Jenkins is 1926, 1945 and 1962 respectively. As to the various procedural claims raised in the notices of appeal, being in agreement with what Lord Denning MR has said, I see no need to refer to them individually. I might perhaps add, however, that as to the claim to cross-examine witnesses, it is quite apparent from the contents of s 167(3) that this was hopelessly ill-founded.
I would only add this, that having noted the professions on the part of the directors in general, and Mr Maxwell in particular, as to the need for speed in the investigation, and as to their desire to co-operate in it, I am in sympathy with one observation of Mr Stable QC, to which counsel for Mr Maxwell objected. Mr Stable referred to witnesses who—
‘… tend to come along and assure us that what is absolutely uppermost in their minds is giving us assistance and then put forward a method of conducting this inquiry which, if adopted, would probably result in its lasting for a matter of years instead of months … [a matter to which he reverted again later, when he said, in relation to demands made, that their acceptance] would make our task quite impossible. It would lengthen our inquiry to such an extent as to make our report quite useless, and it would also involve—and this we are not prepared to do—giving witnesses undertakings touching hypothetical matters which have not arisen and may not arise.’
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The result of the course adopted by the directors who declined to answer any questions at all, has been to cause many months delay in an investigation which they knew needed all practicable expedition. It would have been far more seemly for the directors, as men in high positions in the business world, to show a sense of responsibility to the public interest by submitting in the normal way to a procedure well tried over several generations, instead of raising at the earliest possible moment a whole series of points which were at best clearly premature and which, moreover, on examination, can be seen to be clearly ill-founded.
I, too, would dismiss this appeal, with a view to the directors’ promptly fulfilling their manifest duty to uncover, in this investigation into a complex situation, all those facts of which they, and perhaps they alone, are fully aware.
BUCKLEY LJ. The function of an inspector appointed under s 165 of the Companies Act 1948 is an inquisitorial function. His duty is to investigate the affairs of the company and to report on them to the Board of Trade. It is not a judicial function. But having regard to the circumstances which may lead to the appointment of an inspector under s 165(b), which is the paragraph with which we are concerned in the present case, and to the fact that under the Act a copy of the report must be furnished to the company, a need for due regard to fair treatment may arise if inspectors propose to report adversely on the conduct of any director or officer. If it is found that a director or officer has made some default or acted improperly in relation to the conduct of the company’s affairs, this may well prompt the company to institute proceedings against him, or it may prompt others to institute proceedings against him. In those proceedings the person proceeded against would have the full protection of a judicial process, but, particularly since the company is entitled to a copy of the report, he should not be exposed to the risk of such proceedings without being given a fair opportunity by the inspectors to forestall an adverse report. If inspectors are disposed to report on the conduct of anyone in such a way that he may in consequence be proceeded against, either in criminal or civil proceedings, the inspectors should give him, if he has not already had it, such information of the complaint or criticism which they may make of him in their report and of their reasons for doing so, including such information as to the nature and effect of the evidence which disposes them so to report, as is necessary to give the person concerned a fair opportunity of dealing with the matter, and they should give him such an opportunity.
What disclosure will be necessary for this purpose must depend on the circumstances of the particular case. It may not, and I think often would not, in an ordinary case involve disclosing the identity of witnesses or the disclosure of transcripts. It certainly would not normally involve offering an opportunity to cross-examine any other witnesses, and, indeed, it seems that inspectors could not compel a witness to submit to cross-examination. Whether it would involve confronting the director or officer concerned with any documentary evidence would depend on the circumstances of the case. Until an inspector has reached a stage at which he thinks that he will, or, at least, may, have to report adversely on a director or officer, it will be premature for him to decide what, if anything, he should do to give the director or officer a fair chance of explaining the matter.
The directors in the present case were, I think, quite unjustified in their attempt to obtain undertakings or assurances from the inspectors about the way in which they would conduct the inquiry at its outset. The right of any of them to any information about the course of the investigation is dependent on the inspectors being disposed to criticise them in their report, and in this event the nature of the protection to which any of them will be entitled as a matter of fairness will depend on the nature of the possible adverse comment and of the evidence relating to it which the inspectors have received.
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These are matters which I think rest in the discretion of the inspectors, a discretion which they must exercise with due regard for fair treatment of anyone likely to be adversely affected by their report. The inspectors in the present case, in my judgment, have adopted an entirely correct attitude.
I agree that the appeal should be dismissed.
Appeal dismissed; matter remitted to the inspectors.
Solicitors: Lewis Silkin & Partners (for Mr Clark); Herbert & Gowers & Co (for Mr Street); D J Freeman & Co (for Mr Maxwell); Solicitor, Board of Trade (for the inspectors).
Wendy Shockett Barrister.
G(A) v G(T)
[1970] 3 All ER 546
Categories: CRIMINAL; Ancillary Finance and Property
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND MEGAW LJJ
Hearing Date(s): 21, 22 APRIL, 7 MAY 1970
Affiliation – Time for applying for affiliation order – Payment by putative father within 12 months after child’s birth – Putative father an infant – Payment by agent made allegedly on behalf of putative father – Whether payment by agent entitled mother to take out summons – Affiliation Proceedings Act 1957, s 2(1)(b).
Infant – Agent of – Disposition of infant’s property by – Voidability.
In the late summer of 1964, the mother had intercourse with the defendant who was aged 17, as a result of which she gave birth to a child in July 1965. She wrote to the defendant and told him that she had had a baby but he did not reply. In November 1965, the defendant’s father wrote to the mother enclosing £1 to open a Post Office savings account for the child, and saying that he and the defendant would pay money in weekly for the child. No payments were so made. In July 1966 the defendant’s mother wrote to the mother enclosing £5 for the child’s first birthday, expressed to be from the defendant. By the Affiliation Proceedings Act 1957, s 2(1)(b)a, the mother could make a complaint at any time after 12 months from the child’s birth on proof that the defendant had within 12 months next after the birth paid money for its maintenance. On the question whether the mother was entitled to commence proceedings for an affiliation order,
Held – (i) The defendant (who could lawfully pay maintenance for the child himself) could authorise an agent (eg his parent) to make such payments on his behalf even though it would be against his (ie the defendant’s) interest so to do (see p 549 f and p 551 b, post).
Per Lord Denning MR. An infant cannot appoint an agent to make a disposition of his property so as to bind him irrevocably. A disposition by an agent for an infant is voidable just as a disposition by the infant himself would be, so long as it is avoided within a reasonable time after attaining full age (see p 549 b, post).
(ii) The letters to the mother being inadmissible, there was no evidence that the defendant’s parents had acted with his authority in making payments or in making
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admissions; accordingly, no proceedings for maintenance could be commenced (see p 549 h and j, to p 550 a, p 551 d and p 552 d and f, post).
Notes
For the commencement of proceedings for an affiliation order, see 3 Halsbury’s Laws (3rd Edn) 113–115, para 175, and for cases on the subject, see 3 Digest (Repl) 445–447, 360–383.
For evidence in affiliation proceedings, see 3 Halsbury’s Laws (3rd Edn) 120, 121, paras 184, 185, and for cases on the subject, see 3 Digest (Repl) 452, 453, 412–421.
For the Affiliation Proceedings Act 1957, s 2, see 1 Halsbury’s Statutes (3rd Edn) 77.
Cases referred to in judgments
Chaplin v Leslie Frewin (Publishers) Ltd [1965] 3 All ER 764, [1966] Ch 71, [1966] 2 WLR 40, Digest (Cont Vol B) 434, 178a.
Doyle v White City Stadium Ltd [1935] 1 KB 110, [1934] All ER Rep 252, 104 LJKB 140, 152 LT 32, 34 Digest (Repl) 45, 206.
Edwards v Carter [1893] AC 360, [1891–94] All ER Rep 1259, 63 LJCh 100, 69 LT 153, 58 JP 4, 28 Digest (Repl) 502, 188.
Myers v Director of Public Prosecutions [1964] 2 All ER 881, [1965] AC 1001, [1964] 3 WLR 145, 128 JP 481, Digest (Cont Vol B) 255, 377a.
Shephard v Cartwright [1954] 3 All ER 649, [1955] AC 431, [1954] 3 WLR 967; rvsg sub nom Re Shephard (decd), Shephard v Cartwright [1953] 2 All ER 608, [1953] Ch 728, [1953] 3 WLR 378, Digest (Cont Vol A) 520, 386a.
Wagstaff v Wilson (1832) 4 B & Ad 339, 110 ER 483, 1 Digest (Repl) 705, 2558.
Zouch d Abbot & Hallet v Parsons (1765) 3 Bunn 1794, [1558–1774] All ER Rep 161, 97 ER 1103, 28 Digest (Repl) 486, 28.
Appeal
This was an appeal by the mother from an order of the Divisional Court on a case stated, affirming the dismissal (on appeal) by quarter sessions of the mother’s complaint made under the Affiliation Proceedings Act 1957, in respect of her illegitimate child. The facts are set out in the judgment of Lord Denning MR.
Quintin Hogg QC and G B N A Angel for the mother.
Bruce Holroyd Pearce QC and I G F Karsten for the defendant.
Cur adv vult
7 May 1970. The following judgments were delivered.
LORD DENNING MR. When a single woman has an illegitimate child and seeks to make the father pay for it, she is under a time limit. Section 2(1) of the Affiliation Proceedings Act 1957 provides that she must make a complaint to the justices within 12 months from the child’s birth; or, alternatively, she can make her complaint at any subsequent time if she can prove that the man ‘has within the twelve months next after the birth paid money for its maintenance’. In the present case, the mother did not apply to the magistrates for 2 1/2 years; but she alleges that the defendant did pay maintenance for the child within 12 months after the birth. The question is whether she has proved it.
The facts are these: in the summer of 1964, the mother went to work at Butlin’s Holdiay Camp at Minehead. She was then 32 years of age, unmarried. Her home was in London, but she went down to work at Butlin’s for the summer season. The defendant was also working there. His home was in Minehead. He lived at home with his father and mother. He was only 16 or just 17 years of age. The mother went out with the defendant and they had sexual intercourse together on several occasions. She left Minehead on 5 October 1964 and went back home to London. She discovered in December 1964 that she was pregnant; but she did not tell the
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defendant at that time. She went into King’s College Hospital to have the baby. It was born on 6 July 1965. It was a baby girl. Two days later the mother wrote from hospital to the defendant at his parents’ address in Minehead. She told him that she had had a baby. He did not write back. Two months later she changed her name by deed poll. She changed it to the defendant’s name. She knew that there could never be a marriage between them, but she thought that the child could have its father’s name. She wrote to the defendant’s parents and got a reply from his father, who wrote in it:
‘Why a girl of your age and knowledge finds herself in such a predicament I’ll never understand, especially with someone half your age … Believe me, [the defendant] is in no position to help his ruddy self, he only gets boy’s money as yet and you must appreciate that’s not much … My wife and I will help what little we can and as often as we can to both of you.’
The mother wrote back to the defendant’s parents and they replied to her. The defendant’s mother sent a parcel for the child, and his father wrote saying:
‘The three of us have talked about you a lot and will help as promised all we can. Here’s my proposal. With the £1 enclosed, I want you to get the baby a Post Office Savings Account Book … [The defendant] and I will pay in weekly for her … on top of this, my wife and I will send you £2 per month.’
I am afraid that those promises were not kept. No payments were made into the Post Office for the child. The defendant’s parents did not send anything until the defendant’s mother wrote on 5 July 1966 a registered letter enclosing £5. It arrived on the child’s first birthday on 6 July 1966, stating:
‘… I’m enclosing £5 for you from [the defendant]. I only wish it was more but every little helps … We are sending on a parcel for the baby.’
Later on, in September 1966, the defendant himself gave the mother £5 for the child, but that was more than 12 months after the birth. He did not pay any more for her. Eventually, in September 1967, the mother went to her solicitors. They wrote to the defendant for payment. He then denied that he was the father. The solicitors then applied for maintenance to the justices at Lambeth.
On 20 March 1968, the justices heard the complaint. The mother gave evidence and produced the letters from the parents. Objection was taken to them; but the justices admitted them. The defendant gave evidence. He admitted sexual intercourse at the material time, but he said that he had never made any payment to the mother during the 12 months after the child’s birth, and did not authorise his parents to send any money. He was employed now, he said, in building work. He had married in June 1967, and his wife was expecting a baby. His mother gave evidence, and said that the £5 which she sent was entirely her money. The justices said that the defendant’s mother may have sent the money from her own weekly housekeeping money, but they said that ‘for all practical purposes and indeed in law these moneys were sent on his behalf’. They held that the Act was satisfied. They made an affiliation order against the defendant of 25s a week until the child was 16. The defendant appealed. The court of quarter sessions held that the letters from his parents were not admissible in evidence. They, therefore, allowed the appeal and dismissed the complaint. But they stated a case for the opinion of the High Court. The Divisional Court affirmed quarter sessions. They held that there was no evidence that the parents were making the payments on the defendant’s behalf. The mother now appeals to this court.
The first question in the case stated is: ‘Whether an infant has the capacity to
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appoint an agent.' I am afraid that I have caused some trouble here; because in Re Shephard (decd), Shephard v Cartwright ([1953] 2 All ER 608 at 619, [1953] Ch 728 at 755) I said:
‘… an infant cannot appoint an agent to act for him, neither by means of a power of attorney, nor by any other means.’
That statement taken by itself is too wide. It must be read in its context and limited accordingly. The correct proposition is that an infant cannot appoint an agent to make a disposition of his property so as to bind him irrevocably. A disposition by an agent for an infant is voidable just as a disposition by the infant himself would be, so long as it is avoided within a reasonable time after attaining full age: see Edwards v Carter and Chaplin v Leslie Frewin (Publishers) Ltd.
That proposition does not apply here, because we are not concerned with a disposition of property by an infant. We are concerned with a simple act, namely, the payment of money, said to be done on behalf of a defendant aged 17. To such an act, the general principle is, I think, this: whenever a minor can lawfully do an act on his own behalf, so as to bind himself, he can instead appoint an agent to do it for him. Thus, if a minor can lawfully bind himself by a particular contract because it is for his benefit, he can lawfully appoint an agent to enter into it for him. That is what happened in Doyle v White City Stadium Ltd. Jack Doyle, a professional boxer, under 21, made an agreement through his manager. It was for his benefit and was held binding on him.
Applying this general principle, I first ask myself whether this act (the payment of money) could lawfully have been done by a minor himself on his own behalf. The answer is ‘Yes’. A young man under 18, who is the father of a child, can lawfully bind himself to pay money for its maintenance. As Lord Mansfield CJ said in Zouch d Abbot & Hallet v Parsons ((1765) 3 Bunn 1794 at 1801, [1558–1774] All ER Rep 161 at 163): ‘If an infant does a right act which he ought to do, which he was compellable to do, it shall bind him.' So the defendant could lawfully pay maintenance for this child. It was a right act which he ought to do and which he was compellable to do. Seeing that he could lawfully do it himself, he could lawfully authorise an agent to do it for him. He could tell his bank or his solicitor to pay the money. He could ask his parents to do so. He could put it into the Post Office. In all these cases he is paying it by means of an agent. It certainly binds him so long as it is done with his authority.
The second question in the case stated is whether an infant can appoint ‘an agent to act or make admissions contrary to the infant’s interest’. I have answered this question in the course of the previous answer. If the act or admission is one which the infant himself could lawfully do or make on his own behalf, he can appoint an agent to do it for him, even though it is against his interest. Thus, the defendant could appoint a bank to make payment for him; or appoint his own parents. But there is no evidence that the defendant ever authorised his parents to pay money for him or to make any admissions on his behalf except insofar as such evidence is contained in the letters which they wrote. So it comes to this: are the letters admissible to prove what is contained in them? This brings me to the third question.
The third question in the case stated is whether the letters from the defendant’s parents ‘were admissible in evidence’. His mother said in her letter to the mother: ‘I’m enclosing £5 for you from [the defendant]’. That may be interpreted as meaning: ‘[The defendant] has handed me £5 to send to you.' If that statement had been made by the defendant’s mother on oath, it would have been evidence of a payment by defendant for the maintenance of the child. Not being made on oath,
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but in a letter—and the mother not being called—it is hearsay; and, according to the common law, it is not admissible. The point is covered by Wagstaff v Wilson. Mr Wagstaff’s attorney wrote two letters to Mr Wilson alleging that he had taken his horse wrongfully. Mr Wilson did not reply himself but a reply was received from his attorneys, who wrote:
‘… Mr. Wilson has brought us your letter … respecting a horse belonging to Mr. William Storey, his tenant … We are fully prepared to prove that the horse was legally distrained … by Mr. Wilson’s authority … ’
The judges of the King’s Bench (Parke, Taunton and Patteson JJ) held that the letter was not admissible to show that the horse was taken by Mr Wilson’s authority. Such being the common law about hearsay, we are not at liberty to depart from it. That follows from the decision of the House of Lords in Myers v Director of Public Prosecutions. The answer to the third question is, therefore, that the letters were not admissible in evidence.
I would point out that the Civil Evidence Act 1968, has altered the position for the future. These letters would be admissible as firsthand hearsay if that Act had been applied to civil proceedings before justices. But it has not yet been so applied.
I would like to say, however, that I am not at all reluctant to apply in this case the rule against hearsay. The mother was so much older than the defendant that, if she seeks to make him pay money for the child, she should prove her case properly. I do not think that the defendant should be bound by his mother’s payment of £5 unless it was really sent by his mother on his behalf and with his authority. The best way to prove it would be to call the defendant’s mother to say so. Those representing the mother did not call the defendant’s mother. It was too risky. His mother would say no doubt that she paid the money. That is the end of it. The mother has failed to prove that the defendant made payment within the 12 months for the maintenance of the child. She is, therefore, barred by the time limit. The appeal should be dismissed.
FENTON ATKINSON LJ. Nobody, least of all the defendant himself, has any doubt that he is the father of the child, but, however unmeritorious his attitude in resisting the mother’s claim, the law is that he can only be made to pay anything for the child’s maintenance if the mother can prove that he paid money for the child’s maintenance within 12 months of the birth.
The justices found in the mother’s favour. The defendant appealed to quarter sessions. On the rehearing, the mother gave evidence and, as evidence of payments made by the defendant for the maintenance of the child, produced two letters, one from each of the defendant’s parents. The first was from his father dated November 1965, and enclosed £1 for the mother to get a Post Office savings book. The letter stated that the writer and the defendant would pay in weekly for her. The second was from his mother written just within the 12-month limitation period and enclosed £5, expressed to be ‘from [the defendant]’. No evidence was called by the defendant. A successful submission was made that, as the defendant was an infant aged 17, he had no capacity to appoint an agent and that, even if he had the capacity to appoint an agent, such capacity did not extend to appointing an agent to make admissions contrary to his interests, and that, therefore, the letters were inadmissible. On appeal by case stated to the Divisional Court, the appeal was dismissed on the short ground that, in any event, there was no evidence that the father or mother acted with the defendant’s authority. Accordingly, the court felt that it was unnecessary to deal with the questions posed by the case stated.
For my part, I cannot doubt that there must be circumstances in which an infant
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can appoint an agent with authority to bind him. Counsel for the defendant is driven to contending that, if a banker or solicitor sent a payment to the mother for the maintenance of the child with the full authority of the infant father, that could not be treated as a payment of money by him so as to satisfy s 2(1)(b) of the Affiliation Proceedings Act 1957. I cannot think that that is the law. I have no doubt that, if the defendant in fact authorised his father or mother to make a payment to the mother for the maintenance of the child, that would be a payment of maintenance by him within s 2(1)(b) of the Act. This is just the sort of case in which an infant can authorise an agent to do a specific lawful act on his behalf.
But the existence of the agency must be proved before the agent’s admission can be received against the principal. Evidence of the alleged agent’s own statement of the fact, whether oral or in writing, would be inadmissible hearsay. Leaving out of account the words used in the two letters which could be read as saying that money was being paid on behalf of the defendant and with his authority, I can see no evidence set out in the case stated of any authority in the parents to act as the defendant’s agent. On the material before the Divisional Court, I agree with them that not only was there no direct evidence of any authority vested in the parents to make any admission on behalf of the defendant but also that there were no facts proved from which an agency to make such an admission could possibly be inferred.
Counsel for the mother contends that quarter sessions, having proceeded on a wrong view of the law, namely that no agency was possible in law, have not considered and certainly have not fully set out in the case stated the evidence of the mother covering the period between the birth and the date of the defendant’s mother’s letter, which evidence he submits, if properly considered, could raise a prima facie case of an agency vested in the parents. He invites us to remit the case to quarter sessions for rehearing. But on the facts set out in the case stated there is no evidence whatever of any authority in the parents, nor is any such evidence to be found in the very full note of the mother’s evidence in the magistrates’ court. I see no reason to suppose that any such evidence would be forthcoming if we were to send the case back for rehearing, and I would dismiss this appeal.
MEGAW LJ. The only real issue is whether, on the facts found in the special case stated by quarter sessions, that court ought to have taken into consideration the letters of the defendant’s father and mother as being evidence of the truth of the matters stated in them. If the answer is ‘Yes’, then the case must be remitted to quarter sessions; if the answer is ‘No’, the appeal fails.
The appellant gave evidence that within one year from the birth of the child she received letters from the defendant’s father and mother which contained sums of money. That evidence did not avail her so as to establish her right to pursue her claim against the defendant, unless she could show, so as to satisfy s 2(1)(b) of the Affiliation Proceedings Act 1957, that at least one of the sums of money received by her was money paid by the defendant for the maintenance of the illegitimate child. The onus was on the mother to make out a prima facie case that a payment, coming from the parent, was a payment which was, made with, at least, the knowledge and consent of the infant defendant who is the putative father. For that purpose, for obvious reasons, she desired to rely on the contents of the letters, rather than to call the parents as witnesses in the hope that they might give oral evidence to the same effect. As it was not in dispute that the letters were letters written by the defendant’s father and mother respectively, there was no problem of formal proof. The mother could rely on the fact that the letters had been written by these persons and on the fact that they had contained sums of money. But that was of no use to her unless she could also put the letters in evidence as being proof—prima facie proof—as against the defendant of the truth of the statements in the letters. Part I of the Civil Evidence Act 1968 had admittedly no application in this case. Here the contents of
Page 552 of [1970] 3 All ER 546
the letters could be used by the mother as evidence against the defendant of the truth of the facts stated therein if, but only if, the statements by the parents in the letters could be treated as admissions made by the defendant’s parents as being persons who were, expressly or by implication of the law, authorised to make admissions on the defendant’s behalf.
Is there any implication of law—any presumption—that a parent, merely because he or she is a parent, is a person by whose statements the infant child of such parent is bound? I know of no such principle of law, even where—as I think is not the case here—the admission can be said to have been for the benefit of the infant. In Professor Cross’s book on Evidenceb, under the heading ‘Vicarious Admissions’, I find no suggestion, either directly or by analogy, that there is any such principle in English law. Indeed, I think that it is contrary to the whole tenor of English law, and it would be productive of many surprising and undesirable consequences if it were to be so.
The relevant question, therefore, is whether there was any evidence, apart from the mere fact of kinship, on which it could have been held that the defendant’s parents, in writing the respective letters, were agents for the defendant, acting within their authority as such, for the purposes of making admissions on his behalf. If the contents of the letters themselves cannot be looked at for the purpose of establishing such agency, in my judgment this appeal must fail. There was in the facts found in the case stated no such evidence as laid any foundation for the proposition that there was such agency or authority. There is no reason to suppose that before quarter sessions the mother was precluded from adducing any evidence which she wished to adduce to lay that foundation. Even if one were to look at the notes of evidence in the magistrates’ court—although I think that the parties are bound by the facts as they appear in the case stated—I am unable to see that there is any such foundation.
Hence the mother can succeed only if, as is indeed contended on her behalf, the statements made by the parents in their letters can themselves be looked at in order to establish that the writers of the letters were authorised by the defendant to make admissions on his behalf. This contention involves the proposition that the court may treat the letters as evidence of the truth of the matters stated therein for the very purpose of laying the foundation which has to be laid before the letters may be treated as evidence of the truth of the matters stated therein. In other words, an assumption would have to be made as an essential step in proving the very facts which are essential to enable that assumption to be made. To me it seems clear that neither logic nor law permits a litigant to hoist himself up by his own boot-straps in this manner.
I have referred earlier to the admitted fact that Part 1 of the Civil Evidence Act 1968 does not apply to this case. It does not apply because, although by its terms it relates to all proceedings in any court, the necessary order to bring the relevant provisions of the Act into effect in relation to proceedings in magistrates’ courts has not yet been made. If such an order had been made, and if the rules to be made in relation to magistrates’ courts were to contain similar provisions to those which have been made in respect of proceedings in the Supreme Court (see RSC Ord 38, r 29), the court would have had a discretion to admit the letters as evidence of the truth of their contents, if in all the circumstances it thought that it was just so to do. In the present case it may very well be that the court would have thought that it was just so to do. For myself, I wish that the court had that discretion. But the fact that the court would have had a discretion to admit this evidence if the Act had been applicable is not a valid ground for admitting the evidence in proceedings in a court where the pre-existing law admittedly still remains unaffected by the recent Act.
I would dismiss the appeal.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Meaby & Co (for the mother); Cartwright, Cunningham (for the defendant).
Rosalie Long Barrister.
Note
Vacwell Engineering Co Ltd v B D H Chemicals Ltd (formerly British Drug Houses Ltd)
[1970] 3 All ER 553
Categories: TORTS; Negligence
Court: COURT OF APPEAL, CIVIL DIVISION
Hearing Date(s): 30 APRIL, 1, 4, 5, 6, 7, 8, 11 MAY 1970
Negligence – Causation – Foreseeability – Dangerous chemical liable to explode on contact with water – Damage to property reasonably foreseeable but not extent of damage – No adequate research by seller – No adequate warning given by seller to purchaser – Purchaser entitled to expect adequate warning – Explosion causing death and extensive destruction of property – Whether damage too remote – Whether seller liable.
Appeal
This was an appeal by the defendants, B D H Chemicals Ltd, from the decision of Rees J dated 18 July 1969 and reported [1969] 3 All ER 1681, whereby it was ordered that judgment be entered for the plaintiffs, Vacwell Engineering Co Ltd, on the issues of liability and causation and damages should be assessed by an official referee. The facts are summarised in the headnote at [1969] 3 All ER 1681.
Norman C Tapp QC and C H Whitby QC for the defendants.
Hugh Griffiths QC and John Griffiths for the plaintiffs.
Shortly before the end of the hearing of the appeal Norman C Tapp QC told the court that general terms of agreement had been reached between the parties on the basis that the appeal be allowed and the order of Rees J ([1969] 3 All ER 1681, [1969] 3 WLR 927) be varied by providing, inter alia: (1) that the judgment be entered for the plaintiffs on the issue of liability in negligence limited to 80 per cent of damages; (2) that the amount of damages be referred for assessment by an official referee and the plaintiffs be at liberty to enter final judgment for 80 per cent of the sum assessed in accordance with (1) above; (3) the costs of the action on the issues of liability and causation should be the plaintiffs and the costs of the appeal to be taxed, and costs of the assessment of damages at the discretion of the official receiver. It had been further agreed that the parties go before the official referee on the basis that that part of Rees J’s judgment dealing with remoteness of damage in negligence should not be challenged.
Hugh Griffiths QC said that the plaintiffs accepted the proposed terms.
11 May 1970. The following judgment was delivered.
LORD DENNING MR. The result of the agreement at which the parties have arrived would be very likely almost the same as the court would have arrived at if it had been fully argued and discussed. The appeal would be allowed and the order of Rees J varied accordingly.
Appeal allowed, order below varied.
Solicitors: Barlow, Lyde & Gilbert (for the defendants); Herbert Smith & Co (for the plaintiffs).
Rosalie Long Barrister.
Priday v Priday
[1970] 3 All ER 554
Categories: FAMILY; Divorce
Court: GLOUCESTERSHIRE ASSIZES
Lord(s): CUMMING-BRUCE J
Hearing Date(s): 23, 24, 30 JULY 1970
Divorce – Cruelty – Mental disorder – Schizophrenia – Wife in state of schizophrenic passivity and isolation – Unable to care properly for home and family – Stress, strain and depression suffered by husband – Whether conduct of wife amounted to cruelty.
The parties were married in 1950. There were two children of the marriage. After 1959, the wife developed schizophrenia. Initially this manifested itself with florid psychotic symptoms and she was admitted to hospital in 1960 and 1961 where she responded favourably to treatment. On her discharge from hospital the husband was not told of the nature of his wife’s illness and he never appreciated the diagnosis or prognosis of her condition. Gradually she subsided into a passive state of mental dilapidation characteristic of chronic schizophrenia. She performed household duties only inadequately and on the prompting and with the assistance of the husband and the children. She became incapable of social communication with them and she frustrated attempts made by the husband to make her take the tablets which had been prescribed for her or to see a doctor. At no time, however, did the husband seek specialist medical advice about the wife nor did he initiate a follow-up with the hospital where the wife had been treated. In 1968, as a result of the strain of his attempts to look after the wife, the home and the children, the husband was given treatment for depression. In 1969 he presented a petition for divorce on the grounds of the wife’s cruelty. The consultant in whose charge the wife had been when she was in hospital, gave evidence that although she was unlikely to recover, her symptoms could be alleviated by treatment.
Held – The strains, stresses and ensuing depression suffered by the husband were not dissimilar from those endured by the spouse of a passive invalid struck down by physical disease whose behaviour could not be characterised as cruelty; it was unreal to strain the meaning of the word cruelty to comprehend the schizophrenic isolation, passivity and silliness of the wife and the impact of those manifestations of insanity on the life and health of the husband; accordingly, the petition would be dismissed (see p 561 g and p 562, a, post).
Williams v Williams [1963] 2 All ER 994 followed.
Le Brocq v Le Brocq [1964] 3 All ER 464 and Saunders v Saunders [1965] 1 All ER 838 distinguished.
Quaere. Whether, if, after availing himself of the benefit of specialist medical advice, the husband had left with the children because he found that the strain of continuing to live with and look after the wife was more than his health could stand, he would have had just cause for withdrawal from cohabitation although no matrimonial offence had been committed (see p 562 b, ost).
Notes
For the meaning of, and what constitutes, cruelty, see 12 Halsbury’s Laws (3rd Edn) 269–273, paras 514–521; and for cases on the subject, see 27 Digest (Repl) 294–296, 2392–2422.
Cases referred to in judgment
Gollins v Gollins [1963] 2 All ER 966, [1964] AC 644, [1963] 3 WLR 176, Digest (Cont Vol A) 705, 2416a.
Le Brocq v Le Brocq [1964] 3 All ER 464, [1964] 1 WLR 1085, Digest (Cont Vol B) 351, 2395d.
Page 555 of [1970] 3 All ER 554
Saunders v Saunders [1965] 1 All ER 838, [1965] P 499, [1965] 2 WLR 32, Digest (Cont Vol B) 351, 2395e.
Williams v Williams [1963] 2 All ER 994, [1964] AC 698, [1963] 3 WLR 215, Digest (Cont Vol A) 711, 2537e.
Petition
This was a petition by the husband, Robert Charles Priday, for a decree of divorce on the grounds of cruelty by the wife, Sylvia Winifred Priday. The facts are set out in the judgment.
B E J Shiner for the husband.
D N R Latham for the wife.
Cur adv vult
30 July 1970. The following judgment was delivered.
CUMMING-BRUCE J. The husband married the wife on 10 June 1950. He was 29, she was 26. Their eldest son was born in 1951 and their younger son in 1957. The husband now seeks dissolution on the grounds of the wife’s cruelty. The cruelty alleged in the petition is persistent neglect of husband, home and family since about 1959 continually, and persistent refusal since the same date to speak to the husband; eccentricity of behaviour commencing in 1959, taking the form of curious laughter and mumbling, and wandering off; persistent refusal to seek treatment for her mental condition, and persistent refusal of intercourse since 1959 causing injury to health. By the answer the Official Solicitor, who represents the wife as guardian ad litem, pleads a denial of cruelty, and that, alternatively, the wife was at all material times suffering from mental illness in the form of schizophrenia and did not know what she was doing; alternatively, condonation.
On those pleadings issue was joined. The wife has taken no personal part in the proceedings, being incapable by reason of insanity of so doing. The court heard the evidence of the husband, who was a reliable witness. By consent it received an unsworn statement from the husband’s general practitioner, Dr Blatchley. This was concise in the extreme, and markedly lacking in any discussion of any of the problems germane to the history of the husband’s break-down in health. Concerned about the conciseness of the medical evidence thus received, the court indicated to counsel for the husband the concern that it felt on this score and indicated that if an application for an adjournment were made, in order to enable the husband to call Dr Blatchley to elaborate his evidence, such an application might well be sympathetically considered. After considering the matter overnight, counsel for the husband did not make any such application but stood on the medical evidence that he had put in. The court heard the evidence of Dr Lindsay Walker called on behalf of the wife, a specialist in mental illness who was an impressive and reliable witness. By consent the court was asked to look at hospital notes, records made at the time of the wife’s admissions to hospital in 1960 and 1961, and to take into account, as evidence of fact, materials therein noted. The parties also invited me to have regard at this stage of the proceedings to the welfare report prepared by the reporting probation officer for the purpose of advising and assisting the court in relation to any problem that might arise in relation to the children of the family. The husband impressed me as a responsible man. By occupation a machinist, his daily responsibilities involve him going off reasonably early to his work every day and devoting himself to that work throughout the working week. He is probably not a man of a very strong initiative. Throughout his married life he has been seriously and genuinely exercised about his domestic problem and in connection with the proper discharge of his responsibilities as a husband and father. He had never had any clear or instructed insight into his wife’s true mental condition, or as to the degree to which some form of treatment might moderate the eccentricities of her behaviour. He has never understood the diagnosis, or, I think, had the dimmest understanding of the prognosis. Throughout he has tried to do his best in a very difficult situation, but through
Page 556 of [1970] 3 All ER 554
ignorance or lack of initiative failed to inform himself of the true explanation of his wife’s behaviour.
The primary facts are as follows. Up to 1959 the marriage was a success. Then the wife’s father died, which produced a traumatic response in the wife. Her health broke down, and in 1960 she entered hospital for treatment under s 20 of the Lunacy Act 1890 (as amended by the National Health Service Act 1946, s 50 and Sch 9, Part I). Her admission is recorded as being on account of excitable irrational behaviour of sudden onset. The history of the illness is recorded as follows:
‘Experienced delusions that her father, who died 2 years ago, was poisoned. Disorientated for time. Remained excited and confused for a day or two, but gradually became calmer and rational. Said to have had symptoms during past years at times, e.g., auditory hallucinations’.
On discharge the diagnosis was schizophrenia, and there is a note that she had recovered from the present attack. She had been treated with a drug. She was recommended to remain on that drug and to consult Dr Lindsay Walker, the consultant specialist at the hospital. It is not, I think, necessary for me to elaborate further on that hospital visit. She returned home and she was better on her return home. For a year she remained a good deal better, but then there was another acute episode in June 1961 and she was admitted again under s 29 of the Mental Health Act 1959 on the recommendation of Dr Blatchley. The summary of her case relevant to that admission records as follows:
‘Since her discharge from this hospital on 10.6.60, had kept reasonably well until fairly recently, and about two days prior to admission she became increasingly disturbed and unmanageable at home. [On examination she] Showed marked thought disorder, and lack of affect, but did not express bizarre delusional ideas as on previous admission.’
On the occasion of that hospital admission she underwent a course of five treatments of ECT and was put on to largactil. She was discharged, as she was evidently feeling better, and returned home with a prescription for largactil which she was supposed to take. But when she got home she had not got any largactil. The husband discovered that she ought to have some, so he got some tablets, a duplicate bottle, and thereafter administered the tablets to her. But she frustrated this attempt to carry out the doctor’s wishes, as later on the husband found that she had hidden the tablets that he had been giving her under the cushions of their settee. When he spoke to her about it she pretended that she had not done it. There have been no episodes since as traumatic as those which occurred in 1960 and 1961. The husband was given the impression that the wife had suffered from a nervous break-down, and as she seemed better when she came out of hospital, I expect that he thought for a time that she was then all right. But over the period of nine years preceding the institution of these proceedings the wife has gradually retreated into a state of passive isolation.
The husband gave a clear picture of how the family life has developed since 1961. He said that the wife gradually got worse over the years. She really did not do anything in the house and so he started doing the housework, but he was advised by Dr Logan that that was unwise and that the more that he did for her the less she would do for herself and so, on receipt of that advice, he, very sensibly, deliberately desisted from doing the housework which he probably would have preferred to do rather than see neglected. Therefore for some years he and the children have been living in a state of some discomfort, apparently because of his decision to try to prompt the wife into dealing with the housework, however inadequately, for her own benefit although that involved the sacrifice of comfort for the rest of the family. So over the past few years she has been doing the washing, for example, but does it in a dilatory and unsatisfactory kind of way and he has to push her along to get it done. It is the same
Page 557 of [1970] 3 All ER 554
with the cooking. The family may have to wait sometimes for some hours before a meal is ready. She cooks haphazardly and at no regular times, the food is often not properly cooked and the diet is simple if not primitive. The husband dealt with this apparently by sending the older boy, who is now 19, to his grandmother’s for his main meal.
Even more troublesome has been the lack of communication. The husband said that it was very seldom that the wife would ever speak to him. He has been trying to speak to her but usually there is no answer, and he gave as an example what had happened the day before the hearing. He asked her to get his tea ready, she did not answer. After a long interval the tea appeared. He said that when he spoke to her she tended to turn her back on him and go to another room, talking and mumbling to herself. He summarised that aspect of the situation in this way, that it was not quite so bad in 1961 as it is now. He described how she stopped in most days in the evenings but goes shopping and does the shopping. He dealt with the eccentricity of her behaviour. He said that he finds her gazing in her looking-glass making noises and laughing. Frequently there is an odd blankness. She sits blankly on a chair, for example, when the rest of the family is being entertained by the television, and if they speak to her she takes no notice but simply stares into space. From time to time she wanders off. Sometimes the husband takes no notice and she comes back. Sometimes he has gone off looking for her. On occasions she gas gone wandering off at night in her nightdress unaware of the anomaly of her appearance, and then she has come in and returned to bed as if nothing had happened. He described how she has a way of emitting irrational giggles for no apparent reason, which is liable to happen if somebody is trying to talk to her, and then she will walk away mumbling to herself.
For years she has lost all interest in sexual intercourse. The husband tried to deal with this by making the usual approaches but that did not have any effect. Up to 1968 he sometimes attempted intercourse by force in the hope that if he succeeded in intercourse, even by such method, that that might stimulate her again emotionally to return to reality, but that was unsuccessful and he naturally abstained from such attempts. I am satisfied that his recourse to force in intercourse was not in any sense culpable but was a desperate attempt on his part to re-establish what might have been an important element in matrimonial consortium.
Her behaviour to the two boys is much the same as her behaviour to the husband. She simply does not take any interest. She gives them no affection and has no communication with either of them. She has apparently managed to get the younger boy off to school over the years but, as the husband very candidly stated, really the boys are now his main concern for all practical purposes. I think that he feels that he can probably manage himself but he is concerned about the boys and that, he stated, was really why he brought the proceedings. The older boy has a natural diffidence about bringing any friends home and confronting them with the situation of this irrational creature who is his mother, and the husband said, and I accept, that he is beginning to see a change in the younger boy. The environment in which they live inevitably is disfigured by the absence of routine cleaning.
The husband has made attempts to get the wife to see a doctor and to get further treatment. He did not specify with any great particularity what those attempts over the years have been. The wife always managed to frustrate them. If he tried to get a doctor to visit her at home she would absent herself when the doctor came, and after a time he gave up the attempt to overcome her resistance to further medical treatment. A little curiously, neither the husband nor Dr Blatchley ever referred the case again to Dr Lindsay Walker who had been in charge of the wife in 1960 and 1961. I certainly do not blame the husband for this, but in the light of his evidence that he was trying to get the doctor to see her, together with the fact that in 1968, when his own health was being affected adversely, he gave the doctor a history of his domestic anxieties, it is at least surprising that Dr Blatchley did not himself take the initiative and insist somehow or other in bringing the wife into contact with Dr Lindsay Walker.
Page 558 of [1970] 3 All ER 554
But I have not heard Dr Blatchley in the witness box, and after expressing my sense of puzzlement about what Dr Lindsay Walker, the specialist, described as the puzzling gap in treatment, I abstain from any criticism of Dr Blatchley because there can be an explanation which I have not had the opportunity of hearing.
In 1968, the husband consulted Dr Blatchley, and he described in the witness box the symptoms which caused him so to do. Over the first six months of that year he was losing weight and had actually lost two stone. His sleeping was very poor, he had no appetite, and Dr Blatchley diagnosed that the husband was suffering from depression, a term used by him in a medical sense, and prescribed for him some pills. The husband took his pills and they did him good. He had enough to keep him going for some months but he found that he did not need to take them when he was about halfway through the second bottle which is a tribute to the efficacy of the treatment, and by Christmas 1968 he was a good deal better. In the witness box the husband said that he was better now but often feels low and depressed at home.
I had the advantage of hearing the evidence of the consultant in mental diseases, Dr Lindsay Walker, who had been in charge of the wife in 1960 and 1961, and thereafter unfortunately lost touch with her until he was consulted as a result of the initiative of the Official Solicitor after he had become guardian ad litem to look after the interests of the wife on the institution of these proceedings, and then, for the first time since 1961, Dr Lindsay Walker came back into the case. He described this as a classical picture of a certain type of schizophrenia, starting with floridly psychotic manifestations which were present preceding 1960 and in 1960, and again in 1961, and followed by a change in behaviour, the wife gradually subsiding into a quite different personality to what she had had before and being still mentally ill but without demonstrating the florid signs which had been present in the acute phase. He described the situation as one of mental dilapidation. He said that recovery was very rare and that he did not envisage recovery in the case of the wife, and the whole syndrome of behaviour described by the husband was recognised by Dr Lindsay Walker as a characteristic syndrome of chronic schizophrenia. When asked about treatment, having heard of the wife’s successful attempts to frustrate the husband’s efforts to bring her into contact with medical care, Dr Lindsay Walker nonetheless was of the opinion that it was not impossible by any means that a concerted effort under his direction would overcome this resistance, and he thought that there were ways in which the symptoms of the wife might well be alleviated, although her condition had little or no prospect of cure. This might be effected by taking her into hospital where the supervision of the routine might well have the effect of strengthening her contact with reality or the outer world. Alternatively, the concerted efforts of a team of medical ancillaries or welfare workers visiting her at home might prompt her by giving her added stimuli to moderate her withdrawal from reality. These are modes of treatment that have not been tried because nobody has thought of trying them, and Dr Lindsay Walker made it very plain that he was perplexed by the long gap which had taken place in the case of a patient who might well have benefited, and may still benefit, by the procedures that can at least be tried. When he was asked about the refusal of the wife to co-operate with the doctors, eg by defeating the husband’s efforts to keep her on her largactil as prescribed, Dr Lindsay Walker said that he thought that her refusal to take the tablets was a voluntary act. Of course one has in mind that the wife was cunningly hiding the tablets in the settee and deceiving the husband who thought that she had swallowed them, but Dr Lindsay Walker went on to say that we do not know what is determining her refusal to take the tablets. He gave as an example that she might at that time have had a delusion that the tablets were poisoning her. And I think that it is important in assessing the characteristics of the wife’s behaviour, that there is a distinction validly drawn by the medical specialist between the voluntary character of the wife’s acts and the probable presence of determining factors of a psychological kind which control the operations of her will. Dr Lindsay Walker also said, which
Page 559 of [1970] 3 All ER 554
is important and relevant, that if the husband and family were to leave home he does not think that she could survive long there because she has only managed to survive there as long and as well as she has survived because of their successful efforts in pushing her along and keeping her in touch with the outer world. Left to her own devices she would probably deteriorate into a human vegetable.
On those facts counsel for the husband rests his case. He summarises it in this way: that as a result of the wife’s incapacity for housekeeping there has, objective considered, been neglect in the home of a deeply upsetting kind to the husband personally and as a father; the absence of communication with somebody who is physically present in the house is absolutely intolerable and impossible to live with; her treatment of the children and the effect of her disinterest in them is deeply upsetting to the father who observes it; he has been subjected and is still subjected to the anxiety and embarrassment arising from her propensity to wander off out of the house, sometimes at night in her nightdress; there is the feature of the total absence of sexual relations which he has now had to endure for some years; and all this against a background of refusal by the wife to co-operate in medical treatment which, as we now know, might at least moderate the more intolerable features of her behaviour. It is thus submitted that the totality of the wife’s behaviour has produced such strain on the husband that his health has been proved to have been adversely affected and is likely to be adversely affected again.
In trying to appreciate that case I make the following comments, trying to focus on relevant circumstances material to the question of cruelty.
(a) After 1959, the wife developed the condition of schizophrenia. This was manifested by florid symptoms which were significantly relieved by hospital treatment in 1960 and 1961.
(b) Since 1961, she has subsided into a passive state as a consequence of her schizophrenic condition. This rendered her incapable of maintaining any social communication with the husband or children. She has gradually subsided into personal isolation in which it has for a long time been impracticable without further medical aid to stimulate any interest in personal relations with the husband or the children. Although physically present in the house she is the passive recipient of conversational stimuli, a kind of lay figure from whom little but almost automatic response can be elicited before relapse into blank passivity or irrational mumbling and laughter.
(c) She goes out to do the shopping. She has continued to perform household duties in an inadequate way so that the family live in a state of comfort and nutrition significantly lower than is usual, but her inadequate efforts supplemented by the efforts of the husband and the children have saved the environment from deteriorating into squalor. Having been asked by both parties to read and to take into account the welfare report, I have done so. It described the home as not particularly untidy or dirty, and I accept that description of the atmosphere of the home and its impact on the children and the relationship between the younger boy and the wife.
(d) The husband never appreciated the diagnosis or prognosis of the wife’s condition, although I should have expected him to have been put on enquiry by the traumatic episodes of 1960 and 1961. He never initiated further follow-up by the hospital, apparently accepting nervous break-down as an explanation of the experiences. He made genuine efforts to get her to see a doctor on some occasions and was discouraged by her response. But I am troubled that before taking the drastic step of petitioning for dissolution on the grounds of cruelty he never took steps to invoke specialist medical advice. Had he done so he would have gained greater insight into the wife’s condition; treatment might have been initiated which might in the past have materially moderated her symptoms and unsociable behaviour, and such treatment, if resorted to in the future, may have such effect. Both the added insight which he might have gained, and the effect of the treatment (if it had been successful) might have greatly reduced the personal strains and stresses which combined to cause the onset of his depression in 1968 and subsequently.
Page 560 of [1970] 3 All ER 554
(e) Her refusal of medical aid was as a matter of probability the consequence of her lack of insight due to her schizophrenic condition. Dr Lindsay Walker does not think that it is impracticable to overcome this reluctance. In my view these are circumstances which distinguish the situation materially from the refusal of medical aid due to personal obstinacy or selfishness, which the courts frequently characterise as inexcusable and important as elements in a situation of cruelty. It was the illness itself, as a matter of probability, which has motivated the reluctance to co-operate in the husband’s attempts to interest her in further medical treatment. I regarded the husband as a witness of truth. I am troubled by the lack of particularity about his attempts to gain the wife’s co-operation. I am not satisfied that he did all that he could or should have done in this connection before taking the drastic step of seeking dissolution of marriage on the grounds of cruelty.
(f) It is difficult, too, to distinguish with any confidence the degree to which his own impaired health in 1968 was due to the conduct of the wife rather than to the strains imposed by his attempts to look after her, the home and the children in spite of what is now recognised as her invalid condition. He was in fact trying to manage and look after a chronic invalid, a task which would in any event have imposed severe strain on his nervous and physical energies. In his case the strain must have been much greater because he had no informed insight into her condition. As Dr Lindsay Walker said, physical illness is much more readily recognised and tolerated by the layman than psychiatric disorder. He had not the background of intelligence or information to appreciate her true condition, and for some reason, which is as obscure to me as to Dr Lindsay Walker, neither Dr Blatchley nor anyone else seems to have made him aware of the reality of the situation until he had begun proceedings for divorce. Thus, although there is complaint in the petition of her refusal to seek treatment for her mental condition, there is no other hint therein that the matters complained of constitute a classical picture of schizophrenic syndrome. Now that he understands that all her eccentricities are the various manifestations of a chronic illness which may be alleviated by further medical aid, the strains and stresses on him may well be moderated.
Thus I come to the question of whether the conduct of the wife in these circumstances is of such a character that I can sensibly direct myself that the husband has been treated with cruelty by the wife. In the case of Williams v Williams it was established that if the petitioner was treated with cruelty, the respondent’s mental abnormality constituted no defence, and Lord Reid ([1963] 2 All ER at 1003, [1964] AC at 721) expressed the opinion that the law cannot mean cruelty in its ordinary and popular meaning because that is too vague. The question posed by Lord Reid at the end of his speech was: are the facts such that, after making all allowances for her disability and for both their temperaments, it must be held that the character and gravity of her acts were such as to amount to cruelty? And he indicated ([1963] 2 All ER at 1004, [1964] AC at 722, 723) that in arriving at an answer allowance must be made for misfortunes such as insanity as an explanation of facts which otherwise would be regarded as malignant. Lord Pearce’s ([1963] 2 All ER at 1029, [1964] AC at 762) conclusion in the same case was that where the conduct in question would not amount to cruelty in the absence of an actual intention to hurt, the man who could form no such intention would not be held to have treated his wife with cruelty. Where, however, the conduct would be held to be cruel regardless of motive or intention to be cruel, insanity should not deny relief. Lord Evershed ([1963] 2 All ER at 1009, [1964] AC at 731) concluded that although the derangement of the person charged could not be wholly disregarded, the tests were still objective: in all the circumstances of the case should it fairly be said that the spouse charged had treated the other with cruelty?
Page 561 of [1970] 3 All ER 554
In Le Brocq v Le Brocq the Court of Appeal was concerned with a marriage in which the wife was exasperated beyond endurance by the unsociability and taciturnity of her husband, a situation flowing partly from the incompatibility of their two temperaments, until she worried herself into a state in which her health was impaired because she became so infuriated by the attitude of her husband. The decision was simply that the conduct of the husband had not been proved to be so grave and weighty as to be cruelty. Harman, Pearson and Salmon LJJ said with emphasis that cruelty has no esoteric or artificial meaning in the law of divorce and quoted in their judgments Lord Evershed’s words in Gollins v Gollins ([1963] 2 All ER 966 at 976, [1964] AC 644 at 670) ‘cruel according to the ordinary sense of that word’. Williams v Williams was not cited to the Court of Appeal, and I am not confident that Harman, Pearson and Salmon LJJ would have thus expressed themselves without some qualification if they had had the advantage of considering Lord Reid’s speech in Williams v Williams ([1963] 2 All ER at 1003, [1964] AC at 721), particularly the passage I have cited. Although their observations, if I may say so with respect, were apt in the context of the facts of Le Brocq v Le Brocq, I do not find them helpful in the search for a test to apply to the wife’s conduct in this case.
Counsel for the husband suggested that the test propounded by Sir Jocelyn Simon P in Saunders v Saunders, pointed the way to a simple solution of the question because there constructive desertion had been found; the wife’s complaints were of a callous lack of consideration, and Sir Jocelyn Simon P, after considering Gollins v Gollins and Le Brocq v Le Brocq, concluded that the test of constructive desertion still is, was the conduct of such a grave and weighty nature as to make cohabitation virtually impossible, with which Scarman J agreed. Counsel for the husband submitted that cohabitation with this afflicted wife was virtually impossible and that the husband was not, in the words of Lord Pearce in Gollins v Gollins ([1963] 2 All ER at 992, [1964] AC at 695), called on to endure it any longer. Valuable as I have found the test propounded by Sir Jocelyn Simon P in the determination of the problems of a wide range of matrimonial situations, I do not find it apt as an aid in answering the question whether the husband has been treated with cruelty by reason of the wife’s passivity and isolation, the cause of which the husband but dimly understood. The husband’s sufferings, the stresses and strains and ensuing depression, have not been dissimilar from those which a spouse endures when cohabitation means living with a partner who is struck down by physical disease such as disseminated sclerosis, cerebral thrombosis, or the effects of cerebral haemorrhage, illnesses that for years encumber all communication or active cooperation in the home. These situations engulf both spouses in personal tragedy; the one is called on, as a consequence of the matrimonial obligation, to endure the consequences of the incapacity of the other. No jury would characterise the sufferings of the spouse of a passive invalid as cruelty, although the health of the other might have broken down under the stress of cohabitation.
As I contemplate the spectrum of the manifestations of insanity I observe: (i) at one end, dangerous violence with the consequence of actual or apprehended cruelty; in such cases the matrimonial law relieves the sane partner from the dangerous duty of cohabitation; (ii) at the other end, chronic invalids whose insanity has reduced them to total and vacant passivity, devoid of memory or recognition and free from any propensity which could induce anyone to suggest that the sane spouse was being treated with cruelty. Between these two extremes are an infinite variety of situations on one or other side of the border line.
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In my view of the facts of the present case the sufferings of the husband in consequence of the wife’s misfortune are much closer to (ii) than to (i). It is unreal to strain the meaning of the word ‘cruelty’, which Parliament has made a ground for relief, to comprehend the schizophrenic isolation, passivity and silliness of the wife and the impact of those manifestations of insanity on the life and health of the husband. For those reasons the petition is dismissed. If, after availing himself of the benefit of specialist medical advice, the husband left with the children because he found that the strain of continuing to try to live with and look after the wife was more than his health could stand, it may be that he would have had just cause for withdrawal from cohabitation although no matrimonial offence had been committed. But that question does not arise for decision today.
Petition dismissed.
Solicitors: Colin Dunn & Co, Gloucester (for the husband); Official Solicitor.
Gwynedd Lewis Barrister.
Re Chittenden (deceased)
Chittenden v Doe and another
[1970] 3 All ER 562
Categories: SUCCESSION; Other Succession
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 15, 16, 28 APRIL 1970
Family provision – Time – Application made within six months – Time reckoned from issue of summons – Inheritance (Family Provision) Act 1938, s 2(1) – Intestates’ Estates Act 1952, s 7, Sch 3.
Family provision – Time – Extension – Discretion of court – Service of summons delayed – Defendant party to delay.
The testator died in December 1965 leaving the plaintiff (his widow) and two daughters. The will was proved in March 1966 by the executors and an originating summons for relief under the Inheritance (Family Provision) Act 1938 was issued in August 1966 (ie within the six months provided by s 2(1)a from the date on which representation was taken out). At the suggestion of the executors the originating summons was not served, in the interests of costs, whilst negotiations were being conducted. The negotiations were protracted and in the course of them counsel advised that non-service of the originating summons should be dealt with. On ex parte application, the plaintiff obtained an extension of time from the master for service in July 1968 (ie more than six months from the date on which representation was taken out). The originating summons was duly served and unconditional appearance was entered on behalf of the defendant, the surviving executor. Later the defendant took out a summons to set aside the master’s order and for further relief.
Held – (i) The application under s 2(1) of the Inheritance (Family Provision) Act 1938 (as amended) was made when the originating summons for relief under the Act was issued; accordingly, the application was duly made within the six months stipulated by s 2(1) (see p 565 f, post).
Page 563 of [1970] 3 All ER 562
(ii) Where the defendant had been party to service being withheld, it was proper for the court to make an order extending time for service of the originating summons under the rules of court since it was the rules and not the statute which limited time for service of the originating summons (see p 570 d and e, post).
Dictum of Lord Goddard in Battersby v Anglo-American Oil Co Ltd [1944] 2 All ER at 390, Sheldon v Brown Bayley’s Steelworks Ltd [1953] 2 All ER 894, and dictum of Megaw J in Heaven v Road and Rail Wagons Ltd [1965] 2 All ER at 415 applied.
Holman v George Elliot & Co Ltd [1944] 1 All ER 639 considered.
Dictum of Roxburgh J in E Ltd v C [1959] 2 All ER at 472 doubted.
(iii) Although failure to serve an originating summons within 12 months was itself an irregularity (RSC Ord 2, r 1(1)), application could not, by reason of Ord 2, r 2(1), be made to set aside the irregularity where a fresh step in the proceedings, eg entry of unconditional appearance, had been taken after knowledge of the irregularity (see p 571 c, post).
Sheldon v Brown Bayley’s Steelworks Ltd [1953] 2 All ER 894 applied.
Notes
For renewal of writ (the provisions relating to which are made applicable to an originating summons by RSC Ord 7, r 6), see 30 Halsbury’s Laws (3rd Edn) 303, para 558, and for cases on the subject, see 50 Digest (Repl) 291–293, 328–346.
Cases referred to in judgment
Baker v Bowketts Cakes Ltd [1966] 2 All ER 290, [1966] 1 WLR 861, Digest (Cont Vol B) 502, 2022Aa.
Battersby v Anglo-American Oil Co Ltd [1944] 2 All ER 387, [1945] KB 23, 114 LJKB 49, 171 LT 300, 50 Digest (Repl) 292, 336.
E Ltd v C [1959] 2 All ER 468, [1959] 1 WLR 692, 50 Digest (Repl) 291, 329.
Heaven v Road and Rail Wagons Ltd [1965] 2 All ER 409, [1965] 2 QB 355, [1965] 2 WLR 1249, 50 Digest (Repl) 292, 337.
Hewett v Barr [1891] 1 QB 98, 60 LJQB 268, 50 Digest (Repl) 292, 333.
Holman v George Elliot & Co Ltd [1944] 1 All ER 639, [1944] KB 591, 113 LJKB 459, 170 LT 373, 50 Digest (Repl) 292, 335.
Sheldon v Brown Bayley’s Steelworks Ltd [1953] 2 All ER 894, [1953] 2 QB 373, [1953] 3 WLR 542, 50 Digest (Repl) 293, 345.
Cases also cited
Canas Property Co Ltd v KL Television Services Ltd [1970] 2 All ER 795, [1970] 2 WLR 1113.
Holmes Road (Nos 55 and 57), Kentish Town, Re [1958] 2 All ER 311, [1959] Ch 298.
Searle (decd), Re [1948] 2 All ER 426, [1949] Ch 73.
Procedure summons
This was an application by Charles Joseph Doe, the defendant, to set aside an order made by the master on 29 July 1968 extending the time for service of the originating summons issued by Haidee Ella Chittenden, the plaintiff.
On 1 December 1965, Alexander Edward Chittenden died and his will was proved on 4 March 1966 by his executors, the defendant and Charles Henry Haven. On 26 August 1966, the plaintiff, the testator’s widow, issued an originating summons claiming relief under the Inheritance (Family Provision) Act 1938 (as amended). At the suggestion of the executors, the summons was not served pending negotiations between the parties. On 23 June 1968, Charles Henry Haven died. On 29 July 1968, the plaintiff applied ex parte for an extension of time for service. An order was made extending time for service to 25 August 1968. On 2 August, the originating summons was served and unconditional appearance was entered on behalf of the defendant, the surviving executor, on 5 August. The defendant took
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out a summons on 7 September 1969 to set aside the master’s order of 29 July 1968.
Ian McCulloch for the defendant.
Roger A Cooke for the plaintiff.
Cur adv vult
28 April 1970. The following judgment was delivered.
UNGOED-THOMAS J read the following judgment. This is an application to set aside an order for extending time for service of an originating summons under the Inheritance (Family Provision) Act 1938. Section 2(1) of the Act lays down the time limits within which applications for relief under the Act must be ‘made’, and so far as material is in these termsb:
‘… an order under this Act shall not be made save on an application made within six months from the date on which representation in regard to the deceased’s estate is first taken out.’
RSC Ord 6, r 8, which, under RSC Ord 7, r 6, applies to an originating summons as to a writ, provides for the time within which a writ must be served, and so far as is relevant provides:
‘(1) For the purpose of service, a writ … is valid in the first instance for twelve months beginning with the date of its issue …
‘(2) Where a writ has not been served on a defendant, the Court may by order extend the validity of the writ from time to time for such period, not exceeding twelve months at any one time, beginning with the day next following that on which it would otherwise expire, as may be specified in the order, if an application for extension is made to the Court before that day or such later day (if any) as the Court may allow.’
As appears from the Supreme Court Practice 1970c, an application for extension of time is made ex parte. RSC Ord 32, r 6, provides that ‘The Court may set aside an order made ex parte’, and it is under that rule the application now before me is made.
The testator, Alexander Edward Chittenden, by his will of 4 November 1954, after some small gifts, gave the residue of his estate on trust as to one-third to his wife (the plaintiff) for life and, subject thereto, on certain trusts for his two daughters or their children. On 1 December 1965, the testator died leaving the plaintiff and two daughters surviving, one of the daughters being an infant. On 4 March 1966, the will was proved by the defendants. On 26 August 1966, the originating summons for relief under the Inheritance (Family Provision) Act 1938, was issued on the application of the plaintiff. The summons was thus issued within six months of representation to the deceased’s estate being granted. But it was not served during that period. It is common ground that there was no ill-feeling about the application and that, in that sense, the application was as an affidavit stated, not contentious; that it was arranged between the parties at the defendants’ suggestion that, to save costs, the summons should not be served until negotiations were concluded; that the negotiations were protracted owing to the difficulty of ascertaining the size of the estate particularly in view of tax claims; and that the negotiations were on foot at all material times after the issue of the originating summons and resulted in a reference to counsel when it was decided that the non-service of the summons should be dealt with before proceeding further with the negotiations.
Page 565 of [1970] 3 All ER 562
On 29 July 1968, on the plaintiff’s application ex parte, on affidavit in the usual way, the master made an order extending time for service of the originating summons to 25 August 1968. On 2 August 1968, the originating summons, with the appropriate renewal stamp, was served on the defendant, the surviving executor. The order was thus made after the expiration of six months from the grant of representation to the deceased’s estate and it and the service of the originating summons occurred after the expiration of 12 months from the issue of the originating summons. Subsequently, on 5 August 1968, the defendant entered an unconditional appearance to the originating summons. On 7 September 1969, the summons now before me was taken out for the defendant to the originating summons, under RSC Ord 32, r 6, to set aside the master’s order and for further relief.
It was common ground that the defendant’s application to set aside the master’s order turned on the answers to three questions: (1) is an application for relief ‘made’ within the meaning of s 2(1) of the Inheritance (Family Provision) Act 1938, when the originating summons for the relief is issued or when the originating summons is served? (2) Was the master’s order correctly made? (3) Does entering of an unconditional appearance to the originating summons by the defendant defeat his application?
(1) So I come to the first question, ie is an application ‘made’ under s 2(1) of the 1938 Act when the originating summons is issued or when it is served? The application referred to is an application for an order. The order is made by the court and not by any party to the application so that the application is an application to the court and not to anyone else; and s 1 d expressly refers to the application as an application ‘to the court’. The procedure applicable to the application is not to be found in the 1938 Act but is governed by the Rules of the Supreme Court. It is the rules which provide for service of the originating summons (and even that it is by originating summons that the application shall be made). Service is merely a procedural requirement applied by the rules to the application and is not part of the application itself. A different view would mean that service would have to be effected within the rigid statutory six months period without any provision for extension even though it had to be effected abroad and was being evaded or could only be achieved by establishing a case for substituted service. My conclusion is that the application is ‘made’ within s 2(1) when the originating summons for the relief under the Act is issued and that, therefore, the application in this case was ‘made’ within the six months period stipulated by the subsection.
(2) Was the master’s order extending time for service of the originating summons, correctly made? RSC Ord 6, r 8, which I have read, so far as relevant, replaced the 1962 RSC Ord 6, r 8, which itself replaced the former RSC Ord 8, r 1, and Ord 64, r 7, so far as they were relied on in the authorities as applying to extensions of time for service of the originating process. To appreciate the present significance of the authorities which considered the old Ord 8, r 1, and the old Ord 64, r 7, reference must be made to the relationship of those rules to the present Ord 6, r 8. The old Ord 8, r 1, so far as relevant, provided:
‘No original writ of summons shall be in force for more than twelve months from the day of the date thereof, including the day of such date; but if any defendant therein named shall not have been served therewith, the plaintiff may, before the expiration of the twelve months, apply to the Court or a Judge for leave to renew the writ; and the Court or Judge, if satisfied that reasonable efforts have been made to serve such defendant, or for other good reasons, may order that the original or concurrent writ of summons be renewed for six months from the date of such renewal inclusive … ’
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The present Ord 6, r 8, unlike the old Ord 8 r 1, expressly limits the validity of the writ ‘For the purpose of service’, in accordance with the decision of the Court of Appeal in Sheldon v Brown Bayley’s Steelworks Ltd on the old Ord 8, r 1, even though it did not expressly include that limitation. Order 6, r 8(2), omits from the old Ord 8, r 1, the words ‘… if satisfied that reasonable efforts have been made to serve such defendant, or for other good reasons … ’, but Megaw J in Heaven v Road and Rail Wagons Ltd and Winn LJ in Baker v Bowketts Cakes Ltd considered that the omission did not change the law in any material respect.
The old Ord 64, r 7, was a general provision that the court should have power to enlarge the time appointed by the rules although the application was not made until after the expiration of that time. It was relied on to enable time to be so extended for service of originating process and this effect is now incorporated in the closing words of Ord 6, r 8(2). The result is that so far as material for present purposes the present Ord 6, r 8, in substance incorporates: (1) the provision of the old Ord 64, r 7, governing applications for extension of time after the expiration of the original 12 months time limit for service under the rules such as in this case before me; and (2) in the view of Winn LJ and Megaw J (with which I respectfully agree), the provisions of the old Ord 8, r 1, for extension of time before the expiration of the original 12 months.
I will consider now the authorities referred to which deal with the extension of time for service of an originating process where the plaintiff’s claim would, in the absence of extension, be statute barred. In Hewett v Barr such an extension was refused in accordance with what Lord Esher MR indicated ([1891] 1 QB at 99) was a general rule of conduct. Kay LJ considered ([1891] 1 QB at 99) there might, under the old Ord 64, r 7, be departures ‘under exceptional circumstances’ from this ‘general rule’. Holman v George Elliot & Co Ltd was a Court of Appeal case under the Fatal Accidents Act 1846. Section 1 conferred, in specified circumstances, a right of action where a deceased person would have had such a right if his life had not ensued and s 3 provided that ‘… every such action shall be commenced within twelve calendar months after the death of such deceased person’. A writ under that Act was issued within the 12 months but, owing to neglect by the plaintiff’s solicitors, it was not served until the day after the expiration of 12 months from its date and so did not comply with the old Ord 8, r 1. MacKinnon LJ and Morton J, who constituted the court, held that notwithstanding that the statutory period would have defeated a claim based on a new writ, the court had, under the old Ord 64, r 7, a discretion to extend the time. They confirmed that the discretion had been properly exercised by the puisne judge in favour of the plaintiff. The significance of the decision is that: (1) it differentiated between, on the one hand, the statutory 12 months requirement which was not subject to extension which was satisfied by the issue of the original writ and, on the other hand, the Rules of the Supreme Court provision under the old Ord 8, r 1, that no writ should be in force for more than 12 months from its date—which was subject to extension under the old Ord 64, r 7, notwithstanding that the application was made after the Ord 8, r 1, original 12 months period for service had expired; and that (2) it decided that there was a discretion in the court to extend time for service of the writ notwithstanding that a new writ could not be within the statutory 12 months period required by s 3. The judgments neither defined nor limited the discretion in any way but merely confirmed its exercise in the circumstances of that particular case. The significance of those circumstances to the exercise need not be considered for our purposes.
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Battersby v Anglo-American Oil Co Ltd was also a Court of Appeal case under the Fatal Accidents Act. The judgment of the court (Lord Greene MR, Lord Goddard and du Parcq LJ) was delivered by Lord Goddard. The headnote is misleading ([1945] KB at 23). The court disapproved of the exercise of the discretion in Holman’s case and considered such exercise contrary to earlier decisions; but, as I have said, we need not be concerned with the significance of the particular circumstances in the Holman case to the exercise of the discretion. Lord Goddard made it clear ([1944] 2 All ER at 389, [1945] KB at 28) in the first place that ‘the widest discretion is given to the curt’ under the old Ord 64, r 7. But he then went on to state that there was a line of authorities unbroken until Holman’s case (of whose decision he disapproved), that ([1944] 2 All ER at 389, [1945] KB at 28):
‘… the court will not exercise that discretion in favour of renewal … if the effect of so doing be to deprive a defendant of the benefit of a limitation which has already accrued.’
However, despite this statement and quotation in support of it, he made it unmistakably clear that there were exceptions to the statement; which, therefore, was of a general and not of a rigid rule. His attention was directed ([1944] 2 All ER at 390, [1945] KB at 31) to failure to serve owing to ‘accident or mistake’ as in the Holman case; and although the facts in the Battersby case do not appear, yet such failure is the failure which appears to be the background of the judgment. However that may be, Lord Goddard recognised an exception, or at least indicated that he was not purporting to lay down a rule free from all exception ([1944] 2 All ER at 390, [1945] KB at 31):
‘… we do not deny that if the defendant himself had brought about the delay, as, for instance, by asking the plaintiff to withhold service for some reason, he might well be held disentitled to object to a renewal after the prescribed period had expired.’
In the context, I read this quotation as referring to an application under the old Ord 64, r 7, after both the time for service under the rules and the statutory period of limitation had expired. The main significance for present purposes of this case is that although it was relied on as the strongest case against exceptions, yet even here the court certainly does not rigidly exclude all exceptions ([1944] 2 All ER at 390, [1945] KB at 31):
‘… if the defendant himself had brought about the delay, as, for instance, by asking the plaintiff to withhold service for some reason … ’
In Sheldon v Brown Bayley’s Steelworks Ltd both Singleton and Denning LJJ, who constituted the Court of Appeal, held as an essential part of their ratio decidendi that a writ not served within 12 months in accordance with the old Ord 8, r 1, was not a nullity and that non-service was a mere irregularity; since the writ was subject to renewal after the 12 months period and a nullity cannot be renewed. These judgments, like those in the Holman case, thus emphasise the distinction between, on the one hand, the writ and, therefore, any statutory time limitation applicable to its issue, and, on the other hand, the service of the writ and the provisions of the rules of court applicable to such service. Further, both judgments recognised, in the case of Singleton LJ ([1953] 2 All ER at 895, [1953] 2 QB at 398) ‘normally’, and, in the case of Denning LJ ([1953] 2 All ER at 897, [1953] 2 QB at 401) as a ‘general rule’ that the court would not exercise its discretion in favour of renewing a writ after expiration of the period of service if the effect of so doing would be to deprive the defendant of the benefit of a limitation which had accrued. Thus both Lords Justices
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recognised that the general rule had exceptions, although they did not indicate what the exceptions were.
In Heaven v Road and Rail Wagons Ltd Megaw J refused to renew a writ after expiration of the period for service where renewal had deprived the defendant of the benefit of a limitation which had accrued. The application was under the present Ord 6, r 8, which, as I have already indicated, he considered had not altered the relevant effect of the old rules. He considered himself ([1965] 2 All ER at 415, [1965] 2 QB at 364) bound by the Battersby case. Yet he also considered, quite consistently with being so bound, that the rule was subject to exceptions ([1965] 2 All ER at 413, [1965] 2 QB at 361)—‘exceptional circumstances’ and ([1965] 2 All ER at 415, 416, [1965] 2 QB at 365, 366)—‘exceptional cases’. And he stated that such exceptional cases ([1965] 2 All ER at 415, [1965] 2 QB at 365):
‘… might [inter alia] well arise where there has been an agreement between the parties, express or implied, to defer service of the writ … ’
This seems to me in line with the very example of an exception contemplated in the Battersby case ([1944] 2 All ER at 390, [1945] KB at 31), ie—
‘… if the defendant himself had brought about the delay, as, for instance, by asking the plaintiff to withhold service for some reason … ’
It seems to me quite immaterial whether the delay resulted from the defendant asking the plaintiff to withhold service or from his agreeing with the plaintiff that service should be withheld. In each case, the defendant was party to service being withheld, and without his being party to the delay the originating process was liable to be duly served. The purpose of refusing to exercise the discretion in the plaintiff’s favour, on the ground that otherwise the defendant would have the benefit of the statute of limitation, is, of course, to ensure that benefit to the defendant. So if he is a party to the withholding of service of the originating process—whether by asking or agreeing to it or otherwise—it seems to me that, to the extent to which the withholding to which he is a party overruns the period of statutory limitation, the court should not be concerned in the exercise of its discretion to ensure to him the advantage of that statutory limitation. To do otherwise seems to me plainly unjust. Do the later cases mentioned vitiate this conclusion?
In Baker v Bowketts Cakes Ltd, the application for extension of time for service of a writ was made within 12 months of its issue. Later an attempt just before the 12 months expired to serve the writ by post address to the defendant company’s registered address provided by a director of the defendant company failed because he provided the wrong address. The application was refused (Lord Denning MR and Harman LJ; Winn LJ dissenting). The application was made under the present Ord 6, r 8. But it would have fallen exclusively within the old Ord 8, r 1, if made when that order was in force, without having to call in aid the old Ord 64, r 7. And under the old Ord 8, r 1, the court might order the extension: ‘if satisfied that reasonable efforts have been made to serve such defendant, or for other good reasons’. Lord Denning MR relying on the judgments in the Battersby case, and in Heaven’s case, said ([1966] 2 All ER at 292, [1966] 1 WLR at 866) that the plaintiff ‘must show sufficient reason for extension’. Neither he nor Harman LJ indicated what was sufficient reason apart from holding that the circumstances in that case did not provide such sufficient reason. Winn LJ, as I
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have said, agreed with Megaw J’s view in Heaven’s case that ([1966] 1 WLR at 868, [1966] 2 All ER at 294) ‘the new RSC, Ord 6, as compared with the old RSC, Ord 8, r 1 … has not changed the old law in any relevant respect’. He therefore sought to apply the words which I have quoted from the old Ord 8, r 1, to the circumstances of that case and on the facts concluded in favour of the plaintiff. He disapproved of the use of the expression ‘exceptional circumstances’ in the headnote of Heaven’s case ([1965] 2 QB at 355) as quoted in the then current edition of the White Booke as being inconsistent with Megaw J’s judgment. His disapproval seems to have been directed to ‘exceptional circumstances’ being used to limit the law under the old Ord 8, r 1, and, in particular, to limit the words which I have quoted from it—that law, of course, being the law which he and Megaw J considered had not been changed by the present Ord 6, r 8. So this case in no way affects my conclusion on the exceptions to the general rule set out at the end of my consideration of Heaven’s case.
In E Ltd v C, Roxburgh J refused to renew a writ after expiration of time for its service already extended by order. It does not appear to be stated unmistakably whether a period of statutory limitation had expired or not, but the writ was finally issued to avoid its running. But during the original currency of the writ it was arranged between the plaintiffs and defendants that service should be withheld in view of pending negotiations between them which continued until the second application for renewal of the writ. Roxburgh J apparently objected to such a course on the basis of a passage which he quoted ([1959] 2 All ER at 470, [1959] 1 WLR at 695) from the Battersby case ([1944] 2 All ER at 391, [1945] KB at 32) which included the following:
‘… ordinarily it is not a good reason [for delay of service] that the plaintiff desires to hold up the proceedings … to await some future development … It is for the court and not for one of the litigants to decide whether there should be a stay, and it is not right that people should be left in ignorance that proceedings have been taken against them if they are here to be served.’
The plaintiff did desire to hold up service to await the result of negotiations, but the Battersby case provided that it is only ‘ordinarily’ that that should not be a good reason for delay. The Battersby judgment itself, as has appeared, contemplated that a request by the defendant to delay service might provide a good reason. Nor were the defendants in E Ltd v C left ‘in ignorance that proceedings [had] been taken against them’. It was arranged between them and the plaintiff that service should be withheld. Of course, it is for the court to decide if there should be a stay. But it does not seem to me, with the greatest respect, that any quotation from the Battersby case ([1944] 2 All ER at 391, [1945] KB at 32), including in particular, the statement which I have quoted from it (which appears to be the relevant statement), that ‘It is for the court and not for one of the litigants [meaning in the context the plaintiff] to decide whether there shall be a stay’ leads to or justifies the implication of Roxburgh J’s conclusion that ([1959] 2 All ER at 472, [1959] 1 WLR at 697):
‘This was an attempt by the two parties to do the one thing which the Court of Appeal [in Battersby’s case] said did not lie in their power. It is not for them to decide whether writs should be renewed, but for the court to decide.’
But the implication, in the context, appears to be that the court, in so deciding in the exercise of its discretion, objects to parties arranging that service should be withheld
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and certainly does not regard it as a consideration in favour of extension. Without this implication, the passage would not support Roxburgh J’s refusal to extend time. All I am concerned with for present purposes I have set out here and I am not concerned with the actual correctness of the decision itself.
This case was referred to in Heaven’s case, but it was not mentioned in the judgment and for the reasons which I have given it does not appear to me, with the greatest respect, to accord with my understanding of the principles laid down in the Battersby case, so far as relevant for present purposes, or of the line of cases to which I have referred. So the later cases referred to do not, in my view, vitiate the conclusion stated at the end of my consideration of Heaven’s case.
The plaintiff, however, submitted that the time limit laid down in s 2(1) of the Inheritance (Family Provision) Act 1938, ws more than a statutory limitation on which a defendant could rely at his option and amounted to the exclusion of all jurisdiction. But once the originating summons has been issued within the time limit, then (in accordance with my answer to question (1)) the statutory requirement is satisfied. It is not the Act but the Rules of the Supreme Court (Ord 6, r 8(1)) that limit time for service of the originating summons, and the very same rule that limits time for service provides for extension of that time (Ord 6, r 8(2)). So where the statutory time limit for issue has been complied with it is immaterial whether it is a limit which the defendant may rely on or not at his option, or whether it amounts to exclusion of any jurisdiction where it has not been complied with. In either case, if the defendant is party to service being withheld, there, equally, appears no ground for the court refusing, in the defendant’s interest, an extension under the Rules of the Supreme Court, but on the other hand good ground for granting the extension in favour of a plaintiff who, accordingly, withheld service.
If my reasoning so far is correct, then it does not appear to me that the defendant can successfully invoke in his own aid that the application for extension of time was not made until 11 months after the expiration of the original time for service laid down in the Rules of the Supreme Court, when the defendant was party to that delay and if non-service is an irregularity which can be waived as appears from the Sheldon case. It appears that before the original time for service of the originating summons had expired the plaintiff’s counsel advised the plaintiff to serve within the time if the negotiations appeared unfruitful, and this was not done. The defendant sought to rely on this, but what passed between the plaintiff and her legal advisers does not appear to me to vitiate the defendant’s arrangement with the plaintiff that there should not be service whilst there were negotiations or to vitiate what I have stated appears to me to be the effect of such an arrangement on an extension of time for service of the originating summons. The result is that, in my view, the master’s order was correctly made.
(3) Does the defendant’s entering unconditional appearance to the originating summons defeat his application? It appears from the decision and reasoning of Singleton and Denning LJJ in Sheldon v Brown Bayley’s Steelworks Ltd that failure to serve an originating process within the 12 months required by Ord 6, r 8(1), is an irregularity which is waived by entering an unconditional appearance. So far as relevant, Ord 2, r 1(1), provides:
‘Where … there has … been a failure to comply with the requirements of these rules … the failure shall be treated as an irregularity and shall not
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nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.’
And Ord 2, r 2(1), provides so far as relevant:
‘An application to set aside for irregularity any proceedings … or order therein shall not be allowed unless it is made … before the party applying has taken any fresh step after becoming aware of the irregularity.’
So, in addition to the reasons given in the Sheldon case, the present Ord 2, r 1, provides in effect that failure to serve an originating summons within the 12 months laid down in the rules is an irregularity. And it is clear and is indeed conceded that entering an unconditional appearance is a fresh step in the proceedings. In this case, unconditional appearance was entered after the defendant became aware that service was out of time and that the order for extension of time for service had been made. So my reading fo these rules leads to the same conclusion as in the Sheldon case.
It was, however, suggested that service under an order could not be irregular and, if I rightly understood the submission, that irregularity in an order was limited to some defect of procedure by which the order was obtained. As, however, the only sustainable ground for setting aside the order is that it did not comply with the requirement of the rules (as, of course, judicially applied) it seems to me that the order was either irregular within the meaning of the rules, as indicated by my quotation from Ord 2, r 1, or was good.
So all three questions on which it was agreed that the case turns should, in my view, be decided in favour of the plaintiff, with the result that the application to set aside the order extending time for service of the originating summons fails.
Application dismissed.
Solicitors: Maples, Teesdale & Co, agents for Steward, Vulliamy & Watkins, Ipswich (for the defendant); Field, Fisher & Co, agents for Gotelee & Goldsmith, Ipswich (for the plaintiff).
Jacqueline Metcalfe Barrister.
Adams v Adams (Attorney General intervening)
[1970] 3 All ER 572
Categories: FAMILY; Divorce: CONFLICT OF LAWS
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P
Hearing Date(s): 15 JUNE, 22, 23, 24, 31 JULY 1970
Practice – Parties – Attorney General – Intervention in private suit – Rights.
Divorce – Foreign decree – Recognition by English court – Competence of court granting decree – Competence according to municipal law – Court irregularly constituted – Judge not fulfilling conditions precedent to entry on office – Decree of divorce pronounced in Southern Rhodesia – Judge pronouncing decree not fulfilling requirements of valid Constitution – UK Secretary of State failing to exercise statutory powers to restrain or prohibit and failing to make alternative appointment – Southern Rhodesia (Constitution) Order in Council 1961 (SI 1961 No 2314), s 54(3) (as amended by Constitution Amendment Act 1964 (Southern Rhodesia No 13 of 1964)) – Southern Rhodesia Constitution Order 1965 (SI 165 No 1952), s 4(1)(e).
Conflict of laws – Foreign judgment – Recognition by English courts – Competence of court giving judgment – Competence according to municipal law – Court irregularly constituted – Whether judgment recognisable by reason of necessity or of validity of acts of de facto officer.
Conflict of laws – Foreign judgment – Recognition by English courts – Competence of court giving judgment – Competence according to municipal law – Judges validly appointed under Constitution – Whether subsequent declaration can affect validity of continuation in office – Judges appointed in Southern Rhodesia before unilateral declaration of independence – Judges continuing to sit in High Court thereafter and declared to be sitting by virtue of Constitution held by Privy Council to be invalid.
The Attorney General has a right of intervention in a private suit whenever it many affect the prerogatives of the Crown including its relations with foreign States; certainly he has in such circumstances a locus standi at the invitation of the court or with leave of the court (The Parlement Belge (1879) 4 PD 129 and Engelke v Musmann [1928] ALL ER Rep 18 applied). He also has the right of intervention at the invitation or with the permission of the court where the suit raises any question of public policy on which the executive may have a view which it may desire to bring to the notice of the court (see p 576 j to p 577 a post).
The territory of Southern Rhodesia was annexed by the Crown in 1923 and given the status of a colony. Its system of law was Roman-Dutch. In 1961, the colony received a Constitution by the Southern Rhodesia (Constitution) Order in Council 1961 which was validly amended in 1964 (the 1961–64 Constitution) by the Constitution Amendment Act 1964 of Southern Rhodesia. The 1961–64 Constitution provided, inter alia, for a High Court of Southern Rhodesia comprising an Appellate Division and a General Division. Section 54 of the 1961–64 Constitution dealt with the qualifications of judges and s 54(3)a provided that a judge should not enter on the duties of his office unless he had taken before the Governor, or some person authorised by the Governor in that behalf, the oath of allegiance and the judicial oath, in the forms set out in Sch 1 to the Constitution. Section 55 dealt with the appointment of judges and provided for the appointment of suitably qualified persons as puisne judges by the Governor, on the advice of the Prime Minister and with the agreement of the Chief Justice. Section 56A dealt with tenure of office of the judges, allowed for retirement or resignation of a judge, and enacted that the office of a judge should not, without his consent, be abolished during his tenure of office. Section 56B provided a strict
Page 573 of [1970] 3 All ER 572
code governing the removal of judges. On 11 November 1965, the Prime Minister of Southern Rhodesia and his colleagues issued a unilateral declaration of independence (UDI) purporting to declare that Southern Rhodesia was no longer a Crown colony. The Governor at once announced that the Prime Minister and his colleagues had ceased to hold office. On 16 November, the United Kingdom Parliament passed the Southern Rhodesia Act 1965 which declared that Southern Rhodesia was still part of Her Majesty’s dominions and that the United Kingdom Parliament continued to have responsibility and jurisdiction. The Southern Rhodesia Constitution Order 1965 (the 1965 Order in Council) was made on 18 November; it provided, inter alia, that (s 2(1)b) any instrument made or act done in purported promulgation of any Constitution for Southern Rhodesia except as authorised by Act of Parliament was void and of no effect. Section 4(1)(e)c of that order empowered a Secretary of State to exercise any function that was vested by the Constitution or other law in force in Southern Rhodesia in any officer or authority of the government of Southern Rhodesia (not being a court of law) or (whether or not he exercised that function himself) to prohibit or restrict the exercise of that function by that officer or authority. The order further declared that any law made, business transacted, step taken or function exercised in contravention of any prohibition or restriction imposed by or under the order was void and of no effect. The Southern Rhodesia government continued to carry out its functions and purported to adopt a new Constitution (the 1965 Constitution). This made no provision for a Governor but provided for an Officer Administering the Government in and over Rhodesia. New appointees to the Bench were required to take an oath of loyalty and the judicial oath (in modified forms) before such officer or some person authorised by him. Under s 128 of the 1965 Constitution the High Court of Southern Rhodesia was deemed to have been duly constituted as the High Court of Rhodesia under the 1965 Constitution and, subject to certain provisions, every judge of the High Court on the appointed day was deemed to hold office as if appointed under the 1965 Constitution. In July 1968, the Privy Councild ruled that the 1965 Constitution was, by virtue of s 2(1) of the 1965 Order in Council, void and of no effect. In September 1968, the Appellate Division of the High Court of Rhodesia in R v Ndhlovue ruled that the 1965 Constitution was the only lawful Constitution of Rhodesia and that the High Court was therefore constituted under that Constitution. In November 1968, J B Macaulay QC was appointed to the Bench in Rhodesia and he took the oaths in accordance with the 1965 Constitution. A new, republican Constitution was purported to be enacted for Rhodesia in 1969. At no time had HM government in the United Kingdom recognised Southern Rhodesia (or Rhodesia) as a State either de facto or de jure.
The wife was born and brought up in England. In 1965, she went to Southern Rhodesia for a holiday; whilst there she met and married the husband, who had acquired a domicil of choice in Southern Rhodesia. The marriage broke up and the wife finally returned to England in March 1969. In accordance with Rhodesian law a writ of summons was issued in Rhodesia by agents of the wife’s solicitors claiming, inter alia, a restitution of conjugal rights and (failing that) a decree of divorce. In February 1970, Goldin J, a judge in the General Division who had been appointed before UDI, pronounced a decree for the restitution of conjugal rights and, failing compliance therewith, ordered the husband to show cause why a decree of divorce should not be granted. In April 1970, the matter came before Macaulay J in the General Division; he pronounced a decree of divorce. (This procedure complied with the law of Southern Rhodesia before UDI and, subject only to the issue of competence of the court, the order of Macaulay J was a final decree dissolving the marriage.)
Page 574 of [1970] 3 All ER 572
On the question whether the English courts would recognise the decree of divorce pronounced by the Rhodesian courts,
Held – (i) Although the Southern Rhodesian courts were competent to pronounce a decree of divorce according to the English rules of private international law, the wife had also to show that the court whose decree was in question was competent to pronounce it by its municipal law (see p 584 h, post).
Le Mesurier v Le Mesurier [1895–99] ALL ER Rep 836, Travers v Holley and Holley [1953] 2 ALL ER 794, and Indyka v Indyka [1967] 2 ALL ER 689 followed.
(ii) In satisfying the English court that the court whose decree was in question was competent to pronounce the decree, the relevant decree was that pronounced by Macaulay J since it was the only decree purporting to dissolve the marriage (see p 585 c, post).
(iii) Macaulay J having failed to take before the Governor, or someone authorised by the Governor, the oath of allegiance and judicial oath in the forms set out in Sch 1 to the 1961–64 Constitution had, by virtue of s 54(3) of that Constitution, failed to enter on the duties of his office (see p 585 f, post); his failure was not remedied by the omission of the Secretary of State to exercise his power under s 4(1)(e) of the 1965 Order in Council to prohibit or restrain the ostensible appointment (or himself to appoint a judge to fill the vacancy on the Bench) since such omission did not by implication constitute approval of the ostensible appointment under the 1965 Constitution (see p 585 g, post).
(iv) The English court was not entitled to accord recognition to the judicial acts of Macauley J by reason of the doctrine of necessity (see p 588 d, post) nor by reason of the doctrine of the validity of the acts of a de facto officer (see p 591 c, post).
Madzimbamuto v Lardner-Burke [1968] 3 ALL ER 561 followed.
Harris v Jay (1599) Cro Eliz 699, State v Carroll (1871) 38 Conn 449, Norton v Shelby County (1886) 118 US 425, and Re Aldridge (1897) 15 NZLR 361 considered.
Per Sir Jocelyn Simon P. Notwithstanding the assertion in R v Ndhlovu (1968 (4) SA 515) that the Appellate Division was sitting under the 1965 Constitution of Rhodesia, those judges of the High Court of Rhodesia who were validly appointed under the 1961–64 Constitution can only cease to be judges of the High Court of Rhodesia in accordance with the machinery of the 1961–64 Constitution. A mere declaration by a judge that he is not sitting under the 1961–64 Constitution does not satisfy such machinery. [The possible effect of a renunciation of allegiance was not argued.] Still less can a declaration by three members of the Appellate Division automatically change the legal status of other members of the judiciary. Accordingly, the decision in Ndhlovu’s casef did not ipso jure render all judicial acts in Rhodesia disentitled to recognition (see p 592 b to d, post).
Notes
For recognition of foreign decrees of divorce, see 7 Halsbury’s Laws (3rd End) 112–117, paras 200–204, 119–121, paras 209–211, and for cases on the subject, see 11 Digest (Repl) 481–489, 1079–1124.
For the constitutional position of Southern Rhodesia, see 5 Halsbury’s Laws (3rd Edn) 591, 592, paras 1269–1272.
As reported in the Times on 9 October 1970, the Secretary of State for Foreign and Commonwealth Affairs has announced that the government intended to bring forward proposals which would remove the disability whereby persons from Rhodesia who could not get valid divorces there were not able to obtain them in this country if they wished to remarry in Great Britain.
Cases referred to in judgment
Aldridge, Re (1897) 15 NZLR 361.
Page 575 of [1970] 3 All ER 572
Arantzazu Mendi, The [1939] 1 ALL ER 719, [1939] AC 256, 160 LT 513, sub nom Spain Republic Govt v Arantzazu Mendi 108 LJP 55, 1 Digest (Repl) 129, 155.
Bagot’s Case (1469) YB 9 Edw 4, 2, Brooke’s Abridgement, Patentes 21.
Bowman v Secular Society Ltd [1917] AC 406, [1916–17] ALL ER Rep 1, 86 LJCh 568, 117 LT 161, 15 Digest (Repl) 880, 8489.
Duff Development Co Ltd v Kelantan Government [1924] AC 797, [1924] ALL ER Rep 1, 93 LJCh 343, 131 LT 676, 11 Digest (Repl) 616, 439.
Engelke v Musmann [1928] AC 433, [1928] ALL ER Rep 18, 97 LJKB 789, 139 LT 586, 11 Digest (Repl) 631, 543.
Harris v Jay (1599) 4 Co Rep 30a, Cro Eliz 699, 76 ER 956, 13 Digest (Repl) 41, 549.
Horn v Lockhart [1873] 17 Wallace 570, 21 Lawyers Edn 657.
Indyka v Indyka [1967] 2 ALL ER 689, [1969] 1 AC 33, [1967] 3 WLR 510, Digest Supp.
Knowles v Luce (1579) Moore KB 109, 72 ER 473, 13 Digest (Repl) 43, 576.
Le Mesurier v Le Mesurier [1895] AC 517, [1895–99] ALL ER Rep 836, 64 LJPC 97, 72 LT 873, 11 Digest (Repl) 468, 1011.
Lord Advocate v Jaffrey [1921] 1 AC 146, [1920] ALL ER Rep 242, 89 LJPC 209, 124 LT 129.
Luther v Borden (1849) 7 Howard 1.
Madzimbamuto v Lardner-Burke [1968] 3 ALL ER 561, [1969] 1 AC 645, [1968] 3 WLR 1229, Digest Supp.
Mirehouse v Rennell (1833) 1 Cl & Fin 527, 5 ER 759, 13 Digest (Repl) 188, 54.
Norton v Shelby County (1886) 118 US 425.
Papadopoulos v Papadopoulos [1930] P 55, [1929] ALL ER Rep 310, 99 LJP 1, 142 LT 237, 94 JP 39, 11 Digest (Repl) 486, 1107.
Parker v Kett (1701) 1 Ld Raym 658, [1558–1774] ALL ER Rep 199, 88 ER 1454, 13 Digest (Repl) 46, 613.
Parlement Belge, The (1879) 4 PD 129; rvsd CA (1880) 5 PD 197, [1874–80] ALL ER Rep 104, 11 Digest (Repl) 628, 516.
Practice Direction [1970] 1 ALL ER 1248, [1970] 1 WLR 687.
R v Bedford Level Corpn (1805) 6 East 356, 102 ER 1323, 13 Digest (Repl) 224, 454.
R v Cronin [1940] 1 ALL ER 618, 162 LT 423, 104 JP 216, 14 Digest (Repl) 661, 6699.
R v Ndhlovu 1968 (4) SA 515.
Southern Rhodesia, Re [1919] AC 211, 88 LJPC 1, 119 LT 689, 8 Digest (Repl) 685, 8.
State v Carroll (1871) 38 Conn 449, 9 Am 409.
Travers v Holley and Holley [1953] 2 ALL ER 794, [1953] P 246, [1953] 3 WLR 507, Digest (Cont Vol A) 240, 1023a.
Cases also cited
Anisminic Ltd v Foreign Compensation Commission [1969] 1 ALL ER 208, [1969] 2 AC 147.
Buckley v Edwards [1892] AC 387.
Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (No 2) [1966] 2 ALL ER 536, [1967] 1 AC 853.
Castrique v Imrie (1870) LT 4 HL 414, [1861–73] ALL ER Rep 508.
Milward v Thatcher (1787) 2 Term Rep 81, [1775–1802] ALL ER Rep 404.
Pemberton v Hughes [1899] 1 Ch 781.
State v Charalambous 1969 (1) SA 599.
Texas v White (1868) 7 Wallace 700.
Van Deventer v Hancke and Mossop [1903] TS 401.
Petition
This was a petition by Joanna Sylvia Adams for a declaration that a decree of dissolution of her marriage to Raymond Thomas Every Adams pronounced by Macaulay J in the General Division of the High Court of Rohodesia on 9 April 1970 was valid. The facts are summarised in the headnote.
R M O Havers QC and J G Leach for the wife.
L J Blom-Cooper QC and Gordon Slymn for the Attorney General.
The husband did not appear and was not represented.
Cur adv vult
Page 576 of [1970] 3 All ER 572
31 July 1970. The following judgment was delivered.
SIR JOCELYN SIMON P read the following judgment.
The issue and its repercussions
By her petition dated 29 April 1970 Joanna Sylvia Adams petitions the court under RSC Ord 15, r 16, and Ord 112, r 3, for a declaration that her marriage to the respondent, Raymond Thomas Every Adams, was validly dissolved by a purported decree of divorce of the High Court of Rhodesia dated 9 April 1970.
The wife wishes to remarry in this country. But the Registrar General of Births, Deaths and Marriages, to whom the superintendent registrar of marriages looks for advice has in turn been advised that the purported decree of divorce of 9 April 1970 would not be recognised by English law as validly terminating her marriage, with the result that in the eyes of English law the wife still remains married and cannot contract a fresh union in England. Since she wished to dispute this view of the law, she presented the petition to which I have referred.
She is not the only person similarly situated. I have been informed that since 1 January 1969 eight marriages have not been allowed to proceed in this country where a purported prior divorce had been pronounced in Rhodesia after 11 November 1965 (the unilateral declaration of independence ‘UDI’). Of these, two were pronounced before 13 September 1968 (R v Ndhlovu) by Greenfield J (appointed after JDI). In six cases the decree was pronounced after 13 September 1968 (R v Ndhlovu), five of them by Macaulay J or Greenfield J (both appointed after UDI), one by a judge appointed before UDI. (The significance of this break-down will become apparent as I review the arguments.) There may, of course, be others who are uncertain of their status but have not applied to a superintendent registrar of marriages.
The case therefore affects the personal lives of a number of people besides the wife. It also raises grave constitutional issues. I should have liked to have had more time for consideration of my judgment—particularly as an extremely important and difficult point emerged at a very late stage of the argument, so that it was not the subject of the extensive research and class scrutiny which counsel would otherwise have devoted to it. Nevertheless, we are now at the end of the term; and, having come to a conclusion, I feel that it would not be fair to the wife to keep her waiting for a judgment; and that it is better that I should deliver it now, with all its imperfections. The parties then have a judicial decision on which they can make plans or frame policy, or which they can, if so advised, test on appeal.
The Attorney General’s intervention
By letter dated 21 May 1970 the wife’s solicitors wrote to the Queen’s Proctor, giving notice of these proceedings ‘in case you, as amicus curiae, would wish to be represented by counsel’. They wrote a similar letter to the Attorney General ‘in case you wish to be represented by counsel’. When the case originally came before me on 15 June 1970, counsel appeared for the Attorney General and claimed a right of intervention on the ground that constitutional issues arose in which the Sovereign’s interests might be affected. In my view the Attorney General has a right of intervention in a private suit whenever it may affect the prerogatives of the Crown, including its relations with foreign States (see Duff Development Co Ltd v Kelantan Government ([1924] AC 797 at 802, [1924] All ER Rep 1)); and he certainly has in such circumstances a locus standi at the invitation of the court (The Parlement Belge ((1879) 4 PD 129 at 130, 145), in which the Attorney General appealed ((1880) 5 PD 197, [1874–80] All ER Rep 104) the instant decision) or with the leave of the court (Engelke v Musmann ([1928] AC 433 at 435–437, [1928] All ER Rep 18)).
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I think that the Attorney General also has the right of intervention at the invitation or with the permission of the court where the suit raises any question of public policy on which the executive may have a view which it may desire to bring to the notice of the court. Public policy is a matter of which the courts take direct judicial cognisance, and they do not allow evidence on the point (cf Duff Development Co Ltd v Kelantan Government ([1924] AC at 813, 823, 824, [1924] All ER Rep at 8, 13) per Viscount Finlay and per Lord Summer). ‘Our State cannot speak with two voices … the judiciary saying one thing, the executive another’; said Lord Atkin in The Arantzazu Mendi ([1939] 1 All ER 719 at 722, [1939] AC 256 at 264). (Although Lord Atkin was speaking of recognition of foreign sovereignty, his observation seems to me, in common sense, to be of general application in a unitary State in cases such as the instant one.) Of course, if clear law is expressly based on considerations of public policy the executive must accept it and them unless and until the law is changed by the Queen in Parliament. But where the law is doubtful or the considerations of public policy may be in dispute, the view of the executive may be of value to the courts—if only in indicating that this may be a sphere better left for the direct determination of the constitutional Sovereign, the Queen in Parliament. Several issues in the instant case were based or turned on considerations of public policy.
Although in later stages of the instant case counsel for the Attorney General claimed to be doing no more than drawing relevant legal considerations to the attention to the court, he intervened by wish as a party rather than be heard as amicus curiae; and I was left clearly under the impression that there were matters here, not merely affecting prerogative power in the narrower legal sense, but extending to matters of policy, on which the Crown wished to express a view. In saying this I must not be thought to be criticising the Attorney General or his counsel in any way. On the contrary; it would be deplorable if, through the court’s being left in ignorance, the State did appear to be speaking ‘with two voices’. I think that the Attorney General was also entitled to intervene with the leave of the court under s 44 of the Matrimonial Causes Act 1965, although his counsel did not put his application or claim to intervene on this ground.
I would, in any event, have wished to hear argument on behalf of the Crown. Counsel for the wife expressed the preference that the Attorney General should be an intervener, rather than merely address the court as amicus curiae. There seemed to me to be manifest advantages in having the Attorney General a party, so that my judgement can, if so desired, be tested on appeal in all events. I therefore readily allowed the intervention of the Attorney General, who is now a proper party to the suit. His counsel indicated that he would not in any event be asking that his costs should be paid, and was willing that this should be made a condition of his being allowed to intervene.
The personal background
The wife was born and brought up in England. In 1965 she went to what was then called Southern Rhodesia for a holiday, and stayed on, having obtained work as a riding instructress at livery stables kept by the husband. On 29 December 1965 she went through a ceremony of marriage with the husband in Salisbury. No question has been raised in these proceedings as to the validity of that marriage. From an affidavit sworn in the Rhodesian proceedings it would appear that the husband had a domicil of origin in Australia, but settled in Southern Rhodesia in 1949, and there acquired a domicil of choice. In another affidavit in the Rhodesian proceedings the wife averred simply that the husband was domiciled in Rhodesia. Neither of these averments was controverted. On 5 March 1967 the only child of the marriage, a daughter, Robin Mary, was born. By the end of 1968 the marriage was under strain, with adverse consequences to the wife’s health. In November 1968 the wife
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returned to this country on holiday. She was due to go back to Rhodesia in January 1969. Just before the time when she was due to leave she received communications from the husband, asking her not to return and informing her that he had ‘found somebody else’ and ‘did not want to go on with the marriage’. Nevertheless, in the hope of saving her marriage, the wife went back to Rhodesia about the middle of February 1969. But she was unsuccessful; and eventually the husband bought the wife and the child single air passages to London. The wife arrived in this country again on 4 March 1969, and she has been here ever since. She consulted solicitors in England, who instructed agents in Salisbury. In consequence, on 5 December 1969 a writ of summons was issued against the husband on behalf of the wife, a declaration (equivalent to a statement of claim) being attached; office copies of these are exhibited in the instant proceedings. The writ claimed: (a) an order calling on the husband to restore conjugal rights to the wife, and, failing compliance therewith; (b) a decree of divorce; (c) custody of the child; (d) maintenance for the child; and (e) costs. The husband apparently put in no defence and the wife was permitted to give her evidence by affidavit. On 12 February 1970, the suit came before Goldin J in the General Division of the High Court of Rhodesia. Goldin J had been appointed to the Bench before 11 November 1965 (UDI). Counsel appeared for the wife, the husband appeared in person. The learned judge ordered:
‘That a decree of restitution of conjugal rights be and it is hereby granted to the [wife]. That [the husband] return to or receive the [wife] on or before the 12th day of March 1970, and, failing compliance therewith, to shew cause to this Honourable Court sitting at Salisbury on the 9th day on April 1970:—Why a decree of divorce should not be granted, with costs [etc].’
The husband apparently failed to comply with the decree and order of 12 February 1970, with the result that the matter came again before the General Division of the High Court of Rhodesia on 9 April 1970. The judge this time was Macaulay J, who had been appointed to the Bench on 2 November 1968 in circumstances that I shall describe in a moment. The wife was again represented by counsel, but this time the husband did not appear. Macaulay J ordered: ‘That a decree of divorce be, and is hereby, granted, with costs’; and he made a custody and maintenance order in respect of the child. I have been satisfied by expert evidence that the procedure that was followed in the case complied with the law of Rhodesia as it existed before 11 November 1965 (UDI), and that, subject to the issue of the competence of the court, what was granted on 9 April 1970 was a final decree dissolving the marriage.
On the assumption that her marriage had been validly dissolved, the wife wished, as I have said, to remarry; but there followed the difficulties that I have mentioned with the superintendent registrar of marriages. The strain of the uncertainty of her position is affecting the wife adversely, and through her the child. In the event of the non-recognition of the Rhodesian divorce decree, with the resulting subsistence in the eyes of English law of her marriage with the husband and her domicil in consequence remaining his, she will not be able to institute divorce proceedings against him in England until 4 March 1972: see Matrimonial Causes Act 1965, s 40(1)(b).
The constitutional background
It was agreed that I could take as proved the constitutional history of Rhodesia as it was explained in Re Southern Rhodesia and Madzimbamuto v Lardner-Burke; and a number of other facts of a public nature were stated as agreed evidence from the Bar, or proved by documents being submitted by consent. I need not go back beyond 1923, when the territory in question was annexed by the Crown and given the status of a colony. Its system of law was Roman-Dutch; but the nature of the sovereignty
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of the Queen in Parliament of the United Kingdom over a British colony must be determined by the constitutional law of the United Kingdom: Madzimbamuto’s case ([1968] 3 All ER at 572, [1969] 1 AC at 721).
In 1961, the territory received a Constitution by the Southern Rhodesia (Constitution) Order in Council 1961g. Save for Chapter V, dealing with the judicature, it was extensively reviewed in Madzimbamuto’s case. I need only remark that Chapter 1 deals with the office of Governor, s 1(1) providing:
‘There shall be a Governor in and over the Colony of Southern Rhodesia who shall be appointed by Her Majesty by Commission under Her Sign Manual and Signet and shall hold office during Her Majesty’s pleasure’
and part of s 2 providing:
‘… the Government shall do and execute all things that belong to his office according to such Instructions, if any, as Her Majesty may from time to time see fit to give him.’
Chapter II deals with the legislatures, s 6 providing that it ‘shall consist of Her Majesty and a Legislative Assembly’. Chapter IV deals with executive powers, s 42 providing:
‘The executive authority of Southern Rhodesia is vested in Her Majesty and may be exercised on Her Majesty’s behalf by the Governor or such other persons as may be authorised in that behalf by the Governor or by any law of the Legislature.’
Chapter V, dealing with the judicature, was validly repealed and replaced by the Constitution Amendment Act 1964 of Southern Rhodesia, which was rendered necessary by the break-up of the Central African Federation. Section 50 provides that there shall be a High Court of Southern Rhodesia, consisting of the Appellate Division and the General Division. Section 54 deals with the qualification of judges. Subsection (3) provides:
‘A judge of the High Court shall not enter upon the duties of his office unless he has taken before the Governor or some person authorised by the Governor in that behalf, the Oath of Allegiance and the Judicial Oath in the forms set out in the First Schedule.’
The oath of allegiance is to:
‘Her Majesty Queen Elizabeth the Second, Her Heirs, and Successors according to law.’
The judicial oath states:
‘I … do swear that I will well and truly serve our Sovereign Lady Queen Elizabeth the Second in the Office of … and will do right to all manner of people after the laws and usages of Southern Rhodesia, without fear or favour, affection or illwill … ’
Section 55 deals with the appointment of judges. Subsection (5) provides:
‘The puisne judges shall be persons qualified for appointment under the provisions of subsection (1) of section 54 and shall be appointed by the Governor, on the advice of the Prime Minister and with the agreement of the Chief Justice, by instrument under the public seal.’
Section 56A deals with the tenure of office of the judges, and allows for the retirement or resignation of a judge, and enacts that the office of a judge of the High Court shall
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not, without his consent, be abolished during his tenure of office. Section 56B provides a strict code governing the removal of judges. Section 56D provides, so far as this case is concerned, that the law to be administered should be Roman-Dutch law as modified by subsequent legislation having in Southern Rhodesia the force of law. (It is admitted on behalf of the Attorney General, and in any case I am satisfied by expert evidence, that, saving questions of competence, the decree in this case was regularly pronounced in due course of municipal law.) (I shall refer to the 1961 Constitution as amended in 1964 as ‘the 1961–61 Constitution’.)
On 11 November 1965, the Prime Minister of Southern Rhodesia and his colleagues issued a ‘declaration of independence’ (UDI) purporting to declare that Southern Rhodesia was no longer a Crown colony. On the same day, in a message to the people of Rhodesia, the Governor informed them that the UDI was unconstitutional and that the Prime Minister and his colleagues had ceased to hold office. This message called on the people to refrain from illegal acts furthering the objects of the illegal regime, and proceeded as follows:
‘It is the duty of all citizens to maintain law and order in the country and to carry on with their normal tasks. This applies equally to the judiciary, the armed services, the police and the public service.’
On 16 November 1965, the United Kingdom Parliament passed the Southern Rhodesia Act 1965, which declared that Southern Rhodesia continued to be part of Her Majesty’s dominions and that ‘the Government and Parliament of the United Kingdom have responsibility and jurisdiction as heretofore for and in respect of it’. The Act provided that Her Majesty might make ‘such provision … as appears to Her to be necessary or expedient … by Order in Council’. On 18 November 1965, the Southern Rhodesia Constitution Order 1965h (which I shall refer to as ‘the 1965 Order in Council’) was made in pursuance of this Act. It provides:
‘2. (1) It is hereby declared for the avoidance of doubt that any instrument made or other act done in purported promulgation of any Constitution for Southern Rhodesia except as authorised by Act of Parliament is void and of no effect …
‘4. (1) … (e) … a Secretary of State may exercise any function that is vested by the Constitution or other law in force in Southern Rhodesia in any officer or authority of the Government of Southern Rhodesia (not being a court of law) or, (whether or not he exercises that function himself) prohibit or restrict the exercise of that function by that officer of authority …
‘6. It is hereby declared for the avoidance of doubt that any law made, business transacted, step taken or function exercised in contravention of any prohibition or restriction imposed by or under this Order is void and of no effect.’
Nevertheless, the Prime Minister of Southern Rhodesia and his colleagues disregarded their dismissal from office; and the members of the Legislative Assembly disregarded its suspension and purported to adopt a new Constitution (which I shall refer to as ‘the 1965 Constitution’). It made no provision for a Governor; but Chapter II provided for an ‘Officer Administering the Government in and over Rhodesia’. Chapter VI deals with the judicature; and is in much the same terms as Chapter V of the 1961–64 Constitution, with, so far as this case case is concerned, two important distinctions. First, s 58(3) provides:
‘A judge of the High Court shall not enter upon the duties of his office unless he has taken before the Officer Administering the Government or some person
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authorised by the Officer Administering the Government in that behalf, the Oath of Loyalty and the Judicial Oath in the forms set out in the First Schedule.’
The oath of loyalty states:
‘I … do swear that I will, in accordance with the Constitution of Rhodesia, 1965, be faithful and bear true allegiance to Her Majesty Queen Elizabeth the Second, Queen of Rhodesia, Her Heirs and Successors, and that I will be loyal to Rhodesia … ’
The judicial oath states:
‘I … do swear that I will, in accordance with the Constitution of Rhodesia 1965, well and truly serve our Sovereign Lady Queen Elizabeth the Second, Queen of Rhodesia, in the office of … and that I will respect and uphold the aforesaid Constitution … ’
Secondly, s 65 abolishes appeals from Rhodesia to the Privy Council. Section 128 deals with ‘The High Court and the Judges thereof’. It provides:
‘(1) The High Court of Southern Rhodesia in existence immediately prior to the appointed day shall be deemed to have been duly constituted as the High Court of Rhodesia under this Constitution.
‘(2) Every person who immediately prior to the appointed day holds the office of Judge of the High Court shall, subject to subsections (3) and (4), continue to hold the like office as if he had been appointed thereto under the corresponding provisions of this Constitution … ’
By sub-s (3) the existing judges are, subject to the provisions of sub-s (4), deemed to have complied with the requirements of the Constitution relating to the taking of oaths on appointment to such office. By sub-s (4), however, an existing judge might be required to state forthwith whether he accepts the 1965 Constitution and to take the oath of loyalty and the judicial oath under it, failing which his office should be deemed to have become vacant.
On 23 July 1968 the Privy Council, having heard extensive argument over eight days, gave their advice in Madzimbamuto’s case. They held that the Southern Rhodesia Act 1965 and the 1965 Order in Council were of full legal effect in Southern Rhodesia; and that accordingly the 1965 Constitution, which purported to provide for an ‘Officer Administering the Government in and over Rhodesia’, was void and of no effect by virtue of s 2(1) of the 1965 Order in Council. Their Lordships assumed that the Appellate Division, in the judgment appealed from, considered itself as a court sitting under the 1961–64 Constitution; but the Appellate Division subsequently, in R v Ndhlovu, made it clear that this assumption was incorrect. I am not strictly bound to follow the decision of the Privy Council, but I have no hesitation in doing so.
On 13 September 1968, the Appellate Division of the High Court of Rhodesia gave judgment in R v Ndhlovu. Beadle CJ (1968 (4) SA at 535) held that:
‘It is no longer possible for a Judge to carry on as a Judge serving under the 1961 Constitution … This being so, there is no escape from the view that the 1961 Constitution has now been annulled by the efficacy of change, and from this it follows that the Courts must now take cognisance of the fact that the present Government is the only lawful Government of Rhodesia and that the
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1965 Constitution is the only lawful Constitution … If, therefore, the Judges of the High Court decide to carry on, they cannot carry on as a 1961 Constitution Court, and if they cannot carry on as a Court serving under a de facto government, the only other capacity in which they can carry on is as a Court serving under a de jure government. In the circumstances, if the Judges carry on at all they can only do so by taking cognisance of the fact that the present Government is the lawful Government and the 1965 Constitution the only lawful Constitution.’
This line of argument also appears by Beadle CJ’s conclusions. Quènet JP (1968 (4) SA at 543) summarised his judgment as follows:
‘… the present Government has achieved internal de jure status. It follows that while the judges of this Court exercise the judicial function they must give effect to the laws and the Constitution of the present Government.’
Macdonald JA (1968 (4) SA at 554) concluded his judgment:
‘… I am satisfied that the present Government of Rhodesia has become the only legal Government of this country and the 1965 Constitution the only legal constitution.’
It was in consequence of that case that the Registrar General indicated that he would advise a superintendent registrar that a divorce decree granted after 13 September 1968, whether or not granted by a judge appointed before UDI, would not be recognised as a valid judgment of a lawful court; and the Principal Probate Registry ceased thereafter to reseal Rhodesian grants of representation (see Practice Direction). The Practice Direction of the Senior Probate Registrar (for which I take administrative responsibility) and the advice given by the Registrar General (itself based on advice given to him) do not, of course, in any way bind this court.
By a notice in the Rhodesia Government Gazette dated 2 November 1968 it was notified:
‘… that, in terms of subsection (5) of section 59 of the Constitution of Rhodesia, 1965, His Excellency the Officer Administering the Government has appointed Mr. Advocate John Burman Macaulay Q.C., as a puisne judge of the High Court of Rhodesia.’
(Greenfield J’s appointment to the Bench had apparently been similarly gazetted on 1 May 1968). It is common ground that both took oaths in terms of the 1965 Constitution. In 1969 there was purported to be—
‘… enacted by His Excellency the Officer Administering the Government, as representative of The Queen’s Most Excellent Majesty, by and with the advice land consent of the Parliament of Rhodesia … ’
a new, republican Constitution (which I shall call ‘the 1969 Constitution’). Chapter IV, dealing with the judicature, was in largely similar terms to those of Chapter VI of the 1965 Constitution. The oaths, however, had to be taken before the President, and were in the form appropriate to a republic, omitting all mention of Her Majesty. There does not seem to be any equivalent of s 128 of the 1965 Constitution.
On 2 March 1970, Mr Stewart, then Her Majesty’s Secretary of State for Foreign and Commonwealth Affairs, stated in the United Kingdom Parliament, in relation to affairs in Rhodesia, as followsi:
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‘… in a number of cases members of the public services, including the court, have joined the rebellion. In other cases, members of the public services still believe that they could continue to function as they did before i.d.i. [ie UDI]. But this is not so and can no longer be seen in this light. The former Governor’s injunction has lapsed and those who continue to serve a regime which asserts illegally that Southern Rhodesia is a republic—like those appointed by the regime—cannot be regarded as serving the Crown in Southern Rhodesia. This change in their status must, in our view, have consequences for the functions they perform and for the validity of acts done in the performance of those functions; the effects of these matters on individuals will however fall to be considered by the courts in this country.’
On 21 July 1970, Sir Alec Douglas-Home, who had succeeded Mr Stewart in office, certified as follows to the wife’s solicitors for the purpose of this suit:
‘Adams v Adams
‘In response to the request received on the 9th of July 1970 from Messrs. Leathes Prior and Son for a certificate for use by their client in these proceedings in respect of the following questionnaire, that is to say:—“Did Her Majesty’s Government recognise Mr. Smith’s regime in Rhodesia as the de facto Government as at: (i) 15th June 1970, (ii) 9th April 1970, (iii) 12th February 1970?” I, Alexander Frederick Douglas-Home, Her Majesty’s Secretary of State for Foreign and Commonwealth Affairs, HEREBY CERTIFY as follows:—(a) Southern Rhodesia has since 1923 been, and continues to be, a a colony within Her Majesty’s dominions, and the Government and Parliament of the United Kingdom have responsibility for and jurisdiction over it as and to the extent provided in section 1 of the Southern Rhodesia Act 1965; (b) Her Majesty’s Government in the United Kingdom do not recognise, and have not at any time recognised, Southern Rhodesia (or Rhodesia) as a State either de facto or de jure; (c) Her Majesty’s Government in the United Kingdom do not recognise and have not at any time since the 11th November 1965 recognised, any person purporting to be Officer administering the Government, President or Ministers of Southern Rhodesia (or Rhodesia) as constituting a Government in Southern Rhodesia either de facto or de jure.
[Signed] Alec Douglas-Home’
A certificate from Her Majesty’s Secretary of State has not the same significance where the courts are concerned with questions of usurpation of sovereignty as it has where the courts are concerned with relations with foreign States: see Madzimbamuto’s case ([1968] 3 All ER at 573, 574, [1969] 1 AC at 723, 724). But it is helpful in obviating the need for the court to embark on the generally impracticable task of determining on extrinsic evidence how far a regime is in effective control of any given territory (see Madzimbamuto’s case ([1968] 3 All ER at 574, [1969] 1 AC at 724); and cf Duff Development Co Ltd v Kelantan Government ([1924] AC at 814, [1924] All ER Rep at 8, 9) per Lord Finlay), and in indicating how far Her Majesty’s government are still seeking to regain control of affairs in Rhodesia by ousting the usurping power: see Madzimbamuto’s case ([1968] 3 All ER at 575, [1969] 1 AC at 725). In my view, the certificate makes it impossible for this court to adopt the view of the Appellate Division in R v Ndhlovu that the present regime in Rhodesia is the government de jure, and that the 1965 (or perhaps, now the 1969) Constitution is the only valid Constitution. It is also of assistance in determining some of the issues in this case so far as they depend on questions of public policy or presumed intention of the Sovereign.
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The principal arguments
It was argued on behalf of the Attorney General as follows: (1) for a divorce decree purporting to be pronounced by a court abroad to be recognised by an English court as valid to terminate a marriage, the court pronouncing the decree must be competent to do so in the eyes of English law both according to the rules of English private international law and according to the municipal law of the country in question. (2) An English court will not recognise any judgement or order of any court in Rhodesia since Ndhlovu’s case, since all courts now functioning in Rhodesia purport to be exercising jurisdiction under a Constitution which has no legality in the eyes of English law. There is, therefore, now no court functioning in Rhodesia which has municipal competence to dissolve a marriage. (3) Alternatively, an English court will not recognise any judgment or order of any judge not validly appointed under the only Rhodesian Constitution recognised by English law, ie that of 1961–64. Macaulay J is such a judge, as is also Greenfield J: neither has therefore municipal competence to dissolve a marriage. It was also at one time argued on behalf of the Attorney General that the decree of Macaulay J of 9 April 1970 was invalid by reason of s 6 of the 1965 Order in Council; but this point was ultimately abandoned.
It was argued for the wife as follows: (1) (a) the effective step in the Rhodesian divorce proceedings was the decree of restitution of conjugal rights on 12 February 1970, everything thereafter being routine; (b) Goldin J, a pre-UDI-appointed judge, pronounced that decree of restitution of conjugal rights; and (c) his judgments are therefore entitled to recognition (ie controverting the second argument on behalf of the Attorney General). (2) Even if the decree of Macaulay J of 9 April 1970 was not pronounced by a judge validly appointed under the only Constitution recognised by English law (as was accepted), nevertheless the ostensible change in the wife’s status effected thereby should be recognised as legally valid under the so-called doctrine of ‘necessity’. (3) Alternatively, Macaulay J, although not a judge de jure, was a judge de facto; and as such his judgments and orders are entitled to recognition. (This was the point which emerged at a late stage of the argument.) (4) The Secretary of State, by failing to exercise his powers under s 4(1)(e) of the 1965 Order in Council to prohibit the appointment of Macaulay J, or to appoint any judge in his place, or to prohibit or restrict the exercise of his functions, must be taken to have impliedly approved on behalf of the Crown Macaulay J’s exercise of his judicial function. Counsel for the Attorney General controverted these arguments.
General principles of recognition
For a judgment to be recognised by the courts of this country, it must be pronounced by a court competent to pronounce it according to our rules of private international law. The Rhodesian courts satisfied this test; either because, as the wife swore in her affidavit, the husband was domiciled in Rhodesia (Le Mesurier v Le Mesurier, insofar as not disapproved in Indyka v Indyka); or, because, as stated in the petition in the instant case, the Rhodesian court took jurisdiction on the basis that the wife had been deserted by the husband and that the husband was immediately before the said desertion domiciled in Rhodesia (see Matrimonial Causes Act 1965, s 40(1) (a) (i); Travers v Holley and Holley; Indyka v Indyka); or, because the parties had a close and substantial connection with Rhodesia (Indyka v Indyka). But the court whose decree is in question must also be competent to pronounce it by its municipal law. An issue as to this infrequently arises; although Le Mesurier v Le Mesurier and Papadopoulos v Papadopoulos are examples. Generally the matter is disposed of
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by calling an expert witness who, on examination of the decree, testifies that it would be accepted as evidence of a valid judgment by the courts of the country in question. In the present case this is the crucial question. Should the Rhodesian decree be accepted by the courts of Rhodesia as validly dissolving the marriage by their municipal law? In answering this question the courts of Rhodesia must be taken to be correctly applying the law as laid down by the Queen in Parliament in the United Kingdom, in particular the 1961–64 Constitution and the 1965 Order in Council.
Which decree?
It was argued for the wife that the effective decree was the decree of restitution of conjugal rights pronounced by Goldin J on 12 February 1970, and that everything thereafter was mere routine. This seems to me to be an impossible argument—contradicted indeed by the petition and by the expert evidence called on behalf of the wife. Unless an effective decree of divorce was pronounced, the wife continued to be married to the husband. The only decree purporting to dissolve the marriage was that pronounced by Macaulay J on 9 April 1970.
Macaulay J’s status de jure
Madzimbamuto’s case established that the only lawful Constitution of Rhodesia was that of 1961–64. The inferences that I draw from the certificate of the Secretary of State (reinforced by the statement in Parliament of his predecessor) preclude me, in my view, from a factual investigation, such as was undertaken by the Appellate Division of the High Court of Rhodesia in Ndhlovu’s case, which led them to the conclusion that the usurping regime was a government de jure and the 1965 Constitution the valid constitution of the land. In any case, I have no material for any such investigation. Indeed, it was accepted on behalf of the wife that the 1961–64 Constitution was the only legally valid Constitution of Rhodesia.
In the absence of any evidence to the contrary, I have no hesitation in assuming that Macaulay J was personally qualified under s 54 of the 1961–64 Constitution. But he failed to comply with s 54(3), because he did not take before the Governor, or some person authorised by the Governor in that behalf, the oath of allegiance and the judicial oath in the form set out in Sch 1. It is an agreed fact that Macaulay and Greenfield JJ were appointed under, and took oaths in terms of, the 1965 Constitution.
Nor can I accept the argument that the Secretary of State, by omitting to exercise his power under s 4(1)(e) of the 1965 Order in Council to prohibit or restrain the ostensible appointment of Macaulay J, or himself to appoint a judge to what was presumably a vacancy on the Bench, implicitly approved the ostensible appointment of Macaulay J. That section of the 1965 Order in council is permissive in character; and, moreover, it is expressly stated to be ‘without prejudice to any other provision of this Order’. Section 2(1) declared void and of no effect ‘any instrument made or other act done in purported promulgation of any Constitution for Southern Rhodesia except as authorized by Act of Parliament’. The effect of that was to invalidate the 1965 Constitution: see Madzimbamuto’s case. This seems to me to leave no room for any implied authorisation by the Secretary of State to Macaulay J to assume office ostensibly under the 1965 Constitution, even if that were not repugnant to common sense in view of the certificate of the Secretary of State and the statement in Parliament of his predecessor. I am therefore compelled to hold that Macaulay J is not a judge de jure of the High Court of Rhodesia.
The so-called doctrine of ‘necessity’
This doctrine was exhaustively canvassed in the arguments, and discussed in the
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judgments in Madzimbamuto’s case; and it formed the basis of Lord Pearce’s dissent. Both majority and minority quoted from Grotius: De Jure Belli ac Pacisj:
‘We have treated of him who has now, or has had, the right to govern: it now remains that we say something of him who usurps the government; not after he has by long possession, or agreement obtained a right to it, but so long as the cause of his unjust possession continues. The acts of sovereignty exercised by such a usurper may have an obligatory force, not by virtue of his right (for he has none), but because it is very probable that the lawful sovereign, whether it be the people themselves, or a king, or a senate, chooses rather that the usurper should be obeyed during that time, than that the exercise of the laws and justice should be interrupted, and the state thereby exposed to all the disorders of anarchy.’
(see also the translation quoted by Lord Pearce ([1968] 3 All ER at 581, [1969] 1 AC at 735, 736)). Lord Pearce referred the doctrine to ([1968] 3 All ER at 582, [1969] 1 AC at 737):
‘… the reasonable and humane desire of preserving law and order and avoiding chaos which would work great hardship on the citizens of all races and which would incidentally damage that part of the realm to the detriment of whoever is ultimately successful … For this reason it is clearly desirable to keep the courts out of the main area of dispute, so that, whatever be the political battle, and whatever be the sanctions or other pressures employed to end the rebellion, the courts can carry on their peaceful tasks of protecting the fabric of society and maintaining law and order.’
There were a number of decisions in the United States after the American Civil War which applied the doctrine to legal transactions and forensic acts which took place in the Confederate States during their rebellion. I need only cite one passage from one authority—Horn v Lockhart ((1873) 3 All ER at 576, [1969] 1 AC at 727, 728)—which was quoted in Madzimbamuto’s case ([1968] 3 All ER at 576, [1969] 1 AC at 727, 728):
‘We admit that the acts of the several States in their individual capacities, and of their different departments of government, executive, judicial, and legislative, during the war, so far as they did not impair or tend to impair the supremacy of the National authority, or the just rights of citizens under the Constitution, are, in general, to be treated as valid and binding. The existence of a state of insurrection and war did not loosen the bonds of society, or do away which civil government, or the regular administration of the laws. Order was to be preserved, police regulations maintained, crime prosecuted, property protected, contracts enforced, marriages celebrated, estates settled, and the transfer and descent of property regulated precisely as in time of peace. No one that we are aware of seriously questions the validity of judicial or legislative acts in the insurrectionary States touching these and kindred subjects, where they were not hostile in their purpose or mode of enforcement to the authority of the National government, and did not impair the rights of citizens under the Constitution.’
(I would draw attention in this quotation to the equating of the executive, judicial and legislative acts. Also to ‘mode of enforcement’; since judicial orders, even in the most private sphere, may result in the use of coercive power by executive officers.)
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Lord Pearce’s opinion is a powerful judgment, and if it had prevailed, the instant case would be a fortiori. But the majority of the Board did not agree with it. It is true that, in the view of the majority ([1968] 3 All ER at 577, [1969] 1 AC at 729), the clinching argument was that no general principle depending on ‘necessity’, or an implied mandate from the lawful Sovereign which recognised the need to preserve law and order within the territory controlled by a usurper, could override the legal right of the Parliament of the United Kingdom to make laws for such a territory; and that no purported law made by any person or body in Southern Rhodesia, no matter how necessary such law might be for preserving law and order, or otherwise, could have any legal effect whatsoever.
The foregoing reasons would have been enough to dispose of the argument based on the doctrine of ‘necessity’ so far as the majority of the Board in Madzimbamuto’s case was concerned. But their opinion nevertheless also contained the following passage, which would hardly have been included if their Lordships had not considered that the matters referred to were relevant to the applicability in the Rhodesian situation of the doctrine of ‘necessity’ and of the cases decided in the United States after the civil war ([1968] 3 All ER at 576, [1969] 1 AC at 728):
‘In the first place there was divided sovereignty in the United States, the United States only being sovereign within defined limits … Secondly, the decisions were concerned with the legal effect, as regards the civil claims of individuals, after the end of the civil war, of acts done during it. None of them were cases of courts called on, during the rebellion, to pass on the legality of the governments of the rebelling States … Thirdly the Congress of the United States did not, and perhaps under the Constitution could not, make laws similar to the Southern Rhodesia Act and Order in Council of 1965 providing what the legal position was to be in the seceding States during the war.’
I would draw particular attention to the second consideration referred to. It did not commend itself to Lord Pearce (which reinforces the significance of its inclusion in the majority opinion); although Lord Pearce did acknowledge that ([1968] 3 All ER at 579, [1969] 1 AC at 733):
‘… when one comes to assess the question of public policy … there is a wide difference between the retrospective and contemporaneous.’
But public policy is the very essence of the doctrine, whether one calls it ‘necessity’ or ‘implied mandate’ or anything else. All that I have been told of the political and legislative history of the UDI affair, coupled with the scope of the argument for the Attorney General in the instant case, suggests to me that I am concerned with, so to speak, a legal blockade as a counterpart of the economic blockade. The essence of the blockade of a usurping regime is to cause it to capitulate by bringing pressure on citizens within the territory of usurpation. Innocent private individuals, even children, may be caused undeserved hardship in the process. If this is a just parallel, there does indeed seem to be all the difference between according legal recognition during the usurpation to executive, judicial or legislative acts of the usurping regime and doing so after capitulation; just as there is all the difference between allowing blockade-running during a rebellion and lifting the blockade after the capitulation. Courts of law have no means of judging the necessity or desirability or any type of ostracism or pressure in such cases, or of knowing the repercussions of any measure of relaxation.
Finally, I think that both the majority of their Lordships and Lord Pearce found the
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most satisfactory basis of the doctrine in an implied mandate from the lawful Sovereign, since this does not involve denying his legal right to govern or admit in any way the lawfulness of the unsurpation. As the majority put it ([1968] 3 All ER at 577, [1969] 1 AC at 729):
‘It may be that there is a general principle, depending on implied mandate from the lawful Sovereign, which recognises the need to preserve law and order in territories controlled by a usurper.’
As to this, I would venture to make two observations. First, that this is a fiction. Fictions are desirable, perhaps, when they are the only means of abating the rigour of the law; and more necessary, perhaps, where legislative powers are constrained by a paramount written Constitution. But they are less necessary when sovereign Parliaments are in continuous session and able to express their wishes legislatively (particularly when legislation can be enacted by Order in Council). Secondly, as I have indicated, much that I have heard makes me feel that the implication of a mandate might well be contradicting the real intention of the lawful Sovereign.
The doctrine of ‘necessity’ is intimately connected with concepts of public policy, a sphere in which courts of law are rightly chary of intrusion. Where one has a sovereign legislature continuously in session, it seems to me in every way preferable to leave it to the Queen in Parliament to decide how far recognition should be accorded to executive, judicial or legislative acts of organs of government which are non de jure. I do not think that the doctrine of ‘necessity’ entitles me to accord recognition to the judicial acts of Macaulay J.
Validity of acts of a de facto judge
There seems to have been no recent example of the application of any such doctrine in English law. Indeed, counsel for the Attorney General denied its existence. But, having had an opportunity, however cursory, of examining the authorities (which counsel for the Attorney General did not have), I am satisfied that the concept is part of English law. The authorities are set out in two masterly judgments of great learning in respectively the Supreme Court of Connecticut (State v Carroll) and the Court of Appeal of New Zealand (Re Aldridge); and the doctrine is also discussed in an article entitled ‘De Facto Officers’ by Owen Dixon J (later Chief Justice of Australia) in the publication ‘Res Judicata’k. I think, though, that counsel for the Attorney General was justified in claiming that the doctrine is inconsistent with the decision of the Court of Criminal Appeal in R v Cronin. But the point was not drawn to the attention of the court, the decision of which is in any event not binding on me. (Owen Dixon J in his articlel also mentioned at least one Australian case where the doctrine was not invoked, although it might have been decisive.) But it is of the essence of the common law that its rules, even though fallen into disuse, may be revived if circumstances develop in which they may prove to be again of value: see Mirehouse v Rennell ((1833) 1 Cl & Fin 527 at 546) per Parke B; Bowman v Secular Society Ltd ([1917] AC 406 at 454, [1916–17] All ER Rep 1 at 24) per Lord Summer; and cf the recent revival of the offence of affray. I can certainly conceive of circumstances where the doctrine of the validity of the acts of officers (including judicial officers) de facto sed non de jure would be useful.
‘The de facto doctrine was introduced into the law as a matter of policy and necessity, to protect the interests of the public and individuals, where those
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interests were involved in the official acts of persons exercising the duties of an office without being lawful officers.’
(State v Carroll ((1871) 9 Am at 423, 38 Conn at 467) per Butler CJ.) What I have said about public policy in relation to the doctrine of ‘necessity’ is therefore again relevant here.
A useful illustration of the doctrine in English law appears from R v Bedford Level Corpn. The question was whether the acts of a deputy registrar who continued to act after the death of his principal were valid as those of an officer de facto sed non de jure. Lord Ellenborough CJ giving the opinion of the court said ((1805) 6 East at 368, 369):
‘An officer de facto is one who has the reputation of being the officer he assumes to be, and yet is not a good officer in point of law.’ [His italics.]
The court held that the acts of the deputy registrar were good until the death of the principal was known, but not afterwards. That case shows, in my view, that the doctrine has no place where the circumstances giving rise to the legal defect are notorious.
It is plain from the cases cited in State v Carroll and Re Aldridge, as well as those cases themselves, that the doctrine extends to acts of a judicial officer. Indeed, Re Aldridge was concerned with the acts of a purported judge of the Supreme Court of New Zealand, sitting in criminal jurisdiction. But, with one possible exception, I cannot find that the doctrine has ever been applied to the prejudice of any right of a Sovereign. On the contrary, in Harris v Jay the inscription of a copyhold by an invalidly appointed steward of a manor, who would otherwise have been considered to have been a steward de facto (see Knowles v Luce; Parker v Kett) was not effective because the manor had escheated to the Crown. ‘This new grant is in prejudice to the Queen, who is lady of the manor’, said Gawdy J. (This could, of course, either have been because the Queen had the right of appointment of the steward or because part of her property was alienated.)
The possible exception arises out of the statute 1 Edw 4, c 1, which dealt with various judicial acts, recoveries and forensic processes in the times of Henry 4, Henry 5 and Henry 6, described in the statute as ‘late Kings … in deed and not of right’ (de facto sed non de jure). The Act confirmed generally (although with exceptions) the judicial acts of those kings and of judges appointed by those kings and judicial or forensic processes appendant thereto. Richmond J in Aldridge’s case said ((1897) 15 NZLR at 369):
‘This Act is declaratory, and is expressed to be, to “eschew” [eschuer]—i.e. avoid—doubts which might arise; and, accordingly, in Bagot’s case it was treated by both parties and the court as merely affirming the common law … see the case abridged by Brookem. In the course of the discussion, it was laid down by Billing, Justice, that the judicial acts of a king de facto are good. The case [was] cited as establishing that doctrine by Bacon, arguendo, in Harris v Jay.’
But I cannot myself read the statute 1 Edw 4, c 1, as giving any indication that it was declaratory of the common law; the doubts that might arise were by reason that
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certain judicial acts were declared valid and others not. The reports of Bagot’s Case, and of Harris v Jay do not make it clear what exactly was considered to be the common law element in the matter. If it were correct that at common law the judicial acts of a usurping king, or of a judge appointed by him, are good as those of an officer de facto, the Act for Confirmation of Judicial Proceedings 1660 (12 Car 2 c 12) which runs strictly parallel to the statute 1 Edw 4, c 1, would have been unnecessary, or at least should have been in declaratory form, which it was not; insofar as a matter is dealt with by legislation, it at any rate tends to suggest that there is no common law rule which deals with the situation in a similar way. In the statute 1 Edw 4, c 1, the kings were expressly declared to be kings de facto, which might allow for the proposition that it was in the circumstances a particular statutory extension of a general common law rule as to the efficacy of acts of a de facto officer. Moreover, such a limitation on the doctrine—that it has no application where the appointment to the office is in derogation of the rights of the Sovereign—has, in my view, its counterpart in the rule laid down by the Supreme Court of the United States in Norton v Shelby County that the doctrine has no application when the statute establishing the office is ultra vires.
In any case, I do not think that the instant case comes within the definition of the doctrine even so widely stated as it was by Butler CJ in State v Carroll ((1871) 9 Am at 427, 38 Conn at 471); this was as follows:
‘An officer de facto is one whose acts, though not those of a lawful officer, the law, upon principles of policy and justice, will hold valid so far as they involve the interests of the public and third persons, where the duties of the office were exercised: First, without a known appointment … but under such circumstances of reputation to acquiescence as were calculated to induce people, without enquiry, to submit to or invoke his action, supposing him to be the officer he assumed to be. [But Macaulay J’s appointment was a known one and the circumstances which rendered it invalid in the eye of English law must have been notorious.] Second, under color of a known and valid appointment … but where the officer has failed to conform to some precedent requirement or condition, as to take an oath … [But here the appointment was invalid.] Third, under color of a known … appointment void, because … there was want of power in the … appointing body, or by reason of some defect or irregularity in its exercise, such … want of power, or defect, being unknown to the public. [But here the want of power in the appointing body and the defect and irregularity of its purported manner of appointment were known to the public.] Fourth, under color of an … appointment by or pursuant to a public unconstitutional law, before the same is adjudged to be such.’
This fourth head is primarily referable to conditions in the United States, where there is a paramount Constitution, under which legislative acts can be invalidated; it is difficult to reconcile with Norton v Shelby County; and, in any event, before the purported appointment of Macaulay J under the 1965 Constitution, that Constitution had been declared invalid by the Privy Council in Madzimbamuto’s case.
I would venture to add two more observations on this doctrine. First, I can find no trace of its ever being applied during a rebellion to accord recognition to the judicial or official acts of or under a usurping power: cf Madzimbamuto’s case ([1968] 3 All ER at 576, 577, [1969] 1 AC at 728). Secondly, I think that it would be a constitutional anomaly for our courts to recognise the validity
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of the acts of Macaulay J as a de facto judge while the executive acts of those appointing him (which must include his very appointment) are refused recognition de facto by the executive here.
In Lancastrian and Yorkist times the executive, legislative and judicial functions were not constitutionally differentiated as they are today. If a king who himself exercised judicial power was statutorily declared to be a king de facto, it followed almost inevitably that the acts of his judicial appointees should be accorded de facto recognition. But, in the situation with which I am concerned, the Queen in Parliament in the United Kingdom has expressly declared that those who appointed Macaulay J were non de jure, and the executive has refused to recognise them as exercising power de facto. For the judiciary here to recognise the efficacy of the acts of such an appointee on the ground that he was exercising his office de facto would indeed involve the State in speaking ‘with two voices’. In therefore hold that the doctrine of the validity of the acts of a de facto officer does not entitle this court to recognise the decree of Macaulay J of 9 April 1970 as valid by the municipal law of Rhodesia.
Recognition of other judicial acts in Rhodesia
Having come to the conclusion that the crucial judgment in this case was the divorce decree of 9 April 1970 pronounced by Macaulay J, and that that decree is not entitled to recognition in an English court, being pronounced coram non judice by reason of Macaulay J’s appointment being invalid under the 1961–64 Constitution, it is strictly unnecessary to consider whether Goldin J’s decree of restitution of conjugal rights of 12 February 1970 should be accorded recognition; involving the wider and alternative argument of counsel for the Attorney General that since R v Ndhlovu no judgment of the High Court of Rhodesia whatsoever is entitled to recognition by the courts of this country. Ordinarily, I would not have embarked on any investigation not necessary for the decision of the case before me. Indeed, I should be glad to leave my judgment here. But it seems to me that it would not be fair to deny to marriage officers in this country such guidance as I can give, having heard argument on the point.
I have already indicated what was decided in Ndhlovu’s case and the argument of counsel for the Attorney General based thereon. He relied particularly on a passage from a judgment of the Supreme Court of the United States in Luther v Borden ((1849) 7 Howard 1 at 40), part of which was cited with approval by Beadle CJ in Ndhlovu’s case (1968 (4) SA at 520, 521). It reads:
‘Judicial power presupposes an established government capable of enacting laws and enforcing them after execution, and of appointing judges to expound and administer them. The acceptance of the judicial office is a recognition of the authority of the government from which it is derived. And if the authority of that government is annulled and overthrown, the power of its courts and other officers is annulled with it. And if a State court should enter upon the enquiry proposed in this case, and should come to the conclusion that the government under which it acted had been put aside and displaced by an opposing government, it would cease to be a court and be incapable of pronouncing a judicial decision upon the question it undertook to try. If it decides at all as a court, it necessarily affirms the existence and authority of the government under which it is exercising judicial power.’
Beadle CJ, of course, cited the passage as part of the proposition: we are exercising judicial power; we are thereby affirming the existence and authority of the only effective government of this country; and are therefore sitting by virtue of the 1965 Constitution, since that is the source from which the only effective government
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derives its legal power. Counsel for the Attorney General relies on the passage for the proposition: the courts in Rhodesia, by claiming to sit under the 1965 Constitution, are denying that they are sitting under the 1961–64 Constitution (as, indeed, the Appellate Division did in Ndhlovu’s case); but, since the 1961–64 Constitution is the only legal Constitution, the courts in Rhodesia are by their own assertion not sitting legally at all; so that their judgments are not entitled to recognition.
But, apart from Greenfield and Macaulay JJ, the judges of the High Court of Rhodesia were all validly appointed under the 1961–64 Constitution. In the eyes of English law, in my judgment, they can only cease to be judges of the High Court of Rhodesia in accordance with the machinery of the 1961–64 Constitution. A mere declaration by a judge that he is not sitting under the 1961–64 Constitution does not satisfy such machinery. (The possible effect of a renunciation of allegiance was not argued before me—presumably because it did not affect any issue raised in the instant case; it must await decision in a case in which the issue arises.)
Still less can I see that a declaration by three members of the Appellate Division, albeit of great eminence, can automatically change the legal status of other members of the judiciary. I am, therefore, unable to accede to the wider argument of counsel for the Attorney General, namely that the decision in Ndhlovu’s case ipso jure rendered all judicial acts in Rhodesia desentitled to recognition. I am unhappily aware that this ruling will create anomalies through differential recognition of the acts of judges appointed respectively before and after UDI—anomalies that are obviously likely to increase with the passage of time, if no remedial action is taken. But my task is limited to declaring the law as I see it; any remedial action that seems to be called for is a matter for the executive or the legislature.
Conclusion
So far as I am able to judge, the wife has been ill-used matrimonially, and is now the victim of political circumstances for which she has no responsibility. It is, therefore, with reluctance that I find that the law enjoins me to dismiss her petition. In my view this case is yet one further illustration of the unsatisfactory basis of the divorce jurisdiction of the English court and of the now completely outmoded legal concept that the domicil of a married woman is dependent on that of her husband: Lord Advocate v Jaffrey. The appropriate authorities may wish to consider this aspect of the case also.
Petition dismissed.
Solicitors: Lovell, White & King (for the wife); Treasury Solicitor.
Alice Bloomfield Barrister.
Butler v The Board of Trade
[1970] 3 All ER 593
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 19, 22, 23 JUNE, 9 JULY 1970
Privilege – Legal professional privilege – Loss of privilege in connection with criminal proceedings – Test.
Evidence – Admissibility – Privilege – Privileged document – Copy of document in hands of government department – Document relevant to criminal proceedings – Government department proposing to tender copy in evidence – Whether any equity to prevent copy being tendered in evidence.
Proceedings were instituted by the defendants, a department of the Crown, against the plaintiff under s 332(3) of the Companies Act 1948, in connection with two companies, of which the plaintiff acted as director, and which were in compulsory liquidation. The defendants proposed to tender in evidence on behalf of the prosecution a copy of a letter written by the plaintiff’s solicitor to him before liquidation concerning the affairs of the companies. The plaintiff sought a declaration that the defendants were not entitled, inter alia, to produce the copy letter in evidence at the trial. Since interlocutory relief could not be granted against the Crown, a special case was presented by order of the court under RSC Ord 33, r 3, to test whether there was any equity to grant a declaration at the trial.
Held – (i) The original letter was privileged and the copy confidential, because the contents of the letter could not be regarded as being in preparation for, or in furtherance or as part of, any criminal designs on the part of the plaintiff (see p 596 h and p 598 d, post).
O’Rourke v Darbishire [1920] All ER Rep 1 followed, R v Cox and Railton [1881–85] All ER Rep 68 explained.
(ii) It would not be a right or permissible exercise of the equitable jurisdiction of the court in confidence to make a declaration at the suit of the plaintiff in what was a public prosecution, in effect restraining the defendants as a department of the Crown from adducing admissible evidence relevant to the crime with which the plaintiff was charged (see p 599 j, post), because—
(a) the interest and duty of the defendants as a department of the Crown to prosecute offenders had to prevail over the plaintiff’s limited proprietary right in equity to restrain a breach of confidence (see p 600 d, post); Elias v Pasmore [1934] All ER Rep 380 and Ghani v Jones [1969] 3 All ER 1700 considered.
(b) if the copy letter had been in the hands of a third party the court would, in restraining the third party, have to except the power of the trial court to subpoena such third party to produce the letter and the obligation to comply with that order; if the defendants could subpoena a witness to produce the letter, they ought to be permitted to tender it in evidence themselves (see p 600 a, post); dictum of Bankes LJ in Weld-Blundell v Stephens [1919] 1 KB at 527 applied.
Notes
For confidentiality of communications between solicitor and client, see 36 Halsbury’s Laws (3rd Edn) 51, 52, para 72, and for persons privileged from making disclosures in criminal proceedings, see 10 ibid 479, 480, para 877, and for cases on the subject, see 22 Digest (Repl) 409, 410, 4397–4402.
For Companies Act 1948, s 332, see 5 Halsbury’s Statutes (3rd Edn) 362.
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Cases referred to in judgment
Annesley v Anglesea (Earl) (1743) 17 State Tr 1139, 22 Digest (Repl) 403, 4326.
Argyll (Margaret, Duchess of) v Duke of Argyll [1965] 1 All ER 611, [1967] Ch 302, [1965] 2 WLR 790, Digest (Cont Vol B) 448, 875c.
Ashburton (Lord) v Pape [1913] 2 Ch 469, [1911–13] All ER Rep 708, 82 LJCh 527, 109 LT 381, 22 Digest (Repl) 211, 1977.
Bullivant v A-G for Victoria [1901] AC 196, [1900–03] All ER Rep 812, 70 LJKB 645, 84 LT 737, 18 Digest (Repl) 116, 988.
Calcraft v Guest [1898] 1 QB 759, [1895–99] All ER Rep 346, 67 LJQB 505, 78 LT 283, 22 Digest (Repl) 211, 1976.
Chic Fashions (West Wales) Ltd v Jones [1968] 1 All ER 229, [1968] 2 QB 299, [1968] 2 WLR 201, 132 JP 175, Digest Supp.
Elias v Pasmore [1934] 2 KB 164, [1934] All ER Rep 380, 103 LJKB 223, 150 LT 438, 98 JP 92, 14 Digest (Repl) 212, 1776.
Gartside v Outram (1856) 26 LJCh 113, 28 LTOS 120, 18 Digest (Repl) 115, 973.
Ghani v Jones [1969] 3 All ER 1700, [1970] 1 QB 693, [1969] 3 WLR 1158, Digest Supp.
Goodman and Carr and Minister of National Revenue, Re (1968) 70 DLR (2d) 670, [1968] 2 OR 814, Digest Supp.
Initial Services Ltd v Putterill [1967] 3 All ER 145, [1968] 1 QB 396, [1967] 3 WLR 1032, Digest Supp.
Kerr v Preston Corpn (1876) 6 Ch D 463, 46 LJCh 409, 21 Digest (Repl) 418, 1359.
Milner, Re (1968) 70 DLR (2d) 429, 66 WWR 129, Digest Supp.
O’Rourke v Darbishire [1920] AC 581, [1920] All ER Rep 1, 89 LJCh 162, 123 LT 68, 18 Digest (Repl) 49, 392.
R v Cox and Railton (1884) 14 QBD 153, [1881–85] All ER Rep 68, 54 LJMC 41, 52 LT 25, 49 JP 374, 22 Digest (Repl) 409, 4400.
Rumping v Director of Public Prosecutions [1962] 3 All ER 256, [1964] AC 814, [1962] 3 WLR 763, 46 Cr App Rep 398, Digest (Cont Vol A) 774, 5046a.
Saull v Browne (1874) 9 Ch App 364, 43 LJCh 568, 30 LT 697, 36 Digest (Repl) 566, 1240.
Weld-Blundell v Stephens [1919] 1 KB 520, 88 LJKB 689, 120 LT 494; affd HL [1920] AC 956, [1920] All ER Rep 32, 89 LJKB 705, 123 LT 593, 36 Digest (Repl) 201, 1064.
Williams v Quebrada Railway, Land & Copper Co [1895] 2 Ch 751, 65 LJCh 68, 73 LT 397, 18 Digest (Repl) 152, 1369.
Special case
This was a special case presented under RSC Ord 33, r 3, to determine whether the plaintiff, Ronald Morris Butler, had any equity to claim a declaration that the defendants, the Board of Trade, were not entitled to produce a copy of a letter in proceedings instituted by the defendants against the plaintiff under s 332(3) of the Companies Act 1948.
The following were the facts set out. 1 At all material times before and after 31 July 1964 the plaintiff acted as director of Curzon Artists Ltd (‘Curzon’) and Capricorn Press Ltd (‘Capricorn’). 2 During 1964, the solicitor to Curzon and Capricorn was Mrs Fay Lilian Landau of 3–4 Lincoln’s Inn Fields, London WC2, practising under her maiden name of Miss Berman (‘Miss Berman’). 3 On 31 July 1964, Mrs Phyllis Edith Newman (‘Mrs Newman’) a solicitor of 53 High Street, Old Portsmouth, Hampshire, was in charge of Miss Berman’s practice as locum tenens for Miss Berman. 4 On 31 July 1964, Mrs Newman wrote a letter (‘the letter’) to the plaintiff. 5 On 1 February 1965, Capricorn was ordered to be compulsorily wound up. 6 On 3 May 1965, Curzon was ordered to be compulsorily wound up. 7 Shortly after the dates of the respective winding-up orders a representative of the Official Receiver, being the provisional liquidator of Curzon and Capricorn, called on Miss Berman and collected the papers of the company concerned. A copy of the letter was found amongst these papers. 8 The department of the Official Receiver in Companies Liquidation is a department of the defendants. 9 On 30 January 1970, the plaintiff
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was charged (inter alia) with the following offences: (i) between 1 January 1961 and 3 May 1965, having been knowingly a party to the carrying on of the business of Curzon, a company which went into liquidation on 3 May 1965, with intent to defraud creditors of that company, contrary to s 332(3) of the Companies Act 1948; and (ii) between 1 January 1961 and 1 February 1965, having been knowingly a party to the carrying on of the business of Capricorn, a company which went into liquidation on 1 February 1965, with intent to defraud creditors of that company, contrary to s 332(3) of the Companies Act 1948. 10 The defendants were undertaking the prosecution of the offences: the committal proceedings having been adjourned until 15 July 1970. 11 The defendants proposed to tender in evidence on behalf of the prosecution a copy of the letter or (if produced) the original thereof, and the oral testimony of Miss Berman and Mrs Newman. 12 For the purpose of the special case it was to be assumed: (i) that the letter was unsolicited by the plaintiff; and (ii) that it was written by Mrs Newman as the plaintiff’s own solicitor and not, or not only, as solicitor to Curzon and Capricorn. 13 The writ in the action was issued on 2 March 1970. 14 The question for the opinion of the court was whether there was any equity to prevent the defendants from tendering a copy of the letter in evidence in any of the criminal proceedings. 15 If the court should be of opinion that there was no such equity, then the action was to be dismissed with such order as to costs as the court might think fit. 16 If the court should be of opinion that, on the assumptions made in para 12, there was an equity as aforesaid, then the action was to continue and the costs of and relating to the special case to be costs in the cause. [The letter was thereafter set out in the schedule.]
P N D Pelham for the plaintiff.
P J Millett for the defendants.
Cur adv vult
9 July 1970. The following judgment was delivered.
GOFF J read the following judgment. In this action the plaintiff, who is being prosecuted by the defendants, the Board of Trade, for alleged offences under s 332(3) of the Companies Act 1948 in connection with two companies now in compulsory liquidation, claims a declaration as follows:
‘… that the defendants are not entitled by themselves their servants or agents to publish disclose divulge or otherwise make use of the contents of a letter dated 31st July 1964 written to the plaintiff by Phyllis Edith Newman, a solicitor, or any information contained therein.’
The object is to prevent the defendants from adducing in evidence against the plaintiff at the criminal trial a copy of a letter written to him by Mrs Newman, a solicitor then in charge of the practice of another solicitor, one Miss Berman. As the defendants are a department of the Crown, it is not possible to obtain interlocutory relief, since an injunction cannot be granted against the Crown, nor will the court make an interlocutory declaration. To overcome that difficulty, if possible, this special case has been presented under RSC Ord 33, r 3, pursuant to an order obtained from Master Neave, to test whether there is any equity to grant a declaration at the trial.
The facts which have to be assumed are set out in the case and it is unnecessary to recite them, save paras 7, 8 and 12 which are as follows:
‘7. Shortly after the dates of the respective winding up Orders a representative of the Official Receiver being the provisional liquidator of Curzon and Capricorn called upon Miss Berman and collected the papers of the Company concerned. A copy of the letter was found amongst these papers. 8. The Department of the Official Receiver in Companies Liquidation is a Department of the Defendants … 12. For the purpose of this special case it is to be assumed (i) that the
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letter was unsolicited by the Plaintiff and (ii) that it was written by Mrs. Newman as the Plaintiff’s own Solicitor and not, or not only, as Solicitor to Curzon and Capricorn.’
The last-mentioned paragraph postulates alternatives, but I can only deal with the matter on this special case on one footing, which must be that most favourable to the plaintiff, that is to say, ignoring the words ‘or not only’.
The question for the opinion of the court, as propounded in para 14 of the special case, is:
‘… whether there is any equity to prevent the Defendants from tendering a copy of the letter in evidence in any of the said criminal proceedings.’
The plaintiff claims that the original of the letter is protected by legal professional privilege, and that therefore the copy is a confidential document, and I agree that if the premise be right the conclusion follows. Further, in my judgment it is right prima facie because, although the special case tells me nothing about the solicitor’s instructions, I must, as it seems to me, assume that the advice contained in the letter was given by her as legal adviser and within the ambit of her retainer, and indeed that is really implicit in para 12.
It is submitted on behalf of the defendants, however, that as the plaintiff is charged with criminal offences, and the letter is relevant thereto, which it undoubtedly is, the privilege does not apply. Now, it is clear that a sufficient charge of crime or fraud will in certain circumstances destroy the privilege, but there is a dispute between the parties about what it is necessary to show for that purpose. The defendants say that relevance is alone sufficient, and the position is in effect so stated in the Supreme Court Practice 1970a. The plaintiff submits, however, that it is necessary to go further and to show that the professional advice was in furtherance of the crime or fraud, as is said in Phipson on Evidence,b and 36 Halsbury’s Laws (3rd Edn) p 51, para 72, or in preparation for it: see R v Cox and Railton ((1884) 14 QBD 153 at 165, [1881–85] All ER Rep 68 at 70); see per the Earl of Halsbury LC in Bullivant v A-G for Victoria ([1901] AC 196 at 201, [1900–03] All ER Rep 812 at 814); and see also 10 Halsbury’s Laws (3rd Edn) p 479, para 877.
As questions of this nature have to be determined on a prima facie basis, often without seeing the documents or knowing what was orally communicated, the two tests will, I think, in many and probably most cases be found in practice to produce the same result because in most cases of relevance the proper prima facie inference will be that the communication was made in preparation for or in furtherance or as part of the criminal or fraudulent purpose. However, the two tests are not the same and in the present case cannot, I think, possibly produce the same result. On the information before me, the letter was nothing but a warning volunteered, no doubt wisely, but still volunteered by the solicitor that if her client did not take care he might incur serious consequences, which she described. I cannot regard that on any showing as being in preparation for, or in furtherance or as part of, any criminal designs on the part of the plaintiff. I must, therefore, decide which test is correct, and I prefer the narrowed view.
First, that appears to me to be the true effect of R v Cox and Railton. Counsel for the defendants argued to the contrary and he relief on the passage where Stephen J said ((1884) 14 QBD at 165, [1881–85] All ER Rep at 70):
‘We must take it, after the verdict of the jury, that so far as the two defendants,
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Railton and Cox, were concerned, their communication with Mr. Goodman was a step preparatory to the commission of a criminal offence, namely, a conspiracy to defraud.’
That passage, he argues, cannot mean that the criminal trial disclosed that they went to see Mr Goodman with an already-formed criminal intention, for that the verdict did not show, and, therefore, the true explanation must be, that the evidence was held rightly admitted because it was relevant to the criminal offence subsequently proved to have been committed. I do not so read it. The court by then knew that a criminal offence had been committed and the evidence which had been admitted showed that criminal purpose existed in the minds of Cox and Railton when they saw Mr Goodman, since ((1884) 14 QBD at 156): ‘It was expressly arranged that the partnership should be kept secret’. As I see it, the court having to decide ex post facto whether the evidence had been rightly admitted, inferred that the advice was preparatory to the crime proved, and it will be observed that immediately after the passage in question Stephen J went on to say ((1884) 14 QBD at 165, [1881–85] All ER Rep at 70):
‘The question, therefore is, whether, if a client applies to a legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged? We expressed our opinion at the end of the argument that no such privilege existed.’
If relevance alone is the test, it follows that privilege could never be claimed in cases of crime or fraud, except as to communications in connection with the defence. That, in my judgment, is too narrow, and inconsistent with the whole tenor of R v Cox and Railton. Stephen J said ((1884) 14 QBD at 166, [1881–85] All ER Rep at 71) that they would first state the principle on which the present case must be decided, then set out in the forefront the nature of the privilege itself and then draw the exception to it in these terms ((1884) 14 QBD at 167, [1881–85] All ER Rep at 76):
‘The reason on which the rule is said to rest cannot include the case of communications, criminal in themselves, or intended to further any criminal purpose, for the protection of such communications cannot possibly be otherwise than injurious to the interests of justice, and to those of the administration of justice. Nor do such communications fall within the terms of the rule. A communication in furtherance of a criminal purpose does not “come into the ordinary scope of professional employment“.’
Further, the relevance test is in my judgment negatived by the conclusions of the court, ((1884) 14 QBD at 175, 176, [1881–85] All ER Rep at 76) and in particular the words:
‘We are far from saying that the question whether the advice was taken before or after the offence will always be decisive as to the admissibility of such evidence.’
Secondly, in my judgment all the members of the House of Lords in O’Rourke v Darbishire with the possible exception of Lord Wrenbury, clearly adopted the narrower test, and that is binding on me. Counsel for the defendants relied very
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strongly on the decision of Kekewich J in Williams v Quebrada Railway, Land & Copper Co. That learned judge appears ([1895] 2 Ch at 756) to have construed R v Cox and Railton as laying down the relevance test, but if he did I respectfully beg leave to disagree, and in any case this was long before O’Rourke v Darbishire. The actual decision can, I think, be supported on either test since where, as also in R v Cox and Railton, the alleged criminal or fraudulent purpose consists in endeavouring to defeat another’s rights by unlawful means, advice as to the nature and extent of those rights and the limits of one’s own lawful powers may well be regarded when considered on a prima facie basis as at least in preparation for that unlawful purpose.
Counsel for the defendants also relied on the Canadian cases of Re Goodman and Carr and Minister of National Revenue and Re Milner. Re Goodman does not really assist because the court there found that there was no prima facie case of fraud, but it is to be noted that the judge cited passages which support the limited view of the exception, and in particular ((1968) 70 DLR (2d) at 673) the headnote in R v Cox and Railton ((1884) 14 QBD at 153). In Re Milner it was assumed that relevance was the basis of the exception, but there was no argument or decision as to the ambit of the exception. The only question before the court was whether there was a sufficient prima facie case of fraud. I do not, therefore, find anything in these cases to deflect me from the decision which I have otherwise reached. In my judgment, therefore, on the limited facts before me, the original letter is privileged and the copy confidential.
It thus becomes unnecessary for me to decide the further question which was canvassed, whether in any case the charge of crime is for the purposes of the question in this special case sufficiently averred, in accordance with the principles laid down by Lord Halsbury LC in Bullivant’s case ([1901] AC at 201, [1900–03] All ER Rep at 814) and by Lord Sumner in O’Rourke v Darbishire ([1920] AC at 613, 614, [1920] All ER Rep at 11), although in my view the answer would be in the negative on the assumed facts because I think that it comes back to the original question. If one rejects the bare relevance test, as I have done, then what has to be shown prima facie is not merely that there is a bona fide and reasonably tenable charge of crime or fraud but a prima facie case that the communications in question were made in preparation for or in furtherance or as part of it. It was then argued that the copy letter having left the care of the solicitor and come into the hands of the defendants, so that one is no longer in the realm of privilege but of confidence, there can be no equity which the plaintiff can set up because of the principle succinctly summed up by Wood V-C in Gartside v Outram ((1856) 26 LJCh 113 at 114) in the phrase, ‘there is no confidence as to the disclosure of iniquity’. Lord Denning MR cited that in Initial Services Ltd v Putterill ([1967] 3 All ER 145 at 148, [1968] 1 QB 396 at 405) and then said:
‘In Weld-Blundell v. Stephens [[1919] 1 KB 520 at 527], BANKES L.J., rather suggested that the exception was limited to the proposed or contemplated commission of a crime or a civil wrong; but I should have thought that that was too limited. The exception should extend to crimes, frauds and misdeeds, both those actually committed as well as those in contemplation, provided always—and this is essential—that the disclosure is justified in the public interest. The reason is because “no
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private obligations can dispense with that universal one which lies on every member of the society to discover every design which may be formed, contrary to the laws of the society, to destroy the public welfare“. See Annesley v. Earl of Anglesea [(1743) 17 State Tr 1139 at 1223–1246]. The disclosure must, I should think, be to one who has a proper interest to receive the information.’
In my judgment, however, that does not apply to the present case. At the trial, the defendants may or may not prove the criminal offences with which the plaintiff is charged, and the letter if received in evidence may or may not help them to do so; but although, if more were known of the facts, one might find some communication falling within this exception, I cannot see in this bare warning any element of vice which the umbrella of confidence may not in general cover.
There remains, however, the final question whether the law or equity as to breach of confidence operates in the terms of para 14 of the special case to give the plaintiff—
‘any equity to prevent the Defendants from tendering a copy of the letter in evidence in any of the said criminal proceedings’
where, if tendered it would, as I see it, clearly be admissible: see Calcraft v Guest ([1898] 1 QB 759 at 764, [1895–99] All ER Rep 346 at 349 ), subject of course to the overriding discretion of the trial court to reject it if it thought its use unfair. The plaintiff relies on the decision of the Court of Appeal in Lord Ashburton v Pape, where, a party to certain bankruptcy proceedings having by a trick obtained a copy of a privileged letter, Neville J granted an injunction restraining him and his solicitors from publishing or making use of it, save for the purposes of those proceedings, and the Court of Appeal varied the order by striking out the exception, so that the injunction was unqualified.
Before I consider that further, I can dispose briefly of the argument advanced by counsel for the defendants that the plaintiff cannot be entitled to any relief in equity, because he does not come with clean hands. That seems to me to beg the question. If the letter was part of a criminal project then the copy is not protected anyhow. If, however, it was not such a part then the mere fact, if it be so, that it may help the defendants prove their case on the criminal charge does not soil the hands of the plaintiff with respect to his proprietary interests in the copy.
I turn back to Ashburton v Pape. In the present case there was no impropriety on the part of the defendants in the way in which they received the copy, but that, in my judgment, is irrelevant because an innocent recipient of information conveyed in breach of confidence is liable to be restrained. I wish to make it clear that there is no suggestion of any kind of moral obliquity on the part of the solicitors, but the disclosure was in law a breach of confidence. Nevertheless, that case does differ from the present in an important particular, namely that the defendants are a department of the Crown and intend to use the copy letter in a public prosecution brought by them. As far as I am aware, there is no case directly in point on the question whether that is merely an immaterial difference of fact or a valid distinction, but in my judgment it is the latter because in such a case there are two conflicting principles, the private right of the individual and the interest of the State to apprehend and prosecute criminals: see per Lord Denning MR in Chic Fashions (West Wales) Ltd v Jones ([1968] 1 All ER 229 at 236, [1968] 2 QB 299 at 313) and in Ghani v Jones ([1969] 3 All ER 1700 at 1704, 1705, [1970] 1 QB 693 at 708).
In my judgment it would not be a right or permissible exercise of the equitable jurisdiction in confidence to make a declaration at the suit of the accused in a public prosecution in effect restraining the Crown from adducing admissible evidence relevant to the crime with which he is charged. It is not necessary for me to decide
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whether the same result would obtain in the case of a private prosecution, and I expressly leave that point open.
My reasons for the conclusion I have reached are as follows: first, it is clear that if the copy letter were in the hands of a third party I would in restraining him have to except the power of the trial court to subpoena him to produce the letter and his obligation to comply with that order: see per Bankes LJ in Weld-Blundell v Stephens ([1919] 1 KB at 527). It would be strange if the defendants could subpoena a witness to produce this document yet, having it themselves, not be allowed to tender it in evidence. Secondly, and even more compelling, is the effect of the conflict between the two principles to which I have already referred. In Elias v Pasmore ([1934] 2 KB 164 at 173 [1934] All ER Rep 380 at 384), it was held accordingly by Horridge J that the police were justified in retaining and using at the trial of Hetherington, documents belonging to Elias which they had seized irregularly when entering the premises to arrest Hetherington. True it is that in Ghani v Jones ([1969] 3 All ER at 1703, [1970] 1 QB at 706) Lord Denning MR criticised the dictum of Horridge J as being too wide, in that he gave the police a right to use the documents in the trial of any person, but with that qualification Lord Denning MR accepted what Horridge J had said. Thus Elias v Pasmore ([1934] 2 KB 164 at 173, [1934] All ER Rep 380 at 384) is authority for the proposition that the right and duty of the police to prosecute offenders prevails over the accused’s right of ownership. He cannot demand his own goods back. By analogy it seems to me that the interest and duty of the defendants as a department of the State to prosecute offenders under the Companies Act 1948 must prevail over the offender’s limited proprietary right in equity to restrain a breach of confidence, and here, of course, the doubt suggested by Lord Denning MR does not arise because the accused and the person entitled to the benefit of the confidence are one and the same.
This view of the matter is further supported by Ghani v Jones ([1969] 3 All ER at 1705, [1970] 1 QB at 708, 709) itself and the statement by Lord Denning MR of the relevant principles, and particularly the second and third, guiding the right of the police to retain and use articles where no man has been arrested or charged, and a fortiori where, as here, a criminal prosecution is actually pending. I find some further support for this conclusion in the cases of Saull v Browne and Kerr v Preston Corpn, which say that in general a court of equity will not interfere with a criminal prosecution, although the question there was one of restraining it altogether. For these reasons, in my judgment, the answer to the question propounded in para 14 of the special case is in the negative and the action must be dismissed.
Before parting with the case, however, I should perhaps comment on the speech of Viscount Radcliffe in Rumping v Director of Public Prosecutions ([1962] 3 All ER 256 at 266, 267, [1964] AC 814 at 845). Counsel for the plaintiff, rightly observing that Lord Radcliffe differed from the rest of the House because they held that there was no rule of public policy rendering marital communications inadmissible, relied on Lord Radcliffe’s observations in support of his claim that the copy letter was confidential, there being legal professional privilege for the original. As I have said, in my judgment that follows and counsel had no need to support himself with this dissenting judgment or with Margaret, Duchess of Argyll v Duke of Argyll, on which he also relied. Lord Radcliffe did, however, say this in Rumping’s case ([1962] 3 All ER at 266, 267, [1964] AC at 845):
‘Ought the law to apply a different rule merely because the letter has miscarried and has come into the hands of the police? Considering the history and
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the nature of the principle that lies behind the special rules governing testimony of husband and wife in criminal trials, I do not think that it should. If it does, we must recognise the implications that, personally, I find overwhelmingly distasteful. A husband may gasp or mutter to his wife some agonised self-incrimination, intended for no ear in the world but hers: yet the law will receive and proceed on the evidence of the successful eavesdropper, professional, amateur or accidental. It is free, I suppose, to entertain the testimony of the listening device, if properly proved. An incriminating letter may be intercepted by any means: it may be snatched from the wife’s hand after receipt, taken into custody if she has mislaid it accidentally, withdrawn from her possession by one means or another: in all these cases, it is said, the trophy may be carried into court by the prosecution and, given proof that the prisoner is its author, the law has no rule that excludes it from weighing against him as a confession.’
It might be thought at first sight that this is inconsistent with my judgment, but it is not, because there Lord Radcliffe held that communications between husband and wife were not only privileged from disclosure but inadmissible, and therefore his observations about the police intercepting the letter and so forth have no relevance to the question whether they may retain and use in evidence a copy which is admissible but which was supplied to them in breach of confidence.
In conclusion, I am obliged to counsel for their argument in this case.
Action dismissed.
Solicitors: Beer, Timothy Jones & Webb (for the plaintiff);Solicitor, Board of Trade.
R W Farrin Esq Barrister.
Griffiths v Young
[1970] 3 All ER 601
Categories: LAND; Sale of Land
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, WIDGERY AND CROSS LJJ
Hearing Date(s): 19, 22, 23, 24 JUNE 1970
Sale of land – Contract – Memorandum – Two documents – Letter by purchaser’s solicitors – Terms of agreement ‘subject to contract’ – Amendment to make offer unconditional – Letter of acceptance by vendor’s solicitors – Letter incorporated reference to letter by vendor’s solicitors – Whether letters sufficient memorandum of agreement – Effect of ‘subject to contract’ – Law of Property Act 1925, s 40(1).
The plaintiff wished to buy a piece of land from the defendant, who was not anxious to complete the contract of sale immediately. In April 1963, the defendant asked the plaintiff to guarantee his bank overdraft, and the plaintiff said that he was prepared to consider doing so if the defendant would agree to sell the land in question. The parties discussed all the terms of the contract of sale and subsequently visited their solicitors. On 2 May 1963, the plaintiff’s solicitor wrote to the defendant’s solicitor setting out all the terms of the agreement for the sale of the land, but the price was expressed to be ‘subject to contract’. On 3 May, the defendant began pressing the plaintiff to provide the bank guarantee. The plaintiff got in touch with his solicitor, who telephoned the defendant’s solicitor and informed him that if the defendant was to have the plaintiff’s guarantee at once there must be a binding contract of sale at once, and that the reference to the arrangements being treated as ‘subject to contract’ must be regarded as having been amended. Later the same day the defendant’s solicitor replied to the letter of 2 May in these terms: ‘With reference to your letter of the 2nd instant, we confirm that we have received instructions from [the defendant] to sell the property mentioned in your letter … for
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£3,500 with completion at Michaelmas twelve month … ' He signed the letter as agent for the defendant. On 7 May, the plaintiff gave the guarantee. In an action for specific performance of the agreement, the judge held that the letter of 2 May amounted to an unconditional offer and the letter of 3 May was an acceptance of this offer and granted a decree of specific performance. On appeal by the defendant on the ground that there was no sufficient note or memorandum of the agreement to satisfy s 40(1)a of the Law of Property Act 1925.
Held – There was a sufficient note or memorandum of the agreement in the letter of 3 May which incorporated by reference the letter of 2 May; the reference to the arrangement being ‘subject to contract’ was merely a suspensive provision which did not render the memorandum defective as the oral evidence showed that the condition had subsequently been waived (see p 607 d and e and p 608 c and h, post). Accordingly, the appeal would be dismissed.
Thirkell v Cambi [1919] 2 KB 590 distinguished.
Dictum of Parker J in Société Capa Société à Responsabilité Limitée v Acatos & Co Ltd (in voluntary liquidation) [1953] 2 Lloyd’s Rep at 191 considered.
Notes
For the need for a note or memorandum of agreement in writing if action is to be brought or a contract for the sale of land, see 34 Halsbury’s Laws (3rd Edn) 207–210, 346–348, and for cases on the subject, see 40 Digest (Repl) 21–38, 82–205.
For the Law of Property Act 1925, s 40, see 20 Halsbury’s Statutes (2nd Edn) 500.
Cases referred to in judgments
Bailey v Sweeting (1861) 9 CBNS 843, 30 LJCP 150, 142 ER 332, 12 Digest (Repl) 152, 970.
Société Capa Société à Responsabilité Limitée v Acatos & Co Ltd (in voluntary liquidation) [1953] 2 Lloyd’s Rep 185.
Thirkell v Cambi [1919] 2 KB 590, 89 LJKB 1, 121 LT 532, 12 Digest (Repl) 152, 968.
Cases also cited
Lever v Koffler [1901] 1 Ch 543.
Parker v Clark [1960] 1 All ER 93, [1960] 1 WLR 286.
Timmins v Moreland Street Property Co Ltd [1957] 3 All ER 265, [1958] Ch 110.
Appeal
This was an appeal by the defendant, Reginald Henry Tom Young, from a decision of Goff J dated 6 October 1969 granting a decree of specific performance of a contract for the sale of land at Lakenheath, Suffolk, in favour of the plaintiff, Douglas Anthony Griffiths. The facts are set out in the judgment of Widgery LJ.
E G Nugee for the defendant.
Guy Seward for the plaintiff.
24 June 1970. The following judgments were delivered.
WIDGERY LJ delivered the first judgment at the invitation of Russell LJ. This is an appeal from a judgment of Goff J whereby he made a decree of specific performance in favour of the plaintiff of a contract of sale of land in the Newmarket area of Suffolk. The plaintiff and the defendant were both substantial landowners in this part of Suffolk and they had known each other for a very considerable time. Indeed, there had been previous transactions of sale and purchase of land between them,
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notably on a number of occasions like the present where the plaintiff had bought small areas from the defendant.
The mutual interest of the parties in a transaction relating to this land arose in the early part of 1963 or the latter part of 1962. The defendant was no very anxious to complete a contract of sale promptly because a local authority was in process of acquiring some of his land compulsorily and he seems to have thought, perhaps with good reason, that if he sold off these particular acres to the plaintiff he would prejudice his claim for compensation for severance. Accordingly progress towards a contract seems to have been made very slowly at that time. However, matters began to come to a head on 30 April 1963, when the defendant told the plaintiff that he was, temporarily at any rate, short of money and asked for a loan of £3,000. The plaintiff declined to make a loan. The defendant then suggested that instead of making a loan, the plaintiff might guarantee his overdraft with his bank. The plaintiff’s reaction to that was that he would be prepared to consider giving a guarantee on the defendant’s account if the defendant would agree to sell these particular acres, the broad terms of the intention being that if the plaintiff was called on to pay off the overdraft pursuant to his obligation under the guarantee he would be able to set off that amount against the purchase price of the land.
The parties seem to have moved a considerable way towards agreement on 30 April, but the plaintiff wanted some professional advice as to the nature of an obligation under a bank guarantee and so, on 1 May, they both went to the plaintiff’s bank manager. He no doubt explained to them the consequences and peculiarities of guarantee procedure of an overdraft, but he also made the wise observation to the plaintiff that he, the plaintiff, should go and see his solicitor before doing any more. The parties left the bank, they sat for a time in a motor car outside and thrashed out as best they could all the details of the sale, which included a provision that completion should not take place until 29 September 1964, the following year. The reason for postponing completion until that date was the defendant’s apprehension about the effect of the sale on his severance claim.
Having reached the point when they had dealt with all the matters which they seemed competent to deal with, the plaintiff said that he would go and see his solicitor, Mr Smart, and tell him to get on with this matter, and the defendant implicitly, if not expressly, said he would go to see his solicitor, Mr Tucker. On 2 May the plaintiff, true to his promise, went to see Mr Smart, gave him details of the proposed transaction and told him to act. Without any loss of time Mr Smart on that same day, 2 May 1963, wrote a letter to the defendant’s solicitors. I do not find it necessary to read the letter in detail because it is a letter in common form, written by a solicitor who is recording the terms of an agreement made by his client for the purchase of land. The price is specified, the land is fully identified but the price is expressed to be—and this is important—‘subject to contract’. Having dealt with the details of the proposed sale, Mr Smart went on in the final paragraph to say: ‘You will no doubt seek confirmation of these instructions from [the defendant] and to assist you in this we are enclosing a carbon copy [of the letter]. We shall await hearing from you in due course with a draft contract for approval.' There can be little doubt that what was in Mr Smart’s mind at that time was that the sale was to take place under the ordinary conveyancing procedure whereby a formal contract would be prepared and the whole matter would remain subject to contract until that formal contract had been approved, signed and exchanged. That letter was received by Mr Tucker the following day, 3 May, and he wrote a brief acknowledgment stating: ‘We thank you for your letter of the 2nd instant and we have heard from [the defendant] about the arrangements, and will be writing to you on Monday.’
However, other events were on the move on 3 May. It is common ground that the defendant was anxious lest the provision of his bank guarantee might be unduly delayed and he approached the plaintiff on 3 May to see if matters could not be
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hastened along. The plaintiff gave evidence to this effect which was not challenged, because the defendant did not give evidence. The plaintiff was asked what happened on 3 May and said: ‘[The defendant] telephoned me and said that he badly needed the overdraft facilities, and we had had a bargain, and he could not see why I did not get on and sign it’. The plaintiff, without disclosing in detail what had passed between him and his own solicitor, Mr Smart said that he would go back to Mr Smart and see what could be done to hurry it along.
It is evident that he did so because on 3 May—later than the writing of the letter by Mr Tucker to which I have referred—Mr Smart telephoned Mr Tucker about this matter. What passed in the course of that telephone conversation is the central issue of fact in this case, hotly debated in the court below and as hotly argued before us. I shall have to come back presently to consider the nature of the controversy in a little more detail but, in effect, it was this. Mr Smart said that his object in telephoning Mr Tucker was to point out that if the defendant was to have his bank guarantee at once there must be a binding contract of sale at once. Accordingly, Mr Smart says that in speaking to Mr Tucker, he pointed out that a concluded contract must be completed immediately and that his own letter of the previous day which referred to the arrangement being subject to contract, must, to that extent, be treated as amended. Mr Tucker, in giving his version of what happened in the course of this conversation, said that his understanding was quite different. From what Mr Smart had said, he was under the impression that all that Mr Smart was seeking on behalf of the plaintiff was an assurance that the main terms of the bargain were agreed and, furthermore, that the defendant was genuinely and sincerely intending to go through with the contract. It was put in argument in this way, that Mr Tucker thought that nothing more than a gentleman’s agreement was contemplated, but that the plaintiff did require an assurance that nothing was outstanding on the major terms and that there was a genuine intention on the defendant’s part to go through with the transaction in the ordinary way and in his own time. That was the conflict between these two solicitors in the evidence which they gave and the learned judge accepted the version given by Mr Smart and accepted that the substance of the transaction was an unconditional offer made by Mr Smart on behalf of the plaintiff to buy on the bare terms already agreed and to conclude a binding contract there and then.
What in fact happened following that telephone conversation was that Mr Tucker, having spoken to the defendant, wrote a second letter to Mr Smart also dated 3 May 1963 in these terms:
‘With reference to your letter of the 2nd instant, we confirm that we have received instructions from [the defendant] to sell the property mentioned in your letter to [the plaintiff] for £3,500 with completion at Michaelmas twelve month, but if [the plaintiff] is asked to redeem his guarantee for this amount before this date, then completion shall take place immediately after such payment has been made by the bank.’
I should have said earlier that this minor adjustment in the date of completion was a matter spoken to by Mr Smart as having been raised in the course of this conversation which he had had with Mr Tucker. That letter evidently satisfied Mr Smart because the guarantee was duly given by the plaintiff on 7 May. After that the matter went to sleep for a considerable time.
The next letter on the correspondence is a letter of 25 June 1963, from Mr Smart to Mr Tucker in which he apologises for having allowed the matter to lapse and suggests that a draft contract for approval should now be forwarded ‘so that the details of this transaction can be clearly established with a view to completion at Michaelmas 1964’. Between that letter and the date when matters in this action came to a head, a further desultory correspondence between Mr Smart and Mr Tucker took place which was subjected to microscopic examination in the court
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below and before us. I do not propose to take up time in going through the remaining letters in detail because the learned judge himself did so in a very fair and full way. I am content to express my general view of what the further correspondence reveals by saying that neither party could point to it as showing any strong support for his own contention. That is to say, Mr Smart could not find in it any letter clearly setting up that the ‘subject to contract’ restriction had been abandoned in the course of the telephone conversation, nor could Mr Tucker point to anything which supported his version with any certainty. On the contrary, each of these authors from time to time in the course of his letters has made statements quite inconsistent with the case which in the end they supported in oral evidence before the judge.
The judge came to the conclusion that, if I may use the vernacular, it was six of one and half a dozen of the other, and I agree. I think the correspondence is neutral in the sense that it does not really produce any cogent, powerful effect one way or the other to help in the solution of the central problem, namely, which of these two solicitors was right in the version which he gave of the material telephone conversation. One of the difficulties suffered by Mr Smart during this period was that the plaintiff was accused of a serious criminal offence and sentenced to a term of imprisonment, but his conviction was subsequently quashed. Nevertheless, for a period of months Mr Smart was obviously in some difficulty in getting the plaintiff’s attention to this particular matter.
The learned judge, having concluded that as between Mr Smart and Mr Tucker he should prefer the version given by Mr Smart of the telephone conversation, found as a fact that Mr Smart had made an unconditional offer on behalf of the plaintiff for the purchase of this land, and that Mr Tucker must have appreciated what was happening and must, having taken instructions from the defendant, have been deemed, by his letter of 3 May, to accept that unconditional offer.
The first issue raised in this appeal by counsel for the defendant is that that conclusion was contrary to the weight of evidence and was wrong. Counsel fully accepts the heavy burden which he assumed in asking this court to differ from the trial judge on an issue depending so much on the demeanour and behaviour of the witnesses. He opened very properly by referring us to the authorities which indicate how heavy that task is, and then proceeded, in a full and helpful argument, to demonstrate how, in his submission, the learned judge had gone wrong.
[His Lordship then set out the evidence on this point given by Mr Smart and Mr Tucker respectively and having considered counsel’s submissions on it, concluded:] I am left in no serious doubt that the right answer was achieved by the learned judge on this point. I am satisfied that the case for the defendant was not nearly strong enough to justify our taking a different view.
[His Lordship then dealt with Mr Tucker’s second letter of 3 May and held that it was an acceptance of Mr Smart’s open offer. He then went on:] The remaining two grounds concern s 40 of the Law of Property Act 1925, and the memorandum of the agreement relied on by the plaintiff to satisfy that section. The memorandum relied on consists in the first instance of Mr Tucker’s second letter of 3 May, which is signed by Mr Tucker and, so it is said, as agent for the defendant for this purpose; and incorporated in that letter is the letter from Mr Smart dated 2 May, which is specifically referred to in Mr Tucker’s letter and, therefore, in accordance with the authorities, can be incorporated with it for the purposes of producing a memorandum.
Counsel for the defendant contends that that memorandum is not sufficient, and in the end his argument really amounts to this. He says that, given for this purpose there was a binding contract, given that these two pieces of paper can be regarded together as constituting a memorandum, yet they do not, in the end, constitute a memorandum of a contract because they inevitably include the phrase ‘subject to contract’ which appeared in Mr Smart’s own letter. Counsel argues that those words being in the memorandum, the memorandum cannot serve as a
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memorandum of a contract but merely as a memorandum of an arrangement not yet blossoming into full contractual status. Counsel for the plaintiff’s answer to that argument is that when considering problems under the section one has to approach them by two distinct stages. He says that the first stage is to consider, on all the available, admissible evidence, whether a contract was made at all. If one is satisfied, as the judge was here, that a contract was finally concluded, then the only remaining stage is to see whether there is a piece of writing, signed by the party to be charged, which sets out the terms of the contract. He says that these two letters fulfil that purpose and that the fact that the original letter contained the phrase ‘subject to contract’ is quite irrelevant because that is not a term of the contract; it merely refers to an intention to prescribe a condition precedent or suspensive condition which has now passed out of the picture as soon as the court concluded that a final contract had been made.
I confess that I found this the most difficult part of the case. My immediate feeling, as the argument progressed, was that the approach of counsel for the plaintiff was probably the right one. We were referred to certain dicta of Parker J in Société Capa Société à Responsabilité Limitée v Acatos & Co Ltd (in voluntary liquidation). The facts of the case do not merit consideration. It suffices to say that amongst other issues an argument was raised as to whether a sufficient memorandum under s 4 of the Sale of Goods Act 1893 had been provided. Part of the writing relied on as constituting the memorandum was a letter from the defendants in which they said that they very much regretted any misunderstandings which had taken place between themselves and the other party, but continued by saying: ‘As clearly stated to you from an outsider’s point of view, by reading the letters, no definite commitment was entered into between your firm and ours.' In other words, the letter relied on was one in which the author was precisely and specifically disputing that any contract had been made.
Parker J, having disposed of the case on other grounds, went on to say ([1953] 2 Lloyd’s Rep at 191):
‘In these circumstances that really concludes this case, but I should add that even if I were wrong in holding that there was no waiver of the stipulation as regards the sample on Sept. 5, it seems to me that the defence under Sect. 4 of the Sale of Goods Act is fatal. There are, as it seems to me, only two places where one can find the necessary note or memorandum. The first is this undated letter of August, but if that is relied upon as a note or memorandum it does not contain two terms which I am satisfied were agreed over the telephone; the first is the one to which I have referred, namely, the approval of the sample, and the second that, as Mr Gros says, and I accept his evidence, there was a stipulation for payment by letter of credit.
‘[Counsel], who has said everything that can be said on behalf of the plaintiffs, and has argued the case with great ability, relies also on the latter letters to which I have referred as repudiation. It is perfectly clear, and indeed there are many cases which hold, that a repudiation of a contract can amount to a sufficient note or memorandum for the purposes of Sect. 4. They are all, however, cases where the contract is recognised, though what is there said is that there has been no breach—in other words, the contract is admitted and the breach is denied. In order that such a letter can amount to a note or memorandum it is in my view essential that there should be a recognition and admission of the contract. It is not enough, as it seems to me, that the letter of repudiation should admit the letters and say that those letters do not amount to a concluded contract. Indeed, this very point was dealt with by Scrutton LJ in Thirkell v Cambi [[1919] 2 KB 590 at 597], where he says this: “Secondly, there are those cases beginning with Bailey v Sweeting in which it was held that a letter repudiating liability under an agreement may
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yet be a note or memorandum in writing of that agreement. Basing himself on both these classes, [counsel] argued, first, that the letter of January 2 refers to the terms of an agreement of sale and therefore enables him to give evidence that those terms were entirely in writing and that there were no other terms, and secondly that, although it repudiates any liability under the agreement, that letter is nevertheless a memorandum in writing of the agreement. [Then and this is the important part] In order to make that position good it is necessary to prove two things, which may be one thing containing two elements, a signed admission that there was a contract and a signed admission of what that contract was“.’
The argument based on that observation of Scrutton LJ is that although the two letters in this case may well constitute a signed admission of what the contract was, they do not contain a signed admission that there was a contract in view of the phrase ‘subject to contract’ to which I have referred before.
I have had difficulty on this point, but in the end I have come to the conclusion that counsel for the plaintiff’s argument should still prevail on it. I think a distinction has to be drawn between the type of case to which Scrutton LJ was referring, in which the document relied on as a memorandum has on its face an assertion by the author that the terms have not been agreed, or that the contract has not yet been made, and a case such as the present where the only defect in the memorandum is a reference to a suspensive provision which, on the oral evidence, has subsequently been waived. I do not think that the reference here to the arrangement being subject to contract introduced a new term into the contract, and I do not think that the presence of those words rendered the memorandum defective in view of the learned judge’s conclusion that this condition had subsequently been waived. Accordingly, in my judgment, counsel for the defendant’s argument on this point must fail also.
Finally he takes the point that Mr Tucker was not authorised, on 3 May, to sign a memorandum for the purposes of the Act at all. His argument on this aspect of the case initially referred to the well-known fact that a solicitor has no authority from his client by implication to make a contract on his behalf; and insofar as that means that a solicitor has no power to use his own mind instead of that of a client in deciding to accept an offer, he is, of course, right. On the other hand, on the facts of this case and on the finding of the learned judge, it must be accepted that Mr Tucker was passing on instructions that he had had from the defendant. That he had authority so to do cannot, in my judgment, be disputed, and accordingly I find no substance in that ground of appeal either.
In the result I would dismiss the appeal.
CROSS LJ. Goff J found that, in the course of the telephone conversation of 3 May Mr Smart made on behalf of the plaintiff an unconditional offer to purchase the land in question from the defendant for £3,500, that Mr Tucker realised that such an offer was being made by Mr Smart and said that he would get the defendant’s instructions on it. For my part I see no reason which would justify our interfering with that finding. The inherent probabilities in favour or against the rival versions of what was said appear to me to be fairly evenly balanced. The correspondence, as Widgery LJ has pointed out, tells each way; so the decision really turned on the judge’s view of the relative credibility of Mr Smart on the one hand and Mr Tucker on the other. If once one accepts the judge’s finding then it follows that the 2nd letter of 3 May must be construed as an acceptance of the offer, notwithstanding the words ‘subject to contract’ in the letter of 2 May which is referred to in the letter of 3 May. It also follows that Mr Tucker must be taken to have had authority to write the letter. Counsel for the defendant has argued that nevertheless there is no sufficient memorandum of the contract. He says that for the purpose of s 40 of the Law of Property Act 1925 one must start afresh and look at the two
Page 608 of [1970] 3 All ER 601
letters by themselves, without regard to the oral evidence which has shown that the letter of 3 May was an acceptance of an unconditional offer to purchase. If one disregards the oral evidence and just looks at the two letters then, says counsel, no one would say that they constituted a memorandum of a contract. The letter of 2 May is an offer subject to contract and the letter of 3 May would appear to be, if one disregards the oral evidence, a counter offer, probably itself subject to contract. It could result from his argument that one would be construing the very same document in one way for the purpose of deciding whether there was a contract and in another way for the purpose of deciding whether there was a memorandum of the contract.
I would be most unwilling to arrive at that conclusion unless compelled by authority to do so, and I can see nothing in the authorities cited to us which does so compel me. I am sure that Scrutton LJ in using the words in Thirkell v Cambi ([1919] 2 KB 590 at 597) on which counsel for the defendant places reliance had not in mind a case with the very unusual features of this case. As I see it, there is a real distinction between admitting oral evidence to vary the document said to be a memorandum in respect of what can properly be described as a term of the contract—as, for example, the extent of the property to be sold or the price—and admitting oral evidence to remove from the document said to be a memorandum a suspensive condition such as the words ‘subject to contract’.
I agree that this appeal should be dismissed.
RUSSELL LJ. I also agree that the appeal fails and I would only add a word on the suggestion that the letter of 3 May, referring as it does to the letter of 2 May, was not a sufficient memorandum of a contract for the purposes of s 40 of the Law of Property Act 1925. Section 40 deals with a case where there is, in fact, a contract and it requires the terms of that contract to be evidenced in writing and signed. Here a contract was entered into for the sale and purchase of land. The oral unconditional offer to purchase on the telephone embodied the terms contained in the 2 May letter, with a variation as to completion. Then the defendant’s solicitors’ letter of 3 May, referring as it did to the letter of 2 May, and also embodying, as it did, the variation as to completion suggested on the telephone, accepted that oral unconditional offer. It is plain that this is not prevented from being a sufficient memorandum by the fact that if one looks at the letters of 2 and 3 May alone, the letter o 3 May constitutes apparently a mere counter offer, introducing, as it does, the variation as to the circumstances in which completion might be demanded. But it is said that since the alleged memorandum incorporated the letter of 2 May which contained the phrase ‘subject to contract’, it did not purport to be a memorandum of a contract at all.
It would indeed be most odd if we were to conclude on the one hand, as we must, that the letter of 3 May, on its true construction, constituted by acceptance a contract on the terms of sale contained in it and the letter of 2 May, but yet, on the other hand, were forced to conclude that on its true construction it was not an adequate memorandum, because it pointed away from there being any contract. It shows, in my judgment, that the comments made in the cases to which we were referred to not touch this kind of case at all. If, for example, one had a case in which heads of agreement for the sale and purchase of a piece of land containing all the requisite terms are signed by both the parties ‘subject to contract’ and the parties orally thereafter agree to waive that condition, it seems to me that the document remains a sufficient memorandum of the contract which was brought into force by the waiver. ‘Subject to contract’ is not a term of a contract at all. Once one finds an unconditional contract in fact and its true terms are all to be found in a writing
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signed by the party to be charged, that suffices for the purposes of s 40, unless, of course, as in the cases to which reference was made, in the writing the party expressly denies the existence of a contract.
If I may revert to the example I gave of the heads of agreement, suppose the heads of agreement not themselves to contain the words ‘subject to contract’ but suppose the parties to have signed a separate document making the heads of agreement subject to contract; they then subsequently agree orally to waive the condition imposed by the second document; quite clearly, in my view, the first document would be an adequate memorandum for the purposes of s 40. It would indeed be absurd that a different result must be found because there is only the one document.
The appeal will accordingly be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Vinters, Cambridge (for the defendant); Robbins, Olivey & Lake, agents for Bendall & Sons, Mildenhall (for the plaintiff).
Euan Sutherland Esq Barrister.
London Borough of Havering v Stevenson
[1970] 3 All ER 609
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JAMES AND COOKE JJ
Hearing Date(s): 7 JULY 1970
Trade description – Sale in the course of a trade or business – Sale of car by car-hire firm – Car sold in accordance with usual practice when hire cars over certain age – Trade Descriptions Act 1968, s 1(1)(b).
The respondent operated a car-hire firm. It was his usual practice to sell those vehicles for which he no longer had use in his business, but he did not operate as a motor car dealer. In accordance with that practice, he sold a car to C. At the time of the sale, it was represented to C that the mileage done by the car was substantially less than in fact was the case. The respondent was charged with supplying goods, to which a false trade description was applied, in the course of a trade or business contrary to s 1(1)(b)a of the Trade Descriptions Act 1968.
Held – The sale of the car was, on the true construction of s 1(1)(b) of the Act, in the course of the respondent’s trade or business since it was part of his normal practice to sell cars (see p 611 d and j, post).
Notes
For trade descriptions generally, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314 A-H, and for cases on the subject, see Digest Supp.
For the Trade Descriptions Act 1968, s 1, see 48 Halsbury’s Statutes (2nd Edn) 596.
Cases cited in argument
Davidson (Charles R) & Co v M’Robb or Officer [1918] AC 304.
John v Matthews [1970] 2 All ER 643, [1970] 2 WLR 1246.
Newtons of Wembley Ltd v Williams [1964] 3 All ER 532, [1965] 1 QB 560.
Rolls v Miller (1884) 27 Ch D 71, [1881–85] All ER Rep 915.
Case stated
This was a case stated by justices for the north east London Commission Area acting for the petty sessional division of Havering in respect of their adjudication as a magistrates’ court sitting at Romford on 5 February 1970. On 1 January 1970, an information
Page 610 of [1970] 3 All ER 609
was preferred by the London Borough of Havering, the appellant, against Paul Kenneth Stevenson, the respondent, that he, on 4 November 1969 at 135 Osborne Road, Hornchurch in the London Borough of Havering, in the course of business as a car-hire firm proprietor, supplied to Bryan Charles Carter of 14 Grey Towers Avenue, Hornchurch, a Ford Corsair motor car, registration number MLN 277D, to which a false trade description of history, a mileage of 34,667 miles, was applied, whereas the mileage was at least 50,523 miles, contrary to s 1(1)(b) of the Trade Descriptions Act 1968.
The following facts were found. At all material times the respondent carried on a car-hire business under the name of ‘Record Car Hire’, but did not carry on the business of a motor car vendor or dealer. The respondent had a fleet of 24 cars which he had purchased new or secondhand. He made a regular practice of selling his hire cars after he had had them for about two years or when he chose to run his fleet down or the condition of a particular vehicle warranted it. The cars were assets of the business and the respondent wrote off so much depreciation each year. The respondent never bought cars and then sold them for a greater price. When he sold his hire cars, he sold them at a trade price and the proceeds of sale went back into the business to buy new cars. The respondent owned the Ford Corsair motor car and having used it in his car-hire business he put it up for sale in accordance with his usual practice. In November 1969, it was represented to Mr Carter that the said motor car had a recorded mileage of about 34,000 miles; further the speedometer of the motor car showed a recorded mileage of about 34,000. On 4 November 1969, the respondent supplied the motor car to Mr Carter, who paid the respondent £375 for it. At the same time as supplying the motor car, the respondent supplied to Mr Carter two motor test certificates in respect of it, dated 5 May 1969 and 4 September 1969. These certificates indicated that the car had travelled 41,050 miles by 5 May 1969, and 50,523 miles by 4 September 1969, and the justices accepted these two mileages as being correct.
It was contended by the appellant that since the respondent made a practice of selling cars owned in connection with his business and sold in connection therewith, and the proceeds of sale whereof went into the business funds, he was acting in the course of his business when he supplied the motor car, to which the false trade description had been applied.
It was contended by the respondent that s 1 of the Trade Descriptions Act 1968 was concerned with protecting purchasers against traders who deal in particular goods which are the stock-in-trade of their trade or business and who sell those particular goods for the purpose of making a profit in the course of their trade or business; and that the respondent was not carrying on a business of selling motor cars for profit and the motor car which was sold was not the stock-in-trade of such a business but was a fixed asset of the respondent’s business of car hire.
The justices were of the opinion that the respondent had supplied the motor car to Mr Carter to which a false trade description had been applied but since he did not carry on the business of a motor car vendor or dealer the motor car was not sold in the course of his business within the meaning of s 1(1)(b) of the Trade Descriptions Act 1968.
The justices dismissed the information and the appellant now appeals.
A F B Scrivener for the appellant.
D Eady for the respondent.
7 July 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices of the north east London commission area, sitting at Romford, who dismissed an information, preferred by the appellant against the respondent, that in the course of business as a car-hire proprietor, he supplied to one Carter a Ford Corsair motor car, to which a false trade description of history, namely mileage of approximately
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34,000, was applied, whereas the mileage was approximately 50,000 miles, contrary to s 1(1)(b) of the Trade Descriptions Act 1968. That provision of the Act provides:
‘Any person who, in the course of a trade or business—… (b) supplies or offers to supply any goods to which a false trade description is applied; shall … be guilty of an offence.’
The respondent carried on a car-hire business. I emphasise that; it was a car-hire business and not the business of a motor car vendor or dealer. He had a fleet of 24 cars, and he made a regular practice of selling his hire cars after he had had them about two years, when he chose to run his fleet down or when the condition of a particular vehicle warranted; he never bought cars and sold them for a greater price. The respondent owned the Ford Corsair car, and having used it in his car-hire business, he put it up for sale in accordance with his usual practice. In November 1969, it was represented to Mr Carter, who bought the vehicle, that the motor car had a recorded mileage of 34,000 miles, and the speedometer recorded that mileage. In fact, as is found by the case, the mileage was over 50,000.
Pausing there, on those facts it seems to me that it is almost inevitable that this application of a false trade description was in the course of trade or business; it is not for the purposes of trade or business or even by way of trade or business. Once one finds that a car-hire business, as part of its normal practice buys and disposes of cars, it seems to me almost inevitable that the selling of a car and the application of a trade description in the course of that sale, was an integral part of the business carried on as a car-hire firm. But counsel for the respondent has contended that it is a pure question of fact, and in that connection cites cases concerning accidents in the course of employment, and the question of whether a sale by a mercantile agent is in the ordinary course of business. He goes on to say that if we are to upset the justices’ decision here, it can only be by saying that they have made in effect a perverse finding. He says that the facts here do not merit going to that extreme length.
For my part, however, I look and see what the justices did. They did not find, as a fact, that this was not by way of trade or business. They found that on a true construction of the Act, it could not be within the trade or business of a car-hire firm, but only in the course of a trade or business of a motor car vendor or dealer, and the respondent was not such a vendor or dealer. In the case they state:
‘We were of the opinion that the Respondent had supplied the said motor car to the said Carter to which a false trade description had been applied, but since he did not carry on the business of a motor car vendor or dealer the said motor car was not sold in the course of his business within the meaning of section 1(1)(b) of the Trade Descriptions Act, 1968 … ’
In my judgment, in that paragraph, the justices have erred in law. It is not necessary in order that an offence should be established to prove in the present case that the respondent was in business or trade as a vendor or a dealer. On those short grounds I would allow this appeal and send the case back to the justices with a direction to convict the respondent.
I would only add that since this is one of the early cases under a recent Act, I do not propose to go further in the present case than deal with the limited facts of this case.
JAMES J. I agree.
COOKE J. I agree.
Appeal allowed. Case remitted.
Solicitors: John E Symons, Romford (for the appellant); H Montlake & Co, Ilford (for the respondent).
Vincent Maxwell Esq Barrister.
Povey v Povey
[1970] 3 All ER 612
Categories: ADMINISTRATION OF JUSTICE; Legal Aid and Advice
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P, ORMROD AND FAULKS JJ
Hearing Date(s): 7, 8, 10, 31 JULY 1970
Legal aid – Costs – Unassisted person’s costs out of legal aid fund – Successful appeal – Unassisted husband’s appeal against order of magistrates varying maintenance order and making attachment of earnings order – Whether order for costs would be made against assisted wife – Legal Aid Act 1964, s 1(2), (4).
In August 1961, justices made a separation order and a custody order in favour of the wife and maintenance orders of £4 a week for her benefit and £2 10s a week for the benefit of the child of the family. In September 1962, the justices reduced the maintenance order on an application by the husband, and made an attachment of earnings order. In 1964 or 1965, the wife successfully petitioned for divorce. In 1966, the husband remarried and he now had two children by his second wife. The husband having been unemployed, in June 1969 he again applied to have the maintenance order varied, he being over £1,100 in arrears. The justices again reduced the maintenance order, ordered the husband to pay off the arrears at 10s a week and again made an attachment of earnings order. The husband gave notice of appeal and applied to his area legal aid committee for legal aid in connection with the appeal, which was refused on the grounds that he had ‘not shown reasonable grounds for taking steps to assert or dispute the claim, or for taking, defending, or being a party to proceedings’ and that it appeared ‘unreasonable that [he] should receive legal aid in the particular circumstances of the case’. As a result of taking counsel’s opinion, the grounds of appeal were amended, and a fresh application was made to the legal aid area committee, which was refused, the stated reasons for refusal being the same as those previously given. In consequence of a communication between the husband’s solicitor and a representative of the legal aid area committee, counsel gave a fresh opinion in which she said that legal aid was justified. That opinion was sent to the area committee with a further application for legal aid, which was refused, the stated reasons for refusal being those given for the refusal of the two previous applications. On appeal to the Divisional Court by the husband as an unassisted person, the wife having been granted legal aid and her maximum and actual contributions being assessed at nil, her counsel conceded that the justices’ order of June 1969 could not stand, the attachment of earnings order being technically invalid and the maintenance order being too high. The Divisional Court remitted the issue for rehearing. The husband applied for his costs to be paid out of the legal aid fund. The court found that the husband fulfilled the requirements of the Legal Aid Act 1964, s 1(1)a, and that, in accordance with the first half of s 1(2)b, it would be just and equitable in all the circumstances that provision for the husband’s costs should be made out of public funds. By the second half of s 1(2), the court had to consider what order should be made for costs against the party receiving legal aid, and by s 1(4)c, an order under s 1 was not to be made in respect of costs incurred by the unassisted party in any proceedings in which, apart from the 1964 Act, no order would be made for the payment of his costs.
Held – (Faulks J dissenting) The husband was not entitled to an order for the payment out of the legal aid fund of his costs of the appeal, because the wife having no resources, and having acted quite properly in the case no order would be made that the wife should pay the husband’s costs apart from the 1964 Act (see p 622 f and p 625 j to p 626 a, post), and accordingly, s 1(4) of the 1964 Act applied (see p 622 g and p 626 g, post).
Page 613 of [1970] 3 All ER 612
Nowotnik v Nowotnik (Hyatt intervening) [1965] 3 All ER 167, Gooday v Gooday [1968] 3 All ER 611 and Hanning v Maitland (No 2) [1970] 1 All ER 812 explained.
Per Sir Jocelyn Simon P. Although there is now no special practice in matrimonial causes that an impecunious, or nearly impecunious, wife should not have an order for costs made against her, there is equally no general practice in matrimonial causes that costs should follow the event, because there will be many cases in which such an order would be inappropriate (see p 621 b, post).
Notes
For the awarding of costs to an unassisted person out of the legal aid fund, see Supplement to 30 Halsbury’s Laws (3rd Edn) para 933A.
For the Legal Aid Act 1964, s 1, see 44 Halsbury’s Statutes (2nd Edn) 954.
Cases referred to in judgments
A-G v Sillem (1864) 10 HL Cas 704, 11 ER 1200, 17 Digest (Repl) 254, 576.
Ashley v Ashley [1965] 3 All ER 554, [1968] P 582, [1965] 3 WLR 1194, 130 JP 1, Digest (Cont Vol B) 382, 6739b.
Baldwin Raper v Baldwin Raper and Metz, Baldwin Raper v Baldwin Raper (1926) 42 TLR 619, 27 Digest (Repl) 564, 5173.
Barker v Barker [1950] 1 All ER 812, 27 Digest (Repl) 560, 5116.
Carter v Carter, Carter v Carter and Cowan [1964] 2 All ER 968, [1966] P 1, [1964] 3 WLR 311, Digest (Cont Vol B) 370, 5380b.
Davies v Davies (1907) 51 Sol Jo 412, 27 Digest (Repl) 733, 7006.
Earnshaw v Earnshaw [1896] P 160, 65 LJP 89, 74 LT 560, 60 JP 377, 27 Digest (Repl) 701, 6703.
Gooday v Gooday [1968] 3 All ER 611, [1969] P 1, [1968] 3 WLR 750, Digest Supp.
Hanning v Maitland (No 2) [1970] 1 All ER 812, [1970] 1 QB 580, [1970] 3 WLR 151.
Kara v Kara and Holman [1948] 2 All ER 16, [1948] P 287, [1948] LJR 1741, 27 Digest (Repl) 516, 4602.
Manby v Scott (1660, 1663) 1 Keb 482, 1 Lev 4, [1558–1774] All ER Rep 274, 2 Smith LC (13th Edn) 417, 83 ER 1065, 27 Digest (Repl) 173, 1273.
Medway v Medway [1900] P 141, 69 LJP 56, 82 LT 627, 64 JP 120, 27 Digest (Repl) 697, 6669.
Nowotnik v Nowotnik (Hyatt intervening) [1965] 2 All ER 618, [1967] P 83, [1965] 3 WLR 920; rvsd CA [1965] 3 All ER 167, [1967] P 83, [1965] 3 WLR at 928, Digest (Cont Vol B) 370, 5365e.
Otway v Otway, Otway v Otway and Hoffer (1888) 13 PD 141, 57 LJP 81, 59 LT 153, 27 Digest (Repl) 439, 3689.
Pilcher v Pilcher (No 2) [1956] 1 All ER 463, [1956] 1 WLR 298, 120 JP 127, Digest (Cont Vol A) 830, 6886a.
Poyser v Minors (1881) 7 QBD 329, [1881–85] All ER Rep 1173, 50 LJQB 555, 45 LT 33, 46 JP 84, 13 Digest (Repl) 441, 660.
R v Wilkes (1769) 4 Burr 2527, 98 ER 327, 14 Digest (Repl) 375, 3674.
Roberts v Roberts [1968] 3 All ER 479, [1970] P 1, [1968] 3 WLR 1181, 133 JP 8, Digest Supp.
Robertson v Robertson and Favagrossa (1881) 6 PD 119, [1881–85] All ER Rep 318, 51 LJP 5, 45 LT 237, 27 Digest (Repl) 570, 5258.
Winchester v Fleming [1957] 3 All ER 711, [1958] 1 QB 259, [1957] 3 WLR 1023; on appeal CA [1958] 3 All ER 51, Digest (Cont Vol A) 680, 682a.
Young v Bristol Aeroplane Co Ltd [1944] 2 All ER 293, [1944] KB 718, 113 LJKB 513, 171 LT 113; affd HL [1946] 1 All ER 98, [1946] AC 163, 115 LJKB 63, 174 LT 39, Digest (Cont Vol A) 977, 698a.
Cases also cited
Cope v United Dairies (London) Ltd [1963] 2 All ER 194, [1963] 2 QB 33.
Mearns v Mearns and Bullen [1955] 1 All ER 684, [1955] 1 WLR 303.
Page 614 of [1970] 3 All ER 612
Application
This was an application by the husband, J Povey, that he should have the costs of his successful appeal to the Divorce Divisional Court from an order of the Stone justices dated 11 June 1969 varying a maintenance order in favour of the wife, H M Povey, and making an attachment of earnings order, paid out of the legal aid fund under the Legal Aid Act 1964. The facts are set out in the judgment of Sir Jocelyn Simon P.
Joseph Jackson QC and Margaret Puxon for the husband.
J H Hames for the Law Society.
Cur adv vult
31 July 1970. The following judgments were delivered.
SIR JOCELYN SIMON P. Our judgments today are concerned with an application by the husband, who was a successful appellant before this court, that he should have the costs of his appeal paid out of the legal aid fund under the Legal Aid Act 1964. The provisions of the Act which are of principal moment in this appeal are s 1(1), (2) and (4), and s 6(3). These provide as follows:
‘1. (1) Where a party receives legal aid in connection with any proceedings between him and a party not receiving legal aid (in this Act referred to as “the unassisted party”) and those proceedings are finally decided in favour of the unassisted party, the court by which the proceedings are so decided may, subject to the provisions of this section, make an order for the payment to the unassisted party out of the legal aid fund of the whole or any part of the costs incurred by him in those proceedings.
‘(2) An order may be made under this section in respect of any costs if (and only if) the court is satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds; and before making such an order the court shall in every case (whether or not application is made in that behalf) consider what orders should be made for costs against the party receiving legal aid and for determining his liability in respect of such costs.
‘(4) An order under this section shall not be made by any court in respect of costs incurred by the unassisted party in any proceedings in which, apart from this Act, no order would be made for the payment of his costs.
‘6. (3) This Act … shall be construed as one with Part I of the Legal Aid and Advice Act 1949 … ’
The provisions of the 1949 Act most relevant for the construction of the 1964 Act are ss 1(7)(b) and 2(2)(e), which provide as follows:
‘1. (7)(b) The rights conferred by this Part of this Act on a person receiving legal aid shall not affect the rights or liabilities of other parties to the proceedings or the principles on which the discretion of any court or tribunal is normally exercised.
‘2. (2) Where a person receives legal aid in connection with any proceedings … (e) his liability by virtue of an order for costs made against him with respect to the proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.’
The main issue with which we have been concerned is the construction and application of s 1(4) of the 1964 Act.
The facts which lie behind this application, some of which do not appear from
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the formal evidence filed but have been stated from the Bar without objection, are as follows. The parties were married in February 1960. The only child of the marriage, a daughter, was born on 8 July 1961. On 30 August 1961, the justices of the petty sessional division of Stone on the complaint of the wife found that the husband had treated her with persistent cruelty and had wilfully neglected to provide reasonable maintenance for her, and they made a separation and a custody order in favour of the wife, and maintenance orders of £4 a week for her benefit and £2 10s a week for the benefit of the child. On 5 September 1962, the justices heard a complaint by the husband, who was then in arrears to the extent of £141 10s, for a variation of the order of 30 August 1961. The husband was legally represented; the wife was not, although she gave evidence. The justices so far acceded to the husband’s application as to reduce the wife’s maintenance to £3 10s a week and that for the child to £2. They ordered the husband to pay 10s a week off the arrears; and also made an attachment of earnings order of £6 a week (ie, presumably, to cover the £5 10s maintenance plus the 10s ordered to be paid off the arrears). That attachment of earnings order was almost certainly invalid for similar reasons to those which invalidated the attachment of earnings order with which we were concerned in the instant appeal; nor does it appear that there was any complaint in respect of the arrears to found the jurisdiction of the justices to make that part of their order which related thereto. However, there was no appeal. In 1964 or 1965, the wife successfully petitioned for divorce. In 1966, the husband remarried; and he has two children, now aged about three and one years respectively, by his second wife. On 21 December 1966, the justices heard a further complaint by the husband for variation of the order made against him, which they dismissed. From September 1968 until about April 1969 the husband was unemployed. On 12 May 1969, he applied to have the maintenance order of 30 August 1961(as varied on 5 September 1962) further reduced. He was by then over £1,100 in arrears. His application was based on his previous unemployment, and on the fact that his earnings from his then employment were less than when the order was last varied, so that he allegedly could not afford the weekly amount payable. It was heard on 11 June 1969. Once again the husband was legally represented and the wife not. The wife and her child were dwelling with her mother and were living on £6 7s a week from the Ministry of Social Security. The husband’s average take-home pay was about £15 a week, and there was 18s a week coming into his household by way of family allowance. The justices varied the maintenance order by reducing the sum payable for the wife from £3 10s a week to £2 10s. They made an order that the husband should pay off the arrears at the rate of 10s a week. (That meant that he had to pay a total of £5 a week, the maintenance element itself being reduced from £5 10s to £4 10s.) It does not appear that they had any complaint before them in respect of the arrears. The justices also made an attachment of earnings order. They had not been requested to do so by the wife, who indeed does not seem actively even to have opposed the husband’s application for reduction of the maintenance order—any reduction would probably, in practice, have enured only to the disadvantage of the Supplementary Benefits Commission. The attachment of earnings order as drawn up and dated 11 June 1969 recited the maintenance order as at £4 10s a week (ie as varied on that date), but stipulated a normal reduction rate of £5 (presumably to cover also the payment in respect of arrears) and a protected earnings rate of £10.
On 12 June 1969 the husband gave notice of appeal. The grounds of appeal were: (1) that the amount of maintenance was excessive having regard to the respective means of the parties; (2) that this was not a proper case for the making of an attachment of earnings order; and (3) that the protected earnings rate of £10 a week was insufficient for his needs. He applied to his area legal aid committee for legal aid in connection with his appeal. On 30 June 1969, he received notice of refusal of legal aid, the stated reasons for the refusal being that he had ‘not shown
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reasonable grounds for taking steps to assert or dispute the claim, or for taking, defending, or being a party to proceedings’ and that it appeared ‘unreasonable that [he] should receive legal aid in the particular circumstances of the case’. The husband’s solicitor thereupon obtained the opinion of counsel. This is dated 5 September 1969. It starts: ‘I unhesitatingly advise an appeal to the Divisional Court, for the following reasons.' In consequence of that opinion the grounds of appeal were amended on 24 September 1969 to allege also that the justices were wrong in law in making an attachment of earnings order, in that there was no application by the wife as required by ss 6(1) and 20(1) of the Maintenance Orders Act 1958; and that the justices should have remitted all or part of the arrears of maintenance in all the circumstances. On the basis of counsel’s opinion, a fresh application was made to the legal aid authority. This was refused on 13 October 1969, the stated reasons for refusal being the same as those previously given. In consequence of a communication between the husband’s solicitor and a representative of the legal aid area committee, counsel was asked to give a fresh opinion, expressing her view as to the likely result of an appeal. Counsel’s short further opinion included the following passage:
‘I cannot give the numerical chance of success of an appeal—nor could anyone, I believe—but in my opinion [the husband] should succeed on some, if not all, of the grounds I have indicated and that legal aid is justified.’
That opinion was sent to the area committee on 11 November 1969 with a further application for legal aid. This, too, was refused, by notice dated 1 December 1969, the stated reasons for refusal being those given for the refusal of the two previous applications.
The husband, therefore, decided to bring on this appeal as an unassisted person. The wife had been granted legal aid for the appeal, her disposable income being assessed at £202, her disposable capital at nil, and her maximum and actual contributions at nil. The appeal came before the Divisional Court, consisting of Ormord J and myself, on 13 January 1970. It was rightly conceded by counsel for the wife that the justices’ order could not stand; the attachment of earnings order was technically invalid for no less than four reasons. It was also conceded on behalf of the wife that the maintenance order was too high in view of the decision of this court in Ashley v Ashley. The only contention before us was whether we could ourselves make a maintenance order in place of that of the justices, or whether we would have to remit the issue for rehearing. We reluctantly held that we were obliged in the circumstances to take the latter course. Should the justices have cause to consider at any time the enforcement of arrears, we drew their attention to Pilcher v Pilcher (No 2), in which the Divisional Court laid down that, as a matter of practice, but not of law, no more than a year’s arrears are generally enforced.
At the conclusion of our judgments allowing the appeal, counsel for the husband applied for his costs to be paid out of the legal aid fund under the 1964 Act. But counsel were not ready at the time to argue the point; and we felt that the Law Society should be heard in any such argument. We, therefore, adjourned the question of costs, which came before the Divisional Court as at present constituted pursuant to the provisions of s 63(6)(b) of the Supreme Court of Judicature (Consolidation) Act 1925. Counsel then appeared for the Law Society as amicus curiae; but at our suggestion (in order to facilitate a possible appeal against our decision on the matters he subsequently applied that the Law Society should be made a party; and, counsel for the husband making no objection, we gave leave for this change of locus standi: see Legal Aid (Costs of Successful Unassisted Parties) Regulations 1964d, reg 14. The
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wife was not represented on the adjourned hearing, nor was there any reason why she should have been.
In the meantime, on 25 February 1970, the justices had reheard the husband’s complaint as remitted to them. They reduced the maintenance order for the wife to £1 10s a week and that for the child to a similar amount. They made no order as to the arrears—possibly because the matter was not formally before them.
On 12 March 1970, the husband filed his affidavit under the regulation which I have just cited. It set out his applications for legal aid to which I have referred, and exhibited his counsel’s opinions, part of which I have cited—counsel for the Law Society disclaiming any objection to our looking at them. The husband estimated his party and party costs of the appeal at approximately £223 (a figure which must, as events have fallen out, be adjusted to somewhat under £200). At the time of swearing the affidavit he was employed as a fitter’s mate, earning £17 2s 4d a week take-home pay by working a 48-hour week including overtime. His present wife does not go out to work, presumably in view of her duties to their two young children. She draws 18s a week family allowance. After outgoings which he himself pays and £14 a week which he gives to his wife, he is left with about £1 a week for his own personal expenses.
This summary of facts enables me to deal quite cursorily with a number of the conditions which the husband must satisfy before he can obtain an order against the legal aid fund. These proceedings on appeal are separate proceedings from those in the court below, because they are proceedings in respect of which a separate civil aid certificate could properly be issued under the Legal Aid (General) Regulations 1962e to a person receiving legal aid (as it was, in fact, issued to the wife): see Legal Aid (Costs of Successful Unassisted Parties) Regulations 1964, reg 2. The wife received legal aid in connection with the proceedings; the husband did not. These proceedings were finally decided in his favour: Legal Aid Act 1964, s 2(3). I am also satisfied that it would be just and equitable in all the circumstances that provision for the husband’s costs of the appeal should be made out of public funds, since he should, so far as I can judge, have had his appeal originally financed out of the legal aid fund. The members of legal aid committees perform an onerous and valuable public service, gratuitously; and, considering the enormous volume of litigation conducted under legal aid, there have been remarkably few complaints, and not all of those have been justified. But legal aid committees are manned by human beings, and are, therefore, like other human institutions, liable to error. In the absence of any explanation from the committee, I cannot but conclude that they fell into error in this case. I do not pause to speculate why it appeared ‘unreasonable’ to the committee that the husband ‘should receive legal aid in the particular circumstances of the case.' But, clearly, they were wrong in thinking that the husband had ‘not shown that’ he had ‘reasonable grounds for taking steps to assert or dispute the claim or for taking, defending, or being a party to proceedings.' Finally, for the last limb of s 1(2) of the 1964 Act, I am quite clear that no order for costs should be made against the wife, who was in no way responsible for the errors into which the justices fell, and who has no means apart from the meagre support she gets from the husband and from public funds.
The appeal, therefore, turns on s 1(4), namely on the question whether, apart from the 1964 Act, any order would have been made for the payment of the husband’s costs. In order to answer this question, it is necessary to determine also, first, whether there is an accepted practice which guides the court’s discretion in making orders as to costs in this type of case; and, secondly, whether there is authority binding on us as to the construction to be put on sub-s (4). These latter questions are interconnected.
As to practice, it may be helpful to note that this word is used juristically in at
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least three senses. The first and narrowest sense indicates the rules which guide the mode of proceedings within the walls of the court itself—those which make or guide the cursus curiae: see A-G v Sillem ((1864) 10 HL Cas 704 at 723, 724), per Lord Westbury LC. In its second and broader sense it means the mode of proceedings by which a legal right is enforced, as distinguished from the law which gives or defines the right; ie as equivalent to ‘procedure’: see Poyser v Minors ((1881) 7 QBD 329 at 333, [1881–85] All ER Rep 1173 at 1175), per Lush LJ; Tomlin’s Law Dictionary f. In either of these senses the practice may be embodied in binding rules of law (in the sense of rules that, on proof of a given situation, a given result should ensue, without any power in the court to avert it even though general concepts of justice seem so to demand). This may be seen from the maxim ‘cursus curiae lex curiae’ and in codes of civil procedure (except insofar as they leave a discretion to the court). But there is a third sense, in which ‘practice’ is used in contra-distinction to ‘law’; in this sense it means habitual or customary action: see A-G v Sillem ((1864) 10 HL Cas at 757), per Lord Wensleydale; Oxford English Dictionaryg. Thus, I have already referred to the judgment in Pilcher v Pilcher (No 2) ([1956] 1 All ER 463 at 465, [1956] 1 WLR 298 at 302), in which it was said that, as a matter of practice, but not of law, courts do not usually enforce more than one year’s arrears of maintenance. Again, in Roberts v Roberts ([1968] 3 All ER 479 at 481, [1970] P 1 at 3), a decision of this court, it was stated that we had made enquiries of our brother judges and of the registrars of the Principal Probate Registry as to their practice, on maintenance applications, in weighing benefits and liabilities which were not enforceable at law. Many other examples could be given.
A practice in this third sense frequently arises when a court is given a discretion. ‘Discretion, when applied to a Court of Justice’, said Lord Mansfield in R v Wilkes ((1769) 4 Burr 2527 at 2539)—
‘means sound discretion guided by law. It must be governed by rule, not by humour: it must not be arbitrary, vague and fanciful; but legal and regular.’ [His italics]
Forensic situations will tend to recur in a pattern; judges exercising a given discretion consistently in order to do justice will tend to react similarly to similar situations; so that a practice will develop. The recurring pattern will often differ according to differing types of clause, with the result that the practice resulting from the exercise of a given discretion will often similarly differ according to the type of case involved.
The practice of courts as to costs is a good example of the third type of ‘practice’—habitual or customary action arising out of a discretion. The discretion is a statutory one, couched in the widest terms. It is contained in s 50(1) of the Supreme Court of Judicature (Consolidation) Act 1925:
‘Subject to the provisions of this Act and to rules of court and to the express provisions of any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent the costs are to be paid.’
Nevertheless, the demands of consistent justice have caused various practices to emerge. For example, it would obviously be unjust that a person who was obliged to go to court in order to vindicate or defend his rights should have the fruits of successful litigation attenuated by his having to pay the costs of the litigation. Thus a practice developed that costs should follow the event of the litigation. This is now embodied in RSC Ord 62, r 3(2), which provides:
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‘If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.’
But the residual discretion is sufficient for this still to be a rule of practice and not a rule of law. There will be types of litigation where it would not be appropriate, because it would not be just, that costs should follow the event. An example is where it is not the unsuccessful party who has forced the successful party to court in order to vindicate his rights—for instance, where litigation in relation to a testamentary instrument has been occasioned through some conduct of the testator’s; the general practice will then be that costs should come out of the estate.
Another type of case where justice demanded that costs should not follow the event as the ordinary rule was in litigation between husband and wife. This could not take place at common law, since in the view of the common law the personalities of husband and wife were merged: see Blackstone’s Commentariesh. Moreover, by and large the common law vested the property of the wife in her husband. But, in return, that law imposed on the husband the duty to maintain his wife at an appropriate standard, a duty which was vindicated by recognising her right in certain circumstances to pledge his credit for necessaries: see Manby v Scott. Among such necessaries were the wife’s assertion or defence of her rights under the matrimonial law. So it became a practice in matrimonial causes that even an unsuccessful litigant wife should (unless she had adequate independent means) ordinarily have her costs paid by her husband, at least up to such sum as he had been ordered to pay (as he frequently was) by way of security for her costs, or, at any rate, that she should not be ordered to pay his: see Robertson v Robertson and Favagrossa; Baldwin Raper v Baldwin Raper and Metz (which says there that a general discretion is overriding); Barker v Barker ([1950] 1 All ER 812 at 814), per Bucknill LJ; Carter v Carter ([1964] 2 All ER 968 at 972, 973, [1966] P 1 at 10), per Scarman J; Nowotnik v Nowotnik (Hyatt intervening) ([1965] 3 All ER 167 at 171, [1967] P 83 at 101), per Lord Denning MR, giving the judgment of the Court of Appeal; Gooday v Gooday ([1968] 3 All ER 611 at 617, 618, [1969] P 1 at 11), per Willmer LJ. A particular application of this special practice in matrimonial causes arose in appeals. A wife unsuccessful on an appeal would normally be granted the costs of defending an order made in her favour in the court below: see Otway v Otway; Earnshaw v Earnshaw; Medway v Medway; but cf Davies v Davies, where the wife had separate estate and Medway v Medway was not cited (nor, apparently, the other consonant authorities). In any case, in Kara v Kara and Holman, the Court of Appeal, consisting of Lord Greene MR, Bucknill LJ and Hodson J, in a reserved judgment held that the proposition, based on Otway’s, Earnshaw’s and Medway’s cases, that a wife who succeeds at first instance and seeks to uphold her judgment against the husband’s appeal is entitled, even though unsuccessful, to have her costs paid by the husband, is too wide, as appearing to fetter the court in the exercise of its discretion. Considerations to which the court may have regard in deciding whether the husband should pay the
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wife’s costs include, besides the wife’s means: (1) the desirability of enabling the wife to litigate a reasonable case; (2) the importance of a point of law raised and decided; (3) the fact that the wife has manifestly committed perjury; (4) the discouragement of speculative actions; and (5) the misconduct of the wife, or her advisers, in respect of the litigation. That case establishes, in my view, that the discretion as to costs in matrimonial cases is an unfettered one—unfettered by any rule of practice, on the one hand, that an impecunious wife should normally have her costs paid by her husband, or, on the other, that costs should normally follow the event. The latter was not, indeed, even mentioned as a relevant consideration—on the contrary, the court emphasisedi that
‘the proposition [that a wife is entitled to defend herself and the husband must pay the costs of the appeal even if he succeeds] enunciates an important consideration which commonly arises in matrimonial appeals.’
Moreover, it is clear that, in enumerating various considerations that might be weighed, the court was not attempting to be exhaustive—the judgment ends ([1948] 2 All ER at 19, [1948] P at 292):
‘Finally, we would emphasise that, in making the above suggestions, we have no intention of limiting the discretion of the court as defined by the Supreme Court of Judicature (Consolidation) Act, 1925, s. 50.’
The approach of the Court of Appeal in Kara v Kara and Holman was carried a little further in Gooday v Gooday, which emphasised that much of the rationale underlying any former special practices in matrimonial causes has now disappeared; and this point has been reinforced by the abolition of the wife’s agency of necessity by s 41 of the Matrimonial Proceedings and Property Act 1970, which comes into force on 1 August 1970. Any special practice as to wife’s security for costs in matrimonial proceedings will disappear with it.
But this is not to say that special practices in matrimonial causes that, in the absence of special circumstances, an unsuccessful litigant wife should have her costs against her husband, or at least that no order for costs should be made against her, are to be replaced by a general practice that costs should follow the event. This will often be inappropriate, because unjust; the wife may be entirely dependent on the husband, because, with the functional division of labour between husband and wife, she may have sacrificed her own financial or economic prospects in order to free him to pursue his: see Gooday v Gooday ([1968] 3 All ER at 616, [1969] P at 9), per Widgery LJ; Hanning v Maitland (No 2) ([1970] 1 All ER 812 at 820, 821, [1970] 1 QB 580 at 593), per Edmund Davies LJ. Social developments, in nullifying much of the rationale underlying the former special practice in matrimonial causes, have left the judge’s discretion as to costs under s 50(1) of the Supreme Court of Judicature (Consolidation) Act 1925 entirely untrammelled: see Gooday v Gooday ([1968] 3 All ER at 614, 616, 618, [1969] P at 6, 9, 11), per Diplock, Widgery and Willmer LJJ, thus re-emphasising in this regard the considered judgment of the Court of Appeal in Kara’s case.
This brings me to the authorities in the Court of Appeal which are more immediately relevant to our decision today. These are Nowotnik v Nowotnik, Gooday v Gooday and Hanning v Maitland (No 2). The rationes decidendi of the judgments are not altogether easy to reconcile. Indeed, it was argued before us that Nowotnik v Nowotnik, as explained in Hanning v Maitland (No 2), is inconsistent with Gooday v Gooday. If that were so, this court would be free to choose which authority to
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follow: see Young v Bristol Aeroplane Co Ltd. But the Court of Appeal is bound by its own previous decisions: Young v Bristol Aeroplane Co Ltd ([1944] 2 All ER 293, [1944] KB 718, [1946] 1 All ER at 100, [1946] AC at 169), per Viscount Simon; it must, therefore, be taken to have considered that these decisions were not inconsistent (the later ones being advertent to the earlier, so that the ‘per incuriam’ rule has no application), and it is our own duty in consequence to adopt a similar approach. I think that the actual decisions can be reconciled on the basis that I have already stated—namely that, although there is now no special practice in matrimonial causes that an impecunious, or nearly impecunious, wife should not have an order for costs made against her, there is equally no general practice in matrimonial causes that costs should follow the event, because there will be many cases in which such an order would be inappropriate—Nowotnik v Nowotnik ([1965] 3 All ER at 170, 171, [1967] P at 86, 100, 101) being one such case (the wife was without means at the time when liability for costs fell for determination; see also Hanning v Maitland (No 2) ([1970] 1 All ER at 815, 820, [1970] 1 QB at 587, 593), per Lord Denning MR and per Edmund Davies LJ). Another possible way of reconciling the decisions (although, in my view, less satisfactory) might be to hold that, in construing a statute, what is relevant is what Parliament or her draftsman believes to be the current law and practice; and that Nowotnik v Nowotnik shows what was believed to be the practice, notwithstanding that Gooday v Gooday subsequently explained that, on the principle ‘cessante ratione, cessat ipsa lex’, the belief was mistaken.
It is against this background that I turn to consider the construction and application of s 1(4) of the 1964 Act. It is, in effect, submitted on behalf of the husband that the subsection should be construed as if there were added at the end the words ‘because, although a successful litigant, he has in some way misconducted himself in relation to the litigation’. Such a construction has certain arguments to commend it. First, it is claimed, it does no more than amount to reading RSC Ord 62, r 3(2) (as judicially interpreted), along with the subsection. Secondly, it finds some support in an observation by Edmund Davies LJ in Hanning v Maitland (No 2) ([1970] 1 All ER at 820, [1970] 1 QB at 593), when he was considering this very subsection:
‘There was nothing in the conduct of the successful defendant which would justify the court in denying him an order for costs against the plaintiff.’
Thirdly, such a construction would avoid certain anomalies which might otherwise arise—for example, that a different result might ensue where the assisted wife had available capital of, say, £10 (so that an order for costs might be made against her limited to this sum) as against the case where she had nothing and no prospects of anything (in which case, ex hypothesi, no order for costs would be made against her); or where (as here) there were substantial arrears of maintenance, so that an order might be made against the wife to be set-off against the arrears, although without any real benefit to wife or husband; or where an order for costs is made against the wife, with the stipulation that it is not to be enforced without further order, although without any real expectation of its ultimate enforcement at all. Where possible, a construction should be adopted which will not produce anomalous results: Maxwell on the Interpretation of Statutesj. Finally, I have already indicated my view that it would be just and equitable that the husband’s costs should be paid out of public funds; and a construction should if possible be adopted which would produce a result consonant with justice and equity: see Maxwellk.
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As against those arguments, first, the attempt so to incorporate in the subsection part of RSC Ord 62, r 3(2), takes no account of the residual discretion allowed by that paragraph (which, as I have already indicated, will frequently be relevant in matrimonial cases). Secondly, the observation of Edmund Davies LJ in Hanning v Maitland (No 2) ([1970] 1 All ER at 820, 821, [1970] 1 QB at 593) must be read in its context; the learned Lord Justice was dealing with the facts of the case before him, and not purporting to propound a definition or a general rule—indeed, he went on to say, almost immediately ([1970] 1 All ER at 820, 821, [1970] 1 QB at 593):
‘But there are cases—e g matrimonial disputes, custody proceedings, and the like—where the successful party may be denied his costs even though he has behaved impeccably.’
Thirdly, although a statute will if possible be construed so as to avoid anomaly, the first or ‘golden’ rule of construction is that the words of a statute are to be read in their ordinary and literal sense. Anomalies will be rare if realistic orders are made; and the court must not frame its costs order artificially so as to by-pass the statutory conditions: see Nowotnik v Nowotnik ([1965] 3 All ER at 172, [1967] P at 102). If Parliament or her draftsman had wished to add to the subsection the words ‘because, although a successful litigant, he has in some way misconducted himself in relation to the litigation’, nothing would have been easier than to have done so expressly. Similarly as to the construction to avoid injustice. Moreover, in this connection, it should be noted that the reason why it is just and equitable that the husband’s costs should be paid out of public funds in the instant case is that it was only through what appears to be an error on the part of the legal aid committee that they were not originally so paid. I do not believe that this situation was at all within the contemplation of Parliament or her draftsman in enacting the 1964 Act, and certainly not in enacting s 1(4).
In my view, the words of sub-s (4) are plain and should be applied without any gloss. Nor do I think that it would be right to make any assumption other than that expressly enjoined by the subsection, namely that the 1964 Act had not been passed. It is not suggested that there is any source other than the wife or the legal aid fund (the latter being available only by virtue of the 1964 Act) from which the husband’s costs of the appeal could be paid. I am quite satisfied that no order would be made that the wife should pay the husband’s costs of the appeal—not because of any ‘practice’, but because any such order would be utterly unjust in the circumstances, and, therefore, an improper exercise of the judicial discretion as to costs. It is only by postulating an entirely different factual situation from that which subsists in this case that I can conceive the court ordering the wife to pay the husband’s costs of the appeal.
It follows, in my view, that the husband has failed to satisfy the condition stipulated in s 1(4) of the 1964 Act, and is, therefore, not entitled to an order for the payment out of the legal aid fund of his costs of the appeal. Having been satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds, it is with no pleasure that I arrive at this conclusion. If, as seems to me to be the case, the shortfall in justice to the husband has been due to a mistake by a body exercising public functions (to my mind something not, as I have said, within the contemplation of the 1964 Act), I would hope that it should be possible to compensate the husband by an ex gratia payment out of public funds.
ORMROD J. I agree. It is common ground that the husband fulfils the requirements of the Legal Aid Act 1964, s 1(1), ie he is an unassisted party in whose favour the proceedings have been finally decided against a person receiving legal aid. This court, therefore, has power, subject to the provisions of the rest of the section, to
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order that the whole or part of his costs should be paid out of the legal aid fund. Subsection (3) does not apply in this case because the court is concerned only with the costs of the appeal. The relevant provisions are, therefore, sub-ss (2) and (4). The argument before us on both sides proceeded on the basis that the court should consider: first, the second half of sub-s (2) (ie whether an order for costs should be made against the assisted party and, if so, in what amount); then sub-s (4), which is the main source of difficulty; and, finally, the first half of sub-s (2) (ie whether it is just and equitable that provision should be made for the husband’s costs out of public funds). This is the order in which the full Court of Appeal approached the problem in Nowotnik v Nowotnik (Hyatt intervening), but I am inclined to think that it may be wiser to follow the structure of the section itself.
The opening words of sub-s (2) are unusually emphatic; they direct that the court may make an order against the legal aid fund—
‘… if (and only if) the court is satisfied that it is just and equitable in all the circumstances that provision for those costs [ie the husband’s] should be made out of public funds … ’
In other words, it is a condition precedent to the making of such an order not only that it is just and equitable in all the circumstances, but also that it is just and equitable that public funds should be used to provide for his costs. The next step is a two-phase one: first to decide whether any costs should be borne by the assisted party; and then to determine the amount of his liability in respect of them. Where the assisted party has a nil contribution these two phases are usually elided together and the resulting order is expressed as ‘No order as to costs.' This may lead to confusion because there are important differences between ‘No order as to costs’ and ‘Appellant’s costs, respondent’s liability assessed at nil’. The former, in its strict sense, means that the court has decided that neither party is entitled to costs; the latter, that the appellant is entitled to his costs but cannot recover them against the assisted respondent by virtue of the provisions of the Legal Aid and Advice Act 1949, s 2(2)(e).
Section 1 of the 1964 Act goes on in sub-s (4) to prohibit the court from making an order against the legal aid fund in respect of—
‘… costs incurred by the unassisted party in any proceedings in which, apart from this Act, no order would be made for the payment of his costs.’
This apparently simple provision is, in fact, not an easy one to interpret and the difficulties have been increased by concentrating on questions of established or settled practice rather than on the wording of the section as a whole. Subsection (4) could, perhaps, be paraphrased in this way: ‘No order shall be made against the legal aid fund in respect of the successful unassisted party’s costs in any proceedings in which, apart from the 1964 Act, he would have been expected to bear his own costs.' If this subsection is read with sub-s (2), as suggested by Edmund Davies LJ in Hanning v Maitland (No 2) ([1970] 1 All ER 812 at 820, [1970] 1 QB 580 at 593), it can be interpreted as an instruction to the court, when considering whether any of the costs should be borne by the unsuccessful assisted party, not to allow its decision to be influenced by the fact that the Act provides for recourse to public funds for payment of the successful party’s costs. This, in my judgment, is the intention of the legislature. In other words, in cases in which the court would normally make no order as to costs, in the strict sense, it cannot make an order against the legal aid fund; but in cases where the intention of the court would be accurately expressed in the form of an order directing the assisted party to pay the costs of the successful unassisted party, but assessing the
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‘liability in virtue of an order for costs’ under s 2(2)(e) of the 1949 Act at nil, the court can make an order against the legal aid fund. There are obvious difficulties in practice, particularly in this Division, in drawing a clear distinction between cases in which no order for costs should be made and those in which the assessment of the amount of the liability should be nil, and as time goes on they will tend to increase rather than diminish, as the distinction becomes increasingly blurred.
The problem can be stated in another way. Subsection (4) directs the court to assume a hypothetical situation in which there is no Legal Aid Act 1964, and, therefore, in many cases no funds out of which the successful party can get his costs, and then to decide what order it would make for the successful party’s costs. But the hypothesis is incomplete because it does not state what assumption the court is to make about the ability of the unsuccessful party to pay any costs awarded against him. It is, therefore, easy to fall into the error of saying that no order for costs would be made for the successful party’s costs because the other side is legally aided with a nil contribution and has no means to pay; and, consequentially, that sub-s (4) operates to defeat the claim against the legal aid fund. In my judgment, the right way to approach the matter is to put out of mind the fact that the legal aid fund provides assets out of which an order for costs can be met and to keep in mind the difference between no order for costs and a nil assessment.
I must now try to apply this reasoning to the facts of the present case, dissecting the decision, I hope not too artificially, into its several components. I shall begin with what I have called the condition precedent, ie that on consideration of all the relevant material it is just and equitable that the husband’s costs should be paid out of public funds. This is clearly an issue which lies wholly, or mainly, between the husband and the legal aid fund. His conduct in the litigation must be a relevant factor, and, in my judgment, since public funds are involved the court should look at his conduct in relation to the dispute generally. For the purposes of this particular case, it is not relevant to enquire into the reasonableness or otherwise of the granting of a legal aid certificate to the wife, and I would prefer to express no view whether this is a matter to be considered in other cases. This case is, in fact, a very peculiar one because the hardship on the husband is in no way attributable to the fact that the wife is an assisted person; it is directly attributable to the refusal of the area committee to grant a legal aid certificate to the husband who was at all material times within the financial limits of the legal aid scheme. This is a situation which the 1964 Act clearly does not contemplate; it was obviously not intended to be a means of compensating an individual for loss arising out of an erroneous refusal of legal aid. On the other hand, there is nothing in the Act to preclude the court from considering this aspect of the case when it is deciding whether it is just and equitable to order his costs to be paid out of public funds. It would not be right, in my view, to fetter the court’s discretion in this respect unless there is a compelling reason to do so. However, if the court can take this consideration into account, the consequences are serious and the implications far-reaching. It necessarily involves an enquiry into whether the refusal of legal aid was or was not justified. Counsel for the Law Society, whose assistance I gratefully acknowledge and whose strength of mind and good humour in resisting judicial assaults during the argument I greatly admire, declined, on instructions, to give any explanation of the refusal of a legal aid certificate to the husband. He pointed out that there is a possible lacuna in the legal aid scheme in that there is no machinery for appealing from a decision of an area committee even in matters in which they exercise what might be called an original jurisdiction, as in this case, in connection with legal aid in appellate proceedings, but he steadfastly maintained that an area committee was not required to give its reasons for refusing a certificate in proceedings like the present. There is nothing in the 1949 Act, as far as I know, to prevent them disclosing their reasons in a proper case. The decision not to disclose them is, presumably, a matter of policy. One can see a number of reasons for adopting such a policy in general, but it is poor comfort for a rejected
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applicant or his legal advisers merely to be told, as the husband in this case was, that his application was rejected on two grounds, namely grounds ‘E’ and ‘F’ on the printed form which read as follows:
‘E. You have not show that you have reasonable grounds for taking steps to assert or dispute the claim, or for taking, defending, or being a party to proceedings.
‘F. It appears unreasonable that you should receive legal aid in the particular circumstances of the case.’
This is all the more galling when the application is supported by an unequivocal opinion by experienced counsel. Those who choose not to give their reasons in such circumstances cannot complain if their conduct is regarded as arbitrary.
I have considered very anxiously whether these implications should lead the court to refuse to consider this aspect of the case in dealing with the ‘just and equitable’ point, but my conclusion is that there is no sufficient reason to do so. The area committee’s decision was plainly erroneous on the first ground; the husband had an unanswerable case in law against the attachment of earnings order which was bad on at least three grounds. There is no evidence before us to justify the decision on the second ground although we gave counsel for the Law Society the most ample opportunity to put the area committee’s reasons to us. The conclusion on the evidence before us, and I stress on the evidence before us, inevitably is that the refusal of a legal aid certificate in this case was erroneous and that the husband has suffered serious financial hardship in having to finance his appeal himself without assistance. On this ground alone it is, in my view, just and equitable that his costs should be paid out of public funds. But whether this result can be achieved by using the machinery of the 1964 Act is another matter. With great regret, I have come to the conclusion that it cannot, and that other means of remedying the injustice to the husband should, if possible, be found.
I now turn to the second part of sub-s (2) and to consider what order would be appropriate inter partes, assuming, as sub-s (4) directs, that the 1964 Act had not been passed. I have no doubt that I would not have ordered the wife to pay any part of the husband’s costs of this appeal unless I was forced to do so by some rule of practice from which there was no escape. In my judgment, she is responsible for none or almost none of the costs incurred on this appeal by the husband. She played an entirely passive role throughout. The chain of causation leading to the husband’s loss in having to finance his appeal is clear, and it may be put briefly in this way. The litigation was initiated by the husband’s summons to reduce the order for maintenance; the wife attended the hearing and gave evidence of her financial position, but was not represented and made no positive effort to prevent a variation of the order in the husband’s favour; the attachment of earnings order was made, apparently, on the initiative of the justices themselves, certainly not on hers; the husband was represented by a solicitor who made no protest and failed to point out that the attachment of earnings order was bad in law; the area committee wrongfully refused the husband legal aid; and at te hearing of the appeal the wife, by her counsel, immediately conceded that the order for attachment of earnings was bad in law. The fact that this concession was not made until after the case was called on in this court cannot have added anything to the costs because the husband would have had to have come to this court in any event to get it set aside. He could not have done an unopposed appeal in person with much less difficulty than if it were opposed. On the question of quantum the wife was amply justified in appearing to support the order of the justices. She was in no position to question their conclusions; she had the interest of the child to defend, and her own position vis-a-vis social security to protect. If the 1964 Act is put out of mind, there is an overwhelming case for ordering the husband inter partes to bear his own costs. His loss, in my view, is due to three matters, none of which has anything to do with
Page 626 of [1970] 3 All ER 612
the wife: error on the part of the justices themselves; error by his solicitor; and error by the area committee. Is there then any rule of law or practice to prevent the court making such an order? The answer, in my judgment, is in the negative, unless there is a rigid rule that costs follow the event, but it is clear that RSC Ord 62, r 3, allows ample room for such an order in a case such as this one.
Approached in the way I have attempted to do, it is unnecessary to consider the problems raised by Nowotnik v Nowtnik, but out of respect to the able arguments of counsel I would like to express my views shortly. The decision of the Court of Appeal in Nowotnik was expressly based on the existence of a ‘settled practice’ in this Division that costs are not awarded against a wife unless she has separate estate. In the later case of Gooday v Gooday, the Court of Appeal held that, if there ever had been such a practice, the time had come to stop it. In Hanning v Maitland (No 2), the Court of Appeal reaffirmed its decision in Nowtonik () on this point notwithstanding Gooday’s case. I agree that the decisions in Nowtotnik v Nowotnik and Hanning v Maitland (No 2) are inconsistent with Gooday v Gooday and on the narrow point as to the existence or non-existence of the ‘settled practice’. I do not think that it goes any further than that. I must respectfully demur to the suggestion that the abolition of the so-called ‘settled practice’ ipso facto introduces into this Division another ‘settled practice’, namely that costs follow the event. In my judgment, it may be confusing to talk about ‘the practice’ as if it were a set of binding rules. It means no more than what is usually thought to be just and, therefore, ordinarily done. While ‘costs follow the event’ represents what is generally thought to be just in cases in other Divisions, it does not necessarily represent what is just in many cases which have to be dealt with in a Family Division. In some cases it undoubtedly does, in others it would be plainly unjust, sometimes to the husband, sometimes to the wife, and in some, gravely damaging to the interests of the children. The work in this Division is more often an essay in shades of grey than in black and white. Moreover, in this Division the parties remain bound to one another by ties which are not severed on divorce. They continue to be parents, and in many cases the wife remains dependent on the husband. These are all matters to be taken into account in exercising the discretion as to costs in each individual case: per Diplock and Widgery LJJ in Gooday v Gooday ([1968] 3 All ER at 615, 616, [1969] P at 8, 9). The ‘event’, in my judgment, is not a sufficiently sensitive indicator in the Family Division. If it is to be asserted that RSC Ord 62, r 3, compels a different approach, I would respectfully question whether it does not encroach unduly on the statutory discretion of the court as to costs and I would require to be satisfied that it was intra vires.
The result is that, in my judgment, no order would have been made in this case for the husband’s costs against the wife if the 1964 Act had not been passed. Consequently, s 1(4) of the Act applies, and the court is precluded from ordering the husband’s costs to be paid out of the legal aid fund.
FAULKS J. I have the misfortune to dissent. Sir Jocelyn Simon P having recited the facts, I will come straight to the point. The long title of the Legal Aid Act 1964 is—
‘An Act to provide for the payment out of the legal aid funds of costs incurred by successful opponents of legally aided litigants’,
an admirable object indeed. Most of legal aid, of course, is expended in the Probate, Divorce and Admiralty Division.
Page 627 of [1970] 3 All ER 612
For a long time the only authority on the Act was Nowotnik v Nowotnik (Hyatt intervening), where the Court of Appeal held that the successful unassisted husband was for a number of reasons disentitled to recover his costs from the legal aid funds. In Hanning v Maitland (No 2) ([1970] 1 All ER 812 at 815, [1970] 1 QB 580 at 587), however, Lord Denning MR observed: ‘… I must confess that this court in Nowotnik v Nowotnik interpreted the Act wrongly.' He said this—it would seem—largely because over the period of three years after the passing of the Act Parliament provided no less than £120,000 for the purposes of the Act, of which only £1,155 was used. Nevertheless, he continued ([1970] 1 All ER at 815, [1970] 1 QB at 587):
‘… the decision in Nowotnik v Nowotnik was right; but it should be based solely on the ground that, apart altogether from the Legal Aid Act 1964, no order would have been made in favour of the husband against the wife ordering her to pay his costs. The husband was barred, therefore, from recovering against the legal aid fund by the exception contained in s 1(4) of the 1964 Act.’
Salmon LJ said ([1970] 1 All ER at 818, [1970] 1 QB at 590):
‘… I would like to pay a tribute to the simplicity, clarity and brevity of the Legal Aid Act 1964, which in my respectful view is a model of what such a statute should be … Nor was it [i e the Act] intended to operate for the benefit of husbands in matrimonial suits who would in no event have been likely to obtain an order for costs against their wives (see s 1(4)).’
Before considering the judgment of Edmund Davies LJ, it is desirable to see what it is that is stated in s 1(4) of the 1964 Act. It provides:
‘An order under this section shall not be made by any court in respect of costs incurred by the unassisted party in any proceedings in which, apart from this Act, no order would be made for the payment of his costs.’
I understood that provision to refer to the case where a successful defendant is deprived of his costs in the discretion of the court because he has in some way misconducted himselfl, and it would appear from the judgment of Edmund Davies LJ that that view is correct if the case is heard in the Queen’s Bench Division, but that it has an entirely different meaning in the Probate, Divorce and Admiralty Division. Edmund Davies LJ observed ([1970] 1 All ER at 820, [1970] 1 QB at 593) that the first condition to be observed is that—
‘… the proceedings must be such that, were the case one where no question of legal aid arose, the successful party would have secured an order for costs against the other party (see s 1(4)).’
And he continued ([1970] 1 All ER at 820, [1970] 1 QB at 593):
‘There is no room for doubt that the first condition is here complied with. There was nothing in the conduct of the successful defendant which would justify the court in denying him an order for costs against the plaintiff.’
The plaintiff in that case had a ‘nil’ contribution, no one doubting for a moment that costs would follow the event however impecunious he was. Edmund Davies LJ continued ([1970] 1 All ER at 820, [1970] 1 QB at 593):
‘But there are cases—e g matrimonial disputes, custody proceedings, and the
Page 628 of [1970] 3 All ER 612
like—where the successful party may be denied his costs even though he has behaved impeccably. Indeed, Nowotnik v Nowotnik (Hyatt intervening) was itself such a case.’
The decisions on s 1(4) of the Legal Aid Act 1964, therefore, by which we are bound, amount to this: the subsection clearly states that a person who, like the defendant in Hanning v Maitland (No 2), suffers an injustice in proceedings to the Queen’s Bench Division has a remedy against the legal aid fund while a person like the husband in the instance case who suffers an injustice in the Probate, Divorce and Admiralty Division has no such remedy. As it is the ratio decidendi of these decisions which binds us it is as well to search for it. Salmon LJ summarised it ([1970] 1 All ER at 819, [1970] 1 QB at 591):
‘… this court decided that no order would have been made against the wife … for to have made such an order would have been contrary to the well-established practice of the Divorce Court as stated by Bucknill LJ in Barker v Barker [[1950] 1 All ER 812 at 814].’
Lord Denning MR added in Nowotnik v Nowotnik ([1965] 3 All ER at 171, [1967] P at 101):
‘In order to test the matter, it is necessary to consider what the position would have been if this case had been tried in the days before legal aid.’
So the 1964 Act is to be considered in the conditions prevailing 15 years earlier and in accordance with a practice enunciated 14 years before. Let us see what was actually said in Barker v Barker ([1950] 1 All ER at 814):
‘True, the court has an absolute discretion to grant costs against a respondent wife, whether she has separate estate or not, but I do not think that it is the practice to do so unless the wife has separate means sufficient to pay his and her own costs. Where the wife has put forward charges against her husband which are quite unfounded, or has denied matrimonial offences of which she is found guilty and in which she had no reasonable prospects of success, or where the wife has separate means which are sufficient to pay her own costs, as well as the husband’s costs, the position is different.’
The trial judge in Nowotnik v Nowotnik found that the wife had put forward against her husband charges of adultery which were quite unfounded, but in the instant case no criticism whatever is to be made of the wife’s conduct.
Accordingly, however, much one would like to say that these matters should be looked at in the climate of contemporary conditions, there is no doubt but that we are bound to reject the husband’s application if there is no further matter for consideration. But there is. The law, as has so often been said, is a living thing. Tempora mutantur nos et mutamur in illis. In 1957, in Winchester v Fleming ([1957] 3 All ER 711 at 714, [1958] 1 QB 259 at 264, 265), Devlin J decided:
‘I think that the tort of harbouring as a separate offence and without enticement, is one that was known to the common law. LORD KENYON is clear on the point and there is other authority cited in WINFIELD ON TORTSm … In a society
Page 629 of [1970] 3 All ER 612
that is organised on the basis that everyone is in the last resort to be housed and fed by the state, the bottom has dropped out of the action for harbouring.’
The practice referred to in Barker v Barker stems from the rights of the wife as an agent of necessity for the husband. The bottom has dropped out of that legal fiction and it is to be abolished on 1 August 1970 (Matrimonial Proceedings and Property Act 1970, s. 41). And on 16 July 1968 the Court of Appeal again consideredn the Legal Aid Act 1964, and their conclusions appear to me to be quite irreconcilable with those in Nowotnik v Nowotnik, the references to which decision in Hanning v Maitland (No 2) are, insofar as they refer to s 1(4), of course obiter. Gooday v Gooday binds us also and we have to decide which decision to follow. Diplock LJ dealt ([1968] 3 All ER at 613, 614, [1969] P at 6) with the point in a manner similar to that quote above from the judgment of Devlin J ([1957] 3 All ER 711 at 714, [1958] 1 QB 259 at 264, 265):
‘… it is said that no order for costs should be made against the wife at all because of a settled practice of the court not to award costs against unsuccessful wife petitioners … I do not accept that in the 1960s there should be any settled practice peculiar to the Divorce Division from which learned judges are not entitled to depart. In my view their discretion as to costs, a statutory discretion conferred on them by s 50(1) of the Supreme Court of Judicature (Consolidation) Act, 1925, is as broad in the case of the matrimonial jurisdiction of the court as in the ordinary jurisdiction. No doubt in the old days before the Married Women’s Property Act, 1882, and indeed before the institution of legal aid in civil cases in 1950, such a general practice was one of common sense, because a wife normally would not have had the separate means to meet an order for costs against her. Today, however, where the spouses in the case of many married couples are equally capable of earning their own living, and equally likely to have a joint interest in property or to own property of their own, I can see no rational grounds for saying that there should continue to be a settled practice without regard to the individual features of each case. As I say, I think that the learned judge had a discretion, the statutory discretion given to him by the Act of 1925.’
Widgery LJ said ([1968] 3 All ER at 616, [1969] P at 9):
‘I respectfully agree with DIPLOCK, L.J., however, that, if that ever was more than a simple rule of practice, it has no place in the twentieth century. In these days, when wives are frequently skilled women who can earn as much as, if not more than, their husbands, there is no reason at all why one should start with any kind of presumption in favour of one against the other when these matters arise. That is not to say that the old so-called “practice” will not often be followed hereafter because there will still be many cases in which a wife is entirely dependent on her husband and therefore is in the situation which gave rise to this practice. What, however, is important in my judgment to recognise, as has already been said, is that, in approaching this question at the present day, the judge should not approach it (and is not bound to approach it) with any kind of presumption that his decision should be one way or the other, and indeed, in the exercise of his discretion as to costs, he must do what is right and just in the case before him, and it is not for this court to interfere with the exercise of his discretion in that regard.’
Page 630 of [1970] 3 All ER 612
And Willmer LJ observed ([1968] 3 All ER at 617, 618, [1969] P at 11):
‘I venture to add a few words of my own only because I think that I can claim to have had some experience of the practice in the Divorce Division. Moreover, I was myself a party to the decision of this court in Nowotnik v. Nowotnik (Hyatt intervening). It will be observed that that was a case which came before a specially assembled court of five judges, of whom three were judges who had had prior experience of the matrimonial jurisdiction. Anything that was said in that case, therefore, was said with a considerable weight of authority behind it. I entertain no doubt that, as was there stated, it has been a settled practice of the Divorce Court, going back for many years well into the last century, not to make an order for costs against an impecunious wife and in favour of a husband who has means. The historical reasons for that approach are obvious, and have already been pointed out by DIPLOCK, L.J. I was a party to the statement made with the authority of the full court in that case as to the existence of the practice, and I do not resile from it. On the other hand, I fully appreciate what has already been said as to the change in social conditions which has taken place over recent years, and I agree with my lords that the reason for the existence of that settled practice has now largely disappeared.’
That last sentence appears to me to be wholly inconsistent with the Nowotnik v Nowotnik approach of looking at 1970 through the eyes of 1949.
For my part I unhesitatingly choose to follow Gooday v Gooday. What is the effect of that on this case? Sir Jocelyn Simon P has read s 50(1) of the Supreme Court of Judicature (Consolidation) Act 1925, and I will not read it again. We then look to the rules of court which seem to me to provide a complete code. RSC Ord 62, r 2(4), provides:
‘The powers and discretion of the court as to costs under section 50 of the Act, (which provides that the costs of and incidental to proceedings in the Supreme Court shall be in the discretion of the Court and that the Court shall have full power to determine by whom and to what extent the costs are to be paid) … shall be exercised subject to and in accordance with this Order.’
All I emphasise is that it says ‘that the Court shall have full power’. RSC Ord 62, r 3(2), provides:
‘… the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.’
There are some admirable notes in the Supreme Court Practice 1970o under the heading: ‘Discretion to be Exercised Judicially’—from which we learn that the discretion ‘must be exercised … according to rules of reason and justice, not according to private opinion … over even benevolence … or sympathy.’
The wife, like the plaintiff in Hanning v Maitland (No 2), is impecunious. But she has merits which that plaintiff, albeit badly advised, had not. She is owed arrears of maintenance of more than £1,000, and she was taken to the Divisional Court through no fault of her own but through the mistake of the justices. Whilst it is perfectly true that, on appeal from the Queen’s Bench Division, a defeated litigant
Page 631 of [1970] 3 All ER 612
in the Court of Appeal would be unlikely to escape the costs by saying that it was no fault of his that the judge at first instance decided wrongly in his favour, I feel that, in the instant case, we should be justified in departing from the rule laid down in RSC Ord 62, r 3(2). Indeed, had Gooday’s case not been present to my mind, I might well have thought the appropriate order as to the reserved costs to be no order as to costs. But with Gooday’s case in mind, I feel the appropriate order, apart of course from the Legal Aid Act 1964, would be ‘Wife to pay £50 contribution to the husband’s costs, not to be enforced without further order’. This would cover the contingency of an unforeseen windfall, and is akin to the common order of maintenance at the rating of 1s a year in the case of a temporarily indigent husband.
I find, accordingly, that the proceedings in this court have been finally decided in favour of the husband, that it is just and equitable in all the circumstances that provision for the whole of the husband’s costs as between party and party both of the successful appeal and of the application for the order should be paid out of the legal aid fund (the husband was in fact in receipt of legal aid for the purposes of the application), that no order for costs should be made against the wife personally who is legally aided with a ‘nil’ contribution, and that, apart from the Legal Aid Act 1964, an order would have been made for contribution towards payment of the husband’s costs as set out above. Such an order is sufficient to comply with s 1(4) according to counsel for the Law Society, and I would respectfully agree with him.
I cannot part from this case without saying this. During the argument it was constantly suggested that, whereas the practice of treating wives more favourably as to costs than other litigants may have been brought to an end by Gooday v Gooday, it will nevertheless rise again at once like the phoenix from its ashes and that the question one should ask oneself is, ‘Assuming the wife not to have been legally aided would I have awarded costs against her?' To this it is suggested that the answer should be ‘No.' This would bring about the obviously unjust result that the husband in Nowotnik v Nowotnik would fail against the legal aid fund because his wife was without means, while the husband in Gooday v Gooday would succeed because his wife, who had a contribution of £7, had savings of £50. I think that s 1(4) is, perhaps, not so clear as has been thought, and that the approach of Edmund Davies LJ is the correct one, the question to be asked being—‘Is there anything in the conduct of the litigant with regard to these proceedings to justify my denying him his costs which would normally follow the event?’
I would make the order asked for accordingly.
Application dismissed. Leave to appeal to the Court of Appeal.
Solicitors: Robinson & Bradley (for the husband); Solicitor, Law Society.
Alice Bloomfield Barrister.
Farrell v Federated Employers Insurance Association Ltd
[1970] 3 All ER 632
Categories: INSURANCE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, MEGAW LJ AND SIR FREDERIC SELLERS
Hearing Date(s): 27, 28 JULY 1970
Insurance – Employer’s liability – Subrogation – Receiver and manager appointed for employers – Employee obtaining judgment in default of appearance against employers – Action by employee against insurers for damages and costs – Condition of policy – Every writ served on employers to be notified to insurers immediately on receipt – Failure of employee to notify insurers until judgment obtained – Whether breach of condition relieving insurers of liability – Third Parties (Rights against Insurers) Act 1930, s 1(1)(b).
In November 1962, the plaintiff suffered an injury in the course of his employment, but the employers’ insurers were not notified of the accident by the employers until April 1963. The plaintiff’s solicitors, having written to the insurers asking who was to accept service of proceedings on the employers’ behalf, were informed by the insurers on 4 August 1964 that the proceedings could be issued on the employers. In September 1964, a receiver of the employers was appointed, so that, by virtue of s 1a of the Third Parties (Rights against Insurers) Act 1930, the employers’ rights against the insurers vested in the plaintiff. The writ was issued against the employers in September 1965 and was sent by post to their registered office of 6 January 1966. On 17 January 1966, the plaintiff’s solicitors sent the writ and statement of claim to the receiver who returned them stating that the assets of the employers fell far short of the liabilities. On 28 February 1966, judgment with costs in default of appearance was entered. On 2 March 1966, the plaintiff’s solicitors informed the insurers of this, and in May 1966, the damages were assessed. In an action by the plaintiff claiming the sum from the insurers who denied liability, alleging, inter alia, breach of that part of condition 1 of the policy which provided ‘Every … writ … served on the employers shall be notified or forwarded to [the insurers] immediately on receipt’,
Held – (i) Condition 1 of the policy had not been complied with because the writ had not been notified immediately on receipt, especially as, before the notification to the insurers of the receipt of the writ, judgment by default had been obtained against the employers (see p 635 g to j and p 638 b and f, post).
Dictum of Fletcher Moulton LJ in Re Coleman’s Depositories Ltd and Life and Health Assurance Association [1904–07] All ER Rep at 387 applied.
(ii) The insurers by their letter of 4 August 1964 had not waived condition 1 by inviting service of the writ on the employers (see p 636 a, p 637 g to j and p 638 f, post).
Decision of MacKenna J [1970] 1 All ER 360 affirmed.
Notes
For statutory subrogation of rights under an insurance policy, see 22 Halsbury’s Laws (3rd Edn) 339–343, paras 697–701, and for cases on the subject, see 29 Digest (Repl) 513–515, 3607–3620.
Page 633 of [1970] 3 All ER 632
For the Third Parties (Rights against Insurers) Act 1930, s 1, see 3 Halsbury’s Statutes (3rd Edn) 176.
Cases referred to in judgment
Austin v Zurich General Accident and Liability Insurance Co Ltd [1945] 1 All ER 316, [1945] KB 250, 114 LJKB 340, 172 LT 174, 29 Digest (Repl) 531, 3658.
Coleman’s Depositories Ltd and Life and Health Assurance Association, Re [1907] 2 KB 798, [1904–07] All ER Rep 383, 76 LJKB 865, 97 LT 420, 29 Digest (Repl) 509, 3597.
Lickiss v Milestone Motor Policies at Lloyds [1966] 2 All ER 972, sub nom Barrett Bros (Taxis) Ltd v Davies [1966] 1 WLR 1334, Digest (Cont Vol B) 460, 3675b.
Post Office v Norwich Union Fire Insurance Society Ltd [1967] 1 All ER 577, [1967] 2 QB 363, [1967] 2 WLR 709, Digest Supp.
Appeal
This was an appeal by the plaintiff, Edward Farrell, from an order of MacKenna J, dated 6 November 1969 and reported [1970] 1 All ER 360, giving judgment for the defendant insurers, Federated Employers Insurance Association Ltd, in an action by the plaintiff claiming damages of £14,500 and costs of £292 18s 10d. The facts are set out in the judgment of Lord Denning MR.
Conrad Dehn QC and J Trench for the plaintiff.
W A Macpherson for the insurers.
28 July 1970. The following judgments were delivered.
LORD DENNING MR. Nearly eight years ago, on 10 November 1962, Mr Edward Farrell, the plaintiff, was injured in an accident. He was employed by a firm called J O’Connor & Co Ltd They were laying pipes in a tunnel for the West Ham Corporation. The plaintiff had only been working for them for five days. Then he fell from the jib of a crane. He was severely injured. The employers did not, as they should have done, notify their insurers of the accident. They should have done it as soon as possible. But they did not do it until 1 April 1963. They did then notify them. In giving details they said that there was no defect in the machinery or plant; and that the accident was not caused by the carelessness of anyone other than the plaintiff himself.
Eight months after the accident, on 16 August 1963, the plaintiff consulted solicitors who wrote to his employers claiming damages and asking them to forward the letter to their insurance company. The employers did so. They were insured with the defendants, the Federated Employers Insurance Association Ltd The insurers wrote to the plaintiff’s solicitors saying that no liability was admitted but arranging for a medical examination. Several letters passed, but the insurers evidently thought, as the accident had not been notified to them for some months, that the employers might not claim under the policy, and so, on 8 April 1964, the insurers wrote to the plaintiff’s solicitors:
‘Our Chief Officer has instructed us to deal with this matter at present without prejudice to our liability under our policy.’
On 28 July 1964, the plaintiff’s solicitors wrote to the insurers asking ‘who is to accept service of proceedings on [the employers’] behalf.' On 4 August 1964, the insurers replied:—‘should you wish to issue proceedings, we have no objection to them being issued on [the employers].’ This was not the usual practice. In the ordinary way, of course, an insurance company get their own solicitors to accept service. In this case, they did not take that course. They left the plaintiff’s solicitors to serve the employers direct. But those solicitors did not do so for a long time. The plaintiff’s solicitors waited for over a year. They did not issue the writ until 28 September 1965. That was getting on for three years after the accident. They issued it, of course, against the employers. They did not serve it until 6 January 1966.
Page 634 of [1970] 3 All ER 632
They sent it by post to the registered office of the employers. This was good service, but there was no one there connected with the employers. The solicitors looked up the employers’ file and found that a bank had appointed a receiver for the debenture holders. He had been appointed as long ago as September 1964. So, on 17 January 1966, the plaintiff’s solicitors sent the writ and statement of claim to the receiver. On 18 January 1966, the receiver sent those documents back and stated:
‘You may be aware that I am Receiver and Manager of [the employers], appointed by Barclays Bank Ltd., and in this connection, I should inform you that the assets which have come into my hands fall far short of the sum required to discharge the indebtedness to the Bank, and accordingly there is no possibility of any funds becoming available to the unsecured creditors of which [the plaintiff] might be one.’
On getting that letter, I think that the plaintiff’s solicitors ought at once to have taken the matter up with the insurers. After all, they had been in correspondence with them in 1963 and 1964. But instead, they entered judgment against the employers in default of appearance. On 28 February 1966, they entered judgment for damages to be assessed. Shortly afterwards, on 2 March 1966, they wrote to the insurers (it was their first letter for 18 months):
‘We are writing to advise you that, having now served proceedings upon [the employers], we have obtained a judgment in default of appearance for damages to be assessed.’
The insurers instructed their solicitors who wrote back on 11 March 1966:
‘This is the first occasion upon which [the insurers] have received any notice whatsoever of proceedings having been brought against [the employers] … It was a condition precedent that [the employers] would notify or forward to [the insurers], immediately on receipt, every claim, notice, letter, writ, process or other document concerning any claim. As you will have gathered, none were notified or forwarded.’
Over two years later, on 29 May 1968, the damages were assessed at £14,500. On 16 August 1968, the costs were taxed at £292 18s 10d. On 1 November 1968, the plaintiff’s solicitors issued a writ against the insurers claiming the sums of £14,500 and £292 18s 10d by virtue of a provision of the Third Parties (Rights against Insurers) Act 1930. That Act gives an injured person a direct cause of action against the insurers whenever the insured becomes insolvent. When the insured is a company, the Act applies, among other things, on a receiver being appointed: see s 1(1)(b). Thereupon the injured person can sue the insurers direct. But he has first to establish that the insured was liable to him for that amount: see Post Office v Norwich Union Fire Insurance Society Ltd; and, having done that, he stands in the shoes of the insured. But the insurers can avail themselves, as against him, of all the defences which would have been available to them as against the insured. So in this case the insurers said that the policy was issued subject to conditions on which they relied as a defence.
The insurers had kept no copy of the policy, but they had kept a record card which enables them to reconstruct one. The correctness of it was not challenged. It showed that the employers had made a proposal and declaration on 26 June 1962, and that the policy was signed on 13 September 1962. It was originally for the period from 9 August 1962 to 31 October 1962, but was afterwards extended to 11 December 1962. It insured the employers against liability to their workmen in case of bodily injury or disease arising out of and in the course of their employment; subject, however, to several conditions, of which condition 1 provided:
Page 635 of [1970] 3 All ER 632
‘In the event of any occurrence which may give rise to a claim for indemnity under this policy, the employer shall as soon as possible give notice thereof to the [insurers] in writing with full particulars. Every claim, notice, letter, writ … or other document served on the employer shall be notified or forwarded to the [insurers] immediately on receipt.’
At one stage the insurers sought to rely on the first part of the condition because the employers had not notified them until 4 1/2 months after the accident. But the insurers realised that they had, by their conduct, waived that part of the condition. So they confined their reliance to the second part of the condition. They said that the writ had not been served on them ‘immediately on receipt’. It was received at the employers’ office on 7 January 1966, but was not notified to them until 3 March 1966; and meanwhile judgment had been entered against the employers. MacKenna J ([1970] 1 All ER 360, [1970] 1 WLR 498) held that the insurers were protected by the condition. The plaintiff now appeals to this court.
Counsel for the plaintiff recognised that he stood in the shoes of the employers. His point was that this condition was not binding on the employers unless it was brought to their notice, and proved by evidence so to have been brought. He cited for this proposition Re Coleman’s Depositories Ltd and Life and Health Assurance Associations. He submitted to us that the insurers ought to prove the posting of the policy to the employers; and he cited some old cases on how postage was to be proved. I do not think that this point should prevail. It was not taken on the pleadings. It was taken for the first time at the trial. The insurers met it by calling the brokers who proved that the ordinary course of business was this: the insurers send the policy to the brokers, and then the brokers send it to the employers as against the receipt of the first premium. The brokers had no reason to suppose that this course of business was not followed in this case. That seems to me quite sufficient proof that the policy was sent to the employers, especially when it is now over seven years since the policy was issued and the employers have gone out of business. Their papers, said the receiver, were in an appalling state. There is another answer too. The plaintiff is here claiming the benefit of a policy which is issued to the employers. He must take it as he finds it. He cannot claim the advantages and reject the disadvantage. He cannot claim the benefit and reject the conditions of it: see Austin v Zurich General Accident and Liability Insurance Co Ltd.
Counsel for the plaintiff’s second point was that the condition had been fulfilled. ‘Immediate’, he said, was defined by Fletcher Moulton LJ in Coleman’s case ([1907] 2 KB at 807, [1904–07] All ER Rep at 387). It meant ‘with all reasonable speed considering the circumstances of the case’. He said that the writ was served here on 7 January 1966 and that notice was given to the insurers on 3 March 1966, that is, some eight weeks later. That was, he said, all reasonable speed. I do not think so. I think that, in the circumstances of the case, the plaintiff’s solicitors ought to have told the insurers about the writ soon after they received the letter of 17 January 1966 from the receiver. ‘With all reasonable speed’ would mean by the end of January 1966 at latest. Instead of doing so, the solicitors went on and signed judgment on 28 February 1966, in default of appearance. Counsel for the plaintiff said that judgment made little difference. The insurers had not been prejudiced. They could easily have got that judgment set aside and have got leave to defend. That may be. But I do not see why they should be put to that trouble. The plain fact is that the writ was not notified with all reasonable speed. The condition was not fulfilled. The insurers are entitled to rely on it.
Page 636 of [1970] 3 All ER 632
I ought, perhaps, to mention another point taken by counsel for the plaintiff. He relied on the letter of 4 August 1964 in which the insurers said that proceedings could be issued on the employers. By that letter, he said, they had waived reliance on the condition. They had invited service of the writ on the employers and could not, therefore, complain that they were not notified of it. I do not regard that letter as a waiver at all. It was still the duty of the employers to notify the insurers when they received it.
So I think that all the points taken by counsel for the plaintiff fail. I may add that I think that this is one of those cases where the insurers were quite entitled to rely on the condition. The accident happened nearly eight years ago. It is quite impossible at this distance of time to investigate the rights or wrongs of it.
It think that the judge ([1970] 1 All ER 360, [1970] 1 WLR 498) was quite right. I would dismiss this appeal.
MEGAW LJ. Counsel for the plaintiff attacks the judgment of the learned judge ([1970] 1 All ER 360, [1970] 1 WLR 498) on four separate grounds.
The first ground of attack involves two propositions. The first proposition is that, at any rate in the circumstances which existed at the trial, the burden of proof was on the insurers to show that the relevant condition of the policy was indeed a term of the contract of insurance between the insurers and the employers. The condition in question is that which Lord Denning MR has read, condition 1 in the policy. I need not read it again. It involves the obligation that every claim or writ or other document of the same type should be notified to the insurers immediately on receipt. The second proposition is that, the burden of proof being thus on the insurers, the learned judge was wrong to hold—if on the true construction of his judgment he did hold—that the insurers had proved that the policy in question had been sent to and received by the employers before 10 November 1962. In my judgment, that attack fails in relation to both the propositions involved.
First, as to the burden of proof, it is necessary to look briefly at the pleadings. In the statement of claim put forward on behalf of the plaintiff, it is asserted specifically that at all material times there subsisted a contract of insurance between the insurers and the employers, namely an employers’ liability policy, whereby—and then the body of the terms of the insurance is set out. To my mind, nothing could be a clearer allegation than that of the assertion on behalf of the plaintiff, not merely that there existed a contract of insurance, which of course he has to show in order to lay any foundation for his claim; but also that that contract of insurance was contained in a specified, named document, namely the policy in question. To that pleading on behalf of the plaintiff the insurers did not, as is sometimes done in cases such as this, put the plaintiff to proof of the policy. It may be that, if the argument put forward on behalf of the plaintiff on this occasion were correct in law, it would involve that it future a defendant insurance company would properly be disposed to take what has hitherto sometimes been regarded as the obstructive course of putting the plaintiff to proof of the contract of insurance which he alleges. In this case, however, the insurers rightly and sensibly did not adopt that tactic. They stated in para 1 of their defence that they would refer to the policy in question at the trial for its full terms and effect. Otherwise para 1 of the statement of claim was admitted.
So far there is no issue between the parties on the face of those pleadings as to the existence of a contract of insurance or as to its terms, because, when it came to the trial, there was no doubt or dispute that the document produced was a precisely accurate copy of the policy of insurance which had been issued, and it contained condition 1 which has been read.
Then came the reply, which was heavily amended some time at the early stages
Page 637 of [1970] 3 All ER 632
of the hearing before MacKenna J. Even by that reply, when it is looked at, with all the red ink involved, there is nothing which could be regarded as a specific assertion that this insurance policy was not received by the employers until after the date of the accident or that any of the conditions in it might not have been known to them as the terms of the proposed contract and, therefore, might not be binding on them.
It was said by counsel for the plaintiff that counsel for the insurers at the trial accepted the burden of proof that this contract was a contract involving all the terms which appeared on the face of the policy, and it was on that basis that the burden of proof, having been thus accepted, must rest on the insurers, despite what appeared in the pleadings. But it emerges that the only reason why the insurers had arranged and agreed to open the case before MacKenna J and thus take some burden of proof on themselves, was that there was, indeed, on them a burden to establish that they had not been given notice of the issue of the writ. That being, as appeared in the pleadings, the only relevant issue of fact at the time when that arrangement was made, and when counsel for the insurers in accordance with it began to open the case, it was on that basis, and that basis alone, that the insurers undertook the burden of proving anything. It did not impose on them, and could not impose on them, a burden of proof to show, in this state of the pleadings, where the plaintiff asserts that a particular policy with a given number is the contract, that each and every one of the terms contained in the policy is indeed a contractual term binding the insurers and the employers.
Even if, for some reason or other, the burden of proof had been on the insurers or had been accepted by them, the second proposition put forward on behalf of the plaintiff in my judgment also completely fails. The learned judge was fully entitled to come to the conclusion to which he did come on the whole of the evidence before him that this policy had been received by the employers before the date when the accident happened, in which event the whole of this attack fails. It is perfectly true that the learned judge has used these words ([1970] 1 All ER at 362, [1970] 1 WLR at 500): ‘I have no reason to suppose that the policy was not sent to the employers long before 10th November 1962 … ’, being the date of the accident. It is said by counsel for the plaintiff that that is not a finding that the policy was received by the employers; and it is the receipt by the employers that matters for this purpose. In my judgment, there is no doubt whatever as to what the learned judge intended to find and did find and was entitled to find on the evidence. Accordingly, in my view, the first attack which is made on the judgment of the learned judge wholly fails.
The other three grounds can be dealt with much more briefly. The second ground is that the insurers are not entitled to rely on condition 1 of the policy because, in effect, they are estopped from so doing by a letter which they wrote to the plaintiff’s solicitors on 4 August 1964. In that letter they wrote:
‘We have received your letter dated the 28th July, and we would state that we have not concluded our enquiries into this matter, and should you wish to issue proceedings, we have no objection to them being issued on [the employers].’
It is said that that, in effect, constitutes an estoppel; that the plaintiff’s solicitors were entitled to treat that as being a representation or a statement which meant that the insurers were not concerned to be told about the issue of any writ or other proceedings hereafter. In my judgment, the letter, accompanied by the evidence which was given in relation to it, is quite incapable of bearing such a meaning or producing such an effect.
The third attack is on the basis that the insurers have not shown that the plaintiff failed to comply with condition 1 of the policy, assuming that it was indeed a term of the contract of insurance. The first attempt of service of the writ on behalf of
Page 638 of [1970] 3 All ER 632
the plaintiff was on 6 January 1966, when it was sent to the registered office of the employers. It was then sent to the receiver on 17 January 1966, who promptly sent it back to the plaintiff’s solicitors. It is said that the relevant period which elapsed was from 16 January to 2 March, on which latter date notice was at last given to the insurers as to not merely the issue of the writ but also the judgment which had been by then given on it. It is said that that period, if it be the right period to take, from 16 January to 2 March, is ot sufficient to prevent it constituting the giving of notice ‘immediately on receipt’, which is what is required by the condition. In my judgment, apart altogether from the fact that there had been meanwhile the entry of judgment in default, it is impossible to say that that was giving notice ‘immediately on receipt’.
The fourth and last attack which is made on the judgment is that, even supposing everything else against the plaintiff, if the condition was broken, the insurers were not entitled to repudiate liability on that ground unless the insurers were prejudiced by the breach of the condition. It is said that here they were not prejudiced, particularly because, even though judgment had been entered, they could, had they been so minded, have applied to have that judgment set aside. Let it be assumed for the purposes of this present case that the decision on which counsel for the plaintiff relies—Lickiss v Milestone Motor Policies at Lloyds—is to be treated as authority for the proposition that something which is included in a policy of insurance, and stated therein to be a condition in the old sense of that word, may nevertheless not be sufficient to entitle the insurers to repudiate liability unless they can show that they have actually been prejudiced by the breach. Let that be assumed for the purposes of this appeal. Nevertheless it is, in my judgment, perfectly clear that, in the present case, that decision, so construed, is of no avail to the plaintiff because there was here undoubtedly prejudice to the insurers by reason of the breach of the condition.
I agree that the appeal should be dismissed.
SIR FREDERIC SELLERS. I agree with the judgments of both my Lords, and there is nothing I wish to add to their reasoning, particularly as I have throughout the argument found the judgment of MacKenna J ([1970] 1 All ER 360, [1970] 1 WLR 498) wholly satisfactory and an answer to the several points raised in the attack on it by counsel for the plaintiff. I have been puzzled that what proved to be the main attack of counsel for the plaintiff as to the nature of the contract, whether it was a plain contract without conditions or with the policy conditions, ever became an issue in the court below, having regard to the pleadings. Counsel for the plaintiff had to rely on a contract—he took the contract which the insurers set up and then sought to demolish it. I do not think that it was open to him on the pleadings which have been analysed here, particularly by Megaw LJ. It was not an available argument.
Appeal dismissed
Solicitors: Stuart Hunt & Co (for the plaintiff); Herbert Smith & Co (for the insurers).
Rosalie Long Barrister.
F E Callow (Engineers) Ltd v Johnson
[1970] 3 All ER 639
Categories: HEALTH; Health and safety at work
Court: HOUSE OF LORDS
Lord(s): LORD HAILSHAM OF SAINT MARYLEBONE LC, LORD HODSON, VISCOUNT DILHORNE, LORD DONOVAN AND LORD GARDINER
Hearing Date(s): 27, 28 JULY, 21 OCTOBER 1970
Factory – Dangerous machinery – Duty to fence – Part of machinery not dangerous by itself – Danger caused by juxtaposition of workpiece – Factories Act 1961, s 14(1).
The respondent was a lathe operator employed by the appellants at their factory. On 11 June 1968, he was engaged in machining a stainless steel workpiece, which was held firmly in position by a chuck on the lathe and rotated in the horizontal plane at about 30 revolutions per minute in an anti-clockwise direction. The interior surface of the rotating workpiece was machined by contact with a cutting tool fixed eccentrically to a horizontal boring bar. As the boring proceeded, the boring bar was moved almost imperceptibly towards the interior of the workpiece so that the cutting tool was pushed further and further inside it. The boring bar was attached to the cutting tool so that it did not enter the workpiece centrally but left a gap of 3/8 to 1/2 inch between the boring bar and the inner surface of the workpiece on the respondent’s side and a gap of about 4 inches on the far side. No fence was provided. When stainless steel components were machined the job required to be lubricated and cooled. There was an automatic cooling system but it was not always used. In order to save the trouble fo clearing out swarf from the boring of cast iron workpieces requiring no coolant, which was necessary before the automatic cooling system could be used for stainless steel workpieces, the operators sometimes applied the lubricant manually using a ‘squeezie’ bottle to squirt the coolant onto the inner surface of the workpiece. This practice was known to but not approved of by the appellants because it was regarded as hazardous. When the respondent was applying the coolant manually his hand in some way became caught in the nip between the boring bar and the rotating workpiece and was crushed at the point at which the nip became too narrow. The respondent claimed damages against the appellants for breach of their statutory duty under s 14(1)a of the Factories Act 1961.
Held – (Viscount Dilhorne dissenting) The appellants were liable to the respondent for a breach of s 14(1), because—
(a) in the context of the manual application of the coolant to the inner surface of the stainless steel workpiece and the knowledge of the appellants of the practice of their employees to apply the coolant manually, it was foreseeable that a nip created between the workpiece and the boring bar could cause an accident of the type which occurred (see p 646 j to p 647 a and b, p 651 a and p 652 f and h, post); and
(b) when the machine was in operation a dangerous nip was created between the workpiece and the boring bar, the boring bar was a dangerous part of the machinery within the meaning of s 14(1) (see p 647 b, p 648 b, g and h, p 651 a and p 652 h, and cf p 652 g, post).
Hoare v M & W Grazebrook Ltd [1957] 1 All ER 470 approved.
Dicta of Ashworth J in Lewis v High Duty Alloys Ltd [1957] 1 All ER 740 disapproved.
Per Curiam. Once it is accepted that a nip is dangerous within s 14, it seems to be immaterial whether the nip is caused by two moving parts or by a moving part in juxtaposition with a stationary part (see p 648 h to p 649 a, p 651 a and p 652 h, post).
Page 640 of [1970] 3 All ER 639
Decision of the Court of Appeal (sub nom Johnson v F E Callow (Engineers) Ltd [1970] 1 All ER 129) affirmed.
Notes
For dangerous parts of machinery in a factory, see 17 Halsbury’s Laws (3rd Edn) 74–76, para 126, and for cases on the subject, see 24 Digest (Repl) 1052–1055, 202–218.
For the Factories Act 1961, s 14, see 13 Halsbury’s Statutes (3rd Edn) 417.
Cases referred to in opinions
Allen v Aeroplane and Motor Aluminium Castings Ltd [1965] 3 All ER 377, [1965] 1 WLR 1244, Digest (Cont Vol B) 298, 195ab.
Bill v Fisher & Ludlow Ltd (13 November 1961) unreported.
British Fame ’Steamship or Vessel) (Owners) v Steamship or Vessel Macgregor (Owners) [1943] 1 All ER 33, [1943] AC 197, 112 LJP 6, 168 LT 193, 42 Digest (Repl) 913, 7085.
British Railways Board v Liptrot [1967] 2 All ER 1072, [1969] 1 AC 136, [1967] 3 WLR 770, Digest Supp.
Bullock v G John Power (Agencies) Ltd [1956] 1 All ER 498, [1956] 1 WLR 171, Digest (Cont Vol A) 586, 218a.
Close v Steel Co of Wales Ltd [1961] 2 All ER 953, [1962] AC 367, [1961] 3 WLR 319, Digest (Cont Vol A) 587, 218d.
Eaves v Morris Motors Ltd [1961] 3 All ER 233, [1961] 2 QB 385, [1961] 3 WLR 657, Digest (Cont Vol A) 588, 218e.
Hindle v Joseph Porritt & Sons Ltd [1970] 1 All ER 1142.
Hoare v M & W Grazebrook Ltd [1957] 1 Al ER 470, [1957] 1 WLR 638, Digest (Cont Vol A) 587, 218b.
Lenthall v Gimson & Co (Leicester) Ltd (24 May 1956) unreported.
Lewis v High Duty Alloys Ltd [1957] 1 All ER 740, [1957] 1 WLR 632, Digest (Cont Vol A) 587, 218c.
Midland and Low Moor Iron and Steel Co Ltd v Cross [1964] 3 All ER 752, [1965] AC 343, [1964] 3 WLR 1180; affg [1964] 2 All ER 157, [1965] AC 343, [1964] 2 WLR 1365, Digest (Cont Vol B) 299, 218fa.
Millard v Serck Tubes Ltd [1969] 1 All ER 598, [1969] 1 WLR 211, Digest Supp.
Mitchell v North British Rubber Co Ltd 1945 JC 69, 24 Digest (Repl) 1056, * 100.
Nicholls v F Austin (Leyton) Ltd [1946] 2 All ER 92, [1946] AC 493, 115 LJKB 329, 24 Digest (Repl) 1091, 419.
Pearce v Stanley Bridges Ltd [1965] 2 All ER 594, [1965] 1 WLR 931, Digest (Cont Vol B) 300, 218fb.
Sparrow v Fairey Aviation Co Ltd [1962] 3 All ER 706, [1964] AC 1019, [1962] 3 WLR 1210, Digest (Cont Vol A) 588, 218f.
Summers (John) & Sons Ltd v Frost [1955] 1 All ER 870, [1955] AC 740, [1955] 2 WLR 825, 24 Digest (Repl) 1055, 217.
Walker v Bletchley Flettons Ltd [1937] 1 All ER 170, 24 Digest (Repl) 1054, 212.
Appeal
This was an appeal by F E Callow (Engineers) Ltd from an order of the Court of Appeal (Fenton Atkinson and Karminski LJJ and Sir Gordon Willmer), dated 24 October 1969 and reported [1970] 1 All ER 129, allowing an appeal by the respondent, James Johnson, who was employed by the appellants, from the decision of Lyell J (19 December 1968) dismissing the respondent’s claim for damages for personal injuries. The facts are set out in the opinion of Lord Hailsham LC.
A M Maguire QC and R R Leech for the appellants.
F P R Hinchliffe QC and B A Hytner for the respondent.
Their Lordships took time for consideration
21 October 1970. The following opinions were delivered.
Page 641 of [1970] 3 All ER 639
LORD HAILSHAM OF SAINT MARYLEBONE LC. My Lords, this appeal is another example of litigation arising from s 14 of the Factories Act 1961. Section 14 forms part of a group of five sections (ss 12 to 16) which deal with the liability of an employer in a factory to fence parts of the machinery for the protection of his employees. These sections are clearly intended to form, as it were, a single code and should be read together. Section 12 deals with prime movers. Section 13 deals with transmission machinery. Section 14 deals with dangerous parts of machinery, other than prime movers and transmission machinery. The obligation cast on the employer is not unqualified, and s 15 deals with the operation of machinery which, under the exceptions to the preceding sections, is unfenced. Section 16 deals with the construction and maintenance of fences in cases where the duty to fence applies under the preceding sections. It provides (in language which may be material to this appeal) that the fences are to be kept in position while the parts required to be fenced are ‘in motion or use’, thereby implying that there may be cases in which the parts are in motion but not in use and equally cases in which the parts required to be fenced are in use but not in motion.
At first sight the code provided by this group of five sections is deceptively simple. In point of fact, however, its provisions, especially those of s 14 which are now under discussion, have given rise to a considerable degree of difference of opinion. In some ways the duty cast on employers has seemed at times unduly harsh. In others the protection afforded to the worker has seemed illusory and unreal.
The sanction behind the sections imposed by the Act is primarily penal and this is the only sanction contained expressly in the Act. But for many years a breach of the provisions of the code has been held to give rise to a civil action for damages for personal injury at the suit of the injured workman. As a matter of social policy the necessity for this connection between the judicially recognised remedy and the statutory offence is not logically plain. For, while it might appear to be reasonable and even self-evident that if an employer is guilty of an offence against the code any workman injured thereby should be entitled to damages for the breach, the converse is by no means so obvious; it is not so plain that in the absence of negligence the only correct basis for the compensation by an employer to his workman injured or killed by dangerous machinery is his commission of a criminal offence. It is clearly the law now. But it is not self-evident that it should be so.
But while the policy of the Act is well-established some of the protection to the workman which at first sight might be thought available turns out on closer scrutiny to be illusory. Thus: (1) since it is only parts of the machinery which have to be fenced there is no obligation to fence a machine under s 14 if it is dangerous as a whole but without having dangerous parts (cf British Railways Board v Liptrot ([1967] 2 All ER 1072 at 1081, [1969] 1 AC 136 at 159) per Lord Reid). (2) It is now established that under s 14 what is referred to as a part of the machinery does not include a workpiece moving under power and held in the machinery by a chuck. Nor does it include other material in the machine as distinct from parts of the machinery (see for instance Eaves v Morris Motors Ltd, Bullock v G John Power (Agencies) Ltd). (3) The dangers against which the fencing is required do not include dangers to be apprehended from the ejection of flying material from the machine whether this is part of the material used in the machine (see Nicholls v F Austin (Leyton) Ltd) or whether it is part of the machine itself (see Close v Steel Co Of Wales Ltd). (4) The workman is not ordinarily protected if what comes into contact with the dangerous part of a machine is a hand tool operated by the workman as distinct from the workman’s body or his clothes (see Sparrow v Fairey Aviation Co
Page 642 of [1970] 3 All ER 639
Ltd) nor if the danger created arises because of the proximity of moving machinery to some stationary object extraneous to the machine (Pearce v Stanley Bridges Ltd).
In these circumstances it is not surprising that arguments about the protection afforded by s 14 of the Factories Act were described by Holroyd Pearce LJ as ‘technical’ and ‘artificial’ and the protection itself as ‘illusory in certain respects’ (see Eaves v Morris Motors Ltd ([1961] 3 All ER at 238, [1961] 2 QB at 396)). It is equally not surprising that the decisions in Nicholls v F Austin (Leyton) Ltd and Close v Steel Co of Wales Ltd were strongly criticised by Lord MacDermott and by Lord Reid in Sparrow v Fairey Aviation Co Ltd ([1962] 3 All ER at 709, [1964] AC at 1033) in spite of the fact that Lord Reid regarded himself as bound by the decisions he criticised. It has been pointed out more than once that the position would be ameliorated by the use by the Minister of his regulatory powers under s 14(6) of the Act of 1961 (for this purpose equivalent to s 14(3) of its predecessor, the Factories Act 1937). But no use has so far been made of this power, not, I apprehend, through inadvertence, but as a matter of departmental policy. No one contemplating the situation set up by this series of decisions can wholly avoid the conclusion reached by Holroyd Pearce LJ in the passage cited above ([1961] 3 All ER at 238, [1961] 2 QB at 396) that the gap in the protection afforded by the statute is one ‘which neither logic nor common sense appears to justify’. It is however too late for the courts to close the gap. The gap can only be closed by legislation or to some extent by the use of the regulatory powers of the Minister. It has, however, to be said that I for one would be slow to enlarge the gap or to extend the ambit of the criticised decisions beyond the limits required by the facts of the cases concerned and the reasoning of the judgments in them.
The present proceedings arise out of a claim for damages for personal injuries brought by the respondent against his employers, the appellants, who occupy a factory at Skelmersdale, Lancashire, as the result of an accident which took place on 11 June 1964. The respondent was operating a centre lathe of a fairly common design and machining a stainless steel casting when he lost the middle, ring and little fingers of his right hand and suffered other injuries to the index finger as the result of their being caught and mangled between a rotating workpiece and an almost imperceptibly moving tool bar which was part of the machine. The damages on the basis of full liability were agreed at £6,000. Lyell J dismissed the respondent’s claim. From this judgment the respondent appealed. The appeal was allowed by the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1) who substituted a judgment for the respondent of £4,000 on the basis that the respondent contributed to the accident by his own negligence to the extent of one-third. At the hearing of the action the respondent abandoned all his claims at common law for reasons which, even after the frank explanation of counsel, I confess I find difficult to understand and the only surviving cause of action before your Lordships’ House (as before the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1)) is that which arises under s 14 of the Factories Act 1961. In support of this claim two witnesses were called at the trial by the respondent, namely the respondent himself and an expert on his behalf, and one by the appellants, a Mr Pobgee, who had since been promoted to assistant manager but who at the time of the accident appears to have been the foreman in charge of the group of machines at one of which the respondent was working. Mr Pobgee did not witness the accident. In addition to the oral testimony there were three photographs produced on behalf of the respondent and one photograph produced on behalf of the appellants. On this rather meagre evidence it fell to Lyell J to decide the case, and it now falls to us to decide this appeal.
Page 643 of [1970] 3 All ER 639
At the time of the accident the lathe on which the respondent was working was engaged in machining a stainless steel casting designed as a valve body. The operation was one of boring the interior of the casting. The workpiece was held firmly in position by a chuck on the lathe and was being rotated in the horizontal plane at 30 revolutions per minute or thereabouts in an anti-clockwise direction. The respondent was standing on a duckboard at the side of the lathe. The interior surface of the rotating workpiece was in contact with a cutting tool fixed eccentrically to a horizontal tool bar. This bar was in fact moving almost imperceptibly towards the interior of the workpiece in such a way as to push the cutting tool further and further inside it as the job progressed. The bar attached to the cutting tool was fixed in such a way as to enter the body of the workpiece not centrally but in such a position as to leave a gap of 3/8 inch on the respondent’s near side of the interior of the workpiece and about 4 inches on the far side from the respondent. This positioning of the bar was the same throughout its length. The cutting tool was set in the boring bar at an angle to the boring bar in such a way as to bring it into contact with the workpiece. At the time of the accident the boring bar was almost at the end of its stroke and near the point at which it would have reached the end of the workpiece. The job had been going on at least from 8.00 am on the day on which the accident happened. The accident took place at about 6.30 pm.
In addition to stainless steel workpieces of the type on which the respondent was engaged the lathe was also used, and perhaps more frequently, for machining cast iron workpieces. When it was machining cast iron the job required no lubrication. But when the lathe was machining stainless steel components the job required to be lubricated and cooled and should have been lubricated by an automatic cooling system supplying an oil coolant to the working face. Before the automatic system could be brought into play for machining stainless steel after cast iron components had been used, it was necessary for the operative to give instructions for the removal of the swarf engendered by the previous operations on cast iron components from the sump into which it had fallen, since otherwise the coolant would have been contaminated by the swarf.
The circumstances in which the accident happened were a matter of dispute. But it does not seem to have been disputed that the accident occurred when, instead of using the automatic cooling system supplying lubricant into the machine, the respondent was in fact supplying it manually by means of a household dispenser referred to in the evidence as a ‘squeezie’. The use of this squeezie in place of the automatic system was pleaded both in the statement of claim (as amended) and in the defence as a negligent method of proceeding. The respondent said that this method had been prescribed by the appellants after the automatic cooling system had been found not to work. This account was rejected by the judge. The appellants, whose account on this point was accepted, claimed that the respondent was employing this system without their permission and if they had known that he was doing so he would have been stopped. The judge found, and it must now be accepted, that the only reason that the coolant system was not used by the respondent was to save himself the trouble of cleaning the sump before changing over to the stainless steel valve body.
The respondent claimed that his hand was caught in the nip created between the boring bar and the rotating inner surface of the workpiece while his hand was inside the body of the workpiece but inserted through the aperture in the horizontal plane which contained the boring bar. By the time the case came on for appeal this part of his story was accepted. But the respondent went on to say that the accident happened because, as he was reaching for the squeezie to lubricate the inner surface of the workpiece, the duckboard on which he was standing at right angles to the job slipped at the precise moment when he was leaning forward but he thrust out his hand to save himself and was caught in the nip. This part of his story was rejected as incredible by the judge at the trial.
Page 644 of [1970] 3 All ER 639
The appellants suggested to the respondent in cross-examination that the story was wholly false and that the accident had happened through the insertion of his hand by the respondent into two apertures at right angles to the job which, of course, would have been revolving at the full speed of 30 revolutions per minute. This suggestion was not supported by evidence and was equally rejected by the judge and the appellants made no attempt to pursue the matter either in the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1) or in your Lordship’s House. It was thus accepted for the purpose of this appeal that the accident happened when the respondent’s hand was trapped after it had been inserted at right angles to the position in which the respondent was facing into the orifice in the horizontal plane into which the boring bar was projected. It was somehow caught in the nip between the boring bar and the rotating workpiece and crushed at the point at which it became too narrow.
The case accordingly falls to be decided on the basis that in some way or another the respondent’s hand was caught in the nip created by the revolving inner side of the workpiece and the boring bar attached to the cutting tool. Lyell J dismissed the respondent’s claim. After rejecting the respondent’s own account of how the accident had happened and having refused to accept the alternative suggestion made by the appellants he said:
‘With all the advantages of hindsight, I have been quite unable to envisage how the hand could be partially or, for that matter, wholly drawn into the interior of the valve body through the descending hole save by its deliberate insertion. I have given this matter long and anxious consideration for the [respondent] has suffered very serious injury. Other more fertile minds may be able to find an explanation as to how the accident probably happened but I have wholly failed to do so. If the way in which an accident occurred is so difficult of explanation, even with the benefit of hindsight, it is hard to accept that a reasonable person without that benefit should ever have foreseen it. In that state of the evidence and the suggestions put forward I find it impossible to say that the [respondent] has proved that the use of a squeezie on this machine was ” … a reasonably foreseeable cause of injury to anybody acting in a way in which a human being may be reasonably expected to act in circumstances which may be reasonably expected to occur”—Lord Guest in Close v Steel Co of Wales Ltdb.
‘In coming to this conclusion I am fortified by the evidence of Mr Mercer, an engineer of great experience in the investigation of industrial accidents. He said that he had never seen a lathe of this type with a fence over the moving component. It is a standard type of lathe of which there must be a great number in use. Further, he expressed the view, when giving evidence in chief, that the injection of the coolant through the hole of a component, such as was being machined by the [respondent] and which was revolving at 30 revolutions per minute was not a dangerous act. With that view I agree. For these reasons I have come to the conclusion that the [respondent] has failed to establish that his injuries were caused either by breach of statutory duty or any of the acts of negligence alleged, and there must be judgment for the [appellants].’
Fenton Atkinson LJ (who gave the leading judgment in the Court of Appeal) rejected the learned judge’s approach to this matter. He said ([1970] 1 All ER at 135, 136, [1970] 2 QB at 9, 10):
‘It seems to me in this case that three questions must be answered, the first a question of fact: applying the Walker v Bletchley Flettons Ltd test of dangerous
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machinery, which has later been slightly amended in the House of Lords [this is the same test as was quoted by the learned judge], and paraphrasing to some extent the question of fact, in the ordinary course of human affairs could danger reasonably be expected from the use of the boring bar in juxtaposition with the moving workpiece, not only to the prudent, careful workman but also to the careless and unattentive workman? If the answer to that is “No”, that, of course, is the end of the case. If the answer is “Yes”, then one goes on to the question of law: on the authorities, can one say that the stationary boring bar, in juxtaposition with the moving workpiece, produced a dangerous part of the machinery which s 14(1) of the Factories Act 1961 required to be fenced? If the answer to that is “Yes” then the [respondent] succeeds, subject to a third question of contributory negligence.
‘On the first question, I myself feel no doubt. Once the [appellants] are fixed with the knowledge that their employees, as a convenient short cut and to save themselves trouble, were using squeezies to squirt coolant into the inner side of workpieces of this nature they could, in my view, reasonably have foreseen that sooner or later someone might slip or overreach himself or that some careless workman might get his hand too far inside the workpiece with the danger of being trapped between the boring bar and the workpiece. Indeed, Mr Pobgee, then foreman, now assistant works manager, himself said, in the passage I have already read, that if he had seen such a thing done he would have stopped it because it was, in his view, hazardous. So, in my view, the first question must be answered in favour of the [respondent].’
Fenton Atkinson LJ justified this difference from the trial judge on the basis of the decisions in Allen v Aeroplane and Motor Aluminium Castings Ltd and in Millard v Serck Tubes Ltd. The reasoning of these two cases appears to be that once it is established by the plaintiff on the balance of probabilities that there was a breach of s 14 and that the accident occurred as a result of that breach and in no other way, it does not matter that he is unable to establish exactly how the particular accident came about.
In this House Fenton Atkinson LJ’s reasoning on this point was attacked by counsel for the appellants. But in the event I have come to the same conclusion and for the same reasons. In substance Fenton Atkinson LJ was criticising the reasoning of Lyell J, on two distinguishable grounds. In the first place he was saying that, although the learned judge had stated the right criterion to apply to the question whether the incriminated part was dangerous, he had not applied it correctly. The respondent’s hand was crushed in the nip and Fenton Atkinson LJ argued that the question was whether it was reasonably foreseeable that such an accident could happen and not whether it could be established exactly how it happened. I can very easily understand how this criticism came to be made, and I think that it remains in doubt whether Lyell J clearly distinguished in his mind the two separate points. This would clearly leave it open to us to apply the test ourselves in the light of undisputed facts and the judge’s other findings. Unless the distinction was made, and the criterion applied in the light of it, Lyell J’s judgment was clearly in conflict with Allen v Aeroplane and Motor Aluminium Castings Ltd and Millard v Serck Tubes Ltd. I am not, however, quite clear that this is a correct interpretation of Lyell J’s judgment at this point. But in any event for the reasons which follow I believe that an accident of this description was foreseeable.
The second ground on which the judge’s reasoning was challenged by Fenton Atkinson LJ and, perhaps, the more serious, was that not merely was an accident of this nature foreseeable but the contingency was actually foreseen by both parties and
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their advisers. Although the respondent himself denied in evidence that what he was doing was dangerous, I agree with Fenton Atkinson LJ when he said ([1970] 1 All ER at 133, [1970] 2 QB at 7) that the correct inference to be drawn from the amendment of the particulars of negligence against the appellants was ‘because the [respondent] realised from the very outset that he was doing a dangerous thing in using the squeezie’. However that may be, it is clear from the evidence of Mr Pobgee that an accident was neither unforeseeable nor unforeseen in the light of the knowledge that the appellants had of what was happening. There are two relevant passages in Mr Pobgee’s evidence. The first, taken from his evidence in chief, was as follows:
‘Q Dealing now with the squeezie bottles, who provided, if they appeared in the factory, squeezie bottles, where did they come from? A The operators themselves.
‘Q Was that practice approved of by the [appellants] or not? A No.
‘Q For what reason was it not approved of? A It was considered a hazard, and it was unsuitable for the working job.
‘Q If you had seen any man using one what would you have done? A I would have stopped him and asked him the reason why.’
In cross-examination Mr Pobgee took the matter even further. The transcript is as follows:
‘Q Is this right, if you machine cast iron you don’t require a coolant? A Correct.
‘Q And is it right if you then turn over to do a single stainless steel component you have to get the labourer to clean out the sump? A Yes, that is correct.
‘Q Would you then, after cleaning it out, top up? A Yes, the sump has to be topped up.
‘Q Would you agree that the system of using squeezies, the hand bottles, possibly grew up because of the desire of the operatives not to get their sumps cleaned out merely to do one component? A Correct.
‘Q Is this right by and large the squeezies were used as a short cut by the men to save themselves or the labourer some trouble? A Yes.
‘Q And you knew this happened? A Yes.
‘Q If the man found that the coolant system was not working because the sump required topping up, it might be a natural but lazy thing for him to do to use the squeezie rather than get the labourer to top up? A That is true.’
From this it appears that Mr Pobgee, the appellants’ foreman, both knew that an accident could happen from what was being done and that it was being done. In the result the danger of an accident of this type was in fact foreseen by both parties at the time the operation took place and in these circumstances I am not prepared to hold that such an action was unforeseeable. I must add that for may part I cannot understand in the light of all this why the respondent abandoned his case at common law. Counsel for the respondent explained that he did so because he wished to avoid a finding of contributory negligence. But this is exactly what has happened to him in the event, and I do not myself see how he could have avoided it once the respondent’s account of the slipping of the duckboard was rejected. I would far have preferred to have seen this case decided on the basis of an unsafe system of work, but it is now too late to do so. However that may be, my conviction that the appellants were probably in fact liable at common law removes any regret I may feel in coming, as I do unhesitatingly to the conclusion that on the more technical grounds of the Factories Act 1961, s 14, they are also liable. I do not think that which is in fact foreseen can reasonably be argued to be unforeseeable.
It must, however, be clearly understood that in saying that an accident of the type which occurred was foreseeable in the context of the existing system of work and
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the knowledge of the appellants, I am not necessarily saying that it was foreseeable in the context of a better and normal system when the automatic system of lubrication was in fact in operation to the exclusion of the use of squeezies. This can be considered when and if it happens. The lathe is not of uncommon design and the respondent’s expert said that he had never known a similar accident to happen. However, in the circumstances in which it was being used, that is, to machine a stainless steel component without the use of the automatic cooling equipment, the machine was dangerous in that a nip which could foreseeably cause an accident was created between the workpiece and the boring bar. There would have been no difficulty at all in providing a temporary or permanent fence. The accident was in fact a direct consequence of the breach. It was argued before us that a fence would have rendered the machine unusable by preventing the coolant reaching the part requiring lubrication. There was no evidence that this was so, and I do not think that it was so. But in any event it would be no defence. (See John Summers & Sons Ltd v Frost.)
In my view this is really an end of the case. But the greater part of the argument both here and in the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1) was directed to a second question which arises only if and to the extent that the reasoning of Lyell J is not supported. The difficulty arises from the fact that the component which was moving was not part of the machine itself but the workpiece rotated by the machine and that the bar which caused the accident was moving only very slowly and not in such a way or at such a speed as to increase the danger of an accident being created by a nip or trapping point at any given moment. Clearly the motion of the boring bar is not wholly irrelevant. It is impossible to argue (although at one time it was faintly suggested) that the imperceptibly moving bar was not part of the machinery within the meaning of s 14 or that it was not in motion or in use within the meaning of s 16.
Nevertheless the appellants contended that even if the accident was foreseeable the part which caused the danger and the injury was the moving or rotating workpiece and not at all the boring bar which was moving so slowly and if so, for reasons given above they would escape liability. The appellants’ argument can be stated in a series of two logical propositions: (1) if a plaintiff injured in an accident in his employer’s factory arising from his contact with a machine wishes to claim damages for his injuries under s 14, he must first identify a part of the machine as distinct from the whole and must next establish both that that part was dangerous and unfenced and that his injury flowed from the danger and from the fact that fencing was not provided. In this case the appellants argued that the only part of the machinery identified as dangerous was the boring bar, and that this was not in fact dangerous. Any danger which could have been foreseen flowed distinctly from the motion of the rotating workpiece and not from the boring bar. (2) The appellants further argued that in considering whether a piece of machinery is dangerous the test to be applied is that formulated by Lord Guest in Close v Steel Co of Wales Ltd ([1961] 2 All ER at 976, [1962] AC at 412) in fact cited by Lyell J in his judgment in the passage quoted above and approved by the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1) and that even if it could have been foreseen that the rotating workpiece could conceivably have caused injury to a workman it could not be foreseen that the boring bar concealed within the workpiece would do so by nipping the respondent’s hand. The action of the respondent in inserting his hand into the boring bar was something so unlikely to happen that it was not reasonably foreseeable in the circumstances of the case.
The answer to both these arguments (of which the second appears to me to be only a particular restatement of the reasoning in Lyell J’s judgment) seems to me to follow from two well-established principles in considering cases of this kind. In the first place in considering whether a part of machinery is dangerous the danger
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to be foreseen includes danger not only to workmen who are prudent, alert and skilled and intent on their task but also danger to the careless, inattentive worker whose inadvertent or indolent conduct may expose him to risk of injury or death from the unguarded part (see per Lord Cooper in Mitchell v North British Rubber Co Ltd (1945 JC 69 at 73)). Secondly, in considering whether a part of the machinery is dangerous within the meaning of s 14 one must have regard to the operation of the part while the machine is doing its ordinary work and not when it is stationary. It may therefore be that a part can be dangerous because of its juxtaposition to another part of the machine or because of its juxtaposition to a moving workpiece or the material, notwithstanding that in isolation it would not be dangerous and notwithstanding that when the machine is not in use the part itself would be innocuous. I take this to be the result of Midland and Low Moor Iron and Steel Co Ltd v Cross which was naturally much relied on by the respondent. This was an appeal to this House from the Divisional Court ([1964] 2 All ER 157, [1965] AC 343) in its criminal jurisdiction in which both courts, consisting in all of eight judges, unanimously followed the reasoning of Lynskey J in Hoare v M & W Grazebrook Ltd, itself endorsing an earlier but unreported decision of Finnemore J in Lenthall v Gimson & Co (Leicester) Ltd. Since these two cases were both also endorsed twice in the Court of Appeal by Holroyd Pearce LJ (ie in Eaves v Morris Motors Ltd ([1961] 3 All ER at 238, [1961] 2 QB at 395) and Bill v Fisher & Ludlow Ltd) the concurrence of judicial opinion behind these two decisions is really overwhelming and the dicta to the contrary of Ashworth J in Lewis v High Duty Alloys Ltd can only be considered erroneous.
In Cross’s case, however, the incriminated part of machinery was moving. The House of Lords expressly reserved the question whether a stationary part of the machinery, if in juxtaposition with a moving workpiece so as to constitute a trapping point or nip, could be considered a dangerous part of machinery within the meaning of s 14. As will be seen, that point arises in the present case. There can, however be no doubt that Lynskey J in Hoare’s case ([1957] 1 All ER at 474, [1957] 1 WLR at 643) felt that it could, since he said:
‘… the Act is intended to apply, not merely to moving parts of the machinery, but to non-moving parts of machinery if they are dangerous or become dangerous in use.’
Fenton Atkinson and Karminski LJJ and Sir Gordon Willmer were of the same opinion in the present case. Fenton Atkinson LJ said ([1970] 1 All ER at 142, [1970] 2 QB at 16, 17):
‘In my judgment, if a machine is being worked in its normal way with its normal material and the result is a dangerous nip between a bit of the machine and the material, then it should make no difference in principle whether the bit of the machine is moving and the material is stationary or whether it is the other way about. Like Lord Parker CJc, I find myself coming back to the words of Lynskey J in Hoare v Grazebrook … ’
The other two members of the court agreed and Sir Gordon Willmer withdrew his earlier reported doubts on the point.
With this opinion I agree. Once it is accepted that a nip is ‘dangerous’ within
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s 14, it seems to be immaterial whether it is caused by two moving parts or by a moving part in juxtaposition with a stationary part. Both parts are dangerous parts if the danger occurs when the machine is in motion or in use—although the result of the authorities discussed above is that insofar as a workpiece as distinct from a part of the machine constitutes part of a nip the dangerous character of the workpiece is altogether outside the duty to fence under s 14 since it is not part of the machinery at all.
Counsel for the appellants before us candidly admitted that the facts of the present case were (except for one qualification) wholly indistinguishable from those in the case of Hoare v M & W Grazebrook Ltd in which Lynskey J followed a decision of Finnemore J in the unreported case of Lenthall v Gimson & Co (Leicester) Ltd. The one qualification which counsel for the appellants made to this admission was that it does not appear from the decision in that case whether the injured workman was injured by the boring bar or by the boring tool attached to it. On this qualification I accept the submission made on behalf of counsel for the respondent that there is no sign in any of the judgments in which this case is cited and endorsed that this distinction arose either in the mind of Lynskey J or in the minds of any of the subsequent members of the successive courts who considered the matter.
In my judgment it is wholly sufficient to point out that Hoare’s case, and the decision of Finnemore J which it followed, were cited with approval and adopted twice at least in the Court of Appeal in Eaves v Morris Motors Ltd and in Bill v Fisher & Ludlow Ltd and again by the three members of the court in the Divisional Court and by five members of the House of Lords on appeal in Midland and Low Moor Iron and Steel Co Ltd v Cross. This means that the judgment of Lynskey J has been examined by a minimum of 14 judges prior to the hearing of the present appeal in this House and the suggestion that it made a difference whether the injury was due to the boring tool or to the boring bar never once occurred to any of the 14 members of the Bench who considered the matter. I must add that it does not occur to me either. This in my judgment is sufficient to dispose of the point. Once it be established that Hoare’s case cannot be distinguished it is far too late for the appellants to suggest that it can be overruled after the decision in Cross’s case, except on the one very narrow ground expressly reserved by the House in Cross’s case, which for the reasons I have given do not seem to me to alter the position.
Counsel for the appellants however attempted to avoid the difficulties he was in by a number of ingenious, but to my mind, fallacious, arguments and analogies. In the first place it was argued that, since a nip is not part of the machinery, and the workpiece is also not part of the machinery, it follows that a stationary tool or tool bar is not in itself dangerous. This does not follow. It seems to me to be quite incompatible with the construction of the decision in Cross’s case above arrived at and, as Lynskey J seems to have thought in Hoare’s case, with the language I have quoted above in s 16 of the Act with which s 14 must be read. It is in fact, in my view, nothing more than a variant of the argument by counsel which the House of Lords in Cross’s case mentioned only to reject.
Secondly, an attempt was made to draw a distinction between ‘direct’ and ‘indirect’ dangers and causation, and in this connection the appellants made use of dicta in Nicholls v F Austin (Leyton) Ltd especially those of Lord Simonds ([1946] 2 All ER at 98, [1946] AC at 504). This
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also is inconsistent with the reasoning in Cross’s case. Lord Simonds is there using the word ‘indirect’ in the special sense required by the circumstances of that case, mainly injury to the worker caused indirectly by the machine ejecting a piece of material which struck her eye. Even if this had not been pointed out by Lord Hodson in Cross’s case ([1964] 3 All ER at 760, [1965] AC at 374), I should myself have found it impossible to attach any meaning to the word ‘indirect’ when the worker’s body was in fact directly mangled by the part in question.
Thirdly, it was strenuously suggested that in order to be dangerous within s 14 the part of the machinery in question ought to have in itself some inherently dangerous attribute. If this means something different from ‘dangerous when the machine, or at least that part of the machine, is in motion or in use’ I should find it impossible to reconcile this proposition with the language of ss 14 and 16 of the Act or with the decision in Cross’s case. If on the other hand it means the same thing as ‘dangerous when in motion or in use’ I consider that, once the foreseeability test as defined above is satisfied, and once the part in question is established to be a part of the machinery, there is nothing left to argue.
Fourthly, we were much pressed to examine various analogies, all more or less far fetched—the headman’s axe approaching a stationary block on which the victim’s head rests (although strangely, not a guillotine), a motor car pinning a victim against a stationary wall, and so on, the point in each case being made that what is dangerous is the axe and not the block or the motor car and not the wall. I do not find either or any of these analogies sufficiently close to an accident caused by a nip or trapping point in a machine to be particularly helpful. A machine is a single complex pursuing an organised objective for which the whole is designed and its parts are organised in the way in which the objective can be achieved. The parts (including for this purpose any workpiece being machined) are related to one another and once a dangerous nip is caused when the machine is in use each component in juxtaposition to the other is dangerous and it does not matter whether both or only one, or which one, is the moving object. All motion, after all, is relative to something else and I do not see for this purpose the smallest distinction between the so-called moving and the so-called stationary part. The headman’s axe and the block, the motor car and the wall are not parts of the same thing or of the same complex but independent entities which come into juxtaposition adventitiously in the case of the motor car and the wall, and as the result of a series of deliberate actions in the case of the executioner.
Fifthly, our attention was drawn to the recent decision at Manchester Assizes of Hindle v Joseph Porritt & Sons Ltd by Brabin J. I do not consider it necessary to examine this in any great detail. The facts show that it was not a trapping case at all (see for instance Brabin J’s judgment ([1970] 1 All ER at 1145)). The injury to the plaintiff was not caused by a nip but partly by a knock and partly by the twisting of his arm. There is not enough material in the report to enable me to express any other opinion about the case except that the result, like many others, must depend on examination of its particular facts.
In the case for the appellants, in addition to the other points, the appellants challenged the apportionment of blame arrived at in the Court of Appeal ([1970] 1 All ER 129, [1970] 2 QB 1) but, faced with Steamship or Vessel British Fame (Owners) v Steamship or Vessel Macgregor (Owners), this ground of appeal was abandoned by counsel at the hearing.
In the result in my opinion the appeal fails and should be dismissed with costs.
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LORD HODSON. My Lords, for the reasons which have been given by Lord Hailsham LC, I agree that the appeal fails and should be dismissed with costs.
VISCOUNT DILHORNE. My Lords, on 11 June 1964 the respondent was engaged in machining a stainless steel valve body on a Ward 10 lathe. One end of the body was held in a chuck which revolved at about 30 revolutions a minute in an anti-clockwise direction. At the time the respondent was injured, the inner surface of the valve body was being machined. The tool being used was fixed at an angle at one end of a round boring bar, the other end of which was fixed in the tool post. The bar was horizontal and, when the chuck was revolving, moved automatically from right to left and so slowly that it could be regarded as a stationary part of the machinery. As the work proceeded the boring bar went further into the valve body which can be described as a hollow cylinder with two large apertures in its side opposite each other. There was a gap of not more than half an inch between the side of the boring bar and the inner surface of the valve body nearest to the lathe operator. The space above the boring bar and the inner side of the valve body was of several inches and sufficiently large to admit a man’s hand. There was also considerable space below and on the far side of the boring bar. Once the valve body had been correctly placed in the chuck and the tool and bar properly adjusted the machining of the valve body was entirely automatic.
Valve bodies were either cast iron or made of stainless steel. The cast iron bodies were machined in the same way as the stainless steel ones but when a stainless steel one was being worked on, a coolant had to be applied to the tool. This could and should have been done automatically, the coolant being pumped up from the sump below the lathe and delivered on to the tool through a flexible tube fixed to the boring bar. There was no need for the lathe operator to put his hand in or near the aperture in the valve body through which the boring bar entered when a cast iron valve body was being machined or when a stainless steel one was being worked on and the coolant was being automatically applied.
On 11 June 1964, the respondent was not using the automatic coolant system. He used a ‘squeezie’ bottle filled with the coolant and squirted it on to the inner surface of the valve body. At the time he suffered his injuries the boring bar had almost reached the end of its traverse. It was well inside the valve body. At the commencement of the operation it cannot have been so very difficult to squirt the coolant so that it reached the tool but the further the bar went into the valve body, the more difficult it must have become. To do it, a man would have to put his hand very close to and possibly inside the aperture through which the boring bar entered. The respondent’s right hand was crushed between the boring bar and the valve body where there was a gap of not more than half an inch. His index finger was fractured and the middle, ring and little fingers so crushed that they had to be amputated.
It was contended that this gap constituted a trapping point and that consequently the boring bar was a dangerous part of the machinery which by virtue of s 14(1) of the Factories Act 1961 required to be securely fenced. The gap, and consequently the trapping point, was there both when a cast iron and when a stainless steel valve body was being machined. If in consequence of the gap the boring bar was a dangerous part of the machinery requiring to be fenced, it follows that it required to be fenced both when a cast iron and when a stainless steel body was being worked on.
Indeed if in this case the boring bar is held to be a dangerous part of the machinery, it would follow that whenever the inside of a hollow cylinder of a size sufficient to admit a man’s hand is being automatically machined and there is a similar gap between the boring bar and the cylinder, the boring bar is to be regarded as a dangerous part of a lathe.
In my opinion the boring bar was not a dangerous part of the machinery when a
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cast iron body was being turned. The gap between the bar and the inner surface of the valve body would not then in my opinion be—
‘… a reasonably foreseeable cause of injury to anybody acting in a way in which a human being may be reasonably expected to act in circumstances which may be reasonably expected to occur … ’
(Close v Steel Co of Wales Ltdd, per Lord Guest.)
Is the character of the boring bar changed by reason of the fact that a stainless steel body was being machined and a coolant had to be applied to the tool? I think not.
For his hand to have been caught between the bar and the valve body, the respondent’s hand must have entered the body. Mr Pobgee, the appellants’ foreman at the time of the accident, said in evidence that the practice of using squeezie bottles was not approved of by the appellants as it was considered a hazard and unsuitable for the working job. Undoubtedly such bottles were used from time to time by operatives and this was known to the appellants. But it is one thing to apply coolant by a ‘squeezie’ to a tool machining the outer surface of a cylinder and another to apply it to a tool machining the inner surface when the tool has gone a good way into the cylinder. While in the circumstances of this case the application of coolant by the use of a squeezie bottle might have been reasonably expected to occur, I do not myself consider that a lathe operator could reasonably be expected to put his hand inside the revolving valve body either when a cast iron or a stainless steel body was being machined.
The only question for decision in this appeal is whether the boring bar fixed as it was, was a dangerous part of the machinery of the lathe. I do not think that it was and I would therefore allow the appeal.
LORD DONOVAN. My Lords, I agree that this appeal should be dismissed.
It is important, however, that it should be remembered that the decision of the Court of Appeal ([1970] 1 All ER 129 at 136, [1970] 2 QB 1 at 10) is based on the finding that the appellants were fixed with knowledge ‘that their employees … were using squeezies to squirt coolant into the inner side of workpieces of this nature’. This being so it followed that it could reasonably have been foreseen that sooner or later an accident of the kind which occurred here might happen. Were it not for this feature of the case, there would in my opinion have been no breach of s 14(1) of the Factories Act 1961. If the automatic cooling system had been used in this case, as it could and should have been, it would, in my opinion, have been impossible to stigmatise the boring bar as a dangerous part of the machine even considered in conjunction with the moving workpiece. No danger could then reasonably have been expected.
LORD GARDINER. My Lords, for the reasons which have been given by Lord Hailsham LC, I agree that the appeal fails and should be dismissed with costs.
Appeal dismissed.
Solicitors: Norton, Rose, Botterell & Roche, agents for Weightmans, Liverpool (for the appellants); Evill & Coleman (for the respondent).
S A Hatteea Esq Barrister.
Tormes Property Co Ltd v Landau
[1970] 3 All ER 653
Categories: LANDLORD AND TENANT; Rent
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 9 JULY 1970
Rent restriction – Rent – Determination of fair rent – Evidence – Best evidence of fair rent – Fair rent fixed for comparable properties – Presumption that assessments correct in law until contrary is proved – Contractor’s theory of valuation of little weight where comparable fair rents or market rents – Rent Act 1968, s 46.
Where the fair rents of truly comparable properties have already been fixed by a rent assessment committee, and have not been criticised, the best evidence of a fair rent of residential premises, will be the fair rents of those comparable properties, which must be assumed to be right assessments in law unless shown to be wrong in law. Accordingly, a rent assessment committee was entitled to reject a valuation put forward by landlords, based on a reasonable return on the landlord’s capital investment although not criticising that yardstick, and to apply the yardstick of the fair rents fixed for comparable properties, for little weight could be given to any version of the contractor’s theory of valuation where comparable fair rents or market rents were available (see p 655 a, c, f and g and p 656 b, post).
Notes
For the determination of fair rents by the rent assessment committee, see Supplement to 23 Halsbury’s Laws (3rd Edn), para 1571B, 2.
For the Rent Act 1968, s 46, see 18 Halsbury’s Statutes (3rd Edn) 835.
Appeal
This was an appeal by landlords, Tormes Property Co Ltd, from a decision of the rent assessment committee on 17 February 1970 certifying, pursuant to s 45 of the Rent Act 1968, the fair rent of flat 3, 24 Belitha Villas, London N1, to be £360 per annum. The facts are set out in the judgment of Lord Parker CJ.
P J Crawford for the landlords.
Gordon Slynn as amicus curiae.
9 July 1970. The following judgments were delivered.
LORD PARKER CJ. The appellant landlords are a property company of whom Mr Rambridge is director and main shareholder. The landlords in 1963 purchased premises known as 24 Belitha Villas, London N1, and in 1967 Mr Rambridge acquired control of the company. In 1967 and 1968, improvements were effected and the premises had been converted into flats. Let me say at once, there is no suggestion otherwise than that this is an exceedingly good conversion and these are admirable premises in an excellent state of repair. By October 1969, the landlords were desirous of letting flat 3 in those premises and they made an application, as they were entitled to, on 6 October 1969, under s 45 of the Rent Act 1968 asking for a certificate of fair rent of £565 on the basis of a seven-year lease, the tenant doing internal repairs and the landlords the rest. The only services to be supplied were those of lighting and cleaning the common parts of the premises at a charge of £8 per annum. The matter was considered on 1 November 1969, by the rent officer, who, after going into the matter in great detail by reference to a number of alleged comparables, arrived at a figure of £330 per annum as the fair rent. The landlords were not satisfied with that. They appealed, as they were entitled to, to a rent assessment committee, who heard the appeal on 17 February 1970 and certified £360 per annum, to include the £8 for heating and cleaning, as the fair rent on the terms suggested. The landlords now appeal to this court on what must be a point of law.
Page 654 of [1970] 3 All ER 653
I do not propose to go through the matter in great detail but what the landlords did through Mr Rambridge at the hearing was to put forward a valuation on the basis of a reasonable return to the landlords. It has been said many times that a contractor’s theory based on building costs can do no more than set a ceiling when one is considering old premises. Equally, an adaptation of the contractor’s theory to cover historic costs is something which may lead to very odd results according to the time when the costs were incurred and indeed it may well be that a fair rent will show a landlord a loss on historic costs. What the landlords did was to prefer yet another adaptation, as it were, of the contractor’s theory by starting with an estimate of replacement costs, allowing what was thought to be a reasonable interest on that cost and then adding management expenses, to use a general term, and something in respect of equipment provided. The figure that was put forward was an estimated replacement cost of £5,000. It was said that a fair return on that was 8 per cent, making £400. To that was to be added £128 representing costs of insurance, maintenance, cleaning, legal charges, decoration, plus a further £37 representing a 12 1/2 per cent return on the cost of equipment provided, such as cooker, refrigerator and the like, arriving at a total of £565, and it was said anything less than that would not return a fair profit to the landlords. Mr Rambridge went further, and was supported in this by Mr Hubbard, an expert, by arriving at the same figure of £565 on the basis of market value less scarcity, the evidence of market value being based on certain comparables, in one case unfurnished premises at Hemingford Road and in another case furnished flats in Lonsdale Square. It was said that the market rent was £650 and deducting £85 for scarcity, he arrived at the same figure, £565, as the fair rent.
The committee have not said anywhere that £5,000 is not a proper estimate of the replacement value. They have not said that 8 per cent is not a fair return and they have not expressly challenged the management and other expenses. What, however, they did do was to say that they were not going to approach the matter on the basis of this adaptation of the contractor’s theory but that they were going to go either to market value less scarcity or to the fair rent of other premises which had already been fixed by assessment committees.
The rent officer, as I have said, had referred to a great number of alleged comparables and three of those deserve special mention because they were premises in Belitha Villas. The rent officer in his report refers specifically to a flat in 22 Belitha Villas, one in 12 Belitha Villas, and yet another in Belitha Villas, and he gives the square foot area, his decision in each case and the decision of the assessment committee in question on appeal. In particular, it showed that flat 4 in 12 Belitha Villas had had its fair rent fixed in January 1969 at £360 per annum, that flat having an area of 447 square feet, and the area of the flat in question here, flat 3 in 24 Belitha Villas, was about the same, 430 square feet. What the tribunal did (I find it unnecessary to read their decision) was to go apparently straight to the fair rent that had been fixed in regard to flat 4 in 12 Belitha Villas, which was to all intents and purposes exactly the same, having been converted by the same landlords in the same excellent way, and albeit the square foot area was slightly less in the present case, they fixed the same figure, £360 per annum, as the fair rent.
Counsel for the landlords has raised a number of matters of criticism of this method and although I may deal with some of them in passing, I do not propose to deal with all of them because the real point of law, as I understand it, that emerges in this case can be stated thus: it being accepted that the fair rent that has to be fixed must be something which is so far as possible fair to the tenant and fair to the landlord, when one finds a tremendous difference between the figure put forward by the landlords in a manner which has not been criticised, giving them 8 per cent, which is not an unreasonable return, and then one finds that the committee have arrived at a figure of £360 per annum, which would give the landlords something less than 4 per cent, then says counsel for the landlords, the committee must have misdirected themselves in some way, and in particular by ignoring completely the fair return which one
Page 655 of [1970] 3 All ER 653
would hope to get for the flat. He further criticises the committee for rejecting the landlords’ approach based on this adaptation, as I call it, of the contractor’s theory.
In my judgment, they were perfectly entitled to do what they did. Without criticising the yardstick put forward by the landlords, it seems to me that the committee are perfectly entitled to reject it and to apply another yardstick, and for my part I cannot believe that when one is approaching a building, a residential premise, for which there are any amount of comparables, as is the case here, much weight can properly be given to any version of the contractor’s theory. As I said, the true contractor’s theory can only produce a ceiling. The adaptation based on historic costs may produce false results and the present adaptation based on the replacement cost is, if advanced, doing something indirectly which can be approached directly from market rate comparables or in the fair rents that have been fixed of comparables. I myself think that there are great dangers in approaching the matter in the way the landlords did in the present case where, as here, undoubtedly there are comparable market rents and comparable fair rents. Accordingly, I do not think the committee can be criticised for just saying that they were not going to go into this method of approach advanced by the landlords.
It is then said: but when we see what the committee did, they do not say that they found a market rent of comparables and they do not say, if they had found a market rent, what they had deducted for scarcity. What they did do, as I said, was to look straight to the fair rent already fixed by the committee in respect of a truly comparable flat in Belitha Villas, albeit in 12 and not in 24. As I understand it, counsel for the landlords says that is quite improper because, for all one knows, the committee that assessed a fair rent in regard to the flat in 12 Belitha Villas were wrong in law or wrong in fact, and if that is taken to be the yardstick in the future, then that wrong is just being perpetuated.
For my part, I am quite unable to accept that. Unless and until it is shown that the committee who decided the fair rent in respect of the flat in 12 Belitha Villas were wrong in law, I must and I do assume that they were right in law. The landlords did not appeal on any point of law. The landlords in the present proceedings did not criticise the fair rent in regard to that flat on the basis that it was wrong in law. Insofar as they may have been low in fact without an error of law, that is unfortunately something which, as it seems to me, landlords have to face, and the method of curing that is through Parliament. Parliament has entrusted the facts to these committees. More important, in my judgment, is the fact that the landlords have had these comparables, in particular the comparables in Belitha Villas, before them ever since the decision of the rent officer. There was no criticism, as I understand it from reading the notes of the hearing, of any of the other fair rents fixed in Belitha Villas, and in those circumstances it seems to me that the best evidence of fair rent, which will be market rent less scarcity, is to be found in these fair rents of comparable properties. It must surely be the essence of this whole scheme that there should be uniformity, and no doubt as the volume of registered fair rents increases in the future no one will go to market rent less scarcity, they will go straight to the enormous volume of fair rents that have been registered.
The court has been referred to a passage in Woodfall on Landlord and Tenanta of which this court has an extract, and I observe there that the author writes:
‘Where the rent of comparable properties has been registered within a year or two previous to the determination, the best evidence of the fair rent for a dwelling-house may be the rent registered for such comparable properties: the rent so registered will naturally have excluded any scarcity element. Where there is no comparable property or no rent for it has been recently registered the best evidence of the fair rent would seem to be evidence of the market rent
Page 656 of [1970] 3 All ER 653
for the type of dwelling-house less such percentage as appears to represent the scarcity element in the rent, if it is substantial … A fair return on the landlord’s capital investment may be a guide or check on rental values but it is by no means conclusive.’
In my judgment, that passage in Woodfall accurately sets out the true position in law. It follows that I cannot see that the committee has in any way erred in law and I would dismiss this appeal.
COOKE J. I agree.
FISHER J. I agree.
Appeal dismissed.
Solicitors: Callingham, Tucker & Co (for the landlords); Solicitor, Ministry of Housing and Local Government.
Jacqueline Charles Barrister.
Note
National Bank of Greece S A v Westminster Bank Executor & Trustee Co (Channel Islands) Ltd
[1970] 3 All ER 656
Categories: CIVIL PROCEDURE
Court: HOUSE OF LORDS
Lord(s): LORD HAILSHAM OF SAINT MARYLEBONE LC, VISCOUNT DILHORNE, LORD UPJOHN, LORD DONOVAN AND LORD PEARSON
Hearing Date(s): 7 OCTOBER 1970
Practice – Citation of cases – The Law Reports – Use when case there reported – Practice in revenue cases.
Notes
For reports of decisions as authorities, see 22 Halsbury’s Laws (3rd Edn) 805–807, para 1694, and for cases on the subject, see 30 Digest (Repl) 236–239, 837–907.
7 October 1970. The following opinion was delivered.
LORD HAILSHAM OF SAINT MARYLEBONE LC in the course of the hearing of this appeal gave the following direction. I hope that it will be understood that the Law Reports should be cited when a case is reported in them and that there is no practice that in revenue cases the Tax Cases reports should be used.
S A Hatteea Barrister.
Note
Re Operator Control Cabs Ltd
[1970] 3 All ER 657
Categories: COMPANY; Insolvency
Court: VACATION COURT, CHANCERY DIVISION
Lord(s): WHITFORD J
Hearing Date(s): 2 SEPTEMBER 1970
Company – Avoidance of disposition of property after commencement of winding-up – Discretion of court – Advantage of creditors and company that company continue trading – Winding-up petition not known to directors until hearing listed – Application by company before hearing of petition – Payment of debts by company and dispositions of its property in ordinary course of business – Companies Act 1948, s 227.
Notes
For transactions rendered void by statute where effected after the commencement of a winding-up, see 6 Halsbury’s Laws (3rd Edn) 628–630, paras 1239–1241, and for cases on the subject, see 10 Digest (Repl) 904–906, 6142–6153.
For the Companies Act 1948, s 227, see 5 Halsbury’s Statutes (3rd Edn) 297.
Motion
This was an application by Operator Control Cabs Ltd (‘the company’) for an order that in the event of a winding-up order being made against the company (a) payments made out of the company’s bank account at Barclays Bank Ltd, Queen Square, Wolverhampton, for the purpose of paying debts of the company incurred after the date of the application in the ordinary course of its business, and (b) dispositions of the company’s property sold in the ordinary course of its business to its customers at full market price, should not be avoided by virtue of s 227 of the Companies Act 1948.
On 28 October 1946 the company was incorporated under the name of Tractor Supplies Ltd, its name being changed to its present name on 1 July 1969. The company’s objects were to carry on business as manufacturers of driving and control cabs for use in connection with tractors and tractor parts of all kinds of traction engines, threshing, binding and reaping machines and earth-moving equipment. On 10 July 1970, a petition for the winding-up of the company was presented by a creditor, Samuel Wilkes & Sons Ltd (‘the petitioner’).
The facts leading up to the presentation of the petition were deposed to by the managing director of the company as follows. On 8 June 1970, a notice under s 223 of the Companies Act 1948 was sent by the petitioner to the company’s registered office requiring payment of a debt of £2,570 8s 4d due to the petitioner. The company’s registered office being the office of the company’s accountants, the letter was opened by one of the accountant’s staff and was forwarded to the company. The directors of the company were unaware that the notice had been received and their office manager failed to inform them. On the expiration of the statutory 21-day period provided for in the notice, the petition was served on the company at its registered office and was listed for hearing in the High Court on 5 October 1970. The directors of the company were again unaware that the petition had been served and as a result the matter was not dealt with. If the directors had known of the petition the petitioner’s claim would have been paid immediately; further, that the directors first knew of the petition when it was advertised in a local newspaper. The company’s solicitors at once tried to have the hearing of the petition brought forward but were unsuccessful. The company’s bank account at Barclays Bank Ltd, Wolverhampton, was closed at once and all payments thereafter ceased. As the company could not effectively continue trading through its own bank account, it
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used the account of its wholly-owned subsidiary company. Tractorvision Ltd, to continue to purchase materials necessary to complete the manufacture of the company’s cabs. The company’s customers were then invoiced by Tractorvision Ltd and the customers paid Tractorvision Ltd for the cabs.
The deponent in order to refute the allegation in the petition that the company was insolvent, exhibited to his affidavit a statement of the company’s affairs showing a summary of the trading account for the period October 1969 to July 1970 prepared by the directors. From that statement it appeared, inter alia, that there was an excess of assets over liabilities of £118,000; also, that during that period sales had risen to £369,000 and there were further orders to the value of £239,630. A further exhibit gave details of the company’s trading forecast for the period 31 July 1970 to 31 July 1971, and showed how a minimum anticipated net profit of £51,000 was arrived at and how the company’s running expenses were allocated.
From the date of presentation of the petition to 19 August 1970, the operation of the company’s business had been carried on by Tractorvision Ltd Up to and inclusive of 19 August the company’s largest single customer, Bowmaker Plant Ltd, had paid Tractorvision Ltd for cabs manufactured by the company; and the moneys so obtained had been used to buy materials, pay wages and to cover all incidental running expenses of the company. On 19 August, Bowmaker Plant Ltd informed the company that it would henceforth pay the company direct for cabs received. All other customers continued to pay Tractorvision Ltd.
The company on 2 September, made this application to Whitford J in the vacation court and contended that it was in the best interests of the company, its creditors and customers that it should be allowed to continue trading, that it be allowed to operate its bank account in a normal trading manner, and that by so doing it could satisfy the claims of all its creditors.
Following a meeting between the informal committee of inspection and the directors of the company, the petitioner did not oppose the application. The Inland Revenue (supporting creditor with PAYE debt) opposed the application on the ground that the order sought would not necessarily be for the benefit of the creditors and s 227 of the 1948 Act did not empower the court to make such an order.
O Weaver for the company.
Andrew Goodall for the petitioner.
C Aldous for the Inland Revenue.
2 September 1970. The following judgment was delivered.
WHITFORD J. I am satisfied on the evidence in this case that it would be to the advantage alike of the petitioner and of the creditors and of the company against whom the petition has been launched, that it should be able to continue trading, and to this end I think it is right that I should make an order that, in the event of a winding-up order being made against the company, payments made out of the company’s bank account at the address given in the notice of motion after the date of this order, in the ordinary course of business, up to and including the date on which the petition is to be heard, and dispositions of property of the company sold in the ordinary course of business to its customers at the full market price prior to the date on which this petition is due to be heard—5 October 1970—shall not be avoided by virtue of the provisions of s 227 of the Companies Act 1948.
Order accordingly.
Solicitors: Sharpe, Pritchard & Co, agents for Thomas Cooksey & Co, Wolverhampton (for the company); Peacock & Goddard, agents for Slater, Miller & Co, Walsall (for the petitioner); Solicitor to the Inland Revenue.
E H Hunter Esq Barrister.
P (L M) (otherwise E) v P (G E)
[1970] 3 All ER 659
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): WINN AND SACHS LJJ AND SIR GORDON WILLMER
Hearing Date(s): 24 JULY 1970
Divorce – Custody – Access – Taking out of jurisdiction – Child’s welfare the primary consideration – Remarriage of wife having custody – New husband’s good prospects in New Zealand – Interests of son fully provided for – Conditions for granting leave to remove son.
The mother married the father in April 1965 at a time when she understood that he was contemplating emigrating to Australia and in 1966 he again decided to emigrate there but changed his mind. A son was born late in 1967. In October 1969, the mother obtained a decree nisi of divorce on an undefended petition on the ground of cruelty and she was given an order for custody of the son without dispute with provision for access by the father, the custody arrangements working well. In February 1970, she remarried and the son became a member of the stepfather’s family. The wife was expecting a child of the marriage in November 1970. She applied to the court for leave to take the son out of the jurisdiction to New Zealand, where the stepfather had previously stayed for 18 months and had friends, and where he had the prospect of a job in his trade as a scaffolder at a wage of £35 to £40 a week. He had also the promise of the loan of a bungalow by a friend when away at sea as he was most of the time. The wife and the stepfather did not wish to continue to receive the £3 weekly maintenance theretofore paid by the father. The stepfather had saved up £3,000 and had a car worth £500, but he and the mother would abandon the intention to emigrate rather than have custody of the son transferred to the father.
Held – (i) Leave to take the son to New Zealand would be granted for that course was in the best interests of the son’s welfare which was the primary consideration, there being no fear that arrangements for his protection, support and upbringing were inadequate and having regard also to the uncontested order in favour of custody by the mother and its satisfactory working, the need to avoid a sacrifice by the mother and stepfather which might in the long term enure to the detriment of the son, the absence of blame in the mother for break-up of the marriage and the father’s having been twice minded to go to Australia (see p 660 j, p 661 e and g and p 663 a, c, d and g, post).
(ii) Leave should be conditional on (a) the stepfather’s providing £100 to set up a fund to be held by the mother’s solicitor, to be supplemented by the father periodically if he chose having regard to his saving of maintenance, which could be used to enable the son to be flown back to Britain in case of need and for the father to visit New Zealand to see his son if so wishing (see p 661 h, p 662 b and p 663 d and h, post); and (b) an undertaking by the mother to bring the son back into the jurisdiction if ordered to do so by the court (see p 662 g and p 663 d and h, post).
Notes
For access to children on divorce, see 12 Halsbury’s Laws (3rd Edn) 355, para 757, 393, 394, para 873, and for cases on the subject, see 27 Digest (Repl) 503, 504, 4463–4473, 668, 6319–6333.
Appeal
The mother to whom custody of the son had been granted on her divorce from the father appealed to the Court of Appeal against an order made by his Honour Judge Potter in chambers on 16 July 1970 dismissing the mother’s application to remove the son, the child of the family, born in 1967, permanently out of the jurisdiction.
R A W Sears for the mother.
T G Guest for the father.
Page 660 of [1970] 3 All ER 659
24 July 1970. The following judgments were delivered.
WINN LJ. This is an appeal from his Honour Judge Potter, brought with his leave, against a decision of his given quite recently, on 17 July 1970, by which he rejected an application made to him for leave to take a little boy out of the jurisdiction to New Zealand. The child’s mother has now remarried. She was first married on 3 April 1965 to Mr P at a time when she was 22; she is now 27 years of age. It is a feature of this case not at all insignificant that at the time when she married she understood that the father was contemplating emigration to Australia; and again in 1966 he apparently tentatively but almost finally decided that he would emigrate thither. That matter was made one of the grounds of complaint when she brought a petition alleging cruelty against him. She said of that matter:
‘In the Autumn of 1966 the [father] decided that he would emigrate to Australia. The [mother] was very anxious to go and all arrangements were made. At the very last moment the [father] changed his mind and refused to continue with the project. In consequence, the [mother] was forced to move to a flat in Farnham which she found unattractive and isolated.’
There were other matters of complaint that she had against the father when she filed a petition against him alleging cruelty, the date of which was 1 August 1969.
She had in May 1969 left the father and had taken the child with her. The petition was not defended. It was heard on 24 October 1969 by the same judge, his Honour Judge Potter, at Kingston-upon-Thames, at a time when, of course, the child was not quite two years of age. There was no dispute as to an order for custody which was asked for before the making of the decree nisi. The mother married again on 14 February 1970 a man of 29 years of age. She is expecting a baby by him in November 1970. He wishes to emigrate to New Zealand, being a man who has employment as a scaffolder and has obtained a firm job with a company in Auckland, New Zealand, who have agreed to pay him a wage of between £35 and £40 a week. He has some knowledge of New Zealand, because before he left the Merchant Navy at the beginning of 1969 in which service he was for ten years, he travelled all over the world, including about 18 months in New Zealand, and he has friends there. One particular friend has agreed to lend him his bungalow when he is away at sea, as he will be most of the time. The stepfather is confident, and justifiably so, that he can make a new life, and a good one, for himself and the mother and child and the child that is coming, in New Zealand. He has saved up about £3,000, which is very much to his credit, and he has a car worth about £500. He is prepared to pay the fares for the lot of them to New Zealand, and is obviously a deserving, good type of man, and able to offer a prospect of a good life, it would seem on the face of it.
It is impressive to me at least, and, I rather think, to all members of the court, to know that the judge, his Honour Judge Potter, was told by the stepfather and mother, by affidavit, and it was made quite clear by counsel on instructions, that if leave to take the child to New Zealand were not granted by the judge then the stepfather and the mother would give up their plan to go to New Zealand. They are prepared to be unselfish in that very substantial respect.
It seems to me that in approaching this very finely balanced problem—which involves a difficult and a sad decision—the court should have regard primarily to the welfare of the child. Just as in disputed custody cases, so in a case which substantially is concerned with the subsequent issues resulting from the making of a custody order. It seems to me personally that the welfare of the child is the primary consideration which should weigh with the court. Further, it is to be regarded, I think, as a very dominant factor in such a dispute that there has been an order (which in fact was not resisted) for custody in favour of the one parent, in this case the mother, and that there is every indication that the custody thus ordered has been working satisfactorily in every respect; and that although, naturally, the other parent will feel—and the father does feel—that the access permitted to him is not all that he would wish, in
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no other respect is it suggested in the slightest degree that the custody arrangements have been anything but entirely beneficial to the child and satisfactory in general to the parties concerned.
In a sense the child has been since February 1970 one of the family—comprised in the family—of the stepfather. He has a legitimate motive in going to New Zealand. It may be that he wishes to go again to a climate which he has enjoyed in the past and to surroundings in an agricultural type of country which he finds pleasant and enjoyable. So far as can be seen, he has no bad motive in wishing to go, and in going he must wish to take with him, such things being natural, the mother and the child who is already there and the child who is coming. His right to do what he chooses with his life and to live where he chooses is, of course, in conflict, as the matter stands at this very moment, with the view of the court expressed by his Honour Judge Potter, since that order will prevent freedom for the stepfather in this particular respect. If it is justified, and even more clearly if it is necessary, for the proper protection of the child to forbid the stepfather and the mother to do what they want to do, then of course the court must impose that prohibition. For my part, I cannot see that there is any reason why they should be prohibited from emigrating, and taking the child with them.
It is, of course, a grave thing that the child will be deprived of the advantage, which he would have had if he had been brought up in close contact with the father, of having the advice of the father from time to time, and in case of need of falling back on him for protection and care. But save in emergency there is no reason I think to fear that the arrangements which are being made for his protection and support and up-bringing are in any respect to be regarded as inadequate properly to serve the protection of his welfare, physical or mental. The father can offer a perfectly good home, and so far as his relations with the child are concerned he is not in the very slightest degree to be blamed; his conduct as a father has been impeccable. There is no reason to suppose that he is not very affectionate and responsible and fit to bring up the child. It is not because of any defect of the father, but merely for the sake of the child’s own welfare and future, that I myself have come to the definite conclusion, notwithstanding the very serious nature of the problem and the finely balanced considerations to which regard must be had, that in this particular case the learned county court judge came to a conclusion which I am prepared to describe myself as the wrong conclusion, although he did so in judicial exercise of the discretion entrusted to him. I think that his decision should be set aside and that permission should be given to take the child to New Zealand, as the mother and the stepfather intend to do.
It is right, the court thinks—and I particularly would stress this—that provisions must be made against the eventuality of the plan not turning out so well as it appears and it is hoped that it will. Therefore I propose that the court should make the order (if my Lords agree with my view) giving permission for the child to be taken to New Zealand on condition that the stepfather provides a sum of £100 before the departure, paid over by him to any solicitor whom the parties may agree to be an appropriate recipient. I would suggest that the solicitor who has acted for the mother in these proceedings might be a suitable person, but it is a matter for the parties to agree on between themselves. That £100 should be held by the solicitor to whom it is paid; and if and insofar as the father should wish to supplement that sum of money in the hands of that solicitor as a fund, it is open to him to make any payment which he may wish as and when he sees fit to make it for that purpose, and the money will be received by the solicitor for that purpose and use.
It has been said by the mother and the stepfather—and I recognise it as a very proper step to have taken—that they do not wish to receive any further payment of maintenance, either for the mother or the child, after they have left this country. It is therefore manifest that, to the extent of release from the obligation which at present has been imposed on the father to pay £3 a week for that purpose, he will find himself with slightly better resources financially than he has hitherto enjoyed; and it may
Page 662 of [1970] 3 All ER 659
very well seem to him appropriate and desirable—although this is a matter for him to decide since it is not an order that the court is making; there is no ground of misconduct or impropriety which would justify the making of any order—that he should from time to time after the departure of the mother pay to the same solicitor either £3 a week or so much a month, or so much every couple of months, as he finds convenient, to be received by the solicitor and held, with the £100 received from the stepfather, as a fund to be used in the eventuality either of the child having to be flown back to this country, because of an order of the court or of any other complete change of circumstances, or for the provision of the fare for the father to visit New Zealand if he should in future at any time desire to go there himself and have access to the child in New Zealand; access which it has already been said by the mother would be readily afforded in New Zealand if the father were to come there for that purpose.
The court does not make any express provision against the possibility that the father may fail to make any contribution or may at some time in the future cease to make contributions for any particular period of time, since it hopes that that will not arise. Clearly, were the father not himself to choose to take advantage of the opportunity to raise this fund, it might well be just and proper that the money paid over already on this hypothesis by the stepfather should be released back to him; but the court contemplates that in such a situation the solicitor to whom the money is paid would apply to the court and it gives him leave to apply for that purpose if it should arise in the future.
I think that that is all that I would wish to say. It is not in this particular case necessary, it seems to me, to try to make any provision for welfare reports from the court in New Zealand. Obviously, if trouble were to arise there, then the mother, or the stepfather, or anybody else having the interests of the infant at heart, could seek help from the local court in New Zealand in that event. It is, after all, a highly civilised country, and one need not worry too much about the protection of the child if trouble arose. All this is, of course, without the slightest reflection on the father; I am very firmly of opinion that the child’s happiness is directly dependent not only on the health and happiness of the mother but on her freedom from the very likely repercussions, of an adverse character, which would result affecting her relations with the stepfather and her ability to look after her family peacefully and in a psychological frame of ease, from the refusal of the permission to take the child to New Zealand which I think quite clearly his welfare dictates. There is implicit, of course, and it must be expressly given, the customary undertaking to bring the child back into the jurisdiction if ordered so to do by the court. I would therefore allow this appeal.
SACHS LJ. When a marriage breaks up, then a situation normally arises when the child of that marriage, instead of being in the joint custody of both parents, must of necessity become one who is in the custody of a single parent. Once that position has arisen and the custody is working well, this court should not lightly interfere with such reasonable way of life as is selected by that parent to whom custody has been rightly given. Any such interference may, as Winn LJ has pointed out, produce considerable strains which would be unfair not only to the parent whose way of life is interfered with but also to any new marriage of that parent. In that way it might well in due course reflect on the welfare of the child. The way in which the parent who properly has custody of a child may choose in a reasonable manner to order his or her way of life is one of those things which the parent who has not been given custody may well have to bear, even though one has every sympathy with the latter on some of the results.
In this particular case it seems to me that the stepfather is making an eminently reasonable choice and is someone who has a great regard for the child the subject of
Page 663 of [1970] 3 All ER 659
this appeal. The stepfather and the mother were prepared to make a sacrifice which to me seemed highly creditable—in other words, they were prepared not to adopt the way of life which they specially desired, if that entailed the mother no longer having that custody of the child which had worked so well. To me it seems that it is the sort of sacrifice that ought not to be accepted by this court, for the very reason that it may well in the long term enure to the detriment of the child, for the reasons which have already been stated. In those circumstances, this seems one of those cases in which the court should not interfere with the way of life selected by the parent who has custody, and it seems that to that extent the learned judge at first instance either did not take into account or did not take sufficient account of a material factor.
This happens, incidentally, to be a case in which the mother, who intends now to emigrate, was in no way culpable in relation to the break-up of the marriage. In addition, there is the factor that the father prior to the break-up of the marriage was a man who was twice minded to go out to that hemisphere in which New Zealand is situate. He himself must have thought that to be a reasonable thing to do; and I cannot help observing that it may well be that he could still go there if he so chose, and that if he so chose it would bring him closer to the child. Whilst I doubt if those two last-mentioned matters are fundamental factors, they are yet not irrelevant when one looks at this case in the round. For these reasons, I would agree not only that the appeal be allowed but that the order be made in the terms proposed by Winn LJ.
SIR GORDON WILLMER. I think that this is a very difficult case, and I confess that I have had my doubts as to what the proper order of this court should be. The question which arose was, of course, a matter very much for the discretion of the learned judge to whom the application was made. Had I been sitting in his place, I feel fairly confident that I should in fact have exercised my discretion the other way, and should have acceded to the application for leave to take the child out of the jurisdiction to New Zealand. Merely to say that, however, is not in my view enough. This court can, of course, interfere with the exercise of discretion by the learned judge below, but only if satisfied that that exercise of discretion was wrong.
I do agree with the learned judge, and with what both my Lords have said, that the decision in this case is very finely balanced, and it is because of my doubts whether it could fairly be said that the learned judge’s exercise of his discretion was wrong that I have thought it right to give expression to those doubts. My Lords, however, take a more decided view than I would have been inclined to take, and they have given detailed reasons, which I fully appreciate, for preferring the view that it would be better for this child to go to New Zealand. Having heard what they have had to say, and having given expression to my own doubts, I am certainly not prepared to dissent from the conclusion at which they have arrived. In those circumstances, I agree that the appeal should be allowed; and I also agree with the terms of the order which my Lords have proposed.
Appeal allowed. Permission granted to take the child to New Zealand, on condition that the stepfather pays before departure £100 to the mother’s solicitor to hold as fund against need for air fares. Liberty to the mother’s solicitor to apply regarding release. The mother and the stepfather to undertake to return the child within jurisdiction if called on so to do.
Solicitors: Bowles & Co, Epsom (for the mother); Peacock & Goddard (for the father).
F A Amies Esq Barrister.
Belvoir Finance Co Ltd v Stapleton
[1970] 3 All ER 664
Categories: SALE OF GOODS: CONSUMER; Consumer credit
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND MEGAW LJJ
Hearing Date(s): 22, 23, 27 JULY 1970
Sale of goods – Title – Sale of car by dealer to finance company under illegal contract – Car let out by finance company to hirer under illegal hire-purchase agreement – Car delivered by dealer straight to hirer – Car sold to third party by hirer’s salesman – Whether hirer’s salesman liable in conversion.
Hire-purchase – Damages – Sale of goods by hirer – Measure of damages in conversion – Illegal hire-purchase agreement.
The finance company purchased, and paid for, three cars from dealers and let them out on hire-purchase terms to B Ltd who kept a fleet of cars for letting out on hire. The finance company never took delivery of the cars which went straight from the dealers to B Ltd The contracts of sale by the dealers to the finance company and the hire-purchase contracts between the finance company and B Ltd were illegal because a purpose of these transactions, which was known to all the parties, all of whom had knowledge of the facts, was to contravene certain hire-purchase regulationsa then in force; and all the parties were guilty of conspiracy. B Ltd fraudulently sold the cars to innocent purchasers in breach of the hire-purchase contracts, although to disarm suspicion they paid some of the hire-purchase instalments. Subsequently B Ltd went into liquidation. The finance company sued the defendant, B Ltd’s salesman who had sold the cars, for damages for conversion. The defendant relied on the illegality of the contracts of sale to the finance company as barring its right to recover against him.
Held – (i) Property transferred by one person to another, in pursuance of a conspiracy to effect a fraudulent or illegal purpose, remains vested in the transferee, notwithstanding its illegal origin. This applies even where the transferee has not taken possession of the property so long as the title to it has passed to him. Therefore, although the finance company had obtained the cars under illegal contracts, as the contracts had been executed and the property in the cars had passed to the finance company, it had title to the cars and was able to claim against the defendant, who, as B Ltd’s agent, was liable to the finance company in conversion (see p 667 f and h, p 669 f and p 670 j, post).
Bowmakers Ltd v Barnet Instruments Ltd [1944] 2 All ER 579; Sajan Singh v Sardara Ali [1960] 1 All ER 269 and dictum of Winn LJ in Kingsley v Sterling Industrial Securities Ltd [1966] 2 All ER at 427 applied.
(ii) The proper measure of damages was the finance company’s actual loss, in this case the balance of the hire-purchase price of the cars, and not the full value of the cars at the date of conversion, for the court was entitled to look at the illegal contract for all purposes which justice and convenience required, although they would not enforce it, and could therefore look at the hire-purchase contracts to see what was the balance of the hire-purchase price (see p 668 d, p 670 g and p 671 a to c, post).
Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 All ER 117 applied.
Notes
For actions on contracts involving illegality, see 8 Halsbury’s Laws (3rd Edn) 148–151, paras 257, 258, and for cases on the subject, see 12 Digest (Repl) 310–314, 2390–2424.
Page 665 of [1970] 3 All ER 664
For the measure of damages for conversion, see 38 Halsbury’s Laws (3rd Edn) 792–795, paras 1318–1320, and for cases on the subject, see 46 Digest (Repl) 512–515, 583–605.
Cases referred to in judgments
Belvoir Finance Co Ltd v Harold G Cole & Co Ltd [1969] 2 All ER 904, [1969] 1 WLR 1877, Digest Supp.
Bowmakers Ltd v Barnet Instruments Ltd [1944] 2 All ER 579, [1945] KB 65, 114 LJKB 41, 172 LT 1, 12 Digest (Repl) 310, 2391.
Churchill v Walton [1967] 1 All ER 497, [1967] 2 AC 224, [1967] 2 WLR 682, 131 JP 277, Digest Supp.
Feret v Hill (1854) 15 CB 207, [1843–60] All ER Rep 924, 23 LJCP 185, 23 LTOS 158, 139 ER 400, 12 Digest (Repl) 325, 2509.
Kingsley v Sterling Industrial Securities Ltd [1966] 2 All ER 414, [1967] 2 QB 747, [1966] 2 WLR 1265, Digest (Cont Vol B) 333, 21a.
Sajan Singh v Sardara Ali [1960] 1 All ER 269, [1960] AC 167, [1960] 2 WLR 180, Digest (Cont Vol A) 287, 2460b.
Simpson v Bloss (1816) 7 Taunt 246, 129 ER 99, 12 Digest (Repl) 311, 2399.
Taylor v Chester (1869) LR 4 QB 309, [1861–73] All ER Rep 154, 38 LJQB 225, 21 LT 359, 33 JP 709, 12 Digest (Repl) 311, 2401.
Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 All ER 117, [1967] 1 WLR 295, Digest Supp.
Cases also cited
Bigos v Bousted [1951] 1 All ER 92.
Gordon v Metropolitan Police Chief Comr [1910] 2 KB 1080, [1908–10] All ER Rep 192.
Scarfe v Morgan (1838) 4 M & W 270, [1835–42] All ER Rep 43.
Appeal
This was an appeal by the defendant, John Cameron Stapleton, from the decision of Swanwick J, given on 26 November 1969, that judgment be entered for Belvoir Finance Co Ltd (the finance company), for £972 9s 11d on their claim for damages for conversion of three cars. The facts are set out in the judgment of Lord Denning MR.
C W G Ross-Munro for the defendant.
G K Mynett QC and R S Insall for the finance company.
Cur adv vult
27 July 1970. The following judgments were delivered.
LORD DENNING MR. The Belgravia Car Hire Co had a fleet of cars which they let out on hire. They used to buy new cars on hire-purchase terms, to use them for two years or so, and then resell them to purchasers, paying, of course, the ‘settlement figure’ to the finance company. Later on the Belgravia Co became dishonest. They sold cars to purchasers and pocketed the proceeds. They did not tell the finance company anything about it. They did not pay the ‘settlement figure’. They pretended to the finance company that they still had the cars. They paid the instalments for a little while so as to disarm suspicion. Later on the fraud was discovered. The Belgravia Co collapsed and was put into liquidation. The finance company could not recover anything from them. So it tried to recover from the people who had bought the cars. One of the purchasers was Harold G Cole & Co Ltd They had quite innocently bought three of the cars from Belgravia and resold them. The finance company sued Harold G Cole & Co Ltd and recovered £1,501 9s from them. The case is reported under the name of Belvoir Finance Co Ltd v Harold G Cole & Co Ltd.
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Now the finance company sues the salesman who sold some of the cars on behalf of Belgravia to the innocent purchaser. He is Mr Stapleton, who was the assistant manager of Belgravia. We do not know whether he acted innocently or not. He did not give evidence. The finance company sued him for conversion. Seeing that he sold the cars, he is undoubtedly liable to the finance company, whether he was party to the fraud or not—save for a defence which we have to consider. He says that the finance company acquired the cars unlawfully and cannot recover owing to their own illegality.
The illegality arose because of the provision, then in force, relating to hire-purchase, which required the hirer to make a down payment of 20 per cent of the cash price. It was contained in the Hire-Purchase and Credit Sale Agreements (Control) Order 1964b, art I (1), and Sch 2, Part I, para 3(1). In order to get round, or get over, this requirement of the 20 per cent cash down, the parties devised a scheme which is best described by taking the first of the cars in this case. In May 1965 the Belgravia Co wanted to get a new car, a Ford Anglia. They rang Mr Pike, who was a director of the finance company and asked him to get a Ford Anglia for them. The dealers had in stock a Ford Anglia at a cash price of £580 10s. Belgravia were good customers. So Mr Pike arranged with the dealers to give a discount amounting to £62 10s; thus leaving £518 as the net price. The finance company paid the dealers the £518 for the car. Then the finance company let it out to Belgravia on hire-purchase terms. The hire-purchase agreement stated the cash price to be £580 10s and the deposit paid £116 10s. But the deposit of £116 10s was not truly paid in cash. It was credited as to £62 10s by way of discount. Only £54 was paid in cash.
That scheme was clearly illegal. Whereas Belgravia should have paid £116 down in cash, they only paid £54. The judge found that all three parties, the Belgravia Co, the finance company, and the dealers were implicated in the illegality. He said:
‘… it was part of the [finance company’] purpose in buying the Ford Anglia car from Francis Motors that the discount should be used to form part of minimum deposit of 20 per cent required by law in place of an actual payment. I find that that purpose, which I have already found to be illegal, was further known both to the [finance company] and … to Francis Motors and, of course, to Belgravia. I find that none of them realised what more careful enquiry would have revealed; that is to say, that it was illegal.’
But nevertheless the judge found that they had knowledge of the facts. They were therefore guilty of conspiracy. They could not excuse themselves by saying that they did not know the law, and did not realise that such an act was a crime: see Churchill v Walton ([1967] 1 All ER 497 at 503, [1967] 2 AC 224 at 237). So the judge found ‘that this contract of sale was illegal and one that the court would not enforce at the suit of either party.' So we have a definite finding, which is not challenged, that the contract of sale (by the dealers to the finance company) was illegal as well as the hire-purchase agreement (by the finance company to Belgravia). The two other cases were somewhat similar.
What is the consequence of this illegality? Counsel for the defendant says that by reason of the illegality, the finance company cannot recover against the defendant who sold the cars. He seeks to get over the earlier case of Belvoir Finance Co Ltd v Harold G Cole & Co Ltd (which he himself argued) because he says that he had not then thought of conspiracy, and that this makes all the difference, because it shows that the contract of sale to the finance company was illegal. He submits that, as the finance company cannot make out its case without relying on the illegality, it cannot recover in this action.
Page 667 of [1970] 3 All ER 664
I had occasion to look into all the cases on this subject when I gave the opinion of the Privy Council in Sajan Singh v Sardara Ali, and I see no reason to alter one word of it. I then said ([1960] 1 All ER at 272, [1960] AC at 176):
‘… when two persons agree together in a conspiracy to effect a fraudulent or illegal purpose—and one of them transfers property to the other in pursuance of the conspiracy—then, so soon as the contract is executed and the fraudulent or illegal purpose is achieved, the property (be it absolute or special) which has been transferred by the one to the other remains vested in the transferee, notwithstanding its illegal origin … ’
Counsel for the defendant did not dispute the proposition in general, but he submitted that it should be confined to cases where the transferee actually took possession of the property. Such was the case in Taylor v Chester, where the half-note was actually delivered to the brothel-keeper by way of pledge, so she had a special property in it. So also in Sajan Singh v Sardara Ali, the lorry was actually delivered to the plaintiff. Counsel for the defendant said that the only case in the books where the transferee did not take actual possession was Bowmakers Ltd v Barnet Instruments Ltd; and that, he said, was wrongly decided. He pointed out that counsel for the appellants had there conceded the point ([1944] 2 All ER at 582, [1945] KB at 70). So it was not argued and is not binding on this court.
Counsel for the defendant laid great stress on on the fact that here the finance company had never taken delivery of the car. It had gone straight from the dealers to Belgravia. He submitted that, where a transferee had never taken possession of the thing, he could not rely on the proposition ‘As against a wrongdoer, possession is title’ because he never had possession. So the finance company had to rely on the agreement of sale to them in order to give them title or a right to possession. But the agreement was illegal. And the courts would not allow them to rely on it. It was settled beyond controversy, he said, that the court would not lend its aid to anyone who had to rely on an illegal contract. He cited Simpson v Bloss for the purpose.
I do not accept this distinction taken by counsel for the defendant. I think that the proposition stated in Sajan Singh v Sardara Ali applies even where the transferee has not taken possession of the property, so long as the title to it has passed. If this were not so, it would mean that anyone could take the property with impunity, because there would be no one who could show a title to it. Take this very case. The dealers, who sold the car to the finance company, cannot claim it back from anyone. They have received their price and are out of the picture. Belgravia, who resold the car illegally to a purchaser, cannot claim it from him or anyone else, for they have received the price too. The only persons who can claim it are the finance company who paid for it and have not been repaid. Although it obtained the car under a contract which was illegal, nevertheless inasmuch as the contract was executed and the property passed, the car belonged to the finance company and it can claim it. This was the view of Winn LJ in Kingsley v Sterling Industrial Securities Ltd ([1966] 2 All ER 414 at 427, [1967] 2 QB 747 at 783), and I agree with it. Bowmakers was rightly decided, even though this point was not argued.
Once the title is in the finance company, the rest is clear. Belgravia were bailees of the car. By reselling it, they did an act inconsistent with the bailment. They converted it to their own use. So they and the defendant are liable in conversion.
Page 668 of [1970] 3 All ER 664
He may or may not have been party to the fraud; but no matter. He is liable in conversion.
There remains the measure of damages. The leading case on this subject is Wickham Holdings Ltd v Brooke House Motors Ltd. It shows that, when a finance company sues in conversion, it can recover its actual loss and no more. It does not recover the full value of the goods, but only the balance outstanding.
Counsel for the defendant argued that, when a hire-purchase is illegal, a finance company cannot prove what the balance is except by reference to the hire-purchase agreement; and, as it cannot rely on it, it should recover nothing. The judge rejected that argument, but he went to the other extreme. He thought that the hire-purchase agreement should be ignored altogether, and that in consequence the finance company should receive the full value of the car at the date of conversion. He gave it, therefore, more than it would have recovered if the hire-purchase agreement had been lawful. On the three cars he awarded £972 9s 11d whereas the balance due was only £877 16s.
I reject both extremes. I do not accept the proposition that the court can never look at an illegal contract. It will look at it wherever it is just and proper so to do. It will look at it, in cases such as the present, in order to see whether the property passed to the finance company. If it finds that the property has passed and that the finance company is entitled to damages, it will look at the contract to see what sum the finance company have lost, that is, the balance of the hire-purchase price. It will not, of course, enforce an illegal contract; but it will look at it for all purposes which justice and convenience require.
I would therefore reduce the damages awarded to £877 16s. Save for this variation I would dismiss this appeal.
SACHS LJ. It was established at trial that by reason of the conspiracy to which Lord Denning MR has referred the contracts by which the finance company acquired the cars from the dealers and the hire-purchase agreements which it entered into with Belgravia were both so tainted with illegality as to be void and unenforceable. It was submitted by counsel for the defendant that as a result the finance company cannot establish its title to these cars against any third parties in general and against the defendant in particular. It is argued that this is because—as is the case—it cannot prove its title without putting in evidence and then relying on an illegal contract.
The effect of accepting this submission would, of course, be drastic. It was plain, as indeed counsel for the defendant conceded, that in the circumstances of this case as a whole, there was no one other than the finance company in whom the ownership ot these cars could be said in law to be vested at the material time. If his submission was right, it could not, however, as against a third party, show title because of the illegality which has been referred to. That in turn, it was conceded, produced the result that the first person who managed to obtain possession of the cars could retain it—for the simple reason that there would exist nobody who could establish a legal title against him. It was indeed counsel’s case—as it had to be—that it would matter not whether that possession was gained honestly or by theft; and that such a rule would apply alike in detinue and conversion. It would be tantamount in its effect to sanctioning a confiscation of the property, not by the State, but by third parties. It would produce strange and unconscionable results not only as regards chattels, but, as Megaw LJ pointed out during the argument, in the law of real property and tenancy agreements. Such results could be particularly extensive nowadays; there are so many complex statutes, orders and regulations which can produce an illegality of contract. They can render those concerned guilty of conspiracy, despite the fact that when making the contract they think they have not done anything wrong: for
Page 669 of [1970] 3 All ER 664
knowledge of the law being immaterial they can nonetheless be guilty of conspiracy, on the principles enunciated in Churchill v Walton ([1967] 1 All ER 497 at 501, [1967] 2 AC 224 at 234). The present case is indeed a good example of how that can occur.
There is, however, ample authority for rejecting a proposition that would have these results. Of these the first and nowadays most cited is Bowmakers Ltd v Barnet Instruments Ltd ([1944] 2 All ER 579 at 582, [1945] KB 65 at 70), where du Parcq LJ, when giving the judgment of the court, said:
‘Prima facie, a man is entitled to his own property, and it is not a general principle of our law (as was suggested) that when one man’s goods have got into another’s possession in consequence of some unlawful dealings between them, the true owner can never be allowed to recover those goods by an action.’
Fifteen years later came the decision in Sajan Singh v Sardara Ali. It is only necessary to quote two passages from the opinion of Lord Denning. The first reads ([1960] 1 All ER at 272, [1960] AC at 176):
‘Although the transaction between the respondent and the appellant was illegal, nevertheless it was fully executed and carried out; and on that account it was effective to pass the property in the lorry to the respondent.’
Then a little later he said ([1960] 1 All ER at 272, 273, [1960] 2 QB 747 at 783):
‘The reason is because the transferor, having fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by which he did it—he cannot throw over the transfer. And the transferee, having got the property, can assert his title to it against all the world, not because he has any merit of his own, but because there is no one who can assert a better title to it. The court does not confiscate the property because of the illegality … ’
It follows that despite the careful and persuasive arguments of counsel for the defendant, I have no hesitation in supporting the judgment of the trial judge. It is quite clear that the title to the cars passed as soon as the agreement between the finance company and the dealers was executed and that the passing of this property was not affected by the illegality of that contract nor that of the hire-purchase agreement. It is not in point that the cars were not at any stage physically in the possession of the finance company; in that behalf I respectfully agree with what was said by Winn LJ in Kingsley v Sterling Industrial Securities Ltd ([1966] 2 All ER 414 at 427, [1967] 2 QB 747 at 783). Any other view would produce highly artificial distinctions.
I should perhaps add that cases where general or special property has under an illegal transaction passed to one party to the litigation (as in Feret v Hill) and the other party is seeking to get it back, seem to me to be in a different category to that with which we are dealing here. In such cases the court merely declines to interfere with the right to property which has passed as between the parties.
The issues raised as to the correct measure of damages are not to my mind at all easy to resolve. As a general rule when a conversion is established the damage is measured by the value of the article converted—adding any further sum which can be recovered in the particular circumstances. In Wickham Holdings Ltd v Brooke House Motors Ltd, it was, however, held that a finance company could, as against a hirer who had wrongfully sold a car, only recover a sum equal to the value of that
Page 670 of [1970] 3 All ER 664
interest in the property which the company had lost by reason of the hirer’s wrongful act. Act Lord Denning MR said at the conclusion of his judgment ([1967] 1 All ER at 120, [1967] 1 WLR at 301):
‘If the hirer wrongfully sells the goods or the benefit of the agreement, in breach of the agreement, then the finance company are entitled to recover what they have lost by reason of his wrongful act. That is normally the balance outstanding on the hire-purchase price; but they are not entitled to more than they have lost.’
Danckwerts LJ said ([1967] 1 All ER at 121, [1967] 1 WLR at 302):
‘I also agree that it would be quite wrong that the finance company should be entitled to recover more than the amount of its loss by non-payment of the sum required to complete the payment on the hire-purchase agreement.’
And Winn LJ said that the court should ask itself ([1967] 1 All ER at 122, [1967] 1 WLR at 303):
‘… what would have been the value of this car to this finance company on a balance of probabilities in all the prevailing circumstances … ’
In the result the court equated the damages to the value of the finance company’s proprietary interest in the car.
That case was one in which there was no question of the hire-purchase agreement being unenforceable because of illegality. Here we have a case in which, as between the finance company and Belgravia, there is illegality and the former cannot sue on any of the contracts. Moreover, the defendant sold all three cars as agent for Belgravia, so it can be said that as against the agent the finance company is in no better position that if Belgravia had been solvent and had been sued.
I confess to have had here some doubts as to what was the correct approach to this question of damages, save that it seemed clear that the defendant could not be allowed to retain the benefit that he had personally gained from the conversion, ie his commission on the sale. Counsel for the defendant, however, having rightly submitted that (contrary to the finding of the trial judge) the finance company could not recover more when the hire-purchase agreement was illegal than it would have recovered if it had been legal, went on to contend that damages were either nominal or the value of the finance company’s interest in the car—leaving no half-way house. To hold that the damages should be nominal would result in the right to sue in conversion being useless to the finance company and leaving the defendant with any benefit he had secured by using or selling the chattel; so I am persuaded that the correct measure is that adopted by Lord Denning MR.
As regards the value of the finance company’s interest—in the absence of any other evidence than the figures to be found in the hire-purchase agreement and those as to payments received by the finance company, the end result is £877 16s. Had there been evidence as to the profit element that accrued to the finance company under the illegal hire-purchase agreements, I would have sought to eliminate it—but I am unable to find that evidence.
MEGAW LJ. Counsel for the defendant’s ingenious and attractive arguments as to liability have failed to persuade me that Swanwick J was wrong in holding that this case is governed by Bowmakers Ltd v Barnet Instruments Ltd. Like the learned judge, I can see no valid distinction.
Page 671 of [1970] 3 All ER 664
As regards the measure of damages, I think that it is appropriate in this case to apply the principle laid down in Wickham Holdings Ltd v Brooke House Motors Ltd. Thus the damages would be £877 16s. In my opinion, that figure represents fairly and in common sense the total value of the three cars converted by the defendant, giving to each of the three cars its true value to the finance company at the date of its conversion by the defendant. This takes into account, as I think is permissible in the circumstances, the payments made by Belgravia to the finance company in respect of those cars. The recognition of those payments does not in my judgment involve recognising or giving effect to the illegal hire-purchase agreement. It is recognising and giving effect to the mere fact of the payments and to the fact that those payments can fairly be assumed to represent the actual diminution of the value of the cars in consequence of the fact of this bailment—this bare bailment—to Belgravia during the periods prior to the respective conversions.
Appeal dismissed, save that the finance company’s damages reduced to £877 16s. Leave to appeal to the House of Lords refused.
Solicitors: K A Wyndham-Kaye (for the defendant); Jaques & Co, agents for Harvey, Clarke & Adams, Leicester (for the finance company).
Wendy Shockett Barrister.
Purcell v F C Trigell Ltd (trading as Southern Window and General Cleaning Co) and another
[1970] 3 All ER 671
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND BUCKLEY LJJ
Hearing Date(s): 22 JUNE 1970
Judgment – Order – Consent order – Appeal – Order made by registrar – Appeal without registrar’s leave – Supreme Court of Judicature (Consolidation) Act 1925, s 31(1) (h).
Judgment – Order – Consent order – Interlocutory order – Setting aside order – Contractual effect of order – Grounds for setting aside order.
The plaintiff brought an action for damages against his employers, the first defendants, and the man he was working with, the second defendant, in respect of injuries he sustained in March 1966. After delays caused by the defendants, the statement of claim was delivered in October 1968, and after further delays by the defendants a ‘blanket’ defence was delivered in December 1968. Because of his injuries the plaintiff remembered nothing about the accident and wanted the defendants to answer interrogatories. The defendants having failed to comply with an order to answer the interrogatories, the plaintiff took out a summons asking for judgment against them but, as a result of correspondence between the parties, on 11 August 1969, the district registrar made a consent order that the defence of both defendants should be struck out unless the interrogatories were answered within ten days from that date. Answers were delivered within the time specified but the second defendant’s answers were incomplete. A further application by the plaintiff, made in November 1969, asking for judgment on the ground of failure to answer the interrogatories was withdrawn and the defendants were given a further extension of time, until 31 December 1969, to answer the interrogatories properly. The interrogatories were not properly answered until the first week of January 1970. On 20 January 1970, the
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registrar ordered judgment to be entered against both defendants on the ground of default in complying with the consent order of 11 August 1969, and the order for judgment was confirmed on appeal by the judge in chambers. On 10 April 1970, another judge allowed the defendants to appeal from the consent order of 11 August 1969 and varied the consent order by extending the time for answering the interrogatories to 20 January 1970; the judge also set aside the order for judgment of 20 January 1970. Leave of the registrar to appeal against the consent order was not obtained. On the plaintiff’s appeal from the order of 10 April 1970.
Held – The appeal would be allowed and the order set aside, leaving the order for judgment of 20 January 1970 standing, because—
(i) the judge had no jurisdiction to hear the appeal from the consent order without the leave to appeal of the registrar for the words ‘court’ and ‘judge’ in s 31(1)(h)a of the Supreme Court of Judicature (Consolidation) Act 1925, included a master or registrar when he was exercising the powers exercisable by a High Court judge in chambers (see p 674 j and p 676 h and j, post).
(ii) on the assumption that the registrar would grant leave to appeal, there was no ground for setting aside the consent order for a consent order, whether interlocutory or final, must be give full contractual effect and could only be set aside (Lord Denning MR differing) on grounds which would justify setting aside a contract, and in the present case no such grounds existed (see p 675 c, p 676 g and j, and p 677 d, post); and having regard to the intolerable and inexcusable delays by the defendants which had prejudiced the plaintiff, the defendants were not entitled to ask the court to exercise its discretion not to enforce the consent order (see p 675 e and g and p 677 j, post).
Mullins v Howell (1879) 11 Ch D 763 considered.
Notes
For consent orders, see 22 Halsbury’s Laws (3rd Edn) 765, 766, para 1631, 792, para 1672, and for cases on the subject, see 51 Digest (Repl) 731–737, 3213–3253.
For the Supreme Court of Judicature (Consolidation) Act 1925, s 31, see 7 Halsbury’s Statutes (3rd Edn) 590.
Cases referred to in judgments
Mullins v Howell (1879) 11 Ch D 763, 48 LJCH 679, 51 Digest (Repl) 732, 3223.
Toder v Sansam (1775) 1 Bro Parl Cas 468, 1 ER 695, 28 Digest (Repl) 484, 10.
Cases also cited
Australasian Automatic Weighing Machine Co v Walter [1891] WN 170.
Blundell v Macartney (1793) 2 Ridg Parl Rep 596.
Donisthorpe & Manchester, Sheffield & Lincolnsire Ry Co, Re [1897] 1 QB 671.
Foster v Edwards (1879) 48 LJQB 767.
Hadida v Fordham & Sons Ltd (1893) 10 TLR 139.
Minister & Co v Apperley [1902] 1 KB 643.
Interlocutory appeal
This was an appeal by the plaintiff, Carl Purcell, from the order of Shaw J, made on 10 April 1970, varying the order dated 11 August 1969, made by the district registrar of the Winchester District Registry, that, by consent, the defence of both defendants, F C Trigell Ltd and Roy Allen Davies, should be struck out unless they delivered answers to interrogatories within ten days of 11 August 1969. Shaw J varied the order by extending the time for answering the interrogatories to 20 January 1970, and set aside the district registrar’s order dated 20 January 1970, which was affirmed on appeal by Ashworth J on 3 February 1970, that judgment
Page 673 of [1970] 3 All ER 671
should be entered against both defendants since they had failed to comply with the order of 11 August 1969. The facts are set out in the judgment of Lord Denning MR.
J C Hicks for the plaintiff.
C H Whitby QC for the defendants.
22 June 1970. The following judgments were delivered.
LORD DENNING MR. Four ago there was a serious accident in Winchester. Mr Purcell, the plaintiff, was employed as window cleaner by a firm called F C Trigell Ltd, the first defendants (who traded as the Southern Window and General Cleaning Co). The plaintiff was sent, on 24 March 1966, to clean some windows at the Winchester Travel Bureau, which was on the first floor of 49 and 50 High Street, Winchester. Unfortunately, whilst he was cleaning them, a catch on the window gave way and he was thrown to the ground and severely injured. He had a large depressed fracture of the skull, a broken back and many troubles. He did not remember a thing about it. He sought to claim damages against the first defendants for not giving him proper protection or taking adequate precautions. Soon after the accident solicitors wrote on his behalf. They started writing in July 1966, but they got little satisfaction from the defendants or their solicitors. A question arose as to the name of the company which employed the plaintiff. The defendants’ solicitors gave no help about it. So the plaintiff’s solicitors issued a writ which they afterwards had to amend. He sued the first defendants and Mr Davies, the second defendant, the man who was working with the plaintiff and was said to be responsible for the accident. The plaintiff delivered the statement of claim on 4 October 1968. Again there was a long delay by the defendants in putting in their defence. Eventually, after many extensions of time, the solicitors for the defendants, in order to gain further time, delivered what they called a ‘blanket’ defence on 6 December 1968.
The plaintiff wanted to get on with the matter and particularly he wanted to get interrogatories answered, because the plaintiff himself knew nothing about the accident. He went to the registrar in Winchester on 24 March 1969, and got, amongst other things, an order for interrogatories on the defendants to be answered within 14 days, ie 14 days from 24 March 1969. They asked were not answered in that time, or for months afterwards. Eventually the plaintiff’s solicitors took out a summons returnable on 11 August 1969. They asked for judgment on the ground that the defendants had not complied with the order for interrogatories. Then some important letters passed.
On 6 August 1969, the defendants’ solicitors wrote, stating:
‘In an attempt to avoid our unnecessarily journeying to Winchester on the hearing of your application, would you please agree to the Learned Registrar making an order that unless the Defendants answer the interrogatories as ordered within 14 days that their Defence be struck out?’
The plaintiff’s solicitors replied on 7 August 1969:
‘We would be prepared to agree an order for interrogatories to be delivered in seven days or Defence of both Defendants struck out and with the costs of this application to be borne by the Defendants in any event.’
After those two letters there was a telephone conversation. As a result, on 11 August 1969, there was a consent order. It stated:
‘IT IS ORDERED that as agreed the Defence of both Defendants be struck out unless answers to the Interrogatories Ordered be delivered within ten days and unless a full disclosure as ordered be made within ten days … ’
Within those ten days the defendants delivered answers to the interrogatories, but they were not complete answers. The first defendants were required to answer the interrogatories 1 and 5, and the second defendant was required to answer the
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interrogatories 2 to 9 inclusive. The first defendants did answer 1 and 5, but the second defendant did not answer all of 2 to 9; he answered 1, the first interrogatory, and the fifth, sixth, seventh, eighth and ninth, but he failed to answer 2, 3 and 4. The plaintiff’s solicitors at that time did not notice the omission and did not raise any query about it; but a few weeks later they noticed it. On 6 November 1969, they asked for judgment. They asked that the defence should be struck out on the ground that the interrogatories had not been properly answered. The defendants took umbrage at this summons. They thought that the plaintiff was taking unfair advantage of an oversight. The plaintiff’s solicitors replied on 27 November 1969:
‘We are prepared to withdraw our present Application, provided you agree to pay the costs thrown away, upon receipt of the further affidavits to properly answer the Interrogatories, and upon your specifically replying to those matters referred to herein which you have not yet answered.’
So they gave the defendants an opportunity to put things right. But it was not taken. December went by. There was still no affidavit. On 22 December 1969, the plaintiff’s solicitors told the defendants that they would extend the time to 31 December, but they would not extend it for longer. That opportunity again was not taken. The affidavit was not sworn and filed until the first week of January 1970. The affidavit was then in order, but it was too late. So the plaintiff continued with the summons for judgment. He asked for judgment because of the default of the defendants in complying with the consent order. On 20 January 1970, the registrar ordered judgment to be entered accordingly. On appeal to Ashworth J on 3 February 1970, the appeal was dismissed. When the defendants saw themselves thus defeated on this score, they took out an application before the judge in chambers, asking him to extend the time for appealing from the original consent order of 11 August 1969. Shaw J allowed that appeal. He allowed the defendants to come in and defend on their paying all the costs thrown away. Now the plaintiff appeals to this court. His appeal raises three points.
First: the plaintiff says that the judge had no jurisdiction to hear the appeal as it was a consent order. Section 31(1) (h) of the Supreme Court Judicature (Consolidation) Act 1925, provides that no appeal shall be—
‘without the leave of the court or judge making the order, from an order of the High Court or any judge thereof made with the consent of the parties … ’
In the present case the consent order was made by the district registrar on 11 August 1969. It stated that:
‘… as agreed the Defence of both Defendants be struck out unless answers to the Interrogatories Ordered be delivered within ten days … ’
The plaintiff say that that consent order comes within s 31(1)(h) so that no appeal lies without the leave of the district registrar. The defendants say it does not come within s 31(1)(h) because the registrar is not the ‘court or judge’. The defendants say that ‘court’ means the court sitting in banc; and that ‘judge’ means a judge of the High Court sitting in open court or in chambers. I cannot agree with that submission. Ever since the Supreme Court of Judicature Act 1873, the words ‘court’ or ‘judge’ have been used to include a master or registrar when he is exercising the powers which a High Court judge can exercise in chambers. The master or registrar is the delegate of the judge for the purpose. I think, therefore, that the consent of the district registrar ought to have been obtained. As it was not obtained, there was no jurisdiction to hear the appeal from the consent order. It would, however, be possible to get over this objection by sending the case back to the registrar and asking him for leave to appeal. I do not know whether he would give it. But, assuming that he would, I turn to the second point.
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Second: the plaintiff says that no appeal lies from an order made with the consent of the parties, except in circumstances in which a contract may be set aside or varied, such as mistake, misrepresentation, and so forth; and that this applies on interlocutory orders as well as to final orders. Counsel for the plaintiff relied in this regard on Toder v Sansam. I think that the plaintiff puts his case too high. I think that a party, who gets leave, can appeal from a consent order on wider grounds, at any rate in interlocutory matters. He can appeal, for instance, on the ground of his own mistake, see Mullins v Howell ((1879) 11 Ch D 763 at 766) where Sir George Jessel MR said:
‘… there is a larger discretion as to orders made on interlocutory applications than as to those which are final judgments.’
But there is no ground here so far as I can see setting aside this consent order. It was deliberately made, with full knowledge, with the full agreement of the solicitors on both sides. It cannot be set aside. But, even though the order cannot be set aside, there is still a question whether it should be enforced. The court has always a control over interlocutory orders. It may, in its discretion, vary or alter them even though made originally by consent. This brings me to the third question.
Third: the defendants asked the court to exercise its discretion so as not to enforce this consent order. Counsel for the defendants pointed out, with force, that the failure to answer these interrogatories was a mere oversight—an oversight by the lawyers—and the defendants ought not to be made to suffer for it. Certainly not the first defendants, who answered their interrogatories satisfactorily. They ought not to suffer for the mistakes of the second defendant. I would be much in favour of this submission, if the defendants had behaved properly in the earlier stages of this litigation. But, having regard to the history of the case, I do not think that any mercy should be shown to the defendants or either of them. Their conduct has been deplorable. The plaintiff has acted properly throughout, but he has been subjected to intolerable and inexcusable delays by the defendants or their solicitors at every turn. This delay has been such as to prejudice the plaintiff in his case. The defendants are not in a position to ask for any discretion to be exercised in their favour.
I would, therefore, allow the appeal and set aside the order of Shaw J. That will leave standing the order of Ashworth J on 3 February giving judgment for the plaintiff.
WINN LJ. I agree, and, were it not for the fact we are differing from the learned judge in chambers, I would be content to add nothing for myself. I feel, however, out of respect for his judgment, that I ought to say something to show why it is that I take a view which differs from his.
The learned judge said—I have a transcript or note of his judgment in front of me—
‘[Counsel for the plaintiff] submitted that the inference to be drawn was that where an order made by consent had been drawn up it was inviolable and not amenable to variation by the court. This is no doubt true where the consent order is one which defines and determines the substantive rights and obligations between the parties.’
The being the learned judge’s approach to the problem, I myself think that he fell into error in regarding this agreement as one which dealt only with procedural rights. He went on to say:
‘I see a distinction where the consent relates to a matter which is in essence procedural and does not purport to touch directly upon the definition of the substantive rights and liabilities of the parties.’
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This agreement seems to me to have dealt with substantive rights in as much as there was an agreement, subject to the due delivery of answers to interrogatories, that there should be a striking out order in respect of the defence of both defendants which would have left them immediately vulnerable, as Lord Denning MR has said, to the quasi-automatic entry of judgment.
The terms of the agreement are set out in writing in the correspondence b. The defendants’ solicitors themselves made the suggestion—
‘… would you please agree to the Learned Registrar making an order [that was on the plaintiff’s summons] that unless the Defendants answer the interrogatories as ordered within 14 days that their Defence be struck out?’
That does not differ in any way from an order to strike out the defence unless the interrogatories are delivered within 14 days. The interrogatories referred to there had been ordered on 24 March 1969. This letter was written on 6 August and the order to which the arrangement led was made on 11 August 1969. I think in those circumstances that the learned judge’s distinction between procedure and substance is not appropriate in the case of the instant action. The learned judge also said he doubted whether the plaintiff’s or defendants’ solicitors really contemplated that default by one of the defendants should lead to the result that the other defendant would be shut out from contesting the issue of liability. I am unable to agree entirely about that since nothing could be clearer than the terms of the letter written by the plaintiff’s solicitors on 7 August 1969:
‘We would be prepared to agree an order for interrogatories to be delivered in seven days or Defence of both Defendants struck out and with the costs of this application to be borne by the Defendants in any event.’
I think, therefore, that the learned judge’s reasons in this respect are not appropriate in the instant case. They may have force in other cases though, as Lord Denning MR has said, and I agree, there is no fundamental distinction in law between a consent order made in interlocutory proceedings and a consent order made on a final judgment. However, there is this to be said, that apparently the court would prefer to keep closer control over its interlocutory proceedings than it would over its final orders if satisfied that they had been agreed to by fully advised and competent parties.
So far as the other matters are concerned, I really do not wish to add anything. It seems to me that, if a consent order is to be set aside, it can really only be set aside on grounds which would justify the setting aside of a contract entered into with knowledge of the material matters by legally competent persons, and I see no suggestion here that any matter that occurred would justify the setting aside or rectification of this order looked at as a contract.
So far as the jurisdiction under s 31(1)(h) of the Supreme Court of Judicature (Consolidation) Act 1925, is concerned, I agree respectfully with what Lord Denning MR has said, though of all the arguments presented to the court today I would have thought more hesitantly about that matter than about any of the others; on the whole I do agree that, when one has a master or registrar before whom a consent order has been entered into as a result of which he has made an order, his leave is required to be obtained as a condition of the competence of any appeal from that order.
For these reasons I too agree that this appeal should be allowed.
BUCKLEY LJ. I also agree. On the jurisdictional point I do not think I can usefully add anything to what has already been said by my Lords.
On the question of the contractual effect of an agreed order relating to some procedural matter in an action, I can see no valid distinction in principle between a consent order of that nature and a consent order of a final nature. The defendants in the present case were at the time when they made the proposal which led to the order of
Page 677 of [1970] 3 All ER 671
11 August 1969, in mercy in this respect, that they were out of time in delivering interrogatories which they had been directed by the court to deliver within 14 days from 24 March 1969. They put forward the proposal which is contained in the letter of 6 August 1969, which Lord Denning MR has read, suggesting a period of 14 days. The plaintiff demurred to that and in his solicitors’ letter in reply suggested seven days. The parties subsequently orally agreed that the order should be limited to ten days. The terms of the order were terms which were arrived at by bargaining between the parties. There was clearly consideration for the agreement on each side and the order must in my judgment have contractual effect. Why that aspect of the order should be less effective than if the subject-matter had been not an interlocutory step in the action but some final order I do not myself follow. Moreover, as Winn LJ has pointed out, the order in this case was one which led directly to the liability on the part of the defendants to have judgment entered against them if they failed to comply with the order, for, if their defence was struck out, it would follow that the plaintiff would be in a position to obtain judgment, as indeed he did in the course of events; and it would have been difficult, I think, in those circumstances for the defendants to have successfully resisted judgment being entered against them and to have obtained further concessions from the court.
In my judgment, this order should be regarded as having a binding contractual effect on which the plaintiff was perfectly entitled to insist. In fact, the plaintiff allowed the defendants further latitude, which the defendants unfortunately failed to take advantage of, and in those circumstances the registrar’s order which he made on 20 January 1970 was, in my judgment, a proper order to make, and on appeal that order was affirmed by Ashworth J.
In these circumstances, in my view, with all due respect to the learned judge, it would be quite wrong to job backwards, so to speak, and re-open the matter by allowing the defendants further time to comply with the order for interrogatories. The action has followed a perfectly regular course, being brought to the conclusion of a judgment being entered for the plaintiff, and I do not think it would be right to allow it to be re-opened, the defendants have bound themselves by contract in August 1969 to a situation which has produced precisely that result.
The only other thing that I would like to add is one word on Mullins v Howell, referred to by Lord Denning MR. In that case the parties entered into an agreement that on a defendant giving a certain undertaking on motion all further proceedings in the action should be stayed, so that, although the matter came before the court on motion, the relief which was granted was in fact relief which put an end to the action in its entirety, and perhaps it is not therefore really right to regard the case as one of an interlocutory nature. But, however that may be, it is quite clear, in my judgment, from the terms of Sir George Jessel MR’s observations in that case that he was not in any way disregarding the contractual effect of the arrangement arrived at between the parties. On the contrary, he was saying that there was an agreement but that it was an agreement which in the circumstances of the case the court would not enforce against the defendant; that is to say, he was saying that on equitable grounds, although there was a contract, it was one which ought not to be enforced in its specific terms. In my judgment, nothing in that case conflicts in any way with the view that I have expressed, that a consent order must be given its full contractual effect even if it relates to an interlocutory step in the action.
For these reasons, as well as the other reasons given by my Lords, I agree that the appeal should be allowed.
Appeal allowed. Orders of the registrar and Ashworth J restored.
Solicitors: Watkins, Pulleyn & Ellison, agents for Bernard Chill E Axtell, Southampton (for the plaintiff); Barlow, Lyde & Gilbert (for the defendants).
Wendy Shocket Barrister.
Thompson and another v White
[1970] 3 All ER 678
Categories: ADMINISTRATION OF JUSTICE; Courts
Court: CHANCERY DIVISION
Lord(s): BRIGHTMAN J
Hearing Date(s): 17, 18 JUNE 1970
County court – Transfer of action to, from High Court – Prerequisites to transfer – Action capable of being brought initially in county court – Claim for damages ancillary to claims for declarations and injunctions.
The plaintiffs and the defendant derived title to adjoining plots from a common vendor. A 10 foot wide strip of land within the boundaries of the plaintiffs’ plot was in the shape of a T. The shank and one arm of the T (“the yellow land’) formed a way capable of giving access from the road to the defendant’s plot. The other arm of the T (‘the hammerhead’) served no apparent purpose in relation to the access from the road to the defendant’s plot. Under a conveyance of 1938 to the defendant’s predecessor in title there was expressed to be a right of way over the yellow land and the hammerhead. The 1938 conveyance also contained mutual covenants by the plaintiffs’ predecessor in title and the defendant’s predecessor in title with regard to the construction of a roadway over the yellow land and the hammerhead and its maintenance; the defendant being responsible for the construction (half the expenses to be met by the plaintiffs) and the plaintiffs being responsible for the maintenance (half the expenses being met by the defendant). The plaintiffs alleged, inter alia, that the roadway had not been constructed but that the defendant had made use of the yellow land for access purposes; that the hammerhead was incapable of use for access purposes; that for a period the defendant had trespassed on the plaintiffs’ land by passing over that part of the land which lay between one arm of the T and the shank. The defendant, whilst admitting that the roadway over the hammerhead had not been constructed, claimed that the roadway over the yellow land had been constructed; whilst admitting that the hammerhead had not been used for access purposes, the defendant claimed that it could be so used; the defendant, also denied the alleged trespass. The plaintiffs instituted proceedings in the High Court claiming a declaration that the defendant was not entitled to use the yellow land for access until the roadway had been constructed; a declaration that the purported reservation of a right of way over the hammerhead for access was of no effect (alternatively, that the right of way it any, over the hammerhead had been abandoned; in the further alternative, a declaration that if a right of way over the hammerhead existed the defendant was not entitled to use it before the roadway had been constructed); an injunction restraining the defendant from using the yellow land for access before the roadway had been constructed; if a right of way over the hammerhead were validly reserved and had not been abandoned, an injunction restraining the defendant from using the hammerhead for access until the roadway had been constructed; and damages for trespass. The defendant applied to have the proceedings transferred to a county court under s 45a of the County Courts Act 1959. It was found that the plaintiffs’ claims were founded on tort for the purposes of s 45(2)(a) and it was assumed that the statutory financial limits on the jurisdiction of the county court were not exceeded. The defendant conceded that the proceedings could not be transferred to the county court under s 45 unless the claims, as they existed at the date of transfer, could have been initially prosecuted in the county court.
Held – (i) The action was not one which could properly have been commenced in the county court because the declarations and injunctions sought by the plaintiffs, regarded as a whole, could not be treated in any real sense as serving or assisting the claim to
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damages for trespass and no more; so far as the hammerhead was concerned the plaintiffs did not even claim that the defendant had trespassed thereon and there could therefore be no claim in respect thereof except a claim for one of three alternative declarations and a claim for an injunction (see p 682 d, post);
De Vries v Smallridge [1927] All ER Rep 613 and Kenny v Preen [1962] 3 All ER 814 applied.
(ii) Accordingly, the court had no jurisdiction to order a transfer (see p 682 e, post).
Notes
For jurisdiction of High Court to remit actions to the county court, see 9 Halsbury’s Laws (3rd Edn) 159–161, paras 312–315, and for cases thereon on ancillary jurisdiction, see 13 Digest (Repl) 381, 382, 98–105.
Cases referred to in judgment
De Vries v Smallridge [1928] 1 KB 482, [1927] All ER Rep 613, 97 LJKB 244, 138 LT 497, 13 Digest (Repl) 381, 98.
Kenny v Preen [1962] 3 All ER 814, [1963] 1 QB 499, [1962] 3 WLR 1233, Digest (Cont Vol A) 1003, 2807b.
Cases also cited
Halsall v Brizell [1957] 1 All ER 371, [1957] Ch 169.
Ives (E R) Investments Ltd v High [1967] 1 All ER 504, [1967] 2 QB 379.
Simpson v Crowle [1921] 3 KB 243, [1921] All ER Rep 715.
Procedure summons
By writ issued on 8 March 1967, Leonard James Thompson and Kathleen Marjory Thompson, sought certain declarations and injunctions (see p 680 f and g, post) and claimed damages from Beatrice Valentine White. The defendant applied to have the action transferred to the county court. The facts are set out in the judgment.
Oliver Lodge for the plaintiffs.
M Graham for the defendant.
18 June 1970. The following judgment was delivered.
BRIGHTMAN J. This is an application by the defendant for the transfer of an action from the High Court to the Axminster and Chard county court pursuant to s 45 of the County Courts Act 1959. The plaintiffs are the owners of land lying to the north of Beer Road at Seaton, Devon. The defendant is the owner of adjoining land to the east. The plan used for identification purposes in these proceedings—which is not a wholly agreed plan—contains no compass rose, but I shall assume for the purposes of my narrative of the facts that the top of the plan points to the north. There is indicated on the plan as part of the plaintiffs’ land a strip 10 feet wide extending from Beer Road northwards. The northern end of the strip branches westwards towards the plaintiffs’ house for a distance of about 15 feet and eastwards until it meets the defendant’s land, thus forming a sort of T. The west arm of the T has been called in these proceedings ‘the hammerhead’. The shank of the T and the east arm of the T form a way capable of giving access from Beer Road to the defendant’s land and has been called ‘the yellow land’. The hammerhead serves no immediately apparent purpose so far as concerns access from Beer Road to the defendant’s land, but it is not necessary for me to make—and I do not make—any finding of fact in regard to that on this application.
The plaintiffs and the defendant derive title from a common vendor. Under a conveyance of 1938 there was expressed to be reserved to the defendant’s predecessor in title a right of way over the entirety of the yellow land and the hammerhead and also a right of way over a narrow strip joining the half-way point of the shank of the T to the defendant’s land, which I will call ‘the green land’. The 1938 conveyance
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contained mutual covenants which can be summarised as follows: (i) a covenant by the defendant’s predecessor to construct a roadway in a certain manner over the yellow land and the hammerhead; (ii) a covenant by the plaintiffs’ predecessor to maintain the roadway when constructed; (iii) a covenant by the plaintiffs’ predecessor to pay half the cost of the construction; and (iv) a covenant by the defendant’s predecessor to pay half the cost of such maintenance, so that in terms of obligation, if the obligation were expressed as binding on the plaintiffs and the defendant, the defendant would be the one to construct the roadway at the half-expense of the plaintiffs, and the plaintiffs would be the ones to maintain the roadway at the half-expense of the defendant.
The allegations made by the plaintiffs in their statement of claim can be summarised as follows: (i) the roadway has never been constructed over the yellow land or the hammerhead; nevertheless the defendant uses the yellow land for access purposes; (ii) the hammerhead is incapable of being used for access purposes; (iii) between 1962 and 1966 the defendant trespassed on the plaintiffs’ land by passing over that part which lies immediately to the south of the eastern arm of the T, between the points A and B marked on the plan by way, as I understand it, of a sort of short cut; (iv) in June 1966, the defendant wrongfully removed a wattle fence which had been erected by the plaintiffs between points A and B; (v) between 1962 and 1966 or thereabouts the defendant felled three fir trees belonging to the plaintiffs; and (vi) the green land has never been used for access purposes. The defendant disputes these allegations broadly to the following extent: (i) she claims that the roadway was duly constructed over the yellow land; (ii) although she admits that the roadway has not been constructed over the hammerhead and that the hammerhead head has not been used for access purposes, nevertheless she claims that it could be so used; (iii) the trespass between points A and B is denied; (iv) the felling of the trees is denied; and (v) the non-user of the green land is admitted.
I return to the relief claimed by the plaintiffs and I summarise it as follows: (i) a declaration that the defendant is not entitled to use the yellow land for access until the roadway has been duly made; (ii) a declaration that the purported reservation of a right of way over the hammerhead for access was of no effect; (iii) in the alternative, a declaration that the right of way, if any, over the hammerhead had been abandoned; (iv) alternatively, a declaration that if a right of way over the hammerhead exists, then the defendant is not entitled to use it until she has made the roadway; (v) an injunction restraining the defendant from using the yellow land for access until the defendant has made the roadway; (vi) if a right of way over the hammerhead was validly reserved and has not been abandoned, an injunction restraining the defendant from using the hammerhead for access until the roadway has been made; and (vii) damages for trespass. The plaintiffs claim no relief expressly directed towards the green land.
I turn to s 45 of the 1959 Act and I quote from it so far as relevant:
‘(1) In any action commenced in the High Court to which this section applies, any party may at any time apply to the High Court … for an order that the claim … shall be transferred … (c) to any county court … which the High Court … may deem the most convenient to the parties [and I interpose that if an order for transfer were made, then it is agreed that the county court which I have mentioned would be a convenient one] …
‘(2) This section applies to any action where—(a) the plaintiff’s claim is founded either on contract or on tort and the amount claimed or remaining in dispute in respect thereof does not exceed £750 … ’
I have read para (a) with what I am told is the new financial limit b.
It was conceded by counsel for the defendant—and no doubt rightly conceded—
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that s 45 does not enable this court to transfer an action to the county court unless the claim or claims so transferred, as they exist at the date of transfer, could have been initially prosecuted in the county court. The question before me can therefore be summarised as follows: (1) are the claims in this action founded on contract or tort? And (2) could such claims have been prosecuted in the county court? In my judgment, it is correct to say that the claims are founded on tort. The whole basis of the claim in respect of the yellow land is that the defendant is trespassing thereon because she has no subsisting right of way thereover. The basis of the claim in respect of the hammerhead is that the defendant would be a trespasser if she used it, for the same reason, and, of course, the claim for damages for trespass is obviously founded on tort.
The question therefore remains whether the plaintiffs’ claims could have been prosecuted initially in the county court. So far as material for present purposes the jurisdiction of the county court arises under s 39 of the County Courts Act 1959 read with s 51. I quote, so far as material, from s 39(1), as amended in regard to the financial limitc:
‘A county court shall have jurisdiction to hear and determine any action founded on contract or tort where the debt, demand or damage claimed is not more than £750, whether on balance of account or otherwise: Provided that a county court shall not, except as in this Act provided, have jurisdiction to hear and determine … (b) any action in which the title to any hereditament … is in question … ’
Section 51 (as amendedd):
‘A county court shall have jurisdiction to hear and determine any action in which the title to any hereditament comes in question, being an action which would otherwise be within the jurisdiction of the court—(a) in the case of an easement or licence, if the net annual value for rating of the hereditament in respect of which the easement or licence is claimed, or on, through, over or under which the easement or licence is claimed, does not exceed four hundred pounds … ’
The present action is clearly one in which the title to an easement is in question. For present purposes I will assume, without deciding, that the rateable values of the dominant and servient tenements do not respectively exceed the specified maximum, and I will also assume, without deciding, that the damages which could be awarded for trespass would not exceed the specified maximum.
It is clear from De Vries v Smallridge and Kenny v Preen that the county court cannot make a declaration unless such declaration is relief ‘ancillary to’, in the sense of serving or assisting, a claim for damages. Kenny v Preen was an action by a tenant for damages for breach by the lessor of his covenant for quiet enjoyment. There was tacked on to the claim for damages, a claim for an injunction to prevent the continuance of the disturbance, and also a claim for a declaration that the tenancy was rent controlled. It was held that the claim for a declaration that the tenancy was rent controlled was not relief ancillary to, in the sense of serving or assisting, the claim for damages but raised a different major issue and was accordingly not within the jurisdiction of the county court. Pearson LJ said ([1962] 3 All ER at 821, [1963] 1 QB at 514):
‘The learned judge decided that he had no jurisdiction to grant this declaration. I think that the ground of his decision was that the declaration could not reasonably be regarded as ancillary to the claim for damages [there is a reference to
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De Vries v Smallridge and the County Court Practice 1962eAt p 62]. In my view the decision of the learned judge should be upheld.’
See also Donovan LJ to the same effect ([1962] 3 All ER at 822, [1963] 1 QB at 516):
‘It is argued that in order to establish the money claim a tenancy had to be established of unfurnished premises, and that therefore it would be right to declare that that fact had been established. But if this were so why should not a declaration be asked for of every fact which had to be established as the foundation for a money claim? This, however, would not be the granting of ancillary relief. Ancillary means subservient to; and here it does not serve or assist this particular claim for damages to declare that the lady’s tenancy is protected by virtue of the Rent Acts. A different wording is now proposed, namely, that her tenancy is an unfurnished tenancy and as such entitled to protection; but, as I understand the matter, this will still leave open the question whether it remains a contractual or has become a statutory tenancy, and whichever it is does not affect the claim for damages. That the lady was a tenant of one sort or another was not disputed.’
In my judgment the declarations and injunctions sought by the plaintiffs, regarded as a whole, cannot be treated in any real sense as serving or assisting the claim to damages for trespass and no more. If anything, the claim to damages seems to me to be ancillary to the claim for the declarations and injunctions which are really the principal relief sought. The plaintiffs do not even claim that the defendant has trespassed on the hammerhead, and there is accordingly no claim whatever in respect of the hammerhead except a claim for one of three alternative declarations and a claim for an injunction. I therefore conclude that this action is not one which could properly be now commenced in the county court, and accordingly I have no jurisdiction to order a transfer, even if the statutory financial limits were not exceeded.
It is, I think, desirable that I should say how I would have exercised my discretion if I had the requisite jurisdiction. The evidence which forms the basis of the submission that it would be right to transfer the action to the county court, if it could be transferred, is contained in an affidavit of Dr Lawrey, who is the defendant’s medical adviser. He states that the defendant is aged 81 years and that he has attended her for five years; he states:
‘Her health has declined considerably over the last three years and is directly attributable to her anxiety over this case and I could not allow her to travel to London to pursue this matter in the High Court of Justice as I consider it may well prove fatal. I am of the opinion that she could however face a Hearing in this locality although it would be a great strain upon her.’
It was suggested by counsel for the plaintiffs that the action might be left in the High Court and the evidence of the defendant might be taken before an examiner, and I put to counsel for the defendant that the defendant might in fact prefer to given her evidence before an examiner rather than give her evidence in court. Counsel replied that she wished to be present during the trial of the action, and in my view that is an entirely reasonable attitude for a litigant to take.
Counsel for the plaintiffs urged in effect three reasons why as a matter of discretion the action should not be transferred. First, he said that the court should be slow to interfere with the forum chosen by the plaintiffs. I do not accept that, although I do accept that the onus is on the defendant to justify the transfer. Secondly, counsel urged that this case will involve difficult questions of law, and he submitted that they were not really suitable for trial in the county court. I observe that the
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county court has had statutory jurisdiction for three-quarters of a century in estate duty cases affecting dutiable property to the value of £10,000. I refer to s 10 of the Finance Act 1894. I am not going to make any assumption that the county court is an unsuitable forum for trying difficult questions of law. Thirdly, counsel urged that as it was agreed that the trial would take some two or three days, this might mean that the action would have to be heard in bits and pieces at various places. Counsel for the defendant told me, however, that if the county court judge were informed of the estimated length of the trial, appropriate arrangements might be made for a continuous hearing. I would expect that to be so, and counsel for the plaintiffs in his reply did not suggest the contrary to me.
In these circumstances, if I had jurisdiction to transfer this action to the county court I would, in fact, exercise that jurisdiction.
Solicitors: Dixon, Ward & Co, Richmond, agents for A H Whitwam & Co, Seaton (for the plaintiffs); White & Leonard & Corbin Greener, agents for Tucker & Hilton, Exeter (for the defendant).
Richard J Soper Esq Barrister.
Levene v Roxhan and others
[1970] 3 All ER 683
Categories: TORTS; Defamation: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, PHILLIMORE AND MEGAW LJJ
Hearing Date(s): 7 JULY 1970
Libel – Pleading – Striking out pleading – Statement of claim – Conclusive evidence – Conviction for criminal offence relevant to issue in action – Intermingling with other potentially defamatory matters – Refusal to strike out whole or part – Matters of convictions too closely interwoven with remainder – Civil Evidence Act 1968, s 13(1).
The plaintiff was convicted four times in respect of five offences relating to giving false information and causing general alarm and despondency by telephoning Victoria and Charing Cross stations saying falsely in one case that radioactive material and in the other that a bomb had been left in the luggage office and also by telephoning two embassies indicating again falsely that those occupying them were likely to suffer grievous harm in the near future. He was also convicted of having sexual intercourse with a Swedish girl without her consent, of indecently assaulting her and of buggery and was sentenced to seven years’ imprisonment. An article headed ‘Justice catches up with a vicious pest’ in the News of the World on 23 July 1963 referred to all the convictions but also to other matters mingled with them, some connected with the convictions others independent of them but all capable of being regarded by a jury as highly defamatory of the plaintiff. On 10 July 1969, the plaintiff issued a writ for libel against the defendants, a journalist, the chief editor of the News of the World and the News of the World Organisation Ltd, and in his statement of claim he alleged that many parts of the article were defamatory of him and claimed damages for libel. The defendants pleaded justification and applied to strike out the statement of claim on the ground that it was an abuse of the process of the court by virtue of s 13(1)a of the Civil Evidence Act 1968 and they submitted under the Act certificates of the convictions verified by an affidavit of a legal executive of the defendants’ solicitors stating, in respect of one of the certificates relating to three offences, ‘the facts on which the convictions were based, being accurately set out in the said article’. The judge refused to strike out either (i) the whole statement of
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claim because it related partly to matters other than the convictions covered by the Act of 1968 of which there was no prima facie supporting evidence, or (ii) the passages relating to the convictions because they were too interwoven with the remainder. On appeal,
Held – The judge’s decision would be upheld and neither the statement of claim nor any part of it would be struck out, because—
(i) although the court would have struck out the statement of claim as an abuse of the process of the court if the newspaper article had related only to the plaintiff’s convictions (since s 13(1) of the Act of 1968 making the certificates of conviction conclusive evidence of the commission of the offences afforded a defence in respect of them which was bound to succeed) (see p 685 g and p 687 b and h, post) it would be wrong to strike out the whole statement of claim including the defamatory allegations (other than the convictions) of which the supporting evidence on affidavit was necessarily hearsay and did not state the source of the information, and of much of which there was no evidence at all (see p 686 e, p 687 c and p 688 g and h, post); and
(ii) although it would be proper in some cases to distinguish between defamatory matters in an article leaving in some and striking out others on the basis that no action in relation to them could possibly succeed, eg by virtue of s 13 of the Civil Evidence Act 1968, it had not been shown that the judge had wrongly exercised his discretion in concluding that the case was not one in which that should be done notwithstanding that it was possible to dissect the article (see p 685 j to p 686 b, p 687 f and p 689 a, post).
Notes
For the court’s inherent jurisdiction to strike out pleadings, see 30 Halsbury’s Laws (3rd Edn) 39, para 78 and 407, para 767, and for cases on the subject, see 50 Digest (Repl) 54–95, 420–781.
For the Civil Evidence Act 1968, s 13, see 12 Halsbury’s Statutes (3rd Edn) 925.
Case referred to in judgments
Taylor v Taylor (Taylor intervening, Holmes cited) [1970] 2 All ER 609, [1970] 1 WLR 1148.
Appeal
The defendants, David Roxhan, S W Somerfield (chief editor, News of the World) and the News of the World Organisation Ltd, appealed against an order of Melford Stevenson J made on 26 May 1970 dismissing their appeal against the decision of Master Jacob given on 14 May 1970, refusing to order that the statement of claim and particulars served therewith in the action brought against them by Benjamin Franklin Levene be struck out pursuant to RSC Ord 18, r 19, or under the inherent jurisdiction of the court. The facts are set out in the judgment of Salmon LJ.
A J Bateson for the defendants.
The plaintiff appeared in person.
7 July 1970. The following judgments were delivered.
SALMON LJ. On 10 July 1969, the plaintiff issued a writ for libel against the defendants, Mr David Roxhan, a journalist, Mr S W Somerfield, who was then the chief editor of the News of the World, and the News of the World Organisation Ltd, in respect of an article which appeared in the News of the World as long ago as 23 July 1963, under the headline ‘Justice catches up with a vicious pest’. The plaintiff delivered a statement of claim in which he alleged that many parts of this article were defamatory of him and he claimed damages for libel.
It appears from the unchallenged affidavit evidence that the plaintiff had been convicted four times in respect of five offences relating to giving false information and causing general alarm and despondency, by telephoning Victoria and Charing Cross stations saying quite falsely in one case that radioactive material and in the
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other that a bomb had been left in the luggage office, and also by telephoning two embassies and indicating that those occupying them were likely to suffer grievous harm in the near future. There was, of course, as he knew, no truth in any of the information which he gave on any of those occasions. In respect of these convictions, which occurred in 1959, he was put on probation. In July 1963 at the Old Bailey he was convicted of having sexual intercourse with a Swedish girl without her consent, of indecently assaulting her and of buggery, and sentenced to seven years’ imprisonment.
The article in question undoubtedly refers to all those convictions. It also recites other matters, some connected with the convictions, and others quite independent of them, but all of which might well be regarded by a jury as highly defamatory of the plaintiff. It is not necessary to go into the details of the various allegations made in the article.
The defendants applied to strike out the statement of claim on the ground that it was an abuse of the process of the court. They relied on s 13 of the Civil Evidence Act 1968. Section 13(1) provides:
‘In an action for libel or slander in which the question whether a person did or did not commit a criminal offence is relevant to an issue arising in the action, proof that at the time when the issue falls to be determined, that person stands convicted of that offence shall be conclusive evidence that he committed that offence; and his conviction thereof shall be admissible in evidence accordingly.’
Prior to that enactment the law as stated in a decision that has been much criticised in this court and elsewhere was that the fact that a person had been convicted of a criminal offence was not evidence in civil proceedings that he had committed that offence. Section 13(2) provides:
‘In any such action as aforesaid in which by virtue of this section a person is proved to have been convicted of an offence, the contents of any document which is admissible as evidence of the conviction, and the contents of the information, complaint, indictment or charge-sheet on which that person was convicted, shall, without prejudice to the reception of any other admissible evidence for the purpose of identifying the facts on which the conviction was based, be admissible in evidence for the purpose of identifying those facts.’
I have no doubt at all that if the newspaper article in this case had referred only to the plaintiff’s convictions for rape, buggery and indecent assault and to the other convictions which I have mentioned, the court ought to have struck out the statement of claim. Justification of these matters had been pleaded in the defence, and there was unchallenged evidence before the court to support that plea. In the circumstances postulated, it would have been apparent that this defence was bound to succeed. To persist with the action in such circumstances would clearly be an abuse of the process of the court which should be strongly discouraged. Indeed, if in circumstances such as I have described a judge were to exercise his discretion by refusing to strike out the statement of claim, this court would have no hesitation in coming to the conclusion that that was a wholly wrong exercise of discretion and would order the statement of claim to be struck out.
This, however, is not such a case. As I have already said, there are a number of other allegations in the article which are defamatory of the plaintiff. One of them in particular alleges that the plaintiff had boasted to the Swedish girl that he would make her his slave and turn her into a prostitute; and there are other allegations; eg that he had deserted from the Navy, had been court-martialed, and had practised a number of mean frauds.
It would no doubt be proper in some cases relating to an article containing a number of defamatory matters to distinguish between them and leave some in the statement of claim but strike others out on the basis that no action could possibly
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succeed in relation to them by reason, for example, of s 13 of the Civil Evidence Act 1968. I am, however, by no means satisfied that the learned judge wrongly exercised his discretion in coming to the conclusion, as he did, that, although it would be possible to dissect this article and strike out of the statement of claim some of the passages complained of and leave in others, they were all so interwoven that this was not a case in which such a course ought to be adopted.
Moreover, he rightly considered that the supposed evidence which had been adduced relating to the matters surrounding the convictions was not sufficient to raise even a prima facie case. For example, as I have already stated, the article alleged that the plaintiff had boasted to the Swedish girl that he would make her his slave and turn her into a prostitute. By looking at the indictment or the conviction alone one cannot find any indication justifying that allegation. A legal executive in the employ of the defendants’ solicitors swore an affidavit in which he stated:
‘There is now produced and shown to me marked “C.J.R.3” a certificate of conviction at the Central Criminal Court on the 9th July 1963 of the Plaintiff in this action n respect of three offences against [and then a girl is named] the facts on which the convictions were based, being accurately set out in the said article.’
Quite obviously that gentleman was not present at the time the girl was raped, and the assertion that the facts in respect of the offences were accurately set out in the article is necessarily only hearsay. Nothing appeared in the affidavit as to the source of his information. I suppose that even after this length of time it might have been possible to obtain information from the girl herself or perhaps an affidavit from her, although, having regard to the passage of time, such a course might well have presented great difficulties. However that may be, there is no evidence before the court which shows that that part of the libel is justified, and, of course, as counsel for the defendants with his usual frankness admits, there is no evidence at all to show that many other parts of the article are justified, let alone being conclusive evidence.
I confess that for my part I have a great deal of sympathy with the defendants, because a man who has been convicted of rape and buggery may find great difficulty, I should have thought, in persuading a jury that his reputation was worth anything at all, particularly in July 1963 when the article was published, less than two weeks after his conviction and sentence of seven years’ imprisonment had no doubt been splashed all over the newspapers. But it is for a jury alone to consider these matters and decide whether or not substantial damages ought to be awarded if the article does contain some defamatory matter which cannot be justified and to which there is no other defence.
As I have already indicated, there may well be cases where evidence can be produced not only of convictions but of all the defamatory surrounding facts which a newspaper article sets out and which is unchallenged. In such a case a court, in my view, would be justified in striking out and, indeed, bound to strike out the statement of claim. Here, however, the matter which is justified by the unchallenged evidence at present before the court and the defamatory matter about the truth of which there is no evidence are so intermingled that I think that the learned judge was certainly entitled to take the view that it would be wrong to strike out the whole of the statement of claim or any part of it. Of course, if the whole of it could be struck out there would be great advantages to the defendants and probably no injustice done to the plaintiff, for it seems unlikely that he will recover anything save nominal damages; but one cannot be certain.
Since it is impossible to strike out the whole of the statement of claim, I do not disagree with the exercise of the learned judge’s discretion in refusing to strike out any of it and I would accordingly dismiss the appeal.
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PHILLIMORE LJ. I agree. As Salmon LJ has pointed out, this article refers to a series of convictions. It also refers to some of the facts on which it is said those convictions were based, and it further refers to other matters quite apart from those convictions. It seems to me perfectly clear that, if the article had merely referred to the convictions, then in the light of s 13 of the Civil Evidence Act 1968, on proof of those convictions, it would have been appropriate to strike out the statement of claim. Moreover, if admissible evidence had been adduced before this court, it might have been possible to strike out not merely the references to the actual convictions but also those passages which refer to the facts on which it is said the convictions were based. That procedure would have been in accordance with the normal procedure for striking out a statement of claim as being an abuse of the process of the court. Here, however, the only evidence in support of the summons is an affidavit by a legal executive employed by the defendants’ solicitors exhibiting various certificates of conviction and stating, as Salmon LJ has pointed out, that in the case of the Swedish girl the facts on which the convictions were based were accurately set out in the article. That statement is completely hearsay, and it does not even have the merit of referring to the source of the deponent’s knowledge.
This court recently held in Taylor v Taylor (Taylor intervening, Holmes cited), which was dealt with at the very end of April and is shortly to be reported, that a transcript of criminal proceedings is admissible in evidence under ss 2(1) and 4(1) of the Civil Evidence Act 1968 and RSC Ord 38, r 28b, and, indeed, that it is probable that a transcript of a judge’s summing-up in criminal proceedings is also admissible. It may well be that if this sort of material had been put before the court it might have been possible to strike out not only the reference to the convictions in the Central Criminal Court but also the statements of fact which it is said in the article form the basis of those convictions. Obviously similar material would not be available in regard to the convictions before the justices.
However, in the absence of such evidence I entirely agree that the learned judge exercised his discretion properly and that it would be wrong for this court to interfere. Reference to the convictions is mixed up with the statements in regard to the facts which it is said form their basis, and accordingly it is really impossible to strike out the one without being able to strike out the other. I would dismiss this appeal.
MEGAW LJ. Section 13(1) of the Civil Evidence Act 1968 provides that in an action for libel or slander, in which the question whether a person did or did not commit a criminal offence is relevant to an issue arising in the action, proof that, at the time when that issue falls to be determined, that person stands convicted of that offence shall be conclusive evidence that he committed that offence, and his conviction shall be admissible in evidence accordingly. If in this case the libel complained of had consisted of assertions that the plaintiff had committed certain criminal offences and that he was guilty of those offences mentioning only those matters that would emerge in a certificate of conviction, I should have no doubt or hesitation in saying that the submission put forward on behalf of the defendants was right; and that the certificate of conviction having been produced and not having been challenged the statement of claim insofar as it related to allegations of those convictions or the guilt arising from those convictions should be struck out.
Unfortunately, however, one of the complications which arises is that a certificate of conviction very often is a document which in itself fails to show what was the real nature of the offence. There is a good instance of that in the present case. The article complained of states that the plaintiff once caused a four-hour shutdown of Victoria station after reporting that he had left radioactive material in the left luggage
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office, and later the article asserts that he was convicted in respect of that matter. The certificate of conviction which has been produced from the North London magistrates’ court, perfectly properly recorded in accordance with the procedure, merely shows under the heading ‘Nature of offence or matter of complaint’ that at Archway Underground Station, London N19, the plaintiff maliciously abstracted a quantity of electricity, the property of Her Majesty’s Postmaster General, contrary to s 10 of the Larceny Act 1916.
The defendants say, and I have no reason to doubt what they say, that that offence of malicious abstraction of a quantity of electricity in fact involved the making of a bogus telephone call to Victoria station by which that station was shut down for four hours. It would completely defeat the purpose of s 13 of the Act if it were not permissible for the defendants to assert matters going beyond the mere abstraction of electricity recorded in the certificate of conviction. It is for that purpose, no doubt, or partly for that purpose, that s 13(2) has been enacted. It makes provision for the admissibility of the contents of any document which is admissible as evidence of the conviction, and the contents of the information, complaint, indictment or charge sheet on which the person was convicted. But in a matter of this sort, where the conviction is in a metropolitan police court, it may well be that the information, the complaint or the charge-sheet would show little of the real nature and gravity of the offence.
Section 13(2) provides that the admission of those documents to which I have referred shall be without prejudice to the reception of any other admissible evidence for the purpose of identifying the facts on which the conviction was based. Therefore, it is contemplated by the Act that in a libel action of this nature the defendants may introduce evidence that would otherwise be admissible to show what was the true nature of the offence that was committed. Here, the defendants are faced with a situation of that sort; what has been alleged in the article in respect of which the action is brought goes materially beyond what appears on the face of the certificates of conviction. It is open to the defendants in such circumstances to adduce proper evidence of such matters, going beyond the mere matter of fact of conviction as proved by the certificates. If that evidence is unchallenged, or it is apparent to the court that there is no bona fide challenge to the accuracy of that evidence, is it permissible for the court to treat the statement of claim, insofar as it refers to such matter, as being an abuse of the process of the court and to strike it out? In my view, that course is permissible and ought to be followed in any case in which the condition precedent to the exercise of that drastic power by the court is fulfilled. The condition precedent to my mind is this, that there is sufficient and satisfactory evidence, not subject to bona fide challenge, of the additional facts asserted.
If in the present case I were able to come to the conclusion that the evidence adduced before the master and the learned judge and before this court was sufficient to fulfil that condition, I would for myself have thought that this appeal should be allowed, and that those parts of the statement of claim which asserted the criminal convictions and the surrounding circumstances thereof should be struck out as being an abuse of the process of the court. But I agree with my Lords that the evidence which has been adduced in this case is not sufficient to permit of that course being followed. Here the evidence is not merely hearsay; it does not disclose the source from which the deponent obtained the information. There is merely a bare assertion, in relation to the sexual offences, and not even such an assertion in relation to the bogus telephone call offences, that the facts are or were stated in the article.
In my judgment, there ought, if this application was to succeed, to be evidence from those who could show from their own knowledge or from some reliable and identified source, what were the relevant facts which were proved, on which the magistrates’ decision or the jury’s verdict, as the case may be, was based. Had there been such evidence, and had it been unchallenged or not subject to anything which
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could possibly be regarded as a bona fide challenge, I should have taken a different view. But, in the circumstances that there arise, I agree with the view which has been expressed by my Lords and I would dismiss the appeal.
Appeal dismissed.
Solicitors: Allen & Overy (for the defendants).
F A Amies Esq Barrister.
Edwards v Society of Graphical and Allied Trades
[1970] 3 All ER 689
Categories: EMPLOYMENT; Industrial relations
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, SACHS AND MEGAW LJJ
Hearing Date(s): 15, 16, 17, 20, 30 JULY 1970
Trade union – Explusion – Damages – Trade union member expelled from membership and employer induced to terminate contract of service – Factors relevant to assessment of damages – On appeal, undertaking by union to reinstate as member – Effect on damages.
Trade union – Rules – Validity – Rules giving unfettered power of expulsion from membership – Infringement of right to work – Restraint of trade – Trade Union Act 1871, ss 3 and 4.
The rules of the union provided for both temporary and full members. They did not, however, provide for a minimum period before which full membership could be obtained, nor for a maximum period during which temporary membership might be held, nor for any test to be taken in order to qualify for, or be selected for, full membership. Full members could only be expelled from the union for infractions of specified rules and enjoyed a right of appeal from decisions of the branch committee of the union. Rule 18(4) concerned temporary members (who, unlike full members, were not handed or shown the rule book); this rule provided, inter alia ‘Temporary Membership shall terminate automatically if the Member becomes over six weeks in arrears’ (r 18(4)(h)); ‘It is a condition of membership that holders of temporary cards must relinquish same immediately upon application by the Branch Committee responsible for their issue and shall have no claim upon the Union or its funds’ (r 18(4)(j)); ‘Temporary members shall not have any right of appeal from the decision of their Branch Committee to the Executive Council’ (r 18(4)(k)).
In 1960, the plaintiff who was a skilled craftsman joined the union as a full member on commencing employment with S Ltd (at which company the union insisted on 100 per cent union membership). He ceased to be a member in 1964 for a few months and was readmitted as a temporary member of the union in 1965. Later that year the union introduced a system whereby union dues would be deducted from wages at source. The plaintiff duly completed a form of authorisation for this purpose and handed it to the secretary of the local branch of the union. The secretary failed to deliver the authorisation to S Ltd with the result that S Ltd did not deduct the plaintiff’s union dues. The plaintiff was ignorant of this omission. In due course the union informed him that he was no longer a member by virtue of the union rules. Early in 1966 the plaintiff applied for readmission to the union. He was given a hearing but was informed (July 1966) that his application was not accepted. A few days later he wrote to the union drawing attention to the fact that his failure to pay union dues was a clerical error. He continued to work for S Ltd until other employees said that they would not work with the plaintiff unless his union card was restored. In November 1967 S Ltd suspended him; a few days later the union finally rejected his application for readmission to membership. In the following
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month S Ltd gave him notice. The plaintiff sought other work and brought proceedings against the union, inter alia, for a declaration that he was still a member. In September 1968, he found employment with B Ltd. In the following May he refused (as other skilled men were refusing) to perform the task of a labourer on request of the foreman and was given notice (although it was later admitted that the task in question was not part of his work). The union, who had by this time accepted that the plaintiff was entitled to temporary membership (and who took a leading part in filling vacancies in 100 per cent factories in the area and thus was in a position to be of substantial assistance to him in finding suitable employment), put forward names of prospective employers to him but the work transpired to be labourer’s work. The plaintiff refused these offers since he felt that if he accepted such work it might be difficult thereafter to obtain skilled work. In August 1969, the union advised him of a vacancy at D Ltd. The plaintiff assuming that it too would prove to be labourer’s work, and it being 12 miles from his home, did not apply. The vacancy was, however, for a job which might have opened the way to skilled work. When the action came for trial (November 1969), the union having admitted that the plaintiff was still a member, the only issue was damages. The judge by analogy with awards in personal injuries cases awarded damages totalling £7,971 (general damages, £6,760; special damages, £1,211). At the hearing of the appeal the union undertook to admit the plaintiff to full membership; the union also raised a new point that the plaintiff being only a temporary member was, under the rules, subject to the unfettered discretion of the branch committee of the union to deprive him of that membership and was therefore entitled only to nominal damages.
Held – (i) (Megaw LJ expressing no view on this point) Rule 18(4) so far as it gave the branch committee an unfettered discretion to exclude a member was void, because—
(a) (per Lord Denning MR) a man’s right to work was fully recognised by law and was of especial importance in a situation where a trade union operated a ‘closed shop’ or ‘100 per cent membership’; if the union were to assume to make a rule which destroyed that right or put it in jeopardy (or which was a gratuitous or oppressive interference with it) the union would have exceeded its powers and the rule would be ultra vires (see p 695 j to p 696 a b and f, post);
(b) (per Sachs LJ) in these days of closed shops a rule that entitled a trade union to withdraw the card of a capable craftsman of good character, who for years had been a member, for any capricious reason was plainly in restraint of trade and at common law was clearly unreasonable so far as the public interest was concerned; the rule could not be said to be proper to the purposes of the union under s 3 of the Trade Union Act 1871, nor to be protected by the provisions of s 4 of that Act. Furthermore, a rule intended and likely to be regarded as permitting the union to act without regard to the rules of natural justice must be void on that ground also (see p 700 j to p 701 a and c, post);
(c) the distinction drawn by the union between full and temporary members was not material to the validity of the provisions of the rule (see p 696 d and p 700 g, post); and
(d) accordingly, the union’s contentions that had the plaintiff not been excluded from membership, his continued temporary memberships would have been subject to the right of the union under its rules to terminate his membership at any time and that the plaintiff was entitled for that reason to nominal damages only, failed (see p 695 h and p 700 b, post).
(ii) The plaintiff was under a duty to mitigate the loss he had suffered but his conduct in relation to the incident at B Ltd (see p 694 j, p 699 d and p 704 g, post), his refusal of labourer’s work (see p 695 c, p 699 c and p 704 g, post) and his failure to investigate an offer of work with D Ltd was not unreasonable (see p 695 d, p 699 d, and p 704 g post).
(iii) In quantifying the damages to be awarded against the union for the admitted breach of contract regard should be had (apart from the duty of mitigation referred to
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in holding (ii) above) to such factors as the undertaking given that the plaintiff would be restored to full membership of the union (see p 697 b, p 702 f and p 705 d, post) (Murphy v Stone Wallwork (Charlton) Ltd [1969] 2 All ER 949 applied) and the relationship between the plaintiff and the union (ie in regard to the union’s assistance in finding suitable employment for him) (see p 702 h and p 705 c, post); and the material differences between an award for personal injuries and an award for loss of union membership needed to be borne in mind (see p 697 e and p 698 f, post).
(iv) The damages would be reduced to £3,500 (in total), because—
(a) (per Lord Denning MR) the damages for future loss should be viewed somewhat broadly, starting with the loss of earnings which the plaintiff might reasonably have been expected to have suffered over two years from his expulsion and then working upwards or downwards from that figure (see p 697 f, post);
(b) (per Sachs LJ) an overall assessment on a broad basis was needed, both as regards the past and the future, and an overall sum of £3,500 was proper (see p 703 c, post); and
(c) (per Megaw LJ) the figure awarded by the trial judge for loss up to the date of judgment (£1,211) was appropriate but should be increased to £2,000 to cover the loss to date; having regard to all relevant considerations the plaintiff’s future loss should be quantified at £1,500 (see p 704 g and p 705 d, post).
Decision of Buckley J [1970] 1 All ER 905 varied.
Notes
For the rules of a trade union and provisions therein for membership and expulsion, see 38 Halsbury’s Laws (3rd Edn) 354–357, paras 612–615, and for cases on the subject, see 45 Digest (Repl) 545, 546, 1230–1238.
For the measure of damages for wrongful dismissal, see 25 Halsbury’s Laws (3rd Edn) 523, 524, para 995, and for cases on the subject, see 34 Digest (Repl) 128–132, 866–897.
For the Trade Union Act 1871, ss 3 and 4, see 25 Halsbury’s Statutes (2nd Edn) 1245.
Cases referred to in judgments
Addis v Gramophone Co Ltd [1909] AC 488, [1908–10] All ER Rep 1, 78 LJKB 1122, 101 LT 466, 34 Digest (Repl) 131, 891.
Cockburn v Alexander (1848) 6 CB 791, 18 LJCP 74, 12 LTOS 349, 136 ER 1459, 41 Digest (Repl) 197, * 301.
Faramus v Film Artistes’ Association [1964] 1 All ER 25, [1964] AC 925, [1964] 2 WLR 126, 45 Digest (Repl) 542, 1228.
Lavarack v Woods of Colchester Ltd [1966] 3 All ER 683, [1967] 1 QB 278, [1966] 3 WLR 706, Digest (Cont Vol B) 535, 894e.
Murphy v Stone Wallwork (Charlton) Ltd [1969] 2 All ER 949, [1969] 1 WLR 1023, Digest Supp.
Nagle v Feilden [1966] 1 All ER 689, [1966] 2 QB 633, [1966] 2 WLR 1027, Digest (Cont Vol B) 323, 585a.
Pharmaceutical Society of Great Britain v Dickson [1968] 2 All ER 686, [1970] AC 403, [1968] 3 WLR 286, Digest Supp.
Cases also cited
Abbott v Sullivan [1952] 1 All ER 226, [1952] 1 KB 189.
Bonsor v Musicians’ Union [1954] 1 All ER 822, [1954] Ch 479.
Brace v Calder [1895] 2 QB 253, [1895–99] All ER Rep 1196.
British Guiana Credit Corpn v da Silva [1965] 1 WLR 248.
Clayton Greene v De Courville (1920) 36 TLR 790.
Curwen v James [1963] 2 All ER 619, [1963] 1 WLR 748.
Dawkins v Antrobus (1881) 17 Ch D 615, [1881–85] All ER Rep 126.
Jackson v Hayes Candy & Co Ltd [1938] 4 All ER 587.
Page 692 of [1970] 3 All ER 689
Jenkins v Richard Thomas & Baldwins Ltd [1966] 2 All ER 15, [1966] 1 WLR 476.
Lawlor v Union of Post Office Workers [1965] 1 All ER 353, [1965] Ch 712.
Lee v Showmen’s Guild of Great Britain [1952] 1 All ER 1175; [1952] 2 QB 239.
Martin v Amalgamated Society of Painters and Decorators (1968) The Times, 10 July.
Morgan v Fry [1968] 3 All ER 452, [1968] 2 QB 710.
Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694, [1968] AC 997.
Rookes v Barnard [1964] 1 All ER 367, [1964] AC 1129.
Russell v Duke of Norfolk [1949] 1 All ER 109.
Weinberger v Inglis [1919] AC 606.
Wood v Woad (1874) LR 9 Exch 190, [1874–80] All ER Rep 408.
Yetton v Eastwoods Froy Ltd [1966] 3 All ER 353, [1967] 1 WLR 104.
Appeal
This was an appeal by the Society of Graphical and Allied Trades (‘the union’) from the judgment of Buckley J given on 27 November 1969 and reported [1970] 1 All ER 905, whereby judgment was given for the plaintiff, Beresford Edwards, in the sum of £7,791 10s (special damages, £1,211 10s for loss of earnings to date of trial; general damages, £6,760 (ie £676 per annum with a multiplier of 10) for loss of future earnings) for wrongful exclusion from the union. The union was formed on 1 February 1966 pursuant to an instrument of amalgamation made by the National Union of Printing, Bookbinding and Paperworkers of the one part, and the National Society of Operative Printers and Assistants of the other part. The plaintiff had originally joined the National Union of Printing, Bookbinding and Paperworkers (ie before amalgamation); no point arose in this case on any distinction between that union (which the plaintiff originally joined) and the union (defendant in this action). The facts are summarised in the headnote.
H E Hooson QC and R E Hammerton for the union.
Peter Pain QC and Anthony Lester for the plaintiff.
Cur adv vult
30 July 1970. The following judgments were delivered.
LORD DENNING MR.
1 The facts
The plaintiff is now aged 40. He was born in Guyana. At the age of 14 he was apprenticed to the printing trade in Guyana and worked his way up until he became a foreman there. In 1960, at the age of 30, he came to England and got work in Manchester with Hugh Stevenson & Sons Ltd, the big printing works. In 1965 his wife came over here to join him. He bought a house in Manchester. They have four boys, aged 11, seven, five and three. He remained with Stevensons for nearly eight years until December 1967. He says that he lost his work with Stevensons because the defendant union wrongly deprived him of his membership of the union. He now sues the union for damages for breach of contract. He cannot, of course, sue the union in tort.
At the outset I must mention two points: the first is that the men at Stevensons all belong to a trade union called the Society of Graphical and Allied Trades, or more shortly, SOGAT. The work at Stevensons is not a ‘closed shop’, but the union insists on ‘100 per cent membership’. The difference is this: when a firm is a ‘closed shop’ no man can obtain work there unless he is already a member of the union. But when a firm is ‘100 per cent membership’, he need not be a member when he applies for work, but, as soon as he gets work there, he must join the union.
The second thing is that the union controls employment in the trade. It operates a ‘labour exchange’. It divides its members into two main classes: ‘full members’ and ‘temporary members’. A ‘full member’ is secure in his membership of the
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union. He cannot be fined or expelled except for misconduct, and he has a right of appeal to the appeals committee. If he is out of work, and a job is available, he is always given priority over a temporary member. A ‘temporary member’ is not at all secure in his membership. It can be terminated at a moment’s notice by the branch committee, and he has no right of appeal at all. If he is out of work, and a job is available, he is not considered for it until all the ‘full members’ have been offered it. A ‘temporary member’ can become a ‘full member’, but he has to wait two years, or more, for it.
When the plaintiff was first employed by Stevensons in 1960, he became a full member of the union, or its predecessor. In 1964, he ceased for a few months to be a member, but in January 1965 he was readmitted as a temporary member. A blue card was issued to him showing that his new membership started on 30 January 1965. He paid his weekly contributions regularly until June 1965. The union then introduced a ‘check-off’ system. This meant that, instead of the workman paying his own contributions to the union, his employers were to pay them and deduct them from his wages. The plaintiff signed a written authority for the purpose and handed it to the secretary of the Manchester branch of the union. The secretary ought to have sent it to Stevensons, and, on receipt of it, Stevensons would have paid the contributions. But, unfortunately, the secretary failed to send this written authority to Stevensons. So Stevensons did not deduct anything from his wages for the contributions and did not pay anything to the union. The plaintiff was not aware of this mistake; and continued apparently secure in his membership. So much so that in November 1965 he was elected deputy father of his chapel. Soon afterwards, however, the branch told him that his contributions had not been paid and that he was no longer a member. Rule 18(4)(h) provides that ‘Temporary Membership shall terminate automatically if the member becomes over six weeks in arrears.' Now it is true that the plaintiff was over six weeks in arrears. His contributions had not been paid. But it was not his fault. It was the fault of the union secretary; because he had not notified Stevensons of the ‘check-off’ authority. Nevertheless, although the plaintiff was not to blame, he was treated as no longer being a member. He was told he was no longer a member.
Early in 1966 the plaintiff reapplied for membership. So did four others who were in the same plight. These four were allowed to pay up their back dues and were readmitted. But the plaintiff was refused. In May 1966 he was given a hearing. On 1 July 1966, the secretary wrote to him that the decision of the branch committee was: ‘That your application be not accepted.' The plaintiff did not suggest that this was due to the colour of his skin. He only said ‘Being black doesn’t make it any easier.’
A few days later, on 5 July 1966, the plaintiff wrote drawing their attention to—
‘… the fact that there has been a clerical error on the part of the union and management of Hugh Stevensons in not deducting from weekly wages my union subscriptions.’
Nevertheless, he was not readmitted. Yet he continued at work with Stevensons for another 16 months. Then the men who were working there told Stevensons that they would not work with the plaintiff unless his membership card was restored. In other words, they would strike unless he was dismissed. In consequence, Stevensons on 6 November 1967 felt obliged to suspend him. They wrote to him, stating:
‘Since your membership card has not been restored, we have no alternative, from a Company viewpoint but to suspend you from duty. If your card is restored the Company will pay your wages in full during the period of your suspension.’
On 13 November 1967, the Manchester branch finally refused to restore his membership card. On this occasion they did it without a hearing. The secretary wrote saying that the branch committee decided: ‘… that the application of [the plaintiff]
Page 694 of [1970] 3 All ER 689
for a membership card of this Branch be refused … ’ Stevensons, therefore, had no option but to dismiss him. On 21 December 1967, they gave him notice to terminate his employment and paid him four weeks’ pay in lieu of notice.
The plaintiff got legal aid. On 8 May 1968, he brought an action against the union. He claimed a declaration that he was still a member of the union, and an injunction to restrain the union from interfering with his prospects of employment. On 21 June 1968, the union agreed not to do any act to interfere with his prospects of employment. On 3 July 1968, the union put in a defence, stating that his membership had automatically terminated by reason of arrears and that his application for readmission had been properly rejected.
2 The incident at Boxmakers
Nevertheless, although he was not a member of the union, the plaintiff sought other work. He went to a firm which did not employ union men. It was a ‘non-union shop’—Boxmakers (Manchester) Ltd. He started with them on 9 September 1968 as an assistant. He soon proved himself so capable that he was put on to a Heidelberg cutting-and-creasing-cylinder machine. But he earned less money. Whereas he averaged £29 7s 9d a week at Stevensons, he only averaged £22 a week at Boxmakers.
Six months later, whilst still working at Boxmakers, the union gave up its defence in the action. On 9 April 1968, it agreed that his purported expulsion from the union was null and void and that he had at all times remained a temporary member of the union. It said that it was prepared to submit to declarations to that effect and for damages to be assessed.
Shortly afterwards, however, the plaintiff lost his employment at Boxmakers. On 1 May 1969 he came to loggerheads with them. It happened in this way: the plaintiff was doing work for which he required ‘stillages’ (ie flat pieces of wood on legs) to put the material on. There was none available on the morning of 1 May 1969. The reason was because the labourer who handled them had been away sick for five or six weeks. The firm had ordered more, but they had not arrived. So the foreman asked the plaintiff to unstack some so as to make more available. The plaintiff said that he would not do it. The foreman called the works manager, Mr Lynch. He explained the difficulties, but the plaintiff said: ‘I won’t do it. It’s not my job.' Later on, after dinner, the works manager asked him again to do it. The plaintiff said again: ‘I won’t.' The works manager said: ‘That gives me no alternative but to send you home.' The plaintiff said: ‘You can’t do that. You will have to sack me.' The works manager said: ‘I don’t want to sack you but you leave me no alternative.' So the works manager dismissed him. He gave him one week’s pay in lieu of notice. But he gave him a good reference in these words:
‘[The plaintiff] was in our employ from 9th September 1968 to 1st May 1969. We found him to be honest and a good time keeper. He was employed in our Heidelberg Department dealing with printing, also cutting and creasing. His work was quite satisfactory.’
Finding himself out of work, the plaintiff applied for unemployment benefit; and, after enquiry, the Ministry granted it. Boxmakers told the Ministry, fairly enough, that it was no part of his contract to clear the stillages. So he got his unemployment benefit. But does his conduct count against him in assessing damages?
In point of law the plaintiff, I think, was entitled to take the stand he did. He was asked to do something which was outside his proper work as a skilled man; and he refused. Other skilled men were likewise refusing, he said. But I must say, I think that he was being very unco-operative. Even though it was no part of his contract, I should have thought that he might have helped clear the stillages so as to enable the work to proceed. Nevertheless, in assessing damages, I do not think that this incident ought to be taken against him. It all flowed from the fact that he had been
Page 695 of [1970] 3 All ER 689
expelled from the union. Owing to his expulsion, he could only find work in Boxmakers, a non-union shop; and, working there, he had no union to back him up. If Boxmakers had been a union shop and the plaintiff a member of the union, there is no doubt that Boxmakers would not have dared to dismiss him; because the union would have supported him in his refusal. So it all flowed from his explusion.
3 The job at Deans of Stockport Ltd
After his dismissal from Boxmakers, the plaintiff tried to find work. By this time the union had agreed that he was still a temporary member. He asked the union for a temporary membership card, but it was not forthcoming. The union did, however, put forward names of employers who had work to offer. But the work turned out to be, not skilled work, but labourer’s work; and, quite understandably, the plaintiff refused, because, if he went to labourer’s work, he would find it difficult to get back into skilled work. Then, on 28 August 1969, the union wrote and stated that: ‘a General Assistant’s job in the letter press machine department at Deans of Stockport Limited … is available.' Unfortunately, the plaintiff did not apply for it. He thought that it was a general labourer’s job again; and it was 12 miles away from his home. It was, in fact, a grade III job which might have opened the way to skilled work. The union says that he should have gone to see it. I rather think that he ought, but, on the whole, I cannot say that he was unreasonable. It was the union’s mistake which had put him out of work; and it ought to have done everything possible to remedy it. It ought to have made it clear to him that it was a grade III job.
The action came for trial in the last week of November 1969. Seeing that the union had admitted that he was still a member, the only issue was damages. Incidentally, the plaintiff had asked for a temporary membership card, but he did not get it until the second day of the hearing and the union made him pay all the arrears from December 1967. The judge ([1970] 1 All ER 905, [1970] 1 WLR 379) awarded damages of £7,971. The union appeals to this court. On the second day of the hearing, after some comments from the court, the union promised to make him a full member.
4 The rules
I must at the outset consider a new point which was raised before us by counsel for the union. He said that the plaintiff was only a temporary member and that, under the rules, the branch committee had an unfettered discretion to remove him. Rule 18(4) provides:
‘(j) It is a condition of acceptance of membership that holders of such [temporary] cards must relinquish same immediately upon application by the Branch Committee responsible for their issue and shall have no claim upon the Union or its funds.’
‘(k) Temporary members shall not have any right of appeal from the decision of their Branch Committee to the Executive Council.’
Counsel said that in assessing damages, therefore, it should be assumed that the union would have exercised its power under the rules to remove him; and he should, therefore, recover nothing. At any rate, he should recover nothing after the date of trial because the union would have removed him then. Counsel for the union relied on the judgment of Diplock LJ in Lavarack v Woods of Colchester Ltd ([1966] 3 All ER 683 at 690, [1967] 1 QB 278 at 294).
This point was not taken in the court below ([1970] 1 All ER 905, [1970] 1 WLR 379); and I have had some doubt whether it should be allowed here. But, as it is a point of law, on which no further evidence can help, I think that we should consider it. But I desire to say quite clearly that I think that the point is bad, and for this reason: I do not think the defendant union, or any other trade union, can give itself by its rules an unfettered discretion to expel a man or to withdraw his membership. The reason lies in the man’s right to work.
Page 696 of [1970] 3 All ER 689
This is now fully recognised by law. It is a right which is of especial importance when a trade union operates a ‘closed shop’ or ‘100 per cent membership’; for that means that no man can become employed or remain in employment with a firm unless he is a member of the union. If his union card is withdrawn, he has to leave the employment. He is deprived of his livelihood. The courts of this country will not allow so great a power to be exercised arbitrarily or capriciously or with unfair discrimination, neither in the making of rules, nor in the enforcement of them. The law has means at its disposal. A trade union exists to protect the right of each one of its members to earn his living and to take advantage of all that goes with it. It is the very purpose of its being. If the union should assume to make a rule which destroys that right or puts it in jeopardy—or is a gratuitous and oppressive interference with it—then the union exceeds its powers. The rule is ultra vires and invalid. Thus if the union should make a rule purporting to give itself uncontrolled discretion to expel a member without hearing him, that rule would be bad. No union can stipulate for a power to expel a man unheard, see Faramus v Film Artistes’ Association ([1964] 1 All ER 25 at 33, [1964] AC 925 at 947) per Lord Pearce. And the union cannot get round it by calling him a ‘temporary member’. A temporary member is just as much a member of the union as a full member. He pays his dues just the same; and he is entitled to equal protection by the law. The union has no right to expel a temporary member arbitrarily any more than it has a right so to expel a full member. To call him a ‘temporary member’ is only a covert way of claiming to exclude him at its discretion; and, as such, it cannot be allowed.
I cannot leave the rules there. I think that we must consider them further, even on the issue of damages. The plaintiff is entitled to damages for being wrongfully excluded from the union. That is now admitted. But why was it wrongful? The measure of damages may depend on the nature of the breach.
The union excluded him by virtue of a rule commonly called the ‘automatic forfeiture’ rule. It is r 18(4)(h), which provides: ‘Temporary Membership shall terminate automatically if the member becomes over six weeks in arrears.' That rule is so positive in its language that I see no way of limiting it. Not by way of construction. Nor by way of an implied term. Why then does it not apply to this case? I think it is for this simple reason: this rule, like the other, is invalid. It is an unwarranted encroachment on a man’s right to work. Just think. A man may fall into arrears without any real fault of his own. It may be due to oversight on his part, or because he is away sick, or on holiday. It may be due, as here, to the union’s own fault in not forwarding the ‘check-off’ slip. But, whatever the cause, this rule, if valid, would put it into the power of the union, as soon as a man was six weeks in arrears, either to enforce his exclusion, or to waive it, or to readmit him. It could be as arbitrary or capricious as it pleased. It could discriminate in favour of some and against others as it liked (as indeed the plaintiff thought happened to him). It could turn him out of his work without any good or sufficient cause. Such cannot be permitted. It is ultra vires. No union can stipulate for automatic exclusion of a man without giving him the opportunity of being heard, see what Lord Evershed said in the Faramus case ([1964] 1 All ER at 28, [1964] AC at 941).
Next, I would consider the plaintiff’s application for readmission. Once he was excluded, the union treated his readmission as a matter for its discretion. He applied twice and each time he was refused. Such a refusal may sometimes be justified, as when the trade is oversupplied with labour. But it will not be justified if it is exercised in an arbitrary or capricious manner or with unfair discrimination: see Nagle v Feilden. In this case, seeing that the plaintiff was wrongfully excluded in the first place, it was doubly wrong to refuse him readmission.
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5 The damages
Such being the wrongful exclusion, how are the damages to be measured? I think that they are to be ascertained by putting the plaintiff in as good a position, so far as money can do it, as if he had never been excluded from the union, taking into account, of course, all contingencies which might have led to him losing his employment anyway; and remembering, too, that it was his duty to do what was reasonable to mitigate the damage. Before the judge ([1970] 1 All ER 905, [1970] 1 WLR 379), too, it was necessary to have regard to the fact that he had by that time been restored to temporary membership. Before us, too, we must remember that he has now been restored to full membership. We are entitled to take this into account, even though it is a matter which has arisen since the trial: see Murphy v Stone Wallowrk (Charlton) Ltd. It will considerably reduce the damages.
The loss up to the date of trial was as follows:
£ s d
Actual loss from date when he was dismissed by Stevensons (22nd) December 1967) to date of trial (18th November 1969). The wages he would have earned with Stevensons at £29 7s 9d a week
2,700
13
11
Less his earnings with Boxmakers (£22 a week) unemployment benefit and wages in lieu of notice
1,489
3
11
£1,211 10 0
Loss from date of trial, November 1969 onwards: the judge ([1970] 1 All ER 905, [1970] 1 WLR 379) assessed this loss as if the plaintiff had suffered personal injury incapacitating him from any work except general labouring work. I think that that was not the right measure. There is a great difference between permanent incapacity due to personal injury (which cannot be overcome) and loss of membership due to expulsion from a trade union (which can be overcome by learning another skill or by being reinstated, and so forth).
I feel that damages in such a case as this are so difficult to assess that I would be inclined to view them somewhat broadly. I would start with the loss of earnings which the plaintiff might reasonably be expected to have suffered over two years from his expulsion. That is what was suggested by Lord Donovan’s committeea. I would then work upwards or downwards from that figure, according to the circumstances of the case.
On the whole in this case I would award the figure of £3,500 in all.
SACHS LJ. The plaintiff, who in 1960 came to this country from Guyana, had by June 1965 achieved the prized position of being employed at a Manchester factor as a skilled craftsman in a grade I post in the printing trade. His precise work was that of an auto platen operator—a relatively rare post. His employers were the well-known firm of Hugh Stevenson & Sons Ltd, one of the largest of their type. Their Manchester factory was run on a 100 per cent union basis; in other words, whilst a man taken into employment is not bound to be a union man at that stage, yet when he is engaged he must become one soon. If he either fails to obtain or ceases to be entitled to a union card, the employers are, under their agreement with the trade unions, bound to dismiss him.
The plaintiff at the material time was a temporary member of the defendant union, having held a blue card since January 1965. It was a term of that membership that if his dues became six weeks in arrears his membership automatically terminated.
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In the latter part of 1965 his dues were held by the union to be six weeks in arrears, despite the fact that it was the union itself which by its own muddle had failed to arrange for Stevensons to collect those dues for his credit. On this pretext the union purported to treat him as being no longer a member. Worse still, despite the true facts being brought to its attention, it twice later refused to readmit him to membership and still later by a resolution threatened Stevenson with a strike if they did not dismiss him. The latter in consequence first suspended him and then on 21 December 1967 dismissed him; he had by then been continuously in their service for no less than 7 ½ years. It was not until 9 April (11 months after the writ in the instant proceedings had been issued) that the union came to admit the obvious—that the plaintiff’s membership had never terminated.
The union’s liability in damages being clear, this appeal is concerned with its measure—an important matter in the particular circumstances. These damages, of course, sound in contract and not in tort. It is, however, as well to record at the outset (in view of counsel for the union’s submissions) that certain rules laid down in Addis v Gramophone Co Ltd touching damages for wrongful dismissal have no application to the present type of case. In other words, whereas in the former class of cases the damages can contain no element for the difficulty the dismissal causes to a plaintiff in getting fresh employment, the essence of the measure in the present case is an assessment of the financial consequences of that very difficulty. It is for the courts to assess the actual financial damage naturally flowing from the union’s breach of contract. For that purpose it is in each case necessary first to assess the difference the deprivation of a union card has made to a plaintiff’s earnings up to the date of trial and then to add to the resulting figure a quantification of the difference to his future earning capacity likely thereafter to result from the union’s wrongful act. This can be a task beset by the same type of difficulties as the assessment of similar damages in personal injury cases; in one class of case the court is concerned with the deprivation of physical attributes that qualify a plaintiff to follow his employment, in the other with the deprivation of the union card that qualifies him for it. A difference, however, is that in personal injury cases the defendant cannot restore to a plaintiff, for instance, his arm or his sight, but in trade union cases the defendants can mitigate potential consequences of their wrongful act by restoring the union card. In both cases, however, the court when considering loss of future earning capacity has to do its best to take into account what are commonly termed the chances of life.
In the present case it is convenient first to deal with the loss sustained by the plaintiff from the date of dismissal in December 1967 to that of the judgment at first instance ([1970] 1 All ER 905, [1970] 1 WLR 379), 27 November 1969—a period of close on two years. Not only does this period come first in sequence, but what happened in it throws light on the chances of what the future may hold.
Questions having been raised as to the plaintiff’s duty to mitigate his damages, it is relevant at this stage to note that he is clearly a man of some intelligence, general education, and ability; that he comes from a family who had owned a printer’s business in Guyana; that he had worked in the printing crafts since the age of 14; that he had experience in many of its skills including that of cutter and creaser and that of compositor; and that he had held the post of foreman. In England he had laid down his roots in Manchester where he had settled with his wife and four children. Moreover in this country he had taken considerable steps to improve his position by engaging in lithographical printing, and by learning first personnel management and then industrial administration. He had been elected deputy father of the chapel shortly before he was dismissed. As regards earning capacity, it is common ground that he was earning close on £30 a week at the time the union caused him to lose his employment.
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During those two years after his dismissal the plaintiff was unemployed for some 15 months—that is to say, continuously except for the period he was with Boxmakers (Manchester) Ltd. No one can read of the efforts he made during those months to get work, the rebuffs he received, and the way in which the union added to his difficulties, without having strong feelings about the distress the union caused him without a trace of compunction. For instance, even after the union admitted that he was still a member, it failed despite requests, to send him a much-needed blue card. It thus continued the position that the plaintiff had nothing to show prospective employers as to his membership except a solicitor’s letter—something which might make an employer think that he was buying trouble if he engaged the plaintiff. Such difficulties in practice were the more onerous because, to use the plaintiff’s moderate language, ‘being black doesn’t make things easier.' The court, however, cannot add to the damages on that account.
As regards his refusals to take jobs of the lowest grade (grade IV) (eg to sweep floors and make tea) it seems to me that the union’s suggestions that he should have done otherwise in its interests as regards damages come ill from one whose wrongful act had turned him out of a grade I job. Nor do I find any reason to differ from the trial judge’s findings ([1970] 1 All ER 905, [1970] 1 WLR 379) that the plaintiff has not been shown to be unreasonable either in the attitude he adopted at Boxmakers or as regards his having refrained from applying for the vacancy at Deans of Stockport Ltd, which he was led to believe was another grade IV job. Nor can the union’s rule against refusing work ‘without a satisfactory reason’ be applied against him. Thus fail all the submissions made on behalf of the union that it has discharged the onus of establishing a failure on the part of the plaintiff to take reasonable steps to mitigate his damage during the period before this action came to trial.
As regards the period after that date, in order to assess the loss sustained by the plaintiff it is necessary to come to some estimate of the chances whether and when he may regain work with earnings on the grade I scale current in 100 per cent union shops. That involves considering, amongst other factors, his chances of remaining a member of the union for any length of time and the chances of its assisting him in obtaining employment in a field over which it has a major influence in the filling of vacancies.
In relation to the chances of the plaintiff remaining a member of the union, counsel for the union has urged a point which was not raised at the trial. He has submitted that whilst full members can only be expelled from the union for specific reasons such as misconduct specified in r 27, a temporary membership can be brought to an end ‘completely arbitrarily’ at any moment by an unappealable decision of the branch committee; such a termination could moreover be effected, he claimed, without any regard to the rules of natural justice. The union had in effect a despotic and uncontrollable power under the terms on which the plaintiff became a temporary member. Counsel went on to submit that in relation to claims for breach of contract a court must always assume that a defendant union would act, if so entitled to do, in the way least favourable to the plaintiff (see Cockburn v Alexander ((1848) 6 CB 791 at 814) and Lavarack v Woods of Colchester Ltd ([1966] 3 All ER 683 at 690, [1967] 1 QB 278 at 294)). Counsel then argued that the court ought to proceed on the basis that this union could and would at all material times in the past have acted and would in future act arbitrarily and unreasonably and terminate that membership, and would similarly have refused and would refuse any application for readmission to the union. It followed, as it was said, that temporary membership was of no contractual worth, and that, although the wrongful act of the union might deprive the plaintiff of all opportunity ever to obtain employment in a 100 per cent union factory, nevertheless the damages for such admitted breach of contract should be nominal.
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This set of submissions run contrary to the tenor of the union’s case at trial, contrary to the contents of the notice of appeal, and contrary to the other submissions of the union at this appeal as to the quantification of the damages up to the date of trial. It was said, however, that as it was not necessary for a defendant to plead to damages, any point open on the evidence could be taken in this court. Whatever be the procedural position engendered by this being a wholly new point, it seems to me on examination that it must anyway fail. On a literal reading of the rules there is no limit whatsoever to the grounds on which temporary (and a fortiori full) membership can be refused to an applicant. Similarly there appears to be no limit to the grounds for terminating temporary membership. Rule 18(4) is exclusively concerned with temporary membership. Rule 18(4)(j) provides:
‘It is a condition of acceptance of membership that holders of such cards must relinquish same immediately upon application by the Branch Committee responsible for their issue and shall have no claim upon the Union or its funds.’
There follows r 18(4)(k) as to temporary members not having any right to appeal to the executive council from any decision of their branch committee. The blue (temporary membership) card of the union sets out r 18(4) and no other rules at all. Unlike a full member, the holder of a blue card is not handed or shown the book of rules.
Not only would this rule naturally be read by those who receive their blue card in this literal way, but an examination of the tenor of the documents before this court and of the evidence of Mr Stringer (a branch officer) make it plain that the union acts on the footing that it has in relation to withdrawal of temporary membership those completely arbitrary and unfettered powers claimed by counsel for the union. Can a rule giving powers so contrary to natural justice be valid? Does it offend public policy as being in restraint of trade? In considering these and other questions touching these rules it must be observed that they provide neither for a minimum period before which full membership can be attained, nor a maximum period during which ‘temporary’ membership can be held. Nor do they indicate any test, eg of skill or character, to be fulfilled in order to qualify for or be selected for full membership. Nor is there any quota system laid down. On the contrary, the union can and does admit some applicants to full membership at once, keeps others waiting for periods said to be between two and four years, and has other members who may have to wait far longer; indeed some ‘temporary’ members on its books remain as such for very many years (12 years was mentioned)—particularly women who may perhaps not wish to pay the additional dues which full membership entails. It follows that one is concerned with quite an extensive class of members with limited rights. In truth, the name ‘temporary members’ is simply a label for those who should more aptly be described as ‘class B members’. They are members nonetheless; they depend on that membership for their opportunities to obtain employment. The label in such circumstances is not in point.
The courts have always protected a man against any unreasonable restraint on his right to work even if he has bargained that right away; and it matters not whether the bargain is with an employer or with a society (see Pharmaceutical Society of Great Britain v Dickson, and the cases there cited). A rule that in these days of closed shops entitles a trade union to withdraw the card of a capable craftsman of good character who for years has been a member, even if styled ‘temporary’ member, for any capricious reason such as (to mix conventional and practical examples) having incurred the personal enmity, for non-union reasons, of a single fellow member, the colour of his hair, the colour of his skin, the accent of his speech, or the holding of a job desired by someone not yet a member, is plainly in restraint of trade. At common law it is equally clearly unreasonable so far as the public interest is concerned. Is it then protected by either s 3 or s 4 of the Trade Union Act 1871? It cannot be said that a rule that enabled such capricious and despotic action is proper to the ‘purposes’ of this or
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indeed of any trade union. It is thus not protected by s 3 and is moreover ultra vires. Nor can I find any protection for it in s 4. It is thus void as in restraint of trade.
Counsel for the union sought to controvert that conclusion by aid of certain observations in the speeches in Faramus v Film Artistes’ Association. That case, however, concerned a specific rule as to the eligibility of those who had suffered convictions for admission to a trade union shown by evidence to be operating in special conditions. Those observations cannot, however, have been intended to be applied generally to rules giving a right of expulsion (see the speech of Lord Pearce ([1964] 1 All ER at 33, [1964] AC at 947)) on completely capricious grounds. In addition, if counsel for the union’s claim that the rule is one which permits the union to act without regard to the rules of natural justice (or ‘fair play in action’ as it is often styled nowadays) is correct, it is clearly void also on that ground: it would indeed be lamentable if members of 12 years’ standing, albeit labelled ‘temporary’, could be thus expelled. With regret I am inclined to think that a rule so intended and likely to be so regarded by those most concerned must be interpreted as claimed. If, however, adherence to rules of natural justice is to be implied in that rule, that seems to me also to destroy the ‘nominal damages’ submission, as similarly does the last-minute suggestion of counsel for the union that alternatively the rule gave the union a discretion to terminate the plaintiff’s membership which it must be presumed they would exercise reasonably—for there was no evidence of any material enabling such a discretion to be properly exercised. (It is thus unnecessary to comment on the alleged presumption.)
It follows that, whatever be the true construction of the rules, other than any that are void, a temporary member is given on admission a right not to have his membership ended for completely arbitrary reasons nor in a way which does not accord with natural justice. Once admitted, he is entitled to retain that membership unless there exists some proper ground on which the union can terminate it. No evidence whatsoever was before the court of the existence or likely existence of any such ground as regards the plaintiff. The submissions based on Lavarack v Woods of Colchester Ltd are rejected. In the light of that conclusion it is not necessary to determine whether a rule that allows completely arbitrary refusal to admit or to readmit to the union a duly qualified craftsman of good character and thus in effect permit the union to preclude him from full opportunity to exercise his skills is valid, or whether it is something that, in these days when so many big firms operate on a 100 per cent union basis, is so destructive of the ‘right to work’, in the sense of ‘right of equal opportunity to obtain work’, that it is invalid as being contrary to public policy for the reason discussed in Nagle v Feilden.
The dangers of such unappealable powers to exclude a citizen from his right to work is a matter which has been discussed in the Donovan reportb and again in the more recent 1966 white paperc. So has the arbitrary power to enforce automatic forfeiture of membership for non-payment of dues and the parallel power to refuse readmission after such forfeiture. It is thus not necessary to say anything further on the subject save to note one feature in the present case. When on 13 November 1967 the branch committee for the second time refused the plaintiff’s application for readmission (the first occasion was 23 May), it has been conceded that he was not invited to attend: yet according to para 7(d) of the defence, the ‘Branch Committee fairly and properly considered the Plaintiff’s application’, and rejected it on grounds which included matters arising since 23 May, of which, it was common ground before this court, no notice had been given him. There is thus provided a striking instance of how ‘completely arbitrary’ power can be used. One assumes that such cases are rare in the trade union world, but the fact is that they can occur.
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Before turning to the facts affecting the assessment that has to be made, it is necessary to refer to one further submission made in this court on behalf of the union. It was urged that they who wrongfully put such obstacles in the way of the plaintiff regaining his position in the printing trade were entitled in effect to demand that in mitigation of damages he should have done or should now do one of two things. Either he should, despite having spent a quarter of a century in acquiring the skills of his craft, have himself retrained in some quite different occupation and forego those skills. Alternatively, it was suggested, he should remove himself and his family from the Manchester area and go to some quite different part of this country with a view to taking his chance whether some other branch of the union might be more disposed to admit him to membership and permit him the normal opportunities of exercising those skills. Coming from a defendant whose wrongful act caused the situation, who could and should have taken all possible steps to end it, and who took the opposite course, I confess that this submission was viewed by me with repugnance and I reject it. It lies particularly ill in the mouth of the union to say that it can in effect dictate the whole way of life to be pursued by the plaintiff.
What then are the plaintiff’s chances of remaining a member of the union—a pre-condition, in practice, to his regaining an appropriate grade I job? At first instance he was a temporary member, with a blue card provided only on the second day of trial; a card which on its face put his temporary membership at risk of adverse and unappealable decisions by a branch committee whose attitude to him fell to be assessed from known facts—decisions which could at best be neutralised by further litigation. His long-standing application for full membership had not even received a reply. His chances of regaining his old scale of earnings may well have seemed minimal to the trial judge ([1970] 1 All ER 905, [1970] 1 WLR 379).
In this court the position has changed radically. Albeit once more under the pressure of the possibility that otherwise adverse inferences might be drawn on the question of damages, an unqualified undertaking through leading counsel has been given that he will be granted full membership. For my part I feel unable to ignore this change—although counsel for the plaintiff powerfully pointed out the dangers of taking into account facts that have occurred months after a first instance trial. This is one of those exceptional cases in which the exigencies of justice (to use the words of Lord Pearce in Murphy v Stone Wallwork (Charlton) Ltd ([1969] 2 All ER 949 at 953, [1969] 1 WLR 1023 at 1028) demand it to be taken into account. From now onwards the plaintiff’s position is that he has a card that is not limited to the period of his employment with specified employers; he can clearly only be expelled for infractions of specified rules; and he can appeal from the branch committee. That is a far better position than being the holder of a blue card. As against that counsel for the plaintiff rightly pointed out that the rules are full of provisions (eg against alleging unjust conduct by an officer) which a hostile branch committee can seize on as grounds for expulsion. I propose, however, to assume that the plaintiff will in the future be fairly allowed to retain his membership in the normal way and not to include in the damages now being assessed anything which might constitute damage resulting from an improper future act.
Next comes the question as to the chances of the union making proper efforts to assist him to find a suitable job. It takes a leading part in filing vacancies in 100 per cent union factories—the dominant sector in Manchester; the labour exchange takes little or no part as regards these vacancies, because it is not notified of them. Clearly any fair-minded body of men that has by its own muddle wrongly caused a man to lose a prized job would have given him top priority when any comparable job fell vacant. Not so the union. It applied its practice strictly as if there had been no such fault and put him as a temporary member at the bottom of the queue. On that practice, however, the plaintiff if—and it is an important if—it is fairly applied, should now as a full member receive priority over temporary members for being placed in work—probably grade III in practice; but suitable vacancies leading to promotion
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were stated by the union to be rare, and it has provided no material from its records as to the chances of them occurring. If in this and other matters inferences are drawn against the union, it has only itself to blame for the way in which it has behaved and for having failed to produce information.
Moreover by forcing the plaintiff to take court action to obtain his proper opportunity to work, the union has caused him to make himself a marked man not only within the union itself but in the eyes of employers who wish to be on good terms with it. One way and another it may be a very considerable time before he recovers a grade I job. This is not a case for embarking on detailed calculations or on precise forecasts as to how long it will be before a suitable job with prospects of promotion to grade I becomes vacant and he is selected for it; nor as to how long he may remain in lower grades. An overall assessment on a broad basis is needed, both as regards the past and the future. In the light of his possession of a full membership card, I agree that an overall sum of £3,500 now seems proper. In those circumstances there is no need to canvass what larger sum would have been correct if no such card had been promised. Without such a card and with no prospects of getting it—the situation at the date of trial—the figure at which the trial judge ([1970] 1 All ER 905, [1970] 1 WLR 379) arrived may well have been appropriate. At that date the plaintiff’s chances of getting a fully paid grade I job were in practice hopeless. It suffices to say that in the new situation I would allow the appeal to the extent stated.
MEGAW LJ. The questions in this appeal are whether the award of damages for an admitted breach of contract in the sum of £7,971 is justified; and, if not, what the damages should be.
On behalf of the defendant union, counsel sought to rely on provisions in the union’s rule book, the effect of which, in his submission, was that the plaintiff, since he was at all relevant times merely a temporary member, could lawfully have been deprived of his temporary membership of the union at any time. On the basis of the authorities such as Lavarack v Woods of Colchester Ltd, the plaintiff’s damages for breach of contract are limited to the value to him of the contractual rights which he has lost. If the union could lawfully, under the contract of membership, have terminated that membership at any time, an unlawful purported termination could give rise to no more than nominal damages. Counsel for the union submitted, alternatively, that even if one should not take this submission to its full logical conclusion of nominal damages only, somehow or other the union could rely on the provisions as to temporary membership as preventing the plaintiff’s loss from continuing beyond today.
Counsel for the plaintiff, contended that those submissions were not open to the union. The point had not even been hinted at, let alone argued, before Buckley J ([1970] 1 All ER 905, [1970] 1 WLR 379). It was inconsistent with the express terms of the union’s notice of appeal, which, so far from contending that the damages should only be nominal, invited this court to substitute an award of £500 damages. I think that counsel for the plaintiff’s submission on that point should be upheld. If it were permissible for the union to raise that issue for the first time on this appeal, counsel would wish, and would be entitled, to contend that the provisions of the rules in question must, at least, be construed as not permitting arbitrary termination of a temporary member’s membership; if not so construed, they would, counsel submitted, be void.
I do not think that the important and difficult questions which would arise on such an issue can fairly or usefully be determined in the absence of much more information and evidence than is available as to temporary membership of the union, its meaning, purpose and incidents, and perhaps the practice relating thereto. The reason why such information and evidence are not available is because this issue was not raised in the court below. It was for the union to raise this issue. It did not do so.
Counsel for the plaintiff has made it clear that, if the union is not free to argue that
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the damages should be eliminated or reduced by reason of the rules as to temporary membership, he himself would not wish to contend that the existence of those rules, whatever their legal status or effect may be, would be a factor which should be treated as relevant to increase the damages above what would be appropriate in the absence of such rules. In my view, counsel for the plaintiff was entitled to take that attitude. For myself, therefore, I would express no view on the construction, validity or effect of the rules as to termination of temporary membership. I proceed on the assumption, for the purposes of this appeal, that there is nothing in those provisions of the union’s rules which affects the assessment of the damages, one way or the other. It follows that, with all respect, I am not to be taken as assenting to all the views which have been expressed by my Lords, whether in relation to temporary membership in this particular case or more generally.
Counsel for the union has criticised the learned judge’s ([1970] 1 All ER 905, [1970] 1 WLR 379) approach to the assessment of damages on the grounds that that approach, while appropriate in a case of damages for personal injuries, is not appropriate in a case such as this. He based that criticism not merely on the ground that one involves a tort, while the other involves a breach of contract. He submitted that there is an essential difference between the two types of case, so that a different approach is required. He said that the correct approach is that which is used in cases of wrongful dismissal. Counsel for the plaintiff on the other hand, submitted that the approach adopted by the learned judge ([1970] 1 All ER 905, [1970] 1 WLR 379) was right and that the wrongful dismissal approach would be wrong and unfair. I do not find much help in these analogies. The problem is to assess the financial loss which the plaintiff has suffered and is going to suffer in consequence of the union’s admitted breach of contract. No question arises with regard to foreseeability or remoteness of damage. A part of the loss caused by the breach of contract continues into the future. The amount of that future loss depends on facts which cannot be precisely ascertained. It has to be assessed as best one can on the evidence, both as to its probable duration and as to its amount at any given time during that period.
I think that it is convenient to consider the amount of the damage under two heads. First, what is the plaintiff’s loss, by reason of the breach of contract up to the present moment? Second, what is the future loss, if any? The first head involves consideration of the issue whether the plaintiff acted unreasonably in respect of the termination of his employment with Boxmakers (Manchester) Ltd, and whether he failed in his duty thereafter to seek to mitigate his loss by failing to pursue the possibilities of employment; in particular the vacancy at Deans of Stockport Ltd at Cheadle, of which he was notified by the union. I see no reason to differ from the view taken by the learned judge ([1970] 1 All ER 905, [1970] 1 WLR 379) that neither of these matters ought to be treated as constituting a failure by the plaintiff to act reasonably in mitigation of damage. Hence I agree with the learned judge’s figure of £1,211 10s as being the plaintiff’s loss up to the date of judgment (November 1969). Extending it to the present, since the plaintiff still has not obtained employment, I would assess the plaintiff’s net loss to date at £2,000.
The second head, future damages, involves a more difficult question, for the very reason that it involves looking into the uncertainties of the future. The plaintiff’s loss is the difference between what he would have earned if there had been no breach of contract and what he will earn on the assumption that he uses all proper diligence to mitigate his loss. His future loss is thus not susceptible of calculation. Inevitably it depends on hypothesis and speculation. It must take into account one’s assessment of many factors. First, there are questions, to which no firm or specific answer can be given, as to what would have happened if the contract had not been broken. How long would the plaintiff have continued in employment with Hugh Stevenson & Sons Ltd? If he would have so continued beyond July 1970, how much longer? Would the plaintiff’s earnings in that employment have increased and by how much? Secondly, on the other side of the assessment, there are questions, to which it is equally impossible to give firm or specific answers, as to what is likely to happen in the
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future, up to the time, whenever it may be, that the breach of contract will cease to be effective. How soon or how remote is the time when the plaintiff will get back into employment financially comparable with his employment by Stevensons? Until such time, what are his prospects of obtaining less remunerative employment, of such a nature that he ought to accept it in pursuance of his continuing duty to mitigate damages? Insofar as he may fail to obtain employment or may obtain less remunerative employment, what will the average loss be, over whatever is the relevant period?
Where there are so many incalculables, it would not be right to seek to give an aura of scientific respectability to the assessment of future damages by purporting to apply arithmetical or actuarial formulae to the assessment, or to any individual factor on which the assessment partly depends. One must try to assess. One cannot calculate. In trying to cope with these incalculables, two factors, in my judgment, have to be taken into account. The first, factor, tending towards a larger assessment, is the relationship existing between the plaintiff and the union. That is relevant so far as the plaintiff may have to rely, for future employment, not on the legal obligations of the union towards him (for if they should not be fulfilled, there is a remedy), but on the union’s co-operation outside strict legal obligations. The second factor, tending towards a lesser assessment, is the substantial improvement of the plaintiff’s position and prospects as a result of the undertaking of the union in this court that he will now be granted full membership.
Doing my best to arrive at a fair figure in the light of all the relevant considerations, I assess the plaintiff’s future loss at £1,500. Thus the total damages appropriate to the plaintiff’s loss, past and future resulting from the breach of contract, would be £3,500. I have arrived at the same figures as my Lords, although by a somewhat different route.
I would allow the appeal to that extent.
Appeal allowed. Plaintiff’s damages reduced to £3,500.
Solicitors: W H Thompson (for the union); Lawford & Co (for the plaintiff).
Rosalie Long Barrister.
Re B (TA) (an infant)
[1970] 3 All ER 705
Categories: FAMILY; Children
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 8, 9 JUNE 1970
Infant – Guardianship of Infants Acts – Appeals from courts of summary jurisdiction – Exercise of discretion – Circumstances changed after magistrates’ decision.
Where on an appeal, which is by way of rehearing, from a decision of a magistrates’ court under the Guardianship of Infants Acts 1886 and 1925, the court is empowered by RSC Ord 55, r 7(3) and (5)a, to draw inferences of fact and make any order that the magistrates ought to have made, the discretion is still that of the magistrates (Re B (an infant) [1962] 1 All ER 872 and B(B) v B(M) [1969] 1 All ER 891 followed). If, however, circumstances have so changed that the substratum of the magistrates’ decision no longer exists, then unless the case is such that it ought to be remitted for rehearing, the appellate court exercises an unfettered discretion de novo, on the
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facts as they exist at the time of the appeal. But if that substratum still exists, the appellate court must put into the scales the facts as found by the magistrates, so far as they have not been falsified by the march of events, together with any relevant new facts, and then seek to exercise a discretion in the same way as it appears that the magistrates would have done had the full facts been before them (see p 709 h to p 710 b, post).
Notes
For appeals against decisions of magistrates under the Guardianship of Infants Acts 1886 and 1925, see 21 Halsbury’s Laws (3rd Edn) 215, para 476, and for cases on the subject, see 28 Digest (Repl) 631, 632, 1317–1324.
Cases referred to in judgment
B (an infant), Re [1962] 1 All ER 872, [1962] 1 WLR 550, Digest (Cont Vol A) 924, 1262a.
B(B) v B (M) [1969] 1 All ER 891, sub nom B (B P M) v B (M M) [1969] P 103, [1969] 2 WLR 862, Digest Supp.
F (an infant), Re [1969] 2 All ER 766, [1969] 2 Ch 238, [1969] 3 WLR 162, Digest Supp.
L (infants), Re [1962] 3 All ER 1, [1962] 1 WLR 886, Digest (Cont Vol A) 924, 1265a.
Appeal
This was an appeal by the father from the decision of a magistrate’s court under the Guardianship of Infants Acts 1886 and 1925, giving custody of the sole child of a marriage to the mother. The case was heard and judgment was delivered in chambers, but his Lordship gave permission for it to be reported, counsel having no objection. The facts are set out in the judgment.
Bruce Holroyd Pearce QC and A H Ward for the father.
L L Ware for the mother.
9 June 1970. The following judgment was delivered.
MEGARRY J. This is an appeal from a decision of a magistrates’ court dated 22 September 1969, made under the Guardianship of Infants Acts 1886 and 1925. That decision gave custody of the sole child of a marriage, a daughter then aged rather over 3 1/4 years, to the mother, with £3 a week maintenance. The order was made on a complaint made by the father. The father and mother married on 22 February 1964. In 1965 there was some unhappiness between the parties. The mother had a short-lived affair with a man, which the father described as being physical but not adulterous. The mother merely called it an association, and the magistrates accepted her explanation. At all events, after a holiday, says the father, it was forgotten.
The girl with whom I am concerned was born on 1 June 1966, and so is now just over four years old. On 3 April 1968, the parents took, as foster parents, a coloured boy now aged 5 1/4 years on a more or less permanent basis with a view to adopting him. In the summer of 1968, the mother had a deformed stillborn child after a bad labour. She was much affected by the stillbirth, and relations between her and the father deteriorated. The father was at all material times an engineer who was carrying on a farming business. He was accustomed to working long and irregular hours, sometimes going to bed at 9.00 pm, and sometimes at 3.00 am, and the mother felt neglected. This was the only matter seriously disputed before the magistrates, apart, of course, from the custody of the daughter.
After the stillbirth, the mother became friendly with two girls who worked on the farm, and with one of them, C, she developed a lesbian relationship. I think that it is pretty clear from the evidence, particularly from that of the mother herself, that this was no mere attitude or attraction, but involved physical sexual acts. The mother and father were then on bad terms with each other. The mother told the father that she was a lesbian and said that she did not love him any more. Finally, the father obtained a housekeeper, who had a small boy; and after the mother had seen and approved the housekeeper, the mother left the matrimonial home, in late
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January or early February 1969, to go to live with C. She was, she said, ‘infatuated’ with C, and she said that at the time it seemed that she had no option but to go to live with C.
After the mother left, the father and the housekeeper then ran the home and looked after the daughter and the fostered boy. The housekeeper developed a good relationship with them, although not attempting to act as a mother. While the mother was away the father neglected some pigs on the farm, and on 2 July 1969 he was convicted in the same court of causing unnecessary suffering to 15 pigs by omitting to give them proper care and attention. Two of the magistrates who sat in that case also sat, with one other, in the present case. Of this offence, the father said that it did not show that he would neglect children, but rather that he would neglect other matters to attend to the children.
The mother’s evidence was that the lesbian relationship with C was now at an end, although it is not quite clear when it ceased; it seems to have lasted some three or four months. While the relationship existed, she knew that she could not get custody of the daughter, and did not try; but when it ended she sought custody of the daughter. The magistrates’ decision was primarily based on the mother offering the daughter prospects of a more stable environment than the father. They held that the fostered boy’s welfare was irrelevant. They said that they were—
‘… unable to determine whether there was, in fact, a sordid, depraved relationship of sexual activity between the mother and C, or merely an inordinate affection between them.’
The words ‘sordid, depraved’ have an emotive quality which suggests that the magistrates did not regard dispassionately the pretty clear inference from the evidence on both sides that the relationship was a physically sexual one. There was medical evidence, however, which the magistrates accepted, that the mother’s lesbian attitude was attributable to a puerperal depression; and the evidence was that, once over, it was not likely to recur, save after having another baby. The magistrates set out their reasons in nearly seven pages of typed foolscap, and came to the conclusion that the daughter would be better with the mother. Their reasons included references to the alleged financial instability of the father. The father’s financial affairs are undoubtedly a little complicated, but I do not think that there is any real evidence to show that he is unlikely to be able to provide properly for the daughter.
Counsel for the father attacked the magistrates’ reasoning on a broad front. The main ground of appeal was that their decision was not in accordance with the daughter’s welfare and was contrary to her best interests. The magistrates, he said, had totally ignored the injury to the daughter that the separation from the fostered boy would cause. He contended that their reasons related to factors which aided the mother, but neglected some of those which aided the father. There are, indeed, certain passages and some factors which are open to this construction. The magistrates found it ‘noteworthy’ that whereas the mother had no part in engaging the farm staff, the father engaged C and her friend, and afterwards, when they had gone, engaged two more women whom he later believed to be lesbians. It seems strange that this should be found ‘noteworthy’; such a statement either says too little or implies, without explaining, too much. There were other matters, too. In contrasting the physical advantages of the two possible homes for the daughter, the magistrates, instead of considering merely the advantages that were physical and existing, coupled them with the advantages of the daughter being with the mother, and also the mother’s intention of purchasing a cottage when the father paid her the money that he owed her. For reasons that will appear I will not here pursue this matter further. The mother, I should say, has substantial claims against the father in respect of money that she lent him, and so on, and proceedings under the Married Women’s Property Act 1882, are now pending. It is common ground that there is at any rate £6,000 due to her. There seems to be no hope of a reconciliation.
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The one real point that emerged from counsel for the father’s criticisms was the magistrates’ apparent failure to give proper, or indeed any, overt consideration to the effect on the daughter of transferring her from the home which she had known all her life, from her father, from the fostered boy who had in effect been a brother to her for some 18 months, and from the housekeeper with whom she had a good relationship, to a new home in another part of the country with the mother alone. For a child of three or four this matter is so important that on any footing it merited some express mention.
However, there were some further developments in the case. On 14 January 1970, counsel for the father applied to me, acting for the nominated judge, for leave to adduce further evidence on the appeal from the justices; and counsel for the mother opposed this. This evidence was to be on four points, counsel for the father said, including the resumption by the mother of the lesbian relationship with C, new developments in relation to the father’s financial stability, some further medical treatment of the mother, and some psychiatric evidence. I was not familiar with the practice in these cases, and remained so, even after enquiry of counsel. In the end, I refused the application on the ground that the process of adding new affidavit evidence under these four heads to the magistrates’ notes of oral evidence and their reasons would be unsatisfactory, and that an application to the magistrates for a further hearing seemed preferable. I was told that there was no authority on the point, and when asked I gave leave to appeal from my refusal with, I think I said, the greatest of pleasure, since it was time that there was some authority on the point. I am now told that further evidence of this kind relating to events which occur after the hearing by the magistrates, as distinct from new evidence of old events, is in practice pretty freely admitted, although I am not sure that that is so.
In the event, there was no appeal from my decision; but the application was renewed when the appeal from the magistrates came on for hearing on 5 February before the nominated judge, Pennycuick J, who, of course, has great experience in these matters. He gave leave to adduce the evidence, and gave certain directions. On 4 April, the mother had the daughter on agreed staying access and decided not to return her to the father; and she has been with the mother ever since. The ground given for this was that the father had lost his housekeeper (who had left to get married) and had got another housekeeper without telling the mother. On 20 April, the father moved before Foster J for an order for the return of the daughter. The learned judge made no such order, but instead directed affidavits to be filed dealing with the new housekeeper.
Now that the appeal has come on for hearing, the result is that in addition to the notes of evidence in the magistrates’ court, and the magistrates’ statement of reasons, I have before me 16 affidavits and their exhibits, three of them sworn in January, seven in February and six in April. Since the hearing in the magistrates’ court on 22 September 1969, there have been a number of changes. Thus the mother had changed her home more than once; the father has changed his housekeeper; the daughter is no longer with the father but has been kept by the mother; and there has been a variety of other events. There are thus before me two types of evidence, differing considerably in their quality. First, there is the evidence in the magistrates’ court, given viva voce and with all that was said subject to cross-examination. The magistrates saw and heard the witnesses, but all that I have is the notes of evidence and the magistrates’ reasons for their decision. Secondly, there are the 16 affidavits giving the evidence of witnesses whom I have not seen or heard. This evidence has not been the subject of cross-examination, counsel on neither side having sought leave to cross-examine. This evidence, of course, was not before the magistrates. What I have to try to do is to give the proper combined weight and effect to two such disparate species of evidence.
In those circumstances two procedural questions of some difficulty seem to arise. First, there is the question of the treatment to be accorded to the affidavit evidence.
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There are at least three possibilities. First, as counsel for the father initially submitted, I could ignore it all and merely decide whether on the evidence before them the magistrates were right or wrong. This submission, which was largely based on this being an appeal and the issue being whether the magistrates’ decision was right, fell a little oddly from the lips of counsel for the party who had sought in the first place to introduce such evidence; but I suspect that he had found it as a whole somewhat disappointing. Secondly, in counsel for the father’s alternative submission, I should take into account the affidavit evidence so far as it related to the mother’s lesbian tendency and the father’s financial stability, but ignore it so far as it related to other matters such as changes in the father’s housekeeper and in the mother’s home. The third possibility was to take the affidavit evidence fully into account. Of these three possibilities the first must, I think, be wrong. If subsequent events showed plainly that the magistrates’ decision would be positively harmful to the daughter, I cannot think that this court would say that the magistrates’ decision was right when made and so must be upheld, even though clear evidence had been tendered which showed that to uphold the decision would be disastrous for the daughter. The second possibility also seems insupportable, for the same reason and also because there seems to be no sensible basis for the discrimination. Both the evidence to be admitted and the evidence to be rejected contain elements of bringing up to date factors put before the magistrates. The third possibility seems to be the only proper course that I could adopt; and, indeed, in the upshot I think that counsel for the father really subscribed to this view. Unless I take this course, the probability is that one side or the other will promptly apply to the magistrates for a variation of the order on the ground of changed circumstances; and I think it my duty to attempt to dispose of the case, so far as possible, on the facts as they now are and not as they once were.
On that footing, the second main question arises. In all these cases, there is a substantial discretionary element. In general, the discretion is that of the magistrates, and the appellate court must refrain from substituting its discretion for that of the magistrates: see generally Re B (an infant) and B(B) v B(M) ([1969] 1 All ER 891, [1969] P 103 at 115). What, however, is not clear is what is to be done when some of the facts on which the discretion was exercised no longer exist, and where other facts have come into existence which were never before the magistrates. Do these circumstances set the appellate court free to exercise its own discretion anew, or does the exercise of discretion by the magistrates persist, subject to the appellate court making a supplementary exercise of discretion, as it were, on the new facts? Neither counsel for the father nor counsel for the mother greeted with any enthusiasm my suggestion of sending the case back to the magistrates, a course which would at least result in an undivided discretion being exercised on the full current facts; and in those circumstances I do not think that I ought to insist on the parties suffering the expense and delay of any such remission.
Accordingly, I think that I have to do the best I can. Even though RSC Ord 55, r 3(1), makes it plain that an appeal is by way of rehearing, and RSC Ord 55, r 7(3) and (5), empower me to draw inferences of fact and make any order that the magistrates ought to have made, the discretion, as Re B (an infant) and B(B) v B(M) show, is still that of the magistrates. In my judgment, a distinction should be made. If circumstances have so changed that the substratum of the magistrates’ decision no longer exists, then unless the case is such that it ought to be remitted for a rehearing, with all the consequent disadvantages of expense and delay for the parents and the child, I think that there is nothing for it but for the appellate court to exercise an unfettered discretion de novo, on the facts as they exist at the time of the appeal. But if that substratum still exists, then I think that the appellate court must put into
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the scales the facts as found by the magistrates, so far as they have not been falsified by the march of events, together with any relevant new facts, and then seek to exercise a discretion in the same way as it appears that the magistrates would have done had the full facts been before them (apart, of course, from any respect in which it plainly appears that their discretion was wrongly exercised).
What seems to me of predominant importance in this respect is the fact that the magistrates have seen and heard the witnesses, and especially the mother and the father, whereas I have not. In these guardianship cases so much may turn, consciously or unconsciously, on estimates of character which cannot be made by those who have not seen or heard the parties; and the characters of the parents is of the utmost importance to the well-being of the child. True, such estimates have to be made in the artificial circumstances of a hearing in court, and often in a short time; but the process of giving evidence, and especially of being cross-examined, tends to be wonderfully revealing. The magistrates, it is true, have made no overt assessment of the mother and father in this respect, although preferring the mother as a witness; but it would be almost impossible for them to ignore this factor. In any case I should be very slow to assume that anything that is not expressly mentioned has therefore not been considered, unless it were a factor of such prominence that it would be unnatural to remain silent about it. I may add that in attaching this importance to seeing and hearing the parties I do not of course forget the importance of what they have done. Acts may be as important or more important than estimates of character based on seeing and hearing the witnesses while giving evidence.
The affidavit evidence seems to me to be of little value in relation to the lesbian aspect of the case. Suspicions aroused by the affidavits of enquiry agents employed by the father are fully met by flat denials and by detailed accounts of the presence of other girls and circumstances excluding any possibility of the resumption of lesbian relations between the mother and C; and, without cross-examination, that is that. I think that counsel for the father very properly accepted this. So far as it goes, the evidence of the changes in homes by the mother and of the father’s replacement of his housekeeper does not seem to have greatly affected the claims of either side. I think that the substratum of the case as it stood before the magistrates remains unchanged. So far as I can judge, the mother’s present home circumstances, in her parents’ substantial house, with her father at work only three days a week and her younger brother, aged 24, working at home, are more satisfactory than those existing before the magistrates’ court. In particular, the daughter will not now be being brought up in a manless home. Further, the dependence of the father on housekeepers who may come and go has been demonstrated by the housekeeper who, in her evidence before the magistrates, foresaw nothing to take her away from her post; and yet within a few months she had gone. On the whole, I think that such changes as there have been support the mother’s claim.
It is often said that an appellate court should reverse a decision only if satisfied that it is wrong, and not merely because it is not satisfied that it is right. The main factor that has troubled me is the lack of any demonstration by the magistrates that they gave real weight to the disturbance to a young child of uprooting her from the only home that she had known and from the father and de facto brother. The force of this is somewhat weakened by the disturbance that she suffered when one housekeeper, with whom she got on well, had been replaced by another, and with a consequent change in the children of the housekeeper who had formed part of the household. Furthermore, the daughter has in fact already been uprooted. For over two months now she has been living with the mother, and even though the mother may be open to criticism as to the way in which the change was effected, effected it has been. To restore the daughter to the father now would be to uproot her again, just as she is settling down in her new home. I accept that the magistrates’ decision, when made, was open to criticism on the score of an apparent failure to consider the importance of the uprooting element, but I have to deal with matters
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as I now find them. I also accept that the magistrates’ decision is open to other criticisms of lesser importance, including an apparent lack of appreciation of how the father had been managing, to his credit, to keep the home together despite the mother’s departure and failure to return. Indeed, I should have found the magistrates’ reasons more impressive if they had been more ready to give credit to the father where credit was due; but I cannot see that this lack of readiness invalidates their decision.
On the other hand, the magistrates seem to have had fully in mind that it was the mother who chose to leave the father, her daughter and her home for some sort of lesbian relationship, although this, of course, had a medical explanation. I think that they must also have considered that when that relationship was over it was the mother who nevertheless chose not to return to the father or attempt a reconciliation. The case is one of a mother who was the substantial cause of the break-up of the home, although that does not, per se, mean that she cannot have custody: consider Re L (infants) and Re F (an infant).
Looking at the case as a whole, I can see much cogency in the criticisms forcefully put by counsel for the father. From time to time I have felt that I might have reached a different conclusion from that reached by the magistrates, at all events on the facts as they stood before them. But I might not, and in any case it was they and not I who saw and heard the parents and other witnesses; and the facts have not remained unchanged. I must loyally follow the principles applicable to those cases and refrain from usurping a discretion which is the magistrates’ and not mine. In all the circumstances, on the main ground of appeal I cannot say that I feel satisfied that the decision of the magistrates was wrong.
I must also mention briefly that there was another ground of appeal, namely, that there was a real likelihood of bias on the part of the two magistrates who had taken part in the conviction of the father in relation to the pigs. Counsel for the father did not press this point very strongly, and I do not think that there is anything in it. A judge or magistrate who has heard one case concerning a litigant cannot, without more, thereupon be said to be likely to be biased one way or the other in any subsequent case concerning that litigant. With a constant litigant, indeed, some courts would otherwise soon run out of judges. The magistrates in their reasons flatly deny any actual or potential bias, and point out that at no time during the proceedings did the father raise any objection on this score. I therefore reject this point.
I have not found this an altogether easy or satisfactory case, and it seems to me that the procedural aspects warrant consideration by those more experienced in these matters than I. I have, however, reached the conclusion that there are not sufficient grounds to justify me in disturbing the magistrates’ decision, and I accordingly dismiss the appeal.
Appeal dismissedb.
Solicitors: Adler & Perowne and Aberstones agents for MacDonald, Oates & Co, Petersfield, Hants (for the father); Gibson & Weldon agents for Burley & Geach, Petersfield, Hants (for the mother).
R W Farrin Esq Barrister.
Gallagher and another v Post Office
[1970] 3 All ER 712
Categories: EMPLOYMENT; Contract of service
Court: CHANCERY DIVISION
Lord(s): BRIGHTMAN J
Hearing Date(s): 24, 27, 28 JULY 1970
Master and servant – Contract of service – Breach of contract – Post Office withdrawing recognition from employees’ trade union – Whether implied term of contract that Post Office would continue to recognise trade union – Whether new contract of service, resulting from reorganisation of Post Office under the Post Office Act 1969, bound Post Office to indefinite recognition of union.
Trade union – Recognition – Withdrawal of recognition by Post Office – Whether breach of statutory duty – Post Office Act 1969, Sch 1, para 11(1).
The first plaintiff was a member of the National Guild of Telephonists (‘the guild’). For over 40 years both the guild and another union, the Union of Post Office Workers (‘the union’) had been recognised as negotiating bodies for telephonists employed by the Post Office with the distinction that the guild was recognised as a negotiating body for male telephonists only, the majority of whom belonged to the guild. In the result there was dual trade union representation for male telephonists. The plaintiff had entered Post Office employment in 1961 as a trainee and, in accordance with normal Post Office procedure, had been told towards the end of his initial training course by the Post Office instructress that he was entitled to join either the union or the guild and that both bodies were recognised by the Post Office for the purpose of negotiating on behalf of employees. Subsequently his appointment had been confirmed on terms of service. In preparation for the changeover of the Post Office to a public corporation on 1 October 1969, under the Post Office Act 1969 the plaintiff was sent a form (CS 1) on 1 August 1969. Page 1 of the form, headed ‘Reorganisation of the Post Office’, and addressed to the plaintiff by name, offered him continued employment with the Post Office from 1 October 1969 on the terms and conditions of employment shown in the statement at pp 2 and 3 of the form and in the contract documents to which it referred, and, in the second paragraph of p 1, stated that: ‘Variations in the rules relating to conditions of service referred to in the enclosed statements will be subject to discussion or negotiation with the appropriate staff associations … ’ The plaintiff accepted the offer of employment made in form CS 1 in the manner prescribed by continuing to attend for work after 1 October 1969. The Post Office considered it appropriate to have only one trade union to represent its employees and notified the guild that as from 1 September 1970 it intended to withdraw recognition from the guild. The plaintiff, suing on behalf of the guild, brought an action against the Post Office claiming that withdrawal of recognition was a breach of contract and seeking an injunction to prevent it. On a motion for an interim injunction,
Held – (1) The Post Office was not acting in breach of contract in withdrawing recognition from the guild, because—
(i) it was not an implied term of the plaintiff’s contract of service that the Post Office should continue to recognise the guild, for the statement by the instructress that the plaintiff was entitled to join the guild was purely informative and was not an express term of his contract of employment, nor was it necessary to have an express term to enable an employee to join a trade union (see p 718 b, post); and
(ii) the second paragraph on p 1 of form CS 1 did not form part of the new terms and conditions of employment contained in the form, and did not bind the Post Office to indefinite recognition of the guild (see p 718 j to p 719 a, post).
Page 713 of [1970] 3 All ER 712
(2) The Post Office were not in breach of statutory duty in withdrawing recognition from the guild because on the true construction of Sch 1, para 11(1)a, to the Post Office Act 1969, the Post Office had an absolute discretion as to the organisations it would consult and Sch 1, para 11(1), did not impose on the Post Office a duty not to withdraw recognition from particular trade unions (see p 720 e and g, post).
(3) Since the court was only entitled to grant interlocutory relief if the applicant established a probability of succeeding at the trial or made out a strong prima face case, which in each case required that the court should be satisfied that the applicant was more likely to succeed than fail at the trial, the plaintiff’s motion failed (see p 717 c, post).
Donmar Productions Ltd v Bart [1967] 2 All ER 338n applied.
Notes
For contracts of service generally, see 25 Halsbury’s Laws (3rd Edn) 455–459, paras 884–889, and for cases on the subject, see 34 Digest (Repl) 43–55, 178–278.
For the Post Office Act 1969, Sch 1, para 11, see 49 Halsbury’s Statutes (2nd Edn) 488.
Case referred to in judgment
Donmar Productions Ltd v Bart (1964) [1967] 2 All ER 338n, [1967] 1 WLR 740, Digest Supp.
Cases also cited
Associated Provincial Picture House Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223.
Balfour v Balfour [1919] 2 KB 571, [1918–19] All ER Rep 860.
Ford Motor Co Ltd v Amalgamated Union of Engineering and Foundry Workers [1969] 2 All ER 481, [1969] 2 QB 303.
Inland Revenue Comrs v Hambrook [1956] 3 All ER 338, [1956] 2 QB 641.
Luxor (Eastbourne) Ltd v Cooper [1941] 1 All ER 33, [1941] AC 108.
Moorcock, The (1889) 14 PD 64, [1886–90] All ER Rep 530.
Oscar Chess Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370.
Reilly v Regem [1934] AC 176, [1933] All ER Rep 179.
Riordon v War Office [1959] 3 All ER 552, [1959] 1 WLR 1046.
Rodwell v Thomas [1944] 1 All ER 700, [1944] KB 596.
Motion
By motion dated 17 July 1970 the plaintiffs, representative members of the National Guild of Telephonists, sought an interim injunction to restrain their employers, the Post Office, from withdrawing recognition from their guild. The facts are set out in the judgment.
Peter Pain QC and E V Falk for the plaintiffs.
J H R Newey QC and D J Turner-Samuels for the Post Office.
28 July 1970. The following judgment was delivered.
BRIGHTMAN J. This is a motion by Mr Philip James Gallagher and Mr Alex George John Vincent, who, in the terms of the writ as amended before me, are suing on behalf of themselves and all the other male members of the National Guild of Telephonists employed by the defendant, the Post Office. I shall refer to the National Guild of Telephonists as ‘the guild’. The relief sought by the writ consists of damages for breach of contract and an injunction restraining the Post Office from withdrawing recognition from the guild as a union or staff association representing male telephonists in the employment of the Post Office, and/or refusing to negotiate with or to consult with the guild in matters concerning the pay, welfare and other matters affecting
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the industrial well-being of the male telephonists who are members of the guild. The motion seeks an injunction in the same terms pending trial of the action.
There are about 52,000 telephonists employed by the Post Office; about 10,000 are members of the guild and about 39,000 are members of the Union of Post Office Workers, to which I will refer as ‘the union’. For a great number of years both the guild and the union have been recognised as negotiating bodies for telephonists employed by the Post Office, but with a distinction. The guild was and is recognised as a negotiating body for male telephonists only. The union was and is recognised as a negotiating body for both male and female telephonists. The majority of telephonists are female; about 39,000 females, compared with about 13,000 males. The majority of male telephonists belong to the guild. In the result there is dual trade union representation for male telephonists, who form the minority of telephonists, and there is single trade union representation for female telephonists.
Official recognition of a trade union by the Post Office is of great significance. What it means is spelt out in App B to the 1952 Report of the Post Office (Departmental Classes) Recognition Committeeb, which I will call the Terrington Report. In summary, recognition confers on the trade union the right to negotiate on conditions of service affecting the category of staff for which recognition is granted; the right to take a dispute to the Civil Service Arbitration Tribunal; the right to use working time and Post Office premises for trade union business.
For some years those directing the work of the Post Office have considered it desirable that not more than one trade union should be recognised as representing Post Office employees who have substantially identical interests. This principle of non-duplication of trade union recognition was reaffirmed by the Terrington Report,and a number of attempts have been made to bring to an end dual representation of male telephonists. The Post Office has now announced its intention of withdrawing recognition from the guild on 1 September. This announcement has led to the present action and this motion. I am not concerned to compare the merits of the guild and the union as trade unions; nor am I concerned with the demerits, if any, of having two trade unions operating in the same field. I am only concerned with the question whether the Post Office will be acting in breach of law if it withdraws recognition from the guild.
There is one other matter to which I must refer by way of introduction. The Post Office Act 1969 was passed in July 1969. On the appointed day, which was 1 October 1969, the office of Postmaster General was abolished and his functions were transferred in the main to a new corporation called the Post Office, which is a public authority. I use the expression ‘the Post Office’ in this judgment to mean either the old or the new organisation as the context requires.
There are two plaintiffs named in this action, both being male telephonists. There are two other male telephonists who have given evidence. No difference in principle arises between their respective employments, and I shall therefore for convenience and brevity deal with this case by reference only to the first plaintiff, Mr Gallagher. The first plaintiff entered the employment of the Post Office as a trainee telephonist on 12 June 1961. I quote from para 2 of his affidavit:
‘… Towards the end of my initial training course, I was told by the Post Office Instructress that I, being a male telephonist, was entitled either (a) to become a Member of the Union of Post Office Workers … or (b) the [National Guild of Telephonists], or (c) not to join either Union, both the Unions named in (a) and (b) being recognised by the Post Office for the purpose of negotiating on behalf of employees. The Instructress concerned was herself an employee of the Post Office. It is within my own personal knowledge that the information communicated to trainees, to which I have referred, is a normal part of Post Office procedure, and one of the functions entrusted to the Instructor of each course … ’
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On 16 February 1962, he was informed by the head postmaster of the Kendal office that he had been appointed a probationary telephonist as from 2 February 1962 and that his probationary period would last until November 1963. In due course of time his appointment was confirmed. The first plaintiff is now the acting assistant general secretary of the guild. I do not know, and I do not think it is material, on what precise date he joined the guild.
In preparation for the changeover under the 1969 Act, a communication on form CS 1 was made to the first plaintiff on 1 August 1969. Page 1 of the form was signed by the telephone manager, Lancaster. It is headed ‘Reorganisation of the Post Office’, marked ‘PERSONAL’, and is addressed to the first plaintiff by name. Page 1, which is important, reads as follows:
‘The change from Government Department to public Corporation on 1st October 1969 will not mean a break in service for staff who continue in Post Office employment. I am writing on behalf of the Post Office to offer you continued employment from that date. The Post Office’s terms and conditions of employment are shown in the statement at pages 2 and 3 and in the contract documents to which it refers and which are part of this offer. Your own pay, grade and annual leave allowance will be those which, in the circumstances prevailing at the time of despatch of this letter, would have been current on 1st October 1969 if you had still been in the service of the Postmaster General on that date (see statement at page 4); any change proposed to come into effect before 1st October 1969 will be separately notified to you as a variation of the terms of this offer.
‘Variations in the rules relating to conditions of service referred to in the enclosed statements will be subject to discussion or negotiation with the appropriate staff associations, or, where applicable, arbitration.
‘In accordance with the Government decision already published, this offer of continued employment is made at the same time as I give you, as I now have to do on behalf of the Postmaster General, formal notice that you will cease to be a Government servant after 30th September 1969.
‘If you accept this offer all you need to do is to continue to attend for work on and from 1 October in the normal way … ’
There is nothing else relevant on p 1.
Pages 2 and 3 of CS 1 are headed ‘Terms and Conditions of Employment’. Paragraph 1 is headed ‘General’ and states:
‘You will be subject to the rules, notices, instructions and other directions issued from time to time in regard to your employment.’
The remaining paragraphs cover pay and attendance, superannuation, termination of employment etc, sick absence, patents and inventions and safety. Page 4 is headed ‘Personal Statement’ and specifies grade, civil service status, pay and leave allowance.
The first plaintiff accepted the offer of employment made by CS 1 in the manner prescribed, namely by continuing to attend for work on and from 1 October 1969.
After the 1969 Act was passed the Post Office continued to pursue the aim of seeking to secure single trade union representation of male telephonists. It succeeded to the extent that proposals for a merger were apparently agreed between the executive councils of the guild and the union which Mr Ryland, the Deputy Chairman of the Post Office, described in a letter of 4 February 1970 as ‘statesman-like, forward-looking and in the best interests of the telephonist grade’. When, however, the merger proposals were submitted to a ballot of members of the guild, they were defeated by a 2 to 1 majority. This result was clearly a disappointment to the Post Office and led to a letter of 1 May 1970 from the Deputy Chairman of the Post Office to the general secretary of the guild which I think should be taken as representing the Post Office view of the position. I quote part of this letter:
Page 716 of [1970] 3 All ER 712
‘My letter of 4th February 1970 said that dual representation in the Telephonist field reduced the effectiveness and efficiency of the negotiating machinery and consultative procedures. It creates complications in negotiation and consultation at all levels and most of all at local level where a wide range of day-to-day issues must be covered. Because it demands duplication of negotiating procedures it brings in its train wasted effort and general delay. It inevitably leads to local membership-wars between the two unions and thus to lack of goodwill amongst staff working side by side. More important the consequential frictions and jealousies adversely after the lives and attitudes of Post Office staff at their workplace. We have allowed this unsatisfactory situation to continue for a long time because we were working for and hoped to be successful in mediation which would lead to a happy solution acceptable to all concerned. But, the latest developments suggest that this is no longer a realistic assumption and that we must decide how this most difficult situation should be resolved.
‘We have, of course, taken fully into account the views in your letter of 24th April. We do not however accept that the Trade Union Act of 1964 inhibits us in any way from deciding the matter on the merits as we see them. We think that the factors set out in this letter and the spirit and trend of modern industrial relations away from multi-unionism, are decisive and that henceforth we can recognise only one union as representing Telephonists. We have further concluded that the Union should be the Union of Post Office Workers, provided that they can satisfy us on a number of specific points.
‘There will, of course, have to be a period before the change is made so that the two unions can make whatever arrangements are necessary to meet the new situation. We therefore have it in mind that the operative date of withdrawal of recognition from the National Guild of Telephonists should be 1st September 1970.’
There then follows a reference to assurances which the Post Office sought from the union, and the penultimate paragraph of the letter reads:
‘Given that the Union of Post Office Workers accept these conditions, this letter may be taken as formal notification of our intention to withdraw recognition from the National Guild of Telephonists on the date specified.’
This was followed by a letter of 1 June 1970, from the Deputy Chairman of the Post Office to the acting General Secretary of the guild:
‘Further to my letter to Mr. Fitzgerald of 1st May concerning withdrawal of recognition from the National Guild of Telephonists, you will wish to know that the Union of Post Office Workers has given the Post Office assurances that it will implement the conditions stipulated in that letter. You may therefore take this as formal confirmation of the Post Office decision to withdraw recognition on 1st September 1970.’
Further correspondence ensued until on 15 July the guild’s solicitors wrote to the Post Office solicitor as follows:
‘[The plaintiffs] have now been advised by Leading Counsel that the threatened withdrawal of recognition from the National Guild of Telephonists constitutes a breach of contract with its members, and we have been instructed to proceed at once to institute legal proceedings against the Post Office forthwith, and to apply to the Court by way of Motion, for an Interim Injunction.’
The writ was issued on 17 July by the plaintiffs, and the notice of motion followed. Shortly after this case was opened, I suggested that a practical course might be an expedited trial and for the status quo to be maintained in the meantime. However, counsel for the Post Office told me that this possibility had already been considered,
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but in the circumstances he was not authorised to offer any interim undertaking. I must therefore deal with the matter according to the legal rights of the parties.
Before I deal with the arguments, I propose to say a word on the strength of the case which the plaintiffs need to establish as a matter of law before I am at liberty to grant interlocutory relief pending trial of the action. If the plaintiffs are able to establish with an adequate degree of probability that they may succeed at the trial of the action, I would not hesitate to make such interim order as would be needed to preserve the status quo in the meantime. The balance of convenience would in that event, in my judgment, be heavily in favour of preserving the status quo. The dispute is such that there would not, I think, be any difficulty at all in directing a speedy trial. I am not, however, at liberty to grant an interlocutory injunction merely on the grounds that (1) the plaintiffs have an arguable case, (2) the preservation of the status quo for some three months would not cause much harm to the Post Office, and (3) the loss of the status quo might cause irreparable harm to the guild. I am only entitled to grant interlocutory relief if the plaintiffs establish a probability of succeeding at the trial or make out a strong prima facie case. See Donmar Productions Ltd v Bart. I think that there is no great difference between the two tests. Certainly each requires that the court shall be satisfied that the applicant is more likely to succeed than fail at the trial.
The plaintiffs base their case on two grounds: breach of contract and breach of statutory duty. The claim of breach of contract stems from two arguments: breach of an implied term arising out of the facts which I have narrated from para 2 of the first plaintiff’s affidavit; alternatively, breach of an express term, namely the second paragraph of p 1 of CS 1, ie the paragraph commencing with the words ‘Variations in the rules’. I deal first with the implied term. The nature of that term is specified in para 3 of the first plaintiff’s affidavit, namely:
‘… it was an implied term of my contract of service with the Post Office that the Defendants should continue to recognise and to negotiate with the Union [ie the National Guild of Telephonists] during my contract of employment with them.’
It was not disputed by counsel for the plaintiffs that a term which the parties to a contract have not seen fit to express is only to be implied under the compulsion of necessity. The case sought to be made by the plaintiffs was that in the present case the implication was necessary in order to give business efficacy to the contract of employment. Now it is plain that it is not necessary, in order to give business efficacy to an ordinary contract of service, to imply a term that the employer shall recognise a particular trade union. This was recognised by counsel for the plaintiffs and indeed the first plaintiff was plainly on the facts employed in the first instance under a contract of employment which could not possibly have contained the suggested implied term, because trade unions did not enter into the picture until towards the end of the training period. The matter was analysed in some detail during the course of the reply, and the case submitted by the plaintiffs is this: (1) the contract of employment between the Post Office and the first plaintiff, ie the contract effected after the end of the training period, contained an express term that the Post Office would permit the first plaintiff to join the guild or the union, these being trade unions recognised by the Post Office; (2) in order to give business efficacy to that express term, it is necessary to imply a term that the Post Office will continue to recognise both such unions as negotiating bodies during the continuance of that contract of employment; (3) the term so implied in the first plaintiff’s original contract of employment was imported into his contract of employment with the new corporation by virtue of the first two sentences of CS 1, which read:
‘The change from Government Department to public Corporation on 1st
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October 1969 will not mean a break in service for staff who continue in Post Office employment. I am writing on behalf of the Post Office to offer you continued employment from that date.’
In my judgment, this argument is not correct. I think that the statement by the Post Office instructress that the first plaintiff was entitled either to join the guild or the union or neither was purely informative and not contractual. It was not expressed to be a term of the contract of employment. It did not need to be a term of the contract of employment. If an employee can join trade union X or trade union Y or neither, he does not need a term in his contract to say so. He can join X or Y or neither without any term at all. Nor would I expect a Post Office instructress to be the likely medium through whom terms of a contract or employment would be conveyed. The first plaintiff’s notice of appointment as probationary telephonist was in fact signed by a head postmaster. Later, his CS 1 was signed by the telephone manager for Lancaster. Two other CS 1’s which are before me were also signed by a telephone manager. It seems to me altogether too far-fetched to suggest that when training employees are told by their instructors that they are at liberty either to join specified unions or no union, that becomes an express term of their employment which introduces, under the compulsion of necessity, the further and unspoken term that the employer will always during that contract of service continue in all circumstances to recognise the chosen trade union as a negotiating body in respect of that employee.
A further defence to the plaintiff’s claim was submitted. It was urged on me by counsel for the Post Office that in any event the supposed implied term can only have started its life as a term of the first plaintiff’s engagement as a civil servant of the Crown; that there is ample authority that civil servants are not engaged on contractual terms as a matter of law; therefore there was no contract of employment into which a term could be implied. Counsel for the plaintiffs submitted that the authorities for that proposition are obiter, and it was open to me to decide in favour of the existence of contracts of employment for civil servants. Any contribution of my own in this debatable field would on any basis be obiter having regard to my primary conclusion. I therefore express no view.
I turn to the express contractual term claimed by the plaintiffs to exist as a result of CS 1. The argument depends wholly on the second paragraph of p 1 of CS 1, which I will read again:
‘Variations in the rules relating to conditions of service referred to in the enclosed statements will be subject to discussion or negotiation with the appropriate staff associations, or, where applicable, arbitration.’
The argument for the plaintiff’s proceeded as follows: (1) the paragraph, although appearing on p 1, is just as contractual in its nature as if it had appeared on p 2 or 3 under the heading of ‘Terms and Conditions of Employment’; (2) the meaning of the paragraph was that the Post Office was bound contractually in relation to every employee accepting the offer of continued employment to discuss or negotiate with appropriate staff associations as regards conditions of service; (3) on the facts the guild was ‘an appropriate staff association’ in relation to male telephonists.
In my judgment, counsel for the Post Office was correct when he submitted that all the terms and conditions of the employment of the first plaintiff are contained on pp 2, 3 and 4 of CS 1, and that the second paragraph of p 1 is no more than a glimpse of the fairly obvious, namely that the Post Office intended to discuss matters with the relevant trade union before seeking to alter the terms and conditions of anyone’s employment. If the paragraph were intended to bind the Post Office, as part of the contract of employment, to indefinite recognition of particular trade unions, I cannot think that the paragraph would have been placed ambiguously on p 1 instead of in its proper place on p 2, 3 or perhaps 4. Nor do I think that such vague language as
Page 719 of [1970] 3 All ER 712
‘appropriate staff associations’ would have been adopted when it would have been child’s play to have specified the relevant trade union and to have stated that recognition of that union would not be withdrawn during the currency of the contract of employment. In the result, I reach the conclusion that the Post Office is not acting in breach of any contract if it withdraws recognition of the guild on 1 September 1970.
I turn to the claim that the Post Office will be in breach of its statutory duty if it withdraws recognition of the guiltd. This is a curious point depending on Sch 1, para 11, to the Post Office Act 1969. As appears from the correspondence, it is not an argument which originally presented itself to the minds of those advising the plaintiffs. Counsel for the plaintiffs frankly admitted that they were alerted to the point by para 6 of the affidavit of Mr William Pounder filed on behalf of the Post Office. This reads:
‘By paragraph 11(1) of the First Schedule to the Post Office Act 1969 the Post Office is required to consider and make arrangements in connection with the machinery for negotiating terms and conditions of employment of persons employed by them. Pursuant to such duty the Post Office has considered the question of recognition of unions representing telephonists amongst other employees of the Post Office.’
I will read para 11(1) and (2) of Sch 1 to the Post Office Act 1969:
‘(1) Except so far as the Post Office is satisfied that adequate machinery exists for achieving the purposes of this paragraph, being machinery for operation at national level or local level or a level falling between those levels and appearing to the Post Office to be appropriate, it shall be the duty of the Post Office to seek consultation with any organisation appearing to it to be appropriate with a view to the conclusion between it and that organisation of such agreements as appear to the parties to be desirable with respect to the establishment and maintenance, for operation at any such level as aforesaid, of machinery for—(a) the settlement by negotiation of terms and conditions of employment of persons employed by the Post Office, with provision for reference to arbitration in default of such settlement in such cases as may be determined by or under the agreements; (b) the promotion and encouragement of measures affecting efficiency, in any respect, in the carrying on by the Post Office of its activities, including in particular, the promotion and encouragement of the training of persons employed by the Post Office; and (c) the promotion and encouragement of measures affecting the safety, health and welfare of persons so employed.
‘(2) The Post Office shall send to the Minister and the Secretary of State copies of any such agreement as aforesaid and of any instrument varying the terms of any such agreement.’
The plaintiffs’ argument can, I think, be summarised in this way: (1) the Post Office cannot claim and do not in fact allege that adequate machinery exists for achieving the purposes of para 11. Therefore, para 11 imposes a duty on the Post Office. (2) The duty so imposed is a duty to seek consultation with certain organisations. (3) The organisations with which the Post Office is under a duty to seek consultation are those which appear to it to be appropriate. (4) There is no evidence by the Post Office that it thinks the guild is an inappropriate organisation for consultation; nor would one expect such evidence to exist, because the Post Office has recognised the guild as a negotiating body for male telephonists for over 40 years. (5) Therefore, the Post Office is under a statutory duty to continue to recognise the guild.
In my judgment, this argument is not correct. First, I think that the evidence clearly establishes that the Post Office does not think that the guild is an appropriate organisation for the purposes of this paragraph. I refer to the following passages in the affidavit of Mr Pounder. I read parts of paras 10 and 11:
Page 720 of [1970] 3 All ER 712
‘10 … The Post Office has come to the conclusion that a satisfactory basis for negotiation between the two sides can be achieved only if its telephonists are represented by a single trade union. [Then there is a reference to the abortive merger proposals.]
‘11 … As a result the Post Office had to reconsider the problem presented by dual representation and after giving the matter further careful study and after taking into consideration representations made both by the U.P.W. and N.G.T. the Post Office has decided that in all the circumstances the course most likely to achieve a sound and lasting basis upon which to build for the future is to withdraw the limited recognition at present enjoyed by the N.G.T… .’
It appears to me that the meaning of those passages is that the Post Office no longer considers two such organisations appropriate but does consider one organisation appropriate, and that one which it considers appropriate is the union. This, in my view, is also made clear in the passages which I have quoted from Mr Ryland’s letter of 1 May 1970.
Secondly, I think that the plaintiffs are seeking to read more into Sch 1, para 11, than can fairly be attributed to the wording. The purpose, it seems to me, of para 11 is to encourage the conclusion of certain agreements. The agreements with which the paragraph is concerned are agreements for the establishment of machinery for (a) the settlement by negotiation of terms of employment, (b) the promotion of Post Office efficiency, and (c) the promotion of safety, health and welfare measures. The duty imposed on the Post Office is to seek consultation with a view to the conclusion of such agreements. The entities with which the Post Office is required to seek consultation are in my judgment such organisations as the Post Office thinks fit. In my view, on the true construction of para 11, the Post Office has an absolute discretion as to organisations which it will consult. It would be strange if it were otherwise. Paragraph 11 is merely concerned to pave the way for the conclusion of formal agreements between the Post Office and organisations. Whether an agreement emerges with a particular organisation depends on a coincidence of the will of the Post Office and the will of that organisation. It would be odd if the Post Office were under a statutory duty to seek consultation with an organisation if the Post Office did not desire and could not be forced to make an agreement with that organisation. It appears to me that the words ‘It shall be the duty of the Post Office to seek consultation with any organisation appearing to it to be appropriate’ mean no more than ‘It shall be the duty of the Post Office to seek consultation with such appropriate organisations as it shall think fit to consult’.
In essence, the plaintiffs seek to say that on its true construction Sch 1, para 11, imposes on the Post Office a duty not to withdraw recognition from particular trade unions, I do not think that can possibly be correct. If in a particular case it can be said that adequate machinery exists for achieving the purposes of para 11, the words of exception apply, so that para 11 is not in point, and the paragraph therefore casts no duty on the Post Office to recognise any particular trade union. It would be extremely odd if the one case in which the Post Office is not required to maintain particular trade union recognition is the case in which adequate trade union machinery already exists. If the object of para 11 were to impose on the Post Office a duty to continue particular trade union recognition, surely that duty would be imposed in a case, above all other cases, where the trade union machinery was adequate. The plaintiffs’ argument seems to me to involve the reverse. I therefore reach the conclusion that para 11 has nothing whatever to do with particular trade union recognition.
In the result, I dismiss the motion.
Motion dismissed.
Solicitors: Waterhouse & Co (for the plaintiffs); Solicitor to the Post Office.
Richard J Soper Esq Barrister.
Lovell v Lovell
[1970] 3 All ER 721
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, PHILLIMORE AND BUCKLEY LJJ
Hearing Date(s): 17 JULY 1970
Limitation of action – Acknowledgment – Interrogatory answer to which might constitute – Whether interrogatory necessary to dispose fairly of cause or matter – Limitation Act 1939, s 23(4) – RSC Ord 26, r 1(3).
Limitation of action – Acknowledgment – Interrogatory to obtain evidence that document written before issue of writ amounted to acknowledgment – Whether interrogatory necessary to dispose fairly of cause or matter – Limitation Act 1939, s 23(4) – RSC Ord 26, r 1(3).
In an action for debt in which the defendant has pleaded the Limitation Act 1939, leave under RSC Ord 26, r 1(3), to serve an interrogatory to the defendant the answer to which could constitute a clear acknowledgment that the debt was due and owing, and so deprive the defendant by virtue of s 23(4)a of the Limitation Act 1939 of the defence which Parliament has given him, will not be granted; but an interrogatory designed to obtain evidence to show that a document which was written before issue of the writ was an acknowledgment of the debt may be allowed.
Notes
For leave to serve interrogatories, see 12 Halsbury’s Laws (3rd Edn) 77, 78, para 111, and for cases on the subject, see 18 Digest (Repl) 208, 209, 1808–1820.
For acknowledgment of debts after limitation period has run, see 24 Halsbury’s Laws (3rd Edn) 298, para 591, and for cases on acknowledgements, see 32 Digest (Repl) 413–443, 366–651.
For the Limitation Act 1939, s 23, see 19 Halsbury’s Statutes (3rd Edn) 82.
Interlocutory appeal
The defendant appealed against the order of Melford Stevenson J made in chambers on 29 May 1970 which affirmed the order of a master allowing interrogatories to be administered to the defendant. The facts are set out in the judgment of Salmon LJ.
James Ross QC and R Ashton for the defendant.
D H Wild for the plaintiff.
17 July 1970. The following judgments were delivered.
SALMON LJ. In 1966 Mrs Edith Ellen Lovell died intestate. Her husband, the plaintiff, is the administrator of her estate. In February 1967, he as administrator issued a specifically endorsed writ against the defendant, who is his son, claiming the sum of £2,130 odd as money lent by the deceased to the defendant. The whole estate, excluding the sum claimed, is only £2,500 or thereabouts, and there are four children, including the defendant; and now quite a lot of it, I should imagine, is being dissipated in litigation.
The defendant asked for further particulars of the statement of claim; these were delivered showing payment by the deceased to the defendant of various sums in 1952 and 1953 amounting in all to £930, and further sums on unspecified dates amounting in all to some additional £1,200. The defendant by his defence denied that the deceased had ever lent him any money. He said that if she had paid him any money, the money was a gift from her to him; alternatively, he said that if she
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lent him any money it was on condition that it need not be repaid unless the deceased herself requested or required repayment, and that she had never done so; then, in the further alternative, he alleged that the cause of action is now barred by the Limitation Act 1939, s 2.
In that state of affairs the plaintiff sought to administer nine interrogatories to the defendant. That application was resisted, but all of the interrogatories were allowed by the master, and on appeal to the learned judge, he also took the view that the plaintiff was entitled to have all the interrogatories answered. The first interrogatory was: ‘Is that document [i e an annexed letter addressed to HM inspector of taxes] in the handwriting of [the deceased]?’ The defendant answered that by stating: ‘that document is in the handwriting of [the deceased]’. The document is in these terms: ‘I certify [the defendant] is indebted to a total sum of £2,300. E. E. Lovell (Mrs.)’. It is undated. The second interrogatory was: ‘Does that document relate to money lent to you by [the deceased]?’ The defendant objected to answering that interrogatory on the ground that his answer would be prejudicial to para 5 of his defence; that is the passage in which the defence under the Limitation Act 1939 is set up. The learned judge decided that that was not a valid objection and that the defendant must answer the interrogatory.
I have come to the clear conclusion that the learned judge was wrong. It is quite true that the question and the answer could be very germane to the chief issue raised in the action. However, if the interrogatory were answered, ‘Yes’, the answer would constitute a clear acknowledgment that the debt was due and owing. Section 23(4) of the Limitation Act 1939 is in these terms:
‘Where any right of action has accrued to recover any debt … and the person liable … therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment … ’
Then s 24 provides that the acknowledgment must be in writing and signed by the person making the acknowledgment, and it must be addressed to the person whose claim is being acknowledged.
It is quite true that the answer to that interrogatory could not be relied on as an acknowledgement in the present action, because the right to recover the debt would be deemed to have accrued on the date on which the answer to the interrogatory was sworn; ie after the issue of the writ, and therefore the claim endorsed on the writ would be statute-barred and unacknowledged so far as this action is concerned. There would, however, be nothing to prevent the plaintiff from discontinuing the present action and bringing a fresh action, and relying in that action on the acknowledgment contained in the answer to the interrogatory. RSC Ord 26, r 1(3) provides:
‘On the hearing of an application under this rule [i e an application for leave to administer interrogatories] the Court shall give leave as to such only of the interrogatories as it considers necessary either for disposing fairly of the cause or matter or for saving costs … ’
Can it be said that in order to dispose fairly of this present case it is necessary to compel the defendant to give an acknowledgement of the debt (if it be a debt) which would in reality destroy the defence given to him by the Statute of Limitations? To my mind, the answer to that is clearly, ‘No’.
The courts are not particularly tender towards defendants who rely on the Statute of Limitations, but Parliament has given them this statutory defence. I think that it would be a wholly wrong exercise of discretion to compel a defendant to kill his own defence by taking a step in the action which would in itself amount to an acknowledgment. It seems to me that if the plaintiff is seeking to rely on an acknowledgment before the issue of the writ it would be perfectly proper for him to be given
Page 723 of [1970] 3 All ER 721
leave to administer an interrogatory with a view to proving that prior acknowledgment. There is a great deal of difference, however, between attempting to get an answer which will be evidence of a prior acknowledgment and getting an answer which itself will constitute an acknowledgment on which the plaintiff could subsequently rely. As Buckley LJ pointed out during the course of the argument, if the case put forward on behalf of the plaintiff were good, no one could ever in the future rely effectively on the Statute of Limitations in any circumstances whatsoever. Supposing that money has been owing for more than six years, Parliament has ordained that the debtor cannot successfully be sued unless he has acknowledged the debt or paid something on account of it. If he does, then time under the statute runs only from the date of the acknowledgment or the date of the payment. I postulate a case in which there is undoubtedly a debt but it is statute-barred. The statement of claim is drawn in much the same way as the statement of claim in the present case, and an interrogatory is ordered: ‘Did you borrow from the plaintiff such and such a sum, or some other sum, and what sum, on such a date, or on some other date, and what date?’ If the debtor answers truthfully, as he is bound to do, the plaintiff then tears up the writ and starts another action in which he uses the debtor’s answer to the interrogatory as acknowledgment of his debt. This would reduce the Limitation Act 1939 to a farce; it would make it a complete nullity, and obviously defeat the intention of Parliament. For those reasons, I would disallow the second interrogatory.
For precisely the same reasons I would disallow the sixth and seventh interrogatories. The sixth interrogatory reads: ‘On the date [the deceased] wrote that document did you owe her the sum of £2,300?’ The seventh is: ‘If not £2,300 did you owe her any sum and if so, what sum?’ The ninth interrogatory has been abandoned, and the first and fifth have been answered.
That leaves the third, fourth and eighth interrogatories to consider. I would allow the third and fourth interrogatories as they stand. The third interrogatory is: ‘Did [the deceased] write that document in your presence?’ That is an interrogatory designed to obtain evidence to show that the document which was written before the writ was an acknowledgment of the debt, and it is accordingly a proper interrogatory. The same is true of the fourth interrogatory, which is: ‘Did [the deceased] write that document in your presence?’ So far as the eighth interrogatory is concerned it is in these terms: ‘Since [the deceased] wrote that document have you paid to her any, and if so what, sums in reduction of your debt to her?’ If the words ‘in reduction of your debt to her’ are struck out of the interrogatory, as I think they should be, the rest of the interrogatory is unexceptionable and should be allowed. I would, therefore, allow the appeal and amend the order for interrogatories in the sense that I have indicated.
PHILLIMORE LJ. I entirely agree.
BUCKLEY LJ. I also agree.
Appeal allowed; order for interrogatories amended.
Solicitors: Ward, Bowie & Co, agents for Turner & Co, Spalding, Lincs (for the defendant); Grocock & Staniland, Boston, Lincs (for the plaintiff).
Henry Summerfield Esq Barrister.
Molefi v Legal Adviser and others
[1970] 3 All ER 724
Categories: INTERNATIONAL: Treaties: COMMONWEALTH; Commonwealth countries
Court: PRIVY COUNCIL
Lord(s): LORD MORRIS OF BORTH-Y-GEST, LORD GUEST, LORD DONOVAN, LORD DIPLOCK AND SIR GORDON WILLMER
Hearing Date(s): 7, 8, 9, 13 APRIL, 17 JUNE 1970
Privy Council – Lesotho – Accession to treaty – Positive manifestation of intention to accede – Letter to United Nations after independence adhering to treaties, pending review of commitments, subject to reciprocity.
Privy Council – Lesotho – Refugee – Expulsion – Refugee claiming immunity by virtue of international convention – Whether outside own country as result of events before 1 January 1951 – Convention Relating to the Status of Refugees 1951, art 1 – Aliens Control Act (Basutoland) (No 16 of 1966), s 38(1).
In August 1961, the appellant who had always lived in South Africa, was arrested and charged under the South African Suppression of Communism Act 1950 with offences relating to alleged activities between April and July 1961. In October 1961, while on bail, the appellant left South Africa and went to Basutoland. On 4 October 1966, the independent sovereign Kingdom of Lesotho came into being in what was formerly Basutoland, and the appellant continued to reside in Lesotho. On 22 March 1967, the Prime Minister of Lesotho wrote to the Secretary-General of the United Nations concerning his government’s treaty obligations. As regards multilateral treaties, the following statement was made: ‘The Government of the Kingdom of Lesotho proposes to review each of [the multilateral treaties] individually and to indicate to the depositary in each case what steps it wishes to take in relation to each such instrument—whether by way of confirmation of termination, confirmation of succession or accession. During such interim period of review, any party to a multilateral treaty which has, prior to independence, been applied or extended to the country formerly known as Basutoland, may, on a basis of reciprocity, rely as against Lesotho on the terms of such treaty’. On 1 March 1968, the Aliens Control Act, which had been passed by the Parliament of Basutoland and had been assented to on 30 September 1966, was brought into operation. In October 1968, the appellant was informed that, being an ‘alien’ within the meaning of the Act, he was required to leave the country.
The appellant presented a petition to the High Court of Lesotho invoking s 38a of the Act, which provided protection from expulsion to any alien in Lesotho who was a ‘refugee’ within the meaning of an international treaty or convention relating to refugees, which ‘is or has been acceded to by or on behalf of the Government of Lesotho’. Article 1b of the Convention Relating to the Status of Refugees, a multilateral treaty, applied the term ‘refugee’ to any person, inter alia, who: ‘As a result of events occurring [in Europe or elsewhere] before 1 January 1951 … is outside the country of his nationality’. The appellant relied on two such events: the election of the National Party to power in South Africa in 1948; and the passing of the Suppression of Communism Act 1950, by virtue of both of which it was contended that the administration of certain laws, which discriminated against Africans, ‘became harsher’. On the questions whether (i) the Convention Relating to the Status of Refugees was one that ‘is or has been acceded to by or on behalf of the Government of Lesotho’, within the meaning of s 38(1) of the Aliens Control Act; and (ii) the appellant was an alien who was also a ‘refugee’ as defined by the convention,
Page 725 of [1970] 3 All ER 724
Held – (i) The Prime Minister’s letter of 22 March 1967 amounted to a positive manifestation of intention by the government of Lesotho, for the purposes of s 38(1) of the Aliens Control Act, to accede to the Convention Relating to the Status of Refugees, which accordingly became a provision of the municipal law of Lesotho, because the latter was in itself a declaration that pending individual examination of those multilateral treaties which had resulted in treaty relations between the country formerly known as Basutoland and other States, of which the convention was one, Lesotho would adhere to such treaties (see p 728 d and p 730 j, post).
(ii) On the true construction of the words contained in the definition of the term ‘refugee’ (Convention Relating to the Status of Refugees, art 1), which were not susceptible to legalistic or philosophical examination, the appellant was not outside South Africa as a result of any such pre-1951 events, because the 1948 elections and the passing of the Suppression of Communism Act 1950 merely formed a background to later events in 1960 and 1961 which in themselves gave rise to the prosecution of the appellant (see p 732 c f and g, post).
Cases referred to in advice of the Board
Asylum (Algerian Refugee) Case (1961) 32 ILR 230.
Hungarian Refugee (Austria) Case (1957) 24 ILR 488.
Appeal
This was an appeal by Joseph Sallie Poonyane Molefi from a judgment of the Court of Appeal of Lesotho (Roper P, Schreiner and Maisels JJA), dated 30 May 1969, dismissing an appeal from a judgment of the High Court of Lesotho (Jacobs CJ). The appellant sought an order interdicting the respondents, the Principal Legal Adviser, the Prime Minister and the Commissioner of Police, from expelling him from Lesotho and a declaration that he was a ‘refugee’ within the meaning of s 38 of the Aliens Control Act (No 16 of 1966), and accordingly could not be expelled. The facts are set out in the advice of the Board.
S W Kentridge SC and J Unterhalter (both of the Johannesburg Bar) for the appellant.
J G Le Quesne QC and Mervyn Heald QC for the respondents.
17 June 1970. The following opinion was delivered.
LORD MORRIS OF BORTH-Y-GEST. In August 1961, the appellant, who had always lived in South Africa was arrested. He was charged before the Regional Court of Johannesburg with being a member of an unlawful organisation, namely the Pan Africanist Congress, and with furthering its aims. He was charged with contravening certain provisions of the South African Suppression of Communism Actc. The charges against him related to alleged activities between 8 April 1960 and July 1961. Being (on 28 August 1961) released on bail and being due to appear in court on 26 October 1961, he left South Africa and went to Maseru in the territory then known as Basutoland. After that time he resided in Maseru.
On 4 October 1966, the independent sovereign Kingdom of Lesotho came into being (see the Lesotho Independence Act 1966). The Constitution of Lesotho, which was set out in the Schedule to the Lesotho Independence Orderd came into effect. The appellant continued to reside in Lesotho. In October 1968, by which time he had been seven years in the country, he was informed that, being an ‘alien’ as defined in the Aliens Control Acte, he was required to leave the country. The Aliens Control Act was enacted by the Parliament of Basutoland and was assented to on 30 September 1966. It was to come into operation on a date or dates to be fixed. It was an existing law on the ‘appointed day’ (4 October 1966). It was brought into operation on 1 March 1968. The provisions of s 38(1) and (2) of the Aliens Control Act are as follows:
Page 726 of [1970] 3 All ER 724
‘(1) If any international treaty or convention relating to refugees is or has been acceded to by or on behalf of the Government of Lesotho, an alien who is a refugee within the meaning of such a treaty or convention shall not be refused entry into or sojourn in Lesotho, and shall not be expelled from Lesotho in pursuance of the provisions of this Act except with his consent or except to the extent that is permitted by that treaty or convention, subject to any reservation that may be in force at the material time.
‘(2) If any question arises—
(a) whether an alien is a refugee;
(b) whether any provision of an international treaty or convention relating to refugees, applies to that alien; and
(c) whether the expulsion of that alien from Lesotho is permitted by that treaty or convention,
the High Court may on the application of that alien declare that he is a refugee, that that provision of the international treaty or convention applies to him, and may declare that his expulsion from Lesotho is, or is not, permitted by that treaty or convention, or may decline to make any such declaration.’
On being required to leave Lesotho the appellant invoked the provisions of s 38. He presented a petition to the High Court of Lesotho. The court granted a rule nisi calling on the respondents to show cause why an order should not be granted interdicting them from expelling the appellant. An interim interdict was granted. After hearing argument, Jacobs CJ (on 15 January 1969) discharged the rule (with the consequence that the interim interdict would cease to operate) and refused the declaratory orders for which the appellant had prayed.
The appellant appealed to the Court of Appeal of Lesotho. Pending the determination of the appeal, the interim interdict was renewed. On 30 May 1969, the appeal was dismissed. On that date the Court of Appeal gave provisional, and on 28 October 1969 final, leave to appeal to the Judicial Committee of the Privy Council. The interim interdict was renewed pending the determination of the appeal by the Judicial Committee of the Privy Council. In the appeal before their Lordships the appellant claims that he is protected from expulsion from Lesotho on the ground that, although he is an ‘alien’, he is a ‘refugee’ within the meaning of an international treaty or convention relating to refugees, which ‘is or has been acceded to by or on behalf of the Government of Lesotho’ and that accordingly he can rely on the provisions of s 38 of the Aliens Control Act.
The international convention on which the appellant relies is the Convention Relating to the Status of Refugees. In the course of the preamble to that convention the high contracting powers, although noting that the grant of asylum may place unduly heavy burdens on certain countries, considered that international co-operation was needed to achieve a satisfactory solution of the problems relating to refugees. It was noted that the United Nations had manifested its concern for refugees so that, without discrimination, they should enjoy the widest possible exercise of fundamental rights and freedoms. One provision of the conventionf, is that the contracting powers shall not expel a refugee lawfully in their territory, save on grounds of national security or public order. It is not necessary to consider the provisions of the convention in great detail. The protection from expulsion on which the appellant relies is the protection which he claims is given to him by s 38 of the Aliens Control Act. Save to the extent that the provisions of the convention are introduced into the municipal law of Lesotho, the appellant asserts no separate and independent reliance on them. The date of the convention was 28 July 1951. On that date (see art 39) it was opened for signature at Geneva. Thereafter it was to be deposited with the Secretary General of the United Nations. Provisions concerning signature, ratification and accession are
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contained in art 39. Provisions concerning entry into force are in art 43. There was ratification by the United Kingdom. The ratification was deposited on 11 March 1954. There were certain reservations as permitted by art 42. For present purposes they have no materiality. Under the provisions of art 40 of the convention the United Kingdom later, by notification addressed to the Secretary General of the United Nations, extended the convention (with reservations) to Basutoland as territory for the international relations of which the United Kingdom was responsible. The effective date of such extension was 9 February 1961.
In art 1 of the convention is a definition of the term ‘refugee’. So far as material for present purposes the term applies to any person who—
‘As a result of events occurring before 1 January 1951 and owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it;
‘In the case of a person who has more than one nationality the term “the country of his nationality” shall mean each of the countries of which he is a national.’
The article also contains the following important provision:
‘For the purposes of this Convention the words “events occurring before 1 January, 1951,” in Article 1, Section A, shall be understood to mean either:
(a) “events occurring in Europe before 1 January 1951”; or
(b) “events occurring in Europe or elsewhere before 1 January 1951”; and each Contracting State shall make a declaration at the time of signature, ratification or accession, specifying which of these meanings it applies for the purpose of its obligations under this Convention.”’
In signing the convention, the United Kingdom declared that, for the purposes of its obligations, the words ‘events occurring before 1 January 1951’ were to be understood as referring to ‘events occurring in Europe or elsewhere before 1 January 1951’.
The claim of the appellant to have the protection of s 38 of the Aliens Control Act gives rise to two main questions. The first question is whether the Convention Relating to the Status of Refugees is one that ‘is or has been acceded to by or on behalf of the Government of Lesotho’. The second question is whether the appellant is an alien who is a refugee within the meaning of such a treaty. The argument in favour of an affirmative answer to the first question was advanced on alternative lines. It was contended that the validity of the extension of the convention to Basutoland, as recorded above, could not be questioned and that all that s 38 requires is that there shall have been an accession to a convention, so that if there has been an accession, then s 38 makes the convention pro tanto a part of the municipal law. An alternative submission was that as the convention had been extended to Basutoland (as it had been in 1960 with the effective date of 9 February 1961) the convention was within the terms of s 38 ‘acceded to by or on behalf of the Government of Lesotho’. It was said that in the context of s 38 the phrase ‘Government of Lesotho’ denoted any government which was at any relevant time the government of the territory which is now known as Lesotho. A further alternative submission was developed. It was said that the words ‘acceded to … on behalf of the Government of Lesotho’ were words which were apt to refer to an accession by a predecessor government. Once Lesotho became a sovereign independent State any accession, so it was argued, would not be ‘on behalf of’ but would be ‘by’ the government of Lesotho. So the words ‘on behalf of the Government of Lesotho’, as found in the section, should be understood to cover an
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accession to a convention or treaty which had taken place before Lesotho was in existence, with the consequence that Lesotho would become a party to the convention as a result of the operation of principles of international law relating to succession to treaties. In their Lordships’ view these various contentions place a strained and unnatural meaning on the words in s 38. It is important to remember that the Aliens Control Act was enacted just before Lesotho came into existence. It was to come into operation on a date to be fixed. Its language must have been designed to relate principally to the period when there would be a government of Lesotho. There was such a government as from 4 October 1966. The Act was not brought into operation until 1 March 1968.
In s 37(8) is the provision: ‘In this Act a reference to Lesotho shall, up to the expiry of the 3rd day of October 1966, be construed as a reference to Basutoland.' It followed that, when applying the Act while Basutoland still continued, the words ‘the Government of Lesotho’ would be read as ‘the Government of Basutoland’. There could in that period have been an accession ‘on behalf of the Government of Basutoland’. As from 4 October 1966, but effectively as from the date when the Act was brought into operation, there could be no reason for construing s 38 other than according to the clear meaning of its words. An international treaty or convention relating to refugees is drawn into the municipal law if the treaty or convention ‘is or has been acceded to by or on behalf of the Government of Lesotho’. Some positive manifestation of intention is indicated.
It is not contended on behalf of the appellant that he can claim protection merely by bringing himself within the terms of an international treaty or convention. Nor is it now contended that by extending the convention to Basutoland, Her Majesty had performed a legislative act in regard to Basutoland with the result that such convention had the force of law in Basutoland. The appellant’s reliance is and must be on the terms of s 38. The indications are that that section was drafted so that in the period after 3 October 1966, and after the Act was brought into force, its provisions would be applicable if any international treaty ‘is or has been acceded to by or on behalf of the Government of Lesotho’. As therefore the appellant only claims protection if he can bring himself within a positive provision of the municipal law of Lesotho, and as therefore it has to be considered whether he is a refugee within the meaning of an international treaty or convention which within the meaning of s 38 has been ‘acceded to’, it becomes unnecessary to consider the various views which have been held by international lawyers as to the circumstances under which there may be succession to treaties or conventions by a new State. Nor does it become necessary to consider whether or not the effect of s 17 of the Lesotho Independence Order 1966 would be that Lesotho would not be bound by any obligations which were formerly those of Her Majesty in respect of the government of Basutoland and which arose under a convention with another country or with any international organisation. The terms of s 17 are as follows:
‘(1) All rights, liabilities and obligations of—
(a) Her Majesty in respect of the Government of Basutoland; and
(b) Motolotlehi or the British Government Representative or the holder of any other office under the Crown in respect of the Government of Basutoland on behalf of that Government
shall, from the commencement of this Order be rights, liabilities and obligations of the Government of Lesotho and, subject to the provisions of any law, shall be enforceable by or against that Government accordingly.
‘(2) In this section, rights, liabilities and obligations include rights, liabilities and obligations arising from contract or otherwise (other than any rights referred to in subsections (1), (2) and (3) of section 16 of this Order and any rights, liabilities or obligations of Her Majesty in respect of the Government of Basutoland arising
Page 729 of [1970] 3 All ER 724
under any treaty, convention or agreement with another country or with any international organisation).’
The question therefore arises whether the 1951 Convention Relating to the Status of Refugees (it being common ground that there is no other international convention to which s 38 could apply) has been acceded to by or on behalf of the government of Lesotho. On behalf of the appellant it is contended that there was such an accession on 22 March 1967. If there was, then as from 1 March 1968 (when the Aliens Control Act came into operation), an ‘alien’ in Lesotho who was a ‘refugee’ could claim statutory protection.
On 22 March 1967, a letter was sent by the Prime Minister to the Secretary General of the United Nations. Lesotho has at all material times been a member of the United Nations. The letter was in the following terms:
‘Your Excellency,
‘The Government of the Kingdom of Lesotho is mindful of the desirability of maintenance, to the fullest extent compatible with the emergence into full independence of the Kingdom of Lesotho, of legal continuity between Lesotho and the several States with which, through the action of the Government of the United Kingdom the country formerly known as Basutoland enjoyed treaty relations. Accordingly, the Government of the Kingdom of Lesotho takes the present opportunity of making the following declaration:
‘2. As regards bilateral treaties validly concluded by the Government of the United Kingdom on behalf of the country formerly known as Basutoland, or validly applied or extended by the said Government to the country formerly known as Basutoland, the Government of the Kingdom of Lesotho is willing to continue to apply within its territory, on a basis of reciprocity, the terms of all such treaties for a period of twenty four months from the date of independence (i.e. until October 4, 1968) unless abrogated or modified earlier by mutual consent. At the expiry of that period, the Government of the Kingdom of Lesotho will regard such of these treaties which could not by the application of the rules of customary international law be regarded as otherwise surviving, as having terminated.
‘3. It is the earnest hope of the Government of the Kingdom of Lesotho that during the aforementioned period of twenty-four months, the normal processes of diplomatic negotiations will enable it to reach satisfactory accord with the States concerned upon the possibility of the continuance or modification of such treaties.
‘4. The Government of the Kingdom of Lesotho is conscious that the above declaration applicable to bilateral treaties cannot with equal facility be applied to multilateral treaties. As regards these, therefore, the Government of the Kingdom of Lesotho proposes to review each of them individually and to indicate to the depositary in each case what steps it wishes to take in relation to each such instrument—whether by way of confirmation of termination, confirmation of succession or accession. During such interim period of review, any party to a multilateral treaty which has, prior to independence, been applied or extended to the country formerly known as Basutoland, may, on a basis of reciprocity, rely as against Lesotho on the terms of such treaty.
‘5. It would be appreciated if Your Excellency would arrange for the text of this declaration to be circulated to all Members of the United Nations.
‘Please accept, Sir, the assurance of my highest consideration.
(signed) LEABUA JONATHAN
Prime Minister.’
On behalf of the respondents it was contended that the letter was not an executive act but was a mere statement of policy not having the effect of accession to, or confirmation of, treaties binding on Basutoland. Attention was directed to the words
Page 730 of [1970] 3 All ER 724
‘on a basis of reciprocity’. It was contended that the language of para 4 of the letter is very limited and that the effect of the paragraph was that an offer was being made voluntarily to accept reciprocal obligations contained in multilateral treaties which had affected Basutoland. So it was contended that the letter amounted to no more than an offer voluntarily and on a reciprocal basis to observe certain terms of some treaties or conventions. If the letter did amount to an accession, it is no longer contended that the letter was not written on behalf of the government of Lesotho or that there was a lack of executive authority on the part of the Prime Minister in writing it.
Their Lordships consider that the question whether the Prime Minister’s letter is to be treated as an accession to the convention must be decided by an examination and interpretation of the letter itself. It is to be remembered that the second part of the letter deals comprehensively with multilateral treaties. It follows from this that the letter should not be construed in an unduly restricted manner. Rather should its purport and intention be gathered from the opening passages in the letter itself. The point is made that although the Kingdom of Lesotho has emerged into full independence, yet it is clearly desirable to maintain legal continuity between Lesotho and the various countries with which Basutoland had enjoyed treaty relations. The ‘declarations’ which followed were therefore made ‘accordingly’. They were made with the desirability of legal continuity in mind. The first ‘declaration’ set out what was to happen in regard to bilateral treaties; the second ‘declaration’ concerned multilateral treaties. In regard to those, the government wanted time to consider how it wanted to deal with them. There was to be an ‘interim period of review’. What then was to be the position in that period? It was that:
‘… any party to a multilateral treaty which has, prior to independence, been applied or extended to the country formerly known as Basutoland, may, on a basis of reciprocity, rely as against Lesotho on the terms of such treaty.’
The request was made that the text of the declaration should be circulated to members of the United Nations.
In agreement with Maisels JA their Lordships consider that, so far as concerns multilateral treaties, the reasonable meaning of the letter is that they are to continue in existence and to be considered as binding on Lesotho until such time as decisions could be made in regard to them and about which of them should be terminated and which should be continued. A powerful argument was addressed to their Lordships founded on the words ‘on a basis of reciprocity’. In this connection it is again to be remembered that the letter was dealing generally with all multilateral treaties and not with the convention or any other treaty or convention in particular. Although there are some provisions in the convention which have inter-State reciprocal effect (eg the article relating to the issuing of travel documents) the general scope of the convention is such that it involves individual acceptance by the contracting parties within their own territories of the principle that refugees should be assured of the widest possible exercise of fundamental rights and freedoms without discrimination. There might be some multilateral treaties or conventions where reciprocity would be required to make them effective. The words ‘on a basis of reciprocity’ in the letter were probably necessary for that reason. As applied in the present case the words are not to be read as meaning more than that if there are any reciprocal obligations in a treaty or convention which Lesotho is, at least for the time being, acceding to and if another State failed to adhere to one of those reciprocal obligations then Lesotho was reserving the right not to adhere to that obligation either. The Prime Minister’s letter was therefore, as Maisels JA held, a declaration that pending individual examination (which would take time) of those multilateral treaties which had resulted in treaty relations between the country formerly known as Basutoland and other States, Lesotho would adhere to those treaties. The convention was one of them. When, therefore, the Aliens Control Act came into operation the appellant,
Page 731 of [1970] 3 All ER 724
an ‘alien’, could rely on s 38 if he was a ‘refugee’ within the meaning of the convention. To that question their Lordships must now turn.
It was not disputed that if the Prime Minister’s letter is to be treated as bringing the convention within the applicability of s 38 it would do so on the basis that the words in art 1 of the convention, ie the words ‘as a result of events occurring before 1 January 1951’ were to be understood to cover events occurring elsewhere than in Europe and accordingly in Africa. Was the appellant then a ‘refugee’ within the meaning of the words cited above which are contained in art 1 of the convention? It was not doubted that he is ‘outside the country of his nationality’; nor that owing to ‘well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion’ he is unwilling to avail himself of the protection of the country of his nationality; nor that it is owing to such a fear that he is outside such country. The question to be decided is therefore whether the appellant is outside South Africa as a result of events occurring before 1 January 1951. The appellant’s case is that he is outside South Africa as a result of two events. The two events are stated to be: (1) that in 1948 the National Party was elected to power in South Africa; and (2) that in 1950 the South African Parliament passed the Suppression of Communism Act, which gave extensive powers to the Minister of Justice to restrict the freedom of persons whom the Minister believed were likely to further the objects of ‘communism’ as defined in the Act. The contention was advanced that a consequence of the first of the two stated ‘events’ was that the administration of certain laws which discriminated against Africans ‘became harsher’.
On behalf of the appellant it was pointed out that the question whether the appellant is outside South Africa as a result of pre-1951 events is not to be solved merely by considering what was the immediate cause of his leaving South Africa in 1961. It was contended that the words of definition of a ‘refugee’ were satisfied if some definite event (occurring not too long before 1951) could be found which had a significant causal connection with the absence of the ‘refugee’ from his country; the words of the definition did not denote a sole cause nor did they stipulate that a result must be a direct result. The immediate cause of the appellant’s absence was undoubtedly that he was due to appear on a criminal charge and decided to leave; on his behalf it was said that he had a fear that he might be convicted and imprisoned and a fear that even if he were acquitted of the charge against him, he was likely to suffer disabilities under the Suppression of Communism Act. Furthermore, he believed from reports that he had read that he was ‘banned’ in terms of certain provisions of the Act and if returned to South Africa he would suffer disabilities such as confinement to an area and a prohibition against publishing anything which as a journalist, he might write. It was submitted that if the appellant’s position had been considered in 1961 he would then, as now, have been within the description of a person who is outside his country as a result of pre-1951 events and that it would be enough if his presence in Lesotho was a result of those events.
On behalf of the respondents it was submitted that the two ‘events’ relied on by the appellant were not of the kind that the convention designated and that in the convention the word ‘events’ contemplated such occurrences as invasions or revolutions or transfers of territory. In this connection it may be mentioned that in the Report of the Ad Hoc Committee on Statelessness and Related Problems which was dated 17 February 1950 and which related to an earlier draft of art 1 (which included the words ‘as a result of events in Europe after 3 September 1939 and before 1 January 1951’) it was said:
‘The expression “as a result of events in Europe” is intended to apply to happenings of major importance involving territorial or profound political changes, as well as systematic programmes of persecution in this period which are after-effects of earlier changes. The second date 1 January 1951, excludes events which happen after that date, but does not exclude persons who may become refugees
Page 732 of [1970] 3 All ER 724
at a later date as a result of events before then, or as a result of after-effects which occurred at a later date.’
No later report or record of any committee proceedings was available for their Lordships. It was further contended that on an ordinary and sensible use of language it ought not to be said that there is such a causal link with pre-1951 events as to make it reasonable to say that the appellant is in Lesotho ‘as a result of events occurring before 1 January 1951’. Reference was made to the decision in the Hungarian Refugee (Austria) Case decided in 1957 and to the decision in the Asylum (Algerian Refugee) Case in 1961.
Their Lordships consider that the words in the definition of the term ‘refugee’ must be applied with common sense, while remembering that one event may often lead to another which in turn may lead to another or others. The words do not call for legalistic or philosophical examination. A mean can be found between too much stiffness of interpretation and too much easiness of application. When the facts of a situation are ascertained and known then in a fair-minded way those facts must be surveyed and an answer given to the straightforward question which is posed. If after a fair-minded approach an answer is readily and clearly given it may not be one that requires or permits of detailed elaboration. In considering the question whether the appellant is outside South Africa as a result of pre-1951 events, one or two facts additional to those already mentioned must be borne in mind. The charges preferred against the appellant in 1961 referred to the period between 8 April 1960 and July 1961. The charges included charges of performing acts calculated to further some of the objects of ‘communism’ by participation in the affairs of an unlawful organisation, ie the Pan Africanist Congress. That body did not come into existence until 1959. On 8 April 1960, it was declared to be an unlawful organisation. Roper P stated in his judgment that by the Unlawful Organisations Actg, the Governor General was given power specifically to declare that body an unlawful organisation without notice so that ‘it must have been fairly clear to its members, including the appellant, that an unfavourable climate lay ahead of them’. The view of Roper P was that, properly regarded ‘the pre-1951 South African legislation and the repressive Government policy referred to by the appellant were merely the background to [later] events.' On the undisputed facts the appellant remained in South Africa for some 13 years after the 1948 elections and for some 11 years after the passing of the Suppression of Communism Act in 1950. The charges which were formulated in the prosecution proceedings related to 1960 and 1961.
With full appreciation of the standpoint of the appellant, their Lordships pose the question whether the appellant is outside South Africa ‘as a result of events occurring before 1 January 1951’, so as to be a refugee within the meaning of the 1951 convention. Their Lordships’ conclusion on this point, in agreement with Jacobs CJ and with all the learned judges in the Court of Appeal, is that it has not been shown that the appellant is outside South Africa as a result of pre-1951 events.
The appeal must therefore be dismissed with costs.
Appeal dismissed.
Solicitors: Birkbeck, Montagu’s & Co (for the appellant); Coward, Chance & Co (for the respondents).
S A Hatteea Esq Barrister.
Chesterfield Tube Co Ltd v Thomas (Valuation Officer)
[1970] 3 All ER 733
Categories: LOCAL GOVERNMENT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, SACHS AND PHILLIMORE LJJ
Hearing Date(s): 1, 2, 3, 29 JULY 1970
Rates – Assessment – Machinery and plant deemed to be part of hereditament – Production and generation of power – Electric power converted into hydraulic and pneumatic power – Whether conversion plant pumping engines for hydraulic power’ ‘used in connection with … the generation … of power’ – Rating and Valuation Act 1925, s 24(1), Sch 3 – General Rate Act 1967, s 21(1), Sch 3 – Plant and Machinery (Rating) Order 1960 (SI 1960 No 122), Class 1A.
The meaning of the words ‘generation … of power’ in the Rating and Valuation Act 1925, s 24a, and Sch 3b, and in Class 1A c of the Schedule to the Plant and Machinery (Rating) Order 1960, is what they mean to rating valuers and surveyors, the occupiers of hereditaments and practical technicians, concerned with the design, making and operation of the plant and machinery which the hereditaments contain, to practical men in the field to which the Schedules apply, and not what they mean to philosophers and physicists. They refer to plant which produces some sort of power in the particular factory, including its production by some other form of power, in particular the production of hydraulic and pneumatic power by means of electric motors, and they do not comprise simply the production of power by a prime mover, ie a natural, physical, chemical or fossil source of energy such as steam, mechanical, hydraulic and atomic power (see p 737 f h and j, p 738 d, p 739 d and e and p 740 j to p 741 a, post).
Plant comprising electric motors, hydraulic pumps and air compressors in power houses at a factory used for the production of hydraulic and pneumatic power with ancillary plant and hydraulic accumulators for the storage of such power are therefore ‘Machinery and plant … used … mainly or exclusively in connection with … the generation, storage … of power in or on the hereditament’ which is rateable under those provisions, and it makes no difference that the electric motors, compressors and pumps are beyond the first transformer or the first distribution board constituting the main transmission of power rateable under the order and that the intervening wires connecting those points with the electric motors are not rateable (see p 738 f, p 739 c d and h and p 741 a, post).
Electric motors and hydraulic pumps used to produce hydraulic or pneumatic power are ‘pumping engines for hydraulic power’ within the meaning of Table 1A of the Schedule to the Plant and Machinery (Rating) Order 1960 (see p 738 j and p 739 d, post).
Notes
For the rating of plant and machinery, see 32 Halsbury’s Laws (3rd Edn) 81–83, paras 111, 112, and for cases on the subject, see 38 Digest (Repl) 626–632, 926–958.
For the General Rate Act 1967, s 21, Sch 3, see 47 Halsbury’s Statutes (2nd Edn) 1240, 1361.
The Rating and Valuation Act 1925, s 24(1) and Sch 3, were repealed and re-enacted in the General Rate Act 1967, s 21(1) and Sch 3.
For the statement setting out in detail machinery and plant falling within the Schedule as specified in the Schedule to the Plant and Machinery (Rating) Order 1960,
Page 734 of [1970] 3 All ER 733
as amended by the Rating and Valuation Act 1961, s 5(4), the Pipe-lines Act 1962, s 41(2), and the Gas Act 1965, s 3(7), see 47 Halsbury’s Statutes (2nd Edn) 1363.
Cases referred to in judgments
Imperial Chemical Industries Ltd v Owen and Runcorn Urban District Council (1954) 48 R & IT 43, 26 DRA 1.
Collier (W) Ltd v Fielding (Valuation Officer) (1957) 1 RRC 246, 50 R & IT 218; affd CA [1958] 1 All ER 694, [1958] 1 WLR 323, 122 JP 222, 56 LGR 192, 38 Digest (Repl) 631, 957.
Case stated
The ratepayers, Chesterfield Tube Co Ltd, appealed by way of case stated against a decision of the Lands Tribunal (J H Emlyn Jones Esq), given on 20 June 1969 and reported 15 RRC 248, allowing to an extent agreed by the respondent valuation officer, W M Thomas, an appeal against decisions of a local valuation court of Scarsdale Local Valuation Panel. In its decision the tribunal held that certain hydraulic pumps, air compressors and hydraulic accumulators, together with other items of plant and machinery on the ratepayers’ hereditament at Derby Road, Chesterfield, in the county of Derby, were rateable as falling within Class 1A and the list of accessories in the Schedule to the Plant and Machinery (Rating) Order 1960, being used mainly or exclusively in connection with the generation and storage of power on the hereditament and the hydraulic pumps driven by electric motors being ‘pumping engines for hydraulic power’, an item specified in the Schedule. The following agreed statement of facts was reproduced in the decision included in the case stated: (a) Hydraulic fluid. This fluid was the vehicle for conveying the pressure energy and was a mixture of soluble oil and water. The soluble oil was added to the fluid to subdue the corrosive (rusting) effect of the water which used by itself would have considerably reduced the life of all metal working parts with which it came into contact. (b) Slack water tanks. These units acted as reservoirs for the returned hydraulic fluid. The energy of the fluid was spent in doing mechanical work in the hydraulic presses following which the fluid was returned under low pressure to the slack water tanks. The tanks were also connected to the suction (low pressure side) of the pumps thus providing a constant supply of hydraulic fluid to these units. (c) Hydraulic pumps. These units provided the pressure energy necessary to accomplish the work carried out at the presses. The pumps were generally of two pressure types, 1,600 pounds per square inch (psi), designated low pressure (lp) pumps, and 3,000 psi, and above designated high pressure (hp) pumps. Each hydraulic pump was driven by an electric motor. The pumps accepted rotary mechanical energy from this electric motor and provided hydraulic pressure energy. This was accomplished by coupling the motor to a crankshaft which in turn was connected to rams. The rams reciprocated inside the cylinders receiving slack water as they moved down the cylinders and displacing the water against pressure on the upstroke. In this manner the pumps filled the system with hydraulic fluid at the operating pressure. (d) Hydraulic bottles. Although designated by this title in the ratepayers’ list, these bottles were in fact hydro-pneumatic accumulators whose function was to supply hydraulic power to the production machines. They comprised a steel shell with a fluid inlet at the base and a pneumatic inlet at the top. To bring these units into service a small amount of fluid was pumped into the bottle then air was forced in through the top until the required precharge pressure was attained. Following this additional fluid was pumped into the bottles thus further compressing the gas and at the same time accumulating large quantities of fluid under pressure to do the work. The compressed air had then become a dynamic medium which forced the fluid into the system as and when required by the presses. In this manner the bottles acted as a highly responsive store of pressure energy, supplying immediately the demands of the system. The accumulator bottles supplied the presses according to demand and the fluid so used was replaced by the pumps which drew their supply from the slack water tanks. (e) Variac bottles.
Page 735 of [1970] 3 All ER 733
These bottles were exactly the same construction as the hydraulic bottles and were used as rapid pressure variation devices. The air side of the bottles was connected to the air side of the hydraulic bottles whilst the hydraulic connection of the variacs was connected to both the pumps and to a slack water tank. When the pressure in the system required reducing the air was spilt from the hydraulic bottles into the variacs and at the same time the hydraulic fluid was spilt from the variacs into the slack water tanks thus discharging fluid and hence reducing pressure. To restore the system back to top pressure, fluid was pumped back into the variacs forcing the air back from the top of the variacs into the hydraulic bottles. The reason for charging and discharging the hydraulic side of the circuits to vary the pressure in the system when in fact the same results could have been obtained by exhausting and replenishing the air, was that the hp air compressors had a low volume delivery rating and hence to re-establish the system to high pressure would have taken longer by this method. (f) Hydraulic presses. These items were outside the limits of rateability but for clarity and completeness of the circuit it was necessary to describe them. The function of the presses was to forge bottles and tubes either by punching and drawing or by extrusion. In each case the basic operations were generally accomplished by using hydraulic energy to punch holes in heated billets or to extrude them or to elongate the hollow blooms. A typical press utilised energy to operate on a main ram within a cylinder for the working stroke, the return stroke being accomplished by means of separate return rams. Three older presses had pistons operating within a single cylinder, pressure being exerted on the one side for the working stroke and on the opposite side for the return stroke, this obviating the need for return rams. (g) High pressure (hp) air compressors. These units provided the hp compressed air, which acted as the dynamic pressure medium to hydraulic accumulator bottles. The pressures supplied were approximately 3,200 psi in two cases and 4,750 psi in the third. The compressors were similar in construction and operation to the hydraulic pumps in that they were piston type units driven via a crankshaft and electric motor. The units drew the air from atmosphere, compressed this air, cooled it in water-cooled chambers and fed it to air accumulator bottles. (h) Air accumulator bottles. These units stored the compressed air from the hp air compressors and provided a large storage volume. The bottles were connected to the air side of the hydraulic accumulator bottles thus providing a large volume of air to act as the dynamic pressure medium on the accumulated hydraulic fluid. Provision of a large volume of accumulated air allowed the overall system to be operated on only a small pressure drop as pressure drop varied in direct proportion to volume of air expanded, thus with a large overall volume available the pressure drop for a small expansion of air was relatively small. (i) General service air compressors. These units provided general service compressed air at a pressure of 100 psi. The compressors were piston type units, each driven via a crankshaft and an electric motor. These units drew the air from atmosphere, compressed this air, cooled it in water-cooled chambers and fed it to air receivers. (j) General service air receivers. These units stored the compressed air provided by the general service air compressors. The receivers provided a large volume store and thus acted as a damper in the overall circuit. Fast demands for air made by the machinery connected to the circuits were supplied by the air stored in the receiver. The compressors recharged air into the receivers over a longer period of time, compared with the demand period, which allowed smaller compressors to be installed with a consequent saving in capital cost. It was not contended that hydraulic fluid or hydraulic presses were rateable, but the other items were all held to be rateable by the tribunal and were the subject of appeal. The number of items involved was: 17 slack water tanks, seven air receivers, 25 hydraulic pumps, 16 air compressors and 77 hydraulic or variac or air accumulator bottles. Except for one air receiver, they were situated in or immediately adjoining one or other of four buildings called power-houses or in another building called a hydraulic accumulator house.
Page 736 of [1970] 3 All ER 733
David Trustram Eve for the ratepayers.
J R Phillips QC and J A R Grove for the valuation officer.
Cur adv vult
29 July 1970. The following judgments were delivered.
SALMON LJ. All the relevant facts in this case have been very fully and lucidly set out in the admirable decision of the Lands Tribunal ((1960) 15 RRC 248). I need not therefore repeat them in any detail. The question which arises on this appeal is whether certain plant, almost all of which is housed in the ratepayers’ power-houses at their works in Chesterfield, and is used for the production or storage of hydraulic and pneumatic power, is deemed under s 24(1) of the Rating and Valuation Act 1925 to be a part of the hereditament and therefore rateable. This depends on whether the plant belongs to any of the classes specified in Sch 3 to that Act. Paragraph 1 of this Schedule, so far as it is material, provides:
‘Machinery and plant (together with the shafting … appliances and structures accessory thereto) which is used.. mainly or exclusively in connection with any of the following purposes, that is to say—(a) the generation, storage, primary transformation or main transmission of power in or on the hereditatament … ’
Section 24(3) of the Act of 1925 provides:
‘For the purpose of enabling all persons concerned to have precise information as to what machinery and plant falls within the classes specified in the said Third Schedule [a committee shall be set up by the Minister to] prepare a statement setting out in detail all the machinery and plant which appears to the committee to fall within any of the classes specified in the said schedule.’
Section 24(5) provides that the Minister may make an order confirming the statement and then the statement as confirmed by the order shall ‘have effect as if it were substituted for the Third Schedule to this Act’. Section 24(6) provides for the statement to be revised from time to time and for the revised statement, subject to a confirming order, to have the same effect as the original statement. A committee was duly set up under these provisions and a statement prepared, confirmed and revised. Following such revision, another confirming order was made, the Plant and Machinery (Rating) Order 1960d, the relevant parts of which provide:
‘SCHEDULE
‘CLASSES OF MACHINERY AND PLANT TO BE DEEMED TO BE PART OF THE HEREDITAMENT
CLASS 1A
‘Machinery and plant specified in Table 1A (together with the appliances and structures accessory thereto specified in the List of Accessories) which is used … mainly or exclusively in connection with the generation, storage, primary transformation or main transmission of power in or on the hereditament. “Transformer” means any plant which changes the pressure or frequency or form of current of electrical power to another pressure or frequency or form of current, except any such plant which forms an integral part of an item of plant or machinery in or on the hereditament for manufacturing operations or trade processes. “Primary transformation of power” means any transformation of electrical power by means of a transformer at any point in the main transmission of power. “Main transmission of power” means all transmission of power
Page 737 of [1970] 3 All ER 733
from the generating plant or point of supply in or on the hereditament up to and including:—
(i) in the case of electrical power, the first transformer in any circuit, or where the first transformer precedes any distribution board or there is no transformer the first distribution board;
(ii) in the case of transmission by shafting or wheels, any shaft or wheel driven directly from the prime mover;
(iii) in the case of hydraulic or pneumatic power, the point where the main supply ceases, excluding any branch service piping connected with such main supply …
TABLE 1A …
(b) Steam engines; steam turbines; gas turbines; internal combustion engines; hot-air engines; barring engines … (h) Pumping engines for hydraulic power; hydraulic engines; hydraulic intensifiers; hydraulic accumulators. (i) Air compressors; compressed air engines … (k) Shafting, couplings, clutches, worm-gear, pulleys and wheels … ’
Then there is a list of accessories which includes: ‘compressors … storage cylinders … pipes, ducts … coolers … tanks’. It will thus be seen that for the plant in question to be rateable it must fall within Class 1A and also be specified in Table 1A.
This appeal really turns on whether the electric motors, hydraulic pumps and air compressors in the ratepayers’ power-houses generate power. If they do, then they and all the other ancillary plant, the subject-matter of the appeal, form part of the hereditament and are rateable. Otherwise they do not form part of the hereditament and are, therefore, not rateable. It is conceded that power is ‘any form of energy or force attributable to work’. There is no question but that hydraulic and pneumatic power is produced in the ratepayers’ power-houses and is distributed throughout their works as the motive power which operates their manufacturing machinery. The ratepayers, however, contend that, although this power is produced, it is not generated in their power-houses. They seek to draw a distinction between the production and generation of power. Their argument runs as follows: the generation of power consists of the harnessing of energy; this can be accomplished only by a prime mover which produces power from a natural physical, chemical or fossil source of energy. Once power has thus been generated, it exists and is in effect one and indivisible. It can be used as it is, or converted into some other form of power for working machinery. There can, however, be no question of that power generating other power. The electricity which is fed into the ratepayers’ hereditament is power which has already been generated. Accordingly, it is being used in the power-houses to operate electric motors which, together with the pumps and compressors, merely transform that electric power into hydraulic and pneumatic power. There can be no question of these latter forms of power being generated in the power-house in which they are in fact produced. It is, however, conceded that if ‘prime movers’ (eg steam or gas or petrol engines) were used to produce the hydraulic or pneumatic power, this would constitute the generation of power. Since, however, electric motors are used to produce the hydraulic and pneumatic power, this power is not generated. I am afraid that I cannot accept this argument. I can understand that the true meaning of the generation of power may be a fruitful source of academic discussion amongst philosophers and physicists. We, however, are concerned with what the words ‘generation … of power’ mean as used in para 1(a) of Sch 3 to the Act of 1925 and in Class 1A of the Plant and Machinery (Rating) Order 1960. The question in my view is what they mean to rating valuers and surveyors, the occupiers of hereditaments and the practical technicians concerned with the design, making and operation of the plant and machinery which the hereditaments contain. I hardly think that the legislature intended to included philosophers or physicists among the ‘persons concerned’ referred to in s 24(3) of the Act of 1925. In my
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opinion no true distinction can properly be drawn between the production and the generation of power for the purposes of the law applicable to rating. Had it been intended to draw such a distinction I should have expected Class 1A of the 1960 order to have made this intention clear. This could have been easily accomplished by including in the order a definition of ‘generation of power’ in addition to the definitions of ‘primary transformation of power’ and ‘main transmission of power’.
Since Class 1A is clearly intended to cover plant and machinery used for the generation of hydraulic and pneumatic power, I think that it is permissible to take judicial notice of the fact that at least 99 per cent of hydraulic and pneumatic power in this country is now, and was even in 1925, produced by means of electric motors. It would be strange indeed if none of this power was intended to be covered by Class 1A but only those rare cases, if indeed any exist, in which hydraulic or pneumatic power is produced by means of a ‘prime mover’.
In spite of the very skilful presentation of his case by counsel for the ratepayers, it is based, in my view, on the fundamentally unsound proposition that one form of power cannot be used to generate another. If this were true it would follow that the generation of power would seldom occur—certainly in the case of electricity. This could only truly be said to be ‘produced’ but not ‘generated’ by the conversion of steam, mechanical, hydraulic or atomic power, into electrical power. I entirely agree with Mr Emlyn Jones when in giving the tribunal’s decision in the present case he said ((1969) 15 RRC at 263):
‘… for my part I am unable to see any distinction in principle between the generation of electrical power from hydraulic power as in a hydro-electric generating station, and the generation of hydraulic power from electrical power as in the power-houses at the Chesterfield Tube Works.’
Counsel for the ratepayers seeks to gain some support from the definition of ‘Main transmission of power’. He says, rightly, that rateability for plant used in connection with the main transmission of electrical power stops short at the first transformer or the first distribution board, as the case may be. It follows, therefore, that the ratepayers are not liable for rates in respect of the wires beyond that point, that is to say, the wires leading to the electric motors in the power-houses. How strange he says if, in these circumstances, the motors themselves should be rateable. I am afraid that this does not appear to me to be incongruous if the motors are used, as I think they are, for the purpose of generating other forms of power. I agree that the definition of ‘Main transmission of power’ suggests that, in the case of transmission by shafting or wheels, the type of generating plant contemplated is a ‘prime mover’. I do not know why this is so. Nor do I think that it carries the point raised on this appeal very far. I doubt whether it is possible to find any completely logical explanation of the language used in Class 1A or why some pieces of plant and machinery are rateable and others are not. Nor do I think that for the purpose of this case it is necessary to attempt to do so. Counsel for the ratepayers further argues that, even if hydraulic power was generated in the ratepayers’ power-houses, and accordingly the motors and pumps used to produce it fall within Class 1A, still they would not be rateable because they are not also specified in Table 1A. They do not, so the argument runs, fall within the definition ‘pumping engines for hydraulic power’. The tribunal, which visited the site and also had the advantage of hearing the expert evidence on this matter, found that the motors and pumps were ‘pumping engines for hydraulic power’. I can find no reason for disturbing that finding.
We have been referred to a number of interesting cases. So far, however, as I can discern, the only one to throw any flicker of light on the problem which we have to resolve is W Collier Ltd v Fielding (Valuation Officer). The decision may well have
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been right on the facts of that particular case and I would agree that an electric motor is not a ‘prime mover’ in accordance with the definition of that term in Chambers Technical Dictionary. If, however, the tribunal intended (which I doubt) to lay down the general proposition that an electric motor cannot be used to generate hydraulic or pneumatic power, I could not agree with it.
The only question for us is whether the words ‘generation … of power’ in para 1(a) of Sch 3 to the Act, and in Class 1A, bear the narrow and, to my mind, artificial meaning for which the ratepayers contend, or whether they mean no more and no less than production of power. For the reasons which I have given, I favour the latter construction. Before the motors and pumps and air compressors in the power-houses were put into operation there was no hydraulic or pneumatic power on the ratepayers’ premises. As a result of operating this plant, these forms of power (which are entirely different in kind from electrical power) came into existence. This seems to me obviously to constitute the generation of power. It might equally well be called the creation of production of power, but in my view it is nonetheless the ‘generation … of power’ within the meaning of those words in para 1 (a) of Sch 3 to the Act of 1925 and in Class 1A.
I would accordingly dismiss the appeal.
SACHS LJ. Having had the advantage of reading the judgments of Salmon and Phillimore LJJ and being in agreement with both of them, there is nothing I wish to add beyond emphasising one point. When interpreting the contents of the Plant and Machinery (Rating) Order 1960e, the notional dictionary to be used is that of practical men, experienced in the field to which the Schedules apply. The decision of the tribunal ((1969) 15 RRC 248) is fully consistent with the appropriate dictionary having been used and appears to me to be convincing and correct on that basis.
PHILLIMORE LJ. This case was well argued by counsel and, in addition, we have had the advantage of a decision of the tribunal ((1969) 15 RRC 248) of outstanding quality. The argument for the ratepayers was that certain plant situated in the power-house at their works at Chesterfield had been wrongly classified by the tribunal as ‘used or intended to be used mainly or exclusively in connection with … the generation … of power’ and consequently rateable under the provisions of Class 1A of the Schedule to the Plant and Machinery (Rating) Order 1960f. The plant in question derived its motive power from the electricity supplied to the factory at a point or points where the method of supply had itself ceased to be rateable, as a result of the definition of the words ‘Main transmission of power’ also in Class 1A of the Schedule. The plant in question produced both hydraulic and pneumatic power, the latter cushioning the hydraulic power which was transmitted in due course to hydraulic presses in other parts of the works.
The argument for the ratepayers was that this plant merely utilised or converted or transformed electrical power and did not generate power. It was said that the generation of power requires a prime mover which electricity is not. It was further said that it would be odd if such plant was rateable since its point or points of supply were not. As to the latter argument I mention it only to dismiss it. When one applies broad definitions to highly complex machinery one is bound to get some odd results, and certainly results which might not have been anticipated.
Counsel for the ratepayers relied on a decision of the President of the Lands Tribunal in Imperial Chemical Industries Ltd v Owen and Runcorn Urban District Council ((1954) 48 R & IT 43 at 44), where the tribunal analysed and applied the definition of ‘power’ in the dictionaries and held
Page 740 of [1970] 3 All ER 733
that power meant ‘any form of energy of force applicable to work’. Counsel also relied on another decision of Mr Erskine Simes QC in W Collier Ltd v Fielding (Valuation Officer). In that case, dealing with electric motors operating a chain-drive carrying trays for the bread in a bakery and other ancillary machinery, he held that the motors did not generate power within the meaning of that phrase in Class 1A nor were they prime movers within the definition of ‘Main transmission of power’ in the same class. In the course of his decision he referred to the definition of prime mover in Chambers Technical Dictionary as ‘an engine or other device by which a natural source of energy is converted into industrial power’ and referred to the argument that the instances given did not include electricity. He also referred to the Shorter Oxford Dictionary for the definition of ‘generator’ as ‘that which generates or produces; especially an apparatus for producing gases, steam or electricity’. His conclusion was that none of those motors could be regarded as machinery or plant used or intended to be used mainly or exclusively in connection with the generation, primary transformation or main transmission of power within the order. He further concluded that power, in the expression ‘generation of power’, has a technical meaning which is exemplified by the definition of main transmission of power’. These motors do not generate power but are the means by which the electrical power supplied to the hereditament is used. Nor did he think that they could be described as ‘prime movers’, having regard to the definition in Chambers Technical Dictionary. Thus, said counsel for the ratepayers, the plant in this case does not generate power; it is merely the means by which the electrical power supplied to the factory is used and in converting that power into hydraulic and/or pneumatic power. The generation of power requires a prime mover.
Any decision of Mr Erskine Simes QC is to be treated with the greatest respect, and I do not for a moment doubt the correctness of his decision in that particular case. It is to be observed, however, that he was dealing with the operation of machinery by electricity and was chiefly concerned with the transmission of power, and it is only in connection with such transmission that any reference is made to prime movers in Class 1A. If he had referred to Chambers Technical Dictionary for the definition of generator, he would have been referred to electric generator, and to the following: ‘a machine for converting mechanical energy into electrical energy’. Now, if a machine which converts one sort of energy into another generates that other, what of an electric motor which produces hydraulic or pneumatic power? This, I think, is the crucial question.
The long and short of it is that the court must make up its mind what is meant by the word ‘generate’. If it means generate in the language of the physicist, no doubt it requires a prime mover, but if it merely means ‘produce’, it must involve any plant in the factory which produces, albeit by the use of electricity, some other type of power such as hydraulic or pneumatic power. When one looks at this particular plant, is it right to say that it is used wholly or mainly in the generation of power?
As always in this type of case the matter is inevitably to some extent one of the first impression. Now I do not doubt that ‘generate’ in the case of the physicist connotes something actuated by a prime mover. As Sachs LJ said in the course of argument, ‘the Victoria Falls is a prime mover’, and if power is produced as a result, it is the result of a prime mover. The difficulty is that the Victoria Falls as a prime mover probably actuates a turbine which is a mechanical device and which by the mechanical power it produces, or perhaps I should say generates, acts as a generator and produces electricity. Is this order using the language of the physicist or that of the ordinary man? If the former, no doubt the appeal should succeed.
For myself, however, I think that the latter meaning is to be preferred. Accordingly, in my judgment, ‘generate’ points to any plant which produces some sort of
Page 741 of [1970] 3 All ER 733
power on the premises of the particular factory. If that is right, I agree with the tribunal that the plant in question, which produced hydraulic or pneumatic power, generated such power, and accordingly such plant was rateable.
I would dismiss this appeal.
Appeal dismissed.
Solicitors: Pinsent & Co, Birmingham (for the ratepayers); Solicitor of Inland Revenue.
F A Amies Esq Barrister.
R v Brixton Prison Governor and another, ex parte Keane
[1970] 3 All ER 741
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 21 OCTOBER 1970
Magistrates – Warrant – Indorsement – Irish warrant – Order for return – No order applicable – Likelihood of prosecution or detention for another offence – ‘Another offence’ – Backing of Warrants (Republic of Ireland) Act 1965, s 2(2)(b).
Magistrates – Warrant – Indorsement – Irish warrant – Whether inquiry into existence of prima facie case necessary.
The applicant, who had at one time been a member of the IRA, was the leading member of a new political organisation in the Republic of Ireland called Free Ireland. This had attracted considerable attention from the Irish police and government and although not itself illegal it could be made so at any moment. If it were made illegal the applicant (described by his counsel as a political animal), if he persisted in his political activities, might be detained and prosecuted (the offence being of a political nature). The applicant had served a prison sentence for attempted arson, carrying firearms and common assault arising out of an attack on the government party office. Also he had on a number of occasions been detained for a day or two and was watched fairly closely by the police. Consequently if he pursued his political activities he might from time to time be detained. The applicant arrived in England and within a few days was arrested on two Republic of Ireland warrants endorsed in accordance with the Backing of Warrants (Republic of Ireland) Act 1965. The warrants were for murder and armed robbery. The magistrate before whom the applicant was brought ordered his return to the Republic of Ireland without having inquired into whether a prima facie case had been shown against the applicant on the two offences charged. On application for a writ of habeas corpus it was contended that there being substantial grounds for believing that if the applicant were returned to the Republic of Ireland he would be prosecuted or detained for another offence (eg a political offence), no order for his return could be made by reason of s 2(2)(b)a of the 1965 Act.
Held – (i) On the true construction of s 2(2)(b) the magistrate was only precluded from making the order for the return of the applicant if it had been shown that the applicant was going to be prosecuted on his return not for the offences charged but for another offence or offences (see p 745 e and p 746 c, post).
(ii) In the alternative, even if the widest construction were to be given to s 2(2)(b) (ie that if there were substantial grounds for believing that after the applicant had
Page 742 of [1970] 3 All ER 741
been prosecuted for the offences charged he would at some time in the future undefined be prosecuted for (eg) a political offence no order for his return could be made) the applicant could only succeed if he could point to some offence with which he was going to be detained or charged (see p 745 d and j and p 746 c, post).
(iii) Since the applicant had not satisfied the requirements of either holding (i) or (ii) above, his application failed (see p 746 b and c, post).
Per Curiam. Notwithstanding the provisions of para 3b of the Schedule to the 1965 Act (for the operation of which there was ample scope in regard to matters under s 2(2) that had to be inquired into), there was no requirement in the 1965 Act that an inquiry should be conducted by a magistrate into whether a prima facie case had been made out on the two offences charged (see p 744 a to c and p 746 c, post).
Re Arkins [1966] 3 All ER 651 and Re Dwyer (1970) unreported, approved.
Notes
For backing of Irish warrants, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 649A.
For the Backing of Warrants (Republic of Ireland) Act 1965, s 2 and Schedule, see 13 Halsbury’s Statutes (3rd Edn) 277, 284.
Cases referred to in judgments
Arkins, Re [1966] 3 All ER 951, sub nom R v Metropolitan Police Comr, ex parte Arkins [1966] 1 WLR 1593, 130 JP 427, Digest (Cont Vol B) 295, 156b.
Dwyer, Re (13 April 1970) unreported.
Motion for habeas corpus
This was an application for a writ of habeas corpus on behalf of the applicant, Patrick Francis Keane, detained in Brixton prison. The facts are set out in the judgment of Lord Parker CJ.
J P Comyn QC and I Brownlie for the applicant.
K A Richardson for the governor of Brixton prison and the government of the Republic of Ireland.
21 October 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of one Patrick Francis Keane, at present detained in Her Majesty’s prison at Brixton, pursuant to two warrants issued by the Republic of Ireland, and backed by a metropolitan stipendiary magistrate. The application is an application for a writ of habeas corpus that he be discharged and not sent back to the Republic of Ireland.
The matter arises in this way. On 2 May 1970, the applicant arrived from the Republic of Ireland in this country. On 13 May, he was arrested on two Irish warrants endorsed by the magistrate, the first being for the murder on 3 April of a policeman, Garda Fallon, in connection with a bank robbery. The second was a charge of armed robbery of a bank on another occasion, namely on 20 February. The matter was heard by the magistrate at Old Street on a number of days, but finally on 14 August 1970 the magistrate ordered the applicant’s return to the Republic of Ireland.
Before going on to the points in issue in this case it is, I think, convenient to look quite shortly at the scheme of the legislation which is quite different in the case of the Republic of Ireland to what is provided for in the Extradition Acts 1870 to 1932 and in the Fugitive Offenders Act 1967. By s 1(1) of the Backing of Warrants (Republic of Ireland) Act 1965, it is provided:
‘Where—
‘(a) a warrant has been issued by a judicial authority in the Republic of Ireland
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(in this Act referred to as the Republic) for the arrest of a person accused or convicted of an offence against the laws of the Republic, being an indictable offence or an offence punishable on summary conviction with imprisonment for six months; and
‘(b) an application for the endorsement of the warrant is made to a justice of the peace in the United Kingdom by a constable who produces the warrant and states on oath that he has reason to believe the person named or described therein to be within the area for which the justice acts;
‘then, subject to the provisions of this section, the justice shall endorse the warrant in the prescribed form for execution within the part of the United Kingdom comprising the area for which he acts.’
Subject, therefore, to the provisions of the rest of the section, to which it is unnecessary to refer, the magistrate is there performing a ministerial act of endorsing a warrant issued by the Republic of Ireland on production of that warrant, that endorsement being the authority to an English constable to arrest the man charged.
The next step is dealt with in s 2, which provides:
‘(1) So soon as is practicable after a person is arrested under a warrant endorsed in accordance with section 1 of this Act, he shall be brought before a magistrates’ court and the court shall, subject to the following provisions of this section, order him to be delivered at some convenient point of departure from the United Kingdom into the custody of a member of the police force … of the Republic, and remand him until so delivered. [That is a mandatory provision subject to certain provisions thereafter set out.]
‘(2) An order shall not be made under subsection (1) of this section if it appears to the court that the offence specified in the warrant does not correspond with any offence under the law of the part of the United Kingdom in which the court acts which is an indictable offence or is punishable on summary conviction with imprisonment for six months; [that is the first provision which prevents the order to go being made by the magistrate] nor shall such an order be made if it is shown to the satisfaction of the court—(a) that the offence specified in the warrant is an offence of a political character, or an offence under military law which is not also an offence under the general criminal law, or an offence under an enactment relating to taxes, duties or exchange control; or (b) that there are substantial grounds for believing that the person named or described in the warrant will, if taken to the Republic, be prosecuted or detained for another offence, being an offence of a political character or an offence under military law which is not also an offence under the general criminal law.’
There are not in this case any notes of reasons given by the magistrate; a comment has been made in regard to that, but for my part I find no difficulty arising from the fact that there is an absence of reasons shown. The first point which counsel for the applicant takes here was that there was no inquiry by the magistrate whether, to put it quite shortly, a prima facie case had been shown that the applicant was guilty of the two offences charged, and reference has been made by counsel in particular to para 3 of the Schedule to the Act. It deals with supplementary provisions as to proceedings under s 2. Paragraph 3 provides:
‘Subject to paragraph 2 of this Schedule, the court shall have the like powers, including power to adjourn the case and meanwhile to remand the person arrested under the warrant either in custody or on bail and the proceedings shall be conducted as nearly as may be in the like manner, as if the court were acting as examining justices inquiring into an indictable offence alleged to have been committed by that person.’
Page 744 of [1970] 3 All ER 741
There was no inquiry here whether a prima facie case had been shown.
Counsel for the applicant quite properly recognises the fact that that point is not open to him in this court, and he merely reserves it, and for this reason, that the court rightly or wrongly, in Re Arkins, decided that in this legislation no provision whatever had been made for an inquiry of the nature which takes place by a magistrate under the Extradition Acts 1870 to 1932 and the Fugitive Offenders Act 1967, whether a prima facie case has been made out. That case has been followed more recently by the court in an unreported case of Re Dwyer. It does not appear in the report of Re Arkins or in the transcript of the judgment in Re Dwyer whether the court was specifically referred to para 3 of the Schedule, but for my part I am quite satisfied that we must follow Re Arkins and Re Dwyer, that they were rightly decided, and that there is ample scope for the operation of para 3 of the Schedule in regard to matters that admittedly have to be inquired into under s 2(2) of this Act.
The second point concerns the matter set out in s 2(2), on proof of which no order to go shall be made. I have already read the subsection and I would emphasise that counsel for the applicant, quite rightly in my judgment, does not rely on para (a). He does not suggest, and could not well suggest, that the killing of a policeman in the course of a bank raid or the armed robbery of a bank were offences of a political character, or that they were offences under military law which was not also an offence under the general criminal law, nor that it was an offence under an enactment relating to taxes, to duty or exchange control. What he does say, however, is that he can rely on para (b) and he says that he showed by evidence to the magistrate that there were substantial grounds for believing that the person named or described in the warrant, namely the applicant, would, if taken to the Republic of Ireland, be prosecuted or detained for another offence being an offence of a political character or an offence under military law which is not also an offence under the general criminal law.
Before the magistrate the applicant himself gave evidence, and he called a number of witnesses. Although in his deposition he did not specifically say that he had believed that he was going to be charged with another offence, it is really implicit in the nature of the evidence he gave. I find it unnecessary to go through it because in this court he has put in a further affidavit which embroiders to some extent the evidence which he gave below, and which he is in my judgment entitled to adduce on a habeas corpus application in this court. I do not propose to go through it in any detail, but what he in fact says quite shortly is that he is a man who all his life has conducted considerable political activities; at one time he was a member of the Irish Republican Army. More recently he has organised or been the leading member in a new political organisation called Free Ireland, which as he says excited considerable and present interest and attention from the Irish police and the Irish government. He goes on to say that, although that organisation is not illegal, it could be made illegal at any moment by the introduction of the Offences Against the State Act 1939. If it were in the future made illegal, then he as a leading member of it, if he persisted in his political activities (and as counsel for the applicant put it, he is a political animal who will go on doing this), might be detained and indeed prosecuted under those Acts, and the offences alleged would undoubtedly then be of a political character. That is the first way he puts it.
The second is to say: well, I have served a sentence of imprisonment for attempted arson, carrying firearms, and common assault in October 1967 which arose out of an attack on the headquarters of the Fianna Fail, the government party office, presumably a political offence, showing that he is, as he undoubtedly is, a political animal. He refers also to the fact that on a number of occasions he has been detained for a matter of a day or two days and, that he has always got the police, as it were,
Page 745 of [1970] 3 All ER 741
on his tail watching what he is doing. He refers in particular to an armed robbery on a bank in Newbridge in respect of which he was arrested and detained for some nine weeks before he was granted bail, and that when it came to trial some time later the prosecution entered a nolle prosequi. In other words he is really saying: I am a political animal, I am watched very closely, and if I carry on my political activities, as I am going to, I may from time to time be detained.
Counsel for the applicant urges that that is enough, if believed, to satisfy any court, either the magistrate or this court, that there are substantial grounds for believing that, as the paragraph says: if returned he will ‘be prosecuted or detained for another offence, being an offence of a political character’. As I have said, the magistrate gave no reasons, but for my part I am perfectly prepared to accept that he, like myself, had no reason to disbelieve the evidence given by the applicant. The question as I see it is, accepting all that the applicant has said, is it a case where any reasonable court must come to the conclusion that there are substantial grounds for believing that he will be prosecuted for a political offence?
That brings me to the construction of s 2(2)(b). It is urged that the widest possible construction should be given to the words, and that even if the arrested person was going to be prosecuted for the murder and the armed robbery, yet if there were substantial grounds for believing that thereafter at some time in the future undefined, he was going to be prosecuted for a political offence, then he cannot be returned. The rival construction is the narrow one that this paragraph only acts as a bar to the making of an order for his return if it is shown that he is not going to be prosecuted for the offences charged, but for another offence or offences. For my part I am satisfied that the narrower construction here is the right one. If one reads the whole of the subsection, and reads paras (a) and (b) together, it becomes in my judgment perfectly plain that no order shall be made: (a) if the offence charged is itself of a political nature; or (b) if even though it is worded so as not to be political, yet when the arrested person gets to Ireland he is not going to be prosecuted for that offence, but for a political offence. This is a pure matter of construction, but it seems to me here that the words ‘another offence’ really mean another offence in substitution for that charge, and not as counsel for the applicant would say, an additional offence at some time in the future. It is to be observed for what it is worth, although I find little help can be really derived from it, that the construction which I prefer coincides with the provision in the Extradition Act 1870 which is to be found in s 3(1). I say that I get very little help from that because it is perfectly obvious that the scheme of the Backing of Warrants (Republic of Ireland) Act 1965 differs so much from the scheme of the Extradition Acts 1870 to 1932 and the Fugitive Offenders Act 1967 that little help can be got by a comparison.
If the construction which I prefer is right, then I think that it would really be conceded by counsel for the applicant—I am not suggesting he has conceded it—but I think that he would be really bound to concede that he would fail because there is really no suggestion here that the applicant is not going to be prosecuted on the charges in the warrant. What is feared is that thereafter he may be held or prosecuted for some political offence. However, even if I am wrong, I am by no means satisfied that the applicant has brought himself within the exception in para (b). It seems to me that even on the wider construction he must point to some offence with which he is going to be detained or charged; in other words something which has happened already in which it is alleged that he is concerned, and which is of a political character, and he fears that whether in substitution or in addition he is going to be prosecuted for that. A typical case, as it seems to me, would be if in fact Free Ireland had been made an illegal organisation under the Offences Against the State Act 1939, and that then before he came to this country in May, he had taken some active step as a leading member of that organisation. Then he might well say that he feared, and genuinely feared, and had real ground for fearing, that if he went back he would be charged for that political offence. As I said, the applicant gets nowhere near
Page 746 of [1970] 3 All ER 741
that in this case. He merely says that at some time in the future, he does not know when, this organisation may be declared to be illegal; then if he carries on his activities, he may be charged for a political offence.
In my judgment on either construction the applicant has not brought himself in s 2(2)(b), and I am quite clear that there are no substantial grounds for believing that he will be prosecuted or detained if returned for a political offence. Accordingly in my judgment this motion fails.
ASHWORTH J. I agree.
BROWNE J. I agree.
Application dismissed. Leave to appeal to the House of Lords granted under s 1(1) of the Administration of Justice Act 1960.
Solicitors: B M Birnberg & Co (for the applicant); Director of Public Prosecutions (for the respondents).
N P Metcalfe Esq Barrister.
R v Harris (Richard)
[1970] 3 All ER 746
Categories: COMPANY; Other Company: CONSTITUTIONAL; Legislatures
Court: CENTRAL CRIMINAL COURT
Lord(s): MACKENNA J
Hearing Date(s): 9 APRIL, 9 JUNE 1970
Company – Investigation by Board of Trade – Evidence before inspectors – Self-incrimination – Admissibility against director in subsequent criminal proceedings – Companies Act 1948, s 167(2), (4) – Companies Act 1967, s 50.
Statute – Construction – Purpose of legislation – Natural construction – Implication against admission of self-incriminating evidence – Legislation designed to facilitate detection of fraud – Companies Act 1948, s 167(2), (4).
Pursuant to the provisions of s 167(2)a of the Companies Act 1948 that ‘An inspector may examine on oath the officers and agents of the company or other body corporate in relation to its business, and may administer an oath accordingly’b, H was examined in 1964 by inspectors appointed by the Board of Trade to investigate the affairs of a company of which he had been a director and of a subsidiary of that company. At his trial in 1970, the prosecution sought leave to prove the answers given by H during that examination, as evidence against him, either under s 167(2) or under s 50c of the Companies Act 1967, which provides that an answer given by a person on examination under s 167 ‘may be used in evidence against him’.
Held – (i) On the true construction of s 167(2), it was clear that the answers given by H in a lawful examination could be admitted in evidence against him, and it was not possible to infer a proviso that such answers should not be admitted, since it was one of the purposes of Part IV of the Act of 1948 to facilitate the detection and punishment of fraud (see p 751 f, post).
Page 747 of [1970] 3 All ER 746
Dictum of Lord Campbell CJ in R v Scott (1856) Dears & B at 58 applied.
(ii) In construing s 167(2), it was necessary to disregard the provisions relating to the examination of persons other than officers or agents of a company in s 167(4)d, which were enacted for the first time in 1947, and which could not be said to limit the natural construction of s 167(2) and its predecessors in the Companies Acts 1908 and 1929 (see p 752 b, post); further, s 167(4) could not be construed, in any event, as excluding proof of H’s answers in the ordinary way by oral evidence, whether he was an officer or agent being examined under s 167(2) or any other person under s 167(4) (see p 752 e and p 753 c, post).
Dictum of Lord Russell of Killowen CJ in R v Erdheim [1895–99] All ER Rep at 614, 615 applied.
Dictum of Salmon LJ in R v Savundra Nayagan [1968] 52 Cr App Rep at 644 considered.
(iii) Alternatively, the answers given by H were admissible under s 50 of the Companies Act 1967, although that section was enacted after his examination had taken place, because the alteration in the legislation was one to the rules of procedure and not to the substantive law (see p 754 f, post).
Notes
For examination of officer of a company in relation to its business, see 6 Halsbury’s Laws (3rd Edn) 390, para 756, and for cases on the subject, see 4 Digest (Repl) 553, 4857–4862.
For admissibility or otherwise of notes of evidence on examinations under the companies legislation, see 6 Halsbury’s Laws (3rd Edn) 620, 621, para 1221.
For the Companies Act 1948, s 167, see 5 Halsbury’s Statutes (3rd Edn) 244 and 245, for the Companies Act 1967, s 50, see ibid 586, 587.
Cases referred to in judgment
Blyth v Blyth and Pugh [1965] 2 All ER 817, [1965] P 411, [1965] 3 WLR 365, Digest (Cont Vol B) 664, 357a.
Customs and Excise Comrs v Harz [1967] 1 All ER 177, [1967] AC 760, [1967] 2 WLR 297, Digest Supp.
Gardner v Lucas (1878) 3 App Cas 582, 44 Digest (Repl) 289, 1189.
R v Erdheim [1896] 2 QB 260, [1895–99] All ER Rep 610, 65 LJMC 176, 74 LT 734, 4 Digest (Repl) 553, 4862.
R v Savundra Nayagan and Walker [1968] 3 All ER 439, [1968] 1 WLR 1761, sub nom R v Savundra Nayagan, R v Walker 52 Cr App Rep 637., Digest Supp.
R v Scott (1856) Dears & B 47, 25 LJMC 128, 27 LTOS 254, 20 JP 435, 4 Digest (Repl) 553, 4857.
R v Widdop (1872) LR 2 CCR 3, 42 LJMC 9, 27 LT 693, 37 JP 131, 4 Digest (Repl) 553, 4861.
Cases also cited
A B C Coupler and Engineering Co Ltd (No 2), Re [1962] 3 All ER 68, [1962] 1 WLR 1236.
McClelland, Pope & Langley Ltd v Howard [1968] 1 All ER 569n.
Pulborough School Board Election, Re [1894] 1 QB 725, [1891–94] All ER Rep 831.
R v Coote (1873) LR 4 PC 599.
R v Chandra Dharma [1905] 2 KB 335.
R v Merceron (1818) 2 Stark 366.
Selangor United Rubber Estates Ltd v Cradock (No 2) [1968] 1 All ER 567, [1968] 1 WLR 319.
Wright v Hale (1860) 6 H & N 227.
Application
This was an application by the Crown at the trial in 1970 of Richard Reader Harris
Page 748 of [1970] 3 All ER 746
and Malcolm Gerald Cass, on charges connected with the affairs of a company of which they had been directors and of a subsidiary of that company, for leave to prove certain answers given by Mr Harris, on examination under s 167(2) of the Companies Act 1948 by inspectors appointed by the Board of Trade in 1964 to investigate the affairs of the companies. His Lordship gave leave at the trial but reserved the statement of his reasons for granting leave until a later occasion. Both defendants were later acquitted. The facts are set out in the judgment now delivered.
J N Hutchinson QC and J K Wood QC for Mr Harris.
T M Eastham QC and J Lloyd-Eley QC for Mr Cass.
D P Croom-Johnson QC, M Corkery and M H D Neligan for the Crown.
Cur adv vult
9 June 1970. The following judgment was delivered.
MACKENNA J read the following judgment. In 1964 Mr Harris was examined under s 167(2) of the Companies Act 1948, by inspectors appointed by the Board of Trade to investigate the affairs of Rolls Razor Ltd, a company of which he had been a director between May 1963 and July 1964. At his trial before me, six years later, in 1970, the prosecution asked leave to prove the answers given by him in that examination as tending to establish his guilt on criminal charges connected with the affairs of that company and of its subsidiary, Bylock Electric Ltd. I gave them leave, reserving the statement of my reasons for a later occasion. Although Mr Harris has since been acquitted, I think it right that I should give those reasons now.
I shall begin by citing the principal statutory provisions bearing on the question. Section 165(b)e, states three cases in which the Board of Trade may appoint inspectors. These are:
‘… if it appears to the Board that there are circumstances suggesting—(i) that its business is being or has been conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive of any part of its members or that it was formed for any fraudulent or unlawful purpose; or (ii) that persons concerned with its formation or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards it or towards its members; or (iii) that its members have not been given all the information with respect to its affairs which they might reasonably expect.’
Section 167(2), one of the subsections defining the inspectors’ powers and the principal provision for my purpose, provides:
‘An inspector may examine on oath the officers and agents of the company or other body corporate in relation to its business, and may administer an oath accordingly.’
It will be observed that the subsection contains no provision dealing in any way with the use of answers given by the person examined in subsequent proceedings, civil or criminal. Subsection (3) of the same section provides for the case of the officer or agent’s refusing to produce books or documents or to answer questions; the inspector may certify the refusal to the High Court which may enquire into the case and punish the offender in like manner as if he had been guilty of contempt of court. Subsection (4), dealing with the examination of persons other than officers or agents of the company is in these terms:
‘If an inspector thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be so examined, he
Page 749 of [1970] 3 All ER 746
may apply to the court and the court may if it sees fit order that person to attend and be examined on oath before it on any matter relevant to the investigation, and on any such examination—
‘(a) the inspector may take part therein either personally or by solicitor or counsel;
‘(b) the court may put such questions to the person examined as the court thinks fit;
‘(c) the person examined shall answer all such questions as the court may put or allow to be put to him, but may at his own cost employ a solicitor with or without counsel, who shall be at liberty to put to him such questions as the court may deem just for the purpose of enabling him to explain or qualify any answers given by him;
and notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him … ’
I omit the proviso to this subsection which is immaterial.
Before 1967, the question of the admissibility of answers given under s 167(2) had been raised in at least three cases, but no uniform practice had been developed and no authoritative ruling had been given. In 1954, the shorthand notes of the examination, proved by the shorthand writer, had been admitted in evidence in the committal proceedings, but had not been tendered at the trial. In 1959, in a trial before Judge Aarvold at the Central Criminal Court, evidence of the accused’s answers had been admitted by consent. In 1965, a magistrate had ruled the evidence to be inadmissible, and the evidence had not been tendered at the trial.
In 1967, by s 50 of the Companies Act of that year, it was provided:
‘An answer given by a person to a question put to him in exercise of powers conferred by—(a) section 167 of the principal Act [ie the 1948 Act] … may be used in evidence against him … ’
It was argued for Mr Harris: (i) that before the 1967 Act was passed, answers given in examination under s 167(2) were inadmissible in subsequent criminal proceedings; (ii) that s 50 of the 1967 Act did not apply to examinations held in 1964, before that Act was passed; and (iii) that even if the answers were admissible, whether under the unamended Act or the Act as amended, I should exclude the evidence in the exercise of my discretion.
The prosecution argued that answers given under the unamended Act were admissible; in the alternative, that if they were admissible only under the amended Act, that Act applied to all trials held after its provisions came into force, and made admissible answers given in examinations before that date; and, lastly, that the discretionary grounds for their exclusion urged by the defence were insufficient. In my judgment the prosecution’s first argument was right; if they needed to rely on the 1967 Act, I would have upheld their second argument that that Act makes admissible answers given in examinations held before the Act was passed, and I found no sufficient reasons in the exercise of my discretion for excluding the evidence.
Statutory provisions like those which I have cited are found in one form or another in the Bankruptcy Acts as far back as 1849, from which they have found their way into the modern Companies Acts. Some of the bankruptcy provisions have been the subject of judicial interpretation, notably s 117 of the Bankrupt Law Consolidation Act 1849f, considered by the Court of Criminal Appeal in 1856 in R v Scott. As the judgments of the majority of the court in that case are my principal reason for accepting the prosecution’s first argument in the present case, I shall deal with them
Page 750 of [1970] 3 All ER 746
in a little length, first quoting the relevant statutory provision. Section 117 of the 1849 Act was in these terms:
‘That the Court may summon any bankrupt before it … and upon the appearance of such bankrupt, or if such bankrupt be present at any sitting of the court, it shall be lawful for the court to examine such bankrupt after he shall have made and signed the declaration contained in the Schedule W to this Act annexed, either by word of mouth or on interrogatories in writing, touching all matters relating to his trade, dealings or estate, or which may tend to disclose any secret grant, conveyance, or concealment of his lands, tenements, goods, money, or debts, and to reduce his answers into writing, which examination so reduced into writing the said bankrupt shall sign and subscribe.’
It was held by the Court of Criminal Appeal, Lord Campbell CJ, Alderson B, Willes J, and Bramwell B, Coleridge J dissenting, that the answers given by the bankrupt on such examination might afterwards be given in evidence against him on a criminal charge. In support of the majority view two judgments were given, a shorter one by Alderson B, and a longer one by Lord Campbell CJ. I shall begin with the shorter ((1856) Dears & B at 67):
‘… my judgment proceeds upon the ground that, if you make a thing lawful to be done, it is lawful in all its consequences; and one of its consequences is, that what may be stated by a person in a lawful examination may be received in evidence against him. That is quite settled and conformable to a most important maxim of English law.’
Lord Campbell CJ began by stating the view of the majority, that as the questions put to the accused on his examination related to his trade etc, he could not refuse to answer them, although by his answers he might incriminate himself. He dismissed very shortly the objection that the accused’s answers, given on a declaration tantamount to an oath, were for that reason inadmissible. The next objection was that a confession, to be admissible in evidence, must be voluntary, and that this examination was compulsory. It was answered by saying that ‘voluntary’ in this connection means ‘not induced by threats or promises’. ‘Such an objection’, Lord Campbell CJ said ((1856) Dears & B at 58), ‘cannot apply to a lawful examination in the course of a judicial proceeding.' He went on to consider the accused’s principal objection, and I shall cite this part of the judgment in full ((1856) Dears & B at 59):
‘Finally, the defendant’s counsel relies upon the great maxim of English law ”nemo tenetur se ipsum accusare“. So undoubtedly says the common law of England. But Parliament may take away this privilege, and enact that a party may be bound to accuse himself; that is, that he must answer questions by answering which he may be incriminated. This Act of Parliament, 12 and 13 Vict. 106, creates felonies and misdemeanors, and compels the bankrupt to answer questions which may show that he has been guilty of some of those felonies or misdemeanors. The maxim of the common law therefore has been over-ruled by the Legislature, and the defendant has been actually compelled to give and has given answers, showing that he is guilty of the misdemeanour with which he is charged. The accusation of himself was an accomplished fact, and at the trial he was not called upon to accuse himself. The maxim relied upon applies to the time when the question is put, not to the use which the prosecutor seeks to make of the answer when the answer has been given. If the party has been unlawfully
Page 751 of [1970] 3 All ER 746
compelled to answer the question, he shall be protected against any prejudice from the answer thus illegally extorted; but a similar protection cannot be demanded where the question was lawful and the party examined was bound by law to answer it. At the trial the defendant’s written examination, signed by himself, was in Court, and the reading of it as evidence against him could be no violation of the maxim relied upon. The only argument as we conceive, that can plausibly be put for the defendant is, that there is an implied proviso to be subjoined to the 117th section, viz: “that the examination shall not be used as evidence against the bankrupt on any criminal charge“. To make it evidence there could be no necessity for any express enactment for that purpose, and an implied proviso appears all that can be contended for. But by this interpolation we may be more likely to defeat than to further the intention of the Legislature. Considering the enormous frauds practised by bankrupts upon their creditors, the object may have been, in an exceptional instance, to allow a procedure in England universally allowed in many highly civilised countries. Suppose section 117 had begun with a preamble reciting the frauds of bankrupts, and the importance of having these frauds detected and punished, it would be difficult to say that the Legislature intended that no use should be made of the examination except for civil purposes. When the Legislature compels parties to give evidence accusing themselves, and means to protect them from the consequences of giving such evidence, the course of legislation has been to do so by express enactment, as in 6 Geo. 4 c.129, s.6, and the five other instances adduced in the argument on behalf of the prosecution. We, therefore, think we are bound to suppose that in this instance, in which no such protection is provided, it was the intention of the Legislature to compel the bankrupt to answer interrogatories respecting his dealings and conduct as a trader, although he might thereby accuse himself and to permit his answers to be used against him for criminal as well as civil purposes.’
I find it as difficult to imply a proviso to s 167(2), that the examination shall not be used as evidence against the officer or agent of the company in any criminal case, as Lord Campbell CJ did to the section with which he was dealing. Reference to s 165(b) of the 1948 Act shows that at least one of the purposes of this part of the Act is to facilitate the detection and punishment of fraud. To interpolate a proviso of the kind argued for by the accused would, to use Lord Campbell CJ’s words, be ‘more likely to defeat than to further the intention of the Legislature’. R v Scott has often been cited, and so far as I know, always followed; see, for example, R v Widdop and R v Erdheim.
Counsel for Mr Harris founded an argument on the provisions of s 167(4). It will be recollected that that subsection expressly provides that the written notes of the examination of a person other than an officer or agent may be used in evidence against that person. As there is no similar provision in s 167(2) dealing with the examination of officers or agents, the natural inference is, it was argued, that the legislature did not intend that answers given by officers or agents should be admissible against them. The history of s 167(2) and (4) makes it difficult to attribute this odd intention to the legislature. I say odd, for it would be surprising if the legislature wished to make it easier for the fraudulent officer or agent to escape conviction than for other persons. Section 109 of the Companies Act 1908 is a predecessor of s 167 of the 1948 Act. Section 109(4) gave inspectors the same power of examining officers and agents of a company on oath as they have under s 167(2) of the later Act. But there was no provision in s 109, or elsewhere in the 1908 Act, for the examination of persons
Page 752 of [1970] 3 All ER 746
other than officers or agents. There was no provision such as s 167(4). The case was the same in the Companies Act 1929. Section 135(4) of that Act reproduced s 109(4) of the earlier Act, but again the Act made no provision for the examination of other persons. That provision was made for the first time in s 42(4) of the Companies Act 1947, which was in the same words as s 167(4) of the 1948 Act. On this history I would argue thus. I must give the same meaning to s 167(4) of the 1948 Act as I would have given to its identically worded predecessors, s 135(4) of the 1929 Act and s 109(4) of the 1908 Act. But in construing these provisions of the earlier Acts, their natural meaning—that given by Lord Campbell CJ to similar words in R v Scott—could not have been cut down by any argument based on provisions like those of s 167(4), which did not come into the Act until 1947. Therefore, I would disregard s 167(4) in construing s 167(2).
I would not in any case have read s 167(4) as affecting in any way the application of Alderson B’s principle, that what may be stated by a person in a lawful examination may be received in evidence against him, either in the case of the officer or agent examined under s 167(2), or of the other persons examined under s 167(4). Let me recall its relevant provision:
‘… and notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him … ’
I read these words as providing that the evidence may be given by producing the notes of evidence without calling the person who made them—a form of evidence which would not otherwise have been permissible. Read in this way the words cannot be construed as excluding proof of the examined person’s answers in the ordinary way by oral evidence, whether he is an officer or agent being examined under s 167(2) or any other person under s 167(4). A similar question arose under the Bankruptcy Acts in R v Erdheim, and I find support for the view which I have just expressed in the judgment of Lord Russell of Killowen CJ in that case. This was a decision on the Bankruptcy Act 1883g. By this time the provisions of s 117 of the Bankruptcy Act 1849—the section considered in R v Scott—had been amended, and the new s 17(8) now providedh, in words resembling s 167(4), that:
‘The debtor shall be examined upon oath, and it shall be his duty to answer all such questions as the Court may put or allow to be put to him. Such notes of the examination as the Court thinks proper shall be taken down in writing, and shall be read over to and signed by the debtor, and may thereafter be used in evidence against him … ’
In R v Erdheim, the notes of examination had not been read over to or signed by the debtor, and therefore could not be used in evidence against him at his subsequent trial. Instead the shorthand writer was called to give oral evidence of the debtor’s answers, and the question was whether that evidence was admissible, or whether s 17(8) excluded the ordinary mode of proof. It was held that it did not, and that the evidence was admissible. This was the reason given by Lord Russell of Killowen CJ ([1896] 2 QB at 269, 270, [1895–99] All ER Rep at 614, 615):
‘I regard the statutory provision, therefore, as one intended to provide only for the most authentic way of presenting to the Court the statements made, but not at all as intending to exclude all other modes of giving evidence of statements
Page 753 of [1970] 3 All ER 746
made by the defendant in the course of his examination. We cannot give effect to the objection made without construing the statute as if it had said—which it does not—that the authenticated examination shall alone be received as evidence of the statements so made. If, then, this view is correct, is there any rule of law by which this evidence should be excluded? I know of none. I take the general rule to be (apart from any express statutory exceptions) that any statement made by a party relevant to the matter in hand may be given in evidence against him in any civil case, and also in any criminal case, except where such statement is made upon oath improperly administered, or where such statement is not voluntary within the principle to which I have already referred.’
I find support in this reason for my view that answers under s 167(2) are, notwithstanding s 167(4), admissible in evidence against the officer or agent who gave them. I regret that it is a different view from that expressed obiter in a judgment of the Court of Criminal Appeal by Salmon LJ in R v Savundra Nayagan, R v Walker. The relevant passage, which I cite, is as follows ((1968) 52 Cr App Rep at 644):
‘The Act of 1948 provides for information to be given in many instances. Whenever it intends such information to be admissible in evidence against the person who gives it, it says so in express terms (see, for example, section 167(4) and section 270(7)). Accordingly, when it makes provision for information to be given without expressing that it should be admissible in evidence against him who gave it (see, for example, section 167(2)) the true inference probably is that the Legislature did not intend the information to be so admissible; otherwise it would not have been necessary for the Legislature to provide as it did in section 50 of the Act of 1967 … ’
I have said why I do not think that the inference can be drawn from section 167(4). As to the later Act, I prefer to suppose that it was passed for the removal of doubts and not as an implied legislative declaration that the evidence would otherwise have been inadmissible. I conclude this part of my judgment by a short reference to two passages in the speech of Lord Reid in Customs and Excise Comrs v Harz ([1967] 1 All ER 177 at 181, [1967] AC 760 at 816, 817), and to a passage in Cross on Evidence i. In Harz’s case the accused had been compelled by customs officers to answer oral questions in the nature of cross-examination relating to a possible evasion of purchase tax. The question was whether his answers were admissible. Under the Purchase Tax Act 1963 the customs officer had power to require such information relating to the goods etc, but no power to put oral questions or to demand oral answers on the spot. It was held in these circumstances that the answers to the customs officers’ questions were inadmissible. This is the first passage in Lord Reid’s speech ([1967] 1 All ER at 181, [1967] AC at 816):
‘If a demand for information is made in the proper manner the trader is bound to answer the demand within the time and in the form required whether or not the answer may tend to incriminate him, and if he fails to comply with the demand, he can be prosecuted. If he answers falsely he can be prosecuted for that, and, if he answers in such a manner as to incriminate himself, I can see no reason why his answer should not be used against him. Some statutes expressly provide that incriminating answers may be used against the person who gives them and some statutes expressly provide that they may not. Where, as here, there is no such express provision the question whether such answers are admissible evidence must depend on the proper construction of the particular
Page 754 of [1970] 3 All ER 746
statute. Although I need not decide the point, it seems to me to be reasonably clear that incriminating answers to a proper demand under this section must be admissible if the statutory provision is to achieve its obvious purpose.’
Professor Cross says much the samej:
‘It seems that, if information has been lawfully obtained pursuant to statutory provisions and there is no express restriction on the use which can be made of the information, the person giving it cannot object to its being used in evidence against him either on the ground that such use would infringe his privilege against self-incrimination or because the information would not have been given voluntarily.’
This is the second passage from Lord Reid’s speech in Harz’s case ([1967] 1 All ER at 181, 182, [1967] AC at 817):
‘The Solicitor-General was asked whether he was aware of any other case in which a government department claimed the right to send a representative to interrogate a person for hours on end under the sanction that he would be prosecuted, if he failed to answer any question, and that any incriminating answer which he might give under threat of prosecution for failing to answer could be used in evidence against him. He was unable to cite any parallel case. I am not to be taken as saying that every inquisitorial procedure is inherently objectionable; this case may indicate the contrary. If, however, any such procedure were introduced, it would certainly contain safeguards which are absent from the procedure which the commissioners support in this case.’
Whether s 167(2) is the parallel case which Lord Reid was seeking, or whether the inspectors are not the Board of Trade’s representatives, and so the case is distinguishable, I do not know. The fact remains that s 167(2) provides no safeguards for the officer or agent such as s 167(4) provides for other persons; questions put only by the court or with the court’s permission, and the right to have counsel and a solicitor present and to be re-examined by them. For my part, I see no reason why the safeguards should be given in the one case and withheld in the other, but that is the form of the section. Perhaps some day its provisions will be reconsidered.
If I were wrong in holding that the answers were admissible under the unamended subsection, I should have held that they were admissible under s 50 of the 1967 Act, although that section was enacted after the examination had taken place. In this matter our courts have always distinguished between statutes altering the substantive law and those altering rules of procedure or the law of evidence. Where the trial is held after the substantive law is changed, they apply the old law to transactions taking place before the change was made and the new law only to subsequent transactions. But where the change is in the rules of procedure or the law of evidence, the new law is applied in both cases. Whether this is to give statutes about procedure and evidence retrospective effect, as Lord Blackburn said in Gardner v Lucas ((1878) 3 App Cas 582 at 603), or whether these statutes are construed as giving directions to the court about its mode of hearing all future cases and are in that sense not retrospective at all, as Harman LJ said in Blyth v Blyth and Pugh ([1965] 2 All ER 817 at 826, [1965] P 411 at 430), is a difference of words only. However the matter is expressed, we have Lord Blackburn’s authority in Gardner’s case ((1878) 3 App Cas 582 at 603) for holding that the rule is the same both for criminal and civil cases:
‘… where alterations are made in matters of evidence, certainly upon the reason of the thing, and I think upon the authorities also, those are retrospective, whether civil or criminal.’
Page 755 of [1970] 3 All ER 746
I have been referred to criminal cases since Lord Blackburn’s time, none of them very like the present case, in which the rule was applied as he stated it. No doubt the rule, like most of our rules, is subject to exceptions where they are required by the justice of the case, and the real question is whether there is any good ground for treating the present case as exceptional. Counsel for Mr Harris argued that there was. His argument can be stated in three propositions: (1) if Mr Harris had been examined after the 1967 Act had been passed, he could, on the true construction of that Act, have objected to answering questions on the ground that his answers might incriminate him, ie might be used against him in criminal proceedings; (ii) he could not have made that objection at his examination in 1964 because ex hypothesi his answers could not then have been used against him; and (iii) if the first proposition is right, Parliament cannot have intended in 1967 that the new law should be applied except in cases where the examined person had a right of objection. As persons examined before the Act was passed had according to the second proposition no such right, Parliament cannot have intended that the Act should apply to them, or, to put it in other words, the justice of the case requires that they should be treated as exceptional cases and kept outside the Act.
In my judgment the first proposition is wrong and therefore the argument collapses. The first proposition is inconsistent with the reasoning of Lord Campbell CJ in R v Scott, and with that of Lord Reid in Harz’s case. It would be surprising, although not logically impossible, if Parliament had provided that a man’s evidence might be used against him, while giving him at the same time a right to withhold that evidence. I do not think that Parliament has done so in the 1967 Act. On this part of the case I have had the assistance of a judgment of his Honour Judge Gillis on the separate trial of Mr Harris’s co-defendants, Mr Sowley and Mr Collins. Assuming for the purposes of his judgment that the unamended Act did not enable the evidence to be given, he held—as I would also have been prepared to hold if I had made the same assumption—that the 1967 Act made admissible the answers which they gave in examination held before that Act was passed.
It was argued that the evidence, even if admissible in law, should be excluded, by the court in the exercise of its discretion. As Mr Harris has since been acquitted, it would be useless to state my reasons for rejecting this argument. They could have no bearing on my decision.
Ruling accordingly.
Solicitors: Goodman, Derrick & Co (for Mr Harris); Gouldens (for Mr Cass); Director of Public Prosecutions.
N P Metcalfe Esq Barrister.
London & Overseas Freighters Ltd v Timber Shipping Co SA
[1970] 3 All ER 756
Categories: SHIPPING: ADMINISTRATION OF JUSTICE; Arbitration
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, EDMUND DAVIES AND PHILLIMORE LJJ
Hearing Date(s): 15, 17, 18 JUNE, 14 JULY 1970
Shipping – Charterparty – Time charter – Extension of period to complete voyage – Voyage continuing after specified period because of dock strikes – Whether hire for excess period payable at charter rate or market rate.
Arbitration – Award – Interest – Interest as from date of award – Rate – Power to award at rate exceeding interest rate on judgment debts – Arbitration Act 1950, s 20 – Judgments Act 1838, s 17.
A time charterparty made in London and dated 25 October 1967 of a ship ‘from the time of delivery, for about 12 months 15 days more or less in charterers’ option’ provided, by cl 4, that the charterers should pay at a specified rate ‘for the use and hire of the … vessel … commencing on and from the day of her delivery … hire to continue until the hour of the day of her re-delivery … to the owners’ at a specified range of ports. The ship was delivered under the charterparty on 29 December 1967, and in October 1968 was loaded with cargo for a voyage which was reasonably expected to end by or within a reasonable time after 29 December 1968. As a result of dock strikes at two ports the cargo was not discharged and the vessel was not redelivered to the owners until 24 April 1969, on which date a redelivery certificate headed ‘Charterparty dated London 25th October 1967’ was signed on behalf of the owners and charterers. Market charter rates fell, and during the excess period from 28 December 1968 to 24 April 1969 were lower than those payable under the charterparty. The charterers claimed that the charterparty ended on 28 December 1968 and that thereafter they were liable to pay only at the then current market rates. Arbitrators rejected this contention, and awarded the owners a sum calculated at the charter rate for the excess period, with interest at 8 per cent on the sum found due from the date it should have been paid to date of payment. On appeal, the charterers repeated their contention as to the rate payable, and also contended that by virtue of the Judgments Act 1838, s 17a, and the Arbitration Act 1950, s 20b, the arbitrators had no power to award interest as from the date of their award at more than 4 per cent.
Held – (i) Hire was payable at the rate stipulated in the charterparty for the whole period until redelivery because the charterparty continued in force until then (see p 759 c, p 764 h, and p 768 g, post) (Watson Steamship Co Ltd v Merryweather & Co (1913) 18 Com Cas 294 distinguished), and even if it did not, it was to be inferred from the conduct of the parties that the excess period was to be paid for at the charter rate (see p 759 e, p 764 j to p 765 a and p 768 f, post).
(ii) (Edmund Davies LJ dissenting) Section 20 gave an arbitrator power to award interest at a rate he considered reasonable, which might be greater as well as less than the interest rate on judgment debts, both before and after the date of his award (see p 760 h and p 768 h, post).
Myron (Owners) v Tradax Export SA [1969] 2 All ER 1263 approved.
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Notes
For continuance of charter after term specified in charterparty, see 35 Halsbury’s Laws (3rd Edn) 274, 275, para 416, and for cases on the duration of the charter, and redelivery of the ship, see 41 Digest (Repl) 229–232, 540–555.
For interest on money payable under arbitrator’s award, see 2 Halsbury’s Laws (3rd Edn) 46, para 101.
For the Judgments Act 1838, s 17, see 18 Halsbury’s Statutes (3rd Edn) 9, and for the Arbitration Act 1950, s 20, see 2 ibid 450.
Cases referred to in judgments
Chandris v Isbrandtsen Moller Co Inc [1950] 2 All ER 618, [1951] 1 KB 240, 41 Digest (Repl) 195, 291.
Gray & Co v Christie & Co (1889) 5 TLR 577, 41 Digest (Repl) 230, 543.
Hector Steamship Co Ltd v VO Sovfracht, Moscow [1945] 1 All ER 540, [1945] KB 343, 115 LJKB 182, 172 LT 268, 41 Digest (Repl) 221, 481.
Hick v Raymond and Reid [1893] AC 22, [1891–94] All ER Rep 491, 62 LJQB 98, 68 LT 175, 41 Digest (Repl) 447, 2282.
Johnson v Latham (1851) 20 LJQB 236, 2 Digest nRepl) 558, 928.
Meyer v R F Sanderson & Co (1916) 32 TLR 428, 41 Digest (Repl) 231, 548.
Myron (Owners) v Tradax Export SA, Panama City RP [1969] 2 All ER 1263, [1970] 1 QB 527, [1969] 3 WLR 292, Digest Supp.
Watson Steamship Co Ltd v Merryweather & Co (1913) 108 LT 1031, 12 Asp MLC 353, 18 Com Cas 294, 41 Digest (Repl) 231, 547.
Appeal
Timber Shipping Co SA, charterers of the London Explorer under a charterparty dated 25 October 1967 appealed against so much of the decision of Mocatta J dated 11 March 1970 and reported [1970] 2 Lloyd’s Rep 207 at 208 on a special case stated by arbitrators as affirmed the award of the arbitrators that hire was payable to the owners, London & Overseas Freighters Ltd, at the charter rate from 28 December 1968 until redelivery of the ship (24 April 1969); the owners, by a respondent’s notice to vary the judgment which was treated as a notice of cross-appeal, appealed against so much of the judgment as disallowed the 8 per cent rate of interest from date of award to date of payment awarded by the arbitrators.
R L A Goff QC and J C Tylor for the charterers.
R A MacCrindle QC and A E J Diamond for the owners.
Cur adv vult
14 July 1970. The following judgments were delivered.
SALMON LJ. By a time charterparty dated 25 October 1967, it was agreed that the owners should ‘let’ and the charterers should ‘hire’ the London Explorer—I quote from the charterparty—‘from the time of delivery, for 12 months 15 days more or less in charterers’ option’. The printed word ‘about’ was struck out in line 14 of the charterparty where it would otherwise have appeared between the printed word ‘for’ and the manuscript words ‘12 months 15 days more or less’. Counsel for the charterers appears to set great store by this deletion. I confess, however, that in spite of his most able argument, I for my part am wholly unable to understand how the deletion can have the slightest influence on the result of this appeal.
Clause 4 (lines 51 to 57) of the charterparty provided for the rate at which the charterers should pay (omitting irrelevant words)—
‘… for the use and hire of the … vessel … commencing on and from the
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day of her delivery … hire to continue until the hour of the day of her re-delivery … to the owners.’
The full range of ports at which redelivery was to take place was ‘Galveston/Montreal’. There was, of course, no ‘letting’ or ‘hire’ or ‘delivery’ in the literal sense of these words. The ship remained in the possession of the owners manned by a crew in their employment. The so-called ‘hire’ (a survival from the language used in the old demise charterparties) is in reality remuneration payable by the charterers to the owners for the use and services of the ship.
The London Explorer was delivered on 29 December 1967, and no doubt went on a number of voyages on behalf of the charterers until some time in October 1968, when she was loaded with a cargo of steel in Japan. Eventually she left Japan on what was intended to be her last voyage under the charter; she was destined to discharge her cargo at New Orleans and Houston. At the time when the charterers ordered her on this last voyage, no question arose as to whether she could be redelivered within a reasonable time after 29 December 1968, because there was no reason to suppose that there would be any difficulty in redelivering her on or before that date. It follows that the vessel was lawfully ordered on this last voyage by the charterers and neither the captain nor his employers, the owners, could lawfully have refused the order to undertake that voyage. Matters turned out, however, very differently from what was anticipated. As a result of dock strikes first at New Orleans and then at Houston, the whole of the cargo was not finally discharged until 24 April 1969. The vessel was not redelivered to the owners until 24 April 1969, when a redelivery certificate headed ‘Charterparty dated London 25th October, 1967’ was signed on behalf of the owners and the charterers.
There is a number of cases in the books in which a ship has not been redelivered until after the date mentioned in the charterparty. In these reported cases, in addition to hire under the charterparty for all the time the ship was retained and used by the charterers, the owners have claimed damages for breach of contract. The market had of course risen and the damages claimed by the owners were the difference between the charterparty rate and the market rate during the excess period for which the charterers had kept the ship. Some of these cases were decided in favour of the charterers and others in favour of the owners. Each depended on its own particular facts and the terms of the charterparty in question: compare, for example, Watson Steamship Co Ltd v Merryweather & Co and Meyer v R F Sanderson & Co, on the one hand, with Gray & Co v Christie & Co and Hector Steamship Co Ltd v V O Sovfracht, Moscow, on the other.
There must, of course, have been many cases like the present in which the charterers kept the ship beyond the date of redelivery mentioned in the charterparty after the market had fallen below the rate of hire specified in the charterparty. There is, however, no such reported case, for the simple reason that this is admittedly the first claim of its kind which has been resisted. And I am not at all surprised. Never before have charterers had the hardihood to assert that because: (a) they were in breach of contract in failing to redeliver the ship on time; and (b) without a shadow of right, had kept and used the ship for their own purposes beyond the redelivery date, they could lawfully escape from paying the charterparty rate of hire for the whole period for which they had used the ship. If charterers unlawfully keep and use a ship beyond the date on which they are contractually bound to redeliver her, it hardly lies in their mouths to say that the contract has expired, that therefore they are unlawfully using the ship and that this entitles them to pay less for her services than if they had been lawfully using her. No doubt if the present charterers unlawfully failed to redeliver within the time fixed by the charterparty,
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the owners could, on notice, have withdrawn their vessel and dumped the cargo at the nearest convenient port. This would necessarily have caused great inconvenience and expense to the charterers. Moreover, it would not have helped the owners as the market had fallen. If the failure to redeliver the ship by 29 December 1968 constituted a breach of the charterparty, it clearly was in the interests of both parties that the owners should not treat this as a fundamental breach by withdrawing the ship but that the charterers should continue to use her under the terms of the charterparty until the cargo had been finally discharged.
In this case we have the absurd spectacle of the charterers insisting that they were in breach of contract in failing to redeliver the ship on time and that they were unlawfully detaining her whilst using her for their own purposes and therefore they are liable to pay less for her services than if they had been using her lawfully. I reject that argument. In my judgment, the charterparty did not automatically come to an end even if there was a breach on the part of the charterers. Even if the charterparty did expire, this would not affect the charterers’ liability to pay hire at the charter rate up to the date of redelivery. The owners did not withdraw the ship and nothing was said between the parties; the irresistible implication would be that the charterers, with the owners’ consent, continued to use the ship under the relevant terms of the charterparty. They were therefore liable to pay hire at least at the charterparty rate during such time as they continued to use her.
In any event, since the charterers’ order to proceed on the last voyage was clearly lawful and there is no finding that the charterers failed to deliver the ship within a reasonable time after 29 December 1968, it follows from the principle laid down by Atkin J in Watson Steamship Co Ltd v Merryweather & Co, in relation to charterparties such as the present: (1) that there was no breach on the part of the charterers; (2) that the charterparty did not die by effluxion of time; and (3) that the charterers certainly continued liable to pay the hire up to 24 April 1969.
The only circumstances in which charterers who redeliver a ship after the date stipulated by the charterparty would not continue liable for the hire would be if, but I think only if and when, the charterparty were frustrated. But in this case there is no finding, nor indeed was it argued, nor could it sensibly have been argued, that the charterparty was frustrated. For these reasons, I agree with the finding of the arbitrators and the decision of the learned judge ([1970] 2 Lloyd’s Rep 207 at 208). Accordingly, I would dismiss the appeal on the issue of the charterers’ liability to pay hire at the charter rate up to 24 April 1969.
A more difficult question arises in relation to the arbitrators’ award of interest on sums due under the charterparty at the rate of 8 per cent per annum from the date of the award until payment. Had the arbitrators any power to make such an order? Over 100 years ago, s 17 of the Judgments Act 1838, provided:
‘… Every judgment debt shall carry interest at the rate of four pounds per centum per annum from the time of entering up of the judgment … until the same shall be satisfied … ’
Having regard to the general interest rates prevailing at the time when that Act was passed and for many years thereafter, the provision that a judgment debt should carry interest at 4 per cent per annum was unexceptionable. In modern times, however, when general interest rates have fluctuated violently and are now about double what they were in 1838, the provision has become ridiculously unjust. Indeed, legislation has at last been introduced to cure what has for so long been a glaring anomaly. It positively encouraged all judgment debtors to postpone discharging their liability for as long as possible. In cases in which very large sums were involved, it paid a defendant with a bad case to carry it to the Court of Appeal and, if possible, to the House of Lords, even if he knew that he had no real chance of winning. He
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might then postpone the date of payment for two years or even more. In the meantime, he would have the use of the money which he could easily invest at about 8 per cent or in growth stocks at a lower yield. Thus, if, for example, £1,000,000 were involved, at the end of two years, after allowing for the statutory 4 per cent, he would have obtained an extra £80,000 in interest or a very substantial capital accretion. In either case, even after paying the costs of his unsuccessful appeals, he would be much better off than if he had paid his creditor promptly; and his creditor would be correspondingly worse off.
Section 20 of the Arbitration Act 1950, which replaced s 11 of the Arbitration Act 1934, provides:
‘A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.’
This is perhaps not a very happily worded section. One thing however is, at any rate, clear; it gives an arbitrator the power to exercise a discretion which a judge does not possess. A judge has no power to say anything about interest after judgment. The judgment automatically carries interest at 4 per cent per annum until it is satisfied. So does an award ‘unless the award otherwise directs’. Has the arbitrator a power to direct that the sum awarded shall carry what he considers to be reasonable interest, or is his power limited to ordering that it shall carry no interest or interest at less than 4 per cent until such time as it shall be satisfied? I should be reluctant to give the words of this provision in the Arbitration Act 1950 the restrictive meaning which commended itself to the learned judge. Since a fixed 4 per cent rate of interest was almost as unsatisfactory in 1950 and even in 1934 as it is today, I do not think that Parliament can have introduced this provision into the Arbitration Act 1950 with the intention of giving an arbitrator solely the power of depriving a successful party of any interest between award and payment, or of cutting down the rate of interest for this period to something below 4 per cent per annum. I find it difficult, if not impossible, to think of any circumstances in which the exercise of such a discretionary power could be justified; it would penalise creditors and could only further discourage debtors from discharging their just debts. This would hardly be in the public interest; and I do not think that it is what Parliament intended. It is not unlikely that when the 1934 Act was passed, Parliament realised that time had marched on since 1838. Accordingly, when dealing with the interest which should be payable from the date of an award and giving the arbitrator a discretion in relation to such interest, I do not think that Parliament can have intended to fetter that discretion by restricting the arbitrator to directing that no interest or less than 4 per cent interest should be paid in such cases. Although the language of the section might well have been a good deal clearer, it is in my view wide enough to achieve justice by giving an arbitrator power to direct that his award shall carry what he, in his discretion, considers to be a reasonable rate of interest. It follows that I prefer the construction of s 20 of the Act of 1950 suggested by Donaldson J in Myron (Owners) v Tradax Export SA, Panama City RP to that adopted by the learned judge in the present case ([1970] 2 Lloyd’s Rep at 208). I would accordingly allow the appeal and restore the decision of the arbitrators on the question of interest.
If I am right in thinking that the arbitrators had power to direct that interest should run at ‘8% per annum from 1st June, 1969, until the said capital sum shall in fact be paid’—I am quoting from the award—that is the end of the matter. I will, however, briefly express my view about what order should be made if the arbitrators exceeded their powers. The learned judge concluded that the case should be remitted to them to make a further award which would constitute their final award. He thought that they would have power to award 8 per cent up to the date of their
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further award, although thereafter interest would only be at the rate of 4 per cent. This would, in effect, be allowing 8 per cent by a side wind for what could be much of the relevant period. I would have no insuperable objection to the proposed course on that score alone. I think, however, that even if the arbitrators were wrong in ordering interest at 8 per cent per annum from the date of their award until payment, there would be no justification for remitting the case to them to make a further award. If, instead of saying, as they did, ‘interest at the rate of 8% per annum from 1st June, 1969, until the said capital sum shall in fact be paid’, they had been more prolix and said the same thing thus, ‘interest at the rate of 8% per annum on the capital sum awarded from 1st June, 1969, until the date of this award and we direct that thereafter the capital sum awarded shall bear interest at the rate of 8% per annum until it is paid’, their error could have been corrected by striking out or setting aside everything after the word ‘award’. Everything after that word would have constituted an ultra vires direction under s 20 entirely severable from the rest of the award. This direction would then have disappeared and the capital sum would automatically have borne 4 per cent interest from the date of the award until payment. I cannot believe that the way in which the arbitrators in fact expressed themselves can make any difference to the way in which this mistake about their powers (if it be a mistake) should be corrected. I can see no point in remitting the case to the arbitrators. It would in my view be a waste of time and money to do so unless it can be supposed that if the case were remitted they might veto all interest or order interest at less than 4 per cent per annum from the date of the award. For me, this is altogether too fanciful a supposition.
I would accordingly dismiss the appeal on the issue of liability, but allow it on the issue of interest by restoring the arbitrators’ direction that interest at 8 per cent per annum shall run on the capital sum awarded from 1 June 1969, until payment.
EDMUND DAVIES LJ. The primary question raised by this appeal relates to the construction of a time charterparty in respect of the London Explorer. Dated 25 October 1967, it provided:
‘That the said owners agree to let and the said charterers agree to hire the said vessel, from the time of delivery for 12 months 15 days more or less in charterers’ option.’
It is important to note that the charterparty, as printed, contained the word ‘about’ immediately before the manuscript words ‘12 months 15 days’ were inserted, but this had been deleted. Clause 4 provided:
‘That the charterers shall pay for the use and hire of the said vessel at the rate of three dollars and fifteen cents … per ton … per calendar month, commencing on and from the day of the her delivery … hire to continue until the hour of the day of her re-delivery in like good order and condition … ’
The vessel was delivered under the charterparty on 29 December 1967. On some unspecified date before the lapse of a twelvemonth therefrom, she was loaded in Japan with a cargo of steel products for delivery in New Orleans and Houston. On 11 December 1968, she arrived at New Orleans, but discharge of her cargo was interrupted by a dock strike and was not completed there until 25 February 1969. She then left for Houston, where discharge of the remaining cargo was held up by a dock strike until 18 April. Not until 24 April 1969, was the discharge completed, and on that date a redelivery certificate (headed ‘Charterparty dated London 25th October, 1967’) was signed on behalf of the owners, charterers and master. Despite the delay which occurred, it is well to make it clear that no question of frustration of this contract is involved.
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These proceedings relate solely to the period from 29 December 1968 to 24 April 1969. In respect of that period, were the charterers liable to pay for the use of the vessel at the rate fixed by cl 4 of the charter or merely at the lower market rate which then prevailed? The arbitrators and the learned trial judge ([1970] 2 Lloyd’s Rep 207 at 208) all held that the owners’ claim to the charter rate must be upheld. For the charterers, on the other hand, it is contended that the charter ended by effluxion of time on 29 December 1968 (they never having exercised the option to extend by 15 days conferred by the charterparty); that by failing to redeliver on that date they were in breach; that their retention and use of the vessel thereafter and until 24 April 1969, was a wrongful act in respect of which they were liable to pay damages to the owners; and that the proper measure of such damages was the current market rate which could have been earned by the vessel during that period.
The problem is to determine the duration of the charterparty. This cannot depend simply on the provision in cl 4 that ‘… hire to continue until … her redelivery’. The general position has long been summarised in Scrutton on Charterpartiesc in this way:
‘In the absence of express provision, where a time charter is for a stated period, the time for re-delivery is not normally of the essence of the contract and the charterer commits no breach of contract if, before the expiry of the charter period, he sends the vessel on a final voyage which will not be completed until after the charter period, provided that in so sending her he acts reasonably. In such circumstances he will be liable for hire at the charter and not at the current rates for the excess period.’
Gray & Co v Christie & Co is the starting point of the relevant line of authorities. There a three-month charter was due to end of 26 September, but on 15 September the charterers (despite the protest of the owners) sent the vessel off on a voyage not expected to end until 13 October. Claiming to be paid for the last 17 days at the current rate of freight and not at the lower charter rate, the owners submitted that the charterers had committed a breach of contract by sending the vessel on a voyage which they must have known could not be completed by 26 September. Rejecting this claim, Mathew J said that the question was whether the charterparty was for three months certain, so as to make any employment of the ship thereafter a breach of contract, and added ((1889) 5 TLR at 577): ‘Looking at the terms of the charter, it was true that it was a time charter, but it was also a voyage charter.' Commenting on that decision, Atkin J said in Watson Steamship Co Ltd v Merryweather & Co ((1913) 18 Com Cas 294 at 300):
‘… the exigencies of maritime business demand that the charterers should have a reasonable time within which the hire shall continue after the date fixed for delivery; on other words, it is contemplated that the ship shall go on a succession of voyages, and as it is impossible to arrange that the last voyage shall end precisely at the date mentioned, the document must be construed reasonably, and it would not be a breach of the contract if the ship were redelivered within a reasonable time afterwards if it was the case that she was on a voyage on which she was reasonably sent during the subsistence of the contract. That is the effect of the decision in Gray & Co v. Christie & Co …
Watson Steamship Co Ltd v Merryweather & Co itself is relied on by both parties to these proceedings. The charterparty in that case was for the term 15–31 May 1912, until 15–31 October 1912. The vessel was delivered to the charterers on 6 June 1912. On 18 October 1912, the charterers despatched her from West Hartlepool to St Petersburg and back, although they realised that she could not get
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back to the United Kingdom by 31 October 1912. She was in fact redelivered to the owners at West Hartlepool on 20 November 1912. From 31 October the market freight rate for the vessel was £285 per month higher than the charter rate. The owners sought to recover £190 as damages, calculated as the difference for 20 days between the charter and market rates. Atkin J upheld the umpire’s award of that sum on the basis that there was a breach of the contract by non-delivery of the ship on 31 October.
That conclusion is, not surprisingly, relied on by the charterers in the present case, the market rate being here substantially lower than that reserved by the charter. But to determine whether Watson Steamship Co Ltd v Merryweather & Co may properly be invoked by the present charterers one must have regard to its facts. Clause 5 of the charterparty in that case set out to serve the same purpose as that performed by cl 4 in the present case. That is to say, it provided for payment for the use and hire of the vessel at the specified rate, and the charterparty, as printed, provided:
‘… hire to continue from the time specified for terminating the charter until her re-delivery to owners (unless lost) at a port on east coast of the United Kingdom … ’
But to these printed words the parties added in manuscript the words ‘between 15th and 31st October, 1912’. The addition was to prove crucial to the decision. Atkin J said ((1913) 18 Com Cas at 301):
‘There is no finding that the voyage to St Petersburg was not a reasonable voyage, or that the period of 20 days was an unreasonable period.’
Pausing there, in these circumstances Atkin J would clearly have held, on the basis of the printed words alone, that Gray & Co v Christie & Co operated to exonerate the charterers from paying above the charter rate. There was, however, a complication to be taken into account, and the learned judge continued in this way ((1913) 18 Com Cas at 301):
‘But the parties have not left the clause in relation to hire as it was printed. They have added after “hire to continue from the time specified for terminating the charter until her re-delivery to owners (unless lost) at a port on east coast of the United Kingdom” the words “between 15th and 31st October, 1912“. It is very difficult to give any effect to that clause so far as it creates a further contractual obligation to pay hire, but the parties, in adding the words in writing, must have had some intention in their minds, and I think the proper inference to draw is that they expressly intended to negative the right to continue the contract beyond October 31st; in other words, they used these words for the express purpose of making the time mentioned in the charterparty as of the essence of the contract, so that the hire should terminate on October 31st, and that the ship should be delivered by that date.’
What of the charterparty in the present case? For the charterers it is urged that the deletion of the word ‘about’ in the line dealing with the charter period and the insertion of ‘12 months 15 days more or less in charterers’ option should produce a result indistinguishable from that arrived at in Watson Steamship Co Ltd v Merryweather & Co. It is, however, to be noted that cl 4 in the present charterparty contains the bare provision that ‘hire to continue until the hour of the day of the redelivery’ and leaves it at that. Had that been the position in Watson Steampship Co Ltd v Merryweather & Co, we are left in no doubt what decision Atkin J would have arrived at, for in an earlier part of his judgment he said ((1913) 18 Com Cas at 300):
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‘… what they [the parties] generally do provide is, as they did here in clause 5, as printed, for the hire to continue until the ship is redelivered. That plainly provides that the contractual obligation to pay the hire is to continue after the date which is named in the charterparty for the termination of the hiring, and until the vessel is redelivered to the owners. I think that again would have to be read redelivered within a reasonable time, for if not I think there would be a breach of contract in respect of which the owners would be entitled to recover damages. If the clause in the charterparty remained as printed, I think there is nothing in the facts which would entitle the owners to say that the charterers had committed a breach of contract … ’
The importance of that decision is obvious. But, despite the persuasive powers of counsel for the charterers, what is still not clear to me is how it avails the charterers in the present case. The argument, if I understand it correctly, proceeds on these lines: by the deletion of the word ‘about’ (which, it is stressed, never appeared in the Watson Steamship Co Ltd v Merryweather & Co charterparty), the parties in the present case must be regarded as having excluded what was described as ‘the Gray v Christie implication as to reasonableness’; instead, they substituted an overlap or underlap of 15 days ‘in charterers’ option’, a latitude which must be ignored, since the charterers never exercised any option; and, in the result, 29 December 1968 became the firm and inflexible terminal date for payment of hire at the rate fixed by the charterparty, after which only damages for its breach by the wrongful non-delivery of the vessel on that date were recoverable.
This argument seems to me, with respect, to be ill-founded. As I have already indicated, the present charterparty differs in vital respects from that adjudicated on in Watson Steamship Co Ltd v Merryweather & Co, and, in the light of such of his observations as I have already quoted, it seems clear to me that on the wording of the present charterparty, Atkin J would not have regarded 29 December 1968 as the essence of the contract. As I see it, this is what one may call, for convenience, a Gray & Co v Christie & Co case. If that is right, the conclusion is obvious, there being no suggestion (and certainly no evidence) that, in undertaking the last voyage from Japan to New Orleans and Houston, the charterers were acting unreasonably. On the contrary, every indication points to the conclusion that, but for unheralded labour disputes in both ports, the voyage would have been completed in time sufficient to enable redelivery to be effected as required by the charterparty. That being so, what was a voyage reasonably undertaken does not become one unjustifiably embarked on simply because untoward events prolonged its completion beyond that fixed by the charterparty. On the contrary, those untoward events, supervening as they did without any fault on the part of either party to the charter, must be adverted to in determining what was a ‘reasonable’ time in all the circumstances: see Hick v Raymond and Reid.
For these reasons, I would be for affirming the award and the judgment upholding the right of the owners to recover hire at the charter rate until redelivery was effected on 24 April 1969. I have reached this conclusion as a matter of construction of the charterparty, but I am further of the opinion that in all the circumstances an implication arose that the parties were agreeing to treat the voyage from Japan as one falling within the terms of the charterparty and as one which, until it was ended, would therefore earn for the owners hire at the charter rate. The order to the ship’s master to embark on the voyage was given and accepted months before the charterparty was due to expire, and at that time the parties could only have had in contemplation the payment of hire at the charter rate. It was on that basis that the voyage
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began, and the implied term as to payment cannot, in my judgment, have been destroyed immediately 29 December arrived and then replaced by another term to pay damages. As counsel for the owners observed, it is difficult to think that any businessman would have taken on a charterparty which could so operate. Furthermore, the conduct of the parties throughout is consistent only with such an implied contract taking effect after 29 December. So far from the charterers making clear that their use after 29 December was to be paid for on a new basis, when redelivery was effected on 24 April 1969 the redelivery certificate already mentioned (referring to and clearly based on the charterparty) was signed by all parties. The inescapable conclusion, in my judgment, is that the last voyage was one which the parties undertook on the implied term that the rate of hiring payable until its termination was to be that fixed by the charter.
The other question raised by this appeal relates to the award of interest on the sum adjudged due to the owners. The arbitrators ordered:
‘… that the charterers do pay interest on the said sum at the rate of 8% per annum from 1st June, 1969, until the said capital sum shall in fact be paid.’
But Mocatta J ([1970 2 Lloyd’s Rep at 208) held that they had exceeded their jurisdiction in so ordering, and that their power to award interest at 8 per cent must be restricted to a period ending not later than the date when (pursuant to his order remitting the matter for their further consideration) they made a supplementary award, interest thereafter being payable at 4 per cent only. Which was right, the award of the arbitrators or the decision of the judge?
The two relevant statutory provisions are the Judgments Act 1838, s 17, which provides:
‘… Every judgment debt shall carry interest at the rate of four pounds per centum per annum for the time of entering up the judgment … until the same shall be satisfied … ’
and the Arbitration Act 1950, s 20, which (replacing without alteration s 11 of the Arbitration Act 1934) provides:
‘A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt.’
The proper interpretation of this latter provision appeared as beyond doubt to Mocatta J, who said ([1970] 2 Lloyd’s Rep at 220):
‘The power of the arbitrator in relation to this matter is merely a right of veto. He can direct that it [the award] shall not carry interest at all. If he does not given any direction, it carries interest at the same rate as a judgment debt which, in the present state of the law, is 4 per cent. from the date of the award. I have no doubt whatever that that is the true construction of that clause.’
In so holding, he declined to adopt the view expressed by Donaldson J in Myron (Owners) v Tradax Export SA, Panama City RP ([1969] 2 All ER 1263 at 1268, [1970] 1 QB 527 at 537) that:
‘It would seem from the terms of s. 20 of the Arbitration Act 1950 that arbitrators, unlike a judge, can, in addition to awarding interest, direct that the award itself carry interest at a specified rate in excess of that prescribed for judgments and this is a power which, if it exists, might well be used generally.’
Mocatta J laconically commented that ([1970] 2 Lloyd’s Rep at 220), if this be right—
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‘… an arbitrator has wider powers in relation to dealing with interest after the date of his published decision than a Judge has in relation to what happens after the date on which he gives judgment. That seems an improbable conclusion.’
The proper construction of s 20 presents itself to me as largely a matter of first impression. Although the statutory provision regarding interest on awards has existed in precisely its present form since 1934, I am not aware that, during the 35 years that elapsed until the obiter dictum of Donaldson J in the Myron case ([1969] 2 All ER at 1268, [1970] 1 QB at 537), anyone suggested that it could be construed in the manner now contended for by the owners. I do not personally find it surprising that the contention has hitherto lacked advocates. For, while naturally regretting that I have the misfortune to differ from my brethern on the point, to my way of thinking the layout of s 20, no less than the actual words employed, compels rejection of that contention.
Counsel for the charterers concedes that no judge could award interest as directed by these arbitrators, but rightly points out that, whereas a cause of action merges in a judgment (which can thereafter be sued on as a speciality debt), an award involves no merger and the claimant is free to start all over again if he wishes. While that observation is undoubtedly correct, I have difficulty in seeing that it brings nearer the solution of the present problem. The fact of submission itself invests the arbitrator with power to award interest up to the date of his award—see Chandris v Isbrandsten Moller Co Inc—but thereafter the position depends entirely on the 1950 Act, s 20. I find it impossible to interpret this provision as conferring any affirmative power to award interest. On the contrary, it seems to me to proceed from the assumption that the award has been made and the arbitrator is functus officio, and then provides that his award shall carry 4 per cent interest from its date unless he directs that it shall carry a lower rate of interest or, indeed, no interest at all. In effect, therefore, the section confers on the arbitrator a power of veto, as Mocatta J held. The utility of the statutory provision is that it makes clear what is to happen if an award makes no mention of interest—as, indeed, was the practice, so we were informed, until the Myron case was decided—namely that it will carry 4 per cent interest. But it conferred no larger power on the arbitrator than that.
In my judgment, accordingly, the award of the arbitrators was in this respect wrong, being in excess of their powers, and the learned judge was right in holding that, as from the date of the award, the interest had to be reduced from 8 per cent to 4 per cent. I have reached this conclusion with reluctance, for 4 per cent interest in these days is ridiculously low and I would echo the words of Donaldson J ([1969] 2 All ER at 1268, [1970] 1 QB at 536, 537) that—
‘It is of paramount important to the speedy settlement of disputes that a respondent who is found to be under a liability to a claimant should gain no advantage and that the claimant should suffer no corresponding detriment as a result of delay in reaching a decision … With bank rate at its present level, this [4 per cent interest] is a positive disincentive to payment.’
The present position thus clearly and urgently calls for a legislative remedy.
But that is still not quite the end of the matter. It remains to be considered whether the 8 per cent interest must stop at 6 January 1970, when the arbitrators made their award, or whether it can run on to the date when, pursuant to the judge’s order remitting the matter, they make what he called their ‘supplementary award’. Counsel for the charterers has urged that no necessity for remission arises, that all now called for is an order setting aside that part of the award which, in excess of the arbitrators’ jurisdiction, decreed that 8 per cent interest was to be payable until discharge of the capital sum. I very reluctantly take a contrary view. I think
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that this was an inseparable part of the award and that its rectification can be achieved only by remitter. This is not, in other words, such an award as Erle J spoke of in Johnson v Latham ((1851) 20 LJQB 236 at 238), ‘good as to three points and bad as to the fourth’, which could properly be sent back for the last matter alone to be dealt with. The trial judge was accordingly entitled to remit this award (submitted to the court in the form of a special case) for the purpose indicated by him. Until the arbitrators, acting in accordance with his direction, have decided the date up to which the capital sum is to carry interest at 8 per cent they will not have made a final award.
For these reasons. I would be for upholding the decision of the learned judge in its entirety and would dismiss the appeal.
PHILLIMORE LJ. The argument for the charterers is a curious one. ‘We admit’, they say, ‘that we were guilty of a breach of the charterparty in failing to redeliver the ship by the agreed date and accordingly we must pay damages. It so happens that the rules governing the assessment of damages will produce a lower figure than the amount due if calculated at the charter rate and and thus we shall make a substantial saving as a result of our breach.' Counsel could not refer us to any case where a similar argument had been advanced, let alone any case where it had succeeded.
When the London Explorer left Japan with its cargo of steel, there was no reason to suppose that it would not, having discharged part of its cargo at New Orleans, be able to discharge the rest at Houston—one of the agreed ports for redelivery of the ship—not later than 15 days before or after 29 December 1968. In other words, the voyage should have been completed within the time of the charter. In the event, the vessel was not redelivered to the owners until 24 April 1969. Were the charterers in breach and, if they were, had the owners elected to waive the breach?
Now this was a time charter and, although the contract speaks of the owners agreeing to let and the charterers agreeing to hire the vessel, these terms in their ordinary meaning are hardly appropriate. The crew of the vessel remained the servants of the owners, who could of course countermand the instructions of the charterers if they regarded a voyage proposed by them as not being one permitted by the charter.
The fact is that by this contract the charterers acquired the right to direct the loading and voyages of the ship during the period of and subject to the terms of the charterparty. It is of course obvious that, the hazards of the sea being what they are, it must often happen that a voyage which anyone would reasonably expect to be completed within a certain period may for one reason or another take longer. It would be extremely inconvenient from a business point of view if time was to be treated as of the essence of the contract in the absence of some special provision to that effect. Here was a voyage ordered by the charterers and assented to by the owners at a time when there was no reason to suppose that it could not be completed within the period of the charter. Through no fault of either party, it took four months longer than anticipated.
It is that the charter was for ‘12 months 15 days more or less’ from 29 December 1967, the 15 days being in the charterers’ option, and that the printed word ‘about’ in connection with the charter period was struck out but no date was specified for redelivery in cl 4, which provided for payment at the charter rate until redelivery. In my judgment, this appeal is really concluded against the charterers by the decision of Atkin J in Watson Steamship Co Ltd v Merryweather & Co. Dealing with a similar charterparty, he put it like this ((1913) 18 Com Cas at 300):
Page 768 of [1970] 3 All ER 756
‘Under a charterparty of this kind the general position is that in the absence of an express provision the parties are not bound to regard the period for terminating the contract as a time which is of the essence of the contract, but that the exigencies of maritime business demand that the charterers should have a reasonable time within which the hire shall continue after the date fixed for redelivery; in other words, it is contemplated that the ship shall go on a succession of voyages, and as it is impossible to arrange that the last voyage shall end precisely at the date mentioned, the document must be construed reasonably, and it would not be a breach of the contract if the ship were redelivered within a reasonable time afterwards if it was the case that she was on a voyage on which she was reasonably sent during the subsistence of the contract. That is the effect of the decision in Gray v. Christie, and there is no reference in that case to the fact that there was a continuation clause providing for what was to happen if the actual period mentioned in the charterparty was exceeded. The parties might, of course, specifically provide for the matter, and what they generally do provide, as they did here in clause 5 as printed, for the hire to continue until the ship is redelivered. That plainly provides that the contractual obligation to pay the hire is to continue after the date which is named in the charterparty for the termination of the hiring, and until the vessel is redelivered to the owners. I think that again would have to be read redelivered within a reasonable time, for if not I think there would be a breach of contract in respect of which the owners would be entitled to recover damages.’
In that case the final voyage could not have been completed by the date fixed for the charter, but it is clear that this in itself would not have constituted a breach and that judgment would have been for the charter rate but for a special provision for redelivery by a fixed date which had the effect of making time of the essence. This seems to me obvious good sense and accords with the standard textbook Scrutton on Charterpartiesd.
There is no finding in this case that the period after 29 December 1968 and before redelivery was unreasonable and it is to be observed that the certificate of redelivery dated 24 April 1969, is expressed as a redelivery under the contract. I can find no indication from the papers that prior to 24 April 1969, either party was speaking of the delay in redelivery as constituting a breach. The owners did not attempt to exercise their powers to withdraw the ship. If they had and had unloaded the cargo at some other port, the charterers might have found themselves in very great difficulties. If it was necessary to infer an extension of the charter from the conduct of the parties, it seems to me that it would be proper to do so, but in fact the matter if dealt with as a pure question of construction requires the charterers to pay the owners at the charter rate up to 24 April 1969. I would accordingly dismiss the appeal on this ground.
A further question arises in connection with the award of interest. On this I agree with Salmon LJ that the arbitrators were right and did not exceed their jurisdiction in directing a rate of 8 per cent until payment.
As I see it, the Judgments Act 1838, s 17, in providing for a rate of £4 per cent per annum from the date of judgment until it is satisfied, can only be described as hopelessly out of date in the light of present rates of interest. Why should an arbitrator not have wider powers than a judge? After all, he is chosen by the parties to do what is just between them. If he is not fettered by some Act of Parliament, why should he not do just that?
Section 20 of the Arbitration Act 1950 (replacing s 11 of the Arbitration Act 1934) is so worded as to give the arbitrator discretion as to the rate of interest which will
Page 769 of [1970] 3 All ER 756
apply from the date of the award to the date of payment. Why must he be limited to a rate between 0 per cent and 4 per cent, as has been suggested? Why, if he has a discretion, is it to be so circumscribed that he cannot order what is just? I reject this argument and agree with the reasoning of Donaldson J in Myron (Owners) v Tradax Export SA, Panama City RP ([1969] 2 All ER 1263 at 1268, [1970] 1 QB 527 at 537).
I would accordingly allow the appeal on this ground by restoring the arbitrators’ direction that interest shall run on the capital sum awarded from 1 June 1969 until payment.
Appeal dismissed: cross-appeal allowed. Arbitrators’ award of interest restored. Leave to charterers to appeal to the House of Lords on terms that within 28 days sterling equivalent of sum admitted to be due by charterers, and interest thereon at 8 per cent from 1 June 1969 to date of award and at 4 per cent from date of award to date of payment, be paid to owners and balance of sum claimed by owners, with interest thereon at 8 per cent from 1 June 1969 to date of award and at 4 per cent from date of award to date of payment into court or security given, be paid into court or secured. Existing security to be discharged pro tanto when these conditions complied with.
Solicitors: Bentleys, Stokes & Lowless (for the charterers); Holman, Fenwick & Willan (for the owners).
Henry Summerfield Esq Barrister.
Drinkwater v Joseph Lucas (Electrical) Ltd
[1970] 3 All ER 769
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON AND CROSS LJJ
Hearing Date(s): 8 MAY 1970
Limitation of action – Extension of time limit – Material fact outside knowledge of plaintiff – Ignorance of claim against employer – Application by member of trade union to union for advice – All reasonable steps taken by member – Nature of member’s illness known to him in 1966 – Trade union’s advice that action statute-barred based on mistaken belief that nature of member’s illness known to him in 1962 – Member not informed by trade union that illness caused by breach of statutory duty or negligence of employers – Whether lack of knowledge of material facts relating to the cause of action – Limitation Act 1963, ss 1(3) and 7(3).
Limitation of action – Extension of time limit – Material fact outside knowledge of plaintiff – Mistaken belief that claim statute-barred – Whether mistaken belief by plaintiff amounts to mistake as to material fact – Limitation Act 1963, s 7(3).
The plaintiff was employed from 1928 to 1962 by the defendants as a labourer and his work included the mixing of asbestos. He became short of breath and suffered from bronchitis in 1962 and was put on to a lighter job by the defendants. In 1966, he was x-rayed and the result showed that he was suffering from asbestosis. The plaintiff consulted the district organiser of his trade union, who filled in a particulars of accident form on his behalf under the mistaken impression that the plaintiff had first known that he was suffering from asbestosis in 1962. At this time neither the plaintiff nor the district organiser had formed an opinion whether there had been any negligence on the part of the defendants. The regional claims officer of the trade union then advised the plaintiff that ‘if it is in fact true that you have been aware of the fact that you first caught this condition in 1962’ then the claim had become statute-barred in 1965. The plaintiff understood this to mean that his claim would not succeed and took no further action; he was not informed that his injuries were caused
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by the negligence or breach of statutory duty of the defendants. In 1969, the union became aware of the true position and advised the plaintiff that there was a good chance of his succeeding in an action for damages. The plaintiff applied for leave pursuant to s 1 of the Limitation Act 1963 to issue a writ.
Held – It was not until 1969, at the earliest, that the plaintiff for the first time discovered that there were facts establishing negligence or breach of statutory duty against the defendants; previously, he had taken all such action as was reasonable for him to have taken to ascertain those facts and he was left in the dark about them; accordingly, his ignorance amounted to a material fact of a decisive character outside his knowledge for the purposes of ss 1(3)a and 7(3)b of the Limitation Act 1963, and leave would be granted (see p 773 j to p 774 a and p 774 f and g, post).
Quaere. Whether a mistaken belief by a plaintiff that his cause of action is statute-barred is a mistake as to material fact as defined in s 7(3) (see p 773 h and p 774 e, post).
Notes
For the modification of the limitation period in certain cases, see Supplement to 24 Halsbury’s Laws (3rd Edn), para 381, and for cases on the subject, see Digest (Cont Vol B) 500–502, 1933a–2022a.
For the Limitation Act 1963, ss 1 and 7, see 19 Halsbury’s Statutes (3rd Edn) 103, 108.
Case referred to in judgments
Pickles v National Coal Board [1968] 2 All ER 598, [1968] 1 WLR 997, Digest Supp.
Interlocutory appeal
This was an appeal by Reginald Frank Drinkwater from an order of Fisher J, made in chambers on 17 April 1970, refusing the plaintiff’s application for leave pursuant to s 1 of the Limitation Act 1963, in respect of an intended action against the defendants, Joseph Lucas (Electrical) Ltd, for damages for personal injuries and consequential loss and expense. The facts are set out in the judgment of Salmon LJ.
Tudor Evans QC and N F Irvine for the plaintiff.
8 May 1970. The following judgments were delivered.
SALMON LJ. I confess that I do not find it easy to decide this appeal. It is an appeal from a refusal by the learned judge to give the plaintiff leave under the Limitation Act 1963 to issue a writ claiming damages against the defendants for negligence or breach of statutory duty. The plaintiff is now 65 years of age, and he has been employed by the defendants ever since 1928. Between 1928 and 1962 he worked for the defendants as a labourer. This work consisted mostly in mixing certain substances in their factory, one of which was asbestos. It appears that throughout the years he was constantly exposed to dust and fumes from asbestos. It is also clear that some years prior to 1962, and possibly many years before 1962, he contracted the disease of asbestosis.
In 1962, he was getting very short of breath and was suffering from bronchitis. He certainly then had no idea that anything worse was wrong with him than that. He was taken off his heavy labouring job by the defendants and put on to a lighter job. In March 1966, he was sent by the defendants to be x-rayed, and the result of the x-ray showed that he was in fact suffering from asbestosis. He thought that he might have some chance of obtaining industrial injury benefit and a hardship allowance, so he consulted the district organiser of his trade union at some time in 1966. When he was talking over his case with the district organiser the latter told him that, although he was not a lawyer, he thought that there might be some chance of the plaintiff recovering damages against the defendants for negligence. He suggested that the plaintiff
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should fill in the union’s particulars of accident form so that that might be sent forward to the regional claims officer, who would then advise the plaintiff whether he had a claim against the defendants. So they sat down together. The union official asked questions of the plaintiff for the purpose of filling in the form, and he wrote on the form what he thought that the plaintiff had told him.
I do not think I need read very much from the form, which is dated 12 July 1966, but question 13 was: ‘Give a full description of the circumstances and cause of the accident,’ and the union official wrote down: ‘I have contracted asbestosis, due to using asbestos in the Milam mixer.' Question 14, to which the learned judge naturally paid a great deal of attention, was: ‘If damages are claimed give full particulars of alleged negligence, and name and address of party you hold responsible.' The union official had asked the plaintiff if the defendants had supplied him with a mask, and he had said ‘No’, and the union official thought that that would be a good answer and wrote: ‘[The defendants] did not supply masks for this operation.' Question 17, which was of great importance, was: ‘Did you report the accident to [the defendants]?’, to which the answer was: ‘Yes’. ‘If so, (a) when?’—and the union official seems to have got the impression that the plaintiff reported to the defendants in 1962 that he was suffering from asbestosis. It was an entirely false impression, because clearly the plaintiff had no idea until his x-ray that he was suffering from asbestosis. Under the illusion to which I have referred, the official entered in answer to question 17: ‘From 1962 onwards. By Pneumoconiosis Board.' The form was signed by the plaintiff and sent forward by the district organiser to the regional claims officer.
The regional claims officer wrote a singularly obscure and unfortunate letter, dated 8 August 1966, which I shall have to read. It says:
‘Dear Brother Drinkwater, We have to refer to the form you completed in connection with the disease you found yourself to be suffering from namely Asbestosis. We have with regret to say that we have now had an opportunity of examining with care the L.D.1 [ie the form] you completed and unfortunately we find that you yourself say that you were first suffering from this disease in 1962. If it is in fact true that you have been aware of the fact that you first caught this condition in 1962 then I have with regret to say that it is quite impossible for us to succeed in any claim at Common Law against [the defendants] for negligence. The position would be, of course, that as you knew in 1962 then a Writ should have been issued in this case before a date in 1965 and as it is now 1966 it fails under Section 1(3) of the Limitations Act of 1963. There are no circumstances in this case which would help us to prove that action could not be started because there were facts of a decisive character which were outside the knowledge of yourself and those acting for you.’
What the effect of a letter of that sort was on the plaintiff, I do not know. I suspect that he said to himself: ‘Well, it’s no go; I can’t win.’ So he brought no action. Then later, some time prior to May 1969, he discovered that a good many of his friends who had suffered from asbestosis had recently brought actions against the defendants, and, not unnaturally, he went to the union to complain and said: ‘Why should their actions be supported and not mine? If they had a good case, why haven’t I?’ It then became apparent that the union had completely misunderstood what he had said to them in 1966, and it was discovered that he had not known of the fact that he was suffering from asbestosis until 1966. It was quite wrong of them to have assumed that he had known in 1962, or that he had reported in 1962 to the defendants, that he was suffering from a disease of that kind. When the matter was before the learned judge there was no direct evidence that the plaintiff was unaware until May 1969 that his asbestosis was caused by the negligence or breach of statutory duty on the part of the defendants. In May 1969, he was told by the union for the first time that there was a good chance of succeeding in a claim for damages for negligence or breach of statutory duty.
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The learned judge, quite rightly, examined this case with the greatest care. It is most important that applications, made under this Act to issue a writ should not be granted automatically. They should be granted only if the plaintiff produces a strong prima facie case to bring himself within the provisions of the Act. No one can criticise the learned judge for the decision at which he arrived. Although there was no direct evidence that the plaintiff discovered for the first time in 1969 that there was any chance of establishing negligence or breach of statutory duty against the defendants, there was the form to which I have referred, which, if it stood alone, tended to show that in 1966 the plaintiff recognised that he had a claim for negligence or breach of statutory duty. The matter now, however, is very different. We have a good deal of evidence which was not before the learned judge. We have an affidavit before us dated 8 April 1970 in which the plaintiff states:
‘I most emphatically state that except as to the very limited extent set forth in this paragraph [that is a reference to the fact that he was told that there might be some possibility of a claim] I had no information as to my prospects of establishing that my contraction of asbestosis was attributable to breach of statutory duty or negligence on the part of [the defendants] until my interview with my solicitors on the 24th February, 1970 … ’
I should say that some time after the interview with the trade union officials in May 1969, he was sent to get legal advice from their solicitors. We also have a further affidavit that was not before the learned judge, namely another affidavit from Mr Small, the union’s district officer, who saw the plaintiff in 1966. He states:
‘On the said 12th July, 1966, when I filled in the said form, I had not formed any opinion on whether there had been any negligence on the part of the intended defendants … From my conversation with the intended plaintiff on the said occasion I am sure that he had no idea whether or not the intended defendants had been negligent.’
It seems to me that on the fresh material before the court there is a prima facie case that in 1966 the plaintiff did not know that he had any cause of action for damages for negligence or breach of statutory duty, and did not discover that fact until May 1969 at the earliest, and possibly not until February 1970.
It is necessary that I should refer to one or two sections of the Act. Section 2(2) provides:
‘Where such an application is made before the commencement of any relevant action, the court shall grant leave in respect of any cause of action to which the application relates if, but only if, on evidence adduced by or on behalf of the plaintiff, it appears to the court that, if such an action were brought forthwith and the like evidence were adduced in that action, that evidence would, in the absence of any evidence to the contrary, be sufficient … (b) to fulfil the requirements of subsection (3) of the preceding section in relation to that cause of action.’
Section 1(3), to which s 2(2)(b) refers, provides:
‘The requirements of this subsection are fulfilled in relation to a cause of action if it is proved that the material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which—(a) either was after the end of the three-year period relating to that cause of action or was not earlier than twelve months before the end of that period, and (b) in either case, was a date not earlier than twelve months before the date on which the action was brought.’
Then I pass to s 7(3) which provides:
Page 773 of [1970] 3 All ER 769
‘In this Part of this Act any reference to the material facts relating to a cause of action is a reference to any one or more of the following, that is to say—(a) the fact that personal injuries resulted from the negligence, nuisance or breach of duty constituting that cause of action; (b) the nature or extent of the personal injuries resulting from that negligence, nuisance or breach of duty; (c) the fact that the personal injuries so resulting were attributable to that negligence, nuisance or breach of duty, or the extent to which any of those personal injuries were so attributable.’
Section 7 provides:
‘(5) Subject to the next following subsection, for the purposes of this Part of this Act a fact shall, at any time, be taken to have been outside the knowledge (actual or constructive) of a person if, but only if,—(a) he did not then know that fact; (b) in so far as that fact was capable of being ascertained by him, he had taken all such action (if any) as it was reasonable for him to have taken before that time for the purpose of ascertaining it; and (c) in so far as there existed, and were known to him, circumstances from which, with appropriate advice, that fact might have been ascertained or inferred, he had taken all such action (if any) as it was reasonable for him to have taken before that time for the purpose of obtaining appropriate advice with respect to those circumstances …
‘(8) In this section “appropriate advice”, in relation to any fact or circumstances, means the advice of competent persons qualified, in their respective spheres, to advise on the medical, legal and other aspects of that fact or those circumstances, as the case may be.’
In my view, the plaintiff quite clearly acted reasonably. When he went to see the union official in July 1966, and was told that in that official’s opinion there was some possibility of a claim in damages for negligence, it was explained to him, as I have already said, that if he filled in the form the union would advise him. He did fill in the form, or caused it to be filled in, and he got a letter back from the union (which I have read) in the most obscure terms. It is quite plain to me that what the regional claims officer of the union was intending to state was: ‘Since you knew in 1962 that you had contracted asbestosis the action is statute-barred and it is no good bringing a case.' That advice, as I have said, was based on false information—false because the official whom the plaintiff saw in July 1966 had misunderstood what he had been told. It is doubtful perhaps whether the advice in that letter would have been sound even on the information before the regional claims officer. But the letter certainly did not say to the plaintiff in 1966: ‘You would, of course, have a good case in negligence or for breach of statutory duty but for the fact that the action is statute-barred.' The chief mistake that the union made was in thinking that the action was statute-barred. There is no doubt, I think, from the plaintiff’s own first affidavit that, whatever else he may have thought, he did understand—at any rate, the affidavit which was drafted for him and which he swore says that he understood—that his claim was statute-barred.
If one mistakenly believes that the Act bars one’s claim, is that a mistake as to a material fact within the definition of material facts in s 7(3) of the Act? I do not think it is necessary for me to express any concluded view on that point, and I do not do so. I should say, however, that I find some difficulty in seeing how one could fit a mistake about such a fact (if it be a fact) into the statutory definition of material facts. But the fact that the plaintiff was told that the claim was statute-barred did not lead him to suppose that he had any cause of action in negligence or for breach of statutory duty. We now have the evidence, which was not before the learned judge, to which I have already referred, from which at any rate it appears prima facie that it was not until May 1969 at the earliest that he discovered that he had such a cause of action; in other words, for the first time he discovered that there was a
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case against the defendants for negligence or breach of statutory duty. He had taken all such action as was reasonable for him to have taken to ascertain those facts, and he was left in the dark about them; he just did not know. If one is mistaken whether or not there are facts establishing negligence or breach of statutory duty, it is plain from the decision of this court in Pickles v National Coal Board that that lack of knowledge is lack of knowledge of the material facts.
In those circumstances, I think that if the affidavits to which I have referred had been before the learned judge he would not have arrived at the decision which he reached. I think that on the evidence in those affidavits the plaintiff has made out a prima facie case bringing himself within the conditions laid down in the Limitation Act 1963, under which permission may be granted for the issue of the writ. The point whether he was or was not ignorant of the material facts is certainly not being finally decided now; no doubt it will be canvassed hereafter at the trial, or possibly—I know not—as a preliminary issue. But I am satisfied, for the reasons indicated, that the plaintiff has made out a prima facie case and that accordingly this appeal ought to be allowed and leave granted to issue the writ.
CROSS LJ. I agree. Like Salmon LJ, I have found this a difficult case—my difficulty arising in part from the very complex language in which the Limitation Act 1963 is couched. What we have to decide, as I see it, is whether a material fact of a decisive character relating to the plaintiff’s cause of action was outside the knowledge (actual or constructive) of the plaintiff until at the earliest 17 May 1969. If it were not for s 7(3) of the Act I should have no difficulty in saying that material fact of a decisive character was unknown to him until May 1969; namely the fact that his cause of action was not statute-barred in July 1966 when his condition was diagnosed, as he was told by his trade union that it was. But, like Salmon LJ, I find it difficult to bring that ignorance on his part within the wording of s 7(3), and so I proceed on the footing that we must ask whether the plaintiff was ignorant until May 1969 of the fact that his injuries resulted from negligence or breach of statutory duty on the part of the defendants.
The two affidavits to which Salmon LJ has referred, which were not before the judge but are before us—namely the plaintiff’s affidavit of 1 May 1970 and Mr Small’s affidavit of 13 April 1970—show clearly that when the plaintiff filled in the form he did not know whether or not the defendants had been guilty of negligence. After filling in the form he got the letter from his trade union, and one asks oneself what his reaction to it would be. It may well be, as Salmon LJ has suggested, that all he derived from it was that for some reason or other he had no case; but, even if he read the letter with care, the most that he would have got from it was that his claim was in any event statute-barred. The letter did not tell him in terms or even by necessary implication that his employers had been guilty of negligence. For all that appears, he remained in ignorance of that fact until May 1969.
So far as s 7(5) is concerned, the plaintiff had certainly taken all reasonable steps available to him to become aware of the position. In the result, therefore, I agree with Salmon LJ that this appeal should be allowed.
Appeal allowed.
Solicitors: Pattinson & Brewer (for the plaintiff).
Euan Sutherland Esq Barrister.
Central Press Photos Ltd v Department of Employment and Productivity
[1970] 3 All ER 775
Categories: TAXATION; Other Taxation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, PHILLIMORE AND BUCKLEY LJJ
Hearing Date(s): 23 JULY 1970
Selective employment tax – Standard Industrial Classification – Construction of minimum list headings – Trade meaning not dictionary meaning.
Selective employment tax – Standard Industrial Classification – Construction of minimum list headings – Whether headings mutually exclusive.
In considering under which heading of the Standard Industrial Classification an activity falls the Industrial Tribunal (and, on appeal therefrom, the courts) must consider how the activity in question is properly classified in the trade and must prefer the meaning which would be attributed to a heading of that classification by people in the trade to the dictionary definition (see p 782 b, p 783 f and p 784 f, post).
Dictum of Lord Wilberforce in Secretary of State for Employment and Productivity v C Maurice & Co Ltd [1969] 2 All ER at 41 applied.
Minister of Labour v Southam News Services of Canada [1968] 1 All ER 310 stated to have been overruled by Lord Advocate v Reliant Tool Co [1968] 1 All ER 162.
Quaere. Whether the fact that an activity falls within one heading of the Standard Industrial Classification prevents it from also falling within another (see p 780 g, p 783 c and p 785 b, post).
Notes
For selective employment tax, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 479A.
Cases referred to in judgments
Lord Advocate v Reliant Tool Co [1968] 1 All ER 162, [1968] 1 WLR 205, Digest Supp.
Minister of Labour v Southam News Services of Canada [1968] 1 All ER 310, Digest Supp.
Prestcold (Central) Ltd v Minister of Labour [1969] 1 All ER 69, [1969] 1 WLR 89, Digest Supp.
Secretary of State for Employment and Productivity v C Maurice & Co Ltd [1969] 2 All ER 37, [1969] 2 AC 346, [1969] 2 WLR 797, Digest Supp.
Appeal
This was an appeal by Central Press Photos Ltd (‘the employers’) from the decision of the Queen’s Bench Division (Lord Parker CJ, Ashworth and Cantley JJ) dated 14 November 1969 and reported 1970 ITR 75, upholding a decision of the Industrial Tribunal dated 18 January 1967, that the employers were not entitled to repayment of selective employment tax. The respondent to the appeal was the Department of Employment and Productivity. The facts are set out in the judgment of Salmon LJ.
David Hirst QC and L Brittan for the employers.
Sir Arthur Irvine QC and T H Bingham for the Department.
23 July 1970. The following judgments were delivered.
SALMON LJ. This is a test case brought by the press photographic agencies to obtain an authoritative ruling from the court as to whether they are entitled to repayment of selective employment tax under the Selective Employment Payments Act 1966. The Industrial Tribunal held that they were not so entitled. That finding was upheld
Page 776 of [1970] 3 All ER 775
by the Divisional Courta. The employers, who are one of the press photographic agencies concerned, now appeal from the decision of the Divisional Courtb by leave of that court.
I will read the relevant parts of the Act. Section 1 provides:
‘(1) Where an employer has paid selective employment tax for any contribution week in respect of a person in an employment to which this section applies, then, subject to the provisions of section 7 of this Act, the Minister of Labourc shall make to the employer in respect of that person and that week a payment of an amount equal to the tax paid plus [something which was a premium but the rights to which have since vanished].
‘(2) … this section applies to any employment in, or carried out from, an establishment where—(a) the establishment is engaged by way of business wholly or partly in—(i) activities falling under any of the minimum list headings shown in Orders III to XVI of the Standard Industrial Classification … ’
Section 10(5), so far as material, provides:
‘… in determining the activities falling under any particular minimum list heading in the Standard Industrial Classification, regard shall be had to any express provision of any other such heading.’
The policy of this Act and the Finance Act 1966, which imposed the selective employment tax, was apparently to encourage manufacturers and possibly to introduce a simple and economic way of raising a large amount of revenue. The courts, of course, are not concerned with the policy behind the Act; that is a matter for Parliament. All that we have to do is to consider the Act for the purpose of deciding what it means. Our task does not seem to me to be made any easier by the way in which this Act was drafted. No attempt was made to define or classify in the Act the activities to which it was intended to apply. Had that been done the definition and classification would have been settled by experienced Parliamentary draftsmen and it may be that anyone affected by selective employment tax could, with professional advice, have had a reasonably clear idea of where he stood. The legislature, however, left the question what activities were intended to be covered to be answered by reference to the Standard Industrial Classification prepared by the Central Statistical Office. That document was not prepared with tax in mind, but solely for the purpose of preparing statistical information referring to industrial and other activities. Much of it is extremely obscurely worded. Because this method of legislation has been adopted it seems to me that a great deal of unnecessary worry and uncertainty has been caused to the public in relation to selective employment tax and a great deal of litigation has been generated in the course of which it has fallen to the courts to attempt to solve many intractable problems.
The Standard Industrial Classification consists of some 24 orders and 152 what are termed minimum list headings. Many of these headings contain a number of subheadings; and in all well over a thousand activities are dealt with. Before I read the only two headings relevant to this appeal I should refer to the introduction to the classification. Paragraphs 3 and 4, so far as material, state:
‘3. The classification is based on industries and not on occupations. All persons … employed in a “unit” of industry are included, irrespective of their occupations, in the figures of employment for the industry to which the “unit” is classified …
‘4. For the purpose of this Classification the unit taken is the “establishment“.
Page 777 of [1970] 3 All ER 775
An establishment is normally the whole of the premises, such as a farm, a mine, a factory or a shop at a particular address. All activities carried on at that address … are included … ’
I will now read the two relevant headings. The first is heading 486: ‘Printing, Publishing of Newspapers and Periodicals.' That is in large print. Then in small print:
‘Printers and publishers (including publishers who do not do their own printing) of newspapers, reviews, trade journals, etc., and printers of newspapers, etc. working on commission.’
The second is heading 899.2 which states: ‘Photography’ in large print and then in small print:
‘Commercial and portrait photography; developing, printing, colouring, enlarging, etc. photographs. The production and processing of cinema films and sound track is excluded and classified in Heading 881.’
As Lord Parker CJ observed in this case (1970 ITR at 80):
‘It has been said many times now that the tribunals are chosen for their special skill and knowledge, and that their findings as to whether an activity falls under any particular minimum list heading is not to be lightly set aside.’
That point is further emphasised in the speech of Lord Wilberforce in Secretary of State for Employment and Productivity v C Maurice & Co Ltd ([1969] 2 All ER 37 at 41, [1969] 2 AC 346 at 361). The passage to which I refer is in these terms:
‘There may well be cases where a tribunal, whose duties include those of finding primary facts, are also called on to carry out a process of interpretation, to apply words to those facts, or to bring those facts under words, and where the decision of the tribunal, because made by them, also acquires a strong inherent quality of strength. This is, I would think, especially the case where, as here, the language to be interpreted is admittedly imprecise, adapted (and not well adapted) from another quite different purpose, drafted in language not settled by a skilled revenue draftsman, but for use by statisticians and by businessmen called on to complete the statisticians’ forms. When decision on the language of this classification is entrusted to the Industrial Tribunal I think that Parliament must be taken to have intended to give to their decisions on classification questions, including, as they must, consideration of the classificatory language, a strength only slightly less than that attracted by decisions of fact properly so called. Certainly these decisions may be reviewed; but the reviewing authority ought not, in my opinion, to attempt to construe the headings ab initio as if they were parts of an Income Tax Act or a customs regulation. It should start with the tribunal’s findings, as those of a body which has the means and experience of knowing how industry works and is grouped, and see if the decision is one which reasonable men ought not to have come to, or if it is vitiated by some manifest misdirections.’
The headings cover upwards of a thousand industrial activities. Accordingly it would probably be only by pure chance, were the members of the tribunal to have any personal experience of the industry concerned in the appeal which they were called on to consider. Nevertheless, that does not detract from the force of what Lord Wilberforce has said. It may also be that an additional reason for leaving the tribunal’s findings alone is that sometimes these headings are so obscurely worded that their true meaning is a matter of mere guesswork. No judge can have any confidence
Page 778 of [1970] 3 All ER 775
that his guess as to what they were intended to mean is any better than the guess of the members of the tribunal or, for that matter, of anyone else. Nevertheless, if it appears from the decision of the tribunal that it has manifestly misdirected itself or it is a decision at which no reasonable person could have arrived, the court has the power, and indeed the duty, to intervene.
The decision of the tribunal in the present case was given before the decision of the House of Lords in Lord Advocate v Reliant Tool Co, an authority to which I will refer in a moment. Not having had the advantage of considering that authority, no one could possibly criticise the tribunal for failing to apply principles which it enunciated. The tribunal, however, manifestly misdirected itself in not applying those principles as the Divisional Court pointed out. Lord Parker CJ said (1970 ITR at 79):
‘One has only to read that [ie the tribunal’s decision] to see that the tribunal were then approaching the matter on the basis that an applicant did not qualify under a particular minimum list heading unless he carried out the activities so listed from the beginning to end and only did a part of them.’
Before dealing with the Reliant case I must briefly recite the relevant facts in the present case. Press photographic agencies have editors, caption writers, press operators, printers, glaziers, and in some cases wire photo operators. Their finished product is a captioned press print, that often fades after a day or two, and is of no use to anyone but a newspaper editor who wants to make a block from it and publish it. The press photographic agency has to follow the news, and in many cases create the story. There are many newspapers which have only editorial staff. They make use of press photographic agencies for their pictures and have their engraving, blockmaking, etching and printing done by outside firms. That is how the employers described the functions of a press photographic agency to the tribunal. They also pointed out that the employees of such agencies are members of the Printing and Allied Trades Union, the National Union of Journalists, the National Graphical Association and Allied Trades, and that the wages of the editorial staff and photographers are tied to the newspaper trade agreements.
The unchallenged evidence which the employers called before the tribunal clearly supported everything that I have just said and there was no evidence the other way. The employers themselves carry on their business in Fleet Street as do many other similar agencies. The employers employee some 45 persons. The tribunal in its decision said:
‘In the written representations [and they might have added ‘in the evidence also’] which have been put before the tribunal, emphasis is placed on the fact that these companies cannot in ordinary language be said to be photographers; they are primarily providing news photographs. They have to estimate what photographs will have news value. Their editorial staff supervises what is to be photographed. It allocates particular assignments to particular photographers, and, when the photograph comes in, it decides where is the best place to try to place that photograph. In the ordinary sense, this is not the work of a photographer; it is more work of a news agency than a photographer.’
Turning to the Reliant case, the employers were designers of machine tools. They did not deal with the general public but designed machine tools for large manufacturing companies. The question was whether they were entitled to a repayment of selective employment tax. Their case was that they came within heading 332 which reads ‘Metal-working Machine Tools Manufacturing metal-working machine tools … ’ One of the arguments on behalf of the Lord Advocate was that since the designers
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were not taking part in the whole process of making metal-working machine tools they did not come within the relevant classification. It was further argued that they did not come within the classification because their work was purely preliminary work to the manufacturing of machine tools, and because they carried on their work at an establishment other than the establishment at which the machine tools were actually manufactured. Those arguments failed. Viscount Dilhorne said ([1968] 1 All ER at 166, [1968] 1 WLR at 213):
‘If it is to be regarded as part of the manufacture when the designing and actual making take place in the same establishment, it is none the less to be regarded as part of the manufacturing process if the designing and the making take place in different establishments.’
Lord MacDermott observed ([1968] 1 All ER at 169, [1968] 1 WLR at 217):
‘The classification itself shows how composite a thing modern manufacturing can be, with different establishments responsible for the various steps and processes which together produce the finished article, and neither in it, nor in the statute incorporating it, can I discover any trace of an intention to prefer comprehensive activities to those devoted to a part only of the production … I would hold that on its true construction sub-s. (2)(a)(i) of s. 1 of the Act of 1966 includes activities which constitute a definite part, though not the whole, of the processes involved in the manufacture of metal-working machine tools.’
By a parity of reasoning I come to the conclusion that, just as designing is a definite part of the manufacture of machine tools, although only a part of such manufacture and carried on in an establishment separate from the factory, so the work done by press photographic agencies is a definite and integral part of the whole process of producing a newspaper, notwithstanding the fact that that work is done in different establishments from those in which the newspaper is actually printed, published and produced.
It seems plain that if the tribunal had had the principles enunciated in the Reliant case ([1968] 1 All ER 162, [1968] 1 WLR 205) in its mind and had properly applied them, it would, but for heading 899.2, have come to the conclusion that the work of press photograph agencies falls fairly and squarely within heading 486. It has found that—
‘… the work which these press photograph agencies do, the production of photographs for use by the press, is work which, when done by a newspaper itself, would be a part of the printing and publishing of that newspaper or periodical.’
It seems to me that it follows from that finding that it came to the conclusion, rightly in my view, that if the very work done by the press photographic agencies were done in the newspaper proprietor’s establishment it would fall under heading 486. The tribunal thought, however, that it did not come within that classification because it is work carried out somewhere other than in the newspaper proprietor’s establishment, and also, it seems, because it was not the whole work of producing a newspaper but only part of it. In this it was clearly mistaken.
As I have already indicated, the Divisional Court (1970 ITR 75) took precisely the same view as that which I have expressed. The Divisional Court, however, dismissed the appeal because of the tribunal’s finding that the work in question came expressly within heading 899.2. In arriving at that finding, the tribunal based itself solely on the definition of ‘photography’ in the Shorter Oxford Dictionary. Because of that definition, it came to the conclusion that the work in question was indeed commercial
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photography. I would emphasise that the tribunal did not purport to rely on its own experience of commercial photography, still less on any evidence as to what constituted commercial photography. Indeed there was none save the evidence of the employers, who had said that what they were doing did not constitute commercial photography.
Referring to the dictionary definition the tribunal said:
‘Having regard to this definition, and applying the provisions of section 10(5), we cannot enter into equitable considerations as to whether these companies should be treated as newspapers are treated.’
I gather from that it meant that whatever might be thought of the merits, it was bound to apply the definition in the dictionary which led to the inescapable conclusion that the work of a press photographic agency was in fact the work of commercial photography and was expressly included in heading 899.2. The tribunal’s finding went on:
‘The Legislature in its wisdom has chosen to say that persons engaged in “commercial photography” in the ordinary meaning of those words are persons who do not get a premium or the refund of a tax. The operations of the companies fall directly under the ordinary meaning of those words, and by section 10(5) we must have regard to the provisions of heading No. 899.2 when we consider whether these operations can possibly be brought under No. 486 or No. 489. Having regard to those plain words, with the ordinary meaning of them covering these activities, we can come to no other conclusion than that these operations fall under Heading 899.2. Consequently the applicant companies do not qualify for repayment and premium under section 1 of the Act, because what they are doing does not fall under a heading which is within Order III to XVI of the Standard Industrial Classification.’
The Divisional Court (1970 ITR 75) concluded that in spite of the fact that the tribunal had manifestly misdirected itself in the sense that I have indicated there would be no point in remitting the case to the tribunal having regard to its finding that the employers’ activities came within the heading 899.2. It is to be observed that s 10(5) of the Act does not state that an activity cannot come within heading X if it is expressly referred to in heading Y. The section states that in considering whether the activity comes within heading X the tribunal must have regard to whether it also falls within heading Y.
I do not find it necessary to decide the point whether the tribunal was right in thinking that because an activity comes within heading 899.2 it necessarily cannot also come within heading 486. There is a dictum of Lord Diplock that supports the view expressed by the tribunal: see Prestcold (Central) Ltd v Minister of Labour ([1969] 1 All ER 69 at 74, 75, [1969] 1 WLR 89 at 96). On the other hand there is a dictum of Lord MacDermott in the Reliant case ([1968] 1 All ER at 169, [1968] 1 WLR at 217) which appears to be inimical to that view. It is unnecessary to decide that point because of the affidavit by Mr Hunt which we now have before us. That affidavit was put in at a very late stage. I am convinced that if it had been before the Divisional Court, which of course it was not, the Divisional Court would not have arrived at the decision which it in fact reached. Mr Hunt is the general secretary and chief executive of the Institute of Incorporated Photographers which was founded in 1901 and is recognised by the Department of Employment and Productivity as the body representing all branches of professional photography. The institute has members engaged professionally in all branches of photography. Mr Hunt states in para 3 of his affidavit what is recognised
Page 781 of [1970] 3 All ER 775
in the trade as ‘commercial photography’. It includes architectural photography, portrait photography and other matters but not the work of press photographic agencies. In para 4 he deals with what he calls ‘industrial photography’ and refers to the photographic departments of large industrial concerns such as Marks and Spencers, the General Electric Co and Imperial Chemical Industries. He deals also with ‘scientific photography’ and ‘medical photography’ which he distinguishes from commercial photography and indeed from what he calls industrial photography. Then in para 5 of his affidavit he states:
‘A press photographer is a person engaged in yet another form of activity, different from any of the forms of activity, referred to in paragraphs 3 and 4 herein. He is concerned with the presentation of news and uses his camera in the same way as a reporter uses his pen. He will be either employed by a newspaper or by a photographic news agency. In neither case will the photographs obtained have been expressly commissioned for a fee. Press photography carried out either by an employee of a newspaper or by an employee of a photographic news agency is not described in the trade and could not properly be described in the trade as “commercial photography“. Some commercial photographers do a very limited amount of press photography more often outside London, but when they do this they are regarded in the trade as being engaged in a form of professional activity different from “commercial photography“.’
Counsel for the Department has contended that we should regard this affidavit with reserve since it came forward only at a very late hour. I am afraid that I cannot agree with that contention. When counsel for the employers sought to put in this affidavit, the court enquired of counsel for the Department whether he could challenge any of the evidence it contained; whether if the affidavit were put in, he would wish to cross-examine the deponent or to call evidence to rebut the evidence contained in the affidavit. He very fairly said that he would not desire to do either of those two things; he said that on instructions from the Department. The Department has behaved (if I may respectfully say so) in the exemplary and fair way which I would expect of it. If it had taken the attitude, as it might well have done, that the affidavit took it by surprise, that it had no idea whether the facts that it contained were accurate or not, that it would like time if the affidavit was to be put in to make enquiries, that it might wish to cross-examine the deponent or to call evidence and that in these circumstances the affidavit ought not to be admitted, I would have been strongly in favour of refusing to admit it. It came forward at a very late stage for reasons which I need not recite in detail. The reasons do not cast any reflection on anyone save perhaps the legal executive in the employ of the employers’ solicitors who has, I think, since emigrated. He was supposed to have sent a copy of this affidavit to the Department last March. Evidently, perhaps in the stress of making his preparations for going abroad, he unfortunately forgot to do so. This was not discovered and could not have been discovered until, I think, a day or two ago by the employers’ solicitors who were no doubt very surprised and upset by this unfortunate oversight. Nevertheless, however easy it is to explain the late production of the affidavit, I should not have thought it right to hold up this appeal if the production of the affidavit could have prejudiced the Department. It would have been very hard on the Department to have stood the appeal over at this late stage for the purpose of allowing the contents of the affidavit to be checked or for any other purpose. The right course had there been any challenge to the affidavit would have been to refuse to admit it. Having regard, however, to the attitude which the Department very commendably adopted, we admitted the affidavit. It seems to me that in those circumstances we must accept the evidence that it contains. The Department knew what it was doing and if it had had any doubt as to the facts contained in that affidavit it would not have said what it did say.
I am quite satisfied that if that affidavit had been before the tribunal, it would not have come to the conclusion that the work carried on by the employers constituted
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the work of commercial photography within the meaning of those words in heading 899.2. Indeed, if it had made such a finding it would have been perverse. I am equally satisfied, as I have already indicated, that if the Divisional Court had had the advantage that we have had of reading this affidavit, its decision would have been quite different from what it in fact was. The evidence in this affidavit conclusively rules out any possibility that the work of the employers falls under heading 899.2.
It has been argued that never mind how the work of press photographic agencies is regarded in their trade or in the trade of photography generally, what counts is the definition of those words in the Shorter Oxford Dictionary. I profoundly disagree. It is quite plain from the speech of Lord Wilberforce in the Maurice case ([1969] 2 All ER at 41, [1969] 2 AC at 361) to which I have already referred that the real question for the tribunal to consider is how the activity in question is properly classified in the trade. The question is not what do the words ‘commercial photography’ mean to a Professor of English; it is the meaning which would be attributed to them by people in the trade. When the Standard Industrial Classification was being compiled those who were responsible for it were certainly not embarking on an academic exercise but were seeking to make what the very document itself says, namely an industrial classification. For these reasons I have come to the conclusion that the point which the Department sought to make about heading 899.2 vanishes.
It is obvious that in these circumstances this court must allow the appeal. We have been urged that we should not reverse the decision but that we should remit the case to the tribunal. I think that that would be a waste of time and money. If the case were to be remitted to the tribunal it would presumably follow the principles laid down in the Reliant case. If it did not do so it would manifestly be misdirecting itself and would be corrected by the Divisional Court. If it applied those principles it would in my view be impossible for it to come to any conclusion other than that the activity of press photographic agencies falls fairly and squarely under heading 486 unless it is expressly referred to in some other heading. The only other heading which could possibly have referred to it is heading 899.2. If the case were remitted to the tribunal and it had Mr Hunt’s unchallenged affidavit before it, it would be bound to find that the employers and those engaged in similar activities are not engaged in commercial photography and that accordingly heading 899.2 is irrelevant. As I have already said, it would obviously be misdirecting itself and would be corrected by the Divisional Court. Accordingly I see no point in remitting this case. I would be in favour of allowing the appeal and reversing the decision of the Divisional Court (1970 ITR 75) and of the tribunal.
Before I part with the case I ought to say that, having regard to the Reliant case, the decision in Minister of Labour v Southam News Services of Canada, a decision to which I was party, should no longer be regarded as good law.
PHILLIMORE LJ. The two competing headings in this case are 486, for which the employers contend, and 899.2, for which the Department argues and which was preferred by the tribunal. In the course of its decision, given on 18 January 1967, the tribunal found the following facts:
‘The work which these companies [ie the employers] do, the production of photographs for use by the Press, is work which when done by a newspaper itself, would be a part of the printing and publishing of that newspaper or periodical; it would be work which the employees would be doing in connection with that activity.’
Page 783 of [1970] 3 All ER 775
In other words, the employers’ activities form an essential, necessary and definite part of the printing and publishing of newspapers and periodicals. There can be no doubt, as Salmon LJ has said, that if the tribunal had had before it the decision of the House of Lords in Lord Advocate v Reliant Tool Co it would have held that the activities of the employers brought them within heading 486. However, in the absence of that decision the tribunal turned to heading 899.2 and, treating the words ‘commercial photography’ as an express provision within the wording of s 10(5) of the Selective Employment Payments Act 1966, held, in the light of the definition of ‘photography’ in the Shorter Oxford Dictionary and giving effect to the ordinary meaning of the words, that the employers were commercial photographers and accordingly heading 899.2 applied.
Despite the fact that the Divisional Court (1970 ITR 75) found that the tribunal had misdirected itself in ignorance of the law as decided in the Reliant case, it did not remit this matter to the tribunal in view of the clear finding which it had reached on heading 899.2. It does not appear to have occurred to that court that activities might be described as coming under both headings and that s 10(5) only requires the tribunal to ‘have regard’ to any express provision in deciding on balance which heading is most apt. In fact it is now beyond argument that whatever else they may be the employers are not commercial photographers within the meaning of these words as used by the trade or industry.
In my judgment the proper approach of the tribunal is to consider what is the meaning of these words or what is the meaning to be attributed to the activities of any particular concern in the trade or in industry. That is emphasised by Lord Wilberforce in his speech in Secretary of State for Employment and Productivity v C Maurice & Co Ltd ([1069] 2 All ER 37 at 41, [1969] 2 AC 346 at 361) which, again, Salmon LJ has referred. This is, after all, an industrial classification and in para 6 of the introduction it is stated:
‘The Classification has been prepared to conform with the organization and structure of industry and trade as it exists within the United Kingdom … ’
There are the very words. What is the meaning to be attributed in the trade? In my judgment, in considering that the tribunal ought, of course, to weigh any evidence before it and if there is no evidence then no doubt it would be right to give to the words it has to construe their ordinary meaning and perhaps to have recourse to a dictionary for their assistance. Here, as I see it, the evidence was all one way when this matter originally came before the tribunal, because in the case for the employers it was stated in terms. After they had set out various considerations they said: ‘On these considerations we could not possibly be regarded as “Photographers, Portrait, Commercial, Developing, Colouring”, etc.' They went on to develop this in further passages which are set out in the bundle before us. They called evidence but the Department did not seek to cross-examine any single witness and indeed did not call any evidence to contradict that given on behalf of the employers. So, as I think, this finding was in fact reached in the teeth of the evidence which was before the tribunal.
But of course now, as a result of the affidavit to which Salmon LJ has referred in detail, the matter is beyond argument. Mr Hunt concludes:
‘Press photography carried out either by an employee of a newspaper or by an employee of a photographic news agency is not described in the trade and could not properly be described in the trade as “commercial photography“.’
The Department have not sought to contradict that statement, although, of course, their counsel, as he is entitled to do, does not concede that it is necessarily to be accepted.
In my judgment, we have no option on this evidence; the matter is completely clear.
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Heading 899.2 is out. The tribunal could not, in the face of this affidavit, have found as it did. So, as I think, there is no competitor to heading 486. For the reasons which Salmon LJ has given I agree that there is no point whatever in sending this matter back to the tribunal and that the proper course is to reverse the decision of the Divisional Court (1970 ITR 75).
BUCKLEY LJ. I agree with both the judgments which have been delivered and would only add this. The tribunal construed the expression ‘Commercial … photography’ in heading 899.2 in the light of what it thought was the natural meaning of those words in the English language. Counsel for the Department has contended that this was a reasonable and defensible view and ought not to be disturbed. That is a question of construction and the fact that a particular view on such a question may be reasonable and may be rationally defensible does not mean that that view is necessarily right. The document to be construed must, as in any case of interpretation, be read in the light of any relevant surrounding circumstances and of any admissible evidence and the context in which the words to be construed are found must be considered.
The legislature has chosen in the Selective Employment Payments Act 1966, to legislate by reference to the Standard Industrial Classification. In the absence of any contrary indication in the Act—and I know of none—this document must, in my judgment, be read and interpreted in the light of the circumstances and the purposes for which it was originally prepared. As has already been pointed out, it was prepared to promote uniformity and comparability in official statistics in the United Kingdom. It consists of a classification based on industries and the classification was prepared to conform with the organisation and structure of industry and trade as it exists within the United Kingdom.
The classification must accordingly, in my judgment, be construed in the way in which it would be construed by those for whom it was designed for the purposes for which it was designed, and the terms used in it must, therefore, be given a sense which it is proper to give them relating them to industrial and commercial activities in this country. That is what I think Lord Wilberforce was particularly emphasising in the passage in his speech in Secretary of State for Employment and Productivity v C Maurice & Co Ltd ([1969] 2 All ER 37 at 41, [1969] 2 AC 346 at 361) to which reference has already been made. He there certainly indicated that special weight is to be given to the findings of the tribunal in cases of this kind, because of the character of the tribunal, incorporating as it does businessmen with knowledge appropriate to decide how the classification should be applied. He also clearly stated that its decision is subject to review by an appellate court; and the appellate court, when considering whether or not the view taken by the tribunal was a proper one, must clearly apply similar criteria to those which ought to be applied by the tribunal in the first instance, ie the appellate court must itself construe the various headings in the classification in the light of the way in which those headings would be interpreted in the commercial and industrial world.
We now have the advantage of Mr Hunt’s affidavit which was not available to the tribunal in the first instance or to the Divisional Court (1970 ITR 75) when the matter came before it. In the course of his judgment Lord Parker CJ expressly drew attention to the fact (1970 ITR at 81) that there was no evidence before the tribunal that commercial photography was a word of art like ‘commercial artist’. We now have the benefit, as I say, of Mr Hunt’s affidavit, which makes it clear, in my judgment, that ‘commercial photography’ is a label which is used in the photographic industry with a particular connotation and it is that connotation which should be given to it in considering whether the
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work which is done by press photographic agencies can fairly be said to fall within the activities of commercial photography. The answer to that question, in the light of the affidavit, must be in the negative.
It follows from that that heading 899.2 contains no express reference within the meaning of s 10(5) of the 1966 Act to the activities of the employers, so that no balancing operation has to be carried out as a result of the requirement of that subsection to have regard to any express provision of any other heading. For reasons which have already been discussed by my Lords, one is left with heading 486 in undisputed possession of the field, with the result that the employers are entitled to succeed on this appeal, and I agree that the appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords refused.
Solicitors: Lovell, White & King (for the employers); Solicitor, Department of Employment and Productivity.
Henry Summerfield Esq Barrister.
American Cyanamid Co v Upjohn Co
[1970] 3 All ER 785
Categories: INTELLECTUAL PROPERTY; Patents
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD GUEST, LORD WILBERFORCE AND LORD DIPLOCK
Hearing Date(s): 23, 27, 28, 29 JULY, 27 OCTOBER 1970
Patent – Petition for revocation – Insufficiency – Fair basis – Patent for antibiotic and process of manufacture – Micro-organism described in specification – Micro-organism deposited in collection – Whether patentee must make essential starting material available to public – Patents Act 1949, s 32(1).
A patent related to a new antibiotic called porfiromycin and to a fermentation process for its production using a suitable strain of a particular micro-organism, streptomyces verticillatus. The patent specification contained a scientifically accurate and sufficient description of the relevant strains, from which description the skilled reader could ascertain whether any given strain was suitable for the process. However, the description was not such as to enable the reader to produce or isolate a strain for himself and it was common ground that in order to be able to carry out the invention the reader would in practice need to obtain samples of the micro-organisms isolated by the patentees, the appellants. The appellants had in fact deposited suitable strains at the American Type Culture Collection (ATCC) in the United States, and had referred to the ATCC deposit numbers in their specification. Deposit had taken place before the filing date of the UK application but was accompanied by a ban by the appellants against acquisition of samples by the public without the appellants’ permission. This ban was removed so far as the US public was concerned only after the date of publication of the British specification and was not totally removed until some time after the date of grant of the UK patent. In revocation proceedings the respondents contended that on the above facts the complete specification did not sufficiently and fairly describe the invention or the method by which it was to be performed, and that the claims were not fairly based on the matter disclosed in the specification. They argued that it had from early times been the law that as a consideration for obtaining his monopoly a patentee had to make it possible for others skilled in the matter to produce the finished product commercially after the patent had expired and to conduct experiments during the monopoly period so that they could invent improvements, and that in the present case samples of the deposited strains should have been made available by the appellants at the date of publication of the complete specification. The appellants contended that
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the existing law only required that the specification should sufficiently describe the material to be used and that they were under no obligation to deposit their strains at all or to make them otherwise available, or that (if they were under any such obligation) they had complied with it by authorising the ATCC to make the strains publicly available at the time when they had.
Held – (i) (Lord Diplock dissenting) That a patentee was not under any obligation to make the starting materials of his invention publicly available and that the patent was not invalid on the grounds alleged (see p 789 h and j, p 794 d and g, p 797 c and f, and p 801 d and f, post).
Sturz v De La Rue (1828) 5 Russ 322 distinguished.
Vidal Dyes Syndicate Ltd v Levinstein Ltd (1912) 29 RPC 245 considered.
Per Lord Wilberforce. I fail to see in what sense a failure to give access to strains (admittedly fully described in the specification) can be called a failure of description. It is failure of action, failure quite outside the sphere of the specification, a written document whose purpose is to describe, a failure of conduct by the patentee. It cannot be converted into a failure of description by a formula such as ‘he failed to provide information enabling the addressee to gain access to the culture’ (see p 801 b, post).
(ii) The grounds for revocation set out in s 32a of the Patents Act 1949 had replaced the common law grounds on which a patent could be revoked by scire facias and were exhaustive (see p 789 d, p 794 a and c, p 796 h, p 800 d and p 801 j, post).
Per Lord Reid. If the present problem had arisen while the pre-1949 law was still in force I am very much inclined to think that the court would have held that it was contrary to the general intendment of the Statute of Monopolies 1623 and subsequent legislation that a patentee should be entitled to have the advantage of his patent and yet be able to preserve his monopoly after the expiry of his patent by refusing to take such steps as were necessary to enable others to carry out his invention … The law was still sufficiently flexible for the court to be able to formulate a new ground of repeal or revocation to meet a new situation … Those who seek to replace the common law by statutory code always have to choose between certainty and flexibility. Are they or are they not to include in the code some provision enabling the provisions of the code to be extended to meet new situations? Here such a provision was deliberately repealed and omitted (see p 788 h and j and p 789 c, post).
Notes
For revocation of a patent on the ground of insufficiency of description, see 29 Halsbury’s Laws (3rd Edn) 65–71, paras 137- 148, for revocation on the ground that the claims are not fairly based on the matter disclosed in the specification, see ibid 63–65, paras 130–136, and for cases on the subject, see 36 Digest (Repl) 810–811, 1676–1686.
For the Patents Act 1949, s 32, see 24 Halsbury’s Statutes (3rd Edn) 588.
Cases referred to in opinions
R v Arkwright (1785) 1 Web Pat Cas 64, 36 Digest (Repl) 646, 16.
Savory v Price (1823) Ry & M 1, 36 Digest (Repl) 764, 1117.
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Sturz v De La Rue (1828) 5 Russ 322, 7 LTOS Ch 47, 38 ER 1048, 36 Digest (Repl) 755, 1032.
Vidal Dyes Syndicate Ltd v Levinstein Ltd, Same v Read Holliday & Sons (1912) 29 RPC 245, 36 Digest (Repl) 750, 960.
Appeal
This was an appeal direct to the House of Lords under s 13 of the Administration of Justice Act 1969 by American Cyanamid Co from a decision of Graham J, given on 3 February 1970 and reported [1970] RPC 306, that (subject to a stay pending possible appeal) letters patent 934,853 be revoked. The respondents were Upjohn Co.
B W Budd QC and W Aldous for the appellants.
G D Everington QC and G D Paterson for the respondents.
Their Lordships took time for consideration
27 October 1970. The following opinions were delivered.
LORD REID. My Lords, this appeal arises out of a petition by the respondents for the revocation of the appellants’ patent 934,853 on the grounds that: (1) the complete specification does not sufficiently or fairly describe the invention or the method by which it is to be performed; (2) the scope of each claim is not sufficiently and clearly defined; and (3) no claim of the complete specification is fairly based on the matter disclosed in the specification. A further ground that the patent was obtained on a false suggestion or representation is no longer maintained. The date of application in this country was 9 September 1960; it followed an application in the United States of America on 15 September 1959. The complete specification was published on 21 August 1963.
The complete specification states that the invention relates to a new antibiotic, porfiromycin, and to processes for preparing the same. No question arises as to what precisely was the invention or as to the form of the claims which cover methods of producing the antibiotic and the antibiotic itself whenever produced by these methods. It is stated in the specification that when certain strains of an organism streptomyces verticillatus are cultivated under controlled fermentation conditions this new antibiotic is produced. Full details are given as to how to identify these strains and as to how to carry out the process of production. It is not said that these are in any way insufficient. The controversy in this case arises from the fact that even the most skilled searcher might well fail to find these strains anywhere in the world, at least without good luck, and there is no suggestion that there is any known method of changing better known strains into these particular strains. This gives rise to a new problem in patent law. The appellants argue that the existing law only requires that the specification shall sufficiently describe the material to be used in the new manner of manufacture and the processes used in converting that material into the finished product. The respondents argue that it has from early times been the law that as a consideration for obtaining his monopoly the patentee must make it possible for others skilled in the matter to produce the finished product commercially after the monopoly has expired and to conduct experiments during the monopoly period so that they can invent improvements. When the starting material is not a living organism a sufficient description of it will almost inevitably enable others to buy it or to make it. But here that is not so. The organism will reproduce itself under suitable conditions, so the patentee has an unlimited supply from which to make the finished product. But no one else will ever be able to use the invention unless the patentee makes his strain of the organism available to others so that they too can create a supply by causing the reproduction of the organism made available to them. This problem has arisen because since the discovery of penicillin much costly
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research has shown that other micro-organisms can be made to produce a variety of products of great therapeutic value. But everything depends on getting the right organism to work with.
It appears that a practice has arisen of depositing useful strains in the American Type Culture Collection which we were informed is privately owned. The owners of the collection keep these strains alive and are prepared to make small quantities available on demand and no doubt on payment of a suitable charge. But they will not do that until authorised to do so by the depositor. It is stated in this specification that the strains with which this patent is concerned were deposited in that collection. But the appellants did not authorise the collection to make these strains available to others until a date much later than the publication of this complete specification.
The appellants’ first contention is that they were under no obligation to deposit their strains at all or to make them otherwise available. Alternatively, they contend that if they were under any such obligation they complied with it by authorising the collection to make the strains available at the later date. The respondents contend that unless the strains are available at the time of publication of the complete specification the patent subsequently granted must be invalid and that the defect cannot be cured by making the strains available later.
I must first consider the far-reaching contention that there is no need under the existing law either to make the appellants’ strain available to others or to tell them where they can get it. Indeed it seems not improbable that if the possessor of an existing strain lost it he would not himself have any certainty of being able to find it again in nature. After the enactment of the Statute of Monopolies 1623b the development of the law was left to the courts with few interventions by Parliament until 1883. It was soon decided that a patentee must do something to make it possible for others to carry out the manner of new manufacture after the monopoly had expired. At first it appears to have been sufficient if the patentee trained apprentices who could later carry out the method. But by the early eighteenth century it was required that he should disclose full particulars of his invention. If he did not do so anyone interested could seek repeal or revocation by writ of scire facias. A brief account of this writ is given in a footnote to R v Arkwright. As time passed the courts elaborated various grounds on which revocation could be sought. There was no statutory definition of these grounds until 1932 when a number were set out in s 3 of the Patents and Designs Act 1932, but at the end of that catalogue there was added—
‘… or upon any other ground upon which a patent might immediately before the first day of January one thousand eight hundred and eighty-four, have been repealed by scire facias … ’
If the present problem had arisen while that provision was still in force I am very much inclined to think that the court would have held that it was contrary to the general intendment of the Statute of Monopolies 1623 and subsequent legislation that a patentee should be entitled to have the advantage of his patent and yet be able to preserve his monopoly after the expiry of his patent by refusing to take such steps as were necessary to enable others to carry out his invention when his patent had expired. If this could only be done by making his strain of micro-organism available to others and could not be done by giving information in his specification, then I think that the patentee would have been required to choose between making his organism available and having his patent repealed. The law was still sufficiently flexible for the court to be able to formulate a new ground of repeal or revocation to meet a new situation. But the law was altered by the Patents Act 1949. Section 32(1) of that Act provides:
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‘Subject to the provisions of this Act, a patent may, on the petition of any person interested, be revoked by the court on any of the following grounds, that is to say … ’
and then there follows a list of 12 specific grounds. The provision which I have quoted from the 1932 Act was repealed and not re-enacted and we were not referred to any other provision in the 1949 Act which would enable the court to amplify the 12 specified grounds for revocation.
No doubt it was thought by those who recommended the provisions of the 1949 Act to Parliament that these 12 grounds covered every kind of case which was then known or could be foreseen. And no doubt they were right in that view, because probably the present problem was not then foreseeable. Those who seek to replace the common law by a statutory code always have to choose between certainty and flexibility. Are they or are they not to include in the code some provision enabling the provisions of the code to be extended to meet new situations? Here such a provision was deliberately repealed and omitted.
The court is therefore now confined to the duty of interpreting the words of these 12 grounds. If the words of any of them are reasonably capable of a meaning which makes them applicable to the new situation then they will be so applied. But it would in my view be wrong to twist the words of any of them and give them an unnatural meaning. That would be an end to certainty. If on a reasonable construction none of these grounds will apply to the new situation then the only remedy is new legislation.
The respondents rely on two of the grounds specified in s 32(1) of the 1949 Act:
‘(h) that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed …
‘(i) that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly based on the matter disclosed in the specification.’
Ground (h) deals with the description in the specification and with nothing else. The description in this specification is not attacked as being in any way insufficient or misleading. When counsel was invited to suggest which words should be added to or altered in this description he frankly admitted that no alteration was required. The argument, as I understand it, was that it cannot be said to be a fair description if the addressee cannot by means of it carry out the invention; if the organism were made available to the addressee then and only then would the description be a fair description. It may well be that it is unfair, in the sense of being contrary to the spirit of this legislation, not to make the patentees’ strain of this organism available to others, but that has nothing to do with the specification or what it contains. ‘Fairly describe’ plainly refers to the contents of the specification and not to the patentees’ conduct, and in my judgment no reasonable method of statutory construction could extract this meaning from these words. I am therefore of opinion that ground (h) is of no avail to the respondents.
Ground (i) appears to me to be even more remote from the present case. Again this ground only deals with the specification and what it contains. It requires the claims which always appear at the end of the document to be fairly based on the matter in the earlier part of the specification. It cannot mean that it is unfair of the patentee to make claims because of his conduct in not making the organism available to others. This ground also requires that the scope of the claims shall be sufficiently and clearly defined. But I did not understand that any separate argument was based on that requirement. There was no attack on the claims.
As neither of these grounds can reasonably be made to apply to the present case it follows that the petition to revoke this patent must fail. But I must add one or two observations. No question has been raised and no argument submitted whether
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there is here any patentable invention. Undoubtedly these new substances are of great value to the public and those who have spent large sums in producing them deserve a reward. But I must not be taken as expressing any opinion on any questions other than those which have arisen for decision in this case. That also applies to the need for further legislation. It may well be that there should be a requirement that these organisms should be made available and then the question would arise as to the date at which that should have been done. But that is a question of policy and not of law and I do not think that I can usefully express any opinion about it.
I would allow this appeal with costs.
LORD MORRIS OF BORTH-Y-GEST. My Lords, this appeal (which is the first appeal heard by your Lordships under the procedure made possible by s 13 of the Administration of Justice Act 1969), highlights a problem which may arise in relation to inventions which involve the use of micro-organisms. If an invention consists in applying certain processing steps to certain strains of an organism so that a new antibiotic is produced and if the processing steps are in the complete specification sufficiently and fairly described and if the particular strains are in the complete specification sufficiently and fairly described but if the particular strains are not available or made available at the date of the filing of or the publication of the complete specification or at some other date, should letters patent be revoked on the ground that the complete specification ‘does not sufficiently and fairly describe the invention and the method by which it is to be performed’?
The invention in the present case relates to a new antibiotic porfiromycin and to processes for preparing it. It was found that when certain strains of an organism (streptomyces verticillatus) are cultivated under controlled fermentation conditions a new antibiotic was produced. In the complete specification the particular strains are very fully described. It is recorded that samples of the strains had been deposited in the American Type Culture Collection. The particular strains were referred to as strains AB-929, AA-849 and AB-286, each strain having its culture collection accession number. In the specification the strains were referred to as being ‘new’. There was an instruction to the American centre that the strains were not until further notice to be made available to the public. That instruction was given because of circumstances arising from the passage of a United States application for protection for the same invention. That application was made on 15 September 1959. The application for the letters patent which are the subject of the present proceedings was made on 9 September 1960, under the provisions of the International Convention for the Protection of Industrial Property.
Certain matters are beyond controversy and may be summarised. (1) In the complete specification (which was published on 21 August 1963), the descriptions of the particular strains (which are strains of the organism streptomyces verticillatus) are fully adequate. If a skilled man had a strain in his possession he could ascertain by comparing its properties with those set out in the complete specification whether it is one of the porfiromycin-producing strains to be used in the invention. (2) The complete specification describes the methods which are to be adopted in order to produce the antibiotic from the described strains. The descriptions are fully adequate to enable a skilled man to produce the antibiotic once he has the described strains. (3) The complete specification also describes the antibiotics which will be produced if the described methods are adopted in reference to the described strains. (4) The complete specification does not indicate any way in which samples of the described strains could be obtained apart from their being made available by the American centre and there is no publicly available knowledge which would help a skilled addressee to find the strains. It is impossible to know how long such a person would take to isolate a sample of the strains or indeed whether he would ever isolate such a sample (or obtain it by a routine search). It would in effect be quite by chance that a
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skilled addressee would find the strains. The appellants have not sought to support the validity of the patent on the ground that even if no culture of the micro-organism employed was made available by them to the public the complete specification gave adequate directions for carrying out the invention in that a skilled addressee might by routine isolation techniques discover a suitable strain of the micro-organism for producing porfiromycin. (5) Samples of the particular strains were deposited in the American centre in May and June 1959. The respondents in September 1963, applied unsuccessfully to the American centre for a purchase of samples of the particular strains. It was said that the strains would not be available until the issuance of a United States patent. Samples were, however, made available to members of the public throughout the world at all times after 23 August 1966. That was the date of the sealing of the patent. The date of the patent was 9 September 1960 (the date of the filing of the complete specification). Samples of the particular strains had in fact been made available to the public in the United States and its possessions from 5 January 1966 and samples if obtained by members of the public in the United States could have been transmitted after that date (whether legally or not) throughout the world. By that time a United States patent had been granted. It was granted on 23 November 1965.
After the publication on 21 August 1963 of the complete specification the respondents contended that it did not ‘sufficiently and fairly describe the invention or the method by which it is to be performed’. So under s 14(1)(g) of the Patents Act 1949, they, on 21 November 1963, opposed the grant of letters patent. They succeeded before Mr Mirams ([1966] RPC 532), the superintending examiner acting for the Comptroller General. He heard the matter on 2 December 1965 and gave his decision on 13 January 1966. On appeal to the Patents Appeal Tribunal ([1966] RPC 532) it was held by Lloyd-Jacob J that the specification was not defective in its description of the manner of performance of the invention. ‘The starting materials are adequately defined and the processing steps clearly and sufficiently prescribed.' He therefore on 18 July 1966 allowed the appeal and pursuant to his decision the letters patent were granted on 23 August 1966.
In his decision Mr Mirams accepted ([1966] RPC at 533) that in the specification considerable pains had been taken in regard to description but he pointed out that no indication had been given as to how or where the strains might be obtained otherwise than by reference to the culture collection; he stated that the respondents’ complaint of insufficiency did not relate to the identification of the micro-organisms but to the fact that such micro-organisms were not available to the interested public. He stated that the objection under s 14(1)(g) was not on the ground that the complete specification did not sufficiently and fairly describe the invention but rather on the ground that it did not sufficiently and fairly describe the method by which it was to be performed. He held that this latter ground would be established if a burden of experiment and research was thrown on the public and that there would be such a burden if the micro-organisms were not made available to the public. So he held that opposition based on the latter part of s 14(1)(g) was well-founded.
The learned judge said ([1966] RPC at 538, 539) that it was established that if a person competent in the art had in his possession one or other of the strains which the specification identifies, the specification gave him full information by which he could assure himself of such identity and also adequate directions by following which he could produce the antibiotic porfiromycin. Such a person could by the exercise of his ordinary skill and knowledge put the invention into practice. So there was compliance with the requirement of s 14(1)(g). He said that it was necessary to preserve and indeed to emphasise ‘the distinction between identification of starting materials and making them available’. At the date of the hearing before Lloyd-Jacob J the starting materials had in fact in the manner which I have set out above been available for
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some months. The learned judge held ([1966] RPC at 539) that the reason why prior to January 1966 samples had not been made available from the American centre was one which cast no discredit on the bona fides of the appellants.
Between 23 August 1966 and 28 September 1967 the samples were undoubtedly made available. It was on that latter date that the respondents presented their petition for revocation. It was based on grounds (h), (i) and (j) of s 32(1) of the Patents Act 1949. Those grounds are as follows:
‘(h) that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed, or does not disclose the best method of performing it which was known to the applicant for the patent and for which he was entitled to claim protection;
(i) that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly based on the matter disclosed in the specification;
(j) that the patent was obtained on a false suggestion or representation.’
The petition was heard by Graham J ([1970] RPC 306) on 10 and 11 December 1969 and on 3 February 1970 he ordered that the letters patent be revoked (on the expiration of a period of suspension).
The submissions mainly presented to Graham J related to the ground set out in s 32(1)(h). They were substantially the same as those which had been put forward before the comptroller and before the Patents Appeal Tribunal ([1966] RPC 532). The allegation under s 32(1)(i) that the claims were not clearly defined does not appear to have been argued before Graham J and consequently is not mentioned in his judgment, but it was alleged that the claims were not fairly based on the matter disclosed in the specification. The allegation under s 32(1)(j) appears not to have been pressed at the hearing and it is briefly dismissed in the judgment. If in a specification mention were made of a deposit of strains in a culture collection and if it was intended that such mention should be construed as an admission of the availability of the strains when such was not the case then it might be, as indeed Lloyd-Jacob J pointed out ([1966] RPC at 540) that this would amount to a false suggestion. But it was not contended before your Lordships that an allegation of false suggestion could in this case be advanced. Although in their contentions before your Lordships the respondents relied on the grounds set out in s 32(1)(h) and also (j) it was effectively on the first of these grounds that they mainly based their case.
The learned judge ([1970] RPC at 327) considered that there was a lack of consideration for the grant of a claim to a method or process. He so held for the reason that the public could not carry out the method or process if—
‘… an essential and novel raw material for use in such method or process, which was available to the patentee and which he could have made available to the public, or could have given them sufficient directions to make or obtain is not available to them on the market or is not described in such a way that they can in fact make it or obtain it for themselves.’
He held that adequacy of description of a strain was not enough but that there should be directions which would be sufficient to enable an addressee to obtain the strain by some means or other. So he held that there was deficiency of description in the complete specification in that it had failed at the date of filing sufficiently and fairly to describe the invention or the manner by which it was to be performed and that the claims were not fairly based on the matter set out or disclosed in the specification.
The central question which arises is whether the letters patent are invalid under
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s 32(1)(h) if the complete specification adequately describes and identifies the strains of micro-organism which are to be used and also adequately describes the method of use but if the described and identified strains are not made available to the public. Is a patentee who sufficiently and fairly describes certain strains of micro-organism which are to be used and sufficiently and fairly describes the method by which a result will be achieved under the further obligation of making it possible for the public to obtain the described strains? The problem will only arise if the strains are novel in the sense that unless they are made available by the patentee it is only remotely likely that a member of the public would succeed in isolating them. Must the patentee give information, if he possesses it, as to where the strains could be found or are likely to be found? Must he incorporate this in the complete specification? If the patentee has deposited strains in a culture collection must he make them available to the public? Must he state in the complete specification that they have been available? Or that they are available? Or that they will be available? Will it suffice if without any statement in the complete specification they have in fact been or are available? If he must ensure that the strains are available must this be at the date when he applies for letters patent or at the date when he files his complete specification or at the date when it is published or at the date when the letters patent are sealed or at some and what later date? If as may well be the case the strength of the patentee’s position lies in the fact that either by good judgment or by good fortune he has isolated the particular strains would he be entitled to impose terms for making reproductions of the strains available and if so who is to decide as to those terms?
If the patentee has no further obligation than fully to describe his starting materials and fully to describe his method then it might well be that at the end of the period of his patent he would continue to enjoy a virtual monopoly. His protection during the period of his patent would insure him against the risk that someone during that period might isolate his strains. If, however, he decides to seek protection is he making any suitable return for having the privilege of that protection if he does not at any time make his strains available? What will he have given to the public or what consideration will there have been which will have justified his having been granted his letters patent? Although the letters patent are granted by the exercise of the prerogative it is generally accepted that the reason why there is an obligation fully to describe the method of an invention is so that after the patent has expired the public may fully enjoy the benefit of the invention. If they have no effective means of acquiring the starting materials how are they to make any permissible experiments or how are they to decide whether to oppose a grant or to seek the revocation of a grant? If they have no effective means of acquiring the starting materials of what avail is it to be told exactly what they are and exactly how to use them? If they are not given the tools how can they finish the job?
The various considerations to which I have referred point to the difficulties which may beset any solution by the courts of the problem now posed. Under these circumstances the only safe guide must be found in considering the words of those parts of s 32 which are invoked by the respondents in seeking the revocation of the letters patent. I approach the problem by disregarding the circumstance that at least since 23 August 1966 their complaint of the non-availability of the strains has not operated. Their complaint or their basis for asking the court to revoke the letters patent is firmly rested on a statutory provision. The letters patent contained a proviso that they should be revocable—
‘… on any of the grounds from time to time by law prescribed as grounds for revoking letters patent granted by Us.’
So the respondents rest almost entirely on s 32(1)(h). To the extent that there is dependence on s 32(1)(i) it is, I think, accepted that the notion of a claim not being ‘fairly based’ is but another facet with ‘insufficiency’ of the same basic complaint.
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The statutory words which the respondents invoke are in a section of the Act which now defines the grounds for revocation. The forerunners of the present section have differed in their content from that of the present section. Thus the words (see s 3 of the Patents and Designs Act 1932 and compare s 25 of the Patents and Designs Act of 1907)—
‘… or upon any other ground upon which a patent might, immediately before the first day of January one thousand eight hundred and eighty-four, have been repealed by scire facias’
do not appear in the present section. It must, I think, be taken to set out all the grounds on which revocation may be sought.
I turn then to the words in question. As regards s 32(1)(i) I see no reason for saying that the scope of each claim is not sufficiently and clearly defined; nor do I see any reason for saying that the claims are not fairly based provided always that the complete specification does (in the words of s 32(1)(h)) sufficiently or fairly describe the invention or the method by which it is to be performed. In what then does the invention consist? It consists in applying what Lloyd-Jacob J referred to as ‘processing steps’ to what he referred to as ‘starting materials’. It is common ground that the processing steps are sufficiently or fairly described. It is common ground that the starting materials are sufficiently or fairly described. So the invention and its method of performance are sufficiently or fairly described and in my view the respondents have failed to bring themselves within either of the grounds under s 32 on which they rely. To suggest that there is a requirement of some sort in regard to the availability of the starting materials involves reading into the section some words that are not there. I refer to a requirement of ‘some sort’ because for the reasons that I have earlier indicated if there is to be some implication in the statutory words to the effect that in some circumstances a patentee must do something or promise something in regard to making some material available for an addressee of a complete specification it is a matter of complete uncertainty as to what the implication should be. What is the obligation of the patentee to be and at what date is he to perform it? The fact that there are various rival possibilities in regard to what might be a fair and reasonable obligation to impose on a patentee shows that the bravest attempt to construe the provisions of s 32(1)(h) in a broad and liberal manner will founder in a sea of uncertainty.
The relevant grounds under s 32(1)(h) and (i) do not deal at all with availability. The emphasis under para (h) is on description. It is the description which must be sufficient and fair. There must be description of the invention and of its method of performance. But nowhere in the statutory words can I find or imply an obligation on the part of the patentee himself to supply the starting materials which he amply describes. Nor do I think that authority avails the respondents. When in Sturz v De La Rue it was held that the specification did not give that degree of full and precise information which the public has a right to require so that a person of ordinary skill in the trade will be able to carry on the process, it was in my view so held because the starting materials were not sufficiently described. It did not appear that there was a substance generally known in the trade as ‘the finest and purest chemical white lead’. Although it was said that if material was not made in this country but could be imported mention should be made of that circumstance it was not said that it is the duty of a patentee to make material available. He must give information so that material can be identified. The emphasis in Vidal Dyes Syndicate Ltd v Levinstein Ltd is on the duty of supplying information. A patentee must not throw on the public the burden of experimenting in order to ascertain how the invention is to be carried out. It was pointed out that in preparing his complete specification a patentee has two duties having distinct objects; in the first place he
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must ‘particularly describe and ascertain the nature of the invention’ and in the second place he must particularly describe and ascertain ‘the manner in which the same is to be performed’ (see s 2(2) of the Patents and Designs Act 1907). Fletcher-Moulton LJ said ((1912) 29 RPC at 265, 266):
‘The first is to ensure that the monopoly granted by the patent extends no further than the invention which the applicant for the patent has made. The second is to ensure that the public shall, in return for the grant of the monopoly, be put in full possession of the way to carry out the invention in order that, after the patent has expired, they may enjoy to the full the benefit of that invention.’
These observations emphasised the need for adequacy of description of method but they were not directed to a situation where there is difficulty in procuring the starting materials unless they are made available by the patentee. Such a situation does not appear to have been the subject of any previous judicial consideration or observations.
It was not contended that the comptroller is at present endowed with power in a case such as the present to impose a suitable condition to the grant of letters patent or to require an undertaking so as to ensure that samples of the deposited strains would be made available. If some legislative changes were contemplated a decision of policy would have to be made in regard to the date at which samples of strains (if deposited in a culture collection) should be made available.
For the reasons which I have given I consider that the respondents failed to impugn the complete specification on any ground set out in para (h) or (i) of s 32(1).
I would therefore allow the appeal.
LORD GUEST. My Lords, the invention with which this appeal is concerned—
‘… relates to a new broad spectrum antibiotic called Porfiromycin which is made by what I think may be described at this date as a normal aerobic fermentation but is one in which for the first time particular and new strains of Streptomyces verticillatus are employed.’
Claim 1 which is for the new method of producing the antibiotic reads as follows:
‘A method of producing an antibiotic designated porfiromycin which comprises subjecting a porfiromycin producing strain of Streptomyces verticillatus to aerobic fermentation in an aqueous nutrient medium containing assimilable sources of carbon, nitrogen and inorganic salts.’
Claim 7 is for the antibiotic itself which is specifically identified by a number of physical and taxonomic characteristics. The description contained in the specification, it is agreed by the parties, is apt to enable those skilled in the art to identify the strain positively if and when they can get or find it. But it is agreed that the only source open to the interested reader is in the American Type Culture Collection.
The deposits of the strain with the culture collection were made with the reservation that they were not to be released without permission. Although the deposits were made in 1960 it was not until 5 January 1966 that the patentees removed their ban on availability of these strains to the public in the United States of America. It was therefore not for a considerable time after the publication of the specification on 31 August 1963 that the strains were made available by the patentees to investigators in the United Kingdom. It will be seen that without the possession of the strains in question the skilled reader would be unable to experiment with the invention.
The case has had a somewhat chequered history. The respondents objected to the
Page 796 of [1970] 3 All ER 785
grant of the specification which was refused by the comptroller. An appeal to the Patents Appeal Tribunal ([1966] RPC 532) succeeded and Lloyd Jacob J allowed the grant. Revocation of the grant was sought by the respondents and their objections were successful before Graham J ([1970] RPC 306), who revoked the grant of the patent. The appeal by the appellants from Graham J comes direct to your Lordships’ House pursuant to leave granted under s 13 of the Administration of Justice Act 1969. The case would appear to be ample vindication of the new procedure.
The grounds on which revocation was sought were those contained in s 32(1)(h) and (i) of the Patents Act 1949 which are in the following terms:
‘(h) that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed …
‘(i) that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly based on the matter disclosed in the specification.’
The question which is raised in this case is whether the patentees—
‘… were under an obligation to make available to the public (through the medium of the complete specification) information which would enable the public to obtain the necessary starting material in the form of a porfiromycin producing strain of the organism Streptomyces verticillatus?’
The question is taken from the respondents’ case.
I am not at all clear on what precise ground Graham J ([1970] RPC 306) held that the grant was invalid. The question of lack of consideration bulks largely in the judgment, but I am not able to say with certainty whether lack of consideration in his view is a separate ground for invalidity or whether it is invoked as an aid to the construction of the grounds of invalidity set out in s 32(1). I will, however, deal first with lack of consideration if it is suggested as a separate ground. I am of opinion that whatever may have been the position before 1949, since the passing of the Patents Act 1949 such a ground has now disappeared. Section 25(2) of the Patents and Designs Act 1907 provided as follows:
‘Every ground on which—(a) a patent might, immediately before the first day of January, one thousand eight hundred and eighty-four, have been repealed by scire facias; … shall be available by way of defence to an action of infringement and shall also be a ground of revocation under this section.’
It may be that until 1949 lack of consideration would have been a separate ground for the revocation of a grant according to the existing common law. But these words of s 25 of the 1907 Act were omitted in s 32 of the 1949 Act. The inference must be that such grounds no longer exist as objections to the validity of a patent. The history of patent legislation over the years suggests that grounds of objection appeared in the common law and these were gradually incorporated in the statute law as codification proceeded. The final form of this codification was the Patents Act 1949. In my view this is an exclusive code and there is no residual power left to the court dehors the Act of 1949. It is of course right to say that in the development of the common law lack of consideration was the basis of many of the grounds of invalidity of a patent now set out in s 32 of the 1949 Act. If the words of the statute were ambiguous this element might be an aid to construction.
I proceed now to the specific grounds of objection. Section 32(1)(h) provides: ‘that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed.' The respondents argued that the complete specification did not sufficiently or fairly describe the method by which the
Page 797 of [1970] 3 All ER 785
invention was to be performed. This objection has been sustained by Graham J ([1970]) in the glass which he puts on it as follows:
‘… the patentee must put the addressee of the specification in such a position that he knows how to and is thus able to obtain any novel material which is essential for performing the invention claimed.’
The words of the section are clear. What the section requires is a sufficient description. This suggests in the context of a specification a number of words, illustrations, diagrams or symbols. It does not include an obligation to make available with the specification any particular substance. It is illegitimate, in my view, to read into two paragraphs in the subsection a requirement that the addressee must be able to perform the invention or that he is able to obtain the starting materials. It is not disputed that the starting material is sufficiently described. It is not in question that the process is sufficiently described. It is in fact a well-recognised process. In the cases to which we were referred there is no trace of any idea that the section imposes an obligation on the patentee to do any more than describe the invention and the method by which his invention is to be performed. This ground of objection in my view fails.
I next proceed to consider s 32(1)(i):
‘that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly based on the matter disclosed in the specification.’
It was on the second limb that the second objection by the respondents was but faintly based. There is no possible criticism of the claim. It is for the new antibiotic profiromycin. It cannot be suggested that it is not fairly based on the matters disclosed in the complete specification. That I think the respondents are attempting to do is to invert the ground of objection so that it reads: ‘the matters in the specification must be fairly disclosed’ and then so say that the obligation is, as a matter of fairness, to make the starting materials available. But ‘the matters to be disclosed’ in the specification are, as a matter of construction, dealt with in sub-s (1)(h). The assumption of para (i) is that matters have been properly disclosed and para (h) has been complied with. There is, in my opinion, no valid objection to the grant on this ground which must also fail.
A second question was raised by both parties. This was that on the assumption that the starting materials have to be made available, at what date do they have to be made available? Various dates were put forward—the date of filing, the date of publication of the complete specification, or the date of the sealing of the grant. In the view which I hold this question does not arise.
I would allow the appeal.
LORD WILBERFORCE My Lords, this appeal raises a novel and important issue arising from the use of micro-organisms for the making of a commercial product, in this case a pharmaceutical antibiotic called porfiromycin. Strains of micro-organisms have been found to be useful in various connections; but very large numbers of differing varieties are found in nature. The problem for the scientist lies in identifying and isolating the particular strains of which, or mutants of which, use can be made. These may come to light by painstaking or expensive research assisted by good fortune or by pure good fortune; once identified they represent a valuable asset. It may take years of search for other scientists, however competent, and although provided with full information as to the characteristics of the strain, to isolate the same strain for themselves, if indeed they can ever succeed in doing so. In order to preserve useful strains and to make them available for use, there have been established culture collections where samples can be deposited. The American Type Culture Collection (ATCC) is one such. There is another at Aberdeen, Scotland. The
Page 798 of [1970] 3 All ER 785
ATCC receives cultures and undertakes to breed them if required and to disseminate them to applicants. But it accepts instructions from the depositor not to release samples without his authority.
The micro-organism used in the present invention is streptomyces verticillatus. The invention for which a patent is claimed consists of the cultivation of certain strains of this micro-organism under controlled fermentation conditions with a view to the production of the new antibiotic porfiromycin. The claims extend to the method of producing the porfiromycin and to the antibiotic itself.
The appellants, American Cyanamid Co, who applied for the patent, deposited three strains of streptomyces verticillatus in the ATCC between May and July 1959, but gave instructions not be make them available to the public. The respondents, Upjohn Co, twice applied for samples but were refused. The strains were not made available without restriction to members of the public throughout the world until after 23 August 1966. The other relevant dates, for the purpose of these proceedings, are:
9th September 1960 Appellants’ United Kingdom Application 31,104/60.
21st August 1963 Publication of complete specification 934,853.
21st November 1963 Opposition entered.
2nd December 1965 Opposition hearing at Patent Office.
13th January 1966 Patent Office decision in favour of respondents.
18th July 1966 Patents Appeal Tribunal decisionc on appeal in favour of appellants
23rd August 1966 Sealing of patent 934,853.
The present proceedings are brought by the respondents for revocation of the patent. All facts thought to be relevant were agreed or admitted and the case, on this basis, was tried by Graham J ([1970] RPC 306) without evidence. He decided, on 21 January 1970, that the patent was invalid on the grounds stated in paras (h) and (i) of s 32(1) of the Patents Act 1949. By agreement of the parties, and by leave, appeal from his judgment was brought direct to this House in accordance with s 13 of the Administration of Justice Act 1969. This has resulted in an expenditious and practical way of disposing of what might otherwise have been prolonged and expensive litigation. Before considering the relevant statutory provisions, some general statement of the problem may be appropriate.
Patents, under English law, are granted for a manner of new manufacture, a term which has received accretions by interpretation over the years and which is accepted to extend to products. But manufacture involves the use of starting materials and it has been laid down in reported decisions that applications must in their specification put the public (ie the addressee skilled in the art) in possession of information sufficient to enable him to reach the starting point. This may be done either by reference to an accessible publication containing adequate particulars, or by providing a description of the mode of preparation and of the essential physical properties. A number of reported cases deal with the question whether the applicant has sufficiently complied with this obligation (see particularly Savory v Price, Sturz v De La Rue); others have emphasised that an inventor must not place a burden of research and experiment on those who seek to apply his invention (Vidal Dyes Syndicate Ltd v Levinstein Ltd), but none of these answers, or indeed raises, the question whether the applicant must, as well as identifying the starting material, actually make it available. One may generalise this by saying that, at any rate since specifications came to be required in the early eighteenth century, apart from a statutory requirement imposed at one time (Patents and Designs Act 1907, s 2(5)), to deposit chemical samples, no statutory
Page 799 of [1970] 3 All ER 785
provision and no decided case has ever imposed on a patentee any duty extending beyond what he must insert in a document.
In the case of micro-organisms, exact description, although difficult, is possible, as the specification in the present case shows. It contains a mass of scientific detail, worked out with great skill, which amounts to a scientifically accurate and sufficient description of the relevant strain, and from which the skilled reader can ascertain whether any given strain is of the kind from which porfiromycin can be produced. It goes further than this, for it identifies the strains with those deposited, under disclosed numbers, with the ATCC. All that the addressee lacks is actual access to a sample of the strain until such time (in the present case the date of grant of the patent) as the patentee releases it. The reason for this is obvious. The isolation of the strain represents the effective result of the research effort of the applicants, the process thereafter to be applied, although appearing elaborate to the layman, is in scientific terms simple and probably routine. The priceless strain, being something living, found in nature, cannot be patented; the prosaic process, as applied to the strain, is capable of protection. Therefore, the applicants do not wish to release their strains until they have secured protection for the process which makes then commercially valuable. That is what the appellants did here—they restricted access until the grant of the patent. Thereafter they released it. Whether they are entitled to withhold it and if so, up to what date, is the question which this case involves.
Under the Patents Act 1949, an application for a patent may be challenged at three stages. The first is after the filing of the complete specification. At this stage an examiner, on behalf of the comptroller, considers and reports whether the specification complies with the requirements of the Act and whether there is any lawful ground of objection. There is power at this stage to require the specification to be amended. There is no express power to require delivery of samples. The second stage is after publication of the complete specification. There is then a period of three months during which opposition may be entered. The grounds of opposition are confined to those set out in s 14(1): they include (para (g)) the ground that the complete specification does not sufficiently and fairly describe the invention or the method by which it is to be performed. Opposition was entered by the respondents under this paragraph; Lloyd-Jacob J sitting as the Patents Appeal Tribunal ([1966] RPC 532), considered it and in a reasoned judgment rejected the opposition. His judgment was a direct decision in favour of the appellants on the words ‘sufficiently and fairly describe’.
Finally, after grant, revocation of the patent may be sought under s 32. This section sets out a list of grounds of revocation under 12 paragraphs, of which the respondents invoked three. These are:
‘(h) that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed, or does not disclose the best method of performing it which was known to the applicant for the patent and for which he was entitled to claim protection;
‘(i) that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly based on the matter disclosed in the specification;
‘(j) that the patent was obtained on a false suggestion or representation.’
Graham J ([1970] RPC 306) rejected ground (j) and there was no appeal against his rejection; so the respondents were left with grounds (h) and (i). He decided mainly on ground (h) and applied the words ‘sufficiently and fairly describe’ against the appellants.
The first point to establish is whether the grounds stated in s 32 are exhaustive, or whether, behind and beyond them, there remains some further and broader ground which a petitioner may invoke. The patents legislation in the United Kingdom has
Page 800 of [1970] 3 All ER 785
followed a peculiar course. After the Statute of Monopolies 1623c, there elapsed over 200 years before the first piece of patent legislation in 1835. Since then there have been over 20 items of piecemeal legislation culminating in the Acts of 1949 (Patents and Designs Act 1949, Patents Act 1949) which purport to codify the law. As regards revocation, it is sufficient to refer to three statutes. The Patents, Designs, and Trade Marks Act 1883, s 26, abolished proceeding by way of scire facias but left available (without specification) as grounds for revocation all grounds available under that proceeding before the commencement of the Act. Thus the grounds for revocation were, as before, based on the common law and so capable, within the doctrine of precedent, of development. The first Act which specified grounds was the Patents and Designs Act 1907, but this Act in addition preserved all grounds available in scire facias proceedings before the Act of 1883. The Patents and Designs Act 1932 was in similar form; it contained a longer and more detailed list of specified grounds of revocation but still retained scire facias grounds as residuary. The Patents Act 1949 discarded any reference to scire facias; s 32(1) consists exclusively of an enumeration and, although the words ‘on no other ground’ used in s 14 are not repeated, no residuary ground is stated or preserved. The conclusion, to my mind, is unavoidable that a petitioner for revocation, under the present Act, is confined to the grounds specified in it, and that whatever flexible powers the court may have had under the common law have been absorbed into the enumeration. So, if the enumerated grounds for revocation are not adapted to deal with the new subject-matter of organic strains, the remedy must lie in legislation.
Before coming to grips with the two grounds relied on, there is a general argument to be considered. As Graham J pointed out in his judgment ([1970] RPC at 326), it has always been part of the law of patents, as an underlying assumption, that the monopoly rights conferred on a patentee for the period of the patent are conferred for a consideration. I understand this word to be used not in a contractual sense but as expressing the justification expected of a patentee and indeed of the Crown as grantor, in the interest of the public, for the monopoly conferred on him. As in the allied field of copyright, there is a general social interest to be balanced against the inventor’s, or author’s, right to protection. The nature of this ‘consideration’ has been evolutionary. In the seventeenth century, the public benefit was found in the introduction of a new trade into the country and the period of protection was related to the period necessary to train persons in its techniques. Later, and at the present time, the benefit has been seen rather in the general advantage of improved techniques coupled with the assurance that at the end of the monopoly period these improvements would pass into the public domain. This expectation has dictated the requirement that the specification should be so clear and explicit as to enable the invention to be worked by a suitably intelligent member of the public on the strength of its contents alone.
It is therefore correct, and also helpful, to say that the conception of consideration for the patent underlies much of the statutory provisions, in particular that of s 32. Indeed much of s 32(1) may be said to be concerned precisely with aspects of consideration. The requirements of ‘invention’ (d), novelty (e), lack of obviousness (f), utility (g), and the provisions of paras (h) and (i) may all be regarded in this way. Moreover, if there is a fair ambiguity in any or these paragraphs there may be justification for allowing the underlying assumption of consideration some influence in interpretation. But what is not legitimate, in my opinion, when the issue is whether a patent should be revoked, is to make use of the concept of consideration to add something to the specified grounds which is not there; so to do would be to introduce, indirectly, a residuary ground for revocation which the statute has discarded.
This enables the concrete and fundamental question to be stated. It is whether the patentee has, within the meaning of para (h), in his specification sufficiently and fairly described the invention and the method of performing it—plain words, one would
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think. Is his failure, to provide access to the culture, a failure to comply with this obligation? No reference to the concept of consideration, or use of that concept, can help to answer this question; certainly not one which enlarges the duty of the patentee beyond what the paragraph requires.
My Lords, I fail to see in what sense a failure to give access to strains (admittedly fully described in the specification) can be called a failure of description. It is a failure of action, a failure quite outside the sphere of the specification, a written document whose purpose is to describe, a failure of conduct by the patentee. It cannot be converted into a failure of description by a formula such as ‘he failed to provide information enabling the addressee to gain access to the culture’. What the addressee, before the sealed receptacles in the ATCC, required was not information (no ‘open sesame’ or combination of numbers would help him) but action by the patentee to open them. A requirement of access cannot be worked into the subsection in the sense of a requirement to include in the specification a statement whether, and when, the strain is available. Suppose the specification had said explicitly that the strains, located in the ATCC, would be released the moment the patent was granted, or at any other selected time: how can this be called ‘description’? How, if it could, would it help the addressee? Nor can a requirement of access be extracted from the word ‘fairly’; whatever this word adds or does not add to ‘sufficiently’, it qualifies description and nothing but description, it cannot mean ‘coupled with equitable conduct’. I think that Lloyd-Jacob J was right when he stated ([1966] RPC at 539) the necessity to preserve, and indeed to emphasise the distinction between identification of starting materials and making them available. For although, on the present special facts, one may construct the proposition that a reasonable, and ‘fair’, course would have been to have given release instructions to the ATCC which would then provide all that is needed at a modest fee, there may be other much more difficult cases. What if the material is in short supply? How much must be supplied? On what terms? For how long? What is the position of assignees? A general answer can hardly be given which will cover the variety of cases, certainly not one built on the words ‘sufficiently and fairly describe’.
I conclude therefore that grounds do not exist for revocation under para (h). If this is so, still less can the case be brought within para (i). That the scope of the claims were not sufficiently and clearly described I consider to be unarguable and I cannot understand how it can be said that the claims are not fairly based on the matter disclosed in the specification. The specification discloses, ex hypothesi, all that it had to disclose—the nature of the starting material and the details of the process. The process claims follow exactly and fall wholly within the specification and the product claims are precisely for what the specification provides. In my opinion the respondents fail to make good their claim for revocation on either ground.
My Lords, I have dealt with this case, as inter partes it must be dealt with, on the comparatively narrow issues presented to the court. I express no opinion as to the validity of the invention or as to the possibility or otherwise of other steps which might be taken before the revocation stage. Nor, if access to the strains is to be required to be given as a condition of gaining or preserving the patent, can I express any view as to the date on which this should be done. This is a matter of policy to be decided by Parliament.
I would allow the appeal, and reject the respondents’ petition for revocation of patent 934,853.
LORD DIPLOCK. My Lords, I accept that since the coming into operation of the Patents Act 1949, s 32(1) of that Act contains an exhaustive statement of the grounds on which a patent may be revoked by the court. Where I differ from the rest of your Lordships is in the application of that subsection and in particular of para (h) to a
Page 802 of [1970] 3 All ER 785
discovery of the kind which constitutes the invention claimed in the complete specification attached to the appellants’ patent.
Since the original discovery of the therapeutic uses of antibiotics and of the methods of aerobic fermentation by which they can be produced from micro-organisms to be found in nature, further advances in this field of medicine have been achieved by searching for and finding hitherto unidentified strains of micro-organisms existing in the natural state from which useful new antibiotics can be prepared by what is now a well-known standard process. The task of finding such a strain of micro-organism calls for the exercise of technical proficiency and is laborious and very costly, for the odds against success are large. It is not easy to see what inventive step, as distinct from the mere exercise of proficiency and patience, is involved in this kind of research, but the result of success in it is a new product useful to humanity which does not exist in nature. If such research is to be encouraged in a competitive society, the monetary rewards of success must be assured to those who undertake the expense; and the means of doing so in this and in most other countries with comparable social systems is by according to the successful discoverer of the new product the controlled and limited monopoly granted for inventions under the national patent laws.
Both parties to this appeal are members of the pharmaceutical industry and engage in this kind of research. Both are the owners of patents for new antibiotics in many countries throughout the world. The specifications for those granted in the United Kingdom are substantially in the form of the specification which is now in suit. It is not in the interest of either party that any shadow of doubt should be cast on the eligibility of this type of discovery to protection as an ‘invention’ under the Patents Act 1949, or on the validity of the form of the specification. This has been common ground and your Lordships have been deprived of the advantage of any critical analysis of a concept of invention which is wide enough to embrace the kind of discovery with which this appeal is concerned or of the consequences of applying that concept to the requirements of the Act as to the kind of information to be disclosed in the specification itself.
The only definition of ‘invention’ contained in the Patents Act 1949, is by reference to the phrase ‘any manner of new manufacture’ in the Statute of Monopolies 1623d. This statute has never been construed as confining the grant of patents to processes which would have been within the contemplation of Parliament in the early seventeenth century as constituting a new manner of manufacture. The concept of ‘invention’ as an activity which entitles the person who undertakes it to a patent monopoly of a process or its product has been continually changing by applying the social policy which underlay the Statute of Monopolies 1623 in the seventeenth century to the changing conditions resulting from advances in technology and the sciences. That policy was to provide a material inducement to persons to undertake whatever effort and expense might be needed to introduce into the United Kingdom some useful new process or new product with a view to its becoming generally available for use or manufacture by the inhabitants of the realm. The material inducement provided was the right for a limited period to prevent other persons from using the new process or product in the United Kingdom without the consent of the inventor; but the object of the policy would not be achieved unless at the end of that period those persons wishing to engage in the business of operating processes or making products of that kind were provided with all the information necessary to enable them to operate the process or to make the product.
The counterpart of the temporary monopoly granted by the patent was the provision of the information. I use the word ‘counterpart’ rather than ‘consideration’. This word has acquired a technical meaning in English law, whereas the basic policy which underlies the Patents Act 1949, has been adopted by many other nations which provide a corresponding monopoly to the inventor within their territories under their
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own patent laws. It is in my view consistent with this basic policy to treat the kind of research involved in the discovery of a strain of micro-organism from which a new and useful antibiotic can be prepared as an activity which entitles the person who undertakes it to a temporary monopoly under the Patents Act 1949, of the product of his success. I accept, therefore, the extension of the concept of ‘invention’ to include antibiotics which are discovered through this kind of research. But if this is to be done without defeating the basic policy of the Act one must also accept the necessary corollaries in the interpretation of those parts of it which deal with the information to be provided as the counterpart of the temporary monopoly granted to the inventor. Is is common ground that a mere verbal description of the newly-discovered micro-organism, such as is contained in the specification of the patent which is the subject of this appeal, although adequate to enable the micro-organism to be recognised if it can be found in nature, affords no clue as to where it can be found and does not enable anyone who reads the specification to produce the antibiotic. To enable him to do so he must also be informed where the micro-organism can be obtained. Without this information the counterpart for the grant of the temporary monopoly is not given.
The pharmaceutical industry, by which patents of this kind are held, operates on a world-wide scale. In practice they do give the counterpart. They do so in the way your Lordships have already described, by depositing specimens of new strains of micro-organisms in the collections of cultures which the industry has instituted notably in the United States and in Great Britain. From these collections persons interested can obtain samples from which an unlimited supply of the micro-organism can be grown. The system however is voluntary. There is no legal obligation on the patentee to deposit a specimen of the micro-organism from which the antibiotic which is the subject of his patent can be produced, not is there any legal obligation on him to release samples of a deposited micro-organism to any applicant. The dispute in the present case does not arise because the appellants are unwilling to continue to operate this system voluntarily, but because, for reasons immaterial to the present appeal, they did not release samples of the deposited culture until after the publication of the complete specification.
But the method which is prescribed by the Patents Act 1949 for providing all the information which constitutes the counterpart for the grant of the patent is by including it in the specification and not by other and extraneous means. The complete specification of the patent in suit contains a statement that the culture has been deposited in the US collection and gives the identifying catalogue references but it contains no statement that samples are available. Any such statement would have been untrue at the date of publication of the complete specification. It has not been the practice in the specifications for antibiotic patents to include any statement about the availability of samples of the deposited micro-organism, and the respondents who themselves own many patents of this kind, have resolutely declined to argue that any such statement is required by the terms of the Patents Act 1949. To succeed on this ground would be for them a Pyrrhic victory indeed. My reasons for thinking the contrary therefore may be stated very briefly.
My Lords, once one has extended the concept of ‘invention’ to include new antibiotics resulting from the discovery in nature of the parent micro-organism, the meaning to be ascribed to the provisions of s 32 must, in my view, take account of that extended concept. In agreement with Graham J ([1970] RPC 306), I should construe the requirement in s 32(1)(h) that the complete specification must ‘sufficiently and fairly describe … the method by which it [sc the invention] is to be performed’ as one which is not satisfied unless the specification states where a culture of the parent micro-organism can be obtained by the reader. Without that information the invention cannot be performed by the reader at all. A description of the method of performance which
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omits it is not in my view fair within the meaning to be ascribed to the expression ‘fairly’ in the context of that section. It does not provide the counterpart for the patentee’s monopoly. The provision of this constitutes a part of the basic policy of the Act. If the statement in the specification is untrue because the patentee will not release the sample the remedy is to be found in para (j) of the subsection.
As regards the date at which the sample must be available, I differ from Graham J ([1970] RPC 306) in thinking that the relevant date is that of the publication of the full specification. The statement as to where a sample can be obtained by the reader must be true when it is published to him.
I would therefore dismiss the appeal. Your Lordships, however, take a different view. It follows that if a counterpart which is not illusory is to be required by law of patentees of inventions of this kind amending legislation will be needed.
Appeal allowed.
Solicitors: Allen & Overy (for the appellants); Warren, Murton & Co (for the respondents).
Peter Hayward Esq Barrister.
Procedure Direction
(House of Lords: Appeal to: Patent Appeal)
[1970] 3 All ER 804
Categories: PRACTICE DIRECTIONS
Court: HOUSE OF LORDS
Hearing Date(s): 5 NOVEMBER 1970.
House of Lords – Appeal to – High Court, from – Patent appeal – Appeal from order for revocation of patent – Procedure – Patents Act 1949, ss 32 and 61.
David Stephens, Clerk of the Parliaments
(1) The following direction shall apply to any appeal direct from the High Court to the House of Lords in pursuance of ss 12 and 13 of the Administration of Justice Act 1969 from an order for revocation of a patent made on a petition under s 32 of the Patents Act 1949, or an a counterclaim under s 61 of that Act.
(2) Notice of intention to present an appeal, with a copy of the petition of appeal, must be served on the Comptroller-General of Patents, Designs and Trade Marks (hereinafter referred to as ‘the comptroller’), as well as on the persons mentioned in Direction as to Procedure No 6a, and that direction shall apply accordingly.
(3) If, at any time before the appeal comes on for hearing, the respondent decides not to appear on the appeal or not to oppose it, be must forthwith serve notice of his decision on the comptroller and the appellant, and any such notice served on the comptroller must be accompanied by a copy of the petition under s 32 or of the pleadings in the action and the affidavits filed therein.
(4) The comptroller must, within 14 days after receiving notice of the respondent’s decision, serve on the appellant and lodge in the Judicial Office a notice stating whether or not he intends to appear on the appeal.
(5) The comptroller may appear and be heard in opposition to the appeal—(a) in any case where he has given notice to the Judicial Office under para (4) of his intention to appear, and (b) in any other case (including, in particular, a case where the respondent withdraws his opposition to the appeal during the hearing) if the House so directs or allows.
(6) The House will make such orders for the postponement or adjournment of the hearing of the appeal as may appear necessary for the purpose of giving effect to the foregoing provisions of this direction.
Rother Valley Railway Co Ltd v Ministry of Transport
[1970] 3 All ER 805
Categories: TRANSPORT; Rail
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON, PHILLIMORE AND BUCKLEY LJJ
Hearing Date(s): 14, 15, 16 JULY 1970
Light railway – Amending order – Application for order authorising sale of railway to company formed to operate it – Matters to be taken into account by Minister in determining application – Whether Minister entitled to take public interest into account – Light Railways Act 1896, ss 7 and 24.
The construction of a light railway between Robertsbridge in Sussex and Tenterden in Kent was authorised by the Rother Valley (Light) Railway Act 1896 a and certain variations and extensions were authorised by three orders made under the powers conferred by the Light Railways Act 1896. By the Railways Act 1921, the Transport Act 1947 and the Transport Act 1962, the railway became vested in the British Transport Commission and latterly in the British Railways Board. Passenger services on the railway were discontinued in 1954 and freight services in 1961 but thereafter a small section was used intermittently. The company was formed with the object of acquiring and operating the railway (which was physically capable of being put into operation), and by a contract dated 6 April 1966 the board agreed to sell the railway to the company. This contract was conditional on the Minister of Transport making an amending order under s 24b of the Light Railways Act 1896 authorising the board to transfer to the company its rights in relation to the railway. If the sale went through the railway would be operated again, but otherwise there was no prospect of this happening. The company duly applied to the Minister for such an order and, after an inspector had held an inquiry on behalf of the Minister, the company was informed that their application for the order would not be granted because if the railway were again operated the advantages to the public of having the railway would be outweighed by the effect on road traffic of the level crossings and by the probable need for heavy public expenditure on bridges and also by other factors involving the public interest.
Held – The Minister had a duty to consider the public interest and the expediency of making the order, and her decision to refuse to make the order had not been shown to be based on wrong considerations and would be upheld, because—
(i) (Buckley LJ dissenting) section 7(1)c of the Act, which in terms required the Minister to determine ‘the expediency of granting the application’, applied to the making of the decision under s 24(see p 810 b and p 813 c, post; cf p 814 b, post); and
(ii) even if (as Buckley LJ considered) s 7(1) applied only to a decision to authorise a light railway, s 7(3)d, which obliged the Minister to consider all objections to the application ‘whether made formally or informally’, obliged her in order to exercise her discretion under s 24 to consider whether the making of the order was expedient and in the public interest (see p 810 d, p 813 h and p 814 c, post).
Decision of Megarry J [1970] 1 All ER 1192 reversed.
Notes
For authorisation of light railways by order, see 31 Halsbury’s Laws (3rd Edn) 783,
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784, para 1251, and for matters to be considered by Minister of Transport on application for a light railways order, see ibid 792, 795, paras 1273–1279, and for cases on the subject, see 46 Digest (Repl) 335–340, 137–290.
For the Light Railways Act 1896, ss 7 and 24, see 19 Halsbury’s Statutes (2nd Edn) 873, 880.
Appeal
The Rother Valley Railway Co Ltd issued a writ against the Ministry of Transport, seeking a declaration that a decision of the Minister of Transport that an order should not be made authorising the British Railways Board to sell the Kent and East Sussex Light Railway to the company was invalid and of no effect. The parties signed a special case under RSC Ord 33, r 3, for the decision of the court. Megarry J in a reserved written judgment, dated 23 February 1970 and reported [1970] 1 All ER 1192, held that the Minister had considered the wrong matters in reaching her decision, and made the declaration asked for by the company. The Ministry appealed. The facts are set out in the judgment of Salmon LJ.
S W Templeman QC and J P Warner for the Ministry.
I Percival QC and E A Seeley for the company.
16 July 1970. The following judgments were delivered.
SALMON LJ. Between Robertsbridge in Sussex and Tenterden in Kent there is a single-line railway track which is 13 1/2 miles in length and crosses seven public roads including three main roads. It crosses one of these main roads twice. The construction of this railway was started towards the end of the last century; the railway was extended and altered during the first few years of the present century, and probably from about 1906 until today it has remained unchanged. In 1954 it was closed to passenger traffic, and in 1961 it was for all practical purposes closed to freight. The only passage of freight over the railway after 1954 was over half-a-mile of the railway when materials were conveyed in carriages to a corn mill which was on a spur of the railway in the vicinity of the half-a-mile to which I have referred. This traffic was intermittent and infrequent.
It is necessary that I should make a brief excursion into the history of the legislation relating to this railway. Prior to the Light Railways Act 1896e, anyone who wanted to construct and operate a light railway had to promote a private Bill. The procedure was ponderous and expensive, and it took a good many years and the expenditure of a great deal of money before the Bill finally blossomed into an Act of Parliament. The railway line to which I have referred was known as the Rother Valley Light Railway, and it was originally authorised by the Rother Valley (Light) Railway Act 1896f, which was, of course, a private Act of Parliament. The Light Railways Act 1896, however, was passed for the purposes of facilitating the construction of such railways. I shall have to consider certain of its sections in more detail later. Broadly it provided for the appointment of three Light Railway Commissioners and for applications being made to them for power to construct and operate light railways together with all the ancillary powers which that would entail; and it gave them power to make orders granting such applications. These orders were subject to approval by the Board of Trade.
The Cranbrook and Tenterden Light Railway Order 1899 was an order made under the powers conferred by the public Act of 1896 and which brought this railway line under the ambit of that Act. Then other orders were made varying or extending the original order. There was the Rother Valley Light Railway (Extensions) Order 1902, and the Kent and East Sussex Light Railway (General Powers) Order 1904. Under the latter order the name of the railway was changed to the Kent and East Sussex Light Railway.
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The Ministry of Transport Act 1919 created the Ministry of Transport and transferred to the Minister of Transport the powers which formerly had been exercised by the President of the Board of Trade under the Light Railways Act 1896. The Railways Act 1921 transferred the powers which had been exercised by the Light Railway Commissioners under the Act of 1896 to the Minister of Transport. The Transport Act 1947 transferred the whole of the undertaking of the company which owned the railway to the British Transport Commission. This was a part of the general nationalisation of all public transport in this country. Then, finally, by the Transport Act 1962, the railway system was hived off the commission and transferred to the British Railways Board ‘hereinafter referred to as ‘the board’). Part of the system transferred was this railway running from Robertsbridge to Tenterden. So today in place of the company that formerly owned this light railway, we have the board, and as far as the Act of 1896 is concerned the Minister of Transport stands in the shoes of what were formerly the Light Railway Commissioners and the President of the Board of Trade. The powers which they formerly exercised, or such of them as are still relevant, have been transferred to the Minister of Transport.
It is apparent from what I have already said that when this railway passed to the board in 1962 it was then moribund. Eight years before it had ceased to carry passengers, and in the previous year had ceased for all practical purposes to carry freight. It was quite obvious by 1966 that the board had no intention of ever using this line again. There were, however, a number of people living in the vicinity of this railway who were extremely enthusiastic about reviving it, and undoubtedly sincerely held the view that it was in the public interest that its activities should be revived. They did a great deal of work voluntarily and, indeed, expended a great deal of money with a view to reviving this railway. They were instrumental in forming the Rother Valley Railway Co Ltd which is the plaintiff company in this action. On 6 April 1966 the plaintiff company entered into an agreement with the board under which the board sold the whole of the railway line and everything appertaining thereto to the plaintiff company. The idea was that the plaintiff company was going to take over the line and such of the railway stock as was left and operate a passenger service and also a service for the carriage of freight. Under the agreement the purchase price to be paid to the board was £36,000.
The agreement, however, was subject to the plaintiff company making an application to the Minister of Transport and obtaining an order which would in effect sanction the transfer to the plaintiff company (to the exclusion of the board) of all rights, powers, privileges and obligations of the board (whether statutory or otherwise) in relation to this railway. The agreement provided that in the event of the Minister refusing to make the order or if she would only make the order on conditions to which the parties or either of them could not agree, the agreement should be void. There was a further provision, that in the event of the Minister not making the order within nine months of the date of the agreement or within any extended time to which the parties might agree, the board should be at liberty to serve the purchasers with a written notice fixing a date for completion, and if within the time stipulated the order had not been made and the sale completed no further obligation should rest on the board to convey the railway.
In one of the schedules to the agreement there was a draft of the order for which the plaintiff company under the terms of the agreement was obliged to apply. The plaintiff company did apply to the Minister for such an order. The only part of it which I need read is cl 3:
‘(1) The Board and the Company may enter into and carry into effect agreements providing for the transfer to and vesting in the Company of the railway on such terms and conditions as may be agreed between the Board and the Company.
‘(2) As from the date upon which the railway shall become vested in the
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Company the Company shall to the exclusion of the Board be entitled to the benefit of and to exercise all the rights, powers and privileges and be subject to all the obligations of the Board whether statutory or otherwise for the time being in force in respect of the railway.’
Then cl 4 provided that the motive power should be steam, diesel, diesel electric, and other forms of power which I need not recite.
The Minister caused an inquiry to be held by an inspector who duly reported to the Minister. There were a number of opponents to the proposed order who were heard at the inquiry, and the Minister finally gave her decision on 4 September 1967. There are certain parts of her decision letter which I should read:
‘The Minister has also considered the “other factors involving the public interest” referred to in the Inspector’s recommendation. The most serious disadvantage of re-opening this line lies in the fact that it crosses seven roads on the level. These level crossings include one on the A.21, one of the A.229, and two on the A.28, all principal roads with large and growing flows of road traffic, particularly in summer. On the A.21 alone the summer peak flow is over 13,000 vehicles a day, with an annual growth rate of 7 or 8 per cent. The Minister cannot lightly contemplate imposing further delays on road traffic flows of this order of magnitude. She is advised that queues of up to 30 cars would result from the operation of manned barriers of the type suggested by the Railway Inspectorate as suitable for this line. She is further advised that in this situation, having regard to the expected growth of traffic, it might well be necessary ultimately to provide dual carriageway bridges to carry at least three of the roads over the line; this could involve a burden to public funds of several hundred thousand pounds.’
The Minister then refers to the fact that she noted that two of the county councils did not formally object to the granting of the order but that the spokesman for one of them made it clear that the interruption to road traffic was in his view undesirable and that the Minister should be thoroughly satisfied about the public need for the railway. The letter went on:
‘Similarly, the Inspector in his conclusion, felt … that “there is a public demand, slenderly amounting to evidence of a public need, but of a strength which could not prevail against serious objections on wider public grounds to the railway being re-opened“. The Minister’s decision on this Order must be based on the widest possible assessment of public transport needs. Her final considered view is that the advantages to the public of having the railway would be outweighed by the effects on road traffic and by the probability of heavy public expenditure on bridges … ’
and she refused to make the order and stated her sympathy for those who were asking for it.
As a result of that decision the plaintiff company commenced an action in which it asked for a declaration that the decision of the Minister communicated to the plaintiff company by the letter dated 4 September 1967, declining to make the order under the Light Railways Act 1896, as amended, for which the plaintiff company had applied, was invalid and of no effect. A special case stated in the action was heard before Megarry J ([1970] 1 All ER 1192, [1970] 2 WLR 1041), and he came to the conclusion that the plaintiff company’s contentions were correct and that the Minister’s decision was invalidly made. He accordingly made a declaration to the effect. From that decision the Ministry now appeals.
The learned judge’s view was that the Minister in deciding whether or not to make the order was not entitled to take into account the matters to which she referred in
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her decision letter. Put shortly, the plaintiff company’s contention which appealed to the learned judge was that the only question the Minister should ask herself when deciding on this matter was whether the plaintiff company was a suitable company properly equipped with finance and suitable personnel for the purpose of efficiently running these proposed railway services.
Everything, I think, depends on the true construction of certain sections of the Act of 1896. The first section I will read is s 24:
‘An order authorising a light railway under this Act may be altered or added to by an amending order made in like manner and subject to the like provisions as the original order … ’
The order for which the plaintiff company was asking was clearly an amending order of the original order to which I have referred authorising the light railway in question. It seems to me that looking at s 24 by itself the Minister has a clear unfettered discretion as to whether she will or will not make the amending order prayed for. The only attack that has been made upon the Minister is that in arriving at her decision she took into account matters which she was not entitled to take into account and excluded from her consideration the only relevant material.
I must now go back to earlier sections of the Act, because it will be remembered that under s 24 the Minister can only make an amending order ‘in like manner and subject to the like provisions as the original order’. The original order was made under s 7 of the Act of 1896, but before I read s 7 I ought perhaps to read the parts of s 1 on which counsel for the plaintiff company relied. Section 1(1) provided for the establishment of the commissioners. Section 1(2) reads:
‘It shall be the duty of the Light Railway Commissioners to carry this Act into effect, and to offer, so far as they are able, every facility for considering and maturing proposals to construct light railways.’
This, I think, was intended merely to simplify the procedure for obtaining power to construct and operate light railways. It did not mean that all applications relating to the construction or operation of light railways were to be granted willy-nilly. Section 7(1) provides that:
‘Where an application for authorising a light railway under this Act is made to the Light Railway Commissioners, those Commissioners shall, in the first instance, satisfy themselves that all reasonable steps have been taken for consulting the local authorities, including road authorities, through whose areas the railway is intended to pass, and the owners and occupiers of the land it is proposed to take, and for giving public notice of the application, and shall also themselves by local inquiry and such other means as they think necessary possess themselves of all such information as they may consider material or useful for determining the expediency of granting the application.’
Counsel for the plaintiff company has argued that none of that is relevant when considering a proposed amending order under s 24. He says that it is irrelevant because s 7(1) is primarily concerned with the compulsory acquisition of land and obtaining powers over the land and property of others and over public roads, and an amending order is not necessarily, and certainly this amending order is not, concerned with topics such as that. He concedes, however, as I understand his argument, that s 7(3) applies. It is in these terms:
‘The Commissioners [now the Minister of Transport] shall before deciding on an application give full opportunity for any objections to the application to be laid before them, and shall consider all such objections, whether made formally or informally.’
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Section 9(1)g reads:
‘The Board of Trade [now the Minister of Transport] shall consider any order submitted to them under this Act … with special reference to … (c) any objection lodged with them in accordance with this Act.’
Section 10 provides that any order made under the Act shall have the effect and force of a statute.
I am inclined to think that counsel for the Ministry is right when he says that the Minister not only may but should look back to s 7(1) when operating s 24, and that what is to be derived from s 7(1) is that one of the questions, and perhaps the chief question, to determine is whether or not it is expedient to make the amending order applied for. He says that in the appropriate case, and this is one of them, the Minister in considering expediency must take into account the interest of the public in general as well as the interest of the individuals concerned and cannot disregard the effect which the proposed amending order, if made, would have upon the public roads and on road users.
Even if that view of s 7(1) is wrong, I still consider that the Minister, who admittedly has a discretion under s 24 and has the duty under ss 7(3) and 9 to consider objections, must for the purpose of exercising her discretion ask herself the question, ‘Is it expedient, is it in the public interest that I should make this order?’
When the Minister in the present case considered whether or not she should make the order, she recognised, as was undoubtedly the fact, that unless she made the order this railway would probably never be operated again. The board certainly were not prepared to operate it. The only body that would ever operate it would be the plaintiff company. This line has been half dead since 1954 and completely extinct since 1961 save for an almost imperceptible flicker of life on the half-a-mile of its line to which I have referred. The effect of granting the application and making the order proposed would have brought it back from the dead and perhaps restored it to all its former vigour and possibly even greater activity than it had ever known. No doubt in 1896 there was a real public need for this line, and it may be that before it was closed in 1954 there was a need that it should carry passenger traffic and, prior to 1961, a need that it should carry freight. Quite clearly in 1966 there was a desire amongst many local inhabitants, which still strongly exists and with which the Minister sympathised and indeed I very much sympathise, that this railway should be revived.
The Minister, however, came to the conclusion, and not perhaps a very surprising conclusion, that the volume of traffic on the seven roads crossed by this railway was very different from what it had been in 1896 and even from what it had been in 1954 and 1961, and was likely to get very much greater instead of less. Weighing up the matter as it stood, it seemed to her that the inconvenience to the public using the roads caused by the resuscitation of this railway would substantially exceed any benefit which the railway could confer upon those members of the public who desired to use it. She therefore decided to refuse to make the order for which the plaintiff company applied. She came to this decision after a full inquiry, and, from her letter, she obviously came to it with some reluctance.
It seems to me quite impossible to say that there was no material upon which she could come to that decision. Still less do I think it possible to say that the reasons she gave for arriving at that decision were irrelevant. Counsel for the plaintiff company has argued very persuasively that the Minister should have closed her eyes to the fact that the railway had in effect been moribund for so long; the Minister was not entitled to take public expediency into account but only the competence of the plaintiff company to operate the railway. I am bound to say that in my view it would have been altogether wrong not to take public expediency into account and to have
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ignored the facts as they existed at the time when the application was made. The course proposed by counsel for the plaintiff company would involve approaching the problem in blinkers and wearing an academic gown. The Minister was bound to, and did, approach this problem from a realistic point of view.
I consider that the decision at which the Minister arrived is quite unassailable. It has been said, and said rightly, that Parliament gave her no power to take away the rights of the board to run a railway over this line if they so wished. Of that there can be no doubt. But that does not mean that because the Minister cannot kill a railway she is under any duty to bring a moribund railway back to life; nor does it mean that if the only possible way of reviving a railway is by means of an amending order, the Minister is bound to make the order even if convinced that the revival of the railway is contrary to the public interest. It is not necessary for me to consider what the position would have been if the board had been operating this line for years and was still operating it at the date of the application which the Minister refused.
There is only one other point with which I need deal. It has been suggested that the Minister considered entirely the wrong question, in this sense: the argument is that the board was entitled to transfer the line and sell the whole undertaking to the plaintiff company without the consent of the Minister at all; all that an amending order and, therefore, the consent of the Minister was needed for was to transfer the board’s statutory obligations to the plaintiff company. I doubt whether that argument is correct. It is founded upon s 14(1) of the Transport Act 1962 which reads:
‘Subject to this Act, the Boards shall have power—(a) to enter into and carry out agreements with any person for the carrying on by that person, whether as agent for the Board or otherwise, of any of the activities which the Board may themselves carry on … ’
It is suggested, and at first sight plausibly suggested, that this section gives the board an unfettered right to sell off any part of its undertaking to anyone it likes.
This section in effect reproduced s 2(2)(g) of the Act of 1947. For my part I very much doubt, although I do not think that it is necessary to decide the point, whether s 14(1)(a) can have the meaning for which counsel for the plaintiff company contends. It seems to me very unlikely that that section and its predecessor in the Act of 1947, which was an Act which nationalised the public transport in this country, could have been intended to give power to sell off parts of a nationalised undertaking and hand it back to private enterprise. I am inclined to think that much the most likely view of this section is the one for which counsel for the Ministry contended, namely that the sort of activities to which s 4 is meant to apply, amongst others, are the activities dealt with under s 4 which related to the board’s power to provide road services. He says, and I think with great force, that all that s 14(1)(a) is referring to are agents or independent contractors of the board—eg Carter Paterson—carrying out the road services which the board are empowered to undertake in relation to goods which had been carried by rail.
Counsel for the Ministry also relies on s 16 which provides that the board may enter into any working agreement to which that section applies notwithstanding that it involves the delegation of the functions of the board under any enactment relating to any part of their undertaking. The working agreements to which the section applies are specified in the section. They are very limited in extent. I need not refer to them in detail. It is said that if a company has a power in effect to hive off any part of its undertaking and to sell to someone else, why would s 16 have been incorporated in the Act.
I therefore consider that since the order of 1899 gave the board’s predecessors public rights—eg the right to run trains across the highway and thereby to obstruct the highway—and the line could not be run without these rights being exercised, it was necessary in cl 3(1) of the order applied for to obtain permission to enter into and
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carry into effect the agreement which transferred those rights to the plaintiff company. Those rights had been granted by the order of 1899 to the board’s predecessors in title and to no one else. They passed to the board by Act of Parliament. The board would have no power to confer those rights save by obtaining statutory power to do so, and the only way of obtaining such statutory power was by an order from the Minister, the Act providing that such an order would have statutory force.
But even if the argument with which I have just dealt is wrong and cl 3(1) of the proposed order is otiose, as the learned judge thought, there was, nevertheless, quite obviously a necessity before the projected transfer could be carried out for the board’s statutory obligations to be transferred to the plaintiff company. There were a number of important obligations owed to the public as well as to individuals. For example, under provisions of the order of 1899 and I do not think that I need recite them—the material provisions are ss 19, 20 and 21—there was an obligation cast on the company which then owned the railway to maintain the public highway over the railway crossings and at a certain distance from the railway crossings. There was also a duty to maintain various pieces of equipment running along the railway. The board, successors by statute to the plaintiff company, could not divest themselves of any of those statutory obligations save by an order.
It is quite true that the Minister, in considering the proposed order, dealt with the transfer of rights under cl 3(1), and having come to the conclusion, for the reasons I have indicated, that the order should not be made in respect of cl 3(1) she did not consider it necessary specifically to consider whether or not she ought to make an order shifting the obligations from the board on to the plaintiff company, nor whether she ought to make any order relating to motive power under cl 4. These matters were no longer relevant having regard to the view she took about the propriety of making an order in the terms of cl 3(1).
It would in my view be quite ridiculous to send the matter back to the Minister to consider cl 3(2). If she came to the conclusion, as she did, that it was inexpedient that this line which had been moribund for so long should be brought back to life, she would for the same reason as she refused to make an order sanctioning what was asked in cl 3(1) have refused to sanction what was asked in cl 3(2). Clearly the board were not prepared to go on with the agreement unless they could get rid of their obligations. If the Minister refused to make an order removing these statutory obligations from them, the agreement would die and the line would remain inert. Since in the Minister’s view it was in the public interest and expedient that the line should remain inert, she would have been bound to refuse the order under cl 3(2) for precisely the same reasons as she refused it under cl 3(1).
The board appears to have preserved a neutral position; as far as the board is concerned, it is of little consequence whether the order is made or not. If it is not made, then the line will be torn up and sold as scrap, and we are told that the price it will fetch as scrap is not very much less than the purchase price of £36,000 which the plaintiff company proposed to pay.
For these reasons I have come to the conclusion that the decision of the Minister is really unassailable, and I cannot accept any of the criticisms made of it by counsel for the plaintiff company, nor, indeed, by the learned judge ([1970] 1 All ER 1192, [1970] 2 WLR 1041). I think that he was wrong to make the declaration which he made, and I would accordingly allow the appeal.
PHILLIMORE LJ. I also would allow this appeal, and as the hour grows late, I will state my reasons very shortly, but since we are differing from the learned judge ([1970] 1 All ER 1192, [1970] 2 WLR 1041) I think it is necessary that I should say a few words.
In the first place, I also would like to express my sympathy with the very large
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number of local people, apparently some 800, who supported this project, and some of whom apparently have done a good deal of work on it, but having said that I confess that I think that the Minister was absolutely right in saying that the project was contrary to the public interest and refusing to allow this amending order on those grounds.
The question really involves a simple problem of the construction of the Light Railways Act 1896 and, in particular, of s 24 which provides:
‘An order authorising a light railway under this Act may be altered or added to by an amending order made in like manner and subject to the like provisions as the original order … ’
That, as it seems to me, required the person making the order, and in this case the Minister of Transport, to take into consideration the matters set out in s 7, and, in particular, in s 7(1), which deals with an original application for an order.
Having said that, of course, it was necessary, as I think, for the Minister to consider whether or not it was expedient to make this order. One of the matters to which she was specifically to pay attention was any objection by road authorities, and obviously she had to look at all the facts. Looking at the facts she came to the conclusion that to make this amending order would be contrary to the public interest, and for these reasons. The railway line, as Salmon LJ has said, was really to all intents and purposes dead, and in the absence of an order giving these enthusiasts power to run it it was never going to be revived. It involves seven crossings over roads, four of which are over main trunk roads leading to the south coast, one on the A 21, one on the A 229, and two on the A 28. The company was proposing that the gates at the level crossings should be operated by the crews of the trains. It does not look as if that is going to be a very speedy matter, but, as the inspector reported, on the A 21 something between 1,000 and 1,200 vehicles pass per hour during the busy times of the year. The traffic is increasing annually, and even a delay of two minutes would involve queues of up to 30 vehicles on one side or the other. It has to be observed also that under the order anybody running this railway had power to double the line which at present is only a single line.
In the face of those facts, I should have thought that the Minister’s decision was obviously right. The learned judge appears to have allowed himself to be swayed by the eloquence of counsel for the company into adopting the view that he was not entitled to look at the public interest as it is today, and that inasmuch as this railway was approved in 1896 all he could take into consideration was whether the company were suitable people to whom the rights and obligations of the British Railways Board could be transferred. I cannot think that this is right.
Even if the question of construction was to be answered otherwise, even if it were to be said that it does not import s 7(1), the fact remains that under s 24 the Minister has a discretion and a discretion which is not limited by any specific words, and I fail to see why a court should infer that in exercising that discretion the Minister should close her eyes to all the facts, adopt a thoroughly academic approach and disregard the public interest.
In my judgment this decision was plainly wrong, and, as I have already said, this appeal must be allowed. I do not propose to deal with the further points with which Salmon LJ has dealt since I am in entire agreement with what he has said about them.
BUCKLEY LJ. I agree that the appeal should be allowed, and having regard to the hour, notwithstanding that we are differing from the learned judge ([1970] 1 All ER 1192, [1970] 2 WLR 1041), I hope that what I shall say can be said in a very few minutes.
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The order with which we are concerned was undoubtedly an amending order within the meaning of s 24 of the Light Railways Act 1896, and, therefore, the Minister, in deciding whether or not to make the order, was bound to have regard to the like provisions as if it were an original order. I do not myself, however, take the view that that brings into play s 7(1) in this particular case. An amending order may itself be an order authorising a light railway under the Act if, for instance, the amendment takes the form of asking for an extension of the line or a diversion or something of that nature, and as I read s 7(1) it is only to apply where the application is for an order that authorises a light railway. The present order is an order which seeks an amendment of the Cranbrook and Tenterden Light Railway Order 1899 but it is not an order that seeks authority to establish a light railway.
Nevertheless, I think that that makes no effective difference to the case because s 7(3), which require the Minister of Transport (now standing in the place of the commissioners) to give full opportunity for any objections to the application to be laid before her and to consider all such objections, undoubtedly applies. Section 9(1)(c), to which reference has already been made, applies, and by s 68(1)(b) of the Railways Act 1921—that is the section which substitutes the Minister as the authority for making the orders—the Minister is enjoined on considering an application for an order to take all such matters into consideration and do all such things as he, as successor of the Board of Trade, is under the principal Act (ie the Act of 1896) required to take into consideration and do on submission of an order for confirmation. So the Minister must have regard to s 9(1)(c) and, therefore, must have special regard to any objection lodged in accordance with the Act.
In my judgment it is plain that the Minister has the widest discretion in deciding whether or not to make an amending order, a discretion which I think must be exercised in the light of all the prevailing circumstances, which, in the present case, included the circumstances that the line had been moribund, if not defunct, for the period and to the extent already mentioned by Salmon LJ and that the line would not be reactivated unless the order was made but would be reactivated if the order were made. The circumstances also included the fact that the British Railways Board and the company had by the terms of their agreement in effect subjected that bargain to the Minister’s decision, because the contract was made conditional on the Minister making the order. In these circumstances, it seems to me clear that the Minister was entitled to take into account all the considerations affecting those who live in the neighbourhood, and the public in general which bore on the expediency of making or not making the order.
The learned judge seems to have been impressed with the view that the function of the commissioners under the Act of 1896, and, therefore, the Light Railway function of the Minister as their successor, was that of facilitating the construction of light railways, and he laid some stress on the fact that to make an order, the effect of which was, as he put it, to suppress a light railway, was not consonant with the spirit of that position. It is true that in s 1(1) of the Act of 1896h it was said that the commission was established for the purposes of facilitating the construction and working of light railways, but that does not in my view mean that they are persons who are concerned to promote the establishment of light railways but that they are an authority established as part of a system which would make it easier for people who wished to promote light railways to obtain the necessary statutory powers. The system of which the commissioners formed part was what was to facilitate the establishment of light railways. The function of the commissioners was to operate that machinery in such a way as would best advance or protect the interests of the public. I part company from the learned judge in that particular respect which I think was a cardinal aspect of his judgment.
For the reasons which have already been given I am of the opinion that the Minister
Page 815 of [1970] 3 All ER 805
was fully entitled to reach the decision which she did. In her letter of explanation she referred to the statutory obligations associated with this light railways and the relevance to those obligations of the prospective financial stability of the company but it was not necessary for her to express a concluded view on that aspect of the matter because she went on to explain in her letter that for other reasons connected with the public interest and particularly with the traffic considerations she considered that the order was one which ought not to be made.
It does not seem to me to be a case in which the Minister has failed to apply her mind to all the relevant circumstances. On the contrary, I think that she did apply her mind to the relevant circumstances, one of which appeared to her to give rise to conclusive considerations, and she based her decision on those considerations and in so doing I think that she was entitled to act as she did.
For these reasons, as well as the reasons elaborated by Salmon and Phillimore LJJ, I agree the appeal should be allowed.
Appeal allowed. Order of Megarry J set aside, question of law raised by the statement of case answered in the affirmative. Leave to appeal to the House of Lords refused.
Solicitors: Treasury Solicitor; Sharpe, Pritchard & Co (for the company).
Henry Summerfield Esq Barrister.
R v Jones
[1970] 3 All ER 815
Categories: CRIMINAL; Criminal Procedure
Court: VACATION COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY LJ, CANTLEY AND WALLER JJ
Hearing Date(s): 29 SEPTEMBER 1970
Criminal law – Practice – Other offences taken into consideration – Disqualification for holding licence – Calculation of period of disqualification – Similar offence taken into consideration – Propriety.
In sentencing a defendant for the principal offence of driving while disqualified, it is in order for the court to take into consideration another offence of a similar kind, eg a further offence of driving while disqualified, but not so where the principal offence is of a completely different kind (see p 816 e, post).
Dictum of Lord Goddard CJ in R v Collins [1947] 1 All ER at 147 applied.
Case referred to in judgment
R v Collins [1947] 1 All ER 147, [1947] KB 560, [1948] LJR 6, 111 JP 154, 32 Cr App Rep 27, 45 Digest (Repl) 106, 353.
Notes
For consideration of other charges in fixing sentence, see 10 Halsbury’s Laws (3rd Edn) 490, para 892, and for a case on the subject, see 14 Digest (Repl) 558, 559, 5514.
Application
This was an application by Robert Thomas Jones for leave to appeal against sentence passed on him on 14 May 1970 at Lancashire Quarter Sessions (deputy chairman K K F Lawton Esq). The applicant had pleaded guilty to driving while disqualified and asked for one similar offence to be taken into consideration. James J referred the application to the full court. The facts are set out in the judgment of the court, which treated the hearing of the application as the hearing of the appeal.
The applicant did not appear and was not represented.
Page 816 of [1970] 3 All ER 815
29 September 1970. The following judgment was delivered.
WALLER J delivered the judgment of the court. On 14 May 1970, at Lancashire Quarter Sessions, the applicant pleaded guilty to driving while disqualified and was sentenced to nine months’ imprisonment, his licence was endorsed and he was disqualified for driving for 18 months consecutive to the total period of disqualification to which he was then subject. He was further disqualified for six months under the totting-up provision such disqualification to be concurrent. His application has been referred to the full court because of a technical matter of the propriety of the concurrent disqualification for totting-up. It appears also that the court itself was concerned whether or not it was right to take into account, as was done, one other offence of driving while disqualified.
I must first consider whether it was in order to take that other offence into account? In R v Collins this point arose for consideration and it was then made clear that it would not be right to take into account an offence for which there could be disqualification, such as taking and driving away, or driving while disqualified, when the principal offence was one of a completely different kind. But Lord Goddard CJ added ([1947] 1 All ER at 147, [1947] KB at 561):
‘No doubt, if a man is charged on indictment with an offence under the Road Traffic Acts for which he is liable to be disqualified, and there is a second charge against him for the same class of offence, the court might take that into account.’
That is precisely what was done in this case. The principal offence was one of driving while disqualified and the offence taken into consideration was another offence of driving while disqualified, so that when a period of disqualification was being imposed for the principal offence, the other offence could be taken into consideration. So it was, in the view of this court, perfectly proper for the deputy chairman to allow that other offence to be taken into consideration, it being a similar kind of offence.
The second point that arises is the form of the order of disqualification. The deputy chairman disqualified for 18 months and made the compulsory totting-up disqualification run concurrently. Unfortunately, that is not correct because the Road Traffic Act 1962, s 5(5), provides that the period of any such disqualification shall be in addition to any other period of disqualification imposed. It was not doubt a slip of the tongue on the part of the deputy chairman who probably had in mind the note in Stone’s Justices’ Manuala in dealing with that subsection. This court will modify the order by making the disqualification 12 months consecutive to the total period of disqualification and the totting-up disqualification an additional six months, making 18 months in all and leaving the disqualification unaffected in total. Leave to appeal will be granted, this will be treated as the appeal and to that extent the appeal will be allowed. The effect of what this court is doing is simply a technical readjustment. The applicant is left with precisely the same disqualification as before. Apart from that, the appeal is dismissed.
Appeal allowed in part.
N P Metcalfe Esq Barrister.
Re Bateman’s Will Trusts
Brierley and another v Perry and others
[1970] 3 All ER 817
Categories: TRUSTS
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK V-C
Hearing Date(s): 16 JULY 1970
Trust and trustee – Secret trust – Expressed in writing – Subsequent to date of will – Will referring to future letter to trustees – Validity.
By a will made in 1924 the testator directed by cl 6 that his trustees pay the income of £20,000 to his daughter W for life and the income of a further sum of £20,000 to his daughter D for life and after their death or the death of either of them ‘that the capital sum of Twenty thousand pounds shall be paid to the children (in equal shares) or child of such daughter on his or her or their attaining the age of twenty one years’ followed by default provisions. In the event, W died without issue in 1968 and D who was living had no issue capable of inheriting. By cl 7 the testator directed the trustees ‘to set aside … the sum of Twenty four thousand pounds and to pay the income thereof to such persons … as shall be stated by me in a sealed letter in my own handwriting and addressed to my Trustees and on the death of each person so named and in the case of females on marriage I DIRECT the share of Income so given shall be divided between my said daughters during their respective lives or to the survivor of them or their issue as aforesaid and in default of issue then I direct the capital so set aside shall fall into the residue of my Estate’. The testator died in 1931 and the will was proved in the same year. The estate was never sufficient to meet fully any two of the sums so set aside. On the question of the effect of cll 6 and 7 in the events that had happened,
Held – (i) On the true construction of cl 6, whether read by itself or with cl 7, there were no cross-remainders as between the two shares by which D would take a life interest in W’s share, and the capital representing W’s share would pass to those entitled in default of any children of the testator’s daughters (see p 820 a and b, post).
(ii) The direction as to the sealed letter in cl 7, being a direction relating to a future non-testamentary instrument was invalid (see p 820 e and f, post), and the subsequent direction as to payment of income to the daughters being a direction to take effect on an event to be determined in the future by the said non-testamentary instrument was also invalid (see p 820 g, post). The ultimate gift of capital in default likewise failed (see p 820 j, post).
Notes
For secret trusts, see 38 Halsbury’s Laws (3rd Edn) 843–847, paras 1416–1421, and for cases on the subject, see 47 Digest (Repl) 63–71, 460–513.
Cases referred to in judgment
Jones’ Will Trusts, Re, Jones v Jones [1942] 1 All ER 642, [1942] Ch 328, 111 LJCh 193, 167 LT 84, 47 Digest (Repl) 67, 489.
Keen’s Estate, Re, Evershed v Griffiths [1937] 1 All ER 452, [1937] Ch 236, 106 LJCh 177, 156 LT 207, 47 Digest (Repl) 67, 488.
Case also cited
Tatham, Re [1945] 1 All ER 29, [1945] Ch 34.
Adjourned summons
The trustees of the will dated 19 December 1924 of John Bateman deceased sought to determine the true construction of cll 6 and 7 thereof following the death in
Page 818 of [1970] 3 All ER 817
1968 of the testator’s daughter, Winifred Bateman. The defendants to the summons were Doris Perry, the testator’s surviving daughter, Edith Kay, his niece, and Marshall Bateman and John Oswald Heap, the personal representatives of his residuary legatee. The facts are set out in the judgment.
P A Ferns for the trustees.
R A R Evans for the first defendant.
A W Simpson for the second defendant.
D B Mallard for the third and fourth defendants, the personal representatives of the residuary legatee.
16 July 1970. The following judgment was delivered.
PENNYCUICK V-C. This summons raises certain rather perplexing questions on the construction of the will of one John Bateman, to whom I will refer as the testator. The testator made his will on 19 December 1924. He appointed three executors and trustees. He bequeathed a number of pecuniary legacies. By cl 3, he gave all his real and personal estate on trust for conversion. By cl 4 he directed his executors to pay out of the moneys to arise from such conversion his funeral and testamentary expenses and debts and the legacies bequeathed by his will. Then, by cl 5, he directed that the trustees should invest the residue of the said moneys in their names.
I now come to the two clauses which have given rise to the questions raised by this summons. I will read them in full.
‘6. AND shall stand possessed of the said monies and Investments UPON TRUST to pay the income on Twenty thousand pounds to my Daughter Winifred Bateman during her life and the income on a further Twenty thousand pounds to my daughter Doris Perry (the Wife of Vivian Perry) during her life AND after the death of my said daughters or either of them I DIRECT that the capital sum of Twenty thousand pounds shall be paid to the children (in equal shares) or child of such daughter on his her or their attaining the age of twenty one years AND in case there shall be no child or children of either of my said daughters living at their respective deaths who shall attain the age of twenty one years I DIRECT that the said capital trust sums or sum shall be divided in equal shares between the children then living of my Brothers William Bateman and Lewis Bateman and the children then living of my Sisters Alice Wood and Hannah Smith.
‘7. I DIRECT my Trustees to set aside from my Estate the sum of Twenty four thousand pounds and to pay the income thereof to such persons and in such proportions as shall be stated by me in a sealed letter in my own handwriting and addressed to my Trustees and on the death of each person so named and in the case of females on marriage I DIRECT the share of Income so given shall be divided between my said daughters during their respective lives or to the survivor of them or their issue as aforesaid AND in default of issue then I DIRECT the capital so set aside shall fall into the residue of my Estate.’
By cl 8 he gave a further legacy to each clerk in the employment of Bateman Bros and, finally, cl 9: ‘I GIVE AND BEQUEATH the residue of my Estate to my Brother William Bateman and in case of his death to his children in equal shares.' The testator died on 4 June 1931 and his will was proved on 8 August 1931.
It next becomes material to refer to the state of the family. The testator had two daughters, Winifred and Doris. Winifred was Mrs Shuttleworth, who died in June 1968 without having had a child. The other daughter, Doris, is Mrs Perry, who is still living. She had one child only, a son who died in infancy long ago. The testator had a number of brothers and sisters. His eldest sister, Mary Jane, died very many years ago without a child. His eldest brother, James, similarly died without a child. Then comes William Bateman, mentioned in the will, who had three children: Marshall, who is alive, Frances, who died in 1967, and Edith, who is alive. Next is
Page 819 of [1970] 3 All ER 817
a sister, Alice Wood, who had three children: Jack, who died in 1965, Alice, who is alive and Marjory, who is alive. The next sister, Hannah Smith, had one child only: Jack, who died in 1966. Finally, a brother, Lewis, had three children: Lillian, who died in 1969, Lewis, who has not been heard of for 20 years, and Edna, who is still alive.
There is very little evidence as to what, if any, sealed letter the testator in fact left; but there evidently was some letter on which the trustees acted, because until 1962 they paid the income of the sum set aside under cl 7 to some person in the capacity of the beneficiary under that clause and the sealed letter.
The estate of the testator was never sufficient or nearly sufficient to provide the two sums of £20,000 and the sum of £24,000. In the event, until 1962, the trustees applied the income of the estate rateably between the two daughters under cl 6, and the person named in the sealed letter under cl 7.
As I have said, the daughter Winifred died in 1968 and the daughter Doris is still alive. Neither has had any child who can inherit and certain questions have now arisen as to the construction of the testator’s will, and as to how the fund now in the hands of the trustees should be dealt with. The value of the fund on the death of the daughter Winifred was approximately £38,000, but that is subject to estate duty which is a heavy item, since duty was leviable on her death at the rate of 60 per cent in respect of the fund in which she had a life interest.
The first two questions raised by the summons are in the following terms:
‘(1) Whether upon the true construction of clause 6 of the said Will of the Testator and in the event which has happened, namely the death without issue of Winifred Shuttleworth (in the said Will called Winifred Bateman):—(a) the income of the fund of £20,000 to which the said Winifred Shuttleworth was entitled during her life became payable to the defendant Doris Perry during her life; or (b) the capital representing the said fund of £20,000 has become distributable (subject to any estate duty found to be payable thereout) between the persons in such clause mentioned as being entitled in default of children of the Testator’s daughters who attained the age of twenty one years; of (c) how otherwise the said fund should be dealt with.
‘(2) Whether upon the true construction of clause 7 of the said Will and in the event aforesaid:—(a) the share of income of the fund of £24,000 to which the said Winifred Shuttleworth was entitled during her life accrued to the share of income bequeathed to the Defendant Doris Perry; or (b) the capital representing such share of income aforesaid fell into residue; or (c) the dispositions of income subsequent to the determination of the secret trusts contained in the said clause fail for uncertainty or otherwise; or (d) how otherwise the said fund should be dealt with.’
The parties to the summons are the present trustees of the will, as plaintiffs. The defendants are Doris Perry, Edith Kay (William Bateman’s daughter), Marshall Bateman and John Oswald Heap, the last two being the personal representatives of the residuary legatee, William Bateman.
I turn now to consider cl 6. The clause is clumsily drawn and the draftsman has fallen into the familiar difficulties which arise when one is trying to deal in a single provision with two separate settled shares in a fund. Unless any light is thrown on cl 6 by cl 7 its effect is really free from doubt. The trustees are directed to set aside two several sums of £20,000. As to one such sum they must pay the income to Winifred during her life. After her death the capital of that sum is to be paid to her children, and in default of children the capital of that sum is to be divided between the children then living of William Bateman, Lewis Bateman, Alice Wood and Hannah Smith. Likewise, the second sum of £20,000 is to be held on trust to pay the income to Doris during her life; after her death the capital of that sum is to be
Page 820 of [1970] 3 All ER 817
paid to her children and in default of children the capital of that sum is to be divided in equal shares between the children then living of the brothers and sisters.
It is impossible to read into cl 6 standing alone any cross-remainders as between the two shares, so that Doris, the surviving sister, would take a life interest in the share of Winifred. The only ground on which it is contended that such a cross-limitation could be implied is to be found in cl 7 where, it will be remembered, the testator directs that the share of income given in the sealed letter is to be divided between the two daughters ‘during their respective lives or to the survivor of them or their issue as aforesaid.' It seems to me that that direction is only a rather compendious and clumsy method of referring back to the trusts of cl 6, and I do not think it is legitimate to derive from that direction an intention that under cl 6 the survivor of the two daughters is to take the income enjoyed by the other daughter in default of children of that other daughter. That disposes of question (1) in the summons, and that question must be answered in accordance with para (b).
Clause 7 has given rise to a good deal more difficulty. It will be remembered that the direction in that clause is to set aside a sum of £24,000 and pay the income ‘to such persons and in such proportions as shall be stated by me in a sealed letter … to my Trustees’. Now those words are on their plain meaning future. There is no evidence whether a sealed letter had been written and addressed to the trustees by the testator at the date that he made his will. The only thing that does appear clear is that after his death some sealed letter or, at any rate, some document was in existence on which the trustees acted. Whatever the facts, the direction to pay the income ‘to such persons and in such proportions as shall be stated by me in a sealed letter’ clearly imports that the testator may, in the future after the date of the will, give a sealed letter to his trustees. It is impossible to confine the words to a sealed letter already so given. If that be the true construction of the wording it is not in dispute that the direction is invalid.
I was referred to one or two cases on the point, in particular, Re Keen’s Estate, Evershed v Griffiths, in the Court of Appeal, and Re Jones’ Will Trusts, Jones v Jones, a decision of Simonds J. I do not think it is necessary to go further into those cases because it is clear, that once one must construe the direction as admitting of a future letter then the direction is invalid, as an attempt to dispose of the estate by a non-testamentary instrument. I interpose that I am not concerned on this summons with the application of income down to 1962. All sorts of matters of fact may arise in that context, such as the consent of the various beneficiaries, limitation and so forth.
The next question, which I found puzzling, was whether, if the direction as to the sealed letter is invalid, the subsequent direction as to the share of income given in the sealed letter—that it should be divided between his daughters—fails with the direction as to the sealed letter. After hearing argument on this point I am satisfied that it does. The direction in favour of the daughters is, in express terms, limited to operate on the death of each person named in the sealed letter. It is, I think, impossible to construe the clause as an immediate gift of income to the daughters subject only to the direction as to the sealed letter insofar as it is effective. If one construes the direction as to income, as one must, as a future direction, then it is a direction to take effect on an event which may be determined in the future by a non-testamentary instrument. That is an essential part of the direction as to income, and the direction as to income must fail with the direction as to the sealed letter. It is not in dispute that if the direction as to income fails the ultimate default gift of capital, ie the direction that ‘capital so set aside shall fall into the residue of my Estate’ must equally fail. The result is that cl 7 has completely misfired and has had no effect at all.
Then turning to question (2) in the summons, the answer is in accordance with
Page 821 of [1970] 3 All ER 817
para (c), namely that ‘the dispositions of income subsequent to the determination of the secret trusts contained in the said clause fail’. That being the position, one has under cl 6 an effective gift of two sums of £20,000 on settled trusts, and no effective gift under cl 7. On that footing there can be no doubt that the whole estate which, as I have said, is less than £40,000, is applicable as between the two sums of £20,000, which must abate rateably.
It the default trust in cl 7 had been valid an interesting question would have arisen whether the £24,000 fund went into the ultimate residue or went first to swell the fund under cl 6. However, that question does not arise.
Order accordingly.
Solicitors: Walls, Johnston & Co, Stockport (for the trustees); Linklaters & Paines (for the first defendant); Sedgwick, Turner, Sworder & Wilson, Watford (for the second defendant); Ingham & Wainwright, Stockport (for the third and fourth defendants).
Richard J Soper Esq Barrister.
R v Secretary of State for the Home Department, ex parte Mohammed Rafiq
[1970] 3 All ER 821
Categories: IMMIGRATION
Court: VACATION COURT, QUEEN’S BENCH DIVISION
Lord(s): BRIDGE AND MARS-JONES JJ
Hearing Date(s): 2 SEPTEMBER 1970
Commonwealth immigrant – Admission – Refusal of admission – Directions for removal of immigrant – Time for giving directions – Whether directions must be given within reasonable time – Commonwealth Immigrants Act 1962, Sch 1, paras 3(2), (3) and 4(1).
The applicant who claimed to be a citizen of Pakistan landed in England on 23 July 1970. He had travelled in a small boat from France. The circumstances of his entry to the United Kingdom constituted an offence under the Commonwealth Immigrants Act 1962 and 1968 and he was arrested. He was found to be in possession of a forged UK passport. An immigration officer issued a notice of refusal of admission to him. Following this refusal of admission he was detained under para 4(1)a of Sch 1 to the 1962 Act pending the giving of directions under para 3 of Sch 1 and his removal from the United Kingdom in pursuance of those directions. Since the applicant had arrived by irregular means directions for his removal could only be given under para 3(2) of Sch 1, ie at public expense. (By para 3(3) of Sch 1 no directions could be given in respect of an immigrant after two months from the refusal of admission.) On 30 July, the immigration department at the Home Office communicated with the Pakistan High Commission, explained the mode of the applicant’s arrival and that he had no valid passport, invited the High Commission to issue a travel document to the applicant, and also invited the High Commission to interview the applicant. An interview was later arranged. On 26 August, the Home Office wrote again to the High Commission asking that the issue of a travel document should be expedited; notwithstanding the subsequent letter the High Commission had issued no travel document nor indicated whether the applicant, if returned to Pakistan, would be accepted and received back in that country. On 2 September, counsel applied to the court for a writ of habeas corpus on the ground that the power of detention under para 4 of Sch 1 was limited to such period of time as was reasonably necessary for the giving of directions under para 3 of Sch 1 and the carrying out of those directions.
Page 822 of [1970] 3 All ER 821
Held – Even if the power of detention under para 4 of Sch 1 were limited to a reasonable period and did not extend to the period of two months referred to in para 3(3) of Sch 1, the applicant had failed to show that a reasonable period for the giving of directions had been exceeded in that the delay caused by the enquiries directed to the Pakistan High Commission to ascertain, before the applicant was returned to Pakistan at public expense, whether a direction to return the applicant to that country would be effective was entirely reasonable (see p 824 a c and g, post).
Notes
For detention of Commonwealth citizens and directions as to their removal, see Supplement to 5 Halsbury’s Laws (3rd Edn) para 1514.
For the Commonwealth Immigrants Act 1962, Sch 1, paras 3, 4, see 4 Halsbury’s Statutes (3rd Edn) 49.
Motion for writ of habeas corpus
This was an application for a writ of habeas corpus on behalf of Mohammed Rafiq. The facts are set out in the judgment of Bridge J.
N A Khan for the applicant.
G M Waller for the Secretary of State for the Home Department and the governor of Winchester prison.
2 September 1970. The following judgments were delivered.
BRIDGE J. In these proceedings counsel for the applicant moves on behalf of one Mohammed Rafiq at present detained at Winchester prison by order of the Secretary of State of the Home Department, for a writ of habeas corpus to secure his release. The facts are within a short compass. The applicant arrived in England on 23 July 1970. He came with a number of companions by a small boat from France and landed on a beach somewhere near Portsmouth. On the day of his arrival he and his companions were arrested. It is conceded on his behalf that the circumstances of his entry were such as to constitute an offence under the Commonwealth Immigrants Act 1962, as amended by the Commonwealth Immigrants Act 1968, but it matters not, no charge in respect of any such offence has been made against him. Following his arrest on 23 July the applicant was interviewed by an immigration officer. The applicant said that he was a citizen of Pakistan, that Mohammed Rafiq, the name in which he makes his application, was his true name, but he was found to be in possession of a forged United Kingdom passport in the name of John Sooba, the name that he first gave as his own to the police when he was arrested. The passport was clearly one to which he was not entitled. Later on the day of his arrest, or it may have been on the following day, it matters not, the immigration officer issued to the applicant a notice of refusal of admission to the United Kingdom under the provisions of the Commonwealth Immigrants Act 1962.
This is not a case, unlike so many which come before this court, where any issue is raised on the applicant’s behalf as to the propriety of that refusal of admission. The sole question raised by the application is as to the propriety of the applicant’s continued detention under the powers provided in that behalf by the Commonwealth Immigrants Act 1962 pending the taking of steps under the Act to secure his return to his country of origin. The Act provides by s 3 that questions relating to the examination of would-be Commonwealth immigrants, the exercise by immigration officers of their powers under the Act, the removal of immigrants refused admission, and their detention pending removal are governed by the provisions of Sch 1 to the Act. The specific power of detention which is in question arises under para 4(1) of Sch 1, which, omitting immaterial words, provides:
‘An immigrant who is … refused admission into the United Kingdom under section two of this Act [as it is conceded the applicant has been], may be detained under the authority of an immigration officer or constable pending … the giving
Page 823 of [1970] 3 All ER 821
of directions under paragraph 3 of this Schedule and pending removal in pursuance of such directions … ’
That takes one back to para 3, which it is unnecessary to read in full; para 3(1) provides for the giving of directions by the Secretary of State to the master of the ship or commander of the aircraft or the owners or agents of the ship or aircraft which has brought the immigrant in question into this country. In such cases the Commonwealth citizen who has arrived by any regular and normal means of transport in this country and been refused admission on arrival can, under the Act, be removed at the expense, not of the British taxpayer, but of the owners of the ship or aircraft by which the immigrant arrives, and in any such case he can be required by the direction to be removed either to the country of which he is a citizen, or to any country or territory of which he holds a passport, or to any country from which he embarked to the United Kingdom, or to any other country to which there is reason to believe he will be admitted.
A direction under para 3(1) is clearly not available to the Secretary of State in this case, the applicant in the circumstances I have indicated not having arrived by any regular means of transportation. The alternative under para 3(2) provides that where it is not practicable to give directions under para 3(1), the Secretary of State may give directions to the owners or agents of any ship or aircraft requiring the removal of the applicant to any of the countries referred to in the previous paragraph, the country of which he is a citizen, etc, but in this instance the expense of the immigrant’s return journey is borne by the taxpayer. Finally, para 3(3) provides that no directions shall be given under that paragraph in respect of an immigrant after the expiration of two months beginning with the date on which he was refused admission into the United Kingdom.
The reason, and the only reason for the delay of now nearly six weeks which has elapsed since the refusal of admission to the applicant without any directions being given for his removal under para 3, is that, as already related earlier in this judgment, the applicant is not the holder of any valid passport; he was the holder of the forged passport earlier mentioned. In these circumstances the immigration department at the Home Office, within days of the refusal, in fact on 30 July, communicated with the Pakistan High Commission explaining the circumstances of the applicant’s arrival and inviting the Pakistan High Commission to arrange for a travel document to be issued to the applicant, the Commission being at the same time invited to interview the applicant if that was desired.
In fact in due course he was interviewed at Winchester prison on behalf of the Pakistan High Commission, and on 26 August a further letter was written to the High Commission from the Home Office asking that the issue of a suitable travel document should be expedited in any way possible. But that notwithstanding, the position is still unresolved and no indication has yet been given by the Pakistan High Commission, by the issue of a travel document, a passport or otherwise, to indicate formally that if and when sent back to Pakistan pursuant to a direction under para 3, the applicant would be accepted and received back into that country on his arrival there.
Counsel for the applicant submits that the power to detain an immigrant who has been refused admission under para 4 of Sch 1 is limited to such period of time as is reasonably necessary in the circumstances of any particular case for the giving of directions under para 3, and the carrying out of such directions. It is to be observed, of course, that the power to detain cannot long survive the expiry of the period of two months from the date of refusal within which directions must be given; it can only survive that two months’ period by such further period as is necessary for compliance with directions in any particular case, and a possible view might be that the power of detention is one which in any event extends until the expiry of two months. But it is unnecessary to decide, in my judgment, in the circumstances of this case whether
Page 824 of [1970] 3 All ER 821
the power is as wide as that or whether it is within the two months statutory limitation further limited by the requirement that the period of detention should not exceed such period as is reasonably necessary for the giving of directions in a particular case. Assuming that there is such further limitation, the question arises whether a reasonable period has here been exceeded. As I understand it, the submission of counsel for the applicant in essence is this. Since it is theoretically open to the Secretary of State of the Home Department under para 3(1)(c)(i) to return the applicant to Pakistan as a country of which he is or claims to be a citizen irrespective of whether or not he holds a valid passport or other travel document permitting him to enter that country, that is the step which the Secretary of State should take or, as counsel for the applicant would say, should long since have taken.
On the other hand, counsel for the respondents points out that this is a case where, as I have already indicated, the removal of the applicant must be undertaken at the public expense under para 3(2), and what then, counsel for the respondents asks rhetorically, could be more reasonable than that the Secretary of State should first satisfy himself by suitable enquiries such as have been made of the Pakistan High Commission that if a direction to return the applicant to Pakistan is given, it will be effective in the sense that when he arrives in Pakistan he will be accepted there and not promptly shuttled back to this country.
In my judgment that submission is really quite unanswerable, and it is as it seems to me quite impossible to say that in the circumstances of this case there has been any unreasonable delay, or that the period of the applicant’s detention has exceeded such period as was and still is in all the circumstances reasonably necessary for the giving of directions under para 3. At one stage in the argument I wondered whether the proper course for the court might not be to retain this application, to remain seized of it by adjourning it, for it is as yet still uncertain what would happen if the period of two months allowed for giving directions under para 3 were to elapse, and if no indication were by then to be received from the Pakistan High Commission to the effect that the applicant would be accepted back in Pakistan. But in all the circumstances I have come to the conclusion, speaking for myself, that it is not necessary for the court to retain the case against that contingency; the Home Office are bringing whatever pressure they can to bear on the Pakistan High Commission to decide this matter without further delay. There would seem at present no reason to anticipate that it will not be decided well within the relevant period of two months. If the period of two months should elapse and still no valid direction should have been given under para 3, it would then of course be open to the applicant, if he was still detained, to make a further application for the writ of habeas corpus, but as matters stand at present, for the reasons I have indicated, I would dismiss this application.
MARS-JONES J. I agree.
Motion dismissed.
Solicitors: Daniel P Debidin (for the applicant); Treasury Solicitor.
E H Hunter Esq Barrister.
Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd
[1970] 3 All ER 825
Categories: CONTRACT: COMMONWEALTH: Commonwealth countries
Court: PRIVY COUNCIL
Lord(s): LORD HODSON, LORD GUEST, LORD DONOVAN, LORD PEARSON AND SIR GORDON WILLMER
Hearing Date(s): 20, 21, 22 APRIL, 1 JULY 1970
Privy Council – Australia – Bailment – Sub-bailment for reward – Liability of sub-bailee to owner of goods bailed – Duty arising from assumption of possession – Nature of duty.
The shipowners carried two cases of clocks, belonging to the plaintiffs, in their vessel from Hamburg to Sydney, where the defendants carried on the business of stevedores and ship’s agents. The bill of lading provided, inter alia: ‘When the goods are discharged from the vessel, they shall be at their own risk and expense; such discharge shall constitute complete delivery and performance under this contract and the [shipowners] shall be freed from any further responsibility.' The defendants unloaded the two cases from the vessel at a wharf belonging to the Maritime Services Board, but of which the defendants had the use and control. When the plaintiffs sought to take delivery of the two cases, one of them was missing and was not recovered. The plaintiffs sued the defendants on the ground, inter alia, that: ‘there were delivered to the defendant in Sydney certain goods of the plaintiff to be safely kept and taken care of by the defendant for the plaintiff and the defendant received and had the said goods in its care and keeping for the purpose and upon the terms aforesaid Yet the defendant kept the said goods in a negligent manner and took no care of the same WHEREBY the said goods were wholly lost to the plaintiff.' A finding by the trial judge that the loss would not have occurred if the defendants had exercised reasonable care was not contested. On the question whether the defendants owed a duty of care to the plaintiffs as bailees,
Held – On the assumption that the defendants were at all material times acting as ship’s agents and that the bailment by the plaintiffs to the shipowners continued until delivery of the goods to the plaintiffs (notwithstanding the provisions of the bill of lading), there was a sub-bailment from the shipowners to the defendants, under which the defendants assumed an obligation to take due care of the goods, although there was no contract or attornment between the plaintiffs and the defendants; the obligation was the same as that of a bailee, whether or not it could with strict accuracy be described as being the obligation of a bailee (see p 829 b to g and p 832 f and g, post).
Morris v C W Martin & Sons Ltd [1965] 2 All ER 725 applied.
Notes
For the obligations of a bailee under a contract of custody of goods, see 2 Halsbury’s Laws (3rd Edn) 114–116, para 225, and for cases on the subject, see 8 Digest (Repl) 118, 757, 133, 857, (Cont Vol B) 30, 151a, 42–44, 331a, 366a, 417a.
Cases referred to in advice of the Board
Chesworth v Farrar [1966] 2 All ER 107, [1967] 1 QB 407, [1966] 2 WLR 1073, Digest (Cont Vol B) 42, 331a.
Foulkes v Metropolitan District Ry Co (1880) 5 CPD 157, 49 LJQB 361, 42 LT 345, 44 JP 568, 8 Digest (Repl) 118, 757.
Global Dress Co Ltd v W H Boase & Co [1966] 2 Lloyd’s Rep 72.
Hooper v London & North Western Ry Co (1880) 50 LJQB 103, 43 LT 570, 45 JP 223, 8 Digest (Repl) 133, 857.
Isaack v Clark (1615) 2 Bulst 306, 80 ER 1143, 46 Digest (Repl) 457, 53.
Page 826 of [1970] 3 All ER 825
Learoyd Brothers & Co and Huddersfield Fine Worsteds v Pope & Sons (Dock Carriers) Ltd [1966] 2 Lloyd’s Rep 142.
Lee Cooper Ltd v C H Jenkins & Sons Ltd [1965] 1 All ER 280, [1967] 2 QB 1, [1965] 3 WLR 753, Digest (Cont Vol B) 43, 417a.
Morris v C W Martin & Sons Ltd [1965] 2 All ER 725, [1966] 1 QB 716, [1965] 3 WLR 276, [1965] 2 Lloyd’s Rep 63, Digest (Cont Vol B) 30, 151a.
Moukataff v British Overseas Airways Corpn [1967] 1 Lloyd’s Rep 396, Digest Supp.
Newman v Bourne and Hollingsworth (1915) 31 TLR 209, 3 Digest (Repl) 69, 95.
Thompson v Nixon [1965] 2 All ER 741, [1966] 1 QB 103, [1965] 3 WLR 501, 129 JP 414, Digest (Cont Vol B) 202, 10, 536a.
Appeal
This was an appeal from the order of the Court of Appeal of the Supreme Court of New South Wales (Asprey and Walsh JJA., Hardie AJA dissenting), dated 15 October 1968, dismissing the appeal of the defendants, Gilchrist Watt & Sanderson Pty Ltd, from the judgment of Judge Levine in the District Court of the Metropolitan District of New South Wales, whereby $1,648 damages were awarded to the plaintiffs, York Products Pty Ltd, for the loss of one case of clocks while in the custody of the defendants. The facts are set out in the advice of the Board.
M J Mustill QC and S O Olson for the defendants.
R L A Goff QC and J S Hobhouse for the plaintiffs.
1 July 1970. The following opinion was delivered.
LORD PEARSON. The plaintiffs, who are the respondents in this appeal, carry on in Sydney a business which includes the importation and sale within Australia of watches and clocks. In 1962, they bought two cases of clocks from German suppliers. The price and the freight were paid before shipment. The two cases were shipped in a ship called the Regenstein for carriage from Hamburg to Sydney and for delivery at Sydney. The bill of lading was to ‘order’. The ship arrived at Sydney and, on 29 September 1962, berthed at a wharf belonging to the Maritime Services Board (which will be referred to as ‘the board’).
The defendants, who are the appellants in this appeal, carry on business at Sydney as stevedores and ships’ agents, and in these two capacities they dealt with the cargo of the Regenstein including the two cases of clocks which the plaintiffs had bought. On 2 October 1962, the defendants unloaded the cargo on the wharf and sorted and stacked it in a shed on the wharf. This shed belonged to the board but it was being used and controlled during working hours by the defendants. The key of the shed was kept by customs officials during the night but was fetched by the defendants in the morning and returned by them to the customs officials at the end of the day (or at the close of the night shift if there was one). The defendants’ head stacking clerk had an office in the shed. As goods came off the ship he, with the aid of other stacking clerks employed by the defendants, placed the goods in appropriate positions in the shed and recorded in a book the goods and their positions. The defendants did the work of sorting and stacking them in their capacity as stevedores, and their charges for this work were paid by the plaintiffs and other consignees of the goods. The defendants also employed a number of watchmen to protect the goods while in the shed or being taken to or from the shed. The defendants also employed at least one delivery clerk and a tally clerk for the purpose of effecting delivery of the goods to the consignees. The wages of these clerks and of the watchmen were initially paid by the defendants, but the amounts of these wages and other expenses in respect of each ship were charged by the defendants to the shipowners concerned.
The Regenstein sailed from Sydney on 4 October 1962. On 5 October 1962, agents of the plaintiffs paid 8s 9d to the customs and obtained a customs stamp saying: ‘may be delivered’, on the face of the bill of lading. On 8 October 1962, they paid 10s 1d to the defendants for sorting and stacking, and obtained their stamp
Page 827 of [1970] 3 All ER 825
saying ‘Please deliver’ on the face of the bill of lading. But when the agents of the plaintiffs sought to take delivery of the two cases of clocks, one of them was missing. It has not been recovered.
After some correspondence, the plaintiffs commenced an action against the defendants on 2 July 1964. The particulars of claim contained three alternative counts. The third count, on which judgment was given for the plaintiffs, was in these terms:
‘AND the plaintiff also sues the defendant for that there were delivered to the defendant in Sydney certain goods of the plaintiff to be safely kept and taken care of by the defendant for the plaintiff and the defendant received and had the said goods in its care and keeping for the purpose and upon the terms aforesaid Yet the defendant kept the said goods in a negligent manner and took no care of the same WHEREBY the said goods were wholly lost to the plaintiff.’
Then followed the claim for a sum of £967 14s 7d, but judgment was given for £824 and there is no dispute now as to the amount. The first two counts, on which the plaintiffs did not succeed, were in all material respects similar to the third count except that they contained, after the words ‘to be safely kept and taken care of by the defendant for the plaintiff’, the words ‘for reward to the defendant’.
The question at issue in this appeal, stated very shortly, is whether the defendants as bailees owed a duty of care to the plaintiffs. If there was such a duty, the defendants committed a breach of it and thereby caused the loss. The learned trial judge found that the loss would not have occurred if the defendants had exercised reasonable care, and this finding has not been contested. The learned judge held that there was a bailment of the goods by the plaintiffs to the defendants, although there was no express agreement of bailment. He made a finding that the defendants notified the plaintiffs that the goods had arrived. Then his view was that the defendants’ duties as agents for the shipowners were completed, when they notified the plaintiffs that they had the plaintiffs’ goods on the wharf, and that thereafter they held the goods with the plaintiffs’ consent and retained possession and control of the goods (as it was in their business interest so to do) and thereby a bailment was created. The learned judge’s view was contested by counsel for the defendants in this appeal on the ground that there was no evidence to support the finding that the defendants had notified the plaintiffs of the arrival of the goods, and also on the ground that in any case such notification would not have completed the defendants’ duties to the shipowners, because such duties would include delivery of the goods on behalf of the shipowners to the plaintiffs. There was no direct evidence of the defendants having notified the plaintiffs of the arrival of the goods. Regulation 12 of the board’s Cargo Handling and Wharf Storage Regulations provided that:
‘… the owner of a vessel, from which goods have been unshipped on to any wharf, shall forthwith after the completion of the unshipment of any consignment of goods, cause the owner of such goods to be notified of such unshipment and at the same time furnish him with particulars of such goods and their location on the wharf premises.’
Presumably it was for the defendants as agents of the shipowners to give such notification, and they may have done so, but in the absence of any direct evidence there is not sufficient ground for inferring that they must have done so.
In the Court of Appeal there was a difference of opinion. Asprey JA, with whom Walsh JA agreed, said that the question in the appeal was whether there was any evidence on which the trial judge could find that at the time when the case of alarm clocks was lost the relationship of bailor and bailee existed between the plaintiffs and the defendants. In the opinion of Asprey JA there was such evidence. He held that when the goods were placed on board the ship in terms of the bill of lading, the shipowners had physical possession of them and held them as bailees for the
Page 828 of [1970] 3 All ER 825
holder of the bill of lading, but when the goods after arrival of the ship at Sydney were taken from the ship by the defendants with the authority of the shipowners and placed on the wharf, they came into the physical possession of the defendants and the shipowners ceased to have physical possession. He held that there was a sub-bailment by the shipowners to the defendants and that this sub-bailment determined the bailment to the shipowners. He referred to a provision near the end of cl 4 of the bill of lading that:
‘When the goods are discharged from the vessel, they shall be at their own risk and expense; such discharge shall constitute complete delivery and performance under this contract and the carrier shall be freed from any further responsibility.’
He held that this provision was of general application and not limited to the special situations referred to in the opening portion of cl 4. On this basis there would be a termination of the bailment to the shipowners. Moreover, as there were no charges for freight or otherwise owing to the shipowners, they had no proprietary interest in the goods and they had transferred the physical possession of them to the defendants as independent contractors, and, even if the shipowners had a subsisting contractual duty to effect delivery, the existence of that duty, unlike the relationship of master and servant, did not make the independent contractor’s physical possession constructively possession by the shipowners. He said that by the very nature of the transaction and the provisions of the bill of lading the shipowners were entitled to discharge the goods on to the wharf at Sydney into the possession of some such persons as the defendants. He also said:
‘I am of the opinion that at common law the duty of a bailee arises when one person, otherwise than as a servant, voluntarily takes into his physical possession goods which are the property of another.’
He cited Morris v C W Martin & Sons Ltd ([1965] 2 All ER 725 at 734, 738, [1966] 1 QB 716 at 731, 738) and Chesworth v Farrar ([1966] 2 All ER 107 at 111, [1967] 1 QB 407 at 415).
Hardie AJA took a different view and dissented. He considered that cl 4 of the bill of lading applied only to the special situations referred to in the opening portion of it and was not of general application; that the shipowners’ obligation under the bill of lading to deliver did not come to an end when the goods were unloaded from the ship but continued until delivery to the consignee; that the defendants’ custody and control of the goods in the shed during working hours were referable to their duties as ship’s agents, ie to ensure compliance with the observance of the provisions of the Customs Act and regulations and of the Maritime Services Act and regulations, and to enable the shipowners to exercise their rights and perform their obligations under the contract contained in the bill of lading; that, although the shipowners were a non-resident corporation and the ship had left the port, the shipowners were represented by their agents the defendants; and that possession of the goods remained with the shipowners up to the point of time when it was assumed by the consignees. Hardie AJA also said that the case for the plaintiffs had been fought in the court below on the one issue of whether the defendants had legal possession of the goods as bailees for the plaintiffs; that no claim was there made that, apart from bailment, the defendants were under an obligation to take reasonable care of the goods in question by reason of their having voluntarily assumed some such responsibility; and accordingly it was not appropriate to examine the question whether, in a case such as the present, the plaintiffs might have been able to establish a cause of action, apart altogether from bailment, ie for negligence. The shipowners have not taken any part in these proceedings, and it is not desirable (if it can be avoided)
Page 829 of [1970] 3 All ER 825
to give any decision as to the position of the shipowners, as it might prejudice other cases to which they might be parties. The question raised by this appeal as to the liability of the defendants to the plaintiffs can be decided without deciding questions affecting the shipowners.
Be it assumed in favour of the defendants that they were acting throughout as ship’s agents, taking charge of the goods and keeping them and delivering them on behalf of the shipowners and generally doing the things which the shipowners were obliged to do or cause to be done under the bill of lading and the board’s regulations. Be it assumed also that the bailment of the goods to the shipowners continued until delivery notwithstanding the provisions of the bill of lading that:
‘The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring … after the goods leave ship’s tackle to be discharged transhipped or forwarded … ’
It is conceivable that they might remain bailees although protected by this exemption from liability for delay, loss or damage; they might still have the obligation to deliver the goods (if not lost) to the holder of the bill of lading and be liable for refusal to deliver or for misdelivery. Nevertheless the defendants did take possession of the goods and keep possession of them pending delivery. They were not employees of the shipowners, but independent contractors engaged to do certain work of reception, temporary storage and delivery of the goods. It was not to be expected that the shipowners would themselves look after and deliver the goods at the port of discharge. They would naturally cause these things to be done, according to the ordinary and natural course of business, by engaging the defendants to do these things as ship’s agents, so that the defendants would have the shipowners’ authority to keep and deliver the goods before and after the ship’s departure.
On these assumptions—which are the most favourable to the defendants—the bailment to the shipowners continued but there was a sub-bailment from them to the defendants. The defendants as sub-bailees were given and took possession of the goods for the purpose of looking after them and delivering them to the holders of the bill of lading, who were the plaintiffs. Thereby the defendants took on themselves an obligation to the plaintiffs to exercise due care for the safety of the goods, although there was no contractual relation or attornment between the defendants and the plaintiffs. The principal authority for the existence of such an obligation and ascribing it to bailment is the case of Morris v C W Martin & Sons Ltd which was cited by Asprey JA. But there is some earlier authority for the existence of the obligation. There are two railway cases. In Foulkes v Metropolitan District Ry Co, the plaintiff, at the London and South-Western Railway Co’s Richmond station, took a return ticket to the defendants’ Hammersmith station. He was injured on the return journey in a train of the defendants. The plaintiff’s claim succeeded both on the ground of contractual liability and on the ground of liability apart from contract. Baggallay LJ said ((1880) 5 CPD at 164):
‘… it appears to me sufficient to say that … a duty or obligation was imposed upon the District Company, when they accepted the plaintiff as a passenger by their train, not only to carry him safely to the station where he was to alight, but to provide safe means for his alighting when he arrived at that station.’
Thesiger LJ said ((1880) 5 CPD at 168):
‘… even assuming the contract of carriage from and to Richmond and
Page 830 of [1970] 3 All ER 825
Hammersmith to have been made between him and the London and South Western Railway Company exclusively, the defendants are still liable in respect of the wrongful act which led to the plaintiff’s injuries, by virtue of their actual reception of him in their carriage on his return journey from Hammersmith to Richmond.’
The principle of Foulkes’s case was applied to the carriage of passengers’ luggage in Hooper v London & North Western Ry Co, where the plaintiff, at the Great Western Railway Company’s Stourbridge station, bought a ticket for his journey via Birmingham to Euston. The part of the journey from Birmingham to Euston was in a train of the defendants, and on that part of the journey the plaintiff’s portmanteau was lost. The principle was explained and applied in judgments given by Denman and Lindley JJ. Denman J cited ((1880) 50 LJQB at 104, 105) this passage from the judgment of Thesiger LJ in Foulkes’s case ((1880) 5 CPD at 170, 171):
‘“I think that the true principle in such a case as the present is that, the company, so far as concerns its own line … and its own acts and omissions, is under the same obligations in reference to the security of the passenger, as it would have been if it had directly contracted with him. This principle is a reasonable one, for underlying it is the fact that more or less directly or indirectly the carrying company derives a benefit from its carriage of the passenger, and should therefore come under some corresponding obligation towards him, and what more appropriate obligation can there be than the ordinary one undertaken by railway companies towards their passengers, namely, that of taking due and reasonable care for their safety?”’
Denman J, referring to the defendants, said ((1880) 50 LJQB at 105):
‘It was their duty to protect and forward passengers’ luggage entrusted to their care; and one cannot imagine how it can be said this loss was not due to their negligence. This being the evidence, I am of opinion the defendants neglected a duty which they owed to the plaintiff.’
Lindley J, in the course of his judgment, said ((1880) 50 LJQB at 105):
‘Whether there would be an implied contract with the defendant company may be a question of difficulty, but, as a matter of fact, the portmanteau was lawfully in their charge, and the fact of its not forthcoming at Euston involves the default of some one of the defendants’ servants. The defendant company, having received the portmanteau, are responsible for its loss, in accordance with the principle of Foulkes v. Metropolitan District Ry Co.’
Also there are cases showing that the finder of goods, if he takes them into his possession, owes to the owner a duty of keeping them safely and returning them to the owner (if that is possible). In Isaack v Clark ((1615) 2 Bulst 306 at 312) Coke CJ said:
‘… he which findes goods, (is) bound to answer him for them for them who hath the property; and if he deliver them over to any one, unless it be unto the right owner, he shall be charged for them, for at the first it is in his election, whether he will take them or not into his custody, but when he hath them, one only hath then right unto them, and therefore he ought to keep them safely … ’
In Newman v Bourne and Hollingsworth the plaintiff, being in the defendants’ shop as a customer on a Saturday, left her brooch on a glass case. A shop assistant found it and handed it to the shopwalker, who put it in his desk. On the following Monday
Page 831 of [1970] 3 All ER 825
morning it could not be found. The county court judge held that the defendants had not exercised that degree of care which was due from one who had found an article and had assumed possession of it. The Divisional Court, Ridley and Atkin JJ held that the decision was right.
In 2 Halsbury’s Laws (3rd Edn) p 99, para 198 which refers to these cases of finding is headed ‘When finder of chattel is bailee’. This expression is not etymologically accurate, because the word ‘bailee’ is derived from the French ‘bailler’ meaning to deliver or hand over, and there is no delivering or handing over to a finder. But there is a common element, because both in an ordinary bailment and in a ‘bailment by finding’ the obligation arises because the taking of possession in the circumstances involves an assumption of responsibility for the safe keeping of the goods. In Thompson v Nixon the Queen’s Bench Divisional Court had to decide whether a finder taking possession was a ‘bailee’ for the purposes of the Larceny Act 1916, and it was bound by a previous decision to give a negative answer, but it came to this conclusion reluctantly. Sachs J, with whom Lord Parker CJ and Browne J agreed, said in the course of his judgment ([1965] 2 All ER at 743, 744, [1966] 1 QB at 108, 110):
‘In essence, the issue raised is whether the word “bailee” in the proviso includes all those cases in which a man has those special rights and duties that arise from lawful possession when he is not the actual legal owner, thus embracing all those who today are commonly referred to as bailees; or whether the word “bailee” there only refers to that limited class of persons who have received into possession goods from some other person on express or implied terms as to that possession … Had the point first arisen now that there is so general a view held by those with a wide knowledge of the common law that finders are by their own actions persons who constitute themselves bailees, I for myself would have so construed the word “bailee” even in a criminal statute as to include anyone who elected to take up the position of bailee by his own voluntary act.’
With regard to the liability owed to the first bailor by a person taking possession under a sub-bailment, there is both old and recent authority. In Pollock and Wright on Possession ‘An essay on possession in the common law’, there is this passagea:
‘If the bailee of a thing sub-bails it by authority, there may be a difference according as it is intended that the bailee’s bailment is to determine and the third person is to hold as the immediate bailee of the owner, in which case the third person really becomes a first bailee directly from the owner and the case passes back into a simple case of bailment, or that the first bailee is to retain (so to speak) a reversionary interest and there is no direct privity of contract between the third person and the owner, in which case it would seem that both the owner and the first bailee have concurrently the rights of a bailor against the third person according to the nature of the sub-bailment.’
The principal modern authority as to the liability of a sub-bailee to the first bailor is Morris v C W Martin & Sons Ltd, where a mink stole sent by the plaintiff to a furrier to be cleaned was, with the consent of the plaintiff, sent on to the defendants as cleaning specialists for them to clean it under a contract between them and the furrier. The mink stole was stolen by a servant of the defendants whose duty it was to clean it. It was held that the defendants had a non-contractual liability to the plaintiffs. Lord Denning MR, after citing the passage set out above from Pollock and Wrightb, said ([1965] 2 All ER at 733, [1966] 1 QB at 729):
Page 832 of [1970] 3 All ER 825
‘By which I take it that if the sub-bailment is for reward, the sub-bailee owes to the owner all the duties of a bailee for reward: and the owner can sue the sub-bailee direct for loss of or damage to the goods; and the sub-bailee (unless he is protected by any exempting conditions) is liable unless he can prove that the loss or damage occurred without his fault or that of his servants.’
Diplock LJ said ([1965] 2 All ER at 734, [1966] 1 QB at 731):
‘Duties at common law are owed by one person to another only if there exists a relationship between them which the common law recognises as giving rise to such duty. One of such recognised relationships is created by the voluntary taking into custody of goods which are the property of another. By voluntarily accepting from Mr. Beder the custody of a fur which they knew to be the property of a customer of his, they brought into existence between the plaintiff and themselves the relationship of bailor and bailee by sub-bailment. The legal relationship of bailor and bailee of a chattel can exist independently of any contract … ’
Salmon LJ said ([1965] 2 All ER at 738, [1966] 1 QB at 737):
‘When the defendants received the plaintiff’s mink stole from the furrier, Mr. Beder, for cleaning, they knew that this stole did not belong to him but to one of his customers. They did not know the customer’s name. Nevertheless by taking the fur into their possession in these circumstances they became bailees to the plaintiff for reward … ’
The same principle has been applied in other recent cases relating to sub-bailees, eg Global Dress Co Ltd v W H Boase & Co ([1966] 2 Lloyd’s Rep 72 at 76, 77), Learoyd Brothers & Co and Huddersfield Fine Worsteds v Pope and Sons (Dock Carriers) Ltd ([1966] 2 Lloyd’s Rep 142 at 147, 148) Moukataff v British Overseas Airways Corpn ([1967] 1 Lloyd’s Rep 396 at 412–416), and Lee Cooper Ltd v C H Jenkins & Sons Ltd.
Both on principle, and on old as well as recent authority it is clear that, although there was no contract or attornment between the plaintiffs and the defendants, the defendants by voluntarily taking possession of the plaintiffs’ goods, in the circumstances assumed an obligation to take due care of them and are liable to the plaintiffs for their failure to do so (as found by the trial judge). The obligation is at any rate the same as that of a bailee, whether or not it can with strict accuracy be described as being the obligation of a bailee. In a case such as this, the obligation is created by the delivery and assumption of possession under a sub-bailment. In the English courts the word ‘bailment’ has acquired a meaning wide enough to include this case. It may not have acquired such a wide meaning in the Australian courts. It is to be observed, however, that there is no express reference to bailment in count 3 of the particulars of claim on which the plaintiff succeeded. On a reasonable construction of that count this case falls within it. The plaintiffs have rightly succeeded in their action.
Their Lordships will humbly advise Her Majesty that the appeal should be dismissed. The defendants must pay the costs of the appeal.
Appeal dismissed.
Solicitors: William A Crump & Son (for the defendants); Clyde & Co (for the plaintiffs).
S A Hatteea Esq Barrister.
Brunner and another v Greenslade
[1970] 3 All ER 833
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 12, 13, 14, 15 MAY, 14 JULY 1970
Restrictive covenant – Restrictive covenant affecting land – Building scheme – Community of interest – Reciprocity of obligation – Scheme of development – Head scheme with restrictions relating to original plot – Division into sub-plots – No covenants between sub-purchasers inter se or with sub-vendor – Whether benefit of covenants enforceable by sub-purchasers inter se.
B Ltd sold off a plot of ·7 of an acre to S Ltd, the conveyance dated 5 September 1928, containing covenants expressed to be for the benefit of the vendors and any future owners of the estate and to bind the land conveyed whereby only private dwelling-houses should be erected on the land and that there should be only one such house to each of the five sub-plots into which the purchaser proposed to divide it. Paragraph 7 of the conveyance referred in terms to a ‘scheme of development’ relating to the vendors’ estate. Subsequently S Ltd conveyed one dwelling-house (no 62) and sub-plot to the plaintiffs’ predecessor in title and the next door house (no 64) and sub-plot to the plaintiffs’ predecessor in title, each conveyance conveying the fee simple to the purchaser subject to the covenants and restrictions contained in the conveyance of 5 September 1928 between B Ltd and S Ltd. By a further clause the purchaser covenanted with S Ltd to observe the restrictions and covenants but only by way of indemnity. In 1968 the owner of no 64 sold off part of her garden to the defendant who proposed to build a house thereon. On the plaintiff’s motion for an interlocutory injunction restraining the defendant from building on the land, it was not disputed that the proposed building would be a breach of the restrictive covenant contained in the conveyance of 5 September 1928 and that the defendant was subject to the burden of that covenant. On the question whether the plaintiffs were entitled to the benefit of the covenant,
Held – Where there was a head scheme of development relating to an original plot of land (as that referred to in the conveyance of 5 September 1928) any sub-purchasers would be presumed to be bound inter se by the covenants of that head scheme even though they had entered into no covenants with the sub-vendor or with each other, what bound them inter se being an equity independent of any contractual obligation, arising from the circumstances of the existence of the head scheme, the process of division into sub-plots and the disposal of those plots (see p 839 h, post).
Dicta of Parker J in Elliston v Reacher [1908] 2 Ch at 385 and of Simonds J in Lawrence v South County Freeholds Ltd [1939] 2 All ER at 524 followed.
Accordingly, as the plaintiffs had established a prima facie case for the existence of a right to the benefit of the restrictive covenant, an interlocutory injunction in the terms sought would be granted (see p 843 d and e, post).
Notes
For the essentials of a building scheme and its effect, see 14 Halsbury’s Laws (3rd Edn) 565–568, paras 1053–1057, and for cases on covenants imposed in a building scheme, see 40 Digest (Repl) 333–336, 2728–2745.
Cases referred to in judgment
Baxter v Four Oaks Properties Ltd [1965] 1 All ER 906, [1965] Ch 816, [1965] 2 WLR 1115, Digest (Cont Vol B) 641, 2728a.
Elliston v Reacher [1908] 2 Ch 374, 77 LJCh 617, 99 LT 346; affd [1908] 2 Ch 665, [1908–10] All ER Rep 612, 78 LJCh 87, 99 LT 701, 40 Digest (Repl) 337, 2749.
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King v Dickeson (1889) 40 Ch D 596, 58 LJCh 464, 60 LT 785, 40 Digest (Repl) 351 2831.
Knight v Simmonds [1896] 1 Ch 653; affd CA [1896] 2 Ch 294, 65 LJCh 583, 74 LT 563, 40 Digest (Repl) 362, 2896.
Lawrence v South County Freeholds Ltd [1939] 2 All ER 503, [1939] Ch 656, 108 LJCh 236, 161 LT 11, 40 Digest (Repl) 355, 2844.
Otter v Lord Vaux (1856) 2 K & J 650, 6 De GM & G 638, 26 LJCh 128, 29 LTOS 59, 43 ER 1381, 39 Digest (Repl) 697, 3700.
Renals v Cowlishaw (1878) 9 Ch D 125, 48 LJCh 33, 38 LT 503; affd CA (1879) 11 Ch 866, [1874–80] All ER Rep 359, 48 LJCh 830, 41 LT 116, 40 Digest (Repl) 346, 2796.
Ridley v Lee [1935] Ch 591, [1935] All ER Rep 526, 104 LJCh 304, 153 LT 437, 40 Digest (Repl) 335, 2735.
Rye v Rye [1962] 1 All ER 146, [1962] AC 496, [1962] 2 WLR 361, Digest (Cont Vol A) 986, 997a.
Spicer v Martin (1888) 14 App Cas 12, [1886–90] All ER Rep 461, 58 LJCh 309, 60 LT 546, 40 Digest (Repl) 336, 2744.
Willé v St John [1910] 1 Ch 84; on appeal CA [1910] 1 Ch 325, [1908–10] All ER Rep 325, 79 LJCh 239, 102 LT 383, 40 Digest (Repl) 350, 2820.
Motion
The plaintiffs, Walter Herman Brunner and Margaret Isabel Brunner (his wife), sought an interlocutory injunction to restrain the defendant, J W Greenslade, from erecting a dwelling-house or other structure on a plot of land known as 64 Harwood Avenue, Bromley, Kent. The facts are set out in the judgment.
G B Parker for the plaintiffs.
Richard Scott for the defendant.
Cur adv vult
14 July 1970. The following judgment was delivered.
MEGARRY J read the following judgment. On this motion, only one question arises; but that is not altogether easy. The plaintiffs own 62 Harwood Avenue, Bromley, Kent. The house next door, no 64, is a corner house with a larger garden than the other houses and has a return frontage on to Murray Avenue. It has been owned for well over ten years by Mrs Fox. Mrs Fox recently sold the land comprising the foot of her garden to the defendant, who is proposing to build a house on that land, fronting on to Murray Avenue. The plaintiffs now move for an interlocutory injunction restraining the defendant from erecting any dwelling-house, building or other structure on that land. It is not questioned that the building of the proposed house would be a breach of a restrictive covenant prohibiting the erection of more than one house on any plot. Nor is it disputed that the defendant is subject to the burden of that covenant. What is in issue is whether the plaintiffs are entitled to the benefit of the covenant. Counsel for the defendant says that they are not, and it is this contention which involves some examination of the law governing schemes of development and sub-schemes.
The title is relatively simple. By a conveyance dated 25 March 1926 (which I shall refer to as ‘the 1926 conveyance’) Sir Coles Child, the owner of the Bromley Palace Estate, conveyed a large part of it to Bromley Park Garden Estates Ltd (which I shall call ‘BPGE’). By a conveyance dated 5 September 1928 (which I shall call ‘the 1928 conveyance’) BPGE conveyed to Stanfords (Builders) Ltd (which I shall call ‘Stanfords’) a plot with an area of about ·7 of an acre and a frontage of some 175 feet to Harwood Avenue. Stanfords appear to have divided the plot (which I shall call lot to a purchaser. No 62 is one of those five lots, and no 64 is another. The plaintiffs derive title under a conveyance by Stanfords of no 62 dated 11 October 1928 and the defendant under a conveyance by Stanfords of no 64 dated 5 September 1928.
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In each of the three generations of conveyance there were a variety of covenants. If the covenants in the 1926 conveyance are called the grandparent covenants and those in the conveyance of the individual lots the children covenants, then it is the parent covenants, those in the 1928 conveyance to Stanfords, with which I am primarily concerned. Before I turn to these, however, I shall mention the grandparent covenants in outline.
In the 1926 conveyance, the words ‘the Vendor’ refer, of course, to Sir Coles Child. The words of covenant by BPGE (called in the conveyance ‘the Purchaser’) are contained in cl 3 and are as follows:
‘THE Purchaser for itself and for its assigns (so far as it has power to bind its assigns) hereby covenants with the Vendor his heirs executors administrators and assigns in the manner and to the effect set out in the Fifth Schedule hereto to the intent that (subject to the proviso contained in paragraph (f) of Clause 7 of the said Fifth Schedule) such covenants may enure for the benefit of the owner or owners for the time being of such parts of the land edged green on the said plan and of the lands in Widmore Road Wanstead Road and Nightingale Lane now forming part of the Vendor’s Bromley Palace Estate as are capable of deriving benefit therefrom and every or any part or parts thereof and that so far as the same are restrictive covenants they may be binding on the owner or owners for the time being of the said premises hereby assured but that neither the Purchaser nor any such other owner shall after ceasing to be such owner be personally liable in respect of any breach of any of the said restrictive covenants thereafter committed.’
Schedule 5 to the conveyance contains a miscellany of positive and negative covenants. Put shortly, the relevant restrictive covenants include a covenant that on the land cross-hatched red (which includes the ·7 acre plot) and the land cross-hatched blue:
‘… no buildings other than private dwellinghouses with the usual offices and with or without garages chauffeur’s or gardener’s cottages shall be erected and not more than eight of such houses per acre on the average shall be erected on the land cross hatched red … ’
There is also a covenant prohibiting use for any trade or business or otherwise than as a private dwelling-house, with a modification as to doctors. The covenants seem to be plainly of a type designed to secure and preserve the amenities and values on a newly-developed residential estate.
I now turn to the parent covenants, contained in the 1928 conveyance by BPGE to Stanfords. In this, of course, BPGE are called ‘the Vendors’ and Stanfords ‘the Purchasers’. By cl 3 and Sch 1, Stanfords covenant by way of indemnity only to perform and observe the covenants of the 1926 conveyance as set out in Sch 1 to the 1928 conveyance so far as then subsisting and capable of taking effect. There are then the covenants imposed by cl 4 and Sch 2. These are direct covenants and not merely covenants by way of indemnity. Clause 4 is as follows:
‘The Purchasers hereby covenant with the Vendors and so that this covenant shall be for the benefit and protection of the Vendors’ Bromley Park Garden Estate (of which the property hereby conveyed forms part) and the present and future owners lessees and tenants from time to time of the said estate or any part thereof and shall run with and bind the land hereby conveyed into whosesoever hands the same may come but so that the Purchasers shall not be liable under this covenant after they have sold and parted with all interest in the land hereby conveyed that the Purchasers and the persons deriving title under them will at all times hereafter observe and perform and and singular the stipulations and restrictions set out in the Second Schedule hereto.’
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Schedule 2 has 11 paragraphs. Paragraphs 6 and 11 are substantially positive in nature. Paragraph 7 includes a power of variation, and the other eight paragraphs are all substantially restrictive in nature. Paragraph 1 is as follows:
‘No buildings other than private detached or semi-detached dwelling houses with the usual offices and with or without garages chauffeurs or gardeners cottages shall be erected on the said land and not more than one such house shall be erected in each building plot such building plot to have a frontage of not less than thirty feet to a proposed road … ’
The covenant then continues with provisions as to a building line and prime cost. It is this covenant with which I am principally concerned. Paragraph 7 is as follows:
‘The Vendors reserve all rights of light air and other easements and all rights (if any) restricting the free use of any part of their estate for building purposes and also the right of selling all or any part of their remaining estate free from these stipulations and subject to such stipulations and restrictions (if any) as they may think fit. The Vendors shall not in any way be bound by the plotting or general scheme of development of any remaining plots as may be shown on any plans at any time prepared by them in regard to their Estate and may from time to time alter such plotting and scheme of development in such manner as they may deem fit.’
It will be observed that this paragraph in terms recognises that a scheme of development is or may be involved.
Pausing at that point, the position is that BPGE and their successors in title to any part of the Bromley Park Garden Estate could enforce these parent covenants against Stanfords and their successors in title, subject, where necessary, to the requirements of a scheme of development being satisfied. Subject in the same way, Stanfords and their successors in title to any of the ·7 acre plot would be entitled to enforce the provisions of the scheme against the owners of any part of the Bromley Park Garden Estate. (I may perhaps interpose that I prefer the more ample term ‘scheme of development’, a term which was used by Parker J in the locus classicus on the subject, Elliston v Reacher ([1908] 2 Ch 374 at 384), to the unduly narrow term ‘building scheme’, which has acquired a considerable but undeserved measure of currency. ‘Scheme of development’, I think, is the genus; ‘building scheme’ a species.) In short, subject to establishing the necessary requirements of a scheme, the provisions of the scheme would be enforceable between the owners of any of the ·7 acre plot and the owners of any of the rest of the estate. If in the present case the plaintiffs had owned land outside the ·7 acre plot, they could, on this footing, enforce the covenants against the defendant, owning land within the ·7 acre plot. But here, both the plaintiffs and the defendant own land within the ·7 acre plot, and the question is the enforceability of the covenants, and in particular the covenant in para 1 of Sch 2 relating to the erection of not more than one house on each building plot.
I turn next to the children covenants, those contained in the conveyances of nos 62 and 64. The conveyance of no 62 under which the plaintiffs claim, is dated 11 October 1928, and is made by Stanfords to Mr F H Harlow. In this conveyance, the habendum is:
‘To hold unto the Purchaser in fee simple subject to the covenants restrictions and stipulations contained or referred to in a Conveyance dated the Fifth day of September One thousand nine hundred and twenty eight made between Bromley Park Gardens Estates Limited of the one part and the Vendors of the other part so far as the said covenants restrictions and stipulations relate to or
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affect the said hereditaments and premises and are now subsisting and capable of taking effect … ’
Clause 3 provides:
‘The purchaser with the object and intent of affording the Vendors a full and sufficient indemnity but not further or otherwise covenants with the Vendors to perform observe and comply with the said covenants restrictions stipulations and agreements so far as they are now subsisting and capable of taking effect and to indemnify the Vendors against all claims in respect thereof.’
The conveyance of no 64 to the defendant’s predecessor in title is not in evidence, but the conveyance of no 60 to a Mr J D Steen is before me. Subject to allowing for variations of style between one conveyancer and another, that conveyance is in essence in the same terms as the conveyance of no 62, so that it is not very difficult to infer that the first conveyance of no 64 was in similar terms. This inference is consistent with a deed of variation dated 2 December 1968 made between BPGE and Mrs Fox, which, put shortly, purports to vary the restrictions of the 1928 conveyance (so far as BPGE can do so) to permit the defendant to build the proposed house; and the brief recital of the conveyance of no 64 to the defendant’s predecessor in title contains nothing to negative the inference to which I have referred. It is common ground, I may say, that the deed of variation does not affect the matters that I have to decide.
That brings me to the point of law involved in this case. If the purchasers of each of the five lots into which the ·7 acre plot was divided entered into similar covenants, then all that each of them did was, first, to take the conveyance subject to the 1928 restrictions and, second, to covenant with Stanfords, but only by way of indemnity, to observe these restrictions. In other words, no purchaser of any of the five lots entered into any covenant as of direct obligation (and not merely by way of indemnity) to observe the restrictions. The words in cl 3 of the conveyance expressly negative any obligation of the purchaser to do more than indemnify Stanfords. If a breach of the covenants in the 1928 conveyance occurred within the ·7 acre plot and Stanfords were sued in respect of it, the purchaser of that plot must indemnify Stanfords; but, says counsel for the defendant, there is nothing to show that, within the ·7 acre plot, there was to be any code of covenants enforceable by one lot holder against another, and so none can be enforced. The law of restrictive covenants is, after all, a law of covenants, and it could not be shown that the purchaser of any of the five lots into which the ·7 acre plot had been divided had entered into any covenants on which the plaintiffs could rely. Ridley v Lee is an example of a case in which the want of an effective covenant brought the alleged scheme of development to grief. Thus ran the argument.
I think at the outset it is necessary to make a distinction. If the purchaser of a lot subject to a scheme of development divides it into two or more sub-lots, two different questions may arise as between purchasers of the sub-lots. First, there may be the question whether any sub-scheme has been created, binding all purchasers of sub-lots. A sub-scheme, as I understand it, usually, but perhaps not necessarily, consists of some variant of the head scheme, imposed on the sale of the sub-lots, and drawing its force from the terms of the covenants entered into on those sales. Secondly, there may be the question whether the purchasers of sub-lots are bound inter se by the terms of the head scheme. In such cases, the covenants in question are not those imposed on the sub-sales (for there are none) but those of the head scheme, so that what has to be considered is not whether a new sub-scheme has come into being but whether the old head scheme is operative as between the sub-purchasers of one lot. That, of course, is the main question in this case. I am not concerned with cases
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such as Willé v St John, for there is was held that no building scheme existed, as the covenants had been imposed merely for the benefit of the original vendor. Without a scheme, there can, of course, be no question of the applicability of a scheme to fractions of a plot within the scheme.
Knight v Simmonds, however, is a case to which I should refer. True, it concerns a sub-scheme (a subject on which the authorities are few) and so appears not to be in point; but it is possible to contend that by implication it is relevant to this motion. In that case the purchasers of certain lots which were subject to a scheme of development divided them into sub-lots and entered into a deed of mutual covenant with the purchasers of the sub-lots. The covenants in the deed differed in one important respect from the covenants of the head scheme, relaxing one requirement. In those circumstances, Romer J held that the sub-purchasers could enforce inter se only the covenants of the sub-scheme. In the Court of Appeal ([1896] 2 Ch 294), this point did not arise. Stated baldly in this way, the case might be thought to provide by implication some authority on the point before me, in that the covenants of the head scheme were held not to be enforceable between the sub-purchasers. However, I do not think that such an inference is justified. In Lawrence v South County Freeholds Ltd ([1939] 2 All ER 503 at 521, [1939] Ch 656 at 678) Simonds J found Knight v Simmonds of little help in a case in which (as in the motion before me) there was no need of mutual covenant between purchasers of the sub-lots and so no inference could be drawn that as between those purchasers the covenants of the sub-scheme were being substituted for those of the head scheme. If all the sub-purchasers in terms mutually covenanted that all should be released inter se from the head scheme and subjected to the sub-scheme, naturally no question of their enforcing the head scheme inter se could arise; and the absence of any express release may be immaterial if the intention appears that the new should replace the old. I can see nothing in the case to show that Romer J took the view that in no circumstances could a head scheme bind the sub-purchasers inter se.
I accordingly leave the sub-schemes on one said, and consider the applicability of a head scheme as between sub-purchasers of an original lot in a case where those sub-purchasers have entered into no covenants save by way of indemnity. Does the absence of any covenant by the sub-purchasers mean that inter se the scheme is not enforceable? I accept, of course, that without a foundation of covenant there can be no scheme; but that is not the point in a case in which there is a scheme, and the only question is who are bound by it. The essentials of this point have arisen in two reported cases, King v Dickeson and Lawrence v South County Freeholds Ltd. The former case was relied on by counsel for the defendant, the latter by counsel for the plaintiffs; and I must examine both of them.
In King v Dickeson, the original purchaser of one lot subject to a scheme of development made an equitable mortgage of part of his lot, lot 258. The mortgagee had notice of the terms of the scheme, but entered into no covenant to observe it, and there is nothing to indicate that the mortgage was expressed to be made subject to the restrictions. The mortgagee later foreclosed and obtained a vesting order. He then sold the land to A, who resold it to B, the conveyance from A to B being expressed to be subject to the covenants. North J held that the mortgagor, as owner of the remaining land, could not enforce the covenants of the scheme against those claiming under B. He said ((1889) 40 Ch D at 599, 600):
‘… the owner of Lot 258 conveyed the part of it comprised in the mortgage to
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the mortgagee subject to all rights then existing in relation to it, but did not by implication create as against the mortgagee any new right or obligation in his own favour, and, not having created any such new right or obligation as against the mortgagee, he cannot now set it up as against a purchaser who derives title through the mortgagee.’
In the Lawrence case ([1939] Ch at 677, [1939] 2 All ER at 521), however, Simonds J observed of that case:
‘I think, though NORTH J. does not use the words, that he would have regarded the assertion of any such right as a derogation by the mortgagor from his grant. This decision was in March, 1889; the judgment in Spicer v. Martin which had been given in the previous December appears not to have been cited.’
I would only add, by way of emphasis, that a mortgagor has long been regarded as being in a somewhat special position. His mortgage is treated as being a mortgage of his entire interest, so that, for example, on paying off a prior mortgage he cannot keep it alive as against a subsequent mortgagee: Otter v Lord Vaux. The court is ready indeed to regard as a derogation from his grant the assertion of any right of his own against the mortgagee, and correspondingly slow to imply any reservation in his own favour. If in King v Dickeson the transaction had been a sale rather than a mortgage, I am not at all sure that North J would have reached the same conclusion.
In the Lawrence case, Simonds J held, in a reserved judgment, that on the facts before him no general scheme of development existed. It was accordingly not necessary to determine what rights as between the sub-purchasers there might have been if the main scheme had been held to exist. However, as the point had been fully argued, he expressed his views on it. I do not think that such views can simply be stigmatised as being obiter and so of little weight. A mere passing remark, or a statement or assumption on some matter that has not been argued, is one thing; a considered judgment on a point fully argued is another, especially where, had the facts been otherwise, it would have formed part of the ratio. Such judicial dicta, standing in authority between a ratio decidendi and an obiter dictum, seem to me to have a weight nearer to the former than the latter; and, perhaps I may add, anything uttered by Simonds J carries its own intrinsic authority.
I do not propose to discuss in detail the section of his judgment in which Simonds J reached his conclusion, though I must summarise it. Before doing so, perhaps I may mention that where he cited ([1939] 2 All ER at 523, [1939] Ch at 681) Lord Macnaghten as saying that ‘he would not be disposed to hesitate to extend’ the principles recognised in Renals v Cowlishaw ((1878) 9 Ch D 125 at 129), the ‘not’ has crept in by error. Lord Macnaghten’s words were ‘I should be disposed to hesitate if I were invited to extend the principles’ recognised in that case: see Spicer v Martin ((1888) 14 App Cas at 24, [1886–90] All ER Rep at 466). The substance of the views of Simonds J was that where there is a head scheme, any sub-purchasers are bound inter se by the covenants of that head scheme even though they have entered into no covenants with the sub-vendor or with each other. What binds the sub-purchasers inter se is not any covenant of their own making (for there is none) but an equity independent of any contractual obligation entered into by them, and arising from the circumstances of the existence of the head scheme, the process of division into sub-lots and the disposal of those lots. If on the disposal the common intention was that the local law created by the head
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scheme should apply within the sub-area, then apply it would. It would be remarkable if the restrictions of the head scheme were to be reciprocally enforceable between the owner of a sub-lot and a plot elsewhere on the estate, however distant, and yet unenforceable as between neighbouring owners of sub-lots. I have ventured a somewhat free summary of the conclusions reached by Simonds J, but I think that it contains the kernel of his reasoning.
This conclusion is, of course, adverse to counsel for the defendant’s contentions, and in particular his insistence on the importance of covenant. It is true that the law of restrictive covenants is founded in covenant, and that even the complexities of schemes of development may usually be explained in terms of covenant. Perhaps I may go back to first principles and try to summarise the matter in my own way. The most straightforward case is where A owns the entire estate and, having laid it out, himself sells individual lots to individual purchasers who enter into the covenants of the scheme. As soon as he sells a lot to the first purchaser, B, the scheme crystallises. Not only is B bound in respect of his lot to A, for the benefit of the remainder of the estate, but also A is bound, in respect of the remainder of the estate, to B, for the benefit of B’s plot. It may be noted that while B is bound by the express covenants that he has entered into, A may well have entered into no express covenants with B; and yet the concept of a scheme of development requires that A shall be treated as having impliedly bound himself by the provisions of the scheme. If A then sells another plot to C, C is taking part of the land that has already been subjected to the scheme in favour of B, and the covenants that he enters into are treated as being made for the benefit not only of A’s remaining land but also of B’s plot. If A continues to sell off one lot to each purchaser and all the purchasers are different, in this way the whole concept of the enforceability of the covenants under a scheme of development, as between all within the area of the scheme, is readily explicable in terms of covenant, express or implied.
However, it is not always this simple case that occurs. Sometimes, as in the present case, one person purchases two or more lots or potential lots. There may then be the question whether C, as purchaser of one lot, can be bound as to that lot for the benefit of himself as the owner of another lot, and vice versa. If it is sought to explain the operation of a scheme of development in terms of covenant, the answer must be No; for C cannot effectually covenant with himself: see, eg, Ridley v Lee and Rye v Rye. Yet if the answer is No, the consequence is that there are then haphazard islands of partial immunity within the area of the scheme, with C able to enforce the scheme against others, and others able to enforce it against C, but with C and his successors in title to any of his lots unable to enforce it inter se. Such immunities seem to me to be contrary to the whole basis of schemes of development, with their concept of a local law for the area of the scheme. If, then, the result of putting the basis of schemes of development on a relentless application of the law governing covenants is to produce an unsatisfactory or unworkable result, some other basis must be sought.
Now it seems to me that such a basis has long existed, quite apart from the Lawrence case. In Elliston v Reacher ([1908] 2 Ch at 385), after stating the familiar four requirements for a scheme of development, Parker J said that it was—
‘… observable that the equity arising out of the establishment of the four points I have mentioned has been sometimes explained by the implication of mutual contracts between the various purchasers, and sometimes by the implication of a contract between each purchaser and the common vendor, that each purchaser is to have the benefit of all the covenants by the other purchasers, so
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that each purchaser is in equity an assign of the benefit of these covenants. In my opinion the implication of mutual contract is not always a perfectly satisfactory explanation. It may be satisfactory where all the lots are sold by auction at the same time, but when, as in cases such as Spicer v. Martin, there is no sale by auction, but all the various sales are by private treaty and at various intervals of time, the circumstances may, at the date of one or more of the sales, be such as to preclude the possibility of any actual contract. For example, a prior purchaser may be dead or incapable of contracting at the time of a subsequent purchase, and in any event it is unlikely that the prior and subsequent purchasers are ever brought into personal relationship, and yet the equity may exist between them. It is, I think, enough to say, using Lord Macnaghten’s words in Spicer v. Martin, that where the four points I have mentioned are established, the community of interest imports in equity the reciprocity of obligation which is in fact contemplated by each at the time of his own purchase.’
That passage is, of course, primarily directed to deeds of mutual covenant. No doubt some of the difficulties where no mutual covenant is possible can be surmounted by other means, such as treating a purchaser’s covenant as being made not merely with the vendor but also with previous purchasers of lots. Nevertheless, I think that the words of Parker J show that he would have rested the mutual enforceability of the covenants of a scheme not merely on the principles of covenant but at least in part on an equity born of the community of interest and reciprocity of obligation mentioned by Lord Macnaghten. This view is strongly supported by what Simonds J said in the Lawrence case ([1939] 2 All ER at 524, [1939] Ch at 682). After citing the latter part of the passage from the judgment of Parker J that I have just read, he said ([1939] 2 All ER at 524, [1939] Ch at 682):
‘This, then, is the equity upon which the plaintiffs must rely, an equity which is created by circumstances and is independent of contractual obligation.’
The speech of Lord FitzGerald in Spicer v Martin ([1888] 14 App Cas at 18, 19, [1886–90] All ER Rep at 463) also seems to me to support this view, or at least to be fully consistent with it. For he based his opinion not on covenants entered into by the lessees of the sub-lots but on the covenants which the lessor of the sub-lots had entered into with the Commissioners, who were the common vendors. Indeed, that case has some striking resemblances to the case now before me.
To that I may add some words uttered by Sir Herbert Cozens-Hardy MR in Elliston v Reacher ([1908] 2 Ch 665 at 672, 673, [1908–10] All ER Rep 612 at 615) and concurred in by Fletcher Moulton and Farwell LJJ, when affirming the decision of Parker J ([1908] 2 Ch 374). What Sir Herbert Cozens-Hardy MR said was that it had been argued, somewhat boldly, ([1908] 2 Ch 665 at 672, 673, [1908–10] All ER Rep 612 at 615)
‘… that the whole scheme was at an end, if I follow the argument rightly, because of the four lots which were purchased by Mr. H.C. Bobbold; so far as appears, he was the only purchaser of the property; the other deeds were not produced, and it was unreasonable to suppose that there was any contract entered into between Mr. Cobbold as purchaser of lot 26 and Mr. Cobbold as purchaser of lot 27. I cannot assent to that. I do not think that is the true way to look at it. The very essence of every scheme of this kind is that it does not depend on the fact of there being separate purchasers of each lot, but it means that each lot, into whosesoever hands it comes, whether into the hands of the man who has bought half a dozen lots, or originally to a man who has bought
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one lot from the vendor, shall be subject in either case to the burden and have the benefit of the restrictive covenant.’
The major theoretical difficulties based on the law of covenant seem to me to disappear where instead there is an equity created by circumstances which is independent of contractual obligation. Further, whatever arguments there may be about unity of seisin destroying a covenant, by analogy to easements, I do not think that it precludes the application of a scheme of development as between purchasers of lots merely because they were initially in one hand.
In this case, I accordingly think that I am fabricating no new equity, but merely emphasising an established equity. This view illustrates the way in which equity, in developing one of its doctrines, refuses to allow itself to be fettered by the concept on which the doctrine is based if to do so would make the doctrine unfair or unworkable. After all, it is of the essence of a doctrine of equity that it should be equitable, and, I may add, that it should work: equity, like nature, does nothing in vain. In the field of schemes of development, equity readily gives effect to the common intention notwithstanding any technical difficulties involved: see Baxter v Four Oaks Properties Ltd ([1965] 1 All ER 906 at 913, [1965] Ch 816 at 825, 826), per Cross J. It may be, indeed, that this is one of those branches of equity which work best when explained least.
Assuming that the requirements of a scheme exist, there is then the question of intention. Will the equity apply as between the purchasers of sub-lots only if a positive intention to this effect is established, as Preston and Newsom’s Restrictive Covenantsa seems to suggest, or will it apply unless a contrary intention appears? The true view is, I think, the latter. In the Lawrence case ([1939] 2 All ER at 524, [1939] Ch at 683), Simonds J was plainly impressed by the improbability that the purchasers
‘… intended, while competent to enforce the covenants against the occupiers of the remotest houses on the estate, and liable at their suit to have them enforced, yet to be powerless in regard to the conduct of their nearest neighbours.’
No doubt purchasers may be infinitely various, but this sort of selective immunity and impotence is one for which few are likely to yearn: certainly I should be reluctant to presume any such yearning. An improbability such as this is likely to be present in every case in which a lot is divided. In any case where the requirements of a scheme are satisfied, and a purchaser of two or more actual or potential lots disposes of part of his land to others who have notice of the scheme, the position seems to me to be as follows. First, it will be presumed that each sub-purchaser will take the benefit and be subject to the burden of the equity arising from the scheme, and that the provisions of the scheme will accordingly be mutually enforceable as between all the sub-purchasers, even though they all claim through the same original purchaser from the common vendor. Such a presumption will be reinforced if the conveyances to the sub-purchasers are expressed to be made subject to the provisions of the scheme, or, a fortiori, if the sub-purchasers enter into covenants in terms of the scheme. Secondly, this presumption will be rebutted if the sub-purchasers enter into the new covenants of a sub-scheme which differ from those of the scheme: expressum facit cessare tacitum. In such a case, as between those within the sub-area the new sub-scheme will supersede the main scheme for the estate, and there will be a new local law to replace the old: see Knight v Simmonds. Thirdly, the presumption may be rebutted to the extent that the purchaser from the common vendor has disabled himself from enforcing the scheme against the sub-purchasers, for example,
Page 843 of [1970] 3 All ER 833
by reason of the rule that a man may not derogate from his grant: see King v Dickeson, as explained in the Lawrence case ([1939] 2 All ER at 520, 522, [1939] Ch at 677, 680).
I should add that I confess to some feelings of doubt about both the decision in King v Dickeson ([1939] 2 All ER at 521, [1939] Ch at 677) and the explanation of it in the Lawrence case ([1939] 2 All ER at 520, 522, [1939] Ch at 677, 680) not least because, as Simonds J pointed out in the Lawrence case ([1939] 2 All ER at 520, 522, [1939] Ch at 677, 680), Spicer v Martin was not cited to North J. In a subject which is not much over 130 years old and has been developing all the time, a decision in the first 40 years or so is made in relatively early days, while much of the subject is in a somewhat provisional and formative state. It may be that King v Dickeson ([1939] 2 All ER at 521, [1939] Ch at 677) can be explained on the somewhat narrow ground to which I have referred; but that does not solve all the difficulties, and if and insofar as the decision is inconsistent with the views that I have expressed, I should, if necessary, be prepared not to follow it.
Now in the present case, all that is before me is a motion. I do not have to resolve the matter finally. The status quo is that of the land which originally formed part of the plot on which no 64 stood still having on it only one house, namely, no 64. Counsel for the defendant’s resistance to the injunction is based on his contention that the plaintiffs are bound to fail. For the reasons that I have given, I do not accept that contention. Counsel for the defendant agreed that in order to succeed he must establish that both Lord FitzGerald and Simonds J were wrong. In my respectful judgment, they were right. At all events, I consider that the plaintiffs have very substantial prospects of success. It seems to me that they have established a strong prima facie case both for the existence of the right which they claim and for its impending infringement. There is, I think, sufficient evidence for me to infer on motion that the requirements of a scheme of development are satisfied, though of course I cannot say what will happen at the trial. In any case, the balance of convenience seems to me to point firmly in favour of restraining the erection of the house pending the trial of the action. In those circumstances, it seems to me that the plaintiffs should be granted the injunction that they seek; and I so hold.
Injunction granted.
Solicitors: Lake, Parry & Treadwell (for the plaintiffs); Marshall, Liddle & Downey (for the defendant).
R W Farrin Esq Barrister.
G (S D) v G (H H)
[1970] 3 All ER 844
Categories: FAMILY; Children
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BRANDON J
Hearing Date(s): 6, 9, 10 MARCH, 15 APRIL 1970
Divorce – Estoppel – Paternity of child – Order for custody – Order in undefended divorce proceedings – Application by mother (to whom custody awarded) for maintenance – Application opposed by father – Whether father estopped from denying paternity by reason of order for custody.
The parties were married in May 1955, at which time they had a son who was legitimated by the marriage. They parted in March 1958, and in December 1958 the wife gave birth to a daughter. In 1962 the wife filed a petition for divorce on the ground of cruelty and desertion. The petition stated that there were two children of the family, and the wife asked for their custody and for maintenance for them. In his appearance by solicitors, the husband indicated that it was his intention to defend the suit, that he wished to be heard on the question of maintenance of the children and that he wished to apply for access to them, and he stated that details of his proposals for the care and upbringing of the children would be included in his answer. No answer having been filed by the husband, the petition was set down in the undefended list. In 1963 the wife was given leave to amend her petition so as to ask for the exercise of the court’s discretion, and the amended petition was served on the husband’s solicitors. No answer having been filed (the husband’s solicitors saying that they had no instructions), the wife was granted in May 1963 a decree nisi in an undefended suit and was awarded custody of the two children, the court expressing its satisfaction with the arrangements for them. The decree was made absolute in August 1963. In 1967 the wife applied for maintenance. The husband then alleged that the daughter was not his child. On the question whether the husband was estopped from denying paternity of the daughter,
Held – The husband was estopped from denying paternity of the daughter by reason of the custody order, even though that order was made in the absence of the husband (see p 852 g, post).
Lindsay v Lindsay [1934] All ER Rep 149 applied and Nokes v Nokes [1957] 2 All ER 535 followed.
Notes
For estoppel in matrimonial proceedings, see 15 Halsbury’s Laws (3rd Edn) 183, 184, para 356, and for cases on the subject, see 27 Digest (Repl) 375, 376, 3089–3098.
Cases referred to in judgment
Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (No 2) [1966] 2 All ER 536, [1967] AC 853, [1966] 3 WLR 125, Digest (Cont Vol B) 256, 1298b.
Fidelitas Shipping Co Ltd v V/O Exportchleb [1965] 2 All ER 4, [1966] 1 QB 630, [1965] 2 WLR 1059, Digest (Cont Vol B) 248, 278a.
Lindsay v Lindsay [1934] P 162, [1934] All ER Rep 149, 103 LJP 100, 151 LT 283, 27 Digest (Repl) 614, 5746.
Nokes v Nokes [1957] 1 All ER 490, [1957] P 213, [1957] 2 WLR 493; rvsd CA [1957] 2 All ER 535, [1957] P 213, [1957] 3 WLR 90, Digest (Cont Vol A) 806, 6339a.
Thoday v Thoday [1964] 1 All ER 341, [1964] P 181, [1964] 2 WLR 371, Digest (Cont Vol B) 365, 4179a.
Tumath v Tumath [1970] 1 All ER 111, [1970] P 78, [1970] 2 WLR 169.
Warren v Warren [1962] 3 All ER 1031, [1962] 1 WLR 1310, Digest (Cont Vol A) 740, 3093d.
Page 845 of [1970] 3 All ER 844
Appeal and cross-appeal
This was an appeal summons adjourned into open court under RSC Ord 32, r 13(1), whereby the husband appealed against a maintenance order made by the Plymouth District Registrar on 21 July 1967, providing that he should, as from 4 August 1967, pay for the maintenance of the wife at the rate of £2 a week, and for the child of the family (the son) at the rate of £1 a week. During the hearing of the appeal, Brandon J gave the wife leave to cross-appeal out of time from the refusal of the registrar to make an order for the maintenance of another child (the daughter) of whom the husband alleged he was not the father. The facts are set out in the judgment.
R L Johnson for the husband.
A N L Butterfield for the wife.
Bruce Holroyd Pearce QC for the Queen’s Proctor.
15 April 1970. The following judgment was delivered.
BRANDON J. This is an appeal summons adjourned for hearing in open court under RSC Ord 32, r 13(1). It is an appeal by the husband from a maintenance order made by the Plymouth District Registrar on 21 July 1967. The order provides for payment by the husband as from 4 August 1967 of maintenance for the wife at the rate of £2 a week and for one child (‘the son’) at the rate of £1 a week. The wife had asked for maintenance for a second child (‘the daughter’) as well, but the district registrar made no order relating to her.
The history of the case is as follows. The wife and the husband were married on 27 May 1955, at Plymouth register office. They already had a child, the son, who had been born on 1 April 1955, and who was legitimated by the marriage; he is now 15. At the time of the marriage the husband was aged 20 and was serving in the Royal Marines which he had joined when he was 15. The wife was 19. In November 1956, the husband was posted to Singapore and in April 1957 the wife joined him there. On 2 March 1958, the wife and the husband separated, and on 5 December 1958 the wife gave birth to a second child, the daughter who is now 11. In 1960 the husband left the Royal Marines, but remained for a further five years on the special reserve. On 3 July 1962, after the parties had been separated for more than four years, the wife filed a petition for divorce on the ground of cruelty and desertion. The cruelty alleged consisted mainly of drunkenness and violence. With regard to children, paras 3 and 4 of the petition stated as follows:
‘3. There are two children of the family now living namely … born on the 1st April 1955 and … born on the 5th December 1958.
‘4. The [wife’s] proposals for care and upbringing of the said children (whose custody she seeks) are that they shall continue to reside with and be cared for by her, receive eduction at such schools as may from time to time be appropriate and convenient, and be maintained out of monies to be provided by the [husband].’
In the prayer of the petition the wife asked for: first, a divorce; second, the custody of the two children previously mentioned; third, alimony pending suit; fourth, maintenance for herself and those two children; and fifth, costs. On 12 August 1962, the petition was served on the husband, and on 16 August 1962 he appeared generally by solicitors. By his answers to the questions asked in the form of appearance the husband: indicated first, his intention to defend the suit; secondly, his wish to be heard in any event on questions of costs, maintenance of the children, alimony and maintenance; and thirdly, his wish to apply for access to the children. In answer to question 6 which was: ‘What are your proposals for the care and upbringing of the children?’ he stated, ‘These details will be included in my answer’.
On 18 August 1962, the wife, following a party, and while under the influence
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of alcohol, committed adultery with an unnamed man in consequence of which she became pregnant. On 18 December 1962, no answer having been filed by the husband, the wife set the case down for hearing in the undefended list at Plymouth. On 28 January 1963, the wife was given leave to amend her petition so as to ask for the exercise of the court’s discretion. The order giving her leave to do so directed that the amended petition should be served on the husband’s solicitors and gave the husband 14 days from such service for filing an answer. As a result of this amendment the case was taken out of the list pending renewal of the registrar’s certificate. On 29 January 1963, the amended petition was served on the husband’s solicitors. On 9 April 1963, no answer to the amended petition having been filed by the husband, the wife set the case down for hearing again in the undefended list. About that time—I was not told the precise date—the wife gave birth to her third child as a result of her adultery in August 1962, in respect of which she was seeking the exercise of the court’s discretion. On 10 May 1963, four days before the suit was due for hearing, the husband’s solicitors wrote to the wife’s solicitors saying that they had no instructions from the husband and would not be attending the hearing. On 14 May 1963, the suit came on for hearing in the undefended list before his Honour Judge Hillard sitting as a special commissioner at Plymouth. The wife was granted a decree nisi on the ground of cruelty in the exercise of the court’s discretion, and she was awarded the custody of the two children. Questions of maintenance were adjourned to chambers. Costs were ordered against the husband. The court expressed satisfaction with the arrangements for the children.
According to the evidence of the wife in the present maintenance proceedings, she had had no financial support from the husband, either for herself or for the children, since the separation in 1958, and she had in consequence been living entirely on State benefits. This evidence has not been contradicted by the husband, except that he says that until about the spring of 1961 he was paying maintenance for the son through the National Assistance Board. In these circumstance I find it difficult to see on what material the learned commissioner expressed his satisfaction with the arrangements for the children. In my view, arrangements include financial arrangements, and the situation of the financial side could hardly have been less satisfactory than it was. Be that as it may, the learned commissioner expressed satisfaction, assuming, I suppose, that the questions of maintenance, which he adjourned to chambers, would be dealt with reasonably soon. Unfortunately, as will appear from the rest of the story, they were not.
On 15 August 1963, the decree was made absolute on the wife’s application. On 8 October 1963, the wife’s solicitors sent their bill of costs to the husband’s solicitors, who wrote back that they still had no instructions from him and did not even know his address. On 22 October 1963, following taxation, the husband was ordered to pay the wife costs of £121 1s 10d.
After the divorce the wife and her three children continued to live on State benefits. No steps were taken to obtain maintenance from the husband. In April 1965, the husband was contacted by the National Assistance Board in connection with support of the children, but nothing resulted from the interview. On 31 August 1966, the husband wrote to the district registry for particulars of the divorce decree and on 2 September 1966 he was sent a copy of the decree absolute. On 27 September 1966, the husband married his second wife, who was then expecting a child. On 6 October 1966, the wife, who had been legally aided in the divorce suit, obtained a further legal aid certificate to apply for a maintenance order. On 25 February 1967, the husband’s second wife gave birth to her first child who is now three years old. On 29 June 1967, the wife applied to the district registrar for an appointment for the hearing of an application for maintenance: 21 July was fixed.
On 21 July 1967, the application was heard by the district registrar. The wife was represented by a solicitor. The husband appeared in person. The evidence before the registrar consisted of an affidavit of the wife sworn 26 June 1967, and two
Page 847 of [1970] 3 All ER 844
unsworn statements from the husband. At the conclusion of the hearing the district registrar made the order referred to earlier for the payment of £2 a week for the wife and £1 a week for the son. The husband immediately consulted new solicitors who obtained for him first an emergency and later a full legal aid certificate for him to appeal against the order of the district registrar. On 1 August 1967, an appeal summons was issued. On 28 September 1967, the appeal came on for hearing before his Honour Judge Hillard at Plymouth and was adjourned generally. On 29 September 1967, a consent order was made by the district registrar transferring the appeal to London. There followed a long delay in the prosecution of the appeal, the reasons for which have not been explained to me. On 11 December 1967, the husband filed an affidavit in support of the appeal. On 15 August 1968, the wife filed an affidavit in answer. On 26 October 1968, the husband’s second wife gave birth to her second child, now aged one and a half. On 1 November 1968, the husband filed a further affidavit in reply, and the appeal came on for hearing before me.
It was the respondent’s case, both before the district registrar and before me, that he was not liable to pay maintenance either for the wife or for the daughter, and that, while he was liable to pay maintenance for the son, he could only afford a very small sum. In his unsworn statements put before the district registrar, the husband stated that he had not been notified of the divorce proceedings, so that he was not aware of the grounds of divorce and had no opportunity to contest the case or to cross-petition. As appears from the history of the case which I have outlined, this was plainly untrue. The husband further said that the daughter was not his child, but that of a Malayan with whom the wife had committed adultery in Singapore. In his affidavit sworn 6 December 1967, in support of his appeal, the husband withdrew his statement that he had not been served with the divorce proceedings. He repeated the allegation that the daughter was not his child, saying that there had been no sexual intercourse between the wife and him after December 1957. He stated that he had not defended the divorce proceedings because of ill-health, difficulty of adapting to civilian life and failure to appreciate their significance. He denied having treated the wife with cruelty. He blamed her for the break-down of the marriage on the grounds: first of frequent unfaithfulness; second, refusal of sexual intercourse from 1957; third, refusal to make a proper home for him in Singapore; fourth, association with a Malayan houseboy; fifth, rejection of attempts at reconciliation; and sixth having a second child by the Malayan concerned. He stated that the wife had made no claim for alimony pending suit and no claim for permanent maintenance until June 1967. He stated that he had made payments for the son from time to time but none for the daughter.
In her affidavit sworn 18 August 1968, the wife denied that the daughter was not the husband’s child and denied the husband’s various allegations of misconduct against her. She stated that the delay in prosecuting her claim for maintenance was solely due to difficulties in locating the husband. The matter had been left to the National Assistance Board and the Ministry of Social Security who, after seeing the husband in 1965, lost trace of him until June 1967. In his affidavit in reply sworn 29 October 1968, the husband repeated his allegation that the daughter was not his child, stating that she was a half-cast. He further stated that the wife’s reasons for delay in prosecuting the claim were not correct. He gave details of his places of residence during the years 1960 until 1967 and of the means available to the wife for tracing him had she wished to do so.
On the hearing of the appeal it was apparent that difficult questions arose relating first to estoppel, secondly to delay and thirdly to the small amount of the husband’s means available for distribution between two families. In this connection, the evidence showed that the wife and her children were living entirely on State benefits and that the husband at the time of his last affidavit was earning between £14 and
Page 848 of [1970] 3 All ER 844
£15 net a week. It was also apparent that there was a possible conflict of interests between the two children.
Counsel for the parties told me frankly that, having been briefed only shortly before the hearing of the appeal, they were not in a position to argue the questions of law raised at all fully. In these circumstances, I decided to give a direction under s 6(1)(a) of the Matrimonial Causes Act 1965, for the papers to be sent to the Queen’s Proctor so that he might instruct counsel to argue before the court a number of questions of law specified in the direction. These questions were as follows: (1) whether the husband is estopped in these proceedings from alleging (a) that he is not the father of the daughter, (b) that the said child is not a child of the family, (c) that he did not during the marriage treat the wife with cruelty, and (d) that the wife was guilty of the conduct complained of in sub-paras (a) to (d) of para 4 of the husband’s affidavit sworn 6 December 1967. (2) Whether the wife’s claim for maintenance for (a) herself, or (b) the two children should be dismissed or the amounts awarded in respect of them reduced by reason of the wife’s delay in (i) making any such claims at all and (ii) prosecuting them when made. (3) On what principles the husband’s liability, if any, to pay maintenance for (a) the wife and (b) the said children should be assessed having regard to (i) the smallness of the husband’s income, (ii) his obligation to maintain his second wife and her two children and (iii) the fact the wife and her three children are at present being wholly maintained by State benefits.
At the time when I gave that direction I did not contemplate a long lapse of time before the case would come back to me. I expected it to come back in one or two months at the most. In fact the matter only came back before me on 6 March 1970, after a lapse of 16 months. This further delay was in many ways undesirable and unfortunate, but it had one substantial advantage in that, during the intervening period, an important decision was given by the Court of Appeal on the question of estoppel in matrimonial cases. I refer to Tumath v Tumath.
On the resumed hearing of the appeal I gave counsel for the wife leave to cross-appeal out of time from the refusal of the district registrar to make an order for the maintenance of the daughter. I gave such leave in order to remove any doubt that might exist whether the court could in the present proceedings review the whole matter. I think that the court could have done this anyhow on the husband’s appeal alone, but allowing a cross-appeal to be brought removed any doubt which existed. The resumed hearing occupied more than two days, during which I heard full and very helpful argument from counsel for the Queen’s Proctor and from counsel for the two parties concerned.
At the conclusion of the arguments I ruled as follows: (1) that the husband was estopped from denying that he had treated the wife with cruelty. (2) That the husband was not estopped from complaining of the wife’s conduct in the respects set out in para 4(a) to (d) of his affidavit sworn 6 December 1967. (3) That the husband was estopped from denying paternity of the daughter. I then adjourned the further hearing of the appeal so that both parties could attend for cross-examination on their respective affidavits and the husband’s allegations of bad conduct by the wife could be properly investigated on oral evidence. A subsidiary object of the adjournment and the attendance of the parties was to enable the question of delay also to be investigated more fully. I did not then give any reasons for my rulings because I thought that it would be more convenient to give a single judgment at the conclusion of the whole hearing of the appeal.
When the matter came before me again today I was informed by counsel for the wife and the husband that they had reached agreement as to the terms on which the appeal should be allowed and as to the order that should be made in substitution for the order of the district registrar. I accepted with certain minor modifications
Page 849 of [1970] 3 All ER 844
the proposal which was put forward as being a proposal which was just in all the circumstances. I will deal later with the order which is to be made following that agreement and its approval by the court, but before doing that I think that it is right that I should give my reasons for ruling which I gave after the very full argument before me.
So far as rulings (1) and (2) are concerned, it was agreed by all three counsel that they follow from the recent decision of the Court of Appeal in Tumath v Tumath mentioned earlier. That decision resolved difficulties arising from previous conflicting decision at first instance. So far as ruling (3), relating to the husband’s right to dispute the paternity of the daughter is concerned, the matter is more difficult. In argument before me two views were put forward. Counsel for the Queen’s Proctor and counsel for the husband argued that the husband was estopped from denying that the daughter was a child of the family, but was not estopped from denying that she was his child. Counsel for the wife argued that the husband was estopped from denying that the daughter was his child.
Two authorities need consideration, the first being Lindsay v Lindsay. In that case, a custody order had been made in favour of a wife at the hearing of an undefended suit of divorce, and in later proceedings by the wife for maintenance of the child the husband sought to contend that the child was not his. It was held by Sir Boyd Merriman P that he was estopped from doing so. The basis of the judgment was that the court could only have had jurisdiction to make an order for custody in respect of the child if the child was a child of the parties to the marriage. It followed that the making of the custody order involved by necessary implication a decision on the issue whether the child was a child of the parties to the marriage or not. It involved a decision that the child was such a child. That having been decided as between the parties in the divorce suit was thereafter res judicata in other proceedings between the same parties. I stress the circumstances in that case that the suit was undefended.
The second authority which is necessary to consider is Nokes v Nokes. That was in many ways a similar case, but in that case there had been no order for custody at the time of the undefended suit. In maintenance proceedings, however, a registrar had treated the child in respect of which there was a dispute as a child of the marriage. It was held that, in that case, there was no estoppel because the order of the registrar which had declared that the child was a child of the marriage was an order which he had no jurisdiction to make. The Court of Appeal distinguished Lindsay v Lindsay on the ground that in Lindsay v Lindsay there had been a decision by the judge at the hearing that the child was a child of the marriage, whereas in the case before them there had only been a decision by the registrar, that being a decision that he, as a registrar, had no jurisdiction to make. They allowed an appeal from Barnard J ([1957] 1 All ER 490, [1957] P 213) who had thought that case was one in which he should follow Lindsay v Lindsay. Hodson LJ said ([1957] 2 All ER at 538, [1957] P at 222):
‘The judge in his judgment [[1957] 1 All ER 490, [1957] P 213], after referring to the general law of estoppel, did purport to follow a decision of SIR BOYD MERRIMAN, P., in Lindsay v. Lindsay, but that was a very different case. In that case a petition for divorce included a prayer for custody and an order was made, at the same time as the decree nisi, giving to the wife, the petitioner in that case, the custody of the child. That was tantamount to a declaration by the judge that that child was a child of the marriage. When one compares the petition in the present case, one sees that although the fact of the birth of the child was recited, there was no prayer for
Page 850 of [1970] 3 All ER 844
custody in the petition, and neither at the hearing nor indeed at any time was there a declaration that the child was a child of the marriage, no order for custody being made in favour of the mother or any other person. Lindsay v. Lindsay, therefore, is clearly distinguishable and in a vital matter, because SIR BOYN MERRIMAN, P., was clearly founding himself on the fact that a judge’s order had been made dealing with the very question with which he was concerned. The situation does not arise in the present case, and the consequence is that in my judgment this appeal should be allowed.’
Parker LJ who was the second member of the court, after referring to Lindsay v Lindsay, said ([1957] 2 All ER at 539, [1957] P at 223):
‘It seems to me, however, that there is a very real difference between that and the present case; in Lindsay v. Lindsay the order relied on, namely, the order for custody and the decree nisi, was clearly made by a court of competent jurisdiction, whereas in the present case, if I am right, the registrar had no jurisdiction to determine the issue. On that ground I would allow this appeal.’
Ormerod LJ, who was the third member of the court, agreed.
It seems to me that, although the Court of Appeal did not expressly consider the question whether Lindsay v Lindsay was correctly decided, by their judgment they impliedly approved it for they treated it as good law and decided the case before them on the basis that it was different on the facts from Lindsay v Lindsay. If they has been of opinion that the principle applied in Linsday v Lindsay itself was unsupportable, I do not think that they would have given the reasons for allowing the appeal which they did, or certainly I do not think they would have limited themselves to those reasons. At the time when Lindsay v Lindsay was decided, the court could only make a custody order in respect of a child of the parties to the marriage. On the reasoning in that case, the order for custody implied a finding that the child in respect of whom the order was made was such a child.
In 1963 when the present divorce suit was heard the situation was different. The position was governed by the Matrimonial Causes Act 1950, s 26(1), and the Matrimonial Proceedings (Children) Act 1958, s 1(1) and (2). Section 26(1) of the 1950 Act provided:
‘In any proceedings for divorce or nullity of marriage or judicial separation, the court may from time to time, either before or by or after the final decree, make such provision as appears just with respect to the custody, maintenance and education of the children the marriage of whose parents is the subject of the proceedings, or if it thinks fit, direct proper proceedings to be taken for placing the children under protection of the court.’
Section 1 of the 1958 Act provided:
‘(1) Subject to the provisions of this section, section twenty-six of the Matrimonial Causes Act, 1950 (which enables the High Court to provide for the custody, maintenance and education of the children of the parties to matrimonial proceedings), shall apply in relation to a child of one party to the marriage (including an illegitimate or adopted child) who has been accepted as one of the family by the other party as it applies in relation to a child of both parties.
‘(2) In considering whether any and what provision should be made by virtue of the foregoing subsection for requiring any party to make any payment towards the maintenance or education of a child who is not his own, the court shall have regard to the extent, if any, to which that party had, on or after the acceptance of the child as one of the family, assumed responsibility for the child’s
Page 851 of [1970] 3 All ER 844
maintenance and to the liability of any person other than a party to the marriage to maintain the child.’
These provisions have since been replaced by the Matrimonial Causes Act 1965, ss 34(1) and (4) and 46(2). The effect of the provisions of the Acts of 1950 and 1958 to which I have referred was to enable the court to make a custody order in respect of a child on either of two bases, first that the child was found to be a child of the parties and marriage, and secondly that the child was found to be a child of one of them and accepted by the other.
The argument of counsel for the Queen’s Proctor and counsel for the husband was that, in these circumstances, while the husband was estopped from saying that neither basis for the custody order existed, he was not estopped from saying that it was the second basis rather than the first. On this argument it was open to the husband to dispute the paternity of the daughter, and, if he did so successfully, to invite the court to deal with his liability to maintain her on the footing that the daughter was a child of the wife only whom he had accepted into the family. Having got that far, he would then be able to say that he had never in fact accepted responsibility for the daughter’s maintenance, and, accordingly, ought not, under the Matrimonial Causes Act 1965, ss 34(1) and (4) and 46(2), which now govern the case, be required to pay any maintenance for her at all. If this is really the law, it produces a strange result, for on the facts, which are that the wife and husband separated for good in March 1958, and the child was not born until December 1958, no question of acceptance of the child by the husband as one of the family could arise at all.
I turn now to the argument of counsel for the wife. He accepted that the custody order could in theory have been made on either of the two bases discussed. He said, however, that, if the petition were examined, it showed clearly that the wife was alleging that the child was a child of the husband and that she was seeking a custody order on that ground and that ground alone. It followed, taking the petition and the order together, that the order was founded on a finding that the child was, as alleged, a child of the husband. In support of this argument, counsel for the wife referred me to the rules governing the form of petition in force in 1962 when the petition in this case was filed and served. Those rules were the Matrimonial Causes Rules 1957 a, as amended in 1958b. Rule 1(3) provided various definitions, including a definition of a ‘child of the family’. That definition provided:
‘Child of the family’ in relation to any proceedings means a child of the parties whose marriage is the subject of the proceedings or a child of one party who has been accepted as one of the family by the other party, and includes an illegitimate child or an adopted child within the meaning of section 1 of the Matrimonial Proceedings (Children) Act, 1958, and ‘children of the family’ has a corresponding meaning.’
Rule 3(3) provided as follows:
‘Every application for ancillary relief, being an application … (b) for the maintenance of any children of the family (in these Rules referred to as ‘maintenance of the children’), where custody of the children is claimed by the applicant in the petition or answer … shall be made in the petition or, where an answer claiming relief is filed, in the answer … ’
Rule 4 provided:
‘(1) The petition … shall state … (c) the name of every living child of the family and his date of birth (or, if it be the case, that he has attained the age of
Page 852 of [1970] 3 All ER 844
twenty-one years) or, as the case may be, that there are no living children of the family …
‘(2) Where an application for ancillary relief of the kind mentioned in Rule 3(3) is made in a wife’s petition there shall be included therein a statement in general terms of her husband’s property and income so far as they are within the petitioner’s knowledge or belief and, in the case of an application for maintenance of the children in so far as it relates to a child of whom the husband is not the father, the extent, if any, to which the husband has, on or after the acceptance of the child as one of the family, assumed responsibility for the child’s maintenance, and whether any person other than a party to the marriage is liable to maintain the child.’
It was argued by counsel for the wife that, if she had been seeking custody and maintenance on the basis that the husband was not the father of the child, but had accepted the child as a child of the family, she would have had to plead as required by r 4(2) and that she did not do so. He argued that it was a necessary implication that she was seeking custody and maintenance on the other basis, namely that the husband was the father. In my view, this argument is correct. The court should look at the petition in order to see what case the commissioner accepted and acted on in making the custody order: see Warren v Warren. If that is done, it is clear that the case was that the child was a child of the husband, and not the child of someone else accepted by the husband as a child of the family. That was the case which the wife put forward, and that was the case which the commissioner accepted and found to be true as a necessary basis for the custody order which he made.
What, then, is the result from the point of view of estoppel per rem judicatam? It seems to me that the principle known as issue estoppel applies to the case. There have been a number of recent authorities in which this principle has been discussed, including Thoday v Thoday, Fidelitas Shipping Co Ltd v V/O Exportchleb and Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (No 2). The last of these authorities leaves in doubt the extent to which the principle applied to cases where the judgment relied on as giving rise to the estoppel is a default judgment: see per Lord Reid ([1966] 2 All ER at 554, [1967] AC at 916) and per Lord Upjohn ([1966] 2 All ER at 573, [1967] AC at 947). It can be argued that the custody order in this case, having been made on the hearing of an undefended suit, without the husband being present or heard, was in the nature of a default judgment, and that, applying the dicta to which I have referred, it ought not, on that ground, to be treated as creating an estoppel. I feel the force of this argument and I have been troubled by it. It seems to me, however, that it is inconsistent with Lindsay v Lindsay as impliedly approved in Nokes v Nokes. The latter case is binding on me, and I do not think, having regard to it, that it is open to me to hold that the custody order, because it was made in the absence of the husband, cannot create an estoppel. In my view, the principle of Lindsay v Lindsay applies to the present case. It applies in this way. The wife by her petition raised the issue whether the daughter was a child of the husband. A court of competent jurisdiction found that she was. It did so on the oral evidence of the wife, supported by admissions of the husband. These admissions were of two kinds: first, there was an admission in the appearance, in the husband expressed a wish to be heard on the question of maintenance of the children and said that he wished to have access to the children; and, secondly, there was an admission by implication arising from
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the failure of the husband to plead to the petition. The result of that finding is that both parties to the suit are estopped, as against each other, from disputing its correctness in subsequent proceedings. That is the basis on which I give the ruling which I gave at the last hearing.
It seems clear that the district registrar took a different view and, indeed, must have found as a fact that the daughter was not the husband’s, otherwise I cannot see why he made no order in respect of her. On this ground alone it is clear that the order made by the district registrar has to be reviewed. If agreement had not been reached in the way it has today, it would have been necessary for me to decide questions relating to the conduct of the wife and its part in breaking up the marriage, if any, and to consider further the reasons for the delay in bringing and prosecuting the claim for maintenance. But, in view of the agreement which has been reached, it is not necessary for me to do those things and all that it is necessary for me to do is to state now what order is to be made.
The basis of the order which is proposed is that the husband is in principle liable to maintain both the children. It is further a basis of the order that his liability to maintain the wife is a liability which arises on the footing that both parties were equally responsible for the break-down of this marriage. There has been no finding to that effect because the matter has not, in the events which have happened, been litigated, but counsel for the wife informed me that he was content that the marriage should be treated as having broken down through the joint and substantially equal fault of the two parties to it, and that that was the proper basis on which at any time the maintenance liability to the wife should be assessed.
The order which is to be made is, first of all, that the appeal is to be allowed and that the order of the district registrar is to be set aside entirely. There shall be substituted for it, as from the date of that order until today, an order that the husband do pay maintenance for the wife at the rate of 1s per annum and maintenance for each of the two children at the rate of 10s a week. That is until today, and from today that the husband do pay maintenance to the wife at the same rate, that is to say 1s per annum, and maintenance for each of the two children mentioned at the rate of £1 a week, the order in respect of the son to continue until he is 16 or further order. That order is made on certain undertakings given by counsel for the wife and the husband respectively. The undertaking given by counsel for the wife on her behalf is that she will not take any steps to enforce any arrears accrued up to today without the leave of the court. The undertaking given by the husband is that he will keep the Department of Health and Social Security informed of any change of address or substantial change in his financial circumstances. It will further be recorded in the order that the basis on which the order relating to maintenance for the wife herself is being made is that both parties to the marriage were equally responsible for its break-down. That will be included in the order so as to afford guidance to any tribunal that may hereafter be charged with the task of considering a variation of the order.
Finally, I must deal with costs. It is agreed, and I think it is proper in all the circumstances, that there should be no order for costs inter partes, either as regards the application before the district registrar, or as regards this appeal. Both parties are legally aided. The case has raised questions of principle transcending the amounts involved in the case. It has, I think, been right that the State should have assisted through the legal aid scheme and through the argument of the Queen’s Proctor in resolving, or at any rate helping to resolve, those questions of principle.
Appeal and cross-appeal allowed.
Solicitors: Harold Powis & Co, Clacton-on-Sea (for the husband); J W Trobridge, Plymouth (for the wife); Solicitor, Queen’s Proctor.
Alice Bloomfield Barrister.
Jackson v Jackson
[1970] 3 All ER 854
Categories: FAMILY; Ancillary Finance and Property: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 14 OCTOBER 1970
Husband and wife – Deserted wife’s right to remain in occupation of matrimonial home – Extent of right – Cost to husband exceeding anything he might be ordered to pay in maintenance – Whether wife as trustee under trust for sale would be ordered to concur in sale of matrimonial home.
The parties were married in 1927. There was one child of the marriage, a daughter, who lived with them until 1956. In 1957 they bought a plot of land on which was erected a dwelling-house which was conveyed to them on trust for sale and a trust of the proceeds of sale was declared for them beneficially as joint tenants. In December 1966 the husband left the matrimonial home. The wife later obtained an order for maintenance at the rate of £5 10s per week on the ground of the husband’s desertion but when the husband retired and had to live on the old age pension, this was reduced on his application to 1s per annum. The husband subsequently severed the joint tenancy. The husband, who wished to join the daughter (who had married and was living in Canada) and realise his capital, applied to the court for an order under s 30a of the Law of Property Act 1925 that the wife, as co-trustee with him, should concur in the sale of the house. The wife wished to go on living in the house. The court found that the marriage had irretrievably broken down with no prospect of the husband returning to the former matrimonial home; that the husband had provided most of the cost of the property but accepted that the wife was entitled to a 50 per cent beneficial interest; that the husband had no capital resources except his investment in the house, and that his only income was a pension plus supplemental benefits from the social services; and that the wife’s income position was similar and that she had approximately £400 capital.
Held – The inability of a husband who has deserted his wife to turn her out of the matrimonial home was commensurate with his duty to maintain her, and that, in this case, the cost to the husband of allowing his wife to remain in the former matrimonial home was far in excess of anything he could be ordered to pay by way of maintenance in any matrimonial proceedings, and that, accordingly, the court would exercise its discretion by ordering a sale of the property (see p 863 b, post).
Jones v Challenger [1960] 1 All ER 785, Rawlings v Rawlings [1964] 2 All ER 804, National Provincial Bank Ltd v Ainsworth [1965] 2 All ER at 485 and Halden v Halden [1966] 3 All ER 412 applied.
Notes
For rights of husband and wife in matrimonial home, see 19 Halsbury’s Laws (3rd Edn) 849–851, para 1388, and for cases on the subject, see 27 Digest (Repl) 81, 620, 621.
Cases referred to in judgment
Buchanan-Wollaston’s Conveyance, Re, Curtis v Buchanan-Wollaston [1939] 2 All ER 302, [1939] Ch 738, 108 LJ Ch 281, 160 LT 399, 38 Digest (Repl) 822, 348.
Bull v Bull [1955] 1 All ER 253, [1955] 1 QB 234, [1955] 2 WLR 78, 38 Digest (Repl) 827, 398.
Carr Lane (No 39), Acomb, Re, Stevens v Hutchinson [1953] 1 All ER 699, sub nom Stevens v Hutchinson [1953] Ch 299, [1953] 2 WLR 545, 21 Digest (Repl) 781, 2652.
Page 855 of [1970] 3 All ER 854
Cobb v Cobb [1955] 2 All ER 696, [1955] 1 WLR 731, Digest (Cont Vol A) 692, 2130aa.
Halden v Halden [1966] 3 All ER 412, [1966] 1 WLR 1481, Digest (Cont Vol B) 345, 621x.
Hutchinson v Hutchinson [1947] 2 All ER 792, 27 Digest (Repl) 263, 2121.
Hyde’s Conveyance, Re (1952) 102 LJo 58.
Jones v Challenger [1960] 1 All ER 785, [1961] 1 QB 176, [1960] 2 WLR 695, 47 Digest (Repl) 400, 3595.
Lee v Lee [1952] 1 All ER 1299, [1952] 2 QB 489n, Digest (Cont Vol A) 667, 621a.
Mayo, Re, Mayo v Mayo [1943] 2 All ER 440, [1943] Ch 302, sub nom Re Mayo’s Will Trusts 112 LJ Ch 257, 169 LT 205, 47 Digest (Repl) 399, 3593.
National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, sub nom National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] AC 1175, [1965] 3 WLR 1, Digest (Cont Vol B) 343, 621l.
Rawlings v Rawlings [1964] 2 All ER 804, [1964] P 398, [1964] 3 WLR 294, Digest (Cont Vol B) 343, 621q.
Stewart v Stewart [1947] 2 All ER 813, [1948] 1 KB 507, [1948] LJR 799, 27 Digest (Repl) 263, 2125.
Cases also cited
Bedson v Bedson [1965] 3 All ER 307, [1965] 2 QB 666.
Johns’ Assignment Trusts, Re [1970] 2 All ER 210, [1970] 1 WLR 955.
Turner v Turner [1961] 3 All ER 944, [1962] P 283.
Adjourned summons
This was an application under s 30 of the Law of Property Act 1925 by originating summons dated 4 March 1969 by the husband, Albert Jackson, seeking an order that the wife, Florence Annie Jackson, as co-trustee with him of property (1 Montfort Close, Northampton) concur with him in the sale of the property, and an order that the wife give up possession of the property to the husband for the purpose of the sale. The facts are set out in the judgment of the court.
C A Brodie for the husband.
Dennis Naish for the wife.
14 October 1970. The following judgment was delivered.
PLOWMAN J. This is a lamentable dispute between the husband and the wife who have been married for over 40 years. It is a summons under s 30 of the Law of Property Act 1925 which I had better read. It provides:
‘If the trustees for sale refuse to sell or to exercise any of the powers conferred by either of the last two sections, or any requisite consent cannot be obtained, any person interested may apply to the court for a vesting or other order for giving effect to the proposed transaction or for an order directing the trustees for sale give effect thereto, and the court may make such order as it thinks fit.’
The relief in terms asked for by the originating summons is:
‘An order that the [wife] as trustee of the above mentioned trust for sale [the property being 1 Montfort Close, Northampton] do concur with the [husband] in the sale of the property set forth in the Schedule hereto at such price in such manner and upon such terms as may be agreed between the [husband] and the [wife] or in default of such agreement may be fixed by this Honourable Court.’
The matter comes about in this way. The property, 1 Montfort Close, was acquired in 1957. First of all, a plot of land was bought for some £200 and a dwelling-house was then erected on it at a cost of something like £2,000. That property was conveyed
Page 856 of [1970] 3 All ER 854
into the names of the husband and the wife on trust for sale and a trust of the proceeds of sale was declared for them beneficially as joint tenants. That joint tenancy has since been severed and the husband is now asking that the property be sold and the proceeds of sale be divided between himself and the wife equally.
There is no precise evidence as to the proportions in which the parties contributed to the purchase of this property. It is in evidence that the husband always paid his wages over to the wife, that she was the manager of the household affairs, that when she was working she paid her wages into the pool, and that the expenses of the house and the household were discharged out of the pool. It is expressly admitted by the wife in her affidavit that the husband is right in saying that he provided most of the cost of this property, but I am not concerned with the precise proportions because, as I say, it is accepted by the husband that the wife is entitled to a 50 per cent beneficial interest in this property. They lived there together until December 1966, when they separated and ever since then the wife has lived there on her own. The parties are getting on in years. The husband is a retired shoemaker aged 67 years and the wife is 65 years of age. They were married in the year 1927 and there is one child of that marriage, a daughter, who lived at home until 1956 but is now married and living in Canada. She appears to have been one of the causes of the troubles which arose between the husband and the wife.
As I say, the husband left the matrimonial home in December 1966. That was, therefore, nearly four years ago, but no matrimonial proceedings have been taken by the wife against the husband except that, in May 1967, she complained to the local justices that the husband had deserted her and he cross-claimed that she had deserted him. When the matter came before the justices they found in the wife’s favour, and the husband was ordered to pay £5 10s a week by way of maintenance. When the husband retired and had to live on the old age pension, he made another application to the justices as a result of which the amount payable under the order was reduced to 1s per annum, and that order still stands.
So far as the financial position of the parties is concerned, as I understand it, it is as follows. The husband has no capital resources at all except his investment in this house. His income is what he gets by way of pension plus supplemental benefits from the social services. So far as the wife is concerned, she is roughly speaking in the same position from an income point of view, but she has a few hundred pounds of capital which she came into on the death of her father. She says in her affidavit that she had something like £400 left having already spent £100 on the house since she has been occupying it on her own and is expecting any day to receive a bill for another £100.
The husband says that this marriage has irretrievably broken down, that he wants to join his daughter in Canada and to realise his capital. The wife naturally wants the house retained, to go on living there, she has nowhere else to go and she is not inclined to accept altogether that the marriage has irretrievably broken down. She says that her husband is welcome back if he agrees to come. In fact, I think that he had been invited to return on three occasions and on each of those occasions has declined to do so. The view I take on the evidence before me is that this marriage has irretrievably broken down and that the prospects of the husband returning to the former matrimonial home are nil.
Now, as to the law which is applicable to a case of this sort, the first case to which I should like to refer is a case in the Court of Appeal, Jones v Challenger. I will read the headnote or part of it ([1961] 1 QB at 176):
‘In 1956, a husband and wife purchased a lease, with about 10 years to run, of a house which they then occupied as the matrimonial home, the purchase-money being provided by the parties equally. The lease was assigned to them
Page 857 of [1970] 3 All ER 854
as trustees to sell the same with power to postpone the sale upon trust for themselves as joint tenants. In February, 1959, the husband obtained a divorce from the wife on the ground of her adultery. After the decree the wife, who had left the house, remarried, while the husband continued to live there and refused to agree to the sale of the lease. The wife then applied to the county court for an order under section 30 of the Law of Property Act, 1925, that as co-trustee with her the husband should concur in offering the house for sale. The county court judge held that in exercising his discretion under section 30, it would not be reasonable to order a sale so as to turn the husband out of his house. On appeal:—Held (per Ormerod and Devlin L.JJ.), (1) that when property was required by husband and wife jointly for the purpose of providing a matrimonial home, neither party had a right to demand the sale of the property while that purpose still existed, for that might defeat the object behind the trust; but with the end of the marriage that purpose was dissolved and the duty to sell was restored; it was then for the court to look at all the circumstances and consider, not whether it was reasonable for the husband to continue to live in the house, or for the wife to receive her share of the trust property in cash, but whether it was inequitable for the wife, once the matrimonial home had gone, to want to realise her investment. (2) That there was no way in which the court’s discretion could be exercised except by an order to sell because the conversion of the property into a form in which both parties could enjoy their rights equally was the prime object of the trust.’
I turn then to the judgment of Devlin LJ, and after referring to certain well-known cases, Re Buchanan-Wollaston’s Conveyance, Curtis v Buchanan-Wollaston, Re Hyde’s Conveyance, Re No 39 Carr Lane, Acomb, Stevens v Hutchinson and Bull V Bull, he said ([1960] 1 All ER at 789, [1961] 1 QB at 183):
‘In the case which we have to consider, the house was acquired as the matrimonial home. That was the purpose of the joint tenancy and, for so long as that purpose was still alive, I think that the right test to be applied would be that in Re Buchanan-Wollaston. But with the end of the marriage, that purpose was dissolved and the primacy of the duty to sell was restored. No doubt there is still a discretion. If the husband wanted time to obtain alternative accommodation, the sale could be postponed for that purpose, but he has not asked for that. If he was prepared to buy out the applicant’s interest, it might be proper to allow it, but he has not accepted a suggestion that terms of that sort should be made. In these circumstances, there is no way in which the discretion can properly be exercised except by an order to sell, because, since they cannot now both enjoy occupation of the property, that is the only way whereby the beneficiaries can derive equal benefit from their investment, which is the primary object of the trust.’
Devlin LJ then went on to deal with the question of hardship. It will be remembered that it was a guilty wife who was trying to turn out an innocent husband, and Devlin LJ said ([1960] 1 All ER at 789, 790, [1961] 1 QB at 183):
‘It is said that it is hard on the husband that he should have to give up the house which it was his wife’s choice and not his to abandon. So it is. But wherever there is a joint occupation, whether it is matrimonial or otherwise, and it is brought to an end, it may involve hardship and inconvenience on the person
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who would have preferred it to go on. If the wife had died and left her share under the trust to a stranger, I think that the house would obviously have had to be sold. The position is the same if the marriage is ended by divorce, for the court is not concerned under s 30 with the reasons for the ending of the marriage or the rights and wrongs of it; it can only take note that the object of the trust, so far as it required the preservation of the realty, has been fulfilled.
‘I think that the result must be the same whether the test to be applied is derived from the language used in Re Mayo, Mayo v Mayo or from that used in Re Buchanan-Wollaston. Let it be granted that the court must look into all the circumstances; if when the examination is complete, it finds that there is no inequity in selling the property, then it must be sold. The test is not what is reasonable. It is reasonable for the husband to want to go on living in the house and reasonable for the wife to want her share of the trust property in cash. The true question is whether it is inequitable for the wife, once the matrimonial home has gone, to want to realise her investment? Nothing said in the cases which I have cited can be used to suggest that it is, and in my judgment it clearly is not. The conversion of the property into a form in which both parties can enjoy their rights equally is the prime object of the trust; the preservation of the house as a home for one of them singly is not an object at all. If the true object of the trust is made paramount, as it should be, there is only one order that can be made.
‘It is, I think, desirable to distinguish the position that may arise when an application is made under the Married Women’s Property Act, 1882, s 17, because we were referred to Cobb v. Cobb, a case decided under that Act. It was a case in which a husband and wife owned a house in equal shares. Matrimonial proceedings were begun but both parties continued to live in the house. The husband applied under s. 17 for an order for the sale of the house, which this court refused. The house was still the matrimonial home and the court had a complete discretion. The judgment of DENNING, L.J. [[1955] 2 All ER at 699, [1955] 1 WLR at 734], shows that the question of sale can be dealt with somewhat differently in applications under that section, the marriage being still alive. If the court thinks it proper to give one party or the other the right to reside in the house after the marriage is over, it is not then necessarily interfering with the equal division of property held in equal shares. If there is other property to be divided, an overall equality may be reached; or if there is not, the necessary adjustment may be made on the settlement of alimony or maintenance. So long as in the end the division is in the correct proportion, each party gets his or her rights and the question whether one party shall have the enjoyment of one particular piece of property, such as the house, can properly be decided simply by what seems best to the court and most reasonable. But this can only be done as part of matrimonial proceedings. The order made in this case is tantamount to requiring the wife to contribute towards the upkeep of the husband’s home, and it is too late for that now.’
I call attention to the fact that the marriage in that case had been ended by divorce and I come now to another case where the marriage had irretrievably broken down in fact, although there had been no divorce, and the principles enunciated in Jones v Challenger were applied. That is Rawlings v Rawlings, and I think that I should read the headnote ([1964] P at 398–400):
Page 859 of [1970] 3 All ER 854
‘A husband and wife were married in 1929. In 1957 they purchased a bungalow which was conveyed into their joint names and became the matrimonial home. In June, 1962, the wife deserted the husband, the husband remaining at the matrimonial home with the one son of the marriage, who was aged 21 at the date of judgment in the present appeal. By a summons under section 17 of the Married Women’s Property Act, 1882, dated February 16, 1962, the wife asked for an order for sale of the bungalow, the proceeds to be divided equally between the parties. The husband desired to retain the property and to continue residing there, partly because he still hoped that the wife would return to him and meanwhile desired to maintain a home for his son, and partly because he had purchased an adjacent plot of land the value of which would be depreciated if the bungalow were sold separately. At the hearing, it was contended on his behalf, first, that the transfer of the property into the joint names of the parties constituted a post-nuptial settlement under section 25 of the Matrimonial Causes Act, 1950, with which it would not be proper to interfere in proceedings under the Married Women’s Property Act, 1882, and, secondly, that in any event an order for sale ought not to be made in favour of a deserting wife at a time when the marriage was still subsisting, especially having regard to the welfare of the son of the parties. It was not disputed that the effect of the conveyance into the joint names was that the parties held the property as joint tenants subject to a statutory trust for sale, with power to postpone, and on terms that in the event of a sale the net proceeds, after paying off the mortgage debt, should be shared equally between them. No other proceedings had been instituted by either party. The registrar made an order for the sale of the property. The husband appealed, by his notice of appeal contending (1) that the registrar had been wrong in not holding that the property was the subject-matter of a post-nuptial settlement and, accordingly, that the court had no jurisdiction to make the order; (2) that the registrar had exercised his discretion under section 17 wrongly in ordering a sale; and (3) that in exercising his discretion to order a sale the registrar had failed to take any proper account of the facts that the property was the matrimonial home, that the husband had been guilty of no matrimonial offence, and that he was desirous both that his marriage to the wife should continue and that the matrimonial home should be preserved for that purpose and as a home for the child of the family:—Held (Willmer L.J. dissenting), that, there being here a trust for sale with only a power to postpone sale, the exercise of which needed the consent of both parties, the facts that the parties were husband and wife and that the proceedings were brought in the Divorce Division did not give rise to any question of a post-nuptial settlement under section 25 of the Matrimonial Causes Act, 1950, nor was it proper, when considering the propriety of a sale, to take into account the possibility that the husband might thereby be deprived of his chance in the future of seeking in matrimonial proceedings to vary any such settlement in his favour; that since, on the facts, the marriage had for all practical purposes come to an end and the purposes of the trust had failed, the court should not exercise its discretion to refuse a sale; and that, accordingly, the trust should be executed, the husband giving vacant possession to the purchaser on completion. The registrar’s order had been rightly made.’
I should like to read one or two short passages from the judgments first of Harman and then of Salmon LJJ. Harman LJ said ([1964] 2 All ER at 811, 812, [1964] P at 415, 416):
‘The wife’s true claim was for the execution of the statutory trusts affecting the property or by an application under s. 30 of the Law of Property Act, 1925.
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If the parties were not husband and wife, there could be no doubt about the result of such an application. There is a trust for sale which either party can call on the other to perform and only a power to postpone, the exercise of which needs the consent of both of them.
‘It is said, however, that this is not a case between strangers, and that when husband and wife are the co-owners different considerations apply—see the passage from the judgment of TUCKER, L.J., in Stewart v. Stewart [[1947] 2 All ER 813, [1948] 1 KB 507 at 513] cited by WILLMER, L.J. [[1964] 2 All ER at 809, [1964] P at 411, 412]. I cannot think that the fact that the proceedings are brought in the Divorce Division can possibly import considerations about post-nuptial settlements under s. 25 of the Matrimonial Causes Act, 1950; nor do I take the view that it is proper when considering the propriety of a sale now to take into account the possibility that the husband may be deprived of his chance hereafter of seeking in matrimonial proceedings to vary the so-called post-nuptial settlement in his favour. Apart from that, I cannot imagine in the circumstances of this case that any court would alter such a settlement by depriving the wife of her interest. It is no part of the a statutory trusts to punish the wife for the break-up of the marriage if, as I think we must at present assume, she is responsible for it.
‘WILLMER, L.J. has considered the cases, most of which seem to depend on considerations arising in matrimonial disputes where either both parties are living in the house or the wife is wishing to remain in it. The latter class of case is illustrated by Cobb v. Cobb, where, if the wife proved right in the pending divorce suit, she would be entitled to be provided with a roof over her head at her husband’s expense. The husband has no corresponding right. We have heard a good deal lately about the equity of the deserted wife. What is being set up here is the equity of the deserted husband. But I do not think that the law has gone, or should go, so far as to pronounce for some equitable right in this husband to procure a postponement of the sale in order that he may hereafter reap some advantage in the divorce court. In my view … Stewart v. Stewart, cited by WILLMER, L.J., applies only where the house is at the time the matrimonial home, either because both parties live there or because the wife, if she proves right in the matrimonial proceedings, may be entitled to retain it as a roof over her head. In Stewart v. Stewart the wife by her adultery forfeited this right and the court upheld an order rightly made against her.
‘In the instant case, the house has not been the matrimonial home for two years. The marriage, on the evidence, is clearly at an end, though not so in law. There is, I agree, a discretion, but I cannot think it can be stretched as far as to allow the husband for his own convenience to live rent free in a house half of which belongs to his wife. It is true that he says that he is paying the mortgage installments, but he does not even offer his wife an indemnity against them, still less any rent; nor does he make any offer to buy out his wife’s interest. It is argued that while the marriage is still subsisting he ought not to be turned out of what was the matrimonial home. But it is no longer, in fact, the matrimonial home: the marriage has come to an end in fact, though not in law, and I do not think that the husband can sustain the argument that he ought to be allowed to retain the house because it is his wife’s duty to go back there. There is no suggestion that when three years’ separation are complete he will take proceedings for desertion—and, indeed, I suppose he will not do so, for he will prefer to live in the house, if merely to say that the marriage still subsisting gives him a right to do so.
Page 861 of [1970] 3 All ER 854
‘In my opinion, therefore, the ordinary rule ought to prevail and an order be made for execution of the trusts by way of a sale, the husband giving vacant possession to the purchaser on completion, the costs to come out of the capital of the trust monies.’
Then Salmon LJ to the same effect said ([1964] 2 All ER at 814, [1964] P at 418, 419):
‘It is true that in Jones v. Challenger the parties had been divorced. I do not, however, consider that that case would necessarily have been differently decided had there been no decree of divorce. It certainly did not decide that unless there is a divorce a wife who owns the property jointly with her husband can never obtain an order for sale. I can see no reason on principle or authority for doing so in this case. So to hold would mean that a husband deserted by his wife could, whatever the circumstances, sit back for the rest of his lifetime and enjoy the benefit of the joint investment and deprive his wife of its fruits. It would be of no benefit to her that the value of the investment might increase from year to year. Should she predecease him, she would never be able to touch any part of the capital or to enjoy any benefit from it.’
Then he reached the same conclusion that the marriage was, for all practical purposes, dead, and he said ([1964] 2 All ER at 814, [1964] P at 419, 420):
‘In my judgment, the evidence leads irresistibly to the conclusion that the marriage is for all practical purposes dead and the purposes of the trust have failed. No doubt the fault is with the wife; she has deserted her husband, it must be presumed, without cause. But it is not the function of the court to punish her for this matrimonial wrong. No doubt it is hard on the husband to have to give up the house, and reasonable for him to want to stay. It is reasonable, too, for the wife, in the circumstances, to want to realise her investment. The test is not what is reasonable, but whether it is inequitable for the wife, now that the marriage is dead, to want to realise her investment (Jones v. Challenger). In the special circumstances of this case, in my judgment, equity demands that the house should now be sold. I would dismiss the appeal, and I agree with the order proposed by HARMAN, L.J.’
Of course, in those two cases, Jones v Challenger and Rawlings v Rawlings, it was a guilty wife who was trying to get vacant possession on a sale of the former matrimonial home still occupied by the husband. In the case before me the husband, against whom a magistrates’ finding of desertion still stands, is trying to get a sale with vacant possession of the former matrimonial home where the wife has not been found guilty of any matrimonial offence. It was suggested on her behalf that she ought to be allowed to stay because the husband who is in desertion will not be allowed to turn his wife out of the matrimonial home. It is said that, notwithstanding that in National Provincial Bank Ltd v Ainsworth, it was held that the wife had no equity in the property, it is still good law that a husband cannot turn his wife out in the circumstances that I have mentioned.
I shall refer to he passage in Lord Upjohn’s speech where he said ([1965] 2 All ER at 485, [1965] AC at 1232, 1233):
‘Apart from authority, what is the extent and ambit of her right to continue
Page 862 of [1970] 3 All ER 854
in occupation? I have already pointed out that, before desertion, she has no special rights in the particular house where the spouses are living, and I cannot see why, on principle, any better rights should arise on desertion. Her rights as a wife continue as before, they are not increased by breach of duty on the part of the husband, but, being in breach himself, he may find it difficult to turn her out of the house where she is lawfully living awaiting his return, and the court may prevent the husband by injunction from dealing with his property to the prejudice of the wife without safeguarding her position … ’
and he referred to the case of Lee v Lee.
Similarly in the case in the Court of Appeal in 1966, Halden v Halden, the Court of Appeal took the same view. The headnote of that case is as follows ([1966] 3 All ER at 412):
‘The parties were married in 1933. They lived in a house which was vested in the husband. In 1961 he left the matrimonial home, obtained another house and lived there with his mistress. The wife obtained a maintenance order from the magistrates’ court on the ground of the husband’s adultery. The order contained a non-cohabitation clause. Subsequently the wife obtained an order on application under s. 17 of the Married Women’s Property Act, 1882, restraining the husband from selling the matrimonial home without providing her with suitable alternative accommodation. On appeal by the husband, Held: there was jurisdiction on which, notwithstanding the non-cohabitation clause, an order could be made restraining the husband from turning the wife out unless suitable or alternative accommodation were provided for her. In the present case the order should stand because a husband who had deserted his wife had no right to turn her out of the matrimonial home without an order of the court, even though she had no legal or equitable interest in the house.’
The passage to which my attention is drawn is from the judgment of Lord Denning MR where he said ([1966] 3 All ER at 413, [1966] 1 WLR at 1483, 1484):
‘Accepting that the clause is still there and that there is no duty to cohabit, nevertheless it is plain from my own decision in Hutchinson v. Hutchinson, as long ago as 1947, that it is no ground for saying that the wife cannot be protected in the home. In that very case there was an order for judicial separation and an order for maintenance of £250 a year if she moved out of the matrimonial home and £150 if she stayed in it. I held that nevertheless the wife was entitled to be protected and not to be turned out of the house. Counsel for the husband says that he accepts that decision. I think that all the observations in the House of Lords in National Provincial Bank, Ltd v. Ainsworth, are in accord with it. Whatever the position may be as to a subsequent purchaser, it seems to me quite plain that as between husband and wife, if the husband deserts his wife, leaving her in the house, he has not a right to turn her out. She has not to show a legal or equitable interest in herself. It is sufficient for her to say: “I am his wife and I am under the roof which he provided.” He is not entitled to turn her out except by order of the court; and that will not be given in the ordinary way unless he provides alternative accommodation for her. All the speeches in the House of Lords affirm the decision in Lee v. Lee, under which this court
Page 863 of [1970] 3 All ER 854
assumed jurisdiction to restrain a husband from selling the house over his wife’s head. Hutchinson v. Hutchinson and Lee v. Lee still stand, even after the House of Lords’ decision. They afford ample foundation for the jurisdiction of the registrar in this case to make the order that he did, namely, that the wife was not to be turned out unless the husband provided suitable alternative accommodation, and, in case of dispute, the matter was to go back to the registrar. In these circumstances I see nothing wrong in the order which the registrar made.’
In my judgment, it appears from the cases to which I have referred that the inability of the husband who has deserted the wife to turn her out of the matrimonial home is commensurate with his duty to maintain her. It seems to me that counsel for the husband is right in submitting in this case that the cost to the husband of allowing the wife to remain in the former matrimonial home is far in excess of anything that he would be ordered to pay by way of maintenance in any matrimonial proceedings, and if that is right, then it seems to me that on the authority of Jones v Challenger I ought to exercise my discretion by ordering the sale of this house. In some ways I regret having to arrive at that decision and have considerable sympathy with the wife, but my duty is to exercise my discretion judicially and not in accordance with any sympathies that I might feel. Therefore I think that the husband is entitled to an order the precise nature of which I will discuss with counsel in a moment, but whatever that order may be, I propose to give the wife proper opportunity to look round and make arrangements for her future.
Order accordingly.
Solicitors: Wilkinson, Kimbers & Staddon, agents for Canning & Kyrke, Chard, Somerset (for the husband); Jaques & Co, agents for Frank Jones & Harley, Northampton (for the wife).
Jacqueline Metcalfe Barrister.
Margate Corporation v Devotwill Investments Ltd
[1970] 3 All ER 864
Categories: TOWN AND COUNTRY PLANNING
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD HODSON, LORD GUEST AND LORD DIPLOCK
Hearing Date(s): 13, 14, 15, 16 JULY, 5, 6 OCTOBER, 11 NOVEMBER 1970
Compulsory purchase – Compensation – Purchase notice – Assumptions on valuation – Planning permission reasonably to be expected – Assumption that no part of reference land to be acquired – Proposed by-pass to relieve congestion inapplicable – Assumption of alternative route – Resulting relief of congestion – Justification for immediate full development of land – Assumption of permission therefor – Whether assumption of alternative route justified without evidence – Land Compensation Act 1961, s 16(2), (7).
The respondents, the owners of a piece of land fronting on to Canterbury Road, Birchington, which formed part of the area allocated for residential use in the county development plan, applied to the appellants, the local planning authority, for outline planning permission to develop the land for residential use. Permission was refused on the ground that part of the site would be required for road improvement works to Canterbury Road and that residential development of the land would be premature until it had been possible to finalise details of the road improvement scheme. No such road improvement scheme was shown on the development plan. The respondents served a purchase notice in respect of the land which the appellants accepted. The compensation payable under the notice was required by s 16(2) and (7) of the Land Compensation Act 1961 to be assessed on the assumption that at the time of the deemed notice to treat, planning permission would have been granted for residential development so far as then reasonably to be expected and that no authority possessing compulsory purchase powers would acquire the land. The respondents claimed that compensation should be assessed on the basis of planning permission for full development with 20 houses immediately, with access to Canterbury Road, giving a value of £16,000. The appellants contended that planning permission should be assumed for development with nine houses only immediately, with temporary access to Canterbury Road, and with 11 houses deferred until suitable access became available as a result of development of the land adjoining that belonging to the respondents, giving a value of £8,200. The Lands Tribunal determined the compensation at £13,500 on the assumption that, while no part of the respondents’ land could be taken for the by-pass, it was an inevitable corollary that a by-pass would be provided on some other line and in some different position taking the traffic away from Canterbury Road, so that planning permission might reasonably have been expected for the immediate development of the respondents’ land.
Held – The Lands Tribunal had erred as a matter of law in assuming, as a corollary of the assumption that the respondents’ land was not going to be acquired for the construction of a by-pass which they were required to make, that there would inevitably be a by-pass on some other line and in some different position. The possibility of the construction of a by-pass elsewhere was a matter which could not rest on an assumption but on an examination of all the relevant factors (see p 865 d, p 869 h to p 870 a, p 870 j and p 871 a and b, post).
Decision of the Court of Appeal sub nom Devotwill Investments Ltd v Margate Corpn [1969] 2 All ER 97 reversed.
Notes
For the assumption of planning permission in the assessment of compensation on compulsory purchase (and on a purchase notice), see 10 Halsbury’s Laws (3rd Edn) 107–109, paras 181, 182.
For the Land Compensation Act 1961, s 16, see 6 Halsbury’s Statutes (3rd Edn) 255.
Page 865 of [1970] 3 All ER 864
Cases referred to in opinions
East End Dwellings Co Ltd v Finsbury Borough Council [1951] 2 All ER 587, [1952] AC 109, 115 JP 477, 45 Digest (Repl) 369, 169.
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, 11 Digest (Repl) 131, *149.
Appeal
This was an appeal by the appellants, Margate Corporation, from an order of the Court of Appeal (Russell and Winn LJJ; Lord Denning MR dissenting) dated 11 December 1968 and reported [1969] 2 All ER 97, dismissing an appeal from a decision of the Lands Tribunal (J S Daniel Esq QC) dated 2 October 1967, whereby it was adjudged that the compensation payable by the appellants to the respondents, Devotwill Investments Ltd, for certain land in the borough of Margate should be £13,500. The facts are set out in the opinion of Lord Morris of Borth-y-Gest.
D G Widdicombe QC and R W Bell for the appellants.
Anthony Cripps QC and B A Marder for the respondents.
Their Lordships took time for consideration
11 November 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by my noble and learned friend Lord Morris of Borth-y-Gest I would make the order which he proposes.
LORD MORRIS OF BORTH-Y-GEST. My Lords, on 2 September 1965 the respondents, as owners of a piece of land in Birchington in the borough of Margate, applied to the appellants (as the local planning authority) for outline planning permission to develop the land for residential use. The land has an area of approximately 1·35 acres; in part it fronts on to a road called Canterbury Road and in part it extends to the rear of numbers 245 to 249 Canterbury Road. The land has no buildings on it. It formed part of an area allocated for residential use in the Thanet town map which was part of the current development plan for the county of Kent and which was approved by the Minister of Housing and Local Government in 1958. On 1 October 1965 the appellants refused permission. The refusal was stated to be on the ground that part of the land would be required for road improvement works to Canterbury Road (designed to by-pass Birchington Square) and that residential development of the land would be premature until it was possible ‘to finalise details of the improvement scheme’. No such road improvement works to Canterbury Road were shown on the development plan.
It is provided by s 129 of the Town and Country Planning Act 1962 that where on an application for planning permission to develop any land permission is refused (or is granted subject to conditions) and if an owner of the land claims (inter alia) that the land has become incapable of reasonable beneficial use in its existing state and cannot be rendered capable of reasonable beneficial use by the carrying out of any other development for which planning permission has been granted (or for which the local planning authority or the Minister has undertaken to grant planning permission) he may serve a notice (called a purchase notice) requiring the appropriate council (of the county borough or county district in which the land is situate) to purchase his interest in the land. On 26 November 1965 the respondents served such a notice. On 24 February 1966 the appellants served a notice (see s 130(1)) stating that they were agreeable to purchase the land and stating that the district valuer had been asked to negotiate the terms of the acquisition. The result of this was (see s 130(2) of the Town and Country Planning Act 1962) that the appellants
Page 866 of [1970] 3 All ER 864
were deemed to be authorised to acquire the respondents’ interest compulsorily (in accordance with the provisions of Part V of the Act) and to have served a notice to treat in respect thereof on the date of service of their notice. The respondents became entitled to receive compensation on the basis that there was compulsory acquisition of their land. The amount of the compensation was for the Lands Tribunal to determine. The respondents claimed the sum of £16,000. The decision of the Lands Tribunal (given on 2 October 1967) was that the amount of compensation payable was £13,500.
The appellants, contending that the decision was erroneous in point of law, applied to the Lands Tribunal to state and sign a case for the decision of the Court of Appeal. They moved the Court of Appeal ([1969] 2 All ER 97) for an order that the case be remitted to the Lands Tribunal so that they would assess the compensation according to the principles to be laid down by the court. The Court of Appeal by a majority (Russell and Winn LJJ; Lord Denning MR dissenting) affirmed the decision of the Lands Tribunal and dismissed the appeal. Leave to appeal to your Lordships’ House was given on the undertaking of the appellants not to seek to disturb the orders for costs made by the Court of Appeal and by the Lands Tribunal.
The sole question which arises is whether the decision of the Lands Tribunal was based on any error of law; if it was, then (unless the parties reach an agreement) the matter must be remitted so that a new decision on a correct approach may be made.
Questions of disputed compensation are determined by the Lands Tribunal in accordance with the provisions of the Land Compensation Act 1961. Amongst the rules laid down by s 5 are the rules: (1) that no allowance is to be made on account of an acquisition being compulsory; and (2) that the value of the land is to be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise. It was common ground that the present case is not covered by s 6 of the Act. For the purpose of assessing compensation in respect of any compulsory acquisition certain assumptions (see s 14) are to be made. These are such of the assumptions under ss 15 and 16 as are applicable. It is common ground that certain assumptions which are set out in s 16 are applicable in this case. By s 16 it is provided as follows:
‘(2) If the relevant land or any part thereof (not being land subject to comprehensive development) consists or forms part of an area shown in the current development plan as an area allocated primarily for a use specified in the plan in relation to that area, it shall be assumed that planning permission would be granted, in respect of the relevant land or that part thereof, as the case may be, for any development which—(a) is development for the purposes of that use of the relevant land or that part thereof, and (b) is development for which planning permission might reasonably have been expected to be granted in respect of the relevant land or that part thereof, as the case may be …
‘(6) Where in accordance with any of the preceding subsections it is to be assumed that planning permission would be granted as therein mentioned—(a) the assumption shall be that planning permission would be so granted subject to such conditions (if any) as, in the circumstances mentioned in the subsection in question, might reasonably be expected to be imposed by the authority granting the permission, and (b) if, in accordance with any map or statement comprised in the current development plan, it is indicated that any such planning permission would be granted only at a future time, then (without prejudice to the preceding paragraph) the assumption shall be that the planning permission in question would be granted at the time when, in accordance with the indications in the plan, that permission might reasonably be expected to be granted.
Page 867 of [1970] 3 All ER 864
‘(7) Any reference in this section to development for which planning permission might reasonably have been expected to be granted is a reference to development for which planning permission might reasonably have been expected to be granted if no part of the relevant land were proposed to be acquired by any authority possessing compulsory purchase powers.’
The decision of the Lands Tribunal contains a careful summary of the evidence which was given concerning housing and road conditions in Birchington. I need only refer to some of the matters to which the evidence was related. There was evidence that there was pressure for residential land and that the allocation for the six to 20 year period was nearly exhausted. There was evidence that in 1961 outline planning permission had been granted for the development of an estate called Yew Tree estate (which has an area much larger than that of the land now in question) and that detailed approval for its development had been given in 1962 or 1963. That development involved permitting access on to Canterbury Road at a point a few hundreds of yards from the location of the respondents’ land and nearer to the main shopping area which lies northward of Birchington Square. Through that square there runs a trunk road. Canterbury Road is that part of the trunk road which runs through Birchington. It carries a heavy load of traffic. Some of it is purely local; some of it comes from London or elsewhere and passes through to Margate. On certain parts of the road the sight lines are admittedly bad. There has however for some years been a project to construct a by-pass. This was in mind when, and was the reason why, the respondents were refused planning permission in 1965. It was in mind at the time when approval was given for the development of the Yew Tree estate. The projected by-pass will take the through traffic out of the centre of Birchington; it will do so by a loop to the south east. It will diverge from Canterbury Road at the very place where the lower part of the respondents’ land fronts on to Canterbury Road. It will traverse and absorb the greater part of the area of the respondents’ land. Although it is not yet known whether sanction for the project will or will not be forthcoming this has no materiality in regard to the issues which the Lands Tribunal had to decide. This is because the provision in s 16(7) of the Act of 1961 has the result that the Lands Tribunal must decide what planning permission might reasonably have been expected to be granted if no part of the respondents’ land were proposed to be acquired by any authority possessing compulsory purchase powers. The project or hope or expectation of having the by-pass that is in fact in contemplation must therefore be eliminated from consideration. It follows that having regard to the facts and circumstances of the present case there is no need for the application of the principle which in the Privy Council in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands ([1947] AC 565 at 572) was expressed in the words:
‘… compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition.’
There could be no increase in value of the land now in question due to the construction of a by-pass on it if no by-pass on it is to be constructed. Even if the current project or plan for the by-pass could be described as a scheme its existence must for present purposes be ignored. So also if the decision of the appellants in 1966 to accept the respondents’ purchase notice is regarded as having been made because they had a scheme or plan to acquire the respondent’s land so as to construct a by-pass on it—that circumstance must be ignored. The Lands Tribunal had to proceed on the footing that the respondents’ land had been available for residential use. Beyond this they had to assume (by reason of what was shown on the current development plan) that planning permission would have been granted for development for residential use. They had to decide what planning permission for such development
Page 868 of [1970] 3 All ER 864
might reasonably have been expected to be granted. In assuming that planning permission for residential use would have been granted they had to assume that such permission might have been granted subject to conditions and, if that were so, that the conditions would have been such as it might reasonably have been expected would have been imposed.
The task of the Lands Tribunal was therefore to give consideration to all the relevant facts and circumstances concerning the locality and on the footing that the respondents’ land would have been available for and would have been the subject of planning permission for residential use (and would not be taken for a by-pass) to decide what planning permission (and subject to what, if any, conditions) the respondents might reasonably have expected to receive. Having reached decision on that matter the task of the Lands Tribunal was to assess the fair and reasonable compensation that the respondents should receive for the compulsory acquisition of their land when endowed with such planning permission.
I need not set out the details of the plans or arrangements which were suggested by the parties. The respondents contended that planning permission could reasonably have been expected (at the date of the notice to treat) for the immediate residential development of their land on the basis of a lay-out which they put forward. That suggested lay-out (as set out on a drawing that they put in evidence) was for the erection of 20 houses with an approach road to them leading out from Canterbury Road. The appellants’ view had originally been that no planning permission or at any rate no permission involving access on to Canterbury Road could reasonably have been expected but accepting that some immediate development (by which I think was meant some permission that was not deferred permission) might have been allowed by the Minister on appeal their contention (before the Lands Tribunal) was that the only immediate planning permission that could reasonably have been expected was for the erection of nine houses which would have a temporary access on to Canterbury Road but that further development might have been allowed at a later date when adjoining land lying behind the respondents’ land came to be developed and when suitable access became available as a result of such development. The total number of houses on this basis (as set out on a drawing that they put in evidence) would approximate to 20.
There was evidence as to valuation. If planning permission could reasonably have been expected as the respondents contended then on the basis of their evidence as to valuation their valuation was £16,000. If planning permission could only reasonably have been expected as the appellants contended then on the basis of their differing evidence as to valuation their valuation was £8,200. The tribunal made no finding as to valuation on the basis of planning permission as contended for by the appellants but as regards figures of valuation expressed a preference for those of the respondents over those of the appellants.
The decisions to be made by the Lands Tribunal were decisions in the field of fact. Some of the witnesses appear to have felt that they were asked to apply their minds to situations having an unreality only to be expected in fairyland. I do not think that their approach should have been so hesitant. Their evidence had to be directed to the realities of the conditions that existed and to the actual facts of the period so that the Lands Tribunal should be assisted to reach decision on the basis of the assumptions that had to be made. Even if the appellants had concluded that the problem of road congestion was to be solved by their projected by-pass they were not precluded from expressing an informed view on the question whether if that by-pass could not be constructed there were or were not any other ways of dealing with the problem of road congestion and if so what they were.
The question that arises is whether the decision of the Lands Tribunal was erroneous in point of law. It would be so if based and founded on an erroneous legal proposition.
The actual decision was that:
Page 869 of [1970] 3 All ER 864
‘… at the date of the deemed notice to treat planning permission might reasonably have been expected for immediate development of the whole of the subject land.’
But it is essential to see what were the steps which led to this decision or the propositions on which it was founded.
In the decision of the Lands Tribunal reference was made to a dictum of Lord Asquith of Bishopstone in East End Dwellings Co Ltd v Finsbury Borough Council. In the course of his speech in that case Lord Asquith made the general observation ([1951] 2 All ER at 599, [1952] AC at 132):
‘If one is bidden to treat an imaginary state of affairs as real, one must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.’
My Lords, even apart from the respect which knowledge of the authorship of the words would command I cannot imagine that anyone would question their soundness. After a quotation of the words the decision of the Lands Tribunal contained the following passage:
‘Lord Asquith was there dealing with quite different legislation, but the dictum I have quoted seems to me to be apposite in the present case. I am bidden to assume that the subject land is not proposed to be acquired by an authority having compulsory powers. The inevitable corollaries of this seem to me to be as follows: 1. There can be no by-pass on the subject land; 2. There can therefore be no by-pass on the line at present proposed; 3. But since there is urgent need to take the traffic out of Birchington Square, it must be assumed that a by-pass is proposed on some other line; 4. This other line can only be a line which leaves the subject land inside the by-passed area, for I am satisfied that the position of the subject land in relation to Birchington Square and existing development south of the square makes any other conclusion impossible.’
The decision proceeded on the basis that those were ‘inevitable corollaries’ of the assumption that the subject land was not proposed to be acquired by an authority having compulsory powers. In a later passage it was recorded that Mr Sewell, the borough engineer and surveyor, and town planning officer—
‘… himself was prepared to consider whether widening of Canterbury Road on the side opposite to the subject land would be possible. He was prepared to assume such widening as part of his fairyland. Once such an assumption is entertained I cannot see why the more sensible assumption of a by-pass in a different position should not be made.’
My Lords, in my view these passages reveal an error of approach. An assumption had to be made that the respondents’ land was not going to be acquired so that a by-pass should there be constructed—but it was in no way an inevitable corollary that there would be a by-pass on some other line and in some different position. If there was not to be a by-pass on the respondents’ land it by no means followed that there would inevitably be a by-pass somewhere else. There might be or there might not be. It might have been possible to have another route for a by-pass; it might have been quite impossible. It would be a question depending on topographical and various and many other factors whether there could be a by-pass somewhere else. It would be for consideration whether any alternative by-pass was or was not possible or probable and further whether its construction was or was not likely. These matters could not rest on any assumptions but rather on an
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examination of all the evidence. Nor could the enquiry (as to what planning permission might reasonably have been expected) depend only on the view taken as to one or other or some only of the relevant factors. Although I consider that it was erroneous to assume positively that a by-pass on an alternative site would have been constructed I think that it would be wrong to proceed on the basis that if the appellants were denied the opportunity of dealing with their road problem in the way that they had planned and thought best they would abandon all hope of solving their problem and give it no further consideration. I cannot accept the submission that as a matter of law the Lands Tribunal had to proceed on the basis that any relief of traffic congestion in Canterbury Road in the foreseeable future was to be ruled out. It would, however, be very relevant to enquire whether the initiation and carrying out of any alternative plan would or would not have been likely.
The requirement that the possibility of a by-pass of the site of the respondents’ land was to be eliminated had the consequence that the enquiry had to be on the basis that one expected way of dealing with road congestion problems must be ruled out. There would have to be new examination of the problem. Were there then some other ways? If so what were they—and how effective would they be? Would it have been practicable to effect some road-widening? Could some traffic regulatory adjustments have been made? Within what period of time might some improvement of road conditions have been made? Even if the problem of relieving traffic congestion proved to be baffling—what planning permission for house building might reasonably have been expected? Was there a housing shortage which presented an urgent and serious problem? If the need for homes was pressing, might permission for house building on the basis desired by the respondents have been given even at the cost of adding or adding temporarily to traffic congestion and traffic hazards? How considerable would the added traffic volume be? Was it reasonably to have been expected (on the basis that the respondents’ land was not to be taken for a by-pass) that the Minister would have granted unqualified permission for the development as planned and at the time as planned by the respondents or was it reasonably to have been expected that there would be some, and if so what, different permission for development—the difference being in relation to the location of the houses and the time of their erection? All the many relevant facts and circumstances would have to be considered before answer could be given. The amount of compensation to be awarded would depend on the value of the permission that might reasonably have been expected.
The matter must in my view be remitted to the Lands Tribunal for new consideration on the lines that I have indicated. It will still be open to the respondents to contend that in the light of all the actual facts of the situation (but on the basis that there was to be no by-pass on the line as projected by the appellants) it was reasonably to be expected that planning permission to build houses in accordance with their plan would have been forthcoming. It will still be open to the appellants to contend that no planning permission to do more than was covered by their suggestions would reasonably have been expected or would have been forthcoming.
For these reasons I would allow the appeal and without making an order as to costs in this House remit the case for consideration by the Lands Tribunal.
LORD HODSON. My Lords, I agree with the opinion expressed by my noble and learned friend Lord Morris of Borth-y-Gest. I would allow the appeal and without making an order as to costs in this House remit the case for consideration by the Lands Tribunal.
LORD GUEST. My Lords, I had prepared an opinion in this case. But having read that of my noble and learned friend Lord Morris of Borth-y-Gest I realise that
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my opinion adds nothing to his. Accordingly, for the reasons given by him, I would allow the appeal and send the case back to the Lands Tribunal.
LORD DIPLOCK. My Lords, I agree with the opinion expressed by my noble and learned friend Lord Morris of Borth-y-Gest and with the order that he proposes.
Appeal allowed. Case remitted to Lands Tribunal for reconsideration.
Solicitors: Sharpe, Pritchard & Co (for the appellants); Barlow, Lyde & Gilbert, agents for Girling, Wilson & Harvie, Margate (for the respondents).
S A Hatteea Esq Barrister.
H Lavender and Son Ltd v Minister of Housing and Local Government
[1970] 3 All ER 871
Categories: TOWN AND COUNTRY PLANNING
Court: QUEEN’S BENCH DIVISION
Lord(s): WILLIS J
Hearing Date(s): 11, 12 NOVEMBER, 19 DECEMBER 1969
Town and country planning – Appeal – Permission for development refused – Appeal to Minister – Notification of decision – Decision in accordance with stated policy – Failure by Minister to exercise discretion properly in determination of appeal – Quasi-judicial function – Delegatus non potest delegare – Town and Country Planning Act 1962, ss 23 and 179.
The applicants required planning permission in order to extract certain minerals from an agricultural holding, the greater part of which fell within a reservation area which was land of a very high agricultural quality. Permission was refused on the ground that the Minister of Agriculture, Fisheries and Food objected to the proposed use, for agricultural reasons. The applicants appealed to the Minister of Housing and Local Government, under s 23a of the Town and Country Planning Act 1962. In dismissing the appeal, the Minister of Housing and Local Government stated his reasons, inter alia, as follows: ‘It is the Minister’s present policy that land in the reservations should not be released for mineral working unless the Minister of
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Agriculture, Fisheries and Food is not opposed to working. In the present case the agricultural objection has not been waived, and the Minister has therefore decided not to grant planning permission for the working of the appeal site’. On an application under s 179b of the Town and Country Planning Act 1962 for an order to quash the decision of the Minister of Housing and Local Government,
Held – Although the court had no authority to interfere with the administration by the Minister of Housing and Local Government of his planning policy, it was clear that his decision to refuse planning permission to the applicants was made solely in pursuance of a policy not to permit minerals in the reservation to be worked unless the Minister of Agriculture, Fisheries and Food was not opposed thereto (see p 877 f and p 879 f, post); accordingly, as it was the decision of the Minister of Agriculture, Fisheries and Food not to waive his objection which was decisive in the dismissal of the appeal by the Minister of Housing and Local Government, the latter had failed in the proper exercise of his discretion by acting solely in accordance with his stated policy, and further, had improperly delegated his duties in relation to the appeal, comprising in a hybrid form both administrative and quasi-judicial functions, to the Minister of Agriculture, Fisheries and Food (see p 877 g and p 880 b c and h, post).
Dicta of Lord Greene MR in B Johnson & Co (Builders) Ltd v Minister of Health [1947] 2 All ER at 397 and of Widgery J in Myton Ltd v Minister of Housing and Local Government (1963) 61 LGR at 561, 562 applied.
Notes
For the circumstances in which a duty to act judicially exists in the conduct of inquiries under the town and country planning legislation, see 37 Halsbury’s Laws (3rd Edn) 198–201, para 312.
For the Town and Country Planning Act 1962, ss 23 and 179, see 42 Halsbury’s Statutes (2nd Edn) 991, 992, 1145, 1146.
Cases referred to in judgment
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 65, 45 Digest (Repl) 215, 189.
Darlassis v Minister of Education (1954) 52 LGR 304, 118 JP 452, 19 Digest (Repl) 648, 297.
Franklin v Minister of Town and Country Planning [1947] 2 All ER 289, [1948] AC 87, [1947] LJR 1440, 111 JP 497, 45 Digest (Repl) 376, 193.
Johnson (B) & Co (Builders) Ltd v Minister of Health [1947] 2 All ER 395, [1948] LJR 155, 177 LT 455, 111 JP 508, 26 Digest (Repl) 702, 128.
Luke of Pavenham (Lord) v Minister of Housing and Local Government [1967] 2 All ER 1066, [1968] 1 QB 172, [1967] 3 WLR 801, 131 JP 425, Digest Supp.
Myton Ltd v Minister of Housing and Local Government (1963) 61 LGR 556, 45 Digest (Repl) 336, 34.
R v County Licensing (Stage Plays) Committee of Flint County Council, ex parte Barrett [1957] 1 All ER 112, [1957] 1 QB 350, [1957] 2 WLR 90, 121 JP 80, 45 Digest (Repl) 192, 8.
Page 873 of [1970] 3 All ER 871
R v Minister of Transport, ex parte Grey Coaches (1933) 77 Sol Jo 301, 45 Digest (Repl) 130, 474.
R v Port of London Authority, ex parte Kynoch Ltd [1919] 1 KB 176, 88 LJKB 553, 120 LT 177, 83 JP 41, 16 Digest (Repl) 327, 1056.
Cases also cited
Boyer (William) & Sons Ltd v Minister of Housing and Local Government (1968) 67 LGR 374.
Continental Sprays v Minister of Housing and Local Government (1968) 67 LGR 147.
Givaudan & Co Ltd v Minister of Housing and Local Government [1966] 3 All ER 696, [1967] 2 WLR 250.
Iveagh (Earl) v Minister of Housing and Local Government [1961] 3 All ER 98, [1962] 2 QB 147.
Jackson Stansfield and Sons v Butterworth [1948] 2 All ER 558.
R v Stepney Corpn [1902] 1 KB 317.
Simms Motor Units Ltd v Minister of Labour and National Service [1946] 2 All ER 201.
Whalen v Minister of Housing and Local Government (1969) unreported.
Motion
The applicants, H Lavender and Son Ltd, applied to the Walton and Weybridge Urban District Council for planning permission to extract sand, gravel and ballast from land at Walton-on-Thames. This was refused and the applicants appealed to the Minister of Housing and Local Government who dismissed the appeal. The applicants then moved for an order under s 179 of the Town and Country Planning Act 1962, to quash the Minister’s order. The facts are set out in the judgment.
Douglas Frank QC and K H T Schiemann for the applicants. Gordon Slynn for the Minister.
Cur adv vult
19 December 1969. The following judgment was delivered.
WILLIS J read the following judgment. Counsel for the applicant applies under s 179 of the Town and Country Planning Act 1962 to quash a decision of the Minister of Housing and Local Government (hereinafter referred to as the Minister) given on 14 April 1969, whereby he dismissed an appeal made to him by the applicants against the decision of the second respondents, the Walton and Weybridge Urban District Council, refusing the applicants planning permission to extract sand, gravel and ballast from about 42 acres of land at Walton-on-Thames, part of an agricultural holding of 108 acres known as Rivernook Farm.
The background of this case is the report of the Advisory Committee on Sand and Gravel, known as the Waters Report. It appeared partially in 1948, and was completed in 1953. The terms of reference, so far as material to the present appeal, were:
‘To make recommendations on future policy for the control under the Town and Country Planning Acts of the extraction of sand and gravel, with particular regard to the following: (a) the need for maintaining adequate sand and gravel supplies at a cost which is reasonable in all the circumstances; (b) the need for ensuring that the necessary disturbance to agricultural land is reduced to a minimum and confined as far as possible to the land of less agricultural value.’
In para 55 of Part 1 (General Survey) of the report it is stated:
‘We therefore feel that it is of the greatest importance for securing a proper perspective in this matter to realise … (b) that if suitable filling material is available, all wet pits may be capable of subsequent agricultural production; (c) that, though there will in most cases be diminution of the original fertility, the measure of productivity remaining may nevertheless be substantial.’
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In para 64 of Part 18 (Final General Part) of the report (published in 1953), after a reference to para 55, it is stated:
‘We consider that the principles at (c) should be modified, for we are now satisfied that if suitable methods of after-care are adopted the ultimate productivity of the land may approach, and in some cases even exceed, that of the original site.’
Finally in para 106(c) of Part 2 (Greater London) (published in 1948), it was recommended that certain very high-quality agricultural land should be protected against disturbance by gravel working and reserved indefinitely for agriculture’. The greater part of the appeal site is within such a reservation area.
The applicants bought the appeal site in 1965 as a gravel reserve from a Mr Barker, who had continued to farm it with the rest of the farm as a market garden. Consequent on a threat to a considerable part of their main working site at Hersham by a proposal of the South Eastern Gas Board to acquire some 25 acres as a gas works, the applicants applied in February 1966 for planning permission to work the appeal site. The county planning committee of the Surrey County Council embarked on a number of consultations with interested parties, including the Minister of Agriculture, Fisheries and Food. The letter, in recording his view on 27 April 1966, stated (inter alia):
‘The Minister is anxious to safeguard valuable agriculture land as far as possible and I am directed to advise you that in his opinion there is strong objection to the proposed development on agriculture grounds. Should the Authority consider that there is a case for granting permission on other grounds, the Department will be glad to discuss the position further.’
The application was then advertised, and resulted in only one letter of objection. Thereafter the county planning committee recommended on 5 October 1966 that planning permission should be granted subject to suitable conditions, including conditions as to restoration of what would become a wet pit, those being conditions acceptable to the applicants. There followed discussions between the local planning authority and the Land Commissioner, but the latter confirmed that the Minister of Agriculture, Fisheries and Food maintained his objection since, as he said, the applicants would have sufficient land in hand for the time being because the gas plant proposals had by then been withdrawn.
On 21 February 1967, the applicants again wrote to the local planning authority stressing the urgency of the time factor to them: in March 1967, the mineral extraction sub-committee of the local planning authority resolved:
‘(a) that the County Planning Officer be requested to ascertain from the Land Commissioner whether his objection to the excavation of gravel at Rivernook Farm would be sustained permanently. (b) That in the event of the Land Commissioner not intending to sustain his objection permanently, [a recommendation should be made] to refuse permission … on the grounds [of prematurity and in such an event that the applicants should be told that a new application would be considered in the future].’
The Land Commissioner wrote on 3 April 1967, confirming ‘that the Department is still of the opinion that land of this quality should remain in agricultural use’. This somewhat ambiguous reply was taken by the local planning authority to indicate that the Minister of Agriculture regarded his objection as one which would be permanently sustained. There was nothing in the events that followed to indicate that it was in error in doing so (and this is confirmed in para 69 of the report hereinafter referred to). In the result, the local planning authority, having no objection to the application on either amenity or highway grounds, and, in view of the objection of the Ministry of Agriculture, not wishing to prejudice that objection by refusing the
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application solely on the grounds of prematurity, refused permission on the agricultural grounds set out in the first part of the Land Commissioner’s letter of 27 April 1966, referred to above. It was in the foregoing circumstances that the matter came on for hearing by way of appeal from the second respondents, acting for the local planning authority, before an inspector of the Minister of Housing and Local Government, on 17 and 18 October 1968, who reported in writing to the first respondent on 28 November 1968.
It is unnecessary to make more than a few references to the report, before I come to the inspector’s conclusions. There was virtually no dispute between the applicants and the local planning authority. Mr Barker, the farmer, supported the appeal. Mr Furneaux, a very distinguished soil consultant, was called to support the applicants’ claim that they were able, as they were willing, to restore the land to a high standard of fertility after excavation of the mineral, and Mr Alexander, the Senior Assistant Land Commissioner, was called in support of what was, in effect, the only objection of any substance to the application, namely that of the Ministry of Agriculture, adopted in form by the local planning authority. So far as material, his views insofar as they were not in agreement with those of Mr Furneaux, were recorded in the report as follows:
‘64 … [The] Minister is not concerned with the [applicants] nor with the horticultural tenant. His policy is to safeguard better quality land on the long term basis and he does not want the land in the site to be disturbed.
‘65. The restoration of wet gravel workings presents problems of special difficulty and his department know of no large scale wet workings that have been restored successfully to horticultural cropping. He does not doubt the [applicants’] intentions and he agrees that if the site was restored as has been described by them, the land would have a quality, apart from some settlement equivalent to its present quality …
‘66. Restoration needs very close supervision and this is difficult to provide because of shortage of staff … ’
I now come to the inspector’s conclusions, which, so far as material, state:
‘76. In my view these questions should be considered in the light of existing circumstances, and the present time appears to be appropriate for the removal of the minerals. The applicants are experienced in the work of restoring land and Mr. Barker would not be expected to give such strong support unless he envisages some benefit for himself from the restored land. Satisfactory back filling materials are available in adequate quantities and working the appeal site conjointly with the Fieldcommon Lane site would, by switching activities between the two, enable the selection of the most suitable weather conditions for restoration operations at the appeal site.
‘77. This sort of combination of favourable circumstances is uncommon, and it affords a valuable opportunity for the restoration of the land in a desired manner …
‘78. The issue in this case rests upon whether the areas allocated to agricultural reserves in the Waters Report are inviolable. If they are not inviolable, the present proposal for the appeal site should be allowed subject to suitable conditions …
‘79. On the other hand, if the agricultural reserves are inviolable the present application should be turned down. I am not in a position to come to a decision on the question of whether the agricultural reserve areas are inviolable, therefore I make no recommendation.’
It is, thus, clear that the inspector, left to himself, would have allowed the appeal, rejecting both the agricultural objection and the arguments on prematurity on their
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merits. The Minister gave his decision on 14 April 1969. The letter set out verbatim the inspector’s conclusions and proceeded in para 3 as follows:
‘The Minister has considered his Inspector’s conclusions and appreciates his reasons for not making a recommendation. He notes that the Inspector would have recommended that the appeal should be allowed if the “agricultural reservations” were not to be regarded as inviolable; and he appreciates that the proposals for restoring the land after working have been very carefully thought out. Nevertheless, in weighing the need for sand and gravel against the preservation of high quality agricultural land, he has had to take note of the fact that the appeal site lies within the “agricultural reservations”, which … (the Waters Committee) recommended should be reserved indefinitely for agriculture. It is the Minister’s present policy that land in the reservations should not be released for mineral working unless the Minister of Agriculture, Fisheries and Food is not opposed to working. In the present case the agricultural objection has not been waived, and the Minister has therefore decided not to grant planning permission for the working of the appeal site.’
He dismissed the appeal. It is those last two sentences in the decision letter which lie at the heart of the matter in issue; and it is submitted, first of all, by counsel for the applicants, that they show, in this case, that the Minister had so fettered his own discretion to decide the appeal by the policy which he had adopted that the decisive matter was not the exercise of his own discretion on a consideration of the report and other material considerations, but the sustained objection of the Minister of Agriculture. In effect, he says that the decision was not that of the Minister of Housing and Local Government, the tribunal entrusted with the duty to decide, but the Minister of Agriculture, who had no status save perhaps in a consultative capacity and certainly no status to make the effective decision.
It is not, I think, suggested by counsel for the Minister that the Minister of Agriculture has any status at such an inquiry as was conducted in this case, save insofar as either the applicants or the local planning authority required the attention of a Ministerial witness, nor that there is any statutory requirement for the Minister of Agriculture to be consulted at any stage, either before or after the hearing. As a matter of practice, nevertheless, the Ministry of Agriculture is invariably consulted by the local planning authority in the case of such an application as was made in the present instance, and I would expect the Ministry of Housing and Local Government to follow a similar practice where agricultural land is involved. The statutory duties of the Minister in a case such as this are laid down in ss 17 and 23 of the Town and Country Planning Act 1962, and in the Town and Country Planning (Inquiries Procedure) Rules 1965c. Section 23(1) gives a right of appeal to the Minister. Section 23(4) enables the Minister to allow or dismiss the appeal, or to vary the decision of the local planning authority, and to deal with the application as if it had been made to him in the first instance. Section 23(5) requires the Minister to direct a hearing before an inspector, if either the applicant or the local planning authority desire it, before he determines the appeal, and s 23(6) applies, with any necessary modifications, s 17(1) which so far as material, provides:
‘… where an application is made to a local planning authority for planning permission, that authority, in dealing with the application, shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations, and—(a) may grant planning permission, either unconditionally or subject to such conditions as they think fit, or (b) may refuse planning permission.’
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Rule 9 of the 1965 rules lays down the procedure whereby an applicant for planning permission can require the attendance of a witness from a government department, which, on consultation by the local planning authority, has expressed the view that the application should not be granted, or from the Ministry of Transport, where that Minister has given a direction restricting the grant of permission. Rule 12(2) provides:
‘(2) Where the Minister—
‘(a) differs from the appointed person on a finding of fact, or
‘(b) after the close of the inquiry receives any new evidence … or takes into consideration any new issue of fact (not being a matter of government policy) which was not raised at the inquiry,
and by reason thereof is disposed to disagree with a recommendation made by the [Inspector he must first notify the parties if he proposes to depart from the recommendations and if he thinks proper re-open the inquiry].’
In general support of his main submission, counsel for the applicants has referred me to Professor de Smith’s well-known work Judicial Review of Administrative Actiond and to certain of the cases cited therein. He really puts his argument in two ways: (1) that the Minister has fettered his discretion by a self created rule of policy; and (2) that the Minister, who has a duty to exercise his own discretion in determining an appeal, has in this case delegated that duty to the Minister of Agriculture, who has no such duty and is, statutorily, a stranger to any decision. It is, of course, common ground that the Minister is entitled to have a policy and to decide an appeal in the context of that policy. He can also differ from the inspector on any question of fact, and disagree with the inspector’s conclusion and recommendations. He can, and no doubt should, reject any recommendation of an inspector which runs counter to his policy, since, as counsel for the Minister points out, it is of the very essence of the duties laid on the Minister by s 1 of the Minister of Town and Country Planning Act 1943 that he should secure consistency and continuity in the framing and execution of a national policy with respect to the use and development of land.
The courts have no authority to interfere with the way in which the Minister carries out his planning policy (see per Lord Denning MR Lord Luke of Pavenham v Minister of Housing and Local Government ([1967] 2 All ER 1066 at 1070, [1968] 1 QB 172 at 192)). There is also no question but that the Minister, before making a decision whether or not to allow an appeal, may obtain the views of other government departments (see Darlassis v Minister of Education ((1954) 52 LGR 304 at 318) per Barry J). The duties of the Minister and their extent in relation to a matter such as the appeal in the present case, comprising in a hybrid form both administrative and quasi-judicial functions, were enunciated by Lord Greene MR in a well-known passage in B Johnson & Co (Builders) Ltd v Minister of Health ([1947] 2 All ER 395 at 397 and 399):
‘The duty placed on the Minister with regard to objections is to consider them before confirming the order. He is also to consider the report of the person who held the inquiry. Having done that, his functions are laid down by the last words of the paragraphe, viz., “and may then confirm the order either with or without modification“. Those words are important, because they make it clear that it is to the Minister that Parliament has committed the decision whether he will or will not confirm the order after he has done all that the statute requires him to do. There is nothing in that paragraph, or anywhere else in the Act, which imposes on the Minister any obligation with regard to the objections, save the obligation to consider them. He is not bound to base
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his decision on any conclusion that he comes to with regard to the objections, and that must be so when one gives a moment’s thought to the situation. The decision whether to confirm or not must be made in relation to questions of policy, and the Minister, in deciding whether to confirm or not, will, like every Minister entrusted with administrative duties, weigh up the considerations which are to affect his mind, the preponderating factor in many, if not all, cases being that of public policy, having regard to all the facts of the case … That decision must be an administrative decision, because it is not to be based purely on the view that he forms of the objections, vis-a-vis the desires of the local authority, but is to be guided by his view as to the policy which in the circumstances he ought to pursue.’
Can there, nevertheless, come a point in this hybrid process when the court can interfere with a Ministerial decision which, ex facie, proceeds on a consideration of the inspector’s report and concludes by applying Ministerial policy?
Counsel for the applicants submits that such a point can be reached and has been reached in this case. It is reached, he says, adopting the words of Professor de Smithf, if a tribunal, entrusted with a discretion as the Minister was in the present case, disables itself from exercising that discretion in a particular case by the prior adoption of a general policy. In R v Port of London Authority, ex parte Kynoch Ltd ([1919] 1 KB 176 at 184), Bankes LJ said:
‘In the present case there is another matter to be borne in mind. There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case … On the other hand there are cases where a tribunal has passed a rule, or come to a determination, not to hear any application of a particular character by whomsoever made.’
In another licensing case, R v County Licensing (Stage Plays) Committee of Flint County Council, ex parte Barrett ([1957] 1 All ER 112 at 122, [1957] 1 QB 350 at 367, 368) where the decision was given in the interests of consistency, Jenkins LJ said:
‘Then they went on … to conclude … that the Queen’s Theatre licence must follow the fate of the Pavilion Theatre licence, because it was essential that the same rule should be applied in all cases or, in other words, that the committee should be consistent. I cannot think that that method of approach fulfils the requirement that the matter should be heard and determined according to law … It seems to me that it wrongly pursues consistency at the expense of the merits of individual cases.’
I have referred to these two cases since they were relied on by counsel for the applicants, but I am inclined to agree with counsel for the Minister that the considerations applicable to licensing cases are not of much assistance when considering the scope of a Minister’s duties within a statutory framework.
The nearest case to the present which was referred to in argument on this aspect of the case is Myton Ltd v Minister of Housing and Local Government. It concerned an application to develop land in an area of Leeds affected by what was known as a ‘sketch plan’ for a green belt, in other words, tentative proposals made ex parte
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without having reached the stage of being part of the development plan. The argument (which did not in the result succeed) was that there was a duty on the Minister to address his mind to the question whether the appeal site was required for the green belt and, if the circumstances justified it, to allow development, and that he had failed in this duty. Widgery J said ((1963) 61 LGR at 561, 562):
‘I accept Mr. Bridge’s contention that there is such a duty on the Minister. I think that it would be lamentable if in circumstances where a sketch plan has been prepared and where there is in effect a tentative proposal for a green belt, all applications for development within that green belt area should be automatically and peremptorily refused merely because provision of a green belt was in contemplation … The local planning authority’s decision in this case is not for review before me, but I am bound to observe that the very speed with which they disposed of the application at least raises some suspicion that they dealt with the matter as being already pre-judged by the fact that the land was within the sketch plan green belt.’
It is, of course, clear that if the Minister has prejudged any genuine consideration of the matter before him, or has failed to give genuine consideration to (inter alia) the inspector’s report, he has failed to carry out his statutory duties properly (see Franklin v Minister of Town and Country Planning).
In the present case counsel for the applicants does not shrink from submitting that the decision letter shows that no genuine consideration was given to the question whether planning permission could, in the circumstances, be granted. I have carefully considered the authorities cited by counsel, but I have not found any clear guide to what my decision should be in this case. I have said enough to make it clear that I recognise that in the field of policy, and in relation to Ministerial decisions coloured or dictated by policy, the courts will interfere only within a strictly circumscribed field (see per Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corpn ([1947] 2 All ER 680 at 682, [1948] 1 KB 223 at 228)). It is also clear, and is conceded by counsel for the Minister, that where a Minister is entrusted by Parliament with the decision of any particular case he must keep that actual decision in the last resort in his own hands (see R v Minister of Transport, ex parte Grey Coaches). I return, therefore, to the words used by the Minister. It seems to me that he has said in language which admits of no doubt that his decision to refuse permission was solely in pursuance of a policy not to permit minerals in the Waters agricultural reserves to be worked unless the Minister of Agriculture was not opposed to their working. Counsel for the Minister submits that, read as a whole, the decision letter should be taken as implying some such words as ‘I have gone through the exercise of taking all material considerations into account, but you have not persuaded me that this is such an exceptional case as would justify me in relaxing my policy; therefore I stick to it and apply it’. If that were the right construction perhaps counsel for the Minister would be justified in saying that there was no error in law. But in my judgment the language used is not open to any such implication. There is no indication that this might be an exceptional case such as would or could induce the Minister to change his policy. It is common ground that the Minister must be open to persuasion that the land should not remain in the Waters reservation. How can his mind be open to persuasion, how can an applicant establish an ‘exceptional case’ in the case of an inflexible attitude by the Minister of Agriculture? That attitude was well known before the inquiry, it was maintained during the inquiry, and presumably thereafter. The inquiry was no doubt, in a sense, into the Minister of Agriculture’s objection, since, apart from that objection, it might well have been that no inquiry would have been
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necessary, but I do not think that the Minister, after the inquiry, can be said in any real sense to have given genuine consideration to whether, on planning (including agricultural) grounds, this land could be worked. It seems to me that by adopting and applying his stated policy he has in effect inhibited himself from exercising a proper discretion (which would of course be guided by policy considerations) in any case where the Minister of Agriculture has made and maintained an objection to mineral working in an agricultural reservation. Everything else might point to the desirability of granting permission, but by applying and acting on his stated policy I think that the Minister has fettered himself in such a way that in this case it was not he who made the decision for which Parliament made him responsible. It was the decision of the Minister of Agriculture not to waive his objection which was decisive in this case, and while that might properly prove to be the decisive factor for the Minister when taking into account all material considerations, it seems to me quite wrong for a policy to be applied which in reality eliminates all the material considerations save only the consideration, when that is the case, that the Minister of Agriculture objects. That means, as I think, that the Minister has by his stated policy delegated to the Minister of Agriculture the effective decision on any appeal within the agricultural reservations where the latter objects to the working. I am quite unable to accept that in these circumstances, the public inquiry could be justified, as counsel for the Minister submits, as giving the Minister of Agriculture the opportunity to hear the case and, if he thought right, to waive his objection. Unless there was a real chance that he would do so—and it seems to me clear beyond question that there was not—the inquiry was quite futile in my view, certainly as a means of providing the Minister with the material on which he could have exercised, and should have exercised, a genuine, unfettered discretion.
As counsel for the applicants submits, a policy which prohibited all development in a national park where there was an objection by the National Parks Commission which was not withdrawn, or to confirm all building preservation orders unless the Royal Fine Art Commission approved, would plainly vitiate a decision reached in accordance with that policy by a tribunal which is given a discretion. I think that he is right, and I can find no real distinction between such hypothetical cases and the Minister’s stated policy in this case. If the Minister was intending to follow his stated policy, I think that it was very undesirable that it should not have been made known in advance. It is possible to imagine great hardship falling on appellants who, all unawares, embark on an expensive appeal foredoomed to failure by reason of a strict though unannounced policy. However, I agree with counsel for the Minister that the failure to publicise the policy is not a ground for questioning the decision. Nor do I find it necessary to decide whether counsel for the applicants can succeed on the last ground in the notice of motion, namely that the decision was one which no reasonable Minister could have reached. Counsel recognises the obvious difficulties which face him in an attempt to succeed on this last ground.
On the main ground on which this case has been argued, however, I am satisfied that the applicants should succeed. I think that the Minister failed to exercise a proper or indeed any discretion by reason of the fetter which he imposed on its exercise in acting solely in accordance with his stated policy; and further that on the true construction of the Minister’s letter the decision to dismiss the appeal, while purporting to be that of the Minister, was in fact, and improperly, that of the Minister of Agriculture.
Order accordingly.
Solicitors: C A Maddin & Co (for the applicants); Solicitor, Minister of Housing and Local Government.
E H Hunter Esq Barrister.
R v Kulynycz
[1970] 3 All ER 881
Categories: CRIMINAL; Police, Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, PHILLIMORE LJ AND ASHWORTH J
Hearing Date(s): 5 OCTOBER 1970
Arrest – Arrest without warrant – Constable – Failure to inform arrested person of reason of arrest – Reason given subsequently – Whether arrest lawful.
Arrest – Arrest without warrant – Constable – Reason for arrest given to arrested person – Offence charged differing from reason given for arrest – Validity of arrest.
Arrest – Arrest without warrant – Constable – Arrest erroneously stated to be by warrant – Validity of arrest.
Criminal law – Trial – Place of trial – Indictable offence – Place in which in custody – Whether ‘in custody’ means ‘in lawful custody’ – Criminal Justice Act 1925, s 11(1).
Criminal law – Trial – Place of trial – Indictable offence – Jurisdiction solely under Criminal Justice Act 1925, s 11(1) – Avoidance of hardship – Magistrates’ Courts Act 1952, s 9(2).
The appellant was suspected by the Norfolk police of supplying or ‘pushing’ drugs in King’s Lynn, although he carried on his activities in Cambridge. He was arrested in Cambridge at the request of the King’s Lynn police by a constable who was unaware of the facts and who used words to the effect that a warrant had been issued at King’s Lynn on suspicion of offences committed there. (No warrant had in fact been issued.) Seven minutes later at the police station another constable informed the appellant that he had been brought to the police station at the request of King’s Lynn police in connection with possible drug offences. Shortly afterwards a constable from King’s Lynn arrived and told the appellant that he had been arrested on suspicion of handling stolen drugs and was to be returned to King’s Lynn for questioning. Before the committing justices the appellant was charged with unauthorised possession of drugs in ‘Cambridge or elsewhere’. He was legally represented before the justices and did not apply to go to Cambridge for trial. He was, accordingly, committed to Norfolk quarter sessions where he faced three counts of unauthorised possession of drugs on different dates ‘at Cambridge’, contrary to s 1(1) of the Drugs (Prevention of Misuse) Act 1964. An application was made at the outset that quarter sessions had no jurisdiction to deal with the matter in that in each case the possession was alleged to have been a possession in Cambridge which in the normal way would be outside the jurisdiction of Norfolk quarter sessions. The application was turned down on the ground that jurisdiction existed under s 11(1)a of the Criminal Justice Act 1925, notwithstanding the appellant’s submission that nothing had cured or could cure that unlawful arrest. On appeal,
Held – (i) The original arrest at Cambridge was unlawful in the sense that it might in certain circumstances give rise to a civil action for false imprisonment since the appellant did not know in substance the reason why he had been arrested (see p 883 g, post).
Christie v Leachinsky [1947] 1 All ER 567 followed.
(ii) Even if it were necessary for the purposes of s 11(1) of the Criminal Justice Act 1925 to show that the appellant was in lawful custody, it did not follow from the unlawfulness of the original ‘arrest’ that everything that occurred thereafter was tainted, with the result that Norfolk quarter sessions had no jurisdiction to try the case, since the essential question to be determined was whether, at the time when he appeared before the Norfolk quarter sessions, the appellant was
Page 882 of [1970] 3 All ER 881
in lawful custody; since the two constables who spoke to the appellant at the police station informed him in sufficient detail of the reason for his arrest he was at all times thereafter in lawful custody (see p 884 e and f, post).
Per Curiam. The words ‘in custody’ in s 11(1) of the Criminal Justice Act 1925 mean ‘in lawful custody’ (see p 883 d, post).
(iii) The appellant’s being in lawful custody did not require his release, departure from the police station and subsequent rearrest (see p 884 g, post); nor was it affected by the fact that the appellant was ultimately charged not with handling stolen drugs but with possession of stolen drugs, nor by the fact that the charge related to Cambridge and not King’s Lynn (see p 884 j to p 885 a, post) (dictum of Lord Simonds in Christie v Leachinsky [1947] 1 All ER at 575, 576 applied); nor was it affected by the erroneous statement made at the time of the appellant’s initial ‘arrest’ that the arrest was by warrant (see p 885 b, post).
(iv) The appellant never asked for the matter to be committed to Cambridge or suggested that he would suffer hardship; there was no reason to suppose that the justices did not properly consider the matter as they were required to do under s 9(2)b of the Magistrates’ Courts Act 1952 and their ruling would, accordingly, not be upset (see p 885 g, post).
Notes
For arrest without warrant, see 10 Halsbury’s Laws (3rd Edn) 342, paras 631, 632, 344, 345, para 636, and for cases on the subject, see 14 Digest (Repl) 194–197, 1590–1632.
For venue generally in criminal cases, see 10 Halsbury’s Laws (3rd Edn) 325–327, paras 595–598, 600–603, and for cases on the subject, see 14 Digest (Repl) 156, 157, 1185–1204.
For the Criminal Justice Act 1925, s 11, see 21 Halsbury’s Statutes (3rd Edn) 75.
For the Magistrates’ Courts Act 1952, s 9, see ibid 193.
Case referred to in judgment
Christie v Leachinsky [1947] 1 All ER 567, [1947] AC 573, [1947] LJR 757, 176 LT 443, 111 JP 224, 14 Digest (Repl) 204, 1691.
Appeal
On 7 January 1970 the appellant, Michael Kulynycz, was convicted at Norfolk quarter sessions before the deputy chairman (W M Howard Esq QC) and a jury on three counts of being in unauthorised possession of drugs and was sentenced to three years’ imprisonment in all. He appealed against his conviction with leave of the court (Lord Parker CJ, Karminski LJ and John Stevenson J) granted on 23 July 1970. The facts are set out in the judgment of the court.
D M Cheatle for the appellant.
M E Ward for the Crown.
5 October 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. On 7 January 1970, the appellant was convicted at Norfolk quarter sessions on three counts of being in unauthorised possession of drugs. He was sentenced to 18 months’ imprisonment on the first count, 18 months consecutive on the second count and 18 months concurrent on the third, making in all three years’ imprisonment. He now appeals against his conviction on a point of law.
What happened was that when this case came on for trial at Norfolk quarter sessions an application was made at the outset that quarter sessions had no jurisdiction to deal with the matter in that in each case the possession was alleged to have been a possession in Cambridge which in the normal way would be outside the jurisdiction of Norfolk quarter sessions. That application was overruled on the basis
Page 883 of [1970] 3 All ER 881
that jurisdiction existed by reason of s 11(1) of the Criminal Justice Act 1925, which in certain circumstances deems an offence committed in one place to have been committed in another. The relevant words of the subsection are:
‘A person charged with any indictable offence may be proceeded against, indicted, tried and punished in any county or place in which he was apprehended, or is in custody on a charge for the offence, or has appeared in answer to a summons lawfully issued charging the offence, as if the offence had been committed in that county or place, and the offence shall, for all purposes incidental to or consequential on the prosecution, trial or punishment thereof, be deemed to have been committed in that county or place.’
It was said, and the submission is repeated in this court, that the original arrest was unlawful and that nothing has cured or could cure that unlawful arrest, and, accordingly, when the matter came on before the Norfolk quarter sessions the appellant was not in custody on a charge for the offence within s 11(1) in that ‘custody’ there must mean ‘detained in lawful custody’. Of course, if the subsection merely means that jurisdiction arises if a man is found to be in custody, albeit unlawful, then the whole of counsel for the appellant’s argument here falls to the ground. But without finally deciding the matter this court as at present advised considers that the words in the subsection ‘in custody’ do mean ‘in lawful custody’, and it is of that opinion notwithstanding that the subsection refers to a summons ‘lawfully issued’. Accordingly the court proceeds to consider whether the appellant at the time he appeared before Norfolk quarter sessions was detained in lawful custody.
It has not been easy altogether to ascertain the true facts of the case, but it appears that the appellant was reasonably suspected—nobody has challenged that—of what one may call drug offences in King’s Lynn. As the court understands it, although carrying on his activities in Cambridge, he was supplying people or ‘pushing’ drugs in King’s Lynn, and accordingly the King’s Lynn police asked the Cambridge police to arrest him and hand him over. As a result a Pc Crane at 4.25 pm on 6 August 1969 found the appellant in the market place at Cambridge and he arrested him, using some such words as that a warrant had been issued for his arrest at King’s Lynn on suspicion of offences committed there. Pausing there, it is said (and in the opinion of this court rightly said) that that arrest was an unlawful arrest in the sense that it might in certain circumstances give rise to a civil action for false imprisonment. Without referring to the case in detail, it has been held by the House of Lords in Christie v Leachinsky that when a policeman arrests a citizen, the citizen is entitled to know at any rate the act for which he is being arrested. It is put in this way: that in this country a person is prima facie entitled to his freedom and is only required to submit to restraints on that freedom if he knows in substance the reason why it is claimed that the restraint should be imposed.
Counsel for the appellant here points out that the only matter conveyed to the appellant on arrest was on suspicion of offences committed in King’s Lynn, there being no identification of the nature of the offences or, as the court prefers to put it, of the act constituting an offence or offences. Counsel for the appellant further goes on to point out that the information moreover was wrong because as it turned out a warrant had not been issued. No doubt Pc Crane was sent off merely to bring the appellant into the station, did not know whether or not a warrant had been issued, and did not know the exact nature of the acts constituting the alleged offences. Seven minutes later the appellant was in the police station and there he was seen by Pc Welham, a member of the drug squad stationed at Cambridge. The appellant having been brought into the station, Pc Welham said to him:
‘You have been brought to the police station as a result of a request from the King’s Lynn Police in connection with possible drug offences.’
Page 884 of [1970] 3 All ER 881
The appellant was cautioned and he replied: ‘I know the score. I am saying nothing. I shall be out of here within 24 hours.' It is to be observed there that Pc Welham was more specific in that he referred not merely to offences generally, but to possible drug offences. Shortly after that, on that same evening there arrived from Norfolk Pc Elliott, who had come to take charge of the appellant and take him back to King’s Lynn. He said:
‘We are Police Officers from King’s Lynn. You have been arrested on suspicion of handling stolen drugs and we are taking you back to King’s Lynn for questioning.’
The answer he received was: ‘You can’t prove a thing against me. You realise you can only hold me for 24 hours’. There the information given to the appellant becomes still more specific because it not only deals with drug offences but sets out the particular kind of drug offences that the police in Norfolk reasonably suspected the appellant of having committed, namely handling stolen drugs. Moving on fairly quickly from there, he was brought to King’s Lynn; he was there charged with handling stolen drugs and when the matter came before the committing justices the charge was a charge not of handling stolen drugs but of unauthorised possession of drugs, contrary to the Drugs (Prevention of Misuse) Act 1964, and the place alleged was not King’s Lynn but ‘Cambridge or elsewhere’. It was on that charge that the examining justices committed him to Norfolk quarter sessions.
When the matter got to the drafting of an indictment, it took the form of three counts alleging unauthorised possession of drugs at different dates and instead of ‘at Cambridge or elsewhere’, they were all alleged as possession ‘at Cambridge’. As I have said counsel for the appellant’s argument is that, as the original arrest was unlawful, everything else that took place thereafter fell to the ground with the result that Norfolk quarter sessions had no jurisdiction to try the case. This court is quite unable to accept that argument. As it seems to this court, the question here is whether the appellant at the time when he was before the Norfolk quarter sessions was in lawful custody, and one asks oneself at what stage, if at all, did he become in lawful custody? On that point the court is quite clearly of opinion that when he was, in the police station at Cambridge, informed in sufficient detail by Pc Welham and then Pc Elliott, he was thereafter in lawful custody.
Counsel for the appellant says that before he could become in lawful custody he would have to be free, he would have to leave the police station and be rearrested. The court is quite unable to accept that contention. We are satisfied that, when in the police station shortly after arrest, he was told all that he was entitled to know within the House of Lords’ decision of Christie v Leachinsky, that then at any rate he was detained in lawful custody. Once one reaches that stage, this court is quite clearly of opinion that it matters not that the offence alleged against him changed in character. As Lord Simonds said in his speech in Christie v Leachinsky ([1947] 1 All ER at 575, 576, [1947] AC at 593):
‘These and similar considerations lead me to the view that it is not an essential condition of lawful arrest that the constable should at the time of arrest formulate any charge at all, much less the charge which may ultimately be found in the indictment, but this, and this only, is the qualification which I would impose on the general proposition. It leaves untouched the principle, which lies at the heart of the matter, that the arrested man is entitled to be told what is the act for which he is arrested. The “charge” ultimately made will depend on the view taken by the law of his act.’
Accordingly the fact that ultimately the appellant was charged not with handling
Page 885 of [1970] 3 All ER 881
stolen drugs but with possessing stolen drugs, and that the charge was a possession at Cambridge and not at King’s Lynn cannot affect the lawfulness of the custody which in the opinion of this court arose in the police station at Cambridge.
Two other matters fall to be mentioned. Counsel for the appellant has relied strongly on the fact that Pc Crane, who quite clearly did not know what the position was, referred to the fact that a warrant had been issued, and counsel says that that wrong statement was, as it were, never cured and covered everything which happened thereafter. The court is quite unable to accept that. While the arrested person is entitled to know, as Lord Simonds said, the act giving rise to the arrest, he is not entitled to know whether it was by warrant or as a result of arrest on reasonable suspicion.
The other matter concerns the action of the examining justices in committing the appellant to Norfolk quarter sessions. It is said that they should have exercised a discretion which they had to commit him in all the circumstances to Cambridge. Section 2(3) of the Magistrates’ Courts Act 1952 gives the justices general powers by providing that a magistrates’ court shall have jurisdiction as examining justices over any offence:
‘… committed by a person who appears or is brought before the court, whether or not the offence was committed within the county or borough.’
and by s 9(2) it is provided:
‘If a magistrates’ court proposes to commit a person for trial before a court of assize or quarter sessions that has jurisdiction to deal with the offence by virtue only of subsection (1) of section eleven of the Criminal Justice Act, 1925 [those are the deeming provisions] … then—(a) if it appears to the magistrates’ court that the accused would suffer hardship if he were tried in the county or place aforesaid, the court shall not commit him for trial before the said court of assize or quarter sessions; (b) if the accused applies to the magistrates’ court not to commit him to that court of assize or quarter sessions on the ground that he would thereby suffer hardship, and the magistrates’ court refuses to comply with the application, the accused may appeal to the High Court, and the magistrates’ court, on being informed by the accused of his intention so to appeal, shall not commit him to the court of assize or quarter sessions pending the appeal … ’
The appellant was represented before the committing justices; he never asked for the matter to be committed to Cambridge or suggested that he would suffer hardship. What is said here is that nevertheless the justices on their own motion should have come to the conclusion that he would suffer hardship if tried at Norfolk quarter sessions and that he should be committed to Cambridge. The court has no reason to suppose that the justices did not properly consider the matter and came to the conclusion that the appellant would suffer no hardship by being tried at Norfolk quarter sessions. Accordingly in this highly technical, although no doubt important area, this court has come to the conclusion that the deputy chairman was correct in the ruling which he gave on the application made before the trial. In fact the appellant when the trial proceeded refused to plead, not wishing no doubt to submit to the jurisdiction, a plea of not guilty was entered and he was duly convicted. No question in connection with the trial other than the point of law which the court has dealt with, arises in the appeal and accordingly the appeal is dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Registrar of Criminal Appeals (for the appellant);Metcalfe, Copeman & Pettefar, King’s Lynn (for the Crown).
N P Metcalfe Esq Barrister.
R v Registrar General, ex parte Segerdal and another
[1970] 3 All ER 886
Categories: ECCLESIASTICAL
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WINN AND BUCKLEY LJJ
Hearing Date(s): 1, 2, 3, 6, 7 JULY 1970
Ecclesiastical law – Place of meeting for religious worship – Registration of premises – Duty of Registrar General to be satisfied that premises qualify for registration – Chapel of Church of Scientology – Places of Worship Registration Act 1855, ss 2 and 3.
Ecclesiastical law – Place of meeting for religious worship – Meaning – Places of Worship Registrion Act 1855, ss 2 and 3.
It is a prerequisite to the registration of premises as a ‘place of meeting for religious worship’ by the Registrar General, under s 3a of the Places of Worship Registration Act 1855, that the premises should not only be certified as such under s 2b, but also that the Registrar General should himself be satisfied, following such enquiries as he thinks necessary, that they are in fact such a place; only ‘when he is so satisfied’ does his duty to register the building become ministerial in function (see p 888 j to p 889 a, p 890 g, and p 891 j to p 892 a, post).
On the true construction of ss 2 and 3 of the Places of Worship Registration Act 1855, the words ‘place of meeting for religious worship’ connote a place of which the principal use is for people to come together as a congregation to worship God or do reverence to a deity, and they do not include a building used largely for instruction in a philosophy of human life, eg Scientology (see p 889 j to p 890 a, p 891 e and p 892 c and j, post).
Decision of the Queen’s Bench Division [1970] 1 All ER 1 affirmed.
Notes
For the registration of places of worship, see 13 Halsbury’s Laws (3rd Edn) 32, para 48, 530, para 1140, and for a case on the subject, see 19 Digest (Repl) 577, 4175.
For the Places of Worship Registration Act 1855, ss 2 and 3, see 10 Halsbury’s Statutes (3rd Edn) 1504, 1505.
Cases referred to in judgments
R v Derby Justices (1766) 1 Wm Bl 606, 96 ER 352, 19 Digest (Repl) 577, 4175.
R v Income Tax Special Purposes Comrs (1888) 21 QBD 313, 53 JP 84; sub nom R v Income Tax Special Purposes Comrs, ex parte Cape Copper Mining Co Ltd [1886–90] All ER Rep 1139, 57 LJQB 513, 59 LT 455, 28 Digest (Repl) 403, 1792.
Cases also cited
Adelaide Co of Jehovah’s Witnesses v The Commonwealth (1943) 67 CLR 117.
Bond v Bond [1964] 3 All ER 346, [1967] P 39.
Brace, Re, ex parte The Debtor v Gabriel [1966] 2 All ER 38, [1966] 1 WLR 595.
British Advent Missions v Vane (V O) and Westminster City Corpn (1954) 48 R & IT 60.
Church of Jesus Christ of Latter-Day Saints v Henning (Valuation Officer) [1963] 2 All ER 733, [1964] AC 420.
Page 887 of [1970] 3 All ER 886
Founding Church of Scientology of Washington DC v United States (5 February 1969) unreported.
Franklin v Minister of Town and Country Planning [1947] 2 All ER 289, [1948] AC 87.
Grady, Re (1964) 39 Cal Rpr 912.
Green v Pope (1696) 1 Ld Raym 125.
Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489.
People Ex Rel et al v Board of Education of District 24 (1910) 92 NE Rep 251.
People v Woody (1964) 40 Cal Reptr 69.
R v Stokesley (Yorks) Justices, ex parte Bartram [1956] 1 All ER 563, [1956] 1 WLR 254.
Skrzypkowski v Silvan Investments Ltd [1963] 1 All ER 886, [1963] 1 WLR 525.
Smith & Fawcett Ltd, Re [1942] 1 All ER 542, [1942] Ch 304.
Tarnpolsk (decd), Re [1958] 3 All ER 479, [1958] 1 WLR 1157.
Appeal
This was an appeal by Michael Segerdal and the Church of Scientology of California, the applicants, from the decision of the Divisional Court (Lord Parker CJ, Ashworth and Cantley JJ), dated 14 November 1969, and reported [1970] 1 All ER 1, refusing to grant an order of mandamus, directed to the Registrar General, that he record or cause to be recorded the chapel at Saint Hill Manor, East Grinstead, Sussex, as a place of meeting for religious worship, certified to him under s 3 of the Places of Worship Registration Act 1855. The facts are set out in the judgment of Lord Denning MR.
Peter Pain QC and Gavin Lightman for the applicants.
R J Parker QC and Gordon Slynn for the Registrar General.
7 July 1970. The following judgments were delivered.
LORD DENNING MR. We are here concerned with an estate at Saint Hill Manor, East Grinstead, in Sussex. It is occupied by a group of persons who call themselves the Church of Scientology. There is a building in the grounds which they describe as a chapel. It is separate from the other buildings. It is used for ceremonies which they have set out in a booklet entitled ‘Ceremonies of the Founding Church of Scientology’. The booklet describes the church service, the marriage service, the christening and funeral services. It also sets out the creed of the Church of Scientology.
This group of persons desire to register this building, which they describe as a chapel, as a ‘place of meeting for religious worship’. If it is so registered, they will obtain considerable privileges. They will have taken one step towards getting a licence to celebrate marriages there; they will be outside the jurisdiction of the Charity Commissioners; and the building itself may become exempt from paying rates. All of this depends on whether it is properly a ‘place of meeting for religious worship’.
The legislation on this subject goes back to 1688. The Church of England was then the established Church of the land. All other denominations were proscribed. But in 1688 a measure of tolerance was extended to Protestants who dissented from the established Church. The Toleration Act 1688 made it lawful for Protestant dissenters to meet together as a congregation or assembly for religious worship, provided always that their place of meeting was certified to the bishop or to quarter sessions and registered; and provided, also, that the place was not locked, barred or bolted but was kept open. The same measure of toleration was afterwards extended to the Roman Catholics by the Roman Catholic Relief Acts of 1791 and 1829 and to the Jews by the Religious Disabilities Act 1846. Finally, in 1855, it was extended to all denominations. It was done by the Act now before us, the Places of Religious Worship Registration Act 1855. By that Act all denominations were made free. The 1855 Act applies to ‘every place of meeting for religious worship of any other body or denomination of persons’. By ss 2, 3 and 4 of the 1855 Act, such a place may be certified to the Registrar General; and on receipt of the certificate, he has to record it as a place of public worship. The Act does not say who are the persons who can give the certificate.
Page 888 of [1970] 3 All ER 886
But there is a form of certificate given in Sch A to the Act from which it appears that a ‘minister’ can certify, that an ‘occupier’, or even an ‘attendant’ can certify; or indeed anyone who can show a connection subsisting between him and the place of meeting. If any such person certifies that it is a place of meeting for religious worship, then the Registrar General is to record it.
This brings me to the very first point in the case. Counsel for the applicants submits that, once a place is certified to the Registrar General as a place of meeting for religious worship, the Registrar General is bound to accept the certificate and to record the place. In this very case a Mr Segerdal certified that the chapel of Saint Hill Manor was a place of religious worship, and asked the Registrar General to register it. Counsel said that thereupon the Registrar General had no option but to record it. He said that the duty of the Registrar General was ministerial only, and he relied for this purpose on R v Derby Justices. In that case, under the Toleration Act 1688, a group of Methodists gave a certificate that their place of meeting was for religious worship and asked for it to be recorded. But the justices had refused to record it. The reason for their refusal was apparently because they thought that the certificate ought to set out the particular denomination, namely that they were Methodists. The certifiers applied for a mandamus to command the justices to record it. The court issued the mandamus and said ((1766) 1 Wm Bl at 607):
‘… that in registering and recording the certificate, the justices were merely ministerial; and that after a meeting-house had been duly registered, still, if the persons resorting to it do not bring themselves within the Act of Toleration, such registering will not protect them from the penalties of the law.’
I entirely agree with that case because it is plain that the place of meeting there was truly a place of meeting for religious worship. It was for Methodists. Once it is truly such a place, it is entitled to be recorded and registered. The duty is then only ministerial. But if the place is not truly such a place, then it is not entitled to be registered; and registration can, and should, be refused. I take this view because of the extreme latitude given to the certifier. I cannot believe that a mere attendant or occupier can certify a place, when he may have little or no ground for his certification, and yet call on the Registrar General to record it straight away without enquiry. That would lead to many abuses. No, that cannot be. I think that the Registrar General has only jurisdiction to register a place so long as it is truly a place of meeting for religious worship.
The case comes, in my opinion, within the first class mentioned by Lord Esher MR in R v Income Tax Special Purposes Comrs ((1888) 21 QBD 313 at 319, cf [1886–90] All ER Rep 1139 at 1141). He points out that Parliament—
‘… may in effect say that, if a certain state of facts exists and is shewn to such tribunal or body before it proceeds to do certain things, it shall have jurisdiction to do such things, but not otherwise. There it is not for them conclusively to decide whether that state of facts exists, and, if they exercise the jurisdiction without its existence, what they do may be questioned, and it will be held that they have acted without jurisdiction.’
So here, if the Registrar General should record a place which is not truly a place of meeting for religious worship, he would be acting without jurisdiction. The prerequisite to his jurisdiction is that it should be truly such a place. If it truly is such a place, and certified as such, then, and then only, does the duty of the Registrar General become ministerial. This view is supported by s 8 of the Act. It provides that if it appears ‘to the satisfaction of’ the Registrar General that a place of meeting ‘has wholly ceased’ to be used as a place of meeting for religious worship, then he is to take it off
Page 889 of [1970] 3 All ER 886
the record. He has to be satisfied that it had ceased to be used. It follows that, on the initial registration, he ought likewise to be satisfied. In order to be satisfied, he is entitled to make such enquiries as he thinks fit. It would, I think, be quite wrong that the Registrar General should be compelled to act on the mere ipse dixit of a certifier, especially as the certifier may be a lowly or ignorant person, who is not capable of knowing what is a place of meeting for religious worship.
If the Registrar General does refuse, the remedy is at hand. The applicants can apply to the court for a mandamus, requiring the Registrar General to register the place. If they show that it is a place of meeting for religious worship, then the court will order the Registrar General to register it. They must adduced evidence before the court; and the court then itself will decide the matter. So also, if the Registrar General should record a place mistakenly, then no doubt his decision, as was said in R v Derby Justices ([1970] 1 All ER 1, [1970] 1 QB 430), can be challenged. It could be challenged by the rating authority on a claim for exemption from rates. It could be challenged in any legal proceedings by any person who had an interest in the matter. That gives the Act a sensible and reasonable interpretation. It is for the court eventually to decide whether it is a place of meeting for religious worship.
That brings me to the next question: is this building, described as a chapel, such a place? The Registrar General made enquiries. His assistant asked the applicants for information of the beliefs of the Scientologists, the forms of their service, and so forth. On 22 February 1967, their legal secretary wrote, sending the book entitled ‘Ceremonies of the Founding Church of Scientology’, adding: ‘I am sure you will find the answers to the questions you posed in the various ceremonies, and particularly in the Creed.' The Registrar General, having considered the matter and made all the enquiries he thought necessary, refused to record this place as a place of meeting for religious worship. Thereupon application was made for a mandamus. It was supported by an affidavit by Mr Segerdal. He describes himself as a minister of the Church of Scientology. He exhibits the creeds. He gives a description of what takes place at this building. On Sunday afternoons they have a service at 3.00 pm, which is attended by a congregation of 150 to 200 persons. There is a welcoming address from the chaplain. He then reads one or other of the creeds. He delivers a sermon, covering some aspect of Scientology. After the sermon there is a moment’s silence for contemplation or prayer. He gives out notices of what is to take place during the week. In addition to the Sunday afternoon service, Mr Segerdal says that there are other religious ceremonies at the chapel, such as christenings, funeral services and wedding ceremonies. He says that the chapel is also open at other times for private prayer and meditation.
On that affidavit, the applicants asked the Divisional Court ([1970] 1 All ER 1, [1970] 1 QB 430) to command the Registrar General to register this place. The Divisional Court declined. Ashworth J, delivering the judgment of the court, considered the evidence before it. He discounted, and I think rightly, two sentences at the end of para 7 in Mr Segerdal’s affidavit, because those were inferences on the very matter which the court had to decide. He did not reject any of the statements of fact which Mr Segerdal had made. That was quite right, because there was no application to cross-examine him. In the absence of cross-examination or any real grounds for disbelieving the affidavit, I do not think that the court should do so. The question is whether on the evidence this building can truly be said to be a place of religious worship.
We have had much discussion on the meaning of the word ‘religion’ and of the word ‘worship’, taken separately, but I think that we should take the combined phrase, ‘place of meeting for religious worship’ as used in the Act of 1855. It connotes to my mind a place of which the principal use is as a place where people come together as a congregation or assembly to do reverence to God. It need not be the God which the Christians worship. It may be another God, or an unknown God, but it must
Page 890 of [1970] 3 All ER 886
be reverence to a deity. There may be exceptions. For instance, Buddhist temples are properly described as places of meeting for religious worship. But, apart from exceptional cases of that kind, it seems to me the governing idea behind the words ‘place of meeting for religious worship’ is that it should be a place for the worship of God. I am sure that would be the meaning attached by those who framed this legislation of 1855.
Turning to the creed of the Church of Scientology, I must say that it seems to me to be more a philosophy of the existence of man or of life, rather than a religion. Religious worship means reverence or veneration of God or of a supreme being. I do not find any such reverence or veneration in the creed of this church, or, indeed, in the affidavit of Mr Segerdal. There is considerable stress on the spirit of man. The adherents of this philosophy believe that man’s spirit is everlasting and moves from one human frame to another; but still, so far as I can see, it is the spirit of man and not of God. When I look through the ceremonies and the affidavits, I am left with the feeling that there is nothing in it of reverence for God or a deity, but simply instruction in a philosophy. There may be belief in a spirit of man, but there is no belief in a spirit of God. This is borne out by the opening words of the book of ceremonies. It states:
‘In a Scientology Church Service we do not use prayers, attitudes of piety, or threats of damnation. We use the facts, the truths, the understandings that have been discovered in the science of Scientology.’
That seems to me to express the real attitude of this group. When Mr Segerdal in his affidavit uses the word ‘prayer’ he does not use it in its proper sense, ie intercession to God. When the creed uses the word ‘God’ (as it does in two places) it does not use it in any religious sense. There is nothing which carries with it any idea of reverence or veneration of God. The sample sermon has no word of God in it at all. It says that man has a body, mind and spirit. It emphasises man, and not God. It seems to me that God does not come into their scheme of things at all.
I do not think that this evidence is sufficient to bear out the contention that this is a place of meeting for religious worship. I find myself in agreement with the judgment of the Divisional Court ([1970] 1 All ER 1, [1970] 1 QB 430), and I would dismiss the appeal.
WINN LJ. I entirely agree, and for myself I have really very little to add. The essential and determinative issue in this appeal is that which Lord Denning MR first dealt with, and dealt with in a manner with which I respectfully express my full agreement; ie, if I may be permitted to paraphrase his ruling, that there is an underlying condition precedent to the effective invocation of the then ministerial function of the Registrar General to register, that the building in relation to which his function is invoked shall be, at the time, a place of meeting for religious worship; this is its qualification for registration. It would be tedious to refer to the whole of the preamble to the Places of Worship Registration Act 1855 but reference to it would show clearly that it was passed in order to bring together into one Act numerous similar provisions which had been previously passed relating to the position of various congregations with regard to, or in respect of, their congregational observances, rituals and worship. The whole topic is religious worship.
I am not concerned to dwell on the question which necessarily was discussed in the course of this appeal, whether Scientology is or is not a religion. The answer to that specific question must depend so directly on the meaning that one gives, for the particular purpose and in the particular context, to the chameleon word ‘religion’ or ‘religious’. I do not feel well qualified to discuss religion or religious topics. I think that there are two ways in which one may be somewhat disqualified for discussion
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of such topics. The one is if one is particularly religious in the sense of being particularly observant of the processes and rituals of a particular current religion. The other is if one is preconditioned by a certain amount of study of pre-Christian religions or religious superstitions towards thinking of religion in a very general and wide sense; indeed, in the sense in which the Greeks of classical times used the word, one of superstition, fear, panic about the unknown, horror of what lay after death, and so on and so forth. With a mind so preconditioned, I feel that one does tend to think, when referred to the philosophy of this particular body, that their thetans, which seem to be the most important creatures or beings in their ideological world, are really very much the same as the demons of the Greeks, who came into the body at birth or on some other occasion when the owner of the body was a little careless to protect himself from their invasion, and thereafter lived in the body for many years but could only be exorcised by processes similar to those which are recommended here under the name of auditing; although auditing, I gather, is rather for the cure and instruction of the spoilt thetan in order to remove the engrams. But just as the Egyptians and the Buddhists think all the time of the transmigrating souls, so it seems to me, just superficially examining the doctrines of this particular body, that they are concerned far more with the transmigration and education and development of thetans than they are with God, in any shape or form, or any concept of a divine, superhuman, all-powerful and controlling entity.
It seems to me, therefore, that whilst it may be right—or it may not be right—to call this philosophy (because that is what it is) a religion, when adherents to it come together in any building or other place for communing one with the other—since there is no suggestion that they commune with a deity—and discussion and instruction by sermon and otherwise, they do not, so far as the evidence reveals to my own mind, observe any form whatsoever of worship; by no ‘worship’, if I am bound to define my terms, I mean to indicate that they do not humble themselves in reverence and recognition of the dominant power and control of any entity or being outside their own body and life.
For myself, therefore, without feeling that I am really able to understand the subject-matter of this appeal, I have formed, for what it may be worth, a possibly irrational, possibly ill-founded, but very definite opinion that here the applicants have failed to show that the Divisional Court ([1970] 1 All ER 1, [1970] 1 QB 430) was in any sense wrong in declining to recognise that their building is a place of meeting to which persons come together as a congregation for the purpose of religious worship.
I therefore would dismiss this appeal.
BUCKLEY LJ. I agree.
On the point of construction of the Places of Worship Registration Act 1855 and the reliance that was placed on R v Derby Justices, to which Lord Denning MR has referred, I would only draw attention to the fact that s 2 of the Act of 1855, with which we are principally concerned, does not provide that every place that shall be certified as being a place of meeting for religious worship shall be registered; it provides that every place of meeting for religious worship which is certified shall be registered; and the section, in my judgment, on its true interpretation, postulates that the subject-matter of any registration must be something which properly answers to the description of a place of meeting for religious worship, whether of Protestant dissenters or of Roman Catholics or of Jews or of any other body or denomination of persons. If that is right, it inevitably follows that the Registrar General, if he considers that a certificate which is submitted to him relates to some place which does not properly
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answer to that description, ought to reject the application, as the Registrar General did in the present case.
On the other aspect of the matter, ie the question whether on the evidence the chapel at Saint Hill Manor is in truth ‘a place of meeting for religious worship’, I would only add this: the book of ceremonies, to which reference has been made, does not contain any form of service to be conducted at the Sunday meetings, although it contains a statement of the lines which such a service should follow, but it does contain forms of service which are considered appropriate to a wedding, a naming ceremony and a funeral, and if one looks at those forms of service, it is, in my judgment, manifest that they contain no element of worship at all.
Worship I take to be something which must have some, at least, of the following characteristics: submission to the object worshipped, veneration of that object, praise, thanksgiving, prayer or intercession. Looking at the wedding ceremony, for instance, I can find nothing in the form of ceremony set out which would not be appropriate to a purely civil and non-religious ceremony such as is conducted in a register office. It contains, I think, none of the elements which I have suggested are necessary elements of worship. I do not say that one would need to find every element in every act which could properly be described as worship, but when one finds an act which contains none of those elements, in my judgment, it cannot answer to the description of an act of worship.
If one turns from those ceremonies to the outline of the church service which would take place on other occasions, it seems to me that what is there indicated is that it is a ceremony of instruction and discussion. It is said that after the minister has welcomed the congregation, there shall be his sermon, and examples are given of the sort of subjects that would be appropriate to be discussed in such a sermon, which are aspects of the Scientological beliefs. It is said that a taped lecture of Mr Hubbard (who is the founder of this organisation) can be included as part of the service, and that there will be a question and answer period to be held after the sermon, and that will be followed, according to the suggested outline of service, by announcements as to events to take place during the next week, after which the minister will thank the congregation and invite them to come back on another occasion. There is nothing in that outline of the service which indicates any act which I think could be properly described as worship.
Now, it is true that Mr Segerdal in his affidavit indicates that the form of service adopted in the chapel at Saint Hill Manor is not confined to what I have so far referred to, for in his description of the service he says that one of the creeds of the Scientologists would be read by the minister and that the congregation would read the creed silently in concert with the minister, and he says, also, that after the sermon there would be a moment’s silence for contemplation or prayer.
According to the evidence, there are two creeds, one of which has already been mentioned by Lord Denning MR and one which is rather fuller in its terms and which does in fact contain more references to God than the creed which is set out in the book of ceremonies; but when one comes to read those creeds, they are not, in my judgment, documents that can in themselves be regarded as constituting acts of worship; they are affirmations of faith, but they do not, I think, partake of the character of worship. The fact that in other faiths the recital of a creed may very probably take place in the course of a religious service which is undoubtedly an act of worship does not mean that any creed used on any occasion will itself constitute an act of worship.
In my judgment, the evidence indicates that the sort of ceremony which takes place on a Sunday afternoon in this chapel at Saint Hill Manor is a ceremony of instruction in the tenets of this particular body, but it is not a ceremony which can be properly described as constituting worship, and consequently I agree that it has not been established that this chapel is a place of meeting for religious worship; and
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so, in my judgment, this appeal should be dismissed on the ground that the chapel is in truth not a place to which the section has any application.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Lawrence Alkin & Co (for the applicants); Solicitor, Department of Health and Social Security.
Rosalie Long Barrister.
D v D
[1970] 3 All ER 893
Categories: FAMILY; Children
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BAGNALL J
Hearing Date(s): 7 OCTOBER 1970
Divorce – Infant – Relevant child – Meaning not restricted to infant – Matrimonial Causes Act 1965, s 34(1).
Divorce – Infant – Relevant child – Protection of court – Proper proceedings – Matrimonial Causes Act 1965, s 34(1).
Divorce – Infant – Relevant child – Protection of court – Procedure – Matrimonial Causes Rules 1968 (SI 1968 No 219), rr 95(1) and 108(1) – Matrimonial Causes Act 1965, s 34(1).
Injunction – Husband and wife – Restraining wife from molesting child – Injunction not granted except where purpose was protection of child.
The son, aged 28, had a history of severe emotional illness and had an immature personality. He had been and was under special medical care. The mother petitioned for divorce on the grounds of cruelty. The father denied the allegations of cruelty but there was no cross-prayer. Both the mother and the father sought to bring pressure to bear on the son in the context of the matrimonial suit to serve or further their own interests. The father, by summons, sought an order that proper proceedings be taken under s 34(1)a of the Matrimonial Causes Act 1965 for placing the son under the protection of the court and an injunction restraining the mother from molesting or communicating with the son. The father suggested that the procedure for placing the son under the protection of the court might be either under r 108(1)b of the Matrimonial Causes Rules 1968 (separate representation in matrimonial proceedings of children under a disability) or under r 95(1) c (reference to a court welfare officer for investigation and report of any matter in matrimonial proceedings which concerned the welfare of a child).
Held – (i) The expression ‘relevant child’ in s 34(1) must bear the same meaning in relation to all types of relief under s 34(1) and was not confined to an infant child; accordingly, the son was a relevant child (see p 896 b and c, post).
Le Mare v Le Mare [1960] 2 All ER 280 applied.
(ii) The expression ‘proper proceedings’ in s 34(1) related to proceedings (under the inherent jurisdiction or the statutory jurisdiction in relation to infants exercised by the Chancery Division) other than and separate from the matrimonial suit in which the application was made (see p 896 d and e, post).
(iii) Proceedings to place the son under the protection of the court could not be brought under r 108(1) of the Matrimonial Causes Rules 1968 since that would not involve separate proceedings and there was no power to appoint a guardian ad litem of a person who was sui juris (see p 896 g, post); similarly proceedings could not be
Page 894 of [1970] 3 All ER 893
brought under r 95(1) of the 1968 rules since that would not involve separate proceedings and no order for custody of the son could be made (see p 896 j, post).
(iv) An injunction to restrain the mother from molesting or communicating with the son would not be granted since the basis of the application was not the protection of the son but rather the protection of the father (see p 897 b, post).
Notes
For age limits for making orders for children, see 12 Halsbury’s Laws (3rd Edn) 356, para 760; 394, 395, para 874, and for cases on the subject, see 27 Digest (Repl) 500, 4433–4436, 663, 664, 6282, 6283.
For placing children under the protection of the court, see 12 Halsbury’s Laws (3rd Edn) 354, 355, para 755.
For the Matrimonial Causes Act 1965, s 34, see 17 Halsbury’s Statutes (3rd Edn) 207.
Cases referred to in judgment
Carlton, Re [1945] 2 All ER 370, [1945] Ch 372, 114 LJCh 289, 173 LT 186, 2 Digest (Repl) 199, 188.
Le Mare v Le Mare [1960] 2 All ER 280, [1961] P 10, [1960] 2 WLR 952, Digest (Cont Vol A) 806, 6341a.
Thomasset v Thomasset [1894] P 295, [1891–94] All ER Rep 308, 63 LJP 140, 71 LT 148, 27 Digest (Repl) 664, 6283.
Summons
The summons, which was brought by the father for an order placing the son under the protection of the court and for an injunction restraining the mother from molesting or communicating with the son, was heard in chambers but adjourned into open court for judgment.
R G Merrylees for the mother.
G H Crispin QC and I H Davies for the father.
7 October 1970. The following judgment was delivered.
BAGNALL J. I have been asked to give judgment in this case in open court. I shall do so without giving the names of the parties. I make the usual request, which I know is always observed, that reporters will also not disclose the names of the parties. This summons relates to the son of the marriage of the petitioner and the respondent, who was born on 7 October 1942, and so is just 28 years of age. I shall refer to him as ‘the son’, and to the petitioner and the respondent respectively as ‘the mother’ and ‘the father’.
The family has been beset by a multiplicity of litigation. There are these proceedings, in which the mother petitions for dissolution of marriage on the grounds of cruelty. The allegations of cruelty are denied, but there is no cross-prayer. The father has given an undertaking until judgment or further order not to molest the mother. Secondly, there are proceedings in the Queen’s Bench Division, under the Married Women’s Property Act 1882, with which I am not concerned. Thirdly, there is an action in the Queen’s Bench Division, in which the son is the plaintiff and the father the defendant, in which the son seeks to enjoin the father from communicating with or molesting the son. An ex parte injunction has been obtained in those terms, and the matter is due for hearing inter partes tomorrow.
As to the facts, I think that all I need say is this: there is evidence (which I am content to accept for the purposes only of this summons): (1) that the son has a history of severe emotional illness, has an immature personality, and has been and is under special medical care; no proceedings in relation to him in the Court of Protection have been taken or, as I understand it, are contemplated; and (2) the mother and the father have each sought to bring pressure on the son in the context of their matrimonial dispute and to serve or further their own interest. In those circumstances,
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by this summons the father seeks the following relief: an order (i) that proper proceedings be taken for placing the son under the protection of the court; (ii) that the mother be restrained, by herself, her servants, agents or otherwise, from molesting or communicating with the son; and (iii) in relation to costs. The summons is addressed to and has been served on the mother and the son. The son is not a party to the proceedings and, as I understand it, it is agreed between counsel (he being in law in all respects sui juris) that he cannot be made a party, at any rate without his consent.
Counsel for the father relies under the first head of relief on s 34(1) of the Matrimonial Causes Act 1965, which I must read; I omit the parts that are not relevant:
‘Subject to subsection (6) of this section [that subsection has no materiality], the court may make such order as it thinks just for the custody, maintenance and education of any relevant child—(a) in any proceedings for divorce … before … the final decree; … and in any case in which the court has power by virtue of paragraph (a) of this subsection to make an order in respect of a child, it may instead, if it thinks fit, direct that proper proceedings be taken for placing the child under the protection of the court.’
That section has replaced in succession s 35 of the Matrimonial Causes Act 1857, s 4 of the Matrimonial Causes Act 1859, s 193 of the Supreme Court of Judicature (Consolidation) Act 1925, and s 26(1) of the Matrimonial Causes Act 1950. Before the 1925 Act, the references were to the protection of ‘the Court of Chancery’. Since then, the references have been to ‘the court’, which it is agreed on both sides means ‘the High Court’. I should add that r 54 of the Matrimonial Causes Rules 1957d, made reference to the protection of the Chancery Division. So far as I have been able to find, there is no express reference to this matter in the Matrimonial Causes Rules 1968e.
Counsel for the father has to show, in order to succeed under para 1 of the summons, (1) that the son is a ‘relevant child’; and (2) that proper proceedings can be taken for placing the son under the protection of the court. Section 46 of the 1965 Act contains a definition of ‘relevant child’, but there is no definition of the word ‘child’ by reference to age or infancy. On the first question, my attention has been drawn to a number of other sections of the 1965 Act, namely ss 22, 33(1), 34(3) and 36(4). In each of those sections or subsections there is written a limitation on the meaning of the word ‘child’ by reference either to a specified age or to infancy. On the other hand, s 11, to which junior counsel for the father referred me, as he submitted, plainly is not limited to an infant child. The submission on the part of the father is, that, having regard to the limitations in the other subsections that I have mentioned and to the fact that there is no limitation by reference to age or infancy in s 34(1), that subsection must necessarily embrace a child of any age.
In support of his argument, counsel for the father relies on the decision in Le Mare v Le Mare. In that case Collingwood J, applying the ratio decidendi of Thomasset v Thomasset in the Court of Appeal, held that the court had power under s 26 of the Matrimonial Causes Act 1950 to order the payment of maintenance, which in that case was directly related to education for a child beyond the age of 21 years. Counsel for the father also quite properly referred me to Re Carlton, in which it was held that in s 10(5) of the Naturalization Act 1870 the word ‘child’ was limited to ‘infant child’. Although, as I have said, I was quite properly referred to that case,
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I cannot think that the Naturalization Act 1870 is in pari materia to the Matrimonial Causes Act 1965, and I derive no assistance either way from that case.
In my judgment, it is clear from the decision in Le Mare v Le Mare that the power to order maintenance under s 26 of the 1950 Act, and therefore also under s 34(1) of the 1965 Act, is not limited to a child who is an infant. Equally, it seems to me clear that purely as a matter of construction the words ‘relevant child’ must have the same meaning in relation to all the types of relief that are authorised by s 34(1), although I bear in mind the observations of Lindley LJ in Thomasset v Thomasset ([1894] P at 302, 303, [1891–94] All ER Rep at 312), to which I have referred:
‘… I do not say that a child who has attained years of discretion can, except under very special circumstances, be properly ordered into the custody of either parent against such child’s own wishes.’
It may indeed be that the word ‘custody’ in the Act has no meaning in relation to a child who is not an infant. Accordingly, in my judgment, a ‘relevant child’ in s 34(1), purely as a matter of construction, is not confined to an infant child; and the son is therefore a ‘relevant child’.
The second question is: what are the proper proceedings that can be taken for placing the child under the protection of the court? In my judgment, again as a matter of construction, the reference must be to proceedings other than and separate from the matrimonial suit in which the application is made, for necessarily the child is already under the protection of the court in that suit, in that the court can make all such orders in relation to the child as are authorised by statute and justified by the settled practice of the court. It seems to me that the reference must be to independent proceedings under the inherent jurisdiction or the statutory jurisdiction in relation to infants formerly exercised by the Court of Chancery, now exercised by the Chancery Division, but available in all Divisions. At any rate, counsel has not been able to suggest to me any other separate and independent proceedings in which such an order could properly be made.
Counsel for the father has suggested two methods of procedure. The first is under r 108(1, of the Matrimonial Causes Rules 1968. Under that rule:
‘… if in any matrimonial proceedings it appears to the court that any child ought to be separately represented, the court may—(a) of its own motion, appoint the Official Solicitor if he consents, or (b) on the application of any other proper person, appoint that person, to be guardian ad litem of the child … ’
so that the power is to appoint a guardian ad litem. It seems to me that the argument based on that rule must fail, first because that would not involve any separate or independent proceedings; secondly, because—this I think counsel for the father concedes—there is no power to appoint a guardian ad litem of a person who is sui juris.
The second suggestion is that steps should be taken under r 95(1) of the 1968 rules whereby a judge—
‘… may at any time refer to a court welfare officer for investigation and report any matter arising in matrimonial proceedings which concerns the welfare of a child.’
Again, in my judgment, that submission must fail, because it does not involve separate proceedings, and secondly, because—and again counsel for the father was disposed to concede this—such an order could only be effective if designed to lead to an order for custody, or the refusal of an order for custody, and it is accepted that in the present case no order for custody of the son could be made.
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My conclusion is, therefore, that I have no power under the 1965 Act to make the order asked in para 1 of the summons. As to para 2, in my view, the power of the court to restrain by injunction a person from molesting or communicating with a child is founded on the welfare benefit and protection of the child. In the present case, the basis of the application is not the protection of the son, but the protection of the father from the son and indirectly from the mother. For that reason, whether it be a matter of law or of the exercise of discretion, I should not think it right to grant an injunction.
I should perhaps add, for the purpose of completeness, that even if I had held that under the 1965 Act I had power to make the order in para 1 of the summons, for the reasons I have adumbrated in relation to para 2, I should not think it right to do so. In the result, I propose, as I intimated at the conclusion of the argument, to dismiss the summons with costs.
Summons dismissed.
Solicitors: J D Langton & Passmore (for the mother); J Elliott Brooks & Co (for the father).
Alice Bloomfield Barrister.
R v Pink
[1970] 3 All ER 897
Categories: CRIMINAL; Criminal Procedure
Court: VACATION COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): MEGAW LJ, JAMES AND O’CONNOR JJ
Hearing Date(s): 16 SEPTEMBER 1970
Criminal law – Trial – Irregularity – Accused not represented and refusing to give evidence or call witnesses – Address to jury by prosecution for second time – Whether rule of law or practice in relation to application of proviso to s 2(1) of Criminal Appeal Act 1968.
There is no rule of law or practice that the proviso to s 2(1)a of the Criminal Appeal Act 1968 should not apply where counsel for the prosecution addressed the jury a second time, the accused being unrepresented and having refused to give evidence himself or call witnesses; the test to be applied is the test contained in the proviso itself (see p 899 d and p 900 g, post).
R v Mondon [1968] 52 Cr App Rep 695 distinguished.
Notes
For material irregularity in the course of the trial, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 988.
For when counsel for the prosecution may sum up, see 10 Halsbury’s Laws (3rd Edn) 421, 422, para 774, and for a case on the subject, see 14 Digest (Repl) 304, 2872.
For the Criminal Appeal Act 1968, s 2, see 8 Halsbury’s Laws (3rd Edn) 690.
Cases referred to in judgment
R v Baggott (1927) 20 Cr App Rep 92, 14 Digest (Repl) 326, 3155.
R v Harrison (1923) 17 Cr App Rep 156, 14 Digest (Repl) 304, 2872.
R v Mondon (1968) 52 Cr App Rep 695, Digest Supp.
R v Thomas (1922) 17 Cr App Rep 34, 14 Digest (Repl) 651, 6622.
Appeal
This was an appeal, by leave of the single judge, by Ronald Pink against his conviction
Page 898 of [1970] 3 All ER 897
at Leeds Assizes on 7 May 1969, of living wholly or in part on the earnings of prostitution. He was sentenced to four years’ imprisonment. The facts are set out in the judgment of the court.
J R Playford for the appellant.
B Walsh for the Crown.
16 September 1970. The following judgment was delivered.
MEGAW LJ delivered the judgment of the court. The appellant Ronald Pink was convicted at Leeds Assizes on 7 May 1969 of living wholly or in part on the earnings of the prostitution of a woman named Margaret Wilson. He was sentenced to four years’ imprisonment. He applied for leave to appeal against conviction. In October 1969, the single judge granted him leave to appeal against conviction. The ground on which the single judge granted leave was this. At the trial at Leeds Assizes the appellant was offered legal aid and refused it and conducted his own defence. He did not give evidence or make an unsworn statement from the dock, nor did he call any witnesses. The learned judge invited counsel for the prosecution to address the jury for a second time after the appellant had stated that he would not give evidence. Counsel for the prosecution accepted that invitation and addressed the jury. The single judge took the view that that was wrong. He granted legal aid subject to a statement of means which was supplied by the appellant in December 1969. It is apparent that an irregularity occurred, and counsel appearing for the prosecution in this appeal does not seek to contend the contrary.
The position, which arises out of practice stemming from s 2 of the Criminal Procedure Act 1865, is correctly set out in Archbold, Criminal Pleading Evidence & Practiceb:
‘Where an accused who is unrepresented gives evidence himself but calls no other witnesses, counsel for the prosecution is not allowed to address the jury a second time … ’
and the same applies where an accused who is unrepresented not only does not call any other witnesses but does not give evidence himself.
This court agrees with the single judge. There was thus at the least an irregularity at the trial. The appeal came before this court differently constituted on 5 March 1970. The appellant was represented by counsel, who has appeared on behalf of the appellant today. The court was then told that the appellant had recently disclosed to counsel that he had received information which led him to believe that a member of the jury at the trial was personally known to Miss Wilson. It was desired to adduce evidence to that effect. Accordingly, an adjournment was asked for on behalf of the appellant and this was granted. The appellant was required to furnish the court with a statement of the proposed new evidence at the earliest possible moment. To that end the appellant was granted the legal aid of solicitors as well as of counsel. This court has been informed by counsel for the appellant that, the matter having been investigated, it is not thought right to pursue it further. In those circumstances this court says no more about that matter.
The facts of the case can be fairly briefly summarised. Miss Wilson gave evidence that she first met the appellant in June 1968. She was then aged 18 and a prostitute. Between then and 2 August 1968 she used to stay with him three or four times a week, and on one occasion she went with him to Glasgow and spent some time with him there. She gave the appellant, she said, the money which she earned from prostitution. At the time of the trial Miss Wilson was in borstal for an offence of theft. A number of other prostitutes were called at the trial, at least one of them to give evidence of seeing Miss Wilson with the appellant during this period,
Page 899 of [1970] 3 All ER 897
but also in order that they might establish a system to rebut the anticipated defence of innocent association between the appellant and Miss Wilson. None of these prostitutes gave evidence that Miss Wilson actually gave the appellant money. A police officer gave evidence of arresting Miss Wilson for loitering for prostitution on 1 August 1968. He said that, when she was granted bail that evening, he, the police constable, thereafter saw her approaching and speaking to the appellant. She then resumed her loitering for prostitution and was once again arrested the same night.
The appellant was not arrested until 21 January 1969. He was then in Carlisle. According to the police, he told a number of lies, including denying his identity, denying that he had any girl friends, denying that he had ever lived in Leeds, denying that he knew Miss Wilson and denying that he possessed a car. Some of these lies were immediately detected by reason of documents found on him. There was found on him a photograph showing two of the prostitutes, witnesses who gave evidence at the trial, naked in bed. That photograph was put in evidence at the trial.
Counsel for the appellant has said clearly and well everything that can be said in support of this appeal against conviction. His point is, of course, the irregularity of the second speech by counsel for the prosecution when the appellant was not calling witnesses and the appellant was not represented by counsel. The real issue is whether or not in this case, having regard to that irregularity, the court can, and should, apply the proviso contained in s 2(1) of the Criminal Appeal Act 1968. The terms of that proviso are as follows:
‘Provided that the Court may, notwithstanding that they are of opinion that the point raised in the appeal might be decided in favour of the appellant, dismiss the appeal if they consider that no miscarriage of justice has actually occurred.’
Counsel referred us to R v Mondon decided in 1968 by this court. The facts in that case were that the appellant, Mrs Mondon, was accused of shoplifting. She dismissed her counsel and solicitor and conducted her own defence. She was convicted. The essence of the issue which arose at the trial was that she said, and witnesses for the prosecution denied, that she had given a 10s note to an assistant in the shop in rather unusual circumstances before she left the shop. If the 10s had been given to the assistant, then plainly there was no offence, no dishonesty of any sort. If it had not been given, then it would be difficult to see how the appellant was not guilty. In that case by the same irregularity as has occurred here, after the appellant gave her evidence but called no other witnesses, she being unrepresented, the prosecution made a second speech summing up the evidence to the jury. The court in R v Mondon referred to the earlier authorities on this point, first, R v Harrison where Salter J, delivering the judgment of the court, made it clear that it was permissible to apply the proviso. There was no rule of law that the proviso may not be applied when this irregularity occurs, and, in fact, in that particular case the proviso was applied. But he made the observation ((1923) 17 Cr App Rep at 156)—
‘… it might be that in another case this Court would have to hold that a conviction, in a trial where such an irregularity occurred, must be quashed.’
It may be mentioned also that in R v Thomas, decided a few months earlier, the Court of Criminal Appeal had applied the proviso in such a case. The next case referred to in R v Mondon was R v Baggott where Lord Hewart CJ, delivering the
Page 900 of [1970] 3 All ER 897
judgment of the Court of Criminal Appeal, had referred to R v Harrison, and had said amongst other things ((1927) 20 Cr App Rep at 93):
‘Since that time there have been occasions, including one comparatively recent occasion, where a conviction was quashed upon that ground. That episode in itself is sufficient to conclude the matter.’
It may well be that there is an ambiguity about the words ‘that episode’, because there were some very remarkable features of that case, including the fact that counsel in his irregular second address to the jury had made an erroneous proposition of law which had not been corrected in the subsequent direction to the jury.
The court in R v Mondon ((1968) 52 Cr App Rep at 699) expressed their final conclusion on the matter in these words:
‘We cannot say in a case of this kind, which turned solely upon issues of fact, that the concluding speech of Crown counsel may not have had a powerful effect upon the jury and influenced their verdict. In those circumstances, we do not think that the irregularity which occurred can be cured by the application of the proviso, and accordingly this appeal must be allowed and the conviction quashed.’
Counsel for the appellant says that that case, properly interpreted, lays down a rule of practice that the proviso is not to be applied in such a case, at any rate unless there are some quite exceptional circumstances which he says do not exist in the present case. In the view of this court, R v Mondon is a case in which materially different features are to be found. In that case, even though the court took the view that many people might think that the guilt of the appellant was clear, there was a direct conflict of evidence between the prosecution and the defence on a vital issue. Here there was no real challenge to the evidence of the prosecution, which showed that the appellant had been habitually in the company of a prostitute, Miss Wilson. The appellant did not admit it, but there was no real or substantial challenge. Therefore, it was an issue for the jury, as the judge fairly and clearly pointed out, because it was for the prosecution to prove the fact that the appellant had been habitually in the company of the prostitute in question during the relevant period. But if the jury accepted the unchallenged evidence of habitual association, then, by reason of s 30(2) of the Sexual Offences Act 1956, the burden of proof shifted to the appellant and the appellant had given no evidence.
In the view of this court, R v Mondon did not lay down any rule of practice in relation to the application of the proviso in such a case. The test is the test which is described in the proviso itself in the words which I have already read: ‘… the Court may … dismiss the appeal if they consider that no miscarriage of justice has actually occurred’. The test is this: if the irregularity had not occurred, if no second speech had been made in this case on behalf of the prosecution, would a reasonable jury necessarily and inevitably have brought in a verdict of guilty?
Counsel for the appellant supports his submission that the proviso should not be applied in this case by reference to three matters. First, he says that there was a failure by the learned judge to inform the appellant at the end of the prosecution evidence of the appellant’s right to call witnesses on his behalf. In the literal sense that was so. The learned judge took great care to inform the appellant of his right to give evidence. He did not expressly add ‘or to call witnesses’. But the question arose and the learned judge realised that there was the possibility that there might
Page 901 of [1970] 3 All ER 897
have been some misunderstanding in that matter while the appellant was making his address to the jury, and he then clearly and specifically invited the appellant, if he so wished, to ask that witnesses should be called. The appellant rejected that request saying that it was too late although he was assured by the judge that it was not. There is nothing whatever in that point.
Next, says counsel for the appellant, the learned judge made two mistakes of fact in the summing-up. The first mistake of fact is that the learned judge told the jury that a police constable, Pc Crosby, had said that, on the occasion of 1 August 1968, when he had arrested Miss Wilson as being a prostitute and then released her on bail, he saw Miss Wilson approaching the appellant who was then in a motor car. That, counsel says, on the basis of a transcript (and of course, we accept the accuracy of what he tells us) was not what Pc Crosby said. He did not say that he saw Miss Wilson go to see the appellant in a motor car. Pc Crosby said that she went to see him and spoke to him outside a club. There is nothing whatever in that error which can conceivably affect the determination of this appeal. The second error of fact was, if anything, even less relevant and even more trivial. The learned judge, referring to the evidence of Miss Wilson, said that she had given evidence that the appellant had stayed with her three or four times a week and that it was at her mother’s. In fact, according to the transcript, it was not at her mother’s, at least on most occasions.
Lastly in support of the proposition that the proviso should not be applied, counsel refers to and complains of the admission of evidence of the photograph to which reference has been made which was found on the appellant when he was arrested at Carlisle showing two of the prostitutes who were witnesses naked in bed. It is said by counsel that the judge in his discretion, particularly when the appellant was unrepresented by counsel, ought not to have allowed that photograph to be admitted in evidence because it was irrelevant to any issue and might be prejudicial. In the view of this court, there is again no substance in that objection. It is to be noted that according to the evidence of the police constable who arrested the appellant at Carlisle that one of the questions that the constable asked him was ‘Do you know Margaret Wilson and that she is a prostitute?' The answer to that was ‘I don’t have any girl friends’, and the learned judge properly put to the jury ‘Is that a lie?' That was one of the matters which the learned judge properly left to the jury as being possible corroboration, if it was a lie. In those circumstances it cannot properly be said that the photograph was not admissible in evidence. There being nothing then in any of these matters, there was a fair and accurate direction to the jury both on law and on fact.
In the view of this court, on the material before them, no reasonable jury, unaided by a second address on behalf of the prosecution but with the benefit of a full and fair summing-up such as they had in this case, would have failed to bring in a verdict of guilty. Accordingly, this appeal is dismissed.
Appeal dismissed.
Solicitors: J H Milner & Son, Leeds (for the appellant); Sharpe, Pritchard & Co, agents for T B Atkinson, Leeds (for the Crown).
Rosalie Long Barrister.
R v Harling
[1970] 3 All ER 902
Categories: CRIMINAL; Road Traffic
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): SALMON AND PHILLIMORE LJJ AND NIELD J
Hearing Date(s): 12 JUNE 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen for laboratory test – Reasonable excuse – Excuse relating to blood specimen only insufficient – Road Safety Act 1967, s 3(3).
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Failure to supply specimen – Specimen for laboratory test – Reasonable excuse – Direction to jury – Road Safety Act 1967, s 3(3), (6).
A motorist who has a reasonable excuse for failure to supply a specimen of blood may be convicted of failure without reasonable excuse to provide a specimen for a laboratory test, contrary to s 3(3)a of the Road Safety Act 1967, if he has no reasonable excuse for failure to provide a specimen of urine (see p 904 a and b, post).
The jury must consider whether, on the whole of the evidence of what happened at the police station when the procedure prescribed by s 3(b) b of the Act had been followed, it has been proved beyond reasonable doubt that there was no reasonable excuse for failure to provide a specimen of blood or of urine (see p 904 e, post).
Notes
For the requirement to provide a specimen for a laboratory test, see Supplement to 33 Halsbury’s Laws (3rd Edn) para 1061A, 3.
For the Road Safety Act 1967, s 3, see 47 Halsbury’s Statutes (2nd Edn) 1558.
Appeal
This was an appeal by Frank Harling against his conviction, on 3 October 1969, at Lancashire quarter sessions before the chairman (his Honour Judge Knight) and a jury, of failing to provide a specimen of blood or urine for a laboratory test contrary to s 3(3) of the Road Safety Act 1967. The facts are set out in the judgment.
T D T Hodson for the appellant.
R J Hardy for the Crown.
12 June 1970. The following judgment was delivered.
SALMON LJ delivered the judgment of the court. On 3 October 1969, at Lancashire quarter sessions the appellant was found guilty of failing to provide a specimen of blood or urine for a laboratory test, contrary to s 3(3) of the Road Safety Act 1967. He was sentenced to a fine of £30 and he was disqualified for 12 months and an order was made for his licence to be endorsed. He now appeals against conviction by leave of the single judge.
The facts are very short. On 23 May 1969, the appellant was driving his motor car near Blackburn in Lancashire when it behaved in a very curious way. It ran off the road, went across a verge, through a hedge and turned over, and three of its wheels came off. The appellant appeared to be very shaken, perhaps not unnaturally, and he went to a local farmhouse where a telephone call was put through to the police. The police arrived and they suspected that the appellant had been drinking. So he was required to provide a specimen of breath for a breath test under s 2(2) of the Act of 1967, and the test proved positive. He was arrested, and off he went to
Page 903 of [1970] 3 All ER 902
the police station. A constable in uniform then asked the appellant if he was prepared to give a specimen of his blood for a laboratory test. He said that he would be very happy to give a specimen of his blood, and a doctor was sent for. It is unnecessary to go into the details of what happened then, save to say that the doctor made three conspicuously unsuccessful attempts to take a specimen of blood. At the third attempt the appellant, who not unnaturally resented being used as a pin cushion and had by then lost all confidence in the doctor, said that enough was enough and that he was not prepared to allow that doctor to continue trying to take a blood specimen from him. The constable, while the doctor was still there, then asked the appellant if he would give a specimen of his urine and he refused. The reason which he gave for refusing was that he had thought that, once he had given a specimen of urine, that specimen would be tested by the doctor in whom he had lost all confidence. The appellant having refused the specimen of urine, the constable again asked the appellant for a specimen of his blood. Again the appellant thought that the specimen was going to be taken by the doctor who had performed so unsatisfactorily a short while before, and he refused.
Counsel for the appellant has very persuasively argued his client’s case. He takes a short point under the Act. If this is a good point, it would mean, I suppose, that a fairly high percentage of persons who had been properly arrested and asked for specimens for laboratory tests would obdurately refuse to give them and triumphantly escape when they were subsequently prosecuted under the Act. The section which I must read is s 3, which provides:
‘(1) A person who has been arrested under the last foregoing section … may, while at a police station, be required by a constable to provide a specimen for a laboratory test (which may be a specimen of blood or of urine), if he has previously been given an opportunity to provide a specimen of breath for a breath test at that station under subsection (7) of the last foregoing section … ’
‘(3) A person who, without reasonable excuse, fails to provide a specimen for a laboratory test in pursuance of a requirement imposed under this section shall be guilty of an offence … ’
So, under s 3(1), an arrested man may be required to provide a specimen for a laboratory test. The specimen can be either of blood or of urine. Under s 3(3), if without reasonable excuse he fails to provide a specimen for a laboratory test, then he is guilty of an offence, and that is the offence of which the appellant was convicted.
He certainly did not provide a specimen for a laboratory test as is plain from the facts that have already been stated. Counsel for the appellant relies on s 3(6), which provides:
‘A person shall not be treated for the purposes of … subsection (3) of this section as failing to provide a specimen unless—(a) he is first requested to provide a specimen of blood, but refuses to do so; (b) he is then requested to provide two specimens of urine within one hour of the request, but fails to provide them within the hour or refuses at any time within the hour to provide them; and (c) he is again requested to provide a specimen of blood but refuses to do so.’
The point taken by counsel for the appellant is that under s 3(6)(a) one must read the words ‘without reasonable excuse’ into that paragraph before the word ‘refuses’. According to counsel for the appellant’s construction, s 3(6)(a) would read: ‘A person shall not be treated for the purposes of … subsection (3) … as failing to provide a specimen unless—(a) he is first requested to provide a specimen of blood, but without reasonable excuse refuses to do so.' He says that if a man refuses with a reasonable excuse, then that is the end of the matter and he can in no circumstances be convicted of failing to provide a specimen under s 3(3).
The courts do not readily read into an Act words that are not there. It is sometimes,
Page 904 of [1970] 3 All ER 902
although very rarely, necessary to do so in order to make sense of what would otherwise be nonsense, but we certainly do not do so for the purposes of making nonsense of the Act. It would indeed make nonsense of the Act to read the words ‘without reasonable excuse’ into sub-s (6). Supposing, for example, a haemophiliac was asked to give a blood sample but refused; that obviously would be a very reasonable thing for him to do. The constable might then say to him: ‘Please give me a sample of urine’ and very unreasonably he would reply to that: ‘No, I won’t.' Then he is prosecuted under s 3(3) and he says: ‘You cannot prosecute me under s 3(3) because you have not satisfied the condition under s 3(6) of proving that I refused without a reasonable excuse to give you a blood sample’. This court does not consider that a construction leading to such absurd results can properly be put on s 3(6). That subsection in its ordinary and natural meaning makes perfectly good sense. The constable has to ask the motorist for a specimen of his blood. If the motorist refuses to give a specimen of his blood, s 3(6)(a) is satisfied. Then, if the motorist has refused to give a specimen of his blood, the constable must ask him to provide two specimens of urine under s 3(6)(b). If the motorist fails or refuses to supply samples of his urine in accordance with para (b), the constable must under para (c) again ask him to provide a specimen of blood. If the motorist refuses, the requirements of s 3(6) are satisfied. In these circumstances there is no specimen of any kind either of blood or urine. It is then necessary to go back to s 3(3) and consider whether or not there is any reasonable excuse for the motorist failing to provide a specimen for a laboratory test. This is a question for the jury to consider in the light of what happened when the constable went through the ritual provided by sub-s (6). The jury must consider the question, on the whole of the evidence, whether it has been proved beyond a reasonable doubt that there was no reasonable excuse for the failure by the motorist to provide any specimen either of blood or urine. If they answer that question against the motorist, he is guilty of an offence under s 3(3).
In the present case the summing-up, in the view of this court, was completely accurate. The chairman told the jury quite plainly what they should consider. The appellant in the first instance said that he would give a blood sample. There had been the attempts to which I have referred to take a sample. He had then refused to allow the doctor to go on with those attempts. The chairman said: ‘Was that a reasonable refusal?’, and he gave the jury a fairly clear indication what his views were, namely that it would be harsh to describe the appellant’s conduct as being unreasonable having regard to what the doctor did or failed to do. He then left the question to the jury: ‘Was it reasonable for the appellant to refuse to give specimens of his urine?' He explained to the jury that the reason given by the appellant was that he thought that it was this doctor, who appeared to be incompetent, who would test the urine, but, of course, the jury were not obliged to accept that evidence from the appellant. Indeed, they would be entitled to come to the conclusion that his explanation why he refused to give a specimen of his urine was complete moonshine and, if they disbelieved his explanation, there was plenty of evidence on which they could come to the conclusion that his refusal was unreasonable. In such circumstances they could and indeed should come to the conclusion that he failed to provide a specimen for a laboratory test without reasonable excuse.
In the view of this court, that was a perfectly accurate summing-up. There was plenty of evidence on which the jury could and obviously did come to the conclusion that they had been satisfied beyond a reasonable doubt that the appellant in failing to supply a specimen of his urine had without reasonable excuse failed to provide a specimen for a laboratory test and had, therefore, committed an offence under s 3(3). For these reasons, the appeal against conviction fails and will be dismissed.
Appeal dismissed.
Solicitors: Farley, Parker & Pickles, Blackburn (for the appellant); R H G Horne, Graham & Co, Blackburn (for the Crown).
N P Metcalfe Esq Barrister.
Szechter (otherwise Karsov) v Szechter
[1970] 3 All ER 905
Categories: FAMILY; Other Family
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P
Hearing Date(s): 17, 18 DECEMBER 1969, 9, 10, 11 MARCH, 9 JULY 1970
Nullity – Consent to marriage – Duress – Will of one party overborne by fear – Fear genuine and reasonably held relating to danger to life, limb or liberty – Ceremony of marriage in Polish prison – Attempt to save detainee from ill-effects of long prison term.
It is insufficient to invalidate an otherwise good marriage that a party has entered into it in order to escape from a disagreeable situation such as penury or social degradation. In order for the impediment of duress to vitiate an otherwise valid marriage, it must be proved that the will of one of the parties thereto has been overborne by genuine and reasonably held fear caused by threat of immediate danger, for which the party is not himself responsible, to life, limb or liberty, so that the constraint destroys the reality of consent to ordinary wedlock (see p 915 c, post).
A girl, N, was born in Poland in 1940 to Jewish parents. When she was very young she was despatched by the Germans with her mother to an extermination camp; N’s mother threw N from the train in the hope of saving her life. N’s mother met with her death in the camp and her father committed suicide. N was rescued but her spine had been injured and her fingers required amputation. She was looked after by Mrs K, a member of the Polish resistance and N believed Mrs K to be her real mother. In 1949 Mrs K was arrested and after 27 months’ investigation was sentenced to ten years’ imprisonment for allegedly collaborating with the Germans. After five years she was exculpated and released. In 1958 N, who suffered from ill-health requiring her to spend two months each year in hospital for treatment to her spine and who had suffered from tuberculosis and a pathological condition of the thyroid gland during Mrs K’s imprisonment, was admitted to Warsaw University. In 1963 she graduated and thereafter she worked as a journalist and historical researcher. In the course of such work she met a distinguished historian of Jewish origin, the respondent, and his wife L. The respondent was blind and N became his secretary. By 1966 N was treated by the respondent and L as a daughter. In that year the Polish security police arrested the respondent, L and N; the respondent was released within 48 hours although N did not learn this until much later. N was detained for ten months in a prison during interrogation and for a further four months awaiting trial. For the first four months she shared a very small cell with two other persons and for ten months had no visitors, letters or news of the outside world. The food was exiguous and very poor. Her health, always frail, deteriorated rapidly; although the prison doctor recommended that she be removed to the prison hospital this was not permitted. Interrogations, generally lasting seven or eight hours, took place every day, and sometimes twice a day. Although wearing only summer clothes when arrested, she was provided with no warmer clothing in winter; her cell was unheated and she was supplied with only a single blanket. The interrogations were aimed at persuading her to inculpate certain persons in what were believed by her interrogators to be activities inimical to the regime. Various threats were employed including a threat that N might be sent to a mental hospital (controlled by the security police); a threat of a severe sentence of imprisonment (up to 15 years); a threat of rearrest after serving her sentence of imprisonment; a threat to restrict her employment to menial work outside Warsaw; and a threat that Mrs K (then 76 per cent disabled) would lose her pension. N denied her interrogators the information that they sought. The respondent, meanwhile, knowing the disastrous effect that a long term of imprisonment would have on N’s health devised (together with L) a plan to aid her by taking advantage of the embarrassment
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which his presence in Poland caused the regime. He and L were divorced, and L left for Israel with a younger son. In October 1967, N was brought to trial and sentenced to three years’ imprisonment; thereafter her conditions improved somewhat. In February 1968 after three applications, the respondent was allowed to marry N in prison. The marriage was never consummated. In September 1968, the respondent’s scheme came to fruition; he and N were allowed to renounce Polish citizenship and leave for Israel. At the end of 1968 they arrived in England and were given leave to stay until the end of 1970. In August 1969, L and her younger son arrived in England. In the same month N presented a petition for a declaration of nullity; the respondent and L wished to resume their married life and N wished to be free. The respondent had a university post in England and N was a post-graduate student. An expert on Polish law gave it as his opinion that if the agreement of the parties to enter into matrimony was given under constraint the marriage would be void under Polish law, as this marriage in fact should be held to be. The expert evidence was not contested but the expert, who had to go into hospital, was not available for oral examination.
Held – (i) There was jurisdiction to entertain a petition for a decree of nullity by reason of the residence of the parties in England on the date on which the petition was presented regardless of the question whether the marriage was alleged to be void or merely voidable (see p 912 b, post) (Ramsay-Fairfax (otherwise Scott-Gibson) v Ramsay-Fairfax [1955] 3 All ER 695 followed); by the same date the parties had also acquired a domicil of choice in England and the jurisdiction of the court could, accordingly, be founded also on domicil (dictum of Lord Greene MR in de Reneville v de Reneville [1948] 1 All ER at 59 applied) notwithstanding that the parties’ intention to make their permanent home in England might be frustrated by a refusal of permission to reside in the country (see p 912 d, post) (Boldrini v Boldrini and Martini [1931] All ER Rep 708 and Cruh v Cruh [1945] 2 All ER 545 followed).
(ii) No marriage was valid if by the law of either party’s domicil one party did not consent to marry the other (see p 912 f, post) (dictum of Hodson J in Way v Way [1949] 2 All ER at 963 applied; Dicey & Morris: Conflict of Laws (8th Edn) rule 32 approved) and since N and the respondent were domiciled in Poland at the date of ceremony it was, accordingly, for Polish law to determine whether the marriage was invalid by reason of duress (see p 913 e, post).
(iii) Under Polish law the marriage was void (see p 913 h to p 914 a and p 915 d, post).
(iv) Consideration was also given to the English law in view of the importance of the decree sought and since the expert on Polish law was not available for oral examination and since in the absence of evidence or absence of sufficient evidence the court must look to English law (see p 913 f, post).
Lloyd v Guibert (1865) LR 1 QB 115, dictum in Hartmann v Konig (1933) 50 TLR at 117, dictum of Scott LJ in Re an arbitration between A/S Tank of Oslo and Agence Maritime L Strauss of Paris [1940] 1 All ER at 42, and dictum of Lord Greene MR in Re Parana Plantations Ltd [1946] 2 All ER at 217, 218 applied.
(v) Under English law the rules relating to duress as vitiating the reality of consent to an ostensibly valid contract of marriage did not differ from those relating to other species of contract (dictum of Sir William Scott in Dalrymple v Dalrymple (1811) 2 Hag Con at 104 applied) but it was not necessary that the source of fear and the agent of duress should be the other party to the marriage; accordingly, N’s will having been overborne by a genuine and reasonably held fear caused by threat of immediate danger for which she was not responsible, the constraint destroyed the reality of her consent to the marriage and the marriage would be annulled (see p 914 d and f and p 915 c, post).
H (otherwise D) v H [1953] 2 All ER 1229 and Buckland v Buckland [1967] 2 All ER 300 followed.
Page 907 of [1970] 3 All ER 905
Notes
For jurisdiction in nullity cases involving conflict of laws, see 7 Halsbury’s Laws (3rd Edn) 107–110, paras 191–195, and for cases on the subject, see 11 Digest (Repl) 478–480, 1065–1078.
For grounds on which a decree of nullity may be pronounced, see 12 Halsbury’s Laws (3rd Edn) 224–226, paras 420, 421, and for cases on nullity, see 27 Digest (Repl) 269–283, 2156–2267.
Cases referred to in judgment
Apt (otherwise Magnus) v Apt [1947] 1 All ER 620, [1947] P 127; affd CA [1947] 2 All ER 677, [1948] P 83, [1948] LJR 539, 177 LT 620, 27 Digest (Repl) 67, 459.
Boldrini v Boldrini and Martini [1932] P 9, [1931] All ER Rep 708, 101 LJP 4, 146 LT 121, 2 Digest (Repl) 183, 117.
Buckland v Buckland (1965) [1967] 2 All ER 300, [1968] P 296, [1967] 2 WLR 1506, Digest Supp.
Cruh v Cruh [1945] 2 All ER 545, 115 LJP 6, 173 LT 367, 27 Digest (Repl) 337, 2799.
Dalrymple v Dalrymple (1811) 2 Hag Con 54, 161 ER 665; on appeal (1814) 2 Hag Con 137n, 22 Digest (Repl) 618, 7112.
de Reneville v de Reneville [1948] 1 All ER 56, [1948] P 100, [1948] LJR 1761, 11 Digest (Repl) 479, 1075.
Griffith v Griffith [1944] IR 35.
H (otherwise D) v H [1953] 2 All ER 1229, [1954] P 258, [1953] 3 WLR 849, Digest (Cont Vol A) 661, 135a.
Hartmann v Konig (1933) 50 TLR 114, 2 Digest (Repl) 227, 357.
Kenward v Kenward [1950] 2 All ER 297, [1951] P 124, 11 Digest (Repl) 460, 942.
Lloyd v Guibert (1865) LR 1 QB 115, 35 LJQB 74, 13 LT 602, 122 ER 1134, 1 Digest (Repl) 146, 340.
Parana Plantations Ltd, Re [1946] 2 All ER 214, 12 Digest (Repl) 514, 3858.
Parojcic (otherwise Ivetic) v Parojcic [1959] 1 All ER 1, [1958] 1 WLR 1280, Digest (Cont Vol A) 661, 157a.
Paine, Re, Re Williams, Griffith v Waterhouse [1940] Ch 46, 108 LJCh 427, 161 LT 266, 11 Digest (Repl) 457, 916.
Pugh v Pugh [1951] 2 All ER 680, [1951] P 482, 27 Digest (Repl) 41, 183.
Ramsay-Fairfax (otherwise Scott-Gibson) v Ramsay-Fairfax [1955] 3 All ER 695, [1956] P 115, [1955] 3 WLR 849, Digest (Cont Vol A) 243, 1078a.
Salvesen (or von Lorang) v Administrator of Austrian Property [1927] AC 641, [1927] All ER Rep 78, 96 LJPC 105, 137 LT 571, 11 Digest (Repl) 478, 1069.
Tank of Oslo (A/S) and Agence Maritime L Strauss of Paris, Re an arbitration between [1940] 1 All ER 40, 162 LT 79, 41 Digest (Repl) 165, 99.
Way v Way, Rowley v Rowley, Kenward v Kenward, Whitehead v Whitehead [1949] 2 All ER 959, [1950] P 71. [See also Kenward v Kenward, supra.]
Petition
This was a petition by Nina Maria Szechter for a declaration that her marriage to the respondent, Szymon Szechter, in the Mokotow prison in Warsaw on 2 February 1968 was a nullity. The facts are summarised in the headnote.
Margaret Puxon for Nina.
T G Guest for the Queen’s Proctor as amicus curiae.
The respondent did not appear and was not represented.
Cur adv vult
9 July 1970. The following judgment was delivered.
SIR JOCELYN SIMON P read the following judgment. By her amended petition, originally dated 15 August 1969, Nina Maria Szechter (otherwise Nina Maria Karsov)—whom I shall call ‘Nina’—petitioned for a declaration of nullity,
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alleging that a ceremony of marriage performed (according to the certificate of registration) at Warsaw, but in fact in the Mokotow prison in Warsaw, between herself and Szymon Szechter—whom I shall call ‘the respondent’—was inoperative to give rise to the status of marriage by reason of the fact, as she alleges, that she went through the ceremony as result of duress. It would be affectation to pretend that any judge could listen to the evidence given in this case unmoved by the courage and generosity of the persons principally concerned or by the horror of the circumstances (although I appreciate that I have heard only one side and that few, if any, peoples can claim to have been entirely and at all times innocent of inhumanity or tyranny). But part of the comparative felicity which we have enjoyed in this country has been because we have lived under the rule of law. And not only does law, as Burke said, stand in awful enmity to arbitrary power; the rule of law, as Dicey pointed out, stands in contradistinction to (among other things) wide discretionary authority.
There is obviously a temptation for a court, faced with a situation of hardship brought about by heroism in the teeth of cruelty and oppression, to try if necessary to stretch the law a little here or a little there. The principles of the law are indeed essentially adaptable to varying circumstances; but the principles themselves are those which have been established by juristic authority or Parliamentary enactment. The operation of the law is thus reasonably certain and predictable; and it is no service to those who live under its rule to introduce uncertainty and capriciousness, even with the ostensibly laudable aim of meeting a hard case. If there is a substantial area of hardship which the existing law does not reach, the remedy nowadays lies in the hands of Parliament, which has at its service the advice of the executive as to all foreseeable repercussions of the decision (an advantage denied to courts of law); and if even the most sagaciously framed general rule is still liable to throw up, exceptionally, some cases of hardship, it is open to Parliament, should it be so advised, to establish a court of equity to deal with such cases on their merits. But it is not open to a court of law to deal out what is sometimes called ‘palm-tree justice’.
The story which has been unfolded in this court is so extraordinary as to be liable to strain credence, were it not that Nina and the respondent, who were its main narrators, were in their different ways as impressive witnesses as I have ever had before me. Nina was born in Poland on 10 June 1940. She was of Jewish parentage, although it was only in the course of interrogation by the Polish security police in 1967 that Nina came to know this. When she was very young she was despatched by the Germans with her mother to an extermination camp. On the way there her mother threw her out of the railway train into the snow, hoping thereby to save her life. She was successful in this object, although Nina’s health was permanently impaired by the shock and exposure, her back being injured and her fingers requiring amputation. Her mother subsequently met death in an extermination camp and her father committed suicide. Nina was rescued and brought up in Warsaw by a Mrs Karsov, whom she thought to be her real mother. Mrs Karsov was a Roman Catholic and brought Nina up in that faith.
Mrs Karsov had fought with the Polish resistance movement and had been wounded in the rising of 1944. Nevertheless, in 1949 she was arrested and after an investigation lasting 27 months she was condemned to imprisonment for ten years for allegedly collaborating with the Germans. It was only five years later that Mrs Karsov was exculpated and released, it being accepted that she had in truth been helping to save Jews. This cruel miscarriage of justice had a profound effect on Nina. Moreover, during the time of Mrs Karsov’s imprisonment Nina continued to suffer from ill-health. She contracted tuberculosis and also a pathological condition of the thyroid gland. Every year she had to spend two months in hospital for treatment of her spinal complaint. But she triumphed over all these disabilities sufficiently to gain admittance to Warsaw University, where she studied from 1958 to 1963, graduating Master of Arts. Thereafter she worked as a journalist and as an historical
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researcher. She also began to take an interest in the political trials then going on in Poland, generally in secret. She managed to obtain permission to attend some of these. This was a perilous privilege, since the western press was keenly interested in what was going on. It was her historical and political interests which brought her into contact with the respondent, a distinguished Polish historian of Jewish origin, and his wife Lydia (by which name I shall hereafter refer to her). The respondent had been blinded while fighting against the Germans. Nina became the respondent’s secretary and they collaborated in written work. By 1966 Nina was being treated like a daughter of the family by the respondent and Lydia and their children.
In August 1966 Nina was on holiday with the respondent and Lydia and their family. On 12 August 1966 the respondent, Lydia and Nina were all arrested by the security police. The respondent, who was a public figure, was released 48 hours later, although Nina did not know of this for many months. She herself was detained under interrogation, without trial, in the Mokotow prison for ten months, and then a further four months awaiting trial. For the first four months she was kept in a cell measuring 2 1/2 by 2 metres, which she left only for 20 minutes exercise daily and for interrogation. She shared this cell with two other women; one a common criminal, the other accused of economic malversation. For ten months she had no visitors, no letters, no news of the outside world. She was allowed no writing materials, nor any book until after three months. The food was exiguous and very poor. For breakfast she had unsweetened corn coffee, half a loaf of black bread and 10 grammes of margarine. At midday she had unpeeled beetroot soup and cold, badly peeled, rotten potatoes. In the evening she had only the unsweetened coffee. At no time did she eat meat, fruit or fresh vegetables.
Her health at all times had been frail; and while she was in prison it deteriorated rapidly. After a couple of weeks the prison doctor decided that Nina ought to go to the prison hospital. This was refused by the examining judges. Nina suffered from Basedow’s syndrome, a condition of hyper-thyroid, requiring controlled hormone treatment, only safely to be carried out in hospital. Such uncontrolled treatment as she was given in prison affected her heart, resulting in severe tremulousness and loss of weight. She knew already that absence of, or uncontrolled, treatment would be exceedingly dangerous for her. The condition of her heart had previously caused anxiety. Her tuberculosis could become active again.
At first her interrogation took place every day and sometimes twice a day. It was conducted by the security police. A session generally lasted seven to eight hours, although there was sometimes a half-hour’s break when the police got tired. During an interrogation Nina received no food, although she sometimes watched the police eating their own food. She had been arrested in the summer months when she was wearing only a skirt and blouse. No warmer clothes were provided during the extreme cold of the Polish winter, although the respondent had sent some for her. The prison and cell were unheated. For her ablutions she was supplied with icy-cold water—a particular torment to Nina with her injured hands. Her only furniture consisted of a wooden bed and a pillow filled with hay. She was supplied with a single blanket only.
The main object of the interrogation was to get Nina to inculpate her ‘accomplices’ (particularly the respondent and students) in what her interrogators seemed to regard as activities inimical to the regime. The interrogations included threats; these took several forms. First, the police insinuated that Nina was mentally deranged, and threatened that she would be sent to a mental hospital. This was a particularly terrifying threat, since Nina had knowledge which led her to believe that she would have little chance of release, the ‘hospitals’ in question being controlled by the security police. Secondly, she was threatened by the police with a severe sentence of imprisonment. She knew that the imprisonment for the crime alleged against her—‘anti-State activities’—was likely to be between 3 and 15 years. Thirdly,
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she was threatened with rearrest after any such prison sentence. This, she believed, was far from unlikely; she had known of many political prisoners who had been rearrested after serving their full term of imprisonment. Fourthly, she was told that she would never be able to lead a normal life again after the trial. With State control of the economy and professions she knew that she would never be able to get any job or employment other than that of a menial nature. She was also told that she would not be allowed to live in Warsaw; this would have further grave consequences on her prospects of employment owing to the housing shortage. It was also liable to lead to failure to supply the police with her address, with consequent liability to rearrest on this ground. It was emphasised that she would have no money and therefore would not be able to support Mrs Karsov. To reinforce this threat she was told, fifthly, that Mrs Karsov—who was by now 76 per cent disabled—would lose her pension. Finally, she was told that she would never be allowed to leave the country.
To further the effect of these threats and her privations, it was now divulged to her for the first time, and in the most offensive manner, that she was Jewish by birth. This was meant still more to undermine her morale in view of the prevalent anti-semitic sentiments. (In fact, the knowledge had no such effect since, as Nina told me, she had been brought up by Mrs Karsov to value her fellow-beings according only to their human qualities.) And, for all the threats and ill-treatment, Nina continued to deny to her persecutors the information they were seeking.
While all this was going on, the respondent was exercising his energies, and using such influence as he had, to get Nina freed and into hospital; he knew the disastrous effect a long term of imprisonment would have on her health. But he himself was subjected to the pressures of the security police. He was a figure of some standing and his presence in Poland was an embarrassment to the regime. He was told that if he helped the police he and his family would be allowed to go to Israel. However, he thought that his continued presence in Poland might have a restraining effect on the police’s treatment of Nina, and he did not take advantage of the overtures made to him.
But the knowledge that the police were far from unwilling to see him out of the country led the respondent and Lydia, after the failure to get Nina freed and into hospital, to make fresh plans, including the extraordinary one which has led to these proceedings. Their first idea was to adopt Nina as their daughter; she would then be able to accompany them to Israel as a member of their family. But this proved to be impossible under Polish law owing to the fact that Nina was over the age of 18.
After being ten months in prison, and her interrogation being completed, Nina was for the first time allowed to receive a lawyer, who had been briefed by the respondent. This was the first news Nina had of the Szechters since her arrest. The lawyer put to Nina the fresh plan that Lydia and the respondent had concocted as the only way to help Nina. This was that the respondent and Lydia should obtain a divorce and that the respondent should then go through a ceremony of marriage with Nina and take her to Israel as his wife, there to join up with, and the respondent to remarry, Lydia. In fact the respondent and Lydia had already anticipated Nina’s knowledge of, and agreement with, this plan; secretly (so as not to excite the vigilance of the security police) they were divorced on 14 April 1967; and Lydia left for Israel as a single woman, taking her younger son with her; her elder son was already there. In spite of her peril, Nina did not immediately give her consent to the plan; she did not know when she would be brought to trial or how long her sentence would be and therefore when it would be that the respondent and Lydia could be reunited. In the end, however, she came to see that it was the only solution for her. She believed that she would never survive a long, or even medium, prison sentence and that the desire of the authorities to see the respondent out of the country might lead to her earlier release if she were married to him. She also knew that the respondent
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would be in a better position to help her in prison if they were married; for example, he could probably visit her or send her parcels.
On 2 October 1967 Nina was brought to trial. On 26 October 1967 she was convicted and was sentenced to three years’ imprisonment. As she was being led away after sentence, she noticed the respondent holding a conference in court with representatives of the western press. This act of courage on her behalf, unexampled to her knowledge, made a deep impression on Nina and probably ultimately clinched her consent to the Szechters’ plans.
After Nina’s conviction her conditions improved in some respects. She was allowed one 30-minute visit a month. On the other hand, her health continued to deteriorate in spite of treatment for her thyroid and spinal complaints, now, at last, in hospital (where conditions were, however, deplorable). She came to the conclusion that she would not be able to survive three years’ imprisonment. After three applications the respondent had been given permission to marry Nina, despite the objections of the security police; and Nina herself now consented—attempts by the security police to dissuade her only increased her resolve.
On 2 February 1968 Nina and the respondent went through a ceremony of marriage in Mokotow prison—it took five minutes only and they were at no point allowed to speak to each other during the ceremony. But I have been satisfied on expert evidence that qua formalities it constituted a valid marriage in Polish law, which is unquestionably the proper foreign law. On 5 September 1968, Nina was released—in other words, after serving less than one year of her three-year sentence. Fantastic as it seemed, the Szechters’ scheme had succeeded. Nina was in very bad health; but she and the respondent were under pressure to renounce their Polish citizenship and to leave for Israel, although they each had to pay £300 before they would be allowed to leave. They gladly complied with all the conditions demanded and in early November 1968 Nina and the respondent went to Austria as stateless persons, where they were looked after by the International Rescue Committee. Amnesty International brought them to England at the end of 1968, the Home Office then giving them leave to stay until December 1969 (later extended to December 1970).
In August 1969 Lydia came to England with her younger son. Lydia, the respondent, their younger son and Nina are living at the same address in London. Having achieved their object in extricating Nina from prison and from Poland, the respondent and Lydia now wished to resume their married life together, and Nina too wished to be free of a marriage into which she had entered solely in the hope of thereby securing her release from prison. (Needless to say, the marriage had not been consummated.) So, on 15 August 1969, Nina presented her petition for a declaration of nullity. Nina is studying as a post-graduate at the London School of Economics and Political Science for a Master of Science degree. Lydia is learning English with a view either to taking up a teaching post in this country or to using her qualification of civil engineer in employment here. The respondent is a visiting fellow at the London School of Economics and Political Science. All wish now to remain in this country if they are permitted to do so by the authorities. The evidence of Nina and the respondent as to the socio-political background was borne out by a written statement made by a Mrs Stypulkowska, which was admitted under the provisions of the Civil Evidence Act 1968. Since Nina and the respondent coincided in wishing the marriage to be declared a nullity, since the annulment of any marriage is a serious matter, and since some difficult questions of law might emerge, I requested the independent assistance of the Queen’s Proctor. In the event counsel instructed by the Queen’s Proctor supported counsel for Nina in her submissions. Both counsel have placed the court in their debt.
There are two preliminary questions to be considered. The first is whether an English court has jurisdiction to make the decree which Nina seeks. Some question has been raised whether a marriage vitiated by duress is void or voidable: see
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Parojcic (otherwise Ivetic) v Parojcic. It is however unnecessary for me to examine that question further or to determine what law governs the question (although, as at present advised, I think this would be Polish law: see de Reneville v de Reneville ([1948] 1 All ER 56 at 61, [1948] P 100 at 114), per Lord Greene MR), since there is authority binding on me that the residence of both parties within the jurisdiction of this court at the commencement of the suit (i e at the time of the presentation of the petition) gives the court jurisdiction, whether the marriage is alleged to be voidable or void: see Ramsay-Fairfax (otherwise Scott-Gibson) v Ramsay-Fairfax, a decision of the Court of Appeal. Here both parties were resident in England on 15 August 1969.
The petition, as amended on 2 February 1970, alleges also that both parties were domiciled in England at that date and at the date of the original petition (15 August 1969). Domicil of both parties in England at the commencement of the proceedings undoubtedly gives the English court jurisdiction in nullity, whether the marriage be void or voidable: compare Salvesen (or von Lorang) v Administrator of Austrian Property and see de Reneville v de Reneville ([1948] 1 All ER at 59, [1948] P at 109), per Lord Greene MR. Whether or not Nina had a domicil independent of the respondent’s (ie the marriage was void, and not voidable), I am satisfied that by the time of the petition, and ever thereafter, both parties had acquired and never lost a domicil of choice in England by residing here with the intention of making this country their permanent home. It is immaterial that their intentions were liable to be frustrated by the decision of the Secretary of State for the Home Department as to permission for their continued residence here: Boldrini v Boldrini and Martini and Cruh v Cruh. I am therefore satisfied that I have jurisdiction to entertain this petition on the grounds of both common residence and common domicil in England.
The second preliminary question is what is the proper law to apply in order to determine whether an ostensible marriage is defective by reason of duress. There is little direct authority on this matter. But the effect of duress goes to reality of consent; and I respectfully agree with the suggestion in Dicey and Morris: Conflict of Lawsa that no marriage is valid if by the law of either party’s domicil one part does not consent to marry the other. This accords with the old distinction between, on the one hand, ‘forms and ceremonies’, the validity of which is referable to the lex loci contractus, and, on the other hand, ‘essential validity’, by which is meant (even though by, as the learned editors of Rayden on Divorceb remark, ‘not a happy terminology’) all requirements for a valid marriage other than those relating to forms and ceremonies, for the validity of which reference is made to the lex domicilii of the parties: Rayden on Divorce c and de Reneville v de Reneville ([1948] 1 All ER at 61, [1948] P at 114) per Lord Greene MR. So far as capacity (also a matter of ‘essential validity’) is concerned, there can be no doubt that no marriage is valid if by the law of either party’s domicil one of the parties is incapable of marrying the other: Re Paine, Re Williams, Griffith v Waterhouse and Pugh v Pugh. Moreover, in Way v Way ([1949] 2 All ER 959 at 963, [1950] P 71 at 78, 79) Hodson J said:
‘… questions of consent are to be dealt with by reference to the personal law
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of the parties rather than by reference to the law of the place where the contract was made. This view is not covered by direct authority, but is, I think supported by the judgment of LORD MERRIMAN, P., in Apt (otherwise Magnus) v. Apt [[1947] 1 All ER 620 at 629, 630, [1947] P 127 at 146]: “The case might be put as follows. The wife was a domiciled British subject when she gave the power of attorney. This is not expressed to be irrevocable, Although her intention at the time she gave it was to contract a Christian marriage and to acquire the husband’s domicil when the marriage was celebrated, she changed her mind and revoked the power of attorney before the celebration, while she was still a British subject. The marriage ceremony, therefore, did not effect a ‘voluntary’ union but only a union which is deemed to be voluntary by the law of a country to which she was not subject at the time of the revocation of the power of attorney. That being so, the effect of the revocation should be decided according to English law“. In the same case in the Court of Appeal [[1947] 2 All ER 677 at 679, [1948] P 83 at 88] COHEN, L.J., said: “In our opinion, the method of giving consent as distinct from the fact of consent is essentially a matter for the lex loci celebrationis and does not raise a question of capacity … ” Marriage is essentially a voluntary union, and, as counsel for the husbands put it, and I cannot improve on the phrase, “consent is an emanation of personality“. It is, therefore, I think, justifiable and consistent with authority to apply the matrimonial law of each of the parties.’
When that case went to the Court of Appeal, under the name of Kenward v Kenward ((1933) 50 TLR 114 at 117), Sir Raymond Evershed MR assumed that what Hodson J had said about the relevant law to be applied was correct.
Both Nina and the respondent were domiciled in Poland at the time of the ceremony of marriage on 2 February 1968. It is therefore for Polish law to answer whether, on the facts as I have found them, the marriage was invalid by reason of duress. If I also look (as I propose to do) at what English law says of the matter, it is because the annulment of a marriage is a very serious step, and because the expert witness on Polish law had to go into hospital for an operation, so that he had to give his evidence by affidavit and was not available for oral examination. If a party adduces no evidence, or insufficient evidence, of the proper foreign law, the court perforce looks to English law: Lloyd v Guibert ((1865) LR 1 QB 115 at 129), Hartmann v Konig ((1933) 50 TLR 114 at 117), Re an arbitration between A/S Tank of Oslo and Agence Maritime L Strauss of Paris ([1940] 2 All ER 214 at 217, 218 (per Lord Greene MR)) and Re Parana Plantations Ltd (). It is, however, right to say that counsel for the Queen’s Proctor did not question the accuracy of the averment of the Polish expert, Mr Jaxa, as to Polish law. Mr Jaxa traced back the Polish juristic history of freedom of consent and absence of compulsion to marriage to the Code Napoleon of 1908. Although there were several intermediate enactments (of no material difference), the statutory provision relevant at the date of the ceremony in the instant case was art 82 of the Civil Code of 22 April 1964, which came into force on 1 January 1965. That states in translation:
‘A declaration by a person who for whatever reasons was in a state excluding a conscious or unconstrained decision in expressing his/her will is void … ’
Mr Jaxa sums up his opinion as follows:
‘I am of the firm opinion that if the agreement of the parties to enter into matrimony was given under constraint, that marriage is void in Polish law. I am well aware of the facts of the “marriage” which is the subject of this suit,
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and in my opinion, if such a case were to come before the Polish courts it would be held to be void, and would have been void at the date of the marriage, that is February 2nd, 1968.’
So far as English law is concerned, private reservations or motives are not, in general, matters cognisable to vitiate an ostensibly valid marriage. As was said by Sir William Scott in Dalrymple v Dalrymple ((1811) 2 Hag Con 54 at 105, 106):
‘It is in the intention of the parties that the substance of every species of contract subsists, and what is beyond or adverse to their intent does not belong to the contract. But then that intention is to be collected (primarily at least) from the words in which it is expressed; and in some systems of law, as in our own, it is pretty exclusively so to be collected. You are not to travel out of the intention expressed by the words to substitute an intention totally different and possibly inconsistent with the words.’
But it will be noted that Sir William Scott is, even in his general statement, recognising that there may be exceptions. Earlier he had stated ((1811) 2 Hag Con at 104
‘It is said that the marriage contract must be extorted by force or frauds it not the general law of contracts that they are vitiated by proof of either?’
Although I do not think that in modern law the rules relating to duress as vitiating the reality of consent to an ostensibly valid contract of marriage differ from those relating to other species of contract, in the law of marriage the concept derives from the dirimentary defect of metus in the canon law (this should, I suppose, be translated as ‘fear’, although Esmein in Le Mariage en Droit Canonique (Vol 1, 1929, pp 342–344) uses the word ‘violence’ in describing the impediment). As the American writer Bishop states in his Commentaries on the Law of Marriage and Divorced:
‘Where a formal consent is brought about by force, menace, or duress,—a yielding of the lips, not of the mind—it is of no legal effect. This rule, applicable to all contracts, finds no exception in marriage.’
In the nature of things the source of the fear and the agent of duress will generally be the other party to the marriage. But this is not necessarily so. Thus, in H (otherwise D) v H the source of fear was the political and social dangers to the life, liberty and virtue of the petitioner in her native country of Hungary. In order to obtain a foreign passport she went through a ceremony of marriage with a French citizen, and by agreement separated from him immediately thereafter. She was able thereby to escape to England, and in due course she presented here a petition for nullity on the ground of alleged duress. No allegation was made against the respondent or his agents. Karminski J heard argument not only on behalf of the petitioner but also by the Attorney General on behalf of the Queen’s Proctor. In a reserved judgment he held that the petitioner’s fears were reasonably entertained, and were of such a kind as to negative her consent to the marriage, which was accordingly void. (It appeared that there was no material difference between English and Hungarian law, both deriving from the canon law.)
Again, in Buckland v Buckland the petitioner, a Maltese employed by the British authorities in Malta as a dockyard policeman, in 1953 was charged under Maltese law with the corruption of a 15-year old girl. Although stating he was innocent of the offence, he was advised by his solicitor that he would certainly be found guilty of the charge; that he would probably be sentenced to a long period of imprisonment and ordered to support for 15 or 16 years the child with which the girl concerned was believed to be pregnant; and that his only alternatives were either to marry the girl or to go to prison. The terrified petitioner preferred to marry the girl and
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went through a ceremony of marriage with her at a church in Malta. He left Malta a few days later and came to England, where he had lived ever since and acquired a domicil. He petitioned the English court for the annulment of the marriage on the ground that it was void for want of his consent. There was no evidence of Maltese law and Scarman J therefore apparently applied English law. He followed H v H, and an Irish case, Griffith v Griffith (in which it was held that the fear must arise from some external circumstance for which the petitioner is not himself responsible), and held that the petitioner agreed to the marriage because of fears, reasonably entertained, which arose from external circumstances for which he was in no way responsible, and that accordingly the marriage ceremony was null and void. I am content to follow those decisions. Indeed, the instant case seems to me to be stronger than either H v H or Buckland v Buckland.
It is, in my view, insufficient to invalidate an otherwise good marriage that a party has entered into it in order to escape from a disagreeable situation, such as penury or social degradation. In order for the impediment of duress to vitiate an otherwise valid marriage, it must, in my judgment, be proved that the will of one of the parties thereto has been overborne by genuine and reasonably held fear caused by threat of immediate danger, for which the party is not himself responsible, to life, limb or liberty, so that the constraint destroys the reality of consent to ordinary wedlock. I think that in the instant case that test is satisfied. In my view, English law returns the same answer to the juridical situation as the Polish law as deposed by Mr Jaxa.
In those circumstances I made a decree of nullity at the conclusion of the argument, reserving my reasons, which I have now delivered.
Decree of nullity.
Solicitors: B M Birnberg & Co (for Nina); Solicitor, Queen’s Proctor.
Alice Bloomfield Barrister.
Johnston (Inspector of Taxes) v Heath
[1970] 3 All ER 915
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 7, 8 JULY 1970
Income tax – Trade – Adventure in the nature of trade – Isolated transaction – Sale of land – Contract to sell before contract to purchase – Income Tax Act 1952, s 526(1), Sch D, Case I.
The taxpayer was employed as a manager by a company which carried on business as building and engineering contractors. He did not have any financial interest in the company. Early in 1962 a director of the company told the taxpayer that the company would be prepared to sell 6 1/4 acres of land, which it had not developed because of drainage difficulties, for £15,000, but no instructions were given to the taxpayer to sell it. The taxpayer asked if he could buy the land at that price if he could raise the money, and was told that he could, but no agreement was entered into by the taxpayer with the company. The land did not produce any income from rents, and the taxpayer’s means would not service a loan to allow retention. The taxpayer contacted three possible buyers and entered into a contract to sell the land to one of them for £25,000. He then entered into a contract with the company to buy the land for £15,000. The General Commissioners held that the resulting profit was not a profit or gain from an adventure in the nature of trade within the meaning of s 526(1)a of the Income Tax Act 1952.
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Held – On the true construction of s 526(1) the isolated purchase and sale of the land by the taxpayer was a transaction which, in all the circumstances of the case, constituted an adventure in the nature of trade, so that the profits therefrom were chargeable to tax under Case I of Sch D. because—
(i) the words ‘in the nature of trade’ in s 526(1) governed not only the word ‘concern’ but also the term ‘adventure’ (see p 922 a, post), which term, further, did not necessarily connote an element of risk in the transaction, although in this case the fact that the taxpayer’s employers might in the result have refused to sell the land to him presented such an element (see p 922 f, post); Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48 followed; Liverpool and London and Globe Insurance Co Ltd v Bennett (Surveyor of Taxes) (1912) 6 Tax Cas at 367 distinguished; dictum of Scott LJ in Barry v Cordy (Inspector of Taxes) [1946] 2 All ER at 398 considered;
(ii) no simple distinction between land and other commodities could be drawn; regard was always to be had to the nature and quantity of the land in relation to the surrounding circumstances (see p 920 c, post); Rutledge v Inland Revenue Comrs (1929) 14 Tax Cas 490 and dictum of Lord Normand in Inland Revenue Comrs v Fraser (1942) 24 Tax Cas at 502 applied; Inland Revenue Comrs v Reinhold (1953) 34 Tax Cas 389 distinguished;
(iii) the taxpayer having contracted to sell the land before entering into any agreement to purchase it from his employers, the transaction bearing some relationship to the taxpayer’s line of business and his offering the land for sale to three different prospective purchasers, made it easier to conclude that the transaction was an adventure in the nature of trade (see p 920 j and p 921 e and f, post); dicta of Lord Normand in Inland Revenue Comrs v Fraser (1942) 24 Tax Cas at 502 and of Lord Radcliffe in Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER at 58 applied.
Per Goff J. Had the taxpayer borrowed the purchase price of the land with the idea of reselling when the problem of drainage had been solved, different considerations might have obtained (see p 920 b, post).
Notes
For the taxation of profits arising from the sale of land, see 20 Halsbury’s Laws (3rd Edn) 101–103, paras 182, 183, and for cases on the subject, see 28 Digest (Repl) 50–58, 191–225.
For the Income Tax Act 1952, s 526, see 31 Halsbury’s Statutes (2nd Edn) 489, 490.
In relation to the year 1970–71 and subsequent years of assessment, the Income Tax Act 1952, s 526(1), is replaced by the Taxes Management Act 1970, s 118(1).
Cases referred to in judgment
Bain v Fothergill (1874) LR 7 HL 158, [1874–80] All ER Rep 83, 43 LJ Ex 243, 31 LT 387, 40 Digest (Repl) 287, 2392.
Barry v Cordy (Inspector of Taxes) [1946] 2 All ER 396, 176 LT 111, 28 Tax Cas 250, 28 Digest (Repl) 36, 163.
Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14, [1955] 3 WLR 410, 36 Tax Cas 207, 28 Digest (Repl) 397, 1753.
Inland Revenue Comrs v Fraser (1942) 24 Tax Cas 498, 28 Digest (Repl) 46, * 131.
Inland Revenue Comrs v Reinhold (1953) 34 Tax Cas 389, 28 Digest (Repl) 60, * 178.
Liverpool and London and Globe Insurance Co Ltd v Bennett (Surveyor of Taxes) [1912] 2 KB 41, 81 LJKB 639, 106 LT 323, 6 Tax Cas 327; affd HL [1913] AC 610, 82 LJKB 1221, 109 LT 483, 6 Tax Cas 327, 28 Digest (Repl) 83, 317.
Rutledge v Inland Revenue Comrs (1929) 14 Tax Cas 490, 28 Digest (Repl) 39, * 31.
Sharkey (Inspector of Taxes) v Wernher [1955] 3 All ER 493, [1956] AC 58, [1955] WLR 671, 36 Tax Cas 275, 28 Digest (Repl) 74, 280.
Turner v Last (Inspector of Taxes) (1965) 42 Tax Cas 517, Digest (Cont Vol B) 394, 210b.
Williams (Inspector of Taxes) v Davies, Same v Nisbet [1945] 1 All ER 304, 26 Tax Cas 371, 28 Digest (Repl) 57, 219.
Page 917 of [1970] 3 All ER 915
Case stated
This was a case stated under s 64 of the Income Tax Act 1952 by the General Commissioners for the division of Offlow South in the county of Stafford. 1. At a meeting of the General Commissioners for the division of Offlow South in the county of Stafford held on 19 November 1968 at Kelvin House, 23 Lichfield Street, Walsall, Ronald Jack Heath the taxpayer, appealed against two alternative assessments made on him by the Crown under Case I of Sch D for the income tax years 1961–62 and 1962–63 respectively, each in the sum of £9,820 which was the agreed amount of profit from a sale of land. At this meeting the parties agreed that 1961–62 was the only relative year and that the 1962–63 assessment should be discharged.
2. The question for the determination of the commissioners was whether the sum of £9,820 was a profit or gain from an adventure in the nature of trade within the meaning of s 526(1) of the Income Tax Act 1952.
3. The following cases were referred to: Rutledge v Inland Revenue Comrs b; Inland Revenue Comrs v Fraser c; Edwards (Inspector of Taxes) v Bairstow d; Sharpless v Ress (Inspector of Taxes) e; Reynold’s Executors v Bennett (Inspector of Taxes) f; Gray and Gillitt v Tiley (Inspector of Taxes) g; Turner v Last (Inspector of Taxes) h; Page v Pogson (Inspector of Taxes) i; Leeming v Jones (Inspector of Taxes) j; Inland Revenue Comrs v Reinhold k; Williams (Inspector of Taxes) v Davies, Same v Nisbet l [Paragraph 4 listed copies of the documents which were admitted or proved and were attached to and formed part of the case.]
5. The following facts were admitted or proved: (1) the taxpayer was at all material times employed as a manager by Abraham Purshouse and Sons Ltd (‘the company’) which carried on the business of builders and civil engineering contractors. He had no professional qualification. (2) The taxpayer did not exercise any control over the company. Neither he nor his wife were shareholders or directors, nor were they related to the directors or shareholders of the company. (3) The taxpayer had been employed by the company for about 18 years and managed the Tamworth branch. He supervised all contracts in the Tamworth area involving some 30 to 40 houses per year. (4) The company had owned a plot of land at Coton Lane, Tamworth, comprising approximately 6 1/4 acres, since about 1957. The land had planning permission but had not been developed by the company because of drainage difficulties. Early in 1962 Mr N A Purshouse, one of the directors, told the taxpayer that the company would be prepared to sell the 6 1/4 acres for £15,000, although no instructions were given to the taxpayer to sell it. The taxpayer asked if he could buy it if he could raise the price and was told that he could. The land was not advertised for sale in the open market by the company. (5) The taxpayer was unable to finance the purchase himself as his total assets were at that time £2,000 in a building society, about £250 in bank accounts and an annual salary of £520. He therefore approached three companies offering the land for sale, although he also investigated the possibility of borrowing the purchase price from relatives with the idea of selling when the problem of drainage was solved. One of these companies, Alfred Walker and Son Ltd, which had an option on adjoining land, offered him £25,000 which he accepted. He did not advertise the land for sale, nor did he place it in the hands of agents. The contract
Page 918 of [1970] 3 All ER 915
for the sale of the land by the taxpayer was signed on 28 March 1962 before the contract for its purchase by him which was signed and dated 5 April 1962. (6) It was the taxpayer’s intention throughout to resell the land as soon as possible. (7) It was never the taxpayer’s intention to develop the land himself. The land was not producing any income from rents. (8) The only other sales of property ever undertaken by the taxpayer were the sale of a house in Wolverhampton inherited under his grandmother’s will and sold to the sitting tenant in 1958, and the sale of his residence in Tamworth in 1955. He also agreed that the net profit made on the sale of the land was £9,820.
6. It was contended on behalf of the Crown that: a single purchase and sale of land could constitute an adventure in the nature of trade, the profits of which were chargeable to tax under Case I of Sch D by virtue of the extended meaning given to ‘trade’ in s 526(1) of the Income Tax Act 1952. The taxpayer’s intention was to sell the land in question as soon as he could, and he did not intend to acquire it as an investment, nor was he in a position to do so; for these reasons the taxpayer’s purchase and sale of the land possessed the characteristics of an ordinary trading transaction. The assessment under Case I of Sch D for 1961–62 should be confirmed in the sum of 9,820.
7. It was contended on behalf of the taxpayer that: a Case VII assessment was not applicable in view of the dates of the two contracts; it was also admitted that capital gains taxes were introduced in 1962 and 1965 to cover this type of transaction; it was submitted that an intention to sell does not necessarily render a profit liable to assessment and the three last cases set out in para 2 ante were quoted in support. In all the cases quoted by the Crown relating to real property there had been more than one transaction involved and in Turner v Last (Inspector of Taxes)m the tenant had control of the land but could not finance the transaction. This the taxpayer could have done without recourse to resale by assistance from his relatives.
8. The commissioners decided to discharge the assessment for 1962–63 as the parties agreed that that was inappropriate to the facts. They also found that in their opinion the facts of the present case approximated most closely to those in Inland Revenue Comrs v Reinholdn and that the Crown had not shown, by proving that isolated transactions could be assessable and that transactions in land could also be assessable, that one isolated transaction in land was necessarily so. The three cases quoted on isolated transactions did not involve land and the four cases on land showed multiple transactions. The commissioners accordingly found that the purchase and sale of the land in question was not an adventure in the nature of trade and discharged the assessment for 1961–62.
9. Immediately after the determination of the appeal, the Crown declared to the commissioners its dissatisfaction therewith as being erroneous in point of law, and in due course required them to state a case for the opinion of the High Court pursuant to s 64 of the Income Tax Act 1952, which case they have stated and signed accordingly.
10. The question of law for the opinion of the High Court was whether the evidence warranted the commissioners’ finding that the purchase and sale of the land by the taxpayer was not an adventure in the nature of trade and therefore did not give rise to liability under Case I of Sch D.
P W Medd for the Crown.
D de M Carey for the taxpayer.
8 July 1970. The following judgment was delivered.
GOFF J. This is an appeal by the Crown from a decision of the General Commissioners of Income Tax that a certain profit or gain by the taxpayer on the purchase and sale of land was not a profit or gain from an adventure in the nature of trade. Having so found, the commissioners discharged the assessment which had been made on the footing that it was. The facts admitted or proved are set out in para 5 of the case stated, and I do not think it necessary to recite them, although in the course of my judgment I shall refer to specific matters. The rival contentions are set out in paras
Page 919 of [1970] 3 All ER 915
6 and 7; and then, in para 8, the commissioners state: ‘We decided to discharge the assessment for 1962/63 as the parties agreed that this was inappropriate to the facts.' Nothing turns on that. In the first place, there had been alternative assessments because it was uncertain which was the relevant year. By the time of the hearing, it was agreed that that assessment should be discharged, and the question was fought on the alternative assessment for 1961–62. The commissioners proceeded as follows:
‘We also found that in our opinion the facts of the present case approximate most closely to those in Inland Revenue Comrs v. Reinhold and that [the Crown] had not shown, by proving that isolated transactions can be assessable and that transactions in land can also be assessable, that one isolated transaction in land is necessarily so. The three cases quoted on isolated transactions do not involve land and the four cases on land show multiple transactions. We accordingly found that the purchase and sale of the land in question was not an adventure in the nature of trade and discharged the assessment for 1961/1962.’
Finally, in para 10 the question for determination by the court is propounded as follows:
‘The question of law for the opinion of the High Court is whether the evidence warranted our finding that the purchase and sale of the land by [the taxpayer] was not an adventure in the nature of trade and therefore did not give rise to liability under Case I of Schedule “D“.’
It was suggested by the Crown that there was a non sequitur in the reasoning because the commissioners appeared to be saying that, as the Crown had not shown that an isolated transaction was necessarily an adventure in the nature of trade, therefore an isolated transaction could not be such; but I do not so read para 8. The taxpayer said that there might be a different non sequitur, in that the commissioners said that as there was no decided case of an isolated deal in land being held an adventure in the nature of trade, therefore an isolated transaction could not be such. But counsel for the taxpayer submitted that that was not the true view of para 8, and I agree with him. In my view, what the commissioners said there was that, for all the reasons which they set out, ie first, that they were not bound to hold that this was an adventure in the nature of trade; secondly, that there was no case of an isolated transaction in land being held taxable; and, thirdly, that the facts most closely resembled Inland Revenue Comrs v Reinhold, they decided the question of fact before them in the sense that this was not an adventure in the nature of trade. The second of those reasons is not true in fact since, in Turner v Last (Inspector of Taxes), there was an isolated dealing in land which was held taxable, although the taxpayer took two bites at the cherry in disposing of the land. I cannot agree with the third of those reasons. In my judgment, there is a vital difference between the facts in this case and those in the Reinhold case, in that the land in that case was income-producing although it showed no present profit, and here, it was found as a fact in para 5(7) that: ‘The land was not producing any income from rents.' Those fallacies in the commissioners’ reasons, however, do not necessarily mean that the appeal must succeed, for it is not enough to show that their reasons may be criticised. The Crown must show—and the onus is a heavy one—that the true and only reasonable conclusion contradicts the determination (see Edwards (Inspector of Taxes) v Bairstow ([1955] 3 All ER 48 at 57, 36 Tax Cas 207 at 229)). In my judgment, for reasons which I will presently develop, the Crown has discharged that onus.
In the first place, it was found as a fact that the land was undeveloped and non-income-producing. Secondly, the finding in para 5(5) of the case is: ‘[The taxpayer] was unable to finance the purchase himself’, and details are then given of his capital resources and his salary. Thirdly, it is clear that his means would not service a loan to allow retention. Fourthly, in the finding in para 5(7) of the case it was held that he
Page 920 of [1970] 3 All ER 915
had no intention to develop the land himself; and, indeed, he had not the means to do so. Fifthly—and in my judgment this is extremely important—he had actually contracted to resell the land before he entered into any contract to buy it. In the circumstances, there was no use to which he could put it, unlike a picture or a piece of furniture, or even a house in which he could live or which he could let. It is true that the commissioners found in the finding in para 5(5) of the case that he ‘investigated the possibility of borrowing the purchase price from relatives with the idea of selling when the problem of drainage was solved’. If he had done that, different considerations might have obtained, but he did not, and that was abandoned when he contracted to resell before he had a contract to purchase.
In my judgment, 6 1/4 acres of undeveloped land, in the case of such a purchaser, is like the large quantity of toilet rolls in Rutledge v Inland Revenue Comrs, and the whisky in bond in Inland Revenue Comrs v Fraser, and not the four houses in the Reinhold case. Where it seems to me that the commissioners went wrong was in drawing a simple distinction between land and other commodities and in not having regard to the nature and quantity of the land in relation to the surrounding circumstances. This is of the utmost importance, as appears from the speech of the Lord President (Lord Normand) in Inland Revenue Comrs v Fraser ((1942) 24 Tax Cas at 502, 503). He said:
‘It is in general more easy to hold that a single transaction entered into by an individual in the line of his own trade (although not part and parcel of his ordinary business) is an adventure in the nature of trade than to hold that a transaction entered into by an individual outside the line of his own trade or occupation is an adventure in the nature of trade. But what is a good deal more important is the nature of the transaction with reference to the commodity dealt in. The individual who enters into a purchase of an article or commodity may have in view the resale of it at a profit, and yet it may be that that is not the only purpose for which he purchased the article or the commodity, nor the only purpose to which he might turn it if favourable opportunity of sale does not occur. In some of the cases the purchase of a picture has been given as an illustration. An amateur may purchase a picture with a view to its resale at a profit, and yet he may recognise at the time or afterwards that the possession of the picture will give him aesthetic enjoyment if he is unable ultimately, or at his chosen time, to realise it at a profit. A man may purchase stocks and shares with a view to selling them at an early date at a profit, but, if he does so, he is purchasing something which is itself an investment, a potential source of revenue to him while he holds it. A man may purchase land with a view to realising it at a profit, but it also may yield him an income while he continues to hold it. If he continues to hold it, there may be also a certain pride of possession. But the purchaser of a large quantity of a commodity like whisky, greatly in excess of what could be used by himself, his family and friends, a commodity which yields no pride of possession, which cannot be turned to account except by a process of realisation, I can scarcely consider to be other than an adventure in a transaction in the nature of a trade; and I can find no single fact among those stated by the Commissioners which in any way traverses that view. In my opinion the fact that the transaction was not in the way of the business (whatever it was) of the Respondent in no way alters the character which almost necessarily belongs to a transaction like this. Most important of all, the actual dealings of the Respondent with the whisky were exactly of the kind that take place in ordinary trade.’
When applying that, one has to bear in mind the most important finding that the taxpayer had actually contracted to sell the land before the agreement to purchase it. Therefore, he neither intended to hold it, nor could he lawfully do so.
In my judgment, the present case is really indistinguishable from the elements
Page 921 of [1970] 3 All ER 915
which led the House of Lords to reverse the commissioners in Edwards v Bairstow ([1955] 3 All ER at 58, 36 Tax Cas at 229) where it was said:
‘What other word is apt to describe the operations? Here are two gentlemen who put their money, or the money of one of them, into buying a lot of machinery. They have no intention of using it as machinery, so they do not buy it to hold as an income-producing asset. They do not buy it to consume or for the pleasure of enjoyment. On the contrary, they have no intention of holding their purchase at all. They are planning to sell the machinery even before they have bought it. [The taxpayer in the present case not only planned to do so but contracted to do so.] And, in due course, they do sell it, in five separate lots, as events turned out. And, as they hoped and expected, they make a net profit on the deal, after charging all expenses such as repairs and replacements, commissions, wages, travelling and entertainment and incidentals, which do, in fact, represent the cost of organising the venture and carrying it through.’
In support of his submission that there were grounds on which the commissioners could reasonably reach the conclusion that they did, counsel for the taxpayer relied on the following considerations: first, that there was no selling organisation; secondly, that the taxpayer had no professional qualification; thirdly, that it was outside his ordinary occupation; fourthly, that it was isolated; fifthly, that nothing was done to work the property up; and, sixthly, that the subject-matter was not conclusive of trade.
As to the first, Lord Radcliffe said in Edwards v Bairstow ([1955] 3 All ER at 58, 36 Tax Cas at 230), that the taxpayers in that case did all that was necessary. So, too, here, the taxpayer considered the possibilities and found a sub-purchaser. As to the second, this seems to me to be entirely neutral. As to the third, this transaction bore some relationship to the taxpayer’s line of business; but, in any event, although the conclusion that it was an adventure in the nature of trade is easier where the transaction is in the taxpayer’s line of business, its not being so does not exclude that conclusion (see the passage already cited from Fraser’s case ((1942) 24 Tax Cas at 503)). As to the fourth, isolation is clearly a factor to be weighed but is not conclusive either way. As to the fifth, again something was done, namely approaching three companies and offering the land for sale to them (see finding in para 5(5) of the case). The last point appears to me, in the circumstances, for the reasons I have already given, to be definitely against the taxpayer.
One has, of course, to weigh all the findings, some of which may tell one way and some another, and see in the end whether there was not such a preponderance in favour of the Crown as to make the conclusion which the commissioners reached one which they could not reasonably reach (see, again, Edwards v Bairstow ([1955] 3 All ER at 58, 36 Tax Cas at 230)). In my judgment, for the reasons which I have given, that is so here. I would also refer to what Cross J said in Turner v Last ((1965) 42 Tax Cas at 523). He pointed out that the evidence showed that the taxpayer was not in a very strong financial position, and that that ‘might lead one to doubt, in the absence of any further evidence, whether he could have carried the extra £800 or so indefinitely’. He concluded his judgment by saying ((1965) 42 Tax Cas at 523):
‘Of course, the mere fact that when you buy property, as well as intending to use and enjoy it, you have also in your mind the possibility that it will appreciate in value, and that a time may come when you may want to sell it and make a profit on it, does not of itself make you a trader; but if the position is that you intend to sell it as soon as you can to recover the cost of the purchase, the position is obviously very different—and that is what the Commissioners, having heard this Appellant, thought was the position here.’
In the present case, in my judgment no other conclusion is possible on the facts which the commissioners found.
Page 922 of [1970] 3 All ER 915
Counsel for the taxpayer then submitted that the word ‘adventure’ is not qualified by ‘in the nature of trade, which governs only the word ‘concern’, for which purpose he referred me to a passage in the judgment of Fletcher Moulton LJ in Liverpool and London and Globe Insurance Co Ltd v Bennett (Surveyor of Taxes) ((1912) 6 Tax Cas 327 at 371, [1912] 2 KB 41 at 55). He did not, I think, advance that argument very strenuously. That appears to be an actual decision, and not obiter, and therefore would be binding on me but for two considerations. The first is that it appears to me to be inconsistent with the view taken of the law in Edwards v Bairstow. The second matter is that the question of law before me is whether the finding that it was not an adventure in the nature of trade is right or wrong. It may or may not be that the wrong questions were submitted to the commissioners, but that, as it seems to me, is neither here nor there, and I must consider this case on the footing that I have to see whether or not the finding that the particular transaction was not an adventure in the nature of trade is one which ought to be upheld or, on the principles I have mentioned, reversed. Then, alternatively, he said that the word ‘adventure’ connotes some element of risk, which he says there was not in this case by reason of the fact that the taxpayer had already secured his position by obtaining the contract for the resale. He relied on a passage in Barry v Cordy (Inspector of Taxes) ([1946] 2 All ER 396 at 398, 28 Tax Cas 250 at 258), where Scott LJ said:
‘Whether the word “adventure” is intended to be read like the word “manufacture” as equally independent of the opening word “trade” or like the word “concern” as qualified by the attribute “in the nature of trade” does not, we think, matter in this appeal, though we incline to think it should be read as independent. The Oxford Dictionary gives several meanings of “adventure”, but the most appropriate is that numbered 7: “A pecuniary risk, a venture, a speculation, a commercial enterprise.” [Then he referred to the two most apt quotationso:] “He that puts all upon Adventures, doth often times brake, and come to Pouerty”; [and the otherp] “Whilst interest is at 6 per cent. no man will run an adventure to sea for the gain of 8 or 9 per cent.”’
It will be observed, however, that the definition referred to includes, besides ‘a pecuniary risk’ and ‘a speculation’, ‘a venture’ and ‘a commercial enterprise’. I am therefore far from persuaded that ‘adventure’ in this context necessarily connotes that there must be risk. Even, however, if that be the true view, then there was risk in this case. The taxpayer reduced it to a minimum by getting his contract for resale, and no doubt he trusted his employers to let him buy and it is unlikely that they would have changed their minds; but they were free to do so, and if they had the taxpayer would have been liable in damages to the sub-purchaser and Bain v Fothergill would not have applied.
Then counsel for the taxpayer took an entirely fresh point based on the rule laid down in Sharkey (Inspector of Taxes) v Wernher, and subsequent cases. He laid down three propositions: (1) if a trader disposes of stock at an undervalue to consume it himself or to confer a benefit on another, whether as a gift or by a bargain not at arm’s length, the rule applies; the trader must include the stock at its market value; (2) whenever these circumstances exist, the person acquiring the stock must be treated for tax purposes as though he had paid market value rather than actual price; and (3) if a trader disposes of stock at a gross undervalue, the commissioners are entitled to find that the sale was not at arm’s length or not in the course of trade.
Page 923 of [1970] 3 All ER 915
This rule, he submitted, rests on the principle that such a disposal is not a trading transaction for either party. It is abundantly clear from the case stated that this argument was not presented to the commissioners at all, and in my judgment it is not open at this stage to the taxpayer, he not having served any notice under RSC Ord 90, r 7. Even if it be, however, in my judgment the decision of the commissioners could not be so supported without further findings of fact, notably whether the sale by the company was by way of gift or gift pro tanto, whether the bargain was at arm’s length and whether the sale was in the ordinary course of business—all matters on which evidence could and almost certainly would be led. I specifically invited counsel for the taxpayer to consider whether he wished to ask me to remit the matter to the commissioners on these lines, and he said that he could not ask for that. I must therefore dismiss that line of argument.
However, counsel sought to salvage one point from the wreck of this approach, and he said that he was in any case entitled to rely on a passage in the judgment of Wrottesley J in Williams (Inspector of Taxes) v Davies, Same v Nisbet ([1945] 1 All ER 304 at 307, 26 Tax Cas 371 at 379). The passage is as follows:
‘It has been laid down that the transaction must be judged by ascertaining how far it consists of and is governed by the ordinary incidents of trading. There are obvious features of this case which differ from ordinary trading.’
That passage, however, must not, in my judgment, be taken out of its context. In that case, there was an express finding of fact that the vendor wives were beneficial owners, which the learned judge took ([1945] 1 All ER at 306, 26 Tax Cas at 377) to mean that the conveyances to them were not colourable but genuine gifts. He also said ([1945] 1 All ER at 308, 26 Tax Cas at 379):
‘Here the wives accepted each a present from her husband, and at that stage no one can possibly suggest that the receipt of this present constitutes trading. That leaves only the fact that the wives sold the property back to their husbands’ nominees and received for it between them the full value, which they proceeded to invest in securities. It is not even as though they reinvested in other lands of a similar kind. I am not to substitute for the inference which the commissioners have drawn from the facts of this case the inference which I should have drawn for myself. I cannot say that there is no material in the case from which the commissioners could hold that what took place here was not the carrying on of a trade or an adventure in the nature of trade by the wives.’
In the present case, of course, there is at least one obvious difference between the ordinary course of trading and what was done, as I do not suppose that a property dealer would ordinarily sell before he bought; and, again, the taxpayer did not, as far as I know, reinvest his profit in land. But for the reasons I have already given, I am satisfied that the weight of the findings is such that the conclusion which the commissioners reached was unreasonable; or, to use Lord Radcliffe’s words ([1955] 3 All ER at 57, 36 Tax Cas at 229), ‘the true and only reasonable conclusion contradicts the determination’. I therefore allow the appeal.
Appeal allowed.
Solicitors: Solicitor of Inland Revenue; Gregory, Rowcliffe & Co (for the taxpayer).
K Buckley Edwards Esq Barrister.
R v Russell
[1970] 3 All ER 924
Categories: CRIMINAL; Criminal Evidence
Court: VACATION COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): WIDGERY LJ, CANTLEY AND WALLER JJ
Hearing Date(s): 28 SEPTEMBER 1970
Criminal law – Evidence – Character of co-accused – Evidence given against person charged with same offence – Same offence – Charges of successive possession of forged bank notes – Criminal Evidence Act 1898, s 1(f), proviso (iii).
The appellant and two other men, B and H, were charged on an indictment with activities concerning the same three forged £5 notes. Count 2 charged the appellant alone with uttering the notes, count 3 charged H with being in possession of them, and count 4 charged the appellant and B with being in joint possession of them. B pleaded guilty to aiding and abetting the appellant (count 4) and the trial proceeded against the appellant and H, who both sought to blame each other. The prosecution case was that one surrendered possession at the instant the other received it. On the question whether counsel for the appellant could cross-examine H and bring in H’s character under proviso (iii) to s 1(f)a of the Criminal Evidence Act 1898 (it being assumed that they had attacked witnesses for the prosecution),
Held – It was impossible to say that the offences charged against the appellant and H ceased to be the same merely because the possession alleged was a successive possession rather than a coincident one for the possession was successive in an immediate sense; the subject-matter was the same, the nature of the charge was the same, the circumstances to be proved were the same, and the offences took place, if not technically at the same instant, at moments which were immediately successive one with the other; accordingly, cross-examination of H as to his record was permissible under proviso (iii) (see p 927 d, post).
Notes
For cross-examination of defendant, as to character, see 10 Halsbury’s Laws (3rd Edn) 449–451, para 828, and for cases on the subject, see 14 Digest (Repl) 511–519, 4942–5019.
For the Criminal Evidence Act 1898, s 1, see 12 Halsbury’s Statutes (3rd Edn) 865.
Cases referred to in judgment
Murdoch v Taylor [1965] 1 All ER 406, [1965] AC 574, [1965] 2 WLR 425, 129 JP 208, 49 Cr App Rep 119, Digest (Cont Vol B) 175, 4957b.
R v Meek (1966) 110 Sol Jo 867.
Cases also cited
R v Hadwen [1902] 1 KB 882.
R v Roberts [1936] 1 All ER 23.
Appeal
This was an appeal by George Russell against his conviction on 4 February 1970 at Sheffield Assizes before Veale J and a jury of uttering forged bank notes (count 2) and being in possession of the same (count 4). He was sentenced to concurrent terms of 15 months’ imprisonment. He appealed against his conviction with leave of O’Connor J. The facts are set out in the judgment of the court.
Page 925 of [1970] 3 All ER 924
P M Baker for the appellant.
N J Mylne for the Crown.
28 September 1970. The following judgment was delivered.
WIDGERY LJ delivered the judgment of the court. The appellant, George Russell, was convicted at Sheffield Assizes of uttering forged bank notes and of being in possession of the same forged bank notes. He was sentenced to 15 months’ imprisonment on each count and he now appeals against his conviction by leave of the single judge.
Three men were involved in activities in regard to the same forged notes which were three £5 Bank of England notes. In the event they were charged in the indictment as follows: the first count charged a man called Barraclough, with whom this court is not concerned, with uttering the three notes. He was in due course found not guilty by direction of the judge. The second count charged the appellant alone with uttering the notes and he was, as I have already indicated, convicted on that charge. The third count charged a man called Hurst with being in possession of the notes and he was convicted. The fourth count charged the appellant and Mr Barraclough with joint possession of the same notes. The appellant was convicted and Mr Barraclough pleaded guilty on the basis of aiding and abetting. A further count was withdrawn and requires no further mention.
The offences being charged in that way, the case for the prosecution, as developed at the trial, depended entirely on the evidence of the two accused themselves. They had given statements to the police which were the basis of the proceedings but there was no independent evidence about the activities of these men individually in regard to the three notes except that which came out from their own accounts. The view of the case taken by the prosecution on the material available to it was that the three notes in question had been possessed by the appellant, who had uttered them to Mr Hurst. It followed therefore that the appellant would be guilty both of uttering and possession and that Mr Hurst would be independently guilty of possession.
At the trial the appellant and Mr Hurst both gave evidence and it suffices for this purpose to say that each told the same kind of story with the effect of placing the blame on the other. Thus the appellant in substance said that Mr Hurst had had the notes in his possession and had offered them to the appellant who had declined to take them; a story which of course meant that the appellant was innocent and Mr Hurst was guilty. Mr Hurst returned the other side of the penny, alleging that he had been offered the notes by the appellant and had refused to take them.
It was in this state of affairs that a question arose as to the cross-examination of Mr Hurst on his record under s 1 of the Criminal Evidence Act 1898. For the purposes of this judgment it can be assumed that both the appellant and Mr Hurst had attacked witnesses for the prosecution and thus were in a position in which their characters could be put in at the instance of the prosecution. But for reasons which seemed good to him, counsel for the prosecution was not minded to cross-examine Mr Hurst in regard to his character. Thus it became the interest of counsel for the appellant to cross-examine Mr Hurst and bring in Mr Hurst’s character if he was able to do so. He sought to do so on two grounds, both contained in s 1(f) of the Criminal Evidence Act 1898, under what has been described as provisos (ii) and (iii). I must read them although they are well known. Proviso (ii) permits cross-examination in respect of previous character if the witness—
‘… has personally or by his advocate asked questions of the witnesses for the prosecution with a view to establish his own good character … or the nature or conduct of the defence is such as to involve imputations on the character of the prosecutor or the witnesses for the prosecution.’
Proviso (iii) provides for similar cross-examination where the accused in question has given ‘evidence against any other person charged with the same offence’.
Page 926 of [1970] 3 All ER 924
Counsel for the appellant sought in the court below to invoke each of those provisos. It was not disputed that Mr Hurst had given evidence against the appellant for this purpose, nor for the purposes of this judgment do we challenge the proposition that Mr Hurst had attacked the witnesses for the prosecution in the same way. Accordingly, said counsel for the appellant in the court below, the appellant may cross-examine Mr Hurst as to his record on either of these grounds. Taking them independently, the learned trial judge rejected counsel’s submission on proviso (iii) on the ground that although Mr Hurst had given evidence against the appellant in the terms of the proviso, he and Mr Hurst were not charged with the same offence. He rejected the application to cross-examine under proviso (ii) on the footing that where that proviso applied it was open only to the prosecution to cross-examine and not to a co-accused.
Dealing with proviso (iii) first, it is quite clear in this case that the offences charged against Mr Hurst and the appellant were similar in really every respect. The subject of possession, namely the three forged notes, was the same, the nature of the offence charged, namely illegal possession under s 8 of the Forgery Act 1913, was the same, and all the constituents which had to be proved were the same. But it was argued that nevertheless the offences charged against Mr Hurst and the appellant were not the same offence because the possessions alleged against them were not coincident or concurrent but consecutive. It was accepted below (we think quite rightly accepted) that if the prosecution had been able to charge Mr Hurst and the appellant with joint possession of the notes at one and the same time, the case for cross-examining Mr Hurst against the appellant under proviso (iii) would have been clear. But it was argued below, and successfully argued below, that since the possessions were consecutive, following one another instantly but nevertheless consecutive and not joint, then the offence charged was not the same offence and accordingly the right to cross-examine was denied to the appellant.
Although the 1898 Act has been on the statute book for over 70 years, there is remarkably little authority on the meaning of the phrase ‘the same offence’ in proviso (iii). It does not really seem to have arisen directly for decision in any of the authorities to which we have been referred. In Murdoch v Taylor in the House of Lords a very different issue arose under proviso (iii) and the court was there primarily concerned with the meaning of the words ‘evidence against’, but it is to be observed that Lord Donovan in his speech ([1965] 1 All ER at 416, [1965] AC at 593) evidently took the view that the expression ‘same offence’ and indeed the general ambit of provisos (ii) and (iii) should be wide. He clearly contemplated the possibility that a co-accused might take advantage of proviso (ii) and also that the prosecution might take advantage of proviso (iii). But the case is not authority on any of these points and is of only passing value, as it seems to us, in the issue which we have to decide.
A case somewhat nearer to our problem is R v Meek where a principal and an aider and abettor had been charged in the same count and the question arose whether they were charged with the same offence for present purposes. The decision of the court was that they were not charged with the same offence for a highly special reason, namely that it had become clear at an early stage of the trial that one of the two accused could not be convicted on this charge and all that remained was the technicality of finding him not guilty. That technicality had been omitted but the court held that notwithstanding that omission it could not regard the two accused then before the court as being charged with the same offence when one of them for all practical purposes was no longer charged in the relevant count at all. It seems to us therefore that we have to decide this question on basic principles with virtually no guidance from authority.
One turns to dictionaries for assistance as to the meaning of the word ‘same’ and
Page 927 of [1970] 3 All ER 924
counsel have both relied on Webster’s Dictionary (3rd Edn) which is now before us. In that work ‘same’ is described as ‘resembling in every way, not different in relevant essentials, of one kind’ and then there is the illustration from Boswell: ‘We must not expect to be all happy in the same degree’. The second meaning is ‘conforming in every respect’ and the illustration there is, when the word is combined with ‘as’: ‘Eat the same rations as the captain’. It is pointed out by counsel that in both those illustrations, in both those meanings, the word is not being used to describe two things which are identical but merely two things which possess the same relevant characteristics throughout. Looking at the matter in that way, it seems to us that the fact that the possession alleged in these cases is consecutive and not coincident does not prevent the offences from being the same for present purposes. We are not attempting to lay down any general principles which will be a solution to all cases of this kind hereafter because that is a task which has apparently proved too difficult for our predecessors and we are unwilling now to assume it. But looking now merely at the circumstances of this case and accepting as we must that these two accused would have been charged with the same offence if it had been alleged that they had been jointly in possession of these three £5 notes, we find it impossible to say that the offences charged against them ceased to be the same for present purposes merely because the possession alleged is a successive possession rather than a coincident one. The possession here was, as I have pointed out, successive in an immediate sense; one, on the case for the prosecution, surrendered possession at the instant when the other received it. The subject-matter was the same, the nature of the charge was the same, the circumstances to be proved were the same and the offences took place, if not technically at the same instant, at moments which were immediately successive one with the other. We think that it would be a very unsatisfactory result in a case such as the present if the appellant were denied the right to cross-examine Mr Hurst merely because their possessions were not at the same time but were successive. We think that justice requires us to reach the conclusion which we have reached and so far as this case is concerned we are satisfied that the offences charged should be regarded as the same offence. It follows from that that the learned judge was wrong and should have permitted cross-examination of Mr Hurst as to his record, and if that had been permitted it is impossible to say what the consequences might have been in the minds of the jury. This is a case where everything turned on the credibility of Mr Hurst and the appellant. To deny the appellant the right to cross-examine Mr Hurst as to his character was a very serious denial and we can see no reason at all for applying the proviso to s 2(1) of the Criminal Appeal Act 1968, or otherwise avoiding the necessary consequences of the judge’s ruling. In the circumstances it is unnecessary to consider the effect of proviso (ii) to s 1(f) of the 1898 Act.
Accordingly, for those reasons we shall allow the appeal and quash the conviction of the appellant. So far as these matters are concerned, he is discharged.
Appeal allowed. Conviction quashed. Leave to appeal to the House of Lords refused but the court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether for the purposes of construction and interpretation of s 1 proviso (f) (iii) of the Criminal Evidence Act 1898, the words ‘same offence’ were not confined to cases involving a joint offence.
Solicitors: Registrar of Criminal Appeals (for the appellant); Freshfields (for the Crown).
N P Metcalfe Esq Barrister.
NAS Airport Services Ltd v Hotel and Catering Industry Training Board
[1970] 3 All ER 928
Categories: TAXATION; Other Taxation
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 9, 12, 15 OCTOBER 1970
Industrial training – Levy – Activities of industry – Hotel and catering industry – Meals supplied to airlines for passengers’ consumption – Whether supply ‘to persons for immediate consumption’ – Industrial Training (Hotel and Catering Board) Order 1966(SI 1966 No 1347), Sch 1, para 1(a).
The appellants were a company which prepared and supplied meals for passengers on certain airlines. The food was prepared and cooked at their factories some miles away from the airports and was then placed in containers and taken by the appellants’ lorries to the airports where the containers were handed over to the steward of the aircraft. The food was served to the passengers at any time from one to 18 hours after the aircraft had taken off. In pursuance of the Industrial Training Levy (Hotel and Catering) Order 1968 a, the respondents, the Hotel and Catering Industry Training Board, made an assessment on the appellants for the payment of a levy. On appeal against the levy,
Held – The appellants’ activities were not ‘the supply in the course of any business of food or drink to persons for immediate consumption’ within Sch 1, para 1(a), to the Industrial Training (Hotel and Catering Board) Order 1966, and therefore were not activities which made the appellants liable to the levy, because on the true construction of para 1(a), ‘persons’ meant natural persons and not bodies corporate or incorporate, and ‘for immediate consumption’ meant for consumption by such persons then and there, and accordingly para 1(a) imposed a levy on establishments where food or drink was supplied, as a matter of business, for consumption then and there by the persons in or about the place and did not impose a levy on establishments engaged in cooking or making up food for despatch to other places for consumption (see p 929 e g and j, p 930 d and e and p 931 f and g, post).
Decision of the Queen’s Bench Division [1970] 1 All ER 685 reversed.
Notes
For industrial training boards, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 690A.
Appeal
This was an appeal by NAS Airport Services Ltd pursuant to leave of the Divisional Court, against the decision of the Divisional Court (Lord Parker CJ, Ashworth and Talbot JJ), dated 21 January 1970, and reported [1970] 1 All ER 685, whereby the appellants’ appeal against a decision of the Industrial Tribunal, made on 10 June 1969, dismissing their appeal against an assessment for levy of £1,442 11s 4d made by the respondents, the Hotel and Catering Industry Training Board, pursuant to the Industrial Training Levy (Hotel and Catering) Order 1968, was dismissed. The facts are set out in the judgment of Lord Denning MR.
John K Wood QC and Harry Woolf for the appellants.
Leonard Caplan QC and M F Gettleson for the respondent board.
Cur adv vult
15 October 1970. The following judgments were delivered.
Page 929 of [1970] 3 All ER 928
LORD DENNING MR. NAS Airport Services Ltd is a company which prepares meals for passengers on airlines. The question is whether it is bound to pay a levy to the Hotel and Catering Industry Training Board.
To understand this, I must explain what the appellants do. They have two or three factories which are some miles from the airports. In these factories there are big kitchens, where they employ cooks, butchers and bakers. They prepare and cook the food. There are laying-up rooms where the appellants employ people to lay up the trays. There are storage rooms and washing-up bays. When the meals are prepared, they are placed in special containers, loaded on to lorries, and taken to the airports. They are then put into high loaders by the appellants, and taken to the aircraft. The containers are then handed over by the appellants’ steward to the chief steward of the aircraft. Thenceforward the appellants have no more to do with them. The stewards on the aircraft do all that is necessary. Sometimes the food is only partly cooked and they put it into ovens to finish it off. Sometimes it is cold, and they put it into cold store or deep freeze. Then, when mealtime comes, the meals are served to the passengers. This may be at any time after take-off, varying from one hour to 12 hours, or even 18 hours.
The question is whether the activities of the appellants (as distinct from the activities of the airline) are activities falling within the words of the Industrial Training (Hotel and Catering Board) Order 1966b, Sch 1, para 1(a):
‘the supply in the course of any business of food or drink to persons for immediate consumption … ’
The first point is this: the appellants say that the word ‘persons’ means in this context natural persons; whereas the board says that it includes bodies corporate and unincorporate. I think that the appellants are right. All through Sch 1 there is a clear distinction drawn between ‘persons’ and ‘bodies of persons’. The phrase ‘body of persons’ is defined in para 3(b) as meaning ‘any body of persons, whether corporate or unincorporate’; and there are many places where Sch 1 draws a distinction between ‘persons’ and ‘body of persons’. In those places where the draftsman intends to include both natural persons and bodies corporate or unincorporate, he uses the phrase ‘any person or body of persons’: see para 3(c)(ii) and (iii) and 3(q). In the places where he means only to include bodies corporate and unincorporate and to exclude natural persons, he uses ‘body of persons’, see para 1(b). When he means to denote only natural persons, he simply says ‘persons’, see paras 1(a), (b), (c), 2(b), (d).
The second point is this: the appellants say that ‘for immediate consumption’ means for immediate consumption by them, ie the natural persons just referred to; whereas the board says that it means for immediate consumption by anyone. I think that the appellants are right here too. The draftsman is thinking of supply of food or drink to a group of persons, eg in a hotel or restaurant or canteen or at a wedding reception or cocktail party. When he says ‘supply’ to such a group ‘for immediate consumption’, he means, I think, immediate consumption by them. This is borne out by para 1(b) where he is clearly meaning immediate consumption ‘by the employees’; and para 2(b) when he means immediate consumption by the persons in the staff dining-room, etc.
The third point is the meaning of the word ‘immediate’ in the phrase ‘for immediate consumption’. The appellants say that it means for consumption then and there; whereas the board says that it means for consumption at the next meal, whenever that may be had, or at some time within, say, the next 24 hours. I think that the appellants are right on this point also. Take the case of a ship. Before she leaves port, she will take on food and drink for consumption on the voyage which may be for some days. Such food and drink is clearly not supplied for immediate consumption. Take the case of a cake-shop which sells cakes to a purchaser who is going to take them home and eat them there. The supply is not for immediate
Page 930 of [1970] 3 All ER 928
consumption. Or the case of a maker of sausages or pork pies who sells them in his shop to customers who take them home and there cook them or heat them up. The supply is not for immediate consumption. A shop which sells fish and chips might be difficult to place, because they are often eaten then and there, but also they are often taken home and heated up. But Sch 1 clears up these points. It states in a significant para 4(2):
‘… the supply … (b) of hot fried fish or hot chipped potatoes; shall be deemed to be a supply to persons for immediate consumption, whether or not such food or drink is in fact so consumed.’
That seems to me clearly to indicate that when it is to be consumed in the shop or just outside it, it is supplied ‘for immediate consumption’; but, when it is to be taken home and heated up, it is not in fact so consumed, ie it is not immediately consumed. But, nevertheless, it is, by this very paragraph, to be deemed to be for immediate consumption. I hold, therefore, that on the true construction of Sch 1, ‘immediate’ means ‘then and there’.
This interpretation enables all those in the industry to draw a clear line between those activities which are within and those which are without Sch 1. The levy is to be imposed on establishments such as hotels, restaurants, public houses, cafés, snack bars, canteens, and mess rooms where food or drink is supplied, as a matter of business, for consumption then and there by the persons in or about the place. The levy is not to be imposed on establishments which are engaged in cooking or making up food for despatch to other places for consumption, such as the great factory known as Cadby Hall. That is borne out by para 2(b).
I am very diffident at reaching this result because it means that we are differing from the decisions of the Industrial Tribunal and the Divisional Court ([1970] 1 All ER 685, [1970] 1 WLR 473); but I am comforted by the reflection that this Actc imposes a levy, which is in the nature of a tax, on industry; and there is high authority for saying that we should not strain the interpretation against the taxpayer. If the Minister intended to make establishments such as the appellants liable to the levy, he should have done so in clear words. I doubt whether he did intend it. He clearly exempted the stewards and stewardesses on the aircraft who serve the meals (see para 2(d)); and he may well have intended to exempt the establishments which supply the meals. At any rate, he has not used such clear words that we ought to hold these establishments liable to the levy.
I would, therefore, allow the appeal.
FENTON ATKINSON LJ. I agree with Lord Denning MR’s judgment and only deliver a judgment of my own as we are differing from both the tribunal and the Divisional Court ([1970] 1 All ER 685, [1970] 1 WLR 473). There is no need to repeat the facts which Lord Denning MR has fully covered.
Counsel for the appellants submitted that Sch 1, para 1(a) to the Industrial Training (Hotel and Catering Board) Order 1966d on its true construction dealt only with the preparation and/or service in the course of any business of any food or drink to an individual for consumption by him then and there. He agrees that this is a somewhat narrow construction, but he contends that this is an order imposing a levy on the appellants which should be strictly construed, and although one might well have expected the draftsman to have this type of activity in mind, the language actually used in para 1(a) is not wide enough to include it.
Page 931 of [1970] 3 All ER 928
In support of his argument he relies first on the phrase ‘persons or body of persons’, which appears more than once in this order. He submits that when para 1(a) refers to ‘persons’ it means natural persons and not a ‘body of persons’ (ie a body corporate). If that is right, he submits further that para 1(a) contemplates supply to individual persons for immediate consumption by them, and that this view is supported by the use of the same phrase ‘supply … of food … for immediate consumption’ in para 1(b), where manifestly consumption by the individual employees is what is intended to be covered. So he says this is not a supply to ‘persons’, but to a limited company for consumption by their passengers.
As a second string he says that in any event meals supplied for consumption several hours, possibly 12 hours, after the supply by delivery at the aircraft could not be held to be meals supplied for immediate consumption. On this point he relies not only on the natural and ordinary meaning of those words, but on the provision of para 4(2)(b) of the 1966 order dealing with hot fried fish or hot chipped potatoes, which would be wholly unnecessary if ‘immediate consumption’ meant supply in a form ready to be consumed when the time for the meal should come round.
Counsel for the board contends that ‘persons’ in para 1(a) must be construed to include any body of persons corporate, no contrary intention appearing to exclude the provisions of s 19 of the Interpretation Act 1889. He submits that there is no warrant for reading the words ‘by them’ into the paragraph, and that ‘immediate’ merely means as soon as is reasonable or as soon as circumstances permit. When asked to point out any provision of the order inconsistent with the appellants’ construction, he was, as it seemed to me, unable to do so, but rested basically on the contention that as a matter of common sense the appellants’ activity in question was obviously a catering activity by a company in the catering trade and that on a broad view the draftsman must obviously have meant to include such an activity.
For my part, I see great force in counsel for the appellants’ submissions and I think, for the reasons which Lord Denning MR has given, that he is right. It may be that acceptance of the appellants’ construction of para 1 (a) excludes from the levy provisions certain catering industry activities one would have expected to find included, but this is in effect a taxing statute and the appellants should not be compelled to pay the levy required unless the order unambiguously imposes that liability on them. I do not think that para 1(a) can be so construed and I agree that the appeal succeeds.
CAIRNS LJ. I too am for allowing this appeal. The appellants supply food and drink to airlines for consumption some time later by passengers. I cannot bring such supply within the words ‘the supply … of food and drink … for immediate consumption’ in para 1(a) of Sch 1 to the Industrial Training (Hotel and Catering Board) Order 1966e.
First, I consider that ‘supply … to persons for immediate consumption’ means ‘supply to persons for immediate consumption by them’. This is not to imply words that are not there; it is the ordinary meaning of the words used. To give a person roast beef for dinner is to give it for his dinner. Could the words in para (b), ‘supply … to persons in their employment for immediate consumption’ reasonably be held to mean ‘supply to persons in their employment for immediate consumption by themselves or others?
Secondly, the order draws a clear distinction between ‘persons’ and ‘body of persons’. The airlines are bodies of persons. I cannot believe that ‘supply … to persons for immediate consumption’ means ‘supply to persons or a body of persons for immediate consumption by persons’. Thirdly, if the meaning contended for by the board is correct, it could have been more clearly expressed by omitting the
Page 932 of [1970] 3 All ER 928
words ‘to persons’, or (still more clearly) by adding after ‘consumption’ the words ‘by themselves or others’. Fourthly, while the word ‘immediate’ cannot be construed too strictly, I find great difficulty in extending it to cover consumption hours after supply. Counsel for the board conceded that a picnic hamper supplied for consumption at the end of an overnight journey would not be supplied for immediate consumption, but contended that a hamper supplied for consumption at any time on the same day, or, at any rate, for the next meal on the same day, would be supplied for immediate consumption. This seems to me very artificial and not in accordance with the ordinary usage of words. In relation to the supply of food and drink, I should interpret ‘immediate’ to convey the idea of a lapse of time no longer than the ordinary lapse of time between the placing of a meal on the table and the eating of it. Fifthly, my construction is supported by the provision in para 4(2) of the 1966 order about fish and chips. It is to be noted that the provision specifies hot fish and chips. Whether there is any market for cold fish and chips I do not know, but the express limitation to hot fish and chips clearly assumes that they are to be consumed while still hot—as obviously they will be in all but a few cases. If the word ‘immediate’ has as loose a meaning as the board contends, I can see no need for this special provision. To my mind it obviously means ‘the supply of fish and chips is to be deemed to be supply for immediate consumption whether they are consumed on or just outside the shop or taken home and eaten there.’
Lord Parker CJ said near the end of his judgment ([1970] 1 All ER 685 at 688, [1970] 1 WLR 473 at 477):
‘Quite clearly a supply in the morning of a dinner to be consumed when the time for dinner arrived on a journey to Athens, or whenever it might be, is, I think, a supply of a dinner for immediate consumption, ie in a form ready to be consumed, and to be consumed when the time for the meal in question arose.’
Here it seems to me that Lord Parker CJ is equating ‘supply in a form ready to be consumed’ with ‘supply for immediate consumption’; but, with great diffidence, I express the view that this cannot be right; otherwise meals supplied in a form ready for consumption to a mountaineering party or a party setting out to sail across the Atlantic would be supplied for immediate consumption. Counsel for the board disclaimed any contention that a meal to be consumed more than 24 hours after supply could be said to be supplied for immediate consumption.
The tribunal’s view was that ‘The test is not whether the meals are ready for immediate consumption’. Later they stated:
‘It seems to us that the distinction is between the supply of food or drink to be taken away by the consumer or someone on his behalf or to be consumed on the spot by the consumer, the spot being the place where the consumer receives it.’
I would accept this as the true distinction provided that the supply which is being considered in the second limb is supply to the consumer, but I cannot accept it if the activity in contemplation is that of supplying some other person or body of persons who will later transfer the food or drink to the consumer for consumption on the spot where he receives it.
For these reasons I am of opinion that the activities of the appellants are not among the activities which attract the levy, and that this appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords.
Solicitors: Bower, Cotton & Bower, agents for Roderic Miles & Co, Slough (for the appellants); Nicholls, Christie & Crocker, Wembley (for the board).
Wendy Shockett Barrister.
R v Lawrence
[1970] 3 All ER 933
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): MEGAW LJ, CANTLEY AND CHAPMAN JJ
Hearing Date(s): 16 OCTOBER, 3 NOVEMBER 1970
Criminal law – Theft – Consent to theft – Consent obtained by dishonesty – Consent no defence – Theft Act 1968, ss 1(1) and 2(1)(b).
Criminal law – Theft – Dishonesty – True consent to act – Ingredient of dishonesty not made out – Theft Act 1968, s 1(1).
Criminal law – Theft – Facts also justifying conviction for obtaining property by deception – Offences not mutually exhaustive – Conviction for theft not upset – Theft Act 1968, ss 1(1) and 15(1).
Notwithstanding the provisions of s 2(1)(b)a of the Theft Act 1968, apparent consent brought about by dishonesty provides no defence to a charge of theft under s 1(1)b of the 1968 Act (although where there is true consent to the act or acts complained of the element of dishonesty essential to a charge under s 1(1) would not be established) (see p 936 c, post).
A conviction for theft under s 1(1) of the 1968 Act may be sustained even though the facts proved would also justify a conviction under s 15(1) c of the Act (see p 937 a, post).
Notes
For the meaning of theft, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1475A, 1, 2, 3, 4, 8.
For the Theft Act 1968, ss 1, 2 and 15, see 8 Halsbury’s Statutes (3rd Edn) 783, 784, 792.
Case referred to in judgment
Russell v Smith [1957] 2 All ER 796, [1958] 1 QB 27, [1957] 3 WLR 515, 121 JP 538, 41 Cr App Rep 198, Digest (Cont Vol A) 439, 10,329b.
Authority cited
Smith on the Law of Theft, chapters 2 and 5.
Appeal
This was an appeal by Alan Lawrence against his conviction for theft, contrary to the Theft Act 1968, s 1(1), at Inner London quarter sessions on 2 December 1969 before the deputy chairman (his Honour Judge Peck) and a jury. The facts are set out in the judgment of the court.
J R P Penry for the appellant.
D W T Price for the Crown.
Cur adv vult
Page 934 of [1970] 3 All ER 933
3 November 1970. The following judgment was delivered.
MEGAW LJ read the judgment of the court. The appellant, Alan Lawrence, was convicted at Inner London quarter sessions on 2 December 1969 on an indictment alleging theft. The particulars were that on 1 September 1969 he stole the approximate sum of £6, the property of Eugenio Occhi. He was fined £35 with three months’ imprisonment in default. He was ordered to make compensation to Mr Occhi in the sum of £6 9s 6d. He appeals against conviction. The appellant is a taxi driver. Eugenio Occhi is an Italian. At the relevant time he was a student, 18 years of age. He spoke very little English. On 1 September 1969, he arrived at Victoria station in London. It was his first visit to England. He wanted to go to Ladbroke Grove. Outside Victoria station there was a queue of taxis at the taxi picking-up point. Mr Occhi saw another taxi standing a little distance away from the queue. He went to it. The driver of that taxi was the appellant. Mr Occhi showed the appellant a piece of paper on which was written the address in Ladbroke Grove. The appellant said that it was very far and very expensive. Mr Occhi got into the taxi. He took out his wallet and tendered a £1 note to the appellant. The appellant said that it was not enough. The wallet was still open and the appellant himself proceeded to take out of it a further £1 note and a £5 note. He had thus got possession of £7 from Mr Occhi. He then drove Mr Occhi to the address in Ladbroke Grove, where Mr Occhi got out and went into the Italian centre there, which was his destination. The correct lawful fare for that journey was 10s 6d, or perhaps a little more if there was waiting time.
Those were the essential facts put forward by the prosecution. One or two answers given by Mr Occhi in the course of his evidence have been referred to by counsel for the appellant and they should, therefore, be mentioned. In cross-examination Mr Occhi was asked whether he minded paying, to which he replied: ‘I did not mind but it was the only means of travel.' Whether that question and the answer to it advanced the matter much may be open to doubt. He was also asked, presumably in re-examination, whether he would have paid if he had known the real fare was about 10s. His answer was ‘No’. When he was asked by counsel for the appellant whether he had consented to the money being taken, he said (his evidence being given through an interpreter) that he had ‘permitted’. Again this question and answer may not be of much assistance in the absence of an exposition of the meanings to be attached to ‘consented’ and ‘permitted’. It is accepted that Mr Occhi offered no physical resistance to the appellant when the latter helped himself to the further £6 from the wallet; and that he did not seek to get out of the cab or ask for the return of the money.
The remainder of the evidence related to the issue, which was the sole issue of fact raised by the defence, whether or not the appellant was indeed the taxi driver with whom Mr Occhi had had these dealings. The jury plainly rejected the appellant’s evidence that it was not he and that he knew nothing about this affair. There is not, and could not be, any criticism of the direction by the deputy chairman to the jury on the question of identity. That question is, therefore, no longer in issue.
A submission was made at the close of the evidence for the prosecution that the appellant could not in law, on the evidence adduced, be convicted on this indictment charging theft under s 1(1) of the Theft Act 1968. That submission was rejected by the deputy chairman. The Theft Act 1968 was enacted, as the preamble states, ‘to revise the law … ’ as to theft and similar or associated offences. It was based on the Eighth Report of the Criminal Law Revision Committeed, presented to Parliament in May 1966. As is well known, the primary purpose of the Act was to remove certain notorious difficulties and uncertainties in this branch of the law which had led Lord Goddard CJ in Russell v Smith ([1957] 2 All ER 796, [1958] 1 QB 27 at 30) to describe the law as it then was as ‘a law
Page 935 of [1970] 3 All ER 933
which is exceedingly technical’, and to quote ([1957] 2 All ER at 797, [1958] 1 QB at 31) a statement in an article in the Law Quarterly Reviewe that some of the decided cases were—
‘… a public scandal both because the courts are reluctantly compelled to allow dishonesty to go unpunished, and because of the serious waste of judicial time involved in the discussion of futile legal subtleties.’
It is to be hoped that it will not be found that the provisions of the 1968 Act necessitate the introduction of fresh technicalities or legal subtleties.
For the appellant it is contended that on the evidence in this case s 1(1) of the Theft Act 1968 does not apply; the appellant could not be convicted of theft under that section, under which the indictment was laid; the submission of no case should have been accepted by the deputy chairman and the jury directed to bring in a verdict of not guilty. The main basis of that submission was that Mr Occhi consented to the money being taken by the appellant and where there is consent no offence under s 1(1) is committed; further, even if the deputy chairman was entitled to leave the case to the jury, he should have directed them, as he did not, that consent would provide a complete defence. The provisions of the Theft Act 1968 relevant to that submission are these:
‘1. (1) A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and “thief” and “steal” shall be construed accordingly.
‘2. (1) A person’s appropriation of property belonging to another is not to be regarded as dishonest—(a) if he appropriates the property in the belief that he has in law the right to deprive the other of it, on behalf of himself or of a third person; or (b) if he appropriates the property in the belief that he would have the other’s consent if the other knew of the appropriation and the circumstances of it … ’
Section 3(1) deals with ‘appropriation’. It begins with these words: ‘Any assumption by a person of the rights of an owner amounts to appropriation … ’ Section 4(1) defines ‘property’ as including money and all other property, real or personal. There is thus no technical significance in the word ‘property’ in s 1(1) such as the word sometimes bears in lawyers’ language.
In the argument before us reference was also made to s 5(4), which we do not regard as relevant to the present issue, and to s 15(1) to which we shall refer later. Theft, under the terms of s 1(1) involves four elements: (i) a dishonest (ii) appropriation (iii) of property belonging to another (iv) with the intention of permanently depriving the owner of it. On the facts, no question could possibly arise as regards any of these elements. No one could possibly doubt the dishonesty of the appellant’s conduct. Nor, in view of the words of ss 3(1) and 4(1) already quoted, could there be any serious argument that there was not an ‘appropriation’, and an appropriation of ‘property’. As we understand the argument, counsel for the appellant did not dispute any of these matters. He did, however, contend that there must be implied into the subsection a requirement that the dishonest appropriation must be without the consent of the owner of the property. In our view, no such implication is justified. The words contained in the former definition of larceny, in s 1 of the Larceny Act 1916, ‘without the consent of the owner’, have been omitted, and, we have no doubt, deliberately omitted from the definition of theft in the 1968 Act. If the owner does not resist the taking of his property, or actually hands it
Page 936 of [1970] 3 All ER 933
over, because of, eg threats of violence, in one sense it could be said that there is ‘consent’; yet the offence of robbery as defined in s 8(1) of the 1968 Act involves, as one of its elements, theft. Again, the former offences of larceny by a trick and obtaining property by false pretences, although technically distinct offences under the old law, both involved what in one sense could be described as ‘consent’ by the victim. It was conceded by counsel for the appellant, necessarily and rightly, that the old offence of larceny by a trick is covered by s 1(1) of the 1968 Act, as well as by s 15(1) to which we shall refer later, despite what may be called the apparent consent of the victim.
Of course, where there is true consent by the owner of property to the appropriation of it by another, a charge of theft under s 1(1) must fail. This is not, however, because the words ‘without consent’ have to be implied in the new definition of theft. It is simply because, if there is such true consent, the essential element of dishonesty is not established. If, however, the apparent consent is brought about by dishonesty, there is nothing in the words of s 1(1), or by reason of any implication that can properly be read into those words, to make such apparent consent relevant as providing a defence. The prosecution have to prove the four elements already mentioned, and no more.
No inference to the contrary is to be drawn from the words of s 2(1)(b), already quoted. That reference does no more than show that the essential element of dishonesty does not exist if the defendant when he appropriates the property believes that the owner would consent if he knew the circumstances. ‘The circumstances’ are, of course, all the relevant circumstances. ‘The belief’ is an honest belief. That paragraph does not give rise to the inference that an appropriation of property is not theft when there is a ‘consent’—if it can be rightly so described—which is founded on the dishonesty of the defendant. The primary submission on behalf of the appellant therefore, fails.
In the submission at the trial, it would seem that it was contended on behalf of the appellant that the facts would, or might, have justified a charge being brought under s 15(1) of the Theft Act 1968. That subsection, which defines the offence of obtaining property by deception, reads:
‘A person who by any deception dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall on conviction on indictment be liable to imprisonment for a term not exceeding ten years.’
It was then contended that, assuming the offence amounted to obtaining property by deception, it was of the nature which, before the new Act, would have amounted to obtaining property by false pretences, and not to larceny by a trick. It was then argued that, since the provisions for alternative verdicts previously contained in s 44(3) and (4) of the Larceny Act 1916 have found no counterpart in the Theft Act 1968, the appellant could not be convicted on this indictment. Section 6(3) of the Criminal Law Act 1967 could have no application; and this latter point, as to s 6(3), was indeed conceded before this court by counsel for the prosecution.
In this court, counsel for the appellant contended that on the facts of this case the prosecution could not have succeeded even if the indictment had been laid under s 15(1). In the view of this court, if the indictment had been laid under s 15(1), the jury could, indeed, have convicted of that offence. Had the old law still prevailed, the offence would have been obtaining by false pretences, not larceny by a trick. But under the new law both those old offences are covered by s 15(1). The court sees no ground for saying that, for present purposes, it makes the slightest difference whether under the old law the offence would have been false pretences or larceny by a trick. The old and unsatisfactory distinction is not to be perpetuated unnecessarily where the language of the Theft Act 1968 does not require it. There is no
Page 937 of [1970] 3 All ER 933
magic in the word ‘property’ in s 1(1) in view of the definition in s 4(1) of the Act. In either case, the fact that a charge could have been brought under s 15(1), which covers both, in no way operates to prevent the charge being validly laid as theft under s 1(1) if the prosecution can prove what they must prove, as previously described, under that subsection. This is conceded in respect of an offence which would once have been larceny by a trick. It applies equally to what would once have been obtaining by false pretences, if, as is here the case, the requirements of s 1(1) are also satisfied. That submission also fails.
It may be that the result of our decision is that in any case where the facts would establish a charge under s 15(1) they would also establish a charge under s 1(1). The alternative, however, involves the writing back into s 1(1) of the words which the legislature, no doubt deliberately, omitted, and the reintroduction into the criminal law of the distinction between larceny by a trick and obtaining by false pretences. Counsel for the appellant sought to support his submission that no charge lay under the Theft Act 1968, by reference to the fact that what the appellant had done constituted an offence or offences under other legislation. We were not referred specifically to the relevant Acts, but the reference must be to various Acts including the Metropolitan Public Carriage Act 1869, the London Cab and Stage Carriage Act 1907 and the London Cab Act 1968, and regulations made thereunder. It may be accepted that the appellant committed one or more offences under that body of legislation, consisting of, or including, the offence of demanding more than the authorised fare. This court sees no reason why that fact should be regarded as excluding trial and conviction under the Theft Act 1968, if, as in the case, the facts constitute an offence under the 1968 Act. The appeal is dismissed.
Appeal dismissed.
13 November. Leave to appeal to the House of Lords granted, the court certifying under s 1(2) of the Administration of Justice Act 1960 that two points of law of general public importance were involved, namely (1) whether s 1(1) of the Theft Act 1968 was to be construed as though it contained the words ‘without having the consent of the owner’ or words to that effect; (2) whether the provisions of ss 15(1) and 1(1) of the Theft Act 1968 were mutually exclusive in the sense that if the facts proved would justify a conviction under s 15(1) there could not lawfully be a conviction under s 1(1) on those facts.
Solicitors: Registrar of Criminal Appeals (for the appellant);Solicitor, Metropolitan Police (for the Crown).
N P Metcalfe Esq Barrister.
Singette Ltd and others v Martin
[1970] 3 All ER 938
Categories: LEISURE AND LICENSING
Court: HOUSE OF LORDS
Lord(s): LORD HODSON, VISCOUNT DILHORNE, LORD WILBERFORCE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 13, 14 OCTOBER, 25 NOVEMBER 1970
Gaming – Pool betting – Football pool betting scheme – Necessity for element of skill in forecasting to comply with statutory requirements – Scheme providing option to exercise skill – Exercise of skill by only 1 per cent of participants – Whether statutory requirement complied with – Betting, Gaming and Lotteries Act 1963, Sch 2, para 13(a).
Gaming – Lottery – Football pool betting scheme – Option to choose numbers in place of allocated numbers – Option exercised by only 1 per cent – Option collateral to lottery and not destructive of character – Whether scheme a lottery – Whether requirements of Parts I and III of Betting, Gaming and Lotteries Act 1963 conflicting.
The appellants, who were a registered pool promoter, its administrative agents, and directors of the promoter and its agents, ran a club in connection with which they organised competitions for prizes. On joining the club a member received a membership card containing four numbers which represented his numbers in the competitions. A person entered the competitions by paying 1s which covered his weekly stake (4d) for three weeks. Of each 1s received, 2d was used for cancer research etc, part (2d or 3d) was used to pay prizes, part was used for gifts in a lucky dip scheme, and the remainder was used to pay commission, pool betting duty, expenses and to provide reserves. Each week a number was appropriated to each of the home teams in the association football fixture list in the national leagues. A member’s teams in any week’s competition were determined by relating the numbers on his membership card to the numbers appropriated to the various home teams. A member’s numbers remained in force until he exercised an option to substitute in any week numbers of his own choice. Also a member could make an additional entry by nominating numbers of his own choice. In any given week, however, some 99 per cent of the members remained passive and retained the numbers which they had had in preceding weeks. Of the sums allocated for prize money, 90 per cent was paid to the members whose four teams won their matches and scored the highest number of goals; 5 per cent was paid for the highest number of goals from three winning home teams and a draw; 2 1/2 per cent was paid for the highest total of goals from four draws; and 2 1/2 per cent was paid for the highest total of goals scored by four unbeaten home teams in six weekly competitions. On the question whether the competitions contained an element of skill thus bringing them within para 13(a)a of Sch 2 to the Betting, Gaming and Lotteries Act 1963; and whether, if the competitions were within para 13(a), they were unlawful lotteries under Part III if they did not require the exercise of skill,
Held – (i) On the assumption that the competitions constituted pool betting for the purposes of the Act the competitions did not comply with the requirements of para 13(a), because—
(a) as the appellants knew from experience, the vast majority of competitors made no forecast; they merely accepted the numbers allocated to them and made no attempt to estimate which teams were going to win or score most goals (see p 940 a to c, p 942 h and j to p 943 a and p 944 g, post); and
(b) the exceptional participants who made forecasts represented only 1 per cent and were too few in number to alter the general character of the competitions which were predominantly not competitions for prizes for making forecasts but competitions for holding lucky numbers (see p 940 a to c, p 943 c and p 944 g, post).
Page 939 of [1970] 3 All ER 938
(ii) If the competitions had complied with para 13(a) they would necessarily be competitions for prizes for making forecasts as to sporting or other events and thus would contain an element of skill; by reason of the element of skill they would not be lotteries. There was no conflict or discrepancy in that respect between Part I of the Act (dealing with betting) and Part III (dealing with lotteries and prize competitions). A competition which, having no element of skill, was an unlawful lottery under Part III, could not be lawful pool betting under Part I (see p 940 a to c, p 943 h and p 944 g, post).
(iii) For the vast majority who made no forecast but won prizes if their numbers happened to be lucky, the competition had the character of a lottery; the option to make a forecast and to substitute chosen numbers for the allocated numbers was collateral to the lottery and did not take away its character as a lottery (see p 940 a to c and p 944 a c and g, post).
Challis v Newman (27 April 1937), unreported, approved.
(iv) The existence of minor prizes did not preclude the making of a genuine forecast aimed at winning the main prize (see p 940 a to c and p 944 f and g, post).
Decision of the Queen’s Bench Division [1970] 2 All ER 570 affirmed.
Notes
For requirements as to the conduct of pool betting and offences, see 18 Halsbury’s Laws (3rd Edn) 230, 231, para 443, and 235, para 453.
For lotteries, see ibid 238–241, paras 460–462, and for cases on the subject, see 25 Digest (Repl) 488–495, 498–528, and 511–513, 614–622.
For the Betting, Gaming and Lotteries Act 1963, Sch 2, para 13, see 14 Halsbury’s Statutes (3rd Edn) 622.
Cases referred to in opinions
Barker v Mumby [1939] 1 All ER 611, 160 LT 284, 103 JP 125, 25 Digest (Repl) 489, 508.
Challis v Newman (27 April 1937) unreported.
Director of Public Prosecutions v Bradfute and Associates Ltd [1967] 1 All ER 112, [1967] 2 QB 291, [1967] 2 WLR 459, 131 JP 117, Digest Supp.
Director of Public Prosecutions v Phillips [1935] 1 KB 391, [1934] All ER Rep 414, 104 LJKB 73, 152 LT 190, 98 JP 461, 25 Digest (Repl) 489, 503.
Hall v Cox [1899] 1 QB 198, 68 LJQB 167, 79 LT 653, 25 Digest (Repl) 513, 619.
Moore v Elphick [1945] 2 All ER 155, 110 JP 66, 25 Digest (Repl) 493, 512.
Scott v Director of Public Prosecutions [1914] 2 KB 868, [1914–15] All ER Rep 825, 83 LJKB 1025, 111 LT 59, 78 JP 267, 25 Digest (Repl) 513, 621.
Taylor v Smetten (1883) 11 QBD 207, 52 LJMC 101, 48 JP 36, 25 Digest (Repl) 494, 521.
Willis v Young and Stembridge [1907] 1 KB 448, 76 LJKB 390, 96 LT 155, 71 JP 6, 25 Digest (Repl) 493, 511.
Appeal
This was an appeal by Singette Ltd, ABC Pools Ltd, Marlo Carlo Carpanini, Brian Goode, James Lynch and Kenneth Henry Welsher, against an order of the Queen’s Bench Division (Lord Parker CJ, Bridge and Bean JJ) dated 23 April 1970 and reported [1970] 2 All ER 570, dismissing their appeal by way of case stated from their convictions by the stipendiary magistrate for the city of Cardiff (J C Rutter Esq) on 23, 24 September and 1 October 1969 on 29 informations preferred against them by the respondent, Frederick Martin. In the magistrate convicted the appellants (other than ABC Pools Ltd) of offences contrary to s 4(3) of, and paras 13(a) and 29(2) of Sch 2 to, the Betting, Gaming and Lotteries Act 1963, and also convicted the appellants of offences contrary to s 42 of the Act. The facts are set out in the opinion of Lord Pearson.
Tasker Watkins QC and T M Evans for the appellants.
B F Griffiths QC and A M Jones for the respondent.
Page 940 of [1970] 3 All ER 938
Their Lordships took time for consideration
25 November 1970. The following opinions were delivered.
LORD HODSON. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Pearson, with which I agree. I would dismiss the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Pearson. I agree with it and I would dismiss the appeal.
LORD WILBERFORCE. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Pearson, with which I agree. I would dismiss the appeal.
LORD PEARSON. My Lords, the appellants were convicted by the stipendiary magistrate for the city of Cardiff of offences against the Betting, Gaming and Lotteries Act 1963, in respect of weekly football pools, called ‘competitions’, conducted by them. The competitions were promoted by the appellants Singette Ltd, who were registered pool promoters. The appellants ABC Pools Ltd acted as administrative agents for Singette Ltd. The appellants Carpanini and Goode were directors of Singette Ltd, and the appellants Lynch and Welsher were directors of ABC Pools Ltd. The details of the numerous charges need not be set out. The correctness of the convictions under the first five charges depends on the correctness of the respondent’s contention that the pool betting business involved did not conform with the requirement of para 13(a) of Sch 2 to the Act that such a business—
‘… shall take the form of the promotion of competitions for prizes for making forecasts as to sporting or other events, the bets being entries in the competitions and the winnings in respect of the bets being the prizes or shares in the prizes.’
If that contention is correct, it follows that offences were committed under s 4(3) and paras 13(a) and 29(2) of Sch 2. The correctness of the convictions under the last 24 charges depends on the correctness of the respondent’s contention that the pools were lotteries and unlawful under s 41 of the Act. If that contention is correct, it follows that offences were committed under s 42, as none of the exemptions provided by s 43 to 46 was applicable.
In setting out the facts I shall follow the case stated with some amplification from explanations given by counsel and illustrative documents—rules and forms—that have been supplied.
Membership of the Cancer League Club was a prerequisite to participation in the competitions conducted by the appellants. On joining the Cancer League Club a person received a membership card containing four numbers between 1 and 55. The stub of the card was returned to and kept by the club and served as a record of membership and of the member’s numbers in the competitions. The member could accept the numbers tendered to him (the numbers being already printed on the card) or could select his own numbers if he so desired (filling in his numbers on blank spaces in the card). The majority accepted those tendered. A person entered for the competitions by paying in advance 1s to an authorised collector. This covered the weekly stake of 4d per week for three weeks. Of each 1s collected 2d was paid over for use in cancer research, education and treatment. Of the remaining 10d in the 1s a part (stated to be about 2d or 3d) was paid out in ‘dividends’ (ie prizes) in the competitions, part was used in providing gifts or prizes in certain lucky dip schemes (stated to be the subject of other proceedings) and the remainder went in commission, pool betting duty, other expenses and reserves.
Each week a number between 1 and 55 was appropriated to each of the home teams in a list of 55 association football fixtures in the national leagues. A participant’s
Page 941 of [1970] 3 All ER 938
teams in the week’s football competitions were determined by relating his membership card numbers to the numbers appropriated to the home teams in the list of football fixtures. A participant’s initial set of four numbers remained in force subject to his right to submit a revised pools entry coupon substituting other numbers of his choice for any particular week. A revised pools entry coupon had to be sent to the appellants Singette Ltd in a sealed envelope and had to be posted by the entrant not later than the Thursday prior to the matches. It would not be accepted through the medium of a collector. Also, there was a form called ‘Postal Forecast Coupon’, on which an additional entry with chosen numbers could be made for a particular week on payment of an additional sum of 4d. A person, before submitting a revised pools entry coupon or postal forecast coupon for a particular week, would be able to see the numbers appropriated to the home teams on the list of fixtures for that week and consequently he could make his own choice of his four teams for that week. In any given week, however, some 99 per cent of the participants remained passive and retained the identical four numbers that they had had in preceding weeks without making any selection whatsoever for themselves. Weekly football pool coupons did not have to be filled in by the participants.
Of the sums allocated as prizes for the competitions, 90 per cent was paid to the participant or participants whose four teams won their matches and scored the highest total number of goals, 5 per cent was paid for the highest total of goals from three winning home teams and a draw, and 2 1/2 per cent was paid for the highest total of goals from four draws. Those prizes were called ‘dividends’. There was also, as appears from the rules, ‘Pontoon 2 1/2 per cent. Highest total goals scored by four unbeaten Home teams in six weekly competitions’. The learned magistrate stated his opinion and decision as follows:
‘I was of opinion that, looking at the realities and at what in fact happened with regard to these competitions, that is to say that in any given week 99% of the participants retained the identical four numbers that they had had in the preceding weeks without taking action to make any forecast whatsoever for themselves, such competitions did not involve any real element of forecasting skill but were ones of pure chance. Accordingly, I entered convictions on the Informations set out in the Schedule.’
On appeal the Divisional Court of the Queen’s Bench Division ([1970] 2 All ER 570, [1970] 2 WLR 1290) held that the decision of the learned magistrate was correct, and they dismissed the appeal, but they gave the appellants leave to appeal to your Lordships’ House and certified that points of law of general public importance were involved in their decision, namely:
‘(1) Must a competition for prizes conducted by a registered pool promoter for making forecasts as to sporting events contain an element of skill to be lawful under para 13(a) of Sch 2 to the Betting, Gaming and Lotteries Act 1963?
‘(2) If such a competition conducted by a registered pool promoter is otherwise lawful under para 13, is it an unlawful lottery under s 41 of the Act if it does not require the exercise of skill?’
In the present appeal counsel for the appellants put forward three contentions, namely: (i) that the competitions were lawful as pool betting under Part I of the Act, not failing to comply with the requirement set out in para 13(a) of Sch 2; (ii) that the competitions, being lawful as pool betting under Part I of the Act, could not be unlawful lotteries under Part III; and (iii) that in any case there was in the competitions an element of skill which prevented them from being lotteries.
In relation to the appellants’ first contention the relevant provisions of the Act are as follows. Section 4 provides:
‘… (2) No person shall carry on any pool betting business otherwise than on
Page 942 of [1970] 3 All ER 938
a track unless he is a registered pool promoter … (3) Schedule 2 to this Act shall have effect for the purposes of the registration of a person as, and the conduct of his pool betting business by, a registered pool promoter.’
Schedule 2, para 13, provides:
‘Subject to paragraphs 14 to 19 of this Schedule, the pool betting business carried on by any registered pool promoter shall comply with the following requirements—(a) it shall take the form of the promotion of competitions for prizes for making forecasts as to sporting or other events, the bets being entries in the competitions and the winnings in respect of the bets being the prizes or shares in the prizes; (b) each bet shall be an entry in a particular competition; … (d) in each competition, the prizes shall be equally available for all the bets, and accordingly the question which bets qualify for, or for shares in, the prize or prizes and, save so far as it depends on the amounts staked, the amounts of the respective shares in the prizes, shall be determined solely by the relative success of the forecasts embodied in the respective bets … ’
Schedule 2, para 29(2), provides:
‘If any registered pool promoter fails to comply with any duty imposed upon him by this Schedule or if any of the provisions of this Schedule, except so far as they impose duties on the accountant or the registering authority, are contravened in the case of the business of any registered pool promoter, the registered pool promoter shall be guilty of an offence.’
There is also a provision in s 55 of the Act that the expression ‘pool betting’ has the same meaning as for the purposes of the Betting Duties Act 1963. The meaning of ‘pool betting’ is defined in s 3 of the Betting Duties Act 1963. It is unnecessary for the purposes of the present appeal to decide whether or not the participants in the competition were making ‘bets’ or engaging in ‘pool betting’. It can be argued that for a member merely to stand by and wait and see whether the four numbers on his card might happen to correspond with the numbers allocated by the promoters in a particular week to the four football teams which in that week won their matches and scored the highest aggregate number of goals would not be sufficiently positive or active conduct to constitute a ‘bet’ or ‘pool betting’. On the other hand it can be argued that a member who in a particular week merely stands by and waits to see what happens is passively making a ‘bet’ that his numbers will be the lucky numbers for that week. The question which of these opposing arguments should be preferred can, and in my view should, be left undecided in this appeal. It has to be considered in this appeal whether the competitions, on the assumption that they constitute ‘pool betting’, comply with the requirement of para 13(a) or not. Does the pool betting business ‘take the form of the promotion of competitions for prizes for making forecasts as to sporting or other events’?
In my view, which is in agreement with the views of the learned magistrate and the Divisional Court ([1970] 2 All ER 570, [1970] 2 WLR 1290), the answer is in the negative. There is a long-established course of business and the appellants well know the actual character of the competitions which they are promoting. On the average in any week 99 per cent of the participants do not make any forecast. They already have their numbers which were allocated to them in the past when most of them took the numbers which happened to be tendered to them and the others chose their numbers having no knowledge as to which teams would in future weeks be allocated by the appellants to those numbers. The participants have bought their cards, paying 1s for three weeks, and presumably they have done so because thereby they support the good cause of cancer research and treatment and because they are given the chance of winning a prize if their numbers happen to be the lucky numbers in a particular week. They do not have to do anything more or think about the matter again. In particular they do not
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have to estimate which teams are going to win and score the most goals. On the average in any week 99 per cent of them do nothing. If their numbers happen to be the lucky numbers in that week, they win prizes; otherwise, they do not. The prizes are not for making forecasts but for holding numbers which happen to be lucky in a particular week.
That is the general and predominant character of the competitions. There are the exceptional participants, averaging 1 per cent, who for a particular week use the revised pools entry coupon for the purpose of substituting for the previously allocated numbers other numbers which they have chosen with knowledge of the teams denoted by those numbers for that week. There may also be some participants using the postal forecast coupon for making additional bets paying the additional 4d for each. These exceptional participants can and presumably do make forecasts; they can choose the teams which according to their expectations or hopes are likely to win the matches and score the most goals. But these exceptional participants, who can and presumably do make forecasts, are too few in comparison with the 99 per cent of normal, inactive participants to alter the general character of the competitions, which are predominantly not competitions for prizes for making forecasts but competitions for prizes for holding lucky numbers. As will be pointed out later in relation to the question whether the competitions are lotteries, what is offered in substance and reality is a mere lottery available to all the participants, although there is associated with it an option for any participant in a particular week to opt out of the lottery and make a forecast. Therefore these competitions do not comply with the requirement of para 13(a) and they involve the commission of offences under para 29(2).
In my view there is an element of skill in the making of ‘forecasts as to sporting or other events’ such as are contemplated by para 13(a). Of course a person who has no knowledge or experience in the relevant field of sporting or other events cannot use any skill in his forecasting, and even a person who has such knowledge or experience may choose not to make use of it on a particular occasion. But para 13(a) evidently contemplates activities such as football pools, and football pools can be taken as an illustration. A person who has some knowledge of the football teams concerned and of their records of previous results can and naturally will exercise some skill in forecasting which teams are likely to win and (if this also has to be forecast) which of them are likely to score the most goals. Obviously, if one knows that a particular team has a strong forward line and good supporting half backs and is playing against an inferior team with a weak defence, it is reasonable to expect the former team to win and have a good score of goals. There is some skill in making the forecast, even if the reasonable expectation may be frustrated.
This conclusion undermines the appellants’ second contention, which is that the competitions being lawful pool betting under Part I of the Act cannot be unlawful lotteries under Part III. The competitions are not lawful pool betting under Part I, because they do not comply with the requirement of para 13(a). If they did comply with that requirement, they would be competitions for prizes for making forecasts as to sporting or other events and so would have an element of skill and would for that reason not be lotteries. There is no conflict or discrepancy in this respect between Part I and Part III of the Act. A competition which, having no element of skill, in an unlawful lottery under Part III, cannot be lawful pool betting under Part I.
The third contention of the appellants is that in any case the competitions are not lotteries because they have an element of skill. The question which arises here is to a large extent answered by what has been said above. The decided cases show that: (1) a lottery is a distribution of prizes by lot or chance; (2) for a competition to be a lottery the winning of a prize must depend solely on chance and not on skill; and (3) in deciding whether a competition is a lottery or not, a realistic view should be taken and regard should be had to the way in which the competition is actually
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conducted. Taylor v Smetten ((1883) 11 QBD 207 at 210–212), Hall v Cox, Willis v Young and Stembridge, Scott v Director of Public Prosecutions ([1914] 2 KB 868 at 874, 875, 881 [1914–15] All ER Rep 825 at 830, 831, 834), Director of Public Prosecutions v Phillips ([1935] 1 KB 391 at 400–402, [1934] All ER Rep 414 at 416, 417), Moore v Elphick ([1945] 2 All ER 155 at 156, 157, 161, 162), and Director of Public Prosecutions v Bradfute and Associates Ltd ([1967] 1 All ER 112 at 114, 115, [1967] 2 QB 291 at 295, 297).
For the 99 per cent in any week, who make no forecast but win prizes if their numbers happen to be lucky numbers for that week, the competition has the character of a lottery. For them the distribution of the prizes depends entirely on chance and no element of skill is involved. Is the competition saved from being a lottery by the fact that the participants have in each week an option to substitute chosen numbers, involving a choice of teams, and on the average 1 per cent of them exercise the option in any week? In my opinion it is not saved from being a lottery by that fact. In substance and reality what is offered is a lottery available to all the participants, but there is associated with it an option to opt out of the lottery in a particular week and try to win a prize by making a forecast. This option is something collateral to the lottery and does not take away its character as a lottery. In my opinion the judgment in Challis v Newman, which is not reported but was cited and relied on by Lord Hewart CJ in Barker v Mumby and by Lord Parker CJ in the Divisional Court ([1970] 2 All ER at 574, [1970] 2 WLR at 1296) in the present case, reached a correct conclusion, the facts being somewhat similar to those in the present case.
Some argument in favour of the respondent’s contentions has been based on the variety of the prizes in the competitions. Of the prize money 90 per cent was paid to the participant or participants whose four teams won their matches and scored the highest total number of goals, 5 per cent was paid for the highest total of goals from three winning teams and a draw, and 2 1/2 per cent for the highest total of goals from four draws. It can be said that if a participant made a forecast he would naturally be trying for the 90 per cent for the four winning teams with the highest total of goals, and he could hardly be trying at the same time for the 2 1/2 per cent for four draws with the highest total of goals; if the 2 1/2 per cent prize came to him it would come by chance and not as a result of his forecast. But I do not think this point carries much weight. He might win the 5 per cent as the result of a good forecast narrowly missing the right solution, and the 2 1/2 per cent would be a mere consolation prize for one or more of the losers. The existence of these minor prizes does not in itself preclude the making of a genuine forecast aimed at winning the 90 per cent. The existence of such minor prizes which could only be won by chance might have some effect as an additional factor tipping the scale in a doubtful case, but is not material in the present case.
I would dismiss the appeal.
LORD DIPLOCK. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Pearson, with which I agree. I would dismiss the appeal.
Appeal dismissed.
Solicitors: Sweptstone, Walsh & Son, agents for Gaskell, Rhys & Otto-Jones, Cardiff (for the appellants); Lewin, Gregory, Mead & Sons, agents for R H C Rowlands, Cardiff (for the respondent).
S A Hatteea Esq Barrister.
R v Birmingham City Justice, ex parte Chris Foreign Foods (Wholesalers) Ltd
[1970] 3 All ER 945
Categories: ADMINISTRATIVE
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, JAMES AND COOKE JJ
Hearing Date(s): 7 JULY 1970
Natural justice – Duty to act openly, impartially and fairly – Information received prior to hearing – Meeting with local government officials – Inspection of subject-matter – Objectors at hearing aware of point in issue – Food and Drugs Act 1955, s 9(1)-(3).
Natural justice – Duty to act openly, impartially and fairly – Retirement to take advice – Advice received not made known to objectors – Food and Drugs Act 1955, s 9(1)-(3).
The applicants were importers of food. They imported a quantity of sweet potatoes which, after being lifted, were washed in water, and then dried in the sun. The drying bleached them and colouring matter was added to restore them to their original pink colour. A quantity of the sweet potatoes was seized by a local authority officer under s 9(1)a of the Food and Drugs Act 1955 and brought before a justice of the peace under s 9(2)b on 19 March at the offices of the public health department. The meeting was attended by the senior food inspector and a colleague and also the chief veterinary officer. The justice was shown a box of the sweet potatoes and a sample was cut open for his inspection. It was said that the sweet potatoes were not fit for human consumption in that being vegetables in a raw or unprocessed state they had in them colouring matter (contrary to reg 5(1)c of the Colouring Matter in Food Regulations 1966). To the justice (according to his subsequent affidavit) the sweet potatoes appeared raw; in the public analyst’s certificate which he was shown they were described as ‘unprocessed’. Notice was given to the applicants and the hearing was adjourned until 2 April. On that date the local authority called no evidence but the applicants (who clearly knew the point in issue) made submissions and called evidence. At the conclusion of the applicants’ case the justice retired together with the public analyst and the chief veterinary officer stating that he wished to take advice from them. All three returned some minutes later and the justice announced that he found the sweet potatoes unprocessed and accordingly were, under s 9(3)d of the Act, unfit for human consumption. On an application for certiorari,
Held – (i) The justice, in the exercise of his functions, was under a duty to act openly, impartially and fairly (see p 948 j to p 949 a c f and j, post).
Dicta of Donovan J in R v Cornwall Quarter Sessions Appeal Committee, ex parte Kerley [1956] 2 All ER at 875 and of Lord Parker CJ in Re K (H) (an infant) [1967] 1 All ER at 231 applied.
(ii) His meeting with the chief veterinary officer, the public analyst and public officials on 19 March and their failure to give evidence on 2 April, notwithstanding the inspection of a sample by the justice in the absence of the applicants, did not amount to unfairness since the applicants knew at the hearing what point they had to meet (see p 949 a b f and j, post).
(iii) The retirement of the justice in the company of two officials in order to take advice and the return of all three persons just prior to his decision amounted to a breach of natural justice since he did not inform the applicants of the advice tendered and give them an opportunity to counter it (see p 949 c f and j, post); further, s 9(3)
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of the 1955 Act gave jurisdiction to the justice alone (see p 949 e f and j, post); accordingly, an order for certiorari would go.
Notes
For the rules of natural justice, see 11 Halsbury’s Laws (3rd Edn) 64–66, para 122, and 30 ibid 718, 719, para 1368.
For the Food and Drugs Act 1955, s 9, see 14 Halsbury’s Statutes (3rd Edn) 33.
Cases referred to in judgments
K (H) (an infant), Re [1967] 1 All ER 226, sub nom Re H K (Infant) [1967] 2 QB 617, [1967] 2 WLR 962, Digest Supp.
R v Cornwall Quarter Sessions Appeal Committee, ex parte Kerley [1956] 2 All ER 872, [1956] 1 WLR 906, 120 JP 469, 25 Digest (Repl) 118, 390.
Cases also cited
Pett v Greyhound Racing Association Ltd (No 2) [1969] 2 All ER 221, [1970] 1 QB 46.
University of Ceylon v Fernando [1960] 1 All ER 631, [1960] 1 WLR 223.
Motion for certiorari
This was a motion by the applicants, Chris Foreign Foods (Wholesalers) Ltd, for an order of certiorari to bring up and quash four orders made by Leslie George Seymour, a justice of the peace for the city of Birmingham, on 2 April 1970, whereby he ordered that a consignment of 280 cases of sweet potatoes, the property of the applicants were to be condemned and destroyed as unfit for human consumption in that they contravened s 5(1) of the Colouring Matter in Food Regulations 1966. The facts are set out in the judgment of Lord Parker CJ.
K S Rokison for the applicants.
A F B Scrivener for the respondents.
7 July 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel for the applicants moves for an order of certiorari to bring up and quash four orders made by Leslie George Seymour, a justice of the peace for the city of Birmingham (hereinafter referred to as ‘the justice’) on 2 April 1970, whereby, pursuant to s 9 of the Food and Drugs Act 1955, he ordered that parcels of sweet potatoes amounting in all to 280 cases, the property of the applicants, should be condemned and destroyed as unfit for human consumption in that they contravened reg 5(1) of the Colouring Matter in Food Regulations 1966e.
Before coming to the facts of the case, it is convenient to remind oneself of the legislation. Section 9 of the Food and Drugs Act 1955 provides for the examination and seizure of suspect food. It provides:
‘(1) An authorised officer of a council may at all reasonable times examine any food intended for human consumption which has been sold, or is offered or exposed for sale, or is in the possession of, or has been deposited with or consigned to, any person for the purpose of sale or of preparation for sale, and, if it appears to him to be unfit for human consumption, may seize it and remove it in order to have it dealt with by a justice of the peace.
(2) An officer who seizes any food under the foregoing subsection shall inform the person in whose possession the food was found of his intention to have it dealt with by a justice of the peace, and any person who under section eight of this Act might be liable to a prosecution in respect of the food shall, if he attends before the justice upon the application for its condemnation, be entitled to be heard and to call witnesses.
‘(3) If it appears to a justice of the peace that any food brought before him, whether seized under the provisions of this section or not, is unfit for human
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consumption, he shall condemn it and order it to be destroyed or to be so disposed of as to prevent it from being used for human consumption.’
The ground on which it is said that these potatoes were not fit for human consumption was by reason of an addition of colouring matter. Regulations were made in 1966 entitled the Colouring Matter in Food Regulations 1966 f, and by reg 5(1) it was provided:
‘… no … vegetable, in a raw or unprocessed state, sold, consigned, delivered or imported into England and Wales for human consumption, shall have in it or on it (otherwise than for the purpose of marking) any added colouring matter … ’
In fact the vegetables in the present case were sweet potatoes from Gambia, which undoubtedly did have colouring matter, and the sole issue which would determine whether they were fit or unfit for human consumption was whether they were in a raw or unprocessed state; if they were, they were liable to be condemned.
With that introduction it appears in the present case that the applicants, as their name shows, are importers of foreign foods, amongst other things sweet potatoes. Apparently sweet potatoes had until recently come solely from the Canary Islands, but of recent times they have been imported from Gambia. The Gambia sweet potatoes are pink in colour, but when lifted in Gambia they are sun dried, which bleaches the colour out of them, and in order to restore the pink colour, colouring matter is added.
These parcels of goods were perfectly fit for human consumption save in regard to this one matter, ie whether colouring matter had been added to them in either their raw or unprocessed state. What happened here quite shortly was that these parcels were seized by the local authority officer, and were brought before the justice. They were brought before him on 19 March, when he attended at the offices of the public health department and met the senior food inspector and his colleague, and the chief veterinary officer. He was on that occasion shown a box of these potatoes a sample was cut open, and as the justice in his affidavit in this case says, it appeared to be raw. In addition he was then shown the public analyst’s certificate which stated that the potatoes ‘appeared’ to be unprocessed. Quite properly notice was given to the applicants, who desired to call evidence, and the hearing was adjourned until 2 April. On 2 April a hearing took place at which no evidence was called by the local authority, but the applicants, who clearly knew the point at issue, appeared, made submissions, and called evidence to show that the potatoes were not raw or unprocessed. During the course of that hearing it is said that the justice refused to look at certain photographs which were being adduced by the applicants in support of their submissions, and also declined to look at any sample. Of course, the applicants did not know that he had in fact seen a sample and had one cut open, but at any rate he declined to look at the sample at the hearing.
Finally, this occurred, and in my judgment this is the real question in the case. According to Mr Medhurst, the articled clerk of the solicitors appearing for the applicants, in para 14 of his affidavit he states:
‘The case on behalf of the Applicants herein having been concluded, the Justice of the Peace rose and retired from the room together with the Public Analyst, Mr. Coombs, and the Chief Veterinary Officer, Mr. Wilson, saying that he wished to “Take advice” from them. Counsel on behalf of the Applicants herein protested but his protest was ignored. The Justice of the Peace, the Public Analyst and the Chief Veterinary Officer returned some minutes later, and the Justice of the Peace said that he upheld the Public Analyst’s Certificate, that the sweet potatoes in question did appear to be unprocessed and accordingly were unfit for human consumption.’
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The justice, in his affidavit, again para 14, states:
‘After Counsel had called all his evidence and concluded his argument I left the room with Mr. Coombs and Mr. Wilson. I then read the relevant passage in the Act itself and asked both these gentlemen for further assistance and both explained why they both thought the potatoes were unprocessed. I then returned to the room and I announced that I considered the processing I had heard about, namely (1) washing in warm water to remove the dirt, etc., and (2) drying by natural sunlight, did not result in a substantial change in the natural state of the potatoes and therefore I accepted the Analyst’s Certificate.’
Much argument has been adduced in this present case as to the exact position of the justice under this procedure. Was his a judicial function? Was it a judicial inquiry? Was it a quasi-judicial inquiry? Was he an administrator acting as the result of a judicial inquiry? Was he throughout an administrator? What position was he in?
For my part I find it quite unnecessary to come to any decision in the matter, anymore than I did in a case concerning immigrants, Re K (H) (an infant). That concerned the position of immigration officers, and again considerable argument was adduced as to the exact position of the immigration officers. Having referred to another caseg, I said ([1967] 1 All ER at 231, [1967] 2 QB at 630):
‘This, as it seems to me, is a very different case, and I doubt whether it can be said that the immigration authorities are acting in a judicial or quasi-judicial capacity as those terms are generally understood. At the same time, however, I myself think that even if an immigration officer is not acting in a judicial or quasi-judicial capacity, he must at any rate give the immigrant an opportunity of satisfying him of the matters in the subsection, and for that purpose let the immigrant know what his immediate impression is so that the immigrant can disabuse him. That is not, as I see it, a question of acting or being required to act judicially, but of being required to act fairly. Good administration and an honest or bona fide decision must, as it seems to me, require not merely impartiality, nor merely bringing one’s mind to bear on the problem, but of acting fairly, and to the limited extent that the circumstances of any particular case allow, and within the legislative framework under which the administrator is working, only to that limited extent do the so-called rules of natural justice apply, which in a case such as this is merely a duty to act fairly.’
That, as I understand it, has been approved on more than one occasion in the Court of Appeal.
I approach it in that manner because the court has been referred, amongst other cases, to R v Cornwall Quarter Sessions Appeal Committee, ex parte Kerley, where this court held that a justice to whom a sanitary inspector had referred a matter under legislation then in force for condemnation, was not a court of summary jurisdiction, so that there was no appeal to quarter sessions, and quarter sessions were prohibited from dealing with the applicant’s appeal; that was the ratio of that decision. Quite clearly, as was pointed out in that case, the justice in a case such as this is not acting as a court of summary jurisdiction, there is no information preferred; there is no complaint preferred; he is clearly not acting as a court of summary jurisdiction. The court then went on in various terms to emphasise that he was really acting administratively as if he was the chief inspector confirming one of his underlings. But again Donovan J referred to the matter in the way in which I prefer to refer to it, when he said ([1956] 2 All ER at 875, [1956] 1 WLR at 911) that even though he was acting in an administrative or executive capacity he,
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ie the justice, had to bring qualities of impartiality and fairness to bear on the problem.
Complaint has been made that the justice in this case had a meeting with the chief veterinary officer, the public analyst and public officials on 19 March, when the matter was first referred to him, and that they never gave any evidence at the hearing on 2 April. For my part I do not think that the justice was prevented under this procedure from hearing the evidence of those officials, having a sample taken, inspecting the sample before and in the absence of the applicants. Nor do I think it necessarily any unfairness if those officials do not give evidence at the hearing, provided always that the objectors, the applicants, are told what the point is that they have to meet, and of course at this hearing they clearly knew and had evidence to deal with it.
But the point where I feel that the rules of natural justice in their limited application to such a case as this, limited to openness, impartiality and fairness, have been broken, is when the justice retired with the two officials in order, as he puts it, to take advice, and the three of them then came back into court and he announced his decision. It seems to me that in a case such as this a justice must be very careful not to take any fresh advice or hear any fresh evidence in the absence of the objectors, unless he returns and enables the objectors to know what the advice is that he has received thus enabling them to deal with it. To give an illustration of the present case, the public analyst had said the highest that he had put it was that the potatoes appeared to be unprocessed. Supposing when the justice retires with him, he says ‘I was being very cautious, I think it is quite clear they were unprocessed’, one asks one’s self should not the objectors have an opportunity of meeting that, and probably meeting it by cross-examination, to which in the ordinary way, this not being a trial, there would be no right. One looks to see what is fair.
But the matter does not end there, because this is, as s 9(3) of the Act of 1955 says, a decision of the justice. It is not a decision of the justice together with the chief analyst and the chief veterinary officer, any more than the decision of a justice when he is sitting in a court of summary jurisdiction is the decision of himself and his clerk. It seems to me that in the present case the rules of natural justice in their limited, and very limited, application to a case such as this have been broken in the present case, and I would let the writ issue.
JAMES J. I agree with what Lord Parker CJ has said and would add little. The justice, by virtue of the provisions of s 9(2) of the Food and Drugs Act 1955 was under a duty to hear the applicants and any witnesses they called if they attended on the application for condemnation. Whether one calls that the exercise of a duty which is judicial, quasi-judicial or executive, it seems to me for the reasons already apparent from the judgment given, beyond question that the exercise must be attended with fairness and impartiality, and further that the exercise of that duty should be seen to be carried out openly, impartially and with fairness. To leave the room with the protagonists of the applicants, the man who had brought in the justice to adjudicate, with the person who has provided the evidence, namely the certificate of analysis, and then to return and announce a decision without indicating to the applicants what, if any, further advice had been given by those persons, in my judgment was a breach of the requirements that the procedure should be carried out seemingly open and with fairness.
COOKE J. I agree with both judgments and I have nothing to add.
Order for certiorari.
Solicitors: Ince & Co (for the applicants); Sharpe, Pritchard & Co, agents for Town Clerk, Birmingham (for the respondents).
Vincent Maxwell Esq Barrister.
Samuel Keller (Holdings) Ltd and another v Martins Bank Ltd and another
[1970] 3 All ER 950
Categories: LAND; Mortgages
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, EDMUND DAVIES AND CROSS LJJ
Hearing Date(s): 28, 29 JULY 1970
Mortgage – Discharge – Failure of mortgagor to repay loan secured by charge on his property – Writ issued by mortgagee – Counterclaim by mortgagor for unliquidated damages – Counterclaim possibly exceeding amount of debt due – Whether mortgage debt discharged by existence of counterclaim.
Mortgage – Repayment – Sale of mortgaged property – Unliquidated claim by mortgagor against mortgagee related to mortgage debt – Whether mortgagee entitled to repayment out of proceeds.
In January 1967, L company bought from K company all the issued shares in two companies for £77,220, the contract providing that K should lend L £31,000 on the security of a third mortgage of L’s factory. The mortgage provided for repayment in three instalments with interest. L failed to pay the first instalment or interest due in January 1968 whereupon K issued a writ for judgment under RSC Ord 14. In those proceedings L was granted unconditional leave to defend and delivered a counterclaim for unliquidated damages for breach of conditions and warranties in the contract of sale, being the amount by which the damages might exceed the whole sum secured by the mortgage. Subsequently L’s factory was sold, the first mortgagee was paid off and the second mortgagee, the bank, having deducted the sum due to it out of the proceeds of sale, had in its hands some £36,000 plus accrued interest representing the property charged to K. L asked the bank to pay that sum into court and K then issued the writ dated July 1969 in the present action claiming the moneys. In November 1969, the bank issued an interpleader summons applying for an order that all further proceedings in the present action be stayed until trial of the action pending between K and L. On appeal from a refusal to make any order on the bank’s application,
Held – (i) The mortgage debt due from L to K remained in being despite the existence of L’s counterclaim in the first action.
(ii) Unless and until K’s mortgage was discharged on actual payment and acceptance of the sum due, the mortgage remained a mortgage and K, as mortgagee, was entitled to any surplus proceeds of sale in the hands of the bank up to the amount properly due under the mortgage. Accordingly, the bank was not entitled to a stay of proceedings and the appeal would be dismissed.
Notes
For the application of the proceeds of sale, see 27 Halsbury’s Laws (3rd Edn) 309–311, paras 579–582, and for cases on the subject, see 35 Digest (Repl) 581–587, 2549–2590.
Appeal
The defendants, Martins Bank Ltd appealed from an order of Megarry J dated 9 April 1970 whereby he refused to make any order on the application of the bank by summons for relief by way of interpleader, that all further proceedings in the action between the plaintiffs, Samuel Keller (Holdings) Ltd (Keller), and the defendants be stayed until the trial of an action then pending between the plaintiffs and the claimants, Henry W Lawton Ltd (in liquidation) in the Birmingham District Registry. The facts are set out in the judgment of Russell LJ.
Page 951 of [1970] 3 All ER 950
Jonathan Parker for the bank.
S E Brodie for Keller.
S Goldblatt for Lawton.
29 July 1970. The following judgments were delivered.
RUSSELL LJ. The claimant company (which I will call ‘Lawton’) in January 1967, bought from the plaintiff company (which I will call ‘Keller’) all the issued shares of two companies, A Seazell & Co and Harris Metal Wares Ltd, the price agreed being £77,220. The contract provided that Keller would lend Lawton £31,000 on a third mortgage on a factory belonging to Lawton on completion—a transaction commonly described as leaving part of the purchase price on mortgage. The mortgage was in a fairly common form and it provided, in accordance with the terms of the sale and purchase contract, for repayment in three instalments of £10,000, £10,000 and £11,000 on 28 January 1968, 1969 and 1970 with interest at the rate of 9 per cent per annum. There was failure on the part of Lawton to pay the 1968 instalment or any interest and as a result, on 30 January 1968, Keller issued a writ in the Birmingham District Registry against Lawton suing for £10,000, the first instalment, and a sum of some £1,600-odd net interest up to 28 January 1968.
The contract for the sale and purchase of the shares contains a number of conditions and warranties which are conveniently set out in the defence and counterclaim in the Birmingham action. Clause 1(b) provides:
‘(12): that all information supplied with regard to assets, liabilities and trading of Seazell and Harris was true and correct in every respect and that there had been disclosed in writing prior to the signing of the Share Contract such facts, information and matters as were material or proper for disclosure to an intending purchaser of the shares and rights attaching [i e in effect, a condition or warranty by the vendor that there had been full and accurate disclosure to the purchaser of the shares of all relevant matters] …
‘(23): [a warranty by Keller] that neither Harris nor Seazell had since 30th June 1966 incurred any liabilities otherwise than in the ordinary course of carrying on their business …
‘(25): that to the best of [Keller’s] knowledge and belief no litigation was threatened or pending with respect to either company …
‘(28): that since [the last balance sheet date] the assets of each company had not been depleted by subsequent losses in the course of trade or business.
‘(29): that all debts due to either company would be paid in the ordinary course of business.’
In that action Keller sought judgment under RSC Ord 14; but Lawton successfully resisted that, and was given unconditional leave to defend and counterclaim on the ground that they had a substantial counterclaim for unliquidated damages for breach by Keller of the warranties and conditions to which I have referred, which damages, it is said, would or might exceed even the whole sum secured by the mortgage let alone the first instalment which was sued for under the writ.
The granting of the unconditional leave to defend in that case seems to me to be in accordance with the case to which our attention was drawn. Accordingly, Lawton delivered a defence and counterclaim on 19 April 1968, and a reply was subsequently delivered denying any claim. I need not go in any way into the details of the alleged claim for unliquidated damages for breach of conditions and warranties; but, for example, it was said that one of the two companies whose shares had been bought by Lawton was already in serious trouble in that one of its main customers was cutting down on its orders and ultimately put an end to them saying, rightly or wrongly, that the company was in breach of contract as regards supplies. Thus it was said that the value of the shares which Lawton had bought in these two companies
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was greatly depreciated by facts which, if they had been revealed at the time the contract was entered into, would have led Lawton not to buy the shares at all.
At some date after the Birmingham action started the factory was sold and the first mortgagee was paid off, and the second mortgagee (the first defendant in this action, Martins Bank Ltd) out of the balance of the proceeds of sale after the first mortgagee had been paid off deducted what was due to it as second mortgagee and had in its hands the sum of £36,000-odd and accrued interest as representing the property charged to Keller. Prima facie, it was, of course, the bank’s duty to pay over to Keller that sum, but Lawton, by a letter in April 1969, referring to their counterclaim in the Birmingham action, with a copy to the bank, in effect called on the bank not to pay to Keller but to pay the sum in its hands into court. As a result of this the bank was not prepared to hand over the money to Keller and Keller issued the writ in this action against the bank in July 1969 as subsequent chargee claiming, as I have indicated, the moneys representing the charged property from the bank as prior incumbent. In November 1969, the bank issued an interpleader summons, and no one criticises it for taking that action. This summons came before Megarry J in April 1970 but, of course, since the alleged issue between Keller and Lawton was already on foot in the Birmingham action, Lawton merely asked for a stay of proceedings in this action against the bank, pending the outcome of the Birmingham action, seeking to keep out of the hands of Keller the money representing the charged property until the question whether Lawton had any claim for unliquidated damages could be decided.
Before the judge and before us there was a good deal of technical discussion on the limited circumstances in which it can be said that a mortgage debt is discharged. It was argued that if the outcome of the Birmingham action was that damages were awarded on the counterclaim exceeding the amount due under the mortgage debt it would prove that Keller would not have been justified in obtaining the money from the bank and treating it as their own to meet their mortgage debt. It was submitted that by reason of the counterclaim the mortgage debt no longer existed, but that, to my mind, is plainly not so and I so hold.
Further, it is said that if the counterclaim in damages proved to be a substantial sum, although less than the mortgage debt, it would mean that Keller would not have been justified now in taking and treating as their own for the purpose of repayment of the mortgage debt (which, of course, by the time the interpleader summons was heard had all become payable) the money held by the bank. It was not contended that a court could in any way step in to prevent a claim such as that of Keller’s against the bank if the Lawton counterclaim had no connection at all with the creation of the mortgage; but it was said that when the mortgage was created as a result of a contract which gave rise to the very claim for unliquidated damages for a breach thereof there should in equity be a power in the court to postpone the exercise by the mortgagee of his otherwise undoubted rights until that issue was decided, although it was, on the other hand, accepted that even in such a case the court would not step in to prevent the exercise by the mortgagee of his power of sale. It was nevertheless argued that it would step in to prevent any present exercise of the mortgagee’s subsequent remedies against the proceeds of sale. Put as a matter of equity in terms of fairness it was explicitly, or implicitly perhaps, argued that when the mortgage was part of the purchase price which would not have been paid at all had the matters of complaint (if established) been known at the time of the contract, some check should be put on the full exercise of the mortgagee’s rights until the issue has been determined. Authority for such a proposition is undoubtedly lacking and, if I may say so, reference to cases which showed that an assignee of a mortgage debt takes subject to the state of accounts between the mortgagor and the transferor of the mortgage does not seem to me to afford any guidance. No more do cases such as the casea to which I have already referred. But
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lack of authority, of course, ought not to deter us if in principle it seemed to us right and there appeared to be no countervailing detriment. However, speaking for myself, it seems to me clear that where the parties use a system of payment under a contract which involves in fact notional payment in full and a lending on mortgage of a sum, it could lead to abuse if the mortgagee was to be kept out of his undoubted rights, expressly provided for, by allegations of some connected cross-claim which may prove to be without foundation. Megarry J, in the course of his judgment below, said:
‘Unless and until the mortgage in this case is discharged in the appropriate way on actual payment and acceptance of the sum due, I think that the mortgage remains a mortgage, and that the mortgagee is entitled to any surplus proceeds of sale in the hands of the bank up to the amount properly due under the mortgage. A doctrine of the discharge of a mortgage debt by the existence of unilateral appropriation of an unliquidated claim is one to which I gave no countenance; I regard it as neither convenient nor just. Even where there is a claim which is both liquidated and admitted, and it exceeds the mortgage debt in amount, it may be to the interest of one party or the other, or both, that the mortgage and the mortgage debt should continue in existence. The rate of interest may be attractively high or seductively low; there may be fiscal advantages in keeping the mortgage alive; there may be new projects to be financed which make liquid cash preferable to the satisfaction of mortgage debts; and so on. Nor have I heard any reason why it should be the mortgagor who is to have a unilateral power to discharge the mortgage debt by appropriation without payment.’
I entirely agree with what he there says and, accordingly, I uphold the decision of the judge not to stay the action against the bank.
I would only add this, that on a motion asking for an order restricting Keller from dealing with the money when received from the bank a case might be made that the money, when in the hands of Keller, ought to be regarded as in jeopardy having regard to the strong prima facie case (if one was made out) first of all that Lawton had got a very substantial cross-claim, and, secondly, that if the money were treated by Keller as free to be expended by Keller in the course of his business Lawton’s cross-claim would be in jeopardy. I do not say that this would be so and I do not want to be thought to be encouraging further litigation, but it does seem to me that that could not possibly be so unless there be strong evidence that Keller’s financial situation is one which is such as to give rise to such a claim. Anyway, it seems to me that as regards such a point here Lawton never reached the launching pad, and I say nothing to indicate whether I think he could ever lift off.
Accordingly, I, for my part, would dismiss the appeal.
EDMUND DAVIES LJ. I agree and have nothing to add.
CROSS LJ. I also agree.
Appeal dismissed.
Solicitors: Gibson & Weldon, agents for Wm Attwood & Son, Cradley Heath (for the bank); Alan, George & Sacker, agents for Maurice Putsman & Co, Birmingham (for Keller); Tompkins & Co, Birmingham (for Lawton).
Euan Sutherland Esq Barrister.
Hastings and Thanet Building Society v Goddard
[1970] 3 All ER 954
Categories: LAND; Mortgages
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, EDMUND DAVIES AND CROSS LJJ
Hearing Date(s): 9, 16 OCTOBER 1970
Mortgage – Possession of mortgaged property – Parties – Deserted wife in occupation of former matrimonial home – Default by husband in mortgage payments unknown to wife – No notice to wife of proceedings for possession by mortgagee against husband until after judgment – Whether wife entitled to be joined as defendant in action against husband – Whether husband after order for possession entitled to occupy dwelling-house – Matrimonial Homes Act 1967, s 1(5), (8).
The defendant executed a legal charge of the matrimonial home in favour of the plaintiffs which was registered in the Land Registry in 1966. The legal charge conferred a power of sale on the mortgagee if any instalment payable thereunder was in arrears for two calendar months and a right to enter into possession at any time after the power of sale had arisen. In March 1969, the defendant’s wife registered as a Class F land charge in the Land Charges Register her interest under the Matrimonial Homes Act 1967, and on the following day the defendant deserted the wife and thereafter paid one instalment only. In September 1969, the plaintiffs issued proceedings against the defendant for possession. The wife was not aware of the defendant’s default or of the proceedings until March 1970 when the sheriff informed her that the plaintiffs had obtained an order for possession and that the warrant was to be executed about two weeks later. The wife applied to be joined as a defendant to the action and for a stay of execution. In her affidavit in support the wife did not disclose the existence of means sufficient to redeem the mortgage.
Held – The wife was not, by virtue of her interest under s 1(5)a of the 1967 Act, in any better position than the defendant, who could not resist an order for possession except by redeeming the mortgage (see p 956 a, post); there was no suggestion in the wife’s affidavit in support of her application that there was any prospect of her being able to redeem the mortgage (see p 956 e, post); there was no obligation on the plaintiffs either to inform the wife that the defendant had fallen in arrears with the instalments or to serve notice of proceedings on her when they were issued (see p 957 a and b, post); accordingly, the application would be refused.
Quaere. Whether the defendant, after an order for possession against him and the issue of the warrant for possession, remained ‘entitled … to occupy the dwelling house’ within the meaning of s 1(8) of the 1967 Act so that the Act continued to apply to that dwelling-house (see p 957 h, post).
Decision of Foster J [1970] 2 All ER 737 reversed.
Notes
For necessary parties to proceedings for delivery of possession of mortgaged premises, see 27 Halsbury’s Laws (3rd Edn) 363, para 685.
For the rights of a husband or wife to occupy the matrimonial home, see Supplement to 19 ibid, para 1388A.
For the Matrimonial Homes Act 1967, s 1, see 17 Halsbury’s Statutes (3rd Edn) 139.
Appeal
This was an appeal by the plaintiffs, Hastings and Thanet Building Society, from an
Page 955 of [1970] 3 All ER 954
order of Foster J, dated 13 May 1970, and reported [1970] 2 All ER 737, in proceedings by the plaintiffs as mortgagees against the defendant, Peter Ernest Goddard, for possession of his former matrimonial home that: (1) Margaret Elizabeth Goddard, the deserted wife of the defendant who was still in occupation of the former matrimonial home should be made a defendant to the action; and (2) there should be a stay of execution of the warrant for possession. The facts are set out in the judgment.
A L Price QC and Hubert Picarda for the plaintiffs.
M R Hickman for the wife.
Cur adv vult
16 October 1970. The following judgment was delivered.
RUSSELL LJ read the judgment of the court. This is an appeal from an order of Foster J ([1970] 2 All ER 737, [1970] 1 WLR 1242) in May 1970 in proceedings by the plaintiff mortgagees against Peter Ernest Goddard, the defendant mortgagor, for possession of a dwelling-house in Cairo Avenue, Peacehaven. The order, made at the instance of the defendant’s wife, was that she be joined as defendant and execution of a warrant for possession be stayed. The legal charge was executed in 1966 for an advance of £4,975 at 7 1/4 per cent interest. The principal was repayable on six months’ notice by either party, and in the meantime monthly instalments of £36 odd were payable to meet interest and to reduce capital in the ordinary way of building society instalment mortgages. A power of sale was conferred on the plaintiffs if any instalment was in arrear for two calendar months and a right to enter into possession at any time after the power of sale had arisen.
In March 1969, the defendant left the home—the matrimonial home—paid one more instalment and paid no more. The wife’s then solicitors, the day before he left, registered as a Class F land charge in the Land Charges Register her interest under the Matrimonial Homes Act 1967; but that is irrelevant since the mortgage was in 1966. Equally it is irrelevant that the land was registered land and that it would seem that anyway there should have been a notice or caution registered for it to be effective. The fact that the defendant deserted the wife is not directly relevant, since a spouse’s interest under the Act does not depend on desertion.
On 30 September 1969, the plaintiffs began these proceedings for possession against the defendant. They were served on the defendant in fact at the matrimonial home where he happened to be—presumably to see the children—on that particular day. He did not enter appearance. An order for possession was made and served on the defendant, and in due course a warrant for possession issued. On 16 March 1970, the sheriff communicated to the wife his intention to execute the warrant in about a fortnight’s time. This was the first that the wife heard of the proceedings, or, indeed, of the default. The defendant had not been supporting her, and she was living on social security benefits. Through her present solicitors she applied to be joined as defendant and for a stay of execution, the warrant by agreement not being executed in the meantime. From 1 January 1968 the wife had been entitled, as against the defendant, to the rights conferred by the Matrimonial Homes Act 1967. Those were not rights as against the plaintiffs. Section 1(5) is, however, in the following terms:
‘Where a spouse is entitled under this section to occupy a dwelling house or any part thereof, any payment or tender made or other thing done by that spouse in or towards satisfaction of any liability of the other spouse in respect of rent, rates, mortgage payments or other outgoings affecting the dwelling house shall, whether or not it is made or done in pursuance of an order under this section, be as good as if made or done by the other spouse … ’
Page 956 of [1970] 3 All ER 954
Now, it is plain that the defendant could not resist the order for possession except by redeeming the mortgage. The wife was not by virtue of her interest under the 1967 Act in any better position. Section 36 of the Administration of Justice Act 1970 was not and still is not in force; and we do not pause to consider what might have been the situation were that section in force. Her application to be joined and for a stay was made at a time when over £5,000 would be required to redeem the mortgage. Her affidavit of 4 April 1970 in support contained the following paragraphs:
‘11. That I was not aware that the Defendant had failed to make the payments due in respect of the mortgage and neither was I aware that the plaintiffs had taken proceedings to obtain a Possession Order. I had no knowledge that these proceedings had been taken and was not served with notice of the proceedings.
‘12. That I am advised that I ought to have been served with notice of the proceedings and wish to apply to the Court for a suspension of the Warrant for Possession and for such other relief as may be just.
‘13. That since the date I was advised that the Plaintiffs had obtained an Order for Possession I have consulted the Local Housing Officer, the Local Welfare Department, Estate Agents and various newspaper advertisements with a view to obtaining alternative accommodation for both myself and the children, without success.
‘14. That I am continuing with my efforts to obtain alternative accommodation for myself and my children but am experiencing difficulty in obtaining accommodation in which children are allowed and am restricted as to the amount of rent that I can pay in view of the amount of the allowance that I am receiving from the Department of Health and Social Security.’
No suggestion was there made that there was any prospect of her being able to redeem the mortgage.
The learned judge, having referred to the fact that her ignorance of the proceedings had given the wife no opportunity herself to redeem the mortgage if she had the money, continued ([1970] 2 All ER at 739, 740, [1970] 1 WLR at 1245):
‘In those circumstances, in my judgment, it is correct that she should now be given leave to come in as a defendant to the proceedings for, although she may be impecunious and it may be difficult in divorce proceedings to get sufficient money to pay off the whole of the charge or even to get sufficient from the Department of Health and Social Security to do so, one never knows. She may win a football pool tomorrow or get a large legacy and it would not be right, in those circumstances, that she, not having had any notice of the proceedings, should be unable to exercise the rights given to her by s 1(5) of the Act.’
With respect, the judge was quite wrong in taking into consideration hypothetical matters such as a pools win or a legacy; and counsel for the wife did not seek to support those matters as proper for consideration. Nor so far as we are aware could there be any possibility of a social security payment to pay off a capital debt such as this. It would appear, however, that a possibility of an order for a lump sum in divorce proceedings against the defendant was suggested to the judge. The wife had petitioned for divorce on the ground of adultery on 29 August 1969; this did not come on for hearing until 20 July 1970, when decree nisi was pronounced and maintenance referred to chambers. We also were told that the wife had an idea (which proved unfounded) that she might get a lump sum awarded. But the possibility that at some uncertain future date the wife might conceivably be in funds to redeem the mortgage did not, it appears to us, justify the learned judge in making
Page 957 of [1970] 3 All ER 954
her a defendant and thus postponing the plaintiffs’ undoubted right to possession of the premises with a view to sale with vacant possession.
It was suggested in argument that in every case of a mortgage by a spouse of a matrimonial home the other spouse should be informed by the building society that the mortgagor had fallen in arrears with instalments. If that were done, it was said, the other spouse would have an opportunity to pay the arrears under s 1(5) of the Act before it was too late. We see no statutory justification for such a requirement. Moreover, it would seem impracticable and probably undesirable: impracticable because a building society can scarcely be expected to keep track of the matrimonial status of its mortgagors; probably undesirable as likely to lead to trouble between spouses. A further suggestion was made, not that the wife in occupation should have been made a defendant at the outset, but that notice of the proceedings should have been given to her when they were issued; this by analogy with the case of someone in occupation claiming to be a tenant of the mortgagor of the premises or part of them: see the note in the Supreme Court Practice 1970,b referred to by the learned judge ([1970] 2 All ER at 738, [1970] 1 WLR at 1244). But in such cases the tenant may, rightly or wrongly, contend that the tenancy was binding on the mortgagee; whereas the wife’s interest under the 1967 Act was in no way binding on the plaintiffs save to this extent, that she was able (had she the money) to avoid the possession by redeeming the mortgage. And this it is plain she had no reasonable prospect of doing at any time. It was conceded by the plaintiffs that if the wife in the present case had shown that there was a real prospect in the very near future of her redeeming the mortgage it would have been proper to order her to be joined, as a protection of that aspect of her interest that is found in s 1(5), but anything less than this would serve only to delay unjustifiably the enforcement by the mortgagee of his rights. Indeed, a defaulting mortgagor living in amity with his or her spouse could otherwise view with relative equanimity service of the order for possession, and indeed notification of the intention of the sheriff to execute the warrant; for the spouse could secure further time by then applying to be joined as defendant. Counsel for the wife was almost constrained to admit that the wife’s application was a ‘stalling’ operation. We think that it was, and that it should not have been acceded to. We therefore allow the appeal, set aside the order of Foster J, ([1970] 2 All ER at 740, [1970] 1 WLR at 1246) and in lieu order that the wife’s application be refused.
We add this. Section 1(8) of the 1967 Act is in the following terms:
‘This Act shall not apply to a dwelling house which has at no time been a matrimonial home of the spouses in question; and a spouse’s rights of occupation shall continue only so long as the marriage subsists and the other spouse is entitled as mentioned in subsection (1) above to occupy the dwelling house … ’
The question whether, after an order for possession against him and warrant issued, the defendant (ie ‘the other spouse’) remained ‘entitled … to occupy the dwelling house’ was not ventilated before us, and we reserve the question, expressing no opinion one way or the other.
Appeal allowed.
Solicitors: Henry Boustred & Sons, agents for Percy Walker & Co, Hastings (for the plaintiffs); E P Rugg & Co, agents for F W A Cushman & Son, Brighton (for the wife).
Euan Sutherland Esq Barrister.
Tinker v Tinker (Roberts cited)
[1970] 3 All ER 958
Categories: LAND; Property Rights: FAMILY; Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P
Hearing Date(s): 30 JULY 1970
Husband and wife – Property – Matrimonial home – Protection against eviction – Procedure – Appeal from registrar – Forum of appeal – Matrimonial Homes Act 1967, s 1 – RSC Ord 58, r 1(1).
An appeal from the decision of a registrar on an application under s 1 of the Matrimonial Homes Act 1967 lies to the judge in chambers under RSC Ord 58, r 1(1)a, even though the application is made at the same time as an application under s 17 of the Married Women’s Property Act 1882.
Notes
For applications under s 1 of the Matrimonial Homes Act 1967, see Supplement to 19 Halsbury’s Laws (3rd Edn) para 1388A.
For the Matrimonial Homes Act 1967, s 1, see 17 Halsbury’s Statutes (3rd Edn) 139.
Case referred to in judgment
Maynard v Maynard [1969] 1 All ER 1, [1969] P 88, [1969] 2 WLR 22, Digest Supp.
Appeal and cross-appeal
These were appeals by the wife Barbara Kathleen Tinker and the husband George Barrie Tinker from the order of Mr Registrar Bayne-Powell, made under s 1(1) of the Matrimonial Homes Act 1967. The appeals were heard in chambers and adjourned into open court for judgment.
A A Grant for the wife.
D P F Wheatley for the husband.
30 July 1970. The following judgment was delivered.
SIR JOCELYN SIMON P. This matter came before me originally on cross-summonses by way of appeal from a decision of Mr Registrar Bayne-Powell given on 10 June 1970. In the event, the matters in contention have been sensibly disposed of, together with all other matters in contention between the parties. That has been done by an agreement between the parties, which has resulted in the divorce suit going undefended, although no decree could be pronounced today, since the case has not been listed today as a divorce suit. I was, however, satisfied that the case should proceed on the basis of the terms agreed between the parties, as they seemed entirely reasonable and in accord with justice, and also in accord with the general interest of the whole of this family, which was that the extensive litigation between the parties should at last be brought to an end.
On the cross-appeals, which arose under the Matrimonial Homes Act 1967, s 1, two questions arose for decision. The first was whether the subject-matter of the application and of the appeals under that Act, namely a place called Halgaver House, Halgaver Road, Bodmin, was a matrimonial home within the meaning of the Act. On that I heard argument only on one side, and I therefore desire to say nothing on it. The other question, though, raises a matter of practice which I am satisfied is in doubt and should, if possible, be resolved for the benefit of practitioners. I heard full argument on both sides of that question. I have, therefore, been able to come to a decision on it, and I propose to give such guidance as I can. The question is: does an appeal from a learned registrar on an application under s 1 of the Matrimonial Homes Act 1967 lie to a judge of the High Court, so that this appeal was properly
Page 959 of [1970] 3 All ER 958
brought to me, or to the Court of Appeal? On that matter, as I have indicated, there is doubt as to what is the correct procedure. The learned editors of The Supreme Court Practice 1970b state:
‘Appeals from Orders of a Master or Registrar. It would seem that an order of the Master or Registrar under section 1 of the [Matrimonial Homes] Act lies to the Court of Appeal under O. 58, r. 2(1).’
On the other hand, the learned editors of the Supplement to Rayden on Divorcec state:
‘An appeal from an order of a Registrar made under s. 1 or s. 7 of the Matrimonial Homes Act 1967 lies to a Judge in Chambers, except in the case of an order made on an application under both s. 1 of the 1967 Act and s. 17 of the Married Women’s Property Act 1882 where, because appeal under the latter lies to the Court of Appeal, the appeal should, it is submitted, lie to that Court.’
But, in my view, the matter is plainly governed by the express terms of the Rules of the Supreme Court. RSC Ord 58, r 1, deals with appeals from certain decisions of masters, etc, to the judge in chambers. Rule 1(1) provides:
‘Except as provided by rule 2, an appeal shall lie to a judge in chambers from any judgment, order, or decision of a master of the Queen’s Bench Division or registrar of the Probate, Divorce and Admiralty Division.’
RSC Ord 58, r 2, deals with appeals of certain decisions of masters to the Court of Appeal. Rule 2(1) provides:
‘An appeal shall lie to the Court of Appeal from any judgment, order, or decision of a master of the Queen’s Bench Division (other than an interlocutory judgment, order, or decision) given or made—(a) on the hearing or determination of any cause, matter, question or issue tried before or referred to him, including applications made to him under section 17 of the Married Women’s Property Act, 1882 … ’
It will be noted that, although r 1 extends to a registrar of this Division, r 2 does not do so. It will also be noted that r 2 deals with s 17 of the Married Women’s Property Act 1882 and not with the Matrimonial Homes Act 1967. RSC Ord 58, r 2(2), provides:
‘Subject to any provision made by the Matrimonial Causes Rules 1957 d with respect to the Court to which an appeal shall lie from any judgment, order or decision of a registrar of the Probate, Divorce and Admiralty Division on the hearing of any application made to him under section 17 of the Married Women’s Property Act, 1882, an appeal shall lie to the Court of Appeal from any judgment, order or decision of any such registrar (other than an interlocutory judgment, order or decision) given or made—(a) on the hearing or determination of any application made to him under the said section 17; … ’
(The matter is not affected by anything in the Matrimonial Causes Rules 1957).
Again it will be noted that, first, that paragraph deals with a registrar of this Division and not with a master of the Queen’s Bench Division, and, secondly, it deals with the Married Women’s Property Act 1882 and not with the Matrimonial Homes
Page 960 of [1970] 3 All ER 958
Act 1967. The effect of that is that, reading r 2 together with r 1, an appeal lies to a judge in chambers from an order of a registrar of the Probate, Divorce and Admiralty Division, except on the hearing or determination of an application made to the latter under s 17 of the Married Women’s Property Act 1882.
I need not refer to them in detail; but reference should be made also to RSC Ord 89, r 1, which provides that a registrar may exercise jurisdiction conferred on a judge of the High Court in certain circumstances, and r 3, which deals with the jurisdiction of the High Court under the Matrimonial Homes Act 1967 and also with s 17 of the Married Women’s Property Act 1882.
I think it is probably because, first, the two Acts are mentioned together in RSC Ord 89, r 3(1) and, secondly, because proceedings under the Matrimonial Homes Act 1967 are often brought at the same time and interconnected with proceedings under the 1882 Act, that this confusion has arisen. But it seems to me plain that an appeal brought against a decision of a learned registrar under s 1 of the 1967 Act lies to a judge of this Division under RSC Ord 58, r 1(1), the judge sitting in chambers. Nor, indeed, can I see any justification in the rules (although I can see the argument from convenience) for the gloss put by the learned editors of Rayden in the Third (Cumulative) Supplement, namely that, when the application under the 1967 Act is made with an application under the 1882 Act, the appeal as to both should be brought to the Court of Appeal. Since that is a matter of convenience (or, at least, since it would be convenient that the same appellate tribunal should deal with all interconnected matters), it is a subject which might well call for the consideration of the rule committee.
The view that I have taken—that applications by way of appeal from a decision by a learned registrar under s 1 of the 1967 Act lie to a judge in chambers of this Division—is borne out by Maynard v Maynard, where Baker J entertained an appeal from a learned registrar who had made an order under s 1 as well as under s 7 of the Matrimonial Homes Act 1967. As I have said, as the rules stand at the moment, the appeal under s 1 lies to a judge in chambers in this Division, so that the cross-appeals in this case were properly brought to me. I have had no cause, in the end, to make any order on those cross-appeals, by reason of the sensible agreement of the parties, but I am satisfied that they were correctly brought to me in chambers.
Solicitors: Pritchard, Englefield, Leader, Henderson (for the wife); Gregory, Rowcliffe & Co agents for George I Chisholm, Bodmin (for the husband).
Alice Bloomfield Barrister.
Saunders (Executrix of the estate of Rose Maud Gallie (deceased)) v Anglia Building Society (formerly Northampton Town and County Building Society)
[1970] 3 All ER 961
Categories: CONTRACT
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD HODSON, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD PEARSON
Hearing Date(s): 8, 9, 13, 14, 15 APRIL, 9 NOVEMBER 1970
Mistake – Nature of document – Plea of non est factum – To whom plea available.
Mistake – Nature of document – Plea of non est factum – Burden of proof – Proof that reasonable care exercised – Failure to exercise reasonable care not giving rise to estoppel.
Mistake – Nature of document – Plea of non est factum – Fundamental difference – Mistake as to personality.
The plea of non est factum can only rarely be established by a person of full capacity and although it is not confined to the blind and illiterate any extension of the scope of the plea would be kept within narrow limits (see p 963 c d and f, p 966 j to p 967 a, p 971 e and h, p 973 c and d, p 978 j and p 979 c, post). In particular, it is unlikely that the plea would be available to a person who signed a document without informing himself of its meaning (see p 963 g, p 966 a, p 967 e and j to p 968 a, p 969 e, p 972 e, and p 979 g, post).
The burden of establishing a plea of non est factum falls on the party seeking to disown the document and that party must show that in signing the document he acted with reasonable care (see p 963 e, p 966 c, p 969 h, p 973 a and p 979 d, post). Carelessness (or negligence devoid of any special, technical meaning) on the part of the person signing the document would preclude him from later pleading non est factum on the principle that no man may take advantage of his own wrong; it is not, however, an instance of negligence operating by way of estoppel (see p 962 j, p 966 e and j to p 967 a, p 981 d and p 982 c and h, post).
Foster v Mackinnon (1869) LR 4 CP 704 approved.
Carlisle and Cumberland Banking Co v Bragg [1911] 1 KB 489 overruled.
In relation to the extent and nature of the difference between the document as it is and the document as it was believed to be, the distinction formerly drawn between the character and the contents of the document is unsatisfactory (see p 964 b, p 965 f, p 969 b, p 971 b to d and p 983 a, post) and it is essential, if the plea is to be successful, to show that there is a radical or fundamental distinction (see p 964 e, p 965 g, p 967 f, p 969 c, p 972 b, p 979 d and p 983 b, post).
Dictum in Foster v Mackinnon (1869) LR 4 CP at 711, 712 approved.
Howatson v Webb [1907] 1 Ch 537 disapproved.
Per Lord Hodson. Where there is an error of personality it may or may not be fundamental; the question cannot be answered in isolation. In the case of deeds error of personality is not necessarily so vital as in the case of contracts (see p 965 h, post).
Decision of the Court of Appeal sub nom Gallie v Lee [1969] 1 All ER 1062 affirmed.
Notes
For when a plea of non est factum is available, see 11 Halsbury’s Laws (3rd Edn) 361, 362, para 588, and for cases on non est factum, see 17 Digest (Repl) 247, 248, 508–511.
Page 962 of [1970] 3 All ER 961
Cases referred to in opinions
Anon (1506) Keil 70, 72 ER 231, 35 Digest (Repl) 12, 54.
Bolton v Stone [1951] 1 All ER 1078, [1951] AC 850, 36 Digest (Repl) 18, 79.
Carlisle and Cumberland Banking Co v Bragg [1911] 1 KB 489, 80 LJKB 472, 104 LT 121, 17 Digest (Repl) 248, 510.
Carlton and United Breweries Ltd v Elliott [1960] VLR 320.
Edwards v Brown (1831) 1 Cr & J 307, 9 LJOS Ex 84, 148 ER 1436, 7 Digest (Repl) 189, 223.
Foster v Mackinnon (1869) LR 4 CP 704, 38 LJCP 310, 20 LT 887, 17 Digest (Repl) 242, 457.
Howatson v Webb [1907] 1 Ch 537, 76 LJCh 346, 97 LT 730; affd CA [1908] 1 Ch 1, 77 LJCh 32, 17 Digest (Repl) 247, 509.
Hunter v Walters, Curling v Walters, Darnell v Hunter (1871) 7 Ch App 75, 41 LJCh 175, 25 LT 765, 35 Digest (Repl) 76, 695.
King v Smith [1900] 2 Ch 425, 69 LJCh 598, 82 LT 815, 40 Digest (Repl) 320, 2632.
Lewis v Clay (1897) 67 LJQB 224, 77 LT 653, 6 Digest (Repl) 158, 1109.
Mercantile Credit Co Ltd v Hamblin [1964] 3 All ER 592, [1965] 2 QB 242, [1965] 3 WLR 798, Digest (Cont Vol B) 220, 510b.
Muskham Finance Ltd v Howard [1963] 1 All ER 81, [1963] 1 QB 904, [1963] 2 WLR 87, Digest (Cont Vol A) 472, 510a.
National Provincial Bank of England v Jackson (1886) 33 Ch D 1, 55 LT 458, 17 Digest (Repl) 215, 136.
Shulter’s Case (1611) 12 Co Rep 90, 77 ER 1366, 17 Digest (Repl) 242, 456.
Swan v North British Australasian Co Ltd (1862) 7 H & N 603, (1863) 2 H & C 175, 9 Digest (Repl) 220, 1405.
Thoroughgood’s Case, Thoroughgood v Cole (1582) 2 Co Rep 9a, 76 ER 408, 35 Digest (Repl) 75, 688.
Vorley v Cooke (1857) 1 Giff 230, 65 ER 898.
Whelpdale’s Case (1604) 5 Co Rep 119a, 77 ER 239, 17 Digest (Repl) 248, 511.
Appeal
This was an appeal by the executrix of the estate of the plaintiff, Rose Maud Gallie, from the decision of the Court of Appeal (Lord Denning MR, Russell and Salmon LJJ) dated 25 February 1969 and reported [1969] 1 All ER 1062, allowing the appeal of the Anglia Building Society (formerly the Northampton Town and County Building Society) from a judgment of Stamp J, dated 29 March 1968 and reported [1968] 2 All ER 322, whereby it was declared that as against the building society an assignment relating to leasehold premises known as 12 Dunkeld Road, Goodmayes, Essex, executed by the plaintiff and dated 15 June 1962 was void and of no effect and it was ordered that the building society deliver up to the plaintiff the title deeds held by it pursuant to a mortgage of the premises, dated 10 August 1962 and made between William Robert Lee and the building society. The facts are set out in the opinion of Lord Hodson.
Michael Albery QC and A E Holdsworth QC for the appellant.
P R Oliver QC and H F J Teague for the building society.
Their Lordships took time for consideration
9 November 1970. The following opinions were delivered.
LORD REID. My Lords, I am in general agreement with the speech of my noble and learned friend, Lord Pearson. In my opinion this appeal must fail however one states the law. The existing law seems to me to be in a state of some confusion. I do not think that it is possible to reconcile all the decisions, let alone all the reasons
Page 963 of [1970] 3 All ER 961
given for them. In view of some general observations made in the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) I think that it is desirable to try to extract from the authorities the principles on which most of them are based. When we are trying to do that my experience has been that there are dangers in there being only one speech in this House. Then statements in it have often tended to be treated as definitions and it is not the function of a court or of this House to frame definitions; some latitude should be left for future developments. The true ratio of a decision generally appears more clearly from a comparison of two or more statements in different words which are intended to supplement each other.
The plea of non est factum obviously applies when the person sought to be held liable did not in fact sign the document. But at least since the sixteenth century it has also been held to apply in certain cases so as to enable a person who in fact signed a document to say that it is not his deed. Obviously any such extension must be kept within narrow limits if it is not to shake the confidence of those who habitually and rightly rely on signatures when there is no obvious reason to doubt their validity. Originally this extension appears to have been made in favour of those who were unable to read owing to blindness or illiteracy and who therefore had to trust someone to tell them what they were signing. I think that it must also apply in favour of those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity.
But that does not excuse them from taking such precautions as they reasonably can. The matter generally arises where an innocent third party has relied on a signed document in ignorance of the circumstances in which it was signed, and where he will suffer loss if the maker of the document is allowed to have it declared a nullity. So there must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circumstances; certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy. In general I do not think that he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.
The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any enquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case. Further the plea cannot be available to a person whose mistake was really a mistake as to the legal effect of the document, whether that was his own mistake or that of his adviser. That has always been the law and in this branch of the law at least I see no reason for any change.
We find in many of the authorities statements that a man’s deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the man had taken no precautions at all, and there was no ground for
Page 964 of [1970] 3 All ER 961
his belief that he was signing something different from that which in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to show that he should have it.
Finally, there is the question to what extent or in what way must there be a difference between that which in fact he signed and that which he believed he was signing. In an endeavour to keep the plea within bounds there have been many attempts to lay down a dividing line. But any dividing line suggested has been difficult to apply in practice and has sometimes led to unreasonable results. In particular I do not think that the modern division between the character and the contents of a document is at all satisfactory. Some of the older authorities suggest a more flexible test so that one can take all factors into consideration. There was a period when here as elsewhere in the law hard and fast dividing lines were sought, but I think that experience has shown that often they do not produce certainty but do produce unreasonable results.
I think that in the older authorities difference in practical result was more important than difference in legal character. If a man thinks that he is signing a document which will cost him £10 and the actual document would cost him £1,000 it could not be right to deny him this remedy simply because the legal character of the two was the same. It is true that we must then deal with questions of degree but that is a familiar task for the courts and I would not expect it to give rise to a flood of litigation.
There must I think be a radical difference between what he signed and what he thought he was signing—or one could use the words ‘fundamental’ or ‘serious’ or ‘very substantial’. But what amounts to a radical difference will depend on all the circumstances. If he thinks he is giving property to A whereas the document gives it to B the difference may often be of vital importance, but in the circumstances of the present case I do not think that it is. I think that it must be left to the courts to determine in each case in light of all the facts whether there was or was not a sufficiently great difference. The plea non est factum is in sense illogical when applied to a case where the man in fact signed the deed. But it is none the worse for that if applied in a reasonable way.
I would dismiss this appeal.
LORD HODSON. My Lords, on 25 June 1962, the plaintiff executed an assignment of her leasehold interest in 12 Dunkeld Road, Goodmayes, to one Lee, the first defendant in the action. Her case is that her intention was to give the house to her nephew Walter William Parkin on condition that he was to permit her to reside there for the rest of her life and that she handed the title deeds to Mr Parkin believing that the house thereupon became his property. She admitted that she signed the deed of assignment to Mr Lee but said that she believed that this was a deed of gift giving effect to the transaction in favour of Mr Parkin. She claimed accordingly that the deed was void just as if she had not signed it at all, eg as if her signature had been forged. She pleaded non est factum.
On the day when the deed was signed by her she was 78 years of age and her pleaded case was that Mr Lee came to her house with Mr Parkin and produced a document to her. This he asked her to sign saying words to the effect that he was asking her to sign it as a deed of gift to Wally (Mr Parkin) and everything was in order. The plaintiff had broken her spectacles so that she could not use them. She could not read without them so she did not read the document. Giving her evidence on commission she said that she thought that Mr Parkin and Mr Lee were getting money on the house and that the whole purpose of giving the house to Mr Parkin was so that he could get money on it. She said—‘When they came and spoke to me about the house I said to [Mr Parkin] “I don’t mind what I do to help you along“.' As
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against Mr Lee the deed was voidable as having been induced by fraud and the learned judge ([1968] 2 All ER 322, [1968] 1 WLR 1190) accordingly held it to be void against him. Mr Lee has not appealed. The position of the second defendant, the Anglia Building Society, which is the respondent to the appeal, is entirely different. The building society has advanced £2,000 on a deed which on its face is good security for its loan. The learned judge ([1968] 2 All ER 322, [1968] 1 WLR 1190), however, held that the plaintiff was entitled to succeed against the building society also. He held that the deed was void accepting the plea non est factum put forward by the plaintiff on the basis that she was misled as to the character, not only as to the contents, of the deed. He held that the assignment for consideration to her was of a different character from a deed of gift to Mr Parkin. Relying on the long-accepted distinction between character and contents he gave judgment against the building society as well as against Mr Lee. This distinction stems from Howatson v Webb (affirmed in the Court of Appeal ([1908] 1 Ch 1)), a decision of Warrington J.
The majority of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) in this case applying the same test as the trial judge ([1968] 2 All ER 322, [1968] 1 WLR 1190) arrived at a different conclusion. Russell LJ, accepting an argument which had been rejected by the trial judge, said that the essential character of the document which the plaintiff was intending to execute was such as to divest herself of her leasehold property by transferring it to another so that the transferee should be in a position to deal with the property, in particular by borrowing money on the security of the property. Her evidence showed that she understood that Mr Lee and Mr Parkin were jointly concerned in raising money on the security of the property. It was her intention that this should be done. This was, as Russell LJ said ([1969] 1 All ER at 1075, [1969] 2 Ch at 41), ‘the object of the exercise’. I agree with him that the identity of the transferee (ie Mr Lee instead of Mr Parkin) does not make the deed of a totally different character from that which she intended to sign. On this ground the plea of non est factum must fail. Salmon LJ put the matter somewhat differently, but to the same effect, in concluding from the plaintiff’s evidence that she would have executed the assignment to Mr Lee even if the transaction had been properly explained to her. Lord Denning MR reached the same conclusion but was not prepared to be fettered by the distinction between character and contents.
The distinction is a valid one in that it emphasises that points of detail in the contents of a document are not to be relied on in support of a plea of non est factum. Lord Denning MR did, however, demonstrate that using the words as terms of art for test purposes may produce ludicrous results, eg a mistake as to the amount of money involved may be described as a mistake as to contents although the difference between two figures may be so great as to produce a document of an entirely different character from the one the signer intended.
It is better to adopt the test which is supported by the authorities prior to Howatson v Webb and is sound in principle. This is that the difference to support a plea of non est factum must be in a particular which goes to the substance of the whole consideration or to the root of the matter. Where, as in this case, there is an error of personality it may or may not be fundamental; the question cannot be answered in isolation. There is a distinction between a deed and a contract in that the former does not require consensus and the latter does. Hence, in the case of deeds error of personality is not necessarily so vital as in the case of contracts.
The plea of non est factum requires clear and positive evidence before it can be established. As Donovan LJ said, delivering the judgment of the Court of Appeal in Muskham Finance Ltd v Howard ([1963] 1 All ER 81 at 83, [1963] 1 QB 904 at 912): ‘The plea of non est factum is a plea which
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must necessarily be kept within narrow limits.' To take an example, the man who in the course of his business signs a pile of documents without checking them takes the responsibility for them by appending his signature. It would be surprising if he was allowed to repudiate one of those documents on the ground of non est factum.
I agree with the robust conclusion reached by Lord Denning MR on the facts of this case that the plaintiff having signed the questioned document, obviously a legal document, on which the building society advanced money on the faith of it being her document, cannot now be allowed to disavow her signature. I should have arrived at this conclusion even if I had thought that the law applicable was that which had previously been accepted, namely that the distinction between character and contents should be maintained.
Want of care on the part of the person who signs a document which he afterwards seeks to disown is relevant. The burden of proving non est factum is on the party disowning his signature; this includes proof that he or she took care. There is no burden on the opposite party to prove want of care. The word ‘negligence’ in this connection does not involve the proposition that want of care is irrelevant unless there can be found a specific duty to the opposite party to take care. Carlisle and Cumberland Banking Co v Bragg was on this point, in my opinion, wrongly decided and seems to be due to a confusion of thought by introducing the kind of negligence which founds an action in a tort for injury.
A person may be precluded by his own negligence, carelessness or inadvertence from averring his mistake. The word ‘estoppel’ has often been used in this context but, for my part, I agree with Salmon LJ that this is not a true estoppel but an illustration of the principle that no man may take advantage of his own wrong. If it were treated as estoppel one would have to face the argument put forward by the plaintiff that if there is no deed there can be no estoppel established by the document itself. If there was no estoppel by deed there was no other foundation for that doctrine to be invoked since there was no conduct by way of representation to the building society that the questioned deed was good.
The plea of non est factum was originally available, it seems, only to the blind and the illiterate (cf Thoroughgood’s Case, Thoroughgood v Cole) but by the middle of the last century the modern approach to the matter is illustrated by the leading case of Foster v Mackinnon ((1869) LR 4 CP 704 at 711), in which the judgment of the court was delivered by Byles J. I need not cite the whole passage but note that the judgment extends the scope of the doctrine to a person ((1869) LR 4 CP 704 at 711)—
‘… who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man afterwards signs; then, at least if there be no negligence, the signature so obtained is of no force. And it is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature … ’
It is, I think, plain that the word ‘negligence’ is not used in this passage in the restricted sense of breach of duty.
The case for the plaintiff stands or falls by her evidence. On no reasonable interpretation of this can she, in my opinion, succeed. I would dismiss the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading
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the speeches of my noble and learned friends with which I am in general agreement, and I only desire to add a few observations.
I entirely agree with the reasons given by Russell LJ in the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) for rejecting the plaintiff’s claim. Her evidence was both unsatisfactory and inadequate to sustain her plea of non est factum. In the course of the argument in this House some criticism was made of his observations with regard to corroborative evidence. I do not understand him to have said that such evidence was essential if the plea was to succeed but merely that it would facilitate the discharge of the burden of proof resting on anyone putting forward such a plea.
I also think that Salmon LJ was right when he said that if Mr Parkin had explained the true nature of the document to her and had told her that the solicitors had advised that it should be in that form and had asked her to sign it, there can be no real doubt that she would have done so. She wanted to make it possible for money to be raised on the house for the benefit of Mr Parkin and she knew that the document which she signed was a legal document dealing with her property. She did not read it. Perhaps she would have been no wiser if she had. She said that she had broken her spectacles and could not read without them. She never asked for the document to be read to her or that it should be explained to her. True it is that the assignment of the lease was to Mr Lee and not to Mr Parkin but in the circumstances of this case that did not, in my opinion, make the document wholly different in nature and character from that which she supposed it to be, and she took no care to find out what exactly it was that she was signing. She was content to trust Mr Parkin and Mr Lee and, sad though it is that an old lady should suffer as a result of the misconduct of Mr Lee, she cannot relieve herself of the consequences at the expense of the building society who advanced money on the faith of the document.
Lord Denning MR, after reviewing the cases, endeavoured to state the principle to be implied in relation to a plea of non est factum. I agree that a man at full age and understanding who can read and write cannot be allowed to repudiate his signature to a document which he knows will have legal consequences if he signs it without reading it, but with the greatest respect I think that this is more an example of a case where the plea will fail than a rule of general application.
What are the matters which have to be established for the plea to succeed? First, in my opinion, it must be shown that the document signed was radically different in character from that which the signer thought it was. In Foster v Mackinnon the defendant had been deceived into indorsing a bill when he believed it to be a guarantee. Byles J, delivering the judgment of the court, said ((1869) LR 4 CP at 711):
‘It seems plain, on principle and on authority, that, if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man afterwards signs; then, at least if there be no negligence, the signature so obtained is of no force. And it is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature; in other words, that he never intended to sign, and therefore in contemplation of law never did sign, the contract to which his name is appended.’
It is to be observed that Byles J did not say that failure to read the contract by a person who could read was of itself negligence debarring him from repudiating his
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signature. He recognised that there might be cases where a person forebode to read without being negligent. Later Byles J said ((1869) LR 4 CP at 711):
‘But the position that, if a grantor or covenantor be deceived or misled as to the actual contents of the deed, the deed does not bind him, is supported by many authorities … ’
And then he said ((1869) LR 4 CP at 713):
‘The defendant never intended to sign that contract, or any such contract. He never intended to put his name to any instrument that then was or thereafter might become negotiable. He was deceived, not merely as to the legal effect, but as to the actual contents of the instrument.’
There is nothing in his judgment to indicate that a distinction is to be drawn between the nature and character of a document, on the one hand, and its contents, on the other.
In Howatson v Webb the defendant, a solicitor’s clerk, pleaded that a mortgage deed executed by him was not his deed, he having executed it in the belief that it transferred property which he held as a nominee of the solicitor. The mortgage deed contained a personal covenant for the payment of principal and interest. Warrington J cited the passages from Byles J’s judgment, which I have cited above, and after citing the first passage said ([1907] 1 Ch at 544, 545):
‘I pause there for a moment to remark that it seems to me to be essential to the proposition which is there stated that the contract which the signer means to execute should be of a nature entirely different from the contract in dispute. It will not be contended that if, in reading over a contract to a blind or illiterate person, the reader merely omits or misstates some material clause, the contract is altogether void.’
He then cited the other two passages from Byles J’s judgment which I have cited and said ([1907] 1 Ch at 545):
‘Reading that with reference to the first passage I have quoted I think he means “deceived as to the actual contents” as expressing the nature and character of the document.’
He said that the defendant was told that they were deeds relating to the property to which they did in fact relate ([1907] 1 Ch at 549):
‘His mind was therefore applied to the question of dealing with that property. The deeds did deal with that property. The misrepresentation was as to the contents of the deed, and not as to the character and class of the deed. He knew he was dealing with the class of deed with which in fact he was dealing, but did not ascertain its contents. The deed contained a covenant to pay. Under those circumstances I cannot say that the deed is absolutely void.’
His judgment was upheld in the Court of Appeal ([1908] 1 Ch 1), Sir Herbert Cozens-Hardy MR saying that he accepted and approved every word of his judgment.
One cannot tell the nature and character of a document without having regard to its contents, but what I think that Warrington J was endeavouring to do was to distinguish between cases where there is deceit as to the actual contents to such a degree as to be deceit as to its nature and character and cases where there is not
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deceit as to the nature and character of the instrument but deceit as to some provision in it. But he was, I think, wrong to say that misstatement of a material clause will never render a document void. Whether it does so or not must depend on whether it appears that the document as described is so far different from what it in fact is as to amount to a misrepresentation of its nature and character.
The distinction that Warrington J drew has frequently been adopted as a touchstone in relation to the plea of non est factum. I agree with Lord Denning MR’s powerful criticisms of it, although I somewhat doubt whether Warrington J ever intended the interpretation which has been placed on his words.
I agree with my noble and learned friend, Lord Pearson, that the difference between what a document is thought to be may be in substance or in kind. It will not suffice if the signer thought that in some respect it would have a different legal effect from what it has; nor will it suffice if in some respects it departs from what he thought it would contain. The difference whether it be in kind or in substance, must be such that the document signed is entirely—the word used by Byles J ((1869) LR 4 CP at 711)—or fundamentally different from that which it was thought to be so that it can be said that it was never the signer’s intention to execute the document.
It is, I think, clearly established that the plea of non est factum cannot succeed if the signer of the document has been careless. In Foster v Mackinnon Byles J spoke of ‘negligence’. The use of this word may have led to the decision in Carlisle and Cumberland Banking Co v Bragg, where it was held that there could not be negligence in the execution of a document unless a duty was owed to the person who acted on it. I agree with the many criticisms of that decision, and I think it was wrong. Perhaps it is better to use the word ‘careless’.
Is it possible to define what will amount to a lack of care in the signing of a document? While I agree with Lord Denning MR ([1969] 1 All ER at 1072, [1969] 2 Ch at 36) that a man who signs a document without reading it, whether he does not read it because of the trust he places in another or on account of pressure of business, cannot, if of full age and understanding, repudiate his signature by reliance on the plea non est factum, I do not think that it can be said that in every case failure to read a document by a literate person amounts to carelessness. Should the same standard of care be expected of an elderly spinster who might, if she read the document, be none the wiser and who might not be able to distinguish between a mortgage and a conveyance? I am inclined to think not. In National Provincial Bank of England v Jackson, two sisters executed deeds relating to their property without reading them and without having them read to them and explained. They did so in reliance on their brother, a solicitor. Cotton LJ said that they could not have been said to have been guilty of negligence in so doing. It was held that their plea of non est factum failed as they knew that the deeds they signed dealt in some way with their houses. In every case the person who signs the document must exercise reasonable care, and what amounts to reasonable care will depend on the circumstances of the case and the nature of the document which it is thought is being signed. It is reasonable to expect that more care should be exercised if the document is thought to be of an important character than if it is not.
I would dismiss the appeal.
LORD WILBERFORCE. My Lords, the present case is fairly typical of many where a person, having signed and had witnessed his signature to a formal legal document, contends that the fact of signing should not bind him to the effect of it.
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Such situations, in many legal systems, are regulated by the requirement of execution before a notary who, if he is competent and honest, as he usually is, can do much to ensure that the signer understands and intends what he is doing. In other systems, such as ours, dependence has to be placed on the level of education and prudence of the signer and on the honesty and competence of his professional adviser. But as, inevitably, these controls are sometimes imperfect, the law must provide some measure of relief. In so doing it has two conflicting objectives: relief to a signer whose consent is genuinely lacking (I expand on this later); and protection to innocent third parties who have acted on an apparently regular and properly executed document. Because each of these factors may involve questions of degree or shading any rule of law must represent a compromise and must allow to the court some flexibility in application.
The plea of non est factum has a long history. In mediaeval times, when contracts were made by deeds, and the deed had a kind of life in the law of its own, illiterate people who either could not read, or could not understand, the language in which the deed was written, were allowed this plea (that is what ‘non est factum’ is—a plea); the result of it, if successful, was that the deed was not their deed. I think that three things can be said about the early law. First, that no definition was given of the nature or extent of the difference which must exist between what was intended and what was done—whether such as later appeared as the distinction between ‘character’ and ‘contents’ or otherwise. (See Thoroughgood’s Case, Thoroughgood v Cole when the decision was based on the reading of the deed ‘in other words than in truth it is’, and the sixteenth century case recorded in Keilwey (Keil 70 pl 6)—difference between one acre and two acres. See also the nineteenth century note C to Whelpdale’s Case referring to the inconsistency of the cases: Shulter’s Case—of a man aged 115 years.) Secondly, these cases are for the most part as between the original parties to the deed, or if a third party is concerned (eg Thoroughgood’s Case) he is a successor to the estate granted. Thirdly, there is some indication that the plea was not available where the signer had been guilty of a lack of care in signing what he did; there is no great precision in the definition of the disabling conduct. If Fleta is to be relied on, there was an exception of negligentia or imperitia—see Holdswortha.
In the nineteenth century, the emphasis had shifted toward the consensual contract, and the courts, probably unconscious of the fact, had a choice. They could either have discarded the whole doctrine on which non est factum was based, as obsolete, or they could try to adapt it to the prevailing structure of contract (‘these cases apply to deeds; but the principle is equally applicable to other written contracts’—Foster v Mackinnon ((1869) LR 4 CP 704 at 712)). They chose the course of adaptation,and, as in many other fields of the law this process of adaptation has not been logical, or led to a logical result. The modern version still contains some fossilised elements.
We had traced, in arguments at the bar, the emergence of the distinction, which has come to be made between a difference (of intention from result) of character, which may render a document void, and a difference of contents which at most makes it voidable. As it emerged (see Edwards v Brown) it was expressed as being between the actual contents, on the one hand, and its legal effect on the other (see per Bayley B ((1831) 1 Cr & J at 312)). Here ‘actual contents’ evidently means ‘character’. In this form it was taken into the leading case of Foster v Mackinnon ((1869) LR 4 CP at 704). In the well-known passage
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from the judgment of the court, Byles J used the words ((1869) LR 4 CP at 711) ‘to such a degree that the written contract is of a nature altogether different from the contract pretended to be read’, and later in his conclusion ((1869) LR 4 CP at 713): ‘He was deceived, not merely as to the legal effect, but as to the actual contents of the instrument.' The language used may have been imperfect; but I think that the courts were groping for the test of what should enable a man to say that the document was not his document, his consent no consent, the contract no contract. It was really the language used in the second leading case of Howatson v Webb which has given rise to difficulty. There, in a judgment of Warrington J, which has carried much conviction and authority, we find that, although the judgment of Byles J in Foster v Mackinnon is quoted, the use of the word ‘contents’ is switched to mean what the deed actually (as a matter of detail) contains, and contrasted with what is called its legal character ([1907] 1 Ch at 549), ‘The misrepresentation was as to the contents of the deed, and not as to the character and class of the deed’.
The distinction, as restated, is terminologically confusing and in substance illogical, as the judgments in the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) demonstrate. On the one hand, it cannot be right that a document should be void through a mistake as to the label it bears, however little this mistake may be fundamental to what the signer intends; on the other hand, it is not satisfactory that the document should be valid if the mistake is merely as to what the document contains, however radical this mistake may be and however cataclysmic its result.
The existing test, or at least its terminology, may be criticised, but does it follow that there are no definable circumstances in which a document to which a man has put his signature may be held to be not his document, and so void rather than merely voidable? The judgment of Lord Denning MR seems at first sight to suggest that there are not and that the whole doctrine ought to be discarded, but a closer reading shows that he is really confining his observations to the plainest, and no doubt commonest, cases where a man of full understanding and capacity forbears, or negligently omits, to read what he has signed. That, in the present age, such a person should be denied the non est factum plea I would accept; so to hold follows in logical development from the well-known suggested question of Mellish LJ in Hunter v Walters and from what was said by Farwell LJ in Howatson v Webb ([1908] 1 Ch at 4). But there remains a residue of difficult cases. There are still illiterate or senile persons who cannot read, or apprehend, a legal document; there are still persons who may be tricked into putting their signature on a piece of paper which has legal consequences totally different from anything they intended. Certainly the first class may in some cases, even without the plea, be able to obtain relief, either because no third party has become involved, or, if he has, with the assistance of equitable doctrines, because the third party’s interest is equitable only and his conduct such that his rights should be postponed (see National Provincial Bank of England v Jackson and cf Hunter v Walters ((1871) 7 Ch App at 89)). Certainly, too, the second class may in some cases fall under the heading of plain forgery, in which event the plea of non est factum is not needed, or indeed available (cf Swan v North British Australasian Co Ltd) and in others be reduced if the signer is denied the benefit of the plea because of his negligence. But accepting all that has been said by learned judges as to the necessity
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of confining the plea within narrow limits, to eliminate it altogether would, in my opinion, deprive the courts of what may be, doubtless on sufficiently rare occasions, an instrument of justice.
How, then, ought the principle, on which a plea of non est factum is admissible, to be stated? In my opinion, a document should be held to be void (as opposed to voidable) only when the element of consent to it is totally lacking, ie more concretely, when the transaction which the document purports to effect is essentially different in substance or in kind from the transaction intended. Many other expressions, or adjectives, could be used—‘basically’ or ‘radically’ or ‘fundamentally’. In substance, the test does not differ from that which was applied in the leading cases of Thoroughgood’s Case and Foster v Mackinnon, except in moving from the character/contents distinction to an area better understood in modern practice.
To this general test it is necessary to add certain amplifications. First, there is the case of fraud. The law as to this is best stated in the words of the judgment in Foster v Mackinnon ((1869) LR 4 CP at 711) where it is said that a signature obtained by fraud:
‘… is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature; in other words, that he never intended to sign, and therefore in contemplation of law never did sign, the contract to which his name is appended.’
In other words, it is the lack of consent that matters, not the means by which this result was brought about. Fraud by itself may do no more than make the contract voidable.
Secondly, a man cannot escape from the consequences, as regards innocent third parties, of signing a document if, being a man of ordinary education and competence, he chooses to sign it without informing himself of its purport and effect. This principle is sometimes found expressed in the language that ‘he is doing something with his estate’ (Hunter v Walters, Howatson v Webb) but it really reflects a rule of common sense on the exigency of busy lives.
Thirdly, there is the case where the signer has been careless, in not taking ordinary precautions against being deceived. This is a difficult area. Until 1911 the law was reasonably clear; it had been stated plainly in Foster v Mackinnon that negligence—ie carelessness—might deny the signer the benefit of the plea. Since Bragg’s case was decided in 1911 (Carlisle and Cumberland Banking Co v Bragg) the law has been that, except in relation to negotiable instruments, mere carelessness is not disabling; there must be negligence arising from a duty of care to the third person who ultimately relies on the document. It does not need much force to demolish this battered precedent. It is sufficient to point to two major defects in it. First, it confuses the kind of careless conduct which disentitles a man from denying the effect of his signature with such legal negligence as entitles a person injured to bring an action in tort. The two are quite different things in standard and scope. Secondly, the judgment proceeds on a palpable misunderstanding of the judgment in Foster v Mackinnon; for Byles J, so far from confining the relevance of negligence to negotiable instruments (as Bragg’s case suggests), clearly thought that the signer of a negotiable instrument would be liable, negligence or no negligence, and that negligence was relevant in relation to documents other than negotiable instruments; eg (as in the actual case before him) to a guarantee.
In my opinion, the correct rule, and that which in fact prevailed until Bragg’s case,
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is that, leaving aside negotiable instruments to which special rules may apply, a person who signs a document, and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs, which, if neglected, prevents him from denying his liability under the document according to its tenor. I would add that the onus of proof in this matter rests on him, ie to prove that he acted carefully and not on the third party to prove the contrary. I consider therefore that Carlisle and Cumberland Banking Co v Bragg was wrong, both in the principle it states and in its decision, and that it should no longer be cited as an authority for any purpose.
The preceding paragraphs contemplate persons who are adult and literate: the conclusion as to such persons is that, while there are cases in which they may successfully plead non est factum, these cases will, in modern times, be rare. As to persons who are illiterate, or blind, or lacking in understanding, the law is in a dilemma. On the one hand, the law is traditionally, and rightly, ready to relieve them against hardship and imposition. On the other hand, regard has to be paid to the position of innocent third parties who cannot be expected, and often would have no means, to know the condition or status of the signer. I do not think that a defined solution can be provided for all cases. The law ought, in my opinion, to give relief if satisfied that consent was truly lacking but will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents.
This brings me to the present case. The plaintiff was a lady of advanced age, but, as her evidence shows, by no means incapable physically or mentally. It certainly cannot be said that she did not receive sympathetic consideration or the benefit of much doubt from the judge as to the circumstances in which the assignment was executed. But accepting all of this, I am satisfied, with Russell LJ, that she fell short, very far short, of making the clear and satisfactory case which is required of those who seek to have a legal act declared void and of establishing a sufficient discrepancy between her intentions and her act. I am satisfied to adopt, without repetition, the analysis of the facts which appears in the judgment of Russell LJ as well as that of my noble and learned friend, Lord Pearson.
I would dismiss the appeal.
LORD PEARSON. My Lords, this appeal raises questions of law as to the limits of the plea of non est factum, in a case where the person who signed the deed of assignment of a long lease of a house alleges that she was deceived by the assignee as to the nature and character of the deed, so that it was not her deed, and she relies on the plea not only against the assignee who is alleged to have deceived her but also against an innocent third party, the building society, who afterwards in good faith and with no knowledge of any defect affecting her signature lent money to the assignee on the security of the house. There are also questions of fact on which two members at least of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) took different views from that of the learned trial judge ([1968] 2 All ER 322, [1968] 1 WLR 1199).
In 1962 the plaintiff was 78 years of age. She owned a long lease of a house, where she resided and earned her living by taking in lodgers. The ground rent was small, so that in broad effect she was the owner of the house. The only one of her relatives who frequently visited her was her nephew, Walter Parkin, aged about 40. He had a small garage at which he did motor repairing work. He had a friend and business associate, named William Robert Lee, whom he trusted, although in the event Mr Lee proved to be untrustworthy. The plaintiff told Mr Parkin that she had made a will leaving her house to him. Later she handed over to him the deeds of her house, thinking apparently that she was thereby transferring to him the ownership of the house or at any
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rate enabling him to raise money on the security of the house. She made it a condition that she would have the use of the house for the rest of her life. Mr Parkin needed money for his business, and she wished to help him in this way. If a further step, such as the making of a deed of gift, was required, she would be willing to do this.
Mr Parkin consulted with Mr Lee. Mr Parkin was in a difficulty. He had left his wife and three children, and for years had been living with another woman who had become known as ‘Mrs Parkin’. He was in arrear with maintenance payments to his wife, and he was afraid that if he became the owner of the house his wife might be able to force him to pay the maintenance. Mr Lee needed money in order to purchase a house for himself and his family, as they were still living in his father’s house. He saw the opportunity of raising money on the security of the plaintiff’s house if he could become the owner of it. It was arranged, or at any rate proposed, between Mr Parkin and Mr Lee that the plaintiff should transfer the house to Mr Parkin by deed of gift, and when she had done so Mr Parkin should sell the house to Mr Lee at a price of £2,000 or £2,500 (the evidence is not clear as to the amount of the proposed price) and Mr Lee should raise money from a building society on the security of the house and should pay the price of £2,000 or £2,500 by making monthly payments to the woman known as ‘Mrs Parkin’. Mr Lee consulted a firm of solicitors about the proposed transaction and was advised that a recent deed of gift on the title would be likely to deter a building society from lending money on the security of the house and that a direct sale by the plaintiff to Mr Lee would be preferable. Accordingly, the solicitors drafted a deed of assignment of the house from the plaintiff to Mr Lee at a stated price of £3,000. It may be that the conduct of the solicitors or their managing clerk fell below professional standards, but it is not necessary to investigate that aspect of the matter.
Mr Lee and Mr Parkin went to see the plaintiff. Mr Lee had the deed, and he put it before the plaintiff for her to sign. The plaintiff had broken her spectacles and could not read effectively without them. She asked what the deed was, and Mr Lee said, in the presence of Mr Parkin and without any dissent from him, that the deed was ‘to do with the gift by deed to [Mr Parkin) for the house’. The plaintiff, not having asked Mr Parkin to read the deed to her or give his explanation of it, but assuming that Mr Parkin and Mr Lee knew what they were doing, and desiring to help Mr Parkin in the way that he wished, signed the deed. Mr Parkin witnessed the plaintiff’s signature to the deed. The price of £3,000 was not paid or intended to be paid, so that in practical reality the assignment from the plaintiff to Mr Lee was for no consideration. As between Mr Lee and Mr Parkin the intention was that £2,000 or £2,500 was to be made available in some way by Mr Lee to Mr Parkin; he might pay monthly instalments to the woman known as ‘Mrs Parkin’ or he might from time to time put money into the business of Mr Parkin in which Mr Lee had some interest. It is not easy to gather from the evidence exactly what the arrangement was, and it probably was somewhat indefinite in its details, but I think that that was the broad effect of it. If this arrangement, or something on these lines, had been duly carried out, the plaintiff’s signature to the deed would have enabled Mr Parkin through Mr Lee to raise money on the security of the house in the way that Mr Parkin considered most beneficial to himself.
Mr Lee made to the building society an application containing some false statements and supported it with a testimonial, drafted by him and signed by Mr Parkin, also containing some false statements. The building society, in response to the application, and in reliance on the title deeds including the plaintiff’s assignment to Mr Lee, and having no notice of any defect in the assignment or of anything unusual affecting it, and acting in complete good faith, lent £2,000 to Mr Lee on the security of the house. Then things went wrong. Mr Lee failed to carry out his arrangement with Mr Parkin. Mr Lee was heavily indebted, and the sum which he had borrowed from the building society was used up in paying his debts, and probably his other resources were insufficient to enable him to make any money available to Mr Parkin.
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At any rate, he did not make the sum of £2,500 or £2,000 or any sum available to Mr Parkin in any way. Thus, in the event the plaintiff’s execution of the deed of assignment did not bring any benefit to Mr Parkin, although it would have done if his arrangement with Mr Lee had been duly carried out by Mr Lee.
The plaintiff commenced her action in July 1964. By her amended statement of claim she claimed: (1) against Mr Lee a declaration that the assignment of the house to him was void, return of the title deeds or their value and damages for their detention, and damages for fraudulent misrepresentation; and (2) against the building society a declaration that the assignment of the house to Mr Lee was void, and the delivery up of the title deeds or their value and damages for their detention.
The plaintiff’s evidence was, owing to her age and infirmity, taken on commission, so that the learned judge ([1968] 2 All ER 322, [1968] 1 WLR 1190) did not have the advantage of seeing and hearing her as she was giving her evidence. Evidence was given at the trial by Mr Parkin, Mr Lee and a witness named Hall who had been managing clerk of the solicitors concerned. The learned judge found that Mr Lee and Mr Hall had told lies in the witness box and he could not rely on their evidence. As to Mr Parkin, he found that he had told some lies in the witness box and that his evidence showed a high degree of confusion and inaccuracy, but nevertheless there were times in his evidence when he was saying simple things when the learned judge had the conviction that he was telling the truth. With regard to the plaintiff’s evidence the learned judge said:
‘It is apparent from the transcript of that evidence first that she must have been a difficult witness, that her evidence is not very clear in a number of respects and in some respects it is contradictory.’
He did, however, find as a fact that the plaintiff did not read the document, that Mr Lee represented it to be a deed of gift to Mr Parkin and that the plaintiff executed it in the belief that that was what it was. He also found as a fact that the plaintiff had no idea that the document took the form of an assignment on sale from her to Mr Lee and that a sale or gift to him was something which she did not and would not for one moment have contemplated.
As at least two members of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) did not accept these findings of the learned judge, and I prefer their views to his (although undoubtedly these questions of fact are difficult), I will set out a few extracts from the plaintiff’s evidence taken on commission, in order to show in outline what was the basis of their views:
‘Q Do you know that Mr Parkin—that is Wally—gave the building society a testimonial about Mr Lee so that he could get a mortgage on this house? A I did not know what they were doing when they came to me. I only said to [Mr Parkin]—I didn’t refer to Mr Lee; I referred to [Mr Parkin] and I said to [Mr Parkin]—“I don’t mind helping you at all. I have helped you in the past and I will still help you as long as I can; but mind you are doing the right thing“. I have always trusted [Mr Parkin].
‘Q And if he told you a document was all right you believed him? A I believe [Mr Parkin]. I don’t believe Mr Lee.
‘Q And, of course, when [Mr Parkin] and Mr Lee came along with the document you thought it must be all right? A I did.
‘Q And it was because [Mr Parkin] was there that you were willing to sign it? A Yes …
‘Q Did you know that Mr Lee stated that he would buy the house from Mr Parkin? A No, I did not know he was buying the house. I just thought he was having a loan on my house.
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‘Q Mr Lee was? A Yes. But if [Mr Parkin] had have come to me and said, “Auntie, I am in difficulties”, I would have got him the money instead of bothering Mr Lee.
‘Q But the money was to be borrowed on your deeds through Mr Lee. Is that right? A Yes.
‘Q And you were quite satisfied about that? A Yes. I done it to help [Mr Parkin] with his business …
‘Q Have you brought this action to help [Mr Parkin]? A I have, Sir …
‘Q Did it occur to you to ask [Mr Parkin] to read the document to you? A I never thought of that, Sir.
‘Q You thought it was all right. If [Mr Parkin] was there, it must be all right? A I did.’
The learned judge ([1968] 2 All ER at 332, [1968] 1 WLR at 1204): (1) made a declaration as against Mr Lee that the alleged assignment of 15 June 1962 was void and of no effect, and directed an enquiry as to damages; and (2) made a declaration in the same terms as against the building society and ordered it to deliver up the title deeds.
There was no appeal by Mr Lee. There was an appeal by the building society, and it was allowed by the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17). Lord Denning MR decided the case on a broad principle to which I will refer later. Russell LJ carefully examined the facts of the case and made two comments on the plaintiff’s evidence, and these were in effect his grounds of decision. He said ([1969] 1 All ER at 1075, [1969] 2 Ch at 40, 41):
[(1)] ‘… it is inadequate to establish the minimum facts necessary to establish the plea of non est factum, assuming that it would be sufficient for that plea to show that the plaintiff was induced wholly by [Mr Lee’s] falsehood to think that she was signing a deed of gift to Mr. Parkin whereas she executed an assignment in terms for value to [Mr Lee]. I think that the plaintiff’s evidence in this regard was unsatisfactory, and was inadequate to discharge the burden of proof that is laid by law on this plea, which requires strong and clear evidence for its discharge …
[(2)] ‘At first sight of course it is easy to see the difference between a voluntary assignment of a leasehold property to A and an assignment for value of that property to B. But what on the plaintiff’s own evidence was the essential character of the document she was intending to execute? It was a document intended by her to divest herself of her leasehold property by transferring it to another, not as mere trustee for her, but so that the transferee should be in a position to deal with the property and in particular by borrowing money on the security of the property. Her evidence in my view makes it plain that she understood that [Mr Lee] and Mr. Parkin were jointly concerned in a project of raising money on security of the property and this was her intention. In those circumstances I do not consider that it is correct to say that for the purposes of the plea of non est factum a transfer by her to [Mr Lee] is to be regarded as of a totally different character or nature from a transfer to Mr. Parkin. The learned judge relied on the identity of the transferee as constituting the essential nature or character of the instrument. In so doing I think that he paid insufficient regard to what I may call the object of the exercise. Suppose that [Mr Lee] had carried through the arrangement that Mr. Parkin had understood was made—had in fact paid Mr. Parkin. This would have fulfilled the plaintiff’s purpose in executing the document put before her … ’
I respectfully agree with the reasoning of Russell LJ, and in particular with the
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principle that importance should be attached to the ‘object of the exercise’, when dissimilar legal documents may have similar practical effects. Another example of this will be found in Mercantile Credit Co Ltd v Hamblin. In that case the defendant had signed hire-purchase documents, and there was some evidence that she intended to raise money by means of a mortgage of her car, and she had pleaded non est factum. It became plain, however, that the object of the proposed hire-purchase transaction was to produce the same practical effect as a mortgage of the car would have produced (if it had been lawful). She would sell the car through a dealer to a finance company, and take it back from the finance company on hire-purchase, with the results that she would receive a lump sum down and would repay it with additions by instalments over a period, so that she would for practical purposes be in much the same position as if she had mortgaged the car. The plea of non est factum failed.
I think that Salmon LJ’s view of the facts in the present case was consistent with that of Russell LJ, but his main conclusion on the facts was this ([1969] 1 All ER at 1079, [1969] 2 Ch at 45):
‘In the present case it seems plain from the plaintiff’s evidence, which was given before an examiner and which we are therefore in just as good a position to evaluate as was the learned judge, that she would have executed the conveyance even if its true character and class and the nature of the transaction had been properly explained to her and she had understood the explanation. Certainly she was not induced to sign by any false representation made to her by [Mr Lee].’
In a later passage Salmon LJ said ([1969] 1 All ER at 1080, [1969] 2 Ch at 47):
‘… if Mr. Parkin had taken the trouble to explain the true nature of the document to her and told her that the solicitors had advised that it should be in that form and asked her to sign it, there can in my view be no real doubt but that she would have done so.’
I think that that conclusion of Salmon LJ is probably right but there may be an element of doubt as to what the plaintiff would have done if she had been given a full explanation of the document. I would dismiss the appeal for the reasons given by Russell LJ because they seem to me free from doubt.
In the judgments of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) in this case there was an elaborate and, if I may respectfully say so, illuminating and valuable discussion of the law relating to the plea of non est factum. It is not practicable in this opinion to examine what they have said at length and in detail, dealing with every point. It seems to me that the right course here is to examine the law on this subject with the aid of the judgments in the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) and to endeavour to arrive at clear general propositions for the future on the basis of the earlier law which I think has become distorted in some respects.
I must, however, deal specifically with the broad principle stated by Lord Denning MR as his conclusion from his investigation of the law. It was this ([1969] 1 All ER at 1072, [1969] 2 Ch at 36, 37):
‘Whenever a man of full age and understanding, who can read and write, signs a legal document which is put before him for signature—by which I mean a document which, it is apparent on the face of it, is intended to have legal consequences—then, if he does not take the trouble to read it, but signs it as it is, relying on the word of another as to its character or contents or effect, he cannot be heard to say that it is not his document. By his conduct in signing it he has
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represented, to all those into whose hands it may come, that it is his document; and once they act on it as being his document, he cannot go back on it, and say it was a nullity from the beginning.’
In applying the principle to the present case, Lord Denning MR said ([1969] 1 All ER at 1072, [1969] 2 Ch at 37):
‘… the plaintiff cannot in this case say that the deed of assignment was not her deed. She signed it without reading it, relying on the assurance of [Mr Lee] that it was a deed of gift to Mr. Parkin. It turned out to be a deed of assignment to Mr. Lee. But it was obviously a legal document. She signed it; and the building society advanced money on the faith of its being her document. She cannot now be allowed to disavow her signature.’
There can be no doubt that this statement of principle by Lord Denning MR is not only a clear and concise formulation but also a valuable guide to the right decision to be given by a court in any ordinary case. The danger of giving an undue extension to the plea of non est factum has been pointed out in a number of cases. For instance in Muskham Finance Ltd v Howard ([1963] 1 All ER 81 at 83, [1963] 1 QB 904 at 912) Donovan LJ delivering the judgment of the court said:
‘The plea of non est factum is a plea which must necessarily be kept within narrow limits. Much confusion and uncertainty would result in the field of contract and elsewhere if a man were permitted to try to disown his signature simply by asserting that he did not understand that which he had signed.’
In Hunter v Walters ((1871) 7 Ch App 75 at 87), Mellish LJ said:
‘Now, in my opinion, it is still a doubtful question at law, on which I do not wish to give any decisive opinion, whether, if there be a false representation respecting the contents of a deed, a person who is an educated person, and who might, by very simple means, have satisfied himself as to what the contents of the deed really were, may not, by executing it negligently be estopped as between himself and a person who innocently acts upon the faith of the deed being valid, and who accepts an estate under it.’
This passage was referred to by Farwell LJ in Howatson v Webb ([1908] 1 Ch at 3, 4), where he said:
‘I think myself that the question suggested, but not decided, by Mellish L.J. in that case will some day have to be determined, viz., whether the old cases on misrepresentation as to the contents of a deed were not based upon the illiterate character of the person to whom the deed was read over, and on the fact that an illiterate man was treated as being in the same position as a blind man: see Thoroughgood’s Case and Sheppard’s Touchstoneb; and whether at the present time an educated person, who is not blind, is not estopped from availing himself of the plea of non est factum against a person who innocently acts upon the faith of the deed being valid.’
The principle stated by Lord Denning MR can and should be applied so as to confine the scope of the plea of non est factum within narrow limits. It rightly prevents the plea from being successful in the normal case of a man who, however much he may have been misinformed about the nature of a deed or document, could easily have
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ascertained its true nature by reading it and has taken on himself the risk of not reading it. I think, however, that, unless the doctrine of non est factum, as it has been understood for at least a hundred years, is to be radically transformed, the statement of principle by Lord Denning MR, taken just as it stands, is too absolute and rigid and needs some amplification and qualification. Doubts can be raised as to the meaning of the phrase ‘a man of full age and understanding, who can read and write’. There are degrees of understanding and a person who is a great expert in some subjects may be like a child in relation to other subjects. Does the phrase refer to understanding of things in general, or does it refer to capacity for understanding (not necessarily in more than a general and elementary way) legal documents and property transactions and business transactions?
In my opinion, the plea of non est factum ought to be available in a proper case for the relief of a person who for permanent or temporary reasons (not limited to blindness or illiteracy) is not capable of both reading and sufficiently understanding the deed or other document to be signed. By ‘sufficiently understanding’ I mean understanding at least to the point of detecting a fundamental difference between the actual document and the document as the signer had believed it to be. There must be a proper case for such relief. There would not be a proper case if: (a) the signature of the document was brought about by negligence of the signer in failing to take precautions which he ought to have taken; or (b) the actual document was not fundamentally different from the document as the signer believed it to be. I will say something later about negligence and about fundamental difference.
In the present case the plaintiff was not at the material time a person who could read, because on the facts found she had broken her spectacles and could not effectively read without them. In any case her evidence (unless it was deliberately false, which has not been argued) shows that she had very little capacity for understanding legal documents and property transactions, and I do not think that a reasonable jury would have found that she was negligent. In my opinion, it would not be right to dismiss the plaintiff’s appeal on the ground that the principal stated by Lord Denning MR is applicable to her case. I do not think it is.
The principle as stated is limited to a case in which it is apparent on the face of the document that it is intended to have legal consequences. That allows for possible success of the plea in a case such as Lewis v Clay, where Mr Clay had been induced to sign promissory notes by the cunning deception of a false friend, who caused him to believe that he was merely witnessing the friend’s signature on several private and highly confidential documents, the material parts of which had been covered up.
I wish to reserve the question whether the plea of non est factum would ever be rightly successful in a case where: (1) it is apparent on the face of the document that it is intended to have legal consequences; (2) the signer of the document is able to read and sufficiently understand the document; (3) the document is fundamentally different from what he supposes it to be; and (4) he is induced to sign it without reading it. It seems unlikely that the plea ought ever to succeed in such a case, but it is inadvisable to rule out the wholly exceptional and unpredictable case.
I have said above that the statement of principle by Lord Denning MR needs to be amplified and qualified unless the doctrine of non est factum, as it has been understood for at least a hundred years, is to be radically transformed. What is the doctrine, and should it be radically transformed? As to the early history, the authorities referred to in the judgment of Byles J in Foster v Mackinnon ((1869) LR 4 CP 704 at 711, 712) (and also referred to in Holdsworth’s History of English Law c) were cited in the argument of this appeal. Having considered them I think they show that the law relating to the plea of non est factum remained in an undeveloped state until the judgment in Foster v Mackinnon, and
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the modern development began with that judgment. It was the judgment of the court (Bovill CJ, Byles, Keating and Montague Smith JJ) delivered by Byles J. He said ((1869) LR 4 CP at 711):
‘It seems plain, on principle and on authority, that, if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man afterwards signs; then, at least if there be no negligence, the signature so obtained is of no force. And it is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature; in other words, that he never intended to sign, and therefore in contemplation of law never did sign, the contract to which his name is appended.’
In my opinion, the essential features of the doctrine are contained in that passage and the doctrine does not need any radical transformation. A minor comment is that the phrase ‘who for some reason (not implying negligence) forbears to read’ is (to use a currently fashionable word) too ‘permissive’ in its tone. If a person forbears to read the document, he nearly always should be reckoned as negligent or otherwise debarred from succeeding on the plea of non est factum. The passage which I have set out from Byles J’s judgment, although I think it contains the essential features, was only a brief summary in a leading judgment, and there are further developments which need to be considered.
Ascertainment of the intention. I think the doctrine of non est factum inevitably involves applying the subjective rather than the objective test to ascertain the intention. It takes the intention which a man has in his own mind rather than the intention which he manifests to others (the intention which as reasonable men they would infer from his words and conduct). There are, however, some cases in which the subjective test of intention can be applied so as to produce the same result as would be produced by the objective test. Suppose a man signs a deed without knowing or enquiring or having any positive belief or formed opinion, as to its nature or effect; he signs it because his solicitor or other trusted adviser advises him to do so. Then his intention is to sign the deed that is placed before him, whatever it may be or do. That is the intention in his own mind as well as the intention which by signing he manifests to others. Examples of this will be found in Hunter v Walters; National Provincial Bank of England v Jackson; King v Smith. In King v Smith Farwell J ([1900] 2 Ch at 430) cited and relied on a passage in the judgment of Mellish LJ in Hunter v Walters ((1871) 7 Ch App at 88), where he said:
‘When a man knows that he is conveying or doing something with his estate, but does not ask what is the precise effect of the deed, because he is told it is a mere form, and has such confidence in his solicitor as to execute the deed in ignorance, then, in my opinion, a deed so executed, although it may be voidable upon the ground of fraud, is not a void deed.’
Farwell J said ([1900] 2 Ch at 430) that Mr King ‘had absolute confidence in his solicitor, and executed any deed relating to his property that Eldred put before him.’
I think that this principle affords a solution to a problem that was raised in the course of the argument. Suppose that the very busy managing director of a large company has a pile of documents to be signed in a few minutes before his next meeting,
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and his secretary has arranged them for maximum speed with only the spaces for signature exposed, and he ‘signs them blind’, as the saying is, not reading them or even looking at them. He may be exercising a wise economy of his time and energy. There is the possibility of some extraneous document, involving him in unexpected personal liability, having been fraudulently inserted in the pile, but this possibility is so improbable that a reasonable man would disregard it: Bolton v Stone ([1951] 1 All ER 1078 at 1080, 1081, [1951] AC 850 at 858). Such conduct is not negligence in any ordinary sense of the word. But the person who signs documents in this way ought to be held bound by them, and ought not to be entitled to avoid liability so as to shift the burden of loss on to an innocent third party. The whole object of having documents signed by him is that he makes them his documents and takes responsibility for them. He takes the chance of a fraudulent substitution. I think that the right view of such a case is that the person who signs intends to sign the documents placed before him, whatever they may be, and so there is no basis on which he could successfully plead non est factum.
Negligence. It is clear that by the law as it was laid down in Foster v Mackinnon a person who had signed a document differing fundamentally from what he believed it to be would be disentitled from successfully pleading non est factum if his signing of the document was due to his own negligence. The word ‘negligence’ in this connection had no special, technical meaning. It meant carelessness, and in each case it was a question of fact for the jury to decide whether the person relying on the plea had been negligent or not. In Foster v Mackinnon Bovill CJ had told the jury that, if the indorsement was not the defendant’s signature, or if, being his signature, it was obtained on a fraudulent representation that it was a guarantee, and the defendant signed it without knowing that it was a bill, and under the belief that it was a guarantee and if the defendant was not guilty of any negligence in so signing the paper, the defendant was entitled to the verdict. On appeal this direction was held to be correct. In Vorley v Cooke ((1857) 1 Giff 230 at 236, 237) Sir John Stuart V-C said:
‘It cannot be said that Cooke’s conduct was careless or rash. He was deceived, as anyone with the ordinary amount of intelligence and caution would have been deceived, and he is therefore entitled to be relieved.’
Whatever may be thought of the merits of the decision in that case, this passage illustrates the simple approach to the question whether the signer of the deed had been negligent or not. Similarly, in Lewis v Clay ((1897) 67 LJQB 224 at 225) Lord Russell of Killowen CJ left to the jury the question: ‘Was the defendant, in signing his name as he did, recklessly careless, and did he thereby enable Lord William Nevill to perpetrate the fraud?’
Unfortunately this simple and satisfactory view as to the meaning and effect of negligence in relation to the plea of non est factum became distorted in Carlisle and Cumberland Banking Co v Bragg. The defendant was induced to sign the document by fraud, and did not know that it was a guarantee, but thought that it was a mere proposal for insurance. The jury found that he had been negligent. Pickford J considered that the finding of negligence was immaterial, and on appeal his view was upheld. Vaughan Williams LJ said ([1911] 1 KB at 494):
‘I do not know whether the jury understood that there could be no material negligence unless there was a duty on the defendant towards the plaintiffs. Even if they did understand that, in my opinion, in the case of this instrument, the signature to which was obtained by fraud, and which was not a negotiable instrument, Pickford J. was right in saying that the finding of negligence was
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immaterial. I wish to add for myself that in my judgment there is no evidence whatsoever to shew that the proximate cause of the plaintiffs’ advancing money on this document was the mere signature of it by the defendant. In my opinion, the proximate cause of the plaintiffs’ making the advance was that Rigg fraudulently took the document to the bank, having fraudulently altered it by adding the forged signature of an attesting witness, and but for Rigg having done those things the plaintiffs would never have advanced the money at all.’
The reasoning of the Court of Appeal in Carlisle and Cumberland Banking Co v Bragg has been criticised, eg by Sir William Anson in 1912d and by Professor Guest in 1963 in the Law Quarterly Reviewe. Also doubts as to the correctness of the reasoning were expressed by Donovan LJ delivering the judgment of the Court of Appeal in Muskham Finance Ltd v Howard ([1963] 1 All ER at 84, [1963] 1 QB at 913), and by Gavan Duffy J in Carlton and United Breweries Ltd v Elliott. In my opinion, Carlisle and Cumberland Banking Company v Bragg was wrong in the reasoning and the decision.
I think it is not right to say that in relation to the plea of non est factum negligence operates by way of estoppel. The phrase ‘estoppel by negligence’ tends, in this connection at any rate, to be misleading in several ways. (1) The phrase is inaccurate in itself, as has been pointed out in Spencer Bower and Turner on Estoppel by Representationf and in the judgments of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) in this case. Estoppel in the normal sense of the word does not arise from negligence; it arises from a representation made by words or conduct. (2) The phrase tends to bring in the technicalities of estoppel, and the requirement that the representation must be intended to be acted on may cause difficulties. (3) The phrase tends to bring in the technicalities of negligence as they have been developed in the tort of negligence. This is what happened in Carlisle and Cumberland Banking Co v Bragg, as shown by the passage cited above. The innocent third party who has paid or lent money on the faith of a negligently signed document should not have to prove the signer owed a duty to him, nor that the signer’s negligence was the proximate cause of the money being paid or lent. (4) An estoppel must be pleaded and proved by the party relying on it. In relation to the plea of non est factum, this could put the burden of proof on the wrong party. The person who has signed the document knows with what knowledge or lack of knowledge and with what intention he signed the document, and how he was induced or came to sign it. He should have the burden of proving that his signature was not brought about by negligence on his part.
Salmon LJ has said in his judgment in this case ([1969] 1 All ER at 1081, [1969] 2 Ch at 48):
‘If … a person signs a document because he negligently failed to read it, I think he is precluded from relying on his own negligent act for the purpose of escaping from the ordinary consequences of his signature. In such circumstances he cannot succeed on a plea of non est factum. This is not in my view a true estoppel, but an illustration of the principle that no man may take advantage of his own wrong.’
I agree.
The degree of difference required. The judgments in the older cases used a variety of expressions to signify the degree or kind of difference that, for the purposes of the
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plea of non est factum, must be shown to exist between the document as it was and the document as it was believed to be. More recently there has been a tendency to draw a firm distinction between: (a) a difference in character or class, which is sufficient for the purposes of the plea; and (b) a difference only in contents, which is not sufficient. This distinction has been helpful in some cases, but, as the judgments of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) have shown, it would produce wrong results if it were applied as a rigid rule for all cases. In my opinion, one has to use a more general phrase, such as ‘fundamentally different’ or ‘radically different’ or ‘totally different’.
I would dismiss the appeal.
Appeal dismissed.
Solicitors: Hunt & Hunt (for the appellant); Sharpe, Pritchard & Co, agents for Shoosmiths & Harrison, Northampton (for the building society).
S A Hatteea Esq Barrister.
Stanwick v Stanwick
[1970] 3 All ER 983
Categories: FAMILY; Divorce
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 23 OCTOBER 1970
Divorce – Cruelty – Criminal conduct – Consequent embarrassment and injury to health of other spouse.
Divorce – Cruelty – Wife’s cruelty – Leaving husband to look after three young children as well as earn living.
A persistent course of dishonesty by a spouse, resulting in criminal convictions, the commission of other criminal offences, and putting the other spouse in acutely embarrassing positions, is material on which a court may make a finding of cruelty, and should do so if this conduct injures the other spouse’s health (see p 986 d and p 987 d, post).
Gollins v Gollins [1963] 2 All ER 966 applied.
A wife with three young sons then aged 10, six and two, went off, leaving the husband to look after them as well as to try to earn a living, and telephoned the husband to say that she was never coming back and was in love with another man. There was evidence of injury to the husband’s health. The wife had previously adopted a persistent course of irresponsibility and dishonesty with regard to money matters and had been convicted of forgery and false pretences. On appeal by the husband against dismissal of his petition for divorce on the ground of cruelty,
Held – The wife had treated the husband with cruelty, and leaving in this way was in itself a cruel act (see p 987 c and d, post).
Dictum of Lord Merriman P in Cade v Cade [1957] 1 All ER at 619 applied.
Per Karminski LJ. If in this case the trial judge had sought the assistance of the Queen’s Proctor, which is available in difficult undefended cases under the Matrimonial Causes Act 1965, s 6(1), his difficulties might well have been resolved and this appeal would not then have become necessary (see p 987 g, post).
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Notes
For the meaning of, and what constitutes, cruelty, see 12 Halsbury’s Laws (3rd Edn) 269–278, paras 514–535, and for cases on the subject, see 27 Digest (Repl) 294–296, 2393–2422.
For the Matrimonial Causes Act 1965, s 6, see 17 Halsbury’s Statutes (3rd Edn) 172.
Cases referred to in judgment
Beard v Beard [1945] 2 All ER 306, [1946] P 8, 114 LJP 33, 174 LT 65, 27 Digest (Repl) 408, 3369.
Cade v Cade [1957] 1 All ER 609, [1957] 1 WLR 569, 121 JP 200, Digest (Cont Vol A) 707, 2443b.
Crump v Crump [1965] 2 All ER 980, Digest (Cont Vol B) 353, 2552k.
Gollins v Gollins [1963] 2 All ER 966, [1964] AC 644, [1963] 3 WLR 176, Digest (Cont Vol A) 705, 2416a.
Williams v Williams [1963] 2 All ER 994, [1964] AC 698, [1963] 3 WLR 215, Digest (Cont Vol A) 711, 2537e.
Appeal
This was an appeal by Harold Stanwick against an order of his Honour Judge Lee, at Winchester County Court on 21 January 1970, dismissing his petition for divorce on the ground of the cruelty of his wife, Margaret Lilian Stanwick. The facts are set out in the judgment of Davies LJ.
P H Danbury for the husband.
The wife did not appear and was not represented.
24 June. The court adjourned the appeal so the Queen’s Proctor could be represented.
A B Ewbank for the Queen’s Proctur.
23 October 1970. The following judgments were delivered.
DAVIES LJ. This is an appeal by the husband in an undefended divorce case from an order of his Honour Judge Lee made on 21 January 1970 at Winchester, when he dismissed the husband’s petition for dissolution of the marriage on the ground of the wife’s alleged cruelty. The appeal first came before this court on 24 June 1970, and having heard an argument from counsel for the husband—the court being then differently constituted, as Sachs LJ was sitting with Karminski LJ and myself, and not Widgery LJ—we adjourned the case in order that we might have the assistance of the Queen’s Proctor to help us in the particular circumstances of the case.
The history of the marriage can be very shortly described. The parties were married in June 1947 and they had six sons, of whom the three youngest are now 12, eight and four. The marriage finally came to an end in October 1968, when the wife left the matrimonial home, leaving these three young boys with the husband, and telephoned the husband to say that she was never coming back and that she was in love with another man. That was the final end. But according to the husband’s evidence, all of which the learned judge unreservedly accepted, she had left him for varying periods on a number of previous occasions, perhaps three or four, and on each occasion he was left to look after the family.
The nature of the acts relied on by the husband can, I suppose, be described as a persistent course of irresponsibility and dishonesty with regard to money matters. As long ago as 1950 the wife was convicted of forgery
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and false pretences. That, although not described with any particularity in the husband’s evidence, appears to have been due to the fact that he put her in funds to pay for some china which they had been buying from a mail order firm, and instead of paying the instalments on this purchase she used the money for other purposes; and in order to deceive the husband she forged receipts, purporting to be receipts given for payments made by her to the mail order firm. As a result of that, as I say, she was convicted of forgery and false pretences; but it did not stop there. She was constantly, according to the husband, stealing cheques from his cheque book, forging his signature on them, and I suppose obtaining cash and, in some cases, goods on such cheques. There were in evidence four cheques of that kind given to a well-known store in London. On another occasion, when he had in his possession in his wallet some money which was the property of his employers and for which he was accountable, she stole money from that wallet. It would appear that that conduct continued really throughout the marriage. It caused him the greatest embarrassment, of course, with the firms to whom she had given these forged cheques, embarrassment with his bank and embarrassment with his employers; he had from time to time to borrow from his employers to pay off the debts which she had failed to pay off, having used the money for other purposes, and he also had to get loans from the bank. Eventually the bank refused to lend him any more.
That, obviously, is a perfectly shocking story of misconduct by the wife. The learned judge, as I said, accepted the husband’s evidence. The husband said that this conduct rendered him unwell. There is evidence in an affidavit from the doctor that early in 1968, about February, and later in the same year, in the autumn, the husband attended him and was in a state of tension; and sedatives had to be prescribed. There was also evidence from his employers that on a number of occasions he had to be away from work owing to domestic difficulties, and was away for one period for a whole month.
The learned judge, when counsel for the husband closed his case, said: ‘I accept everything he said. The case is clearly made out. But so far as cruelty is concerned … ’, and then he went on to discuss whether or not, accepting as he did that the husband’s health was injured, the conduct which was proved by the husband could in law amount to cruelty. I shall read, in a moment, the passage in which he decides that question, but I find it a little difficult to understand really what the ratio of the judgment is. It would seem, in the end, that what the learned judge is saying is that the intrinsic nature of this conduct, however serious it was, however it affected the health of the husband, could not, in law, amount to cruelty. The concluding passage of his judgment is in these terms:
‘What is cruelty? In this court counsel has urged on me—by reason of Gollins v Gollins that conduct which in fact causes a deterioration in the health of a petitioner is cruelty. With respect, I think that goes too far. I think it could be cruelty, but one has to look at the whole matter. Cruelty is cruelty, and although a deliberate intention to harm the other may be absent that is no answer. [I think what the learned judge is rightly saying there is that the absence of a deliberate intention to harm the other does not prevent the conduct from being cruel.] This marriage was solemnised in a church, whereby the husband undertook to stay with his wife for better or worse, though it turned out much worse than he could have expected.’
Counsel for the Queen’s Proctor, points out, in my view rightly, that that is a completely irrelevant consideration. The grounds on which and the circumstances in which the court may dissolve a marriage are the same, whether that marriage was solemnised in a cathedral, a church or any place of worship or in a registry office. The learned judge, I think, is not placing much weight on that, but I venture, in passing, to agree with the submission made in that respect by counsel for the Queen’s Proctor. Then the judge went on:
‘His whole life seems to me to be governed by love for the children and his desire to bring them up well. His health has suffered but he is a man of spirit. When his wife left him February 1968, or June 1968, he went to the doctor because he was then in a state of nervous tension, and the doctor gave him some
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pills. The same happened in November 1968, when his wife had finally gone. [The judge actually gets those dates lightly wrong.] I cannot say this is cruelty, it would not do … I suppose he could have hidden his cheque book earlier, and he could have seen that his wife could not get credit as far as he himself is concerned, from then the touts could have whistled for their money. He is a man of spirit and courage. He has been strong to overcome all the difficulties of the family caused by his wife’s conduct. He has suffered, of that I am sure, but I cannot say that this conduct amounts to cruelty. The petition is dismissed.’
With the greatest respect to the learned judge I find myself quite unable to accept his conclusions. One, in a sense, need not go any further than Gollins v Gollins. I think, myself, that this is a more serious case than Gollins v Gollins. In that case there was no dishonesty by the husband. He was what has been described in subsequent cases as a layabout, an idler, who would not do anything, and let his wife carry the heat and burden of the day, and the general management of the home and the marriage. The House of Lords held that conduct of that kind could well amount to cruelty.
As I say, I think this is a worse case. A persistent course of dishonesty, getting herself convicted, committing other criminal offences and putting the husband in acutely embarrassing positions, such as I have described, is material on which a court could make a finding of cruelty. This was not mere irresponsibility and fecklessness; it was something much worse.
Our Attention has been called to a number of cases. There was one interesting one, a decision of Cairnes J, in Crump v Crump. There the wife had a terror of cancer. I read a part of the headnote:
‘She … in 1960 started a ritual wiping everything with Dettol to guard against “cancer germs“. She would prepare a list of articles to be wiped on a particular day, and required the husband to take part in the ritual, which went on for hours; when he objected, she screamed. This conduct of the wife was caused by an obsessional compulsive psycho-neurosis, from which she had suffered since 1953 and which had been quiescent from 1954 to 1960. Her condition was one that could not be controlled by will-power, though she knew what she was doing and was not a mere automaton. Her husband’s health suffered as a result … ”
Cairns J came to the conclusion that that was a ground on which he could make a finding of cruelty. That was a case in which it was expressly found that the wife could not help herself, like the husband in the subsequent case in the House of Lords, Williams v Williams could not help himself as he was insane; but in all those cases a finding of cruelty was made.
Whether or not the wife could help herself in the present case we do not really know. She apparently at some time did have some treatment. I should have thought she could have helped herself; but whether she could or not in my opinion makes no difference at all.
I only refer to one other matter in this case; in the autumn 1968 the wife finally left the husband and, by so leaving, she, of course, revived any previous matrimonial misconduct of hers; and, as was pointed out by Lord Merriman P in Cade v Cade ([1957] 1 All ER 609 at 619, [1957] 1 WLR 569 at 580), an act of desertion of that kind, being a matrimonial offence, can itself at any rate form an element in a charge of cruelty. Lord Merriman P said ([1957] 1 All ER 609 at 619, [1957] 1 WLR 569 at 580):
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‘Desertion is an offence apart altogether from its duration—Beard v Beard. I think that the learned judge himself provides an example in which desertion might well be cruelty, and not merely an ingredient in cruelty. Even if there were nothing else in a case but the fact that the wife to the knowledge of the husband was lying seriously ill in the home, and that, with that knowledge, and without excuse, he left her, with the result that her health deteriorated and she became dangerously ill, on principle I cannot see why that should not also be conduct of a kind which was calculated to cause danger to life, limb or health, bodily or mental.’
Of course, this case is not quite at that level, but here one has the case of a woman with three young children in the home, going off and leaving the husband—the youngest boy, at the time, being two years old—to look after them, as well as trying to earn his living. I think that that itself was a cruel act, and on the whole of the case I have, I must say without any hesitation at all, come to the conclusion, supported in one’s views by the submissions made on behalf of the husband and on behalf of the Queen’s Proctor, that the husband’s case here was clearly made out, and therefore that the appeal should be allowed and a decree nisi pronounced.
WIDGERY LJ. I entirely agree with the judgment which has been delivered and have nothing which I can usefully add.
KARMINSKI LJ. I also agree. My difficulty, like that of Davies LJ, has been to discover what really was the ratio decidendi of the learned judge below. In my view this was a clear case where he should, on the facts which he found proved, have adjudged that this was a case where the husband had made out his case of cruelty.
I wish to add only one other matter on a important procedural point; that is the help which is available in difficult undefended cases under the provisions of s 6(1) of the Matrimonial Causes Act 1965. That section enable the court to call on the assistance of the Queen’s Proctor to argue before the court any question in relation to the matter which the court deems it necessary or expedient to have fully argued. In this case we have had the advantage of hearing counsel for the husband and also counsel for the Queen’s Proctor. As always happens in these cases, the argument put forward by the Queen’s Proctor has been of very great assistance to the court. I mention this matter because I cannot help feeling that if in this case the learned judge below had sought the assistance of the Queen’s Proctor, his difficulties might well have been resolved and this appeal would not have become necessary.
In the event I agree entirely that this appeal must be allowed and a decree nisi pronounced on the grounds of cruelty.
Appeal allowed. Decree nisi granted.
Solicitors: Mills, Henderson & Co, Guildford (for the husband); Solicitor, Queen’s Proctor.
Henry Summerfield Esq Barrister.
Williams v Williams
[1970] 3 All ER 988
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 14, 15 OCTOBER 1970
Rent restriction – Death of tenant – Succession to tenancy – Competing claims of father and son – Son’s claim more meritorious but father’s need greater – Weighing competing factors – Tenancy granted to father – Rent Act 1968, Sch 1, para 3.
On the death of the tenant of rent controlled premises the question arose whether the tenant’s husband or their son should succeed to the tenancy. The son had treated the deceased tenant well, largely supporting her in recent years, and she would probably have wished the son to have the tenancy, whereas the father had treated her badly and they had not been on good terms; however the son was young and single, earning £2,400 a year and able to afford other accommodation but the father was 63, earned only a modest income and would soon have to retire. On the son’s appeal from the grant of the tenancy to the father,
Held – The judge had considered the question properly by weighing the competing factors, that from the point of view of conduct, the son was the more meritorious, but that from the point of view of necessity, the father was the more in need, and the judge had correctly decided that the father’s need outweighed the merits of the son who was in a position to get other accommodation; accordingly, the son’s appeal failed (see p 989 h, and p 990 b and d, post).
Notes
For succession to a statutory tenancy, see 23 Halsbury’s Laws (3rd Edn) 811, 812, para 1590.
For the Rent Act 1968, Sch 1, para 3, see 18 Halsbury’s Statutes (3rd Edn) 895.
Appeal
This was an appeal by the son, Edward Windsor Williams, from the judgment of his Honour Judge Baxter, dated 24 February 1970, whereby it was held that the son was not entitled to possession of flat 37c Vera Road, London SW6, which were rent controlled premises and that the father, Robert John Williams, was entitled to possession as the statutory tenant in succession to the deceased tenant who was the father’s wife and the son’s mother. The facts are set out in the judgment of Lord Denning MR.
J Williams for the son.
D M W Barnes for the father.
15 October 1970. The following judgments were delivered.
LORD DENNING MR. This case is about a flat, 37c Vera Road, London SW6. Mr and Mrs Williams have lived there ever since 1940. Mrs Williams was the tenant because, when she took it, Mr Williams, was away at the war in the Guards. They had a son who was born in 1941. So he is now 29. It was a rent controlled tenancy. The flat has three bedrooms and a kitchen, bathroom and scullery. The rent is only £2 15s 6d a week. Mrs Williams died on 8 January 1969. She was the tenant. The question is: who is to succeed her as the tenant of these rent controlled premises—a very valuable asset? Is the father to have them, or the son? They cannot agree, so it is for the court to decide.
Under the Rent Act 1968a, the person to become tenant is such one or more of them—ie the father or the son here—‘as may be decided by agreement, or in default of agreement, by the county court.' The county court judge has decided in favour
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of the father; but the son appeals. It appears that for several years before the mother died, the father and mother had not been on good terms. They had separate bedrooms. The father was not a good husband. He only made a small allowance to the mother. The son paid most of the household expenses. The judge said that the son ‘largely supported his mother in recent years.' The neighbours said that the mother was a scared woman and the father was rarely seen. She died in January 1969. On the same day as she died, the father left the house because he realised that mother and son were close together, and the mother’s death would be a shock to the son. But the father did not go to the funeral. And a little later he came back to the house and wanted to stay. The son made it clear that he did not want him. So the father left, but he took these proceedings for possession, claiming that he should be the tenant.
The judge had the evidence of the father and of the son. The judge said that the father treated the mother badly, spent much time drinking and habitually kept her short of money. Her life was an unhappy one, especially towards its end. The judge said that he had very little doubt that if the mother was asked she would have preferred that the son should take over the tenancy. But, having found all those matters in favour of the son, the judge put into the scale the financial position of the parties. He pointed out that the father was now 63 years of age; he earned a modest income and would have to retire in a short time; whereas the son was in a good position, a writer, who was earning £2,400 a year and could well afford to get other accommodation as a single man, and would have no difficulty in finding it. The judge then said:
‘I would prefer to find in favour of the son, but I have decided that much greater hardship would be sustained by the father if he were not granted the tenancy than by the son if he were not the tenant.’
And, on the ground of hardship, and only on that ground, he said that he found in favour of the father.
The son appeals to this court. Counsel for the son submits that the judge misdirected himself by making hardship the sole test. If that was the only ground of decision, it would be a misdirection. I think it plain that it was not the sole ground. The judge took the law as stated by Megarry on The Rent Actsb:
‘It is thus uncertain whether the court should select the claimant who is the most meritorious, the most necessitous, or the most closely related to the deceased. Probably the decision should be based on a broad survey of these and any other circumstances of the case … ’
The judge applied that passage. It seems to me that he put all the competing factors into the scale. From the point of view of conduct, the son was the more meritorious; but, from the point of view of necessity, the father was the more in need; and the need of the father outweighed the merits of the son. The judge thought that the son, being a single man earning a very good living, would easily be able to get accommodation elsewhere. This is a case very near the line—so near the line that, as long as the judge has looked at it properly, his decision should prevail. I think that he has looked at it properly and that we should not interfere with his decision.
I would add only this: as a matter of common sense, there ought not to be this separation between father and son. This valuable controlled tenancy ought to be held for the benefit of them both. The sensible solution is for the father to have the tenancy, but for the son to go on living there, even if they do not see eye to eye. The father said that he was quite agreeable to the son living there. They need not come to blows any more than they did when the mother was alive. There is certainly
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enough room for the two of them. They ought to be able to manage. At any rate, I see no sufficient reason to interfere with the determination of the judge. I would, therefore, dismiss this appeal.
FENTON ATKINSON LJ. I agree the appeal must fail. I do not think it was an easy case for the county court judge; but it was a matter for his discretion. It seems to me that in a careful judgment, having heard the two parties concerned, he weighed all the relevant considerations, he gave full weight to the unmeritorious conduct of the father to the mother in the past and considered what the possible or probable wishes of the deceased mother would have been; on balance he came down in the father’s favour on the ground which Lord Denning MR has set out: that, on the one side, here was the son aged 29 earning very good money, easily able to find other accommodation for himself, and, on the other hand, the father aged 63, near retirement. He had worked for a large number of years at Olympia, earning not very high wages, badly in need of premises at a controlled rent. That was the decisive factor in the father’s favour, and I can see nothing wrong in his decision, no error of law, nothing which he has not considered which he should have done; and, although it is perhaps not relevant, in the circumstances, for myself I think I should have reached the same decision.
CAIRNS LJ. I also agree and have nothing to add.
Appeal dismissed. Order for the father to have possession in 28 days from judgment.
Solicitors: Radcliffes & Co (for the son); Oswald Hanson & Griffiths (for the father).
Wendy Shockett Barrister.
Re W (an infant)
[1970] 3 All ER 990
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, SACHS AND CROSS LJJ
Hearing Date(s): 23, 24 MARCH, 7 APRIL, 13 MAY 1970
Adoption – Consent of parent or guardian – Dispensing with consent – Consent unreasonably withheld – Test of unreasonableness – Culpable conduct – Adoption Act 1958, s 5(1)(b).
Adoption – Consent of parent or guardian – Dispensing with consent – Consent unreasonably withheld – Practice – Grounds on which consent unreasonably withheld to be furnished in advance – Adoption Act 1958, s 5(1)(b).
An unmarried mother, who had had children by two different men, but who was living with her two children by the first man and a female cousin, withheld, in relation to her son by the second man, her consent to adoption. The mother had decided before he was born to have the child adopted. He was born on 28 March 1968, and on 5 April 1968 the mother parted with him; he was sent to temporary foster parents (the applicants) and the mother never saw him again, because in July 1968 she accepted the advice of a child care officer that she should not do so unless she decided definitely to look after him permanently. The applicants, who had been married about ten years, adopted a baby girl on 28 March 1968, and in June 1969 had a child of their own. They had looked after the (foster) child successfully, became very attached to him, asked to adopt him in September 1968, and commenced adoption proceedings in January 1969. After some hesitation the mother signed a form of consent in February 1969, but on 30 March 1969 withdrew her consent because she wanted the child back permanently. The case was to be heard on 1
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April 1969 but the judge adjourned it for the parties to be legally represented. The welfare officer considered that the mother could offer the child a good home and be a good mother and that her motives were genuine, but that the applicants could offer an excellent home with a great deal of love and understanding and greater stability and security, and that the child was likely to suffer great emotional disturbance if he went back to the mother. No medical evidence was given as to any possible injury to the child’s health if the order for adoption were not made. On appeal against the decision of the trial judge that an adoption order would be best for the welfare of the child, that the mother was withholding the consent unreasonably within the meaning of s 5(1)(b) of the Adoption Act 1968, and that her consent should be dispensed with and an adoption order made,
Held – The appeal would be allowed and the adoption order set aside, because—
(i) the judge had applied the wrong test in considering the child’s welfare. The child’s welfare could only be relevant where there was a clear prognosis of relative harm to the child if the adoption order were not made, enabling the judge to say that no mother acting reasonably could withhold consent to the adoption; accordingly, the Court of Appeal had itself to decide whether the refusal of consent was unreasonable (see p 996 g, p 1002 g and j and p 1007 c, post); and
(ii) although the circumstances were such that the mother could reasonably have consented to the adoption, the court was not satisfied that the mother therefore was acting unreasonably in withholding her consent (see p 997 c, p 998 j to p 999 a and p 1004 c, post) because (per Sachs LJ) her conduct was culpable (see p 1003 e, post), and (per Cross LJ) her conduct was not such as to amount to the shutting of her eyes to a blameworthy degree to the obvious dangers to which she was exposing the child (see p 1007 d, post).
Re K (an infant) [1952] 2 All ER 877 and dictum of Diplock LJ in Re C (an infant) [1964] 3 All ER at 494 applied.
Per Curiam. Applicants for adoption who ask the court to dispense with the consent of a parent on the ground that that consent is being unreasonably withheld should before trial furnish the court and the parent in question with particulars of the matters on which they rely as showing that the parent is acting unreasonably (see p 997 e, p 1003 f and p 1007 f, post).
Quaere. Whether conduct by the natural parent which is not culpable against the infant but which is culpable against the prospective adopters can constitute culpable conduct entitling the court to hold that the natural parent’s consent was unreasonably withheld (see p 1000 h to p 1001 a and p 1007 b, post).
Notes
For dispensing with the consent of a parent on making of adoption order, see 21 Halsbury’s Laws (3rd Edn) 231–233, para 506, and for cases on the subject, see 28 Digest (Repl) 634–636, 1332–1341.
For the Adoption Act 1958, s 5, see 17 Halsbury’s Statutes (3rd Edn) 642.
The reasoning of this court was not followed by another division of the Court of Appeal in Re B (an infant), p 1008 post.
Cases referred to in judgments
C (an infant), Re [1964] 3 All ER 483, 129 JP 62, sub nom Re C (L) (An Infant) [1965] 2 QB 449, [1964] 3 WLR 1041, Digest (Cont Vol B) 436, 1333d.
Hitchcock v W B [1952] 2 All ER 119, [1952] 2 QB 561, 116 JP 401, 28 Digest (Repl) 635, 1335.
Hornal v Neuberger Products Ltd [1956] 3 All ER 970, [1957] 1 QB 247, [1956] 3 WLR 1034, 35 Digest (Repl) 39, 332.
K (an infant), Re, Rogers v Kuzmicz [1952] 2 All ER 877, [1953] 1 QB 117, 117 JP 9, 28 Digest (Repl) 635, 1336.
L (An Infant), Re (1962) 106 Sol Jo 611.
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Watson v Nikolaisen [1955] 2 All ER 427, [1955] 2 QB 286, [1955] 2 WLR 1187, 119 JP 419, 28 Digest (Repl) 635, 1333.
W (an infant), Re (1963) unreported.
W (infants), Re [1965] 3 All ER 231, [1965] 1 WLR 1259, 129 JP 550, Digest (Cont Vol B) 437, 1341a.
Cases also cited
Adoption Application No 41/61 (No 2), Re [1963] 2 All ER 1082, [1964] Ch 48.
C (M A) (an infant), Re [1966] 1 All ER 838, [1966] 1 WLR 646.
E (an infant), Re [1963] 3 All ER 874, [1964] 1 WLR 51.
Appeal
This was an appeal by the mother against an order for the adoption of her son made by his Honour Judge Willis at Shoreditch county court on 17 July 1969, in which he dispensed with the necessity of the mother’s consent in that it had been unreasonably withheld. The facts are set out in the judgment of Russell LJ.
I H M Jones QC and A M Hill for the mother.
A R Campbell QC and Anita Ryan for the applicants.
Cur adv vult
13 May 1970. The following judgments were delivered.
RUSSELL LJ. This appeal concerns an order for the adoption of a small child—the son of an unmarried mother—against the wishes of the mother, who indeed wishes to bring the child up herself. When it is appreciated that the effect of an adoption order is permanently to sever the relationship between mother and child it may well be thought that very special circumstances must exist to justify a compulsory and total destruction of that relationship despite her opposition. Section 13 of the Adoption Act 1958 describes the effect of an adoption order as the extinguishment of all rights, duties, obligations and liabilities of the parent in relation to the custody, maintenance and education of the infant, and their transfer to the adopters, whose child the infant becomes.
Section 4 of the Act (so far as now material) lays it down that no adoption order can be made without the consent of the parent, subject to exceptional cases set out in s 5. Section 5 empowers (although it does not require) the court to dispense with that consent if the court is satisfied that the parent (1) has abandoned the infant; or (2) has neglected the infant; or (3) has persistently ill-treated the infant; or (4) cannot be found; or (5) is incapable of giving the consent; or (6) is withholding the consent unreasonably; or (7) has persistently failed without reasonable cause to discharge the obligations of a parent of the infant. We are only concerned in this case with the sixth of these matters.
The consent of the parent must be consent at the time of the making of the adoption order. Provision is made by s 6 for the production at the hearing of a consent signed by the parent as evidence that the parent is then consenting to the adoption order; and commonly such forms are signed and delivered to the court some time before the hearing; but if at the hearing it appears that notwithstanding the signing of the form the parent does not then consent, the form is not worth the paper it is written on; and if the proposed adopters wish to pursue the adoption they must first establish by evidence to the satisfaction of the court one or more of the seven matters already listed.
It is to be observed at the outset that while the court, in deciding whether or not to make an adoption order in any case, must regard the welfare of the child as of paramount importance, this is far from the case when the court is considering an application that the consent to the order of an objecting parent should be dispensed with and his or her natural and legal rights overridden. The question whether a
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parent’s consent is unreasonably withheld is not to be solved merely by a view formed by a court, or by a child welfare officer, or a man or woman in the street that life with the proposed adopters would be, if I may use the phrase, a better bet for the child. This truism must be clearly appreciated by any who may interest themselves in cases such as the present case. Were it otherwise the Act would have allowed consent to be dispensed with whenever the adoption order would in the view of the court be in the best interests of the child.
The mother in this case is unmarried, and now aged 23. Her parents were separated and she came down from Scotland to join her mother in London when she was 14. She stopped living with her mother when she was 17, although not in consequence of any disagreement or trouble between them. At some stage thereafter she set up house with a man and by him had two daughters now aged five and four. She and the man split up after the second child was born. The mother has always looked after these two girls, and we know of no criticism of their upbringing. Indeed the welfare officer reports favourably on this. In 1967 the mother lived temporarily with another man and by him conceived (unintentionally) the child with whose proposed adoption we are dealing. The man left her when he found that she was pregnant. The child was born on 28 March 1968.
Before the birth the mother was living in a one-room flat with the two girls. She was hoping for council accommodation, but without it felt that life with three small children would be impossible. She arranged with the appropriate authority before the birth that the child when born should be put out for adoption, which would involve going to temporary foster parents very shortly after birth. In fact the day before the birth she was offered better accommodation by the local authority, where she now lives with the two girls and a young woman cousin. Nevertheless, she had in general terms arranged for adoption and felt that she might not be able to cope with the situation of two small girls and a baby even in improved accommodation, and did not alter the arrangement. The child went to the proposed adopters (‘the applicants’) as temporary foster parents. This was not with a view to adoption by them. They were known to the appropriate department of the local authority as satisfactory for that purpose. In 1968 they had been married for about ten years, being aged 40 and 30, but were childless. On 28 March 1968 (a coincidence of date) they obtained an adoption order for a baby girl, and it was knowledge of this proposed adoption that led the authorities to consider them as foster parents. On 5 April 1968, the child went to them and has remained with them ever since. At the hearing before the judge on 17 July 1969 the child was therefore aged nearly 16 months, and since 5 April 1968 the mother had not seen him—nor indeed has she seen him since. The applicants—against whom as adoptive parents, let me say, nothing is to be said—had a child of their own later, a boy born in June 1969.
The applicants became very attached to the child and in September 1968 indicated to the local authority that they wished to adopt him. This no doubt was communicated to the mother. The adoption proceedings were launched on 31 January 1969. At the same time the mother was presented by the child care officer with the appropriate statutory consent form which after some hesitation, she said, she signed on 11 February 1969. She said that she was, while hesitating to sign, thinking about the child and what was best for him. The form makes it clear, as is the fact, that the consent could be withdrawn at any time before an adoption order. Just as, on the other side, proposed adopters are at liberty to withdraw their application at any time. The hearing was due on 1 April 1969; and on 30 March the mother wrote withdrawing her consent in these terms:
‘I would like to withdraw my consent to the adoption of my child [naming him] Sir when I had my child I just moved into a LCC flat and I had so much to do but now I would like to have my child back as I have enough accommodation for him. I have always wanted him back. I was so mixed up at the time, I have
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two children with me at the moment of my own and I can look after them very well and I would like to have [the child] back with me.’
At the hearing neither side was legally represented. This case was adjourned for this purpose, and was finally heard on 17 July 1969. The judge had a welfare officer’s report—that of Miss Ramsey the guardian ad litem—and oral evidence was given by the female applicant and the mother. The judge expressed himself as satisfied that the mother’s consent was being unreasonably withheld, decided to dispense with her consent, and made the adoption order from which the mother now appeals on the ground that she had not unreasonably withheld her consent. I repeat that this is the only one of the seven listed matters relied on.
I turn now to such information as may be gathered from the notes of evidence and the report of the guardian ad litem welfare officer as to the attitudes and activities of the mother in the period between the time when the child went to the applicants and the time when she withdrew her consent to the adoption. I have already summarised what the mother said about her initial intention to go on with the idea of adoption in spite of the offer of better accommodation. The welfare officer reported that the mother had decided to go ahead with the plan ‘despite some pressure’; ‘she had no furniture for her new flat and wanted time to settle before having the [child] with her’. The report dated 28 March 1969 contained the following passage:
‘The court will be aware that [the mother] has now withdrawn her consent to the adoption. She told me that she had always been undecided and had great difficulty signing the form and then giving it to the child care officer in the first instance. [The mother] has not visited the [child] since he was placed with the applicants, nor has she made enquiries as to his progress, contributed maintenance or sent presents. Her explanation is that she felt confused and knew it would be upsetting if she saw the [child]. [The mother] now feels she is in a position to offer [the child] a decent home. Her eldest daughter attends a day nursery and she has a 26 year old cousin residing with her, who gives help looking after the children and babysitting. She feels guilt about not having [the child] with her and regrets not being able to come to a decision earlier. Her mother and three sisters live locally and she tells me that they give her support and material help. [The mother] impresses me as a warm, though unstable young woman whose behaviour in the past has been inconsistent. It could be that her change of heart is motivated by her own needs and some sentimentality, and not by the best interests of the [child]’.
The final passage of the report was in these terms:
‘Conclusion—I am in some difficulty in making a recommendation to the court. I feel that [the mother] could offer [the] child a good home and could be a good mother. However, one would expect the [child] to be emotionally affected by a change and I rather doubt if [the mother] would have the emotional resources to deal with such difficulties. Her motives are genuine and yet one doubts how deep her feelings are for the child after a year without contact. [The applicants] have been known to me for a longer period and I am satisfied could offer the [child] an excellent home with a great deal of love and understanding. The court may be of the opinion that the rights of the natural mother should be respected. If there is any doubt in the matter I would recommend that on balance the best interests of the [child] would lie with the applicants, who have successfully cared for him for the first year of his life and who in the future could offer him greater stability and security.’
At the hearing the welfare officer stated orally—I quote from the judge’s note:
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‘Great emotional disturbances on [the child] if he went back to his mother. I am still of same opinion I express in conclusion of my report.’
It is I think right to set out most of the judge’s note of the mother’s evidence:
‘… After child was born, [the child] went to the [applicants] to be fostered [I am omitting the names] I am very grateful to them. When I came out of hospital I had to go to a council flat. I had no furniture at all. I let [the child] go to [the applicants]. I had no cot. I have my cousin living with me. She pays me £5 per week and helps with children. I heard from [the child care officer] they wanted to adopt the child. ACA 5 [i e the consent form] handed to me by [the child care officer]. I did not sign it straight away. I was thinking about [the child] and what was best for him. I kept form about two weeks. My flat is now properly furnished. I have two bedrooms, living room, kitchen, landing and bathroom. If I have [the child] I will apply for a bigger flat. My cousin sleeps with me in a double bed. Elder girl goes to day nursery. I do not work. I get £10 4s from Ministry of Social Security. Rent is £3 13s 1d. I think I can be a good mother to [the child]. I have an uncle who visits me. He is 34. He comes about once a week. He would provide a male influence. I wanted to take [the child] back on two occasions. I sincerely want [the child] back.’
Cross-examined: ‘I did not take [the child] back as [the child care officer] advised that [the child] would be best with [the applicants]. At early stage [the child care officer] said I could keep child. I felt I could not cope. If [the child] came back to me, I think he would cry. I should try and overcome it with love and affection. He is a total stranger to me and I to him.’
By court: ‘When I left hospital I got bed from council. I had cooking utensils etc. for unfurnished flat. I could have had [the child] back in July, but [the child care officer] asked that I should not disturb him. I wanted [the child] for weekends.’
Cross-examined by junior counsel for the applicants: ‘My mother could not have had [the child]. She was still in Swedenborg Square. Sisters had no accommodation.’
Now it is on the basis of the above that the applicants have to establish that the refusal of the mother at the hearing to consent was unreasonable. It is to be noted that the mother in July 1968 wanted to have the child for short visits, obviously to see how it would work, but was dissuaded by the child care officer on the ground that it would be upsetting to the child. I assume that the mother was told that she ought to have the child back on a permanent basis, but that short trial visits were deprecated. I must say that I think that last advice was questionable; but the relevance to the matter now under consideration is that there was the mother, three months after the first fostering, and before anyone had appeared as potential adopter, anxious to make or renew contact with the child in one form and dissuaded therefrom by someone whose views would be likely to carry great weight with her. The other point to be particularly noted is that the experienced guardian ad litem stated in her report that she found some difficulty in making a recommendation—clearly on the question of what was in the best interests of the child.
The judge reminded himself at an early stage in his judgment, by reference to a quotation by Pearson LJ in Re C (an infant) ([1964] 3 All ER 483 at 490, [1965] 2 QB 449 at 464) quoting Lord Denning MR in Re L (An Infant) that the welfare of the child is not on this point the sole consideration. It is indeed not even the paramount consideration. He then set out the facts and continued:
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‘The child is now some 16 to 17 months old. There is no doubt to my mind—there is no medical evidence about it but I must be entitled to know it—inevitably it seems to me that to remove a child from the only home it has known and to put it in care of a stranger would, I think, not only disturb the child emotionally and cause untold tears and unhappiness and there might be a psychological disturbance as well. There is no medical evidence before me but it seems to me that one is entitled to take it into consideration as (pertaining to) the welfare of the child. [He then quoted passages from the report of the guardian ad litem and continued:] [Junior counsel for the applicants] said in her address that there must be an enormous question mark as to the [mother]. This was a perfectly legitimate comment. There was no reason why she should have not married the second man. [It is not an important point, but as the man walked out as soon as he found that the mother was pregnant a successful marriage would not seem to have been likely. The judge continued:] It does seem she does make relationships with men which are very unsatisfactory as far as one can see. She may be unlucky. I can’t put it out of my mind. I asked her if another unwanted child might arrive on the scene. “No”, said the mother. I can’t help feeling there is a grave risk of another association and another unwanted child arriving on the scene. A grave risk. Again I asked the mother about getting married. What if a man says “Sons of my own, yes, but sons of another man, no. Not a bastard“. There must be inevitably, to my mind, a risk of that some time in the future. Doing the best I can—I find this case difficult—looking at the matter quite dispassionately and saying what should a reasonable mother do in these circumstances—consent or refuse consent—I take the view, getting the guidance I can from the cases—I take the view that the reasonable mother should consent in all the circumstances of this case. It is inevitable—it must be the best for the welfare of the child. In all the circumstances I feel she is unreasonably withholding consent in this case. I order that her consent should be dispensed with.’
Taking the case as a whole I cannot escape the conclusion that the judge’s decision went entirely on his view as to the best interests of the child, notwithstanding his self-reminder that on this point that was not the sole consideration. It is, of course, right to say that there may be cases in which the circumstances related to the welfare of the child are such that no mother acting reasonably should withhold consent to the adoption; but it seems to me that this requires a clear prognosis of relative harm to the child if the adoption order is not made. An ‘exceptional case’ as was said by this court in the Re K (an infant), Rogers v Kuzmicz, approving Hitchcock v W B. Just because one mother in particular circumstances acting reasonably would give consent, it does not mean that another mother in the same circumstances would act unreasonably in refusing consent. The test is objective, but reasonable people may adopt different attitudes and arrive reasonably at different conclusions in similar circumstances.
I am prepared, as was the learned judge, to accept without specific evidence in the case that a medical view would be expressed that as a general statement there is a risk of psychological disturbance to the child if he is parted from the applicants. My experience of such medical evidence in other cases is that there is no means of quantifying this risk, the cases in which no harm has been done naturally not coming to the attention of the psychiatrists. Moreover, in many cases that do so come there may be other matters predisposing a particular individual to psychological disturbance. Further, it is accepted as a general statement that psychological disturbance may arise on an adopted child discovering that the adoptive parents are not the child’s true parents.
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But if the question of the psychological welfare of the child rests merely—as here—on a general view such as I have stated, and not on any particular medical evidence special to the particular child, I do not find myself able to conclude that a mother on being apprised of that view is acting unreasonably in withholding her consent to adoption. Nor do I consider that the withholding becomes unreasonable because in addition the child, if it is to be brought up by the mother, will be materially less well off than with the proposed adopters. Nor do I consider that a mother is being an unreasonable mother because she does not share with the court a pessimistic view as to her future relations with men.
Before completing the draft of this judgment I had the advantage of reading the judgment that Cross LJ is about to deliver, and I need not refer to the authorities to which he refers. None of them requires me to come to the conclusion that this is a case in which consent was unreasonably withheld, and in general they support the view that it was not.
In summary I am of the opinion that while this is a case in which a mother might reasonably consent to the proposed adoption, it is also a case in which the court should not be satisfied that a mother would be acting unreasonably in withholding her consent. I venture to repeat that where the experienced guardian ad litem in the case expresses herself on the question of adoption as being ‘in some difficulty in making a recommendation to the court’, I find it difficult to sustain the view that the child’s own mother is acting unreasonably in deciding to withhold her consent to the adoption.
Accordingly, I would allow the appeal and discharge the adoption order. Our order should contain any necessary direction to the Registrar General as to cancellation of entries under s 24(3) of the 1958 Act.
I add that I am in agreement with the suggestion, that Sachs LJ will make, that it is desirable that in cases where it is to be alleged that consent is being unreasonably withheld, particulars of the matters relied on should so far as is practicable be given in advance of the hearing; thus the parent will know in advance the case made against him or her on a matter in which the burden of satisfying the court is on the shoulders of those supporting the adoption.
SACHS LJ. The appellant is the mother of the child, born on 28 March 1968. The applicants are the foster parents to whom the child was entrusted for care, on reward from the local authority, just after its birth. They wish to adopt the child. The mother does not consent.
The bond between mother and child is perhaps the strongest that nature forges. It is open to the court in certain circumstances to sever that bond. Any such severance is complete and irrevocable. The mother ceases in law (s 7(1)(a) of the Adoption Act 1958) and in truth to be a parent; she is not entitled ever to see the child in infancy again—indeed it is normally undesirable that she should. As against a mother unwilling to have the bond severed, the order of the court imposes a grave penalty.
One of the circumstances in which the court is entitled to sever the link is if the mother’s refusal to consent to the adoption is held to be unreasonable. The dominant question in the present case is what is the proper approach to the issue whether such a refusal is unreasonable. It is an important question, to which members of this court have in the past devoted much care and delivered cogent and closely reasoned judgments. Of these the most powerful and authoritative is that of Jenkins LJ when giving the considered judgment of a court strong in width of relevant experience in Re K (an infant), Rogers v Kuzmicz, which incidentally expressed unqualified approval ([1952] 2 All ER at 886) of the considered reasoning of the Divisional Court in Hitchcock v W B. In the main
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the principles of approach are thus well settled, but on a few important points it appears on analysis that there may be a divergence of principle between some statements in that decision and those in more recent cases, and also as between some of the statements in those later cases. Some of these may merely be due to the application of principles to special facts. But where conflicting views are to be found it is right to revert to those expressed by Jenkins LJ. These have at all times bound this court, and no portion of that penetrating and humane exposition of the protection afforded to a mother by the Adoption Act 1950 has in any later case been the subject of criticism. Moreover that authoritative decision had been uniformly followed during the years that preceded the passing of the 1958 Act which, in ss 4(1) and 5(1), repeated those provisions of earlier legislation which had been considered in that judgment. The legislature must thus be taken to have in effect incorporated the principles laid down in that judgment in the 1958 Act, and it is for this court to honour the intentions of the legislature.
We have in the present case had the benefit in this court of particularly full and careful argument and a comprehensive citation of authorities. From the latter there emerged plain guidance on a number of points which will be noted later. On some, however, difficulties became apparent in relation to certain matters which substantially affected the mind of the learned county court judge and also on others which counsel for the applicants urged should be taken into account on this appeal. It is convenient first to seek to resolve those difficulties.
Particular matters mentioned by the judge were first the risk of long-term psychological injury to the child; secondly, the better material position of the applicants; and, thirdly, the irregularity of the mother’s past life. In addition it was suggested in this court that adverse weight should be given to the mother’s vacillation and to any damage that has been or might be caused to the interests and feelings of the applicants—although the first of those contentions was later abandoned. It was the conduct of the mother with regard to each of the above matters, save the last, that was relied on on behalf of the applicants.
As a preliminary to dealing with each of them in turn, two questions call for an answer. What is the nature and degree of conduct which may deprive a mother of her right to be a parent? By whose standards does one judge what is reasonable? That such conduct must be culpable is, of course, clear from the analysis of the relevant provisions of the 1950 Act by Jenkins LJ in Re K ([1952] 2 All ER at 884, 885, [1953] 1 QB at 129, 130), his reference to the need to establish something not far short of the highly culpable offences referred to in s 5(1)(a) of the 1958 Act, and the view expressed that the cases in which it can be held established must be ‘exceptional’. After a similar analysis Diplock LJ in Re C (an infant) ([1964] 3 All ER 483 at 494, [1965] 2 QB 449 at 471) used the phrase ‘callous or self-indulgent indifference’ to define the test. In short the degree of culpability to be established is high—as one would expect when an order is sought that has penal aspects. Moreover, using the standard tests to be found in the judgments in Hornal v Neuberger Products Ltd the degree and clarity of proof demanded is that appropriate to the importance of an ‘extremely serious matter’, to cite the words of Lord Goddard CJ in Hitchcock’s case ([1952] 2 QB at 569).
Are the standards of reasonableness those normally applied by a welfare officer accustomed to regard the child’s interests as paramount or those of a mother who genuinely wishes to remain a parent? Clearly not the former—for that incidentally would be to confuse custody and adoption proceedings contrary to the authorities which will be later cited. Nor is the standard that of some hypothetical mother. There exists no Clapham omnibus designed to accommodate all mothers. The court is concerned in each case with the particular mother in her own circumstances and environment and
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full weight must be given to the individual mother’s natural desires in relation to her child. Mothers, like judges, may differ as to what is reasonable, and yet not be unreasonable. Having had the advantage of reading the judgments of Russell and Cross LJJ, I respectfully find myself in full agreement with what they say on this subject. The onus lies squarely on whoever asserts a mother is unreasonable—and it has been rightly said more than once that a mother who genuinely wishes to remain a parent, is able and willing to support the child, and has not offended against s 5(1)(a) or (2), ought not normally to be held to be unreasonable in refusing consent.
On that basis I turn to the risk of psychological long-term disturbance to the child; this seems to have been a matter which the county court judge regarded as of high importance—perhaps the most important and one much pressed in this court. There was no medical evidence before him, but I am prepared to assume that judicial notice can now be taken of the existence of such a risk—or alternatively to assume that there will never be a lack of psychiatric experts to provide some evidence to that effect. Equally, I would assume, judicial notice can be taken of a second and better known set of risks occurring when a child is told that the parent it has been taught to regard simply as ‘mother’ is not truly the child’s mother. Whether one set of risks is greater than the other could be a matter of dispute.
Exceptional cases apart, the court does not put the first risk into the scale for a number of reasons, of which I will mention two. First, the risk is speculative (cf per Ormerod LJ in Re W (an infant) as cited in Re C ([1964] 3 All ER at 491, 492, [1965] 2 QB at 465, 466)) and at highest one of many speculative risks which must be taken in any adoption case. Secondly, and perhaps most importantly, it cannot be unreasonable for a mother, even if apprised of the normal risk, to consider that she can overcome this risk at the same time as the short-term disturbance which any change involves for an infant. Again I respectfully endorse what Ormerod LJ said in Re W—as cited in Re C ([1964] 3 All ER at 491, 492, [1965] 2 QB at 465, 466). There can of course be cases where there is a special risk (as there was in Re L (An Infant) or in Re C) and it could be culpable conduct of a mother to ignore it. But that would be unusual and must be strictly proved by the evidence in that particular case. (See the judgment of Pearson LJ in Re C ([1964] 3 All ER at 493, [1965] 2 QB at 468).)
For my part, I consider such proof must be really strong, and am concerned with the dangers of a whole class of adoption cases being in effect decided by the psychiatric specialist profession. Moreover, to decide these cases on such a basis can only too easily result in the court’s descending the slippery slope of a custody type welfare contest between mother and foster parents. This would have results wholly contrary to the legislature’s intentions as manifested by passing the 1958 Act after the decision in Re K and incidentally the considered judgments in Hitchcock’s case and Watson v Nikolaisen.
Assuming the true mother is in a position to look after the child in a way that provides reasonably for its accommodation, food and health, the better material position of the proposed adopting parents is clearly shown by the authorities not to be relevant to the issue of consent—a millionaire has no more claim to deprive a mother of her child than a milkman. Nor can it normally be put into the scales against the mother that her position may change in the course of time—otherwise unmarried mothers and widows without worldly endowments would always be at risk. Nor can the fact that her past was irregular—at any rate if she has for a reasonable time been living in a steady manner. I have deliberately refrained from adding
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‘of itself’ to the words ‘put into the scales’. It can be only too easy in this class of case to fall into the dangerous trap of adding nought to nought and producing some digit or digits. That is particularly so in regard to welfare factors to which a court is used to giving weight in custody proceedings.
Of the points taken in this court, although not apparently at first instance, the first related to alleged vacillation. For a mother to change her mind is permissible and indeed natural (Re K ([1952] 2 All ER at 885, [1953] 1 QB at 130)). Moreover it is well recognised that during the period following the birth of a child the mind of a mother is especially susceptible to disturbance (cf the Infanticide Act 1938). In addition, nowadays, a mother can find herself under persuasive pressure from welfare officers, her family, doctors and others—any one of whom can affect her mind in one direction or another. Unless the vacillation is at least of a high order—‘bewildering’, as occurred in Re W—it cannot be put in the scales against a mother. Whether it must also be shown to be likely to harm the child by putting its future at risk, or whether the interests of the proposed adopters can properly be taken into account, is a matter to which later reference will be made. As, however, counsel for the applicants towards the end of his address rightly conceded, there is no evidence of undue vacillation here, no more need be said on this point, save that it affects the next to be mentioned.
There remains the question whether and to what extent the interests of third parties, and in particular the proposed adopters, fall to be considered. The Act sets out a number of instances where the mother’s culpable conduct against the child may deprive her of the protection given by s 2(4)(a) of the 1950 Act; it mentions none of conduct towards others. No case prior to 1962 has been cited in which conduct towards others was held to be culpable; moreover, the judgment in Re K, at least implicitly ([1952] 2 All ER at 884, 885, [1953] 1 QB at 130) and perhaps explicitly later ([1952] 2 All ER at 884, 885, [1953] 1 QB at 130), excludes from consideration as a general rule the claims of foster parents. Then came Re L, a case with movingly exceptional features in which the effect of the mother’s conduct in relation to the interests of the foster parents was taken into account against her; later that approach was followed in Re C, in which it is also envisaged by Pearson LJ ([1964] 3 All ER at 491, [1965] 2 QB at 465) that ‘others’ may have interests to be considered (but see Diplock LJ ([1964] 3 All ER at 495, [1965] 2 QB at 472) as to the grounds for this). The reasoning in Re K was, however, in no way criticised in either case. There Jenkins LJ referred to this matter as follows ([1952] 2 All ER at 885, [1953] 1 QB at 130):
‘… the remarkable consequence would ensue that foster-parents entrusted for reward with the care of a child by a parent not for the time being able to provide it with a suitable home could in due course confront the parent with an application to adopt the child which the parent would be unable to oppose.’
I respectfully follow and endorse that approach, which incidentally has its bearing on the question of psychological consequences. (It has already been indicated in another helpful considered judgment, Watson v Nikolaisen ([1955] 2 All ER at 431, [1955] 2 QB at 296), that the relevant passages on this topic are unlikely to be intended to cover only cases where the parent has contributed to the cost of the child.)
In the instant case there has been no undue vacillation and no other conduct has been alleged to be culpable vis-à-vis the applicants, so counsel for the applicants’ point as to the latter’s interests fails on the facts. Thus I am absolved from considering whether conduct, which is not culpable against the infant and does not harm
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him but is in exceptional cases so against the interests of the foster parents in law as to constitute culpable conduct, can entitle the court to hold that the mother was unreasonable and thus to deprive her of her protection. Suffice it to say that there seems to be a conflict of authority as to how the Act should be interpreted and the point is one which may well have to be resolved in due course elsewhere when an appropriate case arises. In any event that conduct must be exceptional. For my part I am impressed by the fact that in all cases where it is sought to sever the natural bond between mother and child against the will of the former, the court is in truth being asked to apply penal provisions of an Act, and if there are two reasonable interpretations of the effect of those provisions it must apply the one least adverse to the mother whom it is sought to penalise.
So much for the points of difficulty raised in the course of argument. I can now return to the general pattern of the approach to an issue of whether a parent ‘is withholding consent unreasonably’. Such has been the care devoted in the courts to the approach appropriate to this important and difficult question that the judgments on this matter have of necessity been lengthy. Accordingly, before turning to the facts in the instant case, it may be of some general service to state in compact form, even at risk of a degree of repetition, the points that fall to be kept in mind as relevant to the approach to the present decision—including both those which are well settled and those which it has been necessary to discuss earlier in this judgment because of certain difficulties. (1) The provisions of s 4 of the Act that there shall be no adoption of a child without the consent of the parent are for the protection of the parent (cf per Diplock LJ in Re C ([1964] 3 All ER at 494, [1965] 2 QB at 470)). (2) That protection can be destroyed by clearly establishing the mother to be guilty of conduct culpable to quite a high degree (cf Re K ([1952] 2 All ER at 884, 885, [1953] 1 QB at 129, 130)). (3) It is not only wrong to apply the welfare tests appropriate to custody proceedings as being a primary consideration in an adoption case; it can be confusing and misleading so to do (Re K ([1952] 2 All ER at 883, 885, [1953] 1 QB at 128, 131); Watson v Nikolaisen ([1955] 2 All ER at 431, [1955] 2 QB at 296)). The conduct of a mother in disregarding the welfare of her child can, however, be shown to be culpable (see per Diplock LJ in Re C ([1964] 3 All ER at 494, [1965] 2 QB at 470)). (4) When a mother genuinely desires to look after a child, is a reasonably good mother, and is able to provide for the child’s needs, it is very difficult to say that she is unreasonably refusing consent (cf Hitchcock’s case ([1952] 2 All ER at 123, [1952] 2 QB at 572) per Devlin J). ‘Prima facie it would seem … eminently reasonable for any parent to withhold … consent’—see Re K ([1952] 2 All ER at 884, [1953] 1 QB at 129). (5) The following factors cannot be taken as showing culpable disregard by a mother of her child’s welfare; (a) the material benefits to the child of being with adopters who are better circumstanced (Re K ([1952] 2 All ER at 885, [1953] 1 QB at 130); Re C ([1964] 3 All ER at 494, [1965] 2 QB at 470) per Diplock LJ); (b) the fact that she considers she can overcome any psychological risks normally inherent in taking over care of her child from foster parents. (Where exceptional risks are established each case falls to be considered on its particular facts—see authorities already cited); and (c) irregularity in her life—if she is able properly to look after her child (Re K ([1952] 2 All ER at 883, [1953] 1 QB at 128)). (6) It is wrong to take adverse account of a mother’s withdrawal of consent to adoption; on the contrary it is permissible (Re K ([1952] 2 All ER at 885, [1953] 1 QB at 131)) and indeed it is natural and to be expected that a mother may change her mind on this matter (Re K ([1952] 2 All ER at 886, [1953] 1 QB at 132)). Exceptionally prolonged and repeated vacillation can be regarded as culpable conduct, at any rate if it affects the child. (7) The standard by which the mother’s conduct and reasonableness is to be assessed
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is not that of a welfare officer but of the mother in her particular circumstances, having due regard to the effect of the natural bond between mother and child. (8) Unreasonableness in withholding consent is a question of fact, which must be proved by those who assert it as a condition precedent to any exercise of the court’s discretion on the basis of the provisions of s 7 of the Act. As a question of fact it falls to be reviewed as such by an appellate court in appropriate cases, and any deviation from the proper approach to the issue can set that question of fact at large.
To resolve the contests between a parent and proposed adopters on the basis that normally the correct test is to take the course which is in the better general welfare interests of the child is plainly wrong. It ignores the necessity first to establish culpable conduct by the parent. To change to that test from the approach laid down by the Act could entail far-reaching and grievous consequences as against parents unwilling to forfeit their parenthood. It is, of course, (as was pointed out by Cross LJ at first instance in Re W (infants) and as he is about to mention in his judgment in the present case) open to the legislature after considering those consequences to make such a change. It is not open to the courts, by adopting a ‘welfare’ approach to the concluding words of s 5(1)(b), to effect by a side wind a change contrary to the legislature’s intentions.
Before returning, in the light of the approach which the authorities show to be appropriate, to the facts of the present case and to the judgment of the county court judge touching those facts, I would first like to express some sympathy with him and indeed with the scores of other judges and justices before whom may come contested adoption proceedings. It is only too easy for them to go wrong when faced by the citation of relatively short passages from amongst the many long judgments given on the subject.
It is not necessary for me to recapitulate the facts which have been recited in the judgment of Russell LJ. It is enough to say that this is a case where the mother is someone of whom it was neither said, nor could be said, that she was in any way a bad mother; indeed she had obviously looked after her other two children well. Nor was it said, nor could it be said, that with the aid of social security she was not in a position to look after the children. Nowhere in the judgment is there really a suggestion that she had been guilty of any culpable conduct. In particular it is not sought to blame her for her conduct in relation to the welfare of the child. Nor can it be said that she abandoned the child either in the sense that word is used in s 3(1)(a) (see Watson v Nikolaisen) or, despite counsel for the applicants’ submissions, in any other relevant sense. On the contrary she acted sensibly and no fault can be attributed to her for following a welfare officer’s advice.
Having, with these matters in mind, read and reread with anxious care the judgment delivered in the instant case, it seems clear that taken as a whole it is what might be called a ‘welfare’ judgment in which there has been followed step by step a welfare report of a welfare officer. The unfortunate fact is that fundamentally the learned county court judge has fallen into error as regards his approach through overreliance on a passage in a judgment in the exceptional case of Re L without being referred to the preceding considered judgments which deal so fully with the problems of adoption cases as a whole. It is, indeed, a classic instance of the dangers of descending the slippery slope to which reference has been made and thus not having proper regard to the difference between custody and adoption proceedings respectively.
In those circumstances it is necessary in this court to come to one’s own conclusion on the question of fact whether the mother has unreasonably withheld her consent. For this purpose it suffices briefly to deal with each of the factors which appeared
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to weigh at first instance and then to have regard to those factors as a whole. It is in essence a simple case once a correct approach is adopted. Taking first the question of long-term psychological risk. There was no medical evidence. There was no suggestion of any exceptional risk. On the principles already discussed these risks cannot be put into the scales against the mother. As regards the better material position of the applicants, this is irrelevant, and also cannot be put into the scales. As to the mother’s past irregularity of life, counsel for the applicants conceded that if what was stated in Re K ([1952] 2 All ER at 883, [1953] 1 QB at 128) by Jenkins LJ correctly sets out the proper approach then that irregularity cannot be put into the scales in this case. I consider that that statement should be followed. The Adoption Act 1958 is not (as counsel for the applicants also rightly conceded) a piece of legislation intended to deprive even prostitutes of the right of parenthood if they are in fact good mothers. There is again nothing under this head that can be put into the scales.
The other points taken on behalf of the applicants have already been dealt with. Whilst having, I hope, every sympathy with foster parents who in the nature of things come to love the youngsters in their care, they must know that they have as such no claim on the infants and are at risk of a sad break. Only if there is culpable conduct by the true parents can they step in without the consent of the latter.
Looking then at the position as a whole, we were invited by counsel for the applicants to take account of the cumulative effect of all the matters referred to by the learned county court judge and those raised in this court. That would involve adding nought to nought and produce a digit. Such a process would be wrong. The plain fact is that the conduct of the mother has not been established to be culpable either as regards the welfare of the child nor in any other relevant direction. She has not been shown to be unreasonable and I too would allow the appeal. I would add that the difficulties which can arise in this class of case are by now manifest. Accordingly, to enable the issues to be properly considered at first instance, the courts should in future ensure that the proposed adopters give before trial particulars of the matters relied on to show that a parent is unreasonably withholding consent to adoption.
CROSS LJ. If the court has power to make an adoption order, the probable effect of making it on the welfare of the infant will be the governing consideration in the mind of the judge when he decides whether or not to make it. But the Adoption Act 1958 prescribes various conditions which have to be satisfied before the power to make an adoption order arises. The conditions in ss 4 and 5 are directed to safeguarding the position of the natural parents. Section 4 lays down the general principle that an adoption order cannot be made unless the parents consent to its being made; but s 5 provides that the court may dispense with such consent if one or other of certain specified states of fact exist. Two of them—namely that the parent in question cannot be found or is incapable of giving his or her consent—are cases in which it is not possible to ascertain whether or not the parent in question is willing to consent. Four of them—namely that the parent has abandoned, neglected or persistently ill-used the child or has persistently failed without reasonable cause to discharge the obligations of a parent—are cases in which the behaviour of the parent in question towards the child has been such as to make it right that he or she should forfeit the right to veto the adoption.
It is, unfortunately, not so clear to what sort of circumstances the remaining case—namely that the parent in question is ‘withholding his [or her] consent unreasonably’—is intended to relate, for the Act does not specify what standard or degree of unreasonableness is envisaged. One approach to the problem would be to say that since a reasonable mother thinks first and foremost of the welfare of her child, if the court is satisfied that its welfare will be promoted by the making of the
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order the mother is acting unreasonably in refusing her consent. In my judgment, such an approach to the problem cannot possibly be right. In the first place if it is right, then the Act might simply have provided that the consent of a parent might be dispensed with if the court was satisfied that the welfare of the child would be promoted by the making of the order. Indeed no reference to parental consent would really be needed at all since the court would never make an order if it did not think it was for the benefit of the child that it should be made.
But quite apart from this point there are several other considerations which, to my mind, show that what I may call the ‘welfare’ approach to the words in question is not right. First, although it is no doubt true that a parent who agrees with the judge that his child will benefit by being adopted, and gives his consent accordingly, can be said to be acting reasonably, it does not follow that a parent who disagrees with the judge is acting unreasonably. In many cases whatever standard of reasonableness you postulate, two views may reasonably be entertained. Secondly, one must remember that a parent faced with the question whether or not to consent to the adoption of his or her child may well not be in a perfectly ‘reasonable’ frame of mind. The mother of an illegitimate child, for instance, may be torn by conflicting emotions; on the one hand the feeling that she ought to be a mother to her child, on the other the feeling that the child may well be better off if adopted. Consequently she may vacillate and change her mind. In finally deciding (if she does so decide) to keep the child, she may take what a detached observer would think was an over-optimistic view as to her ability to cope with the child. Again she may in the view of a detached observer underestimate the risk that the transfer of the child from the proposed adopters to herself may affect the child adversely. But the detached observer might well say: ‘Although anyone who could view the problem with detachment as I can would say, as I do, that she is making the wrong decision, I can quite understand her point of view and judging her by the standards appropriate to a woman in her position, I do not think that she can be said to be acting unreasonably’.
Again, to take a third possibility, one may have a calm and detached parent who says: ‘Yes, I agree that my child would probably be better off—not simply materially but in every sense of the word—if he was adopted. But, after all, it is my child and though I shall not be able to do as well for the child as the proposing adopters I am not hopelessly unsuitable as a parent and I want to have a try’. Can such a parent be said to be acting unreasonably within the meaning of the section if she refuses her consent?
Assuming for a moment that there is no authority the other way, all these considerations lead me to think that the section envisages a degree and standard of unreasonableness which although not amounting to positive misconduct with regard to the child does not fall far short of it. To bring a case within the section, the court, I would think, must be able to say: ‘This is really too much. Making every allowance for the difficulty of your position, in refusing your consent you are failing to face up to obvious facts. You are shutting your eyes to a blameworthy degree to the very serious consequences which your refusal of consent will almost certainly entail for your child’.
I turn now to see whether there is anything in the decisions inconsistent with that view of the meaning of the words. I will take them in chronological order. The decision of the Divisional Court in Hitchcock v W B, is wholly consistent with this view. I would refer in particular to the words of Lord Goddard CJ ([1952] 2 QB at 571, cf [1952] 2 All ER at 123):
‘… if all these circumstances exist I can see no reason why a father can be said to be acting unreasonably if he says, “Good as it might be for my child to be adopted and looked after by somebody else, I am not prepared that my
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child should be removed entirely out of my life and no longer be a member of my family and that I should be as if I had never had the child at all“.’
Again the decision of this court in Re K (an infant), Rogers v Kuzmicz is consistent with it. Jenkins LJ said ([1952] 2 All ER at 884, [1953] 2 QB at 130) that to come within the words a case which did not fall within one of the other sets of circumstances envisaged by what is now s 5 would be an exceptional one. Moreover, he stressed ([1952] 2 All ER at 885, [1953] 1 QB at 131) the distinction between custody cases and adoption cases.
Next comes Re I (An Infant) which is referred to in Re C (an infant) ([1964] 3 All ER 483 at 490, [1965] 2 QB 449 at 464). It may well be possible to justify the decision in that case even on the narrow interpretation which I would put on the words in question, but Lord Denning MR in his judgment in Re L certainly used language which read without regard to the very unusual facts might suggest that in his view the section envisages a higher standard of reasonableness than, apart from authority, I would think that it envisages. Next comes another case, Re W (an infant), also referred to in Re C ([1964] 3 All ER at 491, [1965] 2 QB at 465), which is in no way inconsistent with the view which I have expressed. Finally there is Re C. In that case Diplock LJ expressed the view ([1964] 3 All ER at 494, [1965] 2 QB at 471) that to come within the words a mother must at the least display a ‘self-indulgent indifference’ to the welfare of her child. That accords entirely with my view, although I am not altogether sure that I would have thought that on the facts the mother’s attitude in that case satisfied that test. Pearson LJ, on the other hand, quoted ([1964] 3 All ER at 490, [1965] 2 QB at 464) with approval the passage in the judgment of Lord Denning MR in Re L, to which I have referred. In this state of the authorities I do not think that I am precluded from applying the stricter test—indeed I think that the preponderance of authority is in its favour.
I turn now to the facts of this case. It certainly cannot be suggested that the mother was in March 1969 so palpably unfit to look after the child in question as well as her two other illegitimate children that her refusal to consent to his adoption could be described as ‘unreasonable’ on that ground. Such a conclusion would be altogether inconsistent with the views expressed by the welfare officer in the concluding paragraph of her report. Further, if that were true in March 1969, it must have been equally true in July 1968, but it is common ground that if the mother had changed her mind about adoption then no one could have said that she was acting unreasonably. The case against her must rest entirely on what she did or did not do between July 1968 and March 1969. Two of the points which counsel for the applicants took with regard to her conduct during that period—although they were not in fact taken by the judge—do not in my judgment tell against her at all. The first is her failure to visit or keep in touch with the child. Now, according to the evidence, when the child care officer told her that she must make up her mind one way or the other with regard to having the child adopted, the mother suggested that she should try having the child with her at weekends to see whether or not she could cope. The child care officer may possibly have been right in opposing that suggestion, but it was not on the face of it an unreasonable one and it is quite inconsistent with the view that the mother had no real interest in this child until for some unknown reason she suddenly changed her mind in March 1969. By acquiescing in the view of the child care officer that if she was not prepared to give up the idea of adoption altogether and take back the child she must sever her ties with him completely,
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the mother certainly laid herself open to the argument which is urged against her that by March 1969 she had lost contact with the child for so long that it was unreasonable of her to refuse consent to his adoption. But one cannot fairly also stigmatise her as a mother who had no interest in her child and give her so to say additional black marks for not seeing him between July and March.
Another point urged against the mother is the fact that she signed a formal consent to the adoption on 11 February 1969. In my judgment there is nothing in that point. She had given consent in principle to his being adopted from, or indeed from before, the date of his birth and she was consenting to his being adopted by the applicants from September onwards. The form of consent which she signed—which stated on its face that she could retract it—was merely evidence on which the court could act if she did not appear at the hearing. It carried the matter no further so far as the applicants were concerned and the case against her would have been just as strong or weak if she had never signed any consent before she retracted the consent, which she had in effect given months before, in March 1969. The whole question, as I see it, is whether by March 1969 the mother had acquiesced for so long in her child being cared for by the applicants first as foster parents and then with a view to adoption that to retract her consent in March displayed, to use Diplock LJ’s words ([1964] 3 All ER at 494, [1965] 2 QB at 471), ‘self-indulgent indifference, to the welfare of the child and, so far as it is relevant, self-indulgent indifference to the feelings of the proposed adopters.
The task of the judge in deciding custody cases—and indirectly, therefore, in deciding contested adoption cases—has undoubtedly been made more difficult than it used to be by developments in medical thought over the past 20 years or so. Before the war it was, I think, generally assumed that although he might be made temporarily unhappy, a young child would not be lastingly disturbed by being transferred, even after a prolonged stay, from the care of foster parents or prospective adopters to his natural parents if both were approximately equally well qualified to look after him. But nowadays specialists agree in saying that there is some risk of lasting emotional disturbance to any child who is removed from the care of one woman to that of another between the ages of six months and 2 1/2 years. They are not, however, able to estimate the degree of risk nor to compare that risk with the risk which admittedly exists that a child who is adopted in infancy may be emotionally disturbed when he learns years later that the adoptive parents are not his real parents. But although the problem has been undoubtedly to some extent complicated by this development of medical opinion, I do not think that the complication affects this case. In the first place as no medical evidence was in fact given I do not think that one can fairly attribute to the mother the knowledge of Harley Street opinion which she would have had if she had been used to hearing wardship cases. Secondly, even if general evidence not directed to any particular features of the actual case had been given, I do not think that a mother who maintained her wish to retain her status as a mother in face of such general evidence could be considered to be acting unreasonably within the meaning of s 5 of the Act. In this connection I would respectfully adopt what was said by Ormerod LJ in the unreported case, Re W referred to in Re C ([1964] 3 All ER at 491, [1965] 2 QB at 465).
I turn now to the question of the effect of the refusal on the applicants. I am prepared to assume for the purpose of this judgment that the effect of a refusal of consent on the happiness of the applicants is a matter to be taken into account in considering whether consent has been unreasonably withheld; it is, indeed, probably only on that footing that the decision in Re L can be justified on the narrow construction of the wording of the section. But even on that footing one must bear in
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mind that prospective adopters are themselves entitled to refuse to adopt the child in question if during the probationary period they decide for one reason or another that they do not want to go on with the adoption and that they know perfectly well that they are taking the corresponding risk that the natural parent or parents may change his or their minds during that period. It is, I think, on any footing only in extreme cases—such as Re L—that the distress caused to the proposed adopters has great relevance and on the facts of this case I cannot think that it has any appreciable weight.
To decide this case in favour of the applicants would, as I see it, go further in the direction of the ‘welfare’ approach than any case has yet gone. On the facts, it would be harder to justify on the narrow construction than Re C and would be quite inconsistent with the decision in Re W, which Pearson LJ recognised as a stumbling block in the way of the decision at which the court in fact arrived in Re C.
In deciding as he did in this case, the judge, in my view, applied the wrong test. The question which he asked himself was: ‘Am I satisfied that the making of the adoption order will promote the welfare of this child?’ and not, as I think that it should have been: ‘Am I satisfied that making every proper allowance for the difficulty in which the mother finds herself, she, in refusing her consent, is failing to face up to the realities of the case and is shutting her eyes to a blameworthy degree to the obvious dangers to which she is exposing the child?’. Accordingly, in my judgment, this appeal should be allowed. To hold a balance in adoption cases between the interests of the child and the claims of the natural parents is obviously difficult. It may be that today informed opinion would attribute more weight to the interests of the child and less to the claims of the parents than it did in 1958. I have no views one way or the other; but if the balance is to be tipped in favour of a purely ‘welfare’ approach then that result should be achieved by Parliament after full consideration of all that is involved and not by the court putting a construction on the words ‘withholding unreasonably’ in s 5 which they were not, in my view, intended to bear.
In conclusion I would add that I agree with Sachs LJ in thinking that those who ask the court to dispense with the consent of a parent on the ground that it is being unreasonably withheld should furnish the court and the parent in question with particulars of the matters on which they rely as showing that the parent is acting unreasonably.
I agree that this appeal should be allowed.
Appeal allowed; adoption order discharged; direction to Registrar General under s 24(3) of the Adoption Act 1958. Leave to appeal to the House of Lords refused.
11 June 1970. The appeal committee of the House of Lords (Lord Hodson, Lord MacDermott and Lord Guest) granted leave to appeal.
Solicitors: Wallace Bogan & Co (for the mother); T V Edwards & Co (for the applicants).
Henry Summerfield Esq Barrister.
Re B (an infant)
[1970] 3 All ER 1008
Categories: FAMILY; Children
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WINN AND KARMINSKI LJJ
Hearing Date(s): 8, 9, 10, 13 JULY, 8 OCTOBER 1970
Adoption – Consent of parent or guardian – Dispensing with consent – Consent unreasonably withheld – Test of unreasonableness – Refusal involving serious risk of affecting future happiness of child – Adoption Act 1958, s 5(1)(b).
Consent to an adoption order may be withheld ‘unreasonably’ within the meaning of s 5(1)(b)a of the Adoption Act 1958 even though there is nothing culpable or blameworthy in the refusal of consent (see p 1014 b, p 1021 c and p 1022 f, post) (Re W (an infant) p 990, ante, not followed; dictum of Diplock LJ in Re C (an infant) [1964] 3 All ER at 494 dissented from); the test of reasonableness is: ‘would a reasonable parent regard a refusal to permit the adoption of the child as involving a serious risk of affecting the whole future happiness of the child?’ (see p 1013 e, p 1020 g, and p 1022 b, post) (dictum of Diplock LJ in Re C (an infant) [1964] 3 All ER at 495 approved).
Notes
For dispensing with the consent of a parent on making of adoption order, see 21 Halsbury’s Laws (3rd Edn) 231–233, para 506, and for cases on the subject, see 28 Digest (Repl) 634–636, 1332–1341.
For the Adoption Act 1958, s 5, see 17 Halsbury’s Statutes (3rd Edn) 642.
Cases referred to in judgments
A B and C B v X’s Curator 1963 SC 124, Digest (Cont Vol A) 928, * 738c.
C (an infant), Re [1964] 3 All ER 483, 129 JP 62, sub nom Re C (L) (An Infant) [1965] 2 QB 449, [1964] 3 WLR 1041, Digest (Cont Vol B) 436, 1333d.
Hitchcock v W B [1952] 2 All ER 119, [1952] 2 QB 561, 116 JP 401, 28 Digest (Repl) 635, 1335.
K (an infant), Re, Rogers v Kuzmicz [1952] 2 All ER 877, [1953] 1 QB 117, 117 JP 9, 28 Digest (Repl) 635, 1336.
L (An Infant), Re (1962) 106 Sol Jo 611.
W (an infant), Re (1963) unreported.
W (an infant), Re p 990, ante, [1970] 3 WLR 175.
Appeal
The applicants for an adoption order in respect of a child, who contended that the mother’s consent to the order should be dispensed with on the ground that she was withholding her consent unreasonably, appealed from the decision of his Honour Judge Pennant at Bournemouth county court on 26 March 1970 refusing to dispense with the mother’s consent and accordingly refusing to make an adoption order. At the conclusion of the argument, on 13 July 1970, the Court of Appeal announced that the appeal would be allowed, and an adoption order made, for reasons which the court would give later. The facts are set out in the judgment of Davies LJ.
John Davies QC, L J Blom-Cooper QC and Caroline Rogers for the applicants.
A W M Davies QC and R M Shawcross for the mother.
Cur adv vult
8 October 1970. The following judgments were delivered.
DAVIES LJ. This appeal concerns a male child born to the mother on 5 April 1969. It is an appeal from a judgment of his Honour Judge Pennant sitting at the Bournemouth county court who, after a hearing spreading over 27 February and 24 and 25 March 1970, on 26 March refused the application of the proposed adopters (‘the applicants’), for an adoption order in respect of the child. The mother had, as will appear, originally given her consent to the adoption but subsequently
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drew it; and the basis of the application before the county court judge and of the appeal before this court was the contention on behalf of the applicants that in the circumstances the court ought to dispense with the consent of the mother to the making of the order on the ground that she was withholding her consent unreasonably within the meaning of s 5(1)(b) of the Adoption Act 1958. The learned county court judge in a full and careful judgment decided that the applicants had failed to make out their case.
The appeal was heard in this court on 8, 9, 10 and 13 July 1970. On the last of these dates, at the end of the submissions of counsel, it became obvious that it was necessary to put into writing the reasons for the decision at which we had unanimously arrived, namely that the appeal should be allowed and that the adoption order should be made. Nevertheless, in order that the parties should not be left in suspense, we thought it right to announce our decision forthwith in open court without at that stage giving any reasons, and we accordingly did so.
It is necessary to go in some detail into the past history of the mother, Mrs B, as she now calls herself, and the man B with whom she was living at the date of the hearings in the county court and in this court. She is now 35 years old and has since 1964 been intermittently living with B, who is 38 and is the father of the child. He is engaged in some sort of motor car business. So far as the applicants are concerned, the male is 38 and the female 27. They both come from distinguished army families and he is an officer in a well-known cavalry regiment. They were married in September 1965, but have remained childless on account of some psycho-sexual impotence on the part of the husband, a condition which the learned judge considered would be unlikely to render their marriage unstable and should not be taken as a bar to the adoption.
I would interpolate here that, so far as it is relevant, it is plain on the evidence that, without going into detail, the prospects of the child as regards material, social and financial considerations and as regards the prospects of a stable home and surroundings would be immeasurably superior if he remains with the applicants to those which he would enjoy if he is returned to the mother with or without B. As one small example of this, it is to be noted that since he was handed over to the applicants in September 1969, he has already been put down for Eton.
Returning to the mother, she had an unfortunate and unhappy childhood. She was born in 1934 while divorce proceedings were pending between her parents. She was abandoned by her mother some ten days after her birth. There was a settlement of about £14,000 made on her by her father and the co-respondent in the suit. That fund was principally administered by Mr Shaw, a solicitor, who was one of the trustees and acted as the mother’s guardian. As a matter of history it would appear that that fund has by now been almost wholly expended, save for a sum of £500 put by for use in the event of the mother being able to take divorce proceedings and a final sum of £1,000 due to be paid to her on her fortieth birthday. In June 1954, she married a man called A whom she had met when they were both employed in a London store. By him she had two children, a boy born in 1956 and a girl born in 1958. That marriage obviously deteriorated for by late 1963 or early 1964 the mother was living with B at a cottage in W. In January 1965, the mother applied for the custody of the two children, but it was awarded to their father, A, possibly because she was living in adultery with B.
I come now to the remarkable matrimonial or extramatrimonial career of B. He had married in 1955 and there was issue of that marriage one child, the paternity of whom B disputed. During that marriage, in 1957, he had a child by a woman called G, reputed to be an American millionairess. In March 1962 his wife divorced him. In July 1962, he married G, but within 18 months was associating with the mother. And—to anticipate for a moment—in 1966 G divorced him. In March 1964, the mother found herself pregnant by B. Whereupon B left her and resumed cohabitation with G, his then wife, with a view to a reconciliation, but after some
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three months returned to the mother, with whom he intermittently remained until May 1969. In December 1964, the mother gave birth to a stillborn child. In 1966 the mother underwent a serious surgical operation to deal with a blocked fallopian tube, and there is little doubt that, as the judge found, her object in so doing was to enable her to have a child by B and so, as far as possible, to cement their union. By the summer or early autumn of 1968 the mother must have become pregnant with the child with which we are presently concerned. Shortly after that B, as he had done on the occasion of her previous pregnancy, went off and lived with another woman, whose name we were not told, and then after three months returned to the mother. But by March 1969 he was associating with a young woman of 22 years of age called H, although he continued to live with the mother until May when he set up house with H.
On 5 April 1969 this child was born. Very shortly after his birth he suffered from serious cyanotic attacks and was on two occasions in hospital for a fortnight or so. The mother was apparently told by the doctors that as a result of those attacks the child might have suffered serious brain damage, a view which in the event has happily proved unfounded. In May or June 1969 the mother got in touch with Mr Shaw, her solicitor and trustee, and told him that she wished the child to be adopted, and as a result Mr Shaw later told her that he had found suitable adopters; they were the applicants. On 4 July, after an interview with a welfare officer, the mother informed Mr Shaw, through his secretary, that she had definitely decided on adoption. On 13 August she took a job in London, having arranged for the child to be looked after, at first daily by one local woman and later weekly by another. On 10 September, the child was handed over to the applicants, and on 1 October the mother let her cottage at W for 12 months, having taken a flat in London.
Going back a little in time, on 15 September the mother had received a sum of £2,500 from her trust on her thirty-fifth birthday. Whether the next event had any connection with that, one does not know. But in October, H whom B had been proposing to marry having gone abroad on holiday, B promptly returned to the mother and the two of them had a reconciliatory weekend and exchanged expensive presents. On 30 October, the mother informed Mr Shaw that she had changed her mind about the adoption and wanted the child to be returned to her. At Mr Shaw’s insistence she put this instruction in writing, namely in her letter of 31 October. But H returned to this country, heard of the reconciliation between B and the mother and attempted or pretended to attempt to commit suicide, whereupon B promised to marry her. Having learnt of this, the mother on 7 November telephoned Mr Shaw’s secretary to say that she had changed her mind again about the adoption and wished it to proceed; but within half-an-hour she telephoned again to say that she did not wish the adoption to proceed; and that has remained her attitude ever since. The following weekend she spent with Mr Shaw’s secretary, and her attitude then was that, whether B returned to her or not, she wished to keep the child and that if necessary she would take a domestic job where she could look after him.
To complete the dates. On 10 November, B married H and on 11 November took a house at C where H joined him. But their marriage was unsuccessful. Within a matter of days B was seeing the mother again. H remained with B in the house at C until February 1970. When she left, the mother rejoined B there.
I turn now to consider the law, but would make certain preliminary observations. In the first place, it is to be pointed out that Winn LJ in the course of his judgment, which he wrote before his unfortunate illness, and with which I respectfully agree, has not only dealt with the authorities which were cited to us but has also considered the corresponding provisions of the earlier Acts, ie the Adoption of Children Act 1926 and the Adoption Act 1950. This will enable me to deal with the authorities more briefly than one might otherwise have done and also, as far as the statute law is concerned, to confine my observations to the section which applies in the present case, ie s 5 of the 1958 Act. Secondly, it is to be pointed out that the decision which
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has perhaps caused us the most anxious concern is the recent decision of this court, composed of Russell, Sachs and Cross LJJ, in Re W (an infant). That case is the subject of an appeal to the House of Lords. The appeal has not yet been heard, and we accordingly find ourselves in the somewhat embarrassing position of having to give our reasons for our decision in the present case without having the benefit of their Lordships’ views on the subject. The material part of s 5 of the 1958 Act provides:
‘(1) The court may dispense with any consent required by paragraph (a) of subsection (1) of section four of this Act if it is satisfied that the person whose consent is to be dispensed with—(a) has abandoned, neglected or persistently illtreated the infant; or (b) cannot be found or is incapable of giving his consent or is withholding his consent unreasonably.
‘(2) If the court is satisfied that any person whose consent is required by the said paragraph (a) has persistently failed without reasonable cause to discharge the obligations of a parent or guardian of the infant, the court may dispense with his consent whether or not it is satisfied of the matters mentioned in subsection (1) of this section.’
It seems to me that the section draws a clear distinction between the cases covered by sub-ss (1)(a) and (2) on the one hand and those covered by sub-s (1)(b) on the other. The former are examples of misconduct towards the child; the latter are not, save insofar as it could be said to be misconduct unreasonably to withhold consent. If a person cannot be found, he could not in the ordinary case be said to be guilty of misconduct or, to use the word adopted by Sachs LJ in Re W (At p 998, ante, [1970] 3 WLR at 184), to be culpable on that account, any more than would a person who is incapable of giving his consent. And I for my part can see no justification for colouring the third case covered by sub-s (1) (b), namely the unreasonable withholding of consent, with any conceptions to be drawn from sub-s (1)(a) or (2) and not to be found in the first two cases covered by sub-s (1)(b). To put it in another way, the two subsections do not, in my judgment, deal with seven examples of improper but similar conduct, they do not constitute a genus, and the cases covered by sub-s (1)(b) are not in pari materia with the others. However difficult it may be in any individual case to decide whether the withholding of consent is unreasonable (even though, as is plain on the authorities and as was admitted in the present case by counsel for the mother, the test of reasonableness is an objective one), the problem is not rendered any easier by the substitution of some other and different word for ‘unreasonably’ or ‘unreasonable’. Indeed, to do so served only to render the problem more difficult and to give the statute a meaning which its words do not bear.
The earliest of the cases to which we were referred was Hitchcock v W B, a case in the Divisional Court. There the seriousness of an adoption order was rightly emphasised and it was pointed out that whereas in custody and guardianship cases the welfare of the child is the paramount consideration, that is not so in adoption cases. And Devlin J contrasted ([1952] 2 All ER at 123, [1952] 2 QB at 571) the words of s 3(1)(c) of the 1950 Act, which the court was there considering and which are similar in effect to those of the 1958 Act, with the provisions of s 2(3) of the 1926 Act which enabled the court to dispense with any consent if satisfied that the person whose consent is to be dispensed with (inter alia)—
‘… is a person whose consent ought, in the opinion of the court and in all the circumstances of the case, to be dispensed with’
thus obviously giving to the court a wide discretion.
Next in order comes the important and often quoted judgment of this court,
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given by Jenkins LJ in Re K (an infant), Rogers v Kuzmicz. That was also, of course, a case under the 1950 Act. The important passage for present purposes is where Jenkins LJ said ([1952] 2 All ER at 884, [1953] 1 QB at 129):
‘It is, no doubt, true that s. 3(1)(c) extends to the case of a parent and gives the court jurisdiction to dispense with the consent even of a parent who has not been guilty of any such misconduct or dereliction of duty towards the infant as is mentioned in s. 3(1)(a), if satisfied that such parent’s consent is unreasonably withheld. But we ask ourselves in what circumstances is a parent, not guilty of any such misconduct or dereliction of duty, to be held to have acted unreasonably in withholding his or her consent … One can imagine cases short of such misconduct or dereliction of duty as is mentioned in s. 3(1)(a) in which a parent’s withholding of consent to an adoption might properly be held to be unreasonable, but such cases must, in our view, be exceptional.’
This clear distinction between misconduct or dereliction of duty on the one hand and unreasonable withholding of consent on the other, when applied to the present case, shows that s 5(1)(b) of the present Act deals with an entirely different state of affairs from that covered by s 5(1)(a) and (2). It also, in my view, strongly suggests that in order to come within s 5(1)(b) no element of misconduct, culpability or blameworthiness is necessary.
It is also to be noted that Jenkins LJ said ([1952] 2 All ER at 885, [1953] 1 QB at 130):
‘… the withholding of a parent’s consent to an adoption order cannot be held unreasonable merely because the order, if made, would conduce to the welfare of the child.’
I would underline the word ‘merely’ in this passage. For from nearly all the judgments in the decided cases it is apparent that one of the matters which should be taken into consideration is the welfare of the child. Perhaps it would be more accurate to say that one of the matters which a parent ought reasonably to take into consideration in deciding whether or not to withhold consent should be the prospects and outlook for the child if adopted as compared with those if unadopted; these prospects would include material and financial prospects, education, general surroundings, happiness, stability of the home and the like.
The next case in order of date was Re L (An Infant) decided in July 1962, and referred to in the judgment of Pearson LJ in Re C (an infant) ([1964] 3 All ER 483 at 490, [1965] 2 QB 449 at 464). Pearson LJ quoted ([1964] 3 All ER at 490, [1965] 2 QB at 464) the words of Lord Denning MR in Re L where he said:
‘“But I must say that in considering whether she is reasonable or unreasonable we must take into account the welfare of the child. A reasonable mother surely gives great weight to what is better for the child. Her anguish of mind is quite understandable; but still it may be unreasonable for her to withhold consent. We must look and see whether it is reasonable or unreasonable according to what a reasonable woman in her place would do in all the circumstances of the case“.’
That test was adopted and applied by Pearson LJ who himself added these words ([1964] 3 All ER at 491, [1965] 2 QB at 465):
‘I would think it right that it is primarily the welfare of the child that the mother should have in mind.’
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That case was referred to in A B and C B v X’s Curator, in which Lord Sorn, while applying the test propounded by Lord Denning MR, to some extent put a slight gloss on it in these words (1963 SC at 138):
‘… how would a parent, placed in the situation of the actual parent and having the qualities or the defects of the actual parent, yet considering the situation reasonably, have decided the question?’
It may perhaps be thought that to frame the question in this way is to introduce an element of subjectivity into what is admittedly an objective question.
Another case referred to by Pearson LJ was Re W (an infant) decided in July 1963. In that case there was some medical evidence of danger to the child in the event of the adoption order not being made. But the medical evidence there was, in the words of Pearson LJ ([1964] 3 All ER at 493, [1965] 2 QB at 468), weak and indecisive and the Court of Appeal reversed the order of the county court judge who had dispensed with the mother’s consent. It is to be noted that of all the cases referred to before us Re W (an infant) was the only one in which this court has, as it were, acted in the face of medical evidence to the effect that to return the child to its parent might have deleterious effects. And as will be seen later, the medical evidence in the present case is very strong indeed.
I turn now to Re C itself. Nothing more need be said about the judgment of Pearson LJ to which I have already referred. He applied the test laid down by Lord Denning MR in Re L, and I respectfully agree with and would follow both of those learned judges. But in Re C Diplock LJ propounded two tests which, if I may say so with the utmost respect, seem to me to be inconsistent with each other. He said ([1964] 3 All ER at 495, [1965] 2 QB at 471):
‘The question, indeed, that should be put I would put in these terms: Would a reasonable parent regard a refusal to permit the adoption of the child as involving a serious risk of affecting the whole future happiness of the child?’
With that test I wholeheartedly agree; but earlier Diplock LJ had said that the question was ([1964] 3 All ER at 494, [1965] 2 QB at 471):
‘Does the withholding of the consent by the parent show a callous or self-indulgent indifference to the welfare of the child?’
That last passage had the greatest effect on Judge Pennant in the present case. Indeed I think that it is true to say that he directed himself according to it and that in substance his answer to that question formed the ratio of his judgment. But I confess that for myself I am unable to accept this test—in contradistinction to the other one propounded by Diplock LJ—as valid. To speak of ‘callous or self-indulgent indifference to the welfare of the child’ is again, as I think, to introduce notions of misconduct or dereliction of duty which, as I have attempted to show, in my view form no part of the concept of unreasonableness under s 5(1)(b) of the Act.
The most recent of the cases is Re W (an infant), in which this court reversed a decision of the county court judge that consent was unreasonably withheld. That case is, as I have said earlier, under appeal to the House of Lords, so that it is not easy for us today to comment on it in any detail. It is perhaps sufficient to say that in the course of a most careful and closely reasoned judgment—obviously designed
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to assist those in inferior courts who have to decide these most difficult questions—Sachs LJ stated (At 998, ante, [1970] 3 WLR at 184) that in his view in order to establish the unreasonableness of a refusal of consent there must be shown a high degree of culpability on the part of the parent. And he said (At 998, ante, [1970] 3 WLR at 184) that the order sought, ie an adoption order against the consent of the parent, ‘has penal aspects’.
Of course my view about this matter may be completely wrong; but I can only repeat that which I have already said, namely that unreasonableness and culpability seem to me to be quite different things. What was said in Re W is not in my opinion binding on this court. There was material in that case on which the court could come to the conclusion that consent was not being unreasonably withheld and consequently the general discussion as to the principles to be applied was obiter. The only other comment to be made about Re W is that there was in that case no medical evidence as to the possibility or probability of injury to the child’s health if the adoption order were not made. The court was prepared to treat it as axiomatic that the preponderance of modern medical opinion is to the effect that such danger exists. But that assumption does not go nearly so far as did the reports and the oral evidence of the three doctors in the present case. The substance of their evidence is set out by the learned judge in his judgment and it is unnecessary to repeat it. I would only refer to one answer given by Sir Wilfrid Sheldon dealing with a special danger over and above that inevitably inherent in the transfer back of a child of such tender years from adopted parents—the only parents whom he has ever consciously known—to a natural parent whom he does not know. Sir Wilfrid was asked:
‘What then would you expect if you had first of all a stable home—and there I am including stable parents and home—and transfer to an unstable one?’
and his answer was ‘Disaster’.
How then is the question in this case to be resolved? On the mother’s side there is, of course, the tie of blood and natural love and affection, although it is to be remembered that even before the child was handed over her association with him was to some extent interrupted. Perhaps more importantly operating in her mind is the hope that if she recovers the child that may help to cement her union with B for the sake of which she originally conceived and bore the child. But even to the mother who, it would seem, is completely obsessed with him, B must present an almost insoluble problem. The judge, who saw and heard them both, thought that the union was unlikely to be permanent and, in the light of her past experiences of him, the mother cannot fail to realise that he is hopelessly unreliable and could be off again at any moment. If he does stay, he is obviously, although the natural father, not the sort of man who would be a good example to a growing boy, even if it became somehow possible in the future for him and the mother to marry each other. If, as is not unlikely, he goes off again, then there will be no male influence, good or bad, in the mother’s household. And how can anyone, even the mother herself, be sure what her reaction would be in that event? It is true that in November 1969, her attitude was that she wanted the child with or without B. But if he were to go off again, it is obviously not impossible that the emotional shock to the mother might cause her once more to wish to have the child adopted. In short, the home and family to which the mother seeks to have the child returned is without question fragile and unstable.
It is suggested that it is reasonable for the mother to have regard to the incapacity, such as it is, of the male applicant. But the judge regarded that in this context as a minor matter, as it obviously was, and I do not consider that it would be reasonable for her to attach any weight to it. Contrariwise I do not think that it would really be reasonable for the mother to take into consideration the effect of her decision on the
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applicants or the criticisms made in the evidence of her as a housekeeper or as to her suggested financial irresponsibility, which criticisms she could not be expected to regard as valid.
What have the applicants to offer which makes it unreasonable for the mother to withhold her consent? In the first place, as counsel for the mother admitted during the argument, an ideal home in the circumstances and surroundings such as the mother could never hope to provide, with every prospect of a happy and normal life in sound and stable conditions. To that must be added in this case the medical evidence, which is, and in my view should be realised by the mother to be, almost overwhelming. She should not, if acting reasonably, expose the child to the dangers which the doctors envisage. The shock which it is suggested he might suffer at some future date if he should discover that he had been adopted is, in my view, but a small matter to put into the other side of the scale.
In the light of all the history of this matter, and the story of the mother’s unhappy experiences with B, the advantages and prospects which the applicants have to offer and the medical evidence, I was at the end of the argument clearly of the opinion that the mother was acting unreasonably and was accordingly in favour of allowing the appeal.
WINN LJ (read by Davies LJ). A decision that a mother is permanently to be parted from her infant child is one of the gravest that a judge may ever take; natural diffidence combined with sympathy and repugnance from infliction of pain must impose stringent checks. No one would lightly or readily form the judgment which I myself feel compelled to express: that the mother has unreasonably withheld her consent to the proposed adoption.
It is perhaps a little curious that when Parliament made provision for adoption orders, by the Adoption of Children Act 1926, although it prohibited the making of any such order except with the consent of every person or body who was a parent or guardian of or who had the actual custody of the infant or was liable to contribute to his support—very comprehensive categories—the court was given very wide powers of dispensation. The proviso to s 2 of the Act merits quotation but it is convenient to break it up into separate portions, thus:
‘… the Court may dispense with any consent required by this subsection if satisfied that [1] the person whose consent is to be dispensed with has abandoned or deserted the infant or [2] cannot be found or [3] is incapable of giving such consent or [4], being a person liable to contribute to the support of the infant, either has persistently neglected or refused to contribute to such support or [5] is a person whose consent ought, in the opinion of the court and in all the circumstances of the case, to be dispensed with.’
Thus it is apparent that whilst that Act was in force the court had a discretionary power to make an adoption order notwithstanding the lack of consent of any person whose wishes or opinion the court thought ‘ought’ to be ignored. No guidance was given by the main section (s 2(3)) to the considerations which would justify or require such a value judgment discarding any person’s opinion. A minor provision in s 10 of the 1926 Act empowered the court to confirm existing de facto adoptions, of two years’ standing, without requiring the consent of any parent or guardian; in such a case a requirement was imposed that the court should be—
‘… satisfied that in all the circumstances of the case it is just and equitable and for the welfare of the infant that no such consent should be required and that an adoption order should be made.’
It seems justifiable to comment that the combined effect of the two sections is to indicate that whilst the welfare of the infant was regarded by Parliament as not irrelevant the provisions enacted were calculated primarily to preserve the right
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of any person who had begotten or borne or duly supported and cared for the infant to pronounce a veto on his adoption which the court could only ignore or override for reasons sufficient to support an exercise of judicial discretion and where justice and equity required this course.
In 1950 a consolidating Act called the Adoption Act 1950 was passed which provided, inter alia, by s 2(4), that subject only to the provisions of s 3 of the Act an adoption order should not be made—
‘… except with the consent of every person or body who is a parent or guardian of the infant or who is liable by virtue of any order or agreement to contribute to the maintenance of the infant … ’
Section 3(1) of the Act enabled the court to dispense with any consent so required if satisfied—
‘… (a) in the case of a parent or guardian of the infant, that he has abandoned, neglected or persistently ill-treated the infant; (b) in the case of a person liable by virtue of an order or agreement to contribute to the maintenance of the infant, that he has persistently neglected or refused so to contribute; (c) in any case, that the person whose consent is required cannot be found or is incapable of giving his consent or that his consent is unreasonably withheld.’
On these statutory provisions it may be commented that they provide for disqualification of objections of parents or guardians who have failed to perform or have abused their parental functions or of financial supporters of an infant who have failed to maintain such support, and that apart altogether from those two categories of persons whose wishes may be overridden, three other special cases are contemplated: (1) inability to find a person whose consent is prima facie required to be obtained; (2) the incapacity of such a person, presumably by reason of mental frailty, to give or withhold an intelligent consent; and (3) a refusal by such a person to give consent which is unreasonable. The difficult question is, of course, left open: when is it unreasonable to withhold consent?
In passing it is, perhaps, of some slight interest to note that both the 1926 Act, s 2(4), and the 1950 Act, s 3(2), provided that although one spouse should not be allowed to adopt any infant without the consent of the other spouse, the court might dispense with such consent if satisfied, inter alia, that the spouses had separated and their separation was likely to be permanent, presumably because it could not then be particularly material whether the absent spouse would or would not welcome the arrival of an adopted child into the matrimonial home.
In the Adoption Act 1958 the relevant provisions follow a similar but more succinct form. Section 4 provides that an adoption order shall not be made except with the consent of every person who is a parent or guardian of the infant save to the extent permitted by s 5. The latter section empowers the court to dispense with any such consent—
‘(1) … if it is satisfied that the person whose consent is to be dispensed with—(a) has abandoned, neglected or persistently ill-treated the infant; or (b) cannot be found or is incapable of giving his consent or is withholding his consent unreasonably.’
It is to be observed that the former references to persons who had undertaken an obligation to support the infant have been omitted and now it is only the consent of parents which is required and in relation to which the dispensing power of the court may have to be exercised. There is an additional ground set out in s 5(2), imported from the Children Act 1958, enabling the court to dispense with the consent of any parent or guardian who has failed without reasonable cause to discharge his obligations as parent or guardian to the infant.
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It cannot be doubted that s 5(2) and s 5(1)(a) are aimed at parents who have forfeited the rights and privileges in relation to their child which would otherwise have been inherent in their parenthood; on the other hand, s 5(1)(b) does not, as I see the matter, relate to any form of misconduct in the capacity of parent or otherwise, or to any behaviour or defect to which any pejorative epithet or any form of condemnation could properly be applied. It simply refers to three situations which are the same as those contemplated by and legislated for in the 1950 Act, s 3(1)(a) and (c).
I have stressed the apparent absence of any indication of blame from the wording of s 5(1)(b) of the Act—unless, of course, blame is to be considered to be imputed by the adverb ‘unreasonably’—because I have in mind certain judicial observations to which it will be necessary to refer. Leaving aside for the moment the possible implications of this word ‘unreasonably’ it can, I think, be accepted that the mere fact that a person cannot be found is not normally indicative of his being at fault, in any respect whether in relationship to some infant or in any other respect; of course, many persons who cannot be found have deliberately gone into hiding and if they are hiding are probably guilty in some respect, but it does not follow that this is why they are missing. Equally it must be conceded that many people become incapable of intelligently choosing whether to give or withhold consent for physical reasons for which they cannot be held responsible. Accordingly it does not seem to me that the subject-matter of the subsection comprises any genus by reference to which any implication can be raised that the final phrase ‘is withholding his consent unreasonably’ should be expected to import any misconduct or blameworthiness. If and insofar as it is legitimate at all to draw from the scope of the subsection any inference of intention that all persons to whom it applies should have something in common with one another, I cannot myself envisage any possible common element other than, perhaps, a concept of unavailability for the court of any useful guide whenever it has to deal with a factual situation where no consent of a parent of an infant is forthcoming to satisfy the primary requirement of the Act. Plainly if the parent cannot be found or is mentally defective there will be such an absence of consent; may it be legitimate to regard the concluding words of the subsection as contemplating any case in which, albeit there is a refusal of consent, that refusal can be treated judicially as nugatory because it has been asserted without any reasonable basis?
The word ‘reasonable’ or its correlative ‘unreasonable’ and the corresponding adverbs are in common parlance in the law courts, constantly used, almost as often misused, and forced into the service of many arguments into which they fit with varying and often slight appropriateness. A broad division can be recognised between the use of ‘reasonable’ as a measure of the standard of conduct or foresight of the hypothetical normal citizen or of what he is entitled to receive by due process of law, and, on the other hand, of the rational or irrational character of a decision. In this context the test is probably more accurately stated thus: was the decision in question one to which no reasonable man, woman, jury or bench of magistrates could have come? Should the answer to the question so posed be negative then the court will have no more regard to the decision in question than it would have had to a complete disagreement or an intimation of inability to form any decision.
I am on the whole disposed to think that it may be legitimate or at any rate may tend to favour a fair and just decision in cases where the issue is that which is raised in the instant case, ie was the parent’s consent to the adoption of the infant unreasonably withheld, to adopt and apply the extremely strict test discussed in the preceding paragraph. Thus one would ask oneself in all the circumstances of the particular case and having regard to the experiences of the particular mother, her interests and her rights so far as they are legitimate, is it right for the court to say that it has been established against her that no such mother so situated could, acting reasonably, have refused her consent? In such a statement of the problem the adverb
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‘reasonably’ must mean applying a rational and not unduly prejudiced mind to the relevant considerations, including in particular those directly affecting the infant.
There are certain authorities which bear in a relevant sense on the meaning and proper application of the Act of 1958 and the earlier Act, but before considering these I feel bound to say that a study of them has not made me feel able to accept as authoritative guidance either the observations of Diplock LJ about ‘self-indulgence’b or those of Sachs LJ about ‘culpable conduct’c in two of the more recent cases to which I shall make reference.
The leading authority on the topic of withdrawal of the consent of a parent, decided on the provisions of the 1950 Act, is Re K (an infant), Rogers v Kuzmicz. It was there held that whilst each case must depend on its own facts and circumstances the withholding of consent could not be held to be unreasonable merely because the adoption proposed would conduce to the welfare of the infant, nor was it important that a written consent had originally been given and then withdrawn nor that the child had been fostered for a period. Jenkins LJ, giving the judgment of the court, said ([1952] 2 All ER at 884, [1953] 1 QB at 129):
‘… we ask ourselves in what circumstances is a parent, not guilty of any such misconduct [ie such as is mentioned in s 3(1)(a)] or dereliction of duty, to be held to have acted unreasonably in withholding his or her consent to an order the effect of which, if made, will be to extinguish once and for all his or her parental rights, duties and obligations in regard to the infant, and, indeed, the very relationship between them of parent and child, and to make the infant thenceforth the child of the adopters in substitution for, and to the utter exclusion of, its natural parents? Prima facie it would seem to me eminently reasonable for any parent to withhold his or her consent to an order thus completely and irrevocably destroying the parental relationship. One can imagine cases short of such misconduct or dereliction of duty as is mentioned in s. 3(1)(a) in which a parent’s withholding of consent to an adoption might properly be held to be unreasonable, but such cases must, in our view, be exceptional.’
In the course of this judgment reference was made with approval to Hitchcock v W B in which a Divisional Court held that there was no ground for saying that it was unreasonable of a man to refuse his consent to the adoption of his child if he was found to be working satisfactorily so as to have means to contribute to its maintenance and had an honest desire to remain the parent.
In 1964 there was a decision on the Adoption Act 1958, Re C (an infant). It related to an illegitimate child born in October 1961, who was fostered with the applicants in February 1962 by the children’s officer with a view to their adopting the child, they being in every respect suitable adopters; the father of the child consented to the proposed adoption. After hesitation, the mother gave oral consent, in June 1962, to the proposed adoption but never gave any written consent, and constantly vacillated about the step until August 1963, when she signed a consent form. In September she withdrew her consent although she had no certain plans for the future of the child. Evidence was given by a consultant paediatrician that if the child were taken away from the applicants there would be a serious risk of severe psychological damage to the child; the judge adjourned the hearing to allow the mother to consider this evidence, but she declined to accept its validity. The judge held, primarily by reason of the medical evidence but having regard to all the circumstances, that she had acted unreasonably in withholding her consent and it was held on appeal
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that for the same reasons the judge’s order should be upheld. Pearson LJ said ([1964] 3 All ER at 486, [1965] 2 QB at 461):
‘We are not concerned in cases of this kind, where the question is simply whether the mother’s consent is being unreasonably withheld, with, in itself, the question which course would be in the best interests of the child. It is not enough to show—indeed, it is not strictly a relevant consideration by itself—that, in the interests of the child, it would be better that the child should remain with the foster-parents, or that the child should be taken by the mother. What is relevant is the mother’s attitude to questions concerning the welfare of the child.’
Later he commented ([1964] 3 All ER at 489, [1965] 2 QB at 462):
‘It is a salient feature of this case that it is the first case in which the mother’s attitude to the probable effect on the child of a change of parentage has been made the crucial ground of decision.’
In an important quotation from the judgment of Lord Denning MR in Re L (An Infant), which at the time was reported only in The Times of 19 July 1962 Pearson LJ ([1964] 3 All ER at 490, [1965] 2 QB at 464) quoted Lord Denning MR, who said:
‘“I quite agree that … (iii) the one question is whether she is unreasonably withholding her consent. But I must say that in considering whether she is reasonable or unreasonable we must take into account the welfare of the child. A reasonable mother surely gives great weight to what is better for the child. Her anguish of mind is quite understandable; but still it may be unreasonable for her to withhold consent. We must look and see whether it is reasonable or unreasonable according to what a reasonable woman in her place would do in all the circumstances of the case“.’
Pearson LJ added ([1964] 3 All ER at 491, [1965] 2 QB at 465):
‘I would think it right that it is primarily the welfare of the child that the mother should have in mind; but, of course, it is also relevant to consider the effect of her decision on other persons—on herself, on the adoptive parents … and on any other person concerned … ’
Having considered ([1964] 3 All ER at 491, [1965] 2 QB at 465) Re W (an infant), Pearson LJ stressed that in that case the medical evidence was that a change of care for the infant was not likely to do him any lasting harm of a serious character, and that Ormerod LJ in giving judgment had said ([1964] 3 All ER at 491, [1965] 2 QB at 466):
‘“Having regard to the medical report, it seems to me that it would be extremely difficult on that evidence to say that the mother’s conduct in refusing consent was unreasonable.”’
He also stressed that it was very important to know that the medical evidence in that case had not carried the matter any further than to show a risk which any reasonable mother might take, whereas in Re C it was his opinion that there was
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strong uncontradicted evidence from the doctor that there would probably be a serious effect on the child. Pearson LJ further stated ([1964] 3 All ER at 494, [1965] 2 QB at 469):
‘… in a case such as this, when the medical evidence was so strong, was uncontradicted and was accepted by the learned judge, this court could not properly interfere if his decision were based solely on the first [ie medical] ground.’
In the same case, Re C ([1964] 3 All ER at 494, [1965] 2 QB at 470, 471), Diplock LJ said:
‘It is clear law that the mere fact that the court is satisfied that the order would be for the welfare of the child in the materialistic sense is not sufficient to allow the court to dispense with consent … The relevant consideration in deciding whether a parent is withholding consent unreasonably is the conduct of the parent … of the child; but it is the conduct of the parent as a parent towards the child. This seems to me to be apparent from the various specific grounds on which parental consent can be dispensed with … namely [then he set out the section and continued:] Apart from incapacity, each of these specific grounds is an example of the parent having shown a callous or self-indulgent indifference to the welfare of the child, using “welfare” in the broad sense and not that of mere material advantages, a sense in which it is so often used.’
Diplock LJ then added a gloss on the statutory criteria which strikes me as most interesting, but, I add respectfully, one for which there is no apparent support in authority or from construction of the statute. He said ([1964] 3 All ER at 494, [1965] 2 QB at 471):
‘In considering whether the consent is being unreasonably withheld a similar test, in my view, has to be applied: Does the withholding of the consent by the parent show a callous or self-indulgent indifference to the welfare of the child? Let me hasten to say that, in this case, no question of callous indifference arises; it is one of self-indulgent indifference, in my view.’
For my own part I venture to think that whilst it may be very relevant and, indeed, necessary, to consider whether the natural parent has shown indifference to the welfare of the child, I find it difficult to accept that there is any scope for the application of the additional tests of callousness or of self-indulgence in judging any refusal of consent. The true test is that stated by Diplock LJ, I respectfully think, with perfect precision in these terms ([1964] 3 All ER at 495, [1965] 2 QB at 471):
‘The question, indeed, that should be put I would put in these terms: Would a reasonable parent regard a refusal to permit the adoption of the child as involving a serious risk of affecting the whole future happiness of the child?’
A comparable gloss on the Act was suggested by Sachs LJ in a very recent case which we are told is now the subject of an appeal to the House of Lords, Re W (an infant), in which another division of this court gave judgment on 13 May 1970. He is reported as having said (At 998, ante, [1970] 3 WLR at 184):
‘What is the nature and degree of conduct which may deprive a mother of her right to be a parent? By whose standards does one judge what is reasonable? That such conduct must be culpable is, of course, clear from the analysis of the relevant provisions of the 1950 Act by Jenkins LJ in Re K [[1952] 2 All ER at 884, 885, [1953] 1 QB at 129, 130], his reference to
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the need to establish something not far short of the highly culpable offences referred to in s 5(1)(a) of the 1958 Act, and the view expressed that the cases in which it can be held established must be “exceptional“. After a similar analysis Diplock LJ in Re C (an infant) [[1964] 3 All ER at 494, [1965] 2 QB at 471], used the phrase “callous or self-indulgent indifference” to define the test. In short the degree of culpability to be established is high—as one would expect when an order is sought that has penal aspects.’
Later in his judgment Sachs LJ said (At 1001, ante, [1970] 3 WLR at 187, 188):
‘That protection can be destroyed by clearly establishing the mother to be guilty of conduct culpable to quite a high degree … The following factors cannot be taken as showing culpable disregard by a mother of her child’s welfare … ’
I feel constrained diffidently to express my dissent from any suggestion that it is necessary to show that the refusal of a parent to consent to the adoption of his or her child involves any culpable conduct on the part of that parent in order to establish that such refusal was unreasonable; in my own quite definite opinion a parent may be entirely free from blame and in no respect culpable nor justifiably to be reproached in refusing consent to an adoption and yet it may in the judgment of the court be quite unreasonable to refuse such consent. It follows that I cannot associate myself with the observations of Cross LJ in that case where he is reported as having said (At 1004, ante, [1970] 3 WLR at 191):
‘… all these considerations lead me to think that the section envisages a degree and standard of unreasonableness which although not amounting to positive misconduct with regard to the child does not fall far short of it … “shutting your eyes to a blameworthy degree to the very serious consequences which your refusal of consent will almost certainly entail for your child“.’
I do not myself think that the section either imposes or contemplates the existence of a duty owed to the child to be reasonable nor can I at all clearly envisage the concept of a duty of reasonableness as distinct from a standard of conduct conforming with reasonableness. I do, of course, recognise that such impressions as to the underlying implications or connotations of statutory provisions are very much a matter of personal impression, and it is not my intention in the slightest degree to suggest that those impressions expressed by Diplock, Sachs or Cross LJJ are wrong, or that any comparable impression of my own is right, but merely to state that I am not myself able to adopt any of the criteria of culpability or carelessness as an appropriate guide to the solution of the extremely difficult question which the instant case poses, ie should this court hold that the learned county court judge after a careful and patient investigation was wrong in refusing to find that the refusal of consent by the mother was unreasonable? I have already indicated that I personally am convinced that it was unreasonable for her to have refused consent to the adoption of the child. My main reason for having formed this opinion is that I cannot accept it as possible that a woman in her position having had the experiences that she has had could reasonably have contemplated any future for the child consistent with his happiness and safety if she was determined, as she said that she was, to continue to associate intimately with the man with whom she was living at the time of the hearing, one B.
[Davies LJ said that he would not read the next part of Winn LJ’s judgment, because he recited the history of the case and that had been reasonably fully covered in his own judgment. He then proceeded to the last paragraph of Winn LJ’s judgment.] I cannot regard the mother’s refusal to consent as reasonable or consistent with any assessment that any reasonable mother could make of the implications for her infant child of that refusal, which would inevitably involve, if upheld,
Page 1022 of [1970] 3 All ER 1008
his remaining with her to share her future vicissitudes with B. I say nothing about the issue rather tentatively raised about the fitness of the male applicant to provide a contented household; it was not a real anxiety to anyone. Although I feel great sympathy for the mother and regard her frailty of judgment as a matter for sympathetic understanding and not as a misdemeanour, I feel constrained to say that the court ought to set aside her refusal and make an adoption order in favour of the applicants.
KARMINSKI LJ. I have had the advantage of reading the judgments of Davies and of Winn LJJ, and am in entire agreement with both their conclusions and reasons. But as this appeal is of great importance to the parties and also to the general public, I shall add a few observations of my own.
Some difficulty has been caused in earlier decisions under s 5(6) of the Adoption Act 1958 in ascertaining the meaning of the word ‘unreasonably’. For example in his judgment in Re W (an infant) Sachs LJ repeatedly used the word ‘culpability’ as being an essential element of unreasonableness. Cross LJ thought that the section envisages a degree of unreasonableness not falling far short of positive misconduct, and talked of shutting the parental eye to a blameworthy degree to the very serious circumstances to which she was exposing the child. In the earlier case, Re C (an infant) ([1964] 3 All ER 483 at 494, [1965] 2 QB 449 at 471), under this section, Diplock LJ suggested the test of callous or self-indulgent indifference to the welfare of the child. In the same case Pearson LJ referred ([1964] 3 All ER at 490, [1965] 2 QB at 464) to the very great emotional difficulties which a natural mother must face in coming to a decision on giving or refusing her consent to the adoption of her child, giving proper weight to the welfare of her child, as well as her own strong maternal feelings.
For myself I appreciate the very real emotional difficulties which a mother must face in deciding whether to keep the child herself, or to consent to his adoption and to part with the child for ever. It cannot be easy for a mother to consider the matter reasonably in the sense that that word is used in consent to some conveyancing or commercial transaction. But the Adoption Act 1958 used the word ‘unreasonably’, and a mother must try to be as reasonable as a mother can be when deciding to give up or to keep her own child.
With very real respect to eminent judges who have thought otherwise, I think that it is wrong to import into the section the test of culpability or misconduct or callous or self-indulgent indifference. In my view the question is whether on the facts of this particular case, the mother’s consent was unreasonably withheld. Davies and Winn LJJ have set out the mother’s history, and in particular that part which deals with her association with B. Even if it continues for some time, that association seems to me to be at least very unlikely to provide a stable background for the child. Nothing has been said by way of criticism of the characters or circumstances of the applicants, who on the evidence before us can at least provide a stable and comfortable background for the child.
I agree that the refusal of the mother should be set aside and that an adoption order should be made in favour of the would-be adopters.
Appeal allowed: adoption order made: direction to Registrar General under s 21(4) of the Adoption Act 1958. Leave to appeal to the House of Lords.
Solicitors: Joynson-Hicks & Co (for the applicants); Ellis, Wood, Bickersteth & Hazel (for the mother).
Henry Summerfield Esq Barrister.
Practice Direction
(Divorce: Infant: Arrangements for care and upbringing)
[1970] 3 All ER 1023
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
2 December 1970.
Divorce – Infant – Child of family – Arrangements for care and upbringing – Practice – Petitions filed before 1 January 1971 – Divorce or nullity proceedings or proceedings for judicial separation – Matrimonial Causes Rules 1968 (SI 1968 No 219), Form 2 (as substituted by SI 1970 No 1349) – Matrimonial Causes Act 1965, s 33 – Matrimonial Proceedings and Property Act 1970, s 17.
By s 17 of the Matrimonial Proceedings and Property Act 1970a the court shall not make absolute a decree of divorce or nullity of marriage or make a decree of judicial separation unless the court, by order, has declared that it is satisfied—
(a) that for the purposes of the section there are no children of the family to whom the section applies; or
(b) that the only children who are or may be children of the family to whom the section applies are the children named in the order and that (i) arrangements for the welfare of every child so named have been made and are satisfactory or are the best that can be devised in the circumstances; or (ii) it is impracticable for the party or parties appearing before the court to make any such arrangements; or
(c) that there are circumstances making it desirable that the decree should be made absolute or should be made, as the case may be, without delay notwithstanding that there are or may be children of the family to whom the section applies and that the court is unable to make a declaration in accordance with para (b) above.
Section 17 comes into operation on 1 January 1971 (See s 43(2) of the 1970 Act) and will apply to petitions filed before that date in which no decree nisi, or, in the case of judicial separation, no decree, has been pronounced before that date, and s 33b of the Matrimonial Causes Act 1965 will not apply to such cases.
The information concerning children in these petitions will however be based on the function of the court under s 33 of the Act of 1965 and in some cases this information will be insufficient for the purposes of s 17. In addition to the children to whom s 33 has hitherto applied s 17 is concerned with minor children over the age of 16 who are receiving instruction at an educational establishment or undergoing training for a trade, profession or vocation and with children, whether of one party or of neither party (apart from children who have been boarded-out with the parties by a local authority or voluntary organisation) who have been treated by both parties as children of their family.
In respect of a petition filed before 1 January 1971 there should be lodged at the hearing on or after 1 January 1971 a certificate by the petitioner, or by the respondent if the cause is proceeding on the answer, or by the solicitor for such party, certifying whether or not there are any children of the description to which s 17 applies but to which s 33 did not apply and, if there are any such children, a statement in the form of paras (4) to (7) inclusive of form 2 (General Form of Petition) in the Matrimonial Causes (Amendment No 3) Rules 1070c.
Direction issued by the President with the concurrence of the Lord Chancellor.
D A Newton, Registrar
Practice Direction
(Divorce: Ancillary and alternative relief)
[1970] 3 All ER 1024
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
30 November 1970.
Marriage – Declaration as to matrimonial status of any person – Jurisdiction – Commencement of proceedings in Divorce Registry – Proceedings in London – RSC Ord 112.
Divorce – Ancillary and alternative relief – Jurisdiction – Competence of divorce county court – County Courts Act 1959, s 74.
It has been observed that petitions claiming relief not covered by the definition of matrimonial cause’ in s 10(1)a of the Matrimonial Causes Act 1967 have from time to time been commenced in district registries of the High Court and in divorce county courts.
Under RSC Ord 112, every petition in which, apart from costs, the only relief sought is a declaration with respect to the matrimonial status of any person must be assigned to the Probate Division and must be begun in the Divorce Registry. Unless otherwise directed by a judge, all proceedings on any such petition must take place in London. Petitions claiming a bare declaration may, therefore, not be commenced in a county court or district registry.
Since the assignment of jurisdiction in divorce and nullity to divorce county courts it has been incorrect to pray in the same petition for a declaration as to the validity of a purported divorce and in the alternative for dissolution of the marriage. Though the latter relief is within the competence of a divorce county court, the former is not. A careful distinction must be drawn between these cases and those in which the petitioner seeks a declaration ancillary to the main relief claimed—eg where a declaration is sought as to the validity of the marriage or the invalidity of divorce as a necessary preliminary to consideration of a prayer for divorce or nullity. This type of petition is within the competence of a divorce county court (see County Courts Act 1959, s 74b).
Direction issued by the President with the concurrence of the Lord Chancellor.
D A Newton, Registrar
Re Priestley’s Will Trusts
Hambros Bank Executor & Trustee Co Ltd v Rabagliati and others
[1970] 3 All ER 1025
Categories: SUCCESSION; Wills: TRUSTS
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK V-C
Hearing Date(s): 13, 14 JULY 1970
Power of appointment – Exercise – General power – Power to appoint ‘in such manner … expressly referring to this power as though it were a special power’ – Whether a disposition ‘including any property over which I may have any general power of appointment’ a valid appointment.
The testator by cl 11 of his will conferred a general power of appointment on his wife in the following terms: ‘My Trustees … shall stand possessed of the residue of my Wife’s share … IN TRUST for such person or persons for such purposes and in such manner in all respects as my Wife shall by Will or Codicil expressly referring to this power as though it were a special power appoint’. After his death the testator’s wife made her will which contained a residuary gift of her real and personal estate: ‘… (including any property over which I may have any general power of appointment exercisable by Will) not hereby or by any Codicil hereto otherwise specifically disposed of unto my Trustees UPON TRUST … ' On a summons to determine whether the testator’s wife had effectively exercised the general power of appointment contained in cl 11 of the testator’s will,
Held – The words in cl 11 of the testator’s will ‘as though it were a special power’ meant that the words exercising the power given by the testator’s will must refer to the power with at least such a degree of precision as would be required if the power were a special power. The words in the will of the testator’s wife ‘any general power of appointment’ were not a sufficient reference to the power given by the testator’s will as to show an intention to exercise that power as though it were a special power (see p 1032 g and p 1033 d, post).
Re Ackerley [1911–13] All ER Rep 183 and Re Knight (decd) [1957] 2 All ER 252 applied.
Re Rolt [1908] WN 76 and Re Lane [1908] 2 Ch 581 doubted.
Notes
For exercise of special power of appointment by will, see 30 Halsbury’s Laws (3rd Edn) 252–262, paras 476–489, and for cases on the subject, see 37 Digest (Repl) 315–321, 634–678.
Cases referred to in judgment
Ackerley, Re, Chapman v Andrew [1913] 1 Ch 510, [1911–13] All ER Rep 183, 82 LJCh 260, 108 LT 712, 37 Digest (Repl) 316, 640.
Hayes, Re, Turnbull v Hayes [1901] 2 Ch 529, 70 LJCh 770, 85 LT 85, 37 Digest (Repl) 283, 384.
Knight (decd), Re, Re Wynn (decd), Midland Bank Executor and Trustee Co Ltd v Parker [1957] 2 All ER 252, [1957] Ch 441, [1957] 2 WLR 987, 37 Digest (Repl) 316, 641.
Lane, Re, Belli v Lane [1908] 2 Ch 581, 77 LJCh 774, 99 LT 693, 37 Digest (Repl) 305, 551.
Phillips v Cayley (1889) 43 Ch D 222, 59 LJCh 177, 62 LT 86, 37 Digest (Repl) 305, 548.
Rolt, Re, Rolt v Burdett [1908] WN 76, 37 Digest (Repl) 305, 550.
Teape’s Trusts, Re (1873) LR 16 Eq 442, [1861–73] All ER Rep 678, 43 LJCh 87, 28 LT 799, 37 Digest (Repl) 312, 617.
Page 1026 of [1970] 3 All ER 1025
Waterhouse, Re, Waterhouse v Ryley (1907) 77 LJCh 30, 98 LT 30, 37 Digest (Repl) 305, 549.
Weston’s Settlement, Re, Neeves v Weston [1906] 2 Ch 620, [1904–07] All ER Rep 174, 76 LJCh 54, 95 LT 581, 37 Digest (Repl) 312, 615.
Case also cited
Campbell’s Trustees v Adamson 1936 SC (HL) 31.
Adjourned summons
By an originating summons dated 26 November 1969 the plaintiff, Hambros Bank Executor & Trustee Co Ltd, a trustee and executor of the wills of Sir Joseph Child Priestley KC (‘the testator’) and Lady Annette Maud Warner Priestley, sought to determine whether a general power of appointment conferred by the will of the testator on Lady Priestley was effectually exercised by certain words in her will. The facts are set out in the judgment.
R Cozens-Hardy Horne for the plaintiff.
E I Goulding QC and J B Morcom for the first defendants.
S W Templeman QC and J D Waite for the second, third and fourth defendants.
Cur adv vult
14 July 1970. The following judgment was delivered.
PENNYCUICK V-C. This summons raises a question whether a general power of appointment conferred by the will of the testator on his widow, Lady Priestley, was effectually exercised by certain words in the will of Lady Priestley. In order that the wills of the testator and Lady Priestley respectively may be intelligible, it is necessary first to state certain matters of pedigree and date. The testator and Lady Priestley had two children: a son, Douglas Priestley, and a daughter, Monica, who was married first to a Mr Rabagliati and subsequently remarried twice. By her first marriage she had a daughter, Monica Loretta Rabagliati. That is the whole of the family of the testator and Lady Priestley. The testator had a sister, Mrs Janet Pontifex, who had three sons and one daughter.
The testator made his will on 20 October 1938. At that date both children, ie Douglas and Monica, were alive. There was also living the only daughter of Monica, namely Monica Loretta Rabagliati, to whom, for clarity, I will henceforth refer as Loretta. At that date Loretta was 20 years old. Douglas died on 13 January 1941 without issue. The testator died on 9 June 1941. Lady Priestley made her will on 11 February 1942. At the date of her will the daughter, Monica, and also the granddaughter, Loretta, were living. Monica died on 27 January 1946. Lady Priestley died on 18 July 1946. Loretta is still alive, and she has never had, and cannot now have, any child.
I turn now to the two wills. The will of the testator is a very lengthy document. I must summarise certain of its provisions although the question now before me turns ultimately on a few words in the residuary trust. By cl 1 he appointed Hambros Bank Executor & Trustee Co Ltd and Lady Priestley as executors and trustees. By cl 4 he constituted a residuary estate. By cl 5 he directed his trustees to stand possessed of two twelfths parts of his residuary estate called ‘My Son’s Share’ on settlement trusts for the son, Douglas, with, under cl 6, an accruer in default to his (the testator’s) wife’s share. It will be remembered that Douglas, in fact, predeceased him without having a child. By cl 7 he directed his trustees to stand possessed of two other twelfth parts of his residuary estate called ‘My Daughter’s Share’ on trust to pay the income to his daughter, Monica, during her life, and after her death to stand possessed of the same in trust. In the event Loretta became entitled to the share as the only child of Monica. Then there was a proviso settling any share to which Loretta might become entitled on the trusts of ‘My Grandchild’s First Share’. Clause
Page 1027 of [1970] 3 All ER 1025
8 contains a default accruer to ‘my Wife’s Share’. By cl 9 he directed his trustees to stand possessed of two other twelfth parts of his residuary estate called ‘my Grandchild’s First Share’ on certain trusts for Loretta during her life, with a reversion to Loretta’s children; there is power for Loretta to appoint an annual sum not exceeding £350 to a surviving husband. In cl 10 once again there is a default accruer to ‘my Wife’s share’.
By cl 11 he directs his trustees to stand possessed of the remaining six twelfth parts of his residuary estate called ‘my Wife’s Share’ on trust to pay the income thereof to his wife during her life and after her death to raise out of her share a sum described as therein mentioned called ‘my Grandchild’s Second Share’ on the same trusts as his grandchild’s first share. Then come the vital words:
‘… and shall stand possessed of the residue of my Wife’s Share … IN TRUST for such person or persons for such purposes and in such manner in all respects as my Wife shall by Will or Codicil expressly referring to this power as though it were a special power appoint … ’
Then there follow trusts subject to and in default of such appointment. These are to raise a sum of £5,000 and to stand possessed of the ultimate residue of ‘my Wife’s Share’ on the trusts next thereinafter declared.
Clause 12 contains a further default trust, once again ‘for such person or persons for such purposes and in such manner as my wife shall by Will or Codicil expressly referring to this power as though it were a special power appoint’ and in default of and subject to any such appointment in trust to divide the same equally between such of ‘my Son’s Share my Daughter’s Share and my Grandchild’s First Share’ the trusts whereof shall still be subsisting. After a proviso, which I need not read, cl 13 directs that if the trusts of all ‘my Son’s Share my Daughter’s Share and my Grandchild’s First Share’ should fail or determine the trustees shall stand possessed of the residuary estate in trust for such of the four children, who are named, of his sister, Janet Pontifex, as shall be living at the death of the survivor of himself and his wife and if more than one in equal shares.
As I have said, the testator died on 9 June 1941, and some nine months thereafter Lady Priestley made her will. She appointed Hambros Bank Executor and Trustee Co Ltd and Loretta to be her executors and trustees. Then cl 5 (i) contains a residuary gift in these terms:
‘I GIVE DEVISE AND BEQUEATH all my real and personal estate (including any property over which I may have any general power of appointment exercisable by Will) not hereby or by any Codicil hereto otherwise specifically disposed of unto my Trustees UPON TRUST … ’
for conversion and so forth. Then she declares trusts of the trust fund resulting from the conversion. Clause 5 then provides:
‘(iv) MY TRUSTEES shall hold the income of the Trust Fund for Loretta during her life upon the protective trusts declared by Section 33 of the Trustee Act 1925 …
‘(v) LORETTA may by Will or Codicil appoint to or for the benefit of any Husband who may survive her an interest for his life or any less period in the whole or any part of the income of the Trust Fund …
‘(vi) [There is a trust for the issue of Loretta as she may appoint.] …
‘(viii) [subject to the foregoing trusts] … . Loretta shall also be entitled to appoint the Trust Fund by her Will or any Codicil thereto to any persons and in any manner which she shall think fit to the intent that she shall have a full and testamentary power of disposition over the Trust Fund …
‘(ix) IN the event of there being a total failure of all the foregoing trusts relating to the Trust Fund my Trustees shall hold the Trust Fund (subject as mentioned
Page 1028 of [1970] 3 All ER 1025
in the last preceding Sub-Clause hereof) as to both capital and income In Trust for my said Daughter Monica … absolutely PROVIDED ALWAYS that if my said Daughter shall have died before the time of such total failure as aforesaid my Trustees shall hold the same IN TRUST for such person or persons as would have been entitled thereto under part IV of the Administration of Estates Act 1925 at the death of my said Daughter had she died possessed thereof intestate and without having been married such persons if more than one to take in the shares and manner in which they would have taken under the said Part of the said Act.’
As I have said, Lady Priestley died on 19 July 1946 having been predeceased by Monica. Her grand-daughter, Loretta, is still living. She has never married and now can never have a child. Accordingly, on her death, all the trusts contained in the will of the testator for Monica and Loretta and their children and issue must fail. The only trust that can be outstanding on her death will be the one in favour of her surviving husband should she marry and exercise her power to appoint an annuity to him. In those circumstances, the question has arisen whether Lady Priestley, by cl 5 of her will, effectually exercised the general power of appointment contained in cl 11 of the will of the testator. I need not refer separately to the identical general power contained in cl 12 of the will of the testator.
The present summons has been taken out by Hambros Bank Executor & Trustee Co Ltd as the sole surviving trustee of the testator’s will and one of the trustees of the will of Lady Priestley. The other trustee is Loretta. The defendants are: first, Loretta, and second, William Lionel Pontifex, Grace Ella Mary Duckworth, and Claud Edmund Chambers Pontifex, they being the three surviving children of the testator’s sister, Janet Pontifex. The fourth child died before Lady Priestley.
It will be remembered that the general power contained in cl 11 of the testator’s will is expressed in these words:
‘IN TRUST for such person or persons for such purposes and in such manner in all respects as my Wife shall by Will or Codicil expressly referring to this power as though it were a special power appoint … ’
Apart from authority, I should myself feel no doubt that the words ‘expressly referring to this power’, on their natural meaning, require that the provision in the will of Lady Priestley, in order to constitute a valid exercise of the power, should expressly refer to the power, ie this particular power. That is, it seems to me, what the words say. I should not have thought that it was sufficient that Lady Priestley should refer to ‘any’ power. On this point, however, there is authority, which I feel bound to follow, to the contrary. The authority consists of two cases decided in 1908. I should perhaps mention by way of preface to those two cases that in Re Waterhouse, Waterhouse v Ryley, decided in 1907, the Court of Appeal had to construe a general power containing this proviso: ‘Provided … that no will of such survivor should be deemed an exercise of the power … unless it expressly purported to exercise such power.' That is quite a different point.
I now come to the two cases decided in 1908. The first is Re Rolt, Rolt v Burdett. I must read the report.
‘Sir John Rolt, who died in 1871, by a codicil to his will, directed that, in the events which happened a sum of 1,500l. should be held in trust for such person or persons and for such purposes as his daughter Sarah should by any will or codicil “expressly referring to the present power” appoint. Sarah Rolt, by her will, after appointing executors and bequeathing certain legacies, proceeded as follows: “All the rest residue and remainder of my real and personal estate
Page 1029 of [1970] 3 All ER 1025
not hereby or by any codicil or otherwise specifically disposed of and which I can dispose of by will in manner I think proper either as beneficially entitled thereto or under any general power I bequeath” to the persons thereinmentioned. The present summons was taken out for the determination of the question whether the power of appointment given by the codicil of Sir J. Rolt had been validly exercised by the will of Sarah Rolt …
‘WARRINGTON J. said that the question was whether the will of the donee of the power “expressly” referred to the power. The contest was between the person entitled under Sarah’s will and the persons taking under Sir John Rolt’s will in default of appointment. It was said by the latter that there was no “express” reference in Sarah’s will to the power contained in Sir John Rolt’s codicil. That codicil did not say that the donee of the power must “specifically” refer to the power, all it said was that there must be an “express” reference. In his judgment “express” was distinguished from “implied” and was intended to exclude an exercise which could only be implied by virtue of sect. 27 of the Wills Act, 1837, or in some other way. It would be going too far to say that no will could be an exercise of the power unless it “specifically” referred to the power; the very use of that word “specifically” showed that it was necessary to go outside the words of the will to express one’s meaning. In his opinion there was an “express” reference to the power. The donee of the power first gave all her estate, and then specified two modes in which she thought she had power to dispose of it—either as being beneficially entitled or under any power she might possess, that was, any power which gave her the power to select the objects of the gift and the mode in which the property should be enjoyed. If the donee had possessed several powers of appointment—although that was an aspect of the case to which no great importance was to be attached—they would have been referred to in the reference which she made to any power which she possessed. The power had, therefore, been validly exercised.’
I confess I do not find that reasoning at all satisfying. I should not have thought it was sufficient to distinguish an express reference from an implied reference. What is required is an express reference to the ‘present power’, ie I should have thought, the particular power.
The second case in 1908 is Re Lane, Belli v Lane and I will read the headnote:
‘A fund was settled in trust for such persons as the settlor should by will “expressly referring to this power” appoint. By her will the settlor gave and devised the residue of her estate, both real and personal, of which she should die possessed or entitled to “and over which I shall have any power of disposition by will” to certain beneficiaries:—Held, that this was a sufficient reference to execute the power. Re Waterhouse and Re Rolt applied. Phillips v. Cayley and Re Teape’s Trusts distinguished.’
Swinfen Eady J said ([1908] 2 Ch at 585): ‘In these circumstances I determine that the will is a valid exercise of the power, and the nine fourteenths devolve according to the will.’
It may be that in this, or some future case, a higher court will think it right to reconsider those cases. So far as I am concerned, in this court I am bound to follow them. If the provision in cl 11 of the testator’s will had merely contained the words: ‘expressly referring to this power’, and had not gone on to use the words: ‘as though it were a special power’, I should feel bound, contrary to my own inclination, to hold
Page 1030 of [1970] 3 All ER 1025
that that power was validly exercised by cl 5 of the will of Lady Priestley. However, in the present case cl 5 does go on to include those important words: ‘as though it were a special power’ and effect must be given to those words. The words: ‘as though it were a special power’ must mean that the express reference to the power must be of such a kind as would be required for the valid exercise of a special power. In other words, the words exercising the power must refer to the power with at least such degree of precision as would be requisite if the power were a special power. One must then consider what degree of precision is requisite for the effective exercise of a special power.
The general principle is laid down in Re Ackerley, Chapman v Andrew ([1913] 1 Ch 510 at 514, 515, [1911–13] All ER Rep 183 at 185), where Sargant J said:
‘It is often said that in order to exercise a special power there must be either (1.) a reference to the power, or (2.) a reference to the property subject to the power, or (3.) an intention otherwise expressed in the will to exercise the power. (See Theobald on Willsa and Re Weston’s Settlement, Neeves v Weston [[1906] 2 Ch 620 at 624, [1904–07] All ER Rep 174 at 176].) This is no doubt a good practical way of stating the rule. But when more closely examined the first two alternatives are seen to be in reality only particular examples of the rule embodied in the third alternative, as, indeed, is implied in the use in that alternative of the word “otherwise“. And accordingly I should prefer to state the rule thus, namely, that in order to exercise a special power there must be a sufficient expression or indication of intention in the will or other instrument alleged to exercise it; and that either a reference to the power or a reference to the property subject to the power constitutes in general a sufficient indication for the purpose. I say “in general” because, for instance, where, as here, two powers exist with reference to the same property, it might well be that a reference to the property would not indicate any intention to exercise more than one of the powers.’
The principle with reference to the exercise of a special power was further stated by the Court of Appeal in Re Knight (decd), Re Wynn (decd), Midland Bank Executor and Trustee Co Ltd v Parker. In that case the Court of Appeal ultimately applied the broad principle laid down above. They did, however, in certain passages of their judgment, make an important exposition as to that principle. The headnote is as follows ([1957] Ch at 441):
‘A testatrix gave her residuary estate on trust for sale and directed her trustees to stand possessed of the residue of the proceeds after payment of expenses on trust for a daughter and for the children of a deceased son and a daughter in specified shares. The residuary estate was expressed as “including any property over which I may have any power of disposition at the date of my death“. Under the terms of the will of the testatrix’s father she had a special power of appointment of a share of the residue of her father’s estate amongst a class of objects which included all the persons who were beneficially entitled to her own residuary estate. The class of objects did not include her trustees:—Held, that the intention to exercise a special power must be gathered from the whole will; and that the words used by the testatrix were not, in the context of her will, apt to exercise the special power of appointment conferred on her by her father’s will. Re Hayes, Turnbull v Hayes applied. Semble, that notwithstanding
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section 27 of the Wills Act, 1837, the terms of a general power may be such that effective exercise requires express reference to the power and, therefore, a decision that a reference to “any power of disposition by will” does not, in a particular context, operate to exercise a special power does not necessarily make the reference meaningless and otiose … ’
I will refer to the judgment of the court given by Lord Evershed MR ([1957] 2 All ER at 256, 257, [1957] Ch at 447–450):
‘But since (as we were informed) Mrs. Wynn’s will was prepared by a solicitor, we may legitimately observe that the choice of the formula ”… including any property over which I may have a power of disposition at the date of my death” cannot fairly or easily be attributed to a skilled draftsman who had been informed of the existence of the special power under Mr. Knight’s will, let alone of its terms and the fact of its having already been exercised—or indeed of any limited power … The question, then, is that which we have already stated—should the will of Mrs. Wynn be taken, on its true effect and interpretation, to have exercised her limited power of appointment under Mr. Knight’s will? … We feel, however, no hesitation in adopting the correctness of the interlocutory observation in that case of ROMER, L.J.b: “The intention to exercise a special power must be gathered from the whole will. The cases do not lay down any general principles … ” and the learned lord justice added his authority to the view, already mentioned, that the decided cases are not easily reconcilable … If, then, the question be one of “intention” (to borrow ROMER, L.J.’s phrase) “to be gathered from the whole will” of Mrs. Wynn, then the principle to be applied is that common to all questions of construction of wills; namely, to discern what is the intention which the testatrix has expressed by the words which she has used, construed in their context according to their ordinary and proper sense.’
Lord Evershed MR then referred to Re Weston’s Settlement and went on ([1957] 2 All ER at 257, [1957] Ch at 450):
‘But in a case like the present, where there is reference neither to the power nor to the property subject to the power, it may be said that the general formula does not carry the matter very far: for the question remains, what degree of precision or aptness is requisite to qualify as an expression of intention? What assumptions (if any) should be made as to the testatrix’ knowledge of the character, objects and incidents of the special power the exercise of which is in question?’
Then comes an important passage which I must read in full ([1957] 2 All ER at 258, [1957] Ch at 450–452):
‘We are not satisfied that—at any rate where the words to be construed include so general a formula as that contained in Mrs. Wynn’s will, namely, “any property over which I may have any power of disposition at the date of my death”—it is safe or appropriate to test the question by assuming that the testator was conscious or aware of the terms and incidents of the power which he had. At the other extreme, as it were, it is said that the words “any power of disposition” must be taken to mean, literally, what they say; so that the testator must be treated as expressing the intention to exercise every power in fact vested in him, however limited or remote, and regardless altogether of the nature and terms of the power; with the result that, by an application of the principle known as reddendo singula singulis, all administrative and other
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difficulties and contradictions will be got over and the will can take effect as an exercise of the special power in question if and to the extent that the benefits in the end of all conferred are, and the persons to whom they are given are found to be, within the scope and objects of the power.
‘In our judgment this extreme view, by giving literal effect to a few words, ignores altogether the context in which they appear and stretches to an inappropriate and illegitimate extent the convenience of the rule reddendo singula singulis. Moreover, if such be the proper method of construction, then the circumstance that the beneficiaries under the will of the suggested appointor are wholly or in part objects of the special power loses all significance from the point of view of interpretation. So in the present case counsel for the first five defendants conceded that some limitation must, as a matter of sensible interpretation in their context, be placed on the words “any power of disposition”; but he claimed that they should be construed as meaning “any powers which enable me to create the beneficial interests hereafter stated“.
‘In our judgment the problem in the present case, as a problem of discovering expressed intention, has to be solved by posing and answering the questions: “Having regard to the general form of the will and the context in which the vital words appear which are said to amount to an operation of the special power, did Mrs. Wynn intend to exercise, so far as she effectively could, any and every power that she might have? Or did she mean to exercise only such powers as were available and appropriate for making effective the dispositions in the will?” If such are the proper questions, then in our view, construing the will as a whole as best we can (and unembarrassed for the moment by any decided cases), we think that the answer is that Mrs. Wynn was not intending to exercise (to the extent she could effectively do so) every limited power that she might have: but meant only to exercise such powers as she might have at her death that would enable her to bring into, and make part of her general and disposable estate, for all the purposes of her will, property which was not, strictly speaking, her own; and that the words which she used were not sensibly apt to extend further. To put the matter in a sentence, we think that the words “any power of disposition” should in their context be taken to mean “any relevant power of disposition“.’
The passages which I have read make it clear that in order that any given words in an instrument executed by the donee of a special power should be construed as referring to that power, it must appear from the terms of the instrument, including the disposition made in exercise of whatever power the donee purports to exercise, that the donee did intend to exercise the power when she used the given words. Further, in Re Knight, it was specifically held that a mere reference to any power is not of itself necessarily sufficient.
I must now turn back to the will of Lady Priestley. The question is whether cl 5 of the will of Lady Priestley contains any expression or indication of intention such as would be sufficient for the exercise of the power conferred by cl 11 of the testator’s will if that were a special power. It will be borne in mind that, at the date when Lady Priestley made her will, the testator had quite recently died, and Lady Priestley was herself a trustee of his will. The daughter, Monica, was still alive, as was the granddaughter, Loretta. The latter was a young woman who, in the ordinary course of events was likely to marry and have children. Under the will of the testator, his residuary estate was divided into a number of shares. In the case of what he calls ‘my Daughter’s Share’, two life interests were outstanding, and after them there were reversionary interests for future children of Loretta. That stood in front of Lady Priestley’s general power. In the case of what he calls ‘my Grandchild’s First Share’ and also ‘my Grandchild’s Second Share’, there was outstanding
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a life interest in Loretta and also reversionary interests for any children she might have. That again stood in front of Lady Priestley’s general power.
That being the position, one would expect Lady Priestley, if she had the general power in mind, to have made some reference in exercising the power to the testator’s will, and then to have framed her own disposition under the power so as to fit in with the trusts of the testator’s will. In fact, she did nothing of the kind. In the first place she merely introduces the general power by the common expression ‘including any property over which I may have any general power of appointment exercisable by Will’ under the description of her personal estate—the word ‘any’, I think, is of much significance. In the second place she proceeds to deal with the subject-matter of her residuary gift as a single whole, giving first a life interest in the whole to Loretta, notwithstanding that Loretta already had a life interest in four twelfths of the whole, as to two twelfths in reversion on Monica’s life interest, and as to two twelfths immediately in possession. That is a very odd form of disposition because obviously these four twelfth shares could not fall within the ambit of the power until the death of Loretta. Thus the terms of the disposition made by Lady Priestley of her residuary estate are not appropriate as an exercise of the power bearing in mind the terms of the testator’s will. The inference seems to me inescapable that, when she made her will, Lady Priestley did not have in mind the power conferred on her by cl 11 of the testator’s will, and it follows, applying the standards appropriate to a special power as laid down in Re Ackerley and Re Knight that the words ‘any general power’ in cl 5 of the will of Lady Priestley are not such sufficient reference to the general power in the testator’s will as to show an intention on the part of Lady Priestley to exercise that power as though it were a special power.
In order to avoid misunderstanding, I should say that the terms of cl 5 of the will of Lady Priestley, although they are, as it seems to me, inappropriate as an exercise of the power conferred by the testator’s will, are not actually inconsistent with the terms of the testator’s will, that is to say, they could be made to apply alike to the shares in which Loretta had a life interest and those in which she did not have a life interest. Reference was made to the fact that, under the will of the testator, Loretta had only power to appoint an annuity of £350 to a surviving husband. Under the will of Lady Priestley, she could appoint the whole of the income of the fund to a surviving husband. I found weight in that point.
I conclude, for the reasons I have sought to give, that when one takes into account the entire phrase ‘expressly referring to this power as though it were a special power’, cl 5 of Lady Priestley’s will does not comply with that requirement. As I have already said, my own view would be that it does not expressly apply to the general power at all but even assuming, as I must, that it does expressly refer to the power, I do not think that it refers to this power ‘as though it were a special power’.
Order accordingly.
Solicitors: Norton, Rose, Botterell & Roche (for the plaintiff); Darley, Cumberland & Co (for the first defendant); Collyer-Bristow & Co agents for Buss, Stone & Co, Tunbridge Wells (for the second, third and fourth defendants).
Richard J Soper Esq Barrister.
McKenzie v McKenzie
[1970] 3 All ER 1034
Categories: CIVIL PROCEDURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, SACHS AND KARMINSKI LJJ
Hearing Date(s): 11, 12 JUNE 1970
Practice – Trial – Party acting in person – Right to assistance – Right of friend to assist by attendance, note-taking and advice.
Practice – Trial – Party acting in person – Right to assistance – Refusal of right – Effect of refusal.
Any person, whether he be a professional man or not, may attend a trial as a friend of either party, may take notes, and may quietly make suggestions and give advice to that party (see p 1036 a and d, p 1038 j, and p 1039 j, post).
Dictum of Lord Tenterden CJ in Collier v Hicks (1831) 2 B & Ad at 669 approved. Tucker v Collinson (1886) The Times, 11 February distinguished.
Per Sachs LJ. Where in such circumstances a person is wrongly excluded from the proceedings, the proceedings are not a nullity, but the onus is on the opposite party to show that the error did not cause prejudice (see p 1039 c, post).
Notes
For trial of an action, see 30 Halsbury’s Laws (3rd Edn) 416, para 784, and for admission of public thereto, see 9 ibid 345, 346, para 813.
Cases referred to in judgments
Collier v Hicks (1831) 2 B & Ad 663, 9 LJOSMC 138, 109 ER 1290, 3 Digest (Repl) 356, 48.
Tucker v Collinson (1886) 16 QBD 562, 55 LJQB 224, 54 LT 263, The Times, 11 February, 50 Digest (Repl) 89, 728.
Appeal
The husband, Leveine McKenzie, appealed against so much of the decision of Lloyd-Jones J on 27 June 1969 as dismissed the allegation in the husband’s supplemental petition for divorce that the wife, Maizie McKenzie, had committed adultery with the co-respondent, Joseph Graham, refused the husband a decree nisi, and granted the wife a decree nisi on the ground of the husband’s cruelty. There was no appeal against the dismissal of the husband’s petition alleging cruelty, nor against the finding, on the wife’s answer, that the husband had treated her with cruelty. The facts are set out in the judgment of Davies LJ.
T Ian Payne for the husband.
A D F Wilcken for the wife.
12 June 1970. The following judgments were delivered.
DAVIES LJ. This is a somewhat unusual case. It is an appeal from a judgment of Lloyd-Jones J given on 27 June 1969, whereby he dismissed the prayer in a petition brought by the husband on the ground of cruelty and adultery—the adultery charged being contained, as I shall explain in a moment, in a supplemental petition—and on the wife’s answer granted her a decree on a charge of cruelty. She had also charged adultery, but the learned judge held that that adultery had been condoned. Counsel for the appellant husband does not challenge the judge’s finding of cruelty against the husband, and he does not seek to upset the judge’s dismissal of the charge of cruelty made against the wife.
It is necessary, I think, to give a few dates. These two parties are Jamaican in origin. They were married in that island in September 1954, and have had a large number of children who do not come into the story. The husband came here in 1956 and the wife in 1957, and they lived at all material times at a house in Camberwell Grove, south London. Apparently in about 1964 the marriage became unhappy; and
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in the summer of 1965 the wife made a complaint in the Lambeth magistrates’ court on the ground of persistent cruelty and wilful neglect to maintain. That was shortly followed by the issue of the husband’s petition, on the ground of cruelty, in August 1965. In September 1965—and this is of importance—the wife applied for an injunction to prevent the husband from molesting her and the children and to expel him from the matrimonial home. That was heard by Waller J in the long vacation as vacation judge, and the husband gave an undertaking to the learned judge not to molest his wife and children and to leave the matrimonial home, which he did.
It is not necessary to go in detail into the history of the pleadings but merely to record that there was an answer filed on 13 December 1965, alleging cruelty and adultery; and eventually, after the lapse of a number of years, on 13 February 1969, the husband filed a supplementary petition, as he called it, alleging adultery between his wife and a man called Graham. On 13 May 1966 the wife underwent a perfectly legal operation for hysterectomy in order to terminate her pregnancy; and one of the main points in the husband’s charge of adultery against his wife was, as he said, that he had given his undertaking in September 1965, and that he had not had any intercourse with his wife thereafter; there is no doubt that she was pregnant in the spring of 1966 and, on the advice of a psychiatrist, given on 13 April 1966, had this operation to terminate the pregnancy. I will come back to that in a moment.
The husband in earlier stages of the litigation had been legally aided but, for reasons that we do not know, his legal aid was terminated at the end of 1968. The trial started on 13 June 1969. The husband had made an application to Faulks J on 11 June for an adjournment, but that application was, no doubt quite properly, refused by the learned judge. The trial started two days later and lasted some ten days. The important point from which this appeal really arises is this. The husband no longer had legal aid; but at the actual commencement of the hearing there was sitting beside him a young man called Hanger who was an Australian barrister who was putting in some time in this country in the offices of Jeffrey Gordon & Co who had been the last of two or more firms of solicitors who had been acting for the husband previously in the litigation. Mr Hanger was there voluntarily in order to assist the husband in conducting his case. No doubt Mr Hanger’s assistance would have been of great value to the husband in the hearing of this case, which was complicated and lasted some ten days or so. There was a very long history, and it was a difficult case for a man with an untutored mind to conduct. In addition to having no effective knowledge of legal affairs, there was a good deal of difficulty in communication and in understanding these parties. As the judge said:
‘… this was quite a difficult case, quite apart from the difficulties of communication which are inevitable because of the rapidity and the sometimes inaudible way in which the evidence was given on both sides, if more on the [wife’s] side. But quite apart from the difficulties of communication of that kind (and I am using a phrase which has now become hallowed) there were features in the case that were disturbing and disconcerting.’
That is another point.
There was the husband to conduct his case in person, and there was Mr Hanger to help him in the manner I have described. The judge referred to that:
‘I ought to have said that on the first day [the husband] appeared with a young man who said that he represented one of the firms of solicitors who had once acted for the [husband] and was obviously concerned to prompt the [husband]. I then discovered that that firm was no longer on the record and I hope and believe I rightly said that I did not think [Mr Hanger] could take any part in the proceedings and he did not reappear.’
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Counsel for the husband has submitted to this court, in my opinion quite rightly, that the learned judge was wrong in taking that course. Mr Hanger was not there to take part in the proceedings in any sort of way. He was merely there to prompt and to make suggestions to the husband in the conduct of his case, the calling of his witnesses and, perhaps more importantly, on the very critical and difficult questions of fact in this case, to assist him by making suggestions as to the cross-examination of the wife and her witnesses.
Our attention was called by counsel for the husband to some words of Lord Tenterden CJ used many years ago in Collier v Hicks. I need not go in any detail into the question of fact which arose in that case. Very shortly, it was that somebody wished to appear before a magistrates’ court and he was turned out. An action of trespass was subsequently brought. In the course of giving the first judgment in that case, Lord Tenterden said ((1831) 2 B & Ad at 669):
‘Any person, whether he be a professional man or not, may attend as a friend of either party, may take notes, may quietly make suggestions, and give advice; but no one can demand to take part in the proceedings as an advocate, contrary to the regulations of the court as settled by the discretion of the justices.’
That was, although obiter, a statement by Lord Tenterden CJ that any person may attend as a friend and may take notes and make suggestions. No doubt the learned judge in the instant case had not that passage in mind, for otherwise no doubt he would have ruled differently from the manner in which he did. Cordery on Solicitorsa quotes those words of Lord Tenterden CJ and cites that case as an authority. It might be interesting to note, in case any further editions of that textbook are printed, that, by some extraordinary error, in the same note where Collier v Hicks appears there is a reference to a case called Collett v Dickinson, in The Times of 11 February 1886, which we have seen but which does not help in this case; but the important thing is that the name of the case in The Times newspaper in 1886 is not Collett v Dickinson but is Tucker v Collinson, which is perhaps a rather odd mistake to find in a textbook.
Counsel for the husband submitted, in my opinion rightly, that the judge ought not to have prevented Mr Hanger from assisting the husband in the way that he proposed to do; and, goes the submission, justice was not seen to be done in those circumstances.
The facts of the case were very unusual, and I will touch on them again in a moment. The judge had, and this court has, necessarily to consider them very carefully. I turn very shortly I hope, to the relevant facts. The husband left the house in September 1965. According to the wife, they met casually in February 1966, and she went for a ride in a van which the husband admittedly had at that time. She said, and the judge found—he accepted by and large her evidence throughout, and by and large rejected practically everything that the husband said throughout—that an act of intercourse took place between these parties in the van. That, of course, if it were true, as the judge found it was, would satisfactorily account for her pregnancy in April 1966. But the matter did not stop there, for the husband called a Mrs Martin, from the hospital which the wife had attended in April to have the hysterectomy operation to which I have referred, and she produced a record sheet. The record that Mrs Martin produced does not seem to have been the original record, but a photostat copy, and we have before us, I suppose, a photostat copy of a photostat copy. It is signed, we are told, by a Mr Hutchins, although I cannot read his signature, the consultant psychiatrist. It reads as follows:
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‘13.4.66. [The wife] has borne six children. Husband has left her and she is pregnant [and almost certainly the next three words are] by another man. She is depressed [I cannot read the next word] losing weight and sleeping badly. I am of the opinion that continuation of this pregnancy would be detrimental to her mental health. I would recommend termination of pregnancy and subsequent sterilisation.’
There are two other notes on the next sheet, finishing with one on 13 May 1966: “I agree Hysterectomy and Sterilisation’. The husband says that that document shows that the wife told the psychiatrist not only that the husband had left her but that she was pregnant by another man. The learned judge, despite that, said that he was not really satisfied that the words were ‘by another man’; and of course he had no knowledge of the provenance of the information which the psychiatrist noted in his record. It is perfectly true that there is nothing to show that the wife had told the psychiatrist that, or whether he got the information from possibly some other doctor, or a sister, or a nurse. We do not know. However, there was that document. The judge, as I say, was not satisfied with it at all. Counsel for the wife says that the husband had sufficient knowledge, or was sufficiently well advised, to procure the attendance of Mrs Martin to produce that record; and he could perfectly well, it is said, have procured the attendance of the psychiatrist to give direct evidence, and that was not done. Counsel for the wife says that quite obviously the husband was completely competent to take such steps as were necessary to obtain the evidence. That is the first main point on which counsel for the husband says that the husband was handicapped in being deprived of the assistance to which he was entitled.
The second point of which complaint is made is that the judge said that the direct evidence of adultery was wholly uncorroborated. That evidence was the evidence of the co-respondent, who went into the witness box and said categorically that he had committed adultery with the wife on a number of occasions, giving places where he alleged that the adultery had been committed. The learned judge correctly directed himself that, in the circumstances of the case, it would be unsafe to act on the evidence of the co-respondent unless it was corroborated; and the judge stated categorically that it was wholly uncorroborated. Counsel for the husband says that that again is wrong because there was some corroboration, for what it is worth, in the medical sheets to which I have just been referring. He also submitted that there was some corroboration in the husband’s own evidence of having followed his wife towards the co-respondent’s house on a particular occasion.
The only other point, I think, that was raised by counsel for the husband was the question of condonation. The learned judge, rather unusually, said that he could not make a finding of adultery against the husband because it had been condoned. I would not have thought myself that that was the right approach to the problem. He might very well have made a finding of adultery against the husband. From what he said I think that he was quite satisfied that the husband had committed adultery; but he could have said that he could not pronounce a decree on that ground because it had been condoned.
Be that as it may, the other question on condonation which was adumbrated by counsel for the husband but really, I think, finally abandoned, was this. It was suggested that if, as the wife said, she had had intercourse with the husband willingly in the van in February 1966, she must have condoned all the antecedent cruelty on which she was alleging that she should be given a decree. I do not agree; and I do not think that counsel for the husband really insists on that. If, as the judge found, there was this act of intercourse, it was one isolated act, and I do not think that there was any intention on either side to reinstate the other spouse. It seems to me that condonation goes out of this case.
Now what is to be done in the circumstances? The judge was in error in refusing to allow Mr Hanger to give his advice and assistance to the husband. There are very
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difficult questions of fact in this case. There is the question whether or not the co-respondent’s evidence was rightly rejected. There is the question as to the source of the information contained in the medical sheet. There is the question whether the wife ever said that she was pregnant by another man. There is the question of corroboration of the evidence of the co-respondent. The facts are very unusual; and, as counsel for the husband submitted—and he may very well be right—the findings in some respects are somewhat startling.
The case, as I confess, has caused me some anxiety. It has already taken this very long time in the court of first instance, and cost a great deal of money. One does not really see, save possibly on the question of maintenance, that anything is to be gained by further enquiry into this matter; but at the end of it all I have come to the conclusion that this decision on the husband’s charge of adultery, the dismissal of the husband’s charge of adultery made in his supplementary petition, ought not to stand, in the circumstances. Therefore this appeal should be allowed and a re-hearing should be directed, but a re-hearing only of the charge of adultery against the wife contained in the husband’s supplementary petition; and the case will have to be tried by a different judge. Lloyd-Jones J in the circumstances would not wish to retry the case.
I would allow the appeal accordingly.
SACHS LJ. On the first day of this lengthy trial an incident of a most unusual type occurred. The parties to the litigation come from Jamaica; they came respectively in 1956 and in 1957. From 1965 onwards this litigation between them pursued a course which cannot be described as one of prompt pursuit and which in fact resulted in voluminous pleadings. The result, in turn, was that there was, when the case came to be called on, a really large number of issues, and some of them were complex. Moreover, it was a case which, by the very nature of the origin of the litigants, was bound to result in difficulties of communication as between the parties, the witnesses, and the court. Those difficulties were, as Davies LJ has mentioned, referred to in the trial judge’s judgment as being ‘inevitable’. They were increased by what the judge described as ‘the rapidity and the sometimes inaudible way in which evidence was given on both sides’. The difficulties were thus not only inevitable but they did arise and they affected all concerned in court with the trial of this action.
Not least, those difficulties fell on the husband, who was in person and who had the always arduous task of conducting his own litigation, taking such notes as he could of what was happening, and giving evidence when that was his function. Not having legal aid at the moment when the cause was called on, he had however the advantage at that moment of having sitting beside him a Mr Hanger who had been deputed to help him by a firm of solicitors whom he had previously instructed. Mr Hanger happened to be someone who was qualified as a member of the Bar in Australia; obviously the assistance which he could give might well have proved valuable. On the first day of the trial, however, his position beside the husband attracted the attention of the trial judge, who asked him who he was and who then spoke to him in terms which he, Mr Hanger, not unnaturally took to be an intimation that he should desist from what he was doing. He went away, first to the back of the court and then out of the court.
Mr Hanger, however, had done nothing, so far as this court has been able to ascertain, other than sit quietly beside the husband and give him from time to time some quiet advice or prompting. In those circumstances, the husband was fully entitled to have that assistance, and Mr Hanger was fully entitled to give it. That was settled in 1831, when Lord Tenterden CJ saidb:
‘Any person, whether he be a professional man or not, may attend as a friend
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of either party, may take notes, may quietly make suggestions, and give advice … ’
That statement of the position has never been criticised since. In saying that I have in mind Tucker v Collinson. In that case a lady, stricken with court-dumbness when her appeal was called on, was not allowed to have the assistance of somebody who wished to help her; but that ruling turned on some very special provisions of the in forma pauperis procedure then in force; it had nothing whatsoever to do with a case like the present.
What in the circumstances is the result in the present case of the trial judge having fallen into error in sending Mr Hanger away? Counsel for the husband submitted that there had been such a denial of justice as to render the trial a nullity. His alternative point was that if it was not a nullity it was an irregularity or defect which it had to be shown had caused no prejudice to the husband. No cases have been cited to this court on the effect of an error of the type now under consideration; but for my part I would have no hesitation in rejecting the submission that the proceedings were a nullity. It does, however, seem to me that where such an error takes place the onus rests on the opposite party to show that it did not cause prejudice.
Turning to the particular facts of this case, it has been aptly pointed out that this was a lengthy trial, and that the longer the trial the greater is the need of a litigant in person for assistance. It has also been rightly pointed out that the trial of the issue of adultery had some most unusual facets. For instance, the co-respondent, cited in the supplemental petition, was called and gave evidence of adultery which was completely denied by the wife. There was, too, the note of 13 April 1966, by a consultant psychiatrist which prima facie indicated that the wife may well have confessed that she was pregnant by a man other than her husband. That note the learned trial judge treated as being almost a hieroglyphic and illegible, although it seems to me to bear only one possible construction; but anyway it was something that created a difficulty, a need for elucidation, and a need for advice to be given as to how to deal with the matter. It is not necessary to go into other potential causes of prejudice to the husband in a case like the present.
On the other hand I am fully aware that this particular litigant was one who was described by the learned trial judge as adroit, and nimble, and one able to try to turn matters to his advantage; that he was rated to be a remarkably intelligent and astute person; and that he was able to ‘think on his feet’ and (as the trial judge put it) to make any trick which he thought he could capture. I am also aware and give full credit to both the trial judge and counsel for having rendered every practicable assistance to the husband, endowing him, perhaps, with certain advantages that he would not have had if he had been represented by counsel. Nonetheless, at the end of the day one comes to this: as counsel for the husband aptly pointed out, all the assistance a litigant in person gets from a judge and from opposing counsel is not really the same thing as having skilled assistance at his elbow during the whole of a lengthy trial. In those circumstances it has not been shown that there was no prejudice to the husband on the adultery issue through lack of the assistance which he ought to have had. It is moreover always, to my mind, in the public interest that litigants should be seen to have all available aid on conducting cases in court surroundings, which must of their nature to them seem both difficult and strange. I too agree that in those circumstances there should be a new trial on the one issue to which Davies LJ has adverted.
KARMINSKI LJ. I agree. The effective dismissal by the trial judge of the help of Mr Hanger was in my view wrong, having regard to all the circumstances of the case. It was a heavy case, with grave issues of fact, and there were, as has been pointed out, certain language difficulties which made the judge’s task more difficult. Although
Page 1040 of [1970] 3 All ER 1034
the learned trial judge may have come to a correct decision on the facts of this case, I myself am not certain that he did, nor that he would have come to the same conclusion as he reached if Mr Hanger had been allowed to stay and help the husband.
I agree with the order proposed by my Lords and that the appeal should be allowed and a new hearing ordered accordingly.
Appeal allowed. Decree nisi rescinded. New trial on issue of wife’s adultery ordered.
Solicitors: Jeffrey Gordon & Co (for the husband); Hepburns (for the wife).
Henry Summerfield Esq Barrister.
Lee and another v Barry High Ltd
[1970] 3 All ER 1040
Categories: EMPLOYMENT; Contract of service, Redundancy
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 13 OCTOBER 1970
Employment – Period of continuous employment – Transfer of employee – Apprentice serving different masters – Apprenticeship deed providing for transfer to different employers – Apprenticeship treated as single apprenticeship notwithstanding transfer – Whether apprentice in continuous employment for purposes of redundancy payment – Contracts of Employment Act 1963, Sch 1, para 10(1) – Redundancy Payments Act 1965, ss 1(1) and 8(2).
In 1963 the apprentice L, who was then aged 16, entered into a deed of apprenticeship with M Ltd as his master for a period of five years. The deed provided that the apprentice might be transferred to another master to complete his apprenticeship under the deed but was in terms indicating that the apprenticeship was to be regarded as a single apprenticeship from start to finish. The apprentice attained the age of 18 in July 1965. In February 1966, his apprenticeship was transferred to C Ltd who became his master under the deed. In May 1967, the apprenticeship was transferred to the employers, with whom the apprentice stayed until July 1968 when the five years’ apprenticeship under the deed was completed; the employers certified that the deed of apprenticeship had been complied with. The apprentice then stayed on with the employers for a further two months in employment as a craftsman until on 20 September 1968, he was dismissed on the ground of redundancy. On the question whether the apprentice had been continuously employed for the requisite period within s 1(1)a of the Redundancy Payments Act 1965, so as to entitle him to redundancy payment.
Held – Section 8(2)b of the 1965 Act contained a comprehensive definition of ‘continuously employed’ and required the court to look at Sch 1 to the Contracts of Employment Act 1963 in determining what was continuous employment; by para 10(1)c of Sch 1 to the 1963 Act employment was continuous only when a man was employed by one employer throughout the requisite period (ie for two years after he had attained 18), but the different masters with whom the apprentice had served had to be treated as separate employers although, under the deed, the apprenticeship was to be treated as single and continuous; accordingly, the apprentice had not been continuously employed for the requisite period within s 1(1) of the 1965 Act, because since attaining 18 he had not been two years with any one employer, and he was therefore not entitled to redundancy payment (see p 1042 j to p 1043 c and d and p 1044 d and h, post).
Page 1041 of [1970] 3 All ER 1040
Notes
For entitlement to redundancy payments, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 808A.
For the Contracts of Employment Act 1963, Sch 1, para 10, see 12 Halsbury’s Statutes (3rd Edn) 214.
For the Redundancy Payments Act 1965, ss 1 and 8, see ibid 238, 245.
Appeal
This was an appeal by two apprentices, Christopher Lee and Trevor Arthur Utting, from the judgment of the Divisional Court of the Queen’s Bench Division (Lord Parker CJ, Ashworth and Donaldson JJ) given on 20 February 1970, and reported 1970 ITR 141 (sub nom Lee v Barry High Ltd, Utting v Barry High Ltd), dismissing the apprentices’ appeal from the decision of the Industrial Tribunal (chairman J Shaw Esq QC) dated 20 June 1969, and reported 1969 ITR 327, that they were not entitled to redundancy payment under the Redundancy Payments Act 1965. The facts are set out in the judgment of Lord Denning MR.
Peter Pain QC and P A W Merriton for the apprentices.
I Mitchell for the employers.
13 October 1970. The following judgments were delivered.
LORD DENNING MR. Christopher Lee and Trevor Utting were apprentices. Christopher Lee was born on 19 July 1947. In 1963, as soon as he was 16, he entered into a deed of apprenticeship with John Mowlem & Co Ltd as his master for five years. It is in the standard form of the National Joint Council for the Building Industry. It contemplates that circumstances may arise in which John Mowlem & Co Ltd might transfer their responsibilities as master to another master; and the apprentice would thereafter serve under the deed with a new masterd. That is what happened here. Christopher Lee was apprenticed to Mowlems as a carpenter and joiner. He was sent to work on a site near Letchworth in Hertfordshire. After two or three years Mowlems had no further work on that site for carpenters and joiners. But some sub-contractors, David Chaston Ltd, had work for him. So, as from 21 February 1966, an arrangement was made whereby David Chaston Ltd became the master and were substituted for Mowlems under the deed. A year later David Chaston Ltd went into voluntary liquidation. So Christopher Lee could not continue with them. The apprenticeship deed was then transferred to Barry High Ltd (‘the employers’), as from 1 May 1967. So again there was a change of master under the deed. Christopher Lee stayed on with the employers until his five years were up and he became 21. Then, on the day after his twenty-first birthday, the employers gave him a certificate that his deed of apprenticeship had been faithfully complied with and that during his apprenticeship he had attained the award of the City and Guilds of London Institute Craft Certificate examination in carpentry and joinery.
After completing his apprenticeship, Christopher Lee remained working on the site as a craftsman for the employers. Then two months later, on 20 September 1968, the employers dismissed him. They had no further work for him. They dismissed him for redundancy. The question is whether he is entitled to redundancy payment. If he is so entitled, it would only amount to £26 6s. Trevor Utting is in the same position. His entitlement would only amount to £33 15s 6d. So no great sums are involved; but the union, the Amalgamated Society of Woodworkers, has brought this case before the courts so as to ascertain the position of apprentices.
First of all, let me say at once that if the apprentices had been ordinary workmen employed by one employer after another, they would not get redundancy pay.
Page 1042 of [1970] 3 All ER 1040
In order to qualify, they would have to be at least two years with the same employer. Neither had been two years with either David Chaston Ltd or the employers. But counsel for the apprentices says that the deed of apprenticeship makes all the difference. He says that, by virtue of that deed, each apprentice was ‘continuously employed’ for the five years of his apprenticeship; and thus qualifies just the same as if he had been with the employers as master during all the five years. Section 1(1) of the Redundancy Payments Act 1965 provides:
‘Where on or after the appointed day an employee who has been continuously employed for the requisite period—(a) is dismissed by his employer by reason of redundancy, [he shall be entitled to redundancy payment].’
Counsel for the apprentices says that under the deed of apprenticeship, the apprentice was ‘continuously employed’. Then he turns to s 8(1), which provides:
‘For the purposes of section 1(1) of this Act the requisite period is the period of one hundred and four weeks ending with the relevant date [ie the date of dismissal], excluding any week which began before the employee attained the age of eighteen.’
That shows that the qualifying period of two years does not start until a man is 18. Counsel for the apprentices relies on the opening words, ‘For the purposes of section 1(1)’, which brings in, he says, the benefit of continuous employment and makes it applicable to the apprentice. But the employers point to s 8(2), which provides:
‘Subject to the preceding subsection, and to the following provisions of this section, the provisions of Schedule 1 to the Contracts of Employment Act 1963 … shall have effect for the purposes of this Part of this Act in determining whether an employee has been continuously employed for the requisite period.
The employers say that Sch 1 to the Contracts of Employment Act 1963 contains a definition of ‘continuous employment’ which is a complete code to show whether a man is continuously employed or not. So I turn to Sch 1. Paragraph 1(1) provides: ‘The employee’s period of employment shall be computed in weeks in accordance with this Schedule.' There follows a large number of provisions dealing with breaches in employment due to sickness, strikes, and so forth. Then para 10 deals with change of employer. Paragraph 10(1) provides: ‘Subject to this paragraph … the foregoing provisions of this Schedule relate only to employment by the one employer.' Stopping there, it shows that paras 1 to 9 relate only to employment with one employer. Then para 10(2), (3), (4) and (5) states what is to happen when there is a change of employer, as, for instance, when the employer sells his business to another, or when the employer dies, and so forth. Counsel for the apprentices had frankly to admit that none of those sub-paragraphs applies in this case. So he has to throw over Sch 1. He goes back to s 8(2) of the 1965 Act and says that it does not contain an exhaustive definition of ‘continuous employment’ because it starts with the words: ‘Subject to the preceding subsection’—sub-s (1) of s 8. Alternatively, he said even if Sch 1 to the 1963 Act does come in, it does not cover this case because para 1(1) of Sch 1 is inapplicable, as it deals only with the computation ‘in weeks’.
I have approached the argument of counsel for the apprentices with the greatest sympathy because it seems to me, as it did to the tribunal (1969 ITR 327), that Parliament did not have a case like this in mind. If it were possible on the true construction of the 1965 Act to find in favour of these two apprentices, I would gladly do so. But, after careful consideration, I fear that the words of the 1965 Act are too strong to admit of it. It seems to me plain that s 8(1) only defines what is the ‘requisite period’, namely, in this case, 104 weeks excluding any week before attaining the age of 18. Section 8(2) is ‘Subject to’ s 8(1), ie in regard to the requisite period, and the other proviso. But
Page 1043 of [1970] 3 All ER 1040
otherwise it is comprehensive. It is a definition which requires the court to look at Sch 1 of the 1963 Act in order to see what ‘continuous employment’ means. Looking at Sch 1 of the 1963 Act, it shows that employment is only continuous when a man is employed by the one employer all the way through the requisite period of two years, except for the special circumstances set out in para 10(2), (3), (4) and (5), where there is a transfer of the business, and so forth—none of which applies here.
Applying it here, the apprentices have not had one employer only. They have had three employers during their apprenticeship. Although the deed treats the three as the same master, nevertheless in law they are three separate employers: John Mowlem & Co up to 1966; David Chaston Ltd for the next 14 months to April 1967; and then, finally, the employers for the 14 months until the dismissal. The apprentice Christopher Lee became 18 on 19 July 1965. Since that time he has not been two years with any one employer. He has therefore not served ‘the requisite period’ for redundancy payment. If we were to stretch the interpretation of the 1965 Act so as to cover these apprentices, it would, I fear, cause difficulty in other cases. So I think that we must stand by the letter of the law here. All the more so because I am sure that the apprentices will have no difficulty in getting fresh employment. I would, therefore, dismiss this appeal.
FENTON ATKINSON LJ. I agree and only add a short judgment of my own in deference to the argument of counsel for the apprentices in this court.
By s 1(1) of the Redundancy Payments Act 1965 the right to redundancy payment depends on continuous employment for the requisite period. To find what is the requisite period and what is or is not for this purpose continuous employment one has to turn to s 8 of that Act which Lord Denning MR has already read. The section is headed ‘Continuous employment for requisite period’, and I agree with Lord Denning MR that clearly s 8(1) defines what is the requisite period. Section 8(2) in my judgment provides a definition of what is or is not continuous employment by reference to Sch 1 to the Contracts of Employment Act 1963, and it was the unanimous view both of the tribunal and of the Divisional Court that s 8(2) brings the apprentices up against an insurmountable obstacle, namely, para 10(1) of Sch 1 to the Contracts of Employment Act 1963, which says quite clearly that—‘the foregoing provisions of this Schedule relate only to employment by the one employer’. Faced with that difficulty, when the matter was before the Divisional Court (1970 ITR 141), junior counsel for the apprentices founded his argument on these lines: (this was his main point) that the effect of the substitution of successive masters in the deeds of apprenticeship was to make the subsequent masters, and, in particular, the employers, wholly liable for the performance of the masters’ obligations under the deed and in effect to be substituted as master from the very beginning. So the argument then was that in reality the employer should be regarded as the master right through. The Divisional Court had no hesitation in rejecting that argument. Lord Parker CJ described it as quite impossible (1970 ITR at 145); and counsel for the apprentices has not sought to resurrect it in this court. While he submits that there is on the facts continuous employment, he agrees that there has in the relevant period been employment under three different employers; and he took as his main point a point which apparently was taken by junior counsel for the apprentices below, but possibly with so little emphasis that Lord Parker CJ did not find it necessary to mention it in the course of his judgment. The submission is that, because s 8(2) commences with the words ‘Subject to the preceding subsection’—ie s 8(1)—sub-s (2) has no application in deciding whether there was continuous employment for the requisite period. I suspect that I do counsel for the apprentice’s argument considerably less than justice; but, as I understood it,
Page 1044 of [1970] 3 All ER 1040
he was contending that if there were something in the case which, apart from the statutory definition in s 8(2) of the 1965 Act, the court thinks is obviously continuous employment for the requisite period, then one never in fact gets to s 8(2) at all; and my difficulty in that argument is that I can find nothing whatever in s 8(1) which deals in any sort of way with what is or is not continuous employment; and the only reason I can see for the introduction of the words ‘Subject to the preceding subsection’ is to ensure that in computing the period of employment any week before the employee became 18 is excluded. For my part I cannot see how a court can attempt to see what is or is not continuous employment without reference to s 8(2) and Sch 1 to the 1963 Act. In his reply counsel for the apprentices possibly rather extended his original argument and contended that even if s 8(2) does apply, para 10(1) of Sch 1 to the 1963 Act does not operate to bar the apprentices’ right. I cannot accept that, because when one looks at the beginning of Sch 1, ‘Computation of Period of Employment’, one sees by para 1(1) ‘The employee’s period of employment shall be computed in weeks in accordance with this Schedule; and one finds in para 10(1) direct reference to all the foregoing provisions in Sch 1, including para 1(1), and providing that the employment must be by one employer. Like Lord Denning MR, and I think like the tribunal (1969 ITR 327), I reach with regret the conclusion that this appeal fails. In my view also the statutory provisions are plain and the apprentices here cannot get round them.
CAIRNS LJ. I agree. In one part of his argument counsel for the apprentices took us through the provisions in the deed of apprenticeship and drew attention to the fact that the deed contemplated that there might be a change of employment during the apprenticeship, but nevertheless was in such terms as to indicate that the apprenticeship was to be regarded as a single apprenticeship from start to finish. Then, since under the Redundancy Payments Act 1965, apprenticeship is within the meaning of employment in the Act, it was contended that if there is a continuous period of apprenticeship, it is a continuous period of employment for the purposes of the Act. In my view that argument will not hold water. No doubt from the point of view of the parties it was right to treat the period of apprenticeship—the whole five years—as being one continuous apprenticeship notwithstanding the change of employer during the period. But when one comes to construe the Act of Parliament, the meaning of ‘continuously employed’ is given by s 8(2). I cannot regard the words in the subsection as being words which merely enlarge some common law or common-sense interpretation of the expression ‘continuously employed’. I am satisfied that the subsection is so worded as to provide for the purposes of the Act the complete definition of what is meant by the words ‘continuously employed’. For the reasons given by my Lords I cannot construe the provisions of Sch 1 to the Contracts of Employment Act 1963, which is incorporated by reference in s 8(2) of the 1965 Act, in any other way than to provide that if there is a change of employer, there is not continuous employment unless one of the situations envisaged in para 10(2) to (5) of Sch 1 exists. I see no ground for saying that the opening words of s 8(2) have the effect of limiting the definition of ‘continuously employed’, except to the extent that it can be said to be a limitation of the definition, that continuous employment cannot be taken into account if it occurred before the age of 18.
For those reasons, in addition to those given by my Lords, I think the appeal fails.
Appeal dismissed.
Solicitors: John L Williams (for the apprentices); Kenneth Brown, Baker, Baker (for the employers).
Wendy Shockett Barrister.
R v Aston
R v Hadley
[1970] 3 All ER 1045
Categories: CRIMINAL; Criminal Law
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): MEGAW LJ AND CANTLEY AND JAMES JJ
Hearing Date(s): 12, 27 OCTOBER 1970
Criminal law – Obtaining pecuniary advantage by deception – Deception – Theft Act 1968, s 16(2) (a).
The deception for the purposes of s 16(2)(a)a of the Theft Act 1968 must at least normally be a deception which operates on the mind of the person deceived so as to influence him to do or to refrain from doing something whereby the debt is deferred or evaded (see p 1048 c, post).
Notes
For the offence of obtaining pecuniary advantage by deception, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1586A, 2.
For the Theft Act 1968, s 16, see 8 Halsbury’s Statutes (3rd Edn) 793.
Appeal
This was an appeal by Brian Gideon Aston and Malcolm Thomas Hadley against their conviction at Burton-upon-Trent quarter sessions on 7 April 1970 before the recorder (Oliver B Popplewell Esq QC) and a jury of obtaining a pecuniary advantage by deception, contrary to s 16(1) of the Theft Act 1968. They were each sentenced to 12 months’ imprisonment. The facts are set out in the judgment of the court.
N T Salts for the appellants.
P J Stretton for the Crown.
Cur adv vult
27 October 1970. The following judgment was delivered.
MEGAW LJ read the judgment of the court. The two appellants, Brian Gideon Aston and Malcolm Thomas Hadley, were convicted at Burton-upon-Trent quarter sessions on 7 April 1970 of obtaining a pecuniary advantage by deception. They were each sentenced to 12 months’ imprisonment. The single judge granted them both leave to appeal against conviction.
The facts which the prosecution asked the jury to accept, and which, it would seem, the jury did, at any rate substantially, accept, were these. About midday on 24 January 1970, the two appellants together entered a betting shop at Lichfield. A greyhound race at Hackney was due to start at 1.05 pm. Very shortly before it was due to start, the appellant Aston handed to the counter clerk a betting slip made out for a £70 win on the dog in trap 1 in the race at Hackney. The counter clerk’s limit was £10, so she gave the slip of paper to the manager, Mr Hine. He said ‘All right’, and the slip was given to the cashier who rang the bet up on the till. Mr Hine collected the receipt from the cashier and went to the counter where the appellants were. It may be accepted for present purposes that it was known to all concerned that the transaction was accepted by the betting shop as being a cash betting transaction, and that the clearly understood practice was that, when a bet was accepted, the stake was payable immediately in cash. It may be accepted also that the two appellants were acting in concert with each other in all that was done by either of them. Mr Hine asked for the stake money. At this stage the 1.05 pm race at Hackney either had already started or was about to start. The appellant Aston had a bundle of currency notes, some of them emanating from the appellant Hadley. The appellant Aston proceeded to count the notes with extreme slowness, purporting to select £70 worth out of a larger total in his possession. Mr Hine offered the receipt and
Page 1046 of [1970] 3 All ER 1045
demanded the money, but the slow counting continued and no money was paid over by the appellant Aston to Mr Hine. This play-acting by the appellant Aston was still going on when the progress of the race, which could be followed in the betting shop on a broadcast relay, made it obvious that the dog from trap 1 was not going to win. The appellants then gathered up the money which up to that moment the appellant Aston had still been purporting to count. He and the appellant Hadley went out of the betting shop with some degree of haste. Mr Hine followed them through the streets and caught up with them after half-a-mile or so. Then the police came on the scene.
The prosecution suggested that the whole thing was a dishonest charade, whereby the appellants could achieve the happy situation of ‘Heads I win, tails you lose’. The bet having been accepted by the betting shop, if the dog in trap 1 should win the appellants would claim that they were on the bet and they would demand a sum which, as the odds were, would have been about £200. They hoped, and perhaps expected, that in that event, by reason of successful deceit, or bluff or by making a nuisance of themselves, they would be paid on the basis that they had won the bet, although they had no intention of paying the stake money if their chosen dog failed to win. If that happened, if their dog lost, they intended to do as they in fact did; ie to disappear quickly from the scene, and, if they should be caught up with and challenged, they would assert that no bet had been made, because no cash had been paid. Clearly, and not surprisingly, the jury accepted that the appellants had a dishonest intent. No criticism can be made, or is made, of the direction of the recorder to the jury so far as it referred to the element of dishonesty. He made it clear beyond doubt that, unless the jury were satisfied on all the evidence of a dishonest intent, the verdict must be not guilty. The verdict was guilty.
That, however, is not the end of the matter. At the close of the prosecution case, counsel for both appellants submitted that there was no case to answer because the facts as proved on any view did not support the charge as laid in the indictment. After lengthy arguments, the recorder overruled those submissions and his direction to the jury thereafter involved that, subject to the jury reaching certain conclusions on various matters of fact which were in issue, in addition to the question of dishonest intent, the jury should convict on the indictment as drawn.
Before this court, counsel for the appellants again contended that the appellants could not properly be found guilty of the charge as laid, whatever the jury’s conclusions on the evidence adduced. There was, it is said, misdirection by the recorder which necessarily followed from his rejection of the submissions by the defence. The essence of this matter is the wording of the indictment. It is there alleged that the appellants had obtained a pecuniary advantage by deception, contrary to s 16(1) of the Theft Act 1968. The particulars of offence were that the appellants dishonestly obtained for the appellant Aston a pecuniary advantage, namely the evasion of a debt for which the appellant Aston had made himself liable, by the false representation that the appellant Aston intended to pay immediately the amount of £70 for which he had made a bet. Section 16(1) of the Theft Act provides:
‘A person who by any deception dishonestly obtains for himself or another any pecuniary advantage shall on conviction on indictment be liable to imprisonment for a term not exceeding five years.’
The Act itself defines ‘deception’ and ‘pecuniary advantage’ for the purposes of this section. ‘Deception’ is defined by s 15(4) (which is applied to s 16 by s 16(3)) as follows:
‘For purposes of this section “deception” means any deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including a deception as to the present intentions of the person using the deception or any other person.’
Page 1047 of [1970] 3 All ER 1045
’Pecuniary advantage’ is defined by s 16(2) under three separate heads, set out in paras (a), (b) and (c). This indictment was framed on the basis of para (a). Hence the problems which have arisen, and which would not have arisen, as counsel for the appellants concedes, if para (c) had been applied. Paragraph (a) provides:
‘any debt or charge for which he makes himself liable or is or may become liable (including one not legally enforceable) is reduced or in whole or in part evaded or deferred.’
The prosecution by the wording of the indictment thus took on themselves the task of proving (i) that there was a debt for which the appellants had made themselves liable; and that the appellants (ii) dishonestly, (iii) by a deception, (iv) obtained the evasion of that debt.
The first submission for the appellants, at the trial and before this court, was that there was not a debt. As this was, and was known by all to be, a cash betting transaction, there was, it is contended, no liability on either side until the cash had been actually handed over. The recorder, it was submitted, erred in telling the jury that they could find that there was a debt. This court has no hesitation in rejecting that submission. It is to be observed that, by the words of s 16(2)(a), the debt is not necessarily legally enforceable. It was, in the view of this court, clearly open to the jury to find, having been correctly directed in this respect, that there was a debt. Once the appellants had offered to place the bet and that offer had been accepted and its acceptance notified to the appellants, the jury could properly find that there was a debt, consisting of their obligation, by virtue of the agreement or arrangement made at their request, to hand over the stated stake money forthwith. If the jury were satisfied that Mr Hine was, to the knowledge of the appellants, ready and willing to perform his obligation, namely to hand over the receipt concurrently with the appellants handing over the stake money, the fact that he had not actually handed over the receipt because the appellants were not carrying out their part of the bargain by handing over the money is irrelevant. It does not prevent the existence of a debt because, if the dog from trap 1 had won, the betting shop, if it had proved dishonesty on the part of the appellants, might have been entitled to treat the whole transaction as avoided. As regards the element of dishonesty which the prosecution had to prove, as has been said, the recorder’s direction cannot be criticised, and the jury’s finding cannot be faulted.
The second submission for the appellants relates to the elements of deception and evasion. The prosecution have to prove an evasion of the debt obtained by deception. For the appellants, it is said that the evasion, if any, of the debt was not caused by the deception alleged in the indictment. The deception alleged in the indictment was a false representation that the appellant Aston intended to pay the £70 immediately. The relevant deception as asserted by the prosecution at the trial, and as contended for on behalf of the prosecution in this court, was expressed in this way by the learned recorder in directing the jury:
‘Mr Hine would never, the debt having been incurred, would never have kept the bet open, never have kept it open, that is to say continued to be on risk to pay out after he had rung it up in the till, unless [the appellant] Aston had repeated to him that he intended to hand over immediately the £70, and the prosecution say that he did that by doing the slow count, by counting it out there, and then indicating that he intended to pay the £70. And what the prosecution say is, Mr Hine wouldn’t have offered it, and Mr Hine couldn’t because he kept the bet open, and the bet being kept open constitutes the debt, the evasion of which we are concerned with, unless [the appellant] Aston represented to him he intended to pay the £70 there and then, and this being a cash transaction the obligation is to pay immediately.’
It should be stressed that, when the recorder said ‘[the appellant] Aston had repeated
Page 1048 of [1970] 3 All ER 1045
to him that he intended to hand over immediately the £70’, he must have been suggesting a representation to be inferred from conduct, since there does not appear to have been any evidence of any such statement by the appellant Aston. If there had been any express statement by the appellant Aston to that effect, the position might have been different. As it is, however, the prosecution were asserting that the deception was a deception by conduct; and the conduct relied on was the slow counting of the money.
In the opinion of this court, in addition to other possible difficulties in attempting to force the facts of this case into the framework of s 16(2)(a), the conduct of the appellants in the slow counting of the money could not safely or satisfactorily be presented to, or accepted by, the jury as a deception involving a representation that, as it was put, the appellants intended to pay ‘immediately’. Whatever representation the slow counting might be thought to involve, it could hardly be a representation of an intention to make an immediate payment. Moreover, to be relevant, the deception, for the purposes of s 16(2)(a), must at least normally be a deception which operates on the mind of the person deceived so as to influence him to do or to refrain from doing something whereby the debt is deferred or evaded. It would require an unacceptable stretch of the imagination, on the evidence in this case, to reach the conclusion that the counting of the money operated, whether or not the slowness is taken into account, on Mr Hine’s mind in such a way as to bring about the evasion of the debt.
There was, accordingly, a misdirection which followed initially from the acceptance of the prosecution’s submissions that the facts proved could bring the case within the terms of the indictment as framed by reference to s 16(2)(a). That does not mean that dishonest conduct of this sort falls outside the scope of the criminal law or that it can be resorted to with impunity. The difficulties which have arisen could have been avoided, and an unassailable conviction might well have resulted, as counsel for the appellants was prepared to concede, if the particulars of the indictment had been framed by reference to s 16(2)(c) instead of s 16(2)(a) of the Theft Act 1968.
Paragraph (c) provides the third class of ‘pecuniary advantage’ for the purposes of s 16. It provides:
‘he is given the opportunity to earn remuneration or greater remuneration in an office or employment, or to win money by betting.’
Had the indictment been framed by reference to that paragraph, a jury might well have had no difficulty, on the facts in evidence, in finding that there was a deception. When someone seeks to place a bet in a cash betting shop, a jury might well take the view that he is representing, and intending to be understood to represent, that it is his intention to pay the stake in cash as soon as his bet has been accepted. A jury might well have found, by reference to what happened thereafter—the slow counting and the walk out when the failure of the trap 1 dog was apparent—that that representation was untrue; that it amounted to a deception; and that that deception (not the slow counting, but the original representation of intention) had operated on Mr Hine’s mind so as to influence him to allow the bet to be placed; and thereby to give the appellants the opportunity to win money by betting. It would have been nonetheless an ‘opportunity … to win money by betting’ because, if the dog from trap 1 had won the race, the betting shop, because of the conduct of the appellants, might not have paid the winnings and might have been free from an obligation, legal or moral, to pay. That is the same point as we have mentioned earlier in relation to the existence of a ‘debt’ notwithstanding dishonesty. This approach puts the slow counting of money in its right place. It was strong evidence of an earlier deception, rather than being itself a deception.
However, although the appellants might well have been convicted on a differently drawn indictment, this is not a case in which the powers of the court either under
Page 1049 of [1970] 3 All ER 1045
s 3 or the proviso to s 2(1) of the Criminal Appeal Act 1968 are applicable. Accordingly, as the court has previously pronounced, the convictions of both the appellants are quashed. They, and other persons, would, however, be ill-advised to act in this way in future, as they might find it difficult to escape from the teeth of s 16(2)(c), should a jury be convinced of their dishonesty.
Appeal allowed.
Solicitors: Registrar of Criminal Appeals (for the appellants);Addison, Cooper, Jesson & Co, Walsall (for the Crown).
L J Kovats Esq Barrister.
Sheridan v Dickson
[1970] 3 All ER 1049
Categories: LANDLORD AND TENANT; Rent, Tenancies: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, WINN AND FENTON ATKINSON LJJ
Hearing Date(s): 28, 29 MAY 1970
Rent restriction – Payment to statutory tenant in return for giving up possession – Agreement to make – Illegality – Unenforceability – Whether purchaser of landlord’s interest in receipt of rent pending completion a landlord – Increase of Rent and Mortgage Interest (Restrictions) Act 1920, ss 12(1) (f), (g) and 15(2).
Rent restriction – Landlord – Purchaser of landlord’s interest in receipt of rent pending completion – Increase of Rent and Mortgage Interest (Restrictions) Act 1920, s 12(1) (f), (g).
Contract – Implied term – Warranty that contract not illegal – Letter by solicitor on behalf of client inviting addressee to enter into illegal contract with client – Whether warranty as to legality.
The owner of a house, the upper part of which was let to a statutory tenant (the plaintiff), lived in the lower part and in March 1967 contracted to sell the house. On 26 April 1967 the purchaser of the house (the defendant), who needed a mortgage to enable him to complete the purchase, and who needed vacant possession of the whole to obtain the mortgage, was allowed by the owner to go into possession of the lower part and to collect the plaintiff’s rent. Before 26 April the plaintiff had agreed with the defendant to vacate the upper part and give up his statutory tenancy for £400. Thereafter, both before and after 26 April the defendant constantly reassured the plaintiff that he would pay the £400 if the plaintiff left the premises. On the faith of these assurances the plaintiff left. The defendant obtained his mortgage and completed the purchase but refused to pay the £400, contending that his agreement to do so was rendered illegal and unenforceable by the provision of s 15(2)a of the Rent and Mortgage Interest (Restrictions) Act 1920 that a statutory tenant ‘shall not as a condition of giving up possession ask or receive the payment of any sum, or the giving of any other consideration, by any person other than the landlord’. The plaintiff also claimed the £400, in the alternative, as damages for breach of a warranty, to be implied from the defendant’s solicitor’s letter, that the contract to pay the £400 was legal.
Held – (i) The original agreement to pay the £400 was illegal and unenforceable because it contravened s 15(2) (see p 1051 a and j, and p 1052 h, post).
Page 1050 of [1970] 3 All ER 1049
(ii) The defendant’s reassurances after 26 April did not create a new contract, but even if they had done so such contract would still have been illegal and unenforceable, because the defendant was then at highest no more than a tenant at will, and so was not ‘entitled to possession’ of the upper part and was therefore not a ‘landlord’ within the meaning of the 1920 Act having regard to the definition contained in s 12(1)(f), (g) (see p 1051 f and p 1052 b c and h, post).
(iii) No warranty that the contract was legal could be inferred merely from the fact that the defendant’s solicitor invited the plaintiff to enter into it (see p 1052 g and h, post).
Notes
For requiring of payments by statutory tenant, see 23 Halsbury’s Laws (3rd Edn) 802, para 1579.
The Increase of Rent and Mortgage Interest (Restrictions) Act 1920 (subject to certain savings and transitional provisions) has been repealed by the Rent Act 1968. For provisions comparable to ss 12(1) and 15(2) of the 1920 Act, see now ss 113(1) and 13(1) of the 1968 Act (18 Halsbury’s Statutes (3rd Edn) 891, 804), respectively.
Cases cited in argument
Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 All ER 417, [1961] 1 QB 374.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465.
Shaw v Groom [1970] 1 All ER 702, [1970] 2 WLR 299.
Strongman (1945) Ltd v Sincock [1955] 3 All ER 90, [1955] 2 QB 525.
Thompson v McCullough [1947] 1 All ER 265, [1947] KB 447.
Appeal
The plaintiff, William Sheridan (formerly the statutory tenant of the upper part of a four-floor house which had been divided into two flats), appealed against the dismissal by his Honour Judge Sheldon at Lambeth county court on 20 November 1969 of his action for £400 against the defendant, F K Dickson, who by a written agreement dated 13 March 1967 had agreed to pay the plaintiff £400 if the plaintiff vacated his flat and surrendered his statutory tenancy of it. The plaintiff had vacated the flat on 31 May 1967, and the defendant had completed the purchase of the house on 7 June 1967. The facts are set out in the judgment of Harman LJ.
J E S Ricardo for the plaintiff.
M P Reynolds for the defendant.
29 May 1970. The following judgments were delivered.
HARMAN LJ. The plaintiff sued the defendant for the sum of £400 said to have been promised by the defendant to the plaintiff by way of consideration for the plaintiff giving up his statutory tenancy of the upper part of 167 Jerningham Road, London, SE14. The defendant unblushingly admitted that he had made such a promise and that he had not performed it; anybody who does that is apt to be treated as a disreputable person, but he said in his defence that there was a condition precedent and various other pleas, all of which were demolished. At the trial his counsel said ‘I shall rely on illegality’, and on illegality he has relied; if that plea is good, however much we may disapprove of it, we must give it countenance.
The illegality in question arises out of s 15(2) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920; that section, as far as I need read it, is in these terms:
‘Any tenant retaining possession as aforesaid [and that is the plaintiff’s position here] shall not as a condition of giving up possession ask or receive the payment of any sum, or the giving of any other consideration, by any person other than the landlord … ’
and then it provides that there is a fine if it is proved against him and that the money may be ordered to be repaid.
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This promise was a direct contravention of that section; the plaintiff would have been receiving exactly what it says in terms he may not receive, and he would be liable to a fine of £100. Therefore the county court judge was certainly right in saying that on the original bargain there was illegality which made it unenforceable in law.
The contract into which the defendant had entered was a contract to purchase the house from a Mrs Maxey in March 1967; he knew, and indeed everybody else knew, that unless he could get the local authority to produce the purchase money by way of mortgage, he could not honour his bargain; it stands to reason that although he was in the position of a prospective purchaser, as such he certainly was not a landlord—that is as plain as a pikestaff. But it is said that the position was subsequently changed; there came a time when Mrs Maxey apparently, and without being in any way pressed to do so as far as I can see, gave possession to the defendant of the lower half of the house which had been her residence and authorised him to collect the plaintiff’s rent from the top half of the house. Whether he was accountable for that to Mrs Maxey or not, is very doubtful. The county court judge thought he was, and that he did account; but the completion statement contradicts that.
However that may be, it is argued that after the defendant, on 26 April, went into possession of the lower half and started collecting this rent of the upper half from the plaintiff, the defendant became the landlord and therefore he is outside the mischief of the section if and so far as a new promise was made between the two of them after that date and before the completion of the purchase. We have had a great deal of argument whether there was any such new promise; the learned county court judge came to the conclusion that there was. I can find nothing in the evidence to justify such a contention. All that happened was that the plaintiff was being prodded along by the defendant with continued assurances that he was a man of his word; that it was quite all right; that the money was somewhere in Ghana where it could be got at; and the plaintiff, so deceived by these fraudulent misrepresentations as I regard them, went out without getting the money in his hand; and, having believed promises of this sort from this sort of man, has now not only lost his tenancy but has lost the consideration that he hoped for by surrendering it.
I can find no new promise to support the view that after 26 April there was a new contract made between the parties; but apart from that I do not think, on a true view of the facts, that the relationship of landlord and tenant then existed between these parties. The defendant was at the highest merely a tenant at will of the lower part and was authorised, pending completion, to collect the rent of the upper part; and although in a sense he was in occupation of one part and in receipt of the rent and profits of the other, that was a precarious position which might be undone at any time, as it very nearly was, because Mrs Maxey served him with notice to complete, thereby, as the equity lawyers say, making time the essence of the contract. Therefore, by that time, unless he managed to find the money as he did, he could himself have been turned neck and crop out of the house. Whether he would have landed on his ear, as counsel said, I am not sure.
So I do not think that, even if there was a new promise made after the date when the defendant became tenant at will of the lower part, the relationship of landlord and tenant then existed so as to make any agreement to pay the plaintiff £400 or any other sum for relinquishing his tenancy a good bargain. I think that the learned county court judge was right in the end, although I do not quite agree with the process by which his results were achieved.
For my part, I would dismiss this appeal.
WINN LJ. I agree, and I agree with the reasons that have been given by Harman LJ.
I add very little. It seems to me that albeit there was no cross notice of appeal in this case, it was necessarily implicit in the function that this court had to perform, that this court should form its own judgment on two quite essential matters: (1)
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whether the defendant was at any material time the landlord of the plaintiff within the proper meaning to be given to that term; and (2) whether there was a new promise made at any such time; ie at any time when he, the defendant, was properly to be regarded as the landlord of the plaintiff.
I agree on both those issues with what has fallen from Harman LJ. It seems to me that albeit for some purposes the term ‘landlord’ may comprise a man who is in receipt of—ie entitled to receive—rent from certain premises nevertheless, for the purposes of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, having regard to the definition in s 12(1) (f) and (g), the essential criterion to decide whether a man is the landlord of another man is whether that first person is entitled to recover from that second person possession of the relevant premises. I agree that for the material period, and throughout it, one must answer in the negative the question: was the defendant entitled to obtain from the plaintiff possession of the upper part of this house?
I agree on the other issue that the learned judge came to the wrong conclusion on the evidential material available to him; he went beyond anything that that material could sustain when he made, as he did make, a finding that there had been a new agreement. Quite certainly the true effect of the evidence is that there was repetition—constant repetition—of an affirmation or assertion of intention to perform a pre-existing agreement, and no more. So far as it is sought to be said that ratification itself could support the claim if the ratification was made after the change of status of the defendant, I myself think that that hare does not run at all because a ratification is not, per se, a contract but an affirmation or a reassertion of a pre-existing contract.
There is only one other point, which Harman LJ did not mention for the very natural reason that it is a rubbishy point. That is that the plaintiff contended in this court, and in the court below, that the effect of a certain letter written by the defendant’s solicitors on 14 March 1967 at a time when they were acting for the defendant as well as for Mrs Maxey, the proposed vendor of the whole house to the defendant, could be relied on, as a matter of construction, as a warranty, given by them as agents for the defendant, that the transaction which they were, on his behalf, inviting the plaintiff to enter into, in the form of an undertaking which they sent as an enclosure to their letter, was a legal transaction and that the document was a document which was legal in its effect. I cannot accept that submission as containing any element of common sense at all, since if it were to be upheld it would amount to saying that whenever a man makes a contract with another through his solicitors he must be deemed to have warranted to that other person that the contract will turn out to be perfectly legal. That of course is quite untenable.
For the reasons that Harman LJ has given, and any that I may have added, I think that this appeal should be dismissed.
FENTON ATKINSON LJ. I agree with both my Lords’ judgments and there is nothing I can usefully add.
Appeal dismissed.
Solicitors: E B V Christian & Co (for the plaintiff);Egerton, Sandler & Co (for the defendant).
Henry Summerfield Esq Barrister.
Morgan v Director of Public Prosecutions
[1970] 3 All ER 1053
Categories: CRIMINAL; Criminal Law
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 19 OCTOBER 1970
Criminal law – Corruption – Ingredients of offence – ‘In relation to his principal’s affairs’ – Company employee also trade union official – Employee when acting as union official convicted of corruptly obtaining money as inducement for doing an act – Whether employee’s act in relation to union affairs also act in relation to company affairs – Prevention of Corruption Act 1906, s 1(1).
The appellant was employed as an inspector by a car company, R’s, and was also convenor of shop stewards, being paid full wages while doing trade union duties. As convenor he played a predominant part in negotiations with the management of R’s and in decisions in regard to strikes. H, who worked as sub-contractor for R’s, was ‘blacked’ by the union, but the union later apologised to H for its action and withdrew its objection. Thereafter H became interested in renewing part of the work he had been doing with R’s. The appellant approached H, referred to the possibility of the work being returned to him and told him that he, the appellant, could possibly make it easier for H at the management/union meeting by suggesting to the shop stewards that there was no objection to H doing the work. According to H, the appellant then said that, following the meeting with the management, H was to bring with him ‘Cash, Fivers’. At the management/union meeting, the appellant informed the management that there would be no objection from the union to the work returning to H. The appellant informed H of this and arranged a further meeting with him. H informed R’s, his solicitor and the police. H met the appellant as arranged, taking with him £50 in £5 notes and handed the appellant £25. On appeal by the appellant from the dismissal of his appeal against his conviction of contravening s 1(1)a of the Prevention of Corruption Act 1906 in that being an agent of R’s he corruptly obtained £25 from H as an inducement for doing an act in relation to his principal’s affairs, the appellant contended, inter alia, that throughout he had acted as agent for the union and in relation to union matters.
Held – The appeal would be dismissed because the words ‘in relation to his principal’s affairs’ in s 1(1) of the Prevention of Corruption Act 1906 fell to be widely construed, and the conditions precedent to an offence under that subsection being proved were present; the appellant was an agent, and what was done, albeit it was in relation to the union affairs, was also in relation to his principal’s affairs, namely R’s affairs (see p 1058 c and d, post).
Dictum of Pritchard J in R v Dickinson, R v De Rable (1948) 35 Cr App Rep at 9 applied.
Notes
For corrupt transactions with agents, see 10 Halsbury’s Laws (3rd Edn) 835–836, para 1611, and for cases on the subject, see 15 Digest (Repl) 1199, 12,176–12, 180.
For the Prevention of Corruption Act 1906, s 1, see 8 Halsbury’s Statutes (3rd Edn) 236.
Case referred to in judgments
R v Dickinson, R v De Rable (1948) 33 Cr App Rep 5, 15 Digest (Repl) 1199, 12,180.
Case stated
This was a case stated by Raymond Phillips Esq QC, deputy chairman of Glamorgan quarter sessions, and other justices for the county of Glamorgan, in respect of an adjudication made on 18 November 1969. On 17 and 18 November 1969 at Swansea, quarter sessions heard an appeal by the appellant, Griffith Glyn Morgan, against his conviction on 1 May 1969 by the justices for the county sitting at Caerphilly, on an information charging that, on 19 December 1968, at Ystrad Mynach in the county of Glamorgan, being an agent of the Rover Co Ltd, he corruptly obtained £25 from John Leonard Hurford as an inducement for doing an act in relation to his principal’s affairs, contrary to s 1(1) of the Prevention of Corruption Act 1906. At the close of the case for the Crown it was submitted on behalf of the appellant that there was no case to answer. Quarter sessions rejected this submission. The appellant elected to call no evidence, and further submissions were made to them on his behalf. Having considered the evidence, and the submissions made on behalf of the appellant and the Crown, quarter sessions found the charge proved and dismissed the appeal.
Quarter sessions accepted the evidence given on behalf of the Crown, and found that at all material times the appellant was employed by the Rover Co Ltd (‘Rover’s’) at Cardiff as a standards room inspector. About 1966 he became a shop steward at Rover’s. There were between 12 and 18 shop stewards at Rover’s. There was one convenor, elected by the shop stewards from among their number. About April 1968, the appellant was elected convenor of shop stewards. The convenor took a predominant part in negotiation with management, and in decisions whether to call a strike or to declare work black. A shop steward and a convenor had to be employed by the company or firm where he carried on his trade union duties. A union official customarily received—and the appellant did receive—his normal wages while performing his union duties, and the employer customarily permitted—and Rover’s did permit the appellant—to perform his union duties during working hours. At all material times John Leonard Hurford carried on business on his own account at East Dock, Cardiff, doing painting, storage and small engineering work, often as a sub-contractor, usually for Rover’s, or as sub-contractor for firms having a contract with Rover’s. Ninety per cent of his business consisted of work for Rover’s, most of that work being storage of spare parts. In 1968, a company called Jenks and Cattell were supplying cross-members to Rover’s. About May 1968, Mr Hurford agreed with Jenks and Cattell to finish and paint those cross-members, and did so until October 1968. In October 1968, there was union objection to work which could have been done by Rover’s being done by outside firms, including the work being done by Mr Hurford for Jenks and Cattell. About 17 October 1968, all Mr Hurford’s work for Rover’s was blacked by the union. Following correspondence, the union, by 24 October, apologised for its action and withdrew its objection to the work being done by Mr Hurford for Jenks and Cattell. By then other arrangements had been made and it was too late for Mr Hurford to get the cross-member work back. The cross-member work was a small matter as far as Mr Hurford was concerned, and had not come up to expectation. After the work was cleared Mr Hurford virtually lost interest in it, until it came up for discussion. About December 1968, Jenks and Cattell approached Mr Hurford; the work on the cross-members was going out to sub-contract again; did Mr Hurford wish to apply? Mr Hurford was interested in the work, but not at any price. On Monday 16 December, he went to Rover’s in the morning to discuss the matter with Rover’s metallurgist. At 3.00 pm on 16 December the appellant telephoned Mr Hurford. They had not met previously. The appellant said that he had heard that Mr Hurford had that morning had a meeting to discuss a possible return of the cross-member contract;
Page 1054 of [1970] 3 All ER 1053
that he and Mr Hurford had better have a meeting; that he wanted it to be that evening; and that it should be on ‘neutral ground’. Eventually, they agreed to meet at 7.00 pm at the Cooper’s Arms at Ystrad Mynach. The exact purpose of the meeting was not disclosed to Mr Hurford. The appellant and Mr Hurford met as arranged at 7.00 pm and remained at the Cooper’s Arms until about 10.30 pm. The appellant apologised for his part in blacking Mr Hurford’s work in October. He said that he had been given false information. The appellant turned to the possibility of the work for Jenks and Cattell being returned to Mr Hurford. He said that he could possibly make it easier; there was to be a management/union meeting at Rover’s the next day (Tuesday); if Mr Hurford could get in touch with the management and get the Jenks and Cattell contract put on the agenda, he, the appellant, at the meeting would ask for an adjournment, take out his shop stewards and suggest to them that there was no objection to Mr Hurford doing the work having regard to the allegations which the union had made in October, and over which it had burnt its fingers. If there was any subsequent complaint, Mr Hurford could refer to the minutes of the meeting showing the shop stewards’ approval. It being too late to have the matter added to the agenda for the meeting on the next day (Tuesday), the appellant, accompanied by Mr Hurford, made a telephone call the effect of which was to cause the meeting to be postponed until Wednesday (18 December 1968). Just before driving off the appellant said that he would meet Mr Hurford after the management/union meeting on the following Wednesday, and that Mr Hurford was to bring plenty of funds with him. Mr Hurford asked what the appellant meant. The appellant replied: ‘Cash. Fivers,’ and then drove off. Earlier that evening the appellant had said that he virtually made the men do what he wished, and that it was beneficial to be friends with him. After the appellant left, Mr Hurford spoke on the telephone to Arthur John Moore, Rover’s production control manager. At the management/union meeting on Wednesday 18 December 1968, the question of the work for Jenks and Cattell returning to Cardiff, possibly to Mr Hurford, was raised by the management and discussed, and also the question whether Mr Hurford employed union labour and paid union rates, and no objection was raised from the union side to that work returning to Mr Hurford. At about 1.00 pm the appellant telephoned Mr Hurford and said that at the meeting things had gone according to plan; from his side they had gone as they should. They had gone as anticipated. He wanted to meet Mr Hurford at the same public house at 7.00 pm on Thursday 19 December. Mr Hurford said that he could not. The appellant said: ‘If not 7.00 pm, then 8.00 pm; and be there.' Mr Hurford agreed. Mr Hurford then consulted Rover’s chief security officer, his solicitor and the police. The appellant and Mr Hurford met on Thursday, 19 December 1968, at the Cooper’s Arms in the evening. Mr Hurford had with him £50 in £5 notes. Later that evening Mr Hurford handed £25 to the appellant.
In view of the submission on behalf of the appellant the question arose: for what was the £25 paid? And was there evidence on which it could be concluded that the £25 was paid in part as an inducement to the appellant for doing an act in the future? The note of the evidence of Mr Hurford relevant to the matter was as follows:
‘Examined-in-chief: On Thursday I went to the Cooper’s Arms. I had £50 in £5 notes. A few £5. I sat in bay window. [The appellant] arrived. After a little delay he was served. There were two men on the seat one on each side of me. [The appellant] did not want to sit there. He indicated a table. We sat down. It was noisy. I said I couldn’t stay long. I had decorating to do. We talked for three quarters of an hour. “Now I must go“. “I’ve done my part: now it’s your turn“. “What?” “I earn £25 per week, I think what I did yesterday is worth £25“. “How will I know you won’t want more?” He said he could not see into the future. “If I have to do any more in the future we can sort it out when the occasion arises.” No indication of what work. He gave me to
Page 1055 of [1970] 3 All ER 1053
understand that if there was any trouble with the vehicles or drivers at Rover’s he’d squash it. He’d see I did not get any undue stoppages. He’d stop them before they got into motion. I had a contract for a storage of material. He would see that nothing interfered with my work. If cowboying was necessary he’d see it was all right. I asked him what guarantee I’d get for this payment of £25. He said he would keep the onus off my firm. He was in a position to say out, and not out. £25 was for work done on Wednesday. There was no conversation after the payment of the £25. I put my hand in my pocket to get out the money and hand it over. He said no, not in here. Outside. We walked out; to the porchway. It was light. I counted out five £5 notes: said check it. Counted it into his hand. Gave a signal. Police constables arrived. In his pocket before police came.’
‘Cross-examined: Why did you pay £25? Because he asked for it. Not because police told me. As a reward for doing what? He insisted. Also taking into account he could reverse decisions previously made. Suggested £25 for work done on my behalf on the previous morning: He’d proved his authority with the shop floor—if he said stop they’d stop. I did not pay because I thought it worth it: he insisted on payment. No way of telling if more demanded. I thought it virtually certain to happen in the future. I do recall [the appellant] saying when I asked about future payments he said he could control them over a pint of beer and a sandwich. His influence arose from his position as a convenor. He was in a stronger position than the general manager.’
It was submitted on behalf of the appellant that there was no case to answer on the following grounds: that the £25 was paid to the appellant on 19 December 1968 for what he had done on 18 December, and was, therefore, a reward for what he had done, and not an inducement for doing an act in the future; that if the £25 was obtained as an inducement for doing an act, ie for procuring that there would be no objection by the union to Mr Hurford doing the work, the act was not in relation to Rover’s affairs but in relation to those of the union; that, if the £25 was so obtained, it was not obtained by the appellant as agent of Rover’s but as agent of the union. It was submitted on behalf of the Crown that, while there was some difficulty with the charge as laid, quarter sessions should consider the following matters: that the evidence justified the conclusion that, whilst the £25 may have been paid as a reward, there was also evidence that it was paid as an inducement; that the act was in relation both to Rover’s and to the union’s affairs; that the £25 was obtained by the appellant ‘being an agent’ of Rover’s as well as ‘being an agent’ of the union.
Quarter sessions found that there was a case to answer and, the appellant having elected to give no evidence, found the case proved and determined the appeal. The appellant now appealed.
H E Hooson QC and T H Moseley for the appellant.
John Davies QC and Patrick Webster for the Crown.
19 October 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of Glamorgan quarter sessions who dismissed an appeal by the appellant from his conviction by justices for the county sitting at Caerphilly, that, being an agent of the Rover Co Ltd, he corruptly obtained a sum of £25 from John Leonard Hurford as an inducement for doing an act in relation to his principal’s affairs, contrary to s 1(1) of the Prevention of Corruption Act 1906. [His Lordship stated the facts, and continued:] What has given rise to the trouble in this case concerns what happened at the meeting on Thursday, 19 December 1968, when the £25 was handed over. The charge here was that the appellant had corruptly obtained that money as an inducement for doing an act in the future. There was also an argument whether
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it could be said that he was, in relation to this matter, acting as an agent of the Rover Co Ltd as alleged in the indictment, and whether the inducement was to do an act in relation to Rover’s affairs as opposed to the union’s. I should say that, in fact, although a submission of no case was overruled, the appellant never gave evidence at quarter sessions, although he apparently did before the justices, and, accordingly, this depends on Mr Hurford’s evidence, the notes of which are set out in the case stated. There are certainly here passages, and strong passages, indicating that the £25 was not paid as an inducement for some future act, but as a reward for past favours, squaring the shop stewards and advising the management at the meeting as he did. The notes contained passages such as this: Mr Hurford: ‘Now I must go.' The appellant: ‘I’ve done my part: now it’s your turn.' Mr Hurford: ‘What?' The appellant: ‘I earn £25 per week, I think what I did yesterday is worth £25.' A little later on, the appellant said, ‘If I have to do any more in the future we can sort it out when the occasion arises’, and further on in the evidence there is a note purporting to record Mr Hurford’s evidence which states definitely ‘£25 was for work done on Wednesday’. On the other hand there are a number of passages which would apparently suggest that Mr Hurford was not prepared to hand over the £25 as a reward for the past but wanted certain assurances for the future, and those passages can be summarised in this way: ‘He gave me to understand that if there was any trouble with the vehicles or drivers at Rover’s he’d squash it. He’d see I did not get any undue stoppages. He’d stop them before they got into motion.' Then a reference was made to the storage contract which Mr Hurford had, and the notes read:
‘I had a contract for a storage of material. He would see that nothing interfered with my work. If cowboying was necessary he’d see it was all right. I asked him what guarantee I’d get for this payment of £25. He said he would keep the onus off my firm. He was in a position to say out, and not out.’
Under cross-examination he was asked ‘as a reward for doing what?' Mr Hurford said: ‘He insisted’; then this passage ‘Also taking into account he could reverse decisions previously made’.
All this court has, of course, is those abbreviated notes of evidence, some of which point one way and some point another, but quarter sessions had Mr Hurford himself before them and heard his evidence in full. For my part, it is quite impossible to say, as it seems to me, that, whereas the £25 may well have been in part a reward for what had been done, it was not also in part an inducement for acts to be done in the future. It seems to me that this court could not possibly say that quarter sessions were not entitled to take that view.
The other matter that arises in this case concerns the position of the appellant himself in relation to this matter. It is said with some force by counsel for the appellant that really from beginning to end in relation to this matter he was acting as agent for the union, and in relation to union matters, and, accordingly, that he had been wrongly charged in the present case, albeit there are of course no merits in this defence. For my part, attractive as counsel for the appellant’s argument is, I am satisfied that it is wrong. The opening words of s 1(1) of the 1906 Act are: ‘If any agent corruptly … obtains’, not, be it observed, ‘as an agent corruptly obtains’. Moreover, ‘agent’ includes, by the definition in s 1(2), ‘any person employed by or acting for another’. It is quite clear that in fact the appellant was an agent within s 1(1), namely an agent of Rover’s. The real point is whether, there being an obtaining of money as an inducement for the doing of some other act, that act was to be in relation to his principal’s affairs, namely Rover’s affairs. It is counsel for the appellant’s argument that the words ‘any act in relation to his principal’s affairs’ in s 1(1) must mean in direct relation to his principal’s affairs or, put another way, in relation to matters concerning his principal where he owes a duty as an agent. Read in that way, it can be said that, while the appellant was an agent of Rover’s,
Page 1057 of [1970] 3 All ER 1053
nevertheless the act in question was in relation to union affairs albeit against the background of the business that Rover’s carried on. For my part, I am quite satisfied that those words ‘in relation to his principal’s affairs’ fall to be widely construed, as indeed they were in the only case to which the court has been referred, R v Dickinson, R v De Rable ((1948) 33 Cr App Rep 5 at 9), where Pritchard J, in giving the judgment of the Court of Criminal Appeal, said:
‘In the judgment of the court the words of s 1 of the Act of 1906 are designedly very wide, and it would be undesirable in the extreme to narrow their meaning in the way which would be necessary if the argument on this first point were held to be valid.’
It seems to me that the conditions precedent to an offence being proved are present here; the appellant was an agent, and what was done here, albeit it was in relation to the union affairs, was also in relation to his principal’s affairs, namely Rover’s affairs.
In those circumstances, I have to come to the conclusion that this appeal fails, and should be dismissed.
ASHWORTH J. I agree.
Page 1058 of [1970] 3 All ER 1053
BROWNE J. I agree.
Appeal dismissed.
Solicitors: W H Thompson (for the appellant); Director of Public Prosecutions.
N P Metcalfe Esq Barrister.
R v Tottenham District Rent Tribunal, ex parte Fryer Bros (Properties) Ltd
[1970] 3 All ER 1058
Categories: ADMINISTRATION OF JUSTICE; Tribunals
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 29, 30 OCTOBER 1970
Rent tribunal – Reference of contract – Entry upon consideration – Members of tribunal taken papers to read – Attempt to view premises – Letter of withdrawal received thereafter – Rent Act 1968, s 73(1).
A rent tribunal has entered upon the consideration of a reference under s 73(1) of the Rent Act 1968 when each member of the tribunal has considered the papers albeit individually and then assembled and gone to the premises to view even where no admission is obtained (see p 1060 f and j to p 1061 a, post) and a letter of withdrawal is not operative until it is received by the tribunal itself (see p 1060 j to p 1061 a, post).
Notes
For the withdrawal of a reference for consideration by the rent tribunal, see 23 Halsbury’s Laws (3rd Edn) 863, 864, para 1667.
For the Rent Act 1968, s 73, see 18 Halsbury’s Statutes (3rd Edn) 858.
Page 1059 of [1970] 3 All ER 1058
Motion for certiorari
This was an application for an order of certiorari to quash a decision of the Tottenham district rent tribunal reducing the rent in respect of flat 4, 7 Princes Avenue, Muswell Hill, London N 10, owned by Fryer Bros (Properties) Ltd on an application by the tenant on the grounds that under s 73(1) of the Rent Act 1968 the reference had been withdrawn before the tribunal had entered upon consideration of it. The facts are set out in the judgment of Lord Parker CJ.
L A Marshall for the applicants.
Gordon Slynn for the tribunal.
30 October 1970. The following judgments were delivered.
LORD PARKER CJ. In these proceedings counsel moves on behalf of the applicants, Fryer Bros (Properties) Ltd for an order of certiorari to quash a determination made by the Tottenham district rent tribunal on 12 December 1969 reducing the rent in respect of flat 4, 7 Princes Avenue, Muswell Hill, London N 10, on an application by the tenant, a Mr Penn. The grounds on which the relief was originally sought were twofold: first, and I only mention it to get it out of the way, alleging that the chairman of the rent tribunal was so biased as to be unable to perform his duties as chairman in a judicial manner. Happily that ground has been specifically abandoned by counsel for the applicants. The second ground, and the one which falls to be considered here, is that the tribunal had no jurisdiction to determine the rent, the reference having been withdrawn by the tenant before the tribunal had entered on consideration of it. Before referring to the facts, it is convenient to look at the provision which falls to be construed, s 73(1) of the Rent Act 1968, which provides:
‘Where a Part VI contract is referred to a rent tribunal and the reference is not, before the tribunal have entered upon consideration of it, withdrawn by the party or authority who made it, the tribunal shall consider it and then, after making such inquiry as they think fit and giving to each party to the contract and, if the dwelling is one the general management whereof is vested in and exercisable by a housing authority, to that authority, an opportunity of being heard or, at his or their option, of submitting representations in writing, the tribunal, subject to subsections (2) and (3) below,—(a) shall approve the rent payable under the contract, or (b) shall reduce the rent to such sum as they may, in all the circumstances, think reasonable … ’
The short facts here were that the tenant became the tenant of this flat in 1969. On 8 October on form FR 2 he referred the contract of letting to the rent tribunal. On 22 October he sent in the requisite form, form FR 5, setting out the terms of the tenancy and other information. On 13 October the tribunal wrote fixing 24 November, a Monday, for the view and for the hearing. On 21 November the tenant came to an agreement with the applicants and wrote a letter withdrawing his reference to the tribunal. On 24 November the tribunal, however, went to view the premises; they were unable to obtain access, and accordingly they adjourned the hearing that day and proceeded to hear and adjudicate on the matter on 12 December.
Pausing there, if that stood alone, it might be said that they had no business to go on as they did after the notice of withdrawal. But the matter does not end there, because it is quite clear that the tenant’s letter of 21 November, a Friday, was not in fact received by the clerk to the tribunal until 9.30 am on the Monday and not seen by or communicated to the members of the tribunal itself until later that morning after the abortive view.
In the meanwhile the evidence is, and there is no reason to disbelieve it, that when the sittings ended on 21 November the clerk handed to each member of the tribunal
Page 1060 of [1970] 3 All ER 1058
the papers concerning this reference which was to be heard on the Monday morning following a view. In an affidavit sworn by the chairman, after consulting the other two members, he said that over that weekend, either on the Friday evening, the Saturday or Sunday, each member of the tribunal considered the papers, and indeed he, the chairman, began to make a record which is kept of the facts of the case; that they then assembled on the Monday morning and went to the view; they cannot say whether there was a discussion on the way, but he thinks that there may have been, and then on arriving at the premises they were unable to obtain admission. It was not until after that, and after they had inspected other properties concerning cases in their list that they returned and were told of the withdrawal. The question is whether in all these circumstances the withdrawal was made before the tribunal, to use the words of the section, had ‘entered upon consideration of it’.
The first thing to observe is that the section is not worded in the form ‘Before the Tribunal have entered upon the reference’ when by analogy with arbitration proceedings it would no doubt be the case that the tribunal would not have entered upon the reference until they began the actual hearing; entry upon consideration clearly antedates the hearing. Further, it is not without interest to observe the exact wording here compared with the earlier Act of 1946. By s 2(2) of the Furnished Houses (Rent Control) Act 1946 it was provided:
‘Where any contract to which this Act applies is referred to a tribunal, then, unless at any time before the tribunal have entered upon consideration of the reference it is withdrawn by the person or authority by whom it was made, the tribunal shall consider it and, after making such inquiry … ’
Whether it was done deliberately or not I know not, but the ‘then’ has been transposed in the present legislation, and giving the subsection its normal meaning it separates consideration from making inquiries, presumably having a view and having a hearing or considering representations. In other words ‘entered upon consideration of it’ is really put back to a very early stage in the proceedings.
It would be quite wrong to lay down a definition of the expression; each case must depend on its own particular facts, but for my part I confess here that when each member of the tribunal has entered upon consideration of the documents and assembled and gone to the premises to have a view, that at any rate then they have entered upon consideration of the matter.
There are two other points, however, which I should deal with which have been raised by counsel for the applicants. He says that, however early in the proceedings one puts back consideration, it must be a consideration by the tribunal as a body; they must meet together and consider, and that it cannot be said that the tribunal consisting of three members have entered upon consideration of the matter merely when each member of the tribunal has himself considered it, although not jointly with the others. For my part, I am quite unable to accept that; it seems to me that when three members of a court individually begin to consider the matter it is a consideration by the court or, as here, by the tribunal.
The other point raised by counsel for the applicants is that withdrawal, he would say, can take place when the letter of withdrawal is posted or written, and that the withdrawal does not depend on communication to the tribunal. In my view it is not withdrawn until at any rate it is received by the tribunal itself. Accordingly, in these circumstances I think the tribunal were justified in continuing with the reference and I would dismiss this motion with costs.
ASHWORTH J. I agree.
Page 1061 of [1970] 3 All ER 1058
BROWNE J. I agree.
Motion dismissed.
Solicitors: Trott & Gentry (for the applicants); Solicitor, Ministry of Housing and Local Government.
Jacqueline Charles Barrister.
Re C L Nye Ltd
[1970] 3 All ER 1061
Categories: COMPANY; Charges
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, RUSSELL AND MEGAW LJJ
Hearing Date(s): 10, 11 FEBRUARY, 27, 28, 29, 30 APRIL, 1, 14 MAY 1970
Company – Charge – Registration – Rectification of register – Omission or misstatement of particular – Extent of rectification – Deletion of registration as a whole outside power – Companies Act 1948, s 101.
Company – Charge – Registration – Mortgage – Security for bank overdraft – Particulars submitted to registrar of companies within 21 days of erroneous date, but more than 21 days after actual date – Whether charge void against liquidators – Companies Act 1948, s 95(1).
Company – Charge – Registration – Certificate of registration – Conclusiveness – Date wrongly entered on charge – Wrong date included on certificate – Effect of issue of certificate – Companies Act 1948, s 98(2).
The power to order that an ‘omission or misstatement shall be rectified’ conferred on the court by s 101a of the Companies Act 1948 does not enable the court to order the deletion of a whole registration (see p 1073 f, and p 1075 g, post).
A company occupied premises owned by another company (ADI), title to which was registered. The company, in order to acquire the premises, negotiated a loan from a bank together with an overdraft on the security of the premises. On 28 February 1964, transfers of the premises sealed by ADI were handed over to a solicitor B who was acting for the bank, together with a charge sealed by the company, in appropriate form. The transfers and the charge were undated; B was to investigate title and whether the security was good, report thereon to the bank, and then, if all was in order, to deal with the formalities, including registration of the bank’s charge, under s 95b of the Companies Act 1948; the registration was to be undertaken by B on behalf of the bank. On 9 March 1964, B reported to the bank that the title was valid and the security good; and on that day the bank started to lend money to the company. By an oversight the charge was not registered at that time. The oversight was noticed on 18 June 1964 and on the following 3 July, B applied for registration of particulars of the charge under s 95 and included 18 June as the date on which
Page 1062 of [1970] 3 All ER 1061
the charge was created or evidenced. These particulars were registered on 3 July and the registrar of companies duly gave a certificate of registration under s 98(2)c of the Act. The company later went into liquidation. There was no evidence that anyone else had lent money or given credit to the company between 1 April and 18 June 1964.
Held – On the assumption that the security was created, and the charge became effective, on 9 March 1964, even though the date of creation of the charge had been misstated in the application for registration and in the certificate of registration, and even though the application to register was made more than 21 days after creation of the charge without the time for registration having been extended by the court, as the certificate was ‘conclusive’ by virtue of s 98(2) the charge was valid and effective and binding on the liquidator (see p 1069 h, p 1073 c and p 1075 b, post) and, there being no evidence that any other person had given credit to the company between the dates when the charge should have been and the date when it was registered, the maxim that no one can take advantage of his own wrong had no application (see p 1070 c, p 1074 b and p 1075 f, post).
National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 followed.
Per Russell LJ. It may well be that if a chargee fraudulently deceives the registrar a creditor personally damaged by the fraud can take proceedings in personam (see p 1073 e, post).
Decision of Plowman J [1969] 2 All ER 587 reversed.
Notes
For time for registering charges, see 6 Halsbury’s Laws (3rd Edn) 493, 494, para 953, and for cases on the subject, see 10 Digest (Repl) 815, 5288–5291.
For the certificate of registration of the particulars of a charge, see 6 Halsbury’s Laws (3rd Edn) 498, para 963, and for cases on the subject, see 10 Digest (Repl) 812, 5268–5271.
For rectification of omissions or misstatements, see 6 Halsbury’s Laws (3rd Edn) 499, para 966.
For the Companies Act 1948, ss 95, 98 and 101, see 5 Halsbury’s Statutes (3rd Edn) 189, 193, 194.
Cases referred to in judgments
Cunard Steamship Co Ltd v Hopwood [1908] 2 Ch 564, 77 LJCh 785, 99 LT 549, 10 Digest (Repl) 813, 5278.
Eric Holmes (Property) Ltd, Re [1965] 2 All ER 333, [1965] Ch 1052, [1965] 2 WLR 1260, Digest (Cont Vol B) 105, 5270b.
Esberger & Son Ltd v Capital and Counties Bank [1913] 2 Ch 366, 82 LJCh 576, 109 LT 140, 10 Digest (Repl) 815, 5291.
Hooper v Lane (1857) 6 HL Cas 443, 27 LJQB 75, 30 LTOS 33, 10 ER 1368, 21 Digest (Repl) 555, 519.
London Celluloid Co, Re (1888) 39 Ch D 190, 57 LJCh 843, 59 LT 109, 9 Digest (Repl) 309, 1942.
Mechanisations (Eaglescliffe) Ltd, Re [1964] 3 All ER 840, [1966] Ch 20, [1965] 2 WLR 702, Digest (Cont Vol B) 106, 5270a.
National Provincial and Union Bank of England v Charnley [1924] 1 KB 431, 93 LJKB 241, 130 LT 465, 10 Digest (Repl) 812, 5270.
Yolland, Husson & Birkett Ltd, Re, Leicester v Yolland, Husson & Birkett Ltd [1908] 1 Ch 152, 77 LJCh 43, 97 LT 824, 10 Digest (Repl) 812, 5268.
Cases also cited
Barnests Banking Co, Re (Peel’s case) (1867) 2 Ch App 674.
Capital Finance Co Ltd v Stokes [1968] 3 All ER 625, [1968] 1 Ch 261.
Page 1063 of [1970] 3 All ER 1061
Charles (L H) & Co Ltd, Re [1935] WN 15.
D’Silva v Lister House Development Ltd [1970] 1 All ER 858, [1970] 2 WLR 563.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465.
Independent Automatic Sales Ltd v Knowles & Foster [1962] 3 All ER 27, [1962] 1 WLR 974.
Jubilee Cotton Mills Ltd v Lewis [1924] AC 958.
Kerr v John Mottram Ltd [1940] 2 All ER 629, [1940] Ch 657.
Ladies’ Dress Association v Pulbrook [1900] 2 QB 376.
Lever Finance Ltd v Trustee of Property of Needleman [1956] 2 All ER 378, [1956] Ch 375.
Light (C) & Co Ltd, Re [1917] WN 77.
London Freehold and Leasehold Property Co v Suffield (Baron) [1897] 2 Ch 608.
Monolithic Building Co, Re [1915] 1 Ch 643, [1914–15] All ER Rep 249.
National Debenture and Assets Corpn, Re [1891] 2 Ch 505.
Oakes v Turquand (1867) LR 2 HL 325, [1861–73] All ER Rep 738.
Paul & Frank Ltd v Discount Bank (Overseas) Ltd [1966] 2 All ER 922, [1967] Ch 348.
Wenlock (Baroness) v River Dee Co (1887) 36 Ch D 674.
Appeal
By originating summons dated 4 April 1968, Michael Anthony Jordan and Herbert William Pitt the joint liquidators of C L Nye Ltd (‘the company’) which was in voluntary winding-up, and whose registered office was situated at Caxton Works, Cranborne Road, Potters Bar, Middlesex, applied for the following relief: (i) that the register of charges kept by the registrar of companies under s 98 of the Companies Act 1948, be rectified by deleting therefrom all particulars of a charge bearing date 18 June 1964 over Caxton Works; (ii) that the applicants as liquidators be at liberty to take such steps as might be requisite on the company’s part in connection therewith; and (iii) a declaration that the charge created by the company in favour of Westminster Bank Ltd, the respondents, on or about 29 February 1964 over the Caxton Works was void against the liquidator and creditors of the company. On 14 March 1969, in a reserved written judgment, reported [1969] 2 All ER 587, Plowman J held that the charge in favour of the bank had been given on 28 February 1964 but had not been registered within 21 days thereafter, and bore the date 18 June 1964, and declared the charge void against the liquidators and creditors of the company. The bank appealed and asked that the order be reversed, that the liquidators’ application be dismissed and (if and as far as necessary) for an order under s 101 of the Act extending the time for delivery to the registrar of companies of the charge and the prescribed particulars thereof until the date they were actually registered. The facts are set out in the judgment of Harman LJ.
M Finer QC and P M H Mottershead for the bank.
C J Slade QC and Richard Sykes for the liquidators.
Cur adv vult
14 May 1970. The following judgments were delivered.
HARMAN LJ. This was a question of priority between creditors of a company named C L Nye Ltd (which I shall call ‘the company’); it has been in liquidation since 15 July 1964. The application was by originating summons taken out in April 1968 by the liquidators against Westminster Bank Ltd (which I shall call ‘the bank’) claiming that a charge, on which the bank relied as being a secured creditor (dated 18 June 1964), was void against the liquidators and the general body of creditors because it was not registered in pursuance of s 95 of the Companies Act 1948 within 21 days of its creation. The learned judge ([1969] 2 All ER 587, [1969] 2 WLR 1380) acceded to this application with the result that if he be right the bank has no priority as a secured creditor, but ranks merely as one of the general body of creditors.
Page 1064 of [1970] 3 All ER 1061
Such of the facts as are known are within a comparatively small compass. The company carried on a construction business with its registered office at Potters Bar and was at the end of 1963 in financial difficulties and heavily indebted to its then bank, the National Provincial Bank Ltd, which was unwilling to extend further credit. The company occupied and carried on its business from a factory called Caxton Works which was the sole property of a company called Arnold Drive Ltd (which I will call ‘ADI’) the whole share capital in which was owned by the managing director of the company, Mr C L Nye, and his wife. His son Peter Nye was a director of the company as was Mr Tench, a solicitor’s managing clerk, who was also secretary. Mr Nye senior was about to retire and desired that his son should assume responsibility and it was agreed between the two Nyes, representing the company and ADI, that in order to finance the company ADI should sell to it the Caxton Works at a price of £36,700 of which, however, only £15,000 should be paid on completion, the rest remaining until the Caxton Works should be sold.
The National Provincial Bank Ltd was not willing to give further credit and accordingly the company applied to the bank, the appellant here, at its Watford branch and opened an account there on or about 28 February 1964. On that date there was a meeting at the Watford branch at which were present Mr Nye junior and Mr Tench representing the company, a Mr Gait the manager of the bank, and one Brand a partner in the solicitors’ firm of Brand Montague & Co who had been summoned by the bank manager to act for the bank in this matter. At this meeting it was agreed that if given security over the Caxton Works the bank would provide a loan and an overdraft to pay off the National Provincial Bank and the vendors ADI so far as £15,000 of the purchase price of the factory was due on completion.
This property was held under two instruments registered at the Land Registry in the name of ADI and at this meeting there were handed to Mr Brand on behalf of the bank two documents of transfer, covering the registered title of ADI, in favour of the company, and an instrument of charge by the company in the Land Registry form whereby the company was expressed to charge in favour of the bank the Caxton Works comprised in the two registered titles MX 394153 and MX 407545 with all the liabilities of the company repayable on demand including liabilities on current account or for further advances. All these three instruments (the two registered transfers by ADI and the charge by the company) were undated, but duly executed. The company employed no solicitor on its own behalf but arranged that Mr Brand as well as acting on behalf of the bank as mortgagee to investigate the title should complete the necessary document to perfect the transaction. Mr Brand’s instructions were put into writing and are to be found in a letter of 2 March 1964 exhibited to Mr Brand’s affidavit, from which I think it is clear that he was acting for the bank alone and not for the company, although he described himself as so doing in one of the documents which he used in making application to the registrar. Mr Brand in his affidavit swears that he assumed that the three instruments were handed over to him in escrow, the condition being that they should be acted on if he found the title in order and the security good.
On 9 March 1964, Mr Brand reported to the bank that the title was valid and a good security. On that same day the bank started to lend money to the company, two cheques being drawn, one for the sum due to clear the indebtedness to the National Provincial Bank and the other for £15,000 being the agreed part of the purchase money immediately payable to ADI for the factory. I think that it inevitably follows from this that the date of the creation of the security, ie the date when the charge became effective, was 9 March 1964 and if necessary I would so hold.
It remained to complete the transaction, first by stamping the documents, next by registering the two transfer deeds from ADI to the company with the Land Registry and third by registering the charge at the Companies Registry in accordance with s 95 of the Companies Act 1948. The stamping was effected by 19 March,
Page 1065 of [1970] 3 All ER 1061
but at this point there was a contretemps which has been the source of all the subsequent trouble. According to Mr Brand he sent the documents to be stamped on 10 March still undated and they were returned duly stamped on 19 March, but at this point they were in some way mislaid for a time, although for how long does not appear, for Mr Brand after procuring the Land Registry fees on 9 April from the bank, did nothing about it until in June the bank manager telephoned to ask for the documents and Mr Brand on enquiring in his office found the documents still there which he thought had been sent to the bank completed two months before.
Mr Brand, still not in a hurry, dated the three instruments 18 June (the date when he found them) and sent the two transfers to be registered at the Land Registry, and the transfers were registered on 29 June so that then for the first time the company had the legal estate in the Caxton Works and could have dealt with it accordingly. On 3 July, Mr Brand sent particulars to the Companies Register under s 95 of the Act and the charge was registered on the same day, thus being within 21 days of the date it bore, namely 18 June.
The company went into creditors’ voluntary winding-up on 15 July and it was not until April 1968 that the liquidators instituted these proceedings asking to have the charge register rectified by deleting all particulars of the charge dated 18 June 1964 and a declaration that the charge created over the Caxton Works is void against the liquidators and the creditors of the company. Two points thus emerge: first what was the true date of the ‘creation of the security’? And, second: whatever the answer be, does the registrar’s certificate remedy any defect and conclude the matter in favour of the chargee? It is therefore necessary to look at the Act of Parliament.
Part III of the Act of 1948, which is headed ‘Registration of Charges’, provides by s 95 so far as relevant:
‘(1) … every charge … by a company registered in England … to which this section applies shall, so far as any security on the company’s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge together with the instrument, if any, by which the charge is created or evidenced, are delivered to or received by the registrar of companies for registration in manner required by this Act within twenty-one days after the date of its creation …
‘(2) This section applies to the following charges … (c) a charge created or evidenced by an instrument which, if executed by an individual, would require registration as a bill of sale; (d) a charge on land … or any interest therein … ’
Section 96 obliges a company to send to the registrar particulars of every charge created by the company but registration may be effected by any person interested and sub-s (3) of that section provides for a default fine on any company required to send particulars. Section 98 provides:
‘(1) The registrar of companies shall keep, with respect to each company, a register in the prescribed form of all the charges requiring registration under this Part of this Act, and shall … enter in the register … the following particulars … (b) … (i) if the charge is a charge created by the company, the date of its creation … (ii) the amount secured by the charge; and (iii) short particulars of the property charged; and (iv) the persons entitled to the charge.
‘(2) The registrar shall give a certificate … of the registration of any charge registered in pursuance of this Part of this Act, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part of this Act as to registration have been complied with.’
Section 98(3) makes the register open to inspection by the public. Section 98(4) confers on the Board of Trade power to make the appropriate regulations.
It follows from this, first, that a charge of the appropriate kind must be registered
Page 1066 of [1970] 3 All ER 1061
within 21 days ‘after the date of its creation’. Secondly, failure to register does not avoid the debt but avoids only the security for it. Thus here, the debt of the company to the bank remains, even though the registration be out of time, but the security for it, namely the charge bearing the date 18 June, is void and the bank is a mere unsecured creditor. No doubt large figures are involved in the difference between the two positions so far as the bank is concerned.
Form 47 of the Companies (Forms) Order 1949d is the prescribed form pursuant to s 95 and contains a table of which the first head is the date and description of the instrument creating or evidencing the mortgage or charge. This does not expressly provide for any statement about the date of creation of the charge and this is odd because the similar form 47 prescribed under the Companies Act 1900, where this legislation started, has as its first heading ‘Date of the creation of the Instrument’. I cannot see for present purposes that there is any materiality in the change. The company is obliged under s 95 to supply to the registrar both the prescribed particulars of the charge and the instrument, if any, by which the charge is created so that in the case of a charge created by an instrument the registrar can check the particulars by the instrument itself. If, however, a charge is created by parol and not by an instrument he has no such recourse and must accept what the particulars disclose which, so far as date is concerned, will ordinarily be the date which the instrument bears, that being the prima facie rule although of course it need not be the fact. Still there remains the obligation under s 98 to enter in the register particulars of the date of the creation of the charge and this must of necessity be one of the prescribed particulars. Now the particulars in the present case stated 18 June as the date of the creation of the charge and this would be confirmed by the fact that the charge itself bore the same date. The registrar therefore when he gave his certificate under s 98(2), not unnaturally entered the date 18 June as the date of the creation of the charge. The certificate is in these terms:
‘I HEREBY CERTIFY that a Mortgage or Charge dated 18th June 1964 and created by [the company] for securing all moneys now due or hereafter to become due or from time to time accruing due from the Company to [the bank] on any account whatsoever was registered pursuant to Section 95 of the Companies Act, 1948 on the 3rd July 1964.’
It is the claim of the liquidators that 18 June was a wrong date and that the true date was either 28 February when the instrument was handed over at the meeting I have described or 9 March when it began to be acted on by the bank in lending money on the security of it; that either of these dates is more than 21 days before 18 June and that therefore the security is void against the liquidators. To this the bank gave two answers: first, that the true date of the creation of the charge was 29 June when the company acquired the legal estate and therefore within the 21 days period; second, that even if it were not, the registrar’s certificate given under s 98(2) is conclusive that all the requirements of the Act have been satisfied and that therefore whether the company or the registrar were wrong the security is good because the certificate says so.
The learned judge concluded briefly ([1969] 2 All ER at 598, [1969] 2 WLR at 1392) that the right date was 28 February on the ground that the document was handed over on that date and was intended to be at once acted on. This does not agree with the evidence of Mr Brand, but the date he would give would be 9 March when lending began and whether the date be the one or the other makes no difference to the point taken by the liquidators. For myself I am prepared to assume without deciding that the right date was 9 March and that the whole case turns on the conclusiveness of the certificate. On this point the learned judge concluded ([1969] 2 All ER at 593, [1969] 2 WLR at 1385), again quite briefly, that the certificate could
Page 1067 of [1970] 3 All ER 1061
not be relied on by the bank because so to do would be to rely on its own wrong contrary to Brooms Legal Maximse one of which is that a man cannot rely on his own wrong. The learned judge examined some of the cases to which we have been referred in order to ascertain whether they or any of them precluded him from relying on his own opinion and considered that they did not, and this has been the main point of the appeal.
The first case on the subject seems to be Re Yolland, Husson & Birkett Ltd, Leicester v Yolland, Husson & Birkett Ltd. This was a decision of a powerful Court of Appeal under the corresponding section of the Act of 1900 and the headnote reads as follows:
‘The certificate of the Registrar of Joint Stock Companies … is conclusive evidence that all the requirements of the section as to the registration of debentures have been complied with, and where such a certificate had been granted the Court will refuse to go into the question whether such requirements have in fact been complied with.’
The argument for the liquidator there was that every one of a series of debentures required registration and not merely one of the series and this was implicitly rejected by the Court of Appeal. Farwell LJ said ([1908] 1 Ch at 161):
‘… I will only add that, so far as I can see, the registrar has apparently applied his mind, after hearing arguments, to the construction of sub-s.4, and has—he may be right or he may be wrong—put a construction upon it, holding that this is a series of secondary debentures containing a charge to the benefit of which the holders are entitled pari passu. In a sense it is. It is a series of debentures which contain a charge under which eighty-four come first, and the remainder take pari passu amongst themselves; and it may be that the learned registrar took the view that, inasmuch as all the outside creditors are concerned with is the total amount to which the property to which they look will be subjected, and are wholly indifferent as to the manner in which it is divided up between the parties inter se, that is a sufficient notification for them. But, however, that may be, the learned registrar has given his certificate in that form, and in my opinion the Act makes it final, and it would be quite shocking to my mind to say that a mistake, if it be a mistake, in the registration in such a matter should invalidate these charges which the debenture-holders have obtained. If there be a mistake, it is the mistake of the officer of the Court, and certainly the claim put forward now lacks any semblance of merit.’
So that the deficiency there was said to lie in the failure to certify every debenture of the series which was one of the prescribed particulars.
Next I take National Provincial and Union Bank of England v Charnley. In that case the bank, which was the proprietor of the charge, in sending particulars for registration to the registrar under the Companies (Consolidation) Act 1908 described a mortgage as being a mortgage of leasehold properties, omitting the fact that it was also a mortgage on certain chattels which of course required registration under head (c) of the prescribed particulars. This made the particulars highly misleading and a judgment creditor sought to execute judgment against the chattels on the footing that there was no charge against them; interpleader proceedings followed. The registrar’s certificate showed that the requirements of the section had been complied with in spite of the omission of the chattels both from the charge and from the particulars delivered and it was held as follows (I am reading para (2) of the headnote) ([1924] 1 KB at 432).
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‘That, as the certificate identified the instrument of charge, and stated that the mortgage or charge thereby created had been duly registered, it must be understood as certifying the due registration of all the charges created by the instrument, including that of the chattels, and that it was conclusive evidence of the due registration of the chattels none the less because the register in omitting to mention them was not merely defective but misleading.’
Scrutton LJ said ([1924] 1 KB at 447, 448):
‘So that there is a possibility, first, of the company making an error in delivering the particulars, and secondly of the registrar making an error either in omitting to enter something specified in the particulars, or in misunderstanding the instrument of charge delivered to him with the particulars; and for that reason one can well understand a clause being put in in favour of the grantees of the charge, who are not the persons whose duty it is to deliver the particulars, that if the registrar gives a certificate that all is in order that certificate shall be conclusive evidence that the requirements as to registration have been complied with. The result of the legislation as it appears to me is that if the document sent in for registration does contain a charge on particular property, even if the company sending it in has misstated that charge, or the registrar considering it judicially has misunderstood it, when once the certificate has been given the grantees are safe. Though one can see that this may cause great hardship to a person who gives credit to the company in reliance on a defective register, one can also see that equal hardship would be caused to secured creditors if their security was to be upset for reasons connected with the action of persons over whom they had no control. For these reasons I take the view which was taken in Re Yolland, Husson & Birkett Ltd. and Cunard Steamship Co. Ltd. v. Hopwood that the giving of the certificate by the registrar is conclusive that the document creating the charge was properly registered, even if in fact it was not properly registered. I do not know how the difficulty arose in this case. It looks as if somebody was very careless on behalf of the bank, and also as if somebody was very careless in the registrar’s office.’
Atkin LJ said ([1924] 1 KB at 452):
‘It appears to me to be the true view that when once such a certificate has been given by the registrar in respect to a particular specified document which in fact creates a mortgage or charge, it is conclusive that the mortgage or charge so created is properly registered, even though the particulars put forward by the person applying for registration are incomplete, and the entry in the register by the registrar is defective. That I think follows from Re Yolland, Husson & Birkett, Ltd.’
There was a further point there, that the certificate did not state the amount secured; he nevertheless said that the certificate was effective.
Atkin LJ, after reading the passage I have just read, reserved ([1024] 1 KB at 454) his view in a case of fraud. The error therefore in that case was that of the company applying for the charge, although it was true that the registrar overlooked the fact that the instrument itself would have shown that the application was incorrect in the particulars of the charge.
The third case mentioned by the learned judge is Re Mechanisations (Eaglescliffe) Ltd. There the particulars supplied by the applicant mentioned a principal sum only and left out interest and it was held that the charges were a valid security for the
Page 1069 of [1970] 3 All ER 1061
full amount due under them, for the accuracy of the particulars delivered to the registrar was not a condition of the validity of the charges and the certificate of the registrar once delivered was conclusive that the necessary preliminaries for registration had been complied with and that the prescribed particulars had been delivered to him. There again the omission was an omission by the mortgagees as to the amount secured and they were entitled nevertheless to rely on it for the full amount.
In Re Eric Holmes (Property) Ltd, Pennycuick J held that even though the particulars delivered to the registrar with the application incorrectly stated the date of the charge, the certificate once granted was conclusive evidence that the Act had been complied with. That last case is exactly in point here but of course is not binding on us. The learned judge merely said that the case bore a superficial resemblance to the present but I confess I do not follow him in that particular. In the Eric Holmes case, senior counsel for the liquidators (in this case) appeared for the liquidator and argued in the same sense as he argues here, namely that while the certificate is conclusive as to the correctness of its contents it is not conclusive as to the date of its creation and that the Charnley case was thus distinguishable. This argument was based in part at least on the view that where there is an instrument creating the charge which is available to the registrar he can check the correctness of the particulars, but he has no such means where the date of the creation is concerned. This argument does not survive the test where the charge is created without any instrument at all and therefore none can be delivered to the registrar. In my judgment the certificate must be conclusive and not merely conclusive in part as the liquidators argue. The whole point of creating the register under s 95 is to give security to persons relying on the certificate. If it were possible to go behind the certificate and show that the date of the creation of the charge made it out of time, no lender on the faith of the charge could be secure and sure that it would not thereafter be attacked by somebody who could successfully prove that there was in fact an interval of more than 21 days between the charge’s creation and its registration. This would be disastrous in my opinion and is not a view to be taken unless the language positively compels it. I find no such compulsion and see no reason why the word ‘conclusive’ should not mean what it says. The legislature in 1900 imposed on limited liability companies the obligation to disclose the charges they obtained. This was to the great advantage of the unsecured creditors but a limit was put to that advantage by giving a responsible official the right to judge whether all the prescribed particulars were in order. Once he has done this, in order they are, even though the company has misstated them or the registrar has taken a wrong view.
Counsel for the liquidators’ argument was that it was a condition precedent to the registration of a charge by the registrar that the particulars should have been delivered to him in time and that if that were not done he had no jurisdiction and the registration was a mere nullity. I cannot accept this view. The duty to register the prescribed particulars is put on the registrar; the date of the creation of the charge is one of the particulars he is required to enter and if he is not in a position to investigate the matter further but acts on the particulars furnished by the applicant company that is the end of the matter. Charnley’s case is indistinguishable from the present. The certificate is no less conclusive as to date than as to amount and to hold otherwise would frustrate the whole purpose of the legislature.
As to the maxim on which the learned judge decided the case, namely that no man may take advantage of his own wrong, I refer to Re London Celluloid Co ((1888) 39 Ch D 190 at 206) where I find the following passage in Bowen LJ’s judgment:
‘The maxim that no man can take advantage of his own wrong must be carefully considered, and expressed in more precise terms, before it can be safely
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applied. It means that a man cannot enforce against another a right arising from his own breach of contract or breach of duty. The observations of Baron Bramwell in Hooper v. Lane ((1857) 6 HL Cas 443 at 460, 461) on this subject are very instructive.’
Then Bowen LJ enquired ([1888] 39 Ch D 190 at 206)—‘what is the wrong here?’ and he went on ([1888] 39 Ch D 190 at 206):
‘To return to the maxim that a man cannot take advantage of his own wrong, we can see the point where it ceases to be applicable. Construing the maxim as I have said, the first question is, has the right to demand payment in cash been acquired through the breach of contract in question? Was it through non-registration of the contract that the liability to pay in cash arose? In my opinion it was not … ’
The wrong here must be that the bank has got a priority against unsecured creditors by giving a misleading statement to the registrar. Who then are those creditors? They can be none other than persons who gave credit to the company between the beginning of April when the charge should have been registered and 18 June when it was registered. After the latter date no one was misled. There is no evidence in this case that there were any such creditors and I cannot in these circumstances see that any case has been proved. I would therefore hold that the liquidators have not been on this ground, any more than on the others which I have discussed, entitled to the relief which they ask.
I would allow the appeal.
RUSSELL LJ. At the outset I will assume without deciding: (a) that a charge on the property was created at latest on 9 March; (b) that the solicitor Mr Brand was acting exclusively for the bank; and (c) that no relevantly new or different charge was created on 29 June when the legal estate in the property became vested in the company. We thus have a situation in which the 21 days referred to in s 95 of the Companies Act 1948 had elapsed by 1 April.
The two transfers of the land and the charge, all undated, were only stamped on 19 March, but thereafter were mislaid in the solicitor’s safe until 18 June. On discovery he filled in that date on the charge. The evidence does not state what date he filled in on the transfers, which were registered at the Land Registry on 29 June. I would suppose that he put 18 June in the transfers, and considered that that date was appropriate also for the charge which was in form a charge by way of legal mortgage. It is not suggested that in so dating the charge he was acting fraudulently, or with a mind to deceive the registrar of companies. Indeed there was lengthy argument before us to suggest that if anything the charge should properly have been dated on or after the date when the transfers to the company were registered at the Land Registry.
The particulars of the charge were presented to the registrar of companies on 3 July together with the charge. Form 47f prescribes the particulars to be presented under s 95. The first column is headed ‘Date and description of instrument creating or evidencing the Mortgage or Charge’, and thereunder the solicitor put ‘18th June 1964’, which was indeed the date it bore. Under earlier legislation the form required the date of creation of the charge to be stated in the particulars presented. Section 98(1), however, in prescribing the form of the register to be kept specifies that the date of creation of the charge is to be inserted by the registrar. This was given by the registrar as 18 June 1964, and on 3 July 1964 he certified that a charge dated 18 June 1964 was on 3 July 1964 registered pursuant to s 95. The question debated
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is the effect in the above circumstances of s 98(2), which provides that the registrar’s certificate ‘shall be conclusive evidence that the requirements of this part of this Act as to registration have been complied with’.
Part III of the Act is cross-headed ‘Registration of Charges with Registrar of Companies’. Section 95(1) provides that a charge shall be void as a security against the liquidator and any creditor of the company unless certain steps are taken. Those steps are the delivery of the prescribed particulars (form 47) of the charge, together with the instrument by which the charge is created, if any, to the registrar for registration in the manner required by the Act, within 21 days after the date of the creation of the charge. What then are the requirements of the Act as to registration? Without any guidance from authority I would have thought the answer to be reasonably plain. The prescribed particulars must be, and must correctly be, delivered to the registrar and this within 21 days from the date of creation of the charge. The time limit seems to be an essential part of the requirements of the Act as to registration. That this is so is fortified by the fact that there is a default fine on the company and its officers under s 96 on failure in its duty to present particulars of a charge. Moreover s 101 empowers the court to extend time in certain cases of ‘omission to register a charge within the time required by this Act’. Prima facie therefore the certificate of the registrar is conclusive evidence in the present case that the correct prescribed particulars of the charge bearing date 18 June 1964 were delivered for registration within 21 days from the date of its creation, so that its validity as a security on the company’s property cannot be challenged by the liquidators or any creditor on the sole ground suggested, namely that the requirements of s 95(1) were not complied with.
The conclusiveness of the registrar’s certificate has been the subject of a number of decisions. In Cunard Steamship Co Ltd v Hopwood, the particulars filed were defective in that the date of the resolution creating the debenture stock was omitted by the company, but the certificate of the registrar was held conclusive as to this and the security was valid against the liquidator and other creditors. In National Provincial and Union Bank of England v Charnley, the instrument of charge covered land and movable plant. The chargee, in presenting particulars for registration, stated the property charged as being land only and indeed struck out from the list on the then form 47 that description of the instrument which would be appropriate to a charge on movable plant. The entry on the register similarly omitted all reference to any charge on chattels. But the certificate being conclusive evidence that the requirements of the Act had been complied with, the instrument of charge was held to be effective security against a judgment creditor of the company seeking to enforce his judgment against the movable plant. Bankes LJ referred ([1924] 1 KB at 443), I think quite accurately, to the section as ‘requiring performance of the conditions necessary to prevent its [ie the charge’s] avoidance’; and in stating:
‘Those conditions are that the prescribed particulars and the instrument by which the charge is created shall be delivered to the registrar within twenty-one days.’
Atkin LJ stated in general terms ([1924] 1 KB at 452):
‘It appears to me to be the true view that when once such a certificate has been given by the registrar in respect to a particular specified document which in fact creates a mortgage or charge, it is conclusive that the mortgage or charge so created is properly registered, even though the particulars put forward by the person applying for registration are incomplete, and the entry in the register by the registrar is defective.’
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In Re Mechanisations (Eaglescliffe) Ltd, the particulars delivered by the chargee did not correctly state the payments secured by the charge; nor did the consequent entries on the register; nor did the certificate. The liquidator did not seek to avoid the whole security, but only to the extent of understatement of the payments secured, arguing that the certificate bound the chargee and so made his incorrect particulars the truth. Buckley J followed the Charnley case, holding that the certificate was conclusive evidence not of the correctness of the particulars stated in the certificate itself, but of compliance with the requirements of the Act.
In Re Eric Holmes (Property) Ltd, Pennycuick J held that the certificate was conclusive as to delivery of particulars within the 21-day period after the creation of the charge, an incorrect date having been inserted in the charge, in the particulars delivered, and in the register, although in fact the charge had been created more than 21 days before the particulars were delivered.
In the present appeal the liquidators contend that that last decision was wrong, and that the certificate cannot be conclusive as to the time requirement and points out that in Esberger & Son Ltd v Capital and Counties Bank, neither the learned judge nor eminent counsel concerned appear to have thought of the argument, although it would have (if sound) decided the case the other way. Plowman J ([1969] 2 All ER 587, [1967] 2 WLR 1380) was prepared to accept that the certificate would be conclusive as to the time requirement but he decided in favour of the liquidators by an application of a general principle that a person cannot take advantage of his own wrong, the bank by its solicitor having misled the registrar into thinking that the particulars were lodged within 21 days by putting the erroneous date on the instrument. But I turn first to the liquidators’ contention that quite apart from that general principle the certificate cannot have the effect suggested by the bank.
It was submitted for the liquidators that delivery of particulars within 21 days from creation of the charge is a condition precedent to the validity of the security as against the liquidator; that the registrar has no power or jurisdiction to register a charge presented out of time, the power to extend time being committed, by s 101, to the court; that consequently in any case in which particulars are in fact presented out of time the registration and any certificate must be a nullity. Further it was said that under s 98(2) the certificate must be in respect of a charge ‘registered in pursuance of this Part of the Act’, and no charge can after 21 days be so registered unless time is extended under s 101. It was accepted, however, that a charge of which erroneous particulars were given would be one registered in pursuance of the Act; and further I observe that s 101 is not confined to extension of time but permits also correction by the court of omissions or misstatements.
It was pointed out for the liquidators that error in the particulars or the registration could be observed by the registrar or by a creditor on reading the instrument, but a ‘false’ date for the charge, which prima facie would be the date of the creation of the charge, would not be detectable by him or by a person considering whether to give credit or further credit to the company. This is of course true, but it is also true that the registrar in a case (envisaged by the Act) of a charge without an instrument would be in the same position. Moreover, it was said, the registrar in the present case had available to him as a ground for enquiry the date on the revenue stamps, an expense not commonly accepted before an instrument is effective.
For my part I am not able to accept the arguments for the liquidators. They really involve this: that s 98(2) should be construed as though before the words ‘have been complied with’ there should be read ‘other than the requirement that the
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prescribed particulars must be delivered within a stated time after the creation of the charge’, or words to that effect. Moreover I find it impossible to think that that certificate in the present case would not be an absolute defence to a charge against the company and its officers asserting liability to a default fine. Further I do not see that s 101 is (so far as concerns extension of time) in any way applicable to a case where there is already a registration of a charge. I prefer the contention of the bank that the security is wholly valid unless a condition subsequent of presentation of particulars in time is not fulfilled. ‘Has s 95 relevantly invalidated the security?’ is the question under s 95.
It seems to me that s 98(2) should be taken as meaning what it says. There is good reason for this. Section 95 puts into a charge by a company a weakness; this weakness limits a chargee of the company in dealing with this charge; it is to be expected that the group of sections should not sterilise a chargee of a company in dealing with his charge; it is therefore to be expected that the group of sections should provide in absolute terms for a marketable security, which cannot be achieved unless the certificate of the registrar is in every respect conclusive and unassailable. Moreover it is to be noticed that until recently registration under the Companies Act 1948 was equivalent (for purposes of priority) to registration under the Land Charges Act 1925; this seems to me to make it improbable in the highest degree that registration under the Companies Act 1948 (with a certificate) should be regarded as a nullity in any circumstances; as against the company (as distinct from the liquidators) the priority depends on registration initially under the Land Charges Act 1925.
It may well be that if a chargee fraudulently deceives the registrar, a creditor personally damaged by the fraud can take proceedings in personam. This was hinted at in the Charnley case. But this could only relate, in a case such as the present, if there had been fraud, to someone who had extended credit between 1 April and the date of registration. As to this there is no evidence.
It was also suggested that this is a case for rectification under s 101 of the register by deleting the whole registration. In my judgment this is not available under s 101. Under that section the court may rectify an omission by adding, or rectify a misstatement by correcting. It cannot delete a whole registration. The authority which says that a note of payment off of a charge may be deleted is nothing to the contrary. Indeed the lack of ability under s 101 to expunge a registration of a charge is strong support for the contrary view to that advanced by the liquidator.
I turn last to the ground on which Plowman J ([1969] 2 All ER 587, [1969] 2 WLR 1380) in fact decided the case against the bank. This was that the bank (through the solicitor) put the wrong date on the charge, and that if the correct date had been put on it, 9 March, the registrar would not have registered the charge nor of course issued a certificate. His view was that the law, according to Broom’s Legal Maxims g, forbade a man to make a profit from his own wrong, and that the application of the maxim prevented the bank from relying on the statutory provision that made the certificate of the registrar conclusive evidence that there had been no error and nothing wrong. The liquidator was prepared to support this view on the footing that the relevant wrong must involve a breach of duty. But I ask myself: what was the duty of which the bank (through its solicitor) was in breach? If it was the statutory duty to produce accurate particulars in time, this seems to me to be exactly the matter that the certificate was designed to override, as I have already indicated. What then was the duty to the liquidators and other creditors? It might be said that there was a duty not wilfully to set out to deceive the registrar; but that was not this case. I am unable to accept that there was a duty not to make an honest mistake—even an ill-informed honest mistake. Moreover the application of the maxim to this case seems to me to run counter to the
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decision of this court in the Charnley case. In that case, although the registrar had the means available to him to ascertain by careful inspection of the document of charge that the particulars submitted by the chargee were incorrect in omitting reference to movable chattels (as indeed so had a creditor), there can be no doubt that the omission from the registration and certificate of the registrar were directly attributable to the careless error of the chargee. But that made no difference to the outcome, or to the effective conclusive validity of the certificate. Plowman J considered that Charnley’s case did not touch the present point. In this I respectfully consider that he erred.
Accordingly, in my judgment the certificate of the registrar demonstrates that in law (contrary to the facts and law which I am prepared, without deciding, to assume) the bank has a valid security against the liquidator, and the appeal should be allowed.
MEGAW LJ. On the assumption set out at the beginning of the judgment of Russell LJ the question which remains is whether the registrar’s certificate, by virtue of s 98(2) of the Companies Act 1948, precludes the liquidators from successfully asserting that the charge is void against them even though they can show that it was in fact registered more than 21 days after the creation of the charge.
The learned judge ([1969] 2 All ER 587, [1969] 2 WLR 1380) held that the liquidators were entitled to treat the charge as void on the basis of the maxim that no one may take advantage of his own wrong. Counsel for the liquidators, while relying also on that ground, submitted as his first contention that s 98 has no application whatever where the particulars required by s 95(1) have been delivered out of time; for in such a case, he contends, the purported registration and the purported certificate are complete nullities. The essence of his argument is that on the wording of s 98(1) and (2) the registrar has no jurisdiction to register a charge if the particulars have been delivered more than 21 days after the date of the creation of the charge. For this submission to succeed, with its startling implications as to the limitations on the reliance which can be placed on entries in the register, it would be necessary to distinguish the decision of this court in National Provincial and Union Bank of England v Charnley. Counsel for the liquidators seeks to make such a distinction. In Charnley’s case, he says, the defect was that the particulars supplied were inaccurate; they did not accurately reflect the contents of the charge. In the present case the defect is in respect of the time limit. It is, he says, a condition precedent to the validity of the charge—to the registrar’s jurisdiction to register the charge—that particulars should have been delivered within 21 days from the date of the creation of the charge. It is not, he contends, a condition precedent that the prescribed particulars which are delivered should be accurate. Hence in Charnley’s case there was not a failure to comply with a condition precedent to the registrar’s jurisdiction validly to register and to supply a valid certificate. In the present case there is such a condition precedent.
Counsel for the liquidators seeks to support his suggested distinction between what I may call the time requirement and the accuracy requirement by reference to two factors. First, he says that, in relation to time, the registrar has no means of judging when any particular charge was created; therefore it is not to be supposed that Parliament has entrusted to him the function of conclusively determining this question. In respect of the accuracy of the particulars, however, the registrar can compare the information set out in form 47h with the instrument placed before him. Hence his decision is conclusive. I do not regard this as a valid distinction, especially since, as junior counsel for the bank pointed out, s 95(1) provides for the delivery of ‘the instrument, if any’. There may, indeed, be no instrument. Could it
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be suggested that in such a case the registrar, and the certificate, are not conclusive, even as to the accuracy of the particulars of the charge? Secondly, counsel for the liquidators says that an inference is to be drawn from the terms of s 101 of the Act that the certificate is not to be conclusive where there is a failure to provide the particulars within the specified time. The court, it is said, is given power to extend the time; this shows that the registrar has no jurisdiction, whether or not he has knowledge of the failure, to register a charge in respect of which the time requirement of s 95(1) had not been fulfilled. As I read s 101, it has reference, so far as extension of time is concerned, only to a case in which registration has not already been effected. That being so, it is entirely consistent with the conception that one of ‘the requirements of this Part of the Act’, whereof the certificate under s 98(2) is to be conclusive evidence of compliance, is the requirement of delivery of the particulars within 21 days. In my opinion, neither the time requirement nor the accuracy requirement of s 98(1) is a condition precedent, in the sense put forward on behalf of the liquidator, to the jurisdiction of the registrar to register the charge or to grant a certificate.
The ground on which the learned judge ([1969] 2 All ER 587, [1969] 2 WLR 1380) decided in favour of the liquidator is that, if the bank were to be allowed to rely on the conclusiveness of the certificate, it would mean that the bank would be taking advantage of its own wrong. The ‘wrong’ it is said, is the dating by Mr Brand, as agent for the bank, of the deed of charge with the date 18 June, whereby the registrar was misled into thinking that the date of the operation of the charge was 18 June and that the particulars had been delivered within the 21 days stipulated in s 95(1).
In my view, the decision in Charnley’s case is once again fatal to the argument. If what happened in the present case were properly to be regarded as ‘taking advantage of one’s own wrong’, it would equally have been so in Charnley’s case; the chargee, whose erroneous particulars had resulted in an error in the entry in the register, would have been precluded from relying on the certificate; and the decision would necessarily have been the opposite from the decision which the court in fact reached. For the reasons which I have already given, it appears to me that Charnley’s case cannot be distinguished on the ground that the defect in that case related to the accuracy of the particulars, whereas in the present case it relates to the time within which the particulars were delivered.
The final, alternative, submission made by counsel for the liquidators was that in any event this is a case in which the court can and should exercise its powers under s 101 to rectify a misstatement in the register. The rectification of the register so as to record the date of the creation of the charge as being, say, 9 March 1964 would not, of itself, help the liquidator. I do not think that s 101 gives power to the court to go further or to order the deletion of the whole entry from the register.
I agree that the appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords.
Solicitors: Waltons, Bright & Co (for the bank); Slaughter & May (for the liquidators).
Henry Summerfield Esq Barrister.
R v Chief Registrar of Friendly Societies, ex parte Mills
[1970] 3 All ER 1076
Categories: BANKING AND FINANCE
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, COOKE AND FISHER JJ
Hearing Date(s): 17 JULY 1970
National savings – National development bonds – Dispute as to holding on register – Reference to Chief Registrar of Friendly Societies – Bank having equitable charge over customer’s holding of bonds, and an application for encashment signed by customer, as security for her overdraft – On failure to discharge overdraft bank applying to Director of Savings to encash bonds – Customer countermanding encashment order – Whether ‘dispute’ between Director of Savings and bank – Whether bank person ‘claiming to be entitled’ to the bonds – National Debt Act 1958, s 4(1).
The applicant was the registered holder of £500 of national development bonds. In 1964, she executed in favour of the bank a charge over all her securities held by the bank which included the bonds, the bank then being in possession of the bond book, and she also signed an undated application for encashment of the bonds. The charge which was executed as security for the applicant’s liabilities to the bank including an overdraft contained a covenant by the applicant to execute any of the documents that might be required to vest the securities charged in the bank, and a power of sale over the securities charged if the applicant failed to discharge her liabilities. The applicant having failed to repay her overdraft, the bank wished to encash the bonds and apply the proceeds towards discharge of the overdraft and accordingly, on 6 March 1969, sent to the Director of Savings the bond book and the encashment application which the applicant had signed. The bank was named in the application as the payee and the director sent back to the bank a signed undertaking to forward the proceeds of encashment to them; but, on 11 March 1969, the applicant wrote to the director countermanding the encashment order, and the director thereupon treated the encashment order as withdrawn and so informed the bank. The bank told the director that it was taking legal advice on its position and asked him, pending clarification of the matter, not to return the bond book to the applicant. The director then placed a temporary stop on dealings in the bonds. The bank referred the matter to the Chief Registrar of Friendly Societies under s 4(1)a of the National Debt Act 1958, and he ordered that the bonds should be encashed and the proceeds paid to the bank. On a motion by the applicant for an order of certiorari to quash the registrar’s decision,
Held – (i) There was a ‘dispute’ between the bank and the Director of Savings within the meaning of s 4(1) of the 1958 Act, the bank having made a claim on the director which had been refused, even though, once the applicant had countermanded the encashment order, the director was bound to refuse any demand by the bank for repayment to it of the bonds because under statutory regulationsb he could not take cognisance of any trust or equitable interest in respect of the bonds (see p 1080 a, p 1082 a and p 1084 b, post).
(ii) Since the registrar’s jurisdiction in the present case was not confined to claims at law but included claims to be entitled to the bonds in equity, the bank in claiming under its charge an important right of beneficial ownership, ie to have the bonds encashed and the proceeds paid to it, was a person ‘claiming to be entitled’ to the
Page 1077 of [1970] 3 All ER 1076
bonds within s 4(1) of the 1958 Act even though, because of the terms of the prospectusc under which the bonds were issued, it could not, by virtue of its equitable charge have claimed to have the legal title to the bonds vested in it (see p 1083 b e and f and p 1084 b, post). Accordingly, the registrar had jurisdiction in the matter and the application for certiorari failed.
Bailey v Bailey [1926] Ch 758 applied.
Winter v Winter [1946] 1 All ER 686 considered.
Notes
For the settlement of disputes in relation to savings bonds, see 2 Halsbury’s Laws (3rd Edn) 163, para 305.
For the National Debt Act 1958, s 4, see 38 Halsbury’s Statutes (2nd Edn) 1043.
Cases referred to in judgments
Bailey v Bailey [1926] Ch 758, 95 LJ Ch 470, 135 LT 431, 3 Digest (Repl) 145, 121.
Jones, Re [1965] 2 All ER 428, sub nom Ministry of Pensions and National Insurance v Jones [1966] 1 QB 484, [1965] 3 WLR 179, Digest (Cont Vol B) 44, 121a.
Winter v Winter [1946] 1 All ER 686, [1946] KB 466, 115 LJKB 317, 175 LT 69, 3 Digest (Repl) 146, 123.
Motion for certiorari.
This was an application by Elsie Mills for an order of certiorari to quash a decision of the Chief Registrar of Friendly Societies given on 11 November 1969 whereby he ordered that £500 5 per cent national development bonds standing in the national savings stock register in the name of the applicant should be encashed and the proceeds paid as to £7 10s as a fee for his award and as to the balance to Westminster Bank Ltd, Kings Norton. The facts are set out in the judgment of Cooke J.
J Mitchell for the applicant.
Gordon Slynn for the Director of Savings.
R M Yorke for the bank.
17 July 1970. The following judgments were delivered.
COOKE J delivered the first judgment at the invitation of Lord Parker CJ. In this case counsel for the applicant moves for an order of certiorari to quash a decision of the Chief Registrar of Friendly Societies given on 11 November 1969, whereby he ordered that £500 5 per cent national development bonds standing in the national savings stock register in the name of the applicant should be encashed and the proceeds paid as to £7 10s as a fee for his award and as to the balance to Westminster Bank Ltd.
The circumstances may be stated briefly. In November 1964, the applicant applied for £500 worth of the bonds which were duly allotted to her. On 14 June 1968, she attended at the Kings Norton branch of the bank where she saw the sub-manager. She was at that time a customer of the bank, as was her son. Her son’s account was overdrawn, and he was not in a position to draw cheques on it. He urgently needed £27 and the applicant thought that she would be able to provide it from her deposit account. At the interview with the sub-manager, she signed three documents. The first was a document which in effect transferred her son’s overdraft then amounting to £577 12s 9d to a current account in her name. The second was a charge in favour of the bank over all her securities held by the bank. The third was an undated application for the encashment of the £500 worth of bonds. The bank was at that
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time in possession of the bond book which was her evidence that she was entitled to the bonds. The book is not in itself a document of title. The legal title to the bonds is vested in the person who is registered in the register kept by the Director of Savings as the holder of the bonds. Of course, the applicant was so registered. The relationship between her and the Director of Savings was closely analogous to that between creditors and debtor.
The form of charge which the applicant executed was one of the bank’s standard forms which are familiar, and by para 1 it provided that:
‘all stocks, shares and securities which are now or hereafter shall be deposited with or held by or transferred to the bank shall be held by the bank by way of mortgage and as a continuing security for all my liabilities.’
The form of charge further included a covenant by the applicant to execute such further documents as might be required to vest in the bank the securities charged and also included a provision that if she failed to discharge her liabilities to the bank on demand, the bank should have an immediate power of sale over the securities charged.
In March 1969 the bank, who had been pressing the applicant for repayment of the overdraft for some time, desired that the bonds should be encashed so that the proceeds might be applied towards discharging the overdraft. Accordingly on 6 March the bank sent to the Director of Savings the bond book and the encashment application which the applicant had signed. The bank was named in the application as payee, and the director sent back to the bank a signed undertaking to forward the proceeds of encashment to the bank.
Now it was and indeed is the contention of the applicant that the transactions into which she entered with the bank on 14 June 1968 were void or voidable for reasons into which I need not enter here. On 11 March 1969, the applicant wrote to the Director of Savings in effect countermanding the encashment order. The director then treated the encashment order as withdrawnand so informed the bank. The bank then informed the director that it was taking legal opinion on its position, and asked the director pending clarification of the matter not to return the bond book to the applicant. The director placed a temporary stop on dealings in the bonds pending clarification of the position.
In April 1969, the bank issued a writ against the applicant claiming the amount of the overdraft, its intention being to obtain judgment and then seek a garnishee order against the bonds. Then, on learning that there might be difficulties in obtaining such an order, the bank discontinued the proceedings. Meanwhile the director, yielding to the bank’s insistence, returned the bond book to the bank. On 8 May 1969 the bank’s solicitors wrote to the Chief Registrar of Friendly Societies in these terms:
‘We have been instructed to act on behalf of the [bank] of Kings Norton, Birmingham Branch. [The bank] are the bankers to [the applicant] at present of 3 Coffins Way, Stalbridge, Dorset. In compliance with [the applicant’s] instructions the bank created an overdraft in the sum of £577 12s. 9d. upon [the applicant] completing a request for encashment of National Development Bonds to the bank’s favour. Further, [the applicant] completed a form of charge to the bank’s favour in respect of the bonds. When [the bank] endeavoured to effect discharge of the bonds it was found that [the applicant] had countermanded her instructions. In the light of the restrictions placed upon the Postmaster General by Regulation 48(1) of the Post Office Regulations 1966 the Bonds and Stock Office have advised that [the bank] make application to you under Section 4(1) of the National Debt Act 1958 … ’
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and they enclosed copies of the bank’s charge and of the request for encashment. Regulation 48(1) of the Post Office Savings Bank Regulations 1966d provides:
‘Subject to the provisions of these regulations, no notice of any trust, express, implied, or constructive, shall be receivable by the Postmaster General in respect of any deposit.’
The material parts of s 4 of the National Debt Act 1958 provide:
‘(1) If a dispute arises between the Postmaster General [the Director of Savings is now substitutede for the Postmaster General], or the trustees of a savings bank, and the holder of any stock registered in the register, or a person claiming to be entitled to any such stock, the matter in dispute shall be referred to the Chief Registrar of friendly societies. (2) On a reference under the foregoing subsection, the Chief Registrar may proceed ex parte on notice in writing sent by post to the Postmaster General or trustees, and may inspect the register, and may administer oaths to any witnesses appearing before him; and his award on the matter in dispute shall be final and binding on all parties … ’
Mr Best, the applicant’s solicitor, wrote to the chief registrar contending that s 4 did not give him jurisdiction in the matter, on the ground that the true dispute was a dispute between the applicant and the bank to which the Director of Savings was not a party. The chief registrar replied in these terms:
‘The Chief Registrar understands that [the bank] has “as a person claiming to be entitled to” the bonds made a demand on the Postmaster General for repayment of the bonds and that that demand has been refused. In these circumstances it would appear that a dispute exists which is capable of reference to him under Section 4(1) of the National Debt Act, 1958 and, since the dispute has been referred to him, he is bound to hear it.’
Acting on the view there expressed the chief registrar heard and determined the case and gave the decision which I have mentioned. Mr Best, while not accepting the correctness of the chief registrar’s decision on jurisdiction, appeared at the hearing on behalf of the applicant and at the hearing evidence was given by the applicant and by the sub-manager of the branch in question.
Two points in effect are now taken on behalf of the applicant. The first is that there was no dispute between the Director of Savings and anyone. The second is that on the true construction of s 4(1) of the 1958 Act the bank was not a person entitled to the bonds or a person claiming to be so entitled. As to the first point it is submitted on behalf of the applicant that from and after the time when the bank was notified that she had cancelled the application for encashment, the bank was never in fact saying to the Director of Savings that it was entitled to have the bonds encashed and the proceeds paid to it. This point depends on a fair interpretation of the effect of the correspondence which I have already endeavoured to summarise. Without going into the matter in detail, it seems to me that the true view is that the bank never resiled from the position it took up at the outset, namely that the bounds ought to be encashed and the proceeds paid to it. It is true that when after the applicant had countermanded the encashment order the director refused to encash the bonds and pay the proceeds to the bank, the bank considered an alternative mode of procedure, namely to sue the applicant for judgment on her debt, and then to seek something in the nature of a garnishee order. But I do not think that by considering that alternative mode of procedure, and indeed embarking on the first stages of it, the bank was withdrawing from its original position, and I think that in instituting proceedings before the chief registrar the bank was doing
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no more than trying to enforce against the director what it contended was its right to have the bonds repaid to it.
That brings me to a point which would I think have great force if it were not, as it seems to me, concluded by authority binding on this court. Once the applicant had countermanded the order for encashment, it was of course obvious that to any demand by the bank for repayment of the bonds to it, the answer of the director was bound to be a refusal, because the director could not take cognisance of any trust or equitable interest. Assuming that the word ‘dispute’ in s 4 of the National Debt Act 1958 means a genuine dispute, which is what one would expect, how can it be said in this case that there was any genuine dispute between the bank and the director when it must have been quite plain to everybody, including the bank, that the director must refuse to repay the bonds to the bank?
Megaw J was greatly troubled by a similar point in Re Jones. I read first from the headnote of that case ([1966] 1 QB at 485):
‘A depositor who had a credit of £112 11s. 7d. in his post office savings account, was indebted to the claimants, the National Assistance Board and the Ministry of Pensions and National Insurance, to the extent of £172 15s. and £17 12s. 1d. respectively, those debts being evidenced by a certificate of an appeal tribunal given under section 45(3) of the National Assistance Act, 1948, and a decision of a local appeal tribunal under the National Insurance (Determination of Claims and Questions) Regulations, 1948 f. On June 10, 1963, the claimants, by their solicitor, made a formal request to the director of savings, as the authorised representative of the Postmaster-General, to pay their claims out of the depositor’s account. The director declined to meet the claim in the absence of the signed authority of the depositor, whereupon the claimants referred the matter to the Chief Registrar of Friendly Societies for adjudication under section 8(1)(b) of the Post Office Savings Bank Act, 1954 … ’
Section 8(1) provides:
‘If a dispute arises between the Postmaster-General and … (b) a person who is or claims to be the personal representative or next of kin or creditor of a depositor, or the trustee in bankruptcy or assignee of a depositor who is bankrupt or insolvent, or (c) a person who claims to be entitled to money deposited in the bank, the matter in dispute shall be referred in writing to the Registrar.’
Megaw J in that case reluctantly came to the conclusion that he must hold that there was a dispute between the Postmaster General and the claimants, feeling bound by the authority of Bailey v Bailey, decided by the Court of Appeal. I take the facts in Bailey v Bailey ([1926] Ch at 758, 759) from the report:
‘The plaintiff … by her statement of claim, alleged that she kept house for her father, Benjamin Charles Bailey, for a number of years, and that he allowed her for her services from 10s. to 15s. a week. She further alleged that on August 24, 1920, she deposited a sum of 100l. which she had saved in the Post Office Savings Bank, and retained the remainder of her savings, to which she continued to add, in a box in her bedroom. The father died intestate on June 3, 1924, and letters of administration to his estate were granted to his son, the defendant, Bertram Bailey, who claimed that the plaintiff’s savings formed part of the father’s estate. In consequence of this claim the plaintiff deposited in the bank
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further sums on July 22, August 5, August 18, and October 13, 1924, amounting to 300l., which she alleged were also her savings. In March, 1925, the defendant applied to the Registrar of Friendly Societies under the Savings Bank (Barrister) Act, 1876, to determine who was entitled to the sums so deposited and the interest thereon. The Registrar, as arbitrator, awarded the sum of 304l. 19s. 2d. to the defendant, and this sum was paid out to him by the Controller of the Post Office Savings Bank without the consent of the plaintiff or the production of her deposit book. The Registrar had given notice to the plaintiff of the arbitration, but she, on the advice of a neighbour that nothing could be done without her signature, had neglected to attend. The plaintiff then commenced the present action against the defendant, asserting that the jurisdiction of the Registrar was confined to the determination of disputes between the Postmaster-General on the one hand and a depositor or a person claiming through or under a depositor on the other, and that as there was no dispute between these parties there was no jurisdiction to make the award … ’
The jurisdiction which the Registrar of Friendly Societies purported to exercise in that case was conferred by s 14 of the Savings Bank Act 1844 which, so far as material, provided:
‘… If any dispute shall arise between the trustees and managers of any savings bank and any individual depositor therein, or any executor, administrator, next of kin, or creditor, or assignee of depositor, who may become bankrupt or insolvent, or any person claiming to be such executor, administrator, next of kin, creditor, or assignee, or to be entitled to any money deposited in such savings bank, then and in every such case the matter in dispute shall be referred in writing to the barrister-at-law … ’
The Court of Appeal held that the registrar had jurisdiction to make the award which he made, and the ratio of the decision can best be taken from the judgment of Warrington LJ, who said ([1926] Ch at 772):
‘Then it is said that here there is no dispute between the bank and the outsider. With all respect to the learned judge who has expressed a contrary opinion, I cannot conceive where a dispute arises unless this be a dispute. The claimant calls upon the bank to transfer the money to him and the bank says: “No, I will not transfer the money to you. I will help you to some extent, because I will put a stop on it, but I will not transfer the money to you, because I may afterwards have to pay it to the depositor.” The claimant repeats: “I am entitled to that money and ought to have it transferred to me.” It seems to me there is plainly a dispute there, a dispute between the bank and the claimant.’
Commenting on that passage, in Re Jones ([1965] 2 All ER at 437, [1966] 1 QB at 500) Megaw J said:
‘… if there could be thought to have been—an actual dispute between the Postmaster-General and Bertram Bailey in Bailey v. Bailey, then I am unable to see how there was not equally a dispute between the claimants and the Postmaster-General in the present case. The words which I have read from the judgment of WARRINGTON, L.J., in Bailey v. Bailey ([1926] Ch at 772), wherein he defines what he describes as “plainly a dispute”, are at least equally applicable to the position which arose here, when the claimants made their actual, though formal, claim on the Postmaster-General and the latter refused it … ’
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It seems to me that for similar reasons this court must hold that there was a dispute between the bank and the Director of Savings in the present case. In reaching that conclusion I have borne in mind the judgment of the Court of Appeal in Winter v Winter, where Somervell LJ said ([1946] 1 All ER at 688, 689, [1946] KB at 470), speaking of Bailey v Bailey:
‘The decision is one which we should be reluctant to extend to the statutes and regulations with which we are concerned dealing with national savings certificates. Counsel for the respondent argued that the legal effect on the question of the jurisdiction conferred was the same as in the present case. Assuming that this is so, we do not think the decision covers the present case. When the case is carefully examined it does not, in our view, justify the unqualified statement in the headnote “that a dispute between a depositor and a person claiming adversely to him was a dispute” within the meaning of the relevant statutory provisions conferring jurisdiction on the Registrar. The case was argued on the pleadings as a preliminary point of law. In order to see what was decided it is necessary to consider how the facts as pleaded were understood by the court. [Somervell LJ then quoted from the judgments of Warrington and Sargant LJJ and continued:] It seems, therefore, clear to us that those two members of the court based their decision on the existence of an actual dispute between the bank and the defendant. The decision therefore comes to this. The jurisdiction of the Registrar to decide a dispute between the bank and “a person claiming to be entitled to the money”—to take the words from the statutory provision—“exists, although the attitude taken up by the bank is the result of a dispute between the person claiming to be entitled and the individual depositor.” Further, that the dispute having arisen between the bank and the defendant, the Registrar was entitled, having served notice of the proceedings on the plaintiff, to adjudicate on the issue as between the plaintiff and defendant and finally to determine that issue by his award. We have difficulty in following the reasoning upon which this latter conclusion was based, but we should have felt bound to follow the decision in Bailey v. Bailey if there were no good grounds for distinguishing it from the present case.’
In Winter v Winter the court was able to hold that no dispute had arisen with the Postmaster General and so to distinguish Bailey v Bailey. For the reasons I have already given, I feel unable to draw such a distinction in the present case. I respectfully share the difficulty felt by the court in Winter v Winter in understanding how a statutory jurisdiction to determine a dispute between A and B can include jurisdiction to determine as an incidental matter a dispute between B and C. But in view of the decision in Bailey v Bailey that point is not open to the applicant in this court.
I now turn to the second question, which is whether the bank is a person claiming to be entitled to the bonds within the meaning of s 4 of the 1958 Act. Construing the words ‘or … claiming to be entitled to any such stock’ in that section I think that there is at first sight much to be said for the view that the section is concerned only with simple disputes as to whether a person is the legal owner of stock and so entitled to be registered as the holder. In practice the section and similar sections have not been so construed, and it appears that the Chief Registrar of Friendly Societies, at any rate de facto, exercises an extensive jurisdiction to deal with equitable claims.
Again so far as this court is concerned it seems to me that this point is virtually concluded by the decision in Bailey v Bailey. It is true that the language of s 14 of the Savings Bank Act 1844 to which I have already referred is considerably wider
Page 1083 of [1970] 3 All ER 1076
than the language of s 4 of the 1958 Act. But it seems to me that the jurisdiction of the registrar to make the award which he did make in Bailey v Bailey must have been founded on the words ‘claiming … to be entitled to’ in s 14 of the 1844 Act. In his judgment ([1926] Ch at 771) it seems to me that Warrington LJ was treating those words as the basis of the jurisdiction which the registrar exercised in that case. The claim of the defendant which the registrar upheld in Bailey v Bailey was certainly not a claim that he was the true legal owner of the deposit, and had it been put on that simple basis it would have been bound to fail. I think it must follow that jurisdiction of the registrar in the case before us is not confined to claims at law but must include claims to be entitled to bonds in equity.
It is not disputed in this case that equitable interests may be created in national development bonds, and indeed support for that view is to be found in reg 48(2) of the Post Office Savings Bank Regulations 1966 and in reg 55 of the same regulations, although it should be noted that those regulations apply to many securities other than national development bonds.
That, however, does not conclude the matter because para 8 of the prospectus under which the bonds were issued provides:
‘The bonds will not be transferable except with the consent of the Postmaster-General. Consent will normally be given in the case of a devolution of bonds on the death of a holder and in other special circumstances, but will not be given to any proposed transfer which is by way of sale or for any pecuniary or other like consideration.’
In the light of that paragraph it seems to be clear that the bank could never, by virtue of an equitable charge, have claimed to have the legal title to the bonds vested in it. The bonds are a chose in action which could not be assigned to the bank at law and it may be argued that they cannot be assigned to the bank in equity either.
However, this is not a case in which the bank is claiming, as equitable owners of the bonds, to be entitled to a transfer of the legal title. It is a case in which the bank is claiming by virtue of its charge a right to have the bonds encashed and the proceeds paid to it. Can the bank in such circumstances be said to be a person ‘claiming to be entitled’ to the bonds within the meaning of s 4 of the Act of 1958? The point is a narrow one, and on the whole I do not think that it would be right to cut down the effect of the words ‘claiming to be entitled’ by reference to such a narrow distinction. The bank was certainly claiming one of the important rights of beneficial ownership, and on that basis I would hold that it was a person claiming to be entitled to the bonds.
It follows in my view that this application must fail.
FISHER J. If I were deciding this case free from authority, I should hold that the registrar had exceeded his jurisdiction for two reasons. (1) In my judgment the words ‘a person … entitled to … stock’ in s 4 of the National Debt Act 1958 mean a person able to require payment of the debt constituted by the inscription of the stock in the register and to give a good discharge to the Director of Savings, and a person claiming to be entitled to stock means a person claiming to be such a person. The bank at the time when the dispute (if there was one) arose was not and did not claim to be entitled in this sense. And the chief registrar could not without error of law have held that at the time when the dispute arose it was so entitled. Whatever his jurisdiction may be, his role is a judicial or arbitral role, that is to determine existing rights, not to create rights. By the present award (which is binding on all parties) the chief registrar has purported to enable the bank to give a good discharge to the director. (2) In view of reg 48 of the Post Office Savings Bank Regulations 1966g
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the Director of Savings cannot in law be a party to a dispute as to whether or not there has been a valid equitable charge on or assignment of the stock. When such a claim is made, he can neither accept it nor reject it. For whether he said ‘I agree’ or ‘I disagree’ he would be exceeding his functions.
But I consider that I am prevented by Bailey v Bailey from deciding in favour of the applicant on either of these two grounds, and accordingly I agree that the application should be dismissed.
LORD PARKER CJ. I entirely agree with both judgments and have nothing to add.
Application dismissed.
Solicitors: Lovell, Son & Pitfield, agents for Creech, Best, Redfern & Pettitt, Blandford (for the applicant); Treasury Solicitor;Sharpe, Pritchard & Co, agents for Sydney Mitchell & Co, Birmingham (for the bank).
Jacqueline Charles Barrister.
Meldrum v Meldrum
[1970] 3 All ER 1084
Categories: TRUSTS : FAMILY; Other Family: INSURANCE
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): STIRLING J
Hearing Date(s): 25 MARCH 1970
Variation of settlement (matrimonial causes) – Post-nuptial settlement – House purchased to provide matrimonial home – House mortgaged, both parties undertaking liability for interest on loan – Husband taking out insurance on own life – Insurance policy assigned by husband to mortgagee – Whether, after sale of house, redemption value of insurance policy part of settled funds – Matrimonial Causes Act 1965, s 17.
The matrimonial home was purchased in joint names largely on mortgage under which deed the husband and wife undertook to pay interest on the loan. By the same deed the husband alone (as beneficial owner) assigned the benefits of an insurance policy taken out on his own life to the mortgagees until repayment of the loan. The insurance policy, which was a with profits policy, had been taken out contemporaneously for a sum equal to the loan; the wife was not declared the beneficiary as in policies under the Married Women’s Property Act 1882. Subsequently the parties were divorced, the decree being granted on the grounds of the husband’s adultery. Thereafter the matrimonial home was sold and both parties accepted as fair a 50:50 interest in the proceeds of sale. On an application for the variation of a post-nuptial settlement under s 17 of the Matrimonial Causes Act 1965, the wife maintained, inter alia, that the surrender value of the insurance policy should be held as part of the settled funds.
Held – There being no clear inference that the husband intended that the wife should enjoy any interest in the insurance policy the redemption value of the policy was not part of the settled funds and could not be dealt with on an application under s 17 of the 1965 Act (see p 1088 c and f, post).
Notes
For the principles on which the court will vary a post-nuptial settlement, see 12 Halsbury’s Laws (3rd Edn) 455, 456, para 1023, and for cases on variations, see 27 Digest (Repl) 651–659, 6132–6213.
For the matrimonial Causes Act 1965, s 17, see 17 Halsbury’s Statutes (3rd Edn) 185.
Page 1085 of [1970] 3 All ER 1084
Cases referred to in judgment
Brown v Brown [1959] 2 All ER 266, [1959] P 86, [1959] 2 WLR 776, Digest (Cont Vol A) 799, 6101a.
Cook v Cook [1962] 2 All ER 811, [1962] P 235, [1962] 3 WLR 441, Digest (Cont Vol A) 799, 6101b.
Gunner v Gunner and Stirling [1948] 2 All ER 771, [1949] P 77, [1948] LJR 1904, 27 Digest (Repl) 647, 6102.
Prescott (otherwise Fellowes) v Fellowes [1958] 3 All ER 55, [1958] P 260, [1958] 3 WLR 288, Digest (Cont Vol A) 799, 6106b.
Smith v Smith [1945] 1 All ER 584, 114 LJP 30, 173 LT 8, 27 Digest (Repl) 647, 6101.
Summons
This was a summons by the wife to confirm the recommendations of the district registrar at Reading on an application for the variation of a post-nuptial settlement under s 17 of the Matrimonial Causes Act 1965. The husband served notice seeking a variation of the recommendations. The facts are set out in the judgment.
A W Lyon for the wife.
N O G Murray for the husband.
25 March 1970. The following judgment was delivered.
STIRLING J. This is a summons by a successful wife petitioner to confirm the recommendations of the learned district registrar at Reading in an application for variation of the post-nuptial settlement under s 17 of the Matrimonial Causes Act 1965. The respondent husband has served a notice on the court, and on the wife’s solicitors, seeking substantial variation of the recommendations. The decree nisi, which was on the ground of the husband’s adultery, the suit being undefended, was pronounced in February 1968, the decree absolute being made in the following May. There is a male child of the marriage, born in March 1958. He unhappily is a haemophiliac.
Unfortunately, in my judgment, the matter has been approached from the very start on a wholly wrong basis. The form of the summons before the learned district registrar was strange in an application such as this. It reads as follows:
‘For variation of settlement, namely, to decide on the disposal or allocation of the sale moneys relating to 1 Marshall Place, Oakleigh Green, Windsor, Berkshire, the former matrimonial home. [Later there was added by amendment] … and insurance policy with Norwich Union, No. A171552.’
Apparently the enquiry proceeded on the basis that the parties started on the footing of the equality of distribution, but having regard to this or that factor it was contended that a specific sum should be deducted from the share of one or the other. The learned district registrar had to listen to an immense amount of controversial arithmetical and general argument, which he considered with the greatest care. As far as the policy was concerned he really left it to this court to decide whether the insurance policy should be regarded as part of the settled funds. He made alternative recommendations, namely:
‘Either that the surrender value of the policy should be added to the [wife’s] recommended share in the proceeds of sale of the matrimonial home, and used by the [wife] for the benefit of the wife or child of the marriage as she, in her sole discretion, should think fit; or (2) that the [husband] should keep alive the policy up to maturity, and on maturity pay the income arising to the [wife] for her life, and after her death, as to capital and income for the child absolutely, if he shall attain the age of 18 years, and if not, then upon trust for [the husband] and his estate absolutely.’
I do not consider that the court would have had the power to make this second
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order in the form recommended, but for reasons which I shall deal with hereafter the policy does not, in my judgment, form part of the settled funds.
Although the court has a complete discretion in applications such as this, what I think was entirely overlooked from the first to last was the normal basis on which the courts consider such an application. How far astray the enquiry wandered may be judged when it is seen that one of the husband’s contentions was that because the wife had remained in the matrimonial home, and had had the continued enjoyment of the furniture, half the value of such furniture should be deducted pound for pound from the wife’s share in the proceeds of the sale of the house.
In my judgment on an application to vary a post-nuptial settlement as in the present case, the court has to decide: (1) whether there is such a settlement; (2) what are the trusts of that settlement; (3) having regard to the parties’ respective interests under the trusts whether they should be varied in the light of the divorce so as to mitigate any unfairness to the innocent spouse or issue and to ensure as far as possible that the guilty spouse should not benefit under the existing trusts from his or her own wrong.
When one is dealing with a sum of money, such as here, to extinguish the husband’s interests wholly, or in part, would result in an ascertainable arithmetical sum, and certainly the wife’s means, their respective contributions to the settled funds and the conduct of the parties, should all be taken into account. But it is not, in my judgment, the correct approach to debate exactly whether credit should be given for £x to one party or the other. Fourthly, the court has to consider whether any proposed variation might adversely affect an infant child of the marriage, in which case the child, or children, would have to have the protection of separate representation.
Although the careful review of the facts by the learned district registrar is undoubtedly valuable, I think that I can approach the matter afresh on the basis of principles that I have briefly outlined. The matrimonial home concerned was bought in joint names some ten years after the marriage, and it was conceded by both the wife and the husband that it constituted a post-nuptial settlement. The learned district registrar accepted that view, and having regard to such authorities as Prescott (otherwise Fellowes) v Fellowes and Smith v Smith as explained in Brown v Brown, I have no doubt that he was right. The trusts of the settlement could have given rise to greater difficulty as the parties’ respective interests in their equitable joint tenancy might not necessarily have been equal. A good deal of evidence was apparently given relating to the purchase and sale of a former matrimonial home, and of how the money used for the purchase of 1 Marshall Place was provided. It is true moreover that the learned district registrar states more than once that he regards the principle of equal distribution as fallacious. He was, however, apparently referring to the child, who had no legal or equitable interest in the property, coming in as beneficiary in some further trust of the proceeds of sale, which he considered could be ordered by the court. He was not finding that the parties’ beneficial interest in the original post-nuptial settlement was unequal. I consider that the 50:50 interest suggested by both parties was correct, and the only conclusion which the court could reach on the evidence. The funds for the settlement of the matrimonial home are therefore the net proceeds of sale, each party having a 50:50 interest. I see no reason to differ from the conclusion of the learned registrar that £385 17s 6d, being half the loan account on Barclays Bank Ltd, was a legitimate deduction in arriving at the net proceeds of sale; the resulting figure is £2,266 5s 4d in which the husband’s interest is £1,133 2s 8d. The question then arises whether, and if so, to what extent, the husband’s interest in this sum should be extinguished as though he were dead, the wife taking an immediate interest in that part of his share. Having regard to the small size of the fund it is not a case, in my judgment, where it would be appropriate to settle any part of the income derivable from the husband’s share, either on
Page 1087 of [1970] 3 All ER 1084
the wife or child. The practical solution is for the wife to take an immediate interest in any part of the husband’s fund which may be extinguished. I accept the registrar’s view that the wife is a responsible mother.
I do not consider that a total or partial extinguishment of the husband’s interest in the share of the fund could affect the child adversely. The wife has custody and for her to take an accelerated or increased interest could in no way prejudice this child. The learned district registrar was therefore right in not ordering separate representation for him.
The general maintenance position between the parties is a relevant factor. The husband is earning £2,800 gross and the wife some £1,400 in round figures. On 8 July 1969, the registrar ordered that, on the husband continuing to pay the mortgage payments and outgoings in respect of 1 Marshall Place, the husband should pay a nominal order of 1s per year for joint lives. It is suggested in the husband’s notice that the registrar had no power to make such an order and that consequently the husband’s failure to make such mortgage payments etc should not be held against him. I would only say that I think that it was within the registrar’s power to make such an order. Had he not done so and the wife had had to bear part of that particular financial burden it could only have increased the likelihood of a real, as opposed to a nominal order, being paid. The main point that I think I have to have in mind, although not by any means the only point, is the extent to which the wife would have benefited from the husband’s share in the equity had they continued to live happily together. Each would in a sense have benefited equally from the equitable share of the other. As things stand it could be said that unless the trusts of the settlement are varied she has lost any benefit from his share while he no longer deserves any benefit from hers. To a great extent one has to look at the matter broadly, and although past munificence to a wife could, I suppose, be rather remotely relevant, I do not think the matters urged in para 3 of the husband’s notice, or such matters as the extent to which the husband by his own efforts reduced the interest on the joint current account, can carry any decisive weight any more than the husband’s liability to pay the costs of these proceedings.
The husband’s proposals 1 and 4 in the notice are, in my view, matters which the court could not order except by consent. On the basis of such agreement trusts could have been varied appropriately. But no consent to any such proposals is forthcoming here.
In my judgment the proper order here is to extinguish the husband’s interest in half, his interest in the trust funds, as if he were dead and the wife had survived him and to empower her to take an immediate interest in such half share. I reached this conclusion partly on the basis that on the view I take on the insurance policy the husband would be entitled now to receive a sum equivalent to the redemption value of the policy which, valued at the date of decree absolute, amounts to £599 7s. I must now turn to that part of this application.
Number 1 Marshall Place, was purchased largely on mortgage with the Norwich Union Insurance Co the sum lent being £5,850. The mortgage deed was jointly executed by both the husband and the wife. As is not unusual in this type of transaction with an insurance company, only annual interest was paid on the loan; no part of the capital sum was repaid annually. Contemporaneously with the mortgage deed the husband took out a policy with the Norwich Union Life Insurance Society on which he paid annual premiums, the sum insured being £5,850 with certain profits payable on 20 February 1990 or prior death. By cl 3 of the mortgage deed the husband alone as beneficial owner assigned this policy to the mortgagees, they to hold the same until the date of repayment of the principal sum when the policy would be reassigned. The premium payable by the husband was £21 3s 6d monthly until 25 January 1990. This was, of course, the obligation of the husband alone, in contra-distinction to the payment of interest under the mortgage deed where the obligation was joint.
Page 1088 of [1970] 3 All ER 1084
When the house was sold there was not only the windfall profit after repayment of the loan by the mortgagees, but the husband’s life policy was then floating free and had the surrender value to which I have referred. It is the wife’s contention that this sum should be held to be part of the settled funds, and the learned district registrar, while not deciding the point, inclined to the view that these moneys should be so regarded. I do not take the same view. Prescott v Fellowes makes it clear that in matrimonial jurisdiction a transaction may be regarded as a settlement, although it would not be so regarded for any other purpose. But even in this jurisdiction the underlying intention must be that the disposition should be for the benefit of the wife, qua wife, or the husband, qua husband. While it is obvious or at least presumed that this husband intended the wife should benefit by an interest in the matrimonial home, there is no clear inference that he intended that she should have any interest in the life policy. This was not a policy in which she was the declared beneficiary as in policies under the Married Women’s Property Act 1882, as in such cases as Gunner v Gunner and Stirling. Had there been no sale of the house and the husband had lived until 1990 the mortgage would have been paid off by means of moneys received under the policy; and, subject to the addition of a small sum representing profits, the sum receivable and the amount of the outstanding loan would have coincided. Each party would then have been left with an unencumbered equal share in equity in the matrimonial home. This was, I think, the intention. The policy was merely machinery by which such several benefits could be achieved. In a sense it was collateral security.
Cook v Cook was cited. In that case the question before the Court of Appeal was whether a house jointly purchased by the husband and wife but conveyed into the name of the husband alone was a post-nuptial settlement. Part of the purchase price was borrowed on mortgage secured by two policies on the husband’s life. The only possible relevance of this authority to the present case is that the court was not asked to deal in any way with the insurance policy. As, however, it is not clear from the facts whether either policy had any redemption value I do not consider that Cook v Cook assists me. In my judgment the redemption value of the policy is not part of the settled funds, and the husband is entitled to these moneys absolutely. It follows that I have no power to deal with them under this application.
Summons dismissed.
Solicitors: Charsley Leonard & Co, Slough (for the wife);Clifford Joseph (for the husband).
Alice Bloomfield Barrister.
1971
• Volume 1 • Volume 2 • Volume 3 •
Volume 1
Beachway Management Ltd v Wisewell and another
[1971] 1 All ER 1
Categories: LAND; Land Tenure
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 7, 8, 16 OCTOBER 1970
Perpetuities – Rule against perpetuities – Remoteness – Rentcharge – Amount of charge ascertainable by reference to gross rateable value from time to time – Charge immediately vesting on creation – Whether validly created.
A rentcharge reserved on the transfer of land until the happening of a certain event does not offend the rule against perpetuities, although the amount due to the transferor at any time may be ascertainable only by reference to the gross rateable value of the land from time to time, because the charge vests immediately in the transferor and becomes immediately payable, the only uncertainty being the quantum of each payment which is nevertheless ascertainable (see p 4 j to p 5 a and p 8 e, post).
Re Cassel [1926] Ch 358 followed.
Notes
For commencement and duration of rentcharges, see 32 Halsbury’s Laws (3rd Edn) 552, 553, paras 944, 945.
For the rule against perpetuities and the determination of the time of vesting, see 29 Halsbury’s Laws (3rd Edn) 284–287, paras 572–577 and for cases on the subjects, see 37 Digest (Repl) 93–95, 290–302.
Cases referred to in judgment
Blew, Re, Blew v Gunner [1906] 1 Ch 624, [1904–07] All ER Rep 264, 75 LJCh 373, 95 LT 382, 37 Digest (Repl) 80, 198.
Cassel, Re, Public Trustee v Mountbatten [1926] Ch 358, 95 LJCh 281, 134 LT 724, 37 Digest (Repl) 81, 201.
Johnson’s Settlement Trusts, Re, McClure v Johnson [1943] 2 All ER 499, [1943] Ch 341, 112 LJCh 297, 169 LT 220, 37 Digest (Repl) 81, 202.
Kennedy v Kennedy [1914] AC 215, 83 LJPC 63, 109 LT 833, 37 Digest (Repl) 80, 199.
London and South Western Ry Co v Gomm (1882) 20 Ch D 562, 51 LJCh 530, 46 LT 449, 37 Digest (Repl) 81, 203.
Whiteford, Re, Whiteford v Whiteford [1915] 1 Ch 347, 84 LJCh 584, 112 LT 577, 49 Digest (Repl) 1031, 9647.
Cases also cited
Allan (decd), Re [1958] 1 All ER 401, [1958] 1 WLR 220.
Coleman’s Will Trusts, Re [1936] 2 All ER 225, [1936] Ch 528.
Knight, Re (1882) 21 Ch D 442.
Pearks v Moseley (1880) 5 App Cas 714.
Smith v Cardiff Corpn (No 2) (1955) 1 All ER 113, [1955] Ch 159.
Page 2 of [1971] 1 All ER 1
Adjourned summons
This was an application by the plaintiff company, Beachway Management Ltd, claiming a declaration that certain property, in the name of the defendants, Leslie Jim Wisewell and Barbara Grace Wisewell, was charged in favour of the plaintiff company with a yearly rentcharge. The facts are set out in the judgment.
E I Goulding QC and J A Moncaster for the plaintiff company.
D M Burton for the defendants.
Cur adv vult
16 October 1970. The following judgment was delivered.
PLOWMAN J read the following judgment. This case concerns the construction and validity of a reservation of a rentcharge.
In 1959, the Bay Estate (Aldwick) Ltd was developing a building estate at Aldwick Bay, Bognor Regis. Its title to the estate was registered at the Land Registry. On 7th August 1959, it transferred to a Mr Dumper one of the plots on which a house had already been built, known as 5 Windmill Close. The transfer was expressed to be subject to the exceptions and reservations set out in Sch 2, para 2 of which was as follows:
‘The reservation unto the Transferor until the roads of the Aldwick Bay Estate shall have been adopted by and taken over by the Local Authority out of the property hereby transferred of a yearly rent charge of two shillings in the pound of the gross rateable assessment of such property commencing from the date hereof and to be charged upon and issue out of the said property and to be paid by equal half yearly payments without any deduction on the First day of January and the First day of July in every year the first of such payments or the proportionate part thereof to be paid on the First day of July next’.
The estate roads have still not been adopted and taken over and accordingly the rentcharge on 5 Windmill Close is still payable, assuming that it was validly created in the first place. If it was validly created, it is now vested in the plaintiff company. 5 Windmill Close is now vested in the defendants. The property was first entered in the rating list on 30 September 1958 (almost a year before the transfer to Mr Dumper), and its gross rateable value was £65. But on the quinquennial valuation on 1 April 1963 this figure was increased to £200, at which it still stands.
The first question I am asked to decide is whether, as a matter of the construction of the transfer of 7 August 1959, the rentcharge now payable is £6 10s per annum (ie 2s in £1 on £65), as the defendants contend, or £20 per annum (ie 2s in £1 on £200) as the plaintiff company contends. This is a short point depending whether the words ‘gross rateable assessment’ in para 2 of Sch 2 to the 1959 transfer mean gross rateable assessment at the date of the transfer, or the gross rateable assessment from time to time. If the latter is the true construction, a further question arises, namely whether the limitation of a rentcharge, the amount of which rises or falls with a change in the gross rateable assessment, necessarily offends the rule against perpetuities and is therefore void, with the consequence that the defendants (and several hundred other purchasers) hold their properties free of any rentcharge at all.
On the question of construction, a number of points were made which to some extent cancelled each other out. The best argument for suggesting that ‘gross rateable assessment’ does not mean the gross rateable assessment from time to time seems to me to be that the transfer does not in terms so define it. On the other hand, the mere fact that a formula is used at all is, in my judgment, a strong indication that the expression ‘gross rateable assessment’s refers to the gross rateable assessment from time to time prevailing. If this were not so, one would have expected to find a reservation of an annual rentcharge of £6 10s and not a rentcharge defined by a formula. Counsel for the defendants submitted that I ought to infer that a
Page 3 of [1971] 1 All ER 1
formula was used because the reservation was a common form reservation applicable both to vacant plots (where there would be no gross rateable assessment) and to plots on which houses had already been erected, but I do not feel entitled to reach this conclusion on the evidence. On balance, I have reached the conclusion that the rentcharge in question is one of 2s in £1 of the gross rateable assessment from time to time.
I come now to the question of perpetuity. It is accepted on both sides that the rule against perpetuities applies to rentcharges in the sense that they must be created in such a way as to vest within the period allowed by the rule. It is also accepted on both sides that the mere fact that a rentcharge may be of a fluctuating amount is unobjectionable in law. Counsel for the defendants, however, submitted that this was subject to the qualification that any contingent event affecting the amount of the rentcharge must be bound to happen within the permitted period, if the limitation of the rentcharge is to be good. He submitted that the present rentcharge failed on this score since the rating assessment might be altered outside the permitted period.
On the other hand counsel for the plaintiff company submitted that no question of perpetuity arose in this case. He argued that the transfer created in favour of the vendors an immediate right to a rentcharge and that the fact that such rentcharge was of a variable amount was immaterial. The rentcharge, he submitted, was a single indivisible item of property—a fluctuating rentcharge—which vested once and for all on its reservation, and that was the end of the matter so far as any question of perpetuity was concerned. I am not convinced that this proposition is right but counsel then went on to consider the matter on the basis that it was not, and in support of his submissions he cited Re Cassel, Public Trustee v Mountbatten. The headnote is as follows
‘By his will the testator bequeathed “Brook House and contents” and the stables held therewith, the leases of which would expire in 1995, to trustees upon trust to permit his granddaughter E. to have the use and enjoyment thereof during her life, and after her death upon trust for such one or more of her children or issue as she should by will or deed appoint, and in default of such appointment for the first of her sons or, failing any son, the first of her daughters attaining twenty-one. Subject to these trusts the trustees were to hold “brook House and contents” upon similar successive trusts in favour of (1.) his granddaughter R. and her family, (2.) his nephew and his family, and (3.) his niece and her family. The testator then directed that: “the rent outgoings rates and taxes for the time being payable in respect of the said messuage and premises and keeping the same and the contents thereof insured against fire and burglary and in a proper state of preservation shall be always paid by my trustees out of the income of my residuary personal estate”:—Held, that the clause charged the income of the residuary personal estate (during (a) the term of the leases, and (b) such time as the leases remained the property of a beneficiary deriving his or her title directly under the will) with the payment of an annual sum for the personal benefit of such beneficiary, the sum varying in amount according to ascertainable facts. That the direction did not violate the rule against perpetuities, because the right to the annual sum must vest within the legal period. That the duration of the right beyond that period was no infringement of the rule, which was concerned with the creation and vesting of interests and not with their duration. That the uncertainty of the quantum of the annual sum did not render the disposition void, because the interest arose and was vested within the legal period, and, although the amount necessary to satisfy it was expressed in uncertain terms, it was capable of being rendered certain; and because the
Page 4 of [1971] 1 All ER 1
whole property—namely, the interest in question and the property subject to that interest, was vested in some person or persons during the legal period.’
Russell J after dealing with the question of construction said ([1926] Ch at 367, 368):
‘Thus construed the clause charges the income of the residuary personal estate, during (a) the term of the leases and (b) such time as the leases remain the property of a beneficiary deriving his or her title directly under the will, with the payment of an annual sum in relief and for the personal benefit of such beneficiary; the annual sum varying in amount according to certain ascertainable facts. Does such a provision violate the rule against perpetuities? It is conceded that so far as the absolute interest in Brook House and contents is concerned, it must vest within the perpetuity period. If I am right in my construction of the clause in question the right to have the annual sum in question applied must necessarily also vest within that period. Thus, to take a concrete case, Edwina Ashley is now entitled to that right during her life; if the defendant Patricia is the only child of Edwna and she attains twenty-one she will become absolutely entitled to that right—namely, the right to have the variable annual sum applied for her personal relief and benefit so long as the leases endure, and remain her property. True it is that assuming the leases remained unsold, the interest of the person or persons absolutely entitled might endure beyond the period of lives in being and twenty-one years after; and it was suggested that this possibility would avoid the clause. In my opinion this suggestion is unsound. The perpetutity rule is concerned with creation and vesting of interests, not with their duration. If the interest must necessarily arise and be vested within the period, its duration beyond the period is no infringement of the rule. As is pointed out in Gray on Perpetuitiesa, an interest is not obnoxious to the rule if it begins within lives in being and twenty-one years, although it may end beyond them. In other words the rule prohibits vesting outside the period. It does not prohibit distribution beyond the period. It was, however, further argued that the uncertainty of the quantum of the annual sum rendered the disposition void, because the exact quantum of the interest could not be ascertained within the limit of the rule. This contention, if sound, would produce far-reaching results. A bequest of an annuity of 100l. per annum for 1000 years to A. for life and after his death to any wife of his for her life and after her death to A.’s children for life would be good; but if given free of tax would be bad, for the actual amount payable to the children might not be ascertainable within the perpetuity period. The answer seems to me to be that the interest arises and is vested during the period, and that although the amount necessary to satisfy it is expressed in uncertain terms it is always capable of being rendered certain; and that the whole property (that is to say the interest in question and the property which is subject to that interest) is vested in some person or persons during the necessary period.’
Russell J then went on to distinguish certain cases which were relied on by counsel for the defendants in the present case, namely Re Blew, Blew v Gunner and Kennedy v Kennedy, and he did so on the ground that they were cases of discretionary trusts, the exercise of which create new interests which might come into existence outside the permitted period.
If therefore Re Cassel was rightly decided, and I say that in view of certain submissions which I will mention in a moment, it appears to follow by parity of reasoning
Page 5 of [1971] 1 All ER 1
that, in the instant case, the uncertainty of the quantum of the rentcharge does not render its creation void for perpetuity, since it arises and vests within the permitted period and the quantum is always capable of being rendered certain by the application of the formula.
Counsel for the defendants, however, submitted that Re Cassel should not be followed. He pointed out that Re Whiteford, Whiteford v Whiteford does not appear to have been cited in Re Cassel and he relied strongly on Re Whiteford. The headnote to that case is as follows:
‘Under her marriage settlement a tenant for life had, in the events which happened, a power of appointment by will in favour of her five sons, one of whom was of unsound mind. By her will she appointed that after her death two fifths of the settled funds should be held in trust, until the lunatic should die or two medical men should certify him capable of managing his affairs, to apply the whole or so much of the income of the two fifths as should be required to make up the total income from all sources of the lunatic to 200l. per annum in such manner as the trustees should in their discretion think fit for the maintenance of the lunatic, and to divide the residue (if any) of such income equally between her other four sons; and then there followed gifts over. After the death of the tenant for life the question arose whether the trusts of the income of the two fifths infringed the rule against perpetuities:—Held, that the trusts of the income of the two fifths for the benefit of the lunatic were void for remoteness, for the interest which the lunatic and his brothers took in such income was not vested, but contingent every year on the happening of events.’
Then Neville J after referring to the appointment said ([1915] 1 Ch at 351, 352):
‘That is the appointment I have to consider. It is obviously an appointment of an interest among five persons, and the question I have to determine is: Is it a vested interest or is it a contingent interest? On the one side it is argued that it depends upon the happening of a contingency. On the other side it is argued that it is a vested interest from the death of the appointor, although the amount of income to be received by any one of the five could only be ascertained from year to year and might have to be ascertained after the expiration of twenty-one years. I think the question really is whether you can have a vested interest depending in whole or in part upon the happening of a particular event. It seems to me that to say you can is to state what is a contradiction in terms, because the thing cannot be both vested and contingent. The contingency really is the amount of the yearly income of the appointee, which may involve the payment of the whole income of the two fifths in one year and none of it in the next. It seems to me that it is a contingency affecting the payment to the other four takers because as one share is reduced the other is increased by the same amount, and consequently the other four sons may as well as the first appointee get either something or nothing in each year. It is an interest of a peculiar kind, but it seems to me to be essentially a contingent gift, and a gift of which it is impossible to say that it vested in any particular person. It follows that the trusts of these two fifth shares of the trust funds under the settlement fail.’
In Jarman on Willsb, Re Casse and Re Whiteford are discussed, and the
Page 6 of [1971] 1 All ER 1
editor concludes that they are not easy to reconcile. The editor of Gray on Perpetuitiesc goes further. Referring to the case of Re Cassel, he wrote:
‘… it is difficult to support this decision on principle, or to distinguish it from Re Whiteford which does not appear to have been mentioned by either court or counsel. No authority is cited for the proposition that an annuity free of income tax is a vested interest for the purposes of the Rule against Perpetuities, in a case where its enjoyment might continue during too remote a period. Moreover, the gift here was not an annuity free from tax. The right to the use and income of certain property forever, or for life, or for a term of years, is regarded by the law as a single entire interest in the property, which interest vests at the date of its commencement, and entitles its owner to the income of the property forever, or during the designated period, although the amount of income may vary. The right to a fixed sum annually is likewise regarded as a single entire interest, which vests at the date of its commencement; and possibly the right to a fixed sum annually, plus an amount equal to the tax on such sum, might be held to be a similarly vested interest. But it is hard to see how the right to a varying annual sum can be considered as vested, if its amount is dependent each year on the amount of taxes and other expenses payable with respect to other property and not with respect to such annual sum or the property from which it is derived. The answer given by the learned judge, to the objection of the continuing uncertainty of the amount payable, seems open to the reply above quoted from the opinion in Re Whiteford. The circumstances that a future interest is contingent, not on any person’s volition, but on facts which can be definitely ascertained when a future date is reached, does not make it any the less contingent until that date arrives. The amount of the interest of each son in Re Whiteford was also capable of being rendered certain in each year as it arrived’.
In the same vein, Morris and Leach on The Rule against Perpetuitiesd, after referring to discretionary trusts, state:
‘What is the position if the trustees have no such discretion, but the size of the unborn life tenant’s interest is contingent on the happening of future events which may happen after the perpetuity period has expired? On principle, it would seem that his interest would be too remote. It had been held in two cases that if a share of the income of a fund is given to an unborn person for life, with a direction that if his income from the fund in any year falls below a stated amount it shall be made up to the stated amount from the capital of the fund, or from other shares of income, the direction is void.’
It appears from the footnote that the two cases in question are Re Whiteford, which I have already referred to, and Re Johnson’s Settlement Trusts, McClure v Johnson, to which I shall refer in a moment. Morris and Leach continue:
‘The only case which throws doubt on this matter is Re Cassel, of which the following is a statement [and then the facts in that case are set out]. The actual decision in Re Cassel does not touch the matter here in question; but in the course of his judgment Russell J. said [and there is set out the passage from the judgment which I have already read and the authors continue:] The learned judge cited no authority for the proposition that a tax-free annuity given to an unborn person is not too remote. It is submitted that that proposition cannot be supported, because the amount of income payable to the annuitant would be contingent upon the rate of taxation in every year, and some of those years might
Page 7 of [1971] 1 All ER 1
be beyond the perpetuity period. It is true that if the income or a share of the income of a fund is given to an unborn person, the amount of income payable each year may vary as the yield from the investments rises or falls. But this case differs from that of the tax-free annuity in that the life tenant is entitled in every year to the whole income or to the same proportion of the income of the fund, and therefore his interest is vested from its beginning.’
And then the authors state (At p 241):
‘Like trusts for the payments of debts, directions to pay the outgoings on property out of some other fund are dispositive, not administrative, in character, because they take income away from one person and apply it towards the discharge of obligations for which another person is primarily responsible: but it is convenient to consider them here. Such directions are too remote if they can take effect beyond the perpetuity period, even if the trusts of the property out of which the outgoings are payable are valid. Thus, if Blackacre is devised to A in fee simple, a direction to pay the outgoings on Blackacre out of residue until Blackacre is sold is too remote. And if Blackacre is devised to A for life, with remainder to B in tail, a direction to pay the outgoings on Blackacre out of residue so long as any person entitled to the rents should be an infant is too remote. The only case which throws doubt on this principle is Re Cassel … This decision is difficult to reconcile with other cases which decide that an unborn person’s right to annual sums that may fluctuate in amount in any year is contingent and too remote. Unless it can be supported on the ground that some at least of the outgoings were debts of the testator, it seems incorrect.’
Both Re Cassel and Re Whiteford were considered by Cohen J in Re Johnson’s Settlement Trusts, the headnote of which is as follows ([1943] Ch at 341):
‘In exercise of a special power of appointment among children and issue contained in a marriage settlement the wife, after her husband’s death, appointed the settled property equally among all her children, one son and four daughters, the shares of three of the daughters being settled on them for life and after their deaths to their children, if any, with an accruer clause on failure of issue of any daughter to the others and their issue. The deed of appointment directed the trustees, if the income of any settled share, after deduction of tax, should fall below 400l. a year, to raise the deficiency out of the capital of the share, and pay or apply it for the maintenance of the daughter. Owing to the increase in the rate of income tax, the income of each settled share fell below 200l.:—Held, that the direction purported to give a vested interest in the capital on a contingency which might never occur, or might be too remote, and was, therefore, void as infringing the rule against perpetuities. Re Cassel distinguished.’
Cohen J after stating the facts said ([1943] 2 All ER at 501, [1943] Ch at 344): ‘Mr. Freeman [for Mary, a daughter of the appointor] relies on the decision of RUSSELL J. in Re Cassel’. Later Cohen J said ([1943] 2 All ER at 502, [1943] Ch at 345–347):
‘Mr. Freeman argues that the position is exactly the same here. According to him Mary’s right to have her income made up to £400 per annum vested within the period allowed by the rule against perpetuities, and it is immaterial
Page 8 of [1971] 1 All ER 1
that distribution may continue beyond the prescribed period and that the amount, if any, to be distributed cannot be ascertained until each period of distribution arrives. Mr. King [for Hilda] and Mr. Gilbert [for the son] distinguish Re Cassel on the ground that in that case the right vested immediately and sums became immediately payable under the bequest then under consideration; the uncertainty was only as to the quantum that would have to be paid. In the present case nothing, they say, may be payable at all and the whole right is contingent on an event which might never occur and certainly might not take place within the prescribed period, that is, the event of such an increase in the rate of income tax as would reduce the net income below £400 per annum. On this basis, to quote the words of KAY, J. in London and South Western Ry. Co. v. Gomm ((1882) 20 ChD 562 at 573)—which were approved by the Court of Appeal although his decision was reversed on another ground—Mary’s right is: ”… a present right to an interest in property which may arise at a period beyond the legal limit but is void notwithstanding that the person entitled to it may release it.” This argument is, in my judgment, well founded, and it is supported by the decision in Re Whiteford … I could not, I think, decide this point in favour of Mary unless I take the view, which I am not able to do, that [Re Whiteford ([1915] 1 Ch 347)] is inconsistent with Re Cassel and I have to decide which to follow.
There is no suggestion there that Cohen J regarded Re Cassel as having been wrongly decided. On the contrary, he appears to have accepted its authority by distinguishing it. And he distinguished it on a ground which makes the present case a Re Cassel case, and not a Re Whiteford Case ([1915] 1 Ch 347), because I am concerned with a right, ie a rentcharge, which vested immediately and became payable immediately, the only uncertainty being the quantum that would have to be paid.
In the circumstances I ought, in my judgment, to follow Re Cassel and to declare that 5 Windmill Close is charged in favour of the plaintiff company with a yearly rent-charge of 2s in the £1 of the gross rateable assessment from time to time of the said property.
I would only add that the state of the authorities and the fact that this is a test case makes the question an eminently suitable one for the Court of Appeal.
Declaration accordingly.
Solicitors: Gouldens agents for Smallmans, Chessington, Surrey (for the plaintiff company); Woolley, Whitfield & Busby (for the defendants).
Jacqueline Metclafe Barrister.
Donnelly v Rowlands
[1971] 1 All ER 9
Categories: CONSUMER; Consumer protection
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 2 NOVEMBER 1970
Trade description – False trade description – Falsity – Application of trade description to contents rather than container – Milk – Milk bottle embossed with other than retailer’s name – Foil cap on bottle embossed with retailer’s name – Trade Descriptions Act 1968, ss 1(1)(b) and 3(1).
The respondent, a milk retailer, was charged with contravening s 1(1)(b)a of the Trade Descriptions Act 1968 in that he offered to supply milk to which a false trade description was applied. The milk in question was in bottles each of which was closed with a foil cap bearing the words ‘Untreated milk Produced from T T Cows’, followed by his name and farm address. The bottles themselves were embossed with several names, other than the respondent’s, of well-known milk suppliers to whom the bottles belonged. On the question whether the respondent had offered to supply milk to which a false trade description (within the meaning of s 3(1)) had been applied,
Held – The words on the foil cap of each bottle were an accurate trade description of the milk, and in their context the words on the bottle did not refer to the milk which had already been accurately described, but merely conveyed, as the fact was, that it was a bottle belonging to the person whose name was embossed on it; accordingly, there was no falsity in the trade description (see p 11 j and p 12 b, post).
Per Curiam. If there was a finding supported by evidence that the public were misled, and would, on reading the embossed words, even though coupled with the foil cap, nevertheless think that the firms whose names were embossed on the bottles had had something more to do with the production than merely being the owners of the bottles, there would be some ground for saying that there was a false trade description (see p 12 a and b, post).
Notes
For false trade descriptions, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1314A, 1, 3.
For the Trade Descriptions Act 1968, ss 1 and 3, see 48 Halsbury’s Statutes (2nd Edn) 596, 598.
Case stated
This was a case stated by justices for the county of Denbigh acting in and for the petty sessional division of Denbigh in respect of their adjudication as a magistrates’ court sitting at Denbigh on 3 April 1970.
On 6 March 1970, four informations were preferred by the appellant, Leonard Donnelly, an inspector of Milk Vessels Recovery Ltd of Fawley Road, Tottenham, London N17, against the respondent, David Edward Rowlands, in the following terms: that on 4 Feruary 1970 at Vale Street, Denbigh, he offered to supply 167 pint bottles of milk to which a false trade description was applied (the bottles being marked Northern), contrary to s 1(1)(b) of the Trade Descriptions Act 1968; that on the same date and at the same place he offered to supply seven pint bottles of milk to which a false trade description was applied (the bottles being marked CWS), contrary to the same provision; that on the same date and at the same place he offered to supply three pint bottles of milk to which a false trade description was applied (the bottles being marked Express), contrary to the same provision;
Page 10 of [1971] 1 All ER 9
that on the same date and at the same place he offered to supply three pint bottles of milk to which a false trade description was applied (the bottles being marked Goodwins), contrary to the same provision.
The following facts were found: that on the date and at the place alleged in the informations the respondent in the course of his trade or business as a milk retailer offered to supply 167 pint bottles of milk each of which was embossed with the word ‘Northern’, seven pint bottles of milk each of which was embossed with the letters ‘CWS’, three pint bottles of milk each of which was embossed with the word ‘Express’ and three pint bottles of milk each of which was embossed with the word ‘Goodwins’; that the words and letters were visible and legible in each instance; that the 167 bottles embossed with the word ‘Northern’ were the property of Northern Dairies Ltd, that the seven bottles embossed with the letters ‘CWS’ were the property of the Co-operative Wholesale Society Ltd, that the three bottles embossed with the word ‘Express’ were the property of Express Dairies Ltd and that the three bottles embossed with the word ‘Goodwins’ were the property of Goodwins Ltd; that the milk contained in the bottles on the date and at the place alleged in the informations had been placed in them by the respondent; that on the date and at the place alleged in the informations each of the bottles had a foil cap whereon it was embossed in legible words the following—‘Untreated milk Produced from T T Cows. Rowlands, Plas Meifod, Henllan’; that the respondent in offering the bottles of milk on the date and at the place alleged in the informations when the bottles were embossed as hereinbefore set out had no intention of misleading the public; and that when the offences shown in the informations were pointed out by the appellant to the respondent, on 4 February 1970, the respondent said ‘I am waiting for bottles for my milk. I don’t think Northern Dairies will mind because we get on well with each other’.
At the close of the appellant’s case the respondent’s solicitor submitted on his behalf on a question of fact that there was no case to answer on any of the charges. The justices rejected the submission. The respondent then elected not to give evidence himself and no evidence was called on his behalf. It was then contended on the respondent’s behalf that, although he had offered to supply his own milk in bottles on which the words and letters were embossed as set out above such words and letters did not constitute a trade description which was false to a material degree within the meaning of s 3(1) of the Act. The respondent drew attention to the Milk (Special Designation) Regulations 1963b, Sch 2, Part I, s C, para 1 which provided:
‘Every bottle containing the milk in relation to which the special designation is used shall be tightly closed and shall be securely fastened either with a cap overlapping the lip of the bottle or in some other suitable manner approved by the licensing authority. The cap shall bear the address of the premises at which the milk is bottled and shall be conspicuously and legibly labelled or marked with the words “Untreated Milk” and it may also bear—(a) the day of production, with or without the word “morning” or “evening” according to the time of production; (b) the name of the licence holder by whom the milk was bottled; (c) the words “Produced from cows which have passed the tuberculin test”; and (d) subject to the approval of the licensing authority, the words “Farm Bottled” or “Farm Cartoned”, as appropriate, if the milk has been bottled by the producer at the place of production. Except with the consent of the licensing authority, the cap shall bear no other words. If there is no cap on which the wording can suitably be placed, it shall be placed within a surrounding line in a prominent position elsewhere upon the bottle, and the foregoing provisions shall apply to the words within the surrounding line in the same way as they apply to words on the cap.’
Page 11 of [1971] 1 All ER 9
On this basis the respondent contended that the true trade description of the milk was indicated by the wording on the cap on each bottle, and not by the words embossed on the side of the bottle.
It was contended on behalf of the appellant: that the trade description embossed on each of the bottles was a trade description which was false to a material degree; and that the words ‘to a material degree’ in s 3(1) of the Act referred to the falsity of the trade description as opposed to the effect of the falsity.
The justices were of the opinion that, as the true and correct trade description was to be seen on the cap on each of the bottles, the false trade descriptions contained in the words and letters hereinbefore mentioned were not false to a material degree. They accordingly dismissed the informations and the prosecutor now appeals.
H E P Roberts for the appellant.
The respondent did not appear and was not represented.
2 November 1970. The following judgments were delivered.
LORD PARKER CJ referred to the facts and continued: The justices held that as the true and correct trade description was to be seen on the cap on each of the bottles, the false trade descriptions contained in the words and letters hereinbefore mentioned, that is on the bottles, were not false to a material degree, and accordingly they dismissed the informations. The relevant sections of the Trade Descriptions Act 1968 provide:
‘1. (1) Any person who, in the course of a trade or business … (b) supplies or offers to supply any goods to which a false trade description is applied; shall … be guilty of an offence. [That was the charge in this case.] …
‘2. (1) A trade description is an indication, direct or indirect, and by whatever means given, of any of the following matters with respect to any goods or parts of goods, that is to say … (i) person by whom manufactured, produced, processed or reconditioned …
‘3. (1) A false trade description is a trade description which is false to a material degree. [Later subsections clearly enlarge the meaning of ‘false’.] …
‘(3) Anything which, though not a trade description, is likely to be taken for an indication of any of those matters and, as such an indication, would be false to a material degree, shall be deemed to be a false trade description …
‘4. (1) A person applies a trade description to goods if he—(a) affixes or annexes it to or in any manner marks it on or incorporates it with … (ii) anything in, on or with which the goods are supplied … ’
It was said that in these circumstances both before the justices and in this court that here there was an offer to supply goods, that the words on the bottles CWS, Northern, Express or Goodwins were false trade descriptions and were false to a material degree, and that the fact that the words were on a container did not by reason of s 4 make the description any less a description of the goods.
As I see it, the justices here approached the matter by looking at the whole of the description on the bottles. The whole of the description on the bottles consisted of the wording on the foil cap and the embossed wording. What I think the justices were saying was: if one looks at the whole thing, the falsity contained in the embossed words on the bottles was not a falsity to a material degree bearing in mind the accuracy of the trade description on the foil cap. In my judgment that is a possible approach, although I find it quite unnecessary to go to those lengths. It seems to me that such trade description as there was was not false in any degree. The words on the foil cap were an accurate trade description of the milk, and in their context the words on the bottle did not refer to the milk which had already been accurately described, but merely conveyed, as the fact was, that it was a bottle belonging to the person whose name was embossed. Looked at in that way, which is the ordinary way that any member of the public would look at it, there was no falsity here at all in the trade description.
Page 12 of [1971] 1 All ER 9
Of course, if there was a finding supported by evidence that members of the public were misled, and would, on reading the embossed words, even though coupled with the foil cap, nevertheless think that CWS, Express or the like had had something more to do with the production than merely being the owner of the bottle, then there would be some ground for saying that there was a false trade description. For my part I can find here no false trade description whatever; and accordingly, although for rather different reasons, I would dismiss this appeal.
ASHWORTH J. I agree.
BROWNE J. I agree.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Lovell, Son & Pitfield agents for Walker, Smith & Way, Chester (for the appellant).
N P Metcalfe Esq Barrister.
Re Medicaments Reference (No 2)
[1971] 1 All ER 12
Categories: COMPETITION
Court: RESTRICTIVE PRACTICES COURT
Lord(s): BUCKLEY P, MAJ-GEN W E V ABRAHAM, SIR ERIC BINGEN, MR N C PEARSON AND MR A M KNOX
Hearing Date(s): 7, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 23, 24, 27, 28, 29, 30 APRIL, 1, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15 MAY, 5 JUNE 1970
Restrictive trade practices – Resale price maintenance – Reference for exemption – Medicaments – Ethical products obtained on prescription – Proprietary medicines sold over the counter – Chemists dependent on wholesalers for frequent deliveries – Market for ethical products not affected by commercial considerations – Price of ethicals fixed by voluntary price regulation scheme – Profits on fast-moving ethicals partially subsidising sales of slower-moving ethicals – Fear of chemists being put out of business – Ethicals within power of exemption only to extent of supply under private prescription – Resale Prices Act 1964, s 5(2)(a), (b), (e).
The storage accommodation of the average chemist shop was not large, but had to be used to carry a very varied stock of drugs including (a) between 1,000 and 2,000 different packs of ethical products (‘ethicals’) ie pharmaceutical products not promoted with a view to direct purchase by the public, but sold under brand names and principally obtained by the public on prescription; and (b) a stock of ‘proprietary medicines’, ie pharmaceutical products marketed under brand names and intended for direct sale over the counter to the public; as well as a large number of miscellaneous goods.
The number of ethicals produced was about 2,500, marketed in various formulations, strengths and sizes. The proportion of a retail chemist’s turnover which consisted of dispensing ethicals varied between 40 and 50 per cent, of which about 5 per cent was under private prescription and the remainder under the national health service. Chemists were able to foresee approximately their requirements in the fast-moving ethicals, but the demand for slow-moving ethicals, of which they could not hold large stocks, was unpredictable. Variations in the pattern and degree of demand meant that a chemist might be unable to dispense from stock. It was therefore necessary that he be able to obtain deliveries of small quantities of individual drugs with the shortest possible delay. Accordingly, while multiple chemists and hospitals might order large quantities of drugs direct from the manufacturers, who numbered about 200, most retail chemists depended on wholesalers for their supplies of ethicals, as did hospitals for emergency needs.
Page 13 of [1971] 1 All ER 12
The work of wholesalers in this trade differed from that of other wholesalers in that: (1) they had to deal with small quantities of a very wide variety of products; (2) they had to stock a very comprehensive range of ethicals at all times; and (3) they had to make very prompt deliveries, two or three times a day. Wholesalers also supplied their customers with technical information and other services. Without the wholesalers the retail chemists would not have been able to meet prescriptions on, or within a few hours of, presentation.
The trade in ethicals was exceptional in four respects: (1) the consumer, if he obtained ethicals under the national health service, was not concerned with the price, and even if he purchased them privately he did so because he needed them and was unlikely to be affected by the price; (2) the doctor and not the consumer selected the product, and the decision was unaffected by commercial considerations; (3) the prices charged by the manufacturers were decided not by reference to commercial factors but by a voluntary price regulation scheme, the object of which was to ensure that the prices of the products should be fair and reasonable; and (4) the demand for ethicals being based on considerations of health, the market would be unlikely to be significantly affected by a reduction in prices.
When retail chemists dispensed ethicals privately, the retail price was maintained at a level that provided for a 50 per cent mark-up on the trade prices. When dispensing under the national health service, the retail chemist was reimbursed the cost of ingredients at trade prices plus an on-cost allowance of 10 1/2 per cent to which was added a professional fee and a sum in respect of the container. Wholesalers generally allowed retailers two months’ credit; retailers were paid by the national health service in respect of their national health service dispensing as to 80 per cent of their estimated remuneration within two months and as to the balance within a further month. Wholesalers were generally required to pay manufacturers within 30 days, and were accordingly financing the stock-holding of the trade.
There was very active competition between wholesalers as to the services they provided. For clinical reasons it was necessary that a wide variety of ethicals should be available to the public. Because of resale price maintenance, the profits on the fast-moving ethicals partially subsidised the sales of the slow-moving ethicals.
There were 1,600 proprietary medicines on the market of which less than 200, being those widely advertised to the public, were sold through outlets other than chemist shops, although such outlets sold about 36 per cent in value of all sales of nationally advertised proprietaries. Trade in proprietary medicines constituted about 10 to 13 per cent of the total turnover of the average retail chemist, but brought a large number of customers into his shop and thus helped to promote the other goods stocked. The number of chemist shops had been steadily declining over a considerable number of years and in 1969 there were about 12,800 chemist shops of which a high proportion consisted of independent businesses, and of those about 40 per cent had a turnover not exceeding £20,000 per annum, which produced a net profit before payment of a pharmacist of no more than £2,400 per annum. Ease of access to a chemist shop was a matter of public importance because it was the old and infirm and the mothers of young children who made most use of them.
On a reference by the Registrar of Restricitive Trading Agreements of the applications by the pharmaceutical association and the proprietary associations for exemption from the general prohibition of resale price maintenance for ethical and proprietary drugs respectively under the Resale Prices Act 1964,
Held – (i) In respect of ethicals:
(a) if resale price maintenance were withdrawn, active price competition would rapidly develop at wholesale level. Short-range distributors would emerge who would make a quick profit by concentrating on the fastest-moving and most profitable section of the trade. Discounts would be offered and would be financed by economies in service, including a reduction in the number of deliveries, and with few exceptions
Page 14 of [1971] 1 All ER 12
long-range distributors of the existing kind would cease to exist (see p 25 d to h, post);
(b) the medicines dispensed by a chemist under the national health service were not ‘sold’ or ‘sold by retail’, so that s 5(2) of the 1964 Act did not apply (Pfizer Corpn v Ministry of Health [1965] 1 All ER 450, and Appleby v Sleep [1968] 2 All ER 265 applied); but s 5(2)(a) did apply to all ethicals held in stock by a retail chemist, as such ethicals were ‘available for sale’ while remaining in stock, and ethicals were sold by retail in chemist shops to members of the public who obtained prescribed medicines otherwise than under the national health service (see p 29 g and p 30 d and e, post);
(c) no detriment would result to any member of the public as the result of maintaining resale prices on ethicals, as under the national health service the consumer was unaffected by price, and private consumers could always have recourse to the national health service (see p 32 b, post);
(d) the removal of resale price maintenance from ethicals would result in a contraction of the stock of slow-moving ethicals held by wholesale distributors and would decrease the ability of retail chemists to meet prescriptions from stock and would accordingly reduce substantially the availability of ethicals in the chemist shops to such a degree as to amount to a detriment to those members of the public who consumed or used them. The pharmaceutical association had, accordingly, established its case under s 5(2)(a) (see p 26 j to p 27 b, post);
(e) the delivery service provided by the wholesalers was sufficiently closely associated with retail sales under private prescription to be properly described as ‘provided in connection with’ such a sale within the meaning of s 5(2)(e). The removal of resale price maintenance would result in a substantial contraction in that service, which would operate to the detriment of those members of the public who obtained prescribed medicines by retail purchase, and the pharmaceutical association had, accordingly, established its case under s 5(2)(c) (see p 30 g to p 31 d, post).
(ii) In respect of proprietary medicines, on the abolition of resale price maintenance, competition would develop at retail level and supermarkets would increase the range of proprietary medicines which they stocked, concentrating on the most popular brands, and would make regular cuts in prices. This would not only affect the retail chemists’ turnover in proprietary medicines, but also the other goods in which they dealt, and the rate at which retail chemists were going out of business would increase. While the total number of outlets for the popular brands of proprietary medicines would not be reduced, because they would become more readily available at supermarkets, the number of outlets for slow-moving proprietary medicines would be reduced and the disappearance of the retail chemists would also reduce the number of places at which the public could get prescriptions dispensed, and this reduction would be detrimental to those members of the public who wished to buy such proprietaries. This detriment outweighed the detriment resulting from the maintenance of resale prices, namely the foregoing of rather lower prices on some proprietary medicines, and accordingly the proprietary associations had established their case under s 5(2)(b) (see p 27 d and f to j, post).
(iii) Therefore, ethical drugs and proprietary medicines would be declared exempt goods under the Act (see p 32 g, post).
Notes
For restriction on individual minimum resale price maintenance, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 93A.
For the Resale Prices Act 1964, s 5, see 44 Halsbury’s Statutes (2nd Edn) 1278.
Cases referred to in judgment
Appleby v Sleep [1968] 2 All ER 265, [1968] 1 WLR 948, Digest Supp.
Pfizer Corpn v Ministry of Health [1963] 3 All ER 779, [1964] Ch 614, [1963] 3 WLR 999, affd HL [1965] 1 All ER 450, [1965] AC 512, [1965] 2 WLR 387, Digest (Cont Vol B) 588, 1932a.
Page 15 of [1971] 1 All ER 12
Cases also cited
Bird, Re, Watson v Nunn [1927] 1 Ch 210.
Chemists’ Federation, Re agreement between members of [1958] 3 All ER 448, (1958) LR 1 RP 75.
Chocolate and Sugar Confectionary Resale Price Reference, Re [1967] 3 All ER 261, (1967) LR 6 RP 338.
Cramas Properties Ltd v Connaught Fur Trimmings Ltd [1965] 2 All ER 382, [1965] 1 WLR 892.
Footwear Resale Price Reference, Re [1968] 3 All ER 129, (1968) LR 6 RP 398.
Hall & Co v London, Brighton and South Coast Ry Co (1885) 15 QBD 505.
Heydon’s Case (1584) 3 Co Rep 7a.
Kimpton v Steel Co of Wales Ltd [1960] 2 All ER 274, [1960] 1 WLR 527.
Kirkness v John Hudson & Co Ltd [1955] 2 All ER 345, [1955] AC 696.
Lee v Showman’s Guild of Great Britain [1952] 1 All ER 1175, [1952] 2 QB 329.
Medicaments Reference, Re (1970) LR 7 RP 1.
Net Book Agreement 1957, Re [1962] 3 All ER 751, (1963) LR 3 RP 246.
Newspaper Proprietors Agreement, Re [1963] 1 All ER 306, (1963) LR 3 RP 360; on appeal, sub nom Associated Newspapers Ltd v Registrar of Restrictive Trading Agreements [1964] 1 All ER 55, (1963) LR 4 RP 361.
Roberts v Dorman Long & Co Ltd [1953] 2 All ER 428, [1953] 1 WLR 942 Stevens v Cuckfield Rural District Council [1960] 2 All ER 716, [1960] 2 QB 373.
Reference
This was a reference to the court by the Registrar of Restrictive Trading Agreements under s 6(1) of the Resale Prices Act 1964 of medicaments as a class and a number of particular medicaments or classes of medicaments and allied products including certain accessories. Goods used for veterinary purposes as well as medicaments used for human consumption or use on human beings were included. Three registered suppliers of goods referred to the court entered an appearance: the Proprietary Articles Trade Association and the Proprietary Association of Great Britain (‘the proprietary associations’); the Association of British Pharmaceutical Industry (‘the pharmaceutical association’), in respect of whose goods four notices of reference had originally been issued but, by a later amendment pursuant to the application of the association, all goods produced by the association’s members were incorporated into the reference; and Boots Pure Drug Co. Further applications by the pharmaceutical association: (1) to exclude ethical medicaments from the reference and to direct the registrar to issue a separate notice of reference in respect of ethical medicaments; and (2) to direct the trial as a preliminary point of law of the question whether ethical medicaments were goods sold by retail within the meaning of s 5(2) of the 1964 Act, were refused by the court (Buckley P, Major-General W E V Abraham, Sir Eric Bingen and Mr N C Pearson) on June 18 1968, reported sub nom Re Medicaments Reference at (1968) LR 7 RP 1. The facts are set out in the judgment of the court.
R I Threlfall QC and A P Graham-Dixon for the proprietary associations.
Charles Sparrow QC, Guy Seward and A Duckworth for the pharmaceutical association.
R I Kidwell QC, R A Barr and G S Lawson Rogers for the registrar.
Cur adv vult
5 June 1970. The following judgment was delivered.
BUCKLEY P read the judgment of the court. In this case the Registrar of Restrictive Trading Agreements has referred to the court under the Resale Prices Act 1964, medicaments as a class and a number of particular medicaments or classes of medicaments and allied products including certain accessories. The classes of goods referred include goods used for veterinary purposes as well as medicaments used for human consumption or use on human beings. The case has, however, been contested only in respect of two particular classes of medicaments namely (a) what are known as ethical products, and (b) proprietary medicines.
Page 16 of [1971] 1 All ER 12
The expression ‘ethical products’ means pharmaceutical products not promoted with a view to direct purchase by the public, but sold under brand names and principally obtained by the public on prescription of a medical or dental practitioner. The expression ‘proprietary medicines’ means pharmaceutical products marketed under brand names and intended for direct sale over the counter to the public without the need for any professional prescription. Neither class includes veterinary products. At the present time there are some 2,500 ethical products (which for simplicity we will call ‘ethicals’) in production. These are put up in various formulations, strengths and sizes and consequently the number of packs available is much in excess of 2,500 and can be taken as being somewhere in the neighbourhood of 9,000 to 10,000. The pharmaceutical industry is an industry in which research and development are very active. New products are frequently put on the market, and the fashions in prescriptions are liable to change.
The business of retail chemists consists of: (a) dispensing in response to prescriptions from doctors or dentists; (b) the sale of proprietary medicines; and (c) the sale over the counter of a large number of miscellaneous goods, such as cosmetics, photographic material, toiletries and so forth, which have become traditionally connected with the trade of a chemist.
Much the greatest part of the dispensing which the retail chemist does is under the national health service. The proportion of the turnover of a chemist which consists of dispensing varies rather widely with the conditions of his business and, in particular, its location and the public which he serves. Broadly it may be said to constitute from 40 to 50 per cent of his total turnover but in some cases it will be less than 40 per cent and in some cases more than 50 per cent. The proportion of his dispensing business which consists of prescriptions paid for by the customer and not obtained under the national health service also varies widely according to the circumstances of the chemist’s business. We had evidence from one chemist carrying on business not far from Harley Street in London whose dispensing turnover was only 25 per cent of his total turnover but one quarter of that 25 per cent consisted of private prescriptions. By way of contrast we had evidence from another chemist carrying on business in a small town in the west country whose dispensing business constituted 58·5 per cent of his turnover and included practically no private prescribing at all. In the case of a chemist carrying on business in a south coast seaside town with a very large proportion of elderly residents, his dispensing accounted for 59·5 per cent of his total turnover and, of this, 7 per cent of the total turnover represented private prescriptions. Over the country as a whole it is probably not far out to say that private prescriptions constitute slightly more than 5 per cent of the total prescriptions dispensed in the country, including prescriptions for oral contraceptives, which are not obtainable with the national health service. In 1968 the value of national health service prescriptions was £152,000,000 according to the annual report of the Department of Health and Social Security. Private prescriptions were probably of a value of about £8,000,000 to £9,000,000 and of this amount something like one-ninth would be in respect of prescriptions other than prescriptions for oral contraceptives, the balance being for oral contraceptives.
The rate at which a chemist may be required to fulfil prescriptions for his customers will vary widely according to the season of the year and the state of health of the public. At certain times of the year the demand will be relatively small, at other times and particularly when there is an epidemic of influenza or any other sort of epidemic it may become very intense. The traditional chemist shop is not, as a rule, very large and the storage accommodation of most chemists is limited. That accommodation has, however, to be used for carrying a very varied stock of drugs including probably between 1,000 and 2,000 different packs of ethicals as well as a stock of proprietary medicines and other more bulky miscellaneous goods in which he deals.
Naturally some drugs are in much more frequent demand than others and of these
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the chemist can, within limits, foresee his requirements with reasonable precision, but these will be the more usual items of his prescribing stock and his space will not permit him to carry more than a few days’ supply of these fast-moving drugs. In order to be able to meet on demand the prescriptions that are brought to him the chemist must also maintain a stock of some of the less usual and slower-moving ethicals, but since these by their nature are likely to be less frequently required than the faster-moving lines the chemist will not want to hold a large stock of any one of these slower-moving drugs. The chemist’s business consequently requires him to hold a very varied stock of ethicals but consisting of comparatively small quantities of each component of his stock. A chemist may find himself unable to dispense from stock on account of: (a) a demand for an unusual drug; (b) a demand for a new drug; (c) a change in a local doctor’s prescribing habits or a prescription from a new doctor; or (d) an unusually heavy demand for drugs usually held in stock. In any of these events he must meet the demand with the shortest possible delay, but he can never forecast his requirement of ethicals accurately in view of fluctuations in demand due to epidemics and differences in doctors’ prescribing habits.
The chemist’s aim must be to be able to dispense any prescription which is brought to him from his stock so far as he possibly can, and when he cannot meet the prescription from stock he needs to be able to obtain deliveries of the necessary drugs at very short notice. It is, therefore, necessary for efficient operation of his business that he should be able to replenish his stock of ethicals by deliveries of small quantities of individual drugs at frequent intervals and at short notice. These characteristics of the retail chemist’s business make it essential for him to have at his disposal the services of a stock-holding wholesaler carrying a very wide range of ethical drugs. There are now altogether some 12,800 chemist shops in Great Britain and it would be manifestly impossible for them to obtain from the manufacturers, who number about 200, the supplies which they require in small quantities and with very rapid delivery. Consequently the services of a wholesaler are essential. Some multiple chemists and some chemists who operate as buying groups are able to buy ethicals in quantities which justify placing orders direct on manufacturers or placing orders on wholesalers of a size which enables the purchasers to obtain quantity discounts, but this is the exception rather than the rule, which is that retail chemists obtain their supplies of ethicals from wholesale distributors. Hospitals on the other hand obtain their supplies mainly direct from the manufacturers, but they make use of the wholesalers to meet their emergency needs and for other special purposes.
Most of the wholesale distributors are members of the National Association of Pharmaceutical Distributors, which has 55 members with 158 depots in various parts of the country. Only four of these wholesalers have more than 10 depots, 16 have between two and ten depots each and the remaining 35 have one depot each. As the business of a wholesale distributor of ethicals depends very largely on prompt and speedy delivery the extent of the operations of any wholesale depot will depend on the limits within which it can deliver by road. The business of each wholesaler is consequently restricted to an area within the practicable radius for delivery from his depot or depots. These depots operate in much the same way as any other wholesale distribution depot. They obtain supplies from the manufacturers and store the stock which they hold. They receive and process orders from their customers and they deliver the goods to their customers. There are, however, certain aspects in which the pharmaceutical distributor differs from equivalent organisations in other fields, eg in the grocery trade. First, the pharmaceutical wholesaler must deal with orders for small quantities of a very wide variety of products. Secondly, he must, so far as is possible, keep a very comprehensive range of ethicals available in his warehouse at all times. Thirdly, his deliveries must be extremely prompt. In urban areas pharmaceutical distributors normally provide two or even three deliveries a day. In country areas two deliveries a day are common and even in remote areas once a day is normal.
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It is customary for the wholesaler to telephone his retail chemist customers at prearranged times once or twice a day. Orders placed in the morning will be delivered in the afternoon; orders placed in the evening will be delivered in the following morning. Special deliveries will be made in cases of emergency at any time. This system enables the retail chemist to meet nearly all his prescriptions with promptness and to maintain an efficient stock control notwithstanding that he holds only a very small quantity of any particular ethical drug. When a prescription calls for the use of some drug which the chemist has not in stock, he can obtain it within a matter of hours. In effect, in this trade it is the wholesalers who are the stockholders. This is of particular importance in the case of dangerous drugs of which retail chemists do not like to carry any substantial stocks and in respect of which the wholesalers provide special security precautions.
In addition, most wholesalers offer a special dispensing service for the preparation of small quantities of unusual products or unusual strengths of particular formulations, and provide their customers with technical information on all matters relating to the drugs in which they deal. It can be fairly said that the stockholding wholesaler is an essential part of the mechanism of this trade. Without his services it would be impossible for prescriptions to be met, as nearly all are at present, on presentation or at any rate within a few hours of their being handed to the chemist.
Some ethicals, as we have already remarked, are in much more constant demand than others. An analysis of the business at a depot of one of the big wholesalers disclosed that from a stock of rather more than 8,000 ethical packs 625 packs, ie about 7·7 per cent of the whole, accounted for 70 per cent in value of sales of all ethical products from that depot in one month.
Another exercise, which was carried out by one of the witnesses who gave evidence before us in terms of products as distinct from packs, discloses that the 200 ethical products which had the greatest sales during the year ended 30 November 1969 accounted for 72·9 per cent of all the sales of ethical products for human use during that year, and that the 200 products with the next largest sales accounted for 15·1 per cent of the total sales of such products during the year. Thus 16 per cent of all ethical products realised 88 per cent of all sales of ethical products during the year; but, although these fast-moving ethicals are in much greater demand than the long tail of slow-moving ethicals, it does not at all follow that the slow-movers are less important. To the sufferers from those ailments for which the slow-movers are appropriate they are just as important as the fast-movers are to those patients to whom they are appropriate.
The trade in ethical drugs is in many respects exceptional. First, the consumer, ie the man who takes the medicine, is not concerned with the price. If he obtains his medicine under the national health service he pays the chemist a prescription charge of 2s 6d (unless exempt) and nothing more. The chemist is remunerated by the State. If he obtains his medicine not under the national health service but at his own expense, he buys it not because he wants to but because he needs to, and it is unlikely that his mind will be affected by price. Secondly, the man who takes the medicine does not decide what he shall take. That decision is made by his doctor and is uninfluenced by commercial considerations. Thirdly, the prices charged by the manufacturers are not controlled by normal commercial factors but are decided under a voluntary price regulation scheme to which the government is a party. A scheme of this nature first came into operation in June 1957. It has been revised on three subsequent occasions. The latest scheme, which came into operation on 17 November 1969, was made in the light of the recommendations of the Sainsbury Committee of Enquiry into the relationship of the pharmaceutical industry with the national health service. It is intended to apply to all companies supplying medicines which are prescribed under the national health service by medical or dental practitioners with certain exceptions which are unimportant for present purposes. The object
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of the scheme is to ensure that the prices of the products to which it applies shall be fair and reasonable.
The test under the scheme, which is voluntary but universally accepted, is whether or not the profits earned by individual companies from home sales are accepted by the Department of Health and Social Security as reasonable having regard to the circumstances of the individual company, the special characteristics of the pharmaceutical industry and the profitability of United Kingdom manufacturing industry as a whole. Each company is required to submit to the Department of Health and Social Security an annual financial return in a prescribed form giving financial information on sales, costs and expenses, profits and capital employed. The Department will notify the company whether it wishes to enter into negotiations based on the annual return. These negotiations will be directed initially to determining whether the profits of the company for the latest financial year are reasonable. If the Department concludes that the profits are higher than is reasonable the negotiations will be directed to reaching agreement on the price reductions estimated to be necessary to bring the profits down to a reasonable level. The Department may call for, or a company may of its own volition, submit relevant information additional to that furnished in the annual return. The two principal objectives of the scheme are: first, to maintain prices at a reasonable level; and, secondly, to hold prices steady and to ensure that they will not be raised without good reason established to the satisfaction of the Department.
A price negotiated under the scheme for a particular pack of a product is the trade price, ie the price charged on a sale of that pack to a retail chemist by the manufacturer or by a wholesaler, where no special discount terms for quantity are applicable. Such prices have been negotiated in the knowledge on both sides that the accepted wholesale discount rate is 15 per cent on the trade price. This is in fact the rate of wholesale discount which manufacturers customarily allow to wholesalers in this industry. There are a few products in respect of which the discount allowed is no more than 12 1/2 per cent, associated in some cases with a further 2 1/2 per cent discount for prompt payment.
Fourthly, the market in medicaments is a market in which the demand is unlikely to react to any significant extent to a reduction in prices. The demand for its products is dependent not on economic considerations but on considerations of health. These special factors combine to make the trade in ethicals a very special one, largely immune from the normal workings of economic forces. Most manufacturers of ethical drugs enforce the maintenance of resale prices in respect of their products. They stipulate that the wholesaler must sell at the trade prices agreed with the voluntary price regulations scheme. The resale prices of more than 80 per cent in value of all ethical sales are maintained. In respect of these ethicals, therefore, the wholesaler could not, even if he would, pass on to the retailer any part of the wholesale margin allowed to him by the manufacturer. Where a retail price is relevant the retail margin normally permitted and insisted on is a 50 per cent mark-up on the trade price, but where ethical goods are supplied under the national health service the chemist does not receive a retail price in the normally accepted sense of that term. He is remunerated for prescriptions under the national health service in accordance with regulations which form part of his conditions of service. Under these regulations he is reimbursed the cost of the ingredients prescribed and dispensed at trade prices plus an on-cost allowance of 10 1/2 per cent on the ingredient cost of the prescription. To this a professional fee is added in accordance with a prescribed scale according to the type of prescription, and a further small sum is added at a fixed rate in respect of the chemist providing the necessary container.
At the end of each month the chemist makes a return to the National Health Service Pricing Bureau of the number of prescriptions he has dispensed during the previous month and of the amount of the prescription charges which he has received. Thus on or about 1 February he makes a return in respect of the month of January.
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Soon after 1 March he will receive 80 per cent of the estimated value of the prescriptions dispensed in January, the estimate being based on the average cost per prescription of previous months. The return which he made at the beginning of February will have been accompanied by the actual prescription forms for all prescriptions which he dispensed in January. During February and March these prescriptions will have been individually priced by the pricing bureau and soon after 1 April he will receive the necessary balance to make up the total of his remuneration in respect of the month of January.
In respect of any month in which he has dispensed more than 1,000 prescriptions a discount will be deducted from the remuneration to which he is entitled on a scale which varies according to the number of prescriptions dispensed during the month. This discount constitutes a recognition of the fact that if a chemist has dispensed a large number of prescriptions it is likely that his business is of such a size that he will have been able to buy some of his ethicals in quantities entitling him to quantity discounts. The discount which is brought into the calculation of his remuneration under the national health service is an arbitrary figure which is not related in any real sense to any actual discounts which the chemist has received. The amount of the prescription charges which he has received from patients is also deducted from the remuneration calculated in accordance with the regulations to which we have referred and is thus treated as a receipt on account of such remuneration.
The effect of this system is that a chemist is remunerated for prescribing under the national health service between two and three months in arrear, but receives 80 per cent of his estimated remuneration one month earlier on account. This has a considerable bearing on the credit structure of the trade. Wholesalers in this industry customarily supply goods on terms that they shall be paid for within 30 days from the end of the month in which the goods were invoiced, but this term is never in practice enforced at present. Until recently most distributors have been accustomed to allow three months’ credit to their customers, but this has now been generally reduced to about two months’ credit. Consequently at present a chemist has to pay for ethical goods which he has acquired at about the time when he receives payment for dispensing them. Most manufacturers require payment by wholesalers on a 30 day basis, so that the wholesalers are financing the stockholding of the trade to the extent of one month’s supply at least; whereas the retail chemist is able to dispense from an adequate stock on a very small working capital.
The effect of resale price maintenance in a trade constituted in the way in which this trade is constituted is that the profits on the fast-moving ethicals partially subsidise the sales of the slow-moving tail. It is common ground that a very wide variety of ethical drugs is necessary for clinical reasons and that it is impossible for a chemist to stock all the ethical drugs which he will be called on to dispense. It is also common ground that the existing distribution system of ethical products is dependent on the existence of, and the service provided by, the pharmaceutical distributors; that it is essential for the retail chemist to be able to obtain rapidly both replacements for stock he normally holds and also those ethical products prescribed which he does not carry in stock; and that the existing distribution system efficiently meets this need. It is further common ground that there is in this industry very active competition between wholesale distributors in relation to service although, on account of the existence of resale price maintenance in the industry, there is not competition in price.
The services which the wholesalers provide and in particular their delivery service are expensive and their overheads are high. It is not suggested that the wholesalers make any unreasonable profits. Figures provided by the pharmaceutical association’s accountant witness based on a sample of wholesaler companies showed profits over a period of three years of the order of 2·6 per cent of turnover before taxation and interest on borrowed capital is taken into account, and 1·1 per cent of turnover after making provision for interest on borrowed capital but before taxation. These
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profits represent an annual return on capital employed, including loan capital and other sources of finance, at the rate of 11·6 per cent before interest charges and taxation, or an annual return on the moneys provided by shareholders or proprietors (after making suitable adjustments to take inflation into account) at the rate of 15·2 per cent after making provision for interest on loan capital but before taxation. It is clear that the wholesalers operating on margins such as these could not afford to make any substantial price reductions unless at the same time they effected some significant economies in their own running expenses.
On behalf of the pharmaceutical association it is said that the ending of resale price maintenance on ethicals would immediately result in active price competition at the wholesale level. This it is suggested would take the form of the emergence of a new type of distributor who has been called in the course of the argument a short-range distributor. Such a distributor would concentrate on the relatively small class of fast-moving ethicals which are the most attractive part of the business, offering the largest profits and the quickest returns. Such a distributor, it is said, would not only restrict his range of goods but also would drastically restrict the services which he offered in conjunction with the range in which he dealt and, in particular, his delivery service, reducing it to perhaps two or three deliveries a week. By these means he would avoid much of the overheads incurred at present by the distributors and would be able to offer to retail chemists discounts of very attractive size up to, it was suggested, 7 1/2 per cent, or even more.
It is said that the existing long-range distributors would be unable to ignore this competition and would themselves be bound to restrict either the range of goods in which they deal or the service which they provide, or both, with the result that in the long run the business of all distributors would approximate to that of the short-range distributor. It is suggested that as a result of this the varieties of ethicals readily available to consumers would be substantially reduced to the detriment of the public as consumers or users of ethicals and that at least one necessary service provided with the supply of ethicals, namely the delivery service, would be substantially reduced to the detriment of the public as such consumers or users.
It is further contended by the pharmaceutical association that the short-range distributor would require cash payment from customers or would at least offer much less good credit terms than those at present offered by the existing distributors and that in order to meet the conditions of competition which would arise with the emergence of the short-range distributor the established distributors would themselves be bound to restrict the credit facilities which they at present offer to their customers. This, it is said, would result in a substantial number of dispensing chemists whose business is at present only marginally profitable going out of business with a consequent reduction in the number of establishments in which ethicals are dispensed to the public and a resulting detriment to the public as consumers or users of such products.
On the other hand on behalf of the registrar it is said that if resale price maintenance were ended the retail chemists would act rationally and would not seek to obtain discounts of such a kind as would result in their becoming deprived in the course of time of those services from the wholesalers on which the proper conduct of their own business depends, that is to say, primarily, the holding of a full range of ethical goods and the provision of that sort of delivery service which the wholesalers at present provide.
It is said that in the conditions of competition which would exist after the ending of resale price maintenance the retail chemists would be able to ensure a greater flexibility in their dealings with the wholesalers and procure for themselves that mixture of lower prices and services which was most appropriate to their own needs. Consequently, according to the registrar’s contention, the short-range distributor, if he in fact emerged, would not gain a very extensive allegiance among the retail chemists. Chemists might obtain some of their fast-moving drugs from such a source
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of supply, but they would continue to support the traditional wholesaler as he exists today in order to maintain a supply of the slow-moving tail of ethicals and also to retain the benefit of the delivery service which existing wholesalers provide. The registrar does not deny that some price competition would develop at the wholesale level, but he says that the consequences would be far less extreme and much less dramatic than the respondents contend.
Before we attempt to deal with these arguments it will be convenient if we state the facts relating to that part of the case concerned with proprietary medicines. It seems that there are some 1,600 proprietary medicines at present on the market. Of these rather less than one-quarter are extensively advertised to the public. The outlets through which these goods are sold to the public are largely and traditionally chemist shops. They are also sold through grocers and through various outlets which have been referred to as ‘convenient outlets’, such as general stores in country districts, newsagents shops, tobacconists, confectioners and so forth. Less than 200 proprietary medicines are sold through outlets other than chemist shops. These are some of the proprietary medicines which are widely advertised to the public. By no means all of them will be found in any one non-chemist outlet.
The proportion of a retail chemist’s turnover represented by his trade in proprietary medicines varies considerably in accordance with the conditions of his business but the average may be taken to be somewhere between 10 per cent and 13 per cent of total turnover; but since the cost of proprietary medicines is relatively low the proportion of his sales and therefore of the number of customers served represented by sales of proprietary medicines will be considerably higher than this. Resale prices are not maintained in respect of all proprietary medicines but it can be taken to be broadly true that all those proprietary medicines which are at present dealt in through non-chemist outlets, and all those proprietary medicines in which such outlets would be anxious to deal if resale price maintenance were abolished, are at present price-maintained.
The supply of household medicines supplements in an important respect other forms of medical care. It is estimated that less than one-third of all illness is likely to receive professional medical attention. It is therefore of importance to the proper functioning of the national health service that there should be an adequate and efficient supply of household medicines available to the public.
Although the range of proprietary medicines at present sold through non-chemist outlets is small, the amount involved is substantial and is of the order of 36 per cent in value of all sales of nationally advertised proprietary medicines. Non-chemist outlets are at present prevented by resale price maintenance from price-cutting on those lines of proprietary medicines in which they deal and they do not promote them or feature them prominently in their business, but this would not be the case if resale price maintenance were removed. The evidence indicates that in these circumstances supermarkets and other non-chemist outlets would cut prices to a considerable extent at times of the year when certain types of proprietary medicines are particularly in demand. Perhaps we may say, parenthetically, that this is a market in which, in our view, thrusting salemanship is rather out of place. The public should not be encouraged to buy more medicaments than they truly need.
The price importance to the retail chemist of his sales of proprietary medicines is the large number of customers which they bring into his shop. A customer will visit a chemist shop much more often to buy proprietary medicines than he will need to visit that shop to have a prescription made up. The chemist’s trade in proprietary medicines is accordingly closely linked with his trade in those other over-the-counter commodities in which he deals, and the number of customers who visit his shop to buy proprietary medicines is a significant factor in promoting the sales of his other lines.
The retail chemists fear that, if resale price maintenance is withdrawn from
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proprietary medicines, these types of medicament will be sold more freely in non-chemist outlets and particularly in the supermarkets and food stores where prices will be cut and, at certain times of the year, cut heavily. This, they say, is bound to affect adversely the habit of the public to resort to chemist shops for proprietary medicines. If the housewife becomes accustomed to buy the medicines she needs for her medicine cupboard at the supermarket, she will do so in the course of her other household shopping and will be less inclined to visit the chemist shop with a consequent loss to the chemist not only of sales of proprietary medicines but also of sales of his other over-the-counter lines.
The basic margins available to retailers expressed as a percentage of retail selling price on nationally advertised proprietary medicines of the leading manufacturers range from 18 to 25 per cent before purchase tax and on unadvertised or slow-moving products from 25 per cent to (exceptionally) 33 1/2 per cent before tax. Additional discounts for quantity are of the order of 5 per cent to 12 1/2 per cent dependent on the size of the order. An ordinary retail chemist will be unlikely to buy any slow-moving product in sufficient quantity to qualify for quantity discounts and the best possible rate is consequently of the order of about 35 to 37 1/2 per cent on retail selling price before purchase tax. The retail chemists emphasise that in the chemist shop there is available to the customer the expert professional advice of a qualified pharmacist which is not available in non-chemist outlets. The remuneration of a qualified pharmacist constitutes part of the overheads of the retail chemist which is not reflected in the overheads of non-chemist outlets.
Of the 12,800 or so chemist shops that at present exist some are owned by companies with multiple chains, among which Boots is pre-eminent. There are other smaller chains of multiples, but much the largest number of retail chemists consists of independent businesses, a large number of which are small with a turnover not exceeding £20,000 or thereabouts per annum. Probably about 40 per cent of all the existing chemist shops are of this kind having a turnover of about £20,000 per annum or less. Assuming a net profit at the rate of 10 to 12 per cent, which the evidence indicates to be realistic, a pharmacist with a turnover of £20,000 a year would realise a net profit of no more than £2,000 to £2,400 per annum, before taking his own remuneration into account. To earn this he must in many cases work very long hours with very little holiday. Nowadays there are other opportunities open to a trained pharmacist, eg as a salaried manager of a pharmacy, or in industry, or in the hospital service, in which he could earn a salary of at least this amount with less responsibility and risk and with a prospect of a pension.
The object of the supermarket and other similar outlets in an era of price competition in proprietary medicines would be to obtain a larger share of the market in those goods. The public demand for such goods being inelastic, any gain that the supermarket and other like outlets might make in this respect must be reflected in a loss of sales by the retail chemists. Supermarket trading is on the increase. For example, the Tesco group of supermarkets is increasing at the rate of about 50 supermarkets a year at present, and it seems not unreasonable to estimate the number of visits which their customers make to their supermarkets at between 7,000,000 and 8,000,000 visits a week. At present the range of proprietary medicines carried in Tesco stores is limited because they are price-maintained. The evidence shows that if price maintenance were withdrawn Tesco’s aim would be to extend their range of proprietary medicines to cover the everyday needs of the average housewife at reduced prices.
Very many of the smaller chemist shops are either in rural areas or in urban areas but situate not in shopping centres. These shops enjoy little passing trade and are dependent to a great extent on customer loyalty for the maintenance of their turnover. They would suffer severely from any success on the part of the supermarkets and other like businesses in changing the shopping habits of the public so that it became more common for proprietary medicines to be bought elsewhere than in
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the chemist shop. Such a change would lose them trade not only in proprietary medicines but also in the other over-the-counter goods in which they deal. If the housewife buys her medicines at the supermarket she will have less occasion to visit the chemist shop and so she will find it more convenient to buy those other lines of goods which she might otherwise have bought from the chemist at the supermarket or somewhere else in the course of her shopping in the shopping centre.
Some manufacturers of well-known brands of medium priced cosmetics as well as manufacturers of a considerable number of proprietary medicines at present follow a practice of marketing their products only through chemist shops, but if the turnover in their goods in chemist shops were to fall as a result in the general fall of business in those shops it is likely that these manufacturers would be driven to reconsider their policy and would abandon their present practice and make their goods available in other outlets as well as in the chemist shop.
The retail chemists’ case is presented by the proprietary association primarily under s 5(2)(b) of the Act, although some reliance is also placed on para (a) and (e) of that subsection. It is said that the adverse effect on the trade in the retail chemist shop which would result on the introduction of price competition for the reasons already indicated would result in a number of marginal chemist shops going out of business at a fairly early date, so that there would be a significant reduction in the number of establishments in which proprietary medicines are sold retail and that this would be a detriment to the public as consumers or users of proprietary medicines. It is also said that with the disappearance of those outlets there would disappear the advantage to the public of the professional advice which the qualified pharmacist in those outlets had been accustomed to give to the public.
The number of retail chemist shops in the United Kingdom has been declining for a considerable number of years. In 1954 there were 15,300. By 1959 the number had declined to 15,000. At December 1964 it was 14,300 and at December 1969 12,800. The decline in 1969 was steeper than in any preceding year but this was contributed to, to a considerable extent, by the merger of Boots and Timothy White and the consequent closure of a number of branches. This trend, we think, reflects the general trend away from small local business, and is to be attributed in the main to the economic climate of the age and to the fact that increased mobility on the part of the public has resulted in a decline in local shopping.
Before we deal with some interesting points of law which have been raised on the application of the Act to the circumstances of this particular industry we will proceed to state our view of the evidence on the facts relative to the cases both of the wholesalers and of the retailers. We have heard most helpful evidence from a representative body of pharmaceutical manufacturers, wholesalers and retailers, as well as from medical general practitioners, hospital pharmacists, an academic pharmacologist, cut-price retailers and two professional economists, as well as from officials of the associations. The trade witnesses were unanimously of the opinion that, if resale price maintenance were removed, price competition would occur, in the case of ethicals at wholesale level and in the case of proprietary medicines at retail level. They were at variance about the likely consequences and about how the various interests concerned would react. Of the two professional economists, Mr C J M Hardie, called by the associations, expressed views with which in general we agree in this judgment. Mr Henry Smith, called by the registrar, is an economist of high academic standing who has for many years been a sincerely convinced advocate of the abolition of resale price maintenance. He gave his evidence most carefully and objectively, and in certain respects, having heard the associations’ evidence, he modified the full effect of the views originally expressed in his proof, but he remained firmly of the opinion that the removal of resale price maintenance in the pharmaceutical industry would result in an improved mixture of cheaper prices and adequate services. We have given his evidence the careful consideration which it deserves, and have reached the conclusion that Mr Smith has not given sufficient weight to
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the unusual characteristics of this industry. It is clear, we think, that the exceptional character and circumstances of this industry render it peculiarly immune from some of the ordinary effects of economic pressures and processes. In this respect the industry seems to be unique.
Secondly, many of the retail outlets are only marginally profitable and consequently are very vulnerable to any change in their economic position. The evidence in our judgment establishes that any pharmacy with an annual turnover of less than £25,000 is likely to prove unsaleable unless it can be shown to have undeveloped potentialities. It seems to us to be clear that the small independent retail chemist is a disappearing species, and that without regard to the possible results of abolition of resale price maintenance a large number of this type of business is likely to disappear during the next few years without replacement.
We consider, however, that ease of access to a chemist shop is a matter of public importance, particularly having regard to the fact that many members of the public who make most use of the chemist shop are old, infirm or mothers of young children. A plentiful and well-distributed supply of such shops is therefore desirable.
We feel no doubt that, if resale price maintenance were withdrawn from ethicals, active price competition would rapidly develop at the wholesale level. The evidence has satisfied us that the emergence of distributors operating along the lines of the suggested short-range distributor is probable. A short-range distributor could, it seems, make a quick and substantial profit from a comparatively simple and risk-free operation. Such distributors would not carry a full range of ethical goods but would concentrate on that section of the trade which is most profitable, which moves most quickly and which is most easy to promote.
To secure business and to increase his share of the market the operator would endeavour to give as attractive discounts to customers as he could manage. He would inevitably have to find the necessary margins by economies in the services provided for his customers. The most obvious and most probable field for such economy would be the delivery service. The number of such short-range distributors would depend on the readiness of existing distributors to adapt their range of price and service to the new competitive climate. In the initial stages one would expect at least one short-range distributor in each heavily populated area in the country with the number increasing according to their degree of success, and dependent on the readiness of other distributors to meet the competition.
Most of the existing distributors would be reluctant to follow this example and to reduce either the range of products in which they deal or the services they offer to retailers; but, in view of the immediate loss of profitability to them which would be occasioned by the new price competition, they must inevitably do so sooner or later or go out of business. The extent and nature of this new type of competition would probably vary in different parts of the country, as also would the reaction to it by the existing distributors, but it seems to us to be probable that within two or three years few long-range distributors of the existing type would remain and that the quality and range of service would have greatly contracted.
In particular, we think that a drastic reduction in the number and promptness of deliveries given by the wholesalers would be certain. Other services which the distributors at present provide for the retailers such as technical advice and information and a special compounding service would also be likely to suffer and credit might be drastically reduced. We do not think that the existing distributors would be able to help themselves effectively by surcharges on the slower-moving ethical drugs.
On behalf of the registrar it has been contended that retail chemists acting rationally in their own best interests will be unlikely to seek, or to be attracted by, discounts which in the long run would be calculated to endanger those services and in particular the delivery service which the wholesalers at present provide and which the retail chemists regard as being of the highest importance to their business,
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although the increased flexibility which would result from the abolition of resale price maintenance might result in chemists reorganising their affairs so that they would get a different mix of prices and services. We are satisfied, however, that retail chemists would gladly accept discounts where they could obtain them. The attraction of price reductions would in fact be very strong. If 50 per cent of the business of a chemist with an annual turnover of £20,000 is accounted for by prescribing, and if 70 per cent of his purchase of ethicals, ie of prescription goods, is of fast-moving ethicals, his annual turnover in fast-movers will be of the order of £7,000. A cut of 5 per cent of the prices of these drugs will increase his net profit by £350 per annum, an increase of 17 per cent on an assumed net profit of £2,000 per annum.
Notwithstanding that we accept that retail chemists regard the wholesalers’ delivery service as being of vital importance to their business, we do not think that chemists in general would regard it as irrational to accept cuts in prices of fast-moving ethicals. Although the trade prices fixed under the voluntary price regulation scheme and used for calculating chemists’ remuneration under the national health service might very possibly fall at some stage in consequence of the availability of fast-moving ethicals at reduced prices, with the consequence that not only would chemists pro tanto lose the advantage of the reduced prices but they would also suffer a reduction of their on-cost payment calculated on the ingredient value of their prescribing business, this would be unlikely to happen at once and might we think never overtake to the full the reduction of prices on the fast-moving ethicals. It must be appreciated that as matters stand at the moment prices of ethical drugs are uniform throughout the country and consequently a system of remunerating chemists by a formula based on those prices works fairly everywhere. With the abolition of resale price maintenance prices would be likely to vary in different parts of the country. It would become difficult, if not impossible, to devise a uniform scheme of remuneration of chemists for national health service prescribing which would act fairly in all cases and be administratively practicable. We feel unable to suppose that a scheme of remuneration which involved costing all national health service prescriptions (which at present run at the rate of 300,000,000 a year) on the basis of taking actual discounts obtained by individual pharmacists into account would be administratively practicable. We have heard no evidence to suggest that this would be possible.
It seems likely to us, therefore, that chemists would benefit financially from obtaining cheaper prices for fast-moving ethical drugs for a considerable time and possibly indefinitely—at any rate in some part of the country. No doubt they would continue to give some support to those wholesalers who continued to stock the tail of slow-moving ethical drugs, but they would obtain as large a proportion of their fast-moving ethical drugs from those wholesalers who offered discounts as they could do consistently with maintaining the wholesalers who deal in the slow-moving ethical drugs in business.
Any part of the market in fast-moving ethicals which the cut-price wholesalers were successful in capturing would necessarily be at the expense of the other wholesalers operating in the same district. These other operators would have to fight back. This they could only do effectively by reducing prices and any reduction in their prices would have to be covered by economies in their overheads. Again, the most obvious field for economy would be a reduction in deliveries.
This competition would not, we think, remain static but would certainly escalate, and would very possibly lead to a reduction in the range of ethicals dealt in by all competing wholesale distributors. In the long-term result there would be a deterioration in the stock-holding of the slow-moving ethical drugs and in delivery of ethicals generally throughout the country. In consequence of this we are satisfied that there would be likely to be a substantial reduction of the ability of retail chemists to dispense prescriptions from stock while the consumer waits and a
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substantial reduction in the ability of retail chemists to obtain prompt delivery from wholesalers within the day, or at least within 24 hours, of ethical drugs necessary to enable the chemist to meet his prescriptions requiring drugs which he does not hold in stock. Such a deterioration in the ability of the chemist to meet the needs of his customers would in our judgment operate to the detriment of the public. The varieties of ethicals required to meet the needs of the public as consumers or users of those goods at the point at which they must be available to meet those needs, ie on the shelves of the dispensing chemist, would be substantially reduced.
As regards proprietary medicines we are satisfied that with the abolition of resale price maintenance competition would develop at retail level. Supermarkets, in which term we include for this purpose other outlets accustomed to promote their business by price-cutting, already stock some proprietary medicines. The evidence satisfies us that they would increase their range of proprietary medicines. A witness from Tesco said that his stores would probably stock an additional 50 lines of proprietary medicines and another witness said that he would hope to increase his turnover in proprietary medicines by at least 50 per cent and probably more. The proprietary medicines which would be stocked in these outlets would be those extensively advertised to the public, ie the most popular brands and those most in demand. The supermarkets would undoubtedly cut the prices on these goods and would bring this to the attention of the public. The regular cuts would no doubt be relatively small, perhaps 1d or 2d in 2s 6d, but larger cuts would be made at times of popular demand.
At present there is little incentive to supermarkets to stock proprietary medicines, but with the removal of resale price maintenance this would cease to be so. The supermarkets would undoubtedly increase their share of the market in popular proprietary medicines. These at present constitute a high proportion of the retail chemist sales of proprietaries and are those medicaments most often bought by the housewife for her medicine chest. The sale of proprietary medicines constitutes a relatively small part of the total turnover of the retail chemist, being of the order of 10 per cent, but the sale of such medicines accounts for a much larger proportion of the number of occasions on which customers visit the chemist’s shop and any reduction in this business will affect not only his turnover in proprietary medicines but also his turnover in the other miscellaneous over-the-counter goods in which he deals.
We are of the opinion that the removal of resale price maintenance from the popular brands of proprietary medicines would be likely to increase substantially the rate at which small retail chemists are going out of business. We doubt if this would reduce the total number of outlets at which the more popular brands of proprietary medicines could be obtained, for not only would they become more generally available at supermarkets but also the number of supermarkets outlets is increasing rapidly. It is not suggested, however, that supermarkets would hold a wide range of the proprietary medicines but only those most regularly in demand. The number of establishments in which other proprietary medicines less freely in demand by the public, but for which nevertheless a market exists, can be bought would be substantially reduced, and this in our view would be a detriment to the public as consumers of those brands of proprietary medicines. Moreover, and perhaps more importantly, the disappearance of those retail chemists who fell as casualties in this competition would result in a reduction of the number of points at which the public could get prescriptions dispensed. We think that the casualties would be likely to be in the main, although not exclusively, among chemist shops in urban areas but situate not in the shopping centres. The disappearance of these dispensaries would in our judgment be a detriment to the public as consumers of prescribed medicines. We do not find it necessary to express an opinion on the likely effect of the removal of resale price maintenance in the so-called ‘convenience outlets’.
We now proceed to consider certain questions of construction which arise on s 5 of the Resale Prices Act 1964, and its application to the facts of this case. On behalf
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of the registrar attention is drawn to the fact that in s 5(2), paras (b), (c), (d) and (e), there are references to sale by retail. Paragraph (a) contains a reference to sale, but does not in terms indicate whether sale by retail alone is here intended or whether the paragraph is meant to extend to other types of sale as well. The registrar however submits that para (a) should be construed as applicable only to sales by retail. He contends that in Pfizer Corpn v Ministry of Health, the House of Lords held that when goods are supplied under the national health service against a prescription no sale takes place by the chemist to the customer. The registrar goes on to contend that since in such circumstances there is no sale, there can be no retail sale within the meaning of s 5(2), and therefore the subsection is inapplicable to the supply of prescribed medicines under the national health service. He says that prescriptions which are paid for by the patient are so small a proportion of the trade in prescribed medicines that they should be disregarded for the present purpose.
In Pfizer Corpn v Ministry of Health the House of Lords was not in any way concerned with the Resale Prices Act 1964, nor was it directly concerned with the National Health Service Act 1946. It was concerned with the Patents Act 1949, s 46(1). The Minister of Health had invited tenders for the supply of a drug to national health service hospitals in respect of which a patent was in operation. The question for determination was whether the Minister could under the subsection properly authorise a supplier who was not the patentee to import and supply the drug in question, and this involved deciding whether the proposed supplier was in the circumstances making, using or exercising the patented invention for the services of the Crown.
The patentee who was the appellant before the House of Lords contended, inter alia, that the Crown could not under the subsection authorise the supply of the drug to out-patients because the Crown would then be selling the drug and selling was not within the classes of activity which a government department could authorise under the subsection. Lord Reid dealt with the point as follows ([1965] 1 All ER at 455, [1965] AC at 535):
‘The second question for your lordships’ decision arises out of the provision of the drug for out-patients of hospitals. We have little information about the use of this particular drug but in general it appears that, when out-patients are advised to use a drug after they have gone home, they are given a prescription which they take either to the hospital dispensary or to an outside chemist. Under existing arrangements they must then pay a small charge, at present 2s. There was considerable argument whether they can be required to pay that charge before they can demand the prescribed medicine, but I do not find it necessary to decide that question. I shall consider the case on the footing that a patient is not entitled to demand the drug unless he tenders 2s. The appellants’ argument is that when the patient pays 2s. and gets the drug there is a sale of the drug to him by the hospital or the chemist and that 2s. is the price. If that were right the appellants say that s. 46 does not authorise the department or its servants or agents to sell or vend, it only authorises them to make use or exercise the invention. But in my opinion there is no sale in this case. Sale is a consensual contract requiring agreement express or implied. In the present case there appears to me to be no need for any agreement. The patient has a statutory right to demand the drug on payment of 2s. The hospital has a statutory obligation to supply it on such payment. And if the prescription is presented to a chemist he appears to be bound by his contract with the appropriate authority to supply the drug on receipt of such payment. There is no need for any agreement between the patient and either the hospital or the chemist, and there is certainly no room for bargaining. Moreover the 2s. is not in any true sense the price: the drug may cost much more and the chemist has a right under his contract with the authority to receive the balance from
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them. It appears to me that any resemblance between this transaction and a true sale is only superficial. I would therefore decide against the appellants on this point.’
Lord Evershed said ([1965] 1 All ER at 461, [1965] AC at 544):
‘In my judgment, it is wholly impossible to describe the payment which the patient is now called on to make as a “purchase price” or the transaction which gives rise to the payment as a “sale“.’
Lord Pearce said ([1965] 1 All ER at 463, [1965] AC at 548):
‘My Lords, on the question whether there is a sale to a patient when he is supplied with drugs by or on behalf of the Minister under the National Health Service Act, 1946, I share the view held by the Court of Appeal and by your lordships. There is no consensual bargain between the patient and the Minister or his agent. The Minister is by statute bound to provide the drug and the patient is entitled to receive it … This statutory juxtaposition of the patient and the Minister (or his agent) does not put them into the position of purchaser and vendor. Nor is the resulting transaction a sale. It is simply the provision of the drug to the public at a nominal charge.’
Lord Upjohn said ([1965] 1 All ER at 466, [1965] AC at 552):
‘I cannot accept the argument that this transaction could in legal terms be described as a gift by the Minister to the patient; the patient had a statutory right to demand the drug and the transaction accordingly is one which is sui generis, it is the creature of statute. When the National Health Service Act, 1952, authorised the Minister to make what was described as “a charge”, it seems to me that the basic nature of the transaction was not thereby turned from a statutory relationship into a contractual relationship of bargain and sale. Whereas before the Act the Minister was bound to supply the drugs free, after that Act he became entitled to make an arbitrary charge for that service. I cannot see any element of bargain and sale in that transaction. Accordingly, this point fails.’
With these views Lord Wilberforce agreed ([1965] 1 All ER at 478, [1965] AC at 571).
These passages undoubtedly form part of the reasons adopted by the House of Lords for their decision in that case and they authoritatively bind us to proceed on the view that when a chemist prescribes under the National Health Service Act 1946 no sale takes place in the view of the law between the chemist and the consumer nor does any sale take place between the Minister of Health and the consumer. The transaction is sui generis, the creature of statute, and not a sale at all.
In Appleby v Sleep a Divisional Court in the Queen’s Bench Division held that when a chemist dispenses under the National Health Service Act 1946 he does not make any sale of the drugs so dispensed to the relevant National Health Service Executive Council. But counsel for the pharmaceutical association invites us to hold that on the true construction of s 5 of the Resale Prices Act 1964 the references in sub-s (2) to ‘sale’ are not to be taken as references to sale in the strict legal significance of that word. He draws attention to references in s 2(1) of the Act and in s 3(1) to ‘any goods’ and to the words ‘goods of any class’ in s 5(1) and in s 6(2) and (3) to ‘goods of any description’. He contends that these contexts indicate an intention on
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the part of the legislature to deal with all goods of any kind without exception, and says that it would lead to an extraordinary result, particularly under s 5(2)(d) if ethical drugs constituted an exception from the Act. He says that the Act is not concerned with the contractual aspect of retail sales but with the fact that the public consume or use the goods retailed. He draws attention to the fact that the national health service was already in operation when the Act was passed and says that s 3 of the Act assumes that all goods will be sold within the meaning of the Act somewhere. Counsel for the proprietary associations reinforces these arguments by contrasting the reference in s 21 of the Restrictive Trade Practices Act 1956 to the public ‘being purchasers, consumers or users’ of goods with the references in the present Act to the public as ‘consumers or users’ of goods.
Although the word sale has a definite legal connotation it is not an esoteric term, and its meaning in the mouth of the ordinary man does not, we think, differ from its meaning in law. We feel unable to accept the argument that the legislature in s 5(2) has used the word sale in some secondary sense differing from its ordinary meaning in the English language and its legal significance. We therefore feel bound to accept that, when goods are prescribed under the national health service, they are neither sold nor sold by retail within the meaning of s 5(2) for the reason suggested by the registrar, namely, that where there is no sale there can be no sale by retail. If the subsection so read produces an anomaly in relation to goods dealt in under the national health service, we think that this anomaly is due to an oversight on the part of the legislature which it would not be proper for this court to attempt to cure by putting on the subsection an interpretation which its language is not apt to bear. But although ethicals which are dispensed under the National Health Service Act are not then sold, all the ethicals which a retail chemist holds in stock are, so long as they are in stock, available for sale, and retail chemist shops are establishments in which ethicals are sold by retail to those members of the public who obtain their prescribed medicines otherwise than under the national health service. Any necessary services which are actually provided in connection with prescribed ethicals, whether they are dispensed under the National Health Service Act 1946 or otherwise, are services which are equally available in respect of medicines dispensed under the national health service and those which are sold retail to customers who pay for their prescribed medicines.
The fact that medicines that are sold retail in this manner constitute a much smaller part of the trade in dispensed medicines than do those which are provided under the national health service does not in our view render s 5(2) any the less applicable to the former and to the present case. This argument has of course no relevance to proprietary medicines which are unquestionably sold by retail. This argument contends that services within s 5(2)(e) must be provided by the retailer and must be provided at the time of or after the sale of the goods. We feel unable to accept this argument. The paragraph does not specify that the services must be provided by the retailer, and it is not difficult to think of arrangements in the nature of guarantees or maintenance agreements under which manufacturers in other industries would undertake to provide services to the purchaser after the sale which might be required to be taken into consideration under this paragraph. Nor does the paragraph say in terms that the services must be provided at the time of or after the sale. The more general words ‘in connection with’ are employed. Provided that a service is sufficiently closely associated with a retail sale to be properly described as provided in connection with the sale we see no reason why it should not be treated as falling within the paragraph. For example, we see no reason why delivery by a wholesaler to a retail chemist of an ethical required by the chemist to fulfil a prescription but which he has not got in stock should be regarded as otherwise than a service connected with the sale of that ethical. In such a case there might be no contractual nexus between the wholesaler and the consumer but the consumer would benefit directly from the service provided by the wholesaler.
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In this industry, as we have already indicated, the true stock-holders are the wholesalers. The retail chemist holds a stock of ethicals only sufficient to meet his day-to-day working needs. On the other hand the consumer needs, or at any rate very strongly desires, to have his medicines supplied to him immediately or with the shortest possible delay. The only way in which this can be achieved is by a constant replenishment of the chemist’s working stock and this is wholly dependent on the regularity, frequency and speed of the wholesaler’s delivery.
When the chemist orders an ethical from the wholesaler not to meet an unexpected demand or to replenish an unexpectedly exhausted stock of a particular ethical so as to permit him to dispense a particular prescription, but so as to replenish a wasting stock before it is exhausted, it may be more difficult to relate that delivery to a particular retail sale in contemplation or prescription in existence at the time of delivery; nevertheless, such delivery service is essential to enable the consumer to have the benefit of the immediate services of the chemist which he is entitled to expect. In the particular circumstances of this industry we consider that stock-holding and management of that stock, deliveries and dispensing should be regarded as a combined operation by the wholesalers and the retail chemists as a part of which the deliveries by the wholesalers should in our judgment be treated as provided in connection with such retail sales of ethical goods as take place through chemist shops.
We accept that the delivery service which the wholesaler provides is a service reasonably necessary for the benefit of the consumers. It may be that in some areas where there are a number of wholesalers in operation the retail chemists have a greater number of deliveries at their disposal than is truly necessary. It does not follows that any one wholesaler is providing more deliveries than are reasonable. We are satisfied that it is a reasonable requirement of any retail chemist that he should have available to him the services of at least two and perhaps three wholesalers. There may be areas in which there are more than this number of wholesalers in operation, but this would mean that there would be the greater competition between the wholesalers to provide satisfactory services to their retail chemist customers and this should therefore be for the benefit of the community.
The trade witnesses were unanimous in their view that they required the full services by way of delivery and otherwise at present available to them. This was confirmed by the evidence of the medical practitioner. We are satisfied that no contraction of the delivery services could be accepted without detriment to the interests of the consumer.
We can now proceed to state shortly our conclusions on the application of the section to the facts of the present case.
1. The removal of resale price maintenance from ethicals would result in a substantial contraction in the delivery service provided by wholesale distributors.
2. It would also result in a contraction of the stock of slow-moving ethicals held by wholesale distributors although some wholesalers would continue to hold some of the slow-moving tail of ethicals.
3. It would result in the ability of retail chemists to meet prescriptions from stock or at least at short notice being decreased.
4. Consequently the availability of ethicals at the point at which retail sales of ethicals take place, ie the chemist shop, would be reduced substantially.
5. The extent of this would be such as to amount to a detriment to those members of the public who consume or use ethicals whether as retail purchasers or under the national health service.
6. Although the ethicals most likely to be affected would be those less frequently demanded and the members of the public affected at any one time may constitute a very small proportion of the public, the detriment would be one extending to the public at large, for all men are at risk of becoming aged or infirm or of contracting one or other of the ailments or disabilities for the treatment of which such drugs are required, and sometimes required very urgently.
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7. The delivery by wholesalers is in this particular industry a service provided in connection with the retail dispensing carried out by retail chemists and so is a service provided in connection with such retail sales of ethicals as take place in response to private prescription, the substantial reduction of which would operate to the detriment of those members of the public who obtain prescribed medicines by retail purchase.
8. As to the balancing provision at the end of s 5(2) no detriment would result to any member of the public as the result of maintaining minimum resale prices on ethicals. Under the national health service the consumer is unaffected by price. Even if retaining resale price maintenance results in prices of ethicals being higher at any rate in some parts of the country than they would otherwise be this should not, we think, be regarded as a detriment to the retail purchaser of prescribed medicines, for he can always have recourse to the national health service under which he can get his prescribed medicine for a nominal charge.
9. The removal of resale price maintenance from proprietary medicines would result in more chemists going out of business more quickly than would otherwise be the case with a consequent loss of outlets for not only proprietary medicines but also prescribed medicines.
10. Although there might be no reduction in the number of establishments in which a comparatively small range of those proprietary medicines which are most frequently in demand would be sold by retail, there would be a substantial reduction in the number of establishments in which other proprietary medicines would be obtainable and this would be detrimental to those members of the public who wish to buy these latter classes of proprietary medicines.
11. The more frequently demanded lines in proprietary medicines which would be found in the supermarkets would become available to the public at somewhat cheaper prices than those which at present obtain.
12. As regards proprietary medicines the balancing provision requires the availability of some proprietary medicines at lower prices to be balanced against: (a) the probable reduction in the number of establishments where a wider range of proprietary medicines can be bought retail; and (b) the loss of those chemist shops which are likely to become casualties.
In our judgment the detriments which in these respects would result from the removal of resale price maintenance from proprietary medicines would outweigh the detriment resulting from the maintenance of minimum resale prices, ie the foregoing of somewhat lower prices on some proprietaries.
We therefore reach the conclusion that the associations are entitled to succeed in the present case as regards ethicals under s 5(2)(a) and (e) and as regards proprietary medicines under s 5(2)(b).
We would add two further observations. First, the interest of the public as taxpayers in the economical operation of the national health service is in our view not relevant to the present discussion. In any case the voluntary price regulation scheme is intended to take care of the taxpayer’s interests. Secondly, we think that if resale price maintenance were withdrawn in relation to ethicals the existing scheme for remunerating chemists under the National Health Service Act 1946 would inevitably be thrown into disarray, and it seems to us that any scheme of remuneration which proceeded on any other basis than one of uniform prices for ethical drugs throughout the country would be exceedingly difficult and expensive to administer.
As a result of that judgment we shall declare ethical drugs and proprietary medicines to be exempt goods, but for the purposes of the order it is important that the definition should be one which is absolutely clear in the case of related goods.
Declaration accordingly.
Solicitors: McKenna & Co (for the proprietary associations); Simmons & Simmons (for the pharmaceutical association); Treasury Solicitor.
Euan Sutherland Esq Barrister.
Bentinck Ltd v Cromwell Engineering Co
[1971] 1 All ER 33
Categories: CONSUMER; Consumer credit
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 14 OCTOBER 1970
Hire-purchase – Possession – Restriction on recovery of possession otherwise than by action – Abandoned goods – Protected goods – Owner entitled to retake possession where hirer has abandoned all rights in the goods so as to show he no longer has any interest in them – Hirer left car at garage for nine months without instructions or payment to garage owner – Finance company entitled to take possession from garage owner and to recover from defendants under their indemnity against hirer’s default – Hire-Purchase Act 1965, s 34.
Where the hirer of goods has abandoned all rights in the goods so as to evince clearly that he no longer has any interest in them, a retaking of possession by the owner does not constitute a breach of s 34a of the Hire-Purchase Act 1965, because the owner does not recover possession ‘from the hirer’ within s 34; accordingly, a finance company was not in breach of s 34 when it retook possession of a car left by the hirer at a garage for nine months when the hirer had given no instructions to the garage owner, had not paid him anything and had ceased to pay the hire-purchase instalments (see p 35 a e and h, post).
Notes
For statutory restrictions on the owner’s right to recover possession of goods under a hire-purchase agreement, see 19 Halsbury’s Laws (3rd Edn) 547, 548, para 886.
For the Hire-Purchase Act 1965, s 34, see 45 Halsbury’s Statutes (2nd Edn) 1444.
Cases referred to in judgment
F C Finance Ltd v Francis (1970) 114 Sol Jo 568.
Goulston Discount Co Ltd v Clark [1967] 1 All ER 61, [1967] 2 QB 493, [1966] 3 WLR 1280, Digest Supp.
United Dominions Trust (Commercial) Ltd v Kesler (1963) 107 Sol Jo 15.
Unity Finance Ltd v Woodcock [1963] 2 All ER 270, [1963] 1 WLR 455, Digest (Cont Vol A) 628, 18a.
Appeal
This was an appeal by the defendant company, Cromwell Engineering Co, from the judgment of his Honour Deputy Judge Shorrock, sitting at Manchester County Court, dated 7 January 1970, that the plaintiff finance company, Bentinck Ltd, was entitled to recover the balance of the hire-purchase price of a car from the defendant under its indemnity whereby it had agreed to indemnify the finance company against any default by the hirer. The facts are set out in the judgment of Lord Denning MR.
J J Rowe for the defendant.
G W Humphries for the finance company.
14 October 1970. The following judgments were delivered.
LORD DENNING MR. Mr Faulkner was employed by the defendant, Cromwell Engineering Co, in Bury in Lancashire. He wanted to acquire a car from them—a sports car, MGB—on hire-purchase terms. It was done in this way: a finance company, Bentinck Ltd, bought the car and let it out on hire-purchase to Mr Faulkner. The
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defendant agreed to indemnify the finance company against any default by Mr Faulkner. Mr Faulkner paid the initial instalment of £250. He was thereafter to pay 24 monthly instalments of £19 1s 3d. He paid the monthly instalments for three or four months; but then he fell into arrear.
Soon afterwards, in October 1967, the car was severely damaged in a road accident. Mr Faulkner took it to a garage in the Isle of Wight owned by a Mr Brading. Mr Faulkner did not give an order for the repairs to be done. He told Mr Brading that he wanted to see about his insurance cover and the possibility of a claim against the other person involved in the accident. Two or three months months later, in January 1968, the finance company (who had not heard about the accident) tried to find Mr Faulkner to get the instalments from him. Its representative saw him at his place in Bury. Mr Faulkner told the representative that he was up on a charge of dangerous driving. He did not pay any of the arrears. He gave a false telephone number and then disappeared. The finance company tried to trace him but failed; but it managed to trace the car. Six months later, in July 1968, it found the car in the garage in the Isle of Wight. It took possession of it, with the consent of Mr Brading, the garage owner. He had had the car on his premises for some nine months without any payment, and without hearing anything from Mr Faulkner. So he let the finance company take possession of it. It took it and sold it for £50. The finance company now sue the defendant on the indemnity which had been signed by it. In its claim it sets out the total hire-purchase price of £707 10s. It gives credit for the instalments it had received. It claims £336 9s, the balance outstanding.
The defendant put forward only one defence. It says that Mr Faulkner had paid more than one-third of the hire-purchase price. The car was, therefore, ‘protected goods’. It relies on s 34 of the Hire-Purchase Act 1965, which provides that the owner ‘shall not enforce any right to recover possession of protected goods from the hirer … otherwise than by action’. If the owner recovers it otherwise than by an action, then he cannot get back any of the balance and he certainly cannot get anything from the guarantor. In order to overcome this defence, the finance company says that it did not recover possession from the hirer; because he had abandoned it.
Let me say at once that in the ordinary way, once goods are ‘protected goods’, ie more than one-third has been paid, the finance company cannot recover possession—except by action—from the hirer, nor from any garage or repairer with whom the hirer may have left it. The words ‘from the hirer’ include all those to whom the hirer has bailed it. That is quite clear from FC Finance Ltd v Francis. But that does not touch the question of abandonment.
Counsel for the defendant in an excellent argument—all the better for being brief—drew our attention to two cases where this court appeared to hold that the owner could not retake a car—except by action—even though the hirer had abandoned it. The first is Unity Finance Ltd v Woodcock, which was decided on another point, but I said ([1963] 2 All ER at 272, [1963] 1 WLR at 460):
‘On Sept. 22, 1960, they themselves [ie the finance company] found the car, much damaged, abandoned on a piece of waste ground, and they towed it (because that was the only way that they could get it along) to the dealer’s place; and they left it there in his drive because that was the only place where they could put it.’
Yet it was held that the retaking was illegal. At any rate, that is the way that case was explained in Goulston Discount Co Ltd v Clark. The other case is United Dominions Trust (Commercial) Ltd v Kesler, where the word ‘abandoned’ was used in relation to a horse-box which was left lying at someone else’s riding establishment.
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In neither of those cases was there any discussion about the legal effect of abandonment. It seems to me that if a hirer has in fact abandoned the goods, he no longer has possession of them, either by himself or his agent. If the owner retakes them, he does not recover possession ‘from the hirer’. He does nothing illegal. But the abandonment, to entitle the finance company to retake possession, must be abandonment of all rights in the car so as to evince quite clearly that the hirer no longer has any interest in it. The judge has so found in this case. He said:
‘I draw the inference that, as at least from the end of January 1968 the hirer abandoned all interest in the car and earnestly hoped that he would never see it or the [finance company] or Mr Brading, or even have any sort of connection with it or them again if he could avoid it.’
That seems to me to be a reasonable inference from the facts of this case. Here was a car with all the costs running up. Mr Faulkner would not want to shoulder the liability. He disappeared altogether. The judge was quite entitled to find that he had abandoned it in the real legal sense as abandoning all rights whatever which he had in the car.
I think that the finance company acted quite lawfully in retaking the car which had been thus abandoned. The defence, therefore fails. I quite agree with the judgment of the deputy county court judge. I would dismiss the appeal.
FENTON ATKINSON LJ. Counsel for the defendant put his case most attractively, but I agree, for the reasons which Lord Denning MR has given, that the appeal must fail. My only doubt at any stage of the argument has been whether there was sufficient evidence to justify the learned deputy county court judge’s finding that the hirer had, in the technical sense, abandoned or denounced in law his right of possession; but in the result I am satisfied that there was evidence to justify the finding, and I think the judgment really dealt admirably with the whole matter and is right.
CAIRNS LJ. I agree. There were two questions in this case, the first being a question of fact, or of inference from primary facts, that is to say, had the vehicle been abandoned in the sense that the hirer renounced all rights in respect of it? The second question, arising only if the first is answered in the affirmative, is whether in that case a retaking of possession by the finance company constitutes a breach of s 34 of the Hire-Purchase Act 1965. That is a question of law. On the first issue I am quite satisfied that the facts were such as to justify the learned judge in drawing the inference he did draw, that the hirer has abandoned the vehicle in every sense. Secondly, in relation to the question of law, it seems to me that, looking simply at the Act, it is quite impossible to say that if a vehicle has been abandoned by the hirer so that he has renounced all rights in respect of it, any recovery of it is a recovery from the hirer. Counsel for the defendant has founded himself on previous decisions of this court in which I am quite satisfied that this particular point was not considered by the court. Probably the point did not arise because I do not think that on the facts of any of those cases as reported it is clear that there was an abandonment in the full sense. In any case the court clearly did not consider this matter. Now we have done so, and it seems to me that the question permits of only one answer.
I therefore agree that the appeal should be dismissed.
Appeal dismissed.
Solicitors: Gregory, Rowcliffe & Co agents for Addleshaw, Sons & Latham, Manchester (for the defendant); Lynde, Branthwaite & Bentley, Manchester (for the finance company).
Wendy Shockett Barrister.
Inland Revenue Commissioners v Brander & Cruickshank
[1971] 1 All ER 36
Categories: TAXATION; Income Tax
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD GUEST, LORD UPJOHN AND LORD DONOVAN
Hearing Date(s): 26, 27, 28 OCTOBER, 8 DECEMBER 1970
Income tax – Income – Perquisites or profits of office or employment – Office – Registrarship held in limited company – Registarship held by firm of advocates incidentally to their business – Payment in consideration or in consequence of termination of holding of office – Income Tax Act 1952, Sch E – Finance Act 1960, ss 37(1), (2), 38(3).
Income tax – Income – Perquisites or profits of office or employment – Office – Compensation for loss of office – Payment of lump sum – Firm as registrar of a company – Payment on relinquishing office – Whether office an asset of firm’s business and a subject of taxation under Income Tax Act 1952, Sch D, Case II.
Income tax – Schedules – Exclusivity – Compensation for loss of office – Assessment under Sch E excluding possibility of assessment under Sch D.
The taxpayers were a firm of Scottish advocates who carried on a substantial general legal business. They also acted for some 30 to 40 companies as secretaries and/or registrars, in respect of which they received an annual remuneration, but they did not hold themselves out as professional registrars. For a number of years the taxpayers had acted as secretaries and registrars to two companies, carrying out the duties imposed on secretaries by the Companies Act 1948 and keeping the registers of members as required by s 110 of that Act. In 1965 the two companies were taken over by a third company. As a result of the take-over it was agreed that the taxpayers would cease to be registrars of the two companies and, on so ceasing, would receive a terminal payment of £2,500. Up to that time the taxpayers’ net receipts from all sources (including the registrarships) had been assessed under Sch D, Case II. The terminal payment was likewise assessed under Sch D, Case II. The taxpayers appealed against the assessment. Their argument, which was upheld by the Special Commissioners, was that the registrarships were offices and that the terminal payment, as a payment not otherwise chargeable to income tax, should be assessed under Sch E by virtue of s 37(1),(2)a of the Finance Act 1960 and was thus exempt from tax under s 38(3)b of that Act. The Crown contended that the registrarships were not offices within the meaning of s 37(1) of the 1960 Act or, alternatively, if they were held to be offices, that they were assets, in that they were a source of income acquired by the respondents in the course of carrying on a profession or vocation, the other profits of which were chargeable under Sch D, Case II; accordingly the compensation payable on the disposition of those assets should be treated as a receipt of the profession or vocation likewise chargeable under Sch D, Case II, and was thus not a payment ‘not otherwise chargeable to income tax’ within the meaning of s 37 of the 1960 Act, which did not therefore apply.
Held – (i) On the facts as they found them the Special Commissioners were entitled to take the view that each registrarship was an ‘office’ within the meaning of s 37(1) of the Finance Act 1960 (see p 40 j, p 41 f, p 43 h and p 46 a and d, post).
(ii) Accordingly the terminal payment was a payment made in consideration or in consequence of the termination of the holding of an office which, by virtue of
Page 37 of [1971] 1 All ER 36
s 37(2) of the 1960 Act, was chargeable to tax under Sch E and so could not be charged under Sch D, for the two schedules were completely self-contained and autonomous (see p 40 j, p 41 g, p 44 a, p 45 a and c and p 46 a d and g, post).
Mitchell (Inspector of Taxes) v Ross [1961] 3 All ER 49 applied.
(iii) The registrarships could not be regarded as assets of the taxpayers’ profession or vocation and the terminal payment could not therefore be treated as a trading receipt of the firm, chargeable under Sch D, because the registrarships were acquired by the taxpayers, who were primarily advocates, incidentally to the exercise of their profession and could not have been exploited, turned to account or disposed of (see p 40, j, p 42 b f h and j, to p 43 a, p 45 d and h, p 46 a and p 47 d and f, post).
Blackburn v Close Bros Ltd (1960) 39 Tax Cas 164 distinguished.
Per Lord Donovan. There could be some cases where, although current income was assessable under Sch E yet the terminal payment might be regarded as income of the overall trade, profession or vocation, not on the ground that the office was a trading asset or an asset of the profession or vocation, but on the ground that it was a source of profit belonging to the trade, profession or vocation and that the terminal payment might, therefore, be linked to that trade or profession and identified with it as one of its products (see p 47 c to e, post).
Notes
For the meaning of the word ‘office’ in the Income Tax Acts, see 20 Halsbury’s Laws (3rd Edn) 306, para 563, for profits falling within two or more schedules, see ibid 17, para 16, and for compensation for loss of office, see ibid 324, 325, paras 593, 594, and for cases on liability under Sch E in respect of an office or employment, see 28 Digest (Repl) 225–237, 971–1040.
For the Finance Act 1960, ss 37 and 38, see 40 Halsbury’s Statutes (2nd Edn) 458, 459.
In relation to tax for the year 1970–71, and subsequent years of assessment, ss 37 and 38 of the 1960 Act have been repealed by the Income and Corporation Taxes Act 1970, s 538(1) and Sch 16, and replaced by ibid ss 187 and 188.
Cases referred to in judgment
Blackburn v Close Bros Ltd, Inland Revenue Comrs v Close Bros Ltd (1960) 39 Tax Cas 164, Digest (Cont Vol A) 848, 173h.
Davies v Braithwaite [1931] 2 KB 628, [1931] All ER Rep 792, 100 LJKB 619, 145 LT 693, 18 Tax Cas 198, 28 Digest (Repl) 155, 605.
Ellis (Inspector of Taxes) v Lucas [1966] 2 All ER 935, [1967] Ch 858, [1966] 3 WLR 382, 43 Tax Cas 276, Digest (Cont Vol B) 408, 609a.
Fry v Salisbury House Estate Ltd, Jones v City of London Real Property Co Ltd [1930] AC 432, [1930] All ER Rep 538, 99 LJKB 403, 143 LT 77, 15 Tax Cas 266, 28 Digest (Repl) 33, 148.
Great Western Ry Co v Bater [1920] 3 KB 266; on appeal HL [1922] 2 AC 1, 91 LJKB 472, 127 LT 170, 8 Tax Cas 231, 28 Digest (Repl) 222, 957.
McMillan v Guest [1942] 1 All ER 606, [1942] AC 561, 111 LJKB 398, 167 LT 329, 24 Tax Cas 190, 28 Digest (Repl) 236, 1035.
Mitchell (Inspector of Taxes) v Ross [1959] 3 All ER 341, [1960] Ch 145, [1959] 3 WLR 550; on appeal CA [1960] 2 All ER 218, [1960] Ch 498, [1960] 2 WLR 766; rvsd HL [1961] 3 All ER 49, [1962] AC 813, [1961] 3 WLR 411, 40 Tax Cas 11, Digest (Cont Vol A) 888, 962a.
Walker (Inspector of Taxes) v Carnaby, Harrower, Barham & Pykett [1970] 1 All ER 502, [1970] 1 WLR 276.
Appeal
This was an appeal by the Crown from an interlocutor of the First Division of the Court of Session as the Court of Exchequer in Scotland (the Lord President (Lord Clyde), Lord Guthrie and Lord Migdale) dismissing an appeal by way of case stated against a decision of the Special Commissioners.
Page 38 of [1971] 1 All ER 36
The following facts were found by the commissioners. The taxpayers, Brander & Cruickshank, were a firm of advocates in Aberdeen, conducting a substantial general legal business and also acting as secretaries and/or registrars to some 30 to 40 companies. Two of the companies were large investment trusts, for which the taxpayers acted as secretaries and registrars, and also as managers. As secretaries, the taxpayers dealt with board meetings and completed the various forms required by the Companies Act 1948. As registrars, the taxpayers were responsible for stock registers and preparation of dividend warrants. The taxpayers were primarily law agents and secretaries, and had not set out as professional registrars. Their registrarships were incidental to their business as law agents and secretaries. The following table showed the composition of the taxpayers’ income (including amounts received in respect of registrarships):
Year Ended 31st May Directors
Fees Secretarial Salaries Legal
Fees Business Commissions
Total
£ s d £ s d £ s d £ s d £ s d
1965 10,393 6 8 24,659 7 10 18,427 13 0 1,672 19 10 55,153 7 4
1966 11,004 0 9 24,803 18 4 21,158 17 1 1,807 12 0 58,774 8 2
1967 11,565 0 0 24,139 12 10 27,005 2 11 1,551 10 8 64,261 6 5
Secretaries’ salaries were paid without deduction of tax as the extract from the taxpayers’ profit and loss accounts for the years ended 31 May, 1957 to 1967, showed. Apart from directors’ fees, over the previous ten years about half of the taxpayers’ receipts had come from legal work and about half from work as secretaries. Certain partners held directorships in certain companies and received directors’ fees which were paid subject to deduction of tax, and included in the partnership income. The taxpayers’ net receipts from legal fees, secretarial salaries, managerial fees, business commissions and registrars’ fees were assessed to income tax under Case II of Sch D. Apart from the two investment companies, most of the companies for whom the taxpayers acted, as secretary and/or registrar, were small and the taxpayers’ annual fees in respect of each lay between £20 and £50. Each company accounted for its own routine expenses, which included costs of stationery, postage and telephone. The taxpayers employed and paid their own legal and secretarial staff engaged on company work; they also provided and bore the cost of their own office accommodation. The taxpayers’ appointments as secretaries and registrars were not reviewed annually or at any other time by the board of each company. The taxpayers carried on the work involved from year to year, and periodically their salaries were increased. At some date prior to 1932, two brothers called Lawson went to Aberdeen to start business in a derelict factory. They sought the help of the taxpayers’ then senior partner, Mr Brander, who negotiated a bank loan of £5,000 for them. Mr Brander nursed them along and became friendly with them. Their venture prospered and was turned into a private company, which in about 1935 became a public company known as Robert Lawson & Sons (Holdings) Ltd (‘Holdings’). The taxpayers were appointed secretaries and registrars to Holdings. In 1953 the subsidiary company Robert Lawson & Sons (Dyce) Ltd was formed (‘Dyce’) and thereafter the taxpayers acted as secretaries and registrars to both companies. There was no written agreement of appointment in either case. Salaries were fixed from time to time at board meetings. Throughout the period from 1935 until 1965 Mr Cruickshank, the taxpayers’ then senior partner, was a director of Holdings. In 1965 an approach was made to the directors of Holdings by Unilever Ltd, with a view to a take-over. Most of the shares in Holdings were held by the Lawson family, who were in favour of the project. At an early stage it was pointed out to the taxpayers that in the event of a take-over they would be relieved of their secretaryships and registrarships, but the matter of any payment to the taxpayers
Page 39 of [1971] 1 All ER 36
was not raised until a later stage. Eventually Mr Cruickshank raised the matter with a director of Holdings, Mr Frank Lawson, who was negotiating with Unilever Ltd, and in particular with Lord Trenchard, chairman of Wall & Sons (Meat Products) Ltd, a subsidiary of Unilever Ltd Towards the end of the negotiations the taxpayers as secretaries had prepared draft take-over documents, leaving blank spaces where amounts of compensation could be inserted. When the time came for the blanks to be filled in, Lord Trenchard enquired of Holdings what the taxpayers’ remuneration as secretaries and registrars was, and how their time was divided between their respective duties, as it was intended that the taxpayers should continue as secretaries. Lord Trenchard was informed that the taxpayers salaries were £750 and £500 and that they spent about two-thirds of their time on the registrarships. Lord Trenchard suggested a figure of £2,500 verbally by telephone which was accepted without discussion. Eventually the amount of £2,500 was entered in the blank spaces. and the relevant paragraphs in the letters, dated 17 August 1965, read as follows:
(i) Letter dated 17 August 1965 from Unilever Ltd to the shareholders of Holdings
‘It is not proposed in connection with these Offers that any payment or other benefit shall be made or given to any Director of Lawson as compensation for loss of office or as consideration for or in connection with his retirement from office except (subject to the Offer for the Ordinary Shares becoming unconditional) the sum of £2,500 each to Mr. J. S. R. Cruickshank and Mr. Robert A. Gray. In the event of the Offer for the Ordinary Shares becoming unconditional Messrs. Brander & Cruickshank (of which Firm Mr. J. S. R. Cruickshank is a Partner) will cease to act as Registrars of Lawson and will be paid the sum of £2,500 in connection with the termination of such office.’
(ii) Letter dated 17 August 1965 from Holdings to its members
‘Unilever has informed your Directors that in the event of the Offer for the Ordinary Shares becoming unconditional it is intended that the business of your Company should be continued and expanded along existing lines under the direction of the Lawson family and existing management, except that Mr. Robert A. Gray and Mr. J. S. R. Cruickshank will retire from the Board and, subject to the sanction of your Company in General Meeting, will be paid £2,500 each by way of compensation for loss of office. It is also proposed to pay Messrs. Brander & Cruickshank, who have been Secretaries and Registrars to your Company since its formation in 1953 and to its Dyce subsidiary for fully 28 years (and who will be continuing as Secretaries to both Companies), the sum of £2,500 upon the termination of their appointments as Registrars. Mr. Cruickshank is a partner of the said firm. Members will receive with this letter Notice convening an Extraordinary General Meeting of your Company for 2nd September, 1965, at which a Resolution will be submitted to approve the proposed payments of compensation to Mr. Gray and Mr. Cruickshank subject to the Offer for the Ordinary Shares becoming unconditional. Save as indicated above and in the enclosed letter from Unilever, there are no agreements or arrangements between any of your Directors and any other person in connection with, or conditional upon, the outcome of the Offers.’
A month or so after the take-over, the taxpayers as secretaries of Holdings and Dyce paid themselves as registrars the sum of £2,500. The taxpayers had never previously received payment for termination of a registrarship, and considered that they had no entitlement to such. It was only because of the personal friendship between Mr Cruickshank and Mr Frank Lawson that the former had felt it proper to raise the matter of an ex gratia payment. After the take-over, the taxpayers continued as secretaries of Holdings and Dyce, as a large amount of work had to be carried out. They voluntarily resigned their secretaryships in or about September 1966.
Page 40 of [1971] 1 All ER 36
In addition to their salaries as secretaries and registrars the taxpayers had received from Holdings and Dyce normal fees for any legal work undertaken.
It was contended on behalf of the taxpayers that: (i) the taxpayers’ appointments as registrars of Holdings and Dyce were offices; (ii) the sum of £2,500 paid as compensation on termination of the offices was exempt from taxation under s 38(3) of the Finance Act 1960; (iii) that amount was not otherwise assessable under Sch D. It was contended on behalf of the Crown that: (i) the compensation of £2,500 received on termination of the taxpayers’ appointments as registrars of Holdings and Dyce was a trading receipt and properly included in the firm’s profits assessable under Case II of Sch D; (ii) the compensation was not assessable under Sch E; (iii) there was in the circumstances no office of registrar, receipts from which were assessable under Sch E; (iv) the appointments were like agencies, and not offices or employments within Sch E; (v) the appointments were accepted by the taxpayers in the course of carrying on their composite business or profession as solicitors, managers, secretaries and registrars; (vi) the compensation was not compensation for damage to the whole structure of the taxpayers’ profession; (vii) the compensation was not exempt from income tax by virtue of s 38(3) of the Finance Act 1960.
The Commissioners decided as follows:
‘The issue raised two questions, the first of which was whether the [taxpayers’] appointments as registrars were offices. Taking as our guide the passage from Lord Atkin’s speech in McMillan v Guest [[1942] 1 All ER 606 at 607] we found that the appointments constituted offices. We did not accept the Crown’s argument that because the appointments (unlike those of company secretaries) were not recognised by the Companies Act, 1948, they were not offices. In our view, “office” was a wide term. The companies for which the [taxpayers] acted in fact created the offices, and as offices they were so regarded. (See, for instance, the offer from Unilever Ltd., dated 17th August, 1965.) The second question was whether, notwithstanding that emoluments of an office were taxable under Schedule E, compensation for termination was nevertheless assessable under Schedule D. In our view the offices in question—the registrarships to Holdings and Dyce—were not assets of the [taxpayers’] business assessable under Schedule D. While the offices might loosely be described as assets, in the sense that they were acquired incidentally in the course of the [taxpayers’] profession as advocates, they were not in our view trading assets. These offices were not exploited, or turned to account; further, they could not be disposed of in the normal way. Accordingly we held that the appeal succeeded and we left figures to be agreed between the parties.’
W A Elliott QC (of the Scottish bar), P W Medd and W D Prosser (of the Scottish bar) for the Crown.
J P H Mackay QC and G W Penrose (both of the Scottish bar) for the taxpayers.
Their Lordships took time for consideration
8 December 1970. The following opinions were delivered.
LORD REID. My Lords, for the reasons given by your Lordships I would dismiss this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, the Special Commissioners came to the conclusion, on the basis of the facts which they found, that the taxpayers’
Page 41 of [1971] 1 All ER 36
appointments as registrars of Robert Lawson & Sons (Holdings) Ltd, and of its subsidiary company, Robert Lawson & Sons (Dyce) Ltd, were appointments to offices. The taxpayers were appointed as secretaries and registrars of both companies. In the case of one company the salary was £750 and in the case of the other it was £500. In regard to the time the taxpayers spent as secretaries and registrars of these two companies one third of it related to their duties as secretaries and two thirds to their duties as registrars. When proposals were made for taking over the shares held in the two companies the taxpayers were informed that, in the event of a take-over, they would be relieved of their secretaryships and registrarships. The arrangement that was later made, when the take-over took place, was that the taxpayers should cease to be registrars, should receive £2,500 on such termination of their appointments as registrars but should continue for some time as secretaries of the two companies. They did so continue for some time and then voluntarily resigned their secretaryships.
A duty is imposed on a company to keep a register of members (Companies Act 1948, s 110). Even though the Companies Act 1948 does not require that there should be an appointment as registrar, a company must arrange that some person or persons should on its behalf perform the statutory duties of maintaining its register. In doing so, it may establish a position which successively will be held by different persons. If it does so the company may have created what could rationally for income tax purposes be called an office. In McMillan v Guest ([1942] 1 All ER 606 at 607, [1942] AC 561 at 564) Lord Atkin, while pointing out that there is no statutory definition of ‘office’ was prepared to accept what Rowlatt J had said in Great Western Ry Co v Bater ([1920] 3 KB 266 at 274) (as adopted by Lord Atkinson ([1922] 2 AC 1 at 15)) as being a generally sufficient statement of meaning. Rowlatt J had referred to ([1920] 3 KB at 274):
‘… a subsisting, permanent, substantive position, which had an existence independent of the person who filled it, and which went on and was filled in succession by successive holders … ’
Lord Wright in his speech in McMillan v Guest ([1942] 1 All ER at 609, [1942] AC at 567) pointed out that regard must be had to the facts of any particular case and to the ordinary use of language and the dictates of common sense. In my view, the Special Commissioners were warranted on the facts as they found them in deciding that the taxpayers’ appointments as registrars of the two companies were appointments to offices.
Though in fact the fees which certain partners in the taxpayers’ firm received as directors of certain companies were, by reason of some arrangement that they made between themselves, included in the partnership income and though in fact the taxpayers’ net receipts from all activities (including legal fees, directors’ fees, secretarial salaries, managerial fees, business commissions and registrars’ fees) were assessed to income tax under Case II of Sch D, I think that it must follow from the decision of this House in Mitchell (Inspector of Taxes) v Ross that tax was chargeable under Sch E on the emoluments in respect of the two registrarships.
The payment of £2,500 was clearly made in consideration or in consequence of or otherwise in connection with the termination of the holding of the offices of registrar (see s 37(2) of the Finance Act 1960). Unless it was a payment ‘otherwise chargeable to income tax’ it would be a payment in respect of which income tax would be charged under Sch E (see s 37(1)) but for the fact that by virtue of s 38(3) tax is not to be charged in respect of a payment of an amount not exceeding £5,000. So the question arises whether the payment of £2,500 was ‘otherwise’ chargeable to
Page 42 of [1971] 1 All ER 36
income tax. The presence of the words ‘not otherwise chargeable to income tax’ in s 37(2) (unless they were introduced unnecessarily or for reasons of caution) would appear to recognise that there could be payments coming within the words of sub-s (2), which, independently of sub-s (1), would be chargeable to tax. The words do not necessarily denote chargeability under a schedule other than Sch E. The contention of the Crown is that the offices were assets of the taxpayers’ profession or vocation obtained in the course of carrying on such profession or vocation and that compensation for the loss of those assets should be treated as a receipt of the profession or vocation and taxable under Case II of Sch D.
My Lords, I cannot think that the appointments to the offices of registrar were in any real sense to be regarded as assets of the taxpayer in respect of their profession. No question has been raised for decision as to whether, if they were so to be regarded, a payment for the loss of them would be of the nature of a capital rather than of an income receipt. The conception of the assets of a trader in carrying on his trade is one that has reality and clarity. It is difficult in the case of a firm carrying on the profession of advocates conducting a substantial general legal business but who incidentally acquire appointments as registrars of companies to regard such appointments as being ‘assets’ of the firm in their profession. The case here is quite different from that of a trader who might in the course of his trade acquire assets and dispose of them. The case here is quite different on its facts from the case of Blackburn v Close Bros Ltd, Inland Revenue Comrs v Close Bros Ltd. That was the case of a trader, the profits of whose trade were chargeable under Case I of Sch D, who had a three year appointment as secretary and registrar at a substantial remuneration. The agreement was prematurely terminated and a substantial sum was by agreement paid as compensation. It was held that the compensation was chargeable as a trading receipt of a revenue nature and that this was so even though the remuneration under the agreement would have been chargeable under Sch E. I do not find it necessary to express any opinion in regard to that case. The finding here is that the taxpayers as a firm of advocates in Aberdeen conducted a substantial general legal business and that they also acted as secretaries and/or registrars to a number of companies. They were primarily law agents and secretaries. They had not set out as registrars. Their registrarships were ‘incidental’ to their business as law agents and secretaries. The two registrarships in question had been the consequence of a friendship between the former senior partner of the taxpayers and those who conducted the business which became the business of the two companies. When the registrarships were terminated the taxpayers did not consider that they had any entitlement to any payment. Indeed, as is found in the case stated, it was only because of the personal friendship between a partner in the taxpayer firm and one of the directors that the former had felt it proper to raise with the latter the question whether there might not be an ex gratia payment. Though these facts have not been made the basis of a separate contention, they are, in my view, of relevance when considering whether the registrarships should be regarded as assets of the taxpayers’ business. The finding is that the registrarships were ‘incidental’ to their business. It seems clear that the registrarships could neither have been acquired by purchase nor could they have been assigned for a consideration.
The position was that the taxpayers’ professional qualifications and experience made it appropriate that they should be appointed as registrars even though they had not set out as professional registrars and even though their appointments merely arose out of their professional work. The features connected with the appointments to and the holding of the offices were such as to permit of the conclusion that the offices should not be regarded as assets of the taxpayers in their profession. That was the finding of the Special Commissioners.
‘While the offices might loosely be described as assets, in the sense that they
Page 43 of [1971] 1 All ER 36
were acquired incidentally in the course of the [taxpayers’] profession as advocates, they were not in our view trading assets. These offices were not exploited, or turned to account; further, they could not be disposed of in the normal way.’
I consider that the Special Commissioners were entitled so to hold and consequently to hold that the sum of £2,500 was not assessable under Sch D.
I would dismiss the appeal.
LORD GUEST. My Lords, the taxpayers are a firm of advocates in Aberdeen who carry on an extensive legal business. In addition they act for some 40 companies as secretaries and/or registrars. Those functions are carried on in the taxpayers’ office and with the assistance of the taxpayers’ staff and for which they receive an annual remuneration. In respect of the termination of the ‘post’, to use a neutral expression, of registrar for two companies they received a lump sum of £2,500.
The Crown claim that this sum is chargeable under Sch D, Case II of the Income Tax Act 1952, s 122. The reply of the taxpayers is that it is exempt from taxation under s 37 of the Finance Act 1960. The Special Commissioners gave a decision in favour of the taxpayers, which was affirmed by the First Division of the Court of Session.
Sections 37 and 38 of the 1960 Act, so far as relevant, are in the following terms:
‘37. (1) Subject to the provisions of this and the next following section, income tax shall be charged under Schedule E in respect of any payment to which this section applies which is made to the holder or past holder of any office or employment, or to his executors or administrators, whether made by the person under whom he holds or held the office or employment or by any other person.
‘(2) This section applies to any payment (not otherwise chargeable to income tax) which is made, whether in pursuance of any legal obligation or not, either directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the holding of the office or employment or any change in its functions or emoluments, including any payment in commutation of annual or periodical payments (whether chargeable to tax or not) which would otherwise have been made as aforesaid.
‘38. (3) Tax shall not be charged by virtue of the last foregoing section in respect of a payment of an amount not exceeding five thousand pounds, and in the case of a payment which exceeds that amount shall be charged only in respect of the excess: … ’
The first question, therefore, which logically arises is whether the ‘post’ of registrar is an ‘office’ within the meaning of s 156 of the Income Tax Act 1952, and taxable under Sch E. The Lord President (Lord Clyde) has carefully examined the authorities on this question, and I see no reason to differ from his conclusion, in which Lord Guthrie and Lord Migdale concurred, that the post of registrar is an ‘office’ within the meaning of Sch E.
The argument for the Crown was that whether the appointment of registrar was or was not an ‘office’ under Sch E the fees received by the taxpayers in respect of the appointment as registrars were nonetheless taxable under Sch D, and that accordingly the sum of £2,500 received by them on the termination of that appointment was also chargeable to tax under Sch D. It appears that during the years 1957–67 the fees received by the taxpayers as secretaries and registrars had been assessed along with their professional earnings for income tax under Sch D. This, however, cannot affect the legal position if in fact these fees ought to have been assessable under Sch E. If the position of registrar was not an office then, of course,
Page 44 of [1971] 1 All ER 36
the previous assessments were in order and the sum paid on termination of appointment was assessable under Sch D in accordance with the normal practice. But if, on the other hand, the position of registrar is an office, then the matter is, in my view, concluded by Mitchell (Inspector of Taxes) v Ross. In the argument before Upjohn J the taxpayer contended that the fees of a consultant specialist under the national health service should be assessed under Sch D along with his other professional earnings as a private consultant and that, as a logical consequence, the expenses of his profession generally should be deducted from his gross earnings. Upjohn J, in upholding the Crown’s contention, decided that the consultant’s remuneration from the national health service must be assessed under Sch E as the appointment was an ‘office’ under Sch E and should not be assessed under Sch D. I quote from Upjohn J’s judgment ([1959] 3 All ER at 349, [1960] Ch at 167):
‘Counsel for the taxpayers poses the question: Is the first taxpayer carrying on one profession or two? The question is a narrow one and without the slightest importance except for the purpose of income tax. In a general sense, of course, the first taxpayer is carrying on the profession of a radiologist whether he is performing his national health functions or attending to private patients. It is all part of his vocation as a medical adviser. In my judgment, however, the argument ought not to succeed. When carrying out his national health duties, the first taxpayer is performing the duties of an office and he is taxed under Sch. E. When attending private patients he is exercising his profession and is taxed under Sch. D. Each schedule and the rules thereunder contain, in the words of LORD ATKIN in Fry v. Salisbury House Estate, Ltd. ([1930] All ER Rep 538 at 552, [1930] AC 432 at 457): ” … definite codes applying exclusively to their respective defined subject-matters … “.’
The case subsequently reached the House of Lords where Viscount Simonds said ([1961] 3 All ER at 50, 51, [1962] AC at 831):
‘Dr. Ross, having been assessed to income tax under the Income Tax Act, 1952, Sch. E, in respect of the profits and gains arising from his part-time appointment and under Sch. E in respect of the profits and gains arising from his private practice, appealed against the assessments to the Special Commissioners on two grounds. He claimed, in the first place, that he should be assessed in respect of the whole of his profits and gains under Sch. D, and, in the second place, that, if this claim was not upheld, he was entitled in the computation of his liability under Sch. D to deduct the expenses incurred in the exercise of his appointment to the extent that they were not allowed under Sch. E. The first of these two claims was not maintained before this House, learned counsel conceding that an appointment under the National Health Service to such a post as that held by Dr. Ross fell within Sch. E and that an assessment to tax must accordingly be made under that Schedule. In my opinion, the concession was rightly made and the opposite view was not arguable.’
Lord Radcliffe ([1961] 3 All ER at 54, [1962] AC at 837) agreed with Upjohn J ([1959] 3 All ER 341, [1960] Ch 145) and stated that in his view the schedules are mutually exclusive. Lord Cohen expressed the matter succinctly ([1961] 3 All ER at 58, [1962] AC at 843) when he spoke of the excision of the part-time appointment from Sch D and its inclusion under Sch E.
Page 45 of [1971] 1 All ER 36
This case thus defeats the argument of the Crown that the fees from the appointments as registrar ought to be included in the Sch D assessments. It is to be remarked that the argument of counsel for the Crown in Mitchell’s case when that case was before Upjohn J was the Sch D and Sch E emoluments could not be aggregated, which the Crown now wish to controvert. It is said that if the view expressed above be right the result will be to produce administrative difficulties, as it will be very difficult to apportion the deductible expenses as between the Sch D and Sch E assessments. But this did not deter this House in Mitchell’s case ([1961] 3 All ER at 53, [1962] AC at 836) (see per Viscount Simonds).
My view is that once it is decided that the registrarship is an ‘office’ and the fees assessable under Sch E, there is no room for any inclusion of those fees under Sch D. It follows that, in my opinion, the exemption contained in s 38 of the Finance Act 1960, applies, unless there is some exclusion by reason of the words in s 37(2) ‘not otherwise chargeable to income tax’.
It was argued for the Crown that the holding of the office of a registrar was a ‘trading asset’ of the taxpayers and that, on the termination of that office, a sum paid in compensation therefor was a trading receipt of the taxpayers’ firm. I am not sure that I understand how the holding of an office can be an asset of a firm of lawyers. It cannot, as the Special Commissioners say, be exploited or turned to account and it could not be disposed of. For this reason, I am doubtful whether the decision of Pennycuick J in Blackburn v Close Bros Ltd was sound, where the learned judge held that the sum received in respect of the termination of a contract of service of a secretarial nature was a trading receipt. However that may be, the principal discussion in that case was whether it was a capital payment or a trading receipt, and the learned judge decided in favour of the latter view. Moreover, the taxpayers were a firm of merchant bankers assessed under Case I of Sch D whose trading activities might reasonably be held to include the securing of secretaryships. In the present case the taxpayers are lawyers and there is no finding that it is part of the normal profession of a law agent to act as a registrar or to secure registrarships. It is said to be incidental to the profession but not part of it. Blackburn’s case does not, in my view, assist the Crown.
The next case relied on was Ellis (Inspector of Taxes) v Lucas where Ungoed-Thomas J held that, on the findings of the Special Commissioners, terminal payments were not assets of the taxpayers’ business as a chartered accountant. It is true that the learned judge refers to the auditorships as an asset of the taxpayer’s business as accountant. But his decision was on the facts adverse to the Crown’s contention. Although it may be said to be a decision on the facts, the present case is a fortiori of that decision in respect that the profession of lawyer is further removed from the activities of a registrar than the profession of an accountant. The last case was Walker (Inspector of Taxes) v Carnaby, Harrower, Barham & Pykett where Pennycuick J considered his own decision in Blackburn v Close Bros Ltd but the case was decided on an entirely separate ground, that the payment was ex gratia and, therefore, not taxable. That question is not raised in the present case.
In my view, those cases do not help the Crown. I cannot visualise the holding of a registrarship as a ‘trading asset’ of the profession of a law agent. In any case, once it is decided that the emoluments of the office of registrar are taxable under Sch E it is not legitimate to attribute the compensation for the termination of the office to Sch D. This would be to overturn the principle decided and conceded in Mitchell v Ross.
I would dismiss the appeal.
Page 46 of [1971] 1 All ER 36
LORD UPJOHN. My Lords, I have had the opportunity of reading the speech of my noble and learned friend, Lord Guest. I agree with it and, for the reasons he gives, I would dismiss the appeal.
LORD DONOVAN. My Lords, I deal first with the question whether these two registrarships were offices within the meaning of Sch E. The adjective ‘public’ was dropped in the amendment effected by s 10 of the Finance Act 1956.
The Companies Act 1948, by s 110, requires that every limited company shall keep a register of its members. This means that someone in the company must do it. The register is an important record. It evidences the title of the individual shareholder, and it tells the public, who may inspect it, who are the individuals behind the corporate mask. In some small private companies the work of keeping the register could be done by a minor clerk or even a typist. But in the larger companies it is a full-time job taken on by outside concerns, for example banks, who as part of the job deal with new issues, bonus share distributions and the like. In the present case the two companies concerned were sufficiently important to be taken over by Unilever Ltd. I do not think it possible to say that as a matter of law the Special Commissioners were disentitled to take the view that each registrarship was an ‘office’ within the meaning of Sch E.
Then comes the question how the profits of the office are assessable to income tax in a case like the present. The taxpayers are a firm of Scottish advocates in Aberdeen conducting a substantial legal business and also acting as secretaries and/or registrars to some 30–40 companies. We do not know in how many companies they were registrars. They themselves seem clearly to have regarded their activities as secretaries and/or registrars as ingredients of one composite vocation. All the profits have gone into one account, and all been assessed to income tax under Case II of Sch D. This means that in their income tax returns the firm has represented to the Revenue that they are carrying on one vocation of which the secretaryships and the registrarships (which account for nearly one-half of the total income) are a part. And I think that is the true view. One asks, therefore, why there should not be one global assessment under Case II of Sch D? And the answer is the decision of this House in Mitchell (Inspector of Taxes) v Ross. I think it is to be clearly gathered from that decision that even if offices like these registrarships are collected and exercised by a taxpayer as part of his trade or profession, nevertheless, under the rule that each Schedule to the Income Tax Acts is completely self contained and autonomous, the offices must be separately assessed under Sch E.
In relation to a case like the present I cannot refrain from saying that I think this rule is quite unreal and serves no useful purpose. Indeed, its application to cases like the present will cause administrative chaos unless the law is changed. There can be no relevant difference between secretaryships and registrarships. Both are offices; and henceforth, if this decision is acted on, there will have to be 30–40 separate Sch E assessments in the present case, and the same under of claims for expenses ‘wholly exclusively and necessarily’ incurred in the performance of the duties of each office. In England the position will be worse. There a partnership is not a separate legal entity, and cannot be separately assessed in one assessment except under Sch D on trading or professional profits. Accordingly, a firm of chartered accountants with, say, 20 partners, will have to be assessed in respect of the profits of each office as auditor by means of separate Sch E assessments on each individual partner, who likewise will have to prove his deductible expenses.
The rule establishing the paramountcy of each schedule of the Income Tax Acts
Page 47 of [1971] 1 All ER 36
as regards its own particular subject-matter, first established in Fry v Salisbury House Estate Ltd, served a useful purpose in that case. For the Revenue, having first assessed the company’s property under Sch A, then sought to assess the company under Sch D so as to tax inter alia the excess of the rents over the Sch A assessment; and not surprisingly received the answer that the Sch A assessment was exhaustive of liability as regards the property. But where a company sets on foot an organised seeking after offices of profit and conducts them by means of a single organisation, I see no useful purpose whatever in ignoring that situation for income tax purposes, and in treating the edifice which the taxpayer has thus constructed as a collection of individual bricks having no connection with each other. But I think Mitchell v Ross compels us for the present to sustain this fiction; and it is not for the Crown to complain, since the result flows from their successful argument in the case.
We are, of course, here dealing with terminal payment of compensation and have had to consider the right way of assessing the income while it arose simply as a step toward deciding how the terminal payments should be dealt with. I can see that, as the Crown argues, there could be some cases where although current income was assessable under Sch E pursuant to Mitchell v Ross yet the terminal payments might be regarded as income of the overall trade, profession or vocation (cf Blackburn v Close Bros Ltd and Ellis (Inspector of Taxes) v Lucas. Not on the ground that the office was a trading asset (which I regard as a completely inappropriate term) or an asset of the profession or vocation, but on the ground that it was a source of profit belonging to the trade, profession or vocation and that the terminal payment might, therefore, be linked to that trade or profession and identified with it as one of its products. But that would require a clear finding of fact by the commissioners that the taxpayer had sought the office as part and parcel of his trade or profession; and here such a finding, I think, is lacking. The word ‘incidental’ in the Special Commissioners’ finding is ambiguous; but they do say that the taxpayers did not set out as professional registrars, and by ‘incidental’ I think they must mean something that just happened to come along, and was acceptable.
Reluctantly I think that the appeal must be dismissed. I should add, first, that this will, in my opinion, in no way affect the decision in Davies v Braithwaite which proceeds on different considerations; and, second, that no argument has been adduced in the present case that the £2,500 was immune from income tax as being a capital receipt or a gift.
Appeal dismissed.
Solicitors: Solicitor, Inland Revenue agents for Solicitor, Inland Revenue, Scotland (for the Crown); Bird & Bird agents for Davidson & Syme, Edinburgh (for the taxpayers).
S A Hatteea Barrister.
Mykolyshyn and another v Noah
[1971] 1 All ER 48
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 1, 2 JULY 1970
Rent restriction – Alternative accommodation – Suitable alternative accommodation – Offer to tenant of part of living accommodation presently let to him – Rent Act 1968, s 10(1) (a).
Rent restriction – Alternative accommodation – Suitable to needs of the tenant – Insufficient room for all tenant’s furniture – Whether suitable – Rent Act 1968, s 10(1) (a), Sch, 3, Part IV, para 3(1)(b).
An offer to the tenant of a dwelling-house as alternative accommodation of only a part of the accommodation presently let to and occupied by the tenant may constitute an offer of ‘suitable alternative accommodation’ within the meaning of the Rent Act 1968, s 10(1)(a)a (see p 52 h, and p 51 a and h, post).
McIntyre v Hardcastle [1948] 1 All ER 696, Wright v Walford [1955] 1 All ER 207, and Scrace v Windust [1955] 2 All ER 104 followed.
Thompson v Rolls [1926] All ER Rep 257 and Parmee v Mitchell [1950] 1 All ER 872 applied.
MacDonnell v Daly [1969] 3 All ER 851 explained.
In considering whether the accommodation offered is ‘reasonably suitable … to the needs of the tenant … as regards extent and character’ within the meaning of Sch 3, Part IV, para 3(1)(b)b to the Act, the judge has to consider, amongst other things, whether it would take the tenant’s furniture so far as that furniture is required to enable her to live in reasonable comfort. The premises offered are not rendered unsuitable merely because there is no accommodation for additional furniture for which the tenant has no foreseeable need (see p 53 e, and p 54 a and h, post).
McIntyre v Hardcastle [1948] 1 All ER 696 followed.
Notes
For suitable alternative accommodation, see 23 Halsbury’s Laws (3rd Edn) 815–818, para 1594, and for cases on the subject, see 31 Digest (Repl) 714–719, 7995–8033.
For the Rent Act 1968, s 10, Sch 3, Part IV, see 18 Halsbury’s Statutes (3rd Edn) 798, 911.
Cases referred to in judgments
MacDonnell v Daly [1969] 3 All ER 851, [1969] 1 WLR 1482, Digest Supp.
McIntyre v Hardcastle [1948] 1 All ER 696, [1948] 2 KB 82, [1948] LJR 1249, 31 Digest (Repl) 706, 7950.
Parmee v Mitchell [1950] 1 All ER 872, [1950] 2 KB 199, 31 Digest (Repl) 717, 8019.
Scrace v Windust [1955] 2 All ER 104, [1955] 1 WLR 475, Digest (Cont Vol A) 1106, 8028a.
Page 49 of [1971] 1 All ER 48
Thompson v Rolls [1926] 2 KB 426, [1926] All ER Rep 257, 95 LJKB 901, 135 LT 466, 31 Digest (Repl) 706, 7448.
Wright v Walford [1955] 1 All ER 207, [1955] 1 QB 363, [1955] 2 WLR 198, Digest (Cont Vol A) 1101, 7954d.
Appeal
Mrs Mary Noah, a widow, the tenant of the first floor, unfurnished, of 32 Newton Avenue, Acton, London W3 at a rent of £1 16s a week, appealed against an order for possession in three months made against her by his Honour Judge Worthington-Evans at Brentford County Court on 21 March 1969, in an action by her landlords, Ivan Mykolyshyn and his wife Anna Mykolyshyn, who had purchased 32 Newton Avenue in 1962, on an undertaking by the landlords to let the tenant the first floor, less the sitting-room, at a rent of £1 per week and that they would at all times treat the tenant as though she were still a controlled tenant under the Rent Act 1968. The tenant, who had occupied the first floor for over 30 years, had been given notice to quit on 13 September 1968, and the action was brought on 2 January 1969. The facts are set out in the judgment of Widgery LJ.
John A Baker for the tenant.
The landlords (by Mrs Mykolyshyn) appeared in person.
2 July 1970. The following judgments were delivered.
WIDGERY LJ delivered the first judgment at the invitation of Davies LJ. Number 32 Newton Avenue, Acton, is a conventional dwelling-house built on two floors. The top floor has been in the occupation of the tenant, Mrs Noah, for a very long time, and she is a lady of 78 years at the present time. She occupies that floor under a tenancy which is admittedly protected by the rent restrictions Acts. The top floor comprises four rooms and a lavatory. The front room, which is the biggest, is called on the plan the ‘sitting-room’, and I will so describe it. It is about 14 feet by 16 feet. In addition there is a bedroom, about 11 feet by 10 feet; and there are two other smaller rooms which are intercommunicating and which are described as a scullery and a kitchen. The use to which the tenant puts these rooms is as follows. She seems to spend her life in the bedroom, the kitchen and the scullery. In the sitting-room there is, according to her evidence, a three-piece suite, a dining table and four chairs, a piano, and a sideboard; but she uses that room, apart from the facility which it gives to her to put that furniture in it, very little. It has no heating, no gas and no electric power. She says that she cannot go into it in winter and that she uses it in summer not very often. At one point in her evidence she said ‘I go into the front room once a week in the summer’. The learned judge took the view, and in my judgment he was entitled to take that view, that the so-called ‘sitting-room’ in fact, in the tenant’s use of it, is little more than a store-room for the furniture that she finds it convenient to put in that room.
The ground floor is occupied by the landlords, who own the whole house. So far as lay-out and size are concerned, the ground floor is very much the same as the first floor, and in it live the two landlords, husband and wife, and their two children, a daughter of about ten and a son of about two. There is no doubt in my mind—and the learned judge obviously felt the same—that the landlords are seriously overcrowded with their family of four in this single ground floor of this house. Wishing for more space, and particularly wishing for a means of giving their children separate bedrooms instead of having them sleeping with their parents, the landlords have sought to obtain possession of the tenant’s sitting-room.
They gave a notice to quit to the tenant, and no question arises on that. In their pleadings they initially sought to obtain possession of the sitting-room by saying that they required it for their own use, or for the use of their family, pleading that greater hardship would be occasioned by a refusal of the order than by granting it. In view of the fact that they had bought the house over the tenant’s head, it became apparent at an early stage that they could not proceed on that basis and the case was fought
Page 50 of [1971] 1 All ER 48
on the alternative basis that the landlords would offer the tenant as alternative accommodation the first floor which she now occupies less the sitting-room. The matter came before the judge on that basis. He, having considered the evidence, decided that an order for possession should be made, contingent on the tenant being given a new tenancy on the first floor less the sitting-room and subject to the giving of certain undertakings which were necessary in order to give her a security of tenure equivalent to that of the Rent Act 1968. The question for us is whether he erred in law in reaching that conclusion.
Although we do not know the precise annual value of the premises, it is conceded by counsel for the tenant, that this is an appeal which lies on a point of law only. Three important questions arise. First, counsel for the tenant contends that the offer of three rooms, namely the upper floor less the sitting-room, is not an offer of ‘alternative’ accommodation as that phrase is understood in the rent restrictions legislation. To anyone coming to the subject for the first time it might seem sensible enough that the offer was not of accommodation that could fairly be described as ‘alternative’, but in fact the contrary view has been recognised since the very early days of this legislation. To begin with, in Thompson v Rolls the headnote shows that the defendant was the tenant of a seven-roomed house, she occupied five of the rooms herself, and sublet the remaining two rooms furnished; the plaintiff, who urgently required some rooms in which to reside with her mother and niece, bought the house and asked the defendant to give up possession of the two rooms which she sublet. When the matter came to the court it came in a form similar to the instant case in that the landlord was seeking possession of the whole and offering five rooms as alternative accommodation, excluding from the new letting the two rooms that the tenant had sublet. Rowlatt J, giving the leading judgment in the Divisional Court, said ([1926] 2 KB at 433, [1926] All ER Rep at 259):
‘The next thing the plaintiff has to prove is that there is alternative accommodation available for the defendant. Ex hypothesi the plaintiff is getting possession of the whole house, but eo instanti it appears that the defendant can have the five rooms that she now occupies at a rent which the learned county court judge has found to be reasonable. Why is not that alternative accommodation? I think it is. It is true that the alternative accommodation is not in another house, but the defendant gets the same five rooms in the house which she is now occupying. I do not see why that is not alternative accommodation.’
Then some considerable number of years later, in Parmee v Mitchell, a case in this court, a very similar point arose. There, the defendant had been tenant of a house for a long time. He sublet the upper part of the premises to the plaintiff, reserving the lower part for his own use. Then the plaintiff bought the house and served notice to quit on the tenant, offering the floor of which the tenant was already in possession as alternative accommodation. In that case Jenkins LJ, considered the matter to which I am presently directing my attention. He said ([1950] 1 All ER at 873, [1950] 2 KB at 201):
‘The propriety of the order made by the learned county court judge has been attacked by counsel for the defendant on the ground that it does not lead to any alteration in the physical possession of the premises, but merely strengthens the plaintiff’s position in point of title and deprives the defendant of such chance as he might otherwise have, if he were so minded, of extending his accommodation by obtaining possession, on one or other of the statutory grounds, of the upper part of the house against the plaintiff as his tenant. These arguments are, at
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first sight, attractive because superficially it seems somewhat absurd to make an order for possession subject to alternative accommodation being provided and to treat as alternative accommodation the rooms already occupied by the tenant, thus, in effect, cancelling the operation of the order for possession, but I think that that difficulty is only superficial. It is true that the defendant is only in occupation of the lower part of the house, but he is, nevertheless, in possession of the whole. The plaintiff has no option but to make a claim for possession extending to the whole of the premises, for that is the only way in which he can determine the defendant’s interest. Looking at the matter from that point of view, the alternative accommodation offered is not simply the identical premises of which the defendant is in law in possession, but the part of those premises of which he is in actual physical occupation and which represents the only part of such premises that is necessary to provide the accommodation he wants. The lower part of the premises can, therefore, in my view, properly be regarded as “alternative accommodation” … ’
and he then went on to refer to Thompson v Rolls.
In that same case it is interesting to observe that Sir Raymond Evershed MR gave a slightly more qualified opinion on this point. He said ([1950] 1 All ER at 874, [1950] 2 KB at 203):
‘It is unnecessary to express any view whether the accommodation actually enjoyed by a tenant could ever be “alternative accommodation” in itself, and in this case I certainly do not decide that it could, but I think, for the reasons which JENKINS, L.J., has stated, that that point does not here call for decision.’
Now since those cases there have been a number of cases in this court, to which we have been referred, in which it is quite clear that the proposition had become accepted as being too clear for argument that to offer a part of the existing demised premises could properly be regarded as an offer of ‘alternative’ accommodation, for this purpose. One gets first of all (if I may cite a selection of the cases) Wright v Walford, where precisely the same kind of point as that with which we are now concerned was raised, and I refer to it particularly for the view which Sir Raymond Evershed MR had reached on the point at that time. He said ([1955] 1 All ER at 214, [1955] 1 QB at 380):
‘I have said that the idea that the latter [ie an offer of a part of the same premises] is, or was regarded by Parliament as being, alternative accommodation seems to me to be, perhaps, one of the most surprising results of the legislation; but I think that somewhat remarkable result being now accepted, the anomaly has in consequence been created.’
Sir Raymond Evershed MR, five years after his judgment in Parmee v Mitchell, is there, in my opinion, clearly recognising that an offer of part of the premises presently let can be an offer of ‘alternative’ accommodation for this purpose.
A similar assumption was made in McIntyre v Hardcastle and yet again in Scrace v Windust. In passing, it is of interest that in Scrace v Windust the premises which the landlord sought to remove from the letting by this particular device were premises which were actually occupied by the tenant and not premises which he had sublet.
However, despite that considerable volume of authority counsel for the tenant
Page 52 of [1971] 1 All ER 48
contended before us that the position has now been changed by reason of a decision of this court last year in MacDonnell v Daly. In that case the plaintiff, who owned a house, had as tenant of three rooms an artist, who was a bachelor who clearly did not bother too much with the good things of life because he seems to have slept on a couple of rugs on the floor and to have cooked all his meals on a gas ring; but he had in the three rooms of which he was a protected tenant under the Rent Acts a great deal of equipment connected with his profession, and he used these three rooms as his studio. The landlord, wishing to obtain one of the three rooms, sought possession, offering the other two rooms as ‘suitable alternative accommodation’. The real issue in the case was whether the accommodation offered was ‘suitable’, for present purposes, if it did not adequately provide accommodation for the tenant’s profession. Lord Denning MR, giving the leading judgment, used these words, which are the words on which counsel for the tenant relies ([1969] 3 All ER at 853, [1969] 1 WLR at 1485):
‘The first question is whether these two rooms out of three can be suitable alternative accommodation. Counsel for the landlord submitted to us that alternative accommodation may consist of part only of the premises which are let to the tenant. For that proposition he cited Thompson v. Rolls and Parmee v. Mitchell; but those cases are quite distinguishable. In each case the tenant occupied only part of the house and sublet the rest. He was offered the whole of the part which he himself occupied. That was held to be suitable alternative accommodation. But those cases do not extend to the present. The landlord here does not offer the tenant all the three rooms which he occupies. He offers him only two of them.’
Counsel for the tenant submits that those words, in a judgment which was agreed to by the other members of the court, show that in fact the offer made in the present case to the tenant is not an offer of alternative accommodation at all. For my part I cannot accept that submission. I think it quite clear that Lord Denning MR, in the extract to which I have referred, is not talking simply about alternative accommodation; he is dealing in one step with ‘suitable alternative accommodation’, and that is clear to me from the way in which he treats the two earlier authorities to which I myself have already referred. He distinguishes them on the ground that in those cases the tenant was being offered as alternative accommodation the total number of rooms which he actually occupied and that the part of the letting which the landlord was seeking to recover for himself consisted of rooms sublet.
I appreciate that that consideration may be of great importance in deciding whether the premises offered are ‘suitable’ alternative accommodation; but I cannot see how such a consideration in any way strengthens the argument that in the earlier cases the premises offered were ‘alternative’ accommodation. In my judgment there is nothing in MacDonnell v Daly to disturb the long-accepted proposition that ‘alternative accommodation’ may include part of that previously let; and if Lord Denning MR had wished to express a different view on that proposition he would, I feel sure, have used far more positive language. Accordingly I would reject counsel for the tenant’s first submission and would accept that the judge was right in saying that this accommodation was ‘alternative’ for the purposes of the Rent Act 1968 and then move on to the second question, which is whether it was ‘suitable’ alternative accommodation.
That is a matter which depends on the facts of every case, in the light of the relevant legislation. In the Rent Act 1968, Sch 3, Part IV, one has a code defining ‘Suitable Alternative Accommodation’. I need not trouble with paras 1 and 2, which in the
Page 53 of [1971] 1 All ER 48
first instance concern a certificate from the housing authority, which is not relevant in this case, and, in the second, require that the alternative accommodation shall carry a security of tenure equivalent to that provided by the Act, a point which does not arise in this case. I turn to para 3(1) of Part IV of Sch 3, which provides:
‘For the purposes of paragraph 2 above, the relevant conditions are that the accommodation is reasonably suitable to the needs of the tenant and his family as regards proximity to place of work, and either … (b) reasonably suitable to the means of the tenant and to the needs of the tenant and his family as regards extent and character.’
The question therefore is whether the three rooms offered to the tenant, on the facts of this case, satisfy the criteria laid down in Part IV of Sch 3. Counsel for the tenants criticism of the learned judge’s finding that the accommodation is ‘suitable’ is that the judge misdirected himself by holding that the accommodation would be suitable if it sufficed for the furniture which the tenant actually used even though it was too small to hold additional articles which were not in actual use and were now stored, for convenience, in the sitting-room.
Counsel for the tenant referred us to McIntyre v Hardcastle, where this court held that it was wrong to reject alternative accommodation merely on the ground that it would not accommodate all the tenant’s furniture without first considering how much of that furniture the tenant reasonably required. Counsel for the tenant submits that in the instant case the judge has really gone to the other extreme and treated the presence of the tenant’s furniture in the sitting-room as being a wholly irrelevant consideration. I have considered this submission with care overnight and have come to the conclusion that I cannot accept it. In deciding whether the accommodation offered was reasonably suitable to the tenant’s needs, the judge had to consider, amongst other things, whether it would take her furniture so far as that furniture was required to enable her to live in reasonable comfort. He would, I think, have been right to conclude that the premises were not rendered unsuitable merely because there was no accommodation for additional furniture for which the tenant had no foreseeable need. This is in effect what the judge has done, because he has adopted the tenant’s own conduct as the best test of what furniture she really required and has come to the conclusion that the furniture in the sitting-room is surplus to those requirements and, therefore, the alternative offered is not unsuitable merely because it cannot provide a storage place for that furniture.
Accordingly, as it seems to me, and reminding myself that we are concerned only with points of law, I can find nothing wrong in the learned judge’s direction of himself on the issue whether the accommodation was ‘suitable’.
Finally, it is submitted that even if the judge were right on both those points he was wrong in holding that it was reasonable to make an order for possession on the terms suggested. Counsel for the tenant puts forward two points which he says were clearly relevant and material on the issue of reasonableness and which find no place in the note of the learned judge’s judgment. In particular he refers to the fact that the judge did not refer to the length of time that the tenant had, in fact, been the tenant, nor does he refer to the extent to which this proposal would limit her accommodation by taking away the biggest of the four rooms presently let to her. It is quite true that in the somewhat brief note that we have of the judgment those two matters do not appear for specific mention; but I cannot believe that they escaped the learned judge’s mind, and one cannot assume that he had overlooked them merely because he did not find it necessary to refer to them expressly. There is nothing whatever in his judgment to suggest that he did not consider these matters, and I feel confident for my part that he did.
Page 54 of [1971] 1 All ER 48
Accordingly, I can find no error of law in the judgment below and would feel compelled to dismiss this appeal.
KARMINSKI LJ. I agree, and have nothing to add.
DAVIES LJ. I also agree, and would add very little, referring again, if I may, to the authorities which Widgery LJ has mentioned. The first is McIntyre v Hardcastle. I would refer to a passage ([1948] 2 KB at 92), the purpose of the reference being to emphasise that in that case it was treated as axiomatic that a part of the dwelling-house which the tenant occupied was alternative accommodation. The result of that case in this court was that it was remitted to the county court to reconsider whether that alternative accommodation was ‘suitable’ or not—the question of suitability, incidentally, turning on the question whether the alternative accommodation would satisfactorily house the tenant’s furniture. Tucker LJ said ([1948] 2 KB at 92):
‘With regard to the claim under s. 3, sub-s. (3) [ie of the Rent and Mortgage Interest Restrictions (Amendment) Act 1933], the landlords had offered as alternative accommodation some of the rooms in the house where the tenant was. The premises consisted of the following: downstairs: two sitting rooms, kitchen, two cloak rooms and entrances, front, side and back, brickbuilt outhouse used as kitchen. Upstairs: four bedrooms, bath-room, attic and box-room. The offer to the tenant was the present dining room and lavatory forming a self-contained block to the side entrance together with the kitchen, and, on the first floor, the largest bedroom and joint user of the bath-room … ’
On that proposed division, as I say, the matter was sent back to the county court judge for him to decide whether, that being deemed to be alternative accommodation, it was ‘suitable’ accommodation.
The other of the authorities to which Widgery LJ has referred, from which I should read one passage, is the recent case, MacDonnell v Daly. I would read a passage after the quotation which Widgery LJ has read, which I think underlines and shows that the matter which Lord Denning MR was considering in that case was suitability. Lord Denning MR said ([1969] 3 All ER at 853, [1969] 1 WLR at 1486):
‘In my opinion, when a tenant is protected for combined dwelling and professional purposes, the alternative accommodation must be suitable for his needs which include not only his living, cooking and sleeping, but also his professional needs, including his studio. Insofar as the earlier cases express a different view, I cannot agree them. The overriding consideration is that the tenant here is entitled to protection in regard to all three rooms which he occupies. It is not suitable accommodation to offer him only two of them.’
Finally, I would observe that, with this continuous stream of authority, going back to the earliest days of the rent restrictions Acts, if it were thought necessary to provide that a part of an existing dwelling-house could not be ‘alternative accommodation’ then it would have been the easiest thing in the world for Parliament so to have provided. That they have not done.
I agree with everything that has fallen from Widgery LJ and therefore agree that this appeal fails and must be dismissed.
Appeal dismissed.
Solicitors: Alured Darlington & Parkinson (for the tenant).
Henry Summerfield Esq Barrister.
H Cousins & Co Ltd v D & C Carriers Ltd
[1971] 1 All ER 55
Categories: CIVIL PROCEDURE: INSURANCE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 14, 15, 30 OCTOBER 1970
Interest – Damages – Breach of contract – Receipts from insurers – Whether insured plaintiff to be awarded interest on damages for period after payment by own insurers – Whether plaintiff must account to own insurers for any such interest recovered from defendant – Marine Insurance Act 1906, s 79.
Insurance – Marine insurance – Subrogation – Loss due to defendants’ breach of contract with insured paid to insured by own insurers – Whether insured can recover interest on damages awarded against defendant in respect of period after insurers’ payment of loss – Marine Insurance Act 1906, s 79.
In matters of discretion such as the award of interest the court should look at the reality of the matter and should take note of the right of the parties under any relevant insurance cover if this is necessary in order to do justice; and accordingly, where insurers have paid for a total loss of insured property and then bring an action in the name of the insured to recover the loss from a defendant responsible for it, the insured should be awarded interest in respect of the period after the insurers paid them if, but only if, the insurers are entitled to claim that interest from them (see p 58 b, p 60 b and e, and p 61 f, post).
Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 All ER 225 explained.
The defendants, who were carriers, lost certain goods belonging to the plaintiffs in transit by road in between London and Scotland. The plaintiffs, who had insured the goods under a single contract covering their transit from Hong Kong to Scotland, claimed on their insurers, who settled the claim on 11 August 1966. If the goods had not been lost, the plaintiffs could have expected to have been paid for them by their customers on 17 January 1966. In June 1968, the insurers commenced an action in the plaintiffs’ name against the defendants claiming the value of the goods and interest thereon until the date of judgment. In November 1969, the defendants paid into court the maximum sum recoverable under the terms of the contract of carriage, but that sum included nothing for interest. On appeal by the plaintiffs from a decision of the master awarding interest under the Law Reform (Miscellaneous Provisions) Act 1934 up to 11 August 1966,
Held – The insurers were entitled by subrogation, by virtue of the Marine Insurance Act 1906, s 79(1)a, to recover from the plaintiffs any interest paid by the defendants in respect of the period after the insurers had paid the plaintiffs (see p 58 j, p 59 c, p 60 e and p 61 f, post) (principle stated by Brett LJ in Castellain v Preston [1881–85] All ER Rep at 496 applied); accordingly, the refusal to exercise the discretion to award interest in respect of that period should be reconsidered (see p 60 d and e, and p 61 f, post).
Per Davies and Karminski LJJ. On the matter of awarding interest, it is quite impossible to see any logic or valid distinction between marine and non-marine cases (see p 61 b and f, post).
Dictum of Lord Blackburn in Burnand v Rodocanachi (1882) 7 App Cas at 339 applied.
Page 56 of [1971] 1 All ER 55
Notes
For claims for interest, see 11 Halsbury’s Laws (3rd Edn) 304, para 493.
For insurers’ right of subrogation, see 22 ibid 160–163, paras 309–312.
For the Marine Insurance Act 1906, s 79, see 17 Halsbury’s Statutes (3rd Edn) 876.
Cases referred to in judgments
Burnand v Rodocanachi (1882) 7 App Cas 333, 51 LJQB 548, 47 LT 277, 29 Digest (Repl) 340, 2586.
Castellain v Preston (1883) 11 QBD 380, [1881–85] All ER Rep 493, 52 LJQB 366, 49 LT 29, 29 Digest (Repl) 451, 3298.
Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 All ER 225, [1970] 1 QB 447, [1970] 2 WLR 198.
Liesbosch (Dredger) (Owners) v Steamship Edison (Owners) [1933] AC 449, 102 LJP 73, sub nom The Edison [1933] All ER Rep 144, 149 LT 49, 42 Digest (Repl) 945, 7368.
Mason v Sainsbury (1782) 3 Doug KB 61, 99 ER 538, 29 Digest (Repl) 451, 3293.
Rasnoimport (V/O) v Guthrie v Co Ltd [1966] 1 Lloyd’s Rep 1, Digest Supp.
Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1961] 2 All ER 487, [1962] 2 QB 330, [1961] 2 WLR 1043, 29 Digest (Repl) 339, 2583.
Appeal
This was an appeal by the plaintiffs, H Cousins & Co Ltd, against so much of the judgment of Master Ritchie, given on 11 February 1970, as refused to award them interest under the Law Reform (Miscellaneous Provisions) Act 1934 on the damages recovered by them from the defendants, D & C Carriers Ltd, for loss of goods in respect of the period after 11 August 1966, when the plaintiffs’ insurers had paid them. The facts are set out in the judgment of Widgery LJ.
R L A Goff QC and J H Mance for the plaintiffs.
N F Irvine for the defendants.
Cur adv vult
30 October 1970. The following judgments were delivered.
WIDGERY LJ read the first judgment at the invitation of Davies LJ. This is an appeal from a judgment of Master Ritchie given on 11 February 1970 whereby he awarded the plaintiffs the sum of £3,011 9s damages for loss of goods entrusted by the plaintiffs to the defendants, as carriers and lost in transit. The plaintiffs were also awarded the sum of £121 18s 10d by way of interest under the Law Reform (Miscellaneous Provisions) Act 1934, and the appeal is concerned with this latter sum only.
The goods in question consisted of a consignment of ladies’ clothing and shoes which had been imported by the plaintiffs from Hong Kong, and landed in the port of London, whence they were being carried by road by the defendants to various addresses in Scotland. The goods disappeared in transit on 16 December 1965, and the plaintiffs claimed on their insurers who settled the claim in August 1966. The insurers decided to pursue a claim against the defendants and, accordingly, a writ was issued in the plaintiffs’ name on 21 June 1968, claiming from the defendants the value of the goods (£5,191 5s) and interest thereon ‘at the rate of 1 per cent above Bank Rate until the date of judgment herein’. On 12 November 1969, the defendants paid £3,011 9s into court in satisfaction of the claim. This figure included nothing for interest, but was otherwise agreed as the maximum sum recoverable in the action having regard to the terms of the contract of carriage. When the matter came before Master Ritchie, the only outstanding issue was that relating to interest. The learned master decided that interest should be awarded and should run from 17 January 1966, which was the date on which the plaintiffs could have
Page 57 of [1971] 1 All ER 55
expected payment from their customers if the goods had been duly delivered. There was an issue as to the date to which interest should run, the plaintiffs (through their insurers) contending that this should be the date of the defendants’ payment into court, namely 12 November 1969, whereas the defendants contended that, as the plaintiffs had received a full indemnity from their insurers on 11 August 1966, no interest should be awarded after that date. The master was referred to the decision of this court in Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd, and upheld the defendants’ contention. The plaintiffs appeal.
The defendants contend, inter alia, that the issue in this appeal was decided in Harbutt’s case, and that this court is bound thereby. In that case, the owners of a factory recovered some £173,000 by way of damages from contractors whose negligence had resulted in the destruction of the factory by fire. The factory owners were insured and were duly indemnified by their insurers, the action proceeding on the insurers’ behalf. The hearing in this court occupied five days and was mainly concerned with questions affecting the contractors’ liability in negligence, the dispute as to interest playing a relatively minor part. The matter is dealt with in the judgment of Lord Denning MR (with which the other members of the court concurred) where he said ([1970] 1 All ER at 236, [1970] 1 QB at 468):
‘The plaintiffs received considerable sums from their insurance company soon after the fire: £50,000 within eight weeks, and so forth. Are those to be taken into account in awarding interest? The plaintiffs say that the court should ignore the fact that they were insured, or have received insurance moneys, and should give them full interest as if they had paid the cost of replacement out of their own pocket or borrowed money for the purpose. I think this goes too far. In assessing damages, we ignore, of course, the fact that the plaintiffs are insured. But, in awarding interest, it is different. An award of interest is discretionary. It seems to me that the basis of an award of interest is that the defendant has kept the plaintiff out of his money; and the defendant has had the use of it himself. So he ought to compensate the plaintiff accordingly. This reasoning does not apply when the plaintiff has not been kept out of his money but has in fact been indemnified by an insurance company. I do not think that the plaintiff should recover interest for himself on the money when he has not been kept out of it.’
This court then referred the matter back to the trial judge for a reassessment of the award of interest.
It is, I think, clear that it was uppermost in the mind of this court in Harbutt’s case that the interest in question would be retained by the plaintiff and not handed over to the insurers. This had been accepted by counsel on both sides in argument ([1970] 1 QB at 457), and is implicit in Lord Denning MR’s reference to the plaintiff recovering interest ‘for himself’. We have had the benefit of a full argument designed to show that this premise was false, and that interest awarded in respect of a period after the insurers had settled with the assured can be claimed by the insurers by subrogation. It accordingly seems necessary to examine this argument before reaching a conclusion as to the effect of the Harbutt decision.
The right of an insured plaintiff to proceed against the wrongdoer for the benefit of the insurers was recognised in Mason v Sainsbury. It was there contended that the insurers should not be entitled to recover in an action brought in the plaintiff’s name because they had received the insurance premium and were entitled to no
Page 58 of [1971] 1 All ER 55
more whether a loss occurred or not. This argument was unanimously rejected by the court, Lord Mansfield observing ((1782) 3 Doug KB at 64):
‘The office paid without suit, not in ease of the [defendant], and not as co-obligors, but without prejudice. It is, to all intents, as if it had not been paid. … I am satisfied that it is to be considered as if the insurers had not paid a farthing.’
This principle, namely that the contract of insurance is res inter alios acta, has since been consistently followed in regard to claims of right but, in matters of discretion such as the award of interest, I think it right that the court should look at the reality of the matter and should take note of the right of the parties under any relevant insurance cover if this is necessary in order to do justice.
To look at the reality of the matter requires consideration of whether any interest awarded in respect of a period subsequent to August 1966 could be retained by the plaintiffs, as between themselves and the insurers, or could be claimed by the insurers by subrogation. The goods in question had been insured under a single contract covering their transit from Hong Kong to Scotland. Hence, although the loss occurred on land, the insurers’ right of subrogation is contained in s 79(1) of the Marine Insurance Act 1906, which provides:
‘Where the insurer pays for a total loss … of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.’
Counsel agree that this provision is intended as a statement of the common law, and that reference to the earlier authorities is still appropriate. The principal of these is Castellain v Preston, where Brett LJ having referred to the fundamental principle of insurance law that insurance is a contract of indemnity and no more, continued ((1883) 11 QBD at 388, [1881–85] All ER Rep at 496):
‘Now it seems to me that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried to the extent … that as between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any right, whether by way of condition or otherwise, legal or equitable, which can be, or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished. That seems to me to put this doctrine of subrogation in the largest possible form, and if in that form, large as it is, it is short of fulfilling that which is the fundamental condition, I must have omitted to state something which ought to have been stated.’
I feel indebted to counsel for the plaintiffs for his clear and carefully reasoned argument, but it can be summarised in a single sentence. He submits that, whether one looks at the 1906 Act or at the test prescribed by Brett LJ, the words used are wide enough to subrogate the insurers to any claim of the plaintiffs to interest accruing after August 1966. Accordingly, if the master was misled by Harbutt’s case into taking a different view, his discretion was exercised on a false premise.
Page 59 of [1971] 1 All ER 55
Counsel for the defendants sought to support the master’s decision on a number of grounds. He emphasises that the claim in this action is the plaintiffs’ claim, albeit that it is pursued on behalf of the insurers. He contends that, since the plaintiffs have suffered no loss of interest since August 1966, they cannot claim such interest against the defendants, and the insurers are in no better position. I cannot accept this submission since it would apply equally to the plaintiffs’ claim for the capital value of the goods and is thus contrary to Lord Mansfield’s judgment in Mason v Sainsbury. That the court has power to award interest in respect of the full period seems to me to be clear, although the exercise of its discretion will depend on whether the interest remains in the plaintiffs’ pockets or can be claimed by the insurers.
On this latter point counsel for the defendants maintains that, if interest were awarded for the period following August 1966, such interest could be retained by the plaintiffs as against the insurers. He contends that the insurers could not claim such interest under s 79 of the 1906 Act because the claim to interest is not a right or a remedy of the assured ‘in and in respect of’ the subject-matter of the insurance. Here, again, I disagree. The reference in the section to ‘the subject-matter insured’ is a reference to the goods. The plaintiffs’ claim against the wrongdoer for conversion of the goods is a claim in respect of the subject-matter insured. The resulting judgment is a single judgment based on a single cause of action, and I see no reason for dissecting its amount in the way suggested. One might as well say that the plaintiffs’ entitlement to the costs of the action is something to which the insurers are not subrogated, but this suggestion is not made. Counsel for the defendants further sought to support his argument by saying that the insurers would not be entitled to claim the interest under the tests prescribed by Brett LJb unless the insurance cover obliged the insurers to pay interest to the plaintiffs (which it did not), because the right to interest was not a right whereby ‘the loss against which the assured is insured, can be, or has been diminished’. I do not think that Brett LJ would have taken this view if he had had this particular question in mind. His qualification that the right claimed must be one which diminishes the amount of the loss insured against was a limitation in general terms of a principle expressed in very general language. Here, again, the single cause of action and single judgment should not be dissected so as to offend the fundamental rule that the assured cannot retain compensation in excess of his actual loss.
Counsel for the defendants also relied strongly on the decision of Diplock J in Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd, but in my understanding of that judgment it favours the plaintiffs rather than the defendants. That was a case of a valued marine policy in which a ship was insured for £72,000. Following a total loss the insurers paid the amount of the policy and in subrogation proceedings the assured obtained judgment for substantially the same sum against the Canadian government, as owners of the ship at fault. By the time the damages were remitted to England in Canadian dollars the pound had been devalued so that the amount received by the assured realised no less than £126,971. The insurers sued the assured for the whole of this latter sum but were held entitled to no more than the sum of £72,000 actually paid by them to the assured. The basis of the judgment is that the insurers’ right by subrogation derive from the terms (express or implied) of the contract of insurance. As Diplock J put it ([1961] 2 All ER at 490, [1962] 2 QB at 339, 340):
‘The expression “subrogation” in relation to a contract of marine insurance is thus no more than a convenient way of referring to those terms which are to be implied in the contract between the assured and the insurer to give business efficacy to an agreement whereby the assured in the case of a loss against which
Page 60 of [1971] 1 All ER 55
the policy has been made shall be fully indemnified, and never more than fully indemnified.’
It is, therefore, pertinent to enquire what term, if any, is to be implied in a contract of insurance in regard to the ultimate destination of interest awarded under the Law Reform (Miscellaneous Provisions) Act 1934. It seems to me that the answer to the officious bystander’s query would be: ‘Of course the assured may retain interest accruing prior to the date of settlement by the insurers but thereafter such interest must go to the insurers’. Unless we are constrained by Harbutt’s case to rule otherwise, I think that such a term was necessary to give business efficacy to the contract now in question.
I return, therefore, to Harbutt’s case. The only point decided by this court, in my judgment, was that, if the then plaintiffs would be entitled, as between themselves and the insurers, to retain the award of interest made by the trial judge, such award was an erroneous exercise of his discretion under the 1934 Act. It would, I think, be wholly incorrect to say that this court decided the mixed questions of fact and law involved in a conclusion that the plaintiffs were so entitled. The contract of insurance was not examined, and the judgment of Lord Denning MR proceeds on an assumption of the plaintiffs’ right. Accordingly, this court, in my opinion, is entitled to approach this question as one not concluded by authority. My own conclusion is that, if the learned master had awarded interest in respect of a period subsequent to August 1966, that interest could have been claimed by the insurers as against the plaintiffs. Had the master appreciated this he might have reached a different conclusion, and I would allow the appeal and remit the matter to the master for reconsideration in the light of this judgment.
DAVIES LJ. I entirely agree with the judgment which has been delivered by Widgery LJ, and there is very little that I can add without repetition.
So far as concerns the decision in Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd, I agree that the effect of that decision as to the interest point was that, if any interest awarded would enure to the benefit of the assured, as it was on all hands assumed—in my view wrongly—that it would, then interest ought not to be awarded, since such an award would result in the assured being over-compensated.
As I think, the only substantial argument put forward by the defendants was that, since the insurers, only take over by subrogation such rights as the plaintiffs themselves enjoyed and the plaintiffs after having been paid out had no right to claim interest, therefore the insurers could not claim interest for the period after the date of payment to the assured; but that proposition cuts at the root of the whole principle of subrogation. If it were right, it would prevent the insurers, after indemnifying the assured, from recovering the amount of the loss from the wrongdoer who had caused it, which they admittedly can. The truth of the matter is that, as the insurers after indemnifying the assured have the right to sue the wrongdoer in the name of the assured in order to recover the amount of the loss, there goes with that right the ancillary right to ask the court in its discretion to award interest on the whole or any part of the sums recovered. The fact that the assured has been paid off by the insurers is, so far as concerns the defendants, res inter alios acta.
Counsel for the plaintiffs called our attention to a number of cases in which interest was given as a matter of course in subrogation actions; see for example Dredger Liesbosch (Owners) v Steamship Edison (Owners) and V/O Rasnoimport v Guthrie & Co Ltd. He submitted that for many years it has been the common and regular practice in such cases to award interest. Counsel for the defendants, on the other hand,
Page 61 of [1971] 1 All ER 55
sought to distinguish between marine and non-marine cases. While admitting that interest is normally given in the former class of case, he submitted that it is not normally given in the latter. To that there are two answers in the present case. The first is that, although here the loss occurred on land, the policy was a marine one. Secondly, and of more general importance, it is quite impossible to see any logical distinction between the two classes of case. In his connection reference may usefully be made to the oft-quoted passage in the speech of Lord Blackburn in Burnand v Rodocanachi ((1882) 7 App Cas 333 at 339), where he said:
‘The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy, or a policy against fire on land, or any other contract of indemnity) and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid it, then, if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to be recoupled by having that amount back.’
Lord Blackburn is clearly stating that, so far as concerns subrogation, no distinction can validly be drawn between the two classes of policy, and I respectfully agree with him.
It might be said for the purposes of the present case that, just as the plaintiff must not be over-compensated, so the insurers ought not to be under-compensated; and if the insurers do not recover interest for the period between the date of payment by them and the recovery against the defendants, then they are under-compensated since they have been kept out of their money for that period.
I do not wish to add any more and agree with the order proposed by Widgery LJ.
KARMINSKI LJ. I have had the advantage of reading the judgments of Davies and Widgery LJJ, and am in complete agreement with them. In particular, I desire to express my agreement with the analysis contained in both judgments of the decision of this court in Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd. In the present case, the insurers have been kept out of their money for a considerable time. The remedy for this loss is that they should recover interest for the period during which they have been so kept out of their money. Any other result would be manifestly unfair and unjust to the insurers.
I also agree with the order proposed by Widgery LJ.
Appeal allowed. Case remitted to master for reconsideration. Leave to appeal to the House of Lords refused.
Solicitors: Clyde & Co (for the plaintiffs); Herbert Smith & Co (for the defendants).
Henry Summerfield Esq Barrister.
Practice Note
(Company: Winding-up order: Rescission)
[1971] 1 All ER 62
Categories: PRACTICE DIRECTIONS
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 30 NOVEMBER 1970
Company – Winding-up – Order for – Rescission – Application for rescission – Discretion of court – Exercise of discretion – Time for application – Affidavits in support.
Notes
For jurisdiction of the court to rescind winding-up orders, see 6 Halsbury’s Laws (3rd Edn) 557, 558, para 1073, and for cases on amendment etc of winding-up orders, see 10 Digest (Repl) 896, 6028–6037.
30 November 1970. The following judgment was delivered.
MEGARRY J made the following statement in the Companies Court. In recent years, applications to rescind a winding-up order before it has been drawn up have become increasingly common. Owing to the great increase in the number of such orders it often happens that some time elapses before the order can be drawn up. The making of the order, however, affects all creditors of the company, and gives the Official Receiver authority to act forthwith; and in these circumstances the inherent power of the court to revoke or vary an order at any time before it is perfected is one that ought to be exercised with great caution. Accordingly, although the matter is one for the discretion of the court in each case, application to rescind a winding-up order will not normally be entertained by the court unless it is made within three or four days of the order, and is supported by an affidavit of assets and liabilities. If an application is made later than this, the affidavit should also establish the exceptional circumstances relied upon as justifying the application.
Cases in which the making of the order has not been opposed owing to some matter such as an error or misunderstanding in instructing counsel may, if the application is made promptly, still be dealt with on a statement by counsel of the circumstances; but apart from such cases, the court will normally require any application to be supported by affidavit.
In making this statement, I am speaking after consultation with the other judges of the Companies Court.
R W Farrin Esq Barrister.
Practice Direction
(Divorce: Reconciliation: Certificate)
[1971] 1 All ER 63
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
3 December 1970.
Divorce – Reconciliation – Certificate with regard to – Names etc of persons qualified to help – Organisations and persons regarded as authorised to help – Reference to marriage guidance counsellor or probation officer not formal step in procedure – Proceedings for divorce or judicial separation – Matrimonial Causes Rules 1968(SI 1968 No 219), App II, Form 2A (as added by SI 1970 No 1349) – Divorce Reform Act 1969, ss 3(1) and 8.
Section 3(1)a of the Divorce Reform Act 1969 and that section as applied by s 8 of the Act provides that rules of court shall be made for requiring the solicitor acting for a petitioner for divorce or judicial separation to certify whether he has discussed with the petitioner the possibility of a reconciliation and given him the names and addresses of persons qualified to help effect a reconciliation between parties to a marriage who have become estranged. Rule 12(3) requires the certificate to be given to be in Form 2A in App II to the Matrimonial Causes Rules 1968b.
It is not necessary for the names of individuals to be given to the petitioner and the following organisations and persons will be regarded as persons qualified to help effect a reconciliation for the purposes of the section: any marriage guidance council affiliated to the National Marriage Guidance Council; any centre of the Catholic Marriage Advisory Council; the Jewish Marriage Education Council, 529B Finchley Road, London NW3 1AJ; and any probation officer. It is emphasised that the list is not exclusive, and in the particular circumstances of any case there may be others who should be regarded as qualified within the section.
The object of the section and of the rule made pursuant to it is to ensure that parties know where to seek guidance when there is a sincere desire for a reconciliation; it is important that reference to a marriage guidance counsellor or a probation officer should not be regarded as a formal step which must be taken in all cases irrespective of whether or not there is any prospect of a reconciliation.
Direction issued by the President in concurrence with the Lord Chancellor.
D A Newton, Registrar
Practice Direction
(Chancery Division: Practice: Stay of proceedings)
[1971] 1 All ER 64
PRACTICE DIRECTIONS
CHANCERY DIVISION
15 December 1970.
Practice – Chancery Division – Stay of proceedings – Consent order without personal attendance – Parties represented by solicitors – Procedure.
Practice – Chancery Division – Stay of proceedings – Proceedings set down for hearing in court – Consent order – Application to be in person – Procedure.
1 ORDERS STAYING PROCEEDINGS WITHOUT PERSONAL ATTENDANCE
(1) When all parties are represented by solicitors they may at their discretion lodge, personally or by post, an application to the court for an order by consent for leave to discontinue proceedings or to stay proceedings, in the form of minutes signed by all solicitors on the record.
(2) The following papers must be lodged: (a) the signed minutes (in the correct form of a ‘Tomlin’ order if terms are agreed); (b) when the proceedings have been commenced by writ: (i) the original writ, (ii) copies of any pleadings already served of which copies have not previously been lodged in chambers and (iii) a pro-forma summons asking for an order in the form of the minutes; (c) when the proceedings have been commenced by originating summons: (i) the original originating summons and (ii) a pro-forma notice of appointment under RSC Ord 28, r 2, if no such notice has already been issued; (d) the duplicate appearances, if any, unless already lodged and (e) the fee for any pro-forma summons or notice (but only if the papers are lodged by post; otherwise the fee must be impressed before lodgment).
(3) The papers will be put before the master, who will thereupon make the order unless he considers that the attendance of the solicitors is necessary or desirable, in which case he will call on them to appear before him. If an order is made the papers will then be passed to the registrar.
(4) This procedure is not appropriate if any evidence has to be considered.
(5) The parties should ensure that the sealed duplicates of any legal aid certificates have reached the master’s clerk.
2 STAY OF PROCEEDINGS AFTER SETTING DOWN
If proceedings have been set down for hearing in court and the parties have come to terms they may apply (in person and not by post) to the clerk to the judge in charge of the appropriate list to take the case out of the list and to sign a note (to be prepared by them) to the effect that this has been done. The master may, on production of the note and subject to the issue of any necessary summons, make an order by consent that the action or counterclaim be discontinued or that the proceedings be stayed. The procedure specified in para 1 may be followed if the parties so desire. Nothing in this paragraph shall prevent the parties from mentioning the matter in court if they prefer to do so.
By the direction of the Vice-Chancellor.
R E Ball, Chief Master
Stringer v Minister of Housing and Local Government and others
[1971] 1 All ER 65
Categories: TOWN AND COUNTRY PLANNING
Court: QUEEN’S BENCH DIVISION
Lord(s): COOKE J
Hearing Date(s): 8, 9, 10, 14 APRIL, 3 JULY 1970
Town and country planning – Appeal – Permission for development refused – Appeal to Minister – Local planning authority binding itself by agreement to resist development in area of Jodrell Bank – Authority’s decision refusing permission for development in the area void because of failure to comply with s 17(1) of the Town and Country Planning Act 1962 – Whether Minister properly seised of appeal – Minister entitled to deal with application de novo, or on footing that the authority had failed to notify applicant of an effective decision – Town and Country Planning Act 1962, ss 23(4) and 24.
Town and country planning – Development – Permission for development – Material consideration – Development likely to interfere with Jodrell Bank radio telescope – Such interference a material consideration to which the Minister, on appeal against the refusal of permission, was entitled to have regard – Material considerations not limited to matters of amenity but covering any consideration, in regard to public or private interests, which related to the use and development of land – Town and Country Planning Act 1962, s 17(1).
Town and country planning – Development – Permission for development – Appeal – Appeal to Minister – Natural justice – Appeal against refusal to allow development near to radio telescope at Jodrell Bank – Minister having general policy of discouraging development interfering with the efficient working of the radio telescope – Refusal of permission by Minister because development might interfere with the working of telescope – Minister entitled to have general policy on matters relevant to planning decisions provided policy did not preclude him from fairly judging the relevant issues in each case – Policy did not preclude fair consideration of appeal – No ground for quashing decision.
Town and country planning – Development – Permission for development – Refusal of permission for reasons relating to radio telescope at Jodrell Bank – No right to compensation for refusal on those grounds – Planning authority entitled to refuse permission on such grounds despite absence of compensation.
In September 1966, the applicant applied to Congleton rural district council, who were exercising the planning functions of Cheshire county council, for the erection of four dwellings on a site in Brereton Heath, a hamlet about 4 miles from the site of the Jodrell Bank radio telescope which was a department of Manchester University. In March 1967, before the rural district council had given their decision on the application, an agreement was entered into between the county council, Manchester University and the rural district council ‘to discourage development within the limits of their powers at Brereton Heath until 1990’ for the protection of the Jodrell Bank telescope. In July 1967, the application was refused. One of the reasons given for the refusal, resulting from the agreement of March 1967, was the close proximity of the site to the Jodrell Bank telescope and the likelihood that the development would seriously interfere with the efficient running of the telescope. The other reasons for the refusal were inconsistency of the development with the county development plan and the absence of main drainage. The applicant appealed to the Minister from the refusal, and after a local inquiry into the appeal had been held, the Minister, accepting the inspector’s recommendations, dismissed the appeal on the grounds, inter alia, that on the evidence put forward at the inquiry the development might interfere to a serious extent with the working of the Jodrell Bank
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telescope, and that this possibility constituted a material consideration within s 17a of the Town and Country Planning Act 1962. The Minister’s decision was not based on or influenced by the arrangement of March 1967, nor was there evidence that that agreement had stemmed from advice or encouragement from the Minister, but the Minister had a policy of discouraging development which would interfere with the efficient working of the telescope. On a motion by the applicant under s 179 of the 1962 Act for an order quashing the Minister’s decision the trial judge found that the agreement of March 1967 was ultra vires the rural district council because it was intended to bind the council to disregard considerations which under s 17(1) of the 1962 Act they were required to have regard to in dealing with a planning application; and that by giving effect to the agreement in refusing the application the rural district council had failed to comply with the requirements of s 17(1) and made no proper determination on the application.
Held – (i) The Minister was properly seised of the applicant’s appeal, for although the rural district council’s decision on the application was void, and not merely voidable, by reason of their failure to comply with s 17(1) of the 1962 Act, s 23(4)b of the 1962 Act empowered the Minister to deal with the application de novo so that he was entitled to make a decision on it notwithstanding that the decision appealed from was a nullity; alternatively, the Minister was entitled to entertain the appeal under s 24 of the 1962 Act, which provided for the application of the appeal provisions of s 23 if the planning authority had failed to give notice of their decision on a planning application within the prescribed period because, as the council’s decision was void, in effect they had failed to deal with the applicant’s application and to notify him of an effective decision (see p 75 c to g, post).
Dictum of Lord Reid in Anisminic Ltd v Foreign Compensation Commission [1969] 1 All ER at 217 applied.
Pillai v Singapore City Council [1968] 1 WLR 1278 applied.
(ii) The likelihood of interference with the work of the Jodrell Bank telescope was a ‘material consideration’ within s 17(1) of the 1962 Act, which the Minister was entitled and bound to have regard to in determining the appealc, for while such material considerations must be of a planning nature, they were not limited to matters relating to amenity and covered any consideration, in regard to public or private interests, relating to the use and development of land (see p 77 b and g to j, post).
(iii) The absence of a right to compensation for refusal of planning permission for reasons relating to the telescope was not a ground for arguing that it was not within the power of the planning authority to refuse permission for such reasons (see p 78 h, post).
Dictum of Lord Reid in Westminster Bank Ltd v Minister of Housing and Local Government [1970] 1 All ER at 739 applied.
(iv) A Minister charged with the duty of making administrative decisions in a fair and impartial manner might nevertheless have a general policy on matters which were relevant to those decisions, provided that the existence of the policy did not preclude him from fairly judging all the issues which were relevant to each individual
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case; and in the present case the Minister’s policy in regard to Jodrell Bank was not such as to preclude him from fairly considering the applicant’s appeal on its merits and it could not be said that he had prejudged the case or abdicated any of his functions by having such a policy; accordingly, the Minister had complied with the rules of natural justice in determining the appeal, and the application to quash his decision failed (see p 80 e to g, post).
Dicta of Lord Greene MR in B Johnson & Co (Builders) Ltd v Minister of Health [1947] 2 All ER at 397, and of Banks LJ in R v Port of London Authority, ex parte Kynoch Ltd [1919] 1 KB at 184 considered.
Notes
For the discretionary power to grant planning permission and considerations material thereto, see 37 Halsbury’s Laws (3rd Edn) 301–304, para 413.
For the presumption against interference by statute with private rights, see 36 Halsbury’s Laws (3rd Edn) 413, para 627, and for cases on the subject, see 44 Digest (Repl) 294–298, 1236–1283.
For the Town and Country Planning Act 1962, ss 17, 23 and 24, see 42 Halsbury’s Statutes (2nd Edn) 985, 991, 993.
Cases referred to in judgment
Anisminic Ltd v Foreign Compensation Commission [1969] 1 All ER 208, [1969] 2 AC 147, [1969] 2 WLR 163, Digest Supp.
Buxton v Minister of Housing and Local Government [1960] 3 All ER 408, [1961] 1 QB 278, [1960] 3 WLR 866, 124 JP 489, 45 Digest (Repl) 340, 55.
Fitzpatrick Development Ltd v Minister of Housing and Local Government and Finchley Borough Council (1965) unreported.
Gregory v London Borough of Camden [1966] 2 All ER 196, [1966] 1 WLR 899, 130 JP 244, Digest (Cont Vol B) 472, 292e.
Johnson (B) & Co (Builders) Ltd v Minister of Health [1947] 2 All ER 395, [1948] LJR 155, 177 LT 455, 111 JP 508, 26 Digest (Repl) 702, 128.
Pillai v Singapore City Council [1968] 1 WLR 1278, Digest Supp.
Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 All ER 625, [1958] 1 QB 554, [1958] 2 WLR 371; rvsd HL [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, 123 JP 429, Digest (Cont Vol A) 968, 254a.
R v Port of London Authority, ex parte Kynoch Ltd [1919] 1 KB 176, 88 LJKB 553, 120 LT 177, 83 JP 41, 16 Digest (Repl) 327, 1056.
Simpson v Edinburgh Corpn 1960 SC 313, 1961 SLT 17, 45 Digest (Repl) 322, *32.
Westminster Bank Ltd v Minister of Housing and Local Government [1970] 1 All ER 734, [1970] 2 WLR 645.
Cases also cited
Bowman, Re [1932] 2 KB 621, [1932] All ER Rep 257.
Ellis v Dubowski [1921] 3 KB 621, [1921] All ER Rep 272.
Franklin v Minister of Town and Country Planning [1947] 2 All ER 289, [1948] AC 87.
Lavender (H) & Son Ltd v Minister of Housing and Local Government [1970] 1 WLR 1231.
Luke v Minister of Housing and Local Government [1967] 2 All ER 1066, [1968] 1 QB 172.
Mixnam’s Properties Ltd v Chertsey Urban District Council [1964] 2 All ER 627, [1965] AC 735.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40.
Simms (WJ) Sons & Cooke v Minister of Housing and Local Government (1969) 210 Estates Gazette 705.
Whalen v Minister of Housing and Local Government (1966) unreported.
Motion
This was an application by Geoffrey Harold Stringer for an order under s 179 of the Town and Country Planning Act 1962 to quash the decision of the Minister of Housing and Local Government dated 13 January 1969, dismissing his appeal against the
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decision of the Congleton rural district council acting on behalf of the Cheshire county council refusing planning permission for a plot layout and roads in connection with residential development at Brereton Heath Lane, Congleton in the county of Cheshire. The facts are set out in the judgment.
D G Nowell for the applicant.
Gordon Slynn for the Minister.
Cur adv vult
3 July 1970. The following judgment was delivered.
COOKE J read the following judgment. In this application under s 179 of the Town and Country Planning Act 1962, the applicant, Mr Geoffrey Harold Stringer, seeks an order quashing a decision of the Minister of Housing and Local Government dismissing an appeal by the applicant from a refusal by the Congleton rural district council, acting on behalf of the Cheshire county council, to grant him planning permission for the erection of 23 dwellings in the hamlet of Brereton Heath.
The site of the proposed development is an area of some 4 3/4 acres on the south side of Brereton Heath Lane. It is just over 4 miles from the Nuffield Radio Astronomy Laboratories at Jodrell Bank. These laboratories are a department of Manchester University, and they are, of course, nationally and internationally famous as being the seat of the Jodrell Bank telescope, the world’s largest radio telescope. This department of the university is under the direction of Professor Sir Bernard Lovell, who has been the moving spirit in the conception and birth of the telescope and in the growth and development of the important scientific activities which depend on it. The applicant has been in business as a builder on his own account in a comparatively small way for some 20 years. He has for many years been the owner of land, including the appeal site, on the south side of Brereton Heath Lane. In this area the local planning authority is the Cheshire county council and planning functions are exercised on behalf of the county council by the Congleton rural district council. It is clear that in 1964 the planning authority was contemplating further residential development at Brereton Heath and indeed there was in existence, and in the possession of the area planning officer, an informal plan showing the areas in which it was at that time intended to permit future residential development in the hamlet once main drainage had been provided. Those areas included the whole of the applicant’s land comprised in the present appeal site. This informal plan had been prepared notwithstanding that the appeal site is within an area in which, according to the county development plan as approved by the Minister in 1958, existing land uses are intended for the most part to remain undisturbed. The nature of the informal plan was at that time common knowledge among those interested in development in the locality.
It appears that in 1964 a planning application to develop the appeal site was refused on grounds which the applicant fully accepted after discussions with the area planning officer and the surveyor to the rural district council. There were then further discussions between the applicant and the surveyor and as a result of those discussions the applicant applied, I think in February 1965, for outline planning permission to erect four dwellings on that part of his land on the south side of Brereton Heath Lane which was immediately adjacent to the lane itself. The appeal site is immediately to the south of, and contiguous with, that part of the applicant’s land to which that application related. The application included proposals, on lines agreed between the applicant, the area planning officer and the surveyor, for providing an access road from Brereton Heath Lane to the appeal site. In order to be able to provide such an access road, the applicant had to acquire additional land at a cost of approximately £300. In connection with the application the applicant was specifically requested to show what proposals he had in mind for the appeal site. On that application the applicant was, on 18 August 1965, given outline planning permission for the erection of four dwellings on his land immediately adjoining Brereton Heath
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Lane. One of the conditions on which the application was granted was that the layout of the land should make provision for street access to the back land (that is to the appeal site), on the lines shown in the application. There were then further discussions between the applicant and the area planning officer about the applicant’s detailed proposals for two of the four dwellings for which outline planning permission had been granted. In those discussions again the applicant’s proposals for the development of the appeal site were considered. Those four dwellings have now been constructed. Provision has been made for an access road to the appeal site and the applicant has been required, under s 192 of the Highways Act 1959, to deposit £1,170 with the county council in respect of the costs of constructing the access road. The access road has not in fact been constructed except to the extent of providing a driveway to two of the four dwellings for which planning permission was granted in August 1965.
On that history I think that the applicant may fairly say that he incurred the expense of acquiring additional land in order to provide the access road, and incurred the expense of making a payment to the county council under the Highways Act 1959, in the reasonable expectation, encouraged by informal discussions with officers of the planning authorities, that planning permission would in due course be forthcoming for some form of residential development on the appeal site. His expectation that such planning permission would be forthcoming was no doubt further encouraged by the inclusion, in the planning permission of August 1965, of a condition requiring that the layout of the land should make provision for street access to the appeal site.
In September 1966, the applicant applied to the Congleton rural district council for outline planning permission to erect 23 dwellings on the appeal site. The application was refused on 18 July 1967. Three reasons were given for the refusal. For the moment I need refer to the second reason only. It was this:
‘The site is in close proximity to the Jodrell Bank Authority Research Station and the development, if approved, would be likely to seriously interfere with the efficient running of the Radio Telescope.’
From this refusal the applicant appealed to the Minister on 3 February 1968. On 10 September 1968, Mr Metcalfe, an inspector appointed by the Minister, held a local inquiry into the appeal. Mr Metcalfe’s report is dated 25 September 1968 but, before dealing with that and with the Minister’s decision which followed, it is convenient to refer as briefly as I can to the history of relations between the Jodrell Bank directorate, the Minister and the local planning authorities. A lively description of some part of this history is to be found in Sir Bernard’s book ‘The Story of Jodrell Bankd’.
Electrical sparks and other forms of disturbance from terrestrial sources in the neighbourhood of the telescope produce signals which bear a remarkable similarity to the signals which the telescope receives from outer space. Signals from terrestrial sources can thus interfere with the work of the telescope, but the danger of interference from such sources tends to diminish as their distance from the telescope increases. Planning permission for the construction of the telescope was given in 1952. The telescope was built in the knowledge that certain towns and villages existed in the neighbourhood. For instance, there was Goostrey about 1 1/2 miles to the south-west and Holmes Chapel about 3 miles to the south-west. It has always been a matter of anxiety to Sir Bernard Lovell that there should be as little further development as possible within a radius of 2 miles from the telescope on the north side and within a radius of some 6 miles from the telescope on the eastern, western and southern sides. Outside, but adjacent to a zone thus roughly delimited, certain forms of development might be a source of concern as giving rise to the kind of activities and
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incidents which produce interference. Interference from the south-eastern aspect of the telescope has always been a matter of particular concern. As early as November 1952, Sir Bernard was making his anxieties about these matters known to the clerk of Congleton rural district council, and in the years which followed he made them known to the Minister’s predecessors, to the Department of Scientific and Industrial Research, and to the Cheshire county council.
Just over 6 miles to the south-east of the telescope lies the centre of the borough of Congleton. In 1955, the borough council were most desirous of increasing the size of their town, and in particular were desirous of developing an area known as West Heath, which is within the boundaries of the borough but is also within a 6 mile radius of the telescope. The nature of the development which they envisaged was shown on a map which had been prepared for this purpose, an informal working document of a kind which it is very necessary to produce when working out local plans which may ultimately be adopted and incorporated in the county development plan. Sir Bernard was particularly concerned about the West Heath proposals, and he had discussions about them with officials of the Ministry of Housing and Local Government and of the Department of Scientific and Industrial Research. On 26 July 1955, the Parliamentary Secretary to the Ministry presided at a meeting which was attended by representatives of the borough council, the county council, the Department of Scientific and Industrial Research and by Professor Lovell and one of his colleagues from Manchester University. As a result of that meeting, a compromise was reached. A line was drawn on a map showing the West Heath area of the borough, and it was agreed that the borough council would not seek to develop to the north and west of the line. For some reason the line became known as the ‘F line’. It did not correspond exactly with the circumference of a circle drawn to a 6 mile radius from Jodrell Bank, but all parties were for the time being satisfied.
Sir Bernard’s description of these events in his book includes this sentencee: ‘The Minister drew a line on the map which became the famous “F line”, prohibiting development within our six-mile zone’. That sentence contains inaccuracies which are pardonable and understandable in a popular book written by a busy and eminent scientist who is not a planner or a local government administrator. In fact, the Minister was not exercising any statutory power of making decisions and he did not prohibit anything. The Minister was merely engaging in the normal processes of consultation about planning policy which form part of his functions. There is a letter of 14 November 1966 in which an officer of the Science Research Council displays a misconception similar to that contained in Sir Bernard’s book about the role played by the Minister in these matters.
After the original agreement relating to the ‘F line’, and again by a compromise in which the Minister’s good offices played a part, it was agreed between the Jodrell Bank directorate and the Congleton borough council that the Jodrell Bank directorate would raise no objection to development in a defined area to the north and west of the original ‘F line’. Thus in effect there was a further agreement by which the original agreement relating to the ‘F line’ was modified.
The appeal site is not in Congleton borough, but is some distance to the west in the Congleton rural district. As regards places outside the borough, the Minister has encouraged the Jodrell Bank directorate to make their views known to local authorities as to those areas in which development is likely to interfere with the use of the telescope, the intention being that such areas should be defined from time to time by agreement between the directorate and the local authority. The Minister has also encouraged arrangements between local authorities and the Jodrell Bank directorate whereby the directorate is to be consulted about applications for planning permission is areas so defined.
An example of such arrangements is to be found in a meeting which took place
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on 23 January 1959. The meeting was attended by representatives of Manchester University, including Sir Bernard Lovell, of the Chehire county council, of Congleton borough council, and of a number of district councils. That meeting had before it a map showing an area coloured pink. This area extended to a distance of 6 miles from the telescope on its southern, eastern, and western sides but in other directions was more restricted. Within the pink area was a shaded area extending in part to a distance of 2 miles and in part to a distance of 4 miles from the telescope. It was agreed at the meeting that the university should be consulted about all proposed development within the shaded area, and about all proposed development elsewhere in the pink area except where the proposal was for an individual building for non-industrial use. It was also agreed that it should be left to the discretion of area planning officers whether they should consult the university about proposed development outside the pink area.
The next event to which I need refer occurred in March 1967, ie after the applicant had applied for planning permission to develop the appeal site but before the Congleton rural district council had given their decision on the application. In March 1967, a document was executed on behalf of the county council by their assistant clerk and on behalf of the University of Manchester by Mr Lascelles, Sir Bernard’s special assistant. The document was also signed by the clerk to the Congleton rural district council, who are described as an interested party. The document is headed ‘Cheshire County Council’. The sub-heading is:
‘Undertakings given to Manchester University in relation to future development in that part of the consultation (hatched) zone within the Congleton Rural District for the protection of the radio telescope at Jodrell Bank.’
There is then a section headed ‘Goostrey village zone’, and I need not read that section. The next section is headed ‘Remainder of hatched zone’, and I quote para (a) of that section:
‘The county council will discourage development within the limits of their powers at Blackfirs Lane, Somerford, and at Brereton Heath until 1990. This undertaking not to affect infilling plots or land which already enjoys planning permission.’
This document has been referred to as an agreement, and I will adopt that description of it.
Sir Bernard Lovell gave evidence at the local inquiry held on 10 September 1968 in the applicant’s appeal to the Minister. According to the inspector’s report, Sir Bernard’s evidence as to the effect of the agreement was this—and I quote para 45 of the report:
‘That agreement accepted the relaxation of the university authorities’ opposition to development in Goostrey on the condition that development outside the agreed area, and this specially includes Brereton Heath, was to be resisted.’
In para 61 of the report, which appears under the general heading of ‘case for the Local Planning Authority’, I find this statement about the agreement of March 1967:
‘The rural district council were a party to this agreement and it is this agreement which has resulted in the second reason for refusal.’
Paragraph 76 of the report appears among a fasciculus of paragraphs which summarise the submissions of Mr Thompson, the solicitor who appeared at the inquiry on behalf of the local planning authority. It reads as follows:
‘It is accepted that the local planning authority are in a position to override
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the Jodrell Bank objections but since the agreement was signed … they do not do so.’
The general duties of a local planning authority in dealing with an application for planning permission are prescribed by s 17(1) of the Town and Country Planning Act 1962. The subsection requires the authority to have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations.
It seems to me that the broad intentions of this unhappy agreement are inconsistent with the performance of that duty as regards applications for planning permission at Brereton Heath and elsewhere. It is true that the county council’s undertaking to discourage development at Brereton Heath is qualified by the words ‘within the limits of their powers’. But Sir Bernard Lovell bluntly interprets the agreement as meaning that development at Brereton Heath and at other places was to be resisted. The planning authority admit that since the agreement was signed they do not override the Jodrell Bank objections to development in the areas in question. But it is the duty of a planning authority to deal with the individual planning application before it and to have regard to all considerations which are relevant to that application. Plainly, on an application for planning permission to build houses in a particular place, one consideration which must always be material is the need for houses in that place, and no doubt there are other considerations, totally unrelated to the requirements of the telescope, which may be material to the application. It seems to me that the intention of this agreement was to bind the authority to disregard considerations to which, under the terms of the section, it is required to have regard. I think that the agreement was ultra vires the authority for those reasons. That is a sufficient ground for treating it as without legal effect. It may well be that in any event the parties to the agreement did not intend it to give rise to obligations which would be enforceable in law. But I have no doubt that each party intended to carry out the undertakings which it in fact gave.
Coming now to the applicant’s application for planning permission to develop the appeal site, it seems to me that the local planning authority made no proper determination on that application. It appears that after the application was received but before the agreement was made, the University of Manchester was consulted on the application and objected to the proposed development on the grounds that it might lead to a significant development in the sensitive southern section of the telescope. The county surveyor, who was also consulted, considered the proposed development premature until sewer facilities had been provided. In November 1966, the county council recommended to the rural district council that the application be refused, but evidently the rural district council were not happy about that recommendation and there ensued correspondence between their clerk and officers of the county council. The application was finally considered by the rural district council on 14 July 1967, some four months after the agreement had been made, and notice of refusal was sent on 18 July 1967.
It is true that the first and third reasons given for the refusal had no connection with the telescope. The first reason was that the proposal did not accord with the county development plan, in that the appeal site was within an area where existing land uses were intended for the most part to remain undisturbed. The third reason related to the absence of mains drainage. But although the inclusion of these reasons might suggest that the local planning authority had looked at all the material considerations, the fact is that they had given an undertaking to the university which, whether legally binding or not, they intended to honour. The honouring of that undertaking would necessarily lead to the refusal of the application, and in those circumstances it is difficult to believe that the examination of other considerations can have been anything more than perfunctory, or that there was any true compliance
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with the statutory duties of the authority under s 17. In my view there was no such compliance.
I now turn to the position of the Minister. According to the inspector’s summary of the evidence given by Sir Bernard Lovell at the inquiry, Sir Bernard said that the Minister had advised the university and the local planning authority to seek local agreements, and that the agreement of March 1967 was a local agreement entered into in pursuance of that advice (see para 53 of the inspector’s report). I have already referred to one occasion on which Sir Bernard failed to appreciate the nature of the Minister’s role. I think that this is another. There is no evidence that the Minister specifically advised the agreement of March 1967, and indeed such evidence as there is, is to the effect that the Minister was not consulted about it. It is true, as I have already indicated, that as regards areas outside the borough of Congleton the Minister has encouraged arrangements between the university and local authorities for consultation about applications for planning permission in defined areas. There is no evidence that the Minister has advised or encouraged anything more than such arrangements for consultation. It appears to me that such arrangements are in themselves unexceptionable, for they do not in any way fetter the freedom of the authorities to have regard to all material considerations in dealing with planning applications. Such arrangements are wholly different from the undertakings embodied in the agreement of March 1967. In the result, I cannot accept that it has been shown that the agreement stems from any advice or encouragement whether general or particular, emanating from the Minister.
Reference was made at the inquiry to an application by a Mr Hughes for planning permission to develop another site at Brereton Heath. This other site is quite close to the appeal site and is at the junction of Brereton Heath Lane and Holmes Chapel Road. The application was refused by the local planning authority and Mr Hughes appealed to the Minister. The Minister’s decision, dismissing the appeal, was given on 27 December 1967. In para 4 of his decision letter the Minister stated:
‘The precise grounds for the appeal are noted and your arguments about the proposed septic tank drainage and the location of the site in relation to the Jodrell Bank telescope have been considered. The local planning authority wish to discourage further expansion at Brereton Heath and have also undertaken to restrict development there in the interests of the efficient working of the Jodrell Bank telescope. The Minister considers that the proposed development would be contrary to the policy for the area round Jodrell Bank and would be development in a rural area which would not be in accordance with the provisions of the approved development plan. For these reasons the Minister accordingly dismisses the appeal.’
At the local inquiry into the applicant’s appeal it was said on behalf of the planning authority that the Minister’s decision in the appeal of Mr Hughes was given in the light of the agreement of March 1967 between the local planning authority and the university (see the inspector’s report, para 72). In his conclusions at para 78(m) the inspector quotes the Minister’s decision in the case of Mr Hughes as evidence that the Minister has supported the 1967 agreement. If this short passage in the inspector’s admirable and most illuminating report means that the Minister has expressed approval of the agreement and an intention to abide by its provisions, I regret that I am unable to agree with it. The structure of para 4 of the decision letter in the case of Mr Hughes seems to me to be plain. The first sentence refers briefly to the submissions of Mr Hughes. The second sentence refers briefly to the representations of the local planning authority. It is not until the third sentence that the Minister deals with his own view of the matter. I do not read that sentence as expressing approval of the 1967 agreement or as expressing an intention to abide by its provisions. What the Minister refers to, as one of the reasons for his decision, is not the agreement, but the policy for the area around Jodrell Bank. Whether the Minister
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is entitled to have such a policy and to have regard to it in determining an appeal is another question with I shall refer to later. But I cannot accept the submission that the decision in the appeal of Mr Hughes shows that the Minister has committed himself to upholding the provisions of the agreement.
Sir Bernard’s evidence at the inquiry, in addition to demonstrating his impatience with terrestrial interference in any form whatsoever, dealt in the most cogent and authoritative manner with the anticipated effect of the proposed development on the work of the telescope. He said (see para 46 of the inspector’s report), that if the applicant’s appeal were allowed a very serious danger would arise to the continued operation of the telescope. That evidence was uncontradicted. After making his findings of fact the inspector set out his conclusions in para 79 of his report. He stated:
‘(1) … the first and third reasons for refusal are not sufficiently strong in dismissing this appeal although they do support any other reasons which may exist.
‘(2) The validity of the second reason for refusal is no doubt a matter on which legal opinion will be taken, but the strength of the arguments made at the inquiry in support of this reason for refusal are overwhelming. On the evidence I must accept that the erection of 23 dwellings on the appeal site, no matter how phased, would constitute a serious danger to the continued satisfactory operation of the Jodrell Bank telescope.’
The inspector then recommended that the appeal be dismissed.
The Minister issued his decision letter on 13 January 1969. Paragraph 5 of the letter reads as follows:
‘The Minister agrees with the Inspector’s conclusions and accepts his recommendation. He is satisfied on the evidence put forward, and in particular having regard to the Inspector’s conclusions quoted above, that the development proposed might interfere to a serious extent with the working of the Jodrell Bank Telescope, that this possibility constitutes a material consideration within the meaning of section 17 of the Act of 1962, and that as a result planning permission should not be granted.’
Now it is true that in their submissions at the inquiry the local planning authority urged the Minister to have regard to the 1967 agreement. It is true that in his second conclusion the inspector refers to the strength of the arguments made at the inquiry in support of the second reason for refusal. It is true that the Minister in announcing his decision said that he agreed with the inspector’s conclusions and spoke of those conclusions as a factor in his decision. In reliance on these matters the applicant says that the Minister must have been basing his decision, either wholly or in part, on the 1967 agreement. While this submission has a certain air of logic about it, it seems to me that it is out of touch with reality. The real argument made at the inquiry in support of the second reason for refusal was that the proposed development would be a serious danger to the operation of the telescope. That argument was firmly grounded in Sir Bernard’s evidence. That was the argument to which the inspector was referring when he said that on the evidence he must accept that the erection of 23 dwellings on the appeal site would constitute a serious danger to the continued satisfactory operation of the telescope. And it is reasonable to infer that that was what was really in the inspector’s mind when he spoke of the strength of the arguments made at the inquiry. So far as the Minister’s decision is concerned, it seems to me to be absurdly far-fetched to say that it is in any degree based on the agreement. The Minister gives, as his reason for his decision, that he is satisfied on the evidence put forward that the development proposed might interfere to a serious extent with the working of the telescope. It cannot have been existence of the agreement which satisfied him of that. Obviously, what satisfied him of that was
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the evidence of Sir Bernard Lovell. In my view there is no justification for saying that the Minister’s decision was in any degree based on or influenced by the existence of the agreement.
The arguments before me in support of the application to quash the Minister’s decision may be classified under three heads. First there were arguments based on the general nature and effect of the planning legislation. These arguments were designed to show that the Minister was not entitled to have regard to the interests of the telescope in reaching his decision on the appeal. Secondly, there were arguments designed to show that the Minister had failed to act fairly and judicially in determining the appeal, or at least had given the appearance of such failure. Thirdly, there was a technical argument to the effect that there was no basis on which the Minister could entertain an appeal from the decision of the local planning authority, because that decision was itself a nullity.
It is convenient to deal with the technical argument first. Bearing in mind the observations of Lord Reid in Anisminic Ltd v Foreign Compensation Commission ([1969] 1 All ER 208 at 217, [1969] 2 AC 147 at 175), I think that the right view is that the decision of the local planning authority on the applicant’s application was void and not merely voidable. That was the consequence of their failure to comply with the requirements of s 17 of the 1962 Act. However, that is not enough to dispose of this point in favour of the applicant in this case. The provisions for appeal to the Minister are contained in s 23 of the 1962 Act. Section 23(4) provides that on an appeal to him the Minister may deal with the application as if it had been made to him in the first instance. Since the Minister’s power is in effect to deal with the matter de novo, it seems to me that he is entitled to deal with the application and to make a decision on it even though the decision appealed from is a nullity. I think that support for such a view is to be found in the decision of the Privy Council in Pillai v Singapore City Council ([1968] 1 WLR 1278 at 1286).
Moreover, I think that the same result can, if necessary, be arrived at in a different way. If the decision of the local planning authority on the applicant’s application was void, then the authority was in effect in the position of having failed to deal with the application at all. It never notified the applicant of an effective decision on his application, because it never made such a decision. Section 24 of the Act provides that if the local planning authority does not give notice of its decision on a planning application within the prescribed period from the making of the application, the appeal provisions of s 23 shall apply as if permission had been refused on the application. By the time the applicant appealed to the Minister the prescribed period had elapsed, and it seems to me that if there was no other basis on which the Minister was entitled to entertain the appeal he was entitled to entertain it under the provisions of s 24.
I would accordingly hold that the Minister was properly seised of the applicant’s appeal. The question is whether the Minister’s decision on the appeal can be successfully impeached on either of the two grounds specified in s 179(1)(b) of the 1962 Act. As to this, I turn first to those arguments of the applicant which are based on the general nature and effect of the planning legislation. By way of preface I observe that by virtue of s 23(6) of the 1962 Act, the provisions of s 17(1) of the 1962 Act apply to the determination of an appeal by the Minister in the same way as they apply to the making of a decision by a local planning authority on a planning application; so that the Minister is specifically required to have regard to the provisions of the development plan, so far as material to the appeal, and to any other material considerations.
The first point taken on behalf of the applicant is that the likelihood that the development would interfere with the work of the telescope is not a material consideration in determining whether permission for the development should be
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given. The interests of the telescope, it is said, are interests of a private character. It is said that the purpose of the planning legislation is to protect only the public interest, and indeed only the public interest in a particular sphere, namely the sphere of amenity. Therefore it is said that in this case the Minister has exercised his powers for a purpose not authorised by the planning Acts, and reliance is placed on the judgment of Lord Denning in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1958] 1 All ER 625 at 633, [1958] 1 QB 554 at 572):
‘Although the planning authorities are given very wide powers to impose “such conditions as they think fit”, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest.’
In further support of these submissions the applicant relies on the judgment of Salmon J in Buxton v Minister of Housing and Local Government. That was a case in which a company were refused planning permission to dig for chalk on land which they owned. The company appealed to the Minister against that decision of the local planning authority and the Minister, rejecting his inspector’s recommendation, granted permission. Along with others Mr Buxton, a neighbouring landowner, instituted proceedings under s 31 of the Town and Country Planning Act 1959 (the predecessor of s 179 of the 1962 Act) to quash the Minister’s decision. The question was whether Mr Buxton was a ‘person aggrieved’ within the meaning of the section, and Salmon J held that he was not. Salmon J said ([1960] 3 All ER at 411, 412, [1961] 1 QB at 283, 284):
‘Before the town and country planning legislation any landowner was free to develop his land as he liked, provided he did not infringe the common law … The scheme of the town and country planning legislation, in my judgment, is to restrict development for the benefit of the public at large and not to confer new rights on any individual members of the public, whether they live close to or far from the proposed development … I doubt whether the present applicants had any legal right to appear at the inquiry.’
Reference was also made on behalf of the applicant to the decision of Lord Guest in Simpson v Edinburgh Corpn, a case in which Edinburgh University had obtained planning permission to carry out certain development not in accordance with the city development plan. The pursuer, a neighbouring landowner, was held to have no title to sue for an interdict to prevent the development.
The applicant also relied on the decision of Paull J in Gregory v London Borough of Camden. In that case certain trustees had obtained planning permission from the defendants to carry out a certain development. The plaintiffs, owners of adjacent land, feeling that their land would be affected by the proposed development, sought a declaration that the grant of planning permission by the defendants was ultra vires for non-compliance with certain requirements imposed under statutory authority. It was held that the plaintiffs had no sufficient interest to support such an action. Paull J said ([1966] 2 All ER at 202, [1966] 1 WLR at 908):
‘… if a statute is passed to protect a class of persons, then anyone in that class who is affected by a breach of the statute may bring an action for damages
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in respect thereof. The Town Planning Acts, however, have been passed to give rights to the public only, and not to any particular class of the public.’
Paull J then referred to the decision of Salmon J in Buxton v Minister of Housing and Local Government.
It may be conceded at once that the material considerations to which the Minister is entitled and bound to have regard in deciding the appeal must be considerations of a planning nature. I find it impossible, however, to accept the view that such considerations are limited to matters relating to amenity. So far as I am aware, there is no authority for such a proposition, and it seems to me to be wrong in principle. In principle, it seems to me that any consideration which relates to the use and development of land is capable of being a planning consideration. Whether a particular consideration falling within that broad class is material in any given case will depend on the circumstances. However, it seems to me that in considering an appeal the Minister is entitled to ask himself whether the proposed development is compatible with the proper and desirable use of other land in the area. For example, if permission is sought to erect an explosives factory adjacent to a school, the Minister must surely be entitled and bound to consider the question of safety. That plainly is not an amenity consideration. The broad nature of the duties of planning authorities in dealing with an application is indicated in the judgment of Widgery J in Fitzpatrick Development Ltd v Minister of Housing and Local Government and Finchely Borough Council. Widgery J said:
‘It is the duty of the local planning authority in the first instance and the Minister if the matter comes to him by way of appeal, to plan the area concerned, and an essential feature of planning must be the separation of different uses or activities which are incompatible the one with the other.’
The general statutory duty of the Minister is laid down in s 1 of the Minister of Town and Country Planning Act 1943 in these terms:
‘… securing consistency and continuity in the framing and execution of a national policy with respect to the use and development of land throughout England and Wales … ’
It seems to me that all considerations relating to the use and development of land are considerations which may, in a proper case, be regarded as planning considerations. In this case, it seems to me that the likelihood of interference with the work of the telescope is both a planning consideration and a material consideration within the meaning of s 17.
I find it equally difficult to accept that the local planning authority and the Minister on appeal must have regard only to public interests as opposed to private interests. It is, of course, true, as Salmon J pointed out in the Buxton case, that the scheme of the legislation is to restrict development for the benefit of the public at large. But it seems to me that it would be impossible for the Minister and local planning authorities to carry out their duties as custodians of the public interest if they were precluded from considering the effect of a proposed development on a particular use of land by a particular occupier in the neighbourhood. The public interest, as I see it, may require that the interests of individual occupiers should be considered. The protection of the interests of individual occupiers is one aspect, and an important one, of the public interest as a whole. The distinction between public and private interests appears to me to be a false distinction in this context. In any event, if it were possible or necessary to draw such a distinction, I should feel considerable hesitation in
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holding that the operation of the telescope was not a public, as opposed to a private, interest.
On this aspect of the case I do not think that I am assisted by the distinction between public and private rights which was drawn by Salmon J in the Buxton case or by the decision of Lord Guest in Simpson v Edinburgh Corpn or that of Paull J in Gregory v London Borough of Camden. All those cases were concerned with the right of an individual to maintain proceedings in the courts. An individual may well have no such rights and yet be a person whose interests may very properly be considered at an anterior stage when the question whether or not to grant planning permission is being dealt with.
It is true that Salmon J expressed a doubt whether the applicants before him had any legal right to appear at the inquiry. That doubt was expressed in the light of the legislation as it then stood; but since then the position has been altered. Under r 9(2) of the Town and Country Planning Appeals (Determination by Appointed Persons) (Inquiries Procedure) Rules 1968f, the inspector has a discretion to allow any person to appear at the inquiry, and when the inquiry into the applicant’s appeal was held there was a similar rule in force. The rules thus provide a means whereby, on an inquiry as to whether planning permission for a proposed development should be granted, the representations of an owner of adjacent land may be heard. It is worth noting, however, that at the inquiry with which I am concerned, Sir Bernard Lovell did not appear as a representative of Manchester University, but as a witness called by the local planning authority.
Next it is said that if the interests of the telescope are interests which can properly be taken into account, the result will be to affect adversely the value of the applicant’s land and the land of many others in a similar situation. There is no provision for compensation, and it is said that the planning legislation should not be construed so as to inflict loss without compensation unless the intention to do so is clear.
An argument of this character was recently considered by the House of Lords in Westminster Bank Ltd v Minister of Housing and Local Government ([1970] 1 All ER 734 at 739, [1970] 2 WLR 645 at 651) where Lord Reid said:
‘But it is quite clear that when planning permission is refused the general rule is that the unsuccessful applicant does not receive any compensation. There are certain exceptions but they have no special connection with street widening. If planning permission is refused on the ground that proposed development conflicts with a scheme for street widening, the unsuccessful applicant is in exactly the same position as other applicants whose applications are refused on other grounds. None of them gets any compensation. So absence of any right to compensation is no ground for arguing that it is not within the power of planning authorities to refuse planning permission for this reason.’
It seems to me that those words, mutatis mutandis, are precisely applicable to the present case. The absence of a right to compensation when planning permission is refused for reasons relating to the telescope is no ground for arguing that it is not within the power of the planning authority to refuse planning permission for such reasons.
It is said that it would have been fairer to persons in the applicant’s position if the restrictions required in the interests of the telescope had been imposed by a private Act of Parliament incorporating provisions for compensation. That raises issues of
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policy which go beyond what I have to consider. I observe, however, that in the Westminster Bank case there was actually in existence a code of legislation under which the local authority might have achieved the desired result, but subject to the payment of compensation. The authority was nevertheless held entitled to achieve its objective by the alternative methods of the Town and Country Planning Acts, notwithstanding that the effect of its choosing those methods was that no compensation was payable.
I now turn to the arguments relating to the question whether the Minister has, in determining the appeal, discharged his duty to act fairly and judicially. Two main points were taken in this connection. First it was said that the Minister’s decision was based on or influenced by the 1967 agreement. The provisions of that agreement, it is said, are inconsistent with a fair consideration of the applicant’s appeal on its merits. I would agree that the provisions of the agreement are so inconsistent. But the Minister was not a party to the agreement, and, for the reasons I have already given, I have held that the Minister’s decision was not based on the agreement or in any degree influenced by it. If the applicant is to succeed on the ground that the Minister has failed to comply with the requirements of natural justice, he must put his case in some other way. It was said that the Minister had tied his hands, and precluded himself from considering the appeal with fairness and impartiality, or at least from appearing so to do, by encouraging the parties to the agreement to enter into it, or at least to enter into agreements of that character. As to this, I have held that it has not been shown that the agreement results from any advice or encouragement given by the Minister.
The question therefore comes to this. Is there some other ground on which it can be said that the Minister has prejudged the issues on the appeal, or tied his hands, or precluded himself from acting with fairness and impartiality both in appearance and in fact? The Minister’s anxiety that proper provision should be made for protecting the interests of the telescope is clear from many years of history. He has encouraged the definition by agreement of areas in which development is likely to interfere with the work of the telescope. He has encouraged arrangements for consultation between local authorities and the Jodrell Bank directorate about applications for planning permission in those areas. All that appears to me to be perfectly proper and in no way inconsistent with the proper performance of the Minister’s quasi-judicial duties when occasion arises to perform them. The matter, however, may be said to go further than that, because it appears that the Minister has a policy for the area around Jodrell Bank, and indeed the existence of such a policy is referred to in para 4 of the Minister’s decision letter on the appeal of Mr Hughes. The policy is not defined in the letter, but on the evidence before me it may be said to be a policy of discouraging development which would interfere with the efficient working of the telescope. It is not, however, as it seems to me, a policy which is intended to be pursued to the disregard of other relevant considerations. The question is whether the existence of such a policy disables the Minister from acting fairly on the consideration of an appeal.
There are obviously many matters in the field of planning legislation on which the Minister is entitled and indeed bound to have a policy. The relationship between a Minister’s function in formulating and giving effect to a policy and his functions in making a decision of a quasi-judicial nature have been considered in many cases. In B Johnson & Co (Builders) Ltd v Minister of Health ([1947] 2 All ER 395 at 397) Lord Greene MR said:
‘The duty placed on the Minister with regard to objections is to consider them before confirming the order. He is also to consider the report of the person who held the inquiry. Having done that, his functions are laid down by the
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last words of the paragraphg, viz., “and may then confirm the order with or without modification“. Those words are important, because they make it clear that it is to the Minister that Parliament has committed the decision whether he will or will not confirm the order after he has done all that the statute requires him to do. There is nothing in that paragraph, or anywhere else in the Act, which imposes on the Minister any obligation with regard to the objections, save the obligation to consider them. He is not bound to base his decision on any conclusion that he comes to with regard to the objections, and that must be so when one gives a moment’s thought to the situation. The decision whether to confirm or not must be made in relation to questions of policy, and the Minister, in deciding whether to confirm or not, will, like every Minister entrusted with administrative duties, weigh up the considerations which are to affect his mind, the preponderating factor in many, if not all, cases being that of public policy, having regard to all the facts of the case.’
In R v Port of London Authority, ex parte Kynoch Ltd ([1919] 1 KB 176 at 184]) Bankes LJ said:
‘There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case … On the other hand there are cases where a tribunal has passed a rule, or come to a determination, not to hear any application of a particular character by whomsoever made.’
It seems to me that the general effect of the many relevant authorities is that a Minister charged with the duty of making individual administrative decisions in a fair and impartial manner may nevertheless have a general policy in regard to matters which are relevant to those decisions, provided that the existence of that general policy does not preclude him from fairly judging all the issues which are relevant to each individual case as it comes up for decision.
I think that in this case the Minister was entitled to have a policy in regard to Jodrell Bank, and I think that his policy is not such as to preclude him from fairly considering a planning appeal on its merits. I do not think that it precluded him from fairly considering the applicant’s appeal. I do not think that the Minister has prejudged the case, or tied his own hands, or abdicated any of his functions. The contention that the rules of natural justice have not been complied with in this case cannot in my view be sustained.
In the result the application fails and must be dismissed. I feel bound to add that this is not a result which gives me much satisfaction. I have considerable sympathy for the applicant, who has spent money in the reasonable anticipation of being allowed to develop the appeal site, and who feels with some justification that the forces ranged against him are too powerful for an ordinary man to cope with. But the applicant’s application could not succeed unless he could establish a failure on the part of the Minister in the proper performance of his functions and that, in my judgment, he has failed to do.
Motion dismissed.
Solicitors: H P & H C Rigby, Sandbach (for the applicant); Solicitor, Ministry of Housing and Local Government.
Janet Harding Barrister.
R v Mutford and Lothingland Justices, ex parte Harber
R v East Suffolk Quarter Sessions, ex parte Harber
[1971] 1 All ER 81
Categories: CRIMINAL; Criminal Procedure
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 28 OCTOBER, 2 NOVEMBER 1970
Criminal law – Trial – Plea – Plea of guilty – Withdrawal – Application before sentence passed – Conviction by magistrates’ court and committal to quarter sessions for sentence – Whether application can be heard after committal.
In summary proceedings the jurisdiction of the court to entertain, before sentence, an application for a change of plea is not affected by the provisions of ss 28 and 29 of the Magistrates’ Courts Act 1952 empowering justices to commit an accused to quarter sessions for sentence (see p 85 f and p 86 h, post).
S (an infant) v Manchester City Recorder [1969] 3 All ER 1230 followed.
R v Riley [1963] 3 All ER 949 not followed.
Where a valid committal has been made under these provisions, the proper court to hear and determine such an application is the quarter sessions to which the accused has been committed (see p 85 h to p 86 a and h, post). If on hearing the application quarter sessions accede to it the proper course is to remit the case to the justices for trial (see p 86 b and h, post).
Notes
For the withdrawal of a plea of guilty on trial on indictment, see 10 Halsbury’s Laws (3rd Edn) 408, para 742, and in summary proceedings, see 25 Halsbury’s Laws (3rd Edn) 206, para 375, and for cases on the subject, see 14 Digest (Repl) 286, 287, 2612–2625, 33 Digest (Repl) 245, 762; 304 1289 and Digest (Cont Vol B) 509, 550Ab.
For the Magistrates’ Courts Act 1952, ss 28 and 29, see 21 Halsbury’s Statutes (3rd Edn) 213, 215.
Cases referred to in judgment
R v Clouter and Heath (1859) 8 Cox CC 237, 14 Digest (Repl) 286, 2615.
R v Grant [1951] 1 All ER 28, [1951] 1 KB 500, 115 JP 36, 34 Cr App Rep 230, 14 Digest (Repl) 585, 5822.
R v Norfolk Justices, ex parte Director of Public Prosecutions [1950] 2 KB 558, 34 Cr App Rep 120, 14 Digest (Repl) 585, 5826.
R v Plummer [1902] 2 KB 339, [1900–03] All ER Rep 613, 71 LJKB 805, 86 LT 836, 66 JP 647, 14 Digest (Repl) 287, 2623.
R v Riley [1963] 3 All ER 949, 128 JP 85, Digest (Cont Vol A) 1121, 1289b.
R v Tottenham Justices, ex parte Rubens, R v Middlesex Quarter Sessions, ex parte Rubens [1970] 1 All ER 879, [1970] 1 WLR 800, 54 Cr App Rep 183.
R v West Kent Quarter Sessions Appeal Committee, ex parte Files [1951] 2 All ER 728, 115 JP 522, 33 Digest (Repl) 288, 1159.
S (an infant) v Manchester City Recorder [1969] 3 All ER 1230, [1970] 2 WLR 21.
Cases also cited
R v Dangerfield [1959] 3 All ER 88, [1960] 1 WLR 268.
R v Durham Quarter Sessions, ex parte Virgo [1952] 1 All ER 466, [1952] 2 QB 1.
R v Sheridan [1936] 2 All ER 883, [1937] 1 KB 223.
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Motion for mandamus
This was an application for orders of mandamus directed to East Suffolk quarter sessions (‘the quarter sessions’) or alternatively to the Mutford and Lothingland justices (‘the justices’) to hear and determine an application by Martin John Harber to change his plea of guilty to a charge of theft of a cheque, contrary to the Theft Act 1968, s 1, and also to a charge of obtaining money by virtue of a forged endorsement on that cheque, to a plea of not guilty. The facts are set out in the judgment of Lord Parker CJ.
A J Arlidge for the applicant.
D H Penry-Davey for the quarter sessions and the justices.
Cur adv vult
2 November 1970. The following judgment was delivered.
LORD PARKER CJ read the following judgment. On 11 March 1970, the applicant appeared before justices for the petty sessional division of Mutford and Lothingland (‘the justices’) when he pleaded guilty to a charge of the theft of a cheque, contrary to s 1 of the Theft Act 1968, and also to a charge of obtaining money by virtue of a forged endorsement on that cheque. These pleas of guilty were unequivocal pleas, and in due course after hearing the applicant’s antecedents, the justices, in lieu of sentencing him, committed him to East Suffolk quarter sessions (‘the quarter sessions’) under s 28 of the Magistrates’ Courts Act 1952 with a view to his being sentenced to borstal training. On 20 March, before quarter sessions an application was made that the applicant be allowed to change his plea to one of not guilty. Quarter sessions, however, refused to hear and determine the application. Thereafter, on 1 April, a similar application was made to the justices who had committed him. The justices in turn refused to entertain his application, holding that they were functi officio.
It is in these circumstances that counsel for the applicant now moves for an order of mandamus directed to quarter sessions to determine the application that the applicant be allowed to change his plea; in the alternative he asks for an order of mandamus to the justices to hear and determine a similar application. These proceedings, therefore, raise the question whether there is jurisdiction in the case of a committal under s 28 of the Magistrates’ Courts Act 1952, and, I would add, by parity of reasoning, under s 29 thereof, in either the magistrates’ court or quarter sessions to entertain an application for a change of an unequivocal plea. This court is in no way concerned with the merits of the application, only with whether such an application can be entertained, and if so, by which court.
In the recent case in the House of Lords, S (an infant) v Manchester City Recorder, it was held that in trials before justices, just as in the case of trials before quarter sessions or assizes, the court has jurisdiction to entertain a change of plea, and, I would add, an unequivocal plea at any time until there is a final adjudication, ie until there has been a conviction in the broad sense of a finding of guilt or admission of guilt followed by sentence.
Their Lordships did not have cause to consider the position which arises in these proceedings where no one court is wholly responsible for all that leads up to the final adjudication. Indeed, several of their Lordships specifically excluded consideration of the matter. Thus Lord MacDermott said ([1969] 3 All ER at 1235, [1970] 2 WLR at 29):
‘As to the first of these questions, the exercise of a complete criminal jurisdiction—and I use that expression to exclude special statutory procedures in which guilt is found by one court and punishment awarded by another—naturally falls into two parts, whatever the status of the court concerned.’
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Lord Morris of Borth-y-Gest said ([1969] 3 All ER at 1244, [1970] 2 WLR at 39):
‘There had been no judgment or final adjudication. Again, in that casea no question arose as to the withdrawal of a plea but the case is important as showing that (leaving out of account the procedure where s. 29 of the Act of 1952 is applicable and is properly followed) magistrates who try a case are not functi officio until they have passed a sentence or have otherwise finally adjudicated.’
Finally, Lord Upjohn said ([1969] 3 All ER at 1248, [1970] 2 WLR at 42):
‘I would only add that your Lordships have not had to consider the complications caused by the statutory power of magistrates to send cases to a higher court for sentence—see for example R v. Riley and I express no opinion thereon.’
For myself, I approach this matter on the basis that it would be odd indeed if an accused who had a right to have an application for leave to change his plea determined at any time before final adjudication, should lose that right merely because the final adjudication results from a hearing before two courts, or, as it can be said, before a composite court. Indeed I would not come to that conclusion unless forced to do so. As Lord MacDermott pointed out in S (an infant) v Manchester City Recorder ([1969] 3 All ER at 1235, 1236, [1970] 2 WLR at 29):
‘The evidence relevant to the commission of an offence is generally relevant to the sentence. And that part of the hearing which is directed to the sentence may well cast new light on the question of guilt or innocence … But if, as can happen, the truth comes to light during the second stage of the proceedings, when the question of what to do with the accused is under consideration, why should it not be acted on and a changed plea of not guilty allowed where the interests of justice so require?’
It is of course true that justices before committing have to enquire into the case to decide whether to sentence themselves or to commit; but nevertheless there may be occasions when the further enquiries made on committal by quarter sessions will result, and properly result, in an application to change a plea.
What is urged here, however, is that the statutory provisions dealing with committals indeed produce this results. Thus in the case of a committal under s 28 of the Magistrates’ Courts Act 1952 with a view to borstal, quarter sessions come to deal with the case under s 20 of the Criminal Justice Act 1948. Section 20(5)b provides:
‘Where an offender is so committed for sentence as aforesaid, the following provisions shall have effect, that is to say:—(a) the … court of quarter sessions shall inquire into the circumstances of the case and may—(i) if a sentence of borstal training is available in his case under subsection (2) of section one of the Criminal Justice Act 1961, sentence him to Borstal training; or (ii) in any case, deal with him in any manner in which the court of summary jurisdiction might have dealt with him … ’
It is undoubtedly true that the words ‘deal with him in any manner’ are on the face of them wide enough to cover anything which comes to light or falls to be done by quarter sessions. At the same time, it seems to me clear that the legislature did not have a situation such as this is mind, but were really giving quarter sessions all the
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necessary powers in relation to sentence, including orders such as probation, conditional discharge and the like, including, of course, any adjournment and inquiries involved in deciding what sentence to impose.
Similarly, when one comes to committal under s 29, the matter is dealt with by quarter sessions under s 29(3) of the Criminal Justice Act 1948. Thatc provides:
‘Where an offender is so committed for sentence as aforesaid, the following provisions shall have effect, that is to say:—(a) the … court of quarter sessions shall inquire into the circumstances of the case, and shall have power to deal with the offender in any manner in which he could be dealt with by a court … before which he had just been convicted of the offence on indictment … ’
Again it can be said that those are very wide words which would enable quarter sessions to entertain an application of the kind in question in this case; but again as it seems to me those words are really, in their context, limited to all the steps necessary in and in relation to sentence. In saying that, I have not forgotten that in R v Grant ([1951] 1 All ER 28 at 29, [1951] 1 KB 500 at 502, 503) Lord Goddard CJ, in giving the judgment of the court, said:
‘In our opinion, that section clearly means that once an offender is committed for sentence to quarter sessions he is to be treated in all respects as though he had been committed for trial to quarter sessions and came before quarter sessions as a prisoner who has pleaded Guilty.’
In that case, however, the point in question was whether a notice setting out the qualifying convictions for a sentence of corrective training which had not been served while the matter was before the justices could be served when the matter was before quarter sessions. It was, therefore, a case dealing with matters leading up to the appropriate sentence to be imposed.
There is, therefore, at first sight much force in the argument that the position is different in the case of committals under ss 28 and 29. But it is, I think, important to ascertain the nature of the jurisdiction that exists in any court to allow a change of plea. This jurisdiction exercisable by assizes, by quarter sessions, by justices prior to final adjudication, is certainly not a statutory jurisdiction; rather as it seems to me it is inherent in the court dealing with the matter.
Again, if I may refer to the speech of Lord MacDermott in S (an infant) v Manchester City Recorder ([1969] 3 All ER at 1236, [1970] 2 WLR at 29, 30), he put the matter in this way:
‘As respects trials on indictment, including trials before justices at quarter sessions, the attitude of the common law on this matter has been clear for generations. Such a change may, at the discretion of the court, be allowed at any time before the case has been disposed of by sentence. On principle, I see no reason why this discretionary power should be denied to courts of summary jurisdiction. It is as necessary there as elsewhere if the justices are to be free to do justice while they have seisin of the proceedings.’
In saying that, Lord MacDermott was, as it seems to me, following the view taken as to this jurisdiction in R v Plummer; it was a case which came before the Court of Crown Cases Reserved and was concerned primarily with the position in regard to a conspiracy charge when one alleged conspirator had pleaded guilty and the other alleged conspirator or conspirators had pleaded not guilty and had been acquitted. But in the course of judgment various passages dealt with this very matter. Thus Wright J said ([1902] 2 KB at 347):
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‘Another point is raised in this case, namely, whether the Court had power to allow the appellant to withdraw his plea of guilty. There cannot be any doubt that the Court had such power at any time before, though not after, judgment … ’
References were then made to R v Clouter and Heath, a case to which this court has also been referred. Wright J went on ([1902] 2 KB at 347):
‘… as we infer that but for the erroneous opinion that there was no such power the withdrawal would have been allowed, this might of itself be a ground for a venire de novo … ’
Bruce J said ([1902] 2 KB at 349, [1900–03] All ER Rep at 617):
‘It is clear that the Court had power to allow the appellant to withdraw his plea of guilty. The Court no doubt had a discretion in the matter, and, if the Court had exercised its discretion, it may be that would be final and we should have no power to interfere with the exercise of its discretion. But the Court, acting upon the erroneous opinion that it had no power to allow the withdrawal of the plea, never did exercise its discretion.’
Jelf J agreed with Lord Alverstone CJ, and Lord Alverstone CJ said ([1902] 2 KB at 350, cf [1900–03] All ER Rep at 618):
‘On the second point, we entirely concur in the judgments of Wright and Bruce JJ. I desire to add that I agree with the view taken in those judgments as to the power of this Court to make such order as justice may require.’
Once one realises that the jurisdiction to entertain a change of plea is not a statutory one but is based on the inherent jurisdiction of any court to see that justice is done, one asks oneself whether the statutory provisions to which reference has been made in the case of committals have in respect of the two courts forming this composite court ousted their jurisdiction. In my judgment those statutory powers clearly have not done so.
Accordingly, the next question arises as to what court in such a case had jurisdiction to entertain such an application. Having paid due attention to counsel’s argument in the following cased, it seems to me that common sense and convenience dictate that the jurisdiction should be exercised by the court having seisin of the matter; in this case the quarter sessions. True it is that in R v Norfolk Justices, ex parte Director of Public Prosecutions it was held that a magistrates’ court after committal for sentence is not functus officio and accordingly it might be said that the justices had jurisdiction to entertain the application. However, when one looks at that case it was a case in which the committal turned out to be a nullity. The decision of the court was that the justices, notwithstanding that the committal could only be set aside on appeal or by an order of certiorari, nevertheless retained sufficient jurisdiction to sentence the accused once quarter sessions had found that the committal was a nullity.
As it seems to me, in the present case the respondent justices were right in refusing to entertain the application on the basis that, although the composite court had not
Page 86 of [1971] 1 All ER 81
arrived at a final adjudication, that part of the court which consisted of the justices had parted with their jurisdiction to the quarter sessions, at any rate so long as the committal remained a valid committal. Accordingly, it seems to me that the proper court to hear any such application is quarter sessions. Of course, if quarter sessions, after hearing the application refuses it, that is an end of the matter. If, however, they accede to the application, then as it seems to me the proceedings up to that point including the committal fall, as it were, to the ground, and the proper course would be for quarter sessions to remit the case to the justices for trial on the basis of a plea of not guilty.
This court has been referred to a number of cases, none of which as it seems to me prevents us from coming to the above conclusion. R v Riley was naturally much relied on by the prosecution; it was a decision of the then recorder of the Liverpool Crown Court. It was a decision prior to S (an infant) v Manchester City Recorder, and largely based on reasoning which did not appeal to their Lordships. Further, when one looks at it, one finds that it was an application to quarter sessions to remit the case to the justices to entertain the application for a change of plea. In my judgment that relief was properly refused on any view of the matter.
Again the court was referred to R v Tottenham Justices, ex parte Rubens, R v Middlesex Quarter Sessions, ex parte Rubens. In that case I ventured to express a tentative opinion that in the case of an unequivocal plea quarter sessions would have no jurisdiction to deal with the matter. After hearing further argument in the present case I am quite clear that I was wrong. Incidentally the view at which I have arrived in the present case avoids all the difficulties which were encountered in the Tottenham case when quarter sessions, in order to deal with the matter of the equivocal plea, gave leave to appeal and dealt with it as an appellate court and not in the committal proceedings.
Finally I would only add this. On the basis of my judgment herein there is clearly a danger, which indeed was foreseen by Lord Goddard CJ in R v West Kent Quarter Sessions Appeal Committee, ex parte Files ([1951] 2 All ER 728 at 731), that accused persons content to plead guilty and be dealt with by the justices, will endeavour to change their plea as soon as they realise that they are at the risk of greater punishment in the hands of quarter sessions on a committal. That, however, is a danger which no doubt will be borne in mind by any quarter sessions called on to determine an application for a change of plea. Indeed, when one realises that in such a case as this the applicant has remained silent through all the enquiries which have taken place, before the justices decide whether to sentence or commit, and then only makes the application after the committal has been ordered, the cases must be comparatively rare in which it would be proper at that stage to allow a change of plea. The merits and the considerations of that are, however, for the quarter sessions when called on to entertain a change of plea.
Accordingly, in the result I would refuse the order of mandamus to the justices, but I would direct a mandamus to go to the quarter sessions to hear the application for a change of plea.
ASHWORTH J. I agree.
BROWNE J. I agree.
Order for mandamus.
Solicitors: Hatchett Jones & Co agents for Gerard Dunne & Co, Lowestoft (for the applicant); M F C Harvey, Ipswich (for the quarter sessions and the justices).
Jacqueline Charles Barrister.
Eastham (Inspector of Taxes) v Leigh London and Provincial Properties Ltd (in voluntary liquidation)
[1971] 1 All ER 87
Categories: TAXATION; Capital Gains Tax
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 8, 9, 10, 29 JULY 1970
Capital gains tax – Contract to acquire or dispose of asset – Conditional contract – Agreement to build offices –Completed offices to be leased to builders on compliance with stipulations in agreement – Stipulations complied with – Lease granted – Lease assigned by builders – Capital gain – Agreement not conditional contract for purpose of short-term gains tax – Finance Act 1962, s 10(1) and Sch 9, para 1(3).
On 22 June 1962, an agreement was made between the taxpayer company and the landlords of a building site whereby the taxpayer company was given leave and licence to enter on the site for the purpose of demolishing any existing structures and erecting on the site a six-storey office block with basement garage at a cost of not less than £270,000 for materials and labour. If the building was completed to the satisfaction of the landlords’ surveyor within two years or such extended period as might be agreed, the landlords were to grant to the taxpayer company a lease of the building for a term of 125 years from 24 June 1962. The taxpayer company performed its obligations under the agreement within the prescribed period and on 12 May 1964 the lease was granted. On 28 July 1965, the taxpayer company assigned the lease for £567,000 and was subsequently charged to tax under s 10(1) of the Finance Act 1962 in respect of the excess on the ground that the agreement of 22 June 1962 was a conditional contract within para 1(3) of Sch 9a to the Act of 1962 so that the asset was not acquired until the condition was satisfied by the grant of the lease on 12 May 1964 and the interval between acquisition and disposal was less than three years. The taxpayer company disputed the assessment on the ground that the contract was not a conditional contract, since the date of acquisition was the date of the agreement, ie 22 June 1962, and the three-year period was exceeded so that no tax was exigible under s 10(1) of the Act of 1962.
Held – The contract was not conditional, because—
(i) a contract could not properly be regarded as conditional where there was no condition which was prerequisite to the formation of any binding agreement, as in ‘subject to contract’ cases, or which kept it in abeyance (see p 95 f, post);
Dicta of Jenkins LJ in Parway Estates Ltd v Inland Revenue Comrs (1958) 37 ATC at 166; Ungoed-Thomas J in Property and Bloodstock Ltd v Emerton [1967] 2 All ER at 843, 844 and of Dankwerts LJ in Property and Bloodstock Ltd v Emerton [1967] 3 All ER at 324 applied.
(ii) a contract to acquire an asset subject to no term or condition save the due performance of one’s own obligations could not properly be described as a conditional contract to acquire it, and the agreement in the case depended on no condition outside the contract before it became absolute (see p 97 g, post).
Notes
For the law relating to short-term gains tax on the sale of land, see Supplement to 20 Halsbury’s Laws (3rd Edn) para 182.
For the law relating to conditional contracts, see 8 Halsbury’s Laws (3rd Edn) 194–200, paras 328–338, and for cases on the subject, see 12 Digest (Repl) 466–484, 3483–3607.
Page 88 of [1971] 1 All ER 87
For the Finance Act 1962, s 10 and Sch 9, see 42 Halsbury’s Statutes (2nd Edn) 340, 374. Section 10 of the Finance Act 1962 was amended by the Finance Act 1965 and the Finance Act 1969. In relation to tax for the year 1970–71 and subsequent years of assessment, see s 160 of the Income and Corporation Taxes Act 1970 and for provisions in the 1970 Act comparable to Sch 9 to the 1962 Act, see Sch 7.
Cases referred to in judgment
Aberfoyle Plantations Ltd v Khaw Bian Cheng [1959] 3 All ER 910, [1960] AC 115, [1959] 3 WLR 1011, Digest (Cont Vol A) 1309, 909a.
Counter v Macpherson (1845) 5 Moo PCCC 83, 4 LTOS 449, 13 ER 421, 12 Digest (Repl) 428, 3298.
Parway Estates Ltd v Inland Revenue Comrs (1958) 37 ATC 164.
Property and Bloodstock Ltd v Emerton, Bush v Property and Bloodstock Ltd [1967] 2 All ER 839; affd CA [1967] 3 All ER 321, [1968] Ch 94, [1967] 3 WLR 973, Digest Supp.
Strong v Stringer (1889) 61 LT 470, 31 Digest (Repl) 93, 2422.
Wood Preservation Ltd v Prior (Inspector of Taxes) [1969] 1 All ER 364, [1969] 1 WLR 1077, 45 Tax Cas 112, Digest Supp.
Case stated
At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 20 November 1968, Leigh London and Provincial Properties Ltd (in voluntary liquidation) (‘the taxpayer company’) appealed against an assessment to capital gains tax in the amount of £267,518 in respect of a chargeable gain for the year 1965–66. Shortly stated the question for decision was whether the provisions of an agreement dated 22 June 1962(‘the agreement’) rendered that agreement a conditional contract within para 1(3) of Sch 9 to the Finance Act 1962. If it was such a contract then on the facts the assessment was correct; if it was not, then the assessment was not correct. The only document adduced in evidence before the commissioners was an agreed copy of the agreement dated 22 June 1962.
The following facts were between the parties: (1) the agreement dated 22 June 1962 and made between (1) Kathleen Cozens and others (‘the Landlords’), (2) the taxpayer company and (3) Kennedy Leigh Properties Ltd (‘the Surety’) contained the following provisions which were material to the case:
‘1. THE [taxpayer company] shall for the period of two years from the date when they shall commence the works hereinafter mentioned or from the 29th day of September 1962 whichever shall be the earlier have leave and licence to enter upon ALL THAT piece of land forming the site of numbers 80 and 82 Kings Road in the County Borough of Reading as the same is more particularly delineated for the purposes of identification on the plan annexed hereto and thereon edged red for the purpose of demolishing any existing structures erecting a building and executing works in accordance with the stipulations hereinafter contained and for no other purpose whatsoever.
‘2. THE [taxpayer company] hereby agree to perform and observe the stipulations following: (1) To hold the said premises until the same shall be comprised in a Lease to be granted as hereinafter provided as tenants at will to the Landlords at the same rent and subject to the same covenants and stipulations so far as applicable as if a Lease thereof had been actually granted and so that the Landlords shall have all the remedies by distress or otherwise for rent in arrear that are incident to the relation of Landlord and Tenant but so that nothing herein contained shall be construed as creating a legal demise or any greater interest in the Tenants than a tenancy at will. (2) To pay all rates taxes assessments and outgoings whatsoever in respect of the said piece of land.
(3) At its own cost within the said period of two years to erect cover in and complete fit for immediate occupation upon the said piece or parcel of land in a substantial and workmanlike manner with the best materials of their several
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kinds and in conformity in every respect with the plans elevations sections and specifications which have been approved by the Landlords and are annexed hereto and to the satisfaction in all respects of the Landlords’ Surveyor a six storey building consisting of offices with a garage basement and with all proper and suitable offices drains sewers and fences. (4) To expend in erecting the said building for materials and labour at cost price the sum of not less than Two hundred and seventy thousand pounds. (5) In the erection and completion of the said buildings to do all acts and things required by and perform the works conformably in all respects with the provisions of any statutes applicable thereto and with the bye-laws and regulations and planning schemes of the local authority having authority in that behalf in the district wherein the said land is situate and to pay and keep the Landlord indemnified against all claims for the fees charges fines penalties and other payments whatsoever which during the progress of the works may become payable to or be demanded by the said authority in respect of the said works or of anything done under the authority herein contained and generally from time to time to discharge and pay all claims assessments and outgoings now or at any time hereafter chargeable against an owner by statute or otherwise in regard to the said piece of land or any buildings thereon. (6) Not to do or suffer to be done in or upon the said premises or any part thereof anything which may be or become a nuisance or cause damage to the Landlords or to the [taxpayer company] or occupiers of neighbouring properties. (7) Not to deposit or make up or manufacture or allow to be deposited or made up or manufactured upon the said piece of land any building or other materials except such as shall be required for the building to be erected thereon in accordance with this Agreement and so soon as the said building shall be completed at its own expense to remove from the said piece of land all building and other materials and rubbish whatsoever. (8) To cause to be insured the said building or the part thereof for the time being erected in the joint names of the Landlords and the [taxpayer company] against loss or damage by fire in an office of repute in the full value thereof and to keep the same so insured until a Lease thereof shall be granted as hereinafter provided and to make all payments necessary for the above purposes within ten days after the same shall respectively become payable and to produce to the Landlords or their agent on demand the policy or policies of such insurance and the receipt for each such payment and to cause all money received by virtue of any such insurance to be forthwith expended in re-building and reinstating the building and to make up any deficiency out of its own moneys Provided Always that if the [taxpayer company] shall at any time fail to cause the premises to be insured as aforesaid the Landlords may do all things necessary to effect or maintain such insurance and any moneys expended by them for that purpose shall be repayable by the [taxpayer company] on demand and be recoverable forthwith by action. (9) To pay all fees payable to any Surveyor employed by a public Authority and all other fees and payments properly claimed by any such Authority or otherwise in connection with the carrying out of the works in accordance with this Agreement. (10) Not to assign or part with its interest under this Agreement or any part thereof without the written consent of the Landlords and in the case of any assignment to which the Landlords shall so consent the [taxpayer company] shall be liable for the payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such consent and shall continue liable for the performance of the several stipulations herein contained until the grant of the Lease hereinafter mentioned.
‘3. It is hereby mutually agreed that until the [taxpayer company] have completely performed the aforesaid agreement to build the said building and execute the works in accordance with the stipulations and conditions contained in Clause 2 hereof the Landlords shall possess the rights and powers following that
Page 90 of [1971] 1 All ER 87
is to say: (1) The right for themselves their agent and Surveyor at all reasonable times to enter upon the said premises to view the state and progress of the said building and works to inspect and test the materials and workmanship and for any other reasonable purposes Provided that the landlord shall only exercise the rights aforesaid at their own expense. (2) Full right and liberty in case the said building hereby agreed to be erected shall not be completed and fit for immediate occupation within the period hereinbefore limited (time in this respect being of the essence of the contract) and in accordance with the [taxpayer company’s] stipulations hereinbefore contained or in case the [taxpayer company] shall in any other way fail to perform and observe any of the stipulations on its part herein contained or shall enter into liquidation whether compulsory or voluntary (except voluntary liquidation for the purpose of reconstruction) to re-enter upon and take possession of the said piece of land and premises and all buildings and erections fixtures plant chattels and effects whatsoever thereon with power to hold and dispose thereof as if this Agreement had not been entered into and without making to the [taxpayer company] any compensation or allowance for the same save as provided in the next sub-clause hereof and this Agreement shall thereupon determine but without prejudice to any right of action or other remedy of the Landlords for the recovery of any moneys due to them from the [taxpayer company] or in respect of any breach of this Agreement. (3) Provided Always that if the Landlords re-enter upon the said premises or any part thereof under the immediately preceding sub-clause and complete the said building in respect whereof such re-entry is made the said Surveyor shall certify the value of such building materials which the [taxpayer company] have brought upon the land as the Landlords use in such completion (the Landlords however being under no obligation to use any of such materials) and also the cost in labour and materials of the buildings incurred up to the time of re-entry and the Landlords shall pay to the [taxpayer company] by way of compensation the value of such building materials as so certified and one half of the cost of the building as so certified Provided also that such payment shall not be made until the expiration of six months from the date of completion of the building as certified in writing by the said Surveyor and the Landlords shall be entitled to set off against such payment any sum or sums that may become due to them from the [taxpayer company] by reason of the breach of this Agreement and the surplus (if any) in favour of the [taxpayer company] and no more shall in such case be the amount due and payable under this clause. (4) Provided nevertheless that if such default as aforesaid in completing the said building and works shall be attributable to labour disputes affecting workmen employed on the said works or any workmen employed in any trade generally relative to the building trade or to reasons which in the opinion of the said surveyor shall be beyond the control of the [taxpayer company] then the Landlords shall allow such further time for the completion of the said works as the said Surveyor shall in writing certify to be reasonable. (5) Provided further that notwithstanding any such default as aforesaid the Landlords may in their discretion give notice in writing to the [taxpayer company] of their intention to enforce the [taxpayer company’s] stipulations herein contained and may fix any extended period for the completion of the said works in substitution for the said period of two years hereby fixed for such completion and thereupon the obligations hereunder of the [taxpayer company] to complete the said works and to accept a Lease as hereinafter mentioned shall be taken to refer to such extended period.
‘4. IF the said building shall have been completely finished to the satisfaction of the said Surveyor (to be evidenced by his certificate in writing to that effect) at the expiration of the said period of two years of such extended period (if any) as aforesaid and the [taxpayer company] shall have performed and
Page 91 of [1971] 1 All ER 87
observed all the stipulations and conditions on their part contained other than such as may have been waived as aforesaid then the Landlords shall grant to the [taxpayer company] a Lease of the said building for a term of One hundred and twenty five years from the Twenty fourth day of June One thousand nine hundred and sixty two at the yearly rent of a peppercorn until the Thirty first day of October One thousand nine hundred and sixty three and thereafter at the yearly rent of Five thousand pounds clear of all deductions except Landlords Property Tax payable quarterly in advance on the four usual quarter days the first payment being a proportion from the First day of November One thousand nine hundred and sixty three to be made on that date.
‘5. THE said Lease shall be in the form and shall contain the covenants conditions and provisions set forth in the draft Lease already prepared and approved by the parties hereto and for the purpose of identification signed by the respective Solicitors of the parties and the [taxpayer company] shall accept the said Lease and execute and deliver to the Landlords a counterpart thereof and the Landlords shall deduce his freehold Title to the said premises which shall consist of a copy of the Title register and of the filed plan and an authority to inspect the register.
‘6. Each of the parties hereto shall bear its own costs of the preparation and engrossment of this agreement and the said lease and counterpart and the stamp duties thereon.
‘7. Until the said Lease shall have been granted the [taxpayer company] shall as from the date of this Agreement and so far as circumstances will admit and allow and subject to the provisions of this Agreement pay such rent and perform and observe such covenants and conditions as the [taxpayer company] would have to pay and perform and observe if such Lease had actually been granted.’
(2) On 12 May 1964, the lease referred to in cl 4 of the agreement was duly granted to the taxpayer company. (3) On 28 July 1965, the lease was transferred within the group of companies of which the taxpayer company was one, and immediately thereafter was assigned to an outsider in consideration of the sum of £567,000. (4) Shortly after the transfer and assignment the taxpayer company went into voluntary liquidation.
It was common ground between the parties that under the statutory provisions concerning capital gains there was on 28 July 1965 a disposal of a chargeable asset for the purposes of capital gains tax and that the taxpayer company was the person chargeable to any chargeable gain arising therefrom. The only dispute concerned the date of acquisition; if the agreement was a conditional contract within the meaning of para 1(3) of Sch 9 to the Finance Act 1962, then the date of acquisition of the asset was 12 May 1964 (the date of the lease), with the result that s 82(2) and (3) of the Finance Act 1965 applied and the taxpayer company was chargeable to capital gains tax as assessed. If the agreement was not such a conditional contract, then the date of acquisition was the date of the agreement, namely 22 June 1962, so that s 82 did not apply and the only extent to which the taxpayer company would be chargeable to capital gains tax on the disposal would be the gain, if any, accruing between 6 April 1965 and 28 July 1965, the date of the disposal.
It was contended on behalf of the taxpayer company: (a) that a conditional synallagmatic contract was one where there was a condition (ie an event which might or might not happen) extrinsic to the mutual promises or considerations making up the substance of the contract, which had to be satisfied before the contract became absolute. (b) That the contract to acquire the term of years was the agreement dated 22 June 1962, which was the date of acquisition for the purpose of computing any chargeable gain. (c) That the agreement was a synallagmatic (ie bilateral) contract, consisting of mutual promises, the promises of each party being
Page 92 of [1971] 1 All ER 87
the consideration for the promises of the other. (d) That the promise by the landlords in cl 4 of the agreement to grant a term of years was conditional on due performance by the taxpayer company of its promises in cl 2(3) and (4) to erect a building at a cost of at least £270,000. (e) That the question for determination was not whether the landlords’ promise to grant a term of years was condition, but whether the agreement, consisting of mutual promises, was conditional within the meaning of para 1(3) of Sch 9 to the Finance Act 1962. (f) That there was no condition outside the agreement on which the agreement was conditional, and that therefore it was not a conditional contract within para 1(3) of Sch 9 to the Finance Act 1962. (g) That the taxpayer company was chargeable in respect of capital gains by reference to s 19 of the Finance Act 1965. (h) That the appeal should be allowed and the assessment be discharged.
It was contended on behalf of the inspector of taxes: (a) that the agreement dated 22 June 1962 constituted one contract, namely an agreement for a lease conditional on the fulfilment of the obligations of the taxpayer company under the terms of cl 2 of the agreement. (b) Alternatively, that the agreement should be regarded as two contracts, namely a building contract followed by an agreement for a lease, the latter being subject to a condition precedent in that the taxpayer company had first to perform its obligations under the former. (c) That on either view the right to the lease was acquired on 12 May 1964, which was the date of acquisition for the purpose of computing any chargeable gain. (d) That the taxpayer company was chargeable in respect of capital gains by reference to s 82 of the Finance Act 1965 and to s 12 of, and para 1(3) of Sch 9 to, the Finance Act 1962. (e) That the appeal should be dismissed and the assessment be confirmed.
The commissioners who heard the appeal gave their decision orally as follows:
‘We considered first the second alternative contention put forward on behalf of the Inspector of Taxes. In our view the Agreement was not to be regarded as two contracts, but as one, the consideration being the building provision on the one hand and the grant of the Lease on the other. Dealing with the first and main contention on behalf of the Inspector, we came to the conclusion that the Agreement was not a conditional contract, in the sense that it depended on a condition (or event which might or might not happen) outside the contract before it became absolute; it was, in our view, an absolute contract to acquire the Lease upon the performance of certain terms which the [taxpayer] Company had agreed to carry out. Holding that the Agreement was not a conditional contract within paragraph 1(3) of the Ninth Schedule to the Finance Act 1962, we allowed the appeal and left figures to be agreed between the parties.’
Figures were agreed between the parties on 18 April 1969 and on 15 May 1969, the commissioners discharged the assessment. The Crown immediately after the determination of the appeal declared its dissatisfaction therewith as being erroneous in point of law and on 21 May 1969, required the commissioners to state a case for the opinion of the High Court pursuant to the Finance Act 1965, Sch 10, the Income Tax Management Act 1964, s 12(5), and the Income Tax Act 1952, s 64.
E I Goulding QC and P W Medd for the Crown.
D C Potter for the taxpayer company.
Cur adv vult
29 July 1970. The following judgment was delivered.
GOFF J read the following judgment. This is an appeal by HM inspector of taxes from a decision of the Special Commissioners disallowing an assessment to capital gains tax in respect of a chargeable gain for the year 1965–66. The liability (if any) arises under s 10(1) in chapter II of the Finance Act 1962, on gains accruing from acquisition and disposal of a chargeable asset. Section 10(2) provided that, with an immaterial exception, there should be no acquisition and disposal within
Page 93 of [1971] 1 All ER 87
the meaning of that chapter where the disposal occurred more than three years after the acquisition in the case of a disposal of land. Section 10(3) created a new Case VII of Sch D for the purposes of this tax. All this was amended by s 17(15) of the Finance Act 1965 which provides:
‘Income tax shall not be charged by virtue of section 10 of the Finance Act 1962 in respect of an acquisition and disposal of land where—(a) [a condition which applies to this case in any event] and (b) [which gives rise to the problem] the disposal or acquisition, whichever is the later, occurs more than twelve months after the acquisition or disposal (but not more than three years after) … ’
The later Act contained provisions in the case of companies for the tax (if any) to be exigible as part of its liability to corporation tax, and transitional provisions under which, that liability not having arisen at the material time in respect of the taxpayer company, their chargeable gains (if any) were to be taxed pursuant to special provisions in s 82. It is common ground, however, that that does not affect the charging provisions which I have read, and further that the liability (if any) must be computed in accordance with the rules laid down in the 1962 Act for the new Case VII of Sch D. I need not therefore further refer to the 1965 Act.
The problem is whether the interval of time between the acquisition and disposal, which was on any showing more than 12 months, in fact exceeded three years, and it arises in this way. Section 12(2) of the Finance Act 1962, so far as material, provides:
‘For purposes of Case VII, where a contract is made to acquire or dispose of an asset … the contract shall be deemed to be the acquisition or disposal of the asset … and the conveyance or transfer … in pursuance of a contract previously made shall not be deemed to be an acquisition or disposal of the asset.’
That is, however, by virtue of s 16(8) made to take effect subject to the rules contained in Sch 9, which, so far as material, provides:
‘1.—(1) Save as provided by paragraph 2 below [which does not matter for present purposes], a person’s acquisition or disposal of an asset by a contract in that behalf shall be disregarded for purposes of Case VII if—(a) the contract is discharged by mutual consent or by operation of law; or (b) default is made in carrying out the contract and by reason of that default there is no conveyance or transfer to implement the contract, whether by or to the person originally making the contract or another; or (c) the contract is conditional and the condition is not satisfied …
‘(3) If in the case of a conditional contract to acquire or dispose of an asset the condition is satisfied (and in particular if in the case of a contract conferring an option the option is exercised), then subject to the following sub-paragraph the acquisition or disposal of the asset by the contract shall be treated as taking place at the time when the condition is satisfied.’
On 22 June 1962, an agreement was made between Kathleen Cozens and others (‘the Landlords’) of the first part, the taxpayer company of the second part and Kennedy Leigh Properties Ltd (‘the Surety’) of the third part whereunder the taxpayer company was given leave and licence to enter the site of 80 and 82 Kings Road, Reading, for the purpose of demolishing any existing structures, erecting a building and executing works in accordance with the stipulations thereinafter contained. The terms of that agreement are fully rehearsed in the case stated. For present purposes, I need read only the following clauses:
‘2. THE [taxpayer company] hereby agree to perform and observe the stipulations following: (1) To hold the said premises until the same shall be comprised in a Lease to be granted as hereinafter provided as tenants at will to the Landlords … (3) At its own cost within the said period of two years [which is
Page 94 of [1971] 1 All ER 87
a period specified in cl 1] to erect cover in and complete fit for immediate occupation upon the said piece or parcel of land in a substantial and workmanlike manner with the best materials of their several kinds and in conformity in every respect with the plans elevations sections and specifications which have been approved by the Landlords and are annexed hereto and to the satisfaction in all respects of the Landlords’ Surveyor a six storey building consisting of offices with a garage basement and with all proper and suitable offices drains sewers and fences. (4) To expend in erecting the said building for materials and labour at cost price the sum of not less than Two hundred and seventy thousand pounds …
‘3. It is hereby mutually agreed that until the [taxpayer company] have completely performed the aforesaid agreement to build the said building and execute the works in accordance with the stipulations and conditions contained in Clause 2 hereof the Landlords shall possess the rights and powers following that is to say [and then follow various rights given to the Landlords, including a power of re-entry on default by the taxpayer company and in other events, and a power to extend the two-year period in these terms:] Provided further that notwithstanding any such default as aforesaid the Landlords may in their discretion give notice in writing to the [taxpayer company] of their intention to enforce the [taxpayer company’s] stipulations herein contained and may fix any extended period for the completion of the said works in substitution for the said period of two years hereby fixed for such completion and thereupon the obligations hereunder of the [taxpayer company] to complete the said works and to accept a Lease as hereinafter mentioned shall be taken to refer to such extended period.
‘4. [which is most important] IF the said building shall have been completely finished to the satisfaction of the said Surveyor (to be evidenced by his certificate in writing to that effect) at the expiration of the said period of two years or of such extended period (if any) as aforesaid and the [taxpayer company] shall have performed and observed all the stipulations and conditions on their part contained other than such as may have been waived as aforesaid then the Landlords shall grant to the [taxpayer company] a Lease of the said building for a term of One hundred and twenty five years from the Twenty fourth day of June One thousand nine hundred and sixty two …
‘5. … the [taxpayer company] shall accept the said Lease and execute and deliver to the Landlords a counterpart thereof and the Landlords shall deduce his freehold Title to the said premises which shall consist of a copy of the Title register and of the filed plan and an authority to inspect the register …
‘7. [which does not seem wholly consistent with cl 1] Until the said Lease shall have been granted the [taxpayer company] shall as from the date of this Agreement and so far as circumstances will admit and allow and subject to the provisions of this Agreement pay such rent and perform and observe such covenants and conditions as the [taxpayer company] would have to pay and perform and observe if such Lease had actually been granted.’
The taxpayer company duly performed its obligations within the prescribed period, and on 12 May 1964, the lease was granted. On 28 July 1965, it was assigned for a sum greatly in excess of the expenditure incurred by the taxpayer company, and it is in respect of that excess that the charge to tax has been raised. It is common ground that this was a chargeable asset, and if within due time, a chargeable gain arose, but the question is whether the agreement of 22 June 1962, was, as the Crown contend, a conditional contract within the meaning of para 1(3) of Sch 9. If it was, then the asset was not acquired until the condition was satisfied, and the interval between acquisition and disposal was less than three years. Strictly speaking, on that footing the date of the acquisition would be the date of the certificate of the
Page 95 of [1971] 1 All ER 87
landlords’ surveyor approving the works, but that was not appreciated when the matter was before the commissioners and there was no evidence or finding about it. It was agreed, however, that it could not have been sufficiently long before the grant of the lease to make any material difference, and the case proceeded before me on the footing that that was the relevant date; that is to say, 12 May 1964. If it was not a conditional contract, then the date of the acquisition was the date of the agreement and the three-year period was exceeded.
The commissioners found:
‘… that the Agreement was not a conditional contract, in the sense that it depended on a condition (or event which might or might not happen) outside the contract before it became absolute; it was, in our view, an absolute contract to acquire the Lease upon the performance of certain terms which the [taxpayer company] had agreed to carry out.’
The Crown submit that the question under the Act is not whether there was an unconditional or absolute contract but whether there was an absolute contract to acquire or dispose of an asset, which it says necessarily requires one to consider its position as such a contract. So regarded, it says, it is by the express terms of cl 4 conditional. It says, further, that it is irrelevant in the circumstances that the condition is promissory; that is, something which the taxpayer company was by its contract bound to perform.
The taxpayer company argues that the Crown’s contention puts a gloss on the section; that a contract cannot be conditional on itself, and this contract is absolute subject to no condition preventing it from arising or placing it in abeyance. Alternatively, it says that one must distinguish a contingent condition—ie one operating outside the contract, and not under the control of the parties—from a promissory one, and as this is promissory it cannot on any showing make the contract conditional.
In my judgment, the commissioners came to the right conclusion. In my judgment, a contract cannot properly be regarded as conditional where there is no condition which is prerequisite to the formation of any binding agreement, as in ‘subject to contract’ cases, or which keeps it in abeyance: see Jenkins LJ in Parway Estates Ltd v Inland Revenue Comrs ((1958) 37 ATC 164 at 166).
I find that there is authority for this view in a passage in the judgment of Ungoed-Thomas J in Property and Bloodstock Ltd v Emerton, Bush v Property and Bloodstock Ltd ([1967] 2 All ER 839 at 843, 844) where he said:
‘There was argument whether “not conditional in any way” meant, as the mortgagee before me contended, not conditional on the mortgagor’s right to redeem, or, alternatively [and this is the point], not subject to a condition precedent to the formation of the contract [or, I would add, keeping it in abeyance], or, on the other hand, as the mortgagor before me contended, not subject to a condition whose fulfilment is dependent on a third party where the failure to fulfil the condition terminates the contract. The contract to which CROSSMAN, J.b, referred was a contract of sale and it was the contract of sale itself which he described as “not conditional in any way“. This necessarily means that it was the contract of sale itself which was not conditional; but a contract of sale is not itself grammatically or properly described as conditional because it contains terms which amount to conditions, but only because it is itself subject to a condition.’
This conclusion is further supported by Danckwerts LJ in the same case in the Court of Appeal ([1976] 3 All ER 321 at 324, [1968] Ch 94 at 112), where he said:
Page 96 of [1971] 1 All ER 87
‘On the face of the document, the contract is an ordinary contract of sale and purchase, and though “conditions” are referred to, the matters so referred to are merely the terms of the sale and purchase, and the contract would, in my opinion, not normally be regarded as a conditional sale and purchase. The greater part of the argument for the appellants … has, however, been conducted on contentions that the contract is conditional and did not create the relationship of vendor and purchaser.’
If I am right, that is sufficient to dispose of this case, but in case I am wrong I pass on to consider the further question whether, the term or condition in this case being promissory, the contract is not in any event conditional. In the Property and Bloodstock case ([1967] 2 All ER at 845, 846), Ungoed-Thomas J went on to consider, in the light of Aberfoyle Plantations Ltd v Khaw Bian Cheng, whether the contract which he had found unconditional in the sense I have described was nevertheless a conditional contract of sale, and so did Sachs LJ in the Court of Appeal ([1967] 3 All ER at 330, 331, [1968] Ch at 120, 121), although I think that the other two Lords Justices thought that in the context of the question of a mortgagee’s sale binding a mortgagor it did not matter.
It is to be observed, however, that in that case, as in the Aberfoyle case itself, the further enquiry was of a limited character, namely whether the contract was so far conditional as to prevent it from creating the relationship of vendor and purchaser, and, what is even more important, the term, if conditional, was a contingent condition. Sachs LJ himself said this in the Property and Bloodstock case ([1967] 3 All ER at 331, [1968] Ch at 121):
‘For a considerable time I was inclined to the view that in all the circumstances of this particular contract condition (j) was something more than a mere term concerning title. In this behalf I was influenced by the fact that the whole efficacy of the transaction appeared to depend on the landlords’ consent, over which neither party was in control.’
Then Sellers LJ said ([1967] 3 All ER at 333, [1968] Ch at 124):
‘It is said that the contract before the court in the present case is a conditional contract; and so it is, in the sense that it has within its terms a provision (which has been referred to as condition (j)) that “The sale is subject to the vendor obtaining the consent of the Mayor, Aldermen and Burgesses of the Borough of Maidenhead to the assignment of the said lease to the purchaser.” That is a provision in the contract itself which, if not performed, does of itself discharge the contract without breach.’
The question in Wood Preservation Ltd v Prior (Inspector of Taxes), was of the same limited character, and again the condition, if such it be, was contingent.
I do not think that it can make any difference that one party may be under an express or implied obligation to use his best endeavours to procure the performance or satisfaction of the condition where it depends in the end on an event outside the contract and beyond his control. The conclusion so far is clearly supported by the Parway case, both in its decision and in the following passage from the judgment of Jenkins LJ ((1958) 37 ATC at 166):
‘Of course I think it is really reasonably plain that, if one has a contract of
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sale and purchase which is expressed to be conditional on the happening of some event, the procuring of some consent or something of that sort, the contract for sale and purchase is in abeyance until such time as the condition is fulfilled, though it may well be that there might be a repudiation even before the condition was fulfilled if one of the parties announced they were never going to perform the contract whether the condition was fulfilled or not. But that is not, as I understand it, this case. I cannot see that either of these paragraphs are conditions precedent.’
The Crown, however, relied very strongly on the fact that Jenkins LJ distinguished Counter v Macpherson, which is indistinguishable on the facts from the present case save that it was the converse. There again, however, although the Rt Hon T Pemberton Leigh, giving the opinion of the Board, contrasted ((1845) 5 Moo PCCC at 105) ‘absolute and unconditional contracts’, the question was not whether the contract was conditional but whether it created immediately the relationship of vendor and purchaser so as to make an intending lessee liable for loss occasioned by an accidental fire, and the real question was whether, the intending lessor not having performed his obligations under the contract, he could obtain specific performance. That does not necessarily involve holding that the contract was conditional. It is sufficiently explained on the ground of dependent obligations in an unconditional contract.
The Crown also relied on Strong v Stringer. It is true that Kekewich J there treated a contract of this type as in effect two separate agreements, the one to arise on the performance of the other, but he was not considering whether the agreement in whole or in part was correctly described as a conditional contract for the acquisition of property. The questions before him were again specific performance and when the relationship of landlord and tenant would actually arise.
Finally, if it be said, if this contract be not conditional what would the position under the Act have been had the taxpayer company failed to build properly and in due time, and the lessors had thereupon treated the contract as discharged, the short answer is that in such case there would be no chargeable gain, but in any event the case would be covered by para 1(1)(b) of Sch 9 to the 1962 Act which expressly provides for default in carrying out the contract.
In conclusion, having reviewed all the authorities, including Counter v Macpherson, which was not apparently cited to the commissioners, I find it impossible to hold that a contract to acquire an asset subject to no term or condition save the due performance of one’s own obligations can properly be described as a conditional contract to acquire it, and I agree with the conclusion and reasons succinctly stated by the commissioners in the passage I have read from the case stated. The appeal therefore fails.
Appeal dismissed.
Solicitors: Solicitor of Inland Revenue; Berwin & Co (for the taxpayer company).
K Buckley Edwards Esq Barrister.
Hornett v Hornett
[1971] 1 All ER 98
Categories: FAMILY; Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Hearing Date(s): 16 JANUARY, 26, 27 OCTOBER 1970
Divorce – Foreign decree – Recognition by English court – Basis of recognition – Real and substantial connection between parties and court granting decree – Connection between petitioner and court – Decree granted in France – Respondent having no notice of proceedings – Subsequent affirmation of marriage by parties.
Divorce – Foreign decree – Recognition by English court – Respondent having no notice of proceedings.
Divorce – Foreign decree – Recognition by English court – Subsequent affirmation of marriage by parties.
The husband, an Englishman, married the wife, a French national, at Abbeville in France in 1919. A son was subsequently born to them and the parties lived together for about five years, mostly in France but with an interval of 18 months in England. At the end of that period the husband returned to England, the arrangement being that the wife would pack up their home and eventually follow him with the child. They continued to correspond but in time it became apparent to the husband that the wife was not going to rejoin him and he took steps to obtain a divorce. He then discovered for the first time that the wife had already divorced him in the civil court in Abbeville in June 1924. He had received no notice of the proceedings because the procedure of the French court was liable to be extremely imperfect in its operation at that time. There was no evidence of any fraud or other failure of the French process to work in accordance with its regulations. On learning of the French divorce the husband returned to France and successfully persuaded the wife to return to live with him in England. From then on they lived together in matrimonial amity for 11 years and brought up their child. In 1936 there was further trouble and they finally parted. In 1937 the wife obtained a maintenance order in proceedings before justices in England in which both parties accepted the jurisdiction of the court on the basis that they were married. In 1964 the husband successfully applied for a variation of the order, again on the basis that the marriage was still in being. In 1969 the husband filed a petition seeking a declaration that the French decree was valid.
Held – (i) At the material time the wife had a real and substantial connection with France and French law of a kind sufficient to qualify the French decree for recognition in the English courts (see p 101 f, post), notwithstanding that the decree might not have been recognised in 1937 (see p 103 f, post).
Indyka v Indyka [1967] 2 All ER 689 applied.
(ii) The fact that the husband did not know of the French decree until after it had been granted would not cause injustice to either party or to the child of the marriage, nor did the failure to serve notice on him, a circumstance which might occur in English proceedings, afford evidence of any fraud or other taint in the French proceedings, which would justify a refusal to recognise the French decree (see p 102 b d and e, post).
Igra v Igra [1951] P 404 followed.
(iii) The fact that after the date of the French decree the parties had by their conduct ‘affirmed’ the marriage might be a ground for refusing recognition if, for example, injustice would be caused to either party or their child, but in the present
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case there would be no injustice nor were there any other matters inhibiting the court from granting recognition (see p 102 h, and p 103 b c and g, post).
(iv) Accordingly a declaration that the French decree was valid would be granted.
Notes
For the recognition by English courts of foreign decrees of divorce, see 7 Halsbury’s Laws (3rd Edn) 112, 113, para 200, and for cases on the subject, see 11 Digest (Repl) 481–483, 1079–1097.
Cases referred to in judgment
Haig v Haig (1969) unreported.
Igra v Igra [1951] P 404, 11 Digest (Repl) 518, 1324.
Indyka v Indyka [1967] 2 All ER 689, [1969] 1 AC 33, [1967] 3 WLR 510., Digest Supp.
Cases and authority also cited
Le Mesurier v Le Mesurier [1895] AC 517, [1895–99] All ER Rep 836.
Macalpine v Macalpine [1957] 3 All ER 134, [1958] P 35.
Mather v Mahoney (formerly Mather) [1968] 3 All ER 223, [1968] 1 WLR 1773.
Mayfield v Mayfield [1969] 2 All ER 219, [1969] P 119.
Middleton v Middleton [1966] 1 All ER 168, [1967] P 62.
Peters (otherwise Petrovic) v Peters [1967] 3 All ER 318, [1968] P 275.
Travers v Holley and Holley [1953] 2 All ER 794, [1953] P 246.
Dicey and Morris: Conflict of Laws (8th Edn), p 318.
Petition
This was a petition by the husband asking for a declaration that the decree of divorce by the civil court of Abbeville in France, dated 24 June 1924 and granted to the wife on her petition, should be recognised by the English courts, or in the alternative, that he should be granted a decree of divorce on the ground of the wife’s desertion. The wife cross-petitioned for a decree of divorce on the ground of the husband’s desertion. The facts are set out in the judgment.
K M Willcock and J Hamilton for the husband.
M B Connell for the wife.
27 October 1970. The following judgment was delivered.
CUMMING BRUCE J. On 23 April 1919 the husband, George Charles Francis Hornett, married a French national at Abbeville in France. He had been a rifleman in the Rifle Brigade and after demobilisation he stayed in France and worked at Abbeville, living with the wife’s parents. Their son was born the following year and they continued to live in Abbeville for about two years. Then they moved to the United Kingdom, motivated by the idea that the husband would have better prospects at his work in this country, and they lived for a period of about 18 months in Walthamstow or thereabouts. But the wife was homesick and he agreed to try living in France again, and they lived in France for a period which may have been one or two years.
The husband decided that he would prefer to live in England and the wife agreed, and so he then returned again to England, the family plan being that she would pack up their home and eventually follow with their child. They continued to correspond and he sent her money. Then he received letters which told him that the wife was pregnant and suggested that it was not his child that she was carrying. After a time he reached the conclusion that she was not going to return to him in England and he consulted solicitors at that juncture with a view to obtaining a divorce. Then he heard that she had already divorced him in France. He had had no notice of the proceedings and only heard of them through a side wind. He consulted his mother on what to do about the situation and she advised him to disregard their
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previous troubles and their effect, including the divorce that the wife had obtained in France, and to go to Abbeville and collect the wife and son and return to England. He followed this robust advice and went to France and was wholly successful and returned to England with the wife who had shortly before divorced him. In the meanwhile the child who had been born and whose paternity had been, in his mind, in doubt, had died and was no longer on the scene. Thereafter for 11 years they lived in matrimonial amity in England and brought up their son. The husband knew that the wife had divorced him in France; he decided to pay no attention to that episode; according to his evidence he simply did not give it a thought. His evidence was that after they were reconciled in France neither ever mentioned the French divorce again.
In 1936 there was trouble again. His account—and I have not heard her account—was that she simply left him without warning, taking the furniture and their son, and that since then he has only seen her twice. Sometime during the last war she asked him to return but he refused, and they had a conversation in subsequent years when André was contemplating marriage and there was a discussion about his prospective bride.
Going back again to 1937, a year after the final parting, on 20 January 1937 the wife applied for, and obtained, an order from the justices sitting in Stratford on the grounds of the husband’s desertion. The justices made an order, details of which I do not know, the effect of which was that he was to pay the wife £1 maintenance. He contemplated contesting those proceedings but, as he said in evidence, his luck was out because the lorry in which he was journeying to the magistrates’ court ran out of petrol. He gave an account in the witness box of his arriving at court and finding that the justices were just putting on their coats, the case being over. He told them that he had come to contest the proceedings and, according to him, the justices told him that either it was unnecessary or it was too late to do that, because they had finished their proceedings, and that he had better submit to the order that they had made.
That account is so wildly improbable with the knowledge that one has of the way in which justices in England discharge their duty that I have the greatest hesitation in accepting it, and I think it is likely that the husband has not recalled with accuracy exactly what happened when he turned up at the magistrates’ court after the proceedings had been concluded. I do not, however, think that it is necessary, for the purposes of my decision, to seek the truth about that matter. The fact remains that he submitted to the jurisdiction of the justices who had granted the wife a matrimonial order whereby he was to pay her £1 maintenance on the ground of his desertion, both parties accepting that the justices had jurisdiction on the only possible basis, namely that they were married. Nobody at that point made any mention of the somewhat antiquated French divorce. On 15 October 1964, the husband applied for a variation of the magistrates’ order. He had been paying for nearly 30 years under the order but he had fallen on hard times, was not at all well, and the justices reduced his liability to nil by way of variation. Again, on that occasion he applied for variation on the basis that the justices had jurisdiction because he was married to the wife who was the successful applicant for the order.
A good deal had happened in the meanwhile. In about 1939 or 1940, he began to cohabit with a lady with whom he has made his home, with great happiness and success, ever since. Those two now have a daughter, aged 19, and the proceedings that the husband now brings are motivated primarily by the interests of and concern for that young lady.
In 1949, the husband had obtained a copy from the French authorities of the French formal document called livre de famille, which records the matrimonial history of the parties for the purposes of French law. The copy document which has been put in evidence records the marriage and records the judgment of divorce, given on 3 June 1924, by the civil court of Abbeville. He obtained that copy document
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recording the wife’s divorce in France because he had in his mind then that he should open up, as he called it, the question of the wife’s divorce, and I suppose that he may have had in his mind then the question of obtaining a declaration of recognition of the validity of the French decree. But from that date until 1969 he did not take any legal steps to that end. He has never, as I am satisfied, had very much spare money and I believed him when he said that for years he was trying to save up the sum of £200, which he thought was the sort of money that would be necessary to enable him to take legal proceedings, but when he was getting near his target something always happened and the money disappeared.
It was against that background that, in October 1969, the husband filed a petition seeking from this court a declaration of the validity of the French decree, the effect of which will be that since 1924, in the eyes of English as well as French law, he has not been married to the wife who obtained a divorce against him in France. Obviously the case throws up certain oddities and perhaps anomalies. In the first place he never knew that the wife was divorcing him in France until he heard of the fait accompli. Then, after hearing that the wife had succeeded in divorcing him in France without his knowledge, they both decided to disregard the French judgment and thereafter behaved in England in every way as if they were still married. They cohabited as husband and wife and brought up their son for 11 years. Then, when difficulties arose and they parted in 1936, the wife, who had obtained a decree of divorce in France in 1924, went to the English magistrates’ court and sought from them, with success, a matrimonial order imposing on the so-called husband a liability to pay her maintenance, the whole basis of the jurisdiction which she invoked being that she was married to the husband. He submitted to that jurisdiction by paying under the order for 30 years and after nearly 30 years applied to the justices to vary it downwards because he had no money left, and again he never suggested to the justices on the occasion of that application for variation that he was not the legal husband of the wife. Thus, by their conduct, the two have certainly affirmed the continuance of their marriage after and in spite of the French decree of divorce. Those are the features of the case which induced in me a mood of extreme caution when being invited to make the declaration sought.
It is clear that since Indyka v Indyka the wife is to be regarded as a lady who, at the material time, had a real and substantial connection with France and French law of a kind that is sufficient to qualify her French decree for recognition in the English courts. There is no difficulty in this case on that score, which has been the subject of so much judicial consideration. But then there are the other two features of the history which fall for consideration. Ought this court to recognise the validity of the French decree in a case in which: (a) the husband never knew anything about the proceedings in France; and (b), when he learnt about them, in conjunction with the wife, agreed to disregard the French decree and continued to live as man and wife on the basis that the French decree did not touch their lives at any point?
I have had the advantage of considering a passage in Professor Graveson’s textbook on the Conflict of Lawsa where he summarises the approach of the law to the problems of recognition and classifies the grounds on which the English court will regard itself as inhibited from recognising a foreign decree. I quote:
‘What, then, are the general limits to this wide-ranging scheme of recognition of foreign decrees of divorce? Three such limits appear in the judgments of Indyka v. Indyka: public policy, natural justice and evasion of fraud … Public policy in English law is a concept narrowly construed and from which the law is jealously protected. However, it has within these limits a function to perform, particularly in matters relating to the moral standards of society. This is the
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particular relevance of the question to the case under discussion and in this sense public policy is merely one aspect of a more general question involving the other considerations of natural justice and evasion of the law … The second limitation, now well established, is the residuary discretion of the court to refuse to recognise a foreign decree when the result would be to cause grave injustice. It is a limitation which Lord Pearson felt able to describe as obvious … ’
That seems to me to be a valuable summary of the limits of the modern doctrine. If I were satisfied that there was injustice involved to either party, or to a child of the family as a result of a declaration recognising the French decree, I should hesitate very long before making such declaration. In this case there is no risk of grave injustice or indeed any injustice; and indeed it is the husband—a person who knew nothing about the French decree when it was granted—who is himself petitioning for recognition of the decree. Thus the important consideration of justice does not present any obstacle to the declaration sought.
In relation to the question whether the court should recognise a decree which was granted in France without the knowledge of the respondent to those proceedings, I follow the approach in Igra v Igra. There is a distinction between the case where somebody does not know about legal proceedings although the foreign procedure has been properly carried out, and where there is no fraud, and the case where there has been fraud or some other taint in the foreign proceedings. I accepted the evidence of the expert in French law who explained that at the material time, 1924, the process of the French court was, in practice, liable to be extremely imperfect. It was the responsibility of the court to effect service on a respondent and if the respondent was abroad that was done through invoking the aid of the French Foreign Office who themselves requested the French consular service in England to effect service on the English resident. I was told, and I accept, that in practice that machinery sometimes did not work at all well and that there is no presumption in this case that there was either any fraud or any failure of the French process to work in accordance with its regulations to be inferred from the fact that the husband was never served. Thus, in relation to non-service, this is a case which falls in the same category as Igra v Igra, namely that the fact that the respondent was not served is not in itself a reason for holding that the French decree should not be recognised. It is worthy of note that one of the bases of that reasoning is that in England too it is quite possible for persons to be divorced without their knowledge if, for example, after careful and proper enquiry it proves impossible to trace the whereabouts of the respondent. Then it is the procedure of the English court to order substituted service by advertisement and the case proceeds to decree absolute, although everybody recognised that is is extremely unlikely that the respondent knows anything about it. It is a matter of reciprocity that the English court will recognise a French decree if, when the French process has apparently been followed, one of the results is that the respondent is not served. Contra, if grave injustice is the result; but, as I have stated, I am not satisfied here that any injustice has been or would be caused to the husband if recognition were granted.
Then there is the question of the relevance of the parties’ affirmation of their marriage in England after the date of the French decree of divorce. The French decree in France for ever changed in France the status of the parties and ended their matrimonial relationship, and there are great difficulties about applying a doctrine of estoppel to a legal decree affecting status. It is not by any means unknown for parties who have been divorced, whether in England or abroad, later to become reconciled and to cohabit. If they do so they cohabit as single persons unless they decide to renew their matrimonial status by remarriage. I have had advantage of seeing the approach of Lane J in Haig v Haig, where she said:
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‘The subsequent cohabitation of the parties following the grant of the German decree cannot alter the recognition of the decree, even though this cohabitation may have been in the belief that the decree was invalid.’
Those observations, of course, were made in the context of the facts of that case and I repeat that for me a paramount consideration in considering problems of recognition is the question of justice or injustice. If, for example, in the instant case the parties cohabited as man and wife in disregard of the French decree and so cohabited in England and then had a further family after the date of the French decree, it might well be that the court, considering the problems of injustice to the family concerned, might treat that as a reason for refusing to grant the declaration sought in this case. But it is unnecessary for me to consider that situation because there were no children as a result of the subsequent cohabitation in England.
I conclude that the fact of cohabitation in this case does not have the effect of moving the court to refuse to recognise the French decree, which in France, in any event, had ended the matrimonial relationship and, as I have stated, there is no other aspect of the case, save perhaps public policy, which should inhibit this court from recognising the French decree. Ought public policy to be invoked to that end? Here I come to the relevance of the fact that the wife applied to English justices in 1937 and asserted her married state and that the husband never took any point of jurisdiction, although he knew that the wife had obtained a French divorce many years before. Then 30 years later he himself applied to the English court to vary the order that they had made in 1937. Should the common approach of the parties to the English court, presenting themselves as man and wife under English law and seeking matrimonial relief or submitting thereto, influence this court against granting recognition of the French decree? Now it is perfectly true that if the husband, in 1937, had had the appropriate legal advice and had had the money which in those days was necessary in order to obtain legal representation, he might have taken the point before the Stratford justices that he was not married to the wife, and there might have been interesting proceedings in the Divisional Court, raising the question of the recognition at that date of the French decree. It may not be very valuable to speculate about the result of such proceedings but the law of recognition has developed very fast since 1937 and I envisage that, if he had taken the point, unless his proceedings had reached the House of Lords he might have had very great difficulty in persuading the courts to approach the French decree in the way in which their Lordships approached the decree in Indyka v Indyka some 20 or 30 years later.
Public policy has been called an unruly horse. It is not a doctrine likely to be invoked outside the well-known principles enshrined in the case law of this Division and, to my mind, the question of public policy is closely bound up, on the facts of this case, with the question of injustice. I am satisfied that no injustice would follow as a result of a declaration recognising the French decree. I have come to the conclusion that, in spite of the oddities and anomalies of the story, this is a case in which the court should grant the declaration sought and I declare that under English law the French decree of divorce in 1924 is valid. In those circumstances it is unnecessary for me to make any finding on the subsequent petition and cross-petition of the parties, which were filed in order to obtain a divorce in England in the event of the refusal of the court to recognise the effect of the French decree.
Declaration accordingly.
Solicitors: Ronald A Prior (for the husband); Jas H Fellowes & Son (for the wife).
Alice Bloomfield Barrister.
Maurice Binks (Turf Accountants) Ltd v Huss
[1971] 1 All ER 104
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND CANTLEY JJ
Hearing Date(s): 5, 6 NOVEMBER 1970
Gaming – Betting – Licensed betting office – Advertisement – Elsewhere than inside building comprising licensed premises – ‘Licensed premises’ – Betting (Licensed Offices) Regulations 1960(SI 1960 No 2332), reg 2 – Betting, Gaming and Lotteries Act 1963, s 10(5).
Gaming – Betting – Licensed betting office – Advertisement – Premises giving access to licensed betting office – Outside wall not such premises – Betting (Licensed Offices) Regulations 1960(SI 1960 No 2332), reg 2 – Betting, Gaming and Lotteries Act 1963, s 10(5).
Gaming – Betting – Licensed betting office – Advertisement – Indicating premises licensed betting office – Notice showing company’s registered name – Registered name incorporating ‘Turf Accountants’ – Whether offence – Betting, Gaming and Lotteries Act 1963, s 10(5) (a), (b).
The appellants were a limited company which carried on business as turf accountants and were the holders of a betting office licence. The words ‘Turf Accountants’ appeared in their registered name. They conducted their business in a shop on the outside wall of which they fixed a sign with their registered name on (including the words ‘Turf Accountants’) and on which there was also a picture of a race-horse. Under s 10(5) of the Betting, Gaming and Lotteries Act 1963 the publication of any advertisement indicating that any particular premises were a licensed betting office (para (a)) or indicating where any such office might be found (para (b)) was prohibited except inside the licensed betting office or in such manner as might be prescribed on any premises giving access to such an office. By reg 2 of the Betting (Licensed Offices) Regulations 1960, the holder of a betting office licence was permitted to exhibit on premises giving access to a licensed betting office (‘elsewhere than inside a building comprising the licenced premises’) a notice in addition to his name consisting of the words ‘licensed betting office’ and indicating the times when the office was open. On the question whether the appellants’ sign was an advertisement and, as such, its publication constituted an offence under s 10(5),
Held – (i) Depending on the circumstances a sign which was erected in compliance with s 108 of the Companies Act 1948 could be an advertisement for the purposes of s 10(5) of the Betting, Gaming and Lotteries Act 1963 (see p 107, b, p 108, j, and p 109 a, post).
Dictum of Lord Parker CJ in Robinson v Cox (1968) 67 LGR at 194 applied.
(ii) Notwithstanding reg 2 of the 1960 regulations, the terms ‘licensed betting office’ and ‘licensed premises’ were synonymous; accordingly the outside wall of the building could not be regarded as ‘premises giving access to a licensed betting office’ (see p 107 f, p 108 j, and p 109 a, post).
Robinson v Cox (1968) 67 LGR 188 followed.
(iii) Although the sign might suggest to passers-by that the premises were a place where they could make a bet for cash, s 10(5) must be construed strictly and the word ‘indicating’ (meaning ‘showing’) in paras (a) and (b) involved the proposition that the sign must be a statement of fact; accordingly, since there was nothing on the sign to state as a fact that the premises to which it was attached were a licensed betting office, no offence under s 10(5) had been committed (see p 108 e g h and j, and p 109 a, post).
Dictum of Ashworth J in Dunsford Pearson [1970] 1 All ER at 285 disapproved.
Notes
For the conduct of licensed betting offices, see Supplement to 18 Halsbury’s Laws (3rd Edn), para 392c 2, and for cases on betting offices, see Digest (Cont Vol A) 624, 625, 482Aa–482Ad and ibid (Cont Vol B) 322, 323, 482Aaa–482Ac.
Page 105 of [1971] 1 All ER 104
For the Betting, Gaming and Lotteries Act 1963, s 10, ss 14 Halsbury’s Statutes (3rd Edn) 553, and for the Companies Act 1948, s 108, see 5 Halsbury’s Statutes (3rd Edn) 198.
Cases referred to in judgment
Dunsford v Pearson [1970] 1 All ER 282, [1970] 1 WLR 222.
Robinson (Roy William) Ltd v Cox (1968) 67 LGR 188, Digest Supp.
Case stated
This was an appeal by way of case stated by the justices for the county borough of Darlington in respect of their adjudication as a magistrates’ court sitting at Darlington on 28 April 1970. The respondent, Allan Whittaker Huss, an inspector of police, preferred an information against the appellants, Maurice Binks (Turf Accountants) Ltd, charging that the appellants, being the licensees of a licensed betting office at 6 Duke Street, Darlington, published an advertisement in connection with the office, namely a sign affixed to the outside wall of the premises bearing the words ‘Maurice Binks (Turf Accountants) Limited’, contrary to s 10(5) of the Betting, Gaming and Lotteries Act 1963.
The following facts were found: the appellants were a private limited company carrying on the business of a betting office with a current bookmaker’s permit and betting office licence. On 23 February 1970, a sign bearing the words ‘Maurice Binks (Turf Accountants) Limited’ in bold and clear capital letters was affixed to the outside wall. Before the sign was affixed its design was submitted to a senior police officer at Darlington who saw no objection to its being used as a fascia board. Following the issue of a circular letter by the Darlington police to local betting offices in June 1969 regarding the decision in Roy William Robinson Ltd v Cox ((1968) 67 LGR 188), the respondent twice informed the appellants that in his opinion the exhibition of the sign contravened s 10(5) of the 1963 Act.
It was contended by the respondent that: the sign was an advertisement indicating that the facilities of a betting office were available at the premises. The words ‘Turf Accountants’ contained in the sign indicated the nature of the premises, ie a betting office, notwithstanding that the words formed part of the registered name of the appellants. The appellants were therefore in contravention of s 10(5) of the 1963 Act and in view of the approaches by the respondent prior to 23 February 1970 the defence afforded by proviso (i) to s 10(5) of the 1963 Act was not available to the appellants.
It was contended by the appellants that: even if the sign were an advertisement it was simply an advertisement of the trading name of the appellants as required by s 108 of the Companies Act 1948. The Act of 1963 contained no restriction on the names permitted to be used by licensed bookmakers or the size of the lettering. The passages from the judgment relied on by the respondent were obiter dicta. The appellants had no reasonable cause to suspect that the sign contravened s 10(5) of the 1963 Act and had taken all reasonable steps to ascertain that it did not.
The justices decided that in everyday parlance the term ‘turf accountant’ was synonymous with the word ‘bookmaker’; the business of a bookmaker was to take bets; bets were taken at betting offices; the sign advertised the registered name of the appellants and at the same time advertised the nature of the appellants’ business; and the indication of the appellants’ business by means of the sign was an indication that the premises to which it was attached were a betting office. They accordingly convicted the appellants who now appeal.
P M J Slot for the appellants.
M Graham for the respondent.
Page 106 of [1971] 1 All ER 104
6 November 1970. The following judgments were delivered.
ASHWORTH J. This is an appeal from a decision of justices for the county borough of Darlington before whom the appellants were brought by way of an information charging an offence against s 10(5) of the Betting, Gaming and Lotteries Act 1963. The precise words of the information are set out in the case stated, and no point is taken that they do not appear to follow the wording of the section itself. The issue involved in the case can be very shortly stated. The appellants are a private limited company carrying on business as bookmakers at 6 Duke Street, Darlington and indeed they have so carried on business there for a considerable time. The name Maurice Binks (Turf Accountants) Ltd was adopted with the consent of the Board of Trade in 1965, after other names not containing the words ‘Turf Accountants’ had been refused by the Board. It is not without interest to know that before the sign complained of in the present case was erected, a director of the appellants had been in touch with the police at Darlington and at that time, as long ago as 1966, no objection at all was raised by the police authorities to the sign itself, some comment being made as to its size. But the police at Darlington became aware of the decision of this court in Roy William Robinson Ltd v Cox which was decided on 22 October 1968. That prompted the police in Darlington to look into the matter again, and as a result the respondent, in his capacity as chief inspector of police, discussed the matter with a director of the appellants and failed to persuade the director to alter the sign; accordingly these proceedings were brought.
The case includes a photograph of the shop front of 6 Duke Street, Darlington, and the photograph is an excellent portrayal of the sign in question, which contains by way of letters ‘Maurice Binks (Turf Accountants) Limited’ and as if to guard against the unlikely possibility that someone in Darlington did not know what a turf accountant was, there is a picture of a race-horse passing the winning post close by. It is to my mind as plain as plain can be that anyone looking at that notice would know that Maurice Binks (Turf Accountants) Ltd were bookmakers, and indeed the opposite was not argued at all.
The way this matter comes before the court is that s 10(5) of the Betting, Gaming and Lotteries Act 1963 prohibits the publication of an advertisement indicating that any particular premises are a licensed betting office, save in a licensed betting office or in such manner as may be prescribed on premises giving access to such an office. It is said by the respondent that this sign is an advertisement and that in its position in Duke Street, Darlington, it indicates that the premises to which it is attached are a licensed betting office.
The justices accepted that argument, but they proceeded on a footing with which I confess I am quite unable to agree. Let me dispose of that before going further. Their reason is to be found in the case in which they state:
‘In every day parlance the term “turf accountant” is synonymous with the word “bookmaker“. If we may state the obvious, the business of a bookmaker is to take bets. Bets are taken at betting offices. The said sign advertised the registered name of the [appellants] and at the same time advertised the nature of the [appellants’] business’
and therefore they said, as a corollary to that, that the indication of the appellants’ business by means of the sign was an indication that the premises to which it was attached were themselves a betting office. This completely overlooks the possibility that bookmakers, turf accountants, may carry on business at places which are not licensed betting offices, and that there are at least two forms of betting, credit betting and cash betting.
While I disagree with the justices in that approach to the matter, however, the issue is still before the court whether, looking at that sign, it can be fairly said, within the meaning of s 10(5), that it is an indication that the premises are a licensed betting
Page 107 of [1971] 1 All ER 104
office. In support of the appeal, counsel for the appellant had three submissions to make, only one of which in my view is really of any substance. His first, which it is fair to say he did not press with any conviction, was that this was not an advertisement at all; it was merely the use of the appellants’ name in compliance with s 108 of the Companies Act 1948. He conceded that it might have been smaller, indeed he called attention to the plate which is just visible on the door of the premises giving the appellants’ name, but he said that it would be a misuse of words to call this an advertisement, when it was merely a compliance with s 108.
I would only say that for my part I am content to take the same view as was expressed by Lord Parker CJ in Robinson v Cox ((1968) 67 LGR at 194) where he said:
‘No doubt what does or does not constitute an advertisement in any case depends upon the nature of the case and the nature of the legislation being considered, but for my part I find it quite impossible to say that this sign is not an advertisement within the subsection; indeed it seems to me plainly to fall within the words used “any advertisement indicating that any particular premises are a licensed betting office“.’
In passing I should mention that in that case the sign in question used the words ‘Licensed Betting Office’ and added ‘Open 11 am daily’, therefore unless the bookmaker could escape under some provision of the Betting (Licensed Offices) Regulations 1960a he was plainly in contravention of s 10(5). I therefore for my part would not accept counsel for the appellant’s first point.
His third point was an effort to persuade this court that the decision to which two at least of the present members of the court were party, given in Cox’s case was, if not distinguishable, at any rate open to review. This argument depends on a consideration of the regulations, and the provisions in s 10(5) to this effect: ‘In such manner as may be prescribed on premises giving access to such an office.' Counsel for the appellants sought to persuade the court that the roof of a building and the wall of a building properly regarded can be called premises giving access to the licensed betting office because he says that ‘premises’ by definition in the Act means ‘place’ and a wall is a place. Once again, I find it quite unnecessary to go further than to read what Lord Parker CJ said in Cox’s case ((1968) 67 LGR at 194) dealing with a similar argument:
‘In support of that he refers to that fact that regulation 2 appears at first sight to be drawing a distinction between a licensed betting office and licensed premises. In my judgment, however, these words are really synonymous, and that it is quite impossible to treat the outside wall of the betting office itself, to which this advertisement or notice was fastened, as constituting premises giving access to the office which was the inside of that wall. It seems to me quite unreal to suggest that the outside wall constitutes premises giving access to what is the other side of the wall.’
On that occasion I agreed, and I do no more than repeat my agreement with those words.
That disposes of two of counsel for the appellants’ points and one now comes to the one that is of substance which is to the effect that whatever else this sign is, it is not an advertisement indicating, under s 10(5)(a), that any particular premises are a licensed betting office. It is perfectly true to say that there is nothing whatever on the sign of itself expressly to indicate the premises are a licensed betting office. It is only by an extended use of the word ‘indicating’ that any substance can be found in the case put forward by the prosecution.
Page 108 of [1971] 1 All ER 104
Counsel for the respondent has called the court’s attention to the fact that in the Concise Oxford Dictionary two meanings are given to the word ‘indicate’. The first meaning is one which clearly in this case does him no good at all, a meaning which is: ‘Point out, make known, show.' But he refers to the secondary meaning which is: ‘Suggest, call for; state briefly; be a sign of, betoken.' He says that this sign at least suggests that the premises to which it is affixed are a licensed betting office. If I may say so, that is a plausible argument, attractively presented, but it is without any foundation whatever. The only comfort which he could gain in presenting the argument was from some words which (ill-advisedly) I myself used in giving judgment in Dunsford v Pearson ([1970] 1 All ER 282 at 285, [1970] 1 WLR 222 at 226). They were obiter dicta, and like many obiter dicta they provide cause for subsequent regret, and they were wrong. The words in question are these:
‘It is quite plain that, so far as s 10(5) of the Act is concerned, it would be unlawful for the licensee to place an advertisement outside his premises giving, for example, the information given in the present case, and so much was held by this court in Robinson v Cox of which this court has been supplied with a transcript.’
Factually that sentence is wrong and I regret it, because the sign in Robinson v Cox included the words ‘Licensed Betting Office’ and the court had no difficulty in saying that that involved a contravention of s 10(5). But the sign used in Dunsford v Pearson was a sign similar in form, although different in character, to the present case. It merely used the words ‘Turf Accountants’. It was quite unnecessary for the decision in Dunsford v Pearson to say that it involved an offence under s 10(5) and, on further reflection, I think that the sentence which I have quoted was wrong.
‘Indicating’ in my view in the subsection means ‘showing’. It involves the first of the two meanings put forward by counsel for the respondent and it is to be noted that in s 10(5) the word is used twice in para (a) ‘indicating that any particular premises are a licensed betting office’, secondly in para (b) ‘indicating where any such office may be found’, and in para (c) although the word is not used, the expression is ‘drawing attention to the availability of, or to the facilities afforded to persons resorting to, such offices’.
In my judgment, the use of the word ‘indicating’ in paras (a) and (b) is a use which is within the first meaning; it is not a case of ‘suggesting’, and I am confirmed in that approach to the matter by the fact that the subsection and the paragraph use these words ‘indicating that any particular premises are a licensed betting office’. It involves to my mind the proposition that the sign must be, so to speak, a statement of fact, and in this case there is nothing on the sign to state as a fact that the premises to which the sign is attached are a licensed betting office. To avoid misunderstanding let me say at once, it could suggest to people passing along Duke Street, Darlington, that this may be a place where they can make a bet for cash, but what is penalised in s 10(5) is an advertisement indicating not that the premises may be, but that they are, a licensed betting office.
In my view, having regard to the nature of the Act and the penal character of the offence, it would be wrong to tread outside the strict wording of the subsection, and make it cover cases which are not within its strict language. Accordingly, in my view the sign ‘Maurice Binks (Turf Accountants) Limited’ did not involve the appellants in a contravention of s 10(5), and I would be in favour of allowing this appeal and quashing the conviction.
CANTLEY J. I agree.
Page 109 of [1971] 1 All ER 104
LORD PARKER CJ. I also agree.
Appeal allowed. Conviction quashed.
Solicitors: Denis Hayes & Co agents for Stanley N Walton & Hardy, Darlington (for the appellants); Clarke, Rawlins & Co agents for Waldy, Chaytor & Jacks, Darlington (for the respondent).
Jacqueline Charles Barrister.
Practice Note
(Public Trustee: Investment of funds in court)
[1971] 1 All ER 109
Categories: PRACTICE DIRECTIONS
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND SHAW JJ
Hearing Date(s): 8 DECEMBER 1970
Public Trustee – Investment of funds in court – Common investment funds – Capital fund – Damages – Damages awarded to a minor – Principle governing investment in capital fund.
Notes
For common investment funds, see Supplement to 30 Halsbury’s Laws (3rd Edn) para 654A.
For the Administration of Justice Act 1965, s 1, see 7 Halsbury’s Statutes (3rd Edn) 745.
For the Common Investment Funds Scheme 1965, see 5 Halsbury’s Statutory Instruments (Second Re-issue) 293.
8 December 1970. The following judgment was delivered.
LORD PARKER CJ read the following direction at the sitting of the court: Attention has recently been drawn to cases in which damages awarded to a minor have been invested in the Public Trustee’s capital fund and withdrawn after a comparatively short time, with a resulting loss to the beneficiary because of a decline in the value of the underlying securities. As was emphasised when the three common investment funds were set upa under s 1 of the Administration of Justice Act 1965 on 1 October 1965, the capital fund is designed for the investment of money which is likely to remain undisturbed for at least five years. The underlying securities are such that while they may be subject to fluctuations downwards in the short term they are more likely to increase rather than fall in value in the long term. Thus an investment in the capital fund may well provide some safeguard against a fall in the value of money over a period of five years or more. While it can never be foreseen with certainty whether a particular investment will remain undisturbed for any given period (because, for example, the capital may be urgently needed), investment in this particular fund should not be used unless, at the time, it appears unlikely that the investment will be disturbed for at least five years. Thus, damages awarded to a minor who is within five years of attaining his majority should not be so invested.
N P Metcalfe Esq Barrister.
Treacy v Director of Public Prosecutions
[1971] 1 All ER 110
Categories: CRIMINAL; Criminal Law
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD HODSON, LORD GUEST AND LORD DIPLOCK
Hearing Date(s): 7, 8, 12, 13 OCTOBER, 15 DECEMBER 1970
Criminal law – Jurisdiction – Blackmail – Unwarranted demand – Demand by letter – Letter posted in England – Addressed to person abroad – Demand made within jurisdiction – Theft Act 1968, s 21(1).
Criminal law – Blackmail – Unwarranted demand – Nature of demand – Theft Act 1968, s 21(1).
Criminal law – Blackmail – Unwarranted demand – Demand by letter – Time when demand made – Theft Act 1968, s 21(1).
The appellant wrote and posted in England a letter addressed to a Mrs X in Germany in which he demanded that she should send £175 to him at an address in England under the threat that if she did not he would inform her husband of some allegedly discreditable conduct on her part. Mrs X received the letter in Germany. The question for decision was whether, when a person makes an unwarranted demand with menaces by letter posted in England and received abroad, he can be tried in England on a charge of blackmail under s 21a of the Theft Act 1968.
Held (Lord Reid and Lord Morris of Borth-y-Gest dissenting) – The appellant could be tried in England in such circumstances because the demand was made, and thus the offence was committed, when the appellant posted the letter in England (see p 119 b and c and p 124 f, post).
Per Lord Diplock. Even if the offence of blackmail were not complete until the demand was received abroad by the person to whom it was addressed, the demander could still be tried in England. The absence of any geographical limitation in the definition of blackmail or of other offences in the Theft Act 1968 means that the existence and extent of any such limitation is to be discovered by applying some presumption as to Parliament’s intention extraneous to the definition. The source of such a presumption can only be the rules of international comity, which do not call for more than that each sovereign State should refrain from punishing persons for their conduct within the territory of another State where that conduct has had no harmful consequences within the territory of the State that imposes the punishment. Consequently where the definition of an offence contains a requirement that the described conduct of the accused should be followed by described consequences it is sufficient to constitute the offence if either the conduct of the accused, or its consequences, take place in England or Wales (see p 121 g to p 122 a, p 123 d and j and p 124 a to c, post).
Decision of the Court of Appeal sub nom R v Treacy [1970] 3 All ER 205 affirmed.
Notes
For blackmail, see Supplement to 10 Halsbury’s Laws (3rd Edn) para 1543A.
For the limits of criminal jurisdiction, see 10 Halsbury’s Laws (3rd Edn) 316–319, paras 577, 579, 581, and for cases on the subject, see 14 Digest (Repl) 126, 877, 147–149, 1101–1123.
For the Theft Act 1968, s 21, see 8 Halsbury’s Statutes (3rd Edn) 795.
Cases referred to in opinions
Board of Trade v Owen [1957] 1 All ER 411, [1957] AC 602, [1957] 2 WLR 351, 121 JP 177, 41 Cr App Rep 11, Digest (Cont Vol A) 341, 1110a.
Page 111 of [1971] 1 All ER 110
Cox v Army Council [1962] 1 All ER 880, [1963] AC 48, [1962] 2 WLR 950, 46 Cr App Rep 258, 39 Digest (Repl) 411, 294.
Macleod v A-G for New South Wales [1891] AC 455, 60 LJPC 55, 65 LT 321, 17 Cox CC 341, 14 Digest (Repl) 145, 1075.
R v Aughet (1918) 118 LT 658, 82 JP 174, 26 Cox CC 232, 13 Cr App Rep 101, 14 Digest (Repl) 380, 3713.
R v Brixton Prison Governor, ex parte Rush [1969] 1 All ER 316, [1969] 1 WLR 165, 133 JP 153, Digest Supp.
R v Clear [1968] 1 All ER 74, [1968] 1 QB 670, [1968] 2 WLR 122, 132 JP 103, 52 Cr App Rep 58, Digest Supp.
R v Ellis [1899] 1 QB 230, 68 LJQB 103, 79 LT 532, 62 JP 838, 19 Cox CC 210, 14 Digest (Repl) 148, 1112.
R v Harden [1962] 1 All ER 286, [1963] 1 QB 8, [1962] 2 WLR 533, 126 JP 130, 46 Cr App Rep 90, Digest (Cont Vol A) 342, 1213a.
R v Holmes (1883) 12 QBD 23, 53 LJMC 37, 49 LT 540, 15 Cox CC 343, 47 JP Jo 756, 14 Digest (Repl) 149, 1119.
R v Jameson [1896] 2 QB 425, 65 LJMC 218, 75 LT 77, 60 JP 662, 18 Cox CC 392, 14 Digest (Repl) 145, 1082.
R v Moran [1952] 1 All ER 803, 116 JP 216, 36 Cr App Rep 10, 14 Digest (Repl) 653, 6640.
R v Roche (1775) 1 Leach 134.
Sweet v Parsley [1969] 1 All ER 347, [1970] AC 132, [1969] 2 WLR 470, 133 JP 188, 53 Cr App Rep 221, Digest Supp.
Appeal
This was an appeal by Eugene Anthony Treacy against an order of the Court of Appeal, Criminal Division (Lord Parker CJ, Karminski LJ and John Stephenson J) dated 29 July 1970 and reported [1970] 3 All ER 205, dismissing his appeal against conviction at the Central Criminal Court of making an unwarranted demand with menaces with a view to gain for himself contrary to s 21 of the Theft Act 1968. The facts are set out in the opinion of Lord Morris of Borth-y-Gest.
M Graham for the appellant.
C P C Whelon for the Crown.
Their Lordships took time for consideration
15 December 1970. The following opinions were delivered.
LORD REID. My Lords, I shall not set out the facts of this case. The question in issue can be simply stated. The offence charged was the blackmailing offence of making an unwarranted demand with menaces. Is a person guilty of that offence if in England he writes and posts a letter making such a demand of a person who is abroad?
I think that the best way to approach this case is to consider first the converse case where the blackmailer goes abroad and writes and posts there his letter to his intended victim in England. Can he on his return to England be convicted of this offence? I cannot believe that it would be a good defence that all the physical acts which he did in order to make his demand were carried out by him abroad and that therefore the offence was committed abroad. Whether one takes into account the views of the man in the street or simply construes the words of s 21 of the Theft Act 1968, it seems to me to be quite plain that the blackmailer made his demand in England when the intended victim received his letter. Any other decision would be, as has been said, a ‘blackmailer’s charter’.
First, I think we should see what is meant by making a demand with menaces. Rather than argue about words I shall take a few examples. Suppose the blackmailer uses the telephone and says ‘You know who is speaking. Pay up or I shall kill your
Page 112 of [1971] 1 All ER 110
brother John’. If the victim receives the message he will understand it and clearly there is a demand with menaces. But suppose the blackmailer gets the wrong number. Sometimes an operator taking a call does not listen immediately and no one may hear these words. Or the call may be taken by a complete stranger. He does not know who the caller is or what is demanded, and he is not menaced; he has no brother John. It seems to me very far fetched to say that the blackmailer has made a demand with menaces. He has attempted to do so but his attempt has miscarried.
Then suppose the blackmailer sends an emissary to make an oral demand. Surely no demand is made until the emissary delivers the message. Can it make any difference that the emissary carries a paper with the words written on it? Can it make any difference that the paper is enclosed in an envelope? Can it make any difference that the emissary does not know what is enclosed in the envelope? Can it make any difference whether the message is to be delivered in this country or abroad? I think not. But it is said to make a difference whether or not the blackmailer is able to get in touch with the emissary before the message is delivered and countermand its delivery. I can see no reason for that. In either case the blackmailer has done all the physical acts he can to put in train a series of events which if not interrupted will result in the demand being made. They may be interrupted by the emissary being taken ill or being unable to find the victim or by the blackmailer having second thoughts and being able to countermand delivery. The result is the same in each case. The blackmailer attempted to make the demand when he despatched the emissary, but the demand was never made. The post office is no more than an emissary. The letter may miscarry or the addressee may have left his old address. The letter may or may not be returned by the post office to the sender.
Some difficulty has been introduced into this matter by what was said in R v Moran when it was said that there could not be an attempt to make a demand. There may have been no room in that case for finding an attempt. But if it was intended to say that there can never be an attempt to make a demand with menaces I think that that was clearly wrong. So in this case I have no doubt that a demand with menaces was made by the appellant when the victim received the letter in Germany, but no demand was made in England.
How, then, was he guilty of an offence in this country? He did not make two demands, one when he posted the letter and a second when it was delivered. He did nothing after posting the letter which could amount to a second demand. But it was argued that he made a continuing demand which began when he posted the letter and ended when it was received. Continuing offences are well known in the law. They are generally offences of omission. The accused is guilty of the full offence at the beginning and he continues to be guilty for every moment during which the omission continued. But here was the appellant guilty of the full offence when the letter was posted? Would he, in the examples which I have suggested, have been guilty of the full offence the moment he sent off his emissary? I think not. I therefore reject the argument that there was a continuing demand.
The particulars of the offence of which the appellant was convicted were that he:
‘… on the 1st day of July 1969 within the jurisdiction of the Central Criminal Court, with a view to gain for himself, made an unwarranted demand … with menaces.’
1 July was the day when he posted the letter in England. If I am right that the demand was not made until the letter was received in Germany then that is an end of the case.
But there was much argument on a wider basis involving the jurisdiction of the courts of England when there is a foreign element in the crime. My noble and learned friend, Lord Morris of Borth-y-Gest, has dealt with this matter. I agree
Page 113 of [1971] 1 All ER 110
with what he says and shall not repeat it. But in view of the importance of the question I shall try to state my own views briefly. It has been recognised from time immemorial that there is a strong presumption that when Parliament, in an Act applying to England, creates an offence by making certain acts punishable, it does not intend this to apply to any act done by anyone in any country other than England. Parliament being sovereign is fully entitled to make an enactment on a wider basis. But the presumption is well known to draftsmen, and where there is an intention to make an English Act or part of such an Act apply to acts done outside England that intention is and must be made clear in the Act. I can find no indication of any such intention in the Theft Act 1968 with regard to any part of it with which we are concerned. I think that it would be both retrograde and likely to cause confusion in the law if any such intention were inferred without there being clear words to indicate it.
The present state of the law is, in my view, far from satisfactory. I refer in particular to the decisions in R v Harden and R v Brixton Prison Governor, ex parte Rush. If a person in this country does all that he can to ensure that a crime is committed abroad so that he can reap the benefit here, I can see nothing contrary to legal principle in our law holding him guilty of a crime. If I were entitled to make law I think I would draw some distinction between malum prohibitum and malum in se. The latter is or ought to be a crime everywhere but opinion and practice differ as to the former. But changes of that kind are apt to have side effects which would elude us in any such examination of a problem as we can make in reaching a decision in a particular case.
This is not an offence where there are two elements, eg making a false pretence and then obtaining the money. There is only one element in this offence: making a demand with menaces. But by employing the services of the post office the appellant chose to arrange matters so that he personally did not make the demand; he only had to do the acts preparatory to committing the offence, writing and posting the letter. If I take the law as it is the argument must be that, on a proper construction of the Theft Act 1968, doing the preparatory acts in England can be held to be equivalent to making the demand in England. This seems to me to be a novel and unsound construction. No doubt there ought to be an offence. And I think there would have been an offence under the law as it was before the Theft Act 1968 was passed. Those who prepared that Act tried to simplify the law. But very often the result of simplifying the law is that per incuriam some unusual cases are no longer caught by the simplified provisions. In such a case it is, in my view, wrong to try to remedy this by giving a strained meaning to the new provisions. The proper remedy is new legislation.
I would allow this appeal.
LORD MORRIS OF BORTH-Y-GEST. My Lords, the general principle of the common law of England is that the exercise of criminal jurisdiction does not extend to cover acts committed on land abroad. In general, therefore, acts committed out of England, even though they are committed by British subjects, are not punishable under the criminal law of this country. But as Parliament is supreme it is open to Parliament to pass an enactment in relation to such acts. It is, however, a general rule of construction that unless there is something which points to a contrary intention a statute will be taken to apply only to the United Kingdom. It would be open to Parliament to enact that if a British subject committed anywhere an act designated as blackmail he would commit an offence punishable in England. Such an enactment would, however, have to be in clear and express terms: specific provision would have to be made in regard to acts committed abroad. The general rule as
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expressed by Lord Halsbury LC in Macleod v A-G for New South Wales ([1891] AC 455 at 458) is that ‘all crime is local’ and that jurisdiction over a crime belongs to the country where it is committed. Unless, therefore, there is some provision pointing to a different conclusion, a statute which makes some act (or omission) an offence will relate to some act (or omission) in the United Kingdom. Even where a statute creating a criminal offence is clearly expressed so as to cover acts committed outside the jurisdiction, it will in the absence of further clear provision only be regarded as covering such acts when committed by British subjects.
‘One other general canon of construction is this—that if any construction otherwise be possible, an Act will not be construed as applying to foreigners in respect to acts done by them outside the dominions of the sovereign power enacting.’
(Per Lord Russell of Killowen CJ in R v Jameson ([1896] 2 QB 425 at 430).)
There are numerous statutes which have made express provision in relation to acts committed abroad by British subjects and which have made such acts punishable in this country. It will suffice to give only a few examples. Thus, by s 9 of the Offences against the Person Act 1861, it was provided that where any murder or manslaughter
‘… shall be committed on land out of the United Kingdom, whether within the Queen’s dominions or without and whether the person killed were a subject of Her Majesty or not … ’
Then any such offence if ‘committed by any subject of Her Majesty’ could be dealt with, inquired of, tried, determined and punished in England. Section 10 of that Act made provision for the case where any person ‘being criminally stricken, poisoned, or otherwise hurt upon the sea, or at any place out of England’ should die in England and for the case where someone criminally stricken, poisoned or otherwise hurt in England should die of the same at sea or at any place out of England the offence could be dealt with in England. In s 8 of the Perjury Act 1911 provision is made to allow of a prosecution in England where an offence is ‘committed in any place either on sea or land outside the United Kingdom’. By s 57 of the Offences against the Person Act 1861 it was enacted that whosoever being married should marry any other person during the life of the former husband or wife and ‘whether the second marriage shall have taken place in England or Ireland or elsewhere’ should be guilty of bigamy. One part of the proviso to the section enacted that it would not extend to a second marriage contracted elsewhere than in England and Ireland by any other than a subject of Her Majesty. By s 31 of the Criminal Justice Act 1948 it is provided that any British subject employed under Her Majesty’s Government in the United Kingdom in the service of the Crown who commits, in a foreign country, when acting or purporting to act in the course of his employment, any offence which, if committed in England, would be punishable on indictment, is to be guilty of an offence and subject to the same punishment as if the offence had been committed in England. Without further elaboration it will suffice to quote the words of Viscount Simonds in Cox v Army Council ([1962] 1 All ER 880 at 882, [1963] AC 48 at 67).
‘… apart from those exceptional cases in which specific provision is made in regard to acts committed abroad, the whole body of the criminal law of England deals only with acts committed in England.’
The appellant was charged with an act that is made an offence by s 21 of the Theft Act 1968. That is an Act to revise the law of England and Wales as to theft and
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similar or associated offences and in connection therewith to make provision as to criminal proceedings by one party to a marriage against the other ‘and to make certain amendments extending beyond England and Wales in the Post Office Act 1953 and other enactments’. The Larceny Act 1916 is (subject to one limitation not here relevant) wholly repealed.
The offence of blackmail is created and defined in s 21. Certain conduct had been punishable under ss 29 and 30 of the Larceny Act 1916: such conduct had not in that Act been designated by the name ‘blackmail’. The offence of blackmail is committed if a person (with a view to gain for himself or another or with intent to cause loss to another) ‘makes any unwarranted demand with menaces’. I can see no trace of any words which would warrant a suggestion that Parliament was making it an offence punishable in England for a person to make an unwarranted demand with menaces abroad. Nor did the prosecution ever so contend. They only claimed to prosecute the appellant in respect of what he did in this country. They contended that what he did in this country was made an offence by s 21. They did also advance a contention, which though obscure I must examine, that if the act of the appellant could be said to consist of substantial elements in this country and of substantial elements in Germany then there could be a conviction in this country and also (depending presumably on German law) in Germany.
In my view, the only question that arises in this appeal is whether the appellant made a demand in England or whether he made it in Germany. He posted in England a letter which he had written and which was received in Germany by someone to whom it was addressed and who was living at the address to which the letter was sent. The terms of the letter were such that there was an ‘unwarranted demand with menaces’; the appellant was motivated by ‘a view of gain for himself’. The letter was dated 29 June 1969. It was posted on 1 July 1969 in the Isle of Wight. The letter read:
‘29-6-1969
John Jones, 101 Star St.
c/o, Paddington
London W.2.
Dear [Mrs X],
This is a note asking for the loan of one hundred and seventy five pounds (£175) in return for keeping my mouth shut about you and Kane. If the money does not arrive by the 10 July, I will send the photos of you and Kane to your husband Rod at Liverpool. I just want one payment of £175 in an ordinary letter sent to
Remember 10 July
John Jones.
c/o 101 Star St.
Paddington
London W.2.
Deadline
The appellant was indicted for the offence of blackmail contrary to s 21 of the Theft Act 1968. The particulars of the offence were as follows:
‘Eugene Anthony Treacy on the 1st day of July 1969 within the jurisdiction of the Central Criminal Court, with a view to gain for himself, made an unwarranted demand of the sum of £175 from [Mrs X] with menaces.’
The appellant was tried at the Central Criminal Court. He pleaded not guilty. On the third day of the trial a submission was made that the court had no jurisdiction to try the case. It was contended that no offence had been committed in England. The court ruled that the demand was complete and was made when the irrevocable step was taken of posting the letter. It was held that it was not an essential ingredient of the offence of blackmail that ‘the demand should have been received by the victim’. The trial proceeded for two more days. On the fifth day
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of the trial the appellant changed his plea to one of guilty while preserving his objection that his offence was committed outside the jurisdiction of the court.
On appeal, the Court of Appeal upheld the ruling of the learned judge at the trial that the offence was complete ‘when the last irrevocable step is taken in the making of the demand’. It was held that the offence was committed and the demand completed when the letter was posted. It was said that if for any reason the letter had gone astray and had not been received the demand would still have been made. The view was further expressed that it might be right to regard the demand as continuing until it were received or as repeated when received ([1970] 3 All ER at 207, [1970] 3 WLR at 596).
‘On that view the appellant’s demand was made both in England and in Germany, but he would still be triable for the offence in England although he might also be triable for an offence in Germany.’
My Lords, I am unable to agree with this approach. The short question which arises is whether the appellant made an unwarranted demand with menaces in England. The offence is committed (other words of s 21 being satisfied) if a person ‘makes any unwarranted demand with menaces’. The act which is made an offence involves the making of a demand. How, then, does a person make a demand? He does so by communicating a request. He may do this by speaking to someone. He may do it in other ways. But the notion of making an unwarranted demand with menaces involves that the demand is made to or of someone who could comply with it and who could be influenced by the menaces that accompany the demand. The act of making the demand is not, in my view, committed until it is communicated to the person who is being unjustifiably menaced. There must be contact between the demander and the victim. If the demander puts his menacing demand into writing and trusts to the post either in this country or in some other country to deliver it to his victim he will not have made his demand unless and until his letter arrives. The making of a demand is one act which takes place at one time. If an Englishman on a day trip to France there posts to a place in England a letter containing an unwarranted demand of the addressee of the letter who in due course receives it at his address in England, I consider that the demand is then and at that place made.
I find it wholly unrealistic to suggest, as does the Crown, that a demand is made when a letter containing a demand is posted. Section 21 does not make it an offence to post a letter which contains an unwarranted and menacing demand. Such an offence might have been created but it has not been. The offence under s 21 consists in making a demand. It is said in the present case that the appellant made his demand on 1 July when he posted his letter in the Isle of Wight. On that date Mrs X was in no way exercised to consider whether or not she should send a sum of £175. On that date she was disturbed by no menaces. If the letter had been lost in the post she would have been oblivious of its contents. The letter did later reach her but if after 1 July and before it did reach her she had been asked whether the appellant had made an unwarranted demand with menaces she would assuredly have said that he had made no demand at all.
If a person went on to a remote and deserted shore and spoke words involving an unwarranted demand with menaces it would be fanciful to suggest that he had committed an offence under s 21. If a person put such a demand into writing in a letter which he then posted to an address in England and if after the letter was posted but before it was delivered the addressee of the letter died, I cannot think that it would be right to say that the demand was made. There would, I think, have been an attempt to make a demand. Making a demand or demanding involves effecting contact with a person so that effective communication is established with him. A demand is not made until it is communicated. If the demand is contained in a letter
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it is not made until the letter is received. If the appellant had decided to go over to Germany and there to confront Mrs X and to require her to pay him money, he would not have made his demand until he confronted Mrs X. If he had decided to send a friend to present to Mrs X on his behalf his requirement, he would not have made his demand until his friend had completed his mission. If he had decided to write out his request and personally to take his letter so as to present it to Mrs X, he would not have made his demand until he had seen Mrs X and handed over his letter. If he had entrusted his letter to a friend to take it to Mrs X in Germany and if the friend had accepted the mission and set out on the journey in such manner that precluded his being recalled I would think it strange indeed to say that the appellant had made a demand with menaces when he said farewell to his friend. Nor do I think that anyone so placed would ever think that he had made a demand. His menaces would not have begun to operate. They would only do so when the demand was made. If the friend died on the journey some new plan would have had to be made, for then there would have been no demand.
As the present case only involves and requires a consideration of the meaning of the words of s 21 I do not find it necessary to refer to cases in which, in regard to quite different offences, there has been discussion as to the place where an offence has been committed. There have been many cases in which consideration was given to the question as to where the offence of obtaining goods or money by false pretences was committed. In such cases there might be a false pretence in one place and an obtaining in another. The act of making a false pretence would precede the act of obtaining. Under s 21 there is no comparable problem. There is but one criminal act, ie the act of making the demand. There is no provision in the section covering the doing of an act in one place with some consequences elsewhere. Nor is there scope for or value in speaking about the ‘gist’ of the offence. The gist is in making the demand. There must be the necessary intent and the demand must have the qualities described in the words of the section, but the offence consists in making the demand. That is a single act taking place at one time and in one place. I cannot therefore accept the contention of the prosecution that the act of the appellant can be said to have consisted of substantial elements in this country and substantial elements in Germany. There is nothing in the section to warrant the suggestion that the posting of a letter is a ‘constituent element’ of the offence. Nor can I accept the view that the appellant’s demand was made both in England and in Germany. There were not two demands. There was only one. It is, in my view, wholly artificial to say that the appellant made a demand in England on 1 July and then made the same demand again or a separate demand in Germany some days later. Nor can there be any question of a continuing offence. The offence was committed when the demand was made. As in my opinion the demand was made in Germany when Mrs X received the threatening and demanding letter, I consider that under the law as it now stands, even though it may be unsatisfactory and merit examination, the court lacked jurisdiction.
For the reasons which I have given I would allow the appeal.
LORD HODSON. My Lords, the argument before your Lordships travelled over a very wide field in which many circumstances were considered which do not arise in this case and persuasive arguments were used on both sides as to the difficulties and doubts which might arise in other cases, whichever view was accepted of the two alternatives put forward. The only question which it is necessary for your Lordships to decide is: ‘What is the construction to be placed on s 21(1) of the Theft Act 1968?' The subsection provides:
‘A person is guilty of blackmail if, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces … ’
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The specific words to be construed are ‘makes any unwarranted demand’.
The Theft Act 1968 replaced the Larceny Act 1916, which it repealed, with one immaterial exception. Section 29(1) of the earlier Act provided:
‘(1) Every person who—(i) utters, knowing the contents thereof, any letter or writing demanding of any person with menaces, and without any reasonable or probable cause, any property or valuable thing … shall be guilty of felony … ’
The short facts of this case are these. On 1 July 1969, the appellant posted in the Isle of Wight a letter written by him and addressed to Mrs X in Frankfurt, Germany. The letter read:
“This is a note asking for the loan of one hundred and seventy five pounds (£175) in return for keeping my mouth shut about you and Kane. If the money does not arrive by the 10th July, I will send the photos of you and Kane to your husband Rod at Liverpool. I just want one payment of £175 in an ordinary letter sent to—John Jones c/o 101 Star St Paddington London W.2. Remember 10th July .’’
The change of language in the later Act enabled the appellant to put forward an argument which would not have been available to him under the 1916 Act, for he says that he can rely on the general principle of English criminal law that no conduct constitutes an offence unless it occurs in the territory of England. In the absence of express statutory provision to the contrary, Acts of Parliament must be so construed as not to conflict with this principle. He argues that no demand was made in England but that the demand was not made at all until Mrs X received it in Frankfurt.
Under the 1916 Act there would have been no question but that the letter demanding the money was uttered in England and no doubt as to the justice of the appellant’s conviction could be felt. Now the relevant words are changed to ‘makes any unwarranted demand’ so he says, ‘True, I wrote a letter initiating a demand but no demand was made and ergo no crime was committed until the letter reached its destination in Germany’. Hence the statutory offence of blackmail, which to be justiciable must be committed in this country, was, he says, not committed by him at all. This seems an odd consequence of an Act designed to revise the law of England as to theft and similar or associated offences and I do not find myself able to accept that the result for which the appellant contends follows.
Some learning has been expended in dividing the commission of a crime into its initiatory and its terminatory stages. This forms the basis for an argument that the crime is not completed until the terminatory stage is reached. This was not reached until the letter reached its destination outside the jurisdiction. Similarly, an argument can be built on a distinction between conduct leading up to a result and the result itself. Thus, in obtaining money by false pretences, the conduct which is essential to the crime does not amount to a complete offence until the result is obtained. So in this case the writing of the letter and the posting of it by the appellant is said to be no more than a preparatory act, at worst an attempt to commit the crime of blackmail. Under the 1916 Act, the wording of which I have quoted, it was held that there cannot be an attempt to demand money with menaces. In short, either there is a demand or there is not; a person cannot be guilty of an attempt to demand: R v Moran. This is correct as a general rule if the view I take as to the meaning of the phrase ‘makes a demand’ is right. It is, of course, otherwise if, under the 1968 Act, the demand is not made until it reached its destination; then there could be an attempt to demand in the preparatory stages, culminating in the perfection of the crime when the demand was received.
I see nothing improbable in Parliament in 1968 enacting that the conduct of the appellant in writing and posting a threatening letter should be punished as a criminal
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offence even without proof that the letter was received in this country. It had so enacted in 1916. It has been argued that this view of the construction of the Act gives a blackmailer a charter if he takes the trouble to cross the Channel and post his letter to a recipient in this country. I do not agree, but it is unnecessary to consider such a case which might involve deciding whether a demand made outside the jurisdiction could be treated as a continuous demand subsisting until the addressee received it.
I am in agreement with the Court of Appeal that the criminal offence of blackmail was committed in that the appellant made a demand when he wrote and posted this letter to Mrs X. I would therefore dismiss the appeal.
LORD GUEST. My Lords, I have had the advantage of reading the speech of my noble and learned friend, Lord Hodson. I agree with his views and for the same reasons would dismiss this appeal.
LORD DIPLOCK. My Lords, the appellant wrote and posted in England a typical blackmailing letter addressed to a lady in West Germany. In it he demanded that she should send £175 to him at an address in England under the threat that if she did not he would inform her husband of some allegedly discreditable conduct on her part. She received the letter in West Germany, the police in England were informed and the appellant was arrested in this country and tried and convicted at the Central Criminal Court of the offence of blackmail under s 21 of the Theft Act 1968.
His conviction was upheld by the Court of Appeal who granted leave to appeal to your Lordships’ House and certified that the following point of law of general public importance was involved in the decision:
‘Whether, when a person with a view to gain for himself or with intent to cause loss to another makes an unwarranted demand with menaces by letter posted in England and received by the intended victim in West Germany, the person can be tried in England on a charge under section 21 of the Theft Act 1968.’
In view of the way in which the question is framed and the wide-ranging argument about ‘jurisdiction’ before your Lordships’ House, I am prompted to state at the outset that the question in this appeal is not whether the Central Criminal Court had jurisdiction to try the appellant on that charge, but whether the facts alleged and proved against him amounted to a criminal offence under the English Act of Parliament.
This is a different question from that involved in the old cases about venue which have been relied on by each of the parties in this appeal. In the venue cases, the facts alleged against the prisoner unquestionably amounted to a criminal offence in English law. The only question was whether under the technical rules of venue he was liable to be tried before a court whose jurors were drawn from one locality rather than another. The historical origin of these rules dated back to the embryonic stage of development of English trial by jury. Jurors originally combined the functions of ‘know-ers’ of facts as well as ‘tri-ers’ of facts and the prisoner was entitled to have his guilt determined by jurors drawn from an area where the inhabitants would be most likely to know the facts alleged to constitute the crime with which he was charged. The rules of venue continued to be applied long after the jury had assumed its modern function of deciding facts on evidence adduced before it. The question involved in the old venue cases was one of jurisdiction and, although the reported cases are not decisive as to this, it may well be that under the former doctrine of venue before it was changed by statute in 1827 the jurisdiction to try a prisoner for a particular crime was exclusive to a court whose jurors were from the particular geographical area in which events constitutive of the crime were alleged to have occurred. But these cases
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dealing with competing local jurisdictions of courts in England and Wales are of marginal relevance to the disposition of the instant appeal.
The fact that the appellant was arrested in Greater London and committed for trial at the Central Criminal Court unquestionably gave to that court jurisdiction to determine whether or not he was guilty of the offence for which he was indicted. That offence was the statutory offence of ‘blackmail’ as defined in s 21 of the Theft Act 1968. The Act creates a new code of offences of obtaining or handling property or causing loss dishonestly or by other improper means. It supersedes the previous penal enactments in this field of law, and by s 32(1)(a), abolishes any previously existing offences at common law falling within that field of crime. These are offences of which the victims are generally private individuals. The only question for your Lordships’ House is what did Parliament mean when it enacted in 1968 that:
‘A person is guilty of blackmail if, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces … ’?
The words are quite general. On a literal construction they are satisfied wherever the unwarranted demand is made. No mere application of rules of syntax or semantics can cut them down to ‘if … he makes any unwarranted demand with menaces in England or Wales’. If the meaning of the subsection is to be qualified by implying some geographical limitation as to the place where the unwarranted demand is made, the limitation is not to be derived as a matter of linguistics from the actual words used but from broader considerations of the purpose of the code in which those words appear.
The Theft Act 1968 is a code of criminal law; and criminal law is about the right of the State to punish persons for their conduct, generally where that conduct is undertaken with a wicked intent or without justificatory excuse. A code of criminal law defines offences, ie the kinds of conduct which render the person guilty of it liable to punishment. Conduct which constitutes a crime consists of a person’s doing or, less frequently, omitting to do physical acts; and the definition of the crime always contains a description of physical acts or omissions, though it may, and in Engligh law generally does, also require that the physical acts or omissions which constitute the described conduct should be done with a particular intent either expressly stated in the definition or to be implied from the mere fact that Parliament has made the described conduct punishable (cf Sweet v Parsley). Your Lordships are not, however, concerned with the mental element in the definition of a crime in the instant appeal. But the definition may in addition provide that the described conduct only becomes the defined crime if it is followed by particular consequences occurring after the completion of the physical acts done by the accused which constitute the described conduct. The consequences may be independent of any act of volition by the victim of the accused’s conduct, as in the case of murder by shooting; or they may be dependent on an act of volition by the victim, as in the case of obtaining money by false pretences. But in either case the consequences may take effect on the victim in a different place from that where the physical acts of the accused were done.
Where the definition of the crime incorporates a requirement of consequences subsequent to the completion of the physical acts by the accused, Professor Gordon in his book on Scots criminal lawb classifies the resultant crime as a ‘result-crime’ as distinct from a ‘conduct-crime’, but this nomenclature, though convenient in drawing attention to the distinction, tends to blur the fact that the conduct of the accused is as essential an ingredient of a ‘result-crime’ as it is of a ‘conduct-crime’.
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In his article in the Law Quarterly Reviewc on ‘Venue and the Ambit of Criminal Law’ which was referred to by the Court of Appeal ([1970] 3 All ER at 207, [1970] 3 WLR at 595) in the instant case, Professor Glanville Williams used the contrasting phrases ‘initiatory’ to describe that element or ingredient of a crime which consists of the physical acts of the accused, and ‘terminatory’ to describe its subsequent consequences. He argues the case in favour of what he calls the ‘initiatory theory of jurisdiction’, ie that the accused can be tried for the crime only by the courts of the State in which the accused did the physical acts, but concludes that the English courts have adopted the ‘terminatory theory of jurisdiction’, ie that the accused can be tried for the crime only by the courts of the State in which the consequences of the accused’s physical acts took effect. The Court of Appeal, in the instant appeal, was willing to assume that this was so.
The assumptions which underlie the proposition that English criminal law calls for a choice to be made between these rival theories of jurisdiction are, first, that the definition of the crime under consideration includes a requirement that the physical acts of the accused should be followed by specified consequences; otherwise, the initiatory and terminatory characteristics of the crime coincide. The second assumption is that the existence of jurisdiction in the courts of one State to try the accused for a particular crime, however the crime may be defined, necessarily excludes the jurisdiction of the courts of any other State to try the accused for his physical acts which either alone or in conjunction with their consequences constitute the crime defined. My Lords, whether or not the definition of the crime of blackmail in s 21 of the Theft Act 1968 is one which includes a requirement that the physical acts of the accused himself should be followed by any consequences is a problem of linguistics. The opinions held by your Lordships on it are divided and in due course I shall express my own opinion on this aspect of the instant appeal. But it does not matter which view is correct unless the second underlying assumption of Professor Glanville Williams’s article is justified. This raises a more basic question in our criminal law than a mere problem of linguistics. This I will now proceed to examine.
The Parliament of the United Kingdom has plenary power, if it chooses to exercise it, to empower any court in the United Kingdom to punish persons present in its territories for having done physical acts wherever the acts were done and wherever their consequences took effect. When Parliament, as in the Theft Act 1968, defines new crimes in words which as a matter of language do not contain any geographical limitation either as to where a person’s punishable conduct took place or, when the definition requires that the conduct shall be followed by specified consequences, as to where those consequences took effect, what reason have we to suppose that Parliament intended any geographical limitation to be understood?
The only relevant reason, now that the technicalities of venue have long since been abolished, is to be found in the international rules of comity which, in the absence of express provision to the contrary, it is presumed that Parliament did not intend to break. It would be an unjustifiable interference with the sovereignty of other nations over the conduct of persons in their own territories if we were to punish persons for conduct which did not take place in the United Kingdom and had no harmful consequences there. But I see no reason in comity for requiring any wider limitation than that on the exercise by Parliament of its legislative power in the field of criminal law. There is no rule of comity to prevent Parliament from prohibiting under pain of punishment persons who are present in the United Kingdom, and so owe local obedience to our law, from doing physical acts in England, notwithstanding that the consequences of those acts take effect outside the United Kingdom. Indeed, where the prohibited acts are of a kind calculated to cause harm to private individuals it would savour of chauvinism rather than comity to treat them as excusable merely
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on the ground that the victim was not in the United Kingdom itself but in some other State. Nor, as the converse of this, can I see any reason in comity to prevent Parliament from rendering liable to punishment, if they subsequently come to England, persons who have done outside the United Kingdom physical acts which have had harmful consequences on victims in England. The State is under a correlative duty to those who owe obedience to its laws to protect their interests and one of the purposes of criminal law is to afford such protection by deterring, by threat of punishment, conduct by other persons which is calculated to harm those interests. Comity gives no right to a State to insist that any person may with impunity do physical acts in its own territory which have harmful consequences to persons within the territory of another State. It may be under no obligation in comity to punish those acts itself, but it has no ground for complaint in international law if the State in which the harmful consequences had their effect punishes, when they do enter its territories, persons who did such acts.
The consequences of recognising the jurisdiction of an English court to try persons who do physical acts in England which have harmful consequences abroad as well as persons who do physical acts abroad which have harmful consequences in England is not to expose the accused to double jeopardy. This is avoided by the common law doctrine of autrefois convict and autrefois acquit, a doctrine which has always applied whether the previous conviction or acquittal based on the same facts was by an English court or by a foreign court; see R v Roche and for a modern instance R v Aughet.
Turning from principle to the authorities, little assistance is, in my view, to be gained from the earlier cases. For reasons already stated those on internal venue in England are not in point. In those in which there was a foreign or Scottish element, generally cases of obtaining property or money by false pretences, the courts appear to have treated the problem as one of determining where the crime was ‘committed’, without drawing any distinction between the physical acts of the accused and the subsequent consequences of his acts; and to have treated the jurisdiction of an English court to try it as dependent on that. In R v Holmes it was held on the facts that both the physical acts of the accused (the false pretences) and their consequences (the obtaining) took place in England and it was expressly left open whether the court would have had jurisdiction to try the accused if only one of these ingredients of the offence had taken place in this country. In R v Ellis it was held as a matter of decision that the English court had jurisdiction to try the offence if the obtaining took place in England although the false pretences were made only in Scotland. This is not inconsistent with the view that an English court would likewise have jurisdiction in the converse case where the false pretences were made in England and the obtaining took place only in Scotland, and I do not find the dicta in the several judgments to be sufficiently clear or consistent to be persuasive to the contrary.
The question whether the jurisdiction to try offences of obtaining property or money by false pretences is treated in English law as exclusive to the court of the country in which the property or money was obtained did not fall for decision until comparatively modern times in R v Harden. The only matter discussed in the judgment was as to where the accused obtained cheques which were posted in Jersey addressed to the accused in England as a consequence of his false pretences made previously in England. The Court of Criminal Appeal applied the legal fiction as to the post office being the agent of the offeror, which forms part of the English civil law of contract, and held that the cheques were ‘obtained’ by the accused in Jersey. They assumed, but without giving any reasons, that this finding deprived an English court of jurisdiction to try the accused of the offence charged. Mr Lords, this assumption was really one as to the intention of Parliament when it passed the Larceny Act
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1916. As I have already indicated, I see no justification for it. R v Harden will, in my view, call for re-examination if a similar question should arise in connection with the new offence of obtaining property by deception under s 15 of the Theft Act 1968.
The only decision of this House itself which is even peripherally relevant to the issue in the instant appeal is Board of Trade v Owen. The question there was whether a conspiracy entered into in England to commit acts in Germany which were unlawful under German law to achieve an object which was unlawful there, constituted a conspiracy at common law which was indictable in England. The unanimous opinion of this House was given in the speech of Lord Tucker. He treated the question correctly, not as one of jurisdiction but as to what were the characteristics of the crime of conspiracy at common law. The conclusion reached on examination of the authorities was that the common law crime of conspiracy did not extend to an agreement to achieve an object which was unlawful in a foreign country or to use means to achieve it which were unlawful in a foreign country. This case has since been followed by the Court of Appeal in R v Brixton Prison Governor, ex parte Rush.
Conspiracy is a crime at common law. Its characteristics are to be ascertained by an analysis of the decided cases. Blackmail is a statutory offence. Its characteristics are to be ascertained by determining what Parliament meant by the definition of ‘blackmail’ in s 21(1) of the Theft Act 1968. I have already pointed out that the actual words of the definition are quite general so far as concerns the place where the unwarranted demand is made. The absence of any geographical limitation on where the described conduct of the offender takes place or where its consequences take effect is common to all the other definitions of offences contained in the Act. If any such limitation does exist its source is to be discovered and its extent determined by applying some presumption as to Parliament’s intention extraneous to the words in which the definitions of offences are couched.
Recognition that there is some limitation which ‘goes without saying’ is to be found in s 24 of the Act. This section, by sub-ss (1) and (4), extends the scope of the new offence of handling stolen goods created by s 22, to goods which have been stolen or obtained by blackmail or by deception elsewhere than in England and Wales. In doing so it treats the descriptions of conduct (including, where appropriate, its consequences) which appear in the statutory definitions of ‘steal’ in s 1, of ‘blackmail’ in s 21 and of obtaining property by deception in s 15, as wide enough to include that conduct even though it takes place outside England and Wales. But it also recognises that there may be circumstances in which that conduct is not an offence under the Act. Where those circumstances exist the goods obtained as a result of the conduct are not to be treated as ‘stolen’ goods unless the conduct by which they were obtained amounted to a criminal offence under the law of the place where it occurred. It is thus evident that the circumstances which it is assumed may prevent conduct (including, where appropriate, its consequences) from being an offence under the Act, notwithstanding that it falls within the description of the offence, relate to the place where the conduct (and/or its consequences where these form part of the definition of the offence) occurred. The limitation acknowledged by these sub-sections is thus territorial in character. But neither they nor any other provisions of the Act throw further light on its extent.
The source of any presumption that Parliament intended that the right created by the Act to punish conduct should be subject to some territorial limitation on where the conduct takes place or its consequences take effect, can, in my view, only be the rules of international comity. And the extent of the limitation, where none has been expressed in words, can only be determined by considering what compliance with those rules requires. I can leave aside the question of territorial limitation as between
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the different jurisdictions (England and Wales, Scotland and Northern Ireland etc) within the United Kingdom, for this depends on constitutional practice, not on international comity. For reasons I have stated earlier, the rules of international comity, in my view, do not call for more than that each sovereign State should refrain from punishing persons for their conduct within the territory of another sovereign State, where that conduct has had no harmful consequences within the territory of the State which imposes the punishment. I see no reason for presuming that Parliament, in enacting the Theft Act 1968, intended to make the offences which it thereby created subject to any wider exclusion than this. In my view, where the definition of any such offence contains a requirement that the described conduct of the accused should be followed by described consequences the implied exclusion is limited to cases where neither the conduct nor its harmful consequences took place in England or Wales. It follows that, even if the definition of ‘blackmail’ in s 21 of the Act falls into the category of offences in which the physical acts of the accused must be followed by consequences occurring after completion of those acts, it is sufficient to constitute the offence of blackmail if either the physical acts are done or their consequences take effect in England or Wales.
The physical acts of the appellant in the instant case were that he wrote and posted to an addressee in Germany a letter which contained an unwarranted demand with menaces. They all took place in England. The consequences of those acts were that the letter was received and read by the addressee. Those consequences took place in Western Germany. It follows from what I have already said that, in my opinion, this latter fact would not bring the case within the implied exception. The appellant was guilty of the offence of blackmail whether or not the words ‘makes an unwarranted demand, in s 21 of the Theft Act 1968, as a matter of linguistics, connote a requirement that the demand should be communicated to the person of whom it is made. The Court of Appeal held that those words did not connote any such requirement. That was sufficient to enable them to dispose of the instant appeal and that is the ground on which counsel for the prosecution has chiefly relied in your Lordships’ House.
My Lords, I too think that the Court of Appeal were right as to the construction of the section and that the appeal could be dismissed on this alternative ground. Arguments as to the meaning of ordinary everyday phrases are not susceptible of much elaboration. The Theft Act 1968 makes a welcome departure from the former style of drafting in criminal statutes. It is expressed in simple language as used and understood by ordinary literate men and women. It avoids so far as possible those terms of art which have acquired a special meaning understood only by lawyers in which many of the penal enactments which it supersedes were couched. So the question which has to be answered is, Would a man say in ordinary conversation ‘I have made a demand’ when he had written a letter containing a demand and posted it to the person to whom the demand was addressed? Or would he not use those words until the letter had been received and read by the addressee? My answer to that question is that it would be natural for him to say ‘I’ve made a demand’ as soon as he had posted the letter, for he would have done all that was in his power to make the demand. He might add, if it were the fact, ‘but it has not reached X yet’ or ‘I made a demand but it got lost in the post’. What at any rate he would not say is, ‘I shall make a demand when X receives my letter’, unless he contemplated making some further demand after the letter had been received.
I see nothing in the context or in the purpose of the section to indicate that the words bear any other meaning than that which I have suggested they would bear in ordinary conversation. I do not attach overmuch importance to the omission of the words ‘of any person’ which were present in the corresponding ss 29 and 30 of the Larceny Act 1916 which were superseded by s 21 of the Theft Act 1968. Their presence might
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have strengthened the argument for the contrary view, but their absence may be accounted for by a desire for brevity and simplicity. I should, however, give considerable weight to the fact that s 29 of the Larceny Act 1916, which dealt separately with ‘uttering’ letters containing a demand, in my view unquestionably made it an offence to post such a letter in England to an addressee abroad; and I should hesitate to attribute to Parliament in 1968 the more chauvinistic attitude of tolerating such conduct within the territory subject to its legislative powers.
As respects the purpose of the section, I see no reason for supposing that Parliament did not intend to punish conduct which is anti-social or wicked, if that word is still in current use, unless the person guilty of the conduct achieves his intended object of gain to himself or loss caused to another. The fact that what a reasonable man would regard as an unwarranted demand with menaces after being posted by its author goes astray and never reaches the addressee, or reaches him but is not understood by him, or because of his unusual fortitude fails to disturb his equanimity, as was the case in R v Clear, may be a relevant factor in considering what punishment is appropriate but does not make the conduct of the author himself any less wicked or anti-social or less meet to be deterred.
My Lords, all that has to be decided on this aspect of the instant appeal is whether the appellant ‘made a demand’ when he posted his letter to the addressee. In the course of the argument many other and ingenious ways in which a blackmailer might choose to send his demand to his victim have been canvassed, and many possible, even though unlikely, events which might intervene between the sending of the demand by the blackmailer and its receipt and comprehension by the victim, have been discussed. These cases which so far are only imaginary may fall to be decided if they ever should occur in real life. But unless the purpose of the new style of drafting used in the Theft Act 1968 is to be defeated they, too, should be decided by answering the question, Are the circumstances of this case such as would prompt a man in ordinary conversation to say ‘I have made a demand’?
For both the reasons I have given I would dismiss this appeal.
Appeal dismissed.
Solicitors: Quirke & Co (for the appellant); Director of Public Prosecutions.
S A Hatteea Esq Barrister.
Tolfree v Florence
[1971] 1 All ER 125
Categories: CRIMINAL; Criminal Law: SOCIAL SECURITY
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND CANTLEY JJ
Hearing Date(s): 5 NOVEMBER 1970
National insurance – Benefit – Obtaining benefit by false statement etc – Meaning of benefit – National Insurance Act 1965, s 93(1)(c).
In relation to a charge under s 93(1)(c)a of the National Insurance Act 1965 of making a false statement, false representation etc, for the purpose of obtaining a benefit or payment under the Act, the term ‘benefit’ means the payment of the benefit not the decision to pay the benefit (see p 126 j and p 127 a, post).
Notes
For obtaining a benefit under the National Insurance Acts by a false representation, see 27 Halsbury’s Laws (3rd Edn) 702, para 1278.
Page 126 of [1971] 1 All ER 125
For the National Insurance Act 1965, s 93, see 23 Halsbury’s Statutes (3rd Edn) 360.
Case stated
This was an appeal by way of case stated from a decision of the South West London quarter sessions on 4 December 1969 quashing a conviction by Sutton magistrates’ court of Harry Peter Tolfree, the respondent, for the offence of obtaining a benefit by knowingly making a false representation, contrary to s 93(1)(c) of the National Insurance Act 1965. The facts are set out in the judgment of Lord Parker CJ.
Gordon Slynn for the appellant.
The respondent did not appear and was not represented.
5 November 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of South West London quarter sessions, who quashed a conviction by the Sutton magistrates’ court of the respondent for an offence contrary to s 93(1) of the National Insurance Act 1965. That subsection, so far as it is material, provides:
‘If any person … (c) for the purpose of obtaining any benefit or other payment under this Act, whether for himself or some other person, or for any purpose connected with this Act—(i) knowingly makes any false statement or false representation … he shall be liable on summary conviction to a fine … ’
The short facts are that on 20 January 1969 the respondent made an application, filling up the requisite forms, for sickness benefit. He enclosed a medical certificate of that date, stating that he would be incapacitated for work for seven days from Saturday, 18 January. As a result of considering that application, the Department of Health and Social Security issued a sickness benefit postal order for £12 17s 10d. On 25 January, the respondent produced that postal order at Sutton post office, asking for payment. The postal order stated that the sum of £12 17s 10d was for sickness benefit to cover the period 18 January to 25 January and before he could get his money, he had to sign the postal order under the words ‘Received the above sum to which I am entitled’. Having signed that and as a result of signing that, he received the payment of £12 17s 10d. In fact he had worked on 23 and 24 January and was accordingly not entitled to the full sum of £12 17s 10d.
It was in those circumstances that the information charged the respondent—
‘That on the 25th January 1969 at Worcester Park, for the purpose of obtaining for himself sickness benefit under the National Insurance Act 1965, knowingly made a certain false representation, to wit, that he was entitled to sickness benefit of twelve pounds seventeen shillings and ten pence whereas he was not so entitled as on 23rd and 24th January 1960 he had been working for District Plant Services.’
Quarter sessions, in quashing the conviction, appeared to have read the subsection in such a way as to provide that the obtaining was not an obtaining of payment, but obtaining of the decision to make the payment; accordingly they said the decision to make the payment was made on the representation then perfectly truthful of 20 January.
In my judgment, however, quarter sessions were wrong. A proper reading of the subsection shows that the false representation in question is for the purpose of obtaining any benefit or other payment. In that context ‘benefit’ clearly means not the decision to pay the benefit, but the payment of the benefit. That payment he could not get without filling up the receipt form on the postal order ‘Received the sum in question, to which I am entitled’. That was a false representation; accordingly a prima facie case was made out.
I would allow this appeal, and since the decision of quarter sessions was made on a
Page 127 of [1971] 1 All ER 125
submission of no case, the case must go back to quarter sessions with a direction to continue the hearing.
ASHWORTH J. I agree.
CANTLEY J. I agree.
Appeal allowed. Case remitted.
Solicitor: Solicitor, Department of Health and Social Security.
Jacqueline Charles Barrister.
Note
R v Judd and others
[1971] 1 All ER 127
Categories: CRIMINAL; Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, MEGAW LJ AND JAMES J
Hearing Date(s): 3 JULY 1970
Criminal law – Costs – Prosecution cases – Order for payment – Factors to be considered – Order for one quarter of prosecution costs – Propriety – Costs in Criminal Cases Act 1952, s 2(1), as substituted by Criminal Justice Act 1967, s 32(1).
Notes
For costs which may be allowed in criminal cases, see 10 Halsbury’s Laws (3rd Edn) 551, para 1013, and for cases on the subject, see 14 Digest (Repl) 683, 6976–6979.
For the Costs in Criminal Cases Act 1952, s 2(1), as substituted, see 8 Halsbury’s Statutes (3rd Edn) 397.
Appeals
These were appeals by Gordon Richard Judd, James Harvey McKenzie and George Ramsey Edwards against sentences imposed on 30 December 1969 at Birmingham quarter sessions by the recorder (M V Argyle Esq QC) for conspiracy to steal and, in the case of the appellants McKenzie and Edwards, against an order under s 2(1) of the Costs in Criminal Cases Act 1952, as substituted by s 32(1) of the Criminal Justice Act 1967, for the payment by each of them of one quarter of the prosecution costs. The case is noted only in relation to the order for costs.
A W Palmer for the appellants.
3 July 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. After stating the facts and dismissing the appeals against sentence, he continued: The only slight relief which the court is minded to give is in regard to the order in each of the appellants’ McKenzie and Edwards’s cases to pay one quarter of the prosecution costs. It has been said before by this courta that that is not a very satisfactory order and that if an order of that sort is made it is better for an estimate to be made of the costs and a predetermined figure laid down. To make an order for the payment of one quarter of the prosecution costs does not help to know what that quarter will amount to and whether there is any possibility of a defendant complying with the order. However, so far as the present case is concerned, it seems to this court quite clear that it would be wrong to let this order stand. It could only be implemented, if ever, when the appellants McKenzie and Edwards are released, which is just the time when they will need such money as they earn to get started in life again. The court accordingly
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will allow the appeals in their cases to the extent of revoking the order for payment of the prosecution costs.
Appeals against sentence dismissed. Orders for payment of prosecution costs set aside.
Solicitor: Registrar of Criminal Appeals (for the appellants).
N P Metcalfe Esq Barrister.
Note
R v Gaston
[1971] 1 All ER 128
Categories: CRIMINAL; Criminal Procedure
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND CANTLEY JJ
Hearing Date(s): 16 NOVEMBER 1970
Criminal law – Costs – Prosecution costs – Order for payment – Factors to be considered – Costs in Criminal Cases Act 1952, s 2(1), as substituted by Criminal Justice Act 1967, s 32(1).
Notes
For costs which may be allowed in criminal cases, see 10 Halsbury’s Laws (3rd Edn) 551, para 1013, and for cases on the subject, see 14 Digest (Repl) 683, 6976–6979.
For the Costs in Criminal Cases Act 1952, s 2(1), as substituted, see 8 Halsbury’s Statutes (3rd Edn) 397.
Case referred to in judgment
R v Judd p 127, ante.
Appeal
This was an appeal by Michael Anthony Gaston against a sentence of three years’ imprisonment for burglary imposed on 4 December 1969 at Birmingham City quarter sessions and an order, under s 2(1) of the Costs in Criminal Cases Act 1952, as substituted by s 32(1) of the Criminal Justice Act 1967, for payment of the costs of the prosecution. An application was also made for an extension of the time within which the appellant could renew and application for leave to appeal against conviction. The case is noted only in relation to the order for costs.
C G Hookway for the appellant.
The Crown did not appear and was not represented.
16 November 1970. The following judgment was delivered.
LORD PARKER CJ delivered the judgment of the court. He stated the facts, reviewed the appellant’s criminal record and continued: The court, like the single judge, sees no ground to interfere with the sentence of three years’ imprisonment. Having said that, however, the court is clearly of opinion that the order for payment of costs to the prosecution should be quashed. It was an order made without any enquiries as to means, and in fact it turns out that the appellant has legal aid and no contribution. Further, as was pointed out in R v Judd (P 127, ante), heard by this court on 3 July 1970, it is not appropriate to make an order for costs when one is giving a convicted person a considerable sentence, unless of course he has private capital. When he comes out after three years’ imprisonment, as in this case, any money that he has got will be vitally needed towards his rehabilitation. In all the circumstances the court proposes to quash the order for the payment of costs.
[His Lordship then went on to consider the appellant’s application for an extension of time to renew an application for leave to appeal against conviction and said that that application would be refused.]
Appeal against sentence dismissed. Order for payment of prosecution costs set aside. Extension of time or leave to appeal against conviction refused.
Solicitor: Registrar of Criminal Appeals (for the appellant).
N P Metcalfe Esq Barrister.
Ladbroke (Football) Ltd and others v Perrett
[1971] 1 All ER 129
Categories: LEISURE AND LICENSING
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 4 NOVEMBER 1970
Gaming – Prize competition – Forecast of result of future event – Newspaper competition – Spot-ball – Competitors marking position of football on photograph – Winning positions selected by panel – Whether forecasts of result of future event involved – Betting, Gaming and Lotteries Act 1963, s 47(1) (a) (i).
The first appellants were charged with conducting through certain newspapers a competition called ‘Spot-ball’, contrary to s 47(1)(a) (i)a of the Betting, Gaming and Lotteries Act 1963, in that prizes were offered for forecasts of the result of a future event. Competitors were required to make the most likely positions of the football on a photograph which had been taken during a football match. Prizes were awarded to those competitors who marked the positions closest to that chosen at a later date by a panel of judges.
Held – As the actual position of the ball was immaterial, the choices of each competitor amounted to forecasts of the decision of the panel of judges, and therefore involved forecasts of the result of a future event for the purposes of s 47(1)(a)(i) (see p 134 b and g to j, post).
Notes
For competitions promoted through newspapers, see 18 Halsbury’s Laws (3rd Edn) 199, para 391, and for cases on the subject, see 25 Digest (Repl) 510, 610–612.
For the Betting, Gaming and Lotteries Act 1963, s 47, see 14 Halsbury’s Statutes (3rd Edn) 591.
Case stated
This was a stated by a metropolitan stipendiary magistrate, D Prys Jones Esq, in respect of his adjudication as a metropolitan magistrate sitting at the Wells Street magistrates’ court on 21, 22 and 24 April 1970.
On 24 January 1970, 21 informations were preferred by the respondent, John Perrett, a chief inspector of the Metropolitan Police, against the first appellants, Ladbroke (Football) Ltd, that they on sundry dates unlawfully conducted through sundry newspapers a competition called ‘Spot-ball’ in which prizes were offered for the forecast of the result of a future event, namely the decision of a panel of experts, contrary to s 47(1)(a)(i) of the Betting, Gaming and Lotteries Act 1963. On the same date a total of 21 informations were also preferred by the respondent against the remaining appellants, News of the World Ltd, Daily Mirror Newspapers Ltd, Odhams Newspapers Ltd, Beaverbrook Newspapers Ltd and Associated Newspapers Ltd, all companies publishing newspapers, that they on sundry dates aided, abetted, counselled and procured the alleged summary offences by the first appellants, contrary to s 47(1)(a)(i) of the 1963 Act and s 35 of the Magistrates’ Courts Act 1952.
The following facts were found: On the dates and through the newspapers specified in the informations each of the newspaper companies published entry forms for a competition for prizes conducted by the first appellants, called ‘Ladbrokes Big Bonus Spot-ball’. The first appellants organised and ran the competition by means of entry forms published weekly in the newspaper companies’ newspapers. The specific offences alleged related to the weeks numbered 53, 54 and 55 of that competition. The entry forms published in the newspapers contained a photograph of
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an incident in a football match showing several players in action. The photographs were different each week but each photograph published portrayed a scene of vigorous movement and action. Superimposed on each photograph was a rectangular grid containing 40 numbered squares. No ball appeared in any photograph. The instructions to competitors were contained in a paragraph on each form headed: ‘HOW YOU CAN WIN’. This began as follows:
‘Study the photograph carefully. The ball is not shown in the picture but it is in the area covered by the grid. The picture contains sufficient information to enable a skilful competitor to decide in which eight squares the ball is most likely to be. You can put crosses in a maximum of thirteen squares. The prizes are offered for the most skilful selections based on that information and their skill will be judged by reference to the decision of a panel of Football experts chaired by Alan Mullery, Captain of Spurs and England Player, who will be using the same information as is available to you. The winning eight squares will be published in next week’s competition and the competitor with those squares will win the first prize of £5000.’
The rest of the paragraph dealt with how the minor prizes would be awarded and if necessary shared and also explained how a bonus of £3,000 was to be won over a two-week period. Printed on each photograph were the names of the two sides competing in the match from which the photograph was taken and also the condition of the ground at the time. To enter the competition, a competitor had to send to the first appellants his completed form and a sum of money varying according to the number of squares he had marked. For example, if he had only marked the minimum, namely eight squares, the entrance fee was 1s, whereas if he marked the maximum number of squares, namely 13, the fee to enter was 15s. The competitions were published in the three Sunday newspapers on a Sunday and in the remaining newspapers on the Monday. On the Friday following the publications, the panel met. The panel consisted of Mr Mullery (whose qualifications are described above), Mr Kent, a professional photographer specialising in football photography, and Mr Stoney, a professional competition adjudicator. The meetings were attended by a Mr Thompson, the officer of the first appellants responsible for running the competitions, but he acted as secretary only and kept minutes of the panel’s deliberations. Not one of the newspaper companies was represented. The panel had before them the photographs for each week’s competition exactly as published in the newspapers (ie including the grid and showing no ball). The photographs were, however, clearer than those that were actually published in the newspapers and, for example, the faces of the players were more easily distinguishable. The photographs had in each case been chosen as providing a picture full of action and movement. The meetings of the panel consisted of a detailed analysis of the data contained in the photograph, the members discussing and drawing inferences according to their experience of football, from the postures of the players, the direction in which they were seemingly looking and appeared to be moving, the markings on the field, the ground conditions, the position of the referee where he was shown, the teams involved, the identity and characteristics of individual players and so on. These discussions usually lasted about three-quarters of an hour. Finally on the data available, the panel decided on the eight most likely squares on the grid for the position of the ball to be found and these were noted. The reasons for the panel’s choices were recorded and also its reasons for rejecting the squares which it did not choose. At the time of its meeting, the panel had no knowledge of the squares which competitors had chosen as being the most likely, nor had it any knowledge of the position in which the ball had actually in each case appeared in the photograph. In each case the ball had been in the area of the photograph covered by the grid. The eight squares chosen by the panel constituted the solution to the competition and the competitors’ entries were accordingly checked against the panel’s decision,
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and the names of the winning competitors published with the following week’s competition. In most, but not all, instances over a period of weeks the panel included in its selection the square or squares in which the ball or part of the ball was actually to be found. If in any one competition the panel failed to select any square in which the ball wholly or partly lay, then a competitor who had chosen the same squares as the panel won, but any competitor who had chosen the square or squares in which the ball actually lay, lost. There was no evidence that any of the newspaper companies had any knowledge of how the competitions were run save such as would be derived from perusing the entry forms that they published in their respective newspapers. The secretary of the appellant, Odhams Newspapers Ltd, told the respondent that the advertisements were published in good faith and in the belief that the competitions were in accordance with the opinion of experienced counsel which the appellants had obtained.
It was contended by the first appellants and the newspaper companies that: (a) the meeting of the panel of experts was not an event within the meaning of the subsection, nor was the experts’ decision the result of an event within the meaning of the subsection; (b) this was not (and there was no evidence to show that it was) a competition in which prizes would be offered for a forecast; and (c) there was no evidence that the newspaper companies knew or that they wilfully shut their eyes to all the essential elements which constituted the offence.
It was contended by the respondent that: (a) the coming together and deliberation of the experts was an event and their decision as to the eight most likely squares was the result of that event; (b) what competitors were doing, however they tackled the competition, was to forecast the result of the event; and (c) the newspaper companies knew all the essential elements which constituted the offence, save in perhaps that they did not know when the panel of experts met. If in fact the panel had met and come to its decision before the publication of the competitions it would only have made the difference that the offence would have been under the provisions of s 47(1)(a)(ii) of the 1963 Act, since it would then have been the forecast of the result of a past event, the result of which is not yet ascertained or not yet generally known. Accordingly, it was for the newspaper companies to make enquiry if they did not know of this aspect of the competition, and if they failed to do so then that could not excuse them of culpability.
The magistrate was of the opinion that the decision of the panel was the result of an event and that prizes were offered by the first appellants for forecasts of the decision of a panel of experts, and that all the appellants must be taken to have been fully aware of the nature of the competition. He accordingly convicted the appellants on all the informations. He imposed a fine of £15 on each appellant in respect of each information and made an order for £50 costs to be paid by the first appellants and a total of £50 costs to be paid by the newspaper companies. The appellants now appealed.
T H Bingham for the first appellants.
M Finer QC and T H Bingham for the newspaper companies.
M D L Worsley for the respondent.
4 November 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated against certain decisions of one of the metropolitan stipendiary magistrates sitting at Wells Street magistrates’ court. The informations were directed to the first appellants, Ladbroke (Football) Ltd, that they unlawfully conducted through sundry newspapers a competition called ‘Spot-ball’ for which prizes were offered for the forecast of the result of a future event contrary to s 47(1)(a)(i) of the Betting, Gaming and Lotteries Act 1963. The informations against the other appellants, all of whom were newspaper companies, alleged the aiding and abetting of the offences committed by the first appellants.
Page 132 of [1971] 1 All ER 129
Before turning to the legislation, it is convenient to summarise the facts. The competion was published in advertisements in certain newspapers, which advertisements themselves contained the entry forms for the competition. To take as a specimen an advertisement in the News of the World for 5 October 1969, one sees a substantial advertisement headed ‘GREATEST “SPOT-BALL” EVER’, providing for prizes, and at the end is set out a reproduction of a photograph of certain players, an actual photograph taken during a Chelsea/Arsenal match, in conditions which were dry. The ball itself is eliminated from the photograph, and in its place is a grid of some 40 squares. The competitor for 1s could fill up eight of those squares, being the eight squares in which in his opinion the ball that is no longer there was most likely to be. He could choose, and fill up with a cross, more than eight squares, indeed 13, for an extra entry fee. The winners were to be named the following week, and meanwhile, before that could be done, there was to be a meeting of a panel of experts. That panel of experts would go through the same process that the competitors were expected to go through, of finding the eight squares where the ball was most likely to be. When I say that they were experts, it is enough to say that the chairman was the well-known footballer, Alan Mullery. The panel having arrived at its decision in regard to the eight squares where the ball was most likely to be, the entry forms would then be examined, and those competitors who had chosen those same eight squares would be entitled to a prize. It is to be observed that it was not a competition to find out where the ball was. It may be that the winning eight squares would not in fact contain the ball at all; it may be, in other words, that the panel, expert as it was, would itself have been wrong and would have chosen eight squares where in fact the ball had not been—that matters not. The full print contained in the advertisement under the heading ‘HOW YOU CAN WIN’ is worded thus:
‘Study the photograph carefully. The ball is not shown in the picture but it is in the area covered by the grid. The picture contains sufficient information to enable a skilful competitor to decide in which eight squares the ball is most likely to be. You can put crosses in a maximum of thirteen squares. The prizes are offered for the most skilful selections based on that information and their skill will be judged by reference to the decision of a panel of Football experts chaired by Alan Mullery, Captain of Spurs and England Player, who will be using the same information as is available to you. The winning eight squares will be published in next week’s competition and the competitor with those squares will win the first prize of £5000.’
Apart from what I have recited, the case finds as a fact that on the following Friday after these advertisements, the panel met, that it consisted of Mr Alan Mullery, of a Mr Kent, a professional photographer specialising in football photography, and Mr Stoney, a professional competition adjudicator. The meeting was also attended by Mr Thompson, an officer of the first appellants, but he acted as secretary only.
The magistrate goes on to find that the panel had before it the photograph for each week’s competition exactly as published in the newspaper, including the grid, and showing no ball, and goes on to say that the photograph which they had might have been a little clearer than the version which appeared in the newspapers. Finally it was said:
‘The meetings of the panel consisted of a detailed analysis of the data contained in the photograph, the members discussing and drawing inferences according to their experience of football, from the postures of the players, the direction in which they were seemingly looking and appeared to be moving, the markings on the field, the ground conditions, the position of the referee where he was shown, the teams involved, the identity and characteristics of individual players and so on. These discussions usually lasted about three quarters of an hour.
Page 133 of [1971] 1 All ER 129
Finally on the data available, the panel decided on the eight most likely squares on the grid for the position of the ball to be found and these were noted. The reasons for the panel’s choices were recorded and also their reasons for rejecting the squares which they did not choose.’
Section 47(1) of the Betting, Gaming and Lotteries Act 1963 constitutes the alleged offence, and, so far as it is material, provides:
‘It shall be unlawful to conduct in or through any newspaper, or in connection with any trade or business or the sale of any article to the public—(a) any competition in which prizes are offered for forecasts of the result either—(i) of a future event … (b) any other competition success in which does not depend to a substantial degree upon the exercise of skill … ’
I mention para (b) for two reasons: one is that the appellants were also charged with an offence against s 47(1)(b), and were quite rightly acquitted, because there must be a considerable element of skill in this competition. The second reason for which I mention it is that counsel for the newspaper companies, I think as at present advised quite rightly, conceded that para (a) and para (b) were wholly independent, and that there could be an offence under para (a) although, as here, there was an element of skill; in other words para (a) is not coloured, as it were, by para (b).
What was urged before the magistrate and has been urged before this court in a very forceful argument by counsel for the newspaper companies is really twofold: for two broad reasons he submits that the competition here could not properly be called a competition in which prizes are offered for forecasts of the result of a future event. He emphasised that the words are not ‘forecast a future event’, but to forecast the results of a future event. Various classic illustrations have been given: the event, the Derby, the result, the winner. The general election the event followed by the result, the winner. It is said that it is inconceivable that the legislature intended to cover a case such as this, and indeed the words are quite inept when the result is in effect the decision of the panel; that one is forecasting the decision of the panel and that it is wholly artificial to split up the decision of the panel into an event and a result. The prosecution contended that the event here was the Friday meeting of the panel and its deliberations for three-quarters of an hour. The result was the eight squares eventually chosen by the panel. For my part, while appreciating counsel for the newspaper companies’ argument, I should have thought that what happened here, the deliberations and then the result, could quite fairly and squarely be said to come within the words of the Act. In support of his argument counsel said: but what if the judge in such a competition as this is but one man who does it in that way. For my part, I would not shrink from saying that the event in such a case was his entry into consideration of the matter, and consideration of the matter, and the result was the decision at which he finally arrived.
The second point that counsel for the newspaper companies took can be put in this form: even if I am wrong and there can truly be said here to have been an event and a result of that event, even so, the competitors here were not seeking or attempting to forecast the result, that is, the decision arrived at by the panel after an event, the meeting and the deliberation. They were doing what they were told to do by the small print in the advertisement, namely to decide in which eight squares the ball was most likely to be. He said with considerable force that not only is that what they were told to do, but what any competitor would naturally do. He would not, so it is said, attempt to ascertain what three other people might choose; he would concentrate on what he, using such football skill as he had, thought were the eight squares in which the ball was most likely to be. Counsel said that it may be true that the competitor’s skill in choosing those eight squares may be judged in the end by the decision arrived at by the panel, yet that is only to confuse what is being attempted, namely to decide in which eight squares the ball is most likely to be,
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with what he calls the machinery of judging the skill so exercised. That is an attractive argument, but in my judgment it is wrong. True, and I accept it, the competitor is doing what he is told to do, to decide in which eight squares the ball is most likely to be; that is what he is directly putting his mind to, but a the same time, in the result he is in fact trying to forecast what the panel thinks by its decision are the eight squares in which the ball is most likely to be. Put I think in its simplest form, it is this: it is not what the competitor is directly attempting to do or thinks that he is doing but what in fact he is doing, that matters. In fact, whether he knows it or not, by reason of the panel being the judges, he is trying to arrive at a solution which will accord with the decision of the panel. On those short grounds, I would agree with the learned magistrate in this case that the first appellants had committed an offence and dismiss the appeal by them.
So far as the newspaper companies are concerned, the fact, of course, remains that they cannot be liable as aiders and abetters unless it can be shown that they knew or had constructive knowledge of the constituent facts constituting the offence. Counsel for the newspaper companies has urged that it can properly be said that they did not know (and it has been going on, he said, for some 35 years) or suspect that forecasting of this kind could be said to be the forecasting of the result of an event within the Act. For my part, however, I find it impossible to accede to that argument. They knew all the facts, albeit they did not realise that an offence was being committed. Accordingly I would dismiss the appeal against the appellant newspaper companies’ convictions likewise.
ASHWORTH J. I agree. In deference to counsel for the newspaper companies’ argument I would like to add just a word or two of my own. In s 47 of the Betting, Gaming and Lotteries Act 1963 the offence provided is the conducting through a newspaper of a competition in which prizes are offered. Stopping there, it is quite plain that on the facts proved in this case, those words were satisfied. They are followed by the words ‘Prizes are offered for forecasts of the result of a future event’. Where I part company with counsel for the newspaper companies is in this way: most of his argument was directed to showing what he urged was in the mind of a competitor. He was making a forecast by his entry, as directed by the instructions, as to the eight squares in which the ball was most likely to be. If one was entitled merely to look at this matter from that limited angle, it might well be said that this was not a forecast of the result of a future event. As it seems to me, that is shutting one’s eyes to the true nature of this competition. It certainly was a competition; it was a competition in which the object of each competitor was to win a prize. He would only win a prize if the forecast which he sent in coincided with the decision of the panel which was to adjudicate on the entries.
Accordingly, in my judgment when a competitor sent in his entry he was in effect doing two things. In the first place he was, as directed, making his own attempt to show in which square the ball was most likely to be, but by the very fact that he was entering this competition on the terms disclosed in the case, he was also making a forecast of the result of the future event, namely the adjudication by the panel and their decision on it. That one entry had two purposes, and one of them was the forecasting of the future event, and for those reasons, which are only a variant of what Lord Parker CJ has said, I would agree that these appeals fail.
BROWNE J. I also agree and do not feel I can usefully add anything.
Appeals dismissed. Leave to appeal to the House of Lords refused. The court certified under s 1(2) of the Administration of Justice Act 1960 that a point of law of general public importance was involved, namely whether the competition conducted by the first appellants
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was capable in law of being a competition under s 47(1)(a)(i) of the Betting, Gaming and Lotteries Act 1963, in which prizes were offered for forecasts of the result of a future event.
Solicitors: Stilgoes (for the first appellants); Theodore Goddard & Co (for the newspaper companies); Solicitor, Metropolitan Police.
N P Metcalfe Esq Barrister.
Sun Alliance Insurance Ltd v Inland Revenue Commissioners
[1971] 1 All ER 135
Categories: TAXATION; Stamp Duties
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 14, 15, 16 OCTOBER, 17 NOVEMBER 1970
Stamp duty – Conveyance on sale – Transfer of shares – Scheme of arrangement – Court order – Whether ad valorem stamp duty payable on court order as conveyance or transfer on sale – Stamp Act 1891, s 54, Sch 1.
Stamp duty – Conveyance on sale – Transfer of shares – Scheme of arrangement – Court order – Whether court order instrument executed within meaning of Stamp Act 1891, s 14(4).
S Ltd made an offer to purchase the ordinary shares of L, a company originally incorporated by royal charter. The offer was accepted by more than 75 per cent of the shareholders. A meeting of the remaining shareholders was held at which a majority of those shareholders voted in favour of the scheme of arrangement proposed under s 206a of the Companies Act 1948. A petition was presented to the court to sanction the scheme of arrangement and the appropriate order was made. Paragraph 1 of the scheme of arrangement, set out in the schedule to the order, provided that on the operative date all the outstanding shares should without the necessity for the execution of any instruments be transferred to S Ltd and L should cause the name of S Ltd to be entered on the register as the holder thereof, and para 8 provided for the scheme to become operative as soon as the office copy of the court order sanctioning the scheme had been delivered to the Registrar of Companies for registration. The court order was passed, filed and entered. Prior to the delivery on the following day of the office copy of the order to the registrar, L registered S Ltd as the holder of the remaining shares. On the question whether the original court order was chargeable with stamp duty as being ‘a conveyance or transfer on sale’ within the meaning of s 54b of, and Sch 1 to, the Stamp Act 1891, and if so, whether it was ‘an instrument executed’ within the meaning of s 14(4)c of the Act,
Held – (i) The court order was a conveyance or transfer within the meaning of s 54 and liable to ad valorem stamp duty, since it enabled the scheme of arrangement to bring about the transfer notwithstanding that the scheme was not operative until the office copy had been delivered to the registrar and that the name of the new holders of the shares had still to be entered on the register (see p 142 d to f, post).
(ii) The transfer of shares was a conveyance on sale within the meaning of s 54 of, and Sch 1 to, the Act (see p 142 h, post).
Page 136 of [1971] 1 All ER 135
Ridge Nominees Ltd v Inland Revenue Comrs [1961] 3 All ER 1108 applied.
(iii) The court order was an instrument executed within the meaning of s 14(4), since it was executed when it was drawn, passed and entered (see p 143 d and e, post).
Notes
For conveyance or transfer on sale, see 33 Halsbury’s Laws (3rd Edn) 306–310, paras 537–540, and for cases on the subject, see 39 Digest (Repl) 323–328, 674–694.
For the Stamp Act 1891, ss 14 and 54, see 12 Halsbury’s Statutes (3rd Edn) 861 and 21 Halsbury’s Statutes (2nd Edn) 627.
For the Companies Act 1948, s 206, see 5 Halsbury’s Statutes (3rd Edn) 274.
Cases referred to in judgment
Escoigne Properties Ltd v Inland Revenue Comrs [1958] 1 All ER 406, [1958] AC 549, [1958] 2 WLR 336, 44 Digest (Repl) 231, 493.
Fitch Lovell Ltd v Inland Revenue Comrs [1962] 3 All ER 685, [1962] 1 WLR 1325, 39 Digest (Repl) 327, 694.
Fleetwood-Hesketh v Inland Revenue Comrs [1936] 1 KB 351, [1935] All ER Rep 682, 105 LJKB 676, 153 LT 409.
Harrison’s Share under a Settlement, Re, Harrison v Harrison, Re Ropner’s Settlement Trusts, Ropner v Ropner [1955] 1 All ER 185, [1955] Ch 260, [1955] 2 WLR 256, 51 Digest (Repl) 870, 4206.
Holt’s Settlement, Re, Wilson v Holt [1968] 1 All ER 470, [1969] Ch 100, [1968] 2 WLR 653., Digest Supp.
Inland Revenue Comrs v Tod [1898] AC 399, 67 LJPC 42, 78 LT 571, 35 Digest (Repl) 661, 3364.
Inland Revenue Comrs v Littlewoods Mail Order Stores Ltd, Littlewoods Mail Order Stores Ltd v Inland Revenue Comrs [1962] 2 All ER 279, [1963] AC 135, [1962] 2 WLR 1228, 39 Digest (Repl) 327, 693.
Jodrell v Jodrell [1869] LR 7 Eq 461, 38 LJCh 507, 20 LT 349, 40 Digest (Repl) 729, 2181.
Oughtred v Inland Revenue Comrs [1958] 2 All ER 443, [1958] Ch 678, [1958] 3 WLR 64; affd HL [1959] 3 All ER 623, [1960] AC 206, [1959] 3 WLR 898, 39 Digest (Repl) 326, 692.
Ridge Nominees Ltd v Inland Revenue Comrs [1961] 3 All ER 1108, [1962] Ch 376, [1962] 2 WLR 3, 39 Digest (Repl) 325, 687.
Cases also cited
A-G v Felixstowe Gas Light Co [1907] 2 KB 984.
Birkbeck Freehold Land Society, ex parte (1883) 24 Ch D 119.
Foster (John) & Sons Ltd v Inland Revenue Comrs [1894] 1 QB 516.
Great Western Ry Co v Inland Revenue Comrs [1894] 1 QB 507, [1891–94] All ER Rep 1094.
Inland Revenue Comrs v Glasgow & South Western Ry Co (1887) 12 App Cas 315.
Kirkness v John Hudson & Co Ltd [1955] 2 All ER 345, [1955] AC 696.
Practice Note [1966] 1 All ER 672, [1966] 1 WLR 345.
Adjourned summons
This was an application by originating summons dated 1 May 1969 by the Sun Alliance Insurance Ltd whereby they sought the determination of the court on the following questions: 1. Whether the original of the order of the High Court of Justice made on 19 July 1965 in proceedings Re London Assurance, Re Companies Act 1948, No 00792 of 1965 was (a) chargeable with stamp duty under the heading ‘Conveyance or Transfer on sale’ in Sch 1 to the Stamp Act 1891 (as amended) at the rate of 10s for every £50 and also for any fractional part of £50 of the value of the shares in the capital of Sun Alliance Insurance Ltd and the loan stock of Sun Alliance Insurance Ltd allotted or to be allotted pursuant to cl 2 of the scheme of
Page 137 of [1971] 1 All ER 135
arrangement set forth in the Schedule to the order; or (b) chargeable with some other and, if so, what stamp duty; or (c) not chargeable with any stamp duty. 2. If it be determined in answer to question 1, that the original of the order was not chargeable with stamp duty under the heading, whether the office copy thereof delivered to the Registrar of Companies was (a) chargeable with stamp duty under the heading at the rate on the value; or (b) chargeable with some other, and if so, what stamp duty; or (c) not chargeable with any stamp duty. 3. If it be determined in answer to question 1 that the original of the order was chargeable with stamp duty, or in answer to question 2 that the office copy thereof was so chargeable, whether such original or office copy (as the case might be) was ‘an instrument executed in any part of the United Kingdom’ within the meaning of that phrase in s 14(4) of the Stamp Act 1891. The defendants were the Commissioners of Inland Revenue. The facts are set out in the judgment.
S W Templeman QC and J G Monroe for Sun Alliance.
E I Goulding QC and J P Warner for the Crown.
Cur adv vult
17 November 1970. The following judgment was delivered.
FOSTER J read the following judgment. In this case the facts are not in dispute, and can be shortly stated. The London Assurance (which I shall call ‘London’) was incorporated by royal charter on 22 June 1720. A further charter was granted on 29 April 1721. Finally, a private Act of Parliament was passed in 1931 called the London Assurance Act 1931, which contains provisions regulating the constitution of London.
In 1965 London had as part of its capital 16,655,000 issued ordinary shares of 5s each, and on 21 May 1965, the plaintiff company, Sun Alliance Insurance Ltd (which I shall call ‘Sun Alliance’), made an offer to purchase all the ordinary shares of London. The offer was made by N M Rothschild & Sons on behalf of Sun Alliance, and is, so far as material, in these terms. It is headed: ‘To the Ordinary Shareholders of: THE LONDON ASSURANCE’, and states:
‘DEAR SIR (OR MADAM), We have been authorised and instructed by [Sun Alliance] whose registered office is at No. 1, Bartholomew Lane, E.C.2, to issue on their behalf an Offer (“the Offer”) to purchase on the following terms and conditions all the Ordinary Shares of 5s. od. each in [London].’
Then para 1, which is headed, ‘THE OFFER’, states:
‘We hereby offer, on behalf of Sun Alliance, subject to the terms and conditions contained in Paragraph 2 below, to acquire, free of any charge, lien or encumbrance and together with all rights attaching thereto, all the Ordinary Shares of 5s. od. each in [London] on the following basis,’
and then the basis is set out Paragraph 2A (3) states:
‘The Offer is open for acceptance until 4 p.m. on 11th June, 1965, or such later (dates) as Sun Alliance may decide.’
Paragraph 2B is in these terms:
‘The Offer is conditional upon: (1) Acceptance by the holders of not less than 75 per cent. of the Ordinary Share Capital of [London] (or such smaller percentage as Sun Alliance may decide).’
By 11 June 1965 the holders of some 13,033,655 ordinary shares (being more than 75 per cent of the total number of issued shares) had accepted and signed the form of acceptance and transfer. The offer was then left open indefinitely, and by 15 June
Page 138 of [1971] 1 All ER 135
1965 the holders of a further 651,607 shares had accepted and had also signed the form of acceptance and transfer, leaving 2,969,738 ordinary shares outstanding. The form of acceptance and transfer is in these terms. It is headed: ‘This Form may be counted as a valid acceptance of the Offer whether or not it is accompanied by the relevant documents(s) of title’, and it proceeds:
‘If you wish to accept the accompanying offer of N.M. Rothschild & Sons made on behalf of [Sun Alliance] to purchase your holding of Ordinary Shares of 5s. each in [London] on the terms and conditions of the Offer set out in the accompanying Letter, you should sign this Form and forward it, together with the relevant Share Certificate(s) and/or other document(s) of title, to Lloyds Bank Limited … ’
Then the form states:
‘1. I/We the undersigned, hereby irrevocably accept the offer … made on behalf of Sun Alliance in N. M. Rothschild & Sons’ letter of offer dated 21st May, 1965, subject to the terms and conditions therein in respect of the following number of Ordinary Shares …
3. My/Our signature(s) to this Form of Acceptance and Transfer shall constitute my/our execution of an instrument of transfer of my/our said Shares to [Sun Alliance] or such nominee as it shall nominate.’
4. I/WE HEREBY AUTHORISE and request you to send to me/us by post at my/our risk at the first address written below … the following:—
‘(a) An Allotment Letter for the Sun Alliance Shares and
‘(b) An Allotment Letter for the 6 1/2 per cent. Convertible Unsecured Loan Stock, and
‘(c) A cheque in respect of any fractional entitlement to which I am entitled.’
It is not disputed that the forms so signed are liable to stamp duty.
On 15 June 1965, a summons was issued under s 206 of the Companies Act 1948. Section 206 is in these terms:
‘(1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them or between the company and its members or any class of them, the court may, on the application in a summary way of the company or of any creditor or member of the company, or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be summoned in such manner as the court directs.
‘(2) If a majority in number representing three fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors or the class of creditors, or on the members or class of members, as the case may be, and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.
‘(3) An order made under subsection (2) of this section shall have no effect until an office copy of the order has been delivered to the registrar of companies for registration, and a copy of every such order shall be annexed to every copy of the memorandum of the company issued after the order has been made, or, in the case of a company not having a memorandum, of every copy so issued of the instrument constituting or defining the constitution of the company … ’
The form of the summons was in these terms. The summons asked—
‘… for an Order that [London] may be at liberty to convene a meeting to be held at 1 King William Street in the City of London of the holders of the
Page 139 of [1971] 1 All ER 135
Ordinary Shares of [London] not beneficially owned by [Sun Alliance] for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between [London] and the holders of its Ordinary Shares not beneficially owned by [Sun Alliance] and that directions may be given as to the method of convening the said meeting and that Chairmen of the said meeting may be appointed and be directed to report the result thereof to the Court.’
It was not in dispute that London is liable to be wound up under the 1948 Act, so that s 206 applies to it, and that s 209 does not, for only companies registered under the Companies Acts can avail themselves of the provisions of that section.
On 16 June 1965, an order was made by the Registrar of Companies directing a meeting. That order was in these terms, where material:
‘IT IS ORDERED that [London] do convene a Meeting to be held in London of the holders of its Ordinary Shares not beneficially owned by [Sun Alliance] for the purpose of considering and if thought fit approving (with or without modification) a Scheme of Arrangement proposed to be made between [London] and the holders of its said Ordinary Shares. AND IT IS ORDERED that at least 14 clear days before the day appointed for the said Meeting a Notice convening the same and stating that copies of the said Scheme of Arrangement forms of Proxy and copies of the Statement required to be furnished pursuant to Section 207 … can be obtained at the Principal office of [London] … ’
On 18 June 1965, a notice of meeting, to be held on 5 July 1965, was dispatched to the shareholders of London who had not signed the transfer forms.
The meeting was duly held on 5 July 1965, and the result was that 1,821,794 votes were cast in favour of the scheme and 6,061 votes were against the scheme, producing the necessary majority. It appears that certain further shareholders had accepted and signed the form of acceptance and transfer between 15 June and 5 July, but the number of these is not known. It also appears that the holders of some of the shares the votes on which were cast in favour of the scheme at the meeting were prepared also to sign the form of acceptance but were asked not to do so, so that the necessary majority could be attained at the meeting.
On 5 July, a petition was presented to this court to sanction the scheme and, on 19 July 1965, Pennycuick J made an order. That order is in these terms so far as is relevant:
‘AND [Sun Alliance] by its Counsel submitting to be bound by the Scheme of Arrangement hereinafter sanctioned THIS COURT DOTH HEREBY Sanction the Scheme of Arrangement as set forth in the Schedule to the said Petition and in the Schedule hereto AND IT IS ORDERED that [London] do deliver an Office Copy of this Order to the Registrar of Companies.’
It is signed, ‘MAURICE BERKELEY Registrar’.
Then there is the scheme of arrangement in the schedule to the order, and so far as the scheme is concerned the relevant paragraphs read as follows:
‘1. On the Operative Date all the Outstanding Shares shall by virtue of this Scheme and without the necessity for the execution of any instruments be transferred to Sun Alliance and [London] shall cause the name of Sun Alliance to be entered in its Register as the holder thereof accordingly …
‘8. This Scheme shall become operative as soon as an office copy of an Order of the Court sanctioning this Scheme under Section 206 of the Companies Act, 1948 shall have been delivered to the Registrar of Companies for registration … ’
The order was passed, filed and entered on 22 July 1965. On 23 July 1965, an
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office copy of this order was delivered to the Registrar of Companies for registration, in accordance with the order and s 206(3). It seems that on 22 July (before the delivery of the office copy) London registered Sun Alliance as the holder of the remaining 2,969,738 ordinary shares. These shares can be placed in three categories: (a) shares the holders of which accepted the offer of Sun Alliance after 15 June 1965. The number of these is not known. (b) Shares the holders of which did not accept the offer but voted in favour. The number of these shares was 1,821,794. (c) Shares the holders of which neither accepted it nor voted in favour, whether or not they voted against it. The number of these shares cannot be accurately calculated because of (a) above.
The Crown made no submission that the office copy of the order, delivered to the registrar on 23 July 1965, was liable to stamp duty—a question raised by para 2 of the originating summons. Therefore, three questions fall to be decided: first, was the order of the court liable to stamp duty as a conveyance or transfer under s 54 of the Stamp Act 1891? Secondly, if it was a conveyance or transfer, was it on sale? Thirdly, if the answer to the first or second questions is in the affirmative, does an order of the court come within s 14(4) of the Stamp Act 1891?
The first question relates to s 54 of the 1891 Act, which is in these terms:
‘Meaning of “conveyance on sale“. For the purposes of this Act the expression “conveyance on sale” includes every instrument, and every decree or order of any court or of any commissioners, whereby any property, or any estate or interest in any property, upon the sale thereof is transferred to or vested in a purchaser, or any other person on his behalf or by his direction.’
The four steps in the transaction which have to be considered are as follows. First, the voting at the meeting, whether by person or by proxy, held on 5 July 1965. Second, the order of the court dated 22 July 1965. Third, the delivery of the office copy of the order on 23 July 1965 which made the scheme operative. Fourth, the registration on 22 July 1965, by London of the Sun Alliance as the holder of all the outstanding shares in London. No point was taken that this registration was 24 hours before the scheme became operative by virtue of the delivery to the Registrar of Companies of the office copy of the order.
Now the submissions. On behalf of Sun Alliance it was submitted that the transfer of the shares was effected by the third and fourth steps above, since the third step brought the scheme into operation and the fourth step effected the transfer. In this case no instrument of transfer ever came into being, and there was no instrument which might be liable to stamp duty except the court order, which did no more than bless the scheme. On behalf of the Crown it was submitted that the operative steps in the transfer were the first and second steps, the voting in favour of the scheme and the order of the court sanctioning the scheme. The third and fourth steps were purely administrative steps carrying the order into effect, since the order ordered London to deliver an office copy to the Registrar of Companies and then London, by virtue of the scheme, was bound to register Sun Alliance as the only shareholder by virtue of the scheme approved by the court.
Now the law. There is little authority which assists me on this difficult question. In Inland Revenue Comrs v Tod, it was decided that a decree of the sheriff vesting land in the holder of a bond was a conveyance on sale within the meaning of s 54 of the Stamp Act 1891, and no reference was made to the fact that it was necessary for an extract of the decree to be recorded in the appropriate Register of Sasines before the decree became operative. Fleetwood-Hesketh v Inland Revenue Comrs decided that an acknowledgment of the receipt of money was an agreement for sale within s 59 of the Stamp Act 1891. Lord Hanworth MR said ([1936] 1 KB at 358, 359, [1935] All ER Rep at 690):
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‘Just as in the case of a lease the signature by the landlord may alone be required, so, here, it was unnecessary to have more than the son’s signature, which was the effective signature. Is the document, on that ground, any the less an agreement? It has been suggested that because there was an oral agreement antecedent to this document it might be put in the fire and the parties be no worse off. To my mind that will not do, because I think the parties as a part of their agreement intended that the agreement should be recorded; and by an agreement is meant the record of two minds which have become united for the purpose of the terms contained in the agreement. It seems to me that this document is one which it was the intention of the parties to bring into being, and which it was important—perhaps essential—for the father to hold as a record that the terms of the oral agreement had been fulfilled by him, and to make it clear that the securities which are there mentioned were securities to be received by the son. Even if that document did not amount to an actual conveyance, does it record something which is the subject-matter of an agreement by its reference to the son’s interest in securities and the sale of that interest? Having regard to the cases that have been referred to upon the Stamp Act, I have come to the conclusion that s. 59 does apply to this case. I am inclined to think that it might be misleading to apply the decisions under the Bills of Sale Act. It is, however, important to bear in mind the observations that if a transaction can be established independently of any document in writing, there is nothing requiring to be registered under the Bills of Sale Act, and if no registration is required the fact that there is a document which was not been registered does not invalidate the transaction, which stood proprio vigore without any document at all. So far that it reasoning that may well be applied to this case; but when we go deeper into these cases I am inclined to think that we tend to depart from the consideration of the relevant matters in the present case. I have come to the conclusion that this receipt is a record, a necessary record, an intended record, of an agreement made between the parties, and itself not less an agreement because it is signed only by one of the parties; that it is the record of an agreement which is within the words in s. 59, and therefore liable to ad valorem stamp duty.’
I also find little assistance from Escoigne Properties Ltd v Inland Revenue Comrs, which dealt with exempting rather than charging sections. In Fitch Lovell Ltd v Inland Revenue Comrs, it was decided that transfers of shares signed by the transferor and not by the transferee were within s 54. Wilberforce J said ([1962] 3 All ER at 691, [1962] 1 WLR at 1334):
‘I approach then the first question, which is to consider whether there is here a conveyance on sale with respect to the main transaction from the I.B.S. shareholders to the appellant company. It is, of course, quite true in stamp duty matters that what is to be stamped is documents, not transactions; but, when a court is confronted with a document, it is entitled and indeed bound to inquire into the nature and intended purpose of the document before it. I refer to the remarks of LORD EVERSHED, M.R., in Oughtred v. Inland Revenue Comrs ([1958] 2 All ER 443 at 446, [1958] Ch 678 at 688). Next, I think it is right to say that many documents which, on the face of them would not appear to be conveyances or transfers on sale, have been held to be such within the meaning of Sch. 1 to the Stamp Act, 1891. Those words “Conveyance or transfer on sale” have been given a wide extension. It is sufficient for a document to amount to a conveyance or transfer on sale, if it is the instrument chosen by the parties to complete the sale in such a way as to show that they did not intend any other document to be executed.’
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Ridge Nominees Ltd v Inland Revenue Comrs decided that the statutory authority given by s 209 to the agent appointed to execute an instrument of transfer on behalf of a dissentient shareholder brought into being a transfer or sale within s 54; but the provisions of s 206 do not require any transfer to be brought into being, and none was brought into being in this case in respect of the shares subject to this scheme.
Conclusion: I must therefore answer the first question by construing s 54 and applying it to the mechanics by which the shares came to be registered in the name of Sun Alliance. The scheme itself has no effect unless and until the court has sanctioned it and the operative date has come into being. Paragraph 1 of the scheme provides:
‘On the Operative Date all the Outstanding Shares shall be virtue of this Scheme and without the necessity for the execution of any instruments be transferred to Sun Alliance … ’
No point was taken that the regulations of London, which provided that shares should be transferred by means of transfers, were overriden by the provisions of the scheme. But the effect of para 1 is that the transfer of the shares occurs by virtue of the scheme. The scheme itself has no force or effect without an order of the court sanctioning it. Therefore the court order enables the scheme to bring about that transfer.
It follows that it is the court order that effects the transfer; and this is nonetheless so because the scheme is not operative until an office copy has been delivered to the Registrar of Companies for registration, for the court order itself ordered that to be done and the Act so provides; nor because London has still to cause the name of Sun Alliance to be entered on to the register as the holder of the shares. The registration of the transferee occurs in every case where a transfer is executed, and merely perfects the title of the transferee. The same thing occurs in the case of registered land, where one finds a transfer and subsequent registration. I have therefore come to the conclusion that by the court order the shares were transferred to Sun Alliance, or, to use the words of s 54, by that order property was transferred to a purchaser.
The second question is: was the transfer ‘a conveyance on sale’ within the meaning of s 54 of and Sch 1 to the Stamp Act 1891? It was submitted on behalf of the Sun Alliance that there was no mutual assent given by the holders of the outstanding shares, mutual assent being one of the ingredients of the definition of ‘Sale’ in Benjamin on Saled, which was quoted with approval by Viscount Simonds in Inland Revenue Comrs v Littlewoods Mail Order Stores Ltd, Littlewoods Mail Order Stores Ltd v Inland Revenue Comrs ([1962] 2 All ER 279 at 283, [1963] AC 135 at 152). But in that case no question arose on the lack of mutual assent. In my judgment, the answer to this question is provided by the Court of Appeal decision in the Ridge case. Whether one follows the wide proposition of Danckwerts LJ that a sale may not always require the consensus element mentioned in Benjamin on Sale or the view of Lord Evershed MR and Donovan LJ that the dissent of a shareholder is overridden by an assent which the statute imposes on him does not, I think, matter. It is true that that case was dealing with s 209, but the same, I think, applies to s 206 in the case of the shareholders who voted against the scheme or did not vote at all. The argument that the shareholders who voted in favour of the scheme never assented I find difficult to follow. In my judgment, therefore, the transfer of the shares in this case is a conveyance on sale within the meaning of s 54 of and Sch 1 to the Stamp Act 1891.
The third question is: is the court order ‘an instrument executed’ in any part of the United Kingdom within the provisions of s 14(4) of the Stamp Act 1891? Section 14(4) provides:
Page 143 of [1971] 1 All ER 135
‘Save as aforesaid, an instrument executed in any part of the United Kingdom, or relating, wheresoever executed, to any property situate, or to any matter or thing done or to be done, in any part of the United Kingdom, shall not, except in criminal proceedings, be given in evidence, or be available for any purpose whatever, unless it is duly stamped in accordance with the law in force at the time when it was first executed.’
In s 122, which is the definition section, it is provided ‘The expression “instrument” includes every written document’; and, ‘The expressions “executed” and “execution”, with reference to instruments not under seal, mean signed and signature’. Lord Romilly MR in Jodrell v Jodrell held that a court order was not an instrument within the meaning of the Apportionment Act 1834. Megarry J in Re Holt’s Settlement, Wilson v Holt held that a court order was an instrument within the meaning of the Perpetuities and Accumulations Act 1964, s 15(5). Both these cases turned on the provisions of the particular Acts in question. In the context of the Stamp Act 1891, I have no doubt that the court order is a written document and therefore, by definition, an instrument. Is it executed? Under RSC Ord 42, r 1(3), an order must be marked with the name of the judge, referee or master by whom it was made, and must be sealed. It does not, therefore, have to be signed, although in this case it was signed by Mr Registrar Berkeley. In my judgment, a court order is executed when it is drawn up, passed and entered: see, for example, Re Harrison’s Share under a Settlement, Harrison v Harrison. It was said that it would be startling if the court could not look at its own order if it was not stamped, but it would be equally startling if the only sanction provided by the Act for failure to stamp a document did not apply to a court order, some of which are clearly liable to stamp duty. I have therefore come to the conclusion that a court order is ‘an instrument executed’ within the meaning of s 14(4) when it is perfected.
Declarations accordingly.
Solicitors: Ashurst, Morris Crisp & Co (for Sun Alliance); Solicitor, Inland Revenue.
Jacqueline Metcalfe Barrister.
Faridian v General Medical Council
[1971] 1 All ER 144
Categories: PROFESSIONS; Medical
Court: PRIVY COUNCIL
Lord(s): LORD DONOVAN, VISCOUNT DILHORNE AND LORD WILBERFORCE
Hearing Date(s): 20, 21, 22 JULY 1970
Medical practitioner – Professional misconduct – Infamous conduct in professional respect – Shareholder in company advertising medical services – Power to control company – Failure to exercise power to prevent advertising – Whether capable of amounting to infamous conduct.
A registered medical practitioner had power by reason of his shareholding to control a company which managed a clinic. He was charged with infamous conduct in a professional respect in relation to that interest which he had in the company which it was alleged had advertised services connected with the practice of medicine and in particular had: (i) sent 50 letters to medical practitioners in West Germany offering financial inducements to refer or introduce patients to the clinic; (ii) despatched £20 to a medical practitioner (who returned the money) for introducing a patient to the clinic; (iii) provided material for an article on the clinic in a newspaper; and (iv) the matron of the clinic had advertised its services on television. On proof of these four acts the medical practitioner was found guilty by the disciplinary committee of the General Medical Council. On appeal, on the question whether his failure to exercise his power to control the activities of the company was, on the facts proved, capable of amounting to infamous conduct in a professional respect,
Held – His failure to exercise the power he had when it was not shown that he had prior knowledge of what was done or reason to suspect that it would be done was not capable of being held to be infamous conduct on his part (see p 150 a and c, post).
Notes
As to what amounts to infamous conduct by a medical practitioner, see 26 Halsbury’s Laws (3rd Edn) 64, para 129, and for cases on the subject see 33 Digest (Repl) 519, 520, 25, 26.
Cases referred to in opinion
Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, 33 Digest (Repl) 568, 302.
Bhattacharya v General Medical Council [1967] 2 AC 259, [1967] 3 WLR 498, Digest Supp.
Felix v General Dental Council [1960] 2 All ER 391, [1960] AC 704, [1960] 2 WLR 934, 33 Digest (Repl) 567, 299.
Appeal
This was an appeal by Parviz Faridian from a determination of the disciplinary committee of the General Medical Council on 30 July 1969 that, by reason of a finding that he had been guilty of infamous conduct in a professional respect, his name should be erased from the Medical Register. The facts are set out in the opinion of the board delivered by Viscount Dilhorne.
Sir Dingle Foot QC and E Cotran for the appellant.
R A Gatehouse QC and Robert S Alexander for the General Medical Council.
22 July 1970. The following opinion was delivered.
VISCOUNT DILHORNE. After an inquiry on 29 and 30 July 1969 the disciplinary committee of the General Medical Council found the appellant guilty of infamous conduct in a professional respect and directed the registrar to erase his name from the register. The charge preferred against him was in the following terms:
Page 145 of [1971] 1 All ER 144
‘That you were and are registered under the Medical Acts, and that:
‘(1) Through the medium of two companies known respectively as Parviz Holdings, Limited, and Nurses Night & Day, Limited, in each of which companies you at the material times had directly or indirectly a controlling interest, you have had a controlling interest in a company known as Langham Street Clinic, Limited, whose registered office is situated at 31/35 Langham Street, London, W.1 (hereinafter referred to as “The Clinic”), of which you were also a Director at the material times; and by virtue of your shareholdings and directorships in Parviz Holdings, Limited, and Nurses Night & Day, Limited, you have had also at the material times a substantial financial interest in those companies and therefore a substantial financial interest in the Clinic, in which the majority of issued shares were held by those companies;
‘(2) The Clinic has sought to attract patients and thereby promote its own financial benefit, whereby your own financial benefit has also been promoted in the manner aforesaid, by advertising the services which it is prepared to offer to women desirous of having their pregnancy terminated, and by offering financial inducements to medical practitioners to refer or introduce patients to the Clinic; and in particular (i) The Clinic has sought to attract patients, and offered financial inducements to medical practitioners to refer or introduce patients to the Clinic, by circulating to medical practitioners in West Germany in and after the month of December 1968, letters wherein the Clinic offered to each medical practitioner receiving a copy of such a letter an inducement of 200 DM (equivalent to about £20 in English money) in respect of each patient referred or introduced by him to the Clinic, with the possibility in view of an operation for the termination of her pregnancy under the Abortion Act. (ii) The Matron of the Clinic advertised its services on the BBC television programme Panorama on March 17th, 1969; and more particularly she stated (a) that patients came to the Clinic, with a view to operations for the termination of pregnancy, from a number of foreign countries including Germany in which similar operations were illegal; and (b) that the operations performed at the Clinic were performed by “top specialists” and “Under the right conditions”;
‘(3) At the material times you have accordingly been a Director of, and you have had directly or indirectly a controlling interest and a substantial financial interest in, a company which has advertised services connected with the practice of medicine;
‘And that in relation to the facts alleged you have been guilty of infamous conduct in a professional respect.’
There was some controversy about whether the appellant had, as he contended, resigned his directorship of Langham Street Clinic Ltd on 8 November 1968, the date of incorporation of that company, and of Nurses Night & Day Ltd on either 7 or 31 January 1969. In minutes of ‘the first meeting of the company’, the Langham Street Clinic Ltd, sent to the Companies Registration Office on 8 January 1969, it was recorded that the meeting was held on ‘8th November 1969’ and that the company was incorporated on ‘8th November 1969’. It was also stated that the appellant had resigned his directorship at that meeting and that a Mr M Afsharian had been appointed ‘the next Director of the Company’. Mr Afsharian’s full name was Mahmoud Afsharian Moghaddam but he used the name Afsharian and on occasions the English name of Ashford. It will be convenient to refer to him as Mr Afsharian.
At the hearing a letter was produced dated 5 December 1968 on paper headed ‘Langham Street Clinic Ltd’ signed by the appellant in the following terms:
‘I, [the appellant] as from today hereby resign as director of the above Company and that I have no claim against the Company.’
The reference in the minutes to 8 November 1969 as the date of incorporation
Page 146 of [1971] 1 All ER 144
when it was in fact 8 November 1968 suggests that the minutes were written in 1969 and after the letter of 5 December 1968.
Minutes of a directors’ meeting of Nurses Night & Day Ltd dated 7 January 1969 at which the appellant was chairman and at which Mr Afsharian was present as general manager, stated:
‘The Director, [the appellant], having consistently objected to the way the Company’s business is being run, including that of Langham Street Clinic Ltd. in which the Company has a substantial interest tendered his resignation’
and that Mr Afsharian ‘be also appointed Director in his place until the next Annual General Meeting’. In a letter dated 14 July 1969 the appellant’s solicitors stated that the appellant had resigned this directorship on 31 January 1969. The documents filed at the Companies Registration Office in relation to these two companies did not record his resignation as a director of either of these companies.
Counsel for the appellant, in his address to the committee after the hearing of the evidence, conceded that as a matter of law ‘vis-à-vis the outside world’ as the necessary documents had not been filed at the Companies Registration Office, the appellant was a director of both companies at the material times.
Counsel for the General Medical Council, in his opening speech presenting the case against the appellant, submitted that it made no difference if the appellant had in fact resigned his directorships for the shareholding had not changed and the appellant still had effective control; and counsel for the appellant did not dispute that through his holding in Parviz Holdings Ltd and Nurses Night & Day Ltd and the holding of these companies in Langham Street Clinic Ltd the appellant had sufficient interest to control Langham Street Clinic Ltd. After the evidence had been heard, the president announced that the facts alleged in the charge had been proved to the committee’s satisfaction. One of the facts alleged in para (1) of the charge was that the appellant was a director of these companies at the material times. But in view of counsel for the General Medical Council’s statement that it made no difference if the appellant had resigned the directorships, it may well be that the committee did not think it necessary to reach a conclusion on this issue. There was no evidence that the appellant had acted as a director of Langham Street Clinic Ltd after 8 November 1968 or that since that date he had taken any part in the conduct of that company. In the circumstances, and having regard to counsel for the General Medical Council’s statement, their Lordships think it right to disregard the allegations that the appellant was a director of these companies at the material times and to proceed on the basis that he had a sufficient shareholding directly and indirectly to have control over Langham Street Clinic Ltd.
Apart from this, the allegations of fact in the charge were not disputed. It was admitted that about 50 letters had been sent from the clinic offering 200 DM (equivalent to about £20) in respect of each patient introduced for an abortion to the doctor responsible for the introduction. The letter was dated December 1968. A Mrs Burstoff, a lady employed by the clinic, said that she sent the letters off on her own initiative. She left the clinic in December 1968. The charge alleges that the letters were sent ‘in and after’ December 1968. There was no evidence that any letters had been sent after December. It was also proved that £20 had been sent from the clinic to a Dr Young who had introduced a patient on 21 March 1969 for an abortion. Dr Young said that he had received the money after 10 April 1969. The money was returned on 21 April. It appears that the matron was interviewed for the television broadcast and a recording made on about 12 or 13 March 1969.
The journalist who by arrangement with Mr Afsharian called at the clinic with a photographer, and who saw Mr Afsharian and a person whom he took to be the matron but did not see the appellant, must have made his visit before 6 February for the article in the Sun newspaper was published on that day. The article stated that the Langham Street Clinic had—
Page 147 of [1971] 1 All ER 144
‘… four full time Harley Street surgeons’ and was used by ‘20 other surgeons. It has 40 bedrooms and a staff of 65, including 45 state registered nurses.’
A photograph showing a patient being wheeled into the clinic recovery unit after an abortion was published with the article. Counsel for the appellant conceded that the article ‘was capable of amounting to advertising’.
The appellant gave evidence. Mr Afsharian did not. During 1969 the appellant had been an in-patient at St Andrews Hospital, Northampton, from 18 February to 14 March and from 26 March to 31 March. He had then been a patient in University College Hospital from 2 to 10 April and in the York Clinic, Guy’s Hospital, from 21 April to 12 May. He was again in University College Hospital from 14 to 28 May. The letters to the German doctors must have been sent and the interview with the journalist must have taken place before his admission to St Andrews but the recording of the interview for the broadcast appears to have taken place while he was there. It would seem that the money sent to Dr Young was sent during a period when he was out of hospital. The appellant said that he had no knowledge of the letters sent to the doctors in West Germany until the start of the inquiry; that he had not known that the matron was going to be interviewed for a television broadcast and did not know that she had been until after the broadcast had taken place and that he had not known of the payment to Dr Young or of the interview with the journalist from the Sun.
After the president had announced that the facts alleged in the charge were proved to the committee’s satisfaction counsel for the appellant was invited to address the committee in mitigation. He did so, but first he addressed the committee on the question whether the facts proved amounted to proof that the appellant had been guilty of infamous conduct in a professional respect. He submitted that the appellant’s whole personality had been distorted by recurrent illnesses ‘which pushed him out from the date of the incorporation of the company from any active running or control of the Langham Street Clinic’ and that, before he could be found guilty of infamous professional conduct, it had to be shown that ‘he had at the very least notice of, and in reality knowledge of and approved of what was done in the name of the company’. After hearing counsel for the appellant and without inviting counsel for the General Medical Council to address them on the vital question whether on the facts proved and admitted the appellant was guilty of infamous conduct in a professional respect, the committee found him guilty.
In Felix v General Dental Council ([1960] 2 All ER 391 at 397, [1960] AC 704 at 717) Lord Jenkins delivering the judgment of the board said that the board had been placed in some difficulty by the circumstance that beyond finding the facts alleged proved, the disciplinary committee gave no reasons for its determination and:
‘Their Lordships are thus left without any express guidance as to the view of the facts upon which the Disciplinary Committee proceeded.’
Their Lordships are for the same reason in a similar difficulty in this case. They infer that the committee must have rejected counsel for the appellant’s submission that it had to be shown that the appellant had notice or knowledge of what was done in the name of the company for, if they had accepted it, they must have found the appellant not guilty of infamous conduct, there being no evidence that the appellant had notice or knowledge of what was done until after it had been done. The charge did not allege that the appellant had either knowledge or notice of what was done. It merely said that in relation to the facts alleged the appellant had been guilty of infamous conduct.
In the course of his opening speech counsel for the General Medical Council made the following observations:
Page 148 of [1971] 1 All ER 144
‘We put it this way … There are two extremes. First, no one would suggest that because a doctor is a shareholder in some public company which happens to manufacture or market drugs or medical appliances, and because that company is profitable and he receives dividends, he comes within the prohibition. That would be ridiculous. At the other end of the scale, a doctor who is the alter ego of a company which advertises its services or products, who is directly in executive control of the company, and who is himself benefiting from the company’s profitability, is quite clearly guilty of advertising.
‘This … was the case with Mr. Whitby. Mr. Whitby was the Director of the Cancer Prevention and Detection Centre. Undoubtedly, in that case he was its alter ego. He for all practical purposes was the company.
‘We say that this case now before you, on its facts comes clearly within the second of the instances I have given, because this doctor was exercising complete control via the linking companies and, if not in de facto executive control, because he either resigned or preferred to take a passive part, he at least had the power to control at all times, and he has it today.’
From these observations the inference might be drawn that it was being suggested that the appellant was the alter ego of Langham Street Clinic Ltd and so responsible for the acts of the clinic. The reference to the case of Mr Whitby was perhaps unfortunate for that was not an instance of a doctor being treated as the alter ego of a company as the centre was not a company though Mr Whitby was described as director.
In the final paragraph of the passage cited the case against the appellant was put in two ways, it being alleged that he was exercising complete control and secondly that he had power to control the clinic. There was no evidence that after the incorporation of Langham Street Clinic Ltd the appellant exercised any control over that company’s activities. Consequently, if the committee found him guilty on the ground that he was exercising control at the time of the facts complained of, that finding could not stand.
Whether in relation to a given matter a doctor has been guilty of infamous conduct is a question of mixed fact and law, the question of law being whether on the facts proved or admitted the doctor had been guilty of infamous conduct (see Felix v General Dental Council ([1960] 2 All ER at 397, [1960] AC at 717). In Bhattacharya v General Medical Council ([1967] 2 AC 259 at 265) Lord Hodson delivering the judgment of the board said:
‘In their Lordships’ view that jurisdiction on appeal is not confined to considering whether the alleged facts, if proved, are capable of amounting to infamous conduct in a professional respect, but extends to the consideration whether in the particular circumstances of the case these facts justify a finding of infamous conduct in a professional respect; but in the latter case their Lordships’ board would naturally be very slow to differ from the conclusion of the General Medical Council, to whom is entrusted the decision of these matters as representing the responsible body of opinion in the medical profession upon professional matters.’
Their Lordships have in this appeal to consider two questions which may be stated as follows: (1) whether by reason of his shareholding which gave him power to control Langham Street Clinic Ltd, the facts proved, namely (i) the despatch of the letters to doctors in West Germany, (ii) the conduct of the matron in advertising the clinic in a recording for a television broadcast, (iii) the provision of material for an article in the Sun newspaper, and (iv) the sending of £20 to Dr Young, were capable of amounting to infamous conduct on the part of the appellant in a professional respect;
Page 149 of [1971] 1 All ER 144
and (2) if so, whether, in the particular circumstances of the case, such a finding would be justified.
In support of his case counsel for the General Medical Council drew attention to the following passages in the booklet issued by the General Medical Council called ‘Functions, Procedure and Disciplinary Jurisdiction’ which appeared among the ‘Notes on Certain Professional Offences’:
‘(2) Advertising may also be considered to occur if a doctor knowingly acquiesces in the publication (in any form) by other persons of matter which commends or draws attention to his own professional attainments or services, or if a doctor is associated with or employed by persons or organisations which advertise clinical or diagnostic services connected with the practice of medicine. In determining in either set of circumstances whether professional misconduct has occurred, it is relevant to take into account (a) the extent, nature and object of the publicity; and (b) the question whether the arrangements had served to promote the doctor’s own professional advantage or financial benefit.
‘(3) Advertising may arise from notices or announcements displayed, circulated, or made public by a doctor in connection with his own practice, if such notices or announcements materially exceed the limits customary in the profession. Questions of advertising may also arise in regard to reports or notices or notepaper issued by companies or organisations with which a doctor is associated or by which he is employed.’
The words ‘associated with’ are very imprecise. Association may take many forms. The fact that the conduct of an organisation may enure to a doctor’s own professional advantage or financial benefit, although relevant, is not conclusive on the question whether the association was of such a character as to render him guilty of infamous conduct. The association may be of such a character as to lead to the conclusion that responsibility rests on the doctor for the conduct complained of. The association may be such as to lead to the conclusion that he must have known of what was done and have acquiesced in it, or such that a doctor could reasonably have been expected to take all reasonable steps to prevent the occurrence of events which might lead to charges of infamous conduct being preferred against him; and if in those circumstances it was shown that he had failed to take those steps, then it might be right to infer and to hold that he had connived at the misconduct.
On the other hand no one would contend that association with a company by the holding of some shares in it would make a doctor responsible for the acts of servants of the company and guilty of infamous conduct. Does it make any difference that his shareholding is sufficiently large to give him power to control the company?
There was evidence that prior to the incorporation of the company the appellant was closely associated with the clinic which began to take in patients in June or August 1968, but no complaint was made of the conduct of the clinic until after the incorporation of Langham Street Clinic Ltd. After 8 November 1968 the appellant’s case was that he took no part in the running of it or in the management of Langham Street Clinic Ltd. There was no evidence that he had done so nor was it alleged in the charge that he had.
In Allinson v General Council of Medical Education and Registration ([1894] 1 QB 750 at 760, 761) Lord Esher MR said:
‘I adopt the definition which my brother Lopes has drawn up of at any rate one kind of conduct amounting to “infamous conduct in a professional respect”, viz “If it is shewn that a medical man, in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency” … ’
Page 150 of [1971] 1 All ER 144
In their Lordships’ view it cannot be said that the appellant acted disgracefully or dishonourably in failing to exercise his power by virtue of his shareholding to control Langham Street Clinic Ltd. If there had been any evidence that he knew that the four acts complained of would be perpetrated by those engaged in running the clinic or had any reason to suspect that they might be, the position would be different.
It may be said that a person so closely associated as the appellant was with the clinic at its inception, must do all in his power to prevent misconduct such as occurred in this case, and that, if he does not do so, he must have connived at or acquiesced in what was done and so is guilty of infamous conduct. But in this inquiry the appellant was not charged with acquiescing or conniving at what was done and there was no investigation as to what steps, if any, were taken by him to prevent malpractices. His failure to exercise the power he had when it was not shown that he had any prior knowledge of what was done or reason to suspect that it would be done is not, in their Lordships’ opinion, capable of being held to be infamous conduct on his part.
Their Lordships have therefore humbly advised Her Majesty that the appeal should be allowed.
Appeal allowed.
Solicitors: Max Bitel, Greene & Co (for the appellant); Waterhouse & Co (for the General Medical Council).
S A Hatteea Esq Barrister.
Mutual Life & Citizens’ Assurance Co Ltd and another v Evatt
[1971] 1 All ER 150
Categories: TORTS; Negligence
Court: PRIVY COUNCIL
Lord(s): LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD HODSON, LORD GUEST AND LORD DIPLOCK
Hearing Date(s): 1, 2, 6, 7, 15, 20, 21, 22 JULY, 16 NOVEMBER 1970
Negligence – Duty to take care – Statements – Information or advice – Reliance on skill and judgment – Advisor not engaged in business or profession of giving advice on subject-matter of enquiry – Whether duty to exercise care imposed on advisor.
The respondent brought an action against the appellant company claiming damages for negligent advice given to him gratuitously. In his declaration he alleged that he was a policy holder in the appellant company; that he sought advice from it as to the financial stability and the safety of investments in another company, P Ltd; that the appellant company and P Ltd were both subsidiaries of a third company; that by virtue of that association the appellant company had better facilities than the respondent for obtaining full and up-to-date information as to the financial affairs of P Ltd; that it had in its employment officers capable of forming a reliable judgment on the information so obtained; and that these facts were known to the respondent. He further alleged that the appellant company, without disclaimer of responsibility, informed him that P Ltd was financially stable and that it would of responsibility, be safe to invest in it, in the knowledge that he intended to rely on that advice; that in reliance thereon he decided to retain existing investments in P Ltd and invested further sums therein whereby he suffered financial loss. The respondent did not allege that at or prior to the time of his enquiry the appellant company carried on the business of supplying information or advice on investments or that it claimed to possess any qualification, skill or competence to do so greater than that possessed
Page 151 of [1971] 1 All ER 150
by the ordinary reasonable man. Nor did he allege that the appellant company undertook to make use of its facilities to obtain full information on the financial affairs of P Ltd or that it would communicate to him the opinion of its officers who were capable of forming a reliable judgment on information so obtained. The issue to be determined was whether the facts alleged by the respondent were in themselves sufficient to give rise to a duty to take care in giving the advice which the respondent sought.
Held (Lord Reid and Lord Morris of Borth-y-Gest dissenting) – (i) In the absence of contract, the maker of a statement of fact or opinion (‘the advisor’) owed to a person whom he could reasonably foresee would rely on it in a matter affecting his economic interest (‘the advisee’) a duty to be honest in making the statement, but there was no duty of care unless the relationship between the advisor and the advisee was a fiduciary one or possessed some other characteristic which would give rise to such a duty (see p 154 e and f, post).
(ii) Where the statement was one consisting of advice as to the financial stability of a company and the safety of investments therein, a characteristic of the relationship which would give rise to a duty of care was that the advisor held himself out as a person having the necessary skill and competence, which the advisee did not himself possess, to form a judgment on the subject-matter of the advice (see p 155 e and p 156 e and f, post).
(iii) The carrying on of a business or profession which involved the giving of advice of a kind which called for special skill and competence was the normal way in which an advisor held himself out as a person who possessed the necessary degree of skill and competence (see p 157 e, post) although an advisor who did not carry on that business or profession might let it be known in some other way (see p 158 b, post).
(iv) As the respondent did not allege that to his knowledge the appellant company carried on the business of giving advice on investments, or had let it be known in any other way that they claimed to possess the necessary skill and competence which would give rise to a duty of care, his declaration disclosed no cause of action in negligence (see p 160 j to p 161 a, post).
Per Curiam. The missing characteristic of the relationship which was essential to give rise to a duty of care in a situation of the kind with which the present case was concerned was not necessarily essential in other situations, such as, perhaps, where the advisor had a financial interest in the transaction on which he gave advice (see p 161 c, post).
Low v Bouverie [1891–94] All ER Rep 348 followed.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575 distinguished.
Notes
For the arising of a duty to take reasonable care, see 28 Halsbury’s Laws (3rd Edn) 7, para 4, 19–21, para 17, and for cases on the subject, see 36 Digest (Repl) 12–18, 34–79.
Cases referred to in opinions
Anderson (W B) & Sons Ltd v Rhodes (Liverpool) Ltd [1967] 2 All ER 850, Digest Supp.
Candler v Crane, Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, 36 Digest (Repl) 17, 75.
Cann v Wilson [1888] 39 Ch D 39, 57 LJCh 1034, 59 LT 723, 35 Digest (Repl) 33, 246.
Derry v Peek (1889) 14 App Cas 337, [1886–90] All ER Rep 1, 58 LJCh 864, 61 LT 265, 54 JP 148; rvsg sub nom Peek v Derry (1887) 37 Ch D 541, 57 LJCh 347, 59 LT 78, 35 Digest (Repl) 27, 187.
Fish v Kelly (1864) 17 CBNS 194, 144 ER 78, 43 Digest (Repl) 116, 1054.
Hedley Byrne & Co Ltd Heller & Partners Ltd [1961] 3 All ER 891, [1962] 1 QB 396, [1961] 3 WLR 1225; affd HL [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, [1963] 1 Lloyd’s Rep 485, Digest (Cont Vol A) 51, 1117a.
Page 152 of [1971] 1 All ER 150
Home Office v Dorset Yacht Co [1970] 2 All ER 294, [1970] 2 WLR 1140.
Le Lievre v Gould [1893] 1 QB 491, 62 LJQB 353, 68 LT 626, 57 JP 484, 35 Digest (Repl) 18, 189.
Low v Buverie [1891] 3 Ch 82, [1891–94] All ER Rep 348, 60 LJCh 594, 65 LT 533, 35 Digest (Repl) 34, 258.
Nocton v Lord Ashburton [1914] AC 932, [1914–15] All ER Rep 45, 83 LJCh 784, 111 LT 641, 35 Digest (Repl) 57, 502.
Parsons v Barclay & Co Ltd (1910) 103 LT 196, [1908–10] All ER Rep 429, 3 Digest (Repl) 344, 1115.
Shiells v Blackburne (1789) 1 Hy Bl 158, 126 ER 94, 12 Digest (Repl) 250, 1943.
Woods v Martins Bank Ltd [1958] 3 All ER 166, [1959] 1 QB 55, [1958] 1 WLR 1018, 3 Digest (Repl) 182, 324.
Appeal
This was an appeal by the Mutual Life & Citizens’ Assurance Co Ltd and the MLC Ltd from a judgment of the High Court of Australia (Barwick CJ, Kitto and Menzies JJ, Taylor and Owen JJ dissenting) dated 11 November 1968 dismissing an appeal from a judgment of the Court of Appeal of the Supreme Court of New South Wales (Wallace P and Walsh JA, Asprey JA dissenting) dated 18 December 1967 overruling demurrers by the appellant companies to the respondent’s declaration in a common law action in the Supreme Court of New South Wales. The facts are set out in the opinion of the majority of the Board.
A B Kerrigan QC, T R Morling QC and T Simos (all of the New South Wales Bar) for the appellant companies.
K R Handley, D M J Bennett (both of the New South Wales Bar) and A R F Sharp for the respondent.
16 November 1970. The following opinions were delivered.
LORD DIPLOCK. The appellant companies are defendants to an action brought against them in the Supreme Court of New South Wales by the respondent, Mr Evatt, claiming damages for negligent information and advice given to him gratuitously by the appellant companies. New South Wales still preserves the system of pleading current in England 100 years ago between the passing of the Common Law Procedure Acts 1852–60 and the passing of the Supreme Court of Judicature Act 1875, and expounded in the famous third edition of Bullen and Leakea. The respondent’s declaration contains three counts substantially in the same form, the first against the Mutual Life & Citizens’ Assurance Co Ltd, the second against the MLC Ltd, and the third against the two companies jointly. To each of these counts the appellant companies demurred on the ground that the facts alleged in the count did not disclose any cause of action known to the law. The demurrer was dismissed by the Court of Appeal of the Supreme Court of New South Wales (Wallace P and Walsh JA, Asprey JA dissenting). On appeal to the High Court of Australia this judgment was upheld by a majority of the High Court (Barwick CJ and Kitto and Menzies JJ, Taylor and Owen JJ dissenting). It now comes before this Board by special leave granted by Her Majesty in Council.
Special leave was granted because, as has been common ground at the hearing before their Lordships and in the courts below, what is really at issue between the parties on the demurrer does not depend on the procedural niceties of the system of pleading followed in New South Wales but on a question of substantive law of outstanding importance in the development of that branch of the law of tort which was expounded in the speeches in the House of Lords in Hedley Byrne & Co Ltd Heller & Partners Ltd.
In each of the courts in which the demurrer has been heard attention has been
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confined to the first count in which the respondent sues the first appellant company (‘the company’) alone. Their Lordships do not think that it would be helpful to set out this count ipsissima verba. It was amended during the hearing in the Supreme Court of New South Wales by inserting an additional phrase in the middle of the count which resulted, as a matter of grammar, in an unintended alteration in the meaning of a subsequent phrase. In the High Court of Australia, which has no jurisdiction to allow amendment of the declaration, counsel for the respondent was very sensibly permitted to put an oral gloss on some of the actual words and phrases appearing in the declaration so as to enable the court to rule on the actual question of substantive law which was in issue between the parties rather than that the matter should go off on the technicalities of pre-Judicature Act pleading. This might not have been permissible at the time of the third edition of Bullen and Leake. But 100 years have passed since then, and their Lordships have followed the example of the High Court in interpreting the first count of the declaration in the light of the explanations given orally by counsel in the High Court, and have themselves accepted further explanation of its intended meaning where this has appeared to them to be necessary in order to isolate and define the point of substantive law which the parties wish to have determined.
In the light of these explanations the facts relied on by the respondent as constituting his cause of action against the company may be stated as follows: (1) the respondent was a policy holder in the company; (2) he was seeking from the company information and advice concerning the financial stability of another company, H G Palmer (Consolidated) Ltd (‘Palmer’) and as to the safety of investments in Palmer; (3) the Company and Palmer were subsidiary companies of the MLC Ltd; (4) by virtue of that association the company had better facilities than the respondent for obtaining full, complete and up-to-date information concerning the financial affairs of Palmer, although at the time of the enquiry by the respondent it was not in actual possession of such information; (5) the company had in its employ officers who were capable of forming a reliable judgment on information obtained concerning Palmer’s financial affairs; (6) the respondent knew the facts stated in (3), (4) and (5); (7) the company by itself, its servants and agents informed and advised the respondent that Palmer was and would continue to be financially stable and that it would be safe further to invest therein; (8) the company supplied that information and advice without disclaimer of responsibility and with the knowledge that the respondent intended to act thereon in making a decision whether to retain investments already existing in Palmer and whether to invest further therein; (9) the company supplied the information and advice negligently; (10) in reliance on the information and advice supplied by the company, the respondent did not realise on certain investments existing in Palmer and invested further sums therein whereby he lost the value of the investments together with interest thereon.
The allegation in (9) that the company supplied the information and advice ‘negligently’ is an assertion of a breach of a duty of care owed by the company to the respondent. But under the common law system of pleading still in force in New South Wales the plaintiff in an action for negligence must allege facts from which if they and no other facts were proved at the trial, the law will deduce a duty of care. The question for their Lordships is whether the facts stated in (1) to (8) are in themselves sufficient to give rise to a duty owed by the company to the respondent to take care in giving him the information and advice which he sought. The question is thus different from that which arises under the modern system of pleading in England on an application to strike out a statement of claim as disclosing no reasonable cause of action. There the question is whether it would be open to the plaintiffs on the pleadings to prove facts at the trial which would constitute a cause of action: see Home Office v Dorset Yacht Co.
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The respondent does not allege that at or prior to the time of his enquiry the company carried on the business of supplying information or advice on investments to its policy holders or to anyone else, or that the company had claimed, professed or represented to him or to anyone else that it possessed any qualification, skill or competence to do so greater than that possessed by the ordinary reasonable man. Nor does he allege that at the time of his enquiry the company undertook or represented to him that it would make use of its facilities to obtain full, complete or up-to-date information concerning the financial affairs of Palmer or that it would obtain and communicate to him the opinion of officers in its employment who were capable of forming a reliable judgment on such information if obtained. Nor does he allege that at the time the company supplied him with the information and advice it represented to him that it had done any of these things. Counsel for the respondent concedes that, if in order to establish a duty of care owed by the company to the respondent it will be necessary to establish one or other of these facts in addition to those set out in (1) to (8) above, the company’s demurrer should succeed. The question in this appeal is whether or not it is so necessary.
The several speeches in Hedley Byrne & Co Ltd v Heller & Partners Ltd have lain at the heart of the argument in the courts of Australia and before their Lordships’ Board. That case broadened the category of relationships between one man and another which give rise to a duty at common law to use reasonable skill and care in making statements of fact or of opinion. Prior to Hedley Byrne it was accepted law in England that in the absence of contract the maker of a statement of fact or of opinion owed to a person whom he could reasonably foresee would rely on it in a matter affecting his economic interest, a duty to be honest in making the statement. But he did not owe any duty to be careful, unless the relationship between him and the person who acted on it to his economic detriment fell within the category of relationships which the law classified as fiduciary. Hedley Byrne decided that the class of relationships between the maker of the statement and the person who acted on it to his economic detriment which attracted the duty to be careful was not so limited, but could extend to relationships which though not fiduciary in character possessed other characteristics. In Hedley Byrne itself and in the previous English cases on negligent statements which were analysed in the speeches, with the notable exceptions of Fish v Kelly, Derry v Peek and Low v Bouverie, the relationship possessed the characteristics (1) that the maker of the statement had made it in the ordinary course of his business or profession and (2) that the subject-matter of the statement called for the exercise of some qualification, skill or competence not possessed by the ordinary reasonable man, to which the maker of the statement was known by the recipient to lay claim by reason of his engaging in that business or profession.
In the United States of America, where the development of this branch of the common law of negligence had anticipated the English decision in Hedley Byrne, the American Restatement of the Law of Tortsb, which was referred to by Lord Devlin ([1963] 2 All ER at 612, [1964] AC at 531) and by Lord Pearce ([1963] 2 All ER at 617, [1964] AC at 539) specifies as a necessary characteristic of a relationship which gives rise to a duty of care on the part of the maker of the statement that he should be a person who makes it a part of his business or profession to supply for the guidance of others in their business transactions information of the kind contained in the statement and that the statement should be made by him in the course of that business or profession.
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A requirement that the existence of a similar characteristic is necessary in order to attract a duty of care is not stated unequivocally in any of the speeches in Hedley Byrne. But those speeches, like all judgments under the common law system, must be understood secundum subjectam materiam. The fact that the characteristics were present in the relationship between the maker and the recipient of the statement under consideration in Hedley Byrne made it unnecessary for those who expressed the reasons for their decision of the case to direct their minds to the question whether the terms in which the reasons were expressed would have called for some qualification in their application to cases where those characteristics were absent, as they are in the instant appeal. The speeches in Hedley Byrne cannot thus be determinative in themselves of whether or not the presence of these characteristics in the relationship between the maker and the recipient is necessary in order to give rise to a duty of care at common law. Their Lordships accordingly conceive it to be their task in the instant appeal to examine that question as one of principle in the light of the earlier development of this branch of the law of negligence in the cases which preceded, and were for the most part referred to, in Hedley Byrne, as well as in the light of the speeches in Hedley Byrne themselves.
The instant appeal is concerned with a statement consisting of ‘information and advice concerning the financial stability of a certain company … and as to the safety of investments therein’. In regard to this subject-matter, ie financial stability and safety of investment, no distinction need be drawn between ‘information’ and ‘advice’ and it is convenient to use the latter word. Such advice to be reliable (ie to be of a quality on which it would be reasonable for the advisee to rely in determining his course of action in a matter which affected his economic interests) calls for the exercise on the part of the advisor of special skill and competence to form a judgment in the subject-matter of the advice, which the advisee does not possess himself. The problem to be solved arises in that field of human activity which calls for the services of a skilled man. The proposition stated in the maxim spondet peritiam artis et imperitia culpae adnumeratur is one of the oldest principles in English law. The duty imposed by law on those who followed a calling which required skill and competence to exercise in their calling such reasonable skill and competence as was appropriate to it, lies at the origin of the action of assumpsit itself. It was first applied to artificersc ‘for it is the duty of every artificer to exercise his art right and truly as he ought’. It was later extended to all other occupations which involve the doing of acts calling for some special skill or competence not possessed by the ordinary man. The standard of skill and competence was that which is generally possessed by persons who engage in the calling, business or profession of doing acts of that kind for reward. The duty to conform to the standard was attracted by engaging in that particular calling, business or profession because by doing so a man holds himself out as possessing the necessary skill and competence for it. To undertake to do an act requiring special skill and competence for reward was also a sufficient holding out by the obligor to the obligee. But the doing of the act gratuitously by a person who did not engage in the calling, business or profession, did not attract the duty to exercise skill and competence: Shiells v Blackburne ([1789] 1 Hy Bl 158 at 162). See also the reference to the relevant cases in the speeches in Hedley Byrne of Lord Hodson ([1963] 2 All ER at 598, [1964] AC at 510) and Lord Pearce ([1963] 2 All ER at 616, [1964] AC at 537, 538).
Where advice which calls for the exercise of special skill and competence by the advisor is not to be based exclusively on facts communicated to him by the advisee no relevant distinction can be drawn between the ascertaining by the advisor of the facts on which to base his judgment as to the advice to be given, and the forming
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of that judgment itself. The need for special skill and competence extends to the selection of the particular facts which need to be ascertained in order to form a reliable judgment and to the identification of the sources from which such facts can be obtained.
As in the case of a person who gratuitously does an act which calls for the exercise of some special skill and competence, a duty of care which lies on an advisor must be a duty to conform to an ascertainable standard of skill and competence in relation to the subject-matter of the advice. Otherwise there can be no way of determining whether the advisor was in breach of his duty of care. The problem cannot be solved by saying that the advisor must do his honest best according to the skill and competence which he in fact possesses, for in the law of negligence standards of care are always objective. The passages in the judgment of Sir Herbert Cozens-Hardy MR in Parsons v Barclay & Co Ltd ((1910) 103 LT 196 at 199, [1908–10] All ER Rep 429 at 432, 433) and of Pearson LJ in the Court of Appeal in Hedley Byrne ([1961] 3 All ER 891 at 902, [1962] 1 QB 396 at 414, 415) itself, which were quoted with approval in the House of Lords, make it clear that a banker giving a gratuitous reference is not required to do his best by, for instance, making enquiries from outside sources which are available to him, though this would make his reference more reliable. All that he is required to do is to conform to that standard of skill and competence and diligence which is generally shown by persons who carry on the business of providing references of that kind. Equally it is no excuse to him to say that he has done his honest best, if what he does falls below that standard because in fact he lacks the necessary skill and competence to attain to it.
The reason why the law requires him to conform to this standard of skill and competence and diligence is that by carrying on a business which includes the giving of references of this kind he has let it be known to the recipient of the reference that he claims to possess that degree of skill and competence and is willing to apply that degree of diligence to the provision of any reference which he supplies in the course of that business, whether gratuitously so far as the recipient is concerned or not. If he supplies the reference the law requires him to make good his claim. It would not in their Lordships’ view be consonant with the principles hitherto accepted in the common law that the duty to comply with that objective standard should be extended to an advisor who, at the time at which his advice is sought, has not let it be known to the advisee that he claims to possess the standard of skill and competence and is prepared to exercise diligence which is generally shown by persons who carry on the business of giving advice of the kind sought. He has given the advisee no reason to suppose that he is acquainted with the standard or capable of complying with it, or that he has such appreciation of the nature and magnitude of the loss which the advisee may sustain by reason of any failure by that advisor to attain that standard as a reasonable man would require before assuming a liability to answer for the loss.
But if it would not be just or reasonable to require him to conform to this objective standard of care which would be incumbent on a person who carried on the business of giving advice of the kind sought, there is in their Lordships’ view no half-way house between that and the common law duty which each man owes his neighbour irrespective of his skill, the duty of honesty. No half-way house has been suggested in the argument in the instant appeal or in any of the decided cases. That the duty was confined to that of honesty was decided, as their Lordships think rightly, in Low v Bouverie. The judgment of Lindley LJ in that case no doubt treated Derry v Peek as going further than it was subsequently held to have gone in Nocton v Lord Ashburton ([1914] AC 932 at 950, [1914–15] All ER Rep 45 at 51); but Bowen LJ did not fall into that error, and the decision itself was
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approved in Nocton v Lord Ashburton by Viscount Haldane LC with whom Lord Atkinson concurred. It was also referred to without any indication of dissent by Lord Shaw of Dunfermline ([1914] AC at 968, [1914–15] All ER Rep at 60). In Hedley Byrne, Le Lievre v Gould, which concerned a practising surveyor, and Candler v Crane, Christmas & Co, which concerned practising accountants, were expressly overruled; but Low v Bouverie so far from being overruled was cited without disapproval by Lord Morris of Borth-y-Gest ([1963] 2 All ER at 593, [1964] AC at 502) and accepted as correctly expressing the law by Lord Hodson ([1963] 2 All ER at 600, [1964] AC at 513).
In Low v Bouverie it was made plain to the defendant, who was trustee of a settlement, that the information sought from him as to encumbrances on the life interest of his cestui qui trust was required by the enquirer for the purpose of enabling him to make a decision on a business transaction and that he would rely on that information. The trustee informed the enquirer of the existence of certain encumbrances but omitted to mention six prior mortgages whose existence he had forgotten, though they were recited in the deed by which he had been appointed trustee of the settlement four years before. The only skill and competence on his part which was called for to enable him to provide accurate information was the ability to appreciate the need to look at the deed of appointment. In their Lordships’ view the crucial distinction between this case and those cases which it was held in Hedley Byrne gave rise to a duty of care as well as honesty (ie Cann v Wilson, Le Lievre v Gould, Candler v Crane, Christmas & Co, Woods v Martins Bank Ltd and Hedley Byrne itself), is that the trustee in Low v Bouverie did not hold himself out to the enquirer as being prepared to supply in the course of his business information of the kind sought. He had made no claim to any skill or competence which the law could require him to make good.
The carrying on of a business or profession which involves the giving of advice of a kind which calls for special skill and competence is the normal way in which a person lets it be known to the recipient of the advice that he claims to possess that degree of skill and competence and is willing to exercise that degree of diligence which is generally possessed and exercised by persons who carry on the business or profession of giving advice of the kind sought. The American Restatement of the Law of Tortsd confines the duty of care in giving advice to persons who make it part of their business to supply advice; though later tentative redrafts suggest that the duty also attaches where the advisor has a financial interest in the transaction, a situation which is not relevant to the instant appeal. Denning LJ also so confined it in his dissenting judgment in Candler’s case where after stating that the persons subject to a duty of care in giving advice are:
‘… those persons, such as accountants, surveyors, valuers and analysts, whose profession and occupation it is to examine books, accounts, and other things, and to make reports on which other people—other than their clients—rely in the ordinary course of business … ’, added: ‘Herein lies the difference between these professional men and other persons who have been held to be under no duty to use care in their statements, such as promoters who issue a prospectus: Derry v. Peek (now altered by statute … ), and trustees who answer inquiries about the
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trust funds: Low v. Bouverie. These persons do not bring, and are not expected to bring, any professional knowledge or skill into the preparation of their statements. They can only be made responsible by the law affecting persons generally, such as contract, estoppel, innocent misrepresentation or fraud.’
This dissenting judgment was referred to with approval in Hedley Byrne in the speeches of Lord Hodson ([1963] 2 All ER at 597, [1964] AC at 509), Lord Devlin ([1963] 2 All ER at 611, [1964] AC at 530) and Lord Pearce ([1963] 2 All ER at 617, [1964] AC at 538).
While accepting this as the common case giving rise to the duty of care their Lordships would not wish to exclude the case where the advisor, although not carrying on the business or profession generally, has, at or before the time at which his advice is sought, let it be known in some other way that he claims to possess skill and competence in the subject-matter of the particular enquiry comparable to those who do carry on the business or profession of advising on that subject-matter and is prepared to exercise a comparable skill and competence in giving the advice. Here too, by parity of reasoning, the law should require him to make good his claim. But the mere giving of advice with knowledge, as in Low v Bouverie that the enquirer intends to rely on it does not, of itself, in their Lordships’ view amount to such a claim. The converse of this is the case where a person who does carry on a business or profession which involves the giving of advice of the kind sought by the enquirer, does so in circumstances which should let it be known to a reasonable enquirer that he was not prepared to exercise in relation to the particular advice sought that degree of diligence which he would exercise in giving such advice for reward in the course of his business or profession. Casual advice given by a professional man on a social or informal occasion is the typical example, of which Fish v Kelly provides an illustration among the decided cases.
There are two passages in the speeches in Hedley Byrne which have been particularly relied on, in the argument before their Lordships and in the majority judgments in each of the courts below, as amounting to a decision that the law imposes a ‘duty of care’ on a person who gives advice to another on a subject-matter requiring skill and competence and diligence, so long as he knows or ought to have known that the other intends to rely on it in a matter affecting his economic interests, notwithstanding that the advisor neither carries on the business of giving advice of that kind nor has let it be known in some other way to the advisee at or before the time his advice is sought that he claims to possess a comparable skill and competence and is prepared to exercise a comparable diligence.
The passage in Lord Reid’s speech ([1963] 2 All ER at 583, [1964] AC at 486) is that in which he poses the courses of action open to a reasonable man on being asked for advice on a matter requiring skill and competence and diligence. It reads as follows:
‘A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have
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accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.’
This is not the language of statutory codification of the law of tort but of judicial exposition of the reasons for reaching a particular decision on the facts of the case. Read out of the context in which the whole argument in Hedley Byrne proceeded, ie advice given in the course of a business or profession which involved the giving of skilled, competent and diligent advice, these words are wide enough to sustain the respondent’s case in the instant appeal. But in their Lordships’ view the reference to ‘such care as the circumstances require’ pre-supposes an ascertainable standard of skill, competence and diligence with which the advisor is acquainted or has represented that he is. Unless he carries on the business or profession of giving advice of that kind he cannot be reasonably expected to know whether any and if so what degree of skill, competence or diligence is called for, and a fortiori, in their Lordships’ view, he cannot be reasonably held to have accepted the responsibility of conforming to a standard of skill, competence and diligence of which he is unaware, simply because he answers the enquiry with knowledge that the advisee intends to rely on his answer. This passage should in their Lordships’ view be understood as restricted to advisors who carry on the business or profession of giving advice of the kind sought and to advice given by them in the course of that business.
The other passage relied on by counsel for the respondent occurs in the speech of Lord Morris of Borth-y-Gest ([1963] 2 All ER at 594, [1964] AC at 502, 503). It reads as follows:
‘My lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies on such skill, a duty of care will arise. The fact that the service is to be given by means of, or by the instrumentality of, words can make no difference. Furthermore if, in a sphere in which a person is so placed that others could reasonably rely on his judgment or his skill or on his ability to make careful inquiry, a person takes it on himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows, or should know, will place reliance on it, then a duty of care will arise.’
This passage states a conclusion which follows from a consideration of the decided cases previously examined by Lord Morris in which advice or information was given by a person in the course of carrying on a business or profession which involved giving such advice or information for reward. The dichotomy between the two parts of this passage would appear to be between skilled persons who ‘undertake’ to give skilled advice or information ‘quite irrespective of contract’, and persons placed ‘in a sphere’ in which others could reasonably rely on his skill, judgment or ‘ability’ to make careful enquiry, an expression which, in the context of ‘careful’ enquiry cannot mean merely that he has an ‘opportunity’ to make enquiry which a skilled person would realise was necessary but an unskilled person would not. In their Lordships’ view the reference to the sphere in which the person is placed should be understood in this context as referring to that sphere in which were placed the persons referred to in the cases previously discussed by Lord Morris in which the advisor had been held, or in his expressed opinion should have been held, to be subject to a duty of care, ie that of carrying on a business or profession of giving advice or undertaking enquiries of that kind.
In the respondent’s declaration as originally framed before amendment in the Court of Appeal of the Supreme Court of New South Wales, it contained no allegation that the company was in any better position than the respondent himself to give
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reliable advice concerning the financial stability of Palmer or as to the safety of investments therein. The fact that the company gave the advice without disclaimer of responsibility and with the knowledge that the respondent intended to rely on it in making a decision about his existing and future investments in Palmer was relied on as sufficient in itself to attract the duty of care. It is implicit in the allegation that the advice was given by a corporation ‘by itself its servants and agents’ that the giving of such advice was not ultra vires the company’s powers; but it is not implicit that it in fact carried on or held itself out as carrying on the business of giving skilled as distinct from mere honest advice of this character. Before their Lordships’ Board, counsel for the respondent has expressly disavowed any such implication, though there are passages in the judgments of Kitto and Menzies JJ in the High Court of Australia which suggest that this disavowal may not have been so explicit in the courts below. The corporate character of the defendant may therefore be ignored. The legal position would be no different if the defendant were a natural person not subject to the doctrine of ultra vires. For the reasons already given, the declaration in its original form, which appears to be based on the passage in Lord Reid’s speech in Hedley Byrne ([1963] 2 All ER at 583, [1964] AC at 486) which has already been cited, does not, in their Lordships’ view, disclose any cause of action.
The amendments introduced in the Court of Appeal state the respects in which it is alleged that the company was, and was known by the respondent to be, in a better position than he was to give reliable advice on the subject-matter of his enquiry. They were in a better position than he was to obtain from an outside source information, not alleged to be already in their possession, concerning the financial affairs of Palmer and, if such information were obtained, they had officers in their employment who had the necessary skill and competence to form a reliable judgment concerning Palmer’s financial affairs if the company had chosen to use their services to do so. It is not, however, alleged that it was to any officer possessed of this skill and competence that the respondent addressed his enquiry to the company for its advice; nor is it alleged that the officer or servant of the company to whom his enquiry was actually addressed undertook or represented to the respondent that any such enquiries would be made of any outside source or that any officer of the company possessed or the relevant skill and competence would be consulted. The facts alleged if proved at the trial would establish no more than that the company could have provided the respondent with reliable advice if it had chosen to make the enquiries requisite to provide the material necessary to form a reliable judgment and had required its skilled and competent officers, who ex concessu were not employed for that purpose, to divert themselves from their ordinary employment to exercise their skill and competence on the information so obtained. The same could be said of the successful defendant in Low v Bouverie. The requisite enquiry which he failed to make, ie to inspect his own deed of appointment, indeed, involved no recourse to outside sources. If he did not realise the need to do so or its significance when inspected he could have consulted his solicitor. As respects recourse to outside sources of information the same might be said of any banker giving a reference in the actual course of his business, for, as already pointed out, although by virtue of his carrying on that business the law does impose on him some duty of care, that duty does not extend to making enquiries of outside sources.
In their Lordships’ view these additional allegations are insufficient to fill the fatal gap in the declaration that it contains no averment that the company to the knowledge of the respondent carried on the business of giving advice on investments or in some other way had let it be known to him that they claimed to possess the necessary skill and competence to do so and were prepared to exercise the necessary diligence to give reliable advice to him on the subject-matter of his enquiry. In the absence
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of any allegation to this effect the respondent was not entitled to assume that the company had accepted any other duty towards him than to give an honest answer to his enquiry nor, in the opinion of their Lordships, did the law impose any higher duty on them. This is in agreement with the reasoning of Taylor J in the High Court of Australia with which the judgment of Owen J is also consistent.
As with any other important case in the development of the common law, Hedley Byrne should not be regarded as intended to lay down the metes and bounds of the new field of negligence of which the gate is now opened. Those will fall to be ascertained step by step as the facts of particular cases which come before the courts make it necessary to determine them. The instant appeal is an example: but their Lordships would emphasise that the missing characteristic of the relationship which they consider to be essential to give rise to a duty of care in a situation of the kind in which the respondent and the company found themselves when he sought their advice, is not necessarily essential in other situations, such as, perhaps, where the advisor has a financial interest in the transaction on which he gives his advice (cf W B Anderson & Sons Ltd v Rhodes (Liverpool) Ltd; American Restatement of the Law of Tortse). On this, as on any other metes and bounds of the doctrine of Hedley Byrne their Lordships are expressing no opinion. The categories of negligence are never closed and their Lordships’ opinion in the instant appeal, like all judicial reasoning, must be understood secundum subjectam materiam.
For these reasons their Lordships will humbly advise Her Majesty that the appeal be allowed. In accordance with undertakings given when special leave to appeal was granted, there will be order as to the costs before their Lordships’ Board and the orders for costs below will not be disturbed.
Dissenting judgment by LORD REID and LORD MORRIS OF BORTH-Y-GEST. The main question in this appeal is whether the appellant company owed any duty of care to the respondent when, in response to his request for information and advice about the financial stability of another company, referred to as Palmer, it gave to him an opinion that Palmer was financially stable. The appellant company accepts the principles laid down by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd that in certain circumstances such a duty can arise although there is no contract between the parties, but maintains that no such duty could arise in the present case. The present case is complicated by the fact that the appeal arises on a demurrer and that there is a dispute as to the meaning and effect of the respondent’s pleading. The Supreme Court of New South Wales gave judgment for the respondent on the demurrer and the High Court of Australia by a majority dismissed an appeal from that judgment. If we agree with the majority of the High Court with regard to the principles involved, it would not in our judgment be proper for the Board to reverse the decision of the Australian courts on the grounds that the respondent’s pleading appears to the Board to be defective. That is a matter which must chiefly depend on the practice in the courts of New South Wales, a matter with which the Australian courts are familiar but we are not.
As the facts have not been investigated and there is a dispute as to the meaning of the respondent’s allegation, it is not possible to set out the alleged facts except in the most general way. The respondent had certain investments in Palmer and he had in mind to invest further in that company. He was a policy holder in the company. The appellant company and Palmer were associated in that they were both subsidiaries of another company. The appellant company was in a position to obtain information about Palmer’s affairs which was not available to the respondent.
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And the appellant company had officers in its employment who were capable of forming a reliable judgment on information which the appellant company could obtain from Palmer. So the respondent sought advice from the appellant company about the safety of his investments in Palmer. The appellant company, knowing that the respondent intended to act on its advice, gave him advice which caused him to leave his existing investments with Palmer and to make further investments in that company. That advice turned out to be bad advice with the result that the respondent lost a large sum of money. The respondent’s case is that if the appellant company had taken that amount of care which was reasonable in the circumstances its advice would have been different and he would not have lost his money.
In our judgment it is not possible to lay down hard and fast rules as to when a duty of care arises in this or in any other class of case where negligence is alleged. When in the past judges have attempted to lay down rigid rules or classifications or categories they have later had to be abandoned. But it is possible and necessary to determine the principles which have to be applied in determining whether in given circumstances any duty to take care arises. In this class of case the first principle is that no duty beyond the duty to give an honest answer can arise when advice is given casually or in a social context, and the reason is that it would be quite unreasonable for the enquirer to expect more in such circumstances and quite unreasonable to impose any greater duty on the adviser. The law must keep in step with the habits of the reasonable man and consider whether ordinary people would think they had some obligation beyond merely giving an honest answer.
It may be going too far to say that a duty to take care can only arise where advice is sought and given in a business or professional context, for there might be unusual cases requiring a wider application of this principle. But for present purposes we think that the appropriate question is whether this advice was given on a business occasion or in the course of the appellant company’s business activities. The solution of this question may be difficult where advice is given by an individual, but here the advice is alleged to have been given by a company. It must in fact have been given by some individual. If it was given by the company that must mean that the individual who gave the advice must have had general or special authority from the company to give it, or at least that the company must have held him out as authorised to give it. It is not suggested that the appellant company was so limited by its memorandum and articles that it could not give such authority. We are unable to see how a company can authorise the giving of such advice otherwise than as a part of its business activities. So long as a company does not act ultra vires it is for the company to determine the scope of its business. It appears to be quite common practice for businesses to perform gratuitous services for their customers with the object of retaining or acquiring their goodwill. If they incur expense in doing so it has never so far as we are aware been suggested that such expense is not a business expense. And we think that where companies do perform such service both they and their customers would be surprised to learn that the company is under no obligation to take any care in the matter.
The ordinary rule, that a defendant can only be liable for loss which was caused by his acts or omissions, appears to us to afford the answer to a number of questions discussed in argument. If the plaintiff acted reasonably in seeking the advice of the defendant and made it clear to the defendant that he intended to rely on the advice with regard to a certain matter, then it could properly be said that by giving the advice the defendant caused the plaintiff to act as he did. If however the plaintiff acted unreasonably in taking or following the advice then it was his own fault if he suffered loss and it would be unnecessary to consider whether the defendant owed any duty of care when giving the advice. Accordingly we are only concerned with a case where the plaintiff acted reasonably. In this case the respondent alleges that he was aware that the appellant company had special facilities for obtaining the necessary information and was in a position to give reliable and up-to-date advice,
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and was aware that he intended to act on the appellant company’s advice. So if taking care would have caused the appellant company to give different advice, these allegations would enable the respondent to prove that the appellant company’s failure to take care caused him loss.
Much of the argument was directed to establishing that a person giving advice cannot be under any duty to take care unless he has some special skill, competence, qualification or information with regard to the matter on which his advice is sought. But then how much skill or competence must he have? Even a man with a professional qualification is seldom an expert on all matters dealt with by members of his profession. Must the adviser be an expert or specialist in the matter on which his advice is sought? And when it comes to matters of business or finance where those whose business it is to deal with such matters generally have no recognised formal qualification, how is the sufficiency of the adviser’s special skill or competence to be measured? If the adviser is invited in a business context to advise on a certain matter and he chooses to accept that invitation and to give without warning or qualification what appears to be considered advice, is he to be allowed to turn round later and say that he was under no duty to take care because in fact he had no sufficient skill or competence to give the advice?
It must be borne in mind that there is here no question of warranty. If the adviser were to be held liable because his advice was bad then it would be relevant to enquire into his capacity to give the advice. But here and in cases coming within the principles laid down in Hedley Byrne the only duty in question is a duty to take reasonable care before giving the advice. We can see no ground for the distinction that a specially skilled man must exercise care but a less skilled man need not do so. We are unable to accept the argument that a duty to take care is the same as a duty to conform to a particular standard of skill. One must assume a reasonable man who has that degree of knowledge and skill which facts known to the enquirer (including statements made by the adviser) entitled him to expect of the adviser, and then enquire whether such a reasonable man could have given the advice which was in fact given if he had exercised reasonable care.
Then it was argued that an adviser ought not to be under any liability to exercise care unless he had, before the advice was sought, in some way held himself out as able and willing to give advice. We can see no virtue in a previous holding out. If the enquirer, knowing that the adviser is in a position to give informed advice, seeks that advice and the adviser agrees to give it, we are unable to see why his duty should be more onerous by reason of the fact that he had previously done the same for others. And again, if the previous conduct of the adviser is relevant, would it be sufficient that, in order to attract new customers or increase the goodwill of existing customers, he had indicated a general willingness to do what he could to help enquirers, or must he have indicated a willingness and ability to deal with the precise kind of matter on which the enquirer seeks his assistance? In our judgment when an enquirer consults a businessman in the course of his business and makes it plain to him that he is seeking considered advice and intends to act on it in a particular way, any reasonable businessman would realise that, if he chooses to give advice without any warning or qualification, he is putting himself under a moral obligation to take some care. It appears to us to be well within the principles established by the Hedley Byrne case to regard his action in giving such advice as creating a special relationship between him and the enquirer and to translate his moral obligation into a legal obligation to take such care as is reasonable in the whole circumstances.
In Hedley Byrne their Lordships were not laying down rules. They were developing a principle which flows, as in all branches of the tort of negligence, from giving legal effect to what ordinary reasonable men habitually do in certain circumstances. Admittedly there is nothing in Hedley Byrne’s case which governs this case. The
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principles there indicated must be developed from time to time to cover new cases, and we have attempted to set out what we believe to be a proper development to meet the present case. We are unable to construe the passages from our speeches cited in the judgment of the majority in the way in which they are there construed. In our view they are consistent with and support the views which we have already expressed in the present case. We do not think that it would be useful to quote expressions from speeches used without having in mind circumstances such as we have here. Earlier authorities were explained in that case and, with one exception, we do not propose to add to those explanations.
We must however deal with Low v Bouverie because the appellant company argued that the respondent could not succeed if that case was rightly decided. We do not agree. We see nothing wrong with the decision although the judgments are to some extent coloured by a view of the effect of Derry v Peek which was held in Hedley Byrne & Co’s case to be erroneous. In Low v Bouverie, Low, a moneylender, proposed to lend money to a relative of Bouverie who had interests in a trust of which Bouverie was a trustee. So at the instigation of the borrower he wrote to Bouverie asking whether those interests were mortgaged. In reply Bouverie mentioned two mortgages but failed to mention others which he had forgotten about. So Low lent money but lost it because the borrower became bankrupt and there was nothing left of the borrower’s interest in the trust after payment of the mortgages which Bouverie had forgotten to mention. In the first place Bouverie was not acting in any business capacity. He was acting in his private capacity as a trustee in a family trust and we have already said that in our view there is in general no duty to take care imposed on an adviser who is not acting in the course of his business or professional activities. And secondly it appears from the judgments of Lindley and Bowen LJJ that Bouverie’s letters to Low were not unequivocal statements that there were no other encumbrances. Lindley LJ said ([1891] 3 Ch at 103, [1891–94] All ER Rep at 354):
‘They are quite consistent with the view that the incumbrances mentioned by the Defendant were all he knew of or remembered.’
Bowen LJ said ([1891] 3 Ch at 106, [1891–94] All ER Rep at 355):
‘I think that his language would be reasonably understood as conveying an intimation of the state of his belief, without an assertion that the fact was so apart from the limitation of his own knowledge.’
So it was not reasonable for Low to act in Bouverie’s letters without taking further steps to check the information.
We think that the judgments of the majority in the High Court are consistent with the views which we have expressed as to the principles which should govern the present case. We are therefore of opinion that the appeal should be dismissed.
Appeal allowed.
Solicitors: Linklaters & Paines (for the appellant companies); Coward, Chance & Co (for the respondent).
S A Hatteea Esq Barrister.
R Pagnan & Fratelli v Corbisa Industrial Agropacuaria Limitada
[1971] 1 All ER 165
Categories: CIVIL PROCEDURE: CONTRACT
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): SALMON AND MEGAW LJJ AND SIR FREDERIC SELLERS
Hearing Date(s): 11, 12, 13 MARCH, 14 APRIL 1970
Damages – Mitigation – Contract – Sale of goods – Lawful rejection by buyer – Measure of damages – Market price rule – Later repurchase at a profit by buyer from same seller – Whether profit accountable in mitigation – Continuous dealing between parties – Sale of Goods Act 1893, s 51(3).
Where, after a buyer has lawfully rejected goods under a contract, a new agreement is entered into by the same parties for the sale and purchase of the same goods at a reduced price, but the buyer sues the seller for damages under the original contract, the ordinary principle of mitigation of damages permits account to be taken of the profit made by the buyer on the subsequent contract, provided that it is found as a fact that the subsequent contract is part of a continuous dealing between the parties, the rule in s 51(3)a of the Sale of Goods Act 1893 being no more than a prima facie rule inapplicable to such a case (see p 169 b to d and g, p 170 h and j, p 171 h and p 172 g to j, post).
Dictum of Viscount Haldane LC in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways of London Ltd [1911–13] All ER Rep at 69–71 applied.
Jamal v Moolla Dawood, Sons & Co [1916] 1 AC 175 and Campbell Mostyn (Provisions) Ltd v Barnett Trading Co (1954) 1 Lloyd’s Rep 65 distinguished.
Notes
For the assessment of damages under the market-price rule on a seller’s failure to deliver goods (or on lawful rejection by a buyer), see 34 Halsbury’s Laws (3rd Edn) 151, 152, para 250, and for cases on the subject, see 39 Digest (Repl) 816–819, 2791–2824.
For the Sale of Goods Act 1893, s 51, see 22 Halsbury’s Statutes (2nd Edn) 1014.
Cases referred to in judgments
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, [1911–13] All ER Rep 63, 81 LJKB 1132, 107 LT 325, 17 Digest (Repl) 108, 226.
Campbell Mostyn (Provisions) Ltd v Barnett Trading Co [1954] 1 Lloyd’s Rep 65.
Dunkirk Colliery Co v Lever (1878) 8 Ch D 20, 39 LT 239.
Jamal v Moolla Dawood, Sons & Co [1916] 1 AC 175, 85 LJPC 29, 114 LT 1, 17 Digest (Repl) 109, 227.
Cases also cited
Charter v Sullivan [1957] 1 All ER 809, [1957] 2 QB 117.
Jebson v East & West India Dock Co (1875) LR 10 CP 300, [1874–80] All ER Rep 615.
Payzu Ltd v Saunders [1919] 2 KB 581, [1918–19] All ER Rep 219.
Slater & Co v Hoyle and Smith Ltd [1920] 2 KB 11, [1918–19] All ER Rep 654.
Vic Mill Ltd, Re [1913] 1 Ch 465.
Wertheim v Chicoutini Pulp Co [1911] AC 301, [1908–10] All ER Rep 707.
Page 166 of [1971] 1 All ER 165
Williams Brothers v Ed T Aguis Ltd [1914] AC 510, [1914–15] All ER Rep 97.
World Beauty, The [1968] 2 All ER 673, [1969] P 12, [1969] 3 All ER 158, [1970] P 144.
Appeal
R Pagnan & Fratelli of Padua, the buyers under a contract of sale of maize, appealed from the decision of Roskill J (reported [1969] 2 Lloyd’s Rep 129), given on 19 June 1969, on a special case stated by the Appellate Tribunal of the London Corn Trade Association Ltd, upholding the decision of an umpire who had rejected the claim of the buyers for damages against the sellers, Corbisa Industrial Agropacuaria Limitada of Brazil.
R L A Goff QC and Brian Davenport for the buyers.
A B R Hallgarten for the sellers.
Cur adv vult
14 April 1970. The following judgments were delivered.
SALMON LJ. All the facts canvassed by the parties to this arbitration are fully set out in the award and in the lucid judgment of Roskill J ([1969] 2 Lloyd’s Rep 129). It is unnecessary for me to restate any of them in detail. Moreover, having regard to the concessions made by the buyers in this court, many of those facts have become irrelevant. I need, therefore, refer only in broad outline to the main facts on which this appeal turns.
By a written contract dated 20 May 1965, the buyers, an Italian firm, agreed to buy from the sellers, a Brazilian company, 10,000 tons 5 per cent more or less of Brazilian maize at (US) $64 a ton. The contract which was in form 32 of the London Corn Trade Association Ltd provided for c i f terms, shipment in June 1965 from Brazil for a west coast Italian port or, at the buyers’ option, for an Adriatic port at an extra charge of 50 cents per ton, Rye terms and arbitration in London. Rye terms, for the purposes of this case, mean that if the goods are damaged in transit, the buyers cannot reject but must take them with an allowance off the purchase price, to be fixed by agreement or arbitration. Prima facie, this allowance would be the difference between the value of the goods to the buyers at the time of arrival and the value they would have had if they were undamaged. It is perhaps worth noting that this contract is a typical example of contracts commonly entered into by foreign merchants all over the world. These contracts have nothing to do with this country but nevertheless provide for arbitration in London because of the confidence which the merchants repose in the integrity, expertise and comparative expedition with which arbitrations are conducted and justice is administered in the United Kingdom.
The sellers ran into difficulties from the beginning. They could not find the money necessary to pay for the freight and insurance premiums. The buyers accordingly advanced the money for these purposes. The shipment of the maize was seriously delayed. The buyers twice agreed to an extension of time in consideration of reduction in each instance of 1 1/2 per cent of the contract price. The last extension of time expired on 22 August 1965, and on this date time for performance by tender of documents expired. Thereafter, the sellers were in breach of a fundamental term of the contract and accordingly the buyers might then lawfully have treated the contract as at an end; but they did not do so. Instead, after intensive negotiations, the contract was varied by an oral agreement made between the parties’ representatives on 21 September 1965. By this date, the loading of the cargo had been completed and soon afterwards the buyers designated Venice as the port of discharge. Some damage to the cargo had been observed. The oral agreement, to which I have referred, provided that notwithstanding the sellers’ breaches, the contract should remain alive and that the buyers should accept and pay the contract price
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(as varied) for the cargo, providing that they were satisfied with its condition on arrival at Venice. If they were not satisfied, then they should be entitled to reject it. This meant that the contract had changed its character. The Rye terms had been struck out and it had become a contract for goods delivered when the ship arrived. The ship arrived at Venice on about 10 October 1965. By arrangement between the parties, it was sent on to Trieste where it arrived on 19 October 1965. On that date the buyers, not being satisfied with the condition of the cargo, rejected it, as they were entitled to do.
If the history of the dealings between the parties had stopped there, this case would present no problem. The buyers would clearly be entitled to damages, and these damages would, prima facie, be the difference between the contract price (as varied) and the market price of sound goods in Trieste at the date of the breach, ie about $2 to $3 a ton; but the history of the dealings between the parties did not cease on 19 October. On 13 October, the buyers had obtained a decree of sequestration from the court at Padua relating to 2,350 tons of the cargo as security for $76,130 which they had paid out for freight and insurance premiums, and for $56,450 which they claimed as damages for breach of contract by the sellers. On 27 October, the sellers repaid the $76,130. Accordingly, on 5 November, the sequestration order was lifted as regards 1,650 tons, but remained in force in relation to 700 tons of the cargo. This 700 tons represented upwards of about $35,000 at $51 a ton or $56,000 at the contract price. After 19 October, there were negotiations for a purchase of the whole cargo by the buyers at a reduced price—the buyers having intimated to the sellers by a letter of 11 October, confirmed by a telex of 19 October, that they were prepared to negotiate such a purchase at a reduced price in the event of their rejecting the goods and repudiating the contract of 20 May.
These negotiations resulted in a new contract being entered into between the buyers and the sellers on 13 November under which the buyers bought the cargo at a price of $51·40 per ton, free of all expenses up to 26 November, on an ex silo Trieste basis. According to para 29 of the award the price of $51·40 a ton—
‘[1] … was unduly depressed by reason of [the buyers] … sequestration and having regard to discharging, landing, storage, interest and other incidental expenses saved, the difference of over 23% between the contract price and [$51·40 a ton] was at least 10% more than [the buyers] would have been entitled to receive by way of a Rye terms allowance had the goods been accepted and not rejected. [2] The … purchase of 13th November 1965 formed part of a continuous dealing with the situation in which [the buyers] found themselves, and was not an independent or disconnected transaction. By such purchase [the buyers] diminished and mitigated any loss which they might have suffered.’
An addendum to the agreement of 13 November recited that:
‘About 700 tons … are presently under a conservative seizure. These 700 tons will be paid by buyer and delivered by Silos as soon as seizure is withdrawn and the countervalue deposited with Banca Commerciale Italiana into a “bound account“.’
Accordingly, after 13 November 1965, the 700 tons were released to the buyers, and the proceeds of their sale at $51·40 a ton, amounting to $35,980, were paid by the buyers into a blocked bank account, pending the award to be made in the arbitration proceedings which had been instituted by the buyers in London, claiming damages from the sellers for breach of contract.
The addendum clearly did not amount to an admission by the sellers that the buyers had suffered any loss or damage. Equally clearly, it did not amount to an admission by the buyers that the contract of 13 November was to be treated as a
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settlement of their claim for any loss or damage which they might have suffered as a result of the buyers’ breach of contract.
The arbitrators appointed by the parties failed to agree. Accordingly an umpire was appointed. On 14 March 1966, the umpire made an award in favour of the sellers. The buyers appealed from that award to the appellate tribunal of the London Corn Trade Association Ltd. The very experienced members of that tribunal in their award, which was in the form of a special case, found that the sellers were in breach of the contract of 20 May 1965, but that the buyers were not entitled to recover any damages in respect of these breaches because they had suffered none. The tribunal stated a number of questions of law for the decision of the court, the only one of which that is now material is whether, on the facts found, and the true construction of the contract, the tribunal, in assessing damages, was bound or entitled to take account of the purchase of the cargo by the buyers on 13 November 1965. If the answer to that question is ‘Yes’, the tribunal’s award stands. Otherwise, the buyers’ appeal from the umpire’s award must be allowed and the case remitted to the tribunal to assess damages. The buyers appealed from the tribunal to Roskill J. He upheld the tribunal’s award and answered the question to which I have referred in favour of the sellers. The buyers now appeal to this court from the judgment of Roskill J ([1969] 2 Lloyd’s Rep 129).
In my view, the basis of the tribunal’s conclusion was: (a) that the purchase of 13 November 1965, showed the buyers a profit substantially in excess of the damages which they claimed, namely the difference between the May contract prices (as varied) of $62·64 a ton and the market price of $64·50 to $65 on 19 October 1965; (b) that the purchase of 13 November 1965 formed part of a continuous course of dealing between the same parties in respect of the same goods; (c) that the buyers’ profit extinguished their alleged loss; and (d) that accordingly the buyers, having suffered no loss, were not entitled to any damages.
I entirely agree with Roskill J ([1969] 2 Lloyd’s Rep 129) that the statement in para 29 of the tribunal’s award, that the purchase of 13 November diminished any loss which the buyers might have suffered, when coupled with the finding in para 34 (c) of the award that the buyers were not entitled to recover damages in respect of the sellers’ default, clearly shows that the tribunal were using the word ‘diminished’ to mean that the loss had in fact been extinguished, ie diminished to nothing. Counsel for the buyers argued that there was no evidence on which the tribunal could find that the buyers had made a profit out of the purchase of 13 November. He contended that there was nothing to show that the goods, in the state in which they arrived in Trieste, were worth any more on the market there than $51·40 a ton, let alone so much more that the buyers’ profit on that transaction would extinguish the loss which they might otherwise have suffered through the sellers’ breach of contract. The tribunal’s findings on these matters were, however, essentially findings of fact. Since we do not know all the evidence before the tribunal, it is impossible to hold that there was no evidence to support its finding. On the contrary, from such evidence as the award does set out, it seems plain to me that, having regard so the sequestration order, it would probably have been very difficult for the sellers to dispose of the whole cargo to anyone except the buyers. The buyers were therefore in a strong position virtually to dictate the price at which they would buy. We know too, from para 29 of the award, that the price of $51·40 (for which the buyers bought the goods on 13 November) was substantially less than they would have had to pay for the goods had they accepted them on 19 October, and obtained a reasonable allowance under the Rye terms on account of their damaged condition. The latter net price presumably would have been the market price for this maize in Trieste on 19 October. Since there had been no appreciable fluctuations in the market price in Trieste for Brazilian maize between 19 October or, for that matter, between
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May 1965, and 13 November 1965, it follows that $51·40 a ton was substantially less than the market price on 13 November 1965. I agree with the learned judge that the tribunal’s findings on this point are unassailable.
I come now to the main point taken on behalf of the buyers. counsel for the buyers argued that, when considering the buyers’ claim for damages in respect of the sellers’ failure to deliver goods in accordance with the May contract, the purchase of 13 November must, in law, be treated as irrelevant and that accordingly any profit which the buyers may have made from it must be ignored. Since the November purchase was not a transaction independent of or disconnected with the May contract, but formed part of a continuous dealing between the same parties in respect of the same goods resulting, on balance, in a profit to the buyers, counsel for the buyers’ argument, however attractively he puts it, on analysis comes to this—that the buyers, who in reality have made a handsome profit, are, in law, entitled to recover damages for a fictitious loss. I should be reluctant to come to such an absurd and unjust conclusion unless compelled to do so by the clearest authority. Counsel for the buyers contends that such authority is to be found in Jamal v Moolla Dawood, Sons & Co and Campbell Mostyn (Provisions) Ltd v Barnett Trading Co. I am afraid that I cannot agree with this contention. The principle of law is that where a buyer wrongfully neglects or refuses to accept and pay for the goods or a seller wrongfully neglects or refuses to deliver the goods to the buyer, the innocent buyer or seller, as the case may be, may maintain an action for damages for breach of contract. The measure of damages in each case is the estimated loss directly and naturally resulting in the normal course of events from the breach of contract. Where there is an available market for the goods, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market price at the date of the breach: see ss 50 and 51 of the Sale of Goods Act 1893. The two authorities relied on by counsel for the buyers do no more than illustrate instances in which the prima facie rule relating to the measure of damages applies. In such cases the innocent party is not bound to go on the market and buy or sell at the date of the breach. Nor is he bound to gamble on the market changing in his favour. He may wait, if he chooses; and if the market turns against him this cannot increase the liability of the party in default; similarly if the market turns in his favour, the liability of the party in default is not diminished. Normally if the innocent party goes on to the market and buys or sells after the date of the breach, this is res inter alios acta so far as the party in default is concerned. The present case, however, is quite different. The purchase of 13 November was certainly not inter alios acta; it was between the selfsame buyers and sellers who were parties to the contract of 20 May 1965, and it related to the selfsame goods that were the subject-matter of that contract. Moreover, as already stated, the tribunal found that it was not an independent or disconnected transaction but formed part of a continuous dealing between the parties; and these findings of fact cannot be challenged in this court.
In British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd Viscount Haldane LC, who was a party to the decision in Jamal’s case, said ([1912] AC at 689–692, [1911–13] All ER Rep at 69–71):
‘As James L.J. indicates [in Dunkirk Colliery Co v Lever ((1876) 9 Ch D 20 at 25)], this second principle does not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business. But when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the
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loss he has suffered may be taken into account even though there was no duty on him to act … I think that … provided the course taken to protect himself by the plaintiff … was one which a reasonable and prudent person might in the ordinary conduct of business properly have taken, and in fact did take whether bound to or not … an arbitrator may properly look at the whole of the facts and ascertain the result in estimating the quantum of damage … I think the principle which applies here is that which makes it right for the … arbitrator to look at what actually happened, and to balance loss and gain. The transaction was not res inter alios acta, but one in which the person whose contract was broken took a reasonable and prudent course quite naturally arising out of the circumstances in which he was placed by the breach … I think that the proper inference is that [the course taken by the plaintiff] … formed part of a continuous dealing with the situation in which they found themselves, and was not an independent or disconnected transaction.’
The facts in the Westinghouse case were, no doubt, different from those in the present case, but I think that the principle there enunciated applied equally here. The buyers were not bound to enter into the agreement of 13 November. Clearly, they did not do so with the motive of mitigating damages and thereby diminishing their claim against the sellers. They intended to obtain as much from the sellers as possible; but their motive or intention does not matter. No one can doubt that they took a reasonable, prudent and, I would add, an astute course, quite naturally arising out of the circumstances in which they were placed by the sellers’ breach. It was a course, as the tribunal found, which formed part of a continuous dealing with the situation in which they found themselves and was not an independent or disconnected transaction; it in fact extinguished the loss which they would otherwise have suffered. Normally, when a seller tenders goods which are so defective that they do not correspond with the contract, the buyer has no option. He can reject the goods and recover as damages the difference between the contract price and the market price at the date of the breach, if the market price is then in excess of the contract price. Alternatively, he can take the goods and deduct from the purchase price, or claim damages for the difference between the value of the goods at the time of delivery and their value had they been up to contract; but the buyer cannot have his cake and eat it, as these buyers are seeking to do. They went through the motions of rejecting the goods in October 1965. Indeed they did, in law, reject them. They did so, however, in the confident expectation that, as a result of their rejection and the sequestration order, they would be able to negotiate a new agreement under which they would acquire the goods at a price favourable to themselves. This they did by their purchase of 13 November. The price was substantially below the market price and their resulting profit certainly exceeded the difference between the May contract price as varied and the prevailing market price at all relevant times.
Damages for breach of contract are awarded for loss suffered. Here the buyers suffered no loss. It is only by looking in isolation at the sellers’ failure to deliver sound goods that the buyers’ claim is even arguable. This failure cannot in my view properly be looked at in isolation, because together with the purchase of 13 November which arose out of the situation in which the buyers found themselves, it formed one continuous dealing between the same parties in respect of the same goods. As a result of this dealing, looked at as a whole, the buyers, notwithstanding the sellers’ breach, made a profit and no loss. To allow the buyers’ claim would in my view be contrary alike to justice, common sense and authority.
I would accordingly dismiss the appeal.
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MEGAW LJ. It is unnecessary for me to set out the facts since these are summarised in the judgment of Salmon LJ. I would only say that, for myself, I see no ground for criticism of the conduct of the buyers. It was not they who, from the outset, failed to perform the contract. I agree, however, that the legal rights of the buyers do not depend on their motive or intention in negotiating the purchase of 13 November 1965.
The tribunal’s award is that the sellers were in default in fulfilment of the contract of 20 May 1965, but that the buyers are not entitled to recover any damages from the sellers in respect of such default. The basis on which the appellate tribunal arrived at its decision that the buyers were not entitled to recover damages, was that the purchase of 13 November 1965 involved a profit for the buyers, in the sense that the price agreed was substantially below the market price for those goods at that place on that date; and that this purchase was so closely connected with the antecedent transactions involving the buyers’ claim for loss that the profit should be set against the loss; and, being so set, the loss was fully compensated without any award of damages. This is the implication from various passages in the award, including para 29(d) which states:
‘The said purchase of 13th November 1965 formed part of a continuous dealing with the situation in which [the buyers] found themselves, and was not an independent or disconnected transaction. By such purchase [the buyers] diminished and mitigated any loss which they might have suffered.’
The phrases ‘formed part of a continuous dealing’ and ‘was not an independent or disconnected transaction’ are echoes of words used by Lord Haldane LC in his speech in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd ([1912] AC 673 at 692, [1911–13] All ER Rep 63 at 71).
The tribunal posed four questions of law for the decision of the court. I need not set out any of them except question (4), since there is no longer any challenge by either party to the learned judge’s decision ([1969] 2 Lloyd’s Rep 129) on the first three questions. Question (4) is:
‘whether, upon the facts found and the true construction of the said Contract:—(4) in assessing damages we … are bound or entitled to take account of the subsequent purchase by [the buyers] of the goods or any part thereof.’
If the answer to that question is ‘Yes’, the award stands, and the buyers are entitled to no damages. If the answer to that question is ‘No’, the tribunal desires that the award be remitted to it to assess damages in the light of the court’s answers to the questions of law.
Roskill J has answered the question in the affirmative because, in his view, the British Westinghouse principle permits account to be taken of the profit on the purchase of 13 November 1965, if the principle is applicable; it is applicable if the purchase of 13 November 1965 is a part of a continuous dealing, so that it is not an independent or disconnected transaction. Whether it is or not is a question of fact, on which the tribunal’s finding in favour of the sellers is conclusive; as is also its finding as to the existence and extent of the buyers’ profit on that purchase.
The buyers attack the learned judge’s judgment ([1969] 2 Lloyd’s Rep 129) on two grounds. First, they say that the applicable principle is not that of British Westinghouse, which is irrelevant in a sale of goods case such as this. Secondly, they say that the tribunal’s finding as to the profit in the 13 November transaction was misconceived. I use the word ‘profit’ in the same sense as I have explained it previously, and in the same sense,
Page 172 of [1971] 1 All ER 165
I think, as it was used by the learned judge, ie that the price was substantially below the market price for those goods at that place on that date.
I propose to consider, first, the second ground. The learned judge does not discuss it. We are told that some submission, to the effect that ‘there was no evidence of any profit’, was in fact made by counsel who then appeared for the buyers. It must, I think, have been a somewhat half-hearted submission. This is not surprising. The tribunal does not seem to have been asked to make a specific finding on this matter, nor is there any ground for supposing that it was submitted to the tribunal that there was no evidence. The award, quite properly, does not purport to set out all the evidence. It is impossible for this court to say that the tribunal had no evidence on which to base its finding of profit, ie that the sale price in the contract of 13 November 1965 was less than the market price of those goods at that date.
I come to the buyers’ first ground of attack on the judgment; but I come to it with the consideration in mind that there is an unchallengeable finding of fact that the buyers bought those goods on 13 November 1965 at a price substantially below their market price. The buyers say that that is wholly irrelevant; it cannot, as a matter of law, affect the amount of damages to which they would otherwise be entitled for the earlier breach of contract by the sellers, when these very goods were properly rejected by the buyers. The buyers’ argument is that, whatever may be the position in other types of breach of contract, and however relevant the British Westinghouse principle may be in such other types of case, it has no application in a sale of goods case where there has been a non-delivery by the sellers (or a lawful rejection by the buyers), and where there is an available market for the goods in question. Section 51(3) of the Sale of Goods Act 1893 provides that, where there is an available market, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time when they ought to have been delivered—in the case, as found by the judge, 19 October 1965. That prima facie rule is, it is contended, an invariable and immutable rule, as is shown by the judgment of the Judicial Committee of the Privy Council in Jamal v Moolla Dawood, Sons & Co and by the judgment of this court in Campbell Mostyn (Provisions) Ltd v Barnett Trading Co.
The learned judge does not in his judgment refer to this submission, nor to the cases on which it is founded. It may well be that this submission was given much less prominence in the argument before him. However, counsel for the sellers, who represented them also before Roskill J, has told us that Jamal’s case, at least, was cited before him and that some argument was founded on it. For my part, I think that the argument fails. The rule in s 51(3) of the Sale of Goods Act 1893 does not purport to be more than a prima facie rule. There is nothing in the cases cited, or in any other case which was brought to our attention, to elevate its status above that which is involved in ‘prima facie’. In particular, the cases cited were not concerned with a situation, as here, in which, after a breach of contract by non-delivery, or rejected delivery of defective goods, the selfsame goods became the subject-matter of a contract of purchase and sale between the selfsame parties at a price which differed from the them prevailing market price.
Despite the attractive argument of counsel for the buyers, I am not persuaded that the ordinary principle of mitigation of damages, as laid down in the British Westinghouse case, should not be allowed to have effect in such a case, where the tribunal of fact concludes that the ultimate sale is a part of a continuous dealing.
I would dismiss the appeal.
SIR FREDERIC SELLERS. I agree with and adopt entirely the judgment of Megaw LJ. I would only observe that the members of the tribunal, familiar with
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the transactions of their market and well versed in the respective prima facie rights of buyers and sellers when a breach arises, including, for instance, the prima facie rule for the assessment of damages under s 51(3) of the Sale of Goods Act 1893, and notwithstanding the earlier history of a succession of breaches by the sellers, and the undoubted claim of the buyers, for some damages which had accrued by the default of the sellers on 19 October 1965, nevertheless held that, by reason of the final transaction between the same parties in respect of the goods shipped under the original contract as amended, the buyers had suffered no loss. I find this interesting and feel some satisfaction in being able to support such experienced commercial opinion.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Crawley & de Reya (for the buyers); Richards, Butler & Co (for the sellers).
Henry Summerfield Esq Barrister.
Wheatley v Lodge
[1971] 1 All ER 173
Categories: CRIMINAL; Criminal Procedure, Police
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 26, 27 OCTOBER 1970
Arrest – Arrest without warrant – Deaf person unable to lip-read – Deaf person unaware that he is being arrested – Validity of arrest.
The arrest of a totally deaf person who cannot lip-read, or of a person who cannot speak English, by a constable will be valid if the constable has done everything that a reasonable person would do in the circumstances even though the person under the disability is unaware that he is being arrested.
Tims v John Lewis & Co Ltd [1951] 1 All ER 814 followed.
Dicta in Christie v Leachinsky [1947] 1 All ER 567 applied.
Alderson v Booth [1969] 2 All ER 271 distinguished.
Notes
For statutory power of arrest of constables, see 10 Halsbury’s Laws (3rd Edn) 349–351, para 642, and for cases on the subject, see 14 Digest (Repl) 190, 1553, 194, 1590–1596.
Cases referred to in judgment
Alderson v Booth [1969] 2 All ER 271, [1969] 2 QB 216, [1969] 2 WLR 1252, 133 JP 346, 53 Cr App Rep 301, Digest Supp.
Christie v Leachinsky [1947] 1 All ER 567, [1947] AC 573, [1947] LJR 757, 176 LT 443, 111 JP 224, 14 Digest (Repl) 204, 1691.
R v Kulyncyz [1970] 3 All ER 881, [1970] 3 WLR 1029.
Tims v John Lewis & Co Ltd [1951] 1 All ER 814, [1951] 2 KB 459; rvsd HL sub nom John Lewis & Co Ltd v Tims [1952] 1 All ER 1203, [1952] AC 676, 116 JP 275, 14 Digest (Repl) 193, 1588.
Cases also cited
Compbell v Tormey [1969] 1 All ER 961, [1969] 1 WLR 189.
R v Sadler, R v Palfrey [1970] 2 All ER 12, [1970] 1 WLR 416.
Case stated
This was a case stated by justices for the county borough of Darlington in respect of their adjudication as a magistrates’ court sitting at Darlington on 27 February 1970.
On 21 January 1970, an information was preferred by the appellant, George Wheatley, against the respondent, Maurice Lodge, charging that at the county borough of Darlington on 29 November 1969 he drove a motor car on a road
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called Russell Street, having consumed alcohol in such a quantity that the proportion thereof in his blood as ascertained from a laboratory test for which he subsequently provided a specimen under s 3 of the Road Safety Act 1967 exceeded the prescribed limit at the time he provided the specimen, in that it contained 215 milligrammes of alcohol in 100 millilitres of blood, contrary to s 1(1) of the 1967 Act.
The following facts were found: the respondent was totally deaf and unable to lip-read. His speech was slurred and indistinct. At about 11.40 pm on Saturday 29 November 1969, the respondent was driving a Morris 1100 car OPT 960 D when it was involved in a collision with a Ford Zodiac car HDC 676 F parked outside 8 Upper Russell Street. The Ford Zodiac car was parked on the correct side of the road and showed a parking light to both front and rear. Mr Barry Matthew of 4 Upper Russell Street, who was in his home at the time, heard the noise of the collision, went into the street where the respondent was then reversing his car from the Ford Zodiac car. Both men said something to each other and the respondent asked to whom the Ford Zodiac belonged. Mr Matthew pointed to 8 Upper Russell Street and the respondent accompanied him to those premises where Mr Matthew told the occupier of the house and owner of the Ford Zodiac, Mr Albert William Walker, what had happened. The respondent was admitted to the house and Mr Matthew went home after noticing that the respondent’s speech was slurred and incoherent. The respondent produced documents disclosing his name, address and insurance particulars and asked Mr Walker for his name and address. The respondent mumbled as he made further remarks to Mr Walker who could not understand what was being said. Without informing the respondent what he intended to do, Mr Walker left the room to make arrangements for the police to be called; the respondent concluded that Mr Walker had gone to fetch particulars of his insurance. After waiting a period of time the respondent, remembering that he had left home intending to by away only a short time and had lit the gas under a kettle of water, hurried home to 57 Borough Road, Darlington, an address some 200 yards from 8 Upper Russell Street. He left without telling anyone he was going but he intended to return to 8 Upper Russell Street as soon as he had turned the gas out. He was followed by Mr Matthew, who had been called in the meantime, and by Mr Walker. At no time whilst in the presence of Mr Walker or Mr Matthew had the respondent indicated that he was unable to hear anything said to him. The appellant (a police constable) arrived at the scene of the accident in Upper Russell Street at midnight on Saturday 29 November 1969. The respondent’s Morris 1100 OPT 960 D was still at the scene of the accident and bore evidence of recent damage. The appellant directed by Mr Walker went to 57 Borough Road where he knocked on the door. The respondent did not hear the knock but after a short interval came out of the house and found the appellant there. The respondent had come out with the intention of returning to the scene of the accident. The appellant noticed the respondent’s breath smelt of drink and he was unsteady on his feet. The appellant asked him if he had been driving the Morris 1100 motor car which had been involved in the accident in Upper Russell Street and the respondent thinking that he was being asked to return to the scene of the accident said, ‘Yes’, turned and began to walk in that direction. The appellant spoke the words of the usual caution and said to the respondent that he was being arrested for driving a motor vehicle whilst under the influence of drink to such an extent that his ability to drive was impaired. The respondent saw that the appellant was speaking and said, ‘Yes, definitely, definitely’. The respondent in response to a gesture from the appellant entered a nearby police car and was conveyed to the Darlington police station arriving there at 12.15 am on Sunday, 30 November 1969. When the respondent got into the police car he had not the slightest idea that the appellant had purported to arrest him. He merely thought that he was being invited to enter the car to give his account to the police of how the accident had happened. At no time had the respondent indicated to the appellant that he was deaf and that he had not heard or understood what the appellant had said to him. At the Darlington police station the respondent
Page 175 of [1971] 1 All ER 173
was taken to Sgt Matthews and the appellant explained to him the circumstances of the arrest. Then, because the respondent wanted to know what was going on, for the first time the respondent indicated that he was deaf and unable to hear anything said to him. The normal procedure under the 1967 Act was then followed, by means of either writing down the questions asked of the respondent or showing to him printed material containing the information required by the Act to be conveyed to an arrested person in such circumstances. Sgt Matthews complied in every way with the requirements of the 1967 Act. The respondent provided a specimen of breath which was positive and he then elected to give a sample of blood which was taken by Dr Walton at 1.09 am on 30 November 1969. Forensic examination of this sample showed it to contain 215 milligrammes of alcohol per 100 millilitres of blood.
It was contended on behalf of the appellant that the arresting police officer had done all that was reasonably necessary to effect a valid arrest.
It was contended on behalf of the respondent that because of his deafness the respondent was not aware that he had been arrested or the reason for it; that therefore the arrest was not lawful and in consequence the procedure under the 1967 Act at the police station was invalidated.
The justices were referred to the case of Alderson v Booth ([1969] 2 All ER 271, [1969] 2 QB 216). They were of the opinion that although the appellant had done all that would be required to effect an arrest in normal circumstances, because of the respondent’s total deafness he, the respondent, was not aware that he was being arrested and was under compulsion to attend with the appellant at the police station. He had heard nothing and nothing had been done to indicate to him an arrest. Consequently they could not regard the respondent as a person properly arrested under s 6(4) of the Road Traffic Act 1960 as referred to in s 3(1) of the 1967 Act and accordingly they dismissed the information.
The appellant now appealed.
B R Clapham for the appellant.
D P F Wheatley for the respondent.
27 October 1970. The following judgments were delivered.
BROWNE J delivered the first judgment at the invitation of Lord Parker CJ. Having summarised the facts he continued: counsel who appeared for the appellant in this court, put in without objection, although subject to some comments by counsel for the respondent, a copy of the document which came into existence at the police station in the course of those interviews. The first entry on that sheet, presumably written by the police officer is:
‘You Maurice Lodge have been arrested by [the appellant] under section 6 Road Traffic Act 1960. You have an opportunity now if you wish to provide a breath test’
then there appears the respondent’s signature. The procedure laid down by the Road Safety Act 1967 was then followed, a sample was taken, and it turned out to contain 215 milligrammes of alcohol per 100 millilitres of blood.
The justices record that they were referred to Alderson v Bootha, a case about which I shall have to say something later. They stated their conclusions as follows:
a [1969] 2 All ER 271, [1969] 2 QB 216
‘We were of the opinion that although [the appellant] had done all that would be required to effect an arrest in normal circumstances, because of the Respondent’s total deafness he, the Respondent, was not aware that he was being arrested and was under compulsion to attend with the [appellant] at the Police Station. He had heard nothing and nothing had been done to indicate to him an arrest. Consequently we could not regard the Respondent as a person properly arrested under section 6(4) of the Road Traffic Act 1960 as referred to in Section 3(1) of the Road Safety Act 1967 and accordingly we dismissed the information’
Page 176 of [1971] 1 All ER 173
We were referred to a number of authorities on this matter of arrest, beginning with Christie v Leachinsky. That was an action for false imprisonment. In that case the police officers who had arrested the plaintiff, as he afterwards was, had purported to arrest him under a local Act under which they had no power to arrest him, but they could equally have arrested him under common law powers on reasonable suspicion of theft and receiving; in fact they did not tell him anything about those other possible charges. The question in that case, therefore, was whether an arrest was lawful when the arresting officer had failed to tell the person arrested the reason for his arrest. Viscount Simon, who delivered the first speech in that case, after reviewing the authorities, stated a number of propositions which the House of Lords regarded as being established. The first and fifth of those iterations were ([1947] 1 All ER at 572, 573, [1947] AC at 587, 588):
‘1. If a policeman arrests without warrant on reasonable suspicion of felony, or of other crime of a sort which does not require a warrant, he must in ordinary circumstances inform the person arrested of the true ground of arrest. He is not entitled to keep the reason to himself or to give a reason which is not the true reason. In other words, a citizen is entitled to know on what charge or on suspicion of what crime he is seized …
‘5. The person arrested cannot complain that he has not been supplied with the above information as and when he should be, if he himself produces the situation which makes it practically impossible to inform him, e.g., by immediate counter-attack or by running away.
‘There may well be other exceptions to the general rule in addition to those I have indicated, and the above propositions are not intended to constitute a formal or complete code, but to indicate the general principles of our law on a very important matter.’
It is clear that the House in that case were recognising that there might be other exceptions to the general rule besides the ones which they had mentioned.
The next case to which we were referred was Tims v John Lewis & Co Ltd in the Court of Appeal and in the House of Lords. That again was an action for false imprisonment, and the plaintiff, among other things, said that she had not been told for what she was being arrested. The facts were that the plaintiff and her daughter had been in a shop of John Lewis’s in Oxford Street; they had been seen by some store detectives to take some calendars in the Christmas card department, and the plaintiff was seen to put some in her handbag. The plaintiff and her daughter then went off to another shop where the evidence was that the daughter was seen to pick up a tablecloth. They then left the second shop and were arrested by the store detectives of John Lewis’s who I suppose had followed them. The plaintiff’s evidence was as set out in the report in the Court of Appeal ([1951] 1 All ER at 815, 816, [1951] 2 KB at 460):
‘As we were coming out my daughter was in front, and there were two women. One put her hands up excitedly and said something. I did not catch everything. I could only say what I caught, but it was something about calendars and handkerchiefs and “You must come with me“.’
The daughter also gave evidence about what the detectives said to her mother and herself.
Lord Goddard CJ delivered the first judgment of the Court of Appeal in which Asquith and Birkett LJJ agreed. After referring to Christie v Leachinsky, he said ([1951] 2 KB at 466, 467, [1951] 1 All ER at 816):
Page 177 of [1971] 1 All ER 173
‘Can there be any doubt in this case that the plaintiff did know on what ground she was being taken into custody? Her whole case in the claim for slander was that one of the detectives had said: “You have taken calendars and handkerchiefs from John Lewis’s. You must come with me.” So far as I can see, the only ground she has for saying that she did not know for what she was being arrested was that she was rather hard of hearing, that she did not hear all of what the detective said, and has found out afterwards that that is what she did say. Assuming that that is so, I do not think that the decision of the House of Lords means that if an officer is arresting a deaf person, he has to possess himself of an ear-trumpet, or something of that sort, or shout at the top of his voice. He must do what a reasonable person would do in the circumstances. As I said during the course of the argument, if a police officer who is not able to speak French has to arrest a Frenchman who does not speak English, he can only tell him in English for what he is arresting him, and take him to the police station until some officer who does speak the language or some interpreter comes to explain the charge on which he has been arrested to the person arrested. In stating the charge or on suspicion of what crime a person is arrested, the person arresting without warrant has only to act reasonably. If you arrest without warrant, you arrest, as it has often been said, at your peril … ’
Lord Goddard CJ went on to refer to another casea and then said ([1951] 2 KB at 467, [1951] 1 All ER at 817):
‘In my opinion this plaintiff cannot be in the position of saying that she did not know for what she was being arrested. The daughter’s evidence was that the detective spoke of them and that they were quite close to each other. The plaintiff herself says that she heard enough to know that a charge was being put forward; and she heard the detective say to her: “You have taken calendars and handkerchiefs from John Lewis’s. You must come with me.” That is what she was being arrested for, and in my opinion that is no ground, in view of the decision in Christie v. Leachinsky, for saying that the arrest was unlawful.’
As I said, Asquith LJ agreed with the judgment of Lord Goddard CJ, but he had also said this in the course of argument ([1951] 2 KB at 463):
‘You cannot expect the person arresting to do more than what is reasonable to inform the person arrested of that with which he or she is charged. The plaintiff was hard of hearing.’
That case went to the House of Lords, and the decision of the Court of Appeal was reversed on another point, but in my judgment it is quite clear from the speech of Lord Porter that the House of Lords agreed with the passage I have just read from the judgment of Lord Goddard CJ in the Court of Appeal. Lord Porter, after referring to the evidence about what the plaintiff had heard, said ([1952] 1 All ER at 1205, [1952] AC at 681):
‘That testimony makes it apparent that the crime for which the arrest was made was plainly referred to. The respondent, it is true, denied all knowledge of the accusation until later, but she was deaf and there is nothing to indicate that the detectives had any reason to suspect that she could not hear what was said. They cannot, therefore, be at fault if the respondent did not hear. In my opinion, the decision in Christie v. Leachinsky has no bearing on such a case.’
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As counsel for the respondent quite rightly points out, the finding in the John Lewis case was that in fact the plaintiff had heard what was said, and therefore what Lord Goddard CJ said about the position if he had not heard is I suppose obiter. At the same time it is quite clear to me that that case is at least very strong persuasive authority for the view expressed by Lord Goddard CJ and I think Lord Perter and certainly Asquith LJ that what the arresting officer must do is to do what a reasonable person would do in the circumstances. Christie v Leachinsky recognised that there were certain exceptions to the general rule about what must be brought home to a person being arrested, but left open the possibility that there can be other exceptions, and in my view the John Lewis case recognised another exception.
The case on which the justices relied and on which counsel for the respondent also relied before us is the decision of this court in Alderson v Booth, and particularly the judgment of Lord Parker CJ where he said ([1969] 2 All ER at 273, [1969] 2 QB at 220, 221):
‘Equally it is clear, as it seems to me, that an arrest is constituted when any form of words is used which, in the circumstances of the case, were calculated to bring to the accused’s notice, and did bring to the accused’s notice, that he was under compulsion and thereafter he submitted to that compulsion.’
Counsel for the respondent contends in this case that, as the respondent did not know that he was being arrested, it was not brought to his notice that he was under compulsion, and if he did not know that he was under compulsion he could not have submitted to it.
The last authority to which I think I ought to refer is the very recent decision of this court in R v Kulynycz which has been referred to as the King’s Lynn case. I do not think that I need go through that case in detail; it actually turned on the question whether Norfolk quarter sessions had jurisdiction, which depended in turn on whether the appellant had been in lawful custody immediately before he was brought before sessions. In effect the position there was that the appellant when he had originally been arrested had not been told for what he was being arrested, but very soon afterwards he was given what the court regarded as adequate information about the charges against him, and this court took the view that the original arrest which was unlawful in the sense that a civil action for false imprisonment could have been brought in respect of it, was put right by what happened afterwards at the police station when he was given information.
Counsel for the appellant puts the matter in two ways. First of all he says that the original ‘arrest’ at the respondent’s home was a valid arrest because the appellant did everything that a reasonable person would do in the circumstances. He did not know that the respondent was deaf, and had no reason to believe he was deaf, and nobody on the police side discovered that he was deaf until after he got to the police station. Alternatively, he says that even if that is wrong and the original arrest was not valid, the matter was put right when the respondent got to the police station, and it was found out that he was deaf, and the written questions and answers and so on were put to him which brought home to him that he had been arrested. The second point was not taken in the magistrates’ court and I do not propose to base my decision in this court on it; that point of course was based by counsel for the appellants on R v Kulynycz. But in my judgment the original arrest was a valid arrest.
As I have said, in my judgment the effect of the decision of the Court of Appeal and the House of Lords in John Lewis’s case was to recognise that there was a further exception to the general rule stated in Leachinsky’s case and that if a police officer
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arrests a deaf person or somebody who cannot speak English, what he has to do is to do what a reasonable person would do in the circumstances. Here it is quite plain that the appellant did everything that a reasonable person would have done in the circumstances, and the justices so found. They expressed the opinion that ‘although [the appellant] had done all that would be required to effect an arrest in normal circumstances … ’
In my judgment Alderson v Booth does not really touch this point. That was a case where it was a normal situation and no complication arose; the person arrested could understand what was going on and in my view that does not touch or cut down what I regard as the exception recognised by the court in the John Lewis case. Accordingly, in my view the justices came to a wrong conclusion in this case, and I would allow the appeal and remit the case to the justices with an intimation that the case was proved.
ASHWORTH J. I agree.
LORD PARKER CJ. I also agree.
Appeal allowed. Case remitted to the justices with the opinion of the court that if the point about arrest was the only point involved they should convict.
Solicitors: Clarke, Rawlins & Co agents for Waldy, Chaytor & Jacks, Darlington (for the appellant); Oswald Hickson, Collier & Co agents for Meek, Black & Cleminson, Darlington (for the respondent).
N P Metcalfe Esq Barrister.
Mangin v Inland Revenue Commissioner
[1971] 1 All ER 179
Categories: TAXATION; Income Tax, Tax Avoidance: COMMONWEALTH; Commonwealth countries
Court: PRIVY COUNCIL
Lord(s): LORD DONOVAN, VISCOUNT DILHORNE, LORD WILBERFORCE, LORD PEARSON AND SIR FRANK KITTO
Hearing Date(s): 8, 9, 10 JUNE, 21 OCTOBER 1970
Privy Council – New Zealand – Income tax – Avoidance – Arrangement having purpose or effect of altering incidence of tax – Paddock trust – Yearly lease by taxpayer to trustees of different parts of land when sown to wheat – Income from land held on trust for taxpayer’s family – Whether arrangement altering the incidence of tax – Whether income derived by the taxpayer – Land and Income Tax Act 1954, s 108.
Income tax – Avoidance – Arrangement having the purpose or effect of avoiding liability – Whether arrangement for the maintenance and advancement of taxpayer’s family.
In two consecutive years the taxpayer, a New Zealand farmer, leased different paddocks of his farm to trustees, who were to hold the land for one year at a fixed rental, and to cultivate it. Under a separate trust deed, any resulting income was to be held on trust for the taxpayer’s wife and children. Such an arrangement was termed a ‘paddock trust’. The taxpayer himself, as the employee of the trustees, harvested the crops from the land, sold them and accounted to the trustees for the proceeds. The trustees paid the taxpayer for his labour and certain expenses which he had incurred. The trustees then distributed the net income to the taxpayer’s wife, partly for herself and partly for her children, on which income the wife and children could claim allowances and reduced rates of tax. The arrangement also resulted in less tax being paid by the taxpayer on the profits of the whole farm. Section 108 of the New Zealand Land and Income Tax Act 1954 provided as follows: ‘Every contract, agreement, or arrangement made or entered into, whether before or after the commencement of this Act, shall be absolutely void in so far as directly or
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indirectly, it has or purports to have the purpose or effect of in any way altering the incidence of income tax, or relieving any person from his liability to pay income tax’. By virtue of this section the taxpayer was assessed to tax on his income as it would have stood but for the paddock trusts.
Held (Lord Wilberforce dissenting) – The taxpayer was liable to income tax on his profits as they would have stood but for the paddock trusts because—
(i) the section had a fiscal effect in that it operated not only as between the parties to any contract, agreement or arrangement which fell within the section, but also as against the commissioner; in particular the direction that the impugned contracts, agreements or arrangements should be ‘absolutely’ void, meant that they were void as against the commissioner as well as against all others (Elmiger v Inland Revenue Comr [1967] NZLR 161 applied) (see p 183 j to p 184 a, post);
(ii) the section was not to be construed as referring only to an arrangement by which the burden of any liability to tax already accrued was shifted from the taxpayer, but also to an arrangement by which the legal incidence of tax on the taxpayer’s income was distributed so that he would be liable to less tax in the future (Marx v Inland Revenue Comr [1970] NZLR at 208 and Carlson v Inland Revenue Comr [1970] NZLR 182 approved) (see p 184 c and g, post);
(iii) although the section remained silent whether the taxpayer was to be deemed to derive the income he would otherwise have received but for the agreement or arrangement if the latter was declared void so far as its tax relieving purpose or effect was concerned, in the present case the taxpayer had in fact received the income by selling the crop and receiving the proceeds; accordingly, as his obligation to account for the proceeds to the trustees was void for the purposes of the section, he was liable to tax thereon (see p 185 c, post);
(iv) although the section would not apply if it could be shown that the arrangement could be regarded as an ordinary family trust for the maintenance and advancement of the taxpayer’s family even though it might have some tax saving feature, in the present case the paddock trust was devised for the sole, or at least principal, purpose of avoiding tax liability on a substantial part of the taxpayer’s income (see p 186 g and h, post).
Notes
For provisions in United Kingdom legislation to counter tax avoidance, see 20 Halsbury’s Laws (3rd Edn) 652–655, paras 1275–1282.
Cases referred to in opinions
Canadian Eagle Oil Co Ltd v Regem [1945] 2 All ER 499, [1946] AC 119, 114 LJKB 451, 173 LT 234, 27 Tax Cas 206; affg sub nom Re Canadian Eagle Oil Co Ltd, Petition of Right [1944] 1 All ER 734, 28 Digest (Repl) 205, 860.
Cape Brandy Syndicate v Inland Revenue Comrs [1921] 1 KB 64; affd CA [1921] 2 KB 403, 90 LJKB 461, 125 LT 108, 12 Tax Cas 358, 28 Digest (Repl) 401, 1822.
Carlson v Inland Revenue Comr [1970] NZLR 182.
Charles v Lysons [1922] NZLR 902.
Deputy Federal Comr of Taxation v Purcell (1921) 29 CLR 464, 28 Digest (Repl) 277, * 696.
De Romero v Read (1932) 48 CLR 649.
Elmiger v Inland Revenue Comr [1967] NZLR 161.
Hancock v Comr of Taxation (1961) 108 CLR 258.
Lewis v Inland Revenue Comr [1965] NZLR 634, Digest (Cont Vol B) 399, * 276p.
Marx v Inland Revenue Comr [1970] NZLR 182.
Newton v Comr of Taxation of the Commonwealth of Australia (1956–57) 96 CLR 578; on appeal PC [1958] 2 All ER 759, [1958] AC 450, [1958] 3 WLR 195, 28 Digest (Repl) 369, * 818.
Peate v Comr of Taxation of the Commonwealth of Australia [1966] 2 All ER 766, [1967] 1 AC 308, [1966] 3 WLR 246, Digest (Cont Vol B) 430, * 839b.
Purdie v Inland Revenue Comr [1965] A & NZITR 603.
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Appeal
This was an appeal by Owen Thomas Mangin, the taxpayer, from a judgment of the Court of Appeal of New Zealand (North P, Turner and McCarthy JJ), dated 26 August 1969, allowing the appeal of the Commissioner of Inland Revenue from a judgment of the Supreme Court of New Zealand (Wilson J), dated 4 February 1969, whereby it was held that the commissioner acted incorrectly in making amended assessments of the taxpayer’s income tax for the years ending 31 March 1966 and 31 March 1967. The facts are set out in the opinion of the board delivered by Lord Donovan.
E J Somers (of the New Zealand Bar) for the taxpayer.
The Solicitor General for New Zealand (J C White QC) and I L M Richardson (of the New Zealand Bar) for the commissioner.
21 October 1970. The following opinions were delivered.
LORD DONOVAN delivered the majority opinion. The taxpayer, a farmer in New Zealand, desired to reduce his burden of income tax. After seeking the advice of his accountant and solicitor he created what is called a ‘paddock trust’. This involved his leasing, in 1965, 25 acres of his farm of 385 acres to trustees. These 25 acres were sown wheat. The trustees were to hold the land for one year at a rent of £3 per acre and were to cultivate it. Under a separate trust deed any resulting income was to be held on trust for the taxpayer’s wife and children. The taxpayer himself, as the employee of the trustees, harvested and sold the ensuing wheat crop and accounted to the trustees for the proceeds. The trustees paid him for his labour and certain expenses which he had incurred. They then distributed the bulk of the net income so remaining in their hands to the taxpayer’s wife, partly for herself and partly for the benefit of his children. In 1966, a similar transaction took place in relation to another 24 acres which were ready to be sown with wheat. These were leased to the trustees at £4 an acre. The taxpayer again sowed and reaped the crop as employee of the trustees, and again sold it and accounted to the trustees for the proceeds. They reimbursed him as before for his labour and expenses. Once more the bulk of the net income so accruing to the trustees was distributed by them under the still existing trust deed for the benefit of the taxpayer’s wife and children.
By these transactions part of what would have been the taxpayer’s total income from his farm was hived off and became (via the trustees) the income of his wife and children. This meant that each of the beneficiaries could claim allowances and reduced rates of tax. Thus the taxpayer mitigated what would otherwise have been his burden of tax. The spreading of the liability led to less tax being paid on the profits of the whole 385 acres.
The commissioner made amended assessments on the taxpayer for the years ending 31 March 1966 and 1967 with the object of restoring the taxpayer’s income tax liability to what it would have been for these years but for these ‘paddock trusts’. Against these amended assessments the taxpayer appealed to the Supreme Court in New Zealand and won. In the Court of Appeal, however, he lost; and he now appeals to this Board. The commissioners justified the amended assessments in terms of s 108 of the Land and Income Tax Act 1954 (‘the 1954 Act’). This provides:
‘Every contract, agreement, or arrangement made or entered into, whether before or after the commencement of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way altering the incidence of income tax, or relieving any person from his liability to pay income tax.’
If this section has the effect contended for by the commissioner then the ‘paddock trusts’ must be considered as non-existent. The taxpayer concedes that in that event the amended assessments would stand because he received the disputed income into his own hands and would be unable to contend that it belonged to trustees. The
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annihilating effect of s 108 does not, in other words, here produce the kind of difficult problem which arose in Peate v Comr of Taxation of the Commonwealth of Australia, and which led to a dissenting judgment of the Board in that case.
The taxpayer contends, however, that s 108 has no effect in this case for the following reasons: first, because it has no fiscal effect but operates only as between the parties to the contract, agreement or arrangement; secondly, because if the section does have fiscal effect, that effect is confined to cases where liability to income tax has already accrued; thirdly, because in any event the section can operate only on income derived by the taxpayer; fourthly, because if all else fails, the facts of the present case take it outside the ambit of the section. These contentions pose the question of the true construction of s 108. Its history will be outlined presently; but it may be useful to recall at the outset some of the rules of interpretation which fall to be applied.
First, the words are to be given their ordinary meaning. They are not to be given some other meaning simply because their object is to frustrate legitimate tax avoidance devices. As Turner J said in his (albeit dissenting) judgment in Marx v Inland Revenue Comr ([1970] NZLR 182 at 208), moral precepts are not applicable to the interpretation of revenue statutes.
Secondly,
‘… one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.’
(Per Rowlatt J in Cape Brandy Syndicate v Inland Revenue Comrs ([1921] 1 KB 64 at 71), approved by Viscount Simons LC in Canadian Eagle Oil Co Ltd v Regem.)
Thirdly, the object of the construction of a statute being to ascertain the will of the legislature, it may be presumed that neither injustice nor absurdity was intended. If therefore a literal interpretation would produce such a result, and the language admits of an interpretation which would avoid it, then such an interpretation may be adopted.
Fourthly, the history of an enactment and the reasons which led to its being passed may be used as an aid to its construction.
The argument for the taxpayer in this case leans heavily on this last rule. He prays it in aid first in support of his opening contention that s 108 has no fiscal effect. To do justice to this argument it is necessary to trace the ancestry of the section and for this purpose to cite a number of New Zealand enactments going back to 1878. This involves lengthening the present judgment but is better than attempting a summary.
The Land Tax Act 1878, s 62:
‘Every covenant or agreement heretofore made or hereafter to be made between landlord and tenant, mortgagor and mortgagee, or between any other persons, altering or attempting to alter the nature of the estate in any land so liable to duty for the purpose of defeating or in any other manner evading the payment of land-tax imposed by this Act, or which shall be in any manner contrary to the true intent of this Act, or calculated to prevent its operation in any respect, shall, so far as regards any such covenant or agreement, be void and of no effect as between the parties thereto.’
The Property Assessment Act 1879, s 29:
‘No contract, covenant, or agreement touching the payment of taxes to be charged on their respective premises heretofore made, or hereafter to be made, between any persons which is contrary to the intent and meaning of this Act shall be binding on the parties.’
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The Property Assessment Act 1885, s 35:
‘No contract, covenant, or agreement touching the payment of taxes to be charged on their respective premises heretofore made, or hereafter to be made, between any persons which is contrary to the intent and meaning of this Act shall be binding on the parties.’
The Land and Income Tax Assessment Act 1891, s 40:
‘Every covenant or agreement heretofore made or hereafter to be made between landlord and tenant, mortgagor and mortgagee, or between any other persons, altering or attempting to alter the nature of the estate or interest in any land or mortgage for the purpose of defeating or in any other manner evading the payment of tax imposed under this Act, or which shall be in any manner contrary to the true intent of this Act, or calculated to prevent its operation in any respect, shall, so far as regards any such covenant or agreement, be void and of no effect as between the parties thereto.’
The Land and Income Tax Assessment Act 1900, s 82:
‘Every contract, agreement, or arrangement made or entered into, in writing or verbally, either before or after the commencement of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way directly or indirectly altering the incidence of any tax, or relieving any person from liability to pay any tax or make any return, or defeating, evading, or avoiding any duty or liability imposed on any person by this Act, or preventing the operation of this Act in any respect.’
The Land and Income Tax Assessment Act 1908, s 103:
‘Every contract, agreement, or arrangement made or entered into, in writing or verbally, either before or after the coming into operation of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way directly or indirectly altering the incidence of any tax, or relieving any person from liability to pay any tax or make any return, or defeating, evading, or avoiding any duty or liability imposed on any person by this Act, or preventing the operation of this Act in any respect.’
The Land and Income Tax Act 1916, s 162:
‘Every contract, agreement, or arrangement made or entered into, either before or after the coming into operation of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way altering the incidence of land-tax or income-tax, or relieving any person from his liability to pay such tax.’
The Land and Income Tax Act 1923, s 170:
‘Every contract, agreement, or arrangement made or entered into, whether before or after the coming into operation of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way altering the incidence of land-tax or income-tax, or relieving any person from his liability to pay such tax.’
The present s 108 is in the same form as s 170 of the 1923 Act save that the reference to ‘land-tax’ is omitted.
Income tax was introduced into New Zealand in 1891, and whatever may be said about the earlier enactments cited above, the language of s 82 of the Land and Income Tax Assessment Act 1900 seems to their Lordships directly to contradict the taxpayer’s first contention; and they take the same view of the succeeding sections. In particular, the direction that the impugned contracts, agreements or arrangements should be ‘absolutely’ void, appears to the Board to involve the consequence that they are void as against the commissioner as well as against all others. On this part of the
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case their Lordships are in agreement with the opinions to the like effect expressed in the Court of Appeal in New Zealand in Elmiger v Inland Revenue Comr. It is true that s 16 of the Land and Income Tax Amendment Act (No 2) 1968 (which does not apply retrospectively so as to affect the amended assessments under appeal in this case) specifically provides that the words ‘as against the Commissioner for income tax purposes’ should be added to s 108 after the word ‘void’. In their Lordships’ view this did no more than to declare the existing law.
The second contention of the taxpayer is that s 108 refers only to accrued liabilities to tax and not to liabilities which may be expected in futuro. It is said that no contract, agreement or arrangement can alter the incidence of income tax, for that is prescribed by law. This expression in s 108 must, therefore, be taken to refer to some contract, agreement or arrangement which shifts the burden of some accrued liability to tax. There is, however, another possible meaning. The taxpayer, considering the provisions of fiscal legislation, may discern that by entering into some arrangement he can so distribute the legal incidence of tax on his income that he himself will pay less. In other words, the economic incidence is altered. In their Lordships’ view this is what is contemplated by s 108. The taxpayer’s argument under this head is based alternatively on the omission from the Land and Income Tax Act 1916, s 162 and from its successors, of the expression:
‘… or defeating, evading, or avoiding any duty or liability imposed on any person by this Act, or preventing the operation of this Act in any respect’
which appeared in s 40 of the Land and Income Tax Assessment Act 1891 (although not in identical terms) and again in s 82 of the similar Act of 1900. These words, it is said, are apt to refer to future expected liabilities, whereas the expression ‘relieving any person from his liability etc,’ are not. Accordingly, the omission of the words is significant. Their Lordships cannot accede to this argument. Nor is it really supported by anything which was said in Peate v Comr of Taxation of the Commonwealth of Australia. In that case, the Board was simply concerned with the annihilating effect of s 260 of the relevant Australian statute, and did not have to consider the respective effects of the component parts of the section. In the ordinary use of language, one ‘secures relief from tax’ if one ‘defeats’ it or ‘evades’ it, or ‘avoids’ it; and their Lordships think that the true reason for the omission of these words from the present s 108 and its predecessors of 1916 and 1923 is probably that they were regarded as tautologous. Moreover, to construe s 108 as referring only to liabilities which had already accrued would be to deprive it of almost all effect, and a construction having this result is not to be adopted unless the words of s 108 compel it, which they do not. So far as this second contention is concerned their Lordships find themselves in agreement with the majority of the Court of Appeal in Marx v Inland Revenue Comr and Carlson v Inland Revenue Comr.
The third contention of the taxpayer is that s 108 can have no application to any income which the taxpayer did not derive. Section 77(2) of the 1954 Act provides that income tax is to be payable on all income derived by the taxpayer; and in this case the taxpayer did not derive that portion of the income of the farm which went, under the ‘paddock trusts’, to the trustees. This contention throws into relief the difficulties caused by leaving a section such as s 108 completely silent as to what is to happen once the contract, agreement or arrangement has been declared absolutely void so far as its tax relieving purpose or effect is concerned. Is a vacuum left or is the
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taxpayer to be deemed to go on deriving the income? What is to happen if, simply in order to avoid tax, he has parted with the source of the income? Or receives money which is capital and not income? Section 108 gives no guidance at all on these points whether regarded alone or in conjunction with s 77 of the 1954 Act or s 78. In consequence, and in consequence also of some of the absurdities to which a strictly literal interpretation of s 108 would lead, judges have been compelled to search for an interpretation which would make the section both workable and just. In doing so, they inevitably approach the line where interpretation ceases and legislation begins—a line which they may not cross. It is not that the problem confronting the legislator is insoluble. What is needed is simply a provision to the effect that, where s 108 applies, the taxpayer shall be deemed to have derived the income which he would have derived but for the contract, agreement or arrangement avoided by the section: and that the commissioner might make assessments on him accordingly.
But if future cases may reveal lacunae in s 108 which (if that section be left in its present half-finished state) judges must refuse to fill, the present case does not. The taxpayer here did derive the income. He sold the crop and received the proceeds. True, he then had to account for them to the trustees. But if this obligation has to be regarded as void under s 108, and the trusts non-existent, then one is left with the taxpayer receiving the income and accountable to nobody for it. In these circumstances it seems to their Lordships that the third contention of the taxpayer must fail.
His final contention is that s 108 does not apply to the facts of this case which make it an ordinary family trust for the maintenance and advancement of the taxpayer’s wife and family. On this aspect of the matter Turner J in the Court of Appeal said:
‘The lease of the 24-acre paddock was a lease for one year only. A disposition of an income-earning asset, if the primary reason for it were to provide income for members of the [taxpayer’s] family might confidently be expected to be a disposition for a longer period than this. It was an essential part of this scheme that while the lease of the wheat paddock was for one year, in the following year another paddock was to be leased—and again another the following year. It was the rotation of crops, of course, which made this kind of thing necessary—but which at the same time made this kind of transaction one particularly unfitted to be the basis of a family trust providing assured regular income for its beneficiaries. I cannot think that successive one-year leases of that particular paddock of the farm which by crop rotation happened to be the wheat paddock can be described as an ordinary family dealing, a typical family trust. I find it difficult, too, to accept Wilson J’s conclusion that the rent charged for the paddock was realistic. The profit made undermines such a conclusion. It may well be that the rent, calculated on a basis of arithmetical average with reference to the area involved and the comparative area of the whole farm may appear justifiable; but it is to be remembered that the paddock leased was always the very paddock which in the particular year under consideration was ready for wheat—a highly profitable crop—and it seems to me that the rent charged for such a paddock in a particular year should have been greatly in excess of a mere arithmetical average. The whole scheme smacks of such business unreality that I cannot accept the conclusion of Wilson J; and for myself I am convinced that the only proper inference to be drawn from the facts of the arrangement, and of the profits resulting therefrom, is that this scheme was devised for the sole purpose, or at least the principal purpose, of bringing it about that [the] taxpayer should escape liability on tax for a substantial part of the income which, without it, he would have derived.’
Their Lordships are in complete agreement with these observations. North P expressed his conclusion as follows:
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‘In my opinion, with all respect for the views expressed by Wilson J, this arrangement was obviously an attempt by the [taxpayer] to escape payment of income tax on what was really in truth his income.’
Their Lordships do not think that North P was basing his conclusion on a view of the matter which differed from that of Turner J; but it may nevertheless be useful to recall that, strictly, the question is not whether the diverted income ‘was really in truth his income’ but whether s 108 had the effect of making that which was not in truth the appellant’s income but instead that of the trustees, nevertheless become the appellant’s income for the purposes of the 1954 Act.
Both sides relied on the decision of the Board in Newton v Comr of Taxation of the Commonwealth of Australia. This was a decision on s 260 of the Australian Commonwealth Income Tax and Social Services Contribution Act 1936–1951, a section apparently copied from s 82 of the New Zealand Act of 1900, above quoted. The judgment was delivered by Lord Denning and in the course of it he said ([1958] 2 All ER at 764, [1958] AC at 466):
‘In order to bring the arrangement within the section, you must be able to predicate—by looking at the overt acts by which it was implemented—that it was implemented in that particular way so as to avoid tax. If you cannot so predicate, but have to acknowledge that the transactions are capable of explanation by reference to ordinary business or family dealing, without necessarily being labelled as a means to avoid tax, then the arrangement does not come within the section.’
In their Lordships’ view this passage, properly interpreted, does not mean that every transaction having as one of its ingredients some tax-saving feature thereby becomes caught by a section such as s 108. If a bona fide business transaction can be carried through in two ways, one involving less liability to tax than the other, their Lordships do not think that s 108 can properly be invoked to declare the transaction wholly or partly void merely because the way involving less tax is chosen. Indeed, in the case of a company, it may be the duty of the directors vis-à-vis their shareholders so to act. Again, trustees may in the interests of their beneficiaries, deliberately choose to invest in Government securities issued with some tax-free advantage, and to do so for the express purpose of securing it. They do not thereby fall foul of s 108. The clue to Lord Denning’s meaning lies in the words ‘without necessarily being labelled as a means to avoid tax’. Neither of the examples above given could justly be so labelled. Their Lordships think that what this phrase refers to is, to adopt the language of Turner J in the present case
‘… [a] scheme … devised for the sole purpose, or at least the principal purpose, of bringing it about that [the] taxpayer should escape liability on tax for a substantial part of the income which, without it, he would have derived.’
The present case clearly exhibits such a scheme; and for the reasons above set out their Lordships will humbly advise Her Majesty that the appeal should be dismissed. There will be no order as to costs, an agreement over which has been come to by the parties.
LORD WILBERFORCE. Section 108 of the Land and Income Tax Act 1954 is in the following terms. To facilitate later argument, I set out in parallel the provisions of the corresponding Australian (Commonwealth) enactment, s 260 of the Commonwealth Income Tax and Social Services Contribution Assessment Act 1936–1960.
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New Zealand Australia
108. ‘Every contract, agreement or arrangement made or entered into, whether before or after the comm-encement of this Act, shall be absolutely void in so far as, directly or indirectly, it has or purports to have the purpose or effect of in any way altering the incidence of income tax.’ 260. Every contract, agreement, or arrangement made or entered into, orally or in writing, whether before or after the commencement of this Act, shall so far as it has or purports to have the purpose or effect of in any way directly or indirectly-
(a) altering the incidence of any income tax:
(b) relieving any person from liability to pay any income tax or make any return;
(c) defeating, evading or avoiding any duty or liability imposed on any person by this Act; or
(d) preventing the operation of this Act in any respect, be absolutely void, as against the commisioner10 ¼
The question is as to the application of either of the two limbs (altering the incidence, or relieving) in the New Zealand section to transactions of which the following represents the essentials. The taxpayer owned a farm of 385 acres at Methven, used for sheepfarming and mixed cropping, with emphasis on cropping. He had a wife and two children. After his father had set up a trust for the benefit of his wife and children, the taxpayer agreed to lease to the trustees a paddock of 25 acres at a rent of £3 per acre. The trustees employed the taxpayer to prepare the leased paddock and to sow it in wheat. In due course the crop was harvested and sold. After the taxpayer was paid for his work, goods supplied, and rent, a sum of £401, a net income was left of £739. £652 was distributed, £52 to the wife, £600 to the wife for the benefit, in equal shares, of the two children. A similar operation was performed in the following year, with a different paddock of 24 acres, leased at £4 per acre.
It is relevant to notice the following features of these transactions: (1) The trustees, in each case, became genuinely lessees of the leased paddock, and so liable to income tax in respect of the profit of farming it. (2) The income of the paddocks was, in each relevant year, derived by the trustees and not by the taxpayer (‘derived’ is the word used in s 77, the basic charging section). A contention to the contrary was put forward at the trial but was negatived by the judge. There was no appeal against this finding. (3) The fact that the trustees employed the taxpayer to carry out farming operations was not relied on, either in the judgments appealed from, or in argument, as having any relevance. (4) The taxpayer was not a trustee of the settlement and had no control over the income of the settlement. He neither received nor, under the trusts, could receive any part of it. The payment of income to members of his family may have brought him some benefit, but this, in itself, is not a material consideration, as regards his liability to tax in New Zaland. (5) Before carrying out the transactions, the taxpayer had consulted his accountants and sought advice how he could reduce the amount of income tax payable in the future. But this would only be material if (a) the test were to be the motive of the taxpayer rather than the purpose of the contract etc (as to this see Newton v Comr of Taxation of the Commonwealth of Australia in a contrary sense), and (b) the case was shown to be within one or other of the limbs of the sections (altering the incidence, or relieving).
I turn then to consider the meaning of the section. I approach it with four points
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in mind. First, it is a section with a history. I do not trace it in detail; the successive enactments are set out in the majority judgment and they have been analysed with clarity in more than one judgment in the New Zealand courts. I select what seem to me certain significant points. The starting point was the Land Tax Act 1878, s 62, a section dealing only with land tax, as to which the policy in New Zealand (comparably to the policy in Great Britain concerning landlords’ property tax) was to ensure that this tax should be borne by the owner of the land and its burden not shifted on to others, such as tenants of the land. This section made covenants or agreements contrary to the intent of the Act ‘void and of no effect as between the parties thereto’. These words are perhaps not free from ambiguity, but it seems to have been accepted in New Zealand that they limited the voiding effect of the section to the parties and that it did not relate to or affect the landowner’s liability to the Crown. The ‘inter partes’ character of the legislation was clearly stated in the differently drafted Property Assessment Acts (1879 s 29, 1885 s 35).
The first statute dealing with income tax was the Land and Income Tax Assessment Act 1891. That related both to land tax and to income tax. It provided, in terms similar to the Act of 1878, that the relevant covenants or agreement should ‘be void and of no effect as between the parties thereto’. The parent of the present section, and of the Australian s 260, is the Land and Income Tax Assessment Act 1900, s 82. This contained the four limbs now found in the Australian section and used the words ‘absolutely void’. The disappearance of any reference to ‘the parties’ lends force to the argument that, thereafter, the section had fiscal effect. But the words ‘absolutely void’ would also be fully sufficient to operate inter partes. The words ‘absolutely void’ continued to be used in New Zealand down to and including s 108 of the Act of 1954 and in Australia down to 1936. In that year Australia, in the Commonwealth Act, added the words ‘as against the Commissioner’, an example followed in New Zealand in 1968, subsequently to the assessments now under appeal. These amendments no doubt had the effect of making the sections into purely fiscal sections—but only as from the date of their enactment. Before then, they were both fiscal and inter partes. I have referred to this history because it exposes the difficulties which have faced the courts in interpreting the section—particularly the words ‘altering the incidence’.
The question has arisen, and it arises here, whether these words have an inter partes effect, or a fiscal effect or both, and different answers have emerged. In Charles v Lysons (decided on s 162 of the Act of 1916 which dealt with both land and income tax) the Court of Appeal held that the section had inter partes effect. It
‘must be construed as directed to contracts or agreements altering the incidence as between the owner and third parties. This is the only escape if it is to receive any effect at all.’
But in Elmiger v Inland Revenue Comr, the present learned members of the Court of Appeal distinguished Charles v Lysons as a decision limited to land tax, and held that this limb had fiscal effect. In Australia, the High Court decided in De Romero v Read that the provision operates inter partes, a decision described as ‘unexpected’ in Newton’s case. It would not be surprising if, after a development starting from 1878 in the field of land tax, with the separate strands of inter partes and fiscal applications interwoven in different ways and through the use of different language, a section should emerge which indubitably lacks clarity of purpose and may indeed largely fail of effect. At any rate, its interpretation needs to approached without any predisposition to believe that it adequately embodies or gives effect to modern fiscal policy.
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Secondly, the New Zealand section is not one which, fiscally, has provoked much litigation—perhaps because tax ‘avoidance’ has not been part of the New Zealand way of life. Its consideration by the courts begins in the 1960s. There were two cases in 1965 (Lewis v Inland Revenue Comr, and Purdie v Inland Revenue Comr) decided in favour of the taxpayer. Then in 1966–67, Elmiger’s case was decided by Woodhouse J and the Court of Appeal. That was a case of an artificially created deduction, and it produced the holding that the section applied not only to accrued liabilities but to future liabilities. It went no further. Each member of the court confined his observations to the case where the effect of the attacked arrangement is that the income sought to be taxed was derived by the taxpayer, and expressed no opinion on any case, where the effect of the arrangement was that the income was not derived. So, to refuse the extension demanded by the present case does not run counter to a line of New Zealand decisions: it merely sets a limit to the application of a difficult section.
Thirdly, the present New Zealand section contains only two of the four limbs found in the corresponding Australian s 260; in particular, it does not contain what would naturally appear to be the limb most directly relevant—the ‘avoiding’ limb (c), that under which the great majority of Australian decisions has been given. The third and fourth limbs, previously appearing in the New Zealand Act of 1900, were dropped by the Act of 1916—one of consolidation and amendment. I am prepared to believe that there is some degree of overlapping between the four limbs—although those with the widest spread would seem to be (c) and (d) rather than (a) and (b) which appear to deal with specific limited cases. But it requires a degree of credence, I would, with respect, almost say interpretative astigmatism, to conclude that the two New Zealand limbs cover effectively the whole of the territory occupied by the Australian section—specifically that they cover the whole field of ‘tax avoidance’. Why the New Zealand section was abbreviated in 1916 has not been satisfactorily explained, perhaps for reasons of elegance, perhaps, as the majority judgment suggests, because limbs (c) and (d) were thought to be tautologous. But, like the Venus of Milo, aesthetic improvement by loss of members may be paid for by a loss of potency; and an anonymous draftsman’s hypothetical belief as to tautology can hardly make a canon of construction. We have to consider it possible that he may have been wrong. There are suggestions in the Court of Appeal that the truncated section may be construed according to a supposed legislative intention not to weaken a tax position in the middle of a major war. But I cannot accept this as a legitimate method, and it was not urged on us by counsel for the commissioners. We must take the section as we find it; if it is weaker than its Australian counterpart, at least it may create less difficult cases.
Fourthly, if the courts are agreed on anything about the section, it is that it is a difficult one. Originating in a desire to deal with the simple matter of incidence of land tax, it has found itself confronted, with only minor changes of language, with all the sophistications of modern tax ‘avoidance’. If one compares it with more recent examples of legislation, it can be seen, and the decisions show, that it is deficient in a number of respects: (a) it fails to define the nature of the liability to tax, avoidance of which is attacked. Is this an accrued liability, a future but probable liability, or a future hypothetical liability? Is it one which must have arisen but for the arrangement, or which might have arisen but for the arrangement, and if ‘might’, probably might, or ordinarily might, or conceivably might? (b) It fails to specify any circumstances in which arrangements etc which in fact have fiscal consequence may be outside the section, and, if such exist, to specify on whom the onus lies, and to the satisfaction of whom, to establish the existence of such circumstances. The taxpayer is left to work his way through a jungle of words, ‘purpose’, ‘or’, ‘effect’, ‘purported purpose’, ‘purported effect’ which existing decisions have glossed, but only dimly illuminated. (c) It fails to specify the relation between the section and other provisions in the income
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tax legislation under which tax reliefs, or exemptions, may be obtained. Is it legitimate to take advantage of these so as to avoid or reduce tax? What if the only purpose is to use them? Is there a distinction between ‘proper’ tax avoidance and ‘improper’ tax avoidance? By what sense is this distinction to be perceived? (d) It gives rise to a number of extremely difficult problems as to what hypothetical state of affairs is to be assumed to exist after the section has annihilated the tax avoidance element in the arrangement (cf (in Australia) Peate v Comr of Taxation of the Commonwealth of Australia). These difficulties are referred to in the majority opinion. I return to them later.
Many of these matters are dealt with in the English and Canadian legislation (see Finance Act 1951, s 32, Finance Act 1960, s 20, and the Canadian Income Tax Act, s 138) summarised in an appendix hereto. No doubt these raise their own difficulties, but the New Zealand section, precisely because it was one of the first in the field, leaves the emergent problems largely unassaulted. In Australia and New Zealand, the courts have endeavoured to remedy some of the statutory deficiencies. In Newton v Comr of Taxation ([1958] 2 All ER at 764, [1958] AC at 466), a dividend stripping case, this Board gave some fresh life to the Australian section by instancing transactions
‘… capable of explanation by reference to ordinary business of family dealing, without necessarily being labelled as a means to avoid tax … ’,
a suggestion profitably generalised by Kitto J in the words ‘capable of explanation by reference to ordinary dealing such as business or family dealing … ’ (Hancock v Comr of Taxation ((1961) 108 CLR 258 at 283)) but it could hardly be claimed that these are indications of precision. They have in turn been ‘interpreted’ in the majority decision in this case. But one difficulty leads to another, and the courts are now having to decide how ‘ordinary’ a transaction must be to escape. In the present case, the judges have, not surprisingly, reached differing conclusions. Wilson J thought that the transactions were ordinary; the Court of Appeal found that they were extraordinary. The last word was said on the Australian section, also by Kitto J, in Newton’s case ((1956–57) 96 CLR 578 at 596):
‘Section 260 is a difficult provision, inherited from earlier legislation, and long overdue for reform by someone who will take the trouble to analyse his ideas and define his intentions with precision before putting pen to paper.’
It is because I believe that the limits of judicial interpretation, however liberal or commonsense the process may be claimed to be, are passed when one comes to attempt to apply the New Zealand section to this present case, that I cannot agree with the Board’s decision. I think that we have here a rusty instrument which breaks in our hands and is no longer capable of repair.
Briefly to restate the question. Is a transaction, by which the taxpayer has disposed of an income producing asset, so that in neither of the relevant years does he derive any income, directly or indirectly, fall within the terms of the New Zealand section as either altering the incidence of any tax or relieving him from his liability for income tax? The case seems, if anything, one of ‘avoidance’, as ‘avoidance’ has been interpreted in Australia. But New Zealand lacks the word—it has ‘altering the incidence’ and ‘relieving’. As to altering the incidence, I fail to see how this covers the present case. The tax falls on whom it falls according to the Act. Changing—for a period or indefinitely—the ownership of land does not alter the incidence of the income tax which is imposed on whoever makes a profit from farming the land. I do not think that this can be got over by calling it ‘economic incidence’. To suppose that it can, involves bringing within the section, subject only to the unexpressed and uncertain
Page 191 of [1971] 1 All ER 179
gloss of Newton’s case, all transfers of property. Yet this has often been said not to be the purpose. Thus, in Deputy Federal Comr of Taxation v Purcell ((1921) 29 CLR 464 at 466), Knox CJ said:
‘It [s 53 of the Income Tax Assessment Act 1915–16—predecessor of s 260] does not extend to the case of a bona fide disposition by virtue of which the right to receive income arising from a source which theretofore belonged to the taxpayer is transferred to and vested in some other person.’
Gavan Duffy and Starkey JJ said ((1921) 29 CLR at 473):
‘Its office is to avoid contracts etc which place the incidence of the tax or the burden of the tax upon some person or body other than the person or body contemplated by the Act. If a person actually disposed of income producing property to another so as to reduce the burden of taxation, the Act contemplates that the new owner should pay the tax. The incidence of the tax and and the burden of the tax fall precisely as the Act intends, namely, upon the new owner.’
This case was approved by this Board in Newton’s case.
Then the second limb: ‘relieving any person from his liability to pay income tax’. The commissioner’s argument placed much emphasis on the contention that ‘liability’ here may include a future liability. So it may; Elmiger’s case so decided. I agree with the decision. But it is one thing to say that an arrangement is caught if and when it applies to income to be received in the future, to which a future liability for tax would attach, and is by the arrangement avoided, and quite another to attack an arrangement under which, in the future, no income is ever derived at all. To describe the latter as one ‘relieving’ a person ‘from his liability’ seems to me, with respect, to involve not a flexible use of the word ‘relieving’ but a simple misuse of language. I cannot forget that ‘relief’ has a well accepted meaning in fiscal contexts which is a long way away from the more general concept of avoidance.
The objection against applying the section (either limb) to dispositions of income producing property is underlined, I respectfully suggest, by the majority decision. The opinion, by reference to ss 77 and 78 of the Act, as to deriving of income, points out very clearly the difficulties which are likely to arise in the ordinary case, where a disposition within the section has been made, in assessing the disponer to tax. The opinion seeks to overcome this, in the instant case, by reliance on the special circumstance that the income passed through the taxpayer’s hands on its way to the trustees. But with respect this ignores the finding of Wilson J, not challenged on appeal, that the taxpayer did not derive the income and I fail to see how the physical receipt by him as agent can form the basis of any derivation. As Wilson J said:
‘The … income was not derived by him but by the trustees, and the fact that the merchant who purchased the crops … paid the proceeds, for its own convenience, to the [taxpayer] does not affect the position.’
For these reasons, in agreement with the judgment of Turner J in Marx v Inland Revenue Comr ([1970] NZLR 182 at 208), I am of opinion that the taxpayer’s appeal ought to succeed.
APPENDIX
I. UK Enactments
A Finance Act 1951, s 32:
‘(1) Where the Commissioners are of opinion that the main purpose or one of the main purposes for which any transaction or transactions was or were effected … was the avoidance or reduction of liability to the profits tax, they may, if they think fit, direct that such adjustments shall be made as respects liability to the
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profits tax as they consider appropriate so as to counteract the avoidance or reduction of liability to the profits tax which would otherwise be effected by the transaction or transactions …
‘(3) [Avoidance or reduction of liability to the profits tax deemed to be the main purpose or one of the main purposes if the main benefit which might have been expected to accrue in the three years following completion of the transaction(s) was the avoidance or reduction of liability to the tax] …
‘(5) [Exempted transactions specified].
‘(6) [Duty of commissioner to grant clearance if satisfied that the (transactions) were or will be entered into for bona fide commercial reasons and are such that no direction under the section ought to be given].’
B Finance Act 1960:
‘28. (1) Where—
‘… a person is in a position to obtain, or has obtained, a tax advantage, then unless he shows that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments, and that none of them had as their main object, or one of their main objects, to enable tax advantages to be obtained …
‘(3) Where this section applies to a person in respect of any transaction or transactions, the tax advantage obtained or obtainable by him in consequence thereof shall be counteracted by such of the following adjustments, that is to say an assessment or additional assessment, the nullifying of a right to repayment or the requiring of the return of a repayment already made … or the computation or recomputation of profits or gains, or liability to tax, on such basis as the Commissioners of Inland Revenue may specify by notice in writing served on him as being requisite for counteracting the tax advantage so obtained or obtainable.
‘43 … (4) … (g) “tax advantage” means a relief or increased relief from, or repayment or increased repayment of, income tax, … or the avoidance of a possible assessment thereto, whether the avoidance or reduction is effected by receipts accruing is such a way that the recipient does not pay or bear tax on them, or by a deduction in computing profits or gains.’
II Canadian Enactment
RSC 1952 c 148 Income Tax Act s 138:
‘(1) Whether the Treasury Board has decided that one of the main purposes for a transaction or transactions … was improper avoidance or reduction of taxes that might otherwise have become payable under the Act … the Treasury Board may give such directions as it considers appropriate to counteract the avoidance or reduction.
‘(3) When a direction has been given under this section, tax shall be collected, or assessed or re-assessed and collected, notwithstanding any other provision of this or any other Act, in accordance therewith.’
Appeal dismissed.
Solicitors: Blyth, Dutton & Co (for the taxpayer); Mackrell & Co (for the commissioner).
S A Hatteea Esq Barrister.
Empresa Cubana de Fletes v Lagonisi Shipping Co Ltd
[1971] 1 All ER 193
Categories: SHIPPING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE AND CAIRNS LJJ
Hearing Date(s): 28, 29 OCTOBER 1970
Shipping – Charterparty – Time charter – Hire –Payment in advance – Default in payment – Withdrawal of ship – Instalment of hire due on a Saturday when banks were closed – Charterers mistakenly thinking that payment on the following Monday would do – Payment of hire tendered on Monday afternoon – Charterers in default of payment – Before payment tendered, notice sent by owners to the master withdrawing ship – Notice of withdrawal not sent to charterers until after payment tendered – Default in payment cured by tender – Owners not entitled to withdraw ship unless notice given to charterers – Whether sufficient tender of hire.
The shipowners, a Cyprus company, let their vessel on a time charter in the Baltime form to the charterers, a Cuban enterprise. The charter, which was dated 9 February 1970, was for a period of 24 up to 30 months at the charterers’ option. By cl 6 of the charter the charterers were to pay hire at the rate of 33s per ton in sterling, half-monthly in advance, to the shipowners’ bank in London; ‘in default of payment’ the shipowners had the right to withdraw the vessel from the service of the charterers without noting any protest and without interference by any court or any other formality whatsoever and without prejudice to any claim the shipowners might otherwise have on the charterers under the charter. The charterers paid the hire regularly every half-month in advance from April until the middle of September 1970. The next instalment of hire was due on 3 October 1970 which was a Saturday when the banks in London were closed. The charterers mistakenly thought that because the banks were closed on Saturdays and Sundays, payment of the instalment could be made on Monday, 5 October; and on Friday, 2 October they cabled to their London bank instructing them to pay the instalment to the shipowners’ bank on Monday, 5 October. When the instalment had not been paid by Monday morning, 5 October, the shipowners considered that the charterers were in default of payment and sent a message, at 9.35 am London time, to the master of the vessel telling him that as the hire had not been paid the ship was withdrawn from the charter; but the shipowners did not at this time communicate with the charterers. Further, during the Monday morning the shipowners’ accountant informed the shipowners’ bank that the hire was overdue and must not be accepted. At 2.50 pm on Monday, 5 October, the charterers’ bank tendered payment of the hire to the shipowners’ bank by sending a messenger with a banker’s payment slip, which was equivalent to cash, authorising the shipowners’ bank to receive and to pay themselves the amount of the instalment, and a letter informing them that the payment was for hire in respect of the vessel. The payment slip was rejected and returned to the charterers’ bank in accordance with the shipowners’ instructions not to accept the hire. At 5.45 pm on Monday, 5 October, the shipowners, who were not aware that payment of the hire had been tendered earlier in the afternoon, cabled the charterers, for the first time, that due to their default in payment of hire as provided for in cl 6 the shipowners were exercising their rights under the charter to withdraw the vessel from the charterers’ service. The shipowners then fixed a new charter for the vessel at 43s a ton, freight rates having by then gone up beyond the rates provided for in the charter of 9 February 1970. The charterers brought an action against the shipowners claiming an injunction to prevent the use of the vessel otherwise than in accordance with the charter of 9 February 1970. It was common ground that the charterers were in default of payment in failing to pay the hire by Saturday, 3
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October, and that because of their default the owners were entitled on Monday morning, 5 October, to give notice withdrawing the vessel from the charter.
Held – (i) The right to withdraw the vessel for a default in payment of hire, expressly given to the shipowners by cl 6 of the charter, was exercisable only before payment had been made or tendered, for the words in cl 6 ‘in default of payment’ meant ‘in default of payment and so long as default continues’, and once the charterers had remedied their default, by paying the instalment of hire or tendering it, the shipowners had no right to withdraw the vessel (see p 197 e, p 198 h and p 199 h, post).
(ii) In order to exercise a right to withdraw a ship, the shipowners (save in exceptional circumstances) must give notice of withdrawal to the charterers before the payment or tender was made, and notice of withdrawal to the master of the ship was insufficient, for the withdrawal operated only from the time the notice was received by the charterers (see p 197 g, p 198 j and p 199 h, post).
(iii) The banker’s payment slip sent by the charterers was a sufficient tender of the hire to remedy their default in payment and, accordingly, once the tender had been made the shipowners could not thereafter withdraw the ship because the charterers were no longer in default; the charterers were therefore entitled to an injunction preventing the shipowners from letting out the vessel on a fresh charter (see p 197 j, to p 198 a and p 199 b and h, post).
A/S Tankexpress v Compagnie Financière Belge des Petroles SA [1948] 2 All ER 939 considered.
Notes
For withdrawal of a ship for non-payment of hire, see 35 Halsbury’s Laws (3rd Edn) 281–284, para 423, and for cases on the subject, see 41 Digest (Repl) 229, 532–539.
Cases referred to in judgment
Car and Universal Finance Co Ltd v Caldwell [1964] 1 All ER 290, [1965] 1 QB 525, [1964] 2 WLR 600, Digest (Cont Vol B) 633, 1577.
Langfond (Steamship) (Owners) v Canadian Forwarding and Export Co (1907) 96 LT 559, 10 Asp MLC 414, 41 Digest (Repl) 229, 539.
Martindale v Smith (1841) 1 QB 389, 10 LJQB 155, 113 ER 1181, 39 Digest (Repl) 518, 589.
Mersey Steel and Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App Cas 434, [1881–85] All ER Rep 365, 53 LJQB 497, 51 LT 637, 12 Digest (Repl) 378, 2966.
Tankexpress (A/S) v Compagnie Financière Belge des Petroles SA [1948] 2 All ER 939, [1949] AC 76, [1949] LJR 170, 41 Digest (Repl) 221, 482.
Cases also cited
Croft v Lumley (1858) 6 HL 672, [1843–60] All ER Rep 162.
Dobie v Larkan (1855) 10 Exch 776.
Hartley v Hymans [1920] 3 KB 475, [1920] All ER Rep 328.
Italian State Railways v Mavrogordatos [1919] 2 KB 305.
Kawasaki Kisen Kabushiki Kaisha of Kobe v Bantham SS Co Ltd [1938] 3 All ER 80, [1938] 1 KB 805.
Poole v Tumbridge (1837) 2 M & W 223.
Interlocutory appeal
This was an appeal by the defendant shipowners, Lagonisi Shipping Co Ltd, from the judgment of Donaldson J, on 23 October 1970, giving interlocutory rulings that a telex message, dated 5 October 1970, sent by the shipowners’ agent to the master of the ship Georgios C, which was time chartered by the shipowners to the plaintiff charterers, Empresa Cubana de Fletes, was inadmissible in evidence as being irrelevant, and that the charterers were entitled to an injunction restraining the shipowners from employing, using or allowing to be employed or used (other than in the performance of a charterparty dated 13 October 1970 between the shipowners and Tradex International SA of Panama City) the Georgios C in any way inconsistent with or
Page 195 of [1971] 1 All ER 193
different from the employment and use provided for in the time charterparty dated 9 February 1970, made between the charterers and the shipowners during the subsistence of the charterparty.
On 19 October 1970, Donaldson J had given judgment for the charterers at the trial of their action against the shipowners for an injunction in the above terms and for damages for breach of the charterparty dated 9 February 1970, on the ground that the shipowners had wrongfully withdrawn the vessel from the charter. Subsequent to this judgment, but before the judgment had been drawn up, the telex message dated 5 October 1970 was brought to the attention of counsel for the shipowners who applied to Donaldson J to have it admitted as evidence. Donaldson J, accepting that he had jurisdiction to reconsider the situation, made the interlocutory rulings of 23 October 1970 set out above from which the shipowners appeal. The facts of the appeal are set out in the judgment of Lord Denning MR.
J S Hobhouse and B Shaw for the shipowners.
C S Staughton QC and Brian Davenport for the charterers.
29 October 1970. The following judgments were delivered.
LORD DENNING MR. The dates in this case are striking. On Monday, 5 October 1970, events took place leading to the dispute. The parties went quickly to the Commercial Court, which decided it. Here we are on 29 October deciding it in the Court of Appeal. It involves £150,000. Such expedition by all concerned is much to be commended.
A vessel called the Georgios C is owned by a Cyprus company called the Lagonisi Shipping Co Ltd. They let it on a time charter, in the Baltime form, to an enterprise established under the law of Cuba, which charters vessels, called the Empresa Cubana de Fletes. The time charter was dated 9 February 1970, and was for a period of 24 up to 30 months at charterers’ option. The vessel was delivered on 18 April 1970. Clause 6 provided for the payment of hire. It stated:
‘The Charterers to pay as hire: at the rate of 33/- per ton on Vessel’s total deadweight per calendar month and/or pro rata for any part of a month commencing in accordance with clause 1 until her re-delivery to the [shipowners] … Payment of hire to be made in Pounds Sterling to National Westminster Bank Ltd. 27 St. Mary Axe, London, EC3, for account [the shipowners] without discount half-monthly in advance … In default of payment the [shipowners] to have the right of withdrawing the Vessel from the services of the Charterers, without noting any protest and without interference by any Court or any other formality whatsoever and without prejudice to any claim the [shipowners] may otherwise have on the Charterers under the Charter … ’
The charterers paid the hire regularly every half-month in advance from April until the middle of September 1970. The next payment was due on Saturday, 3 October 1970. It was £11,016 5s 11d. The shipowners claim that the charterers did not pay it on that day; and, accordingly, they had the right to withdraw the vessel; and that they did so on Monday, 5 October. By this time freight rates, instead of being 33s a ton as the charter provided, had gone up to 43s a ton. So naturally it was in the shipowners’ interests to withdraw the ship from the charter if they could; for they could then let her out at the high rates then prevailing.
It is a dramatic story. Early in October—this very month—the Georgios C was sailing in ballast from Panama to Havana. The half-monthly payment was falling due on 3 October. Now 3 October was a Saturday. In London the banks are closed on Saturday and Sunday. On Friday morning, 2 October, the charterers, or their agents in Havana, sent a cable to their London bank, which is the Moscow Narodny Bank. They instructed their bank to pay the instalment of £11,016 5s 11d sterling to the account of the shipowners at the National Westminster Bank Ltd at St Mary Axe on Monday, 5 October. Note the day. It may be that the charterers thought that, as the hire was due on the Saturday, when the banks would be closed,
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and also on the Sunday, it was permissible to pay on the Monday. But the shipowners took a different view. They thought that payment ought to be made at latest by the Saturday, 3 October; and, seeing that the banks would be closed that day, the payment ought to have been made on Friday, 2 October.
On Monday, 5 October, the shipowners thought that the charterers were in default. They said nothing, however, to the charterers at that time. They only sent messages to the master of the ship. The first message, they say, was a radio message from Athens at 10.35 am (which would be 9.35 am in London) to the master: ‘Time charterers did not pay hire therefore ship withdrawn from time charter telegraph your position.' During the Monday the shipowners’ accountant went five times to the National Westminster Bank. On each occasion he told the bank officials that the hire was overdue and it must not be accepted. But he sent no message to the charterers. At about 2.45 pm on the Monday afternoon the Moscow Narodny Bank took steps to fulfil the instructions given them by the charterers. They sent a messenger to the National Westminster Bank at St Mary Axe with an envelope which contained a banker’s payment slip. It authorised the National Westminster Bank to receive—to pay themselves—£11,016 5s 11d. The envelope also enclosed a letter which notified the National Westminster Bank that the payment was for the hire in respect of the Georgios C. The messenger pushed the envelope across the counter at the National Westminster Bank. It was opened by them at 2.50 pm that afternoon. The clerk there at first forgot that it was not to be accepted. So he signed the banker’s payment slip as if to acknowledge receipt of the money. But he soon discovered his mistake. He discovered it before he sent it forward to the clearing house. So he took steps to rectify his error. He wrote on the payment slip: ‘Crossed and discharged in error’. He then sent it back to the Moscow Narodny Bank. But he sent it by second class post, so it did not get there until the Thursday.
That envelope containing the payment slip was received by the bank at 2.50 pm. The shipowners did not know anything about it. At 3.07 pm the shipowners (assuming, I suppose, that the hire had not been paid by 3.00 pm) sent a cable to the master, who would be somewhere in the Caribbean Sea, heading for Havana. It stated: ‘Stop your engines. Await orders.' But the shipowners still sent no message to the charterers.
At 4.45 pm on the same day, the shipowners sent another message to the master: ‘Cancel our today’s dated telegram proceed your destination.' That cancellation was shortlived. The shipowners decided to give notice to the charterers withdrawing the vessel. At 5.45 pm on that Monday afternoon they sent this cable to the charterers. It was their first communication to them:
‘Due to your default in payment of hire as provided for in clause 6 we hereby exercise rights conferred upon us as owners by lines 51 to 53 of charter and withdraw the Georgios C from your service. This is done without prejudice to our other rights etc against you under the charter.’
The shipowners then stopped the ship from going to Havana. They fixed a new charter for her by which she was to go up to St Lawrence and carry a cargo to Belfast. We are told she is is due to arrive at Belfast today.
The question is: what is to happen to the ship? Is the withdrawal effective so that the owners can charter her on the present market at 43s a ton? Or are the charterers still entitled to the ship under the time charter for the next two years at 33s a ton? It is common ground that the half-monthly payment of £11,016 5s 11d fell for payment at latest by Saturday, 3 October. It is also common ground that, come Monday morning, 5 October, the charterers, not having paid by the Saturday, were in default of payment. Thereupon the owners were entitled to give notice withdrawing the vessel from the charter. That appears from A/S Tankexpress v Compagnie Financière Belge des Petroles SA ([1948] 2 All ER 939 at 946, [1949] AC 76 at 94), when Lord Wright said:
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‘The payment of hire was a vital matter because, if there was default of “such payment” (i.e.,; in cash monthly in advance in London), the owners were entitled to cancel the long and valuable charter. Default in payment, that is, on the due date is not, in my opinion, excused by accident or inadvertence.’
And Lord du Parcq put it in a sentence ([1948] 2 All ER at 951, [1949] AC at 102):
‘… if each party had been minded to insist on a literal performance of the contractual obligation, a payment made even a day late would not have sufficed to protect the charterers against cancellation.’
Naturally enough, counsel for the shipowners relies on those statements. He says that if there is default in payment for an hour or for a day, the right to withdraw accrues. It can only be lost, he said, by waiver; and there was no waiver here.
That is a telling argument, but I think that there is an answer to it. The effect of a stipulation as to time always depends on the true construction of the contract. A default in payment does not automatically give the other a right to determine it. Usually it does not do so. It only does so if there is an express provision giving the right to determine, or if the non-payment is such as to amount to a repudiation of the contract. That is shown by Martindale v Smith; and by the well-known judgment of Lord Blackburn in Mersey Steel and Iron Co Ltd v Naylor, Benzon & Co ((1884) 9 App Cas 434 at 444, [1881–85] All ER Rep 365 at 370). In the present case the non-payment was clearly not such as to amount to repudiation. It was obviously a mistake. The charterers thought, as the banks were closed on Saturday and Sunday, that Monday would do. They were wrong in so thinking. But they were not repudiating the contract. Then does the clause itself give the shipowners the right to withdraw? I think it does, as the Tankexpress case shows, provided always that they exercise the right before payment is made or tendered. I think in cl 6 the words ‘In default of payment’ mean ‘in default of payment and so long as default continues’. It means that the owners have the option—so long as the charterers are in default—to withdraw the vessel. But, once the charterers remedy their default, by paying the instalment or tendering it, the owners have no right to withdraw.
So in this case, if the owners had withdrawn the vessel from the charter immediately on the Monday morning by notice to the charterers, it might well have been effective. But they did not do so. They did not give notice to the charterers. They only gave notice to their own master. That was, I think, insufficient. In order to exercise a right to withdraw a ship, the shipowners must give notice to the charterers. The withdrawal only operates from the time notice is received by the charterers. If the charterers pay or tender the instalment before notice is received, they remedy their default and the shipowners cannot thereafter withdraw the vessel.
There may be some exceptional cases in which notice of withdrawal may be excused, as when the charterer has disappeared; see Car and Universal Finance Co Ltd v Caldwell. But there is nothing of the kind here. The shipowners could easily have notified the charterers by giving notice to the agents in London. They did not do so. They left it too late.
I have said that, to remedy their default, the charterers must pay or tender the instalment. The shipowners cannot refuse the tender and then say the charterers were still in default. But did the charterers make a sufficient tender here? Their bank, the Moscow Narodny Bank, sent a banker’s payment slip to the National Westminster Bank. Such a slip is treated in commercial circles as cash. It should, I think, be treated as sufficient tender. Once made, the shipowners could not thereafter withdraw the ship; because the charterers were no longer in default.
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I hold, therefore, in agreement with the judge, that the shipowners are not entitled to let out the vessel on a fresh charter of their own fixing. The vessel must be returned to complete her charter with the charterers. I would dismiss the appeal, accordingly.
PHILLIMORE LJ. I agree. The vessel was originally delivered under the charter on 18 April 1970, and the practice appears to have been to make the half-monthly payments in advance either on 3rd or on 18th of each month as might be appropriate. And so the whole series of payments were made—no less than 11 altogether, and on each occasion the charterers paid either in advance of or on the actual date, namely 3rd or 18th of the month. And then it came to this weekend when the 3rd, being 3 October, fell on a Saturday. The charterers moved in perfectly good time because they sent their telegram to the Moscow Narodny Bank asking them to make payment, as the custom was and in accordance with the charterparty, to the National Westminster Bank Ltd at St Mary Axe. The telegram was received in London at 8.00 am on the Friday morning. But by some error it instructed the bank to make the payment on Monday, 5 October. Somebody had miscalculated or mistyped the actual date. And, of course, freight rates had been rising to such an extent that whereas the rate fixed under this charterparty concluded in the spring was 33s a ton, when, as they though, the owners had purported to withdraw the ship on the Monday afternoon, they offered to recharter it to the charterers on the Thursday at no less than 43s a ton. Obviously what happened was that over that weekend somebody in the employment of the shipowners had spotted the chance of withdrawing the ship from this charter and making a very substantial profit by so doing. This was not a case where the charterers were deliberately trying to avoid their responsibilities—quite the contrary; they had no intention of repudiating their bargain; but the shipowners saw their chance and they were quick to take it. Now, there is no doubt, as Lord Denning MR has said, that by the Monday morning, the charterers were technically in default; the money had not actually been paid, and apparently representatives of the shipowners made a whole series of visits to the bank—no less I think than five in all that day—enquiring whether the money had been received and telling the bank that when they received it they were to reject it. In fact, at 2.50 pm when the clerk in the National Westiminster Bank opened the envelope left by the messenger from the Moscow Narodny Bank, he did not, I suppose, at first remember these instructions and he in fact stamped the banker’s draft or payment slip, as I think it is technically called, just as he would have done if he were accepting it and going to credit it in the ordinary way; and he wrote with a stamp on the covering letter the word ‘received’ and put down the time—2.50 pm. Then, no doubt remembering his instructions he did not go on to credit the payment in the books, and in fact the banker’s payment slip was sent back to the Moscow Narodny Bank, albeit under a stamp for second class mail, with the result that it did not arrive for some days.
Now, what was the position? Technically, at all events, because it is agreed between the parties that this banker’s payment slip was equivalent to cash, until that was paid the shipowners were at liberty to withdraw the ship in accordance with the provisions of cl 6 of the charterparty; but in my judgment they did not do so. I venture to agree with Lord Denning MR that in ordinary commercial practice and save in very exceptional circumstances, withdrawing the ship must involve a notice to the charterers. After all, the charterparty is not a demise. All that it does is to put the ship and the ship’s personnel under the orders of the charterers during the period of the charter, and what is necessary is a notice to the charterers to tell them that their orders will not be observed any more. And indeed, as appears from the actual document which was sent from the shipowners’ agents in London to those of the charterers, the notice reads as follows:
‘Due to your default in payment of hire as provided in clause 6 we hereby
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exercise rights conferred upon us as owners by lines 51 and 53 of charter and withdraw the Georgios C from your service.’
There it is; they were purporting in that actual document to exercise their right in this respect. I agree with Lord Denning MR that albeit they had been in default, the charterers had rectified their default before that message was ever sent; because they had tendered the amount due before 3.00 pm that afternoon. If support is wanted for that view, I think it is to be derived from the decision of the Judicial Committee in Owners of Steamship Langfond v Conadian Forwarding and Export Co. There there was an attempt to withdraw a ship and then payment was made; and then a second attempt to withdraw; and, dealing with the second notice of withdrawal, the court made it clear that that could not operate in the light of the fact that payment had been made before the notice was delivered.
For these reasons I think that the charterers had put themselves in the right before the shipowners gave their notice of withdrawal, and accordingly this appeal fails.
CAIRNS LJ. I agree that this appeal must be dismissed. All the trouble in this case has arisen because when the charterers sent instructions from Cuba to London for payment of the first October instalment of hire, their cable, although sent so as to be received early in the morning of 2 October, directed the payment on 5 October, the Monday. This was obviously a slip on somebody’s part in Cuba. It could not in any way be to the advantage of the charterers to pay on 5th rather than on or before 3 October; and there was clearly no fault on the part of anybody who acted on their behalf in London—no fault on the part of the Moscow Norodny Bank in not making payment until 5 October, because that was the date on which they were directed to pay.
Now, the sheet anchor of counsel for the shipowners’ case has the decision of the House of Lords in A/S Tankexpress v Compagnie Financière Belge des Petroles SA and in particular a passage in the speech of Lord Wright ([1948] 2 All ER at 946, 947, [1949] AC at 94, 95). That passage is dealing solely with the question of what constitutes default. The question was: does a default mean deliberate failure to pay, or would accidental or inadvertent non-payment constitute default? Lord Wright made it clear that there was default whenever payment was not made on the due date, whether deliberately or not, and whether the payment was much overdue or was only a day overdue. But about these matters there has been no issue on this appeal. Although the non-payment was clearly accidental or inadvertent, and although there was only a brief delay before payment was tendered, counsel for the charterers has accepted that there was default, and that the owners then acquired the right to withdraw the ship from the charterparty. This is the kind of situation that Lord Wright had in mind when he spoke of ([1948] 2 All ER at 946, [1949] AC at 95) the stringency of the right to cancel; but Lord Wright and the other noble Lords who decided the A/S Tankexpress case did not have to consider whether once a default had occurred, it could be cured by tender of the money before the right to withdraw the ship had been exercised. I cannot regard the A/S Tankexpress case as any authority on this point; and, for the reasons that my Lords have given, I agree that as this payment was tendered before the withdrawal, the right to withdraw was lost. I also agree that withdrawal here did not take place until notice thereof was given to the charterers, which was after the tender.
I cannot part with this case without remarking on the extraordinary celerity with which it has been possible for the courts, with the assistance of the legal advisers on both sides, to bring it to decision. The cause of action arose on 5 October 1970.
Page 200 of [1971] 1 All ER 193
The writ was issued on 15 October. Donaldson J had the matter before him on three different days and delivered two judgments, one on 19 October and one on 23 October. The case was opened before this court yesterday, 28 October, and judgment has been given today, 29 October. I hope that this will be regarded as demonstrating the services that the Commercial Court and the Court of Appeal can render to the commercial community in a matter where speed is of special importance to the parties and where the commercial men concerned and their advisers co-operate to achieve a rapid decision.
I agree that the appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords.
Solicitors: Constant & Constant (for the shipowners); Coward, Chance & Co (for the charterers).
Wendy Shockett Barrister.
Note
Smith v Cole
[1971] 1 All ER 200
Categories: CRIMINAL; Road Traffic
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 20 OCTOBER 1970
Road traffic – Driving with blood-alcohol proportion above prescribed limit – Evidence – Provision of specimen – Specimen of blood – Specimen divided into parts – Analysis by ordinary equipment and ordinary skill – Analysis by gas chromatography.
For the taking of blood specimens, see Supplement to 33 Halsbury’s Laws (3rd Edn), para 1061A, 3.
Cases referred to in judgment
Earl v Roy [1969] 2 All ER 684, [1969] 1 WLR 1050, 133 JP 427, Digest Supp.
R v Nixon [1969] 2 All ER 688, [1969] 1 WLR 1055, 133 JP 520, 53 Cr App Rep 432, Digest Supp.
Case stated
This was an appeal by way of case stated from a decision of the Essex justices sitting at Clacton-on-Sea on 2 March 1970 convicting the appellant, John Bernard Smith, on an information preferred by the respondent, Leonard George Cole, of driving a motor vehicle with the proportion of alcohol in his blood above the prescribed limit, contrary to s 1(1) of the Road Safety Act 1967. A blood sample had been provided by the appellant on 18 December 1969 and was sent to the Metropolitan Police laboratory where it was analysed six days later by Mr Dennis Goodwin. The appellant sent a sample to Dr Anne Robinson, at the Department of Forenisc Medicine at the London Hospital Medical Centre, who analysed it on 19 December. Both samples disclosed a proportion of alcohol in the blood above the prescribed limit.
A F B Scrivener for the appellant.
B J Higgs for the respondent.
20 October 1970. The following judgments were delivered.
LORD PARKER CJ stated the facts and continued: What was said to the justices, although it is not by any means clear to me at what stage or in what circumstances
Page 201 of [1971] 1 All ER 200
it was said, was that the prosecution had failed to show that the sample was capable of accurate analysis by ordinary methods by a reasonably competent analyst, reference being made to R v Nixon, a decision of the Criminal Division of the Court of Appeal. It was there laid down that the specimen must be capable of analysis by the use of ordinary equipment and ordinary skill by a reasonably competent analyst. It is urged that the prosecution has not so proved, since it appeared that both Mr Goodwin and Dr Robertson found their respective samples clotted and had to use gas chromatography. The sole question is whether the justices were entitled to find that the appellant had been supplied with a suitable sample.
What is really urged here is that the decisions in R v Nixon and in Earl v Roy both referred to gas chromatography as sophisticated equipment only available to the favoured few—I am paraphrasing what was said. The evidence in Earl v Roy was that it needed very expensive apparatus, access to which very few if any analysts had. Here we have a case, as it comes before the justices, where both analysts, without apparently any complaint at all, used gas chromatography, and for my part I can see no reason why in those circumstances the justices, after being referred to Earl v Roy and R v Nixon, should not say: we are satisfied that this was today a suitable sample; both these analysts had the apparatus, and we are satisfied, unlike the earlier days, that that apparatus is available to many analysts and not merely to the favoured few. Accordingly, on the facts of this case, I see no ground whatever to interfere with the decision, and I would dismiss the appeal.
ASHWORTH J. I agree.
BROWNE J. I agree
Appeal dismissed.
Solicitors: Oswald Hickson, Collier & Co agents for J Bernard Smith, Clacton-on-Sea (for the appellant); T Hambrey Jones, Chelmsford (for the respondent).
Jacqueline Charles Barrister.
Note
R v Ironfield
[1971] 1 All ER 202
Categories: CRIMINAL; Sentencing
Court: COURT OF APPEAL, CRIMINAL DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND CANTLEY JJ
Hearing Date(s): 17 NOVEMBER 1970
Criminal law – Compensation – Compensation order – Principle to be applied when making order – Means and prospect of rehabilitation not relevant – Forfeiture Act 1870, s 4, as amended.
Notes
For compensation of person injured by felony, see 10 Halsbury’s Laws (3rd Edn) 553, 554, para 1020, and for a case on the subject, see 14 Digest (Repl) 685, 7021.,
For the Forfeiture Act 1870, s 4, as amended, see 8 Halsbury’s Statutes (3rd Edn) 180.
Appeal
On 9 July 1970, at Northumberland quarter sessions before the chairman (his Honour J A T Hanlon), the appellant, Barrie Ironfield, pleaded guilty to three counts of burglary and asked for 21 other cases to be taken into consideration. He was sentenced to concurrent terms of four years’ imprisonment. In addition, an order was made under s 4 of the Forfeiture Act 1870, that the appellant pay a Mrs Tulip, an aggrieved person in relation to one of the burglaries, compensation in the sum of £140. He appealed against sentence. He had been tried with one Rouane, who was similarly charged with two of the burglaries and who asked for 26 other cases to be taken into consideration (16 with the appellant), and was sentenced to three years’ imprisonment concurrent. At the trial, the appellant was described as having been marauding the district for a period, albeit the sums involved were not very considerable. The Court of Appeal considered that there was no real reason to distinguish between the appellant and Rouane, and reduced the appellant’s sentence to three years’ imprisonment on each count, concurrent. The case is reported on the propriety of the order for compensation.
C L Kelly for the appellant.
17 November 1970. The following judgment was delivered.
LORD PARKER CJ in the course of delivering the judgment of the court, said: One further matter arises. Leave to appeal was given in this case by the single judge in relation to the compensation order that was made, the single judge thinking, wrongly as it turns out, that £100 was the maximum that could be ordered to be paid. In fact, that figure of £100 has been increased to £400a and, accordingly, £140 was well within the jurisdiction of the court. Counsel for the appellant has argued in connection with this compensation order that it would be wrong in principle to allow it to stand in he case of a convicted person who has no means, and who on his eventual release from prison will require such money as he can earn to rehabilitate himself, and that it would be wrong to make a compensation order in a case of a convicted person subjected to a considerable period of imprisonment who has no means. He points by analogy to rulings of this court in that connection relating to fines or costs. This court is quite satisfied that a completely different
Page 203 of [1971] 1 All ER 202
principle applies in the case of compensation. If a man takes someone else’s property or goods, he is liable in law to make restitution, or pay compensation even if no compensation order is made by the court before which he is convicted. A victim who wishes to assert his rights need not be put to the additional trouble and expense of independent proceedings, and certainly cannot be required to forego his rights in order to facilitate the rehabilitation of the man who has despoiled him. In contrast, liability to pay a fine or costs can only arise from an order of the court and, in the case of a fine, is entirely punitive. There is no reason to interfere with the compensation order.
Appeal allowed in part. Sentence varied.
Solicitors: Registrar of Criminal Appeals (for the appellant).
N P Metcalfe Esq Barrister.
Fleming (Inspector of Taxes) v Associated Newspapers Ltd
[1971] 1 All ER 203
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 21, 22, 23, 30 JULY 1970
Income tax – Deduction in computing profits – Business entertaining expenses – Expenses incurred in provision by person of anything in his trade to provide – Newspaper printers and publishers – Provision of hospitality to informants and contributors – Finance Act 1965, s 15(9).
The taxpayer company was the printer and publisher of daily and weekly newspapers. In the course of gathering material for its publications the taxpayer company through its employees incurred a number of expenses, which included the provision of hospitality for informants and contributors. That hospitality was paid for by the taxpayer company. The expenditure incurred on such hospitality in the year 1965–66 was £67,143. On the question whether the taxpayer company was entitled, under s 15(9)a of the Finance Act 1965, to deduct that amount in computing profits as being ‘expenses incurred in … the provision by any person of anything which it is in his trade to provide’,
Held – That amount was deductible under s 15(9) because on the true construction of that subsection—
(i) the word ‘anything’ meant ‘anything’ and was not confined in its scope by reference to the expenses which s 15 disallowed (see p 213 e, post); and
(ii) the expressions ‘provision’ and ‘provide’ did not relate only to the thing provided immediately (see p 212 a and p 214 a, post); accordingly they covered the expenses which were part of the fair cost of producing newspapers and periodicals (as opposed to business entertainment expenses incurred in making a sale) (see p 214 c, post).
Notes
For the law relating to business entertainment expenses, see 20 Halsbury’s Laws (3rd Edn) 158, 159, para 278, 192, para 337.
Page 204 of [1971] 1 All ER 203
For the Finance Act 1965, s 15, see 45 Halsbury’s Statutes (2nd Edn) 521. For 1970–71 and subsequent years of assessment, the Finance Act 1965, s 15, has been repealed by the Income and Corporation Taxes Act 1970, s 538(1), Sch 16, and re-enacted by s 411 of that Act.
Cases referred to in judgment
Cape Brandy Syndicate v Inland Revenue Comrs [1921] 1 KB 64, 12 Tax Cas 358; affd CA [1921] 2 KB 403, 90 LJKB 461, 125 LT 108, 12 Tax Cas 358, 28 Digest (Repl) 410, 1822.
Inland Revenue Comrs v Ross and Coulter (Bladnoch Distillery Co Ltd) [1948] 1 All ER 616, 28 Digest (Repl) 442, 1929.
Kirkness (Inspector of Taxes) v John Hudson & Co Ltd [1955] 2 All ER 345, [1955] AC 696, [1955] 2 WLR 1135, 36 Tax Cas 28, 28 Digest (Repl) 310, 1356.
Lloyds and Scottish Finance Ltd v Modern Cars and Caravans (Kingston) Ltd [1964] 2 All ER 732, [1966] 1 QB 764, [1964] 3 WLR 859, Digest (Cont Vol B) 630, 653a.
No-Nail Cases Proprietary Ltd v No-Nail Boxes Ltd [1944] 1 All ER 528, [1944] KB 629, 113 LJKB 353, 170 LT 384; affd HL [1946] 1 All ER 523, [1946] AC 447, 36 Digest (Repl) 844, 1929.
R v Dibdin [1910] P 57, sub nom R v Dibdin, ex parte Thompson 79 LJKB 517, 101 LT 722; on appeal HL sub nom Thompson v Dibdin [1912] AC 533, 19 Digest (Repl) 242, 14.
Wickwar (Inspector of Taxes) v Berry [1963] 2 All ER 1058, [1963] 1 WLR 1026, 41 Tax Cas 33, Digest (Cont Vol A) 869, 401d.
Case stated
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 5th and 6 May 1969, Associated Newspapers Ltd (hereinafter called ‘the taxpayer company’) appealed under s 9(5) of the Income Tax Management Act 1964 against the disallowance in part of its claim under s 341 of the Income Tax Act 1952 for the year 1965–66 for relief in respect of a loss sustained in its trade.
2. The question for decision was whether or not under the terms of s 15 of the Finance Act 1965 a sum of £67,143 forming part of a larger sum expended by the taxpayer company in the year ended 31 March 1966 (hereinafter called ‘the accounting period’) in providing business entertainment was deductible in computing the taxpayer company’s profits or gains for the purposes of income tax (Sch D).
3. It was agreed: (1) the trade carried on by the taxpayer company includes and during the accounting period included: (a) the printing and publication of the Daily Mail, the Evening News and Weekend; (b) syndicating (ie for a fee licensing third parties to reproduce) news items, feature articles and other copyright material which is published in the above-mentioned journals. The taxpayer company also, inter alia, managed and printed the Daily Sketch under a contract made with the Daily Sketch and Daily Graphic Ltd (96 per cent of whose shares were owned by the taxpayer company), printed other newspapers under contracts made with third parties, promoted exhibitions—including the Daily Mail Ideal Home Exhibition—published other publications, such as the Daily Mail Year Book and the Daily Mail Motor Show Review, and held shares in subsidiary companies. During the accounting period the subsidiary companies included 24 provincial newspaper companies.
(2) In addition to a considerable number of other departments the Daily Mail and the Evening News each had its own editorial department headed by the editor with a team of assistant editors. In each of the editorial departments there were specialists for such subjects as diplomatic matters, Parliament, sport, the arts, industry, agriculture, education, crime, science, aviation, and finance. In addition in each editorial department there were general reporters—men capable of covering any assignment, whose duties were to cover assignments delegated daily by the news editor of their paper. Each of these specialists and general reporters worked exclusively for only one of the newspapers. Weekend also had its own editorial department.
Page 205 of [1971] 1 All ER 203
(3) The Daily Mail and the Evening News contained among other things straightforward news, feature articles, comment and photographs. The greatest part of the information and feature articles published in the taxpayer company’s newspapers and in Weekend was obtained after the taxpayer company had for the purpose of obtaining it incurred expense over and above the salary and travelling costs of the taxpayer company’s editorial staff. In many instances the taxpayer company acquired the information or article by means of a direct payment—such as payments to a news agency, or to an individual informant or contributor. In many instances, however, the information was acquired as a result of providing meals or drinks, or both, to the informant, who might or might not also receive a cash payment. In each of the cases described below the taxpayer company met the cost of such hospitality provided that the journalist produced results which were considered commensurate with the expenditure which he incurred in this way.
(4) In some cases the hospitality was provided because a hotel or restaurant was the only convenient place for interviewing a potential informant in conditions in which he or she would relax and offer the greatest assistance. In some cases a hotel or restaurant was chosen for an interview, and the hospitality was provided, because it was known or anticipated that the potential information would expect some quid pro quo if he was to help the journalist but would not welcome a more mercenary approach. In other cases the informant was found in a hotel or public house or other such place, and the purchase of a round or two of drinks, or a round or two of drinks followed by a meal helped the reporter to establish good relations and obtain the information which he was seeking. For example, when covering an industrial dispute the reporter must meet both employees and union officials as well as management; at such times employees were often to be found in public houses and unions frequently used public houses as a strike HQ and it was over drinks that reporters were able to discuss the issues and obtain the current news together with background information on which to build their reports.
(5) In other cases the information was acquired as a result of the journalist keeping in close touch with numerous ‘contacts’—i e men and women of affairs generally, or men and women working in the particular field in which the journalist specialised. Such ‘contacts’ were particularly important to the specialists. The specialists had to have a wide knowledge of their subjects and had often to probe deeply to find the information which was of real interest to the public, and which would sometimes provide them with exclusive stories which would put their newspaper and its readers ahead of the others. Experience had shown the taxpayer company that the desired relationship with such ‘contacts’ could best be built up and maintained over an occasional meal or drink or, depending on the circumstances, regular or bi-weekly meals or drinks—at a suitable hotel or restaurant or at the journalist’s home. In the course of a general discussion an informed ‘contact’ often not only passed on information or comment whose relevance was self-evident, but also mentioned casually something whose news value was not apparent to him, but which he was prepared to give the journalist permission to publish, or mentioned some other matter which helped the journalist to complete his picture of what was happening. Once the right kind of relationship had been built up with the help of such meetings a ‘contact’ would turn to that journalist, rather than to someone on another newspaper, when he had some news to impart.
(6) In the majority of cases, outside contributors of feature articles were ready and willing to write articles either with a view to financial reward or with a view to obtaining a wider audience for the matters which they wished to publicise, or for a combination of those reasons. On some occasions, however, tactful persuasion had to be exercised by the editorial staff for the purpose of persuading a potential contributor to write at all, or to agree on the form that the article should take, or to write for one of the taxpayer company’s papers rather than for a rival publication; here, too, experience had shown the taxpayer company that a friendly meeting at a
Page 206 of [1971] 1 All ER 203
restaurant was most likely to yield the material which the taxpayer company needed for its papers.
(7) During the part of the accounting period which fell after 6 April 1965 the expenditure on hospitality which the taxpayer company incurred for the purpose of obtaining information and articles which it required for presentation or inclusion in the Daily Mail, the Evening News and Weekend as explained in the foregoing sub-paragraphs amounted to £67,143. Of this sum: (a) £45,540 was reimbursed to journalists who were not in receipt of a round sum allowance and who had incurred expenditure in the circumstances described in sub-paras (4) and (5) above. £16,540 of this £45,540 was attributable to expenditure on occasions when the hospitality provided by the journalist included a meal, and the remaining £29,000 was attributable to drinks and other small items provided on occasions when the hospitality did not include a meal; (b) £21,603 was paid to senior members of the editorial staff by way of round sum allowances for the purpose of meeting the expenditure which they incurred in the circumstances described in sub-paras (4), (5) and (6) above, and was applied by the recipients for that purpose. Four hundred and eighteen jounalists between them received the sum of £45,540 mentioned at (a) above. Forty-five senior members of the editorial staff between them received the sum of £21,603 mentioned at (b) above. The expenditure which the taxpayer company incurred during the accounting period on the editorial departments of the Daily Mail, the Evening News and Weekend was in excess of £3,000,000. This sum included salaries amounting to £1,656,818, expenditure on trunk calls and telegrams amounting to £169,951 and expenses incurred by members of the editorial staffs (including the aforementioned £67,143 expenditure on hospitality) amounting to £436,906.
4. It was conceded by the taxpayer company that the aforementioned expenditure of £67,143 on hospitality by the editorial departments of the Daily Mail, the Evening News and Weekend was expenses incurred in providing business entertainment within the meaning of s 15 of the Finance Act 1965, and that expenditure on hospitality which was incurred by the sales, advertising and promotion departments of the aforementioned journals between 7 April 1965 and 31 March 1966 was disallowable as a deduction in computing the taxpayer company’s profits or gains by virtue of s 15. So far as the advertising department was concerned this concession was made on the assumption (whose validity the taxpayer company might wish to re-examine in regard to some future year) that the business entertainment of that department was undertaken for a purpose which could more properly be described as selling advertising space in the taxpayer company’s papers than as obtaining matter for inclusion in them.
5. It was conceded by the inspector of taxes that the aforementioned expenditure of £67,143 was not excessive in amount and that the whole of the sum would have been allowable as a deduction in computing the taxpayer company’s profits or gains apart from the provisions of s 15.
6. In the accounting period the taxpayer company sustained a loss in its trade, amounting to £634,275 if the whole of the expenditure of £67,143 fell to be disallowed by virtue of s 15(1) of the Finance Act 1965, and to £701,418 if no part of the expenditure fell to be so disallowed. No distinction was sought to be drawn by either party between the various sums making up the disputed amount of £67,143.
7. It was contended on behalf of the taxpayer company: (1) that the words of s 15(9) of the Finance Act 1965 had a wide natural meaning and should be given that natural meaning; (2) that on a proper construction of s 15(9) the expenses of £67,143 were, in terms of the subsection, expenses incurred in the provision by the taxpayer company of something (namely its newspapers and Weekend) which it was its trade to provide, and which was provided by it in the ordinary course of that trade for payment; (3) that accordingly the prohibition in s 15(1)(a) did not apply to the expenses and that they were deductible in computing the taxpayer company’s profits or gains for the purposes of income tax, Sch D; and (4) that the appeal should succeed and the loss be determined in the sum of £701,418.
Page 207 of [1971] 1 All ER 203
8. It was contended on behalf of the inspector of taxes: (1) that regard should be had to the structure and intention of s 15 as a whole; (2) that the function of s 15(9) was limited to ensuring that the deduction (a) of expenses incurred in the provision of entertainment by any person the substance of whose trade was to provide such entertainment or (b) of expenses incurred in the provision by a trader of free samples was not precluded by s 15; (3) that on a proper construction of s 15(9) the expenses of £67,143 incurred by the taxpayer company did not fall within the meaning of the words ‘expenses incurred in … the provision by any person of anything which it is his trade to provide, and which is provided by him in the ordinary course of that trade for payment … ’; (4) that by virtue of s 15(1)(a) the expenses were not deductible in computing the taxpayer company’s profits or gains for the purposes of income tax, Sch D; and (5) that the appeal should be dismissed and the loss be determined in the sum of £634,275.
9. [Set out the cases referred to.]
10. The commissioners decided as follows:
‘Having regard to, inter alia, the observations of Donovan LJ in Wickwar (Inspector of Taxes) v Berry ([1963] 2 All ER 1058, 41 Tax Cas 33) we considered that the principle which we ought to follow was that if the plain reading of a statute made sense that plain reading should be given effect to. To our minds, the plain reading of s 15(9) of the Finance Act 1965 supported the contentions advanced on behalf of the [taxpayer] company. We accordingly allowed the appeal and determined the loss at £701,418.’
J R Phillips QC and P W Medd for the Crown.
G A Rink QC and D G H Braham for the taxpayer company.
Cur adv vult
30 July 1970. The following judgment was delivered.
MEGARRY J read the following judgment. This is a case stated by the Special Commissioners which raises a short but not very easy point on the Finance Act 1965, s 15. The admitted facts are fully set out in the case stated, and for the purposes of my decision I do not think that I need do more than state the salient features. The taxpayer company carries on a trade which includes the printing and publishing of the Daily Mail, the Evening News and Weekend. It also ‘syndicates’ news items, feature articles and other copyright material published in these periodicals, the word ‘syndicate’ being used to mean that for a fee it licenses others to reproduce this material. There are also a number of other activities which I need not mention.
In the course of gathering material for its publications, the taxpayer company, through its employees, incurs a number of expenses. Some of these are direct payments to news agencies or individual informants or contributors; and no question arises on these direct payments. Other expenses take the form of hospitality in the shape of meals or drinks, or both, provided for informants and contributors and paid for by the taxpayer company. Putting it shortly, experience has shown that the provision of hospitality of this kind assists the taxpayer company in obtaining information and in encouraging existing or potential contributors to provide or continue to provide material for the taxpayer company. In the year with which I am concerned, 1965–66, the taxpayer company’s expenditure of this kind amounted to £67,143, nearly two-thirds of this being the reimbursement of employees of the taxpayer company and a little over one-third being payment to senior employees by way of round sum allowances for the purpose. Nothing turns on this distinction, and it is accepted by the Crown that, but for s 15, the whole of this sum would have been an allowable deduction in computing the taxpayer company’s profits or gains. The question is whether s 15 disallows this expenditure.
Section 15(1) may be described as the disallowing subsection. It provides:
Page 208 of [1971] 1 All ER 203
‘Subject to the provisions of this section—(a) no deduction shall be made in computing profits or gains chargeable to tax under Schedule D for any expenses incurred in providing business entertainment, and such expenses shall not be included in computing any expenses of management in respect of which relief may be claimed under the Income Tax Acts; (b) no deduction for expenses so incurred shall be made from emoluments chargeable to tax under Schedule E; and (c) for the purposes of Chapter II of Part X of the Income Tax Act 1952 (capital allowances for machinery and plant) the use of any asset for providing business entertainment shall be treated as use otherwise than for the purposes of a trade.’
Pausing there, it is common ground that if sub-s (1) stood alone, para (a) would catch the expenses here in question. Subsection (5) provides:
‘For the purposes of this section “business entertainment” means entertainment (including hospitality of any kind) provided by a person or by a member of his staff in connection with a trade carried on by that person, but does not include anything provided by him for bona fide members of his staff unless its provision for them is incidental to its provision also for others’.
Later I shall have to mention other subsections of s 15, but at this stage I can go next to sub-s (9), which, the taxpayer company contends, applies to the expenses here and preserves them from the impact of sub-s (1). Subsection (9) provides:
‘Nothing in this section shall be taken as precluding the deduction of expenses incurred in, or any claim for capital allowances in respect of the use of an asset for, the provision by any person of anything which it is his trade to provide, and which is provided by him in the ordinary course of that trade for payment or, with the object of advertising to the public generally, gratuitously.’
The argument on sub-s (9) has ranged far, but at the centre of the dispute have been the words ‘expenses incurred in … the provision by any person of anything which it is his trade to provide.' The Crown construes these words as words of immediacy, relating only to the expenses of providing the thing immediately provided, to the sandwich or the steak or the beer or the burgundy which enters the mouth of the consumer. As so read, the subsection protects a caterer, hotel proprietor, publican or other person whose trade it is to provide entertainment, whether business or otherwise (a category of persons which for brevity I shall represent by the term ‘caterer’), for apart from sub-s (9) they would be caught by sub-s (1). The taxpayer company’s expenses here in question, however, would not be protected by sub-s (9), for it is not the taxpayer company’s trade to provide entertainment, at all events in this sense of the word. On the other hand, the taxpayer company construes the words in question as words of causal import, relating to the ultimate product (in this case newspapers and the like) for which the expenses have been incurred. In other words, the taxpayer company says that the expenses of entertaining their informants and contributors were expenses which were incurred—
‘… in … the provision by any person [here, the taxpayer company] of anything [here, the publication] which it is his [that is, the taxpayer company’s] trade to provide, and which is provided by him [that is, the taxpayer company] in the ordinary course of that trade for payment [that is, the payment made to the taxpayer company for the publications].’
The decision of the commissioners was in favour of the taxpayer company. It is expressed concisely.
‘Having regard to, inter alia, the observations of Donovan, L.J., in the course
Page 209 of [1971] 1 All ER 203
of his judgment in Wickwar (Inspector of Taxes) v Berry, we considered that the principle which we ought to follow was that if the plain reading of a statute made sense that plain reading should be given effect to. To our minds, the plain reading of section 15(9), Finance Act 1965 supported the contentions advanced on behalf of the [taxpayer] company.’
From that decision the Crown appeals; and counsel for the Crown and counsel for the taxpayer company, with supplementary excursions from junior counsel for each, respectively, have examined much of s 15 with a magnifying glass and, at times, a microscope. Unfortunately, the section has not so far attracted to itself any reported authority.
At the outset, counsel for the Crown accepted the proposition to be found in the judgment of Donovan LJ in Wickwar (Inspector of Taxes) v Berry ((1963) 41 Tax Cas at 41, [1963] 2 All ER at 1061). In that case, the words in question were ‘any payment to be used for the purposes of technical education’ as they appeared in the Income Tax Act 1952, s 140(1). What Donovan LJ said was ((1963) 41 Tax Cas at 41, [1963] 2 All ER at 1061):
‘I think the words we have to construe in Section 140 are apt, in their ordinary meaning, to cover the case now before us; and I am not able to subscribe to the view that this is a result so startling that Parliament cannot have intended it, and that therefore the Section should be given a construction which will avoid it. And merely on its merits I find the alternative construction proposed by the Crown unconvincing. In particular, far too much weight is being rested, in my opinion, upon the words “for the purposes of“. We are asked to construe them as if they meant the same thing as “for the promotion of”, and I think it would be wrong to do so. It is perhaps useful to recall what Rowlatt, J., said in Cape Brandy Syndicate v. Inland Revenue Comrs ([1921] 1 KB 64 at 71, 12 Tax Cas 358 at 366), about the construction of a taxing Act. He said: ” … in taxation you have to look simply at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to a tax; you read nothing in; you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax“. Those words are, I think, also true in considering whether a taxpayer comes within the terms of a relieving Section such as Section 140.’
Counsel for the Crown also agreed that sub-s (9) was plain in its meaning, although he said that the meaning was plain in the sense opposite to that for which the taxpayer company contended, so that Wickwar v Berry was no help to the taxpayer company. Counsel for the Crown made a submission based on R v Dibdin (affirmed sub nom Thompson v Dibdin to the effect that a saving clause like sub-s (9) must be limited in its operation to the ambit of the words in the section that it qualifies. R v Dibdin, however, was a very different type of case. The question there was in effect whether a proviso to a section validating marriages between a man and his deceased wife’s sister had any independent validity so as to protect those within the proviso not only against the effect of the substantive section but also against the consequence of other activities not within the section at all; and not surprisingly it was held that it did not. In the present case there is no question of sub-s (9) having any independent force or validity. It is not worded so that it could. The opening words, ‘Nothing in this section shall be taken as precluding … ’, show that its ambit is limited to restricting the effect of the section. In the end, counsel for the Crown
Page 210 of [1971] 1 All ER 203
accepted that R v Dibdin was not wholly in point, although he still contended that it was partly in point. I need only say that I find it of no assistance here, and the same applies to passages that were read to me from No-Nail Cases Proprietary Ltd v No-Nail Boxes Ltd ([1944] 1 All ER 528 at 529, [1944] KB 629 at 637) and Lloyds and Scottish Finance Ltd v Modern Cars and Caravans (Kingston) Ltd ([1964] 2 All ER 732 at 739, 740, [1966] 1 QB 764 at 780, 781).
There is one other general proposition that I should mention. Counsel for the taxpayer company relied on two passages from Inland Revenue Comrs v Ross and Coulter (Bladnoch Distillery Co Ltd), one in the speech of Lord Thankerton and the other in the speech of Lord Porter. What Lord Thankerton said was ([1948] 1 All ER at 625):
‘… if the provision is reasonably capable of two alternative meanings, the courts will prefer the meaning more favourable to the subject.’
Lord Porter referred to the Act in question as being a taxing Act, and said ([1948] 1 All ER at 634):
‘I agree that it must be strictly construed, but nevertheless, if its meaning is plain, its plain words must be followed. If, on the other hand, two constructions are possible, the consequences following the one or the other may rightly be taken into consideration, and if the balance between the two constructions is equal, that in favour of the subject is to be preferred.’
Of these two statements, I think that the taxpayer does rather better with Lord Thankerton, where the benefit of the doubt goes to the taxpayer if the provision is ‘reasonably capable of two alternative meanings’, than with Lord Porter, where the taxpayer has that benefit only if ‘the balance between the two constructions is equal’. In other words, the taxpayer receives the prize from Lord Porter only if there is a dead heat, whereas for Lord Thankerton it suffices if it is a close-run race. Counsel for the Crown did not really dissent from the proposition that an ambiguity should be resolved in favour of the taxpayer, although he reminded me of the passage in Kirkness (Inspector of Taxes) v John Hudson & Co Ltd ([1955] 2 All ER 345 at 351, [1955] AC 696 at 712), where Viscount Simonds pointed out that one could not say that there was an ambiguity merely because judges had differed on what was the meaning of the words in dispute. Each judge—
‘… will necessarily give great weight to the opinion of others, but if, at the end of the day, he forms his own clear judgment and does not think that the words are “fairly and equally open to divers meanings”, he is not entitled to say that there is an ambiguity. For him, at least, there is no ambiguity, and on that basis he must decide the case.’
It may even be that one day each of the members of the Court of Appeal will put a different meaning on the same words, and each will find the meaning clear despite the views of the others. In such a case, however diverse the views on the meaning, on one thing there would be unanimity, namely, that the meaning is clear and that there is no ambiguity. Accordingly, even if in my view sub-s (9) clearly has a meaning different from that put on it by the commissioners, this will not per se mean that the words are ambiguous.
I bear these considerations in mind as I approach sub-s (9); but in the end the question is one of what is the fair meaning of the words of the subsection when read in their context. The taxpayer company did not dispute that whichever meaning was placed on the subsection, it would cover the case of a caterer; the issue was
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whether or not it also applied to the taxpayer company’s activities. The taxpayer company, I should say, drew a distinction between expenses incurred in business entertainment for the purpose of selling advertising space and so on, and expenses incurred in business entertainment in obtaining material for publication ‘I describe these categories in broad terms). Without prejudice to future years, the taxpayer company accepted that the application of sub-s (9) was confined to the latter category and did not extend to the former. In other words, the only expenses incurred in business entertainment for which the taxpayer company contended on the facts before me were what may compendiously be described as the expenses incurred in business entertainment for production purposes, to the exclusion of business entertainment for salesmanship.
Before I examine the language that I have to construe, I must say something about the seven subsections which I have not read. I think I can avoid reading them verbatim if, in summarising the scheme of the section, I give some general idea of their content. Subsection (1), which I have read, imposes the general disallowance of expenses incurred in providing business entertainment, and capital allowances for machinery and plant used for providing it. Subsection (3) extends sub-s (1) in a modified form to money provided for an employee towards the expenses of providing business entertainment. Subsection (2) makes the first of the two exceptions from the general disallowance laid down by sub-s (1); it applies to the expenses of a United Kingdom trader in providing entertainment of a reasonable kind and scale for an overseas customer of his, and correspondingly to the use of an asset for this purpose. Subsection (4) provides for the giving of particulars of the entertainment and the person entertained to the inspector of taxes. There is then a clutch of definition subsections. Subsection (5), which I have read, defines ‘business entertainment’; sub-s (6) defines ‘overseas customer’; and sub-s (7) makes the expenses of entertainment include incidental expenses, makes ‘trade’ include any business, profession or vocation, and defines ‘members of a person’s staff’ who have appeared in sub-ss (2) and (5). Subsection (8) then extends the ambit of the section by making it apply, with minor exceptions, to the provision of gifts as it applies to the provision of entertainment. Subsection (9), the subsection with which I am here concerned, then makes the second exception from the main rule, and finally sub-s (10) lays down the relevant date for the application of the section.
Section 15 has a number of peculiarities that I need not catalogue. One, however, I must mention, and that is the use of the word ‘entertainment’. Apart from its appearance in the definition in sub-s (5), the word appears simpliciter five times, and thrice as qualified by the prefix ‘business’. Subsection (1), which effects the disallowance of expenses and capital allowances, is limited in terms to ‘business entertainment’, using the phrase twice. Subsection (2), which lays down the exception for overseas customers, is expressed in terms of ‘entertainment’ simpliciter, using the word twice. The section is thus drafted in a style in which in certain categories the words of exemption may be wider than the words of disallowance; the expenses of providing ‘business entertainment’ are disallowed, but this does not apply to certain expenses of providing ‘entertainment’ for overseas customers. In the case of overseas customers, the expenses of providing business entertainment are thus caught by sub-s (1), only to be saved by sub-s (2); the expenses of providing entertainment other than business entertainment, although within sub-s (2), do not need its saving hand, for they are never caught by sub-s (1). Presumably they do not need to be caught by sub-s (1) because in normal circumstances the expenses of such entertainment would not in any event be deductible in computing profits or gains. Nevertheless, as a matter of drafting, the draftsman’s style appears as one which does not necessarily tie down words of exemption to a width exactly corresponding to that of the words of disallowance, very possibly on the footing that an excess of width can do no harm in a clause which is confined in its operation to saving certain categories of the doomed and can have no effect on those which are not even threatened. The relevance of this will appear in due course.
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As I have indicated, the argument before me ranged far and wide, with many helpful illustrations and examples. Counsel for the Crown contended that the words ‘provide’ and ‘provision’, as used in the section, normally related only to the thing provided immediately and not to the ultimate product, so that in sub-s (9) the words ‘the provision by any person of anything which it is his trade to provide’, and so on, looked to, and looked only to, the entertainment actually provided. The words ‘providing business entertainment’ in sub-ss (1) and (3), ‘the provision … of entertainment’ in sub-ss (2) and (8), and ‘providing entertainment’ in sub-s (7) all, he said, showed this use of the verb ‘to provide’. The reply of counsel for the taxpayer company was two-fold. First, in defining ‘overseas customer’ in sub-s (6)(a), Parliament speaks of ‘any goods, services or facilities which it is the trade of the United Kingdom trader to provide’. That being so, they said, it is impossible to confine the use of ‘provide’ to the thing immediately provided’ for Parliament has shown that the verb is also used in relation to the trader’s ultimate product. ‘Provide’ is used both for the food and drink that constitutes the entertainment and for the motor cars or glass bottles or whatever else it is that the trader manufactures.
This answer, I may say, also did duty in meeting another of counsel for the Crown’s arguments, namely, that if a manufacturer made motor cars or glass bottles, it was a somewhat unusual description of his activities to describe them as—
‘… the provision by any person of anything which it is his trade to provide, and which is provided by him in the ordinary course of that trade for payment … ’
Why resort to the periphrasis of describing what is merely a manufacture for sale as being the ‘provision’ by a person ‘for payment’ of ‘anything which it is his trade to provide’? To this question, sub-s (6)(a) seems to me to provide an answer of some cogency. It shows that this at least is how Parliament thought it right to speak of goods: the words chosen are ‘any goods … which it is the trade of the United Kingdom trader to provide’. In sub-s (6)(a) the draftsman, if not providing his own dictionary, may at least be said to have compiled his own modern English Usage for the section. Furthermore, this sort of generalised language is apt for cases in which there is a very wide range of subject-matters. If a single verb has to be found which will comprehend ‘goods, services or facilities’, as in sub-s (6)(a), what better word than ‘provide’? ‘Anything’ in sub-s (9) covers at least the same field, and so again ‘provide’ in an apt verb.
Secondly, counsel for the taxpayer company urged that if the intention had been to confine sub-s (9) to the thing immediately provided, the word ‘entertainment’ could have been used instead of ‘anything’. After all, the draftsman spoke frequently enough of ‘providing business entertainment’ and so on. Subsection (9) would plainly then have covered the caterer and left in the cold the car or bottle manufacturer who entertained. At one stage counsel for the Crown objected that this would not work in the case of gifts under sub-s (8). However, in the end he accepted that the form in which sub-s (8) was cast, making sub-s (9) ‘apply in relation to the provision of a gift as it applies in relation to the provision of entertainment’, meant that the section would work in the case of gifts, although it would, he said, be somewhat oblique. But, he added, there would still be difficulties in the application of sub-s (9) to gifts if the word ‘entertainment’ were there instead of ‘anything’, by reason of the words ‘which it is his trade to provide’ in sub-s (9); and he instanced a wine merchant giving away free miniatures to all, or a stationer distributing free calendars to the public. I am not sure that I follow the difficulty; true, it is not the trader’s trade to provide entertainment, but as by sub-s (8) the section applies to the provision of gifts as it applies to the provision of entertainment, I should have thought that in relation to gifts one would have substituted ‘a gift’ for ‘entertainment’, and then sub-s (9) would work well enough. Of course, one can say that ‘a gift which it is his trade to
Page 213 of [1971] 1 All ER 203
provide’ sounds a little odd; but since one of the alternatives with which the sub-section concludes is ‘gratuitously’, some of that oddness disappears. At all events, I do not think this oddity is of a quality that is striking enough to be decisive.
That brings me to perhaps the main point, the word ‘anything’ in sub-s (9). The taxpayer company says that ‘anything’ means what it says, free, wide and untrammelled. The Crown says that it ought to be read as being confined in its scope by reference to the expenses which the section disallows. In effect, the words ‘anything which it is his trade to provide’ should be read as if they ran ‘anything the expenses of providing which is disallowed by the section which it is his trade to provide’. ‘Anything’, counsel for the Crown said, did not mean ‘entertainment’, but it did mean one particular type of ‘anything’, and that alone, namely, ‘anything the expenses of providing which is disallowed by the section’. This, I may say, is the notional drafting as counsel for the Crown put it forward. This submission was primarily based on the need to confine a proviso or exception to the ambit of the substantive provision, and on this I have already indicated my general views. In their application to this argument they are, put shortly, first, that the opening words of sub-s (9) (‘Nothing in this section shall be taken as precluding … ’) suffice to prevent sub-s (9) from having any operation apart from negativing the disallowance of deductions and capital allowances for which the section provides. Accordingly, I cannot see any need or justification for attaching limiting words to ‘anything’, even though this is merely done notionally, as part of the process of construction. Second, as I have indicated, the other exception from sub-s (1), that in sub-s (2), is drafted in terms wider than the words of disallowance in sub-s (1), although, once again, the opening words of the subsection preclude it from doing more than preventing the disallowance in sub-s (1) from operating. Accordingly, I think ‘anything’ in sub-s (9) means ‘anything’, and is not to be confined in its scope in the way for which the Crown contends.
One further contention that counsel for the Crown put forward was that in effect the taxpayer company’s argument proved too much. The words ‘provision … of anything’, he said, would cover not merely the manufacture of articles but also their distribution. He instanced a United Kingdom car dealer who entertained a prospective United States purchaser of cars, and who thus fell within the protection of sub-s (2). If one substituted for the United States purchaser a United Kingdom purchaser, he said, although sub-s (2) would not apply, for there is no overseas customer, on the taxpayer company’s argument sub-s (9) would cover the entertainment, for the United Kingdom dealer would be providing the cars, and the expenses would have been incurred in the provision of the cars. Subsection (9) would thus throw open its doors to all business entertainment, for selling as for everything else.
I do not think that this is right. The expenses of entertaining a prospective purchaser so that he may be induced to purchase goods do not seem to me to be expenses ‘incurred in … the provision’ of the goods. If the prospective purchaser does not buy, there is no ‘provision’ in this sense. If he does buy, he may buy because of the entertainment, in spite of it, or independently of it. The expenses are not the expenses of providing, or incurred in providing, the goods sold, but expenses incurred in the hope or expectation of persuading the purchaser to order goods which, in counsel for the Crown’s example, are pre-existing goods and thus permit the vendor to ‘provide’ them merely in that sense of the word. In short, they are not ‘expenses incurred in … the provision by any person of anything’ so as to be intrinsic to the act of providing, but expenses that are extraneous to that act. Such expenses are mere expenses of an inducement to purchase, and I do not think these fall within sub-s (9). Put as counsel for the taxpayer company put it, the expenses of ‘providing’ goods for a purchaser (in counsel for the Crown’s sense) do not include the expenses of persuading him to buy them. Put a little differently, the expenses of procuring the placing of an order or the making of a contract are anterior to and not part of the cost of providing those goods under the order or contract, and so are not ‘expenses incurred in … the provision by any person of anything’. If ‘provision’ has the flavour of ‘making’ or
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‘producing’, persuading an informant to provide news is part of the process of ‘making’ or ‘producing’ a newspaper, and may of course include abortive expenditure. If, on the other hand, ‘provision’ has the flavour of ‘delivering’ goods already made, persuading a purchaser to buy those goods is no part of the process of ‘delivering’ them. In short, I do not think that ‘provide’ bears the meaning that counsel for the Crown seeks to put on it, and even if it does, the expenses of procuring a sale do not seem to me to be expenses incurred in the provision of the goods.
I accordingly do not consider that the construction for which the taxpayer company contends is driving a coach and four through the section, or opening the door so wide as to stultify any or all of the intentions of Parliament. The section strikes only at the expenses of providing business entertainment, and capital allowances for this purpose; and the number of instances where such expenses are incurred in the provision of anything within sub-s (9) as I have construed it cannot be very great. Expenses and capital allowances incurred for the purpose of selling goods and so on are another matter, and in my judgment they remain within the grasp of sub-s (1), with no escape under sub-s (9). The expenses with which I am concerned here are part of the fair production costs of newspapers and other periodicals, as much as payments in cash to informants and contributors would be. On a fair reading of the language, sub-s (9) seems to me to apply to the disputed expenses in this case, and such help as is to be found in the other parts of the section support this conclusion. Nor do I perceive anything in the consequences of the taxpayer company’s construction which has any real cogency in impelling the court to a different conclusion. In saying this, I bear in mind the words of Donovan LJ ([1963] 2 All ER at 1061, [1963] 1 WLR at 1031) and of Lord Thankerton ([1948] 1 All ER at 625) and Lord Porter ([1948] 1 All ER at 634) that I quoted earlier in the judgment. I do not think that there is any need for the taxpayer company to rely on having the benefit of the doubt, but if there is, the right to this benefit points to the same result. In my view, the language used by Parliament does not leave these expenses of producing newspapers unprotected; more explicit language is needed to produce this result, if in fact Parliament intended it.
I am conscious that this judgment does not solve all the mysteries of sub-s (9). One obscurity lies in a phrase near the end, ‘in the ordinary course of tat trade’. Counsel for the Crown says that it governs each of the alternatives that follow, both ‘for payment and ‘with the object of advertising to the public generally, gratuitously’. Counsel for the taxpayer company says that it merely governs ‘for payment’, so that one of the alternatives is ‘in the ordinary course of that trade for payment’, and the other is ‘with the object of advertising to the public generally, gratuitously’. The phrase is, I fear, a floating middle, capable of being read either as attached to the words ‘for payment’ or as detached from them. The draftsman’s meaning could have been revealed by inserting an ‘either’ immediately before or immediately after the phrase, or by suitable paragraphing or punctuation. In the absence of any of these, I must leave the phrase uninterpreted except so far as this judgment throws any indirect light on it. After reading and re-reading my notes of the argument, I am also conscious that no interpretation of the subsection appears to avoid every difficulty; but in this territory that comes as no surprise. I can only say that, doing the best I can, the taxpayer company’s interpretation seems to me the more convincing. I also realise that I have failed to achieve the brevity of the commissioners, and so I add no more save to say that I dismiss the appeal.
Appeal dismissed.
Solicitors: Solicitor of Inland Revenue; Swepstone, Walsh & Son (for the taxpayer company).
K Buckley Edwards Esq Barrister.
Enderby Town Football Club Ltd v The Football Association Ltd and another
[1971] 1 All ER 215
Categories: ADMINISTRATIVE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 5, 6, 7, 12 OCTOBER 1970
Natural justice – Domestic tribunal – Legal representation – Appeal to tribunal on point of law – Refusal by tribunal to allow representation – Declaration more appropriate remedy than appeal.
The FA, the first defendant, controlled the game of association football. The second defendant was a county football association affiliated to the FA and was an unincorporated association of individual clubs of which the plaintiff club was one. The second defendant appointed a commission to enquire into the activities of the plaintiff club. The commission found, inter alia, that there had been gross negligence in the administration of the club, and the club was severely censured. The club appealed on certain points of law to the FA, and requested permission to be represented on the appeal by solicitor and counsel. Rule 38(b) of the Football Association Rules provided as follows: ‘An Association, Competition or Club may be represented at the hearing of an Appeal, Complaint or claim, or at an Enquiry, by one or more of its Members. A Barrister or a Solicitor may only represent an Association, Competition or Club, of which he is a member if he be the Chairman or Secretary. Any person summoned to attend an Enquiry or the hearing of an Appeal, Complaint or Claim must attend personally and not be legally represented’. The FA refused to allow the club to be legally represented on the appeal. The club moved for an injunction restraining the hearing of the appeal unless the club was permitted to be legally represented.
Held – The club was not entitled to legal representation before the FA, because—
(i) the points of law raised on the appeal were such that could be brought before the court in an action for a declaration and the court was the most appropriate place for such points to be litigated (see p 217 h and p 221 c and h, post); dictum of Romer LJ in Lee v Showmen’s Guild of Great Britain [1952] 1 All ER at 1188 applied;
(ii) If the club did not choose to bring the points of law before the court, but chose to bring them before the FA, it must abide by rule 38(b) which excluded legal representation (see p 217 d, p 220 b and e and p 221 c e and f, post).
Notes
For the observance of the rules of natural justice, see 30 Halsbury’s Laws (3rd Edn) 718, 719, para 1368.
Cases referred to in judgments
Annamunthodo v Oilfields Workers’ Trade Union [1961] 3 All ER 621, [1961] AC 945, [1961] 3 WLR 650, 45 Digest (Repl) 542, 1223.
British Oxygen Co Ltd v Ministry of Technology p 165, ante [1970] 3 WLR 488.
Byrne v Kinematograph Renters Society Ltd [1958] 2 All ER 579, [1958] 1 WLR 762, 45 Digest (Repl) 401, 147.
Collier v Hicks (1831) 2 B & Ad 663, 9 LJOSMC 138, 109 ER 1290, 3 Digest (Repl) 356, 48.
Dickson v Pharmaceutical Society of Great Britain [1967] 2 All ER 558, [1967] Ch 708, [1967] 2 WLR 718; affd HL sub nom Pharmaceutical Society of Great Britain v Dickson [1968] 2 All ER 686, [1970] AC 403, [1968] 3 WLR 286., Digest Supp.
Edwards v Society of Graphical and Allied Trades, p 689, ante, [1970] 3 WLR 713.
Faramus v Film Artistes’ Association [1964] 1 All ER 25, [1964] AC 925, [1964] 2 WLR 126, 45 Digest (Repl) 542, 1228.
Lawlor v Union of Post Office Workers [1965] 1 All ER 353, [1965] Ch 712, [1965] 2 WLR 579, Digest (Cont Vol B) 718, 1214a.
Page 216 of [1971] 1 All ER 215
Lee v Showmen’s Guild of Great Britain [1952] 1 All ER 1175, [1952] 2 QB 329, 45 Digest (Repl) 541, 1221.
Nagle v Feilden [1966] 1 All ER 689, [1966] 2 QB 633, [1966] 2 WLR 1027, Digest (Cont Vol B) 323, 5859.
Pett v Greyhound Racing Association Ltd [1968] 2 All ER 545, [1969] 1 QB 125, [1968] 2 WLR 1471, Digest Supp.
Pett v Greyhound Racing Association Ltd (No 2) [1969] 2 All ER 221, [1970] 1 QB 46, [1969] 2 WLR 1228, Digest Supp; on appeal CA [1970] 1 All ER 243, [1970] 1 QB 67, [1970] 2 WLR 256.
R v Port of London Authority, ex parte Kynoch Ltd [1919] 1 KB 176, 88 LJKB 553, 120 LT 177, 83 JP 41, 16 Digest (Repl) 327, 1056.
Schmidt v Secretary of State for Home Affairs [1969] 1 All ER 904, [1969] 2 Ch 149, [1969] 2 WLR 337, Digest Supp.
Scott v Avery (1856) 5 HL Cas 811, [1843–60] All ER Rep 1, 25 LJEx 308, 28 LTOS 207, 10 ER 1121, 16 Digest (Repl) 132, 133, 162.
St Johnstone Football Club Ltd v Scottish Football Association 1965 SLT 171.
University of Ceylon v Fernando [1960] 1 All ER 631, [1960] 1 WLR 223, 19 Digest (Repl) 655, 362.
Appeal
This was an appeal by the Enderby Town Football Club Ltd, from the judgment of Foster J, given on 31 July 1970, dismissing the club’s motion for an injunction restraining the Football Association, the FA, from hearing an appeal by the club from the decision of the second defendant, the Leicestershire and Rutland County Football Association, unless the club was permitted to be legally represented by counsel and solicitors. The facts are set out in the judgment of Lord Denning MR.
Charles Sparrow QC and Gavin Lightman for the club.
Sir Elwyn Jones QC and R L Johnson for the FA.
The second defendant did not appear and was not represented.
Cur adv vult
12 October 1970. The following judgments were delivered.
LORD DENNING MR. The game of association football (‘soccer’) is under the control of the first defendants, a limited company called The Football Association Ltd (the ‘FA’). The FA has county associations affiliated to it. One of these is the second defendant, the Leicestershire and Rutland County Football Association. The county association is not a limited company, but an unincorporated association of individual clubs. One of these clubs is the Enderby Town Football Club Ltd. The club is a limited company with its own memorandum and articles of association. The club is run on commercial lines. It has directors who are paid directors’ fees, amounting to some £700 a year each, and also receive their expenses. It runs a totalisator on which members of the public can bet.
The second defendant took exception to those activities of the club. It appointed three men as a commission to hear charges against the club. On 5 May 1970, there was a hearing which was attended by three of the directors of the club and the secretary. The commission found that there had been gross negligence in the administration of the club. It fined the club £500. It severely censured the club and the directors; it ordered the club to take immediate steps to organise the affairs of the club in accordance with the rules of the FA.
The club appealed to the FA. Its solicitor asked for permission for the club to be represented by solicitor and counsel at the hearing of the appeal. The secretary wrote a letter of refusal. Thereupon the club, on 8 July 1970, issued the writ in this action and moved for an injunction to restrain the FA hearing the appeal, unless the club was permitted to be legally represented by counsel and solicitor. On 31
Page 217 of [1971] 1 All ER 215
July 1970, Foster J refused to grant an injunction. The club appeals to this court; and we have expedited the hearing.
The FA takes its stand on its rule 38(b). It says that it excludes legal representation. It is in these words:
‘An Association, Competition or Club may be represented at the hearing of an Appeal, Complaint or Claim, or at an Enquiry, by one or more of its Members. A Barrister or a Solicitor may only represent an Association, Competition or Club, of which he is a member if he be the Chairman or Secretary. Any person summoned to attend an Enquiry or the hearing of an Appeal, Complaint or Claim must attend personally and not be legally represented.’
Counsel for the club submitted that the rule did not exclude legal representation. He said that the first sentence applied to the club but was permissive and not imperative. The word was ‘may’ and not ‘must’. He said that the second sentence applied only to a barrister or solicitor who was a member of the club and not to one who was not. He said that the last sentence applied only to an individual, such as a player, who had to attend personally. I can see the force of these arguments, but, looking at the rule broadly, I feel that it was intended to exclude legal representation on behalf of the club.
Counsel for the club’s next submission was that, if the rule went so far as to exclude legal representation, it should not be applied in this particular case. The facts, he said, were undisputed. The only points at issue were points of law. These were of much complexity and difficulty. They could not be properly argued except by a lawyer. Accordingly he submitted that the club should be represented by a lawyer. In order to appreciate this argument, I will set out the principal points which counsel desires to raise.
1. He said that the charge against the club was not properly formulated. The first count, for instance, was ‘that Directors’ Fees were paid to Messrs. H. Jacques, B. Jacques, and K. Moore’, without pointing to any rule which says that directors’ fees may not be paid. There is, in fact, no such rule.
2. He said that the charge was heard by three men who had no jurisdiction to hear it. The rules of the county association gave jurisdiction to the whole council of the association. There was no power to delegate to a commission of three.
3. Rule 45(vi) of the FA rules provides that club companies must contain an article preventing a director from receiving remuneration. Counsel for the club said that that rule applies only to companies which are members of the FA. It does not apply to the club, which is not a member of the FA.
I quite appreciate counsel’s submission that these are difficult points of law on which there are authorities to be cited and rules to be construed. So much so, that I do not think that the FA is itself a suitable body to decide them. It would be much better, I should think, for the club to bring these points straight away before the court in an action for a declaration. That is a course which it is perfectly entitled to take at once before the appeal is heard by the FA. See Lawlor v Union of Post Office Workers ([1965] 1 All ER 353 at 363, [1965] Ch 712 at 733, 734) and Dickson v Pharmaceutical Society of Great Britain ([1967] 2 All ER 558 at 563, [1967] Ch 708 at 740), per Lord Upjohn ([1968] 2 All ER 686 at 700, [1970] AC 403 at 433). In any such action before the court the club would, of course, be entitled to be represented by counsel and solicitors. As an alternative the club could wait until after the hearing of the appeal by the FA and then bring an action for a declaration. It would not be prejudiced by so doing. See Annamunthodo v Oilfields Workers’ Trade Union. But either way, the points of law would be better decided by the courts than by the FA. As Romer LJ said in Lee v Showmen’s Guild of Great Britain ([1952] 1 All ER 1175 at 1188, [1952] 2 QB 329 at 354):
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‘The proper tribunals for the determination of legal disputes in this country are the courts and they are the only tribunals which, by training and experience, and assisted by properly qualified advocates, are fitted for the task.’
Although it is open to the club to come to the court to decide the points, it has not done so. It is sticking to its appeal to the FA. It asks that the points be decided by that body. It wants to have counsel and solicitor to argue them before the FA. The FA declines.
The case thus raises this important point: is a party who is charged before a domestic tribunal, entitled as of right to be legally represented? Much depends on what the rules say about it. When the rules say nothing, then the party has no absolute right to be legally represented. It is a matter for the discretion of the tribunal. It is master of its own procedure; and, if it, in the proper exercise of its discretion, declines to allow legal representation, the courts will not interfere. Such was held in the old days in a case about magistrates: see Collier v Hicks. It is the position today in the tribunals under the Tribunals of Inquiry (Evidence) Act 1921. I think that the same should apply to domestic tribunals, and for this reason: in many cases it may be a good thing for the proceedings of a domestic tribunal to be conducted informally without legal representation. Justice can often be done in them better by a good layman than by a bad lawyer. This is especially so in activities like football and other sports, where no points of law are likely to arise, and it is all part of the proper regulation of the game. But I would emphasise that the discretion must be properly exercised. The tribunal must not fetter its discretion by rigid bonds. A domestic tribunal is not at liberty to lay down an absolute rule: ‘We will never allow anyone to have a lawyer to appear for him.' The tribunal must be ready, in a proper case, to allow it. That applies to anyone in authority who is entrusted with a discretion. He must not fetter his discretion by making an absolute rule from which he will never depart. See R v Port of London Authority ([1919] 1 KB 176 at 184), as applied in this court in Schmidt v Secretary of State for Home Affairs ([1969] 1 All ER 904 at 908, [1969] 2 Ch 149 at 169) and by the House of Lords in British Oxygen Co Ltd v Ministry of Technology. That is the reason why this court intervened in Pett v Greyhound Racing Association Ltd. Mr Pett was charged with doping a dog—a most serious offence carrying severe penalties. He was to be tried by a domestic tribunal. There was nothing in the rules to exclude legal representation, but the tribunal refused to allow it. The reason was because it never did allow it. This court thought that that was not a proper exercise of its discretion. So we intervened and granted an injunction. Natural justice required that Mr Pett should be defended, if he so wished, by counsel or solicitor. Subsequently Lyell J thought we were wrong. He held that Mr Pett had no right to legal representation: see Pett v Greyhound Racing Association Ltd (No 2). But I think we were right. Maybe Mr Pett had no positive right, but it was a case where the tribunal in its discretion ought to have allowed it. And, on appeal, the parties themselves agreed it. They came to an arrangement which permitted the plaintiff to be legally represented at the inquiry. The long and short of it is that, if the court sees that a domestic tribunal is proposing to proceed in a manner contrary to natural justice, it can intervene to stop it. The court is not bound to wait until after it has happened: see Dickson v Pharmaceutical Society of Great Britain ([1968] 2 All ER at 700, [1970] AC at 433), per Lord Upjohn.
The present case differs from Pett’s case in that here there is a rule which states
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that legal representation is not allowed. The question is whether the rule is valid. A preliminary point arises here: has the court any power to go behind the wording of the rule and consider its validity? On this point, counsel for the FA made an important concession. He agreed that if the rule was contrary to natural justice, it would be invalid. I think that this concession was rightly made and I desire to emphasise it. The rules of a body like this are often said to be a contract. So they are in legal theory. But it is a fiction—a fiction created by the lawyers so as to give the courts jurisdiction. This is no new thing. There are many precedents for it, from the time of John Doe onwards. Putting the fiction aside, the truth is that the rules are nothing more nor less than a legislative code—a set of regulations laid down by the governing body to be observed by all who are, or become, members of the association. Such regulations, although said to be a contract, are subject to the control of the courts. If they are in unreasonable restraint of trade, they are invalid: see Dickson v Pharmaceutical Society of Great Britain. If they seek to oust the jurisdiction of the court, they are invalid: see Scott v Avery. If they unreasonably shut out a man from his right to work, they are invalid: see Nagle v Feilden and Edwards v Society of Graphical and Allied Trades. If they lay down a procedure which is contrary to the principles of natural justice, they are invalid: see Faramus v Film Artistes’ Association ([1964] 1 All ER 25 at 33, [1964] AC 925 at 947), per Lord Pearce. All these are cases where the judges have decided, avowedly or not, according to what is best for the public good. I know that over 300 years ago Hobart CJ said that ‘public policy is an unruly horse’. It has often been repeated since. So unruly is the horse, it is said, that no judge should ever try to mount it, lest it run away with him. I disagree. With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice, as indeed was done in Nagle v Feilden. It can hold a rule to be invalid, although it is contained in a contract.
Take an instance from this present case. The FA has a rule, r 40(b), which provides:
‘The Rules of the Association are sufficient to enable the Council as the governing authority to deal with all cases of dispute, and legal proceedings shall only be taken as a last resort, and then only with the consent of the Council.’
If that rule were valid, it would prevent the club from bringing any action in the courts without the consent of the council. But the rule is plainly invalid. Foster J said that ‘it is against public to make provisions ousting the jurisdiction of the courts’. Lord Kilbrandon, in Scotland, said simply that it is ‘contrary to public policy’: see St Johnstone Football Club Ltd v Scottish Football Association.
Seeing that the courts can inquire into the validity of the rule, I turn to the next question: is it lawful for a body to stipulate in its rules that its domestic tribunal shall not permit legal representation? Such a stipulation is, I think, clearly valid so long as it is construed as directory and not imperative: for that leaves it open to the tribunal to permit legal representation in an exceptional case when the justice of the case so requires. But I have some doubt whether it is legitimate to make a rule which is so imperative in its terms as to exclude legal representation altogether, without giving the tribunal any discretion to admit it, even when the justice of the case requires it. Suppose a case should arise when both the parties and the tribunal felt that it was essential in the interest of justice that the parties should be legally represented, and that the tribunal should have the assistance of a lawyer? Would not the tribunal be able to allow it, or, at any rate, to allow the rule to be waived?
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I do not find it necessary to express any opinion on this point. I will decide it when it arises. But in this case, no matter whether the rule is construed as directory or imperative, I am of opinion that the court should not insist on legal representation before the tribunal of the FA. The points which the club wishes to raise are points of law which should be decided by the courts and not by that tribunal. The club is at liberty to bring these points before the courts at once and have them decided with the aid of skilled advocates. If it chooses not to bring them before the courts, but prefers to put them before a lay tribunal, it must put up with the imperfections of that tribunal and must abide by its ruling that there be no legal representation. On this ground I would dismiss the appeal.
FENTON ATKINSON LJ. The first question for decision is the true construction of r 38(b) of the FA’s rules. I agree that, on its true construction, the rules bar legal representation for the club on the hearing of its appeal. Counsel for the club submits that the last sentence of the rule applies only to a natural person (eg a footballer charged with misconduct), and can therefore be disregarded. He further submits that ‘may’ in the first sentences means ‘may’, and confers on a club such as this the privilege of representation by any one of its members, but that if it avails itself of that privilege the member must not be a barrister or solicitor, unless he is also the chairman or secretary. Therefore, he contends that if the club does not choose to be represented by a member, it is left free to be represented by any agent of its choice including a barrister or solicitor.
2. I cannot accept this argument. In my judgment the meaning of this rule looked at as a whole is perfectly plain. The rule may not be expressed with the elegance to be expected of a chancery draftsman, but I have no doubt that on its true construction it means: ‘No legal representation on an appeal, except that a barrister or solicitor may appear for an association, competition or club of which he is a member and is also either chairman or secretary.’
3. If that is the true construction of the rule, the only remaining question on the facts of this case is whether the rule so offends against the rules of natural justice that it must be disregarded and treated as invalid.
4. Counsel for the club was content to accept the statement of the requirements of ‘natural justice’ in matters of this kind to be found in the judgment of Harman J in Byrne v Kinematograph Renters Society Ltd, expressly approved by the Privy Council in University of Ceylon v Fernando ([1960] 1 All ER 631 at 638, [1960] 1 WLR 223 at 232), in these terms ([1958] 2 All ER at 599, [1958] 1 WLR at 784):
‘What, then, are the requirements of natural justice in a case of this kind? First, I think that the person accused should know the nature of the accusation made; secondly, that he should be given an opportunity to state his case; and, thirdly, of course, that the tribunal should act in good faith. I do not think that there really is anything more.’
5. Counsel for the club does not seek to add a right to legal representation before a domestic tribunal as a fourth ground. But he says that an opportunity to state one’s case means a fair opportunity, and that now and again a case may raise legal problems of such complexity and difficulty that no layman could be expected to put his case intelligibly and no lay tribunal could hope to understand and adjudicate correctly on the points raised without the assistance of counsel. The present case, he contends, is such a one. No doubt it is true that questions of construction such as will arise on this appeal are more likely to be answered correctly by a court of law with the assistance of counsel on both sides than by a lay tribunal, however
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conscientious and fair minded, after hearing the points put to them by laymen like Mr Jacques and Mr Holmes.
6. On the other hand, the rule against legal representation applies to both parties to this dispute, in that the local association who appear in the role of prosecutors cannot appear by counsel or solicitor, and the case will be heard by men no doubt of fairness and integrity, and with a great fund of common sense and experience of football and the rules in question. The rule enables a decision to be given speedily without either party to the dispute being at risk of having to pay a heavy bill for costs, and there is always the right of either party to challenge a decision in the courts if the lay tribunal goes wrong in law (eg in adopting a mistaken view on the construction of the rules). Further, if a decision of a local association appears to have been reached contrary to the true legal construction of the rules, and difficult questions of law arise, a club can go direct to the courts instead of appealing to the FA.
7. For my part, I can see nothing unfair in this rule—certainly nothing so unfair as to offend against the rules of natural justice. A similar rule is laid down by Parliament for a number of domestic tribunals. One notes especially that any police officer below the rank of chief constable may not be legally represented at a disciplinary enquiry, although his whole future is at stake (see the Police (Discipline) Regulations 1965a.
8. The FA has been dealing with appeals by clubs or players for years past without legal representation. Similarly, many other domestic tribunals have been discharging their particular responsibilities without hearing lawyers. So far as counsel have been able to discover, this is the first case where it has been suggested that the rules of natural justice demand a right to legal representation before such a tribunal. If such a rule is indeed contrary to natural justice, a very large number of persons, including our legislators, must have been very insensitive over a long period of years to what natural justice requires.
I would dismiss this appeal.
CAIRNS LJ. I agree with both judgments that have been delivered, save that, as at present advised, I am of the opinion that it is open to an organisation to make an absolute rule that a tribunal set up by it is not to hear legal representatives.
I would add a few words in reference to counsel for the club’s contention that to deny representation to the club is to allow administrative convenience to override the claims of justice. I am satisfied that this is not so. It is in the interests of justice and not only of administrative convenience that a decision should be arrived at quickly and cheaply. Where the tribunal is composed of intelligent laymen who have a great knowledge of the sport of business concerned, I think that the employment of lawyers is likely to lengthen proceedings and certainly greatly to increase the expense of them without any certainty of bringing about a fairer decision. I therefore consider that those responsible for drafting rules for such a tribunal are entitled to take the view that justice as well as convenience is served by a rule barring legal representation. There is no need to make any exceptions. In the very rare cases (of which the instant case may well be an example) where difficult points of law arise, it is far better for the points of law to be dealt with by resort to the court.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Field, Fisher & Co agents for Gardiner & Millhouse, Leicester (for the club); Chethams (for the FA).
Rosalie Long Barrister.
Skinner (Inspector of Taxes) v Berry Head Lands Ltd
[1971] 1 All ER 222
Categories: TAXATION; Income Tax
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 16 JULY 1970
Income tax – Profits – Trade receipts – Associated companies – Transactions between associated companies – Company dealing in land – Sale to parent company at under-value – Transaction not in the course of trade.
Income tax – Appeal –Settlement by agreement – Onus of proof on appeal – Whether point of substance settled previously by agreement – Income Tax Act 1952, s 510.
The taxpayer company, which was a land dealing company, on 1 April 1960 came under the control of the parent company W, which was a financial and share and land dealing company. On the same day the taxpayer company contracted to sell to the parent company for £4,175 certain land which it had purchased for £3,575. Also on the same day the parent company contracted to sell to M company (which was not in the group) the same land for £40,000 which was its market value. The two contracts for the sale of the land were completed on 2 April 1960 by a conveyance from the taxpayer company to M company at the direction of the parent company. On 15 November 1961, the inspector of taxes made an assessment on the taxpayer company for the year 1961–62 in the sum of £300 chargeable to tax, against which the taxpayer company appealed on the ground that the assessment was not in accordance with the accounts. On 8 November 1962, the inspector wrote to the taxpayer company’s auditors agreeing their 1962–63 computation in the sum of £446 less £446 losses, and stating that the appeal against the 1961–62 assessment was determined by agreement under the Income Tax Act 1952, s 150 a, in the sum of £148 less £148 losses. The inspector did not know the actual sale price of the land or that the transactions had taken place on one day until he received a letter dated 19 November 1962 from the taxpayer company’s auditors informing him of this. On 29 July 1964, the inspector wrote to the auditors saying that he proposed to revise the tax liability by substituting the market value for the price actually paid for the land sold by the taxpayer company to the parent company and to re-open the assessments on the taxpayer company for 1961–62 and 1962–63. Additional assessments were made on the taxpayer company of £8,995 for 1961–62 and £26,870 for 1962–63 and were appealed against. The Special Commissioners found that the transaction was in the course of trade and they discharged the additional assessments.
Held – (i) The commissioners’ conclusion was one to which they could not reasonably have come, because—
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(a) the irresistible inference to be drawn from the facts, in the absence of an explanation, was that the sale of the land by the taxpayer company to the parent company, being an inter-group sale, was not in the course of trade, but was an appropriation by the taxpayer company to the parent company of the profits arising from the resale to M company (see p 230 d, post);
(b) this inference was supported by the enormous disparity between the actual price and the market value of the land, the fact that all the contracts were made on one day and the land was not simply transferred from one member of a group to be held by another, but that an outside purchaser was ready and waiting with his money and the land was conveyed to him next day (see p 230 e, post).
Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, Sharkey (Inspector of Taxes)v Wernher [1955] 3 All ER 493 and Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) [1964] 1 All ER 269 applied.
(ii) There was nothing in relation to the 1961–62 or 1962–63 assessments which by virtue of s 510 could be regarded as the equivalent to allowing an appeal by the taxpayer company against the inclusion of market value in the assessments; the taxpayer company had to show that that was the point of substance agreed with the inspector under s 510 and it had failed to do so (see p 232 f and h, post).
Cenlon Finance Co Ltd v Ellwood (Inspector of Taxes) [1962] 1 All ER 854 distinguished.
Notes
As to particular receipts constituting trade receipts for income tax purposes, see 20 Halsbury’s Laws (3rd Edn) 153–155, paras 267–270, and for cases on the subject, see 28 Digest (Repl) 50–58, 191–225.
For the law relating to the settlement of tax appeals by agreement, see 20 Halsbury’s Laws (3rd Edn) 680, 681, para 1342.
For the Income Tax Act 1952, s 510, see 31 Halsbury’s Statutes (2nd Edn) 476.
In relation to the year 1970–71 and subsequent years of assessment, the Income Tax Act 1952, s 510, has been replaced by the Taxes Management Act 1970, s 54.
Cases referred to in judgment
Cenlon Finance Co Ltd v Ellwood (Inspector of Taxes) [1960] 3 All ER 390, [1961] Ch 50, [1960] 3 WLR 690; on appeal CA [1961] 2 All ER 859, [1961] Ch 634, [1961] 3 WLR 242; on appeal HL [1962] 1 All ER 854, [1962] AC 782, [1962] 2 WLR 871, 40 Tax Cas 176, Digest (Cont Vol A) 847, 173d.
Edwards(Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14, [1955] 3 WLR 410, 36 Tax Cas 207, 28 Digest (Repl) 397, 1753.
Mason (Inspector of Taxes) v Innes [1967] 1 All ER 760, [1967] Ch 436, [1967] 2 WLR 479; affd CA [1967] 2 All ER 926, [1967] Ch 1079, [1967] 3 WLR 816, 44 Tax Cas 326, Digest Supp.
Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) (1963) 41 Tax Cas 389; on appeal CA [1964] 1 All ER 269, [1964] 1 WLR 190, Digest (Cont Vol B) 401, 424a.
Sharkey (Inspector of Taxes) v Wernher [1955] 3 All ER 493, [1956] AC 58, [1955] 3 WLR 671, 36 Tax Cas 275, 28 Digest (Repl) 74, 280.
Case stated
This was a case stated under the Income Tax Management Act 1964, s 12(5), and the Income Tax Act 1952, s 64, by the Commissioners for the Special Purposes of the Income Tax Acts.
1. At a meeting of the commissioners, held on 31 March 1969, the taxpayer company, Berry Head Lands Ltd, appealed against the following additional assessments to income tax made under Sch D in respect of its profits from property dealing:
Year Amount of assessment
1961-62 £8,955
1962-63 £26,870
Page 224 of [1971] 1 All ER 222
2. Shortly stated, the question for the determination of the commissioners was whether in computing the profits the amount to be credited for income tax purposes in respect of the sale by the taxpayer company of certain freehold land at Brixham, Devon (‘the land’), should be taken to be the sale price thereof or its market value.
3. Evidence was given before the commissioners by Mr Ivor Casson, senior partner in the firm of Messrs Casson, Beckman, Rutley & Co, who were the auditors of the taxpayer company. Mr Casson was at all material times a director of Wimpole Industrial Finance Co Ltd (‘Wimpole’) and became a director of the taxpayer company after the shares of that company had been acquired by Wimpole.
[Paragraph 4 listed the documents proved or admitted before the commissioners.]
5. At the hearing an agreed statement of facts was laid before the commissioners in which it was admitted between the parties that: (1) On 1 April 1960, the following events took place in the following order:
(i) Wimpole entered into a contract to purchase the whole of the issued share capital of the taxpayer company for £32,277, from Messrs J Evans, J R Owen, R H Passmore and A J Boyce.
(ii) The taxpayer company entered into a contract for the sale to Wimpole of the land for £4,175.
(iii) Wimpole entered into a contract with Marina Properties (Torbay) Ltd (‘Marina’) for the sale to it of the land for £40,000.
(2) The two contracts for the sale of the land were completed on 2 April 1960 by a conveyance from the taxpayer company to Marina at the direction of Wimpole. The market value of the land at 1 April 1960 was £40,000. (3) By letter dated 9 July 1962, Messrs Casson, Beckman, Rutley & Co (‘the auditors’) submitted the following documents to HM inspector of taxes for the Cavendish 2nd district (‘the inspector’):
(i) certified copy of the accounts of the taxpayer company in respect of the period from 11 December 1959 to 10 April 1961, and the year ending 10 April 1962;
(ii) income tax computation for the years 1959–60 to 1963–64 inclusive, together with a computation of the profits tax loss carried forward.
(4) In reply to the inspector’s letter dated 25 July 1962, the inspector was informed by letter, dated 30 July 1962, that the shares in the taxpayer company were sold to Wimpole on 1 April 1960, and that on the same date the taxpayer company sold the land at Brixham to Wimpole. By letter dated 14 August 1962, the inspector having pointed out to the auditors the apparent relationship between the taxpayer company and Wimpole asked in what circumstances it was claimed that the sale was at arm’s length. By letter dated 24 October 1962, the auditors confirmed that the sale in question was not at arm’s length and pointed out that from the tax point of view as Wimpole was a dealing company no issue arose. (5) By letter dated 8 November 1962, the inspector agreed the income tax computations for the taxpayer company for the period to 10 April 1962, indicating that the 1962–63 assessment would be £446 less £446 losses and that the appeal against the 1961–62 assessment was determined under s 510 of the Income Tax Act 1952 in the sum of £148 less £148 losses. By letter dated 9 November 1962, the auditors confirmed their agreement to the figures set out in the inspector’s letter of 8 November 1962. (6) By letter dated 22 October 1962, the auditors, who also acted for Wimpole, sent to the inspector a copy of that company’s accounts in respect of the period 1 January 1959 to 30 April 1960, and income tax computations for the years 1958–59 to 1961–62 inclusive. By letter dated 15 November 1962, the inspector (the same individual who was in correspondence with the auditors concerning the taxpayer company’s assessments) asked for a statement showing the date of purchase and sale of securities, land and properties with the purchase and sale prices. This statement
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was sent to the inspector by letter dated 19 November 1962 and showed that Wimpole had purchased the land at Brixham for £4,175 on 1 April 1960, and has resold it on the same date for £L40,000 less expenses. The inspector acknowledged receipt of this information by letter dated 26 November 1962. (7) On 21 November 1962, the inspector issued a notice of assessment to income tax on the taxpayer company for the year 1962–63 in the sum of £500. An appeal against this assessment was made on 28 November 1962 and acknowledged two days later. On 11 December 1962, the inspector wrote to the auditors with reference to the appeal and enclosed details of the adjusted assessment amounting to £446 less losses of £446, in accordance with his letter of 8 November. (8) By letter dated 29 July 1964, the inspector informed the auditors that, following the decision in Petrotim Securities Ltd v Ayres (Inspector of Taxes) ((1963) 41 Tax Cas 389, on appeal CA [1964] 1 All ER 269) he proposed to substitute the market value for the price actually paid for the land sold by the taxpayer company to Wimpole and to re-open the assessments on the taxpayer company for 1961–62 and 1962–63. (9) By letter dated 14 September 1964, the auditors drew the attention of the inspector to the fact that the income tax appeals for 1961–62 and 1962–63 had been determined under s 510 of the Income Tax Act 1952. The inspector replied by letter dated 30 October 1964, maintaining that all the facts had not been known to him at the time of determination and that the Revenue had not been aware at that time that the land at Brixham sold to Wimpole on 1 April 1960 for £4,175 had been sold by Wimpole on the same day for £40,000. Additional assessments for 1961–62 in the sum of £9,103, less first assessment £148 (=£8,955), and for 1962–63 in the sum of £27,316, less first assessment £446 (=£26,870), were issued on 24 November 1964. (10) Formal notice of appeal against the additional assessments was lodged by letter, dated 11 December 1964, from the auditors to the inspector.
6. As a result of the evidence, both oral and documentary, adduced before the commissioners, they found the following facts (in addition to those set out in para 5) proved or admitted:
(1) The taxpayer company was at all material times a land dealing company.
(2) Wimpole was at all material times a finance and share and land dealing company.
(3) The taxpayer company acquired the land at Brixham sold by it on 1 April 1960 for the sum of £3,575.
(4) Appeals made against the first assessments on the taxpayer company for the years 1961–62 and 1962–63 were settled by agreement under s 510 of the Income Tax Act 1952 on 8 November 1962 and 11 December 1962 respectively. On the former date the inspector had not been informed, and on the latter date he did not consider the statement referred to in para 5(6) or have in mind, that the land acquired by Wimpole on 1 April 1960, for £4,175 had been sold by that company on the same day for £40,000.
[Paragraph 7 noted the cases cited to the commissioners.]
8. It was contended on behalf of the taxpayer company: (1) that on the facts set out herein the amount to be credited for income tax purposes in respect of the sale by the taxpayer company of the land was the price paid therefor, ie £4,175; (2) that in any event the additional assessments appealed against were incompetent because the matter in question had been determined by the settlement by agreement under s 510 of the Income Tax Act 1952 of the appeals made against the first assessments on the taxpayer company for the years 1961–62 and 1962–63, the inspector being aware, at the time of the agreement, of the fact (which he himself raised) that the sale of the land was not at arm’s length; (3) that the additional assessments should therefore be discharged.
Page 226 of [1971] 1 All ER 222
9. It was contended by the inspector of taxes: (1) that on the facts set out above the market value of the land when it was sold by the taxpayer company to Wimpole for £4,175 was £40,000 and the transaction was therefore a sale at a gross undervalue; (2) that it was open to the commissioners, on authority, to decide that such a sale between associated companies was not a transaction made in the course of trade, and that on the facts found the commissioners could not reasonably regard it as having been made in the interest of and therefore in the proper course of the taxpayer company’s trade; (3) that in accordance with Sharkey (Inspector of Taxes) v Wernher and Petrotim Securities Ltd v Ayres (Inspector of Taxes), the taxpayer company should therefore be treated for tax purposes as having disposed of the land at its market value of £40,000; (4) that the particular point in question was not determined by, or as a result of, the settlement by agreement on 8 November 1962 of the appeal against the first assessment on the taxpayer company for the year 1961–62; (5) that knowledge of the statement referred to in para 5(6) could not be imputed to the inspector in relation to the settlement by agreement on 11 December 1962 of the appeal against the first assessment on the taxpayer company for the year 1962–63; (6) that even if it could, this would not be conclusive because the particular point in question was not determined by, or as a result of, the agreement reached on that date; (7) that the additional assessments appealed against were therefore competent and should be confirmed.
10. The commissioners gave their decision that the land was admittedly sold by the taxpayer company at substantially less than its market value. The purchaser, Wimpole, had previously acquired the shares of the taxpayer company and the sale was thus a sale by a subsidiary to a parent company. The cost of the land to the taxpayer company was £3,575 and the sale price £4,175, ie £600 in excess of cost. Such a transaction was, it seemed to the commissioners, very different from the X transactions considered in Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) where the investments in question were sold at a very substantial loss. The sale in the present case was an inter-group one, and as a result of it, the taxpayer company and Wimpole both made a profit. Having carefully reviewed the matter, the commissioners did not think that the transaction was so outside the ordinary course of business that they should find that it was not effected in the course of trade, that is to say, that it was one where, following Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) and Sharkey (Inspector of Taxes) v Wernher, market value should be substituted for sale price. They accordingly held that the appeal succeeded on that ground, and discharged the additional assessments to which it related. In those circumstances it was not necessary for the commissioners to consider, and they expressed no opinion on, the question whether the additional assessments appealed against would in any event have been incompetent by reason of what took place in relation to the settlement by agreement of the first assessments made on the taxpayer company for the years in question. The Crown now appealed.
Hubert H Monroe QC and P W Medd for the Crown.
M P Nolan QC and J E H Pearce for the taxpayer company.
16 July 1970. The following judgment was delivered.
GOFF J. In this case the inspector of taxes raised additional assessments on the taxpayer company on the footing that, whereas it had been charged to tax on the profit which emerged by taking it as having received only what it in fact received on the sale of certain land, it ought to have been charged on the basis of the market value, which was very much greater. The commissioners disallowed the additional assessments, and on this appeal two points come before me: first, whether, in any event, the Crown is entitled to raise those additional assessments notwithstanding
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the findings of fact by the commissioners; and, secondly, even if they would otherwise be so entitled, whether they are not precluded, under s 510 of the Income Tax Act 1952, from taking the point by reason of a settlement or agreement which took place with regard to the relevant assessments. That point was before the commissioners but, as they decided the point of substance against the Revenue, they did not see fit to deal with the second point at all.
At the hearing there was an agreed statement of facts in which it was admitted that on one and the same day, 1 April 1960, the following events took place in the following order: first, Wimpole Industrial Finance Co Ltd (‘Wimpole’) entered into a contract to purchase the whole of the issued share capital of the taxpayer company for £32,277 from certain individual shareholders; secondly, the taxpayer company entered into a contract for the sale to Wimpole of the land in question for £4,175; and, thirdly, Wimpole entered into a contract with Marina Properties (Torbay) Ltd (‘Marina’) for the sale to it of the land for £40,000. The two contracts for the sale of the land were completed the next day, on 2 April 1960, by a conveyance from the taxpayer company to Marina at the direction of Wimpole. The market value of the land at 1 April 1960 was £40, 000.
The commissioners received oral evidence, and as a result of the evidence, both oral and documentary, adduced before the commissioners they found the following facts, in addition to those which I have just read, proved or admitted. First, the taxpayer company was at all material times a land dealing company; secondly, Wimpole was at all material times a finance and share and land dealing company; thirdly, the taxpayer company acquired the land at Brixham sold by it on 1 April 1960 for the sum of £3,575. In their decision, the commissioners said that they—
‘… observed that the said land was admittedly sold by [the taxpayer company] at substantially less than its market value. The purchaser, Wimpole, had previously acquired the shares of [the taxpayer company], and the sale was thus a sale by a subsidiary to a parent company. The cost of the land to [the taxpayer company] was £3,575 and the sale price £4,175, that is £600 in excess of cost. Such a transaction was, it seemed to us, very different from the “X” transactions considered in the case of Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) where the investments in question were sold at a very substantial loss. The sale in the present case was an inter-group one, and as a result of it [the taxpayer company] and Wimpole both made a profit. Having carefully reviewed the matter, we did not think that the transaction was so outside the ordinary course of business that we should find that it was not effected in the course of trade—that is to say, that it was one where following the decision in Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes) and Sharkey (Inspector of Taxes) v Wernher market value should be substituted for sale price. We accordingly held that the appeal succeeded on that ground, and discharged the additional assessments to which it related.’
That is expressed in a negative form, but it is, of course, a finding of fact that the transaction was in the course of trade, and there is no right of appeal as such on a question of fact, as is well known. Therefore, in inviting me to go behind it, the Crown has to assume a heavy onus, the nature of which was described by Lord Radcliffe in the well-known passage in Edwards (Inspector of Taxes) v Bairstow ([1955] 3 All ER 48 at 57, 58, 36 Tax Cas 207 at 229), where he said:
‘If the Case contains anything ex facie which is bad law and which bears on the determination, it is, obviously, erroneous in point of law. But, without any
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such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law, and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination, or as one in which the evidence is inconsistent with, and contradictory of, the determination, or as one in which the true and only reasonable conclusion contradicts the determination. Rightly understood, each phrase propounds the same test. For my part, I prefer the last of the three, since I think that it is rather misleading to speak of there being no evidence to support a conclusion when, in cases such as these, many of the facts are likely to be neutral in themselves and only to take their colour from the combination of circumstances in which they are found to occur.’
The principle of law on which the Crown relies was first laid down in Sharkey v Wernher ([1955] 3 All ER at 496, 498, 36 Tax Cas at 296, 298) where Viscount Simonds said:
‘… I cannot escape from the obvious fact that it must be determined whether, and why, a trader, who elects to throw his stock-in-trade into the sea or dispose of it in any other way than by way of sale in the course of trade, is chargeable with any notional receipt in respect of it, before it is asked with how much he should be charged … I do not know how his account as a trader can properly be made up so as to ascertain his annual profits and gains unless his trading account is credited with a receipt in respect of those goods which he has diverted to his own use and enjoyment.’
Then he went on to give the examples of a farmer supplying his own house with milk and a market gardener with vegetables. In the same case Lord Radcliffe said ([1955] 3 All ER at 506, 36 Tax Cas at 307):
‘… it seems to me better economics to credit the trading owner with the current realisable value of any stock which he has chosen to dispose of without commercial disposal than to credit him with an amount equivalent to the accumulated expenses in respect of that stock.’
That case was applied and extended in Petrotim Securities Ltd (formerly Gresham Trust Ltd) v Ayres (Inspector of Taxes). That was a case on its facts somewhat similar to the present one, although it had the distinguishing feature that, whereas in the present case the sale showed a small profit on cost, in the Petrotim case there was a heavy loss, even as against the actual cost price. But in both cases the sale was at a great undervalue, which had the effect of transferring the realisable profit from the subsidiary to the parent. In that case it was held that the Crown was entitled to substitute the actual market value, but there was there a finding of the commissioners that the transaction was not in the course of trade. In that case Ungoed-Thomas J reviewed the facts and said ((1963) 41 Tax Cas at 400):
‘All these transactions were completely out of character with the rest of the Company’s trading operations and the way in which it conducted its trade. The sales were genuine in the sense that the prices were paid, but the conclusion
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appears irresistible that each sale was, in the words of Lord Radcliffe in Sharkey v. Wernher ([1955] 3 All ER 493 at 504, 36 Tax Cas 275 at 305) “a dictated sale at a prescribed price“. This Company trading normally for profit, as it did, never sold such assets at such prices except at such dictation. It is only the intrusion of another body into its affairs that produces such an odd operation. As I have already said, what I am concerned with in this case is whether this Company, as a separate entity, is conducting its own trade in respect of which it is assessed for its own Income Tax liability. In this transaction the Company was not acting in the course of its own trade, which is the subject of taxation, but out of that course. These transactions, when seen in their context of the Company’s trading operations, cry aloud for an explanation.’
It will be observed there that Ungoed-Thomas J did not say (which was all that he needed) that there was evidence on which the commissioners could find as they did, but he gave it as his opinion that the taxpayer company was not acting in the course of its own trade, and he said that the circumstances cried aloud for an explanation. In the Court of Appeal, Lord Denning MR said ([1964] 1 All ER at 272, 273, 41 Tax Cas at 407):
‘It seems to me that, when there is a sale at a gross under-value by one associated company to another, the commissioners are entitled to find that it is not a transaction made in the course of trade. Whoever would suppose that any trader in his right senses would enter into transactions of this kind, that he would sell at a gross under-value, were it not that he had in mind some benefit out of making a loss? It is just on a par with a case where a company gives its money away. You might indeed say here that £630,000 was given away by the taxpayer company in the “X” transactions. It could have realised the securities for £835,000 but it chose to sell them for £205,000. Such a transaction is so outside the ordinary course of business of any trader that the commissioners were entitled to find that it was not done in the course of trade.’
There, Lord Denning MR said only that the commissioners were entitled to find as they did, which was all that he needed to say, but his language was very strong. He said ([1964] 1 All ER at 272, 41 Tax Cas at 407): ‘Whoever would suppose that any trader in his right senses would enter into transactions of this kind … ?’ It will be observed also that he was considering there the overall loss, not merely the actual loss as against cost price. Donovan LJ agreed; and Russell LJ, who also agreed, said ([1964] 1 All ER at 274, 41 Tax Cas at 409):
‘The transactions here, in the form of sales, appear to be designed to confer enormous bounty on companies whose close association with the parent company at once gives every encouragement to uncommercial bounty, and at the same time no ground for trading generosity. I cannot see how it is possible to interfere with the view of the commissioners that these transactions were not in the course of trade.’
I had occasion myself to advert to Sharkey v Wernher when dealing with the author case of Mason (Inspector of Taxes) v Innes ([1967] 1 All ER 760 at 763, 44 Tax Cas 326 at 332), in which I said:
‘… the basis on which Sharkey v. Wernher was decided is that, by consuming or giving away his stock-in-trade, a trader appreciates its value, so that there is a notional receipt … ’
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and I still think that that is the principle of that case. In the Court of Appeal Lord Denning MR said ([1967] 2 All ER 926 at 928, 44 Tax Cas at 339):
‘A trader who supplies himself is accountable for the market value. That is established by Sharkey v. Wernher itself. Now, suppose that such a trader does not supply himself with tins of beans, but gives them away to a friend or relative. Again he has to bring them in at their market value. That was established by Petrotim Securities, Ltd. (formerly Gresham Trust, Ltd.) v. Ayers (Inspector of Taxes)
So Lord Denning MR treated the basis of that decision as being that the transaction there was a gift by the so-called seller to the so-called purchaser.
It appears to me clear beyond doubt that, if the question were whether a finding by the commissioners that this was not within trade could be set aside, the answer must obviously be in the negative; but the problem I have to consider is more difficult than that—namely whether the finding to the contrary is one which they could not reasonably have reached. I have come to that conclusion, although I confess my mind has fluctuated in the course of the argument, that this was, on their own reasoning, a conclusion to which they could not reasonably have come. I say that because it seems to me that the Crown is right in saying that the facts agreed or found did, as Ungoed-Thomas J said in the Petrotim case ((1963) 41 Tax Cas at 400), call for an explanation, and that on the face of it, without an explanation, it was a mere appropriation by the taxpayer company to its parent of the realisable profit from this land.
It is not only the matter of the enormous disparity between the price and the market value; there is the fact that it was all done on one day. It was not a case simply of transferring property from one member of a group to be held by another; the purchaser was there ready and waiting with his money, and there was to be a conveyance forthwith to him, as indeed there was on the very next day. This, on the face of it, was entirely within the Sharkey v Wernher and Petrotim principle. If the commissioners had called for an explanation and had received one, even if one had felt that it was not very convincing, the position would have been entirely different; but it is perfectly clear from the statement of the facts and from their reasoning that they did not call for any explanation, nor was one given; and, in reviewing the result of the facts, one has got to take the case as one in which there is no explanation of the transaction available.
They put their reasoning in a negative way. Fastening on the words of Lord Denning MR in the Petrotim case ([1964] 1 All ER at 273, 41 Tax Cas at 407), that in his view it was so outside the ordinary course of business as not to be trading, the commissioners said that, having regard to the fact that both members of the group made a profit and that they were within a group, the Petrotim case was distinguishable, and they did not think that the matter was so outside the ordinary course of business as not to be effected in the course of trade. They never, as it seems, directed their mind to the questions: (a) what was the inference to be drawn from the facts unexplained; and (b) whether there was any explanation. It seems to me that the irresistible inference to be drawn from the facts, in the absence of an explanation, is that this was not in the course of trade but was an appropriation by the subsidiary to its parent of this profit, and directly therefrom within the principle of law laid down in the Sharkey v Wernher and Petrotim cases. On the main point, therefore, I am in favour of the Crown.
Now I turn to the subsidiary point which is that, under s 510 of the Income Tax Act 1952, where a point has been raised and settled between the Crown and the
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taxpayer, the settlement has the same effect as if the matter had been heard and determined by the commissioners. And, of course, in the absence of an appeal, that decision is final. In the present case, there were appeals in respect of the two assessments, 1961–62 and 1962–63, and there was an agreement, and it is said that that brings the case within s 510. In the case the commissioners set out the history of the matter, and reference to the documents shows that the position was as follows. On 15 November 1961, the inspector made the assessment for 1961–62 in the sum of £300, which was chargeable to tax less a small overpayment, and there was an appeal on the ground that that was not in accordance with the accounts, ‘which should reach you by the 28th February’. On 9 July, accounts and an income tax computation for the years 1959–60 to 1963–64 were submitted and they showed this transaction at the actual figures. On 25 July 1962, the inspector probed into that matter and asked:
‘What are the names and addresses of the purchasers? Were the transactions wholly at arm’s length? From whom were the properties purchased? I should like the dates of all transactions.’
He first got the answer, which I have no doubt was perfectly honest, but which was in fact a mistake, that the transactions were at arm’s length. Then, on 14 August 1962, the inspector pointed out that the purchasers, Wimpole, had on 1 April 1960, purchased all the shares in the taxpayer company, and therefore asked on what ground it was claimed that the sale was at arm’s length. It was then immediately conceded quite frankly that it was not at arm’s length, but the agents said: ‘However, from the tax point of view as Wimpole … is a dealing Company no issue arises’. It seems to me that all the inspector could have had in mind at that time, and what the agents certainly had in mind, was the operation of s 469 of the Income Tax Act 1952, which would be excluded if Wimpole was a dealing company.
Then, on 8 November 1962, the inspector wrote:
‘I am now able to agree your Income Tax computations. The 1962/3 assessment will be £446 less £446 losses. The appeal against the 1961/2 assessment is determined under Section 510, Income Tax Act 1952 in the sum of £148 less £148 losses.’
At that time he did not know the actual sale price; nor, I think, did he know that all the transactions had taken place on one day. But he certainly obtained that information before the 1962–63 assessment was agreed.
On 22 October Wimpole supplied its accounts and income tax computations and stated:
‘There are no items in the Accounts that call for any special comment and we accordingly await to hear that you agree our figures.’
The inspector asked for further information on 15 November, stating: ‘I should like a statement showing the dates of purchase and sale of Securities, Land and Properties.' By letter of 19 November further information was given, and that showed the land as having been bought for £4,175 and sold on 1 April, realising net proceeds of £38,500. So that, by now, the inspector knew the date of sale and knew in substance what the price was.
On 21 November he made an assessment which has not been explained, but which was not in the sum which he originally indicated it would be, nor in any sum which could have resulted from bringing in £40,000 instead of £4,000, or thereabouts. He made an assessment in the sum of £500, and on the face of it said nothing about losses, although I am told that that might have been picked up subsequently. There was then a notice of appeal against the £500 assessment on the ground that ‘it is not in accordance with the accounts … already supplied to you’. There was no
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settlement in form, but on 11 December 1962 the inspector stated: ‘With reference to your appeal … details of the adjusted assessment are shown overleaf’, and that reverted to the figure of £446, with losses of the same amount. There the matter rested for some 18 months or so, until on 29 July 1964, the inspector wrote:
‘In reviewing this case I find that the land sold to Wimpole Industrial Finance Ltd on the 1st April, 1960 for £4,175 was re-sold on the same day by that company for £40,000. At the relevant time [the taxpayer company] and Wimpole Industrial Finance Ltd were under common control and following the decision in [Petrotim] it is proposed to revise this liability substituting the market value for the nominal transfer price.’
It is established by Cenlon Finance Co Ltd v Ellwood (Inspector of Taxes), that s 510 is binding only as to the particular point raised, but that it is not necessary that it should have been specifically stated in the notice of appeal. Thus, the question in that case was whether certain dividends were liable to be brought into account to tax. It appears ((1962) 40 Tax Cas at 179) that the taxpayers submitted tax computations in which the dividends were deducted and excluded from the profits. The inspector then wrote asking for particulars of those dividends, the particulars were given, and, having received them, he wrote agreeing the computations. On those facts, Cross J said ([1960] 3 All ER 390 at 397, 40 Tax Cas at 188):
‘It is true that in this case the taxpayers’ notice of appeal did not raise the question whether or not the Henry White (Sutherland), Ltd. dividend should be included in the computation of its profits. It was simply a notice of appeal against estimated assessments; but the question whether the dividend should be included was raised by the inspector when he saw the accounts, and he agreed to the estimated assessments being reduced on the footing that the dividend ought not to be included. The agreement which he made was, therefore, in substance, equivalent to the allowing of an appeal by the taxpayers against the inclusion of the dividend.
I cannot feel here that, either as to the 1961–62 assessment or as to the 1962–63 assessment, there was anything equivalent to allowing an appeal by the taxpayer company against the inclusion of the market value. True, the inspector was probing the matter, but never in fact made a claim, nor does it seem to me that the question was canvassed between the parties or agreed to be settled. If any point was settled, it was an entirely different one; namely the effect of s 469 of the Income Tax Act 1957. In the case of the 1961–62 assessment, the inspector was not in possession of the facts; and, with regard to the later one, the commissioners found as a fact that the inspector did not consider the statement which he had received from Wimpole ‘or have in mind that the said land acquired by Wimpole on 1 April, 1960, for £4,175 had been sold by that company on the same day for £40,000’. If the question were, as it sometimes is, whether this was a point which could have been raised at the time of the settlement, different considerations no doubt might well apply, but what the taxpayer company has to show is that the point was in substance agreed between the parties; and, on the facts which I have rehearsed, in my judgment it has failed to show that. Accordingly, the Crown is not precluded from taking the point, and in my judgment the appeal succeeds.
Appeal allowed.
Solicitors: Solicitor of Inland Revenue; McKenna & Co (for the taxpayer company).
K Buckley Edwards Esq Barrister.
National Bank of Greece SA v Westminster Bank Executor and Trustee Co (Channel Islands) Ltd
[1971] 1 All ER 233
Categories: TAXATION; Income Tax
Court: HOUSE OF LORDS
Lord(s): LORD HAILSHAM OF SAINT MARYLEBONE LC, VISCOUNT DILHORNE, LORD UPJOHN, LORD DONOVAN AND LORD PEARSON
Hearing Date(s): 5, 6, 7 OCTOBER, 11 NOVEMBER 1970
Income tax – Securities out of the United Kingdom – Income arising from – Payment by guarantor – Foreign bonds secured on foreign property – Principal debtor dissolved, assets frozen, and moratorium declared by foreign government – Guarantor dissolved and successor relieved by foreign government from succession to guarantee – Successor liable under English law – Whether payments by successor in England represented income arising from securities out of the United Kingdom – Income Tax Act 1952, ss 123, 170, Sch D, Case III.
In 1927 and 1930 a Greek company issued bonds secured on property in Greece and guaranteed (as to principal and interest) by another Greek company which at no time had a place of business in the United Kingdom. Subsequently, the Greek government suspended all obligations on the bonds and the guarantor company was later amalgamated with another bank and the new company (the appellants) became universal successor to the rights and obligations under the bonds and acquired a place of business in London. The respondents, a company resident in Jersey, were one of the bondholders. They claimed from the appellants as universal successors to the original guarantors principal and interest. On the question whether, on payment of interest, the appellants were entitled under s 170 of the Income Tax Act 1952 to deduct income tax,
Held – Notwithstanding the substitution of the appellants as guarantors, the acquisition by the appellants of a place of business in London and the alteration by the government of Greece for the purposes of Greek law of the obligations imposed on the principal debtor and the guarantor, the bond itself was a foreign document and the obligations to pay principal and interest, to which the bond gave rise, were obligations whose source was to be found in that document (see p 237 b to d, and p 238 j to p 239 b, post); accordingly, the appellants had failed to make out their claim to deduct tax under s 170 since the source of the income was situated outside the United Kingdom and the respondents were not United Kingdom residents (see p 238 h to p 239 b, post).
Foulsham v Pickles [1925] All ER Rep 706 considered.
Decision of the Court of Appeal sub nom Westminster Bank Executor and Trustee Co (Channel Islands) Ltd v National Bank of Greece SA [1969] 3 All ER 504 affirmed.
Notes
For the charge to tax under Case III, see 20 Halsbury’s Laws (3rd Edn) 245–247, paras 448–452.
Subject to savings and transitional provisions, the Income Tax Act 1952 has been repealed by the Income and Corporation Taxes Act 1970. For s 170 of the 1952 Act, see now s 53 of the 1970 Act. For Sch D, see now ss 108 and 109 of the 1970 Act.
Cases referred to in opinion
Brooke v Inland Revenue Comrs [1918] 1 KB 257, 87 LJKB 279, 118 LT 321, 7 Tax Cas 261, 28 Digest (Repl) 332, 1471.
Chamney v Lewis (1932) 17 Tax Cas 318, 28 Digest (Repl) 209, 885.
Colquhoun v Brooks (1889) 14 App Cas 493, [1886–90] All ER Rep 1063, 59 LJQB 53, 61 LT 518, 54 JP 277, 2 Tax Cas 490, 28 Digest (Repl) 206, 866.
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Foulsham v Pickles [1925] AC 458, [1925] All ER Rep 706, 94 LJKB 418, 133 LT 5, sub nom Pickles v Foulsham, 9 Tax Cas 261, 28 Digest (Repl) 249, 1103.
Holder v Inland Revenue Comrs [1931] 2 KB 81; affd HL [1932] AC 624, [1932] All ER Rep 265, 101 LJKB 306, 147 LT 68, 16 Tax Cas 540, 28 Digest (Repl) 309, 1353.
Inland Revenue Comrs v Whitworth Park Coal Co Ltd [1958] 2 All ER 91, [1958] Ch 792, [1958] 2 WLR 815; affd HL sub nom Whitworth Park Coal Co Ltd v Inland Revenue Comrs [1959] 3 All ER 703, [1961] AC 31, [1959] 3 WLR 842, 38 Tax Cas 531, Digest (Cont Vol A) 882, 709.
Moss’ Empires Ltd v Inland Revenue Comrs [1937] 3 All ER 381, [1937] AC 785, 106 LJPC 138, 157 LT 396, 21 Tax Cas 264, 28 Digest (Repl) 170, 688.
Singer v Williams [1921] 1 AC 41, 89 LJKB 1218, 123 LT 625, 7 Tax Cas 419, 28 Digest (Repl) 203, 854.
Whitney v Inland Revenue Comrs [1926] AC 37, 95 LJKB 165, 134 LT 98, 10 Tax Cas 88, 28 Digest (Repl) 357, 1578.
Appeal
This was an appeal by the National Bank of Greece SA from the decision of the Court of Appeal (Lord Denning MR, Sachs and Karminski LJJ) dated 25 June 1969 and reported [1969] 3 All ER 504, that the respondents, Westminster Bank Executor and Trustee Co (Channel Islands) Ltd, were entitled to receive payments of interest from the appellants without deduction of tax. The Court of Appeal, in so deciding, dismissed an appeal from the decision of Donaldson J on 24 July 1968.
The facts were as follows:
In 1927 and 1930, a Greek incorporated company issued sterling mortgage bonds to the extent of £2,000,000, with interest payable half-yearly and the indebtedness secured on properties in Greece. Payment was to be made in sterling at offices in London or at the option of the holders at a bank in Greece by cheque on London. Each bond stated that the National Bank of Greece (a Greek company) unconditionally guaranteed the due payment of the principal moneys and interest and the due performance of all the conditions of the bond. Each bond had coupons attached to it for interest every half-year, each of which was stated to be payable in sterling in London at certain offices or in Athens at the offices of the Greek bank by cheque on London. In 1941, the Germans captured Athens and occupied Greece and in the result the principal debtor was left with nothing with which to pay the bonds and the property on which they were secured was no longer available. In 1949, the Greek government passed a law suspending all obligations on the bonds. In 1953, the guarantor was amalgamated with another bank, to form the appellants who became the universal successor of the original guarantor. The appellants were a Greek company and carried on business in Greece but they also had an office in England at which they carried on business. In 1955, as a result of a successful suit against the appellants as successors to the guarantor, the Greek government passed a decree exempting the guarantee from the succession. It was subsequently established by the House of Lords that the appellants were still liable to pay the principal and interest on the bonds, such liability being enforceable by action in English courts and recoverable by execution against their assets in England. The respondents who were resident in Jersey sought to recover principal and interest on the bonds from the appellants. The appellants admitted liability but claimed to deduct income tax at the standard rate.
Heyworth Talbot QC and J H W Silberrad for the appellants.
Desmond C Miller QC and J L Creese for the respondents.
J P Warner as amicus curiae on behalf of the Crown.
Their Lordships took time for consideration
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11 November 1970. The following opinions were delivered.
LORD HAILSHAM OF SAINT MARYLEBONE LC. My Lords, in this case the sum remaining in dispute between the parties is £39 0s 5d. But we were assured that this was a test case and that the destiny of further and larger sums of the order of £50,000 was likely to follow the event of this appeal.
The parties to the dispute are both corporations incorporated under laws other than those of the United Kingdom. The respondents are a trust corporation incorporated according to the laws of Jersey. The appellants are a Greek company and were sued as being the guarantors of the principal and interest due under bonds issued in 1927 and 1930 respectively by another Greek company, the National Mortgage Bank of Greece (‘the mortgage bank’). Under the terms of these bonds it was provided on their fact that:
‘The National Bank of Greece [a second Greek company but a different entity from the appellants] hereby unconditionally guarantees the due payment of the principal moneys and interest and the due performance of all the conditions of this Bond.’
At no time did the principal debtors or the original guarantors have any place of business in the United Kingdom.
The appellants are sued as the universal successors under Greek legislation to the rights and obligations of the original guarantors. On the occasion of their becoming universal successors to the original guarantors, the appellants acquired, and still possess, a branch in the United Kingdom at which they carry on business.
The present proceedings began by writ dated 11 July 1963. In the event, the appellants admitted liability and have satisfied the amounts due under the guarantee by way of principal and interest except for the above sum of £39 0s 5d. This sum they claim to be entitled, and indeed bound, to deduct from the payment due by them as guarantors (in default of payment by the principal debtors) of the interest due under the bonds. It is agreed that this sum is correctly calculated as the amount of income tax at the appropriate standard rates applicable at the time. Originally the appellants based their claim to deduct income tax on ss 169 and 170 of the Income Tax Act 1952, the relevant Act in force. In the event they abandoned as untenable any reliance on s 169 and before this House based their argument solely on the provisions of s 170. So far as relevant s 170 provided:
‘Where—(a) any interest of money, annuity or other annual payment charged with tax under Schedule D … is not payable or not wholly payable out of profits or gains brought into charge, the person by or through whom any payment thereof is made shall, on making the payment, deduct out of it a sum representing the amount of the tax thereon at the standard rate in force at the time of the payment.’
It will be seen from the above quotation that in order to sustain their claim to deduct tax under s 170 the appellants are obliged to show that the payment out of which the deduction is made is a payment ‘charged with tax under Schedule D’. The charging section under Sch D was s 122 of the Income Tax Act 1952. It was conceded that no charge to tax relevant to these proceedings could have been made under the terms of sub-s (1)(a) (i)-(iii) of the charging section. Counsel for the appellants, however, rested his argument on the words of s 122(1)(b) which provides:
‘(1) Tax under this Schedule shall be charged in respect of … (b) all interest of money, annuities and other annual profits or gains not charged under Schedule A, Schedule B, Schedule C or Schedule E, and not specially exempted from tax.’
Read out of context these words would appear to be wide enough to charge income even of residents outside the United Kingdom even from property outside the United Kingdom. But it is clear that they cannot be so read, since such charge would be
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wholly outside the scope of the Income Tax Acts altogether including the scope of Sch D.
This appears from the well-known statement of Lord Herschell in the leading case of Colquhoun v Brooks ((1889) 14 App Cas 493 at 504, [1886–90] All ER Rep 1063 at 1067). Lord Herschell said:
‘The Income Tax Acts … themselves impose a territorial limit; either that from which the taxable income is derived must be situate in the United Kingdom or the person whose income is to be taxed must be resident there.’
The whole passage of which this brief extract is only a part was cited as definitive in Brooke v Inland Revenue Comrs ([1918] 1 KB 257 at 266, 269, 7 Tax Cas 261 at 272, 275) (Swinfen Eady and Scrutton LJJ) and in Whitney v Inland Revenue Comrs (Sir D Hogg KC arguendo) and per Lord Wrenbury ([1926] AC at 54, 55, 10 Tax Cas at 112). See also per Lord Phillimore ([1926] AC at 61, 10 Tax Cas at 117).
Before this House the appellants claimed to make their deduction on the ground that tax was to be charged under Sch D, Case III (see Income Tax Act 1952, s 123) and conceded that if the income arose under Case IV (‘income arising from securities out of the United Kingdom’) no deduction could be made since the respondent was not resident within the United Kingdom.
We thought it right to invite counsel (instructed by the Commissioners of the Inland Revenue) to address the House as amicus curiae. He submitted that the only question of substance in the case was whether or not the source of the payments by the appellants (as guarantors in default of payment of interest by the principal debtors) was or was not situated within the United Kingdom. He went on to submit that if this source were within the United Kingdom the income would be taxable under Case III and so deductible under s 170 but that if it were not it would not be so taxable under Sch D or indeed under the Income Tax Acts at all in the hands of the respondents since it would then be either a foreign security within Case IV or a foreign possession within Case V and not taxable in the hands of a recipient not resident in the United Kingdom. In short it would be caught by the territorial limitation laid down by Lord Herschell in the passage quoted above. For my part I accept the simple view of the matter as submitted by counsel, although it is in some ways simpler than the reasons which commended themselves either to Donaldson J or to the members of the Court of Appeal ([1969] 3 All ER 504, [1970] 1 QB 256), both of whom decided the case against the appellants on grounds which were not identical either with the above view or with one another.
I have come to the conclusion that the source of the obligation in question was situated outside the United Kingdom. This obligation was undertaken by a principal debtor which was a foreign corporation. That obligation was guaranteed by another foreign corporation which, as was conceded before us, had at no time any place of business within the United Kingdom. It was secured by lands and public revenues in Greece. Payment by the principal debtor of principal or interest to residents outside Greece was to be made in sterling and either at the offices of Hambros Bank or Erlangers Ltd or (at the option of the holder) at the National Bank of Greece in Athens, Greece, by cheque on London. Whichever method of payment was selected it was pointed out before us that, whatever use were made of the option, discharge of the principal debtor’s obligation would have involved in the ordinary course either a remittance from Greece to the paying agents specified in the bond or, at the option of the holder, a cheque issued within Greece although drawn on London and presumably payable there out of funds remitted by the debtors from abroad. It was also pointed
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out that the bond contained no provision for payment by the guarantor at any particular place or in any particular country.
The only circumstances relied on by the appellants as supporting their contention that the obligation was located inside the United Kingdom were as follows. Although the original guarantor had no branch in the United Kingdom the appellants had acquired one, on the universal succession in London. Moreover it was urged that since discharge of the obligations under the bond in Greece had been caught by the moratorium enacted by the Greek government, it followed that the only place at which the obligation could have been discharged or enforced was in London. Speaking for myself, I do not see how an obligation originally situated in Greece for the purposes of British income tax could change its location either by reason of the fact that one guarantor had been substituted for another, or by the fact that the second guarantor so substituted subsequently acquired a London place of business or by the fact that the government of Greece had by retrospective legislation altered by moratorium and substitution of a new guarantor for the purposes of Greek law the obligations imposed on the principal debtor and the guarantor. The appellants acquired no obligation different from that of the original guarantors, and that was the obligation imposed on the original guarantors by the terms of the bond. In my view the bond itself is a foreign document and the obligations to pay principal and interest to which the bond gives rise were obligations whose source is to be found in this document.
It follows from the view which I have stated above that this appeal must fail. In deference, however, to the arguments from the Bar and to the reasoning of the courts below I fell that I must give some account of the submissions (for this purpose now irrelevant) made from time to time and to the attitude to be taken towards them.
1. Up to the time of the appeal in this House, the appellants contended that the payments in question were in fact ‘interest’ within the meaning of Case III of Sch D. This reasoning appealed to Lord Denning MR in the Court of Appeal and he appears to have accepted it. Before this House the appellants abandoned this contention and this makes it impossible for us to express a final opinion on it. But for the reasoning in Holder v Inland Revenue Comrs (to which Lord Denning MR refers in his judgment) I, too, should have found this contention attractive and it may well be on a subsequent occasion both the reasoning in Holder’s case and the distinction drawn between that case and the present by Lord Denning MR may deserve further consideration. In the absence of full argument on both sides it is not possible for us to deal with it today.
2. The respondents sought to restore the reasoning of Donaldson J (rejected by the Court of Appeal) and to argue that the payments in question here were not ‘annual payments’ within the meaning of Case III on the grounds that they lacked the necessary element of recurrence. The basis of this argument was that the coupons representing interest were bearer documents and that it well might happen in 20 successive years that coupons representing interest were presented by 20 different holders residing in 20 different countries. This, so the respondents argued, deprived the guarantor’s obligation to pay interest (or rather the equivalent sum) in default by the principal debtor of the element of recurrence necessary to satisfy the fourth of the conditions laid down by Jenkins LJ in Inland Revenue Comrs v Whitworth Park Coal Co Ltd. This gave rise, to use the language of Donaldson J (who accepted the contention) to ‘a multiplicity of obligations each one of which is limited to an individual interest payment’. I find this argument wholly unconvincing. I agree entirely with Lord Denning MR that in any event it cannot stand in the light of Moss’ Empires Ltd v Inland Revenue Comrs, and I also agree with the criticism of it contained in Sachs LJ’s judgment in this case in the Court of Appeal.
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3. All three members of the Court of Appeal accepted the contention of the respondents that the payments in question in this case were ‘income arising from securities out of the United Kingdom’ within the meaning of Case IV of Sch D. This view depends on three propositions: (a) the income in question arose from the bond or the guarantee or both; (b) that the bond or that the guarantee is a security within the meaning of Case IV; and (c) that the situs of the bond or situs of the guarantee or both is outside the United Kingdom.
I have myself no doubt that both the bond and the land on which it is secured and the guarantee which appears on the fact of the bond are ‘securities’ within the meaning of Case IV and come within the definitions, fairly construed, of ‘security’ given by Viscount Cave LC in Singer v Williams ([1921] 1 AC 41 at 49, 7 Tax Cas 419 at 431), as supplemented by Lord Shaw of Dunfermline in the same case. Strictly speaking, however, I do not think the question arises. I accept the submission of counsel speaking as amicus curiae that once the location of the source of the income is held to be situated outside the United Kingdom it is therefore not taxable in the hands of the respondents under Case III, or indeed under Sch D or the Income Tax Acts at all. Strictly speaking, therefore, whether the payments come under Case IV or Case V or whether (as was suggested at one time) there can, in certain circumstances, be an overlap between Cases III and IV only to be resolved by an election of the Crown, it is not necessary for this House to decide. Once it is decided that the source of the income is an obligation outside the United Kingdom the appellants’ claim to deduct income tax must fail against the present respondents.
4. We were much pressed in this House by the appellants with Foulsham v Pickles which, it was contended, was an authority for the proposition that the source of income in such a case as this is situated in the United Kingdom. Foulsam v Pickles was not cited to either of the courts below and so we have not the advantage of the judgment in those courts. It is in fact a case in which some of the observations there made in this House may one day be said to have gone too far in one direction or another. But in any event it is a case which stands on its own facts which are vastly different from the present. In that case a contract was made in the United Kingdom to pay money in the United Kingdom by a British company for services to be rendered in West Africa by a resident of the United Kingdom. Income arising under this contract was held not to be income the source of which was wholly situated abroad. In the instant case both the principal debtor and the original guarantor were wholly resident abroad, and the source from which the income was contemplated to be paid was certainly intended to be remitted from abroad and was partly secured by property situated abroad. On the whole I agree with Finlay J in Chamney v Lewis ((1932) 17 Tax Cas 318 at 323) that Foulsham v Pickles is more an authority for the wide meaning of the term ‘possession’ for the purposes of Case V than a reliable guide to the situation of a source of income on facts which differ from those then in question.
For the reasons set out above, therefore, I consider that this appeal fails. The appellants have not made out their claim to deduct under s 170 of the Income Tax Act 1952 since the source of the income in question is situated outside the United Kingdom, and the respondents in the case are not United Kingdom residents. It follows that, in my view, the appeal must be dismissed with costs.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the speech of my noble and learned friend Lord Hailsham LC. I agree with it and that this appeal should be dismissed.
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LORD UPJOHN. My Lords, I have had the advantage of reading the speech of my noble and learned friend Lord Hailsham LC. I agree with it and that this appeal should be dismissed.
LORD DONOVAN. My Lords, I also have had the advantage of reading the opinion of my noble and learned friend Lord Hailsham LC, with which I entirely agree.
LORD PEARSON. My Lords, I have had the advantage of reading the opinion of my noble and learned friend Lord Hailsham LC, and I agree with it and would therefore dismiss the appeal.
Appeal dismissed.
Solicitors: Stibbard, Gibson & Co (for the appellants); Herbert Smith & Co (for the respondents); Solicitor, Inland Revenue.
S A Hatteea Esq Barrister.
Re Thomas Meadows & Co Ltd and Subsidiary Companies (1960) Staff Pension Scheme Rules
Fetherston and others v Thomas Meadows & Co Ltd and others
[1971] 1 All ER 239
Categories: PENSIONS
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 5, 6, 7 MAY 1970
Perpetuities – Rule against perpetuities – Pension scheme – Register of pensionable employees – Entries on register annually – Powers of committee to apply moneys on failure of employees to qualify for pension – Power to determine scheme – Whether powers void for perpetuity – Application of Perpetuities and Accumulations Act 1964, ss 3 and 15.
On 1 September 1960, a defendant company established a staff pension scheme constituted by rules and providing for pensions by means of a group deferred annuity policy taken out by the defendant company on one of its subsidiaries. The policy provided that the insurance company pay the pensions to the defendant company which would keep a register to be made up on 1 September of each year when the defendant company would enter the name of each person entitled to benefit and his particulars from which the amount of the pension was calculable. When an employee became, by promotion, entitled to a higher pension, the relevant alteration was to be entered in the register on 1 September next following. By rule 13 in the event of an employee’s retirement or withdrawal from service before pensionable age, certain amounts were returnable to the defendant company which under rule 15 was to pay them over to the benevolent fund. By the same rule 15 the committee of trustees administering the scheme could apply such fund by paying contributions on behalf of sick employees, in augmenting the pensions of those retiring, in making allowances to the families of deceased employees, and in other similar ways for the benefit of employees and their dependants. By rule 16 the committee could determine the scheme and any balance of the fund was to be shared proportionately among members of the scheme. Rule 17 empowered the committee to alter, add to or repeal the rules. On a summons by the plaintiffs (representing the committee) to determine, inter alia, whether the provisions of rules 15, 16 and 17 infringed the rule against perpetuities,
Page 240 of [1971] 1 All ER 239
Held – (i) Section 15a of the Perpetuities and Accumulations Act 1964 applied from the date on which each employee’s name was entered on the register such entry being ‘a disposition’ within that section as also was each subsequent entry made on promotion; accordingly, the Act was to be applied in respect of each payment coming into the benevolent fund according to the date on which the person insured was registered (see p 241 h and j to p 242 a, post).
(ii) The committee’s powers in respect of the benevolent fund were valid if exercised within the perpetuity period laid down by s 3b of the Act, that is, within 21 years of the death of a registered employee (see p 242 b, post).
Notes
For alterations in the rule against perpetuities in relation to instruments taking effect after 16 July 1964, see Supplement to 29 Halsbury’s Laws (3rd Edn) paras 567A, 567B.
For the Perpetuities and Accumulations Act 1964, ss 3 and 15, see 25 Halsbury’s Statutes (3rd Edn) 6, 18.
Adjourned summons
By a summons dated 1 October 1969 the plaintiffs who were trustees of a fund amounting to some £58,000 derived from three pension schemes (in which they claimed no beneficial interest) sought the determination by the court of questions regarding the construction of the rules of the three schemes. The first defendant company, Thomas Meadows & Co Ltd, had commenced a staff contributory pension scheme for their employees in 1936. The second defendant, Thomas Meadows (Insurance) Ltd, a wholly-owned subsidiary of the first defendant company, established another pension scheme in 1951 for its clerical staff. On 1 September 1960, these two schemes were closed and a new scheme was substituted called Thomas Meadows & Co Ltd and Subsidiary Companies (1960) Staff Pension Scheme. The court decided that certain provisions in the 1936 and 1951 schemes were void as infringing the rule against perpetuities. This report is concerned only with the 1960 scheme and the effect on it of the Perpetuities and Accumulations Act 1964. The material facts are set out in that part of the judgment of Goff J which deals with the 1960 scheme and the content of the most relevant rules of that scheme is described in the headnote.
V G H Hallett for the plaintiff trustees, present members of the 1960 pension scheme committee.
Page 241 of [1971] 1 All ER 239
J R Cherryman for the first four defendants, the companies.
D A Lowe for the fifth to eight defendants, representative members of the staffs of the four defendant companies.
N C H Browne-Wilkinson for the Attorney General.
7 May 1970. The following judgment was delivered.
GOFF J. I have already decided, for reasons which I need not repeat, that the provisions of the benevolent fund, both the powers and the trust on the determination of the fund, are void for perpetuity with regard to the 1936 and 1951 staff pension scheme rules.
I now have to consider the position under the 1960 scheme rules, where the matter may be affected by the Perpetuities and Accumulations Act 1964. The scheme commenced on, or as from, 1 September 1960. Rules were framed for the scheme and it was made to work by means of one single group policy taken out on 10 December 1963, but in order to fit what was being done it was provided that the date of commencement was to be 1 September 1960. Under that policy, the insurance company agreed to pay to the company the pensions which have to be provided under the scheme. The mechanics of the operation are controlled by a register which the conditions of the policy require the company to keep, made up on 1 September each year. Then the company enters the name of each person entitled to benefit from the scheme and particulars from which can be calculated the amount of pension to which he is entitled and the premiums payable. When any employee is raised to a higher grade, so that he becomes entitled to a higher pension, the relevant alteration is made on 1 September next following.
Under the rules each person on the register becomes entitled in certain events to a pension. But under rule 12, if someone retires on pension before the normal pension age, certain amounts become returnable under the group policy to the company, and under rule 13, on withdrawal from service before normal pension age, the relevant slice of the group provision is surrendered for a sum of money. Rule 15 provides for the company to pay over the amounts returnable to a benevolent fund which the committee which is to administer the scheme is then empowered to apply in certain ways. The vice which affected the benevolent fund in the other cases was that the committee were given powers which might be exercised outside the perpetuity period, and a dissolution might take place outside the perpetuity period, and under the old law this possibility defeated the whole gift.
Section 3 of the Act of 1964 provides ‘wait and see’ provisions, and one waits to see whether the power is exercised, or the event happens, within due time, and so is good, otherwise it is bad. I therefore have to determine to what extent the Act of 1964 applies here. By s 15(5) it is enacted that the Act only applies in relation to instruments taking effect after the commencement of the Act, but by s 15(6) the Act is made to apply to a disposition made otherwise than by an instrument as if the disposition had been contained in an instrument taking effect when the disposition was made. If, therefore, interests in the benevolent fund created by the 1960 scheme are interests arising out of a disposition made by an instrument, to wit, the rules or the policy, the Act would not apply by virtue of sub-s (5). But if they are interests under a disposition not so made, the Act applies by virtue of sub-s (6).
I am satisfied that there is no warrant for saying that interests arise under any instrument, whether the policy or the rules. The rules merely set out terms to affect the policy moneys when they become payable. The group policy creates nothing until persons are brought within its ambit. Two possible views were put forward as to what was the disposition: (a) each annual premium is a disposition; or (b) the entry of each name on the register is a disposition qua the pension to be granted to that person. The first view, in my judgment, is wrong because it draws a distinction between the policy and its fruits. This is wrong in principle and in the light of rules 12 and 13. The second view, however, appears to me to be plainly right—no other possibility has been suggested, nor can I conceive of one. Accordingly, in my judgment the Act must be applied in regard to each payment coming into the benevolent
Page 242 of [1971] 1 All ER 239
fund according to the date when the person insured was first entered on the register, with this qualification: that where in any case that person has been promoted to a higher grade, then with regard to the increased benefits, there is a fresh disposition as from the date when the preferment is entered on the register.
The effect, therefore, by virtue of s 3(3) of the Act is that the powers created concerning the benevolent fund by rule 15 are valid if and insofar—but insofar only—as they are exercised within the perpetuity period, and further, the power (under rule 16) to determine the scheme altogether and the trust for the benefit of the employees which will arise in that event is valid by s 3(1) if the power of determination is exercised within due time, but otherwise void.
Then one has to consider what is the relevant perpetuity period. I turn to s 3(4) and (5) of the Act which provide:
‘(4) Where this section applies to a disposition and the duration of the perpetuity period is not determined by virtue of section 1 or 9 (2) of this Act, it shall be determined as follows:—(a) where any persons falling within subsection (5) below are individuals in being and ascertainable at the commencement of the perpetuity period the duration of the period shall be determined by reference to their lives and no others, but so that the lives of any description of persons falling within paragraph (b) or (c) of that subsection shall be disregarded if the number of persons of that description is such as to render it impracticable to ascertain the date of death of the survivor; (b) where there are no lives under paragraph (a) above the period shall be twenty-one years.
‘(5) The said persons are as follows … (b) a person to whom or in whose favour the disposition was made, that is to say … (iii) in the case of a special power of appointment exercisable in favour of members of a class, any member or potential member of the class … (c) a person having a child or grandchild within sub-paragraphs (i) to (iv) of paragraph (b) above, or any of whose children or grandchildren, if subsequently born, would by virtue of his or her descent fall within those sub-paragraphs; (d) any person on the failure or determination of whose prior interest the disposition is limited to take effect.’
Paragraph (b) (iii) is the appropriate paragraph, but this is impracticable and so excluded by the terms of sub-s (4) and I am left with para (d). At first sight, it does not look applicable but I am ultimately convinced that it is. In the case of each person there is a disposition of his part of the global sum in favour of the benevolent fund taking effect on the failure of his prior pension rights.
In my judgment, therefore, as to each separate individual one has to look to see when he was first entered on the register, and if it was before the Act of 1964, it does not apply except as to increments to which he became entitled after the Act came into effect. If he was entered after the Act, it wholly applies. Where it applies, then so long as the powers (under rule 15) with regard to the moneys returned are exercised within 21 years of his death, they are valid. The same applies to the ultimate trust (rule 16) by virtue of s 3(1). It will be necessary to look separately at each sum of money to which the Act applies. The money may be exhausted in due time or the whole fund wound up in the due time for that particular case. So far as it is not, the powers under rule 15 and the ultimate trust will both fail. Similar considerations apply to the power to amend the rules conferred by rule 17.
Declarations accordingly.
Solicitors: Lawrence Jones & Co (for the plaintiff trustees and the defendants); Treasury Solicitor.
R W Farrin Esq Barrister.
Saunders (Executrix of the estate of Rose Maud Gallie (deceased)) v Anglia Building Society (formerly Northampton Town and County Building Society) (No 2)
[1971] 1 All ER 243
Categories: ADMINISTRATION OF JUSTICE; Legal Aid and Advice
Court: HOUSE OF LORDS
Lord(s): LORD REID, LORD HODSON, VISCOUNT DILHORNE, LORD WILBERFORCE AND LORD PEARSON
Hearing Date(s): 9 NOVEMBER, 16 DECEMBER 1970
Legal aid – Costs – Unassisted person’s costs out of legal aid fund – Successful appeal to Court of Appeal against decision in favour of assisted party – Whether just and equitable that order for payment of costs out of legal aid fund should be made – Legal Aid Act 1964, s 1(2).
House of Lords – Costs – Application for costs or expenses against legally-aided party – Application for costs by successful respondent – Legal Aid Act 1964, s 1(2).
Mortgage – Costs – Protecting security – Mortgagee defending his title – Action by legally-aided person – Costs added to security – Legal Aid and Advice Act 1949, s 2(2).
The plaintiff had a long lease of the house in which she lived. She was induced to sign a deed assigning this lease to L for a fictitious price and this enabled L to borrow £2,000 from the building society on the security of a mortgage on the property. Clause 7(3) of the mortgage deed provided ‘all other moneys costs charges and expenses properly paid or incurred by the [building society] under this Mortgage or in relation to their security with interest thereon … shall on demand be repaid to the [building society] by the Mortgagor and until such repayment shall be a charge on the mortgaged property’. The plaintiff sued L and the building society, claiming inter alia a declaration that the assignment of the house to L was void. Her claim against L was based on fraud and non est factum. Her claim against the building society was based solely on non est factum, there being no suggestion of any wrongful or improper conduct on the part of the building society. Her action succeeded at first instance (See [1968] 2 All ER 322) and the building society appealed to the Court of Appeal. That court dismissed the action (See [1969] 1 All ER 1062) against the building society and ordered that the building society be at liberty to add its costs of the action and those occasioned by the appeal to its security comprised in the mortgage. Leave was given for the plaintiff to appeal to the House of Lords. The House, having dismissed the substantive appeal (See [1970] 3 All ER 961), considered the matter of costs. The plaintiff had at all stages been an assisted person under the Legal Aid Acts. Two questions arose: (1) whether the order of the Court of Appeal enabling the building society as the mortgagee to add its costs to its security should be set aside on the grounds that it conflicted with s 2(2)(e)aof the Legal Aid and Advice Act 1949; (2) whether it was just and equitable in all the circumstances that an order should be made under s 1(2)b of the Legal Aid Act 1964 for the payment out of the legal aid fund to the building society of the whole or any part of its costs in the Court of Appeal and the House of Lords insofar as they were not covered by the security.
Held – (i) The order of the Court of Appeal did not conflict with s 2(2)(e) of the 1949 Act and should not be set aside; it did not impose any personal liability on the assisted
Page 244 of [1971] 1 All ER 243
person; it did no more than enable the building society as the mortgagee to operate an existing right against the legally-aided person’s property (see p 246 c, p 247 h, p 248 f, p 249 a, p 250 e, p 251 f and p 252 g, post).
Re Leighton’s Conveyance [1936] 3 All ER 1033 approved.
(ii) For the same reasons the building society as the mortgagee was also entitled to add to its security its costs incurred in resisting the plaintiff’s appeal to the House of Lords (see p 245 j, p 247 h, p 249 a, p 250 e and p 252 h, post).
(iii) It was not just and equitable in all the circumstances that an order should be made for the payment to the building society out of the legal aid fund of the costs not covered by the security which it chose to incur by appealing to the Court of Appeal against a decision at first instance in favour of the legally-aided party (see p 247 d e and h, p 249 j to p 250 a and e and p 254 a, post).
(iv) It was just and equitable in all the circumstances that an order should be made for the payment to the building society out of the legal aid fund of its costs in the House of Lords insofar as they were not covered by the security since the appeal was by the legally-aided party and leave was given for it because it involved important general questions of law (see p 247 c g and h, p 250 d and e and p254 c, post).
Notes
For adding costs to security, see 27 Halsbury’s Laws (3rd Edn) 447, 448, paras 893, 894, and for cases on the subject, see 35 Digest (Repl) 769–771, 4464–4482.
For the award of costs to an unassisted person out of the legal aid fund, see Supplement to 30 Halsbury’s Laws (3rd Edn) para 933A.
For the Legal Aid and Advice Act 1949, s 2, see 25 Halsbury’s Statutes (3rd Edn) 759, and for the Legal Aid Act 1964, s 1, see ibid 789.
Cases referred to in opinions
Cotterell v Stratton (1872) 8 Ch App 295, 42 LJ Ch 417, 28 LT 218, 37 JP 4, 35 Digest (Repl) 778, 4550.
Halsall v Egbunike (1963) 107 Sol Jo 514.
Leighton’s Conveyance, Re [1936] 3 All ER 1033, [1937] Ch 149, 106 LJ Ch 161, 156 LT 93, 35 Digest (Repl) 771, 4482.
Parker v Watkins (1859) John 133, 33 LTOS 270, 70 ER 369, 35 Digest (Repl) 449, 1424.
Turner v Hancock (1882) 20 Ch D 303, 51 LJ Ch 517, 46 LT 750, 35 Digest (Repl) 750, 4205.
Appeal and application
The House of Lords heard counsel on the matter of costs having dismissed the substantive appeal (See [1970] 3 All ER 961) by the executrix of the estate of the legally-aided plaintiff, Rose Maud Gallie, from the decision of the Court of Appeal (Lord Denning MR, Russell and Salmon LJJ), dated 25 February 1969 and reported [1969] 1 All ER 1062, allowing the appeal of the Anglia Building Society (formerly the Northampton Town and County Building Society) from a judgment of Stamp J, dated 29 March 1968 and reported [1968] 2 All ER 322, whereby it was declared that as against the building society an assignment relating to leasehold premises known as 12 Dunkeld Road, Goodmayes, Essex, executed by the plaintiff and dated 15 June 1962, was void and of no effect and it was ordered that the building society deliver up to the plaintiff the title deeds held by it pursuant to a mortgage of the premises, dated 10 August 1962 and made between William Robert Lee and the building society. On the matter of costs, there was an appeal against the order of the Court of Appeal, dated 25 February 1969, that the building society be at liberty to add its costs of the action and those occasioned by the appeal to its security comprised in the mortgage dated 10 August 1962, on the grounds that it would deprive the legally-aided party of the protection of s 2(2)(e) of the Legal Aid and Advice Act 1949, and an application
Page 245 of [1971] 1 All ER 243
by the building society for an order for payment of its costs in the Court of Appeal and the House of Lords, insofar as they were not covered by the security, out of the legal aid fund. The facts are set out in the opinion of Lord Reid.
Michael Albery QC and A E Holdsworth QC for the appeallant, the plaintiff’s executrix.
P R Oliver QC and H F J Teague for the building society.
J H Hames as amicus curiae for the Cambridge Legal Aid Area Committee.
Their Lordships took time for consideration.
16 December 1970. The following opinions were delivered.
LORD REID. My Lords, on 9 November 1970 (See [1970] 3 All ER 961, [1970] 3 WLR 1078) your Lordships decided that this appeal should be dismissed and then heard counsel on the matter of costs. Questions of general importance were raised and further consideration of the case was adjourned until today. The plaintiff, Mrs Gallie, died after argument had been heard by the appellate committee, and her executrix was substituted as a party before 9 November. All counsel involved agreed that this fact had no bearing on any of the questions argued before your Lordships and I shall, therefore, proceed to deal with these questions as if the plaintiff were still alive. The plaintiff had been granted legal aid, and the main question is whether the successful respondents, a large building society, should have an order for payment of any of its costs out of the legal aid fund under the Legal Aid Act 1964. But before dealing with that Act I must recall the facts of this case so far as necessary for the application of its provisions.
The plaintiff had a long lease of the house in which she lived, and this was of considerable value. She was induced to assign this lease to Mr Lee for a fictitious price and this enabled Mr Lee to borrow £2,000 from the building society on the security of the lease. There was nothing to suggest any irregularity to the building society and there is no suggestion now that the building society acted at any time otherwise than reasonably and in good faith. In 1965 the plaintiff sued Mr Lee and the building society seeking a declaration that the assignment to Mr Lee was void; if that had been established the building society’s security would have been worthless. That action succeeded at first instance ([1968] 2 All ER 323, [1968] 1 WLR 1190) and the building society appealed to the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17). That court dismissed the action against the building society and ordered that it ‘be at liberty to add [its] costs occasioned by this Appeal to [its] said security’.
The mortgage deed granted by Mr Lee to the building society provided that all:
‘… moneys costs charges and expenses properly paid or incurred by the [building society] under this Mortgage or in relation to this security … shall be a charge on the mortgaged property.’
That provision is clearly applicable to the building society’s costs in this action. So the building society does not need leave of the court to add those costs to its security. It appears to me that the only value of the part of the Court of Appeal’s order which I have quoted is to show that those costs were ‘properly’ incurred. This form of words appears to be in regular use and it ought, I think, to be incorporated in the order made by this House. A considerable part of the building society’s costs can be covered in this way, and it only seeks to recover from the legal aid fund the remainder which is not so covered. That will probably include its costs in this House and at least part of its costs in the Court of Appeal.
Page 246 of [1971] 1 All ER 243
It was argued for the appellant that such an order would conflict with s 2(2) of the Legal Aid and Advice Act 1949, which is in these terms:
‘Where a person receives legal aid in connection with any proceedings … (e) his liability by virtue of an order for costs made against him with respect to the proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.’
I do not think there is any conflict. The plaintiff succeeded in her action against Mr Lee and she therefore recovered the house but subject to the rights of the building society as bona fide holders of the mortgage for value. As I have already said, the order of the court gives to the building society no more than what it already had. Moreover, the Act refers to orders ‘against’ the legally-aided person. Here there is no order against the appellant in the sense of an order which does or may require the legally-aided person to make a payment. On any view, all that this order does is to enable the successful party to operate an existing right against that person’s property.
I can now come to the main question, the proper construction of the Legal Aid Act 1964. It seemed obvious to many people when the 1949 Act was passed that granting legal aid to one party would in many cases cause serious loss to his opponent if the opponent was not poor enough also to get legal aid. By means of legal aid unsuccessful actions would be brought which otherwise would never have been brought and the unaided defendant would have either to give in or to bear his own costs. Perhaps Parliament thought that legal aid would seldom be given to plaintiffs who failed to succeed or perhaps there were other reasons for not giving any relief. By 1964 it had become clear that the existing system was causing substantial injustice. In that year Parliament enacted provisions calculated to afford a limited degree of relief. A successful unassisted party was enabled to recover part or all of his costs from the legal aid fund, if certain conditions were satisfied. A distinction was drawn between costs in the court of first instance and costs in an appeal. As regards costs at first instance the unassisted party has to show that he will suffer severe financial hardship unless an order is made, but there is no such requirement when it comes to costs in an appeal. We are not concerned in the present case with the building society’s costs at first instance but only with its costs in the Court of Appeal and in this House. The relevant provisions in this case are:
‘1. (1) Where a party receives legal aid in connection with any proceedings between him and a party not receiving legal aid (in this Act referred to as “the unassisted party”) and those proceedings are finally decided in favour of the unassisted party, the court by which the proceedings are so decided may, subject to the provisions of this section, make an order for the payment to the unassisted party out of the legal aid fund of the whole or any part of the costs incurred by him in those proceedings.
‘(2) An order may be made under this section in respect of any costs if (and only if) the court is satisfied that it is just and equitable in all the circumstances that provision for these costs should be made out of public funds; and before making such an order the court shall in every case (whether or not application is made in that behalf) consider what orders should be made for costs against the party receiving legal aid and for determining his liability in respect of such costs …
‘(4) An order under this section shall not be made by any court in respect of costs incurred by the unassisted party in any proceedings in which, apart from this Act, no order would be made for the payment of his costs.”
The first condition is that we must be ‘satisfied that it is just and equitable in all the circumstances’ that the successful unassisted party should get relief. I think
Page 247 of [1971] 1 All ER 243
that ‘just and equitable in all the circumstances’ is a single composite phrase conveying one idea, and that it would be useless and might well be misleading to seek to split up the phrase. It directs the court to consider all the circumstances and to decide on broad lines. It was argued that it cannot be just and equitable to give relief to a wealthy person to whom the loss ought to seem a trifling matter. But it must be observed that when dealing with costs at first instance the Act brings in the means of the unassisted person whereas there is no suggestion of a means test when dealing with costs on appeal. I do not say that it could never be relevant to consider the means of the unassisted person—in usual circumstances it might be—but in general and in the present case I see no reason to take into account the amount of the assets of the building society.
I think we must consider separately costs in this House and costs in the Court of Appeal. Cases can only come before this House with leave, and leave is generally given because some general question of law is involved. In this case it enabled the whole vexed matter of non est factum to be re-examined. This seems to me a typical case where the costs of the building society as the successful respondent should come out of public funds. But different considerations apply to the building society’s costs in the Court of Appeal. When the use of public funds in affording legal aid has been the direct cause of the successful unassisted party having to incur additional costs, there appears to me to be a very strong case for holding that it is just and equitable that such additional costs should be made good to him out of public funds. But in the present case the building society was not taken to the Court of Appeal by the legally-aided opponent. It had to go to that court because the decision at first instance was against it. It may say that the action would never have started if the plaintiff had not had legal aid from the beginning. But that appears to me to be too remote. Although the building society has ultimately succeeded it cannot recover its costs at first instance because it is not impecunious. I cannot see any sufficient reason why it should recover from public funds costs which it chose to incur in appealing against an adverse decision at first instance.
Two other matters must be considered before an order can be made for the building society to have its costs in this House paid out of the legal aid fund. Section 1(4) requires us to consider whether, if the plaintiff had not had legal aid, costs would have been awarded against her. I think that this is clearly a case in which costs would have followed the event. So s 1(4) does not prevent such an order. The other matter arises under the last part of s 1(2). I think it is clear on the facts of this case, and I did not understand it to be disputed by counsel, that no order could have been made against the plaintiff or could now be made against her executrix. It is not suggested that she or her estate had any substantial asset other then her dwelling-house and as I have already stated the building society’s right to add its costs to its security deprives that asset of all value to her or her estate. I therefore move that an order be made for payment to the building society out of the legal aid fund of its taxed costs in this House.
LORD HODSON. My Lords, I concur with my noble and learned friend, Lord Reid, in the conclusion which he has reached.
VISCOUNT DILHORNE. My Lords, after the hearing of this appeal, and before your Lordships delivered their opinions, the original plaintiff died. It was agreed by counsel that that did not affect the questions as to costs which were later argued.
Counsel for the plaintiff challenged that part of the order made by the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) which declared that the building society was to be at liberty to add its costs
Page 248 of [1971] 1 All ER 243
of the action and those occasioned by the appeal to its security comprised in the mortgage dated 10 August 1962, and contended that no such declaration should, in view of s 2(2)(e) of the Legal Aid and Advice Act 1949, have been made by the Court of Appeal or should be made by this House. Section 2(2), so far as material, provides:
‘Where a person receives legal aid in connection with any proceedings … (e) his liability by virtue of an order for costs made against him with respect to the proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.’
To add its costs to the security would, counsel contended, increase the appellant’s liability and do so without regard to the amount which it was reasonable for her to pay.
The mortgage deed contained the following provision:
‘And all moneys expended by the [building society] under any of the foregoing provisions of this clause and also all other moneys costs charges and expenses properly paid or incurred by the [building society] under this Mortgage or in relation to their security … shall on demand be repaid to the [building society] by the Mortgagor and until such repayment shall be a charge on the mortgaged property.’
The building society was thus entitled to add its costs of defending the action to its security, provided that they were properly paid or incurred, without any order or declaration by the court. It is, nevertheless, convenient that in appropriate cases such a declaration should be made, for that may avoid controversy in the future on the question whether the expenditure was properly incurred.
The question under consideration is whether this right of the building society is restricted by s 2(2) of the 1949 Act, when the other party to the litigation is an assisted person and the exercise of the right will increase the amount required to pay off the mortgage. A similar question arose under the old poor persons procedure in Re Leighton’s Conveyance. It was then provided by RSC Ord 16, r 28, that a person suing as a poor person should not be ordered to pay any costs. The Court of Appeal held that the order did not prevent the mortgagee adding to her security her costs in an action brought by the mortgagor suing as a poor person. In the course of his judgment Lord Wright MR said ([1937] Ch at 152, 153, [1936] 3 All ER at 1037):
‘Now what the learned judge has done is to deny the ordinary right of a mortgagee to add to his security all costs, charges and expenses reasonably and properly incurred in ascertaining or defending his rights, or in recovering the mortgage debt. It is not really a matter which arises in connection with the awarding of costs. If it had been a question of the awarding of costs as between parties to the action the learned judge could not have ordered Mrs. Priestman to pay any costs, because she was proceeding as a poor person, and under the terms of Order XVI., r. 28, “no poor person shall be liable to pay costs to any other party”; but that is not the question at all. What the learned judge has done here has been to do something entirely different from ordering ordinary costs in the action. He has made an order which has the effect, if it stands, of depriving the mortgagee in this case … of the ordinary rights of a mortgagee. The mortgagee here was compelled to defend her rights, or at least cannot be said to have acted unreasonably in seeking to defend her rights.’
The language of RSC Ord 16, r 28 and of the Legal Aid and Advice Act 1949, s 2(2),
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differs but in this case, as in Re Leighton’s Conveyance, no order was made for the payment of costs by the appellant. Her liability was not increased by an order for costs made against her. Section 2(2) was not, in my opinion, infringed by the declaration made by the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) and this House can, and in my view should, make a similar declaration.
Counsel for the building society sought to obtain an order for the payment of the building society’s costs in the Court of Appeal and in this House, insofar as they were not covered by the security, out of the legal aid fund. When the legal aid scheme now embodied in the Legal Aid and Advice Act 1949 was devised by the committee of which my noble and learned friend Lord Hodson and I were members, it was realised that the grant of legal aid to a litigant might have unfortunate consequences to his successful unassisted opponent. If the latter’s means were only just above the limits which would enable him to obtain legal aid, he might find himself though successful in the action impoverished by the burden of his own costs. The grant of legal aid might lead to appeals which might not otherwise be brought, with the result that the unassisted litigant might, though successful, have a heavy bill to pay for his own costs. Though the inequity of this was appreciated, it was not at the time possible to find a solution.
The Legal Aid Act 1964 dealt with the problem by making it possible in certain circumstances to order the payment of the unassisted litigant’s costs out of the legal aid fund, where the proceedings are finally decided in his favour. Such an order can be made—
‘… if (and only if) the court is satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds; and before making such an order the court shall in every case (whether or not application is made in that behalf) consider what orders should be made for costs against the party receiving legal aid and for determining his liability in respect of such costs.’
(Section 1(2)). In this case it is clear that no order for costs should be made against the appellant.
Where the application is in respect of costs incurred in a court of first instance further conditions have to be satisfied before such an order is made. The proceedings must have been instituted by the assisted party, and the court must be satisfied that the unassisted party will suffer severe financial hardship if the order is not made. A defendant in an action brought by an unassisted party may, though successful in the action, not be able to obtain payment of the costs awarded to him. It would be wrong if, as a result of being sued by an assisted litigant, he was placed in a better position than if sued by an unassisted person, by being able to have recourse to the legal aid fund. This, I think, was the reason for the requirement that severe financial hardship must be shown to result to the unassisted litigant if such an order was not made in relation to costs in the court of first instance. In this case the building society had to appeal to the Court of Appeal to obtain the reversal of the judgment given against it.
A very wide discretion has been entrusted to the courts in determining whether in all the circumstances it is just and equitable to make an order. In some cases, perhaps a case where the hearing of an appeal has taken a long time and so involves a large amount of costs, it may be just and equitable to order that some part or the whole of the unassisted litigant’s costs of the appeal should be paid out of the legal aid fund. The circumstances of each case will differ. I do not think that the fact that the building society had to appeal to the Court of Appeal to obtain judgment in its
Page 250 of [1971] 1 All ER 243
favour suffices in this case to establish that it is just and equitable to make such an order in relation to its costs in the Court of Appeal. One circumstance that has to be borne in mind is the fact that the building society can add its costs in the High Court and in the Court of Appeal to its security. In most cases a successful unassisted litigant in an appeal will not be able to obtain reimbursement of his costs in the High Court.
The words ‘if (and only if)’ in s 1(2) of the 1964 Act in my view show that no such order should be made unless it is patently clear that it will be unjust and inequitable not to do so. As I have said, a wide discretion is given to the courts and, although in relation to costs in the appellate courts the question of severe financial hardship is not required by the Act to be considered, nevertheless that does not, in my opinion, mean that the financial position of the unassisted litigant is not one of the circumstances to which regard may property be had.
The appellant appealed to this House having obtained legal aid for the purpose. I do not wish to suggest that such aid was not properly granted. Difficult questions of law had to be considered. Is it just and equitable that the building society should, though successful in the Court of Appeal and in this House, have to pay its costs in this House? I think not, and I think that, if no such order as they seek were made in relation to their costs in this House, the Legal Aid Act 1964 would have failed in its purpose.
In my opinion, an order should be made for the payment to the building society out of the legal aid fund of its costs in this House insofar as those costs are not covered by its security.
LORD WILBERFORCE. My Lords, I concur.
LORD PEARSON. My Lords, the substantive appeal to your Lordships’ House ([1970] 3 All ER 961, [1970] 3 WLR 1078) having been dismissed, two questions have been raised with regard to costs. The first question is whether the successful respondent, the building society, is entitled as mortgagee to add its costs to its security. The second question is whether an order should be made under the Legal Aid Act 1964 for the payment out of the legal aid fund to the building society of the whole or any part of its costs insofar as they are not covered by the realisation of its security.
The main facts relevant to these questions of costs can be shortly summarised. The plaintiff in the proceedings has died and her executrix has been substituted for her as a party. In 1962 the plaintiff was about 78 years of age and she had a long lease of the house in which she lived. On 24 June 1962, she executed a deed assigning her lease to Mr Lee. The price was stated to be £3,000, but it was not paid. On 10 August 1962, Mr Lee obtained from the building society a loan of £2,000 secured by a mortgage on the property. Clause 7(3) of the mortgage deed provided that,
‘… all other moneys costs charges and expenses properly paid or incurred by the [building society] under this Mortgage or in relation to their security with interest thereon … shall on demand be repaid to the [building society] by the Mortgagor and until such repayment shall be a charge on the mortgaged property.’
In July 1964, the plaintiff commenced an action against Mr Lee and the building society, claiming a declaration that the assignment of the house to Mr Lee was void, and also claiming other relief. She alleged that she had been induced to execute the deed of assignment by a fraudulent representation made to her by Mr Lee that it was a deed of gift to her nephew, Mr Parkin, and she alleged that consequently it
Page 251 of [1971] 1 All ER 243
was not her deed. Her claim against Mr Lee was based on fraud and non est factum. Her claim against the building society was based solely on non est factum, there being no suggestion of any wrongful or improper conduct on the part of the building society. The learned trial judge, Stamp J ([1968] 2 All ER 323, [1968] 1 WLR 1190), decided in favour of the plaintiff and, by his judgment, (1) he made a declaration as against Mr Lee that the assignment was void, and he directed an enquiry as to damages; (2) he made a declaration in the same terms as against the building society, and ordered it to deliver up the title deeds and to pay three-quarters of the plaintiff’s costs. There was no appeal by Mr Lee. There was an appeal by the building society, and the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) allowed the appeal, holding that the plaintiff’s claim against the building society, based on non est factum, was not established. The Court of Appeal varied the judgment of the learned judge, leaving untouched his declaration and direction as against Mr Lee, but substituting for his declaration and orders as against the building society an order that the action against it be dismissed. They also ordered that the building society should be at liberty to add its costs of the action and its costs of the appeal to the security comprised in the mortgage dated 10 August 1962. Your Lordships granted leave for the plaintiff to appeal to your Lordships’ House. The appeal (which, as stated above, was unsuccessful) involved important questions of general law as to the nature and scope of the plea or doctrine non est factum. The plaintiff was at all stages of the proceedings an assisted person under the Legal Aid acts.
Now it is contended on behalf of the plaintiff’s executrix that the order of the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) that the building society be at liberty to add its costs of the action and of the appeal to the security comprised in the mortgage should be set aside because it involves an infringement of s 2(2)(e) of the Legal Aid and Advice Act 1949. Section 2(2) provides:
‘Where a person receives legal aid in connection with any proceedings … (e) his liability by virtue of an order for costs made against him with respect to the proceedings shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.’
In my opinion, that contention fails, because the order imposes no personal liability on the assisted person and the right of the building society as mortgagee to add its costs to its security arises from the mortgage and not from the order of the Court of Appeal.
Normally the mortgagee’s right is being asserted against the mortgagor and is contractual: Cotterell v Stratton, Turner v Hancock. In this case the plaintiff was not a party to the mortgage and so not a contracting party in relation to the building society, but she has been ascertained to be the person entitled to the equity of redemption and, in my opinion, the building society has by virtue of the mortgage a right as against her to add its costs to the security, unless the court otherwise orders on the ground of unreasonable conduct on its part. That the building society have such a right in relation to a person in the plaintiff’s position is shown by a passage in the judgment of Romer LJ, in Re Leighton’s Conveyance ([1937] Ch 149 at 154, [1936] 3 All ER 1033 at 1037, 1038):
‘Where a mortgagee’s title is attacked by somebody who is a stranger to the mortgagee, the circumstances in which the mortgagee is entitled to add his proper costs in defending his title to the mortgagee’s security are stated by Sir W. Page Wood, V.-C., in Parker v. Watkins ((1859) John 133 at 137) where he said this: “I quite agree
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that, where a mortgagee has been put to expense in defending the title to the estate, the defence being for the benefit of all parties, he is entitled to charge those expenses against the estate; but if some litigious person chooses to contest his (the mortgagee’s) title to the mortgage, that should not affect the parties interested in the equity of redemption, unless they can be shown to have concurred in or assisted the litigation“.’
Those last words apply a fortiori to the case of the plaintiff. She was herself the person who contested the building society’s title to the mortgage, and instead of merely concurring in or assisting the litigation she started it and carried it on.
The restricted function of the court in relation to the mortgagee’s right under a mortgage has been and is defined in the Rules of the Supreme Court. The former RSC Ord 65, r 1, provided:
‘Subject to the provisions of the Act and these Rules, the costs of and incident to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge:Provided that nothing herein contained shall deprive an executor, administrator, trustee or mortgagee who has not unreasonably instituted or carried on or resisted any proceedings, of any right to costs out of a particular estate or fund to which he would be entitled according to the rules hitherto acted upon in the Chancery Division.’
That provision was replaced by r 6(2) of the Supreme Court Cost Rules 1959, which has been repeated without alteration in RSC Ord 62, r 6(2), of the revised rules now in force. Rule 6(2) provides:
‘Where a person is or has been a party to any proceedings in the capacity of trustee, personal representative or mortgagee, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee or personal representative of the mortgaged property, as the case may be; and the Court may otherwise order only on the ground that the trustee, personal representative or mortgagee has acted unreasonably or, in the case of a trustee or personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.’
In my opinion, the Court of Appeal ([1969] 1 All ER 1062, [1969] 2 Ch 17) by their order were not imposing on the plaintiff any personal liability for the building society’s costs, nor creating any right of the building society to add its costs to its security, but were declining to order otherwise, i e, declining to deprive the building society of its right arising from its mortgage. Accordingly, the Court of Appeal’s order does not involve any infringement of s 2(2)(e) of the Legal Aid and Advice Act 1949. This conclusion is in line with the decision and reasoning of the Court of Appeal (Lord Wright MR, Romer and Greene LJJ) in Re Leighton’s Conveyance and appears to be in line with the decision of Pennycuick J in Halsall v Egbunike.
In my opinion also the building society as mortgagee is entitled to add to its security its costs incurred in resisting the plaintiff’s appeal to your Lordships’ House. There is no ground for ordering otherwise, as there is no evidence or suggestion that the building society acted unreasonably in any way. The right of the building society to add to its security these costs, as well as its costs of the trial and of the appeal to the Court of Appeal, may not be of much practical value, but in principle it has the right.
The second question is whether an order should be made for payment of any of the costs of the building society out of the legal aid fund. The relevant provisions are contained in s 1 of the Legal Aid Act 1964 and are as follows:
Page 253 of [1971] 1 All ER 243
‘1. (1) Where a party receives legal aid in connection with any proceedings between him and a party not receiving legal aid (in this Act referred to as “the unassisted party”) and those proceedings are finally decided in favour of the unassisted party, the court by which the proceedings are so decided may, subject to the provisions of this section, make an order for the payment to the unassisted party out of the legal aid fund of the whole or any part of the costs incurred by him in those proceedings.
‘(2) An order may be made under this section in respect of any costs if (and only if) the court is satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds; and before making such an order the court shall in every case (whether or not application is made in that behalf) consider what orders should be made for costs against the party receiving legal aid and for determining his liability in respect of such costs.
‘(3) Without prejudice to subsection (2) above, no order shall be made under this section in respect of costs incurred in a court of first instance, whether by that court or by any appellate court, unless—(a) the proceedings in the court of first instance were instituted by the party receiving legal aid; and (b) the court is satisfied that the unassisted party will suffer severe financial hardship unless the order is made.
‘(4) An order under this section shall not be made by any court in respect of costs incurred by the unassisted party in any proceedings in which, apart from this Act, no order would be made for the payment of his costs …
‘(6) In this section “costs” means costs as between party and party; but the costs in respect of which an order may be made under this section include the costs of applying for that order.”
In view of the provisions of s 1(3)(b), the building society is not asking for an order for its costs of the trial at first instance to be paid out of the fund. It has very large resources, and it could not be said that it ‘will suffer severe financial hardship unless the order is made’.
The difficult problem arises with regard to the building society’s costs of the appeal to the Court of Appeal. It does not have to show ‘severe financial hardship’, because sub-s (3) is not applicable. On the other hand under sub-s (2) the court, before making an order for payment of costs of an unassisted party out of the fund, must be ‘satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds’. In my opinion, this requires something more than that the building society succeeded in its appeal. All the circumstances have to be considered. One circumstance is the innocence of the building society: it has not behaved wrongfully or negligently or oppressively. Another circumstance, which I think is admissible under sub-s (2), though not conclusive under that subsection as it might be under sub-s (3), is that the building society has very large resources, so that its recovery of these costs or failure to recover them will not materially affect its financial position. Another circumstance is that the building society was not taken to the Court of Appeal by the legally-aided plaintiff. The building society took the plaintiff to the Court of Appeal. I think this circumstance is entitled to some weight, but it is far from being decisive against the building society on the present issue, because it was legal aid which enabled the plaintiff to gain the judgment at first instance in her favour, and the building society had to appeal in order to get the judgment reversed. There is another circumstance to which I think some weight should be given. It appears from tentative figures given by counsel and from the well-known increase in the level of house prices in recent years that the mortgage security is likely to be worth substantially more than the debt which, apart from the costs now under consideration, is owing under the mortgage. The building society is being allowed to add its costs to its security. It is likely that, all or most of its costs of the trial at first instance will be recovered by realisation of the
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security, although it could not have obtained an order in respect of these costs under the Legal Aid Act 1964. Thus, the building society is in a favourable position in comparison with most other applicants for orders under this Act. Having regard to all the circumstances which I have mentioned, I am not satisfied that it would be just and equitable that provision for the building society’s costs of the appeal to the Court of Appeal should be made out of public funds.
Then there are the building society’s costs of resisting the plaintiff’s appeal to your Lordships’ House. This was the plaintiff’s appeal, and leave was given for it because it involved important general questions of law. It is not fair or equitable that a substantial part of the expense of elucidating the law should be thrown on the building society as the successful respondent. In my opinion, provision should be made for payment out of the fund of the building society’s costs of resisting the plaintiff’s appeal to your Lordships’ House, except insofar as such costs may have been recovered by the realisation of the security.
Appeal dismissed; order for payment of building society’s costs in the appeal to the House of Lords to come out of the legal aid fund insofar as they are not covered by its security.
Solicitors: Hunt & Hunt (for the appellant); Sharpe, Pritchard & Co agents for Shoosmiths & Harrison, Northampton (for the building society); Secretary, Cambridge Legal Aid Area Committee.
S A Hatteea Esq Barrister.
Re 88 Berkeley Road, London NW9
Rickwood v Turnsek and another
[1971] 1 All ER 254
Categories: LAND; Other Land
Court: CHANCERY DIVISION
Lord(s): PLOWMAN J
Hearing Date(s): 16, 17 NOVEMBER 1970
Joint tenancy – Severance – Land – Notice of severance – Service – Registered post – Recorded Delivery – Law of Property Act 1925, ss 36(2) and 196(4).
Notwithstanding that the proviso to s 36(2)a of the Law of Property Act 1925 requires a notice severing a joint tenancy to be ‘given’ and s 196(4) b refers to notices required by the Act to be ‘served’, where one is considering a notice in writing there can be no difference between ‘serving’ the notice and ‘giving’ the notice (see p 257 f and h, post).
The plaintiff and G bought a house, providing the purchase money in equal shares. The property was transferred to them as joint tenants, legally and beneficially. G later decided to sever the joint tenancy. Her solicitors drafted a notice of severance which she signed. The notice, together with a covering letter from the solicitors asking the plaintiff to accept service and acknowledge receipt, was sent to the plaintiff by recorded delivery service. The letter was delivered by the post office at the house and was taken in and signed for by G herself. The plaintiff however never received the letter. On the question whether the notice of severance had, on the true construction of s 196(4) of the Law of Property Act 1925, been served for the purposes of s 36(2) of the Act,
Held – On the true construction of s 196—
(i) the words ‘if the letter is not returned through the post-office undelivered’ in s 196(4) referred to the ordinary case of the post office being unable to effect delivery at the address on the letter for some reason, such as that the addressee had
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gone away or the house was shut or empty, and did not apply to a case where the letter was delivered by the postman at the address to which it was sent (see p 258 a and b, post);
Hewitt v Leicester City Council [1969] 2 All ER 802 distinguished.
(ii) proof, on the balance of probabilities, of the sending by recorded delivery of a prepaid letter properly addressed containing the notice was sufficient for service; accordingly, as the burden of proof had been discharged the notice of severance was sufficiently served on the plaintiff (see p 258 e, and p 259 b e and h, post).
R v Westminster Unions Assessment Committee, ex parte Woodward & Sons [1917] 1 KB 832 applied.
Notes
For severance of joint tenancies, see 32 Halsbury’s Laws (3rd Edn) 334–337, paras 522–528, and for cases on the subject, see 38 Digest (Repl) 823–826, 360–390.
For the Law of Property Act 1925, ss 36 and 196, see 20 Halsbury’s Statutes (2nd Edn) 494, 819.
Cases referred to in judgment
Hewitt v Leicester City Council [1969] 2 All ER 802, [1969] 1 WLR 855, Digest Supp.
R v Westminster Unions Assessment Committee, ex parte Woodward & Sons [1917] 1 KB 832, 86 LJKB 698, 116 LT 601, 81 JP 93, 38 Digest (Repl) 763, 1791.
Cases also cited
Moody v Godstone Rural District Council [1966] 2 All ER 696, [1966] 1 WLR 1085.
Palmer v Rich [1897] 1 Ch 134.
Adjourned summons
This was an application by originating summons dated 31 December 1969 by the plaintiff, Jessina Gladys Rickwood, whereby she claimed against Helmut Turnsek, the first defendant and the executor of the will of Gladys Elizabeth Goodwin deceased, and Sarah Ann Sally, the second defendant, who claimed to be beneficially entitled under the trusts relating to the property 88 Berkeley Road, London NW9, (1) a declaration that she was solely and beneficially entitled to the fee simple estate in the property, and (2) an order that the first defendant deliver to the plaintiff the land certificate relating to the property. The facts are set out in the judgment.
Ashley Bramall for the plaintiff.
I H Maxwell for the first defendant.
E F R Whitehead for the second defendant.
17 November 1970. The following judgment was delivered.
PLOWMAN J. The question in this case is whether a joint tenancy in a property known as 88 Berkeley Road, London NW9, which formerly subsisted between the plaintiff, Mrs Rickwood, and the late Miss Gladys Elizabeth Goodwin, was severed during the lifetime of the latter. Miss Goodwin had been a friend of the plaintiff’s mother. She was a generation older than the plaintiff, and the first defendant is her executor and the second defendant her residuary legatee.
The facts of the case, in outline are these: in 1944 the plaintiff and her mother went to live with Miss Goodwin in a flat at 94 Berkeley Road. In 1955, the plaintiff and Miss Goodwin bought no 88 at the price of £2,800. They provided the money which was required to purchase that house in equal shares and the property was transferred to them as joint tenants, both legally and beneficially. In 1959, the plaintiff’s mother died. The plaintiff herself went on sharing this house with Miss Goodwin. Then, in 1968, Miss Goodwin decided to sever the joint tenancy; one reason, at any rate, for this seems to have been that the plaintiff was shortly going to get married and Miss Goodwin decided that she did not want the plaintiff to succeed to the whole interest in the property on her death. She took the view that it was for the plaintiff’s husband to house her and that she, Miss Goodwin, in view
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of the plaintiff’s marriage, was released from any obligation which she may have felt to the plaintiff’s mother to ensure that the plaintiff would succeed to the house on Miss Goodwin’s death. Anyway, she went to her solicitors—they were the firm of which the first defendant is a member—and her solicitors advised her about the matter and drafted a notice of severance.
It appears that, on 2 May 1968, Miss Goodwin signed the notice of severance which her solicitors had drafted, her signature being witnessed by Mrs Buckton, and the document which she signed was addressed to the plaintiff, by her maiden name, Miss Eldridge. It is in the following terms:
‘I HEREBY GIVE YOU NOTICE of my desire to sever the joint tenancy in equity of and in the property described in the Schedule hereto now held by you and me as joint tenants both at law and in equity.’
and then the schedule contains particulars of the property. On the following day, 3 May, Miss Goodwin’s solicitors sent the notice of severance to the plaintiff with a covering letter stating:
‘We enclose herewith notice of severance of joint tenancy, on behalf of our Client, Miss Goodwin, service of which would you please accept by post and kindly acknowledge safe receipt.’
That letter with its enclosure was sent by recorded delivery service. The plaintiff never acknowledged receipt, because her evidence is that she never received the notice of severance. She has, in fact, always denied having received it. She continued to deny it even after it had been brought to her notice—or to the notice of her solicitors—that the notice of severance had been sent to her by recorded delivery, and after she had been shown a copy of the certificate of posting. Enquiries were then made of the post office, and it emerged that this letter which had been sent by recorded delivery had indeed been delivered at 88 Berkeley Road but that it had been taken in and signed for by Miss Goodwin herself. The plaintiff says that she never received it, and the evidence is that the post always came after the plaintiff had gone off to work and while Miss Goodwin was there; and it was the habit of Miss Goodwin, if there were any letters for the plaintiff, to put them either on the mantelpiece or on the table so that she could pick them up when she came home. But the plaintiff’s evidence is that she never received this letter. I have seen the plaintiff in the witness box and her evidence convinced me that she was speaking the truth.
The evidence adduced on behalf of the defendants consists of certain hearsay evidence (which has recently become admissible under the Civil Evidence Act 1968) to the effect that Miss Goodwin had made statements to three, I think, other people to the effect that she, Miss Goodwin, had given this notice to the plaintiff and that she had flown into a temper when she got it, and there was talk about pots and pans being flung about and doors being slammed. These witnesses who deposed to these statements which Miss Goodwin had made were all, in my judgment, witnesses of truth. I think that Miss Goodwin undoubtedly made these statements. Precisely why and how she came to make them I do not know but I was convinced when I saw the plaintiff in the witness box that she was speaking the truth, and I accept her evidence.
Just to complete the facts of this case: in June 1968, the plaintiff was married, and on 21 April 1969 Miss Goodwin died. It was after her death that the question of the severance of joint tenancy came to light, and it came to light in a slightly curious manner. When the plaintiff was going through Miss Goodwin’s papers in the house where they had lived together, she came across a copy of the draft notice of severance which had been sent to Miss Goodwin by her solicitors—either a copy of the draft or the original draft itself—and the plaintiff then handed that to her own solicitors,
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and her solicitors informed the defendants’ solicitors of the existence of that document. Those are the facts as they appear to me, and I must come now to certain questions of law that have been argued.
It is submitted on behalf of the defendants that even if the plaintiff did not actually receive the notice of severance, nevertheless she must conclusively be presumed to have done so, and at this point I refer to two sections in the Law of Property Act 1925. The first is in s 36. The proviso to sub-s (2) of that section is in the following terms:
‘Provided that, where a legal estate (not being settled land) is vested in joint tenants beneficially, and any tenant desires to sever the joint tenancy in equity, he shall give to the other joint tenants a notice in writing of such desire or do such other acts or things as would, in the case of personal estate, have been effectual to sever the tenancy in equity, and thereupon under the trust for sale affecting the land the net proceeds of sale, and the net rents and profits until sale, shall be held upon the trusts which would have been requisite for giving effect to the beneficial interests if there had been an actual severance.’
What I call attention to there are the words: ‘shall give to the other joint tenants a notice in writing.’
The other section is s 196 of that Act. Subsection (4) of that section provides:
‘Any notice required or authorised by this Act to be served shall also be sufficiently served, if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned through the post-office undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered.’
I should mention that, while s 196 refers to registered post, nevertheless, by an Act called the Recorded Delivery Service Act 1962, recorded delivery is equated with registration for the purposes which I am considering.
Counsel for the plaintiff made three submissions about that section. First of all, he pointed out that sub-s (4) refers to notices ‘required or authorised by this Act to be served’, and he pointed out that, under the proviso to s 36(2), a notice severing a joint tenancy is not required to be ‘served’, it is required to be ‘given’; and he submitted that there must be taken to be a distinction between ‘served’ and ‘given’, and that indeed s 196 does draw that distinction, because sub-s (1) of the section provides:
‘Any notice required or authorised to be served or given by this Act shall be in writing.’
For my part, I am unable to accept this distinction which counsel for the plaintiff seeks to draw. In the first place, it seems to me that, where one is considering a notice in writing, there can be no difference between ‘serving’ the notice and ‘giving’ the notice; and secondly, I think that it may be possible to derive some support for that view from s 196(5) which provides:
‘The provisions of this section shall extend to notices required to be served by any instrument affecting property executed or coming into operation after the commencement of this Act unless a contrary intention appears.’
It seems to me it would be very odd if one were, for example, considering a lease which required notice either by lessor to lessee or lessee to lessor, and the efficacy of service was to be determined according to whether the lease provided for the notice being ‘served’ or the notice being ‘given’. I do not think that that distinction can really have any effect.
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Counsel for the plaintiff’s second submission was, if he will allow me to say so, an ingenious one. He pointed to the words in sub-s (4)—and I quote: ‘if that letter is not returned through the post-office undelivered’, and he submitted that the facts of the present case showed that the letter was delivered into the hand of Miss Goodwin; in other words, it was really delivered to the sender, because the solicitors who sent it were Miss Goodwin’s solicitors and her agents for this purpose, and that, since the letter was delivered into the hands of the sender, it was in effect returned through the post office undelivered. Again, I do not feel able to accept that submission. In my view, the words ‘if that letter is not returned through the post-office undelivered’ really refer to the ordinary case of the post office being unable to effect delivery at the address on the letter for some reason or other such as that the addressee has gone away or the house is shut or empty. It does not, in my judgment, apply to a case like the present where the letter has in fact been delivered by the postman at the address to which it was sent.
The third submission which counsel for the plaintiff made was to this effect: that where a section in an Act of Parliament is potentially creating an unjust situation, as would be the case here if the notice is to be taken as having been received by the plaintiff although she never received it, then the Act ought to be construed strictly, and that that involves strict proof that the relevant document—the letter containing the notice of severance, in this case—was in fact served. And counsel pointed out that Mr Bender, who was an assistant solicitor in the firm of solicitors who were Miss Goodwin’s solicitors at this time and who was responsible for dealing with this matter, could not actually prove putting the notice of severance in the envelope with the covering letter before it was sent. In my judgment, the onus of proof on the defendants here is no higher than proof that, on the balance of probabilities, that was done; and I feel no difficulty in reaching the conclusion that, on the balance of probabilities, it was in fact done. For these reasons, I cannot accept counsel for the plaintiff’s submissions on s 196(4).
The question then arises: what is the effect of that section? Here, I think R v Westminster Unions Assessment Committee, ex parte Woodward & Sons is of some importance. It was a case on a different Act, namely the Valuation (Metropolis) Act 1869, but there was a section in that Act—s 65—which dealt with the service of orders and notices under the Act, and that section included the following:
‘They may also be served and sent by post, by a prepaid letter, addressed to such person, or to the office of such body or to their clerk, and, if sent by post, shall be deemed to have been served and received respectively at the time when the letter containing the same would be delivered in the ordinary course of post, and in proving such service or sending it shall be sufficient to prove that the letter containing the notice was properly addressed and prepaid and put into the post.’
A Divisional Court had to consider the effect of that section, and Viscount Reading CJ said ([1917] 1 KB at 837, 838):
‘When the requirements of s 65 have been complied with, does that section create an irrebuttable presumption of due service, so that the prosecutors cannot raise the point that they have not been served with the notice? Sect. 65 of the Act first deals with the form of orders and notices and specifies means whereby they may be served. It continues thus: “They may also be served … ” [The Lord Chief Justice read the latter part of s. 65 and continued:] The assessment committee contended that the natural and ordinary meaning of this enactment is that if there has been sent by post a prepaid letter addressed to the person who is the occupier of the premises to be assessed the statute has been complied with, and the person cannot be heard to say that he has not in
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fact received the notice contained in the letter. On the other hand, the prosecutors contended that the words in their fair and natural meaning do no more than establish a prima facie case of service and are not strong enough to preclude them from proving that in fact the notice never was received by them. It is necessary to decide this point because I am satisfied that a prepaid letter was sent by the overseers within the prescribed time and also that the prosecutors did not in fact receive it … On a consideration of this statute I have come to the conclusion that once there has been proved the sending by post of a prepaid letter properly addressed containing a notice the assessment committee have proved all that is necessary, and that there is an end of any question of service … .
‘A notice prepaid and addressed as directed by s. 65 if sent through the post “shall be deemed to have been served and received respectively at the time when the letter containing the same would be delivered in the ordinary course of post“. That provision applies to a case where in fact the notice has not been received, otherwise it has no meaning. The intention is to treat as a fact something which has not been established as a fact—even something which can be shown not to be a fact. The section continues: “and in proving such service or sending it shall be sufficient to prove that the letter containing the notice was properly addressed and prepaid and put into the post.” In my view, when those conditions have been performed it must be taken as concluded that the notice has been served and received.’
Now, as I read that, that was a conclusion on the construction of the part of s 65 of the Act the court was considering, and that section, in my judgment, is really in pari materia with s 196(4). It is perfectly true that Lord Reading CJ went on to say that his view of the construction was fortified by reference to the whole scheme of the Act but, as I read his judgment, it was based on the construction of that section.
There is also one other case to which I should perhaps refer. It is the recent decision of the Court of Appeal in Hewitt v Leicester City Council. That was a case where a letter containing a notice to treat was sent by recorded delivery service and returned marked ‘gone away’, and the question was whether there had been sufficient service of it. Lord Denning MR, in the course of his judgment, said ([1969] 2 All ER at 804, [1969] 1 WLR at 858):
‘Once it appeared that the letter of 20th May 1965 was returned through the post marked “gone away” then it was quite plain that it was not served at all. We are not bound to “deem” a notice to be served at a particular time, when we know that in fact it was not served at all.’
Of course, I am not dealing with a case where the letter was returned through the post office because it had been unable to effect delivery. If I had been dealing with such a case, s 196(4) would itself have answered the question which the Court of Appeal had to consider in Hewitt v Leicester City Council, because in this case, unlike that case, the Act which I am considering is expressly dependent on the condition ‘if that letter is not returned through the post-office undelivered’. So that I do not think that Hewitt v Leicester City Council really has any relevance to the present case.
In those circumstances, and with some regret having regard to my findings of fact, I feel bound to conclude that the notice of severance, even though never received by the plaintiff, was in fact sufficiently served for the purposes of s 36 of the Law of Property Act 1925, with the consequence that the joint tenancy was severed during the lifetime of Miss Goodwin.
Declaration accordingly.
Solicitors: Beach & Beach (for the plaintiff); Farmar, Miller & Turnsek (for the first defendant); Blount, Petre & Co (for the second defendant).
Jacqueline Metcalfe Barrister.
London Borough of Redbridge v Jaques
[1971] 1 All ER 260
Categories: CRIMINAL; Criminal Law
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 20 OCTOBER 1970
Highway – Obstruction – Obstruction of free passage – Fruit and vegetable stall on highway – Acquiescence by authorities in its presence – Whether constituting licence to obstruct – Highways Act 1959, s 121(1).
The respondent had for several years, with the knowledge of the local authority and without any objection on their part, operated as a fruit and vegetable salesman from a stall erected at the back of a stationary vehicle. The vehicle and stall were stationed on a service road, which was a public highway, in front of a row of shops on Thursday afternoons when, being early closing day, the shops were closed. There was evidence that the public were in no way inconvenienced in their use of the highway. The respondent was charged under s 121(1)a of the Highways Act 1959 with wilfully obstructing the free passage along the highway. He maintained that the local authority’s acquiescence in his activities had in effect given him a licence to trade from this position.
Held – A valid licence could not be given to perform the unlawful act of obstructing the free passage along a highway and should such a licence have been given it could be withdrawn at will, the institution of proceedings against the respondent being such a withdrawal (see p 262 c and d, post).
Notes
For summary proceedings under the Highways Act 1959, see 19 Halsbury’s Laws (3rd Edn) 306–308, paras 487–491, and for cases on the subject, see 26 Digest (Repl) 527–529, 2037–2061.
For the Highways Act 1959, s 121, see 15 Halsbury’s Statutes (3rd Edn) 267.
Case stated
This was a case stated by justices for the North East London Area acting in and for the petty sessional division of Beacontree in respect of their adjudication as a magistrates’ court sitting at the Court House, Great Eastern Road, Stratford, on 25 March 1970. On 31 December 1969 an information was preferred by the appellant, the London Borough of Redbridge (the ‘local authority’), against the respondent, Anthony Francis Jaques, charging that he, on 13 November 1969, without lawful authority or excuse did wilfully obstruct the free passage along the service road in Manford Way, Hainault in the London Borough of Redbridge, a highway, by the parking of a motor vehicle and the erection of a stall-like structure from the rear thereof in the service road contrary to s 121(1) of the Highways Act 1959. The following facts were found. The respondent operated as a fruit and vegetable salesman from a motor vehicle and stall in a stationary position in the service road in Manford Way, Hainault. The respondent was in fact operating there on 13 November 1969. The respondent had, with the knowledge of the local authority, conducted his business in the same position on Thursday afternoons for several years and without prior complaint. The respondent operated there at that time because, for the shops fronting the service road, it was half-day closing. The service road was a public highway (maintainable at public expense).
It was contended by the local authority that on 13 November 1969 the respondent caused an obstruction in the service road at Manford Way, Hainault, by
Page 261 of [1971] 1 All ER 260
the presence of a motor vehicle and a stall-like structure erected from the rear thereof and that the obstruction prevented free access by the public over an area of 4 feet 6 inches wide and 22 feet 6 inches in length, the motor vehicle being 4 feet 6 inches wide and 13 feet long, and the stall-like structure being the same width and 9 feet 6 inches long.
It was contended by the respondent that he had traded from the same position for several years to the knowledge of the local authority and as such he had an implied licence to be there; that prior to 13 November 1969 no complaint about obstruction had been made against him by the local authority and the travelling public were in no way inconvenienced, and to support this contention the respondent produced an article, contained in a local newspaper called ‘The Recorder’ on 29 June 1967, concerning street trading in Manford Way and the fact that the assistant commissioner of police was of the opinion that the police would not be justified in taking proceedings in what amounted to a technicality of unreasonable use merely for the purpose of protecting the interests of shopkeepers from competition by street traders.
The justices were of the opinion that the local authority had conduced to, and condoned, the conduct of the respondent and in effect had given him a licence to trade from this position in the roadway, and accordingly dismissed the information. The appellant now appealed.
G R Bartlett for the local authority.
The respondent appeared in person.
20 October 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the North East London Area sitting at Stratford, who dismissed an information preferred by the appellant, the London Borough of Redbridge (the ‘local authority’), against the respondent, that on Thursday 13 November 1969, without lawful authority or excuse, he did wilfully obstruct the free passage along the service road in Manford Way in the borough, a highway, by the parking of a motor vehicle and the erection of a stall-like structure from the rear thereof in the service road, contrary to s 121(1) of the Highways Act 1959. The respondent is in business as a salesman of fruit and vegetables, and does so from a motor vehicle and a stall. For many years now on a Thursday afternoon, Thursday being early closing day in the borough, he has been wont to go on to this service road, and no doubt fulfil a need. For years he has done this; the police have refrained throughout from taking any proceedings, and the local authority has refrained from taking any proceedings. For some reason which is by no means clear to me, it was decided at long last, on 31 December 1969, to prefer this information.
What was found here was, quite shortly, that the service road was a highway, and that the respondent brought his motor vehicle and stall and erected it on Thursday afternoons, including Thursday 13 November, in respect of which the information was laid. The justices dismissed the information, being of opinion:
‘That the appellant had conduced to, and condoned, the conduct of the respondent and in effect had given him licence to trade from this position in the roadway and we accordingly dismissed the information.’
It is implicit in that that the justices found, and indeed they were bound on the facts to find, that there had been a wilful obstruction of the free passage of the highway. There was no lawful authority or excuse, and it could not be said that the erection of the stall and the parking of the vehicle was in law a reasonable user of the highway, which is there for the free passage of persons and vehicles to and fro. As has been held many times, any erection of a structure which for a period and not merely temporarily prevents the free passage of the public or vehicles to every part of the road is an obstruction.
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One cannot help feeling sorry for the respondent, and as I have said, I have been not at all satisfied as to the real reason for this prosecution. Indeed it may be, as the respondent himself thinks, that it has been as the result of complaints from one of the shopkeepers who had changed his early closing day from a Thursday, and is therefore open on a Thursday; I know not. But when the matter comes before this court, the court is not concerned with the reasonableness of the prosecution. Once the prosecution has been launched and is proceeded with, it is for the courts to determine it according to law. The only question that remains is whether the justices were entitled to say, as they did, that in effect the local authority had granted the respondent a licence. It is enough to say in my judgment that it is quite clear that a valid licence cannot be given to perform an unlawful act. The local authority cannot change the nature of a highway. Once a highway, it is always a highway, and in any event if the local authority did give any permit or licence it can withdraw it at will, and the institution of the proceedings would be a withdrawal.
This was a finding by the justices out of sympathy. I also have every sympathy, but unfortunately we have to administer the law in this respect. I am quite clear here that an offence was proved, and the case must go back to the justices with a direction to convict. The penalty, of course, is a matter for them, but no doubt in all the circumstances the penalty will be minimal.
ASHWORTH J. I agree.
BROWNE J. I agree.
Appeal allowed. Case remitted.
Solicitors: K F B Nicholls, Ilford (for the local authority).
A J De Souza Esq Barrister.
Broome v Cassell & Co Ltd and another
Same v Same
[1971] 1 All ER 262
Categories: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISION
Lord(s): LAWTON J
Hearing Date(s): 26, 27, 28, 29, 30 JANUARY, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17 FEBRUARY 1970
Pleading – Damage – Exemplary damages – Need to plead.
A plaintiff claiming exemplary damages must give warning of this in his pleadings and must also plead the facts on which such claim is based.
Perestrello e Companhia Limitada v United Paint Co Ltd [1969] 3 All ER 479 applied.
Notes
For pleading damage, see 30 Halsbury’s Laws (3rd Edn) 12, 13, paras 25, 26, and for cases on the subject, see 50 Digest (Repl) 29–31, 229–243.
Cases referred to in judgment
Manson v Associated Newspapers Lted [1965] 2 All ER 954, [1965] 1 WLR 1038, Digest (Cont Vol B) 494, 2121a.
Perestrello e Companhia Limitada v United Paint Co Ltd [1969] 3 All ER 479, [1969] 1 WLR 570, Digest Supp.
Ratcliffe v Evans [1892] 2 QB 524, [1891–94] All ER Rep 699, 61 LJQB 535, 66 LT 794, 56 JP 837, 17 Digest (Repl) 77, 17.
Rookes v Barnard [1964] 1 All ER 367, [1964] AC 1129, [1964] 3 WLR 269, Digest (Cont Vol B) 217, 13a.
Page 263 of [1971] 1 All ER 262
Actions
These were consolidated actions for damages for libel and an injunction to restrain further publication by Captain John Egerton Broome RN (retired) against Cassell & Co Ltd, the first defendant, and David Irving, the second defendant, who were the publishers and author respectively of the book The Destruction of Convoy PQ17. In the action the plaintiff recovered £40,000 damages including £25,000 exemplary damages and £1,000 damages in respect of words complained of in proof copies.
In the course of the opening speech for the plaintiff, counsel sought leave to adduce certain evidence which was objected to by counsel for the first defendant and counsel for the second defendant on the ground that the evidence concerned related to the issue of exemplary damages no averment as to which was contained in the pleadings. Lawton J ruled on his issue on 28 January 1970.
David Hirst QC and A J Bateson for the plaintiff.
M E I Kempster QC and G E Adeane for the first defemdant.
Colin Duncan QC and A C Pugh for the second defendant.
17 February 1970. The following judgment was delivered.
LAWTON J in the course of hearing argument gave the following ruling in the absence of the jury. Having regard to the novelty and importance of the point that was raised yesterday I have come to the conclusion that I ought to deliver a short judgment. Towards the end of his opening speech to the jury, counsel for the plaintiff told me that he wanted my ruling whether he was entitled to tell the jury certain facts and to comment on them. The jury then left the court and in their absence counsel told me that he wished to submit that the plaintiff was entitled to exemplary damages because he says the plaintiff’s case came within what Lord Devlin in Rookes v Barnard ([1964] 1 All ER 367 at 410, [1964] AC 1129 at 1226) described as the second category of exceptions to the ordinary rule of law that damages should be awarded as compensation to the victim not as punishment for the tortfeasor.
Counsel for the plaintiff said that at a very late state of the case, as a result of an order for further discovery which had been obtained against the second defendant, documents had been disclosed which went to establish that both defendants had published the book out of which the actions arise knowing that passages in it might be adjudged libellous to the plaintiff, and intending to take the risk that the profits of publication would outweigh the risk of libel litigation. When I asked counsel what kind of evidence he would adduce, he told me that he would seek to put in evidence documents originating from both defendants and also documents which had been sent to them. Difficulties might well arise about the admissibility of some of these documents. I decided that in these circumstances it would be more convenient to rule about admissibility when the documents were produced. In so deciding I followed what is the normal practice in criminal cases tried with a jury and what I believe to be a convenient practice when trying civil cases with a jury. It follows that insofar as questions may arise about the admissibility of some of the evidence relied on counsel should not in any event open such evidence to the jury.
Counsel for the first defendant and counsel for the second defendant objected on a more fundamental ground. They both submitted that it was not open to the plaintiff on the pleadings to claim exemplary damages as the amended statement of claim in the consolidated actions contained no averments which would justify a claim for exemplary damages and without such averments there was no issue of exemplary damages before the court. Paragraph 6 of each of the amended statements of claim reads as follows:
‘By reason of the premises the plaintiff has been brought into hatred ridicule and contempt and has thereby suffered damage.’
Page 264 of [1971] 1 All ER 262
Counsel for the first defendant submitted that a claim for exemplary damages must be founded on fact which brings the claim within one or other of the exception categories specified in Rookes v Barnard, and that when no such facts are pleaded a claim for libel should proceed on the basis that the plaintiff is claiming no more than compensation for the damage to his reputation and for the grief and annoyance he has himself suffered.
The object of pleadings is to enable: first, the parties to know what case is being made by the other side; and, secondly, for the court to know what are the issues to be tried. The days when pleadings were a form of catch-as-catch-can are over. If there was any doubt about this amongst practitioners, which there ought not to have been, these doubts were allayed by the Court of Appeal in Perestrello e Companhia Limitada v United Paint Co Ltd. The judgment of the court in that case was delivered by Lord Donovan. The question arose as to the way in which damage had been pleaded and in the course of his judgment Lord Donovan said ([1969] 3 All ER at 485, 486, [1969] 1 WLR at 579):
‘Accordingly, if a plaintiff has suffered damage of a kind which is not the necessary and immediate consequence of the wrongful act, he must warn the defendant in the pleadings that the compensation claimed will extend to this damage, thus showing the defendant the case he has to meet and assisting him in computing a payment into court. The limits of this requirement are not dictated by any preconceived notions of what is general or special damage but by the circumstances of the particular case.’
Then he quoted from Bowen LJ in Ratcliffe v Evans ([1892] 2 QB 524 at 529, [1891–94] All ER Rep 699 at 702): ‘The question to be decided does not depend on words, but is one of substance’. Towards the end of his judgment Lord Donovan said ([1969] 3 All ER at 486, [1969] 1 WLR at 580):
‘What amounts to a sufficient averment for this purpose will depend on the facts of the particular case, but a mere statement that the plaintiffs claim “damages” is not sufficient to let in evidence of a particular kind of loss which is not a necessary consequence of the wrongful act and of which the defendants are entitled to fair warning.’
Applying those principles to this case, the defendants, and each of them, would seem to be entitled to fair warning of what was going to be claimed and to have the relevant facts pleaded. Counsel for the plaintiff replied that in his wide experience of this class of litigation this was the first time that anyone had suggested that the facts on which a claim for exemplary damages was based should be pleaded. Further, he called my attention to Manson v Associated Newspapers Ltd, in which the trial judge left the issue of exemplary damages to the jury without, so it seems, from the report, any specific facts having been pleaded. It seems probable that in that case no one invited the judge’s attention to the point which is being argued before me.
I adjudge that evidence on this issue cannot be led in the absence of facts relevant to it being pleaded. The House of Lords in Rookes v Barnard has clarified the law and has decreed that exemplary damages are an exceptional form of award. In these circumstances anyone who wishes to say that he is making an exceptional kind of claim for damages and not a normal one should say so in his pleading.
Leave to amend pleadings.
Solicitors: Theodore Goddard & Co (for the plaintiff); Oswald Hickson, Collier & Co (for the first defendant); Rubinstein, Nash & Co (for the second defendant).
Janet Harding Barrister.
Lotus Ltd v British Soda Co Ltd and another
[1971] 1 All ER 265
Categories: LAND; Property Rights
Court: CHANCERY DIVISION
Lord(s): PENNYCUICK V-C
Hearing Date(s): 4, 5, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 23, 24, 25, 26, 29, 30 JUNE, 1, 2, 3, 6, 7, 17, 20, 21, 22, 23, 24, 29 JULY 1970
Land – Support – Natural right of support – Withdrawal of support of underlying solid salt strata – Dissolution of salt by natural water and extraction by brine pumping – Whether loss of support occasioned by removal of liquefied strata actionable.
Injunction – Nuisance – Continuing threat of damage – Only effective remedy – Suspension.
The defendant companies operated salt works on land adjacent to that of the plaintiff company. The pumping of brine from certain boreholes resulted in the subsidence of the plaintiff company’s land and factory premises. The threat of immense damage was a continuous one while pumping was maintained, since the subsidence was due to the gradual solution of the salt beds beneath the plaintiff company’s land. The plaintiff company sought damages and an injunction to restrain the operations of the defendant companies.
Held – (i) As there was no significant difference in principle between the removal in specie of a support such as wet sand and an operation, as in the present case, which consisted first, in causing a solid support to liquefy, and then in removing the resulting liquid, the defendant companies were liable to the plaintiff company for the removal of its right to support, the rule that an action will not lie for damage caused by the pumping of water only, having no application to either such operation (see p 269 j to p 270 a, post).
Dictum of Sir Nathaniel Lindley MR in Jordeson v Sutton, Southcoates and Drypool Gas Co [1899] 2 Ch 217 applied.
Popplewell v Hodkinson [1861–73] All ER Rep 996 distinguished.
(ii) An injunction would issue to restrain the operations of the defendant companies, because in the circumstances of the continuing threat of catastrophic damage to the plaintiff company’s premises, it was the only effective remedy, since damages would afford no protection against any loss resulting if the threat were to materialise (see p 270 d, post); further, the operation of the injunction would not be suspended either to allow the defendant companies to wind up their business, or pending an appeal (see p 270 f, post); the injunction would, however, he suspended for 14 days to allow the defendant companies time to attend to the future care and maintenance of the boreholes (see p 270 g, post).
Notes
For the natural right to support of land, see 12 Halsbury’s Laws (3rd Edn) 603–606, paras 1311–1316, and for cases on the subject, see 19 Digest (Repl) 178–183, 1196–1224.
For subsidence damage caused by brine pumping, see 26 Halsbury’s Laws (3rd Edn) 376–378, paras 795, 796.
Cases referred to in judgment
Cabot v Kingman (1896) 166 Mass Rep 403.
Davis v Treharne (1881) 6 App Cas 460, 50 LJQB 665, 19 Digest (Repl) 180, 1209.
Jordeson v Sutton, Southcoates and Drypool Gas Co [1898] 2 Ch 614; affd CA [1899] 2 Ch 217, 68 LJCh 457, 80 LT 815, 63 JP 692, 19 Digest (Repl) 182, 1221.
Popplewell v Hodkinson (1869) LR 4 Exch 248, [1861–73] All ER Rep 996, 38 LJEx 126, 20 LT 578, 19 Digest (Repl) 182, 1219.
Salt Union Ltd v Brunner, Mond & Co [1906] 2 KB 822, 76 LJKB 55, 95 LT 647, 19 Digest (Repl) 182, 1224.
Page 266 of [1971] 1 All ER 265
Cases also cited
Acton v Blundell (1843) 12 M & W 324.
A-G v Salt Union Ltd [1917] 2 KB 488.
Bleachers Association Ltd v Chapel-en-le-Frith Rural District Council [1933] Ch 356, [1932] All ER Rep 605.
Bradford Corpn v Pickles [1895] AC 587, [1895–99] All ER Rep 984.
Charrington v Simons & Co Ltd [1970] 2 All ER 257, [1970] 1 WLR 725.
Chasemore v Richards (1859) 7 HL Cas 349, [1843–60] All ER Rep 77.
Dalton v Angus & Co (1881) 6 App Cas 740, sub nom Public Works Comrs v Angus & Co, Dalton v Angus & Co [1881–85] All ER Rep 1.
English v Metropolitan Water Board [1907] 1 KB 588.
Fletcher v Birkenhead Corpn [1907] 1 KB 205, [1904–07] All ER Rep 324.
Gill v Westlake [1910] AC 197.
Grand Junction Canal Co v Shugar (1871) 6 Ch App 483.
Langbrook Properties Ltd v Surrey County Council [1969] 3 All ER 1424, [1970] 1 WLR 161.
Trinidad Asphalt Co v Ambard [1899] AC 594.
Action
The plaintiff company, Lotus Ltd, sought damages from, and an injunction to restrain either or both of the defendant companies, British Soda Co Ltd and British Salt Ltd, from pumping brine from boreholes, which could result in subsidence of its land. The facts are set out in the judgment.
S Brown QC, G A Grove QC and E F R Whitehead for the plaintiff company.
P R Oliver QC and John Ellison for the defendant companies.
Cur adv vult
29 July 1970. The following judgment was delivered.
PENNYCUICK V-C. By this action the plaintiff company, seeks injunctions against the defendant companies restraining them from pumping brine from certain boreholes, which could result in subsidence of the surface of the plaintiff company’s land, and damages.
The plaintiff company carries on the business of a shoe manufacturer. It owns a large piece of land lying on either side of the Sandon Road, in the borough of Stafford. I will refer to that as ‘the Lotus land’. On the south-east side of the Sandon Road stands its main factory, a very substantial building where about 1,300 workpeople are employed. On the north-west of Sandon Road there stood, until their demolition, a canteen building known as Brook House and Brook Hall and a club. The first defendant company carries on business as a producer of salt. Until November 1969, it owned certain land to the north of the Lotus land. On this land there are three boreholes for the extraction of salt, known as the Sandon Road borehole, the Common Works borehole, and the Blakeford Lane borehole. From about 1959 until November 1969, the first defendant company operated the Sandon Road and Common Works boreholes. In November 1969, the first defendant company sold the land containing the Sandon Road borehole to the second defendant company, an allied company. The second defendant company has since then operated the Sandon Road borehole. The first defendant company has retained the Common Works borehole, and continued to operate it until February 1970. This borehole was then closed down, but the first defendant company keeps it in working condition for use as and when it thinks fit. The Blakeford Lane borehole is still owned by the first defendant company, but has not been operated at any material time. The amount of extraction is very large, about 240,000 gallons of brine a day, representing about 100,000 tons of salt a year, until the Common Works borehole was closed.
Salt had been worked in the Stafford area in the middle ages, but working had been discontinued before the 19th Century. Then the extraction of salt in the area was recommenced about 1893. The defendant companies are now the only producers of salt in the area. There are no other significant mineral operations in the area.
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From 1940 or so onwards, damage apparently due to subsidence occurred in an area lying to the south of the Lotus land. The buildings damaged included a hospital, a prison, and a row of houses in Crooked Bridge Road. Many of the buildings had to be demolished. From about 1960 onwards, serious damage began to develop in the buildings on the Lotus land to the north-west of Sandon Road. In the event, Brook House had to be demolished in 1962; Brook Hall and the club, quite a new building, in 1967. Tennis courts to the north of the club have fallen away at one side. From about 1965, damage began to develop in the main factory, which fronts Sandon Road on the opposite side. Large and important parts of the building have become unusable.
The plaintiff company consulted various experts on the cause of the damage to the north-west of the Sandon Road, and more than one explanation was given. Then, in 1967, as damage continued to develop in the main factory building, the plaintiff company consulted the firm of Messrs K Wardell & Partners, consulting mining engineers. After prolonged experiments, Mr Wardell and Mr Malkin of that firm reached and maintained the view that the damage was caused by subsidence due to the solution of the salt beds beneath the Lotus land, this solution in its turn being due to what is called ‘wild brine pumping’ by the defendant companies at the Sandon Road and Common Works boreholes. I refer collectively to the defendant companies. Nothing turns on the particular transactions which have resulted in the transfer of one borehole from the first to the second defendant company. Wild brine pumping, so far as now material, consists in the extraction by pumping of saturated brine resulting from the dissolution of rock salt by water, the effect of the extraction being that further water comes in and dissolves further salt; the resulting brine is then pumped away, and so on, indefinitely.
In the event, after prolonged correspondence, the writ in this action was issued on 26 February 1969. The plaintiff company moved for an interlocutory injunction, which was granted by Goff J on 3 December 1969. On 6 February 1970, the Court of Appeal discharged this injunction, on the ground that the action raised issues of fact of a kind which made interlocutory relief on affidavit evidence inappropriate, and directed a speedy trial. The action came on for hearing before me on 3 June, and was heard over some six weeks, with full examination and cross-examination of the witnesses on either side, the most important of whom were experts either in the field of geology or in that of hydraulic engineering. The action raises a single basic issue of fact, namely, has the damage to the buildings on the Lotus land (which damage is not itself in dispute) been caused by subsidence attributable to pumping at the Sandon Road and Common Works boreholes? In the nature of things, this issue turns in great part on the proper inference as to the working of subterranean forces to be drawn from observed phenomena. There is relatively little difference on particular matters of fact. [His Lordship then referred to the volume of evidence and continued:] The burden of proof lies on the plaintiff company. If the evidence given on behalf of the plaintiff company fails to establish such a nexus between the damage and the pumping as is in itself, and quite apart from other possible explanations, sufficient to make the pumping appear to be the probable cause of the damage, that is the end of the matter. If it establishes such a nexus, then I must consider whether the evidence given on behalf of the defendant companies establishes some equally probable or more probable cause of the damage. If the issue of fact is determined in favour of the plaintiff company, then one must consider a question of law, namely whether damage caused in this way is actionable. Finally, should the plaintiff company succeed on the issues of fact and law, one must consider whether a remedy by way of injunction is appropriate. Plainly, the plaintiff company would be entitled to damages.
[His Lordship then considered the evidence adduced by the plaintiff company and observed that it raised an overwhelming inference that the defendant companies’ pumping operations were the cause of the subsidence of the plaintiff company’s
Page 268 of [1971] 1 All ER 265
land. His Lordship proceeded to consider the defendant companies’ evidence and concluded that it did not displace the inference raised by that of the plaintiff company. His Lordship then continued:] I conclude that the plaintiff company has established its case on the facts. It remains to consider the law. The general principle governing the right to support is not in dispute: see Davis v Treharne ((1881) 6 App Cas 460 at 466), per Lord Blackburn:
‘I think it must be taken as perfectly settled ground that as of common right the surface land has a right to be supported by subjacent strata of minerals.’
So there is a cause of action if the subjacent support is removed. In Jordeson v Sutton, Southcoates and Drypool Gas Co, this principle was applied by the Court of Appeal to the removal of a wet sand foundation by operations which caused the sand to run. The headnote reads:
‘The plaintiff was the owner of land with houses on it. The adjoining land belonged to the defendants, a gas company incorporated by special Act, with power to purchase land by agreement only, and subject to the provisions of the Gasworks Clauses Acts, 1847 and 1871. Under their statutory powers the defendants proceeded to excavate their land for the purpose of erecting a gasometer. In so doing they penetrated an underground stratum of quicksand, or sand loaded with stagnant water, geologically known as “running silt”, which extended under the plaintiff’s land as well as their own, the silt or sand largely preponderating over the water. In draining their excavation the defendants withdrew a large quantity of the running silt from under the plaintiff’s land and thus caused a subsidence of the surface with consequent structural injury to his houses. The liability of the defendants to proceedings for any “nuisance” caused by them in the execution of their works was preserved by s. 9 of the Gasworks Clauses Act, 1871 … Held, also, by Lindley M.R. and Rigby L.J., that, on their view of the facts, the plaintiff’s land was supported, not by a stratum of water, but by a bed of wet sand or running silt; and that, as the defendants had caused the subsidence of the plaintiff’s land by withdrawing this support they had committed an actionable nuisance at common law entitling the plaintiff to damages: the decision in Popplewell v. Hodkinson, being inapplicable as dealing only with support by water: But held, by Vaughan Williams L.J., [dissenting] that no nuisance giving a right of action had been proved, because, upon his view of the facts, the subsidence had been caused merely by the withdrawal, through the defendants’ draining operations on their own land, of subterranean water-support of the plaintiff’s land; and that, on principle as well as on the authority of Popplewell v. Hodkinson, the withdrawal of subterranean water-support from a neighbour’s land in the course of draining one’s own land, even though it damages the neighbour’s land, gives him no cause of action.’
Then there is this passage in the judgment of Sir Nathaniel Lindley MR ([1899] 2 Ch at 238–240):
‘First, as to the facts. No borings were made in the plaintiff’s land, but it was not contended that in its natural state the land contained a stratum of clear water resting on a bed of sand. The running silt was a bed of wet sand, the amount of water in it varying from time to time, according to the rainfall; but in its ordinary state, if cut through, its equilibrium would be disturbed, and it would run or flow down where cut through if not prevented from so doing. An excavation cut into or through it would disturb its equilibrium for
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some distance all round; and the conclusion at which I have arrived from the evidence is that the operations of the defendants, carefully and skilfully conducted as they were, consisted in removing large quantities of silt from their own land and in pumping on their own land whatever they could get away by pumping; and that the combined effect of both operations was to disturb the equilibrium of the wet sand underneath the plaintiff’s houses and to cause such sand to shift its place and move towards the excavation made by the defendants. The plaintiff’s houses were supported by a bed of wet sand and not by a stratum of water, and they have been let down by a shifting of such sand caused by the removal by the defendants of sand and water from their own soil. This is also the conclusion at which North J. ([1898] 2 Ch 614) arrived, if I understand him rightly. I do not think it necessary to examine in detail the voluminous evidence bearing on this point, all of which I have studied with care, and the evidence of the plaintiff’s witnesses is not, in my opinion, displaced by the defendants’ witnesses. In this view of the evidence it is unnecessary for me to decide whether, if the defendants had done nothing more than pump underground water from their own land and thereby let down the plaintiff’s houses, an action could have been maintained against them. Popplewell v. Hodkinson looks like and has generally been regarded as an authority that no action will lie in such a case. But I am not satisfied that this broad question can be considered as finally settled by that or any other decision. The question involves very important considerations. Two conflicting rights have to be reconciled—namely, the right to support and the right to pump water. It is not necessary to decide which is to give way to the other. I leave the question where it is. I shall assume in the defendants’ favour that an action will not lie for damage caused by pumping water only. They have done more, and what they have done is, in my opinion, an actionable nuisance at common law. If this point is decided in favour of the plaintiff, the defendants do not quarrel with the damages assessed. The only case I know of in which the legal consequences of cutting through quicksand have been considered is the American case of Cabot v. Kingman, to which Mr. Haldane referred us. The Court was the Supreme Court of Massachusetts, and the majority of four to three adopted the conclusion which I have expressed. The grounds of their opinion are given … and I cannot conclude my own judgment better than reading what I there find. Field C.J. said ((1896) 166 Mass Rep at 405):—“Whatever may be true of percolating waters, we think that the defendants had no right to take away the soil of the plaintiff in land which they had not taken under the statutes, and that it is immaterial that the soil was removed by means of pumps from the trench into which it had fallen by its own weight, or had been carried by percolating water. We are unable to distinguish the case from one where the soil falls in from the surface in consequence of an excavation in the adjoining land. The plaintiff, if the facts be as he offered to prove, has been deprived of the lateral support to his land, in consequence of which the quicksand has run from under the surface of his land into the trench, and has been removed by means of pumps, and this has caused the surface to settle and crack. It was the duty of the defendants to prevent this in some manner, if they did not take the plaintiff’s land“.’
That passage is, of course, a passage from a foreign judgment, but it is cited with approval by Sir Nathaniel Lindley MR.
It seems to me that in principle the decision in the case which I have just cited covers the present case. I see no significant difference in principle between the removal in specie of a support such as wet sand and an operation which consists, first, in
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causing a solid support to liquefy and then removing the resulting liquid. The principle laid down in Popplewell v Hodkinson, assuming it to be well founded, is clearly not applicable to the latter, any more than to the former operation. I was referred to Salt Union Ltd v Brunner, Mond & Co, where the action was based on the removal of salt by pumping, and not on any resulting subsidence. The judgment contains one or two rather tantalising dicta with reference to subsidence, but I do not think that these dicta take the matter any further. I was referred to one or two other authorities, But I do not think that these are of any real assistance. On the above findings of fact and law, the plaintiff company is entitled to relief.
[Having heard submissions on the nature of the relief to be granted, his Lordship continued:] I have now to decide whether, in addition to damages, to grant an injunction. On the facts as I have found them, there is no doubt that there is here a continuing threat to the plaintiff company’s factory. It is said on the other side that, although the threat continues, the actual damage which has been observed during the part year or so is relatively slight. That I think is so. The fact remains that there is here a continuing threat, and the threat is of such a kind that, should it eventuate, the consequences to this factory may well be catastrophic. It seems to me that, in those circumstances, I have really no option but to grant an injunction. It is the only effective remedy, and it is perfectly clear that damages would not be a sufficient remedy to the plaintiff company. They would afford no protection against loss resulting, should this continuing threat materialise.
Then comes the question: should the injunction be made operative immediately, or should it be suspended? Counsel for the defendant companies invites me to suspend the injunction for a variety of alternative terms. One is a long period, which he puts at 18 months, in order that the defendant companies may wind up their business in Stafford and make alternative arrangements. That stay would be with liberty to make any further application. I do not think that it can be right to do that, having regard to the continuance of the threat and the gravity of the loss which would result, should the threat materialise. Then it is said that I should suspend the injunction pending an appeal; in other words, that there should be a stay of execution as regards the injunction. I am clear that I ought not to do that in this case. If a stay is to be sought, it must I think be sought in the Court of Appeal. I do not overlook the difficulties which arise from the imminence of the long vacation, but I do not think that it would be right to suspend this injunction for two or three months for that reason. If the defendant companies are not content with that position, they must take whatever steps are open to them during the vacation.
Finally, there is a shorter and rather different point, that the injunction might properly be suspended for a short time, simply in order that the defendant companies can place their Stafford boreholes and the pumping station on a care and maintenance basis, so that they will not deteriorate for the future. That I think I ought to allow but I think that the time must be a very short one. I would mention that, although the possibility of continuing contracts and so forth has been mentioned, there is no evidence before me, or statement, as to any particular contracts or other matters of that kind. I think that I cannot usefully do more than suspend this injunction for 14 days. [His Lordship then conferred with counsel as to the terms of the injunction.]
Injunction granted.
On 30 July the Court of Appeal extended the period of suspension of the injunction to 28 days.
Solicitors: Wedlake, Letts & Birds agents for Kent, Jones & Done, Stoke-on-Trent (for the plaintiff company); Linklaters & Paines (for the defendant companies).
Richard J Soper Esq Barrister.
Inland Revenue Comrs v Wachtel
[1971] 1 All ER 271
Categories: TAXATION; Other Taxation: TRUSTS
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 16, 17, 20, 21 JULY 1970
Surtax – Settlement – Settlor person deemed to have made settlement – Indirect provision of funds for purposes of settlement – Income Tax Act 1952, s 411(2).
Surtax – Settlement – Settlor retaining interest – Application of income for settlor’s benefit – Payment direct or indirect to settlor – Bank overdraft arranged by trustees of settlement to purchase investment – Separate deposit by settlor with bank as collateral – Overdraft reduced by trust income – Settlor’s deposit reduced pro tanto – Income Tax Act 1952, ss 405 and 411(2).
On 4 April 1960, the taxpayer made a settlement of £1,000 on his children. On the following day, the trustees of the settlement contracted to buy the whole of the issued shares of an investment company for £7,691. An arrangement was made with a bank to advance to the trustees a sum sufficient to pay for the shares, on the basis that the taxpayer would guarantee the trustees’ overdraft and would place on deposit with the bank an amount equal to the overdraft. It was agreed that interest on the trustees’ overdraft would be limited to 1 per cent and that no interest would be paid on the amount deposited with the bank in support of the trustees’ overdraft. The guarantee in favour of the bank was signed by the taxpayer on 22 March 1960 and so before the date of the settlement. The bank stipulated that the income of the trust should be applied to reduce the trust’s indebtedness to the bank and that the taxpayer’s deposit could be reduced accordingly. The taxpayer was assessed to surtax on the footing that the trust income applied in reducing the overdraft was income applied for the taxpayer’s benefit as settlor within the meaning of ss 405a and 411(2)b of the Income Tax Act 1952 or, alternatively, that the sums withdrawn from deposit by the taxpayer were capital sums paid directly or indirectly to the taxpayer within s 408c of the 1952 Act.
Page 272 of [1971] 1 All ER 271
Held – (i) On the true construction of s 411(2), the taxpayer was the settlor of the whole fund, and not merely of the £1,000 originally settled, because the fund could not have been provided without his assistance, and the trustees were only able to borrow the necessary funds, virtually free of interest, as a result of the taxpayer’s depositing his money and foregoing the interest thereon (see p 279 c, post).
(ii) The payments of trust income by the trustees to the bank released the taxpayer’s deposit pro tanto; accordingly, the income of the trust was indirectly applied for the settlor’s benefit within s 405(2) (see p 279 d to f, post).
Jenkins v Inland Revenue Comrs [1944] 2 All ER 491, and dictum of Pennycuick J in Muir v Inland Revenue Comrs [1966] 1 All ER at 305 applied.
Per Goff J. The payments by the trustees in reduction of their overdraft, although capital payments, were not made directly or indirectly to the settlor within s 408 of the 1952 Act, since the bank was not in law accountable to the settlor (see p 282 j, post).
Dictum of Lord Normand in Potts’ Executors v Inland Revenue Comrs [1951] 1 All ER at 82 applied.
Notes
For settlements where the settlor retains an interest, see 20 Halsbury’s Laws (3rd Edn) 583–585, paras 1139–1143, and for cases on the subject, see 28 Digest (Repl) 292–294, 1279–1287.
For capital sums paid to the settlor treated as his income, see 20 Halsbury’s Laws (3rd Edn) 586, 587, paras 1147–1150.
For the Income Tax Act 1952, ss 405, 408 and 411, see 31 Halsbury’s Statutes (2nd Edn) 382, 388. In relation to 1970–71 and subsequent years of assessment, the Income Tax Act 1952 has been repealed by the Income and Corporation Taxes Act 1970, and ss 405, 408 and 411 of the 1952 Act have been replaced by ss 447, 451 and 454, respectively, of the 1970 Act.
Cases referred to in judgment
Bulmer v Inland Revenue Comrs (and related appeals) [1966] 3 All ER 801, [1967] Ch 145, [1966] 3 WLR 672, 44 Tax Cas 1, Digest (Cont Vol B) 417, 1278b.
De Vigier v Inland Revenue Comrs [1964] 2 All ER 907, [1964] 1 WLR 1073, 32 Tax Cas 24, Digest (Cont Vol B) 409, 663a.
Jenkins v Inland Revenue Comrs [1944] 2 All ER 491, 171 LT 355, 26 Tax Cas 265, 28 Digest (Repl) 281, 1248.
Muir v Inland Revenue Comrs [1966] 1 All ER 295, [1966] 1 WLR 251; affd CA [1966] 3 All ER 38, [1966] 1 WLR 1269, 43 Tax Cas 367, Digest (Cont Vol B) 419, 1287b.
Potts’ Executors v Inland Revenue Comrs [1951] 1 All ER 76, [1951] AC 443, 32 Tax Cas 211, 28 Digest (Repl) 287, 1268.
Vestey’s (Lord) Executors v Inland Revenue Comrs, Vestey’s (Lord) Executors v Colquhoun (Inspector of Taxes) [1949] 1 All ER 1108, 31 Tax Cas 1, 28 Digest (Repl) 297, 1299.
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Case stated
This was a case stated under the Income Tax Management Act 1964, s 12(5), and the Income Tax Act 1952, s 64, by the Commissioners for the Special Purposes of the Income Tax Acts.
1. At a meeting of the commissioners, held on 2 April 1968, Saul Wachtel (‘the taxpayer’) appealed against the following assessments to surtax; 1960–61 (further) £1,559; 1961–62 (further) £1,647; 1962–63 (main) £3,314; and 1963–64 (main) £3,328.
2. Shortly stated the question for decision was whether the amounts which were released from the security for a guarantee, consisting of the deposit account of the taxpayer and subsequently the deposit account of Saul Wachtel Ltd with the District Bank Ltd, were to be treated as net income of the taxpayer for the purpose of determining his total income for surtax purposes.
3. Evidence was given by the taxpayer and by Mr Maurice Hoff, AACCA, of Haffner, Hoff & Co, accountant to the taxpayer and auditor to Saul Wachtel Ltd.
[Paragraph 4 listed the documents proved or admitted before the commissioners.]
5. As a result of the evidence both oral and documentary, the following facts were proved or admitted: (1) In 1960 the taxpayer, who was in business on his own account as a textile merchant under the style of the British Textile Co, was minded to make provision for his two infant children, Jennifer Brenda, then aged 12, and David Michael Peter, then aged seven. On 4 April 1960, the taxpayer executed a deed of settlement whereby he settled a trust fund of £1,000, with provision for the possibility of later additions of money or investments to the trust fund, on two trustees, Herman Wachtel and Harry Leon, for the benefit of his two children the living and of any further children who might be born to him before 10 June 1973. Mr Harry Leon died on 25 December 1961, and on 25 June 1962, Leopold Calish was appointed as a trustee in his place. (2) On 5 April 1960, an agreement was executed between Ellis Bor and his wife, Alisa Bor, as vendors and the trustees as purchasers whereby the vendors, who held the whole of the issued shares of an investment company, Ebor Investments Ltd (hereinafter called ‘Ebor’), agreed to sell and the purchasers agreed to buy the said shares for £7,500, plus or minus certain adjustments, which in the event brought the actual purchase price up to £7,690 14s 2d. (3) As the trustees had no money with which to pay for the shares, apart from the £1,000 settled on them by the deed of settlement of 4 April 1960, an arrangement was made with the District Bank Ltd (‘the bank’) under which the bank would open a current account in the names of the trustees and would advance to them an amount sufficient to enable them to pay for the shares, on the basis that the taxpayer would guarantee the trustees’ overdraft and would place on deposit with the bank an amount sufficient to cover the overdraft. Copies were produced of a guarantee in favour of the bank signed by the taxpayer on 22 March 1960 and of an authority to the bank signed by the taxpayer on the same day, authorising the bank to hold as security for the guarantee, and to apply in or towards satisfaction of such guarantee, any sum or sums of money at any time standing to his credit with the bank. (4) It was agreed between the taxpayer and the bank that the rate of interest to be charged by the bank on the amount from time to time of the trustees’ overdraft would be limited to 1 per cent and that no interest would be payable by the bank on the amount deposited with the bank by the taxpayer in support of his guarantee of the overdraft. In arriving at this agreement the bank stipulated that the income of the trust should be applied to reduce its indebtedness to the bank and that the taxpayer’s deposit could be reduced accordingly. (5) The trustees’ current account with the bank was opened on 5 April 1960, with a debit of £7,500, which was used to implement the share purchase agreement of that date. On the same date the £1,000, settled by the deed of settlement of 4 April 1960, was paid into the current account, leaving an overdrawn balance of £6,500 in that account, and a deposit account with the bank was opened by the taxpayer with a deposit of £6,500. On 22 April 1960, a further sum of £190 14s 2d was placed in the deposit account, and on 25 April
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1960, £190 14s 2d was disbursed from the trustees’ current account in payment of the balance of the purchase price of the shares in Ebor, due under the agreement of 5 April 1960. Thus, at the conclusion of business on 25 April 1960, the trustees’ current account was overdrawn £6,690 14s 2d, and the taxpayer’s deposit account was in credit to the same amount. (6) On 4 April 1961, 31 October 1961 and 28 March 1962, sums of £1,009 12s 3d, £504 16s 1d and £504 16s 1d respectively, representing dividends paid on the shares in Ebor, were credited to the trustees’ current account with the bank, reducing correspondingly the overdrawn balance of the account. On the same dates amounts equivalent to the sums were withdrawn from the taxpayer’s deposit account with the bank. At the conclusion of business on 28 March 1962, the overdrawn balance of the trustees’ current account was £4,671 9s 9d, and the taxpayer’s deposit account was in credit to the same amount. (7) On 28 March 1961, Saul Wachtel Ltd was incorporated as an exempt private company with an authorised share capital of £5,000. The subscribers to the memorandum and articles of association and the first directors of the company were the taxpayer and his wife, Thelma Wachtel. The issued share capital of the company was £1,000, divided into 1,000 ordinary shares of £1 each, of which at all material times 500 were held by the taxpayer and 500 by his wife. The company took over the business of the British Textile Co. The incorporation of the company and the acquisition by it of the business were effected for reasons unconnected with the settlement. (8) On 22 June 1962, a guarantee in favour of the bank was signed by the taxpayer for and on behalf of Saul Wachtel Ltd, and on 1 February 1963, an authority to the bank was signed by the taxpayer for and on behalf of the company. The guarantee and authority were in terms similar to those of the guarantee and authority signed by the taxpayer on 22 March 1960. It was the taxpayer’s intention that Saul Wachtel Ltd should step into his shoes as guarantor to the bank of the trustees’ overdraft. (9) On 29 June 1962, Saul Wachtel Ltd opened a deposit account (‘deposit account 2’) with the bank with a payment of £4,696, the sum being approximately equivalent to the overdrawn balance of the trustees’ current account, which had remained at £4,671 9s 9d since 28 March 1962 plus £24 11s, a sum equal to the amount debited to the current account on 20 June 1962 in respect of interest charged to the current account by the bank. On 6 July 1962, the taxpayer withdrew from his deposit account the whole of the credit balance therein amounting to £4,671 9s 9d, and closed the account. (10) From July 1962 onwards, from time to time dividends on the shares in Ebor continued to be paid and to be credited to the trustees’ current account and interest on the overdrawn balance of the account continued to be debited thereto by the bank. On, or very shortly after each occasion when the account was so credited or debited, a corresponding amount was withdrawn from or paid into, as the case might be, the Saul Wachtel Ltd deposit account 2. At 31 January 1964, the overdrawn balance of the trustees’ current account had been reduced to £3,024 15s 8d, and the credit balance in the Saul Wachtel Ltd deposit account 2 stood at the same figure. No further payment into or from either of the accounts was made between 31 January 1964 and 5 April 1964. [Sub-paragraph (11) related to bank statements and a comparative schedule of accounts copies of which were annexed to the case.]
6. It was contended on behalf of the Crown that: (1) the deed of settlement executed by the taxpayer on 4 April 1960, together with the provision by him and subsequently by Saul Wachtel Ltd of cash deposits as security for their respective guarantees of the overdraft on the trustees’ current account, constituted an ‘arrangement’ and was therefore a settlement of which the taxpayer, who had provided funds directly and indirectly for the purpose of the settlement, was the settlor within the meaning of s 411(2) of the Income Tax Act 1952, for the purposes of ss 405 and 408 of the Act; (2) under the arrangement made with the bank, the application by the trustees of income arising under the settlement in repayment of the low interest rate loan from the bank was an application which benefited and was intended to
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benefit the taxpayer, in that it entitled him, and later Saul Wachtel Ltd, to withdraw an equivalent amount from the sums deposited with the bank to secure the trustees’ overdraft, and that by virtue of s 405 the sums withdrawn therefore fell to be treated as the income of the taxpayer; (3) alternatively, the said sums withdrawn were capital sums paid directly or indirectly by the trustees of a settlement to the taxpayer as settlor, or to his wife, by way of repayment of loans, and that by virtue of s 408 the sums withdrawn fell to be treated as the income of the taxpayer; (4) that the appeal should be dismissed and the assessments confirmed.
7. It was contended on behalf of the taxpayer that: (1) the deed of settlement executed by him on 4 April 1960, together with the provision by him, and subsequently by Saul Wachtel Ltd, of cash deposits as security for their respective guarantees of the overdraft on the trustees’ current account, did not constitute a settlement of which the taxpayer was the settlor within the meaning of s 411(2) of the Income Tax Act 1952; (2) alternatively, if there was a settlement within the meaning of s 411(2), the taxpayer was not the settlor beyond the amount of £1,000 which he settled by the deed of 4 April 1960 and that insofar as further sums were provided for the purposes of the settlement, they were not provided directly or indirectly by the taxpayer, but were provided by the trustees by means of borrowing from the bank; (3) if there was a settlement of which the taxpayer was the settlor within the meaning of s 411(2) of the Income Tax Act 1952, the moneys deposited with the bank first by the taxpayer and later by Saul Wachtel Ltd, were not in either case property comprised in the settlement; (4) if there was a settlement of which the taxpayer was the settlor within the meaning of s 411(2) of the Income Tax Act 1952: (i) the only income arising under the settlement was the dividends on the shares in Ebor; (ii) the taxpayer did not have an interest in such income nor did he have an interest in any property comprised in the settlement; (iii) no income or property arising under or comprised in the settlement was payable to or applicable for the benefit of the taxpayer or his wife in any circumstances and none had been so paid or applied; and (iv) accordingly, s 405 of the Income Tax Act 1952 did not apply; (5) the sums withdrawn from the taxpayer’s deposit account and subsequently from the Saul Wachtel Ltd deposit account 2 were not capital sums paid directly or indirectly by the trustees of a settlement, or by any body corporate connected with the settlement, to the taxpayer as settlor or to his wife by way of repayment of loans, and that s 408 of the Income Tax Act 1952 did not apply; (6) that the appeal should be allowed and the assessments discharged.
[Paragraph 8 listed the cases to which the commissioners were referred.]
9. The commissioners held that: (i) the deed of settlement of 4 April 1960, and the arrangements between the taxpayer and the bank, and between Saul Wachtel Ltd and the bank together, were an ‘arrangement’ and therefore a ‘settlement’ within the definition in s 411(2); (ii) the taxpayer was the settlor in relation to that settlement. He executed the deed of settlement of 4 April 1960, and provided directly £1,000 for its purpose. In regard to the placing of sums on deposit with the bank as security for the guarantee of the trustees’ overdraft, before mid-1962 the sums were deposited by the taxpayer himself, and after mid-1962 they were deposited by Saul Wachtel Ltd, a company of which the taxpayer and his wife were the sole directors and shareholders and of which the directors were large creditors on loan account. The sums placed in both the taxpayer’s deposit account and subsequently in Saul Wachtel Ltd’s deposit account 2 fell within the description of funds provided directly or indirectly by the taxpayer for the purpose of the settlement; (iii) the taxpayer did not have an interest in any income arising under or property comprised in the settlement, and accordingly s 405 did not apply. Jenkins v Inland Revenue Comrs ([1944] 2 All ER 491) was distinguishable because in that case the trustees enjoyed a specific power, which they in fact used, to apply income under the settlement to repayment of moneys borrowed.
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There was no similar specific power in the present case, and the income of the trustees went to reduce their bank overdraft, ie a loan not from the taxpayer but from the bank. Therefore the taxpayer did not have an interest in any income arising under or property comprised in the settlement; (iv) the commissioners thought that De Vigier v Inland Revenue Comrs ([1964] 2 All ER 907, [1964] 1 WLR 1073) was distinguishable from the present case. Section 408 was a penal section, which must be strictly construed. The commissioners could not find that either the trustees or a body corporate connected with the settlement paid any capital sum directly or indirectly to the taxpayer or his wife. Section 408 therefore did not apply.
The appeal accordingly succeeded. The commissioners discharged the further assessments to surtax made on the taxpayer for 1960–61 and 1961–62 in the amounts of £1,559 and £1,647 respectively, and left the figures of the (main) assessments to surtax for 1962–63 and 1963–64 to be adjusted by agreement between the parties in the light of their decision. Figures in relation to the years 1962–63 and 1963–64 were subsequently agreed between the parties and, on 18 February 1969, the assessments for those years were accordingly discharged. The Crown now appeals.
E I Goulding QC, P W Medd and J P Warner for the Crown.
H H Lomas for the taxpayer.
21 July 1970. The following judgment was delivered.
GOFF J. This is an appeal from a decision of the Special Commissioners of Income Tax, discharging assessments on the taxpayer for the years 1960–61 to 1963–64. The Crown appeals and claims to support the assessments under s 405 of the Income Tax Act 1952 or alternatively, as to part only, under s 408.
The facts are fully set out in the case stated, and may be summarised as follows. On 4 April 1960, the taxpayer made a settlement in the ordinary sense of the word of £1,000 for the benefit of his children. On 5 April 1960, the trustees contracted to purchase the whole of the issued shares in an investment company, Ebor Investments Ltd, for a price which, after certain agreed adjustments had been made, was fixed at £7,690 14s 2d. Paragraph 5(3) of the case states:
‘As the trustees had no money with which to pay for the said shares apart from the £1,000 settled upon them by the deed of settlement of 4th April 1960 (… ) an arrangement was made with the District Bank Ltd (hereinafter called ‘the Bank’) under which the Bank would open a current account in the names of the trustees and would advance to them an amount sufficient to enable them to pay for the said shares, on the basis that the [taxpayer] would guarantee the trustees’ overdraft and would place on deposit with the Bank an amount sufficient to cover the said overdraft. Copies are annexed … forming part of this Case, of a guarantee in favour of the Bank signed by the [taxpayer] on 22nd March, 1960 and of an authority to the Bank signed by the [taxpayer] on the same day authorising the Bank to hold as security for the said guarantee and to apply in or towards satisfaction of such guarantee any sum of sums of money at any time standing to his credit with the Bank.’
It will be observed that the guarantee was prior in date to the trust deed, and reference to an exhibit shows that it was expressly made—
‘In consideration of your having at my request agreed to open or continue a banking account with or otherwise to grant banking facilities to The Trustees of Saul Wachtel’s Settlement.’
Paragraph 5(4) of the case, so far as material, states:
‘It was agreed between the [taxpayer] and the Bank that the rate of interest to be charged by the Bank on the amount from time to time of the trustees’
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overdraft would be limited to 1% and that no interest would be payable by the Bank on the amount deposited with the Bank by the [taxpayer] in support of his guarantee of the said overdraft … In arriving at this agreement the Bank stipulated that the income of the trust should be applied to reduce its indebtedness to the Bank and that the [taxpayer’s] deposit could be reduced accordingly.’
The trustees’ current account with the bank was opened on 5 April 1960, with a debit of £7,500, which was used to implement the share purchase agreement, and on the same day the £1,000 was paid in, leaving an overdraft balance of £6,500. On 22 April 1960, a further sum of £190 14s 2d was placed in the deposit account, and on 25 April 1960, a like sum was drawn by the trustees on overdraft to complete the purchase. Thereafter, as appears from the case stated and the exhibits, the trustees duly paid the dividends on the shares into the bank in reduction of their overdraft, and a like amount was then withdrawn by the taxpayer from the deposit account; and when interest was debited to the trustees on their overdraft the taxpayer added the same amount to the deposit account, so the two accounts were maintained in complete balance. On 28 March 1961, a company called Saul Wachtel Ltd was incorporated, and it took over the taxpayer’s business, but that had no connection with the settlement. At all material times, the taxpayer and his wife were the directors and beneficial owners of all the issued shares in this company, and the taxpayer was a creditor on loan account. In June 1962, however, the company took over the taxpayer’s position with regard to the bank deposit and guarantee. A new guarantee was signed by him on behalf of the company on 22 June. On 29 June, the company opened a new deposit account with the sum then required to balance the trustees’ overdraft subject to a minor discrepancy of pence which was afterwards corrected; and on 6 July 1962, the taxpayer withdrew his own deposit. A substituted authority to hold the company’s deposit account as security was signed by the taxpayer, but for some reason or other not until 1 February 1963; but nothing turns on that.
Paragraph 5(8) of the case states that it was the taxpayer’s intention that Saul Wachtel Ltd should step into his shoes as guarantor to the bank of the trustees’ overdraft. The practice of the payment in of the dividends by the trustees in reduction of their overdraft and of the withdrawal (now of course by the company) of equivalent amounts, and the payment in by the company of amounts to offset the interest debits, continued as before, at all events until after the latest material date in this case. It is claimed by the Crown that the substitution of the company made no difference so far as its claim under s 405 is concerned, but it is conceded that, if it has to rely on s 408, it cannot support assessments in respect of any period after June 1962.
The commissioners held that the deed of settlement of 4 April 1960, and the arrangements between the taxpayer and the bank, and between the company and the bank together, were an arrangement and therefore a settlement within the definition in s 411(2) of the Income Tax Act 1952, and that the taxpayer was the settlor in relation to that settlement, and that in their opinion the sums placed in the taxpayer’s deposit account and subsequently in the company’s account fell within the description of funds provided directly or indirectly by the taxpayer for the purpose of the settlement. In the argument before me, the Crown has not contended that the deposit accounts were funds so provided. The commissioners thought the present case distinguishable from Jenkins v Inland Revenue Comrs, because there was in the present case no specific power to apply income under the settlement to repay borrowed moneys. They held, therefore, that the taxpayer did not have an interest in any income arising under or property comprised in the settlement, and that accordingly s 405 did not apply. In relation to s 408, it appears from the commissioners’
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decision that it was agreed that Ebor Investments Ltd was at the material time a body corporate connected with the settlement within the meaning of s 411(4). The contrary was conceded before me, although it is immaterial. As to s 408, the commissioners said:
‘We think that De Vigier v Inland Revenue Comrs is distinguishable from the case before us. Section 408 is a penal section, which must be strictly construed, and we cannot find that either the trustees or a body corporate connected with the settlement paid any capital sum directly or indirectly to the [taxpayer] or his wife. We therefore hold that Section 408 does not apply.’
The commissioners, in their decision, made reference to other cases cited before them, but I think that I have sufficiently summarised their decision.
I turn now to consider s 405, and I have to determine whether there was a settlement within the wide definition contained in s 411(2); whether the taxpayer was a settlor within the same definition, and, if so, whether of the whole fund or only that part representing the £1,000 which he undoubtedly provided; and whether he had an interest in undistributed income by virtue of s 405(2). I have no doubt, as the commissioners said, that there was an arrangement amounting to a settlement within the definition section, consisting of the deed of settlement of 4 April 1960 and the arrangements between the taxpayer and the bank, and I think also the arrangement by the trustees with the bank. As I have said, the commissioners held that the arrangement with the company, when made, also became part of the settlement, but, as no new funds arose, I think that that is immaterial. Before me, it was common ground that the settled fund was the £1,000, the Ebor shares and the dividends thereon. The Crown did not argue that either deposit account formed part of the settled property, and in my judgment rightly, because no interests in favour of the beneficiaries were charged thereon or created thereout. Nonetheless, the Crown rely on the creation of the deposit account as part of the provision of the trust funds.
Counsel for the taxpayer argued that the taxpayer was not a settlor as to anything more than £1,000 and an aliquot share of the Ebor shares. He said that the taxpayer did not provide the rest of the funds directly or indirectly; they were provided either by the bank, who lent the money, or by the trustees, who borrowed it, or both. When pressed with the suggestion that, if so, the bank might be liable for tax as a settlor, he said: ‘No, because viewed as a whole it was a commercial transaction (see Bulmer v Inland Revenue Comrs)’. This leaves the trustees alone as unlikely settlors of the balance of the shares, although it is fair to say that one is dealing with a wide ‘deeming’ provision. If necessary, he was prepared to say that there was no settlor as to that part. On this part of his argument, counsel for the taxpayer craved in aid the views expressed in Potts’ Executors v Inland Revenue Comrs, and particularly by Lord Normand ([1951] 1 All ER at 82, 32 Tax Cas at 229) and Lord Oaksey ([1951] 1 All ER at 84, 32 Tax Cas at 231) that in s 408, in relation to payment, ‘indirectly’ refers to accountability, and he said that it should have a similar meaning in s 411. He summed up his argument as follows: in the context of this case, there was no indirect provision of funds when considering the trustees borrowing from the bank, because the bank was not in the position of a person to whom funds are transferred in a way which makes them accountable.
Counsel for the Crown said on the other hand: as Bulmer’s case shows a settlement imports bounty, and that flowed only from the taxpayer. There was no element of bounty in the bank’s loan to the trustees because overall they got full interest on their money plus 1 per cent for the accommodation. There was none on the part of
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the trustees, because they got full indemnity from the trust. He did not seriously quarrel with the argument that ‘indirectly’ should have a similar meaning in ss 411(2) and 408, and for that matter s 405, although in my judgment it cannot be altogether the same because the subject-matter varies, and he placed a wider construction on what was said in Potts’s case. He argued that what Lord Normand said ([1951] 1 All ER at 82, 32 Tax Cas at 229) was really in his favour, because the word ‘indirectly’ covers persons accountable, which he construed in a rather wider sense, interposed for the purpose of disguising the transaction. He said that the bank was accountable in this sense because it was bound to release an equivalent part of the deposit.
In the case under s 408 of payment, I think ‘accountability’ means strict accountability at law, but even so I am satisfied that the commissioners were right in holding that the taxpayer was a settlor, and the settlor of the whole fund. It could not have been provided without his assistance. The trustees were able to borrow the necessary funds to buy the shares, and that virtually free of interest, because and only because the taxpayer deposited his money and, what appears to me to be fundamental, forwent the interest on it.
Then comes the question whether, by virtue of s 405(2), the settlor had an interest in the income. The point here is whether the payments by the trustees to the bank were payments indirectly for the benefit of the settlor, or perhaps more accurately whether, because of those payments having to be made, the income was indirectly applicable for his benefit. I bear in mind that this is a taxing Act which must be construed strictly, although counsel for the taxpayer conceded that the width of s 405 did not impose on me any more stringent a standard than that, and that I must look at what was in fact done and not at the substance of the transaction or whether it produces the same result as would have obtained if it had been done differently. So regarded, however, apart from authority, it seems to me that the payments were for his benefit, since they entitled him to withdraw an equivalent amount of his frozen capital. It is not like the commercial transactions envisaged in the cases; eg, the purchase of his house or a loan at a commercial rate of interest, where he derives an incidental benefit.
When I turn to authority, I derive great assistance from Jenkins’s case, to which I have already referred. There, money was paid to the settlor to discharge an interestfree loan, and it was conceded that that was a payment for his benefit. Lord Greene MR ([1944] 2 All ER at 494, 26 Tax Cas at 279) accepted that without question. There is also a dictum of Pennycuick J in Muir v Inland Revenue Comrs ([1966] 1 All ER 295 at 305, 43 Tax Cas 367 at 381) as follows which is important:
‘On this point I find myself unable to agree with the Special Commissioners. Section 405 is in very wide terms, but it must, I think, be confined to cases where income or property “will or may become payable to or applicable for the benefit of the settlor” either under the trusts of the settlement itself or under some collateral arrangement having legal force, e.g., the repayment of an interest-free loan such as was considered by the Court of Appeal in Jenkins v. Inland Revenue Comrs.’
I respectfully agree, and it seems to me that the release of an interest-free deposit is in pari materia. As I have said, the commissioners distinguished that case because of the express power to apply income in one of three ways, including paying off the loan, but in the present case they found that the bank stipulated that income of the trust fund should be applied to reduce the trustees’ indebtedness to the bank and that the taxpayer’s deposit could be reduced accordingly. There was, therefore, an
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express requirement in the arrangement constituting the settlement, or at least by a legally enforceable collateral agreement, that payment should be made. This distinction therefore seems only to make the present an a fortiori case.
Then it is said that there are authorities which compel me or should lead me to the opposite conclusion. The first of these is Lord Vestey’s Executors v Inland Revenue Comrs. In that case the application of s 405 or its predecessor was considered. It was there argued that settlors had an interest because they had power to direct investments and could therefore, so the argument ran, direct a loan to themselves. The House of Lords held that the power was fiduciary and therefore any such loan could only be at a commercial rate of interest, and that disposed of the question (see particularly Lord Reid) ([1949] 1 All ER at 1115, 31 Tax Cas at 83). The case, however, contains dicta on which counsel for the taxpayer relied, and being dicta of the house they are obviously of importance and to be treated with respect. Lord Simonds said ([1949] 1 All ER at 1115, 31 Tax Cas at 83):
‘So far as s. 38(3) and (4)d is concerned, I observe that, even if the argument for the Crown so far prevails, it must still be established that by reason of the settlor’s right to direct investment the income or property arising under or comprised in the settlement is “payable to or applicable for the benefit of the settlor“. I am clearly of opinion that it is not. I think that these words contemplate an out-and-out parting with the trust property or income by payment to the settlor in money or money’s worth. They are as familiar words as any in the conveyancing art. Investment is the very antithesis of this, for it contemplates the retention of something as part of the trust property. I think, therefore, that in any case the claim of the Crown on this head under s. 38(3) and (4) must fail.’
In considering that, however, it must be borne in mind that he was not considering the effect of the word ‘indirectly’. In the present case, there is an out-and-out payment by the trustees to the bank, and the question is whether that was indirectly for the benefit of the settlor. Moreover, Lord Simonds was directing his mind to investment, which he pointed out was the antithesis of payment. Lord Morton of Henryton said ([1949] 1 All ER at 1138, 1139, 31 Tax Cas at 114):
‘Assuming that such a loan were made, would the money lent be “payable to” the borrower within the meaning of sub-s. (4)? Notwithstanding the words “in any circumstances whatsoever” I cannot believe that the words “payable to” were intended to apply to a payment made by way of loan. If these words were read quite literally, they would apply if the settlor were merely used as a channel for conveying the money to someone else, or if money were lent to the settlor on a mortgage of his lands. The phrase “payable to or applicable for the benefit of” is a well-known one, frequently used in settlements where money either is to be paid to a beneficiary, who can then use it as he pleases, or is to be applied by trustees in some manner which will benefit the beneficiary. Reading the phrase as a whole, I am satisfied that the words “payable to” are directed only to an out-and-out payment, with no obligation on the payee to return the money. As to the words “applicable for the benefit of the settlor”, I think that a loan may well benefit a person, even if it is made at a commercial rate of interest, as it may tide him over a difficult period; but I do not think that if money is so lent, it is applied “for the benefit of” the debtor within sub-s. (4).’
There again, in saying that the phrase is well known where money is to be paid to a
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beneficiary who can use it as he pleases, or otherwise applied for his benefit, Lord Morton was contrasting an incidental benefit arising from a commercial transaction. Here, however, the obligatory application was in its nature for the benefit of the settlor, and nonetheless so because it also benefited the trust. If it is said—and indeed it was—that the payment must pass out of and diminish the trust fund, that is completely inconsistent with the Jenkins case. I agree that counsel for the taxpayer’s argument really forces him to say that that case was wrongly decided on a mistaken admission, and I do not think that it was. Potts’ Executors v Inland Revenue Comrs, is more directly concerned with the second part of the case—namely s 408—but it contains observations on the meaning of ‘indirectly’. In that case the settlor had a running account with his company, which made various payments on his behalf, including charitable subscriptions, and it was argued that whenever the account was in debit the balance was a loan to the settlor. Lord Simonds held that the payments were not loans, and therefore his observations as to the meaning of ‘indirectly’ were obiter, although naturally, coming from that source, not to be lightly rejected. So, too, did Lord Oaksey. Lord Normand made no separate finding whether the payments were loans, but dealt with the phrase as a whole. Therefore, that is not obiter but at the same time not conclusive of the question before me, because the problem under review was different. There again, one was considering a payment incidentally benefiting the settlor, and indeed some of the payments were, as I have observed, charitable subscriptions. Similar observations apply to Lord MacDermott, who declined to say whether the transactions were loans. Lord Morton, who dissented, held that the payments were loans and were indirectly made to the settlor.
The dictum most strongly in favour of counsel for the taxpayer is that of Lord Simonds, who said ([1951] 1 All ER at 81, 32 Tax Cas at 228):
‘So far, my Lords, I have not specifically dealt with the word ‘indirectly’. It is sufficient to say that it cannot so enlarge the meaning of the words “paid to the settlor” as to include payment to some other person than the settlor for his own use and benefit. I do not feel called on to determine positively what transactions it might be apt to cover. It may be that it is not apt to cover any that are not already covered by the normal meaning of the words “paid to the settlor“.’
With all respect—and my respect for Lord Simonds is and must be great—I am very loath to hold that the word ‘indirectly’ adds nothing. Lord Normand and Lord Oaksey both made the test accountability. In the present case, the bank was not in law accountable, but one must look at the whole transaction. Indeed, when dealing with the question who was the settlor, counsel for the taxpayer claimed to do just that, and said that the bank would not be liable to tax even if it were a settlor because it was a commercial transaction. When, however, one looks at the whole, the bank was contractually bound as part of the settlement itself to release an equivalent amount. Surely, therefore, the payment was indirectly made for the benefit of the settlor. True, Lord Normand ([1951] 1 All ER at 82, 32 Tax Cas at 229) said:
‘It would be inconsistent with this principle to accept the contention that the words should be extended to any payment made by the settlor’s request to a third party which produces a pecuniary benefit to the settlor equivalent to the sum paid.’
As I have observed, however, he was dealing with an incidental benefit. He also said ([1951] 1 All ER at 82, 32 Tax Cas at 229):
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‘In a taxing Act designed to prevent tax evasion by affecting with liability to tax sums paid to a settlor otherwise than as income, it was obviously necessary to provide for the case where persons accountable to the settlor are interposed between the payer and the settlor for the purpose of disguising the transaction.’
Counsel for the Crown submitted that that exactly covers this case in his favour. I cannot agree, because Lord Normand seems to me to be saying that one cannot regard ‘indirectly’ in that context as going beyond strict accountability, but he was considering the words in relation to payment in s 408, not benefit in s 405. However, Lord MacDermott said ([1951] 1 All ER at 87, 32 Tax Cas at 236):
‘Of the other payments those that matter here were not made to Mr. Potts’ agents or in some circuitous way designed to put the money under his control eventually’,
which does come near to this case. For these reasons, I find nothing in the authorities which precludes me from adhering to my original view or which sufficiently suggests that I ought to depart from it, and I find considerable support for it in Jenkins v Inland Revenue Comrs.
I should deal with one other argument. It was submitted that two payments were not made to the taxpayer but to the company before the change in the arrangements. It could only have been so paid by his order, however, and the commissioners found that on the dates of the payment in of the dividends, including the relevant two, ‘amounts equivalent to the said sums were withdrawn from the [taxpayer’s] deposit account with the bank’, and I do not think that I can hold, on this ground, that he did not receive the benefit of those payments.
There remains the subsidiary question whether the position was altered when the company took over the taxpayer’s position vis-à-vis the bank and deposited its own money, but in my judgment it was not. Counsel for the taxpayer argued at first that one could not pierce the company veil, but he was driven to concede, and in my judgment rightly, that a discretion in the settlement to pay income to a company in which the taxpayer and his wife owned all the shares would be within the section, so that the veil can be pierced. Then it follows, if I am right that the release of the settlor’s frozen funds was a payment indirectly for his benefit, the release of the frozen funds of a company in which he and his wife were the sole shareholders would be no less so. It is therefore strictly unnecessary for me to consider the alternative claim under s 408, which in any case applies only to assessments prior to the company taking over, but as the case may go higher, perhaps I should give my view on that, for what it is worth.
Here, the questions whether there was a settlement and whether the taxpayer was the settlor are common. The new question is whether the payments made by the trustees in reduction of their overdraft were repayments of loans so as to be capital payments under s 408(7), and were made directly or indirectly to the settlor. I think that they clearly were repayments of loan. If one regards it from the angle of the trustees, which is in my view correct, then such they clearly were, and if one looks at what the settlor received, the result is still the same. The difficult question is: were they paid to him? Directly they plainly were not, but were they indirectly? Counsel for the taxpayer relies on the fact that there was no automatic release to the settlor, and again on Lord Normand’s and Lord Oaksey’s theory of accountability. I think that the fact that the bank was not in law accountable to the settlor does prevent the loans from being paid either directly or indirectly to him. It seems to me that the passage in the speech of Lord Normand ([1951] 1 All ER at 82, 32 Tax Cas at 229), which I have read, strongly indicates this. There he says that the fact that payment to an agent or person accountable is in law a direct payment is no reason for reading ‘indirectly’ in any wider sense.
Page 283 of [1971] 1 All ER 271
When, however, the expression is applied not only to ‘payment to’ but to ‘application for the benefit of’, the words have, I think, a wider significance. Paying the taxpayer’s bills could well be a payment to a person not accountable, yet it would be directly or indirectly for the benefit of the taxpayer, though it would not be a payment indirectly to him.
Accordingly, in my judgment the appeal succeeds, but I uphold the commissioners’ finding that s 408 does not apply.
Appeal allowed.
Solicitors: Solicitor of Inland Revenue; J H & J A Bowden, Manchester (for the taxpayer).
K Buckley Edwards Esq Barrister.
Re Collins’s Settlement Trusts
Donne and another v Hewetson and others
[1971] 1 All ER 283
Categories: SUCCESSION; Wills, Gifts
Court: CHANCERY DIVISION
Lord(s): BRIGHTMAN J
Hearing Date(s): 21, 22 OCTOBER 1970
Will – Gift – Personal chattels – Stamp and coin collections – Whether ‘personal effects’ included collections – Whether prima facie meaning of phrase displaced.
Will – Gift – Personal chattels – Beneficiaries to select from personal chattels – Storage and insurance of chattels – Whether costs to be borne by beneficiaries or residue – Whether costs to be borne by income or capital of residue.
The testator by cl 2(6) of his will dated 5 July 1965 bequeathed to the first defendant, his sister, inter alia: ‘(a) such champagne as shall be at my lodgings (b) such articles of furniture and personal effects as she shall select from among those at my lodgings and not already disposed of by this my Will’, with a direction that she ‘be allowed to make her selection before any other person similarly authorised under the provisions of this my Will … ’ By cl 2(7) of the will the second defendant was bequeathed in similar terms ‘such articles of furniture and personal effects as she shall select … and not already disposed of by this my Will … ’, and by cl 2(8) and (9) the third and fourth defendants respectively were bequeathed in similar terms ‘such single item of furniture or personal effects as she shall select … and not already disposed of … ’ By cll 5 and 6 the testator gave his residuary estate on trust for named beneficiaries. At the date of his death, 18 September 1968, the testator owned and kept at his lodgings a stamp collection which was his main hobby, insured for £15,000 and a coin collection. He also kept there a motor car for his own personal use. The estate after payment of duty was some £25,000, the furniture and personal effects being valued at about £3,000, the stamp and coin collection at £5,800 and £150 respectively and the car at £500 to £600. On a summons to determine whether the stamp and coin collection and the car should be treated as personal effects under cl 2 of the will and how the burden of outgoings in respect of storage and insurance of the above items should be borne,
Held – (i) There were no sufficient indications in the will read as a whole to displace the prima facie meaning of ‘personal effects’ which included the stamp and coin collections and the motor car (see p 287 c post).
Re Reynold’s Will Trusts [1965] 3 All ER 686 followed.
(ii) As the title of the beneficiaries under cl 2 stemmed form the act of selection, the profits and expenses prior to the time of selection fell on the income arising from the residue and not on the beneficiary making the selection (see p 288 g, post).
Re Rooke (decd) [1933] All ER Rep 978 distinguished.
Page 284 of [1971] 1 All ER 283
Notes
For gifts of effects, personal estate, etc, see 39 Halsbury’s Laws (3rd Edn) 1020, 1021, para 1539; 1029, 1030, para 1547, and for cases on the subject, see 48 Digest (Repl) 612–614, 5868–5880.
Cases referred to in judgment
Joseph v Phillips [1934] AC 348, [1934] All ER Rep 685, 103 LJPC 79, 151 LT 50, 48 Digest (Repl) 568, 5335.
Pearce, Re, Crutchley v Wells [1909] 1 Ch 819, 78 LJCh 484, 100 LT 699, 23 Digest (Repl) 482, 5500.
Reynolds’ Will Trusts, Re, Dove v Reynolds [1965] 3 All ER 686, [1966] 1 WLR 19, 48 Digest (Repl) 613, 5879.
Rooke (decd), Re, Jeans v Gatehouse [1933] Ch 970, [1933] All ER Rep 978, 102 LJCh 371, 149 LT 445, 23 Digest (Repl) 543, 6064.
Sharp v Lush (1879) 10 Ch D 468, 48 LJCh 231, 48 Digest (Repl) 450, 4031.
Cases also cited
Gartside v Inland Revenue Comrs [1968] 1 All ER 121, [1968] AC 553.
Meldrum’s Will Trusts, Re [1952] 1 All ER 274, [1952] Ch 208.
Wavertree, Re [1933] Ch 837, [1933] All ER Rep 837.
White, Re [1916] 1 Ch 172.
Adjourned summons
By a summons dated 4 February 1970 the plaintiffs, the executors and trustees of the will of Surgeon Captain Charles Patrick Collins RN, sought to determine whether, on the true construction of the testator’s will, the testator’s stamp and coin collections and a motor car ought to be treated as one of the personal effects available for selection by the beneficiaries, the first, second, third and fourth defendants, or whether they formed part of the residuary estate to which the fifth and sixth defendants were beneficially entitled; further, whether the storage and insurance charges incurred by the plaintiffs in respect of the furniture and effects and the collections and the motor car prior to their selection by the legatees were payable out of the legatee’s share or out of the capital or income of the residue. The facts are set out in the judgment.
E A Seeley for the plaintiffs.
J P Brookes for the first and second defendants.
P K J Thompson for the fifth defendant.
T L G Cullen for the sixth defendant.
22 October 1970. The following judgment was delivered.
BRIGHTMAN J. The testator in this case is Charles Patrick Collins who was a retired surgeon captain in the Royal Navy. He made his will on 5 July 1965 and he died on 18 September 1968. At the date of his will and at the date of his death he was living in a suite of rooms in a building known as West Lodge, Wickham, Hampshire, which comprised a service flat. Among his assets was a stamp collection of considerable value. The greater part of the stamp collection was valued for probate purposes at a little over £5,800. A small part of the collection was at the time of his death in the hands of various dealers and that part was estimated at £200. He also owned at his death a Volvo motor car which has since been sold for something between £500 and £600.
As to the stamp collection, the testator kept it insured in the sum of £15,000. The collection was contained mainly in about 39 albums and four stock books, and in addition there was a large number of loose stamps, the greater quantity of which was kept by the testator at his flat and was there at the time of his death. A small quantity of the loose stamps was in the hands of various dealers for sale. The collection
Page 285 of [1971] 1 All ER 283
had, apparently, been assembled by the testator personally over a period of very many years as a hobby, and he continued with his hobby down to the date of his death. He was recognised in philatelic circles as an experienced collector of stamps. The motor car was kept in a garage at the house in which the testator had his flat.
The facts I have stated are deposed to in an affidavit of one of the executors and they are supplemented by a later affidavit of that executor, and by Mrs Hewetson, the first defendant, who was a sister of the testator. In his second affidavit the executor also refers to a coin collection which was valued at £150 and was at the testator’s flat at the date of his death. The first defendant confirms that the stamp collection was the testator’s main hobby. She says that he had been interested in it since he was about ten years old and he kept the whole of his collection in a large wooden cabinet in one of his rooms at West Lodge. She also confirms that the coin collection was a hobby. She adds that the Volvo motor car which I have mentioned was used by the testator for his own personal purposes.
I turn now to the testator’s will. Most of the relevant provisions are contained in cl 2. Clause 2(4) is bequest to the second plaintiff, a Mr Target, of ‘my antique framed maps and such wines and spirits other than champagne as shall be at my lodgings at West Lodge Wickham’. Then in cl 2(5) he bequeaths to Leslie Collins ‘the following pictures and effects … ’, and a number of items are set out, consisting of pictures and a corner cabinet with its contents. In cl 2(6) he bequeaths to the first defendant the following:
‘(a) Such champagne as shall be at my lodgings (b) such articles of furniture and personal effects as she shall select from among those at my lodgings and not already disposed of by this my Will or by any Codicil hereto and I direct that the [first defendant] shall be allowed to make her selection before any other person similarly authorised under the provisions of this my Will or any Codicil thereto AND I DECLARE that it is at the wish of the [first defendant] that I have not made her any pecuniary bequests in this Clause of this my Will and I HERE AND NOW DECLARE my deep appreciation and gratitude for the love and affection she had shown me throughout our lives.’
He then continued with the following bequests:
‘(7) To my niece [the second defendant] … such articles of furniture and personal effects as she shall select from among those at my lodgings and not already disposed of by this my Will or by any Codicil hereto.
‘(8) to [the third defendant] … such single item of furniture or personal effects as she shall select from my lodgings and not already disposed of by this my Will or any Codicil hereto.
‘(9) to [the fourth defendant] … such single article of furniture or personal effects as she shall select from my lodgings and not already disposed of by this my Will or any Codicil hereto
AND I DECLARE that the foregoing Legacies shall be satisfied in priority to any other Legacies or bequest given or made by me in any provision of this my Will hereinafter set out and that the aforesaid Legacies shall not abate notwithstanding the fact that there shall not be sufficient means in my estate to satisfy any annuity legacy or bequest hereinafter set out.’
Clause 3 was a bequest of an annuity to his widow, the fifth defendant, with whom he was not in fact living at the date of the will or his death. Clauses 5 and 6 are a disposition of his residuary estate first in trust to pay the income to the first defendant for life and after her death to the second defendant during her life and after the death of the survivor to the sixth defendant absolutely.
The net estate was sworn for the purposes of probate at a little over £30,000 and after paying duty there was a little under £25,000 left. Apart from the stamp
Page 286 of [1971] 1 All ER 283
collection, the car the coin collection—if they are to be regarded as personal effects—the furniture and personal effects were valued at about £3,000.
The first question raised by the summons is whether the stamp and coin collections and the motor car ought to be treated as personal effects available for selection by the beneficiaries under cl 2(6) to (9) of the will, or whether they, or any of them, form part of the residuary estate of the testator. In Joseph v Phillips ([1934] AC 348 at 352, [1934] All ER Rep 685 at 687) (I do not refer to the facts of the case which for this purpose are immaterial) the Judicial Committee of the Privy Council said:
‘The question is whether the bequest on its true construction is only of things which can properly be treated as personal effects, that is to say, physical chattels, having some personal connection with the testator such as articles of personal or domestic use or ornament, clothing furniture and so forth … ’
In Re Reynolds’ Will Trusts, Dove v Reynolds Stamp J had to consider the will of a testator which gave the remainder of his personal chattels, as defined by the Administration of Estates Act 1925, to certain beneficiaries. The definition of personal chattels in s 55 of the Administration of Estates Act 1925 refers to ‘articles of household or personal use or ornament’. Included among the assets of the testator was a stamp collection valued for probate at rather more than £1,800. The collection was kept at the testator’s home and consisted of several stamp albums, together with some loose stamps. The stamp collection there, as here, was the testator’s main hobby. The question submitted to the court for its decision was whether the stamp collection passed under the specific bequest which I have mentioned. It was held that ([1966] 1 WLR at 20)
‘… giving the terms used in section 55(1)(x) [of the 1925 Act] a wide construction, in the circumstances, since the collection was made and kept up by the testator as his only or principal hobby, it could properly be described as an article of personal use within the meaning of section 55(1)(x), notwithstanding that its value was such that it might be regarded as an investment for the two were not mutually inconsistent.’
I conclude that the prima facie meaning of the expression ‘personal effects’ is such that it would include the stamp collection and the coin collection.
There are other cases cited to me in argument to which I am not proposing to refer, showing also that the prima facie meaning of ‘personal effects’ is such as to include a testator’s personal motor car. The only question which is in issue is whether there could be said to be in this will a sufficient context to displace the prima facie meaning of ‘personal effects’. Those in favour of residue submit that a sufficient context to narrow the meaning of ‘articles of furniture and personal effects’ to some such sense as ‘furniture and like personal effects’ can be found in this and from the surrounding circumstances.
The first argument was that the testator seems to have made some differentation in his own mind between ‘champagne’ and ‘articles of furniture and personal effects’. This argument is based on the fact that in cl 2(6)(a) there is a bequest to the first defendant of ‘such champagne as shall be at my lodgings’ and in cl 2(6)(b) ‘such articles of furniture and personal effects as she shall select from among those at my lodgings and not already disposed of’. The argument is that a more felicitous way of constructing those two clauses, if champagne were regarded by the testator as a personal effect, would have been to have said in cl 2(6)(b) ‘such other articles of furniture and personal effects’, and I am disposed to agree.
Secondly, those arguing in favour of residue based a contention on the use of
Page 287 of [1971] 1 All ER 283
the words ‘at my lodgings’. It was suggested that those words imported into the expression ‘personal effects’ the notion that such effects should be appropriate to the comfort or embellishment of his lodgings. I think that that is a difficult argument because the same words, ‘at my lodgings’, qualify ‘champagne’, which on no basis could have been regarded by the testator as something adding to the comfort or embellishment of his residence.
Thirdly, it was said that it would be unlikely that the testator would have subjected so valuable an asset as his stamp collection to a mere power of selection to be exercised by successive beneficiaries rather than controlling the selection himself. I think that the last argument is really speculation. There is no doubt at all from the form of the will that he had a very great regard and sense of gratitude towards the first defendant, and I think that he may have been perfectly content to leave it to her to choose all or any of the personal effects which were at his disposal at his death, however valuable.
In my view there are no sufficient indications in this will to justify my giving to the expression ‘personal effects’ anything except its prima facie meaning, and that includes the stamp collection, the coin collection and also the Volvo motor car.
The next question on the summons raises a short but not altogether easy point. Since the death of the testator the executors have spent money storing and insuring the motor car, to which I referred previously, and the furniture and effects left by the testator, including insurance of this valuable stamp collection. It is not established exactly what total sum has been spent by the executors on storage and insurance, but it seems that it is not insignificant.
The question now arises whether the storage and insurance expenses in relation to those articles of furniture and personal effects, as may in due course of time be selected by the indicated beneficiaries under cl 2 of the will, ought to fall on the capital of residue, or an the income of residue, or on the particular beneficiary who makes the selection. Indeed, the question raised by the summons goes wider. In the event of any article of furniture or any personal effect being wholly unselected (it is perhaps unlikely) the same problem would arise as between capital and income of residue.
I have guidance on this question in Re Rooke (decd), Jeans v Gatehouse. The headnote states ([1933] Ch at 970):
‘The costs of the preservation and upkeep of property specifically devised and bequeathed between the date of the testator’s death and the date of the executors’ assent are payable by the specific devisees and legatees.’
The trend of judicial authority prior to the decision of Maugham J in Re Rooke (decd) is mentioned briefly in the argument of counsel ([1933] Ch at 970). Apparently in Sharp v Lush ((1879) 10 Ch D 468 at 472) Sir George Jessel MR held that (See [1933] Ch at 970) ‘the expense of warehousing specific legacies was an executorship expense because it was incident to the executor’s office.' However, in a subsequent case, Re Pearce, Crutchley v Wells ([1909] 1 Ch 819 at 821), it was decided by Eve J, who apparently was not referred to Sharp v Lush, that (See [1933] Ch at 971) ‘the upkeep and preservation of specifically bequeathed property from the date of the testator’s death to the date of the executors’ assent must be paid for by the legatee.' Maugham J concluded his judgment in these words ([1933] Ch at 974, [1933] All ER Rep at 980):
‘In these circumstances it seems to me that I ought to follow the judgment of Eve J. in Re Pearce, a decision which seems to have been approved. At any rate I have not been referred to any case in which it has been doubted, and the decision
Page 288 of [1971] 1 All ER 283
of Sir George Jessel M.R. in Sharp v. Lush is open to the criticism that the learned judge did not have to deal with the argument that if a legacy is of a profit-earning character the specific legatee is entitled to the profits which it earns from the date of the testator’s death to the date of the assent. In my opinion it is difficult to explain on what principle the profits in such a case ought to be paid to the legatee, if he is not also to be made liable for the preservation and upkeep of the legacy. For those reasons I hold that, as from the date of the testatrix’s death to the date of the assent, the costs of preservation and upkeep fall upon the legatee.’
It is clear that the ratio decidendi of Maugham J’s decision was, that if the subject-matter of the legacy or devise in fact produced a profit, the legatee or devisee would have been entitled to that profit.
I now have to consider whether there is any different approach to the case before me and I start by directing my mind solely to such articles of furniture and personal effects as may in due course of time be selected by the first defendant or others of the indicated beneficiaries. In the normal case there can be no doubt that the title of a specific legatee stems from the will itself. However, in a case where a particular beneficiary is given a power of selection the title of the beneficiary stems, not directly from the will, but from the act of selection; just as in the case of a fund subject to a discretionary trust or power vested in trustees or to a general power of appointment, the title of the beneficiary stems from the act of selection by the trustee or from the instrument of appointment. In those circumstances it seems to me that logically if the subject-matter of the power of selection has been income-producing, any income produced between the date of death and the date of selection would have belonged to residue and not to the beneficiary in whose favour the selection was made; the income in such case accrued prior to the moment of time at which the title of the beneficiary was created.
I therefore reach the conclusion that, in a case such as the present where persons are given a power of selection, so that the title of the beneficiary stems from the selection, had there been any profits ante-dating the time of selection, those profits would have belonged to residue. On the basis of that reasoning I think that the case is distinguishable from Re Rooke (decd). Accordingly, the expenses of preservation, such as storage and insurance, so far as incurred prior to the time of selection, fall on residue and not on the person making the selection.
As between capital and income of residue, I have not been referred to any case which shows that an ordinary revenue outgoing such as cost of insurance or cost of storage, ought to be borne by capital rather than income. It seems to me that logically income must bear any expense which is incurred in looking after property which, if income-producing, yields such income for the benefit of the life tenant.
I therefore reach the conclusion that the charges in question in this case should be borne by the income and not the capital of residue.
Declaration accordingly.
Solicitors: Donne, Mileham & Haddock (for the plaintiffs); Boxall & Boxall agents for Edwin Boxall & Kempe, Brighton (for the first and second defendants); Irene A Bonetti (for the fifth defendant); White & Leonard & Corbin Greener agents for Ward, Bracewell & Co, Doncaster (for the sixth defendant).
Richard J Soper Barrister.
Keys and another v Boulter and others
[1971] 1 All ER 289
Categories: EMPLOYMENT; Industrial relations: TRUSTS : PROFESSIONS; Lawyers
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE LJ AND GOFF J
Hearing Date(s): 20, 21 OCTOBER 1970
Trade union – Trustees – Powers – Action touching or concerning property of union – Executive council of union not functioning – Power to authorise solicitors to defend action – Trade Union Act 1871, s 9.
Solicitor – Duty – Entry of appearance – Conflict of interests – Authority to enter appearance not affected by alleged conflict of interests.
In February 1966, two trade unions, the National Union of Printing, Bookbinders and Paperworkers (‘NUPB’) and the National Society of Operative Printers and Assistants (‘NATSOPA’), amalgamated to form a single union called the Society of Graphical and Allied Trades (‘SOGAT’). However, the two unions maintained their identity as separate divisions within SOGAT, NUPB becoming Division A and NATSOPA Division 1. Rules were drawn up for SOGAT consisting of general rules for the whole union and special rules for each of the two divisions. The rules made provision for an executive council the standing orders of which stated that the quorum for meetings was to be a specified number of members from each division. Under the general rules trustees were given wide powers over the property of SOGAT and were required to act under the directions of the executive council. A dispute broke out between the two divisions over amendments made to the rules at a rules revision conference and Division 1 decided to amend its own rule by ballot in such a way as to enable it to act independently of SOGAT. The ballot was duly held and the amendments passed. The executive council of SOGAT was unable to deal with the dispute because the members from Division 1 refused to attend meetings, so that it was not possible to obtain a quorum. The plaintiffs, who were members of the executive council of Division A, brought an action against the first defendants, as representatives of Division 1, seeking a declaration that the amendments made as a result of the ballot were invalid. The first defendants instructed solicitors. Subsequently SOGAT was added as second defendant and the same solicitors, with the authority of the trustees of SOGAT, entered an appearance on their behalf. The plaintiffs, however, objected to the same solicitors representing SOGAT as well as the first defendants, maintaining that they had a conflict of interests and that they had no authority to act on behalf of SOGAT.
Held – The appearance entered on behalf of SOGAT by the solicitors was authorised and valid, because—
(i) the action was one which ‘touched or concerned’ the property of SOGAT and accordingly, under s 9a of the Trade Union Act 1871, as well as under the rules of SOGAT, the trustees were empowered to instruct solicitors to enter an appearance on behalf of SOGAT (see p 292 f and p 295 b and f, post);
(ii) (Goff J dubitante) this power was not affected by the fact that the action was brought against SOGAT and not against the trustees in their own name (see p 292 j to p 293 a and c and p 295 b and h, post) nor (per Lord Denning MR) was it affected by the requirement in the rules that the trustees should act under the directions of the executive council, for no direction had been given (see p 293 f, post);
(iii) the question whether there was a conflict of interests did not affect the authority
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of the solicitors for it was a matter between the solicitor and the client himself and not one for the court to determine (see p 294 a and p 295 c and f, post).
Notes
For proceedings by and against trade unions, see 38 Halsbury’s Laws (3rd Edn) 378–380, paras 651, 652, and for cases on the subject, see 45 Digest (Repl) 593–596, 1480–1504.
For the Trade Union Act 1871, s 9, see 25 Halsbury’s Statutes (2nd Edn) 1248.
Cases referred to in judgment
Bonsor v Musicians’ Union [1955] 3 All ER 518, [1956] AC 104, [1955] 3 WLR 788, 45 Digest (Repl) 539, 1213.
Saffron Walden Second Benefit Building Society v Rayner (1880) 14 Ch D 406, 49 LJCh 465, 43 LT 3, 43 Digest (Repl) 80, 677.
Taff Vale Ry Co v Amalgamated Society of Railway Servants [1901] AC 426, 70 LJKB 905, 85 LT 147, 65 JP 596, 45 Digest (Repl) 595, 1500.
Interlocutory appeal
This was an interlocutory appeal in an action by the plaintiffs, William Herbert Keys and Roderick James Hooker, members of Division A of the Society of Graphical and Allied Trades (‘SOGAT’) against the first defendants, D S Boulter and S Butler sued on their own behalf and as representatives of the executive council of Division 1 of SOGAT, and against the second defendant, SOGAT, for a declaration that certain amendments made by Division 1 of SOGAT to its rules were invalid and void. The second defendant, alternatively Messrs Shaen, Roscoe & Bracewell, solicitors for the first defendants and on the record for the second defendant, appealed against an order of Cooke J, made on 22 July 1970, ordering, inter alia, that the appearance entered in the action for the second defendant be struck out. The facts are set out in the judgment of Lord Denning MR.
A L Figgis for SOGAT and/or for the solicitors on the record for SOGAT.
Peter Pain QC and A A M Irvine for the plaintiffs.
21 October 1970. The following judgments were delivered.
LORD DENNING MR. In the printing trade before 1966 there were two important trade unions. One of them was the National Union of Printing, Bookbinders and Paperworkers (which I will call ‘NUPB’) and the other was the National Society of Operative Printers and Assistants (which I will call ‘NATSOPA’). On 1 February 1966 those two unions amalgamated together into one trade union to be called the Society of Graphical and Allied Trades—in short, SOGAT, the second defendant. But the two previous unions continued as two divisions of SOGAT. NUPB became Division A of SOGAT; NATSOPA became Division 1 of SOGAT. Rules were drawn up for the new amalgamated union, which were in three parts: (i) the general rules which contained the objects of the amalgamated union and its organisation; (ii) the special rules applicable to Division A (NUPB); and (iii) the special rules relating to Division 1(NATSOPA).
The general rules of SOGAT provided that there was to be a rules revision conference at which the rules could be revised and altered. This was held in November 1968 at the Metropole Hotel at Brighton. At that conference there were many resolutions carried for alterations in the rules. Soon after the conference, questions arose as to the validity of the alterations. So much so that on 11 December 1968 the executive council of Division 1 (NATSOPA) decided to hold a ballot of the members of Division 1. The ballot was for the purpose of altering the special rules relating to Division 1. These alterations were intended to give Division 1 (NATSOPA) complete self-government so that it could alter its own special rules and give them priority to the rules of SOGAT. The alterations in effect would enable Division 1 (NATSOPA) to withdraw from the affairs of the combined amalgamated union. In short, to
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act independently of SOGAT. The ballot was held of Division 1. The amendments were passed and registered with the Registrar of Friendly societies.
At this point two of the members of Division A (NUPB) took exception to what Division 1 (NATSOPA) had done. They were the plaintiffs, Mr Keys and Mr Hooker. A letter was written on 14 January 1970 by their solicitors claiming that the amendments made by Division 1 were invalid and threatening to take action against Division 1. In consequence a special meeting was called of the executive council of SOGAT. It was held on 29 January 1970. It was useless and for this reason: at a critical point of the meeting, the members of Division A (NUPB) walked out. The result was that there was no longer a quorum. The standing orders stated that ‘the quorum was to be seven from Division A, and six from Division 1’. At later meetings the members of Division 1(NATSOPA) have walked out or not attended. The result is that ever since 29 January 1970 there has been no effective executive council of SOGAT. It cannot come to any decision because there is never a quorum and no hope of getting one. SOGAT is paralysed.
On 6 February 1970, the two members of Division A, the plaintiffs, brought an action against Division 1, or rather against Mr Boulter and Mr Butler, the first defendants, as representing themselves and representing all the other members of Division 1. The plaintiffs asked for a declaration that the amendments which Division 1 (NATSOPA) had made by the ballot were invalid and void. The first defendants instructed solicitors, Shaen, Roscoe & Bracewell, to represent them in this action. These solicitors applied to the master saying that the action involved the rules of the amalgamated union SOGAT which could not be construed in the absence of SOGAT as a party to the action. On 19 March 1970, Master Bickford Smith ordered that SOGAT should be added as defendants to the action. The plaintiffs duly served SOGAT by leaving the writ at their office at SOGAT House. On 7 April 1970, Shaen, Roscoe & Bracewell entered an appearance for SOGAT. They were the self-same solicitors as were already acting for the defendants, representing Division 1. The plaintiffs took strong objection to Shaen, Roscoe & Bracewell (who were solicitors for Division 1) also acting for the amalgamated union SOGAT. The plaintiffs said that Shaen, Roscoe & Bracewell would have a conflict of interest if they acted not only for Division 1, but also for SOGAT itself, the trade union. The plaintiffs’ solicitors warned Shaen, Roscoe & Bracewell about it; but Shaen, Roscoe & Bracewell took the view that they could properly enter an appearance for SOGAT, and did so. Shaen, Roscoe & Bracewell say that they had instructions from the joint general secretary, Mr Briginshaw, and from the trustees of SOGAT. I must say that, so far as I can see at the moment, Mr Briginshaw himself would have no authority to instruct them. He was only the general secretary and had no implied authority. The executive council of SOGAT was paralysed. So it could not give instructions. But Shaen, Roscoe & Bracewell rely on authority from the trustees of SOGAT. They entered an appearance on 7 April 1970, and obtained within a week confirmation or ratification from the trustees of SOGAT. It is dated 13 April 1970. It is addressed to Mr A J Wright, a partner in the firm of Shaen, Roscoe & Bracewell. It states:
‘The Trustees confirm and authorise you to take all legal steps necessary in the name [SOGAT] for the protection of [SOGAT]. Your sincerely … ’
And then the names of the three trustees are there. It is signed by them.
The question is whether this is sufficient authority to enable the solicitors, Shaen, Roscoe & Bracewell, to enter an appearance for SOGAT? The master thought that Shaen, Roscoe & Bracewell ought not to have acted and that the only solicitors with authority were W H Thompson. This was because of a much earlier resolution of SOGAT in 1967 which stated:
‘SOGAT solicitors: It was agreed that W. H. Thompson should be the solicitors for SOGAT, the divisions continuing to have own arrangements.’
Page 292 of [1971] 1 All ER 289
The master made an order enabling W H Thompson to come in as solicitors. On appeal to the judge, Cooke J held that Shaen, Roscoe & Bracewell had no authority to enter an appearance on behalf of SOGAT. He struck out their appearance and he ordered them to pay the costs of the proceedings. But he realised what a difficult position would arise as a consequence of his decision. It would mean that there was nobody—no solicitors—nobody to put in an appearance for SOGAT. The executive council was paralysed and the trustees could not act. Seeing that such an impasse would be reached, the learned judge gave leave to appeal to this court. We have been much indebted to counsel for the arguments which have been adduced to us.
At the outset I must point out that under the general rules of SOGAT the trustees have wide powers. Rule 6 states:
‘The funds, books and property of [SOGAT] shall be vested in the Trustees of [SOGAT] in trust for all the members of [SOGAT]. The Trustees shall remain in office during the will and pleasure of [SOGAT] as expressed through the Executive Council and shall only cease to the Trustees after their successors have been duly elected and have taken upon themselves the responsibility of office … ’
Were the trustees empowered to act on behalf of SOGAT and instruct solicitors?
It seems that the question depends on the true interpretation of s 9 of the Trade Union Act 1871. Does that section give the trustees power to instruct solicitors to enter an appearance on behalf of the union? It provides:
‘The trustees of any trade union registered under this Act, or any other officer of such trade union who may be authorized so to do by the rules thereof, are hereby empowered to bring or defend, or cause to be brought or defended, any action, suit, prosecution, or complaint in any court of law or equity, touching or concerning the property, right, or claim to property of the trade union … ’
I will consider the next sentence a little later; but, speaking for myself, I would read those words in their full width so as to enable the trustees to defend or cause to be defended this action now brought against SOGAT. It seems to me plain that this action touches or concerns the property of the trade union SOGAT. The resolution at Brighton and the proposed amendments to the rules touch the property very closely. It affects the funds and contributions in all sorts of ways. On the very words of the rule, therefore, the trustees are empowered to cause the action to be defended. That carries with it power to instruct solicitors to appear.
I may say that in 1871 the legal position of a trade union was not settled. It was not until Taff Vale Ry Co v Amalgamated Society of Railway Servants that it was settled that it could be sued in its registered name. Even then it was thought to be only a convenient way of suing all the members. But Lord Lindley went on ([1901] AC at 443) significantly to point out that if one wanted to get at the property of the trade union, one could bring in the trustees for the purpose to get any damages from their funds. But a long time afterwards it was settled in Bonsor v Musicians’ Union that a trade union is a legal entity. I will not go into the barren question whether it is in law strictly a corporation. That does not matter. It is certainly a legal entity which can sue and be sued and make contracts in the same way as any other legal entity. I think that, in view of this development of the law, we should read s 9 of the 1871 Act in a wide sense so as to apply it to the circumstances which were not envisaged in 1871. We should expand it so as to apply to a case where a trade union itself is sued. If the executive council of a union is paralysed (as happens in this case), I think that the section enables the trustees themselves (who, after all, have the property of the union and all its funds are vested in them) to defend or cause to be defended any action
Page 293 of [1971] 1 All ER 289
which is brought against the union touching or concerning its property. Such seems to me to be plain from the first sentence of s 9; but I cannot leave the case without referring to the sentence at the end of that section, which provides:
‘… and shall and may, in all cases concerning the real or personal property of such trade union, sue and be sued, plead and be impleaded, in any court of law or equity, in their [i e the trustees’] proper names, without other description than the title of their office … ’
It might be suggested that that second part ought to be read with the first; so that the first part only applies to cases where the trustees sue or are sued in their own proper names. I can see that that argument could be put forward, at all events in 1871, before the law had developed in the way that I have described in the Taff Vale and Bonsor cases. But now that a trade union can sue and be sued in its own name, I think that the section must be construed in the light of the changed situation and moulded accordingly. We can fill in the gaps. So doing, I think the trustees can defend an action against the union and cause it to be defended, and can instruct solicitors for the purpose. Otherwise there would be an impossible situation. Here there would be a trade union made a party to an action, and bound by any order made by the court in this action, and yet it could not be represented at the hearing. The only satisfactory solution of the impasse which has arisen (owing to the dispute between the two divisions) is for the trustees themselves to instruct solicitors to act on behalf of the union. I hold, therefore, that the authorisation given by the trustees in the letter of 13 April 1970 was a valid authorisation.
I would add a word about the suggestion that the 1967 resolution authorised W H Thompson to be the solicitors for SOGAT in this action. I do not think that it was sufficient for the purpose. There is a helpful passage of James LJ in Saffron Walden Second Benefit Building Society v Rayner ((1880) 14 Ch D 406 at 409). Applying it, it seems to me that the appointment of W H Thompson as solicitor was a general appointment only. It did not carry with it instructions to act in this particular action years afterwards to which SOGAT was not originally a party.
Mention was made of the sentence in rule 6: ‘The Trustees shall act under the directions of the Executive Council … ’ That seems to me to apply to the application of the funds. It certainly does not apply in the case where they, being paralysed, have given no direction. So it seems to me that the appearance entered by Shaen, Roscoe & Bracewell was authorised and was valid, and that the order of the judge to the contrary should be set aside.
But I ought to add this, that since that appearance was entered there have been many more disputes arising between the two divisions of SOGAT, between Division A and Division 1. We have been told of proceedings that are now pending and going on both in the Queen’s Bench and Chancery Divisions of the High Court. In view of those, it is quite apparent that Shaen, Roscoe & Bracewell can no longer act for this union, SOGAT, at the same time as acting for Division 1. There is such a conflict of interest arising that Shaen, Rosco & Bracewell, through counsel, have properly told this court that they feel they can no longer act for SOGAT, and that SOGAT must therefore be separately represented. That is all very proper, but it does not make the original appearance bad. We are told that Cooke J expressed the view that the conduct of Shaen, Roscoe & Bracewell was proper, but he thought unauthorised. I would say that it was proper and also was authorised.
Then I must deal with the final point which was put thus by counsel for the plaintiffs: ‘Well, in any event there was such a conflict of interest apparent at the time Shaen, Roscoe & Bracewell entered this appearance that they were in breach
Page 294 of [1971] 1 All ER 289
of duty and indeed in breach of duty to the court, for which they should be penalised in this way, that they ought to pay all the costs of what has happened because they ought never to have undertaken it because of the conflict of interest’. It seems to me there is a short answer to that. The only question for us is whether the appearance was authorised or not by the trustees. The question of conflict of interest is a matter between the solicitor and the client himself. It does not affect the authority of the solicitor. I would not presume to go into the question whether there was such a conflict of interest existing in April 1970 as distinct from what there is today. All I would say is that I would not think it proper for one moment to hold the solicitors guilty of any misconduct at all or to make them pay the costs of any such matter.
I therefore think that the appeal should be allowed and the appearance should be upheld and allowed to stand; but, in view of what I have said, the trustees of this trade union should immediately instruct solicitors to carry on in the action on their behalf, and I hope in instructing the solicitors the trustees as soon as possible will consult all those concerned—in fact there may be the advisers to other parties—so that there will be no further question as to a proper solicitor acting for SOGAT. I would in those circumstances allow the appeal.
PHILLIMORE LJ. I agree that this appeal should be allowed. It is a distressing dispute. As Lord Denning MR has recounted, some years ago these two important unions in the printing trade, the National Union of Printing, Bookbinding and Paperworkers and the National Society of Operative Printers and Assistants, combined to form a single union to be called the Society of Graphical and Allied Trades. That union was actually registered as such on 31 January 1966. Its rules expressly provided:
‘The funds, books and property of [SOGAT] shall be vested in the trustees of [SOGAT] in trust for all the members of [SOGAT].’
It was a somewhat uneasy bargain that they made because each of these two unions, although combined in this way, sought to preserve its own identity. Thus NUPB was to be called Division A of SOGAT and the other union, NATSOPA, was to be called Division 1, and so all the seeds of dissension were there. And, as Lord Denning MR has described, there was the Brighton conference held as prescribed under the rules for their revision. It is perfectly clear that some of the resolutions passed at Brighton directly affected the funds and property of SOGAT. I have only to refer, without reading them in detail, to the amended rule 6 in the booklet regarding the results of the rules revision conference. The result of that conference was that it was apparent that some of the resolutions were contradictory. At this time, as I see it, the representatives of NATSOPA decided that they would like to withdraw from SOGAT and these disputes began. Inasmuch as the executive council of SOGAT could only operate if there was a quorum which comprised a fixed number of each of the two component bodies, one side withdrew and thus destroyed the quorum and then the other side followed suit, so that the executive council was completely stultified and the conduct of SOGAT became impossible. One is tempted to comment that the conduct of these representatives hardly seems proper when one bears in mind their great responsibilities towards their members. It was the behaviour of school boys. However that may be, the result was that NATSOPA sought to amend their rules and then this action was begun. The master, having decided that, inasmuch as this was really a battle over the body of SOGAT, that union must be joined. The solicitors acting for the NATSOPA representatives entered an appearance on behalf of SOGAT and, as Lord Denning MR has described, objection to that was inevitably taken by the representatives of the other part of the union. Indeed they warned the solicitors, ie Shaen, Roscoe & Bracewell, before they entered that appearance that they should not in their view do it. Now the only practical question, as I see it, is the
Page 295 of [1971] 1 All ER 289
question of whether the appearance entered by those solicitors was properly authorised. I agree with Lord Denning MR that Mr Briginshaw, one of the joint secretaries of SOGAT, could not authorise it because the executive council could not authorise him to do so. The executive council was helpless. Their action in entering this appearance was, however, ratified by the trustees, and the question whether that constituted a proper authority depends, as Lord Denning MR has said, on the provisions of s 9 of the Trade Union Act 1871. It is not necessary for me to repeat what he has already said, because I entirely agree with his construction of that section. It seems to me that under that section the trustees of any trade union are empowered to cause to be defended any action touching or concerning the property, rights or claims to property of the union, and, in addition—and I emphasis the word ‘addition’—they can sue or be sued in their own name. Now here is a claim which, as it seems to me, undoubtedly touches the property of the union, property which these trustees hold on behalf of every member of the union. So I think that they were entitled to ratify the appearance entered by Shaen, Roscoe & Bracewell. I agree with Lord Denning MR that, despite all the warnings from the opposition, Shaen, Roscoe & Bracewell were entitled to form their own judgment whether at the time they entered that appearance there was any conflict of interest between their respective clients. It is now conceded that there is a complete conflict. It is now conceded not merely that there is a conflict of interest which would prevent their acting for both these defendants, but also a conflict of interest which would prevent W H Thompson acting for SOGAT. There are all these other actions going on. As I see it, this was a perfectly proper appearance. It was properly authorised by the trustees, but the time has now come when the trustees must instruct fresh solicitors, solicitors who can truly be said to be quite independent, and indeed if those solicitors can be found by agreement between the contestants and the trustees, it seems to me that would be a very happy solution; but that must be a matter for the trustees’ final decision. They have got a duty to all members of the union and they must instruct solicitors to advise them.
For those reasons I concur with the order proposed by Lord Denning MR.
GOFF J. I agree with the conclusion which both my brethren have reached and, apart from the question of s 9 of the Trade Union Act 1871, I would respectfully entirely agree with their reasoning, which I adopt as my own. They have expressed it no doubt better than I could have done myself.
I am bound to say that I have some misgivings as to the true construction of s 9. I have no doubt whatever that this action touches or concerns the property of the trade union; but I think that there is not a little to be said for the view that the section read as a whole does not deal with two things: one, the case where the union itself is a party and the trustees act on its behalf, and the other, the case where the trustees individually are sued. I would have thought, with respect, that the fact that at the time when the section was passed it was not clear that a trade union could sue or be sued in its own name rather supports the view that the section should be read as one entire provision dealing with actions by and against the trustees as individuals and not split into two, as both my brethren think that it ought to be. It is, however, a pure question of construction and, if I may say so with respect, the section is obviously capable of the construction which both my brethren think is right. It being, as I have said, a pure question of construction, I do not think that I would be justified in dissenting on the point, the only point as to which I have any misgivings. I therefore content myself with making these observations about this section, and I respectfully agree with the order which my brethren have proposed.
Appeal allowed.
Solicitors: Shaen, Roscoe & Bracewell (for SOGAT and for the solicitors on the record for SOGAT); D H P Levy & Co (for the plaintiffs).
Rosalie Long Barrister.
Stevenson v Tees-side Bridge and Engineering Ltd
[1971] 1 All ER 296
Categories: EMPLOYMENT; Redundancy
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 26 OCTOBER 1970
Employment – Redundancy – Refusal of employee to work away from home – Dismissal – Whether implied term in contract of employment relating to place of work – Steel erector employed in construction industry – Travelling an essential feature of employment in the industry.
When applying to the respondents, who were constructional engineers, for employment as a steel erector, the appellant stated, in answer to a specific question, that he was prepared to work away from home. He was engaged by the respondents and in fact spent a considerable part of his time working at sites in different parts of the country. The terms and conditions of the appellant’s contract of employment were set out in the national memorandum of agreement in the industry. The contract contained no express term that the appellant could be required by the respondents to go to any site in the country. Nevertheless it contained provisions, such as those dealing with travelling and subsistence allowances, which clearly envisaged that travelling was an essential feature of his employment. The constructional steel industry was one which, by its very nature, meant that sites where work was available might be scattered all over the country and it was known by men working in the industry that travelling round the country was a feature of employment in it. At the time of his dismissal the appellant had been working at a site within daily travelling distance of his home. When work on this site was coming to an end he was ‘offered’ work at three different sites, all of which were at a distance which would require his staying away from home. He refused to go to any of them, not on the ground that he was not employed to do so but because he thought the opportunity of earning overtime was not good. He was accordingly dismissed by the respondents and brought an action claiming that he was entitled to a redundancy payment under s 1(2)(b) of the Redundancy Payments Act 1965.
Held – The appellant had not been dismissed by reason of redundancy and so was not entitled to a redundancy payment. There was no express term in the contract of employment that the appellant would be required to transfer from site to site, but, because of the nature of his work, the fact that prior to his being engaged he had stated that he was prepared to work away from home and the provisions of the contract of employment which envisaged the necessity of travelling and staying away from home, a wide term would be implied in the contract that his place of employment included any site where he might be required by the respondents as a steel erector (see p 299 c, p 300 d and p 301 b and c, post).
Notes
For dismissal of an employee by reason of redundancy, see Supplement to 38 Halsbury’s Laws (3rd Edn) para 808c.
For express or implied term in a contract, see 8 Halsbury’s Laws (3rd Edn) 121–124, paras 212–215.
For the Redundancy Payments Act 1965, s 1, see 12 Halsbury’s Statutes (3rd Edn) 238.
Cases referred to in judgments
O’Brien v Associated Fire Alarms Ltd [1969] 1 All ER 93, [1968] 1 WLR 1916, Digest Supp.
Page 297 of [1971] 1 All ER 296
Ingham v Bristol Piping Co (Erection) Ltd 1970 ITR 218.
Mumford v Boulton & Paul (Steel Construction) Ltd 1970 ITR 222.
Appeal
This was an appeal by Edward Stevenson from a decision of the Industrial Tribunal, given on 24 March 1970, whereby it held that the appellant had not been dismissed by the respondents, Tees-side Bridge and Engineering Ltd, by reason of redundancy, within the meaning of the Redundancy Payments Act 1965, and was not entitled to a redundancy payment. The facts are set out in the judgment of Lord Parker CJ.
M Kershaw for the appellant.
P D J Scott for the respondents.
26 October 1970. The following judgments were delivered.
LORD PARKER CJ. This is an appeal from a decision of the Industrial Tribunal, given on 24 March 1970, whereby it held that the appellant was not entitled to a redundancy payment. The matter arises in this way. For a number of years the appellant has worked as an employee of one or other of the companies, including the respondents, which are in what is known as the Dorman Long Structural Group. At the time of his dismissal at the end of December 1969, he was a charge hand steel erector employed by the respondents. It is of course well known, without really any evidence being given, that the business of steel erecting takes place all over the country, and that constructional companies such as the respondents will take work anywhere.
The sole question in the present case is whether it was a term of the contract of employment that the respondents were entitled to send the appellant to any site in the country where they had secured a contract for steel erection. The appellant lived at Leyland in Lancashire, and at the time of his dismissal the contract on which he had been engaged, which was on the Kirby Industrial Estate near Liverpool, a place within daily travelling distance of Leyland, was coming to an end. He was then ‘offered’ work at other sites where the respondents had secured contracts. He was offered, according to the appellant himself, work at Blyth in Northumberland, at Anglesey and also at Lees near Manchester. He in fact refused to go to any of those places; not, I emphasise, on the ground that he was not employed to go there, but on the basis that he thought that the opportunity of earning overtime was not good. He said in effect that he would have gone if, as he put it, the money had been right.
The tribunal decided that it was a term of his employment that the appellant should go where the respondents required him to go. It stated:
‘One has to bear in mind that we are dealing with the constructional steel industry where, by its very nature, sites where work is available may be scattered all over the United Kingdom and that the men who work in the industry know that travelling around the country is a feature of employment in it. We note in this connection that, on many occasions before, [the appellant] has worked away from home in the way that I have described.’
It then went on to refer to certain clauses and passages which occur in the Memorandum of Agreement between the Engineering Employers’ Federation and the Constructional Engineering Union. It ended by stating:
‘Bearing those three clauses in mind and bearing in mind the custom and practice which members of the tribunal who are experienced in such matters consider does exist in the steel construction industry, and bearing in mind the facts of the [appellant’s] service away from home on a number of occasions we are satisfied that the respondents did have a contractual right to require the [appellant] to work at any of their contract sites where there was work available.
Page 298 of [1971] 1 All ER 296
When in November, 1969 he refused to travel to any of the sites mentioned to him, the respondents were within their rights in dismissing him for breach of contract.’
The tribunal’s decision was given before two cases of a somewhat similar nature were heard in this court, appeals in each case from the Industrial Tribunal. The first case, Ingham v Bristol Piping Co (Erection) Ltd, concerned a maintenance man who, when offered other employment at another site, refused. This court allowed the appeal holding that there was insufficient evidence to justify the tribunal holding that, as a matter of law, it was a term of the employment that the respondents could require the appellant to go anywhere.
The next case is Mumford v Boulton & Paul (Steel Construction) Ltd, where this court was in fact dealing with a steel erector. This case is clearly very relevant to the present one. It is clear that the court considered that it was a borderline case, but again allowed the appeal, finding it impossible to hold that it was a term of his employment that the steel erector could be required to go anywhere. It was a borderline case, as I have said, as is shown by the fact that Bean J came to a different conclusion, and secondly that in that case I said this (1970 ITR at 226):
‘In those circumstances I have come to the conclusion, though with some regret, that this appeal ought to be allowed. I say “with some regret” because this is by no means the first case of its kind which has come before this Court, and one cannot help feeling that in many of these cases if other evidence had been called it might have been possible to show that the employees themselves must be taken to have known at the time when they were engaged that they were liable to be sent anywhere in the country.’
Accordingly, one looks in this case to see what the evidence was. The terms of employment were set out in the form delivered under the Contracts of Employment Act 1963. This stated that the terms and conditions of the appellant’s employment were those set out in the Memorandum of Agreement in the industry. It is conceded, and was conceded by the tribunal, that that Memorandum of Agreement does not state specifically that it is a term of the contract that an employee can be sent from site to site anywhere in the country as required by his employers. The tribunal started with this, that there was, therefore, no express term of the kind alleged by the employers. On the other hand, the position here is quite different from that in Mumford’s case, or indeed any of the earlier cases beginning with O’Brien v Associated Fire Alarms Ltd, where the Court of Appeal held that, on the evidence, the only term that could be implied was that the work which the employee was required to do should be within commutable distance of his home.
Here there was evidence first of all from the respondents given by Mr Williams, who said:
‘I considered it to be part of his contract of employment that he should travel as required to any site to which he was directed. He is a steel erector and must go where sent.’
That is the position from the respondents’ side.
On the appellant’s side it is to be observed first of all that, when he applied for employment, he was specifically asked: ‘Are you prepared to work away from home? A. Yes.' It was, therefore, clearly contemplated by him that he would be required to work away from home. From that one moves to see what in fact did
Page 299 of [1971] 1 All ER 296
happen and, when one considers that, one finds that the appellant spent a considerable part of his time working away from home. He had worked for the respondents at Melton Mowbray for nine months, at Bath for one month, at Peterborough for one month, at Cheltenham for three weeks, and at Eggborough in South Yorkshire for 11 months, and it also appears, and it is accepted, that for other members of the group he has worked at East Greenwich, in London, Haleway and Stanton in Nottinghamshire, London Airport and Bath. I emphasise that, because in Ingham’s Case there was no evidence that the employee had ever been required to work away from his home or at commuting distance from his home, and he had never done so. Equally, in Mumford’s case, there was no evidence that the employee had worked away from home. Indeed, there was a document which was relied on as a statement that he would never be required to work outside the London area.
Although there is no express term in the national Memorandum of Agreement, as I have already stated, it is quite clear that the agreement envisages that travelling is an essential feature. I appreciate that it can be said that it is dealing merely with travelling by agreement with the employee, but for my part I should have thought that the natural inference was that it covered travelling which was expected in the industry, and which the employers were entitled to demand in the industry. Without going through it in detail, the agreement contemplates ‘away contracts’, by which is meant contracts obtained by the employers at places away from the employee’s home. The agreement refers to a travelling allowance of 18s for sites over 20 miles, and that over 20 miles an employee may, with the agreement of his employers, live in lodgings at 18s per day, and throughout, this refers, amongst other things, to ‘away contracts’. The agreement also provides that transport expenses shall be allowed in regard to ‘away contracts’, clearly meaning contracts not within commuting distance of the employee’s home, but where he will live in lodgings. To take an example relied on by the tribunal, one finds, in cl 10 of the Memorandum of Agreement, in the second paragraph, this reference:
‘A worker may, however, be transferred from one contract to a second contract provided he has not been employed by the same employer away from home for more than four weeks … ’
It goes on to deal with the payments which should be made when the worker is so transferred. Certainly it is more consistent in my view with a requirement for transfer subject to a proviso. Again, when one deals with the notes to cl 18, which is attached to the agreement, these words appear:
‘When a contract is nearing completion and the firm require to transfer any of the workers to another contract, at least one week’s notice of the transfer should be given.’
Even if those passages can be said to be just as consistent with what I may call voluntary transfer as opposed to compulsory transfer, the very fact that the details of this are set out with such elaboration in the Memorandum of Agreement certainly conveys, to my mind, that transferring is an essential feature of the industry both from the employers’ point of view and the employees’ point of view. The tribunal, which was very experienced in these matters, stated, in a passage which I have already read, and which I will read again:
‘One has to bear in mind that we are dealing with the constructional steel industry where, by its very nature, sites where work is available may be scattered all over the United Kingdom and that the men who work in the industry know that travelling around the country is a feature of employment in it.’
That is the tribunal expressing, from its knowledge and experience, the employees’ position in the matter.
Page 300 of [1971] 1 All ER 296
Finally, I would observe that what of course we are seeking to do, and must not lose sight of, is to define the place of employment for the purposes of s 1 of the Redundancy Payments Act 1965. Section 1(2) provides:
‘For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to … (b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish.’
What then, one asks, was the place of employment where he was employed? In dealing with an industry such as this, it seems to me that, in the absence of an express term, there must be an implied term of some nature. As I have said, in O’Brien’s case a term was implied that the place of employment was the area which was within commuting distance of the man’s home, and that was based largely on what had happened. I ask myself: how could one ever imply that term in the present case when one sees the whole history of the appellant’s employment going from place to place, as is conceded, without any objection on his part? Short of saying that the place of employment is the very last site at which he was working, so that when he works at another he is really re-engaged, it seems to me that there is every reason here to imply a wide term to give effect to the business efficacy of the contract of employment.
I think that in this case, unlike Mumford’s case, sufficient evidence has been given to justify the tribunal’s finding. Accordingly I would dismiss this appeal.
ASHWORTH J. I agree. I would just like to add one word on what has last fallen from Lord Parker CJ. There are three cases to which this court’s attention has been drawn, O’Brien v Associated Fire Alarms Ltd, Ingham v Bristol Piping Co (Erection) Ltd and Mumford v Boulton & Paul (Steel Construction) Ltd. It so happens that in each one of those cases the applicant for redundancy benefits succeeded eventually. As counsel for the respondents said, and I agree with him, there is a line to be drawn somewhere between those cases where he succeeded and the type of case where an employer has produced enough evidence to justify the tribunal in holding that there was an implied term which, if enforced, would put the claim out of court. It is interesting to notice that Salmon LJ, giving the judgment in O’Brien’s case, was concerned with the question of evidence. He said ([1969] 1 All ER at 97, [1968] 1 WLR at 1925):
‘In my view, there were no facts proved in evidence from which it was permissible for the tribunal to draw the inference in law that it was a term of the employees’ employment that they could be asked to work anywhere within what I have referred to as the area controlled from the company’s Liverpool office. We do not know whether the contracts of employment were oral or in writing, nor what were their express terms, save those set out in the notice to which I am about to refer. There is not a spark of evidence one way or the other about these matters … One cannot, however, call the terms of employment into existence by assuming them.’
In contrast to the situation illustrated by those two cases, the respondents in the present case went to some pains to lay before the tribunal material in order to justify their claim that it was an implied term of the appellant’s contract that he should
Page 301 of [1971] 1 All ER 296
be sent anywhere where he was required as a steel erector. I need not repeat the material relied on by the tribunal in its reasons here, but I would venture to stress what I regard as most important. When the appellant was taken on, he applied in writing to the respondents for employment, and it must have been in the respondents’ mind to know whether they could safely engage him in the steel erecting business, which would require his being sent away from the headquarters, or a particular area. Accordingly the question was asked and he answered, Yes. I take the view that it is highly unlikely that he would ever have been engaged at all if he had answered that question, No. With that material in front of them the respondents engaged him, until he notified them of his unwillingness to continue to work away from home. I would have said quite plainly that there was an implied term in his contract of employment that he would work where directed.
For those reasons, which are really no different from those stated by Lord Parker CJ, I would dismiss this appeal.
BROWNE J. I agree with the reasons given by Lord Parker CJ and Ashworth J.
Appeal dismissed.
Solicitors: Gibson & Weldon agents for Smith, Fazackerley & Co, Preston (for the appellant); Lovell, White & King (for the respondents).
N P Metcalfe Esq Barrister.
Hosier & Dickinson Ltd v P & M Kaye Ltd
[1971] 1 All ER 301
Categories: CONSTRUCTION
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 2 OCTOBER, 5 NOVEMBER 1970
Building contract – Architect’s certificate – Final certificate – Conclusiveness – Conclusive ‘in any proceedings’ – Action commenced prior to final certificate – Counterclaim put in after final certificate – Whether counterclaim barred – RIBA Standard Form of Contract (1963 Edn, July 1969 Revision), cl 30(7).
By an agreement made in June 1966, the employers employed contractors to build a warehouse and offices. The contract was in the standard from of the RIBA. By the summer of 1967, the work was almost complete and the employers had taken possession of the new premises. The architect had by then issued interim certificates amounting to a total of £66,033, of which the employers had paid £51,172, leaving a balance of £14,861. The employers did not pay this sum, complaining that the flooring in the warehouse was faulty. The contractors relaid the floor. Some six weeks later they started proceedings to recover the outstanding amount and issued a summons under RSC Ord 14. The employers put in an affidavit of defence which alleged that the flooring was still faulty and that as a result they had suffered loss of profits amounting to some £13,500. In October 1967, at the hearing of the summons, arrangements were made for the employers to pay a further £5,000 and it was ordered that the action be transferred to an official referee. Further negotiations took place between the parties and it was agreed that the action should be left in abeyance and not, at that stage, transferred to the official referee. The defects in the floor were never remedied. According to the contractors this was because the employers were so busy using the warehouse that it was never convenient to do the work. In September 1968, the contractors wrote to the architect saying that they wanted to be paid. In June 1969, quantity surveyors measured the work and calculated the amount payable on the whole contract as £68,393.
Page 302 of [1971] 1 All ER 301
The architect wrote to the employers for their approval of the completed building but got no reply. Accordingly, on 23 September 1969, he issued the final certificate for the balance of £2,360. Clause 30(7) of the contract provided that ‘Unless a written request to concur in the appointment of an arbitrator shall have been given … by either party before the Final Certificate has been issued … the said certificate shall be conclusive evidence in any proceedings arising out of this Contract … that the Works have been properly carried out … ’ Clause 35 provided for disputes to be referred to arbitration. On 26 September, the employers asked the contractors to concur in the appointment of an arbitrator. The contractors pointed out that it was too late, and in October 1969 they issued another writ for the amount due on the final certificate. The 1967 action on the interim certificate was still on the file and the employers put in a defence and counterclaim in each action claiming £13,500 loss of profits because of the defective floor. The two actions were consolidated. The contractors appealed against a decision of the official referee that cl 30(7) did not apply in relation to the proceedings commenced in 1967 and thus did not bar the counterclaim for bad work.
Held – The fact that the contractors had taken proceedings in the courts in 1967 and not referred the matter to arbitration did not take the dispute out of the ambit of cl 30(7). The words ‘any proceedings’ were so all-embracing that they could not be limited in that way and included proceedings which had already been commenced or might be commenced in the future. Thus, save for an arbitration already commenced under cl 35, the architect’s certificate was conclusive evidence that the work had been properly carried out and completed in accordance with the contract. Accordingly the counterclaim for bad work was barred not only in the 1969 action but also in the 1967 action (see p 305 b g and h, post).
Notes
For conclusiveness of a final certificate, see 3 Halsbury’s Laws (3rd Edn) 464–467, paras 892–896, and for cases on the subject, see 7 Digest (Repl) 369–371, 122–129.
Cases referred to in judgments
Chambers v Goldthorpe, Restell v Nye [1901] 1 KB 624, [1900–03] All ER Rep 969, 70 LJKB 482, 84 LT 44, 7 Digest (Repl) 461, 480.
Doleman & Sons v Ossett Corpn [1912] 3 KB 257, 81 LJKB 1092, 107 LT 581, 76 JP 457, 7 Digest (Repl) 451, 439.
Pitchers Ltd v Plaza (Queensbury) Ltd [1940] 1 All ER 151, 162 LT 213, 2 Digest (Repl) 496, 461.
Interlocutory appeal
This was an interlocutory appeal in two actions by Hosier & Dickinson Ltd (‘the contractors’) against P & M Kayer Ltd (‘the employers’) for sums due to them for work carried out and materials supplied under a building contract dated 24 June 1966. The contractors appealed from the judgment of his Honour Norman Richards QC, official referee, who, on the trial of a preliminary issue on 18 June 1970, held that the employers’ counterclaim for loss of profit because of defective work and materials was not barred by the terms of the contract. The facts are set out in the judgment of Lord Denning MR.
R P Ground for the contractors.
Robert Alexander for the employers.
Cur adv vult
Page 303 of [1971] 1 All ER 301
5 November 1970. The following judgments were delivered.
LORD DENNING MR. By an agreement dated 24 June 1966, P & M Kaye Ltd (whom I will call the employers) employed Hosier & Dickinson Ltd (whom I will call the contractors) to build a warehouse and offices at Hemming Street, London. The architect was Mr Moody of Carl Fisher and Associates. The contract was in the standard form of the RIBA. The contract sum was £45,660 9s 1d, but eventually this was increased by extras and so forth to a total sum of £68,393 6s 6d.
By June 1967, the contractors had practically completed the work. The employers had taken possession of the new warehouse and gone into occupation of the new offices. The architect had already issued interim certificates for £55,059 of which the employers had paid £51,172 leaving outstanding the sum of £3,887. On 6 July 1967, the architect issued a further interim certificate for £10,974. The employers did not pay it. About this time the employers complained that the flooring of the warehouse was faulty. The contractors appear to have admitted the fault and relaid the floor. This was completed by 8 August 1967.
On 19 September 1967, the contractors issued a writ and statement of claim claiming the balance due on the interim certificates, ie £3,887 plus £10,974, making £14,861. They issued a summons under RSC Ord 14. The employers put in an affidavit of defence in which they said that the flooring was still faulty, that the relaid flooring had begun again to crack, and that it would have to be relaid again. They said that the trouble about the floor had meant a loss of profit and that this amounted to £13,464 15s 7d. On 27 October 1967, at the hearing of the summons under RSC Ord 14, arrangements were made under which the employers were to pay £5,000 to the contractors; and an order was made for the action to be transferred to an official referee. Thereafter there were negotiations for the contractors to remedy the defects and meanwhile the parties agreed to let the action stand in abeyance. They agreed that it should not at that stage be transferred to the official referee. Somehow or other the defects were never remedied. The contractors said that they were ready to do it, but the employers were so busy using the premises that it was never convenient for the work to be done. Eventually the contractors wrote to the architects on 11 September 1968, saying that they wanted their money. Their letter read:
‘… we would add that despite the cracking in certain areas of the granolithic floor the surface shows no signs whatsoever of deterioration despite the obvious heavy use it is receiving. It is our considered opinion that further work to the floor is completely unnecessary due to the foregoing and should be no reason for the [employers] to withhold payment of such vast sum of money which they are now so doing.’
Months passed. The quantity surveyors measured the work and on 30 June 1969 made the amount payable for the whole contract to be £68,393 6s 6d. The architect seems thereupon to have written to the employers seeking their approval of the completed building; but he got no response. On 6 August 1969, the contractors wrote to the architect asking him to issue the final certificate. On 25 August 1969, the architect issued it for a total of £68,393 6s 6d; he deducted the previous certificates amounting to £66,033, leaving £2,360 due on the final certificate. By this time there had been changes in the constitution of the employers. The shares in P & M Kaye Ltd had been sold to new owners called Transloyd Ltd. The final certificate of 25 August 1969, was issued in the name of Transloyd Ltd as employers. This was queried. So on 23 September 1969, the architect issued another final certificate for the same £2,360 in the name of P & M Kaye Ltd, the original employers.
Three days after the final certificate had been issued, ie on 26 September 1969, the employers’ solicitors said that the dispute about the work still existed and asked the contractors to concur in the appointment of an arbitrator. The contractors said that this was too late. On 30 October 1969, they issued another writ, this time for the amount of the final certificate, £2,360 6s 6d. There was still on the file, of
Page 304 of [1971] 1 All ER 301
course, the 1967 action on the interim certificates, £14,861 less £5,000, namely £9,861. In November 1969, the employers put in a defence and counterclaim in each action, claiming £13,464 15s 7d for loss of profit because of the defective flooring. The two actions were transferred to the official referee and consolidated. In the pleadings the contractors said that the counterclaim for bad work was barred by the final certificate. They relied on cl 30(7) of the RIBA from which states that the final certificate is ‘conclusive evidence’ that the works have been properly carried out. The employers rejoined that cl 30(7) did not apply to this dispute. The official referee ordered the point to be tried as a preliminary point of law. He held that the counterclaim for bad work (having been raised in the 1967 action) was not barred by the final certificate. The contractors appeal to this court.
The important clause for consideration is, of course, cl 30(7) but I must first mention cl 35. This is an arbitration clause which provides:
‘… in case any dispute or difference shall arise between the Employer or the Architect on his behalf and the Contractor, either during the progress or after the completion or abandonment of the Works … then such dispute … shall be and is hereby referred to the arbitration and final decision of a person to be agreed … ’
It is to be noticed that in 1967, when the dispute arose about the floor, neither party referred it to arbitration. The contractors brought the 1967 action on the interim certificates and the employers defended it. The employers did not apply for a stay pending arbitration.
Now I go to cl 30(7) which provides:
‘Unless a written request to concur in the appointment of an arbitrator shall have been given under clause 35 of these Conditions by either party before the Final Certificate has been issued or by the Contractor within 14 days after such issue, the said certificate shall be conclusive evidence in any proceedings arising out of this Contract (whether by arbitration under clause 35 of these Conditions or otherwise) that the Works have been properly carried out and completed in accordance with the terms of this Contract … ’
subject to certain exceptions, none of which applies here.
It is to be noted that the employer must apply for arbitration before the final certificate is issued, whereas the contractor has another 14 days after it is issued. The reason for the difference is, no doubt, this: the architect is the agent of the employer and owes him a duty to take care not to issue a final certificate unless he is satisfied with the work. It may safely be assumed that the architect has done his duty. So no further time need be allowed to the employer. But the architect is not the agent of the contractor. It is therefore right that the contractor should have further time, namely, 14 days. In this case the employers did not make a request for arbitration before the issue of the final certificate. So the clause, on the face of it, came into operation. The certificate was conclusive evidence ‘in any proceedings arising out of this Contract’.
If this case concerned the second action only, ie the action which was started on 30 October 1969 for the sum due on the final certificate, the clause would, I think, be decisive. The employers would not be able to say that the work was not properly carried out. That contention would be barred by the final certificate. The difficulty is with the first action, ie the action which was brought on 19 September 1967, on the interim certificates. The employers say that, in that action, both parties entrusted the dispute about the flooring to the courts of law—the contractors by bringing the action in the courts and the employers by not applying for a stay—and that the architect could not, by afterwards issuing his final certificate, take that dispute away from the courts. Seeing that the dispute had already been entrusted to the courts—so runs the argument—there was no need for either party to apply for
Page 305 of [1971] 1 All ER 301
arbitration in respect of it. In other words, by bringing that action, the employers had taken the dispute out of the ambit of cl 30(7).
I can see the force of that argument. Indeed it was so cogent that the official referee accepted it. But I think that the words ‘any proceedings’ are so all-embracing that they should not be limited in the way which the employers suggest. Clause 30(7) means what it says. The final certificate is conclusive in any proceedings—which I read as any proceedings whether they have been already commenced or may be commenced in the future—save for an arbitration already commenced under cl 35. The final certificate is conclusive that the works have been properly carried out and completed in accordance with the terms of the contract. It is conclusive evidence, not only in the 1969 action on the final certificate, but also in the 1967 action on the interim certificates.
It was asked in argument: can the architect give a final certificate whilst an action is still pending and thus oust the jurisdiction of the court to decide the issue? Take it one step further: suppose that the court had given judgment finding that there were defects, could the architect give a final certificate such as to reverse the judgment of the court? Those questions are hypothetical, not real. I do not think that they are ever likely to arise. I cannot imagine that an architect would ever be so foolish as to give a final certificate if he thought that the employers’ complaint in an action was well founded. After all, the architect is the agent of the employers. He owes a duty to the employers to use due care in giving his final certificate. If he should negligently give a final certificate barring the employers from a good claim, he would, I think, be liable in damages. I know that in Chambers v Goldthorpe, Restell v Nye the majority of the court held that the architect occupied the position of an arbitrator and was not liable for negligence in giving a final certificate. That case has been much criticised, and will, if the occasion arises, have to be reconsidered. It does not apply here, however. For the clause there was very different from cl 30(7) here. This cl 30(7) gives the contractor 14 days but the employers none. That is because the architect owes a duty of care to the employers to see that the works have been properly carried out and is liable accordingly if he is negligent. He cannot be allowed to cover up his own mistakes by giving a final certificate.
I do not suggest, of course, that in the present case the architect was negligent. Quite the reverse. When he gave his final certificate, the 1967 action was not pending in any true sense of the word. It had lain dormant for nearly two years; and the contractors were being kept out of their money. If the architect was satisfied that the work had been properly completed, he was quite entitled to bring the matter to a close and to issue his final certificate. Once issued, it was conclusive. I would therefore allow this appeal.
Fenton Atkinson LJ, who is unable to be present this morning, authorises me to say that he has read this judgment and the judgment which Cairns LJ is about to deliver and that he agrees with both.
CAIRNS LJ. I agree with the judgment of Lord Denning MR. There is nothing in the contract or in the surrounding circumstances which justifies construing the expression ‘any proceedings’ as the official referee did, to mean:
‘proceedings initiated after the final certificate and which raise matters of dispute which do not already form part of the matters in dispute in current legal proceedings before the final certificate.’
This involves implying a limitation of the plain words ‘any proceedings’ and the limitation is in no way necessary to give business efficacy to the clause. If judgment were obtained and a final certificate conflicting with the judgment were given thereafter (a highly unlikely event) the certificate could not be put in evidence except by
Page 306 of [1971] 1 All ER 301
leave on appeal, which would probably be refused. If, however, any limitation is to be put on the words, a limitation to ‘any proceedings in which judgment has not been obtained before the final certificate’ would be more reasonable than that suggested by the official referee.
Then the official referee held that the parties ‘waived their rights in respect of resolving their differences by arbitration’. This is indeed so; the contractors waived their right by starting the action and the employers waived their right by taking a step in the action, ie by applying for leave to defend: see Pitchers Ltd v Plaza (Queensbury) Ltd. But the question is not whether they waived the right to arbitration but whether they waived the right to rely in the action on a final certificate if one was given while the action was pending. There is no reason for inferring that either party waived such right; the certificate might have enured for the benefit of either. If the question had been raised at the time of the RSC Ord 14 proceedings each party might well have said: ‘We will go on with the action but, of course, if a final certificate is issued before the trial, that can be put in evidence and will be conclusive one way or the other’. The contention for an implied agreement fails for the same reason.
As to estoppel, the allegation is that the employers were induced by the contractors to believe that the contractors were willing to have the issues litigated in court and that the contractors did not rely on cl 30(7), and that by reason thereof the employers did not claim arbitration pursuant to cl 30(7). There is no sound basis here for any estoppel. The contractors were (and still are) willing to have the issues litigated in court. They did not in 1967 rely on cl 30(7) because the opportunity of doing so had not then arisen. The right to arbitration arose not under cl 30(7) but under cl 35 and the employers lost that right by applying for leave to defend instead of applying under s 4 of the Arbitration Act 1950 for a stay. But they did not thereby lose their right to request concurrence in the appointment of an arbitrator. They could not by making such a request at a later stage have compelled the contractors to arbitrate (see Doleman & Sons v Ossett Corpn) but if such a request had been made, the contractors might have agreed to arbitration and the action could have been discontinued. So a request to concur in appointing an arbitrator would not have been a mere useless formality. It would appear that the employers failed to make such a request in time not because they were misled in any way by the contractors but because (misconstruing cl 30(7)) they thought that they could make it within 14 days after the final certificate.
For these reasons, in addition to those given by Lord Denning MR, I agree that the appeal should be allowed.
Appeal allowed. Leave to appeal to the House of Lords refused.
16 December 1970. The appeal committee of the House of Lords (Lord Morris, Lord Upjohn and Lord Diplock) granted leave to appeal.
Solicitors: Letts & Co (for the contractors); Mansons (for the employers).
Rosalie Long Barrister.
Mulholland and another v Mitchell (by his next friend Hazel Doreen Mitchell)
[1971] 1 All ER 307
Categories: CIVIL PROCEDURE
Court: HOUSE OF LORDS
Lord(s): LORD HODSON, VISCOUNT DILHORNE, LORD WILBERFORCE, LORD PEARSON AND LORD DIPLOCK
Hearing Date(s): 15, 19 OCTOBER, 25 NOVEMBER 1970
Court of Appeal – Evidence – Further evidence – Damages for personal injuries – Basis of assessment falsified by subsequent dramatic change of circumstances – Assessment of future cost of medical and nursing services falsified by events occurring after trial – RSC Ord 59, r 10(2).
The respondent to this appeal had been awarded damages for injuries sustained as a result of a road accident which had occurred while he was travelling as a passenger in the appellants’ car. Damages had been assessed on the basis, inter alia, that it would be possible for him to be looked after at home and, if that proved to impose too much of a strain on his family, in an ordinary nursing home. He appealed to the Court of Appeal against the award of damages. While the appeal was pending an application was made on his behalf for leave to adduce fresh evidence on the ground that there had been a dramatic change of circumstances since the award had been made at the trial. The fresh evidence was that the respondent’s mental condition had subsequently and unexpectedly deteriorated to such an extent that he could no longer be looked after at home, that he needed specialist care at a psychiatric rather than an ordinary nursing home and that as a result the costs of nursing care over a long period of years would be about double that originally estimated at the trial. The appellants appealed from the order of the Court of Appeal giving the respondent leave under RSC Ord 59, r 10(2)a, to adduce fresh evidence.
Held – (i) The Court of Appeal had an unfettered discretion to admit evidence of facts occurring after the trial but, since it was desirable that there should be finality in litigation and fresh evidence should not be admitted relating to matters falling within a field or area of uncertainty taken into account by the trial judge, the court should only exercise its discretion in an exceptional case as where, for example, the basis on which the trial judge gave his decision had been clearly falsified by subsequent events (see p 309 d, p 310 f, p 311 a, p 313 b and c, p 314 a b and e and p 315 a, post).
Dictum of Lord Pearson in Murphy v Stone-Wallwork (Charlton) Ltd [1969] 2 All ER at 960 applied.
(ii) Since the basis on which damages had been assessed had been suddenly and materially falsified by a dramatic change in circumstances after the trial, the present case was exceptional and the Court of Appeal had rightly exercised its discretion in favour of admitting the fresh evidence; accordingly, the appeal would be dismissed (see p 310 f and h, p 311 d, p 313 h, p 314 f to h and p 315 a, post).
Notes
For the rule that damages are assessed once and for all, see 11 Halsbury’s Laws (3rd Edn) 227, 228, para 395, and for cases on the subject, see 17 Digest (Repl) 84–88, 57–89.
For the power of the Court of Appeal to receive further evidence, see 30 Halsbury’s Laws (3rd Edn) 468–470, para 884, and for cases on the subject, see 51 Digest (Repl) 823–828, 3794–3829.
Page 308 of [1971] 1 All ER 307
Cases referred to in opinions
Brown v Dean [1910] AC 373, [1908–10] All ER Rep 661, 79 LJKB 690, 102 LT 661, 51 Digest (Repl) 865, 4160.
Curwen v James [1963] 2 All ER 619, [1963] 1 WLR 748, 51 Digest (Repl) 824, 3805.
Evans v Bartlam [1937] 2 All ER 646, [1937] AC 473, 106 LJKB 568, sub nom Bartlam v Evans 157 LT 311, 50 Digest (Repl) 401, 1113.
Jenkins v Richard Thomas & Baldwins Ltd [1966] 2 All ER 15, [1966] 1 WLR 476, 51 Digest (Repl) 825, 3806.
Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489, 51 Digest (Repl) 827, 3826.
Murphy v Stone-Wallwork (Charlton) Ltd [1969] 2 All ER 949, [1969] 1 WLR 1023, Digest Supp.
Appeal
This was an appeal by Patricia Thelma Mulholland and John Anthony Mulholland from an order of the Court of Appeal (Winn and Karminski LJJ and Sir Gordon Willmer), dated 9 February 1970, granting the respondent, John Herbert Mitchell, leave to adduce further evidence on the hearing by the Court of Appeal of his appeal from the judgment of Nield J, dated 18 June 1969. The facts are set out in the opinion of Lord Hodson.
J D May QC and M J P Macnair for the appellants.
W H Griffiths QC and J M Wright for the respondent.
Their Lordships took time for consideration
25 November 1970. The following opinions were delivered.
LORD HODSON. My Lords, the respondent to this appeal, John Herbert Mitchell, sustained very serious personal injuries on 25 June 1965, while travelling as a passenger in a car driven by Patricia Mulholland, the first appellant. Liability was admitted and the only issue at the trial was the amount of damages which the respondent should recover. The damages awarded amounted to £45,757 including special damages of £1,191. Judgment was given on 18 June 1969, after a lengthy consideration of medical evidence by the learned judge. The principal injury sustained by the respondent was to his brain. The evidence showed that he is permanently incapacitated mentally and physically and that he will require continuous care and attention for the rest of his life. His expectation of life, however, has not been diminished, he being some 36 years of age at the date of the trial. The respondent appealed to the Court of Appeal for an increase in the award of damages. This appeal is pending and during its pendency the respondent applied to the Court of Appeal for leave to adduce fresh evidence on the ground that there has been a dramatic change of circumstances since the learned judge made his award, in particular relating to the kind of nursing and medical treatment which he now requires. On 9 February 1970, the Court of Appeal gave the respondent leave to adduce fresh evidence and from that order the present appeal is taken.
By our law, unlike that of many other countries, the maxim interest rei publicae ut sit finis litium is, in the usual case, strictly followed. Damages are accordingly assessed once for all at the time of the trial notwithstanding that in many cases, and this applies especially to cases of personal injury, uncertain matters have to be taken into account. The court has to make the best estimate it can as to the future life of the injured person, not only as to his prospects of recovery or improvement but also, as in this case, it must estimate the cost of caring for him either in his own home or in an institution suitably equipped to deal with his condition. This is the function of the court. Thereafter, to repeat the words of Lord Loreburn LC in Brown v Dean ([1910] AC 373 at 374, [1908–10] All Rep 661 at 662),
Page 309 of [1971] 1 All ER 307
‘When a litigant has obtained a judgment in a court of justice … he is by law entitled not to be deprived of that judgment without very solid grounds … ’
The fundamental principle, however, cannot be absolutely preserved and the Rules of Court provide, and have so provided in substance since 1883, that the Court of Appeal shall have power to admit further evidence on questions of fact. As to matters arising before trial, the practice recommended to be followed is to be found stated in the judgment of Denning LJ in Ladd v Marshall, where the dictum of Lord Loreburn was applied and amplified.
RSC Ord 59, r 10(2), in its present form provides as follows, so far as material to the present case:
‘The Court of Appeal shall have power to receive further evidence on questions of fact … but, in the case of an appeal from a judgment after trial or hearing of any cause or matter on the merits, no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds.’
I have italicised the words in brackets. The Court of Appeal is thus given an unfettered discretion to receive further evidence in a case such as this where there has been, and this is not denied, a dramatic change of circumstances after the date of the trial.
The present position as to the care and nursing of the respondent is said to be such that it falsifies the basis on which the learned judge, after careful consideration of the evidence before him, made his award. I should add that this falsification has not come about through any fault of the appellants, so that there is no question of their entering on this appeal to your Lordships’ House to take an unfair advantage arising from their own wrong.
In view of the language of the rule the House will, I apprehend, not readily interfere with the exercise of the discretion by the Court of Appeal in permitting the reception of fresh evidence as to the present necessities of the respondent relating in particular to nursing and medical treatment. Rules cannot be formulated for the exercise of discretion although general indications may be given as to what may or may not be taken into account. As was pointed out with emphasis by Lord Wright in Evans v Bartlam ([1937] 2 All ER 646 at 656, [1937] AC 473 at 489), the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong:
‘A discretion necessarily involves a latitude of individual choice, according to the particular circumstances, and differs from a case where the decision follows ex debito justitiae, once the facts are ascertained.’
The same considerations apply to an appeal to your Lordships’ House from the exercise by the Court of Appeal of a discretion vested in it by rules of court, and I approach the facts of this case, so far as they have been shown to us, from that point of view.
One feature of the evidence which stands out in importance is this. It was contended on behalf of the respondent that he would within a few weeks of the trial be discharged from hospital to live at home for the rest of his life, there to be cared for by his wife with permanent nursing help. The appellants always contended that the probabilities were that having the respondent at home, even with such help, would impose too great a strain on his wife and daughter (who was aged about 8 3/4 years at the date of trial) so that sooner or later he would have to be cared for in a hospital or nursing home. The substance of the fresh evidence which it is sought to adduce is that the respondent returned home on 25 August 1969, but it proved
Page 310 of [1971] 1 All ER 307
in the event impossible for him to remain there because of the deleterious effect on his own mental health. On 7 October 1969, he was readmitted to hospital. Subsequently he was moved to a nursing home, not the one whose fees were considered and agreed at the trial for the purpose of the argument as to damages. This latter nursing home no longer exists and the one proposed, called the Birchy Hill Nursing Home, is said to be the only available nursing home in the area in which he lives authorised by the local authority to accept patients under the Mental Health Act 1959, and equipped to give the respondent the nursing attendance which he now requires. It is said that it is anticipated that he will remain there indefinitely and that the circumstances leading to the deterioration in the respondent’s health and necessitating his return to hospital had not been foreseen by the doctors attending him, nor was such a possibility referred to in any of the agreed medical reports. The cost of his maintenance and medical attention at the Birchy Hill Nursing Home is put at £1,827 a year as against £903 a year—the cost of the residential nursing home, the latter not being a nursing home specially qualified for treating psychiatric cases. This was the nursing home which no longer exists and was taken into account by the learned judge in order to provide for the possibility that the respondent might have to go to a nursing home if, after a lapse of time, his wife might be unable to look after him. In dealing with post trial expenses the learned judge took the figure of £1,312 a year for nursing at home. He awarded £10,496 under this head taking into account the respondent’s submission that this situation would continue for 35 years and the appellants’ submission that five years’ purchase was the appropriate multiplier. He said that there would undoubtedly be imposed on the respondent’s wife a great strain and that it might be that the respondent would have to go to a nursing home where the cost at present would be £903 a year, or become a patient under national health arrangements, paying nothing. The figure of £10,496 was reached by applying a multiplier of eight.
In view of the decision which I have reached that the order of the Court of Appeal should be upheld, I think that it is undesirable to examine the facts further. As I have already said, the question whether fresh evidence is admitted or not is to be decided by an exercise of discretion. As my noble and learned friend Lord Pearson said in Murphy v Stone-Wallwork (Charlton) Ltd ([1969] 2 All ER 949 at 960, [1969] 1 WLR 1023 at 1036), the question is largely a matter of degree and there is no precise formula which gives a ready answer. In this case, I think that it can be fairly argued that the basis on which the case was decided at the trial was suddenly and materially falsified by a dramatic change of circumstances. An appeal on the whole question of damages is pending and it would be unsatisfactory for the court to deal with that appeal without taking into account the falsification, if such there be, of the basis of the trial judge’s award. In the absence of the fresh evidence, the Court of Appeal would be restrained from dealing with the reality of the case before it. I would therefore not interfere with the Court of Appeal’s order for the admission of fresh evidence. It is not shown that the court took into consideration matters which should not have been considered, nor can it be said at large that the decision was wrong.
I would dismiss the appeal.
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the opinions of my noble and learned friends, Lord Hodson, Lord Wilberforce and Lord Pearson. I am in general agreement with them and wish to add only a few words.
It is clearly not the case that the maxim interest rei publicae ut sit finis litium is to be applied literally to the assessment of damages by a trial judge. Our procedure permits an appeal from his assessment and review by the Court of Appeal and by
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this House. It is, however, unusual for fresh evidence to be allowed to be given on the hearing of such an appeal. Special grounds have to be shown for its admission unless the evidence is of matters which have occurred after the date of trial (RSC Ord 59 r 10(2)). Although the rule does not fetter the discretion of the Court of Appeal as to the admission of evidence of matters which have occurred after the trial, the Court of Appeal no doubt has and should have regard to the general undesirability of allowing that to be done.
In this case damages were assessed on the basis that it would be possible for the respondent to be looked after at home and, if that proved to impose too much of a strain on his family, in an ordinary nursing home. After the trial his mental condition unexpectedly deteriorated to such an extent that he had to be taken from his home and admitted to hospital as an emergency patient. On leaving there he went to the Birchy Hill Nursing Home, the only nursing home in his neighbourhood authorised to receive patients under the Mental Health Act 1959 and there he can receive the treatment which he now requires. The cost of his upkeep in this home is about double that which it was estimated at the trial would have been the cost in an ordinary nursing home. The result is that damages were assessed under this head at the trial on a basis which events after the trial have falsified.
It cannot, in my view, be said that in the exceptional circumstances of this case the Court of Appeal exercised its discretion wrongly. Indeed, in my opinion it was clearly right to grant the application.
I would dismiss the appeal.
LORD WILBERFORCE. My Lords, the respondent has been awarded by Nield J, after a trial lasting six days, damages of £45,757, for the tragic injuries which he suffered in a car accident. This total figure is made up of special damages, compensation for pain and suffering and the loss of amenities of life, compensation for loss of earnings, and £10,496 for future medical and nursing services. An appeal has been entered against the judge’s finding on each of these items, the submission being that in each case the award is too low. In the original notice of appeal the figure of £10,496 was challenged on the ground that it had been wrongly calculated on the material before him by the learned judge in certain specified respects. Later, an application was made to the Court of Appeal to admit fresh evidence of matters occurring since the trial which would, it was claimed, lead to a substantial increase in this item. The Court of Appeal allowed this application, but the appellants have appealed against its order to this House. The substantive appeal remains pending.
Damages for personal injuries in this country—the system differs elsewhere—are fixed by the court ‘once for all’. This expression must not be misunderstood. What it does mean is that the fact finding judicial system has to assess a single total sum of damages to cover the whole period from the accident until (in the case of a living victim) the death of the plaintiff. There is no means of obtaining a reassessment of it, upwards or downwards, in the light of subsequent events or developments. What it does not mean, in my opinion, is that the determination of the trial judge is final. In any case where trial is by judge alone, the assessment of damages for personal injury is subject to review by the Court of Appeal, in the same manner as any other award of damages by a judge. The matter comes under the wide powers of the Court of Appeal as stated in the Rules of the Supreme Court; the appeal is a rehearing, and the Court of Appeal has all the powers of the trial judge.
As regards fresh evidence, the Court of Appeal’s powers are stated, as they have been for over 80 years, in RSC Ord 59 r 10(2):
‘The Court of Appeal shall have power to receive further evidence on questions of fact … but … no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds.’
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The terms of the rule show that, as regards matters occurring since the trial, no special grounds need be shown. The matter lies in the discretion of the court. But on what principle ought this discretion to be exercised? Such answer as can be given to this question must, in my opinion, be extracted from a consideration of the process by which damages are fixed.
In any case of serious injury, such as the present, and brain injury is the most difficult case, the process of fixing the damages is elaborate, anxious for all concerned, and prolonged. It may be months or years before the full effect of the injury shows itself, before it can be seen what degree of recovery is to be hoped for, what the prognosis is to be in terms of life expectation, pain and suffering, earning capacity and medical needs. Since an estimate has to be made covering the plaintiff’s whole life, it is to be expected that medical men will long hesitate before giving their opinion and that when they do so there will be reservations and qualifications. To obtain from them an opinion expressed in such a way that it can form the basis of a monetary calculation often involves lengthy negotiation and correspondence. Much may depend on the emphasis of a phrase, and doctors, whose real concern is with treatment, cannot easily be persuaded to accept a quantitative formula. Medical evidence on the two sides may be and often is basically agreed, but there will remain differing shades of certainty and emphasis on many important matters. The trial judge has to form an opinion, the best he can, as to these matters, and having done so, to express his opinion in the form of a lump sum or sums. The method commonly used is by applying a multiplier, which involves an estimate of duration and probability, to an annual figure of earnings or expenses, and small differences in the parameters may produce large differences in the final award. The judge has to take into account all the uncertainties, foreseen and unforeseen, of the future; it has been said that he must use a compound of prophesy and speculation.
This abbreviated and over-simplified description shows at least what limitations must inherently exist to the Court of Appeal’s discretion to admit further evidence. It makes it clear that an impossible situation would arise if evidence were to be admitted of every change which may have taken place since the trial. In the nature of things medical condition will vary from year to year, or month to month: earning prospects may change, prices may rise, or even fall. If the Court of Appeal were to admit evidence of changes of this kind (and it must not be overlooked that a facility given to one side cannot be denied to the other), not only would a mass of appeals involve the hearing of evidence, but the Court of Appeal would merely be faced with the same uncertainties as faced the judge, and of which the judge has, ex hypothesi, already taken account. In other words, an appellant’s contention that factors such as these have changed since the trial must, in normal cases, be met with the answer that the judge, in his estimate, has already taken account of them.
For these reasons the cases in which fresh evidence has been admitted in the Court of Appeal are few. In the present field (and cases in other contexts are of little assistance) only three reported cases are known: Curwen v James, Jenkins v Richard Thomas & Baldwins Ltd and Murphy v Stone-Wallwork (Charlton) Ltd. Learned counsel were agreed in stating that applications for fresh evidence to be admitted were extremely rare. It is possible to extract from these cases some indications as to the way in which the Court of Appeal’s discretion may be exercised. In Curwen v James appeal could be made to the argument that the court should not speculate where it knows, but my noble and learned friend, Lord Pearson, pointed out that even so neat an axiom had its dangers. The fact that the marriage occurred so close to the trial was no doubt a factor. In Jenkins’s case evidence was admitted of the plaintiff’s inaptitude for work thought suitable for him at the trial, but this decision
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has been regarded as dubious in the case next cited. In Murphy’s case an assumption, held at the trial, that the plaintiff would not be dismissed was falsified by the defendant, and evidence of this was admitted. Their Lordships thought that not to do so would be inequitable.
These cases are useful as instances, but they cannot be generalised into a formula. I do not think that, in the end, much more can usefully be said than, in the words of my noble and learned friend, Lord Pearson, that the matter is one of discretion and degree (Murphy’s case ([1969] 2 All ER at 960, [1969] 1 WLR at 1036)). Negatively, fresh evidence ought not to be admitted when it bears on matters falling within the field or area of uncertainty, in which the trial judge’s estimate has previously been made. Positively, it may be admitted, if some basic assumptions, common to both sides, have been clearly falsified by subsequent events, particularly if this has happened by the act of the defendant. Positively, too, it may be expected that courts will allow fresh evidence when to refuse it would affront common sense, or a sense of justice. All these are only non-exhaustive indications; the application of them, and their like, must be left to the Court of Appeal. The exceptional character of cases in which fresh evidence is allowed is fully recognised by that court.
The present case is, in my opinion, near the borderline, for I see much force in the argument that the period during which the respondent might be expected to remain at home and be looked after by his wife, with nursing help, or might have to be placed in a nursing home, whether paying or under the national health service, were all matters for estimation by the trial judge, and that his choice of a multiplier of eight applied to the costs of home nursing reflected just these uncertainties. If there were nothing more, I would agree that it would be wrong to allow them to be re-estimated in the Court of Appeal merely on evidence that the probabilities had changed. But there are other factors. First, the figure of £903 per annum, which as a figure was agreed, represented the cost of maintaining the respondent at a specified existing nursing home which was not authorised to receive patients under the Mental Health Act 1959 and did not provide specialist psychiatric nursing staff. Secondly, after a period of about seven weeks at home, it was found that the respondent could not remain there and he was admitted as an emergency case to a hospital under the Mental Health Act 1959. The medical recommendation then was that he be transferred to a specified nursing home selected as the only suitable psychiatric nursing home in the area of his home with a good reputation and the only one authorised to receive patients under the Mental Health Act. Thirdly, the nursing home originally chosen, the cost at which was the agreed sum of £903 per annum had ceased to exist. Fourthly, the cost at the present nursing home is approximately double that figure—a disparity which satisfies the test of degree.
In the face of these changes, to allow the appeal to proceed on the basis of factors (accepted at the trial) which have been falsified to such an extent would hardly be creditable to the judicial process. At the lowest, the Court of Appeal was, in my opinion, not wrong in its discretion to accede to the respondent’s application. On the whole I respectfully think that they were right. I would only add that the summary I have necessarily given of the respondent’s fresh evidence does not, of course, prejudice the appellants’ right, if so advised, to contest it and to adduce evidence of their own.
I would dismiss the appeal.
LORD PEARSON. My Lords, I have read the opinions of my noble and learned friends, Lord Hodson and Lord Wilberforce, and I agree that this appeal should be dismissed for the reasons given by them. I wish to add some observations based on what has been said in previous cases.
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It is quite clear from RSC Ord 59, r 10, that the Court of Appeal has a discretionary power to admit evidence as to matters which have occurred after the date of the trial or hearing. As was said in Murphy v Stone-Wallwork (Charlton) Ltd ([1969] 2 All ER 949 at 960, [1969] 1 WLR 1023 at 1036), the question whether or not the fresh evidence is to be admitted has to be decided by an exercise of discretion, and the question is largely a matter of degree, and there is no precise formula which gives a ready answer. There is, however, to be taken into account in exercising the discretion an important factor, to which attention has been directed in several cases. It is in general undesirable to admit fresh evidence on appeal, because there ought to be finality in litigation. Interest rei publicae ut sit finis litium: Curwen v James ([1963] 2 All ER 619 at 624, [1963] 1 WLR 748 at 755), Jenkins v Richard Thomas & Baldwins Ltd ([1966] 2 All ER 15 at 18, [1966] 1 WLR 476 at 479) per Salmon LJ and Murphy v Stone-Wallwork (Charlton) Ltd ([1969] 2 All ER at 952, 953, 956, 960, [1969] 1 WLR at 1027, 1028, 1031, 1035, 1036). The normal rule in accident cases is that the sum of damages falls to be assessed once and for all at the time of the hearing. When the assessment is made, the court has to make the best assessment it can as to events that may happen in the future. If further evidence of new events were too easily admitted, there would be no finality in such litigation (Curwen v James ([1963] 2 All ER at 624, [1963] 1 WLR at 755)).
That is the present principle, the present practice. There is much advantage in finality. The case is finished, the claim is settled, and there will normally be no more expenditure of time and money on litigation. Moreover, an end to litigation may in many cases (not this case, where the injuries are too serious) remove an impediment to a plaintiff’s recovery. It is a familiar experience to hear a medical witness saying, in a case where the plaintiff’s bona fides is not at all impugned, that substantial improvement in the plaintiff’s condition can be expected when his claim has been disposed of. Of course the finality of a judgment at first instance is not absolute in view of the possibility of an appeal. But an appeal normally involves only a review of the judge’s decision on the evidence given at the trial. A partial retrial with further evidence added is not a normal function of the Court of Appeal. There are, however, exceptional situations in which it is right for the Court of Appeal or your Lordships’ House to admit further evidence, as appears from the three cases cited above (although there are doubts as to the correctness of the course adopted in Jenkins v Richard Thomas & Baldwins Ltd.
In the present case, notice of appeal was duly given and, before the time for hearing of the appeal had come, events happened which very materially falsified the expectations on which the judge had assessed the damages relating to the cost of nursing services. The expectations were that the respondent would be able to live at home for a number of years if nursing services were provided for him at his home, and that, if eventually he had to go to a nursing home, a general nursing home would be suitable. There is now evidence available which shows, or is said to show, not only that he cannot be kept at home but also that he needs specialist care at a psychiatric nursing home, and that the difference in cost over a long period of years will be very substantial. In my opinion, the situation in the present case can be regarded as exceptional, and it cannot be said that the discretion was wrongly exercised when leave was given for the further evidence to be adduced.
This is not a case of application being made after the time for appealing has expired. In such a case the end of litigation has been definitely reached, subject only to the court’s power to extend the time. In such a case a very strict rule should be applied: Murphy v Stone-Wallwork (Charlton) Ltd ([1969] 2 All ER at 953, 956, [1969] 1 WLR at 1028, 1031).
I would dismiss the appeal.
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LORD DIPLOCK. My Lords, I agree with the opinion expressed by my noble and learned friend, Lord Hodson. I would dismiss the appeal.
Appeal dismissed.
Solicitors: Barlow, Lyde & Gilbert (for the appellants); W H Thompson (for the respondent).
S A Hatteea Esq Barrister.
Re 462 Green Lane, Ilford
Gooding v Borland
[1971] 1 All ER 315
Categories: CIVIL PROCEDURE
Court: CHANCERY DIVISION
Lord(s): UNGOED-THOMAS J
Hearing Date(s): 26, 27 OCTOBER 1970
Originating summons – Proceedings involving alternative allegation of fraud – Whether essential to be begun by writ or whether may continue as though commenced by writ – RSC Ord 5, r 2, Ord 28, r 8.
Originating summons – Continuance of proceedings as if begun by writ – Effect of RSC Ord 5, r 2, on RSC Ord 28, r 8.
Land registration – Caution – Caution against dealings – Dispute as to existence of contract between proprietor and cautioner – Summons to cancel caution – Propriety.
Proceedings, in which an alternative allegation of fraud is involved, must be begun by writ under RSC Ord 5, r 2a, and may not, if started by originating summons, be continued under RSC Ord 28, r 8b, as though commenced by writ (see p 316 f and p 317 d, post). Ord 28, r 8, should be read as referring exclusively to matters outside the scope of Ord 5, r 2 (see p 316 g, post).
When a caution is registered under the Land Registration Act 1925 by a cautioner on the ground that he is interested in the land by virtue of a contract between the proprietor and himself, a dispute as to the existence of the alleged contract should be tried by action and not by originating summons for an order cancelling the caution (see p 316 h and p 317 b, post).
Re Engall’s Agreement [1953] 2 All ER 503 applied.
Notes
For procedure by writ, see 30 Halsbury’s Laws (3rd Edn) 299–303, paras 550–558 and for procedure by originating summons, see ibid 303–305, para 559.
For the scope and general effect of cautions, see 23 Halsbury’s Laws (3rd Edn) 304, 305, paras 725–728, and for cautions against dealings, see ibid 307–310, paras 737–750.
For the Land Registration Act 1925, s 54, see 20 Halsbury’s Statutes (2nd Edn) 988.
Page 316 of [1971] 1 All ER 315
Case referred to in judgment
Engall’s Agreement, Re [1953] 2 All ER 503, [1953] 1 WLR 977, 38 Digest (Repl) 882, 926.
Preliminary point
This was a preliminary point in proceedings initiated by an originating summons whereby the proprietor, Edwin Julian Gooding, sought an order cancelling the caution registered in favour of Ernest Courtney Borland pursuant to s 54 of the Land Registration Act 1925 in respect of 462 Green Lane, Ilford in the London borough of Redbridge.
Anthony Nicholson for the proprietor.
The cautioner appeared in person.
27 October 1970. The following judgment was delivered.
UNGOED-THOMAS J. This matter involves two pleas on the part of the proprietor, first of non est factum and secondly of fraud. Both these pleas involve considerably detailed issues of fact. The non est factum plea itself does not necessarily involve an allegation of fraud, but as presented before me it turned on exactly the same facts as are relied on for the alternative allegation of fraud. It is clearly desirable that such charges, being of a serious nature, and involving considerably detailed oral and other evidence, should be by an action in which the issues are clearly defined and in which there should be full discovery by each side to the other of all documents that each side holds related to those issues as so defined.
There is nowadays a provision in RSC Ord 28, r 8, that in any matter begun by originating summons, where it appears to the court that it should be continued as if it had begun by writ, the court may order the proceedings to continue as if the matter had been so begun. Normally, in the case of a plea of non est factum in general, its continuation as though it had begun by writ would fall within the court’s discretion under Ord 28, r 8. However, RSC Ord 5, r 2 (so far as material in the present case), provides that proceedings in which a claim made by the plaintiff is based on an allegation of fraud must be begun by writ.
It appears that, in this case, there is a claim based on an allegation of fraud and nonetheless because that allegation is an alternative allegation. It is an allegation relied on although relied on in the alternative. It seems to me that Ord 5, r 2, places a case so based outside the scope of Ord 28, r 8. Otherwise Ord 5, r 2, seems to be a pretty futile provision. And Ord 5, r 2, should, on account of its more specific terms, be preferred to Ord 28, r 8, and thus Ord 28, r 8, should be read as referring exclusively to matters outside the scope of Ord 5, r 2, ie what Ord 28, r 8, provides is that the court may order proceedings to continue as if the case had been begun by writ, but cannot order that the proceedings should be, or be treated as, proceedings begun by writ, and therefore cannot order the proceedings so to continue if they could not have so begun.
Vaisey J, in Re Engall’s Agreement, ie before Ord 28, r 8, came into being, laid down that in a case of an estate contract registered under the Land Charges Act 1925, a dispute as to the existence of the contract should be tried by action and should not be tried by originating summons, and he stated there the principle on which he came to this conclusion. He said ([1953] 1 WLR at 980, [1953] 2 All ER at 505):
‘To ask that a charge be removed from the register, before the substantive point has been decided by the appropriate means of an action, seems to me to be putting the cart before the horse. It is not the right method. The register of charges, in my view, is merely a record: and whether that record of an
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alleged contract should remain or not depends on the question whether the contract purported to be recorded exists or does not exist. To obtain an order removing a charge from the register is merely the consequence of deciding either that there is no contract, in which case the entry will be removed, or that there is a contract, in which case the entry in the register will be allowed to remain. To ask merely that a charge be removed, without a preliminary decision whether the charge purported to be registered exists or not, seems to me to be the wrong method of approach.’
With that I respectfully concur and it seems to me to be equally applicable—indeed’ perhaps a fortiori applicable—to a case of a caution under the Land Registration Act 1925 as to an estate contract under the Land Charges Act 1925.
In those circumstances, therefore, in this case there must be pleadings; there must be discovery; the action must be at least continued as though it had begun by writ. This is not a technicality; it is a most important matter of substance because it is only by this means that the parties can see perfectly clearly what are the serious issues involved and be sure of having made available to them by discovery all the relevant documentary evidence which generally plays such an important part in these cases. Commencing the proceedings by writ would in the circumstances of this case involve only the very small additional expenditure of issuing the writ, and on the rules as they stand it seems to me that the requirement does exist that, whereas here there is an allegation of fraud, the proceedings must be so started and cannot be continued as though commenced by writ when in fact commenced by originating summons.
Ruling accordingly.
Solicitors: J Eaton & Co agents for Oliver Dimdore & Bellis, Ilford (for the proprietor).
Jacqueline Metcalfe Barrister.
British School of Motoring Ltd v Simms and another (A R Stafford (trading as Mini Countryman School of Motoring) and Cooper, third parties)
[1971] 1 All ER 317
Categories: TORTS; Negligence: INSURANCE
Court: WINCHESTER ASSIZES
Lord(s): TALBOT J
Hearing Date(s): 29 JULY 1970
Road traffic – Negligence – Driver undertaking driving test – Duty of examiner.
Insurance – Motor insurance – Third-party risks – Driving school – Car provided by school for driving lessons and driving test – Pupil not covered by insurance – Implied term in contract with school that cover is provided.
The first defendant received driving lessons from the driving school and took her driving test in the dual-controlled test car which belonged to the driving school but which was not insured for her to drive. In the course of the driving test, the first defendant negligently failed to observe ‘give way’ signs and markings in the road and drove straight into a road junction. Almost immediately, she became aware of a car driven by F approaching from her left and she accelerated. Meanwhile, the second defendant, the examiner, who was seated next to the first defendant in the test car and whose view of the road had been somewhat obstructed, also became aware of the approach of F’s car and, sensing the danger, applied the brake so that the test car came to a halt when it was more than half-way across the road.
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There was a collision between F’s car and the test car, which caused the test car to spin round and collide with the plaintiffs’ car, which was stationary on the road. In their action for damages against the first defendant, the plaintiffs joined the second defendant, alleging, inter alia, that he had been negligent in that he had failed to supervise or control the first defendant’s driving and that he applied the brakes when it was unsafe to do so, causing the test car to stop in the path of F’s car. The first defendant alleged breach of contract between the driving school and herself because of the driving school’s failure to insure the test car.
Held – (i) The allegations against the second defendant failed, because—
(a) it was his duty in assessing the first defendant’s fitness to hold a full driving licence to observe whether or not mistakes were made, and he was not to interfere with her driving except when it became necessary to do so to avoid danger to the public (see p 320 g, post); and
(b) in the sudden emergency which arose, the step which he took in applying the brakes, although in the circumstances the wrong one, was nonetheless reasonable and did not amount to negligence (see p 321 c, post); Jones v Boyce (1816) 1 Stark 493 and The Bywell Castle [1874–80] All ER Rep 819 applied.
(ii) In the absence of any express condition, there was an implied term in the contract between the first defendant and the driving school that any car provided by the driving school for driving lessons and the driving test would be covered by insurance; accordingly the first defendant was entitled to damages flowing from the breach, namely the damages awarded against her as a result of the accident which she would not have had to pay had she been insured (see p 321 h, post).
Notes
For apportionment of liability where the defendant creates a situation of emergency, see 28 Halsbury’s Laws (3rd Edn) 91, para 95, and for cases on the subject, see 36 Digest (Repl) 190–192, 1006–1018.
Cases referred to in judgment
Bywell Castle, The (1879) 4 PD 219, [1874–80] All ER Rep 819, 41 LT 747, 36 Digest (Repl) 190, 1006.
Jones v Boyce (1816) 1 Stark 493, 36 Digest (Repl) 23, 101.
Action
This was an action by the plaintiffs, the British School of Motoring Ltd, claiming damages against Margaret Frances Simms (the first defendant) and Cyril Bernard Cooper (the second defendant) in respect of damage to a motor car sustained on 31 October 1968 as a result of a collision between three cars whilst the first defendant was undergoing her driving test with the second defendant as examiner. The first defendant joined A R Stafford, trading as the Mini Countryman School of Motoring (the driving school), as first third party to claim indemnity against liability in respect of a counterclaim against the first defendant by the second defendant, who was joined as second third party, in respect of injuries sustained in the collision. The facts are set out in the judgment.
W E Barnett for the plaintiffs.
M R Selfe for the first defendant.
H J M Tucker for the second defendant.
The driving school did not appear and was not represented.
29 July 1970. The following judgment was delivered.
TALBOT J. These proceedings arise out of a collision between three motor cars that took place on 31 October 1968. I think that at about 10.00 am on that day the position of the three cars involved was as follows. Mrs Drew was driving along
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Cleveland Road in Bournemouth approaching the junction of that road with Wyndham Road. Cleveland Road also extends to the other side of that junction and where Cleveland Road reached Wyndham Road, there are signs that traffic on Cleveland Road should give way to traffic on Wyndham Road. There are also ‘give way’ lines at the mouths of Cleveland Road. Mrs Drew was approaching Wyndham Road driving in a northerly direction, came to the junction with Wyndham Road and stopped. She was undergoing a driving test in a motor car owned by the plaintiffs. Coming from the opposite direction was another motor car (the test car), driven by the first defendant. She also was undergoing a driving test and the driving examiner was the second defendant. Coming along Wyndham Road from an easterly direction, that is to say, from the left from the point of view of the first defendant, was a Ford Galaxy motor car driven by Mr Fisher.
What happened so far as the first defendant is concerned, as I find on the facts, was this. She had come into Cleveland Road from another road about 70 or 80 yards from the junction with Wyndham Road, turned left into Cleveland Road in bottom gear and then accelerated along Cleveland Road, changing up into second gear. It may be, I am not really sure about this, that she got also into third gear, but I do not think that it matters. It is quite plain to me that she did not observe the ‘give way’ signs, nor did she take any notice of, if she observed them, the ‘give way’ lines across the mouth of Cleveland Road. She, without pausing, when driving at something under 20 mph went straight into the junction and almost immediately she became aware of Mr Fisher’s car bearing down on her from the left and she immediately accelerated. Meanwhile the second defendant, who was sitting by her side in the passenger seat of the dual-controlled test car, also became aware of Mr Fisher’s car. At some stage he applied the brake, sensing the danger. The result was that the test car came to a stop when it had passed over the first half of the road and got into the second half of Wyndham Road. There followed a collision between Mr Fisher’s car on the nearside front and the extreme nearside rear of the test car. That caused the test car to spin completely round so that it came into contact with the plaintiffs’ stationary car and caused damage in respect of which the plaintiffs made their claim.
One of the issues whether or not the second defendant told the first defendant to stop when he sensed the danger. I have reached the conclusion that whilst I am quite sure that he honestly believes that he did tell her to stop, he did not in fact do so. I reach that conclusion on the facts in this way. The first defendant has no recollection that he ever told her to stop. Secondly, when the second defendant made his report, as he was required to do, of what occurred to his superiors, it can be seen from that report that there was no reference at all to the fact that he had told her to stop. Furthermore, it would appear from the evidence that the first defendant had correctly obeyed other instructions to pull into the side and on one occasion to make an emergency stop when told to do so. In those circumstances I have reached the conclusion as I have already stated on this point. Those are the bare facts of the accident.
I deal now with the question of liability. First, as regards the first defendant, the fact that she failed to notice, or if she did notice, to see and obey the ‘give way’ sign, was clearly, in my view, an act of negligence. Furthermore, the fact that she drove into and over the junction without having regard to other traffic which might be approaching along the more important road, again clearly was an act of negligence.
The main issue here is whether or not the second defendant was also guilty of negligence in that he applied the test car’s brakes so that it stopped and the collision resulted. What was alleged against him in the first defendant’s original defence was that he applied the brakes when the first defendant was proceeding across Wyndham Road thereby causing the test car to stop in the path of Mr Fisher’s car. The plaintiffs eventually joined the second defendant as a defendant. They alleged that he failed to supervise or control the first defendant’s driving, he failed to keep a
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proper look-out and heed the presence or position of Mr Fisher’s car, he failed to pay any proper regard to the ‘give way’ sign or dotted white lines, or that the first defendant paid sufficient regard to it, he failed to take control of the test car or the brakes soon enough, he applied the brakes when it was unsafe and that he stopped the test car in the path of Mr Fisher’s car. I think that a proper conclusion for me to arrive at is that the second defendant applied the brakes when he sensed that real danger was about to take place. At the particular time there was, on the forecourt of some industrial premises which adjoin Cleveland Road and Wyndham Road and on the left of the test car a large pantechnicon van which obscured the visibility to the left up Wyndham Road. I am satisfied that he appreciated the danger as the test car was quite plainly going across and was not therefore in a position to stop should danger arise. It must have been almost immediately following on that that he became aware that there was in fact danger, namely the danger of Mr Fisher’s car coming on the left. Does that action on his part result, or should it result in a finding of negligence against him, negligence which partly or wholly caused this accident?
The second defendant, as I have said, was a senior driving examiner appointed by the Ministry of Transport to undertake the driving test of those who submit themselves for it in accordance with the statutory requirements. I have not examined the regulations and I am told that there would be no purpose in doing so because there is nothing in the regulations that defines his position or his duties. His duties, however, are plain. He is there to examine and test the driving of the subject who submits himself or herself for the test. He must observe, record and use his discretion in deciding, having seen what he has seen, whether or not the subject is fit to hold a full driving licence. In order properly to make a test of any subject or candidate, he must not interfere with driving, it being his duty to observe whether or not mistakes are made and if mistakes are made, whether they are of sufficient gravity to fail a candidate. He is not therefore in the position of a driving instructor or of a passenger supervising a learner who is there to correct any mistakes as soon as possible. He is there to observe whether or not mistakes are made. In order to satisfy himself as to that, in most cases he has to allow the mistakes to be made. It is laid down as part of the instruction for driving examiners in the Ministry of Transport manual that examiners should not operate or adjust controls or fittings of a test vehicle even at the candidate’s request except where it is essential in order to avoid danger to the public. If it is necessary for me to express any opinion on that for the purpose of deciding this case, I do so. In my judgment, that is a proper instruction to give to driving examiners.
Let me now therefore examine it. His duty is not to interfere except when it becomes necessary to do so in the interest of public safety and the safety of himself and the candidate driving the motor car. In those circumstances, I do not think that the allegations made against the second defendant in the pleadings which allege that he failed to supervise or control the first defendant and the other allegations that I have mentioned are well founded. There remains the essential one on which the first defendant relies in her defence, whether or not the second defendant was negligent in applying the brakes when he did, thus causing the test car to stop in such a position that Mr Fisher’s car just collided with it at the rear. I have had cited to me the well-known cases of Jones v Boyce and The Bywell Castle. It is quite plain that when an examiner is faced with a position of emergency that arrives suddenly, he must take such steps as might appear reasonable to him in the sudden rising of the emergency. If the steps that he takes turn out to be the wrong ones, then the law does not demand that in those circumstances he should be held to be negligent. The expression so often used is ‘an act taken in the agony of the moment’. Where such act is taken in the agony of the moment and it happens to be the wrong one, that
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does not mean that he becomes liable for his act. He would become liable if it was rash. If it was an act which in the agony of the moment he might reasonably take, which he would not have taken had he become aware of all the circumstances, then he is not to be held liable for it. The second defendant was faced with this sudden emergency. It was not for him to stop the first defendant as she was approaching the cross-roads, or to tell her to slow down. He was to observe how she did it and how she dealt with the situation. Only when it became quite plain that she was going to create danger did he, in the sudden emergency, take action. It would seem that he took the wrong steps. It would be, in my judgment, quite wrong, if not quite impossible, to have expected him in that fraction of a second to have decided whether or not it was safer to brake or to go on and whether or not the first defendant would go on. He did what I would have thought most passengers in a motor car in similar circumstances might have done if they had been in a position to do so, and that was to stop the vehicle.
In my judgment, therefore, I do not think it right on these facts to make any finding of negligence against the second defendant. That really deals with the submission made by counsel for the first defendant that her negligence had, as it were, come to an end and that the real and sole cause of this accident was the negligence of the second defendant. There was, in my opinion, no cessation in the causation of her negligence—her negligence caused the collision which caused the plaintiffs to suffer damage.
[His Lordship reviewed the medical evidence relating to the injuries suffered by the second defendant in the accident and awarded him damages against the first defendant.]
Another issue arises between the first defendant and the driving school. This claim is based on a breach of contract alleged to have been made between herself and the driving school. The matter arose in this way. She went in or about October 1968 to the driving school, in order that she might receive driving lessons. She received lessons and eventually entered for the driving test. It was whilst she was driving the test car which belonged to the driving school that the accident happened. I am satisfied on the evidence which I have heard from the first defendant and her husband, as a result of what the driving school told her and her husband after the accident, that the test car was not insured for her to drive at the time of the accident. She, therefore, was unwittingly an uninsured driver. The result to her is this, that she herself having judgment, as she will have shortly, entered against her for damages will have to pay them rather than look to an insurance company to indemnify her. It is pleaded that there was an implied term, because there is no evidence of any expressed term, that she would be covered for all insurance purposes by the driving school during the time she was in a vehicle provided by them for her driving lessons and test. I am prepared to accept that in such a contract as this is, in the absence of any expressed condition, there is an implied term that such a person going to a driving school will be covered by insurance in the motor car provided by the driving school. Therefore, there was a breach of contract by the driving school in providing her with a car which was not insured for her driving. She is entitled to damages which flow from that breach. The measure of those damages, in my opinion, is the damage she now has to pay which she would not have had to pay had she been properly insured.
Solicitors: L Dawson & Co (for the plaintiffs); Colin Bell & Co, Bournemouth (for the first defendant); Ellis, Betcher & Co, Bournemouth (for the second defendant).
Deirdre McKinney Barrister.
Hall v Reginam
[1971] 1 All ER 322
Categories: CRIMINAL; Criminal Evidence
Court: PRIVY COUNCIL
Lord(s): LORD DIPLOCK, LORD DEVLIN AND VISCOUNT DILHORNE
Hearing Date(s): 3 NOVEMBER 1970
Criminal law – Evidence – Admission – Silence of accused – Accused making no reply when informed of accusation against him – Whether silence capable of giving rise to an inference that accused accepted truth of accusation.
Although, in very exceptional circumstances, an inference may be drawn from a failure to give an explanation or disclaimer, as a general rule, where a person is informed that an accusation has been made against him, his silence alone cannot give rise to an inference that he accepts the truth of the accusation (see p 324 b, post); furthermore, the fact that he was not informed of his right not to reply to the accusation cannot support an inference that his silence was not in exercise of that right (see p 324 e, post).
R v Whitehead [1928] All ER Rep 186 and R v Keeling [1942] 1 All ER 507 approved.
R v Feigenbaum [1918–19] All ER Rep 489 disapproved.
Notes
For statements made in the presence of an accused, see 10 Halsbury’s Laws (3rd Edn) 475, 476, para 870, and for cases on the subject, see 14 Digest (Repl) 447, 448, 4342–4356.
Cases referred to in judgment
R v Christie [1914] AC 545, sub nom Public Prosecutions Director v Christie, [1914–15] All ER Rep 63, 83 LJKB 1097, 111 LT 220, 78 JP 321, 24 Cox CC 249, 10 Cr App Rep 141, 14 Digest (Repl) 405, 3962.
R v Feigenbaum [1919] 1 KB 431, [1918–19] All ER Rep 489, 88 LJKB 551, 120 LT 572, 83 JP 123, 26 Cox CC 387, 14 Cr App Rep 1, 14 Digest (Repl) 448, 4346.
R v Keeling [1942] 1 All ER 507, 106 JP 147, 28 Cr App Rep 121, 15 Digest (Repl) 1018, 10,012.
R v Whitehead [1929] 1 KB 99, [1928] All ER Rep 186, 98 LJKB 67, 139 LT 640, 92 JP 197, 28 Cox CC 547, 21 Cr App Rep 23, 15 Digest (Repl) 1018, 10,016.
Appeal
This was an appeal by Dennis Hall from a judgment of the Court of Appeal for Jamaica (Wellington, Shelley and Fox JJA) dated 21 January 1969 dismissing an appeal against his conviction by the resident magistrate of the parish of St Andrews on 20 November 1968 of being in unlawful possession of a dangerous drug, ie ganja. The facts are set out in the opinion of the Board delivered by Lord Diplock.
B Sinclair for the appellant.
S G Davies for the Crown.
3 November 1970. The following judgments were delivered.
LORD DIPLOCK. The appellant, Dennis Hall, was charged before the resident magistrate for the parish of St Andrews, jointly with two other defendants, Daphne Thompson and Daisy Gordon, that they unlawfully had in their possession ganja. The evidence against the appellant was that in the early hours of the morning a search was made of a two-roomed building in the parish of St Andrews at which it was said the three defendants lived together. At the time of the search one room was occupied by Daisy Gordon and the other by Daphne Thompson. In Daisy Gordon’s room packets of ganja were found in a brown grip and a blue brief case. Daisy Gordon admitted that the grip was hers, but denied all knowledge of the ganja found in it. Packets of ganja were also found in a shopping bag in Daphne Thompson’s room. She said that the shopping bag had been brought there by the appellant. The appellant was not on the premises when the search was in progress, but he was brought there shortly afterwards by another police officer. He was told by the officer
Page 323 of [1971] 1 All ER 322
who had conducted the search that Daphne Thompson had said that the ganja belonged to him. He made no comment on this. He remained silent. All three defendants were then cautioned and none of them said anything.
At the conclusion of the prosecution’s evidence, it was submitted on behalf of the appellant that the evidence disclosed no case against him. The resident magistrate ruled that there was a case to answer. The defendants gave no evidence and called no witnesses. The appellant and Daphne Thompson made statements from the dock denying all knowledge of the matter and Daisy Gordon said that she wished to say nothing at all. The resident magistrate found all defendants guilty and sentenced the appellant to three years’ hard labour. All three defendants appealed to the Court of Appeal. The appeal of Daphne Thompson was allowed on the grounds that it was not established beyond any reasonable doubt that she knew what was in the shopping bag and furthermore she had immediately disclaimed ownership of the bag. The appeals of Daisy Gordon and the appellant were dismissed. From this dismissal the appellant appeals in forma pauperis by special leave of their Lordships’ Board.
The Court of Appeal had held that although there was some evidence of joint occupancy of the house—
‘… if the matter had rested on that alone the Court would be of the view that the conviction would be unsafe as that evidence would have been too tenuous on which to have founded a conviction for possession of the ganja found in the house.’
They held, however, that the appellant’s silence when told of the accusation made against him by Daphne Thompson amounted to an acknowledgment by him of the truth of the statement which Daphne Thompson had made. At the hearing before this Board counsel for the Crown has sought to uphold the conviction, not only on the ground accepted by the Court of Appeal but also, in the alternative, on the ground which was rejected by the Court of Appeal, namely that the evidence of the appellant’s occupancy of the premises was sufficient to support the conviction. Their Lordships would not think it right to allow this latter point to be re-opened before this Board. It raises no point of law of general public interest and is dependent on inferences to be drawn from local knowledge of living conditions in Jamaica with which the Court of Appeal is familiar and this Board is not. They will accordingly deal only with the question whether the appellant’s silence in the circumstances outlined above constituted evidence on which he could properly be convicted of the offence with which he was charged. This was the ground on which special leave to appeal was granted by their Lordships.
In dealing with this question, the Court of Appeal cited the following paragraph from Archbold, Pleading Evidence and Practice in Criminal Cases a:
‘A statement made in the presence of an accused person, accusing him of a crime, upon an occasion which may be expected reasonably to call for some explanation or denial from him, is not evidence against him of the facts stated, save in so far as he accepts the statement so as to make it in effect his own. If he accepts the statement in part only, then to that extent alone does it become his statement. He may accept the statement by word or conduct, action or demeanor, and it is the function of the jury which tries the case to determine whether his words, action, conduct or demeanor at the time when the statement was made amount to an acceptance of it in whole or in part.’
This statement in their Lordships’ view states the law accurately. It is a citation from the speech of Lord Atkinson in R v Christie ([1914] AC 545 at 554, [1914–15] All ER Rep 63 at 67). But their Lordships do not consider that in the instant case the Court of Appeal applied it correctly. It is not suggested
Page 324 of [1971] 1 All ER 322
in the instant case that the appellant’s acceptance of the suggestion of Daphne Thompson which was repeated to him by the police constable was shown by word or by any positive conduct, action or demeanour. All that is relied on is his mere silence.
It is a clear and widely-known principle of the common law in Jamaica, as in England, that a person is entitled to refrain from answering a question put to him for the purpose of discovering whether he has committed a criminal offence. A fortiori he is under no obligation to comment when he is informed that someone else has accused him of an offence. It may be that in very exceptional circumstances an inference may be drawn from a failure to give an explanation or a disclaimer, but in their Lordships’ view silence alone on being informed by a police officer that someone else has made an accusation against him cannot give rise to an inference that the person to whom this information is communicated accepts the truth of the accusation. This is well established by many authorities such as R v Whitehead and R v Keeling. Counsel has sought to distinguish these cases on the ground that in them the accused had already been cautioned and told in terms that he was not obliged to reply. Reliance was placed on the earlier case of R v Feigenbaum where the accused’s silence when told of the accusation made against him by some children was held to be capable of amounting to corroboration of their evidence. It was submitted that the distinction between R v Feigenbaum and the later cases was that no caution had been administered at the time at which the accused was informed of the accusation. The correctness of the decision in R v Feigenbaum was doubted in R v Keeling. In their Lordships’ view the distinction sought to be made is not a valid one and R v Feigenbaum ought not to be followed. The caution merely serves to remind the accused of a right which he already possesses at common law. The fact that in a particular case he has not been reminded of it is no ground for inferring that his silence was not in exercise of that right, but was an acknowledgment of the truth of the accusation.
It follows that in their Lordships’ view there was no evidence on which the resident magistrate was entitled to hold that the charge against the appellant was made out. Their Lordships have humbly advised Her Majesty that this appeal should be allowed and the appellant’s conviction quashed.
Appeal allowed.
Solicitors: T L Wilson & Co (for the appellant); Charles Russell & Co (for the Crown).
S A Hatteea Esq Barrister.
Practice Direction
[1971] 1 All ER 324
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (PROBATE)
18 January 1971.
Probate – Practice – Entry of appearance – Time limited for entering appearance – Extension.
D A Newton, Registrar
The President has directed that, except in cases where the time has expired before Monday 18 January 1971, the time limited for appearance to:
1. a writ of summons in a probate action
2. a citation in a probate action or matter
3. the warning of caveat
is, until further notice, extended by six days.
Direction issued by the President.
Qureshi v Qureshi
[1971] 1 All ER 325
Categories: FAMILY; Divorce: ADMINISTRATION OF JUSTICE; Tribunals
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): SIR JOCELYN SIMON P
Hearing Date(s): 22, 23, 24, 25, 26, 29, 30 JUNE, 1, 2, 3, 6, 9 JULY, 30 OCTOBER 1970
Declaration – Jurisdiction – Marital status, declaration as to – Residence of parties as basis of jurisdiction – RSC Ord 15, r 16.
Tribunal – Procedure – No rules prescribed – Tribunal acting in accord with natural justice and bearing objectives in mind – Tribunal not disabled from performing functions.
Tribunal – Procedure – No rules prescribed – Comparable rules applied by analogy.
Divorce – Foreign decree – Recognition by English court – Foreign divorce not judicial act – Marriage celebrated and divorce occurring in England – Divorce by talaq.
Divorce – Foreign decree – Recognition by English court – Discretion to refuse to recognise divorce – Divorce offensive to conscience of English court – Factors affecting exercise of discretion.
By ancient Islamic law marriages had a limited polygamous potential and a marriage between Muslims could be terminated by the talaq. The form of the talaq was the pronouncement by the husband three times of the words ‘I divorce you’. Both these rules of ancient Islamic law were considered by Muslims to be of scriptural, and therefore of divine, authority. So far as Pakistan was concerned, the ancient Islamic law had received statutory modification of a procedural nature to provide better protection for wives. The principal legislation was the Muslim Family Laws Ordinance which was stated to apply to all Muslim citizens of Pakistan wherever they might be. The Ordinance provided for an arbitration council (comprising a chairman and a representative of each party) to be constituted after a husband had pronounced the talaq. The procedure for constituting the arbitration council was that the husband was required to give notice to the chairman of his having pronounced the talaq and the chairman then formed an arbitration council for the purpose of attempting reconciliation between the parties. The central government and the provincial governments were empowered by the Ordinance (s 11) to make rules for carrying the purposes of the Ordinance into effect. Rules were made for West Pakistan under that power and these provided, inter alia, for the chairman to require the nomination of a member to the arbitration council in the event of a vacancy arising otherwise than by reason of a failure by one party to nominate a representative (r 5(4)). The chairman was also required (r 6(1)), within seven days of receiving notification of the talaq, by order in writing to call on each of the parties to nominate in writing a representative to the arbitration council. Rules were also promulgated for East Pakistan but no rules were made specifically in relation to Muslim citizens of Pakistan outside East Pakistan and West Pakistan.
The husband and the wife, who were both Muslims, were born in Hyderabad, which was incorporated into India in 1948. In 1955, the husband qualified as a medical practitioner and in 1957 he took a medical post in West Pakistan; later in 1957 he assumed Pakistani nationality. In 1958, the husband came to England to qualify as FRCS (which would greatly enhance his prospects in Pakistan). Subsequently he obtained a number of hospital appointments but did not succeed in his efforts to qualify as FRCS. Towards the end of 1963 the parties became formally engaged to be married (the wife had remained in India and was an Indian citizen). She came to England and in March 1966 the parties were married at a register office (the marriage being regarded as monogamous); subsequently they participated in a Muslim ceremony and in connection therewith the husband undertook to pay to the wife
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£778 (by agreement) on demand or on the dissolution of the marriage by divorce or death. This was known as ‘dower’ (although this did not correspond with the concept of dower in English law) or ‘sadaqa’. The parties lived in one-room accommodation near the hospital where the husband was employed. The husband paid a deposit and arranged a mortgage on a newly built house (stated by him to be for temporary use prior to returning to Pakistan) but the parties never lived there together. The marriage was not a happy one principally because the wife refused to give up her Indian nationality for Pakistani nationality and in June 1966 the parties separated. The wife later took out a summons complaining of persistent cruelty and desertion and asking for a separation and maintenance order. In December 1966, the justices found the wife’s complaints proved, made a separation order and an order for maintenance. For some months the husband paid maintenance as ordered. In April 1967, the husband wrote to the wife a letter in the form of a talaq, a copy of which was sent to H, an official in the office of the High Commissioner for Pakistan in London, as chairman of the arbitration council provided for by the Ordinance. (The validity of the appointment of H was questioned but the court found the appointment to be valid.) H duly convened an arbitration council, calling on the wife to appear before him with a representative (but not calling on her to nominate a representative in writing as required by r 6(1) of the West Pakistan rules) in May 1967 and the wife attended together with her solicitor, B, and the husband attended with a representative. B protested to the jurisdiction in that he drew attention to the justices’ order of December 1966 which he said governed the matrimonial situation; he further indicated that the wife was willing to be reconciled to the husband. The meeting was adjourned by H until July to endeavour to effect a reconciliation. In that month B wrote to H to say that neither the wife nor himself (ie B) would be attending the adjourned meeting since they wished to do nothing that might appear to concede the jurisdiction or the validity of the talaq. B’s letter did not reach H before the meeting was resumed; H thereupon rang B’s office and learnt that neither B nor the wife intended to attend. The meeting was thereupon held in their absence. In August 1967, H drew up a document formally stating that the arbitration council had met and had failed to effect a reconciliation. The decision that the divorce would be absolute was taken ex parte since neither the wife nor B had attended the July meeting. A few days later the husband ceased to make payments under the maintenance order of December 1966. In November 1967, the wife lodged a complaint in the magistrates’ court in respect of arrears of maintenance; in the following month the husband lodged a complaint that he was no longer liable to pay maintenance at the rate ordered since the parties were then divorced and the wife’s circumstances had changed in that she was then in gainful employment. The justices adjourned the complaints sine die since High Court proceedings were then pending. In the latter proceedings the wife sought a declaration that the marriage subsisted, that she be granted maintenance or that she should continue to receive maintenance in accordance with the order of December 1966; in the alternative (if the marriage had been validly dissolved) she claimed recovery of the dower and maintenance from the date on which the husband had ceased making payments under the order of December 1966. The husband, in his answer, denied an allegation in the wife’s pleadings that he was domiciled in England (the court subsequently found that his domicil was in West Pakistan) and prayed for a declaration that the divorce by talaq was valid. The husband conceded that if the marriage had been validly dissolved the wife was entitled to payment of the dower.
Held – (i) Since the High Court could make no order as to the wife’s entitlement to maintenance in proceedings under RSC Ord 15, r 16, and the maintenance order was not, in any event, terminated by divorce (Wood v Wood [1957] 2 All ER 14 followed), the jurisdiction of the justices in relation to the variation of maintenance
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and arrears of maintenance was not directly affected by the decision of the court as to the effect of the talaq (although the exercise of the justices’ discretion might ultimately be indirectly affected thereby) and they should resume consideration of th complaints without awaiting the decision of the court (see p 345 h to p 346 e, post).
(ii) The court had jurisdiction to entertain the wife’s petition and the husband’s prayer for a declaration since the jurisdiction to make a declaration under RSC Ord 15, r 16(in addition to jurisdiction based on domicil) extended to suits for marital relief where both parties were at the date of the commencement of the proceedings resident in the territorial area over which the court exercised its jurisdiction; accordingly, the husband and wife being resident in England at the commencement of the proceedings, each was entitled to the relief sought (see p 340 e g and h, post).
Garthwaite v Garthwaite [1964] 2 All ER 233 explained.
(iii) According to the law of the domicil (Pakistani law) the marriage was validly dissolved (see p 343 h, post), because—
(a) notwithstanding the failure to enact rules under s 11 of the Ordinance governing the procedure of arbitration councils outside East and West Pakistan, the arbitration council was not thereby disabled from performing its functions; and the arbitration council’s decision was not invalid since, in the absence of rules directly applicable, H had acted in accordance with the precepts of natural justice and with a view to the promotion of the objective with which the arbitration council was set up (see p 342 h to p 343, a, post); and
(b) H’s failure to comply with the requirements of rr 5(4) and 6(1) of the rules applicable to West Pakistan was immaterial and a technical failure; those provisions were at most applicable only by analogy and, insofar as relevant at all, were to be construed as directory and not imperative (se p 343 e, post).
Dicta in Montreal Street Ry Co v Normandin [1917] AC at 175 and in Marsh v Marsh [1945] AC at 284 applied.
(iv) There was no general rule of English law compelling the refusal of recognition to a divorce valid by the law of the domicil on the ground that the divorce was not the creature of a judicial act or performed in the judicial presence, either generally, or if the marriage was celebrated in England, or if the purported divorce took place in England, or both (see p 343 j to p 344, a, post).
Sasson v Sasson [1924] AC 1007, Har-Shefi v Har-Shefi [1953] 1 All ER 783, Har-Shefi (otherwise Cohen-Lask) v Har-Shefi [1953] 2 All ER 373, and Russ (otherwise Geffers) v Russ (Russ (otherwise de Waele) intervening) [1962] 3 All ER 193, followed.
R v Hammersmith Superintendent Registrar of Marriages, ex parte Mir-Anwaruddin [1916–17] All ER Rep 464 doubted.
(v) The court’s discretion to refuse to recognise the divorce as offensive to the conscience of the English court as a denial of the wife’s right of recourse to the English court to secure the dissolution of her marriage and ancillary relief would not be exercised in the wife’s favour since (a) the discretion must be exercised sparingly (Varanand v Varanand (1964) 108 Sol Jo 693 followed); (b) if the marriage was in any event to be dissolved no purpose would be served in postponing its dissolution; (c) the courts of Pakistan (to which country the husband intended to return) would recognise the effectiveness of the talaq and would not recognise any exercise of discretion by the English court to the contrary effect and would refuse to enforce an English order for ancillary relief; (d) the wife would only be entitled to dower if the marriage were regarded as dissolved and regardless of the court’s decision the husband was unlikely to return to her; and (e) the rule of foreign law under which the husband had proceeded had the authority of the holy scriptures of the common faith of the husband and wife (see p 346 g to p 347 a, post).
(vi) Accordingly, the declarations would be made that the talaq divorce was valid and that the wife was entitled to dower (see p 347 b, post).
Page 328 of [1971] 1 All ER 325
Notes
For recognition of foreign decrees of divorce, see 7 Halsbury’s Laws (3rd Edn) 112–117, paras 200–204, and for cases on recognition, see 11 Digest (Repl) 481–489, 1079–1124.
Cases referred to in judgment
Aikman v Aikman (1861) 3 Macq 854, 4 LT 374, 11 Digest (Repl) 328, 37.
Anderson v Laneuville (1854) 9 Moo PCC 325, 24 LTOS 281, 14 ER 320; affg sub nom Laneuville v Anderson (1853) 21 LTOS 209; subsequent proceedings sub nom Laneuville v Anderson (1860) 2 SW & Tr 24, 11 Digest (Repl) 331, 54.
Bruce v Bruce (1790) 2 Bos & P 229, 126 ER 1251, 11 Digest (Repl) 359, 272.
Cheni (otherwise Rodriguez) v Cheni [1962] 3 All ER 873, [1965] P 85, [1963] 2 WLR 17, Digest (Cont Vol A) 234, 924b.
D’Etchegoyen v D’Etchegoyen (1888) 13 PD 132, 57 LJP 104, 11 Digest (Repl) 349, 180.
Doucet v Geoghegan (1878) 9 Ch D 441, 11 Digest (Repl) 337, 94.
Drexel v Drexel [1916] 1 Ch 251, 85 LJ Ch 235, 114 LT 350, 27 Digest (Repl) 238, 1915.
Flynn (decd), Re, Flynn v Flynn [1968] 1 All ER 49, [1968] 1 WLR 103, Digest Supp.
Fremlin v Fremlin (1913) 16 CLR 212, 11 Digest (Repl) 358, * 163.
Gardezi v Yusuf PLD 1963 Supreme Court 51.
Garthwaite v Garthwaite [1964] 2 All ER 233, [1964] P 356, [1964] 2 WLR 1108, Digest (Cont Vol B) 123, 25a.
Guaranty Trust Co of New York v Hannay & Co [1915] 2 KB 536 [1914–15] All ER Rep 24, 84 LJKB 1465, 113 LT 98, 51 Digest (Repl) 729, 3184.
Gulbenkian v Gulbenkian [1937] 4 All ER 618, 158 LT 46, 11 Digest (Repl) 352, 205.
Har-Shefi v Har-Shefi [1952] 2 All ER 821; rvsd CA [1953] 1 All ER 783, [1953] P 161, [1953] 2 WLR 690, Digest (Cont Vol A) 243, 1071.
Har-Shefi (otherwise Cohen-Lask) v Har-Shefi [1953] 2 All ER 373, [1953] P 220, [1953] 3 WLR 200, Digest (Cont Vol A) 243, 1071a.
Hart v Hart (1881) 18 Ch D 670, 50 LJCh 697, 45 LT 13, 27 Digest (Repl) 239, 1923.
Harvey v Farnie (1882) 8 App Cas 43, 52 LJP 33, 48 LT 273, 47 JP 308, 11 Digest (Repl) 481, 1084.
Jatoi v Jatoi PLD 1967 Supreme Court 580.
Lauderdale Peerage, The (1885) 10 App Cas 692, 11 Digest (Repl) 333, 66.
Mandel v Mandel [1955] VLR 51, [1955] ALR 379, Digest (Cont Vol A) 249, * 664a.
Marsh v Marsh [1945] AC 271, 27 Digest (Repl) 690, * 2310.
Montreal Street Ry Co v Normandin [1917] AC 170, 86 LJPC 113, 116 LT 162, 44 Digest (Repl) 307, 1375.
R v Hammersmith Superintendent Registrar of Marriages, ex parte Mir-Anwaruddin [1917] 1 KB 634, [1916–17] All ER Rep 464, 86 LJKB 210, 115 LT 882, 81 JP 49, 11 Digest (Repl) 488, 1122.
Ross v Ellison (or Ross) [1930] AC 1, 96 LJPC 163, 141 LT 666, 11 Digest (Repl) 335, 81.
Russ (otherwise Geffers) v Russ (Russ (otherwise de Waele) intervening) [1962] 3 All ER 193, [1964] P 315, [1962] 2 WLR 930, Digest (Cont Vol A) 249, 1124a.
Sasson v Sasson [1924] AC 1007, 94 LJPC 13, 132 LT 163, 16 Digest (Repl) 216, 1047.
Varanand v Varanand (1964) 108 Sol Jo 693, Digest (Cont Vol B) 131, 1124c.
Wahl v A-G (1932) 147 LT 382, [1932] All ER Rep 922, 11 Digest (Repl) 345, 145.
Wood v Wood [1957] 2 All ER 14, [1957] P 254, [1957] 2 WLR 826, 121 JP 302, Digest (Cont Vol A) 832, 6909a.
Young v Bristol Aeroplane Co Ltd [1944] 2 All ER 293, [1944] KB 718, 113 LJKB 513, 171 LT 113; affd HL [1946] 1 All ER 98, [1946] AC 163, 30 Digest (Repl) 225, 691.
Cases and authorities also cited
Abate v Cauvin (formerly, Abate otherwise Cauvin) [1961] 1 All ER 569, [1961] p 29.
Aldrich v A-G (Rogers intervening) [1968] 1 All ER 345, [1968] P 281.
Ali v Ali [1966] 1 All ER 664, [1966] 2 WLR 620.
Annesley, Re, Davidson v Annesley [1926] Ch 692.
Page 329 of [1971] 1 All ER 325
A-G v Yule and Mercantile Bank of India (1931) 145 LT 9, [1931] All ER Rep 400.
Bailet v Bailet (1901) 84 LT 272.
Bryce v Bryce [1933] P 83, [1932] All ER Rep 788.
Capdevielle, Re (1864) 2 H & C 985.
Casdagli v Casdagli [1919] AC 145.
Castrique v Imrie (1870) LR 4 HL 414, [1861–73] All ER Rep 508.
Chung Chi Cheung v R [1938] 4 All ER 786, [1939] AC 160.
Craignish, Re, Craignish v Hewitt [1892] 3 Ch 180.
Crookenden v Fuller (1859) 1 Sw & Tr 441.
De Gasquet James (Countess) v Mecklenburg-Schwerin (Duke) [1914] P 53.
Doglioni v Crispin (1866) LR 1 HL 301.
Eleftheriou v Eleftheriou (1964) The Times, 21 February.
El Riyami v El Riyami (1958) The Times, 1 April.
Formosa v Formosa [1962] 3 All ER 419, [1963] P 259.
Fremlin v Fremlin (1913) 16 CLR 212.
Fuld (No 3), In the Estate of, Hartley v Fuld [1965] 3 All ER 776, [1968] P 675.
Haque v Haque (1961) [1963] WAR 15; affd (1962) 108 CLR 230.
Henderson v Henderson [1965] 1 All ER 179, [1967] P 77.
Hodgson v De Beauchesne (1858) 12 Moo PCC 285.
Hoosen v Hoosen (12 June 1967) unreported.
Hopkins v Hopkins [1950] 2 All ER 1035, [1951] P 116.
Hussain (Nazar) v Galam Jannat (18 February 1963) unreported.
Igra v Igra [1951] P 404.
Indyka v Indyka [1967] 2 All ER 689, [1969] 1 AC 33.
Johnstone v Beattie (1843) 10 Cl & Fin 42, [1843–60] All ER Rep 576.
K (Infants), Re [1963] 3 All ER 191, [1965] AC 201.
Khan (otherwise Worresck) v Khan (1959) 21 DLR (2d) 171.
L, Re [1967] 2 All ER 1110; affd [1968] 1 All ER 20, [1968] P 119.
Langley’s Settlement Trusts, Re, Lloyd’s Bank Ltd v Langley [1961] 3 All ER 803, [1962] Ch 541.
Lepre v Lepre [1963] 2 All ER 49, [1965] P 52.
Lord v Colvin (1859) 4 Drew 366.
Lyell v Kennedy (1889) 14 App Cas 437.
McGowan v Middleton (1883) 11 QBD 464.
McMullen v Wadsworth (1889) 14 App Cas 631.
Mahadervan v Mahadervan [1962] 3 All ER 1108, [1964] P 233.
Mahbub v Mahbub (1964) 108 Sol Jo 337.
Malik v Malik (25 November 1966) unreported.
Mandel v Mandel [1955] VLR 51.
Martin, Re, Loustalan v Loustalan [1900] P 211.
Merker v Merker [1962] 3 All ER 928, [1963] P 283.
Moorhouse v Lord (1863) 10 HL Cas 272.
Padolecchia v Padolecchia (otherwise Leis) [1967] 3 All ER 863, [1968] P 314.
Pemberton v Hughes [1899] 1 Ch 781.
Pertreis v Tondear (1790) 1 Hag Con 136.
R v Bham [1965] 3 All ER 124, [1966] 1 QB 159.
R v Gyngall [1893] 2 QB 232.
Ramsay v Liverpool Royal Infirmary [1930] AC 588, [1930] All ER Rep 127.
Ratanachi v Ratanachi (1960) The Times, 4 June.
Ruding v Smith (1821) 2 Hag Con 371, [1814–23] All ER Rep 472.
Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438, [1921] All ER Rep 329.
Saccharin Corpn Ltd v Chemische Fabrik von Heyden Aktiengescellschaft [1911] 2 KB 516.
Salt v Cooper (1880) 16 Ch D 544, [1874–80] All ER Rep 1204.
Page 330 of [1971] 1 All ER 325
Salvesen (or von Lorang) v Austrian Property Administrator [1927] AC 641, [1927] All ER Rep 78.
Schwebel v Ungar (or Schwebel) (1963) 42 DLR (2d) 622; affd (1964) 48 DLR (2d) 644.
Shahnaz v Rizwan [1964] 2 All ER 993, [1965] 1 QB 390.
Stanley v Bernes (1830) 3 Hag Ecc 373.
Stevenson v Masson (1873) LR 17 Eq 78.
Thynne v Thynne [1955] 2 All ER 377, [1955] P 272.
Udny v Udny (1869) LR 1 Sc & Div 441.
Whicker v Hume (1858) 7 HL Cas 124, [1843–60] All ER Rep 450.
Halsbury’s Laws (3rd Edn), vols 3, 7, 15 and 19.
Halsbury’s Statutes (3rd Edn), vols 1, 4, 6 and 7.
Jackson: Formation and Annulment of Marriage (2nd Edn).
Lee: Consular Law and Practice.
Oppenheim: International Law (8th Edn) 1955, vol 1.
Radyen on Divorce (10th Edn), 3rd Supp.
Satow: Guide to Diplomatic Practice (4th Edn) pp 213, 226–227.
Supreme Court Practice 1970.
Petition
The wife, Ayesha Asghari Qureshi, by her amended, re-amended petition sought a declaration that her marriage to Mohammad Abdul Hai Qureshi at Kensington register office on 19 March 1966 subsisted and her status was that of a married woman (notwithstanding the pronouncement of a talaq by the husband); and that she might be granted such sums by way of maintenance as might be just or that she might continue to receive the sum of £5 a week from the husband as ordered by the Aldershot justices on 9 December 1966. In the alternative, she prayed that if the court found that her marriage with the husband had been validly dissolved that she was entitled to recover dower in the sum of £788 13s 5d and that she was entitled to maintenance in the sum of £5 as ordered by the court from 11 August 1967(the date on which the husband had ceased making payments under the maintenance order of 9 December 1966). The wife claimed that she and the husband were domiciled in England; this was denied by the husband in his amended answer. The husband prayed that the court should declare that the divorce by talaq was valid. The facts are summarised in the headnote.
Philip L W Owen QC and A M Azhar for the wife.
Bruce Holroyd Pearce QC and A M Abbas for the husband.
Joseph Jackson QC and A B Ewbank for the Queen’s Proctor.
Cur adv vult
30 October 1970. The following judgment was delivered.
SIR JOCELYN SIMON P read the following judgment.
1. The main issue in this case concerns whether this court should accord recognition to a pronouncement of divorce, known as a ‘talaq’, made in this country in 1967, and purporting to dissolve a marriage celebrated in this country in 1966 between two persons of the Muslim faith resident in England, the husband being a citizen of Pakistan and the wife a citizen of India.
2. By what has been called the ‘ancient’ (or ‘substantive’) Islamic law, marriages have a limited polygamous potential. But it has been common ground that the marriage in the instant case, having taken place in England, where monogamy is the rule, must be regarded as monogamous for the purpose of invoking the jurisdiction of this court.
3. Although there were sectarian differences irrelevant to the instant case, by ancient Islamic law a marriage between Muslims could be terminated by the husband pronouncing three times words which can be translated as ‘I divorce you’. This is the talaq. It will be apparent that it has affinities with the ‘bill of divorcement’ mentioned
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in the Authorised Version of the Book of Deuteronomya, the modern modification of which (the Jewish divorce by ‘get’) has received judicial considerationb.
4. Both of the rules of ancient Islamic law I have mentioned—that of limited polygamy and that of divorce by talaq—are considered by Muslims to be of scriptural, and therefore of divine, authority. But, so far as Pakistan is concerned, the ancient Islamic law has received statutory modification of a procedural nature for the greater protection of wives. The interaction of the ancient Islamic law and the modern statutory modification was one of the issues in this case; and I must describe the statutory modification before the factual history of this case can be understood.
Pakistani legislation
5. The principal legislation is the Muslim Family Laws Ordinance (VIII of 1961), which came into force on 15 July 1961(see the edition of the Ordinance by Shaukat Mahmoodc, which must however be used with caution since it contains some significant misprints).
6. By s 1(2), the Ordinance—
‘extends to the whole of Pakistan, and applies to all Muslim citizens of Pakistan, wherever they may be.’
7. Section 2 is an important definition section:
‘(a) “Arbitration council” means a body consisting of the Chairman and a representative of each of the parties to a matter dealt with in this Ordinance: [Provided that where any party fails to nominate a representative within the prescribed time, the body formed without such representative shall be the Arbitration Council.]’
In the original Ordinance the word ‘Chairman’ was followed by the words ‘of the Union Council’ (ie the local authority); but these words were deleted by an amendment of 1961 and the words which I have placed in square brackets were added.
‘(b) “Chairman” means the Chairman of the Union Council or a person appointed by the [Central Government in the Cantonment areas, or by the Provincial Government in other areas,] or by an officer authorised in that behalf by any such Government, to discharge the function of Chairman under this Ordinance.’
The words in square brackets were substituted in 1964 for the words ‘Central or a Provincial Government’.
‘(c) “prescribed” means prescribed by rules made under section 11.’
8. By s 3(1):
‘The provisions of this Ordinance shall have effect notwithstanding any law, custom or usage … ’
9. Section 5 deals with registration of marriages. Section 6, while not proscribing polygamy, stipulates for certain procedural requirements.
10. Section 7, dealing with talaq, is crucial to the decision of this case. The relevant subsections read as follows:
‘(1) Any man who wished to divorce his wife shall, as soon as may be after the pronouncement of talaq in any form whatsoever, give the Chairman notice in writing of his having done so, and shall supply a copy thereof to the wife …
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‘(3) … a talaq unless revoked earlier, expressly or otherwise, shall not be effective until the expiration of ninety days from the day on which the notice under sub-section (1) is delivered to the Chairman.
‘(4) Within thirty days of the receipt of notice under sub-section (1) the Chairman shall constitute an Arbitration Council for the purpose of bringing about a reconciliation between the parties, and the Arbitration Council shall take all steps necessary to bring about such reconciliation.’
11. Section 9, dealing with maintenance, provides that a wife who is inadequately or inequitably maintained may, in addition to any other legal remedy available to her, apply to the chairman, who shall constitute an arbitration council to determine the matter.
12. Section 10 deals with ‘dower’; but although I shall be concerned with ‘dower’ its provisions are not relevant to any issue in the present case.
13. Section 11 enacts a power to make rules, as follows:
‘(1) the [Central Government in respect of the cantonment areas and the Provincial Government in respect of other areas] may make rules to carry into effect the purposes of this Ordinance …
‘(3) Rules made under this section shall be published in the official Gazette and shall thereupon have effect as if enacted in this Ordinance.’
14. Two sets of rules were promulgated under the Ordinance, one for East Pakistan and the other for West Pakistan, published in their respective official gazettes on 20 July 1961. They do not differ materially; although it is agreed that it is the West Pakistan Muslim Family Laws Rules which (insofar as they are relevant at all) govern the present case. Rule 3 deals with the arbitration council. It provides (inter alia) that the union council which shall have jurisdiction in the case of a notice of talaq under s 7(1) of the Ordinance shall, if the wife was not residing in any part of West Pakistan, by the union council of the union or town where the person pronouncing the talaq is permanently residing in West Pakistan. Rule 5(3) provides that, subject to the provisions of r 5(4), proceedings before an arbitration council shall not be vitiated by reason of a vacancy in the arbitration council, whether on account of failure of any person to nominate a representative or otherwise. Rule 5(4) provides that where a vacancy arises otherwise than through a failure to make a nomination, the chairman shall require a fresh nomination. Rule 5(6) provides that all decisions of the arbitration council shall be taken by majority, and where no decision can be so taken, the decision of the chairman shall be the decision of the arbitration council. Rule 6 deals with ‘the prescribed time’. It provides:
‘(1) Within seven days of receiving … a notice under sub-section (1) of section 7, the Chairman shall, by order in writing, call upon each of the parties to nominate his or her representative, and each such party shall, within seven days of receiving the order, nominate in writing a representative and deliver the nomination to the Chairman or send it to him by registered post.
‘(2) Where a representative nominated by a party is, by reason of illness or otherwise, unable to attend the meeting of the Arbitration Council, or wilfully absents himself from such meeting, or has lost the confidence of the party, the party may, with the previous permission in writing of the Chairman, revoke the nomination and make within such time as the Chairman may allow, a fresh nomination.
‘Provided that where a party on whom the order is to be served is residing outside Pakistan, the order may be served on such party through the Consular Officer of Pakistan in or for the country where such party is residing.’
15. On 17 November 1961 the following notice appeared in the Gazette of Pakistan, the notice itself bearing the date 8 November 1961:
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‘In exercise of the powers conferred by clause (b) of section 2 of the Muslim Family Laws Ordinance 1961(VIII of 1961) the Central Government is pleased to authorise the Director General (Administration), Ministry of External Affairs, to appoint Officers of Pakistan Missions abroad to discharge the functions of Chairman under the aforesaid Ordinance.’
An exhibit has been accepted as showing that the Director General (Administration), Ministry of External Affairs, purported to appoint heads of chancery in Pakistan missions abroad to discharge the functions of chairman under s 2 of the Ordinance.
The factual background
16. The wife and the husband, and their present solicitors, respectively Mr Boyle and Mr Thorne, gave evidence on which I rely in setting out the facts. I preferred the evidence of the husband to that of the wife where they differed. There was little variance between the evidence of Mr Boyle and that of Mr Thorne; but I thought that the latter’s recollection was more vivid; and I accept his evidence as a touchstone to test the validity of all other oral evidence.
17. The husband, Mohammad Abdul Hai Qureshi, and the wife, then Ayesha Asghari, were born in Hyderabad in respectively 1933 and 1937. Hyderabad was then a princely State situated in the centre of the Indian sub-continent. Its royal house and ruling class were Muslim, although the bulk of the population was Hindu. Both the wife and the husband have at all times been Muslims. In 1947 India and Pakistan became separate States independent of the British Crown; Hyderabad (emancipated from British paramountcy) was surrounded by Indian territory. In 1948 Hyderabad was invaded by India, its royal house deposed, and the State itself incorporated in India; this is the episode which is ironically referred to in the correspondence as ‘the police action’.
18. In 1955 the husband qualified as a medical practitioner in Hyderabad; and took a job as medical officer in the government of Hyderabad. In February 1957 he went to Pakistan, taking a post as medical officer at the airport at Karachi. Two of his sisters had preceded him to Pakistan, one brother accompanied him and another came later. In October 1957 the husband assumed Pakistani nationality (which he has retained ever since), formally renouncing Indian citizenship and surrendering his Indian passport. On 28 June 1958 he came to England, his purpose being to qualify as a Fellow of the Royal College of Surgeons, a qualification which would have greatly improved his prospects in Pakistan. He took a number of hospital appointments in England under the national health service, and made a number of attempts over the years to qualify as FRCS, although unsuccessfully.
19. Before leaving Hyderabad the husband had apparently become very friendly with the wife; and thereafter correspondence by letter took place between them. An exhibit contains English translations of letters written in Urdu by the husband to the wife and to her brother in the United States from 1960 onwards; reliance was placed on them on the issue of domicil. I think it was towards the end of 1963 that the wife and the husband became formally engaged to marry. The husband was still in England, the wife still in Hyderabad. At all material times she was an Indian citizen. On 9 March 1966 she arrived in England for the purpose of marriage with the husband. On 19 March 1966 the wife and the husband went through a ceremony of marriage at the Kensington register office. This was followed by a further ceremoney in accordance with Muslim rites; but it is common ground that the register office ceremony constituted a legal marriage and that the subsequent religious ceremony had no legal significance. However, I think it was in connection with the religious ceremony that a ‘sadaqa’ was arranged between the parties. Sadaqa has been conveniently referred to as ‘dower’ (which is what it is called in the Ordinance), although it does not correspond to the concept of dower in former English law. The particular type of sadaqa in the instant case amounted to a promise by the husband on behalf of himself and his estate to pay to the wife the sum of
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9,000 rupees (Pakistani) (equivalent to £788 13s 5d in sterling) either (by agreement) on demand at any time or (perforce) on the dissolution of the marriage by divorce or death.
20. At the time of the marriage the husband was working as a casualty officer at Farnham Hospital. After the marriage the wife and husband lived together in one room at 3 Eggars Hill, Aldershot; but this was only envisaged as temporary accommodation; the husband had paid a deposit on and arranged a mortgage for a newly built house in Franborough. However, although both parties have lived in England ever since their marriage, they never lived together elsewhere than at 3 Eggars Hill and occasionally at an address in London where the husband went during weekend duties. The marriage was not a happy one. The principal cause of contention was that the husband wished the wife to assume Pakistani nationality and take a Pakistani passport, whereas the wife wished to retain her Indian nationality and passport. In consequence of their dissensions they separated in June 1966.
21. On 29 October 1966 the wife took out a summons before the Aldershot justices, complaining of persistent cruelty and desertion and asking for a separation and maintenance order. Her complaints were heard by the justices on 18 November and 9 December 1966. The issues were contested; both parties were legally represented, the wife by Mr Boyle. According to the agreed notes of evidence the husband said:
“My wife knew I intended to go to Pakistan when I got my Fellowship and she agreed to this arrangement … I negotiated for the house in this country for my own use for two or three years before I returned to Pakistan … I did not know that my wife would not live in Pakistan but I took it for granted that she would do so.’
The wife said in evidence:
‘My husband had a Pakistani passport, I had an Indian passport. My passport expired in 1966. My husband suggested that I should have a Pakistani passport like him. He wanted to go back to Pakistan.’
(The importance of his evidence is that it was given at a time when there was no sort of issue as to the husband’s domicil.) On 9 December 1966 the justices held that both of the wife’s complaints were proved. They made a separation order; and ordered the husband to pay the wife £5 a week by way of maintenance. There was no appeal from this decision; and for some months the husband paid to the wife the maintenance ordered by the justices.
22. On 27 April 1967 the husband wrote to the wife a letter which was settled by counsel. It is in the following terms:
‘This is to inform you that as irreconcilable differences have arisen between you and myself I have formed an irrevocable intention to divorce you and I am divorcing you under the Pakistani law applicable to me; myself being a Muslim and a citizen of Pakistan domiciled in Pakistan.
‘I divorce you I divorce you I divorce you
‘Please take notice that this act of mine, which is irrevocable, dissolves the marriage between you and myself solemnised at Kensington Registry Office in England, and it also puts an end to the relationship between you and myself which might have been created by the form or ceremony of marriage which I went through with you at 37 Collingham Place, London, S.W.5 before the Imam of the East London Mosque, 448, Commercial Road, London, E.1 on the 19th day of March 1966.
‘From today I am not your husband and you are not my wife.
‘Under provisions of the Muslim Family Laws Ordinance 1961(of Pakistan) I am serving a copy of this divorce instrument upon His Excellency The High
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Commissioner for Pakistan in U.K. of 35 Lowndes Square, London, S.W.1. For your information I am enclosing herewith an extract from the said Ordinance relating to the divorce.’
23. Having himself received a copy of this letter, Mr Tabarak Husain, counsellor and head of chancery at the London office of the High Commissioner for Pakistan, wrote to the wife on 3 May 1967 a letter in the following terms:
‘Please find herewith a copy of the Notice of Divorce submitted to this office in accordance with the provision of the Muslim Family Laws Ordinance 1961 of Pakistan. Now the said Ordinance also empowers the undersigned to constitute an Arbitration Council consisting of one representative from you and the other party.
‘You are, therefore, requested to appear before the undersigned with such representative on the 26th day of May 1967 at 11.30 am at the Pakistan High Commission Office.’
The date of the meeting was subsequently, by general agreement, changed to 25 May.
24. On this date a meeting took place at the High Commission office. Mr Husain presided. The wife was accompanied by Mr Boyle; the husband by Mr Thorne, who was at that time in articles in the office of the solicitor who had represented the husband before the justices. Mr Thorne has at all material times been a personal friend of the husband’s. Mr Husain made it clear that he regarded himself as chairman of an arbitration council under the Ordinance and that Mr Boyle and Mr Thorne were in attendance as the spouses’ ‘representatives’, not as solicitors (Mr Thorne was not yet in fact at that time a solicitor). Mr Boyle protested to the jurisdiction— perhaps not formally, but at least in the sense that he drew attention to the fact that the wife had secured a matrimonial order from the Aldershot justices on 9 December previously which, he claimed, governed the matrimonial situation. He indicated and the wife confirmed, that she was willing to be reconciled to the husband. Mr Husain was apparently of the opinion that a reconciliation might be possible and he adjourned the meeting to 12 July. But on 30 May 1967 Mr Thorne wrote to the wife’s solicitors a letter which contains the following passage:
‘[The husband] is firmly of the opinion that his wife’s statement that she wishes for a reconciliation is without foundation and he does not, himself, seek such a reconciliation. Unless you are able to suggest any steps which we might usefully take we can see no alternative to the divorce being finalised on 12th July next.’
25. On 11 July 1967 Mr Boyle wrote to Mr Husain a letter in the following terms:
‘We write to inform you that we will not be attending at your office tomorrow in view of certain advice we have received nor, we understand, will [the wife] be attending.’
The advice referred to was apparently that Mr Husain had no jurisdiction to act as chairman of an arbitration council, and that nothing should be done that might appear to be conceding any such jurisdiction or the validity of any talaq that might ensue or be sanctioned.
26. On 12 July 1967 the husband together with Mr Thorne attended on Mr Husain at the High Commission office. Neither the wife nor Mr Boyle attended. Mr Boyle’s letter of 11 July apparently not yet being to hand, Mr Husain confirmed by a telephone call to Mr Boyle’s office that neither he nor the wife intended to attend Discussion with the husband and Mr Thorne must then have satisfied Mr Husain that no reconciliation could be expected.
27. On 25 July 1967 Mr Boyle wrote to the husband’s solicitors a letter in the following terms:
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‘We shall be obliged if you would let us know the outcome of the hearing at the Office of High Commissioner of Pakistan on the 12th July. We should also be obliged to hear from you as to whether it is now considered that the letter of divorce dated 27th April 1967 has taken effect. We ourselves have taken the advice of counsel versed in both English and Pakistani law and he advised that on hearing from you confirming that in your view the divorce is complete we should institute proceedings in the High Court for a declaration as to the validity or otherwise of the alleged divorce. We are also advised that the document dated the 12th October 1966 concerning the sadaqa of 9000 rupees is in fact now due to [the wife] and we shall be obliged to hear from you as to what proposals [the husband] has for settling his amount.’
(It was subsequently agreed between the solicitors that questions of liability in maintenance and for the sadaqa should be left for decision in the present proceedings.)
28. On 7 August 1967 Mr Husain drew up the following document, sending copies to the wife and the husband:
‘In the matter of dissolution of marriage in accordance with the provision of the Muslim Family Laws Ordinance, 1961.
AND
‘In the matter of [the husband], s/o late Abdul Nabi Qureshi of “Al-Quraish”, behind “Naz” Cinema, Karachi-3, presently living at Farnham Hospital, Hale Road, Farnham, Surrey and [the wife] of 10 Acacia Avenue, Wembley, Middx.
‘In pursuance of the notice issued by this office vide No. CON/8/1/A/67, dated 10th May 1967 both the parties and their respective representatives appeared before me on the 25th May 1967. Heard both the parties and efforts were made to bring about a reconciliation between the estranged parties. Both the parties sought time to see if they could settle up the matter among themselves amicably and so the proceedings of the Arbitration Council was adjourned till the 12th July 1967.
‘On 12th July 1967 [the husband] with his representative appeared before the Arbitration Council but the solicitor of [the wife] informed me that they would not attend the Arbitration Council. The decision had, therefore, to be taken ex-parte.
‘[The husband] was adamant to see the marriage dissolved and was not agreeable to any reconciliation. Hence it was not possible to grant a new lease of life to the marriage.
‘It was therefore ordered that the divorce would be absolute on 1st August 1967, that is the notice of divorce as received by this office as provided under Section 7 of the Muslim Family Laws Ordinance 1961.’
The significance of the date, 1 August 1967, is that it is 90 days from the purported pronouncement of talaq.
29. On 11 August 1967 the husband ceased making payments under the maintenance order of 9 December 1966; and he made no payment thereafter up to the date of the hearing before me. On 28 November 1967 the wife lodged a complaint in the magistrates’ court in respect of the arrears of maintenance. On 12 December 1967 the husband lodged a complaint, claiming that he was no longer liable to pay maintenance at the rate of £5 a week, on two grounds: first, that he and the wife were divorced; and, second, that the wife’s circumstances had changed, in that she was by then in gainful employment. Both complaints came before the magistrates on 5 January 1968, when both were adjourned sine die. The reason for that was that the present proceedings were impending in the High Court; the wife presented her original petition on 12 January 1968.
30. On 8 February 1968 the husband was issued by the Pakistani High Commission in London with his current passport. It purports to show him by nationality to
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be citizen of Pakistan, domiciled in Pakistan, and (under heading ‘Home in Pakistan’) having an accommodation address in Islamabad. I know nothing of the contents of any previous passport.
31. On 28 August 1968 the husband completed the purchase of the Farnborough house, where he is now living.
The pleadings
32. By a document called her amended re-amended petition the wife alleged that she was not aware of the husband’s domicil; alternatively, that both he and she were domiciled in England. She alleged that each had been bona fide residents in England since the date of the marriage, 19 March 1966. She prayed:
‘(a) that the court might declare that her marriage with the [husband] subsists and that her status is one of a married woman; (b) that she might be granted such sums by way of maintenance as might be just or that she might continue to receive the sum of £5 a week from the [husband] as ordered by the magistrates’ court [on 9th December 1966].’
In the alternative she prayed, if the court were of opinion that her marriage with the husband had been validly dissolved—
‘(i) that she was entitled to recover dower in the sum of £788 13s 5d; (ii) that she was entitled to maintenance in the sum of £5 as ordered by this court, from the 11th August 1967.’
33. By his amended answer the husband denied that he was or had been domiciled in England. He prayed that the prayer of the petition might be rejected and that the court should declare that the divorce (by talaq) was valid. So far as the claim for maintenance was concerned, the husband alleged that it was not maintainable in a petition for a declaration of the subsistence of a marriage and as to the wife’s status as a married woman. As for the claim to dower, the husband alleged that the dower is payable (if at all) only on the dissolution of the marriage or on the husband’s death and he denied that the wife was entitled to include a prayer for its recovery in her petition for a declaration as aforesaid. He further alleged that the dower (as to the recovery of which he made no admission) was not a matrimonial relief within the meaning of the English law, but that the wife’s right (if any) to dower (if any) was ex contractu and as such it is not a cause of action (if at all) maintainable in the Divorce Division of the High Court.
34. The principal relief asked for on each side is therefore a declaration as to status under RSC Ord 15, r 16, and Ord 112, r 3.
Domicil
35. It is common ground that if the husband is domiciled in England the talaq will not be accorded recognition by an English court. The situation which would obtain if he were domiciled in India was not exhaustively explored. The main domiciliary situations for the husband claimed by the parties respectively were a domicil in Pakistan by the husband and a domicil in England by the wife; although the wife was also content to allege alternatively merely that the husband had lost any domicil that he had acquired in Pakistan. It was expressly disclaimed that the wife had assumed any domicil independently of the husband at any time since the marriage. The domicil of the parties might also have some bearing on the jurisdiction of the court. It is therefore the first issue to be determined.
36. It was only faintly controverted that in 1957 the husband abandoned his domicil of origin in India and acquired a domicil of choice in Pakistan. The most significant event, in my view, was the change of nationality: cf D’Etchegoyen v D’Etchegoyen ((1888) 13 PD 132 at 134) and Wahl v A-G ((1932) 147 LT 382 at 383, 385, [1932] All ER Rep 922 at 923-925). There is also the movement of other members of his
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family. I accept that Pakistan was far more attractive than India culturally and politically, with consequent repercussions on career prospects. The evidence in favour of the abandonment of the domicil of origin in India, and the acquisition of a domicil of choice in Pakistan, seems to me to be overwhelming.
37. The wife, however, claims that the husband has abandoned his domicil of choice in Pakistan. The legal background of the argument on her behalf rests on three propositions, all of which I accept as correct. First, a domicil of choice is less retentive, and therefore more easily abandoned, than a domicil of origin. Secondly, a person may change his domicil without any intention to do—indeed, without being conscious of doing so: see D’Etchegoyen v D’Etchegoyen ((1888) 13 PD at 134); Gulbenkian v Gulbenkian ([1937] 4 All ER 618 at 627) (although it has been said that the evidence in such circumstances must be very clear: D’Etchegoyen v D’Etchegoyen ((1888) 13 PD at 134)). Thirdly, given the necessary fact of a physical departure from the country of domicil of choice, for its abandonment the animus that must be shown is not necessarily non revertendi; it is sufficient that the residence in the new country is sine animo revertendi; and in this connection there may be a ‘withering away’ of an intention to return to the country of the domicil of choice: see Re Flynn (decd), Flynn v Flynn ([1968] 1 All ER 49 at 56-58, [1968] 1 WLR 103 at 112–115); although I think that what Megarry J said in that case on these matters was obiter, these seem to me to be valid and valuable tools of analysis: see also The Lauderdale Peerage ((1885) 10 App Cas 692 at 739), per the Earl of Selborne LC; Fremlin v Fremlin ((1913) 16 CLR 212 at 233), per Isaacs J, with whom Gavan Duffy J agreed.
38. So far as the facts are concerned, as Megarry J said in Re Flynn ([1968] 1 All ER at 51, [1968] 1 WLR at 107):
‘In one sense there is no end to the evidence that may be adduced; for the whole of a man’s life and all that he has said and done, however trivial, may be prayed in aid in determining what his intention was at any given moment of time … All that the court can do is to draw inferences from what has been said and done; and in doing this, too much detail may stultify.’
I therefore propose to refer only to the matters on which the parties placed particular reliance and to those which struck me as being particularly significant.
39. For the wife it was principally urged: first, that the husband had spent less than one year of his 35 in Pakistan; secondly, that English social customs were obviously congenial to him; thirdly, that he had held, and could hope to continue to hold, responsible and remunerative posts under the national health service in this country (resignation from which would involve financial sacrifice), whereas his prospects in Pakistan were less favourable and were deteriorating with the effluxion of time; fourthly, that the letters that the husband wrote before marriage are inconsistent with an intention to return to Pakistan; and fifthly, that the husband had told the wife that he intended to remain in England.
40. I do not accept that the husband ever declared or evinced to the wife an intention to make this country his permanent home or not to return to Pakistan; this seems to me inconsistent with her evidence before the justices, some passages from which I have cited. Nor can I take the husband’s letters before marriage as providing any serious evidence of his domiciliary situation; they seem to me to be typical effusions of the weltschmertz, restlessness and self-pity which are common form among many young people. The other matters are certainly to be weighed carefully, but together with all the other circumstances of the case.
41. The principal evidence relied on by the husband for the retention of his domicil of choice in Pakistan was criticised as amounting to nothing more than his ipse dixit. It is true that, in determining domicil, the courts approach direct
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declarations of intention with some caution: see Dicey and Morris: Conflict of Lawsd. But this is because a declaration may be influenced by self-interest; it may be inconsistent with conduct (which, in this connection, may well speak louder than words); and, if the word ‘domicil’ is used, the declarant is unlikely to have understood the meaning of a legal term embodying concepts of great complexity. In my view the law was authoritatively declared by Lord Buckmaster in Ross v Ellison (or Ross) ([1930] AC 1 at 6, 7), in a passage with which Viscount Dunedin, Lord Warrington of Clyffe and Lord Atkin were content merely to express agreement:
‘Declarations as to intention are rightly regarded in determining the question of a change of domicil, but they must be examined by considering the person to whom, the purpose for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression.’
Although I believed the husband when he told me in evidence that he intended to return to Pakistan after having another attempt to qualify as FRCS (whether or not he does in fact qualify), this evidence might not have sufficed alone, on the ground of his knowledgeable self-interest in the matter. The statement in the passport that his domicil was in Pakistan must similarly be received with caution, since it must have been based on a statement of the husband’s at a time when his domicil was to his knowledge a matter of legal significance; although a domicil may be changed with a specific legal end in view (Drexel v Drexel—the object there being a forum for divorce), and in principle it seems to me that a domicil may be similarly retained. The evidence given by both spouses before the justices at the end of 1966 was, in my view, of great importance. So were the declarations made by the husband to Mr Thorne; they are personal friends and have seen each other on an average once a month since the autumn of 1966. Mr Thorne told me that the husband had undeviatingly stated that he had every intention of returning to Pakistan. In the early days he would add, ‘as soon as I have got my fellowship’; latterly these words were omitted (presumably because hope has somewhat been fading). The husband would use the words ‘I am a Pakistani and I am going home’. Under cross-examination Mr Thorne could not recall any change in emphasis over the years—the husband always said that he was a Pakistani and that he was going home one day. It is true that Mr Thorne accepted that on 25 May 1967 no one claimed, in response to Mr Boyle’s objections, that Mr Husain had jurisdiction because the husband was domiciled in Pakistan. But I am unable to treat such omission as derogating significantly from the probative effect of the declarations which I am satisfied the husband made as to his intention—many at a time when he had no possible interest other than in speaking his true mind on the matter: see D’Etchegoyen v D’Etchegoyen ((1888) 13 PD at 135).
42. Nor does the husband’s case rest solely on his declarations. He retained his Pakistani citizenship throughout; and there is no evidence that he ever contemplated applying for British nationality. In 1962 the husband took out in London an endowment policy of insurance with a Pakistani company, in Pakistani currency, the sum assured being payable in Pakistan; and in 1967 he raised money on it to buy land in Karachi for construction of a house (although this was after the purported pronouncement of talaq). Moreover, it is stated in Dicey and Morrise:
‘There is a presumption against the acquisition of a domicile of choice by a person in a country whose religion, manners and customs differ widely from those of his own country’
Citing a number of authorities; and see also Fremlin v Fremlin ((1913) 16 CLR at 233). This seems to me
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not so much a proposition of law as an expression of common experience; people are generally unlikely to make a permanent home in a country which is ethnically and culturally alien—particularly where one which is culturally and ethnically congenial is available as an alternative. Nor am I bound, I think, to pretend ignorance of certain racial tensions and intolerances in this country of recent years, and their possible repercussion on domiciliary intention.
43. It was argued on behalf of the wife that residence in England with the intention of passing an examination or of obtaining a qualification was analogous to residence with the intention to remain until the happening of some doubtful event, such as the making of a fortune (Bruce v Bruce ((1790) 2 Bos & P 229 at 230) and Doucet v Geoghegan or the death of a mistress (Anderson v Laneuville ((1854) 9 Moo PCC 325 at 335)), which will not necessarily affect domicil: see also Aikman v Aikman ((1861) 3 Macq 854 at 858) per Lord Campbell. But such contingencies are, so to speak, open-ended; not so, ordinarily, the attempt at a qualification.
44. I was satisfied that the husband at all times during his residence in this country intended to return to Pakistan; and that he had never lost his Pakistani domicil of choice. I made an interim finding to this effect (reserving my reasons), so as to define the compass of the ensuing argument.
Jurisdiction
45. Counsel were all agreed that the decision of the Court of Appeal in Garthwaite v Garthwaite has been misunderstood. It does not decide that the court has jurisdiction to make a declaration as to status under RSC Ord 15, r 16, only if, on the petitioner’s own case, he or she is domiciled in England at the commencement of the proceedings. (If that were the case, the wife would not be entitled to the declaration that she seeks in her petition.) Garthwaite v Garthwaite in reality decides that (in addition to jurisdiction based on domicil) the court has power to make a declaration under RSC Ord 15, r 16, in such circumstances as would have given the English ecclesiastical courts in their totality before 1857 jurisdiction to accord matrimonial relief—in particular to grant a decree of restitution of conjugal rights. I respectfully concur with this view of the decision: see per Willmer ([1964] 2 All ER at 239, 240, [1964] P at 383–385), Danckwerts ([1964] 2 All ER at 240, [1964] P at 385) and Diplock LJJ ([1964] 2 All ER at 247, [1964] P at 397). In Har-Shefi v Har-Shefi ([1953] 1 All ER 783 at 790, [1953] P 161 at 174) Hodson LJ agreed with Barnard J that petitions in nullity were analogous to declarations under RSC Ord 25, r 5 (now RSC Ord 15, r 16), and thought that jurisdiction in respect of each should be decided on the same principles. The ecclesiastical courts before 1857 had jurisdiction to entertain suits for marital relief if both parties were, at the date of commencement of proceedings, resident in the territorial area over which the court exercised jurisdiction. The High Court still has jurisdiction to entertain a suit for nullity, judicial separation or restitution of conjugal rights where the parties are resident in England at the commencement of proceedings: see Dicey and Morris f. Both the wife and the husband have been resident in England at the commencement of and throughout the present proceedings. It follows that each party is entitled to the declaration sought under RSC Ord 15, r 16 as to the effect of the purported talaq. It is possible that the wife might be entitled to the declaration that she seeks on the further ground that according to her contention both parties were domiciled in England
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at the time of the petition; but I prefer not to rest my decision on this ground, because it is arguable that, on the court deciding the issue of domicil against her, it should not proceed further in the suit.
46. So far as the municipal jurisdiction of this court is concerned, I propose to consider first the wife’s claims as to maintenance. I am satisfied that the High Court has no power itself to make any order for maintenance ancillary to a declaration under RSC Ord 15, r 16: cf Matrimonial Causes Act 1965, ss 16, 19, 20 and 21. Counsel for the Queen’s Proctor urged, however, that the court should declare in the present proceedings that an effective talaq did not necessarily terminate the maintenance order of 9 December 1966 (see Wood v Wood); and that this is one of those exceptional cases envisaged in Guaranty Trust Co of New York v Hannay & Co ([1914–15] All ER Rep 24 at 35, 36, 39, [1915] 2 KB 536 at 563–565, 572) where the court should declare that a person is liable in an existing or possible action. It was argued that it is desirable that the justices should have such guidance, so as to avoid a possible appeal to the Divisional Court. I did not find it necessary to decide this question of jurisdiction, because in the event it seemed to me to be preferable to deal with the matter by way of interim judgment, indicating to the justices that they could proceed properly with the cross-complaints that stood adjourned before them without waiting for final judgment in the High Court. I shall refer later to the terms of the interim judgment.
47. As for the wife’s claim to dower and the husband’s denial of the jurisdiction of this Division of the High Court to determine the matter, the Supreme Court of Judicature (Consolidation) Act 1925, s 43, provides:
‘The High Court … shall, in every cause or matter pending before the court, grant … all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any legal or equitable claim properly brought forward by them in the cause or matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided.’
(See also the notes to the section in the Supreme Court Practice 1970 g.) In Hart v Hart ((1881) 18 Ch D 670 at 680, 681) Kay J indicated no doubt that the Divorce Division could have decreed specific performance of the terms of a separation agreement negotiated in compromise of a divorce suit. It was conceded on behalf of the husband that if his marriage with the wife had been validly dissolved the sum claimed by way of dower is payable to the wife on demand. It is therefore immaterial whether the claim arises ex contractu or as an incident of status; judgment in the matter can be given in the present suit, according to the decision on the validity of the talaq in the eye of the English law. To hold otherwise would be to put the forensic clock back 100 years; and, indeed, the denial of jurisdiction to deal with the matter in this Division and in this suit was abandoned during argument.
The Pakistani law
48. Having found that the court had jurisdiction to declare the parties’ status, my next task is to endeavour to ascertain whether what happened here would be held in Pakistani law to be effective to dissolve the marriage; since prima facie the effectiveness of a divorce is to be referred to the law of the domicil, which I have found to be Pakistani law.
49. The issue before me has unfortunately never fallen for decision by a court in Pakistan, but the expert witnesses were agreed that the Muslim Family Laws Ordinance would be construed according to English rules of construction; and there
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are two decisions of the Supreme Court of Pakistan which show clearly what was the object of the Ordinance, so providing a guide to its construction and scope: Gardezi v Yusuf and Jatoi v Jatoi. In Gardezi v Yusuf (PLD 1963 Supreme Court at 75, 76) it was said that the object of s 7 of the Ordinance was—
‘to prevent hasty dissolution of marriages by talaq pronounced by the husband unilaterally, without an attempt being made to prevent disruption of the matrimonial status … the policy of the Ordinance seems to be to provide some curbs on too facile pronouncements of divorce and unnecessary or unjustified plural marriages.’
Moreover, the two cases make it clear that the Ordinance applies to parties to a marriage in a register office in England (save for the provisions as to registration), and that it is irrelevant that one of the parties is not a Muslim or a citizen of Pakistan, provided that the other one is.
50. The first point for decision in this part of the case is whether the appointment of Mr Husain, the head of chancery in London, as chairman of the relevant arbitration council, was ultra vires s 2(b). Dr Fatmi, the wife’s expert witness, was inclined to doubt the vires. In his view the proper chairman in the case of the husband’s purported talaq was the chairman of the appropriate union council in West Pakistan, although the latter could appoint the head of chancery in London as his surrogate. Dr Fatmi pointed out that by s 11(3) of the Ordinance the rules thereunder were to be considered as part of the Ordinance itself. He was of opinion that since the husband’s Pakistani residence had been in West Pakistan, the West Pakistan rules would be applicable; and that they provide for the chairman of a union council in West Pakistan to be the chairman of the arbitration council (see r 3). But r 3 seems only to apply to talaq where the wife was at the time of the talaq resident in West Pakistan, or where the last joint residence was there, or where the husband is permanently resident there, none of which conditions applies in the present case. Moreover, by s 1(2), the Ordinance is to apply to all Muslim citizens of Pakistan, wherever they may be; if they were in London, there would be no conceivable purpose in appointing the chairman of a local authority in Pakistan as the primary chairman of the arbitration council. Whatever difficulties arise from the literal force of the words of s 2(b) as they now stand, I am clearly of opinion that before their amendment in 1964 the appointment of heads of chancery to act as chairmen of arbitration councils abroad was intra vires; and, since the 1964 amendment obviously has an internal constitutional significance, I do not believe that it would be construed as invalidating the appointment of heads of chancery as chairmen of arbitration councils abroad. It was not disputed that heads of chancery had exercised functions under the Ordinance on a number of occasions without their power to do so being questioned.
51. But Dr Fatmi argued, secondly, that, even if Mr Husain was validly appointed as chairman of an appropriate arbitration council, he was incapable of acting as such because no rules were made under s 11 for arbitration councils abroad; the only rules made had reference to arbitration councils in East and West Pakistan respectively. In particular, Dr Fatmi emphasised that by the proviso to s 2(a) there is a reference to a party nominating a representative within the ‘prescribed’ time; and by s 2(c)’prescribed’ means ‘prescribed by rules made under section 11’; no time was prescribed for the nomination of a representative to an arbitration council outside Pakistan. But in my judgment, where a legislative authority by an enactment setting up a tribunal or other body envisages rules to be made governing the procedure of such tribunal or body, and no such rules are made, the tribunal or body is not necessarily thereby disabled from performing its function. In such case the tribunal or body acts effectively provided it acts in accordance with natural
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justice and to promote the objective with which it was set up, and possibly by analogy with the rules of procedure prescribed for comparable tribunals or bodies. I am satisfied that Mr Husain acted according to natural justice and to promote the objectives of the Ordinance. As for ‘prescribed’ time where no time is prescribed, it is sufficient in my view if the act required is done within a reasonable time. In response to Mr Husain’s letter of 3 May 1967, requesting the wife to attend on him with a ‘representative’, she brought Mr Boyle to the meeting of 25 May. Both Mr Husain’s letter and the meeting were within a reasonable time from the receipt of the document of talaq (indeed, within the time stipulated in the West Pakistan rules); and Mr Husain made it plain at the meeting that Mr Boyle was present as a ‘representative’ of the wife.
52. But Dr Fatmi argued, thirdly, that Mr Husain failed to act in accordance with the West Pakistan rules (as Dr Fatmi considered necessary), or at least by analogy with them, in two further respects. He failed to comply with r 5(4) by failing to require the wife to make a fresh nomination of a representative when Mr Boyle indicated that he was no longer proposing to attend as a member of an arbitration council; and he failed to comply with r 6(1) by failing to require the wife to nominate her representative in writing. These failures, in his view, vitiated the proceedings. But the wife in fact brought Mr Boyle to the meeting of 25 May in response to Mr Husain’s request to her to nominate a representative; and even if Mr Husain had called on the wife to make a fresh nomination she would not have done so. I do not believe that immaterial and technical failure to comply with rules that at most were applicable only by analogy would be held to vitiate the proceedings. Moreover, in my view, the provisions of rr 5(4) and 6(1), insofar as relevant at all, would be construed as directory and not imperative (see Montreal Street Ry Co v Normandin ([1917] AC 170 at 175) and Marsh v Marsh ([1945] AC 271 at 284)). I do not think that a Pakistani court would hold that the proceedings before Mr Husain were invalid and the resultant sanctioning of the talaq ineffective.
53. It will be apparent that on the foregoing issues of foreign law I have in general preferred the evidence of the husband’s expert witness, Mr Saeed, to that of Dr Fatmi; although I have in addition tried to form my own view by scrutinising the written material placed before me (see 15 Halsbury’s Laws (3rd Edn) pp 329, 330, para 600), particularly as their language is English and their construction is according to English law. But for a residual issue I must rely entirely on the expert evidence. Assuming that Dr Fatmi is right in thinking that there was no means by which the Ordinance could be complied with outside Pakistan, would the document of 27 April 1967 operate as an effective immediate talaq under the substantive Islamic law as it existed unmodified by the Ordinance? Mr Saeed answered this question in the affirmative. Dr Fatmi would have agreed, had it not been that the document purported to be made in accordance with and to invoke the Ordinance. I prefer the view of Mr Saeed.
54. It follows that, in my judgment, according to Pakistani law the marriage between the wife and the husband was dissolved in August 1967 by substantive Islamic law as procedurally modified by the Ordinance (in my opinion, the preferable view), or alternatively on 27 April 1967 by substantive Islamic law not so modified.
Attitude of English law to non-judicial divorce
55. There can be no doubt that the law of the domicil is prima facie the proper law for determining the efficacy of a purported divorce to bring about a change of status by dissolving a marriage: Harvey v Farnie. There is equally no doubt that here, as elsewhere, there is a residual discretion in an English court to refuse to recognise the proper rule of foreign law, when to do so would cause injustice—I shall be discussing the application of this discretion later in this judgment. The
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issue which I have to determine under the present heading is whether there is a rule of English law which compels refusal of recognition to a divorce valid by the law of domicil, if it is not the creature of judicial act or performed in judicial presence, either generally, or if the marriage is celebrated in England, or if the purported divorce takes place in England, or both.
56. I am satisfied that there is no general rule to this effect: see Sasson v Sasson, Har-Shefi v Har-Shefi, Har-Shefi (otherwise Cohen-Lask) v Har-Shefi and Russ (otherwise Geffers) v Russ (Russ (otherwise de Waele) intervening). I was also referred to a number of cases either unreported or reported only in the newspapers in which a divorce valid by the law of the domicil was recognised by the courts of this country notwithstanding the absence of judicial intervention or presence in the divorce. Insofar as R v Hammersmith Superintendent Registrar of Marriages, ex parte Mir-Anwaruddin may appear to lay down the contrary, it is, in my view, in conflict with the other Court of Appeal decisions which I have cited, and not to be followed: see Young v Bristol Aeroplane Co Ltd. Nor can it be a material factor that the marriage purported to be dissolved took place in England (any more than it is where there is a decree of divorce by a foreign court of competent jurisdiction, as in Harvey v Farnie. It is true that the Hammersmith Marriage case was at one time thought to establish the anomalous proposition that a Christian marriage in England could not be dissolved by the pronouncement of talaq, even when that would have been a valid dissolution by the law of the domicil. But none of the members of the Court of Appeal in Russ v Russ considered that to be a sustainable proposition, or even a matter justifying the distinction of the two cases. Indeed, Donovan LJ said ([1962] 3 All ER at 201, [1964] P at 331):
‘… only SWINFEN EADY, L.J., went to the length of holding that it was impossible in law for a Christian marriage contracted in England to be dissolved by Talaknama. This indeed had been the principal contention of the Solicitor-General, but no other judge in terms acceded to it … the decision ought not, in my opinion, to be regarded as laying down … that a Christian marriage in England cannot, in the eye of English law, ever be dissolved by Talaknama, notwithstanding that the law of the parties’ domicil permits it.’
57. It was, however, claimed on behalf of the the wife that non-judicial divorce, not least one amounting to unilateral repudiation of an innocent partner, should be refused recognition if it purports to take place in England, it being contrary to public policy that the safeguards of the English matrimonial law should be thereby by-passed. But in my view this contention is inconsistent with the Har-Shefi decision; see also Mandel v Mandel, a reserved judgment of Lowe J. What Davies LJ said in Russ v Russ ([1962] 3 All ER at 203, 204, [1964] P at 335) about the relevance of the talaq taking place in this country was expressly directed to the exercise of the residual discretion. Nor, when it comes to considerations of public policy, can I close my eyes to the fact that a recent statutory change in the law permits (albeit subject to certain conditions and safeguards in some circumstances) the repudiation of an innocent spouse. I confess that I share the misgiving implied by Lowe J at the possible mischief that might accrue if the safeguards inherent in judicially pronounced divorce can be by-passed in this country. But courts of law have no means of judging the possible extent of any such mischief, or the repercussions of attempting to deal with them by judicial law-making. The
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court already has adequate power to refuse to recognise the legal rule of the domicil where it would cause injustice in a particular case. It seems to me to be preferable for the courts to proceed generally on legal principle, and to leave any necessary modifications called for by public policy to other organs of the Constitution.
58. If, as I think, it is immaterial that the marriage purported to be dissolved took place in England or that the purported divorce took place in England, I cannot see how the coincidence of these two factors can make any material difference.
59. I respectfully agree with the view expressed in Dicey and Morris h:
‘In spite of earlier dicta to the contrary, it is now clear that English courts will recognise non-judicial divorces obtained by mutual agreement between the spouses or unilaterally by one party to the marriage in accordance with a religious law (e.g., a Jewish ghet or a Mohammedan talak), provided the parties are domiciled in a country (e.g., Israel or Egypt) the territorial laws of which permit such a method. The recognition of such divorces is perfectly consistent with the status theory of divorce and with the paramount importance of domicile in questions of status. If the cause for divorce is immaterial, so ought the method to be. It is immaterial that the religious divorce takes place in England, provided of course that the parties are not domiciled in England.’
Cheshire: Private International Lawi is to similar effect; see also Graveson: Conflict of Lawsj.
60. In my view, therefore, the fact that there has been no judicial intervention or even presence is irrelevant if the purported divorce is effective by the law of the domicil to terminate the marriage in question, and it should be recognised as such, unless the result would be offensive to the conscience of the English court.
61. My conclusions that the talaq was valid according to the law of the domicil and that there is no rule of English law which precludes its recognition by reason of its non-forensic character make it unnecessary for me to consider an argument advanced to the effect that the office of the High Commissioner for Pakistan is to be accorded extra-territorial status and considered as part of Pakistan, so that the talaq was pronounced, or the arbitration council sat, in Pakistan. In Varanand v Varanand, Scarman J granted a declaration that a marriage between two Thais, celebrated in England, had been validly dissolved by an agreement signed by the parties at the royal Thai embassy in London relinquishing their status as husband and wife. There was no judicial pronouncement or presence, but an expert in Thai law had given evidence that the certificate issued by the embassy would be accepted by the court in Thailand as evidence of a valid divorce. Scarman J seems to have proceeded partly on the extra-territorial character of a foreign embassy; a divorce there, he said, ‘involved no sort of infringement of the royal prerogative of justice’. But Scarman J did not hear adversary argument on the point. As at present advised, there seems to me to be considerable difficulty, both in law and fact, in the way of this line of argument for the husband.
The claim for maintenance
62. As I have indicated, I dealt with this part of the case in an interim judgment. The relevant portion was as follows:
‘It is now not really disputed, and in any event I hold, first, that the High Court has no jurisdiction to order that the wife is entitled to maintenance either in the sum of £5 as ordered by the justices, or any other sum as from 11th August 1967, or any other date, in proceedings such as these. Second, the magistrates’ court order is not in any event automatically terminated by divorce: see Wood v Wood. Third, therefore, the jurisdiction of the justices as to either (a) variation of maintenance, or (b) enforcement of arrears is not directly affected
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by the decision of this court whether or not this marriage has been validly terminated by talaq; since hat question has little, if any, bearing on the factual situation which is relevant to the deliberation of the justices. Fourth, the order of £5 per week of 9th December 1966 continues until it is varied, though it may be varied retrospectively at least to the date of the husband respondent’s summons for variation.
‘It follows, in my view, that the justices can and should resume consideration of the complaints that they had before them on 5th January 1968, without awaiting the decision of this court on the main issue, and should exercise their discretion on those matters of complaint before them. All questions of maintenance and enforcement are entirely in the judicial discretion of the justices, on these matters being properly brought before them.
‘I said that the jurisdiction of the justices is not directly affected by the decision of this court whether or not the marriage was terminated by talaq. That is true. But the way they ultimately exercise their discretion as to quantum of maintenance, or enforcement of arrears, may be indirectly affected by the decision of this court. The reason for that is this. It is common ground that if the marriage has been validly terminated by talaq that sum [the dower] is payable. The payment, or non-payment, of such a sum might well have an effect on how the justices exercise their discretion on the two matters to which I have referred. But that question does not arise until any such payment is actually made. The justices can engage on the investigation of the complaints before them on the assumption that the wife has not obtained any such sum, nor the husband parted with it. If and when it is paid, that might be a reason for varying any order that the justices might have made in the meantime on the assumption, as is the fact, that it has not been paid.’
The residual discretion
63. Some of the main authorities on this matter are collected in Cheni (otherwise Rodriguez) v Cheni ([1962] 3 All ER 873 at 882, 883, [1965] P 85 at 98, 99). This is the part of the case that I have found most difficult of determination. I can well understand that the wife, who has satisfied an English court that she has been gravely wronged by the husband, should feel resentment that he should be able to cast her off at his will, and that she should wish to see her matrimonial status vindicated. It has also been argued on her behalf that she should not be precluded from herself invoking the jurisdiction of an English divorce court, not only to secure the dissolution of her marriage but also to secure an order for ancillary relief. She claims that recognition of the talaq and the denial of rights otherwise available to her under English law would be unconscionable.
64. There are, however, five factors which in the end incline me to think that the judicial discretion should not be exercised to refuse recognition to the otherwise applicable rule of foreign law. First, I think that, as Scarman J said in Varanand v Varanand, ‘the court’s discretion to refuse recognition of a foreign status is one to be most sparingly exercised’. Secondly, if the marriage is in any event to be dissolved, I can see no purpose in postponing its dissolution. Thirdly, I am satisfied that the husband intends to return to Pakistan; I think that the courts there would recognise the talaq as validly terminating the marriage, take no notice of the exercise by an English court of a residual discretion to depart from accepted rules of private international law, and refuse to enforce any English order for ancillary relief: see Jatoi v Jatoi. Fourthly, it is only if the marriage is recognised as dissolved that the wife is entitled to dower. Whatever the judgment of this court, the husband will not return to the wife. I trust that it will not be thought cynical if I feel that she is really better off with a judgment for a considerable sum of money, which is likely to be more easily enforceable while the husband is in this country, than with a largely
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meaningless right to be recognised locally as the husband’s wife. Lastly, the rule of foreign law under which the husband has proceeded has the authority of the holy scriptures of the common faith of himself and the wife.
Conclusion
65. I therefore give judgment for the husband on that part of the prayer of his amended answer that prays that the court may declare that the talaq divorce was valid; and for the wife on that part of the prayer of her petition that claims the sum of £788 13s 5d by way of dower.
Order accordingly.
Solicitors: Bell, Krish & Co, Farnham (for the wife); Smallpeice & Merriman, Guildford (for the husband), Queen’s Proctor.
Alice Bloomfield Barrister.
Re Electrical Installations at Exeter Hospital Agreement
[1971] 1 All ER 347
Categories: COMPETITION
Court: RESTRICTIVE PRACTICES COURT
Lord(s): MOCATTA P, MAJ-GEN W E V ABRAHAM AND MR A M KNOX
Hearing Date(s): 17, 31 JULY 1970
Restrictive trade practices – Agreement subject to registration – Restriction on prices to be charged – Agreement not to offer to supply goods in response to an invitation to tender until after discussions with other persons invited to tender – Whether a restriction in respect of the prices to be quoted – Whether a registrable agreement – Restrictive Trade Practices Act 1956, s 6(1)(a).
The Registrar of Restrictive Trading Agreements, pursuant to his powers under s 14 of the Restrictive Trade Practices Act 1956, required the respondents, who were suppliers of electrical goods, to furnish him with particulars in connection with an agreement in relation to a contract for the supply of goods at Exeter Hospital. The respondents had agreed in October 1966 that they would not tender before they had met together and discussed the contract generally and the tender price in particular. In November 1966 they met and agreed (a) that three of their number would each prepare a detailed tender for the contract, that two of them would prepare check estimates and that the remaining two would do no more than receive cover prices; (b) that, at a further meeting, those who had prepared detailed estimates or check estimates would inform the others of the price estimated; (c) that, as between those who had prepared detailed tenders, the middle price would be taken, and the party who had prepared it would be treated as the successful tenderer; (d) that those parties who had prepared tenders below the middle price would submit tenders exceeding that price, and those who received cover prices would not tender below that price if they tendered at all; and (e) that each estimate would be prepared on the basis that the successful tenderer would pay £500 to each of the other two who had prepared detailed tenders and £200 to each of those who had prepared check estimates. The registrar prepared a memorandum of the terms of the agreement and registered it. He then applied for a declaration under s 20(1) of the Restrictive Trade Practices Act 1956 that, inter alia, the restriction ‘Not to offer to supply goods in response to an invitation to tender save after discussions with any other person or persons invited to tender for the supply of such goods’ was contrary to the public interest, and for an injunction under s 20(3)(a) and (b). On the question whether the restriction fell within s 6(1) of the Act,
Held – The preponderance of judicial reasoning was in favour of a broad construction of s 6(1)(c), so that an agreement preventing the supply or acquisition of any
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goods was included within the ambit of a restriction in respect of ‘the quantities … of goods to be … supplied or acquired’. The language used in para (a) of s 6(1) was not so different as to exclude the application of the broad construction from that paragraph also. Accordingly, the restriction fell within the words ‘restrictions … in respect of … the prices to be … quoted’, and the agreement was a registrable agreement.
Re Automatic Telephone & Electrical Co Ltd’s Application [1963] 2 All ER 302, Daily Mirror Newspapers Ltd v Gardner [1968] 2 All ER 163 and Re National Federation of Retail Newsagents, Booksellers and Stationers’ Agreement (No 3) [1969] 3 All ER 97 applied.
Re Birmingham Association of Building Trades Employers’ Agreement [1963] 2 All ER 361 not followed.
Notes
For registrable agreements, see 38 Halsbury’s Laws (3rd Edn) 98–101, paras 126–130, and for cases on the subject, see 45 Digest (Repl) 405–412, 158–170.
For the Restrictive Trade Practices Act 1956, s 6, see 36 Halsbury’s Statutes (2nd Edn) 937.
Cases referred to in judgment
Automatic Telephone & Electrical Co Ltd’s Application, Re [1963] 2 All ER 302, sub nom Re Telephone Apparatus Manufacturers’ Application LR 3 RP 462, [1963] 1 WLR 463; rvsg [1962] 2 All ER 207, LR 3 RP 98, [1962] 1 WLR 596, 45 Digest (Repl) 405, 159.
Birmingham Association of Building Trades Employers’ Agreement, Re [1963] 2 All ER 361, LR 4 RP 54, [1963] 1 WLR 484, 45 Digest (Repl) 407, 163.
Daily Mirror Newspapers Ltd v Gardner [1968] 2 All ER 163, [1968] 2 QB 762, [1968] 2 WLR 1239., Digest Supp.
National Federation of Retail Newsagents, Booksellers and Stationers’ Agreement (No 3), Re [1969] 3 All ER 97, LR 7 RP 27, [1969] 1 WLR 875, Digest Supp.
Case also cited
Blanket Manufacturers’ Association’s Agreement, Re [1959] 2 All ER 630, LR 1 RP 271.
Reference
This was a reference to the court by the Registrar of Restrictive Trading Agreements under s 20(2)(a) of the Restrictive Trade Practices Act 1956 of an agreement between seven electrical contractors, namely Colston Manufacturing Co Ltd, Troughton & Young Ltd, Lee Beesley & Co Ltd, Duncan Watson (Electrical Engineers) Ltd, Wheeler Crittall Berry Ltd, Haden Electrical Ltd and Drake & Scull Engineering Co Ltd (‘the respondents’). The registrar obtained particulars of the agreement pursuant to his powers under s 14 of the Act and recorded the terms of the agreement in a memorandum which he himself registered pursuant to s 11(2) of the Act. The registrar appended to the notice of application served on the respondents a draft of the formal order which it was proposed the court should be asked to make at the hearing, and this order referred in its second schedule to a list o restrictions said to be contained in the registered agreement. The third restriction alleged was: ‘3. Not to offer to supply goods in response to an invitation to tender save after discussion with any other person or persons invited to tender for the supply of such goods’. The respondents did not contest that the restrictions accepted by them under the agreement falling within the Act were contrary to the public interest. At the hearing, it was contended by the respondents, other than Colston Manufacturing Co Ltd, who were unrepresented and did not appear, that the third restriction was not a registrable restriction and should not be included in the order. It was also sought to amend the order so as to indicate that the restrictions applied to electrical goods for installation and not to offers to supply such goods without any undertaking to instal them. The facts are set out in the judgment of the court.
David Hirst QC and Anthony Evans for the registrar.
R A MacCrindle QC, A P Graham-Dixon and J F Lever for the respondents.
Page 349 of [1971] 1 All ER 347
Cur adv vult
31 July 1970. The following judgment was delivered.
MOCATTA P read the following judgment. This is an application by the registrar for a declaration under s 20(1) of the Restrictive Trade Practices Act 1956 that certain restrictions are contrary to the public interest and for an injunction under s 20(3)(a) and (b).
As a result of the exercise by the registrar of his powers under s 14 of the Act to call for information from persons he has reason to believe are or may be parties to an agreement subject to registration under the Act, the seven respondents, all of whom carried on business at the material time in (inter alia) the supply of electrical goods, furnished him with particulars showing that they had entered into an agreement between themselves in relation to a contract for the supply of goods at the Exeter Hospital for which tenders were invited in or about 1966. The agreement undoubtedly should have been registered by the respondents under the Act, but was not.
The registrar accordingly, on the basis of the particulars he had been given under s 14, prepared a memorandum recording the terms of the agreement and registered this. It is not in dispute that this memorandum correctly records the terms of the agreement. Paragraph 2 of the memorandum records that the respondents orally agreed in October 1966 that they would not tender before they had met together and discussed the contract generally and in particular the tender price which should be submitted for it. Subsequently, in November 1966, the parties at a meeting agreed on various matters set out in para 3 of the memorandum. Since what was there agreed clearly contained restrictions within the provisions of s 6 of the Act and it appears from other cases recently before the court and in today’s list that closely similar restrictions have not infrequently been accepted, but have not been registered by the parties concerned, we set out the details which were:
‘(a) that the then Colston Electrical Co. Ltd., Troughton & Young Ltd. and Lee Beesley & Co. Ltd., would each prepare a detailed tender for the contract, that Duncan Watson (Electrical Engineers) Ltd., and Wheeler Crittall Berry Ltd., (formerly F. H. Wheeler & Co., Ltd) would prepare check estimates and that Haden Electrical Ltd., and the Drake & Scull Engineering Co., Ltd., would do no more than receive cover prices; (b) that at a subsequent meeting each party who had prepared a detailed tender or had prepared a check estimate would inform the others of the price it had estimated; (c) that, as between the prices of the parties who had prepared detailed tenders, a middle price would be taken, and the one of those parties who had prepared an estimate at the middle price would be treated, as between all the parties, as the successful tenderer; (d) that any party who prepared an estimate at a price lower than the middle price would submit tenders at prices increased so as to exceed the middle price, and that any party who had received a cover price would, if they decided to submit a tender, not do so below that price; (e) that each estimate would be made on the basis that the successful tenderer would pay the sum of £500 to each of the other two parties who had prepared detailed tenders and of £200 to each of the two parties who had prepared check estimates.’
The registrar having registered the agreement gave notice on 2 February 1970 referring it to this court. The respondents did not wish to contest that the restrictions accepted by them under the agreement falling within the Act were contrary to the public interest and the registrar was so notified. Accordingly this application was made to the court by the registrar and came on for hearing on 17 July. All the respondents save the Colston Manufacturing Co Ltd were represented by counsel.
With the notice of the application served on the respondents the registrar included a draft of the formal order which it was proposed the court at the hearing should be asked to make. This referred in its second schedule to a list containing four
Page 350 of [1971] 1 All ER 347
restrictions said to be contained in the registered agreement. At the hearing of the application a relatively minor matter in relation to an amendment to the form of the proposed injunction was agreed between the parties, permitting the submission of or agreement to submit a joint tender in response to an invitation to tender. Two matters were, however, argued in relation to the list of restrictions.
The first, a minor point, was whether, as a matter of drafting, the list of restrictions should be amended so as to indicate that the restrictions applied to electrical goods for installation and not to offers to supply such goods without any undertaking to instal them. The Exeter Hospital contract required both supply and installation. Installation would, however, not come within the Act unless it was of such a character as to fall within the words ‘the construction or carrying out of buildings, structures and other works by contractors’ in s 36(2). So far as appears from information available to the court the materiality of the restrictions related to the supply of electrical equipment. We did not, therefore, consider any amendment of the drafting of the list of restrictions was required.
The second point raised a question of some importance. The third restriction in the list was based on para 3 of the memorandum recording the agreement. It states:
‘Not to offer to supply goods in response to an invitation to tender save after discussions with any other person or persons invited to tender for the supply of such goods.’
The argument for the respondents was that this was not a restriction falling within any of the lettered paragraphs of s 6(1) of the Act, was therefore irrelevant and should be deleted from the list. For the registrar it was argued, however, that this restriction came within one or more or all of paras (a), (b), (c) and (e).
There is no doubt that if a restriction falls within the words of any of the lettered paragraphs of s 6(1), it is caught by the Act even though it may be operative for only a short period of time: s 6(3) provides that restriction ‘includes any negative obligation … whether absolute or not’. Accordingly if the restriction here comes within any of the paragraphs on its true construction, it is immaterial that the obligation was to last only until the discussions between the respondents had taken place. The difficulty on the conflicting arguments arises from the fact that the phraseology of some at least of the lettered paragraphs permits either a broad or a narrow construction and that there has been some difference of reasoning in previous decisions of the courts.
In Re Birmingham Association of Building Trades Employers’ Agreement, one of the questions before this court was whether a rule of the association that members should not tender in competition for contracts exceeding £8,000 without bills of quantities being supplied constituted a restriction falling with in paras (a), (b), (c) or (e) of s 6(1). The court decided that it fell within para (e), but not within the other three. It is only necessary to refer shortly to the reasoning in relation to paras (a) and (c). As regards para (a) the court took the view that the paragraph related to restrictions as to the quantum to be charged, quoted or paid and that an agreement that in certain circumstances there should be no quotation at all was a very different thing. Similarly as regards para (c), dealing with the quantities or descriptions of goods to be supplied, the view taken was that a restriction on the quantity of building work to be done was different from a provision that no tender should in certain circumstances be made and accordingly no work at all should be done. The construction adopted in that case of the two paragraphs mentioned, for which there was certainly adequate foundation in the words used in the subsection, may be called the narrow construction.
As against this, counsel for the registrar referred to what he called the broad
Page 351 of [1971] 1 All ER 347
construction that had been adopted in three cases. The first of these was Re Automatic Telephone & Electrical Co Ltd’s Application. This was an originating summons in the Chancery Division under s 13(2) of the Act to determine whether an agreement called the TAM agreement between eight manufacturers of telephonic apparatus contained a restriction and was therefore registrable under the Act. The TAM agreement was subsequent and subsidiary to the ‘Crown agreement’ between the Postmaster General and the eight manufacturers whereby the Postmaster General agreed to place each order for telephone apparatus with only a single manufacturer to be nominated by the eight. The TAM agreement provided the machinery by which the single manufacturer in each case was to be selected and nominated. Wilberforce J decided that by being parties to the TAM agreement the manufacturers had accepted a restriction within para (c). As he put it ([1962] 2 All ER 207, LR 3 RP 98, on appeal [1963] 2 All ER 302, LR 3 RP 462):
‘… an agreement not to offer to supply goods in response to a particular order (interpreted as an invitation to offer) is a restriction as to the supply of goods.’
Since he was dealing with para (c) this reasoning can only be taken to mean that a restriction preventing any supply at all is a restriction as to ‘the quantities … to be … supplied’. After the decision in the Birmingham Builders case, in which little weight in argument seems to have been placed on the reasoning of Wilberforce J, the latter’s decision was reversed in the Court of Appeal on another point concerning the rights of the Crown. As we read the judgments in the Court of Appeal, however, both Willmer and Upjohn LJJ took the view that if the TAM agreement had stood alone, it did contain a registrable restriction. We think, therefore, that counsel for the registrar is right in submitting that in the Automatic Telephone case the courts in relation to para (c) adopted the broad construction in distinction to the reasoning adopted in the Birmingham Builders case on the same paragraph.
The second case referred to was Daily Mirror Newspapers Ltd v Gardner, a decision of the Court of Appeal on appeal from the judge in chambers granting an injunction against the officers of the National Federation of Retail Newsagents, who had recommended their members to boycott the Daily Mirror for one complete week. The court took the view that this recommendation, by virtue of s 6(7), constituted a restriction under the Act. It would seem that this could only have been the case if the recommendation was treated as a restriction coming within para (c). The decision was on an interlocutory matter and it does not appear that argument was specifically directed to the construction of para (c). It does, however appear as if the Court of Appeal, as a matter of first impression at least, considered that a restriction preventing the acquisition of any goods was one restricting ‘the quantities … of goods to be … acquired’.
The same recommendation of the National Federation of Retail Newsagents gave rise to the third case, which was decided in this court: The National Federation of Retail Newsagents, Booksellers and Stationers’ Agreement (No 3). Buckley P presided and Cumming-Bruce J was a member of the court. It was there argued that the recommendation did not amount to a restriction, since it involved a total boycott of the Daily Mirror for one week. The court dealt with this argument as follows ([1969] 3 All ER at 107, LR 7 RP at 71).
‘The recommendation was to the effect that members of the federation should not during a particular week acquire any copies of the Daily Mirror. In our judgment, it clearly imposes a restriction during that week on the quantities
Page 352 of [1971] 1 All ER 347
or descriptions of goods which members should acquire. We consider that the agreement into which the members of the federation are under s. 6(7) to be treated as having entered was one under which they accepted a restriction falling precisely within the terms of s. 6(1)(c).’
Whilst it is true that the same decision might have been reached by referring only to ‘the descriptions of goods’ in para (c), the court also expressly referred to ‘the quantities’. Again we think that counsel for the registrar is correct in his submission that this court in that case adopted the broad construction of the paragraph.
Counsel for the registrar accordingly argued that since the broad construction had been adopted both in the Automatic Telephone case and in the Retail Newsagents case so that a restriction preventing the supply or acquisition of any goods fell within the words ‘the quantities … of goods to be … supplied or acquired’, a similar approach should be adopted in this case and should be applied in particular to para (a) of s 6(1), so that a restriction preventing, if only for a time, any price being quoted in response to an invitation to tender, would fall within para (a). He was content in his final speech to rest his argument on para (a) alone, because of an argument of some force advanced by counsel for the respondents that the third restriction in the list by itself could not on any view fall within para (b), (c) or (e), since the meeting and discussion between the respondents were clearly to take place before the final date for tendering and therefore no question of any restriction on the supply of goods as distinct from a quotation arose.
We express no view on the validity of this latter argument and are prepared to decide the point at issue under para (a). It is clearly desirable that the courts should adopt a consistent approach to the construction of s 6(1). Whilst it is plainly possible to take either the broad or the narrow construction of paras (a) and (c), the preponderance of judicial reasoning in relation to para (c) favours the broad construction. We do not consider the language used in para (a) so different from that in para (c) as to exclude the application to para (a) of the broad construction. We, therefore, hold that the third restriction in the list, since it involves not quoting for a time any price in response to an invitation to tender, comes within the terms of s 6(1)(a).
Accordingly the court declares that all four of the restrictions in the list are contrary to the public interest and grants an injunction in the amended form asked on behalf of the registrar.
Declaration accordingly.
Solicitors: Treasury Solicitor; Slaughter & May (for the respondents Troughton & Young Ltd); Bristows, Cooke & Carpmael (for the respondents Lee Beesley & Co Ltd, Duncan Watson (Electrical Engineers) Ltd and Wheeler Crittall Berry Ltd); Baker & MacKenzie (for the respondents Haden Electrical Ltd); Linklaters & Paines (for the respondents Drake & Scull Engineering Co Ltd).
Euan Sutherland Esq Barrister.
Practice Direction
[1971] 1 All ER 352
PRACTICE DIRECTIONS
PROBATE, DIVORCE AND ADMIRALTY DIVISION (DIVORCE)
18 January 1971.
Divorce – Practice – Notice of intention to defend – Time limited for giving notice – Extension.
Except in cases where the time limited for giving notice of intention to defend has expired before Monday 18 January 1971, until further notice the time for giving notice of such intention is extended by six days.
Direction issued by the President in concurrence with the Lord Chancellor.
D A Newton, Registrar
Australian Coastal Shipping Commission v Green and others
[1971] 1 All ER 353
Categories: SHIPPING
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE AND CAIRNS LJJ
Hearing Date(s): 3, 4, 5, 6 NOVEMBER, 2 DECEMBER 1970
Shipping – General average expenditure – Vessel and cargo in position of peril – Towage contract on UK Standard Towage Conditions giving wide indemnity to tugowners – Contract a general average act – Expenditure reasonably incurred by shipowners defending actions on indemnity in Australian courts – Whether general average expenditure as being direct consequence of general average act – Risk of damage to tug at least a possibility at time of contract – York-Antwerp Rules 1950, rules A, C.
The plaintiffs owned two cargo-carrying vessels, the Bulwarra and the Wangara, and insured them with the defendant representative underwriter under two separate policies of marine insurance. As a result of events occurring on 13 July 1960 and 18 November 1961 the two vessels were respectively put in a position of peril off the Australian coast. The plaintiffs’ officers contracted with the owners of two tugs to tow the vessels to safety. The contracts of towage incorporated the UK Standard Towage Conditions which, inter alia, stated that the plaintiffs were under a duty to indemnify the tugowners for any damage caused to the tugs, even for damage which was due to negligence on the part of the crews of the tugs. While the vessels were being towed, the towropes parted and fouled the tugs’ propellers. As a result one tug drifted, grounded and was a total loss and the other tug accepted salvage services from third parties and was also damaged. The tugowners failed in their action in the Australian courts against the plaintiffs in relation to the Bulwarra incident but the plaintiffs only recovered party and party costs and so were out of pocket as a result of the action. In another action against the plaintiffs by the tugowners in respect of the Wangara incident the plaintiffs were held liable. The plaintiffs claimed that the expenses incurred by them in the two actions by reason of the indemnity clauses in the towage contracts were general average expenditure and that the defendant was liable to reimburse them under the policies, which incorporated cl 8 of the Institute Time Clauses under which, where the contracts of affreightment so provided (as they did), the adjustment of general average should be according to the York-Antwerp Rules 1950a.
Held – The expenses claimed were general average expenditure and were recoverable from the defendant, because—
(i) the towage contracts were ‘general average acts’, being contracts intentionally and reasonably made for the common safety (see p 357 e, p 361 c and e, p 362 e and p 363 c, post).
(ii) the expenses incurred were direct consequences of the general average acts (under rule C of the York-Antwerp Rules 1950); the parting of the towlines and the consequent liability to the tugowners under the indemnity clause were possibilities which could have been foreseen at the time when the towage contracts were made and so did not break the chain of causation (see p 358 f, p 359 c, p 360 d, p 361 f and h and p 363 b, post).
Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co [1899] 2 QB 403, Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd [1915] 1 KB 833 and Anglo-Grecian Steam Trading Co Ltd v T Benyon & Co (1926) 24 Lloyd LR 122, considered.
Decision of Mocatta J [1970] 1 All ER 968 affirmed.
Notes
For general average expenditure and the liability of underwriters, see 22 Halsbury’s Laws (3rd Edn) 122–125, paras 228–235, and 35 ibid 507–510, paras 726–728, and for
Page 354 of [1971] 1 All ER 353
cases on general average expenditure, see 41 Digest (Repl) 513–516. 2864–2919.
For the York-Antwerp Rules 1950, see 22 Halsbury’s Laws (3rd Edn) 446–452, para 901.
Cases referred to in judgments
A & B Taxis v Secretary of State for Air [1922] 2 KB 328, 91 LJKB 779, 127 LT 478, 17 Digest (Repl) 437, 92.
Anderson, Tritton & Co v Ocean Steamship Co (1884) 10 App Cas 107, [1881–85] All ER Rep 663, 54 LJQB 192, 52 LT 441; rvsg sub nom Ocean Steamship Co v Anderson, Tritton & Co (1883) 13 QBD 651; subsequent proceedings (1885) 1 TLR 324, 413, 615, 41 Digest (Repl) 516, 2908.
Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co [1899] 2 QB 403, 68 LJQB 900, 81 LT 291, 41 Digest (Repl) 512, 2862.
Anglo-Grecian Steam Trading Co Ltd v T Benyon & Co (1926) 24 Lloyd LR 122.
Atwood v Sellar & Co (1879) 4 QBD 342, sub nom Attwood v Sellar 48 LJQB 465, 41 LT 83, 4 Asp MLC 153; on appeal CA (1880) 5 QBD 286, 41 Digest (Repl) 376, 1671.
Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd [1915] 3 KB 586, 84 LJKB 1958, 113 LT 805; affg [1915] 1 KB 833, 84 LJKB 544, 41 Digest (Repl) 519, 2940.
Birkley v Presgrave (1801) 1 East 220, 102 ER 86, 41 Digest (Repl) 507, 2797.
Burton v English (1883) 12 QBD 218, 53 LJQB 133, 49 LT 768, 5 Asp MLC 187, 41 Digest (Repl) 510, 2840.
Gratitudine, The (1801) 3 Ch Rob 240, [1775–1802] All ER Rep 283, 165 ER 450, 41 Digest (Repl) 403, 1883.
Hallett v Wigram (1850) 9 CB 580, 19 LJCP 281, 15 LTOS 137, 137 ER 1018, 41 Digest (Repl) 507, 2798.
Heron II, The, Koufos v C Czarnikow Ltd [1967] 3 All ER 686, [1969] 1 AC 350, [1967] 3 WLR 1491., Digest Supp.
McCall & Co v Houlder (1897) 66 LJQB 408, 76 LT 469, 8 Asp MLC 252, 41 Digest (Repl) 512, 2853.
Moss Steamship Co v Board of Trade [1924] AC 133, 93 LJKB 81, 130 LT 354, 16 Asp MLC 250, 17 Digest (Repl) 465, 217.
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126, [1961] 1 Lloyd’s Rep 1, Digest (Cont Vol A) 1148, 185a.
Parana, The (1877) 2 PD 118, 36 LT 388, 3 Asp MLC 399, 41 Digest (Repl) 388, 1752.
Svendsen v Wallace Brothers (1885) 10 App Cas 404, 54 LJQB 497, 52 LT 901, 5 Asp MLC 453, 41 Digest (Repl) 390, 1770.
Tojo Maru, The [1969] 2 All ER 155, [1970] P 21, [1969] 2 WLR 594; rvsd CA [1969] 3 All ER 1179, [1970] P 21, [1969] 3 WLR 902., Digest Supp.
Weld-Blundell v Stephens [1920] AC 956, [1920] All ER Rep 32, 89 LJKB 705, 123 LT 593, 36 Digest (Repl) 201, 1064.
Appeal
This was an appeal by the first defendant, John Richard Daniel Green, a representative Lloyd’s underwriter, from a decision of Mocatta J given on 19 December 1969 and reported [1970] 1 All ER 968 in favour of the plaintiffs, the Australian Coastal Shipping Commission, in their claim for an indemnity under two policies of marine insurance in respect of the motor vessels Bulwarra and Wangara on the ground that the expenditure incurred by them as a result of the vessels being imperilled on 13 July 1960 and 18 November 1961 respectively was general average expenditure within the meaning of the York-Antwerp Rules 1950, which were incorporated in the policies. The facts are set out in the judgment of Lord Denning MR.
M J Mustill QC and S O Olson for the defendant.
C S Staughton QC and D M Grace for the plaintiffs.
Cur adv vult
Page 355 of [1971] 1 All ER 353
2 December 1970. The following judgments were delivered.
LORD DENNING MR
1. Introductory
We so rarely have to consider the law of general average that it is as well to remind ourselves of it. It arises when a ship, laden with cargo, is in peril on the sea, such peril indeed that the whole adventure, both ship and cargo, is in danger of being lost. If the master then, for the sake of all, throws overboard some of the cargo, so as to lighten the ship, it is unjust that the owner of the goods so jettisoned should be left to bear all the loss of it himself. He is entitled to a contribution from the shipowner and the other cargo owners in proportion to their interests. See the exposition by Lord Tenterden quoted in Hallett v Wigram ((1850) 9 CB 580 at 607, 608) and Burton v English. Likewise, if the master, for the sake of all at the height of a storm, cuts away part of the ship’s tackle (as in Birkley v Presgrave, or cuts away a mast (as in Atwood v Sellar & Co, or, having sprung a leak, puts into a port of refuge for repairs and spends money on them (as in Svendsen v Wallace Brothers, it is unfair that the loss should fall on the shipowner alone. He is entitled to contribution from the cargo owners for the loss or expenditure to which he has been put. In all such cases the act done by the master is called a ‘general average act’, and the loss incurred is called a ‘general average loss’.
The principles underlying these cases have been codified in the Marine Insurance Act 1906, which defines a ‘general average act’ in s 66(2):
‘There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.’
And it defines a ‘general average loss’ in s 66(1):
‘A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.’
These definitions, however, have been supplemented by the York-Antwerp Rules 1950 which replaced the 1924 rules and which, by agreement, apply in the two cases now before us. In those rules a ‘general average act’ is defined by rule A:
‘There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.’
And a ‘general average loss’ is defined by rule C:
‘Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average. Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage and any indirect loss whatsoever, such as loss of market, shall not be admitted as general average.’
2. The two cases before us
(i) The Bulwarra
On 13 July 1960, the Bulwarra was moored in a port in New South Wales, laden with steel products. A violent storm arose. Her aftermooring was carried away. The plaintiffs had an officer on shore. He saw the danger. He signalled for help to the captain of a tug called the Hero. The tug got a line aboard and towed the Bulwarra
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for about ten minutes. Then the towline parted. It wrapped itself round the propeller of the tug and stopped it revolving. The tug drifted helplessly. Her anchors were useless. They were inboard and securely lashed to the bulwarks. They had no chains attached to them. The tug grounded and became a total loss. But the Bulwarra managed to get to safety.
The tugowners had thus lost their tug by their own negligence. But they claimed to be indemnified by the plaintiffs. They said that they were engaged on the terms of the UK Standard Towing Conditions which contain this provision:
‘The Tugowner shall not, whilst towing, bear or be liable for damage of any description done by or to the tug … or for loss of the tug … arising from any cause, including negligence at any time of the Tugowner’s servants or agents … and the Hirer shall pay for all loss or damage … and shall also indemnify the Tugowner against all consequences thereof … Provided that any such liability for loss or damage as above set out is not caused by want of reasonable care on the part of the Tugowner to make his tugs seaworthy … ’
The plaintiffs acknowledged that, by the course of dealing, they hired the tug on those conditions. But they resisted the claim on the ground that the loss of the tug was caused by want of reasonable care on the part of the tugowners to make the tug seaworthy. They succeeded in the defence and were awarded costs against the tugowners. But in that action the shipowners recovered only party and party costs. The plaintiffs had to pay their own lawyers the solicitor and client costs. This left them out of pocket$A 3396·31 or £1.313 5s 4d. They claim that this was a general average expenditure. If this is right, they can recover their own proportion from the defendant and the rest from the cargo owners. But the defendant says it was not general average expenditure, and is, therefore, not recoverable from him.
At first sight, it seems strange that such costs should be regarded as general average expenditure. But I must notice an important arrangement that the parties have made. The defendant has agreed that, if the plaintiffs had lost the case brought by the tugowners (and thus became liable to indemnify the tugowners for the loss of the tug); and, if in that case the expenditure by way of indemnity would have been general average expenditure, then this sum of £1,313 5s 4d for costs (which they had to pay their own solicitors) should be treated as general average expenditure. The reason for this agreement is, no doubt, to encourage shipowners in like case to resist a claim by the tugowners.
(ii) The Wangara
On 17 November 1961, the Wangara sailed from Melbourne with a cargo of steel products for carriage to Auckland, New Zealand. Next day she grounded. Two of the plaintiffs’ shore officers engaged the tug Walumba to tow her off. Whilst the tug was towing the Wangara, the towrope parted and wrapped itself round the propeller of the tug and the tug was damaged. A pilot vessel came to the assistance of the tug and towed it to safety. The Wangara also got to safety. The pilot vessel claimed salvage remuneration from the owners of the tug and was awarded it.
The tugowners then claimed to be indemnified by the plaintiffs. They relied on the UK Standard Towage Conditions. The conditions were again incorporated by the course of dealing. The plaintiffs resisted the claim but were found liable. Their total expenditure came to $50,446·71 (£20,098 5s 9d) made up of: (a) the damage to the tug herself; (b) the salvage award payable by the tug to the pilot vessel; (c) the costs payable to the tugowners; (d) their own costs of resisting the claim of the tugowners.
The plaintiffs say that that expenditure was general average expenditure; and that they can recover their own proportion from the defendant and the rest from the cargo owners. The defendant says that it was not general average expenditure.
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In each of the two cases, we must ask, first, what was the general average act? Second, what was the general average loss?
3. The general average act
The ‘general average act’ was I think the contract made by the plaintiffs with the tug. In each case the vessel was in dire peril and the plaintiffs called on the tug for help. If the tug had rendered salvage services on the usual terms of ‘no cure, no pay’, the contract would undoubtedly have been a ‘general average act’. If the services had been successful, the plaintiffs would have been liable to pay a very high reward, which would count as ‘general average expenditure’. If the services had been unsuccessful, they would have had to pay nothing: see The Tojo Maru ([1969] 3 All ER 1179 at 1183, [1970] P 21 at 62). Instead of entering into such a contract, the plaintiffs made a towage contract on the UK Standard Towage Conditions. That was a very reasonable contract to make for both sides. It is well-known that there is a substantial risk in towage operations that the towrope may break and foul the propeller of the tug and that, if that happens, the tug may run aground or be damaged and have to be rescued. In a salvage agreement, the tugowners take that risk on themselves in return for the chance of a very high salvage reward. In a hiring agreement, at a fixed rate of hire, they cannot be expected to take the risk on themselves. It is only right and fair that they should ask for and receive an indemnity. The benefit to the shipowner is that, if the service is successful, he pays much less than he would under a salvage award; but, in return, he has to give an indemnity to the tugowner. In these circumstances, I have no doubt that the towage contract is a ‘general average act’. It was intentionally and reasonably made for the common safety; just as was the contract in The Gratitudine (for the hypothecation of the cargo) and in Anderson, Tritton & Co v Ocean Steamship Co (for towage service).
4. The general average loss
The next question is: what was the general average loss? If the towline had not parted, and the tug had completed her task in safety, the hiring charge would certainly have been a general average expenditure. But the towline did part. It wrapped itself round the propeller of the tug. The result was that, in the case of the Bulwarra, the tug became a total loss; and, in the case of the Wangara, the tug was salved at great expense. The plaintiffs have become bound under the indemnity clause to indemnify the tugowners. Is this expenditure under the indemnity clause, a ‘general average loss’?
This depends on whether the expenditure was the ‘direct consequence’ of the general average act within rule C of the York-Antwerp Rules 1950. At the time when the rules were made in 1924, all lawyers thought that they could tell the difference between ‘direct’ and ‘indirect’ consequences. The distinction had been hallowed by the great authority of Lord Sumner in Weld-Blundell v Stephens ([1920] AC 956 at 983, 984, [1920] All ER Rep 32 at 46). It had been adopted by Parliament in the Indemnity Act 1920, and applied in such cases as A & B Taxis v Secretary of State for Air and Moss Steamship Co v Board of Trade. Naturally enough, therefore, the framers of the York-Antwerp Rules used it too. But 40 years later the Privy Council poured scorn on it. It was in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) ([1961] 1 All ER 404 at 413, [1961] AC 388 at 423) when Lord Simonds said that the test of the ‘direct consequence’ leads to nowhere but the never-ending
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and insoluble problem of causation. To add to the confusion, rule C of the York-Antwerp Rules gives ‘loss of market’ as a typical instance of indirect loss, following, no doubt, The Parana; whereas in The Heron II ([1967] 3 All ER 686 at 691, [1969] 1 AC 350 at 385), Lord Reid said that the loss of market there was ‘directly caused by the defendant’s breach of contract’.
In these circumstances I propose to go back to the concept, as I understood it in 1924, when the York-Antwerp Rules were made. ‘Direct consequences’ denote those consequences which flow in an unbroken sequence from the act; whereas ‘indirect consequences’ are those in which the sequence is broken by an intervening or extraneous cause. I realise that this is not very helpful, because the metaphor of ‘breaking the chain’ of causation means one thing to one man and another thing to another. But still we have to do the best we can with it.
Direct consequences
Applying this set, I would start with the engagement of the tug on the towage conditions. That was the ‘general average act’. From that act we have this sequence: (i) the making fast of the towline and the subsequent towage; (ii) the snapping of the towline and its fouling the propeller; (iii) the loss, or salvage, of the tug; (iv) the claim for indemnity. Is that a direct sequence in unbroken line? Or is the sequence broken? The only two points at which it may be broken are at (ii) and (iv). I will consider them separately.
(i) The subsequent accident
It was a most unfortunate thing that the towline snapped and fouled the propeller. That was an intervening cause of much importance. Without it, the loss and expenditure would never have happened. But did it break the chain of causation?
There is a passage in the German author Ulrichb which seems to say that, when, after a general average act, there is a ‘subsequent accident’ which results in loss or damage, it breaks the chain of causation; so that such loss or damage is never the direct consequence of the general average act. It was quoted with approval by Bigham J in Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co ([1899] 2 QB 403 at 410); and by Bailhache J in Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd ([1915] 1 KB 833 at 836).
I cannot accept this view. If the master, when he does the ‘general average act’, ought reasonably to have foreseen that a subsequent accident of the kind might occur—or even that there was a distinct possibility of it—then the subsequent accident does not break the chain of causation. The loss or damage is the direct consequence of the original general average act.
A good instance was given by Lord Tenterden in his book on Shippingc:
‘So, if, to avoid an impending danger, or to repair the damage occasioned by a storm the ship be compelled to take refuge in a port to which it was not destined, and into which it cannot enter without taking out a part of her cargo, and the part taken out to lighten the ship on this occasion happen to be lost in the barges employed to convey it to the shore, this loss also, being occasioned by the removal of the goods for the general benefit, must be repaired by general contribution.’
This passage was quoted with approval by Cresswell J in Hallett v Wigram ((1850) 9 CB at 608, 609) and by Mathew J in McCall & Co v Houlder. Another instance is the case before Roche J of Anglo-Grecian Steam Trading Co Ltd v T Benyon & Co. The vessel was in peril and
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was taken in tow. The intention was to beach the vessel in the centre of Whitmore Bay. On the way she grounded, the towropes parted, and she got on the rocks and suffered damage. This subsequent accident, said Roche J ((1926) 24 Lloyd LR at 127), was ‘… at all times a possibility’. It did not ‘break the chain of causation and prevent the plaintiffs from recovering in respect of the damage done by the rocks’.
If, however, there is a subsequent incident which was only a remote possibility, it would be different. Thus Lowndesd gave the illustration of a sailing vessel, when the master cuts away the mast and thus reduces her speed; and afterwards she is captured by the enemy. Her loss is not the direct consequence of the general average act. It is due to the intervening capture.
In both cases before us, the master, when he engaged the tug, should have envisaged that it was distinctly possible that the towline might break and foul the propeller. When it happened, therefore, it did not break the chain of causation.
(ii) The indemnity clause
The indemnity clause was most stringent. It was an extraneous cause of much importance. Without it, the expenditure by the shipowners would never have been incurred. But did it break the chain of causation? If the indemnity clause had been unreasonable and such that the master ought never, in justice to the cargo owners, to have agreed to it, then I think that the expenditure would not flow from the general average act. It would flow from the onerous clause in the towage agreement: see Moss Steamship Co v Board of Trade ([1924] AC at 141) per Viscount Cave LC and Lord Sumner; and per Viscount Haldane ([1924] AC at 145). But, seeing that the indemnity clause here was reasonable, and such that the master, quite justly and fairly, agreed to it, then I think the expenditure flowed directly from the general average act. That is borne out by The Gratitudine ((1801) 3 Ch Rob at 272–276, [1775–1802] All ER Rep at 290, 291), when there was a most onerous contract under which the master hypothecated both ship and cargo to a moneylender—so as to pay for repairs—but, as the master had no practicable alternative but to accept the contract, the loss under it was held to be a general average loss.
This, I think, gives the clue to Anderson, Tritton & Co v Ocean Steamship Co. If the master of the Achilles agreed to pay an exorbitant charge, such that he ought never, in justice to the cargo owners, to have agreed to, then the excess of the charge (over and above a reasonable charge) would not flow from the general average act, but from the onerous clause which the master had agreed to. The only amount allowable as a ‘general average loss’ would be a reasonable charge. We were taken right through that case in its course through every court and through the record of the House of Lords. But counsel do not seem to have discovered the later stages of the case on the retrial (See (1885) 1 TLR at 324, 413, 615). The jury found that there was no agreement for an exorbitant sum, but only for a fair remuneration, ie a quantum meruit. So all the nice points of law disappeared. But, if there had been an agreement by the master to pay an exorbitant charge, then it would have to be scaled down to a reasonable figure and that only allowed as general average expenditure. That appears from The Gratitudine ((1801) 3 Ch Rob at 277, [1775–1802] All Rep at 292), where Sir William Scott thought that the commission charged might be excessive; and, if it was more than a proper charge, it would have to be scaled down.
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None of those refinements need worry us here. The indemnity was quite reasonable. So was the expenditure under it. It was the direct consequence of the general average act and must be accepted as a general average loss.
5. Suing and labouring clause
If the plaintiffs were not entitled to recover their expenditure as a general average loss, they would have sought to recover it under the suing and labouring clause. As we hold that it is a general average loss, this point does not arise: see s 78(2) of the Marine Insurance Act 1906. But I may say that in any case I do not think this expenditure was ‘charges’ within the clause.
6. Conclusion
The classical writers stress that general average arises when the master of a vessel gives something for the sake of all (quod pro omnibus datum est). In these cases the master gave, for the sake of all, his agreement to a towage contract containing an indemnity to the tugowner in case the tug was lost or damaged. He must be taken to have realised that there was a distinct possibility that the towline might part and that the tug would be lost or damaged; and that, if that happened, the tugowner would be entitled to an indemnity. Such expenditure was the direct consequence of his act in hiring the tug on those terms. It is, therefore, general average loss.
I would dismiss this appeal.
PHILLIMORE LJ. In each of the two cases the subject of this appeal a ship has had to call on a tug for help. The question is whether in either or both cases a claim subsequently made by the tug against the ship constituted a general average loss as being a direct consequence of a general average act. In each case the tug had been hired by the ship on a towage contract involving an indemnity to the tug in the terms of the UK Standard Towage Conditions which include an indemnity in respect of damage to the tug expressed in very wide terms. Clause 3 of the conditions provides—and I select the vital words:
‘… and the Hirer shall pay for all loss or damage, and personal injury or loss of life, and shall also indemnify the Tugowner against all consequences thereof, and the Tugowner shall not, whilst at the request expressed or implied of the Hirer rendering any service other than towing be held responsible for any damage done to the Hirer’s vessel and the Hirer shall indemnify the Tugowner against any claim by a third party (other than a member of the crew of the tug) for personal injury or loss of life. Provided that any such liability for loss or damage as above set out is not caused by want of reasonable care on the part of the Tugowner to make his tugs seaworthy for the navigation of the tugs during the towing or other services—the burden of proof of any failure to exercise such reasonable care being upon the owner of the tow.’
If in either case the ship had entered into a salvage as opposed to a towage contract with the tug the result would have been that if the tug failed to save the ship, it would have lost all claim for any remuneration; whereas if it had effected salvage it would have gained a salvage award in a sum far in excess of that due under the towage contract.
Counsel agree that the question involves the true construction of the York-Antwerp Rules 1950 and in particular rules A and C. Is the claim against the insurer in either case too remote so that it can be dismissed as not being a direct consequence of the act of general average in question? The answer to the problem depends in my judgment on the true construction of rule A which defines a ‘general average act’ It is worth reading once again the vital words:
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‘RULE A.—There is a general act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.’
Translating these words in relation to the incident involving the Bulwarra it is clear that there was no extraordinary sacrifice—nothing was jettisoned or cut away. The tug was summoned and thereby as the learned judge found a towage contract was entered into and payment for the tug’s services was inevitably incurred. In my judgment this was clearly a case of ‘extraordinary expenditure’, albeit nothing was actually expended at the time.
What was the general average act? It was not merely the summoning of the tug but comprised also the terms of the contract entered into by the master provided always that the terms of that contract were reasonable (see Anderson, Tritton & Co v Ocean Steamship Co.
It was found that the costs incurred by the plaintiffs were reasonably incurred in defending the claim for an indemnity brought against them by the tugowners under the UK Standard Towage Conditions included in the contract of towage. Those conditions are so well known and widely used that it is quite impossible to say that the plaintiffs acted unreasonably in entering into a contract which included them. The parties have agreed that the costs of defending the tug’s claim were ‘general average expenditure’ if the plaintiff’s liability to the owners of the tug would have been general average expenditure if they had been found liable.
In my judgment the plaintiffs made a reasonable bargain when this tug was summoned and the contract of towage entered into. Under the terms of that contract expenditure was reasonably incurred and included liability for indemnifying the owners of the tug unless it could be shown that her loss was due to a want of care on the part of its owner to make his tug seaworthy. If the claim of the tugowners had succeeded the amount involved would clearly have been a direct consequence of the indemnity included in the terms of the contract reasonably entered into as a matter of extraordinary expenditure comprising a general average act. It follows, if only from the agreement of the parties, that the costs to which the plaintiffs were put by their successful defence constituted reasonable expenditure which was a direct consequence of the act of general average and on this part of the appeal for the learned judge was clearly right in finding for the plaintiffs.
I turn to the case of the Wangara. Here again it is in my judgment impossible to dissect the operation and to say that the act of summoning the tug was the general average act and that that act did not comprise the terms on which the tug was reasonably employed and on which the extraordinary expenditure was to be calculated. It follows that the towage contract comprising the UK Standard Towage Conditions formed part of the general average act and again it would be impossible to argue that it was unreasonable to enter into a contract comprising these well-known conditions.
It is a completely fallacious approach to say—well the fact that the towrope parted and fouled the tug’s propeller was a novus actus interveniens and the fact that the tug was compelled for her preservation to enter into a salvage contract with the pilot vessel Wyuna was another. The short answer is that the expenditure which resulted from these several events was expenditure which was a direct consequence of the terms of the indemnity included in the contract reasonably entered into by the Wangara as general average act.
The problem involves defining the act of general average and if that act includes a contract which involves incurring expenditure then assuming the contract was entered into reasonably any expenditure which is a direct consequence of its terms including an indemnity provided by those terms must be general average expenditure.
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Once this approach is adopted the cases such as Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co and Anglo-Grecian Steam Trading Co Ltd v T Benyon & Co, are seen to be irrelevant to the circumstances the subject of this appeal. Moreover the passage from Ulriche quoted in those cases is perfectly understandable assuming that the distinction is maintained between a general average act which involves extraordinary sacrifice and one which involves extraordinary expenditure as a direct consequence of a contract which forms part of the general average act.
On this part of the appeal I find myself also in agreement with the decision of the learned judge. It follows that I too would dismiss the appeal.
CAIRNS LJ. I have not found the problem of whether the expenditure to which the plaintiffs were put was general average expenditure an easy one, but, like my Lords, I have reached the conclusion that it was and I can express my reasons quite shortly.
Both in the Marine Insurance Act 1906, and in the York-Antwerp Rules 1950, it is provided (in slightly different words) that there is a general average act when expenditure is voluntarily and reasonably incurred for the common safety. Then, in both the Act and the rules, a general average loss is defined, so as to include only the direct consequence of a general average act.
Where there is no sacrifice but expenditure is incurred the question arises, what is the general average act? It cannot be the expenditure itself because the expenditure is the general average loss and is defined to be a consequence of the general average act. I think the definitions make sense, without the introduction of any words that are not there, if one realises that the incurring of expenditure is something different from the making of expenditure and that expenditure is incurred when a contract is entered into, say, between a shipowner and a tugowner and the contract provides for payments to be made by the shipowner to the tugowner. Thus the making of the contract is the general average act and I think that any payment that falls due under the contract is a direct consequence of it.
I was at one stage troubled by the sentence in the York-Antwerp Rules, rule C:
‘Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage, and any indirect loss whatsoever, such as loss of market, shall not be admitted as general average.’
This, by the exclusion of damage sustained through delay and loss of market seems to me to give a much narrower meaning to the word ‘direct’ than was understood when directness was considered to be the test in relation to remoteness of damage. But on further consideration I do not think that this sentence has any application to expenditure arising under a contract.
I have also considered the passage from Ulrich which which readse:
‘General average comprises not only the damage purposely done to the ship and cargo, but also (1) all damage or expense which was to be foreseen as the natural (immediate) consequence of the first sacrifice, since this unmistakably forms part of that which was given for the common safety; (2) all damage or expense which, though not to be foreseen, stands to the sacrifice in relation of effect to cause, or, in other words, was its necessary consequence. Not so, however, those losses or expenses which, though they would not have occurred but for the sacrifice, yet, likewise, would not have occurred but for some subsequent accident.’
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This passage has been cited with approval in several English cases: Anglo-Argentine Live Stock and Produce Agency v Temperley Shipping Co ([1899] 2 QB 403 at 410), Austin Friars Steamship Co Ltd v Spillers & Bakers Ltd ([1915] 1 KB 833 at 835) and Anglo-Grecian Steam Trading Co Ltd v T Benyon & Co ((1926) 24 Lloyd LR 122 at 127). The passage, however, appears to me to refer only to a case when the general average act is a sacrifice. This makes it unnecessary to consider whether the breaking of the towrope is properly to be regarded as a ‘subsequent accident’. If the contract provides for the shipowner to indemnify the tugowner against the consequences of a subsequent accident the expenditure involved in such indemnity is a direct consequence of the contract.
I therefore conclude that if it was reasonable to enter into the contract and if, in the events which happened, a payment fell due under the contract, and that payment was made, then the expenditure was a general average loss. In my opinion, for the reasons given by Lord Denning MR, the contracts entered into by the plaintiffs in respect of both ships were reasonable contracts to enter into for the general safety. The payments they have made all fell due under the contracts. Hence the expenditure they made constituted general average loss and I agree that Mocatta J came to the right conclusion and that the appeal should be dismissed.
Appeal dismissed. Leave to appeal to the House of Lords.
Solicitors: Waltons, Bright & Co (for the defendant); William A Crump & Son (for the plaintiffs).
Rosalie Long Barrister.
Zimmerman v Grossman
[1971] 1 All ER 363
Categories: LANDLORD AND TENANT; Leases
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 26, 27, 28 OCTOBER 1970
Rent restriction – Premium – Requirement of payment as condition of grant of lease – Payment not required by landlord – Agreement between landlord and outgoing tenant for surrender of lease and grant of new lease to incoming tenant – Requirement of payment of premium by outgoing tenant from incoming tenant – Whether illegal premium – Rent Act 1968, s 85.
Statute – Construction – Criminal and penal statutes – Strict construction – Two possible meanings – Adoption of more lenient meaning – Rent Act 1968, s 85.
Statute – Construction – Decision of court interpreting provision – Repeal and re-enactment of provision – Specific words re-enacted – Presumption that words intended to have meaning put on them by courts in earlier use – Rent Act 1968, s 85(1).
The plaintiff, the tenant of a flat whose lease had over two years to run, arranged with his landlords that, if he found a new and suitable tenant who would take a lease of the flat at a higher rent, the landlords would accept a surrender of the plaintiff’s lease and grant a new tenancy, which would be a protected tenancy within the meaning of the Rent Act 1968, to the incoming tenant. The plaintiff found a new and suitable tenant, the defendant, who agreed with the plaintiff that, if the landlords would accept her as the new tenant of the flat, she would buy from the plaintiff, for £300, certain fixtures and fittings in the flat. It was not disputed that the fair value of the fixtures and fittings was £100. The defendant paid to the plaintiff
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£100 but refused to pay the balance of £200 on the ground that this was an illegal premium. By s 85(1)a of the Rent Act 1968, any person who, as a condition of the grant of a protected tenancy, required, in addition to the rent, the payment of any premium was guilty of an offence; and by s 85(2), any person who, in connection with the grant of a protected tenancy, received any premium in addition to the rent, was guilty of an offence.
Held – The plaintiff was entitled to recover the balance of £200 because—
(i) where penal provisions were framed in wide and ambiguous language they should be restrictively construed and where there were two possible meanings the court should adopt the more lenient one, avoiding the imposition of a penalty (see p 371 a and c, and p 372 j to p 373 a, post).
(ii) the relevant words in s 85(1) had occurred in the corresponding provision of earlier legislation which had been the subject of judicial decision to the effect that a premium was not illegal unless required as a condition of the grant by the landlord who made the grant and, where specific words were re-enacted, there was a presumption that Parliament intended them to have the meaning which the courts had put upon them in their earlier use (see p 368 f, p 369 c and p 372 j to p 373 a, post).
(iii) s 85(1) replaced Sch 5, para 1 (a), to the Rent Act 1965, and the offence now contained in s 85(2) was introduced for the first time by para 1 (b) of Sch 5 to the 1965 Act; having regard to the layout and the phraseology of Sch 5, para 1, in particular the use of the words ‘in addition to the rent’, sub-paras (a) and (b) were to be construed as dealing with alternative offences which might be committed by the same class of persons, ie landlords, and it was to be presumed that the Rent Act 1968, as a consolidating Act had not changed the law (see p 371 j to p 372 a and c, and p 372 j to p 373 a, post);
(iv) accordingly a premium, to be illegal under s 85(1) or s 85(2) of the 1968 Act, must be required or received by the landlord who made the grant.
Per Curiam. It may be that an outgoing tenant to whom the landlord had delegated his function of finding a new tenant and granting a new lease and who required the incoming tenant to pay a premium might find that he was within the terms of s 85(1) of the 1968 Act (see p 372 g and j to p 373 a, post).
Remmington v Larchin [1921] All ER Rep 298 applied.
Notes
For premiums on the grant, renewal or continuance of a protected tenancy, see 23 Halsbury’s Laws (3rd Edn) 798–800, para 1576 and for cases on the subject, see 31 Digest (Repl) 688–690, 7794–7807.
For the construction of criminal and penal statutes, see 36 Halsbury’s Laws (3rd Edn) 415, 416, paras 630, 631, and for cases on the subject, see 44 Digest (Repl) 321–325, 1522–1589.
For the judicial interpretation of earlier statutes in pari materia, see 36 Halsbury’s Laws (3rd Edn) 403, para 609, and for cases on the subject, see 44 Digest (Repl) 229, 230, 463–483.
For the Rent Act 1968, s 85, see 18 Halsbury’s Statutes (3rd Edn) 867.
Cases referred to in judgments
Elmdene Estates Ltd v White [1960] 1 All ER 306, [1960] AC 528, [1960] 2 WLR 359; affg [1959] 2 All ER 605, [1960] 1 QB 1, [1959] 3 WLR 185, Digest (Cont Vol A) 1090, 7796a.
R v Birmingham (West) Rent Tribunal, ex parte Edgbaston Investment Trust Ltd [1951] 1 All ER 198, [1951] 2 KB 54, 115 JP 45, Digest (Cont Vol A) 1092, 7803.
Remmington v Larchin [1921] 3 KB 404, [1921] All ER Rep 298, 90 LJKB 1248, 125 LT 749, 85 JP 221, 31 Digest (Repl) 688, 7795.
Page 365 of [1971] 1 All ER 363
Sweet v Parsley [1969] 1 All ER 347, [1970] AC 132, [1969] 2 WLR 470, 133 JP 188, 53 Cr App Rep 221., Digest Supp.
Appeal
The defendant, Alma Grossman, appealed against a judgment for £200, being the balance of the price of certain fixtures and fittings at 52 Sandringham Court, London, W9, given against her by his Honour Judge Leslie at Bloomsbury and Marylebone County Court on 17 March 1970 in an action by the plaintiff, Arnold Aaron Zimmerman. The facts are set out in the judgment of Widgery LJ.
E A Bramall for the defendant.
M S Rich for the plaintiff.
28 October 1970. The following judgments were delivered.
WIDGERY LJ delivered the first judgment at the invitation of Davies LJ. This is an appeal from a judgment of his Honour Judge Leslie given in the Bloomsbury and Marylebone County Court on 17 March 1970, whereby he ordered that judgment be entered for the plaintiff for £200, the balance of the price of certain fixtures and fittings at a flat called 52 Sandringham Court, London W9.
At the relevant time the plaintiff was the outgoing tenant of the flat and the defendant was the incoming tenant. A bargain was struck between them whereby the plaintiff would sell these fixtures and fittings for a total sum of £300. The learned judge held, and there is no dispute on this point, that the fair value of the fixtures and fittings in question was only £100, which the defendant paid. The balance, therefore, was in the nature of a premium payable by the defendant to the plaintiff, and the defendant contended below that it was an illegal premium and, therefore, not recoverable. The learned judge held otherwise and the defendant appeals.
There is no appeal on the facts and one must turn to the learned judge’s judgment to see what they were. Dealing with the situation between the landlords and the plaintiff, he said this:
‘The plaintiff, Mr Zimmerman, was the tenant of a flat, 52 Sandringham Court, Lodon, W9. He held it under a lease dated 9th August 1968 for a term of three years from 29th September 1968, but had been the tenant for some years prior to that. In December 1968, he wished to move elsewhere, and he therefore approached the landlords and arranged with them that they would accept a surrender from him, and would grant a new lease to a suitable tenant if he introduced one to them. As the new lease would be at a higher rent this would benefit both the plaintiff and the landlords.’
Counsel for the defendant has attached considerable importance to the arrangements there disclosed, relying particularly on the submission that it had the effect of enabling the plaintiff to choose a nominee for the new tenancy of the flat, and thus to control the terms on which the flat was re-let. I must say at once that I do not so read the learned judge’s words. It seems to me to be a very simple case on the facts, in which the plaintiff sought to persuade the landlords to accept a surrender of his lease, and the landlords responded by saying that they would do so provided he would accept the burden and expense of finding a new and suitable tenant who was prepared to take the new tenancy. That, in my judgment, is the substance of the arrangement made between the plaintiff and the landlords.
As to the arrangement between the plaintiff and the defendant, the learned judge goes on in these terms:
‘In due course the plaintiff and the defendant, Mrs Grossman, got into touch with one another. The defendant wished to take a lease of the flat, and on or about 1st January 1969 the plaintiff and the defendant entered into an agreement the terms of which are perfectly clear. The defendant’s husband on her behalf
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agreed with the plaintiff that if the landlords would accept the defendant as the new tenant of the flat she would buy from the plaintiff certain furniture, fixtures and fittings in the flat for £300.’
There again the terms of the arrangement, as the learned judge says, are clear. On the face of the judgment it is a purely collateral bargain for the sale of the fixtures in question, the only condition introduced being an obvious condition for the protection of the defendant, namely, that the transaction should be conditional on the landlords accepting her as a tenant. If she was not accepted as tenant, of course she did not want to buy the fixtures.
On those simple facts, it is said that the premium constituted by the overcharging for the fixtures is an illegal premium by virtue of s 85 of the Rent Act 1968, which is in these terms:
‘(1) Any person who, as a condition of the grant, renewal or continuance of a protected tenancy, requires, in addition to the rent, the payment of any premium or the making of any loan (whether secured or unsecured) shall be guilty of an offence under this section.
‘(2) Any person who, in connection with the grant, renewal or continuance of a protected tenancy, receives any premium in addition to the rent shall be guilty of an offence under this section … ’
It is common ground that the tenancy in question granted to the defendant was a protected tenancy. Under s 90, provision is made for the recovery of premiums unlawfully required or received, and in s 92(1), there is the definition of premium in these terms: ‘“premium” includes any fine or other like sum and any other pecuniary consideration in addition to rent.’
The 1968 Act is at present the last chapter in a long history of legislation prescribing the control of rent for certain tenancies as a result of the housing shortage which, in various degrees, has been with us ever since the First World War, and it is common ground that one cannot construe those provisions which I have read without, at any rate, some reference to the earlier legislative history. I start with the first relevant Act, which is the Increase of Rent and Mortgage Interest (War Restrictions) Act 1915. By s 1(2) of that Act:
‘A person shall not in consideration of the grant, renewal, or continuance of a tenancy of any dwelling-house to which this Act applies require the payment of any fine, premium, or other like sum in addition to the rent, and where any such payment has been made in respect of any such dwelling-house after the twenty-fifth day of November nineteen hundred and fifteen, then the amount shall be recoverable by the tenant by whom it was made from the landlord … ’
I draw attention to the reference to ‘the landlord’ in the concluding sentence because that was accepted later by the courts as a clear pointer to the fact that the provision there referred to was concerned with premiums paid to and required by the landlord. One can pass quickly from that to the next Act, which is the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, which contained new provisions, the wording of which is somewhat different. By s 8(1):
‘A person shall not, as a condition of the grant, renewal or continuance of a tenancy or sub-tenancy of any dwelling-house to which this Act applies, require the payment of any fine, premium, or other like sum, or the giving of any pecuniary consideration, in addition to the rent … ’
There follows provision for recovery of any premiums which have been unlawfully
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paid, and also provision making the requiring of an illegal premium a criminal offence.
I need not dwell on the differences in the language between that Act and the preceding one, because the next chronological step in this matter is a decision of this court in which the terms of the 1920 Act were specifically considered. the case in question is Remmington v Larchin. The headnote recites the terms of s 8 of the 1920 Act, which I have already read, and goes on to state the facts in this way ([1921] 3 KB at 404, 405):
‘The defendant, who was a tenant for a term of three years from March, 1919, of a dwelling house within the Act was, in May, 1920, desirous of giving up his tenancy, and in that month he agreed with the plaintiff that upon payment by the latter to him of a premium he would surrender his tenancy and the landlord would grant the plaintiff a new tenancy for three years at a slightly increased rent. The landlord did not know that the plaintiff had agreed to pay the defendant a premium. The plaintiff paid the defendant the premium, and the landlord granted the plaintiff a new tenancy for three years. After the Act of 1920 came into operation the plaintiff sued to recover back the premium:—Held, that s. 8, sub-s. 1, was reasonably capable of two constructions; that, the section being a penal one, the Court should give it the more lenient construction avoiding the imposition of a penalty; that, construed in this light, the prohibition in the section was limited to the person who required the payment of the premium “in addition to the rent” and “as a condition of the grant, renewal, or continuance” by him of the tenancy, namely, the landlord; and that the plaintiff was not entitled to recover.’
I find the facts of Remmington v Larchin quite indistinguishable from the facts of the present case; indeed, they have an uncanny resemblance one to the other. In this court, each of the learned lords justices found the point a difficult one. The judgments are short but, since this is the case which the county court judge followed and which we are invited by the plaintiff to follow, I must refer to them in a little detail.
First of all, Bankes LJ, having dealt with the facts of the case, said ([1921] 3 KB at 407, 408, [1921] All ER Rep at 299):
‘It is said that s. 8 differs materially from the corresponding section in the Act of 1915. No doubt it does, because the section in the Act of 1915 which dealt with the demand of a fine or premium in addition to the rent was aimed in express terms at the landlord; it was the landlord alone who was referred to in that section. I do not however myself derive any assistance from the difference in the language of the two sections … We are dealing with a penal section, and therefore one must apply the well-known general rule of construction, that if there are two reasonably possible meanings the Court should adopt the more lenient one. We are also dealing with one in a group of sections which are controlled by the heading—in so far as the Court should apply the heading in interpreting the sections in the group: “Further restrictions and obligations on landlords and mortgagees.” One must approach the language of the section subject to those considerations. In my opinion the more natural construction of the section is to read it as applying to a person who, as a condition of his granting, renewing, or continuing a tenancy, requires the payment of a “fine, premium or other like sum”; and this construction is assisted by the use of the words “in addition to the rent”, because it is more appropriate to speak of a person requiring a payment “in addition to the rent” as meaning a person who is in a position to control the rent, than as including a person who is a stranger to the agreement under which the rent is created.’
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Counsel for the defendants points out that Bankes LJ supports his conclusion on three heads: the first, that this is a penal provision and should be construed accordingly; the second, by reference to the cross-heading of the group of sections in which s 8 appears; and thirdly, by the pointer which he derives from the reference to a premium being a payment ‘in addition to the rent’. Scrutton LJ recognised the same doubts as Bankes LJ. He referred to the well-known rule of construction that penal provisions should be construed narrowly and, having dealt with the facts, asked himself the question ([1921] 3 KB at 409, 410, [1921] All ER Rep at 300):
‘Does that transaction [i e the transaction then in question] come within s. 8? Sect. 8 is one of a group of sections headed “Further restrictions and obligations on landlords and mortgagees“. It begins: “A person.” Why “A person” and not “A landlord”? I am not sure that that criticism is not a little too hypercritical as applied to this Act, which is not very well drafted. Whilst the use of the word “person” rather favours the view that more than the landlord is contemplated, it seems to me that the words “as a condition of the grant, renewal, or continuance of a tenancy” point markedly to the condition being made by the person who grants, or renews, or continues the tenancy—namely, the landlord. And I think “the payment of any fine”, etc., “in addition to the rent” points the same way. Sect. 8 appears to me to be reasonably capable of two meanings. But, on the whole, I think it is rather more capable of the meaning that it is only intended to apply to the landlord. The section being reasonably capable of two meanings, inasmuch as the contravention of it renders a person liable to summary conviction, I apply to it the rule in reference to the construction of penal statutes and select for it the least burdensome construction.’
Atkin LJ delivered a judgment which is very much of the same effect.
That decision is, accordingly, authority for the proposition that, under s 8 of the 1920 Act a premium, to be illegal, must be one which is required as a condition of the grant by the landlord who makes the grant. Counsel for the defendant does not seek to say that that decision was wrong: indeed, he would find himself in some difficulty in doing so in this court. The burden of his argument is that, if that judgment was right on the section then relevant, namely s 8 of the 1920 Act, it is no longer to be followed in the legislative changes which have followed that judgment.
The Rent Acts were amended in 1923 and again in 1939, but I need not refer to those amendments because it is common ground that they did not touch the issue in this case, and I can, therefore, move straight to the next relevant Act which is the Landlord and Tenant (Rent Control) Act 1949. This Act repealed the earlier provisions in regard to premiums and contained this enactment in s 2(1):
‘A person shall not, as a condition of the grant, renewal or continuance of a tenancy to which this section applies, require the payment of any premium in addition to the rent.’
These words are familiar from the earlier legislation to which I have referred. By s 18(2), ‘premium’ was defined as including ‘any fine or other like sum and any other pecuniary consideration in addition to rent’. Again, familiar language. But in s 2(2) comes an entirely novel conception, because that subsection provides:
‘Subject to the provisions of Part II of the First Schedule to this Act, a person shall not, as a condition of the assignment of a tenancy to which this section applies, require the payment of any premium.’
So for the first time we have an express prohibition on the requiring of a premium as a condition of the assignment of the tenancy, as compared with a condition requiring
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a premium on the grant of a tenancy; and, significantly, the definition of ‘premium’, which I have already read, is equally apposite for s 2(1) and s 2(2). On this counsel for the defendant puts forward an argument which I find of some force. He reminds us that, in Remmington’s case, the learned lords justices were all influenced, amongst other things, by the fact that a premium was described as a payment ‘in addition to the rent’. The extracts of the judgments which I have read show that Bankes LJ, for example, used as one of the arguments in support of his judgment the fact that the definition of a premium, as something ‘in addition to the rent’, was a pointer to a premium being something which would be required by the landlord. Counsel for the defendant very rightly points out that, once one comes to the 1949 Act, such considerations are no longer applicable because it is quite clear that under the 1949 Act the word ‘premium’ is appropriate to a payment made to an assignor, and not merely to a landlord.
I have considered this argument and I recognise the weight attached to it but, standing by itself, it ignores another argument which I find of greater force, and that is the well-known principle of construction that, where Parliament has re-enacted specific words which have already been the subject of judicial interpretation, it is presumed that Parliament when re-enacting those words, intends them to have the meaning which the courts have put on them in their earlier use. The matter is well put in Maxwell on Interpretation of Statutesb in a quotation from James LJc in these terms:
‘… if an Act of Parliament uses the same language which was used in a former Act of Parliament referring to the same subject, and passed with the same purpose, and for the same object, the safe and well-known rule of construction is to assume that the Legislature when using well-known words upon which there have been well-known decisions uses those words in the sense which the decisions have attached to them.’
That means, in my judgment, that it is not enough for counsel for the defendant merely to show that, if Remmington’s case had been decided initially under the 1949 Act, a different conclusion might have been reached. For myself, I doubt if the conclusion would have been different, but the point to which I attach importance on this aspect of the argument is that one ought to approach s 2(1) of the 1949 Act as though it had added, in parenthesis, ‘(it is the intention of Parliament that these words be given the meaning given to them in Remmington v Larchin’. I think that this is a clear case in which that presumption should be applied, and so I find that, if the present dispute had arisen after the 1949 Act and fell to be determined on the terms of the 1949 Act, precisely the same conclusion would have been reached as was reached in Remmington v Larchin.
Chronologically, the next step in the history of this matter is a decision of the House of Lords in Elmdene Estates Ltd v White. It was clearly right for counsel to draw our attention to this decision, although I must say that I find little assistance from it on the problem with which we are faced. It was a very special case in which a landlord, as a condition of the grant of a protected tenancy, required the proposed tenant to sell a property to an associated company of the landlord at £500 less than its true and fair value. When the transaction had been carried through, the tenant claimed from the landlord £500 on the basis that, on those facts, he had been required by the landlord, as a condition of the grant of the tenancy, to pay a premium of that amount. The main issue in the Elmdene case was whether the benefit derived by the sale of a property at under value could ever be a premium for the purposes of the 1949 Act at all. Much time was directed to a consideration whether such a benefit was a
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pecuniary consideration in addition to the rent and so on. That is a matter with which, fortunately, we are not concerned in the present case.
A second point taken in the Elmdene case, and based not so much on Remmington v Larchin as on R v Birmingham (West) Rent Tribunal, ex parte Edgbaston Investment Trust Ltd (decided by the Divisional Court), was that a premium which was paid to someone other than the landlord could never be an illegal premium even though it was required by the landlord. Thus it was argued that the fact that this premium (if premium it was) went to the associated company and not to the landlord, was itself sufficient to prevent the premium from being recoverable. That argument was summarily disposed of in the House of Lords, and it is of interest to note that Remmington’s case was mentioned only peripherally by counsel for the appellant. Counsel appearing for the respondent did not find it necessary to refer to Remmington’s case at all. In the speeches, the only reference to that case comes at the end of the speech of Lord Jenkins, in which he said ([1960] 1 All ER at 316, [1960] AC at 549):
‘As to the Birmingham case, I entirely agree with the Court of Appeal that it cannot be supported so far as it proceeds on the general proposition that no sum can in any circumstances be a premium within the meaning of the Act of 1949 unless it is paid to the prospective landlord. There may, of course, be cases in which prospective tenants, with a view to obtaining tenancies, make payments to persons other than the prospective landlords for some consideration other than the granting of the tenancies in view. Examples are to be found in the sums paid by prospective tenants to the builders who were converting the property into flats in the Birmingham case, and in the sum paid to the sitting tenant to vacate the premises in Remmington v. Larchin. Payments such as these might well be held to fall outside the category of premiums because they are not payments required as a condition of granting the tenancy.’
There is nothing in the Elmdene case to throw doubt on the correctness of Remmington v Larchin, and I think that one can pass on to what to my mind is really the crucial stage in the argument developed by counsel for the defendant, which arises out of the next legislative enactment, the Rent Act 1965. That Act repealed the provisions of the 1949 Act dealing with illegal premiums and substituted a new formula. One finds it in Sch 5, para 1, to the Act. That provided, in substitution for s 2(1) of the 1949 Act, the following:
‘A person shall not—
‘(a) as a condition of the grant, renewal or continuance of a tenancy to which this section applies, require the payment of any premium; or
‘(b) in connection with such a grant, renewal or continuance, receive any premium;
‘in addition to the rent.’
‘In addition to the rent’ clearly relates both to para (a) and para (b).
So far as para (a) is concerned, this is again familiar language. I can find nothing to distinguish the language used in sub-para (a) from that which had appeared in the earlier legislation, particularly the 1949 Act; but sub-para (b) is entirely new and has no counterpart in any earlier Act, and I must, therefore, consider whether sub-para (b) has made a material change in the law in regard to the facts of this case. Counsel for the defendant very properly drew attention to the extremely wide words of sub-para (b)—‘in connection with such a grant, renewal or continuance, receive
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any premium’. They are exceedingly wide words. They are, if I may venture to say so, words of unusual width when dealing with a penal provision giving rise, as this does, to a possible criminal prosecution in the event of a breach. It is now accepted that, where words creating a penal obligation are expressed in very wide terms, the courts may be under a considerable duty, when construing those words, to see that they are brought into line (if I may use the phrase) with the accepted principles of the criminal law of this country.
For example, the decision of the House of Lords in Sweet v Parsley illustrates the need for the court to construe such provisions as these in such a way as to make them include a mental element, such mental element (or mens rea) being a normal essential of a criminal offence. Equally, of course, when a penal provision is framed in such wide and, therefore, necessarily ambiguous language, it is necessary to consider the principles to which I have already referred whereby penal provisions are restrictively construed.
Accordingly, it seems to me that one must not just accept the wide words of this provision of the 1965 Act without enquiry, but must try and see what is the mischief at which they are aimed. The first theory put forward in argument is that this is concerned with cases such as the Elmdene case, ie where the landlord requires a payment of a premium, but the premium is paid to and received by somebody else. It is argued that sub-para (b), in the provision to which I am now referring, is designed to ensure not only that the landlord is guilty of an offence for requiring the premium, but the third party is also so guilty for receiving it.
It may be, for all I know, that Parliament were somewhat influenced by the Elmdene case, but I decline to take the view that this is the complete and total explanation. It seems to me that, if the third party receiving the premium in a case such as the Elmdene case was a party to the illegality, and knew that an unlawful premium was being required, he would already, under the existing law, be guilty of a criminal offence as an aider or abettor of the principal offender. It would not, I think, have been necessary to have a special provision to provide for the criminal responsibility of the third party if he was a party to the illegality. On the other hand, if the third party be assumed not to be a party to the illegality, it would be wholly unreasonable to make him guilty of a criminal offence merely because he had received a premium which was in some way received in connection with the grant of a tenancy. Accordingly, I am not satisfied with that as the description of the mischief aimed at, and I prefer the alternative theory which has some support from the textbook writers, namely that the purpose of sub-para (b) is really to cover what one might call the voluntary premium.
There must be cases where a landlord with a house to let has no particular desire to exploit the housing shortage and insist on payment of a premium, yet is pressed by one of a number of applicant tenants to receive a present in order that that tenant might go to the top of the list. In a case of that kind it would be hard to say that the landlord had required the payment of the premium, but it might be very proper to think that he should be guilty of an offence as being someone who receives a premium in connection with the grant, renewal or continuance of a tenancy. I incline to the view that this was the mischief aimed at, and that that is the purpose of sub-para (b), and I am very much reinforced in that view by the lay-out and form of the provision of the 1965 Act to which I am now referring. It opens, as I have said, with words which are common to sub-para (a) and sub-para (b), the words ‘A person shall not … ’ It concludes with the words, which are common to sub-para (a) and sub-para (b), ‘in addition to the rent’. Having regard to that form of phraseology and layout of the section, it seems to me that sub-para (a) and sub-para (b) are dealing with alternative offences which may be committed by the same person or, at any rate, the same
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class of persons. Thus, since sub-para (a), on the authority of the Remmington case, is only concerned with a landlord who requires the payment of a premium, so I would construe the section to the effect that sub-para (b) is equally concerned only with a landlord who receives a premium in connection with the grant of a tenancy. If that is right, there is nothing in the 1965 Act to prevent the decision in the Remmington case from remaining good law after its passage, and that I think is crucial to this appeal, because the next stage of the argument is one which I find comparatively simple.
The 1965 Act has been repealed. It is replaced by the provisions of the Rent Act 1968 which I read at the beginning of this judgment. The 1968 Act is a consolidating Act. It may be true that there are, here and there, amendments of consequence, but it is in the main a consolidating Act and, although the lay-out of the provisions of s 85 differ significantly from the lay-out of the corresponding provisions in the 1965 Act, I can find nothing, either in the language used or in the format of the legislation, to cause me to depart from the well-known principle that consolidating Acts presumably are not intended to change the law.
In the end, after following what I fear to have been a somewhat tortuous path, I have come to the conclusion that the decision in the Remmington case is quite unaffected by the subsequent legislative history; that the learned county court judge was right to consider himself bound by it, and that we should take the same view.
I feel much indebted to counsel for the defendant for his very able and well-presented argument, and in deference to it, I would conclude with a word or two about another approach to the appeal which he put before us. His argument was that the Remmington case, properly understood, does not confine illegal premiums to those required by and paid to a landlord, but is concerned equally with premiums required by and paid to any other person who is in fact in a position to make the payment of the premium a condition of the grant of the tenancy. He sought to argue in this case that, in the circumstances found by the learned judge, the true position here was that the plaintiff was a deputy of the landlords to find a tenant, negotiate the tenancy, and determine who the tenant should be. He says that, in those circumstances, it was the plaintiff who had the power to impose a condition for the payment of a premium on the grant of a tenancy, and that the Remmington case should not be so strictly construed as to exclude from the operation of the criminal law a tenant who, in that position, in fact requires the payment of a premium.
I am impressed by the principle which counsel for the defendant contends for; I do not find it necessary to reach a final conclusion on it today, but I can well understand that a case might arise in which the landlord had said in effect to the outgoing tenant, ‘You find a tenant, you let him the property, you impose whatever terms you think fit’—a case, in other words, in which the landlord had really delegated to the outgoing tenant the landlord’s functions of finding a tenant and granting a new lease. I can well see, and it may have to be determined another day, that a tenant in that position who required the incoming tenant to pay a premium might find that he was within the terms of s 85(1), but I am quite convinced that that is not this case. Even if one illuminates the learned judge’s judgment by reference to the correspondence which we have looked at de bene esse, I am quite satisfied that the facts of this case do not approximate to the hypothetical case to which I have referred. This is not a case in which it can be said that the outgoing tenant was the landlord’s deputy to impose a condition of this kind and, therefore, the attractive argument of counsel for the defendant lacks the factual foundation necessary for its success.
In the end I would feel compelled to say that the county court judge was right in the conclusion that he reached, and I would dismiss this appeal.
KARMINSKI LJ. I agree entirely with the judgment which has just been delivered by Widgery LJ and for myself have nothing to add to it.
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DAVIES LJ. I also agree and do not wish to add to the judgment already given.
Appeal dismissed.
Solicitors: Beach & Beach (for the defendant); Freeman & Co (for the plaintiff).
Henry Summerfield Esq Barrister.
Rugby Joint Water Board v Shaw-Fox and others (trustees of the will of J T Shaw)
Rugby Joint Water Board v Foottit and another
Foottit and another v Rugby Joint Water Board
[1971] 1 All ER 373
Categories: TOWN AND COUNTRY PLANNING; AGRICULTURE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE AND CAIRNS LJJ
Hearing Date(s): 21, 22 OCTOBER 1970
Compulsory purchase – Compensation – Assessment – Agricultural holding – Landlord’s interest – Restriction on power to give tenant notice to quit – Power reserved in lease to give 12 months’ notice – Whether compensation to be assessed on basis that vacant possession could be obtained by giving 12 months’ notice – Agricultural Holdings Act 1948, s 24(2)(b).
Compulsory purchase – Compensation – Assessment – Agricultural holding – Landlord’s interest – Restriction on power to give tenant notice to quit – Power reserved in lease to give 42 days’ notice for specified purposes – Whether compensation to be assessed on basis that vacant possession could be obtained by giving 42 days’ notice – Agricultural Holdings Act 1948, s 23(1).
The first and second claimants were landlords of two separate farms. Both had reserved powers in their respective leases to determine the tenancies on giving 12 months’ notice expiring on Lady Day in any year and the second claimants had also reserved the right to resume possession of any part of the farm which ‘the Landlords may from time to time require for … any purpose … (not being the use of the land for agriculture)’ on giving 42 days’ notice. Parts of both farms were compulsorily acquired by a water board for the purpose of constructing a reservoir. Both claimants maintained that they were entitled to compensation on the basis that they were able to obtain vacant possession by giving 12 months’ notice, and not on the basis that they were debarred from obtaining possession virtually for the tenants’ lives under the Agricultural Holdings Acts. Furthermore the second claimants maintained that they were entitled to compensation on the basis that they could obtain vacant possession by giving 42 days’ notice, for notice of less than 12 months was authorised by s 23(1)(b)aof the Agricultural Holdings Act 1948 where it was ‘given in pursuance of a provision in the contract of tenancy authorising the resumption of possession … for some specified purpose other than the use of land for agriculture’.
Held – The claimants were entitled to compensation on the basis that they could obtain vacant possession as follows:
(i) in the case of both claimants, by giving 12 months’ notice because a tenant was
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only entitled to compensation on the basis that he could be evicted after 12 months’ notice (Minister of Transport v Pettit [1969] RVR 26 applied) (see p 375 d, p 376 g and p 377 e, post); furthermore the position was not affected by s 24(2)(b)b of the Agricultural Holdings Act 1948 which provided that, to be unconditionally effective, such notice could only be given where the land was ‘required for use, other than for agriculture’ for which planning permission had been given, since that provision did not specify that the land must be required by the landlord for his own use (see p 375 f, p 376 h and p 377 e, post);
(ii) (Cairns LJ dubitante) in the case of the second claimants, by giving 42 days’ notice under the terms of the lease because, notwithstanding that the reserved right was to resume possession of any part ‘which the Landlords may … require for … any purpose’, this did not mean that the claimants had to carry out the construction of the reservoir themselves for the clause to be operative (see p 376 d and e and p 377 c d and h, post).
Notes
For the valuation of freeholds and leaseholds for compensation purposes, see 10 Halsbury’s Laws (3rd Edn) 113, 114, para 187, and for cases on the subject, see 11 Digest (Repl) 289–292, 1947–1977.
For the Agricultural Holdings Act 1948, ss 23 and 24, see 1 Halsbury’s Statutes (3rd Edn) 705–707.
Cases referred to in judgments
Jones v Gates [1954] 1 All ER 158, [1954] 1 WLR 222, 52 LGR 57, 2 Digest (Repl) 15, 67.
Minister of Transport v Pettit [1969] RVR 26, 20 P & CR 344, 67 LGR 449, Digest Supp.
Case stated
The Rugby Joint Water Board appealed and the second claimants, Edward Hall Foottit and Zoe Ruth Foottit, cross-appealed by way of case stated against decisions of the Lands Tribunal (Sir Michael E Rowe QC President), given on 27 November 1969. The Lands Tribunal assessed compensation on the compulsory purchase of the land of the first claimants, Jean Helen Shaw-Fox, P H V Twist and H A Sibley, and of the second claimants on the basis that the first and second claimants as landlords were entitled to give effective notice to quit to the tenants of their agricultural holdings expiring on Lady Day 1968. The facts are set out in the judgment of Lord Denning MR.
George Newsom QC and Guy Seward for the water board.
W J Glover QC and J A R Grove for the first and second claimants.
22 October 1970. The following judgments were delivered.
LORD DENNING MR. This case arises out of a proposal to construct a reservoir in Warwickshire. The Rugby Joint Water Board obtained compulsory powers to take some farm land. The question is the proper measure of compensation. One farm was owned by the second claimants, Mr and Mrs Foottit. The water board took 129 acres out of the 132 acres of their farm. The other farm was owned by the first claimants. The water board took 120 acres out of the 216 acres of their farm. Both farms were let to agricultural tenants. In each lease there was a power for the owner to determine the tenancy on 12 months’ notice, expiring on Lady Day of any year. In addition, in the second claimants’ case, there was a clause giving the landlords power to resume possession when it was required for special purposes.
On 6 April 1966, the Minister gave the water board planning permission to enable the water board to construct a reservoir on the land. On 17 March 1967, the water board, in pursuance of its compulsory powers, served notices to treat on the first and second claimants. The question is: what compensation is payable to the
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first and second claimants, as distinct from the tenants? The first and second claimants say that compensation should be assessed on the basis that each of them could turn out his tenant on a year’s notice, ie by a notice given on 25 March 1967 to expire on 25 March 1968, so that the first and second claimants would get vacant possession in a year’s time. Whereas the water board says that the compensation should be assessed on the basis that the tenant had virtually a right to be there for life under the Agricultural Holdings Acts, so that the first and second claimants would not get possession until the tenant died, which might be many years to come.
This point would seem to be covered by the decision in Minister of Transport v Pettit. In that case we considered the compensation payable to the tenant of a farm on its compulsory acquisition. The majority of this court held that the tenant would get only small compensation because his compensation would have to be assessed on the basis that he could be turned out on 12 months’ notice. That decision is in full accord with the Agriculture (Miscellaneous Provisions) Act 1968. Section 42 of that Act provides, in effect, that the tenant’s compensation shall be assessed on the basis that he has to go on the expiry of 12 months’ notice to quit. (But it is to be noticed that he gets compensation for disturbance under s 9 of that Act, which would be a sum equal to four years’ rent.) If Pettit’s case was rightly decided (that the tenant only gets small compensation on the basis that he has only 12 months to go), it seems to follow that the owner of the farm should get large compensation on the basis that at the end of the 12 months he would get vacant possession. Counsel for the water board recognises that Pettit’s case is binding on this court, but he seeks to distinguish it by taking a point which was not taken there. He goes back to s 24(2)(b) of the Agricultural Holdings Act 1948, which provides that the landlord of an agricultural holding can get the tenant out on 12 months’ notice if—
‘… the land is required for use, other than for agriculture, for which permission has been granted on an application made under the enactments relating to town and country planning … ’
Counsel says that that subsection only applies when the land is required by the landlord and not when it is required by anyone else, such as the water board here. I cannot agree with this submission. The section does not say: ‘is required by the landlord for use by him’. It simply says: ‘is required for use, other than for agriculture’, which means, I think, a use by anyone so long as the person is sufficiently definite, and the requirement sufficiently certain. That is borne out by what Sir Raymond Evershed MR said in Jones v Gates ([1954] 1 All ER 158 at 159, [1954] 1 WLR 222 at 224). It is to be noticed also that planning permission can be given to third persons (other than landlord and tenant) who have not yet acquired the land but only intend to acquire it.
I am of opinion, therefore, that s 24(2)(b) applies in this case to this effect: once planning permission was given to the water board to construct a reservoir, and the land was required by it for the purpose, the first and second claimants were entitled to turn out the tenants on 12 months’ notice. The compensation should, therefore, be assessed on that basis.
Now, I turn to the cross-appeal. It only applies in the case of the second claimants. The lease gave the second claimants in certain circumstances power to resume possession on six weeks’ notice. The second claimants say that the compensation should be assessed on that basis, and not on the basis that they had to give 12 months’ notice. The particular clause in the lease was a reservation reserving to the second claimants:
‘The right pursuant to Section 23(1) of the Agricultural Holdings Act 1948(a)
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from time to time to resume possession of any part of the said lands and buildings which the Landlords may from time to time require for building mining roadmaking or any purpose connected therewith or for any other purpose (not being the use of the land for agriculture) upon giving to the tenant not less than forty two days previous notice in writing of such requirement and allowing to the Tenant fair and reasonable compensation … ’
Turning now to s 23(1)(b) of the Act of 1948, it provides in effect that an agricultural holding can be determined by less than 12 months’ notice if it is—
‘… a notice given in pursuance of a provision in the contract of tenancy authorising the resumption of possession of the holding or some part thereof for some specified purpose other than the use of the land for agriculture.’
The Lands Tribunal rejected the claimants’ contention. The tribunal simply said ([1970] RVR 11 at 16): ‘I do not think that either claimant can rely on the terms of his re-entry clause’. Counsel for the second claimants says that they can. He says that the reservation clause brings into operation s 23(1)(b) of the Act, whereas counsel for the water board emphasises the words in the reservation clause: ‘which the landlords may from time to time require’. He says that the second claimants have not required this at all and that it is only the water board who require it. This is a nice point of construction. On the whole, I think that the second claimants are right. I cannot think that, in order to operate the clause, it was necessary for the second claimants themselves to have to do the building, mining or road making. It was intended that the clause should operate to the full extent of s 23(1)(b). It applies if the land is being resumed for a purpose other than agriculture, ie for a reservoir. I think that the owner is right. The compensation is to be assessed on the basis that the landlord could resume possession on the six weeks’ notice.
So, in the case of the first claimants compensation is to be awarded on the footing that the tenant can be got out on 12 months’ notice; and in the case of the second claimants on the footing that the tenant can be got out on six weeks’ notice. I would therefore dismiss the appeal, but allow the cross-appeal.
PHILLIMORE LJ. I agree. The court has to decide the basis on which the interest of the claimant in each of these two cases is to be assessed. As I understand it, the interest crystallises as at the date of service of the notice to treat, which was on or about 11 March 1967. So far as the appeal is concerned, as Lord Denning MR has said, the matter is really covered, with one exception, by the decision of this court in Minister of Transport v Pettit. Indeed, counsel for the water board very fairly conceded that it was not open to him in this court to argue that that decision was wrong. He has, however, taken a point which was not dealt with in that case, namely, that the provisions of s 24(2)(b) of the Agricultural Holdings Act 1948, which deal with the operation of notices to quit, refer only to an occasion where the land is required by the landlord for a use other than agriculture; and, as Lord Denning MR has pointed out, that does involve reading into the section words which are not there, because the wording as it stands is: if ‘the notice to quit is given on the ground that the land is required for a use … ’—not: ‘is required by the landlord’. For myself, dealing with this particular case, whilst I agree with the view of Lord Denning MR that as a matter of construction the words must be given their ordinary broad sense, and that there is no justification for introducing these limitations proposed by counsel for the water board I also would rely on the argument of counsel for the claimants on the whole scheme of the Act dealing with notices to quit. He pointed out that on no less than five occasions, of which this is one, where reference is made to certain
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notices to quit as being exceptions from the ordinary rule, when their effect is fettered by the Act, the language is entirely broad and in no case involves the proposed user of the land for which notice to quit is given being a user of the landlord himself. He referred us to s 23(1)(b), s 31(1), and s 24(2)(b), of course, that being the one particularly in point; and, in addition, s 25(1)(a) and s 23(1)(d); in each case he said that the distinction to be drawn is that the land is required for use for a non-agricultural purpose and not in any instance that it is required for such purpose by the landlord who gives the notice to quit. That seems to me to be amply justified by the wording of each of those provisions to which I have referred. Accordingly, I think that the argument of counsel for the water board on the appeal must fail.
On the cross-appeal I have come to the same conclusion as Lord Denning MR. I cannot think that the intention in the clause which we have to construe was really to do more than to import the provisions of s 23(1)(b) which refer to a notice given in pursuance of a provision in the contract authorising the resumption of possession of the holding or some part thereof for some specified purpose other than use of the land for agriculture. Here again, as was pointed out by counsel for the claimants, there is no suggestion that that is a purpose which is to be carried out by the second claimants, and indeed, to put on the clause the construction for which counsel for the water board contends, and which the tribunal appears to have accepted, involves the interposition of words limiting the giving of the notice to a case where the landlord requires the land for his own use for one of the specified purposes. I can see no justification for importing those words, and I would agree with Lord Denning MR that the cross-appeal should accordingly succeed. I agree, therefore, that the appeal fails and the cross-appeal succeeds.
CAIRNS LJ. I agree that the water board’s appeals should be dismissed for the reasons given by Lord Denning MR and Phillimore LJ; but as to the second claimants’ cross-appeal I have had grave doubts. The reasoning which has led us to dismiss the water board’s appeals depends, at least in part, on the fact that, under s 24(2)(b) of the Agricultural Holdings Act 1948, the language used is simply ‘the land is required’; and I agree that there is no justification for importing there the further words ‘by the landlord’. But when one comes to the interpretation, not of s 23(1) of the Act of 1948 but of cl 1(3) of the second claimants’ lease, one finds different language, ie ‘which the landlord may … require’. Therefore, here there is no question of implying additional words. The question is whether the expression ‘the landlord may … require’ should be given so extended a meaning as counsel for the claimants contended for. I have considerable doubts whether it should be. Secondly, I do not feel at all certain that it can be said that on the facts it was shown that the second claimants required the land, whatever interpretation may be applied to the word ‘require’. However, I appreciate the force of the considerations which have made Lord Denning MR and Phillimore LJ take the view that the wider interpretation can be given to this clause in the lease, and in the end, I do not dissent from the conclusion to which they have come.
Appeals dismissed, cross-appeal allowed. Leave to appeal to the House of Lords granted.
Solicitors: Bretherton, Turpin & Pell, Rugby (for the water board); Witham, Weld & Co, Liverpool (for the claimants).
F A Amies Esq Barrister.
Meyer v Meyer
[1971] 1 All ER 378
Categories: FAMILY; Divorce
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Hearing Date(s): 12, 13, 14, 15, 16 OCTOBER 1970
Divorce – Foreign decree – Invalidity – Basis of invalidity – Lack of consent to divorce proceedings – Duress – Decree granted in Nazi Germany in 1939 – Proceedings instituted by Aryan wife of escaped Jewish husband – Will of wife overborne by fear – Fear of persecution and danger to life, limb and liberty of herself and child – Jurisdiction of English court to declare divorce invalid – Doctrines of comity and natural justice inapplicable.
In 1932, the husband, who was a Jew, and the wife, who was Aryan, both being German nationals, were married in Berlin. The daughter was born in 1933. By agreement the husband and the wife did not have sexual intercourse after the birth of the daughter. The husband was a teacher, but when the Nazi regime came into power in Germany and the persecution of the Jews started he became unemployed and was without prospect of employment. The wife went out to work and supported the husband and the daughter, but in 1937 or 1938, when persecution of the Jews had intensified and Aryans married to Jews were subject to discrimination, she was told by her employers that she would either have to divorce the husband or give up her job. If the wife had lost her job she would not have been able to obtain another except in a most menial capacity. She also feared that she would be evicted from the flat where the family lived. In 1938, therefore, the husband and the wife agreed that the husband should escape from Germany leaving the wife behind with the daughter, who was a delicate child, and that the wife should obtain a divorce. They planned to reunite as soon as possible. The husband reached England in 1939. The wife, having been advised that the fact that the husband was a Jew was insufficient ground for divorce, based her petition on the personal grounds of failure by the husband to provide an income, desertion and refusal of sexual intercourse. A decree was granted on those grounds and the wife was then able to feel that she was out of danger and that political pressures against the daughter, a person of mixed blood, would be lessened. Meanwhile the husband remained in England, became a naturalised British subject and acquired a domicil of choice in England. The wife and the daughter arrived in England in 1949 and although the husband and the wife never lived together thereafter, the husband having become blind and being resident in a hostel and the wife having to work, they frequently visited one another. The wife applied for and obtained United Kingdom citizenship in 1949, describing her marriage as still subsisting. From 1956 the husband, under the Federal Compensation Law of Germany, received a pension as a victim of the Nazi regime. In 1965 he died, and the wife applied for probate of his will describing herself as the widow of the husband and obtained from the German embassy a limited common partial probate in which she was described as ‘his wife’. Her application to the German court for a widow’s pension under the Federal Compensation Law was rejected on the ground that she was the divorced wife of the husband. In order to satisfy the German court, which would accept such a declaration as evidence of the subsistence of the marriage, the wife applied to the English court for a declaration that the divorce decree of 1939 was invalid, and that both at that date of the passing of the Federal Compensation Law and at the date of the husband’s death she was validly married to him. The grounds on which her petition was based were that she had been induced to obtain the divorce by duress and that the proceedings leading to the decree were a sham, the stated grounds were untrue and that the real reason for the divorce being granted (ie that she was an Aryan married to a Jew) offended against the concept of natural justice. Ordinance 16 of the Allied Control Council for Germany which came into force in 1946 and which
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dealt by s 77 with compensation and mitigation of hardship resulting from judicial decisions based on racial, political or religious grounds, expressly provided by s 77(4) that no claim for the restoration of a marriage which had been dissolved through divorce could be made.
Held – (i) In considering the validity of a foreign decree pronounced by a court of competent jurisdiction, when the basis of the attack on it was that it was a violation of natural justice, the court could look only to the proceedings themselves and was not entitled to consider the truth or falsity of the evidence of the matrimonial offences on which the decree was based or to substitute its own view of the merits of the case (see p 386 d and p 387 h, post).
Pemberton v Hughes [1899] 1 Ch 781 followed.
Middleton v Middleton [1966] 1 All ER at 172 applied.
Formosa v Formosa [1962] 3 All ER 419 explained.
(ii) The doctrine of comity had no application where the foundation of the attack on the foreign decree did not lie in the conduct of the foreign proceedings or in the merits of the decision but lay outside them, eg in that duress had overborne the will of the wife in instituting the proceedings (see p 388 c, post); the Control Council Ordinance 16, apparently validating the decree by s 77(4), was part of the internal law of a sovereign State, ie Germany, and not part of the law of England (see p 388 d, post).
R v Bottrill, ex parte Kuechenmeister [1946] 2 All ER at 436 applied.
Igra v Igra [1951] P 404 distinguished.
(iii) There was no reason in logic or in principle why the doctrine of duress should not apply to a decree of divorce obtained under duress where an English court was considering a decree granted by another jurisdiction (see p 384 j, post) (dictum of Barnard J in Burke v Burke (1955) The Times. 17 March applied); accordingly, since the wife when seeking the decree was overborne by a genuine and reasonably held fear caused by a present and continuing danger to life, limb or liberty from external circumstances for which she was not responsible, the declarations which she sought would be granted (see p 385 b and p 393 g and h, post).
Notes
For the jurisdiction of the Divorce Court to make declarations of matrimonial status in cases of conflict of laws, see 7 Halsbury’s Laws (3rd Edn) 111, para 197.
Cases referred to in judgment
Bater v Bater (otherwise Lowe) [1906] P 209, 75 LJP 60, 94 LT 835, 11 Digest (Repl) 482, 1087.
Buckland v Buckland [1967] 2 All ER 300, [1968] P 296, [1967] 2 WLR 1506., Digest Supp.
Burke v Burke (1955) The Times, 17 March.
Formosa v Formosa [1962] 3 All ER 419, sub nom Gray (otherwise Formosa) v Formosa [1963] P 259, [1962] 3 WLR 1246, Digest (Cont Vol A) 248, 1107a.
Har-Shefi v Har-Shefi [1953] 1 All ER 783, [1953] P 161, [1953] 2 WLR 690, Digest (Cont Vol A) 243, 1071.
H (otherwise D) v H [1953] 2 All ER 1229, [1954] P 258, [1953] 3 WLR 849, Digest (Cont Vol A) 661, 135a.
Igra v Igra [1951] P 404, 11 Digest (Repl) 518, 1324.
Kahler v Midland Bank Ltd [1949] 2 All ER 621, [1950] AC 24, [1949] LJR 1687, 3 Digest (Repl) 287, 866.
Kaufman v Gerson [1904] 1 KB 591, [1904–07] All ER Rep 896, 73 LJKB 320, 90 LT 608, 12 Digest (Repl) 105, 618.
Lepre v Lepre [1963] 2 All ER 49, [1965] P 52, [1963] 2 WLR 735, Digest (Cont Vol A) 248, 1101c.
Luccioni v Luccioni [1943] 1 All ER 260; affd CA [1943] 1 All ER 384, [1943] P 49, 112 LJP 51, 168 LT 263, 27 Digest (Repl) 473, 4101.
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Macalpine v Macalpine [1957] 3 All ER 134, [1958] P 35, [1957] 3 WLR 698, Digest (Cont Vol A) 253, 1824a.
Middleton v Middleton [1966] 1 All ER 168, [1967] P 62, [1966] 2 WLR 512, Digest (Cont Vol B) 130, 1114a.
Pemberton v Hughes [1899] 1 Ch 781, 68 LJCh 281, 80 LT 369, 11 Digest (Repl) 487, 1115.
R v Bottrill, ex parte Kuechenmeister [1946] 1 All ER 635; affd CA [1946] 2 All ER 434, [1947] KB 41, 175 LT 232, sub nom R v Kuechenmeister, ex parte Bottrill 115 LJKB 500, 22 Digest (Repl) 311, 3238.
Rosling v Rosling (unreported) See Rayden on Divorce (11th Edn) p 422.
Szechter (otherwise Karsov) v Szechter [1970] 3 All ER 905.
Cases and authorities also cited
Aldrich v A-G [1968] 1 All ER 345, [1968] P 281.
Forbes v Cochrane (1824) 2 B & G 448, [1824–34] All ER Rep 48.
Grotrian (decd), Re [1955] 1 All ER 788, [1955] Ch 501.
Indyka v Indyka [1967] 2 All ER 689, [1969] 1 AC 33.
Mansell v Mansell [1966] 2 All ER 391, [1967] P 306, Digest (Cont Vol B) 129, 1097ba.
Ormes v Beadel (1860) 2 De GF & J 333.
Ridge v Baldwin [1963] 2 All ER 66, [1964] AC 40.
Cheshire Private International Law, 8th Edn.
Dicey Conflict of Laws (8th Edn), p 727.
Oppenheim’s International Law (8th Edn), Vol 1, p 568.
Rayden on Divorce, 10th Edn, pp 98, 366, 1531.
Petition
This was a petition by the wife, Gertrud Berta Hedwig Meyer, for a declaration (1) that a decree of divorce granted by the Civil Chamber of the Landgericht Berlin on 24 October 1939 was invalid, (2) that on 29 June 1956 the wife was lawfully married to the husband, Isaak Löbel Kurt Meyer; and (3) that on 20 July 1965 the wife was lawfully married to the husband. The facts are set out in the judgment.
Sir Elwyn Jones QC and C G Allen for the wife.
N Lermon QC and Elaine Jones for the Queen’s Proctor.
16 October 1970. The following judgment was delivered.
BAGNALL J. On 2 July 1932, Isaak Löbel Kurt Meyer and Gertrud Berta Hedwig Boettcher (whom I will call respectively ‘the husband’ and ‘the wife’) were married at a registry office in Berlin. The husband and the wife were German nationals and were and remained, at least until the end of 1939, domiciled in Germany. The husband was of the Jewish race, the wife was not. In October 1933, their only child Laura (whom I will call ‘the daughter’) was born. In the meantime the Nazi regime had come into power as the government of Germany; I shall have to say more about the consequences of that at a later stage. It is sufficient to say now that there was initiated a policy of dividing Jews from, as they were called, Aryans and of eliminating Jewish influence from German life. The policy intensified into persecution and culminated during the war years in ‘the final solution’—extermination. In August 1938, the husband escaped secretly from Germany first to Czechoslovakia, then to Poland and finally to England. The wife and daughter remained in Berlin.
On 24 October 1939, the Civil Chamber of the Landgericht Berlin adjudged that the marriage of the husband and the wife was dissolved. I must read the record of that adjudication:
‘Facts: The parties have celebrated their marriage on the 2nd July, 1932, before the registry office of Berlin-Tiergarten. They are German citizens. The [wife] is an Aryan; the [husband] is a Jew. There is one daughter of the marriage aged 5 yrs. old. The parties have been separated since August, 1938.
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The [wife] petitions the Court to dissolve the marriage and to declare that the [husband] is the guilty party. She maintains that the [husband] has destroyed the marriage as he has failed to maintain the family although he had been fully capable to work. He had refused sexual intercourse after the birth of the child. The last intercourse had taken place in October, 1933. Finally, he had secretly emigrated to Czechoslovakia and abandoned her and child. The [husband] has not submitted any pleadings although he has been served with the Petition and the notification of the date and place of hearing on the 23rd June, 1939. Reference is made to the contents of the file as stated.
‘Reasons for the Decision: The marriage of the parties has broken down. This follows from the very fact that the [husband] has emigrated from Germany and no longer cares for his family. The [husband] is to be blamed for the breakdown of the marriage. He has not paid alimony to the [wife], has not cared for her, refused to have intercourse with her, and eventually deserted her secretly. Therefore, the marriage was to be dissolved under paragraph 49 of the Marriage Act. According to paragraph 60 of the Marriage Act, it had to be pronounced that the [husband] is responsible for the breakdown of the marriage.’
That judgment, which I will call ‘the 1939 decree’, was final with effect from 15 December 1939.
The husband remained in England, served in the army and in 1947 became a British subject by naturalisation. By then he had become, and he remained, domiciled in England. The wife left Germany with the daughter at the end of 1948 and they arrived in England at the beginning of 1949. Thereafter the wife lived in England as the wife of the husband in circumstances which I shall have to describe in more detail later. They never went through any further ceremony of marriage. On 2 April 1949, the wife applied for registration as a citizen of the United Kingdom and Colonies as the wife of the husband. In that application she stated:
‘My marriage is still subsisting as far as I know, but by a decree of the Nazi Government it was declared that my marriage was dissolved as my husband was Jewish and had escaped from Germany.’
The wife was registered pursuant to that application on 19 May 1949. By then the wife, whether or not she was the lawful wife of the husband, had become and she remained and still remains domiciled in England.
On 20 February 1946, there had come into force an Ordinance of the Allied Control Council for Germanya, s 77 of which provided, so far as material, that:
‘… judicial decisions based solely or predominantly on racial political or religious grounds may be contested by either of the parties injured by such a decision, as well as by the children of the marriage or by the Public Prosecutor (action for mitigation of hardship).’
The action had to be brought within a period which expired early in 1948. It was provided that:
‘The contesting party may in such an action claim compensation for material damage inequitably suffered by him and demand the removal or mitigation of such hardships as adversely affect his personal position.’
By sub-s (4) of the section it was provided:
‘No claim for restoration of a marriage which has been declared void or has been annulled or dissolved through divorce can be made.’
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On 29 June 1956, the government of the Federal Republic of Germany passed the Federal Compensation Law, making provision for the payment of compensation for, inter alia, loss of professional income to the victims of the Nazi regime. Under that law the husband became entitled to receive and did receive a pension of about £1,400 per annum from 1 October 1956 until he died on 20 July 1965. By the same law a widow of the husband is entitled to receive from the date of his death during her life or until remarriage, a pension of about £840 per annum if she was married to the husband on 29 June 1956 and at the date of his death. The wife applied to the Landgericht Berlin for such a pension as the widow of the husband. On 5 February 1958, her application was rejected for the reason that she was not the widow but the divorced wife of the husband. On 18 April 1969, the Civil Chamber of the Landgericht Berlin rejected her appeal against that decision. Earlier, by an order dated 25 June 1968, the same Civil Chamber had directed as follows:
‘The [wife] is ordered to prove by production of a suitable English Document—Certificate of a Registrar of Civil Status, Judgment of the Court, or any other manner—that she was validly married according to English law at the latest on the 29th June, 1956 and at the time of the death of [the husband] having regard to S. 85 Ss. 1 second sentence of the Federal Compensation Law. This document must show that the relevant English Authority was aware of the dissolution of the marriage celebrated in July 1932 between the [wife and the husband] by a Judgment of the Landgericht Berlin dated the 24th October, 1939 and that notwithstanding this [the husband and the wife] were regarded as being validly married.’
Unfortunately the wife did not produce any such certificate or judgment or other suitable document but only, as I understand it, certain correspondence with the Home Office and grants of probate of the will of the husband, in which she was described as his wife. Accordingly, notice of appeal has been duly entered against the decision of 18 April 1969, and I have been told that the German court has intimated that it will accept the decision of this court as to the validity of the 1939 decree under English law. Hence these proceedings.
By her petition the wife claims: (1) a declaration that the 1939 decree is invalid; (2) that it may be declared that on 29 June 1956 the wife was lawfully married to the husband; and (3) that it may be declared that on 20 July 1965 the wife was lawfully married to the husband. The grounds on which that prayer is founded are first, that the wife was induced to obtain the 1939 decree by duress, namely by the fear of danger to her life and liberty and to that of her daughter if she failed to obtain that decree, and further and in the alternative, that by reason of the matters alleged in the petition, the 1939 decree offended intolerably against the concept of justice prevailing in English courts and was contrary to natural justice. It may be that technically the first ground is merely a manifestation of the second but nothing of substance turns on that. Quite apart from duress, the case for the wife under the second ground is that the proceedings leading to the 1939 decree were a sham, that the stated reasons for the decree were not the real reasons and were untrue and that the real reason was that the husband was a Jew married to an Aryan. It is conceded on the part of the wife that the court which pronounced the 1939 decree was the proper court, indeed, the only court, having jurisdiction to dissolve the marriage of the husband and the wife and that no complaint can be made of purely procedural defects, such as failure to give notice to the husband or to hear submissions on his behalf.
The learned registrar gave directions that this petition should proceed without a respondent and that evidence might be given by affidavit. On 23 July 1970, Baker J asked that the Queen’s Proctor should make arrangements for counsel to appear as amicus curiae, and in that capacity and on the Queen’s Proctor’s instructions leading and junior counsel appeared before me. I am greatly indebted to
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them for their researches and for the comprehensive submissions they have put before me both on the facts and on the law.
It is plain that under RSC Ord 112, r 3, I have jurisdiction, albeit a discretionary jurisdiction, to make an order which is a declaration as to martial status. If authority were required for that proposition, it is to be found in Har-Shefi v Har-Shefi. In those circumstances and against the background which I have described, the questions of law that I have to determine are: (1) will this court decline to recognise the validity of a decree of divorce pronounced by a foreign court on the ground that the petitioner instituted the proceedings leading to that decree under duress? If so, what kind and what degree of duress will suffice? (2) Apart from duress, will this court decline to recognise the validity of such a decree on the grounds that it offends against English views of substantial justice or natural justice and, if so, what kind of violation of substantial justice or natural justice will suffice? (3) If otherwise this court would decline to recognise the validity of such a decree, will it nevertheless assert that validity on grounds of comity, and, if so, in what circumstances? And, in particular, should this court take that course in the present case having regard to s 77 of the Control Council Ordinance?
It is well established that where rights and liabilities depend on consent, a consent given under duress is no true consent and the rights and liabilities will be determined as if no consent had been given. Examples abound in the law of contract, eg Kaufman v Gerson and Kahler v Midland Bank Ltd. I should expect to find this principle embedded in any civilised system of jurisprudence. Marriage is a special type of contract because it alters status; and it is plain that that principle applies to marriage. In H (otherwise D) v H the wife married in order to escape from Hungary after the Russian occupation. The occupation was in 1945 when the wife was 14 years old; the marriage was in 1949. Karminski J, after hearing argument to the contrary from the Attorney General on behalf of the Queen’s Proctor, held that her consent to the marriage was negatived by duress. The nature of the duress is set out in the report ([1953] 2 All ER at 1231, [1954] P at 260, 261):
‘The reasons why the wife was anxious to leave Hungary were as follows. She came of a family engaged in a substantial business and of comfortable circumstances—the kind of family who might not be well or sympathetically regarded by a communist government. When Russian troops occupied Hungary in 1945, the wife, then about fourteen years of age, was dressed as a boy in the hope that thereby she might escape the attentions of the occupying troops. She wore this disguise for a few months and then returned to normal feminine dress. It did not appear that she was at any time molested by Russian or other troops. In 1948 a communist government ruled Hungary and the position of the wife, and of many others of her class and background, deteriorated. The wife, undoubtedly, heard many stories of people in her position being taken to prison or concentration camps, and she believed herself to be in real danger of sharing a similar fate. Asked why she was so anxious to leave Hungary, she answered: “Because the time was so terrible. I was afraid of what was going to happen there“.’
It appears ([1953] 2 All ER at 1231, 1954] P at 260) that before the marriage ceremony was performed, the wife had agreed with the husband that they should not live together after the marriage and that it should be dissolved at the earliest possible opportunity. The wife had discussed it
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with her widowed mother who entirely approved the scheme on the basis that it was the only practicable way in which the wife could leave the country. It is to be observed that in that case there was no specific threat but a present and continuous apprehension of danger to life, health or liberty.
In Buckland v Buckland, the threat was of a prosecution of the petitioner on an unjust charge and Scarman J held that consent was vitiated by duress because, following the view of the law expressed in H v H, he had ([1967] 2 All ER at 302, [1968] P at 301)—
‘come to the conclusion that the petitioner agreed to his marriage because of his fears, and that his fears, which were reasonably entertained, arose from external circumstances for which he was in no way responsible.’
and the learned judge held that the petitioner was entitled to a declaration that the marriage ceremony was null and void.
In Szechter (otherwise Karsov) v Szechter, the petitioner consented to marriage in order to escape from imprisonment in truly appalling conditions and from threats of a mental home, a severe sentence of imprisonment, followed almost certainly by rearrest; and in any event the prospect of penury, inability to obtain any employment other than of a menial nature and inability ever to lead a normal life. Sir Jocelyn Simon P in giving his reasons for making a decree of nullity, said ([1970] 3 All ER at 915):
‘It is, in my view, insufficient to invalidate an otherwise good marriage that a party has entered into it in order to escape from a disagreeable situation, such as penury or social degradation. In order for the impediment of duress to vitiate an otherwise valid marriage, it must, in my judgment, be proved that the will of one of the parties thereto has been overborne by genuine and reasonably held fear caused by threat of immediate danger, for which the party is not himself responsible, to life, limb or liberty, so that the constraint destroys the reality of consent to ordinary wedlock.’
Sir Jocelyn Simon P held that in that case that test was satisfied. I must confess to having been troubled by the words ‘threat of immediate danger’; but, having regard to the fact that Sir Jocelyn Simon P expressly followed H v H, it is not necessary, in my judgment, that there should be an immediate specific threat; it is sufficient if there is a present continuing danger, although the apprehended death, injury or deprivation of liberty may not happen until an unknown future time. Equally, in my judgment, although dangers of mere penury or social degradation will not of themselves invalidate an otherwise good marriage, they cannot be disregarded if they form an essential element in the danger to life, limb or liberty. I add, in dealing with Szechter v Szechter, that I desire respectfully to adopt and to reassert the philosophy contained in the second paragraph of Sir Jocelyn Simon P’s judgment.
The doctrine of duress, then, applies to the contract of marriage; does it also apply to a dissolution of marriage? If the question arose in relation to a system of law which recognised divorce by consent, I should have no doubt that the doctrine would apply. For, as in marriage, there would be a special type of contractual arrangement which altered status. But the doctrine is not confined to acts which are contractual, or bilateral or multilateral; it applies to making a will and it applies to a voluntary disposition inter vivos. I can see no reason in logic or on principle why it should not apply to a decree of divorce obtained under duress, at any rate where an English court is considering a decree granted by another jurisdiction. It may be that different considerations would apply if an English court were considering a decree pronounced
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by an English court; but I am not concerned with that situation. I should add that I am fortified in my opinion by an obiter dictum of Barnard J in Burke v Burke where, after holding that a marriage contracted in Russia was invalid, the learned judge added that if the marriage had been valid he would have held that a decree of divorce obtained in Russia would have been ineffective to dissolve it because the wife was being ‘persecuted and tyrannised to obtain a divorce’. It appears from the file, which I have examined, that there the Russian wife and her mother were being threatened with terms of imprisonment unless she obtained a divorce.
I accordingly conclude that this court will declare a foreign decree of divorce invalid if the will of the party seeking the decree was overborne by a genuine and reasonably held fear caused by present and continuing danger to life, limb or liberty arising from external circumstances for which that party was not responsible. I add that I think that ‘danger to limb’ means a serious danger to physical or mental health; and that ‘danger’ must include danger to at least a parent or child of the party.
I turn to the question of natural justice. The starting point must be the decision of the Court of Appeal in Pemberton v Hughes. The headnote of that case reads as follows:
‘A judgment or decree pronounced by the Court of a foreign country will be treated and acted upon here as final, notwithstanding any irregularity of procedure under the local law, provided the foreign Court had jurisdiction over the subject-matter and over the persons brought before it, and the proceedings do not offend against English views of substantial justice. Thus, where a decree for divorce had been pronounced by the proper Court in Florida in an undefended action by the husband against the wife on the ground of her violent and ungovernable temper, both the parties being domiciled and resident in Florida, an alleged irregularity in service of process was held not to be a ground for questioning the validity of that decree in an action brought by the wife in the English Courts to enforce a claim arising out of her alleged second marriage to a British subject.’
Sir Nathaniel Lindley MR said ([1899] 1 Ch at 790, 791):
‘Assuming that the defendants are right, and that the decree of divorce is void by the law of Florida, it by no means follows that it ought to be so regarded in this country. It sounds paradoxical to say that a decree of a foreign Court should be regarded here as more efficacious or with more respect than it is entitled to in the country in which it was pronounced. But this paradox disappears when the principles on which English Courts act in regarding or disregarding foreign judgments are borne in mind. If a judgment is pronounced by a foreign Court over persons within its jurisdiction and in a matter with which it is competent to deal, English Courts never investigate the propriety of the proceedings in the foreign Court, unless they [I interpolate that “they” must mean the proceedings] offend against English views of substantial justice. Where no substantial justice, according to English notions, is offended, all that English Courts look to is the finality of the judgment and the jurisdiction of the Court, in this sense and to this extent—namely, its competence to entertain the sort of case which it did deal with, and its competence to require the defendant to appear before it. If the Court had jurisdiction in this sense and to this extent, the Courts of this country never inquire whether the jurisdiction has been properly or improperly exercised, provided always that no substantial injustice, according to English notions, has been committed.’
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Again I interpolate that, in my view, Sir Nathaniel Lindley MR in his second reference to ‘substantial injustice’ was not intending to widen the reference that he had earlier made where the reference to injustice was to the propriety of the proceedings. I say that because later Sir Nathaniel Lindley MR said ([1899] 1 Ch at 792):
‘A judgment of a foreign Court having jurisdiction over the parties and subject-matter—i.e., having jurisdiction to summon the defendants before it and to decide such matters as it has decided—cannot be impeached in this country on its merits … ’
Rigby LJ ([1899] 1 Ch at 794) agreed with Sir Nathaniel Lindley MR. Vaughan Williams LJ said ([1899] 1 Ch at 796, 797):
‘The true principle seems to me to be that a judgment, whether in personam or in rem, of a superior court having jurisdiction over the person, must be treated as valid till set aside either by the Court itself or by some proceeding in the nature of a writ of error, unless there has been some defect in the initiation of proceedings, or in the course of proceedings, which would make it contrary to natural justice to treat the foreign judgment as valid, as, for instance, a case where there had been not only no service of process, but no knowledge of it.’
That case appears to me to be authority for the proposition that if this court is to refuse to recognise the validity of a foreign decree pronounced by a court of competent jurisdiction because of a violation of natural justice, the violation must relate to the proceedings themselves and not to the merits. It follows that this court will not declare such a decree invalid because the grounds for the decree nisi would not be grounds for divorce in this country; see also Bater v Bater (otherwise Lowe).
However, in Formosa v Formosa, a Maltese domiciled in England had married an English girl in a registry office in England. Later the court of Malta where the husband had become domiciled declared that the marriage was a nullity because the husband was a Roman Catholic but had not been married in a Roman Catholic church. The Court of Appeal declined to recognise the validity of the Maltese decree. The grounds as stated by Lord Denning MR were ([1962] 3 All ER at 423, [1963] P at 269):
‘Suffice it to say that I am content to decide this case on the simple basis that the courts of this country are not compelled to recognise the decree of the court of another country when it offends against our ideas of justice; and this decree, in my judgment, does so offend.’
The grounds were stated by Donovan LJ in these terms ([1962] 3 All ER at 424, [1963] P at 271):
‘… these rules of private international law are made for men and women—not the other way round—and a nice tidy logical perfection can never be achieved. Certainly elementary considerations of decency and justice ought not to be sacrificed in the attempt to achieve it. If the courts here have, as I think that they have, a residual discretion in these matters, they can be trusted to do whatever the justice of a particular case may require if that is at all possible.’
And the grounds as stated by Pearson LJ were ([1962] 3 All ER at 424, [1963] P at 271):
‘In my judgment, the decree in this case, having regard to all the facts and circumstances which have been stated, does offend against our views of substantial justice, and for that reason the degree ought not to be recognised.’
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In Lepre v Lepre, where the facts were substantially indistinguishable from those in Formosa v Formosa, Sir Jocelyn Simon P held that he was bound to follow that case and held that a Maltese decree of nullity, although on general jurisdictional grounds conclusive, should not be accorded recognition because it must be taken to offend intolerably against the concept of justice which prevails in our court. In the view of Sir Jocelyn Simon P, the crux of the decision of the Court of Appeal in Formosa’s case was that it was ([1963] 2 All ER at 57, [1965] P at 64)—
‘… an intolerable injustice that a system of law should seek to impose extra-territorially, as a condition of the validity of a marriage, that it should take place according to the tenets of a particular faith.’
I respectfully agree with him in thinking that that was the true ratio decidendi, although both Lord Denning MR and Donovan LJ had, at the very least, doubts whether in the eyes of English law the Maltese court was the court of competent jurisdiction.
In my judgment, those cases do not establish that this court has a general discretion on grounds of natural justice to substitute its own view of the merits of a foreign decree for the view of the court of competent jurisdiction; for if that were so, they would be in conflict with Pemberton v Hughes and other decisions of the Court of Appeal. Finally, in Middleton v Middleton ([1966] 1 All ER 168 at 172, [1967] P 62 at 69), Cairns J summarised the relevant proposition thus:
‘(i) If a decree of divorce has been pronounced in the court of a foreign place where the parties were not domiciled, the English court will treat it as valid provided it would be recognised as valid by the courts of the place where they were domiciled … (ii) If a decree of divorce has been obtained in a foreign court by false evidence about the matrimonial offence relied on, it will not on that ground be treated by the English court as invalid provided it has not been set aside in the foreign court … (iii) If a decree has been obtained in a foreign court contrary to natural justice, the English court must treat it as invalid … [I interpose that Cairns J there cited Macalpine v Macalpine, where the defect of natural justice was plainly purely procedural.] (iv) The English court has a discretion to refuse to recognise a foreign decree which offends against English ideas of substantial justice … [and Cairns J cited Formosa v Formosa and Lepre v Lepre.] (v) If a petitioner has obtained a decree in a foreign court, which had no jurisdiction to pronounce it, by deceiving the court into believing it had jurisdiction, the English court will treat it as invalid … From the second of these propositions, it is clear that the husband’s false evidence of the wife’s desertion is not a ground on which this court can refuse to accept the decree.’
I do not think that I need read further, either the facts or the judgment, in that case.
Taking into consideration those authorities, I am of opinion that, whatever may be the bounds of the concept of natural or substantial injustice, this court is not entitled to consider the truth or falsity of the evidence of matrimonial offences on which a foreign decree was pronounced, or to substitute its own view as to the merits of the case for that of the foreign court, or to disregard the express grounds on which the foreign decree was based and decide that it was in reality based on some other ground or grounds. If that view be right, it is not necessary for me to consider
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the difficult question of what conclusion this court would reach if a foreign decree were expressed to be solely on racial or religious grounds.
On the third question, it was very properly urged on me by counsel for the Queen’s Proctor that the doctrine of comity required that this court should not lightly set at nought the decision of a foreign court, that s 77(4) of the Control Council Ordinance had in fact validated the 1939 decree, that the increasing tendency of the court was to eschew decisions which led to limping marriages, that a decision in favour of the wife in this case would cast doubt on the validity of many other similar decrees and that, as a matter of discretion, I should refuse the relief sought in the petition. In support of those submissions I was referred to Igra v Igra.
Looking at the matter for the moment apart from authority, in my judgment, the answer to those arguments, which are of course formidable, is that the doctrine of comity should have no application where the foundation of the attack on the foreign decree does not lie in the conduct of the foreign proceedings, or even, if this be relevant, in the merits of the decision, but lies outside them as it does where duress overbears the will of the party instituting the proceedings. In any event, as appears from the declaration set out in R v Bottrill, ex parte Kuechenmeister ([1946] 1 All ER 635 at 636, [1947] KB 41 at 42), and accepted in that case by the Court of Appeal ([1946] 2 All ER 434 at 436, [1947] KB at 50), the Control Council Ordinance must be regarded as part of the internal law of a sovereign State; it is not part of the law of England. Dr Fritz Hellendall, who gave evidence as an expert in German law, expressed the extreme view that s 77(4) of the Control Council Ordinance had no real effect because to declare a decree of divorce invalid was not to restore a marriage and indeed a marriage could not be restored when one of the parties to it was dead. I do not accept that extreme view which seems to me to be mere sophistry. Nevertheless, in my opinion, the Landgericht Berlin has not taken the view that the Ordinance has validated the 1939 decree, otherwise its order of 25 June 1968, which I have read, would be stultified. By making that order the Landgericht has, so to speak, disclaimed in advance the benefit of comity. In this connection it is not wholly immaterial to note an extract from a decision of the Supreme Federal German Court, reported in 1955 in relation to the Federal Compensation Act 1953, which was in pari materia with and was extended by the Federal Compensation Act 1956. I quoteb:
‘Aim and purposes of the legislation for restitution and compensation is to make good as soon and as far as humanly possible the injustice which has been committed. Any interpretation of the law which is possible and which assists this aim is therefore to be preferred to any other interpretation which might make more difficult or might complicate or frustrate restitution.’
Finally, a decision in favour of the wife in the present case would not create a limping marriage, and I should not think it right as a matter of discretion, if I were free to exercise discretion, to deny justice in the present case because of possible hardships in other cases, the facts of which are not before me and which may be wholly different from the facts here.
I must now consider the decision in Igra v Igra. The headnote reads:
‘In 1942 a wife then resident in Berlin obtained a divorce from her husband who was living in England as a refugee from the Nazis. The husband had neither notice of the proceedings nor any hope of successfully contesting them, and it was probable that they were coloured throughout by racial bias; but by the legislation of the Control Council for Germany of 1946 it was expressly provided that no claim could be made, in an action for mitigation of hardship, for the restoration of a marriage which had been dissolved by divorce, and there
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was no doubt that by German law the decree was valid. It was accepted that the German court had jurisdiction in the divorce proceedings; and, although no direct evidence of them was available, it was the usual practice of the German courts to appoint in such cases a curator absentis on behalf of the respondent spouse and to advertise that appointment. The parties voluntarily resumed cohabitation in this country after the war, but later separated; and the husband subsequently went through a ceremony of marriage in America with another woman. On an undefended petition by the wife for an injunction on the ground of jactitation of marriage and in the alternative for a declaration that her marriage to the husband had been validly dissolved:—
‘Held (1.) that, notwithstanding the absence of service upon the husband, it had not been proved that the German decree offended against natural justice. There was a discretion in the English courts to dispense with service, and the court should be slow to brand a foreign decree as contrary to natural justice (particularly when it was made in time of war) merely because notice did not in fact reach the other party. The validity of the present decree had been confirmed by the subsequent law of Germany, and the husband had accepted and acted on that decree; and the interests of comity were not served if one country was too eager to criticize the standards of another country or too reluctant to recognize decrees which were valid by the law of domicile … (2.) That, although in the circumstances the wife was not entitled to the injunction, the court should make a declaration that the marriage had been validly dissolved.’
I should interpose that when the writer of the headnote states that ‘it was probable that they were coloured throughout by racial bias’, it seems to me that he may well have put it too high, and, as I shall state in a moment, the first holding in the headnote seems to me to be too widely expressed. The decision of Pearce J is set out in these terms ([1951] P at 411, 412):
‘Under our own Matrimonial Causes Act, 1857, s. 42, the court has a discretion to order substituted service or dispense with service. That discretion must vary according to the facts of different cases. To refuse to dispense with service may mean that an injured spouse may be temporarily or permanently deprived of his or her matrimonial relief and freedom. To dispense with service means that a respondent will probably be divorced without an opportunity of being heard. In the case of Luccioni v. Luccioni Lord Merriman, P., in circumstances somewhat similar to this case, felt himself unable to dispense with service. The Court of Appeal not only upheld his discretion, but added that they themselves would have decided likewise. On the other hand, in Rosling v. Roslingc, the judge dispensed with service in a case not wholly dissimilar to this one.
‘As there is a discretion in our own court to dispense with service, we should be slow to brand a foreign decree as contrary to natural justice (particularly when it was made in time of war) merely because notice did not in fact reach the applicant. In this case I have no evidence that the usual practice of appointing a curator absentis was not adopted, or that advertisement, albeit ineffectual, was not used by way of substituted service. It must further be remembered that the husband himself is not complaining of want of natural justice in the decree against him, but has accepted it and acted on it by remarrying. The fact that the proceedings were suggested by the Gestapo and that the decree may well have been granted on predominantly racial grounds cannot be disregarded in determining whether the decree was contrary to natural justice. But the legislation of the Control Council, while giving a right to re-open other matters, has expressly refused a right to restore marriages that have been dissolved by divorce. No doubt it did so because it was felt that more injustice
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and hardship would be caused by revoking the divorces than by allowing them to stand. I have no positive proof, but only a suspicion, that the decree in this case was given on predominently racial grounds. Even if it was, the subsequent law of Germany has confirmed its validity, and the injured party, if there has been an injury, has accepted it and acted on it.
‘In those circumstances it would be unfortunate if this court felt bound to reject its validity, with the result that the wife would have a married status in England and an unmarried status in Germany. It has long been accepted that the court of the domicile is the proper tribunal to dissolve a marriage. Its decisions should, so far as reasonably possible, be acknowledged by other countries in the interests of comity. Different countries have different personal laws, different standards of justice and different practice. The interests of comity are not served if one country is too eager to criticize the standards of another country or too reluctant to recognize decrees that are valid by the law of the domicile.
‘In my view it has not been proved that this decree offends against natural justice and should therefore be considered invalid in this country.’
It is to be observed from the final paragraph and from the references to our own rules and practice in matrimonial causes, that the decision was that the decree there under consideration did not offend against natural justice by reason of lack of service of notice of the proceedings. Strictly, therefore, the observations of Pearce J on the question of the Control Council Ordinance and the doctrine of comity were obiter dicta and Pearce J had not the benefit of argument against the validity of that decree such as I have had. They are, however, observations of great weight and I should follow them if I thought that the present case was indistinguishable. In my judgment, it is not. In Igra v Igra there was no allegation of duress; at the date of the decree the wife in that case was living with another man and it is clear that Pearce J thought (and I respectfully agree) that duress could not be established. In that case both parties were living and had acted on the decree of divorce and both parties were concerned to assert and uphold its validity. Lastly, in that case there was no order of the appropriate German court that the party concerned should obtain the decision of this court whether the marriage was still subsisting under English law. For those reasons, in my judgment, I am not precluded by that case from granting to the wife the relief which she seeks, if otherwise she establishes her case.
I turn then to the facts, on which I heard, in addition to the evidence of the wife, evidence from Dr Hajek who had worked for about ten years in research at the Weiner Library in London, an institute of contemporary history specialising particularly in Nazism, Fascism and the persecution of Jews in pre-war Germany; and from Dr Hellendall, whom I have already mentioned, Doctor of Laws of the University of Cologne and a district court judge of Germany, who lived in Germany until 1934 and regularly visited there until 1936, and whose parents lived there until 1939. In addition I have read a number of statements on oath made by persons who were acquainted with the husband and the wife when they lived in Berlin.
I will deal first with the general situation in Germany in the late 1930s and then with the facts particularly concerning the wife. It is plain on all the evidence and as a matter of history (and not really in dispute) that by 1938 the persecution of the Jews in Germany had reached a high degree of intensity. By the Nuremburg Laws of 1935 marriages between Aryans and Jews were prohibited; although, at first, existing marriages were not expressly affected, Aryans married to Jews were subject to discrimination. It is apparent from the case of Johann Julius Adolf Körner and Auguste Körner that by 1938 Aryans were under a severe pressure to divorce a Jewish spouse. There were instances of marriages being dissolved on the ground of ‘mistake’ where one party was Jewish and the other Aryan. There was an incident in
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1937 where the wife of one Ernest Platz was ordered to appear before the Race Office at Columbia House—that was the establishment in Berlin where persons were detained for interrogation by the Gestapo—and called on to obtain a divorce as she was a member of the German Volk married to a Jew. She rejected this request although she was threatened to be imprisoned in a concentration camp if she refused. In fact she said, as was established by further evidence of translation, and said with some heroism: ‘My man stood by me when things were good, I want to stand by him when things are bad.' It is reported that she was subsequently released from Columbia House. I do not know whether she had a child or children or what happened to her afterwards. I was shown an extract from an official Nazi party propaganda document of 11 December 1938, which reads, as translated:
‘The women who have not yet separated the tie with their emigrated Jewish husbands are to be considered as having become Jews in the worst sense of the word and must therefore be treated as Jews.’
As a complement to that, a passage in a document published by Goering relating to the Nuremberg Laws, also in 1938, reads:
‘If a German wife of a Jew obtains a divorce, she returns to the German union of blood and all disabilities for her are eliminated.’
Against that background there was, in November 1938, a vast anti-Jewish pogrom when dozens of Jews were killed in a single night and tens of thousands of male Jews were sent to concentration camps within a few days. Although I have no evidence of a specific instance of an Aryan woman being killed or sent to a concentration camp specifically for refusing to divorce a Jewish husband, I accept Dr Hellendall’s evidence that his Jewish sister married to an Aryan felt safe only because he was a citizen of the United States of America and otherwise would have been deadly afraid; and his evidence and that of Dr Hajek that there was a general atmosphere of lawlessness, in which those who were, or who were to be treated as, Jews were terrorised; that people were sent to concentration camps irrespective of the law for not doing as the Gestapo wished; and that an Aryan married to and living with a Jew could not enjoy a perfect sense of security but was in danger of loss of liberty or even of death.
The wife gave evidence of her own personal life with the husband and her feelings and fears. Although she is of course some 30 years older then she was then, she appeared to me to be a gentle, sincere person, not perhaps cast in the heroic mould but not unduly timid. She gave her evidence fairly and apparently without exaggeration, and although, necessarily, her recollection was imperfect in some matters of detail, I accept her unreservedly as a witness of truth. Her evidence was in any event corroborated by statements of Dr Loeventall and of Fräulein Piltz, Frau Schallbroch and Dr Hanowski, and I will try to summarise the effect of the whole.
At the date of their marriage the husband was a teacher in a Jewish private school, the wife was an administrator in the office of a Red Cross institute that was first an old people’s home and then a hospital. They lived in a rented flat, part of a block of flats, in Gerichtsstrasse in Berlin. After the persecution of the Jews started, the staff and pupils of the husband’s school emigrated and the school was closed. Thereafter, the husband took a few non-Jewish private pupils at home. He was frequently visited by the Gestapo and partly because of those visits and partly from fears of contact with a Jew, those private pupils dwindled until the husband had no employment, no prospect of employment and no income. The husband, the wife and the daughter were wholly dependent on what the wife could earn. In, I think, 1937 or 1938 the representatives of the governors of the Red Cross institute told the wife that she would have to divorce the husband or give up her job and gave her a few months’ notice to do the one or the other. If she had given up her job, she would not have been able to obtain another, except in a most menial capacity. Also, both before and after the husband left Germany, the wife feared that unless she divorced the husband she would have to give up her flat; if that happened, there would have
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been extreme difficulty in finding anywhere to live. Although there was no evidence of an express threat to evict her, having regard particularly to the evidence of Frau Schallbroch and Fräulein Piltz, I believe that these fears were well founded. In the end, in 1938, the husband and the wife were advised that the husband should escape secretly from Germany; that there was no possibility of his taking the wife and the daughter with him, particularly as the daughter was delicate and ailing; and that thereafter the wife should obtain a divorce. The husband and the wife had never before discussed divorce and their marriage had throughout been wholly happy, but they agreed to this plan. In August 1938, the husband escaped by night with a rucksack, virtually no money and no papers. The wife hoped that there would be no war and that she would soon be able to join him. The wife waited until 1939, after she had heard indirectly that the husband was in England, and then found a non-Jewish lawyer to help her. The wife thought that the fact that the husband was Jewish was sufficient ground for divorce but the lawyer advised that there must be some personal grounds connected with the marriage and suggested desertion, refusal to provide an income to support the family and refusal of sexual intercourse. The so-called desertion was of course a matter of agreement between them; the failure to provide an income was solely because the husband was a Jew; they had not had sexual intercourse but had occupied separate rooms since the birth of the daughter as a matter of agreement, because they could not afford another child and contraception was frowned on by the Nazi government and was difficult; they did not know what else to do. So the divorce proceedings were instituted and proceeded to the 1939 decree. The wife described the general situation graphically during her cross-examination. She said:
‘Everybody was frightened; lots had no reason to be frightened, but they were and so was I [I think that she meant that even those who had no Jewish taint were frightened although they had no reason to be]. I had reason to be frightened until I obtained a divorce and I was frightened.’
She was also frightened of losing her job and of losing her flat. Once she obtained her divorce she was, in her own words: ‘out of every conceivable danger’.
Remembering the statement in H v H, to which I have referred, that the wife was one of a special class of persons who were in particular danger, it seems to me that the wife in this case, as the Aryan wife of an escaped Jewish husband, was part of a particular class of persons who were in particular danger. I ask myself: could anyone in Berlin in 1938 and 1939 have truthfully made this statement: ‘I am the Aryan wife of an escaped Jewish husband; I am threatened with the loss of my job and I am likely to lose my home. If I lose my job, I shall have no money. I have a delicate and ailing daughter, but I am in no real danger to life, limb or liberty’? In my view no one in the position of the wife in this case could have truthfully made that statement. The position of the daughter was the subject-matter of a statement agreed between counsel and their respective advisers, which I will read:
‘The [wife’s] daughter was considered under German law i.e. under the first Ordinance made under the law on the Protection of German Blood, of 14.11.1935, section 5(2) as a “Person of Mixed Blood” … . In this capacity she had to suffer discrimination in various respects as a great number of occupations were closed to her partly as a result of specific legal provisions, partly through administrative and police actions and partly through the pressure of the party and its propaganda and general supervisory machinery. Nothing was changed by the [wife’s] divorce in her position as far as the laws and ordinances enacted in the Nazi period are concerned but it was reasonable to expect that the danger of administrative and police actions and party pressure against her would be very greatly lessened.’
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The events after October 1939 are relevant only to the extent that they confirm or cast doubt on events and apprehensions before that date and I can deal with them shortly. The wife brought the daughter to England in 1949. The husband was partially blind then and soon became totally blind. The husband was in a Jewish home. Subsequently, when he received his pension under the Federal Compensation law, he moved to a private hostel. The wife obtained work at Nottingham where the daughter was educated but she visited the husband as far as money would permit. Later the wife lived near the husband in London and worked there; she could not live with the husband and look after him because she had to work during the day to supplement the family income. He went out to stay with her at weekends and she constantly visited him and provided meals for him. After the husband’s death, the wife obtained probate of his will in common form in which she is described as ‘widow and the relict of deceased’; she was not described as his wife in his will. She also obtained a grant of limited common partial probate through the German embassy for exclusive use in compensation proceedings, in which she is described as ‘his wife’. I have seen a transcript of the proceedings leading to that grant in which the wife stated, inter alia:
‘By a Divorce Decree of the Landgericht Berlin dated the 24th October, 1939 i.e. during the World War our marriage was dissolved under the influence of the Nationalist Socialist Legislator.’
Counsel for the wife placed some reliance on these documents, but since they both depended on ex parte statements of the wife, without any argument or inter partes judicial investigation, I do not derive any help from them. From the time she came to England until the husband’s death the wife regarded herself, and was regarded by others, as the wife of the husband. Asked whether she and her husband had contemplated remarriage, the wife said:
‘Someone told my husband that we may have to re-marry. I said if we had to, we will, but it’s really not necessary; the Nazis have gone, Hitler is dead, why should we?’
They were certainly comforted in that opinion by the attitude of the responsible authority to which the existence of the 1939 decree was disclosed when the wife’s application for United Kingdom citizenship was granted.
On the whole of the evidence I find as facts: that in 1939 the wife had a general fear of danger from the attentions of the Gestapo as the persecution of Jews, and those who, like herself, were treated as Jews, intensified, and on that account she feared for her liberty and her health; that she had specific fears of losing her job and her flat; and that if either of those losses occurred she feared serious deterioration of her health and that of her daughter, and that they might even not survive; that the dangers that the wife feared were serious and continuously existing; and in particular that the danger of suffering at the hands of the Nazi authorities would be intensified if the wife became unemployed and/or homeless; that the wife was not herself responsible for these dangers; that her fears were genuine and reasonably held and that she would not have sought to obtain the 1939 decree if her will had not been overborne by those fears. I should add that if I had taken a different view of the law, I should have found as a fact that the stated grounds on which the 1939 decree was sought were not true but were a sham.
My conclusion is that the wife has established her case based on duress in law and on the facts and I propose to make the declarations asked in paras 1, 2 and 3 of the prayer in the petition.
Declarations accordingly.
Solicitors: Hellendall & Co (for the wife); Queen’s Proctor.
Alice Bloomfield Barrister.
The Annefield
Owners of the ship Annefield v Owners of the cargo lately laden on board the ship Annefield
[1971] 1 All ER 394
Categories: SHIPPING
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BRANDON J
Hearing Date(s): 15 MAY, 3, 24, 31 JULY 1970
COURT OF APPEAL, CIVIL DIVISION
LORD DENNING MR, PHILLIMORE AND CAIRNS LJJ
26, 27, 28 OCTOBER 1970
Shipping – Bill of lading – Incorporation of clauses – Incorporation of terms of charterparty – General words of incorporation – Test of incorporation – Arbitration clause – Arbitration clause referring to all disputes ‘under this contract’ – Arbitration clause not directly germane to subject-matter of bill of lading.
The shipowners’ vessel was let out under a voyage charterparty in Centrocon form to buyers of a cargo of maize for the purpose of loading the cargo on the River Plate and carrying it to Mediterranean ports. Clause 39 of the charterparty provided that, ‘All disputes from time to time arising out of this contract’ should be referred to arbitration in London, and that any claim must be made within three months of final discharge. The cargo having been shipped on board the vessel by the shippers, on 13 April 1963 the master, on behalf of the shipowners, signed and issued to the shippers four bills of lading covering the cargo. Each bill was in the form required by the Centrocon charterparty, and stated that ‘all the terms, conditions and exceptions of which Charter Party, including the negligence clause, are incorporated herewith’. The buyers paid for the maize and took up the bills of lading; they then sold part of the cargo to a French company and endorsed some of the bills to them. On discharge of the cargo it was alleged that much of it was in a bad condition and, within three months of the final discharge, the buyers, as charterers, and the French company, as holders of bills of lading, claimed arbitration. The arbitration was not proceeded with and, in 1968, the owners of the cargo of maize (ie the shippers, the charterers, the French company and an Italian company who had taken delivery as agents for the charterers) brought an action in rem against the shipowners for damages for breach of contract or duty in the loading, handling, discharge and carriage of the cargo. The shipowners applied for a stay of the action on the ground that the dispute ought to have been submitted to arbitration.
Held – A clause in a charterparty which was directly germane to the subject-matter of the bill of lading (ie to the shipment, carriage and delivery of goods) could and should be incorporated into the bill of lading contract by general words in such contract, even though it might involve a manipulation of the words to fit the bill of lading exactly, but if the charterparty clause was not thus directly germane, it should not be incorporated into the bill of lading unless incorporation was done explicitly by the terms of the bill of lading or by the charterparty; applying that test, the arbitration clause (cl 39) in the charterparty was not directly germane to the shipment, carriage and delivery of goods and was not, therefore, incorporated into the bills of lading by the general words of incorporation in the bills; neither was the clause expressly incorporated into the bills of lading because the words in cl 39 ‘any disputes under this contract’ meant in their context disputes under ‘this charterparty contract’ and did not include the bill of lading contract; nor were the words of the charterparty so explicit as to bring in disputes under the bills of lading; accordingly,
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the cargo owners were not obliged to go to arbitration and their action should not be stayed (see p 406 a to c e and f, and p 407 j to p 408 a and d, post).
The Njegos [1935] All ER Rep 863 followed.
Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 and The Merak [1965] 1 All ER 230 applied.
Rule in Hamilton & Co v Mackie & Sons (1889) 5 TLR 677 considered.
Per Curiam. A course of practice [ie that upheld in The Njegos ([1935] All ER Rep 863, [1936] P 90)], which had not been challenged for some 56 years [ie since the adoption of the Centrocon form of bill of lading] should not be upset, for once a court had put a construction on commercial documents in standard form, commercial men acted on it and it should be followed in all subsequent cases (see p 405 d, and p 406 h to p 407 a and g, post).
Notes
For incorporation of an arbitration agreement, see 2 Halsbury’s Laws (3rd Edn) 4, para 7, and 35 ibid 359–361, paras 514, 515, and for cases on the subject, see 2 Digest (Repl) 442, 443, 152–158.
Cases referred to in judgment
Anglo-Saxon Petroleum Co Ltd v Adamastos Shipping Co Ltd [1957] 1 All ER 673, [1957] 2 QB 233, [1957] 2 WLR 509, [1957] Lloyd’s Rep 79; rvsd CA [1957] 2 All ER 311, [1957] 2 QB at 255, [1957] 2 WLR 968, [1957] 1 Lloyd’s Rep 271; rvsd HL sub nom Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1958] 1 All ER 725 [1959] AC 133, [1958] 2 WLR 688, [1958] Lloyd’s Rep 73, 41 Digest (Repl) 315, 1198.
Atlantic Shipping and Trading Co Ltd v Louis Dreyfus & Co [1922] 2 AC 250, [1922] All ER Rep 559, 91 LJKB 513, 127 LT 411, 15 Asp MLC 566, 2 Digest (Repl) 450, 185.
Andreas Vergottis v Robinson David & Co (1928) 31 Lloyd LR 23.
Hamilton & Co v Mackie & Sons (1889) 5 TLR 677, 2 Digest (Repl) 442, 152.
Merak, The, T B & S Batchelor & Co Ltd (Owners of Cargo on the Merak) v SS Merak (Owners) [1965] 1 All ER 230, [1965] P 223, [1965] 2 WLR 250, [1964] 2 Lloyd’s Rep 527, Digest (Cont Vol B) 25, 156a.
Njegos, The [1936] P 90, [1935] All ER Rep 863, 105 LJP 49, 155 LT 109, 18 Asp MLC 609, 2 Digest (Repl) 443, 156.
Phonizien, The [1966] 1 Lloyd’s Rep 150.
Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1, 12 Asp MLC 23; affg sub nom The Portsmouth [1911] P 54, 2 Digest (Repl) 442, 155.
Cases also cited
Aktieselskabet Ocean v Harding (B) & Sons Ltd [1928] 2 KB 371.
Dunlop & Son v Balfour Williamson & Co [1892] 1 QB 507.
Motion
This was an application by way of motion by Asimarfield Shipping Corporation, the defendant shipowners in an action in rem against their motor vessel Annefield, for an order that all further proceedings in that action brought against them by the plaintiffs, La Plata Cereal Co SA of Buenos Aires, André & Cie SA of Lausanne, Comptoir Commercial André & Cie of Marseilles and Sorveglianza of Rome, the owners of cargo lately laden on board the Annefield, for damages for breach of contract and/or duty as carriers in and about the loading, handling, custody, care and discharge of the plaintiffs’ cargo and carriage thereof on board the Annefield, should be stayed pursuant to s 4 of the Arbitration Act 1950, and/or that the action should be stayed and/or the writ and statement of claim be struck out on the ground that the claim was barred by effluxion of time pursuant to s 41 of the Supreme Court of Judicature (Consolidation) Act 1925, and/or RSC Ord 18, r 19, and/or the inherent jurisdiction of the court. The facts are set out in the judgment.
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J S Hobhouse and M Dean for the plaintiff cargo owners.
Anthony Evans for the defendant shipowners.
Cur adv vult
31 July 1970. The following judgment was delivered.
BRANDON J read the following judgment. The court has before it an application by the defendants in a cargo damage action to stay or strike out the proceedings. The action is brought in rem against the motor vessel Annefield. The plaintiffs are described as the owners of the cargo lately laden on board the ship or vessel Annefield. They consist of four parties: first, La Plata Cereal Co SA of Buenos Aires, whom I shall call ‘the shippers’; second, André & Cie SA of Lausanne, whom I shall call ‘Swiss André’; third, Comptoir Commercial André & Cie of Marseilles, whom I shall call ‘French André’, and, fourth, Sorveglianza of Rome. The defendants are described as the owners of the ship or vessel Annefield. They are a Liberian company, Asimarfield Shipping Corpn, whom I shall call ‘the defendants’ or ‘the shipowners’ as the context requires. The claim endorsed on the writ is for:
‘… damages for breach of contract and/or duty in and about the loading, handling, custody, care and discharge of the Plaintiffs’ cargo and the carriage thereof on board the Defendants’ ship or vessel “Annefield” in the year 1963.’
It is the defendants’ case that the cargo concerned was carried under bills of lading containing, by incorporation, an arbitration clause providing for arbitration of disputes in London and for all claims to be treated as waived or barred unless the claimants’ arbitrator should be appointed within three months of final discharge. On the basis of that case, the defendants ask, by their notice of motion dated 5 March 1970, for the following relief:
‘For an order, (1) That all further proceeding in this Action be stayed, pursuant to section 4 of the Arbitration Act, 1950, and/or (2) that the action be stayed and/or the Writ and Statement of Claim herein be struck out on the ground that the claim is barred by effluxion of time pursuant to section 41 of the Judicature Act, 1925, and/or Order 18 Rule 19 of the Rules of the Supreme Court and/or the inherent jurisdiction of the Court … ’
It is the plaintiffs’ case that the bills of lading did not incorporate the arbitration clause concerned. Alternatively, if they did, that the court should, on the facts of the case, exercise its discretion by refusing a stay. As to the alternative application to stay or strike out, the plaintiffs say that the defence of time bar raises arguable questions of fact and law and cannot be determined on motion.
The facts with regard to the voyage are these. By a contract of sale made at some time prior to April 1963, Swiss André agreed to buy from the shippers a quantity of maize, to be shipped from the Argentine to Europe. It is said in the evidence that the contract was on c i f terms, but I have not seen the contractual documents and make no finding on that point. By a charterparty made in London on 1 March 1963, Swiss André voyage chartered the Annefield from Oretea SpA of Italy to carry the maize so bought. Oretea SpA, whom I shall call ‘Oretea’, are a company separate from the shipowners, but associated with them. They were at all material times disponent owners of the Annefield under a time charter made with the shipowners. This contract is not before me either, and I do not know its date or terms. In April and May 1963, pursuant to the contract of sale mentioned, the shippers shipped on board the Annefield at Villa Constitución and Buenos Aires a full cargo of maize for carriage to Marseilles and Genoa. Bills of lading were issued in respect of this cargo signed by the master of the Annefield on behalf of the shipowners and providing for delivery to shippers or their order. These were endorsed and transferred to Swiss André as buyers. By a contract of sub-sale Swiss André resold part of the maize to French André. Again, it is said in evidence that this contract was on cif
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terms, but again, I have not seen the contractual documents, and I make no finding about it. Pursuant to the contract of resale, some of the bills of lading were further endorsed and transferred to French André.
The Annefield arrived at Marseilles on or about 28 May 1963 and began discharge there. It soon became apparent that a large part of the cargo was damaged. Part of it was delivered to French André at Marseilles. Then on or about 30 May 1963, on the advice of surveyors, the Annefield was moved to Genoa to complete discharge there. This she did on or about 5 July 1963. The cargo discharged at Genoa was delivered to Sorveglianza as agents for Swiss André. While the matter is complicated by the fact that a parcel covered by one of the bills of lading was split so that two delivery orders had to be issued in respect of it, the cargo was in principle delivered to French André at Marseilles, and to Sorveglianza at Genoa, against presentation of the relevant bills of lading.
The voyage charterparty between Oretea as disponent owners and Swiss André as charterers, which I shall call from now on simply ‘the charterparty’, was made on the well-known Centrocon form. Clause 21 provided: ‘The Master to sign Bills of Lading in the form endorsed hereon … ’ Clause 39 provided:
‘All disputes from time to time arising out of this contract shall, unless the parties agree forthwith on a single Arbitrator, be referred to the final arbitrament of two Arbitrators carrying on business in London who shall be Members of the Baltic and engaged in the Shipping and/or Grain Trades, one to be appointed by each of the parties, with powers to such Arbitrators to appoint an Umpire. Any claim must be made in writing and Claimants’ Arbitrator appointed within three months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred … ’
The bills of lading to which I referred earlier were all in the same form, which was the form endorsed on the charterparty and referred to in cl 21, which I have read. They provided for the delivery of the goods to shippers’ order on payment of freight in accordance with the charterparty dated 1 March 1963, and, following that provision, came the words:
‘… all the terms, conditions and exceptions of which Charter Party, including the negligence clause, are incorporated herewith.’
Following the completion of the discharge of the cargo at Genoa, various letters were written notifying claims and appointing arbitrators. On 10 August 1963, Sorveglianza wrote to Gearnavi, who appear to have been the shipowners’ Genoa agents, and that letter, after setting out details of the damage, reads:
‘For and on behalf of our principals, loaders and/or actual receivers of the goods, we have to confirm our fullest possible reservations and protests, already made in our letter of 27/6 last, and we hold you responsible for all the damage, consequences and expenses. Please note also that the receivers of the cargo ask for arbitration vis-a-vis ourselves, and the owners respectively, and they appoint as their arbitrator Mr. R G. LYNN. Please let us know the name of the arbitrator you have shown.’
It is not clear whether Sorveglianza were regarding the dispute and arbitration as being under the charterparty or the bills of lading. On 12 August 1963, Swiss André wrote to Oretea holding them liable for the cargo damage and nominating Mr R G Lynn of London as arbitrator. The terms of the letter make it clear that Swiss André were regarding the dispute and arbitration as being under the charterparty. On 19 August 1963, French André wrote to Cie Charles le Borgne, of Marseilles, who were surveyors appointed for the shipowners at that port. In translation paras 2 and 3 of that letter read:
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‘We consider the vessel to be responsible for the damage, and, in accordance with the terms of the Charter Party, we, in our capacity as holders of the Bills of Lading for the above-mentioned tonnages, declare arbitration on Centrocon Conditions.
‘To this end and for all purposes, and without prejudice to action initiated before the Tribunal of Commerce, Marseilles, we appoint Mr. R. G. Lynn, London, to be our Arbitrator to defend our interests.’
While the matter is not absolutely clear, the letter is consistent with French André regarding the dispute and arbitration as being under the bills of lading incorporating the terms of the charterparty. On 20 August 1963, Oretea acknowledged Swiss André’s letter of 12 August 1963 and stated that they had passed it to the Standard Steamship Owners P & I association in London, with whom the Annefield was insured. Both Oretea and the shipowners were members of the association, and it is not clear whether the claim was passed to the association as insurers of the former or the latter, or both. On 23 August 1963, Gearnavi wrote to Swiss André apparently in answer to another letter of 12 August 1963, in the same terms as the letter to Oretea. They denied liability of the ship and stated that the matter was under investigation by their P & I Club. On 27 August 1963, Gearnavi wrote to Swiss André nominating Mr G F Johnson as arbitrator. It appears that they, like Swiss André were regarding the dispute and arbitration as being under the charterparty. On 3 September 1963, Messrs W K Webster & Co, whom I shall call ‘Websters’, acting as agents for the cargo underwriters, wrote to Oretea giving notice of their interest and appointing Commander R W Sumpton as arbitrator. They sent a copy of their letter to the shipowners for information. While the matter is again not absolutely clear, it seems that Websters were regarding the dispute and arbitration as being under the charterparty.
On 24 September 1963, the Standard Steamship Owners P & I Association, which I shall from now on call ‘the Club’, wrote to Websters saying that Websters’ letter of 3 September 1963 to Oretea, had been passed to them. Then, after referring to cl 39 of the charterparty, they queried the nomination of Commander Sumpton as arbitrator for cargo interests in view of the earlier appointment of Mr Lynn. On 4 October 1963, Websters wrote to Charles Taylor & Co, the Club’s managers, whom I shall call ‘Taylors’, saying, in effect, that the nomination of Commander Sumpton was an error due to ignorance of Mr Lynn’s earlier appointment. The second paragraph of that letter reads:
‘Unfortunately we are not yet able to forward the supporting documents to you but we shall of course send them to you as soon as they are to hand.’
Following the notification of the claims and the appointment of arbitrators to which I have referred, further discussion of the claims was left between Websters, for cargo interests and Taylors, for ship interests. Correspondence between these two relating to the claims continued inconclusively for over three years, from May 1964 to August 1967. There was also one meeting between representatives of the two firms, on 25 June 1965. [His Lordship proceeded to consider so much of the correspondence between the two firms and their solicitors as was relevant to the question whether the claims should be litigated or arbitrated and to the extensions of time in respect of them. Having referred to the dates on which the writ had been issued and subsequent steps in the action had taken place, he continued:]
I propose to deal first with the application for a stay under s 4(1) of the Arbitration Act 1950, and the first question which arises on that application is a question of law, whether the arbitration clause in the charterparty was incorporated into the bills of lading so as to make it applicable to disputes under the bills of lading. I was referred
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to a number of authorities on that question; these included Hamilton & Co v Mackie & Sons, Thomas & Co Ltd v Portsea Steamship Co Ltd, The Njegos, The Merak, and The Phonizien. In all these cases the bill of lading contained general words of incorporation such as ‘all conditions’, or ‘all terms and conditions as per charterparty’. The terms of the arbitration clause in the charterparty, however, varied. In Hamilton v Mackie the arbitration clause referred to disputes under the charterparty. It was held by the Court of Appeal not to be incorporated. In Thomas v Portsea the arbitration clause referred to disputes arising out of the conditions of the charterparty. It was held by the House of Lords, affirming the decision of the Court of Appeal, that the clause was not incorporated. In The Njegos the bill of lading and the charterparty were in the same terms as in the present case. It was held by Sir Boyd Merriman P, on the authority of Thomas v Portsea, that the clause was not incorporated. In The Merak the arbitration clause referred to disputes arising out of the charterparty or any bill of lading issued under it, and the bill of lading concerned was issued under the charterparty. It was held by the Court of Appeal that the arbitration clause was incorporated. In The Phonizien the arbitration clause was incorporated. In was held by McNair J that the clause was not incorporated.
Those cases seem to me to establish the following propositions. First, in order to decide whether a clause under a bill of lading incorporates an arbitration clause in a charterparty it is necessary to look at both the precise words in the bill of lading alleged to do the incorporating, and also the precise terms of the arbitration clause in the charterparty alleged to be incorporated. Secondly, it is not necessary, in order to effect incorporation, that the incorporating clause should refer expressly to the arbitration clause. General words may suffice, depending on the terms of the latter clause. Thirdly, when the arbitration clause is, by its terms, applicable only to disputes under the charterparty, general words will not incorporate it into the bill of lading so as to make it applicable to disputes under the contract contained in, or evidenced by, that document. Fourthly, where the arbitration clause by its terms applies both to disputes under the charterparty and to disputes under the bill of lading, general words of incorporation will bring the clause into the bill of lading so as to make it applicable to disputes under that document.
The difficulty in the present case is that the arbitration clause in the charterparty does not fall clearly into either of the two categories mentioned. It refers to ‘All disputes from time to time arising out of this contract’. In the context of the charterparty, the expression ‘this contract’ clearly means the charterparty. In the context of the bill of lading, if the clause is read into that document and construed without regard to its origins, the expression equally clearly means the bill of lading. Counsel for the defendants, whose argument on this part of the case was most able and persuasive, contended that the correct approach to the problem was indeed to do just that, that is to say, to read the arbitration clause into the bill of lading and to construe it in its new context there without regard to its origins. In support of his argument that this was the proper method of construction to adopt, he relied on a formidable array of authority. This included Lord Esher MR in Hamilton & Co v Mackie & Sons, Lord Gorell and Lord Robson respectively, in Thomas v Portsea ([1912] AC at 9, 10) Devlin J in Anglo-Saxon Petroleum Co Ltd v Adamastos Shipping Co Ltd ([1957] 1 All ER 673 at 678, [1957] 2 QB 233 at 250), Viscount Simonds
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in the same case in the House of Lords ([1958] 1 All ER 725 at 731, 732, [1959] AC 133 at 154, 155), Sellers LJ in The Merak ([1965] 1 All ER at 233, [1965] P at 250), and McNair J in The Phonizien ([1966] 1 Lloyd’s Rep at 154). Counsel for the plaintiffs argued as follows. First, an arbitration clause is not directly germane to the shipment, carriage, or the delivery of goods. Secondly, an arbitration clause in a charterparty can only be incorporated by clear, express words showing an intention to do so. Thirdly, such words may be found either in the incorporating clause or in the incorporated clause. Fourthly, there were no such words in either clause in this case.
The argument of counsel for the defendants is, to me, at any rate, logically attractive, but the difficulty is to reconcile it with certain of the authorities already referred to. These are as follows. First, The Njegos. That case concerned the same charterparty and bill of lading as in the present case. It was held that the arbitration clause was not incorporated. The decision has stood for over 30 years, and it has been acted on by the commercial community throughout that period. Secondly, The Merak. All three judgments of the Court of Appeal were based on the fact that the arbitration clause in the charterparty expressly referred to disputes under the bill of lading as well as under the charterparty. Sellers LJ said this ([1965] 1 All ER at 233, [1965] P at 249, 250):
‘In my opinion if “including cl. 30” is struck out the remaining clause is quite adequate and effective to make cl. 32, the arbitration clause, in the charterparty “deemed to be incorporated” into the bill of lading. Amongst the various clauses in the charterparty which can be regarded as relevant to the bill of lading is cl. 32, which in terms stipulates for arbitration of “any dispute arising out of this charter or any bill of lading issued thereunder … ” In this respect it is in contrast to Thomas & Co., Ltd. v. Portsea Steamship Co., Ltd., on which so much reliance was placed by the plaintiffs. In that case no mention was made of the bills of lading issued under the charterparty and the inclusion of the arbitration clause in them would have been by implication. No such argument can arise here and I do not think that Thomas v. Portsea can be regarded as an authority that a clause to be incorporated must relate to shipment, carriage and delivery and cannot be extended further and cannot provide for arbitration.’
Davies LJ said ([1965] 1 All ER at 236, [1965] P at 254):
‘Counsel for the plaintiffs, however, further submits that the Thomas case establishes that general words of incorporation can in any event incorporate into a bill of lading only those terms of a charterparty which deal with the shipment, carriage or delivery of the goods and that an arbitration clause is not such a term. It is difficult, however, to see that the Thomas case, when considered on its facts, does establish such a proposition or that parties to a bill of lading, if they use wide enough words of incorporation, cannot, if they are so minded, agree to incorporate into the bill an arbitration clause which expressly applies to disputes arising out of the bill, that is to say, disputes arising out of the shipment, carriage or delivery of the goods.’
Russell LJ said ([1965] 1 All ER at 239, [1965] P at 259, 260):
‘… I see no reason why, as a matter of construction, cl. 32 is not to be regarded as incorporated. The language is of the most ample width possible to imagine,
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and the arbitration cl. 32 expressly refers to disputes arising out of “any bill of lading issued hereunder“. I see no conflict with the decision in Thomas & Co., Ltd. v. Portsea Steamship Co., Ltd. where the arbitration clause referred only to disputes arising under the charterparty. Stress was laid on the opinion of LORD GORELL in that case, as indicating that the true reason for his decision was that arbitration is not directly germane to that which concerns a bill of lading, namely, shipment, carriage and delivery, and that the absence of any reference to bills of lading in the arbitration clause was only a second and confirmatory reason. I observe that the opinions were not reserved, and that the other members of the House made no comment on that of LORD GORELL. I think that a true view of that case is that it shows that clauses which are directly germane to shipment, carriage and delivery may be incorporated by general words though the fact that they are found in a charterparty may involve a degree of verbal manipulation to fit exactly a bill of lading: but that where there is a clause whose subject-matter is not thus directly germane, such as an arbitration clause, it is not permissible to construe general words of incorporation as extending to a clause which does not in terms relate to a bill of lading.’
It will be seen that Russell LJ went further than the other two members of the court. It is right to observe that this was a reserved judgment of the Court of Appeal. It appears that The Njegos was mentioned in the course of the argument, but there is no reference to it in the judgments of any of the three members of the Court of Appeal, either favourable or unfavourable.
Thirdly, The Phonizien. Since the arbitration clause referred to disputes under the charterparty the case was clearly covered by Thomas v Portsea and The Merak. There was therefore no question raised as to the correctness of the decision in The Njegos. McNair J, however, said ([1966] 1 Lloyd’s Rep at 156):
‘In my judgment, the reasoning in Hamilton v Mackie and Thomas v Portsea, which was followed in The Njegos, where the shippers were also the charterers, though the present point though open was not apparently taken, concludes the present case in favour of the plaintiffs.’
The inference is, I think, that McNair J regarded the decision in The Njegos as unaffected by the decision in The Merak.
Counsel for the plaintiffs, as might be expected, relied strongly on these authorities. In particular, he stressed the undesirability of departing from long-established decisions in commercial matters. In support of this point he referred me to the observations of Lord Dunedin in Atlantic Shipping and Trading Co Ltd v Louis Dreyfus & Co ([1922] 2 AC 250 at 257, [1922] All ER Rep 559 at 662), a case to which I shall have to advert in another connection later.
Counsel for the defendants urged me to disregard these authorities. He did so, as I understood him, on two main grounds. First, that when examined, the authorities were not, for one reason or another, convincing or weighty. Second, that they could not stand with the principle of construction for which he contended and which was supported as a principle by even stronger authority. As regards his second point, I have already mentioned the authorities on which he relied. As regards the first point, counsel for the defendants minimised the effect of the authorities relied on by counsel for the plaintiffs in this way. First, as to The Njegos, he said that it was decided without full argument on the basis, then generally accepted, that Thomas v Portsea had decided that general words in a bill of lading could never
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incorporate an arbitration clause in a charterparty whatever the terms of the latter clause might be. That was the interpretation of Thomas v Portsea put forward by counsel for the appellants in The Merak and unanimously rejected by the Court of Appeal. In those circumstances, he said, the authority of The Nejegos which was, in any case, only a decision at first instance, was greatly weakened. Secondly, as to The Merak, he said that it was not necessary for the Court of Appeal to decide more than that general words in the bill of lading were sufficient to incorporate an arbitration clause in a charterparty which referred expressly to disputes under bills of lading as well as under the charterparty. It was not necessary for the Court of Appeal to decide that, unless the arbitration clause in the charterparty expressly referred to bill of lading disputes, general words in the bill of lading could not incorporate it. In that situation, he said that two of the judges of the Court of Appeal, Sellers and Davies LJJ, decided no more than was necessary, leaving open, by implication at least, the question arising in the present case. The third member of the court, Russell LJ, admittedly, went further, saying that in his view the effect of Thomas v Portsea was that general words in a bill of lading could not incorporate an arbitration clause unless that clause referred expressly to disputes under the bill of lading; but, said counsel for the defendants, insofar as Russell LJ did do that, his observations were obiter and not supported by the other two members of the court. Thirdly, as to The Phonizien, counsel for the defendants said that the point could not and did not arise for decision because the arbitration clause referred only to disputes under the charterparty. In those circumstances, an almost casual reference by McNair J to The Njegos was not significant.
In my view, there is considerable force in those arguments by counsel for the defendants and I have been impressed by them. It seems to me, however, that if it is to be said that The Njegos, which has stood for over 30 years, was wrongly decided, that Russell LJ was in error in what he said in a considered judgment in The Merak, and that McNair J, in The Phonizien, failed to appreciate that The Njegos, since The Merak, was no longer good law, it should be said by a higher court than this one. I regard the three authorities, especially the first two, as being of considerable persuasive force and I do not feel able to disregard them lightly. In the end, it seems to me that one has to ask oneself what an ordinary businessman, having both documents before him, would think with regard to the applicability of the arbitration clause in the charterparty to bill of lading disputes. This was the approach of Sellers LJ, a judge with extensive experience of commercial cases, in The Merak ([1965] 1 All ER at 233, [1965] P at 250). It seems to me that the hypothetical businessman would, or might, be left in doubt on the matter, and it seems to me that the reason why he would, or might, be left in doubt on the matter is that no specific words to show the intention clearly are used. There is very strong authority to the effect that specific words are needed. See Thomas v Portsea ([1912] AC at 6), per Lord Loreburn LC and Lord Atkinson. The same case also shows that where, through the absence of specific words, the intention is left doubtful, the court should hold that the clause is not incorporated: see per Lord Gorell ([1912] AC at 9) and Lord Robson ([1912] AC at 11). See also the judgment of Vaughan Williams LJ in the Court of Appeal in that case, reported as The Portsmouth ([1911] P 54 at 63), when he said that the words used were, at the least, ambiguous. While The Njegos is not binding on me, it is a strong, persuasive authority and its correctness is supported by the observations of Russell LJ in The Merak. In these circumstances, I feel that I should follow it, unless I am convinced that it is wrong. For the reasons which I have given, I am not so convinced. On the contrary, although I recognise the matter is far from easy and much can be said on
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both sides, I think that it is probably right. It follows, in my judgment, that the arbitration clause in this case is not incorporated and that the defendants’ application for a stay under it fails on that ground.
If I am right in my view that the arbitration clause in the charterparty is not incorporated into the bills of lading, s 4(1) of the Arbitration Act 1950 does not apply, and the question whether the court should exercise its discretion by granting or refusing a stay does not arise. Since I may well be wrong, however, in my view on that point, I shall go on to consider how I should exercise my discretion if I had to do so. For this purpose it is necessary to assume that the whole of cl 39 of the charterparty, including the part prescribing a time limit of three months for appointing the claimants’ arbitrator, applies.
[His Lordship, having reviewed the facts concluded that, even if he were of a different opinion on the question of the incorporation of the arbitration clause, he would nevertheless, in the exercise of his discretion under s 4(1) of the Arbitration Act 1950, refuse a stay of the action on account of the attitude adopted by the ship interests in the correspondence referred to earlier, that litigation and not arbitration was appropriate and the effect of that attitude on the cargo interests. He then considered the alternative application made by the defendants in para 2 of the notice of motion and concluded that, even if he were of a different opinion in relation to the incorporation of the arbitration clause, the matter in relation to the three months’ time bar was not one which could be dealt with summarily. The defence based on it would raise a number of issues which could only be decided by a trial. He concluded:] For the reasons which I have given, this motion fails and must be dismissed.
Motion dismissed.
Interlocutory appeal
This was an appeal by the defendants, the owners of the ship Annefield, from the judgment of Brandon J, given on 31 July 1970, dismissing the shipowners’ motion that all further proceedings in the action brought against them by the plaintiffs, the owners of cargo lately laden on board the Annefield, for damages for breach of contract or duty as carriers in and about the loading, handling, custody, care and discharge of the cargo owners’ cargo and the carriage thereof on board the Annefield, should be stayed pursuant to s 4 of the Arbitration Act 1950, and/or that the action should be stayed and/or the writ and statement of claim be struck out on the ground that the claim was barred by effluxion of time pursuant to s 41 of the Supreme Court of Judicature (Consolidation) Act 1925, and/or RSC Ord 18, r 19, and/or the inherent jurisdiction of the court. The facts are set out in the judgment of Lord Denning MR.
Anthony Evans and A F B Clark for the defendant shipowners.
J S Hobhouse and M Dean for the plaintiff cargo owners
28 October 1970. The following judgments were delivered.
LORD DENNING MR. Early in 1963 a Swiss company called André & Cie SA—I will call them ‘Swiss André’—arranged to buy a cargo of maize from an Argentine grain company called La Plata Cereal Co SA for shipment from the Argentine to Europe. In order to fulfil this purchase, Swiss André chartered a ship to go to the Argentine and there load the maize. It was the ship Annefield. She was owned by a Liberian company, called Asimarfield Shipping Corpn. She had been let on a timecharter to an Italian company, called Oretea SpA. The Italian company let her on a voyage charter to Swiss André. This voyage charter was contained in a charterparty in the Centrocon form dated 1 March 1963. By it the Italian company as disponent owners agreed that the Annefield should sail to the River Plate and load there a cargo in bulk and proceed to a Mediterranean port. The charterparty contained an arbitration clause, cl 39, which I must read in full:
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‘All disputes from time to time arising out of this contract shall, unless the parties agree forthwith on a single Arbitrator be referred to the final arbitrament of two Arbitrators carrying on business in London who shall be Members of the Baltic and engaged in the Shipping and/or Grain Trades, one to be appointed by each of the parties, with power to such Arbitrators to appoint an Umpire. Any claim must be made in writing and Claimant’s Arbitrator appointed within three months of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred. No award shall be questioned or invalidated on the ground that any of the Arbitrators is not qualified as above, unless objection to his acting be taken before the award is made.’
The Annefield duly went to Buenos Aires. The La Plata Co shipped on board a cargo of maize. On 13 April 1963, the master, on behalf of the shipowners (who were the Liberian company) signed and issued four bills of lading covering the cargo. Most of it was maize in bulk, although there was some maize in bags. Each bill of lading was in the form required by the Centrocon charter. The material words are these:
‘SHIPPED … by La Plata Cereal Co. S.A. on board the Steamship “Annefield” … a quantity of … maize in bulk … to be delivered … at the Port of discharge … unto order or to his or their Assigns he or they paying freight for the said Goods in accordance with the Charter Party dated in London 1.3.63. all the terms, conditions and exceptions of which Charter Party, including the negligence clause, are incorporated herewith.’
The shippers, the La Plata Co, took the bills to Swiss André, who paid for the maize and took up the bills. Swiss André sold part of the cargo to an associated company of theirs which was registered in France (which I will call French André). Swiss André accordingly endorsed some of the bills to French André.
On 28 May 1963, the Annefield arrived at Marseilles. She discharged part of her cargo there and it was delivered to French André. But a large part of it was said to be in a bad condition. On 30 May 1963, the Annefield moved to Genoa. She there discharged the rest of her cargo, which was also said to be in a bad condition. It was there delivered to an Italian company, Sorveglianza of Rome, who were acting as agents for Swiss André.
Within three months of the final discharge, Swiss André, as charterers, claimed arbitration. French André, as holders of bills of lading, also claimed arbitration. For some reason or other, which I need not go into, the arbitration was not proceeded with. On 18 June 1968—that, is, five years after the cargo was shipped—the cargo owners brought an action in rem against the shipowners. The plaintiffs were the La Plata Co, the original shippers; the charterers Swiss André; and also the bill of lading holders French André; and the Italian company, Sorveglianza of Rome.
A year later, on 16 June 1969, the writ was served. Appearance was duly entered. On 9 September 1969, the statement of claim was delivered. On 27 January 1970, the shipowners took out a summons to stay the proceedings in the action on the ground that this dispute ought to have been submitted to arbitration. It was covered, they said, by the arbitration clause in the charterparty which had been incorporated into the bills of lading.
Now, there has been obviously a great deal of delay; seven and a half years have passed since this maize was discharged. That is much to be regretted. But I will not go into the rights and wrongs of it. The only point that we have to consider today is a point of law. The question is whether the arbitration clause which is set out in the charterparty (cl 39) is incorporated into the contract evidenced by the bills of lading by reason of the incorporation clause. If the arbitration clause is incorporated, then it means that the action ought to be stayed, unless the court in its discretion allows it to go on. There is the point about three months’ time limita, which may also be incorporated.
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This very point (on this very Centrocon form and bill of lading) came up for decision in 1936 before Sir Boyd Merriman P. It was in the The Njegos. It arose in relation to the proper law of the contract. In the course of the discussion, it transpired that these clauses in the charterparty and bill of lading had been in existence since 1914; and it had always been held that the arbitration clause was not incorporated in the bill of lading. Sir Boyd Merriman P said ([1936] P at 100, [1935] All ER Rep at 867):
‘Both [counsel] agreed, and their experience in these matters is unrivalled, that since the adoption of this form of bill of lading in 1914, attempts made in chambers, under the bill of lading, to enforce the arbitration clause in the charterparty had uniformly failed, and that no one had been hardy enough to test the matter in Court.’
Sir Boyd Merriman P followed that practice. He held that the arbitration clause was not incorporated into the bill of lading.
That case has not been challenged from that time to this. So we have a course of practice from 1914 to 1970, some 56 years. After this time, it would require a very strong case to upset the practice. Once a court has put a construction on commercial documents in standard form, commercial men act on it. It should be followed in all subsequent cases. If the business community is not satisfied with the decision, they should alter the standard form. In this very case the Centrocon form has, since 1936, been amended in other respects from time to time. But no alteration has been made in this respect. So the construction in The Njegos is of special weight. But counsel for the shipowners submits to us that The Njegos should no longer be considered as authority. He says that it cannot stand in the light of The Merak.
Counsel for the shipowners started with the rule laid down by Lord Esher MR in 1889 in Hamilton & Co v Mackie & Sons. The bill of lading had the words: ‘All other terms and conditions as per charterparty.' The charterparty had the condition: ‘All disputes under this charter shall be referred to arbitration’. Lord Esher MR said ((1889) 5 TLR at 677):
‘… the conditions of the charterparty must be read verbatim into the bill of lading as though they were there printed in extenso. Then if it was found that any of the conditions of the charterparty on being so read were inconsistent with the bill of lading, they were insensible, and must be disregarded.’
Applying that rule in that case the court then held that the arbitration clause referred only to disputes ‘under this charter’ and did not include disputes under the bill of lading.
Counsel for the shipowners says that, in accordance with Lord Esher MR’s rule, we should read cl 39 into this bill of lading as if it were set out verbatim. It then reads, he says, that: ‘all disputes arising from time to time out of this contract’ shall be referred to arbitration; and ‘this contract’ would then be the contract evidenced by the bill of lading. In other words, he says that the arbitration clause must be read in its bill of lading context.
I think that counsel for the shipowners’ argument fails. Lord Esher MR was not laying down a rule of interpretation of universal application. It was a useful test in that case. That is all. In this case we should read the documents together. I would take the clauses in the charterparty and apply them to the bill of lading insofar as they are reasonably applicable to it; and I would reject the others. I would follow
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the test laid down by Russell LJ in The Merak ([1965] 1 All ER at 239, [1965] P at 260), but I would adapt it slightly. I would say that a clause which is directly germane to the subject-matter of the bill of lading (ie to the shipment, carriage and delivery of goods) can and should be incorporated into the bill of lading contract, even though it may involve a degree of manipulation of the words in order to fit exactly the bill of lading. But, if the clause is one which is not thus directly germane, it should not be incorporated into the bill of lading contract unless it is done explicitly in clear words either in the bill of lading or in the charterparty.
Applying this test, it is clear that an arbitration clause is not directly germane to the shipment, carriage and delivery of goods. That appears from the decision of the House of Lords in Thomas & Co Ltd v Portsea Steamship Co Ltd. It is, therefore, not incorporated by general words in the bill of lading. If it is to be incorporated, it must be either by express words in the bill of lading itself (eg if there were added in this case: ‘including the arbitration clause as well as the negligence clause’), or by express words in the charterparty itself (as indeed happened in The Merak where the words were: ‘Any dispute arising out of this charter or any bill of lading issued hereunder’). If it is desired to bring in an arbitration clause, it must be done explicitly in one document or the other. As Lord Loreburn LC said in Thomas & Co Ltd v Portsea Steamship Co Ltd ([1912] AC at 6):
‘… if it is desired to put upon the holders of a bill of lading an obligation to arbitrate because that obligation is stated in the charterparty, it must be done explicitly.’
In this case the words in the charterparty are ‘any disputes under this contract’. Those words, in this context, meant: ‘under this charterparty contract’. They do not include the bill of lading contract. In any case they are not so explicit as to bring in disputes under the bill of lading.
I entirely agree with the judgment of Brandon J. The appeal should be dismissed.
PHILLIMORE LJ. I too agree that the decision of the learned judge was right, and accordingly that this appeal should be dismissed. If I add a few words, it is only in deference to the ingenuity and persistence with which counsel for the shipowners has argued this appeal—and appeal which, in the face of The Njegos, I am tempted to describe as hopeless. Lord Denning MR has pointed out that The Njegos is direct authority on the words of this very charterparty, including this very arbitration clause, and on a bill of lading in identical terms with those which we have to consider here. It was a decision based on what both counsel, Sir Robert Aske KC and Mr Willink KC, two very considerable authorities in themselves, conceded had been the practice of the court for some 21 years at that time, namely 1935, when Sir Boyd Merriman P decided the matter; and it has stood unchallenged since. If authority were needed as to the undesirability in such circumstances of disturbing an existing practice, it is to the found in the sentence to which counsel for the cargo owners referred us from the opinion of Lord Dunedin in Atlantic Shipping and Trading Co Ltd v Louis Dreyfus & Co ([1922] 2 AC 250 at 257, [1922] All ER Rep 559 at 562), where he said:
‘… in these commercial cases it is, I think, of the highest importance that authority should not be disturbed, and if your Lordships find that a certain doctrine has been laid down in former cases and presumably acted on in the
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framing of other contracts you will not be disposed to alter that doctrine unless you think it is clearly wrong.’
Now counsel for the shipowners has been emboldened to put forward this argument by the decision of this court in The Merak, and I think in particular perhaps by part of the headnote, which states that ([1965] P at 224):
‘Thomas & Co., Ltd. v Portsea Steamship Co. Ltd. cannot be regarded as authority for the proposition that a clause to be incorporated by general words in a bill of lading must relate only to shipment, carriage and delivery and cannot include an arbitration clause which expressly applies to disputes arising out of the bill of lading.’
I am bound to say I do not think really that that statement is justified by the decision in that particular case. What happened in The Merak was that the parties were there using a charterparty in the Nubaltwood form which stipulated that the bills of lading should be prepared in a form endorsed on the charter and should contain the words ‘and all terms, conditions, clauses (including clause 32) … as per this charter’. Now, cl 32 was in fact the arbitration clause in the charterparty itself; and when the parties came to draw up the bill of lading a slip was made and in place of cl 32 there was a reference to cl 30, which, of course, had nothing to do with arbitrations and indeed had no possible relevance to the bills of lading. Sellers LJ would have sought simply to rectify the matter and give effect to the obvious intention of the parties by correcting the slip; but the other members of the court did not agree to that course; but they did take the view that in that particular case, although the bills of lading, as a result of the slip, did not refer to the arbitration clause, it was specifically incorporated by the words of the charterparty; in other words, it was not a question here of incorporation as a result of general words, but as a result of specific words. It was an unusual case; but, as far as I can understand, it gives really no force to the argument put before us here; nor does it in any way affect the clear authority of The Njegos.
For those reasons, in addition to those already given by Lord Denning MR, I would dismiss this appeal.
CAIRNS LJ. I agree that this appeal should be dismissed. In my view the conclusion of Brandon J on the question of whether this arbitration clause could be incorporated in the bills of lading was right, and I adopt his reasons as my own. We are, of course, in a different position from the judge in that we could, if we thought fit, overrule The Njegos. There is no decision binding on this court which is on all fours with the present case or with The Njegos. But a case which has stood unchallenged so long as The Njegos has and which was decided on consideration of a practice which had existed for many years before should not be overruled unless it is clearly wrong. I do not think it was wrong at all; I think it was right.
The fundamental argument advanced by counsel for the shipowners was that if one reads the arbitration clause, cl 39 of the charterparty, into the bill of lading, the word ‘contract’ then refers to the bill of lading contract, and the clause so read becomes sensible in the context of the bill of lading, and is therefore incorporated in the bill of lading following the rule laid down by Lord Esher MR in Hamilton & Co v Mackie & Sons and subsequently approved in other cases. I think the answer to this argument is twofold: (1) the rule which I derive from Thomas & Co Ltd v Portsea Steamship Co Ltd and The Merak, taken together, is that there must be
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incorporated in the bill of lading only such terms as are directly relevant to the shipment, carriage or discharge of the cargo or which by explicit reference, either in the bill of lading or in the charterparty, are clearly intended to be incorporated. I am not satisfied that this arbitration clause falls within either of these categories. (2) If one carries out the exercise suggested by Roche J in Andreas Vergottis v Robinson David & Co, and tentatively carries the clause into the bill of lading and then examines it, it is far from clear that the words ‘this contract’ would refer to the bill of lading contract. Admittedly if the words had been ‘this charter’, they could not be manipulated to read ‘this bill of lading’. In my view, the words ‘this contract’, derived from the charterparty but inserted in the bill of lading, would at least be ambiguous there. It is obvious that the words ‘this contract’ in the charterparty could not always after incorporation take the meaning of ‘this bill of lading contract’. For instance, if the bill of lading as well as the charterparty were in numbered paragraphs and if in the charterparty there were a reference in cl 6 to ‘clause 5 of this contract’, it would be absurd in relation to the bill of lading to interpret this as meaning cl 5 of the bill of lading contract. The rule in Hamilton v Mackie must be applied intelligently and not mechanically. Applying it intelligently in the present case, I am inclined to think that this contract after incorporation would still bear the same meaning as if the expression were ‘this charter’; but it is unnecessary to decide that, because it does not clearly mean the bill of lading contract, and that is sufficient to defeat the claim for incorporation.
Counsel for the shipowners in the course of his reply this morning conveniently summarised his argument in four propositions, which were as follows.
(1) If the bill of lading incorporated the Centrocon form, then cl 39 would govern bill of lading disputes.
(2) The same words in the same context should be given the same meaning even when the document is or may be a contract between other parties.
(3) The authorities are unanimous in holding that the clause should be construed in the bill of lading context.
(4) If cl 39 does not refer to bill of lading disputes because of its charterparty origin, this can only be because either: (i) there is some special rule of construction which applies only in those circumstances; or (ii) the rule in Hamilton v Mackie is incorrectly stated.
I am not convinced by these contentions. Taking the first point, I do not think that it is by any means a self-evident proposition that if the bill of lading had incorporated the Centrocon form, cl 39 would have governed bill of lading disputes. The Centrocon form is a form of contract—a form of charterparty contract. That being so, it does not, to my mind, make much difference whether what is said to be incorporated is the Centrocon form or the charterparty; and that really covers point 2.
As to the third point, it does not seem to me that in any of the authorities it was necessary to construe such an expression as we have in this case so as to decide whether it should be construed in the bill of lading context or in the charterparty context. The words used in those cases have been such words as ‘this charter’, or a reference expressly to the bill of lading and never, except, of course, in The Njegos was the court faced with the expression ‘this contract’ which fell for interpretation.
As to the fourth point, I think it is true to say that there is a special rule of construction which applies in these cases, a rule to be derived from Thomas v Portsea and
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The Merak. I do not regard it as being in conflict with Hamilton v Mackie as properly understood. The report in Hamilton v Mackie is a very short report of what was apparently a very short judgment, and it is to be understood, like any judgment, in the context in which it was delivered and not to be applied literally to cases where the facts are different.
For those reasons, in addition to those given by my Lords, I agree that the appeal fails.
Motion dismissed.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: William A Crump & Son (for the shipowners); Clyde & Co (for the cargo owners).
Wendy Shockett Barrister.
Re Associated Transformer Manufacturers’
Agreement (No 2)
[1971] 1 All ER 409
Categories: COMPETITION
Court: RESTRICTIVE PRACTICES COURT
Lord(s): STAMP J, MAJ GEN W E V ABRAHAM AND MR W L HEYWOOD
Hearing Date(s): 12, 13, 14, 19 OCTOBER 1970
Restrictive trade parties – Agreement – New agreement – Test whether new agreement is ‘to the like effect’ to another agreement in respect of restrictions declared to be contrary to public interest – Original agreement compelled preponderant purchaser of large transformers to pay prices dictated by suppliers – New agreement to effect bargain between preponderant customer for large transformers and manufacturers thereof as to allocation of orders and prices to be paid – Restrictive Trade Practices Act 1956, s 20(3) (b).
Restrictive trade practices – Court – Practice – Declaration – No other relief sought – Discretion.
Members of an association, including all the manufacturers of large transformers in the United Kingdom, entered into an agreement (‘the original agreement’) whereby restrictions were placed on the prices at which the parties to it would sell large transformers in the United Kingdom. The parties agreed not to tender except at a minimum price to be based on the average of the three lowest costings tabled by the parties, plus a percentage of profit considered by the association to be appropriate, less common discounts and selling factors. On 24 March 1961, the court made an order whereby it was declared that the restrictions contained in the original agreement were contrary to the public interest, and the parties undertook that they would not, without the leave of the court, (a) give effect to or enforce or purport to enforce the original agreement in respect of the restrictions which were specified; and (b) ‘enter into or make any other agreement or arrangement to which Part I [of the Restrictive Trade Practices Act 1956] applies to the like effect to the [original agreement] in respect of the said restrictions’. Subsequently, certain members of the association (‘the applicants’) sought to have the court determine that it was consistent with that undertaking for them to enter into an agreement (‘the proposed agreement’) with the Central Electricity Generating Board (CEGB), which intended
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to place 96 per cent of its orders for large transformers with them. The proposed agreement, which related only to large transformers, allocated the orders between the applicants, who had agreed to accept orders substantially in accordance with the allocations at prices to be based on the arithmetical average, as adjusted according to existing arrangements for contract price adjustment, of the most recent competitive offers made in 1969 to the CEGB by the applicants in respect of each rating and size of transformer. Provision was made for a reduction in prices of transformers sold to CEGB if the applicants sold similar transformers to other purchasers at prices below the prices ascertained in accordance with the agreement. The applicants contended that the proposed agreement was not ‘to the like effect’ to the original agreement, within the meaning of s 20(3)(b) of the 1956 Act, and that they were entitled to a declaratory judgment to this effect.
Held – (i) To determine whether the proposed agreement was to the like effect to the original agreement, the court had to look at the proposed agreement and see whether, if made effective, it would do or achieve the same things as those which the original agreement, if operative, would have done or achieved (see p 414 d, post).
(ii) Applying that test, the proposed agreement was not to the like effect to the original agreement in respect of the restrictions in the original agreement; under the original agreement a situation was achieved whereby all customers ordering large transformers were bound to buy at prices fixed in advance by reference to a formula agreed between the suppliers (including the applicants), whereas under the proposed agreement, if it became effective, a bargain would be struck between a preponderant customer and the applicants regarding the allocation of orders and the prices to be paid, which would be fixed by reference to those offered by the applicants in competitive tenders (see p 414 f h and j to p 415 a, post).
Re Black Bolt and Nut Association of Great Britain’s Agreement (No 2) [1962] 1 All ER 139 and Re Agreement of Mileage Conference Group of Tyre Manufacturers’ Conference Ltd [1966] 2 All ER 849 followed;
Dicta of Diplock J in Re Black Bolt and Nut Association of Great Britain’s Agreement (No 2) [1961] 3 All ER at 321 considered.
(iii) A declaratory judgment was not to be had as of right where no other relief was sought, but was within the discretion of the court. However, this was a proper case for the court to give such a judgment in favour of the applicants (see p 417 e and f, post).
Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] All ER Rep 329 considered.
Notes
For the powers of the restrictive practices court, see 38 Halsbury’s Laws (3rd Edn) 109–113, paras 142–148.
For the Restrictive Trade Practices Act 1956, s 20, see 36 Halsbury’s Statutes (2nd Edn) 952.
Cases referred to in judgment
Associated Transformer Manufacturers’ Agreement, Re [1961] 2 All ER 233, LR 2 RP 295, [1961] 1 WLR 660, 45 Digest (Repl) 428, 193.
Black bolt and Nut Association of Great Britain’s Agreement (No 2), Re [1961] 3 All ER 316, LR 2 RP 433, [1961] 1 WLR 1139; on appeal CA [1962] 1 All ER 139, LR 3 RP 43, [1962] 1 WLR 75, 45 Digest (Repl) 412, 171.
Mileage Conference Group of Tyre Manufacturers’ Conference Ltd, Re Agreement of [1966] 2 All ER 849, LR 6 RP 49, [1966] 1 WLR 1137, Digest (Cont Vol B) 711, 227a.
Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438, [1921] All ER Rep 329, 90 LJKB 1089, 126 LT 35, 30 Digest (Repl) 170, 213.
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Application
This was an application by Associated Electrical Industries Ltd, British Thomson-Houston Co Ltd, English Electric Co Ltd, General Electric Co Ltd, Hackbridge & Hewittic Electrical Co Ltd (all being subsidiary companies of General Electric and English Electric Co Ltd), Crompton Parkinson Ltd, Fuller Electric Ltd (both being subsidiaries of Hawker Siddeley Group Ltd), C A Parsons & Co Ltd, Bruce Peebles & Co Ltd (both being subsidiaries of Reyrolle Parsons Ltd) and Ferranti Ltd for a declaration that the proposed agreement into which they wished to enter with the CEGB would not be to the like effect as the Associated Transformer Manufacturers’ Agreement dated 1 January 1960 to which the applicants had been parties which was the subject-matter of an order of the court (Russell J, Sir Stanford Cooper and Mr W L Heywood) dated 24 March 1961, following proceedings under s 20 of the Restrictive Trade Practices Act 1956, and reported [1961] 2 All ER 233, in respect of any of the restrictions set forth in Sch 3 to that order, an undertaking having been given on behalf of the applicants that they would not without the leave of the court enter into or purport to enforce or give effect to the original agreement or make any other agreement or arrangement to the like effect. Alternatively, the applicants sought leave of the court for permission to enter into the proposed agreement and be relieved from their undertaking to such extent as would be necessary to enable them to enter into the proposed agreement. The facts are set out in the judgment of the court.
R I Threlfall QC and A P Graham-Dixon for the applicants.
M Finer QC and R A Barr for the registrar.
Cur adv vult
19 October 1970. The following judgment was delivered.
STAMP J read the following judgment of the court. This is an application on the part of Associated Electrical Industries Ltd, British Thomson-Houston Co Ltd, English Electric Co Ltd, General Electric Co Ltd, Hackbridge & Hewittic Electrical Co Ltd, Crompton Parkinson Ltd, Fuller Electric Ltd, C A Parsons & Co Ltd, Bruce Peebles & Co Ltd and Ferranti Ltd, first for a declaration that an agreement into which they propose to enter would not be to the like effect to the Associated Transformer Manufacturers’ Agreement (which we will call ‘the original agreement’), which was the subject-matter of an order made by this court dated 24 March 1961 ([1961] 2 All ER 233, LR 2 RP 295), in respect of any of the restrictions set forth in Sch 3 to that order. The proceedings in relation to the original agreement were proceedings under s 20 of the Restrictive Trade Practices Act 1956 and are reported as Re Associated Transformer Manufacturers’ Agreement ([1961] 2 All ER 233, LR 2 RP 295).
The matter arises in this way. Under s 20(3) of the 1956 Act, where, as here, restrictions are found by the court to be contrary to the public interest, the agreement becomes void in respect of those restrictions, and the court may on the application of the registrar make such order as appears to the court to be proper for restraining all or any of the persons party to the agreement who carry on business in the United Kindom (a) from giving effect to or enforcing or purporting to enforce the agreement in respect of those restrictions; (b) from making any other agreement (whether with the same parties or with other parties) to the like effect. By the order of 24 March 1961 ([1961] 2 All ER 233, LR 2 RP 295), the association on behalf of the parties to the original agreement undertook, in effect, that, without the leave of the court, the parties would not (a) give effect to or enforce or purport to enforce the original agreement in respect of the restrictions which were specified and (b) would not:
‘… enter into or make any other agreement or arrangement to which Part 1
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of the said Act applies to the like effect to the [original agreement] in respect of the said restrictions … ’
The applicants on this application, which is made pursuant to a liberty to apply contained in the order, desire to have it determined that they may consistently with the last mentioned undertaking enter into the proposed agreement. Alternatively the applicants ask, in effect, to be relieved from their undertaking to the extent necessary to enable them to enter into the proposed agreement. It was urged by counsel for the applicants, and counsel for the registrar did not dissent, that it would be convenient if this court delivered judgment on the first part of the case before proceeding to consider the alternative claim.
It is desirable to emphasise that on this part of the application the court is not concerned with whether the restrictions in the proposed agreement will be contrary to the public interest. It is common ground that, if entered into, it will be subject to registration under ss 9 and 10 of the 1956 Act, and can in theory be referred to the court by the registrar, if he thinks fit, under s 20(1). We say ‘in theory’ because the proposed agreement is for a short term and as a practical matter the agreement if entered into will have worked itself out before such a reference can be heard by the court. We shall have to refer to the proposed new agreement in detail later in this judgment; but it is convenient to remark at this stage that it relates exclusively to what were referred to in the 1961 proceedings as ‘large transformers’ or category ‘C’ goods.
The members of the association parties to the original agreement included all the manufacturers of large transformers in the United Kingdom. The original agreement related to sales in the United Kingdom and not exports. The main restrictions in the original agreement were restrictions as to the prices at which the parties to it would sell their goods, which included large transformers. In broad outline, the parties agreed not to tender except at a minimum price, which itself was based on the average of the three lowest costings tabled by the parties, plus a percentage of profit considered by the association to be appropriate, less common discounts and selling factors. This court found as a fact that the Central Electricity Generating Board ordered 91 per cent of the large transformers covered by the original agreement. Those large transformers not ordered by the Central Electricity Generating Board were nearly all ordered by other supply authorities in the United Kingdom.
The parties to the original agreement sought to satisfy the court that its restrictions were not contrary to the public interest. They sought to justify them under s 21(1)(b) and (f) of the 1956 Act, and as regards large transformers there was an additional submission under para (d) of that subsection. As regards para (b), it was submitted that the removal of the restrictions as to price would result in a reduction of prices and a consequent curtailment of research and development or reduction in quality sufficient to deprive purchasers of specific and substantial benefits or advantages. Under this head, the court, while accepting that the removal of the restrictions probably would operate to reduce prices in the home market, was not satisfied that there would as a result be a curtailment of research or development such as would deprive purchasers to any substantial extent of such opportunity of obtaining transformers of increased power and rating as was afforded to them by reason of the existence of the price restrictions and was likely to be afforded to them by its continuance. So far as quality was concerned, equally the court did not envisage a reduction—or at least any relevant to the question of denial of a substantial benefit or advantage. As regards para (f), the court found facts on which it rejected the submission that the removal of the home price restrictions would be likely to cause a reduction in the earnings of the export business in transformers.
We are not concerned with the submission or findings in relation to the attempt to rely on para (d) of the subsection, because the Central Electricity Generating Board
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is a party to the proposed agreement. Having regard to the terms of that paragraph, the proposed agreement could not be saved under that head. In the result the court, as we have already indicated, declared that the restrictions contained in the original agreement and which were set forth in Sch 3 to the order of 24 March 1961 were contrary to the public interest and the undertakings to which we have referred were given.
The proposed new agreement is in these terms. It is headed ‘Large Transformers’ and underneath it contains the words ‘Proposed Memorandum of Arrangement’. By para 1 the parties to the arrangement are stated to be: (A) Central Electricity Generating Board, who are referred to as ‘CEGB’; (B) General Electric and English Electric Cos Ltd, Reyrolle Parsons Ltd, Hawker Siddeley Power Transformers Ltd, Ferranti Ltd, who are referred to as ‘the manufacturers’. By para 2 it is stated that the subject-matter of the arrangement is transmission transformers having a voltage rating of 400 kV,275kV or 132 kV; ie large transformers. The memorandum then proceeds as follows:
‘3. The CEGB has announced its intention, in respect of such of the said transformers as it shall decide to purchase in the United Kingdom during the year ending 31st March 1971, of placing approximately 96% of such orders with “the manufacturers”, allocated between them substantially as follows. [There then follows the allocation between the four companies.]
‘4. The manufacturers have agreed to accept orders substantially in accordance with these allocations at prices determined as set out below:—
‘5. The contract prices are to be based on the arithmetical average (uplifted in accordance with the principles of contract price adjustment arrangements agreed between the CEGB and the BEAMA [British Electrical and Allied Manufacturers Association]) of the most recent competitive offers made in 1969 to the CEGB by the manufacturers in respect of each rating and size of the said transformers to be supplied under this Arrangement.
‘6. If any of the manufacturers during the year ending 31st March, 1971 sells any transformer of comparable rating and size to the transformers covered by this arrangement to any other purchasers for use within the United Kingdom at prices lower than those agreed as aforesaid (after allowing appropriate escalation in accordance with the cost price adjustment arrangements agreed between the CEGB and BEAMA) then the CEGB shall be entitled to such reduced prices for comparable transformers allocated by the CEGB hereunder. The benefit of such reduced prices shall be passed to the CEGB by taking the sum of the products of such price reductions and the number of the comparable transformers ordered by the CEGB hereunder expressed as a percentage of the total value, calculated in accordance with Clause 5 hereof, of all transformers so allocated and reducing the Contract prices (subject to appropriate escalation) for all transformers sold to the CEGB hereunder by that percentage.’
The question which falls to be determined may be propounded thus: is the proposed new agreement or arrangement to the like effect to the original agreement in respect of the restrictions in the original agreement? The proposed new agreement is no doubt ‘to the like effect’ as the original agreement in the sense that the proposed new agreement is ex concessis like the original agreement a price fixing agreement and so registrable under s 9 of the Act of 1956. The contention that such a likeness is sufficient to make one agreement ‘to the like effect’ as another within the meaning of that expression in the context of s 20(3)(b) was however decisively rejected, as well by the Court of Appeal as by this court, in Re Black Bolt and Nut Association of Great Britain’s Agreement (No 2) and we accordingly say no more about it. We do however
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at this point find it convenient to refer to a passage in the judgment of Lord Evershed MR in the Court of Appeal in that case. It was a case in which a similar question fell to be determined and the judgment was one in which the other members of the Court of Appeal concurred. Lord Evershed MR summarised his conclusions thus ([1962] 1 All ER at 145, LR 3 RP at 61):
‘But I return to my consideration of the simple formula in s. 20(3) (b), “any other agreement … to the like effect“. I call it a simple formula, and, as a matter of the English language, so it is, though it has, in all conscience, led to very careful and elaborate argument here. But when one speaks of a written instrument and then of some other instrument “to the like effect”, I should have thought that as a matter of ordinary English, what was meant was that, according to the natural construction of the words used in the second agreement, it was one which was intended to operate in substantially the same way as the first. I do not suggest that that should be taken as an exhaustive statement of what this phrase means, but I do say that, in the ordinary case, the duty of the court is to look at the new agreement in order to see what, according to the language used, its terms, if made effective, will do or achieve, and then ask the question: Are those things done or achieved the same as those which the old agreement, if operative, would have done or achieved? In this case, I say at once that I am not satisfied that that question can be affirmatively answered. I do not wish to say that in no circumstances would it be right and proper to go further if the material were there and to consider what, notwithstanding the language used, the real effect would be; but I cannot myself see in this case any material which would justify us in saying that, notwithstanding the apparent and substantial changes in effect (and I use again deliberately the word “effect”) between the new agreement and that part of the old which was invalidated, the new agreement must, in practice, work in exactly the same way as the old.’
Applying the test so propounded we would conclude that the proposed new agreement is not to the like effect as the original agreement in respect of the restrictions in the original agreement. By the effect of the restrictions in the original agreement, so far as material, each of the manufacturers of large transformers bound itself, when invited by a customer to make a tender for a large transformer, to do so at a minimum price fixed by reference to the agreement; that is to say, at a minimum price based on the average of the three lowest costings tabled by the parties, plus a percentage of profit considered by them to be appropriate, less common discounts and selling factors. If then the question be asked, what did the original agreement in respect of its restrictions do or achieve? the answer in our judgment is that it achieved a state of affairs in the industry in which a customer ordering large transformers was bound to pay not a negotiated or competitive price but a price fixed by the suppliers by reference to a formula agreed between them. Because all the manufacturers of large transformers were parties to it, what was achieved was a position in which the CEGB, which be it remembered ordered 91 per cent of large transformers, and the other supply authorities in the United Kingdom were bound, in order to carry out their statutory duties, to obtain large transformers at prices dictated to them by the suppliers. This is what the original agreement when operative did or achieved. The proposed new agreement will, in our judgment, do or achieve none of these things. It will, if it becomes effective, represent a bargain struck between the preponderant customer for large transformers and the manufacturers who are parties to it, governing the allocation of orders between the manufacturers in the year ending 31 March 1971 and the prices to be paid—prices not fixed
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in advance by a ring but by reference to prices offered by the manufacturers in competitive tenders during the year 1969. It cannot do or achieve what was done or achieved by the original agreement. In our judgment, its effect is quite different. It may have the further effect that other supply authorities have to pay similar prices.
In accordance with the decision of this court in Re Black Bolt and Nut Association of Great Britain’s Agreement (No 2) we have come to our conclusion looking at no material other than (a) the terms of the proposed agreement or arrangement, (b) the terms of the restrictions in the original agreement declared to be contrary to the public interest, and (c) the findings and reasons for the judgment in the original reference under s 20. On the clear authority of that case, as well in the Court of Appeal as in this court, we are not entitled to look at the economic effect of the proposed agreement or arrangement.
We were invited by counsel for the applicants to pay regard to some of the purposes of the proposed agreement as revealed by the evidence which was adduced. To do so would, in our judgment, be to confuse the purposes of an agreement with its effect, and if it were otherwise would, as it seems to us, involve consideration of the economic effect of the proposed agreement. In aid of the applicants’ submission in this regard, reliance was placed on a sentence in the passage from the judgment of Lord Evershed MR, which we have read, in which he said ([1962] 1 All ER at 145, LR 3 RP at 61):
‘I do not wish to say that in no circumstances would it be right and proper to go further if the material were there and to consider what, notwithstanding the language used, the real effect would be … ’
That judgment was delivered in the context of proceedings brought by the registrar to challenge the agreement which he alleged was to the like effect as the original agreement in that case; and we venture to think that what Lord Evershed MR was considering in that passage was a case in which the terms of the new agreement disguised or concealed its true effect. We are not persuaded that Lord Evershed MR was suggesting that the parties to the new agreement might in some circumstances give evidence to show that it had an effect beyond that appearing from its terms. Having heard the evidence, we echo the words of Lord Evershed MR by finding nothing to suggest that, notwithstanding the apparent and substantial changes in effect between the proposed new agreement and the original agreement, the new agreement must work in exactly the same way as the old. It would, in our judgment, work quite differently.
On behalf of the registrar much reliance was placed on the reasoning of this court in the judgment delivered by Diplock J in the Black Bolt and Nut (No 2) case. The court answering the question ‘How like is like?’ concluded ([1961] 3 All ER at 320, LR 2 RP at 443) that the resemblance relevant to the comparison sought to be made is in those characteristics of the restrictions which caused the court to declare them contrary to the public interest. Pausing to apply this reasoning to the present case, what caused the court to declare the restrictions contrary to the public interest was the fact that the manufacturers failed in their attempts to satisfy the court that they fell within the requirements of s 21(1)(b), (d) or (f). Diplock J, delivering the judgment of the court, went on to say ([1961] 3 All ER at 321, LR 2 RP at 444):
‘Where, after hearing argument and evidence in justification of particular restrictions, the court have, as in the present case, given a reasoned judgment why the attempted justification has failed, they will usually have indicated
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those characteristics of the restrictions which have led them to the conclusion that the attempted justification fails and in the absence of which they might not necessarily have arrived at the same conclusion. In such a case, there should be little difficulty in determining whether a new agreement entered into by a respondent either with the same parties or with different parties has characteristics which, if the new agreement had also been the subject-matter of the original hearing and not supported by evidence other than that called at the original hearing, would have led the court to the conclusion that the justification of the new agreement also failed. Accordingly, the test to be applied in a case where the court has given a reasoned judgment on the original reference is this: “In the absence of any fresh evidence other than the terms of the new agreement, would the reasoning expressed in the judgment of the court in the original reference in which it was held that the respondents had failed to satisfy the court under s. 21 of the Restrictive Trade Practices Act, 1956, that acts which the parties to the original agreement had by the provisions thereof which contained restrictions agreed should be done or not done were not contrary to the public interest, necessarily lead the court to the conclusion that the acts which the person subject to the injunction has by entering into the new agreement agreed should be done or not done must also be deemed under that section to be contrary to the public interest?”’
What is urged on behalf of the registrar in this case is that in the absence of fresh evidence other than the terms of the new agreement the reasoning of the court in the original reference in this case would have necessarily led the court to the conclusion that the restrictions in the new agreement were contrary to the public interest.
We do not find it necessary to express a view whether the test so propounded in the judgment delivered by Diplock J is unaffected by the judgments of the Court of Appeal to which we have referred, remarking only that we have not forgotten that Lord Evershed MR was at pains to say that he was not to be taken to be expressing any dissent from anything which had fallen from this court. It is to be observed, however, that Diplock J towards the end of his judgment referred to the difficulty which would arise in applying the test where no attempt had been made to justify the original agreement under any of the paragraphs of s 21(1) and there had been a judgment by consent. He said ([1961] 3 All ER at 322, LR 2 RP at 446):
‘The problem of what is the appropriate test when there has been a consent order on the original reference may raise difficulties, but these may be left to be dealt with when such a case arises.’
He remarked that there were no such difficulties in the case before the court where the court had given a fully reasoned judgment. A similar difficulty appears to us to arise where the reasoned judgment could not, having regard to the very terms of the new agreement, have had any application to it. Here the proposed agreement on its face relates to things to be done in the year 1970–71; and for that reason neither the evidence before the court in 1961 nor the reasoning of the court could have had any relevance to it. If it be possible to suppose the existence of the proposed new agreement in 1961, it is clearly impossible to suppose that the parties could in 1961 have attempted to bring an agreement which was not to operate until 1970 within one of the paragraphs of s 21(1) on the grounds then advanced in respect of the original agreement. There could have been no evidence on which this could have been done. If it were right in these circumstances to attempt to apply the tests adumbrated in the judgment delivered by Diplock J, the question propounded at the end of the passage in the judgment which we have read could we think be
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answered in the negative. The reasoning in 1961, based as it was on the state of affairs in the industry at that time, leading to the conclusion that the manufacturers had failed to satisfy the court under s 21(1) of the Act of 1956 that the restrictions then in force were not contrary to the public interest, does not ‘necessarily lead to the conclusion’ that the acts agreed to be done or not done in the year 1970–71 must also be contrary to the public interest.
If so dialectic an application of the test propounded in the judgment delivered by Diplock J leads logically to the absurd conclusion that no subsequent agreement can be ‘to the like effect’ to an earlier agreement in respect of the restrictions in the earlier agreement, this is a reason for rejecting the test as inappropriate. If, on the other hand, an application of the test led to a conclusion different from that arrived at by applying the test laid down in the Court of Appeal, it is our duty to apply the latter test. On either basis we must in the end prefer and apply the broader and simpler test preferred by the Court of Appeal. Applying that test, we come to the conclusion we have already expressed. We are encouraged to do so by the fact that in Re Agreement of Mileage Conference Group of Tyre Manufacturers’ Conference Ltd ([1966] 2 All ER 849 at 861, LR 6 RP 49 at 104), this court expressed the view that the question of ‘like effect’ was one of degree and of fact.
We must add this. Although we are satisfied on the facts disclosed in the evidence (and more particularly having regard to the considerations advanced in the affidavit of Sir Stanley Brown, chairman of CEGB) that the court ought in this particular case to exercise its jurisdiction to make a declaratory judgment, we cannot accept the submission on behalf of the applicants to the effect that a declaratory judgment may be had as a matter of right. The discretion which the court has to make a declaratory judgment, where no other relief is sought, is a discretion which it has been said is to be exercised cautiously and sparingly (see the speech of Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd ([1921] 2 AC 438 at 446, [1921] All ER Rep 329 at 331)). The discretion has in more recent times been exercised less sparingly than was formerly the case and each case is no doubt to be considered with regard to its particular facts. But, however desirable it may be for this Restrictive Practices Court to give a declaratory judgment in a proper case, it is not to be thought that such a judgment may be had as a matter of course.
Since we have, on the substantial issue, come to our conclusion in favour of the applicants without resort to the evidence which has been given, we need not advert to some of the submissions advanced on behalf of the registrar in the course of counsel for the registrar’s clear and persuasive argument. He would, no doubt, have been even more unwilling than he was to press the arguments leading to the conclusion that the issue ought not to be adjudicated on by way of declaration, but that resort should be had to the procedure under s 22, had he known in advance that the court would not have resort to the evidence which had been tendered.
Accordingly, we grant the declaration for which the applicants ask.
Declaration accordingly.
Solicitors: Bristows, Cooke & Carpmael (for the applicants); Treasury Solicitor.
Euan Sutherland Esq Barrister.
Buswell v Goodwin
[1971] 1 All ER 418
Categories: LANDLORD AND TENANT; Tenancies
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, WIDGERY AND KARMINSKI LJJ
Hearing Date(s): 8, 9 OCTOBER 1970
Rent restriction – Possession – Premises unfit for human habitation – Closing order – Reliance on closing order by landlord claiming possession – Whether landlord entitled to rely on closing order where premises unfit because of own breach of contractual or statutory duty to maintain premises – Housing Act 1957, s 27(5).
Housing – Fitness of property for human habitation – Condition implied by statute – Lease of small dwelling-house – Scope of condition – House incapable of being rendered fit for human habitation at reasonable expense – Housing Act 1957, s 6(2).
The tenant was a controlled tenant of certain premises in which he had lived for a number of years. At all material times the premises were unfit for human habitation. In 1962 the reversioner died. The tenant introduced his future landlord to the agent dealing with the sale of the property. The landlord later purchased the property for £2,000, at which time, it was alleged by the tenant, the landlord agreed to restore the premises. The tenant continued to pay the controlled rent to the landlord and no other rent was agreed between the parties. Several requests were made by the tenant to the landlord that the premises should be made fit for human habitation. No maintenance was carried out by the landlord, however, although he consulted an architect who submitted plans for modernisation of the premises at a cost of £3,200. In 1968, a closing order was made by the local authority under the Housing Act 1957. The landlord claimed possession of the premises on the ground that s 27(5)a of the Housing Act 1957 provided that nothing in the Rent Act 1968 should prevent possession being obtained by the owner of premises in a case where a closing order had been made. The tenant contended that the landlord was not entitled to possession because the closing order had been made as a result of the landlord’s own default in failing to keep the premises reasonably fit for human habitation in breach of his contractual duty or of his statutory duty under s 6(2)b of the Housing Act 1957.
Held – (i) The landlord was entitled to possession of the premises, because, even if their condition was a result of his breach of a contractual or statutory duty, the maxim ex turpi causa non oritur actio had no application to the grant of an order for possession under s 27(5) of the Housing Act 1957, because this was not a case where the only issues were matters of private right between the parties, for the closing order had been made by the local authority in pursuance of its public duty for the maintenance of health (see p 421 f and p 424 c, post).
(ii) The condition of the premises, however, was not a result of the landlord’s breach of a contractual or statutory duty, because—
(a) the parties had never reached agreement on the rent to be paid and therefore there was no concluded bargain between them which could support a contractual duty of the kind alleged (see p 423 h and p 424 c, post);
(b) the landlord’s obligation under s 6(2) of the Housing Act 1957 was restricted to cases where the house was capable of being made fit for human habitation at
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reasonable expense which, on the evidence, was not possible in the present case (see p 422 d and e and p 424 c, post).
Per Curiam. When making a closing order a local authority is only concerned whether the premises are unfit for human habitation, and whether or not they are capable at reasonable expense of being rendered so fit. If a local authority is satisfied on those issues it matters not by whose fault the premises became unfit (see p 421 g and p 424 c, post).
Notes
For implied warranty and undertaking on letting of small houses, see 23 Halsbury’s Laws (3rd Edn) 575, 576.
For recovery of possession of controlled premises taken out of Rent Acts by a closing order, see 23 Halsbury’s Laws (3rd Edn) 813, 814, para 1592, and 19 ibid 594, 595, para 961, and for cases on the subject, see 26 Digest (Repl) 689, 56.
For the Housing Act 1957, ss 6 and 27, see 16 Halsbury’s Statutes (3rd Edn) 118, 140.
Appeal
The tenant, A J Goodwin, appealed from the order for possession of certain premises made against him and in favour of his landlord, Richard Bobart Buswell, by his Honour Judge Duveen at Reading County Court on 13 January 1970. The facts are set out in the judgment of Widgery LJ.
R A Henderson for the tenant.
W P Andreae-Jones for the landlord.
9 October 1970. The following judgments were delivered.
WIDGERY LJ delivered the first judgment at the invitation of Davies LJ. This is an appeal by the tenant from a judgment of his Honour Judge Duveen, given in the Reading County Court on 13 January 1970, whereby he ordered the tenant to deliver up possession to the landlord of premises which had been occupied by the tenant, known as 1 Crazies Hill, Wargrave, Berkshire. The tenant had, on any view, been a controlled tenant of these premises with protection under the Rent Acts, and the landlord had to find some means of claiming possession notwithstanding those Acts. The basis of his claim for excluding the operation of the Rent Acts in this case was that the local authority had made a closing order under the Housing Act 1957. Section 27(5) of that Act provides that nothing in the Rent Acts shall prevent possession being obtained by the owner of premises in a case where a closing order has been made.
The case for the landlord, therefore, was simplicity itself. He pleaded the closing order and said that that entitled him to possession, and so the learned judge found. The basis of the defence which the tenant raised below, and which has been the substance of the argument in this court, was that the reason why a closing order had been made was because of the landlord’s own default in not keeping the premises in a state reasonably fit for human habitation. It is, of course, basic to the making of a closing order that the local authority should be satisfied on that matter, as it is provided in s 16 of the Housing Act 1957, from which the procedure derives, that the requirement that the house be unfit for human habitation is the first matter to be established before a closing order is made. Here it is said that if the house was so unfit, it was unfit because the landlord had broken either a statutory or a contractual duty to keep it fit, and so it is contended that the landlord’s claim should have been rejected on the footing that a man may not profit from his own wrong.
It is necessary to deal with the facts in a little more detail. The tenant had lived in this house, which was one of two adjoining houses, for a great many years. Indeed, his father and, I believe, his grandfather had been tenants of the house before him. At all material times the house was not fit for human habitation by modern standards. It is not necessary to go into detail but, amongst other things, there was no indoor sanitation, no fixed bath, no running water either hot or cold within the confines
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of the house; and that is a situation which has prevailed for very many years. In 1962, the then reversioner entitled to the freehold expectant on the tenant’s interest, died. The freehold came onto the market, and it was first offered to the tenant, as sitting tenant, at a price of £2,000. Unfortunately for him, the tenant was not able to find £2,000 at that time, but he was obviously concerned to get a purchaser for the freehold who would be sympathetic towards him and his interest. It was in that way that the question of the landlord’s buying the freehold reversion became a matter of discussion between the parties. There may be acute controversy as to the exact form of those discussions, but the substance of the matter for this purpose, according to the tenant, is that he used his good offices in the landlord’s favour, by introducing him to the agent dealing with the sale of the property, no doubt putting in a good word for him with the agent and, as a result, says the tenant, preventing the property from getting onto the open market in the face of considerable competition, and resulting in the landlord’s buying the freehold at the price of £2,000, which was the figure at which it had been offered to the sitting tenant.
As will appear in a little more detail in a moment, one of the issues which the tenant has sought to raise and rely on in this case is that there was, as part and parcel of that arrangement preceding the landlord’s purchase of the house, a contract whereby the landlord had obliged himself to put the house into a condition fit for human habitation. In point of fact, the landlord did nothing of the kind. Some eight years have now passed during which the tenant has paid the controlled rent of 7s 9d a week and occupied the premises. It is said, and I accept for this purpose that it is right, that from time to time the tenant asked the landlord to do something about making the house fit for human habitation, and there is also some indication that the local authority also invited, at least, the landlord to do something about it. In fact, nothing was ever done, and so the closing order was made. It is dated 18 December 1968.
Following the making of the closing order, the landlord launched the present proceedings, claiming possession in the circumstances to which I have referred. The matter first came before the learned county court judge on 22 October 1969, when it was adjourned. The reason why it was adjourned seems to have been that the tenant’s employer was prepared to put up a substantial sum of money to help him in having this house modernised and made fit; the county court judge obviously hoped that if the parties were all given a little time, some sort of compromise might emerge whereby the premises could be made fit at the expense of the tenant’s employer, the closing order cancelled, and the tenant allowed to remain in possession. However, that expectation was not fulfilled and, on 13 January 1970, the parties were back before the county court judge. By this time counsel for the tenant was armed with a formal counterclaim, particularised in detail, which was then produced. As I understand it, copies or a copy was given to the counsel for the landlord to consider.
Counsel for the tenant then submitted that the landlord was not entitled to an order for possession on the brief ground, to which I have referred, that he could not take advantage of his own wrong; but counsel also submitted, in the alternative, that if that view was not acceptable to the learned judge, the claim for possession ought to be adjourned pending the trial of the counterclaim. The reasoning here, if I do justice to counsel for the tenant’s argument, was that by his counterclaim the tenant claimed inter alia a mandatory order on the landlord requiring the landlord to put the premises into a habitable state. The strategy employed by counsel for the tenant, or which counsel for the tenant hoped to employ, was that if that counterclaim were heard and succeeded, and an order was made, the order would be followed by a factual restoration of the premises. Then the reason for the closing order would have gone and the landlord’s claim for possession might have to be dismissed. The learned judge was not prepared to accept that argument. He took the view that there was no answer to the landlord’s claim on the material
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then before him, and although he adjourned the counterclaim, regarding it as a matter which sounded in damages, he declined to adjourn the hearing of the claim until the hearing of the counterclaim.
The situation comes before us therefore in a very confused and unsatisfactory state, because counsel for the tenant tells us that he was hampered in his presentation of the tenant’s case in the court below by the county court judge’s insistence that there could be no defence to the landlord’s claim for possession, and his inability therefore to call evidence which he would have wished to call. Asked about the nature of the evidence which he would have wished to call, it seems that it amounted to no more than evidence as to the making of the agreement, to which I have referred; counsel for the tenant was not prepared with evidence as to the value of the property or whether the cost of making the premises habitable would have been reasonable or not, within the meaning of s 16 of the Housing Act 1957. The only two witnesses whose evidence is recorded were both called by the landlord. The first is an architect, Mr Johnson, who submitted plans for the modernisation of the premises, or alternatively both the premises and the adjacent house, 2 Crazies Hill. His evidence was that to make these premises or the tenant’s single house, as the case may be, habitable, would involve an expenditure of £3,200 in one case, and £3,700 in the other. The judge’s notes do not disclose any other evidence relevant to this issue given by Mr Johnson. The other witness called was a Mr Evans, the chief public health officer of the local authority. He gave evidence amongst other things that he had regarded the repair of these premises, so as to put them into a state fit for human habitation, as being an uneconomic project.
That is the position as matters stand today, and counsel for the tenant’s first submission to us must be, as it was before the learned judge below, that to allow the landlord to obtain possession, in the circumstances which I have outlined, would be to allow him to take advantage of his own wrong. The proposition that a man will not be allowed to take advantage of his own wrong is no doubt a very salutary one and one which the court would wish to endorse, but I am not at all satisfied that it can be applied to the circumstances of this case. This is not a case in which the only issues are matters of private right between landlord and tenant. The closing order was made by the local authority in pursuance of its public duty for the maintenance of public health. The point of the closing order is to prevent people from living in insanitary conditions with the unhappy consequences to the public which might result. It seems to me that the local authority, when making such an order, is only concerned with the factors mentioned in s 16 of the Act, namely, whether the premises are unfit for human habitation, and whether or not they are capable at reasonable expense of being rendered so fit. If a local authority is satisfied on those issues, it matters not by whose fault the premises got into that condition.
Accordingly, it seems to me that if one recognised in this case that the landlord was profiting by his own fault one would, in effect, be allowing the landlord’s fault to frustrate the local authority’s public purpose as well, and in my judgment that cannot really be right. The association between the landlord’s fault and the remedy is insufficient in this case to make the maxim applicable. It would be naive to suppose that landlords do not often welcome closing orders and do not often profit from them, but nevertheless the basic purpose of such orders is not to benefit the landlord but to secure the maintenance of public health at the instance of the local authority. It seems to me therefore that the basic argument which counsel for the tenant sought to put forward is one which was unsound in the circumstances, even if one assumes in his favour that the condition of the premises was due to the fault of the landlord.
However, I would not in view of the confused state in which the matter comes before us, be content to leave my judgment there because, in fairness to the tenant, one must go a little further and see how he might have stood on other issues in this case. It is, of course, necessary for his argument for him to show that the condition
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of the premises was due to the fault of the landlord. He seeks to do this in one of two ways. First of all, he says that this was a house in respect of which the landlord was under an obligation under s 6 of the Housing Act 1957 to keep in a state fit for human habitation. It is clear that the house fell within s 6 by virtue of the very small rent payable in respect of it, and accordingly, by s 6(2)—
‘… there shall, notwithstanding any stipulation to the contrary, be implied a condition that the house is at the commencement of the tenancy, and an undertaking that the house will be kept by the landlord during the tenancy, fir for human habitation … ’
It is submitted therefore that the landlord must have been in breach of that duty, and that it was the breach of that duty which provided the occasion for the making of the closing order. Provision on these lines has appeared in housing Acts for a number of years, to my recollection back to 1925 if not before, and on its face it appears to impose a very wide obligation on the landlord. In literal terms it would seem that a landlord must keep a ruinous house fit for habitation at whatever the cost; but counsel for the tenant concedes, and I think that he is entirely right in so conceding, that the obligation under s 6 is not as extensive as that, and it is restricted, as is the landlord’s obligation under other provisions of the same Act, to cases where the house is capable of being made fit for human habitation at reasonable expense. That at once produces this situation, that if the house was not capable of being rendered fit in that way, which was the local authority’s view, then one cannot point to the deficiency and say that the landlord must be responsible for it. If it is not capable of being rendered fit at reasonable expense then the landlord was not liable to have kept it so under s 6. Accordingly, counsel for the tenant at once gets into very deep waters and that is the necessity for challenging the whole basis of the closing order which, as I have said, was that the house could not be rendered fit at reasonable expense. The tenant could not challenge the closing order directly under s 20 of the Act of 1957 and has taken no proceedings to which the local authority is a party to challenge the order in any other way. I am not saying that he could challenge the order in any other way, I merely content myself with saying that he has not done so. He does not claim to possess evidence on which such a challenge might be based. So, as it seems to me, the attempt to contend that the landlord was obliged under s 6 to put this house into a state fit for human habitation is one which cannot succeed on the material which is before us.
I pass therefore to consider his alternative approach, which was that the landlord was liable by contract to render these premises fit for human habitation. Here, of course, we are at great disadvantage in that none of the evidence on which counsel for the tenant would seek to rely on this issue has been called. He says that the judge would not allow it to be called at the hearing in January. It is very regrettable in my judgment that no steps have been taken since then to proceed with the hearing of the counterclaim, a hearing which might well have resolved this matter in itself. The fact is that nothing has been heard by way of evidence on this issue.
It seems to me that the proper way to approach the case in those circumstances is to consider, first of all, how the tenant would stand if his allegations of fact can be substantiated by evidence. One looks, therefore, with some care at his pleadings to see what it is that he says by way of fact to sustain the argument that there was a contractual obligation. The defence to this claim was a home-made defence prepared by the tenant, and it is interesting to see what he said in his own words at that time. He stated:
‘I dispute the [landlord’s] claim because: When [the landlord] took over this property, after acquiring it at my Price as a sitting tenant, he promised that he would convert back to one house, and repair and add bathroom and Flush Toilet … ’
I pause to observe that those words seem to suggest that the promise was made after
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the landlord had acquired the house, in which event, of course, it would be a promise not supported by consideration at all. That is largely corrected by further provisions in the counterclaim, provisions which, of course, were made with counsel as draftsman. We find in para 6 of the defence and counterclaim the matter put rather more precisely. It is there alleged:
‘Further, at or about the end of 1961, the [landlord] agreed to instal electricity and an adequate water supply, adequate drainage and sanitary facilities and adequate facilities for disposal of waste water in the said premises, and to put the said premises into habitable condition, and to convert the said premises and 2 Crazies Hill into one dwelling for the [tenant], including a bathroom and lavatory in the place of the kitchen of Number 2 aforesaid.’
It may be said that there the work is reasonably particularised. On the other hand, in that paragraph nothing is said about the rent which was to be paid when all this had been done, if it were done.
The picture is completed by a reference to particulars delivered by the tenant in response to a request. He was asked for particulars under para 1 of his defence, identifying the date and place, and so far as is practicable, the words alleged to have been used by the landlord in respect of the promise to put the premises into a proper state. The particulars given are:
‘At the factory of Stuart Turner Ltd. in Henley, in the County of Oxford, in or about November 1961, the [landlord] stated that he would buy the said premises and become the [tenant’s] landlord, if that would help him. On the same evening, at the said premises, the [landlord] asked the [tenant] what he wanted to do with the said premises, and inspected them, and all their said defects. When the [tenant] told the [landlord] that he wished to convert the 2 cottages into one, and make the kitchen of number 2 into a bathroom and lavatory, the [landlord] stated that electricity would have to be laid on, as well, but that this would be no problem, because the cables were only a few yards from the back of the cottages. The [landlord] then said words to the following effect: “Tell your bloke I’ll buy them, and I’ll get all them things fixed up for you.” When the [tenant] said that he was willing to pay “a proper rent”, the [landlord] replied that that could be sorted out when everything had been done.’
I ask myself whether, if those are the facts (and they are alleged in the tenant’s own pleadings), they could really possibly form the substance of a concluded contract. In my judgment it is quite clear that they cannot. I leave aside the difficulty whether the work was adequately particularised, and I leave aside the very difficult question, from the tenant’s point of view, of showing that there was any consideration for this kind of promise, if the promise was made. But it cannot have been a concluded bargain between the parties unless the vital issue of rent was the subject of the bargain. It is perfectly clear on the allegations made in this pleading that the parties never settled down to agree a rent at all, nor, as Karminski LJ pointed out, did they agree on any machinery by which the rent could be calculated and fixed, such as arbitration. If one takes the landlord’s words, relied on by the tenant, that the rent could be sorted out when everything had been done, it is abundantly clear, in my judgment, that that vital term of the contract was not the subject of agreement. That being so, it cannot possibly be said that there was any contract between the parties at all.
Counsel for the tenant seeks to counter this objection by saying that the premises would remain within the Rent Acts and that the amount of rent to be charged would be determined by the Rent Act machinery. I agree that, if the work had been done, that may very well have been the consequence, but what he has to establish is a contract between the parties, a meeting of minds in regard to what the rent should be.
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If they had agreed that the rent should be the statutory rent, whatever it proved to be, well enough. There is not the slightest indication that they ever reached any agreement on this vital issue at all. One asks oneself what the position would have been if, the work having been done, the rent payable had gone up to some figure totally outside the tenant’s normal means. Would he have been bound to pay it? In my judgment the answer is obviously, no. So it seems to me that, even if one makes every assumption in favour of the tenant, he is really left in the situation in which he cannot establish that the condition of the premises was due to the landlord’s fault. If he cannot establish that, all the rest of his case collapses. In my judgment the only conclusion which we can reach here is that the appeal should be dismissed.
KARMINSKI LJ. I agree, and in spite of the able and protracted argument of counsel for the tenant I can find nothing useful to add to the judgment of Widgery LJ.
DAVIES LJ. I agree, and I also cannot usefully add anything.
Appeal dismissed.
Solicitors: Gregory, Rowcliffe & Co agents for Haye & Son, Wokingham, Berkshire (for the tenant); Waterhouse & Co agents for Hedges & Son, Wallingford, Berkshire (for the landlord).
Henry Summerfield Esq Barrister.
London Borough of Ealing v Race Relations Board and another
[1971] 1 All ER 424
Categories: CONSTITUTIONAL; Civil Rights and Liberties
Court: QUEEN’S BENCH DIVISION
Lord(s): SWANWICK J
Hearing Date(s): 12, 13, 14, 23 OCTOBER 1970
Race relations – Discrimination – National origins – Discrimination on ground of nationality – Exclusion of non-British subject from council’s housing list – Whether discrimination on ground of national origins – Race Relations Act 1968, ss 1(1), 5(a),(c).
Declaration – Jurisdiction to grant – Exclusion of jurisdiction by statute – Necessity for clear exclusion – Proceedings in pursuance of a determination of the Race Relations Board – Whether statutory procedure ousting jurisdiction to grant declaration to alleged discriminator – Race Relations Act 1968, s 19(1), (10).
Declaration – Jurisdiction to grant – Hypothetical question – Determination by Race Relations Board on unlawful act of discrimination – Communication of opinion and request for assurance against repetition – Whether live issue between board and alleged discrimination sufficient to found jurisdiction.
The borough maintained a register of all applications for housing accommodation and a list of persons transferred from this register to the housing waiting list. The borough adopted rules for the transfer from the register to the list. Rule 3(1) stipulated that an applicant must be a British subject within the meaning of the British Nationality Act 1948. In 1966 and 1968, the second defendant, who was a Polish national, submitted a housing application to the borough, which declined to put him on its waiting list because he was not a British subject as required by r 3(1). In April 1969, following a complaint, the Race Relations Board formed the opinion that the borough had unlawfully discriminated against the second defendant on the ground of his ‘national origins’ under ss 1(1)a and 5 (c)b of the Race Relations Act
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1968. In June 1969, the board notified the borough of its opinion and sought to secure a settlement between the parties and an assurance that the borough’s action would not be repeated. The borough, after rejecting two requests by the board, issued a summons claiming declarations against the board and the second defendant that r 3(1) was lawful, and that it was not in breach of the 1968 Act. The board contended that the court had no jurisdiction to grant the declarations sought on the grounds that proceedings under the 1968 Act other than in accordance with s 19(1)c of the Act were expressly forbidden by s 19(10)d, that the provisions of the Act laid down a complete and exclusive code for such proceedings, and that no live issue had as yet arisen between the parties.
Held – (i) The court had jurisdiction to grant the declarations sought by the borough because—
(a) clear words were required to oust the jurisdiction of the High Court, in particular where a person sought a declaration that the circumstances of his case did not come at all within the provisions of the new Act and he had no right of access of his own motion to an inferior court to establish his case; accordingly, in the absence of express provision to that effect, s 19(10) did not oust the court’s jurisdiction (see p 430 h to p 431 b and p 431 e and f, post); Dyson v A-G [1911] 1 KB 410, Cooper v Wilson [1937] 2 All ER 726, Sivyer v Amies [1940] 3 All ER 285 and dictum of Viscount Simonds in Pyx Granite Co Ltd v Ministry of Housing and Local Government [1959] 3 All ER at 6 applied; Barraclough v Brown [1895–99] All ER Rep 239 and Argosam Finance Co Ltd v Oxby (Inspector of Taxes) [1964] 3 All ER 561 distinguished.
(b) the proceedings brought by the borough were not, for the purposes of s 19(10), ‘proceedings … against any person in respect of any act which is unlawful by virtue only’ of the 1968 Act but proceedings to declare that the borough’s rule was lawful (see p 431 d, post);
(c) the matter at issue between the parties was not of a hypothetical nature in that the board had formed and communicated a formal opinion that the borough had been guilty of unlawful conduct, in view of which the borough, as a public body, was entitled to seek a ruling as to the legality of its rule (see p 432 d, post); Re Clay [1918–19] All ER Rep 94, Re Barnato [1949] 1 All ER 515 and Punton v Ministry of Pensions and National Insurance (No 2) [1964] 1 All ER 448 distinguished.
(ii) The court would not, however, grant the declarations sought by the borough, because the practical effect of the borough’s rule, for the purposes of s 5 of the Act, was inevitably to place the vast majority of people of other than British or Commonwealth nationality in a less favourable position and thus, in effect and in all but an insignificant number of cases, to discriminate against them on the ground of national origins (see p 434 j to p 435 a, post).
Notes
For the power to make declaratory judgments, see 22 Halsbury’s Laws (3rd Edn) 746–751, paras 1610, 1611, and for cases on the subject, see 30 Digest (Repl) 165–182, 174–295.
For discrimination on racial grounds, see Supplement to 7 Halsbury’s Laws (3rd Edn), para 1280.
For the Race Relations Act 1968, ss 1, 5, 19, see 48 Halsbury’s Statutes (2nd Edn) 1541, 1543, 1552, 1553.
For the British Nationality Act 1948, see 1 Halsbury’s Statutes (3rd Edn) 861.
Cases referred to in judgment
Argosam Finance Co Ltd v Oxby (Inspector of Taxes) [1964] 1 All ER 791; affd CA [1964] 3 All ER 561, [1965] Ch 390, [1964] 3 WLR 774, Digest (Cont Vol B) 422, 1352c.
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Barnato, Re, Joel v Sanges [1949] 1 All ER 515, [1949] Ch 258, [1949] LJR 1109, 47 Digest (Repl) 431, 3847.
Barraclough v Brown [1897] AC 615, [1895–99] All ER Rep 239, 66 LJQB 672, 76 LT 797, 62 JP 275, 30 Digest (Repl) 175, 243.
Barwick v South Eastern and Chatham Ry Cos [1921] 1 KB 187, 90 LJKB 377, 124 LT 71, 85 JP 65, 30 Digest (Repl) 173, 234.
Clay, Re, Clay v Booth [1919] 1 Ch 66, [1918–19] All ER Rep 94, 88 LJCh 40, 119 LT 754, 30 Digest (Repl) 170, 215.
Cooper v Wilson [1937] 2 All ER 726, [1937] 2 KB 309, 106 LJKB 728, 157 LT 290, 30 Digest (Repl) 171, 219.
Dyson v A-G [1911] 1 KB 410, 80 LJKB 531, 103 LT 707; subsequent proceedings [1912] 1 Ch 158, 30 Digest (Repl) 168, 193.
Francis v Yiewsley & West Drayton Urban District Council [1957] 1 All ER 825, [1957] 2 QB 136, [1957] 2 WLR 627; affd CA [1957] 3 All ER 529, [1958] 1 QB 478, [1957] 3 WLR 919, 122 JP 31, 45 Digest (Repl) 346, 34.
Lysaght, Re, Hill v Royal College of Surgeons of England [1965] 2 All ER 888, [1966] Ch 191, [1965] 3 WLR 391, Digest (Cont Vol B) 78, 1240a.
Punton v Ministry of Pensions and National Insurance (No 2) [1963] 2 All ER 693, [1963] 1 WLR 1176; on appeal CA [1964] 1 All ER 448, [1964] 1 WLR 226, Digest (Cont Vol B) 552, 3a.
Pyx Granite Co Ltd v Ministry of Housing and Local Government [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, 123 JP 429, Digest (Cont Vol A) 968, 254a.
Sivyer v Amies [1940] 3 All ER 285, 163 LT 118, 30 Digest (Repl) 181, 284.
Action
The London Borough of Ealing (‘the borough’) claimed declarations against the first defendant, the Race Relations Board (‘the board’) and the second defendant, Stanislaw Zesko, in relation to its rules governing the allotment of council housing. The facts are set out in the judgment.
J P Comyn QC and K C L Smithies for the borough.
R A MacCrindle QC and Anthony Lester for the board.
The second defendant did not appear and was not represented.
Cur adv vult
23 October 1970. The following judgment was delivered.
SWANWICK J read the following judgment. This is an originating summons by the London borough of Ealing (‘the borough’) as plaintiff against the first defendant, the Race Relations Board (‘the board’), and the second defendant, Mr Stanislaw Zesko, claiming a number of declarations. The second defendant did not appear at the hearing and, indeed, has not entered an appearance, but his interests and possible viewpoint have been adequately covered by counsel for the board. As well as the substantive point raised by the case, the question of the jurisdiction of this court to hear and determine this matter is involved. Of course, the court cannot arrogate jurisdiction to itself, nor can jurisdiction be conferred on it by the agreement of the parties. The borough asked me to decide the substantive point and to grant relief if I decide in its favour.
Instructions of counsel for the board are equivocal. On the one hand the board would not be adverse to a determination by this court of the substantive point in this particular case; on the other hand it does not wish my decision to create a precedent, binding or otherwise, and it would have liked me to state that it does not. Compliance with this request is clearly impossible, and I have said so. It would be derogatory of the status and powers of the High Court for it to attempt to set limits to the authority of its decisions generally or to their binding effect on an inferior court in a particular case, and would itself create a wholly bad precedent. I am, however, naturally anxious to save duplication of effort and legal costs, and I have therefore consented to listen to argument on both issues and to give my decision on
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both, whatever it may be, to the end that, if it should be determined by me or on appeal that this court has jurisdiction, my judgment on the substantive question should, if it stands, be binding on a county court. If of course it should be determined by my unchallenged decision or on appeal that this court has no jurisdiction, my decision on the substantive point will amount to no more than an observation of opinion. If I find that I have jurisdiction, there is also the question of how I should exercise my discretion to grant what is of course a discretionary remedy. Before I deal with any of these points, it would probably be convenient if I were to summarise the basic facts which are undisputed.
The second defendant was born and bred a Polish national, albeit born in exile in Eastern Siberia in 1913. In 1922, he returned to Poland and eventually joined the Polish Air Force. In November 1939, after the Nazi invasion of Poland, he escaped to France and thence came to the United Kingdom. He enlisted in the Royal Air Force and completed three operational tours in Bomber Command. Since December 1939 he has lived in the United Kingdom.
In December 1959 the second defendant married his wife, who was also Polish by birth and nationality. For several years they lived together in the borough of Ealing, up to February 1970, in conditions of great hardship. They have one child, born in 1960. The second defendant is a glass toughener, a man of perfect character and integrity, and obviously a wholly admirable person.
Following the establishment of the Greater London Council, the council of the present London borough of Ealing, that is to say the plaintiffs, became operative on 1 April 1965 under the London Government Act 1963, and is the local housing authority. As such it has always maintained two lists, first, a register of all applications for housing accommodation under s 22(3) of the 1963 Act, and secondly, a list of persons transferred from this register to the housing waiting list. Rules for transfer from the register to the list were adopted by the borough on 15 June 1965. Under these rules, once on the list, the allocation of houses to the persons listed is in accordance with a points scheme which includes points awarded on the basis of waiting time. Rule 3(1) stipulates: ‘An applicant must be a British subject within the meaning of the British Nationality Act 1948’. Rule 3(2) imposes a further condition as to length of residence in the borough in order to qualify. Rule 6 gives the borough a discretionary power to vary the rules in any specific case.
In July 1966, the second defendant submitted to the borough a housing application form, of course describing himself and his wife as Polish nationals born in Poland. Nothing came of this application. Examination of it shows that it was marked ‘Not British subjects’ and ‘transfer to W/L [meaning waiting list] when British nat. [meaning naturalisation] papers seen’. Through the auspices of the Polish Air Force Association in Great Britain, a further approach was made to the borough in October 1968, and the second defendant submitted, in November 1968, a further housing application form, again correctly describing himself and his wife in the same terms as before. On 4 February 1969, the borough notified the association of its policy not to consider any applicant unless he was a British subject, and it maintained its decision despite protests. The association complained to the board that the borough’s action constituted unlawful discrimination against the second defendant, in breach of the Race Relations Act 1968. The board, in accordance with s 15 of that Act, notified the borough of the complaint and proceeded to investigate it. On 10 April 1969, it formed the opinion that the borough had unlawfully discriminated against the second defendant on the ground of his ‘national origins’, within the meaning of s 1(1) of the Act. On 2 June it so notified the borough. Thereafter it endeavoured, in accordance with its obligation under s 15(3)(b), to secure a settlement between the parties and to seek an assurance against repetition of similar action. Its request to this effect was contained in a letter of 2 June 1969. Following further negotiations, the board’s adherence to its opinion and repetition of its request was conveyed to the borough by a letter of 14 November 1969. On 18 November,
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the borough finally rejected this request and on 21 November, it issued the present summons, the board having already said that it would suspend, until after these proceedings, its decision whether or not to take civil proceedings against the borough, under s 19 of the Act, in the county court.
It transpires that since the inception of these proceedings the second defendant has reluctantly decided to abandon his Polish nationality and, on 31 July 1969, he applied for naturalisation as a British Subject. With his record, it is not surprising that his application has been successful. He is now in fact a British subject by naturalisation, and in accordance with his application, which was never withdrawn, he has been placed on the housing waiting list. Since these proceedings were started he has also rehoused himself. The question therefore arises whether, quite apart from the issue of jurisdiction, the substantive question and the relief sought have become so academic that the court should refuse to consider them. However, I am told that the second defendant’s present house is scheduled for demolition and that he desires to remain on the housing waiting list. On that list he must suffer some loss of points for waiting time if his inclusion should date, as it now does, only from the date of his naturalisation.
So far as the borough is concerned, its position vis-a-vis the board has not altered, in that the board’s expression of opinion and request for assurance in the future still remain with the implied threat of possible proceedings under the Act in the event of the borough’s refusal. Counsel for the board does not contend that if this court had jurisdiction to make any of the declarations claimed when this action started it has become academic since, nor does he wish to rely on the subsequent events that I have mentioned. On the whole, therefore, I do not consider that if this court had jurisdiction to grant, and would in its discretion have granted, the relief claimed when the action was started, these later events should necessarily alter my decision, although I should bear them in mind in deciding on the exercise of my discretion.
By its originating summons, the borough claims, against both the board and the second defendant, five declarations. The first four of these expressly refer to the Race Relations Act 1968, and by them the court is asked in effect to declare that the borough’s rule 3(1), which I have read, does not in law constitute an unlawful discrimination against the second defendant on the ground of his national origins, within the meaning of s 1(1) of the Act. The fifth declaration does not in terms refer to the Act but claims that the borough was entitled to refuse to place the second defendant on the housing waiting list on the ground that he was not a British subject, but was of foreign or alien nationality.
I will deal first with the question of jurisdiction. This depends primarily on the construction of s 19 of the Race Relations Act 1968. But to follow the arguments, I must briefly review the scheme of the Act. Part I, which consists of ss 1-13, defines what shall be unlawful discrimination under the Act. This comprises treating any person less favourably than another person ‘on the ground of colour, race or ethnic or national origins’, in certain defined situations. The relevant situation for the purpose of this action is dealt with by s 5 which makes it unlawful for any person having power to dispose of, or being concerned with the disposal of, housing accommodation to discriminate as above defined—
‘(a) against any person seeking to acquire any such accommodation, premises or other land by refusing or deliberately omitting to dispose of it to him, or to dispose of it to him on the like terms and in the like circumstances as in the case of other persons; … or (c) against any person in need of any such accommodation, premises or other land by deliberately treating that other person differently from others in respect of any list of persons in need of it.’
Part II of the Act, consisting of ss 14–24, substitutes for the Race Relations Board set up by the Race Relations Act 1965, a board by the same name but differently constituted in accordance with Sch 1 to the 1968 Act; differently constituted in that it
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has more personnel and for the first time has the status of a body corporate with perpetual succession and a common seal. This board and its area conciliation committees are charged by the Act with the duty of investigating complaints of unlawful discrimination as defined by the Act and seeking a settlement and, in their discretion, a written assurance against repetition or further similar acts, in default of which the board is required, by s 15(4), to determine whether to bring proceedings under s 19 of the Act. It must notify the parties of the opinion, if any, that it has formed, of whether or not it has obtained a settlement and assurance, and of what action, if any, it proposes to take.
I turn now to s 19(1), which provides:
‘Civil proceedings may be brought in England and Wales by the Race Relations Board, in pursuance of a determination of theirs under section 15 of, or Schedule 2 or 3 to, this Act and not otherwise in respect of any act alleged to be unlawful by virtue of any provision of Part I of this Act, and in those proceedings a claim—
‘(a) may be made for such an injunction as is mentioned in section 21 below;
‘(b) may be made, on behalf of a person alleged to have suffered loss as a result of that act, for such damages as are mentioned in section 22 below;
‘(c) may be made for such an injunction and such damages; or
‘(d) may be made for a declaration that that act is unlawful by virtue of that provision or any other provision of the said Part I;
and in those proceedings, whether or not such a claim is made, an application may be made in accordance with section 23 below for revision of any contract or term in a contract alleged to contravene any such provision.’
Subsections (2)–(9) confine such proceedings to any of the particular county courts nominated by the Lord Chancellor and make various procedural provisions, including a requirement that the judge shall be assisted by two assessors with special experience to assist. There is a right of appeal to the Court of Appeal on questions of fact as well as of law. Section 19(10) provides:
‘Nothing in this Act shall affect the right to bring any proceedings in England and Wales, whether civil or criminal, which might have been brought if this Act had not been passed, but except as provided by subsection (1) above and this subsection no proceedings, whether civil or criminal, shall lie against any person in respect of any act which is unlawful by virtue only of a provision of Part I of this Act.’
This being the scheme of the Act and its relevant provisions, counsel for the board submits that this court has no jurisdiction to grant the relief claimed. His contentions are, first, that s 19(10) expressly forbids the borough to bring these proceedings because, he says, they are brought against persons, namely the board and the second defendant, in respect of an act which is unlawful by virtue only of a provision of Part I of the Act, and that this subsection provides that no such proceedings shall lie except as provided by s 19(1) or (10) itself. He goes on to argue that the borough cannot claim that s 19(1) gives it the right to bring these proceedings, with which counsel for the borough agrees, and that the first part of s 19(10) does not relieve against this prohibition, because these proceedings could not have been brought if this Act had not been passed. On this latter point, counsel for the borough submitted, as somewhat of an afterthought, that if this Act had not been passed, these proceedings could have been brought either under s 5 of the Race Relations Act 1965, which forbids discrimination as defined above in the disposal of tenancies, or quite independently of any Race Relations Act, but in my judgment these submissions were ill-founded. Section 5 of the 1965 Act clearly relates only to the disposal of existing tenancies and the Race Relations Board as constituted by that Act was a different body from the present board and had no legal personality.
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Apart from the Race Relations Act, no one could, in my judgment, possibly have suggested that there was anything wrong with the borough’s rules, as indeed counsel for the borough was at pains to point out, submitting a list of restrictions of aliens and citing authorities, of which the most striking was Re Lysaght, Hill v Royal College of Surgeons of England, to show that far wider discriminations were permissible at common law, as I entirely agree. This first contention of counsel for the board, therefore, depends wholly on whether the present proceedings are brought in respect of an act which is unlawful by virtue only of a provision of Part I of this Act, and thus forbidden by s 19(10). I will deal with this when I come to the main argument of counsel for the borough on jurisdiction. I should add that counsel for the board contended, somewhat faintly, that the words ‘and not otherwise’ in s 19(1) were themselves directed to prohibiting anyone other than the board from bringing civil proceedings in respect of an alleged act of discrimination, but I hold that these words merely debar the board from taking civil proceedings in respect of such an act elsewhere or otherwise than in accordance with the procedure laid down by s 19.
The second contention of counsel for the board on this issue is that the Act clearly implies an intention to exclude the jurisdiction of the High Court to consider its terms relating to discrimination. He suggests that ss 19–24, which are headed ‘Legal proceedings’, form a complete and exclusive code. He points out what is clearly correct, as I have said, that s 19(1) forbids the board to bring civil proceedings for alleged discrimination except in the rather special tribunal and by the procedure laid down by ss 19–24. Counsel suggests that it would be odd and unfair to the board, which is alone given express, although limited, rights to sue for such infringements, if an alleged discriminator could claim the right to sue for a declaration in a higher court. He contends that the person who alleges that he is discriminated against is also forbidden from taking any legal proceedings on his own behalf, and suggests that the same should apply to an alleged discriminator. He points out that the legislature has set up a specially constituted tribunal to deal with sensitive issues, and he makes one or two points, which I regard as of less importance and with which I will deal later in my judgment on this issue. Finally, counsel for the board submits that even if there is jurisdiction in the High Court, it would not be appropriate for me to exercise my discretion to grant the relief prayed because the board has not gone beyond an expression of opinion and a request for an assurance; it may never proceed in the county court, and if it does, he says that the borough can then raise all the contentions which it is now seeking to raise here. Counsel contends that no live issue has been raised and quotes Re Clay, Clay v Booth, Re Barnato, Joel v Sanges and Punton v Ministry of Pensions and National Insurance (No 2). I will deal with those authorities later.
The contentions of counsel for the borough on this issue are, first, that clear words are needed to oust the jurisdiction of the High Court expressly, and I would add at least as clear words to oust it by implication. For authority for this proposition, if authority were needed, I was referred to the well-known words of Viscount Simonds in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1959] 3 All ER 1 at 6, [1960] AC 260 at 286):
‘It is a principle not by any means to be whittled down that the subject’s recourse to Her Majesty’s courts for the determination of his rights is not to be excluded except by clear words. That is, as McNAIR, J., called it in Francis v. Yiewsley & West Drayton U.D.C., a “fundamental rule” from which I would not for my part sanction any departure.’
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Of course if, as in Barraclough v Brown, to which I was also referred, a new right is given and a particular inferior court is nominated uno flatu, as Lord Watson said ([1897] AC at 622, [1895–99] All ER Rep at 243), in which to obtain a remedy, that same remedy cannot be sought in the High Court, but where, as in the Pyx Granite Co case, a person seeks a declaration that the circumstances of this case do not come at all within the provisions of the new Act that threatens him, and in particular where he has no right of access of his own motion to the inferior court to establish his case, the principle of Barraclough’s case could not, in my judgment, possibly apply. Counsel for the borough submits that this is the present position of the borough and I consider that he is right.
The second contention of counsel for the borough is that all the Act by its terms prevents and forbids is, first, that anyone except the board should bring proceedings to prevent or claim damages for breaches of its provisions, that is to say, for acts rendered unlawful by it, and secondly, that the board should bring any proceedings for this purpose except by the stipulated procedure and in the nominated court. The Act, he submits, does not forbid or prevent anyone from bringing proceedings either independently of the Act or in relation to it for any other purpose. Again, I consider that he is right.
In my judgment the words proceedings … in respect of any act alleged to be unlawful by virtue of the provisions of Part I of this Act’ run through and govern ss 19–24, and in s 19(10) they have become ‘proceedings … against any person in respect of an act which is unlawful by virtue only of Part I … ’ Counsel for the borough says, rightly, that the borough is not bringing any such proceedings; it is bringing proceedings to declare that an act of the borough is not unlawful but is lawful. Thus, as in Barwick v South Eastern and Chatham Ry Cos the borough is not asking this court to usurp functions exclusively assigned to another tribunal. If its contention on the substantive question in this case is correct, it will follow that this court will in effect have exercised its jurisdiction to declare that the special tribunal has, in law, no jurisdiction in circumstances such as the present where there is no dispute of fact. If the borough’s contention on the substantive question is wrong, these proceedings will fail and the board can decide, if it so wishes, to take proceedings in the nominated county court.
What then of the other objections of counsel for the board? He says, and in my judgment rightly, that if I am correct, there is a lack of mutuality in that the borough can ask the High Court to declare that its actions are lawful, whereas the board is forbidden to do the converse directly and must seek any such declaration in the county court in the first instance. It is, however, to be observed that the board can initiate proceedings to determine the illegality which it alleges, and that if dissatisfied with the decision of the county court it can have recourse to the Court of Appeal; thus its hardship is far less than that of the borough, who, if I am wrong, cannot go to any court at all unless the board chooses to take it.
There are obviously good reasons of policy why the person alleging discrimination against himself is debarred from himself bringing enforcement proceedings. His claim has to be pursued through the board and brought on his behalf by it if it thinks fit. It is said that if, as in the present case, he is made a defendant to High Court proceedings, he might be ordered to pay costs. If, however, he is wise, he will, like the second defendant, enter no appearance and leave his interests in the safe hands of the board. In any event, I am somewhat doubtful whether he is properly made a defendant to this action, since it could be argued with force that the issue raised is between the borough and the board which alone has formally expressed its opinion and requested the assurance. Furthermore, this problem, should it ever arise, could be adequately dealt with by the exercise of the court’s discretion and the same would
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apply if, in High Court proceedings for a declaration, discovery were sought of documents for which special privilege is given in the county court by s 24—a somewhat unlikely event.
It remains for me to deal with the submissions of counsel for the board that there is not yet a live issue between the borough and the board sufficient to found my jurisdiction, or at least not one sufficient to warrant the exercise of my discretion. In making this submission counsel, as I have said expressly and again I consider rightly, abjured any intention to rely on the events subsequent to the issue of these proceedings, which I have mentioned. On this limb of the argument there were cited to me three cases. In Re Clay, an executor, who had been ordered to pay some costs, paid them but reserved any rights which he might have had under a deed to claim an indemnity against the beneficiaries. He did not, however, make any actual claim against them. They sought a declaration that they were not liable under the deed, but it was held that unless and until a claim was made there was no jurisdiction to make the declaration. Similarly, in Re Barnato, the trustees of a fund joined the Inland Revenue in an effort to get the court to decide whether, if they made an advance to a child and she died within five years, estate duty would be payable, and it was held that the court would not decide a hypothetical question about events which might never occur.
I would distinguish these two cases from the present situation. Of course, here the board has formed and communicated a formal opinion that the borough has been guilty of unlawful conduct and has sought an assurance against repetition. Moreover the borough is a public body which is, in my judgment, entitled in these circumstances to seek a ruling from this court as to the legality of its rule, provided of course that there is a defendant with sufficient interest in the matter. In the circumstances, I consider that these conditions are satisfied and that I have jurisdiction, and that this is a matter where I would exercise my discretion to grant relief by way of declaration, subject, of course, to my being satisfied that the borough is right in its contention on the substantive point of law.
The third case of counsel for the board, Punton v Ministry of Pensions, I regard as distinguishable on other grounds. In that case, the national insurance commissioner had held that the plaintiffs were disqualified for unemployment benefit for the period of a strike by other workers. They sought a declaration in the High Court that he was wrong in law. The judge held that he had no jurisdiction, and in any event refused the relief in the exercise of his discretion. The Court of Appeal upheld the judge, saying that there was no jurisdiction to make, by way of the exercise of the supervisory power of the High Court, a declaration which could not alter the Commissioner’s award, but would only result in two conflicting decisions subsisting, of which that in the lower court would be the effective and prevailing one. This judgment is not in my judgment applicable here. There has been no decision of the county court, and if this court should make a declaration, it will serve a useful purpose both in inhibiting proceedings in the county court and in binding that court on the question of law if proceedings are taken. If this court holds that the rule is unlawful it is to be expected that it will be deleted, subject always of course to the question of appeal.
My decision is fortified by the three cases cited in reply by counsel for the borough. In Dyson v A-G in the Court of Appeal the Inland Revenue had served notices on a taxpayer requiring him to provide certain information. He refused, contending that he was under no obligation. They threatened penalties. He brought an action against the Attorney General for a declaration that the notices and requests were ultra vires and illegal. The Attorney General applied to strike out the statement of claim. The Court of Appeal held that the action was not only competent but was
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also a convenient way of providing speedy and easy access to the courts where a subject had a real cause of complaint against the purported but arbitrary exercise of statutory authority by a government department or official. In Cooper v Wilson, a watch committee purported to dismiss a police sergeant ex post facto after his service had in fact been terminated by resignation. In consequence, it refused him some payments to which he would have been entitled on resignation. It was held that he was not limited to his rights under the Police (Appeals) Act 1927 or to certiorari, but that he could ask the High Court to declare that he had duly resigned and that the watch committee had acted without jurisdiction. Apart from the narrow question of the supervisory jurisdiction of the High Court over inferior tribunals, Greer LJ made some observations ([1937] 2 All ER at 734, [1937] 2 KB at 321) supporting the utility and convenience of declarations where two parties are at issue as to their rights. It is to be observed in the present case that the borough has no other means of establishing its legal position, which is impugned. Finally, in Sivyer v Amies, a landlord had applied to the justices for an order for possession under the Small Tenements Recovery Act 1838. The tenant maintained that it was a yearly tenancy and wanted to call an old man who was too frail to come to court. The justices had no power to take evidence on commission. The landlord refused to bring his action in the county court. The tenant applied to the High Court for a declaration that it was a yearly tenancy. As the rules then stood, he could not sue in the county court for a declaration simpliciter; so, as here, he had no other means of establishing satisfactorily his legal position. Crossman J ([1940] 3 All ER at 292) refused to dismiss the action, holding that in the circumstances it was a proper procedure, not ousting the jurisdiction of the justices but being the only way in which the plaintiff could have his rights properly determined.
In my judgment the same applies here. The borough is not bound to wait and see if the board brings proceedings in the county court. The position is quite different from that which arose, for instance, in Argosam Finance Co Ltd v Oxby (Inspector of Taxes) where it was held by Plowman J that the Income Tax Act 1952, s 341, uno flatu conferred on the taxpayer a right, and provided a specific remedy and a specific tribunal for him so that he must have recourse to that tribunal only, unless and until it acted outside its jurisdiction. Plowman J pointed out ([1964] 1 All ER at 800, [1965] Ch at 405) that Barwick’s case was distinguishable from Barraclough v Brown on the ground that no other remedy was available.
This brings me to the substantive question of law. As I have said, rule 3(1) of the borough’s rules for transfer from the register to the housing waiting list stated: ‘An applicant must be a British subject within the meaning of the British Nationality Act 1948’. That Act, by s 1, defines a British subject as including both British subjects and Commonwealth citizens. Sections 4–10 describe how persons may qualify for citizenship, by birth, descent, registration, naturalisation and incorporation of territory. Section 32 defines an alien as a person who is not a British subject, a British protected person as defined by the same section, or a citizen of Eire. It is, therefore, clear that by its terms the borough’s rule discriminates against, or excludes in effect, aliens only, and is expressed to be by reference to current nationality. I am quite satisfied that this is how the borough applies it in practice. If an alien acquires British nationality, he becomes immediately eligible for transfer to the housing waiting list if otherwise qualified. If a British born national should renounce his
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citizenship under s 19 of the 1948 Act, or a naturalised British subject should be deprived of his citizenship under s 20, he would become ineligible.
The borough’s case is, first, that before the Race Relations Act 1968, it was plainly permissible to discriminate against or exclude aliens or, for that matter, persons of foreign birth or descent in virtually any field, including that of housing. Counsel for the borough produced an agreed list, mainly culled from 1 Halsbury’s Laws (3rd Edn) p 506, of 15 statutory restrictions of aliens; and he gave other instances where extreme discrimination could be and was lawfully employed in many fields at common law and on many grounds, including age, sex, religion, nationality, residence and qualifications. The most striking was Re Lysaght where Buckley J held that a provision in a will which founded some medical studentships, but excluded Jews and Catholics, was not against public policy or unlawful, although the judge deleted the restriction because it would, in the circumstances, have rendered the administration of the trust impracticable.
I pause here to say that I have indeed no doubt that, before the Race Relations Act 1968, the borough’s rule would have been perfectly lawful. Counsel for the borough goes on to argue that this Act therefore interferes with and restricts rights previously existing at common law, as indeed it does, and, therefore, whilst not a penal act, it must be construed with care and a degree of strictness. He maintains that, approaching thus the construction of the phrase ‘on the ground of colour, race or ethnic or national origins’, the term ‘national origins’ does not cover a discriminatory provision on the ground of existing nationality. In brief, he says that the test of exclusion which applies is quite different, and that national like ethnic origins stem from birth (whether by territory or ancestry or both) and are unchangeable; whereas nationality can be changed, indeed, more than once. He says that the second defendant was discriminated against not because of his foreign origins, but because he was not a British national. He is no longer discriminated against despite his foreign origin, because he is now of British nationality. He says that it would have been easy to include nationality in s 1(1), and contrasts this omission with its inclusion in other sections to which I will refer later.
To this counsel for the board replies that the matter is not so simple. He contends that ‘national origins’ is a deliberately wide phrase; that in the vast majority of cases national origins and nationality are the same, because a person’s national origins dictate his original nationality, and the vast majority of people retain their nationality of origin; and that therefore a discrimination on the ground of nationality essentially hits at national origin or, at the very least, renders less favourable the position of persons of foreign origin and therefore of original foreign nationality, because, in order to qualify, they have to surmount the by no means easy hurdle of naturalisation. To construe the relevant phrase as permitting discrimination on the ground of current nationality would, he says defeat the manifest purpose of the Act, and for that matter of the Race Relations Act 1965 which employs the same definitive phrase, even if that is not the actual or conscious purpose of the plaintiffs. I may say that no one suggests that the borough’s rule is a conscious sham.
Counsel for the board, too, relies on the use of particular phrases in other sections of the Act as fortifying his argument. The argument is nicely balanced. As so often happens, the canons of interpretation conflict. Statutes restricting common law rights must be carefully and jealously construed. On the other hand, words must, if possible, not be so construed as to defeat the essential objects of the statute. I can only say that, on balance, I accept the arguments of counsel for the board. Generally speaking, people must be taken to intend the natural consequences of their acts.
In my judgment the practical effect of the borough’s rule is and must be to place, for the purposes of s 5 of the Act, in a less favourable position than almost all people of British or Commonwealth origin, the vast majority of people of other national origins. It is thus, in effect and in all except an insignificant number of cases, a discrimination
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on the ground of national origins although it is not expressed in those terms. I fortify my decision by reference to the Race Relations Act 1965. In the surviving operative sections of that Act, which is to be cited with the 1968 Act, the identical definitive phrase is used, as I have already mentioned. It seems to me that it would make nonsense of s 6 of that Act to say that it would not be an offence against that section, to stir up hatred by threatening, abusing or insulting, in the terms of the section: ‘all people who are not British subjects under the 1948 Act’.
In conclusion, I will refer to the other sections of the 1968 Act where different or extended phrases are used. As is to be expected, counsel for the borough on the one hand suggests that the use of the word ‘nationality’ in other sections indicates a distinction between it and national origins. Counsel for the board on the other hand contends that an exemption for a right to discriminate on the ground of nationality in certain defined cases tends to show that such discrimination would otherwise be unlawful under s 1. On the whole, I prefer the argument of counsel for the board on this point. I do not, however, regard it as a determining factor, because such saving clauses are commonly included for the avoidance of doubt or to preserve existing practices and polices by reference to their precise terms, even if these overlap the definition in the Act.
I will list these references to nationality and other words not occurring expressly in s 1: s 3(2) exempts restrictions on employment or qualifications imposed by existing statutes or statutory provisions. It is probably fair to say that this is aimed mainly at saving the provisions of various statutes disqualifying aliens or limiting their number, which might otherwise be thought to be repealed by this Act. Section 6(2) saves advertisement for Commonwealth citizens for employment outside Great Britain, and for non-Commonwealth citizens for employment in Great Britain. I find this of no assistance. Section 8(1) declares that it shall not be unlawful to select a person of a particular nationality or descent for employment requiring attributes especially possessed by people of that nationality or descent. Whatever may be the exact meaning and application of this subsection, it does, in my judgment, give some indication that such selection on the ground of existing nationality would otherwise be unlawful. Section 9 allows charitable instruments to confer benefits on persons of a particular race, descent or ethnic or national origins. The word ‘descent’ does not occur in s 1(1), but on any view this seems irrelevant to the present problem. Section 27(9) finally exempts rules to be made restricting employment in the service, of the Crown or nominated public bodies to persons of particular birth, citizenship nationality, descent or residence. This is a real mixed bag, presumably directed to the sort of limitations traditionally imposed. It does not help me in my task inasmuch as some of the limitations mentioned are clearly within, and one (ie residence) is clearly outside, the terms of the governing phrase in s 1(1).
For the above reasons, I hold that I have jurisdiction, and I would exercise my discretion to grant one or more of the declarations if I considered that the borough’s argument on the substantive question was well founded in law. In my judgment it is not, and I refuse to make any declaration.
I cannot leave this case without expressing my thanks to both learned counsel for the very full and clear arguments that they have presented to me in this matter.
Judgment for the board.
On 5 November 1970 leave to appeal and cross-appeal to the House of Lords was granted, Swanwick J certifying under s 12 of the Administration of Justice Act 1969 that points of law of general public importance were involved and that such points of law related wholly or mainly to the construction of an enactment and had been fully argued in the proceedings and fully considered in his judgment.
Solicitors: Sharpe, Pritchard & Co agents for J E Mantle, Ealing (for the borough); Lawford & Co (for the board).
Janet Harding Barrister.
The Incorporated Council of Law Reporting for England and Wales v Attorney General and another
[1971] 1 All ER 436
Categories: CHARITIES
Court: CHANCERY DIVISION
Lord(s): FOSTER J
Hearing Date(s): 18, 19, 20 NOVEMBER, 1 DECEMBER 1970
Charity – Benefit to community – Development and administration of judge-made law – Law reports – Preparation and publication of accurate reports of judicial decisions – Use of law reports to enable courts to develop and administer the law – Benefit to members of the legal profession in their practice – Charge made for the law reports – Whether provision of law reports beneficial to the community – Whether falling within the spirit and intendment of the preamble to the Statute of Elizabeth.
Charity – Education – Law reports – Preparation and publication of accurate reports of judicial decisions – Use of law reports for teaching law to students – Use of law reports in court to inform judge of relevant case law – Whether provision of law reports for the advancement of education.
Charity – Company – Objects – Evidence – Evidence whether objects charitable – Objects set out in memorandum – Outside evidence whether objects could be carried out only in a way that was exclusively charitable.
The council, a company limited by guarantee and not having a share capital, was incorporated in 1870, its objects being, shortly, the preparation and publication of reports of judicial decisions. There was no statement in its memorandum of association saying what the purpose of the preparation and publication of reports was. The reports were in fact used for the purpose of the courts in drawing the attention of judges to relevant case law and enabling them to come to a correct decision in accordance with decisions binding on them, for the purpose of members of the legal profession in their practice and for the purpose of teaching law to students. A charge was made for the purchase of the reports. Although the council was carrying on a business, profits, if any, could not be distributed to its members. The council appealed to the court against the refusal of the Charity Commissioners to register it as a charity under s 4(1)a of the Charities Act 1960. The Crown submitted: (1) that the court could not look outside the memorandum to discover what the council’s purposes were, and that it was irrelevant to enquire into the motives or ultimate aims of those who founded the council; (2) that, if that were wrong, the purpose was to benefit members of the legal profession in the practice of that profession; (3) that the council was not established for educational purposes; (4) that its object did not fall within the classification of ‘purposes beneficial to the community’ since it was not analogous to any decided case and was not within the spirit and intendment of the preamble to the Statute of Elizabethb.
Held – (i) Although the court could not construe the objects of the council by reference to evidence outside the terms of the memorandum, once it was established what those objects were, then, in order to determine whether they were or were not charitable, the court must enquire whether they could be carried out only in a way which was exclusively charitable; for this purpose the court could look at the historical background and the use to which the law reports were put and the purpose for which they were published (see p 441 b, post).
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(ii) The preparation and publication of accurate law reports could not be regarded as being for the advancement of education because, although the use of law reports for teaching law to students was for educational purposes, in court they were used to bring the attention of the judge to case law on a particular subject so that he might come to a correct decision in accordance with former decisions binding on him, a purpose which did not come within the meaning of the phrase ‘the advancement of education’ (see p 445 g, post).
(iii) However, the purposes for which the council was established were charitable because—
(a) although the provision of accurate law reports might benefit members of the legal profession who used them in their practice, the role which the law reports played in the development and administration of judge-made law was a purpose beneficial to the community, since without them the administration and development of the law would be difficult, if not impossible; it was no objection that the council was carrying on a business, since the profits, if any, were not distributed to members of the council, nor was it an objection that a charge was made for the purchase of the reports (see p 446 f to p 447 b, post); Inland Revenue Comrs v Falkirk Temperance Café Trust 1927 SC 261 and Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corpn [1967] 3 All ER 215 followed; dictum of Romer LJ in Royal College of Nursing v St Marylebone Corpn [1959] 3 All ER at 668 applied;
(b) the objects of the council fell within the spirit and intendment of the preamble to the Statute of Elizabeth either on the test of analogous decided cases or on the wider test of falling ‘naturally, and in their own right, within the spirit of the preamble’ (see p 448 e, post); dictum of Lord Wilberforce in Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corpn [1967] 3 All ER at 224 applied.
Notes
For the definition of charity, see 4 Halsbury’s Laws (3rd Edn) 206–213, paras 486–491, for charities for educational purposes, see ibid, 218–221, paras 496–499, and for charities for other public purposes beneficial to the community, see ibid, 226–232, paras 506–513.
For cases on the subject of charitable purposes generally, see 8 Digest (Repl) 312–315, 1–12, for cases on charities for educational purposes, see ibid, 326–331, 91–126, and for cases on charities for other public purposes beneficial to the community, see ibid, 342–352, 235–312.
Cases referred to in judgment
A-G v Heelis (1824) 2 Sim & St 67, 2 LJOSCh 189, 57 ER 270, 8 Digest (Repl) 343, 246.
Bowman v Secular Society Ltd [1917] AC 406, [1916–17] All ER Rep 1, 86 LJCh 568, 117 LT 161, 8 Digest (Repl) 359, 378.
British School of Egyptian Archaeology, Re, Murray v Public Trustee [1954] 1 All ER 887, [1954] 1 WLR 546, Digest (Cont Vol A) 92, 118a.
Income Tax Special Purposes Comrs v Pemsel [1891] AC 531, [1891–94] All ER Rep 28, 61 LJQB 265, 65 LT 621, 55 JP 805, 8 Digest (Repl) 312, 1.
Inland Revenue Comrs v City of Glasgow Police Athletic Association [1953] 1 All ER 747, [1953] AC 380, 117 JP 201, 28 Digest (Repl) 320, 1406.
Inland Revenue Comrs v Falkirk Temperance Café Trust 1927 SC 261, 28 Digest (Repl) 324, * 760.
Institution of Civil Engineers v Inland Revenue Comrs [1932] 1 KB 149, [1931] All ER Rep 454, 100 LJKB 705, 145 LT 553, 28 Digest (Repl) 317, 1394.
Keren Kayemeth Le Jisroel Ltd v Inland Revenue Corms [1931] 2 KB 465; affd HL [1932] AC 650, [1932] All ER Rep 971, 101 LJKB 459, 147 LT 161, 28 Digest (Repl) 317, 1395.
Lopes, Re, Bence-Jones v Zoological Society of London [1931] 2 Ch 130, [1930] All ER Rep 45, 100 LJCh 295, 146 LT 8, 8 Digest (Repl) 329, 115.
Macduff, Re, Macduff v Macduff [1896] 2 Ch 451, [1895–99] All ER Rep 154, 65 LJCh 700, 74 LT 706, 8 Digest (Repl) 395, 879.
Page 438 of [1971] 1 All ER 436
Morice v Durham (Bishop of) (1805) 10 Ves 522, [1803–13] All ER Rep 451, 32 ER 947, 8 Digest (Repl) 390, 836.
National Anti-Vivisection Society v Inland Revenue Comrs [1947] 2 All ER 217, [1948] AC 31, [1947] LJR 1112, 177 LJ 226, 8 Digest (Repl) 313, 3.
Royal College of Nursing v St Marylebone Corpn [1959] 3 All ER 663, [1959] 1 WLR 1077, 38 Digest (Repl) 537, 350.
Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corpn [1967] 3 All ER 215, [1968] AC 138, [1967] 3 WLR 1132, 132 JP 30, Digest Supp.
Stanford, Re, Cambridge University v A-G [1924] 1 Ch 73, [1923] All ER Rep 589, 93 LJCh 109, 130 LT 309, 8 Digest (Repl) 468, 1701.
Strakosch (decd), Re, Temperley v A-G [1949] 2 All ER 6, [1949] Ch 529, [1949] LJR 1477, 8 Digest (Repl) 387, 807.
Tennant Plays Ltd v Inland Revenue Comrs [1948] 1 All ER 506, 28 Digest (Repl) 319, 1403.
Williams’ Trustees v Inland Revenue Comrs [1947] 1 All ER 513, [1947] AC 447, [1948] LJR 644, 176 LT 462, 28 Digest (Repl) 14, 49.
Wokingham Fire Brigade Trusts, Re, Martin v Hawkins [1951] 1 All ER 454, [1951] Ch 373, 115 JP 159, 8 Digest (Repl) 345, 264.
Cases also cited
A-G v Blizard (1855) 21 Beav 233.
A-G v Brown (1818) 1 Swan 265.
A-G v Bushby (1857) 24 Beav 299.
A-G v Marchant (1866) LR 3 Eq 424.
A-G v National Provincial and Union Bank of England [1924] AC 262, [1923] All ER Rep 123.
Beaumont v Oliveira (1869) LR 4 Ch App 309.
Berridge, Re (1890) 63 LT 470.
Berry v St Marylebone Borough Council [1957] 3 All ER 677, [1958] Ch 406.
Brighton College v Marriott [1926] AC 192, [1925] All ER Rep 600.
Cranston (decd), Re [1898] 1 IR 431.
Foveaux, Re [1895] 2 Ch 501.
Gilmour v Coats [1949] 1 All ER 848, [1949] AC 426.
Grove-Grady, Re [1929] 1 Ch 557, [1929] All ER Rep 158.
Hopkins Will Trusts, Re [1964] 3 All ER 46, [1965] Ch 669.
Incorporated Council of Law Reporting for England and Wales, Re, Duty on the Estate of (1888) 22 QBD 279.
Inland Revenue Comrs v Baddeley [1955] 1 All ER 525, [1955] AC 572.
Inland Revenue Comrs v Forrest (1890) 15 App Cas 334.
Inland Revenue Comrs v Yorkshire Agricultural Society [1928] 1 KB 611, [1927] All ER Rep 536.
Jones v Williams (1767) Amb 651.
Kendall v Granger (1842) 5 Beav 300.
Koettgen’s Will Trusts, Re [1954] 1 All ER 581, [1954] Ch 252.
London University v Yarrow (1857) 1 De G & J 72.
Mariette, Re [1915] 2 Ch 284.
National Bank of Greece SA v Westminster Bank Executor & Trustee Co (Channel Islands) Ltd [1970] 3 All ER 656, [1970] 1 WLR 1400.
Nightingale v Goulbourn (1848) 2 Ph 594, [1843–60] All ER Rep 420.
Smith v Incorporated Council of Law Reporting for England and Wales [1914] 3 KB 674.
Smith v Kerr [1902] 1 Ch 774.
Wedgwood, Re [1915] 1 Ch 113, [1914–15] All ER Rep 322.
Whicker v Hume (1858) 7 HL Cas 124, [1843–60] All ER Rep 450.
Yates v University College, London (1873) 8 Ch App 454.
Adjourned summons
This was an appeal by originating summons, dated 24 September 1969, by the
Page 439 of [1971] 1 All ER 436
Incorporated Council of Law Reporting for England and Wales (‘the council’), against a decision of the Charity Commissioners for England and Wales that the council was not a charity and should not be entered in the Central Register of Charities under s 4 of the Charities Act 1960. The defendants were Her Majesty’s Attorney General and the Commissioners of Inland Revenue (‘the Crown’). The facts are set out in the judgment.
Raymond Walton QC and Spencer G Maurice for the council.
N C H Browne-Wilkinson for the Attorney General.
H E Francis QC and J P Warner for the Crown.
Cur adv vult
1 December 1970. The following judgment was delivered.
FOSTER J read the following judgment. This is an appeal against a decision of the Charity Commissioners for England and Wales by the Incorporated Council of Law Reporting for England and Wales (which I will call ‘the council’) seeking a declaration that the council is entitled to be registered as a charity under the Charities Act 1960, the Charity Commissioners having refused to register it. By s 4(1) of that Act it is provided:
‘There shall be a register of charities which shall be established and maintained by the Commissioners and in which there shall be entered such particulars as the Commissioners may from time to time determine of any charity there registered.’
By s 5(3) of that Act it is provided:
‘An appeal against any decision of the Commissioners to enter or not to enter an institution in the register of charities … may be brought in the High Court by the Attorney-General, or by the persons who … claim to be the charity trustees of the institution … ’
These appeals are regulated by RSC Ord 108. RSC Ord 108, r 4 provides:
‘(1) An appeal against an order or decision of the Commissioners shall be heard and determined by a single judge
‘(2) Such an appeal must be brought by originating summons to which the Attorney-General, unless he is the appellant, shall be made a defendant in addition to any other person who is a proper defendant … ’
In this originating summons there are two defendants, the Attorney General and the Commissioners of Inland Revenue (whom I will call ‘the Crown’). By s 45(1) of the Act, ‘charity’ is defined as
‘any institution, corporate or not, which is established for charitable purposes and is subject to the control of the High Court in the exercise of the court’s jurisdiction with respect to charities.’
By s 46 it is provided:
‘“charitable purposes” means purposes which are exclusively charitable according to the law of England and Wales.’
The question which therefore arises in this case can be stated as follows: is the council established for purposes which are exclusively charitable according to the law of England and Wales?
Submissions. For the council, it was submitted that the purposes for which the council was established fell within the category of the advancement of education, the second of the four classifications of charity by Lord Macnaghten in Income Tax Special Purposes Comrs v Pemsel ([1891] AC 531 at 583, [1891–94] All ER Rep 28 at 55). Alternatively, it was submitted that it fell within
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the fourth classification, ie ‘other purposes beneficial to the community, not falling under any of the preceding heads’, because it was for the advancement of the administration of the law, and also came within the spirit and intendment of the preamble of the Statute of Elizabeth.
The Attorney General did not support the council’s first submission that it was for the advancement of education, but did support the contention that it fell within the fourth classification as being for the advancement of the administration of the law, and was within the spirit of the preamble. For the Crown it was submitted, first, that the court could not look outside the memorandum to discover what the council’s purposes were, and that it was irrelevant to enquire into the motives or ultimate aims of those who founded the council. Secondly, if that was wrong, it was submitted that the purpose was to benefit members of the legal profession in the practice of that profession. Thirdly, it was submitted that the council was not established for educational purposes, and the question was put: whoever heard of a lawyer who received his education from the council? Lastly, it was submitted that the council’s object did not fall within the fourth classification, since it was not analogous to any decided case and was not within the spirit and intendment of the preamble.
The objects of the council. The council is a company limited by guarantee and not having a share capital. It was incorporated on 28 July 1870. The objects for which the council was established are set out in para 3 of the memorandum of association in these terms:
‘The Objects for which the Association is established are: 1. The preparation and publication, in a convenient form, at a moderate price, and under gratuitous professional control, of Reports of Judicial Decisions of the Superior and Appellate Courts in England. 2. The issue, periodically or occasionally, of any subsidiary or other publications relating to legal subjects which it may be considered expedient to combine with the publication of such Reports, including the Statutes of the Realm, or any part thereof, if deemed expedient. 3. The continuation (in furtherance of the above objects) of the Series of Reports called “The Law Reports” (now in course of publication by the present Council of Law Reporting) under their present or any other name, and either in their present form and according to the present system or subject to any alterations of form or system that may be considered conducive to the promotion of the above objects; and the issue periodically or occasionally of any legal Digests or other publications connected with “The Law Reports”, or subsidiary thereto, or which may be considered likely to increase the utility thereof; and the acquiring by purchase or otherwise, on such terms or conditions as shall be considered expedient, the copyright of any (rival or) other publications of Law Reports which may now or shall hereafter exist or be in course of publication, and the making of any agreement or arrangement for the purpose of procuring the discontinuance of such Reports, or the publishing thereof, or the discontinuance of preparing Reports for any such publication by any other persons. The taking over and assuming all the assets and liabilities of the existing Council of Law Reporting. 4. The doing all such other lawful things as are incidental or conducive to the attainment of the above objects.’
Shortly, the object was the preparation and publication of reports of judicial decisions. It is true that there is no statement there saying what the purpose of the preparation and publication of reports was. The Crown relied on three cases to show that the court should not go outside the actual wording of the memorandum to discover its object, Keren Kayemeth Le Jisroel Ltd v Inland Revenue Comrs, Tennant Plays Ltd v Inland Revenue Comrs and Bowman v Secular Society Ltd.
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In the latter case, Lord Buckmaster ([1917] AC at 468, [1916–17] All ER Rep at 32) said:
‘Neither the documents preliminary to the incorporation of a company registered with a memorandum of association, nor the action of directors after a company has been formed, can properly be received in evidence for the purpose of determining what the objects of the company may be.’
Those decisions, in my judgment, mean only that the court cannot construe the objects by reference to outside evidence but, once the objects are established, the enquiry then is whether the objects are or are not charitable, and for that purpose the court must, I think, enquire whether the objects in the memorandum can be carried out only in a way which is exclusively charitable. For that enquiry, the court can, I think, look at the historical background and the use to which the law reports are put and the purpose for which they are published.
The historical background. In 1849, a report published by the Society for Promoting the Amendment of the Lawc. The report statesd:
‘The judicial decisions of the Superior Courts at Westminster, as reported in the volumes recognised by the Courts, constitute at the present day, almost equally with the statute book, the law of the land. They are, to use the language of Sir Matthew Halee, “the formal constituents of the common law”; and yet, by a singular inconsistency, whilst every act of parliament requires the sanction of the three estates of the realm, and its contents are communicated to the public in the most authentic form, the law laid down by our tribunals is in no respect officially promulgated. A statute creating the most trifling alteration in legal procedure is ushered into public notice in the most formal manner possible; a judicial exposition of one of the leading principles of our common law, materially affecting the future administration of justice, the rights of property, or the liberty of the subject, may take place without notice and without anticipation, amidst an inattentive crowd, whilst the voice of the Judge who delivers it may not reach any one beyond the parties immediately interested in the case which gives rise to it. This remarkable inconsistency is productive of greater inconvenience at the present day than at any previous period. The concurrent jurisdiction of the Superior Courts; the establishment of local tribunals; the extensive jurisdiction of the Quarter Sessions; and other courts remote from Westminster Hall, render it indispensable, in order to secure uniformity in the administration of justice, that the reports of the judicial exposition of the law at the fountain head, should be accurately and expeditiously published, and in such a form as to secure their being generally accessible to all who are either officially or professionally engaged in administering it.’
The report continuesf:
‘Thus, under the present system of reporting, the law expounded in Westminster Hall may not only remain for years concealed from the public, but the professed reporter himself, or the counsel in the case, may alone be in possession of the decisions, at the risk of their being used at any moment to contradict the law as universally received amongst the Profession. This inconvenience is thus alluded to in the preface to Watkins’ Principles of Conveyancing:—“Supposing that a person should be so fortunate as to be able to extract something comprehensible out of printed contradictions, yet other contradictions may make
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their appearance in manuscript, and, overthrowing all his hard-earned knowledge, remind him once again of the glorious uncertainty of the law. Is the law of England to depend upon the private note of an individual and to which an individual can only have access? Is a judge to say, ‘Lo! I have the law of England on this point in my pocket: there is a note of the case which contains an exact statement of the whole facts, and the decision of my Lord A. or my Lord B. upon them. He was a great, a very great man: I am bound by his decision: all you have been reading was erroneous. The printed books are inaccurate; I cannot go into principle. The point is settled by this case’? Under such circumstances, who is to know when he is right or when he is wrong? If conclusions from unquestionable principles are to be overthrown in the last stage of a suit by private memoranda, who can hope to become acquainted with the laws of England?—and who that retains any portion of rationality would waste his time and his talents in so fruitless an attempt? Is a paper evidencing the law of England to be buttoned up in the side pocket of a judge, or to serve for a mouse to sit upon in the dusty corner of a private library? If the law of England is to be deduced from adjudged cases, let the reports of those adjudged cases be certain, known, and authenticated“.’
Nothing came of this report, and in 1853 a further reportg was made by the same society. In that report it is statedh:
‘… 4. Bearing in mind always that the exposition of the general principles of the Law by the Judges in Westminster Hall for the most part equally affects the subject with the law positively enacted by the Legislature,—that the Law of Property, real and personal, in this country, is for the most part governed by precedents—and that our comprehensive system of commercial law has been entirely moulded into its present form from the Judicial Bench,—the contrast between the practice of promulgating the Law enacted by the Legislature and that which is from time to time expounded by our Judges is very remarkable. 5. The authority of a judicial decision of the Courts of Westminster Hall in practice, at least, equals that of an Act of the Supreme Legislature. It is, until overruled, binding on all the inferior judges and magistrates of the land, affects the title to property and the conduct of commercial transactions, and generally controls the administration of justice. It can be upset only by the decision of a Court of Error, or the direct interposition of Parliament. Judicial precedents are, therefore, to use the language of Bentham, Judge-made laws, and, when long acted upon, become of equal force with the express enactments of the Legislaturei; and if it is the duty of the State to make the Law of the land universally known, there can be no reason why the publication of the Law declared from the Bench should be less formal and less complete than that of the Law declared by the Legislature … ’
Again, nothing came of that report but, on 25 February 1865, there took place the first meeting of an unincorporated association known as the Council of Law Reporting, the forerunner of the council. The Law Reports as we know them commenced in 1866 and, as I have said, the council was incorporated on 28 July 1870. The other parts of its memorandum and articles to which I should draw attention are para 4 of the Memorandum, which states:
‘The income and property of the Association, whencesoever derived, shall be applied solely towards the promotion of the objects of the Association as set
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forth in this Memorandum of Association, and no portion thereof shall be paid or transferred, directly or indirectly, by way of dividend, bonus, or otherwise howsoever by way of profit, to the persons who at any time are to have been Members of the Association, or to any of them, or to any person claiming through any of them: Provided that nothing herein shall prevent the payment, in good faith, of remuneration to any Editors, Reporters, Secretaries, officers or servants of the Association, or to any Member of the Association, or other person in return for any services actually rendered to the Association.’
and art 2 of the articles which sets out the composition of the membership and states: ‘The number of the Members of the Association shall not exceed 20’. Then, art 3 sets out in three paragraphs how the members are to be chosen. Under para (a), ten are to come from the four Inns of Court and the Law Society, two from each; under para (b) there are two to be nominated by the council; and under para (c) there are to be three ex officio members, the Attorney General, the Solicitor General and the President of the Law Society. By an amendment which was passed on 28 June 1951, a further para (d), was added to that article in these terms:
‘Any person of persons, not exceeding five in number, nominated by the Council (hereinafter called co-opted members).’
Article 34 states:
‘The Council shall consist of all the Members of the Association for the time being (acting for this purpose in an executive capacity and not as Members of the Association); accordingly every Member of the Association shall, upon his becoming such, ipso facto become and be a Member of the Council, and upon his ceasing for any reason to be a Member of the Association shall ipso facto cease forthwith to be a Member of the Council.’
In this connection I should refer to the affidavit of Professor Goodhart with regard to the history of it. I start at para 3 of his affidavit:
‘3. English Law, usually referred to as the Common Law, unlike the legal systems in most Continental countries, is divided into two parts (a) the statute law and (b) the judge-made law. The statute law consists of the law enacted by Parliament or by some other body to whom legislative power has been given. It is obvious that these statutory enactments must be in written form and must be available to those who may be affected by them. The publication of these statutes is the responsibility of the Controller of Her Majesty’s Stationery Office and Queen’s Printer. They can be purchased by any one for a small sum, covering part of the cost of printing. The printed copy is regarded as being authoritative so that it is unnecessary for anyone to ascertain whether or not it is identical with the original document. It has never been suggested that the publication of statutes should be left solely in the hands of private publishers.
‘4. The second part of English Law, called the judge-made law, has an ancient history which is unique. Under most of the modern Continental legal systems, which are based on written codes, it is presumed that the code covers in principle all legal problems. There are, therefore, no gaps which the judges must fill by their decisions as every novel situation is brought by them under an existing principle. When they decide a case they purport to interpret the law not to create it. There has, therefore, never been the need on the Continent to publish the judgments of the courts in full, or for a law student to read them in detail.
‘5. The English system is an entirely different one. It became firmly established 700 years ago when Henry de Bracton, Chancellor of Exeter Cathedral and Assize Judge, who died in 1268, wrote his classic work on The Laws and Customs of England. The important point is that he based his law in large part on 2,000 cases taken from the Plea Rolls. It was in this period that the Year Books began,
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although they did not fully develop until the time of Edward II. There is considerable uncertainty concerning their origin and function but it can be said that they were in the nature of law reports. They were the foundation on which the English Law was built. They had an unbroken history until 1535 when printing made them obsolete. Thereafter reports of the cases were published by individual reporters, the first three being Dyer, Plowden and Sir Edward Coke. For some reason the Reports declined from the middle of the 17th century to the middle of the 18th century when Burrow’s Reports introduced a better, although not an entirely satisfactory standard. At the beginning of the 19th century the judges looked over the draft reports of some of the reporters.
‘6. The legal profession, however, remained unsatisfied with the various reports so that in 1865 a Council of Law Reporting was established with the function of publishing semi-official Law Reports (which I will call “the Law Reports”—which includes the Weekly Law Reports). The work of the Council proved to be satisfactory, but other law reports, which were published either more rapidly or contained many otherwise unreported cases, continued publication, so that in 1939 the Law Reports Committee was appointed to consider the situation.
‘7. It is unnecessary to consider in any detail the report of the Committeej because shortly after World War II the number of law reports was reduced to such a degree that they no longer constituted a serious problem. It is important, however, to emphasise that the Committee recommended that the Law Reports should continue in their established form, as they performed an essential function for the legal profession. In my dissent I suggested that the Law Reports should not only continue but that they should be the only law reports to which the courts would give recognition, but the majority felt that this would be too radical a step. The war, however, carried out most of the reforms suggested in the dissent as no one would now suggest that all the various reports that were suspended should now be restarted.
‘8. This introduction brings me to the main question that must be considered: Why are the Law Reports not published by the Crown as are the Statutes? Both of them are essential parts of the machinery of justice, because the law would not only become uncertain but would also cease to develop, if the cases were not reported. It is, therefore, obvious that if no private persons were prepared to publish any law reports then the Crown would have to do so. Thus in the United States judgments delivered by the Courts must be published at the cost of the State. There are, of course, private publishers who republish these decisions in various ways, but they all base their publications on the official copy.
‘9. The duty of the Crown, to see that all precedent cases of importance are published has failed to be noticed in England because many of the decisions delivered in the Court of Appeal are in oral and not written form. The Evershed Committee reached the conclusion that no change should be made in this practice as many of the appeals from the County Courts are of limited importance, but all unpublished judgments of the Court of Appeal are now filed and indexed in the Bar library in the Law Courts.’
The advancement of education. The question therefore now arises: does the preparation and publication of accurate law reports come under the heading ‘the advancement of education’ in Lord Macnaghten’s classification? A number of cases were cited to me on this question, the nearest to the present case being Re Stanford, Cambridge University v A-G, where it was assumed that a trust ‘to be applied for the express purpose of carrying on to completion and publication my Etymological
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Dictionary of Anglicised Foreign Words and Phrases’ was a charitable purpose under this head. Professor Goodhart, at paras 11 and 12 of his affidavit, states:
‘… In a frequently quoted essay entitled The Science of Case-Law (1882)k Sir Frederick Pollock, one of England’s most distinguished legal scholars, pointed out that the study of law is a science in the same sense as physics or chemistry are sciences. The material with which it is concerned is constituted by the individual cases which must be analysed and measured as carefully as is the material in the other sciences. Later when Pollock became the editor of the Law Reports he followed this principle in the extreme precision which he applied when editing the draft judgments. It was at this time that Professor Langdell introduced the famous “case-system” of teaching at the Harvard Law School in which every law student is required to study the individual cases instead of relying on the text-books. There has been a similar development in England as the law teachers have introduced a modified form of the case-system, with the result that “the science of case law” is now practised to some degree at every university law school. There is no university law library in England and Wales which does not contain at least one set of the Law Reports.
‘12. In saying that the Law Reports are essential to the teaching of law I am not criticising the unofficial law reports which are often published more rapidly and may contain some novel cases. The latter, however, cannot, because of the expense involved and other considerations, be as accurate, and therefore as authoritative, as are the Law Reports.’
It was urged on behalf of the council that there are no boundaries to an educational object so long as knowledge is disseminated, and reference was made to Re Lopes, Bence-Jones v Zoological Society of London and Re British School of Egyption Archaeology, Murray v Public Trustee, that the council’s activities lead to the production of accurate reports which pass into and form part of educational material; and that if the purpose is to provide additional knowledge of real worth to the community it is an educational purpose and charitable, whatever its subject is. It was suggested that when counsel cites a case to a judge counsel is the teacher, educating the judge in the law. That may well be true in my own case, but I cannot think it is true of my brethren. In so far as the law reports are used in the teaching of the law to students, they are of course being used for educational purposes, but when used in court they are used to bring to the attention of the judge the case law on the particular subject so that he may decide the case before him in accordance with former decisions binding on him or be guided by them to come to a correct decision. That purpose does not, in my judgment, come within the meaning of the phrase ‘the advancement of education’. In truth, it is the way in which the judge-made law is developed and applied.
Other purposes beneficial to the community. Do its objects, then, come under the fourth heading? The first classification of the preamble of the Statute of Elizabeth I was carried out by Sir Samuel Romilly (then Mr Romilly) arguing in Morice v Bishop of Durham, and in his classification the fourth heading was defined as ((1805) 10 Ves at 532) ‘the advancement of objects of general public utility’. Lord Macnaghten, as I have already said, described it as ([1891] AC at 583, [1891–94] All ER Rep at 55) ‘other purposes beneficial to the community, not falling under any of the preceding heads’. The difficulty is in deducing from the many cases decided what the true test is. Although the Statute of Elizabeth was repealed by the Mortmain and Charitable Uses Act 1888, though it was thought that s 13(2) of that
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Act preserved the preamble, and although the 1888 Act has now been wholly repealed by the Charities Act 1960, the case law which has been built up during three and a half centuries on the foundation of the preamble remains. In Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corpn one finds the House of Lords holding that cremation was for the public benefit within the spirit and intendment of the preamble. Lord Reid said ([1968] AC at 148, [1967] 3 All ER at 219):
‘If, then, all that is necessary to bring the objects and activities of the appellants within the spirit and intendment of the preamble to the Statute of Elizabeth I is to find analogous decided cases, I think that there is amply sufficient analogy with the series of cases dealing with burial.’
Lord Upjohn said ([1968] AC at 149, [1967] 3 All ER at 219, 220):
‘… the matter has been argued upon the basis, first: does the provision of a crematorium fall within the fourth class of Lord Macnaghten’s famous classification … But it is familiar law that not every such purpose is charitable so, secondly, the appellant company must establish that it falls within the spirit and intendment of the preamble to the Statute of Elizabeth I … ’
Lord Wilberforce said ([1968] AC at 156, [1967] 3 All ER at 224):
‘First, it may be said that the same evolutionary process which has carried charity from the “repair of churches” to the maintenance of burial grounds (i) in a churchyard and (ii) in a cemetery extended from a churchyard should naturally carry it further so as to embrace the company’s objects. Secondly, and more generally, the company’s objects themselves may directly be seen to be within the preamble’s spirit … I regard, then, the provision of cremation services as falling naturally, and in their own right, within the spirit of the preamble.’
If I apply Lord Upjohn’s tests to the present case the following questions arise: first, does the provision of accurate law reports fall within the fourth classification, ‘trusts for other purposes beneficial to the community’? and, secondly, if the answer is ‘yes’, does it come within the spirit and intendment of the preamble? I have come to the conclusion that the purpose of the publication of the law reports is to enable what Professor Goodhart calls judge-made law to be properly developed and administered by the courts. It is no objection if, in the course of carrying out such purpose, members of the legal profession may themselves be benefited in their own practice by the use of those reports (compare Royal College of Nursing v St Marylebone Corpn). Romer LJ said ([1959] 3 All ER at 668, [1959] 1 WLR at 1085):
‘It is clear, however, from such cases as Institution of Civil Engineers v. Inland Revenue Comrs and other cases that this resulting benefit to the nurses is irrelevant for the purpose now in question, provided that the main object as expressed in art. II (B) (b) to promote the advance of nursing.’
No argument was put forward to me suggesting that the use of the word ‘exclusively’ in s 46 of the Charities Act 1960, has in any way altered the law as set forth in that case. Nor is it an objection that the council are carrying on a business provided that the
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profits so made, if any, cannot be distributed to the council’s members, as in this case (remembering para 4 of the memorandum). I refer also to Inland Revenue Comrs v Falkirk Temperance Café Trust. Nor is it an objection that a charge is made for the purchase of the law reports (compare the Scottish Burial case to which I have referred above). In my judgment, the role which the law reports play in the development and administration of judge-made law is a purpose beneficial to the community, since without them the administration and development of that law would be difficult, if not impossible.
The spirit of the preamble. Do the council’s objects, then, come within the spirit of the preamble? To try to find the test to be applied in deciding whether any particular object falls within or without that spirit, one has to look at three recent House of Lords decisions. The first is Williams’ Trustees v Inland Revenue Comrs. Lord Simonds said ([1947] 1 All ER at 518, [1947] AC at 455):
‘My Lords, there are, I think, two propositions which must ever be borne in mind in any case in which the question is whether a trust is charitable. The first is that it is still the general law that a trust is not charitable and entitled to the privileges which charity confers unless it is within the spirit and intendment of the preamble to 43 Eliz. c. 4, which is expressly preserved by s. 13(2) of the Mortmain and Charitable Uses Act, 1888. The second is that the classification of charity in its legal sense into four principal divisions by LORD MACNAGHTEN in Pemsel’s case ([1891] AC at 583, [1891–94] All ER Rep at 55) must always be read subject to the qualification appearing in the judgment of LINDLEY, L.J. in Re Macduff ([1896] 2 Ch 451 at 466, [1894–99] All ER Rep 154 at 159): “Now SIR SAMUEL ROMILLY did not meanl, and I am certain that LORD MACNAGHTEN did not mean, to say that every object of public general utility must necessarily be a charity. Some may be and some may not be“.’
In National Anti-Vivisection Society v Inland Revenue Comrs ([1947] 2 All ER 217 at 233, [1948] AC 31 at 64), Lord Simmonds said:
‘The task of the court was in some degree simplified by the Statute of Elizabeth, which made it clear that at least the purposes enumerated in the preamble were charitable, but from the beginning it appears to have been assumed that the enumeration was not exhaustive, and that those purposes also were charitable which could be fairly regarded as within its spirit and intendment. This view enabled the court to extend its protection to a vast number of objects which appeared both to the charitable donor and to it to be for the benefit of the community.’
The third case is the Scottish Burial Society case, to which I have already referred.
Those cases, however, do not greatly assist me in finding a test whereby I can decide in any particular case whether an object which is beneficial to the community is within or without the spirit of the preamble. In Re Strakosch (decd), Temperley v A-G ([1949] 2 All ER 6 at 8, [1949] Ch 529 at 538), Lord Greene MR said:
‘The benefit, as we understand it, does not have to be in any way ejusdem generis with the recited purposes, but it has to be charitable in the same sense.
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I, for my part, find little assistance in the words ‘in the same sense’, and find it difficult to ascribe any precise meaning to them.
The other test which has been applied in several cases and which was, I think, applied in the Scottish Burial case is that to come within the spirit of the preamble the court has to find that there is a sufficient analogy with decided cases. In this connection, I was referred to Duke on the Law of Charitable Usesm where the author, in referring to decided cases which come within ‘the intent and purview of the statute’, referred to a case in these words: ‘So for the building of a Sessions house for a City or County’, though no mention is made of the name of the case or of any report of it. However, that case is mentioned by Sir John Leach V-C in A-G v Heelis ((1824) 2 Sim & St 67 at 76, 77) where he said:
‘Thus … a gift to build a sessions house for a county … [has] been held to be charitable uses within the equity of the Statute of Elizabeth.’
In Inland Revenue Comrs v City of Glasgow Police Athletic Association ([1953] 1 All ER 747 at 749, [1953] AC 380 at 391) Lord Normand said:
‘I would hold further that gifts or contributions exclusively for the purpose of promoting the efficiency of the police forces and the preservation of public order are by analogy charitable gifts.’
In Re Wokingham Fire Brigade Trusts, Martin v Hawkins Danckwerts J held that the provision of a public fire brigade for the benefit of the district was a charitable purpose.
Conclusion. If, then, the true test is to find analogous decided cases, I think that those cases are sufficiently analogous to the present case so as to bring the council’s objects within the spirit of the preamble, since I do not think that there can be a great deal of difference, if any, between the provision of a court house and the provision of law reports to cite in that court house. If, however, it is not necessary to find analogous cases but Lord Wilberforce’s wider test as set forth in the Scottish Burial case ([1967] 3 All ER at 224, [1968] AC at 156) is the true test, in my judgment the council’s preparation and publication of the law reports fall (and I quote from Lord Wilberforce’s words) ‘naturally, and in their own right, within the spirit of the preamble’.
I find it incredible that the law on this subject is still derived from the preamble to the Statute of Elizabeth, long since repealed and long since out-of-date, and in modern times applied by analogy on analogy on analogy. It is time this branch of the law was reconsidered, rationalised and modernised.
I propose, therefore, to declare in answer to question 1 of the originating summons that the commissioners should register the council as a charity under s 4 of the Charities Act 1960, for the reasons which I have given above.
Declaration accordingly.
Solicitors: Linklaters & Paines (for the council); Treasury Solicitor; Solicitor, Inland Revenue.
Jacqueline Metcalfe Barrister.
Todd (by his next friend Anne Todd) v Davison
[1971] 1 All ER 449
Categories: CIVIL PROCEDURE
Court: NEWCASTLE-UPON-TYNE ASSIZES
Lord(s): DUNN J
Hearing Date(s): 7, 8, 11 MAY 1970
Limitation of action – When time begins to run – Actions of tort – Disability – Infant – Custody of a parent – Test of whether infant in parents’ custody – Effective care and control – Whether test subjective or objective – Parents of low intelligence and inadequate character – Whether quality of care and control in fact exercised by parents relevant in determining issue of custody – Limitation Act 1939, s 22(2) (b), as amended by the Law Reform (Limitation of Actions, etc) Act 1954, s 2(2).
The plaintiff was born in 1956 and was the youngest of eight children. Both his parents were of very low intelligence and were described as being completely inadequate, unable to make decisions, completely ineffectual and unwilling to take responsibility. In 1959 they were convicted of wilfully neglecting their children and a supervision order was made in respect of the children, most of whom were taken into a Dr Barnardo’s Home. The order expired in July 1962, but a child care officer of Dr Barnardo’s Homes continued to visit the family frequently. On 15 December 1962, when he was living with his parents, the plaintiff was knocked down by the defendant’s motor car. On 23 January 1963, the mother visited a solicitor who told her that he could see no future in the case, but later, on the same day, the solicitor wrote to the mother to say that there might well be a small chance that a claim against the defendant could be established and to ask for further instructions. Thereafter, despite suggestions by the child care officer that they should take legal advice, the parents did nothing until after the child care officer had consulted the plaintiff’s present solicitors in January 1966. A writ was issued on behalf of the plaintiff on 19 June 1968 claiming damages for personal injuries caused by the alleged negligence of the defendant. The defendant denied negligence and alleged that the plaintiff’s right of action did not accrue within three years next before the commencement of the action and was statute-barred. In reply it was asserted that at the time when the right of action accrued to the plaintiff he was not in the custody of a parent within the meaning of the Limitation Act 1939, s 22(2)a, as amended by the Law Reform (Limitation of Actions, etc) Act 1954, s 2(2), because the circumstances of his parents completely denied them the true capacity to exercise proper or any control over the life of the plaintiff with the result that he was not in the effective care and control of a parent at the time of the accident.
Held – At the time when the right of action accrued the plaintiff was in the custody of his parents and therefore the claim was statute-barred because, although for the purposes of s 22(2) of the 1939 Act an infant was ‘in the custody of his parents’ if he was in their effective care and control, the degree to which his parents were in
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fact taking care of the infant was irrelevant for, in this context, ‘effective’ meant the existence of the physical right to control which existed in parents, such that the average reasonable parent so circumstanced could be expected to take the necessary action to prosecute the infant’s claim as if it were his own, and not that the quality of the care and control that the parents in fact exercised must reach the standard to be expected of a reasonable parent (see p 456 g, p 457 a to d and p 458 d, post).
Dictum of Donaldson J in Duncan v London Borough of Lambeth [1968] 1 All ER at 92 applied.
Hewer v Bryant [1969] 3 All ER 578 distinguished.
Notes
For extension of time of limitation for bringing personal injury actions where the plaintiff is an infant when the right of action accrues, see 24 Halsbury’s Laws (3rd Edn) 294, para 583.
For the Limitation Act 1939, s 22, as amended, see 19 Halsbury’s Statutes (3rd Edn) 81.
Cases referred to in judgment
Brook v Hoar [1967] 3 All ER 395, [1967] 1 WLR 1336, Digest Supp.
Duncan v London Borough of Lambeth [1968] 1 All ER 84, sub nom Duncan v Lambeth London Borough Council [1968] 1 QB 747, [1968] 2 WLR 88, Digest Supp.
Hewer v Bryant [1969] 1 All ER 13, [1969] 1 QB 415, [1968] 3 WLR 910; rvsd CA [1969] 3 All ER 578, [1970] 1 QB 357, [1969] 3 WLR 425, Digest Supp.
Kirby v Leather [1965] 2 All ER 441, [1965] 2 QB 367, [1965] 2 WLR 1318; compromised HL [1965] 3 All ER 927, [1965] 1 WLR 1489, Digest (Cont Vol B) 498, 338Aa.
Preliminary issue
This was a preliminary issue in an action by the infant plaintiff, Alan Todd, suing by Ann Todd, his mother and next friend, for damages for personal injuries received as the result of an accident in which a motor car driven by the defendant, Raymond Davison, collided with him. By his defence the defendant pleaded, inter alia, that the plaintiff’s claim was statute-barred. The district registrar ordered that it be tried as a preliminary issue whether this plea disclosed a good defence in law to the plaintiff’s claim. The facts are set out in the judgment.
J F S Cobb QC and R A Percy for the plaintiff.
W D T Hodgson QC and J M Collins for the defendant.
Cur adv vult
11 May 1970. The following judgment was delivered.
DUNN J read the following judgment. On 15 December 1962, the infant plaintiff, Alan Todd, then aged six years, was knocked down by the defendant’s motor car in Sunderland, County Durham, and sustained very serious injuries which it is said will affect him for the rest of his life, rendering him an epileptic. On 19 June 1968, the writ was issued by which the plaintiff sued by his mother, Mrs Ann Todd, and next friend, although, on 7 January 1970, an order was made that his eldest sister, now Phyllis Thompson, should be appointed next friend in place of his mother. On 25 June 1968, the statement of claim was delivered alleging that the accident was caused by the negligence of the defendant. On 12 July 1968, the defence was delivered in which it was denied that the defendant was negligent. It was pleaded that the accident was contributed to by the negligence of the plaintiff in that he suddenly and without warning, jumped or moved into collision with the motor car; alternatively, that the accident was caused by the negligence of his mother and brother-in-law, one Kenneth Nesbitt, who were accompanying him at the time and failed to keep proper control over him.
By para 6 of the defence it was alleged that the plaintiff’s right of action did not
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accrue within three years next before the commencement of the action and was accordingly barred by the Limitation Act 1939, as amended by the Law Reform (Limitation of Actions, etc) Act 1954. On 30 July 1968, a reply was delivered, in para 2 of which it was asserted that, at the time when the right of action accrued to the plaintiff, he was not in the custody of a parent within the meaning of s 22 of the Limitation Act 1939, as amended by the Law Reform (Limitation of Actions, etc) Act 1954. Further and better particulars of that paragraph were delivered on 8 October 1969, in which were set out the facts to be relied on in support of the plea in para 2 of the reply, and it was said that the circumstances of his parents completely denied them the true capacity to exercise proper or, indeed, any control over the life of the plaintiff, so that he was not in the effective care and control of a parent at the time of the accident.
On 31 October 1969, an order was made by the district registrar ordering that the following issue be tried as a preliminary issue before the trial of the action, namely:
‘Whether such findings of fact as may be reached (upon hearing evidence on the trial of the preliminary issue) as to the plea raised by paragraph 2 of the Reply and in particular the Further and Better Particulars thereof the defence alleged in paragraph 6 of the Defence discloses a good defence in law and in fact to all the claims and causes of action pleaded by the Plaintiff in his Statement of Claim.’
Accordingly the matter comes before me on that preliminary issue ordered by the district registrar, and the right of action having accrued on 15 December 1962, the claim will have been barred in December 1965 by reason of the operation of s 2(1) of the Limitation Act 1939, as amended by the Law Reform (Limitation of Actions, etc) Act 1954, unless the plaintiff can prove that he was not, on 15 December 1962 in the custody of a parent.
The infant plaintiff, Alan Todd, was born in 1956 being the youngest of eight children of Mr and Mrs Todd. His parents were married on 13 March 1945, the father then being 21 and the mother 19 years of age. The oldest child, Phyllis, was born in 1946 and thereafter the mother gave birth to eight children in ten years. On 17 February 1958, the second and third children, named respectively Edna and Ronald, were admitted to a residential school for delicate children. In January 1959, the mother underwent a hysterectomy. After that operation she was in poor health, after her discharge from hospital, and was also extremely upset by reason of the recent death of her father. In June 1959, she had a convalescent holiday. On 1 July 1959 both the father and the mother pleaded guilty before the Sunderland justices to a charge of wilfully neglecting six of their children, ie all of them except Edna and Ronald, who were in the residential school, and including the plaintiff. That prosecution was brought by the National Society for the Prevention of Cruelty to Children. The parents were fined £5 and there was a direction that the children should appear before the juvenile court. Pursuant to that direction, on 9 July 1959 a supervision order was made by the juvenile court for three years in respect of the six children under the Children and Young Persons Act 1933. The supervising officer was Miss Mayne who was the senior probation officer attached to the Sunderland Petty Sessional Division.
On 28 September 1959, the mother was admitted to the Cherry Knowle Mental Hospital suffering from depression. The six elder children were all admitted under a voluntary agreement to Dr Barnardo’s Home at Shotley Bridge, and the youngest children, Mattew and the plaintiff, were taken into the care of the Sunderland local authority while their mother was in hospital. She left hospital on 3 November 1959 of her own accord and, on 19 January 1960, together with the two youngest children, Matthew and the plaintiff, she went to Brentwood which is near Marple in Cheshire and is a home for the rehabilitation of neglectful mothers. On 24 March 1960, having received the appropriate instruction in that home, the mother
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and those two youngest children were discharged from Brentwood. On 24 July’ for a short period of about two weeks, the mother was again admitted to Cherry Knowle, suffering from blackouts. She was discharged in August 1960 and from that date down to April 1961 the position was that the father, the mother, Matthew and the plaintiff were all living together at the matrimonial home. The remaining children were in Dr Barnardo’s Home at Shotley Bridge. The supervision of the family was shared between Miss Mayne, the supervising officer pursuant to the supervision order of 9 July 1959, and Mr Gardner, who was a supervising officer dealing with a number of Dr Barnardo’s Homes in the north country.
In April 1961, the eldest daughter, Phyllis, was discharged from Shotley Bridge and returned home, and because she was a girl the supervision on behalf of Dr Barnardo’s was undertaken by Mrs Bowers in place of Mr Gardner, although Miss Mayne remained supervising the family pursuant to the supervision order. In April 1962, the second child, Edna, returned home from Dr Barnardo’s. In July 1962, the supervision order came to an end by effluxion of time and, according to Miss Mayne—whose proof of evidence was before me, by agreement—at that date the material conditions in the home were much improved, but the family pattern of marital stress and recurring financial stress still remained. I accept that part of Miss Mayne’s evidence as being an accurate picture of the family circumstances at the end of the supervision order in July 1962.
Although Miss Mayne ceased to visit the family after July 1962, when the supervision order came to an end, Mrs Bowers, the child care officer, part of the Dr Barnardo’s organisation, continued to visit the family although four of the children were still in Dr Barnardo’s. She was officially supervising Phyllis and Edna and undertaking after care on their behalf, but she was also generally assisting the family in coping with the numerous problems which faced them. To start with she had visited the family perhaps once a month or rather more, but there is no doubt that a time came when her visits very considerably increased and she was visiting them sometimes almost daily and was in constant telephonic communication with them. The probability is that the increase in the number of Mrs Bowers’ visits took place after the accident on 15 December 1962.
Although the Dr Barnardo’s organisation was continuing to supervise and visit the family in the way in which I have described under voluntary arrangements, the local authority did not apply to the court for any further supervision order, nor did they take any steps to take any of the children into care under s 1 of the Children Act 1948, which was a course which would have been open to them without an application to the court, so that that was the situation on 15 December 1962 when this tragic accident occurred, and it is the factual situation which I have to consider.
On 23 January 1963, the father and the mother together with the plaintiff visited a firm of solicitors called Richard Read, Miller & Co By that time the plaintiff had been discharged from hospital; he was still suffering severely from the effects of the accident and I am satisfied that both the father and mother were aware that he was very seriously injured. Although the father accompanied the mother and the plaintiff to the solicitors’ office, the father remained in the waiting room because, as he told me, he thought it would be more helpful if the solicitor actually saw the eye witness to the accident, namely the mother. After her interview with the solicitor, the mother told the father that the solicitor had said that he could see no future in the case so far as the plaintiff was concerned. Later in the day, however, the solicitor wrote the mother a letter which is in these terms:
‘Dear Mrs. Todd,
re [the plaintiff’s] Accident
Further to our meeting this afternoon, we have thought further about this matter and we think there may well be a small chance that a claim against the [defendant] in this case could be established. As Mr Kirkup told you,
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it would be necessary to have a Police Report before we could do anything at all and this would cost £1 0s. 0d. to obtain. There would also be our initial charge of £1 0s. 0d. and if you feel disposed to continue, we should be grateful if you would call and let us have £2 0s. 0d. Please let us have instructions.
Yours faithfully.’
The father told me that in spite of that letter, after the mother’s account of what the solicitor had said to her earlier in the day, he thought that it was, as he described it, ‘a blooming waste of money’ to go on with the case. Although earning good wages he was off work sick at the time. Thereafter nothing was done by either the father or the mother to follow up the letter of 23 January, or to take any further legal advice, although Mrs Bowers suggested from time to time that they should see a solicitor. Sometimes they said they would, but broadly speaking their attitude was summed up by the father when he told Mrs Bowers when she suggested that they should see a solicitor, ‘Well, it’s hopeless’.
Eventually Mrs Bowers got in touch with a Mr Miller who is a solicitor and partner in the firm of Dickinson, Miller and Turnbull, who are the solicitors who now represent the infant plaintiff and who was a gentleman who was interested in Dr Barnardo’s Homes. Meanwhile in 1963 the remaining children were discharged from Dr Barnardo’s and went home, the reason, as Mrs Bowers told me, being that they were a very closely knit family, there was a tremendous amount of affection between them and in spite of all their difficulties it was felt that the family should not be further separated. Since the plaintiff’s accident the mother has had recurrent bouts of depression for which she has been treated with tablets, but it has not been necessary for her to return to Cherry Knowle. In 1965 Mrs Bowers ceased visiting the family. Her function, as she told me, was to advise and support the family and to prevent the children going to care again. ‘The whole idea of my visits’, she said, ‘is to help families along and not to do things for them.’
On 15 January 1966, the plaintiff’s present solicitors were first consulted. There was a good deal of evidence before me as to the character and capacity of the father and the mother and as to the conditions in the home. In 1959, when she was first admitted to Cherry Knowle, the mother was seen by a psychologist, Mr Marszalek, who gave evidence before me. He found that she had a very low intelligence quotient. He said that she was of borderline sub-normal intelligence and lacking in drive and energy. He told me that she was uncertain of herself and needed constant help and reassurance. I am satisfied that that was an accurate account of her condition in December 1962. Mrs Bowers, who had a great deal of experience of both the father and the mother and of the family generally, told me that the mother was completely inadequate, irresponsible with money, and that she could not take decisions and was completely ineffectual. Mrs Bowers said that a great deal was thrown on to the eldest daughter, Phyllis, and that the mother was apathetic and lethargic and would sit around all day, doing nothing at all. Mrs Bowers said that she was quite often called on to deal with matters which would normally be dealt with by a mother, such as telephoning the doctor, and that it was left to her, Mrs Bowers, to see the doctor and to tell the doctor what was required.
The father is a man who has been employed for the past 17 years by the same employers as a semi-skilled labourer. He is employed by Messrs Joblings, the Pyrex Glass firm at Sunderland, as a polisher, stripper and blaster, and he told me that last week he brought home £27 in his wages packet. Mrs Bowers said that the father was something of a bully with the children and the mother. He did not physically ill-treat them but wanted them to run around and get things for him. She said that he was frightened of people and was no more willing to take responsibility than the mother. She said that he would do nothing himself and would shout and groan because the mother did nothing. So far as intelligence was concerned, Mrs Bowers said that she would put him on a par with the mother and that he was
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certainly no brighter than she was. Mrs Bowers said that there had over the years been a great deal of friction between the father and the mother because of sexual difficulties.
Mr Gardner who, as I have said, supervised the family at an earlier stage, also gave me his assessment of the father and mother. He said that it was obvious that they were two very inadequate parents and that any supervision would have to be long term to do any good. He expressed the opinion that the children were all under-nourished and he doubted very much whether the bedding was adequate for the winter. He discovered that they had debts amounting to some £170, the amount of which and the extent of which they had no idea. He said that the home although not dirty was untidy and chaotic. The parents did not know which children had had which childish diseases, there was only one birth certificate for the whole family, there were no medical cards, there was only one school report and, when he first started his supervision, Phyllis had been absent 73 times in one term, without reason; but he said that when the children went to Dr Barnardo’s there were no problems with them, that Phyllis had done extremely well and that there was no delinquency in the family. He said that once they came in to Dr Barnardo’s the father and the mother had not sent the family allowances which they were supposed to do, and he formed the view that one parent was just about as incapable and evasive as the other. He said there was friction between them but an underlying affection, and that any neglect of the children was as a result of inadequacy and was never deliberate. He also said that after the supervision order expired in July 1962, he did not think that the degree of neglect warranted further interference by the child authorities. Mrs Bowers also told me that although the father earned good wages he had no notion of saving, that the children did not have a well-balanced diet, and that the mother sat down and cried under stress saying that she was sick and she was going to do away with herself, or run away.
I saw both the father and mother myself in the witness box and, from what I saw, the views of Mrs Bowers and Mr Gardner to which I have just referred seem to me amply confirmed and justified. So far as the father and the mother’s evidence was concerned, although I accepted certain of the statements of fact which they made, I found it difficult to accept others and, in particular, to accept the inferences which they sought to draw from the facts. I was left with the general impression that the father left the running of the household and the upbringing of the family very largely to the mother. There was also called before me medical evidence, two doctors, Dr Foster, called on behalf of the plaintiff, and Dr Walton, called on behalf of the defendant. Both these gentlemen only saw the father and the mother for the first time last year and their evidence consisted largely of inferences which they had drawn from such facts as they were able to extract from the father and the mother themselves and from the hospital notes and records which they had before them. I am bound to say that I do not find their evidence as helpful on the question of the capacity of the father and mother as parents as I found the evidence of Mrs Bowers and Mr Gardner, who had actually been in close contact with the family at or just before the material time. Dr Foster expressed the view that no woman with an IQ as low as that of the mother was capable of effective custody of her children. I am bound to say that I do not feel able to accept that expression of opinion because, as Dr Foster subsequently agreed, although intelligence forms an important element in the capacity for parenthood there are many other relevant factors. Dr Walton expressed the view that the father and the mother were capable of nourishing and clothing their children but he was very doubtful whether they were capable of the more sophisticated functions of parents.
Those being the facts as I found them, the submissions made by counsel for the plaintiff were as follows. Counsel relied on Hewer v Bryant, which is a case in which
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the plaintiff was a 15 year old boy. He was living away from home on a farm where he was undergoing practical training and receiving weekly wages. While working as an agricultural trainee on that farm he sustained an accident. After the accident his parents looked after him and his father considered bringing an action on his behalf as his next friend, but for a variety of reasons did not do so within the statutory three year period of limitation. When it was found that the plaintiff had failed to make a good recovery the father applied for leave to bring an action out of time under the Limitation Act 1963, but the application was refused. The plaintiff, having then attained his majority, brought an action himself and sought to prove, as is sought in this present case, that at the date of the accident he was not in the custody of the parents. The Court of Appeal, reversing Paull J, held that he had so proved. Counsel for the plaintiff relied in particular on a passage from the judgment of Lord Denning MR, which is in these terms ([1969] 3 All ER at 582, [1970] 1 QB at 369, 370):
‘… I am quite clear that in these Acts the words “in the custody of a parent” are used to denote a state of fact and not a state of law. The word “parent” is defined to include grandparents and step-parents. Whoever heard of an infant being, by operation of law, in their legal custody? And the Act contemplates that a man of 24, if of unsound mind, may be “in the custody of a parent“. That may be if he is utterly dependent on him, but not otherwise. My conclusion is that an infant is “in the custody of a parent” if he is, in point of fact, in the effective care and control of a parent at the time of the accident. I stress the word “effective” because I am firmly of opinion that Parliament must have had in mind a parent so circumstanced that it can be confidently expected that he will take whatever action is necessary or desirable on behalf of the infant; so much so that, if the parent fails to take action, the blame falls on him, and on no one else. To that extent Parliament has said that the sins of omission of the father are to be visited on the children; but no further. If the circumstances are not such that the father can confidently be expected to take action, the child should not suffer. He should be allowed, when of full age, to bring his action.’
Then Lord Denning MR added ([1969] 3 All ER at 583, [1970] 1 QB at 370) that he thought that Brook v Hoar and Duncan v London Borough of Lambeth were rightly decided. Counsel for the plaintiff also relied on a passage from the judgment of Sachs LJ in Hewer v Bryant, in which he said this ([1969] 3 WLR 425 at 435; cf[1969] 3 All ER at 586, 587, [1970] 1 QB at 374, 375):
‘Accordingly it seems to me that the words “in the custody of a parent”, unless they are to be given different meanings in relation to infants and persons of unsound mind, have in the Limitation Acts a special, limited and somewhat artificial meaning unlikely to apply elsewhere. I have concluded that the parent referred to in section 22 of the Act of 1930(now section 2(2) of the Act of 1954) must be someone who factually both has and is effectively exercising those personal powers which a father (or other guardian) has over an infant under the age of 14. (So long as that power exists and is being exercised, the parent can in practice be normally expected to take care of the infant, even if not under a legally enforceable duty so to do—a factor which the legislature may have had in mind.) If the plaintiff proves that the relevant parent either had not got or was not exercising those powers, which include both care and physical control, at the material time, then the period of limitation does not commence to
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run. That is normally a relatively simple matter to determine. In the present case the plaintiff’s father at the time of the accident did not have the relative powers and was not even purporting to exercise such powers … applying the above principles, both Brook v. Hoar and Duncan’s case were correctly decided.’
Karminski LJ said ([1969] 3 All ER at 588, [1970] 1 QB at 376):
‘In my view, control is here the vital test. If the father had sought an order for his custody from the court at this stage, it is in my view unlikely that he would have been successful; because in the circumstances of this case the court would be at least very slow to make an order in respect of a mature boy approaching the age of 16, especially as such an order would be very difficult to enforce if the boy refused to obey it.’
Counsel for the plaintiff has submitted on the authority of Hewer v Bryant that the proper approach to the construction of the section is the factual and subjective one stated by Lord Denning MR and Sachs LJ, that the phrase ‘effective care and control’ goes beyond mere physical control and that in each case the court must determine whether the child had parents who could be relied on to take proper action on his behalf, he being inops concilii. Counsel stressed that Brook v Hoar was held to be rightly decided and drew my attention to a passage in the judgment of Melford Stevenson J in that case. Counsel for the plaintiff relies on the passage where Melford Stevenson J said ([1967] 3 All ER at 398, [1967] 1 WLR at 1341):
‘I do not attempt any definition or even description of custody for the purpose of the subsection under consideration in a case where custody has not been granted to a parent by an order of a court, but I think that an essential characteristic of such custody is the right to control the infant’s life coupled with the capacity to exercise that control, whether arising from economic circumstances or otherwise.’
And counsel for the plaintiff invited me to find as a fact that neither the father nor the mother in the instant case had the capacity to exercise care over their children and that their joint and several capacities were such that there could be no confident expectation that any proper action would be taken in relation to their children and in particular to the plaintiff.
Counsel for the defendant reserved the right to argue hereafter that Hewer v Bryant was wrongly decided. He submitted that in any event the facts in Hewer v Bryant were quite different from those in the instant case, and that Hewer v Bryant was no authority for the proposition that the court should take into account the quality of the care and control being exercised by the parents. Counsel submitted that the word ‘effective’ meant the existence of the physical right to control which exists in parents of young children and dwindles as the children become more independent. He said:
‘The court has to look at the circumstances in which the parents and the child find themselves and then decide whether it can confidently be expected that the parent will take whatever action is necessary or desirable on behalf of the child’,
and counsel for the defendant relied on Duncan v London Borough of Lambeth, which
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was also held by the Court of Appeal in Hewer v Bryant to have been rightly decided. Counsel for the defendant relied in particular on a passage from the judgment of Donaldson J in which he said ([1968] 1 All ER at 92, [1968] 1 QB at 762, 763):
‘In my judgment … the claimant, is in the custody of a parent within the meaning of the section if at the relevant time, the circumstances of the parent and of the claimant are such that in relation to one another the average reasonable parent so circumstanced could be expected to take such action to prosecute or assist in the prosecution of the claim as he could be expected to take if the claim were his own.’
Counsel submitted that apart from two short periods when the mother was in hospital the plaintiff had been brought up and lived with the father and mother for the whole of his life, and that there was no justification for taking into account the legal sophistication, intellectual ability or financial acumen of the parents. ‘At the material time’, said counsel, ‘[the plaintiff] was in the effective custody of his parents’, and he submitted that if the plaintiff’s argument was right no parent who failed to bring an action on behalf of a child could be said to be an adequate parent or to be exercising effective care, and this construction, said counsel, ‘rendered the proviso to the section nugatory’. I accept the argument submitted on behalf of the defendant as to the meaning of the word ‘custody’ in the section and as to the effect of the judgment in the Court of Appeal in Hewer v Bryant, assuming as I must that that case was there rightly decided.
The issue in Hewer v Bryant was stated by Lord Denning MR in these terms ([1969] 3 All ER at 581, [1970] 1 QB at 368):
‘… I wish that Parliament had told us what it meant by the words “in the custody of a parent“. They have aroused acute controversy. One school of thought says that “custody” is a legal concept, and that a son remains in the custody of his father until he is 21. The other school of thought says that “custody” is a factual concept, and that a son is only in the custody of his father when he is, in fact, in his father’s care and control,’
And the conclusion to which Lord Denning MR arrived was as follows ([1969] 3 All ER at 582, 583, [1970] 1 QB at 370):
‘Applying this test, I am satisfied that the plaintiff was not “in the custody of a parent” at the time of the accident. He had left home and was employed miles away as a farm-worker at the agricultural wage. True he was only 15 1/2, but the circumstances would be just the same if he was 18 1/2, even 20 1/2. He was on his own. His father afterwards did everything possible for him, short of bringing an action; but that does not put the boy in his father’s custody at the relevant time, namely, the time of the accident.’
Insofar as Lord Denning MR was intending, in the passage relied on by the plaintiff in the instant case, to state that the court must look into the quality of the care exercised by the parent, that was not necessary for the decision of Hewer v Bryant, but if the passage relied on by the plaintiff in this case is looked at in the context of the whole of Lord Denning MR’s judgment, I do not believe that he did so intend. Moreover the notion that the court is required to look at the quality of the care exercised by the parents was expressly rejected in Hewer v Bryant by Sachs and Karminski LJJ. Sachs LJ said ([1969] 3 All ER at 583, 584, [1970] 1 QB at 371):
‘… it is necessary to embark on the task of seeking some meaning that does
Page 458 of [1971] 1 All ER 449
not produce too many absurdities—and one, moreover, that can be so applied that litigants may know with reasonable clarity where they stand … Next comes a suggestion that the sole or dominant test to be applied was the degree to which the parent was in fact taking care of or taking an interest in the affairs of the infant or person of unsound mind—on the footing that if there was someone in fact taking that degree of care or interest, the person under a disability was sufficiently protected. [Sachs LJ then considered Kirby v Leather and continued:] Insofar as DONALDSON, J., in Duncan’s case ([1968] 1 All ER at 92, [1968] 1 QB at 763) may have tended to that approach when referring to a parent who ” … could be expected to take such action to prosecute … the claim”, I would respectfully differ. Moreover, I would add that such an approach would result in difficulties of application which could only lead to uncertainty in far too many cases. Degrees of care, with or without interest must be dismissed as a sole or dominant test.’
Karminski LJ agreed ([1969] 3 All ER at 588, [1970] 1 QB at 367) with the observations of Sachs LJ and with his criticism of Donaldson J’s judgment in Duncan’s case. With respect to Sachs and Karminski LJJ, I do not myself read the passage of Donaldson J’s judgment in Duncan v London Borough of Lambeth which I have cited as meaning that the court is required to enquire into the degree to which the parent was in fact taking care of the infant, but whether that is so or not, their judgment in Hewer v Bryant constitutes authority binding on me that such enquiry is irrelevant in the determination of the question whether the child is in the custody of a parent. If I am wrong about that and it is necessary for me to consider the quality of the care being exercised by the parent, I am not satisfied in this case that the plaintiff has established on the balance of probabilities that the father and mother were incapable of exercising care over their children.
The degree of care exercised by parents varies enormously depending on the judgment, personality and wisdom of the parents and on their financial circumstances and position in life. These parents were both of very low intelligence and of defective character and they were in poor circumstances, but the children have so far turned out well and after July 1962 the local authority did not find it necessary to intervene in the family affairs. Even in relation to the question of taking action on behalf of the plaintiff the parents soon sought advice and decided not to proceed for reasons which, although they may have been mistaken—as to that I cannot, of course, form any judgment—were certainly not in my judgment wholly unreasonable.
In those circumstances there must be judgment for the defendant on this preliminary issue.
Judgment for the defendant. Leave to appeal to the House of Lords, Dunn J certifying that the requirements of s 12 of the Administration of Justice Act 1969 were complied with.
Solicitors: Dickinson, Miller & Turnbull, Newcastle-upon-Tyne (for the plaintiff); Geoffrey Warhurst & Co, Manchester (for the defendant).
John M Collins Esq Barrister.
Re S (M) (an infant)
[1971] 1 All ER 459
Categories: FAMILY; Children
Court: CHANCERY DIVISION
Lord(s): GOFF J
Hearing Date(s): 14 OCTOBER 1970
Ward of court – Jurisdiction – Forum conveniens – Preliminary issue as to forum – Discretion as to determination as preliminary issue – Normal exercise of discretion.
Ward of court – Jurisdiction – Forum conveniens – factors relevant to determination of forum – Avoidance of possibility of conflicting orders from different jurisdictions.
The infant was the son of the mother and the father who were married in 1955 at Southampton. The father, a serving officer in the Royal Navy, was domiciled in Scotland and for some six months after their marriage the parties lived in Scotland. Subsequently, they lived sometimes in England, sometimes in Scotland, the father being often away at sea on service duties. From about 1968 onwards the matrimonial home had been in married quarters at Portsmouth but in July 1969 the mother established an adulterous association with a man in Malta with whom she continued to live. The marriage finally broke up in March 1970. In that month the father took the infant with the mother’s consent to his parents’ home is Scotland for the Easter holidays and agreed to return him to her at the end of the holiday. He did not keep to this arrangement and the infant remained in Scotland with his paternal grandparents who, the mother said, were not fit to look after him owing to their age and state of health. On 12 May the mother commenced proceedings by originating summons and the infant was made a ward of court. On 12 June 1970, the father obtained from the Court of Session in Scotland, on a petition for custody, an order for interim custody of the infant, and on 3 August he commenced divorce proceedings in Scotland founded on the mother’s admitted adultery. The father then applied to the English court not to exercise its jurisdiction but to allow the question of custody to be determined by the Scottish court or, alternatively, that the English court should refuse the relief requested by the mother in the originating summons and grant care and control to him. The application came before the court on 14 October at a time when the originating summons was ready to be adjourned into court. The Scottish divorce proceedings were due to come on by the end of October 1970.
Held – (i) The court had a discretion to entertain such an application and, although it might in a proper case refuse to deal with it before the hearing, the court ought normally to decide the application as a preliminary point when duly raised (see p 461 g, post).
Dictum of Stamp J in Re P (infants) [1967] 2 All ER at 236 applied.
(ii) Notwithstanding that the English originating summons was first in point of time and that it might come on sooner than the Scottish proceedings, the Scottish court would be regarded as the forum conveniens by reason of the infant’s presence within its jurisdiction, the father’s domicil in Scotland, the divorce proceedings having properly been brought there and the fact that by reason of those proceedings and the separate custody summons the Scottish court had full cognisance of the matter; further it was not in the interests of the infant’s welfare that there should be proceedings concerning him in two jurisdictions with the possibility of conflicting orders (see p 462 h to p 463 d, post).
Notes
For jurisdiction over wards of court, see 21 Halsbury’s Laws (3rd Edn) 216, 217, paras 478, 479, and for cases on the subject, see 28 Digest (Repl) 484–486, 14–26, 606, 607, 1167–1171.
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Cases referred to in judgment
A (infants), Re [1970] 3 All ER 184, [1970] 3 WLR 142.
Andrews (infants), Re [1958] 2 All ER 308, [1958] Ch 665, [1958] 2 WLR 946, 28 Digest (Repl) 706, 2152.
G (an infant), Re [1969] 2 All ER 1135, sub nom Re G (J D M) (an infant) [1969] 1 WLR 1001, Digest Supp.
H (infants), Re [1965] 3 All ER 906; affd CA [1966] 1 All ER 886, [1966] 1 WLR 381, Digest (Cont Vol B) 132, 1185b.
Kernot (an infant), Re [1964] 3 All ER 339, [1964] 3 WLR 1210, sub nom Kernot v Kernot [1965] Ch 217, Digest (Cont Vol B) 131, 1186a.
P (G E) (an infant), Re [1964] 3 All ER 977, [1965] Ch 568, [1965] 2 WLR 1, Digest (Cont Vol B) 442, 2155a.
P (infants), Re [1967] 2 All ER 229, [1967] 1 WLR 818, Digest Supp.
X’s Settlement, Re [1945] 1 All ER 100, [1945] Ch 44, 114 LJCh 305, 172 LT 208, 28 Digest (Repl) 706, 2151.
Application
This was an application by the father for the court not to exercise its jurisdiction on an originating summons brought by the mother and to leave the question of custody of the infant to the Scottish courts; alternatively, for an order committing the infant’s care and control to himself. The hearing was in chambers but judgment was delivered in open court. The facts are set out in the judgment.
J F Mummery for the father.
J H L Leckie for the mother.
14 October 1970. The following judgment was delivered.
GOFF J. This case was heard in chambers, but at the invitation of counsel I am giving judgment in open court. The plaintiff in this case is the mother of an infant son, who will be three years old in december. The defendant is the father, and the parties were married in Southampton on 13 April 1965. Both father and mother are British nationals and the father appears to be domiciled in Scotland. He is a serving officer in the Royal Navy and at present on the high seas. For six months or so after the wedding the parties lived in Scotland. After that they lived sometimes in England and sometimes in Scotland, and the father was of course from time to time away from home on his service duties. The marriage became unhappy during the wife’s pregnancy and finally broke up in March 1970. During the last two years or so the marital home was in married quarters at Portsmouth. In or about July 1969 the mother met another man in Malta with whom she established an adulterous association, as she has admitted, and they are now living together.
On 27 March 1970, the father took the infant up to his parents’ home in Scotland for the Easter holidays with the knowledge and consent of the mother, but it was agreed that he should be returned to her at the end of the holiday. There is a difference between the parties whether that was to be on 26 April or 2 May, but nothing turns on that, at all events for present purposes. The father did not keep to this arrangement and the infant remains in Scotland with the paternal grandparents who, it is said by the mother, are by reason of age and health not fit persons to look after him. That is denied by the father and his parents, and I cannot decide that question on this application.
There are some grounds for thinking on the evidence as it stands that the father never intended to keep his promise to bring the infant back and made it as a trick to get him away, but it may be that he made it genuinely and afterwards changed his mind because, having been advised by Scots lawyers that any order obtained by the mother in England would not be enforceable in Scotland, he felt his position in any litigation with the mother concerning the infant would be better if the boy stayed in Scotland or because, and he gives evidence in support of this, he was genuinely
Page 461 of [1971] 1 All ER 459
afraid that if he returned the infant to the mother she would take him to malta and there keep him permanently out of the jurisdiction, or for both those reasons. Again, I cannot determine that at this stage, but it may well be material when the dispute is heard on the merits.
In these circumstances the mother commenced these proceedings by originating summons on 12 May 1970, and the infant became and is now a ward of court. On 3 August 1970, the father commenced divorce proceedings in Scotland against the mother founded on her admitted adultery. Those proceedings are pending and I am told may come on by the end of the month. On or about 6 June, ie after the issue of the mother’s originating summons and before the divorce proceedings, the father also presented a petition in the Court of Session claiming custody of the infant, and on 12 June 1970 the father obtained an order for interim custody. A report on this matter in a letter of the same date by the mother’s Scottish solicitors, Messrs Fyfe, Ireland & Co, states that the award was in favour of the grandparents, but I think that that must be elliptical as the order itself, which is exhibited in these proceedings, clearly gives the interim custody to the father.
That letter shows that the order was not entirely ex parte and was made in the presence at least of the mother’s Scottish advisers, although I do not know to what extent they were heard, and no answer to the custody petition had then been filed on the mother’s behalf. However, in that letter they do not suggest that it could be set aside or was interim in the sense of continuing only until her answer could be put in. They wrote:
‘[The mother] will be disappointed over the outcome of today’s proceedings. This is, however, only an interim order and should circumstances change then a further application could be made to the court.’
The father now asks this court—
‘not to exercise its jurisdiction in this case, but to let the question of custody be determined by the Scottish courts within whose jurisdiction [the infant], [the mother] and I are domiciled.’
Alternatively, he submits that ‘this court should refuse the relief requested in the originating summons and commit [the infant’s] care and control to myself’.
In these circumstances the first question which arises is whether I can or ought at this stage to consider the question of forum conveniens or whether that is a matter which can only be decided at the hearing of the originating summons. There appears to be no case directly in point on this aspect of the matter, but I am satisfied that there is jurisdiction to entertain such an application and that normally the court ought to decide this as a preliminary point when duly raised, although of course it has a discretion and may refuse to deal with it before the hearing. In the present case I see no reason for not deciding it now.
My reasons for holding that this is properly raisable as a preliminary question are as follows: first, in Re X’s Settlement ([1945] 1 All ER 100 at 102, 103, [1945] Ch 44 at 46), where the point did not in fact arise, Vaisey J thought that if the question were raised the court might have to consider it; secondly, in a number of cases, eg Re Kernot (an infant), Re H (infants) and Re G (an infant), the court has on motion considered whether to make a summary order for the return of a ward to another jurisdiction in part at least on the basis of forum conveniens. In particular, in Re H (infants) ([1965] 3 All ER at 916, [1966] 1 WLR at 393), which was a kidnapping case, Cross J said:
Page 462 of [1971] 1 All ER 459
‘On one side there is the public policy aspect, the question of comity and the question of “forum conveniens“.’
Although such an interim order, if made, removes the infant from the control of the court, at least, even if, as is usually done, the court does not thereupon reward the infant, different considerations may well apply in arriving at a decision from those which obtain where the relief sought is a stay, but I cannot see that on the question whether the application can properly be made there is any difference in principle, nor could counsel for the mother suggest that there was. My third reason is that I entirely accept and agree with the passage in Stamp J’s judgment in Re P (infants) ([1967] 2 All ER 229 at 236, [1967] 1 WLR 818 at 826), where he said:
‘Where the question is whether proceedings are better brought in one court or another, I have never heard it said that the court must hear the case before determining the preliminary question: to do so would be to proliferate litigation.’
Having reached these conclusions I now have to determine what is the proper order to make on this application, and in my judgment in deciding that I have to consider the following principles: first, where the infant is in this country then subject to adjustment as between the Divorce Division and the wardship jurisdiction (as to which see Re Andrews (infants) ([1958] 2 All ER 308 at 310, [1958] Ch 665 at 668)) and subject to the special consideration applicable to kidnap cases, the court must be slow to abdicate its jurisdiction in favour of any other court, see Buckley J in Re Kernot (an infant) ([1964] 2 All ER 339 at 343, [1965] Ch 217 at 222, 223), and particularly his two references to the child being in this country and these words ([1964] 3 All ER at 343, [1965] Ch at 222):
‘I do not think that, however, the matter rests only on convenience. The jurisdiction that is being invoked, and is being invoked by the mother, that is to say, the Italian mother of this child, is the paternal jurisdiction of this court, in the exercise of which, of course, it is a fundamental circumstance that the court must consider the welfare of the infant as the paramount consideration, not as the only consideration but as the paramount consideration. It is a jurisdiction which invokes, to a very high degree, the discretion and intimate judgment of the court; and it is a jurisdiction which one would think, apart from authority, the court ought to be very slow to leave to be exercised by any other tribunal.’
Secondly, in kidnap cases, and for this purpose ‘kidnapping’ has a wide meaning, see per Pearson LJ in Re P (G E) (an infant) ([1964] 3 All ER 977 at 983, 984, [1965] Ch 568 at 588), the court on being satisfied that the infant will not thereby suffer harm will normally order his return to the jurisdiction from which he has been removed, both because it strongly disapproves of such self help, and because the longer the infant remains here the more the wrongdoer who brought him here tends to obtain an advantage, see per Cross J in Re H (infants) ([1965] 3 All ER at 916, [1966] 1 WLR at 393). Thirdly, where, however, the infant is not in this country the court will be slow to exercise jurisdiction, see per Lord Denning MR in Re P (G E) (an infant) ([1964] 3 All ER at 980–982, [1965] Ch at 582–586).
In the present case the infant is not here but in Scotland. Further, although his connection with this country is not tenuous, inasmuch as the mother is here, and there is some and perhaps prima facie evidence that his ordinary place of residence was here, although as I have observed the matrimonial home has sometimes been in Scotland, still Scotland is the place of the father’s, and therefore also of the infant’s, domicil. Moreover, there are divorce proceedings pending there where alone they
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can be brought. It is true, as counsel for the mother has urged, that but for the custody issue those proceedings would be undefended, but whether or not the Scottish court would in the divorce proceedings go into the matter further than to satisfy itself, as it is required to do by the Matrimonial Proceedings (Children) Act 1958, s 2, which applies to Scotland, that the arrangements made by the father are satisfactory in themselves, and subject thereto give him custody as a matter of course as the innocent party, there is also a custody summons commenced by the father now pending in Scotland. The courts of that country therefore have full cognisance of the matter, and have actually made an order giving custody to the father. I am not bound by that order, but I must give it weight particularly since, as I have noted, it was not purely ex parte and it seems to be an order pending trial and not merely pending the mother’s answer.
For these reasons, and applying the principles I have stated, I have come to the conclusion that I ought to regard the Scottish court as the forum conveniens and accede to this application, despite the fact that the English originating summons was first in point of time, and despite the fact, if it be the fact, that the English proceedings if heard out might come on sooner, as the originating summons is now ready to be adjourned into court. I cannot feel that it is for the welfare of the infant that there should be proceedings concerning him in both countries, with the risk of possibly conflicting orders, and in all the circumstances proceedings in Scotland seem the more appropriate.
I was at one time inclined to think that I ought to decide otherwise by analogy to the kidnap cases, but I have rejected that view. As I have said, the evidence as it stands does not really show whether the father made his promise as a trick always intending to break it or changed his mind because of his suspicions, well or ill founded, that the mother intended to take the infant to Malta and keep him there. If the latter, then this would not be a kidnap case at all: see Re A (infants). If the former I think it well might be, but even so this is the converse of the case which the court here has to consider, and it appears to me to be a matter primarily for the Scottish court.
Accordingly, the application succeeds, and I will make an order staying these proceedings, but I want to make it absolutely clear that I have formed no conclusion on the merits of the question, who should have custody or care and control of this infant, as I have not heard any cross-examination nor has that aspect of the matter been argued before me. Nothing in this judgment, therefore, should even by comity have any persuasive influence one way or the other on the Scottish court which will eventually have to try the matter.
I will hear counsel on costs if they wish to address me thereon, but as at present advised I think the right order would be no order, save legal aid taxation of the mother’s costs.
Application granted. Leave to appeal.
Solicitors: Gregory, Rowcliffe & Co (for the father); Watkins, Pulleyn & Ellison agents for Bernard Chill & Axtell, Southampton (for the mother).
R W Farrin Esq Barrister.
Note
Manakee v Brattle
[1971] 1 All ER 464
Categories: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISIONbrc
Lord(s): MOCATTA J, SITTING WITH TWO ASSESSORS
Hearing Date(s): 22 JULY 1970
Expert – Witness – Costs – Fees recoverable as damages but not claimed – Whether costs ‘necessary … for the attainment of justice’ – RSC Ord 62, r 28.
Notes
For costs allowed on taxation, see Supplement to 30 Halsbury’s Laws (3rd Edn) para 805.
Summons
In 1965, the defendants agreed to build a cesspool for the plaintiff. It was built in a defective manner and the plaintiff employed a surveyor, Mr Brooks, to prepare plans and specifications for the construction of a new one. In December 1967, the plaintiff issued a writ claiming the costs of building the new cesspool, the amount claimed in the statement of claim being the amount given in the report of a quantity surveyor, Mr Cleveley, who was employed by the plaintiff to make a report based on the surveyor’s plans and specifications. The two surveyors were called at the trial as expert witnesses and the plaintiff recovered the cost of the rebuilding. On taxation the registrar disallowed that part of the surveyor’s qualifying fee (£43 8s 6d) representing the preparation of the plans and specifications and also disallowed that part of the quantity surveyor’s qualifying fee (£115 10s) representing the preparation of the report. The plaintiff then applied to the registrar of the Maidstone District Registry for a review of the disallowance, but the registrar refused to alter his decision, stating in his certificate on review that the items in dispute were not within the definition in RSC Ord 62, r 28(2)a as ‘all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed’. The plaintiff applied to the judge in chambers for a further review of the disallowance and the matter came before Mocatta J sitting with two assessors. The matter is reported by leave of Mocatta J.
D C Pitman for the plaintiff.
A T K May for the defendants.
22 July 1970. The following judgment was delivered.
MOCATTA J stated the facts and continued: The question has been raised whether the fees of a witness, which included expenditure that could have been claimed as damages in an action but were not included in the damages claimed, can be claimed instead as costs. I can see no reason why they should not be, provided that they are not recovered in the judgment by way of damages, provided that they are a proper item and can be justified as to quantum.
So far as the surveyor was concerned, his evidence was vital and included the
Page 465 of [1971] 1 All ER 464
preparation, before the issue of the writ, of plans and specifications in order to obtain quotations. No criticism can be made of this item and I overrule the disallowance. As to the quantity surveyor, his evidence was required in relation to the violent divergence between the parties on the proper cost of the work. On the summons for directions, three expert witnesses had been allowed for each side.
It is not clear from the documents whether the registrar thought that some of the quantity surveyor’s work had been done before the issue of the writ, and ought not, therefore, to have been allowed. It is clear to me however that he did the whole of his work in 1969. But the question arises whether the amount of his fees can be justified. After careful consideration of what has been said by counsel, the right figure would be to add only £50 to the qualifying fee for the quantity surveyor.
The appeal is accordingly allowed in respect of both expert witnesses.
Appeal allowed.
Solicitors: F B Jevons, Riley & Pope, Tonbridge (for the plaintiff); Masons (for the defendants).
E H Hunter Esq Barrister.
Willson v Willson
[1971] 1 All ER 465
Categories: FAMILY; Divorce
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): BAGNALL J
Hearing Date(s): 11, 12 JANUARY 1971
Divorce – Practice – Answer – Answer containing cross-petition for divorce – Petition based on grounds prescribed by statute – Statute repealed and replaced by new statute before answer filed – New statute prescribing new grounds for divorce – Grounds on which cross-petition should be based.
Where a petition has been presented prior to 1 January 1971 seeking a decree of divorce on the grounds prescribed by s 1 of the Matrimonial Causes Act 1965 and the respondent files an answer on or after that date seeking relief by way of dissolution of marriage, the grounds on which the respondent’s prayer should be based are those prescribed by ss 1 and 2 of the Divorce Reform Act 1969(see p 467 f, post).
Notes
For the ground on which a petition for divorce may be presented under the Divorce Reform Act 1969, see Supplement to 12 Halsbury’s Laws (3rd Edn) para 437A.
Cases referred to in judgment
Blacker v Blacker [1960] 2 All ER 291, [1960] P 146, [1960] 2 WLR 800, Digest (Cont Vol A) 757, 3892c.
Faulkner v Faulkner [1941] 2 All ER 748, 110 LJP 70, 165 LT 381, 27 Digest (Repl) 356, 2943.
Levett v Levett [1957] 1 All ER 720, [1957] P 156, [1957] 2 WLR 484, Digest (Cont Vol A) 245, 1094b.
Russell v Russell and Roebuck [1957] 1 All ER 929, [1957] P 375, [1957] 2 WLR 897, Digest (Cont Vol A) 240, 1024d.
Tulley v Tulley [1967] 1 All ER 639, [1967] P 285, [1967] 2 WLR 840., Digest Supp.
Summons
This was a summons for directions in proceedings for divorce. The summons was heard in chambers but adjourned into open court for judgment. The facts are set out in the judgment.
Page 466 of [1971] 1 All ER 465
T Ian Payne for the wife.
W M Gage for the husband.
12 January 1971. The following judgment was delivered.
BAGNALL J. The jurisdiction of this court to grant a decree of divorce is wholly statutory. That jurisdiction has been founded on a number of Acts of Parliament, starting with the Matrimonial Causes Act 1857 and culminating in the Divorce Reform Act 1969 which came into force on 1 January 1971. The scheme of the successive Acts of Parliament has been not to prescribe the grounds on which the court may grant a decree of divorce, but to prescribe the grounds on which a petition for divorce may be presented. Until 31 December 1970, the grounds on which a petition might be presented were to be found in the then latest of the Acts, namely s 1 of the Matrimonial Causes Act 1965. As from 1 January 1971, the grounds on which a petition may be presented are prescribed by ss 1 and 2 of the Divorce Reform Act 1969. I need not refer in detail to the provisions either of the sections of the 1965 Act or of the sections of the 1969 Act, except to say there are very substantial differences between the grounds prescribed in the former and those prescribed in the latter Act.
In the present case a petition seeking a divorce on the ground of cruelty was presented on 28 September 1970. No answer has yet been filed. The question which I have to decide is this: if the respondent by way of answer seeks in effect to counter-claim for a decree of divorce, must the answer be based for the purposes of that counter-claim or cross-petition on the grounds prescribed by the 1965 Act or on the grounds prescribed by the 1969 Act? It is common ground that it would in any event be open to the respondent to present a separate petition for divorce based on the grounds prescribed by the 1969 Act.
Schedules 1 and 2 to the 1969 Act respectively amend and repeal certain provisions of the 1965 Act and, in particular, Sch 2 to the 1969 Act repeals the whole of s 1 of the 1965 Act, prescribing the grounds on which a petition for divorce may be presented, and sub-ss (1)-(4) inclusive of s 5 of the 1965 Act, of which sub-s (4) sets out certain defences to a petition for divorce. Section 10 of the 1969 Act is in these terms:
‘This Act (including the repeals and amendments made by it) shall not have effect in relation to any petition for divorce or judicial separation presented before the commencement of this Act.’
Again it is common ground that that section requires one to treat, for the purposes of this petition, s 5(4) of the 1965 Act as un-repealed, so affording to the respondent in this suit the several defences prescribed by that subsection.
The other statutory provision that I must read is s 5(6) of the 1965 Act which, as originally enacted, was in the following terms:
‘If in any proceedings for divorce the respondent opposes the relief sought on the ground of the petitioner’s adultery, cruelty or desertion, the court may give to the respondent the relief to which the respondent would have been entitled if the respondent had presented a petition seeking that relief.’
The amendment of that subsection contained in Sch 1 to the 1969 Act, deletes the words ‘opposes the relief sought on the ground of the petitioner’s adultery, cruelty or desertion’ and substitutes the words ‘alleges against the petitioner and proves any such fact as is mentioned in section 2(1) of the Divorce Reform Act 1969’.
The question which I have to decide may be put shortly in this way. If the husband in this case files an answer seeking a divorce, is that answer to be treated as a petition for the purposes of ss 1 and 2 of the 1969 Act? It is plain from the authorities to which I have been referred in the course of the very full and helpful argument I have heard from counsel, that an answer containing a cross-prayer is to be treated as a petition
Page 467 of [1971] 1 All ER 465
for a number of purposes. It is to be treated as a petition for the purpose of determining whether desertion has occurred for the statutory period immediately preceding the presentation of the petition. That is apparent from Faulkner v Faulkner ([1941] 2 All ER 748 at 748, 749) where Hodson J used these words: ‘… the answer takes the place of the petition, and is in itself a petition praying at the end of it that the marriage may be dissolved … ’ That decision was approved by the Court of Appeal in Blacker v Blacker, and there are a number of other decisions to the same effect. Secondly, an answer is to be treated as a petition for the purpose of the application of the rules of court which at one time provided that a second petition might not be presented by the same petitioner until the first petition had been dismissed or otherwise disposed of, and now provide, by r 12 of the Matrimonial Causes Rules 1968a, that such a second petition may not be presented without the leave of the court. That is apparent from the case of Blacker v Blacker to which I have just referred, and Tulley v Tulley. Thirdly, an answer is to be treated as a petition for the purposes of the provisions governing the foundation of the jurisdiction of the court by reference to domicil in the case of a husband, or domicil or the statutory period of residence in the case of a wife. That is established by such cases as Levett v Levett and Russell v Russell and Roebuck.
In my judgment the same principle should apply to the question which I have to decide. One must, in my opinion, construe the Act by putting oneself in the position of the respondent, at the moment at which the answer comes to be filed, and ask the question: what would be the relevant statutory provisions applicable were the respondent now to put himself or herself in the position of a petitioner and file a petition? If that be the right question, there can only be one answer, namely that the respondent must found the answer (for this purpose treated as a petition insofar as it seeks matrimonial relief) on the statutory provisions in force after 1 January 1971. I am fortified in this view, first because it accords with what I should regard as reasonable and common sense; if the contrary view were to prevail, the respondent might choose which law he was to invoke by a decision whether to seek relief by way of cross-prayer in an answer or to seek the same relief by way of an independent petition. Secondly because it accords with the general practice of the court in all action; under rules of court, a counter-claim is founded on a cause of action and, therefore, on the state of the law at the date at which the defence containing the counter-claim is actually delivered. Accordingly I propose to answer the question raised in this summons by declaring that if an answer is filed seeking relief by way of dissolution of marriage the grounds on which that prayer should be based should be the grounds prescribed by ss 1 and 2 of the Divorce Reform Act 1969.
Ruling accordingly.
Solicitors: Badham, Comins & Main (for the wife); Passingham & Hill, Stevenage (for the husband).
Alice Bloomfield Barrister.
Blair v Alan S Tomkins and Frank Osborne (trading as Osborne & Tomkins (a firm)) and another
[1971] 1 All ER 468
Categories: INTELLECTUAL PROPERTY; Copyright
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND MEGAW LJJ
Hearing Date(s): 11, 12 NOVEMBER 1970
Copyright – Licence – Implied licence – Architect’s building plans – Architect employed to prepare plans for purpose of obtaining planning permission – Contract incorporating RIBA Conditions of Engagement – Implied licence to allow use of plans for all purposes connected with the building – Use of plans by purchasers of site and purchasers’ surveyors – Use in preparing further plans required for approval under building regulations – Whether infringement of copyright.
The owners of a plot of land wished to erect two houses on it and employed the plaintiff, and architect, to prepare a detailed plan of the houses for the purpose of applying for planning permission. The contract of employment incorporated the RIBA Conditions of Engagement and Scheme of Provisional Charges, as revised on 1 January 1962, which provided that the engagement entered into between an architect and the client might be terminated at any time by either party on reasonable notice being given and, inter alia, set out the fees to which the architect would be entitled in the event of his performing only part of the work. The plaintiff prepared a detailed plan and submitted it to the planning authority who gave full planning consent for the houses. The plaintiff then sent the certificate of planning consent together with a copy of his plan to the owners. He also submitted to them his account for £70, which was for taking instructions, making a survey, preparing a scheme and obtaining full planning consent. The owners paid the plaintiff’s fee. They then sold the land to the second defendants to whom they handed over the plaintiff’s plan. The second defendants employed their own surveyors, the first defendants, to draw up plans which were required for getting approval for the house under building regulations and the first defendants used the plaintiff’s plan. Approval under the building regulations was given and the houses were built. The plaintiff brought an action against the first and second defendants for infringement of copyright in his plan.
Held – Under the plaintiff’s contract of employment to prepare plans for the houses on the site, he had impliedly promised that, in return for his fee, he would licence the owners to use the plans for the buildings on that site, and the implied licence extended to a builder or another architect employed by the owners and also to a purchaser of the site so as to enable them to make copies of the plans and to use them for those same buildings on that site, but for no other purpose; accordingly, on the payment of his fee, the plaintiff had licensed the use of his plans by the purchasers of the site, their surveyors and workmen for all purposes connected with building the houses on that site, and the claim for infringement of copyright therefore failed (see p 470 h, p 471 b and j to p 472 a and h, post).
Beck v Montana Constructions Pty Ltd [1964–65] NSWR 229 applied.
Notes
For copyright in artistic works, see 8 Halsbury’s Laws (3rd Edn) 378–381, paras 695, 696 and for cases on the subject, see 13 Digest (Repl) 65–66, 117–127.
Case referred to in judgment
Beck v Montana Constructions Pty Ltd [1964–65] NSWR 229, Digest (Cont Vol B) 146, * 57aa.
Page 469 of [1971] 1 All ER 468
Case also cited
Meikle v Maufe [1941] 3 All ER 144.
APPEAL
This was an appeal by the plaintiff, Dennis Blair, an architect, from the judgment of his Honour Judge Corley, in Luton County Court, dated 2nd February 1970, whereby the plaintiff’s claim against the first defendants, Alan S Tomkins and Frank Osborne (trading as Osborne & Tomkins), and the second defendants, P W Byrne Ltd, for damages for infringement of copyright in the plaintiff’s drawing was, subject to a small nominal award against the first defendants, dismissed
The facts are set out in the judgment of Lord Denning MR.
R A Stanley for the plaintiff.
C Wilson-Smith for the defendants.
12 November 1970. The following judgments were delivered.
LORD DENNING MR. This case raises a point of very considerable interest to architects. Mr Underwood and Mr Norris were two neighbours at Sherwood Avenue, near St Albans. Each has a big garden. By each giving up a piece, they could together get a building plot for two houses. They hoped to get planning permission, and then either put up houses themselves or sell the plot with planning permission. They employed the plaintiff, Mr Blair, an architect, to prepare drawings so as to get outline planning permission. He accepted the engagement and told them that his terms would be in accordance with the RIBA scale. He gave them the little bookleta. That was in February 1966. But, after a little while, he told them that it would be better to submit a full planning application. They agreed that that should be done. So he prepared a detailed plan for planning permission for two semi-detached houses. The detailed plan had considerable architectural merit. No doubt the copyright in it belonged to the plaintiff. He submitted it to the local authority. He gave Mr Underwood and Mr Norris copies of the drawings on 6 April 1966. He wrote:
‘… I have now submitted the scheme you favoured for full planning approval. Enclosed are two copies of the drawing for your use. I confirm you understand the fee basis is to be in accordance with the R.I.B.A. scale of charges, and at this stage amounts to 1/6 of minimum full fees.’
That is a reference to the RIBA scale of fees, which states, in cl 3(2):
‘For taking Client’s instructions, preparing sketch designs sufficient to indicate the Architect’s interpretation of the Client’s instructions (but not in detail adequate to enable bills of quantities to be prepared), making approximate estimate of cost and making application for outline Town Planning approval the charge is on quantum meruit and shall not exceed one-sixth of the percentage due under Clause 1 or 2 (as the case may be) on the Architect’s estimated cost of such works.’
The application was approved. On 3 August the plaintiff sent the certificate for full planning approval to Mr Underwood and Mr Norris. He enclosed his account, which came to some £70, and added significantly: ‘Wishing you all the very best in this venture.' His account stated:
‘To: Taking Instructions, Making Survey, Preparing Scheme, Obtaining full Planning Consent: £70.0.0.’
Mr Underwood and Mr Norris paid the £70. They kept the copies of the plans which he had sent them. But they did not employ the plaintiff to do the work.
Page 470 of [1971] 1 All ER 468
They sold the site to a building firm, P W Byrne Ltd, the second defendants, and they handed over the plaintiff’s drawings to this firm. The second defendants wanted to start work quickly before the Land Commission Act 1967 came into operation. They got hold of their own surveyors, Messrs Osborne & Tomkins, the first defendants, and handed them the plans. The first defendants had to get approval under the building regulations. For this they used the plaintiff’s drawings and put in a lot more detail. They got building approval. And the houses were built by the second defendants, with the assistance of the first defendants.
The plaintiff saw the houses. He believed that his plans had been used. He went to the local council and found out that he was right. His plans had been used. Thereupon he claimed damages for infringement of his copyright. He claimed against the first defendants who had used his drawings; and against the second defendants who built the houses from them. The county court judge decided against the plaintiff on the main point. He appeals to this court.
It is quite plain that the plaintiff was entitled to the copyright in his drawings. He drew them himself, and that makes him prima facie the owner of the copyright in them. Furthermore, it is one of the RIBA conditions: ‘Copyright in all drawings and in the work executed from them will remain the property of the Architect.' As owner of the copyright, the plaintiff was certainly entitled to stop people in general from copying his drawings, or building a house from them, but this is subject to this qualification; he could not complain of anything for which he had given licence or permission. The question in this case is whether he had given a licence.
The RIBA conditions do not give any guidance on this question of licence. But they do contain a condition which is of some relevance:
‘An engagement entered into between the architect and the client may be terminated at any time by either party upon giving reasonable notice.’
Suppose now that, after the architect has made the plans, a contract is made by the owner with a builder whereby the builder is to build the house in accordance with the plans; and then the architect says he will go on no longer as architect for the work, and gives one month’s notice. Can the architect refuse to let the owner and the builder use the plans and make the house from them? Surely not. At that stage, at any rate, when the owner has placed a contract for the work, the architect must be taken to have impliedly licensed the work to be done in accordance with the plans. Now take it back to an earlier stage, when the architect has drawn plans and obtained planning permission on the faith of them, and been paid for them. Can the architect then withdraw from the work and refuse to let the owner use the plans? Surely not. That shows that, at that stage also, the architect must be taken to have impliedly licensed the building to proceed in accordance with the plans.
Those illustrations show to my mind that, when the owner of a building plot employs an architect to prepare plans for a house on that site, the architect impliedly promises that, in return for his fee, he will give a licence to the owner to use the plans for the building on that site. The copyright remains in the architect, so that he can stop anyone else copying his plans, or making a house from them; but he cannot stop the owner, who employed him from doing work on that very site in accordance with the plans. If the owner employs a builder or another architect, the implied licence extends so as to enable them to make copies of the plans and to use them for that very building on that site, but for no other purpose. If the owner should sell the site, the implied licence extends so as to avail the purchaser also.
There is no authority in this country on this subject. But I am glad to find that there is a case in the Supreme Court of New South Wales. It is Beck v Montana Constructions Pty Ltd. I find the reasoning of Jacobs J very convincing. He said ([1964–65] NSWR at 235):
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‘… the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely for the purpose of building a building in substantial accordance with them and for the purpose of preparing any necessary drawings as part of the task of building the building.’
I entirely agree. Applying this principle, it seems to me that the payment of £70 to the plaintiff covered the use of the drawings, not only by Messrs Underwood and Norris themselves, but also by the people to whom they sold the plot, and by the surveyors and workmen of the purchasers, so that they might make copies of them and otherwise use them in the accustomed way for building a house on this site. I think that the claim for infringement of copyright fails.
But there is one small point I should mention. When the first defendants put in their detail plan to the local council, they put their own name on it as though it were all their own work; whereas, it was not all their own work. Part of it was the plaintiff’s original drawings. It is conceded that the implied licence did not enable them to put forward part of his work as their own. To that extent, therefore, it was not licensed. But no damage flowed from that misdescription. The local authority said that the name on the document did not influence them. For that technical infringement the judge awarded nominal damages of 40s. Subject to that small nominal award, the judge dismissed the claim and gave no further damages. I think that was quite right. The appeal should be dismissed.
WIDGERY LJ. I agree. The RIBA terms of employment which were incorporated in this contract provided expressly that the engagement entered into between the architect and the client might be terminated at any time by either party on reasonable notice being given. Consequent on the possibility that the contract would thus not run its full normal course but would be terminated prematurely, one finds in cl 3 precise conditions as to the fees to which the architect will be entitled in the event of partial services only being performed. The scheme of the clause is to divide the total work into stages and to indicate what portion of the total fee is to be paid to the architect on the reaching of any one of those stages. So one finds that the first stage deals with preliminary sketches, progressing in the second stage to sufficient plans for outline planning permission and, in the next stage, to sufficient plans for detailed submission for planning approval. Counsel for the plaintiff contends that if an engagement of an architect does not run its full course and fees are payable under the partial services provision to which I have referred, then, despite the fact that the architect has been fully compensated for all the work he has done, the client nevertheless cannot use the product of that work if it infringes the architect’s copyright. That the architect retains the copyright is beyond dispute. He needs it for many good reasons. He needs it to protect himself against the possibility of his plans being used by others who have paid him no fee, or being used for purposes other than the specific building which was contemplated. However, it is common ground between counsel that although the architect retains the copyright, and although the use of the plans would prima facie be a breach of copyright, yet there was in this agreement an implied licence enabling the client to use the plans to some extent. The issue between the parties before us is: what is the extent of that licence, or what is the extent to which the client is impliedly authorised to use the plans? Counsel for the plaintiff in his full argument developed this point in great detail; but I think for my part that his argument can be summarised in a single sentence. He contends that the licence to the client to use the plans is conditional on the architect continuing to be employed. Accordingly he says that if the engagement breaks off at the planning permission stage, if I may so describe it, and the architect is not to be employed thereafter, there is no further licence to use the plans. Counsel for the defendants puts the matter more simply and says that the implied licence is to use whatever
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plans have been prepared for all purposes for which those plans would normally be used, ie all purposes connected with the erection of the building to which the plans relate. I have no hesitation in saying that counsel for the defendants’ approach is right. If it be right that the architect can hold the client to ransom, as counsel for the plaintiff’s argument really implies, this would be quite inconsistent with the clear term in the engagement that that engagement could be put an end to at any time. If counsel for the plaintiff were right, an architect would have very powerful means of preventing his client from dismissing him; and that would be inconsistent with the spirit of the terms of employment if not inconsistent with their letter. I am indebted to Jacobs J for the guidance given in Beck v Montana Constructions Pty Ltd, to which Lord Denning MR has referred. That judgment seems to me to suit the circumstances of this case precisely, and, if I may say so, to be entirely correct in every way. I will repeat because I think it valuable, the general principle which Jacobs J lays down. He said ([1964–65] NSWR at 235):
‘… it seems to me that the principle involved is this: that the engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission, or consent, or licence in the person giving the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement.’
It was contemplated by the parties in this case that the plans would be used in furtherance of the erection on this site of houses of the type to which the plans relate. Counsel for the plaintiff, however, further submits that on the facts of the present case the only engagement by the plaintiff was to prepare plans to lead to the grant of planning permission, and so he argued that that being the only purpose for which the plans were prepared, it was the only purpose for which the parties contemplated that they should be used. I am quite unable to agree with this. The preparation of plans is a progressive process which begins with the most elementary sketches and works on through the details of outline planning permission and detailed planning permission, to working drawings and completion of the work. The observation that the plans in question were only plans to lead to planning permission simply means that they were plans which at that point had only been developed to the extent necessary for that purpose. It is quite wrong and unreal to suggest that the only function of the plans was to obtain planning permission. Their function was to enable that application to be made, and thereafter, if the application was successful, to form the basis for more detailed drawings which would lead to the final plans for the erection of the building.
I agree with Lord Denning MR’s judgment and that this appeal must be dismissed.
MEGAW LJ. I agree that the appeal should be dismissed for the reasons which have been given by my Lords. I would add only one thing as to the terms of the contract with which we are concerned on which the whole of the argument has revolved. The terms of the contract include the ‘Conditions of Engagement and Scheme of Provisional charges’ set out in a pamphlet issued by the RIBA, as revised on 1 January 1962. Those are the relevant terms here because those were the conditions which were in operation at the relevant date. We have been told that since that date a new document described as ‘Conditions of Engagement’ has been issued on 1 October 1966. Whether or not the new conditions of engagement have alterations which would be material in respect of an issue of this nature, I do
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not know. But we have to deal with this case on the conditions that were then prevailing, incorporated into this contract. Having regard to those conditions, I agree with the dismissal of this appeal for the reasons given by my Lords.
Appeal dismissed.
Solicitors: Watkins, Pulleyn & Ellison (for the plaintiff); Machin & Co, Luton (for the defendants).
Wendy Shockett Barrister.
Geoffrey Silver & Drake (suing as a firm) v Thomas Anthony Baines (trading as Wetherfield, Baines & Baines (a firm))
[1971] 1 All ER 473
Categories: PROFESSIONS; Lawyers
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, WIDGERY AND MEGAW LJJ.
Hearing Date(s): 9, 10 NOVEMBER 1970
Solicitor – Undertaking – Enforcement – Procedure – Summary procedure – Jurisdiction of court – Discretion – Principle on which discretion will be exercised – Exercise only in clear case – Undertaking given in professional capacity – Authority of employee to give undertaking in issue
Solicitor – Undertaking – Enforcement – Procedure – Undertaking given in professional capacity – Undertaking to repay money lent for benefit of client by another solicitor – No undertaking to apply money in a particular way – Solicitor not holding money in own hands – Whether undertaking given in capacity as a solicitor.
The defendant was the only partner in a firm of solicitors and employed B, an admitted solicitor, to carry out much of the firm’s work. In March 1969, B asked the plaintiff, a partner in another firm of solicitors, to advance £4,000 for a client of the defendant’s firm. The plaintiff advanced the money, and in an undertaking written on the defendant’s professionally headed notepaper, dated 21 March 1969, addressed to the plaintiff, and signed by B on behalf of the defendant’s firm, it was stated that in consideration ‘of you handing to me the sum of £4,000, we hereby undertake to repay the said sum to you together with interest at 2% a month on the 21st day of May 1969’. The defendant knew nothing about the loan. It was not repaid by 21 May 1969, and when the plaintiff demanded repayment the defendant said that he knew nothing about the loan and he repudiated any liability under the written undertaking. The plaintiff took out an originating summons against the defendant for an order of the court in the exercise of its summary jurisdiction over solicitors for payment of the £4,000 and the interest on it. The judge dealt with the summons summarily on the affidavits and without oral evidence and, holding that the undertaking was binding on the defendant because it was within B’s implied or ostensible authority, he ordered the defendant to pay the sum claimed. On the defendant’s appeal,
Held – (i)(per Lord Denning MR and Widgery LJ) Assuming that the written undertaking was given by the defendant, since it was merely to repay money lent it was not an undertaking given by him in his capacity as a solicitor, even though the money was for the benefit of a client, but was given in his personal capacity, for in regard to money an undertaking given by a person in his capacity as a solicitor was usually one to pay money which he held in trust or an undertaking to apply money in a particular way; accordingly, the first requirement for the exercise of the court’s
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summary jurisdiction over solicitors for breach of an undertaking was absent (see p 475 j to p 476 c and p 477 b to d, post).
(ii) In any event, the court’s summary jurisdiction over solicitors should be exercised only in a clear case which the present case was not since the issue of B’s implied or ostensible authority to give the undertaking was arguable; accordingly, the case was not an appropriate one for summary procedure and the plaintiff must bring an action at law for the money; the appeal would therefore be allowed (see p 476 b, p 477 f and p 478 c, post).
United Mining and Finance Corpn Ltd v Becher [1908–10] All ER Rep 876 and Re a Solicitor [1966] 3 All ER 52 considered.
Dictum of Bowen LJ in Ex parte Cobeldick (1883) 12 QBD at 151 applied.
Notes
For liability on undertakings given as a solicitor, see 36 Halsbury’s Laws (3rd Edn) 195–198, paras 266–269, and for cases on the subject, see 43 Digest (Repl) 350–352, 3651–3690, and 361–365, 3810–3872.
Cases referred to in judgments
Cobeldick, ex parte (1883) 12 QBD 149, 49 LT 741, 43 Digest (Repl) 357, 3754.
Myers v Elman [1939] 4 All ER 484, [1940] AC 282, 109 LJKB 105, 162 LT 113, 43 Digest (Repl) 375, 3981.
Solicitor, Re a [1966] 3 All ER 52, [1966] 1 WLR 1604, Digest (Cont Vol B) 660, 3872a.
United Mining and Finance Corpn Ltd v Becher [1910] 2 KB 296, [1908–10] All ER Rep 876, 79 LJKB 1006, 103 LT 65; on appeal CA [1911] 1 KB 840, 43 Digest (Repl) 362, 3821.
Cases also cited
Alliance Bank Ltd v Tucker (1867) 17 LT 13.
Farquharson Brothers & Co v King & Co [1902] AC 325, [1900–03] All ER Rep 120.
Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All 630, [1964] 2 QB 480.
Hasleham v Young (1844) 5 QB 833.
Guebert v Moir (1881) 25 Sol Jo 392.
Appeal
This was an appeal by the defendant, Thomas Anthony Baines, trading as Wetherfield, Baines & Baines, a firm of solicitors, from the order of Chapman J, sitting in chambers, made on 26 February 1970, that the defendant must pay to the plaintiffs, Geoffrey Silver & Drake, suing as a firm of solicitors, £4,000 with interest thereon at 2 per cent a month pursuant to a written undertaking contained in a letter dated 21 March 1969. The facts are set out in the judgment of Lord Denning MR.
Anthony Lincoln QC and Alec Grant for the defendant.
G V Owen QC and L R Sieve for the plaintiffs.
10 November 1970. The following judgments were delivered.
LORD DENNING MR. This is a dispute between two firms of solicitors. Geoffrey Silver & Drake have two partners—one of whom is Mr Silver. Wetherfield, Baines & Baines have only one partner—Mr Thomas Anthony Baines. He employs an admitted solicitor—a Mr H C Batts, to whom he leaves a lot of the work.
In March 1969, Mr Batts asked Mr Silver to advance £4,000 for a client of Mr Baines’s firm. Mr Silver did so. Mr Batts gave a written undertaking to repay it in two months. The undertaking is dated 21 March 1969. It is signed on behalf of Wetherfield, Baines & Baines by Mr Batts, but Mr Baines, the principal, did not know anything about it. it is addressed to Mr Silver:
‘Dear Sirs,
In consideration of you handing to me the sum of £4,000, we hereby undertake to repay the said sum to you together with interest at 2% a month on the 21st
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day of May 1969, and at the same time we hereby undertake to pay to you the sum of £4,500. for Mr Izzet on you handing to me the deeds of 21 Westminster Road, N.9. on or before the said date.’
the 21 May 1969 came. The sum was not paid. Mr silver demanded payment. Mr Baines wrote on 4 June saying that he did not know anything about it and asked for a copy. Mr Silver sent it. On 9 June, Mr Baines repudiated any liability whatever under the document. At once Mr Silver applied to the Divisional Court to commit Mr Baines for non-fulfilment of his undertakings. In an affidavit of 11 June 1969, Mr Silver said:
‘I … submit that … Thomas Anthony Baines … has been … guilty of contempt of Court, and … ask that leave may be granted to issue a Writ of Attachment against [him] … or … that [he] be committed to … Prison for his said contempt’.
That application was premature, to say the least. Before any application could be made to commit, Mr Silver ought to have obtained an order for payment: see Re a Solicitor. So the Divisional Court sent Mr Silver away. Six months later, in January 1970, Mr Silver took out a summons against Mr Baines. He sought an order that Mr Baines pay the sum of £4,000 forthwith with interest at 2 per cent per month, and also the further sum of £4,500 mentioned in the undertaking, on the deeds being handed over. The summons came before Chapman J on 26 February 1970. He dealt with it summarily on the affidavits without oral evidence. He held that Mr Baines had not in fact given authority to Mr Batts but, nevertheless, the undertaking was within Mr Batts’ implied authority, and also that he had ostensible authority to give it. The judge held that it was binding on Mr Baines personally, and he ordered Mr Baines to pay. Now there is an appeal to this court.
Since that time a similar application has come before Ungoed-Thomas J. He did not follow Chapman J. He thought that the summary procedure was not appropriate. He did not make any order.
I must say that I agree with Ungoed-Thomas J. This court has from time immemorial exercised a summary jurisdiction over solicitors. They are officers of the court and are answerable to the court for anything that goes wrong in the execution of their office. Even if the solicitor has been guilty of no fault personally, but it is the fault of his clerk, he is accountable for it: see Myers v Elman. This jurisdiction extends so far that, if a solicitor gives an undertaking in his capacity as a solicitor, the court may order him straightaway to perform his undertaking. It need not be an undertaking to the court. Nor need it be given in connection with legal proceedings. It may be a simple undertaking to pay money, provided always that it is given ‘in his capacity as a solicitor’: see United Mining and Finance Corpn Ltd v Becher ([1910] 2 KB 296 at 306, [1908–10] All ER Rep 876) per Hamilton J. If such an undertaking is given, the court may summarily make an order on the solicitor to fulfil his undertaking (see Re a Solicitor) and, if he then fails to do so, the court may commit him to prison. Alternatively, if it is an order to pay money, execution may be levied against his property. This summary jurisdiction means, however, that the solicitor is deprived of the advantages which ordinarily avail a defendant on a trial. There are no pleadings; no discovery; and no oral evidence save by leave. The jurisdiction should, therefore, only be exercised in a clear case.
The first question in the present case is whether the solicitor gave the undertaking ‘in his capacity as a solicitor’. This is difficult to define. But I think it will usually be found, in regard to money, that it is an undertaking to pay money which he has in his hands on trust, or on an undertaking that he will apply it in a particular way. Thus, if a solicitor is acting for a client on the sale of land, and gives an undertaking to a bank
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that he will pay over so much of the money, when received to the bank, the undertaking is given ‘in his capacity as solicitor’: see in Re a Solicitor. So also, if a solicitor gives an undertaking that he will hold a sum of money in his hands pending the conclusion of negotiations, that too is given in his capacity as a solicitor, as in United Mining and Finance Corpn Ltd v Becher. But this case is very different from either of those cases. The solicitor here was not holding money in his hands at all. All that happened was that Mr Batts received money and paid it over to a client, Mr Izzet, and promised to repay it to Mr Silver. It was an undertaking to repay money lent. That is all. It was at good interest too, 2 per cent a month. The money may have been for the benefit of a client. But that does not matter. It was, in truth, nothing more nor less than an undertaking to repay money lent. That is not an undertaking ‘in his capacity as a solicitor.' In any case, however, this is not a case in which the court should exercise its summary jurisdiction. The court has a discretion which it will only exercise in a clear case. This is not a clear case.
The issue of authority is a very live issue. I should have thought that it was very arguable whether Mr Batts had any implied or ostensible authority. It is quite inappropriate for summary procedure. I would use of this case the words of Bowen LJ in Ex parte Cobeldick ((1883) 12 QBD 149 at 151):
‘All that has been shewn has been a case in which the party ought to establish his right by an action at law, and not by appealing to the summary jurisdiction of the Court.’
I would, therefore, allow the appeal and discharge the order made by Chapman J. Mr Silver must bring an action at law for the money; and prove, if he can, that Mr Baines is responsible for the acts of his assistant, Mr Batts. We are told that several other persons have brought actions against Mr Baines in respect of Mr Batts’s activities. The claims come to £220,000. Mr Silver must take his place in that queue of claimants. He cannot get ahead of them by invoking the summary jurisdiction of the court.
I would allow the appeal accordingly.
WIDGERY LJ. I agree with Lord Denning MR’s judgment and add a few words only in deference to the views of the learned judge below from whom we are differing. This was not the common case of an undertaking given to the court in which any default is akin to a contempt and naturally attracts the remedy of attachment and committal. The undertaking in question here was not given to the court. It was not even given in the course of litigation. There is clear authority, however, from the earliest days that a solicitor, being an officer of the court, is liable to attachment for a breach of an undertaking even though the undertaking is not given to the court itself. But the first requirement of the exercise of that jurisdiction, as Lord Denning MR has pointed out, is that the undertaking in question must have been given by the solicitor in the course of his activities as a solicitor. It must be given by him professionally as a solicitor and not in his personal capacity. The reason for that is clear enough, because a remedy of this kind is intended primarily to discipline the officers of the court, to ensure the honesty of those officers. The court is thus concerned only with their activities as solicitors, and anything done by a solicitor in his private capacity is outside this jurisdiction.
What is the position here? The undertaking in question has been read and I do not propose to read it again. On its face it is simply an undertaking to repay a debt which is being contracted by the solicitor in question. If a solicitor borrows money personally and incurs a personal obligation in that regard, his promise to pay that money is not a promise in his capacity as a solicitor, even though he sits in his office when he receives
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the money and even though he acknowledges the debt on his professionally headed notepaper. Another possible views of this particular case is that this was in truth the giving of a guarantee by a solicitor for a debt incurred by his client. But then, looking at it in that way, it seems to me to make no difference. Here again one cannot describe this as an act done in the capacity of a solicitor merely because a client of the partnership was involved in the transaction. The position, of course, would have been wholly different if the sense of the transaction had been that the solicitor was to receive this money and undertake to apply it in a particular way. In those circumstances one would have a conventional type of solicitor’s undertaking. It is a commonplace that solicitors obtain possession of money or documents to which they have no direct right and give an undertaking that in consideration of being supplied with the money or documents they will deal with them in a particular way. But the intention here is not that the £4,000 should be disbursed on behalf of Mr Silver. The clear intention is that is should be a loan. I assume for the present purposes that the undertaking was given by Mr Baines and that the agency of Mr Batts was an effective one. On that footing it seems to me that this was an undertaking given by the solicitor in his personal capacity and there is not jurisdiction to use the summary procedure for enforcing repayment of that sum. I also would wish respectfully to endorse what Lord Denning MR has said about the effectiveness of the procedure in this case. It is unthinkable that a man should be sent to prison unless he has had a fair opportunity of defending himself. The rules provide that an application of this sort should be made by originating summons, a method which, as is notorious, is not a particularly effective way of deciding disputed questions of fact. Nevertheless the applicant who seeks to invoke the summary procedure must face those handicaps and if at the end of the day he has not made out his case beyond reasonable doubt, then the judge ought to dismiss the application in his discretion. It seems to me that in this case the material supplied to the learned judge was wholly insufficient to enable him to determine an issue which might result in Mr Baines being committed to prison; and if, as Lord Denning MR has said, the result is that this procedure is available only in relatively clear cases, I should myself be perfectly prepared to agree that that is a proper view.
I agree that the appeal be allowed and application should be dismissed.
MEGAW LJ. The jurisdiction which has been invoked in this case is a jurisdiction which was not created by statute; it is a jurisdiction which has been created by the court itself. It is described in this way by Hamilton J in United Mining and Finance Corpn Ltd v Becher ([1910] 2 KB 296 at 305, [1908–10] All ER Rep 876 at 880, 881):
‘The conduct which is required of solicitors is to this extent perhaps raised to a higher standard than the conduct required of ordinary men, in that it is subject to the special control which a Court exercises over officers so that in certain cases they may be called upon summarily to perform their undertakings, even where the contention that they are not liable to perform them is entirely free from any taint of moral misconduct.’
Let it be assumed for present purposes that the undertaking which is the subject-matter of these proceedings is something that could somehow or other be described as an undertaking given on behalf of Mr Baines (if it was given ‘on his behalf’) in his capacity as a solicitor. That is not the end of the matter, because it is perfectly clear from all the authorities, including the judgment of Hamilton J in the United Mining case, that the fact that a particular undertaking enables the court to take the jurisdiction to deal with the matter in a summary way does not mean that the court has got to deal with the matter in that summary way. There is and there has always been
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recognised a discretion in the court whether or not the circumstances of the case justify the exercise of this exceptional procedure. That was made clear by Hamilton J himself where he said ([1910] 2 KB at 304, 305, [1908–10] All ER Rep at 880):
‘… I do not think that … the question whether to resort to the disciplinary jurisdiction or to an action can be decided by mere reference to the speed of the summary jurisdiction or its convenience to one of the parties, if not to both, as compared with an action.’
If in any particular case where it is sought to invoke this extraordinary jurisdiction it appears to the court that justice requires that another procedure should be followed rather than this special procedure, then the court must exercise its discretion to refuse to allow this extraordinary procedure to be used. In my judgment in the present case, having regard to the serious and difficult issues which are raised, it would be quite wrong against the will of Mr Baines to allow this matter to be dealt with otherwise than by means of an ordinary action in the court with evidence given orally and with the opportunity for cross-examination.
I agree with the order proposed by Lord Denning MR.
Appeal allowed. Order of Chapman J discharged. Leave to appeal to the House of Lords refused.
Solicitors: Lawrance, Messer & Co (for the defendant); Geoffrey Silver & Drake (for the plaintiffs).
Wendy Shockett Barrister.
Jolliffe v Willmett & Co and another
[1971] 1 All ER 478
Categories: TORTS; Tortious Liability, Trespass
Court: QUEEN’S BENCH DIVISION
Lord(s): GEOFFREY LANE J
Hearing Date(s): 14, 17, 20 JULY 1970
Trespass to land – Defence – Leave and licence – Husband and wife living apart – Husband occupying home not the matrimonial home – Whether wife entitled to give permission to third party to enter husband’s home.
Independent contract – Tort committed by contractor – Liability of employer – Solicitor employing enquiry agent in divorce proceedings – Solicitor acting in divorce proceedings on behalf of one spouse – Trespass by enquiry agent in home of other spouse.
Where a husband and wife have separated and are living apart, one spouse has no right to give permission to a third party to enter the other spouse’s home, not being the matrimonial home, for any purpose; and where, in reliance on permission so given, the third party does enter the other spouse’s home, he is a trespasser, whether or not the spouse whose home it is has expressly forbidden him to enter therein (see p 484 e and f post).
An employer is not vicariously liable for the tortious acts of a person in his employment who is not his servant but an independent contractor; but the employer may be liable for tortious acts committed by an independent contractor either if he was negligent in the selection of the independent contractor and that negligence was the cause of the tortious act or if the employer expressly ordered, authorised or ratified the tortious act (see p 485 d and e, post).
Page 479 of [1971] 1 All ER 478
Notes
For defences in an action for trespass to land, see 38 Halsbury’s Laws (3rd Edn) 749–752, paras 1226–1228, and for cases on the subject, see 46 Digest (Repl) 386–393, 287–355.
For the liability of an employer for the torts of an independent contractor, see 25 Halsbury’s Laws (3rd Edn) 497–501, paras 959–964, and for cases on the subject, see 34 Digest (Repl) 196–208, 1376–1456.
Case referred to in judgment
National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, [1965] AC 1175, [1965] 3 WLR 1, Digest (Cont Vol B) 343, 6211.
Action
This was an action by the plaintiff, Ernest Donnell Jolliffe, against Willmett & Co, the first defendants, and Cyril Hearne, the second defendant, for damages for trespass and for personal injuries resulting from an assault by the second defendant. The facts are set out in the judgment.
A C W Hordern for the first defendants.
G I Rich for the second defendant.
The plaintiff appeared in person.
20 July 1970. The following judgment was delivered.
GEOFFREY LANE J. In this action the plaintiff, Ernest Donnell Jolliffe, who has conducted his own case, alleges that the second defendant, Cyril Hearne, trespassed on certain premises in the occupation of the plaintiff, namely 333a High Street, Slough, and there assaulted him. He further alleges that whilst the second defendant was so acting, he was acting as the agent of the first defendants, Willmett & Co, who are solicitors, and acting in such a way that the first defendants, the solicitors, are equally responsible for the trespass and the assault in that they, by authorising or giving permission to the second defendant, so implicated themselves as to render themselves liable in damages. To that the second defendant replies that, although he admittedly came on those premises, he did so with the permission of the plaintiff’s wife, and consequently his actions did not amount to trespass in law. Insofar as the alleged assault is concerned, the second defendant says that, if he did lay hands on the plaintiff at all, he did so in legitimate self-defence when the plaintiff rushed at him and hit him a glancing blow on the chin; himself, as I say, having been first the victim of that unwarranted attack. So far as the first defendants are concerned, they were admittedly acting as the plaintiff’s wife’s solicitors at the time. Admittedly they instructed the second defendant to make enquiries and, as I have already indicated, it is in those circumstances that the plaintiff alleges that they are responsible to him in the same way as the second defendant is responsible to him.
The facts of this unhappy affair are complicated and have obviously given rise to great distress between all parties for very many years. There is a long history of matrimonial dispute between the plaintiff and his wife. The precise facts of that dispute are not material. What is material is the catalogue of various changes of matrimonial home and fortune which there have been in order that one may see precisely the status of 333a High Street, Slough, and to what extent the wife had any rights to be on those premises or to invite other people there. The historical sequence of events, so far as accommodation was concerned in this marriage, appears to be this. The flat at 333a High Street, Slough (‘the flat’) was occupied as a matrimonial home up to about 1953 or 1955. The parties then left the flat together and the flat itself was let. The plaintiff and the wife moved to a house at Beaconsfield and it was there that the first separation between them took place in about 1965. It was the plaintiff who left the home on that occasion, the wife staying behind. There was another dwelling-house owned by the plaintiff at a place called Mansion
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Meadow, which I think was at Egham. It was there that the parties came together being reconciled in May 1966 or thereabouts. That reconciliation lasted for a time, the length of which is in dispute, but in about 1968 the wife left Mansion Meadow and went to live with her eldest son whose name is Geoffrey. Thereafter, the plaintiff continued to live, as I understand it, for a time at Mansion Meadow, and then took up residence at the flat, not living there all the time but occasionally returning to Egham to the accommodation there. In 1965, or thereabouts, divorce proceedings were commenced by the plaintiff’s wife. Counter allegations were made by the plaintiff in his answer, but eventually those proceedings were discontinued in circumstances about which there was considerable dispute, not material to the outcome of the present proceedings. The flat is over the business premises of the plaintiff, who carries on there a tailor’s business and, as I have indicated, it is common ground that the plaintiff’s wife has never lived at the flat since 1953 or 1955. During those 1965 divorce proceedings, the plaintiff had instructed his then solicitors to write to the wife’s solicitors, the first defendants, complaining that an enquiry agent, not the second defendant, had trespassed on his property, and a letter to that effect was sent to the wife’s solicitors.
In 1968 the plaintiff’s wife was minded to commence fresh divorce proceedings against the plaintiff, and instructed the first defendants accordingly. The belief was, apparently, that the plaintiff was committing adultery with a Miss Mara Henderson, who had been, and was, acting as his part-time secretary. Once again, the first defendants instructed enquiry agents to keep observation. Their first choice of enquiry agent was a concern known as Douglas Investigations of Twyford in the county of Berkshire, but that agency was unable to take on the assignment and instead put the first defendants in touch with the second defendant to whom they passed on their letter of instruction. That letter is before me and contains this material paragraph. It is dated 4 Decemeber 1968. I quote:
‘We must stress that the [plaintiff] has instructed solicitors, and therefore no direct approach must be made. In any event a direct approach would be useless as only stealth and cunning are likely to serve in this case.’
The reason for that note of caution was the solicitors’ previous experience of the plaintiff and the trouble they had had in 1965 and the previous warning with regard to trespassing. However, on 19 December 1968, the second defendant, in the course of the observations which he had been asked to make, knocked on the door of the flat. The door was opened by Miss Henderson. What happened thereafter was the subject of dispute. Miss Henderson gave this account. She said that she opened the door, saw there a man and asked him who he was, to which the answer was, ‘You ought to know me’. The man then, she said, put his umbrella in the door opening and told her that he was a police constable from Egham and said to her, ‘It’s Mara, isn’t it?’ He then asked her where the plaintiff was, and she said that she was not sure. He then made an allegation about her behaviour with the plaintiff. She told him, she said, to go away and not to come back. Then he made further allegations, and having made them he went and she closed the door. Coming back a few minutes later he gave her an envelope and went away again very quickly. She ran after him and gave him the envelope back telling him again not to come back as he was trespassing. She told the plaintiff, who was upstairs in his bath at the time, and he then took certain steps with regard to warning the first defendants once again on the question of trespassing.
The second defendant’s account of that incident is this. He had made observations on the rear of the premises all the preceding night, and on the following morning he knocked at the door and Miss Henderson opened it. He told her that he recognised her, and he did say, ‘Hello, Mara’, the reason being, according to him, that he had been in the police force at Egham, and in some way had been concerned with school crossings, and so on, and in that way had got to know Miss Henderson, at least
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by sight. He denied that he said he was a police officer. According to him he said he was Cyril Hearne, instructed by Willmett & Co in divorce proceedings by the plaintiff’s wife. As a result of his observations and enquiries, he said that he was satisfied that Miss Henderson was living there and had stayed the night. He then issued the formal caution according to the terms of the Judges’ Rules, and he said to her, ‘I shall have to see [the plaintiff] about this’, and there the matter ended. He waited at the door for a time. He said that she came down, having spoken apparently to the plaintiff. He gave her the firms’s name and address and she, at the end of the interview, in answer to his allegation about her behaviour, said ‘I have my own bedroom’.
The second defendant then got in touch with Mr Simms, who is the partner in the first defendants’ firm who was dealing with the matter and here is a dispute to a limited extent between the second defendant and Mr Simms, the material partner of the first defendants. Mr Simms is clear in his mind that this conversation which he had with the second defendant was simply confined to the question of whether the second defendant had permission to take the plaintiff’s wife with him on his next expedition to these premises,and Mr Simms’s recollection was that he gave that permission thinking that it would be advisable to have some corroboration of what the second defendant saw. Mr Simms was quite clear that he had never given any authority to the second defendant to go on to these premises. True, he was not clear in his own mind which the premises were that the second defendant was investigating, whether it was Mansion Meadow or whether it was the flat but he was clear in his mind that he had given no permission for him to go on the premises whichever they were. The second defendant, on the other hand, although contradicting himself from time to time on this question, gave the impression that he thought he had permission from Mr Simms actually to go on the premises which the plaintiff was occupying. I need not relate the answers which the second defendant gave in cross-examination. Suffice it to say that I am quite convinced in my own mind that Mr Simms’s account is the correct one, for this reason if no other; Mr Simms knew enough about the plaintiff to realise the trouble that would arise if the second defendant put his nose anywhere inside the flat, and Mr Simms is an experienced enough solicitor not, even in his most incautious moments, to give the sort of permission which the second defendant at one stage in his evidence was suggesting he had been given.
In the meantime, to go back to the plaintiff, he had got in touch with his solicitor, a Mr Owen, in order to make another protest about enquiry agents calling at the flat, and a letter was written which undoubtedly arrived at the office of the first defendants on the Saturday. Mr Simms did not attend the office on Saturday, and it was not until the Monday that Mr Simms, the partner in question, himself saw that letter. It was a letter reiterating the 1965 warning about enquiry agents trespassing. So much for that.
That brings us to Monday, 23 December. Some time shortly before 9.00 am, the second defendant again called at the flat, this time accompanied by the plaintiff’s wife. There were three people, if not living at the flat, at least staying in the flat on the previous night. There was Miss Mara Henderson, the plaintiff and the youngest son of the plaintiff and the wife, by name John. John left the flat in order to open the shop shortly before 9.00 am, and he told me, and I have no reason to disbelieve him, that on his way out he saw the wife and the second defendant, and indeed the wife saw him. The wife and the second defendant then approached the front door. Miss Henderson described events thereafter as follows. She said that 23 December is her birthday. She heard a knock at the door and she shouted out, ‘Who’s there?’ A voice from outside said, ‘Post’. So, it being near Christmas-time, Miss Mara Henderson, not unnaturally, thought that it might be a parcel for the house. She opened the door, put her hand round to take the parcel, whereupon the door was pushed back against her so that she was squashed against the wall, hurting her
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knee, and in walked the second defendant and the wife. Whereupon she said ‘Get out; you’re trespassing’. She ran quickly into the lounge. They asked where the plaintiff was. Then both of them went upstairs. She heard a noise and the wife came down almost immediately. She stood on one side and the wife, as she came down, swore at her. She heard the plaintiff shout ‘Get out’, and some more noise, and after a while the second defendant came down, spoke to the plaintiff and said that they would leave.
The plaintiff’s account is this. He was in bed upstairs half asleep or asleep, and the first thing he knew was when he found the second defendant standing at his bed. The second defendant had come in and the plaintiff started to wake up, and he heard and saw the wife behind the second defendant. He began to sit up and he asked the second defendant to leave. He repeated that invitation to leave and then began to get up. Then for the third time, and this more angrily, he told them to leave again. By this time the wife, he said, had gone downstairs. The plaintiff then got out of bed and the second defendant said ‘Don’t you talk to me like that’. By this time the two of them were on the landing. The plaintiff said that the second defendant had his arms above his head and, as he approached him, he was struck on the top of the head by the second defendant bringing his hands down on the right-hand side of the top of his head. The plaintiff said that he finished up on the floor. He then got up, went back into the bedroom and slammed the door.
The second defendant’s account is this. He arranged with the wife to meet her and to go to the flat. They arranged to go at 9.00 am, he said, because this was the best time in that no one should have been in the flat at 9.00 a.m He had no idea, he said, that either Miss Henderson or the plaintiff would be in the flat. They were anticipating that one of the sons might be there who would have let them in because, he said, the wife had mislaid her key. Pausing there for a moment, I do not believe for one moment that the wife had mislaid her key. She never had a key to the flat; certainly had not had a key since she originally left it some 13 or 14 years previously. They went to the door. They knocked. They realised that someone was there in the flat because they saw the shape behind the kitchen window. A voice said, ‘Who’s there?’ The second defendant told me that he told the wife to say it was the post because, this was his explanation, he was so surprised that Mara Henderson was there, and the wife had lost the key. Mara Henderson, he said, opened the door and he said to Mara:
‘“It’s all right, we have only come to inspect the accommodation.” She opened the door’, he said, ‘and we simply walked in. I was preceded by [the wife]. There was no need for any conversation at all. Mara Henderson said nothing. We went to the threshold of the sitting room. I was looking for some bed which Mara might have slept on down there. There was no bed in the sitting room. We then went upstairs to look at the bedrooms there.’
He said that he did not expect anyone to be upstairs:
‘The thought was not even in my mind that anyone should be in the flat at all. [The wife] went up first. I was taken first of all to the right-hand side of the landing where there was a bedroom with an unmade bed. “That was the room”, said [the wife] “which was occupied by the boys.” And then she took me to the second room. She went in. Her husband was there. He was right behind [the wife] and there were two beds there. [The wife] suddenly stopped.’
He, the second defendant, looked round the door, saw the plaintiff lying on the bed and a sheet and a blanket partly over him. He spoke to the plaintiff and said, ‘I’m here at the invitation of your wife, and we have only come to inspect the premises’. The plaintiff said: ‘You are both trespassers. Get out of my home.' The second defendant went on:
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‘I said “If you are not satisfied you may if you wish call the police“. He leaped out of bed at me, naked, and he punched me a glancing blow on the side of the jaw. [The wife] was behind me, but because of the bodily impact I was forced out on to the landing. I was so surprised that my immediate reaction was to grab him, which I did. I wrapped my arms round him. I did not strike him because we were both on our knees. I had my bowler hat and gloves in one hand kneeling down. He was kneeling down naked facing me. I have no idea what got him on to his knees. He probably collapsed with me. [The plaintiff] again said, “You are both trespassers. Get out of my house“. He stood up, ran into the bedroom and slammed the door behind him.’
It is, of course, on that incident that the allegations of trespass and assault and the counter-allegations of assault are based. So far as the dispute on fact is concerned between Miss Henderson and the plaintiff on the one hand and the second defendant and insofar as she gave material evidence, the wife on the other hand, I have no doubt at all that the correct version, or the more correct version, is that given by the plaintiff and Miss Henderson. Let me give my reasons for coming to that conclusion. First of all, the second defendant was a totally unsatisfactory witness. His actions and the reasons he gave for them, according to his account, were wholly unacceptable. He had been to this flat at 9.00 am on the previous Thursday. He had there found Miss Henderson, and he knew that at that time the plaintiff was in the bath upstairs, not only because of what he was told by Miss Henderson but also because he himself, as he said, saw the steam coming from the waste pipe of the bathroom. Nevertheless, he asked me to believe that he chose 9.00 am on the very next Monday morning as the time to visit this flat because he believed that no one would be there with the possible exception of a son or two of the sons of the plaintiff. That is plain nonsense. The reason why he selected 9.00 am in the light of his Thursday experience was precisely because he thought that he would find the plaintiff in the flat and Miss Henderson in the flat, and I have no doubt at all that he and the wife waited until John had left the flat to open up the shop in order that they might make their way in, hoping to find the plaintiff and Miss Henderson in some compromising situation. He did that in order to forward, so he thought, the ends of the wife and her petition, and also in order, no doubt, to enhance his reputation as an enquiry agent. In other words, he was determined to make his way into this flat in the face of the express instructions which he had received from the first defendants in effect not to do that very thing, and he was prepared to resort to subterfuge in order to achieve those ends. That is precisely what he did. He persuaded the wife to tell the lie about the postman, and in that way obtained the entry to the flat by a plain lie.
Was what he did a trespass or, in other words, was the permission which was given to him by the wife sufficient to amount to a permission from the plaintiff so as to render what would otherwise have been a trespassing incursion a perfectly lawful entry? No doubt where husband and wife are living together the wife has the right to invite anyone she wishes, within reason, to the matrimonial home owned by the husband, and no doubt the husband has similar rights in return. Insofar as the wife requires any permission from her husband, and it is very doubtful if she does, it is normally to be implied from the circumstances, and this sort of matter, happily and for obvious reasons, does not come before the court to be decided. I do not have to decide, nor do I attempt so to do, whether the husband or the wife in those circumstances has the right to forbid the other spouse to bring certain classes of persons into the home so as to make members of that class a trespasser when they come into the home.
But the situation here was very different indeed. As I have already endeavoured to explain, the flat was not the matrimonial home. It is true the parties had lived there in the distant past, 1953 or 1955, but, as I say, had moved from there to Beaconsfield and had there at Beaconsfield separated. They had had a reconciliation for
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about 18 months at Mansion Meadow in Egham, but thereafter the wife had gone off to live somewhere else and the plaintiff had stayed at Mansion Meadow and then had moved at least from time to time to the flat at Slough. The wife’s only connection with the flat in 1968 was that she very occasionally used to visit the flat without the plaintiff’s knowledge (of that I am quite sure) in order, possibly, to see one or other of her sons. She was, on the very rare occasions when she went there, let in by one or other of the sons. She had, as I have already found, no key, and her story of having lost her key by the time of the visit on 23 December 1968 was false.
Classification of husband and wife into categories of licensees, occupiers and trespassers is not helpful, as the decision of the House of Lords in National Provincial Bank Ltd v Ainsworth makes clear. The wife has certain rights, and so indeed has the husband, which stem from the marriage itself, those rights being over the matrimonial home. Where, however, it is not the matrimonial home with which the dispute is concerned, then other considerations must apply, and the further one gets away from the status of marriage, and the further one gets away from the concept of the matrimonial home, and all that that implies, the closer does one get to questions of occupiers and permission and licensees. Both husband and wife when living separate and apart and at arm’s length must have some right to protect themselves from the incursions of the other. It may be that there are circumstances in which the separated spouse may have the right to visit the other without being a trespasser. Into that I do not have to enquire. But what is clear to me is this, that in those circumstances, when the parties are separated and are living at arm’s length, the wife has no right whatsoever to introduce an enquiry agent into the husband’s home, whatever the purport may be, and certainly not in order to garner evidence of the husband’s adultery. Similar considerations would apply, of course, were the situation in reverse. The husband would have absolutely no right to give any enquiry agent permission to enter the wife’s home, when she is living separate and apart from him and not in the matrimonial home, in order to garner evidence of her adultery. And in either of those circumstances the enquiry agent so introduced is a trespasser. That would be so, in my judgment, without any express injunction from the husband forbidding an enquiry agent to enter. Where, as here, in 1965, the express prohibition is given by the husband to the wife’s solicitors, the matter is even stronger, and in my judgment there is no doubt that in the present case the second defendant was a trespasser. Moreover, the second defendant, I do not doubt, knew it. Hence the reason for the masquerading as the post. Hence the reason for the bluffing remark to the plaintiff, ‘Call the police if you wish’.
This incursion by the second defendant had all the marks of a high-handed and insolent piece of behaviour. I do not have to determine, and I expressly do not determine, whether on the previous occasion, namely 19 December, he had masqueraded as a policeman, but there is no doubt that the trappings of the police force, from which he had retired some years before, were very close to his shoulders in his own estimation. This was an unforgiveable piece of behaviour by a man who ought to have known better. So much for the question of trespass.
Now the assault and counter-allegation of assault. The plaintiff, as I have found, had ordered the second defendant out of his house on three separate occasions. On at least two occasions, one of them on 19 December and the other as he walked into the flat on 23 December, he had been told not to come in by Miss Henderson. When, on the first invitation upstairs, the second defendant did not accept the invitation to go, but instead said to the plaintiff ‘Don’t you speak to me like that’, the plaintiff was entitled to use reasonable force to remove the second defendant from the premises. I have no doubt that the plaintiff did rush the second defendant, and he was perfectly entitled so to do. Equally I have no doubt that when the plaintiff made for him, the second defendant did strike the plaintiff as the plaintiff said
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that he did. That was an assault, an unjustifiable assault, for which likewise the plaintiff is entitled to damages.
The next problem is that of amount. The plaintiff has sought to persuade me that ever since this incident he has been suffering from headaches, lack of concentration, inability to work, and general debility, all as a result of the shock of this trespassing incident and because of the blow which he himself received on the head. That evidence, I regret to say, was exaggerated. So far as lack of concentration is concerned, from what I have been told it seems that the plaintiff has been carrying on almost single-handed a legal battle in very many of the courts of this country. In the House of Lords, in the Court of Appeal, before the judge in chambers, before the learned masters of the Queen’s Bench Division, sometimes with success, sometimes with lack of success, but certainly with determination, and certainly, it seems, with great concentration; indeed, the way in which he has conducted the case before me here in this court is very good evidence that his powers of concentration are unimpaired or very largely unimpaired. For the insolent and high-handed trespass which the second defendant committed, I award damages of £250. For the assault, likewise totally unjustified, I award damages of £150, making a total of £400 altogether.
Now I turn to the question of the first defendants’ responsibility for these matters. The second defendant was, vis-à-vis the first defendants, an independent contractor and not a servant. Consequently, looked at strictly, there is no question of any vicarious liability on the part of the first defendants. Were they then equally responsible with the second defendant for the trespass that took place? There are, in my judgment, only two ways in which the first defendants can be made liable to the plaintiff. The first way is if they were negligent in their selection of the second defendant as an independent contractor, and if that negligence was the cause of the trespass. The second way in which they could be made liable would be if they expressly ordered or authorised or ratified the unlawful trespass of the second defendant. So far as negligence is concerned, overlooking the fact that the allegation is not made in the pleading—it is of course a home-made pleading, and to that extent must be treated sympathetically—there is no evidence that Mr Simms, or anyone else in the first defendants’ firm, was negligent in selecting the second defendant. They had recommendations from Douglas Investigations, and indeed if they had gone further and listened to the catalogue of the second defendant’s excellencies which he gave me in evidence, they would have had no hesitation in engaging him. There is no question of negligence. Secondly, did they authorise, order or ratify his conduct? I have said sufficient about the facts and sufficient about the way in which I treat the subsidiary dispute between the second defendant and Mr Simms to show that, in my judgment, Mr Simms did not know that the second defendant was going to the flat in the first place and, even if he did know that he was going there, he never authorised nor ordered the second defendant to enter the flat and would not, in any circumstances, have done so. Accordingly, so far as this action against the first defendants is concerned, that fails.
There must be judgment for the first defendants against the plaintiff, and for the plaintiff against the second defendant for £400 damages.
Judgment for the plaintiff against the second defendant for £400 and judgment for the first defendants against the plaintiff.
Solicitors: Willmett & Co (for the first defendants); Derek Holden & Co (for the second defendant).
Janet Harding Barrister.
Re Danish Bacon Co Ltd staff pension fund Christensen and others v Arnett and others
[1971] 1 All ER 486
Categories: PENSIONS: TRUSTS : EQUITY
Court: CHANCERY DIVISION
Lord(s): MEGARRY J
Hearing Date(s): 9, 15 OCTOBER 1970
Pension – Pension scheme – Nomination – Power to appoint nominee to receive contributions in event of employee’s death before entitlement to pension – Form of appointment provided for by rules of scheme – Power to cancel nomination and appoint new nominee – Exercise of power – Employee cancelling nomination and requesting new nomination by letter to secretary of pension fund – Original nomination form amended by secretary in accordance with letter – Validity of new nomination.
Trust and trustee – Equitable interest or trust – Disposition – Writing – Two or more interconnected documents – Whether satisfying requirement of writing – Law of Property Act 1925, s 53(1) (c).
Nomination – Pension scheme – Power of nomination – Nature of power – Power to appoint nominee to receive contributions in event of employee’s death before entitlement to pension – Power testamentary in character – Whether exercise of power a testamentary disposition – Whether need to comply with statutory requirements as to testamentary papers – Wills Act 1837.
Equitable assignment – nomination – Nomination under pension scheme – Power to appoint nominee to receive contributions in event of employee’s death before entitlement to pension – Power exercised by letter authorising alteration to original nomination form – Power testamentary in character – Whether nomination an assignment – Whether exercise of power effective as an equitable assignment.
The rules of a company pension scheme provided, inter alia, that if a member should die while in the company’s pensionable service an amount equal to his contributions with compound interest up to the date of his death should be paid out to his personal representatives. It was also provided that a member might, and if required by the trustees of the pension fund must, appoint in a form set out in an appendix to the rules, or any other form approved by the trustees, a nominee to receive the moneys which under the rules might, on his death, fall to be paid to his personal representatives. Under this rule a member could also, at any time before or after retirement, cancel any such appointment and simultaneously appoint a new nominee in a similar form. Accordingly, on the death of the member, the moneys were to be paid to the nominee in respect of whom a form of appointment was then in force. C was a member of the company’s staff who died in May 1969 before becoming entitled to a pension and whose contributions amounted to £5,656. In March 1941, he had made a valid nomination in favour of D F, his widow. In March 1959, D, a trustee and secretary of the pension fund, wrote to C and asked him to confirm that his nomination was still in order. The deceased replied by letter dated 12 June 1959 and asked for his nomination to be amended from D F to E M. Accordingly D amended the original form of appointment by striking out the name and address of D F and substituting the name of E M followed by the words, ‘— see letter attached 12/6/59’. The question to be decided was whether there was a valid nomination in favour of E M.
Held – The alteration was effective and the nomination in favour of E M valid and in compliance with the rules for the following reasons—
(i) assuming, which was in any case doubtful (see p 493 f and p 494 g, post), that the alteration to the nomination was ‘a disposition of an equitable interest or trust subsisting at the time of the disposition’ the requirement of s 53(1)(c) of the Law of Property Act 1925 that such a disposition must be in writing could be satisfied by
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two or more documents provided they were sufficiently interconnected and was therefore satisfied by the nomination form read with the deceased’s letter of 12 June (see p 492 c to e, post);
(ii) it was no objection to the validity of the alteration that, because the alteration had been effected after the deceased had signed both the original nomination and his letter of 12 June, it was not therefore authenticated by his signature because, where an existing document was altered under the express authority of a signed instrument, it was unreal to say that the signature could not be treated as referring to the alterations which the document required to be made merely because, ex hypothesi, they were effected after the signature was made (see p 492 g, post); Timmins v Moreland Street Property Co Ltd [1957] 3 All ER 265 distinguished;
(iii) although a nomination had certain testamentary characteristics, under the trust deed and rules it operated by force of the provisions of those rules and not as a testamentary disposition by the deceased and furthermore its testamentary characteristics did not suffice to make the paper on which it was written a testamentary paper; accordingly the requirements of the Wills Act 1837 had no application (see p 494 c, post);
(iv) the subsequent alteration to the original nomination operated to bring into being a new nomination which was in sufficiently substantial compliance with the requirements of the rules for, in a case concerning an equitable interest, where the intention of the deceased to benefit E M was perfectly clear, equity looked to the substance rather than the form; the original nomination was altered under the written instructions and authority of the only person with power to make a nomination and, on the footing that the alterations were duly authorised, the altered nomination was in the requisite form (see p 496 e and f, post).
Per Megarry J. The nomination, read together with the letter of 12 June, did not constitute a valid equitable assignment to E M of the right to the contributions and interest in the events which occurred, because the nomination was sufficiently testamentary in character, in that it was revocable, did not take effect until the nominator’s death and might never bite on any property, to be wholly ineffective as an assignment so long as the nominator was alive (see p 494 f and g, post).
Notes
For revocation or variation of nominations under the statutory provisions relating to friendly societies, see 18 Halsbury’s Laws (3rd Edn) 86, para 173, and for cases on the subject, see 25 Digest (Repl) 329, 169–171.
For the Law of Property Act 1925, s 53, see 20 Halsbury’s Statutes (2nd Edn) 551, and for the Wills Act 1837, see 26 ibid 1326.
Cases referred to in judgment
Bailey v Hughes (1854) 19 Beav 169, 52 ER 313, 37 Digest (Repl) 274, 304.
Barnes, Re, Ashenden v Heath [1940] Ch 267, 109 LJCh 102, 162 LT 263, 28 Digest (Repl) 464, 38.
Bennett v Slater [1899] 1 QB 45, 68 LJQB 45, 79 LT 324, 25 Digest (Repl) 327, 158.
Eccles Provident Industrial Co-operative Society Ltd v Griffiths [1912] AC 483, 81 LJKB 594, 106 LT 465, sub nom Griffiths v Eccles Provident Industrial Co-operative Society Ltd [1911] 2 KB 275, 28 Digest (Repl) 463, 36.
Fuller v Inland Revenue Comrs [1950] 2 All ER 976, 39 Digest (Repl) 333, 725.
Grey v Inland Revenue Comrs [1959] 3 All ER 603, [1960] AC 1, [1959] 3 WLR 759, 39 Digest (Repl) 333, 723.
Inland Revenue Comrs v Buchanan [1957] 2 All ER 400, [1958] Ch 289, [1957] 3 WLR 68, 28 Digest (Repl) 283, 1254.
Llanover (Baroness), Re, Herbert v Freshfield (No 2) [1903] 2 Ch 330, 72 LJCh 729, 88 LT 856, 37 Digest (Repl) 145, 674.
Timmins v Moreland Street Property Co Ltd [1957] 3 All ER 265, [1958] Ch 110, [1957] 3 WLR 678, 40 Digest (Repl) 26, 120.
Page 488 of [1971] 1 All ER 486
Adjourned summons
By originating summons dated 15 January 1970, Emil Bojsen Max Christensen, Robert Debonaire, Walter Dennis Lewis and Osmond Cowlishaw, trustees of the Danish Bacon Co Ltd staff pension fund, claimed the following relief: that it might be determined whether the sum of £5,656 held by the plaintiffs as trustees on account of Christopher Adam Arnett deceased had become payable, in the events which had happened, (a) to the defendant Dorothy Frances Arnett for her own use and benefit; or (b) to the defendants Dorothy Frances Arnett and Valerie Joan Chapman as the legal personal representatives of the above named Christopher Adam Arnett deceased; or (c) to the defendant Ethel Mona Arnett for her own use and benefit. The facts are set out in the judgment.
G M Godfrey for the plaintiffs.
J R Macdonald for the first and second defendants.
F M Ferris for the third defendant.
15 October 1970. The following judgment was delivered.
MEGARRY J. In this case the facts lie in a narrower compass than the law. I have had the pleasure of being conducted on an extended tour of equitable territory which, if not wholly unexplored, is at least inadequately charted; and the pleasures of the tour have been enhanced by a marked divergence of approach in my guides. Some 30 years ago, the Danish Bacon Co Ltd (which I shall call ‘the company’) established a staff pension fund under a trust deed. A number of revisions to the deed have since been made. What I have before me is the deed, with the rules made under it, as amended up to 1 June 1965. Clause 2(a) of the deed provides that the rules are deemed to be incorporated in the deed; and by rule 11, the trust fund is vested in the trustees on the trusts prescribed by the trust deed, and in particular, subject to paying costs, charges and expenses, on trust to apply it ‘in providing pensions and benefits according to the Rule’.
Rules 12 and 14 contain detailed provisions for paying pensions, and then rule 15 deals with certain cases where no pension is payable. Unde rule 15:
‘If a Member shall leave the service of the Company without becoming entitled to a pension under the Rules or shall die while in the Company’s pensionable service then (subject as hereinafter provided) there shall be paid out to him or as the case may be to his own personal representatives, an amount equal to his own contributions to the Fund with accumulations of compound interest at the rate of three per centum per annum calculated up to the date of his leaving the service of the Company or death (as the case may be) provided that interest shall only begin to accrue as from the end of the financial year of the Fund in which the contributions have been made.’
There is then a proviso disallowing interest, unless the trustees otherwise determine, if the member is dismissed for misconduct or leaves to avoid being thus dismissed.
Rule 16(a) provides for the production of probate or letters of administration, and then there is rule 16(b), round which much of the argument has turned.
‘A Member may and if required by the Trustees shall appoint in the form set out in Appendix II hereto or such other form as the Trustees shall from time to time approve a nominee to receive the moneys (if any) which may under the Rules fall to be paid to the personal representatives of the Member provided that no Member shall without the consent of the Trustees appoint an infant as nominee and provided also that a Member may at any time and from time to time whether before or after retirement cancel any such appointment made by him and simultaneously appoint a new nominee in a similar form and accordingly on the death of such Member any such moneys when due shall be paid to the nominee of such Member in respect of whom a form of appointment is then in force.’
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There is then a third proviso, which I need not read, relating to nominees under disability and so on. The contents of Appendix II will sufficiently appear from what I am shortly about to say.
Now in this case I am concerned with a member of the company’s staff who was also a member of the staff pension fund. He died intestate on 29 May 1969 before becoming entitled to a pension, and the sum of £5,656 is accordingly payable out of the fund in respect of his contributions to the fund, together with interest. If he has made a valid nomination under rule 16(b), this sum will pass under the nomination; if not, the money will pass to his administrators under rule 15. The whole case turns, therefore, on whether at his death a valid nomination was extant.
A nomination is in evidence before me. This, as it originally stood, is in the form of Appendix II to the rules, with two minor variations that I shall mention in due course. The nomination consists of a printed form, completed in manuscript; and I shall read it as it appears to have stood before any alterations to it were made. It is headed ‘23’, and underneath that ‘Appendix II’, so that originally it probably consisted of p 23 of a previous version of the trust deed and rules. It then continues as follows:
‘D.B.C. STAFE PENSION FUND. FORM OF APPOINTMENT OF PERSONAL NOMINEE (UNDER RULE 16(b).). To the Trustees of the above-mentioned Fund. I, Christopher Adam Arnett of Colcum House, Whitley Bridge HEREBY APPOINT Dorothy Frances Arnett of Colcum House, Whitely Bridge to receive any benefits from the said Fund that may be payable in the event of my death in respect of my membership of the Fund. [There are then the following words, which appear to have been struck out initially:] In the case of my marriage this appointment shall ipso facto be deemed to be revoked. [A marginal note to those words reads:] Strike out in the case of a married member. [The form then continues:] DATED this 31st day of March One Thousand nine hundred and Forty One (Signature of Member) C. Arnett. WITNESS: Signature H. M. Barclay. Address School Lane, North Ferriby. E. Yks. Occupation
and that is left uncompleted.
The two variations that I mentioned are, first, that the form in the present rules has, after the witness’s occupation, the words: ‘NOTE: The Witness must not be the person nominated or the husband or wife of the Member.' Second, it will be observed that in the nomination form before me the witness has not filled in the space left for stating his occupation. Quite properly, no suggestion has been made that either of these matters in any way prevents a nomination from being perfectly valid. Accordingly, had nothing further happened, ever since 31 March 1941 there would have been in existence a valid nomination in favour of Dorothy Frances Arnett, the deceased’s widow, who is the first defendant to this summons. She and the second defendant are the administrators.
Matters remained thus for over 18 years. Then in March 1959 a Mr Debonnaire, the second plaintiff, who is the Managing Director (Administration) of the company and a trustee and secretary of the fund, was in correspondence with the deceased about his contributions to the fund; and on 17 March, as a trustee of the fund, he sent the deceased two letters. One letter was about the contributions of the deceased, and the other as follows:
‘Dear Mr. Arnett, While going through your papers with regard to the attached letter, I notice the original application form appoints D.F. to receive your Pension Fund Contributions in the event of your death. Would you be good enough to confirm that this nomination is still in order.’
On 12 June 1959 the deceased replied to the letter that I have read, on this as well as on other matters, the relevant sentence in his letter being:
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‘Regarding your letter of the 7th of March, I shall be pleased if you will amend my original application form from “D. F. Arnett” to “Ethel Mona“.’
There is in fact no lady called ‘Ethel Mona’, but there is an ‘Ethel Mona Arnett’ who is the third defendant; and no suggestion has been made that the letter referred to anyone other than the third defendant. Nor has any suggestion been made that the reference to the ‘original application form’ was to anything save the nomination form.
Having received that letter, Mr Debonnaire then, as he states in this affidavit, ‘amended the Form of Appointment dated 31 March 1941 in the manner thereon appearing’. The alterations were twofold. First, the address of the deceased was struck through and ‘White House, Ellerton, NR. York’ was substituted. Nothing turns on that. Second, the words ‘Dorothy Frances Arnett’ and her address as ‘Colcum House, Whitley Bridge’ were struck through, and the words ‘Ethel Mona Arnett—see letter attached 12/6/59’ were written between the two deletions. A different coloured ink and a different pen seem to have been used for the change in the address of the deceased, on the one hand, and the other changes on the other hand; but no point has been taken on this.
There are thus three possibilities. First, there may now be no effective nomination, so that the administrators (the first and second defendants) take in their representative capacity. Second, the original nomination may still be good, in which case the first defendant takes beneficially; and third, there may be a valid nomination in favour of the third defendant, who therefore takes beneficially. In fact, the lines of battle have been somewhat differently drawn, for counsel for the first and second defendants told me that there was no issue between the first defendant on the one hand and the administrators on the other, so that it mattered not to him whether there was no valid nomination, or whether there was still a valid nomination in favour of the first defendant. His primary submission was that no valid nomination was extant, so that the administrators took as such; but on the whole he preferred his secondary submission, which was that the first defendant took. Counsel for the third defendant, on the other hand, contended that there was a valid nomination in favour of the third defendant. Accordingly, the real issue is whether or not the contentions of counsel for the third defendant are well-founded. If they are, the third defendant is entitled; if they are not, counsel for the first and second defendant must succeed in one capacity or the other.
The argument ranged far and wide, though not, I must say, without some provocation from the Bench. Nominations have yet to attract to themselves any body of case law that is comparable with wills or many other classes of documents; indeed, such relevant authority as there is can at best be described as exiguous. I think that some preliminary observations may help to narrow the field of endeavour. First, there are here none of those special statutory provisions governing nominations which may be found in various other cases, such as nominations in respect of friendly societies and savings banks of one form or another. Second, I am concerned with the beneficial interest in a trust fund under which the deceased had certain contractual rights, so that I must consider such of the rules of equity and of the law of contract as are in point. Third, I am plainly concerned with a form of disposition which has a somewhat special operation.
In Re Barnes, Ashenden v Heath, Farwell J was concerned with a nomination under the Industrial and Provident Societies Acts 1893 to 1928. In his judgment ([1940] Ch at 272) he referred to a passage in the speech of Lord Mersey in Eccles Provident Industrial Co-operative Society Ltd v Griffiths ([1912] AC 483 at 490). Farwell J said that it was—
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‘… quite clear from what Lord Mersey there said that his view was that under s. 25 of the Act of 1893, the nomination was intended to operate on the death of the depositor and that it was of an ambulatory nature, either to be effective or not as there might or might not be funds up to 1001. to answer it at the date of the death of the nominator.
‘The same view was expressed quite shortly by Farwell L.J. in the same case in the Court of Appeal. He delivered a dissenting judgment which was not approved by the House of Lords, but a sentence in it to which I wish to refer is wholly consistent with what I have read from Lord Mersey’s speech, and I think may be taken to be quite accurate. Farwell L.J. said this ([1911] 1 KB 275 at 284): “Section 25 of the Act of 1893, like several other sections of the same character in similar Acts, is in my opinion intended to confer a benefit on members of societies of this kind by giving them a limited power of disposition in its nature testamentary without the formality and expense of making a will or obtaining probate. The nomination in pursuance of such a power is, like any other testamentary disposition, revocable, as, under the Wills Act, a will is revocable, and, like a will, does not, prior to the nominator’s death, affect his property, but leaves him free to deal with it as he pleases, either by withdrawing it in accordance with the rules of the society, or receiving payment of his loans to the society, without any power of interference by the nominee. The nominator is in the position of a testator, and the nominee of a legatee.” From that I think it is quite clear that this section has the effect of giving the depositor a power, in its nature testamentary, to deal up to 100l. with his interest in the society. I say “in its nature testamentary”, because it has all the characteristics of a testamentary document, that is to say, it is a nomination which has no effect at all until the death of the nominator who is left completely free during his lifetime to deal with his share irrespective of it. The nominee would have no right to complain of, nor could he take any steps to prevent, the nominator dealing with his interest during his lifetime. The nomination has no operation and is not intended to have any operation until the death of the nominator. Whether or not it then operates depends upon whether or not the nominator has during his lifetime either revoked it or used the money which he purported to nominate for his own purposes, by withdrawing it from the society or in some other way. The result, as I said, is that the nature of the nomination in a case of this sort is clearly testamentary.’
Farwell J accordingly held that if the nominee died in the nominator’s lifetime, the nomination failed; the parallel with lapse is obvious. In general, I cannot see that the decision turns on the special wording of the statutes; and so far as I can see the language of Farwell J is a fair description of the general nature of any nomination, subject always, of course, to any statutory or other provision to the contrary. I may add that Bennett v Slater shows, I think, that the property carried by a nomination under the Friendly Societies Act 1875 forms no part of the nominator’s estate but passes directly to the nominee by force of the nomination. Nevertheless, the applicability of decisions on nominations made under a statute to nominations made under a trust deed and rules is a matter on which, of course, I must exercise due caution.
It is against that background that I have to consider the contentions in this case. Counsel for the first and second defendants submitted that the Law of Property Act 1925, s 53(1) (c), provided him with an answer to the third defendant’s claim. That provision states as follows:
‘(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.’
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The word ‘disposition’ has a wide meaning, as is demonstrated by Grey v Inland Revenue Comrs and other cases, including the Inland Revenue Comrs v Buchanan and Fuller v Inland Revenue Comrs. Accordingly, it was said that the word ‘disposition’ embraced a nomination of what was undoubtedly an equitable interest, and that the third defendant could here point to no disposition signed by the deceased. However, what counsel for the third defendant relied on was not the altered nomination alone, but that nomination when read with the two letters, or at any rate the letter of 12 June. It is well settled that the words in s 40(1) of the Law of Property Act 1925 which state ‘the agreement upon which such action is brought, or some memorandum or note thereof, is in writing … ’ may be satisfied by two or more documents, provided they are sufficiently interconnected. The same principle, it was said, should be applied to s 53(1) (c).
I have been referred to no authority on the point relating to the words in s 53(1) (c) which state ‘a disposition … must be in writing … ’; indeed, despite the riches of authority on this point under s 40, s 53(1) (c) appears to be wholly barren. However, if a statutory requirement that a ‘memorandum’ shall be ‘in writing’ may be satisfied by two or more documents, I do not see why two or more documents should not satisfy the requirement that a ‘disposition’ shall be ‘in writing’. True, s 40(1) is merely directed to providing written evidence of a transaction, whereas under s 53(1) (c) (unlike s 53(1) (b)) the matter is not merely one of evidence but of the disposition itself. Yet two documents are used in constituting a strict settlement of land or establishing a trust for sale of land, and there are well-established rules for the incorporation of documents in a will; and if two or more documents, when read together, dispose of an equitable interest, I do not see why the court should insist on separating them and subjecting each separately to the test of s 53(1) (c).
But are these documents sufficiently connected? Here, the letter of 12 June, admittedly signed by the deceased, refers both to the letter of 17 March and to the nomination as it stood unaltered; the words ‘original application form’ in the letter of 12 June are shown by the letter of 17 March (if demonstration be needed) to be a reference to the nomination. However, relying on certain authorities, and especially Timmins v Moreland Street Property Co Ltd, counsel for the first and second defendants says that one must always start with a document signed by the person concerned, and that no reference to a document not in existence when that signature is made can be permitted. Accordingly, there is here no reference to the alterations in the nomination which is authenticated by the signature of the deceased; for the alterations were made after both the nomination and the letter of 12 June had been signed.
I can see the force of this contention, but I do not think it applies in the present case. Where an existing document is altered under the express authority of a signed instrument, I think that it is unreal to say that the signature cannot be treated as referring to the alterations which the document requires to be made merely because, ex hypothesi, they were effected after the signature was made. The alterations are the very thing that the signed document was intended to bring about; and if the alterations made conform to the authority given, as is plainly the case here, I think that they are supported by the signature. In the Timmins case itself the Court of Appeal accepted that an earlier document was not to be treated as being incapable of referring to a later document if that later document, though made subsequently in time, was made as part of the same transaction. The court showed an understandable reluctance, if I may say so, to split hairs. The facts of the present case are, of course, very different from those in the Timmins case, which concerned evidence of a contract
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for the sale of land; and, when fairly read, I do not think there is anything in the case to preclude me from treating the altered nomination as being sufficiently referred to and supported by the letter of 12 June. Accordingly, if s 53(1) (c) applies, I hold that its requirements are satisfied.
Whether s 53(1)(c) does apply is a matter on which I am by no means clear; and in view of what I have already decided on the section, I do not have to resolve that point. However, it has been extensively argued, and I think I should give some indication of my views. What I am concerned with is a transaction whereby the deceased dealt with something which ex hypothesi could never be his. He was not disposing of his pension, nor of his right to the contributions and interest if he left the company’s service. He was dealing merely with a state of affairs that would arise if he died while in the company’s pensionable service, or after he had left it without becoming entitled to a pension. If he did this, then the contributions and interest would, by force of the rules, go either to his nominee, if he had made a valid nomination, or to his personal representatives, if he had not. If he made a nomination, it was revocable at any time before his death.
The question is thus whether an instrument with this selective, contingent and defeasible quality, which takes effect only on the death of the person signing it, can fairly be said to be ‘a disposition of an equitable interest or trust subsisting at the time of the disposition’. Counsel for the third defendant put much emphasis on the word ‘subsisting’: however wide the word ‘disposition’ might be in its meaning, there was no disposition of a subsisting equity, he said. I should hesitate to describe an instrument which has a mere possibility of becoming a ‘disposition’ as being in itself a disposition ab initio; and I agree that the word ‘subsisting’ also seems to point against the nomination falling within s 53(1)(c). At one stage some authorities were cited in support of a contention that despite s 53(1)(c) an appointment under a power may be made orally; and it was said that this was a case of an appointment under a power. Little, however, emerged in the end save an obiter dictum of Sir John Romilly MR in Bailey v Hughes ((1854) 19 Beav 169 at 175), made with no mention of the Statute of Frauds 1677. However that may be, for the reasons that I have given, and in view of what I shall be saying about equitable assignments, I very much doubt whether the nomination falls within s 53(1)(c); but, as I have indicated, I do not have to decide that point, and I do not do so.
A further point that was put with force this morning was whether a nomination, being testamentary in nature, must satisfy the requirements of the Wills Act 1837 as to execution. There was here something of a dilemma for counsel for the third defendant. It was contended that if a nomination is a disposition inter vivos, it must satisfy s 53(1)(c), whereas if it is testamentary it must satisfy the Wills Act 1837. Nominations made under a statute, of course, do not face this problem; they take effect by force of the statute, and have nothing to fear from the Wills Act 1837 or s 53(1)(c). But where there is no statutory authority, then, said counsel for the first and second defendants, if the nomination is of a testamentary nature it must be executed like a will.
It was on this issue that counsel for the plaintiffs joined in the argument; for the trustees were understandably concerned for the fate of other nominations as well as this. His argument, when conjoined to that of counsel for the third defendant on this point, was twofold. First, although a nomination had certain testamentary characteristics, and not least that of being ambulatory, it took effect as a contractual arrangement and not as a disposition by the deceased. The contributions and interest did not come to the deceased and then pass on from him by force of his will or the nomination; they went directly from the fund to the nominee, and formed no part of the estate of the deceased. I may say that I think that Bennett v Slater and Eccles Provident Industrial Co-operative Society Ltd v Griffiths ([1912] AC at 490) provide some support for this view.
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Despite certain testamentary characteristics, the nomination takes effect under the trust deed and rules, and the nominee in no no way claims through the deceased. Secondly, there is a vast difference, it was said, between a testamentary paper and a disposition of a testamentary nature. A testamentary paper must satisfy the Wills Act 1837; but a disposition might have certain testamentary characteristics without the paper containing it being a testamentary paper. Indeed, counsel for the plaintiffs urged that a nomination was sui generis, with some of the characteristics of an appointment under a power, some of the characteristics of a will, and some of the characteristics of a donatio mortis causa. As Alice said, curiouser and curiouser.
I appreciate the force of these arguments. Non-statutory nominations are odd creatures, and the cases provide little help on their nature. I do not, however, think that a nomination under the trust deed and rules in the present case requires execution as a will. It seems to me that such a nomination operates by force of the provisions of those rules, and not as a testamentary disposition by the deceased. Further, although the nomination has certain testamentary characteristics, I do not think that these suffice to make the paper on which it is written a testamentary paper. Accordingly in my judgment the requirements of the Wills Act 1837 have no application.
I now turn to the contentions of counsel for the third defendant. He based his case on three alternative submissions. His primary submission was that the nomination, when read with the letter of 12 June, was in fact in the form set out in Appendix II to the rules. In the alternative, he contended that the nomination, so read, was in a form approved by the trustees under rule 16(b). In the further alternative, he argued that the nomination, so read, constituted a valid equitable assignment to the third defendant of the right to the contributions and interest in the events which occurred. I shall consider the last submission first, before turning to the rules.
It is true that rule 21 in terms provides that ‘All pensions are non-assignable’; but the right to the return of contributions with interest is not a pension, and so stands outside the rule. I accept, of course, that the requirements of equity for an equitable assignment are far from being stringent; nevertheless, I think it is clear that there can be an equitable assignment only if there is something that can fairly be called an assignment. Bearing in mind what I have said in relation to s 53(1)(c), it does not seem to me that a nomination which is revocable, which will not in any case take effect until the death of the nominator, and which may never bite on any property, can fairly be called an ‘assignment’. It is, I think beyond question that a testator in no way disposes of any of his property merely by making a will, and that until his death his will has no force or effect whatever: see (if authority be needed) Re Baroness Llanover, Herbert v Freshfield (No 2) ([1903] 2 Ch 330 at 335). There is not even a contingent or revocable disposition. In the same way, I think a nomination of the type before me is sufficiently testamentary in nature to be wholly ineffective as a disposition or assignment so long as the nominator lives.
I know that in Bennett v Slater ([1899] 1 QB at 49) A L Smith LJ said:
‘… where there has been a nomination as in the present case, until that nomination has been revoked I think that the nominee, and not the nominator, is the person beneficially interested in the money … ’
Yet in the subsequent case of Eccles Provident Industrial Co-operative Society Ltd v Griffiths ([1912] AC at 490), in a passage cited in Re Barnes ([1940] Ch at 272), Lord Mersey said this:
‘Once made the nomination takes effect, not by creating any charge or trust in favour of the nominee as against the nominator, as was suggested during
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the argument (for the nominator can at any moment revoke the nomination), but by giving to the nominee a right as against the society, in the event of the death of the member without having revoked the nomination, to require the society to transfer the property in accordance with the nomination. Until death the property is the property of the member, and all benefits accruing in respect of it during his lifetime are his also.’
Lord Atkinson concurred in this judgment, and so too, I think, did Earl Loreburn LC, who did no more than concur in dismissing the appeal. Furthermore, there is also the passage that I have already cited from Re Barnes ([1940] Ch at 272). I do not think the fact that the nomination in this case, if not revoked, might spring into life eo instanti with the nominator’s death suffices to bring it within any fair use of the term ‘assignment’. Accordingly, in my judgment no question of any equitable assignment arises.
I turn, then, to the rules, and to the submissions of counsel for the third defendant that the altered nomination, when taken with the letter of 12 June 1959, complied with the rules. For a nomination to be valid, it must, under rule 16(b), be ‘in the form set out in Appendix II hereto or such other form as the trustees shall from time to time approve’. It was on these latter words that counsel for the third defendant erected his alternative argument on the rules; and I can dispose of this briefly. The argument was to the effect that the alteration to the nomination made by Mr Debonnaire, and his failure to require a fresh nomination, showed that the nomination was in a form ‘approved’ by the trustee under rule 16(b). The short answer is that I can see no evidence whatever to this effect. Mr Debonnaire’s affidavit says not a word about it, and even if he had power to give such approval on behalf of himself and his fellow trustees, I can see nothing to suggest that he ever applied his mind to this possibility. In the letter of 12 June the deceased asked him to amend the nomination; he did it, and that is all.
Finally, then, I come to counsel for the third defendant’s main submission. As it stood originally, the nomination complied with rule 16(b). The printed form was the form set out in Appendix II, and apart from the witness failing to fill up the space intended for a statement of his occupation, it was correctly completed. I cannot think that this trivial failure prevented the nomination from being made in due form, and, indeed, this has rightly not even been suggested. What, then, is the effect of the alteration? The letter of 12 June is unquestionably signed by the deceased, and is clear authority from the deceased for Mr Debonnaire to amend the nomination by substituting the name of the third defendant for that of the widow, as in fact he did. The real question for decision is thus whether under the rules a nomination can be amended in this way, the original nomination and the letter being read together.
The second proviso to rule 16(b) is to the effect that any member of the fund can at any time ‘cancel any such appointment made by him and simultaneously appoint a new nominee in a similar form’. If this is done, then on the member’s death the moneys due ‘shall be paid to the nominee of such Member in respect of whom a form of appointment is then in force’. Somewhat oddly, this proviso does not appear to contemplate the mere cancellation of a nomination, without replacement, for the word ‘simultaneously’ indicates that one nomination can be displaced only by another nomination in due form. The words ‘similar form’ must, I think, mean a form similar to that of the existing nomination, which must be in the form set out in Appendix II.
Now a nomination is a unilateral instrument, so that the effect of alterations to an instrument made by one party without the consent of the others does not arise. Being the instrument of the deceased, and of him alone, one question is whether
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the subsequent alteration to the nomination made under his written instructions and authority, being an alteration which is plainly material, operated to bring into being, either separately or in combination, a new nomination in the requisite form. If the alterations had been made before the nomination was signed on 31 March 1941, I do not think it could be said that the nomination was not in the appropriate form. There are deletions and substitutions, it is true, but they do not affect the form. If after being subsequently altered (as, of course, is the case) the nomination had been signed and witnessed afresh, again I do not think it could be said that the nomination was not in due form. The question is whether the alterations to the nomination, when read with the authority to alter which was signed by the deceased but not witnessed, result in the nomination failing to satisfy rule 16(b).
Now the rule stated in 11 Halsbury’s Laws (3rd Edn) p 381, para 626 is:
‘An alteration in an instrument under hand made with the consent of all parties does not avoid it, and it takes effect as altered; but if the result is to create in effect a fresh instrument, it will require restamping.’
I have looked at some of the cases cited, and they seem to me to support that proposition. No question of stamping arises, and of course the consent of ‘all the parties’, in the case of a unilateral writing which has no immediate effect, can refer only to the consent of the person signing it. The worst, I think, that can be said against the nomination as read with the letter of 12 June is that the form in Appendix II provides for a witness, and that although the signature of the deceased to the nomination as it originally stood was duly witnessed, there was no witness to his signature of the letter. In the case of wills, of course, there are express statutory requirements for alterations. In the present case, the rules impose no such requirement.
I am here concerned with an equitable interest in a case where the intention of the deceased to benefit the third defendant was perfectly clear; and, of course, equity traditionally looks to the substance rather than the form. In my judgment there is here, in the nomination and the letter, a sufficiently substantial compliance with the requirements of rule 16(b) to constitute a new nomination in favour of the third defendant to replace the former nomination in favour of the first defendant. The original nomination was altered under the authority of the only person with power to make a nomination; and on the footing that the alterations were duly authorised, the altered nomination is in the requisite form. I do not think that equity, which has long been ready to grant certain classes of persons relief against formal defects in the execution of powers, will be astute to seize on such a debatable matter as the absence of a witness’s signature in this case in order to invalidate the nomination, whether or not in favour of a member of the favoured classes of person. Indeed, counsel for the first and second defendants ultimately stated that he could not rely on the absence of any signature of a witness. In my judgment, the lack of a witness to the unquestioned signature of the deceased to the letter of 12 June ought not to invalidate the whole transaction, and does not do so. The trustees have a document which originally was in full compliance with the rules, and they have clear and explicit alterations to that document made by one of their number in obedience to signed directions of the deceased lodged with them which can leave them in no doubt who is intended to be the nominee. In my judgment, there is a valid nomination in favour of the third defendant, and accordingly I answer question 1 in the summons in sense (c).
Order accordingly.
Solicitors: Roche, Son & Neale (for the plaintiffs); Tuck & Mann & Geffen & Co agents for Gwyndaf Williams & Roberts, Portmadoc (for the first and second defendants); Bell, Brodrick & Gray agents for Parker, March, Charlton & Eastham, Selby, Yorks (for the third defendant).
R W Farrin Esq Barrister.
Re Gregory (deceased) Gregory v Goodenough and others
[1971] 1 All ER 497
Categories: SUCCESSION: Wills
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): HARMAN, WINN AND FENTON ATKINSON LJJ
Hearing Date(s): 27, 28 MAY 1970
Family provision – Widow – Conduct of widow in relation to testator – Testator’s reasons for dispositions – Widow and testator estranged for long period – Break-up of marriage testator’s fault – Widow not looking to testator for support – Widow providing no service or assistance to testator – Testator’s offers of reconciliation towards end of life rejected – Testator’s belief that widow had lost interest in him – Whether reasonable for testator to make no provision for widow – Inheritance (Family Provision) Act 1938, s 1(1), (6), (7), as amended.
Family provision – Small estate – Discretion of court – Limit on Court of Appeal’s interference with exercise of discretion.
The testator and the widow were married in 1916. In 1926 a daughter was born and in the same year the testator left the widow. He paid her no maintenance after 1927. Thereafter the widow worked to support herself, the daughter and her mother. The testator occasionally visited her and in 1950, after the woman with whom he had been living had died, asked the widow to return to him, but she refused. In 1955 the widow, whose mother had by then died, went to Chile where the daughter had settled. The widow had lived there ever since. The testator made numerous wills. In wills made in 1957 and 1958 he left the widow nothing. In 1958, he started to write to her, asking her to return and offering to give her the house which he owned. She did not respond encouragingly, but in his wills made between 1959 and 1964 he did leave her money. In 1966, when the testator made his last will, he told the solicitor’s clerk who drew the will that he felt that the widow had lost interest in him and that he would leave her nothing. In 1968 he died. The testator’s house was worth some £2,500 and constituted the bulk of his estate. The widow received a widow’s pension of £2 17s a week from the British government, her sole means. Her application under s 1a of the Inheritance (Family Provision) Act 1938 for provision out of the testator’s estate was rejected by the county court judge. The widow appealed.
Held – The appeal would be dismissed because—
(a) cases under the 1938 Act were very much matters for the exercise of the judge’s discretion on the basis of the facts as he found them; furthermore, where small, estates were concerned, the court should be slow to deprive the testator of his power to dispose of his property in his own way and appeals to the Court of Appeal should be discouraged (see p 499 a, p 501 f and p 503 e, post); dictum of Romer LJ in Re Howell (decd) [1953] 2 All ER at 607 applied;
(b) there were no grounds in the present case for holding that the judge was not entitled, on the facts as he found them, to decide that the testator’s failure to make provision for the widow was not unreasonable, having regard, in accordance with
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s 1(6)b, (7)c of the 1938 Act, to the widow’s conduct and the testator’s reasons, in particular the length of time that they had been separated, the fact that the widow had not relied on the testator for maintenance or support, that he was under no obligation to her for any kind of service or assistance in his latter years, and the view he had expressed that she had lost interest in him, notwithstanding that, on the evidence available, it appeared that the breakdown of the marriage was entirely his fault (see p 500 g and h, p 501 d, and p 502 j to p 503 a to d and f and g, post).
Notes
For family provision, see 16 Halsbury’s Laws (3rd Edn) 455–462, paras 912–922, and for cases on the subject, see 24 Digest (Repl) 967–973, 9753–9771.
For the Inheritance (Family Provision) Act 1938, s 1, as amended, see 13 Halsbury’s Statutes (3rd Edn) 118.
Cases referred to in judgments
Goodwin (decd), Re, Goodwin v Goodwin [1968] 3 All ER 12, [1969] 1 Ch 283, [1968] 3 WLR 558, Digest Supp.
Howell (decd), Re, Howell v Lloyds Bank Ltd [1953] 2 All ER 604, [1953] 1 WLR 1034, 24 Digest (Repl) 967, 9756.
Inns, Re, Inns v Wallace [1947] 2 All ER 308, [1947] Ch 576, [1947] LJR 1207, 177 LT 165, 24 Digest (Repl) 973, 9769.
Appeal
This was an appeal by Rachel Gregory (‘the widow’) against the decision of his Honour Judge Elder-Jones at Swindon County Court on 26 November 1969, dismissing her application under the Inheritance (Family Provision) Act 1938, as amended, for reasonable provision out of the estate of her deceased husband, Herbert William Gregory (‘the testator’). The facts are set out in the judgment of Harman LJ.
W A Blackburne for the widow.
J R Macdonald for the executors.
28 May 1970. The following judgments were delivered.
HARMAN LJ. This is a widow’s appeal under the Inheritance (Family Provision) Act 1938 as now amended by the Intestates’ Estates Act 1952 and the Family Provision Act 1966, which was heard in the Swindon County Court. The learned judge decided against the widow’s claim, although no provision had been made for her out of the testator’s will. Such of the facts as we do know are sufficiently remarkable; the most remarkable of them is that these people have not lived together for 41 years. The testator never fully supported the widow in his life. He used to send her £1 a week at one time. He has a daughter and has never provided for her at all. The learned county court judge decided, on such of the facts as are known, that it was not unreasonable on the testator’s part to provide the widow with nothing. As to that, clearly there is jurisdiction in the court to make provision in a case of this sort where no provision has been made, because, if one makes no provision, it stands to reason that one cannot have made reasonable provision. That is, so to speak, one aspect.
We then come to the other side of the picture and say: was the fact that the testator did not make provision a reasonable act on his part? I put it like that because I think that that is the right way to put it. We have had a lot of discussion whether the Act means one thing or another and I do not think that it really amounts to anything in this case. One must look so far as one can at the whole of the long and fragmentary history of the marriage and come to a conclusion whether the testator’s act had been a reasonable one, whether there was an obligation on him when the
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time came to provide for the widow. The county court judge has decided that there was not an obligation and, as we know, these discretions vested in the tribunal which tried the case are very much to be observed, unless there is something obviously wrong about them. Romer LJ observed in Re Howell (decd), Howell v Lloyds Bank Ltd ([1953] 2 All ER 604 at 607, [1953] 1 WLR 1034 at 1039), to which we were referred, that in a small case of this sort where the estate is well under £3,000, the court would be very slow to deprive the testator of what is fundamentally his power to dispose of his own money in his own way. The 1938 Act was an invasion of the rights of English testators which was a novelty in 1938 when it was made, and it was a jurisdiction which Wynn-Parry J observed in Re Inns, Inns v Wallace ([1947] 2 All ER 308 at 311, [1947] Ch 576 at 582) ought to be sparingly used. It is less sparingly used than it was because the boundaries of the court’s jurisdiction have been very much widened and enlarged, but it still remains that the court is invading what is normally a testator’s privilege to dispose of his own money in his own way.
I must say a little about the facts, although they are scarce and not altogether certain. The parties were married as long ago as 1916, when the widow was 19 years old and the testator was 28, and they lived together for about ten years from that time. When I say that they lived together, they did not have a matrimonial home; they lived either at the house of the widow’s mother or at various lodgings. The testator was a blacksmith by trade and, in order to find occupation, he had to go to various places, such as Bristol and Cardiff and eventually to Swindon, and when he was in Cardiff, he took up with another woman. The widow did not know about this at the time, but she had a daughter in October 1926, and the testator did not come home for six months after that. When he did come home, he confessed that he had taken up with somebody else, and the marriage at that point broke up, and after 1927 he never sent the widow any maintenance at all. He turned up occasionally, notably in 1946 after the war; by that time he was working in the railway yards at Swindon. The woman with whom he was cohabiting died in 1950; he asked the widow to come back at that point or some time just about then and she declined for the very good reason that she felt responsible for the support of her mother. The widow was a tailoress by profession and supported herself, her daughter and her mother by her efforts. Her mother died in 1951, so she was independent again. At about that period, her daughter went off to Texas. The widow visited her there in 1951, with the knowledge of the testator who contributed £100 towards the fare. In the United States the widow spent two years working as a housekeeper and then felt homesick and came back. She stayed in England until 1955, when she went to Chile to join her daughter, who by then had married and had settled there, and there the widow has lived ever since.
The testator was what one might call a prolific testator. He made a number of wills, the first one of which we know was in 1957, in which he left the widow nothing. He also left her nothing in 1958 when he made another will, but at about that time he started, according to her testimony, to write letters to her asking her to return to him. Apparently the person who followed his mistress as his housekeeper had left him and he wanted somebody to look after him. He was getting on in years after all, he was 70 by then, and there was an odd correspondence, of which the widow has exhibited some letters, not complete at all, and no letters from her. Naturally she did not keep copies and none of her letters, if there were any, were ever found among the testator’s effects. His letters are an odd jumble of whining and self-deprecation, saying that everything was his fault, and not painting a rosy picture of his prospects. Indeed, his prospects were not rosy, except that he was the lucky possessor of a house, and that house is practically the sole potential asset of his estate, being worth some £2,500 now owing to the enormous increase in the value of house property. He said: ‘If you come home, you can have the house’. I do not quite
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know how, but he said: ‘There is the house anyhow and you must come here and claim it.' Apparently the widow very rarely answered his letters and did not answer them to his satisfaction, and he continued to make wills between 1959 and 1964 in which he left money to her. He left her his residue in most of them, and in one of them he left her £1,000, but in 1964 that series of wills seems to have come to an end and in 1966, when he made his last will, he left the widow nothing, and explained to the solicitors’ clerk who drew the will that he did so because he felt that the widow had lost interest in him altogether and that she would not answer his letters; he was not sure where she was. That may or may not have been true, but that is the explanation he gave. He died in 1968 and this application was made a very little out of time, which was extended by consent and there is no dispute about that.
Should some provision be made for the widow by the will? That is the first question. The second question of course is: how much? Counsel for the widow has addressed us with great energy and eloquence. He says that the widow, although she has been 42 years away and has never been maintained by the testator, owes that misfortune entirely to his fault and not at all to hers, and that she has not forfeited the moral obligation which is on a husband to support his wife within the limits of his means, and, that being so, the gulf of years is not a matter of importance. Counsel says that the important part is that the testator left the widow. She, insofar as the evidence goes, is without any offence and therefore she is in a strong moral position and deserves what any other wife left in her position ought to have. Her sole means, so it appears at present, is her pension from the British government, the testator having been an insured person by reason of his trade, and that amounts to £2 17s a week at the present time and has done since his death. Apart from that, she lives with her daughter Freda and is to some extent supported by Her—whether by the grandchild or not, one does not know. So, says counsel for the widow, one ought at least to give her a lump sum or else one ought to give her the income of the estate, which would be about £2 a week, and that will ensure her future and make it safe.
On the other hand, it is said that the widow has never looked to the testator for her support. She worked herself in the early days of the marriage. She worked herself in the middle years of the marriage after he had left her. She has gone to Chile, to have the society and comfort of her daughter presumably, and she has altogether withdrawn herself from the testator’s family and the testator’s family’s duty to support her. It is quite true that the legatees under the testator’s will are not persons having any claim on him, but a man is entitled, other things being equal, to dispose of his property according to his wishes; and that he has done, and done for the reasons that the widow has really refused to depend on him any more and has refused to come back. She refused at one time an offer of some meagre allowance which he made her. She would have nothing more to do with him. I do not say that there is anything unnatural in that, having regard to the fact that he had been with another woman for a number of years and the widow was not bound to forgive him for that; but, declining to answer his letters, she does not say whether she would accept the bounty he offered to her, such as it was. I think that she was throwing in her lot with the daughter and, so far as she was able, casting off the testator altogether.
When one looks at the Act, there is no doubt that the widow is within the definition of a person called a dependant. I do think that the fact that she is described by the definition as ‘a dependant’ does mean something; it means a person whom it was the testator’s moral duty during his lifetime and by his will to support so far as he could, but the court has under s 1(1), to be of opinion that the provision made, if any, is not such as to make reasonable provision for the maintenance of the dependant. That is answered by saying that the testator has made no provision and therefore he has not made reasonable provision. One must then go on and see that under s 1(6):
‘The court shall [this is mandatory] … have regard to any past, present or
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future capital or income from any source of the dependant … to the conduct of that dependant in relation to the deceased and otherwise, and to any other matter … ’
Therefore, the first thing that one has to do is to see what means the widow has—we know that—and the second is what was her conduct. Her conduct we know about only from her own statement of it. She has not offered herself for cross-examination and, therefore, though the facts may be right, a very different complexion might have to be put on them if she had appeared in the county court and had had to undergo the ordeal of being cross-examined about her motives and her actions.
Section 1(1) of the Act provides:
‘The court shall also … have regard to the deceased’s reasons, so far as ascertainable, for making the dispositions … or for refraining from disposing … of his estate … or for not making any provision … ’
We know very little about the testator’s reasons. We know only what he told the solicitors’ clerk who drew the last will, namely, that he thought that the widow had lost all interest in him and had so far as she could, cut herself off from him after this long time. One must remember that he had been making wills and making efforts to induce her to come back for nearly ten years at that time, and the question is whether that was a reason which was an adequate reason for what he did.
The learned county court judge thought that it was, and I am not disposed to dispute it. I think that his discretion was properly exercised on the issue. Fragmentary material was before him, and the order which he made was the proper order, and I would dismiss the appeal.
WINN LJ. I too would dismiss this appeal. I am impressed, as Harman LJ has declared himself impressed, by what was said by Romer LJ in Re Howell (decd), Howell v Lloyds Bank Ltd ([1953] 2 All ER at 607, [1953] 1 WLR at 1039). I think that this is eminently a case where the discretion of the learned county court judge should be allowed to prevail. I myself see no error in his exercise of his discretion.
I am impressed, as Harman LJ is, by the use of the word ‘dependent’ in the Inheritance (Family Provision) Act 1938. It impresses me particularly as a common lawyer because naturally one reflects on the meaning and effect of the use of the word in the Fatal Accidents Acts. It is perfectly plain that the widow would not have been a dependant for the purpose if the Fatal Accidents Acts since she would not have been able to show any dependency on the testator at the time when he died, and, had his death been caused by the tort of some person, she would have had no cause of action for the recovery of damage for the tortious cause of his death, because she would not have been de facto a dependant. As counsel for the widow has said in the course of his most able and cogent submissions, she may well have had a legal right as against the testator to be regarded by him as one of his dependants and entitled from him to receive some support; de facto she had none.
I think that this word is not merely a convenient term adopted for the purposes of the drafting of the legislation since is s 1(1)(b) and (d) there is wording making it perfectly plain that Parliament had in mind the possibility, indeed the probability, that some of the relatives named, members of the testator’s family, might not be capable of self support, ie might have been at the time of his death still dependent on him, such as a daughter who not merely was unmarried but had never been married, or a daughter incapable of self support by employment by reason of some mental or physical disability, or, in the other instance, a son who again by reason of mental or physical disability was incapable of maintaining himself. Those are
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defendants in the de facto sense as well as in the convenient terminology adopted for the purposes of the legislation. The subsection goes on to say that it is for the court to consider on an application being made by any persons of the classes mentioned whether or not reasonable provision has been made. The question is whether the court is of opinion that the disposition or the provisions of intestacy do make reasonable provision for the maintenance of that dependant.
On that question, two cases have been referred to, Re Howell, already mentioned, and Re Goodwin (decd), Goodwin v Goodwin, in which most unfortunately when it was before Megarry J, no reference was made by counsel to the earlier case of Re Howell. Therefore, the judgment was given by Megarry J, so far as one can judge, without having present to his mind what had been said by Sir Raymond Evershed MR in Re Howell ([1953] 2 All ER at 605, 606, [1953] 1 WLR at 1037, 1038). Notwithstanding that deficiency in the material available to Megarry J I think that there is a great deal of strength in the opinion expressed by him. When it is compared with the opinion of Sir Raymond Evershed MR expressed in Re Howell ([1953] 2 All ER at 605, 606, [1953] 1 WLR at 1037, 1038), the difference is this, and I venture to think it possible that there is no contradiction. Megarry J said ([1968] 3 All ER at 15, [1969] 1 Ch at 287):
‘The statutory language is thus wholly impersonal. The question is simply whether the will or the disposition has made reasonable provision, and not whether it was unreasonable on the part of the deceased to have made no provision or no larger provision for the dependant.’
He went on to illustrate circumstances in which such a situation might arise in one direction or another. Sir Raymond Evershed MR said ([1953] 2 All ER at 607, [1953] 1 WLR at 1038): ‘The question then is posed: In making this will … did the testator make unreasonable provision for these children?’ Those words I respectfully think are precisely equivalent to saying: was the provision made by the testator for the children reasonable or unreasonable? They do not at all necessarily per se connote the question: was it reasonable or unreasonable of this testator to have set himself to make the provision that he made or set himself to refrain from making any other or better provision for his wife, children or as the case may be? The practical distinction seems to me to be this and, insofar as there is a distinction, I myself would lean towards the view expressed by Megarry J ([1968] 3 All ER at 15, [1969] 1 Ch at 287) rather than that expressed by Sir Raymond Evershed MR ([1953] 2 All ER at 607, [1953] 1 WLR at 1038) insofar as this court is not bound by the judgment of Sir Raymond Evershed MR; it is only bound by that judgment insofar as it is clear that it has a necessary meaning inconsistent with that said by Megarry J and that which I am now saying. I think that a man may be reasonable or unreasonable in making his will, in setting certain provisions in his will or refraining from making other provisions in his will, according to what he, at the time that he makes the provision, knows, or reasonably believes that he knows, about the material facts; but, if in reality it is found that he was mistaken in so supposing, and looked at from outside, which is one meaning of the word ‘objective’, it can be seen that his provision was not reasonable for him to make had he known what ex hypothesi he did not know, then it is possible to say that it was reasonable for him to make the provision, but the provision which he made was not a reasonable one for him to have made if he had been fully informed about the real facts.
I think that in this particular case, looked at from outside with knowledge of the facts, although as Harman LJ has said, they are rather incomplete and inadequate, the court can say that it was not unreasonable that this provision should have been made for the widow, ie a nil provision, since ever since 1926 she has been no wife to the testator at all except in the technical sense that she was married to him. On
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the one hand, it is manifestly true, at any rate as the evidence goes, that he was to blame for the break-up of the marriage, and again, so far as the evidence goes, there is no reason to regard her as having committed any matrimonial offence, so that in that respect she is guiltless. On the other hand, her conduct towards the testator provided him with no comport, no assistance, no company from the year 1926 onwards. It may well be that that was entirely his fault, but that is not he relevant question. The court is directed to have regard to the conduct of the widow towards the testator, not whether or not the fault, if any, as between the two of them rested with the one or with the other; it is whether he owed her when he died any and, if so, what degree of obligation for what she had done for him in, I think, fairly recent times as his wife qua wife, and that must be answered by saying that for 40 years, albeit it was his fault, she had done nothing for him and he had derived nothing from her. He owed her no obligation for any kind of service or assistance in those years, and I do not think that this jurisdiction is a jurisdiction to sit and dispense on balance of moral merit the net estate of a deceased person. It having first been established that reasonable provision has not already been made, and it is obvious that that it so in this case, the court is to make such provision as, having regard to those matters to which the court is to pay regard under s 1(6) and (7), the court regards as a reasonable provision in the circumstances, even if it be a nil provision.
I myself think that it is right that there should be a nil provision in this particular case.
FENTON ATKINSON LJ. I agree This was very much a matter for the learned county court judge’s discretion, and, as Harman and Winn LJJ have both said, appeals to this court on questions under the Inheritance (Family Provision) Act 1938 should not be encouraged, at all events in the case of small estates, and for my part I can see no reason whatever to think that it has been proved that it was unreasonable on the particular facts of this case for the testator to make no provision for the widow.
It is easy to say that the breakdown of the marriage was entirely his fault. That is the evidence so far as we have it; but we do not and cannot know his side of the full story of the parting in 1926. I must assume that he was the one who was at fault. We do know that they had been apart for over 40 years when his last will was made, that the widow had never claimed a penny from him for maintenance for herself or for their daughter Freda, that she had refused an offer of financial assistance in 1946, that she had settled in Chile since 1955, where she had a home with her daughter, and that there was no reason in 1966 for the testator to suppose that she was not living in reasonable comfort and security with her daughter and grand-daughter, and for 40 years she had not been in any sense dependent on him for a penny. By 1958, when he had reached 70 years of age and, according to his letters, contemplated dropping dead at any moment from coronary thrombosis, it is clear that he had the widow very much in mind and the correspondence began, provision being made for her is some five wills between 1959 and 1964. So plainly he was far from being insensible to her possible needs or any claims she might have on him, but then, as far as one can judge, she ceased to write in 1963 or thereabouts, and thereafter he changed his mind, and he may well have thought: well, she is all right with Freda in Chile she is not interested in me or anything I can leave to her and I will divide what little I have amongst various members of the family and those who have looked after me.
I can see nothing unreasonable in that attitude, and I think that the county court judge was absolutely right in refusing to interfere with the testator’s disposition of his property.
Appeal dismissed.
Solicitors: Owen, White & Catlin, Feltham (for the widow); Morrison & Masters, Swindon (for the executors).
Henry Summerfield Esq Barrister.
Re a Debtor (No 12 of 1970), ex parte the Official Receiver v the Debtor
[1971] 1 All ER 504
Categories: BANKRUPTCY
Court: CHANCERY DIVISION
Lord(s): STAMP AND FOSTER JJ
Hearing Date(s): 12, 13 NOVEMBER 1970
Bankruptcy – Receiving order – Rescission – Jurisdiction of court – Discretion – Principles on which discretion should be exercised – Bankruptcy Act 1914, s 108(1).
In exercising its jurisdiction to rescind a receiving order under s 108(1)a of the Bankruptcy Act 1914 the court should be guided broadly by the same principles as apply to the annulment of an adjudication under s 29 of that Act, and, unless the circumstances are very exceptional (eg, as was the case in Re Izod, ex parte Official Receiver ([1895–99] All ER Rep 1259), where the Official Receiver, considering that a proposed arrangement with creditors was a proper one, did not oppose an application by the debtor to the registrar for rescission of the receiving order and did not ask for a public examination of the debtor), it will only rescind a receiving order where it would have annulled an adjudication on an application for annulment under s 29(1)b (see p 508 e and p 509 a b and e, post).
Re a Debtor (No 446 of 1918) [1918–19] All ER Rep 397 applied.
Re Izod, ex parte Official Receiver [1895–99] All ER Rep 1259 explained.
In considering an application for the rescission of a receiving order regard must be had to the interests of the debtor’s present and future creditors and of the public at large (see p 508 b and p 509 d and e, post).
Re Hester, ex parte Hester [1886–90] All ER Rep 865 applied.
Notes
For rescission of receiving orders, see 2 Halsbury’s Laws (3rd Edn) 338–341, paras 656–661, and for cases on the subject, see 4 Digest (Repl) 179–185, 1632–1686.
For the Bankruptcy Act 1914, ss 29 and 108, see 3 Halsbury’s Statutes (3rd Edn) 77, 134.
Cases referred to in judgments
Blunt v Blunt [1943] 2 All ER 76, [1943] AC 517, 112 LJP 58, 169 LT 33, 27 Digest (Repl) 429, 3589.
Debtor (No 446 of 1918), Re a [1920] 1 KB 461, [1918–19] All ER Rep 397, 89 LJKB 113, 122 LT 354, 4 Digest (Repl) 180, 1637.
Debtor (No 5 of 1936) Re a, ex parte Official Receiver (1937) 106 LJCh 225, 4 Digest (Repl) 182, 1662.
Dixon & Cardus, Re, ex parte Dixon & Cardus (1888) 37 WR 161, 5 Morr 291, 4 Digest (Repl) 182, 1663.
Flatau, Re, ex parte Official Receiver [1893] 2 QB 219, 62 LJQB 569, 68 LT 740, 4 Digest (Repl) 180, 1635.
Hester, Re, ex parte Hester (1889) 22 QBD 632, [1886–90] All ER Rep 865, 60 LT 943, 4 Digest (Repl) 179, 1632.
Izod, Re, ex parte Official Receiver [1898] 1 QB 241, [1895–99] All ER Rep 1259, 67 LJQB 111, 77 LT 640, 4 Digest (Repl) 180, 1638.
Leslie, Re, ex parte Leslie (1887) 18 QBD 619, 56 LT 569, 4 Digest (Repl) 180, 1641.
Macrae (P & J) Ltd, Re [1961] 1 All ER 302, [1961] 1 WLR 229, Digest (Cont Vol A) 194, 7152a.
Page 505 of [1971] 1 All ER 504
Noble (a bankrupt), Re, ex parte the Bankrupt v The Official Receiver [1964] 2 All ER 522, [1965] Ch 129, [1964] 3 WLR 206 CA, Digest (Cont Vol B) 45, 1136a.
Osenton (Charles) & Co v Johnston [1941] 2 All ER 245, [1942] AC 130, 110 LJKB 420, 165 LT 235, 51 Digest Repl) 681, 2840.
Swain (J D) Ltd, Re [1965] 2 All ER 761, [1965] 1 WLR 909, Digest (Cont Vol B) 112, 5813b.
Ward v James [1965] 1 All ER 563, [1966] 1 QB 273, [1965] 2 WLR 455, Digest (Cont Vol B) 219, 783a.
Cases also cited
ABC Coupler & Engineering Co Ltd, Re [1961] 1 All ER 354, [1961] 1 WLR 243.
Debtor (No 994 of 1935), Re a, The Debtor v The Official Receiver [1936] 1 All ER 794.
Evans v Bartlam [1937] 2 All ER 646, [1937] AC 473.
Liberian Shipping Corpn v A King & Sons Ltd [1967] 1 All ER 934, [1967] 2 QB 86.
Monk v Redwing Aircraft Co Ltd [1942] 1 All ER 133, [1942] 1 KB 182.
Thornley v Palmer [1969] 3 All ER 31, [1969] 1 WLR 1037.
Wemyss, Re ex parte Wemyss (1884) 13 QBD 244.
Appeal
The Official Receiver appealed against an order of the registrar of the Hertford County Court that a receiving order made on 4 May 1970 against the debtor, a solicitor, be set aside. The facts are set out in the judgment of Stamp J.
A L Figgis for the Official Receiver.
The debtor appeared in person.
13 November 1970. The following judgments were delivered.
STAMP J. This is an appeal by the Official Receiver against an order of the registrar of the Hertford County Court made on 14 September 1970, rescinding a receiving order made against the debtor on 4 May 1970. The grounds of appeal, stated at greater length in the notice of appeal, can be shortly stated by saying that the Official Receiver contends that the learned registrar has not given proper effect to the considerations which have hitherto guided the courts in the exercise of their discretion to rescind a receiving order.
The debtor, aged 50, is a solicitor by profession and was in the year 1969 practising in partnership with another. During that year he suffered a breakdown in health, and after October 1969 did not return to the practice. He ceased to be a partner by resigning, I think, on 30 December 1969. In the meantime in July 1969 the petitioning creditor obtained judgment against him and another for £4,000 damages for libel and costs. We were told by the debtor that the other was his client for whom he was acting in relation to the document which constituted the libel, that publication was on the advice of counsel, and that the other has left the debtor to discharge the whole or the greater part of the judgment. The bankruptcy petition on which the receiving order was made was founded on a debt of approximately £9,700 due under the judgment.
When the matter came before the learned registrar on the application to rescind the receiving order, the learned registrar found that the debtor was insolvent, but not hopelessly involvent. I am content for the purposes of this judgment to accept this finding without examining the figures and the Official Receiver’s comments on them.
Immediately on the making of the receiving order the debtor made application which was forthwith granted, on terms, for 14 days from 4 May 1970 for a stay of advertisement of the receiving order which stay was subsequently extended with consent until 8 June 1970. On 8 June 1970 the debtor’s application for an order that advertisement of the receiving order for a period of three months from 12 May 1970 be stayed was dismissed by the Divisional Court, the debtor not being present or represented at the hearing, and on 10 June 1970 this court lifted the stay
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of advertisement. At the first meeting of creditors held on 21 July 1970 it was resolved that the debtor be adjudged bankrupt and that the Official Receiver do apply to the court to make the adjudication. It was further resolved that Mr Gerhard Adolf Weiss, chartered accountant, of 19 Eastcheap, London EC3, be appointed trustee of the estate with a committee of inspection. The Official Receiver’s application for an order of adjudication was heard on 21 July 1970 but was adjourned to 14 September 1970; and in view of what subsequently happened has not been proceeded with.
Following a meeting at the offices of the solicitors to the petitioning creditor, the debtor on 10 August 1970 made an application for rescission of the receiving order, the petitioning creditor having expressed the desire to withdraw his support for the resolution for adjudication. A general meeting of creditors was, at the request of the petitioning creditor, called for 14 September to discuss the debtor’s application for rescission. The meeting, if it may properly be so called, was attended by a gentleman from the offices of the solicitors to the petitioning creditor, whose proxy was invalid, by a Mr Bianchi, holder of a general proxy from the Commissioners of Inland Revenue, who claimed to be creditors, and a Mr Mehra representing a creditor whose proxy was invalid. A member of the staff of the debtor’s former partner was also present. Mr Bianchi and Mr Mehra intimated that they were not in favour of the debtor’s application for rescission of the debtor’s receiving order and that had it not been for the present proceedings both the Inland Revenue and Mr Mehra’s principal were contemplating proceedings. Since technically there was only one person present, no resolution was or could be passed. The public examination of the debtor was fixed for 8 October, but, in view of the order appealed against, it has of course not taken place.
At the hearing before the registrar the debtor produced correspondence from the Midland Bank and said that the bank were prepared to put up a sum of £4,000–£5,000 to give him a fresh start. The debtor challenged the tax assessments against him, particularly those in respect of the partnership business, as accounts recently received by him in respect of the practice to April 1969 disclosed a large trading loss. He said that a scheme of arrangement under s 16 of the Bankruptcy Act 1914 was not satisfactory to him as it would mean his disqualification as a solicitor: that s 21 did not apply because he was not adjudged bankrupt, neither did s 29 as the debts had not been paid in full. He then referred to s 108(1) under which the Bankruptcy Court may review, rescind or vary any order made and claimed that this was usually exercised in a way which the court considered was in the best interests of the creditors and drew the attention of the registrar to the decision in Re Izod, ex parte Official Receiver, to which I will have to refer later, which indicated that the court’s powers were not limited. The debtor said that if the receiving order was rescinded he could be in practice again just before Christmas 1970. He felt that with friends in the City he could resuscitate the debt collecting side of the practice which he claimed had been lost by the continuing partner. He went on to mention that there was a possibility of getting a company flotation instruction which could be worth £5,000 in fees. He claimed he was now in good health and was confident of his future, but he did admit that he was still suffering from diabetes for which he was under medical treatment. He also said in answer to a question by the registrar as to his future that he thought there might be an opening for him as a solicitor in the Swansea district, either as an advocate or in employment with a local authority. He claimed that he had incurred no debts since the receiving order. The debtor made some further statements before us, and speaking for myself I cannot withhold my sympathy for him.
The agreed note of the learned registrar’s judgment reads as follows:
‘The Registrar in his judgment said he had given a great deal of thought to the
Page 507 of [1971] 1 All ER 504
application particularly as the debtor’s conduct both in the proceedings and in his life leading up to the Receiving Order had been virtually exemplary. The weight on moral grounds was therefore much in his favour but the legal position was not quite so clear. The Registrar further said that he had taken account of the fact that the Petitioning Creditor was prepared to give him another chance and had taken into account all the cases which had been brought to his attention. The most important one was that of Re Noble (a bankrupt), ex parte the Bankrupt v The Official Receiver which was in itself a forceful case against the debtor. He was mindful of the fact that the debtor had already abandoned an appeal set down in the Divisional Court. The Registrar was of the opinion that [the debtor] was insolvent but not hopelessly insolvent, that some of the debts notified against him are as yet unliquidated and that there was no pending petition against him. [This could hardly have been the case because the receiving order had been made as long ago as 4th May 1970]. In all the circumstances the Registrar decided that it was just and equitable that the Receiving Order should be rescinded.’
The debtor urges that the discretion conferred on the court by s 108 is in terms unlimited and that the court ought not to override the learned registrar.
Section 108(1) of the Bankruptcy Act 1914 provides:
‘Every court having jurisdiction in bankruptcy under this Act may review, rescind or vary any order made by it under its bankruptcy jurisdiction.’
Extending, as it does, over a wide field, different considerations must apply to the exercise of the discretion thereby conferred on the court according to the character of the order sought to be rescinded or varied. It is axiomatic that such a discretion, as is conferred by the section, must be exercised judicially, and that although judicial decisions on the exercise of the discretion in a particular case cannot fetter or limit the discretion or create a binding rule of practice, they do provide a guide to the considerations to which regard must be had in exercising the discretion: see Re P & J Macrae Ltd and Re J D Swain Ltd. If an appellate court comes to the clear conclusion that there has been a wrongful exercise of a discretion in that no weight, or not sufficient weight, has been given to relevant considerations, then the law is that it is the duty of an appellate court to substitute its own discretion, or, in a proper case, to send the case back for reconsideration. Viscount Simon LC in Blunt v Blunt ([1943] 2 All ER 76 at 79, [1943] AC 517 at 526, 527) put the matter thus:
‘If it can be shown that the court acted under a misapprehension of fact in that it either gave weight to irrelevant or unproved matters or omitted to take into account matters that are relevant, there would, in my opinion, be ground for an appeal. In such a case the exercise of discretion might be impeached, because the court’s discretion will have been exercised on wrong or inadequate materials. But, as was recently pointed out in this House in another connection in Charles Osenton & Co v. Johnston ([1941] 2 All ER 245 at 250, [1942] AC 130 at 138): “The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge. In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations … then the reversal of the order on appeal may be justified“.’
Page 508 of [1971] 1 All ER 504
If the judge below gives no reasons, or insufficient reasons for the exercise of the discretion, the court may infer that he has gone wrong in one respect or another: see eg Ward v James([1965] 1 All ER 563 at 570 et seq, [1966] 1 QB 273 at 293 et seq).
There is a series of decisions in which guiding lines have been drawn as to the principles on which the discretion to rescind a receiving order under s 108, or its predecessor, ought to be exercised. They are to be understood, in my judgment, with reference first, to the considerations that once a receiving order has been made the interests of creditors and of the public fall to be considered: see Re Hester, ex parte Hester, and in particular the judgment of Lord Esher MR in that case. Secondly, the legislature has laid down a proceeding under s 16 of the 1914 Act under which, subject to observance of the provisions of that section, a scheme of arrangement or composition may, after the conclusion of the public examination, be sanctioned, and will become binding on all creditors. Thirdly, there is the provision for annulment of an adjudication in bankruptcy contained in s 29(1) of the Act, and providing that an adjudication may be annulled on one of two grounds—and on one of two grounds only—ie:
‘Where in the opinion of the court a debtor ought not to have been adjudged bankrupt, or where it is proved to the satisfaction of the court that the debts of the bankrupt are paid in full … ’
A scheme of arrangement or composition and annulment of the adjudication being two of the ways of getting rid of the consequences of bankruptcy singled out by the legislature, the court in exercising its discretion to rescind a receiving order has adopted a similar approach. In my judgment the single result of all the cases is that the court does not, except in very exceptional circumstances, exercise its discretion to rescind a receiving order, except where it would have annulled an adjudication on an application for annulment under s 29(1): see eg Re Leslie, ex parte Leslie, Re Hester, Re Dixon & Cardus, ex parte Dixon & Cardus, Re Flatau, ex parte Official Receiver, Re a Debtor (No 446 of 1918), and Re a Debtor (No 5 of 1936), ex parte Official Receiver. The matter is, perhaps conveniently summarised in a few words of Lord Sterndale MR in Re a Debtor (No 446 of 1918) ([1920] 1 KB at 465, [1918–19] All ER Rep at 398):
‘It seems to have been said from time to time that, although not proceeding exactly upon the same grounds, the exercise of the jurisdiction to rescind or vary an order under s. 108 should be guided broadly by the same principles that apply to the annulment of an adjudication. I do not mean to say they are absolutely the same.’
The court has been told by counsel for the Official Receiver, that Re Izod, has been much relied on in the county courts throughout the country as a case showing that the court need not have regard to the guiding line to be found in the cases to which I have just referred. This is, in my judgment, a wholly wrong view of the effect of that case. There was there an arrangement with the creditors which might after a public examination have been sanctioned under the predecessor of s 16. The Court of Appeal
Page 509 of [1971] 1 All ER 504
thought that this being so, and in the very special circumstance of that case, the principles underlying the Bankruptcy Acts were not offended by the exercise of the discretion. It is to be observed in this connection, as appears more particularly from the judgment of Collins LJ, that the proceedings had been carried on throughout under the eye of the Official Receiver, so that the interests of the public were protected throughout, and, as I have indicated, the arrangement was one which could have been sanctioned as a scheme of arrangement or composition under the predecessor of s 16 with similar results, to those achieved by the rescission of the receiving order. I accept counsel’s submission that Re Izod indicates no rule, but it is an example of the application of the general principle on which the court has acted, and is an example of a very special exception to the general rule.
In my judgment it is quite clear here that the learned registrar has ignored the considerations to which I have referred and which ought to have guided him inevitably to come to a different conclusion. There has been no payment of the debts in full. No scheme of arrangement or composition is put forward. The learned registrar appears not to have paid regard to the considerations of the public interest on which Lord Esher MR dwelt at length in Re Hester. Nor does he appear to have considered the effect of his decision in relation to future creditors who may give credit to an insolvent debtor. He has not regarded the interests of the creditors deterred from taking bankruptcy proceedings by the existence of the receiving order. In a word, he has not been guided by the decisions of the court as to the considerations by reference to which the court ought to exercise its discretion under s 108 in relation to a receiving order.
In my judgment the appeal should be allowed.
FOSTER J. I agree.
Appeal allowed. Leave to appeal to the Court of Appeal.
Solicitor: Solicitor, Department of Trade and Industry (for the Official Receiver).
Richard J Soper Esq Barrister.
Practice Direction
(Writ: Issue out of central office)
[1971] 1 All ER 510
PRACTICE DIRECTIONS
CENTRAL OFFICE
14 December 1970.
Writ – Issue – Issue out of Central Office – Application – Application by post – RSC Ord 6.
Originating summons – Issue – Issue out of Central Office – Application – Application by post – RSC Ord 7.
1. Subject to the following provisions, from and after 11 January 1971, the plaintiff suing by a solicitor may tender a writ of summons or an originating summons to which an appearance is required to be entered, to be issued out of the Central Office, by making application for such issue by post, instead of by personal attendance at such office.
2. The application must be made by the solicitor acting for the plaintiff posting the requisite documents as defined in para 3 hereof in a prepaid envelope addressed to: The Action Department, Postal Section, Central Office, Royal Courts of Justice, Strand, London, WC2A 2LL.
3. The requisite documents are the following: (a) an application by letter or otherwise duly signed by or on behalf of the solicitor requesting the issue of the writ or the originating summons, as the case may be; (b) the original and one copy of the writ or the originating summons, as the case may be, which must be duly completed by or on behalf of the solicitor, and in the case of a writ of summons it must contain all necessary indorsements properly made as required by RSC Ord 6; in the case of an originating summons it must comply with the requirements of RSC Ord 7; (c) the copy of the writ or the originating summons, as the case may be, must be signed by or on behalf of the solicitor as directed by direction 9 of the Masters’ Practice Directions; (d) a cheque which must be drawn by the solicitor, or a postal or a money order, crossed and made payable to HM Paymaster-General, for the proper amount of the court fees payable on this issue of the writ or originating summons in question. As from 11 January 1971, the fee on the issue of a writ for an amount not exceeding £750 is £6 and in any other case £10; (e) an envelope which must be properly addressed to the solicitor making the application, and sufficiently stamped for the return of the relevant documents to him.
4. Where an application is made for the issue of more than one writ or originating summons by post, it is advisable to make a separate payment by cheque, postal or money order for each such writ or originating summons, as in the event of underpayment for the total number of writs or originating summonses required, the application is liable to be returned for the correct amount to be given.
5. An application for the issue of a writ or an originating summons, as the case may be, made by post will be treated as having been made at the date and time of the actual receipt and acceptance of the requisite documents in the Central Office (on a day when the Central Office is open) and for this purpose the date or time of despatch of the requisite documents will be wholly disregarded.
6. On receiving the requisite documents, and the appropriate payments, an officer of the Central Office will affix to the application an official stamp showing the date and time on which he received the requisite documents, and (i) if the requisite documents are in proper form and order, and the appropriate payments made, he will seal the writ or originating summons, as the case may be, pursuant to RSC Ord 6, r 7, or Ord 7, r 5, and return it by post to the solicitor making the application in the envelope sent by him for this purpose; or (ii) if the documents for any reason appear to such officer not to comply with all the foregoing requirements, he will not issue the writ or originating summons, but will return by post all such documents as were sent by the solicitor making the application in the envelope sent by him for this purpose.
Page 511 of [1971] 1 All ER 510
7. No responsibility will be accepted for the non-delivery to the solicitor making the application of the writ or originating summons duly sealed, or of the documents sent by him returned to him under paras 4, 6(i) or 6(ii) as the case may be.
8. It is the duty of the solicitor for the plaintiff making use of these postal facilities for the issue of a writ or an originating summons to ensure due compliance with the conditions for the proper operation of this medium.
9. The use of these facilities is at the risk of the solicitor concerned. Solicitors should be particularly careful in the use of these postal facilities where time for any reason is material, and particularly so when any period of limitation may be involved.
10. It will not be possible for the Action Department or any part of the Central Office of the Supreme Court to enter into any correspondence or telephonic communication in relation to any writ or originating summons which appears defective, or which has not been issued. Any queries on such matters will require personal attendance at the Action Department of the Central Office of the Supreme Court.
11. These directions shall not apply to the issue of a writ of summons or an originating summons to which an appearance is required to be entered in any case in which the plaintiff is acting in person.
W Russell Lawrence, Senior Master
Practice Direction
(Decimilisation: Practice: Bankruptcy)
[1971] 1 All ER 511
PRACTICE DIRECTIONS
SUPREME COURT TAXING OFFICE
18 December 1970.
Decimalisation – Practice – Bankruptcy – Costs – Taxation – Decimal Currency Act 1969, Sch I.
1. In order to assist in the change over to decimal currency on 15 February 1971, bills of costs and charges lodged in the Supreme Court Taxing Office between 11 January 1971 and 14 May 1971 inclusive may be prepared in either £ s d or decimal currency. However, when £ s d is used, the total(s) in the summary of the bill must show the decimal equivalent(s). After 14 May 1971 only bills prepared in decimal currency will be accepted.
2. In converting items of costs from £ s d to decimal currency, the Whole Penny Table as laid down in Sch I to the Decimal Currency Act 1969a should be used.
3. As from 1st December 1970 all allocaturs will show decimal equivalents in brackets until 15th February 1971, when all figures will be shown in decimal currency only.
4. The Whole Penny Table and examples of bill summaries are on display in all chambers.
These directions are made with the approval of the Lord Chancellor.
Paul Adams, Chief Master Supreme Court Taxing Office
Practice Direction
(Bankruptcy: Costs: Taxation)
[1971] 1 All ER 512
PRACTICE DIRECTIONS
SUPREME COURT TAXING OFFICE
18 December 1970.
Bankruptcy – Costs – Taxation – Documents – Calculation of length – Method of calculation – Page basis – International Standards Organisation paper sizes – Bankruptcy Rules 1952(SI 1952 No 2113), App II.
Paul Adams, Chief Master Supreme Court Taxing Office
The amendment of Appendix II to the Bankruptcy Rules 1952a, which comes into force on 11 January 1971, discontinues the use of folios as a method of calculating the length of documents (apart from official shorthand writers’ charges, which will still be calculated on a folio basis) and for drawing and copying substitutes a system of charging on a page basis, the charge being according to the size of the page or the utilised part thereof.
The purpose of the proposed change is to dispense with the laborious task of counting folios. In case of disagreement, the yardstick on which the page basis is founded is that of 3, 5, 6 and 8 folios of 72 words respectively for quarto (A5), foolscap (A4), draft and brief (A3) sizes of paper.
When calculating the number of pages, care should be taken to ensure that the total charged is in accordance with the number of complete pages, fractions of pages being aggregated.
Charges for documents copied by any photographic process will continue to be allowed on a whole page basis.
The amendments also take into account the International Standards Organisation sizes of paper, principally those known as A3, A4 and A5, which are becoming more widely used, and sets out the comparable present paper sizes, ie A5=quarto; A4=foolscap; A3=brief. Although the actual ISO paper sizes differ slightly from those now in use, the average content of each size is substantially the same as that of its present counterpart and is to be treated as equal for all purposes of taxation.
The amendments also re-classify the charges for letters.
Accordingly, all work affected by the changes in the Appendix (preparation and perusal of documents, copies and letters) undertaken from 11 January 1971 should be charged at the new rates.
These directions are made with the approval of the Lord Chancellor.
Waite v Redpath Dorman Long Ltd
[1971] 1 All ER 513
Categories: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISION
Lord(s): FISHER J
Hearing Date(s): 30 JULY 1970
Interest – Damages – Personal injury – Payment into court – Order for payment out to plaintiff – RSC Ord 22, r 5 – Law Reform (Miscellaneous Provisions) Act 1934, s 3 (1A) (added by Administration of Justice Act 1969, s 22).
In an action for damages for personal injuries the defendants paid into court a total sum of £455. The plaintiff did not give notice under RSC Ord 22, r 3, that he accepted the sum in satisfaction of his cause of action but, after 14 days from the receipt of notice of the payment into court, he applied to the court under RSC Ord 22, r 5a, for an order for payment. On the question whether the plaintiff would be entitled to interest on the sum under s 3 (1A)b on the Law Reform (Miscellaneous Provisions) Act 1934(as added by s 22 of the Administration of Justice Act 1969),
Held – No interest could be awarded on the sum because an order made pursuant to RSC Ord 22, r 5 was not a judgment for a sum of money, neither was it a judgment given in proceedings tried in court (see p 516 h, post).
Notes
For the award of interest on damages, see 27 Halsbury’s Laws (3rd Edn) 10, 11, para 10, and for cases on the subject, see 35 Digest (Repl) 211, 212, 179–182.
For the Law Reform (Miscellaneous Provisions) Act 1934, s 3 (1A), as added by the Administration of Justice Act 1969, s 22, see 49 Halsbury’s Statutes (2nd Edn) 1364.
Cases referred to in judgment
Chinery, Re, ex parte Chinery (1884) 12 QBD 342, 53 LJCh 662, 50 LT 342, 51 Digest (Repl) 723, 3154.
Jefford v Gee [1970] 1 All ER 1202, [1970] 2 QB 130, [1970] 2 WLR 702.
Magor and St Mellons Rural District Council v Newport Corpn [1951] 2 All ER 839, [1952] AC 189, 115 Jp 613, 44 Digest (Repl) 267, 932.
Mersey Docks and Harbour Board v West Derby Assessment Committee and Bottomley [1932] 1 KB 40, [1931] All ER Rep 409, 101 LJKB 8, 145 LT 592, 95 JP 186, 16 Digest (Repl) 114, 12.
Onslow v Inland Revenue Comrs (1890) 25 QBD 465, 59 LJQB 556, 63 LT 513, 39 Digest (Repl) 307, 518.
Motion
The plaintiff applied for a payment out to him of a total sum of £455 paid into court by the defendants in satisfaction of a claim made against the defendants by the plaintiff for damages for personal injuries by him and also claimed interest on the money. The facts are set out in the judgment of Fisher J.
D J Turner-Samuels for the plaintiff.
A Lipfriend for the defendants.
30 July 1970. The following judgment was delivered.
FISHER J. This case has been mentioned before me in order that I may determine a question which has arisen in relation to interest. I should stress it has not been
Page 514 of [1971] 1 All ER 513
listed before me for trial and I have not been asked to try the action. The circumstances in which the case comes before me are these. It is a claim for damages for personal injuries sustained in an accident which occurred in August 1967; the writ was issued and served and statement of claim delivered in January 1969; and in March 1969 a defence was filed denying liability and alleging contributory negligence. On 6 April 1970, a sum of money was paid into court by the defendants pursuant to RSC Ord 22, r 1. On 19 June 1970, an increased sum was paid into court, again pursuant to the same rule, and notice of the payments in was duly given to the plaintiff. The sum now in court is £455.
The plaintiff did not give notice under RSC Ord 22, r 3, within 14 days of receipt of notice of the payments in that he accepted the money in satisfaction of his cause of action and the 14 days have now expired. The plaintiff, is however, minded to accept the sum paid in and comes and desires an order of the court under RSC Ord 22, r 5, which I will read.
‘If any money paid into court in an action is not accepted in accordance with Rule 3, the money remaining in court shall not be paid out except in pursuance of an order of the Court which may be made at any time before, at or after the trial or hearing of the action; and where such an order is made before the trial or hearing the money shall not be paid out except in satisfaction of the cause or causes of action in respect of which it was paid in.’
It has not been suggested that I have no jurisdiction to make an order under that section in respect of an action not yet tried and not before me for trial. It might be thought that the appropriate person to whom to apply for such an order in those circumstances was a master but no point has been taken and I proceed, therefore, to determine the point.
The Law Reform (Miscellaneous Provisions) Act 1934, s 3(1) provides:
‘In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment … ’
and then there is a proviso which I need not read.
Section 22 of the Administration of Justice Act 1969 provided that there should be inserted a new sub-s (1A) following that subsection, in these terms:
‘Where in any such proceedings as are mentioned in subsection (1) of this section judgment is given for a sum which (apart from interest on damages) exceeds £200 and represents or includes damages in respect of personal injuries to the plaintiff or any other person, or in respect of a person’s death, then (without prejudice to the exercise of the power conferred by that subsection in relation to any part to that sum which does not represent such damages) the court shall exercise that power so as to include in that sum interest on those damages or on such part of them as the court considers appropriate, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.’
Counsel for the plaintiff has submitted that an order under RSC Ord 22, r 5, made on application to the court before the trial of the action, as this application is made, would be a judgment falling within the terms of s 3 of the 1934 Act and that that being so, I could include in the sum for which judgment is given, interest on the whole or any part of the sum of £455, and further that, by virtue of the 1969 Act, I am required to do so unless there are special reasons. That can only be so if an order under the rule is a judgment for a sum of money given in proceedings tried in a court.
Page 515 of [1971] 1 All ER 513
The only guidance that there is as to the manner in which the powers under the sections should be exercised is to be found in Jefford v Gee. It is a strange judgment. First of all, everything in it relating to the practice under the 1969 Act is obiter since the case of Jefford v Gee was not governed by the 1969 Act. Furthermore, in the judgment the court appears not to be stating the law so much as to be laying down administrative directions. However, the court was moved by a laudable desire to obtain uniformity, and in practice this judgment is followed, whether it is binding on the courts or not. But it does not really help me in this case. Lord Denning MR dealt with payment into court and he said that interest is not part of the debt or damages claimed, and ([1970] 1 All ER at 1211, [1970] 2 QB at 149):
‘Such being the character of interest, we do not think a defendant can, or should, make any payment into court in respect of it … A defendant should, therefore, in future make his payment into court in the same way as he always has done, namely, an amount which he says is sufficient to satisfy the cause of action apart from interest. If a plaintiff recovers more (apart from interest) he gets his costs. If he recovers no more (apart from interest) he does not get his costs from the date of the payment in and he will have to pay the defendant’s costs. A plaintiff will, of course, in either case, get the appropriate award of interest irrespective of the payment into court. If a plaintiff takes the money out of court in satisfaction of the claim, that is the end of the case. He gets no interest because there is no judgment. The 1934 Act only entitles a plaintiff to interest when he gets a judgment. As a matter of practice, however, if a plaintiff is disposed to think that the payment into court will cover his claim, he will tell the defendant that he is disposed to go to trial in order to collect the interest but that such a course would be to their mutual disadvantage because the Revenue would extract tax on it; so it would be better for them to split the interest and settle for a sum somewhat higher than the sum in court.’
A plaintiff who took that course would be at risk of recovering less than the sum in court, and if that were the only course open to him—the only threat open to him—it might very well be thought to diminish the advantage to him of taking a sum in court and avoiding the risk of going on and recovering less and having to pay part of the costs. In fact there is, of course, no reason why a defendant should not pay into court rather more than he thinks is a proper sum to represent the damages likely to be recovered by the plaintiff, and he may include a little more to tempt the plaintiff, and by virtue of what Lord Denning MR has said about payments into court, if the action goes to trial, the defendant is getting an increased protection by that means; if the plaintiff takes the sum of money out then the plaintiff is getting no more than he would do if he got judgment for the sum in court and interest on top of it, and the defendant’s protection in the matter of costs is improved to the extent that he adds something more to what he thinks is the appropriate figure. But those are mere matters of comment and not really matters which I can take into account when I have to construe a statute. It may well be, as counsel for the plaintiff has submitted, that if his argument is wrong there is a lacuna in the Act, but it is well-established that courts are not entitled to fill gaps in Acts of Parliament. That was laid down, of course, by the House of Lords in Magor and St Mellons Rural District Council v Newport Corpn and has been reiterated many times since in the House of Lords.
I come back to the question of the construction of the Acts of Parliament and the question whether it can be said that an order under this rule is a judgment. Counsel
Page 516 of [1971] 1 All ER 513
for the plaintiff has submitted that a judgment for a sum of money means an order that a sum of money shall be paid to the plaintiff which is (a) made in an action, and (b) concludes the action, and he cites in support of that Re Chinery, ex parte Chinery. He has not cited to me the later case of Onslow v Inland Revenue Comrs, in which Lord Esher MR made some observations about this matter, since that apparently does no more than to apply Re Chinery, ex parte Chinery. He has also cited Mersey Docks and Harbour Board v West Derby Assessment Committee and Bottomley which does not seem to me to advance the matter. Counsel for the defendants submits that a judgment within the terms of the Law Reform (Miscellaneous Provisions) Act 1934 can only be one of the following three things: either a judgment for a sum of money awarded after a trial on the issue both of liability and damages, or after a trial where liability is admitted and damages have been tried; or, secondly, a judgment by consent for a sum of money, ie a judgment given where the parties have agreed that a judgment should be given; or, thirdly—and this, he submits, is a doubtful case but is prepared for present purposes to concede that it would be within the section—a judgment given in default which, in an action for damages for personal injuries, could only be an interlocutory judgment followed by an assessment of damages, but counsel is prepared for present purposes to concede that a default judgment followed by an assessment of damages would be a judgment falling within the section. I do not have to decide whether or not that concession is rightly made. He refers me to the forms in App A to the Supreme Court Practice 1970c where one finds first of all, in form 24, the form of notice of acceptance of money paid into court, and then from form 39 onwards, forms of judgment, in each of which the words are used: ‘… it is this day adjudged that the defendant do pay the plaintiff … ’ a sum of money or damages to be assessed, as the case may be.
Plainly, not every order made in an action is a judgment. An order for discovery, for instance, is not a judgment. Clearly, not every final order is a judgment. An order giving leave to discontinue an action is a final order in that it brings the action to an end, but it is not a judgment—certainly not a judgment for a sum of money, certainly not a judgment falling within the 1934 Act. A court asked to make an order under RSC Ord 22, r 5, will not be asked to consider and will not have to consider the merits of the plaintiff’s claim, whether he has any rights against the defendant, whether he has a cause of action against the defendant, and, if so, whether the sum of money in court is a sufficient sum to satisfy the cause of action; those are not questions with which the court will be concerned. The court will merely have to determine, in the exercise of its discretion, whether the plaintiff should be allowed to take the money out in satisfaction of the cause of action despite the fact that the 14 day limit has expired. The sort of matters which the court will consider are whether the defendant would be prejudiced, whether there has been a change of circumstances, and so on.
It seems to me that, for a number of reasons, such an order cannot possibly be a judgment falling within s 3 of the 1934 Act. In my opinion it is not a judgment at all; it is not a judgment for a sum of money and it is not a judgment given in proceedings tried in the court. Where, as here, the application is made before trial, as under RSC Ord 22, r 5, it can be, then almost by definition the order cannot be one made in proceedings tried in court; it is an order made before trial which has the effect of making a trial unnecessary. It may be that there is a lacuna in the Act, but it is no part of my duty to try to fill it where the words of the Act of Parliament are as clear as, in my opinion, they are in the present case.
Accordingly, my decision is that I have no power to do anything other than to order
Page 517 of [1971] 1 All ER 513
that the plaintiff have liberty to take the sum of £455 out of court in satisfaction of the cause of action and I have no power to order that interest shall be added to that sum.
Order accordingly.
Solicitors: W H Thompson (for the plaintiff); Blount, Petre & Co (for the defendants).
E H Hunter Esq Barrister.
Peck v Anicar Properties Ltd
[1971] 1 All ER 517
Categories: LANDLORD AND TENANT: Leases
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, FENTON ATKINSON AND CAIRNS LJJ
Hearing Date(s): 13, 14 OCTOBER 1970
Landlord and tenant – Long leasehold – House – Lease of building comprising shop on ground floor with tenant’s residential accommodation above – Shop joined up with the shop on the ground floor of next-door building by an opening in the wall – Tenant also lessee of next-door building – Whether building designed or adapted for living in and reasonably called a house – Leasehold Reform Act 1967, s 2(1).
The tenant held a long lease at a low rent of a building comprising a shop on the ground floor and residential accommodation above, where he lived. A staircase connected the shop with the dwelling accommodation. Entrance to the shop and to the dwelling accommodation were from different roads. The tenant was also lessee, under a separate lease, of the next-door building which likewise was a shop with dwelling accommodation above, and a hole had been made in the wall between the two shops which were used by the tenant as one shop. There was no communication between the dwelling accommodation in the two buildings, and the dwelling accommodation in the next-door building was let by the tenant to someone else. The tenant applied under the Leasehold Reform Act 1967 to acquire the freehold of the building where he lived.
Held – Looking at the three things required to be looked at by s 2(1)a of the 1967 Act, ie the lease of the building, the portion occupied as a residence and the physical condition of the structure, the building was still one building, with merely a hole knocked through into the next building, and was a building designed or adapted for living in and reasonably called a ‘house’ within s 2(1); accordingly the tenant was entitled to acquire the freehold (see p 519 b to e and g, post).
Notes
For the meaning of house for the purposes of the Leasehold Reform Act 1967, see Supplement to 23 Halsbury’s Laws (3rd Edn) para 1748.
For the Leasehold Reform Act 1967, s 2, see 18 Halsbury’s Statutes (3rd Edn) 636.
Cases referred to in judgments
Lake v Bennett [1970] 1 All ER 457, [1970] 1 QB 663, [1970] 2 WLR 355.
Appeal
This was an appeal by the landlords, Anicar Properties Ltd, from the judgment of his Honour Judge Fife, sitting at Bromley county court, given on 8 December 1969, on
Page 518 of [1971] 1 All ER 517
an application by the tenant, Frederick Reginald Morby Peck, that he was entitled to acquire the freehold of premises held by him on a long lease at a low rent under the Leasehold Reform Act 1967. The facts are set out in the judgment of Lord Denning MR.
N T Hague for the landlords.
Ashley Bramall for the tenant.
14 October 1970. The following judgments were delivered.
LORD DENNING MR. This raises another nice question under the Leasehold Reform Act 1967. There is in south-east London, at Lee, a row of shops with dwelling accommodation above. The shops face on to Lee High Road. The residential accommodation faces on to Marischal Road. We are concerned here with a building of which the shop on the ground floor is 41 Lee High Road, and the residential accommodation above is 20 Marischal Road. The entrance to the shop is from Lee High Road. The entrance to the dwelling accommodation is from Marischal Road. That building was the subject of a lease 90 years ago, or so; but it has been replaced by a later lease which was granted in 1936 for a period of 35 years. It was a lease of the one building which comprised both 41 Lee High Road and 20 Marischal Road. The rent was £65 a year. It was a long lease at a low rent within the Act. So the tenant is entitled to buy the freehold if he satisfies the requirements of the Act.
The present tenant of the building is Mr Peck. He has been there for many years, and his father and grandfather before him. He has the shop, 41 Lee High Road, on the ground floor, and he has the dwelling accommodation, 20 Marischal Road, above. Prima facie he has a good claim to buy the freehold. It is covered by Lake v Bennett. But there is this complication. The tenant is also the tenant of the next-door building from the same landlords. It is likewise a shop with dwelling accommodation above. The shop is 39 Lee High Road and the dwelling accommodation above is 18 Marischal Road. Now the two shops, 41 and 39 Lee High Road, are joined up and used as one shop. The joinder took place some 50 years ago. A hole was knocked in the wall between the two shops; and for the last 50 years the tenant and his father before him have been using 39 and 41 Lee High Road as one shop—a drapers’ and outfitters’ shop. The tenant lives, as I have said, in the dwelling accommodation 20 Marischal Road, but he lets the dwelling accommodation, 18 Marischal Road, to somebody else. There is no communication between the dwelling accommodation but only between the two shops. It is the complication of the shops being knocked into one which has given rise to the argument in this case. The landlords said that the building (41 Lee High Road and 20 Marischal Road) was not a ‘house’ within the meaning of the Act. They argued before the county court judge that it was a building divided horizontally within s 2(1)(a) of the Act. The judge rejected that argument; for the good reason that on the facts it is not divided horizontally. There is a staircase up and down clearly connecting the living accommodation with the shop. So that that argument failed.
But counsel for the landlords has put a different point. It was not taken in the court below and strictly speaking is not available to him here. But, on the other hand, the facts are not in dispute, and I think we may deal with the case on the footing that the point is open. The point is this: counsel says that the ‘house’ for the purposes of this Act is not the original building (ie the shop at 41 Lee High Road with the dwelling accommodation 20 Marischal Road above it) but that the ‘house’ is a threefold structure, the two shops 39 and 41 Lee High Road, together with the dwelling accommodation of 20 above, all occupied together by the tenant. If that is the ‘house’ then, he says, it is not within the Act for two reasons: first because the rateable value would be over £400; secondly because it is taken out by s 2(2) of the Act which provides:
Page 519 of [1971] 1 All ER 517
‘References in this Part of this Act to a house do not apply to a house which is not structurally detached and of which a material part lies above or below a part of the structure not comprised in the house.’
I agree with counsel for the landlords that, if the ‘house’ is the threefold structure, s 2(2) takes it out of the Act. But counsel for the tenant gave the right answer. It is not sufficient simply to look at the physical condition of the structure as it now appears. The opening words of the Act (s 1(1)) confer the rightb on the ‘tenant of a leasehold house, occupying the house as his residence’. The words of s 2(1) define a ‘house’ as a ‘building designed or adapted for living in and reasonably so called’. Those words show that one must look at three things to find what is that ‘house’: (1) the lease itself; (2) the portion occupied as a residence; and (3) the physical condition of the structure.
Taking those three: First, the lease here only covers the shop, 41 Lee High Road and 20 Marischal Road, the dwelling portion above. Now, suppose that the tenant had owned the freehold of the shop next door, 39 Lee High Road. That would not disentitle him from buying the freehold of the one building (41 Lee High Road and 20 Marischal Road). That must be right. Second, take the part which the tenant occupies as his residence. He only occupies 20 Marischal Road as his residence. It is part of the one building (41 Lee High Road and 20 Marischal Road) with a staircase connecting the shop with the dwelling accommodation. Third, take the physical condition of the premises. The combined premises (41 Lee High Road and 20 Marischal Road) are really one building still, with merely a hole knocked through into the next door. It is a building designed or adapted for living in and it is reasonably called a ‘house’. The fact that an opening has been made into the next-door shop does not take it out of the meaning of ‘house’. So, even if the point were open to counsel for the landlords in this court, it seems to me that it fails. I think the appeal should be dismissed.
FENTON ATKINSON LJ. I agree. I think that it would have been fully open to the court to say that the appeal fails because counsel for the landlords’ only points are points which clearly were not taken below; and indeed not only were the points not taken below, but the whole case for the landlords seems to have been run before the county court judge on quite different lines. But I agree with Lord Denning MR that it is much more satisfactory to consider the merits. Having heard the argument of counsel for the tenant, I think that he has provided the complete answer to the argument on behalf of the landlords; and for the reasons which Lord Denning MR has stated, to which I can add nothing useful, I am satisfied that the appeal fails on its merits.
CAIRNS LJ. I agree that the appeal fails for the reasons given by Lord Denning MR.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Charles Ricketts & Co (for the landlords); Straker, Holford & Co (for the tenant).
Wendy Shockett Barrister.
Wolf v Crutchley and another
[1971] 1 All ER 520
Categories: LANDLORD AND TENANT: Leases
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): LORD DENNING MR, PHILLIMORE AND CAIRNS LJJ.
Hearing Date(s): 22, 23 OCTOBER 1970
Landlord and tenant – Long leasehold – Premises – House and other premises occupied therewith – House connected with adjoining house by doorway – Whether adjoining house other premises – Leasehold Reform Act 1967, s 3(6).
In s 3(6)a of the Leasehold Reform Act 1967 the word ‘premises’ is not used in a wide sense so as to include another house but in a narrow sense to denote a garage or outbuilding or such like, ancillary to the house (see p 521 c, p 522 d and p 523 e, post).
Notes
For the meaning of house for the purposes of the Leasehold Reform Act 1967, see Supplement to 23 Halsbury’s Laws (3rd Edn) para 1748.
For the Leasehold Reform Act 1967, s 3, see 18 Halsbury’s Laws (3rd Edn) 638.
Cases referred to in judgments
Lake v Bennett [1970] 1 All ER 457, [1970] 1 QB 663, [1970] 2 WLR 355.
Peck v Anicar Properties Ltd p 517, ante.
Appeal
This was an appeal by the landlords, Admiral Sir Victor Alexander Crutchley and Donald William Carpenter, from the judgment of his Honour Judge Baxter, sitting at the West London county court, dated 19 January 1970, whereby it was declared that the tenant, Maria Wolf, was entitled to acquire the freehold of a dwelling-house and premises known as 5 Gliddon Road, London W14. The facts are set out in the judgment of Lord Denning MR.
W Blum for the landlords.
I E Jacob for the tenant.
23 October 1970. The following judgments were delivered.
LORD DENNING MR. This case concerns 5 and 6 Gliddon Road, Barons Court, London W 14. In 1900 these two houses were the subject of two building leases. No 5 Gliddon Road was let at a ground rent of £15 a year for 99 years. No 6 was let at £12 10s a year for 99 years. They were at that time completely separate houses. They continued separate for many years. In 1957 the tenant took an assignment of the leasehold interest of 5 Gliddon Road. She lived there and took in lodgers. In 1962 she bought the leasehold of 6 Gliddon Road. It was being used for paying guests. She then took steps to use the two houses together. She made an opening on the first floor of the houses from one to the other. Since that time she has used the two houses together and taken in girl students from a nearby ballet academy. She now claims to be entitled, under the Leasehold Reform Act 1967, to buy the freehold of 5 Gliddon Road. The tenant would clearly be entitled to buy the freehold of 5 Gliddon Road if she had not knocked the two into one. It would, if rated separately, have a rateable value of £326, well below the £400 in the Act. But the landlords reject her claim. They say that there are no longer two houses—nos 5 and 6. There is only one house, the combined nos 5 and 6. The
Page 521 of [1971] 1 All ER 520
rating authorities have rated the two houses as one house at over £600, i e, far in excess of £400, and so outside the Act.
Counsel for the landlords made three points. First, he said that the two houses were to be taken together because of s 3(6) of the 1967 Act, which provides:
‘Where at any time there are separate tenancies, with the same landlord and the same tenant, of two or more parts of a house, or of a house or part of it and land or other premises occupied therewith … ’
they are to be taken together for the purposes of the Act. Counsel says that here there are separate tenancies of a ‘house’ and ‘other premises’ occupied therewith. He says that no 5 is the ‘house’ and that no 6 is the ‘other premises occupied therewith’. So they should be taken together. But I think that counsel for the tenant gave the right answer. The word ‘premises’ in s 3(6) is not used in a wide sense, such as to include another house. It is used in a narrow sense to denote a garage or outbuilding, or such like, ancillary to the house. That is the meaning of ‘premises’ when used in the combined phrase ‘house and premises’: see s 2(3). And I think that the word ‘premises’ when used in s 3(6) has the same meaning. That is shown by reference to s 15(1) (c) and (2), and by reference to the later words in s 3(6) about the ‘tenancy comprising the house’. So I do not think s 3(6) means that 5 and 6 Gliddon Road are to be taken together.
Secondly, counsel for the landlord relied on the licence under which the tenant joined up the two houses. He said that the licence made them one house. It was a licence by deed dated 1 July 1965. By it the landlords gave permission for much more work than was in fact done. They gave permission for there to be means of access from one house to the other, both on the ground floor and on the roof. There were elaborate provisions about the use of the houses together for paying guests. There was to be one dining-room and one television room. There was to be a manager of the whole. In short the licence contemplated the running of the two houses combined as one guest house. Counsel submitted that the licence was equivalent to a surrender of the two previous leases and a grant of one lease for the whole. He also drew attention to the extensive work which was done at the time in the garden of no 5. An electricity transformer chamber was installed with garages above it. And so forth.
I do not think the licence has the effect contended for by counsel. It recites expressly that:
‘1. … the said two Leases … subject to the Licence hereby granted shall continue to subsist and bind the persons in whom the leasehold interests created by the said two Leases shall for the time being be vested … ’
The remainder of the licence proceeds on the footing that the two leases continue separately. For instance, the lessee could underlet each of the houses separately without the consent of the owner. That is shown by the fact that consent was only required for an underletting during the last seven years. Again, if one house was out of repair and the other was in repair, there would be a right to forfeit the one and not the other. In these circumstances, I think that, despite the licence, there remained two separate leasehold interests in regard to nos 5 and 6.
Thirdly, counsel for the landlords relied on the physical connection. He said that nos 5 and 6 were one house because a doorway was knocked through from no 5 into no 6; and that they were used as one house. For instance, the bedrooms were numbered one to 20 straight through the two houses. The cleaners used this doorway to get through to do the cleaning. Some of the young ladies used the doorway at that time to pass to and from.
On this third point, we had a case last week of Peck v Anicar Properties Ltd (Page 517, ante) in which
Page 522 of [1971] 1 All ER 520
it was said that there were three things to be considered: (1) the leasehold interest; (2) the physical structure; and (3) the use as a residence. Taking these three matters: first, the leasehold interest, here there is a separate lease for 5 Gliddon Road. Second, the physical structure; no 5 is structurally a separate house. Any ordinary person would say it was a house. The presence of a connecting door does not mean that it is not a house. Third, occupation as a residence; the tenant occupies no 5 as her residence. She has lived there for years. She does not occupy no 6 as her residence. She could not buy up no 6. But she is entitled to buy no 5. I think therefore that, considering these three matters, the tenant comes within the Act in respect of no 5 and is entitled to buy the freehold of it.
I may perhaps add that the present case was envisaged by myself in Lake v Bennett ([1970] 1 All ER 457 at 459, [1970] 1 QB 663 at 670). I instanced a case where four houses had been knocked into one with 88 rooms let off as furnished rooms. I said that the four houses would not be within the Leasehold Reform Act 1967, but each one of the four might be. So here. The whole is not a house within the Leasehold Reform Act 1967, but each of the two is. I would, therefore, dismiss the appeal.
PHILLIMORE LJ. I entirely agree with the views expressed by Lord Denning MR in regard to the construction of s 3(6) of the Leasehold Reform Act 1967, as to the effect to be given to the word ‘premises’ there, and also, of course, I agree that the tenant has used no 5 as her residence for the requisite time. The point which has troubled me about this case, and I confess my mind has vacillated with regard to it, is whether it can be said that on the relevant date, which in this case was 24 February 1969, no 5 was a house properly so called, as opposed to having become part of a larger structure by unification with no 6. After all, the tenant’s husband is an architect and conducted the negotiations with the landlords on behalf of the tenant, and made it perfectly clear in July 1963, in a letter which he wrote then to the landlords’ agents, that the plan which he desired to execute involved ‘the uniting of the above premises’, ie the uniting of 5 and 6 Gliddon Road. His original proposal would involve openings in the existing party wall which divided these two houses vertically at various levels. When the licence was drawn up it clearly involved a covenant on the part of the tenant that in exercising her rights over the premises, ie both houses, for the reception of paying guests, which is what she wanted to use them for, she would observe conditions which clearly required that the premises, the two houses, should be run as one. It is true that under the licence the openings to be made between the two houses were restricted to one at first floor level and another a good deal higher up, I think from the roof of no 6 to the well of the staircase of no 5, no doubt for safety purposes in the event of fire. But under the covenants which were stipulated in the licence it is quite clear that the intention to which the tenant committed herself was to run these two houses as one. There was evidence before the judge, as Lord Denning MR has already indicated, that the rooms in the two houses, ten in each, were numbered consecutively from one to 20. Not only that but, shortly after the licence had been executed, the valuation officer visited the premises and, as a result, in April 1966, the licence having been signed in July 1965, he proposed a variation in the rating list under which these two houses, instead of being rated separately, should be rated as one. So far as the court is aware, there was no protest from either the tenant or her husband in relation to that variation which was duly carried into effect. What has troubled me, however, is that when this matter came before the learned judge, the evidence put before him was that of the tenant and of her husband only. The tenant in effect was saying: ‘Well, I have not carried out all the covenants in that licence, and all that has really happened is that there has been this one doorway. I have not troubled with the one in the roof.' There was
Page 523 of [1971] 1 All ER 520
one opening made. It was kept locked except when it was necessary to open it for the staff to go through to clean, but otherwise it was not, and in that case the girls, instead of passing from one house to the other through the doorway, would have to go round outside. Indeed counsel for the tenant has made no bones about it. He has said on her behalf that the tenant quite clearly had not troubled to fulfil a number of these covenants, such as, for example, that relating to the provision of meals in the kitchen for all these girls, and a joint sitting room for them, and so on. Having heard her evidence and that of her husband, the county court judge came to the conclusion that it could not be said that in effect these two houses were so united as to constitute one house or, at all events, as to make it impossible to refer to no 5 as a house. Well, the landlords called no evidence. They did not even call the valuation officer, who no doubt could have explained exactly the situation as he found it and what it was that caused him to assume that this was all one dwelling. They did not call any of these girls. I suppose that they could have given evidence. And so the matter had to be decided on the evidence of the tenant and her husband. On their evidence as it stood I confess I find it impossible to differ from Lord Denning MR. I am bound to recognise that, in the light of that evidence, if it was true and was accepted by the county court judge, then no 5 can properly be described as a house, and there was insufficient material here for the judge to make a finding that they were so united that no 5 did not have a separate identity.
For those reasons I agree with the order proposed by Lord Denning MR.
CAIRNS LJ. I agree with the judgment of Lord Denning MR and I would add only a few words of my own. For my part I feel no doubt, having heard the argument on both sides, that this appeal ought to be dismissed. The words that we have to construe are those at the beginning of s 2(1) of the Leasehold Reform Act 1967:
‘For purposes of this Part of this Act, “house” includes any building designed or adapted for living in and reasonably so called … ’
Clearly no 5 is a building designed or adapted for living in. Is it reasonably called a house? It was made clear by two of the judgments of this court in Lake v Bennett ([1970] 1 All ER 457 at 460, 461, [1970] 1 QB 663 at 672, 673) that it is not necessary to be able to say that the premises in question could only be described as a house, and that some other description would be inappropriate. The question is, can no 5 reasonably be called a house? I agree with Lord Denning MR as to the three matters that have to be taken into account in testing the answer, and I agree with him that by all the tests the conclusion emerges that this can reasonably be called a house.
Just in relation to one of these three tests I add a few words more. One of the factors relied on by counsel for the landlords as indicating, in his submission, that nos 5 and 6 together constituted a house was that there was a connecting door between them. I think that it is of importance to remember that that connecting door was not in connection with the use of any part of these premises by the tenant as a residence. It was for the purpose of her business of letting out rooms to paying guests from the ballet school. It is quite clear that her residence was wholly in no 5, and that the connecting door was for the purpose of enabling her to get through and do cleaning and housework by her own hands or by the hands of others in no 6. It seems to me that the degree of connection between no 5 and no 6 is far less than was the connection which we had to consider recently in Peck v Anicar Properties Ltd (Page 517, ante), where there was a shop which covered the ground floor of two houses separately occupied, and we held there that one house consisting of half the shop with the rooms above constituted a house for the purpose of the Act.
Page 524 of [1971] 1 All ER 520
Finally, I would say with regard to the argument presented to us by counsel for landlords, based on analogy with the Rent Act 1968, that it does not seem to me that one can usefully construe this present Act in the light of the Rent Act 1968, bearing in mind the different purpose of the two pieces of legislation and the different language used in them.
For these reasons, in addition to those given by Lord Denning MR, I agree that the appeal fails.
Appeal dismissed.
Solicitors: Frere, Cholmely & Co (for the landlords); Myers, Ebner & Deaner (for the tenant).
Rosalie Long Barrister.
The Banco
Owners of the motor vessel Monte Ulia v Owners of the ships Banco and others
[1971] 1 All ER 524
Categories: SHIPPING
Court: VACATION COURT, PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): LANE J
Hearing Date(s): 14 AUGUST 1970
COURT OF APPEAL, CIVIL DIVISION
LORD DENNING MR, MEGAW AND CAIRNS LJ
16, 17 NOVEMBER, 9 DECEMBER 1970
Admiralty – Jurisdiction – Action in rem – Arrest of ship – ‘That ship … or any other ship’ – Whether arrest of more than one ship lawful – Administration of Justice Act 1956, s 3(4)(b).
Admiralty – Practice – Writ in rem – Amendment – More than one ship named in writ on issue – Service of writ – Amendment by striking out names of ships not served – Administration of Justice Act 1956, s 3(4).
Statute – Construction – Convention – Reference to convention – Statute passed to enact matters agreed at prior convention – Whether convention can be referred to if not mentioned or incorporated in statute.
The plaintiffs’ vessel, the Monte Ulia, collided with a jetty, thereby occasioning considerable damage not only to the vessel but also to the jetty and the oil installations thereon. The plaintiffs claimed that the collision was caused by the negligent navigation or management of the defendants’ vessel, the Banco, and served a writ of summons and warrant of arrest on the Banco and six sister ships owned by the defendants. The defendants applied to set aside the service of the writ and warrants of arrest in respect of all the vessels except the Banco, maintaining that, on the true construction of s 3(4) a of the Administration of Justice Act 1956, under which the Admiralty jurisdiction might be invoked in an action in rem against a ship ‘or’ against ‘any other ship’ beneficially owned by the same person, the plaintiffs were not entitled to arrest more than one vessel belonging to the defendants.
Held – The plaintiffs were not entitled to arrest more than one of the defendants’ vessels because the word ‘or’ in s 3(4) must be construed strictly and not as meaning
Page 525 of [1971] 1 All ER 524
‘and/or’, and the phrase ‘any other ship’ must be construed as meaning ‘ship’ in the singular and not ‘ships’ in the plural (see p 533 b and e, p 537 c and p 540 g, post).
Dictum of Willmer J in The St Elefterio [1957] 2 All ER at 376, 377 applied.
Per Curiam. Since the Administration of Justice Act 1956 was passed to enact matters agreed at the International Convention relating to the Arrest of Sea-going Ships 1952b the court is entitled to look at the convention for the purpose of resolving ambiguities in the statute, even though the statute does not mention the convention and the statute does not exactly correspond with the convention in wording or in effect (see p 531 h to p 532 a, p 537 d f and g and p 540 d, post).
Per Lord Denning MR and Megaw LJ (Cairns LJ dissenting). Notwithstanding that a plaintiff is not entitled to arrest more than one ship belonging to a defendant, a plaintiff is entitled, as soon as a cause of action arises, to issue a writ in rem not only against the offending ship but against all the other ships which at that time are in the defendant’s ownership because the Admiralty jurisdiction in rem cannot be said to have been properly invoked until the writ is served. A writ so issued must be amended by striking out the names of all the other ships (per Megaw LJ) before it is served on the ship which he chooses to arrest or (per Lord Denning MR) once the writ has been so served (see p 533 j to p 534 b and p 538 e to g, post).
Notes
For Admiralty jurisdiction in action in rem, see Supplement to 1 Halsbury’s Laws (3rd Edn) paras 88, 125.
For the Administration of Justice Act 1956, s 3, see 1 Halsbury’s Statutes (3rd Edn) 26.
Cases referred to in judgment
Beldis, The [1936] P 51, [1935] All ER Rep 760, 106 LJP 22, 154 LT 680, 18 Asp MLC 598, 1 Digest (Repl) 121, 69.
Bold Buccleugh, The, Harmer v Bell (1852) 7 Moo PCC 267, [1843–60] All ER Rep 125, 19 LTOS 235, 13 ER 884, 42 Digest (Repl) 1083, 8956.
Castrique v Imrie (1870) LR 4 HL 414, [1861–73] All ER Rep 508, 39 LJCP 350, 23 LT 48, 21 Digest (Repl) 270, 465.
Dictator, The [1892] P 304, [1891–94] All ER Rep 360, 61 LJP 73, 67 LT 563, 7 Asp MLC 251, 1 Digest (Repl) 121, 68.
Diplock, Re, Wintle v Diplock [1941] 1 All ER 193, [1941] Ch 253, 110 LJCh 55, 164 LT 339; affd HL sub nom Chichester Diocesan Fund and Board of Finance (Incorporated) v Simpson [1944] 2 All ER 60, [1944] AC 341, 113 LJCh 225, 171 LT 141, 8 Digest (Repl) 395, 875.
Dupleix, The [1912] P 8, 81 LJP 9, 106 LT 347, 12 Asp MLC 122, 1 Digest (Repl) 197, 837.
Gemma, The [1899] P 285, [1895–99] All ER Rep 596, 68 LJP 110, 81 LT 379, 8 Asp MLC 585, 1 Digest (Repl) 264, 1658.
Heinrich Bjorn, The (1885) 10 PD 44, 54 LJP 33, 52 LT 560, 5 Asp MLC 391; affd HL (1886) 11 App Cas 270, 1 Digest (Repl) 120, 67.
Kirkness (Inspector of Taxes) v John Hudson & Co Ltd [1955] 2 All ER 349, [1955] AC 696, [1955] 2 WLR 1135, 44 Digest (Repl) 255, 801.
Morgan v Thomas (1882) 9 QBD 643, 51 LJQB 556, 47 LT 281, 48 Digest (Repl) 423, 3714.
Post Office v Estuary Radio Ltd [1967] 3 All ER 663, [1968] 2 QB 740, [1967] 1 WLR 1396, [1967] 2 Lloyd’s Rep 299, Digest Supp.
Queen of the South, The [1968] 1 All ER 1163, [1968] P 449, [1968] 2 WLR 973, [1968] 1 Lloyd’s Rep 182, Digest Supp.
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St Elefterio, The, Schwarz & Co (Grain) Ltd v St Elefterio, ex Arion (Owners) [1957] 2 All ER 374, [1957] P 179, [1957] 2 WLR 935, [1957] 1 Lloyd’s Rep 283, 1 Digest (Repl) 175, 607.
St Merriel, The, Smith’s Dock Co Ltd v M/V St Merriel (Owners) [1963] 1 All ER 537, [1963] P 247, [1963] 2 WLR 488, [1963] 1 Lloyd’s Rep 63, Digest (Cont Vol A) 4, 725a.
Salomon v Comrs of Customs and Excise [1966] 3 All ER 871, [1967] 2 QB 116, [1966] 3 WLR 1223, [1966] 2 Lloyd’s Rep 460, 1 Digest (Cont Vol B) 621, 77a.
Motion
This was a motion by the defendants, the owners of the ships, Banco, Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno, in an action against them by the plaintiffs, the owners of the motor vessel Monte Ulia, for damages due to the negligent navigation or management of the Banco, for an order that service of the writ of summons and warrants of arrest on the ships Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno be set aside and the warrants discharged on the grounds of want of jurisdiction and/or that the service of the writ and warrants were an abuse of the process of the court. The facts are set out in the judgment.
A L G Stewart-Richardson for the defendants.
K S Rokison and D W Steel for the plaintiffs.
14 August 1970. The following judgment was delivered.
LANE J. This is a motion to set aside a writ and discharge from arrest six vessels of the defendants to this action, the plaintiffs having arrested all seven of the defendants’ vessels. The ground of the application is that the arrest of the six vessels was wrongful, although it is conceded that the arrest of one vessel, the Banco, was lawful. It is further conceded that, had the Banco not been arrested, the arrest of any one other of the defendants’ vessels would have been equally lawful. The legality or otherwise of the arrest of the six vessels falls to be determined upon a proper construction of s 3(4) of the Administration of Justice Act 1956.
In brief, the relevant facts are these. The plaintiffs’ vessel, the Monte Ulia, collided with a jetty in the River Thames on 26 July 1970, thereby occasioning great damage to the jetty and to oil installations thereon, damage which, at this stage, is perhaps somewhat speculatively estimated at £9,000,000. The plaintiffs claim that the collision was caused by the negligent navigation or management of the defendants’ vessel, Banco.
As a matter of legal history, before 1840 what counsel for the plaintiffs described as ‘anticipatory execution’ could be had in the Admiralty jurisdiction against all property of an offending party and even against that party himself. Thereafter, the right to arrest was limited to what I will call the ‘offending vessel’ itself and none other: see The Beldis ([1936] P 51, [1935] All ER Rep 760).
In 1952 came an international conventionc which dealt (inter alia) with the arrest of ships. In 1956 the Administration of Justice Act, with which this case is concerned, was passed. Section 3(4) of that Act is in these terms:
‘In the case of any such claim as is mentioned in paragraphs (d) to (r) of subsection (1) of section one of this Act [which I may interpolate here includes a claim of the nature with which we are concerned], being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the Admiralty jurisdiction of the High Court and (where there is such jurisdiction) the Admiralty jurisdiction of the Liverpool Court of Passage … may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against—(a) that
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ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid.’
The question for decision is what additional rights that subsection gave. The defendants’ submission is that it gave jurisdiction only to arrest either the vessel concerned with the claim, that is to say, in this case, the Banco, or any one other vessel in the same ownership. The plaintiffs’ submission is that, in the subsection at the end of para (a), the word ‘or’ must be construed to mean ‘and/or’, and that in para (b), the word ‘ship’ must be construed to mean ‘ship or ships’.
I Pause to say that I regret that, as we are now in the afternoon of the last day on which I shall be sitting as a judge of the Vacation Court, it is necessary, or, at any rate, highly desirable, that I should give my judgment here and now, whereas it would have been preferable that there should have been a reserved judgment.
The point at issue is obviously of great importance. It has not previously been litigated, and authority offers little or no guidance, save as to general principles. The court is very grateful for the assistance given to it by counsel for both parties, whose arguments on each side were so cogent as to appear almost unanswerable.
Counsel for the defendants urges a simple, literal construction of the relevant subsection and put his arguments with great clarity, as I have already indicated. He instructed me on matters very useful, navigating, as I am, in unaccustomed waters. He submitted that I ought to hold that there is no ambiguity in the section, but that, if I find there to be such, I should look at the convention of 1952, and, finally, that, if I am in doubt, I should err towards the narrower construction, ie the construction which gives the least extension of jurisdiction. For, as he says, this is an important matter and clear words are needed to extend the jurisdiction. As authority for his submission that I should look at the convention, he relied on Salomon v Comrs of Customs and Excise, and read me certain passages from the judgments in that case, which show, if I may dare to summarise their effect in a few words, that, where Parliament has given effect to matters agreed at an international convention and has done so in ambiguous terms, then the convention itself should be looked at in order to interpret the English Act. Counsel for the plaintiffs submitted that the decision in Salomon’s case does not enable this court to look at the convention because here, as distinct from Salomon’s case, there is no attempt in the Administration of Justice Act 1956 to give an exact reproduction of what was agreed at the convention. Further, he took the point that what their Lordships said in Salomon’s case in the material passages was obiter and not binding on this court. It may have been so, but, if it is of assistance to this court, I shall very gladly look at and follow what their Lordships said.
There is a distinction to be drawn here between the convention concerned in Salomon’s case and the maritime convention of 1952, and also between the Acts which put into force in this country the matters agreed at those several conventions. It was, I suppose, essential in Salomon’s case that the English Act, if it were to give effect to the relevant convention at all, should follow precisely the wording agreed at the convention, for there it was a matter of the definition of a particular term, and the translation of a definition must be precise. Nevertheless, it seems to me, interpreting as best I can the spirit of the decision in Salomon’s case, if not its precise words, that as regards a statute, such as the Administration of Justice Act 1956, passed to enact matters agreed at a prior convention, it should be possible and is desirable for a court to look at the convention, even though such statute may have given effect to broader terms of agreement than those of a precise definition. I have not overlooked counsel for the plaintiffs’ point, that nowhere in the preamble to the 1956 Act, or elsewhere therein, is there found a reference to the 1952 convention. Neither have I overlooked his point that, in that convention, there was no agreement by the high contracting
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parties to put what then agreed into their own legislation. Nevertheless, if only as a matter of common sense, it seems to me that one ought to be able to look at the convention for any assistance it may give in interpreting s 3(4), if this is found to be ambiguous.
I am bound to say, reading the subsection, that I do not find it of such sparkling clarity that it can be interpreted without hesitation, and I am, therefore, glad to look, as I am invited to do, at the convention. The most important article, so far as affording assistance is concerned in this case, is art 3. Paragraph 1 thereof provides:
‘Subject to the provisions of paragraph 4 of this Article and Article 10, a claimant may arrest either [I stress that word] the particular ship in respect of which the maritime claim arose or any other ship which is owned by the person who was at the time that the maritime claim arose the owner of the particular ship.’
I need not read the rest of the article. Not only did counsel for the defendants invite me to look at the English wording of the text, but, without protest from counsel for the plaintiffs, he referred me also to the French text of the convention. I do not propose to read this as part of my judgment, but, with the assistance of the French dictionary with which I was provided, it seems to me that the French text supports the view that the subject of arrest is the offending ship or one other ship, but not more than one ship.
However, I must deal at some length with counsel for the plaintiffs’ submission whether the word ‘or’ at the end of para (a) of s 3(4) should be read in its simple meaning of ‘or’ or whether it should be read as ‘and/or’. He said that, in English legislation, as distinct from the drafting of other legal documents, one does not find the words ‘and/or’; that when Parliament means ‘and/or’, it says ‘or’. He pointed out that, in the very subsection with which we are concerned, the word ‘or’ must mean ‘and/or’ when, for example, it refers to a person who was the ‘owner or charterer of, or in possession or in control of, the ship’, for the same party might be the owner or charterer and in possession and in control of a ship; but counsel for the defendants’ answer to that is, I think, the right one, that there the subsection is saying that any one of those qualifications will suffice.
As whether the word ‘ship’ should be read as ‘ships’ or as ‘ship or ships’, counsel for the plaintiffs relies on s 1(1) of the Interpretation Act 1889, which provides, so far as is relevant to this decision:
‘In this Act and in every Act passed after the year one thousand eight hundred and fifty, whether before or after the commencement of this Act, unless the contrary intention appears … (b) words in the singular shall include the plural, and words in the plural shall include the singular.’
Counsel for the defendants says that this rule of interpretation cannot help the plaintiffs unless the word ‘or’ is construed to mean ‘and/or’. In short, he says that counsel for the plaintiffs must first get over the hurdle of ‘or’ meaning ‘and/or’ before the Interpretation Act 1889 can be of any assistance to him; or, put in another way, that the word ‘or’, properly interpreted according to the defendants’ contention, shows an intention that the singular word ‘ship’ should not include the plural.
Counsel for the plaintiffs further submits that the point raised in this application has in effect been decided by Brandon J in The Queen of the South. I do not propose to read that decision. There is a passage in the judgment ([1968] 1 All ER at 1168, [1968] P at 456) of Brandon J from which counsel for the plaintiffs adduces the argument that ‘ship’ there, or ‘boat’, as the word is, must mean ‘boats’, otherwise the decision would not have been what it was. I hope that he will forgive me if I have considerably truncated his arguments, but it
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is a comfort to reflect that my decision may be reviewed in a higher court, when no doubt those arguments will be better presented than I could reproduce them here.
But there are one or two general considerations to which he referred which I think that I should mention. The purpose of an action in rem, he said, is to obtain a remedy where the defendant is not within the jurisdiction and also to get security, and he drew attention to the fact that s 3(3) of the Act deals with actions where the claim is clearly concerned with the offending ship itself, whereas s 3(4) deals with claims which greatly exceed the value of the offending ship. He poses this question: how is a plaintiff to enforce the right given by s 3(4) where, for example, the defendant owns several vessels worth £10,000 each and one vessel worth £100,000? Is he to arrest one of the £10,000 vessels which happens to be in these waters, or is he to wait in the hope that the £100,000 vessel may come within these waters before a year is out? The answer, perhaps, is that this is not the only Act giving alternative remedies to a plaintiff and that Parliament in Acts other than this requires a plaintiff to make up his mind which alternative remedy he will adopt but does not permit him to have what I may call two bites at the cherry.
Finally, counsel for the plaintiffs took this technical point. The notice of motion asks for relief in respect of all the defendants’ vessels save the Banco, whereas, admittedly, the plaintiffs were entitled to proceed against the Banco or any other vessel. Why should the defendants succeed in saving from arrest all the other ships except the Banco when the plaintiffs need not have arrested the Banco at all? Here again, I think that counsel for the defendants had the answer when he pointed out that the notice of motion seeks further or other relief and that, had the plaintiffs said in effect: ‘We do not want the Banco; we much prefer, if we can only have one, another of your vessels’, in such case the defendants would have been entitled to pray that, instead of the Banco being the only vessel kept under arrest, relief might be granted in respect of the Banco and five of the other six ships.
Fortified by a reading of the convention, I hold that the relevant subsection means that the plaintiffs may arrest one ship of the defendants only, which may be the offending ship or, alternatively, any other ship in like ownership, and that to interpret the word ‘or’ to mean ‘and/or’ in this particular context would be to stretch the meaning of that simple word too far, albeit it undoubtedly bears the wider interpretation in other places in the same Act. Further, I hold that ‘any other ship’ means ‘ship’ in the singular and not in the plural. Had the intention of Parliament been otherwise, it seems to me that, as a matter of drafting, it would have been exceedingly simple to say so in some such words as those suggested by counsel for the defendants in his reply; eg ‘any ships which may be beneficially owned’.
Accordingly, in my judgment, the defendants succeed. The question now arises as to the form in which relief should be given, also bearing in mind that an appeal is likely. It seems to me—but I will not make this order until I have heard any submissions which counsel may wish to make—that my order should be that service of the writ of summons and warrant of arrest herein on the vessels Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno be set aside and the warrants discharged on the ground of want of jurisdiction.
Order accordingly
Jacqueline Metcalfe Barrister.
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Interlocutory appeal
This was an appeal by the plaintiffs, the owners of the motor vessel Monte Ulia, from the judgment of Lane J, given on 14 August 1970, whereby the defendants’ (the owners of the ships Banco, Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno) motion for an order that service of the writ of summons and warrant of arrest on the vessels Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno be set aside was granted. The facts are set out in the judgment of Lord Denning MR.
B C Sheen QC, K S Rokison and D W Steel for the plaintiffs.
J Franklin Willmer QC and A L G Stewart-Richardson for the defendants.
Cur adv vult
9 December 1970. The following judgments were delivered.
LORD DENNING MR. On 26 July 1970, a British motor-tanker, the Banco, was being navigated in the River Thames with the object of mooring at a jetty. She was off Shellhaven. About the same time a Spanish motor vessel, the Monte Ulia, was coming up the river inward bound. She had 163 passengers on board. The Banco was, it is said, so negligently navigated that the Monte Ulia was ‘put by’, ie she had to take emergency action to avoid the Banco. She succeeded in avoiding the Banco which went clear. But, in so doing, the Monte Ulia was forced out of course. She collided with a jetty, 4 Coryton Jetty, and ran aground. She was herself damaged. It cost £12,000 or more to repair her. But that is only a small item in the loss. There was, as it happened, a main oil pipeline running along the jetty. This was damaged. Crude oil escaped and caught fire. The jetty was destroyed. Small craft alongside it were damaged extensively. Much oil was washed on the north shore of the river and polluted it. All those who suffered have made claims against the Monte Ulia, basing their claims on the fact that it was she who hit the jetty and is prima facie liable. The Mobil Oil Co, who are the owners of the jetty, say it will cost £1 1/4 million to rebuild the jetty and its equipment, and that the extra loss involved could run into millions. The Port of London Authorities claim the cost of clearing up the oil pollution. Owners of small craft claim for their damage. And salvage tugs claim salvage. The plaintiffs, the owners of the Monte Ulia, resist these claims, saying it was not the fault of the Monte Ulia, but of the Banco.
The Banco is owned by the defendants, an English company called Beagle Shipping Ltd It also owns six other vessels—Petro, Shell Spirit I, Shell Spirit II, Toro, Ulco and Uno. These vessels all trade round the coast of the United Kingdom and only occasionally to foreign parts.
Very soon after the accident, on 4 August 1970, the plaintiffs brought an Admiralty action in rem. In it they claimed damages for the damage to the Monte Ulia herself, and indemnity or contribution in respect of the claims made against them by the oil company and others. The writ was headed: ‘Admiralty action in rem against: the Ships “Banco”, “Petro”, “Shell Spirit I”, “Shell Spirit 2”, “Toro”, “Ulco”, “Uno“. It described the plaintiffs as ‘The owners of the motor vessel “Monte Ulia”’; and the defendants as the owners of those seven ships, naming them again. At the same time the plaintiffs issued warrants of arrest for the same seven ships.
On 13 August 1970, the writ was served on the ship Banco. The original writ was placed on the outside superstructure of the wheelhouse, starboard side. Then it was taken off and a copy fixed in its place. Likewise the warrant of arrest. Similarly, on the same day in the same way, on four other vessels then in the port, namely the Uno, Shell Spirit I, Shell Spirit II and Petro. Immediately, on the same day, 13 August 1970, the defendants applied to set aside the service of the writ and warrants of arrest in respect of all the vessels save the Banco. They offered to put up bail in the value of the Banco, namely £135,000. On 14 August 1970, the judge (Lane J) granted the application. She held that only one vessel could be arrested. The plaintiffs appeal to this court, asking that they may arrest all of the fleet of seven vessels. The defendants have undertaken that, if they are wrong and the plaintiffs are entitled to arrest all seven ships, they will put up security to the value of the total fleet.
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This case requires us to enquire into the jurisdiction of the Court of Admiralty. Long years ago, in the seventeenth and eighteenth centuries, the ordinary mode of commencing a suit in Admiralty was by arrest, either of the person of the defendant or of his goods. Not only could the offending ship be arrested, but the other ships of the defendant could be arrested also, and any other goods that belonged to him, so long as they were within the jurisdiction. The object was to make the defendant put up bail or provide a fund for securing compliance with the judgment, if and when it was obtained against him: see Clerke’s Practice of the Court of Admiraltyc in 1743 quoted in The Dictator ([1892] P 304 at 311, [1891–94] All ER Rep 360 at 363) and the Selden Society’s Select Pleas in the Court of Admiraltyd. In this respect the Court of Admiralty in those days exercised a jurisdiction which obtained in foreign countries too, and still prevails in many of them today.
The court of common law were, however, jealous of the jurisdiction of the old Court of Admiralty and issued prohibitions against it. They succeeded in cutting down its jurisdiction a great deal. So much so that its jurisdiction in rem to arrest goods became limited to a jurisdiction to arrest the offending ship itself. The right to arrest was conterminous with the maritime lien. Where there was a maritime lien, the right to arrest the ship existed. Where there was no maritime lien, there was no right to arrest the ship. A maritime lien, of course, existed only in respect of the offending ship. It lay for such claims as salvage, wages and collision damages. The claimant had a right to arrest the offending ship for his claim, whenever he could get hold of her. Even if she had been sold to an innocent purchaser for value, still he could arrest her for any claim in respect of which he had a maritime lien: see The Bold Buccleugh, Harmer v Bell. Later on the right to arrest was extended beyond the extent of a maritime lien so as to cover necessaries: see The Heinrich Bjorn. But it only applied to arresting the ship itself for which the necessaries were supplied. It did not apply to any other ship. Finally, in 1935, this court held that the procedure in rem to arrest a ship only applies to the ship to which the cause of action relates. It does not apply to a ship or other property of the defendant unconnected with the cause of action: see The Beldis.
I ought to pause here to add a word so as to avoid confusion. If the defendant enters an appearance, the action in rem proceeds just as an action in personam. If judgment is entered against the defendant, it can be executed against any of his property within the jurisdiction, be it his other ships or any other goods. A writ of fieri facias, or other writ of execution, can be issued against his property, but only after judgment has been obtained: see The Dictator, The Gemma and The Dupleix. If no appearance is entered, however, the action remains, as it began, an action in rem only, operating only against the ship arrested. If judgment is entered in default of appearance, it can be enforced by sale of the ship, but not against the defendant personally: cf Castrique v Imrie ((1870) LR 4 HL 414 at 432, cf[1861–73] All ER Rep 508 at 510).
Such was the state of the law when Parliament enacted the Administration of Justice Act 1956. But, before I come to it, I would tell of the international conventione which preceded it. It is now fully established that when an Act of Parliament
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is passed so as to give effect to an international convention, we can look at the convention so as to help us to construe the Act: see Salomon v Comrs of Customs and Excise and Post Office v Estuary Radio Ltd; and this is so even though the Act of Parliament does not mention the convention. In 1952 there was an international conventionf held at Brussels. It was held because of the different rules of law of different countries about the arrest of sea-going ships. Some countries, like England, did not permit the arrest of any ship except the offending ship herself; whereas many continental countries permitted the arrest, not only of the offending ship, but also of any other ship belonging to the same owner. In the result a middle way was found. It was agreed that one ship might be arrested, but only one. It mighty either be the offending ship herself or any other ship belonging to the same owner; but not more. This was an advantage to plaintiffs in England because it often happened previously that, after a collision, the offending ship sank or did not come to these shores. So there was nothing to arrest. Under the convention the plaintiff could arrest any other ship belonging to the same owner whenever it happened to come to England.
I need not set out all the articles of the convention. I need only set out those which are particularly apposite:
Article 1(1) defines a Maritime Claim. It includes ‘damage caused by a ship either in collision or otherwise’. Then:
‘1(2) “Arrest” means the detention of a ship by judicial process to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgment.’
Article 3 provides:
‘(1) … a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship …
‘(2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.
‘(3) … if a ship has been arrested in any one of such jurisdictions, or bail or other security has been given in such jurisdiction … any subsequent arrest of the ship or of any ship in the same ownership by the same claimant for the same maritime claim shall be set aside, and the ship released … ’
That convention makes it clear that only one ship of the same owner may be arrested. It has been ratified by the United Kingdom, Belgium, France, Greece, Portugal, Spain, Egypt and some others. But not, apparently, by the United States, the Netherlands, Norway, Sweden, Japan and others. So it is not comprehensive. But, nevertheless, it does represent a considerable body of agreement. At any rate, Parliament in this country in 1956 did pass an Act to give effect to the convention. It is the statute which we have to construe. It is the Administration of Justice Act 1956. Section 3(3) states that, in any case in which there is a maritime lien on any ship for the amount claimed the Admiralty jurisdiction may be invoked by an action in rem against that ship.
Section 3(4) is the important one for our purpose. It provides, so far as material, that in the case of any claim (inter alia) for damage done by a ship, the Admiralty jurisdiction:
‘… may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against—(a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by
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that person; or (b) any other ship which, at the time the action is brought, is beneficially owned as aforesaid.’
The important word in that subsection is the word ‘or’. It is used to express an alternative as in the phrase ‘one or the other’. It means that the Admiralty jurisdiction in rem may be invoked either against the offending ship or against any other ship in the same ownership, but not against both. This is the natural meaning of the word ‘or’ in this context. It is the meaning which carries into effect the international convention. It is the meaning which on high authority we ought to give to it. In Morgan v Thomas ((1882) 9 QBD 643 at 645, 646) Sir George Jessel MR said:
‘You will find it said in some cases that “or” means “and”; but “or” never does mean “and”; unless there is a context which shews that it is used for “and” by mistake.’
So also in Re Diplock, Wintle v Diplock ([1941] 1 All ER 193 at 200, [1941] Ch 253 at 260), Sir Wilfrid Greene MR said: ‘The word “or” is prima facie, and in the absence of some restraining context, to be read as disjunctive … ’
Shortly after the Act was passed, Willmer J in The St Elefterio ([1957] 2 All ER 374 at 377, [1957] P 179 at 185), said that the purpose of the Act is to confer:
‘… the right to arrest either the ship in respect of which the cause of action is alleged to have arisen or any other ship in the same ownership.’
That is clearly right. There is no doubt about it. I would add that the word ‘ship’ in the phrase ‘any other ship’, means ‘ship’ and not ‘ships’. Although the Interpretation Act 1889 states that words in the singular include the plural, that does not apply when the contrary intention appears. The contrary intention does appear here. The jurisdiction may be invoked against either the offending ship or any other ship in the same ownership, but not more than one.
All this seems clear save for a point of practice which counsel for the plaintiffs raised before us. He said that, ever since the 1956 Act, the practice had been to issue a writ at once against all the ships owned by the defendant; and to serve it on the one ship considered the most worthwhile when it came within the jurisdiction. Counsel said that if under s 3(4) the jurisdiction in rem can only be invoked against one ship, it means that the action can only be brought against one ship, and the writ can only be issued against one ship; and that, once it is invoked against one ship, it cannot be invoked against any other ship. Counsel said that this would put the plaintiff in an intolerable difficulty; for he would have to wait until one of the ships came within the jurisdiction (the offending ship if she was still afloat, or a sister ship) and then issue a writ against her. If two sister ships came into the jurisdiction, one in London and one in Liverpool, he would not know which of them to name in the writ. If he issued a writ against a small ship, valued at say £10,000, the owner might decide not to enter an appearance; in which case the plaintiff would be limited to the sum realised by that ship on sale. In any case, he would have to issue his writ within the two years or extended period under the Maritime Conventions Act 1911.
I can see the force of this point, but I think that counsel for the defendants gave the right answer. When a plaintiff brings an action in rem, the jurisdiction is invoked not when the writ is issued, but when it is served on the ship and the warrant of arrest is executed. The reason is because it is an action in rem against the very thing itself, and does not take effect until the thing is arrested. This means that the practice is right. The plaintiff is entitled, as soon as his cause of action arises, to
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issue his writ in rem against the offending ship and all other ships which at that time, ie at the date of issue of the writ, belong to the same owner. That saves his time. Then he can wait until he finds the one ship which he thinks most suitable to arrest. Then he will serve her and execute a warrant of arrest against her. That having been done, he cannot go against the other ships and should strike them out of the writ. In my opinion, therefore, the judge was right in setting aside the service of the writ and warrant of arrest on all the vessels save the Banco. I would add, however, that, if the plaintiffs eventually get judgment against the defendants they will, of course, at that stage, be able to execute the judgment against any of the property of the defendants, including the other ships of their fleet, then belonging to them.
I would, therefore, dismiss the appeal.
MEGAW LJ. On 26 July 1970, the motor vessel Monte Ulia was in the Thames proceeding up river, when she collided with a jetty, 4 Coryton Jetty. The owners of the Monte Ulia, a Spanish company, who are the plaintiffs, assert that the collision was caused by the negligent navigation of the motor tanker Banco, owned by Beagle Shipping Ltd, an English company, who are the defendants. As a result of the collision, it is alleged that not only did the Monte Ulia sustain damage, the cost of repairing which is estimated at over £12,000, but also that very extensive, and expensive, damage was caused to a large number of persons, some or all of whom may make claims against the plaintiffs. For example, it is alleged that the oil company which owns the jetty may have a claim of over £1 million for repairs to the jetty and possibly also a larger claim for loss of revenue while the jetty is being repaired.
On 4 August 1970, the plaintiffs issued a writ in the Probate, Divorce and Admiralty Division. The writ is headed:
‘ADMIRALTY action in rem
against:
The Ships “BANCO”, “PETRO”, “SHELL SPIRIT I”
“SHELL SPIRIT 2”, “TORO”, “ULCO”, “UNO“.
THE OWNERS OF THE MOTOR VESSEL “MONTE ULIA”
Plaintiffs
AND
The Owners of THE SHIPS “BANCO”, “PETRO“.
“SHELL SPIRIT I”, “SHELL SPIRIT 2”, “TORO”,
“ULCO”, “UNO“.
Defendants’
The writ was endorsed with a claim to recover damages from the owners of the seven named ships, who as is asserted in the endorsement and as is admittedly true, ‘are or were at the material time the Owners … of the ship “BANCO”’. The claim is in respect of loss and expense sustained by reason of the collision with the jetty, alleged to have been caused whilst the Monte Ulia was taking emergency action necessitated by the negligent navigation of the Banco. The endorsement of the writ further claims an indemnity or contribution in respect of sums which the plaintiffs may be or become liable to pay to any third party, together with relief by way of a declaration.
The plaintiffs’ writ thus asserted a claim in rem, not merely against the vessel alleged to have been in fault, the Banco, but also against her six sister ships, ie the ships owned by the defendants. Having issued the writ on 4 August, the plaintiffs on 12 August caused the writ of summons to be served on the Banco and on the six sister ships, all of which were in United Kingdom waters; and the plaintiffs caused all seven ships to be arrested, warrants of arrest having been obtained in
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accordance with Admiralty procedure for the arrest of ships within the jurisdiction where a writ in rem has been issued.
On the following day, 13 August, the defendants issued a notice of motion asking that the service of the writ of summons and the warrants of arrest on the six sister ships be set aside and the warrants discharged:
‘… upon the grounds of want of jurisdiction and/or that the service of the said Writ and Warrants as aforesaid are [sic] an abuse of the process of the Court.’
The motion was supported by an affidavit, in which the defendants’ solicitors stated that, previous to the service of the writ and arrest, the defendants had offered to put up bail in the value of the Banco, namely £135,000, without prejudice to their right to apply later for a reduction of the amount to about £12,000, being the statutory limit of liability if limitation be permissible under the provisions of the Merchant Shipping Acts. The defendant were still willing, said the deponent, to put up that £135,000. The deponent asserted that the defendants were suffering most severe loss by their arrest of their vessels. He said that he had been advised that the Admiralty jurisdiction in rem can only be exercised against one vessel of a defendant.
On the hearing of the motion before Lane J, sitting as vacation judge, on 14 August, the issue was, simply, whether on the true construction of s 3(4) of the Administration of Justice Act 1956, the plaintiffs were limited to arresting one of the defendants’ seven ships, or, as the plaintiffs contended, they could lawfully arrest them all. The learned judge held that the plaintiffs were limited to arresting one of the defendants’ ships. Accordingly, she made an order setting aside the service of the writ on the six sister ships and discharging the warrants of arrest on those six ships, for want of jurisdiction, and directing that the six ships be released from arrest forthwith. From that order the plaintiffs appeal, Lane J having granted leave to appeal.
The history of actions in rem and the jurisdiction of the Admiralty Court with regard thereto up to 1936, was exhaustively considered by Sir Boyd Merriman P in The Beldis. By that judgment it was made clear that it was only the allegedly offending vessel which could be made the ‘res’ so as to give the Admiralty Court jurisdiction in an action in rem where an action in rem was permissible. Jurisdiction in rem could not be created by the arrest or seizure of any other vessel, whether or not it was a sister vessel, nor of any other property. Admiralty procedure could not lawfully be used for the arrest or seizure of any property other than the allegedly offending vessel.
So the law of England stood until certain provisions of the Administration of Justice Act 1956 came into force on 1 January 1957. The provision of that Act which is primarily relevant is s 3(4) which provides:
‘(4) In the case of any such claim as is mentioned in paragraphs (d) to (r) of subsection (1) of section one of this Act, being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, the Admiralty jurisdiction of the High Court and (where there is such jurisdiction) the Admiralty jurisdiction of the Liverpool Court of Passage or any county court may (whether the claim gives rise to a maritime lien on the ship or not) be invoked by an action in rem against—(a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid.’
There is no doubt but that Parliament thereby intended to extend, and did extend,
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the scope of the jurisdiction of the Admiralty Court in rem. The question in this appeal is: how far was the scope extended? Is it now permissible, in the cases covered by s 3(4), for the plaintiff to cause the arrest, as and when they are found within the jurisdiction, of all the vessels owned by the defendant? Or is he still limited, as formerly, to the arrest of one vessel only, but with the advantage, as compared with the law as it used to be, that the vessel to be arrested need not be the allegedly offending vessel?
The answer depends on the true construction of the words used in s 3(4). The plaintiffs say that the word ‘or’ between paras (a) and (b) at the end of the subsection means, as they put it, ‘and/or’; and that ‘any other ship’, at the beginning of para (b), is, by virtue of s 1(1) of the Interpretation Act 1889, to be read as meaning ‘any other ship or ships’. Hence a plaintiff taking advantage of s 3(4) may lawfully arrest as many vessels belonging to the defendant as he can from time to time find within the geographical area of the jurisdiction of the court. The defendants, on the other hand, say that the word ‘or’ means ‘or’; that the plaintiffs can invoke their action in rem against ‘that ship’ (ie the offending ship) as in para (a), or against ‘any other ship’ as in para (b); but not against both. The defendants further say that a contrary intention appears, which precludes the words ‘any other ship’ being interpreted as including the plural.
The plaintiffs say that, if the defendants’ construction had been intended, the word ‘either’ would have been inserted before para (a). They refer to other provisions of the Act in which the word ‘or’ has a conjunctive meaning. They say that this has the effect at least of making the subsection ambiguous. As to that submission, I would refer to three sentences in the speech of Lord Reid in Kirkness (Inspector of Taxes) v John Hudson & Co Ltd([1955] 2 All ER 349 at 366, [1955] AC 696 at 735, 736):
‘A provision is not ambiguous merely because it contains a word which in different contexts is capable of different meanings. It would be hard to find anywhere a sentence of any length which does not contain such a word. A provision is, in my judgment, ambiguous only if it contains a word or phrase which in that particular context is capable of having more than one meaning.’
I do not myself find any ambiguity in ‘or’ in this particular context. To may mind it expresses an alternative.
The main bulk of the plaintiffs’ argument was directed to stressing the difficulties in which plaintiffs, and their advisers, would be placed if the defendants’ construction were to be accepted. It was said that, if there was ambiguity, this consideration should be treated as a powerful factor in favour of the plaintiffs’ construction. An argument such as this would in some circumstances have considerable weight; but not, I think, in the present case. That is not merely because, as I think there is no ambiguity in the words used. It is also because the subsection on either construction results in a plaintiff being better off than he was before the Act. The fact that, on the plaintiffs’ construction, his betterment would be greater is hardly a legitimate argument for resolving a supposed ambiguity in favour of that construction.
The defendants assert that their construction is in accordance with the natural and ordinary meaning of the words used in their context. They, for their part, make submissions as to the possible hardship or injustice to defendants if the plaintiffs’ construction were right. The defendants rely on a dictum—I think it is obiter dictum, though counsel for the defendants asserted the contrary—of Willmer J in The St Elefterio ([1957] 2 All ER 374 at 376, 377, [1957] P 179 at 185, 186). The learned judge regarded s 3(4) as extending the jurisdiction only so as to permit of the arrest of a sister ship in substitution for the offending ship, and not as permitting of the arrest of more than one ship. The relevant passage in Willmer J’s
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judgment was quoted with approval by Hewson J in The St Merriel ([1963] 1 All ER 537 at 543, [1963] P 247 at 257), though again the actual decision in that case is not in point here.
Counsel for the plaintiffs agreed that, if the plaintiffs’ construction of s 3(4) were right, the desired effect could have been achieved more simply and briefly, by substituting for the whole of para (a) and (b), the words: ‘any ship or ships which at the time when the action is brought is or are beneficially owned as respects all the shares therein by that person.' I find it difficult to accept that, if Parliament had indeed intended to enact that which could have been so comparatively simply expressed, the lengthier, more complicated, and (if the plaintiffs were right as to the meaning) ambiguous, wording would have been used. I think the words used were used deliberately and advisedly to emphasise that paras (a) and (b) are alternatives. As I have said, I think that the meaning put forward by the defendants is right. It is the unambiguous meaning of s 3(4). The word ‘or’ expresses an alternative. ‘Any other ship’ does not include the plural.
If, contrary to that view, the wording of s 3(4) is ambiguous, then, for the reasons given by Diplock LJ in Salomon v Comrs of Customs and Excise ([1966] 3 All ER 871 at 875, 876, [1967] 2 QB 116 at 143, 144) and in Post Office v Estuary Radio Ltd ([1967] 3 All ER 663 at 682, [1968] 2 QB 740 at 757) it would be necessary to consider the provisions of the international Convention relating to the Arrest of Sea-going Shipsg, signed at Brussels on 10 May 1952. It is not disputed that, although Her Majesty’s government of the United Kingdom did not ratify that convention until 18 March 1959, the provisions of the Administration of Justice Act 1956, relating to the Admiralty jurisdiction were, at least to some extent, enacted in order to bring the law of this country into line with that convention, presumably in order to enable Her Majesty’s government to ratify that convention which it had signed.
Article 3(3) of the convention prohibits, for all relevant purposes, the arrest of more than one vessel by a plaintiff in respect of a maritime claim. If the plaintiffs’ construction of s 3(4) of the 1956 Act were correct, Parliament would in that respect not have given effect to, but would have directly contradicted, the international obligation which Her Majesty’s government accepted by ratifying the convention.
Counsel for the plaintiffs submitted that there were various respects in which the 1956 Act did not produce results entirely in accordance with the terms of the convention, and that therefore it should not be assumed that s 3(4) was intended to conform with the convention. In my view, such relatively minor discrepancies are inevitable in the translation of an international convention into domestic law and procedure. There is nothing in them which displaces the presumption that an ambiguity in s 3(4), it there be such, ought to be resolved by interpreting the provision as according with the international obligation undertaken by Her Majesty’s government. Hence if there were an ambiguity in s 3(4) as to the meaning of ‘or’, or as to whether ‘any other ship’ means ‘any other ship or ships’, or as to both these, I should have no hesitation in deciding that any such ambiguity must be resolved in the sense contended for by the defendants.
There remains one matter which was the subject of much learned and interesting argument. Since the 1956 Act, we are told, the practice in the Admiralty Court where the jurisdiction in rem under s 3(4) of the Act has been relevant, has been that a writ in rem may be, and not infrequently is, issued naming more than one vessel alleged to be owned by the defendant. In no case, however, until the present case in July 1970, has any plaintiff attempted to make use of such a multiple writ by proceeding to the arrest thereunder of more than one vessel. A plaintiff by issuing the writ in that form has, at least so it was hoped, had his tackle in order. He has been ready for any contingency. He does not have to wait in order to see which vessel belonging to the
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defendants will arrive in this country; and then, perhaps, in a hurry at the last minute, take out his writ naming that vessel. He does not, perhaps, feel subject to the same urgency to arrest the first vessel belonging to the defendant which happens to arrive within the jurisdiction. He may decide to hold his hand, hoping that a more valuable vessel, among those named in his writ, will arrive thereafter, giving him better security for his claim. When the plaintiff does decide to strike, he amends his writ by deleting the name of all the other vessels, and proceeds with service on, and the obtaining and execution of a warrant of arrest of, the chosen vessel, the name of which has now, by amendment, become the only name in the writ.
For the plaintiffs it was argued that, if the defendants’ construction of s 3(4) of the 1956 Act was right, this practice would necessarily be shown to be wrong, and it would have to cease. The plaintiffs suggested that that was one of the reasons of convenience why any ambiguity in s 3(4) should be resolved in their favour. The plaintiffs’ ingenious argument that the existing practice would be wrong if the defendants’ construction were right is founded on the use in s 3(4) of the 1956 Act (as incidentally, in s 3(1), (2), (3), and (5)) of the phrase ‘the Admiralty jurisdiction may be invoked’. It is said that the jurisdiction is ‘invoked’ when the writ in rem is issued. Hence, if the defendants’ construction of s 3(4) be correct, it would be contrary to the terms of the statute if a writ were to be issued naming more than one vessel.
If the premise is right, I think that the conclusion must follow. That, however, would not lead me to the view that the plaintiffs’ construction, in defiance of the terms of the convention, is right. It would lead me to the view that the practice would have to be abandoned, and that plaintiffs could not be allowed to issue writs in rem, under s 3(4), naming more than one vessel. However, I do not think that the premise is right. I do not accept that the Admiralty jurisdiction is invoked by an action in rem against a vessel merely by the issue of a writ which contains, inter alia, the name of that ship. I agree with counsel for the defendants that, for the purposes of this subsection, the jurisdiction is not invoked merely by the issue of the writ. That may be the start of the invocation, but the invocation is not complete until the writ is served, or, it may be, deemed to have been served, as a result of the entry of appearance by the defendant before service is effected. Moreover, it is to be observed that s 3(4) states: ‘the Admiralty jurisdiction … may … be invoked by an action in rem against that ship … ’. In my view, whatever might be the technicalities otherwise, the jurisdiction cannot properly be said to be invoked ‘against that ship’ (or, equally, of course, ‘against … any other ship’) merely because a writ has been issued which names that ship amongst others, but which cannot lawfully be served upon that ship until something further is done to the writ itself, namely its amendment. If the jurisdiction can be said to have been invoked at all, it is not ‘against that ship’. I do not think that there is anything in this procedural technicality which can, or should, affect the decision of the question before the court.
It appeared to me at one stage that this practice of naming a multiplicity of ships in a writ in rem when only one ship can lawfully be subjected to the jurisdiction in rem might be subject to criticism as being an abuse of the process of the court. In other circumstances that might be so; but in these circumstances I think its practical utility saves it from that condemnation.
I agree that this appeal should be dismissed.
CAIRNS LJ. The issue in this appeal is whether s 3(4) of the Administration of Justice Act 1956 gives a plaintiff the right to bring an action in rem against all the ships owned by the owner of a ship alleged to have done damage (‘the offending ship’) or whether the plaintiff can proceed only against the offending ship or one other ship so owned.
The relevant words of the section are:
‘… the Admiralty jurisdiction of the High Court … may (whether the claim
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gives rise to a maritime lien on the ship or not) be invoked by an action in rem against—(a) that ship, if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid.’
Read literally, these words appear to give the right to proceed against one ship only, ie the offending ship or one other in the same ownership.
Reasons advanced for giving the subsection the wider meaning contended for by the plaintiffs may be summarised as follows:
1. Under s 1(1)(b) of the Interpretation Act 1889, unless a contrary intention appears, words in the singular include the plural. So ‘ship’ in s 3(4)(b) of the 1956 Act should be read as ‘ship or ships’.
2. The word ‘or’ often has to be construed as ‘and/or’. See a number of phrases in the 1956 Act, eg in s 1(1)(a) ‘any claim to the possession or ownership of a ship’ would obviously be interpreted to mean ‘any claim to the possession or ownership or both’.
3. If ‘ship’ in s 3(4)(b) is to be read as ‘ship or ships’ then the word ‘or’ which joins paras (a) and (b) should be read as ‘and/or’ because there could be no reason for confining the plaintiff to a single ship if he elects to sue the offending ship, while allowing him the alternative of suing all the rest of the owner’s fleet.
4. If the plaintiff can only proceed against one of the defendants’ ships he may have a dilemma. A small ship of the defendants’ fleet may reach British waters; if he proceeds against it he may lose the right to proceed against a much more valuable ship which may arrive later.
5. If, after one small ship has been proceeded against, the owners enter no appearance and the plaintiff gets judgment in default of appearance against that ship he will have no right to a judgment in personam against the owners.
6. There has been a practice, ever since 1956, of allowing a plaintiff to join all the ships in a fleet in one action (although hitherto no plaintiff has sought to serve and arrest more than one). The practice is a convenient one, enabling the plaintiff to proceed expeditiously with service and arrest as soon as one of the ships arrives at proceed expeditiously with service and arrest as soon as one of the ships arrives at a British port. But unless all the ships can be joined in one writ this practice is wrong because the jurisdiction of the court is invoked when the writ is issued.
7. It is reasonable that a plaintiff should be able to proceed against all the ships in a fleet and to serve and arrest them from time to time when they arrive in British waters. In practice the ships will be released on bail. If bail in excess of the plaintiffs’ damages is exacted, or if he fails altogether in the action, the cost of providing the excessive bail will be recoverable against him.
8. There is a further protection in that if the defendant is entitled to limit liability, bail can be reduced to the amount of his limitation (Merchant Shipping (Liability of Shipowners and Others) Act 1958, s 5).
9. Although the 1956 Act was admittedly passed as a result of the International Convention relating to the Arrest of Sea-going Ships 1952 h, and although that convention is so worded as only to provide for the arrest of one ship as an alternative to the offending ship, the convention does not assist the construction of the Act because: (a) the Act does not refer to the convention; (b) the convention is dealing with arrests, not with joinder in the action; (c) the date at which common ownership is tested is the date of arrest in the convention, but is the date on which the action is brought in the Act.
10. Where, as here, several different interests are affected by the occurrence, each separate claimant could proceed against a different ship. It may even be that if the present plaintiffs were made defendants in several actions they could claim contributions against different ships. By such means all the fleet might be arrested, so it cannot be said that the right to arrest them all in one action would be oppressive.
Now the ultimate issue is simply one of construction of the subsection and questions
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of convenience can only arise if the words are ambiguous and if one can say that one construction is so convenient and the other construction so inconvenient that Parliament must have intended the former and not the latter. It is clear enough that the construction contended for by the plaintiffs would be convenient for plaintiffs generally but it is equally clear that it would be inconvenient for defendants generally. While there may be some cases in which the whole fleet might be arrested without the assistance of the wider construction, there will be many more cases in which it cannot, and no shipowner can view with relish the idea of having to arrange his affairs (if having regard to his chartering commitments he can so arrange them) to avoid if possible his ships entering British waters and becoming liable to arrest. True, he will usually be able to arrange bail, but if he is a foreign shipowner with a poor financial status this may be impossible or highly expensive for him. It would be convenient for any plaintiff in any division of the court to be able to get, on issue of his writ, security for payment of the judgment which he hopes to obtain. But it is only in Admiralty actions that plaintiffs have this privilege. it was narrowly conferred up to 1956. A most valuable additional privilege was conferred by the 1956 Act even on the narrower construction (because the offending vessel may have been lost or seriously damaged or may be a smaller vessel than some other in the fleet, or may never enter British waters) and I should not be inclined to extend the privilege further on an ambiguity.
I think the convention can be looked at to assist construction. True, the Act does not exactly correspond with the convention in wording or in effect, but I think it must have been intended to achieve a broadly similar result. The difference may be due to differences of procedure between this country and others; it may be that in some countries proceedings are initiated by arrest instead of by writ.
The practice which has been adopted in the registry since the 1956 Act was passed may have much to recommend it. Counsel for the defendants suggested that it might still be used, on the narrower construction of the subsection, on the basis that the jurisdiction of the court is only invoked on service. I find great difficulty in accepting this argument, although it has found favour with Lord Denning MR. I think any litigant who issues a writ is thereby invoking the jurisdiction. But if this is so the practice that has prevailed cannot in any view be justified by the Act. Either the plaintiff is entitled to name only one ship in his writ or else he is entitled to name several and to serve and arrest several.
When I approach the task of construction I am by no means satisfied that the wording is ambiguous at all. I do not think one can start by applying the Interpretation Act 1889 to the word ‘ship’ and then go on to consider the word ‘or’. In looking to see whether a contrary intention appears one must look at the whole subsection. Looking at it as a whole the first impression made on my mind is that it provides alternatives—the offending ship or one other, so displacing the rule that the singular includes the plural. In support of this construction I add (1) that if the wider construction had been intended it could have been more simply expressed by omitting paras (a) and (b) after ‘against’ and simply saying ‘any ship or ships beneficially owned at the time the action is brought by the owner of the ship in connection with which the claim arose’; (2) alternatively, if the wider construction had been intended ‘and’ would be a more appropriate conjunction than ‘or’; (3) if it had been intended to give rights extending beyond those provided by the convention, one would have expected very clear language to be used to emphasise the difference.
For these reasons I am of opinion that Lane J came to a correct conclusion and I would dismiss the appeal.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Ince & Co (for the plaintiffs); Hill, Dickinson & Co (for the defendants).
Rosalie Long Barrister.
Bank für Gemeinwirtschaft v City of London Garages Ltd and others
[1971] 1 All ER 541
Categories: CIVIL PROCEDURE: BANKING AND FINANCE
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): DAVIES, PHILLIMORE AND CAIRNS LJJ
Hearing Date(s): 11, 12, 13, 19 NOVEMBER 1970
Practice – Summary judgment – Leave to defend – Bill of exchange – Action on bill of exchange by holder in due course – Defence of fraud affecting bill set up – Clear evidence of value given in good faith and no ground shown on which that evidence could be challenged – Defendant not entitled to leave to defend where such evidence but only if real issue raised whether bill was taken in good faith and for value – RSC Ord 14, r 3(1).
Bill of exchange – Illegality – Common illegal intention of earlier parties to bill – Holder in due course unaffected.
Practice – Summary judgment – Leave to defend – Some other reason for a trial – Bill of exchange – Action on bill of exchange by holder in due course – Defence of fraud and illegality raised but no reasonable defence disclosed – RSC Ord 14, r 3(1).
Where, on an application for summary judgment under RSC Ord 14 in an action on a bill of exchange by a holder in due course, the defendant sets up the defence of fraud affecting the bill, it does not follow that leave to defend must be given. The defendant is not entitled to leave to defend if the plaintiff can establish by clear and unchallenged evidence that the bill was taken in good faith and for value, for then the defendant’s allegation of fraud does not constitute material which would afford a defence. If, however, on the RSC Ord 14 proceedings there is a real issue whether the bills were taken in good faith and for value that issue cannot be resolved at that stage and leave to defend must be given (see p 545 b c and e, p 549 d, and p 550 a, post).
Hall v Featherstone (1858) 3 H & N 284, Millard v Baddeley (1884) Bitt Rep in Ch 125, Tatam v Haslar (1889) 23 QBD 345, Powszechny Bank Zwiazkowy W Polsce v Paros [1932] 2 KB 353 considered.
Where the intention of the earlier parties to a bill of exchange is to achieve an illegal purpose this will not affect a subsequent holder in due course who takes the bill in good faith and for value (see p 548 a, p 549 f and p 550 g, post).
Observations on the giving of leave to defend under RSC Ord 14, r 3(1) a, whereby even if there is no issue to be tried the court may give leave to defend for some other reason (see p 548 c and p 549 g, post).
Per Cairns and Phillimore LJJ. It is of great importance that the right of a holder in due course to obtain judgment as speedily as possible for what is due to him under a negotiable instrument should be maintained (see p 548 e and p 550 h, post).
Notes
For the means by which a defendant may resist an application for summary judgment under RSC Ord 14, see 22 Halsbury’s Laws (3rd Edn) 761, para 1623.
For applications for summary judgment on a bill of exchange, see 3 Halsbury’s Laws (3rd Edn) 220, para 393, and for cases on the subject, see 6 Digest (Repl) 441–445, 3098–3121.
Cases referred to in judgments
Alexander v Rayson [1936] 1 KB 169, [1935] All ER Rep 185, 105 LJKB 148, 154 LT 205, 30 Digest (Repl) 434, 772.
Page 542 of [1971] 1 All ER 541
Archer v Bamford (1822) 3 Stark 175, 6 Digest (Repl) 158, 1115.
Campbell v Fleming (1834) 1 Ad & El 40, 3 LJKB 136, 110 ER 1122, 39 Digest (Repl) 831, 2926.
Edwards v Davis (1888) 4 TLR 385, 6 Digest (Repl) 445, 3121.
Fuller v Alexander Brothers (1882) 47 LT 443, 52 LJQB 103, 6 Digest (Repl) 444, 3116.
Global Bank Girling KG v Houry (4 November 1970) unreported.
Hall v Featherstone (1858) 3 H & N 284, 27 LJ Ex 308, 13 LTOS 119, 157 ER 478, 6 Digest (Repl) 167, 1161.
Hop and Malt Exchange and Warehouse Co, Re, ex parte Briggs (1866) LR 1 Eq 483, 35 LJCh 320, 14 LT 39, 55 ER 900, 9 Digest (Repl) 94, 423.
Miles v Bull [1968] 3 All ER 632, [1969] 1 QB 258, [1968] 3 WLR 1090, Digest Supp.
Millard v Baddeley (1884) Bitt Rep in Ch 125, 6 Digest (Repl) 443, 3112.
Powszechny Bank Zwiazkowy W Polsce v Paros [1932] 2 KB 353, 101 JLKB 671, 147 LT 377, 6 Digest (Repl) 444, 3117.
Tatam v Haslar (1889) 23 QBD 345, 58 LJQB 432, 6 Digest (Repl) 166, 1154.
Wallingford v Mutual Society (1880) 5 App Cas 685, 50 LJQB 49, 43 LT 258, 7 Digest (Repl) 226, 632.
Cases also cited
Brown, Shipley & Co Ltd v Alicia Hosiery Ltd [1966] 1 Lloyd’s Rep 668.
Lloyd v Howard (1850) 15 QB 995.
Senanayate v Cheng [1965] 3 All ER 296 [1966] AC 63.
Sharpley v Louth & East Coast Ry Co [1876] 2 Ch D 663.
Interlocutory appeal
City of London Garages Ltd, National Sales Corpn Ltd, and Tobias Wolf Wexler, the first, second and third defendants to an action by Bank für Gemeinwirtschaft on ten bills of exchange, appealed against summary judgment on nine of those bills given against them by Mocatta J, in chambers, under RSC Ord 14 on 23 July 1970. The facts are set out in the judgment of Cairns LJ.
B Finlay QC and L Joseph for the first, second and third defendants.
R A MacCrindle QC and R C Southwell for the plaintiffs.
Cur adv vult
19 November 1970. The following judgments were delivered.
CAIRNS LJ read the first judgment at the invitation of Davies LJ: This is an appeal by the defendants from part of an order made by Mocatta J in chambers in a case in the commercial list. By that order, made on an application under RSC Ord 14, he directed that judgment should be entered for the plaintiffs for a large sum of money against three of the four defendants in the action. Those defendants now appeal and say that they should have unconditional leave to defend.
The action is on bills exchange. The plaintiffs are a German bank and claim as holders of ten bills, having received them for collection from a German company called Internationale Genossenschaftsbank Aktiengesellschaft (whom I shall call Ingeba) who the plaintiffs say were holders in due course of the bills. Each bill was drawn in London on 12 December 1969 by the second defendants, National Sales Corpn Ltd, on the first defendants, City of London Garages Ltd, in the sum of 250,000 deutschmarks, payable on 12 June 1970. Each bill was accepted by the first defendants payable at L Behrens & Sohne (hereinafter called Behrens) at an address in Hamburg. Each bill was endorsed by each of the first two defendants, and by the third defendant, Mr Wexler, and by a Mr Patel, purporting to sign on behalf of the fourth defendants, Central Bank of India Ltd I shall refer to the four defendants as ‘National’, ‘City’, ‘Wexler’ and ‘CBI’. Wexler is a director of City and National.
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The bills were all duly presented for payment and were dishonoured, and notice of dishonour was duly given.
On the RSC Ord 14 proceedings the defences raised by City, National and Wexler were that the drawing, acceptance and negotiation of the bills was affected by fraud, and that the transactions under which Ingeba became holders of the bills were tainted with illegality under the provisions of the Exchange Control Act 1947. CBI contended that Mr Patel (who had been their London manager) was not authorised to bind them by his sole signature to an endorsement. Mocatta J gave leave to CBI to defend, and gave leave to the other three defendants to defend as to one bill, but directed that judgment by entered against those three on the other nine bills for the amounts of the bills, with interest and expenses, a total of over £250,000. Those three defendants now appeal against that judgment.
The affidavit on which the first three defendants sought leave to defend was made by Wexler. In it he deposed that in May 1965 he was introduced to Mr Patel and arranged with him for the opening of various accounts with CBI and for credit facilities for himself and his companies on those accounts. Mr Patel appeared to have full authority to act for CBI. Wexler wanted to have large funds available so that at come convenient time he could purchase a public company or a property portfolio, and it was arranged that this should be achieved through the medium of bills of exchange, Bills were drawn by National, accepted by City, endorsed by CBI and discounted through bill brokers in London, Mabey & Gill. Between August 1967 and May 1969, this was done on about ten occasions. The proceeds were paid into accounts with CBI. When bills matured Wexler relied on Mr Patel to make interaccount transfers so that City could meet them. For time to time Mr Patel brought Wexler fresh bills for signature. He always assured Wexler that funds remained available in the accounts. From time to time a possible purchase was considered, but Mr Patel always eventually turned it down. From the middle of 1968 Wexler could not get Mr Patel to produce bank statements, and it was not until May 1970 that he obtained statements which showed many unauthorised withdrawals and large deficiencies. Meanwhile, in December 1968 it became difficult to discount in London bills endorsed by CBI, so Mr Patel arranged on behalf of Wexler and his companies for future bills to be discounted through a German bank, Bank Alexander Levy, which later merged with Behrens. The first set of bills so dealt with was a set of ten, each for 250,000 deutschmarks, dated 16 December 1968, due on 16 June 1969. Wexler always acted on the directions and advice of Mr Patel, who frequently said that he had arranged with one Di Racca, who was associated with Behrens, to revolve bills so that funds could be kept available. When the December 1968 bills matured they were replaced by a second set maturing in December 1969, and those in turn were replaced by a third set, the bills sued on. On 9 May 1969 there was an unauthorised debit to the account of National with CBI of nearly £250,000 and Wexler’s submission is that the issue of the bills dated June and December 1969 was intended by Mr Patel to conceal this false debit (presumably arising from Mr Patel’s defalcations) and accordingly was effected by fraud on Mr Patel’s part. Further, Wexler says that there appears to have been no discounting charge when replacement bills were taken up by Behrens or Di Racca, and he invites the court to infer from this and from other matters that Behrens and Di Racca were cognisant of the irregularity in the bills. It was in April 1970 that Wexler’s suspicions were first aroused, and conversations which he had with Mr Patel and Di Racca in that month tended to confirm that Behrens knew, or ought to have known, of the irregularities. I interpose here that in the course of the hearing of the appeal evidence was by leave of the court introduced with a view to showing some interlocking of interests between Behrens and Ingeba. I do not think that this amounted to anything that would have a bearing on our decision. Mr Patel apparently left for South America in May 1970, and he has since returned to this country and now awaits committal for trial. It should be made clear that nothing said in this judgment constitutes in any
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way a finding that Mr Patel has been guilty of any of the conduct of which Wexler accused him. I am merely setting out what Wexler alleges, which may or may not be true. The contention that the export and negotiation of the bills was illegal is briefly dealt with in Wexler’s affidavit. He says that, to the best of his knowledge, no Treasury permission was ever obtained for such export, as required by s 22 of the Exchange Control Act 1947.
To this affidavit Mr Wellings, a representative of the plaintiffs’ solicitors, replied. He said, on information and belief, that the business was dealt with on behalf of Ingeba by Herr Mathias, their executive director. It was introduced by Di Racca in December 1968, who said that the purpose of drawing and discounting the bills was to obtain further funds to enable Wexler’s companies to pay import deposits and that CBI would back the bills. Herr Mathias obtained satisfactory reports on Wexler and his companies, and he was satisfied with the status of CBI. The first set of bills was discounted at 7 per cent per annum, the second set at 7 per cent per annum and the third at 9 per cent annum, Herr Mathias being satisfied on each occasion that the endorsement was guaranteed by CBI. Such endorsement or guarantee was always signed by Mr Patel alone, but Herr Mathias had no cause to question his authority; he had confirmed his signature by comparison with a list issued by CBI which gave no indication that Mr Patel was not authorised to sign alone on behalf of CBI. On each occasion it was only nine of the ten bills in the set that Ingeba were asked to discount. The tenth bill of the final set was not endorsed to them until 5 May 1970, and as leave to defend has been given in respect of this one, I need say no more about it. The bills were endorsed by Ingeba to the plaintiffs for collection. Ingeba and the plaintiffs disclaim all knowledge of the dealings between Wexler and Mr Patel described in Wexler’s affidavit. Mr Wellings’s affidavit also deals briefly with the illegality issue. Supporting documents were exhibited to the affidavit.
Counsel’s first contention on behalf of the defendants was founded on s 30 of the Bills of Exchange Act 1882 which provides:
‘(1) Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value.
‘(2) Every holder of a bill is prima facie deemed to be a holder in due course; but if in an action on a bill it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bills is affected with fraud, duress, or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill.’
The first question to be considered is whether the drawing, acceptance or negotiation of the bills sued on was affected by fraud. The main contention of counsel for the defendants is that Mr Patel’s purpose in getting the bills issued, accepted and discounted was to conceal his defalcations, and that this fraudulent purpose affected all these transactions on the bills. The plaintiffs’ answer is that nobody was defrauded in connection with these bills. The defalcations had taken place before they were issued. Despite the defalcations, CBI remained liable to City and National for money credited to their accounts. Those companies got by the bills exactly what they bargained for, postponement of the time when they became liable to repay to the holders the amount advanced on the first set of bills. On this issue I accept the defendants’ contention. If nobody else was being defrauded, CBI was, because if renewal bills had not been issued a claim would probably have been made on CBI on the earlier set and Mr Patel’s misbehaviour would have come to light, and they might then have had a better chance of recovering what he had taken away then they had six months later. If Mr Patel’s intention in getting the bills issued, accepted and endorsed was fraudulent, as I think it was, then this was a fraud affecting the bills. Further, I think there was fraud on Mr Patel’s part in the negotiation of the
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bills because he misrepresented his authority to endorse for CBI. This being so, it is strictly unnecessary to consider whether there was fraud at some later stage, but it is fair to Behrens and Di Racca to say that I should not be prepared to say that a prima facie case of fraud was made out against them by the rather vague allegations affecting them in Wexler’s affidavit.
It is clear that if fraud is proved the holders have the onus of proving that they, or the previous holders who endorsed to them, took the bills in good faith and for value. Since in RSC Ord 14 proceedings the defendant cannot be required to establish his defence (it being sufficient for him to show that he has some grounds which would constitute a defence if what he alleges were proved at the trial) it must follow that in an action on a bill of exchange he is entitled to leave to defend if he sets up a case of fraud affecting the bill, unless the plaintiff in his turn can establish that the bill was taken in good faith and for value. Counsel for the defendants goes further and says that once a case of fraud is set up leave to defend must be given, the plaintiff’s possible answer to it being something which he cannot successfully allege under RSC Ord 14, but must establish at the trial. This proposition is based on a statement in the Supreme Court Annual Practice 1970 b, under the heading ‘Bill of Exchange’:
‘“Where there is fraud in the inception of a bill there is no longer a presumption that value has been given.” When the defence is set up that the bill was obtained by fraud, and the defendant desires to have the fact that the value was given by the plaintiff strictly proved, there is no power on a summons under Ord 14 to test the story of either party. Leave to defend must be given.’
This seems to me a surprising proposition. I readily accept that if on RSC 14 proceedings there is a real issue whether the bills were taken in good faith and for value that issue cannot be resolved at that stage and leave to defend must be given. But if there is clear evidence of value given in good faith, and no ground shown on which that evidence can be challenged, then the defendant’s allegation of fraud does not constitute material which would afford a defence.
I do not think the cases cited in the Supreme Court Practice 1970, or the other cases to which counsel for the defendants drew our attention, support the wide proposition for which he contended. Tatam v Haslar and Hall v Featherstone were both cases tried by jury, and it was held that if there was evidence of fraud or illegality the issue of whether value was given in good faith must be left to the jury, and they must be directed that the onus is on the plaintiff. This is plainly right, but does not assist in deciding what course ought to be taken on an RSC Ord 14 application if it is then firmly established that value was given in good faith. In Millard v Baddeley ((1884) Bitt Rep in Ch 125) there had been a prolonged trial on the RSC Ord 14 application of the issue of good faith and Field J was obviously right in holding that proceedings for summary judgment were not the appropriate occasion for such an investigation of the facts. In Powszechny Bank Zwiazkowy W Polsce v Paros ([1932] 2 KB 353 at 358, 359) Scrutton LJ said:
‘In Edwards v Davis the Court were of opinion that the defendant’s affidavit disclosed no defence. From those days to the present time it has been the continued practice not to accept the mere statement on affidavit of the plaintiff that he gave value, where he defendant shows that there was fraud in the negotiation of the bill. In the present case I think there is a prima facie case of fraud shown on the defendant’s affidavit. The mere statement in the plaintiffs’
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affidavit that they took the note in good faith and for value is not sufficient to decide that issue in their favour. In my opinion when a defendant presents a prima facie case of fraud in the plaintiff, the court ought to act on that and give him leave to defend without imposing the condition that he should pay money into court.’
The important word in that passage is the word ‘mere’. The plaintiff cannot deprive the defendant of the right to defend by the bad assertion that value was given in good faith. It is a very different matter if the circumstances in which he received the bills are fully set out and remain uncontested. In the last sentence that I read from the judgment of Scrutton LJ he referred to ‘fraud in the plaintiff’ but in this case no prima facie case of fraud in the plaintiffs is shown. Greer LJ said in the same case ([1932] 2 KB at 359):
‘It has long been the rule that in proceedings under Order XIV. what the Court, whether this Court of the King’s Bench Division, has to ascertain is whether there is a triable issue. If there is, no matter how strongly the Court may anticipate that it will be decided in the plaintiff’s favour, it must order a trial.’
Fuller v Alexander Brothers was an earlier case where there was a mere statement of the plaintiff that he had given value in good faith and leave to defend was given.
The real question in the instant case seems to me to be whether the account given by Mr Wellings in his affidavit, standing as it does uncontradicted and supported by contemporaneous documents, can be said to establish good faith and the giving of value with such a degree of probability that if the case went to trial the defendants’ defence of fraud would have no real chance of success. It was on that basis that Donaldson J gave summary judgment in the recent case of Global Bank Girling K G v Houry (heard in chambers and not reported, but we were supplied with a short note of his judgment). I am glad to have his support for the view that I have taken.
If this case went to trial, is there any real prospect that Herr Mathias would not give evidence in accordance with what Mr Wellings has attributed to him, or that he would be so shaken in cross-examination that his evidence would not be believed? I start with this. Ingeba certainly discounted the first set of bills and the proceeds were paid to CBI to the credit of National. They also discounted the second and third sets, and on each occasion value was given by refraining from presenting the maturing bills for payment. Is there any reason to doubt the good faith of Ingeba? They had nothing to gain by renewing the bills except that they were thereby earning discounting charges at 7 per cent or 9 per cent, by no means an exceptionally high rate of interest at the time. Can it be supposed that they had any suspicion of any irregularity in the bills, of any misbehaviour on Mr Patel’s part, or of his lack of authority to bind CBI by his sole signature? In the absence of any evidence that they had any such suspicion, and while recognising that the onus is on the plaintiffs to establish their good faith, I find it almost impossible to suppose that they would have entered into the transactions if any such suspicion had crossed their minds. I therefore see no possible reason to doubt Herr Mathias’s account of how he dealt with the business for Ingeba, and reach the conclusion that there was no triable issue as to Ingeba’s good faith and that this disposes of the defence of fraud.
This makes it unnecessary for me to deal at length with a point raised by the plaintiffs to the effect that the defendants affirmed the bills by two letters dated 29 June 1970, in which they instructed CBI to meet the bills. It is said on behalf of the plaintiffs that fraud does not invalidate a bill, but merely gives a signatory the right to repudiate liability on it; that if instead of repudiating he elects to be bound by it he cannot thereafter deny his liability; and that instructions to his agent to buy will constitute
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election even though not communicated to the holders. Archer v Bamford and Re Hop and Malt Exchange and Warehouse Co, ex parte Briggs were relied on. It was further contended that it is immaterial whether the person so electing knows all the relevant facts at the time so long as he knows the substance of the matters giving rise to the right to repudiate: see Campbell v Fleming. I am not greatly impressed with this argument. The defendants had indicated their intention to deny liability on the bills by their refusal to pay on presentation and notice of dishonour. They were nevertheless willing for the bills to be met provided CBI were prepared to make the payment, being content in that case to settle accounts with CBI. It does not seem to me that they thereby affirmed their liability to the holders. They could quite consistently say: ‘We do not believe we are liable to the holders, but rather than be involved in litigation with them we are prepared for you, CBI, to pay, because we are confident that you are indebted to us for an equivalent sum. But if you refuse to pay, then of course we shall have to contest the holders’ claims.’
Next there is the issue of illegality. The defendants rely on s 22(1) of the Exchange Control Act 1947, which provides, reading the relevant words:
‘The exportation from the United Kindom of … (e) … (iii) any bill of exchange … expressed in terms of a currency other than sterling … is hereby prohibited except with the permission of the Treasury.’
It is also necessary to have in mind reg 6 of the Exchange Control (Import and Export) Order 1966c, which provides, again reading the relevant words:
‘There shall be exempted from the provisions of the said section 22(1) … (f) … any bill of exchange … expressed in terms of currency other than sterling and issued by an authorised dealer … ’
It is said for the defendants that, so far as they knew, no permission was given for the exportation of these deutschmark bills to Germany and that the bills were not issued by CBI, so that even if CBI was an authorised dealer the export was not made lawful by the 1966 order. It is contended that since the business involved this exportation, the drawing, acceptance and negotiation of the bills was affected by illegality, again bringing into play s 30 of the Bills of Exchange Act 1887; and quite apart from s 30, that since the purpose of the parties was to achieve an illegal object, the whole transaction was illegal at common law. Alexander v Rayson is relied on. It will be observed that if I am right about the holders having taken the bills in good faith and for value, it is on this suggested common law aspect of illegality that the defendants must rely. The question of when and by whom the bills were issued is a difficult one. It depends on whether CBI ever became holders of the bills and on the definitions ‘issue’, ‘holder’ and ‘bearer’ in s 2 of the Bills Exchange Act 1882. I will merely say that I am not satisfied that CBI were the issuers, and I therefore proceed on the basis that the relevant regulation in the 1966 order is not applicable. I will assume, without deciding, that CBI did not obtain Treasury permission for the exportation, but I do not find that there is any evidence of any common intention to export without such permission. Counsel for the defendants contends that the intention of one party to effect an illegal purpose is sufficient to invalidate a contract, and he relies on a passage in the judgment of Romer LJ in Alexander v Rayson ([1936] 1 KB at 182, [1935] All ER Rep at 191). I do not so read this passage. At the end of it Romer LJ said ([1936] 1 KB at 182, [1935] All ER Rep at 191):
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‘In such a case any party to the agreement who had the unlawful intention is precluded from suing on it.’
The inference is that the party who had not that intention is not so precluded, but even if there were a common illegal intention at some stage, I do not consider that this affects the holder in due course. If there were some common law rule about the effect of illegality which could override the rights which s 30 gives to a holder in due course the protection given by that section to such a holder would be valueless. I therefore hold that the defence based on illegality fails.
Finally counsel for the defendants relies on the provision recently introduced into RSC Ord 14, r 3(1)d, whereby even if there is no issue to be tried the court may give leave to defend for some other reason. The only reported case in which that provision has been applied is Miles v Bull. Megarry J there gave leave to defend because the documents on which the claim was based had some appearance of a sham. It is not difficult to think of other circumstances where it might be reasonable to give leave to defend although no defence was shown, eg if the defendant was unable to get in touch with some material witness who might be able to provide him with material for a defence; or if the claim were of a highly complicated or technical nature which could only properly be understood if oral evidence were given; of if the plaintiff’s case tended to show that he had acted harshly and unconscionably and it was thought desirable that if he was to get judgment at all it should be in the full light of publicity. In this case I can see no reason why there should be leave to defend in the absence of a reasonable defence being disclosed; and I consider it of great importance that the right of a holder in due course to obtain judgment as speedily as possible for what is due to him under a negotiable instrument should be maintained.
I need not deal with a point on which counsel for the plaintiffs laid some emphasis. He said that if the defendants could resist the plaintiffs’ claim they could nevertheless claim from CBI the balance in their accounts disregarding any defalcation and so be enriched to the turn of £250,000. I am not sure what the answer to this argument is. I will merely say that if Ingeba were not holders in due course it cannot avail the plaintiffs, and if, as I think, Ingeba were holders in due course the argument is not needed. I would dismiss the appeal.
DAVIES LJ. After the very full judgment that Cairns LJ has just delivered there is very little that I can or proposes to add, and even that will be, I am afraid, largely repetition. I am for myself a little doubtful whether these bills were affected by fraud or illegality within the meaning of s 30 of the Bills of Exchange Act 1882. So far as concerns fraud, Mr Patel and CBI did exactly what was agreed with Wexler as to the first series of bills. Value was given by the discounters and received by the defendants. And, as was pointed out by counsel for the plaintiffs, we find in the bank account of one of the defendant companies with CBI under date 20 December 1968, a credit item of £250,616 1s 1d. So far as concerns the second and third series, Mr Patel again did what was agreed between him and Wexler, namely to revolve or renew the bills and so postpone the due date of payment. Does the fact that Mr Patel had an ulterior motive, namely, to be able to milk the account or to cover up intended or actual defalcations, bring the case within s 30? So far as concerns illegality, that would of course depend on the provisions of the Exchange Control Act 1947, which
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Cairns LJ has read; but it is submitted by counsel for the plaintiffs, with some force, that it is not really shown here that Mr Patel did export the bill without the permission of the Bank of England.
In my view, it is not necessary to decide either of those points. Let it be assumed that there was fraud or illegality within s 30. We find first, that there is no particularity at all in the defendants’ allegations, and, as has been pointed out, on the authority of Wallingford v Mutual Society ((1880) 5 App Cas 685 at 697) a general allegation is not sufficient. But, more than that, it is in my view of cardinal importance in this case that there is not one word in the affidavits to impugn the bona fides of the plaintiffs or of Ingeba. The onus is the other way, of course; it is on the plaintiffs. But it is a remarkable thing that here we have really no suggestion made by the defendants of an attack on the bona fides of the plaintiffs. It is plain from contemporary documents that Ingeba did give value and the defendants received it. As to the giving of value, see the bundle of documents and, as to the receipt, the entry in the bank account to which I have referred. So that even if there were fraud or illegality, the plaintiffs or Ingeba show that subsequently value in good faith was given, and they have in my view discharged the onus.
In those circumstances should there be summary judgment under RSC Ord 14? The authorities cited under RSC Ord 14, ending with Powszechny Bank Zwiazkowy W Polsce v Paros, as to bills of exchange really amount to no more than that the bare assertion of being a bona fide holder for value is not enough, just as the bare allegation of fraud is not enough on the other side, and that if there is no more than such an allegation by the plaintiff the case should go for trial. But, in my opinion, that cannot apply when the claim to be a bona fide holder for value is supported by unchallenged or unchallengeable contemporary documents. I am comforted by the thought that this view was taken by two most eminent and experienced commercial judges, namely, Mocatta J in this case and Donaldson J in the other recent case, Global Bank Girling KG v Houry to which Cairns LJ has referred.
Illegality as a separate point from s 30 is, in my view, a non-starter. It is not shown that it was part of the agreement between Mr Patel and Wexler to contravene the Exchange Control Act 1947. If it was, then Wexler was a party to it, and the plaintiffs and Ingeba were not. So that, in my view, would not prevent the plaintiffs from recovering.
With regard to affirmation, I agree with Cairns LJ. I would not base any part of my judgment on that. But to me, as to Mocatta J, it is a most remarkable feature of this case that as late as 29 June we find Wexler and the companies authorising CBI to pay these bills. One wonders whether perhaps this was merely a tactical move by the defendants in their dispute with CBI.
So far as the argument of counsel for the defendants on the fairly recent amendment of RSC Ord 14, r 3, is concerned, I, like Cairns LJ, cannot see that there is anything in this case which falls within those words. In the absence of any defence shown by the defendants here, I cannot see that there is any other question that ought to be tried.
I rest my judgment on the fact that it is plain that the plaintiffs or Ingeba gave value, and the defendants received value, and there is no suggestion of lack of bona fides in the plaintiffs. That value, of course, was given subsequent to any fraud or illegality affecting the bills, and therefore the plaintiffs come within the express provisions of the section and in my view are entitled to judgment. Like Cairns LJ, I would dismiss the appeal.
PHILLIMORE LJ. Counsel for the defendants asserts that in the light of s 30 of the Bills of Exchange Act 1882 once there is an allegation of fraud of illegality the
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burden of disproving it shifts to the plaintiffs and therefore they cannot get judgment under RSC Ord 14. I cannot think that there is any such hard and fast rule. It all depends on what material is put before the court. The mere assertion of fraud or illegality can no more entitled defendants to have leave to defend than can a mere assertion that they gave value entitle the plaintiffs to judgment; see Powszechny Bank Zwiazkowy W Polsce v Paros, already referred to, and in particular the judgment of Scrutton LJ, and Wallingford v Mutual Society, and in particular the passage in Lord Watson’s judgment where he said ((1880) 5 App Cas at 709):
‘My Lords, it is a well-known and a very proper rule that a general allegation of fraud is not sufficient to infer liability on the part of those who are said to have committed it. And even if that were not the rule of Common Law, I think the terms of Order XIV. would require the parties to state a very explicit case of fraud, or rather of facts suggesting fraud, because I cannot think that a mere statement that fraud had been committed, is any compliance with the words of that rule which require the Defendant to state facts entitling him to defend. The rule must require not only a general and vague allegation but some actual fact or circumstances or circumstances which taken together imply, or at least very strongly suggest, that a fraud must have been committed, those facts being assumed to be true.’
The question, in short, is whether on the material put before the court there is a triable issue. On this point I agree with Cairns LJ, that the note in the Supreme Court Practice 1970e requires reconsideration. For myself, I am content to assume for the purposes of this appeal that Mr Patel was planning fraud from the first, and that the export of these bills was affected by illegality. In making those assumptions I do not ignore the powerful argument of counsel for the plaintiffs that there is no evidence that the drawing, acceptance or negotiation of these bills was affected by fraud; that there is no sufficient proof of illegality; and that there is evidence, in any event, that the defendants having affirmed the bills, they have precluded themselves from disputing their liability. The fact remains that the evidence that the plaintiffs’ predecessors, Ingeba (as we were informed, a very well-known bank at Basle in Switzerland) acted bona fide when they gave value, and that they did so subsequently to any fraud or illegality, is overwhelming, supported as it is by the contemporary documents. There is no doubt that Ingeba, after careful enquiries, parted with £250,000 which reached the Central Bank of India and was standing to the credit of the second defendants in December 1968. The rate of discount was modest, and the whole transaction is consistent, and consistent only, with the bills being, so far as Ingeba were concerned, unaffected by fraud or illegality. Much the same is true of each of the subsequent transactions when these bills were replaced by others. In my judgment, on this ground alone it is clear that there is no defence to this claim, and that there is no triable issue. It follows that this appeal must be dismissed. In dismissing the appeal, I agree with the observation of Cairns LJ that it is indeed important that when one is dealing with negotiable instruments these courts should give full effect to the rights of a bona fide holder for value.
Appeal dismissed. Leave to appeal to the House of Lords refused.
Solicitors: Watts, Vallance & Vallance (for the first, second and third defendants), Herbert Smith & Co (for the plaintiffs).
Henry Summerfield Esq Barrister.
Calgary & Edmonton Land Co Ltd and others v Discount Bank (Overseas) Ltd and others
[1971] 1 All ER 551
Categories: LAND: Land Registration
Court: CHANCERY DIVISION
Lord(s): BRIGHTMAN J
Hearing Date(s): 28, 29 JULY 1970
Land charge – Vacation of entry of register – Pending action – Action struck out by court as scandalous, frivolous and vexatious and an abuse of the process of the court – Decision upheld by Court of Appeal – Petition to appeal pending before House of Lords – Whether entry be vacated as proceedings not prosecuted in good faith – Land Charges Act 1925, s 2(6).
Land registration – Rectification of register – Caution – Cautions entered against mortgagee’s interest in land – Mortgage the subject of High Court action – Action struck out by High Court and Court of Appeal – Petition to appeal pending before House of Lords – Whether a court had decided that mortgagee entitled to any estate right or interest to any registered land – Land Registration Act 1925, s 82(1).
The plaintiffs issued a writ seeking a declaration that certain mortgages of land were void and an injunction to restrain the second defendant (the mortgagee) from exercising its power of sale. The also registered a lis pendens under the Land Charges Act 1925 and cautions under the Land Registration Act 1925. The second defendant obtained an order that the endorsement on the writ be struck out as scandalous, frivolous and vexatious and an abuse of the process of the court. The Court of Appeal upheld that finding. The plaintiffs, out of time, lodged a petition to the House of Lords for leave to appeal. Before the petition was heard, the second defendant sought to vacate the registrations made by the plaintiffs.
Held – The register would be vacated because—
(i) although in view of the petition for leave to appeal to the House of Lords, the proceedings had not been determined, the findings of the judge and the Court of Appeal were sufficient to satisfy the court that the proceedings were not prosecuted in good faith within the meaning of s 2(6)a of the Land Charges Act 1925 (see p 552 j to p 553 b, post);
(ii) the judge’s finding, upheld by the Court of Appeal, that the mortgages were not void, was in effect a decision that the second defendant was a mortgagee and therefore had an estate, right or interest in the land as a consequence of which rectification of the register was required under s 82(1)b of the Land Registration Act 1925 (see p 553 f, post).
Notes
For the discharge and vacation of the register in connection with proceedings not prosecuted in good faith, see 23 Halsbury’s Laws (3rd Edn) 64, 65, para 121, and for cases on lis pendens, see 40 Digest (Repl) 179–181, 1426–1437.
For rectification by the court of the register for registered land, see 23 Halsbury’s Laws (3rd Edn) 203, 204 para 425, and for cases on the subject, see 38 Digest (Repl) 899, 900, 944–950.
For the Land Registration Act 1925, s 82, see 20 Halsbury’s Statutes (2nd Edn) 1013, and for the Land Charges Act 1925, s 2, see ibid 1066.
Cases referred to in judgment
Baxter v Middleton [1898] 1 Ch 313, 67 LJ Ch 200; affd CA 42 Sol Jo 508, 40 Digest (Repl) 180, 1433.
Page 552 of [1971] 1 All ER 551
Clutton v Lee (1876) 7 Ch D 541, n.
Strousberg v M’Gregor (1890) 6 TLR 145, 40 Digest (Repl) 180, 1432.
Motion
This was a motion by the second defendant, Slater Walker Ltd, to vacate registrations under the Land Charges Act 1925 and cautions under the Land Registration Act 1925 registered by the plaintiffs. The facts are set out in the judgment.
R Potts for the first plaintiff.
J G Monroe for the second to the eleventh plaintiffs.
L H Hoffman for the defendants.
29 July 1970. The following judgment was delivered.
BRIGHTMAN J. In my judgment it is right that the relief sought by the notice of motion should be granted. Shortly, the story is that a writ was issued on 29 September 1969 seeking a declaration that certain mortgages of partly registered and partly unregistered land were void and an injunction to restrain the second defendant from exercising its statutory power of sale. There was a motion by the second defendant to bring that action to a halt, and on 28 November 1969 an order was made by Ungoed-Thomas J directing that the endorsement on the writ be struck out on the grounds that it was ‘scandalous frivolous and vexatious’ and ‘an abuse of the process of this Court’. There was an appeal to the Court of Appeal and that appeal was dismissed. I think that, perhaps, the general tenor of the thoughts of the Court of Appeal can be gauged from the passage of the judgment of Winn LJ where he referred to the transactions ‘which we have at great length been called upon to explore with tedium and futility’. Leave to appeal from the Court of Appeal to the House of Lords was refused. Out of time, the plaintiffs lodged a petition to the House of Lords for leave to appeal. That petition is due to be heard in or after October 1970. The motion arises in this way, that some time after the start of the action the plaintiffs registered a lis pendens under the Land Charges Act 1925 and cautions under the Land Registration Act 1925. The motion before me is to vacate those registrations.
I deal first with the Land Charges Act 1925. Section 2 provides for the registration of a lis pendens. Section 2(6) provides:
‘The court, if it thinks fit, may, upon the determination of the proceedings, or during the pendency thereof if satisfied that the proceedings are not prosecuted in good faith, make an order vacating the registration of the pending action, and direct the party on whose behalf the registration was made to pay all or any of the costs and expenses occasioned by the registration and vacating thereof.’
The first question with which I am concerned is whether, as regards those registrations, it is right to say that within the meaning of that subsection the proceedings are determined. I have been referred to Strousberg v M’Gregor, Clutton v Lee and Baxter v Middleton. The tendency of this court is, I think, in this type of case to allow a motion to vacate to stand over to give a prospective appellant the opportunity to prosecute an appeal if he desires to do so and not to vacate a registration unless the prospective appellant fails to make use of that opportunity. It seems to me that the practical effect of those decisions is that as a matter of law a proceedings is determined after a court has reached a decision, but the proceedings are, as it were, taken out of their state of determination in the event of a notice of appeal or a petition of appeal being in fact lodged. In other words, as soon as some step has been taken to prosecute an appeal, the action is no longer in a state of determination. I think, therefore, that I ought not, if I vacate the registration which has been made under the Land Charges Act 1925 to act under that part of s 2(6) which refers to the determination of the
Page 553 of [1971] 1 All ER 551
proceedings, having regard to the fact that a petition for leave to appeal has been lodged with the House of Lords, albeit out of time. That, however, does not conclude the matter because the second limb of s 2(6) refers to the vacation of a registration if the court is ‘satisfied that the proceedings are not prosecuted in good faith’. The situation with which I am faced is that a judge of this court has reached the conclusion that the action is both scandalous and frivolous and vexatious and an abuse of the process of this court, and the Court of Appeal in strong terms has endorsed that conclusion. In those circumstances I consider that the right conclusion for me to draw is that the proceedings are not being prosecuted in good faith and that I ought, therefore, to make an order vacating the registration under s 2(6).
One definition of lack of good faith in Strousberg v M’Gregor is that the action is being prosecuted for some indirect purpose. There is a lot of evidence that if the registrations are vacated the property may be sold by the second defendant at an improper price. I accept what I have been told by counsel for the plaintiffs that the real purpose of that evidence was to show the damage which could occur to the plaintiffs if the registrations were vacated. However, the evidence does suggest to my mind, supporting the inference which I draw from the judgment of Ungoed-Thomas J and the Judgments in the Court of Appeal, that the action is really being prosecuted in order to enable the plaintiffs, as it were, to keep a hand on the manner in which the properties are about to be realised.
The position under the Land Registration Act 1925 is a little different. As I mentioned, cautions have been registered. Section 82(1) of the Land Registration Act 1925 provides:
‘The register may be rectified pursuant to an order of the court or by the registrar, subject to an appeal to the court, in any of the following cases, but subject to the provisions of this section:—(a) Subject to any express provisions of this Act to the contrary, where a court of competent jurisdiction has decided that any person is entitled to any estate right or interest in or to any registered land or charge, and as a consequence of such decision such court is of opinion that a rectification of the register is required, and makes an order to that effect; … ’
This court has in effect decided that the mortgages are not void on the only ground which has apparently been alleged in the action, namely, that they offend provisions of the Moneylenders Act 1927. It seems to me to follow that there is a decision of this court that the second defendant is a mortgagee and therefore has an ‘estate right or interest in or to’ the land in consequence whereof rectification of the register is required.
Section 82(1)(b) provides:
‘Subject to any express provision of this Act to the contrary, where the court, on the application in the prescribed manner of any person who is aggrieved by any entry made in, or by the omission of any entry from, the register, or by any default being made, or unnecessary delay taking place, in the making of any entry in the register, makes an order for the rectification of the register.’
For the reasons which I sought to adumbrate when dealing with the question of good faith under the corresponding subsection of the Land Charges Act 1925, I think that I have liberty to make the order also under para (b). I think that it matters not whether the order is expressly made under para (a) or para (b). In the result I will make the order sought.
Order accordingly.
Solicitors: Frere, Cholmeley & Co (for the first plaintiff); Duke-Cohan & Co (for the second to eleventh plaintiffs); Clifford-Turner & Co (for the defendants).
Richard J Soper Barrister.
Dawson (Bradford) Ltd and others v Dove and another
[1971] 1 All ER 554
Categories: CIVIL PROCEDURE
Court: QUEEN’S BENCH DIVISION
Lord(s): MACKENNA J
Hearing Date(s): 8, 31 JULY 1970
Practice – Parties – Substitution – Defendant dead at date of issue of writ – Substitution of executors – RSC Ord 2, r 1, Ord 15, r 6, Ord 20, r 5.
Where a writ has been issued against a person who is dead at the date of the issue of the writ, the court has no power under RSC Ord 15, r 6a, read in conjunction with Ord 2, r 1b, and Ord 20, r 5c, to amend the writ by substituting the executors as defendants (see p 557 e g and j to p 558 c, post).
Clay v Oxford (1866) LR 2 Exch 54 and Tetlow v Orela Ltd [1920] All ER Rep 419 followed.
Notes
For change of parties, see 30 Halbury’s Laws (3rd Edn) 394–396, paras 735–740.
By s 2(b) of the Proceedings against Estates Act 1970 (51 Halsbury’s Statutes (2nd Edn) 99), which came into force on 1 January 1971, rules of court may be made enabling proceedings purporting to be commenced against a person who is dead to be treated as having been commenced against his estate.
Cases referred to in judgment
Clay v Oxford (1866) LR 2 Exch 54, 36 LJ Ex 15, 15 LT 286, 50 Digest (Repl) 275, 213.
Tetlow v Orela Ltd [1920] 2 Ch 24, [1920] All ER Rep 419, 89 LJCh 465, 123 LT 388, 50 Digest (Repl) 273, 214.
Cases also cited
Davies v Elsby Brothers Ltd [1960] 3 All ER 672, [1961] 1 WLR 1700.
Firth & Sons v De las Rivas [1893] 1 QB 768.
Harkness v Bell’s Asbestos and Engineering Ltd [1966] 3 All ER 843, [1967] 2 QB 729.
Lazard Bros & Co v Midland Bank Ltd [1933] AC 289, [1932] All ER Rep 571.
Mitchell v Harris Engineering Co Ltd [1967] 2 All ER 682, [1967] 2 QB 703.
Pritchard (decd), Re [1963] 1 All ER 873, [1963] Ch 502.
Whittam v W J Daniel & Co Ltd [1961] 3 All ER 796, [1962] 1 QB 271.
Page 555 of [1971] 1 All ER 554
Interlocutory appeal
This was an appeal by James Dove and Colin Gill, the executors of Frederick William Dawson (‘the defendants’) against an order of the Leeds district registrar, dated 24 June 1969, giving the plaintiffs, James Dawson (Bradford) Ltd, J Boyd & Son (Clothiers) Ltd and Rosser & Russell Ltd, leave to amend writs issued against the deceased, the plaintiffs’ landlord, claiming damages in negligence or alternatively nuisance, by substituting the executors as defendants. The facts are set out in the judgment.
C D Chapman QC and H G Hanbury-Sparrow for the plaintiffs.
J W Miskin QC and J C Hicks for the defendants.
Cur adv vult
31 July 1970. The following judgment was delivered.
MACKENNA J read the following judgment. Mr Dove and Mr Gill, the executors of the late Frederick William Dawson (‘the deceased’), have been made defendants by amendment of the writs to three actions originally brought against the deceased. They have taken out summonses to set aside the writs on the ground that the deceased was already dead when they were issued. They contend that where a writ has been issued against a dead man there is no power under the rules of court to amend the writ by substituting the executors in place of the deceased. This contention is disputed by the plaintiffs. Other relief is claimed by the defendants in the alternative, but these claims do not need to be considered if the writs are set aside.
It is convenient to state the facts out of which the dispute arises, giving the dates. Each of the three plaintiffs was tenant of part of a building known as Bank Low Mills in Leeds. The deceased was their landlord, and he had retained the top floor of the building and its boilerhouse in his own occupation. It is alleged by the plaintiffs that on 26, 27 December 1962, through the negligence of the deceased, his servants or agents, water escaped from that part of the building which was under his control and flooded the plaintiffs’ premises, causing damage.
On 28 July 1967, the deceased died, leaving a will of which the defendants were the executors. On 4 October 1967, probate of this will was granted to the defendants. On 4 April 1968, the six months period of limitation for suing the defendants as executors in tort expired: see s 1(3) of the Law Reform (Miscellaneous Provisions) Act 1934. On 17 December 1968, each of the plaintiffs, mistakenly believing the deceased to be still alive, issue a writ against him claiming damages in negligence. This was within the general period of limitation for commencing actions in tort. In the spring of 1969 the plaintiffs learnt of the deceased’s death. On 15 May 1969, their solicitors informed those acting for the defendants that they intended to apply to the registrar to have the writ amended. They replied on 21 May, doubting whether leave to amend could properly be obtained, and again on 23 May, taking the point that the proceedings were a nullity and the situation one which was incapable of remedy.
On 24 June 1969, on the plaintiffs’ ex parte application, the Leeds district registrar gave leave to amend the writs, striking out the deceased’s name and substituting those of the defendants. On 7 July 1969, the amended writs were served on the defendants’ solicitors, who wrote to the plaintiffs stating that they accepted service, would enter an appearance, and on receipt of the statements of claim would apply to the court to deal with the matter which had been the subject of their recent correspondence.
‘In the meantime [the letter ended] the acceptance of service and the entry of appearance is in all respects subject to our clients’ rights in these particular regards.’
Unconditional appearances were entered and, on 11 July 1969, the statements of claim were delivered. On 17 October 1969, the defendants took out their summonses which came before the registrar on 28 Janury 1970. He gave the defendants
Page 556 of [1971] 1 All ER 554
leave to appeal out of time against his ex parte order of 24 June 1969, and referred to the judge in chambers all other questions raised by the summonses.
The plaintiffs claim that the registrar had power to amend the writs under the provisions of RSC Ord 15, r 6 read with those of Ord 2, r 1 and Ord 20, r 5. Order 15, r 6 provides that no cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party, and that at any stage of the proceedings the court may order any person who has been improperly or unnecessarily made a party to cease to be one, and to order any person who ought to have been joined as a party to be added as one. Order 2, r 1 provides that where, in beginning or purporting to begin any proceedings, there has, by reason of anything done or left undone, been a failure to comply with the requirements of the rules, the failure shall be treated as an irregularity, and shall not nullify the proceedings, and that the court may, on the ground that there has been such a failure, exercise its powers under these rules to allow such amendments to be made and to make such order (if any) dealing with the proceedings generally as it thinks fit. Order 20, r 5(1) provides that the court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading. Rule 5(2) and (3) provides that leave may be given to amend a writ in order to correct the name of a party, even though the application is made after any relevant period of limitation current at the date of issue of the writ has expired, and although it is alleged that the effect of the amendment will be to substitute a new party, if the court is satisfied that the mistake sought to be corrected was a genuine one and was not misleading or such as to cause any reasonable doubt as to the identity of the person intended to be sued.
Two authorities have been cited on the meaning of Ord 15, r 6; Clay v Oxford and Tetlow v Orela Ltd. The first of these cases was a decision of the Court of Exchequer holding that where an action had been commenced in the name of a dead man, there was no power, under the Common Law Procedure Act 1852, to substitute his representatives as plaintiffs. Section 34 of that Act provided that the court might at any time before the trial of any cause, order that any person not joined as plaintiff should be so joined, or that any person originally joined as plaintiff should be struck out from the cause. Section 222 provided that it should be lawful for the courts at all times to amend all defects and errors in any proceeding or civil cause, and that all such amendments should be made as might be necessary for the purpose of determining in the existing suit the question in controversy between the parties. It was said ((1866) LR 2 Exch at 55) by Kelly CB that the Act contained no provision in any part of it for substituting a plaintiff suing in a representative capacity for a deceased man who never was a party. Bramwell B thought ((1866) LR 2 Exch at 55) that the powers of amendment conferred by the Act did not apply to a case where there was no plaintiff, and therefore no existing suit, and no question in controversy between ‘parties’. The other judges agreed.
The Supreme Court Rules 1883 took the place of the Common Law Procedure Act 1852 and, in 1920, in Tetlow v Orela Ltd the question was raised once again whether, if an action had been commenced in the name of a dead man, his representative could be substituted as a plaintiff. It was held by Russell J that there could be no substitution. The judgment referred to the decision in Clay’s case and continued ([1920] 2 Ch at 26, [1920] All ER Rep at 423):
‘Thus under the Common Law Procedure Act, 1852, there was no power to substitute as plaintiffs the representatives of a man who was dead when an action was commenced in his name, either under the special provisions of the
Page 557 of [1971] 1 All ER 554
Act [s 34] or under the general words of s. 222. In that condition of things the present rules were framed, and the question is whether they allow that which the Act of 1852 did not allow. I do not think they do, and it would be straining the rules to hold otherwise.’
The 1883 rules relied on by the plaintiff in Tetlow’s case were RSC Ord 16, rr 2 and 11. Order 16, r 2 provided that where an action is commenced in the name of a wrong plaintiff, the court might, if satisfied that it was so commenced through bona fide mistake, and that it was necessary for the determination of the real matter in dispute so to do, order any other person to be substituted. Order 16, r 11 provided that no cause or matter should be defeated by reason of the misjoinder or nonjoinder of parties, and the court might in any cause or matter deal with the matter in controversy so far as regarded the rights and interests of the parties actually before it, and also that the court might at any stage of the proceedings order that the names of any persons improperly joined as plaintiffs or defendants be struck out, and that the names of any parties, whether plaintiffs or defendants who ought to have been joined be added. Russell J thought r 2 meant that where an action had been commenced between two living parties by a living plaintiff, and that plaintiff turned out afterwards to be the wrong person, the court could substitute another for him. He said ([1920] 2 Ch at 26, [1920] All ER Rep at 423): ‘But it does not justify the Court in creating a plaintiff in an action for the first time.' In the same way, he thought the ‘parties’ referred to in r 11 were living persons, and that this rule did not carry the plaintiff any further. He held for these reasons that the 1883 rules had made no change in the position, which was still as it had been under the 1852 Act.
If Ord 16, r 11 of the 1883 rules did not enable an action commenced in the name of a dead man to be continued in the names of the executors, as Russell J held, it must follow, I think, that an action commenced against a dead man could not have been continued against his executors. The language of the rule made no distinction between the power of striking out and adding plaintiffs and that of striking out and adding defendants. If there was no power under the rule of putting matters right where there had been no living plaintiff, the rule must have been equally ineffective where there had been no living defendant. If the ‘parties’ referred to in the rule were only living persons, the rule must have excluded the case of dead defendants as well as that of dead plaintiffs.
Order 15, r 6 of the 1965 rules combines the provisions of the old Ord 16, rr 2 and 11 with each other and with those of the old Ord 16, rr 5, 8 and 39 which are for my purposes immaterial. It adds nothing to rr 2 and 11 which could make the new rule apply to dead plaintiffs or defendants if the old rules did not. If I am to hold that the new rule covers the case of dead defendants, I must, I think, refuse to follow the decision in Tetlow’s case and also that in Clay’s case, which I am not prepared to do. I conceive it to be my duty to follow these old cases unless convinced that they were wrongly decided, which I am not.
I turn to the provisions of Ord 20, r 5(1) to (3). They give the power of correcting the name of a party if the court is satisfied that the mistake was not such as to cause any reasonable doubt as to the identity of the person intended to be sued. The question is whether the relief sought by the plaintiffs in the present case is merely the correction of a misnomer. I do not think that it is. When the writs were issued the intention was to sue the deceased and nobody else. The plaintiffs made no mistake about his name. Their mistake was of a different kind. The believed him to be living when he was in fact dead. To substitute the defendants for the deceased
Page 558 of [1971] 1 All ER 554
would not be correcting a mistake about the deceased’s name. It would be doing something quite different.
Order 2, r 1, as I read its provisions, does not help the plaintiffs here. To commence an action against a dead person can hardly be described as ‘a failure to comply with the provisions of these rules’, which is the case dealt with by Ord 2, r 1. Even if it could be so described, the rule does not give any power to add new parties in substitution for dead men. It only provides that the powers of amending or making orders conferred by the other rules shall be exercisable in the cases it is dealing with. If the relief required is the addition of new parties, the power to give such relief must be sought in the provisions of Ord 15, r 6 or in those of Ord 20, r 5. If the power is not given by these rules it is not exercisable under Ord 2, r 1.
Since the argument in this case, Master Jacob has referred me to the Law Commission’s White Paperd entitled ‘Proceedings against Estates’, and to the Proceedings against Estates Act 1970, passed on 15 May 1970, to implement the commission’s recommendations. Section 2 (b) of that Act provides that rules of court may be made for enabling proceedings purporting to be commenced against a person who is dead to be treated as having been commenced against his estate. So far as I am aware, no rule has yet been made. The White Paper contains this passagee:
‘It appears that a writ issued against a deceased person (naming him as a defendant) is a nullity as it is a general principle of High Court jurisdiction (other than in actions in rem in the Admiralty Division) that the court is able to exercise its jurisdiction over the person of the defendant. There is, however, no judicial authority directly supporting this proposition but if it be correct the writ could not be re-issued in an amended form or validly served and a fresh writ would have to be obtained.’
A footnote to the last sentence reads as follows:
‘Under R.S.C.O. 20 r 5 (1965 revision) if the writ were valid, the court may give leave to amend it by correcting the name of a party notwithstanding that the application is made after the relevant period of limitation has expired. In addition, O. 15 r. 6 provides that no cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party and the court is empowered to order any person who ought to have been joined as a party to be added as a party to the proceedings. In Tetlow v Orela Ltd. Russell J. held that he had no power to substitute the name of a new plaintiff where a writ was issued on behalf of a plaintiff who had died before the issue of the writ, and it is likely that the same principle would be held to apply where a writ had been issued naming a deceased person as defendant.’
I am happy to use the Law Commission’s reasoning from general principles to support a conclusion I had reached on other and narrower grounds.
I shall order that the writs in the three actions and all subsequent proceedings be set aside on the ground that, at the dates when the writs were issued, the deceased was already dead. The plaintiffs must pay the defendants’ costs here and below. The case was fit for leading counsel.
Appeal allowed. Writs set aside.
Solicitors: Willey, Hargrave & Co, Leeds (for the plaintiffs); Stilgoes (for the defendants).
E H Hunter Esq Barrister.
Note
Gsell v Gsell
[1971] 1 All ER 559
Categories: FAMILY: Ancillary Finance and Property
Court: PROBATE, DIVORCE AND ADMIRALTY DIVISION
Lord(s): PAYNE J
Hearing Date(s): 15 DECEMBER 1970
Magistrates – Husband and wife – Maintenance – Maintenance order – Variation – High Court order registered in magistrates’ court – Application for variation – Remission of case for consideration by High Court – Circumstances in which case should be remitted to High Court – Maintenance Orders Act 1958, s 4(4).
Notes
For variation of orders registered in magistrates’ courts, see Supplement to 12 Halsbury’s Laws (3rd Edn) para 880A, 3.
For the Maintenance Orders Act 1958, s 4, see 17 Halsbury’s Statutes (3rd Edn) 297.
Appeal
This was an appeal by the husband, Jean Paul Gsell, from an order of the justices for the petty sessional division of Highgate, sitting as a magistrates’ court at Highgate on 26 June 1970, whereby it was ordered, on his application for the variation of a maintenance order made in favour of the wife, Kathleen Jessie Gsell, by the High Court on 16 April 1969 and registered in the magistrates’ court on 14 November, that the order should not be varied, that £100 should be remitted from the arrears (which amounted to £184) and that he should be sentenced to a period of six weeks’ imprisonment, suspended so long as he complied with the maintenance order and paid, in addition, £2 a week in respect of arrears.
D J Blunt for the husband.
JJ Davis for the wife.
15 December 1970. The following judgment was delivered.
PAYNE J having stated the nature of the appeal, continued: The facts of this case with which I shall deal in a few moments are not of any particular public interest, but this case has drawn attention to some provisions of the Maintenance Orders Act 1958 to which I should like to refer. If a maintenance order is made by the High Court and registered in the magistrates’ court for enforcement, the justices now have power by virtue of the Maintenance Orders Act 1958 to vary the High Court order, and their powers are prescribed in s 4 of the Act as subject to later amendments.
In the present case, after the making of the order in the High Court, and the registration of the order in petty sessions, the husband because of illness ceased to be employed at a substantial wage and, after a period of some seven months’ illness, the doctor certified that he was not fit to return to his salaried employment and he therefore started a business on his own account. In order to ascertain what were his means and what he could afford to pay the wife it has been necessary to consider the details relating to the business which he is now running, and for that purpose I have had to examine affidavits, a large number of exhibits, and a ledger which the husband has kept in connection with the business. He and the wife have given oral
Page 560 of [1971] 1 All ER 559
evidence and have been cross-examined and the case has taken the better part of a day or so.
It seems clear to me that the justices could not in the ordinary course of events have the time to devote to a case like this, nor in most cases would they be likely to have access to all the documents, which have been brought before me, and in a case like this there is much to be said for the justices declining to consider the application for variation and passing the order back to the High Court so that the variation can be considered there. Such a step would avoid such an appeal as is made in this case, and would in the long run save time and expense. It so happens that in the present case I have had the advantage of affidavits and of oral evidence; but in some cases an appeal like this might be presented only on the justices’ notes and reasons. I am not in any sense criticising the justices in the present case, because no application was made to them to remit the matter here, nor when they started on this matter would they appreciate how complicated it was going to become. But in a suitable case, as it seems to me, it would be wise to pass variation back to the High Court instead of dealing with it in the magistrates’ court. The power so to do is in s 4(4) of the Maintenance Orders Act 1958, which provides:
‘(4) If it appears to the court to which an application is made by virtue of subsection (2) of this section for the variation of a rate of payments specified by a registered order that, by reason of the limitations imposed on the court’s jurisdiction by the last foregoing subsection or for any reason, it is appropriate to remit the application to the original court, the first-mentioned court shall so remit the application, and the original court shall thereupon deal with the application as if the order were not registered.’
Appeal allowed only insofar as the balance of arrears remitted.
Solicitors: Austin, Ryder & Co (for the husband); Breeze & Wyles (for the wife).
Alice Bloomfield Barrister.
Re Westbourne Galleries Ltd
[1971] 1 All ER 561
Categories: COMPANY; Insolvency
Court: COURT OF APPEAL, CIVIL DIVISION
Lord(s): RUSSELL, MEGAW AND BUCKLEY LJJ
Hearing Date(s): 30 OCTOBER, 2, 3, 4 NOVEMBER, 16 DECEMBER 1970
Company – Winding-up – Compulsory winding-up – Contributory’s application – Just and equitable – Company in substance a partnership – Provision in articles for removal of directors – Petititoner removed from board and excluded from any part in management of company – Exercise of power of removal bona fide in interest of company – Whether petitioner entitled to winding-up order.
Where a company is in substance a partnership, the exercise by a majority in general meeting of the power under s 184 of the Companies Act 1948, or of a power under the articles, to remove a director from his office, and consequently to exclude him from participation in the management and conduct of the business of the company, does not form a ground for holding that it is just and equitable that the company be wound up, unless it be shown that the power was not exercised bona fide in the interests of the company, or that the grounds for exercising the power were such that no reasonable man could think that the removal was in the interests of the company; it is for the person alleging the lack of bona fides to establish it. Although it is for the shareholders acting bona fide to form a judgment whether the facts justify the removal, the court will substitute its own judgment if, but only if, it appears to the court that no reasonable body of shareholders could have formed the judgment that the removal was justified (see p 565 c g and h, post).
Dictum of Plowman J in Re Expanded Plugs Ltd [1966] 1 All ER at 885 approved.
Blisset v Daniel (1853) 10 Hare 493 and Re Cuthbert Cooper & Sons Ltd [1937] 2 All ER 466 distinguished.
Re Lundie Brothers Ltd [1965] 2 All ER 692 overruled.
Decision of Plowman J [1970] 3 All ER 374 reversed.
Notes
For grounds for winding-up by the court, see 6 Halsbury’s Laws (3rd Edn) 531, 532, para 1031, for the alternative remedy in cases of oppression, see ibid 542, 543, para 1044, and for cases on when it is ‘just and equitable’ for an order to be made, see 10 Digest (Repl) 856–866, 5638–5694.
For the Companies Act 1948, s 184, see 5 Halsbury’s Statutes (3rd Edn) 255, 280.
Cases referred to in judgments
Blisset v Daniel (1853) 10 Hare 493, 68 ER 1022, 36 Digest (Repl) 609, 1703.
Cooper (Cuthbert) & Sons Ltd, Re [1937] 2 All ER 466, [1937] Ch 392, 106 LJ Ch 249, 157 LT 545, 10 Digest (Repl) 857, 5645.
Davis and Collett Ltd, Re [1935] Ch 693, [1935] All ER Rep 315, 104 LJCh 340, 153 LT 329, 10 Digest (Repl) 857, 5644.
Expanded Plugs Ltd, Re [1966] 1 All ER 877, [1966] 1 WLR 514, Digest (Cont Vol B) 112, 5800a.
Lundie Brothers Ltd, Re [1965] 2 All ER 692, [1965] 1 WLR 1051, Digest (Cont Vol B) 110, 5645a.
Yenidje Tobacco Co Ltd, Re [1916] 2 Ch 426, [1916–17] All ER Rep 1050, 86 LJ Ch 1, 115 LT 530, 10 Digest (Repl) 863, 5683.
Cases also cited
Forte (Charles) Investments Ltd v Amanda [1963] 2 All ER 940, [1964] Ch 240.
Elder v Elder & Watson Ltd 1952 SC 49.
Page 562 of [1971] 1 All ER 561
Furriers’ Alliance Ltd, Re (1906) 51 Sol Jo 172.
Green v Howell [1910] 1 Ch 495.
Langham Skating Rink Co, Re (1877) 5 Ch D 669.
Loch v John Blackwood Ltd [1942] AC 783, [1924] All ER Rep 200.
Shuttleworth v Cox Brothers & Co (Maidenhead) Ltd [1927] 2 KB 9.
Symington v Symington’s Quarries Ltd (1906) 8 F (Ct of Sess) 121.
Witt v Corcoran (1872) 21 WR 47.
Wood v Woad (1874) LR 9 Exch 190.
Interlocutory appeal
This was an appeal by Asher Nazar Achoury (‘Nazar’) and George Alexander Nazar Achoury (‘George’) from an order of Plowman J dated 14 July 1970 and reported at [1970] 3 All ER 374, that Westbourne Galleries Ltd (‘the company’) be wound up on the petition of Shokrollah Ebrahimi (‘the petitioner’), a contributory and former director of the company. The facts are set out in the judgment of the court.
A J Balcombe QC and W F Stubbs for the appellants.
Raymond Walton QC and R H W Marten for the petitioner.
Cur adv vult
16 December 1970. The following judgments were delivered.
RUSSELL LJ. The judgment I am about to read is the judgment of the court. This appeal from a winding-up order made by Plowman J ([1970] 3 All ER 374, [1970] 1 WLR 1378) relates to the circumstances in which the court will conclude that it is proper to make such an order at the instance of a contributory on the ground that it is just and equitable so to do, when the company is such as has been described as a quasi-partnership. Counsel for the appellants has accepted before us (while reserving the right to contend otherwise elsewhere) that, as indicated in for example Re Yenidje Tobacco Co Ltd in this court, there can be such a company, and that special considerations in relation to winding-up may stem from its quasi-partnership nature. He also accepted that the company was such a company; which relieves us of any need to attempt a definition of a quasi-partnership company.
The company was incorporated in December 1958, to take over a business in London founded by the first appellant, Nazar, in which the petitioner had been a profit-sharing partner; though Nazar in evidence expressed the view that in law the petitioner had been only a profit-sharing employee. The business was the acquisition and retail sale of Persian carpets and rugs and other floor coverings. Both Nazar and the petitioner were of Persian origin and Nazar at least retained connections in Persia and had other business interests as well. Nazar had a son, George, employed in the same business. When the company was incorporated the 1,000 shares were allotted 400 to Nazar, 400 to the petitioner and 200 to George. The articles named Nazar and the petitioner as the first directors, but substantially at the same time George was appointed a director as well. As is commonly the case the profits of the business were not divided by the fiscally extravagant method of paying dividends but by paying salaries and directors’ fees to the three working director shareholders, substantially we understand in proportion to their shareholdings. The petitioner mainly worked on the sales side in London. Nazar spent much of his time acquiring carpets in Persia and elsewhere which he passed on to the company in manner later stated.
Under the articles of association incorporating much of Table A, the company in general meeting had an express power to remove a director by ordinary resolution. There was of course also the equivalent statutory power under s 184 of the Companies
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Act 1948, and the articles contained no weighting of votes entitling a director on a resolution to remove him to outvote the other shareholders. Pursuant to s 184, or to both that section and the articles, the petitioner was removed from the board by an ordinary resolution passed at a general meeting of the company by the votes of Nazar and George on 12 August 1969. The petitioner launched a petition seeking an order under s 210 of the Companies Act 1948 that either Nazar and George should buy the petitioners’ shares (or vice versa) on such terms as the court should think fit, or an order that the company should be would up on the ground that it would be just and equitable so to do. In the event the judge ([1970] 3 All ER 374, [1970] 1 WLR 1378) rejected the case under s 210, but held that it way just and equitable that the company should be wound up. There is no appeal from this rejection.
We turn to the allegations in the petition. Paragraph 7 states correctly that up to 1965 the practice approved by all three directors in relation to Persian carpets acquired and passed on to the company by Nazar was that he, traveling in Persia, bought carpets and invoiced them to the company at cost plus transport, customs duty, purchase tax and other expenses with a percentage for his personal profit. We remark that the articles permitted in wide form dealings between a director and the company. Under this practice the company paid Nazar when it sold the goods. Paragraph 8 asserted that Nazar then changed his practice, delaying the invoicing until after resale by the company. The paragraph continued:
‘He then invoiced the carpets to the Company at purely arbitrary prices which yielded substantial profits (on occasions up to 200 per cent) for himself and little or no gross profit to the Company. On some occasions prices for carpets have been quoted by Mr. Nazar to the company before re-sale and the price has been altered and increased after the sale by the company. [The] Petitioner has constantly protested against these practices on the part of Mr. Nazar but without result.’
As to this the judge ([1970] 3 All ER at 384, [1970] 1 WLR at 1390), who besides affidavit evidence heard cross-examination of (inter alia) the petitioner, Nazar and George, held that, apart from the allegation that he had constantly protested, the petitioner had wholly failed to prove his allegations in para 8.
By para 9 of the petition the petitioner adverted to the fact that the company paid the rent and other out-goings of its leasehold premises in Church Street, Kensington, as well as of its principal shop in Notting Hill Gate, and that at the former premises carpets and also antiques were sold. He alleged that the company’s expenses at Church Street including the remuneration of an employee were about £3,000 per annum and that the Church Street shop was used mainly for an antique business belonging to Nazar. He continued:
‘Originally it was agreed that the Company should take half the gross receipts as consideration for the use of the said premises and the service of the employee but in October 1964 Mr. Nazar, without [the] Petitioner’s consent reduced the Company’s share to 10 per cent of the gross receipts. He increased this to 15 per cent in March 1968. This falls far short of the expenses and the Company is in fact currently making a loss in the region of £1,500 a year in respect of the said premises.’
In respect of this allegation, again in substance an allegation that Nazar was feathering his nest at the expense of the company, the judge said:
‘If in fact that use of the premises for the sale of antiques were involving the company in substantial loss the position might be different; but, in my judgment, the petitioner has again wholly failed to prove that this is the case.’
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By para 10 of his petition the petitioner summed up his attack under paras 8 and 9 by asserting this:
‘Mr, Nazar has secured for himself unreasonable and improper profits both on his sales of carpets to the company and through the subsidy in effect provided by the company for his antique business. [The] petitioner has protested against his conduct but owing to the majority of the shares held by Mr. Nazar and [George] the petitioner’s protests have had no effect’.
By para 11 the petitioner asserted that at a general meeting on 15 January 1969 it was resolved to sell the leasehold property in Church Street; that in due course the petitioner found a purchaser; but that Nazar refused to conclude the transaction contrary to the resolution and to the interests of the company. As to this allegation the version of Nazar and George was that they agreed to the resolution because the petitioner was pestering them, withdrew their assent, and told the petitioner that they no longer agreed to the sale, but that nevertheless the petitioner sought and found a would-be purchaser. The judge said that he found it difficult to accept that their agreement to the resolution was for the sake of peace; that the reason for their change of mind had not been explained to his satisfaction; but that as an isolated incident it was not sufficient ground for an order under s 210.
Finally the petition by para 13 asserted:
‘Mr. Nazar and [George] have, by removing [the] petitioner from office as director, excluded him from any share in the conduct of the Company’s business. [The] Petitioner apprehends that their motive in so acting was to preserve the personal benefits which Mr. Nazar has improperly obtained from the company and to secure for themselves the whole of the company’s profits.’
Not unnaturally the greater part of the evidence and argument below was directed to the case under s 210. On the question of winding-up it was, we understand, simply argued for the petitioner, as indeed it was among the submissions made to us, that where there is as here a quasi-partnership company, the exercise by the majority of their undoubted power to remove the petitioner from the board was per se a ground for a winding-up order, without regard to any question whether the majority had acted bona fide in what they believed to be the interests of the company and its shareholders as a whole or whether they had grounds which could lead reasonable men to that belief. On the other hand it was submitted to the judge by counsel for the appellants that in no circumstances even in a quasi-partnership case could the exercise by the shareholders in general meeting of their statutory powers of removal be challenged or made a ground for winding-up the company; and that this is particularly so when the terms of their quasi-partnership bargain, the articles, expressly empower that same removal, either during a term of office or on the occasion of a retirement by rotation.
The judge, after reviewing a number of cases, stated his conclusion on the winding up point in these words ([1970] 3 All ER at 384, [1970] 1 WLR at 1390):
‘… while no doubt the petitioner was lawfully removed, in the sense that he ceased in law to be a director, it does not follow that in removing him the respondents did not do him a wrong. In my judgment, they did do him a wrong, in the sense that it was an abuse of power and a breach of the good faith which partners owe to each other to exclude one of them from all participation in the business on which they have embarked on the basis that all should participate in its management. The main justification put forward for removing him was that he was perpetually complaining, but the faults were not all on one side and, in my judgment, this is not sufficient justification. For these reasons, in my judgment, the petitioner, therefore, has made out a case for a winding-up order.’
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It will be observed that in that passage the judge introduces a question of ‘justification’ for the removal. We think that he there may have had in mind an earlier quotation from his own judgment in Re Lundie Brothers Ltd ([1965] 2 All ER 692 at 697, 698, [1965] 1 WLR 1051 at 1055–1057), in which he took Lord Cozens-Hardy MR in Re Yenidje Tobacco Co Ltd ([1916] 2 Ch 426 at 430, [1916–17] All ER Rep 1050 at 1051) to mean that a person who was solely responsible for the fact that it was impossible for the partners to get on, could not found a case for dissolution on that fact. On the other hand, it was accepted in argument before us that he was forming a judgment on the sufficiency of the justification, which had not been debated before him save in the context of oppression under s 210.
We have had before us a number of propositions. The appellants have contended: (1) that even in a case such as the present of a quasi-partnership company, removal of a director by the majority in general meeting, whether under a power in the articles or under a statutory power, and for whatever motive, can never be a ground for winding-up; (2) alternatively that provided the motive be a bona fide regard for the interests of a company the removal cannot justify a winding-up order; (3) that it is for the person alleging lack of bona fides to establish it; (4) that it is for the shareholders acting bona fide to form a judgment whether the facts justify the removal, and that it is not for the court to substitute its judgment on that point, unless it appears to the court that no reasonable body of shareholders could have formed that judgment, which is not quite the same thing as showing lack of bona fides; (5) that removal of a director does not affect his position as a shareholder, but only as a director and that just as a case of oppression under s 210 must be oppression of people in their character as contributories, so it cannot be held just and equitable to order a winding-up on the petition of a shareholder if his situation as such has not been adversely affected.
For the petitioner it was contended: (1) that the removal of the petitioner from the board and his consequent exclusion from participation in the conduct of the business per se made it just and equitable that the company be wound up; (2) alternatively, the onus was on the majority to show that they had acted bona fide in the interests of the company; (3) that the court was at liberty to decide that grounds which the majority bona fide considered to justify the step taken were insufficient and to order a winding up accordingly.
These submissions were put forward with considerable citation of decided cases. In our judgment the first propositions on both sides are not acceptable. We accept the second, third and fourth propositions of the appellants. We reject the fifth proposition of the appellants. We reject the second and third propositions of the petitioner. In our judgment, in a case of a quasi-partnership company such as the present, the exercise by a majority in general meeting of the power under the articles or the statute to remove a direct from his office, and consequently to exclude him from participation in the management and conduct of the business of the company does not form a ground for holding that it is just and equitable that the company be wound up, unless it be shown that the power was not exercised bona fide in the interests of the company, or that the grounds for exercising the power were such that no reasonable man could think that the removal was in the interest of the company.
Applying those principles to the present case it appears to us clear that the winding up order should, on the facts, not have been made. Quite apart from the question of onus, Nazar deposed in terms that in his opinion the removal of the petitioner from office and consequently from participation in the management of the business was in the interests of the company and its business; George deposed that his own view was that the removal was justified and in the best interests of the company; and they were not challenged on those statements in cross-examination. Nor could it possibly be said that no reasonable men could have considered that what the judge referred to ([1970] 3 All ER at 384, [1970] 1 WLR at 1389) as the main justification put forward—that the petitioner was perpetually
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complaining—justified the removal. The complaints, which persisted in the petition and in the petitioner’s affidavit and oral evidence and which the judge found not to be justified, were in large part most serious allegations that one of the board (Nazar) with the support of the third (George) was consistently and for his own personal profit in one way or another milking the company. The quotation from para 13 of the petition will be recalled. We can well understand that Nazar and George after some years of this should reasonably think that the affairs of the company would be better conducted by a board untroubled by such conduct. On the facts of the case we should add that in the evidence it was made clear that Nazar and George did not intend to continue the system by which all profits were distributed by way of salaries to directors.
As stated, we were referred to a considerable number of cases, but we do not find that any require us to come to a different conclusion on the law, or on the law as applied to the facts of this case. For the greater part, references were to particular passages in particular judgments and frequently, we think, attributing to them a weight or width which would surprise the authors, whether it be the Yenidje Tobacco case or others. We mention but a few of them. Re Cuthbert Cooper & Sons Ltd, which was plainly rightly decided, does not in fact lead us to our conclusion because the complaint made was made by persons who were not the initial quasi-partners but were simply attempting to become full quasi-partners. Re Davis and Collett Ltd may be supported on the ground that irregularity was involved. Re Lundie Brothers Ltd was in our judgment wrongly decided on the question of winding-up. It was argued that Blisset v Daniel showed that those purporting to exercise a power in a partnership deed to expel a partner and acquire his interest at the figure shown in the last accounts, have the onus on them to establish that it was exercised in good faith; and that therefore the onus was on Nazar and George in this case. Sir William Page Wood, V-C said ((1853) 10 Hare at 522):
‘It is quite clear that this power was never intended to be exercised by any two-thirds of the partners merely and solely for their own exclusive benefit. If case be shewn, of course it removes all difficulty with reference to fraud, using that word according to the sense in which the court uses it; but if cause be not shewn and proved, then it must be very clearly made out that the exercise of the power has been in good faith.’
We do not consider that that case is in any way applicable to the present. We refer with approval to the language of Plowman J in Re Expanded Plugs Ltd ([1966] 1 All ER 877 at 885, [1966] 1 WLR 514 at 523), where he said:
‘In order to succeed on this petition, the petitioner, in my judgment, has to establish that the matters of which he complains, all of which were carried out within the framework of the articles, were not carried out bona fide in the interests of the company. This, in my judgment, he has failed to establish. All the challenged decisions were decisions which, in my view, were capable of being regarded as being in the best interests of the company and I see no reason to think that those who took them did so other than in good faith.’
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Accordingly, the appeal is allowed and the winding-up order, the effect of which was stayed pending this appeal, is set aside.
Appeal allowed. Winding-up order set aside. Leave to appeal to the House of Lords.
Solicitors: Davenport, Lyons & Co (for the appellants); Arbeid & Co (for the petitioner).
Euan Sutherland Esq Barrister.
Myrddin-Baker v Teesside County Borough Council (No 2)
[1971] 1 All ER 567
Categories: LOCAL GOVERNMENT
Court: QUEEN’S BENCH DIVISION
Lord(s): LORD PARKER CJ, ASHWORTH AND BROWNE JJ
Hearing Date(s): 30 OCTOBER, 13 NOVEMBER 1970
Local government – Officer – Loss of employment – Compensation – Resettlement compensation – Assessment – Deduction – Net emoluments received from work or employment in place of employment lost – Part only of salary to which entitled in new employment paid – Local Government (Compensation) Regulations 1963(SI 1963 No 999), reg 8(1).
Local government – Officer – Loss of employment – Compensation – Long-term compensation – Assessment – Deduction – Factors to be considered – Prospects of other employment – Size of salary officer likely to command in other employment – Local Government (Compensation) Regulations 1963(SI 1963 No 999), reg 14(1) (c), (f).
The appellant had been clerk and solicitor for 17 years with a rural district council which was merged with other local authorities to form a county borough council (the respondents). As a result of the merger he was given notice of termination of his service. Before his employment was terminated he was informally offered the opportunity to apply for posts with the respondents at salaries in the region of £3,000 per annum, which he declined. He set up in partnership in a newly constituted firm of solicitors. In making his claim for compensation under the Local Government (Compensation) Regulations 1963a, he had stated that his salary was to be £1,500 per annum. Although the appellant was entitled to this salary, in fact, owing to difficulties in obtaining overdraft facilities for the firm, he deferred receipt of it and, in his first year, only drew a gross salary of £333. The Industrial Tribunal, on hearing all the evidence, assessed his entitlement to resettlement compensation on the basis of the salary of £1,500. It held that, for the purpose of resettlement compensation, the net emoluments received by him were £1,500 and under reg 8(1)(b) b two-thirds of this sum, ie £1,000, fell to be deducted from the sum payable. It also held that, in the light of all the evidence and after considering the extent to which he had sought suitable employment, the emoluments he might have acquired by accepting other suitable employment and all other circumstances of his case,
Page 568 of [1971] 1 All ER 567
as required by reg 14(1)(c)c and (f), the sum of £1,250 should be deducted from his long-term compensation. On appeal.
Held – (i) In respect of the resettlement compensation the appeal would be allowed because, in assessing the amount to be deducted, the calculation must be based on the sum received by the appellant, ie the sum actually paid to him excluding any sum that was receivable by him or credited to him (see p 570 b and f and p 571 h, post).
(ii) In respect of long-term compensation the appeal would be dismissed; the tribunal was entitled to consider all the circumstances surrounding the appellant’s applications for other employment and his refusals of the invitation to become a candidate for other posts with the respondents both before and after his service with them was terminated, and to draw its own conclusions as to the size of the salary which the appellant could command (see p 571 e to g and h, post).
Notes
For the right of local government officers to compensation for loss of employment or loss or diminution of employment, see 24 Halsbury’s Laws (3rd Edn) 507, para 937.
Case referred to in judgment
Allen v Thorn Electrical Industries Ltd [1967] 2 All ER 1137, [1968] 1 QB 487, [1967] 3 WLR 858, Digest Supp.
Appeal
This was an appeal by Thomas Myrddin-Baker from a decision of the Industrial Tribunal given on 5 May 1970 at which, following a remission ordered by the Divisional Court, reported at [1970] 1 All ER 1108, it reheard the appellant’s appeal against the assessment made by the respondents, Teesside County Borough Council, of his claim for resettlement and long-term compensation under the Local Government (Compensation) Regulations 1963. The following statement of facts is taken from the judgment of Lord Parker CJ in [1970] 1 All ER at 1109. The appellant was clerk and solicitor to the rural district council of Eston in the north riding of Yorkshire; he had occupied that position for 17 years when on 1 April 1968, by virtue of the Teesside Order 1967d, the Eston rural district council ceased to exist. A new county borough of Teesside was formed, and under the 1967 Order the officers, including the appellant, of the local authorities abolished were transferred to the borough council of Teesside. Three days later he was given notice of termination of his service as from 31 July 1968. He then began work as a salaried partner in a new firm of solicitors constituted at Normanby. The dispute related to the amount of resettlement and long-term compensation to which the appellant was entitled.
J M Rankin QC and J G C Phillips for the appellant.
G E Moriarty for the respondents.
Cur adv vult
13 November 1970. The following judgments were delivered.
LORD PARKER CJ read the following judgment. This is an appeal from a decision of the Industrial Tribunal given on 5 May 1970, a decision given after the remission to the tribunal by this court on 28 January 1970 (See [1970] 1 All ER 1108, [1970] 1 WLR 511). It
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concerns the quantum of the appellant’s entitlement to resettlement compensation and long-term compensation under the Local Government (Compensation) Regulations 1963e. The full facts leading up to the claim and the decision of this court have been reported (See [1970] 1 All ER 1108, [1970] 1 WLR 511). As appears from that decision, the court understood that the original arrangement whereby the appellant was entitled to a salary of £1,500 was changed and that all he had become entitled to was the sum actually drawn by him. It was in these circumstances that the court remitted the case back to the tribunal to determine resettlement compensation on the basis of the amount actually received, ie under the changed arrangements. At the same time the court also remitted the determination of long-term compensation since this might be affected by this changed arrangement.
When the matters were so remitted, the tribunal, as appears from the decision now under appeal, heard further evidence as a result of which the tribunal found that the original arrangement had not been changed. The appellant was at all material times, and is, entitled to a salary of £1,500 but has deferred receipt of it. It had been originally contemplated that further overdraft facilities could be obtained from the bank out of which his salary could be paid. When, however, such facilities were not forthcoming, the appellant was content only to draw small sums to the extent that profits allowed, and did not insist on payment of the salary in full, which would have had to come out of his partners’ pockets. It was in these circumstances that the tribunal held, as it originally had, that for the purposes of resettlement compensation two-thirds of the salary received, ie £1,000, fell to be deducted. If, however, it was wrong in this, the tribunal held that two-thirds of £333, being the amount actually received by drawings, fell to be deducted.
It has been urged before us that the tribunal was wrong in deducting two-thirds of £1,500 in that on the facts, although the appellant was entitled to a salary of £1,500, no part of it except the £333 had been paid or received by him. It is necessary in this connection to consider the relevant regulations in some detail.
Regulation 8 provides how the amount of resettlement compensation is to be ascertained. In order to understand how the calculations have to be made, it is convenient to consider the process by stages. In this connection it is to be noted that the compensation is to be ascertained for each week for which it is payable.
Stage 1. One has to ascertain the weekly rate of the net emoluments which the claimant has lost. Both ‘emoluments’ and ‘net emoluments’ are defined in reg 2. Omitting unnecessary words ‘emoluments’ means all salary and other payments paid to an officer for his own use. The word ‘paid’ is in my view used in contrast to the words ‘credited’ or ‘payable’: it denotes actual payment. ‘Net emoluments’ is given two meanings of which only heading (a) is relevant in Stage 1. Under heading (a) it means the annual rate of the emoluments of the employment immediately before the loss. Applying the definition of ‘emoluments’, this definition in heading (a) means the annual rate of all salary and other payments paid to an officer for his own use immediately before the loss. Having found the annual rate, one has to ascertain the weekly rate and reg 8(3) provides that this shall be deemed to be 7–365ths of the annual rate.
Stage 2. Having ascertained the weekly rate of the net emoluments lost, one has to calculate two-thirds of it and the resultant figure is the basic figure for resettlement compensation. If no deductions fall to be made therefrom, the claimant is entitled to that sum for each week for which compensation is payable.
Stage 3. The only deduction relevant to the present appeal is to be found in reg 8(1)(b):
‘two thirds of the net emoluments received by him in respect of such week from work or employment undertaken in place of the employment which he has lost … ’
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The use of the words ‘net emoluments’ in this paragraph introduces the second meaning of those words to be found in heading (b) of the definition in reg 2. Again applying the definition of ‘emoluments’, this definition in heading (b) means the annual rate of all salary and other payments paid to the claimant for his own use at the time in question. It is to be noted that the deduction mentioned in reg 8(1)(b) is not expressed in the same form as is used to calculate the basic figure. Paragraph (b) does not refer to the ‘weekly rate of the net emoluments … lost’: it refers to the ‘net emoluments received by him in respect of such week’. The combination of the word ‘paid’ (involved in the definition of ‘emoluments’) and the word ‘received’ in para (b) lead me to the conclusion that the deduction contemplated in the paragraph is a deduction of a sum actually paid and received in respect of any week included in the basic figure. It is for this reason probably that para (b) does not refer to the ‘weekly rate of the net emoluments’: if it had done so, it would have been easier to give a wider meaning to the word ‘received’.
One of the main contentions advanced against this construction of reg 8 was that it would allow a claimant to refrain from drawing in this new employment sums to which he was entitled. In this way he would recover compensation without any deduction being made under para (b) and thereafter draw from his employment salary covering the same weeks as those for which he received compensation. It is clear from the reasons given by the tribunal that it was impressed by this contention and, as it says, there is common sense in the argument. In order to meet it, counsel for the appellant suggested that in such circumstances it might be held that the appellant received such deferred salary in trust for the compensating authority. Alternatively he submitted that the authority might have some right of subrogation against the appellant’s employers in respect of the deferred salary. For my part I do not consider that either of these methods of escaping from the difficulty that the appellant may in effect be paid twice over would achieve success, though it is not necessary to express a final opinion about either.
While I fully appreciate the force of the argument based on the possibility of double payment, I am unable to agree with it. It involves reading the word ‘received’ in para (b) as including ‘receivable’ or ‘credited’ and in my view that construction is not legitimate. It is worth emphasising that resettlement compensation, payable for a maximum of 26 weeks, is a short-term method of enabling an officer who has suffered loss to tide over the period immediately following his loss. He need not work at all or can work without remuneration and yet draw compensation amounting to two-thirds of his salary prior to dismissal. It would be natural in those circumstances to provide that if he does work and is paid remuneration the compensation should be reduced. It is not so natural to provide for a reduction when he merely has a right to receive and in certain circumstances might never receive remuneration, for example if his new employer went bankrupt. We were quire rightly referred to the decision of the Court of Appeal in Allen v Thorn Electrical Industries Ltd in which in quite a different connection ‘paid’ was held to mean ‘payable’ but I do not think that the reasoning behind that decision is applicable in the present case.
As regards long-term compensation, the tribunal altered its original assessment and in a way unfavourable to the appellant. Whereas originally it had only deducted two-thirds of £1,500, namely £1,000, as in the case of resettlement compensation, in the light of the further hearing, it made a deduction of £1,250. In doing so it stated:
‘The [appellant] was 58 at the time of the termination of his employment with the Eston Urban District Council. He was a qualified solicitor, though he lacked experience in private practice; but as he said in evidence he had considerable experience in planning, housing and public health matters and local government enquiries. The tribunal were shown a list of vacant posts for which he had
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applied without success, some five of them before entering into the partnership agreement and the rest after that date. When the staff for the [respondents] were being appointed in December 1967 he had been given the opportunity of being a candidate (without having to make a formal application) for one or other of four posts. Two posts were as Assistant Town Clerk in the salary grade £3,075–£3,435 and two posts as Assistant Solicitor in the salary grade of £2,085–£3,165. But he was unwilling to be a candidate for any of these posts. They were not formally offered to him and so this was not a relevant consideration under Regulation 7(1)(d) when assessing re-settlement compensation. It is, however, a factor to be considered under Regulation 14(1)(c) and (f) when assessing long term compensation.’
It is conceded that the reference to reg 7(1)(d) was a mistake for reg 13(1)(c)(ii) and that the tribunal was quite right in saying that that regulation had no relevance here. It did, however, consider that the matters cited were made relevant by reg 14(1)(c) and (f) which provided that regard should be had to:
‘(c) the extent to which he has sought suitable employment and the emoluments which he might have acquired by accepting other suitable employment offered to him …
‘(f) all the other circumstances of his case:’
It is urged that the tribunal was wrong in so doing. (1) It is said that in considering suitable employment under para (c) or the circumstances under para (f), vacancies in any local authority employment (or at least in the same local authority employment) should be excluded. I can see no valid reason why this should be so. (2) It is said that ‘all the other circumstances of his case’ only embrace matters arising after his loss of employment. Again I can see no reason why this should be so. (3) It is said that the request to be a candidate, having been made some months before notice of dismissal, was too remote to be taken into consideration. Clearly, however, for some time prior to the notice of dismissal re-employment was under consideration. The appellant knew that he was likely to be dismissed and that the respondents wanted him to apply for employment with them. I cannot myself see why in these circumstances the tribunal should not take the request into consideration as indicating that he was at any rate something more than a £1,500 a year man.
Accordingly, I would dismiss the appeal in regard to long-term compensation and allow the appeal in respect of resettlement compensation and remit the case to the Industrial Tribunal with the opinion of this court to assess the weekly rate of compensation in default of agreement.
ASHWORTH J. I agree.
BROWNE J. I agree.
Appeal allowed in part, dismissed in part. Case remitted.
Solicitors: J G Haley (for the appellant); Lewin, Gregory, Mead & Sons agents for E C Parr, Middlesbrough (for the respondents).
J Okai Thompson Esq Barrister.